NTT — Company History

The public corporation's mission: a telephone everywhere in the country

In August 1952 the Nippon Telegraph and Telephone Public Corporation (日本電信電話公社) was established, taking over the telegraph and telephone business from the Ministry of Communications and the Ministry of Telecommunications. In September of the following month the Kokusai Denshin Denwa Act came into force, fixing an arrangement under which the public corporation carried domestic communications and Kokusai Denshin Denwa carried international traffic. In 1953 telephone tariffs were revised and a rational, efficient management structure for the telegraph and telephone business was established. The largest problem the corporation carried was that the 積滞 — the backlog of applications for a telephone that could not be installed — persisted for a long period. Business lines were installed as a priority, but for households a wait of two or three years after applying was not unusual. Long-distance circuits were also few, and for a long time callers waited several hours after placing a request with an operator.

Through the first to the third five-year plans, total telephone subscribers rose from 2.4 million in 1956 to 6.33 million by the end of 1964 — third in the world in number of telephones, after the United States and the United Kingdom. Even so, rising living standards and the concentration of population in the cities brought a flood of applications, and the number of telephones that could not be installed reached 1.6 million in 1966. The introduction of automatic exchanges at telephone offices gradually reduced the work of operators connecting circuits. As exchanges spread, the areas where subscribers could dial direct without going through an operator also expanded rapidly. By the late 1970s an installation pace of five million telephone terminals a year had cleared the backlog, and supply and demand reversed.

Clearing the backlog, and the case for monopoly unravelling

Clearing the backlog brought on a debate that reopened the question of what the public corporation existed for. Once anyone who applied could subscribe at once, voices grew louder that the mission of a public corporation building infrastructure under monopoly had ended. That telephone charges were high compared with the United States also became an issue: long-distance rates in Japan were said at the time to stand at nine against one for the United States. The argument of the liberalisers was that Japanese companies would lose their international competitiveness if they had to pay such high costs for communication. In the late 1970s, as the corporation's installation pace slowed, new subscriptions fell sharply to about two million a year, roughly half the previous level.

Re-examination from inside the corporation ran in two directions. On one side it aimed at expanding into wireless mobile telephony, including car telephones and mobile phones; on the other, taking the view that telephone-centred communications services had limits to their demand growth, it looked at computer communications, facsimile communications and video communications such as the videophone. Research and development was concentrated in particular on the Information Network System (INS), which unified telephone, image and computer information in digital form. In September 1984 the corporation began INS model trials in the Mitaka and Musashino districts of Tokyo. This carried the meaning of opening to the world the digital communications technology the corporation had accumulated as the service that would come after the telephone.

Shinto Hisashi takes charge, and the market is prepared for opening

In 1981 Shinto Hisashi (真藤恒) became president of the Nippon Telegraph and Telephone Public Corporation. Shinto had graduated from the Faculty of Engineering of Kyushu Imperial University in March 1934 and joined Harima Shipyard that April, becoming a managing director of Ishikawajima-Harima Heavy Industries in December 1960 and its representative director and president in January 1972. He continued to stand at the head of the business after privatisation, taking office as representative director and president of Nippon Telegraph and Telephone Corporation in April 1985. At the listing in February 1987 the executive vice-presidents included Kitahara Yasusada (北原安定), and the board included Sejima Ryuzo (瀬島龍三), who came from Itochu.

The Ministry of Posts and Telecommunications set out deregulation that broke the corporation's monopoly and greatly relaxed the restrictions on using communication circuits. Its representative service was the value-added network (VAN), which resold circuits leased from a carrier with added value attached. In 1984 VANs for small and medium-sized enterprises were approved ahead of the rest. In that same year Daini Denden (DDI) was founded by a group of younger business figures around Inamori Kazuo (稲盛和夫) of Kyocera; Japan Telecom, out of the national railways, was also established, and together with Teleway Japan, in which Toyota Motor and others invested, they waited for approval. The first VAN licence went to Intec, a computing-services company based in Toyama Prefecture, the second to Fujitsu, followed by the Japan Research Institute, NEC and Hitachi Information Networks.

The public corporation goes private, and three new carriers bring competition

On 1 April 1985, under the Nippon Telegraph and Telephone Corporation Act, Nippon Telegraph and Telephone Corporation was established with the entire property of the public corporation contributed as capital. Shares issued totalled 15,600 thousand and capital stood at $3.3B (¥780bn), with every share held by the Minister of Finance. In April of the same year the Ministry of Posts and Telecommunications revised the Telecommunications Business Act, opening the communications market widely and permitting entry by companies other than NTT and KDD. With privatisation, bureau chiefs at head office were retitled department heads, telephone offices around the country became sales offices, and the head of a telephone office became a sales-office manager. The company established a range of subsidiaries connected to the telephone business, pursuing a campaign to raise entrepreneurial spirit from within.

In June 1985 Daini Denden, Japan Telecom and Teleway Japan began operating as telephone companies. In 1986 they launched leased-line services for businesses, and in September 1987 general long-distance telephone service. The Ministry of Posts and Telecommunications had NTT carry both costly local service and long-distance circuits, while the new carriers started as companies specialising in long-distance circuits, where the cost burden was relatively light. The new carriers' long-distance charges were set below NTT's, a deliberate policy move to grow them. The level of the access charges the new carriers paid when using the local network was always a source of major dispute.

The frenzy of the listing, and the stall brought by the Recruit scandal

On 9 February 1987 NTT listed on the First Section of the Tokyo Stock Exchange, listing simultaneously on the Osaka, Nagoya, Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo exchanges. The offering was of 1,650,000 shares, and the share of ¥50,000 par value was priced at $8,230 (¥1m) when sold. Helped by the stock boom of the day it proved enormously popular, and on the first day applications were taken long queues formed outside securities houses from early in the morning — though in the end the shares were allocated by lottery. The price then rose rapidly, jumping into the ¥3 million range in 1987.

NTT's long-distance charges were cut eight times between privatisation and 1994. A three-minute weekday daytime call between Tokyo and Osaka fell from ¥400 at the time of privatisation to ¥180, less than half. The new carriers answered with cuts of their own, the same call falling from ¥300 when their service began to ¥170 in 1994. As margins thinned in the price war, the debate over breaking NTT up surfaced and unsettled the stock market. In 1988 the Recruit scandal broke, and chairman Shinto Hisashi, who had driven privatisation, was arrested. The share price kept sliding, falling below ¥1 million in 1991.

Splitting off mobile and data, and DoCoMo's listing

In July 1988 the business belonging to the Data Communications Division was transferred to NTT Data Communications Systems. That company operated the online foreign-exchange settlement system linking banks, and became the representative example of an industry VAN. NTT Data Communications Systems listed on the Tokyo Stock Exchange in April 1995 and changed its trade name to NTT Data in August 1998. In July 1992 the business covering car telephones, mobile phones, maritime telephones, aircraft public telephones and radio paging was transferred to NTT Mobile Communications Network. The mobile company took the nickname DoCoMo and used the brand as a weapon in a sales offensive on the car- and mobile-telephone market. DoCoMo was taken from the Japanese for from anywhere and to anywhere — a name that suggests the aim of raising entrepreneurial spirit through the spin-off had hit its mark.

In 1993 NTT began to move into employment adjustment, including a call for voluntary redundancies. It employed 230,000 people at the time, and voices continued to argue that a break-up should shrink the scale of the organisation. In April 1994 the sale of mobile handsets was liberalised, allowing telecommunications-equipment makers and consumer-electronics makers to sell terminals directly to users. As each maker pushed miniaturisation and lower prices, mobile subscriptions expanded rapidly. Supply of semiconductor components could not keep up with the unexpected surge in demand, producing a boom in which handsets ran to a wait of several months.

On 22 October 1998 NTT Mobile Communications Network, the mobile subsidiary 95 per cent owned by NTT, listed on the Tokyo Stock Exchange. The public offering and sale raised $16.2B (¥2.13tn) in total from markets at home and abroad, and market capitalisation at listing reached about $30.6B (¥4tn). Yamaichi Securities, originally designated lead manager in Japan, had wound itself up voluntarily, so Nikko Securities took over; the offer price was ¥3.9 million a share. NTT booked a gain on the sale of about $6.5B (¥850bn). Against the Fair Trade Commission's guidance to reduce its holding, NTT set out a policy of keeping control, saying it would not go below 50 per cent.

Reorganisation into a pure holding company, and the splitting of local and long-distance

The revision of the Antimonopoly Act in December 1997 permitted pure holding companies for the first time in fifty years, and the conditions for reorganisation were in place. In July 1999 NTT carried out a reorganisation making itself a pure holding company. The business of intra-prefectural communications services was transferred to the wholly owned subsidiaries Nippon Telegraph and Telephone East and Nippon Telegraph and Telephone West, and inter-prefectural communications services to the equally wholly owned NTT Communications. Under Miyazu Junichiro (宮津純一郎), a line was drawn under the separation and break-up debate that had run for fourteen years since privatisation in 1985. Shareholders and the president carried over unchanged to the holding company.

As a pure holding company, Nippon Telegraph and Telephone narrowed its functions to corporate planning, financing and basic research and held itself to 3,500 staff. The regional companies NTT East and NTT West had about 60,000 employees each, while NTT Communications — released from the constraints of the NTT Act and fully private — sat alongside them with revenue of $11.9B (¥1.35tn). NTT initially put the acquisition of its business partner International Digital Communications (IDC) at about $263.5M (¥30bn) and approached it at a total equity value of $274.1M (¥31bn), but as it built its own global ATM services and international optical-fibre network, the view inside the company that we do not need IDC grew stronger. In the end Cable & Wireless of Britain acquired IDC at a total equity value of $606.1M (¥69bn), and NTT chose the do-it-yourself path.

Abandoning the shared pi system and switching to fibre straight into the home

When subscriber lines were opened to new entrants at the end of 1999, xDSL operators appeared one after another, faster and cheaper than ISDN. The pi system introduced in fiscal 1997 was a shared design in which a single fibre core was shared among several households; it could not support broadband, and fibre to the home had barely advanced at all. NTT East and NTT West halted new pi-system installation work in the summer of 2000 and, at the end of that year, began trial provision of FTTH running one or two fibre cores directly into each home. Nihon Koshinmo, a venture whose dark-fibre negotiations with NTT East had broken down, applied to the Minister of Posts and Telecommunications for arbitration in that same summer of 2000.

While it held an oligopoly over the last mile, NTT was placed in a position where it had to see out the end of ISDN without recovering the capital investment made since its commercial launch in 1988. The telephone-network-style FTTH technology developed since the 1980s with the enormous research spending of the NTT laboratories also entered an age in which it was comprehensively beaten by the Ethernet equipment on sale in Akihabara. The FTTH offered by Usen, which was laying its own optical fibre, ran at 100 megabits per second for ¥6,100 a month, completely overturning the assumption NTT had once made of 1.5 megabits per second at ¥10,000 a month. NTT's own B Flet's began to shift to the Ethernet method.

A hundred and ten thousand redeployed, and the limits of decentralisation

In 2001 the regional company NTT West fell into an operating loss, and the earnings of NTT East and NTT Communications also deteriorated. At the fourth regular national convention of the NTT Workers' Union, held at the end of August that year, delegates resolved to accept a restructuring plan covering about 110,000 people. The company's proposal was to second 110,000 staff — 60,000 from NTT East and West and 50,000 from NTT-ME and others — to regional outsourcing companies to be set up at 33 locations nationwide, retiring and re-employing them. Those aged 51 and over who retired and were re-employed took pay cuts of 15 to 30 per cent, and an estimated 58,000 people were affected.

Against the operating loss, the cash flow NTT East and West generated from their core business exceeded $14.0B (¥1.7tn) a year. Depreciation, which involves no cash outlay, ran to more than $9.9B (¥1.2tn) a year and worked as a self-financing function. Fixed-line contracts numbered about 60 million including corporate lines, and the fixed communications market — voice telephony at $45.3B (¥5.5tn), data transmission networks at $2.1B (¥260bn) and leased lines at $8.2B (¥1tn) — came to about $56.0B (¥6.8tn). Abroad, in May 2010 the listed subsidiary NTT Data made a tender offer of about $3.3B (¥286bn) for Dimension Data of South Africa. Global expansion led by a listed subsidiary rather than by the parent was the shape of the overseas business in this period.

Investment abroad took its wounds in the same period. In the spring of 2000 NTT put about $5.6B (¥600bn) into a tender offer for Verio of the United States, completing the buy-out in September that year. Verio was one of the world's largest web-hosting companies, with customers in more than 170 countries. The worldwide telecommunications slump sent its results sharply lower, however, and a goodwill balance of a little over $4.1B (¥500bn) became subject to write-downs. NTT DoCoMo had also made overseas investments totalling $14.8B (¥1.8tn) over the previous eighteen months and carried vast unrealised losses. Unrealised losses on the shares of AT&T Wireless of the United States, in which it had invested a little over $8.2B (¥1tn), reached close to $4.1B (¥500bn), and it had put about $3.3B (¥400bn) into KPN Mobile of the Netherlands, positioned as the base for exporting i-mode to Europe.

A second attempt abroad, and consolidation into 'One NTT'

Sawada Jun (澤田純), who became president in June 2018, set about a reorganisation to bind the scattered overseas businesses into one. In November that year NTT created a wholly owned subsidiary, NTT Inc., beneath itself and transferred NTT Communications, Dimension Data Holdings, NTT Data and others to it. In July 2019 it created a further wholly owned subsidiary, NTT Ltd., beneath NTT Inc., and moved the overseas businesses of NTT Communications and Dimension Data Holdings into it. The intermediate holding companies were placed outside the NTT Act, and foreign executives were brought onto their boards.

Behind the reorganisation was a ceiling at home. NTT DoCoMo, which earned about 60 per cent of group operating profit, faced a plateau in domestic mobile subscriptions and government pressure to cut charges, so its earnings were expected to thin. After DoCoMo's overseas mobile investment of $16.7B (¥1.8tn) across 1999 and 2000 ended in complete withdrawal, corporate cloud services and systems integration were chosen as the new axis of overseas growth. The medium-term management plan set a target of raising overseas revenue in fiscal 2023 to US$25 billion, about 30 per cent above the fiscal 2017 result. In May 2019 NTT announced IOWN, a next-generation communications platform built on photonics-electronics convergence: replacing electronic signal processing with light to cut power consumption to a hundredth, raise transmission capacity 125-fold and cut latency to a two-hundredth, with realisation targeted for 2030.

Taking DoCoMo back in with a ¥4 trillion tender offer

On 29 September 2020 NTT announced that it would make a tender offer at ¥3,900 a share for its listed subsidiary NTT DoCoMo, in which it held about 66 per cent. The total purchase price of about $39.8B (¥4.25tn) was the largest tender offer for a Japanese company made up to that point. Buying the shares of general shareholders at some 40 per cent above the previous day's close, the offer succeeded in November and lifted the holding to 91.46 per cent. In December that year NTT made NTT DoCoMo a wholly owned subsidiary and DoCoMo was delisted. Twenty-eight years after the separation of 1992, the mobile business had returned to direct control by the parent. Twenty-two years after the listing of 1998, the round trip of buying back its own biggest earner was complete.

The immediate trigger for taking DoCoMo fully in-house was tariff policy. As the government of Suga Yoshihide (菅義偉), formed in September 2020, showed its appetite for lower mobile charges, DoCoMo — which had begun handling the iPhone in September 2013 — had fallen back to third among the big three in revenue and profit despite leading the domestic market in subscriber share. Without a cheap sub-brand, and in the position of a listed company owing consideration to general shareholders, it could not easily move to a further round of price cuts. Taking it fully in-house brought into the parent the more than 30 per cent of DoCoMo's net profit that had been leaking out of the consolidated accounts as minority interests. The design also bound the thin corporate business together with NTT Communications and NTT Comware, strengthening direct co-ordination within the group.

The effect of the buy-back showed in the numbers. Consolidated operating revenue for the year to March 2022 was $92.5B (¥12.16tn) and profit attributable to owners of the parent $9.0B (¥1.18tn), the first time net profit had passed ¥1 trillion. In January 2022 NTT Communications and NTT Comware were moved under NTT DoCoMo, binding the corporate business to mobile. Consolidated operating revenue for the year to March 2023 grew to $93.5B (¥13.14tn) and net profit to $8.6B (¥1.21tn), and the year to March 2024 recorded net profit of $8.4B (¥1.28tn). In June 2022 Shimada Akira (島田明) became president.

Revisiting the NTT Act, and completing the regrouping

The NTT Act was enacted in 1985 with the privatisation of the public corporation, and obliged three companies — NTT together with NTT East and NTT West — to provide a fixed-line telephone network across the whole country including remote areas, to disclose the results of research and development, and to obtain the approval of the Minister for Internal Affairs and Communications for reorganisations and business plans. In June 2023, after the sale of the government's shareholding was raised as an option for securing defence funding, examination of an amendment began, developing under the leadership of the Liberal Democratic Party into a debate that went as far as repeal of the law. On 19 October that year KDDI, SoftBank and Rakuten Mobile held a joint press conference to declare their opposition to repeal. The three rivals also submitted a petition against repeal of the NTT Act signed jointly with 180 organisations including regional cable-television operators.

What the three rivals feared was a merger of NTT East and West with NTT DoCoMo. NTT East and West hold the optical-fibre network, exchange buildings and other facilities inherited from the public corporation, and in the great majority of cases competitors had no choice but to use those facilities to run mobile services or FTTH in Japan. If the constraints of the NTT Act disappeared and the two were made one, the business would become internal transactions and oversight would struggle to reach it. Against this, Shimada Akira stated that there was absolutely no thought of merging DoCoMo with East and West. In April 2024 the amended NTT Act was passed, and the obligation to disclose research results was abolished.

On 8 May 2025 NTT announced that it would launch a tender offer for the shares of its listed subsidiary NTT Data Group. The purchase price of ¥4,000 a share carried a premium of 33.71 per cent over the previous day's close of ¥2,991.5, and the purchase consideration was about $15.8B (¥2.37tn). The holding rose from 57.73 per cent to 81.75 per cent through the offer, and after a share consolidation the company was delisted on 26 September. The funds committed to taking DoCoMo and NTT Data fully in-house came to about $44.1B (¥6.6tn) in total. Consolidated operating revenue for the year to March 2025 was $91.6B (¥13.7tn), profit attributable to owners of the parent $6.7B (¥1tn), consolidated employees numbered 341,321 and total assets stood at $200.9B (¥30.06tn).