[Concall] KT "Plans to Launch Korea-Specialized LLM in Collaboration with MS"

KT Q2 Earnings Conference Call at 3 PM on the 9th
"MS Partnership Business Model is AI Cloud"
No "Technical Limitations" for Additional 5G Frequency Allocation

On the 9th, KT held a Q2 earnings conference call and announced plans to collaborate with Microsoft (MS) to develop Korea-specialized large language models (LLM) and small large language models (sLM).

Jang Min, Chief Financial Officer (CFO), responded to a question about "what the business model will be with the MS partnership" by saying, "AI cloud is the business model," and added, "The current plan is to bring Korea-specialized LLM and sLM models to the market." He also mentioned, "Although it is not a business, we will also nurture cloud talent."

CFO Jang explained the service to be developed with MS, stating, "It features providing a service through sovereign AI and cloud that gives the government, public institutions, and financial institutions confidence in independently owning the rights to data ownership and operational control."

Regarding the question about "whether there are any technical issues with allocation since the additional 5G frequency is not an adjacent band," he said, "Since the government's digital spectrum plan has not been finalized, it is difficult to specify the allocation band or compensation," but added, "It seems there will be no problem applying carrier aggregation (CA) technology."

When asked, "If investing in additional 5G frequencies, will it burden the profit improvement trend?" he replied, "Since there is still plenty of 5G frequency available, it does not seem that capital expenditure (CAPEX) or financial burden will be significant," and added, "We will share our plans when the government’s plan is finalized."

Amid a decline in enterprise service revenue, KT is pushing forward its business with two pillars: eliminating low-profit businesses and redesigning the structure of profitable businesses to improve the revenue structure. As examples of eliminating low-profit businesses, CFO Jang cited withdrawal from blockchain business, digital logistics, and Vietnam healthcare business.

As an example of redesigning the structure of profitable businesses, he mentioned the robotics business. CFO Jang said, "Since distribution was involved, the burden was significant," and added, "We stopped the distribution business and restructured to focus on the robotics platform business." He also cited the AI contact center (CC) as an example, stating, "We avoided on-premise setups and shifted to a service model to create differentiation."

CFO Jang said, "We are very positive about the value-up program and are actively preparing for it," adding, "We are internally discussing specific details." He continued, "We have continuously reviewed the undervalued corporate value, and when the results are concretized to meet market expectations, we will communicate accordingly."

KT disclosed that it recorded consolidated sales of KRW 6.5464 trillion and operating profit of KRW 494 billion in Q2. On a separate basis, sales were KRW 4.5483 trillion and operating profit was KRW 358.8 billion. While sales were similar or slightly increased compared to the same period last year, operating profit decreased by 14.3% on a consolidated basis and 12.0% on a separate basis during the same period.