KT Corporation Q4 FY2024 earnings call

• KT pushed forward with AICT transformation, partnering with Microsoft and innovating workforce and business structure.
• 2024 consolidated revenue was KRW 26,431.2 billion, a historical record since IPO. Operating profit fell 50.9% y-o-y but ex-one-off was up 9.8% y-o-y.
• Adopted quarterly dividend as part of shareholder-friendly policy, with Q4 '24 DPS at KRW 500 per share, and plan to buy back KRW 250 billion shares in 2025 as part of KRW 1 trillion plan until 2028.
• Focus on structural profitability improvements, streamlining underperforming businesses, and driving growth in AICT, cloud, etc.

Wireless revenue was up 1.3% year-on-year, reporting KRW 6,959.9 billion, with 5G subscriber count exceeding 10.4 million subscribers, accounting for 77.8% of total handset subscriber base. Fixed line business: Internet revenue was up 1.1% year-on-year to KRW 2,486.9 billion on the back of growth in GiGA Internet subscribers; Media business saw 1.2% year-on-year growth on IPTV subscriber expansion; Home fixed line telephony revenue was down 7.3% year-on-year to KRW 699.4 billion. B2B services: Despite rationalization of unprofitable businesses, B2B revenue posted 2.9% year-over-year growth, with AI/IT business revenue increasing 11.9% year-on-year. Major subsidiaries: BC Card revenue was down 5.4% year-on-year to KRW 3,805.8 billion but operating profit increased; KT Skylife revenue was down 1.5% year-on-year; Content subsidiary revenue fell by 13.6% year-on-year; KT Cloud posted 15.5% year-over-year growth; KT Estate posted 1.7% year-over-year increase.

• Set consolidated revenue target for 2025 above KRW 28 trillion.
• Will commence launch of KT-specific products with Microsoft in H1 2025, including Korea-specialized AI models and secure public cloud.
• Continue to focus on B2B AX business growth, driving volume and quality growth through partnership with Microsoft.
• Aim to translate growth and profitability into enhanced shareholder return through appropriate dividend and share buyback decisions.

• Uncertainty regarding government spectrum allocation policy, which could impact CapEx investment.
• Foreign ownership limit reaching above 40% affecting share buyback plans, requiring careful market communications.
• Potential fluctuations in dividend inflow from subsidiaries affecting shareholder return plans.

Q: Guide on 2025 revenue, profit, shareholder return and timing of real estate development profit recognition.

A: Revenue guidance is above KRW 28 trillion consolidated. Profit guidance not specific but based on structural improvements. Real estate development profit from March-moving apartments will be recognized in Q1-Q2.

Q: AX business strategy, road map and top line revenue projection; focus and milestones for Microsoft partnership.

A: AX strategy focuses on B2B customers via IT business, B2C CT, and media. AI/IT revenue was KRW 1 trillion in 2024, aiming for double-digit growth in 2025. With Microsoft, plan to launch Korea-specialized secure public cloud in Q1 2025 and Korea-specific AI model in Q2 2025, targeting 3 strategic customers.

Q: CapEx forecast, timing of 5G/6G investment, AI model training investment, and shareholder return plan specifics.

A: CapEx to maintain 2024 levels. 5G investment depreciation ended, 6G investment not imminent. AI model training entails significant investment. Share buyback plan subject to BOD approval, with possibility of KRW 250 billion annual buyback/cancellation until 2028.

Q: Labor cost savings from reorganization and logic behind using subsidiary dividends for shareholder return.

A: Cost savings from 4,400 headcount reduction (2,700 retired, 1,700 transferred). Dividend income from subsidiaries qualifies as resources for shareholder return, with adjusted net profit considering non-cash items to smooth volatilities.