TOKYO -- Hard-pressed to keep growing in a fast-changing communications sector, Nippon Telegraph and Telephone will create a new comprehensive information technology company in its first major reorganization since 1999.
The aim of the new global holding company, to be established by fall, is to create new revenue streams based on data and information flows. NTT hopes to establish another earnings pillar besides wireless unit NTT Docomo, which the group has relied on to supply roughly 60% of its operating profit.
According to plans announced on Tuesday, five subsidiaries will move under the umbrella of the holding company, including NTT Data, NTT Communications and Dimension Data. NTT Data will stay on the Tokyo Stock Exchange, but the other four could be merged by next summer into two entities: one for domestic customers and the other for international. The aim is to eliminate overlap in their operations to boost competitiveness.
The rise of the internet and mobile has transformed the telecommunications industry since NTT's last overhaul. The group's landline-related revenue has shriveled to about 1 trillion yen ($9 billion) in fiscal 2017 from more than 4 trillion yen in fiscal 1999. Overseas operations have also flagged. Consolidated sales have grown just 18% over the 19 years to roughly 11.8 trillion yen.
"Our strength lies in our ability to offer one-stop shopping for a variety of products," President and CEO Jun Sawada told reporters.
"But we lacked a structure enabling us to compete" globally, he said.
The company also announced NTT Venture Capital, a fund of up to $500 million that will invest in promising businesses in such cutting-edge fields as artificial intelligence.
Docomo has been a strong growth engine for the group. But with Japan now having more mobile subscriptions than people, NTT urgently needs to develop a new revenue source for further growth. The new structure will let NTT provide everything from system development to data processing through a single entity to corporate clients increasingly going digital to leverage the flood of information generated by individuals and businesses.
The group also wants to become a bigger player in consumer data. Docomo looks to get involved in the online shopping experience at every level. But American players like Amazon.com are ahead in both areas, and NTT will likely face an uphill battle making inroads on the global stage.