[Foreign Language] Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the 2018 Fourth Quarter Earnings Results by KT. We would like to have welcoming remarks from Mr. Seung-Hoon Chi, KT, IRO, and then, Mr.

Kyung-keun Yoon, CFO, will present earnings result and entertain your questions. Mr. Kyung-Keun Yoon, CFO, will present earnings result and entertain your questions as well. [Operator Instructions] Now we would like to turn the conference over to Mr. Seung-Hoon Chi, KT, IRO..

[Foreign Language] Good afternoon, I'm Chi Seung-Hoon, KT's IRO. This earnings release call is currently being webcasted via our website, and you can follow the slides as you listen in on the call. Let us now begin KT's 2018 full year earnings presentation.

[Foreign Language] Please note that KT's earnings are based on consolidated financial statements under the IFRS standards. We will now begin with our CFO Kyung-keun Yoon opening remarks, followed by highlights on 2018 full year results, including Q4 figures..

business, with the launch of GiGA Energy Manager, we expanded our customer base. And with KT-MEG based, energy efficiency projects and to winning of energy projects from 22 local governments, we brought balanced growth across the whole chain of Smart Energy consumption, production and trading.

In Security business, through a collaborations with affiliates and by actively utilizing the existing distribution channel of our current Telecom business, we brought into subscriber base with GiGA Eyes [ph], the intelligent image security product, and they're further expanding the business domain towards information security, video security and disaster safety.

Going forward, we will continue to focus on securing a leading position in the respective markets of Smart Energy and Security businesses. [Foreign Language] In the field of connected cars based on the GiGA drive platform, we actively cooperated with the domestic and overseas manufacturers, gaining 770,000 subscribers.

Going forward, we will attract more subscribers via collaborations with multiple global companies and segment 5G-based in-vehicle, infotainment and autonomous platform technology so as to prepare for the coming of the age of self-driving cars. [Foreign Language] Above all, this year we'll mark the beginning of 5G services.

KT was the first in the world to showcase 5G services at the PyeongChang Winter Olympics on February the 2018. With the start of 5G frequency transmission last December, commercialization will come under full swing from March, starting with metropolitan areas and major cities around the country.

[Foreign Language] KT has created the largest and most optimal 5G frequency bandwidth, together with our unmatched fixed-line infrastructure we will utilize edge cloud center located nationwide to provide Korea's best quality 5G services.

[Foreign Language] First, in the B2C market on top of individual 5G rate plan launches, we are preparing for a multifaceted immersive media services.

In the B2B market, after the launch of 5G Open Lab last September, we are developing different business models and services in collaboration with multiple number of companies and will incorporate them as services to smart factory among others.

[Foreign Language] In the face of a paradigm shift to be led by 5G, we will bring together all the capabilities of KT and its subsidiaries, so that we may leap towards becoming a number one player in 5G platform.

[Foreign Language] As our guidance last year, we presented KRW23 trillion in consolidated revenue and CapEx of KRW2.3 trillion on stand-alone basis, driven by steady performance from core businesses, growth of platform business and contributions from subsidiaries, 2018 consolidated revenue was above target at KRW23.4 trillion.

And thanks to efficiency efforts, CapEx spend was KRW1.98 trillion. [Foreign Language] This year's consolidated revenue guidance is above KRW24 trillion. On the investment plan, we will communicate once uncertainties around 5G investments are removed. We ask for your kind understanding.

[Foreign Language] 2018 dividend was approved by the BOD at KRW1,101 per share, up 10% year-over-year, and it would become final at the shareholders meeting to be held in March. [Foreign Language] With that, I now move on to 2018 earnings results.

[Foreign Language] First, I will briefly touch upon earnings based on the new K-IFRS 15, and then report on the basis of previous standard for better understanding. Please note that figures under the previous bases are for comparison purposes and are yet to audited or reviewed by an outside auditor.

[Foreign Language] Under the new accounting basis, 2018 full year earnings are as follows., revenue was KRW23,460.1 trillion, operating profit, KRW1,261.5 trillion, and net profit reported KRW762.3 billion.

[Foreign Language] Now for better comparison purposes with previous year's performances, I would present on the full year operating results under the previous accounting standard. [Foreign Language] Revenue was up 1.6% year-over-year to KRW23,751.7 trillion on high-quality subscriber growth from core businesses of Wireless, GiGA Internet and IPTV.

Operating profit was down 11.4% year-over-year to KRW1,218.4 trillion on more subscribers taking out wireless tariff discount plans, closing of the Lypo [ph] of business and payment relief related to the Ahyeon [ph] branch fire incident. Net profit was up 27.3% year-over-year to KRW715.1 billion.

EBITDA was down 5.1% year-over-year, reporting KRW4,500.1 trillion. Next is on the operating expense. [Foreign Language] 2018 full year operating expense was KRW2,533.3 trillion, up 2.4% year-over-year. Marketing expense was down 1.6% year-over-year and lessened competition on the back of stabilized market and efficient marketing activity.

Next is on the financial position. [Foreign Language] Financial position is under the new accounting basis. 2018 Q4 end debt-to-equity ratio was 118.5%, net debt ratio was 26.8%. Next is on CapEx. [Foreign Language] Total capital expenditure over 2018 was KRW 1,976.5 trillion.

Next is the financial results by each business [Foreign Language] Wireless revenue was down 2.3% year-over-year to KRW7,40.9 trillion, while service revenue was down 2% year-over-year to KRW6,610.3 trillion on the back of higher take up of selective discount plans and the close of Lypo [ph] the business. Next is on the fixed-line business.

[Foreign Language] Fixed line revenue driven by a continuous PSTN traffic erosion was down 2.1% year-over-year, reporting KRW4,799 trillion. For the broadband Internet business, excluding the interconnect fees, service revenue posted a growth of 2.9%, continuing a steadfast upward trend for four consecutive year.

Next is the Media and Content business. [Foreign Language] Media and Content revenue was up 9.4% year-over-year, reporting KRW2,449.2 billion. Stand-alone IPTV revenue, driven by a high-quality subscriber growth and platform revenue growth, was up 15.8% year-over-year. Next is financial and other services.

[Foreign Language] Financial revenue was down 2.4% year-over-year to KRW3,444.9 trillion due to the impact of BC Cards gain from sales of MasterCard shares, which was reflected last year. Other services revenue was up 6.7% year-over-year to KRW2,403.6 trillion on good real estate and Internet data center business.

[Foreign Language] For more details, please refer to the distributed documents. We will now entertain your questions..

[Foreign Language] [Operator Instructions] The first question will be provided by Hoi Jae Kim from Daishin Securities. And the next question will be provided by Jay Yoo [ph] from Merrill Lynch Securities. Mr. Kim, please go ahead with your question..

[Foreign Language] I would like to post questions, first you've mentioned that you have decided to pay out KRW1,101 per share as dividend, but excluding the one-offs, so what would be the payout ratio? Would you please share with us that figure? And also, going forward after 2019, what will be your stance in terms of your dividend policy? Second question, there is talks that there would be resumption of discussion on the combined market share related regulations.

I would like to understand what KT's position is with respect to this combined market share regulation is and also what your overall media strategy is?.

[Foreign Language] Responding to your question about dividend, if you were carve out the one-offs on a stand-alone basis, the payout ratio for 2018 stands at around 43%. We've made a decision to pay out KRW1,100 per share in light of our capital utilization plans, as well as our earnings.

In terms of our dividend policy going forward after 2019 we will make an appropriate decision in light of our 5G investment, as well as financial planning and profitability.

[Foreign Language] Responding to your question about the potential re-adoption of the combined market share regulation being re-adopted, I believe that at this point in time it's quite difficult for us to make an accurate prediction going forward.

However, it - the combined market share regulation, it does not really besiege [ph] the current trend that we witnessed in the media market. And there are some problems with respect to undermining of the diversity and fair competition when it comes to broadcasting market.

Therefore, in light of those factors, we do look forward to a reasonable conclusion as we go forward. For us, at KT, we are going to focus our efforts on further strengthening our platform competitiveness across the three products that we hold within our company, meaning KT's IPTV, OLED TV mobiles, GiGA Genie and SkyLife, among others.

[Foreign Language] Moving to our media strategy as a whole, we already are equipped with a very high-quality content library as seen from IPTV, OLED TV mobile and our satellite TV. We're also providing monthly fixed rate packages in the form of prime movie pack and kid's package.

And also, we are providing various different types of services that really helps of our customers and subscribers to make use of the content by providing them with personalized and customized services.

And also, we are making investments into developing original contents on specific area, such as the kid's content, as well IDOE [ph] a specific entertainment content. We are also producing and offering through Sky TV - SkyLife TV certain original content that we are investing and developing.

So we are exerting our assets to provide a very diversified line up of content. [Foreign Language] To prepare for the 5G age that's coming upon our way, we're going to continuously expand our investments into a more immersive media content and services. At PyeongChang we introduced sync view and multi-view, and we also recently launched GiGA Live TV.

Through such efforts, we will continuously develop on highly immersive content. And also, these contents that we will develop will be offered through the media platform that KT owns within the group. And through such efforts, we are going to really focus on acquiring subscribers and especially acquire high-quality subscribers.

[Foreign Language] We'll move on to the next question please. [Foreign Language].

The next question will be presented by Jay Yoo [ph] from Merrill Lynch Securities. Please go ahead with your question..

[Foreign Language] I would like to post two questions. This will be same for your competitors as well with the greater investment into 5G, your depreciation is bound to rise, and this will be a cost burden for the company. You shared with us your revenue guidance of around KRW20 trillion.

I would like to understand what you're OP guidance is? And for your Wireless business, could you provide us with your prediction for service revenue and ARPU trend?.

[Foreign Language] Responding to your question on our profit, in 2019, as I have mentioned before on a consolidated basis, we are looking to achieve KRW24 trillion in revenue. In terms of the Wireless service revenue, we are expecting that it will start to turn around as we enter the second half of the year.

And for the Broadband business and Media, Content business, we are projecting that the growth trend that we've seen in 2018 will continue.

Also, we are now seeing some visible outcomes and results from our future platform business, and we will exert our efforts to make sure that, that growth further expands in 2019 in terms of the growth trends going forward.

[Foreign Language] All in all, in 2019, we believe that our priority task that lay in front of us is to make sure that we secure competitiveness and leadership in 5G, so that we build a firm basis for mid to long-term revenue creation.

At this point, it is difficult for us to share with you specific investment amount, but considering the fact that we are investing into a network evolution, which requires a little bit [ph] of investment, there is bound to be an increase in terms of investment, as well as related cost.

Having said this, in terms of the size of the profit is going to be determined based on 5G-related investment, as well as the speed at which the subscriber base migrates, so it's going to be quite difficult for us to predict with high level of accuracy.

We're going to try to do our best to identify business opportunities from B2C and B2B domains, which is underpinned by 5G services. And through most rational investment and efficient marketing, we are going to try to maintain our 5 leadership - 5G leadership and at the same time maintain our profitability - adequate level of profitability.

[Foreign Language] Responding to your question about wireless revenue going forward and ARPU trends going forward, with a greater discount rate, as well as higher take up of people taking up the tariff discount plan, we do expect the revenue decline will continue.

In 2019, however, we are going to provide stronger benefits to high ARPU, high-quality subscribers, thereby maintaining a growth that's underpinned by quality.

And after the launch of the 5G services, if we are able to accelerate the subscriber migration, we expect that our wireless service revenue will turn around as we enter the second half of the year.

For ARPU, because of the decline in wireless service revenue, as well as more subscribers taking out the second device, as well as the IoT services, the trend of decline is expected to continue.

However, the speed at which subscribers select the - selective discount rate is slowing and also as we focus on bringing up the quality of the subscribers and our sales activities and with the proportion of 5G subscribers increasing we will do our outmost to make sure that we minimize that ARPU decline.

[Foreign Language] Do you have any questions in the queue?.

[Foreign Language] Currently, there are no participants with questions. We will wait for a second until there is another question..

[Foreign Language] With no further questions, we will now end the Q&A session. Thank you for your questions and your interest and for joining us despite your very busy schedule. This brings us to the end of full year 2018 earnings release call. Thank you very much..