1. Background
Against a background of uncertainty in the global economy due to factors such as slowing growth in emerging countries, many companies around the world are taking a proactive business approach and focusing on activities to further strengthen their competitiveness, such as entering new markets and investing in growth markets. The ICT market is undergoing drastic structural change globally, with competition becoming fiercer and more diverse. Leveraging technologies such as layered software-defined networking, virtualization and automation, companies are integrating business divisions that transcend layers, are revolutionizing their business processes through M2M technology and IoT, and business divisions within companies are increasingly making their own IT purchase decisions.
2. Business Strategies
NTT Com continues to offer solutions centered on seamless global services such as cloud, colocation, network, applications, security and managed ICT services. During the fiscal year ended March 31, 2016, NTT Com helped an increasing number of customers expand their business and implement management reforms. In addition, NTT Com designated increasing its global market share as a goal for the year, and worked to improve its service functions and expand its areas of coverage. To strengthen its competitiveness, NTT Com focused on achieving more seamless global processes in the area of services, sales, operations and management.
During the fiscal year ended March 31, 2016, NTT Communications Group increased its revenues and enjoyed continued growth in new business areas, particularly in cloud-related services. As a result, in an analyst report that evaluates IT vendors on a worldwide basis, NTT Com was named to the top "Leader" position in the global network business field for the third year in a row. Furthermore, NTT Com was named to the "Leader" position for the first time in an assessment of cloud business operators in the Asia-Pacific region.
Specific measures taken by type of service were as follows:
As an enhancement to its "Enterprise Cloud" solution, a cloud service for corporate customers offered in 14 locations in 11 countries across the world, in April 2015 NTT Com launched its "Oracle Database Enterprise Edition RAC (Real Application Clusters)" service. NTT Com is the first Japanese cloud business operator to provide such a service.
In addition, in March 2016 NTT Com significantly upgraded its Enterprise Cloud service, launching the new version in Japan and the U.K., with key features including the bundled provision of:
By offering a hybrid cloud solution, including bare-metal servers, and a comprehensive cloud management platform that unifies control of both Enterprise Cloud and third-party providers' clouds, NTT Com is enhancing its cloud environments, helping customers streamline their business operations, and reducing their costs. In this way, NTT Com has leveraged digital transformation to drive innovation in its customers' business environments.
NTT Com additionally commenced delivery of its Nexcenter data center service in the following locations:
NTT Com also commenced construction of its Dallas Texas 1 Data Center (TX1) in the U.S.A. in September 2015. NTT Com further expanded the number of its data center locations by acquiring Lux e-shelter 1 S.a.r.l., a data center business operator in Germany, in June 2015, and PT Cyber CSF, the largest data center business operator in Indonesia, in October 2015.
In the enterprise services area, in August 2015 NTT Com commenced delivery of its "Multi-Cloud Connect" solution, a secure data network service offered via the corporate VPN service "Arcstar Universal One," and via cloud services such as "Microsoft Azure" and "Amazon Web Service." Multi-Cloud Connect became compatible with Microsoft Office 365 in February 2016. NTT Com is working to expand the areas of coverage and increase the number of connection service menus.
As an enhancement to its "Arcstar Universal One" solution, in September 2015 NTT Com commenced the offering of its "Arcstar Universal One Ethernet Leased Line Flexible-Ethernet Option" service, allowing customers to quickly and easily control bandwidth and routing using SDN technology, and helping them to achieve more agile business development processes.
To meet the demand for strengthened security in corporate environments, NTT Com significantly enhanced its OCN DDoS defense orchestrator service, which protects networks against DDoS attacks. These enhancements are in line with new guidelines set by the Financial Services Agency of Japan, and have allowed a greater number of financial institutions and EC business operators and others to access internet services more securely.
For its individual customers, NTT Com launched service counters offering same-day delivery of "SIM Card for Voice & Data," a special SIM card for LTE compatible mobile data communications. These delivery counters have been gradually rolled out nationwide starting May 2015. For users of NTT Com's 050 plus and Mypocket applications, in July 2015 NTT Com introduced a "count-free function" whereby any charges incurred during the downloading or uploading of data via those applications are waived. In addition, in February 2016 NTT Com started offering users of the internet service provider OCN a free malware blocker service which prevents customers from inadvertently divulging personal information, the first internet service provider in Japan to offer such a service.
To further enhance its "Arcstar UCaaS", unified-communication cloud service, NTT Com commenced delivery of its "Arcstar UCaaS Microsoft ® Type" service in April 2015, complementing the existing "Arcstar UCaaS Cisco Type" service. The services were made compatible with other business software applications, such as Office 365, meeting a wide range of customer needs.
In January 2016, NTT Com further enhanced the functionality of its "Arcstar Conferencing," a teleconference service, allowing customers to conduct teleconferences via the internet and video conferences via VPN connections.
In the IP telephony field, in August 2015 NTT Com expanded its business model by launching at a wholesale level "050IP telephone apps" utilizing NTT Com's IP telephony platforms. This enables Mobile Virtual Network operators providing "Kakuyasu Smart Phones" and cable TV operators to provide affordable IP telephony services to users of NTT Com services.
In the area of voice application services, in July 2015 NTT Com launched "Bestie Box," a new group communication application leveraging its SkyWay platform and deploying WebRTC technology, allowing users to enjoy various group activities.
In April 2015, NTT Com conducted a full-fledged launch of "ID Federation," a single sign-on service for enterprises, and made it compatible with over 1,600 business applications including Microsoft Office 365, Salesforce, Box content management and Google applications. After an initial launch in Japan, the service was additionally rolled out in Singapore and Thailand in October 2015, and will gradually become available in other countries and regions.
NTT Com has also expanded the coverage area of Enterprise Mail, an enterprise cloud e-mail service. Having already launched the service in Singapore, Malaysia and Vietnam, NTT Com extended delivery to Thailand and Indonesia in June 2015.
In the field of enterprise storage, NTT Com and Box Inc. jointly developed "Box over VPN," allowing customers to use Box's content platform on NTT Com's VPN. The service was launched in March 2016.
NTT Com enhanced its ICT service Global Management One, expanding the range of managed services to meet the needs of its users, both amongst Japanese companies and globally. As an example, in October 2015, NTT Com launched Managed Oracle, allowing Global Management One to connect with Enterprise Cloud to facilitate the monitoring and backup of Oracle databases. Further, with the aim of further expanding into the application field and accelerating its global expansion, NTT Com announced the acquisition of Atlas Information Technology, S.A., a company delivering various kinds of managed cloud and applications services primarily in Europe, allowing it to further improve the added value of the Global Management One service. In February 2016, NTT Com announced that it would also actively expand availability of the service in North America and Asia-Pacific.
Through collaboration with leading Japanese and U.S.-based security companies, NTT Com has enhanced its Wide Angle security service by offering expanded web application firewall functionality, through improved communication interruption functionality in response to targeted cyber-attacks and through the addition of software-based security appliances that can be deployed on customer companies' private clouds and cloud providers' platforms. NTT Com has additionally leveraged developments in the field of Artificial Intelligence (machine learning) to strengthen detection and analysis of cyber-attacks on enterprises' ICT environments. With new threats evolving in cyber space on a daily basis, the need for responsive high-quality security services continues to grow. NTT Com has accordingly transferred ownership of NTT Com Security AG to Nippon Telegraph and Telephone Corporation; this will allow more focused development of new specialized security technologies, strengthen capacity to make efficient and effective investments and improve the competiveness of the security business, across the entire NTT Group.
NTT Com has continued to expand the range of services, control functions and information available on the NTT Communications Business Portal solution. Approximately 13,000 customer companies have used the portal.
As an enhancement to the NTT Communications API Gateway, in April 2015, NTT Com launched the NTT Communications Developers Portal, which enables users to simultaneously see the specification, operational status and sample codes for NTT Com's APIs.
NTT Com additionally established its IoT Office in August 2015, aimed at providing customers with secure IoT solutions that leverage the company's global network, cloud infrastructure and data centers, and which deploy IoT technology to help improve corporate clients' productivity and facilitate their new business development. The IoT Office has developed various IoT solutions-based services and promoted partnerships with application platform businesses and device businesses.
NTT Com has strengthened its consultative selling capabilities, whereby its account managers and sales persons meet with C-level executives to contribute directly to their management innovations. Furthermore, by improving NTT Com's own business processes to strengthen its sales functions and by reviewing its internal systems in line with those changes, NTT Com has created an environment where account managers and sales persons can focus on proactive customer engagement, instead of spending time on delivery and support issues.
In the field of operations, NTT Com has moved to standardize building facilities, delivery processes, maintenance procedures and operations as part of its changes to strengthening its sales functions. In addition, NTT Com has established an environment where staff responsible for those areas can concentrate on improving customer satisfaction. NTT Com has also taken measures to improve service stability by conducting comprehensive inspections and overhauls based on reliability guidelines and information transmission regulations.
In order to promote seamless global management, NTT Com has implemented a globally standardized ERP system across each NTT Com group company. NTT Com is also aiming to strengthen its procurement capabilities through the use of standardized procurement guidelines in its overseas offices and the centralization of its major group companies' procurement in Japan.
In the field of CSR activities, NTT Com has implemented various environmental protection measures, such as reducing electricity consumption through improvements in air conditioning systems and further expansion in the use of the automatic air conditioning system "Smart DASH" in data centers and communications facilities.
NTT Com established an Information Security Department in October 2015, whose mission is to deliver total solutions for information security and cyber security, including CSIRT (Computer Security Incident Response Team) functionality, further strengthening the management of its own overall security.
In addition, NTT Com has been actively promoting a highly productive ICT-enabled workplace environment for its own employees that allows them to adopt flexible working practices, achieve an improved work/life balance and thereby achieve their full potential, regardless of age, gender, nationality, religion or physical ability. Based on the NTT Group's gender equality plan targeting a doubling of the percentage of women managers to 8.9% in 2020, NTT Com additionally continues to support the career development of female employees and the appointment of female managers, as well as actively hiring more female employees. NTT Com was certified by the Ministry of Economy, Trade and Industry in 2015 as one of the "New Top 100 Companies Managing with Diversity," following an evaluation of global human resources development and other activities.
3. Operating Results
As a whole, NTT Communications Group's consolidated operating revenues increased for the third consecutive fiscal year, increasing 55.8 billion yen (+4.4%) over the prior fiscal year to reach 1319.1 billion yen, owing to strong results in overseas subsidiaries, among other factors. However, operating income decreased 1.6 billion yen (-1.4%) compared to the prior fiscal year to 118.2 billion yen.
Although revenues from NTT Com's cloud computing platforms increased 5.0 billion yen (+7.8%) over the prior fiscal year to 70.0 billion yen, revenues from applications and content increased 0.2 billion yen (+0.7%) to 38.7 billion yen, solution business revenues increased 12.5 billion yen (+8.4%) to 162.3 billion yen, data network revenues decreased by 0.9 billion yen (-0.3%) compared to the prior fiscal year to 369.8 billion yen and voice communications revenues decreased 9.5 billion yen (-3.6%) to 260.3 billion yen. As a result, NTT Communications' total non-consolidated operating revenues increased, for the first increase in eight years, to 8.3 billion yen (+0.9%) over the prior fiscal year to 918.3 billion yen.
As a result of increased telecommunication equipment expenses and the launch of Hikari Collaboration Model services, total operating expenses increased 10.3 billion yen (+1.3%) compared to the prior fiscal year to 827.1 billion yen.
As a result of the above, operating income decreased 1.9 billion yen (-2.1%) compared to the prior fiscal year to 91.1 billion yen, and net income decreased by 4.9 billion yen (- 6.5%) to 72.3 billion yen.