Japan Looking Hard at NTT

Japan's Ministry of Posts and Telecommunications emphasized Friday its desire to re-evaluate the holding company structure of Nippon Telegraph and Telephone (NTT) , the nation's dominant telecommunications company.

The ministry's senior advisor, Toshiyuki Minami, said Friday that a reorganization of NTT in July 1999 has failed to ensure fair competition.

The ministry said it will regulate some of the powerful NTT Group companies, such as NTT DoCoMo, a mobile communication services company; and NTT Communications, which completed a merger with the Colorado-based Web hosting company Verio (VRIO) this year. The ministry sees these companies as "dominant carriers" because of their market share. In Japan, NTT DoCoMo accounts for about 60 percent of the market, while the long-distance and international telecom businesses of NTT Communications account for about 50 percent.

"We would like to prevent NTT from abusing its dominant position," Minami said.

In theory, Minami says, the ministry could force the former state monopoly to break up again - using not the old service categories based on voice communications, but new business categories influenced by the Internet.

The ministry would like NTT's holding company to voluntarily dilute its dominant position, Minami says, by releasing its shares to the public. The ministry would also like to help speed up the nation's telecom deregulation.

For DoCoMo President Keiji Tachikawa, the government's changing policies are puzzling. He said he wonders why the government wants NTT Group companies to compete against each other now, given that it divided the company in 1999 to prevent such competition.

Tachikawa dismissed criticism that the access charge other carriers must pay in order to connect to DoCoMo's wireless network is too high. "The 18.5-yen-per-minute charge is cheaper than the prices charged by overseas carriers," he said at a Tokyo press conference Tuesday, as DoCoMo announced its half-year earnings.

The capital relationship among NTT Group companies has been sticky. NTT owns about 67 percent of DoCoMo's shares, while keeping NTT Communications as a wholly owned subsidiary. Japan's Ministry of Finance still owns about 53 percent of NTT's holding company.

DoCoMo's Tachikawa says the issue is not simply raising or lowering the NTT parent's share in its group companies, but also a matter of looking at the holding company system itself. But he said DoCoMo would "remain neutral in the debate over NTT's corporate structure."

Minami says that if the new policy does not help induce competition, the ministry will take legal action to break up the capital relationship among NTT Group companies. But he declines to specify a deadline.

"Now," Minami says, "the ball is in their court."

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