[Korean] Good morning, and good evening. First of all, thank you all for joining this conference call and now we'll be begin the conference of the 2013 Third Quarter Preliminary Earnings Results by KT. We would like to have welcoming remarks from Mr. Youngwoo Kim, KT IRO; and then Mr. Bum Joon Kim, 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 our Mr. Youngwoo Kim, KT IRO.

[Korean] Good afternoon. I am Youngwoo Kim, IRO of KT. We will now begin our third quarter 2013 earnings conference call. Our call is being webcasted and you can follow the slides as we make the presentation. [Korean] Since Q1 2011, we have been presenting consolidated performance based on the IFRS standards. Also, please note that Q3 2013 consolidated statement includes 62 companies, including KT. We will now have our CFO, Bum Joon Kim, begin the presentation on Q3 earnings performance.

[Korean] Good afternoon. I am Bum Joon Kim, CFO of KT. In mid-September, KT launched world's first wideband LTE services providing faster speed and better quality to the LTE user base, thereby opening up a new chapter in the history of LTE communication. [Korean] Aside from the wideband LTE service launch, in Q3 we laid the basis for growth for the kt Group companies on the back of continuous growth of our group companies and active overseas expansion. [Korean] Since joining kt Group, kt Skylife, kt Rental, BC Card and other major subsidiaries are posting better performance. Also, companies that were newly established last December, such as kt sat, kt Media Hub and kt Estate, are making substantial contribution to the group's bottom line through leveraging their capabilities in their respective field. [Korean] Most of kt Group companies, including major subsidiaries, are leading the growth of the group, showing great improvements and performance with their contribution to operating profit coming in at KRW 160.8 billion, which is a large increase quarter-on-quarter. [Korean] We are committed to leading the virtual goods ecosystem based on our world's best network infrastructure and Korea's biggest All-IP subscriber base. Also, through further strengthening of ICT capabilities, we will become a global ICT new frontier, providing smart life services. I would now like to walk you through our Q3 business results. [Korean] Q3 operating profit -- revenue, excuse me, declined 7.3% year-on-year to KRW 5,734.6 billion on the back of decline in fixed and wireless revenue and merchandise revenue. But service revenue alone, excluding merchandise revenue, increased 1.2% year-on-year to the KRW 4,935 billion. [Korean] Operating profit increased 22.7% year-on-year to KRW 307.8 billion, driven by significant improvement in subsidiarity performance. Net income declined 63.1% year-on-year to KRW 136.3 billion due to a fall in nonoperating…

[Korean] For more details, please refer to the materials that we've circulated. We will now begin the Q&A session.

[Korean] Now Q&A session will begin [Operator Instructions] [Korean] The first questions will be provided by Mr. Kim Hoe Jae from Daishin Securities and the next will question will be provided by Mr. Yang Jong In from Hangul Investment Securities.

[Korean] Yes. So I would like to ask you 3 questions. Could you please, first of all, explain your dividend policy after year 2013? Second question is, that in the month of October, we are seeing smaller number of people actually moving to another carrier through MNP but still, your number of subscribers is declining. Could you explain as to what your subscriber strategy is after October? Third question is, this quarter, you have achieved a better performance in terms of contribution by subsidiaries to your bottom line, much higher than the guidance that you've shared with us in the second quarter. Could you once again walk us through the guidance?

Thank you for your question. I'll answer the first question, and we'll have the Chief Operating Officer of our sales answer the current marketing environment and then I'll go on with the subsidiary companies.

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With respect to dividend policy, it's quite clear in the second term of our CEO, we have mentioned that we will keep a flat rate of KRW 2,000 per share during his term. So at this point, that is still in play.

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[Korean] If you look at the performance of October, some of the positive aspects that we are seeing is that the actual sales volume is significantly higher compared to the month of September. And if you look at the number of subscribers, the MNP subscribers moving to SKT and LG U+, there's been a significant reduction in the number of subscribers leaving our services. I believe that this is due to the fact that the consumers are really accepting the concept of wideband LTE. And I believe such trend to continue for the time being and in the month of November and December as well.

To address your third question, just be clear, third quarter earnings increase over that of second quarter is about KRW 5.7 billion. In the beginning of our forecasting, we had some smaller amounts of profit that we thought would come from BC Cards, Skylife and other companies. But as it turns out, as the year was going forward, a lot of these companies performed a lot better than we expected. So they are increasing at this time. [Korean] To name a few, kt Rental, Skylife, all improved over that of second quarter. And then also, the ones that we -- unexpectedly doing well are kt Capital, kt ens, ktds, kt submarine, Media Hub, all these companies have done quite well at this time. [Korean] To look at the fourth quarter, I think it might not be as good as third quarter for these companies. It's a year end, so I wouldn't expect this much, maybe around the same or a little bit lower. But one other comment that I'd like to give is that the 3 recently spun-off companies like kt Media Hub, kt sat and kt Estate, are 100% wholly owned. So their profits should be looked at the same as kt at this point. It has sort of a -- a bit of a -- the number being deleted from KT but added there. So in essence, it should be looked at as the same company. [Korean]

[Korean] The next questions will be presented by Mr. Yang Jong In from Hangul Investment Securities and the following questions will be presented by Ms. Moon Jee-Hyun from KDB Daewoo Securities.

[Korean] I would like to pose 3 questions. So the first is, could you provide an overall picture with regards to the reduction of CapEx in year 2014? Second question is that in the fourth quarter, I would like to understand how much of asset sales is going to take place, especially capitalizing on your idle assets? The third question, this quarter, your ARPU was not very good. What is your outlook for ARPU for the fourth quarter and next year?

I'll address the first question of CapEx. It is clear that we want to bring CapEx down from this year. Last year was quite high and this year was, again, quite high and I mentioned this in the second quarter earnings call as well. We're still going through the business plan, but I would say a soft target at this time, which we will clarify and define towards the end of this year, but it will be clear to say near KRW 3 trillion, around there, is what I would -- what would help your modeling. [Korean] To address your below the operating line activities, in the third quarter of this year, we had a total revenue of 130 -- I'm sorry, KRW 13.4 billion in revenue from the copper sales, and we did not have any real estate sales in the third quarter. [Korean] Looking at fourth quarter, we will have a little bit of additional copper wire sales, but this is again because of the global copper prices are still kind of falling a little bit. I think I mentioned in the second quarter I know it's in KRW 30 billion to KRW 60 billion. I think it's still around there but a little -- perhaps on the top side is a little less than KRW 60 billion. [Korean] And to give a little bit more clarity on real estate liquidation in the fourth quarter, I think we're looking at a little less than KRW 100 billion in the fourth quarter this year. And again, this is because it's transaction based, the numbers could change. [Korean]

[Korean] In terms of the ARPU number, yes, this quarter, ARPU was not very good because of the double data promotion. Because of that, the additional revenue from the data services had actually declined. And also, there were lower levels of acquisition of LTE subscribers. But we've decided that this double data promotion has ended and we will not do it again. And also, if you look at the trend for subscription acquisition -- subscriber acquisition in October, we are seeing quite positive trend, and we expect that trend to continue going forward. So we expect ARPU to improve and grow in the fourth quarter, and next year, our ARPU growth target is at 4%.

[Korean] The next questions will be presented by Ms. Moon Jee-Hyun from KDB Daewoo Securities. And the following questions will be presented by Mr. Dan Kong from Deutsche Securities.

[Korean] I would like to ask 2 questions, the first has to do with your wireless services. You mentioned during the last quarter's conference call that you would put an effort to recover and improve your distribution and sales network. To what extent were you able to achieve that recovery? And also, in the month of October, there were quite competitive subsidy spending and KCC has launched an investigation. So could you provide a picture as to what the subsidy spending landscape will be like in the coming months of November and December? And how do you view the market going forward? For the media and contents business, there's been an increase in the tariffs [ph] or monthly fee levels. Since KT has the highest level of VOD-related market share, what impact would this have on your revenue and your business?

[Korean] In terms of our sales network, our efforts to recover the situation is ongoing. I would have to admit that it will be time consuming, but quite sure that there will be improvement. And I think the growth and the sales volume in the month of October is a positive signal to the fact that there is a recovery undergoing. In terms of the subsidy for October, the reason why the subsidy level was high is because our actual sales volume was high. It is not necessarily because of the per handset subsidy had increased. And our response to the market going forward is that we will maintain a stabilized -- stabilization approach for November and December, and we will conduct our activities in a manner that is most efficient. [Korean] In terms of our VOD services compared to the second quarter, in the third quarter, we have recorded about 20% growth. And also, on top of that, because of such trend, we expect that next year, we will see also growth by a large margin. In terms of PPV services, we think there is great potential for growth going forward because only 1/3 of our users actually make the PPV purchase. So if we can actually increase the rate of purchase, then there could be much bigger room for growth. So we will have our strategies and have our strategic focus on those aspects.

[Korean] The following questions will be presented by Mr. Dan Kong from Deutsche Securities.

First, on your IPTV business, we recognize that it's one of your strong parts. But we just want to know that if you have a preference between OTV and OTS? And also, in an MPV perspective, I mean, which service actually provides higher MPV because we know that OTS, actually, you can share costs with Skylife? My second question is on your wireless business. Since you already provided a lot of color on your ARPU, now on your subscriber target, I mean, what kind of strategies do you have going into 4Q and beyond to actually achieve your subscriber target that your Chairman actually mentioned earlier in October? [Korean]

[Korean] In terms of OTV and OTS, these are different services that will cater to different needs of the subscribers because there are certain locations and areas where olleh tv, Skylife OTS cannot be provided, and also, there are a group of users who prefer more low-end service that OTV provides. So it's not necessarily a question of preference but it's more of a -- it's a complement -- these 2 products have complementary relationships. And in terms of MPV, we still believe that IPTV has great potential for growth. So rather than talking about MPV for each of the services, basically, our target and objective is geared towards expanding our subscriber base. [Korean] You asked about the subscriber acquisitions after the fourth quarter. I believe that if we implement the strategies very opposite to the reason why we lost our subscribers, we will be able to kick-start and increase our subscriber acquisition. Actually, since the launch of our wideband LTE services, customers' awareness level on wideband LTE had actually increased, and especially, they associate KT the most with the wideband LTE service. And also, as the competitors have now also started wideband LTE, I believe that when customers are pushed to a situation where they would have to make a choice, when that situation comes, I think KT is at a more advantageous position. [Korean] Another important pillar is strengthening and solidifying our sales and distribution networks. There are many programs to achieve that goal, and our network has been once more activated. Now what's more important is to make sure that this trend continues so that it is firmly established.

[Korean] Currently, there is no participant with a question. [Korean] The next questions will be presented by Mr. Dan Kong from Deutsche Securities.

[Korean] Follow-on question. I mean, is there actually a difference in terms of MPV between OTS and OTV, I mean, amongst the subscribers?

That's a very important question as well and it is quite sensitive material. So unfortunately, we do not disclose that exact MPV per customer. Even our wireless customers, these are very sensitive marketing information. So we don't -- and we don't disclose profitability of each business either. [Korean]

[Korean] Currently, there is no participant with a question. [Korean] The next question will be presented by Mr. Hwang Seung-Taek from Hana Investment Securities.

[Korean] For your PSTN revenue, there was a quite significant reduction in the -- during the Q3. Is this a structural reason? Or is this just a temporary one-off phenomenon?

Cumulative revenue decline is KRW 320 billion for the year over that last year. We estimated around KRW 300 billion, but it's actually more than that. [Korean] We identified some of the key issues, one would be substitution from fixed to wireless [Korean], slowing down of new activations [Korean] and also the free Internet pricing plan [Korean]. So all that put together has made the -- what we would want to see, sort of softening of the revenue, but unfortunately it's sort of still showing a straight line, which is always a challenge to us. [Korean]

[Korean]

[Korean]

[Korean] Well, if there are no further questions, we will close the Q&A session. Thank you very much for your questions. Once again, we thank all of you for joining. This has been KT's 2013 Third Quarter Earnings Conference Call. Thank you very much.