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10 July 2008
Nippon Telegraph and Telephone Corporation
Update Report – FY 2008 Results

NTT Data to support growth in revenues going forward

Common BUY Fundamental research indicates a 13.8% upside in the common stock over the next 6-24 months. We
Direct
have access
calculated the to theprice
target fullbased
report free of charge
on fundamental at a weighted average of target
factors, using
Stock prices obtained using DCF and comparative valuation methodologies.
http://www.iirgroup.com/researchoracle/viewreport/show/20267
Ticker: 9432.T
Target price: ¥598,0001 We upgrade the common stock from a HOLD to a BUY with a 6-24 month target price of ¥598,279 per
share.
Current price: ¥526,000

ADR BUY The ADR is expected to appreciate by approximately 14.5% over the next 6-24 months as the 13.8%
fundamental upside is expected to be further augmented by approximately 0.7 percentage points
upside attributable purely to the anticipated appreciation of the Japanese yen against the US dollar
over the same period. As the current ADR price supports BUY rating, we upgrade our ADR rating from a
Ticker: NTT HOLD to a BUY.

Target price: US$27.96 We upgrade the ADR (1 ADR = 0.005 shares) from HOLD to BUY with a 6-24 month target price of
US$27.96.
Current price: US$24.42

Supervisor: Jinesh Joshi

Analyst: Saurabh Jain
Editor: Shem Pennant
Global Research Director:
Satish Betadpur, CFA
Next news due:
1Q 082 results, August 2008
Report summary
Investment horizon- short term trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months. If
this report is provided to you by your broker under the Global Settlement, you may now also access (free of
charge) the short term trading outlook that we publish from time to time for this issuer, looking at the coming
5-30 days for readers with a shorter trading horizon. These are available on-line only at
www.researchoracle.com.

Nippon Telegraph and Telephone Corporation (NTT) reported a 0.7% y-o-y decline in revenues in FY
2008, in line with our estimate. The y-o-y decline in revenues was due to a decrease in NTT East, NTT
West and NTT DoCoMo, Inc. (NTT DoCoMo) revenues, which was partially offset by higher NTT Data
and NTT Communications revenues. In addition to the y-o-y decline in revenues, adjusted3 EBITDA and
EBIT margins experienced a y-o-y decline of 40 bps and 116 bps in FY 2008, respectively, below our
estimates of 30.9% and 11.1%. Going forward, we expect revenues from the fixed-line segment to
decline further due to a reduction in subscriber-base and Average Revenue Per User (ARPU). However,
steady growth in revenues from NTT Data and NTT DoCoMo is expected to partially offset the overall
revenue decline. Margins are expected to show a diminishing trend after FY 2009 as we expect
operating expenses, as a percentage of revenues, to increase going forward. However, as the common
stock currently trades below its fair value we upgrade the common stock from a HOLD to BUY

Currency impact for US investors

The impact by itself of the anticipated currency movements on the ADR (now US$24.42), without
considering changes in the share price, is positive and is expected to be:
Over 6 months: US$28.59
Over 12 months: US$25.05
Over 24 months: US$24.58

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