KT Corporation

Good morning and good evening. Thank you all for joining this conference call, and now we will begin the conference of the fourth 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.

Good afternoon.

This is Choi Jae-gil, KT's IRO.

Let's begin FY 2025 earnings presentation of KT Corp.

Please be reminded that today's presentation includes KIFRS-based financial estimates and operating results, which have 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. Let me now invite our CFO, Chang Min, to walk through the earnings for FY 2025.

First of all, I would like to thank you for your attention Good afternoon, this is Changmin, KT's CFO.

Before presenting the earnings for FY25, I would like to take this opportunity to extend my sincere apologies to shareholders and customers for the inconvenience and concerns caused arising out of last year's data breach incident. This incident is serving as an impetus for KT in solidifying the company's fundamental resilience in network and cybersecurity as we are committed to regaining trust from the customers.

Now moving on to 2025 annual performance.

Under balanced growth from B2C and B2B, KT's revenue and operating profit both saw significant growth versus last year on strong performance from core businesses including data center, cloud, and the Gwangjin-gu real estate project.

Especially in 2024, even if KT's growth and operating profit are eliminated, KT's growth and operating profit will increase by more than two digits compared to last year,

Considering the base effect in 2024 of workforce transformation, and even if we were to exclude profit from this year's Gwangjin-gu project, both the consolidated and standalone operating profit recorded more than a double-digit growth year over year, which is a testament to enhanced fundamental earnings capacity.

We also launched a new product based on cooperation with global big tech companies, and we plan to take the AX market strategy into account in the future. Following the launch of SOTA-K, an AI model based on Microsoft partnership last September, we introduced Secure Public Cloud, a security patent cloud service, to the market in November.

Also, collaborating with global big tech companies, we launched a series of new products, and we will tap into the AX market in earnest moving forward. Following the September rollout of SOTA-K, which is an AI model developed in partnership with Microsoft, we also introduced Secure Public Cloud, which is a security-enhanced cloud service, back in November.

Palantir's revenue-based business performance has also been enhanced. In particular, we have been able to increase

We are also starting to gain more visibility in business outcomes from the Palantir partnership, particularly in respect to the financial sector customers, as we explore new business opportunities in offering consulting and solutions application.

Also, last November, we opened KASAN AI Data Center, making it the first such center in Korea commercializing the liquid cooling technology.

As a large-scale AI infrastructure hub located in the metropolitan area, Capable of running AI computation and data processing, we expect the center will play an important role in making KT Cloud cement its leadership in the market.

In 2025, KT Cloud will be able to run AI computation and data processing in the market. 2025 year end dividend is set at 601 per share with record date of February the 25th.

There was temporary financial impact in the wake of the breach incident, but under a strong commitment towards shareholder value enhancement, Annual DPS was increased 20% from 2001 back in 2024, rising to 2,401 in 2025. Following 2025, under the Corporate Value Enhancement Plan, we are planning on 250 billion won of share buyback and cancellation this year.

We are also working to increase the value of our companies. Last December, KT Alpha At first are continuing towards enhancing the corporate value at the group level as well.

In December, KT Alpha announced its plan on interim dividend and cash payout, which is the first since the establishment of the company. And in January this year, Millie's library announced its corporate value of client as well.

KT 이사회는 지난 11월 4일 대표이사 선임 프로세스를 시작하여 12월 16일 박윤영 후보를 차기 대표이사 후보로 확정했습니다. 미래 기술과 B2B 분야의 전문성을 보유한 박윤영 후보는 정기 총회를 거쳐

The BOD of KT started the process to appoint CEO as of November the 4th and confirmed candidate Park Yoon-young as the next CEO on December the 16th. He is known for his expertise in B2B and future technologies and is expected to take office as the CEO subject to AGM approval. KT is committed to strengthening the company's fundamentals and will do its utmost to rebuild customers' trust.

KT is committed to strengthening the company's fundamentals and will do its utmost to rebuild customers' trust.

Regaining trust is our foremost priority, under which we are taking necessary steps such as free replacement of USIMs, cancellation fee waivers, and implementing customer appreciation package. These measures will increase cost in the short run, but such decisions were made because we believe customers' trust is what matters most in determining corporate value and defining the company's existence in the longer term.

The company is structurally improving the entire security system beyond short-term response. The company is organizing the distributed security organization and its role together,

going beyond the simple short-term response, we are making structural improvements across the entire security framework. Information Security and Innovation Task Force has been set up directly under the CEO as we are revamping the security governance, including further empowering the authority of CISO and integrating and reorganizing distributed legacy security organizations and their roles.

In the next five years, we plan to gradually strengthen the information security system by expanding the zero-trust security system through about 1 trillion won investment. In addition, the company plans to gradually strengthen the information security system through this investment

We are also planning on around 1 trillion won investment into security for five years to expand zero trust security, scale up AI-powered integrated monitoring system, and beef up access control and encryption so as to bolster information security system in phases. Through such investment, KT will internalize security capabilities as its sustainable competitiveness.

Corporate value of plan will be implemented as planned, including the 250 billion won of share buyback and cancellation as previously mentioned.

Now, moving on to FI25 Financial Performance.

Now, moving on to FI25 Financial Performance.

Operating revenue increased 6.9% on-year, reporting 28,244.2 billion won. Operating profit increased 205% year-over-year, reaching 2,469.1 billion won, and continuing growth from core businesses including telecom, real estate, cloud, data center, and also driven by profitability improvement efforts and one-off gains from real estate projects.

On higher operating profit, net income was up 340.4% year-over-year to 1,836.8 billion won.

EBITDA was up 35.5% year-over-year Next, operating expense.

Next, operating expense.

Operating expense was flat year-on-year, recording $25,775.1 billion due to lower labor costs and depreciation and efficient general spending despite the rise in selling expense following the growth in subscribers. Next is on the financial position, the balance sheet. Debt-to-equity ratio as of end of 2025 recorded 120.7%, while net debt-to-equity ratio fell 0.4 percentage points year-over-year, reaching 37.4%. Next is CapEx.

Total capex spent by KT and its major subsidiaries in 2025 was 2 trillion 939.7 billion won.

KT's separate basis was $2,143.9 billion, while major subsidiaries spent $795.8 billion in capex. Moving on to breakdown of business performance.

The net profit increased by 2.8% last year to $7,554 billion. As the investment base expanded to the 5G center, sales growth was determined. The 5G return rate is 81.8% as of the end of 2025. Next is the wired business.

Wireless revenue was up 2.8% on-year to 7,155.4 billion won. Revenue growth was driven by subscriber expansion around 5G, and 5G penetration as of end of 25 recorded 81.8%. Next, fixed line.

Internet revenue was recorded as 2,535.5 billion won, which was increased by 1.9% compared to the previous year due to the increase in internet users and additional services.

Media revenue boosted 1.9% year-over-year growth, reporting 2 trillion 533.5 billion won on the back of giga subscriber growth and value-added service expansion. Media business revenue grew 1.7% on-year, Driven by higher IPTV subscriber net addition and growth in OOH revenue.

Home telephony revenue was down 5.8% year-over-year to 658.9 billion won. Next on B2B services. AI IT business has grown 1.3% compared to the previous year. While stable growth in corporate messaging, corporate internet, and network-based business continues, AI IT business has grown 3.1% compared to the previous year. Next is the performance of major groups.

B2B service revenue was up 1.3% year-over-year on the back of balanced growth from telecom and AI and IT business, despite the impact from streamlining of low margin businesses. And against the backdrop of stable growth from such network-based businesses, such as enterprise messaging and enterprise internet, AI IT has seen growth of 3.1% year-on-year on the back of AICC design and build business, et cetera. Moving on to major subsidiaries.

KT Cloud's revenue increased by 9,975 billion won, which increased by 27.4% compared to the previous year due to the increase in the use of data centers of global customers and the expansion of AI cloud demand. And KT Estate's revenue increased by 9,975 billion won, which increased by 9,975 billion won compared to the previous year due to the increase in the use of data centers of global customers and the expansion of AI cloud demand.

Now, despite the divestment of PlayD, our content subsidiaries' revenue stayed flat year over year following top-line growth from Studio Genie, NAS Media, and Millie's Library. KT Cloud revenue saw rise in data center usage by global customers, And with AI cloud demand expanding, revenue increased 27.4% year-on-year, reporting 997.5 billion won. KT estate revenue was up 15.9% year-on-year to 719.3 billion won on the impact of strong hotel business and new property development projects.

So far, we have talked about KT's performance in 2025. This brings me to the end of the FIA 2025 full-year performance briefing for KT.

Once again, I would like to sincerely apologize for the data breach incident and the concerns it would have caused. KT will take this opportunity as a turning point in redefining itself as a company worthy of trust.

In 2026, we will build a stronger foundation through the growth of the telecommunications industry, the visual achievements of the AX business, and the strengthening of the group's core portfolio. In addition, we will strive to increase the company's value one step further with the unparalleled progress of the value of the company.

on the back of growth from its core telecom business, visible results from AX business with the underpinning of the group's core portfolio, KT will yet again fortify its fundamentals in 2026. We will also implement the plan on corporate value enhancement so as to drive a stepwise increase in corporate value. We ask for continued interest from investors and analysts.

Thank you. For more details, please refer to the earnings presentation that we shared.

We will now take your questions, and please, to give ample chance to everyone, do limit your questions to no more than 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 Won Seok Young from Shenyang Securities.

Please go ahead with your question.

Hello, I'm Jang Won-seok, a researcher at Shinyang Securities. Thank you for your question. I have two questions. First, I'd like to ask you about the financial impact of the customer compensation package. Second, when a new CEO comes in, what will be the direction of the company? I'd like to ask you about whether the existing policy will continue. Thank you.

Good afternoon. Thank you for taking my question. I have two questions that I would like to ask. The first one would like to understand as to what the financial impact is of your customer compensation package regarding the data breach incident. And my second question is with the incoming new CEO, I would like to understand as to whether he will be keeping to the previous shareholder return stance that the company had shown.

Thank you for the question. First, I will answer the first question. The financial impact of the customer reward package is, in fact, when we announced the program, the amount of benefits that customers can feel is 45 billion won. However, the fact that all of these 45 billion won will not be recognized as our cost depends on how much the customer uses these benefits. Thank you.

I would like to first respond to the first question that you posed regarding the customer appreciation package that the company has implemented and its impact on the financials. We originally said that the benefit that the customers would actually feel will amount to about 450 billion Korean won. But not all of that expense is going to be booked as cost under our accounts because It will actually depend on to what extent the customer actually uses up those benefits.

We have already recognized the cost of the incident in 2025 or the cost of the incident in 2026 as the cost of the incident in 2025. In addition to the cost of the incident in 2026, we plan to cooperate with foreign customers to make appropriate settlement.

So in terms of the cost that was actually incurred in 2025 and what is most certain to be accrued in 2026 has already been booked in our 2025 numbers. And with regards to additional incurrence of cost come 2026, in consultation with our external auditor, we will come up with an appropriate accounting treatment.

However, what I want to say is that despite that, it is much better than 25 years of achievement.

But what I can tell you with certainty is that our performance or earnings in 2026 is going to be better compared to 2025. That is the plan that we are currently working under, and we will do our utmost to actually achieve that.

Moving on to your second question, I understand that the question relates to the future approach or direction regarding our shareholder return policy and the sustainability of the company's past growth strategy going forward. and increased the share price by 20% from 2,000 won last year to 2,400 won last year. In fact, this policy, which has been implemented since this year, 26 years ago, needs to be newly established by the new CEO and the board of directors.

Now, first of all, first mentioned in my opening presentation, we've actually increased the DPS by 20% from the 2024-2001 per share to 2,401 in 2025. In terms of the shareholder plan to be applied from 2026, it will be something that the new incoming CEO and the BOD would have to finalize on.

We've continued to increase the shareholder plan, and as I mentioned, we've increased the shareholder plan As you would appreciate, the company's shareholder return policy has been progressive.

It's been expanding year over year. And as I've also mentioned, our objective for this year is going to be higher level of profit versus what we've seen last year. So the dividend plan or the shareholder return plan to be devised by the new CEO and the BOD we expect will be in line with those stands.

Yes, and regarding the maintenance of the current growth strategy, The innovation based on AX is a must-have in all industries. Also, the CEO has experience in the B2B field, and he has practical experience, and he emphasized that the company maintains the promise with the shareholders and the market, so I don't think the current strategy will change much.

In terms of whether the growth strategy that we currently have will continue to be implemented going forward, I'm sure you could appreciate that the AX-driven innovation is something that is essential across all of the industry sectors. So in light of that aspect, the new CEO has practical experience in the B2B domain, and he values the commitment and the promise that the company has made to the market as well as to the shareholder.

Hence, we do not expect that there will be any significant change to our strategic approach.

Now, having said that, with him taking the office in light of certain strategies or certain tactical approaches, Those will reflect the philosophy of the new CEO.

The following question will be presented by Nina Choi from Samsung Securities. Please go ahead with your question.

Thank you for the opportunity to ask a question. I will also ask two questions. The first question is related to wireless business. Due to the cyber-crime accident, from the end of last year to the beginning of this year, There was a delay in some of the applicants during the 14-day free-of-charge period. Regarding this, please explain the prospect and growth strategy of the free-of-charge business this year. And the second question is related to the B2B market. Compared to other companies, the growth rate of the B2B business seems to be somewhat negative. With the cause that the company is understanding, Thank you for taking my question.

I am from Samsung Securities. I would also like to ask you two questions. First is on the outlook for your wireless business going forward. Since the data breach incident, I understand that there was a 14 days of cancellation fee waiver period starting from the end of last year up until the beginning of this year. And I understand that there were some churns of your subscribers. Would like to know, under that backdrop for this year, what is your outlook for your wireless business growth? My second question is, compared to your peers in the industry, your B2B growth seems to be much slower. Would like to understand as to the reason why and what your outlook for your B2B business going forward is.

Thank you for the question. First, I will answer the first question. As we operated the reservation period for 14 days, more than 230,000 customers left our company. However, when we look at the entire 26 years, there were customers who were loyal to us before that, so overall,

So first off, regarding the 14 days of cancellation fee waiver, during that period of time, we had about 230,000 subscribers leave the company. But because of the net addition that we actually achieved previously, The actual all-in-one impact was, on a full year basis, a net addition of subscribers.

Yes, so this pure customer base will be the basis for making a total of 26 years of wireless sales. However, since our wireless business itself is difficult to expect to grow rapidly, So that basis of net addition is what creates the revenues going forward for our wireless business in 2026.

Now, having said that, It is hard to look forward to, for instance, a very high level of growth of double-digit from the wireless business at this point. That's why we are going to focus on making our operations more efficient through rationalizing the selling expenses and distribution and improving on the offerings, which will be the efficiency measures that will help us defend our bottom line.

The second question is about the B2B growth rate and the 26-year outlook of the company. First of all, when we look at B2B business, we look at the entire B2B internet, data center, and AI models. Since KT Cloud is a private company,

Responding to the second part of the question in terms of the reason why our B2B growth rate is lower compared to the industry peers and what our outlook is for 2026. First, in looking at our B2B business, you have to also incorporate our enterprise internet, our leased line business, data center, and AI business as well. And as you know, for us, we have a separate subsidiary entity under KT Cloud. So you also need to take that aspect into consideration.

If we look at the KT Cloud sales together, the overall sales have grown by 6% compared to the previous year, but if we look at the size and share price of the entire B2B market, we see that the 6% growth is not that significant.

So if you were to also combine the KT Cloud revenue on a combined basis, you will see that our revenue growth on a year-over-year basis is 6%. And in light of the total size of the B2B market and the market share that we have in that market, 6% does not look that low.

Lastly, if you look at the KT Cloud revenue separately, it increased by 27.4% compared to last year.

And also, on KT Cloud's separate basis, the growth rate was 27.4% year-over-year, which is a quite steep uptrend, and we expect this trend to continue this year as well.

With no questions in the line, we would now like to close the Q&A session.

Once again, thank you very much for your questions and for your interest in the company. And thank you all for joining us despite your very busy schedules. This brings us to the end of KT's full year 2025 earnings conference call. Thank you.