Nippon Telegraph and Telephone Corp. made a fresh start Thursday as a group of companies under the control of a holding company. As Japan’s largest telecommunications company, NTT is expected to play an even larger role in a broad spectrum of activities. With competition heating up at home and abroad, however, success is by no means assured. The challenge for the “new” NTT is to boost its competitiveness by providing cheaper, better and more efficient services.
The NTT group has two regional carriers serving western and eastern Japan respectively and a third carrier providing long-distance and international services. The group also includes NTT DoCoMo, the cell-phone unit, and NTT Data Corp. With annual sales of over 10 trillion yen, the NTT family is the world’s largest communications conglomerate. There is no assurance, however, that it will win the global race, given tough competition from U.S. and European rivals and a wave of large-scale mergers and acquisitions sweeping the communications industry.
NTT reorganization has been a hard nut to crack ever since its state-owned predecessor was privatized in 1985. The biggest issue was whether to break up the giant corporation into independent units. The Ministry of Posts and Telecommunications called for a complete breakup, but NTT vehemently opposed that course. The dispute continued until 1996, when the two sides reached a deal to split NTT under a holding company.
The new setup will enable the company to respond quickly to developments in the world of communications and expand into new lines of business. However, it will have a lot of catching up to do because the domestic and international circumstances surrounding the communications industry changed dramatically while NTT was bogged down in the seemingly endless controversy over its future shape and course.
The deregulation and liberalization of communications services progressed steadily in major industrialized countries as economic activity expanded rapidly across national borders, giving a further impetus to international business competition. Globalization gained more momentum thanks to spectacular advances in information technology, notably the phenomenal growth of the Internet.
Globalization accelerated mergers, tieups and buyouts involving internationally active corporations, spurring realignments in key industries, such as banking, autos, petrochemicals and, of course, communications. The agreement between AT&T of the United States and British Telecommunications to integrate their international operations is a typical example.
In fact, the deal shows an important aspect of recent mergers in the communications industry: Big, strong competitors are joining forces on an equal footing, instead of the strong consuming the weak. This reflects, among other things, a compelling need to expand the scale of business to serve customers with worldwide networks of offices and factories.
The decontrol of communications services and the subsequent privatization of public communications monopolies in Japan and other countries have also opened domestic markets to foreign competition. Major carriers abroad are setting their sights on Japan, the world’s second-largest communications market after the U.S. and a springboard for expansion into the rest of Asia. Already AT&T and BT have acquired stakes in Japan Telecom Co., and Britain’s Cable & Wireless has purchased International Digital Communications.
At the same time, the rapid increase in Internet services has brought a world of information within easy reach of countless users around the globe. Internet telephone service, for example, looms as a formidable rival to conventional telephone companies.
In this increasingly competitive climate at home and abroad, NTT needs to raise efficiency in management, cut charges and provide better services. Cutting the cost of communication is essential to revamping the high-cost structure of the Japanese economy.
Internet use in Japan is increasing rapidly, according to this year’s white paper on communications, with 11 percent of households owning personal computers that give access to global Web sites. The expansion of the Internet system has spawned new types of business, such as electronic transactions. It is also creating more jobs in related industries.
The Internet foreshadows the future shape of society. The most effective way to spread its use is to cut charges for communications. In this, NTT must take the lead. Indeed, it has a very large role to play in building an information society in which everyone can easily participate.
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