1. Summary of Results

[Overview of Interim Financial Status]
-Summary of Results-

During the first six-month period of the fiscal year ending March 31, 2008, the Japanese economy improved and capital investment increased while corporate business sentiment remained cautious. A gradual recovery was observed as evidenced by the improvement in employment.

In the information and communications sector, continued efforts were made to achieve the ubiquitous broadband society envisioned by the government's "u-Japan Policy" and "IT New Reform Strategy". To that end, accelerated progress was made in the introduction of broadband and mobile services and in the building of next-generation networks, while other factors also helped to bring about dramatic changes to the structure of the market, including alliances between information and communications companies, the collaboration of communications and broadcasting, and the convergence of fixed and mobile services.

While there was a net decrease in the number of DSL subscribers, because of the accelerated increase in the number of optical broadband service subscribers, the broadband service market continued to expand. In addition, there was a rapid growth in net-related businesses, such as full-blast launch of triple-play services that provide Internet access, IP telephony and video services on a single broadband line, and consumer-initiated media such as video-sharing sites and social networking services1. In the telephone market, in addition to the existing competition for telephone services, developments such as advances in mobile phones and optical IP phone services led to full-scale and intensified competition for subscribers to mobile, optical IP telephone, and other types of access line services.

Amid this business environment, Nippon Telegraph and Telephone East Corporation (NTT East) has endeavoured to provide high-quality and stable universal service, while striving to achieve the goals of the NTT Group's Medium-Term Management Strategy, announced in November 2004, primarily focused on the establishment of a next-generation network. To that end, with regard to networks and customers' information communications environment, NTT East has endeavoured to expand its broadband communication business by meeting its customer needs, by continuing the provision of safe, reliable and attractive services, and be coming an all-round ICT2 corporation patronaged by many and familiar to all.

Specifically, to enable more customers to use its B FLET'S optical broadband service, NTT East has sought to boost sales by offering a series of discounts, such as discounts on monthly charges and for installation fees, and has worked with local governments and communities to actively expand its service coverage areas. In addition, NTT East formed partnerships with video transmitting enterprises transmitting contents such as multichannel broadcasting and VOD3. To enhance security measures designed to counter the ever increasing threat of computer viruses, vigorous efforts were made to increase the sales of FLET'S VIRUS CLEAR and FLET'S HOME SECURITY was launched to enable users to remotely surveil their homes through broadband access lines and network cameras. In such manner, NTT East has been making efforts to expand the use of safe, convenient, optical broadband services with high added value.

As part of its efforts to enhance customer services, the B FLET'S installation lead-time was shortened, customer supports for new subscribers as well as engineering work for opening a line were made available on non-business days, and Hikari Support Center, a customer support service which functions as a one-step shop to solve problems for Hikari Denwa service users, were augmented. In addition, a One-Stop After Sales Service was brought into full-scale operation for B FLET'S users providing an equipment-rental service to enable Hikari Denwa to be used even during power outages and providing a support service for solving problems in network, personal computers, routers and other peripheral equipment. This service is provided on a one-stop-shop basis for both on-site support and remote support by telephone. In these and other ways, NTT East has been taking steps to enhance services to give customers greater security as it promotes the further expansion of optical broadband services.

In the corporate service sector the company has actively developed security, video-images, data center, CTI/CRM4, and other solutions to help businesses and local governments to enhance the efficiency of their operations and to allow them implement new business strategies. Of particular note is that in the burgeoning market for data center business, steps have been taken to transform idle real estate into data centers.

In preparation for the full-scale launch of Next Generation Network (NGN), which will offer higher connection speed and a greater security and reliability, while being able to access at anytime, anywhere, in March 2008, field trials began in December 2006. The trial was extended to home users in April 2007 to enable customer needs to be assessed. Based on these field trials and through alliances with companies in a broad range of fields, NTT East proceeded next to build a rich communication environment and to create new business opportunities, by providing high-capacity, high-quality video distribution services and real-time two-way video communication services, plus a variety of services such as information-distribution business using information home appliances. NTT East has also worked to establish a business administrative structure for the coming Optical-IP era by the centralization of charging units and 116 centers, and by increased outsourcing. In addition, NTT has enhanced its marketing activities tailored more carefully for Tokyo-area corporate customers. In an effort to further improve service by refinement of customer services to meet diversifying and sophisticated needs of customers. In October 2007 an Office Business Department was established in the Tokyo branch and in the five prefectural companies within Tokyo5, and a new company-NTT East Solution Corporation6-was established. NTT EAST has also worked to build a stable and enhanced management infrastructure by reducing non-personnel expenses and by making a use of idle real estate assets to increase operating efficiency, aiming to achieve flexible business operations that are responsive to changes in the business environment.

In line with its commitment to create a safe and prosperous society, NTT East placed corporate social responsibility (CSR) as one of its major pillar of its business operations. Based on the "NTT Group CSR Charter" drawn up in June 2006, while NTT East will without saying comply with legal requirements including the protection of personal data, it has also been actively promoting activities that give serious consideration not only to economic aspects but also to environmental and social aspects contributing to society and local community. Specific initiatives to enhance CSR management have included the formulation, in April 2007, of the "NTT EAST Group CSR Code of Conduct," which serves as a guideline for the CSR activities of every individual employee.

Steps taken for times of disaster included company-wide efforts for the swift restoration of communications equipment and services in the aftermath of the earthquake offshore Chuetsu in Niigata Prefecture in July this year. In addition, the company provided means of making contact by installing emergency public telephones and operating its "171" disaster message number and its "web171" broadband disaster message service. Other means by which NTT East played a part in helping disaster victims from the standpoint of an information and communications provider included waiving the payment of standing charges for customers during the period in which they were unable to use phones for such reasons as equipment damage caused by the disaster, and providing the Dial Q2 service for no charge to broadcasters when soliciting contributions for disaster victims.

As a result of these efforts, as of September 30, 2007, the number of subscribers to the B FLET'S service stood at 4.21 million (an increase of 810,000 from the end of March 2007), and the number for Hikari Denwa stood at 2.37 million (an increase of 670,000 from the end of March 2007). With regard to general telephone services, the number of subscriptions at the end of September totaled 20.45 million (a decrease of 910,000 from the end of March 2007), and with regard to INS Net services the number for INS Net 64 was 3.17 million (a decrease of 190,000 from the end of March 2007).

Operating revenues in the first six-month period of the year ending March 31, 2008 totaled 981.8 billion yen, (down by 3.1% from the same period of the previous year), recurring profit totaled 46.2 billion yen (down by 9.6% from the same period of the previous year), and net profit was 73.1 billion yen (up by 106.3% from the same period of the previous year).

In May 2007 there were technical failures in Hikari Denwa and other services, and NTT East deeply regrets the considerable trouble and inconvenience caused to customers as a result. The company has responded by taking prompt measures, including the shortening of the time required to restore service, and by upgrading of processing capabilities of IP transmission devices. NTT East will continue to make efforts to enhance reliability by taking steps to prevent any recurrence of such failure and ensuring stable operations, and by reinforcing the ability of the technical staff responsible for IP-related services.

With respect to the series of major leakages of information that occurred in September this year, NTT East expresses its utmost regrets for the considerable trouble caused to customers and all others affected. It has long been company policy to prohibit the unauthorized removal of business-related files from company premises and NTT East has been using fingerprint verification to control access to servers on which customer information is stored. All employees have been trained and made thoroughly aware of the requirements for handling personal information, and the company has been committed to the protection of such information. NTT East has taken a very serious view of the occurrence of these recent incidents, and has taken steps to ensure stricter control of the handling of personal information, which includes restriction of in-house personal computers' links with external recording equipment through an introduction of software to prevent any outflows of confidential information, and by once again subjecting employees to rigorous courses of training on this subject.

Notes

1: Membership-based community sites that promote and support personal connections.
2. ICT: Information and Communication Technology.
3. VOD: Video On Demand. A system in which various video content is transmitted when the user wishes to see it.
4. CTI: Computer Telephony Integration. A technology that enables the integration of telephone and fax networks on a computer system.
CRM: Customer Relationship Management. A method by which companies use information systems to build long-term relationships with their customers. Refers to integrated customer management systems that include CTI.
5.
NTT East-Tokyominami Corporation (Head office: Minato-ku, Tokyo; President: Masayuki Yamamura)
NTT East-Tokyochuo Corporation (Head office: Chiyoda-ku, Tokyo; President: Satoru Kono)
NTT East-Tokyokita Corporation (Head office: Shinjuku-ku, Tokyo; President: Yoichi Suzuki)
NTT East-Tokyohigashi Corporation (Head office: Taito-ku, Tokyo; President: Hiroshi Hoshino)
NTT East-Tokyonishi Corporation (Head office: Tachikawa-shi, Tokyo; President: Kazuo Sobue)
6. NTT East Solution Corporation (Head office: Bunkyo-ku, Tokyo; President: Toyoaki Ukita) Established September 4, 2007.


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