KT "Q4 Sales Growth Expected... Notable Growth in Core Digico Businesses"

Q3 Sales Up 4.2% Year-on-Year... Operating Profit Up 18.4%
Targeting Demand for Specialized Networks and Multi-Slicing in 5G B2B

[Asia Economy Reporter Oh Su-yeon] KT is expected to continue its growth trend in the fourth quarter as it maintains its performance up to the third quarter this year.

Kim Young-jin, KT Chief Financial Officer (CFO), said during the third-quarter earnings conference call on the 8th, "We will strive to maintain the sales growth trend in the fourth quarter. We expect to sustain sales growth despite uncertain external conditions going forward. However, although there are concerns about volatility in the fourth quarter, we will enhance profitability-focused management by optimizing cost expenditures. We will work to improve profits on an annual basis compared to the previous year," he stated.

CFO Kim added, "In the B2B sector, orders and sales growth continued due to companies' digital transformation demands. In the telco (telecommunications company) sector, sales remained solid as premium subscribers such as 5G and Giga Internet increased. The growth of DIGICO (digital platform company) core portfolios such as media, content, finance, Internet Data Center (IDC), and cloud was also notably strong," he reported.

KT announced that its consolidated sales based on Korean International Financial Reporting Standards (K-IFRS) for the third quarter of 2022 increased by 4.2% year-on-year to KRW 6.4772 trillion, and operating profit rose by 18.4% year-on-year to KRW 452.9 billion.

On a separate basis, service sales increased by 0.6% year-on-year to KRW 3.9444 trillion, and operating profit rose by 24.9% year-on-year to KRW 323.6 billion. Including KT Cloud, which was launched this year, third-quarter separate service sales increased by 2.9% year-on-year to KRW 4.0308 trillion.

KT also plans to maintain its dividend payout ratio. Dividends will be decided based on a policy of paying 50% of adjusted net income on a separate basis through this year.

In the wired and wireless business, 5G subscribers accounted for about 57% of total handset subscribers, reaching 7.96 million. Home wired phone sales decreased by 7.8% year-on-year, but ultra-high-speed internet sales increased by 2.6% year-on-year as the proportion of Giga Internet sales grew.

CFO Kim stated, "We expect annual service sales to increase by around 2% this year, and with the expansion of 5G subscribers, the average revenue per user (ARPU) is expected to rise to last year's level." KT's third-quarter ARPU was KRW 32,917, up 3.5% year-on-year.

The B2B platform business (DIGICO B2B) decreased by 10.4% year-on-year due to the establishment of KT Cloud, but including KT Cloud, it increased by 9.9% year-on-year. Following the COVID-19 pandemic, digital transformation (DX) demand from companies increased, and cumulative orders in the third quarter grew by 21% year-on-year.

The B2B business targeting corporate customers (Telco B2B) grew by 9.5% year-on-year. Corporate internet business sales increased by 10.9%, and corporate call sales rose by 6.8%.

KT shared its outlook on 5G specialized networks and network slicing technology. CFO Kim said, "The KT consortium has secured 4 out of 11 government projects in the 5G specialized network business and is currently building the network. KT can create business opportunities as a 5G specialized network construction and operation operator, and plans to proceed flexibly with the 5G specialized network business at the group level." He added, "To reduce customer cost burdens, customers will build 5G base stations, but 5G core and other components will be built on KT's internal cloud and provided as a service model."

Additionally, KT plans to launch an enterprise-dedicated multi-slicing product within the year. Various pricing strategies will be pursued for customized products to strengthen 5G profitability. CFO Kim said, "In the B2B sector, which is the foundation of future 5G business, network slicing will revalue the worth of the 5G network. We plan to launch an enterprise-dedicated multi-slicing service that separates the network by destination IP within the year, providing enterprise-dedicated services with 5G standalone (SA) devices and SA specialized functions," he explained.

The B2C platform business (DIGICO B2C) sales increased by 3.6% year-on-year as media and mobile platforms grew evenly. The Internet TV (IPTV) business was reorganized as 'Genie TV' and introduced an AI-based 'Media Portal' service, resulting in a 5.8% increase in sales year-on-year.

Recently, there have been concerns that all three major telecom companies will face rising labor and sourcing costs as they focus on content and corporate solutions as future growth engines. However, KT considers these concerns to be unfounded. CFO Kim said, "We have platforms, networks, and sales capabilities, giving us differentiated competitiveness compared to competitors. Although costs may increase due to inflation and other factors, it is more important to expand the market pie and respond to demand rather than compete over a small market." He added, "Structural cost increases in companies are occurring recently, and we believe digital transformation demand will increase to offset this. By leveraging KT's information and communication technology (ICT), we can create new demand."

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