Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the 2021 Second Quarter Earnings Results by KT. We would like to have welcoming remarks from KT IRO, Mr. Seung Chi; and then CFO, Mr. Young-Jin Kim, will present earnings results and entertain your questions. This conference will start with the presentation followed by a Q&A session. [Operator Instructions]. Now we would like to turn the conference over to KT IRO, Mr. Seung Chi.

Good afternoon. I am Chi Seung-Hoon, KT's IRO. This earnings release call is currently being webcasted through our website, and you can follow the slides as you listen in on the call. Let us now begin KT's Q2 2021 earnings presentation. Before we begin, please note that today's presentation includes financial estimates and operating results under the K-IFRS standards and have not yet been 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 welcoming remarks and presentation on Q2 '21 earnings.

Good afternoon. This is Kim Young-Jin, KT's CFO. Let's begin with KT's key earnings highlights for Q2 2021. Consolidated revenue was KRW6,027.6 billion. Service revenue was KRW5,336.8 billion and operating profit reported KRW475.8 billion. Driven by growth from core businesses of 5G and broadband Internet as well as our platform businesses, which include B2B, media, content and financial services, which drove overall improvement in KT and its group affiliates, revenue was up 2.6% year-on-year and operating profit was up 38.5% year-on-year. On a separate basis, revenue was up 3.2% on quarter, reporting KRW4,478.8 billion, while operating profit was up 38.1% on year, reporting KRW351.2 billion. What is noteworthy is not just profit growth, but very clear uptrend in the service revenue. Since the outbreak of the COVID pandemic on the back of the spreading of contact-free culture and digital transformation, there was growing demand for telecom infrastructure, media and content which led to higher year-on-year service revenue and growth in Q2, both on a consolidated and separate basis as versus the first quarter. Year-on-year rise in first half consolidated service revenue was KRW263.5 billion, while stand-alone service revenue was up KRW198.5 billion, outsizing last year's per annum growth. KT also brought meaningful performance in its B2B business, which includes AI and DX. We are laying the basis for multiple sources of growth for the B2B business through developing subscription-based DX digital transformation product offerings by bundling ABC or namely AI, big data and cloud to existing B2B business product suite. Supported by these changes, B2B business orders were up by 60% on year. And recently, we've been selected as the preferred bidder for the upcoming National Defense Broadband Integrated Network project. Corporate fixed line, which form the underpinnings of the B2B business, was up 4.2% on year on the back…

For more details, please refer to the IR or earnings material that we previously circulated. We will now begin the Q&A. [Operator Instructions].

[Operator Instructions]. The next question will be presented by Joonsop Kim from KB Securities.

I would like to ask two questions. First, your profit performance on a stand-alone and consolidated basis were quite good this quarter. Could you share with us what the outlook is as we enter into the second half of the year? And also, your wireless performance was good. What is your outlook for ARPU in the second half of the year?

Thank you for those questions. You asked two questions. And I think the questions are related to what our outlook is for the second half of the year. Currently, our forecast is that the current growth trend will most likely continue into the second half of the year. We expect the growth that we are seeing from our cash cow businesses as well as our platform businesses will continue. In terms of the service revenue, the guidance that we communicated at the beginning of the year, which is above 4%, we believe that we will be able to achieve those guidance. And based on the absolute amount, it will be around in the range of KRW500 billion to KRW600 billion. You asked me questions about our profit outlook. In the second half of the year compared to the first half, we believe that the extent -- the amount of that profit increase may be lower compared to the first half. I say that because it's usually in the second half of the year where we see more expenses that are being spent, including CapEx as well and also in light of the overall business reorganization and revamping that we are considering there are some items that will impact on the expense side. So compared to the first half of the year, the amount or the extent of the rise in the profit may be lower in the second half of the year. On a consolidated basis, if you look at our consolidated subsidiaries, we still believe that these companies will continue on with their top line revenue growth in the second half of the year. Having said that, on these new business areas such as financial, media content and commerce, there will be some spending that will be required. And…

The next question will be presented by Joonsop Kim from KB Securities. And the following question will be presented by Soonhak Lee from Hanwha Investment & Securities.

First of all, congratulations on your good performance. I would like to understand about your KBank -- your subsidiary, KBank, strategic direction for the future. I understand according to press releases, they have focused on specific segment of the customer group. Would like to understand what their strategic direction is?

Well, thank you very much for that encouragement. I understand that your question was relating to how the KBank is planning to continue on with an improvement and the onboarding of the bank customers and asked about strategic direction. As you know, KBank, thanks to the mortgage loans, the apartment-based mortgage loans as well as the connections that it provided to the virtual cryptocurrency trading, and thanks to the characteristics of an online-only bank in terms of its high efficiency as well as low cost was able to report for the first time a quarterly turnaround. In terms of the number of customers in just 1 year since the launch of the services, it was able to really grow the customer base by 4.6x, reaching around 6 million of customers. In terms of the size of the deposit, it's around KRW11 trillion and its lending book has reported around KRW1 trillion. You also asked about the impact of the inflow of our customers from the cryptocurrency trading and also how that had actually increased the amount of the customer base as well as the increase in the demand. And so going forward, we are going to employ a strategy that will, through other services, really lock in these customers that we had so far acquired. And so we'll try to make sure that they do not churn out based off of the average balance related services that we provide. Most of these customers who have come into KBank services came through a bit. And most of these clients are in the generation MZ, mostly young people who are very familiar with the overall mobile environment. And this also coincides with the specific target that KBank from a mid- to long-term perspective is targeting. So by providing a very swift improvement…

The next question will be presented by Soonhak Lee from Hanwha Investment & Securities. The following question will be provided by Seyon Park from Morgan Stanley.

I would like to ask you two questions. One, on your group affiliates earnings and second, on CapEx. It seems that the performance of the group affiliates have really significantly improved. And based on the numbers that we've seen over the years on the IR slide, I think this quarter, it reported the highest maximum level of KRW124.7 billion of profit contribution. So of all of your group affiliates for each of the business areas, which subsidiary made the biggest profit contribution? That's the first question. If you look at the CapEx spend for Q2, it was significantly lower compared to the first half -- I mean if you look at first half cumulative CapEx, even if we were to assume you use double this amount in the second half of the year, still this is going to be 10% lower compared to CapEx of previous year. Can we -- first of all, is this arithmetic correct? Is this calculation correct? And can we also expect such stability in CapEx spend next year as well?

Well, thank you for those two questions. First, relating to the profit contribution by group affiliates, you asked which company made the biggest contribution. Across the board, whether big or whether small in terms of size of the company, they have all made bigger contribution to our earnings. First, looking at BC Card, there was overall growth in the total acquiring volume from KRW52 trillion to KRW55 trillion. For the financial business, there was also improvement in that business from KRW5.2 billion to KRW8.1 billion. Overall, therefore, the revenue had gone up by 4.5% profit by 14%. If you look at the estate business, although the overall -- there was a decline in the real estate sales related revenue, the -- and there were some increases in the deficit from the hotel business operations, overall, there has been some improvement on the overall estate business as of Q2. If you look at Skylife, you probably heard their earnings presentation as well, but because of some of the investments that were needed, marketing spending that was needed for future growth, their operating profit did dip. If you look at skyTV, they had a success streak of different contents that they have aired like The Iron Squad, [indiscernible] Wild Wild Quiz. These are all the very end trendy contents that were very successful, which actually drove up the viewing rate as well as the top line revenue. On the advertisement business side, there is mass media and PlayD, and they are yet to actually disclose their earnings, but their overall revenue and profit also improved as well. KT, it's IT subsidiary, KTDS, also won more orders from outside. So the revenue that is generated by providing service outside had gone up overall improving the performance. Now your second question relating to CapEx outlook and CapEx trend. As you know, there is a seasonality factor embedded in CapEx. Usually, it is relatively lower in the first half but higher in second half. In terms of CapEx, as time goes by, the amount of the CapEx volume as versus the amount of order placed actually goes up. So in the first half of the year, there is going to be a slight increase in the amount on a year-over-year basis based on the orders placed for full CapEx. On a per annum basis, our guidance is going to stay flat compared to last year. In terms of the outlook for CapEx spend for next year, at this point in time, it is undetermined. There will be requirements for investing into the B2B business and the new platform business. But in terms of the specific CapEx guidance, we will make more review. We will review this item and deliberate on it and communicate to you at a latter point in time.

The next question will be presented by Seyon Park from Morgan Stanley.

I would like to ask you two questions. Since we're on the topic of CapEx, I would like to ask further questions on this topic. I saw that KT is moving towards stand-alone, SA 5G. What significant does this move have? And also from the investors' perspective, should we then consider that there will be certain implications or changes to the CapEx and the OpEx? And I understand that as you move into stand-alone 5G, then technologies like network slicing is going to be made possible. So when can we expect to see such technologies or relevant services based off of 5G SA? Second question, your first half performance was very good. And if you look at the first half net profit, it actually is quite similar to the full year net profit of the previous year. So even if -- in the second half of the year, even if you say that your profit growth is going to slow somewhat, I still believe that the net profit for this year is going to be quite significant on a year-over-year basis. So would you be willing to revisit your dividend policy? Or can you just once again, walk us through what your dividend position is?

Thank you for those questions. You asked what 5G SA adoption means and what implication it will have on CapEx and OpEx as well as what relevant services are. As you know, because this SA mode does not go through the LTE network, there's going to be a less or lower latency and also lower level of battery consumption, unlike NSA. Now therefore, 5G SA actually is low latency, low power and it allows high transmission speed. And as you have mentioned, it also allows for network slicing, which is one of the key fundamental point that 5G service can provide. And as you know, as we move into the age of IoT, there's going to be a lot of different IoT-related evolutions that take place. And so from this perspective, this will really help the use and adoption of autonomous driving, smart factory, AI, VR and other 5G-based converged services, through which we will be able to offer very differentiated services to the user base. At this point in time, these types of services have not yet become mainstream, but once it does we believe that the importance and the effectiveness of 5G SA is going to be further highlighted. You also asked about the impact on CapEx and OpEx side from 5G SA. On the CapEx side, actually, all of the investments have been completed. It is actually a small-scale software upgrade-related spending and that's already been complete. On the OpEx side, eventually, if we think about the fact that as a stand-alone mode does not use LTE network, and if we could fully go into a 5G single network, then eventually it will be able to also bring down OpEx as well. Your second question, because first half net profit figures were really good, you asked us and reminded us of what our dividend policy stand would look like going forward. As you know, KT's dividend policy, as we've communicated numerous times, is 50% based on the adjusted net profit on a standalone basis up until 2022. In the first half of the year, on a stand-alone basis, there's been a significant improvement in operating profit as well as net profit. And I do understand that there's been a significant growth, and there is also a quite high level of expectation that market currently has on this year's dividend per share figure. As we communicated at the beginning of the year in terms of both the top line revenue and bottom line profit, we're going to continue to endeavor to generate good performance so that we can bring about year-over-year growth. And underpinned by that, we will once again do our best to improve shareholder value as well.

[Foreign Language]

Well, if there are no further questions, we would like to now end KT's Q2 2021 Earnings Presentation. Thank you for joining us this afternoon despite your very busy schedules. Thank you.