TOKYO, JAPAN -- NTT Communications Corporation (NTT Com) today announced its non-consolidated financial results for the fiscal year ended March 31, 2008. Net income rose 106.8% or 32.4 billion yen, to 62.7 billion yen.

Operating revenues increased 0.8% to 1,154.5 billion yen and operating income rose 35.4% or 27.3 billion yen to 104.7 billion yen. A special profit of 12 billion yen accrued from returning the portion of the employee's pension fund managed on behalf of the government. Special losses of 30.4 billion yen included stock appraisal losses, a new reserve for the telephone card business and the early application of new standards for lease accounting.

Operating expenses decreased 1.7% or 18.3 billion yen, to 1,049.7 billion yen. Despite increased revenues from the solutions business leading to a rise in related costs, operating expenses declined overall as a result of the rationalization of value chains and unification of procurement operations.

All results are based on Japanese accounting principles.

BACKGROUND

In the Japanese information and communication market, business models and new services are evolving rapidly. Such change is centered around the expansion of the Internet and the convergence of both the fixed/mobile and data/broadcasting fields, resulting in the integration or competitive selection of many services. Digital- and Internet-related innovation drove the ongoing evolution of lifestyles and business models, a phenomenon that is truly an "ICT revolution."

Moreover, looking at the rest of the world, the competitive landscape of the ICT industry is changing daily on a global scale, as the industry reforms through mergers and acquisitions, primarily among Internet-related companies in the U.S. and Europe. The Internet community expanded as consumer generated media (CGM), such as blogs and social networking services (SNS) have become inundated with information, resulting in increasingly varied and active communication. Business models that involve customer contact, including effective interaction via the Internet, elevated the role that search engines play in the navigation of such information.

On the other hand, ICT continued to gain importance for multinational companies that need to maintain the stability and reliability of their operations while expanding their global businesses.

BUSINESS STRATEGIES

In response to this increasingly evolving business environment, NTT Com has worked to stabilize and deepen its delivery structure for its enterprise services, Internet-related and global services to better meet needs for total one-stop service as well as global solutions and demands for services that bring about an affluent society and a safe and comfortable lifestyle. Following on from the "second foundation" year in the fiscal year ending March 31, 2008, NTT Com set about achieving its new growth strategy, known as "Business Vision 2010". The company has established as its new mission "partnering with customers on the basis of trust to bridge their present and future potential, working together for the realization of a prosperous society and enhancement of the safety, comfort and convenience of individuals' life styles." Numerous reforms were implemented to make the corporation more vibrant and flexible through new systems and practices for enterprise sales, delivery and quality maintenance, as well as new product-related strategies, and enhancing the capabilities of the frontline and among personnel, while always keeping in mind that the customer/market comes first.

Based on the above mentioned mission, "managed quality operation" was newly added as one of the company's core domains of service, along with solutions, network-management, security, global, ubiquitous and portal/engine services. In addition, corporate resources were realigned as strategic growth engines.

In enterprise services, which NTT Com provides as a trusted ICT solution partner for its enterprise customers, business divisions were reorganized by industry, business practices were strengthened and system engineering capabilities were enhanced. In addition, the company promoted problem-solving consulting services that offer customers high value and benefit.

NTT Com also operated as a global ICT solution partner by providing its global enterprise customers with total, value-added services for network integration, backed by the company's data center, security and server management services.

In Internet-related businesses, which were branded under the concept of "'CreativE-Life' for Everyone," NTT Com positioned NTT Resonant's "goo" portal business as the nucleus of its comprehensive Internet-related services, which includes the OCN- and Plala-brand ISPs, IP telephony, video distribution and CGM services. NTT Resonant and NTT Plala are wholly owned subsidiaries of NTT Com.

In accordance with the CSR Basic Policy of the NTT Com Group, NTT Com implemented several corporate social responsibility initiatives from the perspective of contributing to society, protecting the environment and respecting employees. As an ICT solution partner the company is working towards achieving an affluent and sustainable society by providing information and communications services that bring new value and provide solutions to society on a global scale.

OPERATING RESULTS

In the fiscal year ended March 31, 2008, dramatic growth in solutions revenue led to increases in both revenue and profit. In addition to the extensive increase in solutions revenue when compared to the previous year, the company achieved steady growth in IP-related revenue, including from the OCN brand ISP and from virtual private network services. Despite declines in voice- and data-communications revenue, including leased lines and packet switching, operating revenue grew by 9.0 billion yen, or 0.8%, when compared with the previous fiscal year, to 1,154.5 billion yen.

Earnings-related costs rose, but tighter control of costs throughout the company enabled operating expenses to decrease by 18.3 billion yen, or 1.7% to 1,049.7 billion yen when compared with the previous fiscal year.

Operating income rose 35.4%, or 27.3 billion yen to 104.7 billion yen.

1. Solutions Services
Solutions service revenue rose 16.3%, or 27.0 billion yen, to 192.9 billion yen, in part due to the establishment of a value-added solution delivery framework that enables the company to tailor consulting more closely to each customer's business. This was made possible through the transfer of enterprise business departments from NTT East and NTT West to NTT Com, implemented in August 2006 in accordance with the company's medium-term business strategy. Increased revenues were also supported by the reorganization of business divisions by industry last April, as well as increased IT capital investment by enterprises.

2. IP Services
IP service revenue rose 14.4 billion yen, or 4.5%, to 334.1 billion yen due to increased revenue from wide-area Ethernet and IP-VPN services. OCN-brand ISP service subscriptions exceeded 6.8 million as of March 31, 2008.

3. Voice Services (excluding IP)
Revenues from voice transmission services (excluding IP services) decreased 2.7%, or 12.6 billion yen, to 450.3 billion yen. Call revenues declined as the market continued to shrink due to fewer fixed-line contracts, migration of voice transmission from fixed-line to mobile-phone services and increasing use of email. Efforts to maintain revenue included aggressive marketing of the Platinum Line service for discount calling and solutions that package various services, such as toll-free services.

4. Data Communications Services (excluding IP)
Revenues from data communications services (excluding IP services) decreased by 13.3 billion yen, or 8.3%, to 147.6 billion yen due to migration from leased-line to IP services, such as wide-area Ethernet and IP-VPN and despite the company's marketing of Ethernet interface leased lines known as "Gigastream".
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MEASURES FOR FISCAL 2008

In fiscal 2008, the second year of the Business Vision 2010 growth strategy, NTT Com will continue to promote the group's business by strengthening and expanding its involvement in growth sectors, namely, enterprise, global and Internet-related business.

"Managed quality operations" have been newly added to the company's six existing core domains of service which serve as engines for growth. By upgrading related internal practices and service quality, NTT Com is leveraging its comprehensive strengths to provide highly reliable and satisfactory services that enable enterprise customers to maintain stable network connections, as well as restore connections immediately in the event of any disruption.

For enterprise customers, the company will continue to improve its provision of expert consultation services as their ICT solution partner. Services that variously combine cutting edge technologies such as fixed-mobile convergence (FMC), Software as a Service (SaaS) and managed data center services will be coordinated with other NTT Group companies for one-stop provision.

In global services, since FY 2007, NTT Com has been strengthening its infrastructure by laying optical undersea cables as well as establishing global premium data centers.

In a customer satisfaction survey targeting eight global carriers that was released by the English company Telemark Services in April, NTT Com was ranked the first in the Global Data VPN class overall out of eight global carriers for the first time, improving on its previous performance when it was ranked first in one category.

NTT Com currently has overseas offices in 52 cities of 22 countries. To accommodate the global expansion of its multinational customers, NTT Com will further expand its overseas presence and service areas in a timely manner, resulting in a strengthened global foundation for providing seamless services wherever NTT Com's enterprise customers do business.

In Internet-related business, NTT Com will leverage its group strengths, including the extensive content, services and customer bases of its OCN, Plala and "goo" brands. One such effort is video distribution service from Hikari TV, which NTT Plala launched in March in conjunction with new next-generation network commercial services. Other appealing services will be developed to harness the strength of the next-generation network.

Based on the Business Vision 2010 growth strategy, the company's seven core business domains will be further refined and business in growth areas will be further developed in unison with the NTT Com Group.

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