KT Corporation

Hello, I would like to express my gratitude to all of you who attended today's conference. We will now begin the KT2024 1st Announcement Conference Call. After the KT IRO's announcement, we will have time for the CFO's actual announcement and Q&A. If you have any questions, please press the call button and number 1. KT의 발표 후, 별표와 1번을 누르신 순서대로 발언 기회를 드리겠습니다. 그럼 지금부터 KT IRO의 안내 말씀 시작하겠습니다. Good morning and good evening. Thank you all for joining this conference call. Now, we will begin the conference of the Fiscal Year 2024 First Quarter Earning Results by KT. We would like to have welcoming remarks from KT IRO. and then CFO will present earning results and entertain your question. This conference will start with a presentation followed by a Q&A session. If you have a question, please press star 1, that is star and 1 on your phone during the Q&A. Now, we would like to turn the conference over to KT IRO.

Hello, I am Yun Yong-kyun, KT IRO Manager. I would like to start the KT IRO 1st quarter performance announcement in 2024. Good morning. I'm KT's IRO Young Yoon Yoon.

We will commence KT's first quarter 2024 earnings presentation. This earnings release call is being webcast live on our website, and you can make use of the presentation slides as you listen in on the call.

The content of today's presentation includes estimated financial performance and sales performance based on the KIFRS standard before external review. Please note that all financial and business performance data, except for the confirmed past data, cannot guarantee accuracy and perfection, and can be changed in the future.

Please be reminded that today's presentation includes financial estimates and operating results under the KIFRS standards, which are yet to be reviewed by an outside auditor. We hence cannot ensure accuracy nor completeness of financial and business data, aside from historical actuals. So we ask that you note that these figures may be subject to changes.

Then, along with the greetings of the party's CEO, I will explain the results of the first quarter of 2024.

With that, I invite our CFO, Min Chang, for his welcoming message and presentation on Q1 24 Earnings.

Good morning.

I'm Min Chang, KT's CFO. At the MOVA World Congress 2024 held last February, KT announced its vision to make the leap and transform into an AICT company.

Since then, we have been working on a new AI-based business by combining AI and IT in the existing CT business.

By combining AI and IT with our CT capabilities, we will seek to reinforce our core competitiveness and explore new business opportunities powered by AI. We will be steadfast at finding sustainable growth engines for the future by way of innovation and rationalization of our business structure that is based on AX, short for AI-driven DX. With that said, let's go into the details of KT's Q1 highlights.

KT is based on the growth of B2C and B2B businesses, as well as the growth of key portfolio businesses such as IDC Cloud and real estate. Supported by well-balanced growth from B2C and B2B businesses, on top of growth momentum from the group's core business portfolio, which include IDC and Cloud,

KT's consolidated revenue reported $6,654.6 billion won, and separate basis revenue was at $4,694.8 billion, both reporting growth versus last year. KT's consolidated revenue reported $6,654.6 billion, and separate basis revenue was at $4,694.8 billion, both reporting growth versus last year.

KT's consolidated revenue reported $6,654.6 billion, and separate basis revenue was at $4,694.8 billion, both reporting growth versus last year.

Separate basis operating profit was up 1.5% year-on-year, coming in at 393.8 billion won, driven by revenue growth and efficient marketing activities.

연결기준 영업이익은 PC카드, KT Cloud, KT Estate 등의 핵심 그룹사의 이익성장으로 전년 동기 대비 4.2% 증가한 5,065억 원을 기록했습니다.

Consolidated operating profit increased 4.2% year-on-year to 506.5 billion won on the back of profit growth from major subsidiaries, including BC Card, KT Cloud, KT Estate, among others.

On April 30, KT announced its first quarter-finance dividend of 500 won per quarter and executed its first quarter-finance dividend on April 4.

On April 30th, KT announced cash dividend of 501 per share for the first quarter, making quarterly dividend payment for the first time since the beginning of the company.

KT decided to cut 2% of its own stock stock of 4.41% for the stock market on May 9th.

Following that, KT's Board of Directors made the decision on May 9 to cancel 2% out of the 4.41% of Treasury shares owned by the company. KT will continue to do what it can to enhance corporate value by strengthening shareholder return underpinned by profit growth.

Now, moving on to the earnings of the first quarter of 24. Operating revenue increased 3.3% year-over-year to $6,654.6 billion.

Despite there being rise in business expenses due to inflation, there was solid revenue growth, which drove operating profit up 4.2% year-on-year to $506.5 billion.

Inflation, which drove operating profit up 4.2% year-on-year to $506.5 billion. On top of operating profit growth, unimproved non-operating income, such as from higher dividend income, net income increased 26.9% YOY

reporting 393 billion won. EBITDA posted 4.6% year-over-year growth, reaching 1 trillion 480.2 billion won.

Next is on operating expense.

On increases in business expense and cost of goods sold, operating expense increased 3.2% year-on-year to $6,148.1 billion won.

Next is financial position. Net debt-to-equity ratio as at March end 24 was 129.8%.

Net debt-to-equity ratio came down 8.1 percentage points year-on-year to 38.5%. Next is on CapEx.

KT와 주요 그룹사가 Total capex spend for KT and its main subsidiaries in Q1 amounted to a total of 507 billion won.

KT's separate basis capex was 318.1 billion, while capex from group subsidiaries from key growth areas including finance, media, IDC, and cloud recorded 188.9 billion won. Next is on performance from each of the lines of business.

and increased by 1.7% compared to the previous year.

Wireless revenue was up 1.7% year-on-year to 1,736.5 billion won.

5G has surpassed 99.5 million people, which is 74% of the total number of handset subscribers. In addition, the increase in roaming sales and the expansion of mobile phone businesses have led to the growth of wireless sales.

5G subscriber now accounts for more than 74% of total handset subscribers, surpassing 9.95 million subscribers.

Meanwhile, higher roaming revenue and MVNO business expansion drove wireless revenue growth.

In January, we rolled out ten rate plans under a 5G mid-tier scheme and eight different types of direct rate plan called YOGO, giving more choice for 5G tariff to our customers. KT will continue to innovate its rate scheme and distribution to elevate customer services to a next level.

Next is fixed-line business.

World Bank internet revenue grew 2.1% year-on-year to 620.8 billion won on the back of net addition from giga internet subscribers and differentiated VAS value-added services such as the new Wi-Fi models.

The media business has grown by 2.3% compared to the previous year with the expansion of IPTV subscribers and the sale of premium funds.

Media business posted 2.3% year-over-year growth thanks to momentum behind the premium rate plans and IPTV subscriber base expansion.

PT is planning to lead the group-level media industry AX based on media-specialized AI technology such as Magic Platform through Media Day on April 29.

As announced during the Media Day event held on the 29th, KT will lead AX at the group level, underpinned by specialized AI technologies for media, such as the Magic Platform. Home telephony revenue came down 5.7% year-on-year to 183 billion won.

Next is on B2B services.

Driven by robust growth from enterprise broadband internet and data business and higher demand for AX services, B2B service revenue was up 5% year over year.

Revenue from five major growth drivers posted 4.9% year-over-year growth supported by adoption of AICC service by the financial vertical

and activated IoT project wins for remote command and control environment and security solutions.

AI solution AI solution AI solution AI solution AI solution

We strategically cater to businesses growing AX demand following technology transformation, which was ignited by generative AI. We plan on providing distinctive AX services for each of the industry sectors, as well as AX communication services that combine AI solutions with the incumbent telco service. Next, results from our major subsidiaries.

BC Card revenue was down by 1.8% year-over-year to 935.6 billion won, a narrowing acquiring volume impacted by economic slump.

KT Skylife's revenue was down by 1.8% year-over-year to 935.6 billion won, a narrowing acquiring volume impacted by economic slump. Despite the decline in pay TV service subscribers, Sky Life revenue was buoyed by growth from internet resale and MVNO business, with revenue being flat year-on-year at 254.4 billion won.

KT Studio Genie contents production volume has been reduced, 업계 불황에 따른 나스미디어 매출 감소의 영향으로 전년 동기 대비 2.8% 감소했습니다.

For the content subsidiaries, KT Genie Studio posted a decline of 2.8% year-over-year due to declines in NASM revenue following industry downturn and on downsized production and airing of content.

KT Cloud는 글로벌 고객 중심의 IDC 매출 증가와 DBO 사업 수주를 바탕으로 전년 동기 대비 매출이 17.8% 증가했습니다.

For KT Cloud, on higher IDC revenue, mostly coming from global customers and DBO project wins, its revenue recorded an increase of 17.8% year over year.

KT Cloud는 AI 인프라에 대한 수요 증가에 대응하여 IDC 사업을 확장하고, 클라우드 네이티브 본격화에 따라 서비스 모델을 확대해서 성장세를 지속해 나갈 계획입니다.

To align with growing demand for AI infrastructure, KT Cloud expanded its IDC business as well as the service model to cater to the full-fledged move towards native cloud as we plan to sustain the growth trajectory.

KT Estate는 분양과 임대 사업 간의 균형 잡힌 성장으로 On balanced growth between sale and rental business, KT Estate's revenue increased 20.3% year-over-year.

The operation of Le Meridien Moxie Hotel which opened back in November of 2022, is now fully stabilized, and occupancy rate has also increased year-on-year, sustaining a secular uptrend.

So this has been an update on the earnings of KT for Q1 of 2024.

KT with its focus on the fundamentals, solidified business competitiveness, achieving a balanced growth both on a consolidated and standalone basis. We will endeavor to drive quality growth through fundamental business innovation to enhance profitability mid to longer term,

and will work to enhance KT's corporate value. We ask for your continued interest and support from the investors and market analysts. Thank you.

For more information, please refer to the earnings presentation that we circulated previously, and we will now entertain your questions. To allow as many questions as possible, we would like to ask that you please limit your questions to two per person.

질문을 하실 분은 전화기 버튼의 별표와 1번을 누르시기 바랍니다. 질문을 취소하시려면 별표와 2번을 눌러주시면 됩니다. 원활한 회의 진행을 위해 질문은 한 분당 두 가지 이내로 부탁드립니다. Now, Q&A session will begin. Please press star 1, star and 1 if you have any questions. Please press star 2, star and 2 if you want to cancel questions. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions for each person. The first question will be presented by Sujin Kim from MiraEssaySecurity. Please go ahead with your question.

Hello. I would like to ask two questions. First, KT Cloud has continued to grow in the second quarter. I'm curious about the reason why it was able to continue to make good results. There are many concerns that the IT export of companies will be conservative due to the bad weather this year. I'm curious about how you see the KT Cloud's annual outlook. And the second question is, in February, we announced that we would hire 1,000 IT personnel. Good morning.

I would like to ask you two questions. First is that this quarter, we've seen a double-digit growth from KT Cloud. We'd like to understand as to what are the key drivers behind the sustained growth of your KT Cloud business. And this year, it is expected that because of the economic slump that we are currently facing, Companies' IT expenditure is going to be quite conservative is what we are thinking at this point. So what is your annual outlook for your KT Cloud business? Second question is, back in February, you announced that you will be hiring about 1,000 IT employees. What impact will that have on your annual labor?

Yes, responding to your first question on KT Cloud, if you look at our first quarter numbers, we've seen an IDC business grow underpinned by our co-location and DMO businesses.

Now, the global clients or customers, including AWS, Microsoft, and Google, have started to use our co-location services, and I can tell you that that has worked as a quite strong driver behind our performance. In 2024, our objective is yet again to further grow our revenue and operating profit, and our plan for revenue growth is at about 26%, and for profit, 51% growth.

Second question, the impact of hiring 1,000 IT personnel and on the labor cost line item, it will be in the tune of 20 to 30 billion Korean won. As you are aware, going forward for about five to six years to come, we will have about 1,000 people on a per year basis retire from the company.

So all in all, we do not expect that there will be any significant labor cost impact. Yes, we will have about that amount of people leaving the company due to their retirement.

Next question, please.

The next question will be presented by Ji Soo Jung from Meritus Security. Please go ahead with your question.

Hello, I'm Ji Soo Jung from Meritus Security. Thank you for your question. I have two questions. First, please explain the KT AI strategy in more detail. Second, you have decided to pay 500 won for the military service. Hello, I am from Merit Security.

Thank you very much for taking my question. I have two questions. The first one is, what is KT's overall approach to your AI strategy going forward? And you've made the decision to pay out quarterly dividend of 501 per share. Does that mean that we can expect on a per annum basis about 2,000 won per share? And also, if you could provide, if you can also provide some color with regards to any additional shareholder return plans that you have in place.

Yes, I will start with the first question. The first question is about the AI strategy. Yes, I will first respond to your question about the details of our AI strategy.

If I share with you our mid term strategy first, we actually have three different areas that we are focusing on to become eventually an AICT company.

The first pillar is bringing AI together with our IT capabilities and strengthening our core competitiveness. 업무를 자동화하는 그런 사례가 있을 수 있을 것 같습니다.

A good example that I could cite is by incorporating AI capabilities in our CES centers, what we can do is we can reduce the time spent on counseling our customers and automate certain processes.

두 번째로는 저희 IT 사업 그리고 데이터 클라우드 사업에 AI를 접목하여 신규 비즈니스를 발굴하는 일입니다.

Second pillar will be exploring and identifying new business opportunities by applying AI capabilities into our existing IT business and data cloud business.

In this field, we plan to provide services and models specialized in finance, public and private sectors, as well as models specialized in work such as CRM, ERP, and SCM.

Now, on this area, we are planning on developing services and models that are specialized for certain verticals, like the financial vertical, the public sector, and also the other sectors and verticals within different industries. We will also be developing a business process specific or dedicated solutions and models, for instance, like for the use of CRMs, ERPs, and SCMs.

Lastly, in terms of media content, Last but not least is applying AI capabilities on media and platform business, which will help us innovate the platform powered by AI.

One of the example is that at this point, we are studying and developing different UX and UIs that will be more convenient for our user base by studying and looking into various different viewing patterns, especially of our user base for the media services.

Second, you asked about the payment. We have implemented the 500 won payment this time. Of course, we need to make a decision in the board meeting, Second, on dividend, we have paid out 501 per share as a quarterly dividend payout.

And yes, there would need to be a resolution and decision made at the BOD level, but we will make sure that we do not fall short of the expectations of the market in conducting the quarterly dividend.

Regarding additional shareholder returns, as we've done today, as you know, we've cancelled the treasury shares that we were holding.

Going forward, we'll continue to result to various different ways to make sure that we expand on the shareholder return.

Next question, please. The following question will be presented by Junseop Kim from KB Security. Please go ahead with your question.

Yes, thank you for the question. I'm Junseop Kim from KB Securities. Thank you for taking my question.

I'm from KB Securities. I just have one question. I see that your growth that you're seeing from the B2B services business is quite salient compared to the past. Are there any special reasons I guess, trends or aspects that we need to be mindful of in terms of the types of projects you're winning or the size.

Yes, I'd like to talk about our performance and direction in the field of corporate services. As I explained, corporate services have grown in the field of corporate internet and data.

So we respond to that question about the earnings that we're getting from our B2B services and our direction forward. In our B2B services, we've seen a solid growth from our Internet broadband business and data.

As I mentioned in the AICT, we are continuing to work on AI in the IT field to provide business performance.

I did mention this when I answered the question about AICT, but we are also bringing in AI capabilities into the realm of IT in driving up the performance of our B2B services.

However, as we approach the corporate service market, we are trying to pursue a more realistic, profitable, and practical performance.

Now, having said that, the approach that we are taking for the B2B services market is that compared to the past, we are focused more on driving good profit and really focusing on projects that we can win, that will provide us with a more fundamental boost and will give us more visibility in terms of the returns and the performance that we gain.

Yes, I told you that we have grown by 5.6% compared to last year. This is a realistic

I said previously that there was an year-over-year growth of 5.6%, and we will continue to endeavor to make sure that we derive tangible results.

Thank you.

I see that there are no other questions waiting in the queue, so this brings us to the end of the first quarter 2024 earnings call of KT. Once again, thank you very much for joining us despite your busy schedules, and thank you very much for your continued interest and support.