[Summary] "This Year's Sales Target 25 Trillion+a" KT Aiming at B2B, M&A Also Expected

[Image source=Yonhap News]

[Asia Economy reporters Seulgina Jo and Eunmo Koo] KT, which declared its transition from a 'Telco' to a 'Digico (Digital Platform Company),' reaffirmed its intention to fully launch its 5G business-to-business (B2B) operations starting with smart factories this year. In this process, mergers and acquisitions (M&A) and equity investments will also be pursued. The company plans to accelerate portfolio restructuring toward growth industries such as finance, media, content, and commerce. This year, consolidated sales are targeted at 25 trillion KRW + a.

◆Full-scale 5G B2B Business Launch...AI and DX Divisions Driving Operating Profit Also Accelerate

On the afternoon of the 9th, during a conference call following the announcement of 2020 earnings, KT announced that it will designate 2021 as the 'first year of transformation from Telco to Digico,' and will promote ▲ full-scale growth of B2B business ▲ establishment of a platform business growth foundation through group portfolio restructuring ▲ strengthening profitability of cash cow businesses. KT CFO Youngjin Kim explained, "We plan to fully launch the B2B business this year," adding, "We will actively pursue partnerships with key partners in business promotion. We will fill gaps in capabilities through M&A or equity investments."

The first area advancing in the 5G B2B sector is smart factories leading manufacturing innovation. KT has secured capabilities through equity investment in Hyundai Robotics. It has also secured a total of 42 orders for 5G smart factory collaborative robots. Currently, KT is working with Hyundai Construction Equipment on emergency control for unmanned machinery vehicles and with Samsung Hospital on a project to deliver 5G-based diagnostic results to medical staff in real time. CFO Kim mentioned, "We are discovering B2B business cooperation cases not only in manufacturing but also in shipbuilding, construction, healthcare, media, and public sectors."

KT expects B2B business opportunities to grow further. CFO Kim explained, "Differentiated 5G traffic policies for special services, regional infrastructure, and network slicing technologies are necessary," adding, "We will develop various cases based on enterprise-dedicated 5G infrastructure. Business opportunities are expected to increase." Representative areas include connected cars, immersive media, and customized services based on solution cloud.

KT is also accelerating its artificial intelligence (AI) and digital transformation (DX) businesses, which drove operating profit growth last year. In addition to cloud and IDC, KT plans to fully enter the AI call center market this year. KT Cloud is recognized as the only domestic provider integrating network, IDC, and cloud services. Based on its network business foundation and strengths in cloud infrastructure services (IaaS) and public and financial sectors, KT plans to expand platform services (PaaS) and software (SaaS) businesses.

Sales from AI and DX businesses, emphasized by CEO Koo Hyunmo, grew by 11.8% last year, showing the most explosive growth among all business areas. Although no separate guidance was provided during the conference call, growth exceeding last year is expected this year as well. KT plans to maintain overall capital expenditure (CAPEX) this year while relatively increasing resources for growth sectors such as AI and DX.

◆Portfolio Restructuring Including Media...Sales Declined Last Year

KT is also pursuing portfolio restructuring centered on growth sectors such as finance, media, and content. The acquisition of Hyundai HCN in July last year, the merger of KTH and KT Mhas, and the establishment of KT Studio Genie have been part of this group restructuring. CFO Kim emphasized, "Group restructuring cannot be achieved solely through a top-down approach," adding, "We have prepared to strengthen competitiveness with a perspective that revisits customers."

KT has also signaled a transformation into a platform company focused on growth industries while enhancing IT and telecommunications capabilities this year. In particular, KT expressed confidence as the number one media platform operator in Korea with 12 million IPTV subscribers. With SkyTV, OTT, and Genie Music leading, KT plans to analyze viewing patterns of 12 million subscribers to produce targeted programs. It is expected that stable revenue can be generated through the production and distribution of such original content. Partnerships with domestic entertainment agencies are also under consideration. Funding is being explored through both internal funding and external financing.

KT’s consolidated sales for last year, announced on this day, were 23.9167 trillion KRW, down 1.7% from the previous year. Annual operating profit increased by only 2.1%, resulting in a relatively weaker performance compared to competitors’ double-digit growth.

KT’s standalone sales (17.0828 trillion KRW) also declined by 1.8%, interpreted as a result of a decrease in device revenue. However, digital platform sales including media grew significantly, pushing KT’s standalone service sales beyond the 15 trillion KRW mark for the first time in nine years. Operating profit rose 17.4% to 878.2 billion KRW, and net profit increased 55.3% to 665.5 billion KRW.

By segment, IPTV sales increased 7.7% year-on-year to 1.7232 trillion KRW. Wireless sales (6.9338 trillion KRW) grew 1.3% year-on-year as 5G subscribers increased significantly despite roaming revenue declines due to COVID-19. As of the end of 2020, the cumulative number of 5G subscribers was 3.62 million, recording the highest net increase rate among the three major telecom companies. Wireless ARPU was also the highest among the three. Fixed-line telephone sales, which have been declining in recent years, fell 7.3% year-on-year, while high-speed internet sales remained flat.

Additionally, BC Card’s sales decreased 4.2% year-on-year due to a decline in foreign tourists and reduced consumption caused by COVID-19. KT Estate suffered a direct hit from decreased sales in housing sales and fewer travelers, resulting in a 24.9% drop in sales. Content group sales grew 9.6% year-on-year due to increased T-commerce and online advertising handling volume and expanded music service subscribers.

CFO Kim stated, "In 2021, we will become a company that grows in a differentiated way through the expansion of digital platform businesses and bold business portfolio transformation," adding, "We will concentrate group capabilities on growth and strive to enhance corporate value based on this." Meanwhile, KT decided to increase the dividend per share by 250 KRW from the previous year to 1,350 KRW, to be confirmed and paid after the regular shareholders’ meeting in March.