Since it was established in 1953, Kokusai Denshin Denwa Co., Ltd. has made large progress by providing the world's latest technologies and high-quality service for 44 years as Japan's premier international telecommunications carrier. After the KDD Law was revised, KDD also started domestic telecommunications services from July this year. The recent government announcement to propose the abolishment of the law at the next ordinary session of the Diet has increased expectations that KDD, as a pure private company, will improve its management so it is even more nimble and dynamic.

Since Teleway Corp. was founded in 1984, the company has formed a high-quality, large-capacity national network using only optical fiber cables laid along expressways across Japan. At the same time, by offering services using advanced technologies, Teleway has, in particular, gained a sizable share of the corporate market. Teleway has also advanced a capital policy to solidify its business foundation.

Functioning as the nervous system of society, telecommunications have become an essential part of life. Even more, telecommunications are now a growth business that plays a leading role in Japanese industry. At the same time, due to deregulation and economic globalization, the following changes are taking place in Japan's telecommunications market:

<1> As exemplified by the maturity of the fixed telephone market, a rapid growth of mobile communications and multimedia services, and the globalization of communications needs, the demand structure has been undergoing dynamic changes.

<2> Because the restructuring of NTT did not sever the financial ties among the companies in the NTT group, it is urgent for other carriers to boost competitiveness. At the same time, due to the lowering of restrictions on mergers between domestic and international carriers and on entry by foreign-capital companies, the competition is expected to increase in the telecommunications market.

Against such a backdrop, KDD and Teleway, through a merger on an equal basis, will converge business resources to achieve the maximum amount of synergy and establish a scale of business and level of efficiency that would make the new company competitive against domestic and foreign megacarriers in the age of global megacompetition. The companies have reached a consensus that it would be in their best interest to aim for the following:

(a) Form a high-quality, low-cost network infrastructure based on the global optical fiber cable network that connects Japan and the rest of the world.

(b) Provide inexpensive, seamless domestic-international services to further improve both customer convenience and competitiveness.

(c) Increase involvement in such growth fields as mobile communications and multimedia services.

(d) Aggressively develop operations abroad and further raise the international competitiveness of the Japanese telecommunications industry.

KDD and Teleway are confident that the new company, as a general telecommunications carrier in the global market, will meet the expectations of the Japanese people and society and that it will make substantial contributions to the development of the Japanese economy and society as a whole.

2. Gist of the Merger

(1) Tentative merger schedule

Signing of the merger agreement

Late April 1998

General meeting for the approval of merger agreement

Late June 1998

Merger date

October 1, 1998

Kokusai Denshin Denwa Co., Ltd. will be the surviving company.

(3) Merger ratio

Merger ratio will be decided by the two companies after evaluation by a third party institution.

3. Profiles of the Merging Companies

(14) Financial results in the last three years

Note: The forecast for FY ending in March 1999 does not include the forecast for Teleway for the first one-half of the year.