Value Partner
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NIPPON TELEGRAPH AND TELEPHONE CORPORATION ANNUAL REPORT 2014 For the year ended March 31, 2014 Value for Shareholders Value Partner Value for Society Printed in Japan http://www.ntt.co.jp/ Steady Increases in Corporate Value Increasing Under the Medium-Term Management Strategy, “Towards the Next Stage,” the key strategic initiatives of the NTT Group are “Global Cloud Services” and “Comprehensively Strengthen Network Service Competitiveness.” NTT Value for has taken steps to achieve its medium-term fi nancial target of EPS growth of 60% or more in comparison with the fi scal year ended March 31, 2012. Shareholders We aim to achieve this target by the fi scal year ending March 31, 2016, and to that end we have taken steps to transform our business model. Now, the NTT Group is ready to take the next step with transformation initiatives targeting steady increases in corporate value. Value for Society ANNUAL REPORT 2014 001 Value for Shareholders Creating Value for Society Creating Value through Solutions to Social Issues Contributing to the solution of social issues through ICT, that is the mission of the NTT Group. We will do more than simply take responsibility for the impact of our business activities on the environment and society. We believe that issues for which society expects solutions also con- tain business opportunities, and as a leading company in the fi eld of ICT, which contains unlim- ited potential, we will make full use of our strengths, create new value, and contribute to the realization of a sustainable society. 002 NIPPON TELEGRAPH AND TELEPHONE CORPORATION ANNUAL REPORT 2014 003 Contents 006 Performance Highlights 040 Operations in Review 086 Corporate Governance 006 Financial Data 042 NTT Group in Brief 094 Directors and Audit & Supervisory 008 Operational Data 044 Regional Communications Business Board Members 048 Long Distance and International 010 Message from the President Communications Business 097 Financial Section 052 Mobile Communications Business 098 10-Year Financial Summary 012 Interview with the President 056 Data Communications Business 102 Operating and Financial Review 060 Other Businesses and Prospects 062 Research and Development 118 Consolidated Balance Sheets 022 Special Feature 1 Strong Growth in Global Cloud Services 120 Consolidated Statements of Income 064 NTT Group CSR and Consolidated Statements of 024 Full Lineup of Cloud Services from the NTT Group Comprehensive Income 025 Further Bolstering the Scope and Depth of Our Business Operations 064 NTT Group CSR Charter 121 Consolidated Statements of Changes 026 The Unique Strengths of the NTT Group 068 Dialogue with Stakeholders in Equity 028 Overseas Sales Leading Growth in the Group’s Top Line 070 Communication between People and 122 Consolidated Statements of Cash Flows 030 Steps Taken to Strengthen Scope and Depth in the Past Year Their Communities 123 Reference Information 072 Communication between People and 125 Consolidated Subsidiaries the Global Environment 032 Special Feature 2 Contributing to Solutions for Social 076 Safe and Secure Communication 128 Glossary of Terms 080 Team NTT Communication Issues through ICT 131 Stock Information 082 Human Rights Awareness 034 Establishing Business Models to Resolve Social Issues 084 Supply Chain Management 036 Contributing to the Smooth Operation of Emergency Medical Care through ICT 038 Reducing Environmental Impacts through ICT Editorial Policy Annual Report 2014 is an integrated report that combines information that is important to shareholders and investors, such as financial results, operational reviews, and future strategies, with non-financial information, such as environmental (E), social (S), and governance (G) information. The NTT Group will strive to reinforce the competitiveness of Japanese industry and contribute to the solution of social issues by accelerating the transformation of its business models and increasing its corporate value. We hope that it proves useful to a wide range of stakeholders. Other Information Forward-Looking Statements To help readers broaden their understanding The forward-looking statements and projected fi gures concerning the future performance of Shareholders’ Newsletter “NTTis” 20-F Glossary of Terms NTT and its subsidiaries and affi liates con- http://www.ntt.co.jp/ir/library_e/nttis/ http://www.ntt.co.jp/ir/library_e/sec/ tained or referred to herein are based on a To help readers broaden their understanding of the content of this report, this section provides series of assumptions, projections, estimates, explanations of general IT-related terms and terms related to NTT Group services that are used in judgments, and beliefs of the management of Presentation Materials CSR Report the report and may be difficult to understand. NTT in light of information currently available to http://www.ntt.co.jp/ir/library_e/presentation/ http://www.ntt.co.jp/csr_e/ it regarding the economy, the telecommunica- See page 128 tions industry in Japan, and other factors. Shareholders’ Meeting Materials These projections and estimates may be affected by the future business operations of http://www.ntt.co.jp/ir/shares_e/shareholders_meetings.html/ NTT and its subsidiaries and affi liates, the state To analyze the Company’s results of the economy in Japan and abroad, possible Financial Results fl uctuations in the securities markets, the http://www.ntt.co.jp/ir/library_e/results/ Fact Sheet pricing of services, the effects of competition, the performance of new products, services and Fact sheets that provide an overview of financial and operating data are available on the new businesses, changes to laws and regula- tions affecting the telecommunications industry Company’s website. in Japan and elsewhere and other changes in circumstances that could cause actual results See website to differ materially from the forecasts contained http://www.ntt.co.jp/ir/library_e/ff/ or referred to herein. 004 NIPPON TELEGRAPH AND TELEPHONE CORPORATION ANNUAL REPORT 2014 005 Performance Highlights Financial Data Fiscal years ended March 31 Billions of yen 2005/3 2006/3 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 1 Operating revenues / Operating income Operating revenues*1 ¥10,805.9 ¥10,741.1 ¥10,760.6 ¥10,680.9 ¥10,416.3 ¥10,181.4 ¥10,305.0 ¥10,507.4 ¥10,700.7 ¥10,925.2 1 Increase in operating revenues: ¥224.5 billion Increase in operating income: ¥11.7 billion Operating expenses 9,594.7 9,550.4 9,653.5 9,376.3 9,306.6 9,063.7 9,090.1 9,284.4 9,498.8 9,711.5 Regional Communications: Decline in voice-related revenues, decline in Operating income 1,211.2 1,190.7 1,107.0 1,304.6 1,109.8 1,117.7 1,214.9 1,223.0 1,202.0 1,213.7 1 expenses, etc. 1 714.5 503.1 481.4 635.2 538.7 492.3 509.6 467.7 521.9 585.5 Decrease in operating revenues: ¥87.5 billion Net income attributable to NTT* Increase in operating income: ¥34.3 billion Performance Highlights Total assets*1 19,064.0 18,820.2 18,291.1 18,518.8 18,796.4 18,939.1 19,665.6 19,389.7 19,549.1 20,284.9 Long Distance and International Communications: Increase in system integration revenues, etc. 1 Shareholders’ equity* 6,740.3 6,734.4 7,120.8 7,410.8 7,298.1 7,788.2 8,020.7 7,882.6 8,231.4 8,511.4 Increase in operating revenues: ¥152.0 billion Increase in operating income: ¥6.2 billion Interest-bearing debt 5,525.8 5,296.2 4,770.8 4,677.2 4,899.3 4,491.7 4,553.5 4,274.0 4,036.0 4,200.0 Mobile Communications: Debt ratio (%)*2 45.0% 44.0% 40.1% 38.7% 40.2% 36.6% 36.2% 35.2% 32.7% 33.0% Decline in voice-related revenues, etc. Decrease in operating revenues: ¥8.9 billion Capital investment*3 2,057.4 2,191.9 2,236.9 2,128.9 2,145.1 1,987.1 1,870.1 1,946.6 1,970.0 1,892.8 2 Decrease in operating income: ¥19.2 billion 318.1 308.4 272.1 271.1 268.2 278.1 268.2 267.9 269.2 249.3 Data Communications: R&D expenses Increase in overseas revenues, infl uence of EBITDA*3 3,539.6 3,442.6 3,340.5 3,607.0 3,369.8 3,240.8 3,282.2 3,219.1 3,207.4 3,192.3 unprofi table projects, etc. Increase in operating revenues: ¥40.3 billion EBITDA margin (%) 32.8% 32.1% 31.0% 33.8% 32.4% 31.8% 31.9% 30.6% 30.0% 29.2% Decrease in operating income: ¥17.9 billion Operating free cash fl ow*3 1,482.2 1,250.7 1,103.7 1,478.1 1,224.8 1,253.7 1,412.1 1,272.5 1,237.5 1,299.5 2 Capital investment Down ¥77.2 billion YOY ROE (%) 10.9% 7.5% 6.9% 8.7% 7.3% 6.5% 6.4% 5.9% 6.5% 7.0% [Factors contributing to increase] Ongoing development of LTE Xi service area, etc. ROCE (%) 5.8% 5.8% 5.5% 6.4% 5.4% 5.4% 5.8% 5.8% 6.1% 6.0% [Factors contributing to decrease] Capex to sales ratio (%)*4 19.0% 20.4% 20.8% 19.9% 20.6% 19.5% 18.1% 18.5% 18.4% 17.3% Reduced investment in FOMA (3G) service Effective utilization of existing facilities, etc. Cash dividends, applicable to earnings for the year (Yen) 60 60 80 90 110 120 120 140 160 170 3 3 Dividends per share Dividend payout ratio (%) 13.0% 17.1% 23.0% 19.5% 27.5% 32.3% 31.2% 38.2% 37.2% 33.4% Further enhancement of shareholder returns Dividends up ¥10 YOY, to ¥170 Net income attributable to NTT per share (Yen)*1*5 462 351 348 461 400 372 385 367 431 509 Operating Revenues*1 Operating Income / Net Income Attributable to NTT*1 Interest-Bearing Debt / Debt Ratio Capital Investment / Capex to Sales Ratio*4 (Billions of yen) (Billions of yen) (Billions of yen) (%) (Billions of yen) (%) 12,000 1,500 6,000 60 2,400 30 10,925.2 1,213.7 1,892.8 8,000 1,000 4,000 4,200.0 45 1,600 20 17.3 585.5 4,000 500 2,000 33.0 30 800 10 0 0 0 0 0 0 Fiscal year Fiscal year Fiscal year Fiscal year ended March 31 2005/3 2006/3 2007/3 2008/3 2009/3 2010/3 2011/32012/3