[NTT WEST]1. Summary of Results for Fiscal Year Ended March 31, 2006@0605 - Telecommunications and ICT Services and Solutions

1. Summary of Results for Fiscal Year Ended March 31, 2006

During the fiscal year that ended March 31, 2006, the Japanese economy continued to move toward recovery, with improved corporate earnings and increased capital investment.

The information and telecommunications market has been undergoing drastic environmental changes, with the emergence of new types of services such as "Triple Play" service, which integrate Internet, IP phone and video capabilities, and FMC (Fixed-Mobile Convergence) services, which merge mobile and fixed-line communications. These changes have been supported by the rapid proliferation of broadband access services, and by technological innovation. The dramatically growing broadband market also witnessed increasingly widespread use of optical fiber broadband networks, with optical access lines eclipsing ADSL in terms of the net increase in number of users. Meanwhile, the expansion of IP telephony services and direct subscriber telephone services using dry copper lines intensified competition in the fixed-line telephone market, putting pressure on basic rates and making our business environment more harsh than before.

In the midst of rapid changes in market and competitive conditions, Nippon Telegraph and Telephone West Corporation (NTT West) declared fiscal 2005 as a critical "first step" for achieving the "NTT West Medium-Term Vision", with the goal of "providing optical access services to 15 million users by 2010." Toward this end, NTT West moved forward with efforts to introduce attractive new services aimed at dramatic expansion of optical access lines and fiber-optic IP-based services, promoting highly value-added solution businesses such as security features, and expanding the operations of the entire NTT West Group. In line with this vision, NTT West implemented the following measures:

1. Development of the Broadband Business

(1)	Expanded Broadband Access Services

NTT West started its full-scale optical access services in August 2001 with the launch of "B-FLET'S," after a trial service period that began in December 2000. In March 2005, NTT West offered "FLET'S HIKARI PREMIUM," a service that provides high-quality video-telephony that includes IPv6 technology and security protection as basic functions, to satisfy diverse user needs. NTT West also began marketing "Triple Play" services which combine the "HIKARI DENWA (fiber-optic phone)" with video capabilities, in order to boost sales.

In addition to the conventional limited-time, no-monthly-fee campaign for "FLET'S HIKARI," NTT West introduced the "HIKARI GUTTO (significant) DISCOUNT," a discount program with a special rate for up to one year for the "FLET'S HIKARI PREMIUM Family Type" and "B-FLET'S Family 100 Type" plans and began running various other service campaigns, including free initial installation service. NTT West also made efforts to provide services that meet diverse customer needs by achieving shorter lead times (from application to line connection), through the introduction of the Administrative Quick Response for Optical Service (AQROS) system, and by making 24-hour support available. As a result, the number of FLET'S HIKARI subscriber lines installed exceeded 1.5 million in the four years and eight months since the full-scale launch of the service.

NTT West also engaged in extensive marketing activities for its ADSL services, running a campaign for new subscribers offering a half-price rate for up to one year, to make the services available to a wider range of customers.

(2)	Expanded Broadband Application Services

NTT West expanded its lineup of optical IP phone services. In order to develop its customer base from big businesses to condominium residents, NTT West started providing the "HIKARI DENWA (fiber-optic phone)" service for detached houses in May 2005. For smaller businesses, in March 2006 NTT West began to accept subscription applications for the "HIKARI DENWA Office Type" service, which will begin in May 2006. This service will give a subscriber the use of up to 8 channels with a maximum of 32 telephone numbers. NTT West also engaged in proactive efforts to extend services across regions to attract a wider range of customers.

NTT West has also addressed the issue of developing new features to improve the convenience of its services. Specifically, NTT West expanded the conventional "HIKARI DENWA" plan with the introduction of a "multiple channel" service that enables simultaneous handling of outgoing and incoming calls by 2 lines per subscriber, as well as an "additional number" service that allows the use of up to 5 telephone numbers per subscriber. The company also added a mobile IP-phone terminal capability, compatible with the "IP Centrex function,^* " to the "HIKARI DENWA Business Type" plan.

For "FLET'S SPOT," its public wireless LAN service, NTT West vigorously worked to expand the coverage area and usefulness of the service, by actively utilizing the shared wireless LAN facilities provided by NTT Broadband Platform, Inc., and by introducing a mutual-roaming service with NTT East.

For IPv6-enabled application services, NTT West launched "FLET'S v6 My Disk" in August 2005, targeted at users of the "FLET'S HIKARI PREMIUM" and "FLET'S v6 APPLI" services. The new service enables users to store and manage a large volume of data, such as digital photos and document files, and to share data with other users safely.

In the field of broadband content distribution, NTT West has been providing attractive content exclusive to FLET'S services on its "FLET'S SQUARE" website, in collaboration with the Takarazuka Revue Company, The Walt Disney Company Japan, Ltd., and The Pokemon Company. In addition, NTT West has been operating the "v6 Stage" website to distribute "multi-angle content" and "high-quality content," making full use of the broadband features of "FLET'S HIKARI."

NTT West also joined forces with Warner Bros. Inc. and Toho Co., Ltd. in the "4K Pure Cinema" trial, in which fiber-optic broadband was used to distribute digital videos under DCI (Digital Cinema Initiatives) specifications over the network for multiple commercial movie theaters to play on their screens on a continuous and regular basis. The trial, the first of its kind, yielded valuable results that added momentum to the commercialization of this kind of network-reliant distribution system.

*	A function that provides a standard PBX function as an IP telephone network service.

2. Development of the Solution Business

NTT West launched its "Mobile IP Centrex Solution" as a new item in the lineup for "N.prosol." This solution allows for the fast and low-cost creation of a ubiquitous office environment that integrates fixed-line telephones with mobile telephones and voice with data by combining "HIKARI DENWA Business Type," an IP telephony service for corporate customers, with 3-GHz/wireless LAN dual mobile phones.

For security-related services, NTT West launched its "ThinClient Total Solution," a system that protects confidential information from being lost or stolen, or from being removed improperly by persons within the organization. This system is targeted at business customers and local governments that have concerns regarding information security measures in response to the Law Concerning the Protection of Personal Information coming into effect.

Also, to provide a higher level of authentication at login to enterprise systems that are accessible from multiple networked sites, NTT West introduced the "Biometrics-enabled IC Card Security System." This system combines biometrics technology, which has gained attention due to its effectiveness in preventing loss or theft of information and as a means to protect personal information, with "ELWISE-CARD," which is an IC card developed by NTT Service Integration Laboratories.

Furthermore, in response to customer needs for security measures to protect not only data files but also web content accessible via browsers, NTT West launched its "Web Contents Protection Service," a service that provides protection for important information (such as customers' personal information) in a company's web-based system. The service accomplishes this by regulating the browsing, storing, and printing of content viewed on a browser.

To enhance its value-added services for Ethernet users, NTT West strengthened the reliability of its "Service Level Agreement" (SLA) by introducing an additional agreement, the "Service Availability SLA," which guarantees a committed level of availability of its network services. This was done in order to meet customer needs for greater reliance on the SLA. Also, in response to demand for the total monitoring of LAN equipment at low cost, NTT West added a "Multi-Equipment Monitoring" function to its existing "Inline Monitoring" service, and adjusted its monthly fees.

Furthermore, NTT West opened its business service center. The center seeks to provide secure, safe, and reliable services to loyal corporate customers that use many of NTT West's business Internet access services, such as leased circuits and Ethernet. The entire process of order acceptance, installation, and support for stable operation is managed in a prompt, flexible, and integrated manner, while achieving smooth multi-point, multi-line connections, prompt repair services, and comprehensive after-sale services, regardless of type of circuit or location.

3. Expanded NTT West Group Operations

NTT NEOMEIT CORPORATION collaborated with NETMARKS INC. to start a new business offering thin-client solutions that increase the efficiency of existing personal computers, by uninstalling the existing hard disk and installing a thin-client module called "NBORN."

NTT NEOMEIT also introduced a secure IP call center service which uses grid technology to enhance the security features of the conventional "AQStage PF IP Call Center Service." The new service protects the identities of individual whose personal information is stored in the call center from being disclosed, by dispersing the data and storing it in distributed multiple servers, thereby mitigating the risk of loss of personal information due to the acts of individuals and system failures caused by disasters and the like.

Furthermore, NTT NEOMEIT launched its "AQStage Wide-Area Ethernet Easy LAN" service, which allows users to create an Ethernet VPN at low cost by combining the FLET'S services provided by NTT East and NTT West with IP capsuling equipment that enables virtual creation of IP Layer 2 (L2).

In addition, NTT NEOMEIT developed and commercialized a concrete pole tester^* that enables the diagnosis of the location and degree of hidden cracks using "ultrasonic waves" without the need for digging to expose the base of the pole. This allows replacement of poles to be done more efficiently, since only impaired poles are replaced. (* This innovation earned the 38th Telecommunication Industry Achievement Award in 2005)

Meanwhile, NTT MARKETING ACT CORPORATION introduced "ACTOS MIMAMORI (WATCH-OVER) EYE," a remote security monitoring service for the elderly (who often live alone in Japan's rapidly aging society), local governments, nursing care service providers, and families. This system installs sensor systems in the homes of elderly people who live alone, so that either other family members or care providers can view the subject's daily living situation remotely via personal computer. An e-mail message can be transmitted to a pre-registered contact should any problem be detected.

NTT MARKETING ACT, together with NTT APPLIE CORPORATION and Dai Nippon Printing Co., Ltd., developed the "ACTOS KIT TAG de OMAMORI (protect) MENU," a system that combines broadband circuit and wireless IC tag technologies to provide support to operators of welfare facilities. The new system was introduced by the NTT MARKETING ACT group companies, primarily to welfare institutions, kindergartens, and nursery schools, as a packaged solution.

NTT MARKETING ACT continued to offer "ACTOS e-MACHI-SHIROU (Find out about your town on the web)", a portal site that provides local community information and 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. NTT MARKETING ACT also opened "CA-RA-REER," a new website that merges the features of job placement services and social networking sites (SNS). This new business model is based on the SNS function, which in recent years has been drawing attention for its web-based content.

4. Measures for Fixed-Line Telephone Services

Faced with widespread use of direct subscriber telephone services using dry copper lines, NTT West addressed the demand for lower rates, and implemented a discount on basic charges (line service charges) for customers who pay a consolidated bill for multiple lines, in order to encourage continued use of NTT West's telephone services.

Less than seven years after its full-scale launch, over five million subscribers signed up for the "Number Display" service, in large part because the service meets the needs of home telephone users who want to know who is calling them, and also because the service improves customer service at phone reception desks in business offices.

5. CSR Efforts

The NTT West Group sees its corporate social responsibility (CSR) as a "value creation" activity, in which the Group improves its corporate value by "increasing social value" for customers, the global environment, and communities, "increasing economic value" for shareholders, and "increasing human value" for employees. The Group created the "CSR Promotion Council," which coordinates the activities of existing promotion committees for social contribution, global environmental protection, and information security, under the president's direct control. Other CSR efforts have included the publication of a CSR Report, information disclosure on the company's website, and a CSR survey given to all employees. Specifically, the Group implemented the following measures:

(1)	Establishment of Corporate Ethics

The NTT West Group has been actively working to reinforce its corporate ethics. During the period, the Group has further intensified its efforts to cultivate high ethical standards under review both officially and privately, and to create a solid corporate culture that protects against fraud and misconduct. Various programs to instill a consciousness of ethics throughout the organization include corporate ethics workshops for all levels of employees including top management and awareness surveys to examine the extent to which these ideas have permeated the company.

(2)	Approach to Global Environmental Protection

In compliance with relevant environmental laws and regulations, and in accordance with the NTT West Group Global Environment Charter, the NTT West Group has been making concerted efforts toward environmental protection, by addressing the reduction of environmental load and by ensuring strict compliance. Specifically, during the period under review, the NTT West Group participated in the "Team Minus 6%" campaign initiated by the central government, which is in line with the Kyoto Protocol. The company viewed this campaign as an opportunity to establish a corporate culture that places emphasis on curbing global warming. The NTT West Group also implemented the "Summer 28 Promotion," a summer program to raise awareness about energy saving across the organization. This program includes the rule of "modest cooling temperature, 28 degrees Celsius," with "light clothing in the workplace" during summer, and the running of a "modest heating (20 degrees Celsius) campaign during winter," in order to reduce power consumption through various electricity-saving measures.

In addition, 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 for each branch or office location to apply for certification independently under its own budget. During the period under review, the Kagoshima branch obtained the certification, the last among the 16 branches in the NTT West region to do so.

(3)	Enhanced Information Security

Now that the Law Concerning the Protection of Personal Information, the need for proper handling of customer information is more important has become fully effective than ever. Against this backdrop, the NTT West Group stepped up its efforts to improve its information management systems and methods, by creating the "Information Security Promotion Center" to provide guidance across all group companies. The NTT West Group also conducted a caravan campaign, as well as on-site inspections of contractors, in order to implement stricter control systems and procedures based on the "Security Guidelines for Protection of Customer Information Held by Contractors."

The NTT West Group's efforts to enhance the protection of customer information have also included training sessions on information protection. The Group also checks employees' level of understanding regarding protection of customer information, through mandatory self-evaluation testing on the Web (those in group companies, and temporary workers, must participate). Finally, the NTT West Group prepares and distributes "Q&As" on the protection of personal information, and "One-Point Advice" that summarizes the precautions users must take.

(4)	Disaster Recovery Operations

To supplement the conventional Disaster Emergency Dengon (Message) Dial "171," a method to record voice messages confirming the safety of people in affected regions, in August 2005 NTT West introduced the "Broadband Disaster Message Board" (web 171), which uses video and text, in order to take advantage of the recent diffusion of the Internet to improve the security, safety and reliability of the Group's services.

For the victims of typhoons and the Fukuoka Seiho-oki Earthquake, NTT West waived the basic fees for the period during which the victims had no access to their telephones due to evacuation orders or to structural damage. For those who were forced to move from damaged buildings to temporary housing, NTT West also waived reinstallation charges.

Furthermore, NTT West has worked to maintain and improve the level of customer services throughout its entire service area. As a part of these efforts, NTT West created a system that reroutes heavily congested telephone calls to the Number "113" (repair service hotline) to the Number 113 centers in less affected regions, as a means to accept as many calls as possible during times of disaster/equipment failure.

In addition, for early detection and repair of facility malfunctions, in June 2005 NTT West set up a system to receive information from customers regarding problems and failures at facilities (equipment service hotline "110"), while developing an organizational structure in the NTT Group that also addresses this goal.

To lay the groundwork for the efforts described above, members of the NTT West Group have constantly worked together to advance the Group's "Customer-First Activities," with the goal of gaining customer confidence in the Group's services.

As a result of the above efforts, operating revenue for the fiscal year amounted to 2029.6 billion yen (down 3.3% from the previous year), and ordinary income amounted to 56.5 billion yen (down 29.5% from the previous year). Net income totaled 32.6 billion yen (down 20.4% from the previous year), marking the fourth consecutive year of positive net income.

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