Reorganization Synergies Allow for NTT Earnings Growth Despite Difficult Mobile Market

NTT is an anomaly in the telecom world. It a world-class wireless business in NTT DoCoMo, but its fixed-line business struggled to generate a decent return on investment for many years. NTT consolidated NTT DoCoMo in 2021 and its near-term strategies will focus on extracting synergies from this consolidation in areas such as merging management and delisting NTT DoCoMo, network synergies from the mobile business using some of NTT’s fixed-line core network and backhaul transmission, alignment of research and development activities and cross selling synergies, particularly as the innovative 5G services are likely to be B2B. NTT DoCoMo has made several decisions to significantly lower pricing, one in 2014 and another in 2019 that both hit its operating earnings with flow-on effects to NTT. Further mobile price competition in 2021 has also hit the earnings of all three of the owners of the major mobile networks in Japan. However, with NTT also announcing the planned consolidation of its international businesses with NTT Data we see further potential synergy benefits which should help offset the effects from a difficult mobile market.