During the fiscal year ended March 31, 2002, condition of the Japanese economy remained severe what with continuously sluggish personal consumption amid the prolonged weakness in the global economy on the back of the slowdown in the US economy, and the continued drop in private sector capital investment and earnings. Towards the end of the term, however, there were signs of the downward slide in exports and production coming to a halt in some sectors.
In the information sharing market, the global IT (information technology) slump deteriorated business conditions for carriers, which in turn triggered M&As and alliances beyond national borders, in what could be a move toward realignment in the telecommunications industry. Meanwhile, telecommunications technology is making steady progress, and the rapid diffusion of IT has brought with it major changes in individual lifestyles and socio-economic activity, leading to increasing expectations for the creation of new industries and greater efficiency and revitalization in socio-economic activity.
Amid growing demand for high-speed, high-volume Internet access services and lower rates, the regional communications market, where we play, saw the intensification of competition both in services and prices, with newcomers entering the Internet access services business and expanding their service areas.
The environment in which we find ourselves has become aggravated in the fixed-line phone business, too, as competition in rates and subscriber accounts escalates with the entry of relay carriers to intra-city telephone services and "IP phone (using VoIP technology)" service businesses to the voice transmission business, following the introduction of the MY LINE carrier selection service.
Against this backdrop, Nippon Telegraph and Telephone West Corporation (NTT West) has endeavored to achieve two management goals: "a transition to a profit-making structure" and "a transformation into an information sharing company." Concretely, the Company has focused on management reforms designed to provide greater stability to its management foundation, upon which it can make a dynamic shift in business structure for survival, while increasing convenience for customers and honing its competitive edge in the market.
Furthermore, NTT West has pushed a changeover in its business domain towards IP, offered lower rates for its Internet access services, and added to the variety of its information sharing services in response to the growing diffusion of broadband technology. At the same time, the Company has aggressively exploited new business opportunities by creating platforms that allow advanced content and applications, thereby focusing on developing new revenue sources.
NTT West remains committed to improving management efficiency. To carry out the "Mid-term Restructuring Plan" (fiscal 2000-2002), NTT West has been pursuing a variety of initiatives, including an effort to increase the efficiency of the business operations structure through consolidation of sales offices, a massive changeover of personnel that includes temporary assignments to other Group companies and personnel reshuffling to metropolitan areas, the curtailment of capital investment, and further reductions in outsourcing and other costs. Although these initiatives have been proceeding faster than planned, changes in the market structure and competitive environment have been taking place faster than expected, forcing us to project another loss-making year for fiscal 2002 if we don't take proactive measures. We have therefore begun preparations for the implementation of a structural reform of the Company in fiscal 2002, geared to shoring up our financial foundation and achieving greater autonomy in management.
In more concrete terms, NTT West will specialize in the basic functions necessary to fulfill its responsibility to provide customers with excellent services, in addition to planning, strategies and services development. Other operations, including front-side customer relations, facility operations business, SOHO and mass marketing, along with general affairs and accounting, will be outsourced to regional companies which are to be established in 16 blocks. At the same time, personnel practices have been put to a radical review in response to the diversification of forms of employment and remuneration schemes, including a program to re-employ retired employees aged 51 and over.
NTT West Marketing Planning Co., Ltd. and NTT West Facilities Planning Co., Ltd. (renamed respectively NTT MARKETING ACT Co., Ltd. and NTT NEOMEIT Co., ltd., effective May 1, 2002), both 100% owned by NTT West and responsible for coordinating its regional companies, and NTT BUSINESS ASSOCIE Co., Ltd. Jointly established a subsidiary that serves as an outsourcing partner to NTT West. As such, the new entity is expected to play a key role in our structural reform.
To improve customer convenience and sharpen its competitive edge, the Company took the opportunity of the introduction of the MY LINE carrier selection service in May 2001 to offer a strategic rate discount (8.5 yen per 3 minutes for intra-city calls day and night) as part of our quest for increased price competitiveness. We also offered a variety of services to subscribers to our MY LINE PLUS carrier designation service, including an increase in the discount rate for various discount plans and a reduction in monthly fixed fees. Through these initiatives, designed to make our services easier and more convenient for customers, we have been most aggressive in adding to the number of subscribers to our MY LINE PLUS service, drawing upon the collective strength of our Group.
Beginning in December 2001, following the end of the period during which customers could change their MY LINE service carriers free of charge, we offered a discount on the monthly fee for FLET'S service as a set to those who chose us for MY LINE PLUS service, in a continued effort to take up greater market share.
In our efforts to ensure new revenue sources, NTT West is striving to respond to customer demand for high-speed communications and lower rates with an extended lineup of Internet access services. At the same time, we are pushing forward the changeover in business domain towards IP through the promotion of the solutions business and an aggressive expansion of new business spheres in the information sharing market.
Programs to expand our Internet access services include the expansion of service areas and lowering of rates for FLET'S ISDN and FLET'S ADSL, our IP connection services featuring complete flat-rate Internet access. To better meet the need for higher speed communications, beginning in December 2001 we started offering an 8M Plan for FLET'S ADSL, in addition to our 1.5M Plan.
Beginning in December 2000, we began offering a trial Fiber-optic IP Connection Service, a high-speed, flat-rate Internet access service via the subscriber fiber-optics circuit. In August 2001, we launched full-scale service for B-FLET'S after making a substantial rate cut and expanding the menu, and have since expanded its service areas, thus committing ourselves to greater diffusion of fiber-optic services. We are also striving to stimulate demand by offering a full lineup of broadband access, from metal to optical line services.
In an attempt to increase the Internet user population, NTT West is offering a variety of user-friendly services, including the June 2001 launch of L-MODE services, which allow users to surf the Internet and send e-mail using non-cellular home telephones.
In promoting the solutions business, we are catering to a broad range of customer groups from private businesses to public organs, with marketing priorities directed to the introduction of IT to mid-sized businesses and the promotion of e-municipalities. In response to the accelerated movement among national and local governments to build an infrastructure for an information society that leads to the steady promotion of e-government and e-municipalities in line with the national government's e-Japan Priority Policy Program, we have systematized G prosol branded all-round solution services for local governments. With their three objectives - promoting the building of IT infrastructure within local cities, promoting the building of IT infrastructure in government offices, and refurbishing the foundations for advanced information distribution - the services offer a total solution, from the drafting of basic concepts to the building, maintenance and operation of systems.
As part of our efforts to develop new business, we started offering a trial of regional portal services, beginning in December 2000 with experiments in Suita City, Osaka and Hiroshima City, Hiroshima, with a view to achieving information distribution that caters to the needs of the community via our 100% owned NTT SmartConnect Corporation.
NTT West is also striving to offer more convenient services that make the most of the characteristics of broadband networks. Initiatives in this regard include the foundation of TFM Interactive Inc. with TOKYO FM Broadcasting Co., Ltd., whose goal is to provide high-capacity, high-quality entertainment content that will help expand the broadband content distribution market in Japan; and Homepro Co., Ltd. with OG Capital Co., Ltd., an Internet-based housing information service business, thereby offering more convenient services that take the greatest advantage of broadband networks.
Other initiatives that NTT West is pursuing aggressively to ensure new revenue sources include participation in the E-Learning open lecture trial, a verification of platform distribution for network education in the broadband era, and the intelligent home appliances IPv6 demonstrations, a project to develop the intelligent home appliance network business under the next-generation Internet protocol IPv6.
Aware of the need to address environmental issues, we are duly complying with all related laws and regulations even as the social framework for environmental protection is being refurbished by way of enactment and amendment of laws and regulations. At the same time, we are making steady progress on some of the issues most important for us to reduce the environmental impact created as a result of our business operations - namely, the conservation of paper, prevention of global warming and reduction of industrial waste - in accordance with the mid- and long-term action plan we laid out in 1999. In this manner we are reducing risk to the environment and continuously improving environmental measures. To ensure disclosure, in November 2001 NTT West published its environmental report, which details the present status of our environmental initiatives and the results of the aforementioned measures, thereby fulfilling its corporate responsibility for environmental preservation.
As a result of the above, operating revenues amounted to 2,406.7 billion yen (down 8.8 % from the previous year), and ordinary losses, 170.4 billion yen (up 61.2 % from the previous year).
Net losses totaled 355.3 billion yen (up 696.3 % from the previous year), as we posted 438.6 billion yen in business structure reform expenses and others as extraordinary loss.