NTT to post biggest ever loss in Japan

By : |March 31, 2002 0

TOKYO: Nippon Telegraph and Telephone Corp is likely to post a net loss of
about one trillion yen ($7.5 billion), a Japanese record, in its just-ended
business year as a result of massive write-downs on overseas investments and
restructuring costs, analysts said on Monday.

Analysts said they mostly agree with media reports that Japan’s biggest
telecoms carrier will be hit by an extraordinary group loss of about two
trillion yen for the year ended Sunday. The Nihon Keizai Shimbun and Kyodo news
agency reported the losses over the weekend without citing sources.

NTT DoCoMo Inc, NTT’s mobile subsidiary, will make up one trillion yen of
once off-losses due to appraisal writedowns on its overseas investments after
sky-high global telecoms valuations plummeted in 2001. “There’s no mistake
in NTT’s loss outlook if DoCoMo decides to write off its overseas
investments,” said ING Barings telecoms analyst Hitoshi Hayakawa.

DoCoMo, which took a 263 billion yen appraisal charge in the April-September
first half on its investment in Dutch partner KPN Mobile NV, is also facing a
drop in about half the value of its 16 per cent, $9.8 billion stake in AT&T
Wireless Services Inc, the third-largest US wireless carrier, media said.

Parent NTT, facing lower telephone rates as competition intensifies, has
already committed 1.2 trillion yen to overhaul its workforce by shifting 100,000
employees into lower-paying jobs at subsidiaries. So far, NTT has said it
expects a special loss of 944 billion yen and a net loss of 331 billion yen for
2001/02 on a group basis.

NTT and DoCoMo have both said no decision has been made on any write-downs.
Analysts said they expect NTT and NTT DoCoMo to offer guidance on their earnings
outlook within a month, ahead of results announcements in mid-May.

Other losses loom
Apart from AT&T Wireless and the restructuring, the two biggest chunks
of the one-off losses, analysts say the two firms are also facing losses in
smaller businesses.

DoCoMo is also facing write-down stemming from KPN Mobile of 1.3 billion
euros ($1.14 billion), after the Dutch firm decided last month to take a 13.7
billion euro goodwill write-down on its stake in Germany’s third-largest
wireless carrier, E-Plus. There are questions too over whether DoCoMo will have
to write down its investments in Hutchison 3G UK Ltd. and Taiwan’s KG
Telecommunications Co, analysts said.

In addition, NTT Communications Corp, a wholly owned operator of
long-distance and Internet services, is expected to generate a further 100
billion yen loss on its US Internet unit, Verio Inc, which caused a 498 billion
appraisal loss in the first half.

In the 2000/01 business year DoCoMo’s net profit was a record 365 billion
yen, which helped to shore up parent Nippon Telegraph and Telephone Corp’s
sagging bottom line. Hayakawa of ING Barings said the share prices had largely
factored in the losses.

In the last three weeks, DoCoMo shares have climbed 33 per cent while NTT is
up 25 per cent. Over the same period, the tech-heavy Nikkei 225 average rose 17
per cent. “On the DoCoMo write-down, it wasn’t a question of whether but
when,” Hayakawa said.

“Since the share prices already reflect the losses, it’s good that they
are getting them out of the way in one year,” he said.

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