[Call starts abruptly] Our salary negotiations were reflected in Q4 last year, while we were able to smooth our content sourcing cost this year. In this regard, operating income has increased Y-o-Y in both consolidated and stand-alone basis to continue solid growth.

Excluding wage negotiations and content servicing costs moving, operating income recorded KRW512.2 billion on a consolidated basis and KRW383.7 billion on a stand-alone basis in Q3 which is a 13.1% and 18.6% Y-o-Y growth, respectively.

In addition, on October 17, KT announced the new midterm shareholder return policy which is for the fiscal year 2023 to 2025 period. We are planning to use 50% of the stand-alone adjusted net income as resources for shareholder return. Dividend per share should be maintained at a minimum of 2022 levels.

We also plan to purchase and cancel treasury shares within the financial resources available for shareholder return. Quarterly evidence should be introduced after receiving approval at the ordinary General Shareholders' Meeting in 2024. KT will implement the Digital Service-First strategy by leveraging the company's CT and IT strengths.

ICT capabilities are essential to offer differentiated and innovative digital services sought out by customers. As such, we will make utmost effort to integrate and strengthen the outstanding telco and IT strength of KT. We plan to boost corporate value by focusing on fundamentals based on the company's ICT capabilities to pursue quality growth.

Next, I will go over the business performance of 2023, Q3. Operating revenue reached KRW6,697.4 billion which is a 3.4% Y-o-Y increase. Operating income recorded KRW321.9 billion which is a 28.9% Y-o-Y decrease caused by a reflection of collective dollar renegotiations and smoothing out of content sourcing costs.

Net income declined by 11.6% Y-o-Y to KRW288.3 billion and EBITDA decreased by 7.3% Y-o-Y to KRW1,259.9 billion. I will now go over the operating expense on the next page. Operating expense increased by 5.8% Y-o-Y to reach KRW6,375.5 billion. The next slide is about the company's financial position.

The debt-to-equity ratio as of September 2023 stood at 134.9%, while net-debt-to equity decreased by 6.1 percentage points Q-o-Q to 38.5%. Next, I will go over CapEx. KT Group's cumulative Q3 CapEx amounted KRW2,253.2 billion. On a stand-alone basis, cumulative CapEx as of Q3 stood at KRW1,600.4 billion.

The group's CapEx, including the core business areas of finance, media content and real estate recorded KRW652.8 billion. CapEx implementation is in line with the annual investment plan. Now, I will go over each business line.

We revised the revenue categorization system to better align revenue with our business direction which is to concentrate on fundamental growth and to enhance intuitive understanding of our businesses. We have broken down revenue into wireless, fixed and B2B service and will work to deliver quality growth for each business line.

Revenue of the wireless business rose by 1.6% Y-o-Y to KRW1,708.1 billion. 5G subscribers recorded 9.51 million which now covers 70% of total handsets. With travel gaining traction, roaming revenue has recovered to pre-COVID levels and we are also solidifying our leadership in the MVNO market.

In particular, wireless revenue continues to show robust growth as we focus on premium subscribers driven by quality growth rather than volume growth. Next is the fixed line business. Broadband revenue rose by 3.2% Y-o-Y to KRW619.4 billion, thanks to increased demand for high-quality services and growing GiGA subscribers.

Home Telephony revenue decreased by 7.6% Y-o-Y to KRW186.3 billion. Media revenue increased by 3.9% Y-o-Y which was supported by the expansion of IPTV subscriber base which was mainly driven by high ARPU subscribers.

Since rebranding KT IPTV to Genie TV in October last year, VOD and OTT usage doubled, cementing its role as the first media window at homes. We will continue to strengthen differentiated services that are set out by customers to contribute to invigorating the domestic media ecosystem. Next is B2B services.

B2B service revenue rose by 2.7% Y-o-Y, thanks to the monetization of enterprise DX backlog orders and a robust real estate market. Revenue from corporate broadband and data slightly declined Y-o-Y due to rationalization of some low-profit businesses.

But main product segments showed balanced growth as higher demand for social, safety and infrastructure drove sales of lease lines for CCTV and the core net business growth supported by expansion of local and global CP customer base.

Enterprise DX continues to show growth as previously secured orders, such as the M-BcN project starts turning into revenue. DX demand of government and corporations is consistently rising, we expect B2B backlog orders to remain above KRW3 trillion this year.

Also, AI new business revenue declined by 11.9% Y-o-Y to KRW106 billion, as some order placements are delayed and low-profit projects are rationalized. Meanwhile, the KT AICC service is accommodating a wide clientele from large corporates to small and medium businesses with a cloud-based subscription model to lead the AICC market.

In addition, KT launched MIDEUM, KT's large AI service on October 31. MIDEUM has 4 main line-ups ranging from light to super large models to satisfy every corporate size and purpose. We will be focusing on key 5 areas which are manufacturing, finance, public, education and global markets as future growth drivers.

Next, I will go over the performance of main subsidiaries. BC card revenue saw 1.2% Y-o-Y growth to reach KRW995.7 billion, mainly driven by new businesses, such as PLCC and loans. Skylife revenue decreased by 2.8% Y-o-Y to KRW260.5 billion due to the decline in HCM subscribers despite growth of TPS.

KT Studio Genie and Sky TV released 4 original dramas and 3 original variety shows in Q3. New Recruit Season 2 topped the Monday, Tuesday drama ranking in terms of both buzz and viewership.

Also, the viewership of Not Others, Longing For You and The Kidnapping Day, all showed upward trend, evidencing the strength of our content production capabilities based on strong storytelling. Sky TV is also establishing a line-up of hit shows with the successful launch of new seasons creating massive buzz such as [indiscernible].

However, revenue from the content subsidiaries decreased by 3.6% Y-o-Y to KRW290.4 billion due to contraction of the advertising and commerce market amid economic recession. Revenue of KT Estate jumped by 30.3% Y-o-Y to KRW142.3 billion, thanks to higher office lease revenue and robust hotel business.

In particular, the diversification strategy of the hotel business, launching customer bespoke packages while attracting corporate clients was effective. KT Cloud revenue rose by 34.5% Y-o-Y to KRW193.8 billion, driven by robust growth of private cloud project orders and the IDC business.

KT's large AI model, needing [ph] service is offered with KT Cloud's AI full stock package which helps customers reduce their AI introduction cost. We believe that this combination will contribute to the popularization of large AIs. This concludes the earnings presentation of KT in Q3, 2023.

As the digital innovation partner of Korea, KT will focus on strengthening our fundamental ICT capabilities and pre-emptively developing and launching services that maximize the customer experience to pioneer the transformation of the digital paradigm. We ask for the continued interest and support of shareholders and analysts. Thank you..

For more details, please refer to the earnings presentation which has been previously circulated. We will now begin the Q&A session. In order to allow as many Q&A opportunities as possible, we would appreciate only two questions from each participant. Thank you..

Now, Q&A session will begin. [Operator Instructions] The first question will be presented by Hoi Jae Kim from Daishin Securities..

I am Kim Hoi Jae from Daishin Securities and I have 2 questions. First is regarding the number of MNO subscribers. It seems that the number of subscribers -- the gap between ourself, KT and Uplus is reducing.

And so what would be this number for KT and how do you plan on responding to this reduction of gap of the MNO subscribers? And my second question is regarding the earnings. In Q3, it seems that KT has slightly underperformed market expectations.

It seems that this is because some of the costs that would be normally recognized in Q4 has already been recognized in Q3.

What are those items? And also, what would be your outlook for Q4 and also, for the full year performance?.

Thank you for the questions. I will answer the second question first. And then regarding your first question, we have the Head of the Customer Division here with us to entertain your first question. I will first go over the stand-alone basis.

So, revenue in Q3 actually recorded over KRW4 trillion for 2 consecutive quarters, thanks to the following reasons. We have observed robust growth in the mobile, broadband TV businesses and the previously secured orders in the B2B business is now starting to generate revenue. And in Q3, you asked about some of the costs that were recognized earlier.

Cost that should have been recognized in Q4. So, regarding the salary negotiations, last year, those associated costs was recognized in Q4. But this year, those negotiations concluded early, so we recognized around KRW140 billion in related costs in Q3 this year.

And then there's another KRW50 billion cost regarding the smoothing out of content sourcing cost. And so for these 2 reasons, the stand-alone basis Y-o-Y declined slightly. So, this is more like a quarterly adjustment of cost recognition. These items should not impact the full year performance of the company.

So, if you exclude the salary negotiations and the smoothing out of the content sourcing cost, the operating income in Q3 actually increased by 19% Y-o-Y. And then for your question regarding the outlook for Q4 and the full year performance.

Because some of the costs would have been usually recognized in Q4 has already been recognized in Q3, on a Y-o-Y basis, Q4 numbers should show improvement and we will also make utmost effort to improve the full year performance compared to the previous year by year-end. And now I will briefly go over the consolidated performance of the company.

And in Q3, we saw the main subsidiaries show robust growth, especially in finance, media, DX and real estate. And thanks to the robust growth of all of these subsidiaries, we were able to see the highest revenue recorded ever since going public. Because of the economic recession, we did see some decline in the Advertising and Commerce segments.

But BC Card, KT Cloud and KT Estate, all showed strong profitability. And so their contribution to the overall group's performance in Q3 has remained similar to previous years. And for the remaining months of this year, we will make effort to ensure that the company's growth portfolio and the profitability of the main subsidiaries remain robust.

So that on a full-year basis, they can maintain such high contribution to the group's profits..

My name is Park Jong [ph] and I am the Head of the Customer division and I would like to answer your first question regarding the reduction of the gap of subscribers of MNO between KT and LG.

The recent increase in the number of subscribers for lines of our competitor, according to the numbers and statistics of the government are fully based on IoT, especially in the remote control devices. They are not coming from the actual human customers.

For your reference, I would like to highlight that other than this remote control devices, so for example, vehicles and wireless payment devices, KT is still definitely the market leader. Of course, each company will have their own strategy and will make business decisions accordingly.

So however, I would just like to highlight that for KT, we are not really interested in low-end bidding projects that generate less than KRW1,000 per month in revenue, just to secure millions of lines at once which -- this is mainly happening in the IoT remote control device segment.

So as a company, we are focused on profitability, the scalability of projects, technological innovation and the possibility to build new ecosystems. And so we would not sacrifice these elements just to secure more volume growth. We have been maintaining the gap on the areas of actual human subscribers, wearable devices and second devices.

And we have been always concentrating on enhancing customer value to generate high-quality revenue and profits. And as a result of these efforts, in terms of 5G penetration and ARPU which are the main quality indicators of a telco company, we maintain the gap against our competitors.

As the 5G market enters maturity, the growth momentum can slow down in the future.

We will maintain our MNO service competitiveness by encouraging our LTE subscribers to change into 5G plans and to ensure that the high-end customers maintain their first tier plans and to ensure that our 5G customers will be satisfied with new 5G plans so that they can generate higher ARPU for the company.

We are also focusing on new value-adding services to further enhance customer satisfaction. And even in the MVNO market, we will be targeting the market by different segments to enhance overall customer satisfaction and we will also work to secure high ARPU customers so that the MVNO business can also continue the growth of the wireless business.

We will make utmost effort to ensure that we can continue the robust growth of our telco and wireless business as expected by our investors by focusing on the fundamentals of our business and also continuing to make effort to enhance customer value..

Next question, please..

The following question will be presented by [indiscernible]..

My name is Jae-min [ph] from Investment Securities. I have 2 questions. First, the new CEO has been appointed to KT. I don't think there has been a lot of communication regarding the new CEO's business strategy and direction.

So, can you give us some more color on that? And also, does the company have plans to encourage communication between the CEO and the market in the future? Second question is regarding the B2B business. KT is very strong in this market.

I would like to know more about the strategy that you have and also the outlook that you foresee for the B2B market..

Thank you for those questions, Mr. Ahn. So, I would like to answer your first question.

So, KT's large group direction is to make sure that the IT -- fundamental IT capabilities generate quality growth in the B2B market, sustainable profits in the B2C market and also to ensure that AI will serve as a foundation to encourage and trigger innovation and growth of overall KT. This is the main strategy of our CEO. To go into more detail.

The B2B, we will be focusing on selective concentration based on IT capabilities so that we can generate both revenue and profit growth. In the B2C segment, we will be focusing on launching customized services and also new services to satisfy customers so that the B2C business can serve as a cash cow for the company.

And as for leveraging AI, we will be using AI to develop new profit-generating business models. At the same time, we will be using AI to come up with differentiated services and also to boost the overall productivity of the company. And you also asked about the opportunities for communicating with the market.

So, we are currently developing the mid-term strategy of the company. And once those strategies crystallize, I think we will have an opportunity for our CEO to meet with market persistence. And I think that timing will be around early next year. And you also asked about the B2B market.

So, KT has the widest and most extensive coverage in both wireless and fixed markets. We have a sales force that can reach out to the individual customers and to the various office buildings throughout Korea. And recently, with the popularization of the digital transformation among corporates, the AI, big data and cloud capabilities are essential.

And we have all of these capabilities. And based on our capabilities, we are developing custom-wise services for corporates and this is enabled by the various corporate products that we have. We will be continuously expanding our B2B business, taking advantage of the strength of the company and the digital transformation trend of the industry.

We have the most extensive network in the company -- in the industry. And based on our IT fundamental capabilities, we will be developing differentiated services to further gain competitiveness. We will also be working to reform our cost structure to enhance profitability.

And based on the extensive coverage that I mentioned earlier, we will be leveraging the skills that we have in terms of providing stable services and the data security and the overall network security skills. And we will be working to provide end-to-end services that can enhance the customer convenience to strengthen customer satisfaction.

We have key skills in telco, AI, big data, IDC and cloud. And based on these skills, we have the capability to enhance customer value. And for example, we can use telco AI and big data capabilities to offer targeted marketing services and targeting advertising services.

And we can leverage the skills that we have in the telco and IT businesses to make unlimited offers to strengthen customer value. And with the telco business becoming more of a platform business, we will be working to change the paradigm in this area.

For example, by combining telco, messaging and intelligent networks, we can offer and build platforms for our customers so that our customers came up with new business opportunities.

We also have launched Flexline which offers flexible plans and flexible frequencies so that they can develop the own services that can be satisfying for their own customers. So, we are continuously making efforts to develop new values for our customers.

With the 5G specialized network and other various capabilities of the company, we will be able to come up with the most optimal services that can satisfy the needs of each industry and customer. And in the AICC business, we can leverage some of the mobility technology and services that we have.

And these technologies and capabilities can help the company to drive internal quality growth of our DX services. We will also be focusing on some of the service subscription offers that we have to further generate growth here. Lastly, we have along with cloud and IDC, we have large AI service. And we are working to pioneer this new market in Korea.

We have extensive experience in the Public Cloud segment. And based on this extensive track record, we will be expanding into the Corporate Cloud segment. We also have experience in the SaaS and the public sector as well.

So, we can leverage this experience and combine it with the services offered by KT Cloud and other KT subsidiaries to generate synergy and further penetrate this market. And we will be continuously evolving in this area with our large AI medium to propose and offer customized LLM models for the public finance manufacturing sectors.

And in conclusion with the advancement of technology and the digital transformation trend among our customers, we have -- I believe that we have the key capabilities that can take advantage of the growth of this segment. And in that sense, our B2B business should continue to show robust growth.

Combining our telco and IT, such as AI, big data and cloud capabilities, we will be able to offer various services that are required to satisfy the needs of our customers, thereby becoming the digital innovation partner that is solved out by our main customer base..

Thank you. We can move on to the next question..

The following question will be presented by Jisoo Jeong from Meritz Securities..

Good afternoon. My name is Jisoo Jeong from Meritz Securities. And I have 2 questions. First, if you look at the results of your competitors, inflationary pressures, such as the utility cost and electricity cost seems to have been a burden this quarter.

So, what was the inflationary pressures like for KT? And second, AI competition among telcos in Korea is quite intensive at the moment.

Can you give a little bit more color on your business strategies and your goals in the AI segment?.

Thank you for the two questions, Mr. Jeong. And your first question was about the inflationary pressures such as the power costs.

The inflationary pressures, including the utility cost has been observed across the board and KT is the same though, we have seen inflationary pressures regarding electricity and some of the commission and fees as well and this has had impact on our numbers.

And if you look at our utility, electricity cost, especially it has increased in double digits Y-o-Y basis based on the steep increase of the unit cost of power.

However, we have been making continuous effort to replace equipment and facilities that have been showing low energy efficiency and we have been working to optimize our equipment and facilities. At the same time, we have been making effort to achieve structural cost reduction as well.

And other than domain utility and fees costs in order to enhance cost competitiveness in our overall businesses, we have been improving our business processes to become more efficient. We have been also leveraging AI and DX technologies to further increase our cost -- improve our cost structure.

For example, there may be some commissions regarding the opening of new handsets. So, we have been encouraging self-opening of new handsets for our customers so that we can enhance the efficiency of our after service network in this area.

Also, we have been applying AI to our call centers and these efforts have led to higher productivity and also efficiency. And we will be making continuous effort to achieve structural improvement to enhance both productivity and efficiency by improving our overall business processes. And of course, these are not one-off efforts.

These are sustainable structural improvements. So, they should have continued positive impact to our business. And then your second question was regarding the KT strength in the AI competition in Korea.

So, on the 31st of October, we launched our large AI service, MIDEUM and we will be starting our corporate business with our MIDEUM service in earnest very soon. We launched 4 [ph] services from light to the large, super large models with the MIDEUM service. So currently, our service line-up can satisfy every corporate size and purpose.

We also work with KT Cloud to offer the full AI stack with the MIDEUM service. This means that even if the required customer does not have the infrastructure for development and learning for the AI service, we can offer the full package.

So, this will significantly reduce the cost of introducing AI for our customers and also, we can offer customized services to our customers. Like you've mentioned, there are many players entering the large AI market. I believe that KT has largely 3 key strengths as key competitiveness against our peers.

The first is that we offer the light service all the way up to the super large service. So, we are able to offer customized services for all of our customers. And the second is that we offer the full stack, including the Korean AI software, hardware and so on.

We are the only Korean operator -- we are the only operator in Korea that can offer the full stack of AI because we have cloud and AI and the cloud form of the KT group and the customers can leverage these capabilities of KT to develop customized services that will satisfy the exact need for their own business.

And our MIDEUM is embedded in the Korean system. So, compared to our global competitors in terms of the answers that the AI can provide and in terms of the security of the overall AI system, I believe we have the competitive edge.

And however, initial goal would be to penetrate the private LLM market in Korea because we have strong B2B customer base and our current capabilities can help customers develop customized LLM models. We believe that the private LLM market will be a good start. At the same time, we have existing AI services such as AICC and GiGA Internet.

So, the large AI model can be applied to these existing services to boost profitability of these services. At the same time, they can be applied to our own business to boost the overall productivity and efficiency, further contributing to the profitability of the company..

Thank you. We can move on to the next question..

The following question will be presented by Joonsop Kim from KB Securities..

My name is Joonsop Kim from KB Securities. I have a question regarding IDC business. So, what is KT's view in terms of the supply and demand situation of IDC in Korea? There are multiple operators and many new data centers have been completed recently. At the same time, the data center projects, some of them are falling apart before they are completed.

So, what is KT's view in terms of mid-long-term market outlook? And what would be the strategy of KT and KT Cloud in this area?.

Thank you for the question, Mr. Kim. Your question was regarding the mid long-term outlook of the Korean IDC market and the strategy of KT Cloud. So, if you look at the Korean IDC and cloud market, corporates in Korea continuously are showing demand for digital transformation which generates more demand for data centers.

At the same time, the introduction of large AI models are continuing to support this growth momentum. So, if you look at the mid long-term market outlook here, if you compare the demand and the supply, the demand is definitely outpacing the supply.

So, I think the key strategy should be the ability to respond to this strong demand in a timely manner and this trend should continue for the time being. KT will leverage the key competitiveness in the IDC market to continuously pioneer and dominate the IDC market in Korea. KT has more than 20-plus years of experience in building IDCs.

We have the most superb network infrastructure in Korea and our 7 IDCs are located in geographically accessible Seoul and larger Seoul Metropolitan Area. So currently, we have around 150-megawatts. In the next 5 years, we plan to add 100-megawatts.

And so by actively expanding the capacity, we plan to address the strong demand coming for these type of services. So, KT is the only operator in Korea that can offer services that combine IDC, cloud and network. And therefore, we have the ability to satisfy all types of various demands of customers.

And this is key strength and we will be leveraging these key strengths to further grow in this area..

Next question, please..

Following question will be presented by Seyon Park from Morgan Stanley..

And I have also a question regarding KT Cloud. So, KT Cloud has been showing very strong quarterly growth. And I was wondering the reason behind it.

Is it due to some one-off factor? Or is this 30% to 35% growth sustainable? What is your outlook for Q4 and 2024? And also, I would also like to know a little bit more around the profit levels and the margins that you expect for KT Cloud..

Thank you for the question, Mr. Park. So, regarding KT Cloud, there were extensive amounts of orders that we won last year in the public cloud and private cloud markets. And those previously secured orders are now turning into revenue. Also, the IDC in Yongsan has been completed.

So, due to these factors, in Q3, KT Cloud recorded 34.5% growth in revenue in Y-o-Y terms.

We believe that this growth momentum will continue as we solidify our leadership in the Public Cloud segment as we continue the growth in the AI service business by offering the full stack AI and also, we are continuously adding new IDCs and implementing the price of strategy. So in 2022, KT Cloud's revenue amounted KRW550 billion.

We expect double-digit growth for this year. And this type of growth trend should be continued for the time being next year as well. You also asked about the profit and margin of KT Cloud. So, if you compare the operating margin of KT Cloud to the group average, it is slightly higher. But recently, there has been some upfront investment.

And also, we have been attracting high-quality talent as well which can increase the overall cost levels that can bring down the margin. But like I've just mentioned, we are seeing strong growth coming from the cloud and IDC business and so on. So, the margin should show the upward trend again and continue to show that trend for the time being..

If there are no more questions, we will conclude the Q&A session. Thank you for your questions and interest in KT. Thank you once again for attending today's earnings call despite your busy schedule. We will conclude the earnings call for KT for the third quarter of 2023. Thank you..