NTT moves back into the black

NTT, Japan's mammoth telephone company, is making money again - but sales slid as old-fashioned phone services continued their decline.

The company said the six months to September produced a net profit of 33.2bn yen (£174m; $275m), compared with a loss of 232.1bn yen a year before.

The half-year figures are the first to be prepared under US accounting rules, and showed operating profit - the figure before the cost of NTT's massive restructuring drive - rising by 143% to 823.3bn yen.

But sales dropped 1.6% to 5.37 trillion yen, the result of increased competition for its two main fixed-line business, NTT East and NTT West, as well as in the long-distance and international operation, NTT Communications.

Hard road

For investors, the return to profitability has been a long haul.

For NTT's staff, painful changes have been the rule at a company which for years was essentially the commercial offshoot of the Ministry of Posts and Telecoms.

The ministry is no more, subsumed into the home affairs department, but old civil service habits die hard.

The restructuring has included paying more than 100,000 staff to shift to lowlier positions, a strategy introduced as an alternative to mass redundancy.

Meanwhile, mobile phone subsidiary NTT DoCoMo has had its own problems.

Having spent hundreds of billions of yen on building one of the world's first operating third-generation mobile networks, take-up has lagged way behind predictions.

No more copper wires

And the decline in sales presages yet further changes, the company believes.

Traditional fixed-line sales have been falling for some years, and the shift in focus to broadband and other data needs to be accelerated, admitted NTT's president, Norio Wada.

"We cannot avoid a decline in the full year, so we need to find new sources of income," Mr Wada said.

"It is urgent for us to develop new markets centring on broadband businesses."

One such business, he said, is IP telephony - a technology which routes voice calls across the internet rather than through old-fashioned voice networks.

The technology, increasingly popular with large corporations, means only a local call at either end traverses the phone lines, and cuts down radically on international call costs.

"I don't believe internet protocol (IP) telephony will replace fixed-line voice telecommunications in a short period of time," he said.

"But it will finally take a dominant share of the telephony market."