| BUSINESSWEEK ONLINE : JULY 17, 2000 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN BUSINESS
NTT Com's Parent May Be Too Big (int'l edition) NTT has baggage that this child could do without It's not easy being part of Nippon Telegraph & Telephone Corp., Japan's gargantuan telecom group. Not if you're an independent-minded offspring such as NTT Communications Corp., a leading long-distance carrier and Internet service provider. As part of its plans to expand overseas, NTT Com wants to buy Verio Inc., a U.S. Internet provider. But NTT Com's parent company, NTT, is in a dispute with the U.S. over telecommunication access fees--and the squabble may affect the Verio deal. Moreover, owing to its ties to an old-economy giant, says Masanobu Suzuki, NTT Com's president and CEO, ''some think we're incapable of running an Internet business.'' Suzuki is determined to prove his critics wrong. If he keeps NTT Com on course, it could become another NTT DoCoMo, the barnstorming wireless operator that is pioneering mobile Net services in Japan. Since NTT Com's founding a year ago, Suzuki has shifted the focus from long distance to Web-based network services for companies and consumers. That's a smart move, given the growing competition in Japan's long-distance market from such carriers as KDD, DDI, and Japan Telecom. ''FORWARD-THINKING.'' The benefits have been immediate. In its first year of business, NTT Com racked up operating profits of $1.2 billion on revenues of $10.2 billion. The outgoing and ambitious Suzuki gets the credit. ''He's forward-thinking and takes an open and flexible approach,'' says George Makhoul, a PricewaterhouseCoopers consultant, who has worked with NTT Com and other carriers. Global expansion is a key part of Suzuki's strategy. As Japanese companies move aggressively into Asia, North America, and Europe, NTT Com must extend to its clients the same level of service they enjoy in Japan--at a competitive price. For starters, Suzuki's plan is to establish NTT Com as the leading provider of Internet infrastructure and portal services in Asia. Company engineers are racing to build high-speed networks and platforms for e-commerce for corporate clients. In February, the company launched a task force to nurture online ventures. One of its first projects is to develop a games site with Square, a leading video-game software developer. ''We're even talking about changing our name to NTT.com,'' says Suzuki. ''That's how serious we are about making [the Internet] our core business.'' At the same time, Suzuki is eager to attract foreign multinationals and Internet startups that require ISP services in Japan and Asia. CNN and McDonald's, as well as Honda and leading Japanese newspapers, are among its clients for high-speed Internet access in Japan. ''We need to build an international presence to serve our customers,'' says Satoshi Fujita, general manager of the Global Business Div. Otherwise, he adds, NTT Com will lose out to savvy global rivals. Partnering with foreign carriers and ISPs to offer high-speed networks, Web hosting, and other Internet services is key to the plan. For that reason, NTT Com, a newcomer to the international marketplace, has been frantically closing deals. Over the past year, it has purchased a 49% stake each in HKNet Co. and DavNet, ISPs based in Hong Kong and Australia, respectively. It formed a nonequity tie-up with Korea Telecom, South Korea's largest carrier and ISP. In May, NTT Com agreed to acquire 90% of Verio, a Colorado-based ISP and Web-hosting business that serves small and midsize firms in the U.S. and Europe. POLITICAL FOOTBALL. Analysts are divided over the Verio deal. Some say NTT Com brings little to help Verio expand. Others say the Japanese company is paying too much for Verio, given that the U.S. ISP won't let it reach the multinationals. However, Kate Lye, a telecom analyst with Warburg Dillon Read in Tokyo, says NTT Com ''needs to develop its expertise in international markets, and Verio will help it.'' Either way, the Verio deal is a political football. The U.S. hasn't directly linked the trade talks to the Verio deal, but some American congressmen have demanded that approval be denied unless parent NTT agrees to cut the fee it charges other carriers, foreign and domestic, for access to its local phone lines in Japan. U.S. trade negotiators have demanded that NTT slash the fees by 41%. Tokyo has offered a 22.5% cut over the next four years. With luck the Verio deal will go ahead, once a trade deal is reached, in time for the July 21-23 Group of Eight summit in Okinawa. Whatever the outcome, Suzuki will have the ammunition he needs to fight for more independence from NTT. After all, DoCoMo did it. It was spun off in 1994 and has since gone public. While NTT Com craves similar independence, an initial public offering is not likely soon. ''We'd like to spin off,'' says Katsumi Nakata, director of NTT Com's Strategic Planning Div., ''but it's not in the books right now.'' Still, the resourceful Suzuki will keep pushing until he has a Net empire--and probably a richly valued Net stock too. By Irene M. Kunii in Tokyo _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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