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NTT's global connection
May 10 2000 00:00:00
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Michiyo Nakamoto
Masanobu Suzuki, president of NTT Communications, has reason to be pleased with himself.
Mr Suzuki, 58, whose mission has been to stake out NTT Com's position as a leading force in the global telecommunications market, has just confounded the critics and taken a big step towards that goal.
NTT Com announced on Monday that it will acquire Verio, the world's largest web-hosting company, in a takeover bid that will cost it $5.5bn. While the cost of the acquisition has made some observers nervous, it will transform NTT Com from a giant in its domestic market into a contender in the front line of global e-businesses.
It is a big prize for Mr Suzuki, who has jetted around the world since coming to the helm of NTT Com last July in search of opportunities to accomplish his mission.
Although he has brave ambitions to position NTT Com as a provider of global network and internet services, he has had to contend with some formidable handicaps that have delayed the company's foray into the global telecoms markets.
As the long-distance and international telecoms subsidiary of NTT, NTT Com is a relative newcomer to markets outside Japan.
Until NTT was reorganised into three operating concerns under a holding company, it was largely prevented from participating in cross-border businesses.
While telecoms companies from Europe to Hong Kong made bold moves to lead the industry into the cyber age, NTT had been conspicuously absent from the fray. Apart from a sprinkling of investments in and partnerships with a number of telecoms companies outside Japan, NTT Com has had little to show in the way of a grand global strategy compared with Concert, the joint venture between British Telecommunications and AT&T, or VodafoneAirTouch, which swallowed Mannesmann.
This lack of activity from NTT made it appear laggardly compared with foreign competitors and prompted concerns that it did not have a serious global strategy.
"Their modest investments in a range of companies is not really convincing," said Makio Inui, industry analyst at Nikko Salomon Smith Barney in Tokyo. "What they are doing outside Japan is so small."
But following western rivals into bold investments was never going to be easy for NTT.
As a former public utility, NTT was never strong in the kind of quick decision-making needed to make acquisitions. Unlike companies in the west, where top-down decisions can be made in arelatively short time, NTT is typically Japanese in that it is ruled by consensus-building and bureaucracy.
As if to break that spell, Mr Suzuki peppers his talk with comments about the need to respond swiftly and flexibly to the rapid changes in the industry. "We are in a hurry. The main issue is speed," he repeats as he explains his objectives for the 10-month-old company.
But even recognition that speed is of the essence would not be sufficient to propel NTT on to the global stage.
Full-scale acquisitions require a degree of aggressiveness that is not NTT's management style. When it faced a counter bid from Cable and Wireless for IDC, an international carrier that it had helped set up and was planning to acquire, NTT did not take long to withdraw, claiming it did not really want IDC anyway.
Until recently, even Mr Suzuki had been suggesting that NTT Com would refrain from full-scale acquisitions. "The thinking behind the AOL-TimeWarner merger is that by becoming a large organisation you can provide your customers with better services. We don't think that NTT Communications can provide customers with a full range of services, so we would like to provide services through partnerships," he says.
Besides, mergers and acquisitions are time-consuming and disruptive. "It takes time for a merged company to achieve its goals and there is a risk that the market will change while it is doing so. The key issue is bringing new services to the market as quickly as possible."
That was the thinking behind NTT Com's alliance with International Business Machines and Tivoli in e-business outsourcing and with Computer Associates in IT solutions. Closer to home, the company has agreed tie-ups with Korea Telecom and Telekom Malaysia.
Even its investments in foreign telecoms operators have been relatively modest and concentrated in Asia.
Analysts note that part of the problem could have been that big decisions at NTT Com have had to be approved by Junichiro Miyazu, president of the holding company, who is believed to be resistant to western-style business practices. "We still have to act as a member of the [NTT] family," Mr Suzuki says.
Despite such constraints, Mr Suzuki was always clear about his objective to shed NTT's image as an old-fashioned domestic utility and to transform it into a leading-edge communications service provider with a global presence.
"The key issue is how information is handed over to the user. The network is not a differentiator. Everyone, even water companies, has one," he says.
Establishing a global network is the first step towards building a presence in value-added services, such as network management, that provide better profits.
What matters, Mr Suzuki notes, is what you bring to the network. NTT Com aims to focus on providing the platform for dotcom services and value-added services such as authentication, security and even settlement systems. The web-hosting expertise it stands to gain from Verio provides another attractive possibility.
"We want to provide the flower bed for e-busi-nesses," Mr Suzuki says.
These areas could soon provide NTT Com with billions of dollars in sales, he suggests.
The acquisition of Verio implies Mr Suzuki has finally won a freer rein to act boldly on his vision. If so, it could be just the first of several acquisitions.
Mr Suzuki, the youngest of three frontrunners tipped to succeed Mr Miyazu at the helm of NTT, will need to be watched more closely than ever.
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