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1. Summary of Results for the Fiscal Year Ended March 31, 2012

With respect to the global economy, in the fiscal year ended March 31, 2012, the European sovereign bond crisis caused further instability in the economies of developed countries, which when combined with the slow-down in the growth rates of emerging economies, lead to an overall slow down in the pace of economic recovery globally. The Japanese economy, despite improvements in supply and demand after the severe conditions following the Great East Japan Earthquake, is experiencing only a modest recovery due to the effects of the sluggish global economy, the protracted period of the strong yen, the damage from the flooding in Thailand and other factors.

Information and communications services are expected to make significant contributions to increasing the efficiency of and invigorating social and economic activities and to improving lifestyle convenience by creating the foundations for a ubiquitous (*1) broadband network society where information communication technology (“ICT”) use is highly developed. The government and the private sector are working in partnership to achieve such goals. The information and telecommunications market is undergoing a structural change through the shift to broadband and globalization, and the spread of smartphones, tablet and other devices. This market is catering to increasingly sophisticated and diversified needs by, among other things, expanding cloud services and platform services, including video and music distribution. Regional telecommunications markets are experiencing an increase in competition for fiber-optic access services and cable television-based broadband. Regional telecommunications markets are also undergoing significant changes, such as the convergence of fixed and mobile services, and of telecommunications and broadcasting, caused by the shift to IP and use of a diverse range of wireless devices.

Within this challenging and dramatically changing business environment, NTT West is striving to be a “customer-oriented corporate group” that meets customer expectations, contributes to society and provides high quality, stable universal service. In line with NTT Group’s Medium-Term Management Strategy, “Road to Service Creation Business Group - full-scale rollout of broadband and ubiquitous service” (the “Medium-Term Management Strategy”) adopted by NTT in May 2008, NTT West has devoted its energy to promoting and expanding safe, secure, reliable, and appealing broadband and ubiquitous services that meet customers’ needs, through new services and products that utilize the framework of NGN (*2) and its networks.

(1) Efforts to Promote Fiber-optic and IP Services

In line with the Medium-Term Management Strategy, NTT West is working towards the realization of broadband and ubiquitous networks that enable customers to connect “anytime, anywhere and with anything” “in comfort, safety and peace of mind.” At the current ten-year anniversary of its launch, FLET’S Hikari subscriptions (*3) surpassed 7 million. NTT West is expanding opportunities to use FLET’S Hikari in a wide variety of applications while developing and expanding services that can support a broad range of customers, from individuals to businesses, in their day-to-day lives and business activities.

With respect to FLET’S Hikari Next, to address the problem of IPv4 address depletion (*4), NTT West began providing IPv6 address (*5) Internet (IPv6 PPPoE and IPv6IPoE) connection functions (*6). With respect to Hikari Denwa services, NTT West enhanced its services, including enabling transmissions to the “Teledome” service provided by NTT Communications, Inc.

To increase use of FLET’S Hikari, NTT West introduced FLET’S Hikari Light, a two-tier fixed rate service with monthly charges starting from 2,940 yen, with a price cap of 5,880 yen no matter how much customers use the service. NTT West also continued its expansion of the FLET’S TV (*7) service area, launched “EHIME-CATV and FLET’S Hikari,” a collaboration with EHIME-CATV, INC., in addition to other measures to enhance video services.

With the rapid increase in smartphones, tablet devices and other Wi-Fi-enabled devices, there is a growing need for Wi-Fi capabilities outside the home and office. To address these needs, and to provide greater convenience to customers, NTT West lowered its monthly rates for FLET’S Spot, a public wireless LAN service, began offering the essentially free use of Wi-Fi through the Club NTT-West (*8) points exchange program, and, starting in February 2012, began expanding the service areas for “Web Authentication Protocols,”(*9) to which access is available with a broad range of handsets, including smartphones and tablet devices.

The “ie deji” concept (referring to the complete digitalization of the home) seeks to make day-to-day living and data sharing easier, more convenient, and more comfortable by linking all digital devices at the home through a network. It also seeks to enable customers to share and enjoy activities that they had until now enjoyed on their own with distant family and friends. As a support service, NTT West began providing the “Hikari Device Warranty,” enabling customers, by paying a flat monthly rate, to apply for an extended warranty of up to five years from the date of purchase of the device covering problems with their PC or television even after the time of purchase.

In addition, with respect to support services that are vital for the promotion of the “ie deji” business, NTT West prepared environments enabling the latest “ie deji” services and devices to be experienced from the perspective of a customer, constructed a research environment within the NTT West Research Center for the purpose of developing technical and customer service skills, and commenced research on wiring methods and new services and devices.

Further, NTT West carried out tests with Daiichikoushou Co., Ltd. and Yamaha Corporation to test the possibility of remote karaoke duets, by utilizing the technologies of “NETDUETTO” of Yamaha Corporation and of FLET’S Hikari and Hikari Denwa of NTT West with the online karaoke machine “LIVE DAM.”

(2) Measures Relating to the Solutions Business

As an initiative for large-scale and medium- to small-scale businesses, on April 1, 2011 NTT West launched a project in the Corporate Marketing Headquarters to make cloud-based business an integral part of the growth strategy for the entire NTT West group.

As part of its initiative to enhance its cloud-based services, NTT West aims to bolster its lineup of “Biz Hikari Cloud” services for local governments and medical and health institution (community) groups, and has begun providing “Biz Hikari Cloud Community Remote Health Consultations,” which enable health consultations in remote areas via videophone. NTT West also launched a cloud-based school support service for boards of education and school employees in elementary and middle schools that do not have servers or other IT resources, enabling them to carry out school-related business over a network.

As an initiative to collaborate with local governments, NTT West launched the Smart Hikari Town Kumamoto Project, as an opportunity to collaborate on the “comprehensive tie-up agreement relating to stimulating areas through the use of ICT” in Kumamoto Prefecture and Kumamoto City, and began looking into town-based cloud networks and services on the premise of participating in actual projects of governments, local companies and residents.

Other measures to expand business services included enhancing support services in order to build a framework of mutual cooperation to achieve one-stop (*10) customer support (for breakdowns and other troubleshooting) for information equipment in the office, by, among other things, forming new partnerships with Canon Marketing Japan, Inc., RICOH JAPAN Corporation, TOSHIBA TEC CORPORATION and Allied Telesis K.K.

(3) Status of Business Operation Structures

With respect to NTT West’s business operation structure, pursuant to the revision of the Telecommunications Business Law (enacted November 30, 2011), NTT West implemented structures for ensuring fair competition.

Further, based on lessons learned from the Great East Japan Earthquake, NTT West has been carrying out disaster training in anticipation of the possibility of a series of earthquakes hitting Japan, for example in the Tokai, Tonan, and Nankai areas. As a countermeasure to the increase in third-party accidents caused by low-hanging telephone lines, NTT West implemented “planned facility inspections” and set priority conditions in determining the order of inspection areas.

In order to strengthen the operations and functions of the Remote Support Service, a service that has been well received for the provision of various forms of support by specialized operators in response to customer inquiries, NTT West made remote support services available on the same day as subscription.

Comprehensive cost controls intended to maintain profitable operations included efforts to raise the efficiency of fiber-optic service installation, such as promoting remote installation work for multi-unit dwelling orders (VDSL system), and NTT West was able to eliminate the need to dispatch personnel in over 90% of service terminations and more than 80% of service starts.

(4) Corporate Social Responsibility (“CSR”) Activities

The NTT Group CSR Charter (adopted in June 2006) stipulates that, as responsible members of the information and communication industry, NTT Group companies will provide services of the highest quality and trust and contribute to the development of a safe, secure and prosperous society where people, society and the earth are connected through communications. Based on the CSR Charter, NTT West set up three new core CSR principles - thorough compliance, development of a safe and secure society, and creation of value through business activities - and set a “visualization” benchmark. Each NTT West employee takes part in CSR activities, including working to maintain legal compliance, providing safe and reliable communication services and reducing the burden on the environment.

In particular, with respect to thorough compliance, NTT Group has promoted groupwide initiatives in five high risk areas that could shake consumer trust in NTT West group companies, namely “misconduct in performing services,” “driving under the influence,” “information security breaches,” “power harassment” and “respect for human rights.”

In order to achieve its environmental grand design (new self-determined action plan targets) based on the NTT Group Environmental Vision (The Green Vision 2020) established in November 2010, NTT West has been working to decrease its power usage, amount of paper used, and the waste it produces. In addition, NTT West has set up model offices in Osaka, Nagoya, and Fukuoka that demonstrate and propose a new work style that makes use of ICT solutions helpful in decreasing the burden on the environment.

To promote the principles of the NTT Group CSR Charter and group-wide CSR activities, NTT West enhanced its CSR management and issued the NTT West Group CSR Report 2011 to proactively disclose relevant information to its stakeholders.

With respect to the Great East Japan Earthquake which occurred in March 2011, NTT West, in collaboration with NTT Group, took immediate action after the earthquake to provide support in supplying power to communications facilities that used mobile power supply vehicles in blackout areas, set up special public phones using portable satellite phones, secured communications for important institutions such as the city halls of local governments, and was active in support activities to restore facilities in areas requested by NTT East, with a focus on the southern part of Iwate Prefecture, such as Kamaishi City and Ofunato City. Approximately 2,000 employees took an active role in restoration and support activities.

In addition, despite record-setting heavy rains in the Kinki and Tokai regions, and major damage caused by Typhoons 12 and 15 to NTT West’s communications facilities, communications services were quickly restored due to close cooperation with local governments and the Self Defense Force and restoration efforts were carried out around the clock by employees from companies throughout NTT Group.

Also, in response to power shortages resulting from the effects of the Great East Japan Earthquake, NTT West implemented the maximum power saving measures possible at both its exchange offices and office buildings.

(5) Financial Standing

As a result of these efforts during the fiscal year ended March 31, 2012, operating revenues totaled 1,676.3 billion yen (a decrease of 4.6% from the fiscal year ended March 31, 2011), operating income was 37.0 billion yen (a decrease of 25.4% from the fiscal year ended March 31, 2011), recurring profit was 42.3 billion yen (a decrease of 32.8% from the fiscal year ended March 31, 2011), and net profit totaled 20.4 billion yen (a decrease of 58.2% from the fiscal year ended March 31, 2011).

*1: A term, derived from Latin, that means “present in all places at all times.” Environments that provide access to the Internet and other information networks, anytime, anywhere.
*2: NGN: Next-Generation Network.
*3: A collective name for FLET’S Hikari Next, FLET’S Hikari Premium and B FLET’S.
*4: Due to the increase of internet users in recent years, the availability of IPv4 addresses, the current Internet standard protocol, are declining, preventing new customers from connecting to the Internet.
*5: Abbreviation for Internet Protocol Version 6, the next version of the protocol after IPv4, the current internet standard protocol.
*6: Method of using PPPoE and IPoE protocols to carry out communications from an adapter newly installed in a customer’s home to NTT West facilities connected to an Internet service provider.
*7: A service available to subscribers of NTT West’s telecommunication services FLET’S Hikari Next, FLET’S Hikari Premium or FLET’S TEREBI Transmission Service, as well as the broadcasting service Opticast Facility Usage Service offered by Opticast Inc., that enables reception of terrestrial broadcasts (digital/analog) and BS broadcasts (digital/analog).
*8: Membership style program (no entry fee or annual fee) of NTT West, under which in addition to receiving Internet support information or Internet troubleshooting via mail or phone, users can also collect points every month that they can exchange for benefits.
*9: Authentication method using an ID (FLET’S Spot Authentication ID) and password (FLET’S Spot Authentication PW) issued by NTT West, which can be accessed by general Wi-Fi compatible devices and is compatible with the IEEE 802.11 a/b/g wireless standard.
*10: Various procedures are processed together at one location.


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