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KT CORP — Interim / Quarterly Report 2006
Aug 7, 2006
30640_ffr_2006-08-07_cf6a8ac2-69f7-4f2f-b320-a1294df1528d.zip
Interim / Quarterly Report
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6-K 1 d6k.htm FORM 6-K Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of, August 2006
Commission File Number 1-14926
KT Corporation
(Translation of registrants name into English)
206 Jungja-dong
Bundang-gu, Sungnam
Kyunggi-do
463-711
Korea
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F x Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No x
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
This Current Report on Form 6-K is being filed to be incorporated by reference into Registration Statement No. 333-100251 on Form F-3, effective December 27, 2002, relating to $1,210,050,000 0.25% Convertible Notes Due 2007.
August 3rd, 2006
2nd Quarter 2006
Preliminary Earnings Commentary
(KRX : 030200 / NYSE : KTC)
Disclaimer
This material contains estimated information of unaudited non-consolidated preliminary financial and operating data of KT Corporation (KT or the company) as of June 30, 2006 and forward-looking statements with respect to the financial condition, results of operations and business of KT. Statements that are not historical facts, including statements about KTs beliefs and expectations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other future results or performance expressed or implied by such forward-looking statements. Such forward-looking statements were based on current plan, estimates and perfections of KT and the political and economic environment in which KT will operate in the future and therefore you should not place undue reliance on them.
Therefore, KT does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the unaudited financial and operating data contained in this material and such information maybe materially different from the actual results or performance of KT. KT speaks only as of the date it is made, and KT undertakes no obligation to update publicly any of them in light of new information or future events.
The financial and operating data contained in this presentation have been rounded. Since affiliated companies have not finished accounting, estimated figures were used for the equity method gains/losses.
KTs non-consolidated financial statements and report as of June 30, 2006 will be filed with the Financial Supervisory Service(FSS) and th Korea Exchange(KRX) in August 14, 2006.
If you have any questions in connection with the preliminary earnings, please contact Investor Relations Department of KT Corp.
Tel : 82-31-727-0931~ 4
Fax : 82-31-727-0949
E-mail: [email protected]
1
1. Financial Highlights
A. Summary of Income Statement
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q / 2006 1Q | 2005 2Q | 2006 2Q / 2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | |||||
| Operating revenue | 2,955.7 | 2,897.6 | 58.0 | 2.0 % | 2,990.7 | -35.1 | -1.2 % | 5,853.3 |
| Internet access | 617.3 | 611.8 | 5.5 | 0.9 % | 650.9 | -33.6 | -5.2 % | 1,229.1 |
| Internet | ||||||||
| application | 65.4 | 54.0 | 11.4 | 21.1 % | 66.5 | -1.1 | -1.6 % | 119.3 |
| Data | 307.8 | 308.9 | -1.1 | -0.4 % | 339.0 | -31.2 | -9.2 % | 616.6 |
| Telephone | 1,075.0 | 1,061.5 | 13.6 | 1.3 % | 1,123.3 | -48.3 | -4.3 % | 2,136.5 |
| LM | 438.0 | 438.4 | -0.3 | -0.1 % | 450.1 | -12.1 | -2.7 % | 876.4 |
| Wireless | 331.9 | 323.3 | 8.7 | 2.7 % | 278.3 | 53.6 | 19.3 % | 655.2 |
| Satellite | 28.0 | 27.4 | 0.7 | 2.5 % | 28.9 | -0.8 | -2.9 % | 55.4 |
| Real estate | 32.7 | 26.0 | 6.7 | 25.8 % | 23.0 | 9.7 | 42.3 % | 58.8 |
| Others | 59.5 | 46.5 | 12.9 | 27.8 % | 30.8 | 28.7 | 93.3 % | 106.0 |
| SI | 47.2 | 32.5 | 14.7 | 45.4 % | 31.3 | 15.9 | 50.7 % | 79.6 |
| Operating expenses | 2,385.4 | 2,232.9 | 152.5 | 6.8 % | 2,651.6 | -266.1 | -10.0 % | 4,618.4 |
| Labor | 607.7 | 586.8 | 20.9 | 3.6 % | 670.4 | -62.8 | -9.4 % | 1,194.5 |
| Commissions | 157.4 | 151.3 | 6.1 | 4.0 % | 153.7 | 3.7 | 2.4 % | 308.7 |
| Sales commission | 102.3 | 107.2 | -4.9 | -4.5 % | 90.7 | 11.6 | 12.8 % | 209.5 |
| Sales promotion | 77.8 | 20.4 | 57.4 | 281.6 % | 137.3 | -59.4 | -43.3 % | 98.2 |
| Advertising | 27.4 | 11.5 | 16.0 | 139.5 % | 32.4 | -5.0 | -15.3 % | 38.9 |
| Provision for doubtful | ||||||||
| accounts | 7.9 | 18.4 | -10.5 | -56.8 % | 21.8 | -13.8 | -63.5 % | 26.4 |
| Depreciation | 473.2 | 487.8 | -14.6 | -3.0 % | 485.3 | -12.1 | -2.5 % | 961.0 |
| Repairs & | ||||||||
| maintenance | 80.6 | 78.4 | 2.1 | 2.7 % | 110.5 | -29.9 | -27.1 % | 159.0 |
| Cost of goods sold | 154.6 | 127.0 | 27.7 | 21.8 % | 137.3 | 17.3 | 12.6 % | 281.6 |
| Cost of service | ||||||||
| provided | 439.5 | 429.0 | 10.5 | 2.4 % | 443.1 | -3.6 | -0.8 % | 868.4 |
| R&D | 50.8 | 42.6 | 8.2 | 19.4 % | 55.3 | -4.5 | -8.1 % | 93.4 |
| Others | 206.2 | 172.7 | 33.5 | 19.4 % | 313.9 | -107.7 | -34.3 % | 378.9 |
| Operating income | 570.2 | 664.7 | -94.5 | -14.2 % | 339.1 | 231.1 | 68.1 % | 1,234.9 |
| Operating margin | 19.3 % | 22.9 % | -3.6% P | 11.3 % | 8.0% P | 21.1 % | ||
| EBITDA(1) | 1,043.4 | 1,152.5 | -109.1 | -9.5 % | 824.4 | 219.0 | 26.6 % | 2,195.9 |
| EBITDA margin | 35.3 % | 39.8 % | -4.5% P | 27.6 % | 7.7% P | 37.5 % | ||
| Non-operating income | 96.1 | 168.0 | -71.9 | -42.8 % | 208.2 | -112.1 | -53.8 % | 264.1 |
| Non-operating expenses | 207.2 | 262.6 | -55.4 | -21.1 % | 209.9 | -2.7 | -1.3 % | 469.8 |
| Ordinary income | 459.1 | 570.1 | -111.0 | -19.5 % | 337.4 | 121.7 | 36.1 % | 1,029.2 |
| Income tax expenses | 116.5 | 160.8 | -44.3 | -27.5 % | 113.4 | 3.1 | 2.8 % | 277.4 |
| Effective tax rate | 25.4 % | 28.2 % | -2.8% P | 33.6 % | -8.2% P | 26.9 % | ||
| Net income | 342.6 | 409.2 | -66.7 | -16.3 % | 224.1 | 118.5 | 52.9 % | 751.8 |
| EPS (won) | 1,608 | 1,921 | -313 | -16.3 % | 1,063 | 545 | 51.3 % |
Revenue
Revenue slightly increased compare to the previous quarter due to increase in demand for Kornet of Internet access revenue and for IDC (Internet Data Center) servers of Internet application revenue
Operating expenses
Operating expenses decreased compare to the previous quarter due mostly to increase in sales efforts on Megapass and Ann handset and recognition of more SI service cost as SI revenue increased
Income tax expenses
Income tax expenses decreased compare to the previous quarter due to decrease in ordinary income
2
B. Summary of Balance Sheet
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 2Q | 2006 2Q / 2005 2Q | ||
|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | ||||
| Total assets | 17,492.3 | 17,620.5 | -128.2 | -0.7 % | 18,194.1 | -701.7 | -3.9 % |
| Current assets | 3,154.9 | 3,349.2 | -194.3 | -5.8 % | 3,957.4 | -802.5 | -20.3 % |
| Quick assets | 3,063.5 | 3,233.3 | -169.8 | -5.3 % | 3,819.5 | -756.0 | -19.8 % |
| Cash & Cash | |||||||
| equivalents | 855.6 | 1,096.7 | -241.1 | -22.0 % | 1,526.3 | -670.6 | -43.9 % |
| Inventories | 91.5 | 116.0 | -24.5 | -21.1 % | 137.9 | -46.5 | -33.7 % |
| Non-current assets | 14,337.4 | 14,271.3 | 66.1 | 0.5 % | 14,236.7 | 100.8 | 0.7 % |
| Investments | 3,749.7 | 3,684.0 | 65.6 | 1.8 % | 3,505.2 | 244.4 | 7.0 % |
| KTF shares | 2,655.6 | 2,552.4 | 103.2 | 4.0 % | 2,425.3 | 230.3 | 9.5 % |
| Long-term loans | 249.1 | 279.6 | -30.5 | -10.9 % | 371.6 | -122.5 | -33.0 % |
| Others | 845.0 | 852.0 | -7.0 | -0.8 % | 708.4 | 136.6 | 19.3 % |
| Tangible assets | 10,155.6 | 10,166.1 | -10.5 | -0.1 % | 10,334.3 | -178.6 | -1.7 % |
| Intangible assets | 432.1 | 421.2 | 10.9 | 2.6 % | 397.2 | 35.0 | 8.8 % |
| Total liabilities | 9,387.7 | 9,586.0 | -198.3 | -2.1 % | 10,587.5 | -1,199.8 | -11.3 % |
| Current liabilities | 2,696.1 | 2,786.9 | -90.9 | -3.3 % | 4,110.0 | -1,413.9 | -34.4 % |
| Interest-bearing | |||||||
| debts | 332.7 | 634.8 | -302.1 | -47.6 % | 1,769.6 | -1,436.9 | -81.2 % |
| Accounts payable | 630.1 | 607.4 | 22.7 | 3.7 % | 566.4 | 63.7 | 11.2 % |
| Others | 1,733.3 | 1,544.7 | 188.6 | 12.2 % | 1,774.0 | -40.7 | -2.3 % |
| Long-term | |||||||
| liabilities | 6,691.6 | 6,799.1 | -107.4 | -1.6 % | 6,477.5 | 214.1 | 3.3 % |
| Interest-bearing | |||||||
| debts | 5,177.8 | 5,303.7 | -125.9 | -2.4 % | 4,986.0 | 191.8 | 3.8 % |
| Installation | |||||||
| deposit | 931.7 | 945.9 | -14.2 | -1.5 % | 1,008.5 | -76.8 | -7.6 % |
| Others | 582.0 | 549.4 | 32.7 | 5.9 % | 483.0 | 99.0 | 20.5 % |
| Total shareholders equity | 8,104.7 | 8,034.6 | 70.1 | 0.9 % | 7,606.6 | 498.1 | 6.5 % |
| Common stock | 1,561.0 | 1,561.0 | 0.0 | 0.0 % | 1,561.0 | 0.0 | 0.0 % |
| Capital surplus | 1,440.3 | 1,440.3 | 0.0 | 0.0 % | 1,440.3 | 0.0 | 0.0 % |
| Retained earnings | 9,052.5 | 8,709.9 | 342.6 | 3.9 % | 8,566.5 | 486.0 | 5.7 % |
| Capital adjustments | -3,949.0 | -3,676.5 | -272.5 | N/A | -3,961.2 | 12.1 | N/A |
| Treasury stock | -4,054.1 | -3,840.5 | -213.7 | N/A | -3,962.6 | -91.6 | N/A |
| Gain(loss) on valuation of | |||||||
| investment securities | 34.7 | 39.7 | -5.0 | -12.6 % | -1.0 | 35.7 | N/A |
| Others | 70.4 | 124.2 | -53.8 | -43.3 % | 2.4 | 68.0 | 2817.7 % |
| Total interest-bearing debt | 5,510.5 | 5,938.6 | -428.0 | -7.2 % | 6,755.6 | -1,245.0 | -18.4 % |
| Net debt | 4,654.9 | 4,841.8 | -186.9 | -3.9 % | 5,229.3 | -574.4 | -11.0 % |
| Net debt / Total shareholders equity | 57.4 % | 60.3 % | -2.8% p | 68.7 % | -11.3% P |
Assets
Cash & cash equivalents decreased due to redemption of interest-bearing debts
Tangible assets decreased because CAPEX spending was less than depreciation expenses
Liabilities
Interest-bearing debts decreased due to redemption of bonds and debts
Accounts payable increased due to increase in operating expenses
Shareholders Equity
Treasury stock increased as KT initiated a share buyback from April 3 to June 26 and cancelled all on July 3
3
2. Operating Results
A. Internet Revenue
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 | 2006 2Q /2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | 2Q | amount | D % | ||||
| Internet access | 617.3 | 611.8 | 5.5 | 0.9 % | 650.9 | -33.6 | -5.2 % | 1,229.1 |
| Broadband | 548.5 | 551.2 | -2.7 | -0.5 % | 572.6 | -24.1 | -4.2 % | 1,099.7 |
| Megapass | 527.7 | 532.6 | -4.9 | -0.9 % | 539.4 | -11.7 | -2.2 % | 1,060.3 |
| Nespot | 20.8 | 18.6 | 2.2 | 11.7 % | 33.2 | -12.3 | -37.2 % | 39.5 |
| Kornet | 72.4 | 64.1 | 8.2 | 12.8 % | 77.7 | -5.4 | -6.9 % | 136.5 |
| Others | -3.6 | -3.6 | 0.0 | N/A | 0.6 | -4.2 | N/A | -7.2 |
| Internet application | 65.4 | 54.0 | 11.4 | 21.1 % | 66.5 | -1.1 | -1.6 % | 119.3 |
| IDC | 33.3 | 22.9 | 10.4 | 45.4 % | 25.8 | 7.5 | 28.9 % | 56.2 |
| Bizmeka | 18.6 | 16.6 | 2.1 | 12.4 % | 23.1 | -4.5 | -19.3 % | 35.2 |
| Others | 13.4 | 14.5 | -1.0 | -7.2 % | 17.5 | -4.1 | -23.4 % | 27.9 |
Megapass : Revenue decreased due to decrease in ARPU mainly caused by slowdown in new subscriber addition, decrease in modem rental revenue as the percentage of long-term(three years or more) contract subscribers increased and additional discount on long-term subscribers
Nespot : Revenue increased due to increase in sales of Nespot Swing handset
Kornet : Revenue increased due to increase in demand for Kornet, mostly PC cafe
Internet application revenue increased due to increase in demand for IDC(Internet Data Center) servers
B. Data Revenue
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 | 2006 2Q /2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | 2Q | amount | D % | ||||
| Data | 307.8 | 308.9 | -1.1 | -0.4 % | 339.0 | -31.2 | -9.2 % | 616.6 |
| Leased line | 269.4 | 268.2 | 1.2 | 0.4 % | 295.3 | -25.9 | -8.8 % | 537.6 |
| Local | 114.4 | 110.8 | 3.7 | 3.3 % | 124.5 | -10.0 | -8.0 % | 225.2 |
| Domestic long | ||||||||
| distance | 84.2 | 85.4 | -1.2 | -1.4 % | 89.1 | -4.8 | -5.4 % | 169.7 |
| International long | ||||||||
| distance | 4.4 | 3.7 | 0.7 | 18.2 % | 4.4 | 0.0 | 0.6 % | 8.1 |
| Broadcasting & | ||||||||
| others | 66.3 | 68.3 | -2.0 | -2.9 % | 77.3 | -11.0 | -14.3 % | 134.6 |
| Other data | 38.4 | 40.7 | -2.3 | -5.6 % | 43.7 | -5.4 | -12.3 % | 79.0 |
| Packet data | 2.3 | 2.3 | 0.0 | -0.7 % | 3.4 | -1.1 | -33.2 % | 4.6 |
| National network | ||||||||
| ATM | 18.3 | 21.2 | -2.9 | -13.8 % | 24.9 | -6.7 | -26.8 % | 39.5 |
| Others | 17.8 | 17.2 | 0.7 | 3.8 % | 15.4 | 2.4 | 15.9 % | 35.0 |
Leased line revenue decreased due to decrease in demand for local and domestic long distance leased line service.
4
C. Telephone Revenue
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 2Q | 2006 2Q /2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | |||||
| Telephone revenue | 1,075.0 | 1,061.5 | 13.6 | 1.3 % | 1,123.3 | -48.3 | -4.3 % | 2,136.5 |
| Subscriber | ||||||||
| connection | 347.9 | 347.0 | 0.9 | 0.3 % | 357.9 | -10.1 | -2.8 % | 694.9 |
| Subscription fee | 12.2 | 12.8 | -0.5 | -4.2 % | 20.6 | -8.4 | -40.7 % | 25.0 |
| Basic monthly fee | 281.6 | 281.4 | 0.2 | 0.1 % | 282.5 | -0.9 | -0.3 % | 562.9 |
| Installlation | 10.7 | 9.7 | 1.0 | 10.4 % | 11.2 | -0.6 | -5.1 % | 20.3 |
| Interconnection | 43.4 | 43.2 | 0.2 | 0.5 % | 43.6 | -0.2 | -0.4 % | 86.6 |
| Local | 259.4 | 266.5 | -7.0 | -2.6 % | 276.5 | -17.1 | -6.2 % | 525.9 |
| Usage | 177.3 | 183.4 | -6.1 | -3.3 % | 194.2 | -16.9 | -8.7 % | 360.7 |
| Interconnection | 34.6 | 35.8 | -1.2 | -3.2 % | 35.9 | -1.2 | -3.4 % | 70.4 |
| Others | 47.5 | 47.3 | 0.3 | 0.6 % | 46.5 | 1.0 | 2.2 % | 94.8 |
| Domestic long | ||||||||
| distance | 171.6 | 180.4 | -8.7 | -4.8 % | 189.5 | -17.8 | -9.4 % | 352.0 |
| Usage | 164.5 | 173.2 | -8.7 | -5.0 % | 180.9 | -16.5 | -9.1 % | 337.7 |
| Interconnection | 6.9 | 6.9 | 0.0 | -0.3 % | 8.2 | -1.3 | -16.0 % | 13.8 |
| Others | 0.3 | 0.3 | 0.0 | 0.5 % | 0.3 | -0.1 | -19.7 % | 0.5 |
| International long | ||||||||
| distance | 50.0 | 50.7 | -0.7 | -1.3 % | 59.1 | -9.0 | -15.3 % | 100.7 |
| International | ||||||||
| settlement | 44.9 | 41.3 | 3.6 | 8.6 % | 43.8 | 1.1 | 2.5 % | 86.2 |
| VoIP | 7.5 | 6.9 | 0.6 | 8.6 % | 5.8 | 1.7 | 29.4 % | 14.5 |
| VAS | 93.7 | 93.6 | 0.1 | 0.1 % | 88.9 | 4.7 | 5.3 % | 187.3 |
| Public telephone | 7.1 | 7.1 | 0.0 | 0.1 % | 10.0 | -3.0 | -29.5 % | 14.1 |
| 114 phone directory | ||||||||
| service | 54.3 | 36.9 | 17.5 | 47.5 % | 31.4 | 23.0 | 73.1 % | 91.2 |
| Others | 38.6 | 31.2 | 7.4 | 23.7 % | 60.3 | -21.7 | -36.1 % | 69.7 |
Telephone revenue increased compared to the previous quarter due to temporary increase in settlement of 114 phone directory service
Other telephone revenue increased compare to the previous quarter due to increase in sales of Ann handset [Ann handset sales : 2Q06(11.8bn won), 1Q06(6.2bn won), 2Q05(34.0bn won)
5
D. LM(Land to Mobile) Interconnection Revenue
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 2Q | 2006 2Q /2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | |||||
| LM Revenue | 438.0 | 438.4 | -0.3 | -0.1 % | 450.1 | -12.1 | -2.7 % | 876.4 |
| LM interconnection cost | 203.2 | 211.5 | -8.2 | -3.9 % | 208.3 | -5.1 | -2.4 % | 414.7 |
It takes approximately two months for operators to verify the actual volume of LM traffic. KT estimates LM interconnection cost reflecting historical traffic at the time of quarterly closing and makes appropriate adjustments in the following quarter. This is the reason why LM interconnection cost is not directly related to the volatility of LM traffic
E. Wireless Revenue
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 2Q | 2006 2Q /2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | |||||
| Wireless revenue | 331.9 | 323.3 | 8.7 | 2.7 % | 278.3 | 53.6 | 19.3 % | 655.2 |
| PCS resale | 315.8 | 307.7 | 8.2 | 2.7 % | 261.9 | 54.0 | 20.6 % | 623.5 |
| PCS service | 219.4 | 217.4 | 2.0 | 0.9 % | 213.9 | 5.5 | 2.6 % | 436.8 |
| Handset sales | 96.4 | 90.3 | 6.1 | 6.8 % | 47.9 | 48.5 | 101.2 % | 186.7 |
| Others | 16.1 | 15.6 | 0.5 | 3.2 % | 16.5 | -0.4 | -2.2 % | 31.7 |
Wireless revenue increased due to increase in the number of subscribers and in sales of handset
6
F. Operating Expenses
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 2Q | 2006 2Q /2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | |||||
| Labor | 607.7 | 586.8 | 20.9 | 3.6 % | 670.4 | -62.8 | -9.4 % | 1,194.5 |
| Salaries & wages | 438.0 | 436.0 | 2.0 | 0.5 % | 492.2 | -54.2 | -11.0 % | 874.1 |
| Employee benefits | 114.5 | 105.7 | 8.8 | 8.3 % | 163.9 | -49.4 | -30.2 % | 220.2 |
| Provision for | ||||||||
| retirement | 55.1 | 45.0 | 10.1 | 22.4 % | 14.3 | 40.8 | 285.7 % | 100.2 |
| Commissions | 157.4 | 151.3 | 6.1 | 4.0 % | 153.7 | 3.7 | 2.4 % | 308.7 |
| Marketing expenses | 207.6 | 139.0 | 68.5 | 49.3 % | 260.3 | -52.8 | -20.3 % | 346.6 |
| Sales commission | 102.3 | 107.2 | -4.9 | -4.5 % | 90.7 | 11.6 | 12.8 % | 209.5 |
| Sales promotion | 77.8 | 20.4 | 57.4 | 281.6 % | 137.3 | -59.4 | -43.3 % | 98.2 |
| Advertising | 27.4 | 11.5 | 16.0 | 139.5 % | 32.4 | -5.0 | -15.3 % | 38.9 |
| Provision for doubtful accounts | 7.9 | 18.4 | -10.5 | -56.8 % | 21.8 | -13.8 | -63.5 % | 26.4 |
| Depreciation | 473.2 | 487.8 | -14.6 | -3.0 % | 485.3 | -12.1 | -2.5 % | 961.0 |
| Repairs and Maintenance | 80.6 | 78.4 | 2.1 | 2.7 % | 110.5 | -29.9 | -27.1 % | 159.0 |
| Cost of goods sold | 154.6 | 127.0 | 27.7 | 21.8 % | 137.3 | 17.3 | 12.6 % | 281.6 |
| PCS handset cost | 97.0 | 96.8 | 0.2 | 0.2 % | 43.7 | 53.3 | 121.9 % | 193.7 |
| PDA, WLAN card, | ||||||||
| others | 57.7 | 30.2 | 27.5 | 91.2 % | 93.6 | -36.0 | -38.4 % | 87.8 |
| Cost of service provided | 439.5 | 429.0 | 10.5 | 2.4 % | 443.1 | -3.6 | -0.8 % | 868.4 |
| Cost of service | 186.9 | 171.8 | 15.1 | 8.8 % | 190.9 | -4.0 | -2.1 % | 358.7 |
| PCS resale network cost to | ||||||||
| KTF | 112.7 | 108.3 | 4.4 | 4.0 % | 107.5 | 5.1 | 4.8 % | 220.9 |
| SI service cost | 44.9 | 31.4 | 13.4 | 42.8 % | 29.3 | 15.6 | 53.4 % | 76.3 |
| Others | 29.4 | 32.1 | -2.7 | -8.5 % | 54.1 | -24.8 | -45.7 % | 61.5 |
| International settlement | ||||||||
| cost | 49.3 | 45.7 | 3.6 | 8.0 % | 43.9 | 5.4 | 12.4 % | 95.1 |
| LM interconnection | ||||||||
| cost | 203.2 | 211.5 | -8.2 | -3.9 % | 208.3 | -5.1 | -2.4 % | 414.7 |
| R&D | 50.8 | 42.6 | 8.2 | 19.4 % | 55.3 | -4.5 | -8.1 % | 93.4 |
| Others | 206.2 | 172.7 | 33.5 | 19.4 % | 313.9 | -107.7 | -34.3 % | 378.9 |
| * CAPEX | 529.9 | 219.8 | 310.1 | 141.1 % | 428.5 | 101.4 | 23.7 % |
Labor cost
Labor cost decreased compare to the corresponding period of 2005 as KT completed collective bargaining of salary in 2Q05 and retrospectively recognized 1Q05 salary increase in 2Q05
Marketing expenses
Marketing expenses increased mainly due to intensed sales efforts on Megapass and Ann as industry enviornment became more competitive
Depreciation
Depreciation decreased as depreciable assets are reduced.
Cost of goods sold increased compare to the previous quarter due to increase in sales of Ann handset and in purchase of IDC servers, and increased compare to the corresponding period of 2005 due to increase in sales of PCS handset
Cost of service provided increased compare to the previous quarter because KT has recognized more SI service cost as SI revenue increased
Other operating expenses sharply decreased compare to the corresponding period of 2005; KT recognized the FTC fine of 139.8bn won in 2Q05
7
G. Non-operating Income
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 2Q | 2006 2Q / 2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | |||||
| Non-operating income | 96.1 | 168.0 | -71.9 | -42.8 % | 208.2 | -112.1 | -53.8 % | 264.1 |
| Gains on disposition of | ||||||||
| investments | 0.8 | 0.1 | 0.7 | 907.4 % | 53.6 | -52.9 | -98.6 % | 0.8 |
| Gains on disposition of tangible | ||||||||
| assets | 2.4 | 0.8 | 1.7 | 212.6 % | 1.3 | 1.2 | 93.1 % | 3.2 |
| Interest income | 20.5 | 18.6 | 1.9 | 10.4 % | 20.8 | -0.3 | -1.4 % | 39.1 |
| FX transaction gain | 21.1 | 2.2 | 18.9 | 872.8 % | 3.4 | 17.7 | 513.0 % | 23.3 |
| FX translation gain | 10.7 | 65.3 | -54.6 | -83.6 % | 0.6 | 10.1 | 1607.5 % | 76.0 |
| USO fund | 11.6 | 11.6 | 0.0 | 0.0 % | 20.3 | -8.8 | -43.1 % | 23.1 |
| Gain on equity | ||||||||
| method | 1.9 | 24.4 | -22.5 | -92.2 % | 35.0 | -33.1 | -94.6 % | 26.2 |
| Others | 27.1 | 45.2 | -18.0 | -39.9 % | 73.1 | -45.9 | -62.9 % | 72.3 |
As of June 2006, our foreign currency net debt exposure (total borrowings in foreign currency of US$ 1,511 million - total foreign currency deposit of US$ 33 million) stood at US$ 1,478 million. The US$ depreciated by 15.6 won (975.9 won per dollar at the end of March ® 960.3 won per dollar at the end of June), resulting in FX translation gain of 6.3 billion (FX translation gain of 10.7 billion won - FX translation loss of 4.4 billion won = FX translation gain of 6.3 billion won).
FX transaction gain increased due to redemption of foreign debt of US$ 300 million
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q /2006 1Q | 2005 2Q | 2006 2Q /2005 2Q | ||
|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | ||||
| Gain on equity | |||||||
| method | 1.9 | 24.4 | -22.5 | -92.2 % | 35.0 | -33.1 | -94.6 % |
| Loss on equity | |||||||
| method | 3.8 | 9.1 | -5.3 | -58.6 % | 34.6 | -30.8 | -89.1 % |
| Gain or loss on equity method | -1.9 | 15.3 | -17.1 | N/A | 0.5 | -2.3 | N/A |
| Gain or loss on equity method | |||||||
| Gain or loss from | |||||||
| KTF | 38.9 | 57.4 | -18.5 | -32.2 % | 62.2 | -23.3 | -37.5 % |
| Amortization on goodwill from | |||||||
| KTF | -45.6 | -45.6 | 0.0 | N/A | -45.6 | 0.0 | N/A |
| Other subsidiaries | 4.8 | 3.5 | 1.4 | 39.6 % | -16.1 | 21.0 | N/A |
| (KRW bn) | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
|---|---|---|---|---|---|---|---|
| Total | 326.0 | 181.7 | 181.9 | 154.5 | 141.1 | 141.1 | 76.0 |
8
H. Non-operating Expenses
| (KRW bn) | 2006 2Q | 2006 1Q | 2006 2Q / 2006 1Q | 2005 2Q | 2006 2Q / 2005 2Q | 2006 2nd Half | ||
|---|---|---|---|---|---|---|---|---|
| amount | D % | amount | D % | |||||
| Non-operating expenses | 207.2 | 262.6 | -55.4 | -21.1 % | 209.9 | -2.7 | -1.3 % | 469.8 |
| Interest expense | 84.9 | 86.7 | -1.8 | -2.1 % | 107.4 | -22.5 | -21.0 % | 171.6 |
| FX transaction loss | 1.5 | 4.9 | -3.4 | -69.1 % | 3.5 | -2.0 | -56.6 % | 6.4 |
| FX translation loss | 4.4 | 7.7 | -3.3 | -42.6 % | 0.4 | 4.0 | 1085.8 % | 12.1 |
| Loss on equity | ||||||||
| method | 3.8 | 9.1 | -5.3 | -58.6 % | 34.6 | -30.8 | -89.1 % | 12.9 |
| Loss on disposition of fixed | ||||||||
| assets | 13.7 | 10.7 | 3.0 | 28.1 % | 7.7 | 6.0 | 77.9 % | 24.4 |
| Others | 98.9 | 143.5 | -44.6 | -31.1 % | 56.4 | 42.5 | 75.5 % | 242.5 |
Compare to the corresponding period of 2005, other non-operating expenses increased because there was derivatives translation loss of KRW 52.1 billion for hedging foreign currency fluctuations
9
Appendix 1: Factsheet
| Broadband | Dec-04 | Mar-05 | Jun-05 | Sep-05 | Dec-05 | Jan-06 | Mar-06 | Apr-06 | May-06 | Jun-06 |
|---|---|---|---|---|---|---|---|---|---|---|
| Broadband Subs | 6,077,694 | 6,133,293 | 6,172,475 | 6,244,040 | 6,241,789 | 6,269,282 | 6,240,605 | 6,260,449 | 6,285,473 | 6,320,260 |
| Net Addition | 12,372 | 26,022 | 13,917 | 15,281 | -3,506 | 27,493 | -46,961 | 19,844 | 25,024 | 34,787 |
| Megapass Lite | 4,888,980 | 4,862,075 | 4,821,986 | 4,837,269 | 4,788,942 | 4,787,601 | 4,724,684 | 4,728,481 | 4,740,265 | 4,772,280 |
| Megapass Premium | 662,841 | 688,997 | 717,099 | 724,032 | 717,866 | 717,065 | 689,726 | 681,112 | 675,793 | 671,292 |
| Megapass Special (1) | 2,765 | 4,970 | 5,973 | 7,206 | 8,196 | 8,553 | 8,992 | 9,035 | 9,069 | 9,035 |
| Megapass Ntopia | 523,108 | 577,251 | 627,417 | 675,533 | 726,785 | 756,063 | 817,203 | 841,821 | 860,346 | 867,653 |
| Broadband M/S | ||||||||||
| KT | 51.0 % | 50.7 % | 50.3 % | 51.8 % | 51.2 % | 51.0 % | 50.0 % | 49.9 % | 49.6 % | 49.5 % |
| Hanaro | 23.1 % | 22.7 % | 22.7 % | 23.0 % | 22.7 % | 29.2 % | 28.6 % | 28.5 % | 28.4 % | 28.2 % |
| Powercomm | 0.0 % | 0.0 % | 0.0 % | 0.5 % | 2.1 % | 2.7 % | 3.8 % | 4.4 % | 5.0 % | 5.6 % |
| Dacom | 1.7 % | 2.1 % | 2.1 % | 2.0 % | 1.7 % | 1.7 % | 1.5 % | 1.4 % | 1.3 % | 1.3 % |
| SO | 9.0 % | 9.6 % | 10.3 % | 11.0 % | 11.6 % | 11.8 % | 12.6 % | 12.5 % | 12.5 % | 12.4 % |
| Others | 15.2 % | 14.9 % | 14.5 % | 11.7 % | 10.6 % | 3.6 % | 3.4 % | 3.3 % | 3.2 % | 3.1 % |
| WLAN | ||||||||||
| Dec-04 | Mar-05 | Jun-05 | Sep-05 | Dec-05 | Jan-06 | Mar-06 | Apr-06 | May-06 | Jun-06 | |
| WLAN Subs | 418,451 | 455,958 | 525,718 | 535,630 | 519,778 | 517,735 | 524,671 | 521,644 | 523,273 | 516,708 |
| NESPOT | ||||||||||
| Family | 238,526 | 243,902 | 249,454 | 242,976 | 237,259 | 236,532 | 230,597 | 227,582 | 224,050 | 219,650 |
| NESPOT | ||||||||||
| Solo | 29,914 | 32,189 | 35,871 | 37,218 | 38,385 | 39,133 | 40,725 | 41,042 | 41,270 | 41,519 |
| NESPOT | ||||||||||
| Pop | 131,882 | 154,364 | 180,778 | 189,955 | 187,157 | 184,327 | 180,959 | 179,750 | 180,611 | 173,070 |
| NESPOT | ||||||||||
| Biz | 18,129 | 25,503 | 32,337 | 43,695 | 45,814 | 46,018 | 60,776 | 61,612 | 64,130 | 64,205 |
| NESPOT | ||||||||||
| Play | 0 | 0 | 27,278 | 21,786 | 11,163 | 11,725 | 11,614 | 11,658 | 12,250 | 13,925 |
| NESPOT | ||||||||||
| Home | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 962 | 4,339 |
| Leased Lines | ||||||||||
| Dec-04 | Mar-05 | Jun-05 | Sep-05 | Dec-05 | Jan-06 | Mar-06 | Apr-06 | May-06 | Jun-06 | |
| Leased Lines | 426,633 | 422,728 | 417,312 | 412,160 | 410,073 | 407,486 | 407,999 | 412,795 | 409,676 | 407,357 |
| Local leased line | 390,085 | 387,080 | 382,946 | 378,615 | 376,620 | 375,009 | 376,458 | 380,593 | 377,308 | 375,501 |
| DLD leased line | 36,233 | 35,404 | 34,119 | 33,300 | 33,217 | 32,256 | 31,293 | 31,918 | 32,050 | 31,480 |
| International leased | ||||||||||
| line | 110 | 105 | 111 | 90 | 91 | 90 | 91 | 92 | 91 | 95 |
| Broadcasting leased | ||||||||||
| line | 205 | 139 | 136 | 155 | 145 | 131 | 157 | 192 | 227 | 281 |
| Internet Leased Lines | 38,775 | 39,603 | 40,995 | 42,523 | 43,818 | 44,398 | 45,802 | 47,066 | 49,315 | 51,553 |
| Fixed-line | ||||||||||
| Dec-04 | Mar-05 | Jun-05 | Sep-05 | Dec-05 | Jan-06 | Mar-06 | Apr-06 | May-06 | Jun-06 | |
| Fixed-line Subs (000) | 21,091 | 21,107 | 21,056 | 21,013 | 20,837 | 20,845 | 20,843 | 20,865 | 20,885 | 20,804 |
| Residential users (%) | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % |
| Non-refundable users(%) | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % | 72 % |
| Caller ID Users (000) | 4,043 | 4,057 | 4,049 | 4,123 | 4,222 | 4,270 | 4,357 | 4,402 | 4,437 | 4,450 |
| VAS users (000) | 12,803 | 13,062 | 13,255 | 13,209 | 13,138 | 13,135 | 13,130 | 13,130 | 13,149 | 13,174 |
| Fixed-line M/S | ||||||||||
| Local M/S (subscriber base) | 93.8 % | 93.8 % | 93.5 % | 93.2 % | 93.2 % | 93.1 % | 93.0 % | 92.8 % | 92.8 % | 92.7 % |
| DLD (revenue base) (3) | 83.7 % | 83.5 % | 83.5 % | 85.7 % | 85.6 % | 85.3 % | 85.6 % | 85.7 % | 85.7 % | |
| Reference Data | ||||||||||
| Dec-04 | Mar-05 | Jun-05 | Sep-05 | Dec-05 | Jan-06 | Mar-06 | Apr-06 | May-06 | Jun-06 | |
| Population (000) | 48,199 | 48,294 | 48,294 | 48,294 | 48,294 | 48,311 | 48,344 | 48,362 | 48,481 | 48,498 |
| Number of Household | 15,538 | 15,789 | 15,789 | 15,789 | 15,789 | 15,989 | 15,989 | 15,989 | 15,989 | 15,989 |
Company data except Braodband Market Share and Population
-
Source of Population, No of Household: Korea National Statistical Office
-
Broadband ARPU: excluding revenue from WLAN
(1) Special: Broadband service providing speed up to 20Mbps & 50Mbps.
(2) The number of VDSL technology applied subscribers among Megapass service
(3) Special telecom service providers are included in DLD M/S calculation.
(4) Special telecom service providers are included in ILD M/S calculation.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 7, 2006
| KT Corporation | |
|---|---|
| By: | /s/ Thomas Bum Joon Kim |
| Name: | Thomas Bum Joon Kim |
| Title: | Managing Director |