RESTRICTEDWORLD TRADE
ORGANIZATIONGPA/W/104
14 January 2000
(00-0159)
Committee on Government Procurement Original:  English
RESPONSES TO QUESTIONS FROM THE UNITED STATES RELATING TO NTT
Communication from Japan
The following communication, dated 13 January 2000, has been received from the Permanent
Mission of Japan with the request that it be circulated to the Committee on Government Procurement.
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Please find below Japan's replies to questions from the United States (GPA/W/100) regarding
Japan's notification to the Committee on Government Procurement on the reorganization of NTT.
1. According to Japan's 6 September 1999 notification, when NTT was restructured on
1 July 1999, NTT Communications Corporation "took over the interprefectural telecommunications
business activities conducted by NTT".  Please describe in detail those activities.
The activities mentioned have been described in the public comment conducted prior to
approval of the "Implementation Plans Concerning  the Successor of Business Activities and the
Succession of the Rights and Obligations of Nippon Telegraph and Telephone Corporation"
(hereinafter referred to as "the Implementation Plans").  NTT Communications Corporation has taken
over the following business activities from th e former NTT (i.e. prior to reorganization).
Telecommunications business:- Telephone Services (inter-prefectural communications);- Integrated Digital Communications Services (Basic rate mode;  inter-prefectural
communications);
- Leased Circuits Services (inter-prefectural communications);- Integrated Digital Communications Services (Primary rate mode;  Packet mode);
- Telex Services;
- Digital Data Transmission Services;- Facsimile Communications Services;- Videotex Communications Services;- Open Digital Communications Services;
- Telegraph Services (inter-prefectural communications).GPA/W/104
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Business activities related to the telecommunications business:
- Sales of terminals (including PBXs) and accompanying installation services;
- Commissioned services (investigation, design, construction, maintenance, etc., of
telecommunication equipment;  commissioned R&D;  etc.);
- Consulting on telecommunication system construction, etc.;- Videotex Communications Services information bill collection services.
Business activities necessary for the execution of corporate objectives:
- Overseas consulting (overseas consulting, engineering, and product inspection);- Training programmes and seminars.Research on telecommunication technologies:- Applied research activities recognized to be appropriate are implemented alongside
those telecommunication services transfer red to NTT Communications Corporation.
Example: Development of systems relate d to Open Computer Network (OCN)
services
Development of systems related to frame relay services
Development related to electronic commerce (EC) systems.
2. Were NTT East Corporation and NTT West Co rporation established as private companies
under the Japanese Commercial Law?
Yes, they were.
3. Was NTT's transfer of business activities to NTT Communications Corporation different from
its transfer of business activities to NTT East and NTT West?  If so, please explain the differences in
detail.
There is a difference as regards timing of transfer of business activities and content of
business activities transferred.
4. Has government control or influence over N TT Communications Corporation been effectively
eliminated?  If so, how?  Please explain in detail.
NTT Communications Corporation engages in business activities under the
Telecommunications Business Law, and the conditions are the same as for all other
telecommunications carriers, which are not under government control or influence.  As mentioned in
the notification on 6 September 1999, NTT Communications Corporation was established as a private
company in accordance with the Japanese Commercial Law.  The NTT Law does not apply to the
Corporation.  In this sense, the Government of Japan has no longer control over nor influence on theCorporation.GPA/W/104
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As mentioned in the notification dated 6 September 1999, the Government of Japan has
learned that the Corporation voluntarily continues to make procurement in a transparent and non-
discriminatory manner.
5. How does the Government of Japan explain the following means of government control or
influence over NTT Communications, as set out in the Supplementary Provisions of the NTT Law cited
below?:
(a) the requirements in Article 4 of the Supplementary Provisions of the NTT Law that
MPT instruct NTT to comp ile implementation plans fo r each successor company,
which includes NTT Communications Corporation, in accordance with an MPT
ministerial ordinance, and that NTT obtain MPT authorization to change theimplementation plans;
(b) the exemptions of NTT Communications Co rporation from certain provisions of the
Commercial Law, based on Article 6 of the Supplementary Provisions of the NTT
Law;
(c) the provisions in Article 12 of the Supplementary Provisions of the NTT Law related
to the exemption NTT Communications Corporation as well as the Regional
Companies from certain taxes;  and
(d) Article 13 of the Supplementary Provisions of the NTT Law, which states that MPT
authorization is necessary if NTT intends to dispose of the share of NTT
Communications Corporation.
The items pointed out by the United States Government are not means for the Japanese
Government to exercise influence and c ontrol over NTT Communications Corporation.
(a) Article 4 of the Supplementary Provisions to the Law Concerning Partial Revision to
the Nippon Telegraph and Telephone Law (Law No. 98 of 1997;  hereinafter referred
to as "Revision Law") was a regulation that stipulated temporary measures on
implementation plans for reorganization and was applied to the former NTT (i.e.
before restructuring).  It does not ap ply to NTT Communications Corporation.
(b) Article 6 of the Supplementary Provisions to the Revision Law grants exemption
from formal capitalization of more than one half of the issue price of stocks stipulated
in paragraph 2-2 of Article 284 of the Commercial Law, exemption from inspector
examination of investment in goods at company establishment stipulated inArticle 173 of the Commercial Law, exemption of inspector examination after
company establishment stipulated in paragraph 2 of Article 246 of the Commercial
Law, and exemption of inspector examination of investment in goods related to
capital increase stipulated in Article 280-8 of the Commercial Law.  However, these
were exemptions under the Commercial Law applied for reorganization in order tomaintain financial soundness and smooth implementation of reorganization and do
not apply to NTT Communications Corporation at present.
(c) Article 12 of the Supplementary Provisions to the Revision Law was a regulation that
stipulated temporary measures aimed at smooth implementation of reorganization by
averting tax burdens likely to result in reorganization, in order to carefully consider
the interests of stockholders and the existing customers of the former NTT, and is not
a regulation applied permanently to NTT Communications Corporation.  Also, the
presence of tax-related measures for reorganization does not mean that government
exercises influence in procurement activities of NTT Communications Corporation.GPA/W/104
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(d) Article 13 of the Supplementary Provisions to the Revision Law is applied to NTT
(i.e. holding company) and not NTT Communi cations Corporation.  Also, the Article
is a temporary measure requiring approval of the Minister of Posts and
Telecommunications on disposal of stocks issued at reorganization for the time being,in order to assure and maintain existing long-distance service and to avert tumultuous
changes and does not prevent NTT Communications Corporation from making new
stock offerings.  For these reasons, this Article does not affect the NTT
Communications Corporation's status as a private company.
6. With its exemption from certain taxes based upon Article 12 of the Supplementary Provisions
of the NTT Law, has not NTT Communications been  accorded benefits that are not accorded to
companies established under the Commercial Code?  Why has NTT Communications been given these
benefits?
As mentioned earlier, Article 12 of the Supplementary Provisions to the Revision Law is a
temporary measure instituted for reorganization and does not apply permanently to NTTCommunications Corporation.  Also, the presence of a tax-related measure at reorganization does not
signify government influence on its procurement activities.
7. What other companies established under Japan's Commercial Code are required to seek
government approval before selling stock in the company?
(Although we are not aware of any specific cases), stock disposal is a decision to be made by
the stockholder, and the approval in this case is required only of NTT as stockholder, therefore, this
does not affect NTT Communications Corporation's individual procurement activities.
8. Other than what is described in question 5 above, in what ways is the Japanese Government
empowered to control/influence NTT Communications?   Please describe with relevant legal cites.
The Japanese Government is not empowered to exercise control or influence over
procurement activities of N TT Communications Corporation.
9. What percentage of NTT (H olding Company) stocks does the Government of Japan hold at
present?  What percentage of NTT Communicati ons does the Holding Company hold at present?
The Japanese Government presently holds 53 per cent of NTT stocks.  NTT in turn holds
100 per cent of NTT Communicat ions Corporation stocks.
10. What rights does Japan's Commercial Code accord to shareholders who hold at least
one-third of a company's stock?  Please explain in detail, with relevant legal cites.
The NTT Law obligates the Government to hold at least one third of the issued shares of
NTT, so that the Government is able to secure the companies' public mission, such as the provision ofuniversal service.
In this respect, by holding at least one third of the NTT shares, the Government, according to
the Japanese Commercial Law, can block the undesir able outcome of the following matters in the
light of their public mission if considered appropriate:  change of the articles of association(Article 342, 343 of the Commercial Law), transfer of all or the important part of the business
(Article 245), taking over of the total business of other companies (Article 245), etc.GPA/W/104
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11. What share of the Japanese long-distance market does NTT Communications currently have?
(1) The share in inter-prefectural communication traffic for fixed telephones, serviced by NTT
(therefore, estimated to be served by NTT Comm unications Corporation), was about 51.2 per cent in
1998 (36.1 per cent in NTT's share for traffic among Tokyo, Osaka Prefecture, and Aichi Prefecturewhere traffic is concentrated).
(2) NTT Communications is a completely new carrier for international communications.
Shares of NTT and NCC (New Common Carriers) in  total number of wired inter-prefectural calls
0
100%
80%
60%48.8
40%100
20%
0%51.2
End of FY1984 End of FY1998
NTT NCC
Shares of NTT and NCC in total number of calls among Tokyo, Osaka and Aichi
0
100%
80%
60%
40%100 63.9
20%
0% 36.1
End of FY1984 End of FY1998
NTT NCC
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