KT Corp (KT) 2013 Q4 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 will begin the conference of the 2013 fourth quarter preliminary earnings results by KT. The conference will start with the earnings results presentation by Mr. Youngwoo Kim, KT IRO, followed by a Q&A session. (Operator Instructions).

(Interpreted). Good morning. I am Youngwoo Kim, IRO of KT. Due to the Company's 2014 organizational revamp and changes in management yesterday, today I will be leading our conference call for the fourth quarter 2013. This call is being webcasted on our website. You can follow the slides as we make the presentation. Since the first quarter 2011 KT has been presenting consolidated performance based on IFRS standards.

Now let me start the presentation for the fourth quarter 2013. During the past year, KT has experienced significant changes. Due to innovative wideband LTE services and efforts to improve the distribution network, subscriber trends, which have been on a net decline, have turned around to post net additions from the fourth quarter, thus enabling the Company to regain its leadership in the telecom market. The non-telecom businesses have continued solid performance. In this backdrop we are boosting our efforts to realize full-fledged synergies with the telecom business.

The Company's new CEO, Mr. Chang-Gyu Hwang, who was appointed yesterday, announced he would re-establish the telecom business and make KT number one by leading telecom-based conversion services. To this end, converging its largest and highest quality wireless and wireline telecommunications network in Korea, KT will pre-emptively provide top-quality and differentiated services. Moving away from simply competing on subsidies, we will lead service innovation based competition and focus efforts to create new growth drivers, using ICT-based convergent services.

In addition the new CEO has requested all employees to put their full commitment behind overcoming the crisis, and has declared a crisis management mode for the Company. Specifically the CEO has returned 30% of his annual salary and has deferred his long-term bonus until growth momentum shows signs of recovery. For senior management they have also returned 10% of salary while the total number of officers has been decreased.

Moreover, all investments and costs will be reviewed from square one. The Company plans to review the efficiency of each business line and group affiliate to make adjustments as needed. Internally the business organization will be more empowered, with clear performance-based compensation and responsibilities, in order to enable better communication and boost employee morale.

KT is planning to exert all efforts to overcome the current crisis, recover growth potential and profitability to emerge as KT, the number one telecommunications player in Korea. With that, let me start the presentation on the 2013 results.

2013 operating revenue was similar to the previous year at KRW23,810.6b. Merchandise revenue fell, but service revenue increased 3.1% year on year to post KRW19,844.1b. Operating income decreased 27.7% year on year to KRW874b, due to weaker wireline revenue and rising operating expenses such as depreciation costs. Net income was KRW181.6b, an 83.6% decline year on year because of a deterioration in non-operating income due to factors including less real estate and copper cable sales. EBITDA was similar to the previous year at KRW4,440.2b.

This year we believe wireless revenue will grow at higher levels, but wireline revenue is expected to decrease while cost pressure is expected to continue. KT is planning to put the full force of the organization behind efforts to recover its telecom competitiveness and enhance the profit structure.

Next let me discuss the performance of our major subsidiaries. BC Card, KT SkyLife and KT Rental all showed robust performance in 2013. Amid declining merchant fees and processing fees, BC card was able to increase operating income 0.1% year on year by controlling costs and increasing credit card and card usage volumes.

KT SkyLife increased its subscriber base by 390,000 in 2013, which has led to a significant jump in monthly subscription fees, home shopping fees and advertising revenue. As a result operating income surged 51.2% YOY.

KT Rental continues to record high growth, with market share increasing 2.3 percent points YOY, and revenue and operating income growing 23.6% and 16.7%, respectively.

Other subsidiaries, such as KT ENS, have also experienced significant performance improvements, leading to subsidiaries as a whole contributing KRW529.4b to operating income, which represents an increase of around 3.6 times Y on Y.

This year again the Company plans to strengthen the profitability of our subsidiaries and to focus on realizing group synergies. As a result, we expect stable performance, in line with 2013 levels.

Next I'll talk about the breakdown of operating revenue. While media/contents, finance, rental and other service revenue continued on a growth trajectory, operating revenue remained similar to last year because of a continuous decline in wireline revenue.

[Wireline] revenue, amid a challenging environment of subscriber decline, recorded a slight increase of 0.9% YOY, supported by higher ARPU and a quick recovery in subscribers following the launch of wideband LTE. Wireline revenue weakened 6.7% year on year driven by a continued decline in telephony revenue. Media/contents revenue continued robust growth of 25.3% YOY on the back of a growing subscriber base and higher VOD sales. Finance/rental revenue maintained a strong growth trend by growing 7.4% YOY driven by stable BC card revenue and strong revenue growth from KT rental. Merchandise revenue dropped 13.8% YOY due to a decrease on wireless handset sales.

KT will focus on securing growth by enhancing telecom competitiveness. The Company plans to achieve revenues of KRW24 trillion or more in 2014 by improving wireless, media and subsidiary performance enough to offset the decline in wireline revenue.

Next let me move on to operating expenses. Operating expenses ended up at KRW22,936.6b, which was a 1.3% increase Y on Y. Cost of services provided increased 21.8% from the previous year due to an increase in content-sourcing fees. In addition cost of merchandise fell by 15.6% versus the previous year because of a decrease in handset sales. Marketing cost went up 4.7% year on year as a result of more active LTE marketing.

Next let me touch upon non-operating income. Non-operating income in 2013 recorded a loss of KRW560.3b caused by less real estate and copper cable sales, and more fines and losses on tangible and intangible asset disposals.

Now let me discuss the main highlights of our financial position. The Company's liability/equity ratio as of the fourth quarter was 169.2%, which represents a 11.5 percent point increase quarter on quarter. Net debt stood at KRW9,408.9b or a decrease of 2.2% quarter on quarter. Consequently the net debt to equity ratio dropped by 0.3 percent points quarter on quarter.

Next let me talk about CapEx. 2013 full-year CapEx totaled KRW3,312.5b, which was a 10.7% decrease YOY driven by the savings on wireless investments we enjoyed because we were able to secure wideband LTE spectrum. The breakdown of CapEx is wireless KRW1,293.8b, wireline KRW1,282.5b, and others and common CapEx KRW736.2b. All in all we executed 93.3% of the KRW3.5 trillion 2013 CapEx guidance. The 2014 CapEx guidance is KRW2.7 trillion, a decrease of approximately 18% versus 2013.

Next let me delve into the performance of each service line. Wireless revenue was up 0.9% year on year at KRW6,976.5b. It was challenging securing subscribers due to the two business suspensions, but we still increased ARPU by enlarging our LTE subscriber base.

As of 2013 end LTE subscribers totaled KRW7.87m subs or 47.9% of our total subscriber base. This January we surpassed 8m LTE subscribers. Wireless subscribers continued to grow on the back of the launch of wideband LTE. Going forward we believe this growth will drive revenue growth in the wireless business. The average wireless ARPU for the year was KRW31,556, representing a 6.2% increase YOY.

Looking at the quickly improving subscriber trends, I believe there will be no changes in the long-term growth trends of KT's wireless business. This year KT will continue efforts to stabilize the market. In addition we are going to maintain our leadership in wideband LTE and focus on securing future growth and improving future profitability by recovering our wireless competitiveness.

Next is the wireline business. Wireline revenue stood at KRW5,965.4b, which is a decline of 6.7% versus the previous year on the back of a lower number of both telephony subscribers and minutes of use. However, broadband revenue increased 0.6% year on year due to higher ARPU levels as a result of less bundling discounts. Total wireline telephony subscribers as of 2013 stood at KRW18.02m. Broadband continued to gain net additions to reach KRW8.07m.

KT will continue to expand its IP-based subscriber base to minimize the decline in wireline revenue as much as possible.

Next the media/contents business. Media/contents revenue reached KRW1,337.8b, which is a 25.3% increase YOY, fueled by healthy growth in subscribers. KT IPTV continues to renew its leadership in the pay TV market. In a strongly competitive market environment it was able to acquire 940,000 net additions to reach 4.97m subs. In particular in the media business non-subscription revenues, such as paid content fees, continued to show extraordinary growth at 30.1% YOY.

IPTV is targeting net additions of 800,000 or more this year. Based on the robust growth in non-subscription revenue, such as PPV and home shopping transmission fees, we will continue to pursue qualitative growth, via continuous ARPU enhancement.

Next the finance/rental and other services. Finance/rental revenue achieved KRW3,837.9b, a 7.4% increase YOY due to stable BC Card revenue and healthy growth from KT Rental. Other service revenue was KRW1,726.6b, up 32% YOY driven by an increase in SI revenue from KT ENS and consolidation of real estate revenue from KT Estate.

And that wraps up my presentation on the fourth quarter 2013. For more details please refer to the materials circulated. We will now begin the Q&A session. In addition, today we have the former [CEO], Mr. Bumjoon Kim with us, who will be available for questions as necessary.

(Interpreted). (Operator Instructions). [Kim Wei-Zhe], Daishin Securities.

(Interpreted). So let me ask you a few questions. I think that the most urgent thing that KT needs to deal with right now is to normalize its wireless business. If you look at the net addition trends in terms of subscribers, there has been continuous improvement. However, from March of last year in terms of the overall performance there has been deterioration so I think that there needs to be some normalization of this area. In terms of the market share and in terms of your strategy, for example the overall number of subscribers, is it to maintain the situation or what would that be? For example, what would the overall strategy be for the wireless business?

And if you have any ARPU guidance for this year, that would also be appreciated.

The second question I have is with regards to your media business. If you look at the government's overall strategy to develop the broadcasting market, it is now being focused on commercializing UHD services. If you look at KT, KT right now has KT IPTV and also KT SkyLife. So how will these business lines be involved in the UHD services, commercial services, going forward?

In addition, if you look at the net addition trends in 2013 it seems that versus 2012 there has been more growth on the OTS side rather than the Olleh TV side. So in terms of the support for SkyLife what would be the strategy? Is the direct marketing still something that is valid or is there a change in this stance?

And lastly I would like to ask a question about the new CEO's business strategy for the Company and when there will be an opportunity for there to be a communication about the market -- about that strategy.

(Interpreted). So as you have just pointed out, in 2013 in terms of our MNO subscribers there has been a net decrease. However, if you look at the situation after September, after we had launched our wideband LTE services, in terms of our network competitiveness I think that there has been a recovery. And using this as an impetus I think that there has been an improvement in the brand awareness and also our distribution network.

So I think that there is three different areas in which we can actually prove that there are signs of a recovery in our wireless competitiveness. First would be with regards to our customer awareness, second is in the distribution network and lastly would be the recovery that we see in our subscriber trends.

So first of all maybe to talk about our customer awareness, since we launched our wideband LTE services in September, for various customer surveys that have been focused on the wideband LTE we have been a dominant number one in terms of customer awareness.

We do believe that this change in awareness will be one of the drivers in the recovery of our wireless competitiveness and for the distribution network we do believe that this is something that is deeply related to the fundamental competitiveness of our business. And therefore for the incentives that we provide to our sales agents or for the competencies that we have on the wholesale and also retail side we do believe that there have been various achievements that we have been able to enjoy to see improvements in this area.

So lastly I think I can talk about the subscriber trends right now in terms of the MNP subscribers. Up until the third quarter we had seen around 60,000 in net decrease. However, that has significantly dropped in the fourth quarter to around 10,000. In addition if you look at the new subscribers MNP market share it has gone from 27% in the third quarter to 32% in the fourth quarter and we believe that this recovery momentum is something that we will see continue going forward.

In addition if you also look at the handset sales trends and if you compare the fourth quarter to the third quarter we see a 20% increase in handset sales. And this was all achieved without any large increase in the subsidies that we had provided. So all in all we believe that across the board with regards to our wireless competitiveness that we do see gradual changes of improvement and we believe that this momentum will continue going forward.

Now to talk about maybe the subscriber target or the market share target that we would have in terms of the number of subscribers, of course it is difficult for us to share the target number that we would have. However, we do believe that in terms of market share maintaining the 30% level that we have right now is something that is very critical for us to maintain the minimum amount of competitiveness or growth potential that we would acquire for this business.

So amidst this market environment we do believe that it is very challenging for us to increase our market share through overheated competition. Therefore, we do want to change the paradigm of competition from one that is based upon the number of subscribers to one that is more focused on the level of service competitiveness that we can provide. Therefore, by achieving this qualitative growth we do believe that that will help us maintain the subscriber base that we enjoy.

And lastly to talk about our outlook for the wireless business, of course the fundamental basic target that we would have is to have an opportunity to recover the growth potential of this area that was temporarily weakened. Therefore, in terms of the service revenue the growth target would be to have a growth of around 3% or more.

In addition, as the percentage of LTE subscribers that we have out of our total subscriber base continues to increase, and as we gain more and more healthier customers, we do believe that in terms of ARPU growth that we will be able to achieve around 5% to 6% growth.

Next to address the question that you had on the media content side about UHD TV and the strategies that we have, for our new set-top boxes for IPTV we are planning to have UHD TV compatibility. In addition we also do believe that for the UHD channels, through the varied programs that we have we will, on the VOD side we will be able to secure the platform technology that is required. So as we are able to beef up our technical capacity and also we are able to have more contents in this area, we do believe that there will be a natural progression to provide commercial UHD services.

So from the Group level, for UHD TV services we do believe that SkyLife has the upper hand. However, because structurally speaking it is a technology that is more appropriate for satellite services. However, from KT as a whole we are able to provide both IPTV and satellite TV services to our customers. Therefore, we do believe that as the network becomes more and more advanced, that from both sides we will be able to provide UHD services.

In addition to maybe talk about the net addition trends for last year on the OTV side versus the OTS side, one thing that I can say I think is that in terms of the net addition, the drivers behind that, I think is more what the customers prefer in terms of the product competitiveness of either side. So in terms of where there is more growth or less growth in terms of the number of subscribers is less driven by the activities of the Company and more driven by customer preference.

However, with this area I think that there are just two factors that we would like to highlight. First is that in the case of our OTS services this is a hybrid, very unique service that only KT is able to provide. So being to provide satellite plus IPTV services I think enables us to enjoy a competitiveness that none of our competitors have.

Secondly, in terms of the network efficiency and using our network more efficiently as we have more OTS service subscribers use our satellite services. That actually decreases the burden that we have on our network and, therefore, that also leads to a cost savings in terms of the investments that we are -- that we require for this network.

And from a KT Group's perspective, I do believe that with regards to the balance between OTS and OTV services that this is something that will naturally take place and naturally migrate.

Hi. This is Bumjoon Kim, the past CFO. I'll take the final call --- I mean question on the new CEO issue. As you know, he was selected by a very fine group of selection committee and everybody knows his background and coming back from Samsung. He has been officially became a CEO as of yesterday. Prior to that he spent about 30-plus days transitioning and getting to know what's going on in the Company and, as you might have seen, he has made some very big decisions in terms of the human resource.

And this morning in the executive meeting he decided to go into a state of crisis management. And in the meeting here he has decided to give back 30% of his pay and there will be no bonus until we see a turnaround in the Company. So the point I'm trying to make is he is very serious about turning this Company around. He's in the midst of getting his reign around the Company's issues and, in terms of communicating with the market, coming from Samsung's background he is very, very shareholder knowledgeable.

So I've had my discussions with him and he has expressed the need to speak with shareholders and with analysts in the near future. However, as I will be at a time where he feels appropriate once the strategy of the Company is firmly in place and he feels comfortable in discussing about the future and how we are going to turn the Company around. So, in short, he will agree to and will speak to the investors and also the analysts in the very near future, and he has expressed the interest in doing so.

(Interpreted). Yang Jong-In, Korea Investment and Securities.

(Interpreted). Thank you for the opportunity to ask questions. There are two questions that I would like to ask you.

The first question would be with regards to the long-term CapEx trend. If you look at your CapEx guidance for 2014, right now you have presented KRW2.7 trillion, which is a decrease of around 18% versus the previous year and therefore I believe that this is a very impressive number. However, if you look further down the road, for example if we were to look at 2015 and 2016, and you were to be allocated new frequencies and there would be more investments required for that, do you believe that the KRW2.7 trillion number in terms of CapEx is something that could be maintained or what would you believe would happen at that time? So that's the first question.

And the second question that I would like to ask you is about the fourth quarter in terms of your wireline telephony trend. So on a quarter-on-quarter basis the decrease was only around 0.2% and therefore I think that this is very impressive and also it is very positive for the Company. But actually I would like to understand better the reason behind why the decline has been less than previously. Do you believe that this is a meaningful turnaround or that this would be a meaningful trend in terms of what it actually signifies?

(Interpreted). So maybe to take the second question first about the fourth quarter in terms of the wireline telephony revenue and why there we have seen less of a decline, actually this is driven because in the fourth quarter there was a temporary increase in our VoIP and other telephony revenue.

However, to talk about the future in terms of our wireline telephony revenue and the trends going forward and whether we actually believe that there will be a slowdown, I think that the Company's general stance is to be a bit cautious about that because if you look at the situation last year, the decline was around KRW400b. And we do believe that this year it will be less and so somewhere in the mid-KRW300b level. However, for the actual level and how we see this going down, if at all, I think as of this point is something that we believe it is too early to tell.

Hi. Let me address the issue on the CapEx. Yes it was a dramatic reduction in CapEx from last year to this year's guidance, which is last year's around KRW3.5 trillion to now it's KRW2.7 trillion. It's basically driven by the fact that we have to now be concerned about our cash flow and the ability to create the revenues in the future, and we believe that we can still do it with KRW2.7 trillion.

Now that being said, it's also safe to say that we will be focusing a lot on telecommunications, the excellence in telecommunications. We want to bring back and win back what we lost in telecommunications in the last three years. So obviously within the Company we do a lot of pulling and pushing to figure out which dollar makes the best rate of return in. At this point we are omitting those that we find not to be any revenue-driven CapEx in the short term. So we are focusing on the revenue and our growth for the time being.

And lastly, internally it shows tremendous corporate value increase when we do continue to reduce CapEx and keep it down from our past announced. So in essence we are trying to increase corporate value.

(Interpreted). Sean Oh, Merrill Lynch.

(Interpreted). So there are two questions that I would like to ask you. Thank you for the opportunity to ask questions. First, the question would be your mobile ARPU. So if you look at the ARPU growth on a QOQ basis it was 2.6%. On a Y-on-Y basis it was 4.8%. However, if you look at the revenue growth during the same period, on a QOQ basis it only went up 1.1% and on a Y-on-Y basis it only went up 0.6%. However, if you look at the subscriber numbers, in terms of subscribers there actually hasn't been a significant difference. There was a slight decrease but not very significant.

So I don't understand why the revenue growth has not been as healthy as your ARPU growth. Where is the gap and what is the reason behind that? That's the first question.

And the second question is that if you look at your commissions line item, there seems to be a very large increase on a Q-on-Q basis and what would be included in this commissions line item?

(Interpreted). To address the first question you have between what the gap is with regards to our wireless service revenue and the ARPU, and why the growth numbers are not in line, there would be two reasons behind that. One is that in terms of the MVNO network usage fees that we will receive that that has not been -- that has been weakening. And then on the MNO side that in terms of subscribers we still don't see any increase in the number of subscribers yet.

So maybe to give you more of the specifics. For example, in terms of the MVNO network usage fees that we receive on a Q-on-Q basis, the decline has been around 37%. And in terms of the MNO subscribers, if you look at the quarterly average it actually has decreased around 0.7%. So these two factors have actually had an impact and therefore they are the main reasons between the gap in terms of our growth on the ARPU side versus the revenue side.

In terms of the commissions line item that you mentioned, the main reason why there has been a significant increase there is because of the seasonality that KT has in terms of its business nature so in the fourth quarter there tends to be a significant increase, which has led to the healthy increase in the commissions.

(Interpreted). Sam Min, Morgan Stanley.

Yes, hi. Thank you for this opportunity. I have two quick questions. First would be on your dividend announcement of KRW800 per share. We're kind of curious as to how KT came up with KRW800, what the logic or rationale was, if there was some benchmark in calculating that amount.

In addition can we presume that perhaps future dividends will be at least higher than KRW800 per share considering that your capital expenditure will be falling this year?

My second question is on the marketing cost. We've seen a pretty big jump Q-over-Q in the fourth quarter and could you perhaps kind of explain what drove the increase in marketing cost during the fourth quarter?

Lastly, I just wanted to thank CFO Kim for all the participation and help with the sellside as well as buyside, and wanted to ask where CFO Kim will be heading next. Thank you.

(Interpreted). So maybe to address the first question that you have with regards to the dividend, if you look at 2013 on a non-consolidated basis there has been a net loss of the Company and therefore in such a situation it is a bit burdensome for KT to be paying dividends amidst this environment. However, we do have a commitment that we had made to our shareholders and therefore internally we had looked at the appropriate amount of resources that we could allocate to dividends, and therefore that is how we came up with the KRW800 per share dividend level.

So if you look at the total dividends that is being paid in terms of the total amount in 2013 on a consolidated and non-consolidated basis versus the net income that we have been able to generate, actually we do believe that it is a meaningful amount. And please understand that this is the best effort that we have been able to put forth. However, we do feel sorry to the market that we have not been able to deliver the KRW2,000 per share commitment that we had made.

In terms of our dividend policy going forward, we do believe that this policy will be established in consideration of our mid-to-long-term business plan and also our financial position improvement plan that we are right now establishing. Once these plans have been fully finalized then I do believe that there will be an opportunity for us to communicate to the market what our intentions are.

To talk about the fourth quarter, the sales expenses that we had, this is actually related to our wireless capacity increase versus, for example, the handset sales increase that we have had. So if you look at it on a quarterly basis it is around KRW150b so that represents around 26.7% increase, so that would be KRW707.6b.

And one thing that we would like to highlight here is that if you look at our wireless capacity from the third quarter to the fourth quarter it has increased 25%. However, in terms of our sales expenses actually it has not increased at the same rate. So this is something that we would like to highlight. So we do believe that the core right now of what we would like to emphasize is that if you look at the per-person sales acquisition cost that this has not increased. So that is what we would like to highlight.

And this is Thomas Kim again. Mr. Min, thank you for that question. After eight quarters of doing conference calls this has to be the easiest question I've received. I will be moving on laterally to a department called synergy management, which is a fancy word for taking care of all the subsidiary companies. But more importantly I'd like to introduce a name for the new oncoming CFO and his name is [In-Hee Kim]. And I would very much appreciate all buyside and sellside gave him as much respect as you have given me in the last two years. Thank you.

(Interpreted). Moon Ji-hyun, KDB Daewoo Securities.

(Interpreted). Thank you for the opportunity to ask questions. There are two questions that I would like to ask you and they are both related to the recent developments that have took place in the wireless area.

First is about the tariff package that you have. You recently set forth or launched a tariff package for the wideband LTE services that provided four times more data than has been provided on their existing packages. So what I would like to understand is that is this package just something that you are temporarily promoting as a package or is this something that will be a main tariff plan that you are going to promote in line of moving in the direction of unlimited data being provided to your customers? So that is the first question.

And the second question that I have is with regards to the MVNO services that you have. So right now in terms of the number of MVNO subs you have the largest number of subscribers amongst the various carriers that are operating in Korea. In addition to that there has been some news articles or news reports that maybe one of your subsidiaries may be engaged in the MVNO services going forward. So therefore I think that as a carrier you have the largest exposure to this market. So I would like to ask you what your forecast is about the MVNO market going forward and will there be any changes in terms of strategies for this business?

(Interpreted). So first to talk about the question that you asked about our wideband unlimited (spoken in Korean) tariff package that was actually launched today, this is a tariff package that we are providing under wideband LTE that is focusing on data usage and data traffic so that we can strengthen our leadership in this area. So I think that in terms of this package I think that we can actually describe this better versus the unlimited voice package that we have existing because I think that these two are a very good comparison.

So, for example, for the unlimited voice package that we have launched this is actually something that we have created to accommodate the customer usage patterns. For example, for heavy voice-using customers that was the package that we had to deal with that demand. And for the new package that we launched today this is for customers that are more focused on data usage. So if you actually look at the voice minutes of use that is being provided it is much less than what we have had under our other traditional packages.

So ultimately who we are targeting with this package would be data-heavy users and mostly it would be people who are of a younger age. So rather than this being a promotional package, I think that it should be looked at as a more customized or specialized package that we are providing for the target customer base.

So next to move on the question that you had our MVNO subscribers, the performance and the outlook for the future, as of the year-end 2013 if you look at our MVNO subscriber base it is 1.17m, which accounts for 7.1% of the subscriber base.

And in terms of the overall trend for 2014 I think that, taking into consideration the target that we have to strengthen our retention of MNO customers and also taking into consideration the fact that we do believe that there is limitations for the low end of the market to continue to grow, whether the MVNO market will continue growth in 2014 I think is something that we will have to wait and continue to monitor.

So I think that one thing that is very clear is that for the MVNO market as a whole in terms of nature, that this is a market that is more specialized or geared to low-ARPU customers. Therefore, these customers we do believe are very different from our general MNO customers. So we tend to continue to internally monitor customer movement patterns and therefore if you look at who is moving around in this area it tends to be the lower-ARPU customers who move over to MVNO. In addition to that, if you look at the competitive landscape between the MVNO service providers, the competition is actually heating up.

So at the end of the day for the MVNO service providers, these providers actually pay a network usage fee to us which contribute to the revenues of the Company, of KT. And therefore, within the scope that it does not have a burden on our network capacity, we do believe that MVNO does help our overall network utilization and improving that utilization. So even if there is a user who is working off of a different service provider and they use our MVNO network then I do believe that in terms of increasing the actual utilization value of the network that this actually maximizes it.

(Interpreted). Dan Kong, Deutsche Securities.

(Interpreted). Thank you for the opportunity to ask a question. I would like to ask a very simple question to you. If you look at your LTE subscribers only and then would look at the LTE-A subscribers versus the wideband LTE subscribers, is there any difference in the data usage volume between these two different type of subscribers?

(Interpreted). So from the Company's perspective, since we have launched our wideband LTE out of the 1.8 frequency bandwidth most of the existing customer base that we have had is able to enjoy wideband LTE services. And therefore from the Company's perspective we actually don't do a separate analysis in comparison of the wideband LTE service users versus the LTE service users. From our perspective a customer is a customer and therefore we don't actually segregate numbers with them into different groups.

(Interpreted). Actually, to be more specific about the question, one thing that I was actually very curious about is that if you compare just the generic LTE services versus the wideband LTE services that you have recently launched, do you see the data usage increasing with wideband LTE? That was the current question so could you maybe adjust that?

(Interpreted). So I do understand the gist of the question that you are asking. Taking into consideration that the wideband LTE services started in the third quarter, if you look at the data usage before that point of time and after that point of time there actually has been an increase in data usage. However, rather than this being driven by the wideband LTE services that have been provided, it's actually a part of the general trend of data usage growing on a quarter-on-quarter basis continuously. So therefore to say that the average data volume has increased because of our wideband LTE service launch I think that as of this point of time it is too early to say.

However, one thing that should be taken into consideration is that we do believe that if you look at the situation since October when we completed our double-data promotion, we do believe that that has had an impact. Therefore if you look at the trend starting in the fourth quarter of last year going into the first and second and third quarter of this year, after the effects of the double-data promotion has actually been eliminated I think that we will have a better idea or a better judgment about how much data volume has been increasing.

So if there are no further questions we will wrap up the Q&A session here. Thank you for your questions and interest. Once again I would like to thank you for taking time out of your busy schedule to participate in today's call. With this we would like to conclude the fourth quarter 2013 earnings release of KT. Thank you very much.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.