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1. Summary of Results for Fiscal Year Ended March 31, 2008 |
During the first half of the fiscal year ended March 31, 2008, the Japanese economy expanded moderately, with corporate earnings showing a steady increase and personal consumption showing signs of a recovery. However, in the second half, the general economic outlook became skeptical. Businesses were observed to have more cautious attitudes for capital investments and general trends in employment conditions remained severe.
In the information and telecommunications sector, the market is becoming increasingly diverse. There has been an acceleration of efforts relating to the construction of a next-generation network (NGN) to spur the formation of a ubiquitous network society through the use of broadband as envisioned by the "u-Japan Policy", "New IT Reform Strategy", and "Next-Generation Broadband Strategy 2010." At the same time fixed and mobile services and the telecommunications and broadcasting services are converging in conjunction with the increased use of IP-based technologies. Platform-based services such as the distribution of video and music and SNS are also expanding.
In the broadband market, which continues to grow briskly, the number of subscriptions exceeded 28 million and the household penetration rate reached 54.7%, attaining world-leading levels. In the optical access sector, increased opportunities for use and the aggressive deployment of services by each branch office has pushed the number of subscriptions above 11 million, while still expanding our coverage as the preeminent broadband service.
Meanwhile, the fixed-line telephone business environment is becoming increasingly severe as a result of a shrinking market caused by declining traffic volumes due to proliferation of mobile telephones and a rapid shift to optical and IP telephony services.
Under these extremely difficult business conditions, Nippon Telegraph and Telephone West Corporation (NTT West) strove to provide high-quality and stable universal service. At the same time, NTT West is actively undertaking concrete measures to carry out the NTT Group Medium-Term Management Strategy and the NTT West Group Medium-Term Vision, and make a rapid shift of its revenue base from fixed line telephony to optical and IP telephony, through such initiatives as developing the broadband business through the expansion and improvement of optical access services and adoption of advanced functions, developing solution businesses that contribute to the revitalization and development of local communities, constructing and providing a safe and secure NGN that offers greater convenience, and training highly-skilled IP engineers, as explained in details below. |
(1) Development of the Broadband Business
NTT West launched full-scale provision of the B-FLET'S optical access services in August 2001, with the goal of achieving a ubiquitous network society using broadband that enables connection "anytime, anywhere and with anything," Since then, NTT West has expanded and improved optical access services to respond to diversifying customer needs by launching the IPv6-enabled FLET'S Hikari Premium in March 2005, supporting more advanced functions and by improving customer service and creating new usage scenarios.
During the fiscal year under review, NTT West launched the FLET'S Hikari Premium Apartment Type Mini service for small multiple-dwelling residents last September to respond to the needs of customers who were previously unable to use optical access services because of the type of multiple-dwelling residence they live in.
In addition, to enhance customer service, NTT West reduced lead times (the time from application to the start of services) by introducing an Optical Communications Service Instant Management System and further increased customer convenience by launching a service last July that allows customers to select their desired installation date using the FLET'S Web site (http://flets-w.com).
Household internet usage is becoming more commonplace across a variety of situations among all age groups and among both genders, and calls to make broadband more fun and easier are increasing. In response, NTT West established a tie-up with Nintendo Co., Ltd. last November to promote connectivity between the Wii(R) game console and the FLET'S Hikari (see Note 1) optical access service to create new entertainment in the home.
Also, last October, NTT-Neomeit Corporation began providing the Makasete Anshin Service, a 24-hour, 365-day remote support service that provides assistance for connecting to the internet, using email, and connecting peripheral devices such as printers so customers who are unaccustomed to using PCs and the internet can enjoy convenient broadband services fully and with peace of mind.
As a result of these efforts, the number of FLET'S Hikari subscriptions in the NTT West area surpassed 3 million in July 2007 and the number of subscriber lines for NTT West's broadband services (including FLET'S ADSL) reached 6.06 million at the end of the fiscal year under review. |
(2) Development of the Solution Business
While taking market trends of the previous year into account, NTT West aggressively expanded its menu of solution services including services for business continuity plans (BCP) (see Note 2) and responses relating to internal control. Additionally, during the term under review, NTT West expanded its services lineup, including the launch in August 2007 of the Information Security Incident Response Service. Under this service, NTT West analyzes causes and proposes solutions to businesses, local governments, and other organizations when security incidents such as leaks of personal information occurs.
NTT West also supported the efforts of the national and local governments to implement the "u-Japan Policy" by using its expertise to construct information highways and regional intranets, supporting regional information technology promotion projects intended to eliminate the digital divide on remote islands and in remote mountain communities, and proposing outsourcing services to local governmental bodies to increase administrative efficiency.
In addition, NTT West established NTT West-Kansai IT-Mate Co., Ltd. and NTT West-Hokuriku IT-Mate Co., Ltd. to rapidly train IT technology specialists and create structures that can respond immediately to customers through business operations with close ties to local communities. Together with the companies that NTT West established in the prior fiscal year, the entire West Japan territory (six blocks) is now covered. (see Note 3)
To enhance customer service and encourage further expansions in the use of optical access services, NTT West bolstered its ability to provide solutions to small and medium business and small office/home office (SOHO) businesses by establishing the Office Marketing Division at its head office to supplement the current corporate customer marketing structure focusing on medium to large enterprises and by designating sales personnel as "customer attendants."
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(3) Measures Geared Towards the Launch of NGN Services
The field trials that started in December 2006 with the aim of constructing an NGN that will enable customers to use broadband services with convenience and peace of mind were expanded to general customers in April 2007. NTT West is forming tie-ups with businesses in a wide range of fields and working to identify customer needs and make technical checks.
About 5,800 individuals have come to the NOTE (Umeda) trial showroom (see Note 4) where NTT West explained the NGN concept, suggested business and household use scenarios, and displayed applications and terminals that will use the NGN such as high-definition IP video telephones that use high-definition video and stereo sound, security services (mimamori service) that employ caller ID to ensure privacy, and video conference systems that use high-definition video. Approximately 80% of showroom visitors have expressed the view that the NGN will change lifestyles and business.
Based on the results of the trials, NTT West launched the FLET'S Hikari Next commercial service in some areas of Osaka City in March 2008, and in addition to the existing basic services of optical access services, optical telephony services, VPN services, and Ethernet services began providing new services including high-sound quality telephony services that offer clearer audio quality, video telephony with smooth and natural movement, and quality of service (QoS) (see Note 5) functions that ensure the high-quality and stable distribution of content distribution services such as VOD. (see Note 6)
Going forward, NTT West will expand service areas and work to ensure the efficient provision of services while developing new and highly-convenient services that make the best possible use of NGN features including wide-area coverage, high-quality, and high security levels. NTT West is also expanding its service lineup to further raise the appeal of NGN services by developing highly creative services in collaboration and cooperation with a wide range of businesses that make use of the open nature of the NGN.
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(4) Efforts to Train Highly-Skilled IP Engineers
Against a backdrop of continued technological innovation and changes in market environments, NTT West is training and fostering highly-skilled IP engineers to respond accurately to customer needs in a wide range of work fields from networks to access and in-home services.
Specific measures include the launch in April 2007 of the Hikari Professional College, designed to train optical access technology professionals who not only understand the series of processes from planning to implementation and maintenance but can also employ practical skills and intuitive powers, and the establishment in August 2007 of the Information Terminal Professional Course, which trains engineers who can provide one-stop services in response to demands for enhanced IT environments in homes.
NTT West also started establishing "Techno Colleges" in the six blocks of the NTT West territory in July 2007 to foster engineers well versed in the NGN service operations that will serve as the foundations for future services and to improve skills for stable maintenance of existing telephone services.
Going forward, NTT West will continue these initiatives in the future to train and foster highly-skilled IP engineers.
In addition, to ensure the provision of stable communications services to customers, NTT West has already taken measures to maintain and improve the quality and safety of the communications equipment engineering work. Further efforts in this regard included working with cooperating engineering companies to promote "engineering work from the customer's perspective" and "engineering work that emphasizes compliance", and, from November 2007, the opening of Engineering Work Inquiry Centers at each branch office to listen and respond promptly to the engineering work-related opinions and requests of customers to promote equipment engineering work that provides customers with greater peace of mind.
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(5) Major CSR Efforts
The NTT West Group considers its corporate social responsibility (CSR) activities to be a principal pillar of management and makes group-wide efforts to raise corporate value and contribute to the realization of a safe and secure society through the creation of "social", "economic", and "human" value in our core businesses.
Specifically, NTT West adopted the "NTT West Group Stance on CSR" and is working to increase understanding through training and other programs. NTT West also adopted and is implementing "CSR20", an action plan intended to clarify the objectives of activities in day-to-day operations geared towards "practice and establishment", monitor and analyze progress, and make specific improvements.
To ensure compliance and business risk management, the foundations for the promotion of CSR, NTT West established "Corporate Ethics Day" and "Corporate Ethics Reinforcement Month" to foster a high sense of ethics and develop a pervasive organizational culture that does not allow for improper conduct or scandal.
Furthermore, in activities directed towards environmental protection, pursuant to the NTT West Group Global Environmental Charter, NTT West worked to reduce the environmental impact on society of its business activities, products, and services by conducting thorough 3R (reduce, reuse, recycle) activities and promoting reductions in industrial waste including communications equipment. NTT West also undertook activities to fight global warming including reducing electric power consumption used for the provision of communications services and aggressive reductions in electric power consumption by offices through varied conservation policies such as reduced use of air conditioning in the summer (set to 28°C) and heating in the winter (set to 20°C).
In addition to the above activities, measures to bolster the protection of personal customer information included the establishment of a "Customer Information Protection Reinforcement Period", companywide training, on-site inspections of the handling and use of information by service provider companies that handle customer information, and training of service provider executives and employees to raise awareness concerning the protection of customer information and promote proper handling and management.
NTT West also implemented rules to ensure the use of a check list when emails with attachments are transmitted outside the company to prevent inappropriate disclosures of information, and company-wide efforts were made to reinforce the protection of customer information such as mass inspections of the home computers of employees and the employees of service providers to ensure that they do not contain customer or business-related information.
As a member of local society, NTT West contributed to the development of safe and secure communities through the creation of "Customer Support Functions" at 33 branches in the NTT West area to support "daily life restoration" and "business restoration" in the event of a natural disaster such as torrential rain, typhoons or earthquakes, and designed floors in NTT West buildings in preparation for such natural disasters. NTT West also provided a consulting service to local governments and other customers regarding the installation of disaster-resistant facilities for promotion of business continuity plans.
If a disaster occurs, NTT West will work with the disaster response headquarters to restore communications services, allow use of the roofs and some floors of NTT West buildings as evacuation sites, lend phones to disaster victims, and actively conduct other support activities.
To lay a solid foundation for these activities, the NTT West Group continuously strives to secure the confidence of its customers by conducting "customer-first" activities so customers can use its services with a sense of security.
Finally, to enhance the convenience provided to customers, in July of 2007 NTT West began offering a "Dial 104" service that directly connects customers calling the 104 directory service to the requested number. However, the statements in television commercials, newspaper and magazine advertisements, posters in train and subways stations, and advertisements in trains and buses publicizing the service from July to October led consumers to mistakenly believe that the terms of use were considerably more favorable than the actual terms, and NTT West was subjected to an order to remove the advertisements by the Fair Trade Commission pursuant to Article 6, Paragraph 1 of the Law for the Prevention of Unreasonable Premiums and Misrepresentation concerning Products and Services. NTT West would like to apologize sincerely for the inconvenience caused to its customers. In the future, NTT West will implement comprehensive and appropriate measures to ensure that customers can use its services with a sense of security and will continue its efforts to enhance services.
As a result of the above efforts, operating revenues and recurring profit for the fiscal year ended March 31, 2008 amounted to 1,901.2 billion yen (down 2.6% from the previous year) and 24.8 billion yen (down 53.9% from the previous year) respectively, marking a net loss of 37.7 billion yen for the period due mainly to the effect of an adjustment in the amount recorded for deferred tax assets. |
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NOTES:
| 1 |
The generic term for NTT West's optical broadband services consisting of FLET'S Hikari Next, FLET'S Hikari Premium, and B-FLET'S services. |
| 2 |
Business continuity plan: A plan that specifies methods and procedures for continuing business operations in the event of a crisis situation. |
| 3 |
The six companies established as wholly-owned subsidiaries of NTT West's regional companies: NTT West- Tokai TI-Mate (established in March 2006; changed its name to IT-Mate Tokai in July 2007); NTT West-Chugoku IT-Mate, NTT West-Shikoku IT-Mate, and NTT West-Kyushu IT-Mate (established in March 2007); NTT West-Kansai IT-Mate (established in September 2007); and NTT West-Hokuriku IT-Mate (established in December 2007). |
| 4 |
NOTE is an abbreviation of NGN Open Trial Exhibition, open to visitors by appointment only, that was held for one year from December 20, 2006 to December 17, 2007 in Otemachi, Tokyo and Umeda, Osaka. |
| 5 |
Quality of Service: Technologies incorporated in routers and other devices to ensure the high quality of communications. |
| 6 |
Video on Demand: A system for distributing a variety of video programming whenever users request. |
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