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Annual Financial Report

On June 30, 2009, Nippon Telegraph and Telephone Corporation ('NTT') filed its Form 20-F for the fiscal year ended March 31, 2009. Please access the following link for the Form 20-F, which includes NTT's and its subsidiaries' (the 'NTT Group') consolidated financial results for the fiscal year ended March 31, 2009:

 http://www.sec.gov/Archives/edgar/data/769594/000119312509141360/d20f.htm

Condensed Financial Information

	Fiscal Year Ended March 31, 2008	Fiscal Year Ended March 31, 2009
Operating revenues (million yen)	10,680,891	10,416,305
Operating income (million yen)	1,304,609	1,109,752
Income before income taxes, minority interests and equity in earnings (losses) of affiliated companies (million yen)	1,322,291	1,105,163
Net income (million yen)	635,156	538,679
Net income per share (yen)	461.07	400.41
	As of March 31, 2008	As of March 31, 2009
Total assets (million yen)	18,518,779	18,796,388
Shareholders' equity (million yen)	7,410,761	7,298,110
Shareholders' equity per share (yen)	5,433.61	5515.18

Notes: 

1. 'Net income per share' is calculated based on the average number of shares outstanding during the fiscal year. 'Shareholders' equity per share' is calculated based on the number of shares outstanding at the end of the fiscal year.  2. On January 4, 2009, NTT carried out a 100-for-1 stock split. The figures provided for 'Net income per share' and 'Shareholders' equity per share' are adjusted for the stock split. As of the end of the fiscal year ended March 31, 2009, NTT had 1,323,276,733 shares outstanding.

Management Report

(1)  Outline of Business of NTT Group

During the consolidated fiscal year ended March 31, 2009, turmoil in the international financial markets gave rise to a global economic crisis and the Japanese economy underwent a rapid downturn including substantial drops in exports and production and declines in corporate profits and employment. 

In the information and telecommunications fields, as the rollout of broadband and ubiquitous services progresses, the use of optical services is increasing in the fixed-line communications market and conventional fixed-line telephony is transitioning to optical IP telephone services. In the mobile communications market, services and handsets are becoming more diverse and advanced while rate competition and entry into the market by new MVNOs* are giving rise to increasingly fierce competition. Many other dramatic changes are occurring in conjunction with the increased use of IP, including the integration of and collaboration between fixed-line and mobile communications and communications and broadcasting services, and the creation of diverse new network-based businesses. 

The effects of the intensification of competition and the economic downturn are also being felt within NTT Group, in areas such as orders for solutions services and sales of FLET'S Hikari services and mobile phone handsets. Under these difficult circumstances, NTT Group is working to expand broadband and ubiquitous services pursuant to its new Medium-Term Strategy adopted in May 2008 entitled 'Road to Service Creation Business Group.' 

In the fixed-line communications market, NTT Group expanded the coverage area for the next-generation network ('NGN') that is now being used to provide commercial services such as FLET'S Hikari Next as of March 2008, and worked to expand and enhance services that capitalize on the unique characteristics of the NGN, such as Hikari TV. NTT Group also took steps to enhance the quality of customer service, such as reducing the lead time between a customer's application and the start of FLET'S Hikari service and enhancing support services. As a result of these efforts, the number of FLET'S Hikari subscriptions reached 11.13 million. 

In the mobile communications market, NTT Group deployed new mobile phone handsets tailored to customer preferences and lifestyles and offered new services that support customers' day-to-day lives such as 'i-concier', which delivers information at times and through delivery methods suited to a customer's interests and preferences. NTT Group continued its efforts to firmly establish business models tailored to changes in the market environment, including the new discount services and new handset purchase methods that were introduced during the previous fiscal year. NTT Group also worked to raise customer satisfaction by conducting a comprehensive review extending from customer relations to handsets and network structures. As a result of these efforts, the number of mobile phone subscriptions reached 54.60 million, of which 49.04 million are FOMA services** subscriptions, accounting for 90% of all subscriptions. 

With regard to services for corporate customers, NTT Group worked to provide high value-added solutions according to customer industries and business categories and to raise support capabilities adapted to the global business activities of its customers. In the area of Software as a Service ('SaaS'), which reduces customer information system installation and operation burdens, NTT Group collaborated with its business partners to develop safe and secure SaaS platforms and provide a wide range of services. 

In its global businesses, NTT Group used its comprehensive capabilities to provide Information and Communication Technologies solutions. Overseas business sites were expanded, acquisitions of interests in SI businesses in Europe and the Americas were made to provide solution services and data centers were improved. With respect to international roaming services for mobile phones, the lineup of compatible handsets was expanded and tie-ups with overseas carriers were strengthened to increase the number of countries and territories where services are offered and to provide more convenient services. 

In addition, NTT Group is working in concert to undertake corporate social responsibility  activities intended to contribute to the sustainable development of society. NTT Group has positioned the prevention of global warming as a top-priority of its environmental agenda, and is implementing a variety of measures to reduce carbon dioxide emissions from the business activities of individual group companies and, through the provision of goods and services, to reduce carbon emissions of society as a whole. 'Green NTT,' a policy encouraging the development and use of clean energy such as solar power, was launched in May 2008, and NTT Green LLP was established in August 2008 through joint investments by individual group companies to promote solar power generation. 

As a result of these efforts, NTT Group's consolidated operating revenues for the fiscal year ended March 31, 2009 were 10,416.3 billion yen (a decrease of 2.5% from the previous fiscal year) and consolidated operating expenses were 9,306.6 billion yen (a decrease of 0.7% from the previous fiscal year). Consolidated operating income was 1,109.8 billion yen (a decrease of 14.9% from the previous fiscal year), consolidated income before income taxes was 1,105.2 billion yen (a decrease of 16.4% from the previous fiscal year), and consolidated net income was 538.7 billion yen (a decrease of 15.2% from the previous fiscal year).

* MVNOs (Mobile Virtual Network Operators) are service providers who lease their physical wireless communication infrastructures from other network operators to provide wireless services.

** FOMA services are 3G services enabling voice and data communication using advanced technology that provides high-speed and high-quality services.

(2) Risk Factors

In addition to the other information contained in the Form 20-F prospective investors should carefully consider the risks described below and explained further in the Form 20-F. These have been summarized after a comprehensive assessment of the risks related to NTT Group's business environment and its business strategy and operations and risks related to regulations and NTT's relationship with the Government. Additional risks not currently known to NTT or that NTT now deems immaterial may also impair NTT Group's business operations. The Form 20-F also contains forward-looking information that involves risks and uncertainties. NTT Group's actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including the risks NTT Group faces as described below and in the Form 20-F as a whole.

• NTT Group's business may be adversely affected by the economic situation in Japan.

• NTT Group's market share and revenues may suffer from competition.

• Growth of new businesses and migration from existing businesses accompanying the expansion of IP, broadband and ubiquitous services and other market developments may not progress as anticipated.

• NTT Group's international and domestic investments, alliances and collaborations and investments directed at new fields of businesses may not produce the returns or provide the opportunities NTT Group expects.

• NTT Group may not achieve anticipated cost savings.

• Other cellular phone operators may not adopt the W-CDMA technology of NTT DOCOMO.

• If NTT Group is unable to obtain licenses or other rights to use the intellectual properties of third parties that are necessary for NTT Group to conduct its business, NTT Group may not be able to offer certain technologies, products, or services. In addition, NTT Group may be liable for damages due to infringement of the intellectual property rights of other companies.

• System disruptions, network disruptions and issues with system architecture may affect NTT Group's financial condition and operating results.

• NTT's reputation and credibility may be affected by inappropriate use or leak of confidential business information and personal information.

• Misuse of products and services offered by NTT Group may have an adverse impact on the credibility and corporate image of NTT Group.

• Changes or decisions regarding telecommunications regulations may affect NTT Group's business.

• NTT Group may not be able to secure necessary frequency spectrum for operation and may not be able to expand its facilities due to restrictions imposed on NTT DOCOMO.

• The Government owns enough NTT Shares to give it considerable influence over whether resolutions at NTT shareholder meetings are adopted.

• The issuance or sale of additional NTT Shares or concerns regarding additional supply of NTT Shares in the stock market may affect the trading price of NTT Shares and ADSs.

(3) Related Party Transactions

The NTT Group has entered into a number of different types of transactions with affiliated companies, the most significant of which are the sales of telecommunications equipment, the purchases of terminal equipment and materials and the receipt of certain services. 

Transactions with affiliated companies for the fiscal year ended March 31, 2009 and the related balances at March 31, 2009 were as follows: 

	Fiscal Year Ended March 31, 2009
Operating revenues (million yen)	14,929
Operating expenses (million yen)	98,661
Receivables (million yen)	9,478
Payables (million yen)	76,987

 
Dividends from affiliated companies accounted for by the equity method for the fiscal year ended March 31, 2009 were ¥18,446 million.

Responsibility Statement

I, Satoshi Miura, President and Chief Executive Officer, confirm that, to the best of my knowledge:

the Consolidated Financial Statements for the NTT Group contained within the Form 20-F, prepared in accordance with accounting principles generally accepted in the United States, give a true and fair view of the assets, liabilities, financial position and profit or loss of the NTT Group taken as a whole; and

the Form 20-F includes a fair review of the development and performance of the business and the position of the NTT Group taken as a whole, together with a description of the principal risks and uncertainties that it faces.

Certain statements made in this announcement and in the Form 20-F are forward-looking statements. Such statements are based on expectations at the time that such statements were made and are subject to risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements. Unless otherwise required by applicable law, regulation or accounting standards, NTT undertakes no obligation to update or revise and forward-looking statements, whether due to any change in its expectations, to reflect events or circumstances after the date such statements were made, or otherwise.

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