KT Hong Kong Telecommunications Co., Ltd.KT-Michigan Global Contents Fund KT Alpha Co., Ltd. (KT Hitel Co., Ltd.)Epsilon Telecommunications (BG) EOOD Epsilon Telecommunications (HK) Limited Epsilon Telecommunications (US) Pte. Ltd.Epsilon Telecommunications (SP) Pte. Ltd.Epsilon Global Communications Pte. Ltd.KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.)KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.)KT Alpha Co., Ltd. (KT Hitel Co., Ltd.)GENIE Music Corporation KTGDH Co., Ltd. (KTSB Data Service)KT Hong Kong Telecommunications Co., Ltd.KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.)Telecommunication facility construction and maintenance San-Ya Agricultural Association Corporation Stockholders Association Members 3387640000000 65897000000 876872000000 false FY 0000892450 KR KR The recoverable amounts of BC Card Co., Ltd. are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next five years based on financial budgets. A terminal growth rate of 0.0% was applied for the cash flows expected to be incurred after five years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate (-)0.30% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 8.56% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. 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Table of Contents
As filed with the Securities and Exchange Commission on April 28, 2022
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
20-F

☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| For the fiscal year ended December 31, 2021

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| Date | of event requiring this shell company report

| For the transition period from to

Commission file number
1-14926
KT Corporation
(Exact name of Registrant as specified in its charter)

KT Corporation |  | The Republic of Korea
(Translation of Registrant’s name into English) |  | (Jurisdiction of incorporation or organization)

KT Gwanghwamun Building East
33,
Jong-ro 3-Gil,
Jongno-gu
03155 Seoul, Korea
(Address of principal executive offices)
Young-Jin Kim
KT Gwanghwamun Building East
33,
Jong-ro 3-Gil,
Jongno-gu
03155 Seoul, Korea
Telephone:
+82-31-727-0114;
E-mail:
ktir@kt.com
(Name, telephone,
e-mail
and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class |  | Trading symbol |  | Name of each exchange on which registered
American Depositary Shares, each representing one-half of one share of ordinary share |  | KT |  | New York Stock Exchange, Inc.
Ordinary share, par value ￦ 5,000 per share* |  | KT |  | New York Stock Exchange, Inc.*

Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
As of December 31, 2021, there were 235,808,146 ordinary shares, par value
￦
5,000 per share, outstanding
(not including 25,303,662 ordinary shares held by the registrant as treasury shares)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☒
No
☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes
☐
No
☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated
filer
☐
Emerging growth company
☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes
☒
No
☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
U.S.
GAAP
☐
IFRS
☒
Other
☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item
17
☐
Item
18
☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).
Yes
☐
No
☒

* | Not for trading, but only in connection with the registration of the American Depositary Shares.

Table of Contents

Part I |  |  | 1 |
Item 1. |  | Identity of Directors, Senior Managers and Advisers |  |  | 1 |
|  | Item 1.A. |  | Directors and Senior Management |  |  | 1 |
|  | Item 1.B. |  | Advisers |  |  | 1 |
|  | Item 1.C. |  | Auditors |  |  | 1 |
Item 2. |  | Offer Statistics and Expected Timetable |  |  | 1 |
|  | Item 2.A. |  | Offer Statistics |  |  | 1 |
|  | Item 2.B. |  | Method and Expected Timetable |  |  | 1 |
Item 3. |  | Key Information |  |  | 2 |
|  | Item 3.A. |  | [RESERVED] |  |  | 2 |
|  | Item 3.B. |  | Capitalization and Indebtedness |  |  | 2 |
|  | Item 3.C. |  | Reasons for the Offer and Use of Proceeds |  |  | 2 |
|  | Item 3.D. |  | Risk Factors |  |  | 2 |
Item 4. |  | Information on the Company |  |  | 21 |
|  | Item 4.A. |  | History and Development of the Company |  |  | 21 |
|  | Item 4.B. |  | Business Overview |  |  | 21 |
|  | Item 4.C. |  | Organizational Structure |  |  | 43 |
|  | Item 4.D. |  | Property, Plant and Equipment |  |  | 43 |
Item 4A. |  | Unresolved Staff Comments |  |  | 45 |
Item 5. |  | Operating and Financial Review and Prospects |  |  | 45 |
|  | Item 5.A. |  | Operating Results |  |  | 45 |
|  | Item 5.B. |  | Liquidity and Capital Resources |  |  | 64 |
|  | Item 5.C. |  | Research and Development, Patents and Licenses, Etc. |  |  | 66 |
|  | Item 5.D. |  | Trend Information |  |  | 67 |
|  | Item 5.E. |  | Critical Accounting Estimates |  |  | 67 |
Item 6. |  | Directors, Senior Management and Employees |  |  | 67 |
|  | Item 6.A. |  | Directors and Senior Management |  |  | 67 |
|  | Item 6.B. |  | Compensation |  |  | 71 |
|  | Item 6.C. |  | Board Practices |  |  | 71 |
|  | Item 6.D. |  | Employees |  |  | 73 |
|  | Item 6.E. |  | Share Ownership |  |  | 75 |
Item 7. |  | Major Shareholders and Related Party Transactions |  |  | 77 |
|  | Item 7.A. |  | Major Shareholders |  |  | 77 |

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|  | Item 7.B. |  | Related Party Transactions |  |  | 77 |
|  | Item 7.C. |  | Interests of Experts and Counsel |  |  | 77 |
Item 8. |  | Financial Information |  |  | 77 |
|  | Item 8.A. |  | Consolidated Statements and Other Financial Information |  |  | 77 |
|  | Item 8.B. |  | Significant Changes |  |  | 79 |
Item 9. |  | The Offer and Listing |  |  | 79 |
|  | Item 9.A. |  | Offer and Listing Details |  |  | 79 |
|  | Item 9.B. |  | Plan of Distribution |  |  | 79 |
|  | Item 9.C. |  | Markets |  |  | 79 |
|  | Item 9.D. |  | Selling Shareholders |  |  | 79 |
|  | Item 9.E. |  | Dilution |  |  | 79 |
|  | Item 9.F. |  | Expenses of the Issuer |  |  | 79 |
Item 10. |  | Additional Information |  |  | 80 |
|  | Item 10.A. |  | Share Capital |  |  | 80 |
|  | Item 10.B. |  | Memorandum and Articles of Association |  |  | 80 |
|  | Item 10.C. |  | Material Contracts |  |  | 86 |
|  | Item 10.D. |  | Exchange Controls |  |  | 86 |
|  | Item 10.E. |  | Taxation |  |  | 90 |
|  | Item 10.F. |  | Dividends and Paying Agents |  |  | 98 |
|  | Item 10.G. |  | Statements by Experts |  |  | 98 |
|  | Item 10.H. |  | Documents on Display |  |  | 98 |
|  | Item 10.I. |  | Subsidiary Information |  |  | 98 |
Item 11. |  | Quantitative and Qualitative Disclosures About Market Risk |  |  | 99 |
Item 12. |  | Description of Securities Other than Equity Securities |  |  | 101 |
|  | Item 12.A. |  | Debt Securities |  |  | 101 |
|  | Item 12.B. |  | Warrants and Rights |  |  | 101 |
|  | Item 12.C. |  | Other Securities |  |  | 101 |
|  | Item 12.D. |  | American Depositary Shares |  |  | 101 |
Part II |  |  | 104 |
Item 13. |  | Defaults, Dividend Arrearages and Delinquencies |  |  | 104 |
Item 14. |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  |  | 104 |
Item 15. |  | Controls and Procedures |  |  | 104 |
Item 16. |  | [Reserved] |  |  | 105 |
Item 16A. |  | Audit Committee Financial Expert |  |  | 105 |

ii

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Item 16B. |  | Code of Ethics |  |  | 105 |
Item 16C. |  | Principal Accountant Fees and Services |  |  | 106 |
Item 16D. |  | Exemptions from the Listing Standards for Audit Committees |  |  | 106 |
Item 16E. |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |  |  | 107 |
Item 16F. |  | Change in Registrant’s Certifying Accountant |  |  | 107 |
Item 16G. |  | Corporate Governance |  |  | 107 |
Item 16H. |  | Mine Safety Disclosure |  |  | 108 |
Item 16I. |  | Disclosure regarding Foreign Jurisdictions that Prevent Inspections |  |  | 108 |
Part III |  |  | 109 |
Item 17. |  | Financial Statements |  |  | 109 |
Item 18. |  | Financial Statements |  |  | 109 |
Item 19. |  | Exhibits |  |  | 110 |

iii

Table of Contents
PRESENTATION
All references to “Korea” or the “Republic” contained in this annual report mean the Republic of Korea. All references to the “Government” are to the government of the Republic of Korea. All references to “we,” “us” or the “Company” are to KT Corporation and, as the context may require, its subsidiaries.
Our consolidated financial statements as of December 31, 2020 and 2021 and for each of the years in the three-year period ended December 31, 2021 and related notes thereto (“Consolidated Financial Statements”) are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
All references to “Won” or “
￦
” in this annual report are to the currency of the Republic and all references to “Dollars,” “$,” “US$” or “U.S. dollars” are to the currency of the United States of America. Our monetary assets and liabilities denominated in foreign currency are translated into Won at the market average exchange rate announced by Seoul Money Brokerage Services, Ltd. (the “Market Average Exchange Rate”) on the balance sheet dates, which were, for U.S. dollars,
￦
1,157.8 to US$1.00,
￦
1,088.0 to US$1.00 and
￦
1,185.5 to US $1.00 on December 31, 2019, 2020 and 2021, respectively.
Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding.
All market share data contained in this annual report, unless otherwise specified, are based on the number of subscribers announced by the Ministry of Science and ICT (the “MSIT”), the Korea Communications Commission (the “KCC”) or the Korea Telecommunications Operators Association.
PART I
Item 1. Identity of Directors, Senior Managers and Advisers
Item 1.A. Directors and Senior Management
Not applicable.
Item 1.B. Advisers
Not applicable.
Item 1.C. Auditors
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Item 2.A. Offer Statistics
Not applicable.
Item 2.B. Method and Expected Timetable
Not applicable.
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Item 3. Key Information
Item 3.A. [RESERVED]
Item 3.B. Capitalization and Indebtedness
Not applicable.
Item 3.C. Reasons for the Offer and Use of Proceeds
Not applicable.
Item 3.D. Risk Factors
You should carefully consider the following factors.
Risks Relating to Our Business
Competition in each of our principal business areas is intense.
We face significant competition in each of our principal business areas. In the markets for mobile services, fixed-line services and media and content services, we compete primarily with SK Telecom Co., Ltd. (“SK Telecom”) and LG Uplus Corp. (“LG U+”) (including their affiliates). In the past two decades, considerable consolidation in the telecommunications industry has occurred, resulting in the current competitive landscape comprising three network service providers that offer a wide range of telecommunications and data communications services. In recent years, each of our primary competitors has acquired a leading cable TV operator in Korea to significantly increase their market shares in the pay TV market, which has further intensified competition.
To a lesser extent, we also compete with various value-added service providers and network service providers as classified under the Framework Act on Telecommunications and the Telecommunications Business Act, including mobile virtual network operators (“MVNOs”) that lease mobile networks and offer mobile services, VoIP service providers that offer Internet telephone services, cable TV operators, text messaging service providers (particularly Kakao Corp. (“Kakao”)) and voice resellers, many of which offer competing services at lower prices. We also face changes in the evolving landscape of the market for media and content services arising from the increasing popularity of global
over-the-top
(“OTT”) media services such as Netflix. The entrance of new service providers in the markets for mobile services, fixed-line services and media and content services may further increase competition, as well as cause downward price pressure on the fees we charge for our services. For a discussion of our market shares in key markets, please see “Item 4. Information on the Company—Item 4.B. Business Overview—Competition.”
We compete primarily based on our service performance, quality and reliability, ability to accurately identify and respond to evolving consumer demand, and pricing. With the launch of the next generation 5G mobile services in April 2019, competition has further intensified among the three network service providers, which has resulted in an increase in marketing expenses as well as additional capital expenditures related to implementing 5G mobile services. Mobile service providers also grant subsidies or subscription discount rates to subscribers who purchase new handsets and agree to a minimum subscription period, and we compete also based on such amounts. We and SK Telecom have been designated as market-dominating business entities in the local telephone and mobile markets, respectively, under the Telecommunications Business Act. Under this Act, a market-
2

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dominating business entity may not engage in any act of abuse, such as unreasonably interfering with business activities of other business entities, hindering unfairly the entry of newcomers or substantially restricting competition to the detriment of the interests of consumers. In addition, changes in our local telephone rates and mobile rates of SK Telecom are required to be reported to the MSIT, which has 15 days to object to such changes. The KCC has also issued guidelines on fair competition of the telecommunications companies.
In the financial services market, our credit and check cards issued under the “BC Card” brand pursuant to
co-brand
agreements with member companies compete principally with cards issued by other leading credit card companies in Korea with their own merchant payment networks, such as Shinhan Card, Hyundai Card and Samsung Card. Our member companies that issue
co-branded
credit or check cards include Woori Card, NH Card, Industrial Bank of Korea and KB Kookmin Card. We also compete with service providers that provide outsourcing services related to business operations of credit card companies. Competition in the credit card and check card businesses has increased substantially as existing credit card companies, consumer finance companies and other financial institutions in Korea have made significant investments and engaged in aggressive marketing campaigns and promotions for their credit and check cards, as well as investing in operational infrastructure that may reduce the need for our outsourcing services.
Our inability to adapt to changes in the competitive landscape and compete against our competitors in our principal business areas could have a material adverse effect on our business, financial condition and results of operations.
Failure to renew existing bandwidth licenses, acquire adequate additional bandwidth licenses or use our bandwidth efficiently may adversely affect our mobile telecommunications business and results of operations.
One of the principal limitations on a wireless network’s subscriber capacity is the amount of bandwidth allocated to a service provider. We have acquired a number of licenses to secure bandwidth capacity to provide our broad range of services, for which we typically make an initial payment as well as pay usage fees during the license period. The MSIT reserves the right to reallocate bandwidths in order to address the changing needs for bandwidth capacity of mobile service providers, the consideration for which may depend on the extent of the buildout of the service provider’s telecommunications network to utilize the relevant bandwidth. We made bandwidth license payments of
￦
389 billion in 2019,
￦
367 billion in 2020 and
￦
603 billion in 2021.
For our outstanding payment obligations relating to our bandwidth licenses, see “Item 5. Operating and Financial Review and Prospects—Item 5.A. Operating Results—Overview—Acquisition of New Bandwidth Licenses and Usage Fees.” For more information on our bandwidth licenses, see “ Item 4. Information on the Company—Item 4.D. Property, Plant and Equipment—Mobile Networks.”
The growth of our mobile telecommunications business and the increase in usage of wireless data transmission services have significantly increased the utilization of our bandwidth, because wireless data applications are generally more bandwidth-intensive than voice services. The current trend of increasing data transmission use and the increasing sophistication of multimedia contents are likely to put additional strain on the bandwidth capacity of mobile service providers. In the event we are unable to maintain sufficient bandwidth capacity by renewing existing bandwidth licenses, receiving additional bandwidth allocation or cost-effectively implementing technologies that enhance the efficiency of our bandwidth usage, our subscribers may perceive a general decrease in the quality of mobile telecommunications services. No assurance can be given that bandwidth constraints will not adversely affect the growth of our mobile telecommunications business. Furthermore, we may be required to make substantial payments to acquire additional bandwidth capacity in order to meet increasing bandwidth demand, which may adversely affect our business, financial condition and results of operations.
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The ongoing global pandemic of a new strain of coronavirus
(“COVID-19”)
and any possible recurrence of other types of widespread infectious diseases, may adversely affect our business, financial condition or results of operations.
The
COVID-19,
an infectious disease caused by severe acute respiratory syndrome coronavirus 2 that was first reported to have been transmitted to humans in late 2019 and has spread globally, has materially and adversely affected the global economy and financial markets in recent months. The World Health Organization declared the
COVID-19
as a pandemic in March 2020. In light of the Government’s recommendations for social distancing, we have periodically implemented remote work arrangements for a portion of our workforce, particularly for employees in areas severely impacted by the pandemic. While we do not believe that such arrangements have had a material adverse impact on our business, a prolonged outbreak of
COVID-19
and its variants may result in further disruptions in the normal operations of our business, including disruptions in the operation of our facilities, delays in our network expansion projects, implementation of further work arrangements requiring employees to work remotely and restrictions on overseas and domestic business travel, which may lead to a reduction in labor productivity.
Other risks associated with a prolonged outbreak of
COVID-19
and its variants or other types of widespread infectious diseases may potentially include:

| • |  | increase in unemployment among our customers who may not be able to meet payment obligations, which in turn may decrease demand for our products and services;

| • |  | service disruptions, outages and performance problems due to capacity constraints caused by an overwhelming number of people accessing our services simultaneously;

| • |  | disruptions in supply of mobile handsets or telecommunications equipment from our vendors;

| • |  | depreciation of the Won against major foreign currencies, which in turn may increase the cost of imported equipment necessary for expansion and enhancement of our telecommunications infrastructure; and

| • |  | impairments in the fair value of our investments in companies that may be adversely affected by the pandemic.

We are currently not able to estimate the duration or full magnitude of harm from
COVID-19.
In the event that
COVID-19
or other types of widespread infectious diseases cannot be effectively and timely contained, our business, financial condition and results of operations may be adversely affected.
Introduction of new services, such as our 5G mobile services launched in April 2019, poses challenges and risks to us.
The telecommunications industry is characterized by continual advances and improvements in telecommunications technology, and we have been continually researching and implementing technology upgrades and additional telecommunications services to maintain our competitiveness. For example, we have been building more advanced mobile telecommunications networks based on 5G technology and commenced providing commercial 5G mobile services in April 2019. Since then, we have expanded our coverage to major cities in Korea, and we plan to further expand the coverage nationwide and increase the transmission speed of our 5G services. As we continue to compete with SK Telecom and LG U+ to improve network quality, introduce new services and accommodate
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increased data usage of subscribers, we may incur significant expenses to acquire additional bandwidth licenses and incur significant capital expenditures to build out and improve our network. We have made extensive efforts to develop advanced technologies as well as provide a variety of services with enhanced speed, latency and connectivity. Furthermore, we are also continually upgrading our broadband network to enable better
fiber-to-the-home
(“FTTH”) connection, which enhances data transmission speed and connection quality.
No assurance can be given that our new services will gain broad market acceptance such that we will be able to derive revenue from such services to justify the license fees, capital expenditures and other investments required to provide such services
.
If our new services do not gain broad market acceptance, our business, financial condition and results of operations may be adversely affected.
We may not be able to successfully pursue our strategy to acquire businesses and enter into joint ventures that complement or diversify our current business, and we may need to incur additional debt to finance such expansion activities.
One key aspect of our overall business strategy calls for acquisitions of businesses and entering into joint ventures that complement or diversify our current businesses. For example, in September 2021, KT Skylife Co., Ltd. (“KT Skylife”), in which we held a 49.99% interest as of December 31, 2021, completed its acquisition of a 100.00% interest in Hyundai HCN Co., Ltd. (“HCN”), which is Korea’s fifth largest cable operator, for
￦
491 billion.
While we plan to continue our search for suitable acquisition and joint venture opportunities, we cannot provide assurance that we will be able to identify attractive opportunities or that we will successfully complete the transactions without encountering administrative, technical, political, financial or other difficulties, or at all. Even if we were to successfully complete the transactions, the success of an acquisition or a joint venture depends largely on our ability to achieve the anticipated synergies, cost savings and growth opportunities from integrating the business of the acquired company or the joint venture with our current businesses. There can be no assurance that we will achieve the anticipated benefits of the transaction, which may adversely affect our business, financial condition and results of operations. Pursuing acquisitions or joint venture transactions also requires significant capital, and as we pursue further growth opportunities for the future, we may need to raise additional capital through incurring loans or through issuances of bonds or other securities in the international capital markets.
The Korean telecommunications and Internet-related industries are subject to extensive Government regulations, and changes in Government policy relating to these industries could have a material adverse effect on our operations and financial condition.
The Government, primarily through the MSIT and the KCC, has the authority to regulate the telecommunications industry in Korea. The MSIT and the KCC also have the authority to regulate the pay TV industry under the Korea Broadcasting Act and the Internet Multimedia Broadcasting Services Act, which cover our IPTV services, our satellite TV services provided through KT Skylife (in which we held a 49.99% interest as of December 31, 2021), and cable TV services that we provide through HCN, in which KT Skylife holds a 100.0% interest. See “Item 4. Information on the Company—Item 4.B. Business Overview—Regulation.” The MSIT’s policy is to promote competition through measures designed to prevent the dominant service provider in any such market from exercising its market power in a way that would prevent the emergence and development of viable competitors. Under such regulations, if a network service provider has the largest market share for a specified type of telecommunications service and its revenue from that service for the previous year exceeds a specific revenue amount set by the MSIT, such entity may be designated as a market-dominating business entity that may not engage in any act of abuse, such as unreasonably interfering with
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business activities of other business entities, hindering unfairly the entry of newcomers or substantially restricting competition to the detriment of the interests of consumers. The KCC has also issued guidelines on fair competition of telecommunications and Internet-related companies. In addition, the Government sets the policies regarding the use of radio frequency bandwidths and allocates the bandwidths used for wireless telecommunications by an auction process or by a planned allocation.
We and SK Telecom have been designated as market-dominating business entities in the local telephone and mobile markets, respectively. Accordingly, changes in our local telephone rates and mobile rates of SK Telecom are required to be reported to the MSIT, which has 15 days to object to such changes. The form of our standard agreement for providing local network services and each agreement for interconnection with other service providers must also be reported to the MSIT. Although we compete freely with other network service providers in terms of rate plans for our principal telecommunications and Internet-related services except for rates we charge for local calls, our inability to freely set our local telephone service rates may hurt profits from such businesses and impede our ability to compete effectively against our competitors. In addition, the MSIT may periodically announce policy guidelines that telecommunications companies are recommended to take into consideration in their telecommunications and Internet-related businesses.
The Government may pursue additional measures to regulate the markets in which we compete. There can be no assurance that we will not adopt additional measures that reduce rates charged to our subscribers as well as adjustments to our handset subsidies and other measures in the future to comply with regulatory requirements or the Government’s policy guidelines.
The MSIT may revoke our licenses or suspend any of our businesses if we fail to comply with its rules, regulations and corrective orders, including the rules restricting beneficial ownership and control or any violation of the conditions of our licenses. Alternatively, in lieu of suspension of our business, the MSIT may levy a monetary penalty of up to 3.0% of the average of our annual revenue for the preceding three fiscal years. From time to time, we have been imposed fines for violation of regulations imposed by MSIT and KCC. There is no guarantee that the laws and regulations to which we are or become subject will not have a material adverse effect on our business, financial condition or results of operations.
Legal cases involving our charitable or political donations and other incidents and allegations, including matters connected to a scandal involving
Ms. Soon-sil
Choi, a confidante of former President
Geun-hye
Park, could have a material adverse effect on our business, reputation and stock price.
In April 2014, the Seoul Central District Prosecutor’s Office charged
Mr. Suk-chae
Lee, a former chief executive officer of KT Corporation, with embezzlement and breach of fiduciary duty. Mr. Il Yung Kim, a former president of KT Corporation, was charged as a
co-conspirator
in the breach of fiduciary duty by Mr. Lee, and
Mr. Yu-yeol
Seo, a former president of KT Corporation, was charged as a
co-conspirator
in Mr. Lee’s embezzlement. On May 30, 2017, the Supreme Court of Korea confirmed the acquittal of Mr. Lee and Mr. Kim on the charge of breach of fiduciary duty, and reversed the appellate court judgment against Mr. Lee and Mr. Seo (which had sentenced both to a suspended prison term of 18 months, on probation for two years, for allegedly creating and embezzling
off-the-book
funds of
￦
1.1 billion for personal use between 2009 and 2013) and remanded the case back to the Seoul High Court. On April 26, 2018, the Seoul High Court acquitted Mr. Lee and Mr. Seo of such charge. No indictment or charges of wrongdoing were brought against us or any of our current executives or employees in connection with such indictment of Mr. Lee, Mr. Seo, and Mr. Kim.
In March 2017, the Constitutional Court of Korea found that many Korean corporations, including us, made donations to two
non-profit
foundations, Mir Foundation and
K-Sports
Foundation,
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at the request of Ms. Geun-hye Park, a former President of Korea. Our contributions comprised
￦
1.1 billion of the total
￦
48.6 billion given to Mir Foundation and
￦
700 million of the total
￦
28.8 billion given to
K-Sports
Foundation. The Constitutional Court also found that an aide of former President Park, at the direction of the former President, on several occasions asked our previous chief executive officer to hire (and later to change the employment positions of) two individuals,
Mr. Dong-Soo
Lee and
Ms. Hye-Sung
Shin. Mr. Lee was hired and later appointed as the head of a business unit in charge of our marketing and advertisement campaigns and Ms. Shin was hired to another position in the same business unit. Subsequently, the same presidential aide also requested that Mr. Lee and our other officers award advertising contracts to Playground Communications Co., Ltd. (“Playground”), an advertising agency in which
Ms. Soon-sil
Choi, a confidante of former President Park, effectively owns a 70% equity interest, according to the Constitutional Court. The Constitutional Court further held that the companies receiving the purported “requests” from former President Park’s aide appeared to have felt immense pressure to comply with the requests and could not easily have rejected them. Playground was awarded seven advertising contracts for a total of approximately
￦
6.8 billion in 2016, amounting to approximately 3.7% of our annual advertising spending in 2016. In 2016, Playground recognized approximately
￦
517 million of income from such activities. We have not awarded additional advertising contracts to Playground since September 2016, and Mr. Lee and Ms. Shin resigned in November 2016 and May 2016, respectively.
In November 2016, the Korean Prosecutor’s Office commenced investigations on former President Park and in April 2017 indicted the former President on charges of bribery, coercion and abuse of power, among others. In August 2018, the Seoul High Court sentenced the former President to a prison term of 25 years and a monetary fine of
￦
20 billion, having found the former President guilty on many of the charges, including the coercion charges relating to the same events underlying the Constitutional Court decisions described above: (i) the employment and changes to the employment positions of Mr. Lee and Ms. Shin at KT Corporation, (ii) the entry into advertising contracts with Playground and (iii) the donations to Mir Foundation and
K-Sports
Foundation by us and other Korean corporations. The prosecution appealed the appellate court’s decision to the Supreme Court of Korea, which in August 2019 vacated the appellate court judgment against the former President on the bribery-related charges due to errors made in its sentencing process and remanded the case back to the Seoul High Court for retrial. In July 2020, the Seoul High Court sentenced former President Park upon retrial to a prison term of 15 years and a monetary fine of
￦
18 billion for the bribery-related charges and a prison term of 5 years for the other charges including abuse of power. The prosecution appealed the appellate court’s decision to the Supreme Court of Korea, which in January 2021 rejected the appeal and affirmed the appellate court’s judgment, which became final and conclusive. No indictment or charges of wrongdoing were brought against us or any of our executives or employees in connection with such indictment of the former President.
In January 2018, the Korean Prosecutor’s Office indicted
Mr. Byung-Hun
Jun, a former member of the National Assembly, for charges of bribery, corruption and coercion, among others. One of the allegations was that Mr. Jun, during his term as a member of the former Science, ICT, Future Planning, Broadcasting and Communications Committee (currently the Science, ICT, Broadcasting and Communications Committee) of the National Assembly, solicited donations or financial sponsorships from various corporations, including us, to an organization where he used to serve as the president. In February 2019, the Seoul Central District Court found Mr. Jun guilty of the bribery charges and sentenced him to a prison term of five years and an aggregate monetary fine of
￦
375 million, guilty of abuse of authority and sentenced him to a suspended prison term of one year on probation for two years, and not guilty of the charge in connection with soliciting financial sponsorship of
￦
100 million from us. Both Mr. Jun and the Korean prosecution appealed the court’s decision to the Seoul High Court, which in July 2020 found Mr. Jun guilty of the bribery charges, among others, and sentenced him to a suspended prison term of one year on probation for two years and an aggregate monetary fine of
￦
200 million and not guilty of the charge in connection with soliciting financial sponsorship of
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￦
100 million from us. In March 2021, the Supreme Court of Korea affirmed the appellate court’s judgment against Mr. Jun, which became final and conclusive. No indictment or charges of wrongdoing were brought against us or any of our executives or employees in connection with Mr. Jun’s indictment.
In January 2018, the Korean police commenced an investigation in connection with the allegations that our current and former executives and employees violated the Political Funds Act of Korea, by making certain donations or providing gift cards to various lawmakers using corporate funds. In November 2021, the Seoul Central District Prosecutor’s Office decided not to indict Mr. Chang-gyu Hwang, our previous chief executive officer, on charges that include violating the Political Funds Act, but indicted four other former executives in our Corporate Relations Division for violation of such laws as well as us for violation of the Political Funds Act, which matter is currently pending at the Seoul Central District Court. In November 2021, the Seoul Central District Prosecutor’s Office also issued a summary indictment against our current representative director and chief executive officer, Mr. Hyeon-mo Ku, and nine other current and former executive officers, who permitted using their names, for violating charges that include violation of the Political Funds Act. In February 2022, after a summary judgment was issued, our 10 current and former executive officers filed for a formal trial. The case is currently pending before the Seoul Central District Court.
In March 2019, the KT New Labor Union filed criminal complaints with the Seoul Central District Prosecutor’s Office against our previous chief executive officer, Mr.
Chang-Gyu
Hwang, alleging charges that include a criminal breach of fiduciary duty, in connection with management consulting (research and survey) contracts entered into between us and others, including certain former public officials, since November 2014. In November 2021, the Seoul Central District Prosecutor’s Office dismissed such allegations related to Mr. Hwang.
In April 2019, the Seoul Southern District Prosecutor’s Office indicted four former executive officers, including
Mr. Suk-chae
Lee and
Mr. Yu-yeol
Seo, for charges of obstruction of business arising from allegedly engaging in a number of improper hiring during the public recruiting process of college graduates in the second half of 2012. In October 2019, the Seoul Southern District Court found the former executive officers guilty of the charges and sentenced Mr. Lee to a prison term of one year and Mr. Seo to a suspended prison term of eight months on probation for two years. Both the Prosecutor’s Office and the former executive officers appealed the court’s decision to the Seoul High Court, which in November 2020 sentenced Mr. Lee to a suspended prison term of one year and 6 months on probation for two years and Mr. Seo to a suspended prison term of eight months on probation for two years. In addition, the Seoul High Court found Mr. Lee guilty of bribery charges in relation to the improper hiring incident. Mr. Lee appealed the court’s decisions to the Supreme Court of Korea, which in February 2022 rejected the appeal and affirmed the appellate court’s judgment that became final and conclusive. No indictment or charges of wrongdoing were brought against us or any of our current executives or employees in connection with such indictment of our former executive officers.
In February 2022, we entered into a settlement (the “Settlement”) with the U.S. Securities and Exchange Commission (the “SEC”) to resolve its investigation, which include some of the matters described above and allegations relating to certain payments made by certain of our employees between 2014 and 2018 with respect to procurement of two government contracts in Vietnam.
Pursuant to the Settlement, which resolves these matters, and without admitting or denying any of the SEC’s findings (except for the SEC’s jurisdiction over us and the subject matter of the proceedings), we consented to the entry of an order in which the SEC made findings and ordered, pursuant to Section 21C of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that we cease and desist from committing or causing any violations and any future violations of the books and records and internal accounting control provisions of the U.S. Foreign Corrupt Practices Act (the “FCPA”)—Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. As part of the Settlement, we paid
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disgorgement of approximately $2.8 million (including prejudgment interest) and a civil penalty of $3.5 million to the SEC, and agreed to periodically report to the SEC staff for a two year term the status of our remediation and implementation of compliance measures for ensuring compliance with the FCPA and other applicable anti-corruption laws. There can be no assurance that such development or any further developments relating to the above-mentioned matters, including adverse publicity, will not adversely affect our business, financial results, reputation or stock price.
Cybersecurity breaches may expose us to significant legal and financial exposure, damage to our reputation and a loss of confidence of our customers.
Our business involves the storage and transmission of large amounts of confidential information of our subscribers and cardholders, and cybersecurity breaches expose us to a risk of loss of this information, which may lead to improper use or disclosure of such information, ensuing potential liability and litigation, any of which could harm our reputation and adversely affect our business. Even though we strive to take all steps we believe are necessary to protect personal information, hardware, software or applications we develop or procure from third parties may contain defects or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to circumvent our security measures to gain access to our systems or facilities through fraud, trickery or other forms of deceiving our employees, contractors and temporary staff. In addition, because the techniques used to obtain unauthorized access or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures.
In the past, we have experienced cyber-attacks of varying degrees from time to time, including theft of personal information of our subscribers by third parties that have led to lawsuits and administrative actions against us alleging that the leak was related to our management of subscribers’ personal information. If we experience additional significant cybersecurity breaches or fail to detect and appropriately respond to significant cybersecurity breaches, we could be subject to additional government enforcement actions, regulatory sanctions and litigation in the future. In addition, our subscribers and cardholders could lose confidence in our ability to protect their personal information, which could cause them to discontinue using our services altogether. Furthermore, adverse final determinations, decisions or resolutions regarding such matters could encourage other parties to bring related claims and actions against us. Accordingly, our failure to prevent cybersecurity breaches may materially and adversely impact our business, financial condition and results of operations.
Our business and performance may be harmed by a disruption in our services due to failures in or changes to our systems, or by our failure to timely and effectively expand and upgrade our technology and infrastructure.
Our reputation and ability to attract, retain, and serve our subscribers, cardholders and other business partners are dependent in large part upon the reliable performance of our services and the underlying technical infrastructure. Our telecommunications network systems and information technology systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business. We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failures, capacity constraints due to an overwhelming number of people accessing our services simultaneously, computer viruses, power losses, fraud and security attacks. Our technical infrastructure is also vulnerable to the risk of damage from natural and other disasters, such as fires, earthquakes, floods, and typhoons, as well as from acts of terrorism and other criminal acts. For example, on October 25, 2021, a network maintenance error temporarily disrupted our broadband Internet services nationwide and some of our telecommunications services for approximately 1.5 hours. As compensation for such
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disruptions, we refunded subscription fees for (i) 15 hours (approximately 10 times the interrupted period) for individual subscribers and (ii) 10 days for small business owners.
As the number of our subscribers and cardholders increases and as our customers access, download and transmit increasing volumes of media contents as well as engage in increasing volumes of financial transactions, we may be required to expand and upgrade our technology and infrastructure to continue to reliably deliver our services. We cannot provide assurance that we will be able to expand and upgrade our technology and infrastructure to meet user demand in a timely manner, or on favorable economic terms. We purchase telecommunications network and other equipment from a limited number of key suppliers, and any discontinuation or interruption in the availability of equipment from our key suppliers for any reason could have an adverse effect on our operations. If our users are unable to readily access our services or access is disrupted, users may seek other service providers instead, and may not return to our services or use our services as often in the future. This would negatively impact our ability to attract subscribers, cardholders and other business partners as well as increase engagement of our customers. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed or continually develop our technology and infrastructure to accommodate actual and anticipated changes in our customers’ needs, our business, financial condition and results of operations may be harmed.
Our intellectual property rights are valuable, and our inability to protect them could reduce the value of our products, services and brands.
Our trade secrets, trademarks, copyrights, patents and other intellectual property rights are important assets for us. We rely on, and expect to continue to rely on, a combination of confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, trade secret and patent laws, to protect our brands and other intellectual property rights. However, various events outside of our control may pose a threat to our intellectual property rights, as well as to our products, services and technologies. For example, we may fail to obtain effective intellectual property protection, or effective intellectual property protection may not be available, in every country in which our services are available. Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering services that are substantially similar to ours and compete with our business.
We also rely on
non-patented
proprietary information and technology, such as trade secrets, confidential information,
know-how
and technical information. While in certain cases we have agreements in place with employees and third parties that place restrictions on the use and disclosure of such intellectual property, these agreements may be breached, or such intellectual property may otherwise be disclosed or become known to our competitors, which could cause us to lose competitive advantages resulting from such intellectual property.
We are also pursuing registration of trademarks and domain names in Korea and in select jurisdictions outside of Korea. Effective protection of trademarks, domain names and other intellectual property is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights.
We also seek to obtain patent protection for some of our technology, and we have filed various applications in Korea and elsewhere for protection of certain aspects of our intellectual property and currently hold a number of issued patents in multiple jurisdictions. We may be unable to obtain patent or trademark protection for our technologies and brands, and our existing patents and trademarks, and
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any patents or trademarks that may be issued in the future, may not provide us with competitive advantages or distinguish our products and services from those of our competitors. In addition, any patents and trademarks may be contested, circumvented, or found unenforceable or invalid, and we may not be able to prevent third parties from infringing, diluting or otherwise violating them. Significant infringements of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could harm our ability to compete and our business, financial condition and results of operations could be adversely affected.
We may become party to intellectual property rights claims in the future that may be expensive and time consuming to defend, and such claims, if resolved adversely, could have a significant impact on our business.
Telecommunications and information technology companies own large numbers of patents, copyrights, trademarks, licenses and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights. In addition, various
“non-practicing
entities” that own intellectual property rights often attempt to aggressively assert claims in order to extract payments from companies like us. From time to time, we have received, and may receive in the future, claims from third parties which allege that we have infringed upon their intellectual property rights. Furthermore, from time to time, we may introduce or acquire new services or content, including in areas where we currently do not compete, which could increase our exposure to intellectual property claims from competitors and
non-practicing
entities.
As we face increasing competition, the number and scope of intellectual property claims against us may grow. Any claim or litigation alleging that we have infringed or otherwise violated intellectual property or other rights of third parties, with or without merit, and whether or not settled out of court or determined in our favor, could be time consuming and costly to address and resolve, and could divert the time and attention of our management and technical personnel. The outcome of any litigation is inherently uncertain, and there can be no assurance that favorable final outcomes will be obtained. In addition, plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations.
If any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The terms of any such judgment or any settlement may require us to cease some or all of our operations, pay substantial amounts to the other party or seek licensing arrangements. If we are required or choose to enter into royalty or licensing arrangements, such arrangements may not be available on commercially reasonable terms, or at all. In addition, the development or procurement of alternative technology could require significant effort and expense or may not be feasible. Accordingly, an unfavorable resolution of any intellectual property rights claims could adversely affect our business, financial condition and results of operations.
We rely on key researchers and engineers and senior management, and the loss of the services of any such key personnel or the inability to attract and retain replacements may negatively affect our business.
Our success depends to a significant extent upon the continued service of our research and development and engineering personnel, and on our ability to continue to attract, retain and motivate qualified researchers and engineers. In particular, our focus on leading the market in introducing new telecommunications and Internet-related services has meant that we must aggressively recruit engineers with expertise in cutting-edge technologies. In addition, our ability to execute our strategy effectively is dependent upon contributions from our key senior management. Our future success will depend on the continued service of our key executive officers and managers who possess significant
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expertise and knowledge of our industry. A limited number of individuals have primary responsibility for the management of our business, including our relationships with key business partners. From time to time, there may be changes in our senior management team that may be disruptive to our business, and we may not be able to find replacement key personnel in a timely manner. Any loss or interruption of the services of these individuals, whether from retirement, loss to competitors or other causes, or failure to attract and retain other qualified new personnel, could prevent us from effectively executing our business strategy, cause us to lose key business relationships, or otherwise materially affect our operations.
Government regulation of the credit card industry may adversely affect the operations of BC Card in which we held a 69.5% interest as of December 31, 2021.
Due to the rapid growth of the credit card market and rising consumer debt levels in Korea, the Government has heightened its regulatory oversight of the credit card industry in recent decades. In particular, the FSC and the Financial Supervisory Service (“FSS”) have adopted a variety of regulations governing the credit card industry. Among other things, these regulations impose minimum capital adequacy ratios, minimum required provisioning levels applicable to credit card receivables and stringent lending ratios. The FSC and FSS also impose rules governing the evaluation and reporting of credit card balances, procedures governing which persons may receive credit cards as well as processing fees paid by merchants.
Pursuant to the FSS’s capital adequacy guidelines, which are derived from standards established by the Bank for International Settlements, credit card companies in Korea are required to maintain a total capital adequacy ratio of at least 8.0% on a consolidated basis. To the extent a credit card company fails to maintain such ratio, Korean regulatory authorities may impose penalties on such company ranging from a warning to a suspension or revocation of its license. BC Card’s capital adequacy ratios were 44.2% as of December 31, 2020 and 35.8% as of December 31, 2021. Such capital adequacy ratio will decrease if the growth in BC Card’s asset base is not matched by corresponding growth in its regulatory capital. In addition, BC Card’s capital base and its capital adequacy ratio may decrease if its results of operations or financial condition deteriorates. Accordingly, there can be no assurance that BC Card will not be required to obtain additional capital in the future in order to maintain its capital adequacy ratio above the minimum required levels. There can be no assurance that, if BC Card requires additional capital in the future, it will be able to obtain such capital on favorable terms or at all, which could have a material adverse effect on the business, financial condition and results of operations of BC Card.
The Government may adopt further regulatory changes in the future that affect the credit card industry. Depending on their nature, such changes may adversely affect the operations of BC Card, by restricting its growth or scope, subjecting it to stricter requirements and potential sanctions or greater competition, constraining its profitability or otherwise.
Disputes with our labor union may disrupt our business operations.
In the past, we have experienced opposition from our labor union for our strategy of restructuring to improve our efficiency and profitability by disposing of
non-core
businesses and reducing our employee base. Although we have not experienced any significant labor disputes or unrests in recent years,
there can be no assurance that we will not experience labor disputes or unrests in the future, including extended protests and strikes, which could disrupt our business operations and have an adverse effect on our financial condition and results of operations.
We also negotiate collective bargaining agreements every two years with our labor union and annually negotiate a wage agreement. Our current collective bargaining agreement expires on
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September 5, 2023. Although we have been able to reach collective bargaining agreements and wage agreements with our labor union in recent years, there can be no assurance that we will not experience labor disputes and unrest resulting from disagreements with the labor union in the future.
We are subject to various laws and regulations in Korea and other jurisdictions, including the Monopoly Regulation and Fair Trade Act of Korea.
Our business operations and acts of our management, employees and other relevant parties are subject to various laws and regulations in and outside Korea. These laws are complicated and sometimes conflicting and our efforts to comply with these laws could increase our cost of doing business, restrict our business activities and expose us or our employees to legal sanctions and liabilities.
The Monopoly Regulation and Fair Trade Act provides for various regulations and restrictions on large business groups enforced by the Korea Fair Trade Commission to prohibit or restrict actions that impede competition and fair trade. The Korea Fair Trade Commission designated us as a large business group under the Monopoly Regulation and Fair Trade Act on April 1, 2002. Our business relationships and transactions with our subsidiaries, affiliates and other companies within the KT group are subject to ongoing scrutiny by the Fair Trade Commission as to, among other things, whether such relationships and transactions constitute undue financial support among companies of the same business group. We are also subject to the fair trade regulations limiting debt guarantees for other domestic member companies of the same group and cross-shareholdings among domestic member companies of the same group, as well as requiring disclosure of the status of such cross-shareholdings. Additionally, we are subject to a prohibition, in effect since July 2014, against circular shareholding among any three or more entities within our business group. Any future determination by the Korea Fair Trade Commission that we have engaged in transactions that violate the fair trade laws and regulations may result in fines or other punitive measures and may have a material adverse effect on our reputation and our business.
Concerns that radio frequency emissions may be linked to various health concerns could adversely affect our business and we could be subject to litigation relating to these health concerns.
In the past, allegations that serious health risks may result from the use of wireless telecommunications devices or other transmission equipment have adversely affected the share prices of some wireless telecommunications companies in the United States. In May 2011, the International Agency for Research on Cancer (“IARC”) announced that it has classified radiofrequency electromagnetic fields associated with wireless phone use as possibly carcinogenic to humans, based on an increased risk for glioma, a malignant type of brain cancer. The IARC is part of the World Health Organization that conducts research on the causes of human cancer and the mechanisms of carcinogenesis, and aims to develop scientific strategies for cancer control. We cannot assure you that such health concerns will not adversely affect our business. Several class action and personal injury lawsuits have been filed in the United States against several wireless phone manufacturers and carriers, asserting product liability, breach of warranty and other claims relating to radio transmissions to and from wireless phones. We could be subject to liability or incur significant costs defending lawsuits brought by our subscribers or other parties who claim to have been harmed by or as a result of our services. In addition, the actual or perceived risk of wireless telecommunications devices could have an adverse effect on us by reducing our number of subscribers or our usage per subscriber.
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Depreciation of the value of the Won against the Dollar and other major foreign currencies may have a material adverse effect on the results of our operations and on the prices of our securities.
Substantially all of our revenues are denominated in Won. Depreciation of the Won may materially affect the results of our operations because, among other things, it causes an increase in the amount of Won required by us to make interest and principal payments on our foreign-currency-denominated debt, the costs of telecommunications equipment that we purchase from overseas sources, net settlement payments to foreign carriers and certain payments related to our derivative instruments entered into for foreign exchange risk hedging purposes. Of the
￦
8,438 billion total book value of borrowings outstanding as of December 31, 2021,
￦
3,134 billion was denominated in foreign currencies. Upon identification and evaluation of our currency risk exposures, we, having considered various circumstances, enter into derivative financial instruments to try to mitigate such risks. Although the impact of exchange rate fluctuations has in the past been partially mitigated by such strategies, our results of operations have historically been affected by exchange rate fluctuations, and there can be no assurance that such strategies will be sufficient to reduce or eliminate the adverse impact of such fluctuations in the future. See “—Item 3.A. Selected Financial Data—Exchange Rate Information”, “Item 5. Operating and Financial Review and Prospects—Item 5.B. Liquidity and Capital Resources” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Exchange Rate Risk.”
Fluctuations in the exchange rate between the Won and the Dollar will also affect the Dollar equivalent of the Won price of our ordinary shares on the KRX Korea Composite Stock Price Index (“KOSPI”) Market and, as a result, will likely affect the market price of the ADSs. These fluctuations will also affect the Dollar conversion by the depositary for the American Depositary Receipts (“ADRs”) of cash dividends, if any, paid in Won on our ordinary shares represented by the ADSs.
We may be exposed to potential claims for unpaid wages and become subject to additional labor costs arising from the Supreme Court of Korea’s interpretation of ordinary wages.
Under the Labor Standards Act, an employee’s “ordinary wage” is a key legal construct used to calculate many statutory benefits and entitlements in Korea. Increasing or decreasing the amount of compensation included in employees’ ordinary wages has the effect of increasing or decreasing the amounts of various statutory entitlements that are calculated based on “ordinary wage,” such as overtime premium pay. Under guidelines previously issued by the Ministry of Employment and Labor, prior to the Supreme Court decision described below, an employee’s ordinary wage included base salary and certain fixed monthly allowances for work performed overtime during night shifts and holidays. Prior to the Supreme Court of Korea’s decision described below, companies in Korea had typically interpreted these guidelines as excluding from the scope of ordinary wages fixed bonuses that are paid other than on a monthly basis, namely on a
bi-monthly,
quarterly or biannual basis.
In December 2013, the Supreme Court of Korea ruled that regular bonuses (including those that are paid other than on a monthly basis) shall be deemed ordinary wages if these bonuses are paid “regularly” and “uniformly” on a “fixed basis” notwithstanding differential amounts based on seniority. Under this decision, any collective bargaining agreement or labor-management agreement which attempts to exclude such regular bonuses from employees’ ordinary wages will be deemed void for violation of the mandatory provisions of Korean law. However, the Supreme Court of Korea further ruled that, in certain limited situations, an employee’s claim of underpayment under the expanded scope of ordinary wages for the past three years may be denied based on the principles of good faith, even if the claim is raised within the statute of limitations period. Following this Supreme Court decision, the Ministry of Employment and Labor issued a Guideline for Labor and Management on Ordinary Wages in January 2014. A bill for amendment to the Labor Standard Act, which includes a
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definition of “ordinary wages” as “entire money and valuables determined in advance to be provided to the employee by the employer as wages, regardless of its name, in exchange of the prescribed or total work of the employee,” is currently pending at the
sub-committee
level of the National Assembly.
While we currently are not subject to any claims of underpayment from our current or former employees,
the Supreme Court decision may result in additional labor costs for us in the form of additional payments required under the expanded scope of ordinary wages, both those incurred during the past three years and those to be incurred in the future. Any such additional payments may have an adverse effect on our financial condition and results of operations.
Risks Relating to Korea
If economic conditions in Korea deteriorate, our current business and future growth could be materially and adversely affected.
We are incorporated in Korea, and we generate most of our operating revenue in Korea. As a result, we are subject to economic, political, legal and regulatory risks specific to Korea. In the past, the economic indicators in Korea have shown mixed signs of growth and uncertainty, and starting in 2020, the overall Korean economy and the economies of Korea’s major trading partners have shown mixed signs of deterioration and recovery due to the debilitating effects of the
COVID-19
pandemic. See ““—Risks Relating to Our Business—The ongoing global pandemic of a new strain of coronavirus
(“COVID-19”)
and any possible recurrence of other types of widespread infectious diseases, may adversely affect our business, financial condition or results of operations.” As a result, future growth of the Korean economy is subject to many factors beyond our control, including developments in the global economy.
In recent years, adverse conditions and volatility in the worldwide financial markets, fluctuations in oil and commodity prices, and supply chain disruptions, in particular due to the
COVID-19
pandemic, have contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the Korean economy. The value of the Won relative to major foreign currencies has fluctuated significantly and, as a result of deteriorating global and Korean economic conditions, there has been significant volatility in the stock prices of Korean companies recently. Declines in the KOSPI, and large amounts of sales of Korean securities by foreign investors and subsequent repatriation of the proceeds of such sales may adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea, and the ability of Korean companies to raise capital. Any future deterioration of the Korean economy could adversely affect our business, financial condition and results of operations and the market price of our ADSs.
Developments that could have an adverse impact on Korea’s economy include:

| • |  | declines in consumer confidence and a slowdown in consumer spending, including as a result of the ongoing global COVID-19 pandemic;

| • |  | adverse conditions or developments in the economies of countries and regions that are important export markets for Korea, such as China, the United States, Europe and Japan, or in emerging market economies in Asia or elsewhere, including as a result of the deteriorating economic and trade relations between the United States and China and increased uncertainties resulting from the United Kingdom’s exit from the European Union;

| • |  | adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the U.S. dollar, the Euro or the Japanese Yen exchange rates or revaluation of the Chinese Renminbi), interest rates, inflation rates or stock markets;

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| • |  | the occurrence of severe health epidemics in Korea or other parts of the world, such as the COVID-19 pandemic;

| • |  | deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy (such as the ongoing trade disputes with Japan);

| • |  | increased sovereign default risk in select countries and the resulting adverse effects on the global financial markets;

| • |  | deterioration in the financial condition or performance of small- and medium-sized enterprises and other companies in Korea due to the Government’s policies to increase minimum wages and limit working hours of employees;

| • |  | investigations of large Korean business groups and their senior management for possible misconduct;

| • |  | a continuing rise in the level of household debt and increasing delinquencies and credit defaults by retail and small- and medium-sized enterprise borrowers in Korea;

| • |  | the economic impact of any pending or future free trade agreements or of any changes to existing free trade agreements;

| • |  | social and labor unrest;

| • |  | substantial changes in the market prices of Korean real estate;

| • |  | a substantial decrease in tax revenues and a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs, in particular in light of the Government’s ongoing efforts to provide emergency relief payments to households and emergency loans to corporations in need of funding in light of COVID-19, which, together, would likely lead to a national budget deficit as well as an increase in the Government’s debt;

| • |  | financial problems or lack of progress in the restructuring of Korean business groups, other large troubled companies, their suppliers or the financial sector;

| • |  | loss of investor confidence arising from corporate accounting irregularities or corporate governance issues concerning certain Korean companies;

| • |  | increases in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population size in Korea;

| • |  | geopolitical uncertainty and the risk of further attacks by terrorist groups around the world;

| • |  | political uncertainty or increasing strife among or within political parties in Korea;

| • |  | hostilities or political or social tensions involving oil producing countries in the Middle East (including a potential escalation of hostilities between the United States and Iran) and Northern Africa and any material disruption in the global supply of oil or sudden increase in the price of oil;

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| • |  | hostilities or political or social tensions involving Russia (including the invasion of Ukraine by Russia and ensuing actions that the United States and other countries may take) and any resulting adverse effects on the global supply of oil or other natural resources or the global financial markets;

| • |  | natural or man-made disasters that have a significant adverse economic or other impact on Korea or its major trading partners; and

| • |  | an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.

Escalations in tensions with North Korea could have an adverse effect on us and the market value of our ADSs.
Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapon and ballistic missile programs as well as its hostile military actions against Korea. Some of the significant incidents in recent years include the following:

| • |  | North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and has conducted several rounds of nuclear tests since October 2006, including claimed detonations of hydrogen bombs, and warheads that can be mounted on ballistic missiles. Over the years, North Korea has also conducted a series of ballistic missile tests, including missiles launched from submarines and intercontinental ballistic missiles that it claims can reach the United States mainland. In response, the Government has repeatedly condemned the provocations and flagrant violations of relevant United Nations Security Council resolutions. Internationally, the United Nations Security Council has passed a series of resolutions condemning North Korea’s actions and significantly expanding the scope of sanctions applicable to North Korea, most recently in December 2017 in response to North Korea’s intercontinental ballistic missile test in November 2017. Over the years, the United States and the European Union have also expanded their sanctions applicable to North Korea.

| • |  | In March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the west coast of the Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea for the attack and vowed stern retaliation should there be further provocation.

North Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea.
Although bilateral summit meetings were held between Korea and North Korea in April, May and September 2018 and between the United States and North Korea in June 2018, February 2019 and June 2019, there can be no assurance that the level of tensions affecting the Korean peninsula will not escalate in the future. Any increase in tensions, which may occur, for example, if North Korea experiences a leadership crisis,
high-level
contacts between Korea or the United States and North
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Korea break down or further military hostilities occur, could have a material adverse effect on the Korean economy and on our business, financial condition and results of operations.
Korea’s legislation allowing class action suits related to securities transactions may expose us to additional litigation risk.
The Securities-related Class Action Act of Korea enacted in January 2004 allows class action suits to be brought by shareholders of companies (including us) listed on the KRX KOSPI Market for losses incurred in connection with purchases and sales of securities and other securities transactions arising from (1) false or inaccurate statements provided in the registration statements, prospectuses, business reports, audit reports, semi-annual or quarterly reports and material fact reports and omission of material information in such documents, (2) insider trading, (3) market manipulation and (4) unfair trading. This law permits 50 or more shareholders who collectively hold 0.01% of the shares of a company to bring a class action suit against, among others, the issuer and its directors and officers. Because of the enactment of the act, there is not enough judicial precedent to predict how the courts will apply the law. Litigation can be time-consuming and expensive to resolve, and can divert management time and attention from business operation. We are not aware of any basis upon which such suit may be brought against us, nor are any such suits pending or threatened. Any such litigation brought against us could have a material adverse effect on our business, financial condition and results of operations.
We are generally subject to Korean corporate governance and disclosure standards, which differ in significant respects from those in other countries.
Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies which differ in some respects from standards applicable in other countries, including the United States. As a reporting company registered with the Securities and Exchange Commission and listed on the New York Stock Exchange, we are, and will continue to be, subject to certain corporate governance standards. However, foreign private issuers, including us, are exempt from certain corporate governance standards required under the New York Stock Exchange. For a description of significant differences in corporate governance practice compared to corporate governance standards of the New York Stock Exchange applicable to U.S. issuers, see “Item 16G. Corporate Governance.” There may also be less publicly available information about Korean companies, such as us, than is regularly made available by public or
non-public
companies in other countries.
Risks Relating to the Securities
If an investor surrenders his American Depositary Shares (“ADSs”) to withdraw the underlying shares, he may not be allowed to deposit the shares again to obtain ADSs.
Korean law currently limits foreign ownership of the ADSs and our shares. In addition, under our deposit agreement, the depositary bank cannot accept deposits of shares and deliver ADSs representing those shares unless (1) we have consented to such deposit or (2) Korean counsel has advised the depositary bank that the consent required under (1) is no longer required under Korean laws and regulations. Under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us or with our consent for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary bank at the time of such proposed deposit. The depositary bank has informed us that, at a time it considers to be appropriate, the depositary bank plans to start
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accepting deposits of shares without our consent and to deliver ADSs representing those shares up to the amount allowed under current Korean laws and regulations. Until such time, however, the depositary bank will continue to obtain our consent for such deposits of shares and delivery of ADSs, which we may not provide. Consequently, if an investor surrenders his ADSs to withdraw the underlying shares, he may not be allowed to deposit the shares again to obtain ADSs. See “Item 10. Additional Information—Item 10.D. Exchange Controls.”
A foreign investor may not be able to exercise voting rights with respect to common shares exceeding certain restrictions.
Under the Telecommunications Business Act, a foreign shareholder who holds 5.0% or more of our total shares is prohibited from becoming our largest shareholder. However, any foreign shareholder who held 5.0% or more of our total shares and was our largest shareholder on or prior to May 9, 2004 is exempt from the regulations, provided that such foreign shareholder may not acquire any more of our shares. In addition, under the Telecommunications Business Act, the MSIT may, if it deems it necessary to preserve substantial public interests, prohibit a foreign shareholder from being our largest shareholder. In the event that any foreigner or foreign government acquires our shares in violation of the above provisions, such foreign shareholder may not be able to exercise voting rights with respect to common shares exceeding such threshold. The MSIT may also order us or the foreign shareholder to take corrective measures in respect of the excess shares within a specified period of six months or less.
In addition, the Telecommunications Business Act restricts the ownership and control of network service providers by foreign shareholders. Foreigners (based on citizenship), foreign governments and “foreign invested companies” may not own more than 49.0% of the issued shares with voting rights of a network service provider, including us. For purposes of the Telecommunications Business Act, the term “foreign invested company” means a company in which a foreigner or a foreign government is the largest shareholder and holds 15.0% or more of the company’s shares with voting rights, provided, however, that such company will not be counted as a foreign shareholder for the purposes of the 49.0% limit if (1) it holds less than 1.0% of our total issued and outstanding shares with voting rights or (2) if the MSIT determines that the fact that such foreign government or entity holds a 15.0% or greater shareholding in such company does not present a risk of harm to the public interest.
Notwithstanding the above, pursuant to a recent amendment to the Telecommunications Business Act that became effective on April 20, 2022, a company, so long as (i) its largest shareholder (determined by aggregating the shareholdings of such shareholder and its related parties) is a foreign government or a foreigner of a country that has entered into a bilateral or multilateral free trade agreement with Korea that is designated by the MSIT, and (ii) such shareholder (together with the shareholdings of its related parties) owns 15.0% or more of the issued voting stock of such entity, may own more than 49.0% of our issued shares with voting rights but may not exercise its voting rights with respect to the shares held in excess of the 49% ceiling until the conclusion of the MSIT’s public interest review.
As of December 31, 2021, 43.33% of our common shares were owned by foreign investors. In the event that any foreigner or foreign government acquires our shares in violation of the above provisions, such foreign shareholder may not be able to exercise voting rights with respect to common shares exceeding such threshold. The MSIT may also order us or the foreign shareholder to take corrective measures in respect of the excess shares within a specified period of six months or less. See “Item 4. Information of the Company—Item 4.B. Business Overview—Regulation—Foreign Investment” and “Item 10. Additional Information—Item 10.B. Memorandum and Articles of Association—Limitations on Shareholding.”
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Holders of ADSs will not be able to exercise appraisal rights unless they have withdrawn the underlying ordinary shares and become our direct shareholders.
In some limited circumstances, including the transfer of the whole or any significant part of our business and our merger or consolidation with another company, dissenting shareholders have the right to require us to purchase their shares under Korean law. A holder of ADSs will not be able to exercise appraisal rights unless he has withdrawn the underlying ordinary shares and become our direct shareholder. See “Item 10. Additional Information—Item 10.B. Memorandum and Articles of Association.”
An investor may not be able to exercise preemptive rights for additional shares and may suffer dilution of his equity interest in us.
The Commercial Code of Korea and our articles of incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer any rights to subscribe for additional ordinary shares or any rights of any other nature, the depositary bank, after consultation with us, may make the rights available to an ADS holder or use reasonable efforts to dispose of the rights on behalf of the ADS holder and make the net proceeds available to the ADS holder. The depositary bank, however, is not required to make available to an ADS holder any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:

| • |  | a registration statement filed by us under the Securities Act of 1933, as amended, is in effect with respect to those shares; or

| • |  | the offering and sale of those shares is exempt from or is not subject to the registration requirements of the Securities Act.

We are under no obligation to file any registration statement. If a registration statement is required for an ADS holder to exercise preemptive rights but is not filed by us, the ADS holder will not be able to exercise his preemptive rights for additional shares. As a result, the ADS holder may suffer dilution of his equity interest in us.
Forward-looking statements may prove to be inaccurate.
This annual report contains “forward-looking statements” that are based on our current expectations, assumptions, estimates and projections about us and the industries in which we operate. The forward-looking statements are subject to various risks and uncertainties. These
forward-looking
statements include, but are not limited to, those statements using words such as “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project,” “aim,” “plan,” “likely to,” “target,” “contemplate,” “predict,” “potential” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions generally intended to identify forward-looking statements. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be incorrect. The uncertainties in this regard include, but are not limited to, those identified in the risk factors discussed above. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.
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Item 4. Information on the Company
Item 4.A. History and Development of the Company
In 1981, the Government established us under the Korea Telecom Act to operate the telecommunications services business that it previously directly operated. Under the Korea Telecom Act and the Government-Invested Enterprises Management Basic Act, the Government exercised substantial control over our business and affairs. Effective October 1, 1997, the Korea Telecom Act was repealed and the Government-Invested Enterprises Management Basic Act became inapplicable to us. As a result, we became a corporation under the Commercial Code, and our corporate organization and shareholders’ rights were governed by the Government’s privatization laws and the Commercial Code. Among other things, we began to exercise greater autonomy in setting our annual budget and making investments in the telecommunications industry, and our shareholders began electing our directors, who had previously been appointed by the Government under the Korea Telecom Act.
Prior to 1993, the Government owned all of the issued shares of our common stock. From 1993 through May 2002, the Government disposed of all of its equity interest in us, and the privatization laws ceased to apply to us in August 2002. We amended our legal name from Korea Telecom Corp. to KT Corporation in March 2002.
Before December 1991, we were the sole provider of local, domestic long-distance and international long-distance telephone services in Korea. The Government began to introduce competition in the telecommunications services market in the early 1990’s. As a result, including ourselves, there are currently three local telephone service providers, five domestic long-distance carriers and numerous international long-distance carriers (including voice resellers) in Korea. In addition, the Government awarded licenses to several service providers to promote competition in other telecommunications business areas such as mobile telephone services and data network services. In June 2009, KT Freetel Co., Ltd. (“KTF”), a subsidiary providing mobile telephone services, merged into KT Corporation, with KT Corporation surviving the merger, with the objective of maximizing management efficiencies of our fixed-line and mobile telecommunications operations as well as more effectively responding to the convergence trends in the telecommunications industry. There are currently three mobile telephone service providers in Korea. See “—Item 4.B. Business Overview—Competition.”
We are a corporation with limited liability organized under the laws of Korea, and our legal and commercial name is KT Corporation. Our principal executive offices are located at KT Gwanghwamun Building East, 33,
Jong-ro
3-gil,
Jongno-gu,
03155, Seoul, Korea, our telephone number is
+82-31-727-0114
and the address of our English website is https://corp.kt.com/eng/.
The SEC maintains a website (
http://www.sec.gov
), which contains reports, information statements and other information regarding issuers that file electronically with the SEC.
Item 4.B. Business Overview
We are the leading integrated telecommunications and platform service provider in Korea and one of the most advanced in Asia. In 2020, we announced our plans to transform ourselves into a digital telecommunications platform company as we strive to further expand and strengthen our digital platforms including in relation to our
business-to-business
(“B2B”), media, contents and financial services.
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Our principal services include:

| • |  | mobile voice and data telecommunications services based on 5G, 4G LTE and 3G W-CDMA technology;

| • |  | fixed-line services, which include:

| Ø |  | (i) fixed-line telephone services, including local, domestic long-distance and international long-distance services, (ii) Voice over Internet Protocol (“VoIP”) telephone services (i.e., provision of communication services over the Internet, and not over the fixed-line PSTN) and (iii) interconnection services to other telecommunications companies;

| Ø |  | broadband Internet access services; and

| Ø |  | data communication services, including fixed-line and satellite leased line services and dedicated broadband Internet connection service to corporate and other institutional customers;

| • |  | media and content services, including IPTV, satellite TV, digital music services, e-commerce services, online advertising consulting services and digital comics and novels services;

| • |  | financial services, including credit card processing and other financial services offered primarily through BC Card;

| • |  | other business activities, including information technology and network services and rental of real estate by KT Estate Inc. (“KT Estate”); and

| • |  | sale of goods, primarily sale of handsets related to our mobile services and miscellaneous telecommunications equipment, as well as sale of residential units and commercial real estate developed by KT Estate.

Leveraging our dominant position in the fixed-line telephone services market and our established customer base in Korea, we have successfully pursued new growth opportunities and obtained strong market positions in each of our principal lines of business. In particular:

| • |  | in mobile services, we achieved a market share of 31.3% with approximately 22.8 million subscribers as of December 31, 2021;

| • |  | in fixed-line and VoIP telephone services, we had approximately 13.0 million subscribers, consisting of 9.9 million PSTN subscribers and 3.2 million VoIP subscribers as of December 31, 2021. As of such date, our market share of the fixed-line local telephone and VoIP services was 56.3%; and

| • |  | we are Korea’s largest broadband Internet access provider with approximately 9.5 million subscribers as of December 31, 2021, representing a market share of 41.2%.

For the year ended December 31, 2021, our operating revenue was
￦
25,206 billion, our profit for the year was
￦
1,459 billion and our basic earnings per share was
￦
5,759. As of December 31, 2021, our total assets were
￦
37,159 billion, total liabilities were
￦
20,592 billion and total equity was
￦
16,567 billion.
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Our Services
The following table sets out our operating revenue by principal product categories and the respective percentage of total operating revenue in 2019, 2020 and 2021.

|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
Products and services |  | Billions of Won |  |  | % |  |  | Billions of Won |  |  | % |  |  | Billions of Won |  |  | % |
Mobile services |  | ￦ | 6,795 |  |  |  | 27.3 | % |  | ￦ | 6,805 |  |  |  | 27.8 | % |  | ￦ | 6,936 |  |  |  | 27.5 | %
Fixed-line services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-line and VoIP telephone services |  |  | 1,579 |  |  |  | 6.3 |  |  |  | 1,464 |  |  |  | 6.0 |  |  |  | 1,465 |  |  |  | 5.8 |
Broadband Internet access services |  |  | 2,177 |  |  |  | 8.7 |  |  |  | 2,256 |  |  |  | 9.2 |  |  |  | 2,344 |  |  |  | 9.3 |
Data communication services |  |  | 1,111 |  |  |  | 4.5 |  |  |  | 1,107 |  |  |  | 4.5 |  |  |  | 1,152 |  |  |  | 4.6 |
Sub-total |  |  | 4,867 |  |  |  | 19.5 |  |  |  | 4,827 |  |  |  | 19.7 |  |  |  | 4,960 |  |  |  | 19.7 |
Media and content services |  |  | 2,516 |  |  |  | 10.1 |  |  |  | 2,638 |  |  |  | 10.8 |  |  |  | 2,801 |  |  |  | 11.1 |
Financial services |  |  | 3,642 |  |  |  | 14.6 |  |  |  | 3,494 |  |  |  | 14.3 |  |  |  | 3,662 |  |  |  | 14.5 |
Others |  |  | 2,885 |  |  |  | 11.6 |  |  |  | 3,084 |  |  |  | 12.6 |  |  |  | 3,313 |  |  |  | 13.1 |
Sale of goods (1) |  |  | 4,194 |  |  |  | 16.8 |  |  |  | 3,593 |  |  |  | 14.7 |  |  |  | 3,533 |  |  |  | 14.0 |
Total operating revenue |  | ￦ | 24,899 |  |  |  | 100.0 | % |  | ￦ | 24,441 |  |  |  | 100.0 | % |  | ￦ | 25,206 |  |  |  | 100.0 | %

(1) | Primarily related to sale of handsets for our mobile service and miscellaneous telecommunications equipment, as well as sale of residential units and commercial real estate developed by KT Estate.

Mobile Services
We provide mobile services based on 5G, 4G LTE, and 3G
W-CDMA
technology.
We have made extensive efforts to continually develop advanced technologies as well as to provide a variety of new mobile services with enhanced speed, latency and connectivity. We commercially launched our next generation 5G mobile services in April 2019. We believe that the faster data transmission speed and lower latency of the 5G network enables us to offer significantly enhanced wireless data transmission with faster access to multimedia contents. We began offering 4G LTE services in the Seoul metropolitan area in January 2012, and we completed the expansion of our coverage nationwide in October 2012. 4G LTE technology enables data to be transmitted faster than 3G
W-CDMA
technology.
Revenue related to mobile service accounted for 27.5% of our operating revenue in 2021. The following table shows selected information concerning the usage of our network during the periods indicated and the number of our mobile subscribers as of the end of such periods:

|  | As of or for the Year Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
Average monthly revenue per subscriber (1) |  | ￦ | 31,625 |  |  | ￦ | 31,683 |  |  | ￦ | 32,294 |
Number of mobile subscribers (in thousands) |  |  | 21,922 |  |  |  | 22,305 |  |  |  | 22,799 |
LTE subscribers |  |  | 17,153 |  |  |  | 16,174 |  |  |  | 14,637 |
W-CDMA subscribers |  |  | 3,350 |  |  |  | 2,512 |  |  |  | 1,784 |
5G subscribers |  |  | 1,419 |  |  |  | 3,619 |  |  |  | 6,378 |

(1) | The average monthly revenue per subscriber is computed by dividing total monthly fees, usage charges, interconnection fees and value-added service fees for the period by the weighted average number of subscribers (other than MVNO subscribers) and dividing the quotient by the number of months in the period.

We compete with SK Telecom, a mobile service provider that has a longer operating history than us, and LG U+ which began its service at around the same time as KTF. As of December 31, 2021, we had approximately 22.8 million subscribers, or a market share of 31.3%, which was the second largest among the three mobile service providers.
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We market our mobile services primarily through independent exclusive dealers located throughout Korea. In addition to assisting new subscribers to activate mobile service and purchase handsets, authorized dealers are connected to our database and are able to assist customers with their account. Although most of these dealers sell exclusively our products and services,
sub-dealers
hired by exclusive dealers may sell products and services offered by other mobile telecommunications service providers. Authorized dealers are entitled to a commission for each new subscriber registered, as well as ongoing commissions for the first five years based primarily on the subscriber’s monthly fee, usage charges and length of subscription. The handsets sold by us to the dealers cannot be returned to us unless they are defective. If a handset is defective, it may be exchanged for a new one within 14 days from the date of purchase.
In response to the diversification of our customers’ demands and their increasing sophistication, we have also selectively engaged in opportunities to expand our internal sales channels. We operate customer plazas in key areas that engage in mobile service sales activities as well as provide a
one-stop
shop for a wide range of other services and products that we offer.
We also operate a website to promote and advertise our products and services to the general public and in particular to younger customers who are more familiar with the Internet.
We conduct the screening process for new subscribers with great caution. A potential subscriber must meet all minimum credit criteria before receiving mobile service. The procedure includes checking the history of
non-payment
and credit information from banks and credit agencies such as the National Information and Credit Evaluation Corporation. Applicants who do not meet the minimum criteria can only subscribe to the mobile service by using a
pre-paid
card.
Fixed-line Services
We provide a variety of fixed-line services, including various telephone services, broadband Internet access and data communication services.
Fixed-line and VoIP Telephone Services
We utilize our extensive nationwide telephone network to provide fixed-line telephone services, which consist of local, domestic long-distance, international long-distance services and
land-to-mobile
interconnection services. Our
fixed-line
telephone network includes exchanges, long-distance transmission equipment and fiber optic and copper cables. We also provide VoIP telephone services that enable VoIP phone devices with broadband connection to make domestic and international calls. These fixed-line and VoIP telephone services accounted for 5.8% of our operating revenue in 2021. In recent years, the proliferation of mobile phones, as well as the availability of increasingly lower wireless pricing plans, some of which include unlimited voice minutes, has led to significant decreases in our domestic long-distance call minutes and local call pulses. The following table shows selected information concerning our fixed-line telephone network and the number of PSTN and VoIP subscribers as of the end of the periods indicated as well as their engagement levels during such periods.

|  | As of or for the Year Ended December 31, |
|  | 2017 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | 2021 |
Total Korean population (thousands) (1) |  |  | 51,799 |  |  |  | 51,826 |  |  |  | 51,850 |  |  |  | 51,829 |  |  |  | 51,639 |
PSTN and VoIP lines in service (thousands) |  |  | 15,610 |  |  |  | 14,992 |  |  |  | 14,185 |  |  |  | 13,582 |  |  |  | 13,096 |
PSTN lines in service |  |  | 12,201 |  |  |  | 11,637 |  |  |  | 11,052 |  |  |  | 10,449 |  |  |  | 9,905 |
Local lines in service |  |  | 11,222 |  |  |  | 10,654 |  |  |  | 10,076 |  |  |  | 9,475 |  |  |  | 8,937 |
Group lines in service |  |  | 979 |  |  |  | 983 |  |  |  | 976 |  |  |  | 973 |  |  |  | 968 |
VoIP lines in service |  |  | 3,409 |  |  |  | 3,355 |  |  |  | 3,133 |  |  |  | 3,133 |  |  |  | 3,191 |
Fiber optic cable (kilometers) |  |  | 764,802 |  |  |  | 784,088 |  |  |  | 847,497 |  |  |  | 867,051 |  |  |  | 896,076 |
Domestic long-distance call minutes (millions) (2) |  |  | 1,126 |  |  |  | 892 |  |  |  | 744 |  |  |  | 620 |  |  |  | 500 |
Local call pulses (millions) (2) |  |  | 1,285 |  |  |  | 974 |  |  |  | 804 |  |  |  | 638 |  |  |  | 554 |

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(1) | Based on the number of registered residents as published by the Ministry of the Interior and Safety of Korea.

(2) | Excluding calls placed from public telephones.

Our domestic long-distance cable network is entirely made up of fiber optic cable and can carry both voice and data transmissions. Compared to conventional materials such as coaxial cable, fiber optic cable provides significantly greater transmission capacity with less signal fading, thus requiring less frequent amplification. All of our lines are connected to exchanges capable of handling digital signal technology. A principal limitation of the older analog technology is that applications other than voice communications, such as the transmission of text and computer data, require either separate networks or conversion equipment. Digital systems permit a range of voice, text and data applications to be transmitted simultaneously on the same network.
In recent years, the volume of our incoming calls has exceeded the volume of our outgoing calls. The agreed settlement rate is applied to the call minutes to determine the applicable net settlement payment. The following table shows the number of minutes of international long-distance calls recorded by us and network service providers utilizing our international long-distance network in each specified category for each year in the five-year period ended December 31, 2021:

|  | Year Ended December 31, |
|  | 2017 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | 2021 |
|  | (In millions of billed minutes) |
Incoming international long-distance calls (1) |  |  | 286.4 |  |  |  | 221.1 |  |  |  | 189.6 |  |  |  | 50.8 |  |  |  | 242.4 |
Outgoing international long-distance calls |  |  | 125.9 |  |  |  | 101.1 |  |  |  | 78.8 |  |  |  | 59.5 |  |  |  | 44.4 |
Total |  |  | 412.3 |  |  |  | 322.2 |  |  |  | 268.4 |  |  |  | 110.3 |  |  |  | 286.8 |

(1) | Starting in 2021, includes incoming traffic of application-to-person correspondence.

Under the Telecommunications Business Act, we are required to permit other service providers to interconnect to our fixed-line network. Currently, the principal users of this interconnection capacity include affiliates of SK Telecom and LG U+ (offering local, domestic long-distance and international long-distance services, and transmitting calls to and from their mobile networks). We recognize as
land-to-mobile
interconnection revenue the entire amount of the usage charge collected from the landline user and recognize as an expense the amount of interconnection charge paid to the mobile service provider.
Broadband Internet Access Services
Leveraging on our nationwide network of 896,076 kilometers of fiber optic cables as of December 31, 2021, we have achieved a leading market position in the broadband Internet access market in Korea. We believe we have a competitive advantage over other broadband Internet access service providers because, unlike our competitors, we can utilize our existing networks nationwide to provide broadband Internet access service. Our principal Internet access services are offered under the “KT Internet” and “KT GiGA Internet” brand names. We also offer WiFi services under the “KT WiFi” brand name, which is designed to integrate fixed-line and wireless services by offering high speed wireless Internet access to laptops and smartphones in
hot-spot
zones and KT Internet service in fixed-line environments. Our broadband Internet access services accounted for 9.3% of our operating revenue in 2021.
As of December 31, 2021, we had approximately 9.5 million broadband Internet subscribers, including approximately 6.2 million KT GiGA Internet service subscribers with enhanced data transmission speeds. In addition, we had approximately 5.7 million KT WiFi subscribers as of such date. We also sponsored approximately 103 thousand
hot-spot
zones nationwide for wireless connection as of December 31, 2021.
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Our KT Internet services primarily utilize ADSL technology, which is a technology that converts existing copper twisted-pair telephone lines into access paths for multimedia and high-speed data communications. ADSL transforms the existing public telephone network from one limited to voice, text and
low-resolution
graphics to a system capable of bringing multimedia to subscriber premises without new cabling. The asymmetric design optimizes the bandwidth by maximizing the downstream speed for downloading information from the Internet. We are continually upgrading our broadband network to enable better FTTH connection, which further enhances data transmission speed and connection quality. FTTH is a telecommunication architecture in which a communication path is provided over optical fiber cables extending from the telecommunications operator’s switching equipment to the boundary of home or office. FTTH uses fiber optic cable, which is able to carry a high-bandwidth signal for longer distances without degradation. FTTH enables us to deliver enhanced services that require high bandwidth, such as IPTV, and other digital media contents with higher stability.
Data Communication Services
Our data communication services involve offering exclusive lines that allow
point-to-point
connection for voice and data traffic between two or more geographically separate points. As of December 31, 2021, we leased 295,919 lines to domestic and international businesses. We provide dedicated and secure broadband Internet connection service to institutional customers under the “Kornet” brand name. We provide high-speed connection to our Internet backbone network, as well as rent to our customers and install necessary routers to ensure reliable Internet connection and enhanced security. We provide discount rates to qualified customers, including small- and
medium-sized
enterprises, businesses engaging in Internet access services and government agencies. Data communication services accounted for 4.6% of our operating revenue in 2021.
Through our wholly owned subsidiary KT Sat Co., Ltd., we also provide transponder leasing, broadcasting, video distribution and data communication services through satellites periodically launched by us. We also lease satellite capacity from other satellite operators to offer satellite services to both domestic and international customers.
Media and Content Services
We offer a variety of media and content services, including IPTV, satellite TV,
e-commerce
services, digital music services, online advertising consulting services and digital comics and novels services. Media and content services accounted for 11.1% of our operating revenue in 2021. In addition, in September 2021, KT Skylife, in which we held a 49.99% interest as of December 31, 2021, acquired a 100.00% interest in HCN, which is Korea’s fifth largest cable TV operator. See “Item 5. Operating and Financial Review and Prospects—Item 5.A. Operating Results—Overview—Acquisitions and Disposals of Interests in Subsidiaries and Joint Ventures.”
IPTV
We offer high definition
video-on-demand
and real-time broadcasting and ultra-high-definition (“UHD”) IPTV services under the brand name “olleh tv.” Our IPTV service offers access to an array of digital media contents, including broadcast channels, movies, sports, news, educational programs and TV replay, for a fixed monthly fee or on a
pay-per-view
basis. Through a digital
set-top
box that we rent to our customers, our customers are able to browse the catalogue of digital media contents and view selected media streams on their television. A
set-top
box provides
two-way
communications on an IP network and decodes video streaming data. As part of our IPTV services, we also operate our OTT platform under the brand name “Seezn.” We had approximately 9.1 million IPTV subscribers as of December 31, 2021.
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We are also leveraging our big data analytics capabilities and artificial intelligence technology to further enhance our IPTV services. We offer artificial intelligence-based “GiGA genie” service to our IPTV subscribers through a voice recognition speaker that also serves as the IPTV’s
set-top
box, which enables us to take advantage of big data analytics and enhance our product offerings as well as operate a more effective automated customer service center.
Satellite TV
We offer satellite TV services with features similar to our IPTV services through KT Skylife, in which we held a 49.99% interest as of December 31, 2021. As of December 31, 2021, we had approximately 3.8 million subscribers for our satellite TV services, including olleh tv Skylife combination services.
Digital Music Services
We operate Genie, our platform for music contents as well as subscription-based access to digital music streaming and downloading services, through our subsidiary Genie Music Corporation, in which KT Studio Genie Co., Ltd. (“KT Studio Genie”) held a 36.0% interest as of December 31, 2021. As of December 31, 2021, Genie was the second-largest music streaming and downloading service provider in Korea in terms of number of subscribers. Genie offers a broad selection of Korean and international music, both in streaming and download formats, as well as a variety of features designed to enhance the experience of users. In addition, we provide audiobook services. We offer Genie services in various formats that are specifically designed for mobile and other connected devices, PCs and TVs.
E-commerce
Services
In July 2021, we merged KTH Co., Ltd. (“KTH”) and KT mhows Co., Ltd. (“KT mhows”) to create KT alpha Co., Ltd. (“KT alpha”) in which we held a 70.5% interest on a consolidated basis as of December 31, 2021. Through such merger, we expect to achieve vertical integration and pursue additional mobile commerce opportunities by leveraging KT mhows’ large corporate customer base with the
e-commerce
infrastructure and
know-how
of KTH.
Through KT alpha, we offer TV home shopping, digital content distribution and information and communication technology (“ICT”) platform consulting services. Furthermore, we offer a variety of consumer products and food items on our IPTV and satellite TV platforms. We also secure rights to digital entertainment contents such as movies, animations and TV series and distribute such contents to other media platforms. In addition, we provide a wide range of consulting services related to
build-out
of ICT platforms.
We also offer mobile gift card services through KT alpha under the brand name “giftishow” and other mobile advertising solutions to corporate customers.
Online Advertising Consulting Services
We provide strategic advertising consulting services for the online advertising industry through our subsidiaries Nasmedia, Co., Ltd. (“Nasmedia”), in which we held a 42.9% interest as of December 31, 2021, and PlayD Co., Ltd. (“PlayD”), in which Nasmedia and we in the aggregate held a 70.4% interest as of December 31, 2021. We provide a variety of services for advertising agencies, online media companies and their clients, ranging from market studies to advertising campaign planning as well as analysis of such campaign’s effectiveness. Our proprietary data analysis tools enable us to define specific advertising targets for the clients as well as to evaluate the effectiveness of various marketing channels to provide an optimal advertising campaign strategy.
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Digital Comics and Novels Services
StoryWiz, which was established in February 2020 and in which KT Studio Genie held a 100.0% interest as of December 31, 2021, specializes in producing and distributing digital comics and web novels as well as producing original video contents using our intellectual property rights. StoryWiz operates a web novel platform called Blice and a webtoon platform called KTOON. Through Blice, many writers distribute their web novels, and we support such writers in a variety of ways, such as holding web novel contests as well as providing funding for new and promising writers. KTOON offers a variety of web comics in a wide range of genres including comedy, romance, action and fantasy. We strive to further expand our intellectual property to movies, dramas and web comics.
Financial Services
As part of our overall strategy, we selectively pursue new business opportunities in the financial sector that complement our telecommunications business. In October 2011, we acquired a controlling interest in BC Card, a leading credit card solutions provider in Korea in which we held a 69.5% interest as of December 31, 2021. As of such date, BC Card held a 33.7% interest in K Bank, an Internet-only bank that began its commercial operations in April 2017.
Revenue from our financial services, which consist primarily of revenue from BC Card, accounted for 14.5% of our operating revenue in 2021.
BC Card
Through BC Card, we offer various credit card processing and related financial services. We operate the largest merchant payment network in Korea as measured by transaction volume. We also provide outsourcing services to a wide range of financial institutions for their credit card and check card business operations, including production and delivery of new credit cards, the preparation of monthly statements, management of merchants and other ancillary services. We also offer our services in select countries in Asia, including China, Indonesia and Vietnam.
A minority interest in BC Card is owned by various financial institutions in Korea, many of which are member companies that enter into
co-branding
agreements with us and issue credit cards and check cards under the “BC Card” brand. Our member companies that issue
co-branded
credit or check cards include Woori Card, NH Card, Industrial Bank of Korea and KB Kookmin Card. We engage in joint marketing efforts to promote cards issued pursuant to our
co-branding
agreements. However, we typically do not assume credit risks related to the inability of cardholders to make payments on their card usage, which are typically assumed by the member companies. As of December 31, 2021, we had approximately 20 million credit cards and approximately 26 million check cards issued by our member companies under the “BC Card” brand. We also provide ancillary outsourcing services to various other banks, securities companies and financial institutions that do not issue
co-branded
cards with us.
We charge commissions for merchant fees paid by merchants to credit card companies for processing transactions. Merchant fees vary depending on the type of merchant and the total transaction amounts generated by the merchant. In addition to merchant fees, we receive commissions related to nominal interchange fees for international card transactions, as well as service fees from financial institutions that outsource their credit card business operations.
K Bank
K Bank is one of three Internet-only banks in Korea. Internet-only banks generally operate without branches and conduct their operations primarily through electronic means, which enable them
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to minimize costs and offer customers higher interest rates on deposits as well as lower lending rates. As of December 31, 2021, K Bank had approximately 7.2 million holders of deposit accounts, with total deposits of
￦
11 trillion and outstanding loans of
￦
7 trillion. Other shareholders of K Bank include Woori Bank, BCC Kingpin, LLC, Khan SS L.P., JS Shinhan Partners LCC, NH Investment & Securities, Co., Ltd., GS Retail Co., Ltd. and Hanwha Life Insurance Co., Ltd.
Pursuant to the Act on Special Cases Concerning Internet-Only Banks, starting from January 2019, a company with its ICT assets comprising more than 50% of its total assets (such as us) may obtain up to a 34.0% interest in an Internet-only bank, and is required to obtain approval from the FSC in order to become its largest shareholder.
Other Businesses
We also engage in various business activities that extend beyond telecommunications and financial services, including real estate development. Our other businesses accounted for 13.1% of our operating revenue in 2021.
Information Technology and Network Services
Digital transformation has increased in recent years, and the Government announced “Digital New Deal” initiatives in July 2020 to further accelerate such trend in Korea. Leveraging on our (i) data communications networks, (ii) infrastructure operational
know-how
and (iii) big data analytics capabilities, we believe that we are well-positioned to take advantage of the attractive opportunities in this era of digital transformation. In 2020, we launched our B2B brand, KT Enterprise, to better position ourselves to attract corporate customers that have digital transformation needs.
We offer a broad array of information technology and network services to our corporate and other institutional customers. Our range of systems integration services includes consulting, designing, building and maintaining systems and communication networks that satisfy the individual needs of our customers in the public and private sectors. We also provide
one-stop
global ICT services specifically targeting multinational corporations and international agencies, which range from ICT infrastructure design and buildout to operational solutions that address their multinational needs. In addition, we provide consulting services to optimize energy consumption by corporate and other institutional customers, as well as security surveillance services ranging from buildout of monitoring systems to dispatching of security personnel.
We also operate Internet data centers located throughout Korea and provide a wide range of computing services to companies that need servers, storage and leased lines. In April 2022, we completed a vertical spin-off of our Internet data centers business and established a wholly-owned subsidiary, kt cloud Co., Ltd., to more effectively promote the growth of our cloud and Internet data center operations. Data centers are facilities used to house, protect and maintain network server computers that store and deliver Internet and other network contents. Our data centers are designed to meet international standards, and are equipped with temperature and humidity control systems, regulated and reliable power supplies, mechanical equipment, fire detection and suppression equipment, security monitoring and
wide-bandwidth
connections to the Internet. Our data centers offer network outsourcing services, server operation services and system support services to our corporate customers. Leveraging our Internet data centers as well as our data communications networks, we provide a wide range of cloud computing services that are tailored to address specific needs of our customers in public and private sectors. [In addition, in September 2021, KT ES Pte. Ltd., a subsidiary in which we held a 57.6% interest as of December 31, 2021, acquired a 100.0% interest in Epsilon Global Communications Pte. Ltd. (“Epsilon”) for US$135 million. Epsilon is a data service provider that provides data connectivity services to corporate customers around the world].
We also offer a wide range of “KT DX platform” services for our corporate and other institutional customers that provide customized and integrated digital transformation services that address their technical infrastructure, platform and solution needs.
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Real Estate Development
We own land and real estate in various locations throughout Korea. Technological developments have enhanced the coverage area of telecommunications facilities, which enable us to better utilize our existing land and other real estate holdings. Through our wholly-owned subsidiary KT Estate, we engage in the planning and development of residential complexes and commercial buildings on our unused sites, as well as in the leasing of buildings we own. Under the “Remark VILL” brand, we also lease units in residential complexes developed by us in urban areas such as Seoul and Busan.
Sale of Goods
We recognize revenue related to sale of goods, primarily handsets sold to subscribers of our mobile services as well as miscellaneous telecommunications equipment sold to vendors and other telecommunications companies and sale of residential units and commercial real estate developed by KT Estate. We purchase handsets primarily from Samsung Electronics, Apple and LG Electronics. Sale of goods accounted for 14.0% of our operating revenue in 2021.
Our Rates
We offer various service plans for our mobile, fixed-line and media and content services. For our individual customers, we offer rate plans targeting specific customer segments that aim to address their individual needs. We also offer bundled rate plans that provide discounts for subscribing to a combination of our services, as well as family plans that provide discounts for multiple line subscriptions under one household. For many of our services, we provide additional discounts for customers who commit to extended subscription periods. We provide an online tool designed to help our customers select a plan that is customized to their needs. Our service rates are typically charged on a monthly basis and are due at the end of the month. Our customers are also assessed a 10.0% VAT, which is included in the monthly subscription rates that we charge to our customers.
Our rates for business customers are tailored to the specific needs of the business customers.
Mobile Services
We offer a wide range of mobile service plans that vary depending, among others, on mobile technology (5G, LTE or
W-CDMA),
mobile device (mobile phone, tablet or other WiFi device) and age category, under which we offer plans based on usage volume for voice calling, data transmission and text messaging as well as addition of value-added services. Our premium packages offer unlimited voice calling, data transmission and text messaging as well as additional media content. We also provide plans specially designed for elderly and young subscribers as well as special discounts to subscribers with physical disabilities or on welfare programs. We do not charge an activation fee for our mobile services.
For mobile service plans that offer unlimited data transmission, we typically decelerate data transmission speeds after a subscriber reaches a set data usage threshold. For usage-based data transmission plans, our subscribers are typically charged additional data transmission fees if usage exceeds the applicable quota. However, for many of our plans, we provide our subscribers the ability to bank unused data transmission quota of the current month to the following month, or borrow quota allocated to the following month if the current monthly quota have been exhausted.
We also subsidize the purchase of new handsets by our qualifying subscribers who agree to use our service for a predetermined service period and purchase handsets on an installment basis. Under the Handset Distribution Reform Act, everyone, regardless of their status, is entitled to receive either a handset subsidy related to the purchase of a recently released mobile phone, or a discount on the mobile service subscription rate.
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The following table summarizes the terms of our representative 5G and LTE mobile service plans that we currently offer:

Plan |  | Monthly Rate |  |  | Voice Calls |  |  | Video Calls |  |  | Data Transmission |  | Additional Features
5G Super Plan Premium Choice |  | ￦ | 130,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited |  | •    Unlimited data roaming at 3 Mbps •    Handset insurance using reward points •    No service fee for additional smart device •    Free contents (subscribers can choose two services among Movie / Music / Netflix / Disney)
5G Super Plan Special Choice |  | ￦ | 110,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited |  | •    Unlimited data roaming at 100 kbps •    Handset insurance using reward points •    No service fee for additional smart device •    Free contents (subscribers can choose two services among Movie / Music / Netflix / Disney)
5G Super Plan Special |  | ￦ | 100,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited |  | •    Unlimited data roaming at 100 kbps •    Handset insurance using reward points •    No service fee for additional smart device
5G Super Plan Basic Choice |  | ￦ | 90,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited |  | •    Unlimited data roaming at 100 kbps •    Free contents (subscribers can choose two services among Movie / Music / Netflix / Disney)
5G Super Plan Basic |  | ￦ | 80,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited |  | •    Unlimited data roaming at 100 kbps
5G Simple |  | ￦ | 69,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited, but decelerate to 5 Mbps after 110 GB |  |
5G Slim |  | ￦ | 55,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited, but decelerate to 1 Mbps after 8 GB |  |
5G Save |  |  | ￦ 45,000 |  |  |  | Unlimited |  |  |  | 300 min. |  |  | Unlimited, but decelerate to 400 kbps after 5 GB |  |

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Plan |  | Monthly Rate |  | Voice Calls |  | Video Calls |  | Data Transmission |  | Additional Features
Data On Premium |  | ￦ 89,000 |  | Unlimited |  | 300 min. |  | Unlimited |  | •  Handset insurance using reward points •  No service fee for additional smart device •  Media package offering music, video, webtoon and movie content.
Data On Video |  | ￦ 69,000 |  | Unlimited |  | 300 min. |  | Unlimited, but decelerate to 5 Mbps after 100 GB |  | •  Mobile TV package offering live broadcast and VOD contents of up to 2 GB per day
Data On Talk |  | ￦ 49,000 |  | Unlimited |  | 300 min. |  | Unlimited, but decelerate to 1 Mbps after 3 GB |  | •  Mobile TV package offering live broadcast and VOD contents of up to 2 GB per day
LTE Basic |  | ￦ 33,000 |  | Unlimited |  | 50 min. |  | 1.4 GB with an option to transfer data from and into the next month’s usage |  |

In addition to our mobile service plans, we offer value-added services for additional monthly fees that can be added to the subscription such as media packages, mobile TV packages, additional data transmission packages, caller ID, music service packages and ring tone services and usage reporting services. We also offer fixed-rate international roaming plans that provide data roaming services in various countries around the world, which may be scheduled or automatically activated upon access from an overseas location.
Our mobile services also generate interconnection charges and expenses. For a call initiated by a mobile subscriber of one of our competitors to our mobile subscriber, the competitor collects from its subscriber its normal rate and remits to us a
mobile-to-mobile
interconnection charge. In addition, for a call initiated by our mobile subscriber to a mobile subscriber of one of our competitors, we collect from our subscriber our normal rate and remit to the competitor a
mobile-to-mobile
interconnection charge.
The following table shows the interconnection charges we paid per minute (exclusive of VAT) to our competitors, and the charges received per minute (exclusive of VAT) from mobile operators for mobile to mobile calls:

|  | Effective Starting |
|  | January 1, 2019 |  |  | January 1, 2020 |  |  | January 1, 2021 |
KT |  | ￦ | 11.6 |  |  | ￦ | 10.6 |  |  | ￦ | 10.3 |
SK Telecom |  |  | 11.6 |  |  |  | 10.6 |  |  |  | 10.3 |
LG U+ |  |  | 11.6 |  |  |  | 10.6 |  |  |  | 10.3 |

Fixed-line Services
Fixed-line Telephone Services
Local and Domestic Long-distance
. Our standard usage-based fixed-line telephone service plan consists of a base monthly rate of
￦
5,720 and usage fees for local and domestic long-distance calls, as well as calls to VoIP phones and mobile phones. We charge
￦
42.9 per three-minute increment for local calls,
￦
15.95 per ten second increment for domestic long-distance calls,
￦
53.9 per three-minute increment for calls to VoIP phones and
￦
15.95 per ten second increment for calls to
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mobile phones. All usage-based fees are subject to discounts during certain
low-usage
periods of the day and on national holidays. The rates we charge for local calls are required to be reported to the MSIT, which has 15 days to object to such changes. For our subscribers who are initiating fixed-line telephone services, we charge a
one-time
nonrefundable activation fee of
￦
60,000, which is waived with a three-year subscription commitment.
We also offer a flat rate fixed-line telephone service plan with a base monthly rate of
￦
12,100 (or
￦
8,470 for a three year subscription commitment) that includes 50 hours of local and domestic long-distance calls and calls to VoIP phones. Calls to mobile phones are not included in the free 50 hours, and we charge
￦
14.50 per ten second increment for such calls. For a premium plan with a base monthly fee of
￦
16,500 (or
￦
11,550 for a three year subscription commitment), calls to KT mobile subscribers are included as part of the free 50 hours.
International Long-distance
. For our international long-distance services, fees for
out-going
calls vary based on the destination country and whether the user has subscribed to an international long-distance services plan, which can be customized based on the type of telecommunication device (mobile or fixed-line), destination countries and other customer preferences. Usage is typically measured in
one-second
increments. We pay a settlement fee to the relevant foreign carrier for such calls under a bilateral agreement with the foreign carrier. For incoming calls (including calls placed in Korea by customers of the foreign carriers for home country direct-dial services), we receive settlement payments from the relevant foreign carrier at the applicable settlement rate specified under the relevant bilateral agreement.
Land-to-mobile
Interconnection
. We provide other telecommunications service providers, including mobile operators and other fixed-line operators, interconnection to our fixed-line network. For a call initiated by a landline user to a mobile service subscriber, we collect from the landline user the
land-to-mobile
usage charge and remit to the mobile service provider a
land-to-mobile
interconnection charge. We recognize as
land-to-mobile
interconnection revenue the entire amount of the usage charge collected from the landline user and recognize as expense the amount of interconnection charge paid to the mobile service provider. The MSIT periodically issues orders setting the interconnection charge calculation method applicable to interconnections with mobile service providers. The MSIT determines the land to mobile interconnection charge by calculating the long run incremental cost of mobile service providers, taking into consideration technology development and future expected costs.
The following table shows the interconnection charges we paid per minute (exclusive of VAT) to mobile operators for landline to mobile calls:

|  | Effective Starting |
|  | January 1, 2019 |  |  | January 1, 2020 |  |  | January 1, 2021 |
SK Telecom |  | ￦ | 11.6 |  |  | ￦ | 10.6 |  |  | ￦ | 10.3 |
LG U+ |  |  | 11.6 |  |  |  | 10.6 |  |  |  | 10.3 |

Land-to-land
and
Mobile-to-land
Interconnection
. For a call initiated by a landline subscriber of our competitor to our fixed-line user, the landline service provider collects from its subscriber its normal rate and remits to us a
land-to-land
interconnection charge. In addition, for a call initiated by a mobile service subscriber to our landline user, the mobile service provider collects from its subscriber its normal rate and remits to us a
mobile-to-land
interconnection charge.
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The following table shows such interconnection charge per minute collected for a call depending on the type of call, as determined by the MSIT:

|  | Effective Starting |
|  | January 1, 2019 |  |  | January 1, 2020 |  |  | January 1, 2021 |
Local access (1) |  | ￦ | 7.8 |  |  | ￦ | 7.6 |  |  | ￦ | 7.0 |
Single toll access (2) |  |  | 9.2 |  |  |  | 8.6 |  |  |  | 8.0 |
Double toll access (3) |  |  | 12.2 |  |  |  | 11.2 |  |  |  | 10.9 |

Source: The MSIT.

(1) | Interconnection between local switching center and local access line.

(2) | Interconnection involving access to single long-distance switching center.

(3) | Interconnection involving access to two long-distance switching centers.

VoIP Telephone Services
Our VoIP telephone services offer rate plans that charge generally lower base monthly rates and usage-based fees compared to our fixed-line telephone services. For our subscribers who are initiating VoIP telephone services, we charge a
one-time
nonrefundable activation fee of
￦
27,500, which may be waived if the subscriber opts for self-installation.
Broadband Internet Access Services
We offer various broadband Internet access service plans based on data transmission speed and data usage thresholds and offer discounts based on length of commitment that are applied for periods of up to four years. Most of our plans also include WiFi routers that enable our subscribers to create a WiFi environment in their residences. We charge our customers a
one-time
installation fee per site of
￦
27,500. We also charge a modem rental fee ranging from
￦
4,400 to
￦
22,000 per year that varies depending on the type of model required for the service plan, which is also subject to discounts and waivers based on length of subscription commitment period.
The following table summarizes the terms of our representative broadband Internet access service plans that we currently offer:

Plan |  | Monthly Rate |  |  | Rate with 3 Year Term |  |  | Maximum Speed |  | Max Speed Daily Limit (1) |  | Additional Features
Internet Super Premium |  | ￦ | 110,000 |  |  | ￦ | 88,000 |  |  | 10 Gbps |  | 1000 GB |  | 2 WiFi routers included.
Internet Premium Plus |  | ￦ | 82,500 |  |  | ￦ | 60,500 |  |  | 5 Gbps |  | 500 GB |  | 2 WiFi routers included.
Internet Premium |  | ￦ | 60,500 |  |  | ￦ | 44,000 |  |  | 2.5 Gbps |  | 250 GB |  | Discount on 1 WiFi router rental.
Internet Essence |  | ￦ | 55,000 |  |  | ￦ | 38,500 |  |  | 1.0 Gbps |  | 150 GB |  |
Internet Slim |  | ￦ | 39,600 |  |  | ￦ | 22,000 |  |  | 100 Mbps |  | None |  |

(1) | Data transmission speed is reduced to 100 Mbps if data usage exceeds the specified maximum speed daily limit.

Media and Content Services
Our IPTV and satellite TV service plans vary based on the package of media channels provided, availability of UHD channels and the inclusion of other value-added services. In addition to monthly rates for subscription, we charge a
one-time
installation fee of
￦
27,500 per
set-top
box and a digital
set-top
box rental fee ranging from
￦
7,700 to
￦
9,900 per year that varies depending on the type of
set-top
box required for the service plan, which is also subject to discounts and waivers based on length of subscription commitment period. We also offer various
video-on-demand
contents for
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streaming and downloading for a fee. In addition to offering service plans that enable TV viewing at home as well as access on mobile devices, we provide separate mobile TV plans at lower rates that are specifically designed for mobile devices.
The following table summarizes the terms of our representative IPTV and satellite TV service plans that we currently offer:

Plan |  | Monthly Rate |  | Rate with 3 Year Term |  | Channels (UHD) |  |  | Additional Features
olleh tv live |  |  |  |  |  |  |  |  |  |
tv Movie Plus |  | ￦ 55,000 |  | ￦ 44,000 |  |  | 266 | (6) |  | •    Prime movie package that provides access to more than 28,000 video-on-demand contents. •    Catch-on & Plus channel dedicated to latest popular movies and dramas.
tv NETFLIX UHD |  | ￦ 39,800 |  | ￦ 27,500 |  |  | 263 | (6) |  | •    tv Essence plus premium service of NETFLIX.
tv NETFLIX HD |  | ￦ 37,300 |  | ￦ 25,500 |  |  | 263 | (6) |  | •    tv Essence plus standard service of NETFLIX.
tv Essence |  | ￦ 25,350 |  | ￦ 16,500 |  |  | 263 | (6) |  |
tv Slim |  | ￦ 16,500 |  | ￦ 13,200 |  |  | 219 | (3) |  |
olleh tv skylife |  |  |  |  |  |  |  |  |  |
tv Entertainment |  | ￦ 31,020 |  | ￦ 24,816 |  |  | 226 | (5) |  | •    Monthly coupon of ￦ 10,000 for video-on-demand.
tv Slim |  | ￦ 16,500 |  | ￦ 13,200 |  |  | 216 | (5) |  |

Bundled Rate Plans
In order to provide our customers with additional value and further promote our marketing efforts to cross sell our various services, we provide our customers with various bundled rate plans that provide discounts for subscribing to a combination of our services, as well as family plans that provide discounts for multiple line subscriptions under one household. The majority of our subscribers participate in our bundled rate plans.
Fixed-line Packages
We offer substantial discounts to customers who subscribe to two or more of our fixed-line and TV services consisting of fixed-line telephone, VoIP telephone, broadband Internet access, IPTV and satellite TV services. Subscription payments collected pursuant to our bundled rate plans are allocated to each service.
Mobile Packages
For our mobile services, we offer family plans that provide monthly discounts of up to
￦
11,000 per mobile phone subscription. Up to five members of a household may participate in our family plans.
Fixed-line and Mobile Combination Packages
We also offer various bundled rate plans that combine our fixed-line and TV services with mobile services, for both households and single subscribers. For households that subscribe to broadband Internet access as well as mobile services, our premium family plan provides discounts of approximately 50% for broadband Internet access subscription as well as for mobile services of each additional family member (up to four additional members).
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Competition
We face significant competition in each of our principal business areas. In the markets for mobile services, fixed-line services and media and content services, we compete primarily with SK Telecom and LG U+ (including their affiliates). Over time, considerable consolidation in the telecommunications industry has occurred, resulting in the current competitive landscape comprising three network service providers that offer a wide range of telecommunications and data communications services. In recent years, each of our primary competitors has acquired a leading cable TV operator in Korea to significantly increase their market shares in the pay TV market, which has further intensified competition.
To a lesser extent, we also compete with various value-added service providers and network service providers as classified under the Framework Act on Telecommunications and the Telecommunications Business Act, including MVNOs that lease mobile networks and offer mobile services, VoIP service providers that offer Internet telephone services, cable TV operators, text messaging service providers (particularly Kakao) and voice resellers, many of which offer competing services at lower prices. We also face changes in the evolving landscape of the market for media and content services arising from the increasing popularity of global OTT media services such as Netflix.
We compete primarily based on our service performance, quality and reliability, ability to accurately identify and respond to evolving consumer demand, and pricing. With the launch of the next generation 5G mobile services in April 2019, competition has further intensified among the three network service providers, which has resulted in an increase in marketing expenses, as well as additional capital expenditures related to implementing 5G mobile services. Mobile service providers also grant subsidies or subscription discount rates to subscribers who purchase new handsets and agree to a minimum subscription period, and we compete also based on such amounts. We and SK Telecom have been designated as market-dominating business entities in the local telephone and mobile markets, respectively, under the Telecommunications Business Act. Under this Act, a market-dominating business entity may not engage in any act of abuse, such as unreasonably interfering with business activities of other business entities, hindering unfairly the entry of newcomers or substantially restricting competition to the detriment of the interests of consumers. In addition, changes in our local telephone rates and mobile rates of SK Telecom are required to be reported to the MSIT, which has 15 days to object to such changes. The KCC has also issued guidelines on fair competition of the telecommunications companies.
In the financial services market, our credit and check cards issued under the “BC Card” brand pursuant to
co-brand
agreements with member companies compete principally with cards issued by other leading credit card companies in Korea with their own merchant payment networks, such as Shinhan Card, Hyundai Card and Samsung Card. Our member companies that issue
co-branded
credit or check cards include Woori Card, NH Card, Industrial Bank of Korea and KB Kookmin Card. We also compete with service providers that provide outsourcing services related to business operations of credit card companies. Competition in the credit card and check card businesses has increased substantially as existing credit card companies, consumer finance companies and other financial institutions in Korea have made significant investments and engaged in aggressive marketing campaigns and promotions for their credit and check cards, as well as investing in operational infrastructure that may reduce the need for our outsourcing services.
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The following tables show the market shares in our principal markets in terms of subscribers as of the dates indicated:
Mobile Services

|  | Market Share (%) (1) |
|  | KT Corporation |  |  | SK Telecom |  |  | LG U+ |
December 31, 2019 |  |  | 31.8 |  |  |  | 46.0 |  |  |  | 22.1 |
December 31, 2020 |  |  | 31.6 |  |  |  | 44.8 |  |  |  | 23.6 |
December 31, 2021 |  |  | 31.3 |  |  |  | 44.0 |  |  |  | 24.7 |

Source: The MSIT.

(1) | Includes subscribers of MVNOs that lease mobile networks of the respective mobile service provider.

Fixed-line Local Telephone and VoIP Services

|  | Market Share (%) |
|  | KT Corporation |  |  | SK Broadband |  |  | LG U+ |
December 31, 2019 |  |  | 64.9 |  |  |  | 14.6 |  |  |  | 12.7 |
December 31, 2020 |  |  | 64.6 |  |  |  | 14.5 |  |  |  | 12.6 |
December 31, 2021 |  |  | 64.1 |  |  |  | 14.9 |  |  |  | 12.7 |

Source: Korea Telecommunications Operators Association.
Broadband Internet Access Services

|  | Market Share (%) |
|  | KT Corporation |  |  | SK Broadband |  |  | LG U+ |  |  | Others |
December 31, 2019 |  |  | 40.9 |  |  |  | 25.6 |  |  |  | 19.6 |  |  |  | 13.9 |
December 31, 2020 |  |  | 41.1 |  |  |  | 29.0 |  |  |  | 20.3 |  |  |  | 9.6 |
December 31, 2021 |  |  | 41.2 |  |  |  | 28.7 |  |  |  | 20.7 |  |  |  | 9.4 |

Source: The MSIT.
Pay TV Services

|  | Market Share (%) |
|  | KT Corporation (1) |  |  | SK Broadband |  |  | LG U+ |
December 31, 2019 |  |  | 31.6 |  |  |  | 15.0 |  |  |  | 12.9 |
December 31, 2020 |  |  | 32.2 |  |  |  | 16.1 |  |  |  | 14.1 |
December 31, 2021 |  |  | 32.7 |  |  |  | 17.1 |  |  |  | 14.9 |

Source: Investor relations report of each company.

(1) | Including market share of KT Skylife.

Regulation
With the establishment of the MSIP in March 2013, many of the regulatory responsibilities formerly handled by the KCC have been transferred to the MSIP. On July 26, 2017, the MSIP was renamed as the Ministry of Science and ICT. Under the Framework Act on Telecommunications and the Telecommunications Business Act, the MSIT continues to have comprehensive regulatory authority over the telecommunications industry and all network service providers.
Since the establishment of its predecessor, the MSIP, the MSIT has assumed primary policy and regulatory responsibility for matters such as: (i) registration of network service providers and licensing of select services (the MSIT authorizes the licensing of IPTV service providers and, with the
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consent of the KCC, authorizes the licensing of satellite broadcasting companies); (ii) regulation of mergers and acquisitions, as well as license suspension and termination of network service providers; (iii) providing oversight on foreign ownership ratios in network service providers; and (iv) reviewing telecommunication matters as they relate to the public interest and approving ancillary telecommunication business activities. Additionally, the MSIT is responsible for a broad range of other policy and regulatory matters, including the administration and supervision of regulatory reporting by telecommunications companies, examination and analysis of accounting and business management practices in the industry, establishment and administration of policies governing telecommunications service fees, value-added service providers and network service providers, as well as supervision of reporting requirements of standard telecommunications service/user contracts.
The KCC’s overall policy role is to play a key role in regulatory activities aimed at protecting service users in the broadcast and telecommunications market and it continues to be responsible for investigations and sanctions regarding violations by telecommunications companies, as well as for mediating disputes between service providers and users. The KCC is established under the direct jurisdiction of the President of Korea and is comprised of five standing commissioners. Commissioners of the KCC are appointed by the President, and the appointment of the Chairperson must be approved at a confirmation hearing at the National Assembly.
Under the Personal Information Protection Act, telecommunications service providers are also required to protect personal information of their customers. Generally, when a telecommunications service provider intends to collect or use its customer’s personal information, such telecommunications service provider, with certain exceptions, must notify and receive the customers’ consent in relation to the purpose of collection, the use of the collected personal information, types of personal information collected and period during which the personal information will be possessed and used. Under the Personal Information Protection Act, any enterprise, including Korean telecommunications providers, may not use their customers’ personal information for any purpose other than the purpose their customers have consented to. In addition, there are various internal processes that the telecommunications providers are mandated to install in order to collect and handle personal information of their customers.
The MSIT also has the authority to regulate the pay TV market, including IPTV services. Under the Internet Multimedia Broadcasting Services Act, anyone intending to engage in the Internet multimedia broadcasting business must obtain a license from the MSIT. The ownership of the shares of an Internet multimedia broadcasting company by a newspaper, a news agency or a foreigner is limited.
Rates
Under current regulations implementing the Telecommunications Business Act, a network service provider may set its rates at its discretion, although it must report to the MSIT the rates and the general terms and conditions for each type of network service provided by it. However, the MSIT may object to the rates set by a market-dominating business entity within 15 days from the date of receipt of such report if there is a high risk of (i) harming the users’ interests (including unfair discrimination against specific users based on contract length and usage volume with such service provider) or (ii) harming fair competition (including the provision of telecommunication services at unfair rates compared to the wholesale price offered by other telecommunications service providers). In 1997, the MSIP designated us for local telephone service and SK Telecom for mobile service as market-dominating business entities, which currently remains in effect. As a result, changes in our local
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telephone rates and in the mobile rates of SK Telecom are required to be reported to the MSIT, which has 15 days to object to such changes. The form of our standard agreement for providing local network service and each agreement for interconnection with other service providers must also be reported to the MSIT.
Under the Handset Distribution Reform Act, everyone, regardless of their status, is entitled to receive either a handset subsidy related to the purchase of a recently released mobile phone, or a discount on the mobile service subscription rate. In addition, the MSIT may periodically announce policy guidelines that telecommunications companies are recommended to take into consideration in their telecommunications and Internet-related businesses.
Other Activities
A network service provider, such as us, must obtain the permission of the MSIT in order to:

| • |  | modify its licenses;

| • |  | discontinue, suspend or spin off all or a part of the business for which it is licensed;

| • |  | transfer or acquire all or a part of the business of another network service provider; or

| • |  | enter into a merger with another network service provider.

By submitting a report to the MSIT, a network service provider may enter into arrangements for services to be furnished to its customers by a different telecommunications service provider and, in connection therewith, may provide its telecommunications services to, or authorize the use of all or a portion of its telecommunications facilities by, such other telecommunications service provider. The MSIT can revoke our licenses or order the suspension of any of our businesses if we do not comply with the regulations of the MSIT under the Telecommunications Business Act.
The responsibilities of the MSIT include:

| • |  | drafting and implementing plans for developing telecommunications technology;

| • |  | fostering and providing guidance to institutions and entities that conduct research relating to telecommunications; and

| • |  | recommending to network service providers that they invest in research and development or that they contribute to telecommunications research institutes in Korea.

In addition, all network service providers (other than regional paging service providers) are obligated to contribute toward the supply of “universal” telecommunications services in Korea. Telecommunications service providers designated as “universal service providers” by the MSIT are required to provide universal telecommunications services such as local services, local public telephone services, broadband services, discount services for persons with disabilities and for certain
low-income
persons, telecommunications services for remote islands and wireless communication services for ships. We have been designated as a universal service provider. The costs and losses recognized by universal service providers in connection with providing these universal telecommunications services, except for discount services for persons with disabilities and for certain
low-income
persons, will be shared on an annual basis by all network service providers (other than regional paging service providers), including us, on a pro rata basis based on their respective net annual revenue calculated pursuant to a formula set by the MSIT. As for the costs and losses
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recognized by a universal service provider in connection with providing discount services for persons with disabilities and for certain
low-income
persons, such costs and losses will be borne by such universal service provider.
Prior to April 2018, in accordance with the MSIT’s determination that we possessed essential infrastructure, we were required to permit other fixed-line communications service providers to
co-use
our fixed-line telecommunication infrastructure, upon the request of such other fixed-line telecommunications service providers. In April 2018, to facilitate expedient establishment of 5G mobile services infrastructure, the Government announced its initiatives to amend the
co-use
system, as follows: (i) we should permit not only fixed-line telecommunications service providers, but also mobile service providers such as SK Telecom and LG U+ to
co-use
our telecommunications infrastructure necessary for provision of 5G mobile services, (ii) the Government determined that we, SK Telecom, SK Broadband and LG U+ possessed essential infrastructure with respect to the interval between the cable entry at a building and the initial occurrence of connection within the building and required that the three companies share such infrastructure throughout buildings in Korea with each other, and (iii) fixed-line telecommunications service providers and mobile service providers are required to participate in joint efforts to construct additional fixed-line and mobile network architecture. For more information on our mobile network architecture, see “Item 4.D. Property, Plant and Equipment—Mobile Networks.”
In addition, we are required to lease to other companies our fixed-lines that connect subscribers to our network. This system, which is called local loop unbundling, is intended to prevent excessive investment in local loops. This system requires us to lease the portion of our copper lines that represent our excess capacity to other companies upon their request at rates that are determined by the MSIT based on our cost, and taking into consideration an appropriate rate of return, to enable them to provide voice and broadband services. Revenue from local loop unbundling, if any, are recognized as revenue from other businesses.
All telecommunications service providers must also provide compensation to their users in the following cases: (i) damage is caused to the user in connection with the service provider’s provision of telecommunication services (including from disruptions in service) and (ii) damage is caused to the user due to the reasons stated in such user’s complaint addressed to the service provider or a delay in the service provider’s processing of such complaint. However, if damage to a user is caused by force majeure, or if damage is caused intentionally by, or due to the negligence of, the user, the service provider’s liability for any compensation to such user is mitigated or absolved. In cases where the provision of telecommunication services is disrupted, the service provider must inform its user of the disruption as well as the standards and procedures for obtaining compensation for any damages.
In addition, if the number of users and the network traffic of a value-added service provider exceeds a certain threshold set by the MSIT, such value-added service provider must secure adequate measures to provide stable services to its users, which may require cooperation with other network service providers.
Foreign Investment
The Telecommunications Business Act restricts the ownership and control of network service providers by foreign shareholders. Foreigners (based on citizenship), foreign governments and “foreign invested companies” may not in the aggregate own more than 49.0% of the issued shares with voting rights of a network service provider, including us. For purposes of the Telecommunications Business Act, the term “foreign invested company” means a company in which a foreigner or a foreign government is the largest shareholder and holds 15.0% or more of the company’s shares with voting rights, provided, however, that such company will not be counted as a foreign shareholder for the purposes of the 49.0% limit if (1) it holds less than 1.0% of our total issued and outstanding shares with voting rights or (2) if the MSIT determines that the fact that such foreign government or entity holds a 15.0% or greater shareholding in such company does not present a risk of harm to the public interest.
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Notwithstanding the above, pursuant to a recent amendment to the Telecommunications Business Act that became effective on April 20, 2022, a company, so long as (i) its largest shareholder (determined by aggregating the shareholdings of such shareholder and its related parties) is a foreign government or a foreigner of a country that has entered into a bilateral or multilateral free trade agreement with Korea that is designated by the MSIT, and (ii) such shareholder (together with the shareholdings of its related parties) owns 15.0% or more of the issued voting stock of such entity, may own more than 49.0% of our issued shares with voting rights but may not exercise its voting rights with respect to the shares held in excess of the 49% ceiling until the conclusion of the MSIT’s public interest review.
In addition, the calculation of the above-referenced 49% ceiling will apply to: (x) any foreign entities that have entered into a major management-related agreement with a network service provider or the shareholder(s) thereof; and (y) foreign entities that have entered into an agreement pertaining to the settlement of fees relating to the handling of international electronic telecommunications services. As of December 31, 2021, 43.33% of our common shares were owned by foreign investors. In the event that a network service provider violates the shareholding restrictions, its foreign shareholders cannot exercise voting rights for their shares in excess of such limitation, and the MSIT may require corrective measures be taken to comply with the ownership restrictions.
In addition to the 49.0% limit referenced above, under the Telecommunications Business Act, a foreign shareholder who holds 5.0% or more of our total shares is prohibited from becoming our largest shareholder. However, any foreign shareholder who held 5.0% or more of our total shares and was our largest shareholder on or prior to May 9, 2004 is exempt from the regulations, provided that such foreign shareholder may not acquire any more of our shares. In addition, under the Telecommunications Business Act, the MSIT may, if it deems it necessary to preserve substantial public interests, prohibit a foreign shareholder from being our largest shareholder. In the event that any foreigner or foreign government acquires our shares in violation of the above provisions, the Telecommunications Business Act restricts such foreign shareholder from exercising his or her voting rights with respect to common shares exceeding such threshold. The MSIT may also order us or the foreign shareholder to take corrective measures in respect of the excess shares within a period of up to six months.
Customers and Customer Billing
We typically charge residential subscribers and business subscribers similar rates for services provided. On a
case-by-case
basis, we also provide discount rates for some of our high-volume business subscribers. We bill all of our customers on a monthly basis. Our customers may make payment at either payment points such as local post offices, banks or our service offices, through a direct-debit service that automatically deducts the monthly payment from a subscriber’s designated bank account, or through a direct-charge service that automatically charges the monthly payment to a subscriber’s designated credit card account. Approximately 88.4% of our subscribers as of December 31, 2021 pay through the direct-debit service. Accounts of subscribers who fail to pay our invoice are transferred to a collection agency, which sends out a notice of payment. If such charges are not paid after notice, we cease to provide outgoing service to such subscribers after a period of time determined by the type of subscribed service. If charges are still not paid two to three months after outgoing service is cut off, we cease all services to such subscribers. After service is ceased, the overdue charges that are not collected by the collection agency are written off.
Credit Card Business
Through BC Card in which we held a 69.5% interest as of December 31, 2021, we offer various credit card processing and related financial services. BC Card is regulated and supervised as a
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Specialized Credit Financial Business (“SCFB”), as defined under the Specialized Credit Financial Businesses Act of Korea (“SCFBA”). The SCFBA subjects SCFB companies to licensing (for credit card businesses) and registration (for leasing, installment finance or new technology finance businesses) requirements and provides guidance and restrictions regarding capital adequacy, liquidity ratios, loans to major shareholders, reporting and other matters relating to the supervision of SCFB companies. The SCFBA delegates regulatory authority over SCFB companies to the FSC and FSS. The FSC has the authority to suspend the operations of an SCFB company for up to six months for
non-compliance
with certain regulations under the SCFBA and issue certain administrative orders. The FSC is also entitled to cancel a license or registration if an SCFB company fails to comply with certain SCFBA regulations or FSC administrative orders, including a suspension order.
The SCFBA and the regulations thereunder require an SCFB company to satisfy a minimum
paid-in
capital amount of (i)
￦
20 billion, where the SCFB company engages in no more than two kinds of core businesses and (ii)
￦
40 billion, where the SCFB company, such as BC Card, engages in three or more kinds of core businesses. An SCFB engaging in a credit card business must maintain a total Tier I and Tier II capital adequacy ratio (adjusted equity capital divided by adjusted total assets) of 8% or more. In addition, an SCFB company must maintain a
one-month-or-longer
delinquent claim ratio (delinquent claims divided by total claims) of less than 10%.
Under the SCFBA and the regulations thereunder, an SCFB company is required to maintain a Won liquidity ratio
(Won-denominated
current assets divided by
Won-denominated
current liabilities) of 100% or more. In addition, if an SCFB company is registered as a foreign exchange business institution with the MOEF, such SCFB company is required to maintain (1) a foreign-currency liquidity ratio (foreign currency liquid assets due within three months divided by foreign-currency liabilities due within three months) of not less than 80%, (2) a ratio of foreign currency liquid assets due within seven days less foreign currency liabilities due within seven days, divided by total foreign-currency assets, of not less than 0%, and (3) a ratio of foreign currency liquid assets due within a month less foreign currency liabilities due within a month, divided by total foreign-currency assets, of not less than negative 10%.
Under the SCFBA and the regulations thereunder, an SCFB company may not provide loans in the aggregate exceeding 50% of its equity capital to its major shareholders (including their specially related persons).
Pursuant to the SCFBA and the regulations thereunder, an SCFB company is required to submit business reports to the FSC regarding, among others, financial statements, actual results of management and soundness of assets. An SCFB company is also required to provide information regarding specific matters, including: (i) the amount of loans provided to major shareholders as of the end of each quarter; (ii) changes in the aggregate amount of such loans and the terms and conditions of the credit extension transactions for each quarter; (iii) the amount of stocks acquired by major shareholders as of the end of each quarter; and (iv) changes in the aggregate amount of stocks held and the acquisition price of such stocks for each quarter, in each case within one month of the end of each quarter. In addition, an SCFB company is required to file a report to the FSC upon the occurrence of certain events, including (i) changes to its name; (ii) changes to the largest shareholder; or (iii) changes of 1% or more in the ownership of stocks with voting rights held by a major shareholder and such major shareholder’s specially related persons, in each case within seven days from the date of its occurrence.
Insurance
We carry insurance against loss or damage to all significant buildings and automobiles. Except for our insurance coverage of our satellites and data centers, we do not carry insurance covering
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losses to outside plants or to equipment because we believe the cost of such insurance is excessive and the risk of material loss or damage is insignificant. We do not have any provisions or reserves against such loss or damage. We do not carry any business interruption insurance.
We provide
co-location
and a variety of value-added services including server-hosting services to a number of corporations whose business largely depends on critical data operated on our servers or on their servers located at our data centers. Any disruptions, interruptions, physical or electronic data loss, delays or slowdowns in communication connections could expose us to potential liabilities for losses relating to the disrupted businesses of our customers relying on our services.
Information Technology and Operational Systems
Enhancement of our information technology and operational systems and efficient utilization of such systems are important in effectively promoting our core strategies. We are committed to continually investing in and enhancing our information technology systems, which provide support to many aspects of our businesses. In order to respond more effectively to a changing business environment, an enterprise resource planning system (the “ERP System”) was implemented in July 2012. We are committed to continually investing in and enhancing our information technology systems, which provide support to many aspects of our businesses. In June 2017, a business support system, called KT One System (“KOS”), was implemented. KOS is our wired/wireless system integration program that unified wired/wireless workflows, structures and systems that had been separated previously. KOS has contributed to enhancing various aspects of our business processes and control systems.
Patents and Licensed Technology
The ability to obtain and protect intellectual property rights to the latest telecommunications technology is important for our business. We own or have licenses to various patents and trademarks in Korea and overseas, and have applications for patents pending in Korea and other select countries such as the United States, Europe, China and Japan. A majority of our patents registered in Korea and overseas relate to our wireless and fixed-line telecommunications, media and IoT technologies. In addition, we operate several research and development (“R&D”) laboratories to develop latest technology and additional platforms, as described in “Item 5.C. Research and Development, Patents and Licenses, Etc.” We license our intellectual property rights to third parties in return for periodic royal payments. We currently do not license any material technologies or patents from third parties.
Seasonality of the Business
Our main business generally does not experience significant seasonality.
Item 4.C. Organizational Structure
These matters are discussed under Item 4.B. where relevant.
Item 4.D. Property, Plant and Equipment
Our principal fixed asset is our integrated telecommunications networks. In addition, we own buildings and real estate throughout Korea. As of December 31, 2021, the net book value of our property and equipment was
￦
14,465 billion, of which
￦
3,833 billion is accounted for by the net book value of our land, buildings and structures. As of December 31, 2021, the net book value of our investment properties, which is accounted for separately from our property and equipment, was
￦
1,721 billion. Other than as may be described in this annual report, no significant amount of our properties is leased. There are no material encumbrances on our properties including the fixed assets below.
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Mobile Networks
Our mobile network architecture includes the following components:

| • |  | cell sites, which are physical locations equipped with radio units of base transceiver stations and other equipment used to communicate through radio channels with subscribers’ mobile telephone handsets within the range of a cell;

| • |  | centralized centers, which are physical locations with baseband units of base transceiver stations;

| • |  | core networks, which connect to and control the base transceiver stations and provide the gateway to other networks and services; and

| • |  | transmission lines, which connect the mobile switching centers, base station controllers, base transceiver stations and the public switched telephone network.

One of the principal limitations on a wireless network’s subscriber capacity is the amount of bandwidth allocated to a service provider. We have acquired a number of bandwidth licenses to secure additional bandwidth capacity to provide our broad range of services, for which we typically make an initial payment as well as pay usage fees during the license period. See “Item 5. Operating and Financial Review and Prospects—Item 5.A. Operating Results—Overview—Acquisition of New Bandwidth Licenses and Usage Fees.”
Exchanges
Exchanges include local exchanges and “toll” exchanges that connect local exchanges to
long-distance
transmission facilities. We had approximately 21.6 million lines connected to local exchanges and 2.4 million lines connected to toll exchanges as of December 31, 2021.
All of our exchanges are fully digital and automatic in order to provide higher speed and larger volume services. In addition, all of our lines connected to toll exchanges are compatible to IP platform.
Internet Backbone
Our Internet backbone network, called KORNET, has the capacity to handle aggregate traffic of our broadband Internet access subscribers, data centers and Internet exchange system at any given moment of up to 27 Tbps as of December 31, 2021. Our IP premium network enables us to more reliably support IPTV, VoIP and other
IP-related
services. As of December 31, 2021, our IP premium network had capacity of 3.9 Tbps to support LTE data, IPTV, voice and virtual private network (“VPN”) service traffic. In addition, our 5G backbone network had capacity of 5.2 Tbps to support 5G data service traffic.
Access Lines
As of December 31, 2021, we had 23.6 million access lines installed, which allow us to reach virtually all homes and businesses in Korea. As of December 31, 2021, we had approximately 23.5 million broadband lines with speed of at least 50 Mbps that enable us to deliver broadband Internet access and multimedia contents to our customers.
Transmission Networks
Our domestic fiber optic cable network consisted of 896,076 kilometers of fiber optic cables as of December 31, 2021 of which 133,206 kilometers of fiber optic cables are used to connect our
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backbone network and 762,870 kilometers are used to connect the backbone network to our subscribers. Our backbone network utilizes 64 Tbp Long-haul Reconfigurable Optical Add Drop Multiplexer (“ROADM”) technology for connecting cities. ROADM technology improves bandwidth efficiency by enabling data to be transmitted from multiple signals across one fiber strand in a cable and carrying each signal on a separate wavelength. Our transmission backbone network connecting major cities in Korea utilize Packet Optical Transport Network (“POTN”), and we access such network through multi-service provisioning platform (“MSPP”) architecture.
Our extensive domestic long-distance network is supplemented by our fully digital domestic microwave network, which consisted of 53 relay sites as of December 31, 2021.
International Networks
Our international network infrastructure consists of both submarine cables and satellite transmission systems, including two submarine cable-landing stations in Busan and Keoje and one satellite teleport in Kumsan. International traffic is handled by submarine cables and telecommunications satellites. Because of the high cost of laying a submarine cable, the usual practice is for multiple carriers to jointly commission a new cable and share the costs and the capacity. We own interests in several international fiber optic submarine cable networks. We also operate satellites periodically launched by us, as well as lease satellite capacity from other satellite operators. Data services such as international private lease circuits, IP and very small aperture terminals are provided through submarine cables and satellite transmission. In order to guarantee high quality services to our end customers, our submarine cables and satellite transmission systems are linked to various
points-of-presence
in the United States, Asia and Europe. In addition, as of December 31, 2021, our international telecommunications networks were directly linked to 304 telecommunications service providers in various international destinations and are routed through our three international switching centers in Seoul, Daejeon and Busan.
As of December 31, 2021, our international Internet backbone with capacity of approximately 5,125 Gbps is connected to approximately 300 Internet service providers through our three Internet gateways in Hyehwa, Guro and Busan. In addition, we operate a broadcasting backbone with capacity of 0.9 Gbps to transmit broadcasting signals from Korea to the rest of the world.
Item 4A. Unresolved Staff Comments
We do not have any unresolved comments from the Securities and Exchange Commission staff regarding our periodic reports under the Exchange Act.
Item 5. Operating and Financial Review and Prospects
Item 5.A. Operating Results
The following discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with IFRS as issued by the IASB.
Overview
We are an integrated provider of telecommunications services. Our principal telecommunications and Internet-related services include mobile voice and data telecommunications services, fixed-line services (consisting of fixed-line telephone, VoIP telephone, broadband Internet access and data communication services) and media and content services (including IPTV and satellite TV). The principal factors affecting our revenue from these services have been our rates for,
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and the usage volume of, these services, as well as the number of subscribers. For information on rates we charge for our services, see “Item 4. Information on the Company—Item 4.B. Business Overview—Our Rates.” In addition, we derive revenue from credit card processing and other financial services, sale of goods (primarily handsets related to our mobile services and miscellaneous telecommunications equipment, as well as sale of residential units and commercial real estate developed KT Estate), and miscellaneous business activities including information technology and network services, real estate development and satellite services.
Our four operating segments for financial reporting purposes are organized as the following:

| • |  | the ICT segment, which consists of KT Corporation on a standalone basis that is primarily engaged in providing various telecommunications and platform services to individual, household and corporate customers as well as selling handsets;

| • |  | the finance segment, which engages in providing various financial services such as credit card services and value-added network and payment gateway services;

| • |  | the satellite TV segment, which engages in satellite TV services; and

| • |  | the others segment, which includes (i) information technology and network services, (ii) contents and commerce services, (iii) security services, (iv) satellite service, (v) global business services that provide global network services to multinational or domestic corporate customers and telecommunications companies and (vi) real property development and leasing services and other services provided by our subsidiaries.

Our future performance will depend at least in part on Korea’s general economic growth and prospects. For a description of recent developments that have had and may continue to have an adverse effect on our results of operations and financial condition, see “Item 3. Key Information—Item 3.D. Risk Factors—If economic conditions in Korea deteriorate, our current business and future growth could be materially and adversely affected” and “—The ongoing global pandemic of a new strain of coronavirus
(“COVID-19”)
and any possible recurrence of other types of widespread infectious diseases, may adversely affect our business, financial condition or results of operations.” A number of other developments have had or are expected to have a material impact on our results of operations, financial condition and capital expenditures. These developments include:

| • |  | acquisition of new bandwidth licenses and usage fees;

| • |  | researching and implementing technology upgrades and additional telecommunications services such as 5G technologies;

| • |  | changes in the rate structure for our telecommunications services;

| • |  | acquisitions and disposals of interests in subsidiaries and joint ventures; and

| • |  | marketing activities.

As a result of these factors, our financial results in the past may not be indicative of future results or trends in those results.
Acquisition of New Bandwidth Licenses and Usage Fees
One of the principal limitations on a wireless network’s subscriber capacity is the amount of bandwidth allocated to a service provider. The growth of our mobile telecommunications business and
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the increase in usage of wireless data transmission services have been significant factors in the increased utilization of our bandwidth, since wireless data applications are generally more bandwidth-intensive than voice services. The current trend of increasing data transmission use and the increasing sophistication of multimedia contents are likely to put additional strain on the bandwidth capacity of mobile service providers. We have acquired a number of licenses in recent years to secure additional bandwidth capacity to provide our broad range of services, for which we typically make an initial payment as well as pay usage fees during the license period. The MSIT reserves the right to reallocate bandwidths in order to address the changing needs for bandwidth capacity of mobile service providers, the consideration for which may depend on the extent of the buildout of the service provider’s telecommunications network to utilize the relevant bandwidth.
We made bandwidth license payments of
￦
389 billion in 2019,
￦
367 billion in 2020 and
￦
603 billion in 2021. The following table sets forth our outstanding payment obligations relating to our bandwidth licenses as of December 31, 2021.

Spectrum |  | Bandwidth |  | License Acquisition Date |  | Total Payable Amount (in billions of Won) |  |  | Initial Payment Amount (in billions of Won) |  |  | Initial Payment Year |  |  | Annual Usage Fee (in billions of Won) |  |  | Annual Usage Fee Payment Term
900 MHz |  | 20 MHz |  | July 1, 2021 |  | ￦ | 141 |  |  | ￦ | 35 |  |  |  | 2021 |  |  | ￦ | 21 |  |  | 2021 to 2026
1.8 GHz |  | 35 MHz |  | July 1, 2021 |  | ￦ | 548 |  |  | ￦ | 137 |  |  |  | 2021 |  |  | ￦ | 82 |  |  | 2021 to 2026
1.8 GHz |  | 20 MHz |  | August 4, 2016 |  | ￦ | 470 |  |  | ￦ | 294 |  |  |  | 2016 |  |  | ￦ | 35 |  |  | 2016 to 2026
2.1 GHz |  | 40 MHz |  | December 6, 2021 |  | ￦ | 412 |  |  | ￦ | 103 |  |  |  | 2021 |  |  | ￦ | 62 |  |  | 2021 to 2026
3.5 GHz |  | 100 MHz |  | December 1, 2018 |  | ￦ | 968 |  |  | ￦ | 460 |  |  |  | 2018 |  |  | ￦ | 73 |  |  | 2018 to 2028
28 GHz (1) |  | 800 MHz |  | December 1, 2018 |  | ￦ | 208 |  |  | ￦ | 145 |  |  |  | 2018 |  |  | ￦ | 31 |  |  | 2018 to 2023

(1) | In 2020, we recognized an impairment loss of ￦ 191 billion in relation to the 28 GHz spectrum 800 MHz bandwidth license, as the carrying amount of such license exceeded the recoverable amount.

Researching and Implementing Technology Upgrades and Additional Telecommunications Services such as 5G Technologies
The telecommunications industry is characterized by continued advances and improvements in telecommunications technology, and we have been continually researching and implementing network upgrades and launching additional telecommunications services to maintain our competitiveness. In recent years, we have made extensive efforts to continue to develop mobile services with enhanced speed, latency and connectivity that enable us to offer significantly improved wireless data transmission with faster access to multimedia content.
We also make investments to continually upgrade our broadband network to enable better FTTH connection, which further enhances data transmission speed and connection quality. FTTH is a telecommunication architecture in which a communication path is provided over optical fiber cables extending from the telecommunications operator’s switching equipment to the boundary of home or office. FTTH uses fiber optic cable, which is able to carry a high-bandwidth signal for longer distances without degradation. FTTH enables us to deliver enhanced services that require high bandwidth with stability, such as IPTV and other digital media content. The MSIT has the authority to recommend to network service providers that they provide funds for national research and development of telecommunications technology and related projects. Including such contributions, total expenditures (which include capitalized expenses) on research and development were
￦
254 billion in 2019,
￦
230 billion in 2020 and
￦
213 billion in 2021. We plan to continue to invest in researching and implementing network upgrades, which will entail additional operating expenses as well as capital expenditures.
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Fee Discounts and Adjustments to the Rates for Our Telecommunications Services
We provide bundled packages of our various services at a discount in order to attract additional subscribers to our new services. We offer discounts to customers who subscribe to two or more of our fixed-line and TV services consisting of fixed-line telephone, VoIP telephone, broadband Internet access, IPTV and satellite TV services. For our mobile services, we offer a family plan that provides a discount of 25% for each additional mobile phone subscription. We also offer various bundled rate plans that combine our fixed-line and TV services with mobile services, for both households and single subscribers. See “Item 4. Information on the Company—Item 4.B. Business Overview—Our Rates.”
Changes in our local telephone rates are required to be reported to the MSIT, which has 15 days to object to such changes. The form of our standard agreement for providing local network service and each agreement for interconnection with other service providers must also be reported to the MSIT. Although we compete freely with other network service providers in terms of rate plans for our principal telecommunications and Internet-related services except for rates we charge for local calls, the MSIT may periodically announce policy guidelines that we may be recommended to take into consideration.
The Government may pursue additional measures to regulate the markets in which we compete. There can be no assurance that we will not adopt additional measures that reduce rates charged to our subscribers as well as adjustments to our handset subsidies and other measures in the future to comply with regulatory requirements or the Government’s policy guidelines. For a discussion of adjustments in our rate structure, see “Item 4. Information on the Company—Item 4.B. Business Overview—Our Rates.”
Acquisitions and Disposals of Interests in Subsidiaries and Joint Ventures
One key aspect of our overall business strategy calls for acquisitions of businesses and entering into joint ventures that complement or diversify our current business, as well as disposal or termination of such businesses from time to time. For example, in September 2021, KT Skylife, in which we held a 49.99% interest as of December 31, 2021, completed its acquisition of a 100.00% interest in HCN, which is Korea’s fifth largest cable operator, for
￦
491 billion. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and our financial condition and results of operations may be affected as a result of such acquisitions, disposals or consolidation. Furthermore, pursuing acquisitions, joint venture and certain investment transactions also requires significant capital, and as we pursue further growth opportunities for the future, we may need to raise additional capital by incurring loans or through the issuances of bonds or other securities in the international capital markets, which may lead to increased levels of debt and debt servicing costs in the future.
Marketing Activities
We engage in marketing activities to promote our new, as well as existing, products and services and to further strengthen our marketing efforts through our network of independent exclusive dealers and other third-party dealers. Our marketing expenses, consisting of sales commissions and advertising expenses, amounted to
￦
2,466 billion in 2019,
￦
2,470 billion in 2020 and
￦
2,515 billion in 2021.
Sales commissions primarily consist of sales commissions to third-party dealers related to procurement of mobile subscribers and mobile handset sales, and our advertising expenses relate primarily to our utilization of television commercials and Internet and mobile advertising as well as promotional events.
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While we believe that our large subscriber base as well as the brand power of our products and services will remain key drivers of our growth, we expect to continue to invest significantly in marketing activities, particularly in connection with launching of new products and services such as the launch of our 5G mobile services in April 2019. Our marketing expenses may not directly correspond to our revenue in the same period, and our quarterly marketing expenses have fluctuated in the past and are expected to continue to fluctuate in the future.
Explanatory Note Regarding Presentation of Certain Financial Information under
K-IFRS
In addition to preparing financial statements in accordance with IFRS as issued by the IASB included in this annual report, we prepare financial statements in accordance with
K-IFRS,
which we are required to file with the Financial Services Commission and the Korea Exchange under the FSCMA.
K-IFRS
differs in certain respects from IFRS as issued by the IASB in the presentation of operating profit. Additionally, under
K-IFRS,
revenue from the development and sale of real estate is recognized using the percentage of completion method. However, under IFRS as issued by the IASB, revenue from the development and sale of real estate is recognized when an individual unit of residential real estate is delivered to the buyer. Primarily due to such differences, our consolidated statements of comprehensive income and our consolidated statements of financial position prepared in accordance with IFRS as issued by the IASB included in this annual report differ from our consolidated statements of comprehensive income and consolidated statements of financial position prepared in accordance with
K-IFRS.
The table below sets forth a reconciliation of our operating profit and net income or loss as presented in our consolidated statements of profit or loss prepared in accordance with IFRS as issued by the IASB for each of the years ended December 31, 2019, 2020 and 2021 to our operating profit and net income or loss in our consolidated statements of profit or loss prepared in accordance with
K-IFRS,
for each of the corresponding years, taking into account such differences:

|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | (In millions of Won) |
Operating profit under IFRS as issued by the IASB |  | ￦ | 1,026,970 |  |  | ￦ | 1,022,333 |  |  | ￦ | 1,699,397 |
Effect of changes in operating profit presentation |  |  | 172,253 |  |  |  | 218,323 |  |  |  | (27,573 | )
Revenue recognition of development, sale of real estate, etc. |  |  | (39,657 | ) |  |  | (56,549 | ) |  |  | — |
Operating profit under K-IFRS |  | ￦ | 1,159,566 |  |  | ￦ | 1,184,107 |  |  | ￦ | 1,671,824 |

|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | (In millions of Won) |
Net income under IFRS as issued by the IASB |  | ￦ | 695,868 |  |  | ￦ | 746,256 |  |  | ￦ | 1,459,395 |
Profit before income tax |  |  |  |  |  |  |  |  |  |  |  |
Revenue recognition of development, sale of real estate, etc. |  |  | (39,657 | ) |  |  | (56,549 | ) |  |  | — |
Income tax |  |  | 9,731 |  |  |  | 13,685 |  |  |  | — |
Profit for the year under K-IFRS |  | ￦ | 665,942 |  |  | ￦ | 703,392 |  |  | ￦ | 1,459,395 |

Changes in Accounting Policies—Determination of Lease Term Considering Economic Penalty
Beginning January 1, 2020, we have changed our accounting policy by adopting accounting treatments in accordance with agenda decisions for “Lease Term and Useful Life of Leasehold Improvements” issued by IFRS Interpretations Committee. As a result, we began determining the lease term as the
non-cancellable
period of a lease, together with both (i) periods covered by an option to
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extend the lease, if the lessee is reasonably certain that it will exercise such option and (ii) periods covered by an option to terminate the lease, if the lessee is reasonably certain that it will not exercise such option. In cases where the lessee and the lessor each has the right to terminate the lease without permission from the other party, we began to take into consideration a termination penalty when determining the period for which the contract is enforceable. We have adopted such changes in accounting policy retrospectively pursuant to IASB 8
Accounting Policies, Changes in Accounting Estimates and Errors
and adjusted the comparative line items as of and for the year ended December 31, 2019.
Recent Accounting Pronouncements under IFRS
For a summary of new standards, amendments and interpretations issued under IFRS as issued by the IASB but not effective for 2021, and which have not been adopted early by us, see Note 2.2 of the notes to the Consolidated Financial Statements.
Operating Revenue and Operating Expenses
Operating Revenue
Our operating revenue primarily consists of:

| • |  | fees related to our mobile services, including monthly fees, usage charges for outgoing calls, usage charges for wireless data transmission, contents download fees, mobile-to-mobile interconnection revenue and value-added monthly service fees;

| • |  | fees from our fixed-line services, including:

| Ø |  | fees from our fixed-line and VoIP telephone services, which include:

| Ø |  | monthly basic charges, which are one-time or monthly fixed charges primarily consisting of (i) non-refundable activation fees; and (ii) monthly fixed charges from local telephone services (or monthly fixed charges for discount plans);

| Ø |  | monthly usage charges, which are usage fees based on the amount of services used, primarily consisting of (i) monthly usage charges for local telephone and domestic long distance services; (ii) international long-distance service revenue, (primarily (a) amounts we bill to our customers for outgoing calls made to foreign countries, (b) amounts we bill to foreign telecommunications carriers for connection to the domestic telephone network in respect of incoming calls at the applicable settlement rate, and (c) other revenue, including revenue from international leased lines); (iii) land-to-mobile and land-to-land interconnection revenue; and (iv) interconnection fees we charge to fixed-line and mobile service providers and voice resellers for their use of our local, domestic long-distance and international networks in providing their services; and

| Ø |  | other revenue from (i) value-added services, local telephone directory assistance, call waiting and caller identification services; and (ii) local, domestic long-distance and international calls placed from public telephones; and

| Ø |  | broadband Internet access service revenue, primarily consisting of installation fees and basic monthly charges; and

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| Ø |  | data communication services, primarily consisting of installation fees and basic monthly charges for our fixed-line and satellite leased line services and Kornet Internet connection service;

| • |  | revenue from media and content services, primarily consisting of installation fees and basic monthly charges of IPTV and satellite TV services, as well as revenue from digital music services, e-commerce services, online advertising consulting services and digital comics and novels services;

| • |  | financial service revenue, primarily consisting of fees from credit card services provided by BC Card, our consolidated subsidiary in which we held a 69.5% interest as of December 31, 2021;

| • |  | revenue from our miscellaneous business activities categorized as “others,” including information technology and network services and rental of real estate; and

| • |  | revenue from sale of goods, primarily handsets related to our mobile services and miscellaneous telecommunications equipment, as well as sale of residential units and commercial real estate developed by KT Estate.

Operating Expenses
Our operating expenses primarily include:

| • |  | purchase of inventories, primarily consisting of (i) inventories purchased for our sale of mobile handsets and (ii) development costs of KT Estate for real estate units to be sold, and changes of inventories, which reflects increases or decreases of inventories of handsets, phones and for-sale real estate units during the applicable period;

| • |  | salaries and wages, including post-employment benefits, termination benefits (including severance benefits for voluntary and special early retirements) and share-based payments;

| • |  | card service costs, primarily consisting of costs in connection with credit and cash card services provided by BC Card, including fees paid to member credit card companies in our network for marketing expenses;

| • |  | depreciation expenses incurred primarily in connection with our telecommunications network facilities;

| • |  | sales commissions, primarily consisting of sales commissions to third-party dealers related to procurement of mobile subscribers and mobile handset sales;

| • |  | service cost, primarily consisting of payments to IPTV and satellite TV content providers;

| • |  | commissions, primarily consisting of commission-based payments for certain third-party outsourcing services, including commissions to the outsourced call center staff;

| • |  | amortization expenses incurred primarily in connection with our intangible assets; and

| • |  | interconnection charges, which are interconnection payments to telecommunication service providers for calls from landline users and our mobile subscribers to our competitors’ subscribers.

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Operating Results—2020 Compared to 2021
The following table presents selected income statement data and changes therein for 2020 and 2021:

|  | For the Year Ended December 31, |  |  | Changes |
| 2020 vs. 2021 |
|  | 2020 |  |  | 2021 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Operating revenue |  | ￦ | 24,441 |  |  | ￦ | 25,206 |  |  | ￦ | 765 |  |  |  | 3.1 | %
Operating expenses |  |  | 23,418 |  |  |  | 23,506 |  |  |  | 88 |  |  |  | 0.4 |
Operating profit |  |  | 1,022 |  |  |  | 1,699 |  |  |  | 677 |  |  |  | 66.2 |
Finance income |  |  | 499 |  |  |  | 726 |  |  |  | 228 |  |  |  | 45.7 |
Finance costs |  |  | 507 |  |  |  | 563 |  |  |  | 56 |  |  |  | 11.0 |
Share of net profits of associates and joint ventures |  |  | 18 |  |  |  | 116 |  |  |  | 98 |  |  |  | 543.3 |
Profit before income tax |  |  | 1,032 |  |  |  | 1,978 |  |  |  | 947 |  |  |  | 91.8 |
Income tax expense |  |  | 285 |  |  |  | 519 |  |  |  | 234 |  |  |  | 81.9 |
Profit for the year |  | ￦ | 746 |  |  | ￦ | 1,459 |  |  | ￦ | 713 |  |  |  | 95.6 | %

Operating Revenue
The following table presents a breakdown of our operating revenue and changes therein for 2020 and 2021:

|  | For the Year Ended December 31, |  |  | Changes |
| 2020 vs. 2021 |
Products and services |  | 2020 |  |  | 2021 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Mobile services |  | ￦ | 6,805 |  |  | ￦ | 6,936 |  |  | ￦ | 131 |  |  |  | 1.9 | %
Fixed-line services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-line and VoIP telephone services |  |  | 1,464 |  |  |  | 1,465 |  |  |  | 2 |  |  |  | 0.1 |
Broadband Internet access services |  |  | 2,256 |  |  |  | 2,344 |  |  |  | 87 |  |  |  | 3.9 |
Data communication services |  |  | 1,107 |  |  |  | 1,152 |  |  |  | 44 |  |  |  | 4.0 |
Sub-total |  |  | 4,827 |  |  |  | 4,960 |  |  |  | 133 |  |  |  | 2.8 |
Media and content services |  |  | 2,638 |  |  |  | 2,801 |  |  |  | 163 |  |  |  | 6.2 |
Financial services |  |  | 3,494 |  |  |  | 3,662 |  |  |  | 168 |  |  |  | 4.8 |
Others |  |  | 3,084 |  |  |  | 3,313 |  |  |  | 230 |  |  |  | 7.4 |
Sale of goods (1) |  |  | 3,593 |  |  |  | 3,533 |  |  |  | (60 | ) |  |  | (1.7 | )
Total operating revenue |  | ￦ | 24,441 |  |  | ￦ | 25,206 |  |  | ￦ | 765 |  |  |  | 3.1 | %

(1) | Primarily related to sale of handsets for our mobile service and miscellaneous telecommunications equipment, as well as sale of residential units and commercial real estate developed by KT Estate.

Total operating revenue increased by 3.1%, or
￦
765 billion, from
￦
24,441 billion in 2020 to
￦
25,206 billion in 2021, primarily due to increases in revenue from our information technology and network services categorized as “others” (particularly from the operation of Internet data centers and systems integration services), financial services, media and content services, fixed-line services and mobile services, which impact was partially offset by a decrease in revenue from sale of goods.
Mobile Services
Our mobile services revenue increased by 1.9%, or
￦
131 billion, from
￦
6,805 billion in 2020 to
￦
6,936 billion in 2021, primarily due to increases in our average revenue per user and number of mobile subscribers.
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Our average revenue per user increased by 1.9%, or
￦
611, from
￦
31,683 in 2020 to
￦
32,294 in 2021 mainly due to an increase of 5G subscribers.
We recorded a 2.2% increase in our mobile subscribers from approximately 22.3 million (including 3.6 million subscribers of 5G services) as of December 31, 2020 to approximately 22.8 million (including 6.4 million subscribers of 5G services) as of December 31, 2021.
Fixed-line Services
Our fixed-line services revenue increased by 2.8%, or
￦
133 billion, from
￦
4,827 billion in 2020 to
￦
4,960 billion in 2021, reflecting increases in revenue from broadband Internet access services and data communication services.
Fixed-line and VoIP Telephone Services.
Our fixed-line and VoIP telephone services revenue increased slightly by 0.1%, or
￦
2 billion, from
￦
1,464 billion in 2020 to
￦
1,465 billion in 2021 primarily due to an increase in the portion of our subscribers selecting fixed rate plans, the impact of which was mostly offset by a decrease in the number of PSTN and VoIP lines in service from 13.6 million as of December 31, 2020 to 13.1 million as of December 31, 2021.
Broadband Internet Access Services
. Our broadband Internet access services revenue increased by 3.9%, or
￦
87 billion, from
￦
2,256 billion in 2020 to
￦
2,344 billion in 2021, primarily as a result of an increase in the number of subscribers to our premium services. The number of our KT GiGA Internet service subscribers increased from approximately 5.9 million as of December 31, 2020 to approximately 6.2 million as of December 31, 2021.
Data Communication Services.
Our data communication services revenue increased by 4.0%, or
￦
44 billion, from
￦
1,107 billion in 2020 to
￦
1,152 billion in 2021 primarily due to an increase in revenue from our
co-location
and server leasing services offered to corporate customers.
Media and Content Services
Our media and content services revenue increased by 6.2%, or
￦
163 billion, from
￦
2,638 billion in 2020 to
￦
2,801 billion in 2021 primarily due to an increase in the number of IPTV subscribers from approximately 8.8 million as of December 31, 2020 to approximately 9.1 million as of December 31, 2021.
Financial Services
Financial services revenue increased by 4.8%, or
￦
168 billion, from
￦
3,494 billion in 2020 to
￦
3,662 billion in 2021 primarily due to an increase in fees from credit card services of BC Card.
Others
Other operating revenue increased by 7.4%, or
￦
230 billion, from
￦
3,084 billion in 2020 to
￦
3,313 billion in 2021, primarily due to increases in revenue from our information technology and network services, particularly from the operation of Internet data centers and systems integration services.
Sale of Goods
Revenue from sale of goods decreased by 1.7%, or
￦
60 billion, from
￦
3,593 billion in 2020 to
￦
3,533 billion in 2021, primarily due to a decrease in revenue from sale of residential units and commercial real estate developed by KT Estate, which was partially offset by an increase in revenue from sale of handsets.
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Operating Expenses
The following table presents a breakdown of our operating expenses and changes therein for 2020 and 2021:

|  | For the Year Ended December 31, |  |  | Changes |
|  | 2020 vs. 2021 |
|  | 2020 |  |  | 2021 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Salaries and wages |  | ￦ | 4,124 |  |  | ￦ | 4,216 |  |  | ￦ | 92 |  |  |  | 2.2 | %
Depreciation |  |  | 2,605 |  |  |  | 2,606 |  |  |  | 0 |  |  |  | 0.0 |
Depreciation of right-of-use assets |  |  | 404 |  |  |  | 399 |  |  |  | (5 | ) |  |  | (1.4 | )
Amortization of intangible assets |  |  | 625 |  |  |  | 603 |  |  |  | (22 | ) |  |  | (3.5 | )
Commissions |  |  | 965 |  |  |  | 1,126 |  |  |  | 160 |  |  |  | 16.6 |
Interconnection charges |  |  | 500 |  |  |  | 508 |  |  |  | 7 |  |  |  | 1.5 |
International interconnection fee |  |  | 173 |  |  |  | 192 |  |  |  | 19 |  |  |  | 11.3 |
Purchase of inventories |  |  | 3,682 |  |  |  | 3,754 |  |  |  | 72 |  |  |  | 2.0 |
Changes of inventories |  |  | 257 |  |  |  | 20 |  |  |  | (237 | ) |  |  | (92.0 | )
Sales commissions |  |  | 2,337 |  |  |  | 2,343 |  |  |  | 6 |  |  |  | 0.3 |
Service costs |  |  | 2,103 |  |  |  | 2,296 |  |  |  | 193 |  |  |  | 9.2 |
Utilities |  |  | 361 |  |  |  | 364 |  |  |  | 4 |  |  |  | 1.0 |
Taxes and dues |  |  | 283 |  |  |  | 269 |  |  |  | (15 | ) |  |  | (5.1 | )
Rental expenses |  |  | 136 |  |  |  | 123 |  |  |  | (13 | ) |  |  | (9.6 | )
Insurance premium |  |  | 71 |  |  |  | 67 |  |  |  | (4 | ) |  |  | (6.1 | )
Installation fees |  |  | 132 |  |  |  | 154 |  |  |  | 22 |  |  |  | 17.0 |
Advertising expenses |  |  | 132 |  |  |  | 171 |  |  |  | 39 |  |  |  | 29.4 |
Research and development expenses |  |  | 157 |  |  |  | 169 |  |  |  | 12 |  |  |  | 7.7 |
Card service costs |  |  | 2,942 |  |  |  | 3,114 |  |  |  | 172 |  |  |  | 5.9 |
Impairment loss on property and equipment |  |  | 80 |  |  |  | 2 |  |  |  | (78 | ) |  |  | (97.3 | )
Impairment loss on intangible assets |  |  | 212 |  |  |  | 4 |  |  |  | (208 | ) |  |  | (98.2 | )
Others |  |  | 1,137 |  |  |  | 1,006 |  |  |  | (132 | ) |  |  | (11.6 | )
Total operating expenses |  | ￦ | 23,418 |  |  | ￦ | 23,506 |  |  | ￦ | 88 |  |  |  | 0.4 | %

Total operating expenses increased by 0.4%, or
￦
88 billion, from
￦
23,418 billion in 2020 to
￦
23,506 billion in 2021 primarily due to increases in service costs, card service costs and commissions, which impact was partially offset by decreases in changes of inventories and impairment loss on intangible assets. Specifically:

| • |  | Service costs increased by 9.2%, or ￦ 193 billion, from ￦ 2,103 billion in 2020 to ￦ 2,296 billion in 2021 primarily due to increases in costs relating to procurement of contents and enhancement of B2B businesses, in each case for the expansion of our digital transformation activities.

| • |  | Card service costs increased by 5.9%, or ￦ 172 billion, from ￦ 2,942 billion in 2020 to ￦ 3,114 billion in 2021 primarily due to an increase in the card service costs of BC Card as a result of an increase in the usage of credit cards.

| • |  | Commissions increased by 16.6%, or ￦ 160 billion, from ￦ 965 billion in 2020 to ￦ 1,126 billion in 2021 primarily due to an increase in commissions that we paid to call centers.

These factors were partially offset by the following:

| • |  | Our changes of inventories decreased by 92.0%, or ￦ 237 billion, from ￦ 257 billion in 2020 to ￦ 20 billion in 2021 primarily due to more efficient handling of slow-moving inventories.

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| • |  | Impairment loss on intangible assets decreased by 98.2%, or ￦ 208 billion, from ￦ 212 billion in 2020 to ￦ 4 billion in 2021 primarily due to an impairment loss of ￦ 193 billion on frequency usage rights in 2020 compared to no such impairment in 2021.

Operating Profit
Due to the factors described above, our operating profit increased by 66.2%, or
￦
677 billion, from
￦
1,022 billion in 2020 to
￦
1,699 billion in 2021. Our operating margin, which is operating profit as a percentage of operating revenue, was 4.2% in 2020 and 6.7% in 2021.
Finance Income (Costs)
The following table presents a breakdown of our finance income and costs and changes therein for 2020 and 2021:

|  | For the Year Ended December 31, |  |  | Changes |
|  | 2020 vs. 2021 |
|  | 2020 |  |  | 2021 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Interest income |  | ￦ | 271 |  |  | ￦ | 273 |  |  | ￦ | 3 |  |  |  | 1.1 | %
Gain on foreign currency transactions |  |  | 17 |  |  |  | 20 |  |  |  | 2 |  |  |  | 14.2 |
Gain on foreign currency translation |  |  | 164 |  |  |  | 33 |  |  |  | (132 | ) |  |  | (80.1 | )
Gain on settlement of derivatives |  |  | 9 |  |  |  | 2 |  |  |  | (7 | ) |  |  | (76.4 | )
Gain on valuation of derivatives |  |  | 0 |  |  |  | 255 |  |  |  | 255 |  |  |  | N.M. |
Gain on valuation of financial instruments |  |  | 34 |  |  |  | 91 |  |  |  | 57 |  |  |  | 167.7 |
Others |  |  | 3 |  |  |  | 52 |  |  |  | 49 |  |  |  | 1,784.9 |
Total finance income |  | ￦ | 499 |  |  | ￦ | 727 |  |  | ￦ | 228 |  |  |  | 45.7 |
Interest expenses |  | ￦ | 264 |  |  | ￦ | 263 |  |  | ￦ | (0 | ) |  |  | (0.1 | )%
Loss on foreign currency transactions |  |  | 28 |  |  |  | 13 |  |  |  | (14 | ) |  |  | (52.9 | )
Loss on foreign currency translation |  |  | 26 |  |  |  | 214 |  |  |  | 187 |  |  |  | 711.3 |
Loss on settlement of derivatives |  |  | 1 |  |  |  | 6 |  |  |  | 5 |  |  |  | 347.2 |
Loss on valuation of derivatives |  |  | 164 |  |  |  | 16 |  |  |  | (148 | ) |  |  | (90.3 | )
Loss on disposal of trade receivables |  |  | 8 |  |  |  | 22 |  |  |  | 15 |  |  |  | 178.6 |
Loss on valuation of financial instruments |  |  | 16 |  |  |  | 26 |  |  |  | 10 |  |  |  | 66.1 |
Others |  |  | 1 |  |  |  | 2 |  |  |  | 2 |  |  |  | 218.6 |
Total finance costs |  | ￦ | 507 |  |  | ￦ | 563 |  |  | ￦ | 56 |  |  |  | 11.0 |

N.M. | means not meaningful.

We recorded net loss on foreign currency transactions of
￦
10 billion in 2020 compared to net gain on foreign currency transactions of
￦
7 billion in 2021 due to fluctuations in the average value of the Won against the Dollar in 2020 and 2021. In terms of the market average exchange rates announced by Seoul Money Brokerage Services, Ltd., it was
￦
1,157.8 to US$1.00 as of December 31, 2019, and the average value of market average exchange rates depreciated to
￦
1,180.1 to US$1.00 in 2020 but appreciated to
￦
1,144.4 to US$1.00 in 2021. In addition, we recorded net gain on foreign currency translations of
￦
138 billion in 2020 compared to net loss on foreign currency translations of
￦
181 billion in 2021, as the Won appreciated against the Dollar at year end in 2020 but depreciated in 2021. In terms of the market average exchange rates, the Won appreciated against the Dollar from
￦
1,157.8 to US$1.00 as of December 31, 2019 to
￦
1,088.0 to US$1.00 as of December 31, 2020, but depreciated to
￦
1,185.5 to US$1.00 as of December 31, 2021. Against such fluctuations, we recorded a net loss on valuation of derivatives of
￦
164 billion in 2020 compared to a net gain on valuation of derivatives of
￦
403 billion in 2021, and we recorded a net gain on transactions of derivatives of
￦
8 billion in 2020 compared to a net loss on transactions of derivatives of
￦
4 billion in 2021.
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Our gain on valuation of financial instruments increased by 167.7%, or
￦
57 billion, from
￦
34 billion in 2020 to
￦
91 billion in 2021 primarily due to an increase in valuation of our interests in overseas funds.
Our finance income categorized as “others” increased by 1,784.9%, or
￦
49 billion, from
￦
3 billion in 2020 to
￦
52 billion in 2021 primarily due to increases in gain from disposal of financial instruments and dividend income
Share of Net Profits (Losses) of Associates and Joint Venture
Our share of net profit of associates and joint ventures increased by 543.3%, or
￦
98 billion, from
￦
18 billion in 2020 to
￦
116 billion in 2021. In 2020, our share of net profit of associates and joint ventures consisted primarily of our share of profit from various associates, including
K-Realty
CR-REITs
No. 1, of
￦
39 billion and Korea Information & Technology Fund of
￦
12 billion, which was partially offset by our share of loss from K Bank of
￦
30 billion. In 2021, our share of net profit of associates and joint ventures consisted primarily of our share of profit from
K-Realty
CR-REITs
No. 1, of
￦
76 billion and Korea Information & Technology Fund of
￦
17 billion.
Income Tax Expense
Income tax expense increased by 81.9%, or
￦
234 billion, from
￦
285 billion in 2020 to
￦
519 billion in 2021, as our profit before income tax increased by 91.8%, or
￦
947 billion, from
￦
1,032 billion in 2020 to
￦
1,978 billion in 2021. Our effective tax rate was 27.7% in 2020 and 26.2% in 2021. See Note 30 of the notes to the Consolidated Financial Statements.
Profit for the Year
Due to the factors described above, our profit for the year increased by 95.6%, or
￦
713 billion, from
￦
746 billion in 2020 to
￦
1,459 billion in 2021. Our net profit margin, which is net profit for the year as a percentage of operating revenue, was 3.1% in 2020 and 5.8% in 2021.
Segment Results—ICT
Our operating revenue for the ICT segment, prior to adjusting for inter-segment transactions, increased by 2.5%, or
￦
459 billion, from
￦
18,276 billion in 2020 to
￦
18,734 billion in 2021, primarily due to increases in revenue from our mobile services and IPTV services, as described above.
Our operating profit for the ICT segment, prior to adjusting for inter-segment transactions, increased by 44.6%, or
￦
361 billion, from
￦
810 billion in 2020 to
￦
1,171 billion in 2021, as the
￦
459 billion increase in the segment’s operating revenue outpaced the
￦
97 billion increase in operating expenses. For this segment, operating margin, which is operating profit as a percentage of total operating revenue prior to adjusting for inter-segment transactions, increased from 4.4% in 2020 to 6.3% in 2021.
Our depreciation and amortization for the ICT segment, prior to adjusting for inter-segment transactions, decreased by 0.5%, or
￦
16 billion, from
￦
3,234 billion in 2020 to
￦
3,218 billion in 2021.
Segment Results—Finance
Our operating revenue for the finance segment, prior to adjusting for inter-segment transactions, decreased by 1.4%, or
￦
50 billion, from
￦
3,686 billion in 2020 to
￦
3,636 billion in 2021, primarily due to a decrease in revenue of BC Card’s value added network business.
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Our operating profit for the finance segment, prior to adjusting for inter-segment transactions, increased by 62.1%, or
￦
53 billion, from
￦
85 billion in 2020 to
￦
138 billion in 2021, as the
￦
103 billion decrease in the segment’s operating expenses outpaced the
￦
50 billion decrease in operating revenue. For this segment, operating margin increased from 2.3% in 2020 to 3.8% in 2021.
Depreciation and amortization for the finance segment, prior to adjusting for inter-segment transactions, decreased by 8.6%, or
￦
5 billion, from
￦
53 billion in 2020 to
￦
49 billion in 2021.
Segment Results—Satellite TV
Our operating revenue for the satellite TV segment, prior to adjusting for inter-segment transactions, increased by 9.4%, or
￦
66 billion, from
￦
707 billion in 2020 to
￦
773 billion in 2021 primarily reflecting an increase in operating revenue of KT Skylife.
Our operating profit for the satellite TV segment, prior to adjusting for inter-segment transactions, increased by 7.8%, or
￦
6 billion, from
￦
71 billion in 2020 to
￦
77 billion in 2021, as the
￦
66 billion increase in the segment’s operating revenue outpaced the
￦
61 billion increase in operating expenses. Operating margin for this segment decreased slightly from 10.1% in 2020 to 10.0% in 2021.
Depreciation and amortization for the satellite TV segment, prior to adjusting for inter-segment transactions, increased by 7.5%, or
￦
6 billion, from
￦
85 billion in 2020 to
￦
91 billion in 2020.
Segment Results—Others
Our operating revenue for the others segment, prior to adjusting for inter-segment transactions, increased by 8.6%, or
￦
512 billion, from
￦
5,944 billion in 2020 to
￦
6,456 billion in 2021, primarily due to an increase in revenue from our information technology and network services, particularly from the operation of Internet data centers and systems integration services.
Our operating profit for the others segment, prior to adjusting for inter-segment transactions, increased by 71.1%, or
￦
149 billion, from
￦
209 billion in 2020 to
￦
358 billion in 2021, as the
￦
512 billion increase in the segment’s operating revenue outpaced the
￦
363 billion increase in the segment’s operating expenses. Operating margin for this segment increased from 3.5% in 2020 to 5.5% in 2021.
Depreciation and amortization for this segment, prior to adjusting for inter-segment transactions, increased by 2.5%, or
￦
9 billion, from
￦
346 billion in 2020 to
￦
355 billion in 2021.
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Operating Results—2019 Compared to 2020
The following table presents selected income statement data and changes therein for 2019 and 2020:

|  | For the Year Ended December 31, |  |  | Changes |
| 2019 vs. 2020 |
|  | 2019 |  |  | 2020 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Operating revenue |  | ￦ | 24,899 |  |  | ￦ | 24,441 |  |  | ￦ | (459 | ) |  |  | (1.8 | )%
Operating expenses |  |  | 23,872 |  |  |  | 23,418 |  |  |  | (454 | ) |  |  | (1.9 | )
Operating profit |  |  | 1,027 |  |  |  | 1,022 |  |  |  | (5 | ) |  |  | (0.5 | )
Finance income |  |  | 424 |  |  |  | 499 |  |  |  | 74 |  |  |  | 17.5 |
Finance costs |  |  | 432 |  |  |  | 507 |  |  |  | 75 |  |  |  | 17.4 |
Share of net profits (losses) of associates and joint ventures |  |  | (3 | ) |  |  | 18 |  |  |  | 21 |  |  |  | N.A. |
Profit before income tax |  |  | 1,016 |  |  |  | 1,032 |  |  |  | 16 |  |  |  | 1.5 |
Income tax expense |  |  | 320 |  |  |  | 285 |  |  |  | (35 | ) |  |  | (10.8 | )
Profit for the year |  | ￦ | 696 |  |  | ￦ | 746 |  |  | ￦ | 50 |  |  |  | 7.2 | %

N.A. means not applicable.
Operating Revenue
The following table presents a breakdown of our operating revenue and changes therein for 2019 and 2020:

|  | For the Year Ended December 31, |  |  | Changes |
| 2019 vs. 2020 |
Products and services |  | 2019 |  |  | 2020 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Mobile services |  | ￦ | 6,795 |  |  | ￦ | 6,805 |  |  | ￦ | 10 |  |  |  | 0.1 | %
Fixed-line services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-line and VoIP telephone services |  |  | 1,579 |  |  |  | 1,464 |  |  |  | (115 | ) |  |  | (7.3 | )
Broadband Internet access services |  |  | 2,177 |  |  |  | 2,256 |  |  |  | 79 |  |  |  | 3.6 |
Data communication services |  |  | 1,111 |  |  |  | 1,107 |  |  |  | (3 | ) |  |  | (0.3 | )
Sub-total |  |  | 4,867 |  |  |  | 4,827 |  |  |  | (40 | ) |  |  | (0.8 | )
Media and content services |  |  | 2,516 |  |  |  | 2,638 |  |  |  | 121 |  |  |  | 4.8 |
Financial services |  |  | 3,642 |  |  |  | 3,494 |  |  |  | (148 | ) |  |  | (4.1 | )
Others |  |  | 2,885 |  |  |  | 3,084 |  |  |  | 198 |  |  |  | 6.9 |
Sale of goods (1) |  |  | 4,194 |  |  |  | 3,593 |  |  |  | (601 | ) |  |  | (14.3 | )
Total operating revenue |  | ￦ | 24,899 |  |  | ￦ | 24,441 |  |  | ￦ | (459 | ) |  |  | (1.8 | )%

(1) | Primarily related to sale of handsets for our mobile service and miscellaneous telecommunications equipment, as well as sale of residential units and commercial real estate developed by KT Estate.

Total operating revenue decreased by 1.8%, or
￦
459 billion, from
￦
24,899 billion in 2019 to
￦
24,441 billion in 2020, primarily due to decreases in revenue from sale of goods and fixed-line and VoIP telephone services, which impact was partially offset by increases in revenue from media and content services and financial services.
Mobile Services
Our mobile services revenue increased by 0.1%, or
￦
10 billion, from
￦
6,795 billion in 2019 to
￦
6,805 billion in 2020, primarily due to increases in our mobile subscribers and average revenue per
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user, which were offset in part by a decrease in our roaming revenue due to a significant decrease in international travel during the
COVID-19
pandemic.
We recorded a 1.7% increase in our mobile subscribers from approximately 21.9 million (including 1.4 million subscribers of 5G services) as of December 31, 2019 to approximately 22.3 million (including 3.6 million subscribers of 5G services) as of December 31, 2020.
Our average revenue per user increased from
￦
31,625 in 2019 to
￦
31,683 in 2020 mainly due to an increase of 5G subscribers.
Fixed-line Services
Our fixed-line services revenue decreased by 0.8%, or
￦
40 billion, from
￦
4,867 billion in 2019 to
￦
4,827 billion in 2020, reflecting a decrease in our revenue from fixed-line and VoIP telephone services, which impact was partially offset by an increase in revenue from broadband Internet access services.
Fixed-line and VoIP Telephone Services.
Our fixed-line and VoIP telephone services revenue decreased by 7.3%, or
￦
115 billion, from
￦
1,579 billion in 2019 to
￦
1,464 billion in 2020, primarily due to decreases in subscribers reflecting continued decrease in demand for such services. Our number of PSTN and VoIP lines in service decreased from 14.1 million as of December 31, 2019 to 13.6 million as of December 31, 2020.
Broadband Internet Access Services
. Our broadband Internet access services revenue increased by 3.6%, or
￦
79 billion, from
￦
2,177 billion in 2019 to
￦
2,256 billion in 2020, primarily as a result of an increase in the number of subscribers to our premium services. The number of our KT GiGA Internet service subscribers increased from approximately 5.5 million as of December 31, 2019 to approximately 5.9 million as of December 31, 2020.
Data Communication Services.
Our data communication services revenue decreased by 0.3%, or
￦
3 billion, from
￦
1,111 billion in 2019 to
￦
1,107 billion in 2020 primarily due to a decrease in revenue from our
co-location
and server leasing services offered to corporate customers.
Media and Content Services
Our media and content services revenue increased by 4.8%, or
￦
121 billion, from
￦
2,516 billion in 2019 to
￦
2,638 billion in 2020 primarily due to an increase in the number of IPTV subscribers from approximately 8.4 million as of December 31, 2019 to approximately 8.8 million as of December 31, 2020, as well as an increase in revenue of Genie Music Corporation.
Financial Services
Financial services revenue decreased by 4.1%, or
￦
148 billion, from
￦
3,642 billion in 2019 to
￦
3,494 billion in 2020 primarily due to a decrease in fees from credit card services of BC Card as a result of a reduction in the usage of credit cards during the
COVID-19
pandemic.
Others
Other operating revenue increased by 6.9%, or
￦
198 billion, from
￦
2,885 billion in 2019 to
￦
3,084 billion in 2020, primarily due to increases in revenue from our information technology and network services, particularly from systems integration services and the operation of Internet data centers.
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Sale of Goods
Revenue from sale of goods decreased by 14.3%, or
￦
601 billion, from
￦
4,194 billion in 2019 to
￦
3,593 billion in 2020, primarily due to decreases in revenue from sales of mobile handsets and residential units and commercial real estate developed by KT Estate in 2020 compared to 2019. The sale of mobile handsets decreased in 2020 primarily due to a slowdown in consumption as a result of the
COVID-19
pandemic. The sale of residential units and commercial real estate developed by KT Estate in 2020 decreased due to the slowdown in the real estate market as a result of
COVID-19.
Operating Expenses
The following table presents a breakdown of our operating expenses and changes therein for 2019 and 2020:

|  | For the Year Ended December 31, |  |  | Changes |
|  | 2019 vs. 2020 |
|  | 2019 |  |  | 2020 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Salaries and wages |  | ￦ | 3,974 |  |  | ￦ | 4,124 |  |  | ￦ | 149 |  |  |  | 3.8 | %
Depreciation |  |  | 2,530 |  |  |  | 2,605 |  |  |  | 75 |  |  |  | 3.0 |
Depreciation of right-of-use assets |  |  | 443 |  |  |  | 404 |  |  |  | (38 | ) |  |  | (8.7 | )
Amortization of intangible assets |  |  | 657 |  |  |  | 625 |  |  |  | (32 | ) |  |  | (4.8 | )
Commissions |  |  | 1,115 |  |  |  | 965 |  |  |  | (150 | ) |  |  | (13.4 | )
Interconnection charges |  |  | 534 |  |  |  | 500 |  |  |  | (34 | ) |  |  | (6.4 | )
International interconnection fee |  |  | 240 |  |  |  | 173 |  |  |  | (68 | ) |  |  | (28.2 | )
Purchase of inventories |  |  | 4,454 |  |  |  | 3,682 |  |  |  | (772 | ) |  |  | (17.3 | )
Changes of inventories |  |  | 283 |  |  |  | 257 |  |  |  | (26 | ) |  |  | (9.2 | )
Sales commission |  |  | 2,316 |  |  |  | 2,337 |  |  |  | 21 |  |  |  | 0.9 |
Service cost |  |  | 1,610 |  |  |  | 2,103 |  |  |  | 493 |  |  |  | 30.6 |
Utilities |  |  | 333 |  |  |  | 361 |  |  |  | 28 |  |  |  | 8.4 |
Taxes and dues |  |  | 278 |  |  |  | 283 |  |  |  | 5 |  |  |  | 2.0 |
Rental expenses |  |  | 193 |  |  |  | 136 |  |  |  | (57 | ) |  |  | (29.5 | )
Insurance premium |  |  | 82 |  |  |  | 71 |  |  |  | (11 | ) |  |  | (13.8 | )
Installation fee |  |  | 155 |  |  |  | 132 |  |  |  | (23 | ) |  |  | (14.9 | )
Advertising expenses |  |  | 150 |  |  |  | 132 |  |  |  | (18 | ) |  |  | (11.8 | )
Research and development expenses |  |  | 165 |  |  |  | 157 |  |  |  | (8 | ) |  |  | (4.9 | )
Card service costs |  |  | 3,067 |  |  |  | 2,942 |  |  |  | (125 | ) |  |  | (4.1 | )
Impairment loss on property and equipment |  |  | 43 |  |  |  | 80 |  |  |  | 36 |  |  |  | 84.4 |
Impairment loss on intangible assets |  |  | 62 |  |  |  | 212 |  |  |  | 150 |  |  |  | 241.9 |
Others |  |  | 1,187 |  |  |  | 1,137 |  |  |  | (50 | ) |  |  | (4.2 | )
Total operating expenses |  | ￦ | 23,872 |  |  | ￦ | 23,418 |  |  | ￦ | (454 | ) |  |  | (1.9 | )%

Total operating expenses decreased by 1.9%, or
￦
454 billion, from
￦
23,872 billion in 2019 to
￦
23,418 billion in 2020 primarily due to decreases in purchase of inventories, commissions and card service costs, which impact was partially offset by increases in service costs, impairment loss on intangible assets and salaries and wages. Specifically:

| • |  | Our purchase of inventories decreased by 17.3%, or ￦ 772 billion, from ￦ 4,454 billion in 2019 to ￦ 3,682 billion in 2020 primarily due to a decrease in purchases of mobile handsets (consisting of a decrease in the total number of mobile handsets (mostly smartphones) and a decrease in the per-unit price of handsets).

| • |  | Commissions decreased by 13.4%, or ￦ 150 billion, from ￦ 1,115 billion in 2019 to ￦ 965 billion in 2020 primarily due to a decrease in commissions that we paid to call centers.

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| • |  | Card service costs decreased by 4.1%, or ￦ 125 billion, from ￦ 3,067 billion in 2019 to ￦ 2,942 billion in 2020 primarily due to a decrease in the card service costs of BC Card as a result of a slowdown in the usage of credit cards during the COVID-19 pandemic.

These factors were partially offset by the following:

| • |  | Service costs increased by 30.6%, or ￦ 493 billion, from ￦ 1,610 billion in 2019 to ￦ 2,103 billion in 2020 primarily due to service costs associated with the development of IT services for KTDS Co., Ltd. and the recognition of service costs incurred by KT Engineering Co., Ltd., in which we acquired a controlling interest in 2020.

| • |  | Impairment loss on intangible assets increased by 241.9%, or ￦ 150 billion, from ￦ 62 billion in 2019 to ￦ 212 billion in 2020 primarily due to an impairment loss of ￦ 193 billion on frequency usage rights in 2020.

| • |  | Salaries and wages increased by 3.8%, or ￦ 149 billion, from ￦ 3,974 billion in 2019 to ￦ 4,124 billion in 2020 primarily due to an increase in wages as well as the consolidation of salaries and wages of certain subsidiaries, such as KT Engineering Co., Ltd., in which we acquired a controlling interest in 2020.

Operating Profit
Due to the factors described above, our operating profit decreased by 0.5%, or
￦
5 billion, from
￦
1,027 billion in 2019 to
￦
1,022 billion in 2020. Our operating margin, which is operating profit as a percentage of operating revenue, was 4.1% in 2019 and 4.2% in 2020.
Finance Income (Costs)
The following table presents a breakdown of our finance income and costs and changes therein for 2019 and 2020:

|  | For the Year Ended December 31, |  |  | Changes |
|  | 2019 vs. 2020 |
|  | 2019 |  |  | 2020 |  |  | Amount |  |  | % |
|  | (In billions of Won) |
Interest income |  | ￦ | 283 |  |  | ￦ | 271 |  |  | ￦ | (12 | ) |  |  | (4.3 | )%
Gain on foreign currency transactions |  |  | 25 |  |  |  | 17 |  |  |  | (7 | ) |  |  | (28.9 | )
Gain on foreign currency translation |  |  | 18 |  |  |  | 164 |  |  |  | 146 |  |  |  | 814.1 |
Gain on settlement of derivatives |  |  | 9 |  |  |  | 9 |  |  |  | 0 |  |  |  | 4.2 |
Gain on valuation of derivatives |  |  | 77 |  |  |  | 0 |  |  |  | (77 | ) |  |  | (99.8 | )
Others |  |  | 13 |  |  |  | 37 |  |  |  | 24 |  |  |  | 187.4 |
Total finance income |  | ￦ | 424 |  |  | ￦ | 499 |  |  | ￦ | 74 |  |  |  | 17.5 |
Interest expenses |  | ￦ | 278 |  |  | ￦ | 264 |  |  | ￦ | (15 | ) |  |  | (5.3 | )%
Loss on foreign currency transactions |  |  | 30 |  |  |  | 28 |  |  |  | (2 | ) |  |  | (8.1 | )
Loss on foreign currency translation |  |  | 94 |  |  |  | 26 |  |  |  | (68 | ) |  |  | (72.0 | )
Loss on settlement of derivatives |  |  | 0 |  |  |  | 1 |  |  |  | 1 |  |  |  | 6,930.0 |
Loss on valuation of derivatives |  |  | 16 |  |  |  | 164 |  |  |  | 148 |  |  |  | 932.1 |
Loss on disposal of trade receivables |  |  | 11 |  |  |  | 8 |  |  |  | (3 | ) |  |  | (27.8 | )
Others |  |  | 2 |  |  |  | 16 |  |  |  | 14 |  |  |  | 617.5 |
Total finance costs |  | ￦ | 432 |  |  | ￦ | 507 |  |  | ￦ | 75 |  |  |  | 17.4 |

Our net loss on foreign currency transactions increased by 81.8%, or
￦
5 billion, from
￦
6 billion in 2019 to
￦
10 billion in 2020 due to depreciations in the average value of the Won against
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the Dollar in 2019 and 2020. In terms of the market average exchange rates announced by Seoul Money Brokerage Services, Ltd., it was
￦
1,118.1 to US$1.00 as of December 31, 2018, and the average value of market average exchange rates depreciated to
￦
1,165.7 to US$1.00 in 2019 and further depreciated to
￦
1,180.1 to US$1.00 in 2020. In addition, we recorded a net loss on foreign currency translations of
￦
76 billion in 2019 compared to a net gain on foreign currency translation of
￦
138 billion in 2020, as the Won depreciated against the Dollar at year end in 2019 but appreciated in 2020. In terms of the market average exchange rates, the Won depreciated against the Dollar from
￦
1,118.1 to US$1.00 as of December 31, 2018 to
￦
1,157.8 to US$1.00 as of December 31, 2019, but appreciated to
￦
1,088.0 to US$1.00 as of December 31, 2020. Against such fluctuations, we recorded a net gain on valuation of derivatives of
￦
61 billion in 2019 compared to a net loss on valuation of derivatives of
￦
164 billion in 2020, and our net gain on transactions of derivatives decreased by 11.2%, or
￦
1 billion, from
￦
9 billion in 2019 to
￦
8 billion in 2020.
Our interest income decreased by 4.3%, or
￦
12 billion, from
￦
283 billion in 2019 to
￦
271 billion in 2020 primarily due to a general decrease in the weighted-average interest rate applicable to our bank deposits.
Our interest expenses decreased by 5.3%, or
￦
15 billion, from
￦
278 billion in 2019 to
￦
264 billion in 2020 primarily due to a general decrease in the weighted-average interest rate of our borrowings in 2020 compared to 2019.
Share of Net Profits (Losses) of Associates and Joint Venture
We recorded a share of net losses of associates and joint ventures of
￦
3 billion in 2019 compared to a share of net profit of associates and joint ventures of
￦
18 billion in 2020. In 2019, our share of net losses of associates and joint ventures consisted primarily of our share of loss from K Bank of
￦
29 billion, which was partially offset by our share of profit from Korea Information & Technology Fund of
￦
18 billion. In 2020, our share of net profit of associates and joint ventures consisted primarily of our share of profit from various associates, including
K-Realty
CR-REITs
No. 1, of
￦
39 billion and Korea Information & Technology Fund of
￦
12 billion, which was partially offset by our share of loss from K Bank of
￦
30 billion.
Income Tax Expense
Income tax expense decreased by 10.8%, or
￦
35 billion, from
￦
320 billion in 2019 to
￦
285 billion in 2020, while our profit before income tax increased by 1.5%, or
￦
16 billion, from
￦
1,016 billion in 2019 to
￦
1,032 billion in 2020. Our effective tax rate was 31.5% in 2019 and 27.7% in 2020. See Note 30 of the notes to the Consolidated Financial Statements.
Profit for the Year
Due to the factors described above, our profit for the year increased by 7.2%, or
￦
50 billion, from
￦
696 billion in 2019 to
￦
746 billion in 2020. Our net profit margin, which is net profit for the year as a percentage of operating revenue, was 2.8% in 2019 and 3.1% in 2020.
Segment Results—ICT
Our operating revenue for the ICT segment, prior to adjusting for inter-segment transactions, decreased by 1.4%, or
￦
252 billion, from
￦
18,528 billion in 2019 to
￦
18,276 billion in 2020, primarily due to a decrease in revenue from our fixed-line services to individual and household customers and the sale of handsets, the impact of which was partially offset by increases in revenue from media and content services and mobile services, as described above.
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Our operating profit for the ICT segment, prior to adjusting for inter-segment transactions, increased by 27.7%, or
￦
176 billion, from
￦
634 billion in 2019 to
￦
810 billion in 2020, as the
￦
428 billion decrease in the segment’s operating expenses outpaced the
￦
252 billion decrease in operating revenue. For this segment, operating margin, which is operating profit as a percentage of total operating revenue prior to adjusting for inter-segment transactions, increased from 3.4% in 2019 to 4.4% in 2020.
Our depreciation and amortization for the ICT segment, prior to adjusting for inter-segment transactions, increased by 0.1%, or
￦
5 billion, from
￦
3,229 billion in 2019 to
￦
3,234 billion in 2020.
Segment Results—Finance
Our operating revenue for the finance segment, prior to adjusting for inter-segment transactions, decreased by 2.9%, or
￦
109 billion, from
￦
3,795 billion in 2019 to
￦
3,686 billion in 2020, primarily due to decrease in fees from credit card services of BC Card as a result of a reduction in the usage of credit cards during
COVID-19
pandemic.
Our operating profit for the finance segment, prior to adjusting for inter-segment transactions, decreased by 46.3%, or
￦
73 billion, from
￦
158 billion in 2019 to
￦
85 billion in 2020, as the
￦
109 billion decrease in the segment’s operating revenue outpaced the
￦
36 billion decrease in operating expenses. For this segment, operating margin decreased from 4.2% in 2019 to 2.3% in 2020.
Depreciation and amortization for the finance segment, prior to adjusting for inter-segment transactions, increased by 90.6%, or
￦
25 billion, from
￦
28 billion in 2019 to
￦
53 billion in 2020.
Segment Results—Satellite TV
Our operating revenue for the satellite TV segment, prior to adjusting for inter-segment transactions, increased by 1.7%, or
￦
12 billion, from
￦
695 billion in 2019 to
￦
707 billion in 2020 primarily due to an increase in operating revenue of KT Skylife.
Our operating profit for the satellite TV segment, prior to adjusting for inter-segment transactions, increased by 2.9%, or
￦
2 billion, from
￦
69 billion in 2019 to
￦
71 billion in 2020, as the
￦
12 billion increase in the segment’s operating revenue outpaced the
￦
10 billion increase in operating expenses. Operating margin for this segment increased from 10.0% in 2019 to 10.1% in 2020.
Depreciation and amortization for the satellite TV segment, prior to adjusting for inter-segment transactions, decreased by 10.6%, or
￦
10 billion, from
￦
95 billion in 2019 to
￦
85 billion in 2020.
Segment Results—Others
Our operating revenue for the others segment, prior to adjusting for inter-segment transactions, increased by 1.7%, or
￦
98 billion, from
￦
5,846 billion in 2019 to
￦
5,944 billion in 2020, primarily due to an increase in revenue from our information and technology and network services.
Our operating profit for the others segment, prior to adjusting for inter-segment transactions, decreased by 4.3%, or
￦
9 billion, from
￦
218 billion in 2019 to
￦
209 billion in 2020, as the
￦
107 billion increase in the segment’s operating expenses outpaced the
￦
98 billion increase in the segment’s operating revenue. Operating margin for this segment decreased from 3.7% in 2019 to 3.5% in 2020.
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Depreciation and amortization for this segment, prior to adjusting for inter-segment transactions, decreased by 3.1%, or
￦
11 billion, from
￦
357 billion in 2019 to
￦
346 billion in 2020.
Item 5.B. Liquidity and Capital Resources
The following table sets forth the summary of our cash flows for the years indicated:

|  | For the Years Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | (In billions of Won) |
Net cash inflow from operating activities |  | ￦ | 3,745 |  |  | ￦ | 4,740 |  |  | ￦ | 5,562 |
Net cash outflow from investing activities |  |  | (3,887 | ) |  |  | (3,761 | ) |  |  | (5,137 | )
Net cash outflow from financing activities |  |  | (250 | ) |  |  | (648 | ) |  |  | (41 | )
Cash and cash equivalents at beginning of the year |  |  | 2,703 |  |  |  | 2,306 |  |  |  | 2,635 |
Cash and cash equivalents at end of the year |  |  | 2,306 |  |  |  | 2,635 |  |  |  | 3,020 |
Net increase (decrease) in cash and cash equivalents |  |  | (398 | ) |  |  | 329 |  |  |  | 384 |

Capital Requirements
Historically, our capital requirements consisted principally of purchases of property and equipment and other assets and repayments of borrowings. In our investing activities, we used cash of
￦
3,263 billion in 2019,
￦
3,208 billion in 2020 and
￦
3,495 billion in 2021, for the acquisition of property and equipment and investment properties. In addition, we used cash of
￦
531 billion in 2019,
￦
511 billion in 2020 and
￦
752 billion in 2021 for the acquisition of intangible assets, which consisted primarily of acquisition of bandwidth licenses. In our financing activities, we used cash of
￦
1,377 billion in 2019,
￦
1,627 billion in 2020 and
￦
1,999 billion in 2021, for repayments of borrowings. From time to time, we may also require capital for investments involving acquisitions, including shares of our affiliates, and strategic relationships, as well as repurchases of our shares.
Our cash dividends paid to shareholders and
non-controlling
interests amounted to
￦
305 billion in 2019,
￦
311 billion in 2020 and
￦
350 billion in 2021.
We anticipate that capital expenditures and repayment of outstanding contractual obligations and commitments (including for bandwidth licenses) will represent the most significant use of funds for the next several years. We currently expect our capital expenditures for the acquisition of property and equipment and investment property and acquisition of intangible assets in 2022 to be comparable to those in 2021 on a standalone basis. However, the actual amount remains subject to adjustment depending on market conditions, our results of operations and changes in our
build-out
plan for our 5G mobile telecommunications network. We may also require capital for purchase of shares of our affiliates as well as investments involving acquisitions and strategic relationships. We compete primarily in the telecommunications and
Internet-related
markets in Korea, which are rapidly evolving. In recent years, competition among us, SK Telecom and LG U+ to commercialize 5G mobile services has intensified and we have made and will continue to make capital expenditure to expand our 5G mobile service capabilities and technologies. We may need to incur additional capital expenditures to keep up with unexpected developments in rapidly evolving telecommunications technology. There can be no assurance that we will be able to secure funds on satisfactory terms from financial institutions or other sources that are sufficient for our unanticipated needs.
Payments of contractual obligations and commitments will also require considerable resources. In our ordinary course of business, we routinely enter into commercial commitments for various aspects of our operations, including repair and maintenance. We have also provided guarantees to our affiliates. See Note 20 of the notes to the Consolidated Financial Statements for a disclosure of the guarantees provided.
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Capital Resources
We have traditionally met our working capital and other capital requirements principally from cash provided by operations, while raising the remainder of our requirements primarily through debt financing. Our major sources of cash have been net cash provided by operating activities, including profits for the year, expenses not involving cash payments such as depreciation and amortization, and proceeds from issuance of bonds and borrowings. We expect that these sources will continue to be our principal sources of cash in the future. We recorded profits for the year of
￦
696 billion in 2019,
￦
746 billion in 2020 and
￦
1,459 billion in 2021 as discussed in “Item 5.A. Operating Results.”
Non-cash
expense adjustments in our statement of cash flows from depreciation, amortization of intangible assets and depreciation of
right-of-use
assets amounted to
￦
3,671 billion in 2019,
￦
3,668 billion in 2020 and
￦
3,647 billion in 2021, primarily reflecting our capital investment activities during the recent years, including our payments on bandwidth licenses for our operations, investments in network infrastructures and acquisition of real estate.
We had net proceeds from borrowings and debentures, after adjusting for repayments of borrowings and debentures, of
￦
574 billion in 2019,
￦
168 billion in 2020 and
￦
900 billion in 2021.
Long-term
borrowings, excluding current installments, were
￦
6,113 billion as of December 31, 2019,
￦
5,898 billion as of December 31, 2020 and
￦
6,706 billion in December 31, 2021. Total
short-term
borrowings were
￦
1,186 billion as of December 31, 2019,
￦
1,418 billion as of December 31, 2020 and
￦
1,731 billion as of December 31, 2021. We periodically increase our
short-term
borrowings and adjust our
long-term
debt financing levels depending on changes in our capital requirements. For the maturity profile of our borrowings, their currency denomination and interest rates, see Note 16 of the notes to the Consolidated Financial Statements. Under our borrowing policy, we continually take into consideration various factors, including financial market conditions and our business environment, in order to decide on specific terms of the borrowing, such as borrowing amount, maturity date, currency denomination and type of interest rate (fixed or floating). We also strive to prudently manage our borrowing level and mitigate our refinancing risks through various methods, including diversification of currency denominations and borrowing lines. Our
debt-to-equity
ratio, which is calculated by dividing total liabilities with total equity, was 129% as of December 31, 2019, 116% as of December 31, 2020 and 124% as of December 31, 2021.
We also dispose of a portion of our trade receivables relating to handset sales to several special purpose companies, as part of our efforts to improve our cash and asset management. We entered into asset management agreements with each of these special purpose companies, and will be receiving management fees from such companies. See Note 20 of the notes to the Consolidated Financial Statements. From time to time, we also generate cash from the sale of our treasury shares.
We believe that we have sufficient working capital available to us for our current requirements and that we have a variety of alternatives available to us to satisfy our financial requirements to the extent that they are not met by funds generated by operations, including the issuance of debt securities and bank borrowings denominated in Won and various foreign currencies. See Note 16 of the notes to the Consolidated Financial Statements. However, our ability to rely on some of these alternatives could be affected by factors such as the liquidity of the Korean and the global financial markets, prevailing interest rates, our credit rating and the Government’s policies regarding Won currency and foreign currency borrowings. Other factors which could materially affect our liquidity in the future include unanticipated increase in capital expenditures and decrease in cash provided by operations resulting from a significant decrease in demand for our services. We may also need to raise additional capital sooner than we expect in order to fund unanticipated investments and acquisitions.
Our total equity was
￦
15,141 billion as of December 31, 2019,
￦
15,551 billion as of December 31, 2020 and
￦
16,567 billion as of December 31, 2021.
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Liquidity
We had a working capital (current assets minus current liabilities) surplus of
￦
1,828 billion as of December 31, 2019,
￦
1,962 billion as of December 31, 2020 and
￦
1,786 billion as of December 31, 2021.
The following table sets forth the summary of our significant current assets for the years indicated:

|  | As of December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | (In billions of Won) |
Cash and cash equivalents |  | ￦ | 2,306 |  |  | ￦ | 2,635 |  |  | ￦ | 3,020 |
Trade and other receivables, net |  |  | 5,859 |  |  |  | 4,902 |  |  |  | 5,087 |
Inventories, net |  |  | 792 |  |  |  | 535 |  |  |  | 514 |
Other financial assets |  |  | 868 |  |  |  | 1,203 |  |  |  | 1,186 |

Our cash and cash equivalents (substantially all of which are in Won) totaled
￦
2,306 billion as of December 31, 2019,
￦
2,635 billion as of December 31, 2020, and
￦
3,020 billion as of December 31, 2021. As of December 31, 2021, on a standalone basis, we held approximately 97% of our cash and cash equivalents denominated in Won and the remainder denominated in foreign currencies. Other current financial assets primarily consist of financial instruments,
available-for-sale
financial assets and derivative assets used for hedging. For a discussion of our use of financial instruments for hedging purposes, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.
The following table sets forth the summary of our significant current liabilities for the years indicated:

|  | As of December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | (In billions of Won) |
Trade and other payables |  | ￦ | 7,597 |  |  | ￦ | 6,210 |  |  | ￦ | 6,641 |
Borrowings |  |  | 1,186 |  |  |  | 1,418 |  |  |  | 1,731 |

Substantially all of our revenues are denominated in Won. Depreciation of the Won may materially affect the results of our operations because, among other things, it causes an increase in the amount of Won required by us to make interest and principal payments on our foreign currency-denominated debt, the costs of telecommunications equipment that we purchase from overseas sources, net settlement payments to foreign carriers and certain payments related to our derivative instruments entered into for foreign exchange risk hedging purposes. As of December 31, 2021, we entered into various commitments with financial institutions totaling
￦
3,148 billion, US$320 million and EUR8 billion, of which
￦
348 billion, US$70 million and EUR8 billion was used.
See Note 20 of the notes to the Consolidated Financial Statements. Of the
￦
8,438 billion total book value of debentures and borrowings outstanding as of December 31, 2021,
￦
3,134 billion was denominated in foreign currencies. See Note 16 of the notes to the Consolidated Financial Statements. Upon the identification and evaluation of our currency risk exposures, we, having considered various circumstances, enter into derivative financial instruments to manage such risks. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Exchange Rate Risk and Interest Rate Risk.” We have not had, and do not anticipate that we will have, difficulty gaining access to short-term financing sufficient to meet our current requirements.
Item 5.C. Research and Development, Patents and Licenses, Etc.
In order to maintain our leadership in the converging telecommunications business environment and develop additional platforms, services and applications, we engage in research and
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development (“R&D”) activities together with our various business units and also operate the following R&D laboratories:

| • |  | the infrastructure digital transformation (“Infra DX”) R&D laboratory;

| • |  | the artificial intelligence to everything (“AI2XL”) R&D laboratory; and

| • |  | the convergence R&D laboratory.

As of December 31, 2021, KT Corporation had 4,077 domestic and 1,706 international registered patents.
The MSIT has the authority to recommend to network service providers that they provide funds for national research and development of telecommunications technology and related projects. Including such contributions, total expenditures (which include capitalized expenses) on research and development were
￦
254 billion in 2019,
￦
230 billion in 2020, and
￦
214 billion in 2021.
Item 5.D. Trend Information
These matters are discussed under Item 5.A. above where relevant.
Item 5.E. Critical Accounting Estimates
Our financial statements are prepared in accordance with IFRS as issued by IASB. See Note 3 of the notes to our financial statements for a discussion of our critical accounting estimates.
Item 6. Directors, Senior Management and Employees
Item 6.A. Directors and Senior Management
Directors
Our board of directors has the ultimate responsibility for the administration of our affairs. Our articles of incorporation provide for a board of directors consisting of:

| • |  | up to three inside directors, including the Representative Director; and

| • |  | up to eight outside directors.

All of our directors are elected at the general shareholders’ meeting. If the total assets of a company listed on the KRX KOSPI Market exceed
￦
2,000 billion as of the end of the preceding year, which is the case with us, the Commercial Code of Korea requires such company to have more than three outside directors, with outside directors being the majority of the board of directors. Under our articles of incorporation, the term of office for a director is up to three years. Pursuant to an amendment to our articles of incorporation in March 2020, the term of office for an outside director changed from up to ten years to up to six years, which change was made to reflect an amendment to the enforcement decree of the Commercial Code of Korea. The terms for both an inside director and an outside director are, however, extended to the close of the annual shareholders’ meeting convened with respect to the last full fiscal year of a director’s term of office. If the term of office for a director is not completed and ends before the close of the annual general shareholders’ meeting and a new director is appointed in his or her place, the term of office for such replacement director will coincide with the uncompleted remaining term of office of his or her predecessor.
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Under the Commercial Code of Korea, we must establish a committee to nominate candidates for outside directors within the board of directors, and outside directors must make up more than half of the total members of the outside director candidate nominating committee. According to our articles of incorporation, such committee must consist of one inside director and all of our outside directors, other than for election of an outside director resulting from the expiration of the term of the office, in which case such outside director whose term is expiring may not be a member of the committee. Our Outside Director Candidate Nominating Committee nominates outside director candidates for appointment at the general shareholders’ meeting.
Upon the request of any director (to the extent that the board of directors does not separately authorize only a particular director to make such request), a meeting of the board of directors will be assembled. The chairperson of the board of directors is elected from among the outside directors by a resolution of the board of directors. The term of office of the chairperson is one year.
Our current directors are as follows:

Name |  | Position |  | Director Since |  |  | Date of Birth |  | Expiration of Term of Office |
Inside Directors (1) |  |  |  |  |  |  |  |  |  |  |  |
Hyeon-Mo Ku |  | Representative Director and Chief Executive Officer |  |  | March 2020 |  |  | January 13, 1964 |  |  | 2023 |
Kyung-Lim Yun |  | President, Head of Group Transformation Group |  |  | March 2022 |  |  | June 14, 1963 |  |  | 2023 |
Outside Directors (1) |  |  |  |  |  |  |  |  |  |  |  |
Dae-You Kim |  | Outside Director, DB Life Insurance Co., Ltd. |  |  | March 2018 |  |  | July 21, 1951 |  |  | 2024 |
Gang-Cheol Lee |  | Outside Director, Paju Country Club Co., Ltd. |  |  | March 2018 |  |  | May 6, 1947 |  |  | 2024 |
Hee-Yol Yu |  | Board Chairperson, Korea Carbon Capture and Sequestration R&D Center |  |  | March 2019 |  |  | January 12, 1947 |  |  | 2025 |
Hyun-Myung Pyo |  | Outside Director, Hankook Tire & Technology Co.,Ltd. |  |  | March 2020 |  |  | October 21, 1958 |  |  | 2023 |
Chung-Gu Kang |  | Professor, School of Electrical Engineering, Korea University |  |  | March 2020 |  |  | December 12, 1962 |  |  | 2023 |
Eun-Jung Yeo |  | Professor, School of Business, Chung-Ang University |  |  | March 2020 |  |  | February 15, 1973 |  |  | 2023 |
Yong-Hun Kim |  | Partner Lawyer, DR & AJU Law Group |  |  | March 2022 |  |  | March 29, 1955 |  |  | 2025 |
Benjamin Hong |  | Board Chairperson, LINA Korea Co.,Ltd. |  |  | March 2022 |  |  | February 20, 1958 |  |  | 2025 |

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

Our “Representative Director” is authorized to perform all judicial and extra-judicial acts relating to our business. Our shareholders elect the Representative Director in accordance with the provisions of the Commercial Code and our articles of incorporation. In March 2018, we amended our articles of incorporation in efforts to add more rigor and transparency to the process of selecting our Representative Director. Our Corporate Governance Committee conducts investigation and composition of a pool of candidates and selects the representative director candidates whose candidacy will be further examined. Subsequently, the Representative Director Candidate Examination Committee examines and selects Representative Director candidates and submits an examination report of such candidates to our board of directors. A Representative Director candidate recommended by our board of directors is nominated at the shareholders’ meeting.
Under our articles of incorporation, the board of directors must submit a draft management contract between KT Corporation and the candidate covering our management objectives to the
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shareholders’ meeting at the time of candidate nomination to the meeting. When the draft management contract has been approved at the shareholders’ meeting, we enter into such management contract with the Representative Director. In such case, the chairperson of the board of directors, on our behalf, signs the management contract. In March 2020, our articles of incorporation were amended to have management goals be set based on objectives that can be accomplished during a Representative Director’s term in office.
The board of directors may conduct performance review discussions to determine if the new Representative Director performed his or her duties under the management contract, or hire a professional evaluation agency for such purpose. If the board of directors determines, based on the results of the performance review, that the new Representative Director has failed to achieve the management goals, it may propose to dismiss Representative Director at a shareholders’ meeting.
Senior Management
In addition to our inside directors who are also our executive officers, we have the following executive officers as of April 15, 2022:

Name |  | Title and Responsibilities |  | Year of Birth |
Kook-Hyun Kang |  | President, Customer Business Group |  |  | 1963 |
Jong-Ook Park |  | President, Safety and Health Office (and) Corporate Planning Group |  |  | 1962 |
Byung-Sam Park |  | Senior Executive Vice President, Ethics Office |  |  | 1966 |
Chang-Seok Seo |  | Senior Executive Vice President, Network Group |  |  | 1967 |
Jae-Ho Song |  | Senior Executive Vice President, AI/DX Convergence Business Group |  |  | 1966 |
Soo-Jung Shin |  | Senior Executive Vice President, Enterprise Business Group |  |  | 1965 |
Hyun-Yok Sheen |  | Senior Executive Vice President, Corporate Management Group |  |  | 1968 |
Sang-Don Ahn |  | Senior Executive Vice President, Legal Affairs Office |  |  | 1962 |
Jeong-Min Woo |  | Senior Executive Vice President, IT Group |  |  | 1964 |
Bong-Gyun Kim |  | Executive Vice President, Busan/Gyeongnam Regional Headquarter |  |  | 1972 |
Young-Woo Kim |  | Executive Vice President, Group Management Office |  |  | 1967 |
Young-Jin Kim |  | Executive Vice President, Financial Management Office |  |  | 1967 |
Yi-Han Kim |  | Executive Vice President, Institute of Convergence Technology |  |  | 1966 |
Chae-Hee Kim |  | Executive Vice President, Strategy and Planning Office |  |  | 1974 |
Hoon-Bae Kim |  | Executive Vice President, Media Business Unit |  |  | 1963 |
Chang-Yong Ahn |  | Executive Vice President, Daegu/Gyeongbuk Regional Headquarter |  |  | 1966 |
Chi-Yong Ahn |  | Executive Vice President, Northern Seoul/Gangwon Regional Headquarter |  |  | 1966 |
Yul-Mo Yang |  | Executive Vice President, Public Relations Office |  |  | 1967 |
Kyung-Hwa Ok |  | Executive Vice President, IT Strategy Unit |  |  | 1968 |
Kong-Hwan Lee |  | Executive Vice President, Policy Cooperation Office |  |  | 1966 |
Sun-Joo Lee |  | Executive Vice President, On External Training |  |  | 1969 |
Chang-Ho Yi |  | Executive Vice President, CEO Office |  |  | 1972 |
Hyeon-Seuk Lee |  | Executive Vice President, Chungnam/Chungbuk Regional Headquarter |  |  | 1966 |
Jong-Taek Lim |  | Executive Vice President, External Cooperation Office |  |  | 1964 |
Sang-Kwi Chang |  | Executive Vice President, Legal Affairs Department 1 |  |  | 1968 |
Jung-Soo Jung |  | Executive Vice President, Southern Seoul/Western Seoul Regional Headquarter |  |  | 1966 |
Hoon Cho |  | Executive Vice President, SCM Strategy Office |  |  | 1966 |
Jung-Yong Ji |  | Executive Vice President, Jeonnam/Jeonbuk Regional Headquarter |  |  | 1968 |
Chan-Ki Choi |  | Executive Vice President, Sales Operating Business Unit |  |  | 1966 |
Jun Koh |  | Senior Vice President, Legal Affairs P-TF |  |  | 1971 |
Gang-Bon Koo |  | Senior Vice President, Customer Business Unit |  |  | 1972 |
Jae-Hyung Koo |  | Senior Vice President, Network Research Technology Unit |  |  | 1972 |
O-Ryung Kwon |  | Senior Vice President, Group Strategic Partnership Office |  |  | 1969 |
Hye-Jin Kwon |  | Senior Vice President, Network Strategy Unit |  |  | 1971 |
Hee-Keun Kwon |  | Senior Vice President, Metropolitan Wholesale Unit |  |  | 1970 |
Kwang-Dong Kim |  | Senior Vice President, Policy Cooperation Department |  |  | 1970 |
Moo-Seong Kim |  | Senior Vice President, ESG Management & Implementation office |  |  | 1972 |
Byung-Kyun Kim |  | Senior Vice President, Device Business Unit |  |  | 1968 |
Bong-Ki Kim |  | Senior Vice President, Convergence Laboratory |  |  | 1968 |

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Name |  | Title and Responsibilities |  | Year of Birth |
Sang-Kyoon Kim |  | Senior Vice President, Management Support Office |  |  | 1970 |
Seong-Il Kim |  | Senior Vice President, Chungnam/Chungbuk Network O&M Headquarter |  |  | 1966 |
Young-Sool Kim |  | Senior Vice President, External Cooperation P-TF |  |  | 1967 |
Young-Sik Kim |  | Senior Vice President, DX Platform Business Unit |  |  | 1972 |
Young-In Kim |  | Senior Vice President, Southern Seoul/Western Seoul Network O&M Headquarter |  |  | 1968 |
Jae-Kwon Kim |  | Senior Vice President, Biz Customer Business Unit |  |  | 1968 |
Jun-Ho Kim |  | Senior Vice President, Public/Finance Customer Business Unit |  |  | 1965 |
Gil-Hyun Ryu |  | Senior Vice President, On External Training |  |  | 1968 |
Pyeong Ryu |  | Senior Vice President, Jeonnam/Jeonbuk Enterprise Customer Sales Headquarter |  |  | 1966 |
Sang-Ryong Moon |  | Senior Vice President, IT Consulting Unit |  |  | 1967 |
Sung-Uk Moon |  | Senior Vice President, Global Business Office |  |  | 1972 |
Young-Il Moon |  | Senior Vice President, Information Security Unit |  |  | 1966 |
Hye-Byung Min |  | Senior Vice President, Enterprise Service DX Unit |  |  | 1969 |
Sun-Ha Park |  | Senior Vice President, Fieldwork Supporting Unit |  |  | 1965 |
Yong-Man Park |  | Senior Vice President, Jeonnam/Jeonbuk Customer Sales Headquarter |  |  | 1965 |
Jeong-Jun Park |  | Senior Vice President, Enterprise Customer Business Unit |  |  | 1967 |
Jung-Ho Park |  | Senior Vice President, Customer DX Business Unit |  |  | 1970 |
Jong-Ho Park |  | Senior Vice President, Network Control Unit |  |  | 1964 |
Hyo-Il Park |  | Senior Vice President, Customer Experience Innovation Unit |  |  | 1970 |
Soon-Min Bae |  | Senior Vice President, AI2XL Laboratory |  |  | 1980 |
Seung-Yun Paik |  | Senior Vice President, Strategic Investment Office |  |  | 1970 |
Ki-Hong Seo |  | Senior Vice President, Daegu/Gyeongbuk Enterprise Customer Sales Headquarter |  |  | 1967 |
Young-Soo Seo |  | Senior Vice President, Network O&M Unit |  |  | 1968 |
Jeong-Hyun Seo |  | Senior Vice President, Legal Affairs Department 3 |  |  | 1971 |
Won-Je Sung |  | Senior Vice President, Southern Seoul/Western Seoul Enterprise Customer Sales Headquarter |  |  | 1972 |
Hoon-Joo Shin |  | Senior Vice President, Corporate Image Strategy P-TF |  |  | 1971 |
Jin-Ho Yang |  | Senior Vice President, Legal Affairs Department 2 |  |  | 1973 |
Jae-Min Eom |  | Senior Vice President, Busan/Gyeongnam Customer Sales Headquarter |  |  | 1965 |
Hun-Yong Oh |  | Senior Vice President, Enterprise Business Consulting & Implementation Unit 2 |  |  | 1966 |
Heung-Jae Won |  | Senior Vice President, Western Seoul Customer Sales Headquarter |  |  | 1967 |
Yong-Kyu Yoo |  | Senior Vice President, Enterprise Business Strategy Unit |  |  | 1971 |
Chang-Kyu Yoo |  | Senior Vice President, Northern Seoul/Gangwon Enterprise Customer Sales Headquarter |  |  | 1966 |
Kyeong-Mo Youn |  | Senior Vice President, SCM Strategy Department |  |  | 1969 |
Jin-Hyoun Youn |  | Senior Vice President, Media Business Unit Media R&D P-TF |  |  | 1968 |
Mi-Hee Lee |  | Senior Vice President, C-level Consulting Unit |  |  | 1970 |
Sang-Il Lee |  | Senior Vice President, Northern Seoul/Gangwon Network O&M Headquarter |  |  | 1964 |
Sang-Ho Lee |  | Senior Vice President, AI Robot Business Unit |  |  | 1975 |
Young-Jun Lee |  | Senior Vice President, Chungnam/Chungbuk Enterprise Customer Sales Headquarter |  |  | 1968 |
Young-Jin Lee |  | Senior Vice President, Group Human Resources Office |  |  | 1972 |
Yong-Gyoo Lee |  | Senior Vice President, Busan/Gyeongnam Network O&M Headquarter |  |  | 1965 |
Jong-Sik Lee |  | Senior Vice President, Infra DX Laboratory |  |  | 1972 |
Seung-Hyouk Yim |  | Senior Vice President, Digital & Bio Health Business Unit |  |  | 1970 |
Jang-Mi Lim |  | Senior Vice President, Convergence Laboratory Industry Biz 2 P-TF |  |  | 1966 |
Kil-Sung Jung |  | Senior Vice President, Corporate Strategy Department |  |  | 1974 |
Jae-Wook Jeong |  | Senior Vice President, CEO Office team 1 |  |  | 1972 |
Seong-Eun Cho |  | Senior Vice President, S/W Development Unit |  |  | 1971 |
Young-Sim Jin |  | Senior Vice President, Group HR Development Academy |  |  | 1972 |
Kang-Rim Choi |  | Senior Vice President, AI Mobility Business Unit |  |  | 1974 |
Sung-Wook Choi |  | Senior Vice President, Daegu/Gyeongbuk Customer Sales Headquarter |  |  | 1965 |
Si-Hwan Choi |  | Senior Vice President, Eastern Seoul Customer Sales Headquarter |  |  | 1967 |
Joon-Ki Choi |  | Senior Vice President, Artificial Intelligence and Big Data Business Unit |  |  | 1974 |
Ja-Kyung Hahn |  | Senior Vice President, Convergence Laboratory Industry Biz 1 P-TF |  |  | 1971 |
Suk-Zoon Huh |  | Senior Vice President, Institute of Economic and Business Research |  |  | 1967 |
Tae-Jun Heo |  | Senior Vice President, Enterprise Business Consulting and Implementation Unit |  |  | 1970 |
Sung-Pil Hong |  | Senior Vice President, Group Real Estate Unit |  |  | 1965 |

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Item 6.B. Compensation
Compensation of Directors and Executive Officers
In 2021, the aggregate compensation paid and accrued to all directors and executive officers was approximately
￦
45.3 billion and the aggregate amount set aside or accrued by us to provide pension and retirement benefits to such persons was approximately
￦
6.2 billion.
The compensation of our five highest compensated directors and executive officers who received total annual compensation exceeding
￦
500 million in 2021 was as follows:

Name |  | Position |  | Total Compensation in 2021 |  | Composition of Total Compensation
|  |  |  | (In millions of Won)
Yoon-Young Park |  | Former President |  | ￦ 2,020 |  | ￦ 74 (salary); ￦ 399 (bonus); ￦ 7 (benefits); ￦ 1,540 (severance pay)
Hyeon-Mo Ku |  | Chief Executive Officer |  | ￦ 1,522 |  | ￦ 556 (salary); ￦ 946 (bonus); ￦ 20 (benefits)
Jong-Ook Park |  | President |  | ￦ 985 |  | ￦ 454 (salary); ￦ 509 (bonus); ￦ 22 (benefits)
Soo-Jung Shin |  | Senior Executive Vice President |  | ￦ 836 |  | ￦ 378 (salary); ￦ 448 (bonus); ￦ 10 (benefits)
Hyun-Yok Sheen |  | Senior Executive Vice President |  | ￦ 810 |  | ￦ 365 (salary); ￦ 429 (bonus); ￦ 16 (benefits)

The chairperson of our board of directors enters into an employment agreement on our behalf with our Representative Director. The employment agreement sets certain management targets to be achieved by the Representative Director as determined by the Evaluation and Compensation Committee each year, including a target for the amount of “EBITDA” to be achieved in each year. EBITDA is defined as earnings before interest, tax, depreciation and amortization. Other management targets include (i) short-term operational and strategic goals centered around key performance indices and (ii) increase on a long-term basis in shareholder value measured against performance of companies listed on KOSPI and the shares of our competitors. Failure to achieve certain thresholds below the targets will allow the board of directors to take actions with respect to the Representative Director’s employment, including proposing at the shareholders’ meeting an early termination of his employment. In addition, the head of each of our functional departments, the president of each of our subsidiaries and the heads of each regional head office have entered into employment agreements with the Representative Director that provide for similar management targets to be achieved by each of our departments, subsidiaries and regional head offices.
Item 6.C. Board Practices
As of April 1, 2022, none of our inside or outside directors maintained directors’ service contracts with us or with any of our subsidiaries providing for benefits upon termination of employment.
Corporate Governance Committee
The Corporate Governance Committee is comprised of four outside directors and one inside director
Hee-Yol
Yu, Gang-Cheol Lee, Hyun-Myung Pyo, Benjamin Hong and
Kyoung-Lim
Yun. The chairperson is
Hee-Yol
Yu. The committee is responsible for the review of matters with respect to our Corporate Governance Guidelines and our performance under such guidelines to monitor effectiveness of our corporate governance. The committee is also responsible for authorization of investigation and composition of a pool of internal and external Representative Director candidates and selection of the
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Representative Director candidates, who shall be further examined by the Representative Director Candidate Examination Committee, pursuant to the examination criteria determined by our board of directors. The committee members are elected by the board after the annual meeting, and the term of the committee members is one year.
Representative Director Candidate Examination Committee
The Representative Director Candidate Examination Committee is comprised of all of our outside directors and one inside director. The committee convenes when it becomes necessary to do so, and attendees are ascertained prior to such meeting. No member of this committee shall become a candidate for the position of the Representative Director during his or her term as a member of the committee. The committee’s duties include examining the Representative Director candidates selected under the examination criteria determined by our board of directors, selecting the Representative Director candidates pursuant to such criteria and reporting to the board of directors the outcome of the examination.
Outside Director Candidate Nominating Committee
The Outside Director Candidate Nominating Committee consists of all of our outside directors and one inside director, other than for election of an outside director resulting from the expiration of the term of the office, in which case such outside director whose term is expiring cannot be a member of the committee. The committee convenes when it becomes necessary to do so, and attendees are ascertained prior to such meeting. The committee’s duties include reviewing the qualifications of potential candidates and proposing nominees to serve as outside directors on our board of directors to the shareholders at the general shareholders’ meeting. The committee members’ terms expire immediately after the adjournment of the shareholders’ meeting where the outside directors are elected.
Evaluation and Compensation Committee
The Evaluation and Compensation Committee is currently comprised of four outside directors,
Dae-You
Kim,
Hee-Yol
Yu, Hyun-Myung Pyo and Benjamin Hong. The chairperson is
Dae-You
Kim. The committee’s duties include prior review of the Representative Director’s management goals, terms and conditions proposed for inclusion in the management contract of the Representative Director, including, but not limited to, determining whether the Representative Director has achieved the management goals, and the determination of compensation for the Representative Director and the inside directors. The committee members are elected by the board after the closing of the annual meeting, and the term of the committee members is one year.
Management Committee
The Management Committee is currently comprised of
Hyeon-Mo
Ku and Kyoung-Lim Yun. The chairperson is
Hyeon-Mo
Ku. The committee’s duties include the authorization of establishment and management of branch offices, the disposal and sale of stocks of our subsidiaries, which have a market value between
￦
15 billion and
￦
30 billion, not including any sale for stocks with market value of
￦
10 billion or more that involves a change of control, making investments and providing guarantees between
￦
15 billion to
￦
30 billion, the acquisition and disposal of real estate having market value between
￦
15 billion to
￦
30 billion, and the issuance of certain debt securities.
Related-Party Transactions Committee
The Related-Party Transactions Committee is currently comprised of four outside directors, Gang-Cheol Lee,
Hee-Yol
Yu,
Chung-Gu
Kang and
Eun-Jung
Yeo. The chairperson is Gang-Cheol Lee. This committee’s duties include reviews of transactions between KT Corporation and its subsidiaries and ensures compliance with applicable antitrust laws. The committee members are elected by the board after the annual meeting, and the term of the committee members is one year.
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Sustainability Management Committee
The Sustainability Management Committee is currently comprised of four outside directors and one inside director, Hyun-Myung Pyo, Gang-Cheol Lee,
Yong-Hun
Kim, Benjamin Hong and
Kyoung-Lim
Yun. The chairperson is Hyun-Myung Pyo. The committee’s duties include reviews of sustainable management plans, the authorization of establishment of medium- and long-term sustainable management strategies, sustainable management results, regular reporting and risk management of sustainable management activities and charitable contributions. The committee members are elected by the board after the annual meeting, and the term of the committee members is one year.
Audit Committee
Under the Commercial Code of Korea and our articles of incorporation, we are required to establish an audit committee comprised of three or more outside directors and at least
two-thirds
of the Audit Committee members are required to be outside directors. Audit Committee members must also meet the applicable independence criteria set forth under the rules and regulations of the Sarbanes-Oxley Act of 2002. The committee is currently comprised of Eun-Jung Yeo, Dae-You Kim, Chung-Gu Kang and Yong-Hun Kim. The chairperson is Eun-Jung Yeo and Eun-Jung Yeo also serves as the financial expert of the Audit Committee. Members of the committee are elected by our shareholders at the shareholders’ meeting. Our internal and external auditors report directly to the committee.
The duties of the committee include:

| • |  | appointing an independent registered public accounting firm;

| • |  | approving the appointment and recommending the dismissal of the internal auditor;

| • |  | evaluating performance of the independent registered public accounting firm;

| • |  | approving services to be provided by the independent registered public accounting firm;

| • |  | reviewing annual financial statements;

| • |  | reviewing audit results and reports;

| • |  | reviewing and evaluating our system of internal controls and policies

| • |  | examining improprieties or suspected improprieties; and

| • |  | on a quarterly basis, reviewing reports on internal controls for legal compliance, including with respect to cybersecurity laws.

In addition, regarding the shareholders’ meeting, the committee may examine the agenda, financial statement and other reports to be submitted by the board of directors at each shareholders’ meeting.
Item 6.D. Employees
On a
non-consolidated
basis, we had 21,759 employees as of December 31, 2021, compared to 22,720 employees as of December 31, 2020 and 23,372 employees as of December 31, 2019.
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Labor Relations
We consider our current relations with our work force to be good. However, in the past, we have experienced opposition from our labor union for our strategy of restructuring to improve our efficiency and profitability by disposing of
non-core
businesses and reducing our employee base.
As of December 31, 2021, about 78.6% of the employees of KT Corporation were members of the KT Trade Union. On behalf of its members, the union negotiates a collective bargaining agreement with us every two years, and our current collective bargaining agreement expires on September 5, 2023. The current collective bargaining agreement provides that even in the event of a strike, the minimum number of employees necessary to operate the telecommunications business must continue to work.
The union also negotiates its members’ wages with us every year. Under the Act of the Promotion of Worker’s Participation and Cooperation, our Employee-Employer Cooperation Committees, which are composed of representatives of management and labor for each business unit and regional office, meet quarterly to discuss employee grievances, working conditions and potential employee-initiated improvements in service or management.
The Trade Union and Labor Relations Adjustment Act (“Labor Act”) allow multiple labor unions to be formed within one company. Therefore, additional labor unions may be formed by our employees. Pursuant to such amendments, our employees formed a new labor union called “KT New Union” in July 2011. The Labor Act also requires such multiple unions to consolidate themselves into a single channel when negotiating with the company on behalf of their members and to enter into a single collective bargaining agreement with the company. As a result of the recent consolidation of labor unions, KT Trade Union was selected as the bargaining representative of the labor unions. Its term as the bargaining representative expires in December 31, 2023.
Employee Stock Ownership and Benefits
We have an employee stock ownership association, which may purchase on behalf of its members up to 20.0% of any of our shares offered publicly in Korea. The employee stock ownership association owned 0.38% of our issued shares as of December 31, 2021.
In accordance with the National Pension Act of Korea, we contribute an amount equal to 4.5% of an employee’s standard monthly wages, and each employee contributes 4.5% of his or her standard monthly wages, into his or her personal pension account. Our employees, including executive officers as well as
non-executive
employees, are subject to a pension insurance system, under which we make monthly contributions to the pension accounts of the employees, and upon retirement, such employees are paid the pension amount due from their pension accounts. Prior to April 2011, our executive and non- executive employees were subject to a
lump-sum
severance payment system, under which they were entitled to receive a
lump-sum
severance payment upon termination of their employment, based on their length of service and salary level at the time of termination. Starting in April 2011, in accordance with the Korean Employee Retirement Income Security Act, we replaced such
lump-sum
severance payment system with our current pension insurance system in the form of a defined benefit plan, and also introduced a defined contribution plan in December 2012, with a total combined unfunded portion of approximately
￦
269 billion as of December 31, 2021.
Lump-sum
severance amounts previously accrued prior to our adoption of the current pension insurance system continue to remain payable. We also provide a wide range of fringe benefits to our employees, including housing, housing loans, company-provided hospitals and schools, a company-sponsored pension program, an employee welfare fund, industrial disaster insurance, cultural and athletic facilities, physical education grants, meal allowances, medical examinations and training and resort centers. See “Item 5. Operating and Financial Review and Prospects—Item 5.A. Operating Results.”
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Employee Training
The objective of our training program is to develop information technology specialists who are able to create value for our customers. In order to develop skills of our employees, we require 86 hours of training per year from most of our employees, using individually-tailored curriculums based on individual assessments. We also operate a Cyber Academy to provide online classes to our employees, as well as offer various foreign language classes to our employees. In addition, we provide tuition and living expense reimbursements to our high potential employees who pursue graduate programs in Korea and abroad, as well as provide financial assistance to those who pursue
work-related
professional licenses or participate in after-work study programs.
Item 6.E. Share Ownership
Ordinary Shares
The persons who currently serve as our directors or executive officers held, as a group, 400,824 ordinary shares as of April 2, 2022. The table below shows the ownership of our ordinary shares by our directors and executive officers:

Shareholders |  | Number of Ordinary Shares Owned |
Hyeon-Mo Ku |  |  | 30,134 |
Kyung-Lim Yun |  |  | 1,100 |
Gang-Cheol Lee |  |  | 1,486 |
Dae-You Kim |  |  | 1,486 |
Hee-Yol Yu |  |  | 1,015 |
Hyun-Myung Pyo |  |  | 11,227 |
Chung-Gu Kang |  |  | 543 |
Eun-Jung Yeo |  |  | 543 |
Kook-Hyun Kang |  |  | 11,588 |
Jong-Ook Park |  |  | 14,197 |
Byung-Sam Park |  |  | 10,681 |
Chang-Seok Seo |  |  | 11,977 |
Jae-Ho Song |  |  | 10,208 |
Soo-Jung Shin |  |  | 10,124 |
Hyun-Yok Sheen |  |  | 10,837 |
Sang-Don Ahn |  |  | 3,165 |
Bong-Gyun Kim |  |  | 6,346 |
Young-Woo Kim |  |  | 4,737 |
Young-Jin Kim |  |  | 7,843 |
Yi-Han Kim |  |  | 6,286 |
Chae-Hee Kim |  |  | 4,791 |
Hoon-Bae Kim |  |  | 4,424 |
Chang-Yong Ahn |  |  | 5,743 |
Chi-Yong Ahn |  |  | 9,165 |
Yul-Mo Yang |  |  | 5,777 |
Kyung-Hwa Ok |  |  | 5,447 |
Kong-Hwan Lee |  |  | 1,905 |
Sun-Joo Lee |  |  | 4,725 |
Chang-Ho Yi |  |  | 4,797 |
Hyeon-Seuk Lee |  |  | 8,125 |
Jong-Taek Lim |  |  | 6,740 |
Sang-Kwi Chang |  |  | 8,444 |
Jung-Soo Jung |  |  | 5,589 |
Hoon Cho |  |  | 2,500 |
Jung-Yong Ji |  |  | 8,874 |
Chan-Ki Choi |  |  | 8,397 |
Jun Koh |  |  | 81 |

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Shareholders |  | Number of Ordinary Shares Owned |
Gang-Bon Koo |  |  | 3,214 |
Jae-Hyung Koo |  |  | 95 |
O-Ryung Kwon |  |  | 36 |
Hye-Jin Kwon |  |  | 1,392 |
Hee-Keun Kwon |  |  | 127 |
Kwang-Dong Kim |  |  | 875 |
Moo-Seong Kim |  |  | 3,194 |
Byung-Kyun Kim |  |  | 3,467 |
Bong-Ki Kim |  |  | 3,699 |
Sang-Kyoon Kim |  |  | 3,134 |
Seong-Il Kim |  |  | 1,110 |
Young-Sool Kim |  |  | 81 |
Young-Sik Kim |  |  | 16 |
Young-In Kim |  |  | 2,876 |
Jae-Kwon Kim |  |  | 4,251 |
Jun-Ho Kim |  |  | 1,657 |
Gil-Hyun Ryu |  |  | 450 |
Pyeong Ryu |  |  | 9,803 |
Sang-Ryong Moon |  |  | 102 |
Sung-Uk Moon |  |  | 3,872 |
Young-Il Moon |  |  | 4,322 |
Hye-Byung Min |  |  | 5,143 |
Sun-Ha Park |  |  | 46 |
Yong-Man Park |  |  | 4,925 |
Jeong-Jun Park |  |  | 3,772 |
Jung-Ho Park |  |  | 234 |
Jong-Ho Park |  |  | 2,985 |
Hyo-Il Park |  |  | 5,155 |
Soon-Min Bae |  |  | 4,804 |
Seung-Yun Paik |  |  | 2,079 |
Ki-Hong Seo |  |  | 81 |
Young-Soo Seo |  |  | 5,746 |
Won-Je Sung |  |  | 81 |
Hoon-Joo Shin |  |  | 1,047 |
Jin-Ho Yang |  |  | 3,036 |
Jae-Min Eom |  |  | 2,066 |
Hun-Yong Oh |  |  | 7,268 |
Heung-Jae Won |  |  | 4,681 |
Yong-Kyu Yoo |  |  | 3,951 |
Chang-Kyu Yoo |  |  | 5,299 |
Kyeong-Mo Youn |  |  | 46 |
Jin-Hyoun Youn |  |  | 94 |
Mi-Hee Lee |  |  | 4,002 |
Sang-Il Lee |  |  | 1,913 |
Young-Jun Lee |  |  | 81 |
Young-Jin Lee |  |  | 81 |
Yong-Gyoo Lee |  |  | 4,171 |
Jong-Sik Lee |  |  | 2,754 |
Seung-Hyouk Yim |  |  | 3,131 |
Jang-Mi Lim |  |  | 1,151 |
Kil-Sung Jung |  |  | 91 |
Jae-Wook Jeong |  |  | 5,482 |
Seong-Eun Cho |  |  | 2,345 |
Young-Sim Jin |  |  | 595 |
Kang-Rim Choi |  |  | 2,952 |
Sung-Wook Choi |  |  | 2,150 |
Si-Hwan Choi |  |  | 2,100 |
Joon-Ki Choi |  |  | 1,101 |
Ja-Kyung Hahn |  |  | 1,486 |
Suk-Zoon Huh |  |  | 1,590 |
Tae-Jun Heo |  |  | 81 |
Sung-Pil Hong |  |  | 2,208 |
|  |  | 400,824 |

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Stock Options
We have not granted any stock options to our current directors and executive officers.
Item 7. Major Shareholders and Related Party Transactions
Item 7.A. Major Shareholders
The following table sets forth certain information relating to the shareholders of our ordinary shares as of December 31, 2021:

Shareholders |  | Number of Shares |  |  | Percent of Total Shares Issued |
National Pension Corporation |  |  | 33,098,617 |  |  |  | 12.68 | %
NTT DOCOMO, Inc. (1) |  |  | 14,257,813 |  |  |  | 5.46 | %
Silchester International Investors LLP |  |  | 13,588,760 |  |  |  | 5.20 | %
Employee stock ownership association |  |  | 993,785 |  |  |  | 0.38 | %
Directors as a group |  |  | 73,777 |  |  |  | 0.03 | %
Public |  |  | 173,795,394 |  |  |  | 66.56 | %
KT Corporation (held in the form of treasury stock) |  |  | 25,303,662 |  |  |  | 9.69 | %
Total issued shares |  |  | 261,111,808 |  |  |  | 100.00 | %

(1) | In January 2022, NTT DOCOMO, Inc. sold all of its equity interest in us to Shinhan Financial Group Co., Ltd.

Item 7.B. Related Party Transactions
We have engaged in various transactions with our subsidiaries and affiliated companies. See Note 36 of the notes to the Consolidated Financial Statements. We have not issued any guarantees in favor of our consolidated subsidiaries.
Item 7.C. Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
Item 8.A. Consolidated Statements and Other Financial Information
See “Item 18. Financial Statements” and pages
F-1
through
F-118.
Legal Proceedings
In 2010, we entered into a contract with Enspert, Co., Ltd.(“Enspert”), a consumer electronics manufacturer, to purchase approximately 200,000 tablet PCs. Due to defects with the tablet PCs, we cancelled our contract and the outstanding order for approximately 170,000 tablet PCs, for which we would have paid approximately
￦
51 billion. In June 2014, the Korea Fair Trade Commission imposed a penalty surcharge of approximately
￦
2 billion on us, finding that we cancelled our contract with Enspert without cause. We appealed such decision but the decision was confirmed by the Seoul High Court and the Supreme Court in May 2016 and September 2016, respectively. In April 2017, Enspert filed a lawsuit against us at the Seoul Central Court, alleging damages of approximately
￦
94 billion caused by our cancellation of the contract between Enspert and us for the tablet PCs and specifying a claim amount of
￦
47 billion, which amount was subsequently increased by Enspert to
￦
141 billion in
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July 2019. In February 2020, the Seoul Central Court ruled in favor of Enspert, entitling it to recovery of damages of approximately
￦
6.7 billion. Both parties appealed the ruling, and in January 2022, the Seoul High Court ruled in favor of Enspert for recovery of damages of approximately
￦
9.0 billion. Both parties appealed the ruling (Enspert appealing to seek
￦
250 billion in damages), and we intend to vigorously defend against such lawsuit.
In April 2019, the Korea Fair Trade Commission determined that we, LG U+, SK Broadband and Sejong Telecom colluded in numerous biddings held by public institutions, including the Public Procurement Service and the Korea Racing Authority, between April 2015 to June 2017 for the engagement of telecommunications companies to provide dedicated fixed-line services, in violation of the Monopoly Regulation and Fair Trade Act, and issued an order to cease and desist, imposed a penalty surcharge of
￦
5.7 billion on us and filed a criminal complaint against us, which trial is in progress at the Seoul Central Court.
In April, June and September 2021, 555 of our subscribers filed class action lawsuits claiming damages totaling
￦
0.5 billion alleging poor service quality of our 5G mobile services. There can be no assurance that such class action lawsuits may not result in additional subscribers making similar claims in the future. We intend to vigorously defend against such class action lawsuits.
For a description of our additional legal proceedings, see “Item 3. Key Information—Item 3.D. Risk Factors—Legal cases involving our charitable or political donations and other incidents and allegations, including matters connected to a scandal involving
Ms. Soon-sil
Choi, a confidante of former President
Geun-hye
Park, could have a material adverse effect on our business, reputation and stock price.”
As of December 31, 2021, we have established provisions relating to litigation proceedings of
￦
80 billion.
See Notes 17 and 20 of the notes to the Consolidated Financial Statements.
Dividends
The table below sets out the annual dividends declared on the outstanding ordinary shares to shareholders of record on December 31 of the years indicated and the interim dividends declared on the outstanding ordinary shares to shareholders of record on June 30 of the years indicated:

Year |  | Annual Dividend per Ordinary Share |  |  | Interim Dividend per Ordinary Share |  |  | Average Total Dividend per Ordinary Share |
|  | (In Won) |  |  | (In Won) |  |  | (In Won) |
2017 |  | ￦ | 1,000 |  |  |  | — |  |  | ￦ | 1,000 |
2018 |  |  | 1,100 |  |  |  | — |  |  |  | 1,100 |
2019 |  |  | 1,100 |  |  |  | — |  |  |  | 1,100 |
2020 |  |  | 1,350 |  |  |  | — |  |  |  | 1,350 |
2021 |  |  | 1,910 |  |  |  | — |  |  |  | 1,910 |

If sufficient profits are available, the board of directors may propose annual dividends on the outstanding ordinary shares, which our shareholders must approve by a resolution at the ordinary general meeting of shareholders. This meeting is generally held in March of the following year and if our shareholders at such ordinary general meeting of shareholders approve the annual dividend, we must pay such dividend within one month following the date of such resolution. Typically, we pay such dividends shortly after the meeting. The declaration of annual dividends is subject to the vote of our shareholders, and consequently, there can be no assurance as to the amount of dividends per ordinary share or that any such dividends will be declared. Interim dividends paid in cash can be declared by a resolution of the board of directors. See “Item 10. Additional Information—Item 10.B. Memorandum and Articles of Association—Dividends” and “Item 12. Description of Securities Other than Equity Securities—Item 12.D. American Depositary Shares.”
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The Commercial Code provides that shares of a company of the same class must receive equal treatment. However, major shareholders may consent to receive dividend distributions at a lesser rate than minor shareholders.
Any cash dividends relating to the shares held in the form of ADSs will be paid to the depositary bank in Won. The deposit agreement provides that, except in certain circumstances, cash dividends received by the depositary bank will be converted by the depositary bank into Dollars and distributed to the holders of the ADRs, less withholding tax, other governmental charges and the depositary bank’s fees and expenses. See “Item 12. Description of Securities Other than Equity Securities—Item 12.D. American Depositary Shares.”
Item 8.B. Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
Item 9. The Offer and Listing
Item 9.A. Offer and Listing Details
Market Price Information
Ordinary Shares
Our shares were listed on the KRX KOSPI Market on December 23, 1998 under the securities identification code “030200.”
ADSs
The outstanding ADSs, each of which represents
one-half
of one share of our ordinary share, have been traded on the New York Stock Exchange under the ticker symbol “KT” since May 25, 1999.
Item 9.B. Plan of Distribution
Not applicable.
Item 9.C. Markets
Please refer to “Item 9.A. Offering and Listing Details.”
Item 9.D. Selling Shareholders
Not applicable.
Item 9.E. Dilution
Not applicable.
Item 9.F. Expenses of the Issuer
Not applicable.
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Item 10. Additional Information
Item 10.A. Share Capital
Currently, our authorized share capital is 1,000,000,000 shares, which consists of ordinary shares, par value
￦
5,000 per share (“Ordinary Shares”) and shares of
non-voting
preferred stock, par value
￦
5,000 per share
(“Non-Voting
Shares”). Ordinary Shares and
Non-Voting
Shares together are referred to as “Shares.” Under our articles of incorporation, we are authorized to issue
Non-Voting
Shares up to
one-fourth
of our total issued share capital. As of December 31, 2021, 261,111,808 Ordinary Shares were issued, of which 25,303,662 shares were held by the treasury stock fund or us as treasury shares. We have never issued any
Non-Voting
Shares. All of the issued Ordinary Shares are fully-paid and
non-assessable
and are in registered form.
Item 10.B. Memorandum and Articles of Association
Under Article 2 of our articles of incorporation, the primary purpose of KT Corporation is to engage in, including but not limited to, the integrated telecommunications business, the new media and internet multimedia broadcasting business, the development and sale of media contents and software, the sale of telecommunications devices, the testing and inspection of telecommunications equipment, the telemarketing business and financial data services. This section provides information relating to our share capital, including brief summaries of material provisions of our articles of incorporation, the FSCMA, the Commercial Code and related laws of Korea, all as currently in effect. The following summaries are subject to, and are qualified in their entirety by reference to, our articles of incorporation and the applicable provisions of the FSCMA and the Commercial Code. We have filed a copy of our articles of incorporation as an exhibit to registration statements under the Securities Act or annual reports under the Securities Exchange Act previously filed by us.
Directors
A director is prohibited from voting on a proposal, arrangement or contract in which the director has an interest. Director compensation is determined based on the standards and methods of compensation as determined by the board of directors and reviewed by the Compensation Committee, which consists of four independent directors, and approved by the board of directors in accordance with our articles of incorporation. See “Item 6.B. Compensation—Compensation of Directors.” Directors appointed at the general shareholders meeting may not be beneficiaries nor participants of the employee welfare fund, which includes borrowings. There is no explicit age limit relating to a director’s retirement or
non-retirement,
and there is no number of shares required for purposes of determining a director’s qualifications.
Dividends
We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. No dividends are distributed with respect to shares held by us or our treasury stock fund. The Ordinary Shares represented by the ADSs have the same dividend rights as other outstanding Ordinary Shares.
Holders of
Non-Voting
Shares are entitled to receive dividends in priority to the holders of Ordinary Shares in an amount of not less than 9% of the par value of the
Non-Voting
Shares as determined by the board of directors at the time of their issuance, provided that if the dividends on the Ordinary Shares exceed those on the
Non-Voting
Shares, the
Non-Voting
Shares will also participate in the distribution of such excess dividend amount in the same proportion as the Ordinary Shares. If the amount available for dividends is less than the aggregate amount of such minimum dividend, the holders of
Non-Voting
Shares will be entitled to receive such accumulated unpaid dividend in priority to the holders of Ordinary Shares from the dividends payable in respect of the next fiscal year.
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We declare dividends annually at the annual general meeting of shareholders which is held within three months after December 31 of each year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record as December 31 of the preceding year. We may distribute the annual dividend in cash or in Shares. However, a dividend of Shares must be distributed at par value. If the market price of the Shares is less than their par value, dividends in Shares may not exceed
one-half
of the annual dividend. We may pay interim dividends in cash once a year to shareholders or registered pledgees who are registered in the registry of shareholders as of June 30 of each fiscal year by a resolution of the board of directors. We have no obligation to pay any annual dividend unclaimed for five years from the payment date.
Under the Commercial Code, we may pay our dividend only out of the excess of our net assets, on a
non-consolidated
basis, over the sum of (1) our stated capital and (2) the total amount of our capital surplus reserve and earned surplus reserve (the “Legal Reserve”) accumulated up to the end of the relevant dividend period. In addition, we may not pay any dividend unless we have set aside as earned surplus reserve an amount equal to at least 10% of the cash portion of the dividend or unless we have accumulated an earned surplus reserve of not less than
one-half
of our stated capital. We may not use the Legal Reserve to pay cash dividends but may transfer amounts from the Legal Reserve to share capital or use the Legal Reserve to reduce an accumulated deficit.
Distribution of Free Shares
In addition to paying dividends in Shares out of our retained or current earnings, we may also distribute to our shareholders an amount transferred from the Legal Reserve to our stated capital in the form of free shares. We must distribute such free shares to all our shareholders in proportion to their existing shareholdings.
Preemptive Rights and Issuance of Additional Shares
We may issue authorized but unissued shares at times and, unless otherwise provided in the Commercial Code, on terms our board of directors may determine. Subject to the limitation described in “Limitation on Shareholdings” below, all our shareholders are generally entitled to subscribe for any newly issued Shares in proportion to their existing shareholdings. We must offer new Shares on uniform terms to all shareholders who have preemptive rights and are listed on our shareholders’ register as of the relevant record date. Under the Commercial Code, we may vary, without shareholders’ approval, the terms of these preemptive rights for different classes of shares. We must give notice to all persons who are entitled to exercise preemptive rights regarding new Shares and their transferability at least two weeks before the relevant record date. Our board of directors may determine how to distribute Shares for which preemptive rights have not been exercised or where fractions of Shares occur.
Under the Commercial Code, it is required that the new Shares, convertible bonds or bonds with warrants be issued to persons other than the existing shareholders solely for the purpose of achieving managerial objectives. Under our articles of incorporation, we may issue new Shares pursuant to a board resolution to persons other than existing shareholders, who in these circumstances will not have preemptive rights, if the new Shares are:

| • |  | publicly offered pursuant to Articles 4 and 119 of the FSCMA;

| • |  | issued to members of our employee stock ownership association;

| • |  | represented by depositary receipts;

| • |  | issued upon exercise of stock options granted to our officers and employees;

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| • |  | issued through an offering to public investors pursuant to Article 165-6 of the FSCMA, the amount of which is no more than 10% of the issued Shares;

| • |  | issued in order to satisfy specific needs such as strategic alliance, inducement of foreign funds or new technology, improvement of financial structure or other capital raising requirement; or

| • |  | issued to domestic or foreign financial institutions when necessary for raising funds in emergency cases.

In addition, we may issue convertible bonds or bonds with warrants, each up to an aggregate principal amount of
￦
2,000 billion, to persons other than existing shareholders in the situations described above.
Members of our employee stock ownership association, whether or not they are our shareholders, generally have a preemptive right to subscribe for up to 20.0% of the Shares publicly offered pursuant to the FSCMA. This right is exercisable only to the extent that the total number of Shares so acquired and held by members of our employee stock ownership association does not then exceed 20.0% of the total number of Shares then issued (including in such total both: (i) all issued and outstanding Shares at the time the preemptive rights are exercised; and (ii) all Shares to be newly issued in the applicable share issuance transaction in connection with which such preemptive rights are exercised). As of December 31, 2021, 0.38% of the issued Shares were held by members of our employee stock ownership association.
Limitations on Shareholding
The Telecommunications Business Act permits maximum aggregate foreign shareholding in us to be 49.0% of our total issued and outstanding Shares with voting rights (including equivalent securities with voting rights, e.g., depositary certificates and certain other equity interests). For the purposes of the foregoing, a shareholder is a “foreign shareholder” if such shareholder is: (1) a foreign person; (2) a foreign government; or (3) a company whose largest shareholder is a foreign person (including any “specially related persons” as determined under the FSCMA) or a foreign government, in circumstances where (i) such foreign person or foreign government holds, in aggregate, 15.0% or more of such company’s total voting shares, and (ii) such company holds at least 1.0% of our total issued and outstanding Shares with voting rights. For the avoidance of doubt, both of conditions (i) and (ii) in the foregoing item (3) must exist for such a company to be counted as a “foreign shareholder” for the purposes of calculating whether the 49.0% foreign shareholding threshold is reached under the Telecommunications Business Act. In addition, the Telecommunications Business Act prohibits a foreign shareholder from being our largest shareholder if such shareholder owns 5.0% or more of our Shares with voting rights. For the purposes of this restriction, any two or more foreign persons or foreign governments who enter into an agreement to act in concert in the exercise of their voting rights will be counted together and prohibited from becoming our largest shareholder in the event that they collectively hold 5.0% or more of our Shares. For the purposes of this restriction under the Foreign Investment Promotion Act, a “foreign shareholder” is defined in the same manner as described above with respect to the foreign shareholding restriction under the Telecommunications Business Act, provided, however, that no exception is made under the Foreign Investment Promotion Act regulations for companies that own less than 1.0% of our Shares (see item (3)(ii) above in this paragraph). A foreigner who has acquired the Shares in excess of such ceiling described above may not exercise its voting rights for shares in excess of such limitation, and the MSIT may require corrective measures to comply with the ownership restrictions.
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General Meeting of Shareholders
We hold the annual general meeting of shareholders within three months after December 31 of each year. Subject to a board resolution or court approval, we may hold an extraordinary general meeting of shareholders:

| • |  | as necessary;

| • |  | at the request of shareholders of an aggregate of 3.0% or more of our issued Ordinary Shares;

| • |  | at the request of shareholders holding an aggregate of 1.5% or more of our issued Shares for at least six months; or

| • |  | at the request of our Audit Committee.

We must give shareholders written notice setting out the date, place and agenda of the meeting at least two weeks before the date of the general meeting of shareholders. However, for holders of less than 1.0% of the total number of issued and outstanding Ordinary Shares, we may give notice by placing at least two public notices in at least two daily newspapers at least two weeks in advance of the meeting. Currently, we use Seoul Shinmun, Maeil Business Newspaper and The Korea Economic Daily published in Seoul for this purpose. Shareholders not on the shareholders’ register as of the record date are not entitled to receive notice of the general meeting of shareholders or attend or vote at the meeting. Holders of
Non-Voting
Shares are not entitled to receive notice of general meetings of shareholders, but may attend such meetings.
Our general meetings of shareholders are held at our office in Seoul, or if necessary, may be held elsewhere.
Voting Rights
Holders of our Ordinary Shares are entitled to one vote for each Ordinary Share, except that voting rights of Ordinary Shares held by us, or by a corporate shareholder that is more than 10.0% owned by us either directly or indirectly, may not be exercised. The Commercial Code permits cumulative voting, under which voting method each shareholder has multiple voting rights corresponding to the number of directors to be appointed in the voting and may exercise all voting rights cumulatively to elect one director. Our articles of incorporation permit cumulative voting at our shareholders’ meeting. Under the Commercial Code of Korea, any shareholder holding shares equivalent to not less than 1/100 of the total number of shares issued may apply to us for selecting and appointing such directors by cumulative voting.
Our shareholders may adopt resolutions at a general meeting by an affirmative majority vote of the voting shares present or represented at the meeting, where the affirmative votes also represent at least
one-fourth
of our total voting shares then outstanding, except that where voting rights can be exercised electronically, members of the Audit Committee may be elected by an affirmative majority vote of the voting shares present at the meeting. In addition, under the Commercial Code and our articles of incorporation, the following matters, among others, require approval by the holders of at least
two-thirds
of the voting shares present or represented at a meeting, where the affirmative votes also represent at least
one-third
of our total voting shares then outstanding:

| • |  | amending our articles of incorporation;

| • |  | removing a director;

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| • |  | reduction of our share capital;

| • |  | effecting any dissolution, merger or consolidation of us;

| • |  | transferring the whole or any significant part of our business;

| • |  | effecting our acquisition of all of the business of any other company or our acquisition of a part of the business of any other company which will significantly affect our business; or

| • |  | issuing any new Shares at a price lower than their par value.

In general, holders of
Non-Voting
Shares are not entitled to vote on any resolution or receive notice of any general meeting of shareholders. However, in the case of amendments to our articles of incorporation, any merger or consolidation of us, or in some other cases that affect the rights or interests of the
Non-Voting
Shares, approval of the holders of
Non-Voting
Shares is required. We may obtain such approval by a resolution of holders of at least
two-thirds
of the
Non-Voting
Shares present or represented at a class meeting of the holders of
Non-Voting
Shares, where the affirmative votes also represent at least
one-third
of our total outstanding
Non-Voting
Shares.
Shareholders may exercise their voting rights by proxy. The proxy must present a document evidencing an appropriate power of attorney prior to the start of the general meeting of shareholders. Additionally, shareholders may exercise their voting rights in absentia by submission of signed
write-in
voting forms. To make it possible for our shareholders to proceed with voting on a
write-in
basis, we are required to attach the appropriate
write-in
voting form and related informational material to the notices distributed to shareholders for convening the relevant general meeting of shareholders. Any of our shareholders who desire to vote on such
write-in
basis must submit their completed and signed
write-in
voting forms to us no later than one day prior to the date that the relevant general meeting of shareholders is convened.
Holders of ADRs exercise their voting rights through the ADR depositary, an agent of which is the record holder of the underlying Ordinary Shares. Subject to the provisions of the deposit agreement, ADR holders are entitled to instruct the ADR depositary how to vote the Ordinary Shares underlying their ADSs.
Appraisal Rights of Dissenting Shareholders
In some limited circumstances, including the transfer of the whole or any significant part of our business and our merger or consolidation with another company, dissenting shareholders have the right to require us to purchase their Shares. To exercise this right, shareholders must submit to us a written notice of their intention to dissent before the general meeting of shareholders. Within 20 days after the relevant resolution is passed at a meeting, the dissenting shareholders must request us in writing to purchase their Shares. We are obligated to purchase the Shares of dissenting shareholders within one month after the expiration of the
20-day
period. The purchase price for the Shares is required to be determined through negotiation between the dissenting shareholders and us. If we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily Share prices on the KRX KOSPI Market for the
two-month
period before the date of the adoption of the relevant board resolution, (2) the weighted average of the daily Share price on the KRX KOSPI Market for the one month period before the date of the adoption of the relevant board resolution and (3) the weighted average of the daily Share price on the KRX KOSPI Market for the one week period before the date of the adoption of the relevant board resolution. However, if we or any of the dissenting shareholders do not accept the purchase price calculated using the above method, the rejecting party may request the court to determine the purchase price. Holders of ADSs will not be able to exercise appraisal rights unless they have withdrawn the underlying ordinary shares and become our direct shareholders.
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Register of Shareholders and Record Dates
Our account management institution, Kookmin Bank, maintains the electronic register of our shareholders at its office in Seoul, Korea. Our account management institution effects transfers of Shares on the electronic register of shareholders only upon the electronic registration of such transfers pursuant to the Act on Electronic Registration of Stocks, Bonds, Etc. of Korea (the “Electronic Registration Act”).
The record date is December 31. Further, we may set a record date for the purpose of determining the shareholders entitled to rights pertaining to the Shares, and we must announce such record date at least two weeks prior to such record date. The trading of Shares and the delivery of share certificates may continue while the register of shareholders is closed.
Annual Reports
At least one week before the annual general meeting of shareholders, we must make our annual report and audited consolidated financial statements available for inspection at our principal office and at all of our branch offices. In addition, copies of annual reports, the audited consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.
Under the FSCMA, we must file with the Financial Services Commission and the KRX KOSPI Market (1) an annual report within 90 days after the end of our fiscal year and (2) interim reports with respect to the three month period, six month period and nine month period from the beginning of each fiscal year within 45 calendar days following the end of each period. Copies of these reports are or will be available for public inspection at the Financial Services Commission and the KRX KOSPI Market.
Transfer of Shares
Under the Electronic Registration Act, the transfer of Shares is effected by the electronic registration of such transfers on an electronic registry pursuant to the Electronic Registration Act, under which the electronic registration of stocks, bonds and transfers thereof will be required. To assert shareholders’ rights against us, the transferee must have his name and address registered on our electronic register of shareholders. For this purpose, a shareholder is required to apply for electronic registration of transfer between accounts. The above requirements do not apply to the holders of ADSs.
Under current Korean regulations, Korean securities companies and banks, including licensed branches of
non-Korean
securities companies and banks, investment management companies, futures trading companies, internationally recognized foreign custodians and the Korea Securities Depository may act as agents and provide related services for foreign shareholders. Certain foreign exchange controls and securities regulations apply to the transfer of Shares by
non-residents
or
non-Koreans.
See “Item 10. Additional Information—Item 10.D. Exchange Controls.”
Our account management institution is Kookmin Bank, located at 26,
Gukjegeumyung-ro
8-gil,
Yeongdeungpo-gu,
Seoul, Korea.
Acquisition of Shares by Us
Under the Commercial Code, we may acquire our own Shares by (i) purchasing on the KRX KOSPI Market, or (ii) purchasing from shareholders on a pro rata basis in accordance with the number of shares held by each shareholder. The aggregate purchase price for the Shares may not exceed the total amount available for distribution of dividends at the end of the preceding fiscal year. Moreover, we must acquire our own Shares from dissenting shareholders who exercise their appraisal rights.
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Under the FSCMA, we may acquire Shares only by (i) purchasing on the KRX KOSPI Market, (ii) purchasing from shareholders on a pro rata basis in accordance with the number of shares held by each shareholder, or (iii) receiving Shares returned to us upon the cancellation or termination of a trust agreement with a trustee who acquired the Shares by either of the methods indicated above. The aggregate purchase price for the Shares may not exceed the total amount available for distribution of dividends at the end of the preceding fiscal year.
In general, corporate entities in which we own a 50.0% or more equity interest may not acquire our Shares.
As of December 31, 2021, there were 25,303,662 treasury shares including shares held by our treasury stock fund.
Liquidation Rights
In the event of our liquidation, after payment of all debts, liquidation expenses and taxes, our remaining assets will be distributed among shareholders in proportion to their shareholdings. Holders of
Non-Voting
Shares have no preference in liquidation.
Item 10.C. Material Contracts
None.
Item 10.D. Exchange Controls
General
The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree (collectively the “Foreign Exchange Transaction Laws”) regulate investment in Korean securities by
non-residents
and issuance of securities outside Korea by Korean companies. Under the Foreign Exchange Transaction Laws,
non-residents
may invest in Korean securities only in compliance with the provisions of, and to the extent specifically allowed by, these laws or otherwise permitted by the MOEF. The Financial Services Commission has also adopted, pursuant to its authority under the FSCMA, regulations that control investment by foreigners in Korean securities and regulate the issuance of securities outside Korea by Korean companies.
Under the Foreign Exchange Transaction Laws, if the Government deems that certain emergency circumstances, including, but not limited to, the outbreak of natural calamities, wars or grave and sudden changes in domestic or foreign economies, are likely to occur, the MOEF may temporarily suspend the transactions where Foreign Exchange Transaction Laws are applicable, or impose an obligation to deposit or sell capital to certain Korean governmental agencies or financial institutions. In addition, if the Government deems that it is confronted or is likely to be confronted with serious difficulty in movement of capital between Korea and abroad which will bring serious obstacles in carrying out its currency policies, exchange rate policies and other macroeconomic policies, the MOEF may take measures to require any person who performs transactions to deposit such capital to certain Korean governmental agencies or financial institutions.
Government Review of Issuance of ADSs
In order for us to issue shares represented by ADSs, we are required to file a prior report of the issuance with the MOEF if our securities and borrowings denominated in foreign currencies issued during the
one-year
period preceding such filing date exceed US$30 million in aggregate. No further Korean governmental approval is necessary for the initial offering and issuance of the ADSs.
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Under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us or with the consent of us for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary bank at the time of such proposed deposit. We can give no assurance that we would grant our consent, if our consent is required. Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs.
Reporting Requirements for Holders of Substantial Interests
Any person whose direct or beneficial ownership of shares, whether in the form of shares or ADSs, certificates representing the rights to subscribe for Shares and equity-related debt securities including convertible bonds and bonds with warrants (collectively, the “Equity Securities”) together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with the person accounts for 5.0% or more of the total issued Equity Securities is required to report the status of the holdings to the Financial Services Commission and the KRX KOSPI Market within five business days after reaching the 5.0% ownership interest. In addition, any change in the ownership interest subsequent to the report which equals or exceeds 1.0% of the total issued Equity Securities is required to be reported to the Financial Services Commission and the KRX KOSPI Market within five business days from the date of the change. The required information to be included in the 5.0% report may be different if the acquisition of such shareholding interest is for the purpose of exercising influence over the management, as opposed to an acquisition for investment purposes. Any person reporting the holding of 5.0% or more of the total issued Equity Securities and any person reporting the change in the ownership interest which equals or exceeds 1.0% of the total issued Equity Securities pursuant to the requirements described above must also deliver a copy of such reports to us.
Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment and may result in a loss of voting rights with respect to the unreported ownership of Equity Securities exceeding 5.0%. Furthermore, the Financial Services Commission may issue an order to dispose of
non-reported
Equity Securities.
Restrictions Applicable to ADSs
No Korean governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares underlying ADSs and the delivery inside Korea of shares in connection with the withdrawal, provided that a foreigner who intends to acquire the shares must obtain an investment registration certificate from the Financial Supervisory Service as described below. In general, the acquisition of the shares by a foreigner must be reported by the foreigner or his standing proxy in Korea immediately to the Governor of the Financial Supervisory Service; provided, however, that in cases where a foreigner acquires shares through the exercise of rights as a holder of ADSs (or other depositary certificates), the foreigner must cause such report to the Governor of the Financial Supervisory Service to be filed by the Korea Securities Depository.
Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares without any further governmental approval.
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Restrictions Applicable to Shares
As a result of amendments to the Foreign Exchange Transaction Laws and Financial Services Commission regulations adopted in connection with the stock market opening from January 1992, which we refer to collectively as the Investment Rules, foreigners may invest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRX KOSPI Market or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRX KOSPI Market or the KRX KOSDAQ Market only through the KRX KOSPI Market or the KRX KOSDAQ Market, except in limited circumstances, including:

| • |  | odd-lot trading of shares;

| • |  | acquisition of shares (“Converted Shares”) by exercise of warrant, conversion right under convertible bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company;

| • |  | acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends;

| • |  | over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded;

| • |  | shares acquired by foreign direct investment as defined in the Foreign Investment Promotion Act;

| • |  | disposal of shares pursuant to the exercise of appraisal rights of dissenting shareholders;

| • |  | disposal of shares in connection with a tender offer;

| • |  | acquisition of shares by a foreign depositary in connection with the issuance of depositary receipts;

| • |  | acquisition and disposal of shares through overseas stock exchange market if such shares are simultaneously listed on the KRX KOSPI Market or the KRX KOSDAQ Market and such overseas stock exchange;

| • |  | acquisition and disposal of shares through alternative trading systems (ATS);

| • |  | arm’s length transactions between foreigners, if all of such foreigners belong to an investment group managed by the same person.

For
over-the-counter
transactions of shares between foreigners outside the KRX KOSPI Market or the KRX KOSDAQ Market for shares with respect to which the limit on aggregate foreign ownership has been reached or exceeded, an investment broker licensed in Korea must act as an intermediary.
Odd-lot
trading of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market must involve a licensed investment trader in Korea as the other party. Foreign investors are prohibited from engaging in margin transactions through borrowing shares from a securities company with respect to shares which are subject to a foreign ownership limit.
The Investment Rules require a foreign investor who wishes to invest in shares on the KRX KOSPI Market or the KRX KOSDAQ Market (including Converted Shares) to register its identity with
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the Financial Supervisory Service prior to making any such investment; however, the registration requirement does not apply to foreign investors who acquire Converted Shares with the intention of selling such Converted Shares within three months from the date of acquisition of the Converted Shares or who acquire the shares in an
over-the-counter
transaction or dispose of shares where such acquisition or disposal is a foreign direct investment as defined in the Foreign Investment Promotion Act. Upon registration, the Financial Supervisory Service will issue to the foreign investor an investment registration certificate that must be presented each time the foreign investor opens a brokerage account with a financial investment business entity. Foreigners eligible to obtain an investment registration certificate include foreign nationals who are individuals residing abroad for more than six months, foreign governments, foreign municipal authorities, foreign public institutions, corporations incorporated under foreign laws, international organizations, funds and associations as defined under the FSCMA. All Korean offices of a foreign corporation as a group are treated as a separate entity from the offices of the corporation outside Korea. However, a foreign corporation or depositary bank issuing depositary receipts may obtain one or more investment registration certificates in its name in certain circumstances as described in the relevant regulations.
Upon a foreign investor’s purchase of shares through the KRX KOSPI Market or the KRX KOSDAQ Market, no separate report by the investor is required because the investment registration certificate system is designed to control and oversee foreign investment through a computer system. However, a foreign investor’s acquisition or sale of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market (as discussed above) must be reported by the foreign investor or his standing proxy to the Governor of the Financial Supervisory Service at the time of each such acquisition or sale; provided, however, that in cases where a foreigner acquires shares through the exercise of rights as a holder of ADSs (or other depositary certificates), the foreigner must cause such report to the Governor of the Financial Supervisory Service to be filed by the Korea Securities Depository; and further provided that a foreign investor must ensure that any acquisition or sale by it of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market in the case of trades in connection with a tender offer,
odd-lot
trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor of the Financial Supervisory Service by the investment trader, the investment broker, the Korea Securities Depository or the financial securities company engaged to facilitate such transaction. A foreign investor may appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks, including domestic branches of foreign banks, investment traders, investment brokers, the Korea Securities Depository, financial securities companies and internationally recognized custodians that satisfy all relevant requirements under the FSCMA.
Certificates evidencing shares of Korean companies must be kept in custody with an eligible custodian in Korea. Only the Korea Securities Depository, foreign exchange banks including domestic branches of foreign banks, investment traders, investment brokers, collective investment business entities and internationally recognized custodians satisfying the relevant requirements under the FSCMA are eligible to act as a custodian of shares for a
non-resident
or foreign investor. A foreign investor must ensure that his custodian deposits its shares with the Korea Securities Depository. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor of the Financial Supervisory Service in circumstances where compliance with that requirement is made impracticable, including cases where compliance would contravene the laws of the home country of such foreign investor.
Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a Korean company without being subject to any foreign investment ceiling. As one such exception, designated public corporations are subject to a 40.0% ceiling on the acquisition of shares by foreigners in the aggregate and a ceiling on the acquisition of shares by a single foreign investor pursuant to the articles of incorporation of such corporation. Currently, Korea Electric Power Corporation is the only
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designated public corporation which has set such a ceiling. Furthermore, an investment by a foreign investor of not less than 10.0% of the issued shares with voting rights of a Korean company is defined as a direct foreign investment under the Foreign Investment Promotion Act, which is, in general, subject to the report to, and acceptance, by the Ministry of Trade Industry & Energy. The acquisition of shares of a Korean company by a foreign investor may also be subject to certain foreign shareholding restrictions in the event that the restrictions are prescribed in each specific law which regulates the business of the Korean company. A foreigner who has acquired our ordinary shares in excess of this ceiling may not exercise his voting rights with respect to our ordinary shares exceeding the limit.
Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at an investment broker or an investment trader. Funds in the foreign currency account may be remitted abroad without any governmental approval.
Dividends on Shares are paid in Won. No governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by a
non-resident
of Korea must be deposited either in a Won account with the investor’s investment broker or investment trader or his Won Account. Funds in the investor’s Won Account may be transferred to his foreign currency account or withdrawn for local living expenses up to certain limitations. Funds in the Won Account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.
Investment brokers and investment traders are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these investment brokers and investment traders may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors, without the investors having to open their own accounts with foreign exchange banks.
Item 10.E. Taxation
The following summary is based upon tax laws of the United States and the Republic of Korea as in effect on the date of this annual report on Form
20-F,
and is subject to any change in United States or Korean law that may come into effect after such date. Investors in the ordinary shares or ADSs are advised to consult their own tax advisers as to the United States, Korean or other tax consequences of the purchase, ownership and disposition of such securities, including the effect of any national, state or local tax laws.
Korean Taxation
The following summary of Korean tax considerations applies to you as long as you are not:

| • |  | a resident of Korea;

| • |  | a corporation organized under Korean law; or

| • |  | engaged in a trade or business in Korea through a permanent establishment or a fixed base.

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Shares or ADSs
Dividends on Ordinary Shares or ADSs
Unless an applicable tax treaty provides otherwise, we will deduct Korean withholding tax from dividends paid to you either in cash or shares at a rate of 22.0% (including local income tax). If you are a resident of a country that has entered into a tax treaty with Korea, you may qualify for a reduced rate of Korean withholding tax under such a treaty. For example, if you are a qualified resident of the United States for purposes of the
US-Korea
Tax Treaty (the “Treaty”) and you are the beneficial owner of a dividend, a reduced withholding tax rate of 16.5% (including local income tax) generally will apply. You will not be entitled to claim treaty benefits if you are not the beneficial owner of a dividend.
In order to obtain the benefits of a reduced withholding tax rate under a tax treaty, you must submit to us, prior to the dividend payment date, an application for entitlement to a reduced tax rate. If you hold ADSs and receive the dividends through a depositary, you are not required to submit the application for entitlement to a reduced tax rate. If you are an overseas investment vehicle (an “OIV”), which is defined as an organization established in a
non-Korean
jurisdiction that manages funds collected through investment solicitation by way of acquiring, disposing, or otherwise investing in any such assets and distributes the yield therefrom to investors), you must submit to us a report of the OIV and a schedule of beneficial owners together with their applications for entitlement to a reduced tax rate, which you should collect from each beneficial owner. Excess taxes withheld may be recoverable if you subsequently produce satisfactory evidence that you were entitled to have tax withheld at a lower rate.
If we distribute to you free shares representing a transfer of certain capital reserves or asset revaluation reserves into
paid-in
capital, that distribution may be a deemed dividend subject to Korean tax.
Capital Gains
Capital gains from a sale of ordinary shares will generally be exempt from Korean taxation if you have owned, together with certain related parties, less than 25.0% of our total issued shares during the year of sale and the five calendar years before the year of sale, and the sale is made through the KRX KOSPI Market, and you have no permanent establishment in Korea. Capital gains earned by a
non-Korean
holder from a sale of ADSs outside of Korea are exempt from Korean taxation by virtue of the Special Tax Treatment Control Law of Korea (the “STTCL”), provided that the issuance of the ADSs is deemed to be an overseas issuance under the STTCL.
If you are subject to Korean taxation on capital gains from a sale of ADSs, or ordinary shares that you acquired as a result of a withdrawal, your gain will be calculated based on your cost of acquiring the ADSs representing the ordinary shares, although there are no specific Korean tax provisions or rulings on this issue. In the absence of the application of a tax treaty that exempts tax on capital gains, the amount of Korean tax imposed on such capital gains will be the lesser of 11.0% (including local income tax) of the gross realization proceeds or, subject to the production of satisfactory evidence of the acquisition cost and the transaction costs of the ADSs, 22.0% (including local income tax) of the net capital gain.
If you are subject to Korean taxation on capital gains from a sale of ADSs, or ordinary shares that you acquire as a result of a withdrawal, and you sell your ordinary shares or ADSs, the purchaser or, in the case of a sale of ordinary shares on the KRX KOSPI Market or through a licensed securities company in Korea, the licensed securities company, is required to withhold Korean tax from the sales price in an amount equal to 11% (including local income tax) of the gross realization proceeds and to
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make payment thereof to the Korean tax authorities, unless you establish your entitlement to an exemption from taxation under an applicable tax treaty or produce satisfactory evidence of your acquisition cost and the transaction costs for the ordinary shares or ADSs. In order to obtain the benefit of an exemption from tax pursuant to a tax treaty, you must submit to the purchaser or the securities company (or through the depositary), as the case may be, prior to the first payment, an exemption application, together with a certificate of your tax residence issued by a competent authority of your residence country. If you are an OIV, you must submit a report of the OIV and a schedule of beneficial owners together with their applications for exception, which you should collect from each beneficial owner. The withholding obligor must submit the application and the report to the relevant tax office by the ninth day of the month following the date of the first payment of such income. This requirement will not apply to exemptions under Korean tax law. Excess taxes withheld may be recoverable if you subsequently produce satisfactory evidence that you were entitled to have taxes withheld at a lower rate.
Most tax treaties that Korea has entered into provide exemptions for capital gains tax for capital gains from sale of ordinary shares. However, Korea’s tax treaties with Japan, Austria, Spain and a few other countries do not provide an exemption from such capital gains tax. For example, Article 13 of Korea’s tax treaty with Japan provides that if a taxpayer holding 25% or more (including those shares held by any related party of the taxpayer) of total issued shares of a company in a taxable year sells 5% or more (including those sold by any related party of the taxpayer) of total issued shares of the same company in the same taxable year, the country where the company is a resident may impose tax on such taxpayer.
Inheritance Tax and Gift Tax
Korean inheritance tax is imposed upon (a) all assets (wherever located) of the deceased if at the time of his death he was domiciled in Korea or had resided in Korea for at least 183 days immediately prior to his death and (b) all property located in Korea which passes on death (irrespective of the domicile of the deceased). Gift tax is imposed in similar circumstances to the above. Taxes are currently imposed at the rate of 10% to 50% if the value of the relevant property is above a certain limit and vary according to the identity of the parties involved.
Under Korean Inheritance and Gift Tax Law, shares issued by a Korean corporation are deemed located in Korea irrespective of where they are physically located or by whom they are owned. It remains unclear whether, for Korean inheritance and gift tax purposes, a
non-resident
holder of ADSs will be treated as the owner of the shares underlying the ADSs. If such
non-resident
is treated as the owner of the shares, the heir or donee of such
non-resident
(or in certain circumstances, the
non-resident
as the donor) will be subject to Korean inheritance or gift tax at the same rate as described above.
Securities Transaction Tax
If you transfer ordinary shares on the KRX KOSPI Market, you will be subject to the securities transaction tax at a rate of 0.08% for any transfers made before January 1, 2023 (transfers made on and after January 1, 2023 will not be subject to such securities transaction tax) and an agriculture and fishery special tax at a rate of 0.15%, calculated based on the sales price of the shares. If you transfer ordinary shares and your transfer is not made on the KRX KOSPI Market you will generally be subject to the securities transaction tax at a rate of 0.43% for transfers before January 1, 2023 and 0.35% for transfers on and after January 1, 2023 and will generally not be subject to the agriculture and fishery special tax.
With respect to transfers of ADSs, a tax ruling issued in 2004 by the Korean tax authority appears to hold that depositary receipts (such as the ADSs) constitute share certificates subject to the
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securities transaction tax. In May 2007, the Seoul Administrative Court held that depositary receipts do not constitute share certificates subject to the securities transaction tax. In 2008, the Seoul Administrative Court’s holding was upheld by the Seoul High Court and was further upheld by the Supreme Court. Subsequent to this series of rulings, however, the Securities Transaction Tax Law was amended to expressly provide that depositary receipts constituted a form of share certificates subject to the securities transaction tax. However, the sale price of ADSs from a transfer of depositary receipts listed on the New York Stock Exchange, the Nasdaq National Market or other qualified foreign exchanges are exempt from the securities transaction tax.
United States Federal Income Taxation
The following discussion describes the material
United States federal income tax consequences of the ownership of our ADSs and ordinary shares as of the date hereof. This discussion deals only with ADSs and ordinary shares that are held as capital assets by a U.S. Holder (as defined below). In addition, the discussion set forth below is applicable only to U.S. Holders (i) who are residents of the United States for purposes of the current Treaty, (ii) whose ADSs or ordinary shares are not, for purposes of the Treaty, effectively connected with a permanent establishment in Korea and (iii) who otherwise qualify for the full benefits of the Treaty.
For purposes of this summary, a “U.S. Holder” is a beneficial owner of our ADSs or ordinary shares that is:

| • |  | a citizen or resident of the United States;

| • |  | a United States domestic corporation; or

| • |  | otherwise is subject to United States federal income taxation on a net income basis in respect of such ADSs or ordinary shares.

This discussion is based upon provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof, as well as the Treaty (as defined above).Those authorities may be changed, perhaps retroactively, so as to result in United States federal income tax consequences different from those summarized below. In addition, this discussion is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.
This discussion does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:

| • |  | a dealer in securities or currencies;

| • |  | a financial institution;

| • |  | a regulated investment company;

| • |  | a real estate investment trust;

| • |  | an insurance company;

| • |  | a tax-exempt organization;

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| • |  | a person holding our ADSs or ordinary shares as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;

| • |  | a trader in securities that has elected the mark-to-market method of accounting for securities;

| • |  | a person liable for alternative minimum tax;

| • |  | a person who owns or is deemed to own 10% or more of our stock (by vote or value);

| • |  | a partnership or other pass-through entity for United States federal income tax purposes; or

| • |  | a person whose “functional currency” is not the United States dollar.

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) holds our ADSs or ordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our ADSs or ordinary shares, you should consult your tax advisors.
This discussion does not contain a detailed description of all the United States federal income tax consequences to you in light of your particular circumstances and does not address the estate or gift taxes, the Medicare contribution tax on net investment income or the effects of any state, local or
non-United
States tax laws.
If you are considering the purchase of our ADSs or ordinary shares, you should consult your own tax
advisors concerning the particular United States federal income tax consequences to you of the purchase, ownership and disposition of our ADSs or ordinary shares, as well as the consequences to you arising under other United States federal tax laws and the laws of any other taxing jurisdiction.
ADSs
If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying ordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to United States federal income tax. For the remainder of this discussion, references to “ordinary shares” should be interpreted to include ADSs, unless otherwise specified.
Taxation of Dividends
The gross amount of distributions of cash or property with respect to the ordinary shares (including any amounts withheld to reflect Korean
withholding taxes) will be taxable as dividends to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Because we do not expect to determine earnings and profits in accordance with United States federal income tax principles, you should expect that a distribution will generally be treated as a dividend for United States federal income tax purposes.
Any dividends that you receive (including any withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of ordinary shares, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction allowed to corporations under the Code. With respect to
non-corporate
United States investors, certain dividends received from a qualified foreign corporation may be subject to preferential rates of taxation. A qualified foreign corporation includes a foreign corporation that is
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eligible for the benefits of a comprehensive income tax treaty with the United States which the United States Treasury Department determines to be satisfactory for these purposes and which includes an exchange of information provision. The United States Treasury Department has determined that the Treaty meets these requirements, and we believe we are eligible for the benefits of the Treaty.
Non-corporate
U.S. Holders will not be eligible for reduced rates of taxation on any dividends received from us if we are a passive foreign investment company in the taxable year in which such dividends are paid or in the preceding taxable year (see “—Passive Foreign Investment Company” below).
The amount of any dividend paid in Won will equal the United States dollar value of the Won received calculated by reference to the exchange rate in effect on the date the dividend is received by you, in the case of ordinary shares, or by the depositary, in the case of ADSs, regardless of whether the Won
are converted into United States dollars. If the Won received as a dividend are converted into United States dollars on the date they are received, you generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. If the Won
received as a dividend are not converted into United States dollars on the date of receipt, you will have a basis in the Won
equal to their United States dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the Won
will be treated as United States source ordinary income or loss.
Dividends paid on the ordinary shares will be treated as income from sources outside the United States and will generally constitute passive category income for U.S. foreign tax credit purposes. As a result of recent changes to the U.S. foreign tax credit rules, for taxable years beginning after December 28, 2021, Korean taxes generally will need to satisfy certain additional requirements in order to be considered creditable taxes for a U.S. Holder, except in the case of a U.S. Holder that is eligible for, and properly claims, the benefits of the Treaty. We have not determined whether these requirements have been met, and, accordingly, no assurance can be given that any Korean withholding tax on dividend distributions will be creditable. Alternatively, a U.S. Holder may elect to deduct Korean withholding taxes in computing such U.S. Holder’s taxable income (provided that the U.S. Holder elects to deduct, rather than credit, all foreign income taxes paid or accrued for the relevant taxable year). The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.
Passive Foreign Investment Company
Based on the past and projected composition of our income and assets and the valuation of our assets we do not believe we were a passive foreign investment company (“PFIC”) for our most recent taxable year or in the preceding taxable year and do not expect to become a PFIC in the current taxable year or the foreseeable future, although there can be no assurance in this regard.
In general, we will be a PFIC for any taxable year in which, taking into account our proportionate share of the income and assets of our subsidiaries under applicable “look-through” rules:

| • |  | at least 75% of our gross income is passive income, or

| • |  | at least 50% of the value (determined based on a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income.

For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from
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a related person). If we own at least 25% (by value) of the stock of another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income.
The determination of whether we are a PFIC is made annually based on the facts and circumstances at the time, some of which may be beyond our control, such as the amount and composition of our income and the valuation and composition of our assets, including goodwill and other intangible assets, as implied by the market price of our ordinary shares. Recent stock market volatility could exacerbate these considerations. See “Item 3. Key Information—Item 3.D. Risk Factors—Risks Relating to Our Business—The ongoing global pandemic of a new strain of coronavirus
(“COVID-19”)
and any possible recurrence of other types of widespread infectious diseases, may adversely affect our business, financial condition or results of operations.” Accordingly, we cannot be certain that we will not be a PFIC in the current or any future taxable year. If we are a PFIC for any taxable year during which you hold our ordinary shares, you will be subject to special tax rules discussed below.
If we are a PFIC for any taxable year during which you hold our ordinary shares and you do not make a timely
mark-to-market
election, as described below, you will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of ordinary shares. Distributions received in a taxable year will be treated as excess distributions to the extent that they are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the ordinary shares. Under these special tax rules:

| • |  | the excess distribution or gain will be allocated ratably over your holding period for the ordinary shares,

| • |  | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

| • |  | the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which you hold our ordinary shares, you will generally be subject to the special tax rules described above for that year and for each subsequent year in which you hold the ordinary shares (even if we do not qualify as a PFIC in such subsequent years). However, if we cease to be a PFIC, you can avoid the continuing impact of the PFIC rules by making a special election to recognize gain as if your ordinary shares had been sold on the last day of the last taxable year during which we were a PFIC. You are urged to consult your own tax advisor about this election.
In lieu of being subject to the special tax rules discussed above, you may make a
mark-to-market
election with respect to your ordinary shares provided such ordinary shares are treated as “marketable stock.” The ordinary shares generally will be treated as marketable stock if they are regularly traded on a “qualified exchange or other market” (within the meaning of the applicable Treasury regulations).
If you make an effective
mark-to-market
election, for each taxable year that we are a PFIC you will include as ordinary income the excess of the fair market value of your ordinary shares at the end of the year over your adjusted tax basis in the ordinary shares. You will be entitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the ordinary shares over their
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fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the
mark-to-market
election. Your adjusted tax basis in the ordinary shares will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the
mark-to-market
rules. In addition, upon the sale or other disposition of your ordinary shares in a year that we are a PFIC, any gain will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount of income previously included as a result of the
mark-to-market
election.
If you make a
mark-to-market
election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on a qualified exchange or other market, or the Internal Revenue Service (the “IRS”) consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the
mark-to-market
election, and whether making the election would be advisable in your particular circumstances.
Alternatively, you can sometimes avoid the special tax rules described above by electing to treat a PFIC as a “qualified electing fund” under Section 1295 of the Code. However, this option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election.
If we are a PFIC for any taxable year during which you hold our ordinary shares and any of our
non-United
States subsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of the PFIC rules. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.
You will generally be required to file IRS Form 8621 if you hold our ordinary shares in any year in which we are classified as a PFIC. You are urged to consult your tax advisors concerning the United States federal income tax consequences of holding ordinary shares if we are considered a PFIC in any taxable year.
Taxation of Capital Gains
Subject to the discussion above under “—Passive Foreign Investment Company,” for United States federal income tax purposes, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of the ordinary shares in an amount equal to the difference between the amount realized for the ordinary shares and your adjusted basis in the ordinary shares.
Such gain or loss will generally be capital gain or loss and will generally be long-term capital gain or loss if you have held the ordinary shares for more than one year. Long-term capital gains of
non-corporate
U.S. Holders (including individuals) are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as United States source gain or loss.
You should note that any Korean
securities transaction tax or agriculture and fishery special tax will not be treated as a creditable foreign tax for United States federal income tax purposes, although you may be entitled to deduct such taxes, subject to applicable limitations under the Code. You should consult your own tax advisors regarding the application of the foreign tax credit rules to your investment in, and disposition of, the ordinary shares.
Foreign Financial Asset Reporting
Certain U.S. Holders that own “specified foreign financial assets” with an aggregate value in excess of U.S.$50,000 on the last day of the taxable year or U.S.$75,000 at any time during the
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taxable year are generally required to file an information statement along with their tax returns, currently on IRS Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a
non-United
States financial institution, as well as securities issued by a
non-United
States issuer that are not held in accounts maintained by financial institutions. The understatement of income attributable to “specified foreign financial assets” in excess of U.S.$5,000 extends the statute of limitations with respect to the tax return to six years after the return was filed. U.S. Holders who fail to report the required information could be subject to substantial penalties. You are encouraged to consult with your own tax advisors regarding the possible application of these rules, including the application of the rules to your particular circumstances.
Information Reporting and Backup Withholding
In general, information reporting will apply to dividends in respect of our ordinary shares and the proceeds from the sale, exchange or other disposition of our ordinary shares that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient. A backup withholding tax may apply to such payments if you fail to provide a taxpayer identification number or certification of exempt status or fail to report in full dividend and interest income.
Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is timely furnished to the IRS.
Item 10.F. Dividends and Paying Agents
See “Item 8. Financial Information—Item 8.A. Consolidated Statements and Other Financial Information—Dividends” for information concerning our dividend policies and our payment of dividends. See “—Item 10.B. Memorandum and Articles of Association—Dividends” for a discussion of the process by which dividends are paid on our ordinary shares. See “Item 12.Description of Securities Other than Equity Securities—Item 12.D. American Depositary Shares” for a discussion of the process by which dividends are paid on our ADSs. The paying agent for payment of our dividends on ADSs in the United States is Citibank, N.A.
Item 10.G. Statements by Experts
Not applicable.
Item 10.H. Documents on Display
We are subject to the information requirements of the Exchange Act, and, in accordance therewith, are required to file reports, including annual reports on Form
20-F,
and other information with the U.S. Securities and Exchange Commission. These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission’s public reference rooms in Washington, D.C. Please call the Commission at
1-800-SEC-0330
for further information on the public reference rooms. We are required to make filings with the Commission by electronic means, which will be available to the public over the Internet at the Commission’s website at http://www.sec.gov.
Item 10.I. Subsidiary Information
Not applicable.
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Item 11. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to foreign exchange rate and interest rate risks primarily associated with underlying liabilities, and to equity price risk as a result of our investment in equity securities. Our long-term financial policies are annually reported to our Board of Directors, and our finance division conducts financial risk management and assessment. Upon identification and evaluation of our risk exposures, we, having considered various circumstances, enter into derivative financial instruments to try to manage some of such risks. These contracts are entered into with major financial institutions, thereby minimizing the risk of credit loss. The activities of our finance division are subject to policies approved by our foreign exchange and interest rate risk management committee. These policies address the use of derivative financial instruments, including the approval of counterparties, setting of limits and investment of excess liquidity. Our general policy is to hold or issue derivative financial instruments largely for hedging purposes.
For our hedging derivative contracts, we recognized a valuation gain of
￦
77 billion, a valuation loss of
￦
16 billion and accumulated other comprehensive income of
￦
92 billion in 2019, a valuation loss of
￦
164 billion and accumulated other comprehensive loss of
￦
114 billion in 2020, and a valuation gain of
￦
204 billion, a valuation loss of
￦
7 billion and accumulated other comprehensive income of
￦
192 billion in 2021. For further details regarding the assets, liabilities, gains and losses recorded relating to our derivative contracts outstanding as of December 31 2019, 2020 and 2021, see Note 7 of the notes to the Consolidated Financial Statements.
Exchange Rate Risk
Most of our cash flow is denominated in Won. We are exposed to foreign exchange risk related to foreign currency denominated liabilities and anticipated foreign exchange payments. Anticipated foreign exchange payments, mostly in U.S. Dollars, relate primarily to payments of foreign currency denominated debt, net settlements paid to foreign telecommunication carriers and payments for equipment purchased from foreign suppliers. We have entered into several currency swap contracts, combined interest currency swap contracts and currency forward contracts to hedge our foreign currency risks.
The following table shows our assets and liabilities denominated in foreign currency as of December 31, 2019, 2020 and 2021:

|  | As of December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
(in thousands of foreign currencies) |  | Financial assets |  |  | Financial liabilities |  |  | Financial assets |  |  | Financial liabilities |  |  | Financial assets |  |  | Financial liabilities |
U.S. Dollar |  |  | 645,941 |  |  |  | 1,830,764 |  |  |  | 400,046 |  |  |  | 1,937,935 |  |  |  | 245,759 |  |  |  | 2,302,642 |
Special Drawing Right |  |  | 255 |  |  |  | 729 |  |  |  | 255 |  |  |  | 728 |  |  |  | 255 |  |  |  | 722 |
Japanese Yen |  |  | 24,930 |  |  |  | 80,000,000 |  |  |  | 209,376 |  |  |  | 46,000,009 |  |  |  | 29,227 |  |  |  | 30,000,763 |
British Pound |  |  | — |  |  |  | 56 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,005 |
Euro |  |  | 1 |  |  |  | 6 |  |  |  | 316 |  |  |  | 162 |  |  |  | 3,943 |  |  |  | 10,801 |
Chinese Yuan |  |  | 457 |  |  |  | 161 |  |  |  | 458 |  |  |  | 491 |  |  |  | — |  |  |  | — |
Rwandan Franc |  |  | 706 |  |  |  | — |  |  |  | 646 |  |  |  | — |  |  |  | 586 |  |  |  | — |
Thai Bhat |  |  | — |  |  |  | — |  |  |  | 535 |  |  |  | — |  |  |  | 2,160 |  |  |  | — |
Myanmar Kyat |  |  | 84 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Tanzanian Shilling |  |  | 6,919 |  |  |  | — |  |  |  | 1,019 |  |  |  | — |  |  |  | 1,644 |  |  |  | — |
Botswana Pula |  |  | 911 |  |  |  | — |  |  |  | 212 |  |  |  | — |  |  |  | 93 |  |  |  | — |
Hong Kong Dollar |  |  | — |  |  |  | 268 |  |  |  | — |  |  |  | 198 |  |  |  | — |  |  |  | 105 |
Bangladeshi Taka |  |  | 18,897 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Polish Zloty |  |  | — |  |  |  | — |  |  |  | 26 |  |  |  | — |  |  |  | — |  |  |  | — |
Vietnamese Dong |  |  | 271,563 |  |  |  | — |  |  |  | 242,370 |  |  |  | — |  |  |  | 257,895 |  |  |  | — |
Central African Franc |  |  | 97,411 |  |  |  | — |  |  |  | 16,229 |  |  |  | — |  |  |  | — |  |  |  | — |
Singapore Dollar |  |  | — |  |  |  | — |  |  |  | 6 |  |  |  | 284,000 |  |  |  | 13 |  |  |  | 284,000 |
Taiwan Dollar |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 226 |
Swiss Franc |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 161 |

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As of December 31, 2019, a 10% strengthening in the exchange rate between the Won and all foreign currencies, with all other variables held constant, would have increased our income before income tax by
￦
45 billion, and total equity by
￦
52 billion, with a 10% weakening in the exchange rate having the opposite effect. As of December 31, 2020, a 10% strengthening in the exchange rate between the Won and all foreign currencies, with all other variables held constant, would have increased our income before income tax by
￦
25 billion, and total equity by
￦
37 billion, with a 10% weakening in the exchange rate having the opposite effect. As of December 31, 2021, a 10% strengthening in the exchange rate between the Won and all foreign currencies, with all other variables held constant, would have decreased our income before income tax by
￦
3 billion, and increased our total equity by
￦
9 billion, with a 10% weakening in the exchange rate having the opposite effect. The foregoing sensitivity analysis assumes that all variables other than foreign exchange rates are held constant, and as such, does not reflect any correlation between foreign exchange rates and other variables, nor our decision to decrease the risk. See Note 37 of the notes to the Consolidated Financial Statements.
Interest Rate Risk
We are also subject to market risk exposure arising from changing interest rates. A reduction of interest rates increases the fair value of our debt portfolio, which is primarily of a fixed interest nature. We use, to a limited extent, interest rate swap contracts and combined interest rate and currency swap contracts to reduce interest rate volatility on some of our debt and manage our interest expense by achieving a balanced mixture of floating and fixed rate debt. We entered into several interest rate swap contracts in which we exchange fixed interest rate payments with variable interest rate payments for a specified period, as well as entered into the combined interest rate and currency swap contracts to hedge our interest rate risk.
The following table summarizes the principal amounts, fair values, principal cash flows by maturity date and weighted average interest rates of our short-term and long-term liabilities as of December 31, 2021 which are sensitive to exchange rates and/or interest rates. The information is presented in Won, which is our reporting currency:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | December 31, 2021 |
|  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | Thereafter |  |  | Total |  |  | Fair Value |
|  | (in millions of Won, except rates) |
Local currency: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed rate |  |  | 888,420 |  |  |  | 765,493 |  |  |  | 1,195,493 |  |  |  | 502,293 |  |  |  | 1,952,619 |  |  |  | 5,304,318 |  |  |  | 5,688,668 |
Average weighted rate (1) |  |  | 1.70 | % |  |  | 2.06 | % |  |  | 2.07 | % |  |  | 2.22 | % |  |  | 2.52 | % |  |  | 2.18 | % |  |  |  |
Variable rate |  |  | 20,000 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 20,000 |  |  |  | 20,000 |
Average weighted rate (1) |  |  | 3.38 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 3.38 | % |  |  |  |
Sub-total |  |  | 908,420 |  |  |  | 765,493 |  |  |  | 1,195,493 |  |  |  | 502,293 |  |  |  | 1,952,619 |  |  |  | 5,324,318 |  |  |  | 5,708,668 |
Foreign currency: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed rate |  |  | 779,151 |  |  |  | — |  |  |  | 17,756 |  |  |  | 474,200 |  |  |  | 972,110 |  |  |  | 2,243,217 |  |  |  | 2,300,135 |
Average weighted rate (1) |  |  | 1.68 | % |  |  | 0.00 | % |  |  | 2.16 | % |  |  | 1.00 | % |  |  | 2.58 | % |  |  | 1.93 | % |  |  |  |
Variable rate |  |  | 42,310 |  |  |  | 423,271 |  |  |  | 425,261 |  |  |  | — |  |  |  | — |  |  |  | 890,842 |  |  |  | 876,926 |
Average weighted rate (1) |  |  | 1.54 | % |  |  | 1.14 | % |  |  | 1.17 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 1.17 | % |  |  |  |
Subtotal |  |  | 821,461 |  |  |  | 423,271 |  |  |  | 443,017 |  |  |  | 474,200 |  |  |  | 972,110 |  |  |  | 3,134,059 |  |  |  | 3,177,061 |
Total |  |  | 1,729,881 |  |  |  | 1,188,764 |  |  |  | 1,638,510 |  |  |  | 976,493 |  |  |  | 2,924,729 |  |  |  | 8,458,377 |  |  |  | 8,885,729 |

(1) | Weighted average rates of the portfolio at the period end.

As of December 31, 2019, 2020 and 2021, a 100 basis point increase in the market interest rate, with all other variables held constant, would have increased our profit before income tax by
￦
0.4 billion, increased our profit before income tax by
￦
1.0 billion and increased our profit before
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income tax by
￦
0.8 billion, respectively. As of December 31, 2019, 2020 and 2021, such increase, with all other variables held constant, would have increased our total equity by
￦
15 billion, increased our total equity by
￦
19 billion and increased our total equity by
￦
6 billion, respectively.
As of December 31, 2019, 2020 and 2021, a 100 basis point decrease in the market interest rates, with all other variables held constant, would have decreased our profit before income tax by
￦
0.5 billion, decreased our profit before income tax by
￦
1.0 billion and decreased our profit before income tax by
￦
0.7 billion, respectively. As of December 31, 2019, 2020 and 2021, a 100 basis point decrease in the market interest rates, with all other variables held constant, would have decreased our total equity by
￦
19 billion,
￦
19 billion and
￦
6 billion, respectively.
The foregoing sensitivity analyses assume that all variables other than market interest rates are held constant, and as such, does not reflect any correlation between market interest rates and other variables, nor our decision to decrease the risk, but reflects the effects of derivative contracts in place at the time of conducting the analysis.
Equity Price Risk
We are also subject to market risk exposure arising from changes in the equity securities market, which affect the fair value of our equity portfolio. As of December 31, 2019, 2020 and 2021, a 10% increase in the equity indices where our marketable equity securities are listed, with all other variables held constant, would have increased our total equity by
￦
0.6 billion, by
￦
3.5 billion and by
￦
4.6 billion, respectively, with a 10% decrease in the equity index having the opposite effect. The foregoing sensitivity analysis assumes that all variables other than changes in the equity index are held constant, and that our marketable equity instruments had moved according to the historical correlation to the index, and as such, does not reflect any correlation between the equity index and other variables.
Item 12. Description of Securities Other than Equity Securities
Item 12.A. Debt Securities
Not applicable.
Item 12.B. Warrants and Rights
Not applicable.
Item 12.C. Other Securities
Not applicable.
Item 12.D. American Depositary Shares
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Fees and Charges
Under the terms of the deposit agreement, holders of our ADSs are required to pay the following service fees to the depositary:

Services |  | Fees
Issuance of ADSs upon deposit of shares |  | Up to $0.05 per ADS issued
Delivery of deposited shares against surrender of ADSs |  | Up to $0.05 per ADS surrendered
Distribution delivery of ADSs pursuant to sale or exercise of rights |  | Up to $0.02 per ADS held
Distributions of dividends |  | None
Distribution of securities other than ADSs |  | Up to $0.02 per ADS held
Other corporate action involving distributions to shareholders |  | Up to $0.02 per ADS held

Holders of our ADSs are also responsible for paying certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:

| • |  | fees for the transfer and registration of shares charged by the registrar and transfer agent for the shares in Korea ( i.e., upon deposit and withdrawal of shares);

| • |  | expenses incurred for converting foreign currency into U.S. dollars;

| • |  | expenses for cable, telex and fax transmissions and for delivery of securities;

| • |  | taxes and duties upon the transfer of securities ( i.e., when shares are deposited or withdrawn from deposit); and

| • |  | fees and expenses incurred in connection with the delivery or servicing of shares on deposit.

Depositary fees payable upon the issuance and surrender of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for surrender. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date.
The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividend rights), the depositary charges the applicable fee to the ADS record-date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary sends invoices to the applicable record-date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via the Depository Trust Company, or DTC), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary.
In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse to provide the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to such holder of ADSs.
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The fees and charges that holders of our ADSs may be required to pay may vary over time and may be changed by us and by the depositary. Holders of our ADSs will receive prior notice of such changes.
Fees and Payments from the Depositary to Us
In 2021, we received the following payments, after deduction of applicable U.S. taxes, from the depositary:

Reimbursement of NYSE listing fees |  | $ | 190,042.00 |
Reimbursement of SEC filing fees |  | $ | 224,698.08 |
Reimbursement of proxy process expenses (printing, postage and distribution) |  | $ | 112,190.89 |
Reimbursement of legal fees (reimbursement received in 2021 in respect of 2020) |  | $ | 236,170.82 |
Contributions toward our investor relations efforts (including non-deal roadshows, investor conferences and investor relations agency fees) |  | $ | 55,066.81 |

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PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15. Controls and Procedures
Disclosure Controls and Procedures
Our management has evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act, as of December 31, 2021. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2021. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed by, and under the supervision of, our principal executive, principal operating and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Our management has performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021, utilizing the criteria discussed in the Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, we concluded that our internal control over financial reporting was effective as of December 31, 2021.
Samil PricewaterhouseCoopers, an independent registered public accounting firm, which also audited our consolidated financial statements as of, and for the year ended December 31, 2021, as stated in their report which is included herein, has issued an attestation report on the effectiveness of our internal control over financial reporting.
Attestation Report of the Registered Public Accounting Firm
The attestation report of our independent registered public accounting firm on the effectiveness of our internal control over financial reporting is furnished in Item 18 of this Form
20-F.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our Audit Committee is comprised of
Eun-Jung
Yeo,
Dae-You
Kim,
Chung-Gu
Kang and
Yong-Hun
Kim. The board of directors has determined that
Eun-Jung
Yeo is the financial expert of the Audit Committee.
Eun-Jung
Yeo is independent as such term is defined in Section 303A.02 of the NYSE Listed Company Manual, Rule
10A-3
under the Exchange Act and the Korea Stock Exchange listing standards.
Item 16B. Code of Ethics
We have adopted a code of ethics, as defined in Item 16B. of Form
20-F
under the Exchange Act. Our code of ethics applies to our chief executive officer, chief financial officer and persons performing similar functions, as well as to our directors, other officers and employees. Our code of ethics is available on our web site at www.kt.com. If we amend the provisions of our code of ethics that apply to our chief executive officer, chief financial officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website.
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Item 16C. Principal Accountant Fees and Services
Audit and
Non-Audit
Fees
The following table sets forth the fees billed to us by Samil PricewaterhouseCoopers, our independent registered public accounting firm, during the fiscal years ended December 31, 2020 and 2021.

|  | Year Ended December 31, |
|  | 2020 |  |  | 2021 |
|  | (In millions) |
Audit fees (1) |  | ￦ | 3,910 |  |  | ￦ | 4,255 |
Tax fees (2) |  |  | 181 |  |  |  | 219 |
All other fees |  |  | — |  |  |  | 10 |
Total fees |  |  | 4,091 |  |  |  | 4,484 |

(1) | Audit fees consist of fees for the annual audit and quarterly review services engagement and the comfort letters.

(2) | Tax fees consist of fee for tax services which are mainly the preparation of tax returns or non-recurring tax compliance review of original or amended tax returns.

Audit Committee
Pre-Approval
Policies and Procedures
Our Audit Committee has established
pre-approval
policies and procedures to
pre-approve
all audit services to be provided by Samil PricewaterhouseCoopers, our independent registered public accounting firm. Our Audit Committee’s policy regarding the
pre-approval
of
non-audit
services to be provided to us by our independent registered public accounting firm is that all such services shall be
pre-approved
by our Audit Committee.
Non-audit
services that are prohibited to be provided to us by our independent registered public accounting firm under the rules of the SEC and applicable law may not be
pre-approved.
In addition, prior to the granting of any
pre-approval,
our Audit Committee must be satisfied that the performance of the services in question will not compromise the independence of our independent registered public accounting firm and does not include delegation of the Audit Committee’s responsibilities to the management under the Exchange Act.
Our Audit Committee did not
pre-approve
any
non-audit
services under the de minimis exception of Rule
2-01
(c)(7)(i)(C) of Regulation
S-X
as promulgated by the SEC.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
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Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table sets forth the repurchases of ordinary shares by us or any affiliated purchasers during the fiscal year ended December 31, 2021:

Period |  | Total Number of Shares Purchased |  |  | Average Price Paid per Share (In Won) |  |  | Total Number of Shares Purchased as Part of Publicly Announced Plans |  |  | Approximate Value of Shares that May Yet Be Purchased Under the Plans (In billions of Won) |
January 1 to January 31 |  |  | 2,993,586 |  |  | ￦ | 24,067 |  |  |  | 2,993,586 |  |  | ￦ | 117.8 |
February 1 to February 29 |  |  | 2,700,000 |  |  |  | 25,013 |  |  |  | 2,700,000 |  |  |  | 50.3 |
March 1 to March 31 |  |  | 1,907,300 |  |  |  | 26,490 |  |  |  | 1,907,300 |  |  |  | — |
April 1 to April 30 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
May 1 to May 31 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
June 1 to June 30 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
July 1 to July 31 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
August 1 to August 31 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
September 1 to September 30 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
October 1 to October 31 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
November 1 to November 30 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
December 1 to December 31 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  |  | 7,600,886 |  |  | ￦ | 25,011 |  |  |  | 7,600,886 |  |  |  | — |

Repurchases were made in the open market pursuant to the Share Repurchase Agreement, pursuant to which we were authorized to repurchase up to
￦
300 billion of our common shares from November 6, 2020 to November 5, 2021.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
The following is a summary of the significant differences between the New York Stock Exchange’s corporate governance standards and those that we follow under Korean law:

NYSE Corporate Governance Standards |  | KT Corporation’s Corporate Governance Practice
Director Independence |  |
Independent directors must comprise a majority of the board. |  | The Commercial Code of Korea requires that our board of directors must comprise no less than a majority of outside directors. Our outside directors must meet the criteria for outside directorship set forth under the Commercial Code of Korea. The majority of our board of directors is independent (as defined in accordance with the New York Stock Exchange’s standards), and 8 out of 10 directors are outside directors.
Nominating/Corporate Governance Committee |  |
Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. |  | We have not established a nominating/corporate governance committee composed entirely of independent directors. However, we maintain an Outside Director Candidate Nominating Committee composed of all of our outside directors and one inside director. We also maintain a Corporate Governance Committee comprised of four outside directors and one inside director. The committee is responsible for the review of matters with respect to our Corporate Governance Guidelines and our performance under such guidelines to monitor effectiveness of our corporate governance.

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Compensation Committee |  |
Listed companies must have a compensation committee composed entirely of independent directors. |  | We maintain an Evaluation and Compensation Committee composed of four outside directors.
Executive Session |  |
Non-management directors must meet in regularly scheduled executive sessions without management. |  | Our outside directors hold meetings solely attended by outside directors in accordance with the charter of our board of directors.
Audit Committee |  |
Listed companies must have an audit committee which has a minimum of three directors and satisfy the requirements of Rule 10A-3 under the Exchange Act. |  | We maintain an Audit Committee comprised of four outside directors who meet the applicable independence criteria set forth under Rule 10A-3 under the Exchange Act.
Shareholder Approval of Equity Compensation Plan |  |
Listed companies must allow their shareholders to exercise their voting rights with respect to any material revision to the company’s equity compensation plan. |  | We currently have three equity compensation plans: one providing for stock grants to officers and directors; another providing for performance bonuses to employees that are payable in cash or common shares based on election by the employees; and an employee stock ownership association program. All material matters related to the granting stock options are provided in our articles of incorporation, and any amendments to the articles of incorporation are subject to shareholders’ approval. Matters related to performance bonuses or the employee stock ownership association program are not subject to shareholders’ approval under Korean law.
Shareholder Approval of Equity Offerings |  |
Listed companies must allow its shareholders to exercise their voting rights with respect to equity offerings that do not qualify as public offerings for cash, and offerings of equity of related parties. |  | Voting rights are not separately provided for equity offerings that do not qualify as public offerings for cash, or offerings of equity of related parties.
Corporate Governance Guidelines |  |
Listed companies must adopt and disclose corporate governance guidelines. |  | We have adopted Corporate Governance Guidelines in March 2007 setting forth our practices with respect to corporate governance matters. Our Corporate Governance Guidelines are in compliance with Korean law but do not meet all requirements established by the New York Stock Exchange for U.S. companies listed on the exchange. A copy of our Corporate Governance Guidelines in Korean is available on our website at www.kt.com.
Code of Business Conduct and Ethics |  |
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for executive officers. |  | We have adopted a Code of Ethics for all directors, officers and employees. A copy of our Code of Ethics in Korean is available on our website at www.kt.com

Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OF KT CORPORATION

|  | Page |
Report of Independent Registered Public Accounting Firm |  |  | F-2 |
Consolidated Statements of Financial Position as of December 31, 2020 and December 31, 2021 |  |  | F-6 |
Consolidated Statements of Profit or Loss for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-8 |
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-9 |
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-10 |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-13 |
Notes to the Consolidated Financial Statements |  |  | F-14 |

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Item 19. Exhibits

1 |  | Articles of Incorporation of KT Corporation (English translation)
2.1* |  | Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(i) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6)
2.2* |  | Form of Amendment No. 1 to Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(ii) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6)
2.3* |  | Letter from Citibank, N.A., as depositary, to the Registrant relating to the establishment of a direct registration system for ADSs and the issuance of uncertified ADSs as part of the direct registration system (incorporated herein by reference to Exhibit 2.4 of the Registrant’s Annual Report on Form 20-F filed on June 30, 2008)
2.4 |  | Description of common stock (see Item 10.B. Memorandum and Articles of Association)
2.5 |  | Description of American Depositary Shares (incorporated herein by reference to Exhibit 2.6 of the Registrant’s Annual Report on Form 20-F filed on April 29, 2020)
8.1 |  | List of subsidiaries of KT Corporation
12.1 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS |  | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 |  | The cover page for the Company’s Annual Report on Form 20-F for the year ended December 31, 2021, has been formatted in Inline XBRL

* | Filed previously.

(P) | Paper filing.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|  | Page |
Report of Independent Registered Public Accounting Firm (PCAOB ID 1103) |  |  | F-2 |
Consolidated Statements of Financial Position as of December 31, 2020 and December 31, 2021 |  |  | F-6 |
Consolidated Statements of Profit or Loss for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-8 |
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-9 |
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-10 |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2020 and 2021 |  |  | F-13 |
Notes to the Consolidated Financial Statements |  |  | F-14 |

F-1

Table of Contents
Report of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of KT Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of KT Corporation
and its subsidiaries
(the “Company”) as of December 31, 2021 and 2020,
and the related consolidated
statements of profit or loss, comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).
We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in
Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020
,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021
in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in
Internal Control—Integrated Framework
(2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2020.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated
financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated
financial statements included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
F-2

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audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the
consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Cash-Generating Units Impairment Assessment—Information and Communication Technology (“ICT”) Segment
As described in Notes 2.16, 11, 13 and 35 to the consolidated financial statements, the Company’s property and equipment and intangible assets balance was KRW 17,912,219 million as of December 31, 2021. This amount includes KRW 14,257,680 million of property and equipment and intangible assets associated with the Cash-Generating Units in the ICT segment (the “CGUs”). The long-lived assets of the CGUs are primarily comprised of property and equipment and intangible assets. The Company performs its impairment assessment for assets attributed to the CGUs when impairment indicators exist or in the case of goodwill and indefinite lived intangible assets at least annually. The Company identified three CGUs in the ICT segment. Those CGUs are Mobile, Fixed Line and Corporate Services. The Company compared the carrying value of each CGU to the estimated recoverable amount. The recoverable amount of the CGUs was determined based on a discounted cash flow model which requires management to estimate significant assumptions, including the revenue growth rate, the terminal growth rate and the discount rate.
The principal considerations for our determination that performing procedures relating to the CGUs impairment assessment is a critical audit matter are that there was significant judgment by management when developing the above estimates which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence related to management’s discounted cash flow model and significant assumptions, including the revenue growth
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rate, the terminal growth rate and the discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s CGUs impairment assessment, including controls over management’s determination of the estimated recoverable amount of each CGU and development of significant assumptions, including the revenue growth rate, the terminal growth rate and the discount rate. These procedures also included, among others, testing management’s process for identifying CGUs and determining the estimated recoverable amount of CGUs, including evaluating the appropriateness of the discounted cash flow model; testing the completeness, accuracy, and relevance of underlying data used in the model; and evaluating the significant assumptions used by management, including the revenue growth rate, the terminal growth rate and the discount rate. Evaluating management’s assumptions related to the revenue growth rate, the terminal growth rate and the discount rate involved evaluating whether the assumptions used by management were reasonable considering current and past performance of the CGUs, management’s future plans, external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit. In addition, the discount rate was evaluated considering the cost of capital of comparable businesses and other industry factors. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and significant assumptions, including the revenue growth rate, the terminal growth rate and the discount rate.
Accounting for the Acquisitions of Hyundai HCN Co., Ltd. and Epsilon Global Communications Pte. Ltd.
As described in Notes 2.13 and 41 to the consolidated financial statements, the Company completed the acquisition of Hyundai HCN Co., Ltd. (“HCN”) and Epsilon Global Communications Pte. Ltd. (“EGC”), for total net consideration of approximately KRW 674,829 million during 2021, which resulted in KRW 541,243 million of intangible assets being recorded. Management applied significant judgment in estimating the fair value of intangible assets acquired, which involved the use of significant estimates and assumptions with respect to the timing and amounts of cash flow projections, the revenue growth rates, the terminal growth rates, the customer attrition rates, and the discount rates.
The principal considerations for our determination that performing procedures relating to the acquisition of HCN and EGS as a critical audit matter are (i) a high degree of auditor judgment and subjectivity in performing procedures relating to the fair value of intangible assets acquired due to the significant judgment by management when developing the estimate; (ii) the significant audit effort in evaluating the management’s significant assumptions related to the revenue growth rates, the customer attrition rates and the discount rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the intangible assets and controls over the development of significant assumptions related to the revenue growth rates, the customer attrition rates and the discount rates. These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for estimating the fair value of intangible assets. Testing management’s process included evaluating the appropriateness of the valuation methods, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of significant assumptions related to the revenue growth rates, the customer attrition rates and the discount rates for
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the intangible assets. Evaluating the reasonableness of the customer attrition rates involved considering the past performance of the acquired businesses, as well as economic and industry forecasts. The discount rate was evaluated by considering the cost of capital of comparable businesses and other industry factors. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation methods.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
April 28, 2022
We have served as the Company’s auditor since 2010.
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KT Corporation and Subsidiaries
Consolidated Statements of Financial Position
December 31, 2020 and December 31, 2021

(In millions of Korean won) |  | Notes |  |  | December 31, 2020 |  |  | December 31, 2021 |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 4,5 |  |  | ￦ | 2,634,624 |  |  | ￦ | 3,019,592 |
Trade and other receivables, net |  |  | 4,6 |  |  |  | 4,902,471 |  |  |  | 5,087,490 |
Other financial assets |  |  | 4,7 |  |  |  | 1,202,840 |  |  |  | 1,185,659 |
Current income tax assets |  |  |  |  |  |  | 2,059 |  |  |  | 5,954 |
Inventories, net |  |  | 8 |  |  |  | 534,636 |  |  |  | 514,145 |
Assets held for sale |  |  | 10 |  |  |  | 1,198 |  |  |  | 1,187 |
Other current assets |  |  | 9 |  |  |  | 1,876,352 |  |  |  | 2,044,323 |
Total current assets |  |  |  |  |  |  | 11,154,180 |  |  |  | 11,858,350 |
Non-current assets |  |  |  |  |  |  |  |  |  |  |  |
Trade and other receivables, net |  |  | 4,6 |  |  |  | 1,250,769 |  |  |  | 1,091,326 |
Other financial assets |  |  | 4,7 |  |  |  | 544,347 |  |  |  | 822,379 |
Property and equipment, net |  |  | 11 |  |  |  | 14,206,119 |  |  |  | 14,464,886 |
Right-of-use assets |  |  | 21 |  |  |  | 1,217,179 |  |  |  | 1,248,308 |
Investment properties, net |  |  | 12 |  |  |  | 1,368,453 |  |  |  | 1,720,654 |
Intangible assets, net |  |  | 13 |  |  |  | 2,161,258 |  |  |  | 3,447,333 |
Investments in associates and joint ventures |  |  | 14 |  |  |  | 557,881 |  |  |  | 1,288,429 |
Deferred income tax assets |  |  | 30 |  |  |  | 433,698 |  |  |  | 423,728 |
Other non-current assets |  |  | 9 |  |  |  | 768,661 |  |  |  | 793,948 |
Total non-current assets |  |  |  |  |  |  | 22,508,365 |  |  |  | 25,300,991 |
Total assets |  |  |  |  |  | ￦ | 33,662,545 |  |  | ￦ | 37,159,341 |

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KT Corporation and Subsidiaries
Consolidated Statements of Financial Position (Continued)
December 31, 2020 and December 31, 2021

(In millions of Korean won) |  | Notes |  |  | December 31, 2020 |  |  | December 31, 2021 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Trade and other payables |  |  | 4,15 |  |  | ￦ | 6,210,099 |  |  | ￦ | 6,641,422 |
Borrowings |  |  | 4,16 |  |  |  | 1,418,114 |  |  |  | 1,731,422 |
Other financial liabilities |  |  | 4,7 |  |  |  | 2,493 |  |  |  | 72,807 |
Current income tax liabilities |  |  |  |  |  |  | 232,225 |  |  |  | 266,430 |
Provisions |  |  | 17 |  |  |  | 165,990 |  |  |  | 171,316 |
Deferred revenue |  |  |  |  |  |  | 60,252 |  |  |  | 64,742 |
Other current liabilities |  |  | 9 |  |  |  | 1,103,299 |  |  |  | 1,124,293 |
Total current liabilities |  |  |  |  |  |  | 9,192,472 |  |  |  | 10,072,432 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Trade and other payables |  |  | 4,15 |  |  |  | 807,540 |  |  |  | 1,338,781 |
Borrowings |  |  | 4,16 |  |  |  | 5,898,184 |  |  |  | 6,706,281 |
Other financial liabilities |  |  | 4,7 |  |  |  | 260,676 |  |  |  | 424,859 |
Defined benefit liabilities, net |  |  | 18 |  |  |  | 378,087 |  |  |  | 197,883 |
Provisions |  |  | 17 |  |  |  | 86,202 |  |  |  | 86,081 |
Deferred revenue |  |  |  |  |  |  | 149,050 |  |  |  | 194,309 |
Deferred income tax liabilities |  |  | 30 |  |  |  | 429,331 |  |  |  | 643,958 |
Other non-current liabilities |  |  | 9 |  |  |  | 909,570 |  |  |  | 927,596 |
Total non-current liabilities |  |  |  |  |  |  | 8,918,640 |  |  |  | 10,519,748 |
Total liabilities |  |  |  |  |  |  | 18,111,112 |  |  |  | 20,592,180 |
Equity |  |  |  |  |  |  |  |  |  |  |  |
Share capital |  |  | 22 |  |  |  | 1,564,499 |  |  |  | 1,564,499 |
Share premium |  |  |  |  |  |  | 1,440,258 |  |  |  | 1,440,258 |
Retained earnings |  |  | 23 |  |  |  | 12,155,420 |  |  |  | 13,287,390 |
Accumulated other comprehensive income |  |  | 24 |  |  |  | 86,051 |  |  |  | 117,469 |
Other components of equity |  |  | 24 |  |  |  | (1,234,784 | ) |  |  | (1,433,080 | )
Equity attributable to owners of the Controlling Company |  |  |  |  |  |  | 14,011,444 |  |  |  | 14,976,536 |
Non-controlling interest |  |  |  |  |  |  | 1,539,989 |  |  |  | 1,590,625 |
Total equity |  |  |  |  |  |  | 15,551,433 |  |  |  | 16,567,161 |
Total liabilities and equity |  |  |  |  |  | ￦ | 33,662,545 |  |  | ￦ | 37,159,341 |

The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
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KT Corporation and Subsidiaries
Consolidated Statements of Profit or Loss
Years ended December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | Notes |  | 2019 |  |  | 2020 |  |  | 2021 |
Operating revenue |  | 26 |  | ￦ | 24,899,189 |  |  | ￦ | 24,440,647 |  |  | ￦ | 25,205,659 |
Revenue |  |  |  |  | 24,639,758 |  |  |  | 24,099,394 |  |  |  | 24,898,005 |
Other income |  | 27 |  |  | 259,431 |  |  |  | 341,253 |  |  |  | 307,654 |
Operating expenses |  | 28 |  |  | 23,872,219 |  |  |  | 23,418,314 |  |  |  | 23,506,262 |
Operating profit |  |  |  |  | 1,026,970 |  |  |  | 1,022,333 |  |  |  | 1,699,397 |
Finance income |  | 29 |  |  | 424,395 |  |  |  | 498,614 |  |  |  | 726,283 |
Finance costs |  | 29 |  |  | (432,133 | ) |  |  | (507,383 | ) |  |  | (563,330 | )
Share of net profits of associates and joint ventures |  | 14 |  |  | (3,304 | ) |  |  | 18,041 |  |  |  | 116,061 |
Profit before income tax |  |  |  |  | 1,015,928 |  |  |  | 1,031,605 |  |  |  | 1,978,411 |
Income tax expense |  | 30 |  |  | 320,060 |  |  |  | 285,349 |  |  |  | 519,016 |
Profit for the year |  |  |  | ￦ | 695,868 |  |  | ￦ | 746,256 |  |  | ￦ | 1,459,395 |
Profit for the year attributable to: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owners of the Controlling Company |  |  |  | ￦ | 645,703 |  |  | ￦ | 700,889 |  |  | ￦ | 1,356,878 |
Non-controlling interest |  |  |  | ￦ | 50,165 |  |  | ￦ | 45,367 |  |  | ￦ | 102,517 |
Earnings per share attributable to the equity holders of the Controlling Company during the year (in Korean won): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings per share |  | 31 |  | ￦ | 2,634 |  |  | ￦ | 2,858 |  |  | ￦ | 5,759 |
Diluted earnings per share |  | 31 |  | ￦ | 2,632 |  |  | ￦ | 2,858 |  |  | ￦ | 5,747 |

The above consolidated statements of profit or loss should be read in conjunction with the accompanying notes.
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KT Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
Years ended December 31, 2019, 2020 and 2021

(In millions of Korean won) |  |  |  |  |  |  |  |  |  |  |  |
|  | Notes |  |  | 2019 |  |  | 2020 |  |  | 2021 |
Profit for the year |  |  |  |  |  | ￦ | 695,868 |  |  | ￦ | 746,256 |  |  | ￦ | 1,459,395 |
Other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Items that will not be reclassified to profit or loss: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Remeasurements of the net defined benefit liability |  |  | 18 |  |  |  | (25,777 | ) |  |  | (60,181 | ) |  |  | 55,822 |
Shares of remeasurement gain (loss) of associates and joint ventures |  |  |  |  |  |  | 649 |  |  |  | 786 |  |  |  | (1,596 | )
Gain on valuation of equity instruments at fair value through other comprehensive income |  |  |  |  |  |  | 155,319 |  |  |  | 51,696 |  |  |  | 144,890 |
Items that may be subsequently reclassified to profit or loss: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on valuation of debt instruments at fair value through other comprehensive income |  |  |  |  |  |  | 11,833 |  |  |  | (9,699 | ) |  |  | (15,110 | )
Valuation gain (loss) on cash flow hedge |  |  |  |  |  |  | 67,548 |  |  |  | (84,044 | ) |  |  | 141,855 |
Other comprehensive income (loss) from cash flow hedges reclassified to profit (loss) |  |  |  |  |  |  | (44,684 | ) |  |  | 111,431 |  |  |  | (136,583 | )
Share of other comprehensive income (loss) from associates and joint ventures |  |  |  |  |  |  | 2,517 |  |  |  | 15,932 |  |  |  | (24,216 | )
Exchange differences on translation of foreign operations |  |  |  |  |  |  | 4,933 |  |  |  | (2,666 | ) |  |  | 505 |
Total other comprehensive income |  |  |  |  |  |  | 172,338 |  |  |  | 23,255 |  |  |  | 165,567 |
Total comprehensive income for the year |  |  |  |  |  | ￦ | 868,206 |  |  | ￦ | 769,511 |  |  | ￦ | 1,624,962 |
Total comprehensive income for the year attributable to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owners of the Controlling Company |  |  |  |  |  |  | 768,341 |  |  |  | 727,077 |  |  |  | 1,510,373 |
Non-controlling interest |  |  |  |  |  |  | 99,865 |  |  |  | 42,434 |  |  |  | 114,589 |

The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
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KT Corporation and Subsidiaries
Consolidated Statements of Changes in Equity
Years ended December 31, 2019, 2020 and 2021

|  |  |  |  | Attributable to owners of the Controlling Company |  |  |  |  |  |  |
(In millions of Korean won) |  | Notes |  |  | Share capital |  |  | Share premium |  |  | Retained earnings |  |  | Accumulated other comprehensive income |  |  | Other components of equity |  |  | Total |  |  | Non-controlling interest |  |  | Total equity |
Balance as at December 31, 2018 |  |  |  |  |  | ￦ | 1,564,499 |  |  | ￦ | 1,440,258 |  |  | ￦ | 11,256,069 |  |  | ￦ | 50,158 |  |  | ￦ | (1,181,083 | ) |  | ￦ | 13,129,901 |  |  | ￦ | 1,528,589 |  |  | ￦ | 14,658,490 |
Changes in accounting policy |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (3,890 | ) |  |  | — |  |  |  | — |  |  |  | (3,890 | ) |  |  | — |  |  |  | (3,890 | )
Adjusted total equity at the beginning of the financial year |  |  |  |  |  |  | 1,564,499 |  |  |  | 1,440,258 |  |  |  | 11,252,179 |  |  |  | 50,158 |  |  |  | (1,181,083 | ) |  |  | 13,126,011 |  |  |  | 1,528,589 |  |  |  | 14,654,600 |
Comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit for the year |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 645,703 |  |  |  | — |  |  |  | — |  |  |  | 645,703 |  |  |  | 50,165 |  |  |  | 695,868 |
Remeasurements of net defined benefit liabilities |  |  | 18 |  |  |  | — |  |  |  | — |  |  |  | (22,774 | ) |  |  | — |  |  |  | — |  |  |  | (22,774 | ) |  |  | (3,003 | ) |  |  | (25,777 | )
Share of gain on remeasurements of associates and joint ventures |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 636 |  |  |  | — |  |  |  | — |  |  |  | 636 |  |  |  | 13 |  |  |  | 649 |
Share of other comprehensive income of associates and joint ventures |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,427 |  |  |  | — |  |  |  | 2,427 |  |  |  | 90 |  |  |  | 2,517 |
Valuation loss on cash flow hedge |  |  | 4,7 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,850 |  |  |  | — |  |  |  | 22,850 |  |  |  | 14 |  |  |  | 22,864 |
Gain on valuation of financial instruments at fair value through other comprehensive income |  |  | 4,7 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 114,869 |  |  |  | — |  |  |  | 114,869 |  |  |  | 52,283 |  |  |  | 167,152 |
Exchange differences on translation of foreign operations |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,630 |  |  |  | — |  |  |  | 4,630 |  |  |  | 303 |  |  |  | 4,933 |
Total comprehensive income for the year |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 623,565 |  |  |  | 144,776 |  |  |  | — |  |  |  | 768,341 |  |  |  | 99,865 |  |  |  | 868,206 |
Transactions with owners |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dividends paid by the Controlling Company |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (269,659 | ) |  |  | — |  |  |  | — |  |  |  | (269,659 | ) |  |  | — |  |  |  | (269,659 | )
Dividends paid to non-controlling interest of subsidiaries |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (35,500 | ) |  |  | (35,500 | )
Changes in scope of consolidation |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (245 | ) |  |  | (245 | ) |  |  | 1,784 |  |  |  | 1,539 |
Changes in ownership interest in subsidiaries |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (9,082 | ) |  |  | (9,082 | ) |  |  | (74,578 | ) |  |  | (83,660 | )
Appropriations of loss on disposal of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (15,169 | ) |  |  | — |  |  |  | 15,169 |  |  |  | — |  |  |  | — |  |  |  | — |
Disposal of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,346 |  |  |  | 3,346 |  |  |  | — |  |  |  | 3,346 |
Others |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,812 |  |  |  | 1,812 |  |  |  | — |  |  |  | 1,812 |
Subtotal |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (284,828 | ) |  |  | — |  |  |  | 11,000 |  |  |  | (273,828 | ) |  |  | (108,294 | ) |  |  | (382,122 | )
Balance as at December 31, 2019 |  |  |  |  |  | ￦ | 1,564,499 |  |  | ￦ | 1,440,258 |  |  | ￦ | 11,590,916 |  |  | ￦ | 194,934 |  |  | ￦ | (1,170,083 | ) |  | ￦ | 13,620,524 |  |  | ￦ | 1,520,160 |  |  | ￦ | 15,140,684 |

The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
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KT Corporation and Subsidiaries
Consolidated Statements of Changes in Equity (Continued)
Years ended December 31, 2019, 2020 and 2021

|  |  |  |  | Attributable to owners of the Controlling Company |  |  |  |  |  |  |
(In millions of Korean won) |  | Notes |  |  | Share capital |  |  | Share premium |  |  | Retained earnings |  |  | Accumulated other comprehensive income |  |  | Other components of equity |  |  | Total |  |  | Non-controlling interest |  |  | Total equity |
Balance as at January 1, 2020 |  |  |  |  |  | ￦ | 1,564,499 |  |  | ￦ | 1,440,258 |  |  | ￦ | 11,590,916 |  |  | ￦ | 194,934 |  |  | ￦ | (1,170,083 | ) |  | ￦ | 13,620,524 |  |  | ￦ | 1,520,160 |  |  | ￦ | 15,140,684 |
Comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit for the year |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 700,889 |  |  |  | — |  |  |  | — |  |  |  | 700,889 |  |  |  | 45,367 |  |  |  | 746,256 |
Remeasurements of net defined benefit liabilities |  |  | 18 |  |  |  | — |  |  |  | — |  |  |  | (49,554 | ) |  |  | — |  |  |  | — |  |  |  | (49,554 | ) |  |  | (10,627 | ) |  |  | (60,181 | )
Share of gain on remeasurements of associates and joint ventures |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 410 |  |  |  | — |  |  |  | — |  |  |  | 410 |  |  |  | 376 |  |  |  | 786 |
Share of other comprehensive income of associates and joint ventures |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 14,701 |  |  |  | — |  |  |  | 14,701 |  |  |  | 1,231 |  |  |  | 15,932 |
Valuation loss on cash flow hedge |  |  | 4,7 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 27,433 |  |  |  | — |  |  |  | 27,433 |  |  |  | (46 | ) |  |  | 27,387 |
Gain on valuation of financial instruments at fair value through other comprehensive income |  |  | 4,7 |  |  |  | — |  |  |  | — |  |  |  | 184,215 |  |  |  | (150,135 | ) |  |  | — |  |  |  | 34,080 |  |  |  | 7,917 |  |  |  | 41,997 |
Exchange differences on translation of foreign operations |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (882 | ) |  |  | — |  |  |  | (882 | ) |  |  | (1,784 | ) |  |  | (2,666 | )
Total comprehensive income for the year |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 835,960 |  |  |  | (108,883 | ) |  |  | — |  |  |  | 727,077 |  |  |  | 42,434 |  |  |  | 769,511 |
Transactions with owners |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dividends paid by the Controlling Company |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (269,766 | ) |  |  | — |  |  |  | — |  |  |  | (269,766 | ) |  |  | — |  |  |  | (269,766 | )
Dividends paid to non-controlling interest of subsidiaries |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (40,802 | ) |  |  | (40,802 | )
Changes in ownership interest in subsidiaries |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 11,628 |  |  |  | 11,628 |  |  |  | 18,197 |  |  |  | 29,825 |
Appropriations of loss on disposal of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (1,690 | ) |  |  | — |  |  |  | 1,690 |  |  |  | — |  |  |  | — |  |  |  | — |
Acquisition of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (110,097 | ) |  |  | (110,097 | ) |  |  | — |  |  |  | (110,097 | )
Disposal of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 33,213 |  |  |  | 33,213 |  |  |  | — |  |  |  | 33,213 |
Others |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,135 | ) |  |  | (1,135 | ) |  |  | — |  |  |  | (1,135 | )
Subtotal |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (271,456 | ) |  |  | — |  |  |  | (64,701 | ) |  |  | (336,157 | ) |  |  | (22,605 | ) |  |  | (358,762 | )
Balance as at December 31, 2020 |  |  |  |  |  | ￦ | 1,564,499 |  |  | ￦ | 1,440,258 |  |  | ￦ | 12,155,420 |  |  | ￦ | 86,051 |  |  | ￦ | (1,234,784 | ) |  | ￦ | 14,011,444 |  |  | ￦ | 1,539,989 |  |  | ￦ | 15,551,433 |

The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
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11

Table of Contents
KT Corporation and Subsidiaries
Consolidated Statements of Changes in Equity (Continued)
Years ended December 31, 2019, 2020 and 2021

|  |  |  |  | Attributable to owners of the Controlling Company |  |  |  |  |  |  |
(In millions of Korean won) |  | Notes |  |  | Share capital |  |  | Share premium |  |  | Retained earnings |  |  | Accumulated other comprehensive income |  |  | Other components of equity |  |  | Total |  |  | Non-controlling interest |  |  | Total equity |
Balance as at January 1, 2021 |  |  |  |  |  | ￦ | 1,564,499 |  |  | ￦ | 1,440,258 |  |  | ￦ | 12,155,420 |  |  | ￦ | 86,051 |  |  | ￦ | (1,234,784 | ) |  | ￦ | 14,011,444 |  |  | ￦ | 1,539,989 |  |  | ￦ | 15,551,433 |
Comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit for the year |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 1,356,878 |  |  |  | — |  |  |  | — |  |  |  | 1,356,878 |  |  |  | 102,517 |  |  |  | 1,459,395 |
Remeasurements of net defined benefit liabilities |  |  | 18 |  |  |  | — |  |  |  | — |  |  |  | 47,348 |  |  |  | — |  |  |  | — |  |  |  | 47,348 |  |  |  | 8,474 |  |  |  | 55,822 |
Share of gain on remeasurements of associates and joint ventures |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (1,559 | ) |  |  | — |  |  |  | — |  |  |  | (1,559 | ) |  |  | (37 | ) |  |  | (1,596 | )
Share of other comprehensive income of associates and joint ventures |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (19,718 | ) |  |  | — |  |  |  | (19,718 | ) |  |  | (4,498 | ) |  |  | (24,216 | )
Valuation loss on cash flow hedge |  |  | 4,7 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,222 |  |  |  | — |  |  |  | 5,222 |  |  |  | 50 |  |  |  | 5,272 |
Gain on valuation of financial instruments at fair value through other comprehensive income |  |  | 4,7 |  |  |  | — |  |  |  | — |  |  |  | 76,288 |  |  |  | 47,247 |  |  |  | — |  |  |  | 123,535 |  |  |  | 6,245 |  |  |  | 129,780 |
Exchange differences on translation of foreign operations |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,333 | ) |  |  | — |  |  |  | (1,333 | ) |  |  | 1,838 |  |  |  | 505 |
Total comprehensive income for the year |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 1,478,955 |  |  |  | 31,418 |  |  |  | — |  |  |  | 1,510,373 |  |  |  | 114,589 |  |  |  | 1,624,962 |
Transactions with owners |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dividends paid by the Controlling Company |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (326,487 | ) |  |  | — |  |  |  | — |  |  |  | (326,487 | ) |  |  | — |  |  |  | (326,487 | )
Dividends paid to non-controlling interest of subsidiaries |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (23,762 | ) |  |  | (23,762 | )
Changes in scope of consolidation |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (17,566 | ) |  |  | (17,566 | )
Changes in ownership interest in subsidiaries |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15,797 |  |  |  | 15,797 |  |  |  | (22,620 | ) |  |  | (6,823 | )
Appropriations of loss on disposal of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (20,498 | ) |  |  | — |  |  |  | 20,498 |  |  |  | — |  |  |  | — |  |  |  | — |
Acquisition of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (190,105 | ) |  |  | (190,105 | ) |  |  | — |  |  |  | (190,105 | )
Disposal of treasury stock |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 50,954 |  |  |  | 50,954 |  |  |  | — |  |  |  | 50,954 |
Recognition of the obligation to purchase its own equity |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (101,829 | ) |  |  | (101,829 | ) |  |  | — |  |  |  | (101,829 | )
Others |  |  |  |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,389 |  |  |  | 6,389 |  |  |  | (5 | ) |  |  | 6,384 |
Subtotal |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (346,985 | ) |  |  | — |  |  |  | (198,296 | ) |  |  | (545,281 | ) |  |  | (63,953 | ) |  |  | (609,234 | )
Balance as at December 31, 2021 |  |  |  |  |  | ￦ | 1,564,499 |  |  | ￦ | 1,440,258 |  |  | ￦ | 13,287,390 |  |  | ￦ | 117,469 |  |  | ￦ | (1,433,080 | ) |  | ￦ | 14,976,536 |  |  | ￦ | 1,590,625 |  |  | ￦ | 16,567,161 |

The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
F-
12

Table of Contents
KT Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years ended December 31, 2019, 2020 and 2021

(In millions of Korean won) |  |  |  |  |  |  |  |  |  |  |  |
|  | Notes |  |  | 2019 |  |  | 2020 |  |  | 2021 |
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash generated from operations |  |  | 33 |  |  | ￦ | 4,058,065 |  |  | ￦ | 4,745,293 |  |  | ￦ | 5,829,607 |
Interest paid |  |  |  |  |  |  | (255,908 | ) |  |  | (254,852 | ) |  |  | (257,809 | )
Interest received |  |  |  |  |  |  | 276,349 |  |  |  | 259,836 |  |  |  | 272,061 |
Dividends received |  |  |  |  |  |  | 18,922 |  |  |  | 19,623 |  |  |  | 74,441 |
Income tax paid |  |  |  |  |  |  | (352,255 | ) |  |  | (30,073 | ) |  |  | (356,466 | )
Net cash inflow from operating activities |  |  |  |  |  |  | 3,745,173 |  |  |  | 4,739,827 |  |  |  | 5,561,834 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collection of loans |  |  |  |  |  |  | 63,517 |  |  |  | 63,435 |  |  |  | 54,934 |
Loans granted |  |  |  |  |  |  | (65,138 | ) |  |  | (48,731 | ) |  |  | (54,128 | )
Disposal of financial assets at fair value through profit or loss |  |  |  |  |  |  | 720,148 |  |  |  | 528,655 |  |  |  | 609,849 |
Disposal of financial assets at amortized cost |  |  |  |  |  |  | 422,637 |  |  |  | 528,746 |  |  |  | 690,457 |
Disposal of financial assets at fair value through other comprehensive income |  |  |  |  |  |  | — |  |  |  | 351,065 |  |  |  | 244,994 |
Disposal of assets held-for-sale |  |  |  |  |  |  | 28,834 |  |  |  | 83,241 |  |  |  | — |
Disposal of investments in associates and joint ventures |  |  |  |  |  |  | 16,930 |  |  |  | 24 |  |  |  | 10,880 |
Acquisition of investments in associates and joint ventures |  |  |  |  |  |  | (29,980 | ) |  |  | (273,411 | ) |  |  | (487,828 | )
Disposal of property and equipment, and investment properties |  |  |  |  |  |  | 42,554 |  |  |  | 49,832 |  |  |  | 174,413 |
Acquisition of property and equipment, and investment properties |  |  |  |  |  |  | (3,263,338 | ) |  |  | (3,207,566 | ) |  |  | (3,495,021 | )
Acquisition of financial assets at fair value through profit or loss |  |  |  |  |  |  | (793,977 | ) |  |  | (521,142 | ) |  |  | (753,907 | )
Acquisition of financial assets at amortized cost |  |  |  |  |  |  | (501,838 | ) |  |  | (759,180 | ) |  |  | (623,924 | )
Acquisition of financial assets at fair value through other comprehensive income |  |  |  |  |  |  | (14,277 | ) |  |  | (14,092 | ) |  |  | (131,674 | )
Disposal of intangible assets |  |  |  |  |  |  | 12,097 |  |  |  | 13,362 |  |  |  | 11,624 |
Disposal of right-of-use assets |  |  |  |  |  |  | 9,393 |  |  |  | 2,023 |  |  |  | 318 |
Discontinued operations |  |  |  |  |  |  | 1,977 |  |  |  | 205 |  |  |  | — |
Acquisition of intangible assets |  |  |  |  |  |  | (530,775 | ) |  |  | (511,094 | ) |  |  | (752,181 | )
Acquisition of right-of-use assets |  |  |  |  |  |  | (6,236 | ) |  |  | (5,824 | ) |  |  | (4,261 | )
Decrease in cash due to changes in scope of consolidation |  |  |  |  |  |  | — |  |  |  | (41,018 | ) |  |  | (671,359 | )
Increase in cash due to changes in scope of consolidation |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 39,340 |
Net cash outflow from investing activities |  |  |  |  |  |  | (3,887,472 | ) |  |  | (3,761,470 | ) |  |  | (5,137,474 | )
Cash flows from financing activities |  |  | 33 |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from borrowings and debentures |  |  |  |  |  |  | 1,951,568 |  |  |  | 1,795,221 |  |  |  | 2,899,567 |
Repayments of borrowings and debentures |  |  |  |  |  |  | (1,377,394 | ) |  |  | (1,627,354 | ) |  |  | (1,999,173 | )
Settlement of derivative assets and liabilities, net |  |  |  |  |  |  | 23,901 |  |  |  | 36,594 |  |  |  | (1,496 | )
Cash inflow from consolidated capital transactions |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 67,693 |
Cash outflow from consolidated capital transactions |  |  |  |  |  |  | (122,918 | ) |  |  | (1,192 | ) |  |  | (11,001 | )
Cash inflow from other financing activities |  |  |  |  |  |  | 65,698 |  |  |  | 35,854 |  |  |  | 2,556 |
Dividends paid to shareholders |  |  |  |  |  |  | (305,159 | ) |  |  | (310,567 | ) |  |  | (350,334 | )
Acquisition of treasury stock |  |  |  |  |  |  | — |  |  |  | (114,683 | ) |  |  | (193,626 | )
Cash outflow from other financing activities |  |  |  |  |  |  | — |  |  |  | — |  |  |  | (60,901 | )
Decrease in finance leases liabilities |  |  |  |  |  |  | (485,444 | ) |  |  | (447,784 | ) |  |  | (394,567 | )
Decrease in other liabilities |  |  |  |  |  |  | — |  |  |  | (13,674 | ) |  |  | — |
Net cash outflow from financing activities |  |  |  |  |  |  | (249,748 | ) |  |  | (647,585 | ) |  |  | (41,282 | )
Effect of exchange rate change on cash and cash equivalents |  |  |  |  |  |  | (5,481 | ) |  |  | (2,042 | ) |  |  | 1,890 |
Net increase (decrease) in cash and cash equivalents |  |  |  |  |  |  | (397,528 | ) |  |  | 328,730 |  |  |  | 384,968 |
Cash and cash equivalents |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of the year |  |  | 5 |  |  |  | 2,703,422 |  |  |  | 2,305,894 |  |  |  | 2,634,624 |
End of the year |  |  | 5 |  |  | ￦ | 2,305,894 |  |  | ￦ | 2,634,624 |  |  | ￦ | 3,019,592 |

The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
F-
13

Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

1. | General Information

The consolidated financial statements as of December 31, 2021 include the accounts of KT Corporation, which is the controlling company as defined under IFRS 10, Consolidated Financial Statements, and its
79
controlled subsidiaries as described in Note 1.2 (collectively referred to as the “Group”).

| 1.1 | The Controlling Company

KT Corporation (the “Controlling Company”) commenced operations on January 1, 1982, when it spun off from the Korea Communications Commission (formerly the Korean Ministry of Information and Communications) to provide telephone services and to engage in the development of advanced communications services under the Act of Telecommunications of Korea. The headquarters are located in Seongnam City, Gyeonggi Province, Republic of Korea, and the address of its registered head office is 90,
Buljeong-ro,
Bundang-gu,
Seongnam City, Gyeonggi Province.
On October 1, 1997, upon the announcement of the Government-Investment Enterprises Management Basic Act and the Privatization Law, the Controlling Company became a government-funded institution under the Commercial Code of Korea.
On December 23, 1998, the Controlling Company’s shares were listed on the Korea Exchange.
On May 29, 1999, the Controlling Company issued 24,282,195 additional shares and issued American Depository Shares (ADS), representing new shares and 20,813,311 government-owned shares, at the New York Stock Exchange. On July 2, 2001, the additional ADS representing 55,502,161 government-owned shares were issued at the New York Stock Exchange.
In 2002, the Controlling Company acquired the entire government-owned shares in accordance with the Korean government’s privatization plan. As at the end of the reporting period, the Korean government does not own any share in the Controlling Company.

| 1.2 | Consolidated Subsidiaries

The consolidated subsidiaries as at December 31, 2020 and 2021, are as follows:

|  |  |  |  |  | Controlling percentage ownership 1 (%) |  |
Subsidiary |  | Type of business |  | Location |  | December 31, 2020 |  | December 31, 2021 |  | Closing month
KT Linkus Inc. |  | Public telephone maintenance |  | Korea |  | 92.4% |  | 92.4% |  | December
KT Submarine Co., Ltd. 2,4 |  | Submarine cable construction and maintenance |  | Korea |  | 39.3% |  | 39.3% |  | December
KT Telecop Co., Ltd. |  | Security service |  | Korea |  | 86.8% |  | 86.8% |  | December
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  | Data communication |  | Korea |  | 67.1% |  | 73.0% |  | December
KT Service Bukbu Inc. |  | Opening services of fixed line |  | Korea |  | 67.3% |  | 67.3% |  | December
KT Service Nambu Inc. |  | Opening services of fixed line |  | Korea |  | 77.3% |  | 77.3% |  | December
KT Commerce Inc. |  | B2C, B2B service |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Strategic Investment Fund No.2 |  | Investment fund |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Strategic Investment Fund No.3 |  | Investment fund |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Strategic Investment Fund No.4 |  | Investment fund |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Strategic Investment Fund No.5 |  | Investment fund |  | Korea |  | 100.0% |  | 100.0% |  | December
BC-VP Strategic Investment Fund No.1 |  | Investment fund |  | Korea |  | 100.0% |  | 100.0% |  | December

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  |  |  |  |  | Controlling percentage ownership 1 (%) |  |
Subsidiary |  | Type of business |  | Location |  | December 31, 2020 |  | December 31, 2021 |  | Closing month
BC Card Co., Ltd. |  | Credit card business |  | Korea |  | 69.5% |  | 69.5% |  | December
VP Inc. |  | Payment security service for credit card, others |  | Korea |  | 50.9% |  | 50.9% |  | December
H&C Network Co., Ltd. |  | Call center for financial sectors |  | Korea |  | 100.0% |  | 100.0% |  | December
BC Card China Co., Ltd. |  | Software development and data processing |  | China |  | 100.0% |  | 100.0% |  | December
INITECH Co., Ltd. 4 |  | Internet banking ASP and security solutions |  | Korea |  | 58.2% |  | 58.2% |  | December
Smartro Co., Ltd. |  | VAN (Value Added Network) business |  | Korea |  | 64.5% |  | 64.5% |  | December
KTDS Co., Ltd. 4 |  | System integration and maintenance |  | Korea |  | 95.5% |  | 95.5% |  | December
KT M&S Co., Ltd. |  | PCS distribution |  | Korea |  | 100.0% |  | 100.0% |  | December
GENIE Music Corporation 2,4 |  | Online music production and distribution |  | Korea |  | 36.2% |  | 36.2% |  | December
KT MOS Bukbu Co., Ltd. 4 |  | Telecommunication facility maintenance |  | Korea |  | 100.0% |  | 100.0% |  | December
KT MOS Nambu Co., Ltd. 4 |  | Telecommunication facility maintenance |  | Korea |  | 98.4% |  | 98.4% |  | December
KT Skylife Co., Ltd. 4 |  | Satellite TV |  | Korea |  | 50.3% |  | 50.3% |  | December
Skylife TV Co., Ltd. |  | TV contents provider |  | Korea |  | 92.6% |  | 100.0% |  | December
KT Estate Inc. |  | Residential building development and supply |  | Korea |  | 100.0% |  | 100.0% |  | December
KT AMC Inc. |  | Asset management and consulting services |  | Korea |  | 100.0% |  | 100.0% |  | December
KT NEXR Co., Ltd. |  | Cloud system implementation |  | Korea |  | 100.0% |  | 100.0% |  | December
KTGDH Co., Ltd. |  | Data center development and related service |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Sat Inc. |  | Satellite communication business |  | Korea |  | 100.0% |  | 100.0% |  | December
Nasmedia, Co., Ltd. 3,4 |  | Solution provider and IPTV advertisement sales business |  | Korea |  | 44.0% |  | 44.0% |  | December
KT Sports Inc. |  | Management of sports group |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Music Contents Fund No.2 |  | Music contents investment business |  | Korea |  | 100.0% |  | 100.0% |  | December
KT-Michigan Global Contents Fund |  | Content investment business |  | Korea |  | 88.6% |  | 88.6% |  | December
KTCS Corporation 2,4 |  | Database and online information provider |  | Korea |  | 31.9% |  | 32.2% |  | December
KTIS Corporation 2,4 |  | Database and online information provider |  | Korea |  | 30.8% |  | 31.4% |  | December
KT M Mobile Inc. |  | Special category telecommunications operator and sales of communication device |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Investment Co., Ltd. |  | Technology business finance |  | Korea |  | 100.0% |  | 100.0% |  | December
Whowho&Company., Ltd. |  | Software development and supply |  | Korea |  | 100.0% |  | 100.0% |  | December
PlayD Co., Ltd. |  | Advertising agency |  | Korea |  | 70.4% |  | 70.4% |  | December
Next Connect PFV Inc. |  | Residential building development and supply |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Rwanda Networks Ltd. |  | Network installation and management |  | Rwanda |  | 51.0% |  | 51.0% |  | December

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  |  |  |  |  | Controlling percentage ownership 1 (%) |  |
Subsidiary |  | Type of business |  | Location |  | December 31, 2020 |  | December 31, 2021 |  | Closing month
AOS Ltd. |  | System integration and maintenance |  | Rwanda |  | 51.0% |  | 51.0% |  | December
KT Japan Co., Ltd. |  | Foreign telecommunication business |  | Japan |  | 100.0% |  | 100.0% |  | December
East Telecom LLC |  | Fixed line internet business |  | Uzbekistan |  | 91.6% |  | 91.6% |  | December
KT America, Inc. |  | Foreign investment business |  | USA |  | 100.0% |  | 100.0% |  | December
PT. BC Card Asia Pacific |  | Software development and supply |  | Indonesia |  | 99.9% |  | 99.9% |  | December
KT Hong Kong Telecommunications Co., Ltd. |  | Fixed line telecommunication business |  | Hong Kong |  | 100.0% |  | 100.0% |  | December
Korea Telecom Singapore Pte. Ltd. |  | Foreign investment business |  | Singapore |  | 100.0% |  | 100.0% |  | December
Texnoprosistem LLC |  | Fixed line internet business |  | Uzbekistan |  | 100.0% |  | 100.0% |  | December
Nasmedia Thailand Co., Ltd. |  | Internet advertising solution |  | Thailand |  | 99.9% |  | 99.9% |  | December
KT Hopemate |  | Manufacturing |  | Korea |  | 100.0% |  | 100.0% |  | December
K-REALTY RENTAL HOUSING REIT 3 |  | Residential building |  | Korea |  | 88.6% |  | 88.6% |  | December
Storywiz Co., Ltd. |  | Contents and software development and supply |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) |  | Telecommunication facility construction and maintenance |  | Korea |  | 100.0% |  | 100.0% |  | December
KT Studio Genie Co., Ltd. |  | Data communication service and data communication construction business |  | Korea |  | — |  | 100.0% |  | December
KHS Corporation |  | Operation and maintenance of facilities |  | Korea |  | — |  | 100.0% |  | December
Lolab Co., Ltd. |  | Truck transportation and trucking arrangement business |  | Korea |  | — |  | 80.0% |  | December
HCN Co., Ltd. |  | Cable television service |  | Korea |  | — |  | 100.0% |  | December
MEDIA GENIE Co., Ltd. |  | TV contents provider |  | Korea |  | — |  | 100.0% |  | December
KT Seezn Co., Ltd. |  | Movies, videos and TV contents production and distribution |  | Korea |  | — |  | 100.0% |  | December
BOOK CLUB MILLIE 3 |  | Book contents service |  | Korea |  | — |  | 38.6% |  | December
KT ES Pte. Ltd. |  | Foreign investment business |  | Singapore |  | — |  | 57.6% |  | December
Epsilon Global Communications Pte. Ltd. |  | Network service industry |  | Singapore |  | — |  | 100.0% |  | December
Epsilon Telecommunications (SP) Pte. Ltd. |  | Fixed line telecommunication business |  | Singapore |  | — |  | 100.0% |  | December
Epsilon Telecommunications (US) Pte. Ltd. |  | Fixed line telecommunication business |  | Singapore |  | — |  | 100.0% |  | December
Epsilon Telecommunications Limited |  | Fixed line telecommunication business |  | UK |  | — |  | 100.0% |  | December
7D Digital Limited |  | Software development |  | UK |  | — |  | 100.0% |  | December
Epsilon Telecommunications (HK) Limited |  | Fixed line telecommunication business |  | Hong kong |  | — |  | 100.0% |  | December
Epsilon US Inc. |  | Fixed line telecommunication business |  | USA |  | — |  | 100.0% |  | December
Epsilon Telecommunications (BG) EOOD |  | Employee support service |  | Bulgaria |  | — |  | 100.0% |  | December
Epsilon M E A General Trading LLC 3 |  | Local counter work |  | Dubai |  | — |  | 49.0% |  | December
Nasmedia-KT Alpha Future Growth Strategic Investment Fund |  | Investment fund |  | Korea |  | — |  | 100.0% |  | December
KT Strategic Investment Fund 6 |  | Investment fund |  | Korea |  | — |  | 100.0% |  | December
Altimedia Corporation |  | Software development and delivery |  | Korea |  | — |  | 100.0% |  | December

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  |  |  |  |  |  |  | Controlling percentage ownership 1 (%) |  |
Subsidiary |  |  |  | Type of business |  | Location |  | December 31, 2020 |  | December 31, 2021 |  | Closing month
Alticast B.V. |  |  |  | Software development and delivery |  | Netherlands |  | — |  | 100.0% |  | December
Alticast Company Limited |  |  |  | Software development and delivery |  | Vietnam |  | — |  | 100.0% |  | December
Wirecard (Vietnam) Company Limited |  | Software sales business |  | Vietnam |  | — |  | 100.0% |  | December
KT Philippines |  |  |  | Fixed line telecommunication business |  | Philippines |  | 40.0% |  | 100.0% |  | December

1 | Sum of the ownership interests owned by the Controlling Company and subsidiaries.

2 | Although the Controlling Company owns less than 50% ownership in this entity, this entity is consolidated as the Controlling Company can exercise the majority voting rights in its decision-making process at all times considering the historical voting pattern at the shareholders’ meetings.

3 | Although the Controlling Company owns less than 50% ownership in this entity, this entity is consolidated as the Controlling Company holds the majority of voting right based on an agreement with other investors.

4 | The number of subsidiaries’ treasury stock is deducted from the total number of shares when calculating the controlling percentage ownership.

| 1.3 | Changes in Scope of Consolidation

Subsidiaries newly included and excluded in the consolidation during the year ended December 31, 2021:

Changes |  | Location |  | Name of Subsidiary |  | Reason
Included |  | Korea |  | KT Studio Genie Co., Ltd. |  | Newly established
Included |  | Korea |  | Lolab Co., Ltd. |  | Newly established
Included |  | Korea |  | KHS Corporation |  | Transferred
Included |  | Korea |  | HCN Co., Ltd. |  | Transferred
Included |  | Korea |  | MEDIA GENIE Co., Ltd. |  | Transferred
Included |  | Korea |  | KT Seezn Co., Ltd. |  | Transferred
Included |  | Korea |  | BOOK CLUB MILLIE |  | Transferred
Included |  | Singapore |  | KT ES Pte. Ltd. |  | Newly established
Included |  | Singapore |  | Epsilon Global Communications Pte. Ltd. |  | Transferred
Included |  | Singapore |  | Epsilon Telecommunications (SP) Pte. Ltd. |  | Transferred
Included |  | Singapore |  | Epsilon Telecommunications (US) Pte. Ltd. |  | Transferred
Included |  | UK |  | Epsilon Telecommunications Limited |  | Transferred
Included |  | UK |  | 7D Digital Limited |  | Transferred
Included |  | Hong kong |  | Epsilon Telecommunications (HK) Limited |  | Transferred
Included |  | USA |  | Epsilon US Inc. |  | Transferred

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

Changes |  | Location |  | Name of Subsidiary |  | Reason
Included |  | Bulgaria |  | Epsilon Telecommunications (BG) EOOD |  | Transferred
Included |  | Dubai |  | Epsilon M E A General Trading L.L.C |  | Transferred
Included |  | Korea |  | K-REALTY RENTAL HOUSING REIT V |  | Newly established
Included |  | Korea |  | Nasmedia-KT Alpha Future Growth Strategic Investment Fund |  | Newly established
Included |  | Korea |  | KT Strategic Investment Fund 6 |  | Newly established
Included |  | Korea |  | Altimedia Corporation |  | Transferred
Included |  | Netherlands |  | Alticast B.V. |  | Transferred
Included |  | Vietnam |  | Alticast Company Limited |  | Transferred
Included |  | Vietnam |  | Wirecard (Vietnam) Company Limited |  | Transferred
Included |  | Philippines |  | KT Philippines |  | Transferred
Excluded |  | Belgium |  | KT Belgium |  | Liquidated
Excluded |  | Korea |  | KT Powertel Co., Ltd. |  | Shares disposed
Excluded |  | China |  | Korea Telecom China Co., Ltd. |  | Liquidated
Excluded |  | Poland |  | KBTO Sp.z o. o. |  | Liquidated
Excluded |  | Korea |  | GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co. |  | Liquidated
Excluded |  | Korea |  | KT M Hows Co., Ltd. |  | Merged
Excluded |  | Netherlands |  | KT Dutch B.V. |  | Liquidated
Excluded |  | Korea |  | KT Music Contents Fund No.1 |  | Liquidated
Excluded |  | Korea |  | Autopion Co., Ltd. |  | Shares disposed
Excluded |  | Korea |  | K-REALTY RENTAL HOUSING REIT V |  | Excluded from consolidation

Summarized information for consolidated subsidiaries as at and for the years ended December 31, 2019, 2020 and 2021 is as follows:

(In millions of Korean won) |  | December 31, 2019 |
|  | Total assets |  |  | Total liabilities |  |  | Operating revenue |  |  | Profit (loss) for the year |
KT Powertel Co., Ltd. |  | ￦ | 118,052 |  |  | ￦ | 19,766 |  |  | ￦ | 62,846 |  |  | ￦ | 3,085 |
KT Linkus Inc. |  |  | 70,494 |  |  |  | 62,088 |  |  |  | 97,892 |  |  |  | (2,258 | )
KT Submarine Co., Ltd. |  |  | 120,947 |  |  |  | 18,452 |  |  |  | 55,244 |  |  |  | 486 |
KT Telecop Co., Ltd. |  |  | 279,878 |  |  |  | 153,841 |  |  |  | 332,063 |  |  |  | (4,875 | )
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  |  | 279,818 |  |  |  | 74,769 |  |  |  | 323,065 |  |  |  | 1,426 |
KT Service Bukbu Inc. |  |  | 64,802 |  |  |  | 58,984 |  |  |  | 219,427 |  |  |  | (445 | )
KT Service Nambu Inc. |  |  | 63,917 |  |  |  | 55,548 |  |  |  | 266,148 |  |  |  | 280 |
BC Card Co., Ltd. 1 |  |  | 3,912,982 |  |  |  | 2,594,232 |  |  |  | 3,553,008 |  |  |  | 115,885 |
H&C Network Co. Ltd. 1 |  |  | 282,016 |  |  |  | 68,401 |  |  |  | 320,701 |  |  |  | (1,593 | )
Nasmedia Co., Ltd. 1 |  |  | 356,236 |  |  |  | 203,105 |  |  |  | 117,550 |  |  |  | 22,484 |

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | 2019 |
|  | Total assets |  |  | Total liabilities |  |  | Operating revenue |  |  | Profit (loss) for the year |
KTDS Co., Ltd. 1 |  |  | 158,153 |  |  |  | 105,462 |  |  |  | 428,758 |  |  |  | 9,027 |
KT M Hows Co., Ltd. |  |  | 74,326 |  |  |  | 50,638 |  |  |  | 33,443 |  |  |  | 6,771 |
KT M&S Co., Ltd. |  |  | 248,142 |  |  |  | 215,777 |  |  |  | 813,498 |  |  |  | 12,732 |
GENIE Music Corporation |  |  | 234,131 |  |  |  | 80,952 |  |  |  | 230,480 |  |  |  | 7,658 |
KT MOS Bukbu Inc. |  |  | 33,376 |  |  |  | 28,841 |  |  |  | 63,761 |  |  |  | 353 |
KT MOS Nambu Inc. |  |  | 34,258 |  |  |  | 26,722 |  |  |  | 67,300 |  |  |  | 3,099 |
KT Skylife Co., Ltd. 1 |  |  | 848,276 |  |  |  | 142,839 |  |  |  | 704,996 |  |  |  | 56,008 |
KT Estate Inc. 1 |  |  | 1,686,000 |  |  |  | 295,706 |  |  |  | 485,686 |  |  |  | 48,552 |
KTGDH Co., Ltd. (KTSB Data service) |  |  | 10,437 |  |  |  | 1,628 |  |  |  | 3,977 |  |  |  | 344 |
KT Sat Inc. |  |  | 651,195 |  |  |  | 127,523 |  |  |  | 168,376 |  |  |  | 16,497 |
KT Sports Inc. |  |  | 15,603 |  |  |  | 8,333 |  |  |  | 55,241 |  |  |  | (464 | )
KT Music Contents Fund No.1 |  |  | 10,579 |  |  |  | 1,677 |  |  |  | 521 |  |  |  | 345 |
KT Music Contents Fund No.2 |  |  | 7,675 |  |  |  | 279 |  |  |  | 331 |  |  |  | 48 |
KT-Michigan Global Content Fund |  |  | 11,688 |  |  |  | 61 |  |  |  | 248 |  |  |  | (1,113 | )
Autopion Co., Ltd. |  |  | 7,460 |  |  |  | 4,894 |  |  |  | 5,604 |  |  |  | (302 | )
KT M mobile Inc. |  |  | 135,917 |  |  |  | 30,603 |  |  |  | 161,720 |  |  |  | (5,580 | )
KT Investment Co., Ltd. 1 |  |  | 73,463 |  |  |  | 56,212 |  |  |  | 13,375 |  |  |  | 847 |
KTCS Corporation 1 |  |  | 378,171 |  |  |  | 213,983 |  |  |  | 944,778 |  |  |  | 7,597 |
KTIS Corporation |  |  | 305,798 |  |  |  | 137,524 |  |  |  | 454,561 |  |  |  | 9,205 |
Next connect PFV Inc. |  |  | 385,412 |  |  |  | 24,275 |  |  |  | 1,590 |  |  |  | (5,898 | )
KT Japan Co., Ltd. 1 |  |  | 1,851 |  |  |  | 2,858 |  |  |  | 2,891 |  |  |  | 651 |
Korea Telecom China Co., Ltd. |  |  | 879 |  |  |  | 39 |  |  |  | 844 |  |  |  | 192 |
KT Dutch B.V. |  |  | 31,003 |  |  |  | 50 |  |  |  | — |  |  |  | (242 | )
Super iMax LLC |  |  | 3,568 |  |  |  | 5,304 |  |  |  | 4,604 |  |  |  | (631 | )
East Telecom LLC 1 |  |  | 20,857 |  |  |  | 16,302 |  |  |  | 17,186 |  |  |  | 2,140 |
KT AMERICA, INC |  |  | 4,611 |  |  |  | 537 |  |  |  | 6,808 |  |  |  | 572 |
PT. KT Indonesia |  |  | 8 |  |  |  | — |  |  |  | — |  |  |  | — |
KT Rwanda Networks Ltd. 2 |  |  | 132,461 |  |  |  | 183,164 |  |  |  | 18,013 |  |  |  | (31,662 | )
KT Belgium |  |  | 93,321 |  |  |  | 11 |  |  |  | — |  |  |  | (64 | )
KT ORS Belgium |  |  | 6,913 |  |  |  | 14 |  |  |  | — |  |  |  | (43 | )
KBTO sp.zo.o. |  |  | 1,767 |  |  |  | 245 |  |  |  | 519 |  |  |  | (3,457 | )
AOS Ltd. 2 |  |  | 12,337 |  |  |  | 3,993 |  |  |  | 6,982 |  |  |  | (591 | )
KT Hongkong Telecommunications Co., Ltd. |  |  | 5,126 |  |  |  | 2,923 |  |  |  | 13,321 |  |  |  | 586 |
KT Hopemate |  |  | 2,129 |  |  |  | 1,019 |  |  |  | 1,027 |  |  |  | (390 | )
GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co. |  |  | 6,285 |  |  |  | 1,139 |  |  |  | 176 |  |  |  | 70 |
K-REALTY RENTAL HOUSING REIT 3 |  |  | 300 |  |  |  | — |  |  |  | — |  |  |  | — |

1 | These companies are the intermediate controlling companies of other subsidiaries and the above financial information is from their consolidated financial statements.

2 | At the end of the reporting period, convertible preferred stock issued by subsidiaries is included in liabilities.

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | December 31, 2020 |
|  | Total assets |  |  | Total liabilities |  |  | Operating revenues |  |  | Profit (loss) for the year |
KT Powertel Co., Ltd. |  | ￦ | 119,694 |  |  | ￦ | 18,833 |  |  | ￦ | 65,897 |  |  | ￦ | 3,809 |
KT Linkus Inc. |  |  | 58,372 |  |  |  | 54,022 |  |  |  | 84,519 |  |  |  | (3,212 | )
KT Submarine Co., Ltd. |  |  | 116,813 |  |  |  | 14,032 |  |  |  | 110,201 |  |  |  | 1,197 |
KT Telecop Co., Ltd. |  |  | 318,456 |  |  |  | 193,737 |  |  |  | 392,489 |  |  |  | 212 |
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  |  | 288,949 |  |  |  | 92,599 |  |  |  | 350,231 |  |  |  | 2,080 |
KT Service Bukbu Inc. |  |  | 60,825 |  |  |  | 56,554 |  |  |  | 217,451 |  |  |  | (871 | )
KT Service Nambu Inc. |  |  | 58,182 |  |  |  | 51,460 |  |  |  | 264,776 |  |  |  | (456 | )
BC Card Co., Ltd. 1 |  |  | 3,084,398 |  |  |  | 1,778,751 |  |  |  | 3,387,640 |  |  |  | 39,455 |
H&C Network 1 |  |  | 269,651 |  |  |  | 61,365 |  |  |  | 322,690 |  |  |  | 2,413 |
Nasmedia Co., Ltd. 1 |  |  | 422,039 |  |  |  | 221,371 |  |  |  | 113,136 |  |  |  | 23,134 |
KTDS Co., Ltd. 1 |  |  | 183,297 |  |  |  | 133,129 |  |  |  | 499,990 |  |  |  | 10,635 |
KT M Hows Co., Ltd. |  |  | 104,704 |  |  |  | 76,315 |  |  |  | 44,860 |  |  |  | 6,935 |
KT M&S Co., Ltd. |  |  | 231,260 |  |  |  | 197,306 |  |  |  | 661,533 |  |  |  | (485 | )
GENIE Music Corporation |  |  | 250,538 |  |  |  | 88,488 |  |  |  | 247,237 |  |  |  | 9,472 |
KT MOS Bukbu Co., Ltd. |  |  | 32,167 |  |  |  | 26,070 |  |  |  | 67,975 |  |  |  | 1,473 |
KT MOS Nambu Co., Ltd. |  |  | 33,765 |  |  |  | 24,947 |  |  |  | 71,259 |  |  |  | 1,639 |
KT Skylife Co., Ltd. 1 |  |  | 919,476 |  |  |  | 175,039 |  |  |  | 706,631 |  |  |  | 58,190 |
KT Estate Inc. 1 |  |  | 1,689,601 |  |  |  | 325,429 |  |  |  | 365,335 |  |  |  | 14,370 |
KTGDH Co., Ltd. (KTSB Data Service) |  |  | 11,003 |  |  |  | 1,669 |  |  |  | 4,282 |  |  |  | 538 |
KT Sat Inc. |  |  | 630,740 |  |  |  | 92,791 |  |  |  | 173,693 |  |  |  | 14,753 |
KT Sports Inc. |  |  | 26,572 |  |  |  | 14,940 |  |  |  | 46,608 |  |  |  | (2,516 | )
KT Music Contents Fund No.1 |  |  | 4,844 |  |  |  | 1,525 |  |  |  | 243 |  |  |  | 84 |
KT Music Contents Fund No.2 |  |  | 15,021 |  |  |  | 285 |  |  |  | 169 |  |  |  | (116 | )
KT-Michigan Global Contents Fund |  |  | 10,382 |  |  |  | 175 |  |  |  | 111 |  |  |  | (1,420 | )
Autopion Co., Ltd. |  |  | 4,903 |  |  |  | 4,961 |  |  |  | 6,174 |  |  |  | (2,459 | )
KT M Mobile Inc. |  |  | 129,011 |  |  |  | 27,281 |  |  |  | 163,472 |  |  |  | (3,617 | )
KT Investment Co., Ltd. 1 |  |  | 115,627 |  |  |  | 93,695 |  |  |  | 47,801 |  |  |  | 4,680 |
KTCS Corporation 1 |  |  | 384,919 |  |  |  | 215,175 |  |  |  | 933,006 |  |  |  | 11,323 |
KTIS Corporation |  |  | 294,289 |  |  |  | 126,894 |  |  |  | 454,172 |  |  |  | 7,387 |
Next Connect PFV Inc. |  |  | 394,268 |  |  |  | 37,271 |  |  |  | 26 |  |  |  | (7,101 | )
KT Japan Co., Ltd. 1 |  |  | 2,694 |  |  |  | 2,622 |  |  |  | 1,853 |  |  |  | 1 |
Korea Telecom China Co., Ltd. |  |  | 381 |  |  |  | 21 |  |  |  | 618 |  |  |  | (492 | )
KT Dutch B.V. 1 |  |  | 29,585 |  |  |  | 10,109 |  |  |  | 26,782 |  |  |  | 6,061 |
KT AMERICA, INC |  |  | 4,498 |  |  |  | 125 |  |  |  | 6,808 |  |  |  | 712 |
KT Rwanda Networks Ltd. 2 |  |  | 114,768 |  |  |  | 191,781 |  |  |  | 17,870 |  |  |  | (34,610 | )
KT Belgium |  |  | 87,608 |  |  |  | — |  |  |  | (81 | ) |  |  | (81 | )
KBTO sp.z o.o. |  |  | 438 |  |  |  | 117 |  |  |  | 490 |  |  |  | (2,823 | )
AOS Ltd. 2 |  |  | 11,812 |  |  |  | 3,875 |  |  |  | 5,719 |  |  |  | 296 |
KT Hong Kong Telecommunications Co., Ltd. |  |  | 6,159 |  |  |  | 2,800 |  |  |  | 16,386 |  |  |  | 1,308 |
KT Hopemate |  |  | 3,720 |  |  |  | 2,787 |  |  |  | 5,239 |  |  |  | (13 | )
GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co. |  |  | 5,703 |  |  |  | 1,165 |  |  |  | 333 |  |  |  | 83 |
Storywiz Co., Ltd |  |  | 21,594 |  |  |  | 10,065 |  |  |  | 19,209 |  |  |  | (1,954 | )
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) |  |  | 138,220 |  |  |  | 102,963 |  |  |  | 346,040 |  |  |  | (8,461 | )

1 | These companies are the intermediate controlling companies of other subsidiaries and the above financial information is from their consolidated financial statements.

2 | At the end of the reporting period, convertible preferred stock issued by subsidiaries is included in liabilities.

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | December 31, 2021 |
|  | Total assets |  |  | Total liabilities |  |  | Operating revenues |  |  | Profit (loss) for the year |
KT Linkus Inc. |  | ￦ | 54,219 |  |  | ￦ | 53,316 |  |  | ￦ | 81,434 |  |  | ￦ | (3,095) |
KT Submarine Co., Ltd. |  |  | 110,390 |  |  |  | 10,736 |  |  |  | 31,374 |  |  |  | (3,183 | )
KT Telecop Co., Ltd. |  |  | 363,224 |  |  |  | 233,797 |  |  |  | 515,456 |  |  |  | 3,985 |
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  |  | 390,671 |  |  |  | 172,767 |  |  |  | 471,870 |  |  |  | (8,692 | )
KT Service Bukbu Inc. |  |  | 59,341 |  |  |  | 54,070 |  |  |  | 231,602 |  |  |  | 1,128 |
KT Service Nambu Inc. |  |  | 62,513 |  |  |  | 52,695 |  |  |  | 271,174 |  |  |  | 1,430 |
BC Card Co., Ltd. 1 |  |  | 3,933,427 |  |  |  | 2,481,004 |  |  |  | 3,580,970 |  |  |  | 120,308 |
H&C Network Co., Ltd. 1 |  |  | 88,616 |  |  |  | 4,993 |  |  |  | 227,604 |  |  |  | 11,995 |
Nasmedia Co., Ltd. 1 |  |  | 490,394 |  |  |  | 268,618 |  |  |  | 125,876 |  |  |  | 27,120 |
KTDS Co., Ltd. 1 |  |  | 341,358 |  |  |  | 199,831 |  |  |  | 632,899 |  |  |  | 21,464 |
KT M&S Co., Ltd. |  |  | 241,377 |  |  |  | 203,051 |  |  |  | 710,634 |  |  |  | 3,496 |
KT MOS Bukbu Co., Ltd. |  |  | 32,511 |  |  |  | 25,402 |  |  |  | 70,212 |  |  |  | 1,637 |
KT MOS Nambu Co., Ltd. |  |  | 36,741 |  |  |  | 26,053 |  |  |  | 71,940 |  |  |  | 2,016 |
KT Skylife Co., Ltd. 1 |  |  | 1,275,645 |  |  |  | 469,694 |  |  |  | 772,950 |  |  |  | 62,309 |
KT Estate Inc. 1 |  |  | 2,370,940 |  |  |  | 791,884 |  |  |  | 577,578 |  |  |  | 213,203 |
KTGDH Co., Ltd. |  |  | 11,464 |  |  |  | 1,560 |  |  |  | 4,423 |  |  |  | 553 |
KT Sat Inc. |  |  | 593,616 |  |  |  | 34,169 |  |  |  | 174,750 |  |  |  | 20,830 |
KT Sports Inc. |  |  | 29,524 |  |  |  | 19,740 |  |  |  | 67,612 |  |  |  | (2,039 | )
KT Music Contents Fund No.2 |  |  | 14,985 |  |  |  | 278 |  |  |  | 253 |  |  |  | (30 | )
KT-Michigan Global Contents Fund |  |  | 3,552 |  |  |  | 112 |  |  |  | 13,592 |  |  |  | 10,032 |
KT M Mobile Inc. |  |  | 144,175 |  |  |  | 40,749 |  |  |  | 204,641 |  |  |  | 5,918 |
KT Investment Co., Ltd. 1 |  |  | 87,366 |  |  |  | 66,108 |  |  |  | 21,040 |  |  |  | (697 | )
KTCS Corporation 1 |  |  | 416,750 |  |  |  | 234,172 |  |  |  | 968,499 |  |  |  | 19,034 |
KTIS Corporation |  |  | 369,361 |  |  |  | 177,619 |  |  |  | 487,801 |  |  |  | 24,944 |
Next Connect PFV Inc. |  |  | 518,441 |  |  |  | 167,963 |  |  |  | — |  |  |  | (6,519 | )
KT Japan Co., Ltd. 1 |  |  | 1,474 |  |  |  | 2,633 |  |  |  | 1,298 |  |  |  | (142 | )
KT America, Inc. |  |  | 4,884 |  |  |  | 101 |  |  |  | 6,508 |  |  |  | 201 |
KT Rwanda Networks Ltd. 2 |  |  | 125,860 |  |  |  | 236,389 |  |  |  | 23,328 |  |  |  | (28,770 | )
AOS Ltd. 2 |  |  | 11,539 |  |  |  | 2,812 |  |  |  | 6,942 |  |  |  | 823 |
KT Hong Kong Telecommunications Co., Ltd. |  |  | 6,613 |  |  |  | 1,346 |  |  |  | 18,825 |  |  |  | 1,313 |
KT Hopemate 1 |  |  | 6,311 |  |  |  | 2,978 |  |  |  | 12,538 |  |  |  | 116 |
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) |  |  | 185,850 |  |  |  | 144,832 |  |  |  | 284,998 |  |  |  | 366 |
KT Studio Genie Co., Ltd. 1,2 |  |  | 648,534 |  |  |  | 276,933 |  |  |  | 90,047 |  |  |  | (16,443 | )
Lolab Co., Ltd. |  |  | 26,726 |  |  |  | 897 |  |  |  | 2,107 |  |  |  | (134 | )
East Telecom LLC 1 |  |  | 35,904 |  |  |  | 22,088 |  |  |  | 11,960 |  |  |  | 2,487 |
KT ES Pte. Ltd. 1 |  |  | 240,331 |  |  |  | 80,597 |  |  |  | 15,157 |  |  |  | (6,355 | )
KT Philippines |  |  | 3,641 |  |  |  | 1,243 |  |  |  | — |  |  |  | — |
Altimedia Corporation 1 |  |  | 32,338 |  |  |  | 9,742 |  |  |  | 6,968 |  |  |  | 1,037 |

1 | These companies are the intermediate controlling companies of other subsidiaries and the above financial information is from their consolidated financial statements.

2 | At the end of the reporting period, convertible preferred stock issued by subsidiaries is included in liabilities.

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

2. | Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

| 2.1 | Basis of Preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The financial statements have been prepared on a historical cost basis, except for the following:

| • |  | Certain financial assets and liabilities (including derivative instruments) – measured at fair value

| • |  | Assets held-for-sale – measured at fair value less costs to sell

| • |  | Defined benefit pension plans – plan assets measured at fair value

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

| 2.2 | Changes in Accounting Policy and Disclosures

(1) New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2021.
- Amendments to IFRS 16
Lease – Practical expedient for
COVID-19—Related
Rent Exemption, Concessions, Suspension
As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the
COVID-19
pandemic is a lease modification, and the amounts recognized in profit or loss as a result of applying this exemption should be disclosed. The amendments did not have a significant impact on the financial statements.
- Amendments to IFRS 9
Financial Instruments
, IAS 39
Financial Instruments: Recognition and Measurement
, IFRS 7
Financial Instruments: Disclosure
, IFRS 4
Insurance Contracts
and IFRS 16
Lease –
Interest Rate Benchmark Reform (Phase 2 Amendments)
In relation to interest rate benchmark reform, the amendments provide exceptions including adjust effective interest rate instead of book amounts when interest rate benchmark of financial instruments at amortized costs is replaced, and apply hedge accounting without discontinuance although the interest rate benchmark is replaced in hedging relationship. The Group is in review for the impact of these amendments on the financial statements (Notes 7 and 16).
(2) New standards and interpretations not yet adopted by the Group
The following new accounting standards and interpretations have been published, but are not mandatory for December 31, 2021 reporting periods and have not been early adopted by the Group.
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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
- Amendments to IFRS 16
Lease – Concession on
COVID-19—Related
Rent Concessions Beyond June 30, 2021
The application of the practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the
COVID-19
pandemic is a lease modification, is extended to lease payments originally due on or before June 30, 2022. The amendment should be applied for annual periods beginning on or after April 1, 2021, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.
- Amendments to IFRS 3
Business Combination – Reference to the Conceptual Framework
The amendments update a reference of definition of assets and liabilities qualify for recognition in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of IAS 37
Provisions, Contingent Liabilities and Contingent Assets
, and IFRIC 21
Levies
. The amendments also confirm that contingent assets should not be recognized at the acquisition date. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.
- Amendments to IAS 16
Property, Plant and Equipment – Proceeds Before Intended Use
The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements
- Amendments to IAS
37 Provisions, Contingent Liabilities and Contingent Assets – Onerous Contracts: Cost of Fulfilling a Contract
The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.
- Amendments to IAS 1
Presentation of Financial Statements – Classification of Liabilities as Current or
Non-Current
The amendments clarify that liabilities are classified as either current or
non-current,
depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability include the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and
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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements.
- IAS 1
Presentation of Financial Statements – Disclosure of Accounting Policies
The amendments to IAS 1 define and require entities to disclose their material accounting policies. The IASB amended IFRS Practice Statement 2 Disclosure of Accounting Policies to provide guidance on how to apply the concept of materiality to accounting policy disclosures. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements.
- IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Accounting Estimates
The amendments define accounting estimates and clarify how to distinguish them from changes in accounting policies. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.
- IAS 12
Income Taxes – Deferred Tax Related to Assets and Liabilities Arising From a Single Transaction
The amendments include an additional condition to the exemption to initial recognition of an asset or liability that a transaction does not give rise to equal taxable and deductible temporary differences at the time of the transaction. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements.
- Annual improvements to IFRS 2018-2020
Annual improvements of IFRS 2018-2020 Cycle should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.

| • |  | IFRS 1 First Time Adoption of Korean International Financial Reporting Standards – Subsidiaries that are first-time adopters

| • |  | IFRS 9 Financial Instruments – Fees related to the 10% test for derecognition of financial liabilities

| • |  | IFRS 16 Leases – Lease incentives

| • |  | IAS 41 Agriculture – Measuring fair value

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| 2.3 | Consolidation

The Group has prepared the consolidated financial statements in accordance with IFRS 10
Consolidated Financial Statements
.
(1) Subsidiaries
Subsidiaries are all entities (including special purpose entities (“SPEs”)) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any
non-controlling
interest in the acquired entity on an
acquisition-by-acquisition
basis either at fair value or at the
non-controlling
interest’s proportionate share of the acquired entity’s net identifiable assets. All other non-controlling interests are measured at fair values, unless otherwise required by other standards. Acquisition-related costs are expensed as incurred.
The excess of consideration transferred, amount of any
non-controlling
interest in the acquired entity and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recoded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in the profit or loss as a bargain purchase.
Intercompany transactions, balances and unrealized gains on transactions among group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(2) Changes in ownership interests in subsidiaries without change of control
Any differences between the amount of the adjustment to
non-controlling
interest that do not result in a loss of control and any consideration paid or received is recognized in a separate reserve within equity attributable to owners of the Controlling Group.
(3) Disposal of subsidiaries
When the Group ceases to consolidate for a subsidiary because of a loss of control, any retained interest in the subsidiary is remeasured to its fair value with the change in carrying amount recognized in profit or loss.
(4) Associates
Associates are entities over which the Group has significant influence but does not possess control or joint control. Investments in associates are accounted for using the equity method of
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December 31, 2019, 2020 and 2021
accounting, after initially being recognized at cost. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. If the Group’s share of losses of an associate equals or exceeds its interest in the associate (including long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. After the Group’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If there is an objective evidence of impairment for the investment in the associate, the Group recognizes the difference between the recoverable amount of the associate and its book amount as impairment loss. If an associate uses accounting policies other than those of the Group for transactions and events in similar circumstances, if necessary, adjustments shall be made to make the associate’s accounting policies conform to those of the Group when the associate’s financial statements are used by the Group in applying the equity method.
(5) Joint arrangements
A joint arrangement, wherein two or more parties have joint control, is classified as either a joint operation or a joint venture. A joint operator recognizes its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. A joint venture has rights to the net assets relating to the joint venture and accounts for that investment using the equity method.

| 2.4 | Segment Reporting

Information of each operating segment is reported in a manner consistent with the business segment reporting provided to the chief operating decision-maker (Note 34). The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

| 2.5 | Foreign Currency Translation

(1) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which each entity operates (the “functional currency”). The consolidated financial statements are presented in Korean won, which is the Controlling Company’s functional and presentation currency.
(2) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss. They are deferred in other comprehensive income if they relate to qualifying cash flow hedges and qualifying effective portion of net investment hedges, or are attributable to monetary part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs
.
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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Non-monetary
items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on
non-monetary
assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on
non-monetary
assets such as equities classified as
available-for-sale
financial assets are recognized in other comprehensive income
.

| 2.6 | Financial Assets

(a) Classification
The Group classifies its financial assets in the following measurement categories:

| • |  | those to be measured at fair value through profit or loss

| • |  | those to be measured at fair value through other comprehensive income

| • |  | those to be measured at amortized cost

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
For financial assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. The Group reclassifies debt investments when, and only when its business model for managing those assets changes.
For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. Changes in fair value of the investments in equity instruments that are not accounted for as other comprehensive income are recognized in profit or loss.
(b) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
A. Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. The Group classifies its debt instruments into one of the following three measurement categories:

| • |  | Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in ‘finance income’ using the effective interest rate method.

| • |  | Fair value through other comprehensive income: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment loss (and reversal of impairment loss), interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Interest income from these financial assets is included in ‘finance income’ using the effective interest rate method. Foreign exchange gains and losses are presented in ‘finance income or finance costs’ and impairment loss in ‘finance costs or operating expenses’.

| • |  | Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or fair value through other comprehensive income are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit or loss within ‘finance income or finance costs’ in the period in which it arises.

B. Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as ‘finance income’ when the Group’s right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognized in ‘finance income or finance costs’ in the statement of profit or loss as applicable. Impairment loss (reversal of impairment loss) on equity investments, measured at fair value through other comprehensive income, are not reported separately from other changes in fair value.
(c) Impairment
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables and lease receivables, the Group applies the simplified approach, which requires expected lifetime credit losses to be recognized from initial recognition of the receivables.
(d) Recognition and derecognition
Regular way purchases and sales of financial assets are recognized or derecognized on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are
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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
If a transfer does not result in derecognition because the Group has retained substantially all the risks and rewards of ownership of the transferred asset, the Group continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received.
(e) Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.

| 2.7 | Derivative Instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group has hedge relationships and designates certain derivatives as:

| • |  | hedges of a particular risk associated with the cash flows of recognized assets and liabilities and highly probable forecast transactions (cash flow hedges)

At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items.
The fair values of derivative financial instruments designated in hedge relationships are disclosed in Note 3
8
.
The full fair value of a hedging derivative is classified as a
non-current
asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. A
non-derivative
financial asset and a
non-derivative
financial liability is classified as a current or
non-current
based on its expected maturity and its settlement, respectively.
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the cash flow hedge reserve within equity to the limit of the cumulative change in fair value (present value) of the hedge item (the present value of the cumulative change in the future expected cash flows of the hedged item) from the inception of the hedge. The ineffective portion is recognized in ‘finance income (costs)’.
Amounts of changes in fair value of effective hedging instruments accumulated in equity are recognized as ‘finance income (costs)’ for the periods when the corresponding transactions affect profit or loss.
When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any accumulated cash flow hedge reserve at that time
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December 31, 2019, 2020 and 2021
remains in equity until the forecast transaction occurs, resulting in the recognition of a
non-financial
asset such as inventory. When the forecast transaction is no longer expected to occur, the cash flow hedge reserve and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss.

| 2.8 | Trade Receivables

Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognized at fair value. Trade receivables are subsequently measured at amortized cost using the effective interest method, less loss allowance. See Note 6 for further information about the Group’s accounting for trade receivables and Note 2.6 (c) for a description of the Group’s impairment policies.

| 2.9 | Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the moving average method, except for inventories
in-transit.

| 2.10 | Non-Current Assets (or Disposal Group) Held-for-Sale

Non-current
assets (or disposal group) are classified as assets held for sale when their carrying amount will be recovered principally through a sale transaction rather than through continued use and when a sale is considered highly probable. The assets are measured at the lower amount between their carrying amount and the fair value less selling costs.

| 2.11 | Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditures that is directly attributable to the acquisition of the items.
Depreciation of all property and equipment, except for land, is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives as follows:

|  | Useful Life
Buildings |  | 5 – 40 years
Structures |  | 5 – 40 years
Machinery and equipment (Telecommunications equipment and others) |  | 2 – 40 years
Vehicles |  | 4 – 6 years
Tools |  | 4 – 6 years
Office equipment |  | 2 – 6 years

The depreciation method, residual values and useful lives of property and equipment are reviewed at the end of each reporting period and, if appropriate, accounted for as changes in accounting estimates.

| 2.12 | Investment Property

Real estate held for rental income or investment gains is classified as investment property and
right-of-use
asset. An investment property is measured initially at its cost. After recognition as an
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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
asset, investment property is carried at cost less accumulated depreciation and impairment losses. Investment property, except for land, is depreciated using the straight-line method over their useful lives from
10
to 40 years.

| 2.13 | Intangible Assets

(1) Goodwill
Goodwill is measured a
s
explained in Note 2.3 (a) and goodwill arising from acquisition of subsidiaries and business are included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of subsidiaries and business include the carrying amount of goodwill relating to the subsidiaries and business sold.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or group of CGUs, that is expected to benefit from the synergies of the combination. Goodwill is monitored at the operating segment level.
(2) Intangible assets excluding goodwill
Intangible assets, except for goodwill, are initially recognized at its historical cost, and carried at cost less accumulated amortization and accumulated impairment losses. Membership rights (condominium membership and golf membership) that have an indefinite useful life are not subject to amortization because there is no foreseeable limit to the period over which the assets are expected to be utilized. The Group amortizes intangible assets with a limited useful life using the straight-line method over the following periods:

|  | Useful Life
Development costs |  | 5 – 6 years
Software |  | 4 – 6 years
Frequency usage rights |  | 5 – 10 years
Others 1 |  | 1 – 50 years

| 1 | Membership rights (condominium membership and golf membership) and broadcast license included in others are classified as intangible assets with indefinite useful life.

| 2.14 | Borrowing Costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Investment income earned on the temporary investment of specific borrowings on qualifying assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are expensed in the period in which they are incurred.

| 2.15 | Government Grants

Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants related to assets are presented in the statement of financial position by setting
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December 31, 2019, 2020 and 2021
up the grant as deferred income that is recognized in profit or loss on a systematic basis over the useful life of the asset. Grants related to income are presented as a credit in the statement of profit or loss within ‘other income’.

| 2.16 | Impairment of Non-Financial Assets

Goodwill and intangible assets with indefinite useful life are tested annually for impairment at the end of each reporting period. If certain assets are deemed to be impaired, their recoverable amount is estimated in order to determine the impairment loss. The Group estimates the recoverable amount for each asset, and in cases when the recoverable amount cannot be estimated for an asset, the recoverable amount of the cash generating unit to which the asset belongs is estimated. Corporate assets are allocated to individual cash generating units on a reasonable and consistent basis and if they cannot be allocated to individual cash generating units, they are allocated to the smallest group of cash generating units on a reasonable and consistent basis. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount (higher of its fair value less costs of disposal and value in use). Impairment loss on
non-financial
assets other than goodwill are evaluated for reversal at the end of each reporting period.

| 2.17 | Trade and Other Payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of reporting period which are unpaid. Trade and other payables are presented as current liabilities, unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.

| 2.18 | Financial Liabilities

(1) Classification and measurement
The Group’s financial liabilities at fair value through profit or loss are financial instruments held for trading. A financial liability is held for trading if it is incurred principally for the purpose of repurchasing in the near term. Derivatives that are not designated as hedging instruments or derivatives separated from financial instruments containing embedded derivatives are also categorized as held for trading.
The Group classifies
non-derivative
financial liabilities, except for financial liabilities at fair value through profit or loss, financial guarantee contracts and financial liabilities that arise when a transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortized cost and present as ‘trade payables’, ‘borrowings’ and ‘other financial liabilities’ in the statement of financial position.
The loan is initially recognized as the amount obtained by subtracting the transaction cost incurred from the fair value and is then measured as amortized cost. The difference between the consideration received (after deducting the transaction cost) and the repayment amount is recognized as profit or loss over the period using the effective interest rate method. Fees paid to receive the borrowing limit are recognized as transaction costs for loans to the extent that they are likely to be borrowed as part or all of the borrowing limit. In this case, the fee will be deferred until the borrowing is executed. There is a high possibility that borrowing will be executed as part or all
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December 31, 2019, 2020 and 2021
of the borrowing limit agreement (relevant fees to the extent that there is no evidence) are recognized as assets as advance payments for services that provide liquidity and then amortized over the relevant borrowing limit period.
Preferred shares that require mandatory redemption at a particular date are classified as liabilities. Interest expenses on these preferred shares using the effective interest method are recognized in the statement of profit or loss as ‘finance costs’, together with interest expenses recognized from other financial liabilities.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
(2) Derecognition
Financial liabilities are removed from the statement of financial position when it is extinguished; for example, when the obligation specified in the contract is discharged or cancelled or expired or when the terms of an existing financial liability are substantially modified. The difference between the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid (including any
non-cash
assets transferred or liabilities assumed) is recognized in profit or loss.
The Group’s financial liabilities at fair value through profit or loss are financial instruments held for trading and financial liabilities designated as at fair value through profit or loss. A financial liability is held for trading if it is incurred principally for the purpose of repurchasing in the near term. A derivative that is not a designated as hedging instruments and an embedded derivative that is separated are also classified as held for trading. Financial liabilities designed as at fair value through profit or loss are structured financial liabilities containing embedded derivatives issued by the Group.

| 2.19 | Financial Guarantee Contracts

Financial guarantee contracts are recognized as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value, subsequently at the higher of the following amount, and the related liability is recognized as ‘other financial liabilities’ in the consolidated statement of financial position:

| • |  | the amount determined in accordance with the expected credit loss model under IFRS 9 Financial Instruments

| • |  | the amount initially recognized less, where appropriate, the cumulative amount of income recognized in accordance with IFRS 15 Revenue from Contracts with Customers

| 2.20 | Compound Financial Instruments

Compound financial instruments are convertible notes that can be converted into equity instruments at the option of the holder.
The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option, and subsequently measured at amortized cost until extinguished on conversion or maturity of the bonds. The equity component is recognized initially on the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
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December 31, 2019, 2020 and 2021

| 2.21 | Employee Benefits

(1) Post-employment benefits
The Group operates both defined contribution and defined benefit pension plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The contributions are recognized as employee benefit expenses when an employee has rendered service.
A defined benefit plan is a pension plan that is not a defined contribution plan. Generally, post-employment benefits are payable after the completion of employment, and the benefit amount depended on the employee’s age, periods of service or salary levels. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service costs.
(2) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits at the earlier of the following dates: when the entity can no longer withdraw the offer of those benefits or when the entity recognizes costs for a restructuring.
(3) Long-term employee benefits
Certain entities within the Group provide long-term employee benefits that are entitled to employees with service period for ten years and above. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. The Group recognizes service cost, net interest on other long-term employee benefits and remeasurements as profit or loss for the year. These liabilities are valued annually by an independent qualified actuary.

| 2.22 | Share-Based Payments

Equity-settled share-based payment is recognized at fair value of equity instruments granted, and employee benefit expense is recognized over the vesting period. At the end of each period, the Group revises its estimates of the number of options that are expected to vest based on the
non-market
vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
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December 31, 2019, 2020 and 2021
The acquiree may have outstanding share-based payment transactions that the acquirer does not exchange for its share-based payment transactions. If vested, those acquiree share-based payment transactions are part of the
non-controlling
interest in the acquiree and are measured at their market-based measure. If unvested, the market-based measure of unvested share-based payment transactions is allocated to the
non-controlling
interest on the basis of the ratio of the portion of the vesting period completed to the greater of the total vesting period and the original vesting period of the share-based payment transaction. The balance is allocated to post-combination service.

| 2.23 | Provisions

Provisions for service warranties, recoveries, litigations and claims, and others are recognized when the Group presently hold legal or constructive obligation as a result of past events, and when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period, and the increase in the provision due to the passage of time is recognized as interest expense.

| 2.24 | Leases

As at January 1, 2019, with implementation of IFRS 16 Leases, the Group has changed accounting policy. The Group has adopted IFRS 16 modified retrospectively, as permitted under the specific transitional provisions in the standard, and recognized the cumulative impact of initially applying the standard as at January 1, 2019.
(a) Lessee
The Group leases various repeater server rack, offices, communication line facilities, machinery and cars.
Contracts may contain both lease and
non-lease
components. The Group allocates the consideration in the contract to the lease and
non-lease
components based on their relative stand-alone prices. However, for leases of real estate for which the Group is lessee, the Group applies the practical expedient which has elected not to separate lease and
non-lease
components and instead accounts them as a single lease component.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

| • |  | Fixed payments (including in-substance fixed payments), less any lease incentives receivable

| • |  | Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

| • |  | Amounts expected to be payable by the Group (the lessee) under residual value guarantees

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December 31, 2019, 2020 and 2021

| • |  | The exercise price of a purchase option if the Group (the lessee) is reasonably certain to exercise that option, and

| • |  | Payments of penalties for terminating the lease, if the lease term reflects the Group (the lessee) exercising that option

Measurement of lease liability also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease.
The Group determines the lease term as the
non-cancellable
period of a lease, together with both (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b) periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. When the lessee and the lessor each has the right to terminate the lease without permission from the other party, the Group should consider a termination penalty in determining the period for which the contract is enforceable.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, which is the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the
right-of-use
asset.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use
assets are measured at cost comprising the following:

| • |  | amount of the initial measurement of lease liability

| • |  | any lease payments made at or before the commencement date less any lease incentives received

| • |  | any initial direct costs (leasehold deposits)

| • |  | restoration costs

The
right-of-use
asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the
right-of-use
asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases and leases of
low-value
assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less, such as mechanical devices and cars.
Low-value
assets are comprised of tools, equipment, and others.
(b) Lessor
Lease income from operating leases where the Group is a lessor is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as expense over the
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December 31, 2019, 2020 and 2021
lease term on the same basis as lease income. The respective leased assets are included in the statement of financial position based on their nature. As a result of adopting the new lease standard, the Group applied the accounting for assets held as a lessor.
(c) Extension and termination option
Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximize operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. Information on critical accounting estimates and assumptions related to the determination of the lease term is presented in Note 3.

| 2.25 | Share Capital

The Controlling Company classifies ordinary shares as equity.
Where the Controlling Company purchases its own shares, the consideration paid, including any directly attributable incremental costs, is deducted from equity until the share are cancelled or reissued. When these treasury shares are reissued, any consideration received is included in equity attributable to the equity holders of the Controlling Company.

| 2.26 | Revenue Recognition

(a) Identifying performance obligations
The Group identifies performance obligations with a customer such as providing telecommunication services, selling handsets and other. The revenue from handsets is recognized when a performance obligation is satisfied by transferring promised goods to customers, and the revenue from telecommunication services is recognized over the estimated contract periods of each services by transferring promised services to customers.
(b) Allocation the transaction price and revenue recognition
The Group allocates the transaction price to each performance obligation identified in the contract based on a relative stand-alone selling prices of the goods or services being provided to the customer. To allocate the transaction price to each performance obligation on a relative stand-alone price basis, the Group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocate the transaction price in proportion to those stand-alone selling price. The stand-alone selling price is the price at which the Group would sell a promised good or service separately to the customer. The best evidence of a stand-alone selling price is the observable price of a good or service when the Group sells that good or service separately in similar circumstances and to similar customers. The Group recognizes the allocated amount as contract assets or contract liabilities, and amortizes it through the remaining period which is adjusted in operating income.
(c) Incremental contract acquisition costs
The Group pays the commission fees when new customers subscribe for telecommunication services. The incremental contract acquisition costs are those commission fees that the Group incurs to acquire a contract with a customer that would not have been incurred if the contract had not been acquired. The Group recognizes the incremental contract acquisition costs as an asset
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December 31, 2019, 2020 and 2021
and amortizes it over the expected period of benefit. However, as a practical expedient, the Group may recognize the incremental contract acquisition costs as an expense when it is incurred if the amortization period of the asset is one year or less.
(d) Commission fees
Commission fees are recognized when it is probable that future economic benefits will flow to the entity and these benefits can be reliably measured. Revenues are measured at the fair value of the consideration received.

| 2.27 | Current and Deferred Income Tax

The tax expense for the period consists of current and deferred tax. Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The current income tax expense is measured at the amount expected to be paid to the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit or loss.
Deferred tax assets are recognized only if it is probable that future taxable amount will be available to utilize those temporary differences and losses.
The Group recognizes a deferred tax liability all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint arrangements, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, the Group recognizes a deferred tax asset for all deductible temporary differences arising from such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when the Group has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the assets and settle the liability simultaneously.
The Group adopts the consolidated corporate tax return and calculates income tax expenses and income tax liabilities of the Group based on systematic and reasonable methods.
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December 31, 2019, 2020 and 2021

| 2.28 | Dividend

Dividend distribution to the Group’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Group’s shareholders.

| 2.29 | Approval of Issuance of the Financial Statements

The consolidated financial statements of 2021 were approved for issuance by the Board of Directors on April 14, 2022.

3. | Critical Accounting Estimates and Assumptions

The Group makes estimates and assumptions concerning the future. The estimates and assumptions are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Actual results may differ from these estimates.
The spread of Coronavirus disease 2019
(“COVID-19”)
has been posing a material impact on the global economy in 2021. It may have a negative impact, such as, decrease in productivity, decrease or delay in sales, collection of existing receivables and others. Accordingly, it may have a negative impact on the financial position and financial performance of the Group.
Significant accounting estimates and assumptions applied in the preparation of the consolidated financial statements can be adjusted depending on changes in the uncertainty from
COVID-19.
Also, the ultimate effect of
COVID-19
to the Group’s business, financial position and financial performance cannot presently determined.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Additional information of significant judgement and assumptions of certain items are included in relevant notes.

| 3.1 | Impairment of Non-Financial Assets (including Goodwill)

The Group determines the recoverable amount of a cash generating unit (CGU) based on fair value or
value-in-use
calculations assess
non-financial
assets (including goodwill) for impairment (Note 13).

| 3.2 | Income Taxes

The Group’s taxable income generated from these operations are subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain (Note
30
).
If certain portion of the taxable income is not used for investments or increase in wages or dividends in accordance with the
Tax System for Recirculation of Corporate Income,
the Group is liable to pay additional income tax calculated based on the tax laws. Accordingly, the measurement of current and deferred income tax is affected by the tax effects from the new tax system. As the Group’s income tax is dependent on the investments, as well as wage and dividends increase, there is an uncertainty measuring the final tax effects.
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December 31, 2019, 2020 and 2021

| 3.3 | Fair Value of Derivatives and Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period (Note 38).

| 3.4 | Impairment of Financial Assets

The provision for impairment for financial assets is based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period (Note 37).

| 3.5 | Net Defined Benefit Liability

The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions including the discount rate (Note 18)

| 3.6 | Amortization of Contract Assets, Contract Liabilities and Contract Cost Assets

Contract assets, contract liabilities and contract cost assets recognized under the application of IFRS 15 are amortized over the expected periods of customer relationships. The estimate of the expected terms of customer relationship is based on the historical data. If management’s estimate changes, it may cause significant differences in the timing of revenue recognition and amounts recognized.

| 3.7 | Provisions

As described in Note 17, the Group records provisions for litigation and assets retirement obligations as at the end of the reporting period. The provisions are estimated based on the factors such as the historical experiences.

| 3.8 | Useful Lives of Property and Equipment and Investment Property

Property and equipment, intangible assets, and investment properties, excluding land, goodwill, condominium memberships and golf club memberships are depreciated using the straight-line method over their useful lives. The estimated useful lives are determined based on expected usage of the assets and the estimates can be materially affected by technical changes and other factors. The Group will increase depreciation expenses if the useful lives are considered shorter than the previously estimated useful lives.

| 3.9 | Critical Judgments in Determining the Lease Term

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
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December 31, 2019, 2020 and 2021
For leases of property, machinery and communication line facilities, the following factors are normally the most relevant:

| • |  | If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate).

| • |  | If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend (or not terminate).

| • |  | Otherwise, the Group considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.

Most extension options in offices, retail stores and vehicles leases have not been included in the lease liability, because the Group can replace the assets without significant cost or business disruption.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.

4. | Financial Instruments by Category

Financial instruments by category as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |
Financial assets |  | Financial assets at amortized cost |  |  | Financial assets at fair value through profit or loss |  |  | Financial assets at fair value through other comprehensive income |  |  | Derivatives used for hedging |  |  | Total |
Cash and cash equivalents |  | ￦ | 2,634,624 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 2,634,624 |
Trade and other receivables |  |  | 5,034,622 |  |  |  | — |  |  |  | 1,118,619 |  |  |  | — |  |  |  | 6,153,241 |
Other financial assets |  |  | 671,068 |  |  |  | 809,919 |  |  |  | 258,516 |  |  |  | 7,684 |  |  |  | 1,747,187 |

( I n millions of Korean won) |  | December 31, 2020 |
Financial liabilities |  | Financial liabilities at amortized cost |  |  | Financial liabilities at fair value through profit and loss |  |  | Derivatives used for hedging |  |  | Others |  |  | Total |
Trade and other payables |  | ￦ | 7,017,639 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 7,017,639 |
Borrowings |  |  | 7,316,298 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7,316,298 |
Other financial liabilities |  |  | 132,558 |  |  |  | 2,682 |  |  |  | 127,929 |  |  |  | — |  |  |  | 263,169 |
Lease liabilities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,143,640 |  |  |  | 1,143,640 |

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December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | December 31, 2021 |
Financial assets |  | Financial assets at amortized cost |  |  | Financial assets at fair value through profit or loss |  |  | Financial assets at fair value through other comprehensive income |  |  | Derivatives used for hedging |  |  | Total |
Cash and cash equivalents |  | ￦ | 3,019,592 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 3,019,592 |
Trade and other receivables |  |  | 5,687,103 |  |  |  | — |  |  |  | 491,713 |  |  |  | — |  |  |  | 6,178,816 |
Other financial assets |  |  | 608,389 |  |  |  | 952,319 |  |  |  | 347,877 |  |  |  | 99,453 |  |  |  | 2,008,038 |

( I n millions of Korean won) |  | December 31, 2021 |
Financial liabilities |  | Financial liabilities at amortized cost |  |  | Financial liabilities at fair value through profit and loss |  |  | Derivatives used for hedging |  |  | Others |  |  | Total |
Trade and other payables |  | ￦ | 7,980,203 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 7,980,203 |
Borrowings |  |  | 8,437,703 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 8,437,703 |
Other financial liabilities |  |  | 263,500 |  |  |  | 216,040 |  |  |  | 18,126 |  |  |  | — |  |  |  | 497,666 |
Lease liabilities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,159,369 |  |  |  | 1,159,369 |

Gains or losses arising from financial instruments by category for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Financial assets at amortized cost |  |  |  |  |  |  |  |  |  |  |  |
Interest income 1 |  | ￦ | 79,838 |  |  | ￦ | 55,742 |  |  | ￦ | 74,937 |
Gain (loss) on foreign currency transactions 4 |  |  | 32,293 |  |  |  | (19,244 | ) |  |  | 12,826 |
Gain (loss) on foreign currency translation 4 |  |  | (474 | ) |  |  | (3,895 | ) |  |  | 2,911 |
Gain (loss) on disposal |  |  | (43 | ) |  |  | 138 |  |  |  | 35 |
Impairment loss |  |  | (59,947 | ) |  |  | (140,474 | ) |  |  | (110,286 | )
Financial assets at fair value through profit or loss |  |  |  |  |  |  |  |  |  |  |  |
Interest income 1 |  |  | 5,634 |  |  |  | 6,548 |  |  |  | 3,673 |
Dividend income 5 |  |  | 1,096 |  |  |  | 4,379 |  |  |  | 21,499 |
Gain on valuation 6 |  |  | 4,334 |  |  |  | 59,044 |  |  |  | 64,659 |
Gain (loss) on disposal |  |  | 5,115 |  |  |  | (329 | ) |  |  | 29,974 |
Loss on foreign currency transactions 4 |  |  | — |  |  |  | (38 | ) |  |  | — |
Gain on foreign currency translation 4 |  |  | (27 | ) |  |  | — |  |  |  | 17,794 |
Financial assets at fair value through other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |
Interest income 1 |  |  | 217,355 |  |  |  | 227,736 |  |  |  | 222,290 |
Dividend income 5 |  |  | 2,312 |  |  |  | 56 |  |  |  | 1,365 |
Impairment loss |  |  | (304 | ) |  |  | — |  |  |  | — |
Loss on disposal |  |  | (11,247 | ) |  |  | (8,152 | ) |  |  | (22,712 | )
Other comprehensive income for the year 2 |  |  | 167,152 |  |  |  | 41,997 |  |  |  | 129,780 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Derivative used for hedging |  |  |  |  |  |  |  |  |  |  |  |
Gain on transactions |  |  | 6,332 |  |  |  | 6,050 |  |  |  | — |
Loss (gain) on valuation |  |  | 56,537 |  |  |  | (2,707 | ) |  |  | 203,961 |
Other comprehensive income (loss) for the year 2 |  |  | 46,806 |  |  |  | (2,373 | ) |  |  | 144,967 |
Reclassified to profit or loss from other comprehensive income for the year 2,3 |  |  | (39,604 | ) |  |  | 3,645 |  |  |  | (143,305 | )
Financial liabilities at fair value through profit or loss |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on valuation |  |  | (1,936 | ) |  |  | 119 |  |  |  | 42,447 |
Gain on disposal |  |  | 2,664 |  |  |  | 799 |  |  |  | 2,136 |
Loss (gain) on foreign currency transactions 4 |  |  | — |  |  |  | — |  |  |  | (2 | )
Derivatives used for hedging |  |  |  |  |  |  |  |  |  |  |  |
Gain on transactions |  |  | — |  |  |  | 1,141 |  |  |  | (6,208 | )
Loss (gain) on valuation |  |  | 4,949 |  |  |  | (161,003 | ) |  |  | (7,206 | )
Other comprehensive income (loss) for the year 2 |  |  | 20,742 |  |  |  | (81,671 | ) |  |  | (3,112 | )
Reclassified to profit or loss from other comprehensive income for the year 2,3 |  |  | (5,080 | ) |  |  | 107,786 |  |  |  | 6,722 |
Financial liabilities at amortized cost |  |  |  |  |  |  |  |  |  |  |  |
Interest expense 1 |  |  | (223,974 | ) |  |  | (220,945 | ) |  |  | (232,197 | )
Loss on foreign currency transactions 4 |  |  | (20,958 | ) |  |  | (10,717 | ) |  |  | (3,580 | )
Gain (loss) on foreign currency translation 4 |  |  | (75,502 | ) |  |  | 141,849 |  |  |  | (201,623 | )
Lease liabilities |  |  |  |  |  |  |  |  |  |  |  |
Interest expense 1 |  |  | (55,001 | ) |  |  | (44,091 | ) |  |  | (36,650 | )
Total |  | ￦ | 159,062 |  |  | ￦ | (38,610 | ) |  | ￦ | 215,095 |

1 | BC Card Co., Ltd., etc., subsidiaries of the Group, recognized interest income and expenses as operating revenue and expenses, respectively. Related interest income recognized as operating revenue is ￦ 27,440 million ( 2019 : ￦ 21,018 million, 2020: ￦ 20,854 m illion) and related interest expense recognized as operating expense is ￦ 5,458 million ( 2019: ￦ 548 million, 2020: ￦ 1,456 million) for the year ended December 31, 2021.

2 | The amounts directly reflected in equity after adjustments of deferred income tax.

3 | During the current and previous year, certain derivatives of the Group was settled and the related gain or loss on valuation of cash flow hedge in other comprehensive income was reclassified to profit or loss for the year.

4 | BC Card Co., Ltd., a subsidiary of the Group recognized foreign currency translation/transaction gain and loss and as operating revenue and expense. In relation to this, foreign currency translation gain and loss recognized as operating revenue and expense amount to translation gain ￦ 3 million (2019: translation loss ￦ 5 million, 2020: translation loss ￦ 56 million) and transaction gain and loss amount to transaction gain ￦ 2,373 million (20 19: trans ac tion loss ￦ 17,006 million , 2020 : transaction loss ￦ 19,687 m illion), respectively, for the year ended December 31, 2021.

5 | BC Card Co., Ltd., etc., subsidiaries of the Group, recognized dividend income as operating revenue. Related dividend income recognized as operating revenue is ￦ 1,340 million (2019: ￦ 2,250 million , 2020: ￦ 2,059 million) for the year ended December 31, 2021.

6 | KT Investment Co., Ltd., etc., subsidiaries of the Group, recognized financial instruments measured at fair value through profit or loss as operating revenue and expenses. In relation to

| this, valuation gain and loss recognized as operating revenue and expense amount to valuation

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| loss ￦ 15,459 million (2019: valuation gain ￦ 15,429 million, 2020: valuation gain ￦ 40,822 million), for the year ended December 31, 2021.

5. | Cash and Cash Equivalents

Restricted cash and cash equivalents as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  | December 31, 2021 |  | Description
Bank deposits |  | ￦ 28,414 |  | ￦ 28,219 |  | Deposit restricted for government project and others

Cash and cash equivalents in the statement of financial position equal to cash and cash equivalents in the statement of cash flows
.

6. | Trade and Other Receivables

Trade and other receivables as at December 31, 2020 and 2021, are as fol
l
ows:

|  | December 31, 2020 |
(In millions of Korean won) |  | Total amounts |  |  | Provision for impairment |  |  | Present value discount |  |  | Carrying amount |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade receivables |  | ￦ | 3,388,099 |  |  | ￦ | (322,992 | ) |  | ￦ | (8,977 | ) |  | ￦ | 3,056,130 |
Other receivables |  |  | 1,948,108 |  |  |  | (101,619 | ) |  |  | (148 | ) |  |  | 1,846,341 |
|  | ￦ | 5,336,207 |  |  | ￦ | (424,611 | ) |  | ￦ | (9,125 | ) |  | ￦ | 4,902,471 |
Non-current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade receivables |  | ￦ | 892,992 |  |  | ￦ | (4,323 | ) |  | ￦ | (34,716 | ) |  | ￦ | 853,953 |
Other receivables |  |  | 513,926 |  |  |  | (102,985 | ) |  |  | (14,125 | ) |  |  | 396,816 |
|  | ￦ | 1,406,918 |  |  | ￦ | (107,308 | ) |  | ￦ | (48,841 | ) |  | ￦ | 1,250,769 |

|  | December 31, 2021 |
(In millions of Korean won) |  | Total amounts |  |  | Provision for impairment |  |  | Present value discount |  |  | Carrying amount |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade receivables |  | ￦ | 3,337,398 |  |  | ￦ | (346,869 | ) |  | ￦ | (7,662 | ) |  | ￦ | 2,982,867 |
Other receivables |  |  | 2,201,781 |  |  |  | (93,256 | ) |  |  | (3,902 | ) |  |  | 2,104,623 |
|  | ￦ | 5,539,179 |  |  | ￦ | (440,125 | ) |  | ￦ | (11,564 | ) |  | ￦ | 5,087,490 |
Non-current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade receivables |  | ￦ | 612,654 |  |  | ￦ | (2,856 | ) |  | ￦ | (17,351 | ) |  | ￦ | 592,447 |
Other receivables |  |  | 621,195 |  |  |  | (108,131 | ) |  |  | (14,185 | ) |  |  | 498,879 |
|  | ￦ | 1,233,849 |  |  | ￦ | (110,987 | ) |  | ￦ | (31,536 | ) |  | ￦ | 1,091,326 |

The fair values of trade and other receivables with original maturities less than one year equal to their carrying amounts because the discounting effect is immaterial. The fair value of trade and other receivables with original maturities longer than one year, which are mainly from sales of goods, is determined
by
discounting the expected future cash flow at the weighted average interest rate.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Details of changes in provision for impairment for the years ended December 31, 2020 and 2021, are as follows:

|  | 2020 |  |  | 2021 |
(In millions of Korean won) |  | Trade receivables |  |  | Other receivables |  |  | Trade receivables |  |  | Other receivables |
Beginning balance |  | ￦ | 295,319 |  |  | ￦ | 83,680 |  |  | ￦ | 327,315 |  |  | ￦ | 204,604 |
Provision |  |  | 89,097 |  |  |  | 50,860 |  |  |  | 82,329 |  |  |  | 23,015 |
Reversal |  |  | — |  |  |  | (890 | ) |  |  | — |  |  |  | (508 | )
Written-off or transfer out |  |  | (60,598 | ) |  |  | (25,067 | ) |  |  | (62,564 | ) |  |  | (25,900 | )
Change in consolidation scope |  |  | 3,211 |  |  |  | 87,614 |  |  |  | 416 |  |  |  | (300 | )
Others |  |  | 286 |  |  |  | 8,407 |  |  |  | 2,229 |  |  |  | 476 |
Ending balance |  | ￦ | 327,315 |  |  | ￦ | 204,604 |  |  | ￦ | 349,725 |  |  | ￦ | 201,387 |

Provisions for impairment on trade and other receivables are recognized as operating expenses and finance costs.
Details of other receivables as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Loans |  | ￦ | 116,082 |  |  | ￦ | 101,718 |
Receivables 1 |  |  | 1,699,608 |  |  |  | 1,872,467 |
Accrued income |  |  | 6,901 |  |  |  | 5,933 |
Refundable deposits |  |  | 350,180 |  |  |  | 349,360 |
Loans receivable |  |  | 150,527 |  |  |  | 328,753 |
Finance lease receivables |  |  | 64,047 |  |  |  | 85,370 |
Others |  |  | 60,416 |  |  |  | 61,288 |
Less: Provision for impairment |  |  | (204,604 | ) |  |  | (201,387 | )
|  | ￦ | 2,243,157 |  |  | ￦ | 2,603,502 |

1 | Settlement receivables of BC Card Co., Ltd., a subsidiary of the Group, of ￦ 1,108,936 million related to credit card transactions are included as at December 31, 2021 (2020: ￦ 986,384 million).

The maximum exposure of trade and other receivables to credit risk is the carrying amount of each class of receivables mentioned above as at December 31, 2021.
A portion of the trade receivables is classified as financial assets at fair value through other comprehensive income considering the trade receivables business model for managing the asset and the cash flow characteristics of the contract.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

7. | Other Financial Assets and Liabilities

Details of other financial assets and liabilities as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Other financial assets |  |  |  |  |  |  |  |
Financial assets at amortized cost 1 |  | ￦ | 671,068 |  |  | ￦ | 608,389 |
Financial assets at fair value through profit or loss 1,2,3 |  |  | 809,919 |  |  |  | 952,319 |
Financial assets at fair value through other comprehensive income 1,3 |  |  | 258,516 |  |  |  | 347,877 |
Derivative used for hedging |  |  | 7,684 |  |  |  | 99,453 |
Less: Non-current |  |  | (544,347 | ) |  |  | (822,379 | )
Current |  | ￦ | 1,202,840 |  |  | ￦ | 1,185,659 |
Other financial liabilities |  |  |  |  |  |  |  |
Financial liabilities at amortized cost 4 |  | ￦ | 132,558 |  |  | ￦ | 263,500 |
Financial liabilities at fair value through profit or loss |  |  | 2,682 |  |  |  | 216,040 |
Derivatives used for hedging |  |  | 127,929 |  |  |  | 18,126 |
Less: Non-current |  |  | (260,676 | ) |  |  | (424,859 | )
Current |  | ￦ | 2,493 |  |  | ￦ | 72,807 |

1 | As at December 31, 2021, the Group’s other financial assets amounting to ￦ 115,033 million (2020: ￦ 104,442 million), which consist of checking account deposits and payment guarantee, are subject to withdrawal restrictions.

2 | As at December 31, 2021, MMW(Money Market Wrap) and MMT(Money Market Trust) amounting to ￦ 460,180 million (2020: ￦ 509,068 million) is included in other financial assets.

3 | As at December 31, 2021, the Group provided investments in Korea Software Financial Cooperative amounting to ￦ 5,794 million (2020: ￦ 5,491 million) as a collateral for the payment guarantee provided by the Cooperative.

4 | The amount includes liabilities related to the obligation to acquire additional shares in Epsilon Global Communications Pte. Ltd. and BOOK CLUB MILLIE (Note 20).

Details of financial assets at fair value through profit or loss as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Equity Instruments (Listed) |  | ￦ | 46,449 |  |  | ￦ | 24,285 |
Equity Instruments (Unlisted) |  |  | 83,017 |  |  |  | 64,835 |
Debt securities |  |  | 680,453 |  |  |  | 862,481 |
Derivatives held for trading |  |  | — |  |  |  | 718 |
Total |  |  | 809,919 |  |  |  | 952,319 |
Less: non-current |  |  | (276,109 | ) |  |  | (488,040 | )
Current |  | ￦ | 533,810 |  |  | ￦ | 464,279 |

The maximum exposure of debt instruments of financial assets recognized at fair value through profit or loss to credit risk is the carrying amount as at December 31, 2021.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Details of financial assets at fair value through other comprehensive income as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Equity Instruments (Listed) |  | ￦ | 6,216 |  |  | ￦ | 19,079 |
Equity Instruments (Unlisted) |  |  | 245,730 |  |  |  | 234,048 |
Debt securities |  |  | 6,570 |  |  |  | 94,750 |
Total |  |  | 258,516 |  |  |  | 347,877 |
Less: non-current |  |  | (258,516 | ) |  |  | (259,435 | )
Current |  | ￦ | — |  |  | ￦ | 88,442 |

Upon disposal of these equity investments, any balance within the accumulated other comprehensive income for these equity investments is not classified to profit or loss, but to retained earnings. Upon disposal of these debt investments, the remaining balance of the accumulated other comprehensive income of debt investments is reclassified to profit or loss.
During the period ended December 31, 2021, the Group sold all Mastercard Inc. shares. The fair value of the shares sold is
￦
206,840 million, and the cumulative amount recognized in comprehensive income after tax is
￦
76,296 million. Of these,
￦
53,052 million is reclassified as retained earnings attributable to owners of the Controlling Company.
Derivatives used for hedging as at December 31, 2020 and 2021, are as follows:

|  | December 31, 2020 |  |  | December 31, 2021 |
(In millions of Korean won) |  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
Interest rate swap 1 |  | ￦ | — |  |  | ￦ | 1,078 |  |  | ￦ | — |  |  | ￦ | 77 |
Currency swap 2, 3 |  |  | 7,684 |  |  |  | 126,189 |  |  |  | 99,453 |  |  |  | 18,049 |
Currency forwards 4 |  |  | — |  |  |  | 662 |  |  |  | — |  |  |  | — |
Total |  |  | 7,684 |  |  |  | 127,929 |  |  |  | 99,453 |  |  |  | 18,126 |
Less: non-current |  |  | (2,111 | ) |  |  | (126,408 | ) |  |  | (67,889 | ) |  |  | (242 | )
Current |  | ￦ | 5,573 |  |  | ￦ | 1,521 |  |  | ￦ | 31,564 |  |  | ￦ | 17,884 |

1 | The interest rate swap contract is to hedge the risk of variability in future fair value of the borrowings.

2 | The currency swap contract is to hedge the risk of variability in cash flow from the borrowings. In applying the cash flow hedge accounting, the Group hedges its exposures to cash flow fluctuation until September 7, 2034.

3 | The amount of derivatives subject to the second phase of interest rate indicator reform is 21,635 million, and the Group is considering the impact of switching to alternative indicator interest rates.

4 | The currency forward contract is to hedge the risk of variability in cash flow from transactions in foreign currencies due to changes in foreign exchange rate.

The full value of a hedging derivative is classified as a
non-current
asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The valuation gains and losses on the derivatives contracts for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Type of Transaction |  | Valuation gain |  |  | Valuation loss |  |  | Other comprehensive income 1 |  |  | Valuation gain |  |  | Valuation loss |  |  | Other comprehensive income 1 |  |  | Valuation gain |  |  | Valuation Loss |  |  | Other comprehensive income 1 |
Interest rate swap |  | ￦ | — |  |  | ￦ | 45 |  |  | ￦ | (963 | ) |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | (567 | ) |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 1 |
Currency swap |  |  | 72,417 |  |  |  | 15,784 |  |  |  | 87,626 |  |  |  | — |  |  |  | 161,661 |  |  |  | (113,175 | ) |  |  | 203,961 |  |  |  | 7,206 |  |  |  | 191,569 |
Currency forwards |  |  | 4,858 |  |  |  | — |  |  |  | 4,858 |  |  |  | — |  |  |  | 2,049 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | ￦ | 77,275 |  |  | ￦ | 15,829 |  |  | ￦ | 91,521 |  |  | ￦ | — |  |  | ￦ | 163,710 |  |  | ￦ | (113,742 | ) |  | ￦ | 203,961 |  |  | ￦ | 7,206 |  |  | ￦ | 191,570 |

1 | The amounts before adjustments of deferred income tax directly reflected in equity and allocation to the non-controlling interest.

The ineffective portion recognized in profit or loss on the cash flow hedge is valuation loss of
￦
11,825 million for the current period (2019: valuation gain of
￦
4,181 million, 2020: valuation loss of
W
2,711 million).
The unsettled amount of derivative instruments for the years ended December 31, 2020 and 2021, are as follows:
(i) Hedging instruments

(In millions of Korean won and thousands of foreign currencies) |  | 2020 |
|  |  |  |  |  |  | Book value of hedging instruments |  |  | Changes in fair value to calculate the ineffective portion of hedges |
Currency |  | Foreign currency |  |  | Contract amount |  |  | Assets |  |  | Liabilities |
USD |  |  | 1,768,912 |  |  | ￦ | 2,037,568 |  |  | ￦ | 2,111 |  |  | ￦ | 100,623 |  |  | ￦ | (136,852 | )
JPY |  |  | 46,000,000 |  |  |  | 488,924 |  |  |  | 5,573 |  |  |  | 13,839 |  |  |  | (4,065 | )
SGD |  |  | 284,000 |  |  |  | 245,208 |  |  |  | — |  |  |  | 13,467 |  |  |  | (13,611 | )
Total |  |  |  |  |  | ￦ | 2,771,700 |  |  | ￦ | 7,684 |  |  | ￦ | 127,929 |  |  | ￦ | (154,528 | )

(In millions of Korean won and thousands of foreign currencies) |  | 2021 |
|  |  |  |  |  |  | Book value of hedging instruments |  |  | Changes in fair value to calculate the ineffective portion of hedges |
Currency |  | Foreign currency |  |  | Contract amount |  |  | Assets |  |  | Liabilities |
USD |  |  | 2,016,350 |  |  | ￦ | 2,322,085 |  |  | ￦ | 93,948 |  |  | ￦ | 77 |  |  | ￦ | 186,130 |
JPY |  |  | 30,000,000 |  |  |  | 326,751 |  |  |  | — |  |  |  | 18,049 |  |  |  | (7,199 | )
SGD |  |  | 284,000 |  |  |  | 245,208 |  |  |  | 5,431 |  |  |  | — |  |  |  | 18,387 |
EUR |  |  | 7,700 |  |  |  | 10,283 |  |  |  | 74 |  |  |  | — |  |  |  | 51 |
Total |  |  |  |  |  | ￦ | 2,904,327 |  |  | ￦ | 99,453 |  |  | ￦ | 18,126 |  |  | ￦ | 197,369 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
(ii) Hedged item

(In millions of Korean won) |  |  |  |  |  |
| 2020 |  |  | 2021 |
Currency |  | Book value of hedged items |  |  | Changes in fair value to calculate the ineffective portion of hedges |  |  | Cash flow hedge reserves 1 |  |  | Book value of hedged items |  |  | Changes in fair value to calculate the ineffective portion of hedges |  |  | Cash flow hedge reserves 1 |
USD |  | ￦ | 1,924,576 |  |  | ￦ | 133,978 |  |  | ￦ | 19,641 |  |  | ￦ | 2,401,943 |  |  | ￦ | (177,120 | ) |  | ￦ | 21,826 |
JPY |  |  | 484,960 |  |  |  | 4,228 |  |  |  | (2,569 | ) |  |  | 309,072 |  |  |  | 7,199 |  |  |  | 269 |
SGD |  |  | 233,510 |  |  |  | 13,611 |  |  |  | 2,707 |  |  |  | 249,108 |  |  |  | (15,570 | ) |  |  | 3,071 |
EUR |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,336 |  |  |  | (53 | ) |  |  | 18 |
Total |  | ￦ | 2,643,046 |  |  | ￦ | 151,817 |  |  | ￦ | 19,779 |  |  | ￦ | 2,970,459 |  |  | ￦ | (185,544 | ) |  | ￦ | 25,184 |

1 | The amounts after adjustments of deferred income tax directly reflected in equity.

Details of financial liabilities at fair value through profit or loss as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Derivatives held for trading 1,2 |  | ￦ | 2,682 |  |  | ￦ | 216,040 |

1 | The Group signed a shareholder-to-share agreement with financial investors participating in the paid-in capital increase of K Bank for the year period ended December 31, 2021. According to the Drag-Along Right, if K Bank fails to be listed on the terms agreed upon for the date of completion of the acquisition, financial investors may exercise the Drag-Along right to the Group, and the Group may comply or exercise the right to claim for sale. If financial investors exercise the Drag-Along Right, the Group must exercise the right to claim for sale or guarantee the return on the terms agreed upon by financial investors.

2 | The amount includes derivatives for redeemable convertible preference shares and convertible bonds issued by the Group (Note 16).

The valuation gain and loss on financial liabilities at fair value through profit or loss for the years ended December 31, 2019, 2020 and 2021, are as follows:

|  | 2019 |  |  | 2020 |  |  | 2021 |
(In millions of Korean won) |  | Valuation gain |  |  | Valuation loss |  |  | Valuation gain |  |  | Valuation loss |  |  | Valuation gain |  |  | Valuation loss |
Derivatives held for trading |  | ￦ | 78 |  |  | ￦ | 2,014 |  |  | ￦ | 172 |  |  | ￦ | 53 |  |  | ￦ | 51,187 |  |  | ￦ | 8,741 |

8. | Inventories

Inventories as at December 31, 2020 and 2021, are as follows:

|  | December 31, 2020 |  |  | December 31, 2021 |
(In millions of Korean won) |  | Acquisition cost |  |  | Valuation allowance |  |  | Book amount |  |  | Acquisition cost |  |  | Valuation allowance |  |  | Book amount |
Merchandise |  | ￦ | 650,856 |  |  | ￦ | (133,224 | ) |  | ￦ | 517,632 |  |  | ￦ | 601,360 |  |  | ￦ | (120,304 | ) |  | ￦ | 481,056 |
Others |  |  | 17,004 |  |  |  | — |  |  |  | 17,004 |  |  |  | 33,089 |  |  |  | — |  |  |  | 33,089 |
Total |  | ￦ | 667,860 |  |  | ￦ | (133,224 | ) |  | ￦ | 534,636 |  |  | ￦ | 634,449 |  |  | ￦ | (120,304 | ) |  | ￦ | 514,145 |

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Cost of inventories recognized as expenses for year ended December 31, 2021, amounts to
￦
3,787,203 million (2019:
￦
3,905,630 million, 2020:
￦
3,938,842 million) and reversal of valuation loss on inventory recognized amounts to
￦
12,920 million for year ended December 31, 2021 (2019: valuation loss on inventory amounts to
￦
30,857 million, 2020: valuation loss on inventory amounts to
￦
11,214 million).

9. | Other Assets and Liabilities

Other assets and liabilities as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Other assets |  |  |  |  |  |  |  |
Advance payments |  | ￦ | 168,302 |  |  | ￦ | 151,266 |
Prepaid expenses |  |  | 66,578 |  |  |  | 100,697 |
Contract cost |  |  | 1,804,948 |  |  |  | 1,801,244 |
Contract assets |  |  | 586,438 |  |  |  | 745,085 |
Others |  |  | 18,747 |  |  |  | 39,979 |
Less: Non-current |  |  | (768,661 | ) |  |  | (793,948 | )
Current |  | ￦ | 1,876,352 |  |  | ￦ | 2,044,323 |
Other liabilities |  |  |  |  |  |  |  |
Advances received 1 |  | ￦ | 328,491 |  |  | ￦ | 372,375 |
Withholdings |  |  | 105,415 |  |  |  | 135,160 |
Unearned revenue 1 |  |  | 29,593 |  |  |  | 35,577 |
Lease liabilities |  |  | 1,143,640 |  |  |  | 1,159,369 |
Contract liabilities |  |  | 384,133 |  |  |  | 323,651 |
Others |  |  | 21,597 |  |  |  | 25,757 |
Less: Non-current |  |  | (909,570 | ) |  |  | (927,596 | )
Current |  | ￦ | 1,103,299 |  |  | ￦ | 1,124,293 |

1 | The amounts include adjustments arising from adoption of IFRS 15 (Note 26).

10. | Assets Held for Sale

For the year ended December 31, 2020, the Group decided to sell some real estate and other assets, it classified
￦
1,187 million as
assets held for sale. The asset was measured at net fair value in accordance with IFRS 5, which is a non-repetitive fair value measured using the recent sale price of similar businesses, an observable input variable
. The details of the assets to be sold are as follows.

( I n millions of Korean won) |  |  |
Land |  | ￦ | 172 |
Buildings |  |  | 938 |
Others |  |  | 77 |
Total |  | ￦ | 1,187 |

During the current period, the Group recognized the
impairment
loss of
￦
11 million, regarding assets scheduled to be sold, and classified it as other expenses (loss of assets expected to be sold). The asset has not been disposed of as of the end of the reporting period.
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

11. | Property and Equipment

Changes in property and equipment for the years ended December 31, 2020 and 2021, are as follows:

|  | 2020 |
(In millions of Korean won) |  | Land |  |  | Buildings and structures |  |  | Machinery and equipment |  |  | Others |  |  | Construction- in-progress |  |  | Total |
Acquisition cost |  | ￦ | 1,262,313 |  |  | ￦ | 4,125,229 |  |  | ￦ | 37,654,635 |  |  | ￦ | 1,612,108 |  |  | ￦ | 1,001,171 |  |  | ￦ | 45,655,456 |
Less: Accumulated depreciation (including accumulated impairment loss and others) |  |  | (132 | ) |  |  | (1,963,165 | ) |  |  | (28,561,384 | ) |  |  | (1,344,573 | ) |  |  | (903 | ) |  |  | (31,870,157 | )
Beginning, net |  |  | 1,262,181 |  |  |  | 2,162,064 |  |  |  | 9,093,251 |  |  |  | 267,535 |  |  |  | 1,000,268 |  |  |  | 13,785,299 |
Acquisition and capital expenditure |  |  | 25,156 |  |  |  | 7,249 |  |  |  | 112,085 |  |  |  | 47,669 |  |  |  | 2,959,690 |  |  |  | 3,151,849 |
Disposal and termination |  |  | (1,756 | ) |  |  | (3,367 | ) |  |  | (69,401 | ) |  |  | (3,385 | ) |  |  | (1,027 | ) |  |  | (78,936 | )
Depreciation |  |  | — |  |  |  | (135,646 | ) |  |  | (2,343,965 | ) |  |  | (91,164 | ) |  |  | — |  |  |  | (2,570,775 | )
Impairment |  |  | — |  |  |  | (36 | ) |  |  | (35,271 | ) |  |  | (44,468 | ) |  |  | — |  |  |  | (79,775 | )
Transfer in (out) |  |  | 53,238 |  |  |  | 283,937 |  |  |  | 2,489,138 |  |  |  | 28,024 |  |  |  | (2,899,197 | ) |  |  | (44,860 | )
Transfer from (to) investment properties |  |  | 6,792 |  |  |  | (8,848 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,056 | )
Changes in scope of consolidation |  |  | 56 |  |  |  | 494 |  |  |  | 225 |  |  |  | 43 |  |  |  | — |  |  |  | 818 |
Others |  |  | (11,040 | ) |  |  | 2,175 |  |  |  | 68,921 |  |  |  | 1,398 |  |  |  | (16,899 | ) |  |  | 44,555 |
Ending, net |  | ￦ | 1,334,627 |  |  | ￦ | 2,308,022 |  |  | ￦ | 9,314,983 |  |  | ￦ | 205,652 |  |  | ￦ | 1,042,835 |  |  | ￦ | 14,206,119 |
Acquisition cost |  | ￦ | 1,334,759 |  |  | ￦ | 4,402,691 |  |  | ￦ | 39,182,265 |  |  | ￦ | 1,619,822 |  |  | ￦ | 1,046,795 |  |  | ￦ | 47,586,332 |
Less: Accumulated depreciation (including accumulated impairment loss and others) |  |  | (132 | ) |  |  | (2,094,669 | ) |  |  | (29,867,282 | ) |  |  | (1,414,170 | ) |  |  | (3,960 | ) |  |  | (33,380,213 | )

|  | 2021 |
(In millions of Korean won) |  | Land |  |  | Buildings and structures |  |  | Machinery and equipment |  |  | Others |  |  | Construction- in-progress |  |  | Total |
Acquisition cost |  | ￦ | 1,334,759 |  |  | ￦ | 4,402,691 |  |  | ￦ | 39,182,265 |  |  | ￦ | 1,619,822 |  |  | ￦ | 1,046,795 |  |  | ￦ | 47,586,332 |
Less: Accumulated depreciation (including accumulated impairment loss and others) |  |  | (132 | ) |  |  | (2,094,669 | ) |  |  | (29,867,282 | ) |  |  | (1,414,170 | ) |  |  | (3,960 | ) |  |  | (33,380,213 | )
Beginning, net |  |  | 1,334,627 |  |  |  | 2,308,022 |  |  |  | 9,314,983 |  |  |  | 205,652 |  |  |  | 1,042,835 |  |  |  | 14,206,119 |
Acquisition and capital expenditure |  |  | 60,817 |  |  |  | 36,446 |  |  |  | 28,159 |  |  |  | 55,336 |  |  |  | 2,947,335 |  |  |  | 3,128,093 |
Disposal and termination |  |  | (45,318 | ) |  |  | (11,827 | ) |  |  | (76,676 | ) |  |  | (6,868 | ) |  |  | (64 | ) |  |  | (140,753 | )
Depreciation |  |  | — |  |  |  | (145,954 | ) |  |  | (2,368,679 | ) |  |  | (81,507 | ) |  |  | — |  |  |  | (2,596,140 | )
Impairment |  |  | — |  |  |  | — |  |  |  | (2,075 | ) |  |  | (40 | ) |  |  | — |  |  |  | (2,115 | )
Transfer in (out) |  |  | 4,608 |  |  |  | 415,771 |  |  |  | 2,340,948 |  |  |  | 27,051 |  |  |  | (2,872,257 | ) |  |  | (83,879 | )
Transfer from (to) investment properties |  |  | (59,848 | ) |  |  | (73,096 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (132,944 | )
Changes in scope of consolidation |  |  | 20,911 |  |  |  | 6,355 |  |  |  | 67,925 |  |  |  | 15,583 |  |  |  | 497 |  |  |  | 111,271 |
Others |  |  | — |  |  |  | (18,295 | ) |  |  | 11,986 |  |  |  | 6,031 |  |  |  | (24,488 | ) |  |  | (24,766 | )
Ending, net |  | ￦ | 1,315,797 |  |  | ￦ | 2,517,422 |  |  | ￦ | 9,316,571 |  |  | ￦ | 221,238 |  |  | ￦ | 1,093,858 |  |  | ￦ | 14,464,886 |
Acquisition cost |  | ￦ | 1,315,929 |  |  | ￦ | 4,707,250 |  |  | ￦ | 40,270,005 |  |  | ￦ | 1,607,853 |  |  | ￦ | 1,094,479 |  |  | ￦ | 48,995,516 |
Less: Accumulated depreciation (including accumulated impairment loss and others) |  |  | (132 | ) |  |  | (2,189,828 | ) |  |  | (30,953,434 | ) |  |  | (1,386,615 | ) |  |  | (621 | ) |  |  | (34,530,630 | )

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Details of property and equipment provided as collateral as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020
|  | Carrying amount |  |  | Secured amount |  |  | Related line item |  |  | Related amount |  |  | Secured party
Land and Buildings |  | ￦ | 11,644 |  |  | ￦ | 15,502 |  |  |  | Borrowings |  |  | ￦ | 3,072 |  |  | Industrial Bank of Korea, Korea Development Bank
|  | ￦ | 4,142 |  |  | ￦ | 249 |  |  |  | Deposits |  |  | ￦ | 249 |  |  | K Bank

(In millions of Korean won) |  | December 31, 2021
|  | Carrying amount |  |  | Secured amount |  |  | Related line item |  |  | Related amount |  |  | Secured party
Land and Buildings |  | ￦ | 11,320 |  |  | ￦ | 15,412 |  |  |  | Borrowings |  |  | ￦ | 3,272 |  |  | Industrial Bank of Korea, Korea Development Bank

The borrowing costs capitalized for qualifying assets amount to
￦
5,360 million (
2019: ￦ 6,360 million
,
2020:
￦
8,452 million
), for the year ended December 31,
2021. The interest rate applied to calculate the capitalized borrowing costs is 2.04% (
2019: 2.63%,
2020: 2.36
%), for the year ended December 31, 2021.

12. | Investment Properties

Changes in investment properties for the years ended December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2020 |
| Land |  |  | Buildings |  |  | Construction- in-progress |  |  | Total |
Acquisition cost |  | ￦ | 555,164 |  |  | ￦ | 1,323,518 |  |  | ￦ | 1,902 |  |  | ￦ | 1,880,584 |
Less: Accumulated depreciation |  |  | (1,568 | ) |  |  | (491,586 | ) |  |  | — |  |  |  | (493,154 | )
Beginning, net |  | ￦ | 553,596 |  |  | ￦ | 831,932 |  |  | ￦ | 1,902 |  |  | ￦ | 1,387,430 |
Acquisition |  |  | 11,723 |  |  |  | 7,096 |  |  |  | 34,243 |  |  |  | 53,062 |
Disposal and termination |  |  | (1,536 | ) |  |  | (243 | ) |  |  | — |  |  |  | (1,779 | )
Depreciation |  |  | — |  |  |  | (64,531 | ) |  |  | — |  |  |  | (64,531 | )
Transfer from(to) property and equipment |  |  | (6,792 | ) |  |  | 8,848 |  |  |  | — |  |  |  | 2,056 |
Transfer and others |  |  | (18,656 | ) |  |  | 469 |  |  |  | 10,402 |  |  |  | (7,785 | )
Ending, net |  | ￦ | 538,335 |  |  | ￦ | 783,571 |  |  | ￦ | 46,547 |  |  | ￦ | 1,368,453 |
Acquisition cost |  | ￦ | 539,903 |  |  | ￦ | 1,341,326 |  |  | ￦ | 46,547 |  |  | ￦ | 1,927,776 |
Less: Accumulated depreciation |  |  | (1,568 | ) |  |  | (557,755 | ) |  |  | — |  |  |  | (559,323 | )

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | 2021 |
| Land |  |  | Buildings |  |  | Construction- in-progress |  |  | Total |
Acquisition cost |  | ￦ | 539,903 |  |  | ￦ | 1,341,326 |  |  | ￦ | 46,547 |  |  | ￦ | 1,927,776 |
Less: Accumulated depreciation |  |  | (1,568 | ) |  |  | (557,755 | ) |  |  | — |  |  |  | (559,323 | )
Beginning, net |  | ￦ | 538,335 |  |  | ￦ | 783,571 |  |  | ￦ | 46,547 |  |  | ￦ | 1,368,453 |
Acquisition |  |  | 171,872 |  |  |  | 42,151 |  |  |  | 56,351 |  |  |  | 270,374 |
Disposal and termination |  |  | (17,133 | ) |  |  | (4,862 | ) |  |  | — |  |  |  | (21,995 | )
Depreciation |  |  | — |  |  |  | (47,754 | ) |  |  | — |  |  |  | (47,754 | )
Transfer from(to) property and equipment |  |  | 59,848 |  |  |  | 73,096 |  |  |  | — |  |  |  | 132,944 |
Changes in scope of consolidation |  |  | 5,262 |  |  |  | 1,779 |  |  |  | — |  |  |  | 7,041 |
Transfer and others |  |  | 55,579 |  |  |  | (7,891 | ) |  |  | (36,097 | ) |  |  | 11,591 |
Ending, net |  | ￦ | 813,763 |  |  | ￦ | 840,090 |  |  | ￦ | 66,801 |  |  | ￦ | 1,720,654 |
Acquisition cost |  | ￦ | 815,331 |  |  | ￦ | 1,424,066 |  |  | ￦ | 66,801 |  |  | ￦ | 2,306,198 |
Less: Accumulated depreciation |  |  | (1,568 | ) |  |  | (583,976 | ) |  |  | — |  |  |  | (585,544 | )

The fair value of investment properties is
￦
4,263,381 million as at December 31, 2021 (December 31, 2020:
￦
2,645,482 million). The fair value of investment properties is estimated based on the expected cash flow.
Rental income from investment properties is
￦
185,877 million (2020:
￦
203,763 million
), for the year ended December 31, 2021
and direct operating expenses (including repairs and maintenance) arising from investment properties that generated rental income during the period are recognized as operating expenses.
As at December 31, 2021, the Group (Lessor) has entered into a
non-cancellable
operating lease contract relating to real estate lease. The future minimum lease fee under this contract is
￦
63,509 million for one year or less,
￦
130,745 million more than one year and less than five years,
W
83,589 million over five years, and
￦
277,843 million in total.
Details of investment properties provided as collateral as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |
|  | Carrying amount |  |  | Secured amount |  |  | Related account |  | Related amount |
Land and Buildings |  | ￦ | 790,414 |  |  | ￦ | 62,968 |  |  | Deposits |  | ￦ | 56,247 |
Land and Buildings |  | ￦ | 2,861 |  |  | ￦ | 3,434 |  |  | Borrowings |  | ￦ | 2,928 |

(In millions of Korean won) |  | December 31, 2021 |
|  | Carrying amount |  |  | Secured amount |  |  | Related account |  | Related amount |
Land and Buildings |  | ￦ | 828,103 |  |  | ￦ | 72,910 |  |  | Deposits |  | ￦ | 63,012 |
Land and Buildings |  | ￦ | 2,883 |  |  | ￦ | 3,688 |  |  | Borrowings |  | ￦ | 2,728 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

13. | Intangible Assets

Changes in intangible assets for the years ended December 31, 2020 and 2021, are as
follows:

|  | 2020 |
(In millions of Korean won) |  | Goodwill |  |  | Development costs |  |  | Software |  |  | Frequency usage rights |  |  | Others |  |  | Total |
Acquisition cost |  | ￦ | 541,596 |  |  | ￦ | 1,661,372 |  |  | ￦ | 978,139 |  |  | ￦ | 3,622,327 |  |  | ￦ | 1,193,048 |  |  | ￦ | 7,996,482 |
Less: Accumulated amortization (including accumulated impairment loss and others) |  |  | (306,026 | ) |  |  | (1,388,738 | ) |  |  | (840,758 | ) |  |  | (1,868,386 | ) |  |  | (758,537 | ) |  |  | (5,162,445 | )
Beginning, net |  | ￦ | 235,570 |  |  | ￦ | 272,634 |  |  | ￦ | 137,381 |  |  | ￦ | 1,753,941 |  |  | ￦ | 434,511 |  |  | ￦ | 2,834,037 |
Acquisition and capital expenditure |  |  | — |  |  |  | 26,990 |  |  |  | 37,077 |  |  |  | — |  |  |  | 101,563 |  |  |  | 165,630 |
Disposal and termination |  |  | — |  |  |  | (1,849 | ) |  |  | (105 | ) |  |  | — |  |  |  | (11,866 | ) |  |  | (13,820 | )
Amortization |  |  | — |  |  |  | (104,938 | ) |  |  | (54,191 | ) |  |  | (399,348 | ) |  |  | (69,677 | ) |  |  | (628,154 | )
Impairment 1 |  |  | — |  |  |  | — |  |  |  | (1,776 | ) |  |  | (193,194 | ) |  |  | (16,667 | ) |  |  | (211,637 | )
Changes in scope of consolidation |  |  | — |  |  |  | 575 |  |  |  | 77 |  |  |  | — |  |  |  | 3,690 |  |  |  | 4,342 |
Others |  |  | (5,485 | ) |  |  | 87,587 |  |  |  | 27,537 |  |  |  | (736 | ) |  |  | (98,043 | ) |  |  | 10,860 |
Ending, net |  | ￦ | 230,085 |  |  | ￦ | 280,999 |  |  | ￦ | 146,000 |  |  | ￦ | 1,160,663 |  |  | ￦ | 343,511 |  |  | ￦ | 2,161,258 |
Acquisition cost |  |  | 536,093 |  |  |  | 1,767,422 |  |  |  | 1,053,980 |  |  |  | 3,373,095 |  |  |  | 1,167,735 |  |  |  | 7,898,325 |
Less: Accumulated amortization (including accumulated impairment loss and others) |  |  | (306,008 | ) |  |  | (1,486,423 | ) |  |  | (907,980 | ) |  |  | (2,212,432 | ) |  |  | (824,224 | ) |  |  | (5,737,067 | )

1 | For the year ended December 31, 2020, an impairment loss of ￦ 190,929 million on frequency usage rights was recognized.

|  | 2021 |
(In millions of Korean won) |  | Goodwill |  |  | Development costs |  |  | Software |  |  | Frequency usage rights |  |  | Others 1 |  |  | Total |
Acquisition cost |  | ￦ | 536,093 |  |  | ￦ | 1,767,422 |  |  | ￦ | 1,053,980 |  |  | ￦ | 3,373,095 |  |  | ￦ | 1,167,735 |  |  | ￦ | 7,898,325 |
Less: Accumulated amortization (including accumulated impairment loss and others) |  |  | (306,008 | ) |  |  | (1,486,423 | ) |  |  | (907,980 | ) |  |  | (2,212,432 | ) |  |  | (824,224 | ) |  |  | (5,737,067 | )
Beginning, net |  | ￦ | 230,085 |  |  | ￦ | 280,999 |  |  | ￦ | 146,000 |  |  | ￦ | 1,160,663 |  |  | ￦ | 343,511 |  |  | ￦ | 2,161,258 |
Acquisition and capital expenditure |  |  | 467,394 |  |  |  | 38,113 |  |  |  | 36,437 |  |  |  | 1,065,096 |  |  |  | 113,579 |  |  |  | 1,720,619 |
Disposal and termination |  |  | — |  |  |  | (7,893 | ) |  |  | (506 | ) |  |  | (276 | ) |  |  | (5,108 | ) |  |  | (13,783 | )
Amortization |  |  | — |  |  |  | (92,230 | ) |  |  | (52,547 | ) |  |  | (386,741 | ) |  |  | (73,226 | ) |  |  | (604,744 | )
Impairment |  |  | — |  |  |  | (216 | ) |  |  | (316 | ) |  |  | — |  |  |  | (3,216 | ) |  |  | (3,748 | )
Changes in scope of consolidation |  |  | (607 | ) |  |  | 8,640 |  |  |  | (4,548 | ) |  |  | — |  |  |  | 152,768 |  |  |  | 156,253 |
Others |  |  | — |  |  |  | 960 |  |  |  | 14,905 |  |  |  | 389 |  |  |  | 15,224 |  |  |  | 31,478 |
Ending, net |  |  | 696,872 |  |  |  | 228,373 |  |  |  | 139,425 |  |  |  | 1,839,131 |  |  |  | 543,532 |  |  |  | 3,447,333 |
Acquisition cost |  |  | 1,002,530 |  |  |  | 1,812,377 |  |  |  | 1,083,426 |  |  |  | 2,617,647 |  |  |  | 1,426,576 |  |  |  | 7,942,556 |
Less: Accumulated amortization (including accumulated impairment loss and others) |  |  | (305,658 | ) |  |  | (1,584,004 | ) |  |  | (944,001 | ) |  |  | (778,516 | ) |  |  | (883,044 | ) |  |  | (4,495,223 | )

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

1 | The carrying amount of membership rights and others, excluding goodwill, with indefinite useful life not subject to amortization is ￦ 219,204 million (20 20 : ￦ 221,099 million) as at December 31, 2021.

In April 2021, the Group was reassigned with a portion in accordance with Article 11 of the Radio Waves Act (frequency allocation based on consideration). The frequency band and payment are as follows.

(In millions of Korean won) |  | 900MHz |  |  | 1.8GHz |  |  | 2.1GHz |
Payment amount 1 |  | ￦ | 141,300 |  |  | ￦ | 547,800 |  |  | ￦ | 411,700 |

1 | The Group paid a certain portion of the full payment in a lump sum during the year ended December 31, 2021, and plans to make the remainder payment in annual installment for the next five years.

Goodwill is allocated to the Group’s cash-generating unit which is identified by operating segments. As at December 31, 2021, goodwill allocated to each cash-generating unit is as follows:

(In millions of Korean won) |  |  |
Operating Segment |  | Cash generating Unit |  | Amount |
ICT 10 |  | Mobile services 1 |  | ￦ | 65,057 |
Finance |  | BC Card Co., Ltd. 2 |  |  | 41,234 |
Satellite TV |  | HCN Co., Ltd. 3 |  |  | 252,680 |
Others |  | GENIE Music Corporation 4 |  |  | 50,214 |
|  | BOOK CLUB MILL I E 5 |  |  | 51,580 |
|  | PlayD Co., Ltd. 6 |  |  | 42,745 |
|  | KT Telecop Co., Ltd. 7 |  |  | 15,418 |
|  | Epsilon Global Communications Pte. Ltd. 8 |  |  | 149,706 |
|  | MEDIA GENIE Co., Ltd. 9 |  |  | 10,633 |
|  | KT MOS Bukbu Co., Ltd and others |  |  | 17,605 |
|  | Total |  | ￦ | 696,872 |

| 1 | The recoverable amounts of mobile services business are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next five years based on financial budgets. A terminal growth rate of 0.0% was applied for the cash flows expected to be incurred after five years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate 2.02% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 8.72% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. Accordingly, the Group did not recognize an impairment loss on goodwill on mobile business for the years ended December 31, 2019, 2020 and 2021.

| 2 | The recoverable amounts of BC Card Co., Ltd. are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next five years based on financial budgets. A terminal growth rate of 0.0 % was applied for the cash flows expected to be incurred after five years. This growth rate does not exceed the average growth

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate -0.30% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 8.56% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. Accordingly, the Group did not recognize an impairment loss on goodwill on BC Card Co., Ltd. for the years ended December 31, 2019, 2020 and 2021.

| 3 | The recoverable amounts of HCN Co., Ltd. are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next four years based on financial budgets. A terminal growth rate of 0.0% was applied for the cash flows expected to be incurred after four years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate 3.02% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 11.81% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. Accordingly, the Group did not recognize an impairment loss on goodwill on HCN Co., Ltd. for the years ended December 31, 2021.

| 4 | The recoverable amount of GENIE Music Corporation is calculated based on fair value less cost to sell.

| 5 | The recoverable amounts of BOOK CLU B MILLIE are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next four years based on financial budgets. A terminal growth rate of 1.0% was applied for the cash flows expected to be incurred after four years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate 27.77% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 16.92% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. Accordingly, the Group did not recognize an impairment loss on goodwill on HCN Co., Ltd. for the years ended December 31, 2021.

| 6 | The recoverable amount of PlayD Co., Ltd. is calculated based on fair value less cost to sell.

| 7 | The recoverable amounts of KT Telecop Co., Ltd. are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next five years based on financial budgets. A terminal growth rate of 1.0% was applied for the cash flows expected to be incurred after five years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate 0.72% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 11.59% used reflected specific risks relating to the relevant CGUs. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. Accordingly, the Group did not recognize an impairment loss on goodwill on KT Telecop Co., Ltd. for the years ended December 31, 2019, 2020 and 2021.

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| 8 | The recoverable amounts of Epsilon Global Communications Pte. Ltd. are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next nine years based on financial budgets. A terminal growth rate of 1.0% was applied for the cash flows expected to be incurred after nine years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate 11.24% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 8.08% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. Accordingly, the Group did not recognize an impairment loss on goodwill on Epsilon Global Communications Pte. Ltd. for the years ended December 31, 2021.

| 9 | The recoverable amounts of MEDIA GENIE Co., Ltd. are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next five years based on financial budgets. A terminal growth rate of 0.0% was applied for the cash flows expected to be incurred after five years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate 3.12% based on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rates 16.72% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, the Group concluded that the carrying amount of CGU does not exceed the recoverable amount. Accordingly, the Group did not recognize an impairment loss on goodwill on MEDIA GENIE Co., Ltd. for the years ended December 31, 2021.

| 10 | The Group performed its impairment assessment for long-lived assets attributed to the Information and Communication Technology (“ICT”) reporting segment, which includes the Cash-Generating Units of Mobile, Fixed line, and Corporate Services (the “CGUs”). The Group compared the carrying value of each CGU to the estimated recoverable amount. The recoverable amounts of ICT reporting segment are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next five years based on financial budgets. A terminal growth rate of 0.0% was applied for the cash flows expected to be incurred after five years. This growth rate does not exceed the average growth rate of the industry which the cash-generating unit belongs in. The Group estimated its revenue growth rate 2.02% ~ 5.65% ba sed on past performance and its expectation of future market changes. In addition, management estimated the cash flow based on past performance and its expectation of market growth, and the discount rate 8.72 %. Accordingly, the Group did no t recognize an impairment loss on ICT reporting segment for the years ended December 31, 2019, 2020 and 2021.

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

14. | Investments in Associates and Joint Ventures

Details of associates that are material to the Group as at December 31, 2020 and 2021, are as
follows:

|  | Percentage of ownership (%) |  |  | Location |  |  | Closing month |
| December 31, 2020 |  |  | December 31, 2021 |  |  |  |  |  |  |
Korea Information & Technology Fund |  |  | 33.3 | % |  |  | 33.3 | % |  |  | Korea |  |  |  | December |
KT-IBKC Future Investment Fund 1 1 |  |  | 50.0 | % |  |  | 50.0 | % |  |  | Korea |  |  |  | December |
K Bank |  |  | 34.0 | % |  |  | 33.7 | % |  |  | Korea |  |  |  | December |
Hyundai Robotics Co., Ltd. 2 |  |  | 10.0 | % |  |  | 10.0 | % |  |  | Korea |  |  |  | December |
K-REALTY CR REITs No.1 |  |  | 23.3 | % |  |  | 30.1 | % |  |  | Korea |  |  |  | December |

| 1 | At the end of the reporting period, although the Group owns 50% ownership, the equity method of accounting has been applied as the Group, which is a limited partner of the investment fund, because the Group cannot participate in determining the operating and financial policies.

| 2 | At the end of the reporting period, although the Group has less than 20% ownership in ordinary share, this entity is included in investments in associates as the Group has a significant influence in determining the operating and financial policies.

Changes in investments in associates and joint ventures for the years ended December 31, 2020 and 2021, are as follows:

|  | 2020 |
(In millions of Korean won) |  | Beginning |  |  | Acquisition (Disposal) |  |  | Share of net profit from associates and joint ventures 1 |  |  | Others |  |  | Ending |
Korea Information & Technology Fund |  | ￦ | 163,975 |  |  | ￦ | — |  |  | ￦ | 12,205 |  |  | ￦ | (6,025 | ) |  | ￦ | 170,155 |
KT-IBKC Future Investment Fund 1 |  |  | 14,100 |  |  |  | — |  |  |  | 2,090 |  |  |  | — |  |  |  | 16,190 |
KT-CKP New Media Investment Fund |  |  | 134 |  |  |  | (134 | ) |  |  | — |  |  |  | — |  |  |  | — |
K Bank |  |  | 45,158 |  |  |  | 195,011 |  |  |  | (30,209 | ) |  |  | (1,688 | ) |  |  | 208,272 |
Hyundai Robotics Co., Ltd. |  |  | — |  |  |  | 50,000 |  |  |  | (64 | ) |  |  | 1,000 |  |  |  | 50,936 |
Others 1 |  |  | 44,293 |  |  |  | 28,400 |  |  |  | 34,298 |  |  |  | 5,337 |  |  |  | 112,328 |
|  | ￦ | 267,660 |  |  | ￦ | 273,277 |  |  | ￦ | 18,320 |  |  | ￦ | (1,376 | ) |  | ￦ | 557,881 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  | 2021 |
(In millions of Korean won) |  | Beginning |  |  | Acquisition (Disposal) |  |  | Share of net profit from associates and joint ventures 1 |  |  | Others 2 |  |  | Ending |
Korea Information & Technology Fund |  | ￦ | 170,155 |  |  | ￦ | — |  |  | ￦ | 16,702 |  |  | ￦ | (7,922 | ) |  | ￦ | 178,935 |
KT-IBKC Future Investment Fund 1 |  |  | 16,190 |  |  |  | (5,700 | ) |  |  | 1,591 |  |  |  | — |  |  |  | 12,081 |
K Bank 2 |  |  | 208,272 |  |  |  | 424,957 |  |  |  | 5,809 |  |  |  | 192,699 |  |  |  | 831,737 |
Hyundai Robotics Co., Ltd. |  |  | 50,936 |  |  |  | — |  |  |  | (2,373 | ) |  |  | 162 |  |  |  | 48,725 |
K-REALTY CR REITs No.1 |  |  | 31,088 |  |  |  | — |  |  |  | 75,676 |  |  |  | (39,106 | ) |  |  | 67,658 |
Others 1 |  |  | 81,240 |  |  |  | 57,691 |  |  |  | 18,769 |  |  |  | (8,407 | ) |  |  | 149,293 |
|  | ￦ | 557,881 |  |  | ￦ | 476,948 |  |  | ￦ | 116,174 |  |  | ￦ | 137,426 |  |  | ￦ | 1,288,429 |

1 | KT investment Co., Ltd., a subsidiary of the Group, recognized its share in net profit from associates and joint ventures as operating revenue and expense. These include its share in net gain from associates and joint ventures of ￦ 113 million (2019: net gain of ￦ 52 million, 2020: net gain of ￦ 279 million) recognized as operating revenue during the period.

2 | The amount includes the amount increased as derivatives liabilities were borne by shareholders’ agreements between financial investors participating in the paid-in capital increase of K Bank during the current period (Note 7).

Summarized financial information of associates and joint ventures that are material to the Group as at and for the years ended December 31, 2020 and 2021, is as follows:

(In millions of Korean won) |  | December 31, 2020 |
|  | Current assets |  |  | Non-current assets |  |  | Current liabilities |  |  | Non-current liabilities |
Korea Information & Technology Fund |  | ￦ | 107,652 |  |  | ￦ | 402,812 |  |  | ￦ | — |  |  | ￦ | — |
KT-IBKC Future Investment Fund 1 |  |  | 32,379 |  |  |  | — |  |  |  | — |  |  |  | — |
K Bank |  |  | 4,255,620 |  |  |  | 74,193 |  |  |  | 3,752,838 |  |  |  | 88,155 |
Hyundai Robotics Co., Ltd. |  |  | 315,886 |  |  |  | 125,619 |  |  |  | 80,615 |  |  |  | 59,324 |

(In millions of Korean won) |  | December 31, 2021 |
|  | Current assets |  |  | Non-current assets |  |  | Current liabilities |  |  | Non-current liabilities |
Korea Information & Technology Fund |  | ￦ | 117,172 |  |  | ￦ | 419,632 |  |  | ￦ | — |  |  | ￦ | — |
KT-IBKC Future Investment Fund 1 |  |  | 24,163 |  |  |  | — |  |  |  | — |  |  |  | — |
K Bank |  |  | 13,263,658 |  |  |  | 70,362 |  |  |  | 11,594,316 |  |  |  | 2,467 |
Hyundai Robotics Co., Ltd. |  |  | 308,776 |  |  |  | 120,221 |  |  |  | 91,637 |  |  |  | 57,899 |
K-REALTY CR REITs No.1 |  |  | 208,825 |  |  |  | — |  |  |  | — |  |  |  | — |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | 2020 |
|  | Operating revenue |  |  | Profit (loss) for the year |  |  | Other comprehensive income(loss) |  |  | Total comprehensive income(loss) |  |  | Dividends received from associates |
Korea Information & Technology Fund |  | ￦ | 54,473 |  |  | ￦ | 36,615 |  |  | ￦ | 9,647 |  |  | ￦ | 46,262 |  |  | ￦ | 9,241 |
KT-IBKC Future Investment Fund 1 |  |  | 6,551 |  |  |  | 4,179 |  |  |  | — |  |  |  | 4,179 |  |  |  | — |
K Bank |  |  | 80,301 |  |  |  | (105,374 | ) |  |  | (1,126 | ) |  |  | (106,500 | ) |  |  | — |
Hyundai Robotics Co., Ltd. |  |  | 195,311 |  |  |  | (642 | ) |  |  | 11,573 |  |  |  | 10,931 |  |  |  | — |

(In millions of Korean won) |  | 2021 |
|  | Operating revenue |  |  | Profit (loss) for the year |  |  | Other comprehensive income(loss) |  |  | Total comprehensive income(loss) |  |  | Dividends received from associates |
Korea Information & Technology Fund |  | ￦ | 58,791 |  |  | ￦ | 50,107 |  |  | ￦ | (6,847 | ) |  | ￦ | 43,260 |  |  | ￦ | 5,640 |
KT-IBKC Future Investment Fund 1 |  |  | 5,912 |  |  |  | 3,184 |  |  |  | — |  |  |  | 3,184 |  |  |  | — |
K Bank |  |  | 287,775 |  |  |  | 21,728 |  |  |  | (28,211 | ) |  |  | (6,483 | ) |  |  | — |
Hyundai Robotics Co., Ltd. |  |  | 189,255 |  |  |  | (23,730 | ) |  |  | 1,977 |  |  |  | (21,753 | ) |  |  | — |
K-REALTY CR REITs No.1 |  |  | 425,363 |  |  |  | 180,437 |  |  |  | — |  |  |  | 180,437 |  |  |  | 40,142 |

Details of a reconciliation of the summarized financial information to the carrying amount of interests in the associates and joint ventures that are material to the Group as at and for the years end December 31, 2020 and 2021, are as
follows:

(In millions of Korean won) |  | December 31, 2020 |
|  | Net assets (a) |  |  | Percentage of ownership (b) |  |  | Share in net assets (c)=(a)x(b) |  |  | Intercompany transaction and others (d) |  |  | Book amount (c)+(d) |
Korea Information & Technology Fund |  | ￦ | 510,464 |  |  |  | 33.30 | % |  | ￦ | 170,155 |  |  | ￦ | — |  |  | ￦ | 170,155 |
KT-IBKC Future Investment Fund 1 |  |  | 32,379 |  |  |  | 50.00 | % |  |  | 16,190 |  |  |  | — |  |  |  | 16,190 |
K Bank |  |  | 488,819 |  |  |  | 34.00 | % |  |  | 166,198 |  |  |  | 42,074 |  |  |  | 208,272 |
Hyundai Robotics Co., Ltd. |  |  | 301,566 |  |  |  | 10.00 | % |  |  | 30,157 |  |  |  | 20,779 |  |  |  | 50,936 |

(In millions of Korean won) |  | December 31, 2021 |
|  | Net assets (a) |  |  | Percentage of ownership (b) |  |  | Share in net assets (c)=(a)x(b) |  |  | Intercompany transaction and others (d) |  |  | Book amount (c)+(d) |
Korea Information & Technology Fund |  | ￦ | 536,804 |  |  |  | 33.33 | % |  | ￦ | 178,935 |  |  | ￦ | — |  |  | ￦ | 178,935 |
KT-IBKC Future Investment Fund 1 |  |  | 24,163 |  |  |  | 50.00 | % |  |  | 12,081 |  |  |  | — |  |  |  | 12,081 |
K Bank |  |  | 1,737,237 |  |  |  | 33.72 | % |  |  | 585,837 |  |  |  | 245,900 |  |  |  | 831,737 |
Hyundai Robotics Co., Ltd. |  |  | 279,461 |  |  |  | 10.00 | % |  |  | 27,946 |  |  |  | 20,779 |  |  |  | 48,725 |
K-REALTY CR REITs No.1 |  |  | 208,825 |  |  |  | 30.05 | % |  |  | 62,752 |  |  |  | 4,906 |  |  |  | 67,658 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Due to discontinuance of equity method of accounting, the Group has not recognized loss from associates and joint ventures of
￦
717 million for the year ended December 31, 2021 (for the year ended December 31, 2020:
￦
992 million). The accumulated comprehensive loss of associates and joint ventures as at December 31, 2021, which was not recognized by the Group is
￦
9,006 million (as at December 31, 2020:
￦
8,228 million).

15. | Trade and Other Payables

Details of trade and other payables as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Current liabilities |  |  |  |  |  |  |  |
Trade payables |  | ￦ | 1,239,717 |  |  | ￦ | 1,537,148 |
Other payables |  |  | 4,970,382 |  |  |  | 5,104,274 |
Total |  | ￦ | 6,210,099 |  |  | ￦ | 6,641,422 |
Non-current liabilities |  |  |  |  |  |  |  |
Trade payables |  | ￦ | 1,528 |  |  | ￦ | — |
Other payables |  |  | 806,012 |  |  |  | 1,338,781 |
Total |  | ￦ | 807,540 |  |  | ￦ | 1,338,781 |

Details of other payables as at December 31, 2020 and 2021 are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Non-trade payables 1 |  | ￦ | 3,841,227 |  |  | ￦ | 4,378,445 |
Accrued expenses |  |  | 933,978 |  |  |  | 1,037,616 |
Operating deposits |  |  | 803,904 |  |  |  | 814,613 |
Others |  |  | 197,285 |  |  |  | 212,381 |
Less: non-current |  |  | (806,012 | ) |  |  | (1,338,781 | )
Current |  | ￦ | 4,970,382 |  |  | ￦ | 5,104,274 |

1 | Settlement payables of BC Card Co., Ltd., a subsidiary of the Group, of ￦ 1,086,996 million related to credit card transactions are included as at December 31, 2021 (2020: ￦ 1,007,171 million).

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

16. | Borrowings

Details of borrowings as at December 31, 2020 and 2021, are as follows:
Debentures

(In millions of Korean won and thousands of foreign currencies) |  | December 31, 2020 |  |  | December 31, 2021 |
Type |  | Maturity |  |  | Annual interest rates |  | Foreign currency |  |  | Korean won |  |  | Foreign currency |  |  | Korean won |
MTNP notes 1 |  |  | Sep. 7, 2034 |  |  | 6.500% |  |  | USD 100,000 |  |  | ￦ | 108,800 |  |  |  | USD 100,000 |  |  | ￦ | 118,550 |
MTNP notes |  |  | Jul. 18, 2026 |  |  | 2.500% |  |  | USD 400,000 |  |  |  | 435,200 |  |  |  | USD 400,000 |  |  |  | 474,200 |
MTNP notes |  |  | Aug. 7, 2022 |  |  | 2.625% |  |  | USD 400,000 |  |  |  | 435,200 |  |  |  | USD 400,000 |  |  |  | 474,200 |
FR notes 2 |  |  | Aug. 23, 2023 |  |  | LIBOR(3M)+0.90% |  |  | USD 100,000 |  |  |  | 108,800 |  |  |  | USD 100,000 |  |  |  | 118,550 |
MTNP notes |  |  | Jul. 6, 2021 |  |  | — |  |  | JPY 16,000,000 |  |  |  | 168,682 |  |  |  | — |  |  |  | — |
MTNP notes |  |  | Jul. 19, 2022 |  |  | 0.220% |  |  | JPY 29,600,000 |  |  |  | 312,061 |  |  |  | JPY 29,600,000 |  |  |  | 304,951 |
MTNP notes |  |  | Jul. 19, 2024 |  |  | 0.330% |  |  | JPY 400,000 |  |  |  | 4,217 |  |  |  | JPY 400,000 |  |  |  | 4,121 |
MTNP notes |  |  | Sep. 1, 2025 |  |  | 1.000% |  |  | USD 400,000 |  |  |  | 435,200 |  |  |  | USD 400,000 |  |  |  | 474,200 |
FR notes 2 |  |  | Nov. 1, 2024 |  |  | LIBOR(3M)+0.98% |  |  | USD 350,000 |  |  |  | 380,800 |  |  |  | USD 350,000 |  |  |  | 414,925 |
FR notes 2 |  |  | Jun. 19, 2023 |  |  | SOR(6M)+0.5% |  |  | SGD 284,000 |  |  |  | 233,510 |  |  |  | SGD 284,000 |  |  |  | 249,108 |
MTNP notes |  |  | Jan. 21, 2027 |  |  | 1.375% |  |  | — |  |  |  | — |  |  |  | USD 300,000 |  |  |  | 355,650 |
The 180-2nd Public bond |  |  | Apr. 26, 2021 |  |  | — |  |  | — |  |  |  | 380,000 |  |  |  | — |  |  |  | — |
The 181-3rd Public bond |  |  | Aug. 26, 2021 |  |  | — |  |  | — |  |  |  | 250,000 |  |  |  | — |  |  |  | — |
The 182-2nd Public bond |  |  | Oct. 28, 2021 |  |  | — |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | — |
The 183-2nd Public bond |  |  | Dec. 22, 2021 |  |  | — |  |  | — |  |  |  | 90,000 |  |  |  | — |  |  |  | — |
The 183-3rd Public bond |  |  | Dec. 22, 2031 |  |  | 4.270% |  |  | — |  |  |  | 160,000 |  |  |  | — |  |  |  | 160,000 |
The 184-2nd Public bond |  |  | Apr. 10, 2023 |  |  | 2.950% |  |  | — |  |  |  | 190,000 |  |  |  | — |  |  |  | 190,000 |
The 184-3rd Public bond |  |  | Apr. 10, 2033 |  |  | 3.170% |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | 100,000 |
The 186-3rd Public bond |  |  | Jun. 26, 2024 |  |  | 3.418% |  |  | — |  |  |  | 110,000 |  |  |  | — |  |  |  | 110,000 |
The 186-4th Public bond |  |  | Jun. 26, 2034 |  |  | 3.695% |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | 100,000 |
The 187-3rd Public bond |  |  | Sep. 2, 2024 |  |  | 3.314% |  |  | — |  |  |  | 170,000 |  |  |  | — |  |  |  | 170,000 |
The 187-4th Public bond |  |  | Sep. 2, 2034 |  |  | 3.546% |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | 100,000 |
The 188-2nd Public bond |  |  | Jan. 29, 2025 |  |  | 2.454% |  |  | — |  |  |  | 240,000 |  |  |  | — |  |  |  | 240,000 |
The 188-3rd Public bond |  |  | Jan. 29, 2035 |  |  | 2.706% |  |  | — |  |  |  | 50,000 |  |  |  | — |  |  |  | 50,000 |
The 189-2nd Public bond |  |  | Jan. 28, 2021 |  |  | — |  |  | — |  |  |  | 130,000 |  |  |  | — |  |  |  | — |
The 189-3rd Public bond |  |  | Jan. 28, 2026 |  |  | 2.203% |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | 100,000 |
The 189-4rd Public bond |  |  | Jan. 28, 2036 |  |  | 2.351% |  |  | — |  |  |  | 70,000 |  |  |  | — |  |  |  | 70,000 |
The 190-1st Public bond |  |  | Jan. 29, 2021 |  |  | — |  |  | — |  |  |  | 110,000 |  |  |  | — |  |  |  | — |
The 190-2nd Public bond |  |  | Jan. 30, 2023 |  |  | 2.749% |  |  | — |  |  |  | 150,000 |  |  |  | — |  |  |  | 150,000 |
The 190-3rd Public bond |  |  | Jan. 30, 2028 |  |  | 2.947% |  |  | — |  |  |  | 170,000 |  |  |  | — |  |  |  | 170,000 |
The 190-4th Public bond |  |  | Jan. 30, 2038 |  |  | 2.931% |  |  | — |  |  |  | 70,000 |  |  |  | — |  |  |  | 70,000 |
The 191-1st Public bond |  |  | Jan. 14, 2022 |  |  | 2.048% |  |  | — |  |  |  | 220,000 |  |  |  | — |  |  |  | 220,000 |
The 191-2nd Public bond |  |  | Jan. 15, 2024 |  |  | 2.088% |  |  | — |  |  |  | 80,000 |  |  |  | — |  |  |  | 80,000 |
The 191-3rd Public bond |  |  | Jan. 15, 2029 |  |  | 2.160% |  |  | — |  |  |  | 110,000 |  |  |  | — |  |  |  | 110,000 |
The 191-4th Public bond |  |  | Jan. 14, 2039 |  |  | 2.213% |  |  | — |  |  |  | 90,000 |  |  |  | — |  |  |  | 90,000 |
The 192-1st Public bond |  |  | Oct. 11, 2022 |  |  | 1.550% |  |  | — |  |  |  | 340,000 |  |  |  | — |  |  |  | 340,000 |
The 192-2nd Public bond |  |  | Oct. 11, 2024 |  |  | 1.578% |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | 100,000 |
The 192-3rd Public bond |  |  | Oct. 11, 2029 |  |  | 1.622% |  |  | — |  |  |  | 50,000 |  |  |  | — |  |  |  | 50,000 |
The 192-4th Public bond |  |  | Oct. 11, 2039 |  |  | 1.674% |  |  | — |  |  |  | 110,000 |  |  |  | — |  |  |  | 110,000 |
The 193-1st Public bond |  |  | Jun. 16, 2023 |  |  | 1.174% |  |  | — |  |  |  | 150,000 |  |  |  | — |  |  |  | 150,000 |
The 193-2nd Public bond |  |  | Jun. 17, 2025 |  |  | 1.434% |  |  | — |  |  |  | 70,000 |  |  |  | — |  |  |  | 70,000 |
The 193-3rd Public bond |  |  | Jun. 17, 2030 |  |  | 1.608% |  |  | — |  |  |  | 20,000 |  |  |  | — |  |  |  | 20,000 |
The 193-4th Public bond |  |  | Jun. 15, 2040 |  |  | 1.713% |  |  | — |  |  |  | 60,000 |  |  |  | — |  |  |  | 60,000 |
The 194-1st Public bond |  |  | Jan. 26. 2024 |  |  | 1.127% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 130,000 |
The 194-2nd Public bond |  |  | Jan. 27. 2026 |  |  | 1.452% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 140,000 |
The 194-3rd Public bond |  |  | Jan. 27. 2031 |  |  | 1.849% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 50,000 |
The 194-4th Public bond |  |  | Jan. 25. 2041 |  |  | 1.976% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 80,000 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won and thousands of foreign currencies) |  | December 31, 2020 |  |  | December 31, 2021 |
Type |  | Maturity |  |  | Annual interest rates |  | Foreign currency |  |  | Korean won |  |  | Foreign currency |  |  | Korean won |
The 195-1st Public bond |  |  | Jun. 10. 2024 |  |  | 1.387% |  |  | — |  |  | ￦ | — |  |  |  | — |  |  | ￦ | 180,000 |
The 195-2nd Public bond |  |  | Jun. 10. 2026 |  |  | 1.806% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 80,000 |
The 195-3rd Public bond |  |  | Jun. 06. 2031 |  |  | 2.168% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 40,000 |
The 18-1st Won-denominated unsecured bond |  |  | Jul. 02. 2024 |  |  | 1.844% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 100,000 |
The 18-2nd Won-denominated unsecured bond |  |  | Jul. 02. 2026 |  |  | 2.224% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 50,000 |
The 148th Won-denominated unsecured bond |  |  | Jun. 23. 2023 |  |  | 1.513% |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | 100,000 |
The 149-1st Won-denominated unsecured bond |  |  | Mar. 08. 2024 |  |  | 1.440% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 70,000 |
The 149-2nd Won-denominated unsecured bond |  |  | Mar. 10. 2026 |  |  | 1.756% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 30,000 |
The 150-1st Won-denominated unsecured bond |  |  | Apr. 07. 2023 |  |  | 1.154% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 20,000 |
The 150-2nd Won-denominated unsecured bond |  |  | Apr. 08. 2024 |  |  | 1.462% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 30,000 |
The 151-1st Won-denominated unsecured bond |  |  | May 12. 2023 |  |  | 1.191% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,000 |
The 151-2nd Won-denominated unsecured bond |  |  | May 14. 2024 |  |  | 1.432% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 40,000 |
The 152-1st Won-denominated unsecured bond |  |  | Aug. 30. 2024 |  |  | 1.813% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 80,000 |
The 152-2nd Won-denominated unsecured bond |  |  | Aug. 28. 2026 |  |  | 1.982% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 20,000 |
The 153-1st Won-denominated unsecured bond |  |  | Nov. 10. 2023 |  |  | 2.310% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 30,000 |
The 153-2nd Won-denominated unsecured bond |  |  | Nov. 11. 2024 |  |  | 2.425% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 70,000 |
The 154th Won-denominated unsecured bond |  |  | Jan. 23. 2025 |  |  | 2.511% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 40,000 |
Subtotal |  |  |  |  |  |  | 6,962,470 |  |  |  |  |  |  |  | 7,558,455 |
Less: Current portion |  |  |  |  |  |  | (1,228,283 | ) |  |  |  |  |  |  | (1,337,714 | )
Discount on bonds |  |  |  |  |  |  | (19,847 | ) |  |  |  |  |  |  | (22,093 | )
Total |  |  |  |  |  | ￦ | 5,714,340 |  |  |  |  |  |  | ￦ | 6,198,648 |

1 | As at December 31, 2021, the Group has outstanding notes in the amount of USD 2,000 million with fixed interest rates under Medium Term Note Program (“MTNP”) registered in the Singapore Stock Exchange, which allowed issuance of notes of up to USD 100 million. However, the MTNP has been terminated since 2007.

2 | The Libor (3M) and SOR (6M) is approximately 0.209% and 0.431%, respectively as at December 31, 2021. The loan has not been converted to an alternative indicator interest rate, and the Group is reviewing the impact of switching to an alternative indicator interest rate.

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Convertible bonds

(In millions of Korean won and thousands of foreign currencies) |  |  |  |  |  |  |
Type |  | Issuance date |  |  | Maturity |  |  | Annual interest rate |  |  | December 31, 2020 |  |  | December 31, 2021 |
The 1st CB(Private) 1,2 |  |  | Jun. 5, 2020 |  |  |  | Jun. 5, 2025 |  |  |  | 0.00 | % |  | ￦ | 8,000 |  |  | ￦ | 8,000 |
Redemption premium |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2,267 |  |  |  | 2,267 |
Bond discount issuance |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (4,644 | ) |  |  | (3,825 | )
Subtotal |  |  |  |  |  |  |  |  |  |  |  |  |  | ￦ | 5,623 |  |  | ￦ | 6,442 |
Current portion |  |  |  |  |  |  |  |  |  |  |  |  |  | ￦ | — |  |  | ￦ | — |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  | ￦ | 5,623 |  |  | ￦ | 6,442 |

1 | Common shares of Storywiz Co., Ltd. are subject to conversio n (appraisal period: June 5, 2021~ May 4, 2025).

2 | Nominal interest rate and maturity yield is approximately 0% and 5% and will be settled on maturity

Redeemable convertible preferred stock

( I n millions of Korean won) |
Type |  | Transition period |  | Repayment period |  | Dividend |  | December 31, 2020 |  |  | December 31, 2021 |
Redeemable convertible preferred stock 1 |  | For 10 years from the day after the first issue |  | From the day after three years have elapsed from the date of issuance to the expiration date of the preferred residence period |  | Priority dividend equivalent to 1% of the par value (accumulated) | ￦ |  | — |  |  | ￦ | 2,979 |

1 | The redeemable convertible preferred stock was issued in BOOK CLUB MILLIE , and the part acquired by GENIE Music Corporation was excluded. Redeemable convertible preferred stock are measured according to the effective interest rate at the time of issuance, and the conversion ratio is one subsidiary stock per preferred stock (adjusted based on the issuance price under certain conditions). The repayment value is the amount obtained by subtracting the base payment dividend from the total amount of interest calculated by applying 6% annual compound interest fr om the issuance date to the repayment date (But, for some orders, 3% annual compound interest is applied).

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Short-term borrowings

(In millions of Korean won) |  |  |  | December 31, 2020 |  |  | December 31, 2021 |
Type |  | Financial institution |  | Annual interest rates
Operational |  | NongHyup Bank |  | — |  | ￦ | 40,189 |  |  | ￦ | — |
|  | Shinhan Bank |  | 2.980% |  |  | 22,500 |  |  |  | 4,500 |
|  | Shinhan Bank |  | — |  |  | 10,000 |  |  |  | — |
|  | Woori Bank |  | — |  |  | 1,900 |  |  |  | — |
|  | Woori Bank 1 |  | KORIBOR(3M) + 1.970% |  |  | — |  |  |  | 20,000 |
|  | Korea Development Bank |  | 2.210% ~ 3.680% |  |  | 10,000 |  |  |  | 16,000 |
|  | Industrial Bank of Korea |  | 2.550% |  |  | 200 |  |  |  | 6,000 |
|  | Hana Bank |  | 1.420% |  |  | 11,000 |  |  |  | 5,000 |
|  | KB SECURITIES |  | 1.240% ~ 1.380% |  |  | — |  |  |  | 71,000 |
|  | Shinhan Investment |  | 1.240% ~ 1.930% |  |  | — |  |  |  | 73,000 |
|  | KIWOOM Securities |  | 1.380% ~ 1.930% |  |  | — |  |  |  | 63,000 |
|  | NH INVESTMENT & SECURITIES |  | 1.240% ~ 1.380% |  |  | — |  |  |  | 53,000 |
|  | Korea Investment & Securities |  | 1.240% |  |  | — |  |  |  | 10,000 |
|  | HSBC |  | 2.075% |  |  | — |  |  |  | 17,427 |
|  | Total |  | ￦ | 95,789 |  |  | ￦ | 338,927 |

1 | The KORIBOR (3M) is approximately 1.410% as at December 31, 2021.

Long-term borrowings

( I n millions of Korean won and thousands of foreign currencies) |  | December 31, 2020 |  |  | December 31, 2021 |
Financial institution |  | Type |  | Annual interest rates |  | Foreign currency |  |  | Korean won |  |  | Foreign currency |  |  | Korean won |
Export-Import Bank of Korea |  | Inter-Korean Cooperation Fund 1 |  | 1.000% |  |  | — |  |  | ￦ | 2,961 |  |  |  | — |  |  | ￦ | 2,467 |
CA-CIB |  | Long-term CP |  | 1.260% |  |  | — |  |  |  | 100,000 |  |  |  | — |  |  |  | 100,000 |
Shinhan Bank |  | Facility loans 2 |  | LIBOR(3M)+1.140% |  |  | USD 25,918 |  |  |  | 28,199 |  |  |  | USD 25,918 |  |  |  | 30,726 |
|  | General loans 2 |  | LIBOR(3M)+1.650% |  |  | USD 8,910 |  |  |  | 9,694 |  |  |  | USD 8,910 |  |  |  | 10,563 |
|  | General loans 2 |  | LIBOR(3M)+2.130% |  |  | USD 25,000 |  |  |  | 27,200 |  |  |  | USD 25,000 |  |  |  | 29,638 |
|  | General loans 2 |  | LIBOR(3M)+1.847% |  |  | — |  |  |  | — |  |  |  | USD 13,000 |  |  |  | 15,412 |
|  | General loans |  | 1.900% ~ 3.230% |  |  | — |  |  |  | — |  |  |  | USD 31,472 |  |  |  | 37,345 |
|  | General loans |  | — |  |  | — |  |  |  | 5,000 |  |  |  | — |  |  |  | — |
Industrial Bank of Korea |  | General loans |  | — |  |  | — |  |  |  | 6,000 |  |  |  | — |  |  |  | — |
NongHyup Bank |  | Facility loans |  | — |  |  | — |  |  |  | 54 |  |  |  | — |  |  |  | — |
|  | PF loans |  | 2.280% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 46,267 |
Woori Bank |  | General loans 2 |  | EURIBOR(3M)+0.900% |  |  | — |  |  |  | — |  |  |  | EUR 7,700 |  |  |  | 10,336 |
|  | General loans |  | 3.320% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15,000 |
|  | PF loans |  | 2.000% ~ 2.820% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 23,614 |
|  | CP |  | 2.302% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 88,510 |
Korea Development Bank |  | General loans |  | 1.920% ~ 3.000% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 39,000 |
|  | General loans |  | — |  |  | — |  |  |  | 10,000 |  |  |  | — |  |  |  | — |
|  | General loans |  | — |  |  | — |  |  |  | 30,000 |  |  |  | — |  |  |  | — |
Kyobo Life Insurance |  | PF loans |  | 2.280% |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 41,640 |

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

( I n millions of Korean won and thousands of foreign currencies) |  |  | December 31, 2020 |  |  | December 31, 2021 |
Financial institution |  | Type |  | Annual interest rates |  |  | Foreign currency |  |  | Korean won |  |  | Foreign currency |  |  | Korean won |
Standard Chartered First Bank Korea |  | PF loans |  |  | 2.280% |  |  |  | — |  |  | ￦ | — |  |  |  | — |  |  | ￦ | 27,760 |
Samsung Life Insurance |  | PF loans |  |  | 1.860% |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 23,133 |
Kookmin Bank and others 2 |  | Facility loans 2 |  |  | LIBOR(3M)+1.850% |  |  |  | USD 48,855 |  |  |  | 53,155 |  |  |  | USD 9,771 |  |  |  | 11,584 |
Subtotal |  |  |  |  |  |  |  |  |  |  |  |  | 272,263 |  |  |  |  |  |  |  | 552,995 |
Less: Current portion |  |  |  |  |  |  |  |  |  |  |  |  | (94,042 | ) |  |  |  |  |  |  | (51,803 | )
|  |  |  |  |  |  |  |  |  |  |  | ￦ | 178,221 |  |  |  |  |  |  | ￦ | 501,192 |

1 | The above Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period.

2 | LIBOR (3M) and EURIBOR (3M) are approximately 0.209% and - 0.583%, respectively, as at December 31, 2021. The loan has not been converted to an alternative indicator interest rate, and the Group is reviewing the impact of switching to an alternative indicator interest rate.

Repayment schedule of the Group’s borrowings including the portion of current liabilities as at December 31, 2021 is as follows:

( I n millions of Korean won) |
|  | Bonds |  |  | Borrowings |  |  | Total |
|  | In local currency |  |  | In foreign currency |  |  | Sub- total |  |  | In local currency |  |  | In foreign currency |  |  | Sub- total |  |  |  |
Jan. 1, 2022 ~ Dec. 31, 2022 |  | ￦ | 560,000 |  |  | ￦ | 779,151 |  |  | ￦ | 1,339,151 |  |  | ￦ | 330,994 |  |  | ￦ | 59,736 |  |  | ￦ | 390,730 |  |  | ￦ | 1,729,881 |
Jan. 1, 2023 ~ Dec. 31, 2023 |  |  | 650,000 |  |  |  | 367,658 |  |  |  | 1,017,658 |  |  |  | 15,493 |  |  |  | 55,612 |  |  |  | 71,105 |  |  |  | 1,088,763 |
Jan. 1, 2024 ~ Dec. 31, 2024 |  |  | 1,160,000 |  |  |  | 419,046 |  |  |  | 1,579,046 |  |  |  | 135,494 |  |  |  | 23,971 |  |  |  | 159,465 |  |  |  | 1,738,511 |
Jan. 1, 2025 ~ Dec. 31, 2025 |  |  | 358,000 |  |  |  | 474,200 |  |  |  | 832,200 |  |  |  | 144,293 |  |  |  | — |  |  |  | 144,293 |  |  |  | 976,493 |
After Jan. 1, 2026 |  |  | 1,869,465 |  |  |  | 948,400 |  |  |  | 2,817,865 |  |  |  | 114,107 |  |  |  | 23,710 |  |  |  | 137,817 |  |  |  | 2,955,682 |
Total |  | ￦ | 4,597,465 |  |  | ￦ | 2,988,455 |  |  | ￦ | 7,585,920 |  |  | ￦ | 740,381 |  |  | ￦ | 163,029 |  |  | ￦ | 903,410 |  |  | ￦ | 8,489,330 |

17. | Provisions

Changes in provisions for the years ended December 31, 2020 and 2021, are as follows:

|  | 2020 |
(In millions of Korean won) |  | Litigation |  |  | Restoration cost |  |  | Others |  |  | Total |
Beginning balance |  | ￦ | 64,241 |  |  | ￦ | 113,289 |  |  | ￦ | 76,631 |  |  | ￦ | 254,161 |
Increase (Transfer) |  |  | 17,064 |  |  |  | (1,933 | ) |  |  | 17,873 |  |  |  | 33,004 |
Usage |  |  | (3,948 | ) |  |  | (2,990 | ) |  |  | (2,265 | ) |  |  | (9,203 | )
Reversal |  |  | (857 | ) |  |  | (3,023 | ) |  |  | (23,212 | ) |  |  | (27,092 | )
Changes in scope of consolidation |  |  | — |  |  |  | 424 |  |  |  | 898 |  |  |  | 1,322 |
Ending balance |  | ￦ | 76,500 |  |  | ￦ | 105,767 |  |  | ￦ | 69,925 |  |  | ￦ | 252,192 |
Current |  | ￦ | 76,500 |  |  | ￦ | 22,343 |  |  | ￦ | 67,147 |  |  | ￦ | 165,990 |
Non-current |  |  | — |  |  |  | 83,424 |  |  |  | 2,778 |  |  |  | 86,202 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  | 2021 |
(In millions of Korean won) |  | Litigation |  |  | Restoration cost |  |  | Others |  |  | Total |
Beginning balance |  | ￦ | 76,500 |  |  | ￦ | 105,767 |  |  | ￦ | 69,925 |  |  | ￦ | 252,192 |
Increase (Transfer) |  |  | 6,288 |  |  |  | 6,772 |  |  |  | 19,835 |  |  |  | 32,895 |
Usage |  |  | (2,599 | ) |  |  | (2,776 | ) |  |  | (1,926 | ) |  |  | (7,301 | )
Reversal |  |  | (24 | ) |  |  | (3,685 | ) |  |  | (19,188 | ) |  |  | (22,897 | )
Changes in scope of consolidation |  |  | — |  |  |  | 1,086 |  |  |  | 1,228 |  |  |  | 2,314 |
Others |  |  | — |  |  |  | 194 |  |  |  | — |  |  |  | 194 |
Ending balance |  | ￦ | 80,165 |  |  | ￦ | 107,358 |  |  | ￦ | 69,874 |  |  | ￦ | 257,397 |
Current |  | ￦ | 79,947 |  |  | ￦ | 26,026 |  |  | ￦ | 65,343 |  |  | ￦ | 171,316 |
Non-current |  |  | 218 |  |  |  | 81,332 |  |  |  | 4,531 |  |  |  | 86,081 |

18. | Net Defined Benefit Liabilities

The amounts recognized in the statements of financial position as at December 31, 2020 and 2021, are determined as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Present value of defined benefit obligations |  | ￦ | 2,556,712 |  |  | ￦ | 2,494,930 |
Fair value of plan assets |  |  | (2,189,375 | ) |  |  | (2,314,632 | )
Liabilities in the statement of financial position |  | ￦ | 378,087 |  |  | ￦ | 197,883 |
Assets in the statement of financial position |  | ￦ | 10,750 |  |  | ￦ | 17,585 |

Changes in the defined benefit obligations for the years ended December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2020 |  |  | 2021 |
Beginning |  | ￦ | 2,427,351 |  |  | ￦ | 2,556,712 |
Current service cost |  |  | 248,047 |  |  |  | 249,125 |
Interest expense |  |  | 45,083 |  |  |  | 44,905 |
Benefit paid |  |  | (258,866 | ) |  |  | (310,766 | )
Changes due to settlements of plan & Past Service Cost |  |  | 1,075 |  |  |  | (681 | )
Remeasurements: |  |  |  |  |  |  |  |
Actuarial gains and losses arising from changes in demographic assumptions |  |  | 5,191 |  |  |  | (8,375 | )
Actuarial gains and losses arising from changes in financial assumptions |  |  | 17,077 |  |  |  | (61,002 | )
Actuarial gains and losses arising from experience adjustments |  |  | 57,703 |  |  |  | (5,271 | )
Changes in scope of consolidation |  |  | 14,051 |  |  |  | 30,283 |
Ending |  | ￦ | 2,556,712 |  |  | ￦ | 2,494,930 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Changes in the fair value of plan assets for the years ended December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2020 |  |  | 2021 |
Beginning |  | ￦ | 2,069,710 |  |  | ￦ | 2,189,375 |
Interest income |  |  | 38,590 |  |  |  | 39,858 |
Remeasurements: |  |  |  |  |  |  |  |
Return on plan assets (excluding amounts included in interest income) |  |  | 2,589 |  |  |  | (130 | )
Benefits paid |  |  | (213,953 | ) |  |  | (271,506 | )
Employer contributions |  |  | 284,243 |  |  |  | 325,818 |
Changes in scope of consolidation |  |  | 8,196 |  |  |  | 31,217 |
Ending |  | ￦ | 2,189,375 |  |  | ￦ | 2,314,632 |

Amounts recognized in the ‘Operating expenses’ of the consolidated statements of profit or loss for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Current service cost |  | ￦ | 243,598 |  |  | ￦ | 248,047 |  |  | ￦ | 249,125 |
Net Interest cost |  |  | 12,017 |  |  |  | 6,494 |  |  |  | 5,047 |
Changes due to settlements of plan & Past Service Cost |  |  | 910 |  |  |  | 1,075 |  |  |  | (681 | )
Transfer out |  |  | (16,215 | ) |  |  | (16,514 | ) |  |  | (16,660 | )
Total expenses |  | ￦ | 240,310 |  |  | ￦ | 239,102 |  |  | ￦ | 236,831 |

Principal actuarial assumptions used are as follows:

|  | December 31, 2019 |  |  | December 31, 2020 |  |  | December 31, 2021 |
Discount rate |  |  | 1.97% |  |  |  | 1.93% |  |  |  | 2.55% |
Future salary increase |  |  | 4.92% |  |  |  | 4.88% |  |  |  | 5.10% |

The sensitivity of the defined benefit obligations as at December 31, 2021, to changes in the principal assumptions is:

(In percentage, in millions of Korean won) |  | Effect on defined benefit obligation |
|  | Changes in assumption |  | Increase in assumption |  |  | Decrease in assumption |
Discount rate |  | 0.5% point |  |  | ￦ (148,019) |  |  | ￦ | 159,360 |
Salary growth rate |  | 0.5% point |  |  | 152,609 |  |  |  | (142,660 | )

A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
The above sensitivity analyses are based on an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position.
The Group
actively monitors how the duration and the expected yield of the investments match the expected cash outflows arising from the pension obligations. Expected contributions to post-employment benefit plans for the year ending December 31, 2022, are
￦
383,379 million.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The expected maturity analysis of undiscounted pension benefits as at December 31, 2021, is as follows:

(In millions of Korean won) |  | Less than 1 year |  |  | Between 1-2 years |  |  | Between 2-5 years |  |  | Over 5 years |  |  | Total |
Pension benefits |  | ￦ | 210,751 |  |  | ￦ | 303,737 |  |  | ￦ | 833,009 |  |  | ￦ | 1,964,398 |  |  | ￦ | 3,311,895 |

The weighted average duration of the defined benefit obligations is 6.5 years.

19. | Defined Contribution Plan

Recognized expense related to the defined contribution plan for the year ended December 31, 2021, is
￦
71,068 million (2019:
￦
57,170 million, 2020:
￦
61,912 million).

20. | Commitments and Contingencies

As at December 31, 2021, major commitments with local financial institutions are as follows:

(In millions of Korean won and thousands of foreign currencies) |  | Financial institution |  | Currency |  | Limit |  |  | Used amount |
Bank overdraft |  | Kookmin Bank and others |  | KRW |  |  | 1,452,000 |  |  |  | 4,500 |
Inter-Korean Cooperation Fund |  | Export-Import Bank of Korea |  | KRW |  |  | 37,700 |  |  |  | 2,467 |
Insurance for Economic Cooperation project |  | Export-Import Bank of Korea |  | KRW |  |  | 3,240 |  |  |  | 1,732 |
Collateralized loan on electronic accounts receivable-trade |  | Kookmin Bank and others |  | KRW |  |  | 430,104 |  |  |  | 26,585 |
Plus electronic notes payable |  | Industrial Bank of Korea |  | KRW |  |  | 50,000 |  |  |  | 698 |
Loans for working capital |  | Korea Development Bank and others |  | KRW |  |  | 231,049 |  |  |  | 141,137 |
| Shinhan Bank |  | USD |  |  | 39,298 |  |  |  | 39,298 |
| Woori Bank |  | EUR |  |  | 7,700 |  |  |  | 7,700 |
Facility loans |  | Shinhan Bank and others |  | KRW |  |  | 844,000 |  |  |  | 162,414 |
| Kookmin Bank and others |  | USD |  |  | 212,000 |  |  |  | 9,771 |
Derivatives transaction limit |  | Korea Development Bank |  | KRW |  |  | 100,000 |  |  |  | 8,043 |
| Woori Bank and others |  | USD |  |  | 69,054 |  |  |  | 20,760 |
Total |  |  |  | KRW |  |  | 3,148,093 |  |  |  | 347,576 |
|  |  |  | USD |  |  | 320,352 |  |  |  | 69,829 |
|  |  |  | EUR |  |  | 7,700 |  |  |  | 7,700 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
As at December 31, 2021, guarantees received from financial institutions are as follows:

(In millions of Korean won and thousands of foreign currencies) |  | Financial institution |  | Currency |  |  | Limit |
Performance guarantee |  | Seoul Guarantee Insurance and others |  |  | KRW |  |  |  | 171,043 |
|  | Hana Bank |  |  | USD |  |  |  | 1,200 |
Guarantee for payment in foreign currency |  | Kookmin Bank and others |  |  | USD |  |  |  | 70,092 |
Guarantee for payment in Korean currency |  | Shinhan Bank and others |  |  | KRW |  |  |  | 20,911 |
Refund guarantee for advances received |  | Korea Development Bank |  |  | USD |  |  |  | 8,536 |
Comprehensive credit line |  | Hana Bank and others |  |  | KRW |  |  |  | 24,800 |
|  |  |  |  | USD |  |  |  | 8,700 |
Guarantees for depositions |  | HSBC |  |  | USD |  |  |  | 580 |
Bid guarantee |  | Hana Bank |  |  | USD |  |  |  | 400 |
Bid guarantee |  | Korea Software Financial Cooperative and others |  |  | KRW |  |  |  | 108,407 |
Performance guarantee / warranty guarantee |  |  |  |  | KRW |  |  |  | 558,359 |
Guarantee for advance payments/others |  |  |  |  | KRW |  |  |  | 574,103 |
Construction fund guarantee insurance and others |  | Seoul Guarantee Insurance |  |  | KRW |  |  |  | 33,963 |
Total |  |  |  |  | KRW |  |  |  | 1,491,586 |
|  |  |  |  | USD |  |  |  | 89,508 |

As at December 31, 2021, guarantees provided by the Group to a third party, are as follows:

(In millions of Korean won) |  | Subject to payment guarantees |  | Creditor |  | Limit |  |  | Used amount |  |  | Period |
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) |  | Gasan Solar Power Plant Inc. |  | Shinhan Bank |  | ￦ | 4,700 |  |  | ￦ | 1,035 |  |  |  | Jan. 7, 2021 ~ Jan. 8, 2025 |
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) |  | SPP Inc. |  | Suhyup Bank |  |  | 3,250 |  |  |  | 624 |  |  |  | Feb. 17, 2014 ~ Feb. 16, 2024 |
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) |  | Korea Cell Inc. |  | Suhyup Bank |  |  | 3,250 |  |  |  | 614 |  |  |  | Feb. 17, 2014 ~ Feb. 16, 2024 |
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) |  | San-Ya Agricultural Association Corporation |  | Suhyup Bank |  |  | 3,250 |  |  |  | 624 |  |  |  | Feb. 17, 2014 ~ Feb. 16, 2024 |
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  | Cash payers |  | Cash payers |  |  | 860 |  |  |  | — |  |  |  | Jul. 21, 2021 ~ Apr. 15, 2022 |
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  | Mobile Voucher amount |  | NongHyup Agribusiness Group Inc and others |  |  | 30,000 |  |  |  | 10,400 |  |  |  | Jan. 16, 2021 ~ Jan. 14, 2022 |
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  | Mobile Voucher amount |  | Emart Co., Ltd and others |  |  | 20,000 |  |  |  | 300 |  |  |  | Jun. 19, 2021 ~ Jun. 17, 2022 |
Nasmedia Co., Ltd. |  | Stockholders Association Members |  | Korea Securities Finance Corp |  |  | 5,654 |  |  |  | 1,236 |  |  |  | — |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
As at December 31, 2021, the details of the issuance of real estate collateral trust and beneficiary certificates of the Group are as follows:

( I n millions of Korean won) |  |  |  |  | Commitment (limit) amount |  |  | Amount provided as collateral for beneficiary rights |
Collateral assets |  | Placing |  |  | Trust collateral beneficiary
Real Estate Collateral Trust 1 |  |  | 1st place |  |  | NH Jayang Inc. |  | ￦ | 100,000 |  |  | ￦ | 120,000 |
|  |  |  |  |  | Kyobo Life Insurance |  |  | 180,000 |  |  |  | 216,000 |
|  |  |  |  |  | Standard Chartered Bank Korea Limited |  |  | 120,000 |  |  |  | 144,000 |
|  |  |  |  |  | Samsung Life Insurance |  |  | 100,000 |  |  |  | 120,000 |
|  |  | 2nd place |  |  | Industrial Bank of Korea |  |  | 40,000 |  |  |  | 48,000 |
|  |  |  |  |  | Korea Investment Capital |  |  | 40,000 |  |  |  | 48,000 |
|  |  |  |  |  | BNK Capital |  |  | 30,000 |  |  |  | 36,000 |
|  |  |  |  |  | Standard Chartered Bank Korea Limited |  |  | 20,000 |  |  |  | 24,000 |
|  |  |  |  |  | NH Capital |  |  | 20,000 |  |  |  | 24,000 |
|  |  | 3rd place | 2 |  | LOTTE Engineering & Construction |  |  | — |  |  |  | 736,921 |

| 1 | The Group provides a certificate of beneficiary rights for land classified as investment properties and inventory assets as collateral in connection with the above real estate collateral trust.

| 2 | The Group provides LOTTE Engineering & Construction with a certificate of third-priority beneficiary rights as collateral in relation to the construction contract amount of ￦ 614,101 million.

The Controlling Company is jointly and severally obligated with KT Sat Inc. to pay KT Sat Inc.’s liabilities incurred prior to
spin-off.
As at December 31, 2021, the Controlling Company and KT Sat Inc. are jointly and severally liable for reimbursement of
￦
733 million.
For the years ended December 31, 2020 and 2021, the Group made agreements with the Securitization Specialty Companies (2021: First 5G 55
th
to 60
th
Securitization Specialty Co., Ltd., 2020: First 5G 49
th
to 54
th
Securitization Specialty Co., Ltd.), and disposed of its trade receivables related to handset sales. The Group also made asset management agreements with each securitization specialty company and in accordance with the agreement the Group will receive asset management fees upon liquidation of securitization specialty company.
As at December 31, 2021, the Group is a defendant in 219 lawsuits with the total claimed amount of
￦
101,597 million (2020:
￦
110,409 million). As at December 31, 2021, litigation provisions of
￦
80,165 million for pending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course of business. The final outcomes of the cases cannot be estimated at the end of the reporting period.
According to the financial and other covenants included in certain debentures and borrowings, the Group is required to maintain certain financial ratios such as
debt-to-equity
ratio, use the funds for the designated purpose and report to the creditors periodically. The covenant also contains restriction on provision of additional collateral and disposal of certain assets.
At the end of the reporting period, the Group participates in Algerie Sidi Abdela new town development consortium (percentage of ownership: 2.5%) and has joint liability with other consortium participants
.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
At the end of the reporting period, contract amount of property and equipment acquisition agreement made but not yet recognized amounts to
￦
1,336,758 million (2020:
￦
596,983 million).
As the end of the reporting period, there are derivatives generated by the Group granting Drag-Along Right to financial investors participating in
paid-in
capital increase of K Bank (Note 7).
For the year ended December 31, 2021, the Group entered into an agreement with the seller, who participated in the acquisition of shares in BOOK CLUB MILLIE. If certain conditions are not met in the future as disclosed in the terms and conditions of the agreement, the seller may exercise
Tag-Along
Right, Drag-Along Right and Put Option for the ordinary and redeemable convertible preferred shares it owns (Note 7).
For the year ended December 31, 2021, the Group entered into an agreement with financial investors, who participated in the acquisition of shares in Epsilon Global Communications Pte. Ltd. If certain conditions are not met in the future as disclosed in the terms and conditions of the agreement, financial investors may exercise
Tag-Along
Right, Drag-Along Right and the right to sell shares for the convertible preferred shares it owns (Note 7).
The Group has an additional investment obligation under the agreement to Future Innovation Private Equity Fund No.3
and others
. For the year ended December 31, 2021, the cumulative investment amount is
￦
25,611 million and USD 14,600 thousand, and the remaining amount of
￦
8,109 million and USD 5,400 thousand will be invested in the Capital Call method later.

21. | Leases

Information on leases when the Group is a lessee is as follows: Information on leases when the Group is a lessor is provided in Note 12.

| (i) | Amounts recognized in the consolidated statement of financial position

The consolidated statement of financial position shows the following amounts relating to leases:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Right-of-use assets |  |  |  |  |  |  |  |
Property and building |  | ￦ | 1,073,207 |  |  | ￦ | 1,086,133 |
Machinery and telecommunication line facilities |  |  | 42,127 |  |  |  | 64,443 |
Others |  |  | 101,845 |  |  |  | 97,732 |
Total |  | ￦ | 1,217,179 |  |  | ￦ | 1,248,308 |
Investment property (buildings) |  |  | 19,456 |  |  |  | 1 |
(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Lease liabilities 1 |  |  |  |  |  |  |  |
Current |  | ￦ | 345,224 |  |  | ￦ | 332,702 |
Non-Current |  |  | 798,416 |  |  |  | 826,667 |
Total |  | ￦ | 1,143,640 |  |  | ￦ | 1,159,369 |

| 1 | Included in the line items ‘Other current liabilities and other non-current liabilities’ in the consolidated statement of financial position (Notes 9).

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
For the year ended December 31, 2021,
right-of-use
assets has increased for
￦
426,854 million for lease contracts.

| (ii) | Amounts recognized in the consolidated statements of profit or loss

The consolidated statements of profit or loss show the following amounts relating to leases:

(In millions of Korean won) |  | December 31, 2019 |  |  | December 31, 2020 |  |  | December 31, 2021 |
Depreciation of Right-of-use assets |  |  |  |  |  |  |  |  |  |  |  |
Property and building |  | ￦ | 300,773 |  |  | ￦ | 290,168 |  |  | ￦ | 303,984 |
Machinery and telecommunication line facilities |  |  | 89,452 |  |  |  | 58,419 |  |  |  | 41,794 |
Others |  |  | 52,402 |  |  |  | 55,588 |  |  |  | 52,938 |
Total |  | ￦ | 442,627 |  |  | ￦ | 404,175 |  |  | ￦ | 398,716 |
Depreciation of Investment Properties |  | ￦ | 21,809 |  |  | ￦ | 19,113 |  |  | ￦ | 1,794 |
Interest expense relating to lease liabilities |  |  | 55,001 |  |  |  | 44,091 |  |  |  | 36,651 |
Expense relating to short-term leases |  |  | 14,718 |  |  |  | 10,998 |  |  |  | 7,984 |
Expense relating to leases of low-value assets that are not short-term leases |  |  | 26,575 |  |  |  | 25,894 |  |  |  | 26,033 |
Expense relating to variable lease payments not included in lease liabilities |  |  | 5,993 |  |  |  | 8,096 |  |  |  | 8,400 |

The total cash outflow for leases for the year ended December 31, 2021 amounts to
￦
468,360
million (2019: ￦ 532,730 million,
2020:
￦
492,772 million).

22. | Share Capital

As at December 31, 2020 and 2021, the Group’s number of authorized shares is one billion.

|  | December 31, 2020 |  |  | December 31, 2021 |
|  | Number of issued shares |  |  | Par value per share (Korean won) |  |  | Ordinary Shares ( I n millions of Korean won) |  |  | Number of issued shares |  |  | Par value per share (Korean won) |  |  | Ordinary Shares ( I n millions of Korean won) |
Ordinary shares 1 |  |  | 261,111,808 |  |  |  | ￦ 5,000 |  |  |  | ￦ 1,564,499 |  |  |  | 261,111,808 |  |  |  | ￦ 5,000 |  |  |  | ￦ 1,564,499 |

| 1 | The Group retired 51,787,959 treasury shares against retained earnings. Therefore, the ordinary shares amount differs from the amount resulting from multiplying the number of shares issued.

23. | Retained Earnings

Details of retained earnings as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Legal reserve 1 |  | ￦ | 782,249 |  |  | ￦ | 782,756 |
Voluntary reserves 2 |  |  | 4,651,362 |  |  |  | 4,651,362 |
Unappropriated retained earnings |  |  | 6,721,809 |  |  |  | 7,853,272 |
Total |  | ￦ | 12,155,420 |  |  | ￦ | 13,287,390 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| 1 | The Commercial Code of the Republic of Korea requires the Controlling Company to appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued share capital. The reserve is not available for the payment of cash dividends, but may be transferred to share capital with the approval of the Controlling Company’s Board of Directors or used to reduce accumulated deficit, if any, with the ratification of the Controlling Company’s majority shareholders.

| 2 | The provision of research and development of human resources is separately accumulated with tax reserve fund during earned surplus disposal by Tax Reduction and Exemption Control Act of Korea. Reversal of this provision can be paid out as dividends according to related tax law.

24. | Accumulated Other Comprehensive Income and Other Components of Equity

As at December 31, 2020 and 2021, the details of the Controlling Company’s accumulated other comprehensive income are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Changes in investments in associates and joint ventures |  | ￦ | 16,257 |  |  | ￦ | (3,461 | )
Gain or loss on derivatives valuation |  |  | 19,809 |  |  |  | 25,031 |
Gain on valuation of financial assets at fair value through other comprehensive income |  |  | 61,438 |  |  |  | 108,685 |
Exchange differences on translation for foreign operations |  |  | (11,453 | ) |  |  | (12,786 | )
Total |  | ￦ | 86,051 |  |  | ￦ | 117,469 |

Changes in accumulated other comprehensive income for the years ended December 31, 2020 and 2021, are as follows:

|  | 2020 |
(In millions of Korean won) |  | Beginning |  |  | Increase/ decrease |  |  | Reclassification to gain or loss |  |  | Ending |
Changes in investments in associates and joint ventures |  | ￦ | 1,556 |  |  | ￦ | 14,701 |  |  | ￦ | — |  |  | ￦ | 16,257 |
Gain or loss on derivatives valuation |  |  | (7,624 | ) |  |  | (83,998 | ) |  |  | 111,431 |  |  |  | 19,809 |
Gain on valuation of financial assets at fair value through other comprehensive income |  |  | 211,573 |  |  |  | (150,135 | ) |  |  | — |  |  |  | 61,438 |
Exchange differences on translation for foreign operations |  |  | (10,571 | ) |  |  | (882 | ) |  |  | — |  |  |  | (11,453 | )
Total |  | ￦ | 194,934 |  |  | ￦ | (220,314 | ) |  | ￦ | 111,431 |  |  | ￦ | 86,051 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  | 2021 |
( I n millions of Korean won) |  | Beginning |  |  | Increase/ decrease |  |  | Reclassification to gain or loss |  |  | Ending |
Changes in investments in associates and joint ventures |  | ￦ | 16,257 |  |  | ￦ | (19,718 | ) |  | ￦ | — |  |  | ￦ | (3,461 | )
Gain or loss on derivatives valuation |  |  | 19,809 |  |  |  | 141,805 |  |  |  | (136,583 | ) |  |  | 25,031 |
Gain on valuation of financial assets at fair value through other comprehensive income |  |  | 61,438 |  |  |  | 47,247 |  |  |  | — |  |  |  | 108,685 |
Exchange differences on translation for foreign operations |  |  | (11,453 | ) |  |  | (1,333 | ) |  |  | — |  |  |  | (12,786 | )
Total |  | ￦ | 86,051 |  |  | ￦ | 168,001 |  |  | ￦ | (136,583 | ) |  | ￦ | 117,469 |

The Group’s other components of equity as at December 31, 2020 and 2021, are as
follows
:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Treasury stock 1 |  | ￦ | (882,224 | ) |  | ￦ | (1,009,798 | )
Gain or loss on disposal of treasury stock 2 |  |  | (17,579 | ) |  |  | (8,658 | )
Share-based payments |  |  | 5,901 |  |  |  | 4,068 |
Others 3 |  |  | (340,882 | ) |  |  | (418,692 | )
Total |  | ￦ | (1,234,784 | ) |  | ￦ | (1,433,080 | )

| 1 | During the year ended December 31, 2021, the Group acquired 7,600,886 treasury shares and granted 1,566,902 treasury shares as share-based payment.

| 2 | The tax impact amount directly reflected in equity is ￦ 4,080 million (2020: ￦ 7,288 million) for the year ended December 31, 2021.

| 3 | Profit or loss incurred from transactions with non-controlling interest and investment difference incurred from change in proportion of subsidiaries are included.

As at December 31, 2020 and 2021, the details of treasury stock are as follows:

|  | December 31, 2020 |  |  | December 31, 2021 |
Number of shares (in shares) |  |  | 19,269,678 |  |  |  | 25,303,662 |
Amounts ( i n millions of Korean won) |  | ￦ | 882,224 |  |  | ￦ | 1,009,798 |

Treasury stock is expected to be used for the stock compensation for the Group’s directors and employees and other purposes.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

25. | Share-based Payments

Details of share-based payments granted by the Controlling to executives and employees, including the CEO, by the resolution of the board of directors for the years ended December 31, 2020 and 2021, are as follows:

|  | 2020
(In share) |  | 14th grant
Grant date |  | June 16, 2020
Grantee |  | CEOs, internal directors, external directors, executives
Vesting conditions |  | Service condition: 1 year Non-market performance condition: achievement of performance
Fair value per option (in Korean won) |  | ￦ 22,700
Total compensation costs (in Korean won) |  | ￦ 5,243 million
Estimated exercise date (exercise date) |  | July 14, 2021
Valuation method |  | Fair value method
(In share) |  | Employee wage negotiation
Grant date |  | September 21, 2020
Grantee |  | All employees
Vesting conditions |  | Current employees as of September 21, 2020
Fair value per option (in Korean won) |  | ￦ 22,950
Total compensation costs (in Korean won) |  | ￦ 23,317 million
Estimated exercise date (exercise date) |  | December 22, 2020
Valuation method |  | Fair value method
|  | 2021
(In share) |  | 15th grant
Grant date |  | June 17, 2021
Grantee |  | CEOs, internal directors, external directors, executives
Vesting conditions |  | Service condition: 1 year Non-market performance condition: achievement of performance
Fair value per option (in Korean won) |  | ￦ 32,350
Total compensation costs (in Korean won) |  | ￦ 5,005 million
Estimated exercise date (exercise date) |  | During 2022
Valuation method |  | Fair value method

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In share) |  | Employee wage negotiation
Grant date |  | September 6, 2021
Grantee |  | All employees
Vesting conditions |  | Current employees as of September 6, 2021
Fair value per option (in Korean won) |  | ￦ 30,950
Total compensation costs (in Korean won) |  | ￦ 40,083 million
Estimated exercise date (exercise date) |  | December 10, 2021
Valuation method |  | Fair value method

Changes in the number of stock options and the weighted-average exercise price as at December 31, 2020 and 2021, are as follows:

( I n share) |  | 2020 |
|  | Beginning |  |  | Grant |  |  | Expired |  |  | Exercised 1 |  |  | Ending |  |  | Number of shares exercisable |
13th grant |  |  | 372,023 |  |  |  | — |  |  |  | (241,548 | ) |  |  | (130,475 | ) |  |  | — |  |  |  | — |
14th grant |  |  | — |  |  |  | 398,856 |  |  |  | — |  |  |  | — |  |  |  | 398,856 |  |  |  | — |
Employee wage negotiation |  |  | — |  |  |  | 1,020,105 |  |  |  | — |  |  |  | (1,020,105 | ) |  |  | — |  |  |  | — |
Total |  |  | 372,023 |  |  |  | 1,418,961 |  |  |  | (241,548 | ) |  |  | (1,150,580 | ) |  |  | 398,856 |  |  |  | — |
(In share) |  | 2021 |
|  | Beginning |  |  | Grant |  |  | Expired |  |  | Exercised 1 |  |  | Ending |  |  | Number of shares exercisable |
14th grant |  |  | 398,856 |  |  |  | — |  |  |  | (264,286 | ) |  |  | (134,570 | ) |  |  | — |  |  |  | — |
15th grant |  |  | — |  |  |  | 284,209 |  |  |  | — |  |  |  | — |  |  |  | 284,209 |  |  |  | — |
Employee wage negotiation |  |  | — |  |  |  | 1,432,332 |  |  |  | — |  |  |  | (1,432,332 | ) |  |  | — |  |  |  | — |
Total |  |  | 398,856 |  |  |  | 1,716,541 |  |  |  | (264,286 | ) |  |  | (1,566,902 | ) |  |  | 284,209 |  |  |  | — |

| 1 | The weighted average price of ordinary shares at the time of exercise in 2021 was ￦ 31,122 (2020: ￦ 25,486).

26. | Revenue from Contracts with Customers and Relevant Contract Assets and Liabilities

The Group has recognized the following amounts relating to revenue in the Consolidated Statements of Profit or Loss:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Revenue from contracts with customers |  | ￦ | 24,441,122 |  |  | ￦ | 23,895,631 |  |  | ￦ | 24,712,128 |
Revenue from other sources |  |  | 198,636 |  |  |  | 203,763 |  |  |  | 185,877 |
Other income (Note 27) |  |  | 259,431 |  |  |  | 341,253 |  |  |  | 307,654 |
Total revenue |  | ￦ | 24,899,189 |  |  | ￦ | 24,440,647 |  |  | ￦ | 25,205,659 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Operating revenues for the years ended December 31, 2019, 2020 and 2021 are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Mobile services |  | ￦ | 6,795,124 |  |  | ￦ | 6,805,218 |  |  | ￦ | 6,936,485 |
Fixed-line services |  |  | 4,866,698 |  |  |  | 4,827,015 |  |  |  | 4,960,338 |
Fixed-line and VoIP telephone services |  |  | 1,578,546 |  |  |  | 1,463,553 |  |  |  | 1,465,059 |
Broadband Internet access services |  |  | 2,177,447 |  |  |  | 2,256,188 |  |  |  | 2,343,591 |
Data communication services |  |  | 1,110,705 |  |  |  | 1,107,274 |  |  |  | 1,151,689 |
Media and content |  |  | 2,516,256 |  |  |  | 2,637,691 |  |  |  | 2,800,630 |
Financial services |  |  | 3,641,655 |  |  |  | 3,493,920 |  |  |  | 3,661,896 |
Sale of goods |  |  | 4,194,168 |  |  |  | 3,593,127 |  |  |  | 3,532,973 |
Others |  |  | 2,885,288 |  |  |  | 3,083,676 |  |  |  | 3,313,337 |
Total |  | ￦ | 24,899,189 |  |  | ￦ | 24,440,647 |  |  | ￦ | 25,205,659 |

Mobile and fixed-line service
Telecommunication service revenues include mobile and fixed-line (e.g., fixed-line and VoIP telephone, broadband internet access services and data communication services). These services represent a series of distinct services that are considered a separate performance obligation. Service revenue is recognized when services are provided, based upon either usage (e.g., minutes of traffic/bytes of data processed) or period of time (e.g., monthly service fees).
Media and content services
Revenue from media and content services primarily consists of installation fees and basic monthly charges of IPTV and satellite TV services, as well as revenue from digital content distribution, digital music streaming and downloading. Media and contents services revenue are recognized when services are provided, based upon either usage or period of time.
Financial services
Financial services primarily include commissions for merchant fees paid by merchants to credit card companies for processing transactions. Revenue from the commission is recognized when the service obligation is performed.
Sale of goods
Revenue from sale of goods, primarily handsets related to our mobile services is recognized when a performance obligation is satisfied by transferring promised goods to customers.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The contract assets and liabilities recognized in relation to the revenues from contracts with customers are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Contract assets 1 |  | ￦ | 672,672 |  |  | ￦ | 821,901 |
Contract liabilities 1 |  |  | 413,707 |  |  |  | 360,098 |
Deferred revenue 2 |  | ￦ | 89,694 |  |  | ￦ | 81,136 |

| 1 | The Group recognized contract assets of ￦ 76,816 million and contract liabilities of ￦ 36,447 million for long term construction contracts as at December 31, 2021 (2020: contract assets of ￦ 86,234 million and contract liabilities of ￦ 29,574 million). The Group recognizes contract assets as trade and other receivables, and contract liabilities as other current liabilities.

| 2 | Deferred revenue recognized relating to government grant is excluded .

The contract costs recognized as assets are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Incremental cost of contract establishment |  | ￦ | 1,764,009 |  |  | ￦ | 1,726,191 |  |  | ￦ | 1,726,401 |
Cost of Contract performance |  |  | 85,234 |  |  |  | 78,757 |  |  |  | 74,843 |

As at December 31,
2021, the Group recognized
￦
1,842,621
million (2019: ￦ 1,681,039 million, 2020:
￦
1,831,638 million) of operating expenses related to contract cost assets.
The recognized revenue arising from carried-forward contract liabilities from prior year is as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Revenue recognized that was included in the contract liability balance at the beginning of the year |  |  |  |  |  |  |  |  |  |  |  |
Allocation of the transaction price |  | ￦ | 266,478 |  |  | ￦ | 251,975 |  |  | ￦ | 275,965 |
Deferred revenue of joining/installment fee |  |  | 44,032 |  |  |  | 42,685 |  |  |  | 42,100 |
Total |  | ￦ | 310,510 |  |  | ￦ | 294,660 |  |  | ￦ | 318,065 |

27. | Other Income from Operating Revenue

Other income for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Gains on disposal of property and equipment and investment properties |  | ￦ | 21,949 |  |  | ￦ | 20,289 |  |  | ￦ | 54,007 |
Gains on disposal of intangible assets |  |  | 7,213 |  |  |  | 2,961 |  |  |  | 1,726 |
Gain on disposal of right-of-use assets |  |  | 4,651 |  |  |  | 5,797 |  |  |  | 3,138 |
Compensation on property and equipment |  |  | 117,873 |  |  |  | 168,263 |  |  |  | 148,927 |
Gains on government subsidies |  |  | 19,722 |  |  |  | 31,906 |  |  |  | 43,822 |
Gain on disposal of investments in subsidiaries |  |  | 23,218 |  |  |  | — |  |  |  | 244 |
Reversal of other allowance for bad debts |  |  | — |  |  |  | 890 |  |  |  | 508 |
Others |  |  | 64,805 |  |  |  | 111,147 |  |  |  | 55,282 |
Total |  | ￦ | 259,431 |  |  | ￦ | 341,253 |  |  | ￦ | 307,654 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

28. | Operating Expenses

Operating expenses for the years ended December
31
,
2019
,
2020
and
2021
, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |  |
Salaries and wages |  | ￦ | 3,974,233 |  |  | ￦ | 4,123,680 |  |  | ￦ | 4,215,810 |  |
Depreciation |  |  | 2,530,252 |  |  |  | 2,605,128 |  |  |  | 2,605,594 |  |
Depreciation of right-of-use assets |  |  | 442,627 |  |  |  | 404,175 |  |  |  | 398,716 |  |
Amortization of intangible assets |  |  | 656,611 |  |  |  | 624,982 |  |  |  | 603,327 |  |
Commissions |  |  | 1,115,477 |  |  |  | 965,461 |  |  |  | 1,125,944 |  |
Interconnection charges |  |  | 534,025 |  |  |  | 500,081 |  |  |  | 507,567 |  |
International interconnection fee |  |  | 240,254 |  |  |  | 172,529 |  |  |  | 192,008 |  |
Purchase of inventories |  |  | 4,453,820 |  |  |  | 3,681,801 |  |  |  | 3,753,792 |  |
Changes of inventories |  |  | 282,957 |  |  |  | 257,041 |  |  |  | 20,491 |  |
Sales commission |  |  | 2,315,731 |  |  |  | 2,337,127 |  |  |  | 2,343,375 |  |
Service cost |  |  | 1,610,261 |  |  |  | 2,102,875 |  |  |  | 2,296,324 |  |
Utilities |  |  | 332,816 |  |  |  | 360,797 |  |  |  | 364,373 |  |
Taxes and dues |  |  | 277,742 |  |  |  | 283,197 |  |  |  | 268,651 |  |
Rent |  |  | 193,357 |  |  |  | 136,355 |  |  |  | 123,246 |  |
Insurance premium |  |  | 82,404 |  |  |  | 71,018 |  |  |  | 66,717 |  |
Installation fee |  |  | 155,178 |  |  |  | 132,117 |  |  |  | 154,542 |  |
Advertising expenses |  |  | 150,166 |  |  |  | 132,466 |  |  |  | 171,400 |  |
Research and development expenses |  |  | 165,028 |  |  |  | 156,940 |  |  |  | 168,969 |  |
Card service cost |  |  | 3,066,766 |  |  |  | 2,941,669 |  |  |  | 3,114,047 |  |
Loss on disposal of property and equipment |  |  | 71,233 |  |  |  | 75,879 |  |  |  | 71,417 |  |
Loss on disposal of intangible assets |  |  | 5,965 |  |  |  | 3,207 |  |  |  | 3,885 |  |
Loss on disposal of right-of-use assets |  |  | 4,502 |  |  |  | 7,844 |  |  |  | 11,457 |  |
Direct cost of government subsidies |  |  | 23,248 |  |  |  | 31,447 |  |  |  | 42,732 |  |
Loss on disposal of investments in subsidiaries |  |  | 7,586 |  |  |  | — |  |  |  | 13,727 |  |
Impairment loss on property and equipment |  |  | 43,260 |  |  |  | 79,775 |  |  |  | 2,115 |  |
Impairment loss on intangible assets |  |  | 61,899 |  |  |  | 211,637 |  |  |  | 3,747 |  |
Donations |  |  | 98,659 |  |  |  | 20,745 |  |  |  | 10,981 |  |
Other allowance for bad debts |  |  | 26,372 |  |  |  | 51,333 |  |  |  | 28,066 |  |
Others |  |  | 949,790 |  |  |  | 947,008 |  |  |  | 823,242 |  |
Total |  | ￦ | 23,872,219 |  |  | ￦ | 23,418,314 |  |  | ￦ | 23,506,262 |  |

Details of salaries and wages for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Short-term employee benefits |  | ￦ | 3,663,337 |  |  | ￦ | 3,770,786 |  |  | ￦ | 3,837,359 |
Post-employment benefits(Defined benefit plan) |  |  | 240,310 |  |  |  | 239,102 |  |  |  | 236,831 |
Post-employment benefits(Defined contribution plan) |  |  | 57,170 |  |  |  | 61,912 |  |  |  | 71,068 |
Share-based payment |  |  | 6,398 |  |  |  | 28,604 |  |  |  | 47,415 |
Others |  |  | 7,018 |  |  |  | 23,276 |  |  |  | 23,137 |
Total |  | ￦ | 3,974,233 |  |  | ￦ | 4,123,680 |  |  | ￦ | 4,215,810 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

2 9 . | Financial Income and Costs

Details of financial income for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Interest income |  | ￦ | 282,704 |  |  | ￦ | 270,571 |  |  | ￦ | 273,460 |
Gain on foreign currency transactions |  |  | 24,596 |  |  |  | 17,493 |  |  |  | 19,976 |
Gain on foreign currency translation |  |  | 17,979 |  |  |  | 164,351 |  |  |  | 32,768 |
Gain on settlement of derivatives |  |  | 9,016 |  |  |  | 9,397 |  |  |  | 2,215 |
Gain on valuation of derivatives |  |  | 77,353 |  |  |  | 172 |  |  |  | 255,149 |
Gain on valuation of financial instruments |  |  | 6,460 |  |  |  | 33,868 |  |  |  | 90,653 |
Others |  |  | 6,287 |  |  |  | 2,762 |  |  |  | 52,062 |
Total |  | ￦ | 424,395 |  |  | ￦ | 498,614 |  |  | ￦ | 726,283 |

Details of financial costs for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Interest expenses |  | ￦ | 278,427 |  |  | ￦ | 263,579 |  |  | ￦ | 263,389 |
Loss on foreign currency transactions |  |  | 30,267 |  |  |  | 27,805 |  |  |  | 13,105 |
Loss on foreign currency translation |  |  | 93,977 |  |  |  | 26,340 |  |  |  | 213,689 |
Loss on settlement of derivatives |  |  | 20 |  |  |  | 1,406 |  |  |  | 6,287 |
Loss on valuation of derivatives |  |  | 15,867 |  |  |  | 163,763 |  |  |  | 15,947 |
Loss on disposal of trade receivables |  |  | 11,298 |  |  |  | 8,152 |  |  |  | 22,712 |
Loss on valuation of financial instruments |  |  | 2,125 |  |  |  | 15,646 |  |  |  | 25,994 |
Others |  |  | 152 |  |  |  | 692 |  |  |  | 2,207 |
Total |  | ￦ | 432,133 |  |  | ￦ | 507,383 |  |  | ￦ | 563,330 |

30 . | Deferred Income Tax and income Tax Expense

The analysis of deferred tax assets and deferred tax liabilities as at December 31, 2020 and 2021, is as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Deferred tax assets |  |  |  |  |  |  |  |
Deferred tax assets to be recovered within 12 months |  | ￦ | 404,434 |  |  | ￦ | 398,329 |
Deferred tax assets to be recovered after more than 12 months |  |  | 1,631,759 |  |  |  | 1,754,113 |
Deferred tax assets before offsetting |  |  | 2,036,193 |  |  |  | 2,152,442 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Deferred tax liability to be recovered within 12 months |  |  | (637,317 | ) |  |  | (642,954 | )
Deferred tax liability to be recovered after more than 12 months |  |  | (1,394,509 | ) |  |  | (1,729,718 | )
Deferred tax liabilities before offsetting |  |  | (2,031,826 | ) |  |  | (2,372,672 | )
Deferred tax assets after offsetting |  | ￦ | 433,698 |  |  | ￦ | 423,728 |
Deferred tax liabilities after offsetting |  | ￦ | 429,331 |  |  | ￦ | 643,958 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

(In millions of Korean won) |  | 2020 |
|  | Beginning |  |  | Consolidated statements of profit or loss |  |  | Other comprehensive income |  |  | Ending |
Deferred tax liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative instruments |  |  | (10,898 | ) |  |  | 10,055 |  |  |  | — |  |  |  | (843 | )
Investment in subsidiaries, associates, and joint ventures |  |  | (108,191 | ) |  |  | (64,553 | ) |  |  | (8,820 | ) |  |  | (181,564 | )
Depreciation |  |  | (11,606 | ) |  |  | 7,431 |  |  |  | — |  |  |  | (4,175 | )
Advanced depreciation provision |  |  | (313,121 | ) |  |  | 1,203 |  |  |  | — |  |  |  | (311,918 | )
Deposits for severance benefits |  |  | (496,853 | ) |  |  | (26,419 | ) |  |  | 2,015 |  |  |  | (521,257 | )
Accrued income |  |  | (1,541 | ) |  |  | (212 | ) |  |  | — |  |  |  | (1,753 | )
Reserve for technology and human resource development |  |  | (204 | ) |  |  | — |  |  |  | — |  |  |  | (204 | )
Contract cost |  |  | (410,863 | ) |  |  | 67,898 |  |  |  | — |  |  |  | (342,965 | )
Contract assets |  |  | (53,750 | ) |  |  | (112,794 | ) |  |  | — |  |  |  | (166,544 | )
Financial assets at fair value through profit or loss |  |  | (323 | ) |  |  | (304 | ) |  |  | — |  |  |  | (627 | )
Financial assets at fair value through other comprehensive income |  |  | (103,837 | ) |  |  | (4,420 | ) |  |  | 77,634 |  |  |  | (30,623 | )
Others |  |  | (523,150 | ) |  |  | 53,797 |  |  |  | — |  |  |  | (469,353 | )
Total |  |  | (2,034,337 | ) |  |  | (68,318 | ) |  |  | 70,829 |  |  |  | (2,031,826 | )
Deferred tax assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative instruments |  |  | — |  |  |  | 40,342 |  |  |  | (9,860 | ) |  |  | 30,482 |
Provision for impairment or trade receivables |  |  | 84,071 |  |  |  | 4,994 |  |  |  | — |  |  |  | 89,065 |
Inventory valuation |  |  | 23 |  |  |  | (259 | ) |  |  | — |  |  |  | (236 | )
Contribution for construction |  |  | 16,154 |  |  |  | 246 |  |  |  | — |  |  |  | 16,400 |
Unsettled expenses |  |  | 160,436 |  |  |  | (24,358 | ) |  |  | — |  |  |  | 136,078 |
Provisions |  |  | 32,824 |  |  |  | 1,198 |  |  |  | — |  |  |  | 34,022 |
Property and equipment |  |  | 228,655 |  |  |  | (1,695 | ) |  |  | — |  |  |  | 226,960 |
Defined benefit liabilities |  |  | 569,471 |  |  |  | 13,707 |  |  |  | 15,186 |  |  |  | 598,364 |
Withholding of facilities expenses |  |  | 6,183 |  |  |  | (436 | ) |  |  | — |  |  |  | 5,747 |
Deduction of installment receivables |  |  | 48 |  |  |  | (20 | ) |  |  | — |  |  |  | 28 |
Assets retirement obligation |  |  | 29,016 |  |  |  | (883 | ) |  |  | — |  |  |  | 28,133 |
Gain or loss foreign currency translation |  |  | 20,677 |  |  |  | (20,539 | ) |  |  | — |  |  |  | 138 |
Deferred revenue |  |  | 35,800 |  |  |  | 7,230 |  |  |  | — |  |  |  | 43,030 |
Contract assets |  |  | — |  |  |  | 97,464 |  |  |  | — |  |  |  | 97,464 |
Real-estate sales |  |  | 13,685 |  |  |  | (13,685 | ) |  |  | — |  |  |  | — |
Others |  |  | 708,437 |  |  |  | (123,798 | ) |  |  | 948 |  |  |  | 585,587 |
Total |  |  | 1,905,480 |  |  |  | (20,492 | ) |  |  | 6,274 |  |  |  | 1,891,262 |
Temporary difference, net |  |  | (128,857 | ) |  |  | (88,810 | ) |  |  | 77,103 |  |  |  | (140,564 | )
Tax credit carryforwards |  |  | 128,245 |  |  |  | 16,686 |  |  |  | — |  |  |  | 144,931 |
Total net balance |  |  | (612 | ) |  |  | (72,124 | ) |  |  | 77,103 |  |  |  | 4,367 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | 2021 |
|  | Beginning |  |  | Consolidated statements of profit or loss |  |  | Other comprehensive income |  |  | Ending |
Deferred tax liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative instruments |  |  | (843 | ) |  |  | (18,326 | ) |  |  | (1,400 | ) |  |  | (20,569 | )
Investment in subsidiaries, associates, and joint ventures |  |  | (181,564 | ) |  |  | (68,166 | ) |  |  | 9,097 |  |  |  | (240,663 | )
Depreciation |  |  | (4,175 | ) |  |  | (84,413 | ) |  |  | — |  |  |  | (88,588 | )
Advanced depreciation provision |  |  | (311,918 | ) |  |  | (27,087 | ) |  |  | — |  |  |  | (339,005 | )
Deposits for severance benefits |  |  | (521,257 | ) |  |  | (17,340 | ) |  |  | (331 | ) |  |  | (538,928 | )
Accrued income |  |  | (1,753 | ) |  |  | 598 |  |  |  | — |  |  |  | (1,155 | )
Reserve for technology and human resource development |  |  | (204 | ) |  |  | — |  |  |  | — |  |  |  | (204 | )
Contract cost |  |  | (342,965 | ) |  |  | 65,695 |  |  |  | — |  |  |  | (277,270 | )
Contract assets |  |  | (166,544 | ) |  |  | (50,103 | ) |  |  | — |  |  |  | (216,647 | )
Financial assets at fair value through profit or loss |  |  | (627 | ) |  |  | 291 |  |  |  | — |  |  |  | (336 | )
Financial assets at fair value through other comprehensive income |  |  | (30,623 | ) |  |  | (33,267 | ) |  |  | 16,369 |  |  |  | (47,521 | )
Inventory valuation |  |  | — |  |  |  | (29 | ) |  |  | — |  |  |  | (29 | )
Others |  |  | (469,353 | ) |  |  | (132,256 | ) |  |  | (178 | ) |  |  | (601,787 | )
Total |  |  | (2,031,826 | ) |  |  | (364,403 | ) |  |  | 23,557 |  |  |  | (2,372,672 | )
Deferred tax assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative instruments |  |  | 30,482 |  |  |  | 8,085 |  |  |  | (244 | ) |  |  | 38,323 |
Provision for impairment or trade receivables |  |  | 89,065 |  |  |  | 5,343 |  |  |  | — |  |  |  | 94,408 |
Inventory valuation |  |  | (236 | ) |  |  | 236 |  |  |  | — |  |  |  | — |
Contribution for construction |  |  | 16,400 |  |  |  | (1,376 | ) |  |  | — |  |  |  | 15,024 |
Unsettled expenses |  |  | 136,078 |  |  |  | 31,826 |  |  |  | — |  |  |  | 167,904 |
Provisions |  |  | 34,022 |  |  |  | 951 |  |  |  | — |  |  |  | 34,973 |
Property and equipment |  |  | 226,960 |  |  |  | (1,139 | ) |  |  | — |  |  |  | 225,821 |
Defined benefit liabilities |  |  | 598,364 |  |  |  | (8,663 | ) |  |  | (18,365 | ) |  |  | 571,336 |
Withholding of facilities expenses |  |  | 5,747 |  |  |  | (446 | ) |  |  | — |  |  |  | 5,301 |
Deduction of installment receivables |  |  | 28 |  |  |  | (7 | ) |  |  | — |  |  |  | 21 |
Assets retirement obligation |  |  | 28,133 |  |  |  | 333 |  |  |  | — |  |  |  | 28,466 |
Gain or loss foreign currency translation |  |  | 138 |  |  |  | 18,417 |  |  |  | — |  |  |  | 18,555 |
Deferred revenue |  |  | 43,030 |  |  |  | 18,287 |  |  |  | — |  |  |  | 61,317 |
Contract assets |  |  | 97,464 |  |  |  | (10,327 | ) |  |  | — |  |  |  | 87,137 |
Others |  |  | 585,587 |  |  |  | 83,852 |  |  |  | — |  |  |  | 669,439 |
Total |  |  | 1,891,262 |  |  |  | 145,372 |  |  |  | (18,609 | ) |  |  | 2,018,025 |
Temporary difference, net |  |  | (140,564 | ) |  |  | (219,031 | ) |  |  | 4,948 |  |  |  | (354,647 | )
Tax credit carryforwards |  |  | 144,931 |  |  |  | (10,514 | ) |  |  | — |  |  |  | 134,417 |
Total net balance |  |  | 4,367 |  |  |  | (229,545 | ) |  |  | 4,948 |  |  |  | (220,230 | )

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The tax impacts recognized directly to equity as at December 31, 2019, 2020, and 2021, are as follows:

|  | 2019 |  |  | 2020 |  |  | 2021 |
(In millions of Korean won) |  | Before recognition |  |  | Tax effect |  |  | After recognition |  |  | Before recognition |  |  | Tax effect |  |  | After recognition |  |  | Before recognition |  |  | Tax effect |  |  | After recognition |
Gain on valuation of financial assets at fair value through other comprehensive income |  |  | 225,635 |  |  |  | (58,483 | ) |  |  | 167,152 |  |  |  | 54,969 |  |  |  | (12,972 | ) |  |  | 41,997 |  |  |  | 163,892 |  |  |  | (34,412 | ) |  |  | 129,780 |
Gain (loss) on valuation of hedge instruments |  |  | 31,003 |  |  |  | (8,139 | ) |  |  | 22,864 |  |  |  | 37,247 |  |  |  | (9,860 | ) |  |  | 27,387 |  |  |  | 6,916 |  |  |  | (1,644 | ) |  |  | 5,272 |
Remeasurements of net defined benefit liabilities |  |  | (33,814 | ) |  |  | 8,037 |  |  |  | (25,777 | ) |  |  | (77,382 | ) |  |  | 17,201 |  |  |  | (60,181 | ) |  |  | 74,518 |  |  |  | (18,696 | ) |  |  | 55,822 |
Share of gain(loss) of associates and joint ventures, and others |  |  | 4,493 |  |  |  | (1,327 | ) |  |  | 3,166 |  |  |  | 25,538 |  |  |  | (8,820 | ) |  |  | 16,718 |  |  |  | (34,909 | ) |  |  | 9,097 |  |  |  | (25,812 | )
Exchange differences on translation for foreign operations |  |  | 6,692 |  |  |  | (1,759 | ) |  |  | 4,933 |  |  |  | (3,614 | ) |  |  | 948 |  |  |  | (2,666 | ) |  |  | 683 |  |  |  | (178 | ) |  |  | 505 |
Total |  | ￦ | 234,009 |  |  | ￦ | (61,671 | ) |  | ￦ | 172,338 |  |  | ￦ | 36,758 |  |  | ￦ | (13,503 | ) |  | ￦ | 23,255 |  |  | ￦ | 211,100 |  |  | ￦ | (45,533 | ) |  | ￦ | 165,567 |

Details of income tax expense for the years ended December 31, 2019, 2020 and 2021, are calculated as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Current income tax expense |  | ￦ | 120,533 |  |  | ￦ | 213,225 |  |  | ￦ | 289,471 |
Impact of change in deferred taxes |  |  | 199,527 |  |  |  | 72,124 |  |  |  | 229,545 |
Income tax expense |  | ￦ | 320,060 |  |  | ￦ | 285,349 |  |  | ￦ | 519,016 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the entities as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Profit before income tax expense |  | ￦ | 1,015,928 |  |  | ￦ | 1,031,605 |  |  | ￦ | 1,978,411 |
Statutory income tax expense |  | ￦ | 269,018 |  |  | ￦ | 273,329 |  |  | ￦ | 533,701 |
Tax effect |  |  |  |  |  |  |  |  |  |  |  |
Income not taxable for taxation purposes |  |  | (1,265 | ) |  |  | (24,657 | ) |  |  | (4,307 | )
Non-deductible expenses |  |  | 19,543 |  |  |  | 31,741 |  |  |  | 20,570 |
Tax credit |  |  | (39,190 | ) |  |  | (47,056 | ) |  |  | (31,517 | )
Additional payment of income taxes |  |  | 3,832 |  |  |  | 429 |  |  |  | (221 | )
Tax effect and adjustment on consolidation |  |  |  |  |  |  |  |  |  |  |  |
Goodwill impairment |  |  | 159 |  |  |  | — |  |  |  | — |
Eliminated dividend income form subsidiaries |  |  | 21,917 |  |  |  | 20,682 |  |  |  | 7,264 |
Changes of out-side tax effect |  |  | 13,539 |  |  |  | 38,552 |  |  |  | 4,738 |
Intangible Asset impairment and amortization |  |  | 14,052 |  |  |  | 3,790 |  |  |  | 796 |
Reversal expenses of contract cost assets |  |  | 11,213 |  |  |  | (6,643 | ) |  |  | (2,932 | )
Change in scope of consolidation |  |  | — |  |  |  | — |  |  |  | (5,128 | )
Others |  |  | 7,242 |  |  |  | (4,818 | ) |  |  | (3,948 | )
Income tax expense |  | ￦ | 320,060 |  |  | ￦ | 285,349 |  |  | ￦ | 519,016 |

Details of deferred tax assets and liabilities that are not recognized as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2020 |  |  | 2021 |
Deductible temporary differences |  |  |  |  |  |  |  |
Investment in subsidiaries, associates, and joint ventures |  | ￦ | 2,160,963 |  |  | ￦ | 2,354,109 |
Unused tax loss |  |  | 129,680 |  |  |  | 106,853 |
Unused Tax credit |  |  | 2,924 |  |  |  | 1,376 |
Others |  |  | 254,397 |  |  |  | 122,895 |
Total |  | ￦ | 2,547,964 |  |  | ￦ | 2,585,233 |
Taxable temporary differences |  |  |  |  |  |  |  |
Investment in subsidiaries, associates, and joint ventures |  | ￦ | 452,286 |  |  | ￦ | 784,170 |
Others |  |  | 43,491 |  |  |  | — |
Total |  | ￦ | 495,777 |  |  | ￦ | 784,170 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The expected period of expiry for unused tax losses not recognized in deferred tax assets as at December 31, 2020 and 2021, is as follows:

(In millions of Korean won) |  | 2020 |  |  | 2021 |
2022 |  | ￦ | 2,140 |  |  | ￦ | 4,249 |
2023 |  |  | 80,649 |  |  |  | 76,133 |
2024 |  |  | 5,848 |  |  |  | 4,484 |
2025 |  |  | 4,867 |  |  |  | 2,836 |
2026 |  |  | 2,847 |  |  |  | 2,390 |
2027 |  |  | 9,709 |  |  |  | 3,419 |
2028 |  |  | 8,389 |  |  |  | 2,091 |
2029 |  |  | 8,426 |  |  |  | 2,579 |
2030 |  |  | 2,579 |  |  |  | 3,150 |
After 2031 |  |  | 4,226 |  |  |  | 5,522 |
Total |  | ￦ | 129,680 |  |  | ￦ | 106,853 |

3 1 . | Earnings per Share

Basic earnings per share is calculated by dividing the profit from operations attributable to equity holders of the Group by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares purchased by the Group and held as treasury stock.
Basic earnings per share from operations for the years ended December 31, 2019, 2020 and 2021, is calculated as follows:

|  | 2019 |  |  | 2020 |  |  | 2021 |
Profit attributable to ordinary shares ( i n millions of Korean won) |  | ￦ | 645,703 |  |  | ￦ | 700,889 |  |  | ￦ | 1,354,537 |
Weighted average number of ordinary shares outstanding ( in shares) |  |  | 245,171,283 |  |  |  | 245,207,307 |  |  |  | 235,201,782 |
Basic earnings per share ( i n Korean won) |  |  | 2,634 |  |  |  | 2,858 |  |  |  | 5,759 |

Diluted earnings per share from operations is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Controlling Company has dilutive potential ordinary shares from convertible preferred stocks, stock options and other share-based payments.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Diluted earnings per share from operations for the years ended December 31, 2019, 2020 and 2021 is calculated as follows:

|  | 2019 |  |  | 2020 |  |  | 2021 |
Profit attributable to ordinary shares ( i n millions of Korean won) |  | ￦ | 645,703 |  |  | ￦ | 700,889 |  |  | ￦ | 1,354,537 |
Adjustment to net income attributable to ordinary shares ( I n millions of Korean won) |  |  | (157 | ) |  |  | — |  |  |  | — |
Diluted profit attributable to ordinary shares ( i n millions of Korean won) |  |  | 645,546 |  |  |  | 700,889 |  |  |  | 1,354,537 |
Number of dilutive potential ordinary shares outstanding ( i n number of shares) |  |  | 70,267 |  |  |  | 69,598 |  |  |  | 483,760 |
Weighted average number of ordinary shares outstanding ( i n number of shares) |  |  | 245,241,550 |  |  |  | 245,276,905 |  |  |  | 235,685,542 |
Diluted earnings per share ( i n Korean won) |  |  | 2,632 |  |  |  | 2,858 |  |  |  | 5,747 |

Diluted earnings per share is earnings per outstanding of ordinary shares and dilutive potential ordinary shares. Diluted earnings per share is calculated by dividing adjusted profit for the year by the sum of the number of ordinary shares and dilutive potential ordinary shares.

3 2 . | Dividend

The dividends paid by the Group in 2021, 2020 and 2019 were
￦
326,487 million (
￦
1,350
per share), ￦ 269,766 million (￦ 1,100 per share), ￦
269,659 million (
￦
1,100
per share), respectively. A dividend in respect of the year ended December 31, 2021, of ￦
1,910
per share, amounting to a total dividend of ￦
450,394
million, was approved at the shareholders’ meeting on March 31, 2022.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

3 3 . | Cash Generated from Operations

Cash flows from operating activities for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
1. Profit for the year |  | ￦ | 695,868 |  |  | ￦ | 746,256 |  |  | ￦ | 1,459,395 |
2. Adjustments to reconcile net income |  |  |  |  |  |  |  |  |  |  |  |
Income tax expense |  |  | 320,060 |  |  |  | 285,349 |  |  |  | 519,016 |
Interest income |  |  | (303,722 | ) |  |  | (291,425 | ) |  |  | (300,900 | )
Interest expense |  |  | 278,975 |  |  |  | 265,035 |  |  |  | 268,847 |
Dividends income |  |  | (3,408 | ) |  |  | (4,442 | ) |  |  | (21,525 | )
Depreciation |  |  | 2,567,754 |  |  |  | 2,635,307 |  |  |  | 2,643,894 |
Amortization of intangible assets |  |  | 660,705 |  |  |  | 628,154 |  |  |  | 604,744 |
Depreciation of right-of-use assets |  |  | 433,199 |  |  |  | 404,174 |  |  |  | 398,716 |
Provision for severance benefits |  |  | 256,525 |  |  |  | 255,615 |  |  |  | 253,491 |
Impairment losses on trade receivables |  |  | 60,193 |  |  |  | 139,957 |  |  |  | 105,344 |
Share of net profit or loss of associates and joint ventures |  |  | 3,252 |  |  |  | (18,041 | ) |  |  | (116,061 | )
Loss(gain) on disposal of associates and joint ventures |  |  | 30 |  |  |  | 111 |  |  |  | 1 |
Loss on the disposal of subsidiaries |  |  | — |  |  |  | — |  |  |  | 13,483 |
Loss(gain) on disposal of right-of-use assets |  |  | 1,556 |  |  |  | 2,047 |  |  |  | 8,319 |
Impairment losses on assets held for sale |  |  | 7,586 |  |  |  | — |  |  |  | 11 |
Loss on disposal of property and equipment and investment in properties |  |  | 49,284 |  |  |  | 55,590 |  |  |  | 17,410 |
Loss(gain) on disposal of intangible assets |  |  | (1,248 | ) |  |  | 246 |  |  |  | 2,159 |
Loss on impairment of intangible assets |  |  | 61,899 |  |  |  | 211,637 |  |  |  | 3,747 |
Loss(gain) on foreign currency translation |  |  | 75,998 |  |  |  | (138,011 | ) |  |  | 180,921 |
Loss(gain) on valuation and settlement of derivatives, net |  |  | (70,482 | ) |  |  | 155,600 |  |  |  | (235,130 | )
Loss(gain) on disposal of financial assets at fair value through profit or loss |  |  | (5,115 | ) |  |  | 329 |  |  |  | (29,974 | )
Gain on valuation of financial assets at fair value through profit or loss |  |  | (4,335 | ) |  |  | (59,044 | ) |  |  | (64,660 | )
Loss(gain) on disposal of financial assets at amortized cost |  |  | 43 |  |  |  | (138 | ) |  |  | (35 | )
Others |  |  | 143,500 |  |  |  | 127,948 |  |  |  | 86,740 |
3. Change in operating assets and liabilities, net of effects from purchase of controlled entity and sale of engineering division |  |  |  |  |  |  |  |  |  |  |  |
Decrease(increase) in trade receivables |  |  | (433,292 | ) |  |  | 66,462 |  |  |  | 327,031 |
Decrease(Increase) in other receivables |  |  | (79,130 | ) |  |  | 685,209 |  |  |  | (328,610 | )
Decrease(increase) in other current assets |  |  | 984 |  |  |  | 9,089 |  |  |  | (89,230 | )
Decrease(increase) in other non-current assets |  |  | (178,180 | ) |  |  | (86,039 | ) |  |  | (143,087 | )
Decrease(increase) in inventories |  |  | 240,488 |  |  |  | 288,507 |  |  |  | 32,798 |
Increase(decrease) in trade payables |  |  | 44,354 |  |  |  | (135,760 | ) |  |  | 289,044 |
Decrease in other payables |  |  | (102,375 | ) |  |  | (1,232,646 | ) |  |  | 207,583 |
Increase in other current liabilities |  |  | 43,384 |  |  |  | 127,076 |  |  |  | 107,993 |
Increase(decrease) in other non-current liabilities |  |  | (199,547 | ) |  |  | (56,319 | ) |  |  | (14,915 | )
Decrease(Increase) in provisions |  |  | (12,164 | ) |  |  | 2,264 |  |  |  | (4,668 | )
Decrease(Increase) in deferred revenue |  |  | 641 |  |  |  | (1,948 | ) |  |  | 3,696 |
Increase in plan assets |  |  | (375,499 | ) |  |  | (136,336 | ) |  |  | (114,631 | )
Payment of severance benefits |  |  | (119,716 | ) |  |  | (186,520 | ) |  |  | (241,350 | )
4. Cash generated from operations (1+2+3) |  | ￦ | 4,058,065 |  |  | ￦ | 4,745,293 |  |  | ￦ | 5,829,607 |

The Group made agreements with securitization specialty companies and disposed of its trade receivables related to handset sales (Note 20). Cash flows from the disposals are presented in cash generated from operations.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Significant transactions not affecting cash flows for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Reclassification of the current portion of borrowings |  | ￦ | 1,030,056 |  |  | ￦ | 1,229,359 |  |  | ￦ | 1,303,543 |
Reclassification of construction-in-progress to property and equipment |  |  | 2,698,146 |  |  |  | 3,011,519 |  |  |  | 2,916,888 |
Reclassification of accounts payable from property and equipment |  |  | 685,859 |  |  |  | 22,052 |  |  |  | (149,512 | )
Reclassification of accounts payable from intangible assets |  |  | (356,911 | ) |  |  | (345,675 | ) |  |  | 524,040 |
Reclassification of payable from defined benefit liability |  |  | (19,053 | ) |  |  | 72,346 |  |  |  | 69,415 |
Reclassification of payable from plan assets |  |  | (14,298 | ) |  |  | 66,046 |  |  |  | (60,320 | )

3 4 . | Changes in Liabilities Arising from Financing Activities

Changes in liabilities arising from financing activities, liabilities related to cashflow to be classified as future financing activities, for the years ended December 31, 2019, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2019 |
|  |  |  |  |  |  | Non-cash |  |  |  |
| Beginning |  |  | Cash flows |  |  | Changes in Accounting Policy 1 |  |  | Newly acquired |  |  | Exchange difference |  |  | Fair Value changes |  |  | Others |  |  | Ending |
Borrowing |  | ￦ | 6,648,294 |  |  | ￦ | 574,175 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 64,398 |  |  | ￦ | — |  |  | ￦ | 12,000 |  |  | ￦ | 7,298,867 |
Lease liabilities |  |  | 163,858 |  |  |  | (485,444 | ) |  |  | 771,410 |  |  |  | 774,906 |  |  |  | — |  |  |  | — |  |  |  | (13,379 | ) |  |  | 1,211,351 |
Derivative liabilities |  |  | 65,067 |  |  |  | (9,734 | ) |  |  | — |  |  |  | — |  |  |  | (4,234 | ) |  |  | (20,058 | ) |  |  | (10,945 | ) |  |  | 20,096 |
Derivative assets |  |  | (29,843 | ) |  |  | 33,635 |  |  |  | — |  |  |  | — |  |  |  | (53,729 | ) |  |  | (11,398 | ) |  |  | 2,759 |  |  |  | (58,576 | )
Total |  | ￦ | 6,847,376 |  |  | ￦ | 112,632 |  |  | ￦ | 771,410 |  |  | ￦ | 774,906 |  |  | ￦ | 6,435 |  |  | ￦ | (31,456 | ) |  | ￦ | (9,565 | ) |  | ￦ | 8,471,738 |

(In millions of Korean won) |  | 2020 |
| Beginning |  |  | Cash flows |  |  | Non-cash |  |  | Ending |
| Newly acquired |  |  | Exchange difference |  |  | Fair Value changes |  |  | Change in Consolidati- on Scope |  |  | Others |
Borrowing |  | ￦ | 7,298,867 |  |  | ￦ | 167,867 |  |  | ￦ | 17,523 |  |  | ￦ | (157,985 | ) |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | (9,974 | ) |  | ￦ | 7,316,298 |
Lease liabilities |  |  | 1,211,351 |  |  |  | (447,784 | ) |  |  | 473,477 |  |  |  | (3 | ) |  |  | 40 |  |  |  | 3,564 |  |  |  | (97,005 | ) |  |  | 1,143,640 |
Other financial liabilities |  |  | — |  |  |  | (13,674 | ) |  |  | 13,674 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Derivative liabilities |  |  | 20,096 |  |  |  | (943 | ) |  |  | 2,798 |  |  |  | 142,511 |  |  |  | (23,669 | ) |  |  | — |  |  |  | (10,220 | ) |  |  | 130,573 |
Derivative assets |  |  | (58,576 | ) |  |  | 34,933 |  |  |  | — |  |  |  | 2,870 |  |  |  | (3,456 | ) |  |  | — |  |  |  | 16,623 |  |  |  | (7,606 | )
Total |  | ￦ | 8,471,738 |  |  | ￦ | (259,601 | ) |  | ￦ | 507,472 |  |  | ￦ | (12,607 | ) |  | ￦ | (27,085 | ) |  | ￦ | 3,564 |  |  | ￦ | (100,576 | ) |  | ￦ | 8,582,905 |

(In millions of Korean won) |  | 2021 |
| Beginning |  |  | Cash flows |  |  | Non-cash |  |  | Ending |
| Newly acquired |  |  | Exchange difference |  |  | Fair Value changes |  |  | Change in Consolidati- on Scope |  |  | Others |
Borrowing |  | ￦ | 7,316,298 |  |  | ￦ | 900,394 |  |  | ￦ | 52,782 |  |  | ￦ | 196,890 |  |  | ￦ | — |  |  | ￦ | 15,994 |  |  | ￦ | (44,655 | ) |  | ￦ | 8,437,703 |
Lease liabilities |  |  | 1,143,640 |  |  |  | (394,567 | ) |  |  | 403,451 |  |  |  | 3 |  |  |  | 90 |  |  |  | 36,840 |  |  |  | (30,088 | ) |  |  | 1,159,369 |
Derivative liabilities |  |  | 130,573 |  |  |  | (1,712 | ) |  |  | 2,637 |  |  |  | (4,311 | ) |  |  | (4,892 | ) |  |  | — |  |  |  | (47,119 | ) |  |  | 75,176 |
Derivative assets |  |  | (7,606 | ) |  |  | 216 |  |  |  | — |  |  |  | (189,700 | ) |  |  | (17,251 | ) |  |  | — |  |  |  | 114,888 |  |  |  | (99,453 | )
Total |  | ￦ | 8,582,905 |  |  | ￦ | 504,331 |  |  | ￦ | 458,870 |  |  | ￦ | 2,882 |  |  | ￦ | (22,053 | ) |  | ￦ | 52,834 |  |  | ￦ | (6,974 | ) |  | ￦ | 9,572,795 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

35. | Segment Information

The Group’s operating segments are as follows:

Details |  | Business service
ICT |  | Mobile/fixed line telecommunication service and convergence business, B2B business and others
Finance |  | Credit card business and others
Satellite TV |  | Satellite TV business
Others |  | IT, facility security and global business, and others

Details of each segment for the years ended December 31, 2019, 2020 and 2021, are as follows:

|  | 2019 |
(In millions of Korean won) |  | Operating revenues |  |  | Operating Income |  |  | Depreciation and Amortization 1 |
ICT |  | ￦ | 18,527,631 |  |  | ￦ | 634,046 |  |  | ￦ | 3,229,159 |
Finance |  |  | 3,795,185 |  |  |  | 158,235 |  |  |  | 27,852 |
Satellite TV |  |  | 694,637 |  |  |  | 69,357 |  |  |  | 94,992 |
Others |  |  | 5,845,973 |  |  |  | 218,402 |  |  |  | 357,294 |
|  |  | 28,863,426 |  |  |  | 1,080,040 |  |  |  | 3,709,297 |
Elimination |  |  | (3,964,237 | ) |  |  | (53,070 | ) |  |  | (79,805 | )
Consolidated amount |  | ￦ | 24,899,189 |  |  | ￦ | 1,026,970 |  |  | ￦ | 3,629,492 |

| 1 | Sum of the amortization of tangible assets, intangible assets, investment properties, and right-of-use assets.

|  | 2020 |
(In millions of Korean won) |  | Operating revenues |  |  | Operating Income |  |  | Depreciation and Amortization 1,2 |
ICT |  | ￦ | 18,275,765 |  |  | ￦ | 809,741 |  |  | ￦ | 3,233,878 |
Finance |  |  | 3,686,430 |  |  |  | 85,008 |  |  |  | 53,098 |
Satellite TV |  |  | 706,631 |  |  |  | 71,345 |  |  |  | 84,931 |
Others |  |  | 5,944,093 |  |  |  | 209,078 |  |  |  | 346,215 |
|  |  | 28,612,919 |  |  |  | 1,175,172 |  |  |  | 3,718,122 |
Elimination |  |  | (4,172,272 | ) |  |  | (152,839 | ) |  |  | (83,838 | )
Consolidated amount |  | ￦ | 24,440,647 |  |  | ￦ | 1,022,333 |  |  | ￦ | 3,634,284 |

| 1 | Sum of the amortization of tangible assets, intangible assets, investment properties, and right-of-use assets.

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| 2 | Property and equipment and intangible assets associated with ICT reporting segment are ￦ 13,583,173 million.

|  | 2021 |
(In millions of Korean won) |  | Operating revenues |  |  | Operating Income |  |  | Depreciation and Amortization 1,2 |
ICT |  | ￦ | 18,734,342 |  |  | ￦ | 1,170,920 |  |  | ￦ | 3,217,643 |
Finance |  |  | 3,636,260 |  |  |  | 137,779 |  |  |  | 48,542 |
Satellite TV |  |  | 772,950 |  |  |  | 76,926 |  |  |  | 91,306 |
Others |  |  | 6,455,905 |  |  |  | 357,747 |  |  |  | 355,015 |
|  |  | 29,599,457 |  |  |  | 1,743,372 |  |  |  | 3,712,506 |
Elimination |  |  | (4,393,798 | ) |  |  | (43,975 | ) |  |  | (104,869 | )
Consolidated amount |  | ￦ | 25,205,659 |  |  | ￦ | 1,699,397 |  |  | ￦ | 3,607,637 |

| 1 | Sum of the amortization of tangible assets, intangible assets, investment properties, and right-of-use assets.

| 2 | Property and equipment and intangible assets associated with ICT reporting segment are ￦ 14,257,680 million.

Operating revenues for the years ended December 31, 2019, 2020 and 2021 and
non-current
assets as at December 31, 2020 and 2021 by geographical regions, are as follows:

(In millions of Korean won) |  | Operating revenues |  |  | Non-current assets 1 |
Location |  | 2019 |  |  | 2020 |  |  | 2021 |  |  | 2020.12.31 |  |  | 2021.12.31 |
Domestic |  | ￦ | 24,832,068 |  |  | ￦ | 24,368,729 |  |  | ￦ | 25,114,719 |  |  | ￦ | 18,934,766 |  |  | ￦ | 20,627,543 |
Overseas |  |  | 67,121 |  |  |  | 71,918 |  |  |  | 90,940 |  |  |  | 18,243 |  |  |  | 253,638 |
Total |  | ￦ | 24,899,189 |  |  | ￦ | 24,440,647 |  |  | ￦ | 25,205,659 |  |  | ￦ | 18,953,009 |  |  | ￦ | 20,881,181 |

| 1 | Non-current assets include property and equipment, intangible assets, investment properties and right-of-use assets.

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December 31, 2019, 2020 and 2021

36. | Related Party Transactions

The list of related party of the Group as at December 31, 2021, is as follows:

Relationship |  | Name of Entity
Associates and joint ventures |  | KIF Investment Fund, K-REALTY CR REITs No.1, Boston Global Film & Contents Fund L.P., QTT Global (Group) Company Ltd., CU Industrial Development Co., Ltd, KD Living, Inc., LoginD Co., Ltd., K Bank, ISU-kth Contents Investment Fund, Daiwon Broadcasting Co., Ltd., KT-DSC Creative Economy Youth Start-up Investment Fund, Korea Electronic Vehicle Charging Service, K-REALTY RENTAL HOUSING REIT 2, AI RESEARCH INSTITUTE, KT-IBKC Future Investment Fund 1, Gyeonggi-KT Yoojin Superman Fund, FUNDA Co., Ltd, CHAMP IT Co., Ltd., Alliance Internet Corp., Little big pictures, Virtua Realm Sendirian Berhad, KT-Smart Factory Investment Fund, Studio Discovery Co., Ltd., KT Young Entrepreneurs DNA Investment Fund, Hyundai Robotics Co., Ltd., IGIS Professional Investors Private Investment Real Estate Investment LLC No.395, Maruee Limited Company Specializing in the Cultural Industry, Trustay Co., Ltd., The Skyk Co., Ltd., StorySoop Inc., Mastern No.127 Logispoint Daegu Co., Ltd., SMART KOREA KT NEXT VENTURE FUND, KT Early Stage Investment Fund, Pacific Professional Investors Private Investment Real Estate Investment LLC No.55 Mastern KT Multi-Family Real Estate Private Equity Investment Fund 1, Home Choice Corp, K-REALTY RENTAL HOUSING REIT V, K-Realty 11th Real Estate Investment Trust Company, IBK-KT Emerging Digital Industry Investment Fund, SG-IBKC K-Contents Investment Fund No.1
Others 1 |  | Goody Studio Co., Ltd.

| 1 | Although it is evaluated by applying IFRS 9, it is included in the scope of related parties under IAS 24 as it has a significant influence.

Outstanding balances of receivables and payables in relations to transactions with related parties as at December 31, 2020 and 2021, are as follows:

|  | December 31, 2020 |
|  |  |  | Receivables |  |  | Payables |
( I n millions of Korean won) |  | Trade receivables |  |  | Other receivables |  |  | Lease receivables |  |  | Trade payables |  |  | Other payables |  |  | Lease liabilities |
Associates and joint ventures |  | K-REALTY CR REIT 1 |  | ￦ | 457 |  |  | ￦ | 16,200 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 20,857 |
| K Bank |  |  | 775 |  |  |  | 32,964 |  |  |  | — |  |  |  | — |  |  |  | 891 |  |  |  | — |
| Others |  |  | 72 |  |  |  | 1,147 |  |  |  | — |  |  |  | — |  |  |  | 858 |  |  |  | — |
Total |  |  |  | ￦ | 1,304 |  |  | ￦ | 50,311 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 1,749 |  |  | ￦ | 20,857 |

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December 31, 2019, 2020 and 2021

|  | December 31, 2021 |
|  |  |  | Receivables |  |  | Payables |
( I n millions of Korean won) |  | Trade receivables |  |  | Other receivables |  |  | Lease receivables |  |  | Trade payables |  |  | Other payables |  |  | Lease liabilities |
Associates and joint ventures |  | K Bank |  | ￦ | 821 |  |  | ￦ | 51,422 |  |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 513 |  |  | ￦ | — |
| IGIS Professional Investors Private Investment Real Estate Investment LLC No.395 |  |  | 4,614 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
| Others |  |  | 565 |  |  |  | 1,853 |  |  |  | — |  |  |  | 343 |  |  |  | 4,829 |  |  |  | — |
Total |  |  |  | ￦ | 6,000 |  |  | ￦ | 53,275 |  |  | ￦ | — |  |  | ￦ | 343 |  |  | ￦ | 5,342 |  |  | ￦ | — |

Significant transactions with related parties for the years ended December 31, 2019, 2020 and 2021, are as follows:

|  |  |  | 2019 |
(In millions of Korean won) |  | Sales |  |  | Purchases 1 |
Associates and joint ventures |  | K- Realty CR-REITs No.1 |  | ￦ | 1,302 |  |  | ￦ | — |
| K Bank |  |  | 17,815 |  |  |  | 8,524 |
| Others |  |  | 1,498 |  |  |  | 10,531 |
Others |  | K-REALTY CR-REIT 10 1 |  |  | 2,801 |  |  |  | — |
Total |  |  |  | ￦ | 23,416 |  |  | ￦ | 19,055 |

| 1 | The amounts include acquisition of property and equipment and others.

|  | 2019 |
(In millions of Korean won) |  | Acquisition of lease receivables |  |  | Acquisition of right-of-use assets |  |  | Interest expense |  |  | Dividend income |
Associates and joint ventures |  | K- Realty CR-REITs No.1 |  | ￦ | — |  |  | ￦ | 776 |  |  | ￦ | 2,225 |  |  | ￦ | 10,928 |
| Korea Information & Technology Investment Fund (KIF Investment Fund) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,280 |
| Others |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 146 |
Total |  |  |  | ￦ | — |  |  | ￦ | 776 |  |  | ￦ | 2,225 |  |  | ￦ | 15,354 |

|  |  |  | 2020 |
( I n millions of Korean won) |  | Sales |  |  | Purchases 1 |
Associates and joint ventures |  | K- Realty CR-REITs No.1 |  | ￦ | 2,298 |  |  | ￦ | — |
| Korea Information & Technology Investment Fund (KIF Investment Fund) |  |  | — |  |  |  | — |
| K Bank |  |  | 15,658 |  |  |  | 8,227 |
|  | Others |  |  | 809 |  |  |  | 10,272 |
Total |  |  |  | ￦ | 18,765 |  |  | ￦ | 18,499 |

| 1 | The amounts include acquisition of primarily property and equipment.

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December 31, 2019, 2020 and 2021

|  | 2020 |
( I n millions of Korean won) |  | Interest income |  |  | Interest expense |  |  | Dividend income |
Associates and joint ventures |  | K- Realty CR-REITs No.1 |  |  | ￦ — |  |  |  | ￦ 917 |  |  |  | ￦ 8,061 |
| Korea Information & Technology Investment Fund (KIF Investment Fund) |  |  | — |  |  |  | — |  |  |  | 9,241 |
|  | K Bank |  |  | 14 |  |  |  | — |  |  |  | — |
|  | Others |  |  | — |  |  |  | — |  |  |  | 43 |
Total |  |  |  | ￦ | 14 |  |  | ￦ | 917 |  |  | ￦ | 17,345 |

|  |  |  | 2021 |
(In millions of Korean won) |  | Sales |  |  | Purchases 1 |
Associates and joint ventures |  | K- Realty CR-REITs No.1 |  | ￦ | 238,847 |  |  | ￦ | 1,308 |
| IGIS Professional Investors Private Investment Real Estate Investment LLC No. 395 |  |  | 5,000 |  |  |  | — |
| K Bank |  |  | 24,247 |  |  |  | 15,164 |
|  | Others |  |  | 28,092 |  |  |  | 21,302 |
Total |  |  |  |  | 296,186 |  |  |  | 37,774 |

|  | 2021 |
(In millions of Korean won) |  | Interest income |  |  | Interest expense |  |  | Dividend income |
Associates and joint ventures |  | K- Realty CR-REITs No.1 |  |  | ￦ — |  |  |  | ￦ 205 |  |  |  | ￦ 40,142 |
| Korea Information & Technology Investment Fund (KIF Investment Fund) |  |  | 223 |  |  |  | — |  |  |  | — |
|  | K Bank |  |  | — |  |  |  | — |  |  |  | — |
|  | Others 2 |  |  | — |  |  |  | — |  |  |  | 8,637 |
Total |  |  |  | ￦ | 223 |  |  | ￦ | 205 |  |  | ￦ | 48,779 |

| 1 | The amounts include acquisition of primarily property and equipment.

| 2 | Transaction amount before OSKENT Co., Ltd., Mission Culture Industry Limited, Sweet and Sour Culture

Industry Limited, Alma Mater Culture Industry Limited, and KT Philippines are excluded from associates and joint ventures.
Key management compensation for the years ended December 31, 2019, 2020 and 2021, consists of:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Salaries and other short-term benefits |  | ￦ | 2,955 |  |  | ￦ | 2,086 |  |  | ￦ | 2,189 |
Post-employment benefits |  |  | 321 |  |  |  | 390 |  |  |  | 412 |
Stock-based compensation |  |  | 891 |  |  |  | 625 |  |  |  | 669 |
Total |  | ￦ | 4,167 |  |  | ￦ | 3,101 |  |  | ￦ | 3,270 |

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December 31, 2019, 2020 and 2021
Fund transactions with related parties for the years ended December 31, 2019, 2020 and 2021, are as follows:

|  | December 31, 2019 |
|  | Borrowing transaction 1 |  |  | Equity contributions in cash |
(In millions of Korean won) |  | Borrowing 2 |  |  | Repayment |
KT-IBKC Future Investment Fund1 |  | ￦ | — |  |  | ￦ | — |  |  | ￦ | 3,750 |
KT Philippines C o. Ltd. |  |  | — |  |  |  | — |  |  |  | 99 |
Virtua Realm Sendirian Berhad |  |  | — |  |  |  | — |  |  |  | 550 |
K-REALTY CR REIT 1 |  |  | — |  |  |  | 30,385 |  |  |  | — |
K Bank |  |  | — |  |  |  | — |  |  |  | 21,782 |
KIF Investment Fund |  |  | — |  |  |  | — |  |  |  | — |
Daiwon Broadcasting Co.,Ltd. |  |  | — |  |  |  | — |  |  |  | — |
JB Emerging Market Specialty Investment Private Equity Trust No.1 |  |  | — |  |  |  | — |  |  |  | — |
Gyeonggi-KT Yoojin Superman Fund |  |  | — |  |  |  | — |  |  |  | 1,000 |
KT-CKP New Media Investment Fund |  |  | — |  |  |  | — |  |  |  | (174 | )
KT-DSC creative economy youth start-up investment fund |  |  | — |  |  |  | — |  |  |  | (1,800 | )
KT-Smart Factory Investment Fund |  |  | — |  |  |  | — |  |  |  | 2,800 |
KT-SB Venture Investment Fund |  |  | — |  |  |  | — |  |  |  | (2,404 | )
Total |  | ￦ | — |  |  | ￦ | 30,385 |  |  | ￦ | 25,603 |

| 1 | Borrowing transactions include lease transactions.

| 2 | Conversion effect from the adoption of IFRS 16 Lease on January 1, 2019 has been excluded.

|  | December 31, 2020 |
|  | Borrowing transaction 1 |  |  | Equity contributions in cash |
(In millions of Korean won) |  | Borrowing |  |  | Repayment |
K- Realty CR-REITs No.1 |  | ￦ | — |  |  | ￦ | 20,304 |  |  | ￦ | — |
Studio Discovery Co. Ltd. |  |  | — |  |  |  | — |  |  |  | 3,000 |
KT Young Entrepreneurs DNA Investment Fund |  |  | — |  |  |  | — |  |  |  | 3,600 |
KT-Smart Factory Investment Fund |  |  | — |  |  |  | — |  |  |  | 2,800 |
KT-CKP New Media Investment Fund |  |  | — |  |  |  | — |  |  |  | (109 | )
K Bank |  |  | — |  |  |  | — |  |  |  | 195,011 |
Gyeonggi-KT Yoojin Superman Fund |  |  | — |  |  |  | — |  |  |  | 1,000 |
Hyundai Robotics Co. Ltd. |  |  | — |  |  |  | — |  |  |  | 50,000 |
Total |  | ￦ | — |  |  | ￦ | 20,304 |  |  | ￦ | 255,302 |

| 1 | Borrowing transactions include lease transactions.

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December 31, 2019, 2020 and 2021

|  | December 31, 2021 |
|  | Borrowing transaction 1 |  |  | Equity contributions in cash |
(In millions of Korean won) |  | Borrowing |  |  | Repayment |
K- REALTY CR REIT 1 |  | ￦ | — |  |  | ￦ | 15,964 |  |  | ￦ | — |
K Bank |  |  | — |  |  |  | — |  |  |  | 424,957 |
Pacific Professional Investors Private Investment Real Estate Investment LLC No. 55 |  |  | — |  |  |  | — |  |  |  | 11,000 |
KT Young Entrepreneurs DNA Investment Fund |  |  | — |  |  |  | — |  |  |  | 8,400 |
Mastern KT Multi-Family Real Estate Private Equity Investment Fund 1 |  |  | — |  |  |  | — |  |  |  | 6,055 |
KT-IBKC Future Investment Fund 1 |  |  | — |  |  |  | — |  |  |  | (5,700 | )
Others |  |  | — |  |  |  | — |  |  |  | 18,176 |
Total |  | ￦ | — |  |  | ￦ | 15,964 |  |  | ￦ | 462,888 |

| 1 | Borrowing transaction include lease transactions.

The Group has an obligation to invest in
IBK-KT
Emerging Digital Industry Investment Fund, a related party, according to the agreement. As at December 31, 2021, the Group is planning to invest an additional
￦
27,200 million.

3 7 . | Financial Risk Management

(1) Financial Risk Factors
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures such as cash flow risk.
The Group’s financial policy is set up in the long-term perspective and annually reported to the Board of Directors. The financial risk management is carried out by the Value Management Office, which identifies, evaluates and hedges financial risks. The treasury department in the Value Management Office considers various finance market conditions to estimate the effect from the market changes.
1) Market risk
The Group’s market risk management focuses on controlling the extent of exposure to the risk in order to minimize revenue volatility. Market risk is a risk that decreases value or profit of the Group’s portfolio due to changes in market interest rate, foreign exchange rate and other factors.
(i) Sensitivity analysis
Sensitivity analysis is performed for each type of market risk to which the Group is exposed. Reasonably possible changes in the relevant risk variable such as prevailing market interest rates,
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December 31, 2019, 2020 and 2021
currency rates, equity prices or commodity prices are estimated and if the rate of change in the underlying risk variable is stable, the Group does not alter the chosen reasonably possible change in the risk variable. The reasonably possible change does not include remote or ‘worst case’ scenarios or ‘stress tests’.
(ii) Foreign exchange risk
The Group is exposed to foreign exchange risk arising from operating, investing and financing activities. Foreign exchange risk is managed within the range of the possible effect on the Group’s cash flows. Foreign exchange risk (i.e. foreign currency translation of overseas operating assets and liabilities) unaffecting the Group’s cash flows is not hedged but can be hedged at a particular situation.
As at December 31, 2019, 2020 and 2021, if the foreign exchange rate had strengthened/weakened by 10% with all other variables held constant, the effects on profit before income tax and shareholders’ equity would have been as follows:

(In millions of Korean won) |  | Fluctuation of foreign exchange rate |  |  | Income before tax 1 |  |  | Shareholders’ equity |
2019.12.31 |  |  | 10 | % |  | ￦ | 45,149 |  |  | ￦ | 52,092 |
|  | -10 | % |  |  | (45,149 | ) |  |  | (52,092 | )
2020.12.31 |  |  | 10 | % |  | ￦ | 25,220 |  |  | ￦ | 36,961 |
|  | -10 | % |  |  | (25,220 | ) |  |  | (36,961 | )
2021.12.31 |  |  | 10 | % |  | ￦ | (3,433 | ) |  | ￦ | 8,692 |
|  | -10 | % |  |  | 3,433 |  |  |  | (8,692 | )

| 1 | Computed with considering derivatives hedging effect applied by the Group to hedge foreign exchange risk of liabilities in foreign currencies.

The above analysis is a simple sensitivity analysis which assumes that all the variables other than foreign exchange rates are held constant. Therefore, the analysis does not reflect any correlation between foreign exchange rates and other variables, nor the management’s decision to decrease the risk.
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December 31, 2019, 2020 and 2021
Details of financial assets and liabilities in foreign currencies as at December 31, 2019, 2020 and 2021, are as follows:

(In thousands of foreign currencies) |  | 2019 |  |  | 2020 |  |  | 2021 |
| Financial assets |  |  | Financial liabilities |  |  | Financial assets |  |  | Financial liabilities |  |  | Financial assets |  |  | Financial liabilities |
USD |  |  | 645,941 |  |  |  | 1,830,764 |  |  |  | 400,046 |  |  |  | 1,937,935 |  |  |  | 245,759 |  |  |  | 2,302,642 |
SDR 1 |  |  | 255 |  |  |  | 729 |  |  |  | 255 |  |  |  | 728 |  |  |  | 255 |  |  |  | 722 |
JPY |  |  | 24,930 |  |  |  | 80,000,000 |  |  |  | 209,376 |  |  |  | 46,000,009 |  |  |  | 29,227 |  |  |  | 30,000,763 |
GBP |  |  | — |  |  |  | 56 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,005 |
EUR |  |  | 1 |  |  |  | 6 |  |  |  | 316 |  |  |  | 162 |  |  |  | 3,943 |  |  |  | 10,801 |
CNY |  |  | 457 |  |  |  | 161 |  |  |  | 458 |  |  |  | 491 |  |  |  | — |  |  |  | — |
RWF 2 |  |  | 706 |  |  |  | — |  |  |  | 646 |  |  |  | — |  |  |  | 586 |  |  |  | — |
THB 3 |  |  | — |  |  |  | — |  |  |  | 535 |  |  |  | — |  |  |  | 2,160 |  |  |  | — |
MMK 4 |  |  | 84 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
TZS 5 |  |  | 6,919 |  |  |  | — |  |  |  | 1,019 |  |  |  | — |  |  |  | 1,644 |  |  |  | — |
BWP 6 |  |  | 911 |  |  |  | — |  |  |  | 212 |  |  |  | — |  |  |  | 93 |  |  |  | — |
HKD 7 |  |  | — |  |  |  | 268 |  |  |  | — |  |  |  | 198 |  |  |  | — |  |  |  | 105 |
BDT 8 |  |  | 18,897 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
PLN 9 |  |  | — |  |  |  | — |  |  |  | 26 |  |  |  | — |  |  |  | — |  |  |  | — |
VND 10 |  |  | 271,563 |  |  |  | — |  |  |  | 242,370 |  |  |  | — |  |  |  | 257,895 |  |  |  | — |
XAF 11 |  |  | 97,411 |  |  |  | — |  |  |  | 16,229 |  |  |  | — |  |  |  | — |  |  |  | — |
SGD 12 |  |  | — |  |  |  | — |  |  |  | 6 |  |  |  | 284,000 |  |  |  | 13 |  |  |  | 284,000 |
TWD 13 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 226 |
CHF 14 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 161 |

| 1 | Special Drawing Rights.

| 2 | Rwanda Franc.

| 3 | Thailand Bhat.

| 4 | Myanmar Kyat.

| 5 | Tanzanian Shilling.

| 6 | Botswana Pula.

| 7 | Hong Kong Dollar.

| 8 | Bangladesh Taka.

| 9 | Polish Zloty.

| 10 | Vietnam Dong.

| 11 | Central African Franc.

| 12 | Singapore Dollar.

| 13 | Taiwan Dollar.

| 14 | Swiss Franc.

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
(iii) Price risk
As at
December 31, 2019, 2020 and 2021, the Group is exposed to equity securities price risk because the securities held by the Group are traded in active markets. If the market prices had increased/decreased by 10% with all other variables held constant, the effects on profit before income tax and shareholders’ equity would have been as follows:

(In millions of Korean won) |  | Fluctuation of price |  | Income before tax |  |  | Equity |
2019.12.31 |  | 10% |  | ￦ | 24 |  |  | ￦ | 613 |
| -10% |  |  | (24 | ) |  |  | (613 | )
2020.12.31 |  | 10% |  | ￦ | 2,811 |  |  | ￦ | 3,472 |
| -10% |  |  | (2,811 | ) |  |  | (3,472 | )
2021.12.31 |  | 10% |  | ￦ | 2,000 |  |  | ￦ | 4,588 |
| -10% |  |  | (2,000 | ) |  |  | (4,588 | )

The above analysis is based on the assumption that the equity index had increased/decreased by 10% with all other variables held constant and all the Group’s marketable equity instruments had moved according to the historical correlation with the index. Gain or loss on equity securities classified as financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income can increase or decrease equity.
(iv) Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from liabilities in foreign currency such as foreign currency debentures. Debentures in foreign currency issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by swap transactions. Debentures and borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group sets the policy and operates to minimize the uncertainty of the changes in interest rates and financial costs.
As at December 31, 2019, 2020 and 2021, if the market interest rate had increased/decreased by 100 bp with other variables held constant, the effects on profit before income tax and shareholders’ equity would be as follows:

(In millions of Korean won) |  | Fluctuation of interest rate |  |  | Income before tax |  |  | Shareholders’ equity |
2019.12.31 |  |  | + 100 bp |  |  | ￦ | 425 |  |  | ￦ | 14,764 |
|  | - 100 bp |  |  |  | (482 | ) |  |  | (19,280 | )
2020.12.31 |  |  | + 100 bp |  |  | ￦ | 973 |  |  | ￦ | 18,584 |
|  | - 100 bp |  |  |  | (973 | ) |  |  | (19,377 | )
2021.12.31 |  |  | + 100 bp |  |  | ￦ | 753 |  |  | ￦ | 5,549 |
|  | - 100 bp |  |  |  | (731 | ) |  |  | (5,675 | )

The above analysis is a simple sensitivity analysis which assumes that all the variables other than market interest rates are held constant. Therefore, the analysis does not reflect any correlation between market interest rates and other variables, nor the management’s decision to decrease the risk.
2) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s trade receivables from customers, debt securities and others.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| - | Risk management

Credit risk is managed on the Group basis with the purpose of minimizing financial loss. Credit risk arises from the normal transactions and investing activities, where clients or other party fails to discharge an obligation on contract conditions. To manage credit risk, the Group considers the counterparty’s credit based on the counterparty’s financial conditions, default history and other important factors.
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as outstanding receivables. To minimize such risk, only the financial institutions with strong credit ratings are accepted.
The Group’s investments in debt instruments are considered to be low risk investments. The credit ratings of the investments are monitored for credit deterioration.

| - | Security

For some trade receivables, the Group may obtain security in the form of guarantees or letters of credit, etc. which can be called upon if the counterparty is in default under the terms of the agreement.

| - | Impairment of financial assets

The Group has four types of financial assets that are subject to the expected credit loss model:

| • |  | trade receivables for sales of goods and provision of services,

| • |  | contract assets relating to provision of services,

| • |  | debt investments carried at fair v a lue through other comprehensive income, and

| • |  | other financial assets carried at amortized cost.

While cash equivalents are also subject to the impairment requirement, the identified impairment loss was immaterial.
The maximum exposure to credit risk of the Group’s financial instruments without considering value of collaterals as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Cash and cash equivalents (except for cash on hand) |  | ￦ | 2,625,581 |  |  | ￦ | 2,989,713 |
Trade and other receivables |  |  |  |  |  |  |  |
Financial assets at amortized costs |  |  | 5,034,621 |  |  |  | 5,687,103 |
Financial assets at fair value through other comprehensive income |  |  | 1,118,619 |  |  |  | 491,713 |
Contract assets |  |  | 586,438 |  |  |  | 745,085 |
Other financial assets |  |  |  |  |  |  |  |
Derivatives financial assets for hedging |  |  | 7,684 |  |  |  | 99,453 |
Financial assets at fair value through profit or loss |  |  | 680,453 |  |  |  | 862,481 |
Financial assets at fair value through other comprehensive income |  |  | 6,570 |  |  |  | 94,750 |
Financial assets at amortized costs |  |  | 671,068 |  |  |  | 608,389 |
Total |  | ￦ | 10,731,034 |  |  | ￦ | 11,578,687 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(i) Trade receivables and contract assets
The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.
The Group measures the expected credit loss by considering the future irrecoverability rate of the remaining balance of trade receivables and other receivables at the end of the reporting period. Each trade receivables and other receivables are classified considering the credit risk characteristics and overdue periods in order to measure expected credit loss. The expected credit loss rate calculation is based on historical payment and credit loss information in relation to revenue for 36 months period up to December 31, 2021. Expected credit loss of 12 months was applied as the credit sales and other credit-related assets of BC Card Co., Ltd., a subsidiary of the Group, has been determined to have low credit risk.
(ii) Cash equivalents (except for cash on hand)
The Group is also exposed to credit risk in relation cash equivalents. The maximum exposure at the end of the reporting period is the carrying amount of these investments.
(iii) Other financial assets at amortized costs
Other financial assets at amortized cost include time deposits, other long-term financial instruments and others. All of the financial assets at amortized costs are considered to have low credit risk, and the loss allowance recognized during the period was, therefore, limited to 12 months expected losses. Management consider ‘low credit risk’ for other instruments when they have a low risk of default and the issuer has a strong capacity to me
e
t its contractual cash flow obligations in the near term.
(iv) Financial assets at fair value through other comprehensive income
All of the debt investments at fair value through other comprehensive income are considered to have low credit risk, and the loss allowance recognized during the period was, therefore, limited to 12 months expected losses. Management consider ‘low credit risk’ for other instruments when they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. The maximum exposure at the end of the reporting period is the carrying amount of these investments.
(v) Financial assets at fair value through profit or loss
The Group is also exposed to credit risk in relation to financial assets that are measured at fair value through profit or loss. The maximum exposure at the end of the reporting period is the carrying amount of these investments.
3) Liquidity risk
The Group manages its liquidity risk by liquidity strategy and plans. The Group considers the maturity of financial assets and financial liabilities and the estimated cash flows from operations.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The table below analyzes the Group’s liabilities (including interest expenses) into relevant maturity groups based on the remaining period at the date of the end of each reporting period to the contractual maturity date. These amounts are contractual undiscounted cash flows and can differ from the amount in the consolidated financial statements.

|  | December 31, 2020 |
(In millions of Korean won) |  | Less than 1 year |  |  | 1-5 years |  |  | More than 5 years |  |  | Total |
Trade and other payables |  | ￦ | 6,587,796 |  |  | ￦ | 730,758 |  |  | ￦ | 258,255 |  |  | ￦ | 7,576,809 |
Borrowings(including debentures) |  |  | 1,573,944 |  |  |  | 4,373,534 |  |  |  | 2,258,360 |  |  |  | 8,205,838 |
Lease liabilities |  |  | 336,024 |  |  |  | 658,501 |  |  |  | 190,907 |  |  |  | 1,185,432 |
Other non-derivative financial liabilities |  |  | 574 |  |  |  | 131,242 |  |  |  | — |  |  |  | 131,816 |
Financial guarantee contracts 1 |  |  | 22,422 |  |  |  | — |  |  |  | — |  |  |  | 22,422 |
Total |  | ￦ | 8,520,760 |  |  | ￦ | 5,894,035 |  |  | ￦ | 2,707,522 |  |  | ￦ | 17,122,317 |

| 1 | It is total amount guaranteed by the Group according to guarantee contracts. Cash flow from financial guarantee contracts is classified as the maturity group in the earliest period when the financial guarantee contracts can be executed.

|  | December 31, 2021 |
(In millions of Korean won) |  | Less than 1 year |  |  | 1-5 years |  |  | More than 5 years |  |  | Total |
Trade and other payables |  | ￦ | 6,698,783 |  |  | ￦ | 1,232,468 |  |  | ￦ | 159,647 |  |  | ￦ | 8,090,898 |
Borrowings(including debentures) |  |  | 1,927,456 |  |  |  | 5,635,558 |  |  |  | 2,275,557 |  |  |  | 9,838,571 |
Lease liabilities |  |  | 388,226 |  |  |  | 484,476 |  |  |  | 427,860 |  |  |  | 1,300,562 |
Other non-derivative financial liabilities |  |  | 1,473 |  |  |  | 206,749 |  |  |  | 100,900 |  |  |  | 309,122 |
Financial guarantee contracts 1 |  |  | 71,697 |  |  |  | — |  |  |  | — |  |  |  | 71,697 |
Total |  | ￦ | 9,087,635 |  |  | ￦ | 7,559,251 |  |  | ￦ | 2,963,964 |  |  | ￦ | 19,610,850 |

| 1 | It is total amount guaranteed by the Group according to guarantee contracts. Cash flow from financial guarantee contracts is classified as the maturity group in the earliest period when the financial guarantee contracts can be executed.

At the end of the reporting period, the cash outflows and inflows by maturity of the Group’s derivatives held for trading and gross-settled derivatives are as follows:

|  | December 31, 2019 |
(In millions of Korean won) |  | Less than 1 year |  |  | 1-5 years |  |  | More than 5 years |  |  | Total |
Outflow |  | ￦ | 650,497 |  |  | ￦ | 1,602,513 |  |  | ￦ | 507,947 |  |  | ￦ | 2,760,957 |
Inflow |  |  | 684,720 |  |  |  | 1,648,746 |  |  |  | 524,483 |  |  |  | 2,857,949 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  | December 31, 2020 |
(In millions of Korean won) |  | Less than 1 year |  |  | 1-5 years |  |  | More than 5 years |  |  | Total |
Derivatives settled gross 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outflows |  | ￦ | 248,300 |  |  | ￦ | 2,179,046 |  |  | ￦ | 498,619 |  |  | ￦ | 2,925,965 |
Inflows |  |  | 249,301 |  |  |  | 2,074,747 |  |  |  | 480,570 |  |  |  | 2,804,618 |

|  | December 31, 2021 |
(In millions of Korean won) |  | Less than 1 year |  |  | 1-5 years |  |  | More than 5 years |  |  | Total |
Derivatives held for trading 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outflows |  | ￦ | — |  |  | ￦ | 158,284 |  |  | ￦ | — |  |  | ￦ | 158,284 |
Derivatives settled gross 3 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outflows |  | ￦ | 843,489 |  |  | ￦ | 1,857,942 |  |  | ￦ | 377,302 |  |  | ￦ | 3,078,733 |
Inflows |  |  | 856,508 |  |  |  | 1,917,236 |  |  |  | 394,134 |  |  |  | 3,167,878 |

| 1 | Cash outflow and inflow of gross-settled derivatives are undiscounted contractual cash flow and may differ from the amount in the statement of financial position.

| 2 | During the current period, derivative liabilities held-for-trading are classified under the ‘more than one year to less than five years’ category as they are relevant to the fair value of derivatives liabilities related to shareholder-to-share contracts (Note 20).

As these derivatives
held-for-trading
are m
a
naged based on net fair value, their contractual maturities are not necessarily taking into consideration to understand the timing of cash flows.

| 3 | Cash outflow and inflow of gross-settled derivatives are undiscounted contractual cash flow and may differ from the amount in the statement of financial position.

Meanwhile, as at December 31, 2021, the Group is obligated to invest
￦
27,200 million in
IBK-KT
Emerging Digital Industry Investment Fund, a related party, and others, and
￦
8,109 million and USD 5,400 thousand to be paid in the future Capital Call method to Future Innovation Private Equity Fund No.3 (Notes 20 and 36).
(2) Management of Capital Risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other shareholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group’s capital structure consists of liabilities including borrowings, cash and cash equivalents, and shareholders’ equity. The treasury department monitors the Group’s capital structure and considers cost of capital and risks related each capital component.
The
debt-to-equity
ratios as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |  |  | December 31, 2021 |
Total liabilities |  | ￦ | 18,111,112 |  |  | ￦ | 20,592,180 |
Total equity |  |  | 15,551,433 |  |  |  | 16,567,161 |
Debt-to-equity ratio |  |  | 116 | % |  |  | 124 | %

The Group manages capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as ‘equity’ in the statement of financial position plus net debt.
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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The gearing ratios as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won, %) |  | December 31, 2020 |  |  | December 31, 2021 |
Total borrowings |  | ￦ | 7,316,298 |  |  | ￦ | 8,437,703 |
Less: cash and cash equivalents |  |  | (2,634,624 | ) |  |  | (3,019,592 | )
Net debt |  |  | 4,681,674 |  |  |  | 5,418,111 |
Total equity |  |  | 15,551,433 |  |  |  | 16,567,161 |
Total capital |  |  | 20,233,107 |  |  |  | 21,985,272 |
Gearing ratio |  |  | 23 | % |  |  | 25 | %

(3) Offsetting Financial Assets and Financial Liabilities
Details of the Group’s recognized financial assets subject to enforceable master netting arrangements or similar agreements are as follows:

(In millions of Korean won) |  | December 31, 2020 |
|  | Gross assets |  |  | Gross liabilities offset |  |  | Net amounts presented in the statement of financial position |  |  | Amounts not offset |  |  | Net amount |
| Financial instruments |  |  | Cash collateral |
Trade receivables |  | ￦ | 71,497 |  |  | ￦ | (1 | ) |  | ￦ | 71,496 |  |  | ￦ | (67,421 | ) |  | ￦ | — |  |  | ￦ | 4,075 |

(In millions of Korean won) |  | December 31, 2021 |
|  | Gross assets |  |  | Gross liabilities offset |  |  | Net amounts presented in the statement of financial position |  |  | Amounts not offset |  |  | Net amount |
| Financial instruments |  |  | Cash collateral |
Trade receivables |  | ￦ | 79,102 |  |  | ￦ | — |  |  | ￦ | 79,102 |  |  | ￦ | (65,592 | ) |  | ￦ | — |  |  | ￦ | 13,510 |

These include price subject to netting arrangements on facility interconnection and data sharing among telecommunication companies.
The Group’s recognized financial liabilities subject to enforceable master netting arrangements or similar agreements are as follows:

(In millions of Korean won) |  | December 31, 2020 |
|  | Gross liabilities |  |  | Gross assets offset |  |  | Net amounts presented in the statement of financial position |  |  | Amounts not offset |  |  | Net amount |
| Financial instruments |  |  | Cash collateral |
Trade payables |  | ￦ | 69,361 |  |  | ￦ | — |  |  | ￦ | 69,361 |  |  | ￦ | (67,421 | ) |  | ￦ | — |  |  | ￦ | 1,940 |
Other financial liabilities |  |  | 1 |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
|  | ￦ | 69,362 |  |  | ￦ | (1 | ) |  | ￦ | 69,361 |  |  | ￦ | (67,421 | ) |  | ￦ | — |  |  | ￦ | 1,940 |

(In millions of Korean won) |  | December 31, 2021 |
|  | Gross liabilities |  |  | Gross assets offset |  |  | Net amounts presented in the statement of financial position |  |  | Amounts not offset |  |  | Net amount |
| Financial instruments |  |  | Cash collateral |
Trade payables |  | ￦ | 69,944 |  |  | ￦ | — |  |  | ￦ | 69,944 |  |  | ￦ | (65,592 | ) |  | ￦ | — |  |  | ￦ | 4,352 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
These include price subject to netting arrangements on facility interconnection and data sharing among telecommunication companies.

38. | Fair Value

38.1 Fair Value of Financial Instruments by Category
Carrying amount and fair value of financial instruments by category as at December 31, 2020 and 2021, are as follows:

|  | December 31, 2020 |  |  | December 31, 2021 |
(In millions of Korean won) |  | Carrying amount |  |  | Fair value |  |  | Carrying amount |  |  | Fair value |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | ￦ | 2,634,624 |  |  |  | 1 |  |  | ￦ | 3,019,592 |  |  |  | 1 |
Trade and other receivables |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets measured at amortized cost 2 |  |  | 4,976,423 |  |  |  | 1 |  |  |  | 5,610,377 |  |  |  | 1 |
Financial assets at fair value through other comprehensive income |  |  | 1,118,619 |  |  |  | 1,118,619 |  |  |  | 491,713 |  |  |  | 491,713 |
Other financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets measured at amortized cost |  |  | 671,068 |  |  |  | 1 |  |  |  | 608,389 |  |  |  | 1 |
Financial assets at fair value through profit or loss |  |  | 809,919 |  |  |  | 809,919 |  |  |  | 952,319 |  |  |  | 952,319 |
Financial assets at fair value through other comprehensive income |  |  | 258,516 |  |  |  | 258,516 |  |  |  | 347,877 |  |  |  | 347,877 |
Derivative financial assets for hedging |  |  | 7,684 |  |  |  | 7,684 |  |  |  | 99,453 |  |  |  | 99,453 |
Total |  | ￦ | 10,476,853 |  |  |  |  |  |  | ￦ | 11,129,720 |  |  |  |  |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade and other payables |  | ￦ | 7,017,639 |  |  |  | 1 |  |  | ￦ | 7,980,203 |  |  |  | 1 |
Borrowings |  |  | 7,316,298 |  |  |  | 7,643,116 |  |  |  | 8,437,703 |  |  |  | 8,578,827 |
Other financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial liabilities at amortized cost |  |  | 132,558 |  |  |  | 1 |  |  |  | 263,500 |  |  |  | 1 |
Financial liabilities at fair value through profit or loss |  |  | 2,682 |  |  |  | 2,682 |  |  |  | 216,040 |  |  |  | 216,040 |
Derivative financial liabilities for hedging |  |  | 127,929 |  |  |  | 127,929 |  |  |  | 18,126 |  |  |  | 18,126 |
Total |  | ￦ | 14,597,106 |  |  |  |  |  |  | ￦ | 16,915,572 |  |  |  |  |

| 1 | The Group did not conduct fair value estimation since the book amount is a reasonable approximation of the fair value

| 2 | With the application of IFRS 7, lease receivables are excluded from fair value disclosure.

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| 3 8 .2 | Fair Value Hierarchy

To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. Financial instruments that are measured at fair value are categorized by the fair value hierarchy, and the defined levels are as follows:

| • |  | Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

| • |  | Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

| • |  | Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Fair value hierarchy classifications of the financial assets and financial liabilities that are measured at fair value or its fair value is disclosed as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |
| Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade and other receivables |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through other comprehensive income |  | ￦ | — |  |  | ￦ | 1,118,619 |  |  | ￦ | — |  |  | ￦ | 1,118,619 |
Other financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through profit or loss |  |  | 46,449 |  |  |  | 330,961 |  |  |  | 432,509 |  |  |  | 809,919 |
Financial assets at fair value through other comprehensive income |  |  | 5,606 |  |  |  | 202,121 |  |  |  | 50,789 |  |  |  | 258,516 |
Derivative financial assets for hedging |  |  | — |  |  |  | 7,684 |  |  |  | — |  |  |  | 7,684 |
Disclosed fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment properties |  |  | — |  |  |  | — |  |  |  | 2,645,482 |  |  |  | 2,645,482 |
Total |  | ￦ | 52,055 |  |  | ￦ | 1,659,385 |  |  | ￦ | 3,128,780 |  |  | ￦ | 4,840,220 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Borrowings |  | ￦ | — |  |  | ￦ | 7,643,116 |  |  | ￦ | — |  |  | ￦ | 7,643,116 |
Other financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial liabilities at fair value through profit or loss |  |  | — |  |  |  | 45 |  |  |  | 2,637 |  |  |  | 2,682 |
Derivative financial liabilities for hedging |  |  | — |  |  |  | 123,735 |  |  |  | 4,194 |  |  |  | 127,929 |
Total |  | ￦ | — |  |  | ￦ | 7,766,896 |  |  | ￦ | 6,831 |  |  | ￦ | 7,773,727 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

(In millions of Korean won) |  | December 31, 2021 |
| Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade and other receivables |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through other comprehensive income |  | ￦ | — |  |  | ￦ | 491,713 |  |  | ￦ | — |  |  | ￦ | 491,713 |
Other financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through profit or loss |  |  | 24,285 |  |  |  | 310,095 |  |  |  | 617,939 |  |  |  | 952,319 |
Financial assets at fair value through other comprehensive income |  |  | 17,328 |  |  |  | 7,176 |  |  |  | 323,373 |  |  |  | 347,877 |
Derivative financial assets for hedging |  |  | — |  |  |  | 67,888 |  |  |  | 31,565 |  |  |  | 99,453 |
Disclosed fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment properties |  |  | — |  |  |  | — |  |  |  | 4,263,381 |  |  |  | 4,263,381 |
Total |  | ￦ | 41,613 |  |  | ￦ | 876, 872 |  |  | ￦ | 5,236,258 |  |  | ￦ | 6,154,743 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Borrowings |  | ￦ | — |  |  | ￦ | 8,578,827 |  |  | ￦ | — |  |  | ￦ | 8,578,827 |
Other financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial liabilities at fair value through profit or loss |  |  | — |  |  |  | 708 |  |  |  | 215,332 |  |  |  | 216,040 |
Derivative financial liabilities for hedging |  |  | — |  |  |  | 18,126 |  |  |  | — |  |  |  | 18,126 |
Total |  | ￦ | — |  |  | ￦ | 8,597,661 |  |  | ￦ | 215,332 |  |  | ￦ | 8,812,993 |

38.3 Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements
There are no transfers between Level 1 and Level 2 of the fair value hierarchy for the recurring fair value measurements.
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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements as at December 31, 2020 and 2021, are as follows:

|  | 2020 |
|  | Financial assets |  |  | Financial liabilities |
(In millions of Korean won) |  | Financial assets at fair value through profit or loss |  |  | Financial assets at fair value through other comprehensive income |  |  | Financial liabilities at fair value through profit or loss |  |  | Derivative financial liabilities (assets) for hedging |
Beginning balance |  | ￦ | 495,141 |  |  | ￦ | 42,054 |  |  | ￦ | — |  |  | ￦ | (17,788 | )
Purchases |  |  | 374,259 |  |  |  | 13,142 |  |  |  | 2,798 |  |  |  | — |
Reclassification |  |  | 208 |  |  |  | — |  |  |  | — |  |  |  | — |
Disposal |  |  | (451,663 | ) |  |  | (571 | ) |  |  | — |  |  |  | — |
Amount recognized in profit or loss 1,2 |  |  | 14,564 |  |  |  | (428 | ) |  |  | (161 | ) |  |  | 29,345 |
Amount recognized in other comprehensive income 1 |  |  | — |  |  |  | (3,408 | ) |  |  | — |  |  |  | (7,363 | )
Ending balance |  | ￦ | 432,509 |  |  | ￦ | 50,789 |  |  | ￦ | 2,637 |  |  | ￦ | 4,194 |

| 1 | Amount recognized in profit or loss and other comprehensive income with respect to derivative financial liabilities for hedging comprises loss on valuation of derivative instruments.

| 2 | Amount recognized in profit or loss with respect to financial liabilities at fair value through profit or loss comprises loss on valuation of derivative instruments.

|  | 2021 |
|  | Financial assets |  |  | Financial liabilities |
( I n millions of Korean won) |  | Financial assets at fair value through profit or loss |  |  | Financial assets at fair value through other comprehensive income |  |  | Derivative financial assets (liabilities) for hedging |  |  | Financial liabilities at fair value through profit or loss |
Beginning balance |  | ￦ | 432,509 |  |  | ￦ | 50,789 |  |  | ￦ | (4,194 | ) |  | ￦ | 2,637 |
Acquisition |  |  | 441,068 |  |  |  | 118,648 |  |  |  | — |  |  |  | 205,323 |
Reclassification |  |  | (25,757 | ) |  |  | 14,633 |  |  |  | — |  |  |  | — |
Changes in Consolidation Scope |  |  | 353 |  |  |  | (3,051 | ) |  |  | — |  |  |  | 46,208 |
Disposal |  |  | (325,401 | ) |  |  | (5,325 | ) |  |  | — |  |  |  | — |
Amount recognized in profit or loss 1,2 |  |  | 95,167 |  |  |  | 71 |  |  |  | 43,150 |  |  |  | (38,836 | )
Amount recognized in other comprehensive income 1 |  |  | — |  |  |  | 147,608 |  |  |  | (7,391 | ) |  |  | — |
Ending balance |  | ￦ | 617,939 |  |  | ￦ | 323,373 |  |  | ￦ | 31,565 |  |  | ￦ | 215,332 |

| 1 | The recognition of gains and losses on derivatives financial liabilities (assets) for hedging purposes consists entirely of derivatives valuation losses.

| 2 | The recognition of gains and losses on financial liabilities measured at fair value through profit or loss consists of derivative valuation losses.

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| 3 8 .4 | Valuation Technique and the Inputs

Valuation techniques and inputs used in the recurring,
non-recurring
fair value measurements and disclosed fair values categorized within Level 2 and Level 3 of the fair value hierarchy as at December 31, 2020 and 20
21
, are as follows:

|  | December 31, 2020
(In millions of Korean won) |  | Fair value |  |  | Level |  |  | Valuation techniques
Assets |  |  |  |  |  |  |  |  |  |
Trade and other receivables |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through other comprehensive income |  | ￦ | 1,118,619 |  |  |  | 2 |  |  | DCF Model
Other financial assets |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through profit or loss |  |  | 763,470 |  |  |  | 2,3 |  |  | DCF Model, Adjusted net asset model
Financial assets at fair value through other comprehensive income |  |  | 252,910 |  |  |  | 2,3 |  |  | DCF Model, Comparable Company Analysis
Derivative financial assets for hedging |  |  | 7,684 |  |  |  | 2 |  |  | DCF Model
Investment properties |  |  | 2,645,482 |  |  |  | 3 |  |  | DCF Model
Liabilities |  |  |  |  |  |  |  |  |  |
Borrowings |  | ￦ | 7,643,116 |  |  |  | 2 |  |  | DCF Model
Other financial liabilities |  |  |  |  |  |  |  |  |  |
Financial liabilities at fair value through profit or loss |  |  | 2,682 |  |  |  | 2,3 |  |  | DCF Model, Binomial Option Pricing
Derivative financial liabilities for hedging |  |  | 127,929 |  |  |  | 2,3 |  |  | Hull-White model, DCF Model

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  | December 31, 2021
(In millions of Korean won) |  | Fair value |  |  | Level |  |  | Valuation techniques
Assets |  |  |  |  |  |  |  |  |  |
Trade and other receivables |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through other comprehensive income |  | ￦ | 491,713 |  |  |  | 2 |  |  | DCF Model
Other financial assets |  |  |  |  |  |  |  |  |  |
Financial assets at fair value through profit or loss |  |  | 928,034 |  |  |  | 2,3 |  |  | DCF Model, Adjusted Net Asset Model
Financial assets at fair value through other comprehensive income |  |  | 330,549 |  |  |  | 2,3 |  |  | DCF Model, Market approach Model
Derivative financial assets for hedging |  |  | 99,453 |  |  |  | 2,3 |  |  | Hull-White Model, DCF Model
Investment properties |  |  | 4,263,381 |  |  |  | 3 |  |  | DCF Model
Liabilities |  |  |  |  |  |  |  |  |  |
Borrowings |  | ￦ | 8,578,827 |  |  |  | 2 |  |  | DCF Model
Other financial liabilities |  |  |  |  |  |  |  |  |  |
Financial liabilities at fair value through profit or loss |  |  | 216,040 |  |  |  | 2,3 |  |  | DCF Model, Binomial Option Pricing Model
Derivative financial liabilities for hedging |  |  | 18,126 |  |  |  | 2 |  |  | DCF Model

| 3 8 .5 | Valuation Processes for Fair Value Measurements Categorized Within Level 3

The Group uses external experts that perform the fair value measurements required for financial reporting purposes. External experts report directly to the chief financial officer (CFO), and discusses valuation processes and results with the CFO in line with the Group’s reporting dates.

| 3 8 .6 | Gains and losses on valuation at the transaction date

In the case that the Group values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by the said valuation technique differs from the transaction price, then the fair value of the financial instruments is recognized as the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instruments. However, in the case that inputs of the valuation techniques become observable in markets, the remaining deferred difference is immediately recognized in full in profit for the year.
In relation to this, details and changes of the total deferred difference for the years ended December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | 2020 |  |  | 2021 |
| Derivatives used for hedging |  |  | Derivative held for trading |  |  | Derivatives used for hedging |  |  | Derivative held for trading |
I. Beginning balance |  | ￦ | 3,682 |  |  | ￦ | — |  |  | ￦ | 2,257 |  |  | ￦ | — |
II. New transactions |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
III. Recognized at fair value through profit or loss |  |  | (1,425 | ) |  |  | — |  |  |  | (1,425 | ) |  |  | — |
IV. Ending balance (I+II+III) |  | ￦ | 2,257 |  |  | ￦ | — |  |  | ￦ | 832 |  |  | ￦ | — |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

3 9 . | Interests in Unconsolidated Structured Entities

Details of information about its interests in unconsolidated structured entities, which the Group does not have control over, including the nature, purpose and activities of the structured entity and how the structured entity is financed, are as follows:

Classes of entities |  | Nature, purpose, activities and others
Real estate finance |  | A structured entity incorporated for the purpose of real estate development is provided with funds by investors’ investments in equity and borrowings from financial institutions (including long-term and short-term loans and issuance of Asset Backed Commercial Paper (“ABCP”) due in three months), and based on these, the structured entity implements activities such as real estate acquisition, development and mortgage loans. The structured entity repays loan principals with funds incurred from instalment house sales after the completion of real estate development or with collection of the principal of mortgage loan. The remaining shares are distributed to investors. As at December 31, 2021, this entity is engaged in real estate finance structured entity, and generates revenues by receiving dividends from direct investments in or receiving interests on loans to the structured entity. Financial institutions, including the Entity, are provided with guarantees including joint guarantees or real estate collateral from investors and others. Consequently, the entity is a priority over other parties in the preservation of claim. However, when the credit rating of investors and others decreases or when the value of real estate decreases, the entity may be obliged to cover losses.
PEF and investment funds |  | Minority investors including managing members contribute to Private Equity Fund (“PEF”) and investment funds incorporated for the purpose of providing funds to the small, medium, or venture entities, and the managing member implements activities such as investments in equity or loans based on the contributions. As at December 31, 2021, the entity is engaged in PEF and investment funds structured entity, and after contributing to PEF and investment funds, the entity receives dividends for operating revenues from these contributions. The entity is provided with underlying assets of PEF and investment funds as collateral. However, when the value of the underlying assets decreases, the entity may be obliged to cover losses.
Asset securitization |  | The Group transfers accounts receivable for handset sales to its Special Purpose Company (“SPC”) for asset securitization. SPC issues the asset-backed securities with accounts receivable for handset sales as an underlying asset, and makes payment for the underlying asset acquired.

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Details of scale of unconsolidated structured entities and nature of the risks associated with an entity’s interests in unconsolidated structured entities as at December 31, 2020 and 2021, are as follows:

(In millions of Korean won) |  | December 31, 2020 |
| Real Estate Finance |  |  | PEF and Investment Funds |  |  | Asset Securitization |  |  | Total |
Total assets of unconsolidated structured entities |  | ￦ | 2,004,869 |  |  | ￦ | 4,380,534 |  |  | ￦ | 2,152,412 |  |  | ￦ | 8,537,815 |
Assets recognized in statement of financial position |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other financial assets |  | ￦ | 29,874 |  |  | ￦ | 128,332 |  |  | ￦ | — |  |  | ￦ | 158,206 |
Joint ventures and associates |  |  | 51,607 |  |  |  | 219,753 |  |  |  | — |  |  |  | 271,360 |
Total |  | ￦ | 81,481 |  |  | ￦ | 348,085 |  |  | ￦ | — |  |  | ￦ | 429,566 |
Maximum loss exposure 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment assets |  | ￦ | 81,481 |  |  | ￦ | 348,085 |  |  | ￦ | — |  |  | ￦ | 429,566 |
Cash deficiency support |  |  | — |  |  |  | 29,130 |  |  |  | — |  |  |  | 29,130 |
Total |  | ￦ | 81,481 |  |  | ￦ | 377,215 |  |  | ￦ | — |  |  | ￦ | 458,696 |

| 1 | It includes the investments recognized in the Group’s consolidated financial statements and the amounts which are probable to be determined when certain conditions are met by agreements including purchase agreements, credit granting and others.

|  | December 31, 2021 |
(In millions of Korean won) |  | Real Estate Finance |  |  | PEF and Investment Funds |  |  | Asset Securitization |  |  | Total |
Total assets of unconsolidated structured entities |  | ￦ | 2,343,487 |  |  | ￦ | 5,202,439 |  |  | ￦ | 2,256,256 |  |  | ￦ | 9,802,182 |
Assets recognized in statement of financial position |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other financial assets |  | ￦ | 40,587 |  |  | ￦ | 237,841 |  |  | ￦ | — |  |  | ￦ | 278,428 |
Joint ventures and associates |  |  | 125,009 |  |  |  | 246,440 |  |  |  | — |  |  |  | 371,449 |
Total |  | ￦ | 165,596 |  |  | ￦ | 484,281 |  |  | ￦ | — |  |  | ￦ | 649,877 |
Maximum loss exposure 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment assets |  | ￦ | 165,596 |  |  | ￦ | 484,281 |  |  | ￦ | — |  |  | ￦ | 649,877 |
Investment agreement, etc |  |  | — |  |  |  | 63,489 |  |  |  | — |  |  |  | 63,489 |
Total |  | ￦ | 165,596 |  |  | ￦ | 547,770 |  |  | ￦ | — |  |  | ￦ | 713,366 |

| 1 | Includes the investments recognized in the Group’s financial statements and the amounts which are probable to be determined when certain conditions are met by agreements including purchase agreements, credit granting and others.

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

40 . | Information About Non-controlling Interests

40
.1 Changes in Accumulated
Non-controlling
Interests
Profit or loss allocated to
non-controlling
interests and accumulated
non-controlling
interests of subsidiaries that are material to the Group for the years ended December 31, 2019, 2020 and 2021 are as follows:

(In millions of Korean won) |  | December 31, 2019 |
| Non- controlling Interests rate (%) |  |  | Accumulated non-controlling interests at the beginning of the year |  |  | Profit or loss allocated to non-controlling interests |  |  | Dividend paid to non- controlling interests |  |  | Others |  |  | Accumulated non-controlling interests at the end of the year |
KT Skylife Co., Ltd. |  |  | 49.7 | % |  | ￦ | 374,150 |  |  | ￦ | 10,029 |  |  | ￦ | (8,279 | ) |  | ￦ | 6 |  |  | ￦ | 375,906 |
BC Card Co., Ltd. |  |  | 30.5 | % |  |  | 345,547 |  |  |  | 37,795 |  |  |  | (18,900 | ) |  |  | 53,033 |  |  |  | 417,475 |
KT Powertel Co., Ltd. |  |  | 55.2 | % |  |  | 52,865 |  |  |  | 1,751 |  |  |  | — |  |  |  | (340 | ) |  |  | 54,276 |
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  |  | 32.9 | % |  |  | 52,336 |  |  |  | 1,720 |  |  |  | — |  |  |  | 653 |  |  |  | 54,709 |
KT Telecop Co., Ltd. |  |  | 13.2 | % |  |  | 103,357 |  |  |  | (588 | ) |  |  | — |  |  |  | (99,119 | ) |  |  | 3,650 |

(In millions of Korean won) |  | December 31, 2020 |
| Non- controlling Interests rate (%) |  |  | Accumulated non-controlling interests at the beginning of the year |  |  | Profit or loss allocated to non-controlling interests |  |  | Dividend paid to non- controlling interests |  |  | Others |  |  | Accumulated non-controlling interests at the end of the year |
KT Skylife Co., Ltd. |  |  | 49.7 | % |  | ￦ | 375,906 |  |  | ￦ | 22,171 |  |  | ￦ | (8,279 | ) |  | ￦ | (898 | ) |  | ￦ | 388,900 |
BC Card Co., Ltd. |  |  | 30.5 | % |  |  | 417,475 |  |  |  | 9,899 |  |  |  | (22,787 | ) |  |  | 7,239 |  |  |  | 411,826 |
KT Powertel Co., Ltd. |  |  | 55.2 | % |  |  | 54,276 |  |  |  | 2,151 |  |  |  | (478 | ) |  |  | (202 | ) |  |  | 55,747 |
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  |  | 32.9 | % |  |  | 54,709 |  |  |  | (1,840 | ) |  |  | — |  |  |  | (2,563 | ) |  |  | 50,306 |
KT Telecop Co., Ltd. |  |  | 13.2 | % |  |  | 3,650 |  |  |  | 152 |  |  |  | — |  |  |  | (208 | ) |  |  | 3,594 |

(In millions of Korean won) |  | December 31, 2021 |
| Non- controlling Interests rate (%) |  |  | Accumulated non-controlling interests at the beginning of the year |  |  | Profit or loss allocated to non-controlling interests |  |  | Dividend paid to non- controlling interests |  |  | Others |  |  | Accumulated non-controlling interests at the end of the year |
KT Skylife Co., Ltd. |  |  | 49.7 | % |  | ￦ | 388,900 |  |  | ￦ | 24,795 |  |  | ￦ | (8,279 | ) |  | ￦ | 5,279 |  |  | ￦ | 410,695 |
BC Card Co., Ltd. |  |  | 30.5 | % |  |  | 411,826 |  |  |  | 34,496 |  |  |  | (6,434 | ) |  |  | 59,040 |  |  |  | 498,928 |
KTIS Corporation |  |  | 68.6 | % |  |  | 120,071 |  |  |  | 17,715 |  |  |  | (1,837 | ) |  |  | (709 | ) |  |  | 135,240 |
KTCS Corporation |  |  | 67.8 | % |  |  | 129,502 |  |  |  | 21,394 |  |  |  | (2,211 | ) |  |  | (3,574 | ) |  |  | 145,111 |
Nasmedia Co., Ltd |  |  | 56.0 | % |  |  | 112,549 |  |  |  | 15,185 |  |  |  | (3,808 | ) |  |  | 255 |  |  |  | 124,181 |

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Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
40
.2 Summarized Financial Information on Subsidiaries
The summarized financial information for each subsidiary with
non-controlling
interests that are material to the Group before inter-company eliminations is as follows:
Summarized consolidated statements of financial position as at December 31, 2019, 2020 and 2021, are as follows:

|  | December 31, 2019 |
(In millions of Korean won) |  | KT Skylife Co., Ltd. |  |  | BC Card Co., Ltd. |  |  | KT Powertel Co., Ltd. |  |  | KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |  |  | KT Telecop Co., Ltd. |
Non-controlling Interests rate (%) |  |  | 49.7 | % |  |  | 30.5 | % |  |  | 55.2 | % |  |  | 32.9 | % |  |  | 13.2 | %
Current assets |  | ￦ | 459,077 |  |  | ￦ | 2,580,634 |  |  | ￦ | 86,465 |  |  | ￦ | 115,694 |  |  | ￦ | 55,908 |
Non-current assets |  |  | 389,199 |  |  |  | 1,332,348 |  |  |  | 31,587 |  |  |  | 164,124 |  |  |  | 223,969 |
Current liabilities |  |  | 123,506 |  |  |  | 2,452,219 |  |  |  | 17,757 |  |  |  | 62,378 |  |  |  | 64,218 |
Non-current liabilities |  |  | 19,333 |  |  |  | 142,013 |  |  |  | 2,009 |  |  |  | 12,391 |  |  |  | 89,622 |
Equity |  |  | 705,437 |  |  |  | 1,318,750 |  |  |  | 98,286 |  |  |  | 205,049 |  |  |  | 126,037 |
Operating revenue |  |  | 704,996 |  |  |  | 3,553,008 |  |  |  | 62,846 |  |  |  | 323,065 |  |  |  | 332,063 |
Profit or loss for the year |  |  | 56,008 |  |  |  | 115,885 |  |  |  | 3,085 |  |  |  | 1,426 |  |  |  | (4,875 | )
Total comprehensive income (loss) |  |  | 55,936 |  |  |  | 289,122 |  |  |  | 2,469 |  |  |  | (1,840 | ) |  |  | (6,558 | )
Cash flows from operating activities |  |  | 152,549 |  |  |  | 429,331 |  |  |  | 780 |  |  |  | 49,870 |  |  |  | 52,693 |
Cash flows from investing activities |  |  | (101,594 | ) |  |  | (419,894 | ) |  |  | (9,525 | ) |  |  | (50,138 | ) |  |  | (44,393 | )
Cash flows from financing activities |  |  | (18,833 | ) |  |  | (5,744 | ) |  |  | (687 | ) |  |  | (1,860 | ) |  |  | (5,227 | )
Net increase (decrease) in cash and cash equivalents |  |  | 32,122 |  |  |  | 3,693 |  |  |  | (9,432 | ) |  |  | (2,128 | ) |  |  | 3,073 |
Cash and cash equivalents at beginning of year |  |  | 31,728 |  |  |  | 275,089 |  |  |  | 15,649 |  |  |  | 39,186 |  |  |  | 5,708 |
Exchange differences |  |  | — |  |  |  | 380 |  |  |  | — |  |  |  | (15 | ) |  |  | — |
Cash and cash equivalents at end of year |  |  | 63,850 |  |  |  | 279,162 |  |  |  | 6,217 |  |  |  | 37,043 |  |  |  | 8,781 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

|  | December 31, 2020 |
(In millions of Korean won) |  | KT Skylife Co., Ltd. |  |  | BC Card Co., Ltd. |  |  | KT Powertel Co., Ltd. |  |  | KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) |
Non-controlling Interests rate (%) |  |  | 49.7 | % |  |  | 30.5 | % |  |  | 55.2 | % |  |  | 32.9 | %
Current assets |  | ￦ | 480,450 |  |  | ￦ | 1,785,914 |  |  | ￦ | 90,056 |  |  | ￦ | 140,948 |
Non-current assets |  |  | 439,026 |  |  |  | 1,298,484 |  |  |  | 29,638 |  |  |  | 148,001 |
Current liabilities |  |  | 153,236 |  |  |  | 1,602,667 |  |  |  | 17,045 |  |  |  | 74,045 |
Non-current liabilities |  |  | 21,803 |  |  |  | 176,083 |  |  |  | 1,788 |  |  |  | 18,554 |
Equity |  |  | 744,437 |  |  |  | 1,305,648 |  |  |  | 100,861 |  |  |  | 196,350 |
Operating revenue |  |  | 706,631 |  |  |  | 3,387,640 |  |  |  | 65,897 |  |  |  | 350,231 |
Profit or loss for the year |  |  | 58,190 |  |  |  | 39,455 |  |  |  | 3,809 |  |  |  | 2,080 |
Total comprehensive income (loss) |  |  | 55,647 |  |  |  | 61,796 |  |  |  | 3,442 |  |  |  | (8,700 | )
Cash flows from operating activities |  |  | 160,934 |  |  |  | (119,163 | ) |  |  | 6,011 |  |  |  | 62,521 |
Cash flows from investing activities |  |  | (105,293 | ) |  |  | 58,042 |  |  |  | (3,353 | ) |  |  | (58,186 | )
Cash flows from financing activities |  |  | (19,650 | ) |  |  | 22,790 |  |  |  | (1,515 | ) |  |  | (1,856 | )
Net increase (decrease) in cash and cash equivalents |  |  | 35,991 |  |  |  | (38,331 | ) |  |  | 1,143 |  |  |  | 2,479 |
Cash and cash equivalents at beginning of year |  |  | 63,850 |  |  |  | 279,162 |  |  |  | 6,217 |  |  |  | 37,043 |
Exchange differences |  |  | (7 | ) |  |  | (247 | ) |  |  | — |  |  |  | (83 | )
Cash and cash equivalents at end of year |  |  | 99,834 |  |  |  | 240,584 |  |  |  | 7,360 |  |  |  | 39,439 |

|  | December 31, 2021 |
(In millions of Korean won) |  | KT Skylife Co., Ltd. |  |  | BC Card Co., Ltd. |  |  | KTIS Corporation |  |  | KTCS Corporation |  |  | Nasmedia, Co., Ltd. |
Non-controlling Interests rate (%) |  |  | 49.7 | % |  |  | 30.5 | % |  |  | 68.6 | % |  |  | 67.8 | % |  |  | 56.0 | %
Current assets |  | ￦ | 408,484 |  |  | ￦ | 1,991,152 |  |  | ￦ | 124,420 |  |  | ￦ | 302,953 |  |  | ￦ | 409,345 |
Non-current assets |  |  | 867,161 |  |  |  | 1,942,275 |  |  |  | 244,941 |  |  |  | 113,797 |  |  |  | 81,049 |
Current liabilities |  |  | 249,676 |  |  |  | 1,658,476 |  |  |  | 103,927 |  |  |  | 189,641 |  |  |  | 248,648 |
Non-current liabilities |  |  | 220,018 |  |  |  | 822,528 |  |  |  | 73,691 |  |  |  | 44,530 |  |  |  | 19,970 |
Equity |  |  | 805,951 |  |  |  | 1,452,423 |  |  |  | 191,743 |  |  |  | 182,579 |  |  |  | 221,776 |
Operating revenue |  |  | 772,950 |  |  |  | 3,580,970 |  |  |  | 487,801 |  |  |  | 968,499 |  |  |  | 125,876 |
Profit or loss for the year |  |  | 62,309 |  |  |  | 120,308 |  |  |  | 24,944 |  |  |  | 19,034 |  |  |  | 27,120 |
Total comprehensive income (loss) |  |  | 74,995 |  |  |  | 122,578 |  |  |  | 28,669 |  |  |  | 16,914 |  |  |  | 27,991 |
Cash flows from operating activities |  |  | 102,947 |  |  |  | (157,645 | ) |  |  | 49,011 |  |  |  | 6,945 |  |  |  | 44,500 |
Cash flows from investing activities |  |  | (352,116 | ) |  |  | (283,313 | ) |  |  | (27,143 | ) |  |  | (1,039 | ) |  |  | (16,966 | )
Cash flows from financing activities |  |  | 230,010 |  |  |  | 526,563 |  |  |  | (23,126 | ) |  |  | (16,622 | ) |  |  | (9,843 | )
Net increase (decrease) in cash and cash equivalents |  |  | (19,159 | ) |  |  | 85,605 |  |  |  | (1,258 | ) |  |  | (10,716 | ) |  |  | 17,691 |
Cash and cash equivalents at beginning of year |  |  | 99,834 |  |  |  | 240,584 |  |  |  | 31,779 |  |  |  | 75,440 |  |  |  | 53,720 |
Exchange differences |  |  | (3 | ) |  |  | 293 |  |  |  | — |  |  |  | (840 | ) |  |  | (15 | )
Cash and cash equivalents at end of year |  |  | 80,672 |  |  |  | 326,482 |  |  |  | 30,521 |  |  |  | 63,884 |  |  |  | 71,396 |

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021

| 40 .3 | Transactions with Non-controlling Interests

The effect of changes in the ownership interest on the equity attributable to owners of the Group during 2019, 2020 and 2021 is summarized as follows:

(In millions of Korean won) |  | 2019 |  |  | 2020 |  |  | 2021 |
Carrying amount of non-controlling interests acquired |  | ￦ | (9,566 | ) |  | ￦ | 1,750 |  |  | ￦ | 14,702 |
Consideration paid to non-controlling interests |  |  | 484 |  |  |  | 9,878 |  |  |  | 1,095 |
Excess of consideration paid recognized in parent’s equity |  | ￦ | (9,082 | ) |  | ￦ | 11,628 |  |  | ￦ | 15,797 |

4 1 . | Business Combination

KT Skylife Co., Ltd., a subsidiary of the Group, acquired 7,000,000 common shares (100%) of Hyundai HCN Co., Ltd. for
￦
515,091 million on September 30, 2021 to strengthen the competitiveness of the paid broadcasting business and create synergy and changed its name to HCN Co., Ltd.
KT ES Pte. Ltd., a subsidiary of the group, acquired 81,320,642 common shares (100%) of Epsilon Global Communications Pte. Ltd. for USD 135 million on September 30, 2021 to expand its global telecommunications business and create synergy.
The details of major business combinations that occurred for the year ended December 31, 2021, are as follows.

( I n millions of Korean won) |  | Major transfer business |  | Business combination date |  |  | Transfer price |
HCN Co., Ltd. |  | Cable television service |  |  | Sep. 30, 2021 |  |  | ￦ | 515,091 |
Epsilon Global Communications Pte. Ltd. |  | Network service industry |  |  | Sep. 30, 2021 |  |  |  | 159,738 |

The values of assets and liabilities acquired on the acquisition date from major business combinations for the year ended December 31, 2021, are as follows:

( I n millions of Korean won) |  | HCN Co., Ltd. |  |  | Epsilon Global Communications Pte. Ltd. |
I. Total transfer price (A) |  | ￦ | 515,091 |  |  | ￦ | 159,738 |
II. Amount recognized as identifiable assets and liabilities |  |  |  |  |  |  |  |
Non-current assets |  |  | 243,397 |  |  |  | 73,810 |
Current assets |  |  | 104,574 |  |  |  | 19,003 |
Non-current liabilities |  |  | 49,409 |  |  |  | 36,773 |
Current liabilities |  |  | 36,151 |  |  |  | 46,008 |
Total identifiable net assets (B) |  |  | 262,411 |  |  |  | 10,032 |
III. Non-controlling interest (C) |  |  | — |  |  |  | — |
IV. Fair value of net assets acquired (D=B-C) |  |  | 262,411 |  |  |  | 10,032 |
V. Goodwill (E=A-D) |  | ￦ | 252,680 |  |  | ￦ | 149,706 |

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KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
The fair values of assets and liabilities acquired on the acquisition date from major business combinations for the year

( I n millions of Korean won) |  | HCN Co., Ltd. |  |  | Epsilon Global Communications Pte. Ltd. |
Fair value of identifiable assets |  | ￦ | 347,971 |  |  | ￦ | 92,813 |
Cash and cash equivalents |  |  | 57,322 |  |  |  | 7,470 |
Trade and other receivables |  |  | 34,820 |  |  |  | 11,533 |
Other financial assets |  |  | 8,847 |  |  |  | — |
Finance lease receivables |  |  | 4,119 |  |  |  | — |
Property and equipment |  |  | 90,895 |  |  |  | 21,457 |
Investment properties |  |  | 7,178 |  |  |  | — |
Right-of-use assets |  |  | 2,601 |  |  |  | 34,254 |
Intangible assets |  |  | 1,819 |  |  |  | 3,311 |
Customer relationship (Intangible assets) |  |  | 125,893 |  |  |  | 12,964 |
Deferred income tax assets |  |  | — |  |  |  | 1,824 |
Long-term finance lease receivables |  |  | 3,108 |  |  |  | — |
Other non-current assets |  |  | 6,644 |  |  |  | — |
Investments in associates and joint ventures |  |  | 2,760 |  |  |  | — |
Other non-current financial assets |  |  | 1,965 |  |  |  | — |
Fair value of identifiable liabilities |  |  | 85,560 |  |  |  | 82,781 |
Trade and other payables |  |  | 32,075 |  |  |  | 22,648 |
Lease liabilities |  |  | 2,620 |  |  |  | 40,021 |
Current provisions |  |  | 345 |  |  |  | — |
Current income tax liabilities |  |  | 2,401 |  |  |  | — |
Other current liabilities |  |  | 2,940 |  |  |  | 680 |
Net defined benefit liabilities |  |  | 4,535 |  |  |  | — |
Deferred income tax liabilities |  |  | 40,376 |  |  |  | 2,204 |
Other non-current liabilities |  |  | 268 |  |  |  | 631 |
Borrowings |  |  | — |  |  |  | 16,597 |
Fair value of identifiable net assets |  | ￦ | 262,411 |  |  | ￦ | 10,032 |

Intangible assets additionally identified by the Group as a result of major business combinations for the year

( I n millions of Korean won) |  | Goodwill |  |  | Customer relationship |
HCN Co., Ltd. |  | ￦ | 252,680 |  |  | ￦ | 125,893 |
Epsilon Global Communications Pte. Ltd. |  |  | 149,706 |  |  |  | 12,964 |

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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019, 2020 and 2021
Operating revenue and net profit and loss before elimination of intercompany transactions of the acquired companies transferred through major business combinations for the year ended December 31, 2021, are as follows:

|  | After business combination |  |  | 2021 1 |
(In millions of Korean won) |  | Operating revenue |  |  | Profit (loss) for the year |  |  | Operating revenue |  |  | Profit (loss) for the year |
HCN Co., Ltd. |  | ￦ | 63,682 |  |  | ￦ | 7,882 |  |  | ￦ | 248,636 |  |  | ￦ | 21,821 |
Epsilon Global Communications Pte. Ltd. |  |  | 15,670 |  |  |  | (2,866 | ) |  |  | 60,178 |  |  |  | (12,592 | )

| 1 | Operating revenue and profit or loss of the entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as at the beginning of the annual reporting period.

4 2 . | Events After Reporting Period

The Group has issued the following bonds since the end of the reporting period.

Type |  | Issued date |  |  | Face value ( I n millions of Korean won) |  |  | Interest rate |  |  | Redemption date |
The 196-1st Public bond |  |  | Jan. 27, 2022 |  |  | ￦ | 270,000 |  |  |  | 2.60 | % |  |  | Jan. 27, 2025 |
The 196-2nd Public bond |  |  | Jan. 27, 2022 |  |  |  | 100,000 |  |  |  | 2.64 | % |  |  | Jan. 27, 2027 |
The 196-3rd Public bond |  |  | Jan. 27, 2022 |  |  |  | 30,000 |  |  |  | 2.74 | % |  |  | Jan. 27, 2032 |

After the current reporting period, in accordance with a resolution of the Board of Directors on February 15, 2022, the Group transferred its Cloud/IDC business to KT Cloud Co., Ltd., a newly established company owned by the Group, through an investment in kind on April 1, 2022. The Group aims to enhance the value of the Cloud/IDC business and foster KT Cloud Co., Ltd. as a specialized company.
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Table of Contents
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form
20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

KT CORPORATION
(Registrant)
/s/ HYEON-MO KU
Name: Hyeon-Mo Ku
Title: |  | Representative Director and Chief Executive Officer

Date: April 28, 2022

Table of Contents
Exhibit Index

1 |  | Articles of Incorporation of KT Corporation (English translation)
2.1* |  | Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(i) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6)
2.2* |  | Form of Amendment No. 1 to Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(ii) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6)
2.3* |  | Letter from Citibank, N.A., as depositary, to the Registrant relating to the establishment of a direct registration system for ADSs and the issuance of uncertified ADSs as part of the direct registration system (incorporated herein by reference to Exhibit 2.4 of the Registrant’s Annual Report on Form 20-F filed on June 30, 2008)
2.4 |  | Description of common stock (see Item 10.B. Memorandum and Articles of Association)
2.5 |  | Description of American Depositary Shares (incorporated herein by reference to Exhibit 2.6 of the Registrant’s Annual Report on Form 20-F filed on April 29, 2020)
8.1 |  | List of subsidiaries of KT Corporation
12.1 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS |  | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 |  | The cover page for the Company’s Annual Report on Form 20-F for the year ended December 31, 2021, has been formatted in Inline XBRL

* | Filed previously.

(P) | Paper filing.