Business Plan for Fiscal Year 1998

The Japanese economy remained sluggish in fiscal year 1997 due to an uncertain financial system and prolonged slowdown in consumption. Real economic growth is expected to remain low in fiscal year 1998 due to lower corporate profits and smaller public investment. The global economy, led by Europe and the United States, is expected to remain firm, albeit concerns over a further weakening of the Asian economy. Against such a backdrop, the demand for telecommunications in Japan is expected to rise further in various segments of the economy. A more vital market due to deregulation, increasingly borderless economies and societies, and further technical innovation toward the multimedia age are expected to fuel this demand.

In fiscal year 1998, KDD will focus on supporting and enriching interpersonal communications to contribute to the development of economies and societies the world-over, by providing various services between Japan and the rest of the world in response to the progress of deregulation at home and abroad as well as to the increasingly diversified and advanced communications needs of customers.

To this end, KDD, by working with telecommunications carriers overseas, will broaden and improve its range of services. At the same time, the company will launch a full-scale domestic telephone service and offer global sales activities that are fine-tuned to meet the needs of customers. In order to meet the needs of the multimedia age KDD will also push ahead with the construction of large-capacity networks, and aggressively pursue research and development activities to gain the leading edge in advanced technologies in new fields.

KDD will, with cost-effective capital investment attended with further efforts to enhance efficiency of the management through various measures including cutback of expenditures, strive to establish and solidify its business base as a global, full service telecommunication carrier by aggressively advancing into promoting telecommunication-related fields.

These measures are intended to further improve KDD's competitiveness in global telecommunication markets and to convince customers to use the company for years to come.

Based on these basic concepts, KDD will put priority on the following policies in fiscal year 1998:

1. Launch full-scale domestic telephone service and begin new services catering to multimedia needs.

(1)	Launch a full-fledged domestic telephone service
(2)	Establish a more flexible rate system associated with a variety of discount plans
(3)	Develop aggressively telephone services through overseas business bases
(4)	Launch total solutions by combining such network services as frame relay and ATM, such application services as EDI (electronic data interchange), and terminals in customer premises.

2. Advance the construction of the JIH cable that will make Japan a telecommunication hub in the world and further expand its telecommunication infrastructure. Also construct large-capacity, high-quality networks that are essential to multimedia-related services.

(1)	Advance the construction of the JIH cable and domestic directly-operated transmission channels that complement the cable.
(2)	Expand the economical and dependable large-capacity optical submarine cable network in the Asia-Pacific region, by constructing the China-US cable and SEA-ME-WE3 cable, and other measures.
(3)	Promote the construction of a global service network that supports the launching of communication services by overseas business bases.
(4)	Improve domestic transmission channels for multimedia application services and increase POIs (points of interface) to broaden service area.
(5)	Enlarge and improve the international network to support the increase in Internet traffic, to improve connectivity, and to accommodate new technologies such as ATM.
(6)	Improve domestic transit switch and next-generation service processing units and rebuild the service support system to meet the full launching of domestic telephone service and the increasing variety of interconnections with domestic telecommunications carriers.

3. Advance pioneering research and development to support tomorrow's large-capacity, very high speed telecommunication technology.

(1)	Advance research and development of large-capacity optical communication technology, optical device that enables very high speed optical transmission, cable construction and maintenance technology, and so forth to apply them for fundamental technologies for next- generation networks and the construction of a domestic network.
(2)	Advance the research and development of leading-edge technologies that will lead to new businesses and services in multimedia applications, the Internet, and next-generation radio communication network.
(3)	Advance the research and development of network planning, control, and operation technologies to make network administration even more efficient and advanced.

4. KDD has budgeted 120.9 billion yen for capital investment, and has earmarked a sizable portion of this amount for investment in next-generation networks (please refer to the attached sheet for details).

5. The revenues and expenditure plan is as follows:

[Appendix]

[Reference]

(Reference)
Estimated consolidated statement of income for fiscal year 1997