Attachment 1


Nippon Telegraph and Telephone East Corporation (NTT East) was established and launched its operations on July 1, 1999 following the reorganization of Nippon Telegraph and Telephone Corporation. NTT East operates as a telecommunications enterprise in the eastern Japan region.

During the interim under review, the Japanese economy showed signs of mild improvement as the effects of various policy measures were felt throughout the economy. However, a full-fledged recovery proved elusive as plant and equipment investment continued to decline and employment conditions remained bleak.

In the telecommunications markets, the dramatic increase in mobile telephone and Internet users has resulted in a sharp increase in demand for digital data transmission services which are taking the place of conventional voice-based communication services. In addition to these quantitative changes, the telecommunications markets are expected to undergo important qualitative changes as a result of growing digitalization. Competition in all areas of these new markets is being intensified by the entry of foreign telecommunications carriers and new participants from other industries.

Given this rapid pace of change and increasing competition, NTT East faces an extremely difficult business environment. Against this background, NTT East has adopted as its basic management principle the provision of timely and attractive services and has launched various initiatives characterized by three key features: "inexpensive," "easy to use" and "reliable."

The principal initiatives launched during the reporting period are as follows.

With the growing number of Internet users, sales of ISDN lines have been increasing rapidly. For improved customer convenience and the promotion of wider use, NTT East launched "i・Number," a system allowing INS-Net 64 subscribers to use two telephone numbers on one line. NTT East also started marketing its "Magic Box" voice mail services which records messages at a processing center when a line is busy or when a call is unanswered. "Magic Box" can also be used for transferring incoming call to a cellular phone. For users subscribing to the "Magic Box" service together with either or both of the "i・Number" and "INS Number Display" services, NTT East is offering a "Package Discount" on monthly service charges on the combined services, making them even more attractive. NTT East is also launching various new services to support the growing use of the Internet. The "i・ai Plan," targeting individuals and small businesses, provides fixed-rate local-call access to the Internet at discounts of up to 60%. The "i・school" service, available to schools on an experimental basis, features flat-rate Internet access at special discounts. As a result of changing lifestyles, there is a growing need to maintain certain operations on weekends and holidays. In response to this demand and in order to improve the quality of our services, NTT East has decided to extend the operating hours of its "dial 116" services to include Saturdays, Sundays and holidays. The "dial 116" service is responsible for processing inquiries and orders for the relocation of subscriber telephone lines and various other services.

For its corporate customers, NTT East has developed a management support program known as "Team Marketing Solution" featuring team collaboration with customers to meet management challenges. NTT East continues to strengthen its marketing capabilities through such initiatives.

Sales of principal installations during the interim period under review were as follows.

Owing to the continued buoyant sales of INS-Net digital services, the total number of ordinary telephone subscriber lines came to 28.28 million (representing a decrease of 0.29 million lines since NTT East went into operation on July 1). In the area of INS-Net services, the number of INS-Net 64 digital lines totaled 2.73 million as of September 30, 1999 (an increase of 0.31 million lines since July 1).

NTT East's three-months ended September 30,1999 were as follows: operating revenues amounted to 696.5 billion yen, current profit amounted to 10.9 billion yen, and net loss came to 7.1 billion yen.