NTT has reported an 8.2% rise in operating profit.
Although a pension shortfall led to net profits falling substantially, the Japanese incumbent telephone operator NTT today reported an 8.2% rise in profits. This reflects strong growth in the mobile telecoms, Internet access, and data communications branches, more than compensating for falling revenues in the company’s fixed-line business.
A major driver behind the good results is NTT’s 67.1% stake in Japan’s dominant mobile phone operator NTT DoCoMo. As well as being a major operator in one of the world’s largest markets, DoCoMo is also the only operator so far to run a successful mass-market mobile Internet service with its iMode technology. 14 million people in Japan use iMode data enabled phones, and other global carriers are interested in it as an alternative to disappointingly received WAP services.
DoCoMo is in a very good position for the future. It will be the first operator in a major market to offer UMTS wireless services, starting next May. Combined with its strategy of taking stakes in international mobile operators to promote its wCDMA technology globally, this should allow it to continue to lead the mobile Internet market – it has the technical expertise and the financial muscle to finance acquisitions.
NTT’s terrestrial Internet, long-distance infrastructure, and data services subsidiary NTT Communications is also doing extremely well, as Japan’s corporate use of IT approaches American levels. Whilst the market is becoming more competitive, as exemplified by Cable and Wireless’ decision this month to build a broadband data network linking Japan’s major cities, NTT Communications is still in a good position to compete.
There is a small cloud on the horizon. Regulators globally are becoming less keen to allow former nationalized monopolies to dominate throughout the telecoms market. Indeed, the Japanese government recently decided that NTT should allow its subsidiaries more autonomy. It is possible that over the next few years regulators may encourage NTT to split its long distance / Internet operation and its mobile operation from its core network. This would leave the rump company with limited growth prospects.
This is unlikely to happen in the near future, however. In any case, as data and mobile services become ever more important, the fixed-line last-mile business will become a comparatively minor component of NTT’s revenues. Spinning it off, or even splitting the company three ways, would still leave NTT Communications and NTT DoCoMo as major players in their own right.
