KT Corp (KT) 2012 Q3 法說會逐字稿

(Interpreted). Good morning and good evening. First of all, thank you all for joining this conference call. And now we'll begin the conference of the 2012 third quarter preliminary earnings results by KT. This conference will start with a presentation, followed by a Q&A session. Consecutive interpretation will be provided for your convenience. (Operator Instructions). Now we shall commence the presentation on the 2012 third quarter preliminary earnings results by KT CFO, Mr. Bum Joon Kim.

(Interpreted). Good afternoon. I am Youngwoo Kim, IRO of KT. Let us begin the third quarter 2012 earnings conference call. This conference call is available on our website via webcasting. You can view the presentation slides while listening to the presentation. KT has been presenting its financials on a consolidated basis according to IFRS since first quarter of 2011. The results for third quarter 2012 include a total 58 companies, including KT and the newly-added KT Rental. With that, I will now turn it over to the CFO, Mr. Bum Joon Kim for the presentation.

(Interpreted). Good afternoon. This is Bum Joon Kim, the CFO of KT. The third quarter was a period during which KT was able to confirm its competitiveness and leadership in the wireline/wireless broadband area. First, based on our world-class wireline/wireless network quality and differentiated services, KT reached 8m broadband subscribers for the first time in Korea and achieved 2m LTE subscribers during the shortest timeframe in the market. Going forward we will leverage our number one wireline/wireless customer base to expand usage in IP-based services such as IPTV, smartphone, smart tablet and VoIP, to lead the wireline/wireless convergence market, focusing on the distribution of virtual goods.

The third quarter accumulated operating income of consolidated Group companies excluding KT reached KRW191.5b, representing a 2.8 times increase versus KRW69b during the same period last year. We believe this is a reflection of the results of our Group management strategy that we have been pursuing.

In addition, on September 13, KT was named as a global supersector leader in the telecommunications area by DOW Jones Sustainability Index for the second year in a row, reflecting our position as the de facto world-best telecommunications company. I believe this is recognition of KT's efforts to change and innovate to enhance governance transparency, contribute to society, and to grow together. Looking ahead, we will continue to improve our corporate value in line with our position as one of the best telecommunications companies in the world, and to gain respect as a company that fulfills its social responsibilities.

With that, let me begin the third quarter earnings presentation. Third quarter operating revenue increased 30.6% year on year to KRW6,519.4b due to the inclusion of BC Card and KT Rental in the consolidated financial statements. Operating income grew 4.3% year on year to KRW538.8b, which reflects the disposition gain on investment stock accounted in the equity method by KT Rental. Net income grew 45.6% year on year to KRW372.3b due to an increase in non-operating income and losses, while EBITDA increased 11.5% year on year to post KRW1,412.8b.

Let me move on to discuss the performance of our core subsidiaries in the following page. BC Card, KT Skylife and KT Rental all showed stable performance during the third quarter. BC Card's operating income declined slightly due to an increase in expenses, but KT Skylife and KT Rental both showed growth in revenue and operating income. In addition, driven by growth in core subsidiary operating income and one-time gains from the consolidation of KT Rental, subsidiaries across the board contributed KRW128.9b to total operating income.

Now let me explain the breakdown of operating revenue. On the operating revenue level all businesses with the exception of our Wireline services posted growth on a year-on-year basis. Wireless revenue grew 1% year on year due to higher ARPU driven by an increase in LTE subscribers. Media/Contents revenue continued its strong growth trajectory by posting 24.8% growth year on year. Finance/Rental revenue increased significantly year on year due to the impact of BC Card and KT Rental which was consolidated for the first time this quarter. Merchandise revenue, driven by increased wireless handset sales and other operating revenue mainly due to the disposal gains on investment stock accounted in equity method by KT Rental, also posted high year-on-year growth.

Next I'll talk about operating expenses. Operating expenses increased 33.6% year on year to KRW5,980.6b. General expenses increased 53.3% year on year due to the consolidation of BC Card and KT Rental. In addition, selling expenses and cost of merchandise rose 69% and 37.5% year on year respectively due to active marketing for LTE.

Next let me talk about our financials. Due to the consolidation of KT Rental third quarter assets, liabilities and equity increased 14.4%, 19.1% and 7.9%, respectively. Net debt showed a slight increase versus the previous quarter, but the net debt to equity ratio dropped more than 3 percent points year on year, further improving our financial soundness. On a KT standalone basis, net debt decreased 5.7% year on year due to efforts including the securitization of handset receivables.

Let me now discuss CapEx. Third quarter CapEx dropped 40.7% quarter on quarter to KRW592.3b, reflecting the concentration of LTE investments in the first half. On a third quarter accumulative basis CapEx increased 9.9% versus 2011 to total KRW2,488.2b due to the increase in wireless CapEx for the build-out of the LTE network.

Now let me touch upon the performance of each of our businesses. Wireless revenue increased 0.8% quarter on quarter to KRW1,754.2b, led by an increase in ARPU driven by more LTE subscribers. Wireless ARPU continues to grow. It grew 1.8% quarter on quarter to KRW29,970 on a year-on-year basis. This represents an increase of 1.2%, which is meaningful since it represents growth despite rate cuts implemented in fourth quarter 2011.

Smartphone subscribers reached 9.79m in the third quarter, representing 59.4% of total subscribers. Of these subs, 2.49m are LTE subscribers. As of the end of October, our LTE subscriber number is 2.8m. Looking towards the end of the year we will continue to efficiently acquire LTE subscribers to achieve our 4m subscriber target by providing differentiated tariff packages and leveraging new strategic handsets.

Next we'll talk about our Wireline business. Wireline revenue declined 10.2% year on year to KRW1,568b due to a decline in revenue from less wireline telephony subscribers and call volume and an increase in broadband bundling discount. Total fixed-line telephony subscribers as of the third quarter stands at 18.84m. Even though it is a seasonal low season, we added a net 40,000 broadband subscribers to exceed a total 8m subscribers. Our broadband subscriber base of 8m is the result of maintaining world-class service competitiveness and market leadership consistently for 13 years since the service was first launched. Going forward, we will continue to exert our best efforts to continuously grow our customer base.

Next, the Media/Contents business. Media/contents revenue grew 24.8% year on year to KRW266.4b, driven by steady growth in subscribers and ARPU. KT Group media subscribers, which include IPTV and Skylife, grew by more than 200,000 in the third quarter, further enhancing our position in the pay TV market. In the media business in particular, non-subscription revenue, such as pay per view and home shopping fee revenue, increased significantly, driving ARPU up more than 13% year on year, showing that we have been able to also achieve qualitative growth. We are targeting 4m IPTV subscribers by the end of the year, which should be easily achievable when looking at the current trends.

Next is Finance and Other service revenues. Finance/Rental revenue grew significantly year on year to KRW939.1b due to BC Card and the newly-consolidated KT Rental. Other service revenue increased 9.8% year on year to KRW332.3b due to the revenue growth of other subsidiaries.

With this, let me end the presentation on the third quarter 2012 earnings.

(Interpreted). Now, Q&A session will begin. (Operator Instructions). In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. The first questions will be provided by Mr. Yang Jong In from Heungkuk Investment Securities. And the next question will be provided by Mr. Kim Hong Sik from NH Nonghyup Securities. Mr. Yang Jong In, please go ahead with your question.

(Interpreted). Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is with regards to the real estate operations that you have. During the second quarter earnings release conference call, you had said that, on the real estate side, your revenue forecast was around KRW850b by the year 2015. From this December you will now have a real estate affiliate that will be launched and in terms of your target and the general big picture is there anything that will be different?

The second question that I would like to ask you is with regards to the numbers on page 16. If you look at the Merchandise line there actually there are sales profits of around KRW60b there. If you look at these numbers back historically usually it's been a negative number or in the same range. I'd like to know why there's suddenly a very profitable number here and what are your forecasts going forward for this line item?

(Interpreted). Thank you for your question. To answer your first question very briefly with regards to the real estate side, in the second quarter, from what we have told you, actually there is no large differences. Right now we are in the process of spinning off our real estate operations and the reason for that is because we want to provide more clarity to the market and have more professional businesses in terms of our operations. Therefore the numbers that we have told you are still valid.

(Interpreted). Maybe I can answer your second question. I am Youngwoo Kim. With regards to the Merchandise gains that you talked about, this is because we have abolished a promotional discount that we had been providing and therefore the amount that we offsetted versus the revenue no longer exists and that is why on the handset side we have been able to record a gain. As our [kappa] going forward decreases we believe that this effect will also decrease.

(Interpreted). The next questions will be presented by Mr. Kim Hong Sik from NH Nonghyup Securities. And the following questions will be presented by Mr. Stanley Yang from Nomura Securities.

Mr. Kim Hong Sik, please go ahead with your question.

(Interpreted). So there are three simple questions that I would like to ask you, and I believe that these questions are the questions that are most asked by the market. The first is with regards to your copper cable. What is the book value of the copper cable that you have right now? And in terms of your disposition, what would be the roadmap going forward?

Secondly, with regards to the real estate side, if you look at it, you have disposal revenues and you also have rental revenues that you have on the real estate side. However, there seems to be some up-and-downs in this area, and therefore, for us to judge it, it seems a bit difficult. On a normalized yearly average basis, what would you believe the range would be on this side? And if you could share that information, that would be helpful.

And thirdly, we believe that in the fourth quarter iPhone 5 will be launched and there is some concern about the marketing expenses related to that. Versus the third quarter and the fourth quarter, will you be spending more on marketing or will you be spending less?

Let me address your first question regarding the copper wires. To date we have liquidated roughly KRW25.6b. This is really relative to the market price of copper. So we have an internal target of a certain amount, but it's hard for us to say because it may not be achieved. So I don't want the market to over-expect or under-expect, but we will try to give more. As we come closer to selling, maybe we'll give you an early warning as to how much -- or early notifications how much we're going to do. But at this time it's difficult to say. Just as a reference, because the price keeps fluctuating, it's really hard to state how much we have in copper value, but I can state that we have about 320,000 kilometers of copper wires underneath the ground.

The second question somewhat applies the same answer, which is the real estate. To date we've liquidated around KRW138.8b worth of real estate this year. Again we have some internal targets, but again this is pending uncertain ability to liquidate before the year is over, so it's hard for me to give us precise numbers once again because these are ongoing deals. And again, once we come closer to signing some kind of a liquidation then we can notify the market, but at this time it's difficult for us to say. But I think everyone knows how much real estate we have and what the book value and everything else is so I'll just leave it at that.

With respect to your last question, iPhone, us along with everybody else in Korea are looking forward to the release of the iPhone 5 here in Korea. But when it does I guess the market is worried if it's going to cause another round of heavy marketing or what not. We don't believe so. We believe that iPhone 5 will be a very good opportunity for us to sell a very good phone at a very high tariff rate with reasonable marketing dollars.

So we look at the entire year as a marketing dollar budget, let's say. And if you look at our first quarter and second quarter, it was relatively low. Last quarter -- third quarter was quite high, only because we're ready to now launch LTE with full force. But as we always say, we really don't want to use money as the backdrop of any kind of competitive environment. So we hope to offer good rates, various bundling products and everything else so that we can acquire a good number of subs without stimulating market competition.

(Interpreted). The next questions will be presented by Mr. Stanley Yang from Nomura Securities. And the following question will be presented by Mr. Sam Min from Morgan Stanley. Mr. Stanley Yang, please go ahead with your question.

(Interpreted). So the question I would like to ask you is with regards to the marketing environment. If you look at the current environment since the end of September there has been a lot of cool down within the market and maybe this has been triggered by the government regulations or the government investigation. Do you believe that this is the predominant reason for the current market environment or do you believe that within the industry amongst the carriers there have been some self-restraint that have been exercised?

If you look at the current environment right now in the fourth quarter there has been a lot of cool down and as a result of that it has been positive on your share price and there are higher expectations about earnings for the full year. However, in terms of marketing, this is a situation that can always turn to the other side. Therefore, what I would like to ask you is that, amidst the current market being cool down, do you see any changes in terms of the patterns of behavior of the consumers or the vendors?

For example, on the consumer side, there's no subsidies, do you see consumers actually delaying purchasing of handsets or that the replacement cycle for handsets is getting longer? And on the vendor side, with less sales do you see any signs that they are trying to maybe ask for larger subsidies? And in this type of situation, do you believe that there is room for the telcos to actually maneuver and create a situation that could actually work in their favor?

What I'm trying to ask you is that, in the current environment, which is a cool down environment, do you believe that amongst the value chain, that includes the consumer and also vendor, do you think that there is room for improvement so that we can look for a brighter 2013? Or do you believe that the environment, i.e. the ultimate question that I would like to ask you is that, in case of the marketing environment for 2013, do you believe it will be better than the environment for 2012?

And do you believe the reason for that, will that be driven more by the regulations or will it be driven by more self-restraint or self-effort that the telcos are making by themselves?

Thank you for the short question. I guess I would first address your question regarding fourth quarter. Whatever may have happened, we ourselves, again I've mentioned this three quarter in a row, that we're not really there to stimulate the market and we would like to keep marketing dollars as low as possible. Obvious for various reasons.

But whatever happened in the fourth quarter, and again I will address the fact that, yes, there is a sort of a government review of our marketing practice right now, and that had some impact on the marketing cool down. And whatever the ultimate reason may be, because it's not just what KT does that matters, it's what everybody does, and I think the review has brought everyone to cool down, which is good. I'm very happy that the marketing dollars are not being spent like it was in the third quarter and I think it's a good trend. I welcome the trend.

We hope that this trend continues next year as well. If you look at KT, we are really disciplined as to how much profit we're supposed to extract out of the Company on a quarterly basis. We have a certain amount of responsibility to our shareholders. So we try to balance the tough marketing environment with profitability and we try to extract as much as we can. And that will go forward as well to 2013. We will always have a certain amount of profit guidance that we have to have in order for this Company to sustain for a long time.

But this year's third quarter was a tough quarter because just looking at profit alone will actually be detrimental to our long term if we continue to lose our subs. So we had to play with the game in the market with the rest of the players, and it was tough. But like you said, cooling down in the fourth quarter is great and we hope that it continues next year.

To give -- it is not just me saying that. Hopefully next year it continues, but some of the things that changing in the market that may help in that direction is that we are signing up for longer contracts, which should translate to better churn rates. And secondly the penalty for contract breach will be much more enforced. Therefore our subscribers will stay on our networks longer, not just our network but everybody's network. So those things combined should be a good mechanism for holding on to the sub longer than the current periods and I expect this to be positive for the market.

(Interpreted). The next questions will be presented by Mr. Sam Min from Morgan Stanley, and the following questions will be presented by Mr. Yi Dong Sub, from SK Securities. Mr. Sam Min, please go ahead with your question.

Yes, hi, I have two questions. My first question is on I guess ARPU and whether LTE could essentially lead to higher ARPU for the entire sector. I want to point out that we initially thought that 3G smartphone pricing with the ARPU accretion and that did not happen and if you look at current LTE ARPU levels this is where 3G smartphone ARPUs were in early 2010. So I was wondering if you can walk us through how LTE ARPU will not succumb to the same declining sort of trend as mainstream adopts LTE. I would appreciate that.

My second question is mobile voice-over-IP and I think one of the politicians actually said that they would look to facilitate mobile voice-over-IP and I was wondering what KT and Korean telecom operators have in plan to defend against mobile voice-over-IP, whether it's in pricing or what have you. Thank you.

Thanks for the question. Our ARPU has been steadily declining in the past quarters and finally made a tick up in the second quarter versus the first, and it's gone up again in the third quarter versus the second so it's a very good sign. The overall ARPU we are talking about does have a lot to do with various other factors like you know, a tariff reduction that we had last year of KRW1,000 per subscriber for non-LTE but, however, we have a large base bet so that made an impact. Secondly, again, now with LTE as well, but we also have a lot of bundling of savings that we're doing so that brings it down a little bit. But overall, as I said in the last two quarters, it's going up so that's very positive.

But to give a little bit of, again, a future view, we do see ARPU increasing again probably in the next quarter and that is supported by the fact that the average sign-up for LTE currently is still KRW62,000 tariff rate and above, which is 52% of overall LTE sign-up. So the point I'm trying to make is, yes, we shall see more increase in our overall ARPU, not just LTE ARPU because the overall enhancement by the new LTE subs.

For your MVoIP question, currently on the 3G side we allow MVoIP for anybody who signs up for KRW54,000 price tariff or more and for LTE it's KRW62,000 and above that we allow MVoIP. However, the call quality is not really perfect yet nor is the user interface and the user interface is quite cumbersome at this time and so the usage rate for MVoIP is relatively small. Going forward we will probably use a lot of feedback from the market and the customers and see if we can work with the customers to provide a much more user-friendly and better quality MVoIP in the future.

(Interpreted). The next question will be presented by Mr. Yi Dong Sub from SK Securities. And the following question will be presented by Mr. John Kim from Deutsche Securities Korea. Mr. Yi Dong Sub, please go ahead with your question.

(Interpreted). So thank you. There are two questions that I would like to ask you. First, if you look at KT in 2009 and 2010, when you first introduced the iPhone actually in the smartphone area KT was the leader at the time. However, two years have passed and if you look at the situation now particularly in relation to LTE it seems that you are lagging a bit behind the other competitors. So what do you believe the reason for this is? Do you believe it's because your 3W strategy in itself had issues or do you believe that you started in the LTE space too late, or do you believe that your network strategy in general had issues?

And going forward what you believe the strategy needs to be for you to gain or regain the leadership position that you had enjoyed in the market.

Secondly, I'd like to ask you about the iPhone strategy going forward. In the beginning, the iPhone was a very attractive market and a very attractive phone. However, if you look at the situation now from the other manufacturers they all have flagship handsets that are similar in terms of performance or have very similar features and therefore I don't think that the iPhone in itself is differentiating itself any better now if you look at the general situation. Therefore, when compared to LG Uplus or SK Telecom are you going to beef up your line up of strategic handsets or are you going to continue your situation as you have up until this point with more emphasis on the iPhone?

Thank you for your question. Regarding market situation with LTE and your questions regarding our 3W strategy, I think they are independent of each other. I think we had a very good strategy in dealing with smartphone subscribers at that time. As 3G smartphones started really taking effect there was a huge demand for data and our 3W strategy did work. We had a lot of WiFi users, we had some WiBro users and obviously wideband CDMA users. So that in itself was a very good strategy.

LTE was, it was tough for us because as you all know that we had a very severe delay in shutting down our 2G, which was refarming our 1.8 gigahertz spectrum. So that late start actually pushed us back and time to market was slower than our competitors. But once we had legal green light to rollout LTE, we were one of the fastest rollout of LTE in history, finishing major cities with before June. And to date now we are completely rolled out equal to none. I think some of the studies have shown that our speed is much faster and we went full speed ahead in terms of LTE subscriber acquisition in the third quarter.

So the overall comment that I would like to leave here is that yes, there was some glitches in the beginning of this program, but we realized our weakness, rolled out as quickly as we can. We have very good phones now and we have -- our tariff rates are very competitive. Our fundamentals have not changed, it's just market perception, but I think that's changing as well. So we are looking to equalize this unbalanced selling of LTE in the near future. We believe that we have everything in place now. There's nothing for us to be held back and so in terms of fundamental offering we are better than any other companies here in Korea.

Regarding your second question about the iPhone, yes we were the first ones to introduce the iPhone in Korea and at that time had a major positive reaction to our subscriber numbers as well as the ARPU and everything. And thereafterwards iPhone is one of many phones that we offer along with our competitor who offers iPhone. And we still look forward, as I mentioned in my speech, we look forward to introducing iPhone 5 once again when it comes to Korea and I think there will be a very strong niche market if not a major market for that phone coming up.

(Interpreted). The next questions will be presented by Mr. John Kim from Deutsche Securities Korea and the following questions will be presented by Mr. Sean Oh from Merrill Lynch. Mr. John Kim, please go ahead with your questions.

Yes, thank you for the opportunity to ask questions. First one is regarding your fixed line. I think it's good to see that KT's PSTN line decline has slowed down to about 3.6%, according to your fact-sheet, YOY and your broadband subscriber base continues to grow. But revenue-wise your telephony business still fell 12% and broadband also 11%. So when, at what level do you expect this side of your business to stabilize?

Second question is on your international business. How intent and committed is KT to growing your international operations and I'm asking specifically because a senior executive of KT was quoted that you intend on growing your overseas revenue by eight-fold to KRW4 trillion by 2015 over the course of the summer. So does the top management's objective and growth strategy still remain the same? Thank you.

Thanks for the question. Regarding PSTN, you're right, it's falling and the rate of fall is declining which is positive for us. I think statistically speaking, two years ago, it fell around KRW520b a year but this year, perhaps it's a little less than -- a little around KRW300b to KRW330b a year. And so it's diminishing, which is a positive sign.

Where will this end, where will this land, is a very tough question. There's a lot of mobile migration. Our Wireless ARPU or Wireless tariffs are slowly coming down. Natural competition as well as a tariff reduction and all so it's making it easier for people to migrate to mobile and so it's hard to say. But we do look at, in the mid to long term we look at more corporate usage in the PSTN or more stickiness from the corporate usage, various types of tariff and voice programs that we have.

We hope to keep as much as we can and I would like to give you a flat number where we ultimately think that it's going to end up, but it's very difficult. I think assuming for your modeling something a little less than this year would be probably the most -- the best way of looking at it. That is how we will look at it for next year's business plan.

With regards to your question on overseas investments, those figures that you heard are what we are shooting after, but we look at it conservatively. We are not going to run out and buy companies just because we have a target in mind without being careful. And so when we explained to the market about telecoms in South Africa, that is the kind of investments that we are looking at. We are not just out there to purchase a company for the sake of purchasing. We are actually -- it's a two-fold business plan. We want to sell our managed service, increase the value of the company. In the meantime we want to hold on to the company a little bit for the short or the mid term.

And so I think we will look at overseas companies but knowing KT's internal corporate governance it's hard to pass through. And we hope that whatever passes through our shareholders will not be disappointed and we will have a clear defined way of explaining, as we did in Telkom SA, that that's what we are doing.

Just to add a little bit, we look at things that we are doing that we feel that overseas companies may be interested in. Things like our CCC, Cloud Communication Center, is something of a very different type of network architecture that I think other companies may be interested. We are more than willing to go and work with them and see if we can sell these kind of knowledge base. Those are some of the things that we look at as overseas. So there are organic and inorganic growth of overseas. I know good portion of that that was discussed May sounded like inorganic but we look at both sides so that we can help KT's overseas expansion go smoothly.

(Interpreted). The next questions will be presented by Mr. Sean Oh from Merrill Lynch and the following questions will be presented by Mr. Kim Dong-June from Eugene Investment Securities. Mr. Sean Oh, please go ahead with your question.

Yes, thank you for the opportunity. Two quick questions. Are you planning to close the gap between your overall market share and LTE market share? And if so what is the timeline that KT's management is expecting?

And number two, given that one of your competitors has changed its dividend policy, can you please let us know if you plan to stick by minimum DPS of 2,000? Thank you.

Thanks for the question. It was only natural that we had mismatching market share, overall market share versus LTE market share, because we didn't have an LTE network in the beginning. We couldn't sell so it was obviously we were a bit behind. If I was to explain 100 yard dash, we were starting really late. But now that everything is ready we are comfortable in achieving a more balanced market share growth of LTE.

And to address what will be the time line, that really depends on everything that we look at, which is profitability, the speed of how fast we can do it, the market itself. And so I would hate to give a timeline but we see nothing I guess lacking in terms of what KT's gotten prepared so far. So we hope that in a natural non-destructive way we can make back some of our market share, but we think it will happen relatively amid the time period that we're comfortable with.

With your question on dividends, we are still under the assumption that we announced earlier that we have a minimum of 2,001 DPS going forward for the next two years -- I'm sorry, three years. I was thinking of the second term. Okay, three years from --

(Interpreted). The next question will be presented by Mr. Mr. Kim Dong-June from Eugene Investment Securities. Please go ahead, sir.

(Interpreted). Thank you. The question that I would like to ask you is if you look at the LTE subscriber number as of the end of October, you said that you have 2.8m subs and the target that you have until the end of the year is to be at 4m subscribers. If you take into to consideration that the marketing environment right now is cooled down, that the KCC is doing its review and that the iPhone 5 launch in itself is being delayed versus schedule, do you believe that it would be possible to reach your 4m by the end of the year subscriber target?

And in this situation in which the market environment has cooled down a bit, if you need to heat up the environment to gain the subscribers that you want, will you do so? Or will you not hit the target and maybe maintain the coolness of the market as it is right now, i.e. the question that I would like to ask you is that if you have to choose between gaining the subscriber base that you want versus spending more marketing dollars, which side do you sit on?

Thanks for the question. Yes, we still have a target of 4m LTE subscribers but looking at the current rate, as I said in my speech, we'll try to reach for 4m. And we may not reach that and that target may be pushed over to next year. But it really is, again, it's a very good question you are proposing, is that are we choosing profitability over the number of subscribers that we have. They're both important to us. I'd rather -- I'd like to have 4m LTE subscribers because it will pay off next year but at the same time we have an internal target of profitability.

So we will see what we can do. My budgeting encompasses not only wireless to wireless. We can also save money on IPTV or save money on this. So we have to see. But at the same time we don't want to stimulate the market and make it a very heavily competitive market which, as I said earlier, I am quite happy with the way it is going right now. So ultimately for us it's equally important but if push comes to shove I guess we could be shy of 4m. The number itself is, I think it's not as critical as profitability. I think 4m is still achievable in terms of, yes, the number, but if we are 5% short or wherever it may be at this current rate, then I think we can push next year.

(Interpreted). Since there are no further questions we will wrap up our Q&A session. Once again, we appreciate your questions and interest and we would like to express our gratitude to everyone who participated in today's call. With this let us wrap up the third quarter 2012 earnings conference call for olleh KT. Thank you very much.

Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an Interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.