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NTT posts $2.1 billion loss, cuts outlook

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CIOL Bureau
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Reed Stevenson and Eriko Amaha






TOKYO: Nippon Telegraph and Telephone Corp (NTT) said on Thursday that it went
deep into the red in the first half, hit hard by hefty write-downs on

investments soured by a global telecoms slump.






Japan's dominant telecoms carrier and former state monopoly said its
consolidated net loss for April-September was 261.8 billion yen ($2.1 billion),

a sharp reversal from the 175.4 billion yen profit seen a year earlier.



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The main reason for the decline was a 762.4 billion yen consolidated special

loss, with about two-thirds due to a widely expected 498 billion yen write-down

in the value of its US Internet subsidiary, Verio Inc.

NTT can usually count on robust earnings at subsidiary NTT DoCoMo Inc to

boost its bottom line, but its mobile phone unit itself was hit with a 262.7

billion yen charge on its own investment in Dutch mobile firm KPN Mobile NV,

which added to the group total.

The write-downs are the result of a severe downturn in demand for telecoms

and Internet services that has eroded the earnings and appraisal value of the

two investments. The remainder of NTT's total loss came from a modest 1.6

billion yen charge for an early early retirement plan at regional units NTT West

Corp and NTT East Corp.

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NTT said total labour restructuring charges for the business year to March

would balloon to 183 billion yen as the sprawling group prepares to move 100,000

workers into outsourcing subsidiaries in an effort to cut labour costs.

As a result, NTT said it was facing a 331 billion yen net loss for 2001/02,

its worst ever. "Even though most of the bad news was already out there, it

was still a pretty poor performance," said Kirk Boodry, telecoms analyst at

Dresdner Kleinwort Wasserstein.

"The impact on the share price is slightly negative," he added. NTT

shares closed higher by 0.62 per cent at 489,000 ahead of the results, having

priced in most of the key numbers, which had been trickling out of the former

government entity for weeks.

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Although above their year-low of 456,000 yen, NTT shares have dropped by

nearly half in the last year and far below their decade peak of 1.94 million set

two years ago.

Massive job shift



The telecom giant said it would be moving a total of about 100,000 employees

into subsidiaries, a figure that had been quoted by its union but was only

officially announced on Thursday.

NTT's core business of providing telephone services in the world's second

largest telecoms market has been under pressure after it was forced under a

trade accord last year to open its network of lines connecting homes and

businesses to competitors seeking to offer their own services at lower rates.






First half sales amounted to 5.8 trillion yen, up from 5.5 trillion a year
earlier, but the underlying figures showed that gain was entirely due to DoCoMo,

where revenue rose 17.8 per cent.

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For the full year, NTT expects revenue of 11.8 trillion yen, a rise of 3.5

per cent.



To improve profitability, 39,000 workers at NTT East, one of NTT's two regional
arms, will be shifted into newly created outsourcing firms that will provide

construction, engineering and installation services. Money-losing NTT West will

move 59,000 workers. The NTT group had 215,000 thousand employees last year.

Workers opting for early retirement have also increased to 9,400 who will

leave by December 31, from an original 7,000. As a result, NTT East said it will

see a total of 110 billion yen in cost savings and NTT West a total of 155

billion yen in cost savings in 2002/03, which begins next April.

While DoCoMo continues to spend heavily on rolling out advanced wireless

services, NTT East and West said they would cut a combined 90 billion yen in

capital spending from next year. Total capital investment at NTT last year was

2.67 trillion yen.

(C) Reuters Limited.

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