TOKYO -- Nippon Telegraph and Telephone will tap into its idle real estate assets nationwide in an effort to break its dependence on its mobile phone unit, NTT Docomo, which generates 60% of its profit.
NTT established NTT Urban Solutions as a wholly owned subsidiary on July 1, with NTT Urban Development and NTT Facilities under its umbrella. NTT Urban Solutions will play a key role in the group’s real estate business. It also owns a 49% stake in NTT West Asset Planning, a real estate operator affiliated with NTT West.
NTT owns 7,000 telephone exchange stations and 1,500 office buildings nationwide, but it has been unable to put all of those assets to productive use. Most NTT telephone exchange stations were built in prime locations in smaller cities before the company was privatized in 1985.
According to NTT's financial reports, its land and buildings were worth 2.5 trillion yen ($23 billion) at the end of March this year.
Some properties secured for rebuilding telephone exchange stations have been left idle due to digitization, among other reasons. There were also cases where developers other than NTT Urban Development were entrusted with the redevelopment projects of NTT East and West.
NTT racked up about 12 trillion yen in sales and 1.7 trillion yen in operating profit in the fiscal year that ended March. Of that, the property unit’s sales of 400 billion yen and operating profit of 30 billion yen made up only 2-3% of the total.
Meanwhile, NTT Docomo -- which generates 35% of sales and 59% of operating profit -- is facing headwinds, including government pressure to cut mobile phone fees and market maturation.
NTT President and CEO Jun Sawada has vowed to grow the property unit by using the group’s assets since he took the post last June. The company plans to invest 1 trillion yen to 1.5 trillion yen in NTT Urban Solutions to boost sales to 600 billion yen by 2025.
With a shrinking population and tougher competition, it will not be easy for NTT to improve its profit-earning capability in Japan’s property market. NTT Urban Solutions President Hiroshi Nakagawa said he wants to use the group’s expertise on information technology and energy in urban development.
For example, a building owned by NTT East in Sendai in northern Japan will be pulled down and rebuilt as a multipurpose complex, including offices for companies and researchers using next-generation synchrotron radiation facilities, which are used to analyze the structure of materials at the atomic level. The building will feature NTT’s advanced technologies, such as ultrafast communications, security and artificial intelligence.
Since its privatization, NTT has been unable to make full use of its manpower, technology and assets as group companies sought growth independently. A real estate subsidiary will serve as a test for Sawada's reconstruction measures.