Nippon telegraph & Telephone Corp.

Japan's Largest telecommunications operator,

said it plans to turn to activities outside its core to keep growing while suffering
revenue declines in its mainstay phone business. Satoshi Miura, NTT's New Chief
Executive Officer, said in an interview that he wants to increase revenue from
business outside main communication areas to one trillion yen, or about & 8 billion,
a year from 700 Billion yen as soon as possible. In order to put ourselves on a
growth path, we need to expand our business offerings in addition to improving our
current services, said the 63 year old Mr Miura and NTT veteran who became CEO
late last month.
In order to expand more broadly outside traditional phone business, Mr Miura is
focusing on areas like call center outsourcing and providing financial services in
tandem with other companies such as banks that ultimately NTT's high speed
telecommunications networks. He also wants to more proactively turn products and
services developed by the company's extensive research facilities into business. We
want to offer services that add value to our fiber optic services, Miura said.
NTT, which provides mobile phone, local and long distance telephone services
through five main subsidiaries, is the world's largest telephone company by
revenue, with annual sales of about $ 88 Billion. It has one of the most advanced
telecommunications networks in the world, but the Japanese giant has been
struggling to come with increased competition on all fronts from rival like KDDI
Corp. and Softbank Corp. Revenue has been falling falling for years at NTT's fixed
line business as mobile phones and the internet supplanted traditional phone calls.
NTT high speed fiber optic telephone services as on way to keep customers. But
competition has forced it to charge such low prices that it has been unable to stem
the revenue decline.
Meanwhile, NTT DoComo Inc. its mobile telephone subsidiary, has been hit by
severe price competition. Docomo had long enjoyed dominant status, and still
counts 54 % of Japan's mobile users as customers. But recently, it seems many of
them leave for KDDI and Softbank. The two companies have aggressively stepped
up promotions since a government rule last november (2006) made it easier for
customers to exit by letting them keep their phone numbers even if they switched
carriers (i.e. telephone companies). NTT reported a 7% drop in operating profit to
1.1 Trillion yen in the business year that ended March 1 (2007). It said results would
be flat in the current year.
Beyond Japan, Mr Miura said he is interested in extending NTT's reach overseas,
given Japan's shrinking population and limited economic growth, He also said NTT
would be open to more partnerships with telecommunications operator, and would
consider making financial investments in those companies if it made sense, though
he didn't provide details. NTT owns 15.5 % of Philippine Long Distance Telephone
Co. which has more than 27 Million subscribers.
In Manila yesterday, PLTD Chairman Manuel Pangilinan said discussions about NTT
increasing its stake in the Philippine company should be concluded hopefully by
year end. The discussions involve share in PLTD held by First Pasific Co. Of

Hongkong. Mr Pangilinan is chief executive of First Pasific. NTT has expressed

interest in raising its stake in PLTD to as much as 21 %

Questions
1. Do you Agree with the Executive's decision to enter new business ? Why ?
2. What is NTT diversification strategy ? Related or Unrelated ? Explain
3. Does it make sense to expand to international market ? Why

Background

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Case Analysis

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