NTT Reports Flat Full-Year Operating Income

For the full year ending 31 March 2010, NTT reported operating revenues of ¥10.181 trillion (US$110.27 billion), down 2.3% year-on-year (y/y). Operating income for the year increased slightly by 0.7% y/y to ¥1.118 trillion. Net profit amounted to ¥492.3 billion, down 8.6% y/y.

• Regional Fixed-Line Businesses: The operating revenues of NTT East and NTT West for the fiscal year ending 31 March 2010 decreased by 2.5% y/y, while operating income was up by 16.5% y/y. The decline in revenues was mainly due to the continuous drop in voice-related revenues, while the improvement of operating income was on the back of a reduction in expenses for purchase of goods and services. The two reported a combined number of fibre-optic internet subscribers at 13.251 million at end-March, up 19.0% y/y.
• Long-Distance and International Communication Businesses: NTT Communications reported a 4.2% y/y decline in its full-year operating revenues, while its operating income was up 1.4% y/y.
• Mobile Businesses: The full-year operating revenue of NTT DoCoMo dropped by 3.7% y/y, as revenue losses from handset sales more than offset increases in services sales. The company's operating income increased by 0.4% y/y, as the operator cut the amount of subsidies it paid for handset sales. The number of mobile subscribers increased by 2.7% y/y to 56.082 million at end-March, of which 53.203 million were 3G subscribers.
• Data Communication Businesses: NTT DATA reported a 0.5% increase y/y in its operating revenues but a 25.2% decrease y/y in its operating incomes. The revenues increased thanks to the expansion of the number of subsidiary companies, but the operating income declined as the data communication business segment was negatively affected by the recent economic downturn.

Outlook and Implications

NTT managed to prevent further operating income decline in the fiscal year ending 31 March 2010, compared with the previous year when it reported a decrease of 14.9% y/y in operating income. This is partly thanks to the gradual recovery of the economic condition. The cost-cutting measures at the group's various units have also helped deduce operating expenses. However, the group is still struggling to generate revenue growth, as the various business segments in Japan's telecoms industry have all reached high-mature status. Other than the data communication segment, the other major units of the group have all seen declines in their operating revenues in the last fiscal year. In response, NTT has been making attempts in search of future revenue growth engines.

In the fixed-line segment, the pace of fibre-optic subscriber growth has slowed recently amid the economic hardship. NTT East and West therefore further expanded the coverage area for "FLET'S Hikari Next", the next-generation network (NGN) commercial service, and enhanced services, including a high-speed service with a maximum download speed of 200 Mbps introduced in eastern Japan. The group also pursued initiatives in collaboration with other companies to expand sales. In addition, NTT Group took steps to enhance the quality of customer service by, among other things, reducing the lead time between a customer's application and the start of FLET'S Hikari service, strengthening support services, and expanding benefits offered to customers under its membership programmes.