KT Stock

Good morning, and good evening. Thank you all for joining this conference call. And now we will begin the conference of the First Quarter of Fiscal Year 2026 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. [Operator Instructions] Now we would like to turn the conference over to KT IRO.

Good afternoon. I am Sun Wook Kim, IRO of KT. We will now begin the earnings presentation for the first quarter of 2026. Please note that today's presentation includes estimates of financial and operating performance based on K-IFRS that have not been reviewed by an outside auditor. As such, other than confirmed historical data, we cannot guarantee the accuracy and completeness of financial and business-related information and such information is subject to change in the future. Now Hye-Byung Min, CFO of KT will present the 2026 Q1 earnings.

Good afternoon. I am Hye-Byung Min, CFO of KT. In Q1, KT reorganized the company's growth strategy and implementation system based on stable transition of the management and business structure and developed a new midterm shareholder return policy to solidify the foundation for corporate value enhancement. KT will evolve to become an AX platform company that leads the AI innovation of Korea. AX innovation will be a springboard for our next leap forward. First, we will make utmost effort to regain customer trust while also strengthening our core businesses by innovating information security, network and IT infrastructure.

Second, we plan to secure solid growth drivers with AX innovation-based success models such as sector-specific AX, hyper-personalized AX and new growth AX. At the same time, we will continue to seamlessly implement our corporate value up plan. In order to ensure continuity, the new midterm shareholder return policy effective from 2026 to 2028 will be equivalent to the previous policy of using 50% of stand-alone adjusted net income as resources for shareholder return. For 2026, the annual dividend per share will be a minimum of KRW 2,400 and the dividend per share for Q1 will be KRW 600. The record date is May 27 and payment date is June 11. Also, as part of our corporate value up plan for 2026, the share buyback program of KRW 250 billion will be completed by September. Next, the performance and future plan of each business division will be presented by the respective division heads before we dive into the Q1 results.

Good afternoon. I am Hyun-Jin Park, Head of the Customer Business Group. The B2C business in January experienced temporary decline in both wireless and fixed line subscribers because of the early termination penalty waiver program. However, since February, we are observing a net increase in the number of subscribers. The related sales expense, which increased last year should weigh on this year's results as it is amortized this year. But since February, the related numbers are being managed within our business plan.

The most important strategic direction this year is to regain customer trust while also pursuing sustainable growth by offering a hyper-personalized customer experience based on AX. In this regard, since February 1, we have been running a customer appreciation program to regain customer trust and strengthen customer protection. And on April 28, we launched the Customer Protection 365 Task Force to which we are concentrating company-wide resources. We are working to detect risk preemptively by leveraging AI to analyze on and off-line VOC while establishing a system to address damages incurred by customers within 24 hours based on a company-wide cooperation system. We also have the customer outreach forum to engage in direct communication with customers.

In order to provide an AX-based hyper-personalized customer experience, we are concentrating on the following: First, we will focus on what we do best, which is AI in B2C. MyK, a AI service for B2C customers will be constantly improved to offer hyper-personalized user experience and convenience. For small business owners, we have Sajang Easy AI, which offers specialized AI services for the small business segment. We will continuously develop the platform to support the success of small business owners.

Second, we will prepare the next IPTV platform to enhance the media content user experience. The platform will offer hyper-personalized customized services by using AI speakers and TV windows. Content curated to the taste of the user will be recommended while also enhancing overall convenience. Third, AI will be applied to the entire process of customer contact to deliver uninterrupted user service. AI will be introduced to customer consultation, sales, phone activation and customer service to boost operational efficiency and to ensure that customers use KT in the most convenient manner from beginning to end. By leveraging AI, we will offer products and services tailored to customer needs, provide activation service at the customers' earliest convenience and ensure continued usage of KT services through customized care.

Good afternoon. I am Bong-Gyun Kim, Head of the Enterprise Business Division. The strategic goal of KT's B2B business in 2026 is to lead the B2B AX market with specialized AI for the public sector and different industries. The 3 main pillars are basics and principles, solid growth and future readiness. Basics and principles will be our top priority in terms of securing strong fundamentals. We will rigorously fulfill our commitment to customers while ensuring a safe working environment for our employees. By doing so, we will strengthen our preemptive risk management system.

Solid growth will be driven by KT's uniquely differentiated telco capabilities and AX competitiveness. To this end, we will preoccupy the rapidly growing AX infrastructure market by winning a diverse array of large-scale projects that are expected for this year and also expand the database business by leveraging group-wide capabilities. Also, we will pioneer new markets step by step by promoting our sector-specific AX reference within each customer category and then expand our presence into neighboring sectors. Moreover, we will continuously advance our service model to reflect values desired by customers to offer telco and AX services as a package. Lastly, we will prepare for the future to secure sustainable growth. We will combine telco, which is KT's key strength with AX to deliver a standard model for each industry that addresses the key issues of customers. And based on the standard model, we will lay the foundation for mid- to long-term growth by innovating the overall B2B project implementation system across sales, consulting, execution and operations.

Good afternoon. I am Sang-won Park, Head of the AX Business Division. In Q1, KT mobilized company-wide AX capabilities and organically connected AX consulting, AI technology, platforms and operational skills to develop an AX platform-centered project implementation system that can rapidly and effectively support the customer AX journey. In addition, we have started the execution-based AX consulting service, which works together with customers on diverse sectors to define on-site AX issues and jointly verify applicable solutions. Going forward, KT's AX business will go beyond being a mere AX tech provider to become an AX value partner by working together with customers to deliver business innovation. To this end, in 2026, KT's AX business will focus on core strategic directions.

First, we will further cement the business competitiveness of our key strength, which is agentic AICC. We are incorporating business task automation based on agentic AI to develop the next-generation AICC. AICC will be more than a simple customer service channel. It will evolve to become a customized marketing channel, which we plan to deploy to a wide range of sectors. Second, we will develop a platform that considers industrial characteristics, government regulations, security and even sovereign requirements. The 5-layer AX end-to-end service will be strengthened with this platform.

Customers will be able to apply our AX platform to their business rapidly. It will be offered as a customized service that incorporates sector-specific features. We plan to provide an end-to-end AX service, which encompasses the A to Z of AX from adoption to operational optimization. Third, we will strengthen the foundation for the data for AI business, which is necessary to secure and leverage data and is a key factor for successful corporate AX adoption. Based on internally accumulated data operation experience in the process of our own AX innovation, we will advance the foundation for data usage for customers to create a key driver for AX growth.

Lastly, we will continue to expand the scope of our AX business. With customized product packaging, we will venture into finance, public, manufacturing, defense and other sectors to continue growth. Also, by commercializing managed services, which enables continuous support and optimization of the overall AX operation of customers, we will build a solid footing for long-term sustainable business growth. Thank you.

So that was the presentation by the heads of each business division on the first quarter results and the overview of the future strategic direction. Now we will move on to the financial performance of 2026 Q1. Operating revenue decreased by 1.0% Y-o-Y to KRW 6, 778.4 billion. Operating income declined by 29.9% to KRW 482.7 billion due to last year's base effect coming from property sales of the Gwangjin District development project and an increase of sales and labor costs. Net income contracted by 31.5% Y-o-Y to KRW 388.3 billion due to the decline of operating income. EBITDA decreased by 13.1% to KRW 1,440 billion. I'll go over the operating expense on the next page.

Depreciation expense should shrink. However, the amortization of increased sales expense that was incurred last year and the increase in labor cost led to a 2.3% increase Y-o-Y to KRW 6,295.7 billion. The statement of financial position is on the next page. As of 2026 Q1, debt-to-equity stood at 117.6%. Net debt-to-equity decreased by 3.9 percentage points on Y-o-Y basis to 39.9%. The total CapEx executed by KT and major group subsidiaries in 2026 Q1 was KRW 363.7 billion. On a stand-alone basis, CapEx was KRW 304.2 billion. Major subsidiaries executed KRW 59.5 billion. Now I will go over the performance of each business division. Wireless service revenue increased by 0.4% Y-o-Y to KRW 1,683 billion. Since the expiry of the early termination fee waiver program in January, the subscriber base turned to net addition. Number of subscribers grew by 2.72 million Y-o-Y to reach 29.16 million subscribers. 5G penetration as of Q1 was 82.7%.

Next is fixed line. Broadband revenue rose by 1.8% to KRW 640.2 billion, thanks to an increase in both GiGA Internet subscribers and value-added services. The media business grew by 1.3%, which was mainly driven by an increase in both IPTV subscribers and premium plans. Next is B2B services. B2B revenue decreased by 2.2% Y-o-Y due to the completion of a large-scale data center design and build project and ongoing streamlining of low-margin businesses. Moving forward, we will focus on winning B2B AX projects and strengthening the growth portfolio to deliver visible results. Next, I will go over the major subsidiaries. KT Cloud posted KRW 250.1 billion in revenue, which is similar to last year, thanks to winning public sector projects and higher utilization of the Gasan data center despite the base effect coming from last year's completion of a DBO project.

KT Estate revenue jumped by 72.9% Y-o-Y to KRW 237.4 billion, driven by robust hotel business and the Dunsan apartment complex property sales. The content subsidiaries grew by 1.9% Y-o-Y despite the divestiture of PlayD, showing balanced growth across StudioGenie, Nasmedia and Millie's Library. In particular, StudioGenie had a strong year, generating buzz and viewership with its premium original content lineup, including Honor and Climax. The company is also working to enhance competitiveness by diversifying distribution.

Today, I went over the business performance of KT for the first quarter of 2026. In Q1, we set the direction of the company, which is to become an AX platform company. We reviewed our core competitiveness and created a launch pad for growth. Going forward, we will continue to boost corporate value by expanding our AX-driven growth portfolio and implementing rigorous profit management. We look forward to your continued interest and support. Thank you.

For further details, please refer to the earnings release materials distributed earlier. We will now begin the Q&A session to answer your questions. [Operator Instructions].

[Operator Instructions] The first question will be provided by Jae-min Ahn from NH Investment & Securities.

And first, I would like to congratulate the new CFO, Hye-Byung Min; and IRO, Sun Wook Kim for their new appointments. And we really look forward to communicating with you as we further discuss KT IR issues? I have 2 questions today. One is regarding the appointment of the new CEO. So Mr. Yoon-Young Park was appointed as the new CEO. And so I would like to have a better understanding of his strategic view and whether the company has plans to communicate -- has plans to -- for the CEO to communicate with the market? My second question is regarding the first quarter stand-alone operating income. I think it did underperform the expectations. So what would your annual outlook for operating income be for 2026?

So thank you for those kind words, and we look forward to working with you as well. I think there were largely 2 questions. First was regarding the appointment of the new CEO, his strategic direction and communication plans with the market. And the second question was regarding the annual operating income outlook. Yes. And I will take your first question regarding the strategic direction of the new CEO. So the new CEO has emphasized KT's vision as to become an AX platform company. This means that we will be accelerating AX innovation based on the key strengths of KT. And in that sense, I think it's largely in line with the previous strategic direction of AICT. The 2 pillars of the AX platform company is strong fundamentals and solid growth. So we are working to establish a virtuous cycle between the 2 pillars. So the strong fundamentals will drive solid growth and then the solid growth can be reinvested in strong fundamentals. And by doing so, we believe KT can be a leader in the AX market going forward.

To go into more detail on the strong fundamentals. So I think top priority of KT at the moment is to regain customer trust. And to do that, we will be focusing on innovating information security, strengthening the quality of network infrastructure and further advancing IT infrastructure as well. And we believe that such strong fundamentals will be a cornerstone for sustainable growth. And then I will go into more detail on solid growth. So as you all know, AX innovation has become an essential factor in all industries. And to achieve that solid growth, we will be working on not only the B2C and B2C telco markets, but also we'll be expanding the AX success model to new growth areas.

And so driven by strong fundamentals and solid growth, KT to become an AX platform company would be the key strategic vision of the new CEO. And then you also asked about communication plans. So our new CEO has consistently emphasized the importance of communicating and delivering our commitments with the shareholders and the market. Currently, we are internally reviewing the right timing and format for such communication. And so once that is confirmed, we will be communicating that with the market. So then I will move on to the second question. You asked about the annual outlook for profitability. So in January, because of the reduction of our subscriber base and the completion of large-scale data center build projects, our service revenue declined. And in the cost segment, the depreciation expense decreased. However, operating costs such as sales and labor costs increased. So Q1 results were relatively lower than previous quarters.

But going into Q2, we will be having very strict management of the operating expenses with a special focus on sales cost. And so considering all those factors for the full year, we plan to achieve similar results as last year. So if you look at the last year results, if we exclude the impact of the data breach incident, adjusted operating income was around KRW 1.5 trillion. So we are working to achieve those levels. And if we also talk about the group subsidiaries, the main growth drivers, which are the real estate, DC cloud and content subsidiaries, I believe will continue to generate improved growth, and that should also have positive contribution to the overall group numbers.

The following question will be presented by Seung Woong Lee from Yuanta Securities.

I largely have 2 questions. One is regarding the shareholder return policy. And KT announced the new midterm shareholder return policy recently, and I believe it largely continues the previous one. But if profitability recovers, what would be the direction of your shareholder return policy then? Is there a possibility that the return policy can be upsized? And there is also the item of the adjustment. So in the adjustment, you included noncash items and nonordinary P&L. So can you elaborate on specifically what those 2 items mean? And the third question is regarding your wireless business. In the first quarter this year, there was the early termination waiver program that led to a reduction of the subscriber base and that had negative impact on the revenue. So what would be the growth strategy and overall revenue outlook for the full year for the wireless business?

I think largely your question has 2 sections. The shareholder return policy will be addressed by myself. And your question on the wireless business will be addressed by Mr. Park Hyun-Jin, the Head of the Customer Business division. Yes. So regarding your question on shareholder return, the mid- long term, so 2026 to 2028 shareholder return policy was announced to be 50% of net adjusted income. And so that will continuously be implemented. Yes. And then you talked about the overall direction of the return policy. So of course, we will make effort to continuously improve profitability, which also means that we are making effort to increase the dividend per share. Yes. And as you would know, according to our value up program, we are buying shares around KRW 250 billion every year. And so that program will continuously be implemented according to the value up program. And so I'd like to highlight that we are also working to indirectly increase the shareholder return.

And your next question was regarding the adjustments that we make to come with the net adjusted income number. So there are largely 2 elements. One is noncash items and the second is nonordinary P&L. So if you first look at the noncash items, it's the same as the previous policy. But for example, there is some valuation gains and losses that may be incurred from some investments or foreign funds, overseas funds that we hold. So these transactions do not actually ensue cash transactions. And then regarding the nonordinary items. So for example, we may be divesting a sizable asset or there may be some penalties that are sizable that we may need to pay. So we are trying to remove the impact of one-off to ensure that there is stable visibility of dividend payments.

Yes. And I am Hyun-Jin Park, the Head of the Customer Business division, and I will address your question regarding the wireless service business. First of all, the decrease of subscriber base we experienced in January, I think, is largely being offset at the moment given the February numbers show net additions. And as you all know, in the second half, there are some new plans that will be launched related to government policy. But the QoS is around 400 kilo bps. So we don't believe that this will have significant negative impact to our revenue.

And for the full year outlook, I think I can summarize it into 2 key words. It is efficiency and agility. We recently launched a 5G choice plan that is linked to the YouTube premium service. KT is the only telco company in Korea that was able to partner with YouTube and launch this type of plan. So we will continuously work to understand customer needs and reflect them in the design of our plans so that we can observe an increase of the ARPU. And at this point, we are not really concentrating on acquiring new customers by spending large amounts of marketing and sales costs. We will be concentrating on efforts in noncontact channels and other types of services like the used phone sales service so that we can reduce the acquisition cost and generate appropriate level of revenue.

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

I have 2 questions regarding data centers. One is the AI data center. So I believe that the customer needs and requirements for AI data centers will be different from existing B2B customers. So what are the key needs that you have understood from your discussions with customers? And what is the competitive edge KT has in this area? Second is the securing of power. So I believe that power has become the key obstacle in terms of building and securing more data centers. So how is KT working to overcome this challenge?

Thank you for the question. I think there were largely 2 questions. One was regarding AIDC. What are the customer needs and characteristics and what are KT's key strengths in this area? And second was regarding the security of power for the data centers. So to address this question, Mr. Bong-Gyun Kim, the Head of the Enterprise Business Division, will be answering your question.

Yes, I am Bong-Gyun Kim, Head of the Enterprise Business Division, and I'd like to take your questions. So first, regarding the needs of customers in the AIDC. I think there are largely 3 needs. One is the environment that the GPU is operating. So when I say environment, it includes, like you already mentioned today, the securing of power, the heating. And when heating occurs, can it be well managed by the facilities there. So the overall environment will be one key need. Second will be the build-out. So you will have multiple racks and all those racks will be holding GPUs. Those racks will be connected to each other. We call this the clustering capability, and that is also one key aspect that the customers look at.

And the third is operations. So if there is a failure in one of the GPUs, can you detect it and take that up quickly and reconnect all of the racks. So we call that reclustering ability. So largely, there are 3 aspects. One is the environment, second is the build and third is the operations. And I'll move on to KT's key strengths. So we have very long experience and track record in this area going back to IDCs. And we are also operating the largest number of data centers as well. So that experience is key strength. Yes. And so in terms of the accumulation of the experience, the skills and capabilities, I think KT would be by far top notch. And we are also continuously enhancing the clustering abilities that I mentioned earlier as well.

In terms of the environment, in the past, for the DCs, air cooling was sufficient. But because the new data centers use very high voltage, it needs to be -- it usually uses liquid cooling. Yes. And I would like to highlight that KT is the first company in Korea to commercialize this liquid cooling data center. So we mentioned the Gasan data center, which has been recently established, and the Gasan data center uses this type of cooling system. And currently, we are in the testing period.

I will move on to your question regarding securing power. Yes. In relative terms, I believe the power is more -- it does more ample power in the areas outside of Seoul rather than Seoul. So in the Seoul and largely Seoul metropolitan area, we will be focusing on the expansion of low voltage, so the existing type data centers. And outside of Seoul, where the power can be more abundant, we will be laying out the AIDC infrastructure. In terms of execution strategy, we are planning to buy and lease land that already has secured the necessary power. Yes. So to summarize, we have a 2-track strategy. So we have different strategy for Seoul and metropolitan Seoul and the areas outside of Seoul. And as for the execution strategy, we will be securing land that has already confirmed the procurement of power.

The following question will be presented by Charlie Bai from HSBC.

Congratulations on new management Board. I have only one follow-up question on AIDC. May I know more about your new AIDC buildup plan? And may I know if you have any full year revenue target for the KT Cloud business?

Thank you for those questions. I think your first question is related to the capacity plans that we have for AIDC. So unfortunately, we are not able to share the exact numbers that we have for AIDC, but we have the goal to achieve around 500 megawatts within 5 years. Yes. And regarding your question on KT Cloud, so let me try to answer it this way. I think we will be able to continue double-digit growth this year for the revenue. Yes. And the 500-megawatt number that I just shared with you, I want to clarify that it is for our total data center capacity.

There are no questions in the queue right now.

There are no further questions, we will now conclude the Q&A session. We appreciate your active participation and interest. Thank you for joining us today despite your busy schedules. This concludes the earnings call for the first quarter of 2026. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Interpreted] 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. [Operator Instructions] Now we would like to turn the conference over to KT IRO.

[Interpreted] Good afternoon. This is Jaegil Choi, KT's IRO. Let's begin FY 2025 Earnings Presentation of KT Corp.

Please be reminded that today's presentation includes K-IFRS-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, Jang Min, to walk through the earnings for FY 2025.

[Interpreted] Good afternoon. This is Jang Min, KT's CFO. Before presenting the earnings for FY '25, 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.

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 stand-alone operating profit recorded more than a double-digit growth year-over-year, which is a testament to enhanced fundamental earnings capacity.

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.

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

Also last November, we opened Gasan 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. .

2025 year-end dividend is set KRW 600 per share with a 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 KRW 2000 back in 2024, rising to KRW 2,400 in 2025. Following 2025 under the corporate value enhancement plan, we are planning on KRW 250 billion of share buyback and cancellation this year.

Efforts 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 plan as well.

The BoD of KT started the process to appoint CEO as of November, the 4rth and confirmed candidate Park Yoon-young as the next CEO on December, the 16th. He is known for his expertise in B2B in future technologies and is expected to take office as the CEO subject to AGM approval.

KT, once again, is committed to strengthening the company's fundamentals and will do its utmost to rebuild customer 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 costs 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.

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 organization and their roles.

We are also planning on around KRW 1 trillion investment into security for 5 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 up plan will be implemented as planned, including the KRW 250 billion of share buyback and cancellation as previously mentioned. .

Now moving on to FY '25 financial performance. Operating revenue increased 6.9% on year, reporting KRW 28,244.2 billion, Operating profit increased 205% year-over-year, reaching KRW 2,469.1 billion 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 KRW 1,836.8 billion. EBITDA was up 35.5% year-over-year to KRW 6,349.3 billion.

Next, operating expense. Operating expense was flat year-on-year, recording KRW 25,775.1 billion, due to lower labor cost 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 spend by KT and its major subsidiaries in 2025 was KRW 2,939.7 billion. KT separate basis was KRW 2,143.9 billion, while major subsidiaries spent KRW 795.8 billion in CapEx.

Moving on to breakdown of business performance. Wireless revenue was up 2.8% on year to KRW 7,155.4 billion. Revenue growth was driven by subscriber expansion around 5G and 5G penetration as of end of '25 recorded 81.8%.

Next, fixed line. Broadband revenue posted 1.9% year-over-year growth, reporting KRW 2,533.5 billion 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 KRW 658.9 billion.

Next, on B2B services. 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. Now despite the divestment of PlayD, our content subsidiaries revenue stayed flat year-over-year, following top line growth from StudioGenie, Nasmedia 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 KRW 997.5 billion. KT Estate revenue was up 15.9% year-on-year to KRW 719.3 billion on the impact of strong hotel business and new property development projects.

This brings me to the end of the FY 2025 full year performance briefing for KT. Once again, we 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.

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 step-wise increase in corporate value. We ask for continued interest from investors and analysts.

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

[Interpreted] We will now take your questions. [Operator Instructions] The first question will be provided by Wonseok Hwang from Shinhan Securities.

[Interpreted] I have 2 questions that I would like to ask. The first one, I 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 has shown?

[Interpreted] I would like to first respond to the first question that you pose 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 KRW 450 billion. But not all of that expense is going to be booked as cost under our accounts because it would actually depend on to what extent the customer actually uses up those benefits.

So in terms of the cost that was actually incurred in 2025 and what is most certain to be accrued in 2026 has already booked -- 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.

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.

Now first or first mentioned in my opening presentation, we've actually increased the DPS by 20% from the 2024 KRW 2000 per share to KRW 2,400 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.

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 a 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 -- in line with those stance.

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.

Next question, please?

[Interpreted] The following question will be presented by Minha Choi from Samsung Securities.

[Interpreted] I am [indiscernible] from Samsung Securities. I would also like to ask you 2 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 was some churn of your subscribers, I 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?

[Interpreted] 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 impact was on a full year basis, a net addition of subscribers. 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 more -- 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.

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 lease 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. 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.

And also on KT Cloud 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.

[Interpreted] 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.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Interpreted] Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the third 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. [Operator Instructions]

Now we would like to turn the conference over to KT IRO.

[Interpreted] Good afternoon. This is Choi Jaegil, KT's IRO. We will begin the third quarter 2025 earnings presentation.

Please be reminded that today's presentation includes K-IFRS-based financial estimates and operating results, which have not yet been 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.

With that said, let me now invite our CFO, Jang Min, to discuss KT's Q3 2025 earnings.

[Interpreted] Good afternoon. This is Jang Min, KT's CFO. Before going into the earnings for Q3 2025, I would like to extend my sincere apologies to our customers and investors for the unauthorized micro payments and infringement incident perpetrated through the illegal base station connection.

KT is currently implementing a comprehensive plan to compensate customers affected by such unauthorized micro payments and personal information breach. Starting November 5, KT is replacing used SIM free of charge for all of its customers. Going forward, KT will do its utmost to put in place technical and system-based guardrails to protect customers, and to ensure that such incidents are prevented through preemptive and far-reaching security measures.

On November 4, we officially began the process for CEO nomination. KT's Director Candidate Nomination Committee, comprising of all of the independent auditors, will select a pool of candidates from various different channels to recommend one candidate to the Board of Directors before the end of the year. BOD will then make the final confirmation and the new CEO will be appointed at the General Meeting of Shareholders.

Now I will move on to KT's third quarter earnings for 2025. Based on our telco business and continuing growth of group's core portfolio, as well as real estate profit gained from Gwangjin District development, KT sustained growth in revenue and operating profit this quarter. We are also collaborating with global big tech companies to launch specific services, and have secured a solid footing for AX business execution by opening KT Innovation Hub, placing momentum behind the transformation towards an AICT company.

We released consecutively our proprietary model, Mi:dm2.0, SOTA K, which is a model developed in collaboration with Microsoft, as well as Llama K, based on Meta's open source technology, introducing AI LLM lineup catering to Korean requirements. Under the AI multimodal strategy, we will expand AI-driven usage base across various verticals including media press, education, public and financial domains.

In October, we opened KT Innovation Hub under strategic partnership with Microsoft, where we can hold exhibitions on AX and AI experience and provide industry-specific consulting services. AI experts of both companies, together with our clients, will be working together in the hub to explore new AX business opportunities.

Third quarter dividend is KRW 600 per share as we maintained 20% higher dividend payout year-over-year as was the case in Q1 and Q2. Corporate value enhancement plan also is ongoing as planned. We had concrete results in securing capacity required for structural transformation into becoming an ICT company, with SOTA K launch being one of such endeavors. We continue to work on streamlining assets and driving profitability enhancements through rationalizing low-margin businesses and liquidation of noncore assets.

As part of the value enhancement plan, we also completed KRW 250 billion share buyback on 13th of August.

Next on financial performance for Q3 of '25. Operating revenue was up 7.1% year-over-year, reporting KRW 7.1267 trillion and sustained growth from core businesses, including telecom, real estate, cloud and data center and profitability improvement efforts as well as onetime real estate sales gains. Operating profit was up 16% Y-o-Y, reporting KRW 538.2 billion. Net income was up 16.2% Y-o-Y, recording KRW 445.3 billion, driven by increase in operating profit. EBITDA increased 5.2% Y-o-Y, reaching KRW 1.5039 trillion.

Next page, I will walk through the operating expense items. Operating expense increased 6.4% year-on-year to KRW 6.5886 trillion, an increase in cost of goods sold, cost of services and selling expense.

Next is the financial position of the company. Debt-to-equity ratio at end of September 2025 was 123.3%, while our net debt ratio went up 4.2 percentage points year-over-year, reaching 34.5%.

Next, on CapEx. Total CapEx up to the third quarter of '25 of KT and its main subsidiaries accounted for KRW 1.9637 trillion. KT's separate basis CapEx was KRW 1.3295 trillion, while major subsidiaries spent KRW 634.2 billion.

Next, performance breakdown by business. Wireless revenue was up 4% year-on-year, reaching KRW 1.8096 trillion. Subscriber base expansion around 5G drove the top line growth, with 5G penetration as of third quarter end reaching 80.7%.

Next is fixed-line business. Broadband internet revenue increased 2.3% year-on-year to KRW 636.7 billion on the back of GiGA Internet subscriber growth and value-added services. Backed by higher IPTV subscriber net addition and sale of premium plans, media business posted growth of 3.1% year-over-year. Home telephony revenue fell 6.6% year-over-year to KRW 160.9 billion.

Next is B2B business. B2B service revenue reported 0.7% year-over-year growth on the back of enterprise messaging, corporate broadband and network-based business growth, despite streamlining of low-margin businesses.

For the AI and IT business, revenue came down 5.7% year-over-year due to structural enhancement work done on certain businesses in line with our selective focus strategy, notwithstanding AICC project wins from large customers and ongoing monetization.

Next is performance of major subsidiaries. Revenue from content subsidiaries dipped 1.8% year-over-year due to less number of original title production.

KT cloud revenue was up 20.3% year-on-year, following higher data center usage by global clients and AI cloud demand growth. KT Estate revenue was up 23.9% year-on-year to KRW 186.9 billion, backed by good performance from hotel business and new development projects.

This ends report on KT's third quarter earnings results. Once again, I would like to extend my sincere apology for causing concern over unauthorized micro payments and the infringement incident. KT will cooperate with the government's investigation process and exert our utmost effort in ensuring network security and stronger customer protection. Also, we will bring true AI CT transformation. And by successfully implementing corporate value enhancement plan, we'll endeavor to drive stepwise upgrade in KT's corporate value.

Once again, thank you to our investors and analysts for your continued interest and support.

[Interpreted] For more information, please refer to the document and materials that we had previously circulated. We will now begin the Q&A session. To give as much opportunity as possible, I would like to ask that you limit your questions to 2 per person.

[Interpreted] [Operator Instructions] The first question will be provided by Hoi Jae Kim from Daishin Securities.

[Interpreted] I'm Kim Hoi Jae from Daishin Securities. You were able to record good financial performance up until the third quarter. I know that for the fourth quarter, usually there is a seasonality expense-related impact, so it will be hard to make that projection. But still I would like to get some color as to what your projection is going forward for the fourth quarter.

And you've decided to pay out dividend per share of KRW 600 up until Q3. Just wondering whether there is further upside to the dividend payment for -- when the fourth quarter comes? And also until -- so in 2025, you had decided to do a share buyback and cancellation in the amount amounting to KRW 1 trillion. Just wondering whether in 2026, you will be able to grow that size of share buyback and cancellations?

[Interpreted] Thank you for that question. Responding to the question on Q4 outlook. As you have correctly mentioned, in the fourth quarter, there are usually seasonality issue. And also, we have to consider all the measures to compensate for customers. And also, there are certain uncertainties that currently exists relating to the fines or the penalties that we will be subject to. So at this point, we are making a quite conservative stance when it comes to making a forecast going forward, but we are putting our utmost efforts to minimize any impact or any damage to our customers and also to our financials.

Now, however, because we were able to report a quite solid performance up until Q3, if we were to make projections on the full year 2025 financials, thanks to our efforts in growing our top line growth, at the same time, improving the profitability and considering that there was also a one-off gain from the NCP business, the real estate, and also due to the fact that we are able to drive our core business-centric group affiliate growth, we believe that both on a consolidated and separate basis, we could achieve a year-over-year growth.

On the second question, basically, when it comes to the dividends, yes, there will be a onetime impact coming from this hacking incident, and there will be certain uncertainties in terms of its impact on the financials. However, we will be considering the annual based financial performance as well as the expectations that the shareholders have, based upon which I am most certain that our BoD will make a reasonable decision.

So lastly, regarding our announcement of the plan to do the share buyback and the cancellation amounting to a total size of KRW 1 trillion, so for this year, we had already conducted the buyback and cancellation amounting to KRW 250 billion. And your question was whether for next year, can you expect about the same amount or more bigger as we go forward. I can tell you that our value up plan will continue to be implemented. And in consideration of the confidence that the market is giving us, we will make sure that either this could happen on the same size basis as it was for this year, for next year or there could be certain adjustments. We will very flexibly and nimbly respond to changes in the overall operational backdrop and deciding on the specific size.

Next question, please.

[Interpreted] The following question will be presented by Chan-Young Lee from Eugene Investment & Securities.

[Interpreted] I am Lee Chan-Young from Eugene Investment & Securities. My question relates to the recent hacking incident. I would like to understand as to what the financial impact will be in line with your compensation to the customers and your subscribers, and also for the measures that you are putting in place to make sure that you prevent a recurrence of such incident going forward. And I would like to know the extent of this expense that is currently captured in Q3 numbers. And also going forward, what will be the timing or the scope of that expense?

[Interpreted] Thank you for that question. As I've mentioned before, we have put in place a measure and a compensation plan to compensate for any harm that has been inflicted due to the unauthorized micropayment incident as well as the data breach issue. Now -- and also on November 5, we had made the announcement that we will be replacing the used SIM cards of all of the KT customers. And if and when we go through this investigation process by the government as well as the police, if additional harm is identified, then the -- eventually, the final amount of the compensation will be determined.

Now in terms of the timing as well as the size of this expense, we cannot make a perfect prediction based on where we are today. However, we believe that in terms of the used SIM chip replacement, the relevant costs will be recognized under Q4 figures. There is also free data that we are planning to provide and KRW 150,000 discount on the handset tariff as well as certain other expenses. Now these expenses, when they are actually incurred, that would be the timing upon which it will be booked in our financials.

Now we've also already made an announcement to the market that for the coming 5 years, that we have put in place an information security-related investment in the amount that exceeds KRW 1 trillion. We've actually communicated that plant was into the market. And looking back at our track record, we've been investing about KRW 120 billion to KRW 130 billion on a per annum basis for this security purposes. So we believe that this KRW 1 trillion, which we'll be investing in the upcoming 5 years, is not going to be overly burdensome for the company.

Next question, please.

[Interpreted] The following question will be presented by Eun Jung Shin from DB Securities.

[Interpreted] I just have one question. Your CEO appointment process has just begun. Can you just walk us through the process under which your new CEO will be appointed? And when there is a new CEO that comes into office, will there be any changes to the current value of program that the company has?

[Interpreted] Thank you for that question. Let me walk you through our CEO appointment process. We've actually officially kick started the discussion process on appointment of the new CEO as of the November 4. And under the BoD rules, there is going to be a director candidate recommendation committee that's going to be comprised of all of our independent directors, who are 8 of them in total, and they will go through the relevant processes.

So first off, we begin with the candidacy pool of the CEO, who's going to be recommended by a third party and outside entity. And also, we will go through an open call process as well and also receive recommendation from the current shareholders as well as include a candidate from the -- internally from inside the company. So the Director of Candidates Recommendation Committee will then go through the screening and vetting process based upon the documentation, and we'll also engage in interviews. And by the end of the year, the committee is going to select one CEO candidate to be tabled at the BoD.

So this one candidate that is recommended by the recommendation committee is going to be tabled at the BoD, BOD making the final confirmation on that candidate, and this candidate will go through the General Meeting of Shareholders deliberation process in 2026 to be finally appointed as the CEO of the company.

Lastly, your question on the consistency of the sustainability of the current value up plan that's in place. Now the company went through the BoD resolution last November and had made appropriate market disclosure. And we also went through the disclosure on the implementation progress in May as well. And so I do not think that there is a correlation between the CEO change and the changes to the value up plan. Basically, because of a new CEO, there is not -- the value up plan itself is going to be made invalid for instance, because the BoD understands the direction for the company that is deflated in the value up plan and actually, the value up plan is a commitment and promise that we make to the market. And therefore, I believe the action plans that are included in the plan itself is going to be sustained.

[Interpreted] There are no questions in the queue right now.

[Interpreted] With no questions in the queue. We would now like to close the Q&A session. Thank you, everyone, for your interest and for your questions. And once again, thank you very much for joining us despite your very busy schedules. This ends KT's third quarter 2025 earnings call. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]