A few committee members expressed opposing opinions, as described below, to the proposals for the restructuring of Nippon Telegraph and Telephone Corp. (NTT) in Chapter 4.

(1) As international markets continue to open up, the world is moving toward an era of major competition. We are entering a situation in which deployment in the overseas market as well as competition in the domestic market in info-communications arena is becoming a vital issue. In this situation, it is inadvisable to break-up NTT. Such a break-up would weaken both the competitiveness to enter the overseas market and its R&D capability. Furthermore, competition already exists between NTT and new common carriers (NCCs) in the long-distance market, and the two Regional NTTs created out of the restructuring would operate under the same monopolistic status as is the case at present. As a result, the restructuring of NTT does not have many merits.

(2) Any restructuring of NTT must be carried out after ascertaining the possibility of regional competition.

(3) I am opposed to the restructuring of NTT as described in the draft report for the following reasons: (See Attachment for explanation.)

1. It would sap research and development strength which is essential for the maintenance and enhancement of international competitiveness. The development of info-communications-related science and technology would also be seriously damaged.

2. Taking into account the current NTT income and expenditure balance sheet, it can be foreseen that the regional companies outside the greater Tokyo area will make a loss. This would create disparities in rates and services among regions, which would have an adverse effect.

3. This proposal infringes on the rights of existing NTT stockholders in terms of stock allocation methods and listing requirements for the companies resulting from restructuring.

4. There has been no examination of alternative methods of establishing fair and effective competition conditions other than those described in the draft report.

The proposal has been compiled after careful examination of all the objections raised in the above opinions; for example, there are limitations to ensuring fair and effective competition by non-structural measures only.

1. The Sapping of NTT Research and Development Strength

The restructuring of NTT would disperse research and development resources, incur losses and weaken Japan's research and development strength which is the source of Japan's international competitiveness. (The negative effect on R&D can be attested to in the case of the division of AT&T.)
In particular, it would be difficult to maintain internationally superior technology development capabilities in the area of network infrastructure. As this plays a vital role in multimedia, Japan would lose its power to contribute to the development of international standards. This would compromise the international competitiveness of Japanese industry and have a negative effect on Japan's future.

2. Disparities in Rates and Services among Regions

The NTT 1994 income and expenditure balance sheet shows an ordinary profit of around 300 billion yen, giving consideration to various factors such as the revision of the basic rates. But the future business environment for NTT is unfavorable, due to the increasing ferocity of competition caused by opening of its networks (NTT assumes this will cost 300 billion yen in the year 2000), the lowering of inter-prefectural call rates (by the year 2000 the longest-distance rate will become 100 yen, with a loss of 200 billion yen), and so on. Even with rationalization, economizing, and revenue raising efforts, unless there are dramatic changes in NTT's sales profit (estimated performance for the fiscal year 1995 is 299 billion yen), it would maintain the current level of profitability at most (according to newspaper coverage, NTT's ordinary profit in the year 2000 will be around the 250 billion yen).
If the restructuring of NTT is carried out in this business environment, there is no reason to believe that NTT West would make more of a profit than NTT East. As a result, there is every possibility that NTT West will be in the red. This will create disparities in rates and in the level of services offered. (This can be clearly seen in the case of the regional companies after the division of AT&T.)

3. Protection of Stockholders' Interests

There are currently approximately 1.6 million NTT stockholders in addition to the government. Their rights must not be impinged on in the course of restructuring. The report proposes measures to protect stockholders' rights, such as the establishment of a special law for the spot issue of stock for the new company, for which there is no rule in the Commercial Law and the establishment of a special case under the listing requirements. However, it can be foreseen that stockholders' rights will be impinged on as there has been no examination of either the disadvantages in terms of distribution of nonpar- value stock, nor of the possibility of concrete realization of such unusual measures.
There is no reference how the costs for the restructuring of NTT will be borne. A situation can be envisaged in which stockholders will ultimately have to bear the costs involved.

[Table showing scenario in which NTT is divided into three companies: Long- Distance NTT, NTT East, and NTT West. ]
(The Table is based on NTT publicly available documentation)
Calculations are based on NTT's income and expenditure balance sheet for fiscal year 1994, with consideration given to various factors such as revision of the basic rate.