NTT Expects Competition to Push Down Profit 8.5%

The company with the highest-priced shares in the world, Nippon Telegraph and Telephone Corp., is facing a profit decline due to intensifying competition, company officials said Monday.

They told a press conference that the increased competition will push current profit down nearly 8.5% in 1987-88, to $2.3 billion (328 billion yen).

New entrants into the lucrative long-distance telephone business are expected to lure away profits from NTT, said Osamu Kajima, deputy executive director for NTT’s accounts and finance department.

But Japanese investors who are holding shares worth more than $20,000 apiece are not likely to be worried, brokers said.

“People are not buying it on simple growth,” said David Keller, an analyst at the James Capel & Co. brokerage house.

“They mainly buy it because it goes up and down. They hope they can buy it when it’s down and sell it when it’s high. It’s not that easy, but that’s why they buy it,” he said.

NTT’s share price has soared 128% to $20,213 (2.85 million yen) since the government sold 1.96 million shares in the formerly state-owned company in February.

Investors are betting the price will rise again ahead of an expected second sale of government-owned shares in the company later this year, some brokers said.

Analysts said NTT’s share price reflects strong investor demand and confidence in Japan’s bull market rather than the company’s actual growth prospects. “Growth stocks are being shunned right now,” Keller said.

Non-resident foreigners are prohibited from holding the shares. The question of whether they will be able to invest in NTT shares in the future remains undecided, Yoshio Miwa, deputy executive manager at NTT’s general affairs department, told the news conference.

A change in existing law would be required before foreigners could legally buy the shares, he said.

For the 1986-87 year that ended March 31, NTT reported $2.6 billion (358 billion yen) in profit, up more than 13% from the previous year.