SUMMARY OF RESULTS
During the interim period ended September 30, 2004, the economy continued to show signs of a steady recovery. Corporate profits continued to rise, and capital investment expanded. The employment situation, while still harsh, continued to improve, and personal consumption showed a gradual increase.
In the information and communications sector, the demand for broadband service has been growing rapidly as society moves closer to ubiquitous networks--the ability to send and receive a wide range of information anytime and anywhere. Within the broadband market, ADSL speed continued to rise and intense competition for customers has led to lower rates. In addition, IP telephone services are becoming widely available, and demand for optical access services has steadily expanded. In the fixed-line market, meanwhile, a competitor announced plans to build an IP-based fixed-line network using dry copper, a move that can be expected to further intensify competition here as well.
Within this business environment, Nippon Telegraph and Telephone East Corporation (NTT East) has worked hard to develop new sources of revenue and build a strong financial base while keeping business operations focused on the vision of being "a truly customer-oriented company." NTT East has positioned this period as the critical period for gearing up its recently launched "Hikari" optic network and has implemented internal reorganization in order to further boost its sales and service-development capabilities and to accelerate decision making. In addition, NTT East has worked actively to develop a wide range of new IP / broadband services.
During the interim period under review, NTT East focused its efforts on the following.
First, in the rapidly expanding broadband market, NTT East worked to further upgrade and expand its services to respond to its customers' diverse needs, while continuing to lower rates. With regard to its ADSL service, in August 2004, NTT East began offering faster transfer speeds through "FLET'S ADSL More III," with maximum download speeds of approximately 47 Mbps and maximum upload speeds of approximately 5Mbps. In September 2004, for users of its B FLET'S "Mansion Type," NTT East began offering "Hikari Denwa," IP Telephony Service for Condominiums that permits subscribers to make and receive calls to and from conventional phone lines and within the IP phone network, using the conventional phone-line number with no prefix. In addition, NTT East initiated "L-Mode on FLET'S," which gives users of B FLET'S, FLET'S ADSL, and other broadband services the use of L-mode capabilities, including the ability to send and receive email and search for information with a specially designed telephone. To respond to the video-transmission needs of our corporate customers, NTT East began providing its "More Live" service, which enables simultaneous video transmission to multiple receivers within a prefecture without sacrificing image quality.
At the same time NTT East initiated several services designed to give its customers an added sense of security. NTT East added "More III" options to its existing 24 hours and 7 days a week repair and backup service "FLET'S ADSL Advanced Support." For small businesses, NTT East began offering "FLET'S Safety Type II," which makes it easy to protect against viruses and unauthorized access. And in September 2004, NTT East soled by subscription an IP-based video phone terminal called "FLET'S Phone VP 1000," operated by user-friendly touch screen, for added customer convenience.
Meanwhile, in an effort to expand its offerings of high value-added content exploiting the broadband environment, NTT East began trial distribution of "'Try To Golfers' BB on FLET'S" in partnership with another company and is working to make the pay-per-use service "FLET'S on Demand" accessible to more users.
NTT East has also taken a number of steps to promote sales. It has worked to lower rates by instituting toll-free calls between "Corporate IP Telephone Service" subscribers, even between prefectures, and by lowering monthly access rates for its B FLET'S "Mansion Type." NTT East also extended its "3 months free" campaign for FLET'S ADSL and is planning a "2 months free campaign" for B FLET'S beginning in October 2004. In April 2004, NTT East has launched a new calling plan that will allow subscribers to call from mobile to fixed-line phones at lower rates than those offered by mobile telephone carriers.
NTT East is also taking measures to respond to an increasingly competitive environment with respect to phone rates. Beginning January 2005, NTT East is implementing a rate cut in anticipation of the coming era of optical IP services, which will usher in a system of flat basic charges and call rates. We will also implement cuts in subscription fees from March 2005.
In its corporate-services sector, NTT East implemented a review of our headquarters in July 2004 in order to construct business units for each business group based on operations by industry and business category and to realize a corporate system that will enable it to provide total services from service development to sales.
Under NTT East's "Team M@rketing Solutions" business concept for tackling issues and developing new businesses in partnership with its corporate customers, NTT East has been working actively to provide new services for business use, including data centers and such corporate optic access services as "Mega Data Netz," "Super Wide LAN," and "Metro Ether," while simultaneously moving forward with its "total solutions" business designed to meet accurately the increasingly diverse and sophisticated needs of its customers, as by taking advantage of the bilateral-contract system under the amended Telecommunications Business Law, revised in April 2004. In addition, active efforts are under way in the e-Japan Promotion Department of the Corporate Business Headquarters, as well as the e-Japan Promotion Office of the Business Communications Department of each branch, to respond to opportunities presented by the e-Japan Priority Plans of local governments within the NTT East area.
As for business management structure, we have established three new units--the Consumer Business Headquarters, Corporate Business Headquarters, and Network Business Headquarters--as well as the reorganization of NTT East corporate headquarters, including streamlining and consolidation in the area of staffing, to increase the speed of decision making, including relationships with branch offices. In addition, the NTT East Group has been working actively to expand its business domain, as seen in the development of a new IT home consulting business offered through partnerships with the prefectural outsourcing subsidiaries* established under the group's structural reform program.
* Prefectural outsourcing subsidiaries: Companies set up at the prefecture level named NTT Service [prefecture name] Corporation, NTT ME [prefecture or region name] Corporation, or NTT Business Associe [prefecture name] Co., Ltd.
As a result of these efforts, sales performance in NTT East major areas of service was as follows during the interim period under review.
In NTT East's broadband access services, as of the end of September 2004 there were 632,000 B FLET'S subscribers, an increase of 206,000 from the end of March 2004, and 2,620,000 FLET'S ADSL subscribers, an increase of 338,000 from the end of March 2004.
In subscriber telephone services, the total number of lines installed was 25.23 million as of the end of September 2004, an increase of 10,000 from the end of March 2004, while the total number of INS-Net 64 lines fell by 180,000 from the end of March 2004 to 4.21 million as a result of the shift to broadband access services.
In leased circuit services, as of the end of September 2004 the total number of High Super Digital (HSD) transmission services installed was 229,000 circuits, a decline of 20,000 circuits from the end of March 2004 resulting from a shift in demand toward business-user-oriented optical access services.
During the interim period under review, operating revenue totaled1,071.4 billion yen (down 3.8 % from the same period of the previous year); recurring profit came to 53.4 billion yen (down27.7% from the same period of the previous year); and net profit totaled 31.3 billion yen (down21.9% from the same period of the previous year).