[Foreign Language] Good morning and good evening. Thank you all for joining this conference call. Now we will begin the conference of the Fiscal Year 2024 First Quarter Earnings Results by KT. We would like to have welcoming remarks from KT IRO. And the CFO will present earnings results and entertain your questions.

This conference will start with our presentation followed by a Q&A session. [Operator Instructions] Now we would like to turn the conference over to KT IRO.

[Foreign Language] Good morning. I'm KT's IRO, Young-Yoon Yun., we will commence KT's first quarter 2024 earnings presentation. This earnings release call is being webcast live on our website and you can make use of the presentation slides as you listen in on the call.

Please be reminded that today's presentation includes financial estimates and operating results under the K-IFRS standards, which are yet to be reviewed by an outside auditor. We hence cannot ensure accuracy nor completeness of financial and business data aside from historical actuals.

So we ask that you note that these figures may be subject to changes. With that I invite our CFO, Min Jang for his welcoming message and presentation on Q1 2024 earnings..

[Foreign Language] Good morning. I'm Min Jang, KT's CFO. At the Mobile World Congress 2024 held last February, KT announced its vision to make believe and transform into an AI CT company. By combining AI and IT with our CT capabilities we will seek to reinforce our core competitiveness and explore new business opportunities powered by AI.

We will be steadfast at finding sustainable growth engine for the future by way of innovation and rationalization of our business structure that is based on AX short for AI-driven DX. With that said let's go into the details of KT's Q1 highlights.

Supported by well-balanced growth from B2C and B2B businesses on top of growth momentum from the group's core business portfolio which include IDC and cloud, KT's consolidated revenue reported KRW 6,654.6 billion and separate basis revenue was at KRW 4,694.8 billion, both reporting growth versus last year.

Separate basis operating profit was up 1.5% year-on-year, coming in at KRW 393.8 billion, driven by revenue growth and efficient marketing activities. Consolidated operating profit increased 4.2% year-on-year to KRW 506.5 billion at the back of profit growth from major subsidiaries, including BC Card, KT Cloud, KT Estate, among others.

On April 30, KT announced cash dividend of KRW 501 per share for the first quarter making quarterly dividend payment for the first time since the beginning of the company. Following that, KT's Board of Directors made the decision on May 9 to cancel 2% out of the 4.41% of treasury shares owned by the company.

KT will continue to do what it can to enhance corporate value by strengthening shareholder return underpinned by profit growth. Now moving on to the earnings of the first quarter of 2024. Operating revenue increased 3.3% year-over-year to KRW 6,654.6 billion.

Despite there being rise in business expenses due to inflation, there was solid revenue growth, which drove operating profit up 4.2% year-on-year to KRW 506.5 billion. On top of operating profit growth on improved non-operating income such as from higher dividend income, net income increased 26.9% Y-o-Y reporting KRW 393 billion.

EBITDA posted 4.6% year-over-year growth, reaching KRW 1,480.2 billion. Next is on operating expense. On increases in business expense and cost of goods sold operating expense increased 3.2% year-on-year to KRW 6,148.1 billion. Next the financial position. Debt-to-equity ratio as at March end 2024 was 129.8%.

Net debt-to-equity ratio came down 8.1 percentage points year-on-year to 38.5%. Next is on CapEx. Total CapEx spend for KT and its main subsidiaries in Q1 amounted to a total of KRW507 billion.

KT separate basis CapEx was KRW318.1 billion while CapEx from group subsidiaries from key growth areas, including finance, media, IDC and cloud recorded KRW188.9 billion. Next is on performance from each of the lines of business. Wireless revenue was up 1.7% year-on-year to KRW1,736.5 billion.

5G subscriber now accounts for more than 74% of total handset subscribers surpassing 9.95 million subscribers. Meanwhile, higher roaming revenue and MVNO business expansion drove wireless revenue growth.

In January, we rolled out 10 rate plans under 5G mid-tier scheme and 8 different types of direct rate plan called YoGo giving more choice for 5G tariffs to our customers. KT will continue to innovate its rate scheme and distribution to elevate customer services to a next level. Next is fixed-line business.

Broadband Internet revenue grew 2.1% year-on-year to KRW620.8 billion on the back of net addition from GiGA Internet subscribers and differentiated VAS, value-added services, such as the new WiFi models. Media business posted 2.3% year-over-year growth, thanks to momentum behind the premium rate plans and IPTV subscriber base expansion.

As announced during the Media Day event held on the 29th, KT will lead AX at the group level underpinned by specialized AI technologies for media such as the Magic platform. Home telephony revenue came down 5.7% year-on-year to KRW183 billion. Next is on B2B services.

Driven by robust growth from enterprise broadband Internet and data business and higher demand for AX services, B2B service revenue was up 5% year-over-year.

Revenue from five major growth drivers posted 4.9% year-over-year growth supported by adoption of AICC service by the financial vertical and activated IoT project wins for remote command and control environment and security solutions.

The strategically cater to businesses growing AX demand following technology transformation which was ignited by generative AI, we plan on providing distinctive AX services for each of the industry sectors as well as AX communication services that combine AI solutions with the incumbent telco service. Next, results from our major subsidiaries.

BC Card revenue was down by 1.8% year-over-year to KRW 935.6 billion, a narrowing acquiring volume impacted by economic slump. Despite the decline in pay TV service, subscribers Skylife revenue was buoyed by growth from Internet resale and MVNO business with revenue being flat year-on-year at KRW 254.4 billion.

For the content subsidiaries, KT Genie Studio posted a decline of 2.8% year-over-year due to declines in not media revenue following industry downturn and on downsized production and airing of content. For KT Cloud on higher IDC revenue mostly coming from global customers and DBO project wins, its revenue recorded an increase of 17.8% year-over-year.

To align with growing demand for AI infrastructure, KT Cloud expanded its IDC business as well as the service model to cater to the full-fledged move towards native cloud, as we plan to sustain the growth trajectory. On balanced growth between sales and rental business, KT Estate revenue increased 20.3% year-over-year.

The operation of Le-meridian Moxy Hotel, which opened back in November of 2022 is now fully stabilized and occupancy rate has also increased year-on-year sustaining a secular uptrend. So this has been an update on the earnings of KT for Q1 of 2024.

KT with its focus on the fundamentals solidified business competitiveness achieving a balanced growth both on a consolidated and stand-alone basis. We will endeavor to drive quality growth through fundamental business innovation to enhance profitability mid to longer term and we'll work to enhance KT's corporate value.

We ask for your continued interest and support from the investors and market analysts. Thank you..

For more information please refer to the earnings presentation that we circulated previously and we will now entertain your questions. To allow as many questions as possible, we would like to ask that you please limit your questions to two per person..

[Foreign Language] Now, Q&A session will begin. [Operator Instructions] The first question will be presented by Soojin Kim from Mirae Securities. Please go ahead with your question..

[Foreign Language] Good morning. I would like to ask you two questions. First is that this quarter we've seen a double-digit growth from KT Cloud. Would like to understand as to what are the key drivers behind the sustained growth of your KT Cloud business.

And this year it is expected that because of the economic slump that we are currently facing companies IT expenditure is going to be quite conservative is what we are thinking at this point. So, what is your annual outlook for your KT Cloud business? Second question is back in February you announced that you will be hiring about 1000 IT employees.

What impact will that have on your annual labor cost?.

[Foreign Language] Yes, responding to your first question on KT Cloud. If you look at our first quarter numbers we've seen an IDC business grow underpinned by our colocation and DMO businesses. Now, the global clients or customers including AWS Microsoft and Google have started to use our colocation services.

And I can tell you that that had worked as a quite strong driver behind our performance. In 2024, our objective is yet again to further grow our revenue and operating profit and our plan for revenue growth is at about 26% and forward profit 51% growth.

Second question, the impact of hiring 1000 IT personnel and on the labor cost line item it will be in the tune of KRW 20 billion to KRW 30 billion. As you are aware going forward for about five to six years to come we will have about 1000 people on a per year basis retire from the company.

So all in all we do not expect that there will be any significant labor cost impact. Yes, we will have about 700 people leaving the company due to their retirement. Next question please..

The following question will be presented by Jisoo Jeong from Meritz Securities. Please go ahead with your question..

I am Jeong Jisoo from Meritz Securities. Thank you very much for taking my question. I have two questions. The first one is what is KT's overall approach to your AI strategy going forward? And you've made the decision to pay out quarterly dividend of KRW 500 per share.

Does that mean that we can expect on a per annum basis about KRW 2000 per share? And also if you could provide – if you can also provide some color with regards to any additional shareholder return plans that you have in place..

Yes, I will first respond to your question about the details of our AI strategy. If I share with you our mid-term strategy first, we actually have three different areas that we are focusing on to become eventually an AICT company. Now the first pillar is bringing AI together with our IT capabilities and strengthening our core competitiveness.

A good example that I could cite is by incorporating AI capabilities in our CS centers. What we can do is we can reduce the time spend on counseling our customers and automate certain processes. Second pillar will be exploring and identifying new business opportunities by applying AI capabilities into our existing IT business and data cloud business.

Now on this area, we are planning on developing services and models that are specialized for certain verticals like the financial vertical, the public sector and also the other sectors and verticals within different industries.

We will also be developing a business process specific or dedicated solutions and models for instance like for the use of CRMs, ERPs and SCMs. Last but not least is applying AI capabilities on media and platform business, which will help us innovate the platform powered by AI.

One of the example is that at this point, we are studying and developing a different UX and UIs that will be more convenient for our user base by studying and looking into various different viewing patterns especially of our user base for the media services. Second, on dividend. We have paid down KRW 500 per share as a quarterly dividend payout.

And yes, there would need to be a resolution and decision made at the BOD level, but we will make sure that we do not fall short of the expectations of the market in conducting the quarterly dividend.

Regarding additional shareholder returns, as we've done today, as you know, we've canceled some -- we have canceled the treasury shares that we were holding. Going forward, we'll continue to resort to various different ways to make sure that we expand on the shareholder return. Next question, please..

[Foreign Language] The following question will be presented by Joonsop Kim from KB Securities. Please go ahead with your question..

[Foreign Language] Thank you for taking my question. I'm from KB Securities. I just have one question.

I see that your growth that you're seeing from the B2B services business is quite salient compared to the past? Are there any special, I guess, trends or aspects that we need to be mindful of in terms of the types of projects you're winning or the size?.

[Foreign Language] I will respond to that question about the earnings that we're getting from our B2B services and our direction forward. In our B2B services, we've seen a solid growth from our Internet broadband business and data.

I did mention this when I answered the question about AICT, but we are also bringing in AI capabilities into the realm of IT in driving up the performance of our B2B services.

Now having said that, the approach that we are taking for the B2B services market is that compared to the past, we are focused more on driving good profit and really focusing on projects that we can win that will provide us with a more fundamental boost and will give us more visibility in terms of the returns on the performance that we gain.

I said previously that there was a year-over-year growth of 5.6%, and we will continue to endeavor to make sure that we drive tangible results..

[Foreign Language] I see that there are no other questions waiting in the queue. So this brings us to the end of the first quarter 2024 earnings call of KT. Once again, thank you very much for joining us despite your busy schedule. Thank you very much for your continued interest and support..