NTT shares hit by Verio report

NTT shares were hit by reports that the telco is set to lose billions in a revaluation of Verio

In this story: Possibility not ruled out 'Should not affect the stock' RELATED STORIES, SITES

By Staff and wire reports

TOKYO, Japan -- Shares in Nippon Telegraph & Telephone (NTT) slipped by as much as 3.47 percent on Thursday after a report of a Verio possible revaluation.

The stock, which opened at 778,000 yen, slipped to 751,000 yen before closing 0.77 percent down at 772,000 yen.

A spokesperson for NTT declined to confirm a report in the Financial Times that that the Japanese telecom giant could post a special loss of billions of dollars on Verio, a U.S. Internet services provider it acquired for $5.5 billion last year.

The report quoted an unidentified senior NTT manager saying Verio's rapidly deteriorating business environment in the United States was changing the assumptions used to value the company.

Possibility not ruled out

"We have not incurred any unrealized losses on our important assets," the NTT spokesperson said Thursday.

But the spokesperson did not rule out completely the possibility of a revaluation.

"If it is determined that the value of an asset has declined, including Verio, then a revaluation will be done according to standard accounting principles," he said.

The bulk of the Verio purchase, $4.41 billion, was made up of goodwill, which is being amortized over 10 years, said an NTT Communications spokesperson.

'Should not affect the stock'

Merrill Lynch senior analyst Yasumasa Goda says that even if the acquisition of Verio results in a loss, it should not affect the stock price.

Goda says NTT bought Verio not for overseas expansion but "because they wanted Verio's expertise."

"In fact, NTT Communications has already started a Web site hosting business by using know-how from Verio," he says.

The Financial Times reported that NTT was in the process of compiling a 10-year business plan for its subsidiary, which could lead to a write-down in the first half of the business year that started on April 1.

If NTT decides to take a loss on Verio for the previous business year, that would appear in earnings results due out mid-May.

NTT Communications President Masanobu Suzuki was quoted as saying earlier this month that his company will continue to fund loss-making Verio in fiscal 2001.

The reports weighed down NTT shares, which closed 0.77 percent lower in Tokyo at 772,000 yen, down 6000 yen.

That compared with gains made by other telecom carriers and a 1.35 percent rise by the benchmark Nikkei share average.

Reuters contributed to this report.

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