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1. Summary of Results for Fiscal Year Ended March 31, 2007 |
During the fiscal year ended March 31, 2007, the Japanese economy remained on track for recovery, with improved corporate earnings and increased capital spending, despite the employment situation remaining severe in some sectors.
The information and telecommunications market has undergone substantial changes, with the development of "Triple Play" services that combine Internet access services with IP telephony and video distribution capabilities, and the advancement of IP-based fixed-mobile convergence and the merging of telecommunications and broadcasting. These changes were facilitated by the rapid proliferation of broadband access services and by technological innovation, which has moved Japan closer to the ubiquitous network society which the "u-Japan Policy" and "IT New Reform Strategy" envision.
In the dramatically growing broadband market, in particular, there was a net decrease in the number of ADSL contracts due to the changeover from ADSL to optical broadband access services, which has ushered in the era of a full-scale optical broadband network.
Meanwhile, the fixed-line telephone business environment has become harsher than before, due to more widespread use of mobile phones, as well as declining traffic volume and a decrease in users due to the switch-over to IP phones.
Faced with this drastically changing, competitive market environment, NTT Telegraph and Telephone West Corporation (NTT West) strove to provide high-quality, stable universal service. At the same time, NTT West designated fiscal 2006 as a critical year for achieving the NTT West Group Medium-Term Vision, and stepped up efforts to realign the business structure with optical broadband services at its center, enhance its lineup of access line services, develop attractive applications services and content, and develop solution businesses aimed at contributing to the revitalization and advancement of local communities on a larger scale. In line with this vision, NTT West proactively implemented the following measures: |
1. Development of Broadband Business |
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(1) Expanded Broadband Access Services |
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Since the start of the "FLET'S ADSL" service in December 2000, NTT West has been actively working to augment its broadband access service lineup, by launching "B-FLET'S" in August 2001, "FLET'S HIKARI PREMIUM Family Type," which provides IPv6-enabled high-quality video telephony and security protection as its basic functions, to customers in detached houses in March 2005, "FLET'S HIKARI PREMIUM Condominium Type" for customers in multi-dwelling houses in April 2005, and "FLET'S HIKARI PREMIUM Enterprise Type" for corporate customers, which enables high-quality transmission of a large volume of data at the high speed of 1Gbps, in August 2006.
In addition, with the aim of making broadband access services available to a wider variety of customers on a larger scale, NTT West stepped up marketing efforts to boost sales of "FLET'S HIKARI "(*1) with a focus on "FLET'S HIKARI PREMIUM", by promoting the benefits of triple play services. At the same time, NTT West strove to provide services in response to customer needs, by offering various discount programs on installation and other charges, and making 24-hour support available so that customers can use services with greater peace of mind.
As a result of these efforts, the number of subscriber lines for NTT West's broadband services ("FLET'S HIKARI "and "FLET'S ADSL"), the most important of which is the "FLET'S HIKARI PREMIUM" service, topped 5 million in January 2007 in the western region of Japan. The number reached 5.22 million at the end of March 2007, of which 2.68 million was accounted for by "FLET'S HIKARI" subscriber lines, which exceeded the number of "FLET'S ADSL" subscriber lines.
| (*1) |
A generic term for NTT West's optical broadband services consisting of "FLET'S HIKARI PREMIUM", and "B-FLET'S" services |
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(2) Expanded Broadband Application Services |
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In order to respond to the growing demand for lower telephone charges and higher-quality IP phone services, NTT West expanded its service lineups by introducing "HIKARI DENWA (optical IP telephony service) Business Type" in October 2003 and "HIKARI DENWA" for customers in multi-dwelling houses in September 2004. In June 2006 "HIKARI DENWA Office Type" was added to the conventional service lineup for small and medium-sized businesses. It allows the use of up to 8 channels with a maximum of 32 telephone numbers.
NTT West also launched a new plan, "HIKARI DENWA A (Ace)" in October 2006, as an economical service package that combines the "HIKARI DENWA "service with six additional services. The basic monthly charge for the package includes a maximum 3 hours of calling time.
In January 2006, NTT West also introduced a new application service featuring an IPv6-enabled videophone function, which provides videophone connections to "FLET'S Net Number," a videophone service provided by NTT East, with the aim of providing customers with a higher level of convenience.
In addition, NTT also enhanced the security features of "FLET'S HIKARI PREMIUM" and "FLET'S v6 Appli," as part of its efforts to allow customers to enjoy their broadband environments with an enhanced sense of security.
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 dedicated to FLET'S service users, in collaboration with the Takarazuka Revue Company, The Walt Disney Company Japan, Ltd., and USEN CORPORATION.
NTT West also worked to promote and expand Triple Play services for FLET'S HIKARI PREMIUM users, through ongoing alliances with such companies as OptiCast Marketing Inc., the marketer of multi-channel broadcasting service "Sukapa!-HIKARI", and On Demand TV, Inc., the provider of a video distribution service called "On Demand TV." |
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(3) Efforts to Improve Optical Fiber Broadband Service Quality |
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In response to the major system failure in the "HIKARI DENWA" service that occurred in March 2006, NTT West launched the cross-divisional "Optical Fiber Broadband Service Quality Improvement Project" at its head office in May 2006. This was designed to allow prompt, preventive steps to be taken, including reinforcing the development system, improving network reliability by installing additional equipment, reducing service restoration time, and providing information to customers in a more effective manner, while continuing efforts to improve the quality of optical fiber broadband services. In response to an event that caused connection difficulties, NTT West also set up the "HIKARI Network Quality Evaluation & Improvement Project Team" to reexamine the processing capacity of the entire network and the performance of the equipment, installed additional servers on a priority basis, and rerouted lines for load distribution, in a bid to further improve reliability, on an emergency basis.
In addition, NTT West improved its training programs with the aim of rapidly developing a large number of optical IP engineers, and assigned younger employees in particular to development sections in order to facilitate their technical education. At the same time, NTT West actively worked on the improvement of customer service by providing timely information to customers and customer service sections on the Web, reducing service restoration time by developing a database of breakdowns and congestion, and reinforcing the of responsible departments capacity to respond to breakdowns more swiftly. |
2. Development of Solution Businesses |
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In anticipation of a sharp rise in IT investment by small and medium-sized businesses in the coming years, NTT West expanded its solution business by introducing the "Business Solution Package" that allows customers to reduce communication costs and enhance information security. NTT West also newly established its "Solution Business Promotion System" at its head office and all the branches.
In addition, in response to the growing interest in business continuity planning (BCP)" among corporations and local governments, NTT West launched "BCP Total Solution," a solution package that systematizes planning, implementation of measures, and operational management of BCP activities, while setting up its new "BCP Solution Business Promotion System" at its head office and all branches.
Moreover, in the company's area of operations, there are many places where demand for optical fiber access services is low, such as remote islands and mountainous areas. To help bridge the digital divide in those places, NTT West has actively participated in national and local government initiatives by providing support in the development of community information systems, and delivering proposals based on the use of subsidies and the IRU (indefeasible Right of Use) concept (*2).
Furthermore, in response to the enactment of the Financial Instruments and Exchange Law (the Japanese version of the Sarbanes Oxley Act (*3)) in June 2006, NTT West set up a project to address internal control issues, and launched its "Internal Control Support Solution," a solution package that systematizes support for the documentation, testing, and assessment of internal controls, and the development of information systems.
| (*2) |
IRU: Indefeasible Right of Use, a long-term usage right which cannot be nullified or terminated without the agreement of the parties involved in the contract or agreement. |
| (*3) |
The Japanese version of the corporate reform act passed in the U.S. in July 2002. The act calls for improvement in accounting audit systems, and stricter internal control in corporations, with the objective of preventing accounting fraud and ensuring compliance. |
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3. Expansion of NTT West Group Operations |
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NTT NEOMEIT CORPORATION started the "HIKARI DENWA TEIDEN ANSHIN Service," which allows customers to enjoy uninterrupted use of optical line-based telephone services even in the event of power outage, and also launched a trial service of high-speed PLC (Power Line Communication) (*4).
NTT NEOMEIT also started accepting advance applications for subscription to the "WEBCALLING" service that allows users to make inquiries about products and services on the Internet free of charge.
NTT NEOMEIT also launched "HIKARI MOBILE my PC," a service that allows customers to remotely operate their home and office personal computers. Customers are able to run application programs, check e-mail, browse web sites, listen to music, and view moving pictures, using their mobile terminals while away from home or out of the office.
Meanwhile, NTT MARKETING ACT CORPORATION entered into business tie-ups with Japan Staff Leasing Co., Ltd. and Aso Humaney Center Corporation to expand the service area of its job placement support service for members of the business-based SNS (social networking site) called "CA-RA-REER." The service, which was formerly only available in the Tokyo metropolitan area and Osaka Prefecture, is now accessible to members in all parts of western Japan.
The mobile phone comic distribution site "Comic I," which is operated by NTT SOLMARE CORPORATION, saw the number of downloads of paid content steadily growing to reach approximately 100 million 32 months after the launch of the service, thanks to an increasing number of flat-rate packet plan users, and the expanding mobile comic market.
| (*4) |
a service that enables simplified home networking using domestic power lines. |
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4. Measures for Fixed-Line Telephone Services |
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In the face of a declining traffic volume due to the widespread use of mobile phones, the diffusion of IP-based optical phone services on a full scale, and the advancement of direct subscriber telephone services using dry copper lines, NTT West continued to offer a variety of telephone charge discount programs to attract customers to stay with its fixed-line plans. These plans include "ICHIRITTSU, " a plan that applies a flat rate charge to in-prefecture calls, and "WARIMAX PLUS," a plan that applies a fixed-rate discount to in-prefecture telephone charges exceeding 10,000 yen, NTT West also reduced the charge for the "SANKYU (THANK YOU) DIAL 0039" service that connects a call from a fixed-line telephone to a mobile phone, in January 2007. |
5. Review of Business Operation Structure |
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In order to adapt to a full-fledged optical broadband era, NTT West reviewed its business operation structure in July 2006, in a bid to make a shift in its axis of business operations toward optical broadband services, implement a "completely market-oriented approach," and pursue "improvement in service quality." NTT West reorganized its headquarters operations into a "function-based business promotion structure" that enables the organization to deal with the optical broadband business in a specialized manner, and at the same time set up the "Strategic Project Promotion Headquarters" in order to respond to critical cross-divisional issues more flexibly and swiftly. NTT West also revised its marketing structure, replacing its previous 16-branch structure with an organization consisting of a branch in all 30 prefectures in the western Japan region, in order to promote a community-based marketing approach. Also, in order to adapt to the multi-polar, disbursed market structure peculiar to western Japan, NTT West set up a regional headquarters in each of the Kansai, Tokai, Hokuriku, Chugoku, Shikoku, and Kyushu regions. The regional headquarters are responsible for region-specific strategies and coordination. Further, NTT West consolidated three categories of subsidiary company (responsible for marketing, facilities, and general affairs), which had previously been under the control of each branch, into a newly created regional company to provide a higher level of customer service including the implementation of a flow-through operation system for fiber optic-based services.
Meanwhile, NTT West contracted out the construction, operation, and maintenance of networks collectively to NTT NEOMEIT CORPORATION, in order to enhance and strengthen the operation and maintenance systems for IP-based services, and at the same time, to better respond to diversified employment patterns and improve the level of expertise. Furthermore, NTT West also decided to contract out call center operations including the number 104 service (for directory assistance) to NTT MARKETING ACT CORPORATION, seeking to enhance marketing capabilities, and maintain and improve the level of customer service. NTT MARKETING ACT has also assumed responsibility for on the function of securing, supplying, and developing human resources for call center operations including the number 116 service.
In addition, in March 2007, NTT West newly established NTT WEST-CHUGOKU IT-MATE, NTT WEST-SHIKOKU IT-MATE, and NTT WEST-KYUSHU IT-MATE, which provide temporary staff mainly for system engineering work and repair services for IP-based systems, in the field of NTT West's solution businesses. |
6. Major CSR Efforts |
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The NTT West Group sees its corporate social responsibility (CSR) as a principal pillar of management, and has been constantly developing "value creation" activities, in which every employee works to improve the NTT West Group's corporate value by creating "social value" for customers and the global environment and local communities, "economic value" for shareholders, and "human value" for employees, taking full advantage of the NTT West Group's strengths, technology, resources, and know-how in primary business operations.
Specifically, the NTT West Group reinforced its CSR organization by creating the "CSR Promotion Office" and "CSR Promotion Council," and held seminars for top management, and training workshops for all levels of employees.
The NTT West Group also issued the "NTT West Group CSR Report 2006", and posted this report on the NTT West's official website, to help stakeholders understand the NTT West Group's CSR policies and efforts as well as facilitate communication with customers.
Furthermore, the NTT West Group held training sessions for all levels of employees including executives, to more widely spread and more firmly establish the concept of compliance and the sense of business risk management on which CSR efforts are founded, among people across the organization. At the same time, NTT West set up the "Business Risk Management Promotion Committee," with the aim of cultivating high ethical standards and creating a solid corporate culture that prevents employees from engaging fraud and misconduct. NTT West also introduced a group-wide campaign against drunk driving, in an effort to ensure that nobody drives or allows others to drive while intoxicated.
As for information security, the NTT West Group, in line with the Law Concerning the Protection of Personal Information that came fully into force in April 2005, stepped up its efforts across the organization to enhance protection of customer information. These efforts include holding training sessions for NTT West Group companies to ensure complete implementation of information management, checking system logs and access authorization status, conducting a sweeping inspection of employees' home-use personal computers and other terminal equipment to see whether they store data related to the company's business activities, and implementing web-based employee self-evaluation to check the level of understanding about the risk of file transfer software.
Furthermore, to supplement the conventional Disaster Emergency Dengon (Message) Dial "171 service," which allows callers to check the safety of their families, relatives, and friends in disaster-stricken areas, NTT West began to operate the "Broadband Disaster Message Board (web 171)" service in October 2006.
In the meantime, for customers who were unable to use their telephones for over 24 hours due to building damage caused by heavy rains, typhoons, or earthquakes, or due to evacuation orders or advisories, NTT West waived the basic telephone charges for the affected period. For customers who were forced to move from damaged buildings to temporary housing, and needed to have their telephone sets reinstalled, NTT West waived reinstallation charges as well.
Until recently, NTT West had been providing universal service based on the Law Concerning Nippon Telegraph and Telephone Corporation ("NTT Law"). The increasingly harsher business conditions for fixed-line telephone services, however, made it difficult to maintain universal service based on the management efforts of NTT West alone. Under such circumstances, a new universal service funding system was set up in January 2007, in which telecommunications carriers share the costs and make an appropriate contribution to the fund. Under the new framework, NTT West will also continue its efforts to provide universal service that is equally and stably accessible to everyone.
Also, in order to conduct technological verification, and ascertain customer needs, toward making a secure, safe, and high-quality next generation network (NGN) commercially available on a full scale, NTT West opened a showroom for field trials in Osaka (Umeda) in December 2006. Meanwhile, NTT West has been conducting trials for NTT Group employees since January 2007, and has also been recruiting monitors for extensive trials targeted at general customers starting in April 2007.
In order to lay a solid foundation for these efforts, the NTT West Group has continually strived to secure the confidence of customers, by pushing forward with ongoing group-wide "customer-first activities" so that customers can use its services with a sense of security.
As a result of the above efforts, operating revenue, ordinary income, and net income for the fiscal year ended March 31, 2006 amounted to 1, 951.5 billion yen (down 3.8% from the previous year), 54.0 billion yen (down 4.4% from the previous year), and 28.3 billion yen (down 13.3% from the previous year), respectively, marking the fifth consecutive year of positive net income. |
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