NTT is in trouble. With these admirably forthright words, guaranteed to catch a journalist’s eye, Northern Business Information Ltd launches into its analysis of the fortunes of Japan’s domestic carrier. Its problems are those faced by all deregulated telephone monopolies, struggling to come to terms with new market entrants, and compounded by the requirements of Japanese business culture and the Ministry of Posts and Telecommunications, says the report. The former means that, for example, job cuts a la British Telecommunications Plc’s Release ’92 are virtually impossible to institute. The latter means that consistent business plans are prone to ministerial meddling, as the report says: The Ministry rules by providing guidance, one of those marvellous Japanese euphemisms that say much more than any direct word can possibly do. The report adds that unfortunately, the principles behind the guidance are not published and decisions it takes have not always been consistent with any discernable pattern. Add to this Japan’s economic downturn, pressure from abroad for access to the telecommunications equipment market, and the full range of problems become apparent.
Too downbeat
As a result, and in contrast to most PTTs which are commonly returning 20% growth rates, profits are down. Excluding inflation, the company’s pre-tax profits for 1991 were 12% lower than in 1988, and are set to fall a further 30% in 1992. The report predicts further falls next year. Let’s not be too downbeat though. Northern Business valued the domestic telecommunications market at over $50,000m last year, of which NTT retains 76%. However, it is the lucrative fast-growing sectors where the new carriers are strongest – the report points out that they have already captured over 50% of traffic along the Tokyo-Nagoya-Osaka corridor – the busiest long distance route in the country. Likewise, NTT has lost control of 40% of cellular telephone revenue. It’s no surprise that a company loses market share in a newly deregulated market, but profits are being hit by the reduction in market share at the same time as Japanese standard telephone revenues are showing close to zero growth. The Ministry is holding the prices of its erstwhile monopoly uncompetitively high, its network will not be fully digital for some years – in contrast to the other players in the market – and its internal structures mean that it is unresponsive to customers. So how is the company going to escape these straits? Northern Business Information reckons that international expansion could provide a solution – if only the Ministry would allow it. Under the existing regime, the report describes NTT’s aspiration to offset the loss of its domestic market against international trade a forlorn hope. However the Japanese way is often based on long-term strategies and in this NTT International is no exception. The problem with NTT becoming a global carrier, as the Ministry is well aware, is that it means a head-on clash with Kokusai Denshin Denwa Co, traditionally a retirement home for superannuated Ministry officials. At this point, the report becomes very coy, saying despite the difficulties, one can expect to see NTT making very aggressive moves to extend its carrier services outside Japan, adding, even more archly, important announcements could be made soon. The eminently-readable 128-page report NTT – A Strategic Analysis, costs less than an NTT share, at $2,475.
