6-K 1 d384059d6k.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 2017

Commission File Number 1-14926

KT Corporation

(Translation of registrant’s name into English)

KT Gwanghwamun Building East

33, Jongno 3-gil, Jongno-gu

110-130 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  ☒            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  ☒

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 21, 2017
		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, 2016 to December 31, 2016)

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

Table of Contents

Table of Contents

I. Corporate General
1. Corporate Purpose of KT Corporation					2
2. History					3
3. Total Number of Shares and Related Matters					4
4. Voting Rights					5
5. Dividends and Related Matters					5
II. Business Details
1. Overview					7
2. Main Products and Services					33
3. Matters Related to Revenue					45
4. Research and Development Activities					56
5. Other Matters Necessary for Making Investment Decisions					57
III. Financial Information
1. Summary of Financial Statements (Consolidated)					58
2. Summary of Financial Statements (Separate)					59
IV. Auditors’ Opinion
1. Auditor’s Opinion on the Consolidated Financial Statements					60
2. Auditor’s Opinion on the Separate Financial Statements					60
3. Compensation to External Auditors for the Last Three Fiscal Years					60
V. Management and Affiliated Companies
1. Overview of the Board of Directors and Committees					61
2. Audit Committee					67
3. Matters on Shareholder’s exercise of Voting Rights					68
4. Equity Investments					69
VI. Directors, Senior Management and Employees
1. Directors					70
2. Senior Management					70
3. Current Status of Employees					74
4. Remunerations fo Executive Officers					74

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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, electrical construction business and fire protection facility 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

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, energy generation business and electrical system design 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. Information securities, any and all other business in the field of identification service

27. Activities of management consultancy

28. Warehousing and storage

29. 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 13606

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 general 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 general shareholders’ meeting held on March 16, 2012.

• At the annual general 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.

• At the annual general shareholders’ meeting held on March 25, 2016, KT’s shareholders approved the addition of Information securities, any and all other business in the field of identification service.

• Mr. Chang-Gyu Hwang was re-elected as the CEO and President of KT at the annual general shareholders’ meeting held on March 24, 2017. KT’s shareholders approved the addition of fire protection facility business, electrical system design business, activities of management consultancy, and warehousing & storage

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3. Total Number of Shares and Related Matters

A. Total Number of Shares

(As of December 31, 2016)				(Unit: Shares)
Category				Type of Shares
				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 Reduced Shares					51,787,959				51,787,959
Details of Reduced Shares		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					16,140,165				16,140,165
VI. Current Number of Issued and Outstanding Shares					244,971,643				244,971,643

B. Status of Capital Increase/Decrease

(As of December 31, 2016)

(Unit: Won, Shares)

Date of Shares Issued (Retired)

Details of Issued (Retired) Shares

Type of Shares Issued (Retired)

Type

Number of Issued (Retired) Shares

Par Value per Share

Par Value of Issued per Share

Note

December 31, 2016

—

—

—

—

—

—

C. Acquisition and Disposal of Treasury Shares

(As of December 31, 2016)				(Unit: Shares)
Method of Acquisition				Beginning of Term				Acquisition (+)				Disposition (-)				Retirement (-)				End of Term
Direct Acquisition		Over-the-Counter			16,262,008				14,508				136,351				—				16,140,165
		Exchange-Traded			—				—				—				—				—
Subtotal					16,262,008				14,508				136,351				—				16,140,165
Indirect Acquisition (e.g. Trust Contract)					—				—				—				—				—
Total					16,262,008				14,508				136,351				—				16,140,165

Ø The above “Beginning of Term” means as of January 1, 2016 and “End of Term” means as of December 31, 2016, which is the most recent date of shareholder registry.

Ø Details of acquisition of treasury shares from January 1, 2016 to December 31, 2016 are as follows.

Acquisition of Treasury Shares

• May 10, 2016: Acquisition of treasury shares(14,508 shares) due to the cancellation of long-term incentives provided in 2012.

Disposition of Treasury Shares

• May 10, 2016: Disposition of treasury shares(3,720 shares) for FY2015 stock compensation for outside directors

• August 22, 2016: Disposition of treasury shares(132,631 shares) for executives’ long-term incentive payment.

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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, 2016)

(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

1,370,466

1,353,777

Total

1,404,344

1,387,655

4. Voting Rights

(As of December 31, 2016)		(Unit: Shares)
Category				Number of Shares				Note
Total Issued Shares (A)		Common Shares			261,111,808			—
		Preferred Shares			—
Shares without Voting Rights (B)		Common Shares			16,140,165			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 Preferred Shares			244,971,643 —			—

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.

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B. Dividends Paid during the Past Three Fiscal Years

Category						FY2016				FY2015				FY2014
Par Value per Share (Won)							5,000				5,000				5,000
Net Profit of the Current Term (in Millions of Won)							797,844				631,288				-966,176
Net Profit per Share (Won)							2,904				2,258				-4,316
Year-end Cash Dividend (in Millions of Won)							195,977				122,425				—
Year-end Share Dividend (in Millions of Won)							—				—				—
Cash Dividend Pay Out (%)							24.6				19.4				—
Cash Dividend Yield (%)			Common Shares				2.7				1.7
			Preferred Shares								—
Cash Dividend per Share (Won)			Common Shares				800				500
			Preferred Shares								—

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

Ø Cash dividend Pay Out (%) 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, KT Linkus, KT Rwanda Networks LTD)

The telecommunication business involves businesses such as mobile communications, fixed-line telephony, line lease businesses and Internet Protocol Television (“IPTV”). The value chain in the telecommunication business consists of 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. However, competition in the Korean telecommunications industry is intense and each of the service areas (wireless, fixed telephony and high-speed internet) is experiencing stagnant growth.

The satellite service business acquires orbits and frequencies from the government, uses them to obtain satellites, and provide services to generate profits. Therefore, the government should be authorized as a service provider for satellite communications services, and satellite orbit and frequency should also be allocated by the government. Currently, we have three satellites in total, and we are also using satellite repeaters from overseas operators.

PTT(Push To Talk) business operated by KT Powertel is progressing from the Trunked Radio System (“TRS”) service to the radiomessage service based on LTE. PTT service is expected to sustain its growth in the foreseeable future, mainly focusing on specific markets such as logistics and industrial sites. For leading technology development, we strive to pioneer a PTT service with high quality and various functions.

The public telephony business provides services that can be used anywhere in the country, such as remote areas and remote islands, by utilizing the nationwide infrastructure to enjoy the same service at the same price for anyone, anywhere, anytime. According to the Telecommunications Business Act and relevant laws, the public telephone service in the city is designated as a universal service delivery business and is provided as a basic public communication service.

Rwanda has an area of 26,338 km2 (1/4 of South Korea) and a population of approximately 12.4 million (as of December, 2016). Of these, mobile subscribers number amount to 8,921,533 with 79% penetration ratio. Rwanda, a developing country, has a very low penetration rate of fixed broadband (over 256 kbps) (21,500 subscribers as of September 2016), mainly used by government offices and businesses.

On the other hand, the number of mobile broadband subscribers (over 256 kbps) is 3,962,575, with a penetration rate of about 33%, and the number of subscribers is steadily increasing. Of these, about 450,000 3G subscribers and about 900,000 smartphone users are estimated.

KT and the Rwandan government have established KT Rwanda Networks, the world’s first PPP (public private partnership) public-private partnership, to spread LTE-based mobile broadband infrastructure and services. KT has been providing services to mobile service providers (MNOs) and internet service providers (ISPs) by acquiring 25 years of 4G and beyond network wholesale exclusive business right and wideband frequency from the Rwandan government.

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• Overseas investment (KT Belgium)

KT Belgium holds stake of KT Rwanda Networks Ltd., which is engaged in the business of building LTE-based mobile broadband infrastructure and services in Rwanda. It does not carry out separate business in Belgium.

• 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)

The broadcasting market is broadly classified into the pay-TV market, the broadcasting channel trading market, the broadcasting program trading market, and the broadcasting advertising market.

In the pay-TV market, pay-TV broadcasting platforms (general cable broadcasting companies, satellite broadcasting companies, and IPTV providers) provide multi-channel broadcasting services and secure subscribers. In the analog broadcasting market cable broadcasting companies provide service and in the digital broadcasting market, cable broadcasting operators, satellite broadcasting operators, and IPTV providers are competing.

In the broadcast channel trading market, pay-TV platform operators configure a channel package on channels provided by terrestrial broadcast and program providers and its own channels. It receives license fee in return for transmitting the contents and in exchange pay channel fee (license fee) to terrestrial broadcasters and broadcasting service providers.

In the broadcasting program trading market, terrestrial broadcasters and broadcasting channel operators create its own programs or receive programs from subcontracted program producers, etc., and earn profits by audience rating-based-advertisement and paid broadcasting license fees.

In the broadcasting ad market, terrestrial broadcasters and broadcasting service providers earn profits by providing advertisements on their respective channels. pay-TV platform operators also earn profits via utilizing allocated advertisement time by its own channels or broadcasting service providers.

In addition to the above markets, there is a home shopping channel transmission market which is concluded between home shopping operators and paid broadcasting platforms (general cable broadcasting operators, satellite broadcasting operators, and IPTV providers). Home shopping transmission fee is contracted every year in exchange for home shopping operators paying the platform separately depending on the contribution of sales to the platform.

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

The real estate development business is a project that covers a series of processes from the preparation of the development business such as real estate acquisition, business fund procurement, project planning and promotion, construction management to stabilization after development. The real estate development business is heavily influenced by changes in the financial environment, such as interest rates and capital availability, as well as real estate conditions, due to the large capital input and long-term development planning.

Real estate development projects have a higher return than subcontracting projects when they succeed, but it is also important to effectively manage risks as a high-risk business. The real estate leasing / management business includes (1) real estate asset management business (PM) that covers the operation, maintenance, lease management and financial management, and (2) real estate facility management (FM) that covers operation, maintenance and renovation of various facilities to create pleasant and convenient real estate use.

• Staffing Agency (HNC network)

In Korea, core businesses as manufactures and services have high portion of the outsourcing rate. Outsourcing is the majority of indirect employment and its ratio has been shown high in big companies.

• Information Securities (Initech)

Securities: The importance of Information Securities is increasing more and more nowadays. ICT Development can make us to be convenient. However, the risk of other side is also expanded. The only solution to solve these risks is construction of network securities

Financial: Recently, as new electronic financial services are introduced rapidly and new services are being newly introduced, various payment methods such as Internet professional banks are emerging and new fund transactions such as cloud funding are actively being made. In addition, with the advancement of the armed FinTech company based on advanced IT technology and vast customer information, the development of FinTech leads to the introduction of new financial services and efficient operation of existing financial services, thereby improving the overall financial market and economic efficiency.

• 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.

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• Online Contents Distribution (KT Hitel)

Contents: Our content business is a business that supplies digital distribution rights for video content, distributes it to distribution platforms, and distributes profits. It is positively affected by the growth of the domestic content industry. The content industry is characterized by the characteristics of One Source Multi Use (OSMU) It is possible to create economic added value and it has emerged as one of the growth engines of Korea. With OSMU’s characteristics, an increase in content consumption platform, the introduction of prosumers that simultaneously produce and consume content, and the popularization of mobile devices are creating a favorable environment for industrial expansion. We expect to benefit from industry growth as a business operator.

T-commerce: The T-Commerce industry is commerce for digital pay-TV subscribers who are provided two-way services, and it has the characteristics of TV home shopping and Internet shopping. T-Commerce is emerging as new retail channels because it can give a chance to search for products conveniently which subscribers want to know through pay-TV.

• 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 all industrial areas that produce added value and generate economic value through music in various fields such as composition, performance, publishing, copyright, management, music, broadcasting, advertising, and movie music. The music industry can be divided into two main categories. The first is the traditional offline music industry, such as planning and production of music, and distribution. The second is online media convergence, which produces and distributes digital music through online and mobile media.

Since 2000, the size of the offline music industry has been steadily declining. However, since the digital music industry surpassed the scale of offline music industry in 2004, it continues to grow and has become a bridgehead for growth of the domestic music industry. Since the end of 2009, as the spread of smartphones has expanded, the use of music content via wireless internet such as 3G, LTE, WiFi is continuously increasing. In the past, sales of mobile music services and contents providers focused on feature phones (general phones) accounted for a relatively high portion in the online digital music market. However, with the distribution of smart devices the proportion of online music service industry is increasing.

• 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.

• Advertising (Nasmedia)

In the domestic advertising market, the reorganization of the market structure is becoming more and more prevalent among multinational advertising companies and domestic large-scale large advertising companies. In this environment, the advertising industry is focusing on providing comprehensive marketing communication services. In the case of small and medium-sized advertising companies, it operates as a media agency specialized in media agency and an advertising agency specialized in creative. Recently, online advertising, which is the fastest growing segment, is experiencing an increasing proportion of global players’ services, with service fierce competition among major portals. Major portals are constantly in the process of restructuring their advertising operations due to increased demand for advertising.

• Software Development and Provision (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.

• Directory Assistance Business (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.

We launched the KT Tax Refund (KTTR) business, a domestic refund business for foreign tourists and laid the foundation for new growth.

• MVNO (KT M mobile)

MVNO means Mobile Virtual Network Operator. MVNO operators have no their own cable and do their MVNO business by leasing existing cable from Telco. In Korea, Many corporates including affiliates of big company and small-middle sized companies started MVNO service.

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(2) Growth of the Industry

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

KT		(Unit: thousand persons)
Category		2016				2015				2014
Broadband internet Subscribers			20,556				20,025				19,199
Local Telephone Subscribers			15,746				16,341				16,939
Mobile Phone Subscribers			60,287				57,937				56,310

* Based on MSIP’s end-2016 disclosure

KT Sat

The market size of the global satellite leasing industry is Won 14 trillion in 2015. 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 is expected to expand into South East Asia, Middle Asia, Africa, and Latin America.

KT Powertel		(Unit: persons)
Category		2016				2015				2014
KT PowerTel			286,140				304,842				327,062
Others			174				5,051				4,615
Total			286,314				309,893				331,677

* Based on MSIP’s end-2016 disclosure

KT Linkus

The public telephony business is a trend in which the number of telephony sales and facilities is decreasing due to the expansion of the mobile communication market. However, the infrastructure related to the public telephony facilities is fused with a variety of services such as booth advertisement, Mulit public telephone booth, Safety-Zone booth, AED-smart post. We are aggressively responding to new business proactively.

		(Unit: persons)
Category		2016				2015				2014
Number of public telephone facilities			73,780				83,086				87,986
Unmanned aerial			62,265				69,285				71,571
Self-supporting public			11,515				13,801				16,415

Source: Company data

KT 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.

However, in developing countries such as Rwanda, when the Data Explosion Era arrives, voice networks will be replaced by data networks and 3G networks will not be able to meet the demand. As we have exclusive wholesale rights to data technology over 4G, we will be able to conduct business in an absolutely favorable position.

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• 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)

Broadcast services are evolving into multiple media services such as mobile and OTT as well as broadcast and communication convergence services based on wired networks. In particular, personalized services that actively provide the optimal service for personal situation information and preference are growing through knowledge accumulated in the network. Ultra-high definition UHD (Ultra HD) which is 4 ~ 16 times clearer than full HD broadcasting, Next-generation broadcasting services such as multi-channel services are growing.

The broadcasting service market is characterized by an intrinsic nature. The total market size based on the number of subscribers is steadily increasing, and in the case of the year 2016 (as of the end of June), it increased by 1.6%.

[Paid-TV subscriber trend]

		June, 2016				2015				2014				2013
Subscribers			28,730,419				28,266,499				27,466,348				25,498,662
Growth			1.6	%			2.9	%			7.7	%			—

Source: Paid-TV Providers

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

Although the real estate market has been continuously implementing various real estate stimulus measures such as financial support and deregulation to revitalize the economy of the government and restructuring of the tax system, It is a situation that the recession phase is continuing. Due to the decline in the value of real estate due to the long-term recession of the real estate market, the size of the real estate development market for simple investment, which does not take into account real clients such as large-sized apartments, is continuously decreasing.

It is anticipated that opportunities for real estate development projects for facilities, recreational facilities and business hotels will expand. In addition, the concept of real estate is being reshaped from investment and ownership to utilization due to the increase in the number of households in Korea due to changes in the living environment, such as a decline in the real estate market, a decline in the birth rate and marriage rate, and an aging population. Accordingly, the demand for comprehensive real estate leasing / management services centered on small residential facilities such as urban living houses is expected to increase gradually.

• Staffing Agency (HNC network)

				(Thousands)												(%)
				2016				2015				2014				2016				2015				2014
Wage Worker		Total			19,627				19,312				18,776				100.0				100.0				100.0
		Full-Time			13,183				13,041				12,699				67.2				67.5				67.6
		Part-Time			6,444				6,271				6,077				32.8				32.5				32.4
Dispatch/Service		Total			897				866				798				100.0				100.0				100.0
		Dispatch			201				210				194				22.4				24.2				23.9
		Service			696				656				604				77.6				75.8				76.1

Source: Korea Labor Institute

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• Information Securities (Initech)

Securities: According to the ‘Information Survey on the Information Security Industry in Korea’ published by the Information and Communications Industry Promotion Agency in Korea, sales of information security companies in Korea has been estimated to increase steadily by an annual average of 14.18% reaching total market size of KRW 3,846,931 million by 2020. Specifically, ‘Information Security Product’ market is to reach KRW 3,017,847 million, and ‘Information Protection Service’ market is estimated to be KRW 829,084 million.

Financial: In 2017, the domestic financial IT services market is expected to expand in size with demand for new next-generation projects in the financial sector. We also expect to see a steady annual growth rate of 1.7% over the next five years by 2020. Therefore, the financial sector is expected to be fiercely competitive in the next generation business. According to domestic media reports, KB Kookmin Bank’s next-generation system business is expected to be worth W250bn (or below) at the beginning of the year, while KB Kookmin Card (150 billion won), NH Nonghyup Card (120 billion won), BC Card (80 billion won) and other orders are expected within first half this year. Orders from Mirae Asset (W40bn), The K’s Insurance (W20bn), and Hungkuk Life (W20bn) will also be on the market.

According to the ‘Financial IT & Security Top Ten Issues Outlook Report’ released by the Financial Services Commission in 2017, issues related to financial services such as block-chain-based services, big data industry, and cloud era are expected to attract attention. We are also preparing a strategy for securing and responding to the technology.

• Financing business (Smartro)

The financial VAN industry has grown steadily despite the overall economic downturn due to government policy (expansion of credit card merchants, income deduction benefits, cash receipt issuance system, micropayment, etc.) and convenience of card use. However, the issue of merchant commission fees has become a socio-political issue, and there is a possibility that growth will slow down in general as a result of credit card vendors’ downward pressure on VAN commission rates and the National Tax Service.

• Equipment and Related Product Wholesale (KTM&S)

		(Unit: thousand persons)
Category		2016				2015				2014
Mobile Subscribers			2,492				2,704				2,803
Fixed Line Subscribers			953				951				837

Source:: Company data

• Online Contents Distribution (KT Hitel)

Contents: Thanks to the growth of the existing IPTV market and the increase in digital convergence of CATV, there is a sufficient amount of content consumption channel and stable growth is expected. In addition, the diffusion of smart media and the spread of one-person households are expected to continue to popularize non-real-time mobile-centric personalized on-demand content consumption. With the expansion of content consumption using digital contents platforms such as OTT and MCN (Multi-Channel Network), we expect that the activation of production and consumption of online contents such as web drama and web art will stimulate the expansion of industry. We expect to benefit from the growth of the industry as the largest operator in Korea with IP (Intellectual Property) and intellectual property rights (IPTV, mobile, etc.), including movies and dramas.

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T-commerce: In order for the Internet industry to develop, as the high-speed Internet network must be established, the T-commerce market should grow to include the digital pay-TV environment that can use T-commerce. Recently, digital TV (IPTV, satellite, SO) subscription has reached 23 million households, and T-Commerce has settled in. The market for T-commerce is improving the use environment of T-commerce such as high accessibility of TV, smart TV, evolution of TV remote control, activation of VOD service, We are expecting the growth rate to be high due to an increase in the number of customers who are accustomed to this.

• E-commerce (KT Commerce)

Due to the complexity of business-to-business (B2B) transactions and trading practices such as trauma, the pace of development is very slow, but it is growing due to cost savings and increased outsourcing rates.

• Music contents (KT Music)

According to the “2015 Music Report” published by the Korea Creative Content Agency, online music retailer sales grew 11.3% YoY in 2013 and 11.3% YoY in 2012 ~ 2014. The spread of Smart Devices since the end of 2009 has laid the foundation for the growth of business to customer wired and wireless services. As the concept of “non-allegations” is applied (July 23, 2009), the possibility of distribution of illegal music is diminishing. The digital music industry is expected to grow gradually based on this strong copyright law.

• Submarine Cable Construction (KT Submarine)

International demand for submarine telecommunication cable systems is expected to continue to increase capacity. In the past, submarine telecommunication cables were constructed as a high-cost, stable infrastructure, led by a consortium of national telecommunication carriers. Since 2008, however, large private operators and telecommunication carriers have been constructing consortia for cable construction and thus new construction demand is expected to remain stable.

Submarine power cables expected to grow on increasing demand for electric power supply due to tourism/local development and market competition system due to restructuring of electric power industry. The world market is also expected to grow steadily as demand for new electric power is inevitably required in this vigorous Southeast Asia and Europe is seeking to lighten and simplify the submarine power cable, increase the capacity and improve the insulation performance.

• 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.

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• Advertising (Nasmedia)

In 2016, the size of the domestic advertising market is estimated to be 11.29 trillion won, a 0.7% decrease from 2015. Mobile advertising, which is our business area, has risen 31.1%, and smart advertising (IPTV, mobile, internet, and digital signage) has risen 8.3%. In particular, mobile advertising and Internet advertising accounted for 33.2% of the total ad market in 2016 due to the rapid growth of mobile advertising. IPTV ad growth is -4.6% YoY, but YoY adverse growth is anticipated, but 2017 is expected to grow slightly. The outdoor advertising market is estimated to have declined by about 2% from the previous year, and is expected to rebound slightly in 2017.

The slowdown in advertising expenditure growth due to the decline in the use of traditional media shows the transition to new media. Especially, the increase of Internet usage time due to the expansion of the Internet and the digitization of analog media are leading the increase of advertising expenditure in new media. In addition, the recent rapid growth of mobile media is changing the usage of media.

										(KRW Million)
		2017(F)				2016(E)				2015
Display Ad.			784,411				793,213				775,198
Search Ad.			1,172,268				1,150,052				1,278,174
Mobile Ad.			2,045,950				1,804,152				1,374,442
Total			4,002,629				3,747,417				3,427,814
IPTV Ad			84,000				83,002				87,000
Digital Signage Ad			31,407				30,018				27,065

Source: 2016 KOBACO

• Software Development and Provision (KT DS)

In the domestic IT services market in 2016, traditional solutions are expected to be stagnated due to the IT reduction trend of companies, but it is expected to show substantial growth mainly in the public sector cloud industry due to the next generation project field of the financial sector and particularly the cloud development law passing. In addition, Big Data, Internet of Things and Simplified Payment are expected to show remarkable technological growth in the market.

• Directory Assistance Business (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.

• MVNO (KT M mobile)

As a result of the government’s policy to revitalize MVNOs, the entry of large-sized companies into the market, and better recognition of MVNO’s, the number of MVNO users steadily rose to 6.84 million as of December 2016, This is equivalent to 11.3% of the mobile phone market subscribers. The growth potential of the MVNO business is expected to be positive, given the demand for low-priced services in the mobile communications market and the rational consumption trend.

		2016				2015				2014
Subscribers			6,840,589				5,920,878				4,583,867

* Source: 2016 MSIP

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(3) Characteristics of Economic Cycle and Seasonality

• Telecommunication (KT, KT Sat, KT Powertel, KT Linkus, KT 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.

(A) 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, the marine service for shipping companies is sensitive to market conditions.

(B) KT Powertel

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

(C) KT Linkus

• In the public telephony business, due to the increase in mobile phones, voice sales are steadily declining and may accompany seasonality.

(D) KT 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.

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

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

• Staffing Agency (HNC network)

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

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• Information Securities (Initech)

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.

• Financing business (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.

• Online 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. As the importance of CCTV service has been realized recently, and the high-definition CCTV has become popular, the sustained growth is expected.

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• Advertising (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 Provision (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.

• Directory Assistance Business (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.

• MVNO (KT M mobile)

As the telecommunication service is perceived to be a necessity it is not impacted by seasonality and market fluctuations.

(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

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(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.

• Telecommunication (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.

• Telecommunication (KT Powertel)

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

• Telecommunication (KT Linkus)

(a) Competing Companies

• Public Telephone Business: KT is the only service provider in Korea.

• Logistic Business: CJ Korea Express, Hanjin, and Hyundai Logistics

• Product Distribution Business: Cannot be specified as a distributor of the same product

(b) Market Entry Requirements

• Public Telephone Business: Government authorized business.

• Logistic Business: Authorization

• Product Distribution Business: Report

(c) Factors of Competition

• Service charge and quality, marketing ability, brand value, distribution network competitiveness, etc.

• Telecommunication (KT 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.

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• Credit Cards Business (BC Card)

(a) Competing Companies

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

(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. 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. The number of relay wired broadcasting operators is decreasing 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. However, the market and the competition later on expected to be different as the integrated broadcasting act was submitted on Nov. 2015.

(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.

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

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

• Staffing Agency (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.

• Information Securities (Initech)

Security: Our core businesses are classified as content / information leakage prevention security and password / authentication products in the information security industry. There are many companies involved in password / authentication information security solutions, but three or four typical companies are mainly competing. In order to gain a competitive advantage in the field of encryption / authentication, security of technology and solution for key core technology, experience of building security system of company and stability of company financial structure are considered important.

The Internet banking outsourcing business is in competition with our company and webcash, but we have an advantage based on our long experience and know-how. In the SI business, we compete with webcash, TMAX, and Euracle.

• Financing 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.

• Online 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)

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.

• Advertising (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 Provision (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.

• MVNO (KT M mobile)

(a) Competing Competitors

• MVNO(CJ Hellovision, SK telink, Medialog, etc.) players

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(b) Market Entry Requirement

• Resale telecommunication operator registration

(c) Factors of Competition

• Differentiated price plan, service quality, and marketing ability, etc.

(5) Relevant Laws and Government Regulations

(a) Relevant Laws

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

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

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

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

(b) Government Regulations

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

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

B. Current Status of the Company

(1) Market Characteristics and Classification of Businesses

(a) Market Characteristics

• Telecommunication (KT, KT SAT, KT Powertel, KT Linkus, KT 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 innovative customer values.

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Considering the highly saturated mobile phone market in Korea (114.5% penetration rate with 57,940 thousands subscribers as of the end of 2015), 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 smart phones, eggs; data modem, iPads, and kids phones.

Also, KT launched data unlimited and data centric plan stimulating data usage in smartphone era, which achieved Data Explosion recording 1,300x data usage per a smartphone user compare to feature phone.

KT’s initiatives led to a smartphone penetration rate. It recorded more than 50% first time among 3 operators as of February of 2012. Our LTE subscribers had a penetration rate of more than 10 million as of September 12, 2014 and LTE subscribers recorded 126.7 million as of the end of 2015. 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 80.5% of market share as of the end of 2015 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. Its global revenue is continuously increasing despite of the stagnant domestic revenue. The satellite market in Korea is expected to expand due to increasing UHD channels and demand of repeaters of UAV, and demands for the rental repeaters is expected to increase because of increasing number of DTH companies and the broadcasting channels globally. Thus KT Sat is planning to launch the next satellite in 2017 targeting Asian and Indian markets.

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 appear to be steady.

The public phone service, the main business for KT Linkus, is experiencing a challenge due to continuously decreasing voice revenue and the number of phone booth because of rapid growth of mobile industry.

KT 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. KT Rwanda Networks Ltd. try to expand the internet service (retail) with Rwanda government’s ICT supporting policy and the data market growth trend.

• 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.

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• 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.

In addition, recently UHD(4x definition of HD) market is growing, because of increasing proportion of UHD TV sales since the price of UHD TV is continuously decreasing as the competition among manufacturers becomes severe. Also, UHD contents production is expected to be vigorous since UHD terrestrial channels would start to offer real time services in next Feb. KT Skylife expanded its UHD channels of 5 which is the largest in Korea in the end of 2016 since it commercialized 3 satellite channels for the first time in the world in June 2015.

• 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 made a huge progress in 2016 for developments and investments, especially not only successfully launching Remark ville but also parceling out apartment in Gwangju Ssangam Hill state, and beginning constructing hotel developments in Sinsa.

• Staffing Agency (HNC network)

Subcontract 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.

• Information Securities (Initech)

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.

• Financing 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, and others. However, decreasing revenue is getting critical due to lower unit price of cash receipt and big distribution franchise’s own cash receipt registration since July 1st 2013 according to National Tax Service notification.

• 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.

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The market competition is expected among telecommunication, manufacturer, and specialized distribution due to popularity of smart phones and expansion of IoT devices.

KT M&S currently manages approximately 2,492,000 mobile subscribers and approximately 953,000 fixed-line subscribers.

• Online 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 major business areas are music service business and contents investment/distribution business. Genie music service enhanced customers’ conveniences by launching the first music VR service in Korea and ‘Genie 4.0 EQ curation’ to easily cope with the change of future internet services such as IoT, VR.

KT is continuously focusing to enhance market competitiveness in the Online Contents Distribution market through KT music contests association of investment that the major entertainment agencies in Korea and KT is participating.

• Submarine Cable Construction (KT Submarine)

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

• Security and Guards (KT Telecop)

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

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• Advertising (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 Provision (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.

• Directory Assistance Business (KT IS, KTCS)

KT IS and CS have been offering customer service for KT by regional groups, contact center service, and Priority Number Assistance service.

• MVNO (KT M mobile)

A mobile virtual network operator (MVNO) is a wireless communications services provider that does not own the wireless network infrastructure. The dozens of national subsidiaries of big corporation and small & medium business manage MVNO business.

(b) Operations Subject to Disclosure

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

(2) Market Share

• Telecommunication (KT, KT Powertel)

Number of Subscribers		Operator		Market Share (%)
				2016				2015				2014
Local Telephone		KT			80.6				80.6				81.1
		SK Broadband			16.2				16.3				16.0
		LG U+			3.2				3.1				2.9
Mobile Telephone		KT			30.6				30.6				30.2
		SK Telecom			49.1				49.1				49.9
		LG U+			20.3				20.3				19.9
Broadband internet		KT			41.4				41.6				42.3
		SK Broadband			25.3				25.1				25.1
		LG U+			17.6				17.4				15.7
		Service Operators			15.7				15.9				16.9
TRS		KT Powertel			286,140				304,842				327,062
		others			174				5,051				4,615
		total			286,314				309,893				331,677

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.

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• Telecommunication (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%.

• Telecommunication (KT Linkus)

KT group is the only national operator offering public phone service. There is no market share information for related distribution business or related goods distribution business.

• Telecommunication (KT Rwanda Networks Ltd.)

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

• Credit Cards Business (BC Card)

Category		2016				2015				2014
Card transaction M/S			26.1	%			26.6	%			26.6	%

Ø Source: BC Card’s internal data

• Satellite Broadcasting Service (KT Skylife)

【Paid-TV market share】

														(unit : person)
Companies		Digital Market								Analog Market				Total Paid TV
		Subscriber				M/S				Subscriber				Subscriber				M/S
SO Total			7,716,586				30.09	%			6,825,771				14,542,367				44.79	%
Satellite broadcasting			4,359,891				17.00	%			0				4,359,891				13.42
IPTV Total			13,568,456				52.91	%			0				13,568,456				41.79	%
Total			25,644,933				100.00	%			6,825,771				32,470,704				100.00	%

Ø Skylife and KT subscribers: 2.08 million hybrid product(OTS) subscribers double-counted

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

Ø Satellite/IPTV: Dec.31th, 2016

Ø Cable: Nov. 30^th, 2016

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

It is difficult to estimate the market share because of the characteristics of the business area.

• Staffing Agency (H&C Networks)

Category		2016				2015				2014
Number of employment M/S			0.12	%			0.13	%			0.13	%

• Information Securities (Initech)

Initech is the dominant market share #1 player among the first financial institutions, and leading market operator in PKI, SSO/EAM products and services.

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• Financing Business (Smartro)

There are 15 players in VAN industry, and no disclosed information about market share is available.

• Equipment and Related Product Wholesale (KTM&S)

		(unit : person)
Category		New Subscriber
		2016				2015				2014
Wireless (new activation)			1,301,651				1,472,689				1,390,739
Wireline (new activation)			181,395				327,018				371,300

Ø Source: KT M&S Internal Data

• Online Contents Distribution (KT Hitel)

It is difficult to estimate the market share because of the characteristics of the business area.

• E-commerce (KT Commerce)

It is difficult to estimate the market share because of the characteristics of the business area.

• Music Contents (KT Music)

				(unit: 1,000)
Rank		Homepage		UV of 4Q16
1		melon.com			15,244
2		genie.co.kr			5,295
3		bugs.co.kr			2,216
4		mnet.com			2,265
5		soribada.com			358
6		ollehmusic.com			230

Ø Source: KoreanClick, Android mobile app

• Submarine Cable Construction (KT Submarine)

It is difficult to estimate the market share because of the characteristics of the business area.

• Security and Guards (KT Telecop)

It would be categorized mainly by security service, distribution/others (real estate investments).

• Advertising (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, online advertisement market share is 9% by the total volume handled in the end of 2016.

• Software Development and Provision (KT DS)

The main business are system development and management within captive market among KT and affiliates, and it is also extending its non-captive market as well.

• Directory Assistance Business (KT IS, KTCS)

There is no market information that reputable organization discloses for contact center service industry.

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• MVNO (KT M mobile)

(unit:10,000 person)
		KT M mobile				CJ Hellovision				SK Telink				Medialog
Subscriber			49.4				84.6				74.0				21.6

Ø Source: MSIP News(2016.11.30)

(3) Status and Forecast of New Businesses

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

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.

KT is enhancing future growth business focusing on making synergies among 5 areas of smart energy, integrated safety, next generation media, healthcare, intelligent networked transportation, and other businesses. Especially, KT is driving new growth engine based on IoT, Big Data and Convergence, and preparing to develop new next generation services of autonomous machines as self-driving cars based on 5G network and VR.

• 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 Service(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.

• 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.

• Staffing Agency (H&C Networks)

H&C Networks plans to expand payment related business rather than general outsourcing area to enhance professional competencies. It offers subcontract proposal of credit/debit card processing to enlarge payment related business.

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• Information Securities (Initech)

Initech established separate organization to pan new business and expected to make official announcement when it achieves tangible outcomes.

• Financing Business (Smartro)

Smartro plans to expand VAS services related with VAN business, and expects to enlarge various areas with IT, Telecommunication and financial business.

• 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.

• Online Contents Distribution (KT Hitel)

KT Hitel offers IP based edged service data broadcasting T commerce ‘K shopping’ channels after it launched since July 2013.

• Submarine Cable Construction (KT Submarine)

KT submarine expands to offshore business as new renewable energy business.

• 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.

• Advertising (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 Provision (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.

• Directory Assistance Business (KT IS, KTCS)

We launched the KT Tax Refund (KTTR) business, a domestic refund business for foreign tourists and laid the foundation for new growth.

• MVNO (KT M mobile)

KT M mobile is trying to get high value customers by diversifying the price plan.

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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.

2. Main Products and Services

• Telecommunication (KT)

Service		2016		2015		2014
Local telephony		<2016.2> •   Brand Pop-up service launch(2.26) •   Connect calls when calling from the smartphone •   An image call connection service that displays the image / name / greetings previously registered by the customer (individual carrier) on the outgoing smartphone <2016.3> •   Media CID launch •   When a call is made from a local phone to a mobile phone, the information of the caller is displayed in the form of multimedia		<2015.6> •   Multi-number service launch •   Value Added service that allow user to add another phone number besides existing mobile number		<2014.4> •   Improvement on bulk/multi line discount plan •   Easing subscription conditions for New subscriber <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

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Mobile <2016.3>   •   Y24 Pricing Plan launch(3.3)   •   Y24 299/349/399/449/499/ 599 6tyle launch   •   Offers ‘Three Hours Daily Data’ and ‘Half Content’ benefits for under-24s   <2016.4>   •   Wearable device tariff plan launch(4.7)   <2016.7>   •   Actioncam tariff launch   <2016.8>   •   Yteen tariff launch   •   Yteen 20/27/32/38 4 type launch   <2016.9>   •   Data Together Plan launch   <2016.11>   •   Y unlimited Data festival campaign <2015.3>   •   Removal Membership fee(3.31)   •   W7200gW0   <2015.5>   •   LTE Data Choice Plan launch(5.8)   •   LTE Data Choice Plan 299/349/399/499/599/699/999(7 kinds)   •   Mobile Voice Unlimited, Data roll over and borrow service   <2015.6>   •   Strengthened voice call benefit for Data Choice Plan(6.1)   •   LTE Data Choice Plan 299/349/399/499)   •   Add more benefit : Unlimited Voice for both mobile and fixed   •   My time plan launch   •   LTE only service   •   Provision of Data Unlimited in preferred time zone(within 3hrs 2GB at full speed, after 3hrs unlimited data at 3Mbps)   <2015.7>   •   Added LTE Data Choice Plan   •   LTE Data Choice Plan 449   <2015.8>   •   LTE Safe Data 350 launch (8.1)   •   Data 450MB + max 400Kbps Qos   <2015.9>   •   LTE Safe Data 350 launch (8.1)   •   Data 450MB + max 400Kbps Qos   <2015.9>   •   Youth Genie Plan launce(9.21)   •   Youth Genie Basic / Youth Genie Safe(2kinds)   •   Genie music unlimited and roll over unlimited <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)   •   Unlimited Voice for one designated on-net number   <2014.4>   •   Voice/SMS/Data unlimited package launch (4.1)   •   Unlimited79 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   •   Unlimited87 launch (5.28)   •   Additional benefit for unlimited97 (6.1)   •   Provide free contents package for unlimited87/97/129 (6.1)

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				<2015.10> •   Net tariff Data Safe plan launch(10.21) •   Tablet only plan launch(1kind) •   Data 35GB + max 5Mbps QoS		<2014.7> •   Wireless bundle discount products launch •   Family wireless discount(7.01~10.31) <2014.8> •   Disabled plan with plenty video offering •   LTE Sonmal sharing69 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) •   Youth safe data plan launch •   Youth safe data45 (10.31) <2014.11> •   Net tariff plan without penalty launch •   Net unlimited69, etc. 29 kinds (11.12~24) •   Wearable handset only plan launch •   Wearable plan (11.5) <2014.12> •   Reduce feature phone data rate

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Broadband <2016.1.1>   •   GIGA Internet Subs 1M promotion   •   For user, GiGA / UHD / GWH GiGA WiFi home Rent discount   •   Term : 16.1.1~3.31   •   1G Discount Promotion   •   For Giga (1G) customers, Internet fee and GiGA WiFi home rent discount   •   Term : 16.3.2~6.30   <2016.9.1>   •   GIGA WiFi AP Discount   •   GiGA WiFi AP monthly rent discount according to the Internet products and bundle conditions used   <2016.10.1>   •   Discount promotion for on-line sign up customers   •   Discounted internet rate for new customers who join internet and TV products online   •   term : 16.10.1~17.3.31 <2015.3.2>   •   olleh GiGA WiFi home launch   •   Residential GiGA speed AP   •   3years contract W3,000   <2015.3.2>   •   GiGA WiFi home promotion   •   LTE/TV/Internet bundle discount   •   Period : 15.3.2~6.30   <2015.6.8>   •   Olleh Internet Office IP pack launch   •   Option type added service to select Static/DHCP IP according to office environment   •   3years contract Static IP W40,000 / DHCP IPW35,000   <2015.7.27>   •   Best Customer GiGA speed provision promotion   •   GiGA internet usage fee discount toward customers over 15years or MIT bundle customers over 10years   •   Period : 15.7.27~16.1.26   <2015.8.5>   •   GiGA WiFi home bundle discount launch   •   GiGA WiFi home Monthly rent discount on subscription conditions   <2015.8.24>   •   GiGA WiFi home AP discount program for long term customers   •   Monthly rent discount when customers newly rent AP for over 3years.   <2015.10.1>   •   GiGA Internet 1year anniversary promotion.   •   1G new/change customer discount of GiGA WiFi home AP rent   •   Period : 2015.10.1~2015.12.31 <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

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IPTV		<2016.4> •   Change in formula of discount benefits to return •   Target : new customers signing up from April.1. 2016 •   Change Item : Terminal Equipment Rental / Contract Term Discount / Re-Contract Discount •   Change detail : Change to a parabolic structure so that discount benefits to return are reduced after a certain time <2016.8> •   Olleh TV Air launch(8.18) •   Providing the first wireless-based IPTV watching environment in Korea •   Price : 99,000won		* 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(W12,000) •   ollehTV live 15 : basic package providing 80 channels and 40k VOD libraries(W18,400) •   ollehTV live 25 : Combination package providing ollehTV live 15 and prime movie pack (W28,800) •   ollehTV live 34 : Combination package providing ollehTV live 25 and catch on & catch plus, VIKI pay-tv channel (W40,000) <2015.4> •   ollehTV Skylife 10/15 launch •   ollehTV Skylife 10 : ollehTV VOD or select type + Sky + HD + time& sports basic package((W12,000) •   ollehTV Skylife 15 : ollehTV VOD or select type +SkyFamily + HD basic package((W18,400)		<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 picture quality and various smart functions
				<2015.11> •   ollehTV live / ollehTV Skylife 12 launch •   ollehTV live 12 : 60 channels and 40k VOD libraries(W14,400) •   ollehTV Skylife 12 : ollehTV VOD or select type + Skyon + HD + time&sports basic package(W14,400) •   Subscription Installment fee, Relocation Installment fee Exemption Þ Discount

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VoIP		No new price plan		<2015.2> •   Unlimited VoIP launch •   3,000 free minutes and CID provision •   Olleh home unlimited (W3,500), Olleh unlimited(W5,500), Soho unlimited(W7,500) <2015.9> •   VoIP D1 launch •   Premium Voice service based on Dect VoIP technology on 1.7GHz Voice only spectrum •   WhoWho Spam block •   KT PI design		Same as Right
Bundle		<2016.2> •   GIGA Loyal Club MediaPack discount Promotion •   Term : 2.1~6.30 •   Providing free of charge for media pack for 24 months to customers signing up for Internet + IPTV + mobile (LTE bundle, wired / wireless combination) meeting the following conditions •   Internet : Olleh GiGA Internet, Olleh GIGA Internet Compact •    IPTV : OTV 12/15//25/34, OTS 12/15 •   Mobile : LTE Data Selection 999, LTE Data Selection 699 <2016.8> •   ‘Total amount combination’ launch •   Provide combined discounts based on total combined mobile monthly payments •   Establishment of ‘Enterprise success pack’ business combination •   Provides mobile combined benefits to employees who use leased line / KORNET / VPN use as a company		<2015.1> •   Bundled discount on new ollehTV products •   W500 ~ 6,000 Monthly discount based on use condition(4kinds including OTV10) <2015.2> •   Bundled discount on new Unlimited VoIP(3kinds) products •   Olleh unlimited home 3000 / W1,400 discount •   Home unlimited 3000 / W2,200 discount •   Soho unlimited 3000 / W3,000 discount <2015.4> Bundled discount on new ollehTV products •   W500 ~ 3,400 Monthly discount based on use condition(2kinds including OTV10) <2015.7> •   Easement on Internet olleh together discount condition •   Allowance of discount when mobile flat subscription is over W20,000 •   Improvement on BIZ bundled products •   Change in discount method as same as mobile		<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

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<2016.10>   •   ‘Total amount bundle’ mobile designated line discount (100%)   •   Discount option that provides the total amount of mobile discounts to the total number of combined mobile calls that the customer specifies •   Strengthened mobile benefit : LTE together discount on employees of corporate clients   •   Creation of BIZ bundle requirements : Internet, mobile condition added   <2015.9>   •   GiGA WiFi AP promotion normalization   •   W1,000 ~ 3,000 Monthly discount based on use condition of bundled products   <2015.11>   •   Bundled discount on new ollehTV products   •   W600 ~ 2,400 Monthly discount based on use condition(2kinds, OTV12, OTS12) •   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

• Telecommunication (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.

• Telecommunication (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.

Based on the LTE standard rate, the base fee is 15,000 Won per month, the individual wireless call charge per 10 seconds is 12 Won, the group call charge is 22 Won, and the mobile phone charge is 1.0 Won per second.

• Telecommunication (KT Linkus)

Item				2016				2015				2014
Public Phone		Local call			70				70				70
		Local distance call			70				70				70
		International call			300				300				300
		Mobile call			70				70				70

1. Local phone billing time: 180 seconds

2. Long-distance telephone billing time

• 1 band (between billing distance of 30 km and adjacent calls): 180 seconds

• 2 bands (over 30 km of billing distance): 43 seconds

• 2 band discount time (0:00 to 08:00 on weekdays, 21:00 to 24:00 holidays 0:00 to 24:00): 61 seconds

3. International billing time: billing time difference by destination country

• Discount time (24: 00 ~ 06: 00 on weekdays, 00: 00-24: 00 on public holidays)

4. Mobile phone billing time: based on 38 seconds

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• Telecommunication (KT 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				Speed control under 512kbps over 100GB
200GB and unlimited			3.00				Speed control under 1Mbps over 200GB

p white-label wholesale product : “Monthly Unlimited Pack”

Products		Composition of Products		Wholesale Price
500MB per day (15.6)		Speed throttle down to 128Kbps when daily usage is over 500MB		$18/m(monthly flat rate, no return for unused data)
1GB per day (15.2)		Speed throttle down to 128Kbps when daily usage is over 1GB		$36/m(monthly flat rate, no return for unused data)
2GB per day (15.6)		Speed throttle down to 256Kbps when daily usage is over 2GB		$72/m(monthly flat rate, no return for unused data)
MUP Smart (15.6)		Speed throttle down to 128Kbps when it is over 500MB in specific time zone(00:00~08:00, 08:00~24:00)		$20/m(monthly flat, no return for unused data)
CSFB Daily & Weekly Packs (15.10))		Daily usage limit : 1GB(4G smartphone user target)		$1.4/GB (flat rate, no return for unused data)
4GB per day(16.1)		Speed throttle down to 512Kbps when daily usage is over 4GB		$137/m(monthly flat, no return for unused data)
CSFB Monthly Packs (16.2)		Daily usage limit : 1GB(4G smartphone user target)		$1.4/GB (flat rate, no return for unused data)
Small Volume Packs (16.4)		ISP 1GB (7 days), 5GB (30 days) Small-size bundle product		$3.0/GB (flat rate, no return for unused data)
Speed-limited volume product launched(16.6)		10GB / 30GB / 50GB / 100GB capacity at a rate of (30Mbps) proposed entry-level product		$3.0/GB (flat rate, no return for unused data)
Speed-limited flat-rate product launched (16.6)		Fixed-rate products with a maximum speed of 1Mbps / 3Mbps / 5Mbps		$ 140 / Mbps (monthly flat rate)
Voucher promotional items (16.12)		Daily ticket with validity of 1 day		$ 1 / GB (do not return unused data with promo sticker rate)

• Credit Cards Business (BC Card)

		(Unit: Won)
Category		2016		2015		2014
Member Store fee rate		0.8~2.5		1.50 ~ 2.70		1.50 ~ 2.70
Installment fee rate		11.0~18.5		11.00 ~ 18.50		11.00 ~ 18.50
Cash service interest rate		7.9~23.3		9.80 ~ 25.70		15.00 ~ 25.92
Card loan(credit loan)		—		—		—

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• Satellite Broadcasting Service(KT Skylife)

								2016
								1Q				2 Q				3Q				4Q
SkyLife		UHD Blue		3yr Contract		Basic fee			15,000				14,000				14,000				14,000
						Installation fee			—				—				—				—
				5yr Contract		Basic fee			14,000				13,000				13,000				13,000
						Installation fee			—				—				—				—
		UHD Green		3yr Contract		Basic fee			13,000				12,000				12,000				12,000
						Installation fee			—				—				—				—
				5yr Contract		Basic fee			12,000				11,000				11,000				11,000
						Installation fee			—				—				—				—
		UHD On		3yr Contract		Basic fee			11,000				10,000				10,000				10,000
						Installation fee			—				—				—				—
				5yr Contract		Basic fee			10,000				9,000				9,000				9,000
						Installation fee			—				—				—				—
OTS		UHD OTS 15		3yr Contract		Basic fee			15,000				15,000				15,000				15,000
						Installation fee			—				—				—				—
		UHD OTS 12		3yr Contract		Basic fee			12,000				12,000				12,000				12,000
						Installation fee			—				—				—				—
		UHD OTS 10		3yr Contract		Basic fee			10,000				10,000				10,000				10,000
						Installation fee			—				—				—				—

• 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.

• Staffing Agency (HNC Network)

		(unit: Won thousand)
Category		2016				2015				2014				Note
Subcontract			2,711				2,490				2,434			Average subcontract, dispatch commission / person
Dispatch			2,367				1,625				1,594

• Information Securities (Initech)

		(Unit: Won thousand)
Category				2016				2015
Certification and encryption		PKI			5,000				5,000
		INISAFE Web			4,563				6,489
		SAFE DB			3,811				7,460
Integrated Security Management		INISAFE NEXESS			9,195				7,161
		NexID			5,612				3,989

• Financing business (Smartro)

There is a variety of service prices for each card and service, and the service unit price is falling every year due to the issue of commission fee cuts. The average unit price in 2016 has been reduced by 10.1% compared to 2015.

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• Equipment and Related Product Wholesale (KTM&S)

In the case of terminals, it follows the manufacturer’s pricing policy, and in case of communication services, KT’s pricing policy is applied.

• Online Contents Distribution (KT Hitel)

We offer a variety of services such as movies, drama, and education in the content area. We also sell a variety of products through T-commerce ‘K-shop’. It is not possible to calculate the sales item price for all these services.

• E- Commerce (KT Commerce)

During the reporting period, there is no change in the selling price of products or services that have a significant impact on the profitability of the business.

• Music contents (KT Music)

Category		Detail		2016. 4Q
Record		CD			8,000
Online streaming		Download 30 songs + streaming			9,000
		Download 100 songs + streaming			20,000
		Smart Download + streaming			7,000
		Download 30 songs			6,000
		Download 100 songs			18,000
		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.

• 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 Provision (KT DS)

A price for IT services varies depending on the software price.

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• Directory Assistance Business (KTIS, KTCS)

KTCS

Item		2016		2015		2014
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)

* Estimation of the average price of a contact center is not meaningful because it can not be seen as a single task due to the nature of business depending on the type of business (inbound / outbound), business type (financial business, shopping mall, etc). The distribution business also has many kinds of product sales, and it can not calculate the exact price according to various reasons such as the environmental change of communication market and marketing cost.

KTIS

Item				2016																2015																2014
Contact center		114 directory assistance			Won120 (Night/Holidays Won140)																Won120 (Night/Holidays Won140)																Won120 (Night/Holidays Won140)
		Contact center			2,220( unit : Won thousand/month, person)																2,220( unit : Won thousand/month, person)																2,284( unit : Won thousand/month, person)
Priority Number assistance		Monthly fixed rate (Won)			1 group				2group				3 group				4 group				1 group				2group				3 group				4 group				1 group				2group				3group				4 group
		Megalopolis			Delete																Delete																65,000				63,000				60,000				55,000
		City			55,000				53,000				50,000				45,000				55,000				53,000				50,000				45,000				55,000				53,000				50,000				45,000
		Borough			44,000				42,000				40,000				36,000				44,000				42,000				40,000				36,000				44,000				42,000				40,000				36,000
		Dong			33,000				31,000				30,000				27,000				33,000				31,000				30,000				27,000				33,000				31,000				30,000				27,000

* Priority number assistance subscription fee is subdivided according to service area and industry group.Each group is divided into city, district and province, and the groups of each industry are divided into four groups: 1 group(moving center, car rental), 2 group(flower shop, flower delivery), 3group(quick delivery, key repair, etc.), and 4 group(1 ~ 3 groups).

• MVNO (KT M mobile)

Products		2016		2015
Mobile (Postpaid)		<2016.1> M JejuAirline 19/28/34 <2016.2> M unlimited Voice call USIM 448 M Teenage LTE USIM 19/24 <2016.3> M Gift 19/28/34 <2016.4> Young 30 <2016.5> M unlimited Voice call 459 Young 50		2015.01 2015.02 2015.03 2015.05 2015.06 2015.07 2015.08 2015.09		LTE Standard(WiFi) M Economy 19 M Welfare 8000, M welfare LTE 45 M LTE 19/24/29 No Contract LTE 43 (unlimited voice) M Economy 17 M Economy 22 Absolute Discount M 119 Zero M Unlimited Voice in network LTE 35/45/55(roll over) No Contract LTE USIM 17 LTE Absolute Discount M Youth LTE 19/24 M Unlimited Voice USIM 205 M Unlimited Voice 285/325

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Products		2016		2015
		<2016.7> 3G Discounted tariff M unlimited Voice call 3G 46 <2016.8> M Adult 19/24 <2016.9> M Teen 3G 13 <2016.12> Economy USIM 0.9 Economy USIM 1.7 Economy USIM 1.9 Economy USIM 2.9		2015.10 2015.11 2015.12		No Contract LTE USIM 13 M Unlimited Voice USIM 258/298 M Unlimited Voice 425 M Unlimited Voice USIM 348 M Data Only USIM 3.2GB M Absolute Discount
Mobile (Prepaid)		<2016.7> MPPS 35 <2016.8> LTE PPS 35		2015.02 2015.09		M Soldier M LTE Basic

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3. Matters Related to Revenue

A. Performance in Terms of Revenue

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

² KT

(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Service revenue			14,755,901				86.7	%			14,505,385				85.6	%			14,408,096				82.6	%
Merchandise sales (*)			2,272,967				13.3	%			2,436,972				14.4	%			3,027,707				17.4	%
Total			17,028,868				100.0	%			16,942,357				100.0	%			17,435,803				100.0	%

Ø figures are calculated based on K-IFRS

² KT Sat

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Gap filler rentals			84,903				58.78	%			83,881				62.9	%			80,628				57.9	%
Data transmission			13,354				9.25	%			13,195				10.0	%			13,625				9.8	%
Video transmission			10,843				7.50	%			10,295				7.8	%			8,520				6.1	%
Mobile satellite service			14,910				10.32	%			14,546				10.9	%			14,967				10.8	%
Others			20,428				14.14	%			11,311				8.4	%			21,412				15.4	%
Total			144,438				100.0	%			133,228				100.0	%			139,152				100.0	%

Ø figures are calculated based on K-IFRS

² KT Powertel

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Frequency Trunked Communications			58,928				73.3	%			70,957				68.3	%			85,277				81.3	%
Mobile Handsets			18,830				23.4	%			27,525				26.5	%			16,923				16.1	%
Others			2,607				3.3	%			5,369				5.2	%			2,666				2.5	%
Total			80,365				100.0	%			103,851				100.0	%			104,866				100.0	%

Ø figures are calculated based on K-IFRS

² KT Linkus

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Public Telephony Business			61,282				52.3	%			67,679				59.2	%			70,243				66.1	%
Logistics Business			27,710				23.6	%			25,775				22.5	%			23,284				21.9	%
Product Distribution Business			15,911				13.6	%			11,051				9.7	%			5,178				4.9	%
Others			12,339				10.5	%			9,841				8.6	%			7,560				7.1	%
Total			117,242				100.0	%			114,345				100.0	%			106,265				100.0	%

Ø figures are calculated based on K-IFRS

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² KT Rwanda Networks, Ltd

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
LTE			9,282				34.5	%			1,929				25.4	%			520				13.2	%
Fixed			5,032				63.7	%			5,506				72.5	%			3,418				86.8	%
Other			256				1.8	%			159				2.1	%			0				0.0	%
Total			14,570				100.0	%			7,594				100.0	%			3,939				100.0	%

Ø Source: KTRN financial statements, 2016

• Credit Cards Business (BC Card)

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Card revenue			210,879				5.9	%			205,030				5.9	%			202,420				6.1	%
Credit card processing			3,072,762				86.1	%			2,948,177				84.1	%			2,857,252				86.7	%
Additional service			88,716				2.5	%			91,803				2.6	%			94,860				2.9	%
Others			194,581				5.5	%			259,085				7.4	%			139,767				4.2	%
Total			3,566,938				100.0	%			3,504,095				100.0	%			3,294,299				100.0	%

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.

Ø figures are calculated based on K-IFRS

• Satellite Broadcasting (KT Skylife)

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Service revenue			342,187				54.7	%			356,051				56.8	%			377,656				60.6	%
Platform revenue			185,909				29.7	%			162,116				25.9	%			129,921				20.9	%
Rental revenue			43,446				6.9	%			46,664				7.4	%			53,001				8.5	%
Others			53,583				8.6	%			61,567				9.8	%			62,223				10.0	%
Total			625,126				100.0	%			626,398				100.0	%			622,800				100.0	%

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

Ø figures are calculated based on K-IFRS

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

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Rental business			131,530				33.8	%			130,171				40.2	%			132,009				47.1	%
Real estate commission business			120,697				31.0	%			115,203				35.5	%			103,756				37.0	%
PM fee			8,183				2.1	%			6,226				1.9	%			9,427				3.4	%
Development business			76,050				19.6	%			69,548				21.5	%			34,312				12.2	%
Selling business			38,772				10.0	%			—				0.0	%			246				0.1	%
Others			13,488				3.5	%			2,769				0.9	%			636				0.2	%
Total			388,720				100.0	%			323,917				100.0	%			280,386				100.0	%

Ø figures are calculated based on K-IFRS

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• Staffing Agency (HNC Network)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Subcontract			33,984				93.9	%			29,811				91.3				28,112				93.9
Dispatch			2,189				6.1	%			2,833				8.7				1,817				6.1
Total			36,173				100.0	%			32,645				100.0				29,929				100.0

Ø figures are calculated based on K-IFRS

• Information Securities (Initech)

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Certification & Encryption (PKI, SAFE DB)			5,358				8.0	%			5,423				9.6	%			6,662				14.7	%
Total Security Solution (INISAFE NEXESS, SA)			2,518				3.7	%			2,350				4.1	%			1,790				3.9	%
Equipment Sales			366				0.5	%			669				1.2	%			136				0.3	%
Finance ASP			10,025				14.9	%			10,025				17.7	%			11,283				24.8	%
SI			23,710				35.2	%			10,384				18.2	%			5,825				12.8	%
Products			8,225				12.2	%			14,261				25.1	%			10,769				23.7	%
ITO			11,915				17.7	%			8,447				14.9	%			4,264				9.4	%
Outsourcing			4,942				7.4	%			4,928				8.7	%			4,455				9.8	%
Rental Revenue			269				0.4	%			268				0.5	%			265				0.6	%
Total			67,328				100.0	%			56,755				100.0	%			45,449				100.0	%

• Financing Business (Smartro)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Product			11,957				7.3	%			6,476				4.2	%			3,848				2.7	%
Outsourcing			152,521				92.7	%			145,945				95.8	%			137,054				97.3	%
Total			164,478				100.0	%			152,421				100.0	%			141,352				100.0	%

• Equipment and Related Product Wholesale (KTM&S)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Product			526,118				73.0	%			636,601				74.7	%			626,541				70.8	%
Commission			194,882				27.0	%			216,177				25.3	%			258,845				29.2	%
Total			721,000				100.0	%			852,778				100.0	%			885,386				100.0	%

Ø figures are calculated based on K-IFRS

• Online Contents Distribution (KT Hitel)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Contents Distribution (IP Contents)			56,361				28.4	%			54,509				34.0	%			47,691				35.0	%
Platform Construction, R&D			68,976				34.7	%			64,668				40.3	%			62,039				45.6	%
TV Shopping			73,402				36.9	%			41,318				25.7	%			26,307				19.3	%
Wireless Internet			—				—				49				0.0	%			41				0.0	%
Total			198,739				100.0	%			160,545				100.0	%			136,078				100.0	%

Ø Most of sales are generated domestically.

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• E- Commerce (KT Commerce)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Product			496,860				99.9	%			586,762				99.8	%			514,928				99.8	%
Others			698				0.1	%			742				0.2	%			890				0.2	%
Total			497,558				100.0	%			587,504				100.0	%			515,818				100.0	%

Ø figures are calculated based on K-IFRS

• Music contents (KT Music)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Music business			103,001				92.6	%			86,772				97.3	%			85,261				98.8	%
Others			8,286				7.4	%			2,407				2.7	%			1,079				1.2	%
Total			111,287				100.0	%			89,179				100.0	%			86,340				100.0	%

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

Ø Others: Outsourcing and others.

• Submarine Cable Construction(KT Submarine)

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Construction			65,821				78.4	%			43,817				65.9	%			49,739				64.9	%
Maintenance & Repair			11,552				13.8	%			12,615				18.9	%			13,534				17.7	%
Others			6,586				7.8	%			9,986				15.2	%			13,380				17.4	%
Total			83,959				100.0	%			66,418				100.0	%			76,653				100.0	%

Ø figures are calculated based on K-IFRS

• Security and Guards (KT Telecop)

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Security service			307,734				98.0	%			295,244				98.2	%			254,480				99.0	%
Distribution			5,652				1.8	%			4,882				1.6	%			1,942				0.8	%
Others			542				0.2	%			522				0.2	%			607				0.2	%
Total			313,928				100.0	%			300,648				100.0	%			257,029				100.0	%

Ø figures are calculated based on K-IFRS

• Advertising (Nasmedia)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Advertising			61,632				99.8				45,375				99.7				29,855				100.0
Financial Lease			118				0.2				115				0.3				—				—
Total			61,750				100.0				45,490				100.0				29,855				100.0

Ø figures are calculated based on K-IFRS

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• Software development and Provision (KT DS)

																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Product			56,631				12.0	%			74,372				17.8	%			14,627				4.1	%
Outsourcing			413,975				88.0	%			342,708				82.2	%			338,653				95.9	%
Total			470,606				100.0	%			417,080				100.0	%			353,280				100.0	%

Ø figures are calculated based on K-IFRS

• Directory Assistance Business (KTCS, KTIS)

KTCS																		(Unit : Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Olleh customer service (1)			204,578				44.6	%			207,098				43.0	%			182,201				41.6	%
Contact business (2)			76,475				16.7	%			78,061				16.2	%			75,380				17.2	%
114 business (3)			29,468				6.4	%			36,795				7.6	%			34,763				7.9	%
Number priority business (4)			31,201				6.8	%			32,782				6.8	%			35,168				8.0	%
Distribution (5)			102,335				22.3	%			119,169				24.7	%			102,875				23.5	%
Others (6)			14,222				3.1	%			7,838				1.6	%			7,651				1.7	%
Total			458,279				100.0	%			481,741				100.0	%			438,038				100.0	%

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		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Outsourcing (1)			203,657				46.6	%			213,075				46.2	%			203,884				45.2	%
Number priority business (2)			28,791				6.6	%			30,315				6.6	%			33,260				7.4	%
Call center business (3)			74,066				17.0	%			73,629				16.0	%			76,830				17.1	%
Distribution (4)			107,775				24.7	%			128,970				28.0	%			131,621				29.2	%
Others			22,440				5.1	%			15,108				3.3	%			5,068				1.1	%
Total			436,730				100.0	%			461,098				100.0	%			450,663				100.0	%

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

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Ø (3) Call center service provided other than KT

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

• MVNO (KT M mobile)

																		(Unit: Won million)
Category		2016								2015								2014
		Amount				%				Amount				%				Amount				%
Product (Pre-paid)			619				0.6	%			366				0.9	%			—				—
Service(Pre-paid)			5,405				4.8	%			2,301				5.4	%			—				—
Product (Post-paid)			49,649				44.3	%			25,862				60.9	%			—				—
Service(Post-paid)			56,333				50.3	%			13,907				32.8	%			—				—
Total			112,006				100.0	%			42,436				100.0	%			—				—

Ø figures are calculated based on K-IFRS

B. Channels and Methods of Sales

• Telecommunication (KT)

• Sales organization

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• Sales Channels

C. Methods and Conditions of Sales

[Discount rates based on Contract Periods(Broadband)]

(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	%			—

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[Additional discounts after the Three-Year contract(Broadband)]

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 contracts renewal(Broadband)]

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

%

—

[Mobile sign up fee removal] (effective of Mar 31 2015)

		2015		2014		2013
Discount rate		100% (Won 7,200 -> Won 0)		70% (Won 14,400 -> Won 7,200)		40% (Won 24,000 -> Won 14,400)

Ø VAT included

[LTE Data-Centric Plans]

Price		Basic(KRW)		Voice		SMS		Data		Others
LTE Data Centric 32.8		32,890		Unlimited (plus 30 min Video Call)		Unlimited		300MB		Free Olleh TV Mobile (54.8 or higher) Free Data sharing for 2 lines
LTE Data Centric 38.3		38,390						1GB
LTE Data Centric 43.8		43,890						2GB
LTE Data Centric 49.3		49,390						3GB
LTE Data Centric 54.8		54,890						6GB
LTE Data Centric 65.8		65,890		Unlimited (plus 200 min Video Call)				Unlimited
LTE Data Centric 76.8		76,890
LTE Data Centric 109		109,890

[Aged 24 and under Plans]

Price

Basic(KRW)

Voice

SMS

Data

Others

Under 24

Y24 32.8

32,890

Unlimited (plus 30 min Video Call)

Unlimited

300MB

2GB+3Mbps for 3 hours in every Day Half price for Genie pack

Y24 38.3

38,390

1GB

Y24 43.8

43,890

2GB

Y24 49.3

49,390

3GB

Y24 54.8

54,890

6GB

Y24 65.8

65,890

Unlimited (plus 200 min Video Call)

Unlimited

Under 18

Y Teen 20

20,900

Controlling in given Data

200 a day

1,400MB

Data Switch

Y Teen 27

27,390

2,000MB

Y Teen 32

32,890

3,000MB

Y Teen 38

38,390

4,700MB+400Kbps

Under 12

Kid AL 115(LTE)

12,650

12,000

50

—

Smart safeguard

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[3G Smartphone Tariff Plan]

Type of plan

Basic fee

Voice (minute)

SMS (one)

Data (GB)

Others

Net Unlimited 51

56,100

Unlimited

Unlimited

5GB

Net Unlimited 61

67,100

Unlimited

Unlimited

10GB

Net Unlimited 77

84,700

Unlimited

Unlimited

17GB

Net Unlimited 99

108,900

Unlimited

Unlimited

25GB

Net Everybody olleh 28

30,800

130

Unlimited

750MB

On-net wireless unlimited

Net Everybody olleh 34

37,400

185

Unlimited

1.5GB

On-net wireless unlimited

Net Everybody olleh 41

45,100

250

Unlimited

2.5GB

On-net wireless unlimited

Net i-Slim

23,100

150

200

100MB

Net i-Value

39,600

300

300

Unlimited

[Smart Device Plan(LTE)]

		Type of plan		Basic fee				Voice (minute)		SMS (one)		Data		Others
Wearable		Wearable			11,000			50		250		500MB		—
Tablet		Data together			12,1000			—		—		500MB		—
		Net Data 1.6G			19,8000			—		—		1.6GB		—
		Net Data 3.2G			24,750			—		—		3.2GB		—
		Net Data 6.4G			33,000			—		—		6.4GB		—
		Net Data Unlimited			108,900			—		—		35GB		5Mbps QoS
Action Cam		Smart Action 10GB			16,500			—		—		10GB		10Mbps QoS

* If you visit olleh.com, you can find the various price plan to more detail

D. Sales Strategy

• Telecommunication (KT)

(a) Mobile Service

• Enhancing leadership and competitiveness in the smartphone and emerging devices market: expanding the smartphone subscriber base and pioneering wearable device and IoT 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 video streaming 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.

• Providing various discount program and alliance program to the customer : credit card, CMA, check card

• Constructing the CS service process to optimize the smartphone customer and providing the differentiate program.

• Proving new program to the customer for more easier and innovative migration program for existing customer

• Launching to Improve retention program

(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.

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(c) Broadband Internet Service

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

• Expanding synergies with smart home businesses such as IPTV

• 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.

(d) Telephone Service

• Minimizing PSTN line loss by customer segmentation.

• Expanding a new customer base.

• Discovering a new business model and promoting remodeling.

• Private and SOHO customer : Unlimited Price Plan

• Customer retention program for various bundling service and bulk line discount program

• Telecommunication (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.

• Telecommunication (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.

• Telecommunication (KT Rwanda Network Ltd)

KTRN is the 4G network wholesaler in Rwanda. KTRN focuses on increasing 4G service recognition and expanding sales volume through cooperation with mobile retailer. In recently by expanding shop-in-shop type distribution channel where customer try to use the smartphone handset directly before they are buying and providing the partnership program with wholesale and retail channel and improving the 4G awareness to the customer. KTRN opened the 4G LTE flagship store “4G Square” in Kigali(June, 2015) and Lubabu(August, 2015). From September 2015, KTRN sell the 4G samsung smartphone and 4G bundle service in the 23 service center in the country by cooperating with TICO.

• 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 250 sales offices which are organized under 13 branches (four in Seoul, two in Busan and one each in Daejeon, Daegu, Gwangju and etc). KT Skylife is offering “olleh TV Skylife” through KT’s inbound and outbound sales channels. KT Skylife is offering expanded bundled products, 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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• 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.

• Information Securities (Initech)

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.

• Online 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.

• E-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.

• Directory Assistance Business (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)

• R&D Organization Structure

• Institute of Convergence Technology.

• 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.

• R&D Costs

(Unit: Won, million)
Category				2016				2015				2014
Raw Materials					—				—				—
Labor Costs					49,821				49,626				43,426
Depreciation					45,921				54,835				56,426
Commissions					—				12				—
Others					115,181				107,624				347,659
Total R&D Costs					210,923				212,097				447,512
Accounting Treatment		Research and Ordinary Development Costs			165,720				178,436				183,595
		Development Costs (Intangible Assets)			45,203				33,661				263,917
Percentage of R&D Costs over Revenue					1.24	%			1.25	%			2.57	%

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5. Other Matters Necessary for Making Investment Decisions

A. Intellectual Property Rights

• Telecommunication (KT)

KT holds 5,044 domestic patents and 1,072 overseas patents as of December 31, 2016.

• Online Contents Distribution (KT Hitel)

KT Hitel holds 40 patents, more than 500 trademarks and 3 designs.

• E-commerce (KT Commerce)

KT Commerce holds 2 patents.

• Security and Guards (KT Telecop)

KT Telecop holds total 113 (36 patents, 5 designs and 72 trademarks)

• Information Security Business (Initech)

Intech holds 32 domestic patents and 35 trademarks

• Advertising (Nasmedia)

Nasmedia holds 2 domestic patents and 3 trademarks

• Software development and provider (KT DS)

KTDS holds 2 patents, 8 trademarks and 13 designs

• MVNO (KT M-mobile)

KT M-mobile holds 3 intellectual property rights.

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III. Financial Information

1. Summary of Financial Statements (Consolidated)

(Unit: Won, million)
Classification		2016				2015				2014
Current Assets			9,643,306				8,583,176				8,750,934
•   Cash and Cash Equivalents			2,900,311				2,559,464				1,888,663
•   Trade and Other Receivables			5,331,245				4,884,617				4,813,761
•   Inventories			377,981				525,366				393,271
•   Other Current Assets			311,135				316,905				349,615
Non-current Assets			20,944,427				20,758,009				25,024,568
•   Trade and Other Receivables			709,011				704,147				848,863
•   Property, plant and equipment			14,312,111				14,478,914				16,468,196
•   Investment Property			1,148,044				1,102,070				1,059,630
•   Intangible Assets			3,022,803				2,599,751				3,544,033
•   Investments in Joint Ventures and Associates			284,075				270,029				338,780
•   Other Non-Current Assets			106,099				102,358				72,041
Total Assets			30,587,733				29,341,185				33,775,502
Current Liabilities			9,466,147				8,639,906				9,992,244
Non-Current Liabilities			8,326,807				8,535,814				11,992,970
Total Liabilities			17,792,954				17,175,720				21,985,214
Capital Stock			1,564,499				1,564,499				1,564,499
Share Premium			1,440,258				1,440,258				1,440,258
Retained Earnings			9,656,544				9,059,305				8,571,130
Accumulated Other Comprehensive Expense			-1,432				13,870				25,790
Other Components of Equity			-1,217,934				-1,232,863				-1,260,709
Non-Controlling Interests			1,352,844				1,320,396				1,449,320
Total Shareholders’ Equity			12,794,779				12,165,465				11,790,288
		(Unit: Won million)
Classification		2016				2015				2014
Operating Revenue			22,743,665				22,281,221				22,311,666
Operating Profit			1,439,979				1,292,944				-406,590
Profit for the Period			797,844				631,288				-966,176
Number of Consolidated Companies			56				54				66

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2. Summary of Financial Statements (Separate)

		(Unit: Won, million)
Classification		2016				2015				2014
Current Assets			4,851,079				4,636,920				3,836,507
•  Cash and Cash Equivalents			1,602,397				1,126,991				469,255
•  Trade and Other Receivables			2,590,161				2,974,117				2,977,621
•  Other Financial Assets			289,613				2,051				16,433
•  Inventories			178,096				327,240				201,870
•  Other Current Assets			190,812				204,579				169,607
Non-Current Assets			19,849,258				19,585,575				21,083,789
•  Trade and Other Receivables			622,045				605,181				722,658
•  Other Financial Assets			198,777				218,582				136,581
•  Property and equipment			11,961,193				12,144,964				12,418,683
•  Investment Property			662,985				683,511				694,626
•  Intangible Assets			2,337,549				1,804,083				2,443,023
•  Investments in Subsidiaries, Associates and Joint Ventures			3,638,856				3,541,837				3,838,200
•  Other Non-Current Assets			26,507				30,929				38,882
Total Assets			24,700,337				24,222,495				24,920,296
Current Liabilities			6,027,671				5,978,832				6,330,712
Non-Current Liabilities			7,588,147				7,859,707				8,983,730
Total Liabilities			13,615,818				13,838,539				15,314,442
Capital Stock			1,564,499				1,564,499				1,564,499
Share Premium			1,440,258				1,440,258				1,440,258
Retained Earnings			9,156,204				8,446,950				7,729,425
Accumulated Other Comprehensive Income			-32,091				(17,270	)			-24,193
Other Components of Shareholders’ Equity			-1,044,351				(1,050,481	)			-1,104,135
Total Shareholders’ Equity			11,084,519				10,383,956				9,605,854
		(Unit: Won, million)
Classification		2016				2015				2014
Operating Revenue			17,028,868				16,942,357				17,435,803
Operating Profit			1,059,591				863,860				-719,490
Profit for the Period			809,330				770,324				-1,141,889

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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 2016		FY 2015		FY 2014
Samil PwC		Samil PwC		Samil PwC

B. Audit (or review) Comments

Fiscal Year		Audit (or review) Comments		Issues noted
2016		Unqualified		Not applicable
2015		Unqualified		Not applicable
2014		Unqualified		Not applicable

2. Auditors’ opinion on the separate financial statements

A. Auditor’s opinion on the separate financial statements

FY 2016		FY 2015		FY 2014
Samil PwC		Samil PwC		Samil PwC

B. Audit (or review) Comments

Fiscal Year		Audit (or review) Comments		Issues noted
2016		Unqualified		Not applicable
2015		Unqualified		Not applicable
2014		Unqualified		Not applicable

3. 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

2016

Samil PwC

Review interim financial statements

2,700

39,835

Audit of Separate financial statements

Audit of the consolidated financial statements

20-F Filing

2015

Samil PwC

Review interim financial statements

2,700

41,837

Audit of Separate financial statements

Audit of the consolidated financial statements

20-F Filing

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

B. Non-Audit services contract

(Unit: Won)
Fiscal Year		Contract date		Contents		Service period		Compensation
2016		2016/7		Comfort letter		2016/7			150,000,000
2015		2015/9		Confirming FY2014 financial ratio for Internet-only bank license		2015/9			900,000
2015		2015/2		Samurai bond comfort letter		2015/2			100,000,000
2014		2014/4		Comfort letter		2014/4			150,000,000
Total									400,900,000

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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 28, 2016, the Board of Directors of KT consists of 11 Directors (3 Inside Directors and 8 Outside Directors). Under the Board of Directors, KT has eight different Committees as follows; Corporate Governance Committee, Audit Committee, Outside Director Candidate Recommendation Committee, Evaluation & Compensation Committee, Executive Committee, CEO Recommendation Committee, Related-Party Transaction Committee and Corporate Sustainability Management 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
1st		2016. 1. 28		Approval of financial statements(separate and consolidated) of the 34th term		Original proposal approved
				Approval of Business reports of the 34th term		Original proposal approved
				Proposal on Corporate Sustainability Management Plan in 2016		Original proposal approved
				Proposal on donation to CSV in 2016		Original proposal approved
				Amendment of the articles on the BOD’s Committee		Original proposal approved
2nd		2016. 3. 3		Proposal on operational support for GCCI (Gyeonggi Center for Creative Economy and Innovation)		Original proposal approved
				Amendment of the articles		Original proposal approved
				Disposal of long term incentive and Acquisition of treasury shares		Original proposal approved
				Recommendation of Audit committee’s candidate		Recommendation of Audit committee’s candidate
				Agreement on the recommendation of Inside Directors		Original proposal approved
				Limit on Remuneration of Directors in 2016		Original proposal approved
				Standards and Method of Payment on Remuneration of CEO and Inside Directors		Original proposal approved
				Amendment of Executives’ severance pay Regulations		Original proposal approved
				Limit on Remuneration and distinction of administration executives		Original proposal approved
				Approval of financial statements(separate and consolidated) of the 34th term		Original proposal approved
				Approval of Business reports of the 34th term		Original proposal approved
				Notice of Annual General Meeting for the 34th term		Original proposal approved
				Report on operational condition of the internal accounting management system in 2015		Original proposal approved
				Report on inspection results of the internal accounting management system in 2015 by Audit committee		Original proposal approved
3rd		2016. 3. 25		Proposal on Acquisition of new Spectrum		Original proposal approved
				Proposal on election the chairman and committee organization		Chairman of BOD and members of committees appointed
4th		2016. 4. 28		Proposal on Corporate Sustainability Management committee Establishment and organization		Original proposal approved
				Amendment of the Corporate Governance Committee’s articles		Original proposal approved
				Proposal on disposition of treasury shares for long-term incentive		Original proposal approved
				Proposal on Real estate development plan of Sin-sa branch		Original proposal approved
				Report of financial statements(separate and consolidated) of the 1Q 2016		Original proposal approved
				Report of financial performance with other corporate which is less than 15 billion		Original proposal approved
				Report on inspection results of compliance management		Original proposal approved
5th		2016. 5. 22		Proposal on Renewal of 2.1GHz spectrum		Original proposal approved
6th		2016. 7. 28		Report of financial statements(separate and consolidated) of the 1H 2016		Original proposal approved
				Proposal on participation in capital increase with consideration on KT M mobile		Original proposal approved
				Proposal on election compliance officer and Amendment of the compliance standard		Original proposal approved
				Proposal on provision long-term incentive payment and disposition of treasury shares		Original proposal approved
				Limit on Remuneration of long term incentive and standard on stock compensation		Original proposal approved
				Proposal on Changing the committee’s organization		Original proposal approved

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7th		2016. 9. 23		Amendment of articles on the BOD		Original proposal approved
8th		2016. 10.28		Report of financial statements(separate and consolidated) of the 3Q 2016		Original proposal approved
				Proposal on donation and operational support for ICCI (Incheon Center for Creative Economy and Innovation)		Original proposal approved
				Proposal on Real estate complex development plan of Songpa branch		Original proposal approved
				Proposal on Real estate complex development plan of Seoul joongang branch		Original proposal approved
				Amendment of the articles of the BOD’s Committee		Original proposal approved
9th		2016. 12. 8		Proposal on KT business plan for 2017		Original proposal approved
				Proposal on ITO Related-party Transaction for 2017		Original proposal approved
				Proposal on donation to labor welfare fund in 2016		Original proposal approved

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

(a) Organization of the Committees under the Board of Directors (as of March 28, 2017)

Title		Organization		Name		Purpose of Establishment and Authority		Note (Prior to 35th AGM)
CEO Recommendation Committee		All 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) Do-Kyun Song, Jong-Gu Kim, Gae-Min Lee, Hyeon-Mo Ku		Improvement of Corporate Governance		Suk-Gwon Chang (Chairperson) Do-Kyun Song, Dae-Keun Park, Dae-Ho Kim, Hyeon-Mo Ku
Outside Director Candidate Recommendation Committee		All 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-Gu Kim (Chairperson) Dong-Wook Chung, Sang Kyun Cha, Dae-Keun Park		Audit Committee installation according to Commercial Law §542: 11 (Audit Committee) 1st article ø See V. 2. Audit Committee		Jong-Gu Kim (Chairperson) Dong-Wook Chung, Sang Kyun Cha, Dae-Keun Park
Evaluation & Compensation Committee		4 Outside Directors		Dong-Wook Chung (Chairperson) Do-Kyun Song, Suk-Gwon Chang, Il Lim		Management Agreement with the CEO and Assessment		Sang Kyun Cha (Chairperson) Do-Kyun Song, Suk-Gwon Chang, Dae-Keun Park
Executive Committee		3 Inside Directors		Chang-Gyu Hwang (Chairperson), Heon Moon Lim, Hyeon-Mo Ku		Management and financial matters authorized by the Board of Directors		Chang-Gyu Hwang (Chairperson), Heon Moon Lim, Hyeon-Mo Ku
Related-party Transaction Committee		4 Outside Directors		Dae-Keun Park(Chairperson), Do-Kyun Song, Gae-Min Lee, Il Lim		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’		Dong-Wook Chung (Chairperson) Jong-Gu Kim, Dae-Ho Kim
Corporate Sustainability Management Committee		4 Outside Directors, & 1 Inside Director		Sang Kyun Cha(Chairperson), Dong-Wook Chung, Suk-Gwon Chang, Il Lim, Heon Moon Lim		Matters about Corporate Sustainability Management		Dae-Keun Park(Chairperson), Dong-Wook Chung, Suk-Gwon Chang, Sang Kyun Cha, Heon Moon Lim

ø Outside director Daiwon Hyun resigned on June 8, 2016.

ø Outside Director Gae-Min Lee and Il Lim newly appointed on March 24, 2017.

ø Outside Director Jong-Gu Kim, Dae-Keun Park and Inside Director Heon Moon Lim, Hyeon-Mo Ku reappointed on March 24, 2017

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

• CEO Recommendation Committee

Meeting Date

Agenda

Results of discussion

Outside Director

Jong-Gu Kim

Do-Kyun Song

Dong-Wook Chung

Suk-Gwon Chang

Sang Kyun Cha

Dae-Keun Park

Dae-Ho Kim

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

2017.1.4

Plans for CEO election

Original proposal approved

—

FOR

FOR

FOR

FOR

FOR

FOR

2017.1.16

Reviews on CEO candidate’s documentation and Interview

Progress of review

—

FOR

FOR

FOR

FOR

FOR

FOR

2017.1.26

CEO candidate interview

Progress of interview

—

FOR

FOR

FOR

FOR

FOR

FOR

2017.1.31

Recommendation for CEO

Recommendation

—

FOR

FOR

FOR

FOR

FOR

FOR

ø According to the CEO Recommendation Committee’s articles, the affirmative votes of majority of all directors in office excluding the chairperson are required for resolution (The chairperson don’t have the right to vote)

• Corporate Governance Committee:

Meeting Date

Agenda

Results of discussion

Outside Director

Suk-Gwon Chang

Do-Kyun Song

Sang Kyun Cha

Dae-Keun Park

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 80%

2016.1.28

Report on Corporate Sustainability Management Plan in 2015

Original proposal approved

FOR

FOR

FOR

FOR

Report on Amendment of the articles of the BOD’s Committee

Original proposal approved

FOR

FOR

FOR

FOR

2016.2.16

Report on Amendment of the articles

Original proposal approved

FOR

FOR

FOR

FOR

Meeting Date

Agenda

Results of discussion

Outside Director

Suk-Gwon Chang

Do-Kyun Song

Dae-Keun Park

Dae-Ho Kim

Attendance 100%

Attendance 100%

Attendance 80%

Attendance 100%

2016.4.28

Report on Corporate Sustainability Management committee Establishment

Original proposal approved

FOR

FOR

FOR

FOR

Report on Amendment of the Corporate Governance Committee’s articles

Original proposal approved

FOR

FOR

FOR

FOR

2016.9.23

Report on Amendment of the articles on the BOD

Original proposal approved

FOR

FOR

Absent

FOR

2016.10.26

Report on Amendment of the articles on the BOD’s Committee

Original proposal approved

FOR

FOR

FOR

FOR

• Evaluation & Compensation Committee

Meeting Date

Agenda

Results of discussion

Outside Director

Joo Hwan Im

Do Kyun Song

Suk-Gwon Chang

Daiwon Hyun

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

2016.2.16

Result of CEO management assessment for 2015

Original proposal approved

For

For

For

For

CEO management goal for 2016

Original proposal approved

For

For

For

For

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

Original proposal received

For

For

For

For

Report on Amendment of the Directior’s Severance pay regulation

Original proposal received

For

For

For

For

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Meeting Date		Agenda		Results of discussion		Outside Director
						Sang Kyun Cha		Do-Kyun Song		Suk-Gwon Chang
						Attendance 100%		Attendance 100%		Attendance 100%
2016.7.28		Report on provision long-term incentive payment and disposition of treasury shares		Original proposal received		For		For		For
		Report on Limit on Remuneration of long term incentive and standard on stock compensation in 2016		Original proposal received		For		For		For

• Executive Committee

Meeting Date		Agenda		Results of discussion		Inside Director
						Chang-Gyu Hwang		Heon Moon Lim
						Attendance 100%		Attendance 100%
2016.1.14		Plan for issuance of 189th corporate bonds		Original proposal approved		For		For
2016.2.5		KT Handset Account Receivable Selling Plan for 2016		Original proposal approved		For		For
		Plan for Revision of name and location of branches		Original proposal approved		For		For
2016.2.17		Plans for donation to Viewer Media Foundation		Original proposal approved		For		For

Meeting Date		Agenda		Results of discussion		Inside Director
						Chang-Gyu Hwang		Heon Moon Lim		Hyeon-Mo Ku
						Attendance 100%		Attendance 100%		Attendance 100%
2016.5.31		Proposal of Establishment for Smart farm school		Original proposal approved		For		For		For
2016.6.9		Plan for issuance of 1st foreign currency corporate bonds		Original proposal approved		For		For		For
2016.6.30		Plans for social donation in 2016		Original proposal approved		For		For		For
2016.7.8		Proposal of Establishment for ICT incubation center		Original proposal approved		For		For		For
		Proposal of invest fund for small and middle company’s overseas expansion		Original proposal approved		For		For		For
2016.9.26		Proposal of Project ‘Naju’		Original proposal approved		For		For		For

• Related-Party Transaction Committee

Meeting Date		Agenda		Results of discussion		Outside Director
						Dong-Wook Chung		Jong-Gu Kim		Dae-Ho Kim
						Attendance 100%		Attendance 100%		Attendance 100%
2016.12.2		Proposal on ITO Related-party Transaction for 2017		Original proposal approved		For		For		For

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• Corporate Sustainability Management committee

Meeting Date

Agenda

Results of discussion

Outside Director

Dae-Keun Park

Dong-Wook Chung

Suk-Gwon Chang

Sang Kyun Cha

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

2016.7.28

Report on Corporate Sustainability Management goals and 2016 First half-year assessment

Original proposal approved

For

For

For

For

(c) Evaluation of Board Activity in 2016

Evaluation Factors				Score
Role and Responsibility of BOD		Long-term strategy building		4.3
		Oversight of the management		3.7
		Review financial performance		4.6
		Independence for the fairness to shareholders		4.9
		Decision-making considering long-term interest of shareholders		4.6
		CEO Evaluation and compensation		4.3
		CEO search, training and succession		3.4
		Average		4.3
Efficiency of BOD		The number of BOD meeting and appropriateness of agenda		4.4
		Fullness of materials and sufficient explanation		4.2
		Provision of sufficient time to review materials		3.9
		Open discussion		4.3
		Access to information necessary for decision-making		4.2
		Review of follow-up measures		4.0
		Education of new board members		4.3
		Appropriateness of BOD composition		4.4
		Average		4.2
Appropriateness of board committees’ activities		Expertise of BOD members		4.0
		Empowerment to committees		4.6
		Organic connection between BOD and committees		3.9
		Appropriateness of committees’ composition		4.5
		Proper use of expertise		4.4
		Efficient operation of committees		4.1
		Average		4.2

(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 search and advisory service may be conducted if necessary.

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(b) Appointment of new Directors

Name		Expertise		Recommendation		Committees		Inside trading, relationship with major shareholders
Jong-Gu Kim		Legal		Outside Director Candidate Recommendation Committee		Audit Committee(Chairperson) Corporate Governance Committee		Not Applicable
Dae-Keun Park		Finance/Accounting		Outside Director Candidate Recommendation Committee		Related-party Transaction Committee(Chairperson) Audit Committee		Not Applicable
Gae-Min Lee		Communication		Outside Director Candidate Recommendation Committee		Corporate Governance Committee Related-party Transaction Committee		Not Applicable
Il Lim		Management Of Technology/ IT technology		Outside Director Candidate Recommendation Committee		Evaluation & Compensation Committee Related-party Transaction Committee Corporate Sustainability Management committee		Not Applicable

(c) Establishing separate committee to appoint new directors

Name		Whether Outside Director		Note
Do-Kyun Song		O		The number of Outsider Directors should be more than 50%
Sang Kyun Cha		O
Suk-Gwon Chang		O
Dong-Wook Chung		O
Hyeon-Mo Ku		X

• Outside Director Candidate Recommendation Committee

Meeting    Date

Agenda

Results of discussion

Independent and Non-Executive Directors

Do-Kyun Song

Sang Kyun Cha

Suk-Gwon Chang

Dong-Wook Chung

Attendance 100%

Attendance 100%

Attendance 100%

Attendance 100%

2017.1.16

Proposal on Operation plan for Outside Director Candidate Recommendation Committee

Original proposal approved

For

For

For

For

2017.2.21

Report on result of the candidate search and confirm new director candidates

Original proposal approved

For

For

For

For

2017.3.3

Final decision on Outside Director candidates

Original proposal approved

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 2016

• Management presentation for new BOD members : 1^st (3.15), 2^nd(5.17), Dae-Ho Kim

• Programs provided by Korea Directors Association(9.20-11.22), Dae-Ho Kim

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2. Audit Committee

(1) Personal Information of Members of the Audit Committee

		(as of March 28, 2017)
Name		Experience		Note
Jong-Gu 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 (present)		Outside Director
Sang Kyun Cha		•    Ph.D. in database systems, Stanford University •    Professor of Seoul National University (present) •    Chairman, Big data Research center of Seoul National University (present) •    Member of IEEE ICDE Executive Committee (present)		Outside Director
Dae-Geun Park		•    Ph.D., Economics, Harvard University •    Professor of the College of Economics and Finance, Hanyang University (present) •    Chief of the Economic Research Institute, Hanyang University (present) •    Chairman, Financial Development Council, Financial Services Commission (present)		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 (present)		Outside Director

(2) Independence of Audit Committee

The Audit Committee is established within the Board of Directors and members of the audit committee are appointed at the shareholders’ meeting. The Audit Committee is composed of four Outside Directors. Among the members, Dae-Geun Park 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.

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

Order		Date		Subject		Result of Discussion
1st		2016. 2.16		Approval on remuneration for non-audit services of external auditors		Original proposal approved
				Approval of nomination for external auditor between 2016 and 2018 and audit fee in 2016		Original proposal approved
				Report on operational condition of the internal accounting management system		Original proposal approved
				Approval of nomination for new internal audit manager		Original proposal approved
				Audit committee’s report on operational condition of internal accounting management system		Original proposal approved
				Report on audit records for 2015 and audit plan for 2016		Original proposal approved
				Report of final audit for fiscal year 2016		Original proposal approved
2nd		2016. 3.17		Report of result of shareholders’ meeting agenda and papers reporting research		Original proposal approved
				Audit report for the annual general meeting of shareholders for the 34th term		Original proposal approved
				Evaluation report on operational status of internal compliance device of the audit committee		Original proposal approved
3rd		2016. 3.25		Appointment of the chairman of Audit committee		Chairman appointed
				Approval of remuneration for non-audit service of independent auditor for consolidated company for the Fiscal year 2015		Original proposal approved
4th		2016. 4.25		Report of financial statements(separate and consolidated) of the 1Q 2016		Original proposal approved
5th		2016. 7.26		Report of final audit for the first half of fiscal year 2016		Original proposal approved
				Report of audit performance for the first half of fiscal year 2016 and audit plan for second half of fiscal year 2016		Original proposal approved
				Report of financial statements(separate and consolidated) of the 1H 2016		Original proposal approved
6th		2016. 10.26		Report of financial statements(separate and consolidated) of the 3Q 2016		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, 2016]																										(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				113,725				202
KT Linkus co., Ltd.			3,045,232				87.2	%			6,588																3,045,232				87.2	%			6,588				64,318				-3,830
KT Submarine			8,085,000				39.3	%			24,370																8,085,000				39.3	%			24,370				156,993				5,146
KT Telecop Co. Ltd.			5,765,911				86.8	%			26,045																5,765,911				86.8	%			26,045				265,553				143
KTCS			3,177,426				7.4	%			6,427																3,177,426				7.4	%			6,427				207,071				7,865
KTIS			10,196,190				29.3	%			30,633																10,196,190				29.3	%			30,633				221,176				9,991
KT Skylife			23,908,000				50.3	%			311,696																23,908,000				50.3	%			311,696				762,816				65,938
kt service bukbu			476,094				67.3	%			7,089																476,094				67.3	%			7,089				32,863				694
kt service nambu			531,127				76.4	%			10,155																531,127				76.4	%			10,155				32,621				772
KT New Business Investment Fund No.1			80				90.9	%			8,112																80				90.9	%			8,112				881				-280
KT Data System Co., Ltd.			2,400,000				95.3	%			19,616																2,400,000				95.3	%			19,616				195,696				10,753
KT Capital Media Contents Investment Fund No. 2			1,339				43.5	%			1,341				-1,339				-1,341								0				0.0	%			—
KT Estate			15,848,819				100.0	%			1,084,522																15,848,819				100.0	%			1,084,522				1,656,463				53,116
KT Strategic Investment Fund No. 1			200				90.9	%			20,000																200				90.9	%			20,000				3,360				-4,371
Gyeonggi-KT green growth fund			7,600				40.3	%			2,900				-7,600				-2,900																—
SkylifeTV co., Ltd.			6,000,000				14.8	%			3,000																6,000,000				14.8	%			3,000				54,012				934
KT SB Data service			3,774,000				51.0	%			18,870																3,774,000				51.0	%			18,870				20,075				-1,983
BC card			3,059,560				69.5	%			633,004																3,059,560				69.5	%			633,004				3,555,624				148,958
H&C Network			8,903				1.0	%			848																8,903				1.0	%			848				89,726				626
KT innoedu			5,390,980				95.6	%			5,539				2,068,000				1,034				-6,573				7,458,980				96.8	%			—				6,477				103
KT Hitel			22,750,000				63.7	%			120,078																22,750,000				63.7	%			120,078				249,202				4,298
KT Commerce, Inc.			266,000				19.0	%			1,782																266,000				19.0	%			1,782				132,675				1,180
KT mhows Co., Ltd.			510,000				51.0	%			3,344				250,000				3,450								760,000				76.0	%			6,794				28,539				2,865
KT M&S Co., Ltd.			47,400,000				100.0	%			124,564																47,400,000				100.0	%			124,564				247,854				-12,955
KT Music Co., Ltd.			20,904,514				50.0	%			37,417																20,904,514				50.0	%			37,417				110,080				8,235
Nasmedia Co., Ltd			3,742,406				45.4	%			23,051																3,742,406				42.8	%			23,051				192,275				11,500
Nsearch Marketing															17,393				20,000								17,393				33.3	%			20,000				84,928				731
KT Sat			10,000,000				100.0	%			390,530																10,000,000				100.0	%			390,530				744,653				36,266
KT Strategic Investment Fund No. 2			200				90.9	%			20,000																200				90.9	%			20,000				14,429				-4,080
KT Strategic Investment Fund No. 3			0				0.0	%			—				65				6,500								65				86.7	%			6,500				7,533				-99
KT -Music Contents Investment fund no.1			2,450,000,000				23.3	%			2,450																2,450,000,000				23.3	%			2,450				10,592				103
KT Sprorts			1,320,000				66.0	%			6,600																1,320,000				66.0	%			6,600				16,925				-198
KT -Michigan Global Contents Fund			3,140,000,000				49.1	%			3,140				6,280,000,000				6,280								9,420,000,000				53.5	%			9,420				16,250				-514
Autopion			400,000				100.0	%			2,000																400,000				100.0	%			2,000				6,163				-409
KT M mobile			20,000,000				100.0	%			100,000				20,000,000				100,000								40,000,000				100.0	%			200,000				131,446				-40,041
Kt investment.inc			4,000,000				100.0	%			20,000																4,000,000				100.0	%			20,000				17,759				-1,024
Smart Channel			1,300,000				65.0	%			—				-1,300,000												0				0.0	%			—
Korea Telecom America, Inc.			6,000				100.0	%			4,064				-1,500				-1,688								4,500				100.0	%			2,376				4,464				181
Korea Telecom Japan Co., Ltd.			6,684				100.0	%			22,867												-22,867				6,684				100.0	%			—				3,592				-1,391
Korea Telecom China Co., Ltd.			0				100.0	%			2,160																0				100.0	%			2,160				532				60
KT Dutch B.V.			222,098				100.0	%			55,847																222,098				100.0	%			55,847				34,197				85
PT.KT Indonesia			198,000				99.0	%			108																198,000				99.0	%			108				16				-7
kt Belgium			66,049,999				99.9	%			69,461																66,049,999				99.9	%			69,461				79,391				-67
KT ORS Belgium			1,829,999				99.9	%			1,961																1,829,999				99.9	%			1,961				2,013				-46
KBTO			30				60.0	%			483				43,210				1,295								43,240				75.0	%			1,778				1,166				-2,587
Hong Kong Telecom			0				0.0	%			—				405,000				460								405,000				100.0	%			460				1,571				120

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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		January 23, 1953		2020 AGM
Heon Moon Lim		President		March 2014		November 15, 1960		2018 AGM
Hyeon Mo Ku		President		March 2016		January 13, 1964		2018 AGM
Outside Directors (1)
Do Kyun Song		Senior Advisor, Bae, Kim & Lee LLC		March 2013		September 20, 1943		2019 AGM
Sang Kyun Cha		Professor, Department of Electrical and Computer Engineering, Seoul National University		March 2012		February 19, 1958		2019 AGM
Jong-Gu Kim		Corporate lawyer, New Dimension Law Group		March 2014		July 7, 1941		2020 AGM
Suk-Gwon Chang		Dean, School of Business, Hanyang University		March 2014		February 21, 1956		2018 AGM
Dae-Geun Park		Professor, Department of Economics and Finance, Hanyang University		March 2014		March 15 1958		2018 AGM
Dong-Wook Chung		Senior Counsel, Law Firm Kim¸Choi & Lim		March 2015		August 22, 1949		2018 AGM
Gae-Min Lee		(Former)Editor-in-chief, The Korea Economic Daily		March 2017		November 1, 1946		2020 AGM
Il Lim		Professor, Business Administration, Yeonsei University		March 2017		March 20, 1966		2020 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. Senior Management

Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company (2)		Date of Birth
In-Hoe Kim		Senior Executive Vice President, CEO Office		December 2015		3		June 25, 1964
Cheol-Soo Kim		Senior Executive Vice President, Chief Marketing Office, Customer Business Group		December 2015		3		February 7, 1963
Kyu-Taek Nam		Senior Executive Vice President, Chief Operating Office, Corporate Management Group, Human Resources Office		December 2015		31		February 6, 1961
Soo-Ho Maeng		Senior Executive Vice President, Corporate Relations Group		December 2015		21		October 16, 1959
Seong-Mook Oh		Senior Executive Vice President, Network Group		December 2012		31		August 20, 1960
Kyoung-Lim Yun		Senior Executive Vice President, Future Convergence Business Office		December 2014		7		June 14, 1963
Dong-Myun Lee		Senior Executive Vice President, Institute of Convergence Technology		January 2014		25		October 15, 1962
Mun-Whan Lee		Senior Executive Vice President, Enterprise Business Group		December 2015		28		October 1, 1963
Kook-Hyun Kang		Executive Vice President, Chief Marketing Office, Marketing Group		December 2015		28		September 8, 1963
Jae-Hyeon Kim		Executive Vice President, Chief Marketing Office, Customer Business Group, Southern Seoul Sales Headquarter		December 2014		20		September 26, 1962
Hyoung-Wook Kim		Executive Vice President, Platform Business Planning Office		December 2015		19		April 24, 1963
Sang-Bong Nam		Executive Vice President, Chief Operating Office, Corporate Planning Group, Legal Affairs Office		January 2014		4		October 19, 1963
Byung-Sam Park		Executive Vice President Chief Operating Office, Corporate Planning Group, Legal Affairs Office, Legal Affairs Department 1		April 2014		4		October 13, 1966
Yoon-Young Park		Executive Vice President, Enterprise Business Group, Enterprise Business Consulting Unit		June 2015		21		April 18, 1962
Kwang Suk Shin		Executive Vice President, Chief Operating Office, Corporate Planning Group, Financial Management Office		December 2014		28		January 5, 1960

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Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company (2)		Date of Birth
Soo-Jung Shin		Executive Vice President, Chief Operating Office, IT Planning Group		December 2015		3		August 10, 1965
Jong-Jin Yoon		Executive Vice President, Public Relations Office		December 2015		2		February 9, 1964
Dae-San Lee		Executive Vice President, Chief Operating Office, Corporate Management Group		December 2014		29		January 10, 1961
Cheol-Gyu Lee		Executive Vice President, Network Group, Gangbuk Network O&M Headquarter		December 2015		31		August 24, 1960
Pill-Jai Lee		Executive Vice President, Chief Marketing Office, Marketing Group, Marketing Strategy Business Unit		December 2015		29		October 3, 1961
Tae-Sung Lim		Executive Vice President, Global Business Initiative Office		December 2014		26		March 4, 1963
Hong-Beom Jeon		Executive Vice President, Institute of Convergence Technology, Infra Laboratory		January 2014		25		October 3, 1962
Yeong-Ik Choi		Executive Vice President, Corporate Relations Group, Corporate Relations & Support Office		September 2014		22		January 5, 1961
Myung-Beom Pyun		Executive Vice President, Chief Marketing Office, Customer Business Group, Busan Sales Headquarter		December 2014		20		June 19, 1960
Won-Sic Hahn		Executive Vice President, Chief Operating Office, Corporate Planning Group, SCM Strategy Office		December 2015		32		October 26, 1960
In-Sik Kang		Senior Vice President, Chief Marketing Office, Marketing Group, Media Business Unit, Media Contents Department		December 2015		9		March 27, 1960
Ki-Young Ko		Senior Vice President, Network Group, Global Technology Consulting Unit		January 2014		25		October 20, 1963
Yoon-Jeon Koh		Senior Vice President, Chief Marketing Office, Marketing Group, Customer Analysis Office		December 2015		21		July 12, 1967
Dae-Gi Gong		Senior Vice President, Chief Marketing Office, Customer Business Group, Gangwon Sales Headquarter		December 2014		30		March 13, 1960
Min-Yong Kwon		Senior Vice President, Chief Marketing Office, Customer Business Group, Jeonnam Sales Headquarter		December 2015		24		September 20, 1966
Kyoung-Il Kim		Senior Vice President, Chief Marketing Office, Customer Business Group, Daegu Sales Headquarter		March 2015		20		May 25, 1967
Kwang Dong Kim		Senior Vice President, Economics & Management Research Institute, ICT Policy Research TF		February 2016		1		November 24, 1970
Ki-Taek Kim		Senior Vice President, Chief Marketing Office, Marketing Group, GiGA Business Unit		December 2015		18		August 2, 1965
Dong-Sik Kim		Senior Vice President, Chief Operating Office, Corporate Planning Group, Financial Management Office, Cost Innovation Department		December 2015		26		October 18, 1966
Man-Sik Kim		Senior Vice President, Corporate Relations Group, Corporate Relations & Cooperation Office, Fair Competition Department		January 2014		11		April 9, 1967
Bong-Gyun Kim		Senior Vice President, Chief Marketing Office, Customer Business Group, Biz Customer Business Unit		December 2015		20		October 3, 1972
Young-Myoung Kim		Senior Vice President, Future Convergence Business Office, Creative Economy Initiative Unit		December 2015		28		November 13, 1961
Young-Sik Kim		Senior Vice President, Network Group, Field Support Unit		December 2015		27		March 15, 1961
Young-Ho Kim		Senior Vice President, Chief Marketing Office, Customer Business Group, Sales Operating Business Unit		December 2015		20		September 3, 1966
Weon-Kyung Kim		Senior Vice President, CEO Office, Corporate Strategy Research Department		December 2015		26		June 15, 1963
Yi-Shik Kim		Senior Vice President, Platform Business Planning Office, Big Data Center		December 2014		4		October 16, 1968
June-Keun Kim		Senior Vice President, Platform Business Planning Office, GiGA IoT Business Unit		December 2015		7		November 12, 1966
Tae-Gyun Kim		Senior Vice President, Future Convergence Business Office, Future Business Development Unit, Smart Connectivity Business Department		December 2015		22		May 6, 1971

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Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company (2)		Date of Birth
Hyung-Joon Kim		Senior Vice President, Network Group, PyeongChang Winter Olympic Games Business Unit		December 2014		21		November 2, 1963
Hoon-Bae Kim		Senior Vice President, Platform Business Planning Office, Platform Service Business Unit		December 2015		21		December 13, 1963
Hee-Su Kim		Senior Vice President, Economics & Management Research Institute		December 2014		6		October 15, 1962
Jung-Yong Moon		Senior Vice President, Chief Operating Office, Corporate Management Group, Corporate Culture Office		December 2015		23		August 24, 1962
Kyeong-Weon Park		Senior Vice President, Chief Marketing Office, Customer Business Group, Fieldwork Supporting Unit		December 2014		28		June 25, 1963
Dae-Su Park		Senior Vice President, Economics & Management Research Institute		December 2014		28		October 28, 1963
Dong-Seope Park		Senior Vice President, Enterprise Business Group, Enterprise Business Performing Unit		December 2015		31		November 5, 1961
Sang-Hoon Park		Senior Vice President, Network Group, Field Support Unit, Mobile Access Network Quality Department		December 2014		27		September 29, 1962
Jae-Yoon Park		Senior Vice President, Network Group, Busan Network O&M Headquarter		December 2015		31		December 18, 1960
Jong-Ryeol Park		Senior Vice President, Chief Operating Office, Corporate Planning Group, SCM Strategy Office, SCM Strategy Department		December 2015		30		March 14, 1963
Jong-Ook Park		Senior Vice President, Chief Operating Office, Corporate Planning Group, Strategy & Planning Office		December 2014		24		January 24, 1962
Jong-Jin Barg		Senior Vice President, Chief Marketing Office, Customer Business Group, Chungbuk Sales Headquarter		December 2014		25		August 14, 1963
Gyu-Tae Baek		Senior Vice President, Institute of Convergence Technology, Service Laboratory		December 2015		21		March 3, 1959
Sang-Wook Seo		Senior Vice President, Chief Operating Office, Corporate Planning Group, Strategy & Planning Office, Strategic Investment Department		June 2014		5		January 26, 1972
Chang-Seok Seo		Senior Vice President, Network Group, Network Strategy Unit		December 2014		23		July 5, 1967
Sook-Kyung Sung		Senior Vice President, Institute of Convergence Technology, Infra Laboratory, Intellectual Property Rights Department		January 2014		17		November 18, 1964
Kyung-Min Song		Senior Vice President, CEO Office, Group Relations Unit		December 2015		22		November 25, 1963
Jae-Ho Song		Senior Vice President, Future Convergence Business Office, Future Business Development Unit		July 2015		24		March 26, 1966
Keum-Seok Shin		Senior Vice President, CEO Office, Ethics Center, Corporate Audit Department		December 2014		27		February 18, 1965
Hyun-Sam Shin		Senior Vice President, Chief Operating Office, Corporate Management Group, Group Human Development Academy, Educational Dispatch		February 2016		26		November 12, 1962
Hyun-Yok Sheen		Senior Vice President, Chief Operating Office, Corporate Management Group, Management Support Office		January 2014		23		August 25, 1968
Sang-Keun Ahn		Senior Vice President, Chief Marketing Office, Customer Business Group, Northern Seoul Sales Headquarter		December 2014		18		September 10, 1962
Sung-Kyu Yang		Senior Vice President, Chief Marketing Office, Customer Business Group, Customer Value Management Unit		December 2015		29		March 14, 1962
Man-Soo Oh		Senior Vice President, Chief Marketing Office, Customer Business Group, Jeonbuk Sales Headquarter		December 2014		29		February 9, 1961
Mi-Na Oh		Senior Vice President, Chief Operating Office, Corporate Management Group, Group Human Development Academy, Educational Dispatch		February 2016		23		April 11, 1969
Young-Ho Oh		Senior Vice President, Corporate Relations Group, Corporate Relations & Cooperation Office		December 2015		19		September 16, 1962
Jeong-Min Woo		Senior Vice President, Chief Operating Office, IT Planning Group, Next Generation System Development Unit		December 2014		22		February 25, 1964

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Name (1)		Title and Responsibilities		Current Position Held Since		Years with the Company (2)		Date of Birth
Sang-Kyu Yoo		Senior Vice President, Chief Marketing Office, Customer Business Group, Chungnam Sales Headquarter		December 2015		20		September 22, 1962
Yang-Hwan Ryoo		Senior Vice President, Future Convergence Business Office, Smart Energy Business Unit		December 2015		38		October 12, 1958
Hee-Kwan Ryu		Senior Vice President, Chief Marketing Office, Marketing Group, Media Business Unit		December 2015		23		July 2, 1962
Kyung-Keun Yoon		Senior Vice President, CEO Office, Biz Trend Research Department		December 2014		20		January 14, 1963
Hye-Jeong Yun		Senior Vice President, Platform Business Planning Office, Big Data Center		December 2015		26		June 12, 1966
Kang-Soo Lee		Senior Vice President, Chief Operating Office, IT Planning Group, IT Strategy & Planning Department		December 2015		21		January 10, 1967
Kong-Hwan Lee		Senior Vice President, Chief Operating Office, Corporate Management Group, Human Resources Office		December 2014		22		September 20, 1966
Mi-Hyang Lee		Senior Vice President, Future Convergence Business Office, Future Business Development Unit, Future Business Development TF		December 2015		27		January 26, 1965
Sang-Yong Lee		Senior Vice President, Enterprise Business Group, Enterprise Business Consulting Unit, ICT Convergence Business Consulting Department		December 2014		6		December 23, 1967
Sun-Woo Lee		Senior Vice President, Chief Marketing Office, Marketing Group, Enterprise Solution Business Unit		December 2014		26		January 17, 1966
Sung-Q Lee		Senior Vice President, Chief Operating Office, Corporate Management Group, Management Support Office, Labor Relations Department 1		December 2014		27		December 24, 1965
Seung-Yong Lee		Senior Vice President, Corporate Relations Group, Corporate Relations & Cooperation Office		December 2015		24		May 18, 1964
Chang-Geun Lee		Senior Vice President, Chief Operating Office, Corporate Management Group, Group Human Development Academy, Educational Dispatch		February 2016		25		December 11, 1967
Hyon-Seog Lee		Senior Vice President, Chief Marketing Office, Customer Business Group, Customer Planning Business Unit		December 2015		25		March 10, 1962
Hyeon-Seuk Lee		Senior Vice President, Chief Marketing Office, Marketing Group, Device Business Unit		December 2014		20		November 12, 1966
Sang-Kwi Chang		Senior Vice President, Chief Operating Office, Corporate Planning Group, Legal Affairs Office, Legal Affairs Department 2		May 2014		3		July 12, 1968
Hee-Youp Chang		Senior Vice President, Chief Marketing Office, Customer Business Group, Western Seoul Sales Headquarter		December 2014		31		October 1, 1959
Yoon-Sik Jeong		Senior Vice President, Enterprise Business Group, Enterprise Customer Business Unit		December 2014		8		September 30, 1964
Jun-Su Jeong		Senior Vice President, CEO Office, Ethics Center		December 2015		25		November 2, 1962
Hyun-Meen Jung		Senior Vice President, Network Group, Field Support Unit, Core Network Quality Department		December 2015		31		November 5, 1960
Chang-hwan Cho		Senior Vice President, Chief Operating Office, Corporate Planning Group, Financial Management Office, Tax Department		January 2016		2		May 10, 1962
Young-Min Choi		Senior Vice President, Chief Operating Office, Corporate Management Group, Group Human Development Academy		January 2015		2		September 8, 1961
Han-Kyu Choi		Senior Vice President, Network Group, Network O& M Unit		December 2015		30		September 1, 1960
Sang-Hyun Han		Senior Vice President, Enterprise Business Group, Public Customer Business Unit		December 2015		30		April 2, 1963
Gyung-Pyo Hong		Senior Vice President, Institute of Convergence Technology, Convergence Laboratory		December 2014		30		June 10, 1962

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

(2) Does not include period of employment by KT Corporation’s affiliates.

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3. Current Status of Employees

(Unit: Persons, Years, Won million)

Type

Number of Employees

Average Years in Continuous

Total

Average Payroll per

General

Other

Total

Service

Payroll

Person

Note

Total

22,981

594

23,575

19.7

1,690,011

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Ø Number of employees as of December 31, 2016 (excluding executive directors).

Ø Average years in continuous services: Calculated using aggregate years of service of employees as of December 31, 2016 divided by number of employees as of December 31, 2016.

Ø Average payroll per person: Calculated using yearly average number of employees (22,291 employees).

4. Remuneration to Executive Officers

(1) Total 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
3 Inside Directors			4,292				5,900				1,431
8 Outside Directors			642								80

Ø The total amount paid and the average amount paid per person include the compensation for directors who resigned in 2016.

(2) Remuneration paid to Inside Directors

				(Unit: Won million)
Name		Position		Total Amount Paid
Chang-Gyu Hwang		Chief Executive Officer			2,436
Heon Moon Lim		President			900
Hyeon Mo Ku		Senior Executive Vice President			672

Name		Type				Total Amount Paid				Note
Chang-Gyu Hwang		Earned income		Salary			573			Based on the resolution of the board of directors, the total base pay was 373 million won and the total position pay was 200 million won
				Incentives			1,858			Based on the resolution of the board of directors, the incentives has been decided by evaluating the sales figures and operating profits of the previous year as the quantitative indicators and considering the business competitiveness and the status as the qualitative indicators comprehensively. The short-term incentives can be 0~250% of the base pay and the long-term incentives can be 0~340% of the base pay. We have calculated and paid 1,858 million won in consideration of the earning results (sales of 17.029 trillion won and operating profit of 1.060 trillion won in 2016) and the strengthened business competitiveness based on GiGA infrastructure and 5G leadership.
				Stock option			—			—
				Fringe benefits			5			Including medical expenses, health checkup costs
		Retirement income					—			—
		Others					—			—

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Name		Type				Total Amount Paid				Note
Heon Moon Lim		Earned income		Salary			367			Based on the resolution of the board of directors, the total base pay was 267 million won and the total position pay was 100 million won
				Incentives			518			Based on the resolution of the board of directors, the incentives has been decided by evaluating the management results comprehensively. The short-term incentives can be 0~140% of the base pay and the long-term incentives can be 0~119% of the base pay. We have calculated and paid 518 million won in consideration of the leadership as the chief of Marketing Office.
				Stock option			—			—
				Fringe benefits			15			Including medical expenses, health checkup costs
		Retirement income					—			—
		Others					—			—

Name		Type				Total Amount Paid				Note
Hyeon Mo Ku		Earned income		Salary			239			Based on the resolution of the board of directors, the total base pay was 211 million won and the total position pay was 100 million won *  239 million won calculated by the period of director
				Incentives			413			Based on the resolution of the board of directors, the incentives has been decided by evaluating the management results comprehensively. The short-term incentives can be 0~140% of the base pay and the long-term incentives can be 0~60% of the base pay. We have calculated and paid 413 million won in consideration of the new business strategy and cost efficiency as the chief of the management group.
				Stock option			—			—
				Fringe benefits			20			Including medical expenses, health checkup costs
		Retirement income					—			—
		Others					—			—

(3) Grant and Exercise of Stock Option

* Not applicable as of December 31, 2016.

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