Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KT Corp (KT, Financial) executed a strategic partnership with Microsoft to enhance AI cloud and IT domain capabilities.
- The company is focusing on structural profitability improvement and sustainable intrinsic growth.
- KT Corp (KT) reported a 2.5% year-over-year increase in wireless revenue, driven by 5G subscriber growth and higher roaming revenue.
- The company canceled 5.14 million treasury shares and decided on a Q2 cash dividend payout of KRW500 per share.
- KT Corp (KT) saw a 17.1% year-over-year increase in IDC revenue, driven by global customers and timely monetization of DBO projects.
Negative Points
- Operating profit fell 14.3% year-over-year on a consolidated basis due to collective wage agreements.
- Net income was down 5.1% year-over-year to KRW410.5 billion due to lower operating profit.
- Operating expenses increased by 1.4% year-over-year, driven by higher labor and business costs.
- Revenue for BC Card was down 6.8% year-over-year due to lower acquiring volume following the economic downturn.
- Home fixed line revenue declined 7.8% year-over-year to KRW175.6 billion.
Q & A Highlights
Q: Can you elaborate on the strategic partnership with Microsoft and its expected impact on KT's business?
A: (Min Jang, CFO): The partnership with Microsoft focuses on AI cloud and IT cooperation. By leveraging KT's B2B customer base and Microsoft's AI capabilities, we aim to address Korea's rising AI demand. This collaboration will help us develop sovereign cloud and AI solutions, ensuring data and AI sovereignty for domestic customers. We plan to engage in joint R&D projects, service development tailored to Korea, and talent cultivation.
Q: What are the key financial highlights for the second quarter of 2024?
A: (Min Jang, CFO): Consolidated revenue was KRW6,546.4 billion, flat year-over-year, while stand-alone revenue increased by 1.4%. Operating profit fell 14.3% year-over-year on a consolidated basis due to an earlier-than-usual collective wage agreement. Excluding this impact, consolidated operating profit decreased by 3.1%, while stand-alone operating profit increased by 3.9%.
Q: How is KT addressing the decline in operating profit?
A: (Min Jang, CFO): We are streamlining low-margin businesses and focusing on structural profitability improvements. This includes rationalizing our solar energy, digital logistics, and healthcare businesses, and transitioning AICC and robotics from infrastructure-based to service-oriented models. Although short-term sales may decline, we expect long-term profit improvement.
Q: What is the status of KT's 5G subscriber base and its impact on wireless revenue?
A: (Min Jang, CFO): Our 5G subscriber base surpassed 10 million, achieving a 75% penetration rate. This, along with higher roaming revenue and MVNO business expansion, boosted wireless revenue by 2.5% year-over-year to KRW1,765.1 billion. We continue to offer diverse rate plans to cement our subscriber base.
Q: Can you provide an update on KT's B2B business performance?
A: (Min Jang, CFO): B2B business revenue declined by 1% year-over-year due to the rationalization of low-margin businesses, including solar energy. Despite this, we saw double-digit growth in AI contact center services and meaningful revenue from our LLM model's global expansion, particularly with the Jasmine Group in Thailand.
Q: How did KT's subsidiaries perform in the second quarter?
A: (Min Jang, CFO): BC Card's revenue was down 6.8% year-over-year, but operating profit increased due to stabilizing costs. Skylife's revenue dipped 2.5% due to a decline in pay TV subscribers and home shopping advertising. KT Cloud saw a 17.1% revenue increase, driven by IDC revenue from global customers. KT Estate's revenue grew by 7.1%, particularly in the hotel segment due to higher demand from global tourists.
Q: What are KT's plans for the media business?
A: (Min Jang, CFO): We plan to utilize AI technology to lead the media industry's transformation. This includes introducing an on-device AI set-top box in the second half of the year. Despite a 14.8% revenue decline in our content subsidiary, we are seeing meaningful results from digital advertising and original drama productions.
Q: What are KT's future plans to enhance shareholder value?
A: (Min Jang, CFO): We will continue to expand cooperation with global IT tech companies to solidify our position as an AICT company. Additionally, we will streamline our businesses to drive sustainable profit growth and enhance shareholder value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
