ddi annual report 1999the ddi group subsequently expanded into cellular-phone services in 1989 and...

DDI CORPORATIONANNUAL REPORT 1999

Printed in Japan

Dream Communications

1

Consolidated statements of income:

Total operating revenues

Operating income

Income before income taxes

Net income (loss)

Consolidated balance sheets

Total assets

Total shareholders’ equity

Interest-bearing debt

Per share data (yen)

Net income (loss)

Cash dividends

Notes: 1. For purposes of comparison, net income and cash dividends per share for the fiscal years prior to fiscal 1995 have been restated to reflectthe 11:1 stock split.

2. Interest-bearing debt consists of short-term loans and current portion of long-term loans, long-term loans, bonds and long-termaccounts payable.

3. Certain amounts relating to Enterprise taxes, Amortization of goodwill, Equity in income of Unconsolidated Subsidiaries and Affiliatesshown in the consolidated financial statements for the years ended March 31, 1998, 1997, 1996 and 1995 have been reclassified to con-form with the 1999 presentation.

Years ended March 31

Selected Financial Data

Millions of yen

1999 1998 1997 1996 1995

¥1,246,582 ¥1,178,345 ¥1,016,398 ¥669,609 ¥510,391

69,874 79,611 46,194 82,895 87,313

49,715 65,018 37,880 75,569 75,645

17,061 8,310 (26,161) 4,281 29,604

1,585,848 1,296,747 1,055,673 790,323 560,487

231,208 218,321 175,556 205,287 203,704

1,068,253 779,786 614,537 324,584 204,474

¥ 7,501 ¥ 3,807 ¥ (12,031) ¥ 1,969 ¥ 14,121

1,790 1,790 1,790 1,380 970

DDI was established in June 1984 as Dai-ni Denden Planning Company. It

changed its name to DDI Corporation in April 1985, as the liberalization of the telecom-

munications sector was taking place, and received permission to operate as a Type 1

Telecommunications Carrier in June 1985.

DDI began to provide leased circuit services in October 1986 and long-distance tele-

phone services in September 1987, thus bringing competition to the Japanese telecom-

munications market, which had previously been monopolized by Nippon Telegraph and

Telephone Corporation (NTT). The DDI Group subsequently expanded into cellular-

phone services in 1989 and Personal Handy-phone System (PHS) services in 1995. In

November 1998 it began satellite-based global telecommunications operations based on

the IRIDIUM and International services.

The DDI Group will continue to expand its activities in the future as it evolves into

an integrated telecommunications services provider.

1 Selected Financial Data

2 To Our Shareholders

4 The Japanese Telecommunications Industry

in the Fiscal Year Ended March 1999

8 DDI’s Business Operations

10 DDI’s Network Services

13 DDI’s Cellular-Phone Services

16 DDI’s PHS Services

20 DDI’s IRIDIUM Services

23 DDI’s Overseas Mobile Services

24 Financial Highlights

Response to the Y2K Problem

26 Consolidated Balance Sheets

28 Consolidated Statements of Income

29 Consolidated Statements of Shareholders’ Equity

30 Consolidated Statements of Cash Flows

31 Notes to Consolidated Financial Statements

37 Report of Independent Accountants

38 Scope of Consolidation

39 Corporate Data

Table of Contents

made a number of changes to its system of charges. It launched

a new plan that combines a basic charge with a certain amount

of free call time and also introduced discount services. C-Mail, a

mail service for cellular telephones, and the EZweb service,

which allows Internet access from cdmaOne telephones, were

introduced in April 1999.

PHS Services The advantages of PHS relative to cellular-telephone services are

shrinking in terms of charges and functions. In an effort to

expand its user base, DDI introduced new charging plans and ser-

vices and continued to improve the functionality of its network.

However, the business environment was extremely harsh, and

other PHS operators made major changes in their operations.

The number of subscribers registered with the Pocket

Telephone companies reached a peak of 3,617,000 in July 1998.

This was followed by net declines each month until February

1999. DDI sought to halt this trend by introducing a number of

innovations, including the P-Mail DX (P-Mail Deluxe) telephone

with enhanced mail functions, and the Moji Denwa (Text

Phone), which was specially designed to take advantage of the

data communications capabilities of PHS. These measures

brought a return to net growth, and by March 1999 the total

number of subscribers was only 0.8% below the previous year’s

level at 3,457,000.

IRIDIUM ServicesThe Iridium Service is a global satellite phone and pager service

based on low-orbit satellites. Services began on a trial basis in

November 1998, and full service was launched in January 1999.

In February and May the charges were adjusted to make the ser-

vice more convenient to customers. The number of subscribers

stood at 1,200 as of March 31, 1999. The slow start is attribut-

able to delays in the launch of the service and the introduction

of terminals.

DDI is also working to ensure the success of the global

Iridium venture. It is a shareholder in IRIDIUM SOUTH PACIFIC

PTY LTD. in Australia and IRIDIUM SOUTHEAST ASIA CO.,

LTD. in Thailand. These companies were established to provide

Iridium services in the South Pacific and Southeast Asia.

Future OutlookThe Japanese telecommunications industry is entering a period

of major change. NTT restructuring took effect in July 1999,

and new market participants, including foreign companies, are

starting to offer a full range of services. These and other devel-

opments are expected to bring a proliferation of low-cost

services and trigger fierce competition among carriers.

Telecommunications user profiles are becoming increasingly

diverse. In addition to the growth of personal telecommunica-

tions, the Internet and other types of data communications are

expected to have a growing influence on various aspects of soci-

ety. The DDI Group has developed the following strategies in

preparation for these changes.

1. Group Integration to Match Market Needs DDI is converting its network to fiberoptic technology and

building an IP network to support data communications. These

enhancements will enable it to respond flexibly to the demand

for high-speed, large-capacity services.

As customer needs become more sophisticated and diverse,

DDI will also enhance its ability to market its services through a

consulting approach as a provider of comprehensive solutions

that include the design of corporate communications systems.

In April 1999 it established DDI Network Systems to handle its

solutions business.

Members of the DDI Group have joined forces to develop

and provide the EZweb service, which was launched in April

1999. EZweb allows users to access Internet information from a

cellular telephone. Access is via DION, an Internet connection

service operated by DDI.

2. Reducing Reliance on the NTT Network Until now DDI has connected to the NTT network via relay

exchanges. It is now moving closer to users by introducing

group center (GC) connections at local exchanges. This will

lower DDI’s reliance on the NTT network and reduce the

amount of access charges paid to NTT.

DDI also plans to reduce the reliance of the CELLULAR

TELEPHONE companies on the NTT network by enabling them

to use group connections via the DDI network. This change,

which has already been implemented for the PHS companies,

will also bring savings in the amount of access charges paid to

NTT. Group connections are expected to enhance the earnings

of all group companies.

32

The globalization of the Japanese telecommunications business

continued in the fiscal year 1999, ended March 31, 1999. There

were also further moves toward deregulation, including changes

to the Telecommunications Business Law. An expanding influx

of both Japanese and foreign companies into the market was

reflected in escalating competition based on both services and

prices. There was also evidence of accelerating change in the

structure of the industry, including mergers, transfers of opera-

tions and business partnerships among carriers.

A conspicuous feature of trends in the telecommunications

market was the rapid growth of demand for mobile telephone

services. There was also further diversification of consumer

needs, including increased demand for Internet access and

other data communications services. The focus of the market

continued to shift from fixed-line to wireless communications,

and from voice to data communications. In this market environ-

ment, DDI focused on the expansion of its long-distance, inter-

national, cellular telephone, PHS and Iridium services.

DDI’s non-consolidated profit in fiscal year 1999 was

affected by a reduction in long-distance telephone charges in

February 1998, and by the growing popularity of discount ser-

vices. Operating revenues rose by 13.0% over the previous year’s

level to ¥605,510 million, and recurring profit declined by

23.3% to ¥33,648 million. Net income was 29.0% lower at

¥16,867 million. On a consolidated basis, operating revenues

increased by 5.8% to ¥1,246,582 million, while recurring profit

declined by 20.0% to ¥50,866 million. Net income was 105.3%

higher at ¥17,061 million.

Long-Distance Services DDI worked to enhance its competitiveness primarily through

pricing strategies, including the introduction of new discounts

to make services more accessible to existing users, especially in

the area of voice calls. The expansion of the Internet was

reflected in increased demand for data communications services.

DDI responded by cutting charges for its Frame Relay Service

and launching a new Cell Relay Service to support high-volume

data communications. It further enhanced its competitiveness in

the high-growth field of data communications by adding new

service options to its DION Internet connection system.

The improvement of network infrastructure continued. DDI

acquired the Japan Information Highway (JIH) system, a large-

capacity submarine cable encircling the entire Japanese archi-

pelago. It also continued to convert its network to fiberoptic

cable. These enhancements will further reinforce network relia-

bility while ensuring that DDI is able to keep pace with future

growth in the demand for telecommunications services.

International Services The provision of a seamless domestic–international service has

been a cherished goal for DDI. In June 1998, it signed network

interconnection services with Japanese and overseas carriers

and other organizations covering the provision of international

telecommunications services. In October 1998, it began to offer

low-cost international telephone services. Users can now call

almost any location on Earth at affordable prices simply by dial-

ing the “0078” access number.

Growth is also predicted for international data communica-

tions. DDI’s acquisition of the PC-1 submarine optical fiber

cable, which links Japan and the United States, will allow it to

respond flexibly to demand in this area.

Preparations for the establishment of cellular-telephone

services in Brazil and Paraguay also continued. Services

were launched in December 1998 in Brazil, and in May 1999

in Paraguay.

Cellular-Phone Services The DDI CELLULAR Group achieved steady growth in its

subscriber base, which increased by 22.4% to 5,298,900 as of

March 31, 1999.

In July 1998 KANSAI CELLULAR TELEPHONE Co.,

KYUSHU CELLULAR TELEPHONE Co. and OKINAWA

CELLULAR TELEPHONE Co. launched a new service based on

the cdmaOne technology, which is superior to the PDC system in

terms of both voice quality and suitability for data communica-

tions. The new service was subsequently introduced by

CHUGOKU CELLULAR TELEPHONE, HOKURIKU CELLULAR

TELEPHONE and SHIKOKU CELLULAR TELEPHONE in March

1999, and by HOKKAIDO CELLULAR TELEPHONE Co. and

TOHOKU CELLULAR TELEPHONE Co. in April 1999. Seamless

nationwide coverage was established in April 1999, when IDO

launched cdmaOne services in the Tokyo and Tokai regions.

To improve the competitiveness of existing services, DDI

To Our Shareholders

President and Chairman

Yusai OkuyamaFounder and Chairman Emeritus

Kazuo Inamori

Founder and Chairman Emeritus

Kazuo Inamori

President and Chairman

Yusai Okuyama

54

Since 1998, the Japanese telecommunications

industry has entered, in many ways, a new phase.

Restrictions on carrier services have been

removed and the distinction between

international and domestic services has become

meaningless. There has been an accelerating

process of mergers and alliances across national

borders, and both Internet use and mobile

telecommunications have expanded rapidly.

These changes are being driven by deregula-

tion in the various telecommunications fields, by

the NTT split-up, by changing user needs and by

rapid advances in technology. One major change

was the approval of international simple resale

line connections in December 1997. This move

means that carriers other than traditional inter-

national telephone companies now have

increased opportunities to move into the inter-

national market. The growth of cross-border

mergers and alliances has accelerated since the

removal, in January 1998, of restrictions on for-

eign ownership of new common carriers (NCCs).

In July 1998 the KDD Law was repealed, and in

July 1999 the NTT split-up took effect. These

changes have allowed KDD to move into domes-

tic communications and NTT to move into the

international communications market.

The telecommunications industry faces a

number of key issues. One debate concerns the

planned introduction, in the spring of 2001, of

preferential connections and the long-term

incremental cost method for NTT charges.

Number portability is another focus of debate,

including portability between fixed-line and

mobile systems. The long-term incremental

cost method is especially important because of

its implications for a reduction of the heavy

cost burden imposed on NCCs through NTT

access charges.

The NTT split-up involved changes to the

NTT Law. NTT was split up under a holding

company structure into one long-distance car-

rier and two regional telephone companies serv-

ing eastern and western Japan. One effect of this

law change will be the establishment of rules for

fair competition between NTT and other carriers

in the area of local telecommunications.

Hitherto, there has been a de facto monopoly for

NTT. The NTT restructuring must lead to the

creation of a fair and competitive environment.

The industry cannot afford anti-competitive col-

lusion, in such areas as personnel, financing,

The Japanese Telecommunications Industry

in the Fiscal Year Ended March 1999

ZC connection(telephone)

ZC connection(ISDN)

GC connection(telephone)

PHS localcommunications

¥2.59/call¥0.0847/second¥17.84/3 minutes


Type Fiscal Year

Ended March 1999Fiscal Year

Ended March 1997


Fiscal Year Ended March 1998


¥1.71/call¥0.06333 minutes¥13.10/3 minutes

Principal Access Charges








The Japanese telecommunications industry has entered an era of fierce com-

petition, amid the easing of regulations and the flurry of mergers and realignments.

Competition is now focused more on “one-stop teleservice” than on price, and compa-

nies are vying to provide an array of convenient new services as the use of the Internet and

data communications continues to grow.

76

procurement of supplies and management infor-

mation, between NTT’s long-distance company,

which will be the dominant carrier, and its local

telephone companies. These issues are certain to

be the focus of continuing debate.

The Ministry of Posts and Telecommunications

has recommended to NTT that it introduce flat-

rate charging for its Internet connection services.

The low level of Internet use in Japan compared

with the level in the United States is attributable in

part to usage-based connection charges. There is

likely to be considerable debate over the timing of

the move to flat-rate charges.

One major change in user needs has been the

shift from fixed-line to mobile telephones. This

trend is symbolized by the shrinkage in the NTT

fixed-line subscriber base for the first time in the

history of NTT. The number of fixed-line connec-

tions fell from 61.3 million in the year to March

1997, to 60.4 million in the year to March 1998,

and to 58.4 million in the year to March 1999.

The combined cellular telephone and PHS mar-

ket expanded from 26.9 million users fiscal 1997

to 38.2 million in fiscal March 1998, and to 47.3

million in fiscal 1999.

New advances in technology have been

accompanied by growing interest in Internet-

based IP networking as a new trend in fixed-line

telephone use. In the United States voice and

data traffic are both transmitted via IP networks

and some carriers are by-passing existing

telephone exchange networks. Japanese telecom-

munications companies are also examining the

concept of IP networks. Another area of interest

is the use of WDM technology. This can dramati-

cally increase the transmission capacity of fiber

optic networks.

Until the early 1990s mobile telecommunica-

tions were predominantly based on analog tech-

nology. Since then there has been a shift to digi-

tal technology. In the past all digital cellular

telephone companies in Japan used PDC as their

standard system. However, sound quality is poor

with PDC, and data transmission speeds are lim-

ited to 9.6kbps. As a result, the technology is not

really suitable for high-quality voice communi-

cations or Internet communications. Another

disadvantage is that PDC is a uniquely Japanese

standard, which means that global roaming is

not available to Japanese users.

It was in this environment that DDI began to

introduce cdmaOne in July 1998. In April 1999 it

launched a nationwide service in partnership

with IDO. The new system provides high-quality

voice communications and 64kbps data

transmission. In addition, it supports global

roaming. Its introduction is expected to trigger

another phase of rapid growth in the Japanese

cellular telephone market. Moreover, the CDMA

technology used in the cdmaOne system is the

base technology for the next generation of cellu-

lar telephones, which will be able to support

even higher data transmission speeds. The

International Telecommunications Union is now

developing a world standard for this new cellular

telephone system, called “IMT-2000.”

Advances in technology are also bringing

mobile communications and computers ever

closer together. The ability to send and receive e-

mail and browse the web without connecting to

a computer is likely to become a standard feature

of cellular telephones. In the future, users who

buy cellular telephones or PHS units are likely to

regard an e-mail address as a normal adjunct to

a telephone number.

All Carriers’ Portable-phone SubscribersDDI CELLULAR TELEPHONE Group

All Carriers’ PHS SubscribersDDI POCKET TELEPHONE Group

Mar.1996

Mar.1997

Mar.1998

Mar.1999

Mar.1995

Mar.1996

Mar.1997

Mar.1998

Mar.1999

949,

000

4,33

1,36

9 10,2

04,0

23

1,95

9,10

0

3,42

3,70

0

20,8

76,8

20

4,32

8,50

0

31,5

26,8

70

5,29

8,90

0

41,5

30,0

00

2,88

0,60

0

3,48

6,60

0

3,45

7,70

0

6,02

9,69

1

6,72

7,02

3

5,78

0,00

0

1,50

8,11

4

776,

400

Total Number of PHS Subscribers––All Carriers’ and DDI POCKET TELEPHONE Group

Total Number of Portable-Phone Subscribers––All Carriers’ and DDI CELLULAR TELEPHONE Group

9

NETWORK SERVICES 10DDI’s foundation is its digital microwave and optic fiber net-work connecting the entire nation of Japan and extendingoverseas. This network is rapidly evolving to accommodatethe explosion in IP (Internet-related) traffic.

CELLULAR-PHONE SERVICES 13Through rapid conversion to digital, now including the amaz-ingly clear-sounding cdmaOne technology, DDI’s CELLULAR-PHONE network has grown to serve almost nine millionsubscribers as it meets the growing needs of a mobile society.

PHS SERVICES 16PHS (Personal Handy-phone System) technology offers a level ofconvenience and flexibility unprecedented in consumer personalmobile communications. New technologies are sweeping in anew era of smart, affordable voice and data communication.

IRIDIUM SERVICES 20DDI has taken a major leadership role in supporting Iridium inJapan and the Asia-Pacific region. Introduced less than ayear ago, Iridium fulfills the dream of anywhere, anytime com-munications independent of terrestrial phone systems.

OVERSEAS MOBILE SERVICES 23Overseas business is a new strategic element of DDI’smedium- to long-term growth. By partnering with local andinternational investors in new markets overseas, DDI is bring-ing global communications excellence to the world at large.

With a seamlessly integrated, high-fiber network of five core

operations, the DDI Group delivers the ideal environment for

both global and personal communications.

telecommunications by theone provider for all markets

Comprehensive

DDI’S BUSINESS OPERATIONS

8

In fiscal 1999, the year ended March 31, 1999, DDI’s

operating revenues increased by 13.0% or ¥605,510 mil-

lion, while its operating income declined by 21.1% to

¥34,788 million compared with the previous fiscal year.

Capital expenditure was 28.8% lower at ¥66,548 mil-

lion. Though the reduction in long-distance call charges

in February 1998 led to a fall in revenue, there was

increased revenue from peripheral activities in the form

of sales of terminals and other items to CELLULAR

TELEPHONE companies. Profit was down, mainly

because of the price reduction. Increased income from

data communications should help to boost both rev-

enue and profit in the year in fiscal 2000.

Securing New Income Sources

DDI sees the high-growth area of data communications

services as a major new source of income. In July 1997

it launched DDI Integrated Open Network (DION) to

provide Internet access services. As of the end of March

1999, there were 147,200 subscribers. It has introduced

a charging plan for individual users of the DION dial-

up service, and for corporate customers it now offers

the DION Standard 2 charging plan. These plans have

made Internet access more affordable and offered a con-

tinuous connection service. In May 1998 the UP Link

Server technology developed by Unwired Planet, Inc.

was adopted for the DION network. The UP Link Server

supports the Wireless Application Protocol (WAP). Its

addition to the DION network allows users to access the

Internet through the DION network, from cellular or

PHS telephones equipped with the UP Browser. With

the UP Server, it is possible to access information from

around the world from a telephone without using a note-

book computer or other equipment. There is also easy

access to various other applications, including e-mail

and schedule management.

DDI has taken a consultative approach to the mar-

keting of its data transmission services. It is also enhanc-

ing its capacity to meet continuing growth in the

demand for data communications due to the expansion

of Internet-related markets. In June 1998 it introduced

an ATM Leased Circuit Service and in December

launched the Cell Relay Service, which supports super-

high-speed, high-bandwidth data communications. To

improve the competitiveness of the Frame Relay Service,

domestic charges were reduced in February 1999, and

international charges were reduced in March 1999.

In the year ended March 1999, the number of sub-

scribers for DDI’s long-distance telephone service

increased by 3.1% to 1.68 million circuits. In addition

10 11

DDI’S NETWORK SERVICES

DDI sees the high-growth area of data communications services as a major

new source of income and is converting all voice networks to IP networks

as it seeks to provide a total information solution for every customer need.

excellence in every aspect of telecom expertise

SSurpassing

Revenues from CELLULAR-Phone

Services

The eight CELLULAR TELEPHONE companies are con-

solidated subsidiaries of DDI. All offer services based on

cdmaOne and PDC digital technology and the TACS ana-

log system. In fiscal 1999, the year ended March 1999,

their operating revenues amounted to ¥690,606 million,

an increase of 15.5% over the previous year’s result, while

operating income was 41.0% lower at ¥30,338 million.

Capital investment increased by 90.8% to ¥273,751 mil-

lion, including ¥184,700 million in expenditure on

cdmaOne facilities. Though revenues increased, thanks

to growth in the cdmaOne subscriber base and other fac-

tors, profit came under pressure from increased sales

expenses, especially in relation to the marketing of

cdmaOne. We aim to achieve growth in both revenues

and profits in the year to March 2000 through a sub-

stantial increase in the number of cdmaOne subscribers

By March 31, 1999, the eight CELLULAR TELE-

PHONE companies had a cumulative total of 5,298,900

subscribers, an increase of 22.4% compared with the pre-

vious fiscal year’s total. The group’s market share reached

26% in all service areas except the Tokyo/Tokai region. In

the Tokyo/Tokai region, services are provided by two TU-

KA Cellular companies, which increased their aggregate

subscriber base by 26.5% to 2,061,000.

The cdmaOne system is highly competitive for a vari-

ety of reasons, including its excellent voice quality and

compatibility with high-speed data communications.

The DDI Cellular Group has worked with Nippon Idou

Tsushin Corp. (IDO) to develop nationwide seamless

coverage with the new system, and in April the service

became available throughout Japan. Moreover, cdmaOne

telephones now compare favorably with existing PDC

types, thanks to development of lighter, more compact

models with improved standby times. In April 1999 two

enhanced services, EZweb and C-Mail, were introduced

to take advantage of the data communications capabil-

ities of the cdmaOne system. The EZweb service is pro-

vided through EZserver, a Wireless Application Protocol

12 13

to aggressive marketing of its existing system, DDI intro-

duced the new Danzen Hiruwari (Daytime Ultra-

Discount) service. For a flat monthly charge of ¥200,

subscribers can enjoy calling during business hours at

after-hours charging rates. If total charges exceed

¥1,000, an additional 25% discount is provided on calls

to five destinations.

In October 1998 DDI began to offer international

telephone services through interconnections with KDD,

Teleglobe of Canada and C&W of the United Kingdom.

DDI is able to price a 3-minute daytime weekday call

between Japan and the United States at a very com-

petitive ¥168, compared with ¥240 through KDD (¥216

with discount).

The improvement of network infrastructure is a con-

tinuing priority for DDI. To provide for future growth

in telecommunications demand, DDI is building a

fiberoptic network to complement its existing wireless

network. The domestic trunk backbone is KDD’s Japan

Information Highway (JIH), which is being converted to

optical technology. DDI also anticipates growth in the

demand for international data communications. Recently

it signed memoranda covering the purchase of 1.5Gbps

of capacity on the PC-1 submarine cable link between

Japan and the United States. In addition, DDI plans to

invest actively in the development of a next-generation IP

network suitable for data communications.

DDI does not have direct links to its customers and

it must pay access charges to NTT, which has a virtual

monopoly over local networks. The reduction of those

access charges is a crucial priority. DDI hopes to achieve

this goal by changing its connection method. In the past

its network was linked to NTT networks through zone

centers (ZCs)—transit switches. In April 1998 it began

to use group centers (GCs)—local exchanges near users.

GC access rates were ¥5.81 per three minutes, compared

with ¥11.98 for ZC connections as of March 31, 1999.

In the year to March 2000, DDI plans to establish con-

nections to around 700 of the approximately 1,600 GCs

in Japan. Another goal is the reduction of access charges

paid by DDI Group companies for access through the

DDI network.

With voice quality that rivals standard telephones, cdmaOne is the de facto performance stan-

dard for wireless telephones around the world. And the same qualities that make it such a clear

winner for voice will soon give it a performance edge in high-speed mobile data transmission.

technologies for a new age oftelecommunications

DDI’S CELLULAR-PHONE SERVICES

cdmaOne

DDI’S NETWORK SERVICES

14 15

(WAP) gateway. Cellular telephones with the EZbrowser

function can be used to send and receive e-mail and

access a variety of information sites without the need

to connect to a computer or other equipment. The intro-

duction of this service has facilitated Internet access in

a mobile environment. C-Mail is a stored mail commu-

nications service provided through the cdmaOne sys-

tem. Text messages can be sent and received between

C-Mail configured cellular telephones, and text mes-

sages and e-mail can be received even from telephones

without the C-Mail function.

The data communications capabilities of the

cdmaOne system will be further enhanced with the

introduction of a 64Kbps packet data transmission ser-

vice in December 1999. Other changes that have

enhanced the attractiveness of the service to customers

include the introduction of Tanoshi-Mail, which works

under the PDC system and supports text message ser-

vices not only between cellular telephones, but also

between P-Mail configured PHS telephones.

In the fiscal year 1999 ended March 1999, the DDI

CELLULAR Group worked to strengthen its competi-

tiveness by cutting basic charges and other prices, intro-

ducing new charging plans, and expanding discount

services. Charges for calls from NTT subscriber tele-

phones to cellular telephones were cut in October 1998.

In the case of KANSAI CELLULAR TELEPHONE, for

example, the call time for ¥10 was increased from 10

seconds to 12 seconds. In January 1999, the basic

charges for cdmaOne and PDC telephones were reduced

by ¥200 for the standard plan and ¥100 for the Low Call

plan. In addition, the ratio of weekday, daytime call

charges to standard plan charges was lowered from 1.5

to 1.4. In October 1998 the new Komi-Komi call plan

was introduced. The basic charge under this plan

includes a specific amount of free call time. Discount

services were also enhanced. For example, the Nakayoshi

discount plan, which was launched in May 1998, pro-

vides special discounts for calls to designated numbers.

Preparing for IMT-2000

International Mobile Telecommunications-2000 (IMT-

2000) is a next-generation mobile communications system

using the 2 GHz band. The Radiocommunications Sector

of the International Telecommunications Union (ITU-R)

is currently studying international standards for the sys-

tem. The Association of Radio Industries and Businesses

(ARIB) is meanwhile working to develop standards in

Japan. DDI and IDO have established a joint venture, the

DDI-IDO Joint Laboratory, to carry out research and

development activities in preparation for the introduc-

tion of IMT-2000. The two companies previously entered

into a similar arrangement for cdmaOne. The aim of the

research program is to develop and evaluate a radio trans-

mission system that will be compatible with the existing

cdmaOne system. Through this work, DDI and IDO will

contribute to the establishment of standard specifications

for IMT-2000. They will also work with manufacturers to

improve their technology and competitiveness in prepa-

ration for commercialization.

Standard Low Call Set Plan

Contract Business Handling Charge ¥2,700 ¥2,700 ¥2,700

Call Charge yen/3min

Inside own network

Other Area

Inside own network

Other Area

Inside own network

Other Area

Inside own network

Other Area

sec/¥10

18.0

16.0

29.0

26.5

32.5

29.0

45.0

40.0

100

120

70

70

60

70

40

50

Daytime on weekday

Nighttime on weekday

Daytime and nighttime onSat., Sun. and Holidays

Midnight, early morning

Basic Monthly Usage Charge (yen)TACS ¥3,400PDC ¥3,400cdmaOne ¥3,500

TACS ¥4,400PDC ¥4,400cdmaOne ¥4,600

Jumbo–

¥8,900¥5,700¥5,900

¥3,900¥4,000

Cellular-phone Service Rate Chart (KANSAI CELLULAR)(as of August 1999)

Up to ¥4,000of free-minute*

calls includedin monthlycharge

¥20/minIrrespective ofcalling time ordistance

Up to ¥3,000of free-minute*



Up to ¥1,400 of free-minute*



yen/3min

Same asStandard

1.4 times Standard

Plan L Plan S

Cellular phoneto cellularphone

*Free-minute rates shown in Set Plan are for cdmaOne

Mar.1995

Mar.1996

Mar.1997

Mar.1998

Mar.1999

DDI CELLULAR GroupTU-KA Cellular Group

949

130

1,95

956

9

3,42

31,

287

4,32

81,

628 2,

061

5,29

8

Growth in Subscribers among the DDI CELLULAR Group and Two TU-KA Cellular Telephone Companies(Unit/Thousand)

DDI’S CELLULAR-PHONE SERVICES

Operating revenues for the year ended March 1999

amounted to ¥331,300 million, a 3.6% increase com-

pared with the previous year’s result. Operating income

increased by 191.4% to ¥9,972 million, while capital

expenditure decreased by 38.7% to ¥61,146 million.

Traffic increase, cost reductions and other factors were

reflected in the first operating surplus since the launch

of services.

The cumulative subscriber base of the nine POCKET

TELEPHONE companies decreased by 0.8% to 3,457,700,

and their market share reached 59.8%. After a period of

continuous decline between July 1998 and February 1999,

the number of subscribers showed net growth in March

1999. This reflected efforts to attract new customers. PHS

offers call charges lower than cellular telephone charges,

and the system is also excellent for high-speed data com-

munications. As in the previous year, there was continu-

ing growth in the use of the system for non-voice

communications. In fiscal 1999, text message calls

accounted for about 48% of total traffic, compared with

28% in the year to March 1998. These non-voice modes of

communication are especially popular with young people.

In October 1998 the DDI POCKET TELEPHONE

companies reduced the cost of a three-minute daytime,

weekday call placed from PHS units to cellular tele-

phones from ¥180 to ¥150 for customers on standard

plans, and from ¥180 to ¥90 for calls placed at other

times. As part of their efforts to expand the user base,

the DDI POCKET TELEPHONE companies also

launched the Anshin-da Phone (Peace of Mind Phone)

service in April 1998.

Under this plan, which limits the numbers to which

calls can be placed, the monthly basic charge is reduced

to ¥980, compared with a normal charge of ¥2,700.

There is no limit on incoming calls. The service was

designed primarily to provide “peace of mind” to other

family members by having children and the elderly

carry PHS units. Another money-saving plan was intro-

duced for people who use telephones in the daytime,

such as housewives.

In June 1999 a range of charging packages was

launched. With Super Pack S, the customer pays a basic

monthly charge of ¥3,300. This includes ¥1,200 worth

of free calls, which allows the user to talk for up to 115

minutes. Customers can talk free for as long as 348 min-

utes with the Super Pack L. The ¥5,000 basic monthly

1716

The wireless ISDN technology of PHS fulfills the need for affordable and

flexible voice and high-speed data communications. Improvements in

voice, text and high-speed data capabilities and performance are expand-

ing its role in multi-function personal communication.

Subscribers of the DDI POCKET TELEPHONE Group(Unit/Thousand)

Mar.1996

Mar.1997

2,88

0

Mar.1998

3,48

6

Mar.1999

3,45

7

776

DDI’S PHS SERVICES

Flexibleforesight leads

to expanding capabilities

18

charge includes ¥3,000 worth of free calls. These new

products were developed to attract new customers by

offering the services at reduced cost. The package con-

cept is designed to promote customer confidence.

Services were further enhanced with the opening of

the P-Mail Deluxe (DX) Center in December 1998. The

facility supports the P-Mail DX system, which permits

the transmission of messages up to 1,000 characters

long, and P-mail, which carries 20-character text mes-

sages. February 1999 saw the launch of the Moji Denwa

(Text Telephone) specified non-voice communications.

This dedicated terminal is designed to exploit the data

communications capabilities and text messaging capa-

bilities of PHS technology. The new service is limited

to certain types of communications. Text mail and hand-

written messages and drawings can be exchanged

between dedicated terminals, and Internet mail can be

sent or received either directly or via the P-Mail Deluxe

Center. The system also supports access to text-based

information services. In the summer of 1999, 64kbps

data communications and image-capable terminals was

introduced.

Measures to improve call quality included the estab-

lishment or expansion of base stations and the enhance-

ment of network handover functions. Together with

improvements in terminal capabilities, these changes

will ensure that customers are able to place calls without

interruption, even when moving.

The POCKET TELEPHONE companies will continue

to strengthen the competitiveness of their services and

inform users about the advantages of PHS technology.

19

Anshin-da Phone*Standard Super Pack-S Super Pack-L

¥2,700¥2,700 ¥2,700

Same as Standard

¥980¥2,700

Daytime

sec.

Nighttime Midnight

¥3,300 ¥5,000

Contract BusinessHandling Charge

Call Charge

60

4526

18

15

15

Local area

adjacent, ～30km～60km

～100km

～160km

160km～

Monthly Charge

PHS Charge Table (as of August 1999)

yen

40

5080

110

130

130

sec.

60

4530

26

20

17

yen

40

5070

80

100

120

sec.

70

6045

36

26

20

yen

40

4050

60

80

100

Up to ¥1,200 of

free minutes is

included in the

monthly charge

Over ¥1,200,

1.2 times

Standard

Up to ¥3,000 of

free minutes is

included in the

monthly charge

Over ¥3,000,

2 times

Standard

DDI’S PHS SERVICES

*Anshin-da Phone rates apply to up to two pre-assigned call destinations

2120

DDI supports Iridium throughout Japan and the

Asia Pacific. Launched in November 1998,

Iridium provides full-time communication any-

where on the globe when conventional commu-

nication is unavailable. It’s the best choice when

nothing else even comes close.

In Front

Providing Iridium Services for the

Asia Pacific

The Iridium Service uses 66 low-earth-orbit satellites

to allow communications outside of areas covered by

ground-based cellular-telephone systems, and in loca-

tions without a communications infrastructure. It is a

cellular telephone and pager service covering the entire

world. Services are provided by local carriers in each

region. NIPPON IRIDIUM CORPORATION is the

provider in Japan.

The parent organization for the promotion of the

Iridium scheme is the American Iridium company,

Iridium LLC. In addition to proposing the overall busi-

ness plan, this company also owns and operates the satel-

lites. NIPPON IRIDIUM CORPORATION has an 11.2%

shareholding in Iridium LLC and participates in its man-

agement by appointing three directors.

Commencement of Services in

November 1998

NIPPON IRIDIUM CORPORATION prepared for the start

of services by building a gateway station and establish-

ing a marketing structure based primarily on the DDI

Cellular Group. In March 1998 it obtained approval for

its service contract and charges. The satellite network

was completed approximately one year after the launch

of the first satellite in May 1997. After a series of com-

munication tests, commercial services were launched

in November 1998. Until the end of December, the ser-

vice was provided on a trial basis, and users were not

required to pay the basic charge.

DDI’S IRIDIUM SERVICES

Iridium Paging ServiceIridium SatelliteService Stand-Alone With Iridium Satellite Service

Sign-Up Charge

Basic Monthly Usage Charge

Charges for Iridium Services (The following charges were approved in August 1999.)

¥5,000¥10,000

US$50/month US$90/month US$30/month

and up front, we’re a leader

2322

Targets, Subscriber Numbers

The Iridium Service allows calls to be placed using a

single cellular-phone terminal in areas where commu-

nication was previously difficult or outside of ground-

based cellular-telephone service areas. There is strong

demand for this type of service from government agen-

cies, local authorities, the media, construction firms,

fishing companies, business people on overseas trips,

and anyone who needs to communicate in mountain-

ous areas, at sea, in overseas locations with poor

telecommunications infrastructure, or in emergencies.

Iridium satellite telephones were carried by Mitsuro

Oba on his successful solo expedition across Antarctica,

and by a Japanese team participating in relief operations

following a disaster in South America. All praised the

excellent sound clarity of the Iridium Service and its abil-

ity to support communications in extreme conditions.

Further recognition of the Iridium Service came in

January 1999, when it was designated as a communica-

tions system for the Global Maritime Distress and Safety

System (GMDSS).

As of March 31, 1999, the number of subscribers

stood at 1,200. The slow start reflects the fact that cel-

lular satellite telephones manufactured by Kyocera did

not become available until April, with the result that

only Motorola models were available.

Reduction of Charges

Charges for calls placed from international waters were

reduced in February 1999. In May 1999 the charging

system was simplified and charges were reduced. These

changes are intended to make the system more acces-

sible to users.

Overseas Telephone Business

The worldwide trend toward deregulation of the telecom-

munications sector prompted DDI to make plans for the

international expansion of its telephone business. It has

already established cellular-telephone services in Brazil

and Paraguay.

Following the liberalization of the Brazilian cellu-

lar-telephone market, DDI joined with leading local com-

panies and other investors to establish Global Telecom

S.A. The new company obtained licenses to provide cel-

lular-telephone services in the States of Parana and Santa

Catalina, and provision of services commenced in

December 1998. There is a strong demand for the low-

cost, high-quality service offered by the new company

in these relatively high-income regions, where previ-

ously the only provider was a state monopoly. DDI

believes that this is a very promising market.

The cdmaOne system used by the DDI CELLULAR

Group in Japan has been adopted in Brazil. Brazilian

users will therefore enjoy the additional advantage

of global roaming.

DDI also had the opportunity to enter the cellular-

telephone market in Paraguay. In September 1998 it

established Hola Paraguay S.A. with leading local com-

panies and other investors. The new company began to

provide services in may 1999.

Participation in Overseas Iridium Ventures

DDI sees participation in overseas Iridium ventures as a

way of ensuring the global success of the Iridium scheme.

It has invested in companies in the South Pacific and

Southeast Asia.

It has a 25% shareholding in the Australian company

Iridium South Pacific PTY. Ltd., which was established in

April 1998 to provide Iridium services in the South

Pacific. It also owns a 25% shareholding in a Thai sub-

sidiary, Iridium Southeast Asia Co., Ltd., which will

launch Iridium services in Southeast Asia in September

1999. Iridium satellite telephone services have been avail-

able in both regions since November 1998.

In growing its international telecommunications infrastructure, DDI is partnering

with telecommunications and local companies around the world as an experi-

enced operator of demonstrated flexibility, and technical foresight.

Sharing

DDI’S OVERSEAS MOBILE SERVICES

Origin Destination Call Charge

Subscriber Telephone orSurface CELLULAR PHONE

($0.274/10 sec.)

Iridium Satellite ServiceIridium PagerSubscriber Telephone or Surface CELLULAR PHONE

($0.534/10 sec.)

Iridium Satellite Service in Japan

Outgoing Call Charges from Iridium Satellite Service(Call charge unit: $U.S.)

extensive telecommunications operating experience worldwide

DDI’S IRIDIUM SERVICES

ddi annual report 1999the ddi group subsequently expanded into cellular-phone services in 1989 and...

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