[Non-English content] Good morning and good evening. Thank you all for joining this conference call. Now, we will begin the conference auto 2021 second quarter earnings results by KT. We would like to have welcoming remarks from KT IRO Mr. Seung-Hoon 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. If you have a question, please press star one, that is star and one on the phone, during the Q&A. We would like to turn the conference over to KT IRO Mr. Seung-Hoon Chi. [Non-English content] Good afternoon. I am Seung-Hoon Chi, KT's IRO. This earnings release call is currently being webcasted through our website. You can follow the slides as you listen in on the call. Let us now begin KT's Q2 2021 earnings presentation. [Non-English content] Before we begin, please note that today's presentation includes financial estimates and operating results under the K-IFRS standards and has 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. [Non-English content] Now, I will invite our CFO Young Jin Kim for his welcoming remarks and presentation on Q2 2021 earnings. [Non-English content] Good afternoon. This is Young Jin Kim, KT's CFO. Let's begin with KT's key earnings highlights for Q2 2021. Consolidated revenue was KRW 6,027.6 billion. Service revenue was KRW 5,336.8 billion, and operating profit reported at KRW 475.8 billion. [Non-English content] 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-over-year. Operating profit was up 38.5% year-over-year. On a separate basis, revenue was up 3.2% quarter-over-quarter, reporting KRW 4,478.8 billion, while operating profit was up 38.1% year-over-year, reporting KRW 351.2 billion. [Non-English content] What is noteworthy is not just profit growth, 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 KRW 263.5 billion, while standalone service revenue was up KRW 198.5 billion, outsizing last year's per annum growth. [Non-English content] 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. [Non-English content] Supported by these changes, B2B business orders were up by 60% on- year. Recently, we've been selected as the preferred bidder for the upcoming National Defense Broadband Integrated Network project. [Non-English content] Corporate fixed line, which form the underpinnings of the B2B business, was up 4.2% on- year on the back of growing demand by central and local government and big global players. While AI and DX were up by 6.2% on- year, sustaining a steep uptrend. [Non-English content] For the IDC business, we opened our 14th IDC at Namguro in May, which is the first branded IDC, and it has since gone into full-fledged operations. Based on KT's number one positioning in terms of our IDC operational competitiveness, we are expanding into the DBO business, which is to design, build, and operate IDCs for other service providers. We have also successfully expanded into branded IDC business model, which adopts KT's operational system and network to data centers of other operators. [Non-English content] Now, for the cloud business, we are winning various projects, including build out of video conferencing platform from our public and financial client segment where KT has competitive strength. By 2025, all public agencies are expected to migrate to cloud, we expect there to be greater business opportunity in the future. [Non-English content] AI Contact Center is also expanding into public sectors, hospitals, small vendors from its traditional client base of insurance and the finance sector. In September, we will be launching Voice DX, which is a voice bot that small merchants can use to provide booking and information services to its customers. Through these efforts, we plan to move ahead in the AI contact center market. [Non-English content] Aside from what I have just mentioned, we are also gearing up for new businesses. First, for the AI robotics business. In order to provide these services, we have built our own robotics operational platform and distribution system for sales and consulting and IT development. At this basis, we will launch various different types of service robots, such as for serving, caring, and barista robot. [Non-English content] Digital and bio healthcare is another area of KT focus. Bio industry in the future will evolve around personalized offerings, where processing of massive amount of individual's health data will become critical. KT in fact already has the basic infrastructure like cloud, big data, and blockchain that can be used to process mass amount of health data. We are currently making preparations for businesses such as telemedicine monitoring, digital treatment, and healthcare AI solutions, and are also seeking partnerships with those leading domestic and global players. [Non-English content] Also, from the incumbent telecom business, we brought solid revenue growth both in terms of quality and volume, mainly around our premium subscribers. In particular, we broadened the customer base through strengthening customer benefits, differentiating product competitiveness, and diversifying distribution channel, including the online channel. [Non-English content] With sustained growth in number of 5G subscribers, wireless service revenue was up 4.5% on- year, and wireless ARPU was up 3% on- year, reporting KRW 32,342. Broadband internet is also seeing its subscriber base expand on higher sale of product for a single member households and giga products. [Non-English content] As we swiftly reorganized the group for our digital transformation, there were growth in both, in terms of revenue and profit from our group affiliates. [Non-English content] K Bank in the second quarter reported KRW 3.9 billion in net profit, reporting a positive turnaround since the launch in April 2017. It recently completed a successful capital increase amounting to KRW 1.25 trillion, attesting to K Bank's growth potential. By expanding product coverage, app upgrades, alliance marketing, and diversifying loan products, as well as through stronger synergies with group affiliates, K Bank will position itself as a distinctive financial platform provider. [Non-English content] In order to strengthen KT Group's financial platform capabilities, following the investment in Bank Salad shares in April, KT made equity investment in Korea's number one B2B fintech company called WebCash Group. [Non-English content] Underpinned by KT's platform capabilities in AI, big data, and cloud, we not only have B2C capabilities through BC Card, K Bank, and Bank Salad, but also capabilities in B2B fintech by way of the WebCash Group, as we transform into a company that can deal in both B2C and B2B areas. [Non-English content] For the media content business, we continued on with the structural realignment around Studio Genie. KT has taken its shareholding in Genie Music and made investments in kind to newly incorporated KT Seezn. To bolster synergies for the content business across the group, has effected Studio Genie to be the acquirer of Hyundai Media. From the second half of the year, Studio Genie will fully embark on its journey with a release of original content. [Non-English content] Commerce business under KT Alpha is showing a fast pace of growth as well. In July, we officially launched the merged entity. On a solid commerce platform, we drive the company towards becoming an integrated commerce company. Also, K Deal, launched together with Nasmedia end of February, has seen its volume grow by more than five-fold versus March, with more than 4x growth of its outbound commerce messaging, reporting an explosive growth. Through big data analytics and strong product competitiveness, we plan to set it up as a mall offering the lowest price benefit, customized to the needs of our customers. [Non-English content] I will now move on to earnings for Q2 2021. Total revenue was up 2.6% on- year to KRW 6 trillion, 27.6 billion. Operating profit was up 38.5% on- year, reporting KRW 475.8 billion. [Non-English content] Net profit was up 77.4% year-on-year to KRW 370.8 billion. EBITDA was up 9.4% on-year to KRW 1,373.2 billion. Next is operating expense. [Non-English content] Operating expense was up 0.3% on- year to KRW 5,551.8 billion, on rise in labor cost and selling expenses. Next is on the financial position. [Non-English content] Debt to equity ratio as of Q2 end 2021 was 117.9%, down 7 percentage points year-on-year. Net debt ratio was down 3.1 percentage points year-on-year, reporting 29.7%. Next is on CapEx. [Non-English content] CapEx spend for Q2 2021 was KRW 574.7 billion, with a total of KRW 864.1 billion Won as of the first half. Moving on to performances of each business line. [Non-English content] Wireless revenue was up 3.8% on- year to KRW 1,788.5 billion Won. Wireless service revenue was up 4.5% on- year to KRW 1,688.5 billion Won, driven by steady growth of 5G subscribers. [Non-English content] There was a total of 22,620,000 wireless subscribers as of the end of second quarter 2021, with 5,010,000 5G subscribers, which account for 35% of handset subscribers. Next is on the fixed line and the IPTV business. [Non-English content] Fixed line revenue was down 1.6% year-on-year to KRW 370.5 billion Won. On growth of enterprise subscribers, Voice DX service revenue reported a large increase, mitigating the revenue downfall. Broadband internet revenue was up 2.1% year-on-year to KRW 507.4 billion Won, on the back of stronger customer benefit offerings and activated sales to single member households, which drove rise in subscribers. [Non-English content] With continuing subscriber growth and media platform based revenue growth, we completed negotiations on commissions with a number of home shopping channels, which drove IPTV revenue up 14.5% on- year to KRW 466.6 billion Won. Next is on the B2B business. [Non-English content] Despite business growth of corporate fixed line and AIDX on revenue declines from global business due to COVID-19 and last year's revenue from system infrastructure project for the National Disaster Safety Network, there were declines in B2B IT and solutions revenue, which brought down B2B revenue 0.8% on-year to KRW 691.3 billion Won. If we are to exclude global revenue decline and infrastructure revenue for National Disaster Safety Network booked in Q2 of last year, B2B revenue recorded a growth of 3.2% year-on-year. [Non-English content] Corporate fixed line revenue was up 4.2% on the back of increase in traffic from higher demand for digital transformation and increase in contact-free working modes. AIDX business saw growth in revenue from IDC and AI Contact Centers, and on rise in public financial cloud revenue reported 6.2% year-over-year growth. [Non-English content] Next is earnings from our major group affiliates. BC Card revenue was up 4.6% year-over-year to KRW 906.8 billion Won, on the back of increase in domestic acquiring volume. SkyLife revenue was down 1.5% on-year to KRW 175.1 billion Won, on declines in subscribers for the OTT services. [Non-English content] Revenues from the content affiliate, which is one of key businesses for KT's transition into a Digico, saw its major company's platform-based revenue rise, reporting KRW 211.8 billion Won, which is up 16.3% on-year. [Non-English content] Due to declines in real estate sales and the impact following COVID pandemic on the hotel businesses, and transferring of the FM, facilities management, business to another group affiliate, estate revenue was down 36% on-year, coming in at KRW 66.8 billion Won. [Non-English content] I have so far walked through KT's Q2 2021 earnings performance. COVID pandemic has had a significant social and economic impact. Contact-free and online culture have become a norm. Companies are quickly demanding digital transformation and KT has been quick to respond to such changes. [Non-English content] KT last year declared its transition to a Digico from a telco, have begun to shift group's business portfolio around strengthening the digital platform with a focus on growth. Many customers are seeking after KT in both B2C and the B2B market, seeing the transformation that KT is taking. [Non-English content] I believe growth of the business and the subscriber expansion we've seen in the first half of the year is a result of KT's good response to changes happening in the market. We will do our best to sustain such revenue uptrend in the second half of the year as well. [Non-English content] As explained at the very beginning, we will launch new businesses of significance, such as AI Contact Centers and AI robot, in the second half of the year. We will endeavor to bring good performances from our new businesses, including the platform business, as well as from our telecom business. [Non-English content] We will also continue to carry out restructuring or reorganization of the group. Just as we completed the structure for the content business around Studio Genie, we will actively undertake revamping of the businesses that have valuable growth potential. [Non-English content] We also plan to take a proactive stance on group affiliates IPOs. K Bank, which recorded its quarterly turnaround, is considering to go public in 2023. Studio Genie also is targeting after a successful IPO once it sets itself up as Korea's premier content company. Through synergies across group affiliates and revamping of the business structures, we will do our utmost to strengthen the group's core competitiveness. [Non-English content] Through these efforts, we will establish KT as a successful Digico by further speeding up growth. We ask for your continued support and interest. Thank you. [Non-English content] For more details, please refer to the IR or earnings material that we previously circulated. We will now begin the Q&A. To allow more people to submit their questions, we would like to ask you to please limit your questions to two per person. [Non-English content] Now Q&A session will begin. Please press star one, star and one if you have questions. For canceling your questions, press star two, star and two. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per participant. [Non-English content] The first question will be presented by Ji Eun Lee from Daishin Securities. [Non-English content] The next question will be presented by Ji Eun Lee from KB Securities. [Non-English content] Thank you. I would like to ask two questions. First, your profit performance on a standalone 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? Also your wireless ARPU performance was good. What is your outlook for ARPU in the second half of the year? [Non-English content] Thank you for those questions. You asked two questions. I think the questions relate 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. [Non-English content] 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 excellent amount, it will be around in the range of KRW 500 billion-KRW 600 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. In light of the overall business reorganization and revamping that we are considering, there are some items that will impact on the expense side. 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. [Non-English content] 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. Also there are some seasonality factors relating to the end of the year or to fourth quarter of the year. Compared to the profit levels that we've seen in the first half, we are taking a more conservative stance. In the second half of the year, in terms of operating profit, once again, we are taking a conservative stance, but in terms of the revenue growth, we are maintaining our previous guidance and previous outlook. Also on a per annum operating profit basis, there will be an year-over-year increase. [Non-English content] Moving on to your second question about our wireless ARPU growth rate, the good numbers that we are seeing there, and what our outlook is in the second half. If you look at the MNO services, there are key or flagship handset models which will be launched in the second half of the year, and all of these handsets will be 5G only. This would naturally lead to increase in 5G subscribers. There is scheduled to be Samsung foldable phone and iPhone 13, which will be introduced into the market, and we expect that's going to really activate the handset market. At the end of the year, our 5G penetration target is 45%. We believe that considering all of these market backdrop, we will be able to continue on with this ARPU increase. [Non-English content] Next question, please. [Non-English content] The next question will be presented by Joon Sop Kim from KB Securities. The following question will be presented by Soonhak Lee from Hanwha Investment & Securities. Mr. Joon Sop Kim, please go ahead with your question. [Non-English content] First of all, congratulations on your good performance. I would like to understand about your subsidiary, K Bank's 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. [Non-English content] Well, thank you very much for that encouragement. I understand that your question was relating to how the K Bank is planning to continue on with an improvement and the onboarding of the bank customers, and asked about strategic direction. [Non-English content] As you know, K Bank, thanks to the mortgage loans, the apartment-based mortgage loans, as well as the connections that it provided to the virtual cryptocurrency trading. 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. [Non-English content] In terms of the number of customers, in just one year since the launch of the services, it was able to really grow their customer base by 4.6 x, reaching around 6 million of customers. In terms of the size of the deposit, it is around KRW 11 trillion, and its lending book has reported around KRW 1 trillion Won. [Non-English content] 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. 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. 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 K Bank services came through Upbit, and most of these clients are in the generation MZ, mostly young people who are very familiar with the overall mobile environment. This also coincides with the specific target that K Bank, from a mid to long-term perspective, is targeting. By providing a very swift improvement and enhancement into the application, as well as providing various different asset management and investment services, we plan to lock in these customer base. Also we will fully leverage our capability in providing corporate deposit services to our affiliate companies as well. [Non-English content] We also plan to carry on with a differentiated competitive edge in the product offerings that we provide to the customers. In the second half of last year, we provided the so-called Plus Box product and apartment mortgage product. These are very unique and distinct lending and deposit products. This year, we will be introducing also different types of savings products and lending products as well, loans for the so-called the minus bank book, et cetera. In the second half of the year, we have also launched smart loan as well as mid-priced loans that's going to be provided to people with poor creditworthiness. We are also planning to actually introduce a Jeonse loan as well. All of these are planned for the second half of this year. [Non-English content] To be a little more specific about our lending strategy, we're going to diversify our loan portfolio by providing secured loans as well as mid-priced loans, and we'll further upgrade our CSS capabilities, strengthen our risk management capabilities so that we can continue on with the loan growth trend. [Non-English content] Aside from a very diversified lending product and deposit product, and aside from our cooperations with our group affiliates, we are also cooperating with a cryptocurrency exchange as well as other asset managers. All in all, at the end of the day, K Bank wishes to establish itself as a comprehensive asset platform player. [Non-English content] Next question, please. [Non-English content] 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. Mr. Sunhak Lee, please go ahead with your question. [Non-English content] Thank you. I would like to ask you two questions, one on your group affiliate earnings and second on CapEx. It seems that the performance of the group affiliates have really significantly improved. 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 KRW 124.7 billion of profit contribution. 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. 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. Is this arithmetic correct? Is this calculation correct? Can we also expect such a stability in CapEx spend next year as well? [Non-English content] 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. [Non-English content] First, looking at BC Card, there was overall growth in the total acquiring volume from KRW 52 trillion to KRW 55 trillion. For the financial business, there was also improvement in that business from KRW 5.2 billion to KRW 8.1 billion Won. Overall, therefore, the revenue had gone up by 4.5%, profit by 14%. [Non-English content] If you look at the estate business, although there was decline in the real estate sales related revenue, and there were some increases in the deficit from the hotel business operations. Overall, there's 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 SkyLife TV, they had a success streak of different contents that they have aired, like The Iron Squad, Sumi's Sanjang and Wild Wild Quiz. These are all the very trendy contents that were very successful, which actually drove up the viewing rate as well as the top-line revenue. [Non-English content] On the advertisement business side, there's Nasmedia and PlayD, and they are yet to actually disclose their earnings, but their overall revenue and profit also improved as well. KT IT subsidiary, KT DS, also won more orders from outside, so the revenue that is generated by providing service outside had gone up, overall improving the performance. [Non-English content] 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. [Non-English content] In terms of CapEx, as time goes by, the amount of the CapEx volume as versus the amount of order placed, actually goes up. 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 CapEx. On a per annum basis, our guidance is going to stay flat compared to last year. [Non-English content] 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. 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 later point in time. [Non-English content] Next question, please. [Non-English content] The next question will be presented by Seyon Park from Morgan Stanley. Please go ahead with your question. [Non-English content] Thank you. I would like to ask you two questions. Since we're on the topic of CapEx, I would like to ask further question on this topic. I saw that KT is moving towards standalone SA 5G. What significant does this move have? Also from the investor's perspective, should we then consider that there will be certain implications or changes to the CapEx and the OpEx? I understand that as you move into standalone 5G, then technologies like network slicing is going to be made possible. 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. If you look at the first half net profit, it actually is quite similar to the full-year net profit of the previous year. 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. Would you be willing to revisit your dividend policy, or can you just once again walk us through what your dividend position is? [Non-English content] 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 lower latency and also lower level of battery consumption, unlike NSA. [Non-English content] Now, therefore, 5G SA actually is low latency, low power, and it allows high transmission speed. As you have mentioned, it also allows for network slicing, which is one of the key fundamental point that 5G service can provide. [Non-English content] 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. From this perspective, this will really help the use and adoption of autonomous driving, smart factory, AR, 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. Once it does, we believe that the importance and the effectiveness of 5G SA is going to be further highlighted. [Non-English content] He also asked about the impact on CapEx and OpEx side from 5G SA. On the CapEx side, actually, all of the investments have been complete. 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 SA standalone 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. [Non-English content] Your second question, because first half net profit figures were really good, you asked us and reminded us of what our dividend policy stance 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. [Non-English content] In the first half of the year, on a standalone basis, there's been a significant improvement in operating profit as well as net profit. 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. [Non-English content] 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.