NTT Reorganization: Can Move Enhance Company’s International Presence?

Editorial

13:59 JST, May 26, 2025

In the field of digital technology, Japanese companies are lagging far behind overseas tech giants. NTT Corp. should enhance its international presence with the opportunity afforded through the completion of its group reorganization.

NTT will make NTT Data Group Corp., a major information technology services company, its wholly owned subsidiary. NTT currently holds a 58% stake in NTT Data Group. NTT will acquire the remaining 42% through a tender offer with a plan to delist the subsidiary.

In Japan, NTT Data Group has advantages in the business of system development for government and public organizations as well as financial institutions. The company oversees the NTT group’s overseas businesses, and it reportedly holds a third largest share in the global data center market.

NTT was established in 1985 when Nippon Telegraph and Telephone Public Corporation was privatized. Forty years later, it can be said the NTT group’s reintegration of its subsidiaries has entered its final stage of reorganization. In 2020, NTT Docomo, Inc. was also made a wholly owned subsidiary.

It is important for NTT to marshal its strengths in the group to create groundbreaking IT services. In pursuing further growth, NTT Data Group is expected to play a central role through the expansion of overseas businesses.

In both the domestic and overseas markets, an increase in the demand for electricity is expected due to the rapid development of artificial intelligence.

NTT is rushing to commercialize the Innovative Optical and Wireless Network (IOWN), a next-generation communications infrastructure that utilizes optical technology and can significantly reduce electricity consumption. By applying this new technology to its data center business, NTT may be able to take the lead in this field.

The government’s policy for the telecommunications industry is also at a turning point. Until now, the government has focused on facilitating competition in the industry by strictly regulating NTT through the law to prevent the firm from becoming excessively large. This was because the company had nearly monopolized the fixed-line telephone network business.

For this reason, NTT separated its units of new businesses, such as mobile phone and data communication services, from itself as separate companies to list them on the stock exchange to avoid being overly regulated.

However, during this period, Google and other U.S. tech giants emerged, leaving NTT and other companies in Japan’s information and telecommunications industry behind.

To deal with this situation, the government revised the NTT Law last year, relaxing the mechanism in which the internal affairs and communications minister’s approvals were required for the appointment and dismissal of executives, thereby increasing operational flexibility. NTT’s decision to make NTT Data Group its wholly owned subsidiary is also a move to capitalize on changes in the regulatory environment of the telecommunications industry.

While ensuring fair competition is a prerequisite, it is desirable to constantly review regulations in such a way to enhance the freedom of NTT’s management in order to foster companies in Japan capable of competing.

(From The Yomiuri Shimbun, May 26, 2025)