[Concall Summary] "Balanced Growth in Platform, 5G, and B2B" KT Achieves Double-Digit Growth in Q1

Q1 Operating Profit 444.2 Billion KRW... 15.4% Increase YoY, Best Performance Since Q2 2017

[Asia Economy Reporter Eunmo Koo] KT, which declared its transition to a ‘Digico (Digital Platform Company),’ recorded double-digit operating profit growth in the first quarter. This balanced improvement in performance is the result of rapid growth in platform businesses such as artificial intelligence (AI), digital transformation (DX), media, and content, along with the expansion of existing core businesses like 5G and high-speed internet.

Balanced Growth in Platform and Telecommunications Businesses

KT announced on the 11th that its consolidated operating profit for the first quarter of this year reached 444.2 billion KRW, a 15.4% increase compared to the same period last year. This is the highest since the second quarter of 2017. Revenue for the same period also rose 3.4% to 6.0294 trillion KRW. On a separate basis, operating profit increased by 21.4% to 366 billion KRW, and revenue grew 3.3% to 4.5745 trillion KRW.

The improvement in operating profit compared to the same period last year was driven by balanced growth in platform and telecommunications businesses, resulting in revenue growth across all group sectors. The B2B market, including internet data centers (IDC) and cloud services, continues to expand due to the spread of untact (contactless) services, and the core telecommunications business saw a turnaround in wireless average revenue per user (ARPU).

Specifically, AI and DX business revenue increased by 7.5% year-on-year, leading the growth of the ‘Digico’ segment. The demand from major IDC clients in finance and gaming sectors increased, and the Yongsan IDC, opened in November last year, contributed to revenue expansion. Additionally, data consumption rose as the use of non-face-to-face services expanded. Overall B2B business revenue, including corporate lines and enterprise IT and solutions, grew by 2.3% due to orders related to the Digital New Deal. A KT official stated, “In the first quarter of this year, we discovered meaningful achievements such as the full-scale launch of lifestyle DX services including AICC (AI Contact Center), Call Check-in, and AI robots.”

Kim Young-jin, KT’s Chief Financial Officer (CFO), explained during the 2021 first-quarter earnings conference call held in the afternoon, “The messaging business, a representative DX platform business, continues to show double-digit growth, and the Call Check-in business, launched in October last year, is also seeing continuous increases in subscribers and revenue.” He added, “Regarding the IDC business, revenue from Yongsan IDC has been fully realized since the first quarter, and the cloud business is steadily maintaining double-digit growth through the acquisition of new customers.”

In the traditional ‘MIT’ (Mobile, Internet, TV) business, wireless and internet segments contributed to revenue growth by attracting premium subscribers centered on 5G Giga Wi-Fi. The wireless segment recorded revenue of 1.7707 trillion KRW, a 2.0% increase year-on-year, driven by the full-scale expansion of 5G subscribers. As of the end of the first quarter, the cumulative number of 5G subscribers reached 4.4 million, accounting for 31% of postpaid mobile subscribers.

Due to the strong performance in the wireless segment, the 4% revenue guidance for wireless services remains valid. CFO Kim explained, “As 5G becomes widespread, the proportion of high-ARPU subscribers is expanding, additional revenue is being generated through various value-added services, and we plan to achieve the annual revenue guidance of 4%.”

Revenue from fixed-line telephone services decreased by 0.3% year-on-year, but the decline has significantly slowed. The proportion of business fixed-line telephone subscribers is steadily increasing, and sales of flat-rate products have stabilized the revenue decline. CFO Kim explained, “The number of corporate internet phone subscribers increased, the decline in home phone revenue slowed, and the sales expansion of flat-rate home phone products stabilized the revenue decline compared to the same period last year.” High-speed internet recorded revenue of 503.2 billion KRW, similar to the previous year.

IPTV also maintained solid growth. By continuously strengthening service competitiveness through securing high-quality subscribers and expanding partnerships, revenue increased by 6.8% year-on-year to 446.2 billion KRW. As of the first quarter, the number of IPTV subscribers reached 8.893 million. CFO Kim added, “IPTV growth was driven not only by monthly subscription fees based on the subscriber base but also by platform revenue such as home shopping transmission fees and advertising.”

KT invested 289.4 billion KRW in capital expenditures (CAPEX) in the first quarter. This included 149.7 billion KRW for subscriber networks, 34.2 billion KRW for backbone networks, 61.1 billion KRW for enterprise communications, and 44.4 billion KRW for others.

Accelerating Portfolio Restructuring for Digico Leap

This year, KT is accelerating portfolio restructuring to become a platform company focused on growth industries while strengthening its IT and telecommunications capabilities. In particular, KT continues to express confidence as the number one media platform operator in Korea with 12 million IPTV subscribers.

In the content sector, one of the core businesses in KT’s Digico roadmap, progress is becoming more concrete following the establishment of KT Studio Genie in January and the contribution of KT’s stakes in StoryWiz and skyTV to KT Studio Genie in March. In April, KT also acquired ‘Altimedia,’ a specialized technology company supplying core solutions for the media business.

Significant changes and improvements are underway in the financial business as well. As of the end of April, K Bank surpassed 12.1 trillion KRW in deposits and 5.37 million customers. Additional equity investments are planned within the year. In April, KT announced a strategic equity investment in the asset management service app ‘Bank Salad,’ signaling an acceleration in my data-related businesses.

In the first quarter, KT’s content group companies’ revenue grew 12.2% year-on-year. Increased sales in T-commerce and online advertising, as well as expanded music distribution volumes, contributed to the revenue growth. BC Card’s revenue improved by 5.0% year-on-year due to increased domestic purchases despite a decline in foreign tourists caused by COVID-19. Conversely, KT Estate’s revenue decreased by 41.3% year-on-year due to declines in sales from housing and hotels.

CFO Kim stated, “Thanks to the successful transition to ‘Digico,’ KT achieved operating profits exceeding market expectations in the first quarter of this year. Going forward, the group will maintain stable profits in both wired and wireless businesses and focus on becoming a digital platform specialist company by concentrating on media, finance and commerce, and B2B businesses, led by the nation’s top ‘ABC’ platforms?AI, Big Data, and Cloud.”

This content was produced with the assistance of AI translation services.