NTT Com takes business to the Net

Long-distance unit finds infrastructure niche to woo online firms

by

NTT Communications Corp. is reaching beyond conventional telecommunications to focus on e-commerce infrastructure so Japanese firms can make the jump to cyberspace, says Masanobu Suzuki, president of NTT Com.

Security, settlement and authentication systems are essential for successfully conducting e-commerce operations, said Suzuki, head of the long-distance and international arm of Japan’s largest telecom group.

“These are functions needed for IP-based (Internet protocol-based) services. We’re preparing those functions to help our clients conduct e-business. We are trying to offer a theater, so to speak,” Suzuki, 58, said in an interview with The Japan Times.

NTT Com was created to offer both long-distance and full-scale international services when the former telecom monopoly was broken up by the government last July into three firms to be controlled by a holding company.

But Suzuki estimates it will take about two years for sales from IP-based services to exceed conventional voice-based services, which are the source of more than half of the carrier’s revenue.

So NTT Com has agreed to provide Square Co., a major producer of video game software, with networks and other platforms for a service that will allow multiple users to simultaneously play together online.

NTT Com has also joined a venture with Toyota Motor Corp., FamilyMart Co., and four other convenience store chains to develop e-commerce platforms for multimedia terminals to be set up in stores and dealerships. NTT Com has a 5 percent stake in the venture.

The fully owned subsidiary of Nippon Telegraph and Telephone Corp. estimates that sales for its first business year, which covers the last nine months through March 31, will reach 1.1 trillion yen.

NTT Com is competing with carriers who will try to take as big a bite of the IP pie as they possibly can, but it will also face competition from other NTT group companies.

NTT Data Corp. and NTT-ME Corp., for example, will be trying to create products that are similar to NTT Com’s, including Internet access and data communications services.

Suzuki said competition within the group is a matter of course now that reorganization has changed its nature. In the old days, the behemoth just wouldn’t have been able to function without a clear-cut division of labor that defined the role of each section.

“Through the reorganization, we became (a group of) small organizations.” Suzuki said. “We have a rough outline about the roles each organization plays. But it is not practical to determine the territories in complete detail.”

However, if intragroup competition somehow heats up to the extent that it harms the interests of its shareholders, the group may find itself in need of “coordination,” he said.

As a fledgling international carrier, Suzuki said it is urgent for NTT Com to strengthen its international network, with particular emphasis on Asia.

NTT Com has been forming partnerships with Asian carriers and recently obtained a 15 percent stake in Philippine Long Distance Telephone Co., along with a 22 percent stake in StarHub Pte in Singapore.

“We give primary importance to Asia, and that region is the market that will grow rapidly in the future. Our partnerships (with local carriers) are beginning to bear fruit,” Suzuki said.

While NTT Com is creating footholds in Asia through those partnerships, how to approach the U.S. market, which is competitive and hard to crack, is an issue NTT Com will be tackling this year, Suzuki said.

“New ‘dot-com’ companies in America are looking for an opportunity to enter the Asian market as quickly as possible.” Suzuki said. “Our policy is to serve as a gateway to the market for those American (e-business) companies.”

Suzuki said the carrier has not yet figured out its approach to the American market. Unlike NTT DoCoMo, the use of mergers and acquisitions is an option it is willing to consider.

Although NTT Com may want to raise extra capital in the future, a leap to the stock market is not in the cards at the moment.

“We are not considering going public right now because it has been only months (since we started up),” Suzuki said. “But we may have to come up with an answer in the near future on how we do finance and how we handle the issue of M&A.”