III. Carrying out NTT Group Structural Reform

NTT East and NTT West are already carrying out a Mid-term Restructuring Plan, announced November 1999, by which they will (a) reduce the number of employees by 28,000 from the time of reorganization to the end of fiscal 2002, (b) reduce capital investment by 900 billion yen, and (c) introduce a performance-based personnel and wage system (from April 2001). (See Attachment 7)


In addition to these measures, the NTT Group plans for a fundamental structural reform as outlined below, aimed at the cost structure reform of NTT East and NTT West. Negotiations on the labor conditions are now taking place with labor representatives toward an agreement before year-end. The specifics of the plans and the expected benefits in terms of improved earnings, etc., will be announced later.

1. Reducing personnel costs by adopting a fundamental outsourcing strategy, and by diversifying employment types
Around half of the NTT East and NTT West employees (approx. 60,000), or around 100,000 employees when personnel of existing subsidiaries are counted, will be transferred to outsourcing companies. (See Attachment 8)
A system will be introduced whereby those transferred employees aged 51 or over will be retired from NTT East and NTT West and rehired by the outsourcing companies with a 15 % to 30% reduction in their wage levels.

2. Further carrying out of personnel reallocation within the Group
Reallocation from NTT East and NTT West to Group companies will be expanded from the original plan of 4,000 to around 6,500 employees.


In spite of the above moves, if changes in market structures are more drastic than foreseen at this time, even if the interconnection charge level should be based on the current long-run incremental costing model, it may become necessary from a financial standpoint (a) to reduce capital investment even further, (b) to reduce spending on core R&D, and (c) to sell off assets, etc., all of which could present obstacles to the future deployment of optical services and maintaining of universal service.


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