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Japan-Update

Cloud services lift NTT interim profit to record high

But revamping overseas operations is key for future growth

TOKYO -- Corporate demand for cloud computing and systems development services buoyed Nippon Telegraph & Telephone's net profit 11% to 527.5 billion yen ($4.65 billion) for the April-September half, marking a second straight interim high to set a record.

Operating revenue, equivalent to sales, rose 3% to 5.66 trillion yen, NTT said Friday. Subsidiaries NTT Communications and NTT Data captured a growing corporate appetite for improved efficiency using big data. NTT Urban Development boosted rent income from office buildings.

Operating profit increased 5% to 975.1 billion yen. Regional arms NTT East and NTT West switched from direct marketing of their fiber-optic internet service to wholesale, successfully slashing costs. Mobile service unit NTT Docomo suffered a profit decline on rising costs for keeping customers from leaving for low-cost carriers, but this was more than offset by gains elsewhere in the group.

NTT upgraded its full-year guidance, now projecting net profit to rise 10% year-on-year to 880 billion yen -- 50 billion yen more than an earlier projection. The payment Docomo received from India's Tata Group to settle a dispute over the end of their tie-up will be booked as non-operating income.

NTT does need to work on fortifying its overseas operations. Due mainly to the write-down South African unit Dimension Data took last fiscal year, the parent has already moved back its expectations for reaching the targets for its foreign operations -- $22 billion in sales and $1.5 billion in operating profit -- by one year from fiscal 2017.

The group will pursue affiliate reorganization while also focusing on the IT service business that NTT Data bought from Dell last year and considering more acquisitions. Dimension Data is enjoying improvement in margins and will not book any impairment charges this fiscal year, NTT President Hiroo Unoura says.

NTT is also close to reaching its target of a minimum 400 yen earnings per share for this fiscal year. The next milestone of 500 yen may become a realistic goal if profit grows in the overseas operations.

(Nikkei)

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