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May 11, 2007 12:18 pm

NTT falls short of profit forecast

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Nippon Telegraph & Telephone, the world’s biggest phone company by sales, missed forecasts Friday with a 7 per cent drop in annual operating profit.

The slide in demand for land lines, a long-running problem for the company, continued to hit earnings. But profits were also damaged by the October introduction of number portability, which allows customers to change provider without the bother of changing number. This has intensified competition among mobile providers.

The company also said Friday that Norio Wada would resign as chief executive in June, after five years in the job. He will be replaced by Satoshi Miura, one of two senior executive vice-presidents at NTT.

The company said the replacement was “well-timed”, since the company was at a “critical juncture”. However, it declined to say whether the resignation was connected to the low earnings figures.

NTT announced a 7 per cent drop in operating profit to Y1,107bn in the year to March, disappointing analysts’ expectations of stable earnings. Sales inched up 0.2 per cent to Y10,761bn for the year just past. NTT forecast flat operating profit for the year ending March 2008.

The number of fixed lines continued to decline, hit by a switch to mobiles and to internet-based telephones.

But NTT failed to gain from an increase in mobile users at NTT DoCoMo, a subsidiary and Japan’s biggest mobile carrier. DoCoMo’s operating profit also declined by 7 per cent over the same period, hit by sharp price competition and high promotion costs incurred in preventing customers defecting because of number portability.

NTT has been arguing with the government over what price it can charge rival companies for access to various parts of its network. The fall in profit could strengthen NTT’s complaint that the strict current caps on its charges are uneconomic for the company.

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