NTT Affirms Pledge to Buy U.S. Phone Gear

The head of Nippon Telegraph & Telephone Corp. said Thursday that his firm will continue to buy equipment without discriminating between Japanese and foreign manufacturers, whether or not the United States agrees to renew a procurement agreement with Japan.

Hisashi Shinto, NTT’s president, would not comment on discussions being held by U.S. and Japanese negotiators in Washington on whether to renew the agreement. But he said that even if it is ended, the government-owned phone company will continue to buy foreign equipment if the price is right and if the standards meet NTT’s specifications.

“If we went back to the old system (of limiting purchases to Japanese equipment), we would lose money,” Shinto told a group of foreign correspondents.

Under the agreement, the U.S. and Japanese governments gave assurances to Japanese and American telecommunications equipment manufacturers of access to markets in each other’s country. Shinto’s statement, however, offered an assurance that American makers would still have access to NTT even if Japanese firms lost guaranteed access to the American market.

Disappointing Sales

Citing disappointing results in sales of American telecommunications equipment in Japan, particularly to NTT, since the procurement agreement in 1981, Reagan Administration officials have been threatening to end it when it expires Dec. 31. Japan’s Ministry of Posts and Telecommunications has proposed to extend the agreement for another three years, through 1989.

Shinto said NTT’s foreign purchases have grown and--now that the gain in the yen’s value has made foreign products more competitive in Japan--will increase “steadily” in the future.

As evidence, he cited a contract that NTT signed with Northern Telecom last May 19 to buy $250 million worth of digital switches from the Nashville, Tenn.-based company over a five-year period beginning in 1989. Sample switches are to be installed beginning next year, he said.

The Northern Telecom contract is the largest single purchase of foreign equipment in NTT’s history, bigger than NTT’s total overseas purchases last year.

Shinto refused to estimate how much the giant phone company would procure from foreign or American firms in its current fiscal year ending next March 31. Last year, the company bought $230.6 million worth of foreign equipment, including $200.6 million worth of American products.

The sum was largely unchanged from fiscal 1984, when NTT bought $198.8 million worth of American products, or only 3.5% of its total procurement of $5.7 billion.

Shinto complained that foreign officials frequently fail to understand that “once we start to buy major equipment, whether we like it or not, we must continue to purchase that equipment for many years” to ensure compatibility with the national telephone system.

Must Adapt Products

That fact, he added, means that new suppliers of equipment must be willing to adapt their products to existing NTT standards, spending as long as two years in technical discussions to work out acceptable adaptations, he said.

Foreign manufacturers initially “strongly insisted that we had to buy their products without any changes. They were far too high-handed,” Shinto said. “Now, they have changed their unreasonable attitude and have become willing to adapt their products to our needs.”

On another topic, Shinto called “totally inconceivable” the prices paid for 200,000 shares of NTT’s stock last month in the first such auction, a special session open only to institutional investors and wealthy individuals. The prices ranged from $6,356 to $15,000 a share.

He also said the price at which NTT’s stock will be offered to the general public, when it goes on sale later this month, is “mind-boggling” and “unsubstantiated.”

The Finance Ministry, basing its decision on the median price paid for NTT’s stock in the special auction, fixed the initial offering price at 1,197,000 yen ($7,481.25) a share, or 24 times the stock’s par value.

Shinto said bidders had paid exorbitant sums for NTT’s stock because of a “money game” mentality sweeping both the world’s and Japan’s financial markets.

“There is nothing to substantiate that level of price for NTT’s stock--nor, for that matter, the price of many stocks” on the Tokyo Stock Exchange, he said.