NTT’s Third-Quarter Consumer Business Weakness Offset by Business Strength

Narrow-moat-rated Nippon Telegraph and Telephone Corp's, or NTT’s, third-quarter fiscal 2022 result (quarter-ended December 2022) was in line with our expectations on profitability and better than expected on revenue. Revenue grew 8.3% year on year with an operating profit decline of 1.2% year on year. We believe NTT will beat its unchanged full-year revenue guidance of 3.6% growth, but will struggle to reach its full-year operating profit growth guidance of 2.9%. The strongest businesses were the global solutions businesses segment with operating profit up 20.6% year on year and NTT DoCoMo’s enterprise and smart life segments which both reported double-digit operating profit growth. The weakest businesses were the regional communications businesses (NTT East and NTT West) which saw operating profit decline by 15% year on year this quarter and NTT DoCoMo’s consumer business which saw operating profit decline by 9.5%. The regional business decline was largely due to the JPY 50 billion in benefit to the previous period from the Olympics not in this period. Surging electricity prices have also affected the traditional telecom network businesses by around JPY 15 billion in each quarter this year.