Return to increasing trend after bottoming out this fiscal year NTT East and NTT West|電経新聞

Return to increasing trend after bottoming out this fiscal year NTT East and NTT West

NTT東日本が構想する次世代デジタル基盤(Next-generation digital infrastructure envisioned by NTT East)

NTT East’s fiscal year 2023 results show increased sales and profits. Operating revenue was 1,710.5 billion yen (an increase of 8.3 billion yen from the previous year), and operating profit was 298.6 billion yen (an increase of 13.2 billion yen from the previous year). Operating income increased for the 12th consecutive year. Capital investment was 243.8 billion yen, a decrease of approximately 5 billion yen compared to the previous year, due to efficient investment. Hikari services had a net increase of 40,000, down 130,000 from the previous year, due to factors such as the end of remote demand.

For fiscal year 2024, operating revenue and profits are expected to decline by 1,655 billion yen (down 55.5 billion yen from the previous year) and operating profit by 210 billion yen (88.6 billion yen from the previous year). Capital investment will be 245 billion yen, the same level as FY2023. Hikari services are expected to have a net increase of 50,000 (13.42 million subscriptions).
President Naoki Shibutani says, ”Sales of FLET’S Hikari Cross, a 10-giga service, are growing at about four times the rate.We will continue to expand the area and strive to further stimulate demand”.
Operating revenue will decline by 55.5 billion yen due to the backlash from the slimming down of non-core assets in order to achieve the business plan for FY2023, but excluding the slimming down of non-core assets, this will be the first time for the company to improve its top line on its own. succeed in Operating income is expected to decline by 88.6 billion yen due to an increase in revenue-linked expenses due to the increase in SI orders, although SI orders are steadily increasing due to the digital needs of ministries and agencies.
President Shibutani stated, ”We will hit the bottom in FY2024 and return to a steady trend of increasing profits.We are positioning FY2027 as an important year to take on this challenge”.

The past two years have been a headwind for NTT East. The special demand for remote services due to the coronavirus pandemic disappeared, and the net increase in optical services suddenly stopped. Furthermore, the electricity bill rose by 15 billion yen. Increases in labor costs and material costs (such as routers) also had a large impact.
”We are now on track to break out of these headwinds.We will shift to a trend of increasing profits while setting the goal of restoring our earning power” (President Shibutani).

First, the key theme will be how to get subscriber phone users, whose revenue scale is around 205 billion yen in the East Japan area alone, to migrate to alternative services and maintain them.
Specifically, they will actively promote its wireless landline phone, which was released in January. They will promote the transition by proposing the integrated VPN service ”Interconnected WAN” as an alternative service. They will develop these initiatives through a company-wide project promotion system.

They are also promoting the minimization of metal costs. They are still using metal in areas where there is a problem with relocation or where new demand has arisen, but in these areas, they can use fiber-optic telephones, wireless fixed-line telephones, etc. to facilitate relocation, repair of problems, or relocation of problems. Suppress the laying of exposed metal.
”We will sell the removed metal as copper. By establishing this kind of flow, we will strive to minimize costs,” said President Shibutani.
The metal used in communications has a high purity, exceeding 99%. Currently, it has become an urban mine, selling for around 1.35 million yen per ton.
To improve productivity, they will combine CX and DX and simplify business flows from a customer-centered perspective.
For example, they will introduce generative AI such as tsuzumi to call centers, create work flows that do not rely on human labor, and shift about 3,000 people to growth fields by FY2027.
President Shibutani said, ”Currently, we are promoting a project to train operational experts in order to fundamentally review our business flow.Up until now, we had outsourced the construction of our business flow system, but we have moved to our own in-house platform and We will bring all development and operations in-house.We will be able to keep up with changes in society and technology while developing experts in business flow”.

By digitizing paper-based materials, they can reduce the environmental impact and reduce costs. The plan is to improve cost efficiency by approximately 40 billion yen by fiscal 2027.
In addition to selling fiber optic lines, we will also focus on fiber-optic related businesses. In response to the growing DX needs of local governments and small and medium-sized businesses, sales of VPNs, Wi-Fi, managed services, etc. are trending steadily and are growing at around 10 billion yen annually.
The plan is to develop it by combining government solutions for ministries and agencies, cloud integration platforms for local governments, networks that support the digitalization of society, delivery, maintenance and operation, etc.
”Furthermore, by combining urban development and renewable energy, we can centrally address local issues.We want to firmly support a local recycling-oriented society” (President Shibutani).
NTT East plans to update its network-based assets to next-generation digital infrastructure. Create new businesses and services by sharing the updated infrastructure with local assets.
A specific example that is often cited is strengthening networks to cope with increasing traffic.
Currently, various hyperscalers are locating their cloud, video services, and generative AI bases in Japan. As a result, traffic has tripled over the past five years, with fixed networks now carrying about five times as much traffic as mobile networks.
As a business that supports the backbone, they has begun building a connectivity platform that will connect data centers directly using a new optical network in an optimal manner and via the shortest route. By attracting a variety of interconnection companies and IX operators here, the city hopes to quickly provide the networks required by hyperscalers and data center operators, supporting AI and a digital society.
“The hubs of Asia used to be Singapore, Hong Kong, and Tokyo, but due to the intensification of the US-China conflict and the power shortage in Singapore, investment in Japan is increasing.To meet the needs of hyperscalers, Tokyo is the only place to concentrate. Instead, it is an opportunity to improve connectivity with the Tokyo metropolitan area, such as Fukuoka, Osaka, or Akita, Tomakomai, and Obihiro, which have a lot of renewable energy, and make Japan a data hub for Asia and a destination for Asia’s traffic ” (President Shibutani).
NTT West’s fiscal year 2023 financial results showed operating revenue of 1,497 billion yen (down 4.6 billion yen from the previous year) and operating profit of 138.9 billion yen (up 4 billion yen from the previous year), both sales and profits increased. Capital investment was 237.2 billion yen, down 12.1 billion yen from the previous year. The net increase in optical services was 40,000, down 100,000 from the previous year.

They forecast a decline in sales and profits in FY2014. Operating revenue decreased by 52 billion yen from the previous year to 1,445 billion yen, and operating income decreased by 58.9 billion yen from the previous year to 80 billion yen. Capital investment is planned to be 237 billion yen, the same level as FY2023. We aim for a net increase of 50,000 in optical services.
President Ryota Kitamura said, ”Although we will have to take a big step forward in fiscal 2024, we are positioning it as a time to make a comeback to ensure a turnaround from fiscal 2024 onwards.” We will strengthen the measures we have taken and put the company back on a growth track.”

In July, the company established the Security & Trust Department, which is responsible for total management of information security and cybersecurity measures for the entire NTT West Group, planning and formulating security strategies, and training and deploying security personnel. The former Information Security Promotion Department and Cyber Security Strategy Office will be integrated into the Security & Trust Department.