Youngwoo Kim - IRO Gwang-Seok Shin - CFO.

Analysts:.

Good afternoon, I am Youngwoo Kim, IRO of KT. We will now begin Q1 2015 Earnings Presentation. Our call is being webcasted via the company's website and please refer to the presentation slides as we present this quarter's business results. Please note that since Q1 of 2011 KT has been presenting consolidated numbers under the IFRS accounting standards.

With that, let me invite our CFO, Gwang-Seok Shin for his opening remarks and presentation on Q1 2015 business results..

Good afternoon. I am Gwang-Seok Shin, CFO of KT. As an outcome of our efforts to enhance competitiveness of our telco business and to corporate restructuring endeavors over the last year, in the first quarter we have seen visible improvements in both growth and profitability.

For the wireless business, growth momentum is continuing on reinforced brand value and channel competitiveness, and growing LTE subscriber base. KT therefore is focusing on market stabilization and improving customer services.

In terms of the fixed line and media business there were series of innovative product launches such as the GiGA Internet followed by GiGA WiFi home, net addition trend in broadband Internet continues, with IPTV subscribers surpassing the 6 million mark displaying a robust upward trajectory.

Recently the media industry is facing a new competitive framework for example like the talks on pay TV market share regulations. Under this new environment KT will lead a change in paradigm in order to establish a positively reinforcing cycle of the telecom industry.

Rather than simply going at increasing the subscriber numbers for telecom IPTV and other B2C markets, we will enhance subscriber quality, bring service improvements and develop new services so as to grow the entire pie and focus on solidifying fundamental competitiveness.

KT wishes to bring complete differentiation against our peers and we believe gaining an upper hand in 5G and spreading GiGA infrastructure is key to becoming global number one and are therefore focusing our corporate wide efforts to lay the basis for such a lead.

We are also solidifying our future growth engines on top of KT's strong GiGA infrastructure.

We laid the basis for battery recharging business for electric vehicles in the smart energy segment and are seeing visible outcomes in forming business alliances with number one players in the financial, transportation and retail industries in relation to IOT opportunities.

As mentioned in the beginning we have started to see certain results in Q1 as preparations and plans developed last year came under full implementation.

Results in terms of market stabilization and cost savings are starting to emerge and eventually we wish to attain complete competitive edge in core businesses, trigger new business growth and differentiate our technology and services.

Also KT is committed to enhancing corporate value and we will continue to win trust from our shareholders, investors and customers. With that, I will now move on to Q1 2015 business results. Before going into the detailed business results, let me first outline some changes in the financial statements arising from the sale of KT Rental.

KT Rental's sales agreement was executed in Q1 of this year. As a result P&L of KT Rental is presented as P&L from discontinued operations, applied retroactively from 2014. For your reference, assets and liabilities of KT Rentals are reclassified under the other current asset and liabilities and the line items of assets and liabilities held for sale.

Q1 2015 operating revenue was down 3.7% year-on-year to KRW 5,436.4 billion and declined in fixed line and merchandise revenue. Service revenue was up 1.2% year-over-year on positive revenue stream from all businesses expect for the fixed line business.

Operating profit was up 135.3% year-on-year coming in at KRW 320.9 billion driven by stable market and lower labor cost arising from ERP of last year. Net income came in at KRW 280.6 billion on higher operating profit and valuation gains and derivatives related to KT Rental sale. EBITDA was up 20.3% year-on-year to KRW 1,162.7 trillion.

Next is on performance from each of the key subsidiaries. But before I go into the details on our key subsidiaries, let me first talk about our statement on our financial position. Debt-to-equity ratio as of Q1 end recorded 187.5%, up 1.0 percentage points on Q-o-Q basis. Net debt ratio excluding net debt of KT Rental is 77.7%. Next is on CapEx.

Q1 2015 CapEx recorded KRW 355.7 billion and by the end of this year we plan to spend the remainder of CapEx guidance of 2.7 trillion. Next is on performances of each business unit.

In terms of the wireless revenue, despite declines in interconnect and other wireless revenues driven by growth in LTE subscribers and ARPU, service revenue was up 2.2% year-on-year to KRW 1,822.3 billion.

In Q1 there was net addition of 170,000 subscribers with LTE subs growing by large margin to 11.43 million with LTE portion expanding from 62.4% end of last year to 65.3%. Q1 ARPU recorded KRW 34,389, up 4.5% year-over-year. Next is on the fixed line business. Fixed line revenue was down 8.1% year-on-year to KRW 1,305 billion.

Fixed line revenue continued to trend down and despite growth in broadband subscribers, broadband revenue declined year-on-year on increased benefits from bundling.

Currently we are seeing sustained growth in broadband subscribers driven by positive responses from GiGA Internet and GiGA WiFi subscribers and we expect improvements on future revenue steam as well. Next is on media and contents business. Media and contents revenue was up 3.8% year-on-year to KRW 383.8 billion.

KT's IPTV in Q1 saw 180,000 net additions reaching 6.04 million subscribers, writing a new chapter in the history of pay TV market. Next is on the financials and other services. Financial revenue was up 1.2% year-on-year to KRW 829.4 billion on higher revenues from BC Card.

Other services revenue was 35.7% year-on-year to KRW 410.7 billion with the inclusion of KT IS and KT CS in the consolidated statement and increased revenue from IT and solutions. This brings me to the end of Q1 2015 earnings presentation. For more details, please refer to the materials we provided earlier. From now on we will entertain questions..

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