Nippon Telegraph&Telephone Corp.

Overview Key strengths Key risks Leading position in Japan's telecom market, with a solid customer base as the country's largest telecom company Fierce competition and weak competitive position in the growth area of IT service business relative to telecom business World-class technology Somewhat weaker groupwide profitability than that of U.S. and European telecom majors, due to high costs of maintaining broad mobile and fixed-line communications networks, in addition to expanding IT service business Ability to steadily generate high levels of earnings and cash flow from telecom business Likelihood of key cash flow ratios remaining somewhat weak for the ratings due to increased growth investments Consolidated revenue underpinned by solid earnings growth from telecom-related and IT service businesses and groupwide cost

...Nippon Telegraph & Telephone Corp. (NTT) will likely maintain the strongest position in Japan's mobile communications market despite a fierce competitive environment. In its core mobile communications business, which generates over 50% of consolidated EBITDA, NTT slightly lags its domestic peers in new customer acquisition. This is partly because it introduced discount rate plans slightly later than major peers. We also believe it will need time to substantially improve network quality that has deteriorated due to increased traffic volume. However, customers in the domestic mobile market do not switch carriers easily, due to customer retention measures that major carriers, including NTT, have in place. We believe NTT can retain its customer base with diverse service plans backed by strong brand recognition. Earnings growth in telecom-related and IT service businesses, together with groupwide cost reductions, should help increase consolidated earnings. NTT has suffered sluggish growth in...

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