NTT Staying Big in Japan

Nippon Telegraph and Telephone Corporation (NTT - Analyst Report) is one of the largest phone companies in the world, mostly serving Japan, with approximately 54 million fixed-line customers and 51 million wireless subscribers. Although the Japanese telecom market has been open to competitors over the past decade, NTT remains the technology and market leader.

NTT's strategy is to maintain the leadership position in the domestic telecom market and capture selected international opportunities to drive long-term growth. Relative to the closest competitor in Japan, NTT's brand and omnipresence enables the company to aggressively handle competitive threats.

Major concerns facing NTT include intensifying competition in the Japanese wireless market and the potential impact of low-cost, fixed-line services, such as voice-over-Internet protocol (VoIP). At least two major national competitiors have entered the fixed-line and wireless phone market and offer affordable broadband alternatives to the incumbent.

We are concerned about lower Average Revenue Per User (ARPU) and its subscriber retention plan for its emerging Video on Demand services. Therefore, we maintain our Hold rating and the same target price of $26 based on a forward P/E multiple of 15.2x our fiscal 2009 earnings estimates, at par with the S&P 500 average.

Nalak Das contributed to this report.

Read the full analyst report on NTT