Mid-Term Management Strategy

RNS Number:8510T
Nippon Telegraph and Telephone Corp
09 November 2005


---------------------------------

This English text is a translation of the Japanese original.
The Japanese original is authoritative.
---------------------------------



                                                                November 9, 2005



             Promoting NTT Group's Medium-Term Management Strategy



In November 2004, NTT Group announced the "NTT Group's Medium-Term Management
Strategy." To implement this strategy, we have put together a roadmap for
building the next-generation network and developing ubiquitous broadband
services.



With this roadmap, we will create a network environment that provides a
ubiquitous broadband service that is fast and convenient, safe and secure, and
offers connectivity anytime and anywhere - so that our customers can easily and
conveniently access our various application services. We believe this will help
create a rich communications environment for individuals as well as for
communities, make corporate activities more efficient, and generate new business
opportunities.



Our intention is to build an open next-generation network that a variety of
players outside NTT Group can use to pioneer and develop a variety of services
and business models. At the same time, we plan to actively move ahead with
alliances with these players in a wide range of forms. Through such initiatives,
we are making a contribution toward achieving the goals of the e-Japan Strategy
and the u-Japan Policy, so that Japan may have an energetic aging society in
which the social problems Japan faces today, such as decreasing birthrate and
rapidly aging population, issues of nursing and medical care, employment
mismatch, crime and disaster prevention, and energy and environmental problems,
are resolved.



I. Trends in the Information and Communications Market: Changes in the Past Year


(1)   Fixed-line broadband market: optical access service is becoming prevalent 
      and more applications are available



Fixed-line broadband access services (ADSL, FTTx, CATV) are becoming
increasingly popular, with 20.6 million subscribers using some form of broadband
service at the end of the first quarter of fiscal 2006. In particular, the
expansion of optical access service has accelerated, with the net increase in
subscribers exceeding that of ADSL from the fourth quarter of fiscal 2005. The
number of optical access service subscribers surpassed 3.4 million at the end of
the first quarter of fiscal 2006.



Applications using optical access are also on the rise. Examples include Hikari
Denwa (a high quality IP telephony service), video distribution, and
bi-directional audiovisual communications such as videophones.


(2)   Mobile communications market: migration to 3G mobile phones is 
      accelerating and more applications are available



In mobile communications, the number of subscribers in the overall market
(including PHS) reached 93 million at the end of September 2005. With the
migration from 2G to 3G mobile phones accelerating, the number of 3G mobile
phone users exceeded 38 million at the end of September 2005.

--------------------------------------------------------------------------------

Furthermore, migration to 3G mobile phones has led to the expansion of broadband
communication and increasing multifunctionality in mobile phones, with features
such as mobile Internet, video/music distribution, audiovisual communication
(videophone), and payment of small amounts using Osaifu-Keitai (mobile phones
equipped with payment services). A wide array of applications are being
developed and offered that go beyond simple means of communication.


(3)   A full-scale convergence of services has begun



As IP-based services become more prevalent, a convergence of services is taking
place. The primary broadband service offered by telecommunications carriers and
CATV operators is the triple play of Internet access, telephone, and video
distribution.



Fixed mobile convergence (FMC) is also progressing, such as services by
telecommunications carriers that provide corporate customers with integrated
communications systems using one handset functioning as both a fixed and mobile
phone (One Phone integration), services that enable secure and remote access to
corporate information systems using PDAs and other handsets, and videophone
services between mobile and fixed-line phones. In addition, South Korea is
moving ahead with preparations for the early commercialization of mobile WiMAX
(WiBro). As more WiMAX-related technologies are developed, it is becoming
increasingly clear that fixed-line and mobile communications services will
converge even further.



Furthermore, service convergence is developing in a variety of ways, as
exemplified by advances in the convergence of telecommunications and
broadcasting through IP-based multi-channel TV broadcasts offered by
telecommunications carriers and the distribution of content over the Internet by
digital terrestrial broadcasters.


(4)   Development of new businesses as broadband becomes increasingly prevalent



As broadband services become increasingly prevalent, a recent trend has been the
development of new businesses targeted at the creation of new "communities" of
individuals on the Internet. The blog search engine business is growing due to
the rapid increase in blog usage (473 million as of the end of September 30,
2005), and business opportunities in advertising are expanding as a result of
growth in affiliate programs1 and SNS (social networking sites).2 We expect many
more new business opportunities to emerge in the future.
------

(Notes)

1. A system under which an ad is posted on a web site or e-mail newsletter, and
if a visitor makes a purchase through such ad or there is otherwise a desired
result, a commission is generated.

2. A community web site at which participants introduce their friends to each
other and form new friendships.

--------------------------------------------------------------------------------
(5)   Changes in the market and competitive structure as the transition to 
      IP-based services progresses



As the transition to IP-based services moves forward, telecommunications
carriers in Japan and overseas are changing their networks/business structures
and entering into alliances to respond to the fixed mobile convergence as well
as the convergence of telecommunications and broadcasting. In addition, new
business models continue to develop as witnessed by the emergence of providers
offering a variety of content and applications using IP networks.



Also, overseas carriers are proactively engaged in fortifying their
international competitiveness in the emerging IP era, including the
standardization of the wireless broadband system (e.g., 4G and WiMAX in mobile
communications) and IPv6.



In these ways, the information and communications market and its competitive
structure are rapidly changing both in Japan and abroad.


II.   Measures to Promote NTT Group's Medium-Term Management Strategy


1.    Building the Next-Generation Network


(1)   Basic concepts



NTT Group will build an efficient and flexible next-generation network enabling
the provision of seamless IP-based services, using optical access and broadband
wireless access for intra- and inter-prefectural communication, for
communication between eastern and western Japan, and for communication between
fixed-line phones and mobile handsets. These services will be offered through
the collaboration of Group companies, consistent with the terms of fair
competition as defined under the current legal framework. With this
next-generation network, we will provide broadband Internet access, IP
telephony, multicast communication for video distribution, bi-directional video
(data) communications, and ethernet services.



(Note) We will, to the extent possible, use ethernet services on the
next-generation network to replace existing dedicated line services, but for
dedicated line needs requiring a certain level of quality, we will install
dedicated line service nodes to allow network sharing at the wavelength
multiplexing level. In addition, we are reviewing ways to integrate and
consolidate service categories for dedicated line services that use special
codes.



The next-generation network will have specific functions for controlling traffic
during times of congestion and for restricting unauthorized traffic, as well as
for handling cyber-terrorism and physical damage due to natural disasters. By
ensuring communications quality and bandwidth appropriate for the various types
of services, we will aim to provide safe, secure, and convenient services that
combine the advantages of the existing telephone network and the IP network.

--------------------------------------------------------------------------------

The next-generation network will adopt a layered structure model so that it can
respond better to technological advances and service diversification. In
addition, subject to satisfaction of certain conditions, including maintenance
of security, we will disclose the interface between the network and application
management systems in order to allow application service providers (ASPs), video
distributors and others to make use of the next-generation network and provide a
wide range of application services. The service control functions of the
next-generation network conform to the IP multimedia subsystem (IMS), which is
compatible with the layered structure model being standardized by the
International Telecommunication Union (ITU).



The next-generation network will be an open network that provides reliable
connectivity with other IP networks (including ISPs). Specifically, voice
communication connectivity will be the same as it is today; furthermore, with
respect to video communications (other than voice communications), we will
actively participate in efforts by the government and telecommunications
carriers to ensure connectivity, while keeping an eye on how services are
spreading and how the social consensus forms in relation to quality and other
matters.



(Note) With regard to office and home environments, we will enhance the
convenience of our customers by installing optical outlets and providing optical
cords that are unaffected by bending, so that customers can install these
equipment by themselves.


(2)   Roadmap for building the next-generation network



Demand for optical access service is growing rapidly. Video-related services are
expected to expand in fiscal 2008 due to consumer interest in the Beijing
Olympics, and IP retransmission of digital terrestrial broadcasts in
high-definition, which is slated to begin that year. Accordingly, it is
imperative to build the next-generation network as soon as possible. In the US,
the Federal Government is planning to develop an IPv6-compatible network in
fiscal 2008.



In light of these circumstances, we will begin field trials in the second half
of fiscal 2006, and begin building the next-generation network relay system by
deploying relay nodes and optical wavelength transmission equipment on the IP
networks of NTT East and NTT West. Following this, in the second half of fiscal
2007, we will begin deploying edge nodes as well as service control functions,
and begin providing next-generation network services on a full scale. Existing
user nodes and new edge nodes will initially be accommodated together in
next-generation network relay nodes; we will overlay the new edge nodes across
the network over time by replacing the existing nodes gradually.



We intend to achieve seamless linkage with the mobile network through the
deployment of mobile network edge nodes at the time of NTT DoCoMo's introduction
of the Super 3G service, and through NTT DoCoMo Group's transition of the ATM
(voice) network to an IP-based network.

--------------------------------------------------------------------------------

As for specific measures to resolve the inefficiencies that result from the
next-generation network coexisting with the existing fixed-line network, we will
put together our plans by fiscal 2010 based on trends in demand for the optical
access, next-generation network.


(3)   Summary of field trials



Prior to the completion of development work on our new edge node technology, we
will commence field trials in the second half of fiscal 2006 in order to carry
out a technological review with a view toward full-scale commercialization.
While the field trials will be carried out only in limited areas, or with a
limited member of trial users (which will be determined before the end of this
fiscal year), we plan to steadily introduce new services including Internet
access, IP telephony, video distribution, fixed mobile convergence services, and
solutions services for corporate customers as soon as preparations are complete.
The services and features currently undergoing technological review include
end-to-end quality control functions utilizing active controls across the
spectrum from simple voice communications to high-vision class high resolution
video distribution; IP-Multicast functions that permit large volume high
resolution video transmission; security functions including unauthorized access
blocking that provide safe, secure, and convenient services; multi-tier
integrated technologies that realize convergence by enabling the provision of
multiple services economically and efficiently; functions that combine fixed and
mobile communications; open connectivity functions to link applications, and
more.



We are conducting our field trials in association with manufacturers of
information household appliances and software ASPs. As part of our field trials
we plan to disclose our network interface to other carriers and ISPs.


2.    Development of Ubiquitous Broadband Services



By enhancing the efficiency of our business operations through the effective
utilization of NTT Group's resources, and by responding to the demand for
convergence of services and technologies while satisfying the conditions for
fair competition under the current legal framework, we will actively promote the
development of ubiquitous broadband services.



To this end, we will clearly define the role and responsibility of each company
for each network service, upper layer service, and corporate customer service.
At the same time, we will strengthen intra-Group collaboration and promote
alliances with other companies.



In addition, the holding company will strengthen its function of formulating
overall Group strategy, including strategic alliances with domestic and overseas
companies.

--------------------------------------------------------------------------------
(1)   Network services



In connection with the next-generation network, NTT East, NTT West and NTT
DoCoMo Group will build the network and provide seamless integration between
fixed line services (intra-prefectural/inter-prefectural, and eastern Japan/
western Japan) and mobile IP-based services. Additionally, NTT Communications
will provide corporate customers with one-stop services that include solutions
services.



In a continuation of current practice, NTT East, NTT West, and NTT
Communications will provide fixed line telephone network services for
intra-prefectural, inter-prefectural and international calls.


(i)   Fixed-line communications



With recent demand increasing sharply, the number of subscribers using B FLET'S
optical access services reached 2.3 million at the end of September 2005. By
providing faster, more diversified, and more reliable services, we plan for even
further acceleration in the expansion of this service and aim to raise the
subscriber figure to 30 million by fiscal 2010.



Specific measures include the following: (1) providing faster and more
convenient broadband Internet access, (2) expanding services that will become
possible due to IP telephony's multi-channel and multi telephone number
functions, (3) providing more high-value added functions such as IP-Centrex, (4)
 diversifying fee structures (e.g., quasi-flat rates) and work to promote flat
rates, (5) enhancing high quality, bi-directional video communications service
(videophone) and bi-directional communications service for large data volume,
and (6) expanding multicast communications for video distribution which will
enable high-quality video-on-demand services and IP-based TV broadcasting
services.



In implementing these optical access services, we believe that it is important
to promote alliances with other ISPs and other companies to a greater extent
than ever before; at the same time, we also believe it is important to form
wide-ranging alliances with consumer electronics manufacturers, due to the
importance of achieving coordination with user systems that incorporate recent
developments in IT-capable home appliances.


(ii)  Mobile Communications



NTT DoCoMo Group will offer high-speed downlink packet access (HSDPA) and super
3G services to enable such services as high-speed high-volume video, audio and
text distribution and video communications. In addition, based on the "
Seikatsu-Keitai" concept (the mobile phone as a multifunctional tool useful for
people's diverse lifestyle needs), NTT DoCoMo Group plans to promote
diversification of mobile phone handset use by building in credit card and
electronic money functions as well as incorporating functions such as GPS
(Global Positioning System).

--------------------------------------------------------------------------------
(iii) Fixed Mobile Convergence (FMC)



We will offer our individual customers handsets that serve as both a fixed-line
and a mobile phone by having dual connectivity with WiFi and FOMA (One Phone).
We are also making preparations for the timely provision of services such as
forwarding calls between fixed-line and mobile phones when there is no response,
and rate discounts for service packages.



We will also provide flexible, high-level communications services that can move
seamlessly between fixed-line and mobile communications by introducing the
next-generation network and combining it with WiFi, WiMAX or other wireless
broadband technologies.


(2)   Upper layer services (Internet connection, portal services, etc.)



In relation to the services that Group companies currently offer-e.g., Internet
connection, IP telephony (050 numbers), video distribution (provision of
platform and content) and portal services-we intend to improve the efficiency of
our business operations by consolidating our facilities and operations as well
as our procurement activities into one entity. Also, by vertically integrating
these businesses, we intend to promote the construction of a new business model
by offering service packages comprised of flexible combinations of upper layer
services and creating a common points system. Moreover, integration of these
businesses will unify and clarify the point of contact for companies looking to
enter into an alliance with NTT Group. By proactively forming alliances with
other companies, we will look to promote the development of new businesses such
as advertising, e-commerce, and payment settlement businesses, including
micropayments.



In preparation for the planned business consolidation of NTT Resonant and NTT
Communications, our upper layer fixed line services will be transferred to NTT
Communications by next summer. We will consolidate the facilities and operations
in stages to allow our users to make a smooth migration.


(3)   Corporate services



With regard to corporate services, we will aim to develop a centralized service
and response system for corporate users, and to strengthen our total solutions
products and services for fixed/mobile services, for networks, and for software
/ information systems. In addition, we will look to create new businesses by
further promoting alliances with other companies.



In order to provide enhanced solutions using open-source software, which is
expected to expand in the future, we will consolidate the open source
software-related operations dispersed throughout NTT Group to create a uniform
support system from systems development to operations, and we will also increase
our ability to develop strategic software. Moreover, in response to increasing
diversification in payment methods and growth in applications using IC cards for
personal identification, we will strengthen our card solutions that incorporate
user authentication technology and encryption technology using IC cards.

--------------------------------------------------------------------------------

To this end, we will review our user account system within the Group by next
summer. In principle, NTT Communications will have responsibility for responding
to customers, including with respect to network solutions. Moreover, in order to
accommodate our customers' increasing FMC requirements, we will strengthen
business ties between NTT Communications and NTT DoCoMo Group. NTT East and NTT
West will continue to take the lead role in servicing customers that have close
affiliation with their localities.



NTT Data will be principally responsible for software / information systems
solutions for our corporate customers, while strengthening its ties with NTT
Communications and NTT Group software companies.


(4)   Convergence of telecommunications and broadcasting



By proactively responding to the convergence of telecommunications and
broadcasting, we will aim to increase the market penetration of our optical
services, improve the video distribution platform business, and expand our
content distribution business by forming alliances with content owners.



In line with the movement toward system reforms to enable IP retransmissions of
digital terrestrial broadcasts, we will address the fiscal 2005 research
conducted by the Ministry of Internal Affairs and Communications, and continue
to work toward commencement of IP retransmission services by moving ahead with
efforts to unify our intra-Group video distribution platform, by actively
participating in the formulation of technical specifications, and by promoting
alliances with TV set manufacturers.



We will also promote alliances with terrestrial broadcasters, for example by
jointly establishing sales and operating companies that offer multi-channel pay
TV services using optical fiber, and by jointly developing new services that
promote the convergence of telecommunications and broadcasting and take
advantage of the new opportunities created by the commencement of one segment
broadcasting for hand-held receivers. Furthermore, we will promote alliances
with broadcasters to improve content for our video-on-demand (VOD) services.


(5)   International business



With increasing demand for global services that bring together domestic and
international services and with competition unfolding on a global scale, NTT
Group will use the expertise it has developed and the fruits of research it has
obtained in ubiquitous broadband services to form alliances with equipment
manufacturers to actively create business opportunities overseas. To strengthen
Japan's international competitiveness, we intend to actively participate in the
formulation of international standards and other international initiatives
through the International Telecommunication Union (ITU) and the World Summit on
the Information Society (WSIS). Accordingly, we will establish an international
section within the holding company, which will be tasked with formulating NTT
Group's international business strategy and international standardization
strategy and coordinating the international businesses of the Group companies.

--------------------------------------------------------------------------------

With respect to China, where the Beijing Olympics (2008) and the Shanghai World
Expo (2010) promise growth opportunities, we intend to establish an NTT Group
office in Beijing that will be the uniform point of contact for the Chinese
government and Chinese businesses. By doing so, we will strengthen our efforts
in this market as we work in unified collaboration with local Group
subsidiaries.


(6)   Providing one-stop services to our customers



Amidst the diversification and convergence of services due to the shift to
IP-based networks, we will ensure the availability of one-stop services for
customers, and seek collaboration between Group and non-group companies to
increase customer convenience in all facets of our business (sales,
installation, user support, repairs, etc.).



Particularly, customers have made especially strong requests for a unified
billing service for NTT Group services. Although we have already been
accommodating the individual needs of our corporate customers, we now intend to
increase customer convenience by enabling individual users to pay fixed and
mobile phone bills online with a single sign-on. This service is expected to be
in place by the end of the first half of fiscal 2006. We are also considering
other measures to increase customer convenience. Because completely unifying the
payment system for existing services that various Group companies separately
offer requires a major system reorganization, we are focusing our efforts on
efficiently achieving unification of the payment system in conjunction with the
construction of the next-generation network.


(7)   Working toward a safe and secure society in line with the e-Japan Strategy and the u-Japan Policy



NTT Group is working hard toward the realization of the goals of the e-Japan
Strategy and the u-Japan Policy by assertively addressing social problems such
as falling birthrate and aging society, employment mismatch, nursing care and
health care, crime and disaster prevention, and energy and environmental
problems through the use of ICT (Information and Communication Technology).



More specifically, we are working to make remote medical care possible by using
our next-generation network to carry out health monitoring and consulting via
video. Additionally, we are developing technologies and providing system
solutions so that health-care systems can exchange information with each other.



As demand increases for diversified employment forms tailored to individual
needs as a means to eliminate the problem of employment mismatch, we are making
efforts to facilitate telework (working from home using telecommunications), and
SOHO (Small Office, Home Office) / home offices that make use of the
next-generation network, and to promote the distribution of help wanted and
position wanted ads.

--------------------------------------------------------------------------------

Because of natural disasters such as the Niigata earthquake of October 2004 and
because of the increasing crime rate, the need for disaster and crime prevention
is increasing. We have been working to enhance the reliability of our networks
by combining the strengths of our fixed-line and mobile communications systems,
to prevent service disruptions when natural disasters occur, and to quickly
restore service. We will further strengthen our efforts in these areas, and we
will also move forward with efforts to develop home security, off-site
monitoring and home control services on the next-generation network using IT
home appliances.



With the Kyoto Protocol being adopted in 1997 and worldwide attention being
focused on global warming, Japan is taking measures to respond to energy and
environmental problems by recycling and reducing waste. At NTT Group, we will
contribute to resource and energy conservation by utilizing our information and
communications technology.






Figures and descriptions contained in this document relating to future
predictions were estimated according to information available at this point in
time, and may change in response to trends in the Japanese economy and the
information communications world, as well as new services and rate of charges,
etc. NTT Group therefore does not guarantee the reliability of the figures and
descriptions relating to future predictions in question.



                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

MSCIIFVALFLAIIE