6-K 1 d919270d6k.htm FORM 6-K

Form 6-K

Table of Contents

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 2015

Commission File Number 1-14926

KT Corporation

(Translation of registrant’s name into English)

Kwang Suk Shin

KT Gwanghwamun Building East

33, Jong-ro 3-Gil, Jongno-gu

463-711 Seoul, 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-             

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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, 2015
KT Corporation
By:		/s/ Youngwoo Kim
Name:		Youngwoo Kim
Title:		Vice President
By:		/s/ Jungsup Jung
Name:		Jungsup Jung
Title:		Director

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ANNUAL FINANCIAL REPORT

OF

KT CORPORATION

(From January 1, 2014 to December 31, 2014)

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

Table of Contents

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			5
II. Business Details			6
1. Overview			6
2. Main Products and Services			25
3. Matters Related to Revenue			39
4. Research and Development Activities			59
5. Other Matters Necessary for Making Investment Decisions			60
III. Financial Information			61
1. Summary of Financial Statements (Consolidated)			61
2. Summary of Financial Statements (Separate)			62
IV. Auditors’ Opinion			63
1. Auditor’s Opinion on the Consolidated Financial Statements			63
2. Compensation to External Auditors for the Last Three Fiscal Years			63
V. Management and Affiliated Companies			64
1. Overview of the Board of Directors and Committees			64
2. Audit Committee			68
3. Matters on Shareholder’s exercise of Voting Rights			69
4. Equity Investments			70
VI. Directors, Senior Management and Employees			71
1. Directors			71
2. Senior Management			71
3. Current Status of Employees			74
4. Remunerations fo Executive Officers			75

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I. Corporate Generals

1. Corporate Purpose of KT Corporation

Business Objectives

1. Information and communications business;

2. New media business and internet multimedia broadcasting 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, device or facilities;

6. Advertisement business;

7. Retail business via telephone, mail order or online;

8. IT facility construction business and electrical construction business;

9. Real estate and housing business;

9(1). Business facilities management and business support service industry

10. Electronic banking and finance business;

11. Education and learning service business;

12. Security service business (Machinery system surveillance service, Facilities security service, etc);

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

14. Frequency-based telecommunications services and other telecommunications services

15. Value-added telecommunications business

16. Manufacture, provision (screening) and distribution of contents such as musical records, music videos, movies, videos and games

17. Issuance and management of pre-paid electronic payment instruments, and businesses related to electronic finance such as payment gateway services

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

19. Any overseas business or export and import business related to activities mentioned in Subparagraphs 14 through 18

20. Tourism

21. (Deleted)

22. New and renewable energy and energy generation business

23. Health Informatics business

24. Manufacture of communication equipment, device or facilities for military purpose

25. Energy diagnostics business, professional business relating to energy conservation, and any and all other business in the field of energy use rationalization

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

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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 February 5, 2015)		(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			16,249,100				16,249,100
VI. Current Number of Issued and Outstanding Shares			244,862,708				244,862,708

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B. Status of Capital Increase/Decrease

(As of February 5, 2015)

(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.

(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 February 5, 2015)				(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			17,221,575				16,418				988,893				—				16,249,100
				Preferred Shares			—				—				—				—				—
		Reasons other than Article 165-2 of Securities and Exchange Act		Common Shares			—				—				—				—				—
				Preferred Shares			—				—				—				—				—
Subtotal				Common Shares			17,221,575				16,418				988,893				—				16,249,100
				Preferred Shares			—				—				—				—				—
Indirect Acquisition (e.g. Trust Contract)				Common Shares			—				—				—				—				—
				Preferred Shares			—				—				—				—				—
Total				Common Shares			17,221,575				16,418				988,893				—				16,249,100
				Preferred Share			—				—				—				—				—

Ø The above “Beginning of Term” means as of January 1, 2014 and “End of Term” means as of February 5, 2015, which is the most recent date of shareholder registry.

Ø Details of acqusition of treasury shares from January 1, 2014 to February 5, 2015 are as follows.

(1) Acquisition of Treasury Shares

• April 24, 2014 : Acquisition of treasury shares (16,418 shares) due to the cancellation of long-term incentives provided in 2010.

(2) Disposition of Treasury Shares

• March 19, 2014 : As the merger of investment business division of KT Capital Co. by KT Corporation is completed, KT Corporation transferred treasury shares (986,787 shares) to KT Hitel Co. – shareholder of KT Capital Co. – as payment for the split off and merger. KT Hitel Co. disposed these treasury shares within 6 months to comply with the Fair Trade Act which monitors any undue financial support among companies of the same business group.

• April 24, 2014: Disposition of treasury shares (2,106 shares) for FY2013 stock compensation for outside directors

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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, 2014)		(Unit: Shares)
Type of Account		Type of Shares		Balance at Beginning of Term				Term-End Balance
Association Account		Common Shares			33,878				33,878
Association Member Account		Common Shares			1,656,334				1,656,334
Total					1,690,212				1,690,212

4. Voting Rights

(As of February 5, 2015)
Category				Number of Shares				Note
Total Issued Shares (A)		Common Shares			261,111,808			—
		Preferred Shares			—
Shares without Voting Rights (B)		Common Shares			16,249,100			Treasury Shares
		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			244,862,708			—
		Preferred Shares			—

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						FY2014				FY2013				FY2012
Par Value per Share (Won)							5,000				5,000				5,000
Net Profit of the Current Term (in Millions of Won)							-966,176				-60,251				1,105,439
Net Profit per Share (Won)							-4,316				-666				4,296
Year-end Cash Dividend (in Millions of Won)							—				195,112				487,445
Year-end Share Dividend (in Millions of Won)							—				—				—
Cash Dividend Propensity (%)							—				—				46.6
Rate of Return on Cash Dividend (%)			Common Shares				—				2.5				5.2
			Preferred Shares				—				—				—
Cash Dividend per Share (Won)			Common Shares				—				800				2,000
			Preferred Shares				—				—				—

Ø Net Profit, Net profit per share, Cash dividend propensity are based on consolidated result.

Ø Cash dividend propensity is calculated on a basis of Net Profit contribution to KT.

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II. Business Details

1. Overview

A. Present Conditions of the Industry

(1) Characteristics of the Industry

• Telecommunication (KT, KT Sat, KT Powertel, Olleh Rwanda Networks Ltd.)

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 and transponders, all of which KT purchased from foreign operators.

The Trunked Radio System (“TRS”) service, operated by KT Powertel, allows users to utilize limited spectrums for radio communication services. Approximately 320,000 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.

Olleh Rwanda Networks constructs relevant network facilities in order to provide 4G LTE services in Rwanda.

Rwanda has an area 26,338 km2-a quarter of South Korean regions, with a population of 12million according to 2014 CIA research. The country has low fixed broadband penetration, with government and corporations as main user base. On the other hand, 3G mobile broadband penetration rate reached 23%, with 2,778,077 subscribers. As 3G mobile broadband subscribers base expected to expand further, KT and Rwanda government established Olleh Rwanda Network in order to create various ICT convergence value added services, based on 4G LTE networks and user expansions. The government of Rwanda gave ORN monopolistic rights regarding wholesale business. KT and Rwanda government constructs LTE networks through investments, and ORN sells traffic to MNOs and ISPs where those operators sell to end users as packaged items then.

• 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.

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• 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, Skylife TV 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.

• 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 increasingly prefer 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 have been an increasing number of subscribers consuming music contents via their smartphone devices.

• 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.

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• 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.

• (KT CS, KTIS)

KT CS business area comprises of contact center, 114 businesses, and merchandising business. KTCS contact center offers call centers to various firms, responsible for client firm’s customer satisfaction and their brand images. KTCS also provides 114 phone number information services. Merchandising business regards with sales of KT’s wireline and wireless products.

KTIS also offers contact center services, sales of advertisement and telecommunication services. Korea domestic demands for contact center are growing considering client firms’ outsourcing needs for call centers. We expect higher demands in the future, considering corporate employment policies, growing needs for professional customer services, and increasing burdens of pricey IT systems and facilities investment. KTIS sells KT’s wireline and wireless products.

(2) Growth of the Industry

• Telecommunication (KT)

		(Unit: thousand persons)
Category		2014				2013				2012
Broadband internet Subscribers			19,199				18,738				18,253
Local Telephone Subscribers			13,939				17,620				18,261
Mobile Phone Subscribers			57,208				54,681				53,624
TRS Subscribers			332				368				384

• Satellite Leasing Service (KT Sat)

The market size of the global satellite leasing industry is Won 15 trillion, and has grown at a rate of 9% per year as of 2013 level. 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.

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• Olleh Rwanda Networks LTD.

Current mobile operators passively respond to the needs for LTE products, as they are afraid of cannibalization with their 3G revenue. On the other hands, new entrants in Internet Service Providers face difficulty in 4G network sales due to lack of distribution channels available.

But under data explosion era, Rwanda voice would be replaced with data networks as many developed country experienced. And 3G networks capacity would not be able to hold increasing demands, increasing appeal for 4G networks, and ORN, a monopoly wholesale operator for LTE.

• 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)
		2014				2013				2012
Subscribers			29,574,822				27,640,859				25,269,752

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. 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.

• 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, %)
		2014				2013				2012
Number of registered vehicles			20,120				19,400				18,870
Number of registered cars			15,747				15,078				14,577
Number of registered rental cars			459				371				325
Growth rate of registered rental cars			23.7	%			14.2	%			12.5	%
Rental cars to registered cars ratio			2.9	%			2.5	%			2.2	%

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

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• 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)		2014				2013				2012
# of users			10,859				8,613				6,310

• Lease and Corporate Loan (KT Capital)

(a) Lease Items

		(Unit: Won billion)
Items		2014 3Q				2013				2012
Industrial machinery			15,787				21,771				21,199
Transportation equipment			61,631				67,297				62,886
Medical devices			6,853				9,769				9,225
Pollution prevention equipment			0				7				0
Equipment for Science and Technology			3,235				3,739				5,402
Telecommunication Equipment			346				1,249				1,276
Industrial equipment for distribution			232				343				206
Other			1,896				3,891				2,433
Total			89,980				108,066				102,627

Source: Credit Finance Association (4Q 2014 data unpublished)

(b) Installment Finance

		(Units: Won billion, thousand items)
		2014.3Q				2013				2012
Durables			93,010				107,176				91,692
Housing			2,355				4,643				4,196
Machinery			3,698				5,072				6,295
Others			1,328				1,212				1,325
Sum			100,391				118,102				103,508

Source: Credit Finance Association (4Q 2014 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.

• Information Service (KT CS, KTIS)

Contact center service is expected to grow in the near future. Because of increasing cost burdens for client firms these days, various sectors increase their needs for outsourcing from professional. Client base not only include finance, telecommunications, but also manufacturing, construction and public utilities. 114 information area face downsizing trend as information technology develops and internet penetration rate increases.

(3) Characteristics of Market Fluctuations and Seasonality

• Telecommunication (KT, KT Sat, KT Powertel, Olleh Rwanda Networks LTD)

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) Olleh Rwanda Networks, LTD

• Developing countries like Rwanda tries to reduce IT service differences amongst classes, so we expect less effect from seasonality and fluctuations.

• 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).

• 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.

• 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.

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• Information Service (KT CS, KTIS)

Contact center service shows little dependency upon seasonality and market fluctuations. Previous economic recessions force various companies to face higher competition so that corporation today need cost reduction for survival. For strategic positioning, many of today’s corporations choose outsourcing various in house functions to professionals, and this sector has no further replacement except for KT CS and KTIS contact center.

114 information businesses does not affected by market fluctuations directly. Rather, this area has higher dependencies upon seasonality, weather, and domestic events such as World Cup or Olympics. Merchandising advertising products traditionally depends upon GDP and economic conditions. Merchandising products regarding telecommunication services does not be influenced heavily by economic cycles as telecommunications services are regarded as necessities.

(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 TV & 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.

• Olleh Rwanda Networks LTD

4G LTE networks provide overall wireline and wireless services. For example, this network can offer smartphone, mobile routers, modems for home use, so that ORN face previous operators for this area as competitors. And especially for current mobile operators in Rwanda do not actively engage in 4G network sales, because they thought 4G network as a threat for their 3G revenues.

• 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 the sole provider of satellite broadcasting service in Korea 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.

• 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.

• 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.

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• Music contents (KT Music)

As smart devices become more widely used, the consumption of digital music increases. In order to quickly respond to such a change, the capability of service design and development is becoming more important.

• 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.

• 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.

• Software development and distribution Advertising Business (KT DS)

IT service core competency includes understanding of customized client biz process, IT system operating experiences, rapid program developing capacities. Global software products such as Oracle, SAP already possess high market share, stability and compatibility. And this current dominant market player’s stable market position works as market barriers for new IT service expansions.

(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.

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(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.

B. Current Status of the Company

(1) Market Characteristics and Classification of Businesses

(a) Market Characteristics

• Telecommunication (KT, KT SAT, KT Powertel, Olleh Rwanda Networks Ltd.)

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 8,130 thousands of its broadband subscribers, 13,710 thousands of its PSTN subscribers (Including Premises /Excluding DID) and 17,330 thousand of its mobile subscribes as of the end of 2014.

Considering the highly saturated mobile phone market in Korea (113.5% penetration rate with 57,210 thousands subscribers as of the end of 2014), 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 12.42 million (72% of KT’s mobile subscribers) as of end of 2014 and our LTE subscribers had a penetration rate of more than 10 million as of September 12, 2014. In order to promote data usage, KT increased the data volume provided for mobile subscribers by utilizing its 3W (WCDMA, WiFi, WiBro) networks.

In the PSTN business, KT owns 81.0% of market share as of the end of 2014 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 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.

Olleh Rwanda Networks Ltd., which has an exclusive wholesale business license for the 4G data technology, gives the existing mobile carriers and ISPs a same opportunity to build a 4G retail business. Olleh Rwanda Networks Ltd. try to expand the internet service (retail) with Rwanda government’s ICT supporting policy and the data market growth trend.

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• 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. 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 5.86 million as of the end of 2014, representing 54% 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.

• 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 expanded their business portfolio to lease and development business areas. KT Estate established a complex development master plan for the Dongdaemun & Busan telecommunication office and Yeongdeungpo 2-cha rental house.

• 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.

• 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 2,803,000 mobile subscribers and approximately 837,000 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.

• 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.

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• 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.

• Telephone number guide business (KT IS, KT CS)

KT IS and CS have been offering customer service for KT by regional groups and 114 telephone number guide service.

(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 (%)
				2014				2013				2012
Local Telephone (Number of Subscribers)		KT			81.0				81.5				82.8
		SK Broadband			16.1				15.6				14.5
		LG U+			2.9				2.9				2.7
Mobile Telephone (Number of Subscribers)		KT			30.3				30.1				31.5
		SK Telecom			50.0				50.0				50.6
		LG U+			19.7				19.9				17.9
Broadband internet (Number of Subscribers)		KT			42.3				43.1				44.0
		SK Broadband			25.1				24.4				24.1
		LG U+			15.7				15.6				15.0
		Service Operators			16.9				16.9				16.9
TRS (Number of Subscribers)		KT Powertel			98.6				98.6				98.6
		Regional operators			1.4				1.4				1.4

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.

• Satellite Business (KT Sat)

There is no national market share information. However KT Sat, which has satellite, is the only one player in Korea and the global market share is approximately 1.1%.

• Data Wholesale Business (Olleh Rwanda Networks Ltd.)

Olleh Rwanda Networks Ltd has an exclusivity in 4G data wholesale business, so the 4G data market share is 100%

• Credit Cards Business (BC Card)

Category		2014				2013				2012
Card transaction M/S			26.6	%			25.9	%			25.0	%

Ø Source: BC Card’s internal data

• Satellite Broadcasting (KT Skylife)

Paid-TV market share (December 31, 2014)
Companies		Digital Market								Analog Market				Total Paid TV
		Subscriber				M/S				Subscriber				Subscriber				M/S
- T-broad			1,541,156				7.0	%			1,761,748				3,302,904				11.2	%
- CJ Hello Vision			2,505,491				11.4	%			1,710,015				4,215,506				14.3	%
- CNM			1,583,425				7.2	%			795,756				2,379,181				8.0	%
- CMB			168,921				0.8	%			1,327,317				1,496,238				5.1	%
- Hyundai HCN			679,045				3.1	%			681,915				1,360,960				4.6	%
Total MSO			6,478,038				29.4	%			6,276,751				12,754,789				43.1	%
Minor SO Total			652,055				3.0	%			1,269,814				1,921,869				6.5	%
SO Total			7,130,093				32.4	%			7,546,565				14,676,658				49.6	%
Satellite broadcasting			4,261,123				19.3	%							4,261,123				14.4	%
KT			5,859,000				26.6	%							5,859,000				19.8	%
SK			2,828,841				12.8	%							2,828,841				9.6	%
LG U+			1,949,200				8.8	%							1,949,200				6.6	%
IPTV Total			10,637,041				48.3	%							10,637,041				36.0	%
Total			22,028,257				100.00	%			7,546,565				100.00	%			100.00	%

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Ø Skylife and KT subscribers: 2.23 million hybrid product(OTS) subscribers double-counted

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
				2014 3Q								2013								2012
				Subscriber				M/S				Subscriber				M/S				Subscriber				M/S
Olleh TV		Kt			5,860				54.0	%			4,968				57.7	%			3,847				60.9	%

• Car Rental Business (KT Rental)

Major car rental companies and market share status
		(Unit : each)
Companies		End-2014								End-2013								End-2012
		Number of Cars				M/S				Number of Cars				M/S				Number of Cars				M/S
KT Rental			122,220				26.6	%			91,668				24.7	%			72,861				22.40	%
AJ Rent-A-Car			58,300				12.7	%			50,200				13.5	%			46,741				14.37	%
Hyundai Capital			41,688				9.1	%			35,832				9.9	%			32,024				9.84	%
SK Network			32,923				7.2	%			22,446				6.0	%			15,944				4.9	%
Red Cap Tour			15,350				3.3	%			11,322				3.48	%			11,322				3.48	%
Samsung Card			10,059				2.2	%			10,059				2.7	%			8,736				2.7	%
Amazon			12,173				2.7	%			10,051				2.7	%			7,799				2.4	%
Dongbu Express			6,594				1.4	%			6,045				1.6	%			5,706				1.8	%
Kia Motors			4,540				1.0	%			4,520				1.2	%			5,647				1.7	%
Others			155,181				33.8	%			126,764				34.1	%			118,554				36.4	%
Total			459,028				100.00	%			371,821				100.00	%			325,334				100.00	%

Ø Source: Korea Rent-A-Car Association

• Equipment and Related Product Wholesale (KTM&S)

		(unit : person)
Category		New Subscriber
		2014				2013				2012
Wireless (new activation)			1,298,168				1,167,739				956,637
Wireline (new activation)			379,207				244,495				184,057

Ø Source: KT M&S Internal Data

• Security and Guards (KT Telecop)

Category		Company		Market Share (%)
				2014				2013				2012
Revenue		KT Telecop			10.78				12.68				16.95
		S1			67.92				61.81				57.61
		ADT caps			21.30				25.51				25.44

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. Currently, internet banner advertisement market share is ca.25%.

• Telephone number information business (KT IS, KT CS)

		(unit:%)
		2014				2013				2012
KT IS			39.3				39.2				37.8
KT CS			60.7				60.8				62.2

(3) Status and Forecast of New Businesses

• Telecommunication (KT, KT Sat, KT Powertel, Olleh Rwanda Networks)

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 3.4 million VoIP subscribers as of September 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.

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.

• 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.

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• 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.

• 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.

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2. Main Products and Services

A. Status of Main Products

• Telecommunication (KT, KT SAT, KT Powertel)

² KT

		(Unit: Won, million)
Business category		2014
Service revenue			14,408,096 (82.6	%)
Merchandise sales(*)			3,024,707 (17.4	%)
Total			17,435,803 (100.0	%)

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

² KT SAT

		(Unit: Won, million)
Business category		2014
Transponder lease			80,628 (57.9	%)
Data			13,625 (9.8	%)
Video			8,520 (6.1	%)
Mobile			14,967 (10.8	%)
Others			21,412 (15.4	%)
Total			139,152 (100.0	%)

² KT Powertel

		(Unit: Won, million)
Business category		2014
Telecommunication(TRS, etc)			88,142 (84	%)
Distribution of Mobile Handset(TRS Handset)			16,723 (16	%)
Total			104,865 (100.0	%)

² Olleh Rwanda Networks Ltd

		(Unit: Won, million)
Business category		2014
LTE			520 (13	%)
Fixed			3,418 (87	%)
- Transport			431 (11	%)
- Capacity domestic			132 (3	%)
- Gor VPN			1,871 (48	%)
- Tower lease			310 (8	%)
- Dark fiber lease			35 (1	%)
- Duct lease			6 (0	%)
- Fiber optic installation			634 (16	%)
Total			3,939 (100	%)

Ø Source : FY2014 ORN financial statements

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• Credit Cards Business (BC Card)

		(Unit: Won, million)
Category		2014
Card revenue			202,420 (6.1	%)
Credit card processing			2,857,252 (86.7	%)
Additional Service			94,860 (2.9	%)
Others			139,767 (4.2	%)
Total			3,294,299 (100.0	%)

• Satellite Broadcasting (KT Skylife)

				(Unit: Won, million)
Business		Revenue		2014
Satellite Broadcasting		Service			622,800 (100.0	%)
Total					622,800 (100.0	%)

• Car Rental Business (KT Rental)

								(Unit: Won, million)
Business				2014
				Revenue				Ratio
		Car rental			719,617				71.26	%
		Used car			175,856				17.42	%
Domestic		Equipment rental			67,177				6.65	%
		Others			47,173				4.67	%
		Total			1,009,823				100.0	%

• Media Contents (KT Media Hub)

		(Unit: Won, million)
Category		2014
TV			217,987 (65.0	%)
Advertising			82,043 (24.5	%)
OTM			25,411 (7.6	%)
Others			9,804 (2.9	%)
Total			335,245 (100.0	%)

• Auto Lease and Installment Financing (KT Auto Lease)

		(Unit: Won, million)
Category		2014
Lease			37,522 (87.9	%)
Installment financing			5,075 (11.9	%)
Others			77 (0.2	%)
Total			42,674 (100.0	%)

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

		(Unit: Won, million)
Category		2014
Lease			132,009 (47.1	%)
Management commission			103,756 (37.0	%)
PM commission			9,427 (3.4	%)
Real estate disposal			246 (0.1	%)
Development			34,312 (12.2	%)
Others			636 (0.2	%)
Total			280,386 (100.0	%)

• Human Resource Management (HNC network)

		(Unit: Won, million)
Category		2014
Subcontract			28,112 (93.9	%)
Dispatch			1,817 (6.1	%)
Total			29,929 (100.0	%)

• Network Securities (Initech Corp)

				(Unit: Won, million)
Category				2014
Product		Certification and encryption			6,662 (14.7	%)
		Integrated Security Management			1,790 (3.9	%)
		Finance ASP / Cloud			11,283 (24.8	%)
		SI			5,825 (12.8	%)
		Equipment, SE POS			136 (0.3	%)
		Subtotal			25,696 (56.5	%)
Merchandise		Finance, Security, Channel			10,769 (23.7	%)
ITO		ITO			4,264 (9.4	%)
Service		Maintenance			4,455 (9.8	%)
Others		Lease commissions			265 (0.6	%)
Total					45,449 (100.0	%)

• Finance (Smartro)

						(Unit: Won, million)
Division		Category		Item		2014
VAN		Product		Card Reference Terminal			3,848 (2.7	%)
		Service		Transit fees			137,504 (97.3	%)
Total							141,352 (100.0	%)

• Equipment and Related Product Wholesale (KTM&S)

		(Unit: Won, million)
Category		2014
Product			626,541 (70.8	%)
Commission			258,845 (29.2	%)
Total			885,386 (100.0	%)

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• Online Contents Creation (KT Hitel)

						(Unit: Won, million)
Category		Item		Service		2014
Contents distribution		IP Contents		Movie, play			47,692 (35.0	%)
Platform		Building Platform, R&D		GIS, Ringo, etc.			62,039 (45.6	%)
T commerce		TV Shopping		SKY T Shopping			26,306 (19.4	%)
Others		Wireline/Wireless internet		Paran.com, Game, etc.			41 (0.0	%)
Total							136,078 (100.0	%)

• E-commerce (KT Commerce)

				(Unit: Won, million)
Category		Item		2014
Merchandise		MRO			514,928 (99.8	%)
Others		Insurance business			890 (0.2	%)
Total					515,818 (100.0	%)

• Database and Online information (KT Music)

				(Unit: Won, million)
Category		Item		2014
Music		Music			85,261 (98.8	%)
Others		Others			1,079 (1.25	)
Total					86,340 (100.0	%)

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		2014
Construction			49,739 (64.9	%)
Maintenance			13,534 (17.7	%)
Others			13,380 (17.4	%)
Total			76,653 (100.0	%)

• Security and Guards (KT Telecop)

		(Unit: Won, million)
Category		2014
Security system			200,331 (87.7	%)
Personnel Security/Facilities management			41,300 (4.2	%)
Additional products			12,884 (6.5	%)
Distribution			1,942 (1.4	%)
Others			572 (0.2	%)
Total			257,029 (100.0	%)

• Advertising (Nasmedia)

						(Unit: Won, million)
Services		Type		Item		2014
Advertising		Advertising		Media sales			29,799 (99.8	%)
Service		Service		SI/SM			56 (0.2	%)
Total							29,855 (100.0	%)

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• Lease and Corporate Loan (KT Capital)

		(Unit: Won, million)
Services		2014
Installment			5,153 (2.97	%)
Lease			49,973 (28.81	%)
Loan			75,443 (43.50	%)
New Tech Finance			5,693 (3.28	%)
Others			37,169 (21.44	%)
Total			173,431 (100.0	%)

• Software development and supply (KT DS)

		(Unit: Won, million)
Category		2014
System maintenance and operation			194,774 (55	%)
System development			63,781 (18	%)
Asset Supply			14,627 (4	%)
Others			80,098 (23	%)
Total			353,280 (100	%)

• Directory Assistance Business

• KTCS

		(Unit: Won, million)
Category		2014
Olleh Customer Service			182,201 (41.6	%)
Contact center			75,380 (7.9	%)
114 Directory Assistance			34,763 (7.9	%)
Priority Number Assistance			35,168 (8.0	%)
Distribution			102,875 (23.5	%)
Others			7,651 (1.7	%)
Total			438,038 (100	%)

• KTIS

		(Unit: Won, million)
Category		2014
Outsourcing Commission			203,884 (45.24	%)
Priority Number Assistance			33,260 (7.38	%)
Contact center			76,830 (17.05	%)
Distribution			131,621 (29.21	%)
Others			5,068 (1.12	%)
Total			450,663 (100	%)

Ø

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B. Price Trend of Main Products

• Telecommunication (KT)

² KT

Service		2014		2013		2012
Local telephony		<2014.4> •   Improvement on bulk/multi line discount plan •   Easing subscription conditions for New subscribber <2014.6> •   unlimited plan launch (6.1) •   Fixed rate including basic fee •   Home unlimited 3000 : Won 5,500/mo (3yrs bundle contract) •   Soho unlimited 3000 : Won 7,500/mo (3yrs bundle contract) <2014. 10> •   Call manager App launch (10.24) •   Make call and send/receive SMS with Local Telephony number by installing App on smartphone •   Provide various additional services including call history management <2014.11> •   Wireline/Wireless integrated Ringo launch •   Use Local telephony Ringo music on Mobile service		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
Mobile		<2014.1> •   Wideband Safe Unlimited launch (1.29) •   Wideband safe unlimited 67/77 •   Given Data 15GB. After 15GB speed capped at 400kbps <2014.2> •   LTE Selective plan launch (2.28) •   LTE selective 100min/250M Wideband safe unlimited 73.5, etc. (33 kinds) •   Voice+Data, Select Data amount best fit to usage pattern <2014.03> •   Additional benefit for Wideband safe unlimited couple package (3.13) •   Wideband safe unlimited 67/73.5/77/84.5 (4 kinds)		<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		<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)

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•    Unlimited Voice for one designated on-net number   <2014.4>   •    Voice/SMS/Data unlimited package launch (4.1)   •    Unlimited 79 launch (4.7)   •    LTE Selective plan additional launch (4.28)   •    Add on-net unlimited voice option   •    On-net unlimited selective 100min/250M, Wideband safe unlimited 73.3, etc. (21 kinds)   <2014.6>   •    Contents bundled data unlimited package launch   •    Unlimited 87 launch (5.28)   •    Additional benefit for unlimited 97 (6.1)   •    Provide free contents package for unlimited 87/97/129 (6.1)   <2014.7>   •    Wireless bundle products promotional launch   •    Family wireless discount (7.01~10.31)   <2014.8>   •    Disabled plan with plenty video offering   •    LTE Sonmal sharing 69 launch (8.31)   <2014.9>   •    Wireless signup fee reduction   •    before : Won14,400   •    after : Won7,200   •    Strengthen benefits for vulnerable plan   •    Provide more data for disabled/Senior plan   •    Household Telecom bill reduction plan   •    Reduce Simple Charge voice rate (9.30)   •    (Won4.8 -> Won4.4)   •    LTE prepaid launch   •    LTE charge/LTE lite/LTE medium (9.30)   <2014.10>   •    Tariff discount launch which is substitute for handset subsidy   •    Tariff discount (subsidy substitute) (10.1)   •    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) <2012.5>   •     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

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		•    Youth safe data plan launch •    Youth safe data 45 (10.31) <2014.11> •    Net tariff plan without penalty launch •    Net unlimited 69, etc. 29 kinds (11.12~24) •    Wearable handset only plan launch •    Wearable plan (11.5) <2014.12> •    Reduce feature phone data rate
Broadband		<2014.3.1> •    New semester promotion •    free internet event (Mar~Apr) <2014.7.1> •    Internet office promotion •    Discount up to 35% <2014.7.4> •    Olleh soho Success-pack launch •    Mandatory in-store communication products sale •    Won20,000 with 3yrs contract <2014.8.18> •    Olleh internet launch •    100Mbps •    Won25,500 with 3yrs contract <2014.10.20> •    Olleh giga internet launch •    1G/500Mbps •    Won35,000/30,000 with 3yrs contract <2014.10.20> •    Giga internet launch promotion •    Additional Won5,000 discount for ‘Olleh together’ subscriber		<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
IPTV		<2014.3> •    New semester promotion •    Provide Smart STB for free to 3 yrs contract new subscriber <2014.9> •    UHD STB launch •    Upgraded to provide UHD definition and various smart functions		<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		<2012.3> •    New semester promotion •    Discount STB rental fee for new customers with three years contract •    Period: 3.1 ~ 3.31

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		*   IPTV price plan reorganization (2015.1) •    ollehTV live 10/15/25/34 launch •    ollehTV live 10 : basic package providing 50 channels and 40k VOD libraries (Won 12,000) •    ollehTV live 15 : basic package providing 80 channels and 40k VOD libraries (Won 18,400) •    ollehTV live 25 : Combination package providing ollehTV live 15 and prime movie pack (Won 28,800) •    ollehTV live 34 : Combination package providing ollehTV live 25 and catch on & catch plus, VIKI pay-tv channel (Won 40,000)		•    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%)		<2012.5> •    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
VoIP		Same as Right		<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.

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Bundle <2014.2>   •    ‘All-IP alright bundle promotion’ normalization   <2014.4>   •    Wireless-wireline bundle product ‘LTE olleh together2’ launch   •    Provide Won3,000~8,000 basic fee discount based on price plan   •    Rename bundle product   •    All IP alright -> Internet olleh together   •    Improve bundle product   •    Strengthen discount benefit for internet olleh together mobile 2 lines   <2014.5>   •    Improve internet olleh together mobile sign up conditions   : Include 3G   <2014.6>   •    Olleh SOHO success-pack launch   <2014.9>   •    Internet olleh together : Strengthen 1 line discount   •    Business account bundle product : increase VoIP able to bundle lines (50 lines -> 100 lines)   <2014.10>   •    launch new product compatible with giga internet   •    Discount won2,000 ~ 35,000   •    Bundle promotion in accordance with giga internet launch   •    Period : ~ ’15. April   •    Discount up Won5,000   <2014.12>   •    Business account bundle product   •    Integrate similar products and improve subscription terms <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

• 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.

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• 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 1.7(per second) on mobile voice calls.

• Olleh Rwanda Networks Ltd

There is no change with whole sale rate since commercialization in Nov. 2014

• There are two options for retail sellers

Option#1) Single standard wholesale rate(include international internet service) : $3.25/GB

Option#2) Wholesale rate by rating group (include international internet service)

Rating Group (Retail Product Type)		Price (USD/GB)				Description
1GB or less			3.75
Above 1GB to 3GB			3.50
Above 3GB to 10GB			3.25
Above 10GB to 100GB			3.15
100GB and unlimited			3.00			Limited until 512kbps over 100GB
200GB and unlimited			3.00			Limited until 1Mbps over 200GB

• Credit Cards Business (BC Card)

						(Unit: Won)
Category		2014		2013		2012
Member Store fee rate		1.50 ~ 2.70		1.50 ~ 2.70		1.50 ~ 2.70
Installment fee rate		11.00 ~ 18.50		11.00 ~ 18.50		11.00 ~ 18.50
Cash service interest rate		9.80 ~ 25.70		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		2014																2013
						4Q				3Q				2Q				1Q				4Q				3Q				2Q				1Q
ktmh		olleh tv mobile		Monthly fee			5,000				5,000				5,000				5,000				5,000				5,000				5,000				5,000
kt		olleh tv mobile pack		Monthly fee			5,000				5,000				5,000				5,000				2,500				2,500				5,000				5,000
kt		Contents pack		Monthly fee			8,000				8,000				8,000

• 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.

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• Human Resource Management (HNC Network)

														(unit: Won thousand)
Category		2013				2013				2012				Note
Subcontract			2,490				2,434				2,386			Average subcontract, dispatch commission / person
Dispatch			1,625				1,594				1,578

• Network Securities (Initech Corp)

								(Unit: Won thousand)
Category				2014				2013
Certification and encryption		PKI			5,000				7,250
		INISAFE Web			17,125				22,422
		SAFE DB			5,655				8,718
Integrated Security Management		INISAFE NEXESS			200				7,247
		INISAFE SA			147				3,244

• Finance (Smartro)

Price may change depending on the credit card company and services. The average price in 2014 decreased by 2.6% compare to that of 2013 because of merchant fee cut.

• Database and On-line information (KT Music)

Category		Detail		2014. 4Q
Record		CD			8,000
Online streaming		Download 30 music + streaming			9,000
		Download 100 music + streaming			12,000
		Smart Download + streaming			7,000
		Download 30 music			6,000
		Download 100 music			9,000
		Online streaming			6,000
		Smart streaming (only for smart seduces)			5,000

Ø Main reason of price change : Reflecting collecting policy for copyright holder’s rights and neighboring rights fees

• 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.

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• Directory Assistance Business (KTIS, KTCS)

• KTCS

Item		2014		2013		2012
114 directory assistance		Won120 (Night/Holidays Won140)		Won120 (Night/Holidays Won140)		Won120 (Night/Holidays Won140)
Priority number assistance		Won30,000 / month (same standard)		Won30,000 / month (same standard)		Won30,000 / month (same standard)

• KTIS

Item				2014																								2013																								2012
Contact center		114 directory assistance			Won120 (Night/Holidays Won140)																								Won120 (Night/Holidays Won140)																								Won120 (Night/Holidays Won140)
		KTCustomer center			Grade				S				A				B				C				D				Grade				S				A				B				C				D				Won2,493
					Amount				2,542				2,480				2,442				2,405				2,380				Amount				2,504				2,455				2,430				2,356				2,306				Won2,432
					ø Apply monthly SLA performance linked rate																								ø Apply monthly SLA performance linked rate
					(unit : Won thousand/mo, person)																								(unit : Won thousand/mo, person)																								(unit : Won thousand/mo, person)
		Contact center			2,284 (unit : Won thousand/mo, person)																								2,284 (unit : Won thousand/mo, person)																								2,284 (unit : Won thousand/mo, person)
Priority Number assistance		Monthly fixed rate (Won)			1 group				2group				3group				4 group				5 group								1group				2group				3group				4 group				5 group								1group				2group				3group				4 group				5 group
		Megalopolis			65,000				63,000				60,000				55,000				52,000								65,000				63,000				60,000				55,000				52,000								65,000				63,000				60,000				55,000				52,000
		City			55,000				53,000				50,000				45,000				42,000								55,000				53,000				50,000				45,000				42,000								55,000				53,000				50,000				45,000				42,000
		Borough			44,000				42,000				40,000				36,000				34,000								44,000				42,000				40,000				36,000				34,000								44,000				42,000				40,000				36,000				34,000
		Dong			33,000				31,000				30,000				27,000				26,000								33,000				31,000				30,000				27,000				26,000								33,000				31,000				30,000				27,000				26,000

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• Satellite Broadcasting (KT Skylife)

(Unit: Won)
Services								2014																2013																2012
								1Q				2Q				3Q				1Q				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				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				30,000
						Install fee																			—				—				—								—				—				—				—
		HD Blue		3yrs		Subscription			14,000				14,000				14,000				14,000				16,000				14,000				14,000				14,000				16,000				16,000				16,000				16,000
						Install fee																			—				—				—								—				—				—				—
				5yrs		Subscription			13,000				13,000				13,000				13,000				15,000				13,000				13,000				13,000				15,000				15,000				15,000				15,000
						Install fee																			—				—				—								—				—				—				—
		HD Green		3yrs		Subscription			12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000				12,000
						Install fee																			10,000																10,000				10,000				10,000				10,000
				5yrs		Subscription			11,000				11,000				11,000				11,000				12,000				11,000				11,000				11,000				12,000				12,000				12,000				12,000
						Install fee																			—				—				—								—				—				—				—
		HD On		3yrs		Subscription			10,000				10,000				10,000				10,000				9,000				10,000				10,000				10,000				9,000				9,000				9,000				9,000
						Install fee																			20,000																20,000				20,000				20,000				20,000
				5yrs		Subscription			9,000				9,000				9,000				9,000				8,000				9,000				9,000				9,000				8,000				8,000				8,000				8,000
						Install fee																			10,000																10,000				10,000				10,000				10,000
OTS (Flat rate service launched in 2Q10		All-Right		3yrs		Subscription			9,000				9,000				9,000				9,000												9,000				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				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				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				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) : 2013 July ~2014 February

Ø Unification desire promotion (additional Won 3,000 discount on TV) : 2014 May ~2014 July

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3. Matters Related to Revenue

A. Performance in Terms of Revenue

• Telecommunication (KT, KT Powertel, KT Sat, Olleh Rwanda Networks, Ltd.)

² KT

																						(Unit: Won million)
Business category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Service revenue			14,408,096				82.6	%			14,205,196				79.2	%			14,560,667				77.2	%
Merchandise sales (*)			3,027,707				17.4	%			3,731,883				20.8	%			4,302,570				22.8	%
Total			17,435,803				100	%			17,937,079				100.0	%			18,863,237				100.0	%

Ø FY2014, FY2013 and FY2012 figures are calculated based on K-IFRS Article 1001 “Financial statements report” amendment (KT stand-alone).

² KT Powertel

																						(Unit: Won million)
Business category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Frequency Trunked Communications			88,142				84.0	%			99,670				88.4	%			111,954				89.6	%
Mobile Handsets			16,723				16.0	%			13,072				11.6	%			12,982				10.4	%
Total			104,865				100	%			112,742				100.0	%			124,936				100.0	%

² KT Sat

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Gap filler rentals			80,628				58	%			84,397				57.8	%			5,945				55.9	%
Data transmission			13,625				10	%			9,326				9.7	%			1,270				11.9	%
Video transmission			8,520				6	%			14,224				6.4	%			663				6.2	%
Mobile satellite service			14,967				11	%			16,375				11.2	%			1,324				12.4	%
Others			21,412				15	%			21,671				14.8	%			1,436				13.5	%
Total			139,152				100	%			145,993				100	%			10,638				100	%

² Olleh Rwanda Networks, Ltd

						(Unit: Won million)
Category		2014
		Amount				%
LTE			520				13	%
Fixed			3,418				87	%
- Transport			431				11	%
- Capacity domestic			132				3	%
- GoR VPN			1,871				48	%
- Tower lease			310				8	%
- Dark fiber lease			35				1	%
- Duct lease			6				0	%
- Fiber optic installation			634				16	%
Total			3,939				100	%

Ø Source: ORN financial statements, 2014

Ø ORN established in 2013.

² Credit Cards Busines (BC Card)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Card revenue			202,420				6.1	%			211,788				6.9	%			222,619				7.1	%
Credit card processing			2,857,252				86.7	%			2,618,188				84.7	%			2,662,609				85.1	%
Additional service			94,860				2.9	%			135,956				4.4	%			140,749				4.5	%
Others			139,767				4.2	%			124,092				4.0	%			102,905				3.3	%
Total			3,294,299				100	%			3,090,024				100	%			3,128,882				100	%

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

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

² Satellite Broadcasting (KT Skylife)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Monthly fee			367,652				59.7	%			380,880				63.4	%			354,554				64.3	%
Channel			151,317				24.5	%			134,212				22.4	%			117,458				21.3	%
Advertising			21,158				2.9	%			17,410				2.9	%			14,498				2.6	%
Others			82,673				12.8	%			67,799				11.3	%			64,759				11.7	%
Total			622,800				100	%			3,090,024				100	%			551,270				100	%

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

² Car Rental Business (KT Rental)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Car Rental			719,617				71.26	%			577,014				68.0	%			456,396				66.2	%
Used Car			175,856				17.42	%			153,573				18.1	%			157,765				22.9	%
Equipment Rental			67,177				6.65	%			66,252				7.8	%			60,660				8.8	%
Others			47,173				4.67	%			51,594				6.1	%			14,772				2.1	%
Total			1,009,823				100	%			848,433				100	%			689,593				100	%

² Media Contents (KT Media Hub)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
TV business			217,987				65.0	%			209,782				68.9	%			12,694				88.3	%
Advertising business			82,043				24.5	%			65,645				21.6	%			1,081				7.5	%
Mobile TV business			25,411				7.6	%			18,681				6.1	%			159				1.1	%
Others			9,804				2.9	%			10,579				3.5	%			447				3.1	%
Total			335,245				100	%			304,687				100	%			14,381				100	%

² Auto Lease and Installment Financing (KT Auto Lease)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Lease			37,522				87.9	%			31,683				90.0	%			28,295				97.6	%
Installment finance			5,075				11.9	%			3,419				9.7	%			423				1.5	%
Others			77				0.2	%			85				0.2	%			281				1.0	%
Total			42,674				100	%			35,187				100	%			28,999				100	%

² Real Estate Development, Rental, and Management (KT Estate)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Lease			132,009				47.1	%			136,411				53.9	%			12,289				49.4	%
Building management			103,756				37.0	%			98,770				39.1	%			976				3.9	%
PM commission			9,427				3.4	%			12,145				4.8	%			11,596				46.6	%
Real estate sales commission			246				0.1	%			2,319				0.9	%
Development Sales			34,312				12.2	%							0.0	%
Others			636				0.2	%			3,233				.3	%
Total			280,386				100	%			252,878				100	%			24,861				100	%

• Human Resource Management (HNC Network)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Contract			28,112				93.9	%			28,512				94.3	%			21,633				92.1	%
Outsourcing			1,817				6.1	%			1,732				5.7	%			1,862				7.9	%
Total			29,929				100	%			30,244				100	%			23,494				100	%

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• Security Business (Initech)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Certification & Encryption (PKI, SAFE DB)			6,662				14.7	%			8,765				17.2	%			7,607				17.6	%
Total Security Solution (INISAFE NEXESS, SA)			1,790				3.9	%			3,293				6.5	%			3,604				8.3	%
Equipment Sales			136				0.3	%			569				1.1	%			831				1.9	%
Finance ASP			11,283				24.8	%			10,919				21.5	%			10,156				23.5	%
SI			5,825				12.8	%			11,219				22.1	%			12,122				28.1	%
Products			10,769				23.7	%			9,887				19.4	%			4,995				11.6	%
ITO			4,264				9.4	%			2,211				4.3	%			537				1.2	%
Outsourcing			4,455				9.8	%			3,709				7.3	%			3,090				7.2	%
Rental Revenue			265				0.6	%			265				0.5	%			267				0.6	%
Total			45,449				100	%			50,836				100	%			43,207				100	%

• Financial Business (Smartro)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Product			3,848				2.3	%			5,399				3.8	%			6,413				4.8	%
Outsourcing			137,054				97.7	%			135,646				96.2	%			126,596				95.2	%
Total			141,352				100	%			141,045				100	%			133,009				100	%

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

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Product			626,541				70.8	%			635,573				71.9	%			803,256				79.6	%
Commission			258,845				29.2	%			248,398				28.1	%			206,075				20.4	%
Total			885,386				100	%			883,971				100	%			1,009,331				100	%

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

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Contents Distribution (IP Contents)			47,692				35.0	%			50,578				38.8	%			44,383				35.0	%
Platform Construction, R&D			62,039				45.6	%			69,673				53.5	%			68,446				53.9	%
TV Shopping			26,306				19.3	%			7,752				5.9	%			1,777				1.4	%
Fixed/Wireless Internet & Game			41				0.0	%			2,334				1.8	%			12,333				9.7	%
Total			136,078				100	%			130,337				100	%			126,939				100	%

Ø Most of sales are generated domestically.

• Electronic Commerce (KT Commerce)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Product			514,928				99.8	%			450,355				99.8	%			316,967				99.6	%
Others			890				0.2	%			944				0.2	%			1,153				0.4	%
Total			515,818				100	%			451,299				100	%			318,120				100	%

• Database and online information provider (KT Music)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Music business			85,261				98.8	%			50,056				98.5	%			29,486				93.9	%
Others			1,079				1.2	%			772				1.5	%			1,907				6.1	%
Total			86,340				100	%			50,828				100	%			31,393				100	%

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

Ø Others: Outsourcing and others.

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• Submarine Cable (KT Submarine)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Construction			49,739				64.9	%			57,152				69.20	%			45,805				66.50	%
Maintenance & Repair			13,534	%			17.7	%			9,651				11.70	%			8,200				11.90	%
Others			13,380				17.5	%			15,837				19.20	%			14,895				21.60	%
Total			76,653				100.00	%			82,640				100.00	%			68,900				100.00	%

Security and Guards (KT Telecop)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Security service			195,031				75.9	%			186,932				78.5	%			174,803				59.0	%
Guard			30,067				11.7	%			25,148				10.6	%			18,199				6.1	%
Installment			5,265				2.0	%			4,914				2.1	%			4,242				1.4	%
Additional Service			12,884				5.0	%			9,279				3.9	%			9,723				3.3	%
Total Security related Service			243,247				94.6	%			226,273				95.1	%			206,967				69.9	%
Facility Management			11,233				4.4	%			11,107				4.7	%			88,755				30.0	%
Distribution			1,942				0.8	%
Others			607				0.2	%			655				0.3	%			458				0.2	%
Total			257,029				100	%			238,025				100	%			296,180				100	%

• Lease and Corporate Loan (KT Capital) 

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Installment			5,153				3.0	%			5,289				2.4	%			7,079				2.6	%
Lease			49,973				28.8	%			65,185				29.6	%			75,785				27.3	%
Loan			75,443				43.5	%			89,926				40.8	%			88,874				31.99	%
New Tech Finance			5,693				3.3	%			6,855				3.1	%			8,723				3.1	%
Others			37,169				21.4	%			52,937				24.0	%			97,322				35.0	%
Total			173,431				100	%			220,192				100	%			277,783				100	%

• Advertising (Nasmedia)

																						(Unit: Won million)
Category		3Q14								2013								2012
		Amount				%				Amount				%				Amount				%
Advertising			29,799				99.8	%			24,681				99.7	%			23,355				99.8	%
Outsourcing			56				0.2	%			73				0.3	%			108				0.2	%
Total			29,855				100	%			24,754				100	%			23,463				100	%

• Software development and provider (KT DS)

																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Product			14,627				4.1	%			78,277				13.7	%			41,077				7.2	%
Outsourcing			338,653				95.9	%			495,121				86.3	%			529,673				92.8	%
Total			353,280				100	%			573,398				100	%			570,750				100	%

• Telephone number information (KTCS, KTIS)

KTCS																						(Unit: Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Olleh customer service (1)			182,201				41.6	%			149,674				37.8	%			158,862				41.4	%
Contact business (2)			75,380				17.2	%			75,121				19.0	%			62,730				16.3	%
114 business (3)			34,763				7.9	%			39,963				10.1	%			44,945				11.7	%
Number priority business (4)			35,168				8.0	%			38,236				9.7	%			40,215				10.5	%
Distribution (5)			102,875				23.5	%			87,633				22.1	%			72,571				18.9	%
Others (6)			7,651				1.7	%			5,597				1.4	%			4,851				1.3	%
Total			438,038				100	%			396,223				100	%			277,783				100	%

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Table of Contents

Ø (1) KT’s representative product, contact business

Ø (2) Open market contact business providing service to public institution (City Hall, KAMCO, Ministry of Employment and Labor) and corporations (Skylife, KB Card, and Nonghyup)

Ø (3) Telephone number searching service for when customers call in at 114

Ø (4) Telephone number priority service when customers call in at 114 for unspecified store numbers

Ø (5) Selling products of KT, under a contract with KT

Ø (6) Other business includes sales consulting, leasing and etc.

KTIS																						(Unit :Won million)
Category		2014								2013								2012
		Amount				%				Amount				%				Amount				%
Outsourcing (1)			203,884				45.2	%			183,583				47.3	%			187,660				48.3	%
Number priority business (2)			33,260				7.4	%			37,612				9.7	%			43,024				11.1	%
Call center business (3)			76,830				17.0	%			77,004				19.9	%			72,629				18.7	%
Distribution (4)			131,621				29.2	%			85,841				22.1	%			81,136				20.9	%
Others			5,068				1.1	%			3,677				0.9	%			4,162				1.1	%
Total			438,038				100	%			387,720				100	%			388,613				100	%

Ø (1) Telephone number searching business and KT customer service

Ø (2) Telephone number priority service when customers call in at 114 for unspecified store numbers

Ø (3) Call center service provided other than KT

Ø (4) Outsourcing, prepaid card/phone service, mobile sale, and other resell of KT product

B. Channels and Methods of Sales

• Telecommunication (KT)

• Sales structure

• Sales Channels

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Table of Contents

• Tariff discounts based on usage period

(3) Methods and Conditions of Sales

[Discount rates based on Contract Periods]

(KRW)		1 Year				2 Years				3 Years				4 Years
Olleh GiGA internet			5,000				10,000				15,000
Olleh GiGA internet compant			4,000				8,000				12,000
olleh internet			3,000				6,000				10,500
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		Remarks
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 extend 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	%			—

[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 excluded

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.

Ø Olleh GiGA internet compact/olleh GiGA internet are only applicable of type A

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Table of Contents

[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

Ø When contracted for 2-years, tariff discounts are applied till 30 months, and after contract periods cancellation penalties are not levied

[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

Ø VAT excluded.

[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)		13,000		-

Ø VAT excluded

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[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 (Data plus monthly price plan, i-tariff plan, LTE tariff plan).

[(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)

• Data can be shared within the standard data that are stated in each tariff plan

[LTE Data Sharing Service]

• Price: 7,500won/month per device

• For customers under the LTE tariff plan, LTE data sharing service is provide for free up to 2 smart devices (pad, smart PC, smart camera and etc.). 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.

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.

Olleh Data Forever

• 3G tariff plan that are usable on tablet PC such as i-pad and etc.

(Unit: Won, Minute)

Product

Basic fee

Data

After data exceeds

Tariff discounts

Additionally provided

Data forever 4G

42,500

4G

0.025won/0.5KB

18,000

WiFi Single Ucloud 50G

Data forever 2G

27,500

2G

11,500

Data forever 1G

22,500

1G

10,000

Ø VAT excluded

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Al Smart Tariff Plan

• Smartphone teen user suitable tariff plan

• Unlimited Al-roll-over: Without any additional cost or period constraint up-to 150k AL can be rolled over

(Unit: Won, VAT excluded)

Price plan

Basic fee

Charge

Adjustable volume

SHOW-king sponsor discount (Monthly)

Voice

SMS

Data

(per 10 seconds)

(per one)

(per 0.5KB)

AL Smart 190

19,000

25 AL

15 AL

0.02 AL

Basic AL 20,000 Data 150MB SMS 20,000 AL

AL Smart 240

24,000

Basic AL 28,000 Data 300MB SMS 20,000 AL

AL Smart 340

34,000

Basic AL 34,000 Data 500MB SMS 20,000 AL

11,000

AL Smart 440

44,000

Basic AL 52,000 Data 1GB SMS 20,000 AL

14,500

Ø VAT excluded

Kids AL115(3G) Tariff Plan

• Tariff plan suitable for kids using 3G Smartphone

(Unit: Won, VAT excluded)

Price plan

Basic fee

Charge

Service provided

Voice

SMS

Data

(per 10 seconds)

(per one)

(per 0.5KB)

Kids AL 115(3G)

11,500

25 AL

15 AL

0.02 AL

Basic AL 12,000, SMS 750 AL ‘Smart Protection’ service free ‘’Safe Kids Phone’ service free

Ø VAT excluded

Net Tariff Plan(3G)

• Net tariff plan that is free from tariff discount penalty

(Unit: Won/Month, VAT excluded)

Type of plan

Basic fee

Voice (minute)

SMS (one)

Data (GB)

Others

Net Unlimited 3G 51

51,000

Unlimited

Unlimited

5

Net Unlimited 3G 61

61,000

Unlimited

Unlimited

10

Net Unlimited 3G 77

77,000

Unlimited

Unlimited

17

Net Unlimited 3G 99

99,000

Unlimited

Unlimited

25

Net Everybody olleh 28

28,000

130

Unlimited

750MB

Wireless on-net unlimited

Net Everybody olleh 34

34,000

185

Unlimited

1.5

Wireless on-net unlimited

Net Everybody olleh 41

41,000

250

Unlimited

2.5

Wireless on-net unlimited

Net i-slim

21,000

150

200

100MB

Net i-value

36,000

300

300

Unlimited

Net-talk share 23

23,000

Video chat 120

1,000

300MB

Net-voice share 23

23,000

250

100

300MB

Net AL 23

23,000

34,000 AL

20,000 AL

500MB

Net Golded 20

20,000

20,000 AL

—

300MB

30% discount on domestic voice for 3 designated lines ‘Smart Protection’ for free

Ø VAT excluded.

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Table of Contents

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 750MB, SMS 200
LTE-420			42,000				1.8				20				0.01			Voice 200 minutes Data 1.5GB, SMS 200
LTE-520			52,000				1.8				20				0.01			Voice 250 minutes Data 2.5GB, SMS 250
LTE-G550			55,000				1.8				20				0.01			Voice 250 minutes Wireless on-net 3,000minutes Data 2.5GB, SMS 250
LTE-620			62,000				1.8				20				0.01			Voice 350 minutes Data 6GB, SMS 350
LTE-G650			65,000				1.8				20				0.01			Voice 350 minutes Wireless on-net 3,000minutes Data 6GB, SMS 350
LTE-720			72,000				1.8				20				0.01			Voice 450 minutes Data 10GB, SMS 450
LTE-G750			75,000				1.8				20				0.01			Voice 450 minutes Wireless on-net 3,000minutes Data 10GB, SMS 450
LTE-850			85,000				1.8				20				0.01			Voice 650 minutes Wireless on-net 3,000minutes Data 14GB, SMS 650
LTE-1000			100,000				1.8				20				0.01			Voice 1050 minutes Wireless on-net 3,000minutes Data 20GB, SMS 1050
LTE-1250			125,000				1.8				20				0.01			Voice 1250 minutes Wireline/Wireless unlimited Data 25GB, SMS 2500

Voice promotion for olleh subscribers

Tariff Plan		Basic Fee				On-net voice provided		Others
LTE-520			52,000			1000 minutes		Only applicable for subscribers before June 30, 2012
LTE-620			62,000			3000 minutes
LTE-720			72,000			5000 minutes
LTE-850			85,000			7000 minutes
LTE-1000			100,000			10000 minutes

Ø VAT excluded.

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

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.

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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

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

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

• 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/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

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

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.

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

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

(1) Wireline/Wireless unlimited voice tariff plan (3G)

		(Unit: Won/Month, VAT excluded)
Tariff Plan		Basic Fee				Vocie		SMS		Data
Unlimited Voice 67(3G)			67,000			Unlimited		Unlimited		5GB
Unlimited Voice 77(3G)			77,000							9GB
Unlimited Voice 97(3G)			97,000							17GB
Unlimited Voice 129(3G)			129,000							Unlimited

(2) Wireline/Wireless unlimited voice tariff plan (LTE)

(Unit: Won/Month, VAT excluded)

Tariff Plan

Basic Fee

Vocie

SMS

Data

Cream Pack (Contents Pack)

Unlimited Voice 67(LTE)

67,000

Unlimited

Unlimited

5GB

Unlimited Voice 77(LTE)

77,000

9GB

Unlimited Voice 79(LTE)

79,000

Unlimited

Unlimited Voice 87(LTE)

87,000

For Free

Unlimited Voice 97(LTE)

97,000

Unlimited Voice 129(LTE)

129,000

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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
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 79(LTE/3G)			79,000				14,000				18,000				168,000				432,000
Unlimited Voice 87(LTE/3G)			87,000				16,000				20,000				192,000				480,000
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

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.

[Wideband Unlimited tariff plan (LTE)]

• Unlimited data plan

• Unlimited voice plan for one designated on-net line (applies to 67/73.5/77/84.5)

(Unit: Won/Month, VAT excluded)
Tariff Plan		Basic Fee				Vocie		SMS		Data
Wideband Unlimited 67			67,000			100 minutes		100		Unlimited
Wideband Unlimited 73.3 (on-net unlimited)			73,300			100 minutes (on-net unlimited)		Unlimited
Wideband Unlimited 73.5			73,500			180 minutes
Wideband Unlimited 77			77,000			300 minutes
Wideband Unlimited 79.8 (on-net unlimited)			79,800			180 minutes (on-net unlimited)
Wideband Unlimited 83.3 (on-net unlimited)			83,300			300 minutes (on-net unlimited)
Wideband Unlimited 84.5			84,500			400 minutes
Wideband Unlimited 100			100,000			Unlimited

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
Wideband Unlimited 67			67,000				12,000				16,000				144,000				384,000
Wideband Unlimited 73.3 (on-net unlimited)			73,300				14,000				18,000				168,000				432,000
Wideband Unlimited 73.5			73,500				14,000				18,000				168,000				432,000
Wideband Unlimited 77			77,000				14,000				18,000				168,000				432,000
Wideband Unlimited 79.8 (on-net unlimited)			79,800				14,000				18,000				168,000				432,000
Wideband Unlimited 83.3 (on-net unlimited)			83,300				14,000				18,000				168,000				432,000
Wideband Unlimited 84.5			84,500				14,000				18,000				168,000				432,000
Wideband Unlimited 100			100,000				20,000				24,000				240,000				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.

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LTE A La Carte Plans

• Adjustable data, voice + SMS at own choice

Price plan		Basic fee				Voice		SMS		Data
A La Carte 100 minutes, 250MB			24,000			100 minutes		100		250MB
A La Carte 100 minutes, 1GB			30,000							1GB
A La Carte 100 minutes, 2GB			35,000							2GB
A La Carte 100 minutes, 3GB			41,000							3GB
A La Carte 100 minutes, 6GB			48,500							6GB
A La Carte 100 minutes, 10GB			55,500							10GB
A La Carte 180 minutes, 250MB			32,000			180 minutes		180		250MB
A La Carte 180 minutes, 1GB			36,000							1GB
A La Carte 180 minutes, 2GB			45,000							2GB
A La Carte 180 minutes, 3GB			52,000							3GB
A La Carte 180 minutes, 6GB			56,000							6GB
A La Carte 180 minutes, 10GB			62,000							10GB
A La Carte 300 minutes, 250MB			45,000			300 minutes		300		250MB
A La Carte 300 minutes, 1GB			49,000							1GB
A La Carte 300 minutes, 2GB			55,000							2GB
A La Carte 300 minutes, 3GB			56,000							3GB
A La Carte 300 minutes, 6GB			59,000							6GB
A La Carte 300 minutes, 10GB			65,000							10GB
A La Carte 400 minutes, 250MB			54,500			400 minutes		400		250MB
A La Carte 400 minutes, 1GB			59,000							1GB
A La Carte 400 minutes, 2GB			63,000							2GB
A La Carte 400 minutes, 3GB			64,000							3GB
A La Carte 400 minutes, 6GB			66,000							6GB
A La Carte 400 minutes, 10GB			69,000							10GB
Wireline/Wireless Unlimited 250MB			64,500			Unlimited		Unlimited		250MB
Wireline/Wireless Unlimited 1GB			65,000							1GB
Wireline/Wireless Unlimited 2GB			65,500							2GB
Wireline/Wireless Unlimited 3GB			66,000							3GB
Wireline/Wireless Unlimited 6GB			76,000							6GB
Wireline/Wireless Unlimited 10GB			84,000							10GB
On-net unlimited A La Carte 100 minutes, 250MB			30,300			100 minutes (On-net Wireless Unlimited)		100		250MB
On-net unlimited A La Carte 100 minutes, 1GB			36,300							1GB
On-net unlimited A La Carte 100 minutes, 2GB			41,300							2GB
On-net unlimited A La Carte 100 minutes, 3GB			47,300							3GB
On-net unlimited A La Carte 100 minutes, 6GB			50,200							6GB
On-net unlimited A La Carte 100 minutes, 10GB			61,800							10GB
On-net unlimited A La Carte 180 minutes, 250MB			33,200			180 minutes (On-net Wireless Unlimited)		180		250MB
On-net unlimited A La Carte 180 minutes, 1GB			39,000							1GB
On-net unlimited A La Carte 180 minutes, 2GB			51,000							2GB
On-net unlimited A La Carte 180 minutes, 3GB			55,200							3GB
On-net unlimited A La Carte 180 minutes, 6GB			59,200							6GB
On-net unlimited A La Carte 180 minutes, 10GB			68,300							10GB
On-net unlimited A La Carte 300 minutes, 250MB			51,300			300 minutes (On-net Wireless Unlimited)		300		250MB
On-net unlimited A La Carte 300 minutes, 1GB			55,300							1GB
On-net unlimited A La Carte 300 minutes, 2GB			59,200							2GB
On-net unlimited A La Carte 300 minutes, 3GB			60,000							3GB
On-net unlimited A La Carte 300 minutes, 6GB			64,000							6GB
On-net unlimited A La Carte 300 minutes, 10GB			71,300							10GB

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LTE 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
A La Carte 100 minutes, 250MB			24,000				2,500				5,000				30,000				120,000
A La Carte 100 minutes, 1GB			30,000				2,500				5,000				30,000				120,000
A La Carte 100 minutes, 2GB			35,000				2,500				7,000				30,000				168,000
A La Carte 100 minutes, 3GB			41,000				2,500				7,000				30,000				168,000
A La Carte 100 minutes, 6GB			48,500				7,000				11,000				84,000				264,000
A La Carte 100 minutes, 10GB			55,500				10,000				14,000				120,000				336,000
A La Carte 180 minutes, 250MB			32,000				2,500				5,000				30,000				120,000
A La Carte 180 minutes, 1GB			36,000				2,500				7,000				30,000				168,000
A La Carte 180 minutes, 2GB			45,000				7,000				11,000				84,000				264,000
A La Carte 180 minutes, 3GB			52,000				10,000				14,000				120,000				336,000
A La Carte 180 minutes, 6GB			56,000				10,000				14,000				120,000				336,000
A La Carte 180 minutes, 10GB			62,000				12,000				16,000				144,000				384,000
A La Carte 300 minutes, 250MB			45,000				7,000				11,000				84,000				264,000
A La Carte 300 minutes, 1GB			49,000				7,000				11,000				84,000				264,000
A La Carte 300 minutes, 2GB			55,000				10,000				14,000				120,000				336,000
A La Carte 300 minutes, 3GB			56,000				10,000				14,000				120,000				336,000
A La Carte 300 minutes, 6GB			59,000				10,000				14,000				120,000				336,000
A La Carte 300 minutes, 10GB			65,000				12,000				16,000				144,000				384,000
A La Carte 400 minutes, 250MB			54,500				10,000				14,000				120,000				336,000
A La Carte 400 minutes, 1GB			59,000				10,000				14,000				120,000				336,000
A La Carte 400 minutes, 2GB			63,000				12,000				16,000				144,000				384,000
A La Carte 400 minutes, 3GB			64,000				12,000				16,000				144,000				384,000
A La Carte 400 minutes, 6GB			66,000				12,000				16,000				144,000				384,000
A La Carte 400 minutes, 10GB			69,000				12,000				16,000				144,000				384,000
Wireline/Wireless Unlimited 250MB			64,500				12,000				16,000				144,000				384,000
Wireline/Wireless Unlimited 1GB			65,000				12,000				16,000				144,000				384,000
Wireline/Wireless Unlimited 2GB			65,500				12,000				16,000				144,000				384,000
Wireline/Wireless Unlimited 3GB			66,000				12,000				16,000				144,000				384,000
Wireline/Wireless Unlimited 6GB			76,000				14,000				18,000				168,000				432,000
Wireline/Wireless Unlimited 10GB			84,000				14,000				18,000				168,000				432,000
On-net unlimited A La Carte 100 minutes, 250MB			30,300				2,500				5,000				30,000				120,000
On-net unlimited A La Carte 100 minutes, 1GB			36,300				2,500				7,000				30,000				168,000
On-net unlimited A La Carte 100 minutes, 2GB			41,300				2,500				7,000				30,000				168,000
On-net unlimited A La Carte 100 minutes, 3GB			47,300				7,000				11,000				84,000				264,000
On-net unlimited A La Carte 100 minutes, 6GB			50,200				7,000				11,000				84,000				264,000
On-net unlimited A La Carte 100 minutes, 10GB			61,800				10,000				14,000				120,000				336,000
On-net unlimited A La Carte 180 minutes, 250MB			33,200				2,500				5,000				30,000				120,000
On-net unlimited A La Carte 180 minutes, 1GB			39,000				2,500				7,000				30,000				168,000
On-net unlimited A La Carte 180 minutes, 2GB			51,000				7,000				11,000				84,000				264,000
On-net unlimited A La Carte 180 minutes, 3GB			55,200				10,000				14,000				120,000				336,000
On-net unlimited A La Carte 180 minutes, 6GB			59,200				10,000				14,000				120,000				336,000
On-net unlimited A La Carte 180 minutes, 10GB			68,300				12,000				16,000				144,000				384,000
On-net unlimited A La Carte 300 minutes, 250MB			51,300				7,000				11,000				84,000				264,000
On-net unlimited A La Carte 300 minutes, 1GB			55,300				10,000				14,000				120,000				336,000
On-net unlimited A La Carte 300 minutes, 2GB			59,200				10,000				14,000				120,000				336,000
On-net unlimited A La Carte 300 minutes, 3GB			60,000				10,000				14,000				120,000				336,000
On-net unlimited A La Carte 300 minutes, 6GB			64,000				12,000				16,000				144,000				384,000
On-net unlimited A La Carte 300 minutes, 10GB			71,300				12,000				16,000				144,000				384,000

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.

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[Wearable tariff plan]

• Tariff plan for wearable devices

(Unit: Won/Month, VAT excluded)

Tariff Plan

Basic Fee

Vocie

SMS

Data

Others

Wearable tariff plan

8,000

50 minutes

250

100MB

Free switch over of incoming calls

[Net Tariff Plan (LTE)

• Net tariff plan that is free from tariff discount penalty

(Unit: Won/Month, VAT excluded)

Type of plan

Basic fee

Voice (minute)

SMS (one)

Data (GB)

Others

Net Unlimited 51

51,000

Unlimited

Unlimited

5

Net Unlimited 61

61,000

Unlimited

Unlimited

Unlimited

Net Unlimited 67

67,000

Unlimited

Unlimited

Free cream pack

Net Unlimited 77

77,000

Unlimited

Unlimited

Net Unlimited 97

99,000

Unlimited

Unlimited

Net Wideband Unlimited 51

51,000

100

100

Unlimited

On-net unlimited for designated one line

Net Everybody olleh 28

28,000

130

Unlimited

750MB

On-net wireless unlimited

Net Everybody olleh 34

34,000

185

Unlimited

1.5

On-net wireless unlimited

Net Everybody olleh 41

41,000

250

Unlimited

2.5

On-net wireless unlimited

Net-talk share 27

27,000

Video chat 120

1,000

1

Net-voice share 27

27,000

250

100

1

Net-talk share 53

53,000

Video chat 600

Unlimited

5

Net teems safe data 34

34,000

52,000 AL

20,000 AL

2

400kbps data unlimited

Net AL 27

27,000

34,000 AL

20,000 AL

500MB

Net Golded 20

20,000

20,000 AL

—

500MB

30% discount on domestic voice for 3 designated lines ‘Smart Protection’ for free

Net alliance 51

51,000

400

400

5

Oil coupon

[Simple Discount Program]

• Tariff discount on self-supplied 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-G550			55,000				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-voice share 34			34,000				2,500				7,000				30,000				168,000
LTE-talk share 34			34,000				2,500				7,000				30,000				168,000
LTE-talk share 69			69,000				12,000				16,000				144,000				384,000
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 77(LTE)			79,000				16,000				18,000				168,000				432,000
Unlimited Voice 87(LTE)			87,000				16,000				20,000				192,000				480,000
Unlimited Voice 97(LTE/3G)			97,000				16,000				20,000				192,000				480,000

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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
Smart talk/voice share			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.

[My family Wireless Discount]

• Tariff plan for wearable devices

Basic Fee		Under 34k		34~under 67k		67~under 87k		87~under 97k		Over 97k
Discount on lines		1,000 won		3,000 won		5,000 won		7,000 won		10,000 won

Ø VAT excluded

Ø No contract period and no penalty

Ø If New/Rentention/Re-contract subscribers bundle within end next month, discount provided for 24 months

Ø Non-applicable for existing wireline-wireless bundle users

[Tariff Discount]

• ‘Tariff Discount’ benefit provided for subscribers who do not choose handset subsidies

• Monthly discount: On 2-year Smart/LTE sponsor net tariff X discount is applied (X = 12% discount rate as of Feb 2015)

(Unit: Won, VAT excluded)
Discount Example		Basic Fee				2-yr subscription								1-yr subscription
						Sponsor Discount				Tariff Discount				Sponsor Discount				Tariff Discount
Net Unlimited 67 (LTE)			67,000								-8,050								-8,050
Net Unlimited 51 (LTE)			51,000								-6,150								-6,150
Unlimited 67 (LTE)			67,000				-16,000				-6,150				-12,000				-6,150
LTE-340			34,000				-7,000				-3,250				-2,500				-3,250
Standard			11,000								-1,350								-1,350
Piety			8,800								-1,100								-1,100

Ø Discount provided during contract term

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

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[Subscription Fee Lowered]

• Apply date: Aug 30, 2014

Category		Before				After		Total Discount Amount
Subscription Fee			14,400 won			7,200 won (50% discount)		7,200 won (50% discount)

Ø VAT included

[Feature Phone Data Rate Lowered]

• Feature phone data rate lowered to 0.25won/0.5KB

Before				After
Single Product		By Service
Single Rate 1.5won/0.5KB		Text 4.5won/0.5KB		0.25won/0.5KB
		Multi-media 1.75won/0.5KB
		VOD 0.45won/0.5KB
Internet Direct Connection 0.25won/0.5KB

[LTE Prepaid Price Plan]

Category		Basic Fee (per day)				Voice (per second)
LTE charge standard			0 won				4.4 won
LTE charge light			166 won				3.9 won
LTE charge medium			266 won				3.4 won

Ø Video chat 6.0won/second, SMS 22won/one, LMS 33won/one, MMS 220won/one

Ø Wireless Data(per packet): 22.5won/MB

Category		Price Level
		Basic Fee				Voice		Data
LTE simple charge data-plus 500MB			8,000 won						500MB
LTE simple charge data-plus 1GB			13,000 won						1GB
LTE simple charge data-plus 2GB			18,000 won						2GB

(4) Sales Strategy

(a) Mobile Service

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

• Strengthening competitiveness by utilizing a differentiating network: Maintaining LTE leadership with a seamless wideband LTE-A coverage and better quality.

• 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.

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(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.

• Olleh Rwanda Network Ltd

Olleh Rwanda Network(ORN) is the 4G network wholesaler in Rwanda. ORN focuses on increasing 4G service recognition and expanding sales volume through cooperation with mobile retailer.

• 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 227 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.

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• Car Rental Business (KT Rental)

(1) Marketing Organizational Structure

Business		Department		Structure
Car Rental		Marketing department		5 teams, 1 center
		Strategic marketing department		3 teams
		New business planning department		4 teams, 1 laboratory, 1 TF, 6 reservation centers
		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
		4th Sales department		1 team, 12 offices, 15 branches, 1 reservation center
Equipment Rental		Equipment rental department		5 teams, 1 TF, 2 offices, 2 local offices

(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.

• 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.

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• 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.

• Call Number Guiding Service (KTCS, KTlS)

KTIS, KTCS is currently conducting KT group’s Customer Channel, Contact Center Business, 114 Directory and Call Number Guide Service, Logistic and Distribution Business.

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4. Research and Development Activities

A. Research and Development Activities

• Telecommunication (KT)

(1) R&D Organization Structure

• Structure (As of Dec, 2014)

• Institute of Convergence Technology.

• Future Convergence Business Office

• Main Mission

• Secure core technology for developing future businesses and strengthening competitiveness of existing businesses.

• Research technology for next generation network.

• Research differentiated service and technology to enhance the competiveness of ICT business.

• Support for business feasibility study and commercialization of ICT based convergence technology in KT Group.

• Execution of convergence service and incubation of new business project.

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(2) R&D Costs

(Unit: Won, million)
Category				2014				2013				2012
Raw Materials					—				—				—
Labor Costs					43,426				45,613				29,877
Depreciation					56,426				41,246				13,378
Commissions					0				166				1,128
Others					347,659				214,299				436,378
Total R&D Costs					447,512				301,324				480,760
Accounting Treatment		Research and Ordinary Development Costs			183,595				159,783				137,075
		Development Costs (Intangible Assets)			263,917				141,541				343,685
Percentage of R&D Costs over Revenue					2.60	%			1.70	%			2.60	%

5. Other Matters Necessary for Making Investment Decisions

A. Intellectual Property Rights

• Telecommunication (KT)

KT holds 5,045 domestic patents and 867 overseas patents as of December 31, 2014.

• Online Contents Production (KT Hitel)

KT Hitel holds 25 patents, and more than 10 patents application are in the process.

• E-commerce (KT Commerce)

KT Commerce holds 3 patents, 1 utility models and 1 design.

• Submarine Cable Construction (KT Submarine)

KT Submarine holds 1 patent.

• Security and Guards (KT Telecop)

KT Telecop holds 30 patents, 1 utility model, 5 designs and 72 trademarks.

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III. Financial Information

1. Summary of Financial Statements (Consolidated)

(Unit: Won, million)
Classification				2014				2013
Current Assets					8,750,934				9,968,449
•		Cash and Cash Equivalents			1,888,663				2,070,869
•		Trade and Other Receivables			4,813,761				5,292,747
•		Inventories			393,271				614,062
•		Other Current Assets			1,655,239				1,990,771
Non-current Assets					25,024,568				24,878,084
•		Trade and Other Receivables			848,863				813,471
•		Tangible Assets			16,468,196				16,386,964
•		Investment Property			1,059,630				1,105,495
•		Intangible Assets			3,544,033				3,827,393
•		Investments in Jointly Controlled Entities and Associates			338,780				363,903
•		Other Non-Current Assets			2,765,066				2,380,858
Total Assets					33,775,502				34,846,533
Current Liabilities					9,992,244				11,187,738
Non-Current Liabilities					11,992,970				10,793,885
Total Liabilities					21,985,214				21,981,623
Capital Stock					1,564,499				1,564,499
Share Premium					1,440,258				1,440,258
Retained Earnings					8,571,130				10,046,883
Accumulated Other Comprehensive Expense					25,790				24,538
Other Components of Equity					(1,260,709	)			(1,320,943	)
Non-Controlling Interests					1,449,320				1,109,675
Total Shareholders’ Equity					11,790,288				12,864,910

(Unit: Won million)
Classification		2014				2013
Operating Revenue			23,421,673				23,810,599
Operating Profit			(291,653	)			839,343
Profit for the Period from the Continuing Operations			(966,176	)			(60,251	)
Profit for the Period			(966,176	)			(60,251	)
Number of Consolidated Companies			66				69

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2. Summary of Financial Statements (Separate)

		(Unit: Won, million)
Classification				2014				2013
Current Assets					3,836,507				4,711,799
•		Cash and Cash Equivalents			469,255				1,023,946
•		Trade and Other Receivables			2,977,621				3,007,471
•		Other Financial Assets			16,433				15,002
•		Inventories			201,870				478,388
•		Estimated Assets of Sales			1,721				34,429
•		Other Current Assets			169,607				152,563
Non-Current Assets					21,083,789				20,982,095
•		Trade and Other Receivables			722,658				674,795
•		Other Financial Assets			136,581				141,760
•		Property and Equipment			12,418,683				13,087,625
•		Investment Property			694,626				564,002
•		Intangible Assets			2,443,023				2,712,527
•		Investments in Subsidiaries, Associates and Joint Ventures			3,838,200				3,361,677
•		Deferred Income Tax Assets			791,136				401,109
•		Other Non-Current Assets			38,882				38,600
Total Assets					24,920,296				25,693,894
Current Liabilities					6,330,712				7,041,105
Non-Current Liabilities					8,983,730				7,608,732
Total Liabilities					15,314,442				14,649,837
Capital Stock					1,564,499				1,564,499
Share Premium					1,440,258				1,440,258
Retained Earnings					7,729,425				9,277,248
Accumulated Other Comprehensive Income					(24,193	)			(3,449	)
Other Components of Shareholders’ Equity					(1,104,135	)			(1,234,499	)
Total Shareholders’ Equity					9,605,854				11,044,057

(Unit: Won, million)
Classification		2014				2013
Operating Revenue			17,435,803				17,937,079
Operating Profit			(719,490	)			309,950
Profit for the Period			(1,141,889	)			(392,311	)

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IV. Auditors’ Opinion

1. Auditors’ opinion on the consolidated financial statements

A. Auditor’s opinion on the consolidated financial statements

FY 2014		FY 2013		FY 2012
Samil PwC		Samil PwC		Samil PwC

B. Audit (or review) Comments

Fiscal Year		Audit (or review) Comments		Issues noted
2014		Unqualified		Not applicable
2013		Unqualified		Not applicable
2012		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

2014

Samil PwC

Review interim financial statements

3,100

43,022

Audit of Separate financial statements

Audit of the consolidated financial statements

20-F Filing

2013

Samil PwC

Review interim financial statements

2,550

43,612

Audit of Separate financial statements

Audit of the consolidated financial statements

20-F Filing

2012

Samil PwC

Review interim financial statements

2,685

41,919

Audit of Separate financial statements

Audit of the consolidated financial statements

Audit of financial statements based on US-GAAP

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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 27, 2015, 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. 27, 2014		Approval of financial statements (separate and consolidated) of the 32nd term		Original proposal approved
				Business reports of the 32nd term		Original proposal approved
				Proceed to Split Off & Merger and Proposal on disposure of treasury share		Original proposal received
				Composition of Outside Director Candidate Nominating Committee		Composition of committee
Second		Feb. 20, 2014		KT business plan for 2014		Original proposal approved
				Recommendation of Audit committee’s candidate		Original proposal approved
				Agreement on the recommendation of non-independent Directors		Original proposal approved
				Long-term performance incentives provided for 2013		Original proposal approved
				Report of financial management plan for 2014		Original proposal received
				Notice of Annual General Meeting for the 32nd term		Original proposal approved
				Approval of financial statements( separate and consolidated) of the 32nd term		Original proposal received
				Business reports of the 32nd 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
				Limit on Remuneration of Directors for 2014		Original proposal approved
				Standards and Method of Payment on Remuneration of CEO and Internal Directors		Original proposal approved
				Limit on Remuneration of Executive Director for 2014		Original proposal approved
Third		March. 15, 2014		Report and Announcement of Completion of Spilt off and Merger of KT Capital		Original proposal approved
Fourth		March. 21, 2014		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
				Plan for Corporate Sustainability Management of the 2014		Original proposal approved
Fifth		April 24, 2014		Disposal of Treasury Share for stock based compensation for 2013		Original proposal approved
				Proposal on disposition of treasury shares for long-term performance based incentive payment for 2014		Original proposal approved
				Processing for paid long term incentive		Revised proposal approved
Sixth		April 30, 2014		Amendment of KT business plan for 2014		Original proposal approved
				Report of financial statements( separate and consolidated) of the 1Q 2014		Original proposal received
				Reports of inspection results in accordance with corporate compliance control standards		Original proposal received

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Seventh		June. 27, 2014		Official sponsor of the 2018 Pyeongchang Winter Olympics telecommunications sector participation		Original proposal approved
Eighth		July. 24. 2014		Report of financial statements( separate and consolidated) of the 2Q 2014		Original proposal received
				Report of transaction with other corporate which is less than 15 billion		Original proposal received
				Improvement of supporting for law cost for Directors and executive management		Original proposal approved
Ninth		Oct. 1. 2014		Seoul Project		Original proposal approved
Tenth		Oct. 30. 2014		Report of financial statements( separate and consolidated) of the 3Q 2014		Original proposal received
				Proposal on donation to labor welfare fund in 2013		Original proposal approved
				Proceed of Project S		Original proposal approved
Eleventh		Dec. 11. 2014		Strategy for Mid-term and KT business plan for 2015		Original proposal approved
				Proceed of Project Taeback		Original proposal approved
				Composition of Outside Director Candidate Nominating Committee		Composition of committee

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

(a) Organization of the Committees under the Board of Directors (as of March 27, 2015)

Title		Organization		Name		Purpose of Establishment and Authority		Note (Prior to 33rd AGM)
CEO Recommendation Committee		All(8) Outside Directors & 1 Inside Director		Recommendation of CEO candidates to the general meeting (Article 32 of Articles of Incorporation)
Corporate Governance Committee		4 Outside Directors, & 1 Inside Director		Suk-Gwon Chang (Chairperson) Sang Kyun Cha, Do-Kyun Song, Dae-Keun Park, Jeong Tae Park		Improvement of Corporate Governance		Suk-Gwon Chang (Chairperson) Sang Kyun Cha, Do-Kyun Song, Dae-Keun Park
Outside Director Candidate Recommendation Committee		5 Outside Directors, & 1 Inside Director		Recommendation of Outside candidates to the general meeting (Commercial Law §542: 8 ) ø 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) Sang Kyun Cha, Dae-Keun Park, Dong-Wook Chung		Audit Committee installation according to Commercial Law §542: 11 (Audit Committee) 1st article ø See V. 2. Audit Committee		Jong-Goo Kim (Chairperson) Keuk Je Sung, Sang Kyun Cha, Pil Hwa Yoo
Evaluation & Compensation Committee		4 Outside Directors		Chu-Hwan Yim (Chairperson) Do-Kyun Song, Suk-Gwon Chang, Daiwon Hyun		Management Agreement with the CEO and Assessment		Chu-Hwan Yim (Chairperson) Do-Kyun Song, Pil Hwa Yoo , Suk-Gwon Chang
Executive Committee		3 Inside Directors		Chang-Gyu Hwang (Chairperson), Heon Moon Lim, Jeong Tae Park		Management and financial matters authorized by the Board of Directors		Chang-Gyu Hwang (Chairperson) Heon Moon Lim
Related-party Transaction Committee		4 Outside Directors		Dong-Wook Chung (Chairperson) Jong-Goo Kim, Chu-Hwan Yim, Daiwon Hyun		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) Jong-Goo Kim, Chu-Hwan Yim, Dae-Keun Park

ø Inside director Hoon Han resigned on January 27, 2015.

ø Outside Director Dong-Wook Chung, Daiwon Hyun and Inside Director Jeong Tae Park newly appointed on March 27, 2015.

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

• CEO Recommendation Committee : 2014 CEO Recommendation Committee was not configured.

• Corporate Governance Committee

Outside Director

Suk-Gwon Chang

Do Kyun Song

Sang Kyun Cha

Dae-Geun Park

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Meeting Date

Agenda

Results of discussion

Voting Result

July 21, 2014

Report for Improvement of supporting for law cost for Directors and executive management

Original proposal accepted

For

For

For

For

• Evaluation & Compensation Committee

						Outside Director
						Jong-Hwan Song		Chun Ho Lee		Keuk Je Sung
						Attendance 100%		Attendance 100%		Attendance 100%
Meeting Date		Agenda		Results of discussion		Voting Result
Feb. 19, 2014		Proposal on the limit on remuneration of Directors for 2014		Original proposal Received		For		For		For
		Proposal on remuneration standards and payment methods for CEO and Standing Directors		Original proposal Received		For		For		For
		Result of CEO management assessment for 2013		Original proposal approved		For		For		For
		Report of payment of Long-term incentive for 2013		Original proposal Received		For		For		For
March 6, 2014		CEO management goal for 2013		Original proposal approved		For		For		For

• Executive Committee

						Inside Director
						Chang-Gyu Hwang		Hyun Myoung Pyo
						Attendance 100%		Attendance 100%
Meeting Date		Agenda		Results of discussion		Voting Result
Feb. 6, 2014		KT Handset Account Receivable Selling Plan for 2014		Original proposal approved		For		For
Feb 13, 2014		Plan for issuance of 186th corporate bonds		Original proposal approved		For		For
Feb 19, 2014		Revision of branches name		Original proposal approved		For		For

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						Inside Director
						Chang-Gyu Hwang		Hoon han		Heon Moon Lim
						Attendance 100%		Attendance 100%		Attendance 100%
Meeting Date		Agenda		Results of discussion		Voting Result
March. 27, 2014		Plan for issuance of 1st foreign corporate bonds for 2014		Original proposal approved		For		For		For
June 2, 2014		Proposal of donation for ‘Sewol Ho’		Original proposal approved		For		For		For
June 13, 2014		Plan for issuance of 186th corporate bonds		Original proposal approved		For		For		For
July 3, 2014		Proposal of donation in kind for ‘Support for Sewol Ho accident’		Original proposal approved		For		For		For
Aug 7, 2014		Support of WD(Wireddifferently)		Original proposal approved		For		For		For
Aug 14, 2014		Plan for issuance of 187th corporate bonds		Original proposal approved		For		For		For
Sep 25, 2014		Donation of financial fund for Study of Human Body safety against the mobile electromagnetic		Original proposal approved		For		For		For
Oct 8, 2014		Proposal on investment to Partnership Business for Large & Mid-Small Company’s productivity Innovation		Original proposal approved		For		For		For
Oct 23, 2014		Proposal of Selling West-Pusan Branch Building		Original proposal approved		For		For		For
Dec 4, 2014		Donation of financial investment for Large & Mid-Small Company’s foreign exhibition		Original proposal approved		For		For		For

• Related-Party Transaction Committee : Related-Party Transaction Committee was not configured

(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.

(b) Appointment of new Directors

Name		Expertise		Recommendation		Committees		Inside trading, relationship with major shareholders
Dong-Wook Chung		Law		Outside Director Candidate Recommendation Committee		Related-party Transaction Committee		Law Firm Kim¸ Choi & Lim in 2014 (1 transaction)
Daiwon Hyun		Media Business		Outside Director Candidate Recommendation Committee		Evaluation & Compensation Committee / Related-party Transaction Committee		No

(c) Establishing separate committee to appoint new directors

Name		Whether Outside Director		Note
Sang Kyun Cha		O		The number of Outsider Directors should be more than 50%
Do Kyun Song		O
Jong-Gu Kim		O
Chu-Hwan Yim		O
Dae-Geun Park		O
Heon Moon Lim		X

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• Outside Director Candidate Recommendation Committee

Independent and Non-Executive Directors

Sang Kyun Cha

Do Kyun Song

Jong-Gu Kim

Chu-Hwan Yim

Dae-Geun Park

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 50%

Attendance 100%

Meeting    Date

Agenda

Results of discussion

Voting Results

Jan. 29, 2015

Proposal on Operation plan for Outside Director Candidate Recommendation Committee

Original proposal approved

For

For

For

Absent

For

Feb. 23, 2015

Finalization of Outside Director candidates

Original proposal approved

For

For

For

For

For

(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 2014

• Programs provided by Korea Directors Association(3.11): Jong-Gu Kim, Chu-Hwan Yim, Pil Hwa Yoo, Suk-Gwon Chang and Dae-Geun Park

2. Audit Committee

(1) Personal Information of Members of the Audit Committee

(as of March 27, 2015)
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
Dae-Geun Park		•    Ph.D., Economics, Harvard University •    Professor of the College of Economics and Finance, Hanyang University •    Chief of the Economic Research Institute, Hanyang University •    Chairman, Financial Development Council, Financial Services Commission		Outside Director
Dong-Wook Chung		•    Seoul National University, Graduate School of Law, LL.M., Seoul, Korea •    Chief Prosecutor, Bucheon Branch of the Incheon District Prosecutors’ Office •    Prosecutor, Seoul High Prosecutors’ Office •    Senior Counsel, Law Firm Kim¸Choi & Lim		Outside Director
(Prior to March 27, 2015)
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

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(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. 8, 2014		Report of result of Extraordinary shareholders’ meeting agenda and papers reporting research		Original proposal accepted
				Pre-approval of non-audit service of external auditor for consolidated company		Original proposal approved
Second		Feb. 19, 2014		Report on operating result of internal accounting management system for fiscal year 2013		Original proposal accepted
				approval on remuneration for non-audit services of external auditors		Original proposal approved
				Approval of appointment for Internal Audit Officer		Original proposal approved
				Report of final audit for fiscal year 2013		Original proposal accepted
				Report on operational condition of internal accounting management system for fiscal year 2013 (prepared by audit committee)		Original proposal approved
				Report on audit records for 2013 and audit plan for 2014		Original proposal accepted
Third		Mar. 6, 2014		Report on agenda of the 32nd annual general meeting of shareholders and result on document review		Original proposal accepted
				Audit report for the annual general meeting of shareholders for the 32rd term		Original proposal accepted
				Evaluation report on operational status of internal compliance device of the audit committee		Original proposal accepted
Fourth		Mar. 21, 2014		Appointment of the chairman of Audit committee		Chairman of committees appointed
				Approval of remuneration for audit and non-audit services of independent auditor of consolidated companies for fiscal year 2014		Original proposal approved
Fifth		April. 11, 2014		Report on filing of Form 20-F for consolidated fiscal year 2013 Financial Statement		Original proposal accepted
				Report on filing of Form 20-F for consolidated operational condition of internal accounting management system for fiscal year 2013		Original proposal accepted
Sixth		Apr. 24, 2014		Report on statement(Separate and Consolidate) of accounts for the first quarter of fiscal year 2014		Original proposal accepted
Seventh		July. 24, 2014		Report on statement(Separate and Consolidate) of accounts for the Second quarter of fiscal year 2014		Original proposal accepted
				Report on accounts for the first half of fiscal year 2014(KT stand-alone and consolidated basis)		Original proposal accepted
				Report of audit performance for the first half of fiscal year 2014 and audit plan for second half of fiscal year 2014		Original proposal accepted
Eighth		Oct. 30, 2014		Report on statement(Separate and Consolidate) of accounts for the third quarter of fiscal year 2014		Original proposal accepted
				Approval of remuneration for non-audit service of independent auditor for consolidated company(KT Skylife)		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).

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4. Equity Investments

[As of December 31, 2014]																										(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				157,330				5,368
KT E&S			2,000,000				100.0	%			48,684				-1,000,000				—				-48,684				1,000,000				100.0	%			—				200,137				-124,607
KT Linkus co., Ltd.			2,941,668				93.8	%			6,282				—				—				—				2,941,668				93.8	%			6,282				70,718				1,076
KT Submarine			1,617,000				36.9	%			24,370																8,085,000				36.9	%			24,370				11,877				9,018
KT Capital Co., Ltd.			36,651,949				83.6	%			267,092				-13,534,202				-94,658				—				23,117,747				83.6	%			172,434				1,975,001				30,795
KT Rental Co., Ltd.			5,698,768				58.0	%			156,957				—				—				—				5,698,768				58.0	%			156,957				2,517,841				40,003
KT Telecop Co. Ltd.			5,765,911				86.8	%			26,045				—				—				—				5,765,911				86.8	%			26,045				305,988				-6,576
KT Skylife			23,908,000				50.0	%			311,696				—				—				—				23,908,000				50.0	%			311,696				670,211				55,553
Softnix Co. Ltd.			360,000				77.4	%			1,810				—				—				—				360,000				77.4	%			1,810				213				-1,029
KT New Business Investment Fund No. 1			200				90.9	%			20,112				—				—				—				200				90.9	%			20,112				14,130				-2,598
KT Data System Co., Ltd.			2,400,000				95.3	%			19,616				—				—				—				2,400,000				95.3	%			19,616				91,233				-13,609
Gyeonggi- KT Green Growth Investment Association			122				40.3	%			12,167				—				-1,125				—				122				40.3	%			11,042				20,527				-2,687
KT Capital Media Contents Investment Fund No. 2			3,043				43.5	%			3,045				—				—				—				3,043				43.5	%			3,045				5,801				-585
KT oic			6,100,000				79.2	%			5,883				-6,100,000				-5,883				—				0				0.0	%			—				—				—
KT Estate			15,848,819				100.0	%			1,081,808				—				2,714				—				15,848,819				100.0	%			1,084,522				1,468,701				13,015
KT Strategic Investment Fund No. 1			200				90.9	%			20,000				—				—				—				200				90.9	%			20,000				12,405				-1,730
Korea HD Broadcasting			6,000,000				14.8	%			3,000				—				—				—				6,000,000				14.8	%			3,000				38,644				519
KT-SB Data Services			3,774,000				51.0	%			18,870				—				—				—				3,774,000				51.0	%			18,870				25,094				-3,960
KT cloudware			3,295,287				86.2	%			28,600				-3,295,287				-28,600				—				0				0.0	%			—				—				—
Enswers			17,861				35.5	%			15,957				—				-10,627				—				17,861				35.5	%			5,330				7,260				-4,346
Centios			266,667				82.8	%			13,984				800,001				—				—				1,066,668				82.8	%			13,984				28,370				-4,131
H&C Network			8,903				1.0	%			848				—				—				—				8,903				1.0	%			848				87,402				1,670
Ustream Korea			509,532				51.0	%			2,548				173,633				868				—				683,165				51.0	%			—				634				-1,313
KT innoedu			1,749,000				48.4	%			7,775				—				—				—				1,749,000				48.4	%			—				8,761				-7,291
KT Hitel			22,750,000				65.9	%			120,078				—				—				—				22,750,000				63.7	%			120,078				229,777				12,433
KT Commerce, Inc.			266,000				19.0	%			1,782				—				—				—				266,000				19.0	%			1,782				119,297				4,610
KT mhows Co., Ltd.			510,000				51.0	%			3,344				—				—				—				510,000				51.0	%			3,344				22,846				-5,626
KT M&S Co., Ltd.			47,400,000				100.0	%			124,564				—				—				—				47,400,000				100.0	%			124,564				281,787				6,391
KT Music Co., Ltd.			20,904,514				57.8	%			37,417				—				—				—				20,904,514				57.8	%			37,417				83,386				3,240
Sidus FNH Co.			5,797,000				72.4	%			7,022				-5,797,000				-7,022				—				0				0.0	%			—				—				—
Nasmedia Co., Ltd			3,742,406				51.4	%			23,051				—				—				—				3,742,406				45.4	%			23,051				97,502				7,956
KT media hub			1,000,000				100.0	%			80,000				—				—				—				1,000,000				100.0	%			80,000				172,621				14,054
KT sat			10,000,000				100.0	%			390,530				—				—				—				10,000,000				100.0	%			390,530				480,689				30,016
BestPartners			300,000				100.0	%			1,500				—				—				—				300,000				100.0	%			1,500				113				-753
KT Strategic Investment Fund No. 2			100				90.9	%			10,000				—				—				—				100				90.9	%			10,000				9,534				-1,842
KT Tech			5,146,962				93.8	%			—				-5,146,962				—				—				—				—				—				—				—
T-On telecom			1,840,000				100.0	%			9,200				280,000				1,400				-9,200				2,120,000				100.0	%			1,400				2,543				-1,802
KT -Music Contents Investment fund no. 1			2,450,000,000				23.3	%			2,450				—				—				—				2,450,000,000				23.3	%			2,450				10,573				-74
KT Sprorts			1,200,000				60.0	%			6,000				6,000				—				—				1,200,000				60.0	%			6,000				15,753				-34,986
KT -Michigan Global Contents Fund			3,140				49.1	%			3,140				—				—				—				3,140				49.1	%			3,140				5,610				-617
Autopion			400,000				100.0	%			2,000				—				—				—				400,000				100.0	%			2,000				5,791				662
Korea Telecom America, Inc. (USA)			6,000				100.0	%			4,064				—				—				—				6,000				100.0	%			4,064				5,510				-3,179
Korea Telecom Japan Co., Ltd. (Japan)			12,856				100.0	%			3,995				29,820				13,981				—				42,676				100.0	%			17,976				16,551				-22,769
Korea Telecom China Co., Ltd. (China)			—				100.0	%			2,160				—				—				—				0				100.0	%			2,160				1,011				-25
KT Dutch B.V			82,614				60.0	%			36,275				133,823				15,108				—				216,437				100.0	%			51,383				45,203				462
PT. KT Indonesia			198,000				99.0	%			108				—				—				—				198,000				99.0	%			108				32				1
KT Belgium			36,049,999				99.9	%			38,345				30,000,000				31,116				—				66,049,999				99.9	%			69,461				72,405				-192
KT ORS			89,999				99.9	%			96				1,740,000				1,865				—				1,829,999				99.9	%			1,961				1,932				-82

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VI. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

1. Directors

Name		Position		Director Since		Date of Birth		Expiration of Term of Office
Inside Directors (1)
Chang-Gyu Hwang		Chief Executive Officer		January 2014 (2)		January 23, 1953		2017 AGM
Heon Moon Lim		Senior Executive Vice President		March 2014		November 15, 1960		2016 AGM
Jeong Tae Park		Senior Executive Vice President		March 2015		December 10, 1959		2016 AGM
Outside Directors (1)
Do Kyun Song		Chairperson of the Board of Directors, Advisor, Bae, Kim & Lee LLC		March 2013		September 20, 1943		2016 AGM
Sang Kyun Cha		Professor, Department of Electrical and Computer Engineering, Seoul National University		March 2012		February 19, 1958		2016 AGM
Jong-Goo Kim		Of Counsel, New Dimension Law Group		March 2014		July 7, 1941		2017 AGM
Chu-Hwan Yim		Honorary President, Korean Institute of Communications and Information Sciences		March 2014		February 9, 1949		2016 AGM
Suk-Gwon Chang		Professor, Department of Business Administration, Hanyang University		March 2014		February 21, 1956		2018 AGM
Dae-Keun Park		Professor, Department of Economics and Finance, Hanyang University		March 2014		March 15 1958		2017 AGM
Dong-Wook Chung		Senior Counsel, Law Firm Kim¸ Choi & Lim		March 2015		August 22, 1949		2018 AGM
Daiwon Hyun		Chairman, Korea Digital Content Industry Forum		March 2015		August 1, 1964		2018 AGM

(1) All of our inside 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.

2. Senior Management

Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Kyu-Shik Shin		Senior Executive Vice President, Enterprise Sales Business Group		December 2014		4		June 7, 1957
Seong-Mook Oh		Senior Executive Vice President, Network Group		January 2014		29		August 20, 1960
Kyu-Taek Nam		Senior Executive Vice President, Marketing Group		January 2014		29		February 06, 1061
Ki-Chul Kim		Senior Executive Vice President, IT Planning Group		December 2014		10		January 1, 1955
In-Sung Jun		Senior Executive Vice President, Corporate Relationship Group		January 2014		33		October 9, 1958
Hyeon-Mo Ku		Senior Executive Vice President, CEO Office		December 2014		28		January 13, 1964
Myung-Beom Pyun		Executive Vice President, Customer Group, Busan Sales Headquarter		December 2014		18		June 19, 1960
Jong-Jin Chae		Executive Vice President, Enterprise Sales Business Group, Enterprise Business Consulting Unit		December 2014		28		June 25, 1961
Cha-Hyun Yoon		Executive Vice President, Network Group, Gangbuk Network Operation Business Unit		December 2014		30		December 2, 1961
Kook-Hyun Kang		Executive Vice President, Marketing Group, Marketing Strategy Business Unit		December 2014		26		September 8, 1963
Hae-Jung Park		Executive Vice President, Marketing Group, IMC Center		December 2014		8		May 23, 1963
Dong-Myun Lee		Executive Vice President, Institute of Convergence Technology		January 2014		24		October 15, 1962
Mun-Whan Lee		Executive Vice President, Corporate Planning Group		December 2014		26		October 1, 1963
Kwang Suk Shin		Executive Vice President, Corporate Planning Group, Financial Office		December 2014		26		January 5, 1960
Soo-Jung shin		Executive Vice President, Corporate Planning Group, Data & Information Security Unit		August 2014		1		August 10, 1965
Dong-Su Yi		Executive Vice President, Corporate Planning Group, Brand Management Center		February 2015		0		August 26, 1961

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Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Dae-San Lee		Executive Vice President, Management Support Group		December 2014		28		January 10, 1961
Heon-Yong Park		Executive Vice President, Corporate Relationship Group, Corporate Relationship & Coorporation Office		December 2014		21		August 15, 1961
Yeong-Ik Choi		Executive Vice President, Corporate Relationship Group, Corporate Relationship & Support Office		September 2014		20		January 5, 1961
Kyoung-Lim Yun		Executive Vice President, Future Convergence Business Office		December 2014		5		June 14, 1963
Yoon-Young Park		Executive Vice President, Future Convergence Business Office, Future Business Development Unit		December 2014		19		April 18, 1962
Cheol-Soo Kim		Executive Vice President, Customer Value Management Office		September 2014		1		February 7, 1963
Sang-Bong Nam		Executive Vice President, Legal & Ethics Office, Legal Affairs Center		January 2014		2		October 19, 1963
In-Hoe Kim		Executive Vice President, CEO Office, Department 2		December 2014		1		June 25, 1964
Jin-Chul Kim		Senior Vice President, Customer Group, Customer Planning Business Unit		December 2014		26		May 25, 1962
Hyon-Seog Lee		Senior Vice President, Customer Group, Sales Operation Business Unit		December 2014		23		March 10, 1962
Young-Ho Kim		Senior Vice President, Customer Group, Sales Operation Business Unit, Mobile Sales Department		December 2014		18		September 3, 1966
Hong-Jae Lee		Senior Vice President, Customer Group, Biz Customer Business Department		December 2014		30		August 29, 1962
Kyeong-Weon Park		Senior Vice President, Customer Group, Fieldwork Support Unit		December 2014		26		June 25, 1963
Sang-Keun Ahn		Senior Vice President, Customer Group, Northern Seoul Sales Headquarter		December 2014		16		September 10, 1962
Jae-Hyeon Kim		Senior Vice President, Customer Group, Southern Seoul Sales Headquarter		December 2014		18		September 26, 1962
Hee-Youp Chang		Senior Vice President, Customer Group, Western Seoul Sales Headquarter		December 2014		29		October 1, 1959
Kyoung-Il Kim		Senior Vice President, Customer Group, Daegu Sales Headquarter		March 2015		18		May 25, 1967
Yang-Hwan Ryoo		Senior Vice President, Customer Group, Jeonnam Sales Headquarter		December 2014		37		October 12, 1958
Man-Soo Oh		Senior Vice President, Customer Group, Jeonbuk Sales Headquarter		December 2014		27		February 9, 1961
Hyeong-Chul Park		Senior Vice President, Customer Group, Chungnam Sales Headquarter		December 2014		29		February 2, 1962
Jong-Jin Barg		Senior Vice President, Customer Group, Chungbuk Sales Headquarter		December 2014		23		August 14, 1963
Dae-Gi Gong		Senior Vice President, Customer Group, Gangwon Sales Headquarter		December 2014		28		March 13, 1960
Sang-Yong Lee		Senior Vice President, Enterprise Sales Business Group, Enterprise Business Consulting Unit, ICT Convergence Business Consulting Department		December 2014		4		December 23, 1967
Ki-Jong Moon		Senior Vice President, Enterprise Sales Business Group, Enterprise Business Performing Unit		December 2014		38		September 30, 1957
Yoon-Sik Jeong		Senior Vice President, Enterprise Sales Business Group, Enterprise Business Consulting Unit		December 2014		6		September 30, 1964
Hee-Kyoung Song		Senior Vice President, Enterprise Sales Business Group, Public Customer Business Unit		December 2014		2		July 24, 1964
Hyung-Joon Kim		Senior Vice President, Enterprise Sales Business Group, Pyung-Chang Winter Olympic Games Business Unit		December 2014		19		November 2, 1963
Chang-Seok Seo		Senior Vice President, Network Group, Network Strategy Unit		December 2014		21		July 5, 1967
Hyun-Meen Jung		Senior Vice President, Network Group, Network Strategy Unit, Access Network Building Department		December 2014		29		November 5, 1960
Cheol-Gyu Lee		Senior Vice President, Network Group, Network Operation & Maintenance Unit		January 2014		29		August 24, 1960

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Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Jae-Yoon Park		Senior Vice President, Network Group, Network Technology Support Unit		December 2014		29		December 18, 1960
Mi-Na Oh		Senior Vice President, Network Technology Support Unit, Core Net Support Department		December 2014		21		April 11, 1969
Young-Sik Kim		Senior Vice President, Network Group, Gangnam Network Operation & Maintenance Headquarter		April 2014		25		March 15, 1961
Ho-Won Moon		Senior Vice President, Network Group, Busan Network Operation & Maintenance Headquarter		April 2014		29		January 7, 1959
Hee-Kwan Ryu		Senior Vice President, Marketing Group, GiGA Business Unit		April 2015		22		July 2, 1962
Pill-Jai Lee		Senior Vice President, Marketing Group, Media Business Unit		April 2015		27		October 3, 1961
Sun-Woo Lee		Senior Vice President, Marketing Group, Enterprise Solution Business Unit		December 2014		24		January 17, 1966
Hyeon-Seuk Lee		Senior Vice President, Marketing Group, Device Business Unit		December 2014		18		November 12, 1966
Hye-Jeong Yun		Senior Vice President, Marketing Group, Service Development Business Unit		December 2014		24		June 12, 1966
Young-Myoung Kim		Senior Vice President, Institute of Convergence Technology, Research Support Department, ICT Cooperation Team		January 2014		26		November 13, 1961
Hong-Beom Jeon		Senior Vice President, Institute of Convergence Technology, Infra Laboratory		January 2014		24		October 3, 1962
Sook-Kyung Sung		Senior Vice President, Institute of Convergence Technology Infra Laboratory, Intellectual Property Right Department		January 2014		15		November 18, 1964
Seong-Choon Lee		Senior Vice President, Institute of Convergence Technology, Service Laboratory		January 2014		30		March 28, 1960
Gyung-Pyo Hong		Senior Vice President, Institute of Convergence Technology, Convergence Laboratory		December 2014		28		June 10, 1962
Jae-Ho Jang		Senior Vice President, IT Planning Group, IT Strategy & Planning Department		December 2014		2		July 12, 1962
June-Keun Kim		Senior Vice President, IT Planning Group, Business Infrastructure Department		December 2014		5		November 12, 1966
Jeong-Min Woo		Senior Vice President, IT Planning Group, Next Generation System Development Unit		December 2014		20		February 25, 1964
Jong-Ook Park		Senior Vice President, Corporate Planning Group, Strategy & Planning Office		December 2014		22		January 24, 1962
Dong-Seope Park		Senior Vice President, Corporate Planning Group, Strategy & Planning Office, Strategy & Planning Department		January 2014		30		November 5, 1961
Sang-Wook Seo		Senior Vice President, Corporate Planning Group, Strategy Investment Department		June 2014		3		January 26, 1972
Jung-Yong Moon		Senior Vice President, Corporate Planning Group, Strategy & Planning Office, Affiliate Management Department 1		December 2014		21		August 24, 1962
Won-Sic Hahn		Senior Vice President, Corporate Planning Group, Procurement Cooperation Office		December 2014		30		October 26, 1960
Kyung-Joon Lee		Senior Vice President, Corporate Planning Group, Procurement Cooperation Office, Procurement Strategy Department		December 2014		24		June 2, 1963
Kong-Hwan Lee		Senior Vice President, Management Support Group, Human Resources Office		December 2014		20		September 20, 1966
Dong-Kwang Kim		Senior Vice President, Management Support Group, Human Resources Office		March 2015		20		March 23, 1962
Young-Sik Park		Senior Vice President, Management Support Group, Human Resources Office		December 2014		37		April 9, 1957
Young-Hyun Kim		Senior Vice President, Management Support Group, Human Resources Office		December 2014		37		December 19, 1958
Hyun-Yok Sheen		Senior Vice President, Management Support Group, Management Support Office		January 2014		22		August 25, 1968

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Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company		Date of Birth
Sung-Q Lee		Senior Vice President, Management Support Group, Management Support Office, Labor Relations Department 1		December 2014		25		December 24, 1965
Jun-Su Jeong		Senior Vice President, Management Support Group, Corporate Culture Office		May 2014		23		November 2, 1962
Young-Min Choi		Senior Vice President, Management Support Group, KT Group HR Development Academy		January 2015		0		September 8, 1961
Young-Suk Jeon		Senior Vice President, Management Support Group, KT Group HR Development Academy Educational Dispatch		February 2015		23		December 14, 1963
Han-Sup Lee		Senior Vice President, Management Support Group, KT Group HR Development Academy Educational Dispatch		February 2015		19		March 6, 1966
Sung-Kyu Yang		Senior Vice President, Management Support Group, KT Group HR Development Academy Educational Dispatch		February 2015		27		March 14, 1962
Dae-Su Park		Senior Vice President, Corporate Relation Group, Economics & Management Research Institute		December 2014		26		October 28, 1963
Hee-Su Kim		Senior Vice President, Corporate Relation Group, Economics & Management Research Institute		December 2014		4		October 15, 1962
Seung-Yong Lee		Senior Vice President, Corporate Relation Group, Creative Economic Initiative Center		December 2014		22		May 18, 1964
Young-Ho Oh		Senior Vice President, Public Relations Office		March 2014		17		September 16, 1962
Jae-Ho Song		Senior Vice President, Future Convergence BUsiness Office, Future Business Strategy Department		December 2014		22		March 26, 1966
Seong-Hoon Kim		Senior Vice President, Future Convergence BUsiness Office, Smart Energy Business Unit		December 2014		2		September 29, 1964
Yi-Shik Kim		Senior Vice President, Future Convergence Business Office, Big Data Center		December 2014		2		October 16, 1968
Tae-Sung Lim		Senior Vice President, Global Business Unit		December 2014		24		March 4, 1963
Hwa Jung		Senior Vice President, Customer Value Management Office, In-House Consulting Unit		December 2014		26		August 10, 1964
Weon-Kyung Kim		Senior Vice President, Legal & Ethics Office, Corporate Audit Center		December 2014		24		June 15, 1963
Keum-Seok Shin		Senior Vice President, Legal & Ethics Office, Corporate Audit Center, Corporate Audit Department 2		December 2014		25		February 18, 1965
Byung-Sam Park		Senior Vice President, Legal & Ethics Office, Legal Affairs Center, Legal Department 1		April 2014		2		October 13, 1966
Sang-Kwi Chang		Senior Vice President, Legal & Ethics Office, Legal Affairs Center, Legal Department 2		May 2014		1		July 12, 1968
Hyoung-Wook Kim		Senior Vice President, CEO Office Department 1		December 2014		18		April 24, 1963
Kyung-Keun Yoon		Senior Vice President, CEO Office Department 2		December 2014		19		January 14, 1963
Jong-Jin Yoon		Senior Vice President, CEO Office Department 3		February 2015		0		February 9, 1964

(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

22,663

708

23,371

18.5

1,551,714

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Ø Number of employees as of December 31, 2014 (excluding executive directors).

Ø Average years in continuous services: Calculated using aggregate years of service of employees as of December 31, 2014 divided by number of employees as of December 31, 2014.

Ø Average payroll per person: Calculated using yearly average number of employees (22,233 employees).

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

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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
2 Inside Directors			2,368				5,900				1,184				—				—				—
8 Outside Directors			617								69				—				—				—

Ø The total amount paid and the average amount paid per person include the compensation for directors who resigned in 2014.

Ø The amount paid for Inside directors includes retirement benefits for directors who resigned in 2014.

(2) Grant and Exercise of Stock Option

* Not applicable as of December 31, 2014.

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