NTT Reports Mixed Q1 Results and Plans Structural Reform

NTT Corporation Reports Q1 FY2024 Financial Results

NTT Corporation (TSE: 9432), a leading telecommunications and information technology services provider, released its financial results for the first quarter of fiscal year 2024. The report indicated increased operating revenue but a decline in operating profit. Despite these challenges in the telecommunications sector, the company remains committed to its profit plan through various initiatives and structural reforms.

Key Highlights

• Operating Revenue: Increased by ¥129 billion, reaching ¥3.240 trillion, primarily driven by growth in the Integrated ICT Business and Global Solutions Business.
• Operating Profit: Decreased by ¥38.8 billion to ¥435.8 billion, impacted by lower revenues from telecommunication services and higher expenses for customer support and disaster recovery efforts.
• Strategic Focus: NTT plans to enhance sales, improve network quality, cut costs, and expand the enterprise business to boost performance.
• Shareholder Returns: The company expects to enhance shareholder returns through a share buyback program of up to ¥200 billion.
• Regional Operations: NTT East and West are undergoing structural reforms aimed at achieving better operational efficiency, with impacts to be assessed in fiscal years 2025 and 2026.
• Financial Management: NTT Group is actively managing foreign exchange risks and debt levels, considering guidance from the Federal Reserve and the Bank of Japan, with the goal of reducing debt and interest expenses.

Company Outlook

• NTT recently established AI-CIX, developed its tsuzumi platform, launched nwm ONE, and made strides in renewable energy initiatives.
• The company aims to transform and reduce costs in its Regional Communications segment.
• Strategies are being developed to counter declining revenue in fixed-line and mobile voice services.

Challenges

• There has been a decline in Average Revenue Per User (ARPU) and revenue from voice services, particularly affecting NTT Communications.
• The transition from Public Switched Telephone Network (PSTN) is negatively impacting profits, although this is expected to diminish over time.

Opportunities

• There is strong domestic demand for data centers, with expansion plans underway.
• NTT is committed to achieving EBITDA targets through both organic growth and acquisitions.

Q&A Highlights

• NTT is exploring measures to reduce debt and manage interest costs, such as considering the transfer of data centers to Real Estate Investment Trusts (REITs).
• Ongoing investments in data centers are expected to increase debt initially, but these investments are anticipated to generate cash flow in the long term.
• Potential increases in shareholder returns may occur if earnings per share (EPS) targets prove difficult to meet.

Integration of NTT East and West

• The integration seeks to improve efficiency and provide consistent services across Japan.
• Despite opposition, management believes this integration could yield significant benefits, including economies of scale and enhanced consumer convenience.

NTT Corporation concluded the earnings call by emphasizing its commitment to making robust investments and providing sustainable shareholder returns. The integration of NTT East and West continues to be an important topic, anticipated to improve operational efficiency and customer service. No additional questions were raised during the session.