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1.Summary of Results for the Fiscal Year Ended March 31, 2013

With respect to the global economy, in the fiscal year ended March 31, 2013, despite the relative stabilization of the U.S. economy, Europe's bond-related economic downturn had a ripple effect on China and other emerging countries, leading to continued economic stagnation. The Japanese economy, despite showing signs of mild recovery mainly from domestic demand stemming from rebuilding after the Great East Japan Earthquake, has shown weakened growth from the effects of the global economic slowdown. However, the outlook for the Japanese economy started to show signs of improvement from December 2012 through the close of the fiscal year in anticipation of the new monetary easing policy adopted by the Bank of Japan.

In addition to the growth of the information and communications market, due to increased Internet usage in conjunction with the increasing shift to IP and broadband services, the market has seen structural changes that transcend the existing framework, including fixed-line and mobile convergence, cloud computing(*1), the development of "smart" televisions, the penetration of high-speed wireless and Wi-Fi(*2)compatible devices in the market, such as smartphones and tablet devices, and the spread of applications that enable free voice and messaging communications.

The market environment, in relation to regional telecommunications is also changing dramatically, with growing competition in broadband service facilities and services centered around the shift to fiber-optic services, the expansion of other new services that leverage various wireless devices and the resulting diversification of customer usage applications, as well as increased off-load(*3)needs resulting from the increase in the amount of transmitted data.

Amidst such a challenging and volatile business environment, and as a responsible standard-bearer for the information and communications industry, NTT East continued to comply with all laws and regulations and social norms and worked to strictly uphold fair competition conditions. At the same time, NTT East aimed to stabilize and strengthen its managerial platform while also providing high quality and stable universal services. NTT East also worked to ensure reliability with respect to social infrastructure, starting with prompt restoration in times of large-scale natural disasters. Furthermore, NTT East moved forward with its initiatives to achieve full-fledged recovery from the Great East Japan Earthquake, promoted various measures to further improve the reliability of its communications networks, and has implemented measures that take into account possible future disasters including an earthquake directly under Tokyo.

In line with NTT Group's Medium-Term Management Strategy "Road to Service Creation Business Group" (the "Medium-Term Management Strategy") adopted by NTT in May 2008, NTT East has devoted its energy to enhancing broadband/ubiquitous environments and to expanding fiber-optic access service user demographics through the provision of new services and products that leverage the next generation network (NGN(*4)), as well as the provision of customer-friendly rate menus that allow longer term usage.

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

Amid intensifying competition with respect to broadband services, NTT East launched new services, which promote the expansion and continued use of "FLET'S Hikari"(*5)and aim to meet customer needs when using their Wi-Fi-compatible devices.

  1. ⅰ.NTT East implemented its largest-ever discount campaign, "Omoikkiri-Wari," for customers who newly subscribe to FLET'S Hikari.

    NTT East also launched the "Ninen-wari" rate plan, which offers discounted monthly charges to multi-dwelling units in addition to single-dwelling units on the condition that users stay subscribed for a period of two years, and also lowered the monthly fee for FLET'S Hikari Light Mansion Type in order to attract more customers.

  2. ⅱ.In response to the spread of smartphone and tablet devices, NTT East launched "FLET'S Hikari Wi-Fi Access," which allows shared wireless LAN access connected by optical networks by multiple users within the same apartment buildings or other small-scale multi-dwelling units. Further, NTT East launched the "FLET'S Odekake Pack," a set that includes, "FLET'S Spot" and "Mobile Data Transmission Service,"(*6)provided by other mobile communications carriers.

    In addition, under an arrangement with the Jiyugaoka Association of Business Commerce, station areas, the shopping districts and stores in Jiyugaoka township in Tokyo have become Wi-Fi areas through the use of "Hikari Station." NTT East contributed in improving the attractiveness of the Jiyugaoka shopping district by providing an environment that enables the transmission of information about Jiyugaoka's shopping district to smartphones and high-speed Internet connections via "FLET'S SPOT."

    Furthermore, under arrangements with local governments and tourism associations in Yamanashi Prefecture, Miyagi Prefecture, Nagano City, Aomori City and elsewhere, NTT East provided Wi-Fi environments to commercial areas which are also accessible to foreign tourists, whose numbers have been increasing rapidly in recent years. As a result, NTT East has enhanced user convenience by enabling people to procure information distributed by tourism centers, stores, and lodging facilities.

  3. ⅲ.NTT East made the "FLET'S MATOMETE SHIHARAI" payment collection agent service, which was previously limited to just information services such as digital content, available for use by businesses that sell products online over the Internet, and for a wider range of products, such as for food and apparel.

    As a result, businesses that sell information services, goods and other products by utilizing the Internet now have the option of providing customers with a new and secure settlement method, in addition to existing methods such as credit cards and payment on receipt, where charges are combined with NTT East's, such as FLET'S service charges.

  4. ⅳ.As a new initiative to support communication between families and persons living apart from their families, NTT East also launched the "Single & Family Support App (miFa)." In addition, NTT East began accepting applications for the "Single & Family Support Rate" that discounts the monthly rate for each "FLET'S Hikari" billing group.

    For "FLET'S Hikari" users, NTT East also announced the launch date of the "FLET'S Azukeru" service, which enables the online storage(*7), sharing and viewing of images, video, and other data via the Internet.

    Furthermore, NTT East commenced the sale of a set of devices that work with "FLET'S Miruene," for which subsidies are available under the "Project Encouraging Deployment of Energy Management Systems (HEMS(*8)Deploying Business)" program from the Ministry of Economy, Trade and Industry. NTT East also launched the "FLET'S Miruene Otegaru Pack (Subsidized)," which includes installation work for the devices.

  5. ⅴ.NTT East has worked to promote subscription to the membership program "FLET'S Hikari Member's Club" intended for FLET'S Hikari subscribers. In February 2013, membership surpassed 4 million.

(2) Initiatives Relating to the Solutions Business

NTT East launched business operations in fields such as local government, medicine, and education, centered around industry-specific solutions that take into account each industry's characteristics and trends, for the satisfaction of its regional customers through the promotion of ICT(*9)utilization.

  1. ⅰ.In the field of local government, given the need for preserving important data, as made evident by the Great East Japan Earthquake, and the heightened needs of cloud customers to transition from "possession" to "use," NTT East launched "Biz Hikari Cloud Safe Server Hosting," a service that lends customers virtual servers in NTT East's cloud platform, and "Biz Hikari Cloud Safe Data Backup," a service that allows customers to back up their data on a cloud platform.

    In order to accommodate the information distribution needs of organizations such as local governments and NPOs(*10), NTT East launched "FLET'S Cast Share," a service that enables easy transmission of images and other data to multiple users at a low rate.

    In addition, NTT East executed a Cooperation and Coordination Basic Agreement with the University of Aizu with the goal of mutually cooperating towards local revitalization and industry creation utilizing ICT.

  2. ⅱ.In the field of medicine, NTT East launched the diagnostic information coordination system "Hikari Timeline," which enables information sharing among medical institutions by gathering electronic medical records of different medical institutions and placing them in chronological order.
  3. ⅲ.NTT East reached an agreement with Microsoft Japan Co., Ltd. to promote ICT utilization by small- to medium-scale businesses in the small office/home office market. In collaboration with Dell Japan, NTT East and Microsoft Japan Co., Ltd. launched a one-stop service that unifies the resources of NTT East and Microsoft Japan, namely the operating systems, applications, and cloud service provided by Microsoft Japan, NTT East's "FLET'S Hikari" and "Office Marugoto Support," together with Dell Japan's latest personal computers and tablet devices.

(3) Status of Business Operation Structure

With respect to business operational structure, in March 2013, NTT East established the "Tohoku ICT Promotion Office" within its Business & Office Business Promotion Headquarters in order to propose and build "Town Disaster Capabilities Enhancement" and "Town Vitalization and High-Speed Conversion," each of which utilize information communications systems, for local governments in the Tohoku Region.

(4) Corporate Social Responsibility Activities

NTT East considers Corporate Social Responsibility ("CSR") activities to be one of the most important pillars in the management of the company. NTT East believes that it is the social responsibility of a company to contribute to the environmentally-friendly, healthy and sustainable development of society. To this end, pursuant to the NTT Group CSR Charter (adopted in June 2006), NTT East sought to comply with the law and address its efforts towards reducing the environmental burden of its operations.

  1. ⅰ.NTT East continued to direct its efforts towards compliance with laws and regulations to ensure fair competition, protect personal information, make correct representations in advertising, and regarding the dispatch of workers. In addition to the efforts undertaken to date, in particular, in light of the arrest of an employee in March 2012 on suspicion of violating the Act concerning Nippon Telegraph and Telephone Corporation, etc. ("NTT Law"), NTT East worked to enhance awareness of corporate ethics by once more implementing thorough employee training for all workers at all work places of the NTT East Japan Group regarding the intent of the NTT Law and the importance of compliance.
  2. ⅱ.In view of the national state of supply and demand of electricity during the summer season, NTT East worked, as it did in the last fiscal year, to save electricity used by communication facilities to the greatest extent possible while ensuring the maintenance of communications services. NTT East's goal was cutting peak electricity consumption by 30% or more in offices compared to the 2010 fiscal year.

    NTT East also worked to save electricity in the winter season, particularly in the Hokkaido Electric Power area.

  3. ⅲ.NTT East actively promoted diversity efforts based on the view that fostering and utilizing diverse personnel leads to new innovation and the strengthening of corporate capabilities. NTT East identified diversity management as an important management strategy, and pursuant to its diversity vision, "Turn brightness into power. Turn motivation into innovation," worked to support employee career development and to promote work/life balance. Also, in order to help employees successfully carry out work and child-rearing responsibilities, NTT East established "DAI★KIDS Hatsudai," an in-office child care center, in the head office building.
  4. ⅳ.To promote the principles of such CSR activities, NTT East issued the NTT East Group CSR Report 2012, among other things, to proactively disclose relevant information to its stakeholders.

(5) Efforts towards Full-fledged Restoration from the Great East Japan Earthquake

  1. ⅰ.In efforts directed towards full-fledged restoration from the Great East Japan Earthquake, NTT East worked to further improve service reliability, including ensuring the reliability of relay transmission lines (inland route detours to avoid tsunami areas and under-river cables), relocating destroyed or washed-away buildings to higher ground, improving water-resistance of flooded communication buildings and replacing degraded batteries.
  2. ⅱ.Utilizing the lessons learned from the Great East Japan Earthquake, NTT East increased the storage capacity of messages in terms of number and storage time of the Broadband Disaster Message Board (web171), linked the mobile and PHS versions of the disaster message board services together, and added certain functions such as the ability to provide message registration details via email and voice. NTT introduced this service as the Web171 Disaster Message Board.
  3. ⅲ.In addition to the foregoing, as countermeasures against future disasters, NTT East implemented a drill in October 2012 where employees assembled at the head office as part of preparations in anticipation of a disaster on a non-working day, and in February 2013, as part of preparations in anticipation of a suspension of head office building functions following a disaster, NTT East implemented drills for alternate gathering points and an alternate headquarters launch.

(6) Financial Standing

As a result of these and other cost reduction efforts during the fiscal year ended March 31, 2013, operating revenues totaled 1,831.7 billion yen (a decrease of 1.1% from the fiscal year ended March 31, 2012), operating income totaled 65.0 billion yen (an increase of 29.3% from the fiscal year ended March 31, 2012), recurring profit was 88.8 billion yen (an increase of 18.2% from the fiscal year ended March 31, 2012), and net income totaled 52.8 billion yen (an increase of 64.3% from the fiscal year ended March 31, 2012).

  • *1A new form of computer network usage where users can access data services and Internet technology contained in a group of servers on a network "from wherever, whenever needed, and only for the functions needed" without processing or saving data on their own computers.
  • *2An abbreviation for Wireless Fidelity. This is a brand name for ensuring compatibility, so that when "IEEE802.11a/b/g/n," a wireless LAN standard of measure, is loaded onto a product, it can operate reciprocally with devices having a different IEEE802.11a/b/g/n.
  • *3A mechanism for lightening the load on a given system by splitting processing among other systems.
  • *4An abbreviation for Next Generation Network.
  • *5A collective name for FLET'S Hikari Next, B FLET'S, FLET'S Hikari Light and FLET'S Hikari Wi-Fi Access.
  • *6A data communications service that uses the reception of a mobile telephone to connect a personal computer or other device to the Internet.
  • *7A service that lends disk space for saving files on the Internet.
  • *8An abbreviation for Home Energy Management System, a system for supporting home energy management.
  • *9An abbreviation for Information and Communication Technology, referring to technology in the information and communication industry.
  • *10An abbreviation for Non-Profit Organization. This is a collective term for groups that carry out various activities to contribute to society and are not organized for the purpose of distributing earnings to the group's members.