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1. Summary of Results for the Fiscal Year Ended March 31, 2017

In the fiscal year ended March 31, 2017, a wide range of changes took place in the information and telecommunications market with the increased spread and market penetration of devices that utilize fixed-line and mobile broadband, and improved convenience in people's everyday lives and productivity in various industries through the emergence of new services made possible by the evolution of technologies such as cloud services, AI (*1), Big Data (*2), and IoT (*3). In addition, the role of information and telecommunications is becoming increasingly important, including strengthening security measures against increasingly sophisticated and complex cyberattacks, strengthening natural disaster countermeasures and managing safe and secure social systems. This change can be seen on a global scale.

The regional telecommunications market is also changing dramatically, with intensifying competition in broadband services. In addition, 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, and offloading (*4) needs are increasing due to the expansion of the volume of data communications.

Amid such a difficult and volatile business environment, as a carrier with an important leadership role in the information and telecommunications industry, NTT East has endeavored to be thorough in its compliance regime and to abide by the requirements of fair competition. At the same time, NTT East has worked to secure a stable and solid foundation for its business, and to ensure its reliability as a social infrastructure, through the provision of high-quality, stable, universal services, construction of a telecommunications network that is resilient against disasters, and initiatives for prompt restoration of services in case of large-scale natural disasters and other calamities.

NTT East has also endeavored to enhance the broadband network environment and further expand its user base by offering new services and products, as well as offering customer-friendly pricing options with long-term appeal.

1.Efforts to Promote Fiber-Optic and IP Services

Amid intensifying competition with respect to broadband services, NTT East strengthened its "Hikari Collaboration Model" initiatives to expand and continue using "FLET'S Hikari" (*5) and to meet customers' needs. Businesses receiving fiber-optic access services (FLET'S Hikari) from NTT East combine their own services with fiber-optic access services to create and provide their own new service. NTT East has been working to create new demand and to improve customer retention by supporting and actively developing new business partners for its "Hikari Collaboration Model." NTT East has also been working to promote early stable operations and increased efficiency of related operations.

An example of "Hikari Collaboration Model" usage includes a collaboration with IIDA CABLE TELEVISION Co., Ltd. to launch the "IIDA CABLE TELEVISION & FLET'S Hikari" service on April 27, 2016. This service utilizes "FLET'S Hikari" provided by NTT East or fiber optic access services provided by Hikari Collaboration businesses and allows customers to watch and listen to broadcasting services provided by IIDA CABLE TELEVISION.

Similarly, NTT East started providing "Sayama Cable TV & FLET'S Hikari" in conjunction with Sayama Cable TV, as of March 25, 2017.

In addition, through home appliances control utilizing HEMS (*6), building a next generation security network that utilizes "FLET'S VPN GATE," and collaborating with a variety of businesses such as private preparatory schools and care providers, NTT East aimed to promote ICT usage in a wide variety of fields. As a result, the "Hikari Collaboration Model" is being utilized by over 470 businesses, and the number of subscribers for "Hikari Collaboration Model" fiber-optic access services (Hikari Collaboration) exceeded five million as of January 29, 2017. The fiber-optic access services "FLET'S Hikari" and "Hikari Collaboration" exceeded the number of fixed telephone facilities, exceeding 11 million subscribers as of October 31, 2016.

2.Initiatives Relating to the Solutions Business

NTT East worked on providing new services and solutions that meet the needs and characteristics depending on the industry and business format of its corporate customers, expanding broadband services and promoting ICT utilization.

  1. ⅰ.

    As part of its Wi-Fi services for corporate customers, NTT East is currently providing a simple Wi-Fi service "GigaRaku Wi-Fi," including support services. From April 1, 2016, NTT East also began providing "Remote access option," which includes remote access functions that enable access to the office LAN on the road and from home via a mobile device, combined with installation and operational support, and "LAN power supply option," which supplies power to access points via LAN cables, together with support services.

  2. ⅱ.

    For cloud services, on April 25, 2016, NTT East began providing "GigaRaku Camera," a cloud-based camera monitoring and recording service, with which users can monitor a network camera in real-time and view recorded data anytime and from anywhere.

    In addition, on September 1, 2016, NTT East began providing the "CloudGatewayAppliPackage," a metered service for corporate customers who want to use cloud-based applications easily and securely. The service provides a function to allow cloud service connectivity without an internet connection and an application server as a package. NTT East also began providing a fixed-price network service, "CloudGatewayCrossConnect" from October 11, 2016, intended for customers who want to use cloud services via a high-reliability closed area network. The service enables access to cloud services from FLET'S VPN Service.

    In addition, on June 28, 2016, NTT East began offering "KantanTablet service," a cloud service for corporate customers that want to deploy their own services for elderly or similar customers who are unfamiliar with the internet. This service provides portal functions for beginners that enables more intuitive operations from a tablet device with large buttons, platforms that offer automatic log-on functions for online shopping and other sites, and telephone and other remote functions.

  3. ⅲ.

    NTT East launched "MaruRaku Office" on March 31, 2017 in response to requests for a basic ICT environment as a set package. This service offers internet lines, Wi-Fi environment, security measures, and a support menu including an ICT help desk and 24-hour/365-day malfunction response services as a bundle.

  4. ⅳ.

    One industry-specific service includes "RoboConnect," a cloud-based robot platform service launched on September 1, 2016 that offers application services such as dialog functions and camera image capture functions via cloud through the utilization of communication robots provided by various robot manufacturers for nursing care businesses.

    In addition, in order to realize a service that enables users to utilize home electricity usage information, NTT East began offering a platform service, "HEMS information connect," for HEMS information utilization businesses on October 14, 2016. This platform integrates HEMS information data collected from HEMS service providers into a unified data format.

  5. ⅴ.

    As a measure to revitalize local communities through sports, NTT East launched the "Smart Stadium" service on July 2, 2016 to NACK5 Stadium Omiya in order to solve regional challenges through ICT use. This service utilizes cutting-edge technologies to provide a new type of visual experience and style for watching sports.

    In addition, at the request of the Tokyo Metropolitan Government, NTT East started working in May 2016 on the installation of undersea fiber-optic cables and maintenance in order to connect the "5 villages and 6 islands of Tokyo Metropolis" that do not have access to fiber-optic connectivity. NTT East will be contributing to community development through ICT, utilizing fiber-optic broadband in "tourism," "education," "energy" and other fields.

3.Status of Business Operation Structure

NTT East has set up a Network Security Promotion Department within the Network Business Headquarters, a facilities division, in order to centrally respond to ordinary and extraordinary situations related to electrical and telecommunication facilities, as part of its effort to further strengthen countermeasures against cyber-attacks on electrical and telecommunication services.

4.Corporate Social Responsibility Activities

NTT East considers Corporate Social Responsibility ("CSR") activities to be one of the most important pillars of the management of the company, and recognizes that it is the social responsibility of a company to contribute to the environmentally friendly, healthy and sustainable development of society. In addition to the provision of various services and solutions in order to create a richer society, NTT East has directed its efforts to resolve various social challenges as follows: (ⅰ) ensuring a high degree of stability and reliability of vital infrastructure that is indispensable to the general public; (ⅱ) complying with laws and regulations, including those that ensure fair competition, protect personal information, make accurate representations in advertising, and regulate the dispatch of workers; and (ⅲ) providing information and telecommunications services that contribute to the reduction of the environmental impact of society as a whole, as well as taking measures to reduce its environmental impact by, among other things, reducing its consumption of energy, resources and electricity.

Having clearly defined the "Shape the NTT East Group is Aiming For," NTT East has made an effort to realize CSR activities befitting its position as a leading company in information and telecommunication, such as working to widen the reach of the "NTT Group CSR Charter" (enacted in June 2006) and striving to set up specific practices for the PDCA cycle based on "KPIs" (*7) established for each important theme of CSR activities.

For example, many fiber-optic cables were severed as a result of flooding rivers and fallen bridges due to the torrential rain caused by Typhoon Number 10 in August 2016. NTT East quickly restored such cables through the utilization of multi-helicopters and the prompt design and redirection of fiber-optic cabling routes.

In addition, in order to ensure the availability of a means of communication during disasters, NTT East worked on the pre-installation of "public telephones for disasters (special public telephones)" in collaboration with local governments. The number of facilities as the fiscal year ended March 31, 2017 reached 40,000 units, an increase of 9,000 units year on year. This enabled NTT East to provide its customers peace of mind and safety during the disaster caused by Typhoon Number 10. Further, NTT East is working to create a stronger community that can withstand disasters in conjunction with local governments through the provision of disaster prevention solutions and other measures.

In addition, NTT East worked on promoting activities to protect the environment, including signing a memorandum of understanding in connection with promoting the "Furusato-no mori regeneration project" run by Sendai city by donating a portion of NTT's sales from pasteboards from its telegram services.

Furthermore, NTT East proactively endeavored to disclose relevant information to its stakeholders by issuing the "NTT East Group CSR Report 2016".

5.Financial Standing

As a result of these measures and cost reduction efforts, operating revenue totaled 1,672.2 billion yen (a decrease of 2.9% year on year), operating income totaled 189.1 billion yen (an increase of 16.9% year on year), ordinary income was 204.4 billion yen (an increase of 17.9% year on year), and net income totaled 149.6 billion yen (an increase of 26.0% year on year).

  • *1An abbreviation for Artificial Intelligence. Computer software and systems that mimic intelligent tasks carried out by human brains.
  • *2A large volume of digital data that is produced with popularization of the internet and faster computer processing speeds
  • *3An abbreviation for Internet of Things. A concept in which things that were not connected to the Internet before can now be connected to the Internet.
  • *4Dispersing the load in order to eliminate reduction in transmission speed or connection difficulties that arise due to an increase in telecommunication traffic.
  • *5A collective name for "FLET'S Hikari Next", "B FLET'S", "FLET'S Hikari Light" and "FLET'S Hikari Wi-Fi Access" (including "Hikari Collaboration Model").
  • *6An abbreviation for Home Energy Management System. An energy management system for the home which provides visualization and central management for energy.
  • *7An abbreviation for Key Performance Indicator. Key indicators for evaluating performance. This is a quantitative indicator that measures the degree to which goals have been achieved.