Attachment 1


Economic conditions in Japan during the first half of the current fiscal term continued to deteriorate. Increasingly severe conditions were brought on by the "IT recession" and the subsequent slowdown in global economic growth. This development generated significant reductions in Japan's export and production levels, while also diminishing corporate profits and capital investments. Finally, personal consumption which had previously managed to remain flat, began to trace a downward trend during this period.

In the telecommunications market, dramatic advances in information technologies have generated significant changes in market structure, such as a concerted move towards broadband Internet services, and the accelerated proliferation and expansion of mobile communications. In a related development, conditions of intense competition are building up throughout the entire telecommunications market, covering all aspects of regional, long-distance, and international communications. This reflects the aggressive engagement of overseas communications companies in Japan's domestic markets and the entry of new providers of low-priced IP-based telephone services utilizing VoIP technologies. Of particular note is the rapid emergence of intense competition in regional telecommunications markets. The entry of long-distance carriers into local telephone markets following the introduction of the dialing parity system has resulted in aggressive price-cutting and the intensification of competition to attract customers. At the same time, the entry of new carriers and rapid reduction in charges has led to a wave of fierce competition in the DSL, optical fiber, wireless, and CATV segments of the market.

In order to respond effectively to these structural changes and the increasingly severe business environment, the Nippon Telegraph and Telephone East Corporation (NTT East) has adopted as its basic business principle the timely provision of attractive services which are "inexpensive," "easy to use," and "reliable." This conception is based on the identification of NTT East as a "service-providing company" with close ties with local and regional customers. In the pursuit of above goals, we are striving to strengthen our corporate framework and to develop new revenue sources in order to complete the transition from our "telephone-based" business structure to one that is focused on "information sharing." NTT East is also undertaking various initiatives aimed at contributing positively to the "e-Japan Strategy," a top-priority national program of the Japanese government.

The major initiatives and programs implemented during the six-month period under review are as follows:

With regard to the Internet market where the introduction of broadband technologies is proceeding at an accelerated pace, NTT East has endeavored to respond to growing customer needs for high-speed and low-cost services by enhancing its menu of flat-rate Internet access services and by reducing service charges. Specific measures include the expansion of service areas for "FLET'SISDN" and "FLET'SADSL" services, and a reduction of charges on these services implemented in July. The trial program launched last December known as "Fiber-optic IP Connection Services" (temporary name), was upgraded into a full-fledged service in August. The newly named service, "B FLET'S," features economical charges and a maximum 100Mbps transmission capacity.

Responding to the introduction of the dialing parity system and subsequent launch of the "My Line" Carrier Selection Service and the "My Line Plus" Carrier Designation Service in Japan in May, NTT East lowered its local telephone charges in January and continued its company-wide efforts to achieve customer satisfaction and increased subscription to its MYLINE PLUS service by following up with a second round of price-cutting and an expansion of discount services in May.

In June, NTT East launched its "L-mode" services designed to provide simple, convenient, and inexpensive access to Internet-based information searches and the exchange of e-mail using household telephones. This initiative helps to narrow the "digital divide" by making the Internet accessible to a much broader group of Internet users.

In the area of marketing to corporate customers, NTT East has continued to expand its presence in the total solutions business under the concept of "Team Marketing Solutions" which entails team cooperation with customers in developing effective responses to customer needs in the rapidly advancing field of information sharing. This features such initiatives as the active use of optical access services designed for corporate customers, including "Wide-LAN" and "Metro Ether", and other advanced data center technologies for building sophisticated and efficient information sharing networks.

To achieve more effective use of its technological know-how and to promote the growth of its information sharing businesses, NTT East established NTT BizLink, Inc. in July. The specific aim of the new company is to develop rapid responses to data center needs in the broadband age and to maintain the competitive advantages of NTT East through cooperative operations. Another newly formed company B-BAT, Inc., established jointly with the Nippon Television Network Corporation in September 2000 to examine the feasibility of commercial distribution of visual content by TV broadcasting companies, went into full operation in September.

NTT East remains strongly committed to achieving greater management efficiency in order to develop a solid management foundation for responding effectively to rapid changes in the business environment and to accelerate the transition from "telephone-based businesses" to "information sharing." Following up on the initiatives taken during the previous fiscal term, NTT East continues to pursue the early realization of the goals of the "Mid-term Restructuring Plan." Specific areas of company-wide action include consolidation of local and regional offices, streamlining of head-office and back-office operations, the large-scale reassignment of personnel to NTT Group companies, and the implementation of voluntary early retirement programs. Further to these programs, NTT East is engaged in implementing a series of additional measures to prepare for the development of new businesses under the extremely difficult business conditions anticipated in the future. These are contained in the package of additional structural reform measures adopted in conjunction with the "NTT Group Three-Year Business Plan (FY2001-2003)" promulgated by the Nippon Telegraph and Telephone Corporation. The principal line of action is aimed at achieving a fundamental review of business structures and consists of concrete measures designed to reduce personnel costs through increased outsourcing and the introduction of diversified employment systems.

As a result of these activities, the performance of principle services during the six-month period under review is as follows.:

In the area of subscriber telephone services, the total number of lines installed came to 25.24 million as of the end of September, representing a year-on-year decline of 440,000 lines. On the other hand, sales of INS-Net services continued to grow. As of the end of September, the number of INS-Net 64 lines installed rose to 5.33 million lines, marking a year-on-year increase of 330,000 lines.

In the area of leased circuit services, as of the end of September, the total number of high-speed digital transmission services installed totaled 300,000 circuits, representing a year-on-year increase of 12,000 circuits.

Pursuant to these activities, NTT East's first-half results for the fiscal year ending March 31, 2002 were as follows:
Operating revenues amounted to 1,280.8 billion yen, (an increase of 7.4% from the previous year).Recurring loss amounted to 16.6 billion yen (compared to 30.5 billion yen in recurring profit in the preceding year).Net loss for the six-month period came to 15.6 billion yen (compared to 12.0 billion yen in net profit in the preceding year).