Financial Statement for the Fiscal Year Ended in March 1998

(1) Overview

During the fiscal year under review, the continuing slump in personal consumption and the cutdown in capital investment dampened Japanese economic conditions. Meanwhile, European and American economies enjoyed strong growth while Asian economies suffered from currency woes and business slowdown. Due to such severe economic conditions at home and abroad, overall international telephone traffic, in terms of minutes, rose only some 3%.

Operating revenues fell 1.9% from last fiscal year to 316,400 million yen. Of the operating revenues, telephone revenue decreased 5.0% to 251,400 million yen, despite an increase in traffic, particularly international calls using Super World Cards and mobile telephones. The fall can be blamed on the rate reduction in November 1996 and the introduction of large volume discount services.
Multimedia revenues(*), anticipated to be the main source of revenues in the future, continued to grow, rising 29.0% from last fiscal year.

Operating expenses fell 1.7% from last fiscal year to 305,300 million yen.

As a result, ordinary income decreased 19.4% to 16,700 million yen and net income dropped 16.9% to 8,400 million to record the consecutive year of lower revenues and lower income.

Capital investment amounted to 95,200 million yen, of which 59,000 million yen went to multimedia-related investments.

(*) Multimedia revenues:

The sum of revenues from Internet, ATM, frame relay, high-speed leased circuit, ISDN, etc.

(2) Forecast for the fiscal year ending March 1999

KDD anticipates some 5% increase in international telephone traffic (in minutes) in fiscal year ending March 1999. Financial forecasts for that fiscal year are 306,000 million yen in operating revenues, 245,000 million yen in telephone revenue (17,000 million yen from the domestic telephone service to be launched this July), 9,000 million yen in ordinary income, and 5,000 million yen in net income. The budget for capital investment is 120,900 million yen, of which 86,000 million yen will go to multimedia-related investments.

These forecasts do not take into account a merger with Teleway Co., Ltd.

2. Consolidated Statement

(1) Overview

During the fiscal year under review, due to the sluggish economies of Asia and Japan, operating revenues fell 9.1% from last fiscal year to 364,800 million yen, while operating expenses decreased 6.6% to 351,900 million yen. Consequently, ordinary income fell 47.0% to 15,500 million yen and net income decreased 61.6% to 4,900 million yen. The result was therefore lower revenues and lower income.

(2) Forecast for the fiscal year ending March 1999

In the fiscal year ending March 1999, the KDD Group expects 384,000 million yen in operating revenues, 10,000 million yen in ordinary income, and 5,500 million in net income.

3. Future Management Policies

Amidst the progress of deregulation at home and abroad, KDD will continue to streamline its operations. The company aims to become a general global communications company by aggressively pursuing domestic telecommunications business and overseas communications businesses while maintaining a foothold on international telecommunications business.

[Summary of financial results]
	(Unit: hundreds of millions of yen)

	Fiscal Year Ended March 1998	Fiscal Year Ended March 1997	Increase/Decrease (%)
Operating revenues	3,164	3,224	1.9
Telephone revenue	2,514	2,646	5.0
Other revenues	649	577	12.4
Operating expenses	3,053	3,106	1.7
Operating income	110	118	6.7
Ordinary income	167	208	19.4
Net income	84	101	16.9

Note:

The figures are rounded off to the nearest hundred million yen (the same applies to the tables below)

[Summary of consolidated financial results]
	(Unit: hundreds of millions of yen)

	Fiscal Year Ended March 1998	Fiscal Year Ended March 1997	Increase/Decrease (%)
Operating revenues	3,648	4,012	9.1
Operating expenses	3,519	3,766	6.6
Operating income	129	246	47.5
Ordinary income	155	293	47.0
Net income	49	128	61.6