Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the 2021 First Quarter Earnings Results by KT. We would like to have welcoming remarks from Mr. Seung-Hoon Chi, KT IRO. And then, Mr. Young-Jin 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 Mr. Seung-Hoon Chi, KT IRO.

Good afternoon. I’ m Chi Seung-Hoon, KT’ s IRO. We are webcasting this earnings release call. And you can also follow the slides as you listen in on the call. Let us now begin KT’ s Q1 2021 Earnings Presentation. Before we begin, please note that today’ s presentation includes financial estimates and operating results based on K-IFRS standards and are yet to be reviewed by an outside auditor. As we cannot ensure accuracy and completeness of financial and business data, except for historical performances, please be reminded that these figures are subject to changes. Now, I will invite our CFO, Kim Young-Jin, for his greetings and presentation on Q1 ‘ 21 earnings.

Good afternoon. I’ m Kim Young-Jin, KT’ s CFO. I will begin with Q1 ‘ 21 key business highlights. KT’ s consolidated revenue was KRW 6,029.4 billion, service revenue was KRW 5,230.4 billion and operating profit came in at KRW 444.2 billion. Driven by balanced growth across B2B, financial, media and content and other platform businesses and incumbent core businesses of 5G and Internet, revenue was up 3.4% on year, and operating profit was up 15.4% year-over-year. Service basis revenue was up 3.3% on year to KRW 4,574.5 billion, while operating profit was up 21.4% on year, reporting KRW 366 billion. KT in Q1 has aggressively expanded its platform businesses, reorganized business portfolio around growth businesses and once again was able to confirm the feasibility of success as a Digico. KT’ s main core business, which is AI and DX, was up 7.5% on year driven by the growth of platform businesses, including AI and cloud. Also, untapped or contact-free environment has geared up data traffic, which led to top line growth of B2B including enterprise messaging. In the midst of company’ s growing demand for digital transformation, KT has been launching DX services, mostly around areas that KT can excel in and that which has potential for growth. For instance, AI contact centers provide services that adopt DX on top of existing telecom services for insurance and financial, which are the sectors that traditionally operate call centers. And we are expanding to other service areas, i.e., public and retail. In development currently is a voice call DX for small merchants, which uses voice bot for booking and information delivery. For CITS, which is a next-generation, intelligent, digital-based transport system, we started off with a successful reference in Jeju Island and one project from Ulsan and Gwangju city. And we…

[Operator Instructions] The first question will be provided by Kim Joonsop from KB Securities. And the next question will be provided by Choi Minha from Samsung Securities.

I’ m Kim Joonsop from KB Securities. First of all, congratulations to you for such a great performance. Would like to first understand what management’ s assessment is behind such a good performance this quarter. That’ s the first question. Second is, it seems like your PSTN top line erosion speed has slowed. Once again, what’ s the reason behind that?

Thank you, Mr. Kim Joonsop for your question. I will respond to both of those questions. First question relates to what KT’ s management’ s view is regarding the causes behind the good performance. Well, as mentioned during the presentation that I had just made, well, basically, the good performance is attributable to good results from KT’ s core businesses as well as from AI and DX and growth in top line from our affiliates and subsidiaries, which drove a year-over-year improvement in operating profit. Now first of all, we call this business -- or our traditional telecom business the MIT business, which includes mobile, Internet and TV. We’ ve seen both on the wireless and Internet increases in 5G subscribers as well as overall improvement in the acquisition of premium subscribers, which drove top line growth. In terms of Internet, we’ ve seen growth in subscriber base for GiGA Wire as well. And also, we’ ve seen monthly IPTV-related fees actually been -- we were making the usage fees of IPTV had also gone up and also home shopping. Transmission commission has also had a positive impact, while the revenues from advertising and platform business have also contributed to the good performance. Also on top of that, if you look at our -- one of our DX digital transformation platform-related businesses, which is a messaging business, we’ ve been able to achieve double-digit growth. And also, we launched a call check-in service back in October. Although the absolute size is not that significant at this point in time, we are seeing quite steep growth in terms of subscriber numbers as well as top line revenue. For IDC, with the opening of the Yongsan IDC Center, we’ ve been starting to get some inflow of good performance being booked and…

The next question will be presented by Choi Minha from Samsung Securities. And the following question will be presented by Jang Min June from Kiwoom Securities.

I’ m from Samsung Securities. I’ m Choi Minha. I would like to ask you 2 questions. We have seen quite steady and stable growth from your wireless business, including the number of subscribers and the earnings and revenue. And the earnings from your media and content subsidiaries have been quite positive. But overall, there seems to be subsidiaries that have been negatively impacted by COVID pandemic. Could you provide some color as to what your projection is going forward for these affiliates? And also, if you could give us a hint as to when, on a total aggregate basis, you expect a turnaround in operating profit of your group affiliates.

Thank you, Ms. Choi Minha. You asked question regarding group affiliates. You asked about our forecast of group affiliate earnings going forward. I believe key subsidiaries are BC Card, KT Estate and KT Skylife. In terms of BC Card last year, on the back of the COVID pandemic, the overall domestic acquiring volume as well as UnionPay-based acquired volume, with the fall in the Chinese inbound tourists, have fallen. In terms of the domestic acquiring volumes for Q1 and on a year-over-year basis, there was an upward impact of around KRW 40 billion with the recovery of consumption, and that had a positive impact. Now on the UnionPay-based credit cards, still we haven’ t been able to recover the inbound tourist demand or consumption, so that still had some negative impact. So all in all, we will make sure that we exert our utmost effort so that in terms of the profit, we could at least achieve the level of the previous year. Now for KT Estate, last year, there was some one-off sales-related revenues from selling appointments and office sales in Busan and Daegu area. But with that factor now eliminated, we expect for this year that there will be some decline. Now for the hotel business, on a year-to-date basis, we are seeing some signs of recovery. But still, there is lingering impact from the pandemic, so we are currently taking a quite conservative projection on that business. However, there is a slight increase from the rental-related revenue. So all in all, if you look at KT Estate, once again, because that one-off sales-related revenue impact is now ended, we expect on an overall basis, there would be a slight dip in terms of the top line. For Skylife, they actually have their earnings release call schedule for…

The next question will be presented by Jang Min June from Kiwoom Securities. And the following question will be presented by Stanley Yang from JPMorgan.

I’ m Jang Min June from Kiwoom Securities. Two questions. First, in terms of your wireless business, beginning of the year, you communicated about 4% year-over-year growth as your guidance. Now that we have passed the first quarter, the growth rate is around 2%. What guidance would you be able to give us for the entire year since we now have the track record of Q1? Second question, just want to confirm your plan or your position regarding upping or increasing your payout ratio. There seems to be certain issues or talk around your dividend-related, I guess, practices. So could you just share with us what your position is regarding dividend payout?

Thank you, Mr. Jang Min Jun for your question. First, you asked us about any possible adjustments or updates regarding the guidance of 4% growth of our service revenue. Regarding any updates on the 4% growth guidance for our wireless service revenue, that guidance still holds valid. As we see 5G taking up and increasing its penetration and we see a number of subscribers taking high ARPU subscribers are also growing. And also by providing value-added services like the caller ring and identifying other sources of revenue, we expect that we will be able to and our plan is to achieve this 4% revenue growth target. Second question, whether that 50% payout ratio is still valid, you asked for our confirmation. Back in May of 2020, we communicated KT’ s mid- to long-term plan. And we communicated that on a separate or stand-alone basis based on adjusted net profit, we will be paying out 50%. And that is a commitment and promise that we’ ve made to our investors and shareholders, and we plan to keep to it.

The next question will be presented by Stanley Yang from JP Morgan. And the following question will be presented by Haesu Lee from Robeco.

I would like to ask you 2 questions. First, you’ ve communicated in terms of your growth projections that by 2022, on a stand-alone operating profit basis, you’ re targeting KRW 1 trillion. But now that your Q1 performance has been quite stellar, do you think that you will be able to achieve this target ahead of that 2022 schedule? And if that is the case, would you be willing to increase that target for 2022? I asked this question because if you look at 2016, when you achieved KRW 1 trillion of operating profit, your Q1 performance or earnings was actually lower than what you have reported this quarter. So I would like to understand whether you think that you will be able to achieve this target earlier than you had previously planned for? And second, do you have plans to cancel your treasury shares? If not, where would you use the treasury shares, for what purpose?

Thank you, Mr. Stanley Yang, for your question. You mentioned if we are able to achieve that operating profit target of KRW 1 trillion on a stand-alone basis earlier than ‘ 22, will we have planned to further increase our target. Basically, for this year, our plan is to bring about higher operating profit on a year-over-year basis. And after we look at that track record, we will -- it will be after that point in time that we will make a decision as to whether we will update our target for 2022. Regarding second question of whether we are reviewing possibility of a share cancellation, at this point, I think that specificity is under review. Then where would we use the treasury share for? Those will be used to further strengthen competitiveness of the company and also to generate synergies by entering into strategic alliances or partnerships or looking at possibility of M&As. But at this point in time, we do not have any specific plans that is confirmed yet.

The next question will be presented by Haesu Lee from Robeco.

Shed some light on what the progress is for your share buyback of KRW 300 billion. Until when will that process last?

Thank you Ms. Lee for your question. You asked about the progress of our share buyback process. On November 5, our BoD resolved for a share buyback. It’ s a trust arrangement, through which we undertook buying back of KRW 300 billion of treasury shares, and that whole process has been completed as of March 17. Basically, we have acquired 12,150,000 shares, which account for 4.7% of total outstanding. [Foreign Language]

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Thank you. This ends the earnings release for KT Q1 2021. Thank you to all of you for your questions and your interest in the company, and thank you for joining our call despite your very busy schedules. This ends the first quarter 2021 earnings presentation. Thank you.