Sale of telephone stock gets Japan's privatization off to a good start

There may be widespread pessimism over the stock market, but Japanese investors are enthusiastically buying shares of the recently privatized national telephone company, Nippon Telegraph & Telephone Corporation. When the second block of shares was released on the Tokyo Stock Exchange last week, 1.95 million shares were sold out immediately in spite of the record high price of 2.55 million yen ($18,888) per share.

In the wake of ``Black Monday'' in New York and the following market chaos, Japan's Ministry of Finance was doing everything it could, including pressuring institutional investors, to keep the price in ``a desired range.'' Sales of the second block alone are expected bring in about 5 trillion yen ($37 billion) to a government whose budget plans depend heavily on NTT revenue. Offers of two more blocks of remaining NTT shares are due in the near future, probably at an even higher price.

Last year, the first shares in NTT were sold for a record $8,815 a share, bringing hundreds of thousands of new private investors into the stock market and $17 billion in government revenue.

At $18,888 a share, the NTT stock may not seem to be a bargain, but investors and experts seem confident the price will rise.

``Under the current market situation, NTT shares seem to be just about the only shares which are safe,'' said Kazuo Kitada, a Tokyo-based securities analyst. ``NTT shares are virtually keeping the market from falling apart. And the Finance Ministry and major brokerage firms are firmly united in backing them up, too.''

On top of the public interest over the future of the company, investors share the view that the price of NTT stock will be kept up, because it is ``a government policy.''

``I bought an NTT share at the first offer and am buying one again,'' said Motoko Goto, a housewife and private investor in Tokyo. ``Apparently, the Finance Ministry is intervening on security firms and other institutional investors to control the price of NTT shares at a fairly high level. The price may not jump up drastically, but it is almost certain even to an amateur investor like me that they won't allow it to fall.''

Brokerage firms and the Finance Ministry are working together to prop up NTT shares ``because there is a common interest between the two,'' said Keiichi Nishida, an analyst at Kidder, Peabody & Co.'s Tokyo office. ``Both are desperate to make NTT shares attractive and popular.''

Revenue from the NTT sale became even more important as the government failed to pass a proposed sales tax last spring, in the face of tough public opposition. The $37 billion revenue from last week's offer alone can generate twice the income which the sales tax could have generated in one year.

The success of the NTT sale is important to the Finance Ministry because it is only the first of a series of privatization of government-owned corporations. Following NTT, shares of other newly privatized companies, such as Japan Air Lines, Japan Tobacco Company, and the Japan National Railways, are to be offered to the public. ``If the NTT offer turned out to be a failure, it will become extremely difficult to attract investors to other privatized companies,'' Mr. Nishida said.

NTT shares are now fluctuating at about the 2.5 million-yen mark, but analysts believe the price will rise as the offer of government-owned shares of Japan Air Lines, scheduled for Dec. 15, nears.

``For the brokerage firms,'' Nishida continued, ``shares of privatized companies, like NTT, mean far more than the commission they can get. As NTT shares have become the core item in the Tokyo Stock Exchange, shares of Japan Air Lines, Japan Tobacco Company, and Japanese National Railways are expected to be the main items in the future of the Tokyo market.''

NTT shares account for more than 10 percent of the total value of all shares listed on the Tokyo Stock Exchange's first section, where stocks of major companies are listed. Though the Tokyo market plunged 16 percent on average following Black Monday in New York, NTT shares fell less than 10 percent, and rebounded back to previous levels the next day.