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1. Summary of Results for the Fiscal Year Ended March 31, 2014

In the fiscal year ended March 31, 2014, the U.S. was stable, and Europe showed signs of recovery, but the economies of China and other emerging nations slowed, so the overall pace of growth of the global economy was gradual. The Japanese economy continued to show signs of mild recovery driven mainly by domestic demand, stimulated by the effects of government policies.

The information and communications market is growing due to an increasing shift to broadband services and globalization. The market is undergoing structural changes beyond the existing framework, including fixed-mobile convergence, cloud computing(*1)and smart TV development, penetration of high-speed wireless and Wi-Fi(*2)compatible devices, such as smartphones and tablet devices, and widespread use of applications that enable free phone calls and messaging. Regional telecommunications markets are also changing dramatically, with intensifying competition in broadband service facilities and services centered around the shift to fiber-optic access, and increasing offloading(*3)needs due to the expansion of the volume of data communications. New services that leverage a variety of wireless devices are also expanding, which in turn leads to diversification in the way that customers are using these devices.

Amid such a difficult and volatile business environment, as a carrier with an important leadership role in the information and communications industry, NTT East strove to ensure that it strictly complies with any applicable rules and regulations, abiding by the requirements of fair competition. At the same time, NTT East has aimed to secure a stable and solid foundation for its business, worked to provide high-quality, stable universal services and aimed to ensure the reliability in social infrastructure, such as the prompt restoration of services in times of large-scale natural disasters and other calamities.

In line with NTT Group's Medium-Term Management Strategy "Towards the Next Stage" adopted by NTT in November 2012, 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, as well as the provision of customer-friendly rate menus and rate menus which encourage subscribers to use its services for longer terms.

(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"(*4)and aim to meet customer needs when using their Wi-Fi-compatible devices.

Ever since "FLET'S Hikari" was launched in 2001 as "B-FLET'S," the service has become ever faster and cheaper, with an enhanced product lineup. Through proactive initiatives, such as forming alliances with a variety of vendors, and by working hard to expand the range of situations where optical fiber can be used, NTT East reached 10 million subscribers on October 12, 2013.

  1. ⅰ.NTT East's largest-ever discount campaign, "Omoikkiri-Wari," for customers who newly subscribe to "FLET'S Hikari," was started in December 2012, and continued until the end of January 2014. Starting in October 2013, the "FLET'S Hikari Light Family Type" was added to the services covered by this campaign.

    In addition, to encourage communication between people living alone and their other family members, NTT East started the "Tanshin & Kazoku O-en Wari," offering discounted monthly fees for the "FLET'S Hikari" service for groups on a single bill.

    Further, to meet the needs of corporate customers, NTT East began offering, in limited geographic areas, the "FLET'S Hikari Next Prio," with bandwidth priority that enables stable, high-speed, high-quality communications, even at times of network congestion.

  2. ⅱ.In order to increase the use of smart TV services, NTT East launched the TSUTAYA Stick(*6), a smart TV device that allows the video streaming service TSUTAYA TV(*5)offered by T-MEDIA HOLDINGS Co., Ltd. to be used with FLET'S Hikari. This service makes it easier for customers to enjoy their favorite movies and television dramas at home over the Internet.
  3. ⅲ.NTT East introduced the "FLET'S Azukeru" online storage service(*7), by which customers can store and share on the Internet various types of data, such as photos and videos, etc. they have stored on their PCs, smartphones and tablets. They can also perform automatic backups of data at set intervals. Stored data can be accessed from anywhere using a mobile device through indoor / outdoor Wi-Fi, therefore increasing customer convenience.
  4. ⅳ.NTT East also initiated its "Rakureji" tablet POS service(*8), allowing retailers to manage their sales and accounting on the cloud network. Compared with conventional POS registers, this costs less and uses less space, and in addition, increased convenience as a result of the tangible operation involved when using a tablet.

    NTT East also began offering "Raku Pop Board," a digital signage service that can support a wide range of POP advertising(*9), transmitting video and image content and other information to tablets in a timely fashion.

  5. ⅴ.With the growing popularity of smartphones and tablets, NTT East worked with local governments and other public agencies in Yamanashi Prefecture and the Tohoku region to provide Wi-Fi environments in tourist destinations and commercial areas and which foreign tourists can also access. As a result, NTT East has enhanced user convenience by enabling visitors from overseas and others to access information distributed by tourism centers, stores, and lodging facilities. NTT East has also worked with Recruit Lifestyle Co. Ltd. on a trial offer of a free application for tourists in Hakone, one of Japan's premier tourist destinations, called "Tabi-Navi Hakone." This app uses geo-fence technology(*10)to deliver information and special offers concerning tourists' locations to tourists automatically to their smartphones, so they can plan their trip and time more effectively, and enjoy travel in a new way. For tourist destinations and retailers, this service offers a new way to attract customers, by guiding them directly to shops and hotels.
  6. ⅵ.As online shopping has become more and more a part of everyday life, NTT East has developed "FLET'S Hikari Otoku Market," on the website of the "FLET'S Hikari Member's Club," a membership program for "FLET'S Hikari" users, to enable people of all ages to take advantage of secure and convenient online shopping. This new service allows members to buy everyday products offered by participating companies at special prices, or with specific benefits attached. Operators of NTT East also offer support services, so that even users who are new to the Internet can be at ease when they shop online.

(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(*11)utilization.

  1. ⅰ.In the field of local government, NTT East launched "Biz Hikari Cloud Anpi Kakunin Service," a service that allows officials to verify government workers' well-being during major disasters. This service uses applications that were proven to be reliable and effective when access was needed to large quantities of data during the Great East Japan Earthquake. NTT East provides this service from its Biz Hikari cloud platform installed in data centers, which are built to withstand powerful earthquakes up to magnitude 6 (on the Japanese Shindo scale). This service provides reassurance that officials can confirm workers' safety and make emergency contact even at times of major disasters.
  2. ⅱ.In the field of medicine, NTT East launched "Biz Hikari Cloud Future Clinic 21Warp," an electronic records service for medical clinics, as it has become increasingly important for local hospitals and clinics to collaborate and provide integrated patient treatment. This new service helps keep initial implementation costs down, while allowing medical clinics to enter data in the electronic records as easily as writing by hand. Electronic medical records are centrally managed and stored at data centers which provides for disaster countermeasures and risk management, enhancing convenience for medical clinics.
  3. ⅲ.In the field of education, NTT East is working with elementary and junior high schools to ease the massive administrative burden of educators and has continued to provide total support for the installation, operation and maintenance of in-school administrative systems. In consideration of requests by the customers of such services, NTT East has started offering an elementary and junior high school administration support service(*12)called "Biz Hikari Cloud Omakase Kohmu." Offering this service on a cloud platform helps educators keep initial implementation costs low, take less time installing systems, and make the service easier to use.

    For educational systems(*13)used as core systems in the university sector, there is a growing need for cloud computing as a means of easing the burden of systems management, reducing costs and following its business continuity plan (BCP). NTT East is working to realize these goals, agreeing to collaborate with educational systems specialists Japan System Technology Co., SystemD Inc. and NTT Data Kyushu Corp. to make cloud computing a reality in this context.

  4. ⅳ.As the new lineup for "Office Marugoto Support," the support service for small- to medium-sized businesses, NTT East began offering "IT Support Type I" to customers who use an Internet connection besides "FLET'S Hikari," and "Fukugouki Omakase Support," for customers who use multifunction printers.

(3) Status of Business Operation Structure

Regarding the structure of NTT East's business operations, in July 2013, NTT East reorganized its head office structure, in order to respond to the rapidly changing market environment and business environment, provide services based on customer needs on a timely basis, create new business markets, and to make business operations even more efficient.

From the perspective of responding to a rapidly changing environment, the main details of this reorganization were revisions to the service development systems on a market-by-market basis, such that the company now has four divisions. The New Business Development Headquarters was established, with a unified grasp of the full range of the company's activities from development of services for consumers and business users to marketing (pre-sales); to enhance the company's sales power and productivity, the Sales Promotion Headquarters now covers sales of services to mass users and SOHOs; the Corporate Sales Promotion Headquarters handles sales of services and solutions for business users; and the Network Business Promotion Headquarters handles development, design, construction and maintenance of network equipment.

(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. As part of our ongoing efforts to raise employee awareness, following the arrest and indictment of an employee on suspicion of violating the Act concerning Nippon Telegraph and Telephone Corporation, etc. ("NTT Law") in December 2013, NTT East has redoubled its efforts to strengthen checks on contract operations, raise employee awareness, and prevent recurrence.
  2. ⅱ.In view of the national state of supply and demand of electricity, 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. To conserve power in its own offices, NTT East added to its energy conservation efforts to date by expanding installation of thin client systems, installing LED lighting, and making further efforts to conserve electricity.
  3. ⅲ.To realize CSR activities befitting its position as the leading company in Japan's information and communications industry, NTT East established the "Shape the NTT East Group Is Aiming For," worked to achieve greater penetration of the "NTT Group CSR Charter," and strove to set up specific practices for the PDCA cycle based on key performance indicators(KPI*14). As a result, the NTT East Group succeeded in systematically establishing a new framework for its CSR activities
  4. ⅳ.To promote the principles of such CSR activities, NTT East issued the NTT East Group CSR Report 2013, among other things, to proactively disclose relevant information to its stakeholders.

(5) Efforts towards Improved Reliability and a 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, moving exchange offices that were hit by the tsunami to higher ground.
  2. ⅱ.In addition, to prepare for an earthquake directly beneath Tokyo, NTT East is working with local governments and the Japan Self-Defense Forces, and other companies in the NTT Group in disaster training programs to strengthen cooperation and enhance disaster-response skills.

(6) Financial Standing

As a result of these and other cost reduction efforts during the fiscal year ended March 31, 2014, operating revenues totaled 1,773.8 billion yen (a decrease of 3.2% from the fiscal year ended March 31, 2013), operating income totaled 66.7 billion yen (an increase of 2.5% from the fiscal year ended March 31, 2012), recurring profit was 91.7 billion yen (an increase of 3.2% from the fiscal year ended March 31, 2013), and net income totaled 53.9 billion yen (an increase of 2.1% from the fiscal year ended March 31, 2013).

  • *1A new form of computer network usage where users can access data and software 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 wireless LAN equipment can connect effortlessly with other equipment. Now this term is used to signify the wireless LAN environment itself in which Wi-Fi -compatible equipment interacts with other equipment.
  • *3A mechanism for lightening the load on a given system by splitting processing among other systems.
  • *4A collective name for FLET'S Hikari Next, B FLET'S, FLET'S Hikari Light and FLET'S Hikari Wi-Fi Access.
  • *5A Video On Demand (VOD) and Electronic Sell-Through (EST) service that streams high definition video content.
  • *6A stick-type set top box (STB) that enables access to the "TSUTAYA TV" Video On Demand (VOD) service by connecting to the HDMI interface on a television.
  • *7A service that lends disk space for saving files on the Internet.
  • *8An abbreviation for Point of Sales. This is a system that records sales information for each product sold in-store, and uses the compiled information for inventory management and marketing purposes.
  • *9An abbreviation for Point of Purchase Advertising. These are ads that are placed in the storefront of retail stores or on products, such as posters, price cards and displays.
  • *10This feature enables dynamic information acquisition, including receiving new information and acquisition of points, when a person carrying a smartphone enters the geographic area.
  • *11An abbreviation for Information and Communication Technology, referring to technology in the information and communication industry.
  • *12A system that allows staff at elementary and junior high schools to conduct administrative activities in the staffroom using information communication technology. Information that was previously recorded by hand (student information and grades etc.), is instead added to a database, which enables the centralization of processes and improves efficiency.
  • *13A collective name for systems that handle functions necessary for the running of universities, such as centrally managing universities' student registers and managing students' grades.
  • *14An abbreviation for Key Performance Indicator. This is a quantitative indicator that measures the degree to which goals have been achieved.