Summary of Results for Fiscal Year Ended March 31, 2005
|During the fiscal year ended March 31, 2005, the Japanese economy moved gradually toward a moderate recovery, with significant improvement in corporate earnings and capital spending.|
The telecommunications market has been undergoing drastic structural changes in anticipation of the changeover from voice to Internet and data telecommunications, along with the rapid proliferation of IP phone services. In this environment, the full scale introduction of direct connection phone services using dry copper bodes an era of intense competition in the fixed-line phone market, including basic rates. Meanwhile, the business environment surrounding the growing broadband market has grown harsher than ever, due to intensifying competition among telecommunications carriers for new customers in the form of both services and prices, this in spite of the fact that broadband access services like optical fiber and ADSL are experiencing full-scale proliferation and expansion.
In the midst of the significant environmental changes in the market and competitive conditions, Nippon Telegraph and Telephone West Corporation (NTT West) positioned fiscal 2004 as critical year for making a dramatic leap into the optical fiber broadband market, and for transforming the base of its revenue structure from telephones to IP. Toward this end, NTT West moved forward with efforts to take full advantage of the characteristics of optical fiber to enrich its application and content services, promote high value-added solution businesses like security services, expand the operations of the entire NTT West Group, and reexamine the current price structure of fixed-line phone services. Specifically, NTT West implemented the following measures:
1. Development of the Broadband Business
|i. Expanded Broadband Access Services|
|In the area of optical fiber services, NTT West added to the existing B-FLET'S plans with the launch of the"FLET'S HIKARI PREMIUM Family Type" plan, a new access service for detached houses that provides connectivity via ISPs, high-quality video-telephony via IPv6 technology, and security, to satisfy diverse user needs. NTT West also introduced the"Video Communication Network Service", which enables bundled transmission of up to 400 channels, to satisfy the needs of broadcasters that use telecommunications services to distribute multi-channel video via optical fiber lines.|
In ADSL, NTT West expanded its existing plans with the addition of"FLET'S ADSL More Special," which boasts a downstream speed of up to 44 ~ 47 Mbps and an upstream speed of up to 5 Mbps, in response to customer demand for faster telecommunications.
NTT West ran a limited-time, no-monthly-fee campaign for new subscribers to B-FLET'S and FLET'S ADSL services. NTT West also introduced attractive special discount programs:"FLET'S ATTO (amazing) DISCOUNT," which provides a discount on monthly charges conditioned on 2 continuous years of use, and"FLET'S ZUTTO (continuous) DISCOUNT," which offers an automatic discount on monthly charges based on the number of years of use, in order to attract new customers and encourage continued use of the service.
Further, to expand the availability of FLET'S services and to respond to the need for"after-hours system failure recovery" primarily on the part of corporate and SOHO users, NTT West extended the"Support Menu," which provides 24/7 service 365 days a year, to cover the"Family 100" plan, in addition to the"FLET'S ADSL Type 2,""B-FLET'S Business Type,""B-FLET'S Basic Type," and"B-FLET'S Mansion Type" plans.
ii. Expanded Broadband Application Services
|In response to the need for lower call rates and the growing demand for high-quality IP telephone services comparable to fixed-line telephony, NTT West promoted the rapid deployment of its IP phone service by offering the"HIKARI
DENWA (optical fiber phone)" to B-FLET'S Mansion Type users living in multi-family housing, and in February 2005 began accepting advance applications for the service from FLET'S HIKARI PREMIUM Family Type users living in detached houses. NTT West modified its service terms for the"HIKARI
DENWA Business Type" plan (formerly, IP Phone Service for Corporate Customers) to include additional options for lower-cost access lines (B-FLET'S Basic Type), in order to make the service accessible to a wider spectrum of business customers.|
NTT West improved the transmission speed of its public wireless LAN service,"FLET'S SPOT," to 54 Mbps, and boosted the number of access points in the western Japan region to over 3,000 by the end of March, making the service more conveniently accessible to more customers. All of these accomplishments underscore its status as Japan's largest public wireless LAN service provider.
NTT West also launched a new application service for B-FLET'S and FLET'S ADSL customers,"FLET'S v6 APPLI," an add-on service based on IPv6 technology that provides high-quality video-telephony and security functions.
Furthermore, in broadband content distribution, NTT West launched"FLET'S v6 CAST," an IPv6-enabled content distribution service for high-quality video and music that connects the servers of content providers. It is available to FLET'S HIKARI PREMIUM and FLET'S v6 APPLI subscribers.
Furthermore, NTT West, ITOCHU Corporation and SKY Perfect Communications Inc. joined forces in February 2004 to conduct a two-month test distribution of quality-controlled content via IPv6 technology. The results of this test led to On Demand TV, Inc., a joint venture between ITOCHCHU, SKY Perfect, NTT West and NTT East, and the March 2005 launch of"On Demand TV" video distribution for NTT East and West FLET'S subscribers.
In addition, since last year FLET'S SQUARE has been collaborating with leading content owners to provide attractive content that is unique to FLET'S services. This includes video programs from Takarazuka Revue Company related to its shows,"In Quest of the Blue Bird" and"Takarazuka Dream Kingdom," a variety of entertainment from The Walt Disney Company Japan, Ltd., and new"Pokemon content" from The Pokemon Company.
2. Development of the Solution Business
|NTT West has been offering the"prosol Series" of system solutions to satisfy the needs of a wide range of customers, from public to private sector corporations. During the period under review, NTT West expanded its"N.prosol" lineup, which provides total solutions for optimized networks, with the launch of"SSL-VPN Solution," a service that responds to the growing demand for security through the easy creation of a safe, reliable remote access environment for smaller businesses and municipalities, and the"Video Conference Package," a service that enables rapid, high-quality video communication connections at low cost via broadband circuits like B-FLET'S.
NTT West also added to its lineup for"C.prosol," a total solution for optimized commerce (commercial transaction cycles) that enables enterprises, regardless of type of business, to quickly apply information technology to their business at low cost. NTT West introduced the"Shared EDI Solution for Liquor Businesses," which is specifically designed to facilitate greater operating efficiency and speed for liquor businesses, and the"EDI Solution for Department Stores," which assists vendors like wholesalers and manufacturers in achieving strategic merchandising.
Furthermore, as a new item in the lineup for"D.prosol," a total solution addressing customers demand for protection against security threats, NTT West worked together with NTT MARKETING ACT and NTT NEOMEIT to launch the"Information Security Audit Service," which allows an objective assessment of a customer's information assets management. NTT West has also partnered with Tokio Marine and Fire Insurance Company, Limited to introduce"Security Check Safety," a security diagnostic service which includes an indemnification plan, providing a total security solution that covers any demand for compensation for damages arising from a security breach.
Additionally, NTT West introduced two new services:"U.prosol," a total solution that assists the management of universities in creating the best environment for education and research as well as surviving an era of tough competition with the support of information technology; and"A.prosol," a total solution that aids in the revitalization of rural regions through improved productivity, one of the real challenges faced by today's agricultural industry.
Meanwhile, NTT West integrated IP and mobile telephony to build an IP phone system connecting 49 OSAKA GAS CO., LTD. operating bases. This IP phone system handles external calls through the"HIKARI
DENWA Business Type" service (formerly, IP Phone Service for Corporate Customers) provided to corporate customers by NTT West, while internal calls (between operating bases) are handled by NTT West's high-quality, optical fiber, wide-area Ethernet service. On the company premises, a mobile terminal serves to make/receive both internal (between operating bases) and external calls via the IP phone system, while the same terminal device serves off premises as a mobile phone. All in all, the system contributes to total communications cost savings while achieving high-quality voice communications comparable to fixed-line telephony. At the same time, it leads to improved productivity by transforming working styles.
3. Expanded NTT West Group Operations
|NTT NEOMEIT CORPORATION has been actively working to expand its operations through closer ties and diverse alliances with NTT West Group companies, focusing on system integration and maintenance integration (SI/MI). During the period under review, NTT NEOMEIT launched the"AQStage PF IP Call Center Service," a service with enhanced security that employs grid technology;"InfoDock," a comprehensive information security diagnostic tool; and"AQStage Call S," an IP phone service for small- and medium-sized businesses. NTT NEOMEIT also enriched its service lineup with the introduction of"AQStage Shared Public Wireless LAN Access Point Service," which houses multiple wireless LAN carriers in a single public wireless LAN access point to promote widespread use of the LAN access service while solving radio interference problems.
Furthermore, in order to prevent possible personal information leaks resulting from the disposal and replacement of personal computers, NTT NEOMEIT has tied up with TOKYO LEASING CO., LTD. to establish a reutilization/recycling business for personal computers. The first step was marked by the opening of a"PC Security Recycle Center," which handles all processes from complete hard disk data erasure to the recycling of used personal computers and intermediate treatment of industrial waste, in a high-security environment.
NTT MARKETING ACT CORPORATION, meanwhile, introduced"ACTOS WATCH-OVER EYE," a new monitoring service for the security of the elderly. Sensor systems are installed in the homes of elderly people who live alone so that either other family members or local government staff can review the daily living situation remotely via personal computer, and an e-mail message can be transmitted to a pre-registered contact should any problem be detected.
NTT MARKETING ACT likewise joined with NTT Syscom Corporation and Dai Nippon Printing Co., Ltd. to develop"ACTOS KIT OKKAKE (surveillance) CAMERA MENU," an image distribution system combining broadband circuits and wireless IC tag technology. NTT MARKETING ACT has begun to market this system through its group companies as a solution package mainly for kindergartens and nursery schools.
In addition to the above, since last year NTT MARKETING ACT has been offering"ACTOS e-MACHISHIROU" (Find your town information on the web), a portal site that provides local community information, as a solution that allows local stores and businesses to attract more customers and increase sales; and"ACTOS MOBILE C," a service that enables timely distribution of e-mail and coupons to members of a user company via mobile phones using 2-dimensional codes.
4. Measures for Fixed-Line Telephone Services
||Reduction in Telephone Charges and Review of Telephone Installation Charges
|To properly respond to changes in the business environment and customer needs, and in an effort to achieve the smooth migration of fixed-line phone subscribers to optical fiber IP networks, NTT West reduced basic charges (line service charges) and eliminated the fees NTT West charges for the touch-tone option. To the same end, NTT West introduced two new types of discount plans:"Ichirittu Plan 1," which permits intra-prefecture calls at a flat rate of 8.5 yen per 3 minutes, and"Ichirittu Plan 2," which allows intra-prefecture calls at a flat rate of 7.5 yen per 3 minutes for a fixed monthly payment of 100 yen per telephone line.|
NTT West also reexamined the telephone installation charges for subscriber telephone lines and INS-Net 64 lines, as well as the surcharge for the Light Plan (subscriber telephone and INS-Net 64 Light).
||Launch of Service for Calls from Fixed-line to Mobile Telephones
|In the past, calls from fixed-line to mobile phones were priced exclusively by the mobile-phone operators. However, NTT West has been able to start its own low-rate telephone service for calls from fixed-line to mobile telephones (THANK YOU DIAL 0039 Service), now that dialing a mobile-phone operator's identification number enables NTT West to determine the charges itself.|
In addition to the above, NTT West waived the basic fees for customers who could not use their telephones due to building damage from typhoons and those who had no access to their telephones because they had been ordered to evacuate, and also waved reinstallation charges for customers who moved from damaged buildings to temporary housing. NTT West also provided a Dial Q2 collection service free of charge for donations for the victims of the Niigata Chuetsu Earthquake and the Sumatra Earthquake.
Meanwhile, in light of the severe social criticism stemming from a series of corporate scandals, the NTT West Group has been actively working to reinforce its corporate ethics. During the period under review, the Group further applied itself to cultivating high ethical standards both officially and privately, and creating a solid corporate culture against fraud and misconduct. Among other things, the Group also held corporate ethics workshops similar to those held last year for all levels of management and employees, produced new videos that carry the president's message to employees, and conducted a survey of corporate ethics awareness among all employees, in order to install a consciousness of ethics throughout the organization.
Moreover, in light of the lessons learned from the recent spate of information leaks, the NTT West Group has been promoting proper management of customer information through training workshops for all employees, in order to boost morale and tighten control over the handling of customer information. In addition, NTT West has completely overhauled its systems operations and is exercising closer supervision over the customer information held by contractors, in order to implement all possible means to protect the information NTT West has on its customers.
In the area of environmental protection, NTT West has been addressing the conservation of paper resources, measures against global warming, and reduction of industrial waste, which are its top priorities for reducing the environmental impact of its business activities. Specifically, NTT West has taken effective measures to reduce the consumption of pure pulp for telephone directories, cut back the consumption of power for communications, and reduced industrial waste, through annual numerical targets established under a medium- to long-term action program.
The NTT West Group has also been working on certification to ISO14001, the international standard for environmental management systems, in order to constantly improve its efforts to protect the environment and reduce environmental risks. NTT West's strategy has been to have each branch or office location apply for certification under its own budget; during the period under review, the Okayama and Kumamoto branches joined 13 other branches that had already succeeded in obtaining this certification. The Group will continue to work hard to achieve certification for every branch as well as all group companies by the end of fiscal 2005.
As part of NTT West Group's program of actively disclosing information regarding the status of the Group's environmental protection measures, in October 2004 NTT West compiled and published the NTT West Group Environmental Report, a follow-up to the edition of the previous year. The report presents the overall progress of NTT West Group's environmental protection measures as well as the environmental protection activities of the NTT MARKETING ACT Group and NTT NEOMEIT Group, demonstrating its commitment to the protection of the environment as a matter of corporate responsibility.
As a result of the above, operating revenue for the fiscal year amounted to 2,098 billion yen (down 3.2% from the previous year), and recurring profit amounted to 80 billion yen (down 11.6% from the previous year). Net income totaled 41 billion yen (down 33.2% from the previous year), marking the second consecutive year of positive net income.