KT Corporation - Earnings Call - Q2 2025
August 11, 2025
Transcript
Speaker 3
Good morning and good evening. Thank you all for joining this conference call, and now we will begin the conference of the second quarter of fiscal year 2025 earnings results by KT Corporation. We would like to have welcoming remarks from KT Investor Relations Officer, and then Chief Financial Officer will present earnings results and entertain your questions. This conference will start with a presentation followed by a Q&A session. If you have a question, please press *1, that is * and 1 on your phone during the Q&A. Now we would like to turn the conference over to KT Investor Relations Officer.
안녕하십니까, KT IRO 최재길입니다. KT의 2025년 2분기 실적 발표를 시작하겠습니다.
Good afternoon, this is KT's IRO, Jae-Gil Choi. We would like to begin KT's second quarter 2025 earnings presentation.
accordance with K-IFRS before external auditor review. Except for confirmed historical data, we cannot guarantee the accuracy and completeness of all financial and management performance data, and please note that these may be subject to change in the future.
Be reminded that today's presentation includes financial estimates and operating results under the K-IFRS standards that are 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.
of our company, there will be an explanation of the 2025 second quarter results.
With that said, I now invite the company CFO, Min Jang, to run through the second quarter results of 2025.
Speaker 2
안녕하십니까, KT 재무 실장 장민입니다. 저희 KT는 AI/CG 기업으로의 완전한 변화를 위해 노력 중인 가운데, 이번 분기에도 매출과 영업 이익의 성장세를 이어갔습니다.
Speaker 3
Good afternoon, this is Min Jang, KT's CFO. KT continues to drive revenue and operating profit growth this quarter while making the effort towards a complete transformation into an AI/CG company.
Speaker 2
기업 가치 제고 계획도 차질 없이 이행되고 있습니다. 기업 가치 제고 계획의 일환으로 진행 중인 ₩25 billion 규모의 자사주 매입을 8월 13일 완료할 예정입니다. 그리고 2025년 2분기 배당금은 전년 동기 대비 20% 상향된 주당 ₩600이며, 이번 분기부터 분기 배당에도 선 배당금 결정 후 기준일 설정을 도입하며 주주 친화적인 배당 제도를 운영하고 있습니다.
Speaker 3
Also, the corporate value enhancement plan is well underway, and as part of that value-up plan, we plan to complete a share buyback of ₩250 billion on August 13. Dividend for the second quarter has been decided at ₩600 per share, an increase of 20% year over year. Starting from this quarter, even for quarterly dividend payouts, dividend amounts will first be declared, which will then be followed by setting up the record date, a system that is shareholder friendly.
Speaker 2
the AX demand of enterprises and established a growth foundation by successfully winning large-scale AI/IT business contracts with major corporations and IT companies.
Speaker 3
KT, as an AI/CG company, has responded actively to companies' AI/CG demand, successfully winning large-scale projects from large companies and IT enterprises, thereby laying the basis for growth.
Speaker 2
또한 멀티 모델 전략 로드맵 아래 지난 7월 독자 모델 MIDIM 2.0을 출시하였으며, 오픈 모델, Microsoft 협력 모델을 순차적으로 공개하며 AI 풀 라인업을 완성할 예정입니다. 특히 독자 모델인 MIDIM 2.0을 기반으로 대기업, Gyeonggi Provincial Government, Korea Water Resources Corporation 대상 AI 플랫폼 구축 사업 수주에 성공하며 공공 분야에서의 입지를 강화했습니다.
Speaker 3
Under the multi-model strategy roadmap, we launched KT's proprietary LLM, MIDIM 2.0, last July and will be completing AI full lineup with the unveiling of the open source model and Microsoft collaboration model in sequence. Based on KT's proprietary model, MIDIM 2.0, we won AI platform build projects from large companies, Gyeonggi Provincial Government, and Korea Water Resources Corporation, further cementing our positioning in the public sector.
Speaker 2
and a large language model was integrated into Genie TV, expanding AI utilization. In the second half of the year, KT Corporation plans to accelerate its market strategy by launching Secure Public Cloud, which applies confidential computing technology, the highest level of security protocol, and a Korean-tailored AI model based on ChatGPT 4.0.
Speaker 3
Microsoft collaboration continues also as we roll out new services. In July, AI Agent, powered by Azure OpenAI-based large language model, was integrated into Genie TV, expanding the AI use case. In the second half, we plan to launch AI model better tailored for Korea that is powered by ChatGPT 4.0 and Secure Public Cloud, which uses top-notch security protocol, confidential computing, in order to kickstart our reach into the market.
Speaker 2
over the next five years to proactively strengthen security. Through this, we will innovate our information protection system so that customers can use telecommunications services with peace of mind.
Speaker 3
To proactively strengthen security, KT has a plan to invest a cumulative ₩1 trillion in information security over five years. To make sure customers can feel safe in using telecom services in their everyday routine, we will innovate our information security system.
Speaker 2
now discuss the 2025 second quarter results.
Speaker 3
From now onwards, I will move on to financial results for the second quarter 2025.
Speaker 2
Operating revenue increased 13.5% year-over-year to ₩7,427.4 billion. Operating profit reached ₩1,014.8 billion, up 105.4% year-over-year, driven by balanced growth in the telecommunications business and core group portfolio, profitability improvement efforts, and one-off distribution gains.
Speaker 3
Operating revenue increased 13.5% year over year, reaching ₩7.4274 trillion. Operating profit was up 105.4% year over year, reaching ₩1.0148 trillion on the back of balanced growth from telco business and the group's core portfolio, as well as profitability improvement efforts and one-time gains from real estate sales.
Speaker 2
increased 78.6% year-over-year to ₩733.3 billion, driven by higher operating profit. EBITDA increased 36.3% year-over-year to ₩1.9907 trillion. On the next page, I will explain operating expenses.
Speaker 3
Net income increased 78.6% year over year to ₩733.3 billion, driven by higher operating profit. EBITDA was up 36.3% year over year, reporting ₩1.9907 trillion. Next page is operating expense.
Speaker 2
the expansion of wireless device sales and the cost of the Gangbuk Headquarters real estate development business, despite a decrease in labor costs. The next page will explain the financial position.
Speaker 3
Despite a decline in labor costs due to costs of real estate sales project at Kangbook division and increase in COGS from growing wireless handset sales, operating expense was up 5.9% year over year, recording ₩6.4126 trillion. Next is on financial statement.
Speaker 2
ratio is 123.5% and the net debt-to-equity ratio increased by 3.3%p year-on-year to 36.8%. Next, I will speak about capital expenditures.
Speaker 3
Debt-to-equity ratio as of June end of 2025 was 123.5%, while net debt ratio edged up 3.3% year over year, reaching 36.8%. Next is CAPEX.
Speaker 2
₩1,364.3 billion. On a separate basis for KT Corporation, ₩845.8 billion was executed, while major core group companies executed ₩518.5 billion. I will now discuss the performance by business segment.
Speaker 3
Total CAPEX spend by KT and its major affiliates was in total ₩1.3643 trillion on a cumulative basis as of Q2 2025. KT's separate basis, cumulative CAPEX as of Q2, was ₩845.8 billion, while CAPEX of major group affiliates amounted to ₩518.5 billion. Next is on the breakdown of results by each business segment.
Speaker 2
First, wireless revenue increased 0.9% year-over-year to ₩1,781.7 billion.
Speaker 3
Firstly, wireless revenue increased 0.9% year on year, reporting ₩1.7817 trillion.
Speaker 2
5G 가입자가 전체 핸드셋 가입자의 79.5%를 차지하는 가운데 2분기에는 번호 이동 가입자 유입의 영향으로 MNO 가입자가 전분기 대비 3.4% 증가했습니다. 다음은 유선입니다.
Speaker 3
Lost 5G subscribers accounted for 79.5% of total handset subscribers due to the impact from subscriber addition through MNP. MNO subscriber increased 3.4% Q on Q. Next, the fixed line business.
Speaker 2
to ₩631.4 billion, driven by an increase in GiGA Internet subscribers and the expansion of value-added services.
Speaker 3
On the back of GiGA Internet subscriber growth and expanded value-added services, broadband revenue increased 2.1% year over year, reporting ₩631.4 billion.
Speaker 2
grew 0.8% year-on-year, driven by an increase in IPTV subscribers and efforts to sell premium plans.
Speaker 3
On net IPTV subscriber adds and premium plan uptake, media business posted 0.8% growth year over year.
Speaker 2
Home wireline telephone revenue increased 0.4% year-on-year to ₩176.2 billion. Next is enterprise services.
Speaker 3
Home telephony revenue recorded ₩176.2 billion, up 0.4% year on year. Next, KT's B2B services.
Speaker 2
businesses, enterprise service revenue increased by 4.5% year-on-year due to balanced growth in telecommunications and AI/IT business.
Speaker 3
Despite streamlining of low margin businesses, B2B service revenue posted 4.5% year-on-year growth on balanced growth coming from telecom and AI/IT services.
Speaker 2
saw a 13.8% increase in operating revenue year-on-year, driven by growth in design & build and cloud businesses.
Speaker 3
Thanks to the growth of design and build projects and cloud business, AI/IT business revenue saw 13.8% year over year growth.
Speaker 2
다음은 주요 그룹사 실적입니다.
Speaker 3
Next, moving on to performances of our major subsidiaries.
Speaker 2
billion as the NAVER volume declined, but operating profit remained at the previous year's level based on risk management and efforts to strengthen profitability.
Speaker 3
Card revenue fell 6.9% year over year to ₩909.8 billion as acquiring volume declined, but operating profit was kept flat year over year through risk management and profitability enhancement efforts.
Speaker 2
growth, driven by the expansion of KT Studio Genie's production and distribution scale and the increase in subscribers to KT Millie's Library.
Speaker 3
Content subsidiaries reported 6% year-on-year revenue growth on the back of production and distribution expansion by KT Studio Genie and increase in subscribers of KT Millie's Library.
Speaker 2
revenue grew 23% year-over-year due to increased data center utilization by global customers and expansion of DBO business orders.
Speaker 3
KT Cloud saw its revenue grow 23% year on year, driven by growing data center usage by global customers and expanded DBO project wins.
Speaker 2
Estate revenue increased by 2% year-over-year to ₩160.4 billion, driven by growth in office and hotel rental sales.
Speaker 3
KT Estate revenue increased 2.0% year on year, reaching ₩160.4 billion, driven by growth in rental revenue from office and hotels.
Speaker 2
지금까지 KT Corporation의 2025년 2분기 실적을 말씀드렸습니다. KT Corporation은 앞으로도 AI/CG 기업으로의 완전한 변화와 기업 가치 제고 계획의 성공적 이행을 통해 기업 가치를 한 단계 더 높일 수 있도록 노력하겠습니다.
Speaker 3
This has been an update on KT Corporation's earnings for the second quarter 2025. KT Corporation will endeavor to complete the transformation into an AI/CG company, and through successful execution of the corporate value-up plan, we will drive KT Corporation's corporate value a notch higher.
Speaker 2
interest and support from investors and analysts. Thank you.
Speaker 3
We look forward to your ongoing support and interest from the investors and analysts. Thank you very much.
were distributed in advance for detailed information. We will now begin the Q&A session. Each person may ask up to two questions.
For details, do refer to the earnings material that we have given out. We will now take your questions from the participants. Please would like to ask that you limit your questions to two per person.
Speaker 0
* and 1 buttons on your telephone. To cancel your question, please press the * and 2 buttons.
Speaker 3
Now the Q&A session will begin. Please press *1, that is * and 1, if you have any questions. Questions will be taken according to the order you have pressed the number *1. For cancellation, please press *2, that is * and 2 on your phone.
Speaker 0
from Young Jin Kim at KB Securities.
Speaker 3
The first question will be provided by Young Jin Kim from KB Securities. Please go ahead with your question.
네, 질문 기회 주셔서 감사합니다. KB Securities 김준성입니다. 저는 AI 관련 사업 방향성과 Handset Subsidy Act 폐지 이후에 번호 이동 시장의 동향에 대해서 좀 여쭤보고 싶은데요. 먼저 AI 관련 사업 방향에 대해서 여쭤보면 말씀 주신 것처럼 풀 AI 라인업을 확보할 예정이라는 점, 그리고 또 AI/IT 사업 중심의 성장이 지속되고 있다는 실적을 공유해 주셨는데요. 사실 아시다시피 AI 사업 영역이 다양한 걸로 알고 있습니다. 그래서 저희, 특히 저희 KT Corporation이 공을 들이고 있으신 사업 영역에 대해 말씀 주시면 저희 AI 사업을 전망해 보기 용이할 것 같습니다. 그리고 두 번째는 Handset Subsidy Act 폐지 이후 번호 이동 시장인데요. 이 번호 이동 시장 관련해서 보는 사람마다 견해가 다른 것 같습니다. 이에 대해 저희 KT Corporation이 시장을 어떻게 보고 있으신지, 향후 어떻게 전망하고 있으신지 공유해 주시면 현재 KT Corporation의 환경 변화를 이해하는 데 큰 도움이 될 것 같습니다. 감사합니다.
Thank you for taking my question. I would like to ask two questions. First on AI business direction going forward, and second is a question relating to how you see the MNP market following the repeal of the Handset Subsidy Act. Regarding the AI business direction, you've talked about the full AI lineup as well as your estimates as to a steep growth going forward from your AI/IT business. Because AI scope really includes wide-ranging aspects, we'd like to know where KT Corporation wants to focus on going forward that will help us understand better in terms of your AI business direction into the future. Second question, how do you see the MNP market following the repeal of the Handset Subsidy Act? Because different people see the market differently, we'd like to understand as to what KT Corporation's thoughts are regarding the MNP market going forward.
Speaker 2
question. For the first question, I will summarize KT's AI business direction in about three main points.
Speaker 3
Thank you for those questions. Regarding the first question on our AI business direction forward, I would like to just summarize that point into three main items.
Speaker 2
is to supplement our insufficient capabilities through partnerships with global big tech companies like Microsoft and exclusive solution supply contracts with Palantir. Based on this, we provide services such as Secure Public Cloud and Korean ChatGPT, introducing new AI services to our customers.
Speaker 3
Now, the first strategy that we have is through the partnerships with global big techs like Microsoft, as well as the partnership that we have, the exclusive licensing partnership that we have with Palantir. We've been able to really enhance our competitiveness and fill up the gap that we internally did not have. By leveraging these aspects, we want to be able to provide new AI services to our customer base that includes Secure Public Cloud as well as Korean-tailored GPT services.
Speaker 2
are trying to pursue a multi-model AI strategy. That includes not only the collaboration model with Microsoft that I mentioned first, but also new improvements to MIDIM 2.0, which we have been working on for several years, to reach our customers. Finally, we also plan to utilize open models like LLAMA to provide AI services.
Speaker 3
The second strategy is, as I've mentioned during my opening presentation, we have taken on a multi-model based strategy. Not only will we be using the Microsoft collaboration model, but as you know, over the past year we've been developing our internal model, which is MIDIM 2.0. We will continuously make enhancements to that so that we can come closer to the needs that our customers have. We will also be leveraging open source models like LLAMA to provide and build the AI services that our customers require.
Speaker 2
our network management or media services. For example, the first is applying an AI agent based on Microsoft Azure Open Service to the Genie TV set-top box, or incorporating such AI-based innovation for the efficiency of our base station operations. This can be described as our third strategy.
Speaker 3
Moving on to the third strategy, we will be leveraging such AI capabilities and services and managing the network that we have and also providing media-related services. A good case in point is we've basically installed an AI agent that is based upon Microsoft Azure Open Service into our Genie TV set-top box, as well as using such AI capabilities in enhancing the operational efficiency of our 5G base stations. We will be continuously leveraging such AI capabilities.
Speaker 2
and changes in the market situation, to briefly explain, as you can see, although the Galaxy flagship model was recently launched, we believe that there has not been any excessive subsidy competition in the market that would be cause for concern.
Speaker 3
Responding to your second question about what impact there was following the lifting of the Handset Subsidy Act as well as the market impact, firstly, as you know, even though there was a launch of Galaxy flagship handset model, we did not see any overheating of competition in the market.
Speaker 2
하지만 향후 아이폰 등이 출시되었을 경우에 경쟁이 좀 치열해질 수 있을 가능성도 분명히 있다라고 보고 있지만, 이러한 상황들은 장기화가 되기는 어려울 것이다 이렇게 저희는 판단을 하고 있습니다.
Speaker 3
If when the iPhone, the next versions are introduced into the market, competition in the market may heat up, so there is that possibility. Having said that, we do not believe, it is our belief that it is not going to be long lasting even if that happens.
Speaker 2
80%, and not only has the device replacement cycle become quite prolonged, but currently, we, the telecommunications operators, believe that it is time to focus on investment in the AI/IT business and new businesses. Therefore, I would like to say that competition in the wireless market will not continue to be so intense in the long term.
Speaker 3
Now, I say that because of three main reasons. First being, already the 5G penetration is above 80%, and also the handset replacement cycle has gotten longer compared to the past. Right now, it is an important timing for all the telcos to really focus and invest into the new business areas relating to AI and IT. That is the basis upon which I believe that that's why the competition in the wireless market, even if it exists, is not going to be long lasting.
Speaker 2
Yes, next question please.
Speaker 3
Next question, please.
Speaker 0
The following question will be presented by Kim Hoi Jae from Daishin Securities. Please go ahead with your question.
안녕하십니까, Daishin Securities Kim Hoi Jae입니다. 먼저 Jae-Gil Choi IRO님 취임 축하드립니다. 그동안 해주셨던 것처럼 앞으로도 투자자분들과 좋은 커뮤니케이션 유지해 주시기를 부탁드리고요. 저는 두 가지 질문 드리겠습니다. 2분기에 좀처럼 보기 힘든 상당히 좋은 실적 달성하신 거 축하드리는데, 하반기 실적 전망에 대해서 설명 부탁드립니다. 그리고 두 번째는 작년에 발표한 기업 가치 재고 계획 관련해서 상반기 이행 현황 공시를 해주셨는데, 향후 배당하고 자사주 매입 정책에 변화가 있을지 현 시점에서의 기업 가치 재고 계획 업데이트 좀 부탁드립니다. 감사합니다.
Speaker 3
Thank you. I'm Kim Hong-sik from Daishin Securities. Before asking the question, I would like to first congratulate Jae-Gil Choi, the new IRO. I look forward to very good and productive communication going forward as we've done in the past. My two questions are, the first is your second quarter results have been quite outstanding. We'd like to know what your therefore outlook is for the second half of the year. Regarding the value-up plan, you've made the implementation disclosure already. We'd like to understand as to what the update is. Would you be considering any changes to your dividend or your share buyback plans?
Speaker 2
예, 질문 감사드립니다. 첫 번째 질문 하반기 실적 전망에 대해서 먼저 말씀을 드리겠습니다. 저희는 2분기에 부동산 관련된 어떻게 보면 좀 일회성 요인으로 큰 실적을 내긴 했지만 그것을 제외하고라도 별도 기준으로 작년 대비 상당히 좋은 실적을 달성을 했다고 보고 있으며 하반기에도 그런 실적, 좋은 실적은 서비스 매출 성장세가 지속되면서 계속될 걸로 전망을 하고 있습니다.
Speaker 3
Responding to your question, the first one on the second half outlook, in Q2, there was a significant one-off gain from our real estate business. That had a big impact on bringing a good performance. Even aside from that, if you look at our separate basis statements, you will see that our year-over-year performance had been quite, it was quite good. It was very good. We think that we will be able to continue on with that good momentum into the second half of the year, considering the fact that we will be able to sustain a very solid service revenue uptrend.
Speaker 2
expenses are also expected to turn to a decreasing trend now that 5G investments have been fully amortized. There is some risk of an increase in commissions or selling expenses, which is a concern, but we believe this will be linked to our performance, so we are not too worried about it.
Speaker 3
Now, on the cost side, we were able to drive an improvement in our headcount. We are keeping our labor costs. We're managing that quite well. On the depreciation side, we have completed the depreciation on our 5G. We see the depreciation cost coming down. There may be some concern on the commissions paid as well as the selling-related expenses. There may be slight risk there, but these are numbers that are linked to our earnings performance. We're not at all greatly worried about this item.
Speaker 2
두 번째서 질문해 주신 배당 정책에 대해서는 첫 번째 저희 현재 배당은 아시는 것처럼 조정 장기 수익의 50%인데 이미 그 수준을 조금 넘어설 것으로 전망이 되고 있는 분기 배당 ₩60 billion을 저희가 결정을 했고 3분기 4분기에도 저희가 크게 실적이 흔들리지 않는 한 이 정도의 배당은 저희 이사회의 이사님들이 결정해 주실 걸로 저희는 생각을 하고 있습니다.
Speaker 3
Regarding the second question about our dividend payout plan, first off, basically our basis upon which we make the dividend decision is 50% of adjusted net profit. We have declared and made the decision on dividend per share of ₩600 already, which is actually in excess of that criteria. Having said that, as long as we, and as we are confident that we will be able to carry on with the performance levels into Q3 and Q4, I believe that at minimum the BOD will continue to make such decisions in alignment with the market expectations.
Speaker 2
as quite shareholder-friendly and market-friendly. You can expect that we will present a dividend policy that will not disappoint the market. As for the additional KRW 1 trillion share buyback under the value-up plan, as mentioned, we completed KRW 250 billion this year, and over the next three years, including next year and the year after, we will carry out the remaining KRW 750 billion without any setbacks.
Speaker 3
In terms of how our shareholder return program will look like after next year, of course, the BOD will make appropriate decisions as we go forward. In light of the fact that we are seeing an improvement on our bottom line and the fact that our dividend program is shareholder-friendly and market-friendly, I can tell you that you can expect that we will not, in any circumstances, fail the expectation of the market. In terms of the value-up plan, under the value-up plan, we will be making additional share buyback in the size of ₩1 trillion. We've already done ₩250 billion. Over the coming three years, we will, in sequence, be making that share buyback in the amount of ₩750 billion.
Speaker 2
네, 이것으로 Q&A 세션을 마치도록 하겠습니다. 많은 질문과 관심에 감사드립니다. 바쁘신 일정에도 오늘 참여해 주신 모든 분들께 다시 한 번 감사의 말씀을 드리며, 이상으로 2025년 2분기 실적 설명을 마치겠습니다.
Speaker 3
This ends the Q&A for today. Thank you for your time and interest. We will close the earnings call for the second quarter of 2025. Thank you for joining us despite your very busy schedule.