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NTT Reports Earnings Up 36%, Warns of Profit Drop

May 29, 2000|From Bloomberg News

TOKYO — Nippon Telegraph & Telephone Corp., the world's largest telephone company, today said second-half earnings rose 36% on growth in its mobile-phone unit and better-than-expected performances by its regional phone companies.

However, the company warned without explanation that profit for the current year will drop. NTT faces increased competition in local phone service and pressure to trim connection fees for other companies.

For the six months ended March 31, group current profit, or pretax profit from operations, rose to $3.1 billion from $2.3 billion in the year-earlier period. Sales rose to $50.4 billion from $46.7 billion.

NTT was expected to report second-half current profit of $2.4 billion, based on the full-year estimate of five analysts surveyed by Bloomberg News. As in previous periods, NTT's 67% owned NTT DoCoMo Inc. mobile-phone business provided the momentum.

"I would have to say DoCoMo" is the story behind NTT's earnings, said Tsuyoshi Segawa, general manager for equity derivatives at Sakura Securities Co. "That is where the strong growth is coming from."

After a charge for retirement benefits, NTT had a second-half group net loss of $2.9 billion versus net income of $3.2 billion in the year-earlier period.

DoCoMo, Japan's largest mobile-phone company, provided $4.7 billion of NTT's $7.7 billion in annual group current profit, the company said. DoCoMo's earnings rose 44% for the year.

Even with DoCoMo's expected continued growth, though, NTT said its group current profit for the current year will fall 18% to $6.3 billion from $7.7 billion in the year just ended.

Analysts said NTT East and NTT West, NTT's regional phone businesses, will be hurt by competition from rivals charging lower rates and by reduced revenue from the charges their parent levies on other carriers using its network.

Governments including Japan's have pressed NTT to cut fees.

Still, one analyst questioned NTT's projection. Shinji Moriyuki, senior analyst at the Daiwa Institute of Research, called the profit forecast too modest and "not realistic at all." Given DoCoMo's momentum, he said, the company could have better earnings this year than last.

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