1. Summary of Results for Fiscal Year Ended March 31, 2008

1. Summary of Results

Overall Business Conditions

During the fiscal year ended March 31, 2008, the Japanese economy continued to expand at a moderate pace supported by strong corporate performance, but fluctuations in the stock and currency exchange markets triggered by the subprime mortgage crisis in the United States as well as changes in oil prices resulted in weak corporate earnings and flat capital investment, and improvements in employment came to a standstill. As a result, cautious views concerning economic recovery have become more widespread.

In the information and telecommunications sector, market structures continued to undergo drastic changes as collaboration between telecommunications and broadcasting and the convergence of fixed and mobile services increase. Rapid advances in the use of broadband and mobile networks and efforts for construction of the next-generation network ("NGN") accelerated towards the realization of the ubiquitous network society envisioned by the "u-Japan Policy" and the "New IT Reform Strategy."

In the broadband market, while a net decline was seen in the number of DSL subscribers, the expansion of optical access services continued. In addition, new services such as the full-scale roll-out of triple play services that provide integrated Internet access, IP telephony and video services, the peripheral network business known as consumer generated media, such as video sharing sites and social networking services (see Note 1), and new services that use information devices and wireless devices developed rapidly. In the fixed-line telephone market, competition with the direct subscriber telephone services of other companies using dry copper lines has intensified, and competition has started among fixed-rate services for calls between mobile phones and among services that integrate fixed and mobile telephony.

Under this drastically changing business environment, Nippon Telegraph and Telephone East Corporation ("NTT East") endeavors to be an "accessible all-around ICT corporation" (see Note 2), which provides high-quality and stable universal service that maintains loyal patronage from its customers. NTT East has been devoting its energy to expand safe, secure, reliable, and appealing broadband services that meet customer needs, including the provision of services and products such as "FLET'S Hikari Next," a full-scale commercial NGN service, while striving to achieve the NTT Group Medium-Term Management Strategy announced in November 2004.

(1) Promotion of Optical and IP Services
To provide full-scale NGN services on a commercial basis in furtherance of the NTT Group Medium-Term Management Strategy, in April 2007, NTT East began expanding the field trials that started in December 2006 to include general customers, and collaborated with businesses in a wide range of fields while making its efforts to understand its customer needs. Based on the results obtained through these actions, NTT East began providing the "FLET'S Hikari Next" service on a commercial basis in March 2008 in certain areas of Tokyo, Kanagawa, Chiba and Saitama Prefectures. In addition to the provision of services equivalent to the existing optical access, optical IP telephony, VPN and Ethernet services, new services were launched that enable the use of the high-quality voice communication and video telephone which are attributes of the NGN, as well as bandwidth-assured additional services that enable customers to enjoy VOD and other content distribution services at a higher level of quality and stability (see Note 3).

NTT East will continue to direct its efforts toward enhancing its service lineup in ways that increase the appeal of the NGN, including through the development and provision of new and convenient services that maximize the attributes of the NGN, such as wide bandwidth, high quality, and high security levels, and will continue to promote activities designed to create rich communications environments and new business opportunities.

To encourage more customers to subscribe to the B FLET'S optical access service, NTT East worked to increase sales by adopting a variety of discount plans for monthly fees and installation fees, and actively to expand service areas through collaboration with local governments and residents.

In addition, NTT East took measures to increase sales by providing new usage scenarios for optical access services, including the formation of a tie-up with Nintendo Co., Ltd. to promote connectivity between the Wii(R) game console (see Note 4) and B FLET'S. NTT East also actively took measures to expand and increase the use of high added-value services that provide customers convenience and peace of mind by using optical access, by collaborating with businesses that provide a variety of video services, such as multi-channel broadcasting and VOD, and by launching services such as FLET'S Home Security that enables users to remotely monitor their homes via a mobile phone using network cameras.

In order to improve customer service, NTT East took further measures to reduce lead times before the start of B FLET'S services and now proactively accepts applications and performs installations on Saturdays and holidays. NTT East also launched the "B FLET'S Hyper Family Type Advanced Support" to respond to inquiries regarding B FLET'S Hyper Family Type Service on a 24-hour, 7-days-a-week basis, and expanded the Hikari Support Center to provide one-stop solutions to inquiries and requests from users of the Hikari Denwa service. Moreover, NTT East reinforced its security measures against threats such as computer viruses that are increasing in prevalence day by day, by actively marketing its "FLET'S Virus Clear" service and launched a rental service for hardware that allows the Hikari Denwa service to be used even during a power outage. NTT East took additional measures to expand use of optical access services that customers are able to use with peace of mind. This included the full-scale provision of "One-Stop After-Sales Service", offering at-home support and remote support via telephone for B FLET'S users for problems relating to connection between the network and PCs and peripheral devices such as routers.

(2) Measures Relating to the Solution Business
In the corporate business sector, NTT East aggressively marketed a variety of solutions including security, video, data centers and BCPs (see Note 5). Some of the specific solutions are the launch of "Keyword-Designated File Search and Deletion Solutions" for prevention of information leaks and promotion of the data center business, an area of market growth, such as "Ephelio DR" (see Note 6), a BCP solution for medium-size businesses. NTT East also provided support to local governments and businesses in preparing business contingency plans for events of disaster and information security countermeasures, enhancing business efficiency and developing new business strategies.

(3) Status of Business Structures
With regard to business structures, NTT East bolstered region-focused marketing activities targeting corporate customers in the Tokyo area by creating "Office Sales Departments" at Tokyo branches and five local subsidiaries (see Note 7) in October 2007, and establishing NTT East Solutions Corporation (see Note 8) to provide tailored responses to advanced and diversifying solution needs. NTT East also consolidated billing departments and 116 Centers, increased outsourcing, and aggressively increased cost efficiency and utilization of idle real estate. These efforts were directed towards stabilizing and reinforcing NTT East's managerial base by improving managerial efficiency, and towards developing flexible business operations that promptly respond to changes in the business environment.

(4) CSR Activities
NTT East regards CSR (corporate social responsibility) activities geared towards the development of a safe, secure, and prosperous society as a major pillar of business operations within the NTT East Group. Based on the NTT Group CSR Charter adopted in June 2006, NTT East not only complies rigorously with legal requirements, including the protection of personal information, but also conducts business activities taking into consideration economic as well as environmental and social factors, including contributions to society and local communities. Specifically, NTT East adopted the NTT East Group CSR Code of Conduct to serve as a guideline concerning CSR activities for each of its employees and took other measures to reinforce CSR-oriented management. NTT East also proactively disclosed information to stakeholders, such as by publication of the NTT East CSR Report 2007.

Regarding natural disasters, some of NTT East's undertakings included company-wide efforts to quickly restore communications facilities and services following the Chuestu earthquake in Niigata Prefecture in July 2007. For example, means of communication such as the installation of temporary public phones and operation of "171" and "web171" telephone and broadband disaster message center services were provided, and monthly fees for customers who were unable to use their telephones due to equipment damage for the unusable period and fees for Dial Q2 programs that solicited contributions for disaster victims were waived. Through such activities, NTT East played a role as a telecommunications carrier in supporting the victims of this disaster.

Also, immediately following the earthquake, NTT East distributed disaster relief supplies such as emergency food via its Niigata branch in response to requests from Kashiwazaki City and Kariwa Village.

In addition, NTT East deeply regrets and would like to offer its sincere apologies for the considerable inconvenience it has caused to customers and other affected parties when technical failures of Hikari Denwa and other services occurred in May 2007 and also for the series of large-scale information leaks in September 2007.

With regard to the outages of Hikari Denwa and other services, the company took prompt measures including reducing the restoration time of services and upgraded the processing capabilities of IP transmission equipment. Going forward, NTT East will continue to make company-wide efforts to enhance reliability by taking steps to prevent any recurrence of such failures and to ensure stable operations, by improving and reinforcing the training of engineers responsible for IP-related services.

Concerning the information leaks, NTT East has long prohibited unauthorized removal of business files from company premises and has used fingerprint verification to control access to servers on which customer information is stored. All employees have been trained and are made thoroughly aware of the requirements concerning the handling of personal information, and the company is committed to the protection of such information. NTT East takes these recent incidents very seriously and has taken additional steps to ensure stricter control of personal information handling including restricting links between in-house PCs and external recording equipment through the introduction of software to prevent leaks of confidential information and by re-implementing rigorous employee training on this matter.

Finally, with regard to the directory information business, in July 2007, NTT East began offering "Dial 104", a service that directly connects customers calling the 104 directory service to the requested number, to enhance the convenience provided to customers and to secure income from directory information services. However, statements in television commercials, newspaper and magazine ads, posters in train and subway stations, and ads on trains and buses publicizing the service from July to October 2007 led some consumers to mistakenly believe that the terms of use were considerably more favorable than the actual terms. Consequently, NTT East was subject to a retraction order 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 East deeply regrets and would like to offer its sincere apologies for the inconvenience caused to its customers. Going forward, NTT East will implement comprehensive and appropriate measures to ensure that customers can use its services with peace of mind and will continue its efforts to enhance its services.

(5) Sales Conditions
As a result of these activities, operating revenues for the fiscal year ended March 31, 2008 totaled 2,002.7 billion yen (down 2.8% from the previous year), recurring profit was 67.4 billion yen (down 25.3% from the previous year), and net profit totaled 96.8 billion yen (up 14.9% from the previous year).
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Notes:
1. Community-type membership services that promote and support interpersonal contacts.
2. ICT: "Information and Communication Technology."
3. VOD: "Video on Demand." Refers to systems and services that distribute a variety of video programming that can be seen when the customer wants.
4. Wii is a registered trademark of Nintendo Co., Ltd.
5. BCP: "Business Continuity Plan." A business strategy designed to protect a company in the event of disaster by preventing a suspension of major business operations, resuming operations as quickly as possible if they must be suspended, and preventing the loss of customers to competitors, declines in market share, and decline in corporate value during a suspension of operations.
6. Ephelio is a general term for NTT East's total outsourcing services for the complete provision of business system design, construction, maintenance, and operation services to customers. "DR" stands for disaster recovery. This is a general designation for operational systems believed to be necessary for continuing business operations in the event information systems are damaged by disaster.
7. NTT East-Tokyominami Corporation (based in Minato-ku, Tokyo)
NTT East-Tokyochuo Corporation (based in Chiyoda-ku, Tokyo)
NTT East-Tokyokita Corporation (based in Shinjuku-ku, Tokyo)
NTT East-Tokyohigashi Corporation (based in Taito-ku, Tokyo)
NTT East-Tokyonishi Corporation (based in Tachikawa-shi, Tokyo)
8. NTT East Solutions Corporation (based in Bunkyo-ku, Tokyo; established on September 4, 2007)


2. Systems for Ensuring Proper Conduct of Business Affairs

NTT East's board of directors adopted a basic policy concerning the maintenance of internal control systems within the NTT East Group. The substance of this basic policy is set forth below.

Although there were incidents involving leaks of information and NTT East was subject to a retraction order from the Fair Trade Commission regarding statements and advertisements for the "Dial 104" service, the Audit and Compliance Office, which acts as an internal audit organization, confirmed that internal control systems are functioning effectively after conducting audits of the NTT East head office and branches and group companies and implementing corrective measures and improvements as necessary.


<Basic Policy on the Maintenance of Internal Control Systems>

I. Basic Approach on the Maintenance of Internal Control Systems
1. NTT East will maintain a system of internal controls including measures for the prevention and minimization of losses with the objectives of ensuring compliance with legal requirements, managing risks, and achieving proper and efficient business operations.
2. NTT East will establish an Audit and Compliance Office to oversee the establishment and maintenance of internal control rules and systems. The Audit and Compliance Office will evaluate the effectiveness of the internal control system based on audit reviews and audits regarding high risk matters affecting the entire NTT East Group, including audit items affecting all NTT Group companies as instructed by NTT, and will implement necessary corrective measures and improvements.
3. NTT East will also take appropriate measures in collaboration with NTT to ensure the reliability of its system of internal controls based on the U.S. Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley Act) Sections 302 (disclosure controls) and 404 (internal control over financial reporting).
4. As the chief executive officer, the president of NTT East will be responsible for ensuring the establishment, maintenance and operation of the system of internal controls.

II. Development of the Internal Control Systems
1. Systems to ensure that the performance of duties by directors and employees conforms with laws and regulations and NTT East's Articles of Incorporation
NTT East has implemented the following measures with the objective of ensuring that its business is conducted in compliance with the law and in accordance with high ethical standards:
(1) Employment rules and regulations require employees to adhere faithfully to applicable laws, regulations, and official notices and to devote all their energies to the performance of their duties so that business activities may be carried out appropriately and effectively.
(2) In accordance with the NTT Group Corporate Ethics Charter, all directors and employees of the NTT will endeavor to strengthen corporate ethics within the NTT East Group.
(3) A Corporate Ethics Committee chaired by a senior executive vice president was established to clarify the structure of responsibilities for corporate ethics, including developing and promoting corporate ethics within the organization, raising awareness concerning compliance, maintaining corporate discipline, and conducting investigations concerning reports of misconduct.
(4) An internal helpline was established to foster a more open corporate culture and provide a forum for personnel to report and consult on internal ethics issues. In addition, an external group-wide Corporate Ethics Helpline staffed by attorneys was created for personnel to report and receive consultation on ethical issues.
(5) Corporate ethics training is conducted as part of continuous educational activities for officers and employees. In addition, corporate ethics awareness surveys are conducted to improve and reinforce internal checks.

2. Regulations and other systems concerning business risk management
NTT East takes the following measures to manage business risks appropriately:
(1) NTT East established a Business Risk Management Committee, headed by a senior executive vice president, to clarify responsibilities concerning management of business risks and to perform crisis management in response to new business risks affecting corporate operations.
(2) NTT East formulated a Business Risk Management Manual with the goal of promoting a unified risk management system for the entire NTT Group focusing on preventing and preparing for risks, and positioning the NTT Group to respond appropriately and rapidly as risks materialize.

3. Systems for ensuring that directors perform their duties efficiently
NTT East has taken the following measures to ensure that its business activities are managed efficiently through appropriate allocation of responsibilities among directors and maintaining an appropriate oversight structure to monitor such matters:
(1) NTT East has adopted organizational rules governing the functions and operations of internal organizational groups, and responsibility regulations setting forth the allocation of responsibilities among the various organizational groups.
(2) NTT East has adopted board of director regulations governing the function and responsibilities of the board of directors. In principle, the board of directors holds meetings once each month, and is responsible for decisions on important matters pertaining to management on the basis of applicable laws and regulations, business judgment principles, and other considerations including the duty of care of a good manager. Directors report regularly to the full board of directors concerning the status of implementation of their duties.
(3) NTT East has established executive committees and subcommittees for the purpose of considering and deciding important matters pertaining to the management of NTT East and the NTT East Group.

4. Systems for custody and management of information relating to the performance of duties by directors
NTT East has adopted the following measures to facilitate appropriate and efficient conduct of business activities through the proper management of information relating to the performance of duties by directors:
(1) NTT East has adopted document retention regulations and rules on information security setting forth matters necessary for the management of documents (including related materials and information recorded on electronic media, referred to as "Documents") and other information.
(2) Documents shall be retained for the periods required by law and as necessary for business operations.

5. Systems for ensuring the propriety of the business activities of the NTT East Group
NTT East has adopted the following measures to ensure that transactions among NTT East Group companies and with NTT are conducted appropriately and in compliance with applicable laws and regulations and to ensure appropriate business conduct by the NTT East Group, thus contributing to the growth and development of the NTT East Group:
(1) Develop communications systems for NTT East Group companies to notify NTT East and for notification by NTT East to NTT in emergency situations.
(2) Conduct employee education and training to prevent scandals or misconduct.
(3) Establish systems concerning information security and the protection of personal information.
(4) Require NTT East Group companies to report regularly to NTT East on their financial condition.
(5) Conduct audits of NTT East Group companies by NTT East's internal audit division.

6. Matters relating to employees who assist corporate auditors in the performance of their duties and the independence of those employees from the directors
NTT East has adopted the following measures with respect to employees who assist corporate auditors in the performance of their duties to ensure the effective performance of audits by the auditors:
(1) The Auditors' Office was established as an integral part of NTT East's corporate organization under the Corporation Law. The Auditors' Office is staffed with dedicated personnel who work full time in assisting the corporate auditors in the performance of their duties.
(2) Personnel assigned to the Auditor's Office perform their responsibilities at the instruction and direction of the corporate auditors.
(3) Decisions concerning matters such as transfer of personnel assigned to the Auditor's Office, evaluations of such personnel and similar matters are made with due regard for the opinion of the board of corporate auditors.

7. Systems for reporting to corporate auditors by directors and employees and systems for ensuring the effective implementation of audits by auditors
To ensure that audits by the corporate auditors are carried out effectively, NTT East has adopted the following measures concerning reporting to the corporate auditors by directors and employees with regard to important matters relating to the performance of their duties:
(1) Directors and other personnel report the following matters concerning the performance of their duties:
<1> Matters resolved at executive management meetings
<2> Matters that cause or may cause substantial damage to the company
<3> Monthly financial reports
<4> The status of internal audits
<5> Matters that pose a risk of violation of applicable law or the Articles of Incorporation
<6> The status of reporting to helplines
<7> Other material compliance matters.
(2) Representative directors, accounting auditors, and internal control divisions report to and exchange ideas and opinions with corporate auditors periodically and at other times as necessary upon the request of the corporate auditors.
(3) Corporate auditors may attend meetings of the board of directors and other important meetings.
(4) Corporate auditors may contract independently with and seek advice from external experts with respect to the performance of audit operations.


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