The Nippon Telegraph and Telephone Corp. group has been driven into a tight financial corner with its first-ever cut in charges for fixed-line phone services in the face of an onslaught from rivals.
Norio Wada, president of NTT, the group’s holding company, said last Friday that the company will lower the basic monthly charges — regarded as the “sanctuary” of its revenues — due to intensifying competition with rival carriers KDDI Corp. and the Softbank group.
“The plan we have worked out is much more than we could really afford,” Wada told a news conference. “We have lowered (the charges) to the minimum possible level. This is a painful choice.”
“Ordinary profit of 95 billion yen expected in the year ending next March will be wiped out,” said Akira Arima, an NTT East Corp. director.
The NTT group began discussing countermeasures on Sept. 16, the day after KDDI announced the new service with lower charges.
Top executives of NTT East Corp., NTT West Corp. and NTT Communications Corp. gathered with Wada at NTT’s head office in Tokyo for the consultations.
But discussions hit a deadlock immediately with head-on clashes between those present, an NTT group executive said.
The problem is how to counter competition from rivals who have plugged into NTT’s network through area NTT stations that provide telephone connections to homes, called the “last mile.”
These local connections, controlled by NTT, were made available to other companies in 2000, when regulations were eased. In the spring, KDDI and the Softbank group began using the local circuits to connect users to their networks at a lower cost, enabling them to provide a full connection service.
If these options grow, users might cancel their contracts with the NTT group, destroying its final stronghold. The rivals’ new services were unexpected, Wada said.
Softbank President Masayoshi Son announced earlier this year, “We are going to destroy the NTT group’s stronghold.”
Another problem for the group is that NTT Communications Corp., like KDDI and the Softbank group, is renting the “last mile” from NTT East and NTT West. NTT Communications is in charge of long-distance calls.
To counter the onslaught from their rivals, NTT Communications will have to provide full connection services at a lower cost, which is bound to erode profits from the “last mile” for NTT East and NTT West.
But after they consulted with the NTT group companies, “NTT Communications had to back down (from the lower service idea) with due consideration to the entire group,” an NTT Communications executive said.
But the executive said his company has not given up its intention of starting a cheaper service, indicating that internal conflicts have not been resolved.
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