KT Corporation

Hello, I would like to thank everyone who attended today and start the KT 2025 2-minute performance announcement conference call. The order will have a performance announcement and Q&A time for CF after the KT IRO's announcement. If you have any questions, please press the call button with the star and number 1. We will give you a chance to speak in the order you press the star and number 1 after the KT announcement. Good morning and good evening.

Thank you all for joining this conference call, and now we will begin the conference of the second quarter of fiscal year 2025 earnings results by KT. We would like to have welcoming remarks from KT IRO, and then CFO will present earnings results and entertain your questions. 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, this is KT IRO Choi Jae-gil. We would like to begin KT's second quarter 2025 earnings presentation.

Be reminded that today's presentation includes financial estimates and operating results under the KIFRS standards that are yet to be reviewed by an outside auditor.

We therefore cannot ensure accuracy nor completeness of financial and business data aside from the historical actuals. So please note that these figures may be subject to change in the future. With that said, I now invite the company's CFO, Chang Min, to run through the second quarter results of 2025.

Hello, I'm Chang Min, the CEO of KT. Good afternoon.

This is Changmin, KT's CFO. KT continued to drive revenue and operating profit growth this quarter while making the effort towards a complete transformation into an AICT company.

KT is also working on a new company Also, corporate value enhancement plan is well underway.

And as part of that value-up program, we plan to complete share buyback of 250 billion won on August the 13th. Dividend for the second quarter has been decided at 601 per share, an increase of 20% year over year. And starting from this quarter, even for quarterly dividend payouts, dividend amount will first be declared, which will then be followed by setting of the record date, a system that is shareholder-friendly.

As an AICT company,

KT, as an AICT company, has responded actively to companies' AX demand, successfully winning large-scale projects from large companies and IT enterprises, thereby laying the basis for growth.

In addition, under the multi-model strategy roadmap, we have released the independent model 믿음 2.0 in July, and we will release the open model and Microsoft cooperation model in order to complete the AI full line-up. In particular, based on the independent model 믿음 2.0, we will succeed in building an AI platform for large companies, Gyeonggi-do and Sujawon construction,

And under the multi-model strategy roadmap, we launched KT's proprietary LLM Mideum 2.0 last July and will be completing AI full lineup with the unveiling of the open source model and Microsoft collaboration model in sequence. Based on KT's proprietary model Mideum 2.0, We want AI platform build projects from large companies, Gyeonggi Provincial Government, and Korea Water Resources Corporation, further cementing our positioning in the public sector.

New services are also being released through cooperation with Microsoft. Last July, we expanded the use of AI by installing AI agents with LLM based on Azure Open AI services on Genie TV. Microsoft collaboration continues also as we roll out new services.

In July, AI Agent, powered by Azure OpenAI-based LLM, was integrated into Genie TV, expanding the AI use case. In the second half, we plan to launch AI model better tailored for Korea that is powered by chat GPT for Omni and secure public cloud, which uses top-notch security protocol, confidential computing in order to kickstart our reach into the market.

KT is planning to invest a total of 1 trillion won in the field of information protection for the next five years to strengthen the potential security. Through this,

The proactively strengthened security, KT has a plan to invest cumulative 1 trillion won in information security over five years. To make sure customers can feel safe in using telecom services in their everyday routine, we will innovate our information security system. From now onwards, I will move on to financial results for the second quarter of 2025.

The sales revenue increased by 13.5% compared to the previous year by 7.427.4 trillion won. The sales revenue increased by 105.4% compared to the previous year by 1.14.8 trillion won due to the growth of the communication business and the balanced growth of the core group portfolio.

Operating revenue increased 13.5% year-over-year, reaching $7,427.4 billion won. Operating profit was up 105.4% year-over-year, reaching $1,014.8 billion, on the back of balanced growth from telco business and the group's core portfolio, as well as profitability improvement efforts and one-time gains from real estate sales.

Net income increased 78.6% year-over-year to 733.3 billion won, driven by higher operating profit.

EBITDA was up 36.3% year-over-year, reporting 1 trillion 990.7 billion won. Next page is operating expense.

Next page is operating expense.

Despite a decline in labor costs due to costs of real estate sales project at Gangbuk division and increase in COGS from growing wireless handset sales, operating expense was up 5.9% year-over-year, recording 6,412.6 billion won. Next is on financial statement.

In June 2025, the bond rate was 123.5%, and the net bond rate increased by 3.3% compared to the previous year. 36.8%. Next, let's talk about investment spending.

The net debt ratio, as of June end of 2025, was 123.5%, while net debt ratio edged up 3.3 percentage points year-over-year, reaching 36.8%. Next is CapEx.

In the second quarter of 2025, KT and its main group invested a total of $3,643 billion in investment spending. Total capex spent by KT and its major affiliates was in total $1,364.3 billion won on a cumulative basis as of Q2 of 2025.

KT's separate basis cumulative capex as of Q2 was $845.8 billion won while capex of major group affiliates amounted to 518.5 billion. Next is on the breakdown of results by each business segment. Firstly, wireless revenue increased 0.9% year-on-year, reporting 1,781.7 billion.

While 5G subscribers accounted for 79.5% of total handset subscribers due to the impact from subscriber addition through MNP,

MNO subscriber increased 3.4% queue-on-queue. Next, the fixed-line business. On the back of Giga Internet subscriber growth and expanded value-added services, broadband revenue increased 2.1% year-over-year, reporting 631.4 billion won.

미디어 사업은 IPTV 가입자 순중 확대와 프리미엄 요금제 판매 노력에 힘입어서 전년 동기 대비 0.8% 성장했습니다.

On net IPTV subscriber ads and premium plan uptake, media business posted 0.8% growth year over year.

홈 유선전화 수익은 전년 동기 대비 0.4% 증가한 1,762억 원입니다. 다음은 기업 서비스입니다.

Home telephony revenue recorded 176.2 billion, up 0.4% year-on-year. Next, KT's B2B services. Despite streamlining of low-margin businesses, B2B service revenue posted 4.5% year-on-year growth, unbalanced growth coming from telecom and AI and IT services. Thanks to the growth of design and build projects and cloud business, AI IT business revenues saw 13.8% year-over-year growth. Next, moving on to performances of major subsidiaries.

BC Card revenue fell 6.9% year-on-year to $909.8 billion as acquiring volume declined

but operating profit was kept flat year-over-year through risk management and profitability enhancement efforts. Content subsidiaries reported 6% year-on-year revenue growth on the back of production and distribution expansion by KT Studio Genie, an increase in subscribers of KT Millie's library. KT Cloud saw its revenue grow 23% year-on-year, driven by growing data center usage by global customers and expanded DBO project wins. KT estate revenue increased 2.0%, year-on-year reaching $160.4 billion, driven by growth in rental revenue from office and hotels.

지금까지 KT의 2025년 2분기 실적을 말씀드렸습니다. This has been an update on KT's earnings for second quarter 2025.

KT will endeavor to complete the transformation into AICT company and through successful execution of corporate value of plants, we will drive KT's corporate value a notch higher. We look forward to your ongoing support and interest from the investors and analysts.

Thank you very much.

For details, do refer to the earnings material that we have given out. We will now take your questions from the participants.

Please would like to ask that you limit your questions to two per person.

Now Q&A session will begin. Please press star 1, that is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2. That is star and 2 on your phone. The first question will be provided by John Sop Kim from KB Securities. Please go ahead with your question.

Yes, thank you for the question. I'm Kim Junseong from KB Securities. I would like to ask about the direction of AI-related business and the direction of the number transfer market after the cancellation of the bill. First, I'd like to ask you about the AI-related business direction. As you said, we are planning to secure a full AI lineup, and you shared that the growth is continuing at the center of the AI IT business. As you know, we know that there are various areas of the AI business. So, if you could tell us about the areas of the business that KT would like to focus on, it would be easier for us to look forward to the AI business. The second is the number transfer market after the ban on communication. Thank you for taking my question.

I would like to ask two questions. First on AI business direction going forward, and second is a question relating to how you see the MNP market following the repeal of the Handset Subsidy Act. Regarding the AI business direction, you've talked about the full AI lineup as well as your estimates as to a steep growth going forward from your AI and IT business. Because AI scopes really includes wide-ranging aspects, we'd like to know where KT wants to focus on going forward that will help us understand better in terms of your AI business direction into the future. Second question, how do you see the M&P market following the repeal of the Hansa's, lifting of the Hansa's Subsidy Act because different people see the market differently. So we'd like to understand as to what KT's thoughts are regarding the M&P market going forward.

Yes, thank you for the question. The first question is about KT's AI business direction. Thank you for those questions.

Regarding the first question and our AI business direction forward, I would like to just summarize that point into three main items.

First, as we have explained continuously, through the partnership with Microsoft, which is a global big tech, and the exclusive solution supply contract with Palantir,

The first strategy that we have is through the partnerships with global big techs like Microsoft, as well as the partnership that we have, the exclusive licensing partnership that we have with Palantio, we've been able to really enhance our competitiveness and fill up the gap that we internally did not have. And by leveraging these aspects, we want to be able to provide new AI services to our customer base that includes secure public cloud as well as KGPT, or the more Korean-tailored type of GPT services.

Yes, the second is what I explained earlier. It's about a multi-model strategy. The first one is Microsoft's cooperation model. We are trying to improve our trust in Microsoft 2.0. Lastly, we are planning to use open models such as Lama to provide AI services.

The second strategy is, as I've mentioned during my opening presentation, we have taken on a multi-model-based strategy. So not only will we be using the Microsoft collaboration model, but as you know, over the past year, we've been developing our internal model, which is BDM 2.0. We will continuously make enhancements to that so that we can come closer to the needs that our customers have. We will also be leveraging open-source models like LAMA to provide and build the AI services that our customers require.

Lastly, the third is to integrate AI services into our network management or media services. For example, the first is to integrate AI agents based on Microsoft Azure Open Services into the GTV Setup Box or to integrate AI agents based on

Moving on to the third strategy, we will be leveraging such AI capabilities and services and managing the network that we have and also providing media-related services. A good case in point is we've basically installed an AI agent that is based upon Microsoft Azure Open Service into our Genie TV set-top box, as well as using such AI capabilities and enhancing the operation efficiency of our 5G base stations. So we will be continuously leveraging such AI capabilities.

Yes, the second question is about the changes in the market situation after the DANTONG law. First of all, as you can see, Recently, the Galaxy flagship model has been released, but I don't think there has been an excessive supply and heat competition in the market.

Responding to your second question about what impact there was following the lifting of the Hansa Subsidy Act, as well as the market impact. Firstly, as you know, even though there was a launch of Galaxy flagship, handset model, we did not see any overheating of competition in the market. But of course, when the iPhone, the next version, are introduced into the market, competition in the market may heat up, so there is that possibility. But having said that, we do not believe, it is our belief, that it is not going to be long-lasting, even if that happens.

If I may briefly explain the three reasons for this, the 5G coverage rate has already increased by more than 80%, and the exchange period for short-term devices has not only been quite long, Now, I say that because of three main reasons.

First being already the 5G penetration is above 80%, and also the handset replacement cycle has gotten longer compared to the past. And right now, it is an important timing for all the telcos to really focus and invest into the new business areas relating to AI and IT. So that is the basis upon which I believe that that's why the competition in the wireless market, even if it exists, is not going to be long-lasting.

Next question, please.

The next question will be presented by Hoji Kim from Daishin Securities. Please go ahead with your question.

Hello, I'm Hoji Kim from Daishin Securities. First of all, congratulations to Choi Jae-gil and I.O. I hope you continue to maintain good communication with investors as you have done so far. I have two questions. Congratulations on your good performance in the second quarter, and please explain the prospects for your performance in the second quarter. And the second one is, you announced last year that you would implement the second quarter in the second quarter regarding the value of memory. Will there be a change in the policy of sharing and investing? Please update the value of memory in the current situation. Thank you.

Thank you. I'm Kim Hye-jae from Taishan Securities. Before asking the question, I would like to first congratulate Choi Jae-gyu, the new IRO. I look forward to very good and productive communication going forward, as we've done in the past. So my two questions are, the first is, your second quarter results have been quite outstanding. I would like to know what your, therefore, outlook is for the second half of the year. And regarding the value of plan, you've made the implementation disclosure already. I would like to understand as to you know, what the update is. Would you be considering any changes to your dividend or your share buyback plans?

Yes, thank you for the question. The first question is about the outlook for the second half of the year. We have made a lot of progress with real estate in the second half of the year, but other than that, we have made a lot of progress with real estate

responding to your question the first one on the second half outlook um in q2 there was yes a significant one-off gain from our real estate business so that had a big impact on bringing a good performance But even aside from that, if you look at our separate basis statements, you will see that our year-over-year performance was quite good. It was very good. And we think that we will be able to continue on with that good momentum into the second half of the year, considering the fact that we will be able to sustain a very solid service revenue uptrend.

As you can see from the cost side, we are managing our human resources well due to the performance of our personnel. Now on the cost side, we were able to

drive and improvement in our headcount. And so we are keeping our labor costs. We're managing that quite well. And on the depreciation side, we have completed the depreciation on our 5G. So we see the depreciation costs coming down. But there may be some concern on the commissions paid as well as selling related expenses. There may be slight risk there, but these are numbers that are linked to our earnings performance. So we're not at all greatly worried about this item.

The second question is about the dividend policy. First of all, our current dividend is, as you know, 50% in the short term, but we have already decided on a dividend of 600 won, which is expected to be a little over that level. Even in the third and fourth quarter, we have decided that this dividend, as long as our performance is not shaken,

Regarding the second question about our dividend payout plan, first off, basically our basis upon which we make the dividend decision is 50% of adjusted net profit, and already we have declared and made the decision on dividend per share of 601 already, which is actually in excess of that criteria. Having said that, as long as we are confident that we will be able to carry on with the performance levels into the Q3 and Q4, I believe that at minimum the BOD will continue to make such decisions in alignment with the market expectations.

As you expect, our profitability will continue to increase and our dividend policy has been very close to the market, so I think it would be good to expect a dividend policy that will not disappoint the market. According to the value-up plan, the additional 1 trillion won of self-sufficiency is as I said, 2.5 billion won this year, and we will continue to implement the remaining 7.5 billion won for the next year, next year, and three years.

In terms of how our shareholder return program will look like after next year, of course the BOD will make appropriate decision as we go forward. But in light of the fact that we are seeing an improvement on our bottom line and the fact that our dividend program is shareholder friendly and market friendly, I can tell you that you can expect that we will not in any circumstances fail the expectation of the market. In terms of the value of program, under the value of program, we will be making additional share buyback in the size of $1 trillion.

We've already done $250 billion, and over the coming three years, we will in sequence be making that share buyback in the amount of $750 billion.

This ends the Q&A for today. Thank you for your time and interest. We will close the earnings call for the second quarter of 2025. Thank you for joining us despite your very busy schedule.