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Ambiguous Half-Public Status Troubling Giant Utility

April 24, 1989

TOKYO (AP) _ Nippon Telegraph and Telephone Corp. became the biggest and most profitable Japanese business after the government tranformed it from a public monopoly into a private company four years ago.

But now NTT faces restructuring and possible dismemberment, partly because of links to one of the worst political scandals in Japan’s postwar history.

Critics and former officials blame NTT’s problems on confusion about whether it really has become private. The government still owns three-quarters of NTT’s stock, and its employees are subject to the same restrictions as public servants.

″The most serious mistake was the government tried to satisfy everyone, including politicians, government agencies and NTT’s labor union,″ said Yoichi Sando, an analyst at Asahi Research Center, a private thinktank.

″That left NTT in an ambiguous status of half-public and half-private in the past four years,″ he said. ″NTT was consistently under pressure to fulfil these two contradictory roles.″

NTT appeared to be successfully transforming itself into a competitive company after the government privatized it in April 1985, following trends in the United States and Britain to promote competition in telecommunicat ions.

It has has undergone major changes since then, reducing its work force by more than 10 percent and launching many new services.

″We would never be able to make those drastic changes if we remained government-owned,″ Haruo Yamaguchi, president and chief executive of NTT, told the Associated Press in an interview. ″The privatization was certainly a major turning point in our company’s 43-year history.″

The privatized NTT became the most profitable company in Japan with record earnings of 496.7 billion yen or about $3.8 billion in 1987. It was also the most popular company among new university graduates seeking jobs in 1987 and 1988 because of what they saw as its stability and progressive image.

But big trouble surfaced when NTT’s link to a major bribery scandal surfaced last year. It has led to the arrests of former chairman Hisashi Shinto and three other senior executives since February.

Prosecutors are also investigating the company’s lobbying practices with politicians, and there is some expectation that NTT will somehow be restructured or broken up.

The price of the utility’s stock, once the most popular issue on the Tokyo Stock Exchange, has been stuck around 1.5-million-yen a share, or $11,360, less than half its peak of 3.18 million yen a share in April 1987.

Critics say NTT has been victimized by conflicting interests of politicians and bureaucrats.

Hajime Nakayama, a former official of the Ministry of Posts and Telecommunications, which supervises NTT, said the ministry was under strong pressure to deregulate the communication market.

But when the ministry suggested breaking up NTT into regional competitors and reducing parliamentary oversight, he said, ″we met with opposition from politicians and government officials who have a large stake in NTT.″

The company was left in the awkward position of having to compete with other companies while being required to aid the same rivals in the name of fair competition.

NTT president Yamaguchi said the unclear status sometimes hindered his ability to run the company effectively.

″I am aware we really have no other choice but to let the govenment decide what they will do with us,″ he said. ″But frankly, I wish they would leave us alone and let us run the company on our own, or don’t privatize it at all.″

Critics say the firm’s alleged involvement in the bribery affair symbolizes its dilemma. Shinto and other executives were charged with receiving bribes from an information-based conglomerate called Recruit, which leased equipment from NTT and bought two U.S.-made supercomputers from it.

But legal experts say the alleged bribes would have been an ordinary business practice if the deal took place between two private companies.

The 1985 law that changed NTT’s status says its workers remain ″semi- public servants″ and prohibits them from receiving money and valuables.

After the arrests of the senior officials, NTT employees expressed confusion about their status. Some were surprised that they were still subject to the same laws as politicians and public servants, though they no longer enjoy the privileges of public servants.

″The arrest of the chairman reminded many of us that we are not all that private as we thought we were,″ said Takao Nakajima, a head of the firm’s advertising section.

End adv for Sunday, April 23

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