6-K 1 d720894d6k.htm FORM 6-K

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of April 2014

Commission File Number 1-14926

KT Corporation

(Translation of registrant’s name into English)

90, Buljeong-ro,

Bundang-gu, Seongnam-si,

Gyeonggi-do,

Korea

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  x            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨            No   x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: April 30, 2014
KT Corporation
By:		/s/ Youngwoo Kim
Name: Youngwoo Kim
Title: Vice President
By:		/s/ Jungsup Jung
Name: Jungsup Jung
Title: Team Leader

ANNUAL FINANCIAL REPORT

OF

KT CORPORATION

(From January 1, 2013 to December 31, 2013)

(Translation of the Annual Report filed in Korean with the Financial Supervisory Service of Korea)

Table of Contents

I. Corporate General			2
1. Corporate Purpose of KT Corporation			2
2. History			3
3. Total Number of Shares and Related Matters			3
4. Voting Rights			5
5. Dividends and Related Matters			6
II. Business Details			10
1. Overview			10
2. Main Products and Services			28
3. Matters Related to Revenue			41
4. Research and Development Activities			59
5. Other Matters Necessary for Making Investment Decisions			59
III. Financial Information			60
1. Summary of Financial Statements (Consolidated)			60
2. Summary of Financial Statements (Separate)			61
IV. Auditors’ Opinion			62
1. Auditor’s Opinion on the Consolidated Financial Statements			62
2. Compensation to External Auditors for the Last Three Fiscal Years			62
V. Management and Affiliated Companies			63
1. Overview of the Board of Directors and Committees			63
2. Audit Committee			70
3. Matters on Shareholder’s exercise of Voting Rights			72
4. Equity Investments			73
VI. Directors, Senior Management and Employees			75
1. Directors			75
2. Senior Management			76
3. Current Status of Employees			80
4. Remunerations fo Executive Officers			80

1

I. Corporate Generals

1. Corporate Purpose of KT Corporation

Business Objectives

1. Information and communications business;

2. New media business;

3. Development and sale of software and contents;

4. Sale and distribution of information communication equipment;

5. Testing and inspection of information communication equipment, devices and facilities;

6. Advertisement business;

7. Telecommunications retail business;

8. Development of information and technology, and electrical infrastructure;

9. Real estate and housing business;

10. Electronic banking and finance business;

11. Education and learning services business;

12. Security services business (including machinery system surveillance services and facilities security services);

13. Research and technical development, education, training and promotion, overseas businesses, export and import trade, manufacturing and distribution related to the activities mentioned in items 1 through 12;

14. Telecommunications services business, including frequency-based telecommunications business;

15. Value-added telecommunications business;

16. Production, supply (screening) and distribution of music albums, music videos, movies, videos and games;

17. Electronic finance and electronic payment gateway services, including issuance and management of pre-paid electronic payment methods;

18. Sales and leasing of equipment and facilities related to the activities mentioned in items 14 through 17;

19. Overseas and export and import trade related to activities mentioned in items 14 through 18;

20. Travel agency business;

21. (RESERVED)

22. Alternative energy generation business;

23. Health Bioinformatics business;

24. Military telecommunication equipment manufacturing business;

25. Energy inspection, energy conservation, and other energy use rationalization business; and

26. Any and all other activities or businesses incidental to or necessary for the attainment of the foregoing.

2

2. History

A. Changes since Incorporation

(1) Date of Incorporation: December 10, 1981

(2) Location of Headquarters:

90 Bulljeong-ro

Bundang-gu, Seongnam-city

Gyeonggi-do 463-711

Korea

(3) Major Changes in KT Corporation

• On March 27, 2009, KT Corporation (“KT”) signed a merger agreement with its mobile subsidiary KTF, in which KT held a 54.25% interest, and on June 1, 2009, the merger was completed.

• At the annual shareholders’ meeting held on March 11, 2011, KT’s shareholders approved the addition of the health bioinformatics business to KT’s business objectives, which is a new emerging industry that integrates IT with genetic data information sequencing, computation, accumulation, and application. The shareholders also approved the addition of military communication equipment, devices and facility manufacturing to its business objectives.

• Mr. Suk Chae Lee was reelected as the Chief Executive Officer (“CEO”) and President of KT at the annual shareholders’ meeting held on March 16, 2012.

• At the annual shareholders’ meeting held on March 15, 2013, KT’s shareholders approved the addition of energy inspection, energy conservation, and the energy use rationalization business to KT’s business objectives.

• Mr. Chang-Gyu Hwang was elected as the CEO and President of KT at the extraordinary general shareholders’ meeting held on January 27, 2014.

3. Total Number of Shares and Related Matters

A. Total Number of Shares

(As of December 31, 2013)						(Unit: Shares)
Category		Type of Shares
		Common Shares				Total
I. Total Number of Authorized Shares			1,000,000,000				1,000,000,000
II. Total Number of Issued Shares			312,899,767				312,899,767
III. Total Number of Shares Reduced			51,787,959				51,787,959
1. Reduction of Capital			—				—
2. Share Retirement			51,787,959				51,787,959
3. Redemption of Redeemable Shares			—				—
4. Other			—				—
IV. Current Number of Issued Shares (II – III)			261,111,808				261,111,808
V. Number of Treasury Shares			17,221,575				17,221,575
VI. Current Number of Issued and Outstanding Shares			243,890,233				243,890,233

3

B. Status of Capital Increase/Decrease

(As of December 31, 2013)

(Unit: Won, Shares)

Date of Shares Issued (Retired)

Type of Shares Issued (Retired)

Details of Issued (Retired) Shares

Type

Number of Issued (Retired) Shares

Par Value per Share

Par Value of Issued per Share

Note

June 2, 2009

—

Common Shares

700,108

5,000

5,000

Issuance of new shares for merger

Ø For the merger with KTF, KT issued 700,108 new shares. As a result, the capital amount increased by Won 3.5 billion as follows.

(Unit: Won)

Category

Before Merger

Amount of Change

After Merger

Capital Amount

1,560,998,295,000

3,500,540,000

1,564,498,835,000

C. Acquisition and Disposal of Treasury Shares

(As of December 31, 2013)																			(Unit: Shares)
Method of Acquisition				Type		Beginning of Term				Acquisition (+)				Disposition (-)				Retirement (-)				End of Term
Direct Acquisition		Pursuant to Article 165-2 of Securities and Exchange Act		Common Shares			17,389,417				—				167,842				—				17,221,575
				Preferred Shares			—				—				—				—				—
		Reasons other than Article 165-2 of Securities and Exchange Act		Common Shares			—				—				—				—				—
				Preferred Shares			—				—				—				—				—
Subtotal				Common Shares			—				—				—				—				—
				Preferred Shares			—				—				—				—				—
Indirect Acquisition (e.g. Trust Contract)				Common Shares			—				—				—				—				—
				Preferred Shares			—				—				—				—				—
Total				Common Shares			17,389,417				—				167,842				—				17,221,575
				Preferred Share			—				—				—				—				—

Ø The above “Beginning of Term” means as of January 1, 2013 and “End of Term” means as of December 31, 2013.

Ø Details of share buyback and retirement of treasury shares from January 1, 2013 to December 31, 2013 are as follows.

(1) Acquisition of Treasury Shares

• Not Applicable.

4

(2) Disposition of Treasury Shares (167,842 shares)

• May 24, 2013: Disposition of treasury shares to distribute long-term performance based bonus payments to company executives.

D. Share Ownership Status of the Employee Stock Ownership Association

(1) Transactions with the Employee Stock Ownership Association

• Not Applicable.

(2) Guidelines for Exercising the Voting Rights of the Employee Stock Ownership Association

• Association Account: The Employee Stock Ownership Association exercises its voting rights in a manner that is in proportion to the number of association members who wish to exercise their voting rights.

• Association Member Account: Employee Stock Ownership Association may exercise its voting rights only if (i) the association receives a request by an association member to exercise his voting rights with a minimum notice period of seven days or (ii) the association member chooses to delegate his voting rights to the association.

(3) Shares Held by the Employee Stock Ownership Association

(As of December 31, 2013)

(Unit: Shares)

Type of Account

Type of Shares

Balance at Beginning of Term

Term-End Balance

Association Account

Common Shares

33,940

33,940

Association Member Account

Common Shares

2,767,725

2,714,419

Total

2,801,665

2,748,359

4. Voting Rights

(As of December 31, 2013)				(Unit: Shares)
Category				Number of Shares		Note
Total Issued Shares (A)		Common Shares		261,111,808		—
		Preferred Shares		—
Shares without Voting Rights (B)		Common Shares		17,308,160		Including Treasury Shares & BC Card stake
		Preferred Shares		—
Shares with Restricted Voting Rights under the Stock Exchange Act and Other Laws (C)		—		—		—
Shares with Reestablished Voting Rights (D)		—		—		—
Shares with Exercisable Voting Rights (E = A – B – C + D)		Common Shares		243,803,648		—
		Preferred Shares		—

Ø Shares without voting rights under the Commercial Code of Korea: 17,221,575 treasury shares held through treasury stock funds and 86,585 shares owned by BC Card.

5

5. Dividends and Related Matters

A. Dividends

KT determines its shareholder return policy by considering business performance and cash flow after completing its investment for long-term growth opportunities and retaining internal cash requirements. KT’s shareholder return policy is subject to change depending on its operating status and business environment.

B. Dividends Paid during the Past Three Fiscal Years

Category				FY2013				FY2012				FY2011
Par Value per Share (Won)					5,000				5,000				5,000
Net Profit of the Current Term (in Millions of Won)					-392,311				708,819				1,289,055
Net Profit per Share (Won)					-1,609				2,953				5,299
Year-end Cash Dividend (in Millions of Won)					195,112				487,445				486,602
Year-end Share Dividend (in Millions of Won)					—				—				—
Cash Dividend Propensity (%)					—				67.8				37.7
Rate of Return on Cash Dividend (%)		Common Shares			2.5				5.2				5.3
		Preferred Shares			—				—				—
Cash Dividend per Share (Won)		Common Shares			800				2,000				2,000
		Preferred Shares			—				—				—

Ø The dividend-related information is based on KT’s stand-alone result.

6

II. Business Details

1. Overview

A. Present Conditions of the Industry

(1) Characteristics of the Industry

• Telecommunication (KT, KT Sat, KT Powertel, KT ENS)

The telecommunication business usually involves businesses such as mobile communications, fixed-line telephony, line lease businesses and Internet Protocol Television (“IPTV”). The value chain in the telecommunication business begins from contents, platform, network and terminal. The convergence of fixed-line, wireless, and broadcasting telecommunications has increased and expanded to adjacent sectors. The traditional telecommunications business is increasingly evolving into services such as IPTV and advanced wideband LTE (“LTE-A”). However, competition in the Korean telecommunications industry is intense and each of the service areas (wireless, fixed telephony and high-speed internet) are experiencing stagnant growth.

Licenses are required within the satellite business in order to use orbital space and spectrum from the government and provide services to clients. KT currently owns three satellites. Globally, KT’s satellite channel broadcasting business comprises approximately 80% of its satellite business. Due to increased demands for high-definition (“HD”) channels, satellite broadcasting has increased in popularity over the past few years.

The Trunked Radio System (“TRS”) service, operated by KT Powertel, allows users to utilize limited spectrums for radio communication services. Approximately 360,000 subscribers are using iDEN services. The TRS service is expected to sustain its growth in the foreseeable future, mainly focusing on specific markets such as logistics and industrial sites.

Network Integration / System Integration (“NI / SI”) are expanding its business boundaries as we move into the convergence era of information and communication technology (“ICT”)-based smart society such as green information technology (“IT”), cloud computing, BcN, and etc.

• Credit Cards Business (BC Card)

In 1982, five domestic banks (Chohung, Commercial, First Korea, Hanil, Seoul Trusts) established the Banks’ Credit Card Association (the predecessor of BC Card) and launched their card operations. Today’s credit card business structure was formed when the Credit Card Industry Act was enacted in 1987. In 2009, the government expanded possible credit card payment accounts that were limited to commercial bank’s accounts into financial investment company cash management accounts (“CMA”), which were allowed to issue CMA-based credit cards. The credit card industry has expanded the scope of its business as a result of the government’s credit card proliferation policy, which was designed to help the government correctly charge taxable income. Recently, the industry is reinforcing its risk management in order to enhance profitability.

• Satellite Broadcasting Service (KT Skylife)

Since broadcasting services have become increasingly integrated into the telecommunication business, its value in the media industry has been re-prioritized. New broadcasting technologies such as digital conversion and broadband broadcasting have developed due to the convergence of broadcasting and telecommunication and are available to satisfy customer needs.

• Car Rental Business (KT Rental)

Due to Korea’s per capita income increase, continuous economic growth, and the convenience of the car rental system, consumer interest in the rental car business, including interest within the government and corporate sectors, has demonstrated steady growth.

7

• Media Contents (KT Media Hub)

The recent development of smart devices for media contents consumption allows users to enjoy contents seamlessly with the device of preference. KT Media Hub is focusing not only on the development of new media contents but also to optimize contents for mobile IPTV. KT Media Hub is also focusing to create a stronger synergy among KT’s media related subsidiaries and affiliates, such as KT Skylife, KTH, KT Music, USTREAM, Enswers, Sidus FnH, and etc.

• Auto Lease and Installment Financing (KT Auto Lease)

KT Auto lease offers its customers leased automobiles by charging certain rates for usage fees and interests. Financing allows users to pay for their automobiles on an installment basis.

• Real estate development, rental and management (KT Estate)

Real estate development usually requires large scale capital investments and takes long period of time for profits to be realized. Although real estate development returns are usually high, it is also affected by many risks. Efficient management of real estate assets is also an important business portfolio for KT Estate.

• Financing business (Smartro)

The VAN business involves linking credit card companies’ financing networks with large vendors and POS for credit card transactions. Although there are no regulatory barriers for financing the VAN business, certain network operation know-how is required.

• Public Telephone Operation and Management (KT Linkus)

Public telephone services offer the same service to anyone, anywhere, at any time, using a nation-wide infrastructure. Moreover “public telephone” is defined as a universal service by the government in accordance with Telecommunication Business Act.

• Equipment and Related Product Wholesale (KTM&S)

Previously, telecommunication equipment distributions were agency oriented. However, recent telecommunication equipment distributions are moving toward direct channels and on-line channels as smartphones and emerging devices are becoming increasingly popular. As distribution practices are being more focused on direct channels, we are planning to improve differentiation through CRM and service quality enhancement.

• Contents Distribution (KT Hitel)

The contents distribution business is growing due to increased demands for various N-Screen contents. Video contents are especially suitable for one-source-multi-use due to its ability of being recreated with more value added products. KT Hitel has the greatest number of rights for movie contents for the IP platform. KT Hitel also launched the T-Commerce business, which offers interactive shopping contents for TV viewers. We expect great growth potential from T-Commerce.

• E-commerce (KT Commerce)

Companies are increasingly preferring e-commerce business to business (“B2B”) provided that it allows for more efficient sales and purchasing procedures. A broker-managed e-commerce system commences once an order from the e-catalogue is placed and is followed by certain logistical procedures. B2B e-commerce offers purchasing companies greater efficiency, optimized processes and an integrated database system, while at the same time, offering selling companies with greater access to distributors of stable credit ratings.

• Music contents (KT Music)

The music industry refers to the overall cycle of value creation for music contents, starting with composition, performance, publishing, copyrights, management, record labels, and public relations activities. With the rapid expansion of smartphones, since late 2009, there has been an increasing number of subscribers consuming music contents via their smartphone devices.

8

• Submarine Cable Construction (KT Submarine)

KT Submarine provides cable construction and management services for telecommunication carriers. In addition to submarine cables for telecommunication carriers, KT Submarine also provides submarine construction for electricity providers. With increasing demands for electricity from China and Southeast Asian countries, the submarine power system is considered to be an ideal source of power to meet such demands.

• Security and Guards (KT Telecop)

The security service business has been growing due to reasons such as an increase in gross domestic product (“GDP”), women’s social advancement, and the aging population. The security business has a high entry barrier and is not very susceptible to the economic cycle. Security services are provided for individual clients as well as corporate and governmental organizations for the security of personnel, equipment or other assets.

• Lease and Corporate Loan (KT Capital)

Installment financing refers to lending capital to individual customers who purchase goods that are costly, such as automobiles, machinery or real estate, and charging monthly installments which includes principal and interest. Lease services refers to an agreement between two parties whereby one party allows the other to use his/her property for a certain period of time in exchange for a periodic fee. Most financing companies offer both installment financing and lease services.

• Advertising (Nasmedia)

There are two main types of agencies for small-to medium sized advertising agencies, which are media representatives and agencies focused on creative directing. The online advertising market is growing most rapidly in the advertising market and has the most access to opportunities.

• Software development and distribution (KT DS)

Korea’s IT servicing business has reached its peak. While new trends such as cloud services, big data, and open sources are receiving more attention from the market, the growth potential for these new services seems to be limited, as most of Korea’s corporations are trying to limit their budget for IT investments. As such, KT DS is looking to advance into the global market while tapping into IT-based convergence services.

(2) Growth of the Industry

• Telecommunication (KT, KT Powertel)

			(Unit: thousand persons)
Category		2013				2012				2011
Broadband internet Subscribers			18,738				18,253				17,860
Local Telephone Subscribers			17,620				18,261				18,862
Mobile Phone Subscribers			54,681				53,624				52,507
TRS Subscribers			368				384				382

• Satellite Leasing Service (KT Sat)

The market size of the global satellite leasing industry is Won 18 trillion, and has grown at a rate of 7.8% per year for the past three years. Companies such as Intelsat, SES, Eutelsat, and Telesat are the incumbent dominant players in the market and competition among these companies remains intense. The market for the global satellite leasing industry will expand into South East Asia, Middle Asia, Africa, and Latin America.

• SI/NI Service (KT ENS)

The needs for SI/NI services are increasing as the various networks and platforms for mobile, clouding IT, and media are being integrated into one convergent platform. According to Korea IDC, Social Network services, Big data, and Cloud 2.0 will boost further growth within SI/NI services.

9

• Credit card business (BC Card)

Until 2010, the credit card business grew explosively with the supportive policy of the Korean government. However, as overall levels of credit card users began to saturate and the decline of average credit card payments have escalated, the card business market is facing difficulties in securing sustainable growth.

• Satellite Broadcasting Service (KT Skylife)

In the future, broadcasting and telecommunication operators will provide not only voice data and data with IPTV and voice-over-internet-protocol (“VoIP”), but will also offer interactive satellite and mobile services that integrate wireless and wireline characteristics.

    [Paid-TV subscriber trend]

			(Unit: person)
Paid TV Market		Subscribers (No. of Lines)
		2013				2012				2011
Subscribers			27,640,859				25,269,752				23,114,017

Source: Paid-TV Providers

• Online contents (KT Hitel)

The mobile internet market is growing rapidly with the proliferation of smartphones compared to the stagnant growth in the wired internet industry. The IPTV platform, another emerging screen, is growing with a subscriber base of 8.5 million as of the end of 2013 and is expected to increase to a subscriber base of 10 million by 2014. The robust growth of the IPTV platform will generate an explosive demand for contents such as movies, dramas, and animation. Meanwhile, T-commerce was launched as a new shopping platform. The Korea Communications Commission expects the T-Commerce market to grow to Won 7.8 trillion by 2015.

• Security and Guards (KT Telecop)

The domestic security industry is affected by developments in electronics, computers, the internet, and the telecommunications and film industries and more value-added products are being introduced into the market. With an expectation that disposable income will continue to grow, the relevant security industry should continue to yield stable growth in the coming years.

• Car Rental Business (KT Rental)

The domestic car rental market has shown stable growth along with an increase in car sales. The percentage of rental cars compared to registered vehicles has been maintained above 2%. Considering the past growth trend and expected increase in per capita income, the portion of rental cars to registered vehicles will increase steadily.

    [Numbers of registered vehicles and rental cars in Korea]

(Units: 1,000, %)

		2013				2012				2011				2010				2009
Number of registered vehicles			18,870				18,870				18,437				17,941				17,325
Number of registered cars			14,577				14,577				14,198				13,632				13,024
Number of registered rental cars			325				325				289				258				216
Growth rate of registered rental cars			12.5	%			12.46	%			11.98	%			19.44	%			8.00	%
Rental cars to registered cars ratio			2.2	%			2.23	%			2.03	%			1.89	%			1.66	%

Source: Ministry of Land, Transport and Maritime Affairs / Korea Rent-A-Car Association

10

• Media Contents Business (KT Media Hub)

The IPTV service has become the main media services platform in Korea and continues to expand in its presence.

(a) IPTV Subscriber

(unit : Thousand)		2013				2012				2011
# of users			8,613				6,310				4,919

• Lease and Corporate Loan (KT Capital)

(a) Lease Items

			(Unit: Won billion)
Items		2013.3Q				2012				2011
Industrial machinery			16,486				21,199				2.294.5
Transportation equipment			50,351				62,886				6,524.7
Medical devices			7,395				9,225				890.3
Pollution prevention equipment			36				0				1.1
Equipment for Science and Technology			1,896				5,402				525.3
Telecommunication Equipment			757				1,276				122.1
Industrial equipment for distribution			279				206				36.8
Other			1,808				2,433				207.0
Total			78,972				102,627				10,601.8

Source: Credit Finance Association (2012 data unpublished)

(b) Installment Finance

(Units: Won billion, thousand items)
		2013.3Q				2012				2001
Durables			70,579				91,692				93,916
Housing			1,856				4,196				9,176
Machinery			3,947				6,295				6,190
Others			816				1,325				896
Sum			77,198				103,508				110,178

Source: Credit Finance Association (2012 data unpublished)

• Real estate development, rental and management (KT Estate)

As Korea’s birth rate continues to decline, less of the population will prefer to own properties. We expect to see an increase in demand for housing rental over purchasing small-sized households.

(3) Characteristics of Market Fluctuations and Seasonality

• Telecommunication (KT, KT Sat, KT Powertel)

The demand for communications services does not fluctuate widely with economic conditions due to the fact that such services are regarded as a necessity in modern life. However, if the Korean economy slows and per capita income declines, it could have an adverse impact on KT’s business activities.

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(A) KT Powertel

• KT Powertel is not affected directly by seasonality and fluctuations.

(B) KT Sat

• Transponder leasing - one of KT Sat’s major services – typically has a five-year (or longer) contract with its clients. As a result, KT Sat is not susceptible to seasonality and market fluctuations. Transmissions of video contents for government and data transmission are not affected by market fluctuations or seasonality. However, B2B services and mobile satellite service are sensitive to market conditions.

(C) KT ENS

• KT ENS could be affected by macroeconomic factors such as Europe’s fiscal crisis and changes in the global economic environment despite the activation of Green IT and expansion of Smart IT.

• Credit Cards Business (BC card)

The credit card industry is a typical domestic business which is highly affected by the private consumption trend and overall economic conditions.

• Satellite Broadcasting Service (KT Skylife)

The paid-TV market is perceived to be a necessity. Unless there is a severe economic downturn, the customer churn rate will be relatively stable. Moreover, the revenue from paid-TV services is based on monthly subscription fees, which are not impacted by seasonality.

• Car Rental Business (KT Rental)

Korea’s domestic auto rental market is focused largely on long term rentals for corporate clients. The short-term rental market has also shown growth potential as there is an increased interest in leisure activities. The short-term rental market (less than one-year rental) generates more than 6% of its revenue in the summer due to a huge demand for vacation related purposes.

• Media Contents (KT Media Hub)

The media market has less correlation with seasonality than other businesses.

• Auto Lease and Installment Payment Financing (KT Auto Lease)

Although lease financing is not typically impacted by seasonality, KT Auto Lease is partly affected by market conditions as some of its clients are corporate in nature and are susceptible to budgets and economic cycles.

• Real estate development, rental and management (KT Estate)

The real estate market is heavily dependent upon cyclical movements of the economy.

• Human Resource Management (HNC network)

After the economic crisis of 1997, many of our human labor services have been outsourced and has expanded to other labor centric operations such as call centers, hotel room cleaning services, and hospital cooking services.

• Network Securities (Initech Corp)

The information security market is affected by market conditions. For example, the economic downturn causes companies to cut down their budget for IT services and such services are less prioritized than other IT systems. However, as recent information leakage incidents are reported from across various industries (finance institutions, government organizations, and corporations) awareness as to the importance of information security has greatly increased.

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• Finance Services (Smartro)

The VAN industry is directly correlated to the amount of credit card usage, and is therefore sensitive to consumption levels and market trends, and other factors related to consumption such as weather conditions, days in a month and types of affiliates (gas station, convenient store, or restaurants).

• Public Telephone Operation and Management (KT Linkus)

Public telephone businesses are declining due to less usage. The public telephone business is also affected by seasonality.

• Equipment and Related Product Wholesale (KTM&S)

Communications services are regarded as necessities, and are relatively less sensitive to market fluctuations and seasonality than other industries. However, distribution channels tend to react negatively to the introduction of new handsets, new technology, and trend changes.

• Contents Distribution (KT Hitel)

The contents market is less sensitive to seasonal factors than other businesses, with the dissemination of a variety of platforms and N-screen services. Typically the first and third quarters of a year are more profitable as a result of school breaks. However, after considering recent trends, the market appears to be more affected by content line-ups rather than factors related to seasonality. The T-commerce market is less sensitive to market trends and seasonality than other shopping methods due to the fact that the service is not limited to time, space, and payment methods.

• E-commerce (KT commerce)

E-commerce is less sensitive to seasonality than normal commerce transactions as demand for E-commerce increases due to efficient purchases.

• Music contents (KT Music)

The music contents business has grown with the expansion of smartphones and is not influenced heavily by seasonality.

• Submarine Cable Construction (KT submarine)

The submarine cable construction business is influenced by the investment strategy between KT and the foreign communication infrastructure operators. KT Submarine’s business is linked with the infrastructure investment environment in China and other countries in the region.

• Security and Guards (KT Telecop)

The security business is less sensitive to economic fluctuations due to the conservative nature of the security business. However, domestic economic slowdowns and price competition may adversely affect the growth outlook.

• Lease and Corporate Loan (KT Capital)

Seasonality in the credit financing industry is not clearly evident, however, lease and installment payment markets are affected by the macro economy. The new financing market is not impacted by seasonality.

• Advertising Business (Nasmedia)

The advertising market is often viewed as the barometer of economic cycles and is highly affected by economic conditions. Revenue derived from advertising tends to show an N-pattern every year. Corporations usually reduce monthly advertisements from January to February and from July to August and increase spending for advertising from April to May and from September to year-end.

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• Software development and distribution (KT DS)

The public IT sector is more heavily influenced by government policy than the market environment. The private IT sector is affected by the amount in investments it receives.

(4) Competition

• Telecommunication (KT)

(a) Competing Companies

• Local calls: SK Broadband, LG U+, etc.

• Long distance calls: SK Broadband, SK Telink, LG U+, Onse Telecom, etc.

• International calls: SK Broadband, SK Telink, LG U+, Onse Telecom, etc.

• Broadband internet: SK Broadband, LG U+, Service Operators (cable television & relay wired broadcasting operators)

• Mobile telecommunications: SK Telecom, LG U+, etc.

• Internet telephones (VoIP): SK Broadband, SK Networks, SK Telink, Samsung Networks, LG U+, etc.

• IPTV: SK Broadband, LG U+

• Mobile internet (WiBro): SK Telecom

(b) Market Entry Requirements

• Communication service providers: business operations must be approved by the Korea Communications Commission.

• Specific telecommunications service providers: registration is required.

• Value-added telecommunications service providers: reporting is required.

(c) Factors of Competition

• Service fees, product quality, marketing power, brand value and competitiveness of the distribution channel, etc.

• KT Sat

KT Sat is the only satellite operator in South Korea and competes with other global satellite operators for the satellite transponder leasing business. As for the domestic internet and broadcasting business, KT Sat competes with other fixed-line service providers in Korea.

• KT Powertel

KT Powertel aims to expand its market share by taking advantage of the TRS’ uniqueness as an alternative for mobile services.

• KT ENS

SK Broadband and LG U+ are KT ENS’s industry competitors while Samsung S&S, SK E&C, and GS Neoteck are competitors of the Information Communications business.

• Credit Cards Business (BC Card)

(a) Competing Companies

• Samsung Card, Hyundai Card, Lotte Card, Shinhan Card, Kookmin Card, Woori Card, KB Card and Hana-SK Card.

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(b) Market Entry Requirements

• Not applicable.

(c) Factors of Competition

• The number of member card issuers, the number of card transactions, member stores, and the number of issued cards.

• Satellite Broadcasting Service (KT Skylife)

(a) Competing Companies

• The terrestrial broadcasting service includes radio, television and terrestrial DMB. As of the end of 2013, there are 32 broadcasters in Korea. The paid-TV market is segmented by operators such as cable operators, satellite broadcasters and IPTV providers. Cable operators are again divided into cable TV operators and relay wired broadcasting operators. In 2012, the number of cable TV operators decreased from 94 to 92. The number of relay wired broadcasting operators also decreased from 97 to 78, declining from 638 relay wired broadcasting operators in 2001 due to M&A or liquidation of business.

• KT Skylife is currently our satellite service provider and launched its service in March 2002. TU Media launched its service in May 2005, merged with SK Telink in November 2010 and terminated its service on August 31, 2012.

• The IPTV service was first commercialized in January 2009 after receiving a license in September 2008. Currently, there are three IPTV service providers – KT (olleh TV), SK Broadband (B TV) and LGU+ (LG U+ TV). The IPTV service is regulated by different regulations from those of the cable TV business and the satellite broadcasting business.

(b) Market Entry Requirements

• Regulation is one of the main entrance barriers in the paid-TV market. Paid-TV regulations mainly refer to the ownership, contents and technologies.

(c) Factors of Competition

• Some major competing factors are channel availability, advertising and program production. Securing a meaningful market share is also crucial for IPTV providers to be successful. Additionally, market share, vertical integration and the regulatory environment are other important aspects in a competitive environment.

• Car Rental Business (KT Rental)

Currently, the car rental market players are divided into two groups; 1) nationwide mid-to-large-sized enterprises supported by large companies; or 2) companies which are consolidated through M&A. The second group of companies are usually small companies operating on a local base only. The first group’s market share has been on a rising trend and the top 5 companies are expected to further expand their market shares. Since the merger with Kumho Rent-a-Car, KT Rental holds the biggest market share.

Rental of measurement equipment has been another main business portfolio. The Korean rental market is considered to be an oligopoly with KT Rental, Korean Rental and Aju Rental representing 88% of the market share. Currently, the demand for rental cars is increasing as 4G LTE repeater production and demand for smartphones are increasing.

• Media Contents (KT Media Hub)

Media Hub is competing with other IPTV service operators (SK Broadband, LG U+), as well as CATV service providers (CJ HelloVision, T-Broad) and etc. KT Media Hub possesses its competitiveness in video on demand (“VOD”) services, duplex services, Smart TV and N-screen services.

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• Auto Lease and Installment Financing (KT Auto Lease)

In order to enter the leasing and financing business, capital amount, credit level, liquidity, and risk management ability must meet the standards set by the Korean Finance Supervisory Services. However, the leasing business has a low entry barrier compared to other financing sectors.

• Real estate development, rental and management (KT Estate)

Real estate development and the rental and management business are sensitive to real estate market conditions.

• Human Resource Management (HNC network)

Currently, many firms prefer to outsource certain operations to agencies specializing in human resources. However, many companies have standards when selecting human resources agencies such as customer scale, experience, and reputation and these internal standards often create entrance barriers for new human resources agencies.

• Network Securities (Initech Corp)

There are 166 listed members of the Korea Information Security Industry Association as of the end of 2013. Although the information security business is highly segmented, the market is considered to be quite competitive. Initech’s main business—Public Key Infrastructure – currently operates 17 companies in the market, however, only three or four companies are directly competing with each other.

• Financial Services (Smartro)

For the VAN industry, competitiveness is based on the availability of stable IT support, provision of solutions, and service infra that could connect diverse franchise networks.

• Public Telephone Operation and Management (KT Linkus)

(a) Competing Competitors

• Public phone booth business: KT Linkus is the only service provider in Korea.

• Coffee Distribution business: Nespresso, Tassimo, Cafissimo.

• Logistics Business: CJ Korea Express, Hanjin, Hyundai Logistics.

(b) Market Entry Requirement

• Public payphone booth business: business operations must be approved by the Korea Communications Commission.

• Commodity Distribution Business: reporting is required.

• Motor Truck Businesss: registration is required.

(c) Factors of Competition

• Service fee, quality, marketing capacity, brand value, and distribution channel competitiveness.

• Equipment and Related Product Wholesale (KTM&S)

(a) Competing Competitors

• External competitors: PS&M, SK Networks, APR (Apple Premier Reseller), Pantech Lots, Samsung mobiles, etc.

• Internal competitors: KTCS, KTIS, etc.

(b) Factors of Competition

• Acceleration of LTE competition, pressure to reduce monthly telecommunications fees, entrance of distribution companies into MVNO market, etc.

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• Contents Distribution (KT Hitel)

There is no available data to gauge the level of competition in the contents market. As for T-Commerce, there are four competing operators, excluding home shopping. It is possible that more operators will participate in the market and the increase in competitors is a sign of market expansion.

• E-commerce (KT Commerce)

(a) High barriers to entry

• Generally the B2C e-commerce market does not have high entry barriers because entry costs are comparatively low, as there are no huge investments for machinery or equipment. On-line shopping malls usually require just a few million Korean won to start a business. However, B2B e-commerce requires entrants to have specialized knowledge of website development, industry, and transactions. Furthermore, B2B e-commerce should have an ERP system or infrastructure in advance to start. Compared to B2C, B2B e-commerce has higher barriers to entry with respect to technology and marketing.

• Music contents (KT Music)

Our service area is divided into the music service business and the contents investment and distribution business.

(a) Music services

• KT Music operates OllehMusic (www.ollehmusic.com) and also operates Genie (www.genie.co.kr) on behalf of KT. KT Music consistently upgrades OllehMusic and Genie Smart applications in order to enhance customer satisfaction and convenience.

(b) Music contents investment and distribution

• KT Music acquired KMP Holdings, which was previously owned by Korea’s major recording agencies such as SM entertainment, YG entertainment, and JYP. KT Music completed a merger with KMP holdings on June 24, 2013, after resolution by the Board of Directors in April 2013. KT Music expects to strengthen its capacity through KMP’s music contents and distributions channels.

• Submarine Cable Construction (KT Submarine)

The submarine cable construction market has no competitors domestically. In South Korea, KT Submarine is only one provider with vessel maintenance and related service facilities. For the overseas projects, Nexans, Presmian, ABB, JPS, and VISCAS are the major players.

• Security and Guards (KT Telecop)

The Korean security market is currently dominated by three companies: KT Telecop, S1 and ADT Caps. The entrance barriers in the security industry are government regulations, brand power, security network infrastructure and nationwide mobilization capacity.

• Lease and Corporate Loan (KT Capital)

According to the Credit Finance Act (Article 5-1), credit financing companies are required to meet certain mandated criteria such as a minimum capital amount (Won 20 billion for up to two credit financing companies and Won 40 billion for three and more), capital adequacy, prudent credit limit, liquidity and risk management. Nevertheless, entry barriers into the credit financing industry are fairly low compared to other financial industries such as banking, insurance and credit card markets. However, except for auto loans, the current domestic credit loan market is not sizable enough and many small players are competing for market share, resulting severe competitions.

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• Advertising Business (Nasmedia)

(a) Competing Competitors

• Online Advertisement: Mezzomedia, DMC Media

• Digital Media Advertisement (IPTV): Incross, Dartmedia

• Digital Interior Advertisement (SMRT): Jeonhong, Yujinmetro

(b) Market Entry Requirement

• IPTV Advertisement Provider: business operations must be approved by the Korea Communications Commission

• Digital Interior Ads: business operations must be approved by district borough office

(c) Factors of Competition

• Media planning capacity, negotiation skills, advertisement effect measurement and analysis systems, quality of proposals, and etc.

(5) Relevant Laws and Government Regulations

(a) Relevant Laws

• Telecommunications policy-related laws: Telecommunications Basic Act, Telecommunications Business Act (total 7)

• Radio and broadcasting policy-related laws: Radio Regulation Law

• Information related laws: Promotion of Information and Communication Basic Act (total 9)

• Broadcast related laws: Broadcasting Law, internet Multimedia Broadcasting Business Law (IPTV related), etc.

(b) Government Regulations

• The Korea Communications Commission is responsible for managing the convergence between broadcasting and communications, as well as assuring their independence and role of providing public services. The commission is also responsible for issuing relevant licenses, permits, approvals, policy enactments and other matters relating to the promotion of broadcasting and communications and the enhancement of their global competitiveness.

The statements included in the above sections are based on KT’s forecasts and are offered for the sole purpose of providing a better understanding of the company’s current state. Consequently, investors must not rely solely on KT’s forecasts when making their investment decisions.

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B. Current Status of the Company

(1) Market Characteristics and Classification of Businesses

(a) Market Characteristics

• Telecommunication (KT, KT SAT, KT Powertel, KT ENS)

The Korean telecommunications market is currently experiencing stagnant growth as major services, including fixed-line telephony, broadband internet and mobile communications, have reached maturity, caused in part by intense competition in the industry. KT is also facing a difficult business environment with fixed-mobile substitution, emergence of internet telephone (VoIP), and price and subsidy competition. Despite the unfavorable economic environment, KT has made continuous efforts to promote cost-cutting measures and innovate customer values. In order to communicate with customers efficiently, KT introduced its new brand name “olleh.” As a result, KT has maintained 8,070 thousands of its broadband subscribers, 14,360 thousands of its PSTN subscribers (Including Premises /Excluding DID) and 16,450 thousand of its mobile subscribes as of the end of 2013.

Considering the highly saturated mobile phone market in Korea (106.9% penetration rate with 56,810 thousands subscribers as of the end of 2013), growth potential by adding new subscribers or raising voice service pricing is limited. In such an environment, however, the mobile data business is considered to be a growth engine.

In late 2009, KT successfully switched the paradigm of the mobile competition from a voice centered market to data-centered services by introducing Apple’s iPhone to the Korean market and enhanced its competitiveness by introducing emerging devices including the iPhone 4 and iPads. KT’s initiatives led to a smartphone penetration rate of 11.29 million (69% of KT’s mobile subscribers) as of end of 2013 and our LTE subscribers had a penetration rate of more than 5 million as of March 19, 2013. In order to promote data usage, KT increased the data volume provided for mobile subscribers by utilizing its 3W (WCDMA, WiFi, WiBro) networks.

KT launched its LTE network services in January 2013, which was delayed compared to its competitors. However, KT completed the nationwide deployment within a ten-month span in October 2013. Due to the speedy roll-out of our LTE networks and adoption of advanced LTE WARP technology, KT achieved the world’s first TDD-FDD LTE roaming services and launched successful voice-over-LTE (“VoLTE”) services. KT also provided broadband LTE and offered carrier aggregation services using a premium WiFi network. With these efforts, KT received the Award of Best Network Operator at the LTE World Summit held in May 2012. In August 2012, KT introduced the LTE data carryover pricing plan which enhanced its competitiveness. In the contents business, KT is trying to increase data consumption by offering ‘Genie’ and ‘olleh tv now’ which provides live broadcasting channels and VODs.

In the PSTN business, KT owns 81.5% of market share as of the end of 2013 with its high brand value and loyalty to customers. However, as KT’s competitors began introducing fixed-mobile bundle services with competitive pricing, KT’s PSTN revenue has been declining steadily. Nevertheless, KT has been trying to mitigate the decline in revenue through various pricing plans and by providing valuable customer services through the CRM system.

In order to maximize the fixed-mobile synergy, KT has introduced diverse bundling plans such as ‘olleh Toong,’ ‘Unlimited plan for family,’ ‘Family sponsor,’ and ‘olleh together.’ KT also launched the ‘ucloud’ service and ‘olleh KT club,’ which is a customer loyalty program for both fixed and mobile subscribers.

In the broadband internet arena, KT will aim to improve its customer value and marketing power by continually providing Fiber-To-The-Home (“FTTH”) services.

KT Sat was spun off from KT on December 1, 2012, and recorded an average growth rate of 8% for three years in a row. KT Sat provides transponder leasing, broadcasting, video distribution and data communications services through our satellites.

Although TRS services require at least two people to subscribe, KT Powertel’s TRS allows consumers to save in investment costs by offering a customized network through a public network. TSR is absorbing demands to substitute mobile communication services for certain companies and the growth forecast appears to be steady.

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KT ENS has positioned itself as a NI-specialized subsidiary under KT group since 2004 and conducted internal network planning, construction, maintenance, and operations. KT ENS is expanding its business to a Green IT and global system distribution business. KT ENS currently operates six offices in five major cities nationwide.

• Credit Cards Business (BC Card)

BC Card’s main business is in the acquisition of credit card issuers and in issuing credit cards on behalf of client credit card issuers. In addition, BC Card provides money transfers, insurance, telecommunication sales and travel services to its cardholders.

• Satellite Broadcasting (KT Skylife)

KT Skylife has been leading the paid TV market with its competitive edge in HD channels and providing hybrid services through IPTV. Moreover, its strong presence in distribution, which is supported by KT, increased its subscriber base by over 4.18 million users. Competition over subscriber acquisition is expected to be intensified as more players in the paid TV market are providing bundling products with mobile, internet, IPTV, and satellite broadcasting services.

• Car Rental Business (KT Rental)

Currently, there are many smaller companies in the car rental business as the market entry barrier is low. Almost every year, there are new entrants in the market. As a result, the competition in the car rental market is very severe and the rental pricing is adversely affected. Auto lease companies also exist to act as a substitute for the car rental business. Moving forward, the market is expected to expand around companies that are able to provide nationwide branch offices, brand awareness and value added services.

• Media Contents (KT media hub)

KT obtained right to operate its IPTV business in September 24, 2008 and KT media hub launched its IPTV services with live channels on November 17, 2008. KT’s IPTV subscribers are recorded at 4.96 million as of the end of 2013, representing 58% of total IPTV subscribers in Korea. Olleh TV Mobile provides live TV channels and VOD contents on mobile handsets. KT media hub also records advertising revenue from interactive ads and pre-play ads on IPTV, and outdoor billboard ads and screen ads in subway stations. Moreover, KT media hub provides a variety of content services such as mobile games, launcher, and education and kids contents.

• Auto Lease and Installment Financing (KT Auto Lease)

KT Auto Lease offers financing services in order to help customers lease vehicles more easily. Although the vehicles are used as collateral, the KT Auto Lease business is typically considered to be high risk and high return in nature due to the fact that the business is based on the credibility of customers.

• Real estate development, rental and management (KT Estate)

KT Estate has expanded its business portfolio into real estate development and rental and real estate management after receiving investment in kind of 95 major real estate assets from KT on December 1, 2012. As a real estate consulting company, KT Estate offered city planning services for Daejeon Academy, established a complex development master plan for the Ganbuk headquarters, and carried out lease consulting with respect to land in Gwangju Ssangam-dong.

• Human Resource Management (HNC network)

The labor outsourcing business has limited growth as the market is highly competitive. Furthermore, large companies establish their subsidiaries and outsource 100% of the work to internalize revenue and costs through consolidated financial statements.

• Network Securities (Initech Corp)

Initech provides Public Key Infrastructure (“PKI”), which is the most fundamental security infrastructure for securing identification and transaction safely. Accordingly, PKI-based solutions have been provided not only to financial companies but to other companies and public institutions as well. Increasing the awareness of personal information protection is expected to expand the demand for such security services to individual customers.

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• Financial Business (Smartro)

As more customers are using their credit cards to make purchases, the usage rate and the volume of credit card transactions have greatly increased. Moreover, credit card transactions are provided through a variety of processes using open webs, HTML5, AJAX, and diversified UX designs online.

• Public Telephone Operation and Management (KT Linkus)

Public telephone services have faced obstacles due to rapid growth of mobile communications. Public telephone services are provided certain protective measures by the government as the service is categorized as a universal service in the telecommunication business.

• Equipment and Related Product Wholesale (KTM&S)

Data communication equipment distribution is moving from an agency and local store-oriented business to direct management channels. The market is expanding to include a general telecommunication service supply market from a simple product selling market. KT M&S has made sustainable growth and focused on margin improvement. KT M&S currently manages approximately 2,808,000 mobile subscribers and approximately 663,000 fixed-line subscribers.

• Contents distribution (KT Hitel)

Increased integration between broadcasting and telecommunications is eliminating boundaries between the two business sectors. Moreover, the media market is moving towards a more contents based business over a platform-based business. Further, the T-commerce market has considerable growth potential as it has both the characteristics of home-shopping and internet-shopping.

• E-commerce (KT Commerce)

KT Commerce is a leading B2B e-commerce business and is considered to be an “intermediary B2B e-commerce” under the National Statistical Office’s categorization. B2B industry e-commerce was introduced to Korea in the year 2000 as purchasing procedures were being carried out online. KT Commerce conducts overall business activities from purchases to management and offers clients with efficient purchasing services.

• Music Contents (KT Music)

The digital music market has grown since smartphones were introduced to Korea in the year 2009 along with the expansion of fixed-line internet services. Unlike feature phones that would provide various music services on a limited basis because of the expensive data service fee, smartphones enabled users to receive music services at no cost through Wi-Fi, 3G, and LTE networks. Consequently, in this environment, the digital music market faced a turning point and is continuing to grow.

• Submarine Cable Construction (KT Submarine)

The submarine cable construction market is usually made up of telecommunication operators’ consortiums that share any expenses. However, recently each submarine cable companies are starting to operate independently. These submarine cable companies receive orders from telecommunication operators and construct submarine cables with their own vessels. Meanwhile, the submarine cable construction method has also changed. Multiple ships are deployed for bulk cable construction in order to implement new technology more quickly. Accordingly, it currently takes approximately two years for the full process of oceanographic investigation to complete, which would have taken approximately five years to complete in the past.

• Security and Guards (KT Telecop)

Security companies have focused on price competition as an attempt to increase its market share. It is expected that quality centric competition, rather than price driven competition, will intensify. We anticipate the launch of numerous products and additional services. KT Telecop provides personnel guard, CCTV and access control through machinery security, either independently or as an integrated package. It also provides BMS services in connection with a customer’s ERP system. Based on these services, KT Telecop is pursuing differentiated strategies by expanding its video security and in-building and FM businesses.

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• Lease and Corporate Loan (KT Capital)

KT Capital has been offering various machinery leases and other financing services. Installment financing mainly involved automobiles; however, KT Capital has recently expanded its business to include installment financing for construction machinery as well. As for the synergy project with KT, based on its assets, KT Capital has a broad range of businesses in various sectors such as investments for new technology. Further, KT Capital is expanding into credit financing businesses, including financial lease and IT venture investment.

• Advertisement (Nasmedia)

Internet advertisement has the characteristics of “customer-targeted” and “interactive information.” Since its unit price is low, small to medium enterprises prefer internet advertisement. In addition to growth from online advertisement, mobile advertisement is also expected to grow with the proliferation of smartphones, tablets, and new telecommunication devices. Although the mobile advertisement market is still fairly small compared to the online advertising market, it is expected to grow significantly.

• Software development and distribution (KT DS)

Although system operations and the maintenance business has faced difficulty with respect to growth, KT DS is working to improve efficiency through cost saving strategies.

(b) Operations Subject to Disclosure

KT’s main area of business is the telecommunications sector as classified by the Korea Standard Industry Code.

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(2) Market Share

• Telecommunication (KT, KT Powertel)

Category		Operator		Market Share (%)
				2013				2012				2011
Local Telephone (Number of Subscribers)		KT SK Broadband LG U+			81.5 15.6 2.9				82.8 14.5 2.7				84.3 13.3 2.4
Mobile Telephone (Number of Subscribers)		KT SK Telecom LG U+			30.1 50.0 19.9				30.8 50.3 18.9				31.5 50.6 17.9
Broadband internet (Number of Subscribers)		KT SK Broadband LG U+ Service Operators			43.1 24.4 15.6 16.9				44.0 24.1 15.0 16.9				43.8 23.5 15.7 17.0
TRS (Number of Subscribers)		KT Powertel Regional operators			98.6 1.4				97.5 2.5				96.4 3.6

Ø The above data was provided by the Ministry of Science, ICT and Future Planning (www.msip.go.kr).

Ø Broadband internet market share of SK Broadband includes SK Telecom’s resale subscribers.

Ø TRS regional operators include T-on Telecom, Powertel TRS and Daesung Global Networks.

• Credit Cards Business (BC Card)

Category		2013				2012				2011
Card transaction M/S			25.9	%			25.0	%			26.2	%

Ø Source: BC Card’s internal data

• Car Rental Business (KT Rental)

[Major car rental companies and market share status]

																						(Unit : each)
Companies		End-2013								End-2012								End-2011
		Number of Cars				M/S				Number of Cars				M/S				Number of Cars				M/S
KT Rental			91,668				24.7	%			72,861				22.40	%			61,191				21.20	%
AJ Rent-A-Car			50,200				13.5	%			46,741				14.37	%			40,767				14.10	%
Hyundai Capital			35,832				9.9	%			32,024				9.84	%			28,747				10.00	%
SK Network			22,446				6.0	%			15,944				4.9	%			12,639				4.4	%
Red Cap Tour			11,322				3.48	%			11,322				3.48	%			10,981				3.80	%
Samsung Card			10,059				2.7	%			8,736				2.7	%			4,725				1.6	%
Kia Motors			4,520				1.2	%			5,647				1.7	%			5,350				1.9	%
Dongbu Express			6,045				1.6	%			5,706				1.8	%			7,498				2.6	%
Others			136,815				36.8	%			126,353				38.8	%			116,736				40,4	%
Total			371,821				100.00	%			325,334				100.00	%			288,634				100.00	%

Ø Source: Korea Rent-A-Car Association

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• Satellite Broadcasting (KT Skylife)

[Paid-TV market share (December 31, 2013)]

Companies		Digital Market								Analog Market								Total Paid TV
		Subscriber				M/S				Subscriber				Subscriber				M/S				Subscriber
•   T-broad			1,273,087				6.72	%			2,062,960				1,273,087				6.72	%			2,062,960
•   CJ Hello Vision			2,017,361				10.64	%			2,019,621				2,017,361				10.64	%			2,019,621
•   CNM			1,536,702				8.11	%			921,919				1,536,702				8.11	%			921,919
•   CMB			119,167				0.63	%			1,399,133				119,167				0.63	%			1,399,133
•   Hyundai HCN			611,895				3.23	%			788,300				611,895				3.23	%			788,300
Total MSO			5,558,212				29.32	%			7,191,933				5,558,212				29.32	%			7,191,933
Minor SO Total			604,409				3.19	%			1,491,705				604,409				3.19	%			1,491,705
SO Total			6,162,621				32.51	%			8,683,638				6,162,621				32.51	%			8,683,638
Satellite broadcasting			4,181,022				22.06	%							4,181,022				22.06	%
IPTV Total			8,613,578				45.44	%							8,613,578				45.44	%
KT			4,968,254				26.21	%							4,968,254				26.21	%
SK			2,095,751				11.06	%							2,095,751				11.06	%
LG U+			1,549,573				8.17	%							1,549,573				8.17	%
Total			18,957,221				100.00	%			8,683,638				18,957,221				100.00	%			8,683,638

Ø Skylife and KT subscribers: double-counted for bundled service (OTS) subscribers – 2.23 million as of December 2013.

Ø Sources: Cable—KCTA, Satellite broadcasting—Subscriber data submitted to KCC, IPTV—Company IR data.

• Media Contents (KT Mediahub)

																										(unit:1,000)
Category		Company				Subscriber
						2013								2012								2011
						Subscriber				M/S				Subscriber				M/S				Subscriber				M/S
Olleh TV			Kt				4,968				57.7	%			3,847				60.9	%			2,810				61.5	%

• Equipment and Related Product Wholesale (KTM&S)

										(unit : each)
Category		New Subscriber
		2013				2012				2011
Wireline			244,532				184,057				309,846
Wireless			1,168,055				956,637				1,217,943

Ø Source: KT M&S Internal Data

• Security and Guards (KT Telecop)

Category		Company		Market Share (%)
				2013				2012				2011
		KT Telecop			12.9	%			16.95	%			16.06	%
Revenue		S1			61.2	%			57.61	%			58.61	%
		ADT caps			25.9	%			25.44	%			25.33	%

Ø Source: Financial Supervisory Service, Electronics Disclosure System (dart.fss.or.kr)

• Lease and Corporate Loan (KT Capital)

Market share information may be misleading as there are numerous players such as banks, securities firms and credit financing firms in the leasing and corporate loan markets.

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• Advertisement (Nasmedia)

It is difficult to estimate the market share because there are different competitors in each advertisement media and different types of advertisement media within each company’s target sales.

(3) Status and Forecast of New Businesses

• Telecommunication (KT, KT Sat, KT Powertel, KT ENS)

In order to secure continuous growth potential, KT has been actively expanding its business into new businesses with growth prospects. KT aims to offer ubiquitous services for subscribers while offering telecommunication based business solutions to corporate clients.

Since the introduction of VoIP in early 2008, KT has been expanding its VoIP subscriber base, recording 3.5 million VoIP subscribers as of end-2013. Unlike other operators which have positioned VoIP as a substitute for PSTN, KT has marketed its VoIP as both a substitute and complementary service for PSTN. On the back end of these efforts, KT has maintained a relatively stable PSTN subscriber base.

KT has also introduced ‘Home hub phone’ and ‘smart home pad,’ which are integrated terminals combining PSTN, VoIP and access point (“AP”), allowing subscribers to enjoy services such as mobile IPTV and Life Jockey services using their home devices. KT plans to solidify its customer base through such creation of new convergent terminals with value-added services and applications. In January 2013, in order to transform conventional PSTN and VoIP oriented telephony customers into storage-over-internet-protocol (“SoIP”) subscribers, KT launched smart-home phone HD, which converged the smart-home contents service and HD voice/data communication function of WiFi-only smartphones.

4G WiBro, which stands for Wireless Broadband, enables portable devices to access broadband internet services, allowing universal internet access with high transmission speeds through personal handsets or laptop computers. 4G WiBro was first commercialized using Korea’s own technology and KT successfully provided its commercial 4G WiBro services to limited areas in 2006.

Since April 2007, KT started to provide 4G WiBro services in the Seoul metropolitan area. In October 2008, the 4G WiBro service coverage was further expanded to 19 neighboring cities and its service speed became two times faster. Furthermore, in March 2011, KT expanded its 4G WiBro service coverage to 82 cities nationwide and major highways, offering the world’s first nationwide data-only network service. 4G WiBro is the first commercialized fourth generation wireless broadband internet technology in Korea and its maximum download speed is 40.3Mbps, which is about three times faster than those of HSDPA/HSUPA 3G networks. KT’s nationwide 4G WiBro coverage is about 88% in the population base, which is significantly higher than those in major developed countries such as United States (36%) and Japan (70%). Currently, anyone may enjoy KT’s 4G WiBro service with personal computers, WiBro-compatible laptop computers, WiBro phones (WCDMA mobile phones with WiBro service), portable media players, navigation devices or Dongle (a USB device connecting to any laptop computer). In addition, “Egg,” which is a portable AP device launched at the beginning of 2009, enables customers to enjoy the WiBro service with various Wi-Fi embedded devices. KT will continuously expand its array of digital devices that are compatible with WiBro services. With data traffic increasing explosively, KT’s 3W network strategy is essential for success and the value of 4G WiBro will become even more important.

As for our corporate business, we plan to expand our presence to the overseas markets with our IT solution products such as Mobile Office and Cloud Computing. After launching in 2010, KT is leading the Cloud Service market with Multi-Data Center and abundant Cloud conversion know-how. In case of u-cloud personals, with a 2.6 million subscriber base and 60 corporations commencing service commercialization of u-cloud personals API. Through introductions of VPC, Cloud NAS, Cloud HPC and other value-added services, KT aims to enhance and diversify its cloud service product lines.

• Credit Cards Business (BC Card)

BC Card is expanding its business to standardize and commercialize the next-generation of mobile cards and payment processing in traditional markets. In addition, it expects to increase profits by innovating the transaction process.

25

• Satellite Broadcasting (KT Skylife)

In order to have a competitive edge in screen resolution quality – one of the most important differentiating factors in real-time broadcasting service—KT Skylife is preparing for the UHD service, also known as the 4K and 8K. With its satellite network, KT Skylife plans to continue its leadership in the UHD market. KT Skylife also plans to offer interconnected services for a web-mobile-TV, which will enable subscribers to watch internet streaming videos on TV and through mobile App. KT Skylife is preparing to offer satellite channel services with next generation technology, such as DCS, MDU, overlay and etc., which will improve the stability of service quality without any interference from external conditions.

• Car Rental Business (KT Rental)

KT rental envisions becoming a rental only company by launching various new business products, especially those that could have synergies with KT’s telecommunication businesses.

• Media Contents (KT Media Hub)

KT Media Hub implemented HTML5 middleware to allow for a more open and accessible platform for media contents consumption. As such, applications that could be provided any devices will provide true N-screen services to the users.

• Auto Lease and Installment Financing (KT Auto Lease)

KT Auto Lease will focus more on the maintenance of lease services for corporate customers and personal customers that do not have enough time to manage their cars.

• Real estate development, rental and management (KT Estate)

KT Estate plans to offer total real estate asset management including planning, investment, and management of clients real estate.

• Equipment and Related Product Wholesale (KTM&S)

KT M&S is creating a synergy with KT by expanding a mobile and fixed customer base through supporting on-site sales.

• Contents distribution (KT Hitel)

KT Hitel launched “Sky T Shopping Channel,” which is a television commerce channel and T-commerce was broadcasted July of last year. KT Hitel plans to position itself as the leading T-commerce player.

• Security and Guards (KT Telecop)

KT Telecop launched the “Face-Cop service,” which allows control of building access and the “Energy-Cop service,” which offers automatic counting of building entrants, and also launched “Home Securities Service for Women,” which helps protect against violence.

• Lease and Corporate Loan (KT Capital)

KT Capital plans to focus on stable development of existing businesses and will try to advance into the foundation of retail financing business.

• Advertising Business (Nasmedia)

Nasmedia plans to develop interactive products and solutions for advertising to maintain its stable growth despite the decrease in the online advertisement market. Nasmedia also plans to advance the integrated digital video advertising network.

26

• Software development and distribution (KT DS)

KT DS has successfully completed BIT project -construction of the next generation BSS, OSS and BI/DW. KT DS tries to maximize the efficiency of the KT group as a whole and the competiveness by integrating the IT service unification of KT’s group companies.

The statements included in the above sections are based on KT’s forecasts and are offered for the sole purpose of providing a better understanding of the company’s current state. Consequently, investors must not rely solely on KT’s forecasts when making their investment decisions.

27

2. Main Products and Services

A. Status of Main Products

• Telecommunication (KT, KT SAT, KT Powertel)

² KT

		(Unit: Won million)
Business category		2013
Service revenue			14,205,196	(79.2%)
Merchandise sales(*)			3,731,883	(20.8%)
Total			17,937,079	(100.0%)

Ø Results are based on K-IFRS (KT stand-alone).

² KT SAT

		(Unit: Won, million)
Business category		2013
Transponder lease			84,397	(57.8%)
Data			9,326	(6.4%)
Video			14,224	(9.7%)
Mobile			16,375	(11.2%)
Others			21,671	(14.9%)
Total			145,993	(100.0%)

Ø Results are based on K-IFRS.

² KT Powertel

								(Unit: Won, million)
Business		Revenue type		Category		Brand		2013
Telecommunication		Service		Mobile		TRS			99,670	(88.4%)
Distribution of Mobile Handset		Merchandise		TRS handset		Double V			13,072	(11.6%)
Total									112,742	(100.0%)

Ø Results are based on K-IFRS.

28

² KT ENS

								(Unit: Won, million)
Business		Item		Revenue				Note
		International call			1,567	(0.3%)		International call revenue
Special Category Telecommunications		Internal communication			53,900	(9.4%)		Group-tel/inner-tel revenue, leasing bond interest revenue
SI/NI		Establishing Communications network			517,126	(90.3%)		SI/NI construction revenue, Equipment sales revenue
Total					572,593	(100.0%)

Ø Including discontinued revenue related to mobile FMC (Won 195 million)

Ø Results are based on K-IFRS

• Credit Cards Business (BC Card)

		(Unit: Won, billion)
Category		2013
Card revenue			218.1	(7.1%)
Credit card processing			2,618.2	(85.2%)
Additional Service			136.0	(4.4%)
Others			101.1	(3.3%)
Total			3,073.4	(100.0%)

Ø Results are based on K-IFRS.

• Satellite Broadcasting (KT Skylife)

(Unit: Won, million)

Business

Revenue

Items

2013

Satellite Broadcasting

Service

Domestic

600,302

Overseas

—

Total

Total

600,302

Ø Results are based on K-IFRS.

• Car Rental Business (KT Rental)

				(Unit: Won, million)
Business				2013
				Revenue				Ratio
		Car rental			577,014				68.01	%
		Used car			153,573				18.10	%
Domestic		Equipment rental			66,252				7.81	%
		Others			51,594				6.08	%
		Total			848,433				100.0	%

Ø Results are based on K-IFRS.

29

• Media Contents (KT Media Hub)

		(Unit: Won, million)
Category		2013
TV			209,782	(68.9%)
Advertising			65,645	(21.5%)
New business			4,755	(1.6%)
OTM			18,681	(6.1%)
Others			5,824	(1.9%)
Total			304,687	(100.0%)

Ø Results are based on K-IFRS.

• Auto Lease and Installment Financing (KT Auto Lease)

		(Unit: Won, million)
Category		2013
Lease			31,683	(90.0%)
Installment financing			3,419	(9.7%)
Others			85	(0.3%)
Total			35,187	(100.0%)

Ø Results are based on K-IFRS.

• Real estate development, rental and management (KT Estate)

		(Unit: Won, million)
Category		2013
Lease			136,411	(53.9%)
Management commission			98,770	(39.1%)
PM commission			12,145	(4.8%)
Real estate disposal			2,319	(0.9%)
Others			3,233	(1.3%)
Total			252,878	(100.0%)

Ø Results are based on K-IFRS.

• Human Resource Management (HNC network)

		(Unit: Won, million)
Category		2013
Subcontract			28,520	(94.3%)
Dispatch			1,723	(5.7%)
Total			30,243	(100.0%)

Ø Results are based on K-IFRS.

30

• Network Securities (Initech Corp)

				(Unit: Won, million)
Category				2013
		Certification and encryption			8,765(17.2%)
		Integrated Security Management			3,293(6.5%)
		Finance ASP / Cloud			10,919(21.5%)
Product		SI			11,219(22.1%)
		Equipment, SE POS			568(1.1%)
		Subtotal			34,764(68.4%)
Merchandise		Finance, Security, Channel			9,887(19.4%)
SM		SM			2,211(4.3%)
Service		Maintenance			3,709(7.3%)
Others		Lease commissions			265(0.5%)
Total					50,836(100.0%)

Ø Results are based on K-IFRS.

• Finance (Smartro)

								(Unit: Won, thousand)
Division		Category				Item		2013
VAN			Product			Card Reference Terminal			5,399,063(3.83%)
			Service			Transit fees			135,645,947(96.17%)
Total									141,045,010(100.0%)

Ø Results are based on K-IFRS.

• Public Telephone Operation and Management (KT Linkus)

				(Unit: Won, million)
Category		Revenue type		2013
Public phone		Service			67,887(66.2%)
Modem/STB renewal		Service			6,387(6.2%)
Product distribution		Merchandise			7,273(7.1%)
Logistics distribution		Service			21,064(20.5%)
Total					102,611(100.0%)

Ø Results are based on K-IFRS.

• Equipment and Related Product Wholesale (KTM&S)

		(Unit: Won, billion)
Category		2013
Product			635.6(71.9%)
Commission			248.4(28.1%)
Total			884.0(100.0%)

Ø Results are based on K-IFRS.

31

• Contents Distribution (KT Hitel)

										(Unit: Won, billion)
Category		Item		Service		2013				2012
Contents distribution		IP Contents		Movie, Video, Animation, play			50.6	(38.8%)			44.4	(35.0%)
Platform		Building Platform, R&D		GIS, Ringo, etc.			69.7	(53.5%)			68.4	(53.9%)
T commerce		TV Shopping		SKY T Shopping			7.7	(5.9%)			0.2	(0.2%)
Mobile Internet		Wireline/Wireless internet, Game		Paran.com, Pudding, Game			2.3	(1.8%)			13.9	(11.0%)
Total							130.3	(100.0%)			126.9	(100.0%)

Ø Results are based on K-IFRS.

• E-commerce (KT Commerce)

						(Unit: Won, thousand)
Category		Item		Specific Use		2013
Merchandise		MRO		Internet			450,354,706(99.8%)
Others		Insurance business		Internet			944,072(0.2%)
Total							451,298,778(100.0%)

Ø Results are based on K-IFRS.

• Database and Online information (KT Music)

						(Unit: Won, million)
Category		Item				2013
Music			Music				50,056(98.5%)
Others			Others				772(1.5%)
Total							50,828(100.0%)

Ø Results are based on K-IFRS.

Ø Music : olleh music and other ASP revenue, contents distribution

Ø Others : Rental revenue and others

• Submarine Cable Construction (KT Submarine)

		(Unit: Won, million)
Category		2013
Construction			57,152(69.2%)
Maintenance			9,651(11.7%)
Others			15,837(19.2%)
Total			82,640(100.0%)

Ø Results are based on K-IFRS.

• Security and Guards (KT Telecop)

		(Unit: Won, million)
Category		2013
Security system			191,846(80.6%)
Personnel Security/Facilities management			36,255(15.2%)
Additional products			9,279(3.9%)
Others			655(0.3%)
Total			238,035(100.0%)

Ø Results are based on K-IFRS.

32

• Lease and Corporate Loan (KT Capital)

										(Unit: Won, million)
Services		2013				2012				2011
Installment			5,289				7,079				6,321
Lease			65,185				75,785				73,870
Loan			89,926				88,874				107,080
New Tech Finance			6,855				8,723				6,388
Others			52,937				97,322				29,236
Total			220,192				277,783				222,895

Ø Results are based on K-IFRS.

• Advertising (Nasmedia)

						(Unit: Won, million)
Services		Type		Item		2013
Advertising		Advertising		Media sales			24,681(99.7%)
Service		Service		SI/SM			73(0.3%)
Total							24,754(100.0%)

Ø Results are based on K-IFRS

• Software development and supply (KT DS)

						(Unit: Won, million)
Category		2013		2012		2011
System maintenance and operation		•   KT charging system operation •   KT BIT ERP AMO, IMO •   ITO of 14 subsidiaries including KT M&S		•   KT charging system operation •   KT BIT ERP IMO •   ITO of 12 subsidiaries including KT telecop		•   KT charging system operation •   Cloud migration •   Olleh shop operation •   KT Music ITO •   ARGOS maintenance •   ITO of 12 subsidiaries including KT telecop
System development		•   KT BIT project •   GNS2.0 infra development		•   KT BIT project •   KT Networks ERP building •   MVNO billing infra building		•   KT BIT project •   KT integrated NMS project

36

B. Price Trend of Main Products

• Telecommunication (KT Powertel)

² KT

Service		2013		2012		2011
Local telephony		Same as right		<2012.1> •   olleh club launch (1.1) •   Introduce CRM program •   Targeted for customers who use 6 major products (mobile, internet, wireline telephony, VoIP, IPTV, Wibro) <2012.5> •   Ringo plus launch (5.1) •   Provide 2 additional promotion sound source in addition to the 1 basic sound source •   Price: Won 4,000 / mo <2012.9> •   ‘PSTN + olleh TV for senior’ bundle launch (9.11) •   Discount PSTN Basic fee when bundled with olleh TV (only for customers over 65) •   PSTN basic fee: Won 2,000 / mo		<2011.2> •   Discontinue olleh set custom (2.1) •   bundle service providing PSTN basic fee and call discount when bundled more than 2 products •   Discount rate: 3% ~ 5% <2011.8> •   Provide incoming call for bundled SOHO customer •   Free Incoming call fee (Won 1,000/mo) •   ‘PSTN + Skylife. Bundle promotion •   Discount monthly basic fee (only for customer over 65) •   Discount amount: Won 4,000/mo With 3 years contract •   Promotion period: 8.16 ~ 12.31

34

Mobile <2013.1> •   Early termination penalty program (1.7) •   Impose penalty for termination within contract period •   Expect longer handset usage period and lower churn rate   <2013.2> •   LTE unlimited data plan (6 kinds) •   LTE-550/650/750/950/1100/1300 •   Temporary plan only for 3 months •   Promotion period: 2.1 ~4.30   <2013.4> •   LTE everyone olleh (4.1) •   Everyone olleh 35/45/55/65/75/85/100/125 •   Unlimited voice within on-net customers   •   Fixed-Line & Wireless Unlimited (4.22) •   Unlimited 67/77/97/129 •   Free voice calls from KT to KT and other carriers users, free fixed-line voice calls •   Promotion plan: 4.22 ~ 10.31   <2013.6> •   3G everyone olleh (6.17) •   3G everyone olleh 35/45/55 •   3G Fixed-Line & Wireless Unlimited (6.17) •   3G Unlimited 67/77/97/129 •   Promotion plan: 6.17 ~ 10.31 •   LTE disabled plan (6.24) •   LTE sound share/sigh language share   <2013.7> •   Expand benefits for youth plan (7.1) •   Double data promotion(~10.31) •   Doule the given data •   7.1 ~: only for unlimited plan customers •   9.1 ~: for entire LTE customers   <2013.12> •   Expand benefits for youth plan (12.1) •   Smartphone plan for kids (12.1) •   Expand benefits for senior (12.23) <2012.1> •   LTE price plan •   LTE-only price plan •   340/420/520/620/720/850/1000 •   Provide safe cut option and safe zone(20% for 3 months) to prevent billing shock •   Provide LTE sponsor discount •   Call promotion among KT mobile customers (~6.30): Provide maximum 1,000 minutes on-net calls   <2012.4> •   Expand data benefits for LTE plan •   Provide 1.5X ~ 2X more data than given data   •   LTE segment plan •   LTE-Al plan (4 kinds for youth), LTE-golden plan(2 kinds for over 65)   <2012.5> •   Simple discount program •   Provide discount for self-terminal with the introduction of a blacklist program   <2012.7> •   LTE-1250 plan •   VIP plan providing on-net unlimited voice calls   <2012.8> •   Plan for Galaxy (LTE-G plan) •   LTE-G650/750 •   Provide 3,000 minutes on-net voice calls and data carry over(temporary)   <2012.11> •   Additional Galaxy plan (LTE-G plan) •   LTE-G550   <2012.12> •   LTE olleh together •   Differential discount according to the mobile plan •   Strengthen olleh tv bundle to prepare ALL-IP base <2011.3> •   Additional benefits for couple plan   <2011.10> •   Discount Won 1,000 of basic fee for total mobile customers •   except for some plans and newly launched plan after October 21   <2011.10> •   Style plan (a la carte) •   Mandatory voice option among 270/320/350/450/550/750/950 •   Optional SMS and data •   Provide Data secure option •   Provide 3,000 minutes on-net voice calls for over 550   <2011.11> •   Provide additional free 50 SMS for total mobile customers •   except for some plans   <2011.12> •   Plan for vulnerable social groups •   Goldsmart 150/275 for over 65 •   Plan for the disabled (2 kinds) •   Plan for college students •   Campus-smart 340/440

35

Broadband		<2013.7> •   Internet all-right promotion •   Period: 7.12 ~ 10.31 <2013.10> •   Extend Internet all-right promotion •   Period: ~ ’14.1.31		<2012.5> •   Promotion •   2012 Internet free event (May ~ July) <2012.12> •   Olleh internet MS office		<2012.5> •   Promotion •   2011 new semester promotion (Feb ~ April) <2011.4> •   Exemption internet modem rental fee •   Provide free modem for customers who newly sign up for more than 3 years (Modem rental fee : Won 3,000/mo)
IPTV		<2013.3> •   New semester promotion •   Provides one month basic fee discount with three-year contract •   Period: 3.1 ~ 3.31 <2013.8> •   olleh TV web transformation activate promotion •   Discount STB rental fee for new customers with three years contract •   Period: 8.28 ~ 10.31 •   olleh TV live all-right •   More than 55 channels and 40,000 VOD •   Basic fee: Won 14,000 <2013.9> •   olleh TV Skylife all-right •   168 channels and 40,000 VOD •   Basic fee: Won 14,000 <2013.12> •   Long-term users re-commitment discount •   Additional discount by contract period (3~5%)		<2012.3> •   New semester promotion •   Discount STB rental fee for new customers with three years contract •   Period: 3.1 ~ 3.31 <2012.5> •   olleh tv Skylife STB rental fee cuts •   Won 4,000 -> Won 2,000 (three years contract) <2012.9> •   Low income group digital transformation promotion •   Won 2,000 basic fee cuts with three years contract •   Period: 9.1 ~ 12.31 <2012.10> •   Smart STB launch		<2011.5> •   Global grand-prix commemorative promotion •   Discount installment/STB rental fee with three years contract •   Period: 5.13 ~ 9.12 <2011.8> •   Educational type products promotion •   Provides three packages for one package price •   Period: 8.1 ~ 12.31

36

VoIP		<2013.1> •   VoIP incoming call only service launch •   Rate: Won 3,000/mo <2013.2> •   Discontinue messenger phone service <2013.11> •   VoIP HD phone launch		<2012.1> •   Introduce ‘olleh club’ program(1.1) <2012.5> •   olleh VoIP biz-call launch(5.1) •   Rate: Won 4,000/port •   Relaxed plan (5.22) •   Rate : Won 10,000/mo •   Unlimited on-net voice calls and 100 minutes free call for KT mobile/other carriers <2012.8> •   Media CID for corporate (8.6) •   Rate: Won 6,000/line <2012.9> •   Home-hub special launch(9.10) <2012.10> •   Plan for Smart home phone •   Rate(based on 2 yrs contract) •   Smart home B: Won 3,500/mo. •   Smart home C: Won 6,000/mo. •   Smart home D: Won 10,000/mo. •   Smart home E: Won 14,000/mo.		<2011.6> •   Plan for kibot •   Rate: Won 5,000
Bundle		<2013.1> •   Expand bundling product for ‘Internet swing’ •   Add LTE data product <2013.2> •   Expand bundling product for ‘4G Smart plan’ •   Add Style plan subscribers <2013.3> •   Promotion •   ollehTV Skylife new semester promotion (3.1 ~ 3.31) •   Expand bundling product for ‘LTE olleh together’ and ‘4G Smart plan’ •   Add LTE unlimited data promotion plan		<2012.7> •   Adjust condition for smart discount of ‘olleh together’ <2012.9> •   ‘PSTN + IPTV’ •   Discount PSTN basic fee when bundled with IPTV •   PSTN basic fee: Won 2,000 (only for over 65 and three years contract) <2012.12> •   ‘LTE olleh together’ launch •   Mobile basic fee discount: Won 1,500 ~ Won 10,000 (Depending on monthly plan) •   Discount Won 2,000 of internet basic fee when bundled with IPTV and mobile with three years contract		<2011.3> •   Strengthen ‘olleh set home’ line-up •   Internet + Mobile •   PSTN + Mobile •   VoIP + Mobile •   PSTN + VoIP + Mobile <2011.5> •   ‘olleh together’ launch •   Smart discount: Won 8,000 ~ Won 12,000 •   Family discount: Won 1,000 ~ Won 5,000 <2011.9> •   Wibro based ‘Internet swing’ launch •   Internet + Wibro: Won 35,000 •   Internet + 3G data: Won 37,000 •   Internet+Wibro+3G data: Won 49,000

² KT SAT

KT SAT is providing satellite based services. As the price for those services is based on terms of condition, there are no changes in those pricing rates.

² KT Powertel

When based on the general plan, the basic monthly fee is Won 17,000 and, there are additional fees of Won 12 per 10 seconds on individual radio calls, Won 22 on group calls, and Won 17 on mobile voice calls.

37

² KT ENS

It is not appropriate to calculate a standard price for services such as NI, IT maintenance and resale.

• Credit Cards Business (BC Card)

(Unit: Won)

Category

2013

2012

2011

Member Store fee rate

1.50 ~ 2.70

1.50 ~ 2.70

1.50 ~ 4.50

Installment fee rate

11.00 ~ 18.50

11.00 ~ 18.50

11.00 ~ 18.50

Cash service interest rate

15.00 ~ 25.92

15.00 ~ 25.92

15.00 ~ 25.92

Card loan(credit loan)

—

—

—

• Car Rental Business (KT Rental)

Prices frequently changes depending on economic condition and market competition.

• Media Contents business (KT Mediahub)

(Unit: %)

Subject

Product

Item

2013 1Q

2013 2Q

2013 3Q

2013 4Q

ktmh

olleh tv mobile

Monthly fee

5,000

5,000

5,000

5,000

kt

olleh tv mobile pack

Monthly fee

5,000

5,000

2,500

2,500

Ø 50% discount on olleh tv mobile pack from July to December

Bundle discount (only for olleh tv mobile)
Discount(Won)		Discount rate		Product
5,000		100%		Mobile(3G/LTE)+Internet+TV
				All-IP(LTE+Internet all-right+TV all-right)
				Internet+TV(Above OTV basic/OTS standard)
3,000		60%		Internet+TV(Below OTV value/Above OTS economy)
				Mobile(3G/LTE)+Internet(except Internet all-right)
2,000		40%		Internet all-right+TV all-right

• Auto lease and installment financing (KT Autolease)

Price changes cannot be calculated due to the nature of finance industry.

• Real estate development, rental and management (KT Estate)

KT estate provides real estate development and lease and maintenance service. The price for each service cannot be calculated due to the different nature of each business segment.

• Human Resource Management (HNC Network)

(unit: Won)

Category		2013				2012				2011				Note
Subcontract			2,434,644				2,386,906				2,355,311			Average subcontract,
Dispatch			1,594,577				1,578,790				1,569,667			dispatch commission / person

38

• Network Securities (Initech Corp)

(Unit: Won thousand)

Category				2013				2012
Certification and encryption		PKI			7,250				8,788
		INISAFE Web			22,422				20,422
		SAFE DB			8,718				9,509
Integrated Security Management		INISAFE NEXESS			7,247				7,090
		INISAFE SA			3,244				1,348

Ø Price is the average of total revenue divided by the total number of contracts. Price may change depending on the customers’ system figures (even though it is same product).

Ø Price for finance ASP and SI cannot be calculated due to the nature of the business.

• Finance (Smartro)

Price may change depending on the credit card company and services. The average price in 2013 decreased by 1.57% compare to that of 2012.

• Public Telephone Operation and Management (KT Linkus)

(Unit: Won)

Category				2013				2012				2011
		Local telethony			70				70				70
Public phone		Long distance call			70				70				70
		International call			300				300				300
		Mobile			70				70				70

Charging time

Ø Local telephony: 180 seconds

Ø Long distance call

• 1st tier (within 30km): 180 seconds

• 2^nd tier (more than 30km): 43 seconds

• Discount hours for 2^nd tier (Work day 00:00~08:00, 21:00~24:00, off-day 00:00~24:00): 61 seconds

Ø International call: varies depending on country

• Discount hours (weekday 24:00~06:00,00:00~24:00)

Ø Mobile: 38 seconds

• Equipment and Related Product Wholesale (KTM&S)

In terms of handsets, price is determined by the handset makers. In terms of telecommunication services, KT M&S follows KT’s pricing policy.

• Contents Distribution (KT Hitel)

The company provides a variety of services such as advertising, game, music, video, etc. in the area of the portal sites and contents. It is not possible to calculate the price per item for all of these services.

• E-commerce (KT Commerce)

There have not been any price changes for items that are deeply related to the profit of company.

• Music Contents (KT Music)

39

Category		Detail		2013
Record		CD			8,000
Online streaming		Download 30 music + streaming			9,000
		Download 100 music + streaming			13,000
		Smart Download + streaming			8,000
		Download 30 music			6,000
		Download 100 music			10,000
		Online streaming			6,000
		Smart streaming(only for smart seduces)			5,000

• Submarine Cable Construction (KT Submarine)

Price changes cannot be calculated due to the nature of the business.

• Security and Guards (KT Telecop)

The company provides a variety of services, and the price varies depending on the services provided.

• Lease and Corporate Loan (KT Capital)

The credit financing service pricing trend is not available due to the characteristics of such business.

• Advertising (Nasmedia)

The company provides a variety of services such as online advertisements, digital video advertisements, and etc. It is not possible to calculate the price per item for all of these services.

• Software development and supply (KT DS)

Prices for IT services varies depending on the software price.

40

• Satellite Broadcasting (KT Skylife)

(Unit: Won)

Services										2013												2012																2011
										1Q				2Q				3Q				1Q				2Q				3Q				4Q				1Q				2Q				3Q				4Q
Skylife			HD Platinum (Plus)			3yrs		Subscription			33,000				33,000				33,000				33,000				33,000				33,000				33,000				33,000				33,000				33,000				33,000
								Install fee			—				—				—				—				—				—				—				—				—				—				—
						5yrs		Subscription			30,000				30,000				30,000				30,000				30,000				30,000				30,000				30,000				30,000				30,000				30,000
								Install fee			—				—				—				—				—				—				—				—				—				—				—
			HD Blue			3yrs		Subscription			16,000				14,000				14,000				16,000				16,000				16,000				16,000				18,000				18,000				18,000				18,000
								Install fee			—				—				—				—				—				—				—				—				—				—				—
						5yrs		Subscription			15,000				13,000				13,000				15,000				15,000				15,000				15,000				16,000				16,000				16,000				16,000
								Install fee			—				—				—				—				—				—				—				—				—				—				—
			HD Green			3yrs		Subscription			12,000				12,000				12,000				12,000				12,000				12,000				12,000				13,000				13,000				13,000				13,000
								Install fee			10,000												10,000				10,000				10,000				10,000				30,000				—				—				—
						5yrs		Subscription			12,000				11,000				11,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000
								Install fee			—				—				—				—				—				—				—				30,000				—				—				—
			HD On			3yrs		Subscription			9,000				10,000				10,000				9,000				9,000				9,000				9,000				9,000				10,000				11,000				11,000
								Install fee			20,000												20,000				20,000				20,000				20,000				30,000				30,000				30,000				30,000
						5yrs		Subscription			8,000				9,000				9,000				8,000				8,000				8,000				8,000				8,000				9,000				10,000				10,000
								Install fee			10,000												10,000				10,000				10,000				10,000				30,000				30,000				30,000				30,000
OTS (Flat rate service launched in 2Q10			All-Right			3yrs		Subscription											9,000				9,000
								Install fee
			Economy			3yrs		Subscription			12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000
								Install fee			—				—				—				—				—				—				—				—				—				—				—
			Standard			3yrs		Subscription			15,000				15,000				15,000				15,000				15,000				15,000				15,000				15,000				15,000				15,000				15,000
								Install fee			—				—				—				—				—				—				—				—				—				—				—
			Premium			3yrs		Subscription			20,000				20,000				20,000				20,000				20,000				20,000				20,000				20,000				20,000				20,000				20,000
								Install fee			—				—				—				—				—				—				—				—				—				—				—

Ø All-Right (Internet+TV+Mobile) was launched in September to secure price competitiveness (Bundled price: Won 290,000)

Ø Happy promotion (additional Won 3,000 discount on TV, bundled price Won 280,000):  July ~ December

3. Matters Related to Revenue

A. Performance in Terms of Revenue

• Telecommunication (KT, KT Powertel, KT Sat, KT ENS)

² KT

(Unit: Won million)

Business category		2013				2012				2011
Service revenue			14,205,196				14,560,667				15,122,455
Merchandise sales (*)			3,731,883				4,302,570				4,201,178
Total			17,937,079				18,863,237				19,323,633

Ø FY2011 and FY2012 figures are calculated after reflecting K-IFRS Article 1001 “Financial statements report” amendment (KT stand-alone).

41

² KT Powertel

(Unit: Won million)

Business Unit		Revenue Type		Category				2013				2012				2011
Telecommunication		Service		Frequency Trunked Communications		Export			276				276				245
						Domestic			99,394				111,678				113,224
						Total			99,670				111,954				113,469
		Merchandise		Mobile Handsets		Export			29				—				—
						Domestic			13,043				12,982				12,885
						Total			13,072				12,982				12,885
Total						Export			305				276				245
						Domestic			112,437				124,660				126,109
						Total			112,742				124,936				126,354

Ø Results are based on K-IFRS.

Ø FY2011 and FY2012 figures are calculated after reflecting K-IFRS Article 1001 “Financial statements report” amendment.

² KT Sat

(Unit: Won million)

Category		2013
Gap filler rentals			84,397
Data transmission			9,326
Video transmission			14,224
Mobile satellite service			16,375
Others			21,671
Total			145,993

Ø Results are based on K-IFRS.

² KT ENS

(Unit: Won million)

Business Unit		Business Category		2013				2012				2011
Products		Home Server and etc.			108,403				128,792				116,175
Service		Network Construction			464,190				371,763				258,343
Total					572,593				500,555				374,518

Ø Results are based on K-IFRS.

Ø Numbers include discontinued operations related to wireless FMC. Sales related to discontinued operations amounted to Won 195 million in 2013, Won 39.7 million in 2012, and Won 32.4 million in 2011.

• Credit Cards Busines (BC Card)

		(Unit: Won billion)
Category		2013				2012				2011
Card revenue			230.3				223.6				223.2
Credit card processing			2,662.6				2,725.6				2,687.8
Additional service			140.8				121.2				99.0
Others			78.0				66.9				62.5
Total			3,111.7				3,137.3				3,072.5

Ø Card revenue includes commissions from member companies for the proxy act of card related work.

Ø Additional services includes revenue from insurance, telecommunication, travel and etc.

Ø Results are based on K-IFRS.

42

• Satellite Broadcasting (KT Skylife)

		(Unit: Won million)
Business		Revenue Type		2013				2012				2011
Satellite Broadcasting		Monthly fee			354,554				321,667				297,494
		Channel			117,458				80,161				67,104
		Advertising			14,498				12,233				15,605
		Others			64,759				45,776				40,720
Total					551,270				459,838				420,923

Ø Channel revenue : channel rental revenue + commission for home shopping transmissions.

Ø Results are based on K-IFRS.

• Car Rental Business (KT Rental)

		(Unit: Won million)
Business						2013				2012				2011
Domestic			Car Rental				456,396				414,103				252,650
			Used Car				163,724				169,027				88,001
			Equipment Rental				60,660				42,612				42,216
			Auto Lease				35,427				35,805				26,161
			Total				716,027				661,547				409,028

Ø Results are based on K-IFRS.

• Media Contents (KT Media Hub)

		(Unit: Won million)
Business		2013
TV business			209,782
Advertising business			65,645
New business			4,755
OTM			18,681
Others			5,824
Total			304,687

Ø Results are based on K-IFRS.

Ø Company created on December 3, 2012.

Ø Consolidated on January 2, 2013.

• Auto Lease and Installment Financing (KT Auto Lease)

		(Unit : Won million)
Category		2013				2012				2011
Lease			31,683				28,295				2,497
Installment finance			3,419				423				—
Others			85				281				5
Total			35,187				28,999				2,502

Ø Results are based on K-IFRS.

43

• Real estate development, rental and management (KT Estate)

		(Unit : Won million)
Category		2013				2012				2011
Lease			136,411				12,289				94
Building management			98,770				976				—
PM commission			12,145				11,596				7,744
Real estate sales commission			2,319								—
Others			3,233				—				—
Total			252,878				24,861				7,838

Ø Results are based on K-IFRS.

• Human Resource Management (HNC Network)

		(Unit : Won million)
Category		2013				2012				2011
Contracat			28,520				21,632				14,621
Outsorcing			1,723				1,862				2,023
Total			30,243				23,494				16,644

Ø Results are based on K-IFRS.

• Security Business (Initech)

		(Unit: Won thousand)
Category		2013				2012				2011
Certification & Encryption			8,764,585				7,606,829				8,111,329
Total Security Solution			3,292,652				3,604,146				1,854,479
Equipment Sales			568,700				830,600				—
Finance ASP			10,919,333				10,155,854				10,206,377
SI			11,219,005				12,121,943				7,122,696
Products			9,886,629				4,994,716				3,465,337
SM			2,211,304				536,783				31,671
Outsourcing			3,709,179				3,089,768				2,789,509
Rental Revenue			264,544				266,585				106,103
Total			50,835,931				43,207,225				33,687,500

Ø Results are based on K-IFRS.

• Financial Business (Smartro)

		(Unit: Won thousand)
Category		2013				2012				2011
Outsourcing			135,645,947  (96.17%)				126,596,469  (95.18%)				103,381,160  (96.78%)
Product			5,399,063  (3.83%)				6,412,615  (4.82%)				3,439,827  (3.22%)
Total			141,045,010(100.0%)				133,009,084(100.0%)				106,820,987(100.0%)

Ø Results are based on K-IFRS.

44

• Public Telephone Operation and Management (KT Linkus)

		(Unit: Won million)
Category		2013				2012				2011
Public Phone			67,887				61,463				57,800
Modem/STB			6,387				7,009				8,919
Product distribution			7,273				5,460				7,979
Distribution business			21,064				8,057				3,500
Total			102,611				81,989				78,198

Ø Results are based on K-IFRS.

• Machine and related product wholesale (KT M&S)

		(Unit: Won 100 million)
Category		2013				2012				2011
Product Sales			6,356				8,032				7,599
Commission Revenue			2,484				2,061				1,573
Total			8,840				10,093				9,172

Ø Results are based on K-IFRS.

• Online contents creation and e-commerce (KT Hitel)

		(Unit: Won 100 million)
Category		2013				2012				2011
IP Contents			506				444				353
Platform Construction, R&D			697				684				731
TV Shopping			77				2				—
Fixed/Wireless Internet & Game			23				139				223
Total			1,303				1,269				1,307

Ø Results are based on K-IFRS.

Ø Most of sales are generated domestically.

• Electronic Commerce (KT Commerce)

		(Unit: Won thousand)
Category		2013				2012				2011
Product Sales			450,354,706				316,967,371				331,750,995
Others			944,072				1,153,619				2,480,577
Total			451,298,778				318,120,990				334,231,572

Ø Results are based on K-IFRS.

• Database and online information provider (KT Music)

		(Unit: Won million)
Category		2013				2012				2011
Music Business			50,056				29,486				30,210
Others			772				1,907				1,069
Total			50,828				31,393				31,279

45

Ø Results are based on K-IFRS.

Ø Music Business: Olleh Music and other ASP sales, contents distribution and etc.

Ø Others: Outsourcing and others.

• Submarine Cable (KT Submarine)

		(Unit: Won million)
Category		2013								2012								2011
		Amount				% of sales				Amount				% of sales				Amount				% of sales
Construction			57,152				69.20	%			45,805				66.50	%			80,950				72.60	%
Maintenance & Repair			9,651				11.70	%			8,200				11.90	%			17,455				15.60	%
Others			15,837				19.20	%			14,895				21.60	%			13,048				11.80	%
Total			82,640				100.00	%			68,900				100.00	%			111,453				100.00	%

Ø Results are based on K-IFRS.

• Security and Guards (KT Telecop)

		(Unit : Won million)
Category		2013				2012				2011
Security service revenue			237,380				295,814				259,110
Other revenue			655				366				223
Total			238,035				296,180				259,333

Ø Results are based on K-IFRS.

• Lease and Corporate Loan (KT Capital) 

		(Unit: Won million)
Services		2012				2011
Installment			5,289				7,079
Lease			65,185				75,785
Loan			89,926				88,874
New Tech Finance			6,855				8,723
Others			52,937				97,322
Total			220,192				277,783

Ø Results are based on K-IFRS.

• Advertising (Nasmedia)

		(Unit : Won million)
Category		2013				2012				2011
Advertising			24,681				23,355				21,466
Outsourcing			73				108				190
Total			24,754				23,463				21,656

Ø Results are based on K-IFRS.

46

• Software development and provider (KT DS)

		(Unit : Won million)
Category		2013				2012				2011
Product			78,277				41,077				50,854
Outsourcing			495,121				529,673				447,303
Total			573,398				570,750				498,157

Ø Results are based on K-IFRS.

B. Routes and Methods of Sales

• Telecommunication (KT)

(1) Marketing Organizational Structure (as of March 26, 2014)

47

(2) Sales Path

• Customer center and branch offices offer sales of goods and customer service.

• Subscription to goods and services through the internet (www.olleh.com).

• Attracting new subscribers and increasing cross-sales through business sales agreements and affiliation: sales agencies.

(3) Methods and Conditions of Sales

(a) Sales Methods

• Service fees are paid in cash (wire transfer, direct bank transfer and credit cards). Fixed and wireless telephone services are operated on a unit pricing system or a partial flat rate system and broadband internet access services are operated on a flat rate system.

• Sale of terminals may involve installment payments.

• Rental of terminals is charged on a monthly basis and a discounted rate is applied during the contract period.

• Distribution fees are charged upon installation and additional periodic maintenance fees.

(b) Conditions for Sales

• Discounts of Service Fees in accordance with the Subscription Period.

[Discount rates based on Contract Periods]

Category		1-Year		2-Year		3-Year		4-Year
olleh internet		5%		10%		15%		20% (limited to Special)
KORNET (Express/Premium)		5%		10%		15%		—
olleh TV (Live/VOD)		5%		10%		20%		—

[Additional discounts after the Three-Year contract]

Category		After 3 Years		After 4 Years		After 5 Years		Note
olleh internet		2%		3%		5%		—
KORNET (Express/Premium)		2% (for additional 1 year)		3% (for additional 2 years)		5% (for additional 3 years)		When subscribers sign extended contracts

Ø No additional discounts are available for new subscribers signing after November 1, 2008.

[Additional discounts for olleh internet subscribers renewing contracts]

Category

Renewal for 1 year

Renewal for 2 years

Renewal for 3 years

Renewal for 4 years

Type A

Won 1,000

Won 2,000

Won 3,000

Won 4,000

Type B

—

5

%

10

%

—

Ø Renewing contracts before November 1, 2008 will be applied a 3% discount for a two-year contract and a 5% discount for a three-year contract. Customers need to renew their contract to apply for changed discount rates.

Ø Customers who applied for contract renewal or bundling products will no longer be eligible for “additional discounts” if they have contracts that exceed a three-year term.

Ø Internet contract renewal is only available one a one-time basis, and is only available for over three-year Lite users and over four-year Special users.

48

[Optional discount based on the subscription period (SHOW-king sponsor basic type)]

Monthly fee

Period of subscription

12 months

18 months

24 months

Won 30,000 to Won 40,000

Discount up to Won 3,000

Discount up to Won 5,000

100% discount (up to Won 10,000)

More than Won 40,000

Additional 10% discount

Ø VAT included.

[Monthly Discounts for i plan (SHOW-king sponsor/i type)]

		(Unit: Won/Month, VAT excluded)
type plan		Slim				Lite/Talk*				Value				Medium				Special*				Premium
Monthly discounts			5,000				8,000				10,000				13,000				16,000				22,000

Ø Instead of offering handset subsidies, Smartsponsor is offering additional tariff discounts from Won 6,000~11,000.

Ø i-talk and i-special plans are newly added (March 1, 2010)

[Smart-sponsor Discount Plans]

		(Unit: Won/Month, VAT excluded)
Type of plan		Basic fee				Amount of monthly discount								Amount of total discount
						1-yr subscription				2-yr subscription				1-yr subscription				2-yr subscription
i-slim			34,000				5,000				13,000				60,000				312,000
i-teen			34,000				5,000				13,000				60,000				312,000
i-light/talk			44,000				8,000				16,000				96,000				384,000
i-value			54,000				10,000				18,000				120,000				432,000
i-medium			64,000				13,000				21,000				156,000				504,000
i-special			78,000				16,000				24,000				192,000				576,000
i-premium			94,000				22,000				30,000				264,000				720,000
DIY 340			34,000				5,000				13,000				60,000				312,000
DIY 440			44,000				8,000				16,000				96,000				384,000
DIY 540			54,000				11,000				19,000				132,000				456,000
DIY 640			64,000				13,000				21,000				156,000				504,000
DIY 790			79,000				16,000				24,000				192,000				576,000
Style 270			27,000				1,500				8,500				18,000				204,000
Style 320			32,000				3,000				11,000				36,000				264,000
Style 350			35,000				5,000				13,000				60,000				312,000
Style 450			45,000				8,000				16,000				96,000				384,000
Style 550			55,000				10,000				18,000				120,000				432,000
Style 750			75,000				15,000				23,000				180,000				552,000
Style 950			95,000				22,000				30,000				264,000				720,000
Al-smart 340			34,000				5,000				11,000				60,000				264,000
Al-smart 440			44,000				7,000				14,500				84,000				348,000
Campus-smart 340			34,000				5,000				13,000				60,000				312,000
Campus-smart 440			44,000				8,000				16,000				96,000				384,000

Ø VAT excluded.

Ø If contract is cancelled before its minimum term, customers would have to return tariff discounts that were applied.

49

[Wireless/Wireline On-net Unlimited Voice Plans]

• Applies to two tariff plans: the i-Premium and the Voice 2000 tariff plan.

• Customers under these two plans are available for wireline/wireless on-net unlimited voice service.

(Unit: Won/Month, VAT excluded)

Tariff Plan		i-Premium		Voice 2000(subscription limited)
Basic Fee		94,000		96,000
Basic Service		Wireline/wireless on-net voice unlimited		Wireline/wireless on-net voice unlimited
		Off-net 800 minutes		Off-net 2000 minutes
		SMS 1,000 units		None
		Data Unlimited		None
Tariff discount (if subscribed to SHOW-king Sponsor)		22,000		25,000

[i-Teen and Silver Tariff Plan]

(Unit: Won/Month, VAT excluded)

Tariff Plan		i-Teen		Hyo
Basic Fee		34,000		8,800
Available Subscribers		Teens under 18		Ages 65 and over
Free Benefits		29,000 Al		Voice 30 minutes/Video Chat 30 minutes
		SMS 4,000 units		SMS 30 units
		-		For one designated line, 30% voice discount Provision of “Smart Safeguard”
Tariff discount (if subscribed to SHOW-king Sponsor)		22,000		25,000

[Tethering Service Policy]

• When connected to internet service by tethering, (if not noticed otherwise) data will be deducted against the customers’ basic tariff plan that includes the data provision.

[(3G) Data Sharing Service]

• Price: Won 3,000/month

• Without an additional subscription fee or basic fee, customers can enjoy data sharing service (up to 5 lines for modem).

[LTE Data Sharing Service]

• Price: 7,500won/month per device

• For customers under the LTE tariff plan, LTE data sharing service provide for free for smart devices (pad, smart PC, smart camera and etc.). However, starting from the third device, Won 7,500/month will be additionally levied.

[Data Roll-Over Service]

• Without additional fee, data can be rolled over to the next month.

• Applicable tariff plan: Wireline/wireless unlimited voice(LTE/3G), Everybody Olleh(LTE/3G), LTE-G550/G650/G750/850/1000/1250: i-Slim/Talk/Light.

50

[Mobile Bundling Plans]

(Unit: Won/Month, VAT excluded)

Type		Basic fee				Total amount of usage				Complementary beneficiaries												Additional beneficiaries						SIM
										Voice (minute)				SMS				Discount rate (max)				Youth- only SMS				Bundling benefits		1
Mobile Toong (Single)			34,000				38,500				245				1,350				9	%			—			Unlimited voice among family members			1~5
Mobile Toong (Small)			64,000				72,000~120,000				566				3,000				46	%			500
Mobile Toong (Medium)			94,000				122,000~170,000				1,019				5,500				44	%			1,000
Mobile Toong (Large)			124,000				172,000~220,000				1,481				8,000				43	%			2,000

[A La Carte Plans]

• Adjustable voice/data/SMS volumes at own choice with fixed free basic volume.

(Unit: Won, VAT excluded)

Price plan		Basic fee				Charge														Adjustable volume				SHOW-king sponsor discount
						Voice				SMS				Data
						(per 10 seconds)				(per one)				(per 0.5KB)
A La Carte 340			34,000				18				20				0.25			Free data of 50MB offering			25,000				5,000
A La Carte 440			44,000				18				20				0.25						36,000				8,000
A La Carte 540			54,000				18				20				0.25						48,000				11,000
A La Carte 640			64,000				18				20				0.25						67,000				13,000
A La Carte 790			79,000				18				20				0.25						96,000				16,000

[Unlimited 3G Data Plans]

• Subscribers who signed up for the basic fees at a minimum of Won 54,000 can use unlimited 3G data services with no additional charges.

(Unit: Won, Minute)

				Carryover data plans												Unlimited data plans
Basic Fee				i-Slim				i-Talk				i-Lite				i-Value				i-Medium				i-Special				i-Premium
					34,000				44,000				44,000				54,000				64,000				78,000			94,000
Benefits		Voice			150				250				200				300				400				600			Unlimited on-net 800 minutes off-net
		SMS			200				300												400				600			1,000
		Data			Data roll-over												Unlimited 3G data
					100MB				100MB				500MB
					Unlimited WiFi data

Ø The same applies to iPhone lifetime tariff plan, VAT excluded.

[Campus Smart Plans]

• Adjustable voice/data/SMS volumes with additional discount at a specified campus zone targeting college students.

(Unit: Won, VAT excluded)

Plan		Basic fee				Charge												Adjustment volume				Other benefit
						Voice				SMS				Data
						(per second)				(per unit)				(per 0.5KB)
Campus smart 340			34,000				1.8				20				0.025				25,000			50% discount on out- going voice/data charge at one specified campus zone
Campus smart 440			44,000				1.8				20				0.025				36,000

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[LTE Plans]

• Tariff plan for LTE services.

• “ Safe Block Service” option available for customers to prevent billing shock on data over-consumption.

• Three-months “Data safe-zone (provides additional 20% of basic data that are provided based on each tariff plan)” is provided to customers who do not select the “Safe Block Service.”

(Unit: Won, VAT excluded)

Plan		Basic fee				Charge												Benefit
						Voice				SMS				Data
						(per second)				(per unit)				(per 0.5KB)
LTE-340			34,000				1.8				20				0.01			Voice 160 minutes Data 500MB, SMS 200
LTE-420			42,000				1.8				20				0.01			Voice 200 minutes Data 1GB, SMS 200
LTE-520			52,000				1.8				20				0.01			Voice 250 minutes Data 1.5GB, SMS 250
LTE-620			62,000				1.8				20				0.01			Voice 350 minutes Data 3GB, SMS 350
LTE-720			72,000				1.8				20				0.01			Voice 450 minutes Data 5GB, SMS 450
LTE-850			85,000				1.8				20				0.01			Voice 650 minutes Data 7GB, SMS 650
LTE-1000			100,000				1.8				20				0.01			Voice 1050 minutes Data 10GB, SMS 1050

[LTE Sponsor Tariff Plan]

(Unit: Won, VAT excluded)

Category						Monthly discount								Total discount
Plan		Basic fee				1-yr subscription				2-yr subscription				1-yr subscription				2-yr subscription
LTE-340			34,000				2,500				7,000				30,000				168,000
LTE-420			42,000				7,000				11,000				84,000				264,000
LTE-520			52,000				10,000				14,000				120,000				336,000
LTE-G550			55,000				10,000				14,000				120,000				336,000
LTE-620			62,000				12,000				16,000				144,000				384,000
LTE-G650			65,000				12,000				16,000				144,000				384,000
LTE-720			72,000				14,000				18,000				168,000				432,000
LTE-G750			75,000				14,000				18,000				168,000				432,000
LTE-850			85,000				16,000				20,000				192,000				480,000
LTE-1000			100,000				20,000				24,000				240,000				576,000
LTE-1250			125,000				26,000				30,000				312,000				720,000

52

[LTE Plan with strengthened data benefits]

• For the seven types of LTE tariff plans, the data provision would be strengthened by 1.5 to 2.0 times.

Tariff Plan		As-Is		To-Be
LTE-340		500MB		750MB
LTE-420		1GB		1.5GB
LTE-520		1.5GB		2.5GB
LTE-620		3GB		6GB
LTE-720		5GB		10GB
LTE-850		7GB		14GB
LTE-1000		10GB		20GB

[Wireline/Wireless unlimited voice tariff plan launched – applies to LTE & 3G]

• Provides wireline, wireless unlimited voice and SMS (includes off-net voice).

(Unit: Won/Month, VAT excluded)

Tariff Plan		Basic Fee				Vocie		SMS		Data
Unlimited Voice 67(LTE/3G)			67,000			Unlimited		Unlimited		5GB
Unlimited Voice 77(LTE/3G)			77,000							9GB
Unlimited Voice 97(LTE/3G)			97,000							17GB
Unlimited Voice 129(LTE/3G)			129,000							Unlimited

Ø VAT excluded.

[3G/Smart-Sponsor Tariff Discounts]

(Unit: Won/Month, VAT excluded)

Category						Monthly Discount								Total Discount
Tariff Plan		Basic Fee				1-yr subscription				2-yr subscription				1-yr subscription				2-yr subscription
Unlimited Voice 67(LTE/3G)			67,000				12,000				16,000				144,000				384,000
Unlimited Voice 77(LTE/3G)			77,000				14,000				18,000				168,000				432,000
Unlimited Voice 97(LTE/3G)			97,000				16,000				20,000				192,000				480,000
Unlimited Voice 129(LTE/3G)			129,000				26,000				30,000				312,000				720,000

[Everybody Olleh tariff plan launched – LTE 8 type, 3G 3 type]

• Provide unlimited voice, video chat and SMS between Olleh customers.

(Unit: Won/Month, VAT excluded)

Tariff Plan

Basic Fee

Voice(Minutes)

SMS

Data

On-net

Off-net

Everybody Olleh 35(LTE/3G)

35,000

Unlimited (Wireless)

130

Unlimited

750MB

Everybody Olleh 45(LTE/3G)

45,000

185

1.5GB

Everybody Olleh 55(LTE/3G)

55,000

250

2.5GB

Everybody Olleh 65(LTE/3G)

65,000

350

6GB

Everybody Olleh 75(LTE/3G)

75,000

450

10GB

Everybody Olleh 85(LTE/3G)

85,000

650

14GB

Everybody Olleh 100(LTE/3G)

100,000

1,050

20GB

Everybody Olleh 125(LTE/3G)

125,000

Unlimited (Wireless & Wireline)

1,250

25GB

53

[LTE/Smart-Sponsor Tariff Discounts]

(Unit: Won/Month, VAT excluded)

Category						Monthly Discount								Total Discount
Tariff Plan		Basic Fee				1-yr subscription				2-yr subscription				1-yr subscription				2-yr subscription
Everybody Olleh 35(LTE/3G)			35,000				2,500				7,000				30,000				168,000
Everybody Olleh 45(LTE/3G)			45,000				7,000				11,000				84,000				264,000
Everybody Olleh 55(LTE/3G)			55,000				10,000				14,000				120,000				336,000
Everybody Olleh 65(LTE/3G)			65,000				12,000				16,000				144,000				384,000
Everybody Olleh 75(LTE/3G)			75,000				14,000				18,000				168,000				432,000
Everybody Olleh 85(LTE/3G)			85,000				16,000				20,000				192,000				480,000
Everybody Olleh 100(LTE/3G)			100,000				20,000				24,000				240,000				576,000
Everybody Olleh 125(LTE/3G)			125,000				26,000				30,000				312,000				720,000

[SIMple Discount Program]

• Provides tariff discounts to ‘blacklist’ handsets.

(Unit: Won, VAT excluded)

Plans						Monthly Discount								Total Discount
Tariff Plan		Basic Fee				1-yr subscription				2-yr subscription				1-yr subscription				2-yr subscription
LTE-340			34,000				2,500				7,000				30,000				168,000
LTE-420			42,000				7,000				11,000				84,000				264,000
LTE-520			52,000				10,000				14,000				120,000				336,000
LTE-620			55,000				10,000				14,000				120,000				336,000
LTE-G650			62,000				12,000				16,000				144,000				384,000
LTE-720			65,000				12,000				16,000				144,000				384,000
LTE-G750			72,000				14,000				18,000				168,000				432,000
LTE-850			75,000				14,000				18,000				168,000				432,000
LTE-1000			85,000				16,000				20,000				192,000				480,000
LTE-1250			100,000				20,000				24,000				240,000				576,000
LTE-Golden 275			125,000				26,000				30,000				312,000				720,000
LTE-Al 240			24,000				1,000				1,000				12,000				24,000
LTE-Al 340			34,000				2,500				7,000				30,000				168,000
LTE-Al 420			42,000				7,000				11,000				84,000				264,000
LTE-Al 520			52,000				10,000				14,000				120,000				336,000
LTE- Smart Sharing 1			34,000				2,500				7,000				30,000				168,000
LTE- Smart Sharing 2			42,000				7,000				11,000				84,000				264,000
Unlimited Voice 67(LTE/3G)			67,000				12,000				16,000				144,000				384,000
Unlimited Voice 77(LTE/3G)			77,000				14,000				18,000				168,000				432,000
Unlimited Voice 97(LTE/3G)			97,000				16,000				20,000				192,000				480,000
Unlimited Voice 129(LTE/3G)			129,000				26,000				30,000				312,000				720,000
Everybody Olleh 35(LTE/3G)			35,000				2,500				7,000				30,000				168,000
Everybody Olleh 45(LTE/3G)			45,000				7,000				11,000				84,000				264,000
Everybody Olleh 55(LTE/3G)			55,000				10,000				14,000				120,000				336,000
Everybody Olleh 65(LTE/3G)			65,000				12,000				16,000				144,000				384,000
Everybody Olleh 75(LTE/3G)			75,000				14,000				18,000				168,000				432,000
Everybody Olleh 85(LTE/3G)			85,000				16,000				20,000				192,000				480,000
Everybody Olleh 100(LTE/3G)			100,000				20,000				24,000				240,000				576,000
Everybody Olleh 125(LTE/3G)			125,000				26,000				30,000				312,000				720,000
i-slim, i-teen			34,000				5,000				13,000				60,000				312,000
i-light, i-talk			44,000				8,000				16,000				96,000				384,000
i-value			54,000				10,000				18,000				120,000				432,000
i-midium			64,000				13,000				21,000				156,000				504,000
i-special			78,000				16,000				24,000				192,000				576,000
i-premium			94,000				22,000				30,000				264,000				720,000

54

Plans						Monthly Discount								Total Discount
Tariff Plan		Basic Fee				1-yr subscription				2-yr subscription				1-yr subscription				2-yr subscription
Smart sharing			34,000				5,000				13,000				60,000				312,000
Golden smart 275			27,500				2,500				7,500				30,000				180,000
Campus smart 340			34,000				5,000				13,000				60,000				312,000
Campus smart 440			44,000				8,000				16,000				96,000				384,000
Al smart 340			34,000				5,000				11,000				60,000				264,000
Al smart 440			44,000				7,000				14,500				84,000				348,000
Style 270			27,000				1,500				8,500				18,000				204,000
Style 320			32,000				3,000				11,000				36,000				264,000
Style 350			35,000				5,000				13,000				60,000				312,000
Style 450			45,000				8,000				16,000				96,000				384,000
Style 550			55,000				10,000				18,000				120,000				432,000
Style 750			75,000				15,000				23,000				180,000				552,000
Style 950			95,000				22,000				30,000				264,000				720,000
A La Carte 340			34,000				5,000				13,000				60,000				312,000
A La Carte 440			44,000				8,000				16,000				96,000				384,000
A La Carte 540			54,000				11,000				19,000				132,000				456,000
A La Carte 640			64,000				13,000				21,000				156,000				504,000
A La Carte 790			79,000				16,000				24,000				192,000				576,000

Ø If the contract is cancelled before its minimum term, customers will have to return the tariff discounts that were applied.

Ø If the two year contract is selected, tariff discounts would be applied for a period of 30 months.

(4) Sales Strategy

(a) Mobile Service

• Enhancing leadership and competitiveness in the smartphone and emerging devices market: expanding the smartphone subscriber base and pioneering the tablet PC market.

• Strengthening competitiveness by utilizing a differentiating network: Building a differentiated ‘Mobile Wonderland’ (a network usage environment) based on the 3W(3G/WiFi/WiBro) network.

• Attracting high ARPU users by offering free WiFi/uCloud services to subscribers who signed for higher plans.

• Offering differentiated services experience after forming an optimized customer service structure to smartphone users.

• Controlling marketing expenses by introducing a new sales program which provides for a special tariff discount instead of a handset subsidy.

• Strengthening a customer retention policy targeting the long-term contract customers whose contract period has matured.

(b) IPTV Service

• Promoting IPTV (olleh TV) products to our existing internet subscribers.

• Expanding the client base by offering free set-top box rentals (with a three-year subscription contract) and opportunities to experience KT services.

• Increasing synergy with Skylife by providing a hybrid product to strengthen customer retention and to promote up-selling.

(c) Broadband Internet Service

• Strengthening competitiveness of All-IP based products and solidifying a No.1 market stance with active FTTH investment.

• Expanding synergies with smart home businesses such as IPTV, home pad and Kibot.

• Satisfying a diverse range of customer needs by providing differentiated value-added services.

• Promoting specialized high-quality and optimized products by analyzing patterns of users.

55

(d) Telephone Service

• Minimizing PSTN line loss by customer segmentation.

• Expanding a new customer base.

• Discovering a new business model and promoting remodeling.

(e) WiBro Service

• Enhancing service competitiveness with nationwide coverage of 83 cities and position as ‘mobile WiFi’ with 11,000 of nationwide WiFi hot zones.

• Planning to expand WiBro emerging devices Pad, WiMax imbedded device, etc.).

• Increasing subscriber base by expanding distribution channels and terminal competitiveness.

• Designing various plans such as 3G/LTE bundling plan, fixed-mobile bundling plan, and WiBro only plan, etc.

• Improving brand value by proactive promotion and marketing.

• KT Sat

Our sales organization is based at our headquarters and our mobile satellite business division has a sales office in Busan. For overseas repeaters sale, we operate sales offices in Jakarta and Dubai. With respect to other services, including Inmarsat, we conduct business through special distribution channels.

• KT Powertel

Through direct sales organizations and cosigned dealers, KT Powertel is selling TRS services (voice and wireless data products) to customers. KT Powertel is providing cosigned dealers with a management fee of 6~9% of customer charges for 60 months. After 60 months, 7% of customer charges are paid to cosigned dealers as a long-term customer care fee.

• KT ENS

(1) Sales Organization

• NI and SI business divisions’ sales organization is divided by item and project under a team leader. For special category telecommunication businesses, the headquarters is in charge of service planning and sales management and for each service a designator is allocated for managing operational organization.

(2) Methods and Conditions of Sales

• NI/SI business is contracted by project and construction, and special category telecommunication business products are sold via internal/external organization, branches of group-tel, call-center, and internet. Discounts are provided for large volumes and long-term usage to promote subscriptions.

• Credit Cards Business (BC Card)

BC Card performs credit card (including debit card) issuing and payment processing based on the contract with credit card companies. BC card targets providing card issuances and payment processing services to more credit card companies.

• Satellite Broadcasting (KT Skylife)

KT Skylife currently has four different sales channels: 1) local channels; 2) KT; 3) customer centers and 4) KT Skylife’s head office. There are 200 sales offices which are organized under seven branches (three in Seoul and one each in Daejeon, Daegu, Busan, and Gwangju). KT Skylife is offering “olleh TV Skylife” through KT’s inbound and outbound sales channels. On December 2012 and September 2013, KT Skylife is offering expanded bundled products like “LTE together olleh” and “All-Right,” which are bundled products of KT’s fixed and mobile LTE services. Two customer service centers are located in Suwon and Gwangju, providing customer services and retention services like HD product promotion and new subscriber acquisition. In order to strengthen direct and indirect sales channels, KT Skylife is utilizing its homepage and partnership marketing with public offices and on-line companies.

56

• Car Rental Business (KT Rental)

(1) Marketing Organizational Structure

Business		Department		Structure
Car Rental		Strategic marketing department		3 parts
		1st Sales department		2 teams, 9 offices, 17 branches, 14 reservation centers
		2nd Sales department		1 team, 13 offices, 12 branches
		3rd Sales department		1 team, 25 offices, 20 branches, 7 reservation centers
Equipment Rental		Equipment rental department		5 teams, 1 TF, 1 Center, 5 branches

(2) Sales Path

<Car Rental>

• Long-term rental

• Dedicated corporate customer care by strategic marketing department.

• Attracting new customers through marketing branches.

• Short-term rental

• Reservation to rental service through the online and call center.

• Attracting new customers through marketing branches.

<Equipment Rental>

• Long-term rental

• Corporate customer and individual customer care in each equipment’s sales parts.

• Attracting new customers through marketing branches.

• Dedicated marketing department for group companies.

• Short-term rental

• Attracting new customers through marketing branches.

• Corporate customer and individual customer care in each equipment’s sales parts.

(3) Sales Strategy

• Car Rentals: For short-term rentals, the company is maximizing the abundant sales branches to secure a competitive edge. For long-term rentals, the company is focusing on diversifying new clients for risk management and economy of scale. The company is utilizing ATL media, outdoor advertising, and individual promotions to intensify company’s brand recognition.

• Equipment Rentals: OA, Telecommunication devices are sold to public agencies or sold through group affiliates. Home electronics and other consumer gadgets’ rentals operate under the ‘KT’ brand for confidence. Door-to-door sales and consigned sales are also utilized for this business.

• Media Contents (KT Media Hub)

Through bundled products with Olleh internet and Skylife channeling services, Media Hub is focusing on customer retention and upselling. At the same time, the company is strengthening its biz-pack sales via merchandise structural improvement.

• Real estate development, rental and management (KT Estate)

Conduct development of KT’s real estate, operate self-development project, consulting and real estate rental and management businesses.

57

• Network Securities (Initech Corp)

Sales are divided by direct versus indirect sales. Upon a client’s order, products are sold and payment is received upon inspection of products. Maintenance and repair is conducted upon contract and payment is received every month.

• Contents Distribution (KT Hitel)

The majority of the sales are conducted via internet and revenue from the portal and contents are generated from end-consumers.

• Electronic Commerce (KT Commerce)

Because of the company’s business characteristics (B2B business with corporations being our clients), the impact of general advertising is low for our company. Instead of advertisements, we conduct educational seminars targeting business personnel. Nowadays, the media is talking about how the B2B business can bring cost cutting measures, and thus, more corporations are recognizing the value of the B2B business, setting our sales strategy as more customers have an increasing desire for diversified products.

• Music contents (KT Music)

Through the wireline/wireless music portal we provide audio on demand (“AOD”), downloading services to customers directly, and music services as ASP to KT group and our affiliates. We also conduct consulting businesses to provide adequate music services to shops and stores.

The sale of digital sound via music sites are conducted by streaming and downloads. In addition, payment is made by credit card, on-line cash transfer, and through mobile handsets.

• Submarine Cable Construction (KT Submarine)

From 2001, we have been participating in submarine electronic cable construction projects developed by Korea Electric Power Corporation. However, to hedge the risk of a slowdown in submarine electronic cable construction projects, we strive to diversify our portfolio.

In order to participate in overseas construction, in addition to our ordinary sales, we aggressively participate in international conferences and seminars and strive to enhance our brand image by promoting our company and our equipment.

• Security and guards (KT Telecop)

Our sales channels which consist of internal sales staff and an outside distribution network (allied store, special partners, etc.) attracts new customers.

• Lease and Corporate Loan (KT Capital)

KT Capital is currently conducting sales through its human resources and does not offer individual financing services.

58

4. Research and Development Activities

A. Research and Development Activities

• Telecommunication (KT)

(1) R&D Organization Structure

• Structure (As of Jan 27, 2014)

• Main Mission

• Providing strategic direction and developing core technology for the future.

• Leading technological innovation in order to reduce significantly KT CAPEX and OPEX through R&D.

• Innovation of new technology on service area and new BM development for KT competiveness Enhancement.

• Support for business feasibility study and commercialization of business incubation.

• Support for KT group convergence service and incubation of new technology.

(2) R&D Costs

												(Unit: Won, million)
Category				3Q 2013				2012				2011
Raw Materials					—				—				—
Labor Costs					45,613				29,877				24,018
Depreciation					41,246				13,378				15,158
Commissions					166				1,128				2,437
Others					214,299				436,378				266,982
Total R&D Costs					301,324				480,760				308,596
Accounting Treatment		Research and Ordinary Development Costs			159,783				137,075				153,131
		Development Costs (Intangible Assets)			141,541				343,685				155,465
Percentage of R&D Costs over Revenue					1.68	%			2.55	%			1.53	%

Ø Adopting K-IFRS from FY2011, results of FY2010 are recalculated from K-GAAP into K-IFRS.

5. Other Matters Necessary for Making Investment Decisions

A. Intellectual Property Rights

• Telecommunication (KT)

KT holds 5,183 domestic patents and 808 overseas patents as of December 31, 2013.

59

III. Financial Information

1. Summary of Financial Statements (Consolidated)

						(Unit: Won, million)
Classification		2013				2012
Current Assets			9,968,449				10,517,419
•   Cash and Cash Equivalents			2,070,869				2,057,613
•   Trade and Other Receivables			5,292,747				5,907,508
•   Inventories			614,062				935,033
•   Other Current Assets			1,990,771				1,617,265
Non-current Assets			24,878,084				24,040,489
•   Trade and Other Receivables			813,471				1,072,966
•   Tangible Assets			16,386,964				15,806,366
•   Investment Property			1,105,495				1,155,213
•   Intangible Assets			3,827,393				3,213,638
•   Investments in Jointly Controlled Entities and Associates			363,903				379,495
•   Other Non-Current Assets			2,380,858				2,412,811
Total Assets			34,846,533				34,557,908
Current Liabilities			11,187,738				11,266,766
Non-Current Liabilities			10,793,885				10,073,167
Total Liabilities			21,981,623				21,339,933
Capital Stock			1,564,499				1,564,499
Share Premium			1,440,258				1,440,258
Retained Earnings			10,046,883				10,646,383
Accumulated Other Comprehensive Expense			24,538				1,325
Other Components of Equity			(1,320,943	)			(1,343,286	)
Non-Controlling Interests			1,109,675				908,796
Total Shareholders’ Equity			12,864,910				13,217,975

						(Unit: Won million)
Classification		2013				2012
Operating Revenue			23,810,599				23,856,375
Operating Profit			839,343				1,209,233
Profit for the Period from the Continuing Operations			(60,251	)			1,136,973
Profit for the Period			(60,251	)			1,105,439
Number of Consolidated Companies			69				62

60

2. Summary of Financial Statements (Separate)

						(Unit: Won, million)
Classification		2013				2012
Current Assets			4,711,799				6,089,523
•   Cash and Cash Equivalents			1,023,946				1,172,981
•   Trade and Other Receivables			3,007,471				3,951,132
•   Other Financial Assets			15,002				8,785
•   Inventories			478,388				809,379
•   Estimated Assets of Sales			34,429
•   Other Current Assets			152,563				147,246
Non-Current Assets			20,982,095				20,419,253
•   Trade and Other Receivables			674,795				926,081
•   Other Financial Assets			141,760				156,096
•   Property and Equipment			13,087,625				13,009,279
•   Investment Property			564,002				573,740
•   Intangible Assets			2,712,527				2,122,153
•   Investments in Subsidiaries, Associates and Joint Ventures			3,361,677				3,303,346
•   Deferred Income Tax Assets			401,109				290,596
•   Other Non-Current Assets			38,600				37,962
Total Assets			25,693,894				26,508,776
Current Liabilities			7,041,105				7,338,080
Non-Current Liabilities			7,608,732				7,299,501
Total Liabilities			14,649,837				14,637,581
Capital Stock			1,564,499				1,564,499
Share Premium			1,440,258				1,440,258
Retained Earnings			9,277,248				10,103,996
Accumulated Other Comprehensive Income			-3,449				-2,662
Other Components of Shareholders’ Equity			-1,234,499				-1,234,896
Total Shareholders’ Equity			11,044,057				11,871,195

						(Unit: Won, million)
Classification		2013				2012
Operating Revenue			17,937,079				18,863,237
Operating Profit			309,950				708,819
Profit for the Period			-392,311				708,819

61

IV. Auditors’ Opinion

1. Auditors’ opinion on the consolidated financial statements

A. Auditor’s opinion on the consolidated financial statements

FY 2013		FY 2012		FY 2011
Samil PwC		Samil PwC		Samil PwC

B. Audit (or review) Comments

Fiscal Year		Audit (or review) Comments		Issues noted
2013		Unqualified		Not applicable
2012		Unqualified		Not applicable
2011		Unqualified		Not applicable

2. Compensation to external auditors for the last three fiscal years

A. Audit services contract

										(Unit: Won million, Hours)
Fiscal Year		Auditor		Contents		Compensation				Total Time
2013		Samil PwC		Review interim financial statements Audit of Separate financial statements Audit of the consolidated financial statements 20-F Filing			2,550				43,612
2012		Samil PwC		Review interim financial statements Audit of Separate financial statements Audit of the consolidated financial statements 20-F Filing			2,685				41,919
2011		Samil PwC		Review interim financial statements Audit of Separate financial statements Audit of the consolidated financial statements Audit of financial statements based on US-GAAP			2,492				43,709

62

V. Management and Affiliated Companies

1. Overview of the Board of Directors and Committees

A. Matters on the Board of Directors

(1) Organization

As of March 31, 2014, the Board of Directors of KT consists of 11 Directors (3 Inside Directors and 8 Outsider Directors). Under the Board of Directors, KT has seven different Committees as follows; Corporate Governance Committee, Audit Committee, Outside Director Candidate Recommendation Committee, Evaluation & Compensation Committee, Executive Committee, CEO Recommendation Committee and Related-Party Transaction Committee. The Board of Directors may establish additional committees if necessary.

(2) Major Activities of the Board of Directors

Order		Date		Subject		Result of Discussion
First		Jan. 31, 2013		Approval of separate financial statements of the 31st term		Original proposal approved
				Approval of consolidated financial statements of the 31st term		Original proposal approved
				Business reports of the 31st term		Original proposal approved
				Report of fund management plans of 2013		Original proposal received
				Plan for securitization of KT handset sold in 2013		Original proposal approved
				Delegation of voting rights to Executive Committee with regards of selling securitization of KT handset sold		Original proposal approved
				Approval of payment of baseball development funds		Original proposal approved
				Approval of appointment of compliance officer		Original proposal approved
Second		Feb. 14, 2013		Proposal on the compensation for the shareholders		Original proposal approved
				Proposal on the compensation and payment system for CEO and Board of Directors		Original proposal approved
				Proposal on the members and limit on remuneration of Executive Director		Original proposal approved
				Approval of separate financial statements of the 31st term		Original proposal approved
				Approval of consolidated financial statements of the 31st term		Original proposal approved
				Business reports of the 31st term		Original proposal approved
				Convocation of annual general meeting of shareholders of 31st term		Original proposal approved
				Report on operational condition of the internal accounting management system		Original proposal received
				Audit committee’s report on operational condition of internal accounting management system		Original proposal received
				Recommendation of Audit committee’s candidate		Original proposal approved
				Agreement on the recommendation of non-independent Directors		Original proposal approved
				Proposal on the amendment of Article of Corporation		Original proposal approved
Third		March. 15, 2013		Proposal on building new data center		Original proposal approved
				Proposal on fund raising of Won 100 billion for the sustainability of contents business		Original proposal approved
				Report on transactions under Won 15 billion with other entities for 2012		Original proposal received
				Report on current status of subsidiary companies		Original proposal received
				Reports of inspection results in accordance with corporate compliance control standards		Original proposal received
				Appointment of the Chairman of the Board of Directors and the proposal on the organization of committees under the Board of Directors		Chairman of BOD and members of committees appointed

63

Fourth		April. 28, 2013		Plan for sustainable growth in 2013		Original proposal approved
				Proposal on disposition of treasury shares for long-term performance based incentive payment		Original proposal approved
				Proposal on plans for the payment of long-term incentive for 2013		Original proposal approved
				Proposal on disposure of treasury share for the payment of 2013 Profit Sharing		Original proposal approved
				Report on separate financial statement of the first quarter of 2013 fiscal year		Original proposal received
				Report on consolidated financial statement of the first quarter of 2013 fiscal year		Original proposal received
				Report on the fund management performance in 2012		Original proposal received
Fifth		June 07, 2013		Proposal on the establishment and financing joint venture of Rwanda LTE Infra Co.		Original proposal approved
				Proposal of financing of Industry Innovation Movement 3.0 participation		Original proposal approved
Sixth		July. 26, 2013		Proposal on authorization of auction rewards from obtaining frequency allotment		Original proposal approved
Seventh		Aug. 8, 2013		Proposal of the amendment on the committee member structure in the BOD		Members of the committee changed
				Proposal on donation to labor welfare fund in 2013		Original proposal approved
				Proposal of establishment of KT Dhaka office in Bangladesh		Original proposal approved
				Proposal of establishment of KT Warsaw office in Poland		Original proposal approved
				Report of KT group CSV advance plan		Original proposal approved
				Proposal on ‘Project X’		Original proposal approved
				Report on separate and consolidated financial statement of the first half of 2013 fiscal year		Original proposal received
				Report on current status of KT subsidiary companies		Original proposal received
				Report of KT strategy on estate		Original proposal received
Eighth		Sept. 13. 2013		Amendments on the establishment and financing joint venture of Rwanda LTE Infra Co.		Original proposal approved
				Proposal of donation of building Ministry Of National Defense Cyber Intelligence Information Facility		Original proposal approved
Ninth		Oct. 25. 2013		Report on separate and consolidated financial statement of the third quarter of 2013 fiscal year		Original proposal received
				Report on the fund management performance first half of 2013		Original proposal received
Tenth		Nov. 12. 2013		Report of measure after CEO resignation will		Original proposal received
Eleventh		Nov.18. 2013		Proposal of Management Contract		Original proposal approved
				Proposal of CEO Recommendation Committee management		Original proposal approved
Twelfth		Nov. 29. 2013		Report on dividend policy of 2013		Original proposal received
				Closure of Shareholders		Original proposal approved
Thirteenth		Dec. 12. 2013		Proposal on ‘Project C’		Original proposal approved
				Proposal of improvement of group CSV transparency		Original proposal received
Fourteenth		Dec. 18. 2013		Convocation of Extraordinary general meeting of shareholders		Original proposal approved
				Amendment of approval time on KT group management plan for 2014		Original proposal approved

64

(3) The Status of Committees under the Board of Directors

(a) Organization of the Committees under the Board of Directors (as of March 21, 2014)

Title		Organization		Name		Purpose of Establishment and Authority		Note (Before Jan 27, 2014)
CEO Recommendation Committee		8 Outside Directors & 1 non- independent Director		Recommendation of CEO candidates to the general meeting (Article 32 of Articles of Incorporation)
Corporate Governance Committee		4 Outside Directors, & 1 non- independent Directors		Suk-Gwon Chang (Chairperson) Sang Kyun Cha, Do-Kyun Song, Dae-Keun Park, Hoon Han		Improvement of Corporate Governance		Choon Ho Lee (Chairperson) E. Han Kim Byung Won Bahk Sang Kyun Cha Hyun-Myung Pyo
Outside Director Candidate Recommendation Committee		5 Outside Directors, & 1 non- independent Directors		Recommendation of Outside candidates to the general meeting (Commercial Law §542: 8 ) See V. 1.(4) Independence of the Board of Directors for the Outside Director Candidate Recommendation Committee
Audit Committee		4 Outside Directors,		Jong-Goo Kim (Chairperson) Keuk Je Sung, Sang Kyun Cha, Pil Hwa Yoo		Audit Committee installation according to Commercial Law §542: 11 (Audit Committee) 1st article See V. 2. Audit Committee		Hyun Nak Lee (Chairperson) E. Han Kim, Byung Won Bahk Sang Kyun Cha
Evaluation & Compensation Committee		4 Outside Directors		Chu-Hwan Yim (Chairperson) Do-Kyun Song, Pil Hwa Yoo, Suk-Gwon Chang		Management Agreement with the CEO and Assessment		Jong-Hwan Song (Chairperson) Choon Ho Lee Keuk-Je Sung
Executive Committee		3 non- independent Directors		Chang-Gyu Hwang (Chairperson) Hoon Han, Heon Moon Lim		Management and financial matters authorized by the Board of Directors		Chang-Gyu Hwang (Chairperson) Hyun Myung Pyo
Related-party Transaction Committee		4 Outside Directors		Keuk-Je Sung (Chairperson) Jong-Goo Kim,Chu-Hwan Yim, Dae-Keun Park		Internal transactions that require resolution by the Board of Directors as stipulated by the ‘Antitrust Regulation and Fair Trade Law’ and ‘Securities and Exchange Act’		Keuk-Je Sung (Chairperson) Hyun Nak Lee Do-Kyun Song

Outside Director E. Han Kim and Choon Ho Lee resigned on March 20th 2014.

Outside Director Jong-Goo Kim, Chu-Hwan Yim, Pil Hwa Yoo, Suk-Gwon Chang, and Dae-Keun Park were appointed, and non-independent director Hoon Han and Heon Moon Lim were appointed on March 21^st 2014.

65

(b) Activities of the Committees under the Board of Directors

• CEO Recommendation Committee

Meeting Date

Agenda

Results of discussion

Independent and Non-Executive Directors

Hyun Nak Lee

E. H Kim

Choon Ho Lee

Byung Won Bahk

Keuk-Je Sung

Sang Kyun Cha

Do Kyun Song

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Voting Result

Nov 25, 2013

Proposal of CEO candidate recommendation

Original proposal accepted

For

For

For

For

For

For

For

Dec 15, 2013

Reports of expert research results about CEO candidates

Original proposal received

For

For

For

For

For

For

For

Proposals on the interviewee lists

Appointment of Interviewee lists

For

For

For

For

For

For

For

Dec.16, 2013

Proposal on recommendation of CEO candidates

Recommendation of CEO candidate

For

For

For

For

For

For

For

• Corporate Governance Committee

Meeting Date

Agenda

Results of discussion

Independent and Non-Executive Directors

Choon Ho Lee

E. H Kim

Byung Won Bahk

Sang Kyun Cha

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Voting Result

Feb 13, 2013

Report on amendment of Articles of Incorporation

Original proposal accepted

For

For

For

For

66

• Evaluation & Compensation Committee

Meeting Date

Agenda

Results of discussion

Independent and Non-Executive Directors

Jong-Hwan Song

Choon Ho Lee

Hyun Nak Lee

Keuk Je Sung

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Voting Result

Feb.13, 2013

Result of CEO management assessment for 2012

Original proposal approved

For

For

For

For

Proposal on the limit on remuneration of Directors for 2013

Original proposal Received

For

For

For

For

Proposal on remuneration standards and payment methods for CEO and Standing Directors

Original proposal Received

For

For

For

For

Feb 26, 2013

CEO management goal for 2013

Original proposal approved

For

For

For

For

Meeting Date

Agenda

Results of discussion

Independent and Non-Executive Directors

Jong-Hwan Song

Choon Ho Lee

Keuk Je Sung

Do Kyun Song

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Voting Result

April. 28, 2013

Payment for long-term incentive and stock grant for the 2012 fiscal year

Original proposal approved

For

For

For

For

Proposal on the long-term incentive and stock grant for the 2013 fiscal year

Original proposal received

For

For

For

For

Meeting Date

Agenda

Results of discussion

Independent and Non-Executive Directors

Choon Ho Lee

Keuk Je Sung

Do Kyun Song

Attendance 100%

Attendance 100%

Attendance 100%

Voting Result

Aug 07, 2013

Report of CEO management goal for the first half of 2013 fiscal year

Original proposal received

For

For

For

67

• Executive Committee

Meeting Date		Agenda		Results of discussion
March. 7. 2013		Proposal on the amendment of condition for on investment for establishment of Joint Venture ‘Project oxford’		Original proposal approved
March. 22. 2013		Plan for issuance of 184th corporate bonds		Original proposal approved
		Establishment, relocation, closure of branches
April. 11. 2013		Proposal to award KT Company-Labor Union Youth Scholarship		Original proposal approved
April. 25. 2013		Proposal to award KT Creation & Innovation Leader Scholarship		Original proposal approved
		Proposal on consignment of Public Service Business of KT Culture Foundation of 2013
May. 10. 2013		Sponsoring Korea Digital Media Industry Association		Original proposal approved
July. 11. 2013		Plan for issuance of 2nd foreign corporate bonds		Original proposal approved
August. 29. 2013		Plan for issuance of 185th corporate bonds		Original proposal approved
		Proposal on the donation of 2013 OllehClub Mileage to Public Service
September. 12. 2013		Proposal on investment to Partnership Business for Large & Mid-Small Company’s productivity Innovation		Original proposal approved
November. 7. 2013		Proposal on capital increase plan for subsidiary for TD-LTE business		Original proposal approved
		Proposal to support Korea Boxing Association
November. 21. 2013		Proposal on investment to fund-raising for Joint Overseas Expansion of Large & Mid-Small Company		Original proposal approved
November. 28. 2013		Proposal on financial support for recovery from Typhoon damage in the Philippines		Original proposal approved

• Related-Party Transaction Committee

Meeting Date		Agenda		Results of discussion
November. 12. 2013		Proposal to unify internal communication business		Original proposal approved

(4) Independence of the Board of Directors

(a) Independence of appointing BOD members

In order to secure independence and transparency, all candidates to the Board of Directors should be selected and must receive approvals from the general meeting of shareholders. Also, the outside research and advisory service may be conducted if necessary.

68

(b) Appointment of new Directors

Name		Expertise		Recommendation		Committees		Inside trading, relationship with major shareholders
Jong-Goo Kim		Law		Outside Director Candidate Recommendation Committee		Audit Committee(Chairman) / Related-party Transaction Committee			No
Chu-Hwan Yim		ICT Business		Outside Director Candidate Recommendation Committee		Evaluation & Compensation Committee(Chairman) / Related-party Transaction Committee			No
Pil Hwa Yoo		Finance & Accounting		Outside Director Candidate Recommendation Committee		Audit Committee / Evaluation & Compensation Committee			No
Suk-Gwon Chang		Management Science		Outside Director Candidate Recommendation Committee		Corporate Governance Committee(Chairman) / Evaluation & Compensation Committee			No
Dae-Keun Park		Finance & Policy		Outside Director Candidate Recommendation Committee		Related-party Transaction Committee / Corporate Governance Committee			No

(c) Establishing separate committee to appoint new directors

Name		Whether Outside Director		Note
Choon Ho Lee		O		The number of Outsider Directors should be more than 50%
E. Han Kim		O
Keuk-Je Sung		O
Sang Kyun Cha		O
Do Kyun Song		O
Hyun Myung Pyo		X

• Outside Director Candidate Recommendation Committee

Meeting Date

Agenda

Results of discussion

Independent and Non-Executive Directors

E. Han Kim

Choon Ho Lee

Keuk-Je Sung

Sang Kyun Cha

Do Kyun Song

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Voting Results

Jan. 27, 2014

Proposal on Operation plan for Outside Director Candidate Recommendation Committee

Original proposal approved

For

For

For

For

For

Feb.19, 2014

Finalization of Outside Director candidates

Original proposal approved

For

For

For

For

For

69

(5) Expertise of Outside Directors

(a) Supportive team for Outside Directors

• Corporate Governance Team at the Management Planning Department.

(b) Education for outside directors in 2013

• Programs provided by Korea Directors Association: Two Outside Directors (Hyun-Nak Lee and Keuk-Je Sung) took the program.

2. Audit Committee

(1) Personal Information of Members of the Audit Committee

				(Prior to March 21, 2014)
Name		Experience		Note
Hyun Nak Lee		•   M.A. in Economics, Seoul National University •   Executive Director and Chief Editor, Donga Ilbo Daily •   President, Kyeonggi Ilbo Daily •   Professor of Sejong University (present)		Outside Director
E. Han Kim		•   Ph.D. in Finance, State University of New York-Buffalo •   Independent Director and Non-Executive Chairman of the Board of Directors, POSCO •   Tenured professor and Director of Financial Research, University of Michigan (present)		Outside Director
Sang Kyun Cha		•   Ph.D. in Stanford University •   Professor of Seoul University (present)		Outside Director
Byong Won Bahk		•   M.A. in Economics, University of Washington •   7th Vice-Minister, Ministry of Finance and Economy (currently Ministry of Strategy and Finance) •   Chairman of National Bank Association (present)		Outside Director
				(After March 21, 2014)
Name		Experience		Note
Jong-Goo Kim		•   Ph.D.in Law, College of Law, Dongguk University •   Director of the Seoul Supreme Prosecutors’ Office •   The 46th Minister of Ministry of Justice •   Corporation lawyer of New Dimension Law Group		Outside Director
Sang Kyun Cha		•   Ph.D. in database systems, Stanford University •   Professor of Seoul National University (present)		Outside Director
Keuk Je Sung		•   Ph.D., Economics, Northwestern University •   Senior Representative to WTO negotiations •   Secretary General, Chairman of Board of Directors, ASEM-DUO Fellowship Program •   Professor, Graduate School of International Studies, Kyung Hee University (present)		Outside Director
Pil Hwa Yoo		•   Ph.D., Business Administration, Harvard University •   Standing Director, The Korean-Japanese Economics & Management Association •   Vice-President, Korean Academic Society of Business Administration •   (Present) : Dean of Sungkyunkwan Graduate School of Business, Sungkyunkwan University (present)		Outside Director

70

(2) Independence of Audit Committee

The Audit Committee is established within the Board of Directors a and members of the audit committee are appointed at the shareholders’ meeting. The Audit Committee is composed of four Outside Directors. Among the members, Pil Hwa Yoo is the financial expert.

The Audit Committee performs its duties and accounting work independently. If necessary, the Audit Committee and its members have the right to report on the company’s business and investigate the company’s financial status.

(3) Major Activities of the Audit Committee (Auditor)

Order		Date		Subject		Result of Discussion
First		Jan. 17, 2013		Pre-approval of non-audit service of external auditor for consolidated company		Original proposal approved
Second		Jan. 30, 2013		Approval of financial statements for the 31th term		Original proposal approved
				Report on consolidated financial statements for the 31th term		Original proposal accepted
				Report of business report for the 31th term		Original proposal accepted
				Pre-approval on remuneration for non-audit services of external auditors		Original proposal approved
				Pre-approval of remuneration for non-audit service of external auditor for consolidated company		Original proposal approved
				Report of final audit for fiscal year 2012		Original proposal accepted
Third		Feb. 13, 2013		Report on operating result of internal accounting management system for fiscal year 2012		Original proposal accepted
				Appointment of external auditor for fiscal years 2013~2015 and approval of the remuneration for 2013		Original proposal approved
				Pre-approval on remuneration for non-audit services of external auditors		Original proposal approved
				Report on operational condition of internal accounting management system for fiscal year 2012 (prepared by audit committee)		Original proposal accepted
				Report on audit records for 2012 and audit plan for 2013		Original proposal accepted
Fourth		Feb. 25, 2013		Report on agenda of the annual general meeting of shareholders and result on document review		Original proposal accepted
				Audit report for the annual general meeting of shareholders for the 31th term		Original proposal accepted
				Evaluation report on operational status of internal compliance device of the audit committee		Original proposal accepted
Fifth		Mar.21, 2013		Approval of remuneration for audit and non-audit services of independent auditor of consolidated companies for fiscal year 2013		Original proposal approved
Sixth		Apr. 18, 2013		Appointment of the chairman of Audit committee		Chairman appointed
				Report on filing of Form 20-F for fiscal year 2012		Original proposal accepted
Seventh		Aug. 27, 2013		Report on statement of accounts for the first quarter of fiscal year 2013		Original proposal accepted
				Report on consolidated statement of accounts for the first quarter of fiscal year 2013		Original proposal accepted
				Report of audit performance for the first quarter of fiscal year 2013 and audit plan for second quarter of fiscal year 2013		Original proposal accepted
Eighth		Aug. 7, 2013		Report on accounts for the first half of fiscal year 2013(KT stand-alone and consolidated basis)		Original proposal accepted
				Approval of remuneration for audit service of independent auditor for consolidated company for fiscal year 2013		Original proposal approved
				Approval of remuneration for non-audit service of independent auditor for consolidated company for fiscal year 2013		Original proposal approved
				Report of audit performance for the first half of 2013		Original proposal accepted
				Report of audit performance for the second quarter of 2013 and audit plan for the third quarter of 2013		Original proposal accepted

71

Ninth		Oct. 24. 2013		Report on accounts for the third quarter of fiscal year 2013 (KT stand-alone and consolidated basis)		Original proposal accepted
				Proposal on decision to file a lawsuit against minority shareholder’s derivative suit		Original proposal approved
				Report of audit performance for the third quarter of 2013 and audit plan for the fourth quarter of 2013		Original proposal accepted
Tenth		Dec. 6. 2013		Proposal on minority shareholder’s claim of filing a lawsuit against director		Original proposal approved

3. Matters on Shareholder’s Exercise of Voting Rights

(1) Adoption of Cumulative Voting System

Automatic introduction of the cumulative voting system was implemented following the completion of the privatization process in 2002.

(2) Adoption of the Written Voting System or Electronic Voting

Adoption of the written voting system in accordance with the changes in the Articles of Incorporation at the 23rd General Meeting of Shareholders (March 11, 2005).

72

4. Equity Investments

[As of December 31, 2013]																																						(Units: In Share, Won million, %)
Name of Company or Item		Beginning Balance												Increase (Decrease)												Ending Balance												Financial Facts (Latest fiscal year)
		Number of Shares				Equity Ratio				Book Value				Acquisition (disposal)								Valuation				Number of Shares				Equity Ratio				Book Value				Total Assets				Net Profits
														Shares				Amounts
KT Powertel Co. Ltd.			7,771,418				44.8	%			37,419				—				—				—				7,771,418				44.8	%			37,419				167,131				5,453
KT E&S			2,000,000				100.0	%			48,684				—				—				—				2,000,000				100.0	%			48,684				299,844				21,671
KT Linkus co., Ltd.			2,941,668				93.8	%			6,282				—				—				—				2,941,668				93.8	%			6,282				70,562				1,920
KT Submarine			1,617,000				36.9	%			24,370				6,468,000												8,085,000				36.9	%			24,370				115,781				6,146
KT Capital Co., Ltd.			36,651,949				83.6	%			267,092				—				—				—				36,651,949				83.6	%			267,092				5,462,028				129,354
KT Rental Co., Ltd.			5,698,768				58.0	%			156,957				—				—				—				5,698,768				58.0	%			156,957				2,188,271				32,400
KT Telecop Co. Ltd.			5,765,911				86.8	%			26,045				—				—				—				5,765,911				86.8	%			26,045				192,126				3,840
KT Skylife			23,908,000				50.0	%			311,696				—				—				—				23,908,000				50.0	%			311,696				684,651				72,724
Softnix Co.Ltd.			360,000				77.4	%			1,810				—				—				—				360,000				77.4	%			1,810				1,431				-178
KT New Business Investment Fund No.1			200				90.9	%			20,112				—				—				—				200				90.9	%			20,112				16,739				-4,492
KT Data System Co., Ltd.			2,400,000				95.3	%			19,616				—				—				—				2,400,000				95.3	%			19,616				189,983				18,245
Gyeonggi- KT Green Growth Investment Association			122				40.3	%			12,167				—				—				—				122				40.3	%			12,167				25,906				500
KT Capital Media Contents Investment Fund No. 2			3,043				43.5	%			3,045				—				—				—				3,043				43.5	%			3,045				6,385				-642
KT oic			6,100,000				79.2	%			5,883				—				—				—				6,100,000				79.2	%			5,883				3,626				-448
KT Estate			15,848,819				100.0	%			1,081,808				—				2,714				—				15,848,819				100.0	%			1,084,522				1,434,685				22,692
KT Strategic Investment Fund No. 1			200				90.9	%			20,000				—				—				—				200				90.9	%			20,000				14,135				-8,328
Korea HD Broadcasting			6,000,000				14.8	%			3,000				—				—				—				6,000,000				14.8	%			3,000				40,520				-820
KT-SB Data Services			3,774,000				51.0	%			18,870				—				—				—				3,774,000				51.0	%			18,870				28,001				-4,802
KT cloudware			3,295,287				86.2	%			28,600				—				—				—				3,295,287				86.2	%			28,600				15,995				-2,913
Enswers			17,861				35.5	%			15,957				—				-10,627				—				17,861				35.5	%			5,330				8,722				-4,990
Centios			266,667				82.8	%			13,984				800,001				—				—				1,066,668				82.8	%			13,984				27,873				-5,097

73

H&C Network			8,903				1.0	%			848				—				—				—				8,903				1.0	%			848				257,390				18,870
Ustream Korea			509,532				51.0	%			2,548				173,633				868				—				683,165				51.0	%			3,416				2,677				-2,363
KT innoedu			1,749,000				48.4	%			7,775				—				—				—				1,749,000				48.4	%			7,775				12,618				-1,020
KT Hitel			22,750,000				65.9	%			120,078				—				—				—				22,750,000				63.7	%			120,078				293,665				3,551
KT Commerce, Inc.			266,000				19.0	%			1,782				—				—				—				266,000				19.0	%			1,782				88,602				1,226
KT mhows Co., Ltd.			510,000				51.0	%			3,344				—				—				—				510,000				51.0	%			3,344				25,845				1,739
KT M&S Co., Ltd.			47,400,000				100.0	%			124,564				—				—				—				47,400,000				100.0	%			124,564				281,011				22,614
KT Music Co., Ltd.			20,904,514				57.8	%			37,417				—				—				—				20,904,514				57.8	%			37,417				82,997				-5,088
Sidus FNH Co.			5,797,000				72.4	%			7,022				—				—				—				5,797,000				72.4	%			7,022				9,481				-387
Nasmedia Co., Ltd			3,742,406				51.4	%			23,051				—				—				—				3,742,406				45.4	%			23,051				97,140				5,615
KT media hub			1,000,000				100.0	%			80,000				—				—				—				1,000,000				100.0	%			80,000				184,702				21,146
KT sat			10,000,000				100.0	%			390,530				—				—				—				10,000,000				100.0	%			390,530				492,965				56,859
BestPartners			300,000				100.0	%			1,500				—				—				—				300,000				100.0	%			1,500				882				-681
KT Strategic Investment Fund No. 2			100				90.9	%			10,000				—				—				—				100				90.9	%			10,000				11,376				86
KT Tech			5,146,962				93.8	%			—				-5,146,962				—				—				—				—				—				—				—
T-On telecom			—				—				1,840,000				9,200				—				1,840,000				100.0	%			9,200				3,347				-2,358				—
KT -Music Contents Investment fund no.1			—				—				—				2,450,000,000				2,450				—				2,450,000,000				23.3	%			2,450				10,529				-157
KT Sprorts			—				—				1,200,000				6,000				—				1,200,000				60.0	%			6,000				15,672				-970				—
KT -Michigan Global Contents Fund			—				—				3,140				3,140				—				3,140				49.1	%			3,140				6,227				-173				—
Autopion			—				—				—				400,000				2,000				—				400,000				100.0	%			2,000				5,314				—
Korea Telecom America, Inc.(USA)			6,000				100.0	%			4,064				—				—				—				6,000				100.0	%			4,064				5,773				32
Korea Telecom Japan Co., Ltd.(Japan)			12,856				100.0	%			3,995				—				—				—				12,856				100.0	%			3,995				17,752				30
Korea Telecom China Co., Ltd.(China)			—				100.0	%			2,160				—				—				—				0				100.0	%			2,160				1,178				-1,108
KT Dutch B.V			82,614				60.0	%			36,275				133,823				15,108				—				216,437				100.0	%			51,383				46,347				-4,131
PT. KT Indonesia			198,000				99.0	%			108				—				—				—				198,000				99.0	%			108				30				1
KT Belgium			—				—				—				36,049,999				38,345				—				36,049,999				99.9	%			38,345				38,033				-11
KT ORS			—				—				—				89,999				96				—				89,999				99.9	%			96				95				—

74

VI. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

1. Directors

Name		Position		Director Since		Date of Birth		Expiration of Term of Office
Non-Independent Directors (1)
Chang-Gyu Hwang		Chief Executive Officer		January 2014 (2)		January 23, 1953		2017
Hoon Han		Senior Executive Vice President		March 2014		March 23, 1958		2015
Heon Moon Lim		Senior Executive Vice President		March 2014		November 15, 1960		2015
Outside Directors (1)
Do Kyun Song		Chairperson of the Board of Directors, Advisor, Bae, Kim & Lee LLC		March 2013		September 20, 1943		2016
Keuk Je Sung		Professor, Graduate School of Pan Pacific International Studies, Kyunghee University		March 2012		June 4, 1943		2015
Sang Kyun Cha		Professor, Department of Electrical and Computer Engineering, Seoul National University		March 2012		February 19, 1958		2016
Jong-Goo Kim		Of Counsel, New Dimension Law Group		March 2014		July 7, 1941		2017
Chu-Hwan Yim		Honorary President, Korean Institute of Communications and Information Sciences		March 2014		February 9, 1949		2016
Pil Hwa Yoo		Professor, Graduate School of Business, Sungkyunkwan University		March 2014		January 13, 1954		2015
Suk-Gwon Chang		Professor, Department of Business Administration, Hanyang University		March 2014		February 21, 1956		2015
Dae-Keun Park		Professor, Department of Economics and Finance, Hanyang University		March 2014		March 15 1958		2017

(1) All of our non-independent and outside directors beneficially own less than one percent of the issued shares of KT Corporation in the aggregate.

(2) On November 12, 2013, Mr. Suk-Chae Lee resigned from his position as the President and Chief Executive Officer of KT Corporation. Mr. Chang-Gyu Hwang’s appointment as the new Chief Executive Officer was approved at an extraordinary general meeting of shareholders held on January 27, 2014.

75

2. Senior Management

Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Kyu-Taek Nam		Senior Executive Vice President, Marketing Group		January 2014		28		February 6, 1961
Kyu-Shik Shin		Senior Executive Vice President, Global & Enterprise Group		January 2014		3		June 7, 1957
Seong-Mook Oh		Senior Executive Vice President, Network Group		January 2014		28		August 20, 1960
Ki Chul Kim		Senior Executive Vice President, IT Group		January 2014		9		January 1, 1955
In-Sung Jun		Senior Executive Vice President, Corporate Relations Group		January 2014		32		October 9, 1958
Jeong-Tae Park		Senior Executive Vice President, Legal & Ethics Office		January 2014		30		December 10, 1959
Hae-Jung Park		Executive Vice President, Integrated Marketing Communication Business Unit		January 2014		7		May 23, 1963
Jong-Jin Chae		Executive Vice President, Enterprise Network Business Unit		January 2014		26		June 25, 1961
Cha-Hyun Yoon		Executive Vice President, Network Design Unit		January 2014		29		December 2, 1961
Dong-Myun Lee		Executive Vice President, Institute of Convergence Technology		January 2014		23		October 15, 1962
Yoon-Young Park		Executive Vice President, Future Business Development Group, Institute of Convergence Technology		January 2014		22		April 18, 1962
Kyoung-Lim Yun		Executive Vice President, Future Convergence Strategy Office		February 2014		4		June 14, 1963
Mun-Whan Lee		Executive Vice President, Strategy & Planning Office		January 2014		25		October 1, 1963
Bum-Joon Kim		Executive Vice President, Synergy Management Office		January 2014		9		March 25, 1965
In-Hoe Kim		Executive Vice President, Financial Management Office, Corporate Planning Group		January 2014		0		June 25, 1964
Kwang-Suk Shin		Executive Vice President, Value Management Department, Financial Management Office, Corporate Planning Group		January 2014		25		January 5, 1960
Dong-Hoon Han		Executive Vice President, Management Support Group		January 2014		33		September 12, 1959
Sang-Bong Nam		Executive Vice President, Legal Affairs Center, Legal & Ethics Office		January 2014		1		October 19, 1963
Tae-Yol Yoo		Executive Vice President, Economics & Management Research Institute		January 2014		30		April 4, 1960
Hyeon-Mo Ku		Executive Vice President, CEO Office		January 2014		27		January 13, 1964
Dae-San Lee		Executive Vice President, Group Department, CEO Office		January 2014		27		January 10, 1961
Yun-Su Kim		Senior Vice President, Customer Strategy Business Unit		January 2014		22		November 2, 1963
Jae-Hyeon Kim		Senior Vice President, Sales Operating Business Unit		January 2014		17		September 26, 1962

76

Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Young-Sik Park		Senior Vice President, Small & Medium Business Unit		January 2014		36		April 9, 1957
Jin-Chul Kim		Senior Vice President, Customer Satisfaction Unit		January 2014		25		May 25, 1962
Myung-Beom Pyun		Senior Vice President, Northern Seoul Sales Headquarter		January 2014		17		June 19, 1960
Dae-Gi Gong		Senior Vice President, Gwanghwamun Sales Branch, Northern Seoul Sales Headquarter		January 2014		27		March 13, 1960
Hyon-Seog Lee		Senior Vice President, Southern Seoul Sales Headquarter		January 2014		22		March 10, 1962
Hee-Youp Chang		Senior Vice President, Gangnam Sales Branch, Southern Seoul Sales Headquarter		January 2014		28		October 1, 1959
Seong-Yll Cheon		Senior Vice President, Sinsa Sales Branch, Southern Seoul Sales Headquarter		January 2014		27		April 15, 1960
Hong-Jae Lee		Senior Vice President, Western Seoul Sales Headquarter		January 2014		29		August 29, 1962
Gang-Geun Lee		Senior Vice President, Busan Sales Headquarter		January 2014		25		June 22, 1961
Dong-Kwang Kim		Senior Vice President, Daegu Sales Headquarter		January 2014		19		March 23, 1962
Hyeong-Chul Park		Senior Vice President, Jeonnam Sales Headquarter		January 2014		28		February 2, 1962
Youn-Mo Jeon		Senior Vice President, Jeonbuk Sales Headquarter		January 2014		17		September 6, 1960
Dae-Su Park		Senior Vice President, Chungnam Sales Headquarter		January 2014		25		October 28, 1963
Jun-Su Jeong		Senior Vice President, Chungbuk Sales Headquarter		January 2014		22		November 2, 1962
Seung-Gyum Kim		Senior Vice President, Gangwon Sales Headquarter		January 2014		28		June 21, 1961
Sung-Kyu Yang		Senior Vice President, Jeju Sales Headquarter		January 2014		26		March 14, 1962
Kook-Hyun Kang		Senior Vice President, Marketing Strategy Business Unit		January 2014		25		September 8, 1963
Jong-Jin Park		Senior Vice President, Marketing Strategy Department, Marketing Strategy Business Unit		January 2014		22		August 14, 1963
Hyoung-Wook Kim		Senior Vice President, Device Business Unit		January 2014		17		April 24, 1963
Bong-Goon Kwak		Senior Vice President, Data Service Business Unit		January 2014		29		March 2, 1960
Hye-Jeong Yun		Senior Vice President, Service Development Department, Data Service Business Unit		January 2014		23		June 12, 1966
Hee Kyoung Song		Senior Vice President, Enterprise IT Business Unit		January 2014		1		July 24, 1964
Ki-Jong Moon		Senior Vice President, Enterprise Business Performing Unit		January 2014		37		September 30, 1957
Yang-Hwan Ryoo		Senior Vice President, Enterprise Business Consulting Unit		January 2014		36		October 12, 1958

77

Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Jae-Gyo Kim		Senior Vice President, Public Customer Business Unit		January 2014		35		September 23, 1958
Yoon-Sik Jeong		Senior Vice President, Enterprise Customer Business Unit		January 2014		5		September 30, 1964
Tae-Sung Lim		Senior Vice President, Global Business Unit		January 2014		23		March 4, 1963
Pan-Sik Shin		Senior Vice President, Global Professional Group, Global Business Unit		January 2014		27		February 25, 1959
Jae-Yoon Park		Senior Vice President, Network Strategy Business Unit		January 2014		28		December 18, 1960
Cheol-Gyu Lee		Senior Vice President, Network Operation & Maintenance Unit		January 2014		28		August 24, 1960
Chang-Seok Seo		Senior Vice President, Network Technology Unit		January 2014		20		July 5, 1967
Mi-Na Oh		Senior Vice President, Core Network Technology Department, Network Technology Unit		January 2014		20		April 11, 1969
Young-Hyun Kim		Senior Vice President, Gangbuk Network Operation & Maintenance Headquarter		January 2014		36		December 19, 1958
Young-Sik Kim		Senior Vice President, Gangnam Network Operation & Maintenance Headquarter		January 2014		24		March 15, 1961
Ho-Won Moon		Senior Vice President, Busan Network Operation & Maintenance Headquarter		January 2014		28		January 7, 1959
Jong-Ok Park		Senior Vice President, IT Strategy & Planning Business Unit		January 2014		23		January 24, 1962
June-Keun Kim		Senior Vice President, Management Infrastructure Department, IT Strategy & Planning Business Unit		January 2014		4		November 12, 1966
Sang-Yong Lee		Senior Vice President, Data & Information Security Department, IT Strategy & Planning Business Unit		January 2014		3		December 23, 1967
Yi-Shik Kim		Senior Vice President, Big Data Analysis Department, IT Strategy & Planning Business Unit		January 2014		1		October 16, 1968
Dong-Sik Yun		Senior Vice President, Service Platform Business Unit		January 2014		26		June 9, 1963
Ji-Yun Kim		Senior Vice President, Cloud Platform Business Unit		January 2014		2		January 27, 1968
Young-Myoung Kim		Senior Vice President, Research Support Department, Institute of Convergence Technology		January 2014		25		November 13, 1961
Hong-Beom Jeon		Senior Vice President, Infra Laboratory		January 2014		23		October 3, 1962
Sook-Kyung Sung		Senior Vice President, Intellectual Property Rights Department, Infra Laboratory		January 2014		14		November 18, 1964
Seong-Choon Lee		Senior Vice President, Service Laboratory		January 2014		29		March 28, 1960
Ji-Hie Kim		Senior Vice President, Big Data Development Practical Job Training, Future Business Development Group, Institute of Convergence Technology		January 2014		1		August 6, 1965

78

Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Jae-Ho Song		Senior Vice President, Future Convergence Strategy Office		January 2014		21		March 26, 1966
Seong-Hoon Kim		Senior Vice President, Future Convergence Strategy Office		January 2014		1		September 29, 1964
Dong-Seope Park		Senior Vice President, Corporate Planning Department, Strategy & Planning Office		January 2014		29		November 5, 1961
Pill-Jai Lee		Senior Vice President, Strategic Investment Department, Strategy & Planning Office		February 2014		26		October 3, 1961
Jeff Kahng		Senior Vice President, Valuation Department, Synergy Management Office		January 2014		1		August 13, 1966
Weon-Kyung Kim		Senior Vice President, Human Resources Office		January 2014		23		June 15, 1963
Doo-Seong Cheon		Senior Vice President, HR Development Center, Human Resources Office		January 2014		4		May 1, 1968
Jae-Eui Choi		Senior Vice President, Educational Dispatch, Human Resources Office		February 2014		27		April 17, 1961
Hoon Cho		Senior Vice President, Educational Dispatch, Human Resources Office		February 2014		21		December 4, 1966
Eung-Ho Lee		Senior Vice President, Educational Dispatch, Human Resources Office		February 2014		23		December 7, 1962
Min-Woo Seo		Senior Vice President, Educational Dispatch, Human Resources Office		January 2014		28		February 7, 1960
Hyun-Yok Sheen		Senior Vice President, Management Support Office		January 2014		21		August 25, 1968
Won-Sic Hahn		Senior Vice President, Procurement Cooperation Office		January 2014		29		October 26, 1960
Han-Sup Lee		Senior Vice President, Network Technology Investigation Department, Procurement Cooperation Office		January 2014		18		March 6, 1966
Young-Pil Park		Senior Vice President, Corporate Relations Support Department, Corporate Relations Group		January 2014		8		February 9, 1968
Young-Ho Oh		Senior Vice President, Public Relations Office		March 2014		16		September 16, 1962
Min-Woo Seo		Senior Vice President, Public Relations Office		January 2014		28		February 7, 1960
Byung-Sam Park		Senior Vice President, Legal Affairs Department, Legal Affairs Center, Legal & Ethics Office		January 2014		1		October 13, 1966
Hee-Su Kim		Senior Vice President, Economics & Management Research Institute		January 2014		3		October 15, 1962
Kyung-Joon Lee		Senior Vice President, Project Planning Department, Economics & Management Research Institute		January 2014		23		June 2, 1963
Hwa Jung		Senior Vice President, PEG, Project Planning Department, Economics & Management Research Institute		January 2014		25		August 10, 1964

79

Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Sang-Wook Seo		Senior Vice President, PEG, Project Planning Department, Economics & Management Research Institute		January 2014		2		January 26, 1972
Hyo-Sill Kim		Senior Vice President, PEG, Project Planning Department, Economics & Management Research Institute		January 2014		21		April 17, 1963
Jae-Yon Cha		Senior Vice President, Finance Department, CEO Office		January 2014		23		September 25, 1965

(1) All of our executive officers beneficially own less than one percent of the issued shares of KT Corporation in the aggregate

3. Current Status of Employees

(Unit: Persons, Years, Won million)

Type

Number of Employees

Average Years in Continuous Service

Total Payroll

Average Payroll per Person

Note

General

Other

Total

Total

31,592

859

32,451

19.9

2,077,245

67

Ø Number of employees as of December 31, 2013 (excluding executive directors).

Ø Average years in continuous services: Calculated using aggregate years of service of employees as of December 31, 2013 divided by number of employees as of December 31, 2013.

Ø Average payroll per person: Calculated using yearly average number of employees (31,059 employees).

* Average payroll per person = total payroll amount / yearly average number of employees.

4. Remuneration to Executive Officers

(1) Remuneration paid to Directors (including Outside Directors) and Members of the Audit Committee (Auditors)

																						(Unit: Won million)
Category		Total Amount Paid				Amount Approved by the General Meeting of Shareholders				Average Amount Paid per Person				Fair Value of Stock Option				Weight				Reference
3 Non-Independent Directors			5,603				65				1,401				—				—				—
8 Outside Directors			639								85				—				—				—

Ø The number of outside directors: the total amount of paid and the average amount paid per person include Mr. Jong Hwan Song who resigned on June 13, 2013.

Ø Non-Independent directors’ retirement benefits, employee benefits included in the amount paid.

(2) Grant and Exercise of Stock Option

* Not applicable as of December 31, 2013.

80