Japan’s telecoms giant Nippon Telegraph & Telephone plans to arrest a long-term decline in its profit by building up non-core businesses such as real estate and intellectual property, in a move that challenges the international trend against diversified conglomerates.
Satoshi Miura, president of Nippon Telegraph & Telephone, one of Japan’s largest companies, told the Financial Times on Tuesday that he needed to bring NTT’s telecoms businesses “back on track.” But “only doing such things is not enough to create a growth trend. That’s why we would like to expand our operations in non-telecoms businesses,” he said.
The comments by Mr Miura, who became head of NTT last month, go against the trend among the world’s largest companies of splitting off non-core businesses – largely under pressure from aggressive activist shareholders. In Japan, activist shareholders have been strongly opposed in particular to non-property companies dabbling in the real estate market, which was the source of many firms’ financial difficulties after land prices collapsed and Japan’s bubble era ended in the 1990s.
But Mr Miura said it made sense for NTT to utilize its own valuable real estate, which includes prized telephone offices in various town centres dotted about Japan. It plans, for example, to replace corporate apartments and other facilities with “condos which can be sold to employees”. Mr Miura added that NTT had three research and development subsidiaries, which had made progress in fuel cell, ozone sensor and broadcasting technology as well as strictly telecoms areas. These R&D subsidiaries showed promise but “we have to strengthen their marketing capability. The commercialization needs to be more active,” he said.
Mr Miura plans to boost revenue from non-telecoms business from Y700bn to Y1,000bn “as soon as possible”. He did not give a profit target for non-telecoms operations. NTT’s revenue was Y10,761bn in the year to March. The company’s revenue has been eroded by a decline in the number of fixed-line telephone customers, and by severe competition in the mobile market hitting profit at NTT DoComo, its biggest subsidiary by earnings.
Asked whether there was a risk in expanding its non-core operations, the new president said NTT had already built up considerable expertise in those areas. For example, it has a listed property subsidiary, NTT Urban Development, which rents out Tokyo office space.