KT CORP [KT] Filings

20-F 1 d436251d20f.htm FORM 20-F Form 20-F

As filed with the Securities and Exchange Commission on April 28, 2023

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

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

For the fiscal year ended December 31, 2022

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

☐	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

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:

82-2-3495-3557

;

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, 2022, there were 256,042,678 ordinary shares, par value

￦

5,000 per share, outstanding

(not 5,069,130 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

☒

☐

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

☐

☒

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

☒

☐

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

☒

☐

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

☒

☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Yes

☐

☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to

§240.10D-1(b).

Yes

☐

☒

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

☐

Item

☐

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

☐

☒

*	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		20

	Item 4.A.	History and Development of the Company	20

	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	58

	Item 5.C.	Research and Development, Patents and Licenses, Etc.	61

	Item 5.D.	Trend Information	61

	Item 5.E.	Critical Accounting Estimates	61

Item 6.	Directors, Senior Management and Employees		61

	Item 6.A.	Directors and Senior Management	61

	Item 6.B.	Compensation	66

	Item 6.C.	Board Practices	66

	Item 6.D.	Employees	69

	Item 6.E.	Share Ownership	70

	Item 6.F.	Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation	72


Item 7.	Major Shareholders and Related Party Transactions		72

	Item 7.A.	Major Shareholders	72

	Item 7.B.	Related Party Transactions	72

	Item 7.C.	Interests of Experts and Counsel	72

Item 8.	Financial Information		73

	Item 8.A.	Consolidated Statements and Other Financial Information	73

	Item 8.B.	Significant Changes	74

Item 9.	The Offer and Listing		74

	Item 9.A.	Offer and Listing Details	74

	Item 9.B.	Plan of Distribution	74

	Item 9.C.	Markets	74

	Item 9.D.	Selling Shareholders	75

	Item 9.E.	Dilution	75

	Item 9.F.	Expenses of the Issuer	75

Item 10.	Additional Information		75

	Item 10.A.	Share Capital	75

	Item 10.B.	Memorandum and Articles of Association	75

	Item 10.C.	Material Contracts	81

	Item 10.D.	Exchange Controls	82

	Item 10.E.	Taxation	86

	Item 10.F.	Dividends and Paying Agents	94

	Item 10.G.	Statements by Experts	94

	Item 10.H.	Documents on Display	94

	Item 10.I.	Subsidiary Information	94

	Item 10.J.	Annual Report to Security Holders	94

Item 11.	Quantitative and Qualitative Disclosures About Market Risk		94

Item 12.	Description of Securities Other than Equity Securities		97

	Item 12.A.	Debt Securities	97

	Item 12.B.	Warrants and Rights	97

	Item 12.C.	Other Securities	97

	Item 12.D.	American Depositary Shares	97

Part II			99

Item 13.	Defaults, Dividend Arrearages and Delinquencies		99

Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		99

Item 15.	Controls and Procedures		99


Item 16.	[Reserved]	100

Item 16A.	Audit Committee Financial Expert	100

Item 16B.	Code of Ethics	100

Item 16C.	Principal Accountant Fees and Services	101

Item 16D.	Exemptions from the Listing Standards for Audit Committees	101

Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	102

Item 16F.	Change in Registrant’s Certifying Accountant	102

Item 16G.	Corporate Governance	103

Item 16H.	Mine Safety Disclosure	104

Item 16I.	Disclosure regarding Foreign Jurisdictions that Prevent Inspections	104

Part III		105

Item 17.	Financial Statements	105

Item 18.	Financial Statements	105

Item 19.	Exhibits	106

iii

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, 2021 and 2022 and for each of the years in the three-year period ended December 31, 2022 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. All references to “Dollars,” “$,” “US$” or “U.S. dollars” are to the currency of the United States of America. All references to “Euro” or “EUR” are to the currency of the European Union. All references to “SGD” or “Singapore dollars” are to the currency of the Republic of Singapore. 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, ￦1,088.0 to US$1.00, ￦1,185.5 to US $1.00, and ￦1,267.3 to US $1.00 on December 31, 2020, 2021 and 2022, 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.

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 risk factors, which have been identified by us.

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. In January 2023, the MSIT announced plans to encourage a fourth service provider to enter the Korean mobile service market by awarding a bandwidth license for the use of the 28 GHz spectrum and provide various measures to support the competitiveness of the new market entrant. 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.”

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. For example, in December 2022, the MSIT cancelled our bandwidth license for the use of the 28 GHz spectrum, noting that we had failed to meet certain agreements made with the MSIT at the time of the license allocation in December 2018. For all of our bandwidth licenses, we made aggregate payments of ￦367 billion in 2020, ￦603 billion in 2021 and ￦319 billion in 2022. 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.

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 all major cities in Korea, and we plan to further expand the coverage nationwide by mid-2024 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 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, 2022, completed its acquisition of a 100.00% interest in Hyundai HCN Co., Ltd. (“HCN”), which is Korea’s fifth largest cable operator.

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, 2022), 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 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. In recent years, the Government has been promoting further diversification of mobile rate plans, in part to mitigate the burden of rising household expenditures. In response, the three telecommunications companies in Korea, including us, have launched additional mobile rate plans starting in August 2022.

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 from telecommunications services relating to the violation 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.

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.

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 years. 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, additional outbreaks of COVID-19 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 the 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.

We are currently searching for a suitable chief executive officer and several directors to fill out vacancies. We depend on our senior management, and our ability to successfully manage this transition could have a material adverse effect on our business, financial condition, results of operations and stock price.

We depend on the efforts, skills, reputations and abilities of our senior management, including our chief executive officer and other directors who serve on our board. Our ability to execute our strategy effectively is dependent upon contributions from such senior management. As of December 31, 2022, our board of directors consisted of two inside directors (including our chief executive officer) and eight outside directors. Subsequently, Hyeon-Mo Ku, our representative director and chief executive officer, resigned on March 28, 2023 and four of our outside directors (Dae-You Kim, Gang-Cheol Lee, Hee-Yol Yu and Benjamin Hong) resigned between January 2023 to March

2023 for personal reasons. In addition, Kyoung-Lim Yun, who was our inside director and a candidate for the position of chief executive officer, resigned and withdrew his candidacy on March 27, 2023. Of the four remaining outside directors, the terms of office for three outside directors (Hyun-Myung Pyo, Chung-Gu Kang and Eun-Jung Yeo) expired in March 2023, resulting in only one outside director (Yong-Hun Kim) remaining as the sole member of our board of directors. No additional directors were elected at our annual shareholders’ meeting held on March 31, 2023.

In accordance with Articles 386 of the Commercial Code of Korea, a director whose term has expired or who has resigned may continue to have the rights and obligations of a director until a newly elected director takes office, if the number of directors remaining on the board would otherwise become fewer than three. Accordingly, the three outside directors (Hyun-Myung Pyo, Chung-Gu Kang and Eun-Jung Yeo) whose terms of office expired in March 2023 and Hyeon-Mo Ku, together with outside director Yong-Hun Kim (whose term expires in March 2025), are currently serving on our board of directors. In addition, starting March 28, 2023, Jong Ook Park, our head of corporate planning group, is serving as our acting chief executive officer while we search for a successor chief executive officer.

On April 17, 2023, our board of directors created a task force that will review and recommend ways to enhance our corporate governance. The task force consists of (i) five independent corporate governance experts selected by our board of directors from candidates recommended by our shareholders, (ii) our general counsel and (iii) our chief financial officer. The board of directors completed a comprehensive review of candidates, taking into consideration their expertise in corporate governance, diversity of the task force membership and expertise in environmental, social and governance (“ESG”) management. The five independent corporate governance experts are (i) Jun-Ki Kim, professor at Seoul National University Graduate School of Public Administration and president of the Korean Society of Public Enterprises, (ii) Suk-Ho Sonu, professor emeritus at Hongik University and former chairman of the board of KB Financial Group, (iii) Myeong-Hyeon Cho, professor of business administration at Korea University and former head of the Korean Corporate Governance Service, (iv) Hyung-Hwan Joo, visiting professor at Sejong University and former minister of Trade, Industry and Energy and (v) Alicia Ogawa, assistant adjunct professor at Columbia University School of International and Public Affairs. The task force, which we currently expect will operate until July 2023, will make recommendations regarding our corporate governance, including refinement of the selection process for our next chief executive officer and directors.

Senior management transitions can be inherently difficult to manage and may cause disruption to our business. There can be no assurances concerning the timing or outcome of our search for a new chief executive officer and directors. The leadership transition may also result in changes in our business strategy, which may create uncertainty and negatively impact our ability to execute our business strategy quickly and effectively. We depend on our senior management, and our inability to attract and retain suitable personnel or the loss of investor confidence in our interim management could have a material adverse effect on our business, financial condition, results of operations and stock price.

Legal cases involving our political donations and other incidents and allegations could have a material adverse effect on our business, reputation and stock price.

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 to various lawmakers using corporate funds. In November 2021, the Seoul Central District Prosecutor’s Office decided not to indict 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. In June 2022, the Seoul Central District Court (i) sentenced the four former executives to suspended prison terms ranging between six to ten months on probation for two years and (ii) imposed a penalty of ￦10 million on us. The four former executives did not appeal such rulings, which became final and conclusive. We appealed the decision of the Seoul Central District Court, which appeal was dismissed by the Seoul High Court in February 2023. In February 2023, we appealed such decision to the Supreme Court.

In November 2021, the Seoul Central District Prosecutor’s Office also issued a summary indictment against our former representative director and chief executive officer, 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. Such proceeding is pending at the Seoul Central District Court.

In November 2022, the KT New Labor Union and the People’s Solidarity for Participatory Democracy filed a criminal complaint with the Seoul Central District Prosecutor’s Office against our former chief executive officer, Hyeon-mo Ku, and our board of directors, alleging a criminal breach of fiduciary duty related to (i) a settlement with the U.S. Securities and Exchange Commission (the “SEC”) to resolve its investigation (described below) and (ii) inaction to take responsibility for alleged violation of the Political Funds Act by our current and former executives described above. This matter is currently being investigated by the Seoul Central District Prosecutor’s Office.

In March 2023, a civic group filed a complaint with the Seoul Central District Prosecutor’s Office against Hyeon-mo Ku, our former chief executive officer, and Kyoung-Lim Yun, our former president, alleging breach of fiduciary duty in connection with various matters, particularly (i) their alleged involvement in Hyundai Motor Company’s acquisition of AirPlug Co., Ltd., a company operated by the brother of Hyeon-mo Ku and (ii) Hyeon-mo Ku’s alleged inappropriate funneling of subcontracting work of KT Telecop Co., Ltd. to KDFS Co., Ltd., a facility management company. This matter is currently being investigated by the Seoul Central District Prosecutor’s Office.

In February 2022, we entered into a settlement (the “Settlement”) with the SEC to resolve its investigation, which included charitable and 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, and 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 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, with which requirement we have been complying. 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, in October 2021, a network maintenance error temporarily disrupted our broadband Internet services nationwide and some of our telecommunications services for approximately 1.5 hours.

As the numbers of our subscribers and cardholders increase 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 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 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. 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, 2022.

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 35.8% as of December 31, 2021 and 27.3% as of December 31, 2022. 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 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.

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 ￦10,006 billion total book value of borrowings outstanding as of December 31, 2022, ￦3,140 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.

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, supply chain disruptions and the increasing weakness of the global economy, in particular due to the COVID-19 pandemic, and beginning in the second half of 2021, rapid increases in interest rates globally to combat inflation, 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 uncertain global and Korean economic conditions, there has been significant volatility in the stock prices of Korean companies recently. Future 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:

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

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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 have taken and may take in the future) and any resulting adverse effects on the global supply of oil and other natural resources or the global financial markets;

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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 difficulties faced by several banks in the United States and Europe in recent months;

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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;

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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;

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

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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;

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

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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;

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

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social and labor unrest;

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substantial changes in the market prices of Korean real estate;

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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;

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

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

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

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

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

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

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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:

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North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted six rounds of nuclear tests since October 2006, including

claimed detonations of hydrogen bombs, which are more powerful than plutonium 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. Starting in 2022, North Korea has increased the frequency of its ballistic missile tests, including intercontinental ballistic missiles. In response, the Government has repeatedly condemned the provocations and flagrant violations of relevant United Nations Security Council resolutions. In February 2016, the Government also closed the inter-Korea Gaesong Industrial Complex in response to North Korea’s fourth nuclear test in January 2016. 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. Over the years, the United States and the European Union have also expanded their sanctions applicable to North Korea.

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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 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 and the market value of our ADSs.

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 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 an 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 (an “FTA Country”) 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 49.0% ceiling until the conclusion of the MSIT’s public interest review. Furthermore, pursuant to an amendment to the Telecommunications Business Act that became effective on December 11, 2022, this exemption from the restriction of foreign ownership of a network service provider beyond the 49.0% threshold applies not only to a foreign government or a foreigner from an FTA Country but also to a foreign government or a foreigner from an OECD country.

As of December 31, 2022, 42.63% 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.”

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.

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 +82-2-3495-3557 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.

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:

(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;

broadband Internet access services; and

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 web 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 24.1 million subscribers as of December 31, 2022;

•

in fixed-line and VoIP telephone services, we had approximately 12.6 million subscribers, consisting of 9.4 million PSTN subscribers and 3.2 million VoIP subscribers as of December 31, 2022. As of such date, our market share of the fixed-line local telephone and VoIP services was 55.0%; and

•

we are Korea’s largest broadband Internet access provider with approximately 9.7 million subscribers as of December 31, 2022, representing a market share of 41.3%.

For the year ended December 31, 2022, our operating revenue was ￦26,234 billion, our profit for the year was ￦1,386 billion and our basic earnings per share was ￦5,200. As of December 31, 2022, our total assets were ￦40,990 billion, total liabilities were ￦22,577 billion and total equity was ￦18,413 billion.

Our Services

The following table sets out our operating revenue by principal product categories and the respective percentage of total operating revenue in 2020, 2021 and 2022.


	For the Year Ended December 31,
	2020					2021					2022
Products and services	Billions of Won		%			Billions of Won		%			Billions of Won		%
Mobile services	￦	6,805		27.8	%	￦	6,936		27.5	%	￦	7,014		26.7	%
Fixed-line services:
Fixed-line and VoIP telephone services		1,464		6.0			1,465		5.8			1,378		5.3
Broadband Internet access services		2,256		9.2			2,344		9.3			2,505		9.5
Data communication services		1,107		4.5			1,152		4.6			1,173		4.5

Sub-total		4,827		19.7			4,960		19.7			5.057		19.3

Media and content services		2,638		10.8			2,801		11.1			3,100		11.8
Financial services		3,494		14.3			3,662		14.5			3,837		14.6
Others		3,084		12.6			3,313		13.1			3,834		14.6
Sale of goods ⁽¹⁾		3,593		14.7			3,533		14.0			3,394		12.9

Total operating revenue	￦	24,441		100.0	%	￦	25,206		100.0	%	￦	26,234		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 26.7% of our operating revenue in 2022. 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,
	2020		2021		2022
Average monthly revenue per subscriber ⁽¹⁾	￦	31,683	￦	32,294	￦	32,803
Number of mobile subscribers (in thousands)		22,305		22,799		24,062
LTE subscribers		16,174		14,637		14,261
5G subscribers		3,619		6,378		8,483
W-CDMA subscribers		2,512		1,784		1,318

(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, 2022, we had approximately 24.1 million subscribers, or a market share of 31.3%, which was the second largest among the three mobile service providers.

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.

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 5.3% of our operating revenue in 2022. 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,
	2018		2019		2020		2021		2022
Total Korean population (thousands)⁽¹⁾		51,826		51,850		51,829		51,639		51,439
PSTN and VoIP lines in service (thousands)		14,992		14,185		13,582		13,096		12,581
PSTN lines in service		11,637		11,052		10,449		9,905		9,376
Local lines in service		10,654		10,076		9,475		8,937		8,430
Group lines in service		983		976		973		968		946
VoIP lines in service		3,355		3,133		3,133		3,191		3,206
Fiber optic cable (kilometers)		784,088		847,497		867,051		896,076		917,114
Domestic long-distance call minutes (millions)⁽²⁾		892		744		620		500		395
Local call pulses (millions) ⁽²⁾		974		804		638		554		463

(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 international calls has significantly exceeded the volume of our outgoing international 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, 2022:


	Year Ended December 31,
	2018		2019		2020		2021		2022
	(In millions of billed minutes)
Incoming international long-distance calls⁽¹⁾		221.1		189.6		50.8		242.4		422.2
Outgoing international long-distance calls		101.1		78.8		59.5		44.4		36.1

Total		322.2		268.4		110.3		286.8		458.3

(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 917,114 kilometers of fiber optic cables as of December 31, 2022, 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 9.5% of our operating revenue in 2022.

As of December 31, 2022, we had approximately 9.7 million broadband Internet subscribers, including approximately 6.5 million KT GiGA Internet service subscribers with enhanced data transmission speeds. In addition, we had approximately 6.1 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, 2022.

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, 2022, we leased 306,906 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 4.5% of our operating revenue in 2022.

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, web comics and novels services and media content creation and distribution services. Media and content services accounted for 11.8% of our operating revenue in 2022. In addition, in September 2021, KT Skylife, in which we held a 49.99% interest as of December 31, 2022, 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 “Genie 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 9.4 million IPTV subscribers as of December 31, 2022.

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, 2022. As of December 31, 2022, we had

approximately 3.7 million subscribers for our satellite TV services, including Genie 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, 2022. 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 a variety of original audio contents through Genie, including audio books and novels. We offer Genie services in various formats that are specifically designed for mobile and other connected devices, PCs, TVs and automobiles. Genie Music Corporation also provides online streaming of live music performances through STAYG platform.

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, 2022. 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 and digital content distribution 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.

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 43.0% interest as of December 31, 2022, and PlayD Co., Ltd. (“PlayD”), in which Nasmedia and we in the aggregate held a 70.4% interest as of December 31, 2022. 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.

Web 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, 2022, specializes in producing and distributing web comics and web novels as well as producing original video contents using our intellectual property rights. StoryWiz operates two platforms, Blice for web novels and KTOON for web comics. Through Blice, many writers distribute their web novels, and we support them in various ways, including holding web novel contests as well as providing funding for new and promising writers. KTOON offers a diverse selection of web comics across various genres such as comedy, romance, action and fantasy. We strive to further expand our intellectual property to movies, dramas and web comics.

Media Content Creation and Distribution Services

We engage in media content creation and distribution services through KT Studio Genie, in which we held a 90.9% interest as of December 31, 2022. KT Studio Genie produces and sells a wide range of media contents, including multi-episode drama series, to traditional media channels and OTT services. KT Studio Genie also serves as a distribution agency of media contents produced by third-parties.

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, 2022. 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 14.6% of our operating revenue in 2022.

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, 2022, we had approximately 22 million credit cards and approximately 27 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 to minimize costs and offer customers higher interest rates on deposits as well as lower lending rates. As of December 31, 2022, K Bank had approximately 849 million account holders, with total deposits of ￦14.6 trillion and outstanding loans of ￦10.8 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 14.6% of our operating revenue in 2022.

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 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.

In September 2021, KT ES Pte. Ltd., a subsidiary in which we held a 57.6% interest as of December 31, 2022, acquired a 100.0% interest in Epsilon Global Communications Pte. Ltd. (“Epsilon”) for US$139 million. Epsilon is a data service provider that provides data connectivity services to corporate customers around the world.

Information Data Center and Cloud Services

We 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., (“kt cloud”) to more effectively promote the growth of our Internet data center and cloud operations. Data centers are facilities used to house, protect and maintain network server computers that store and deliver Internet and other network contents. kt cloud’s 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. kt cloud’s data center businesses include (i) colocation services (provision of infrastructure services necessary for clients’ server operations), (ii) interconnection services (direct private connections of counterparties, including global cloud service providers), (iii) DBO (design, build and operation) services for clients’ data centers and (iv) managed service provider offerings (operation and maintenance of information technology equipment).

kt cloud also provides a wide range of cloud services that are tailored to address specific needs of its customers in public and private sectors. kt cloud’s cloud businesses include (i) customized cloud infrastructure services for government institutions and major enterprises, (ii) CDN (content

delivery network) services offering geographically distributed and interconnected servers for enhanced data traffic and content delivery, (iii) private cloud computing services with infrastructure dedicated to a single customer and (iv) marketplace platform services that enable users to access SaaS (software as a solution) services of various partners of kt cloud.

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 12.9% of our operating revenue in 2022.

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 carry over 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.

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 / YouTube / Tving)

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 YouTube / Tving)

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 YouTube / Tving)

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 Plus

￦

61,000

Unlimited

300 min.

Unlimited, but decelerate to 1 Mbps after 30 GB

5G Slim

￦

55,000

Unlimited

300 min.

Unlimited, but decelerate to 1 Mbps after 10 GB

Plan

Monthly
Rate

Voice
Calls

Video
Calls

Data Transmission

Additional Features

5G Save

￦

45,000

Unlimited

300 min.

Unlimited, but decelerate to 400 kbps after 5 GB

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, 2020		January 1, 2021		January 1, 2022
KT	￦	10.6	￦	10.3	￦	9.7
SK Telecom		10.6		10.3		9.7
LG U+		10.6		10.3		9.7

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 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 ￦27,500.

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, 2020		January 1, 2021		January 1, 2022
SK Telecom	￦	10.6	￦	10.3	￦	9.7
LG U+		10.6		10.3		9.7

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.

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, 2020		January 1, 2021		January 1, 2022
Local access⁽¹⁾	￦	7.6	￦	7.0	￦	6.7
Single toll access⁽²⁾		8.6		8.0		7.6
Double toll access⁽³⁾		11.2		10.9		10.4

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 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
Genie tv
NETFLIX Choice UHD	￦39,800	￦31,680		266	(6)	• Genie tv Essence and NETFLIX premium service
NETFLIX Choice HD	￦37,300	￦29,680		266	(6)	• Genie tv Essence and NETFLIX standard service
SuperPack Choice	￦36,300	￦29,480		266	(6)	• Genie tv Essence and free movie, drama and animation contents
VOD Choice	￦31,020	￦24,816		266	(6)	• Genie tv Essence and monthly coupon of ￦10,000 for video-on-demand
Essence Plus	￦28,160	￦22,484		266	(6)	• Genie tv Essence and monthly coupon of ￦5,000 for video-on-demand
Essence	￦25,300	￦20,240		266	(6)
Lite	￦19,800	￦15,840		240	(3)
Basic	￦18,150	￦14,740		236	(3)
Slim	￦16,500	￦13,200		219	(3)
Genie tv skylife
Entertainment	￦31,020	￦24,816		228	(6)	• Monthly coupon of ￦10,000 for video-on-demand.
Slim	￦16,500	￦13,200		219	(6)

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).

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.

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.

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, 2020		31.6		44.8		23.6
December 31, 2021		31.3		44.0		24.7
December 31, 2022		31.3		42.9		25.8

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, 2020		64.6		14.5		12.6
December 31, 2021		64.1		14.9		12.7
December 31, 2022		63.1		14.9		12.7

Source: Korea Telecommunications Operators Association.

Broadband Internet Access Services


	Market Share (%)
	KT Corporation		SK Broadband		LG U+		Others
December 31, 2020		41.1		29.0		20.3		9.6
December 31, 2021		41.2		28.7		20.7		9.4
December 31, 2022		41.3		28.5		21.0		9.2

Source: The MSIT.

Pay TV Services


	Market Share (%)
	KT Corporation ⁽¹⁾		SK Broadband		LG U+
December 31, 2020		32.2		16.1		14.1
December 31, 2021		32.7		17.1		14.9
December 31, 2022		33.1		17.8		14.7

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

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 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 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. According to an amendment to the Telecommunications Business Act on January 3, 2023, which will become effective on July 4, 2023, a value-added service provider that (i) averages greater than one million domestic users during the last three months of the preceding year and (ii) records domestic communication traffic volume in excess of a certain threshold set by the MSIT will be obligated, among other things, to submit to the MSIT information regarding the status and its plans on measures to provide stable services, on an annual basis.

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.

Notwithstanding the above, pursuant to an 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 49.0% ceiling until the conclusion of the MSIT’s public interest review. Furthermore, pursuant to an amendment to the Telecommunications Business Act that became effective on December 11, 2022, this exemption from the restriction of foreign ownership of a network service provider beyond the 49.0% threshold applies not only to a foreign government or a foreigner from an FTA Country but also to a foreign government or a foreigner from an OECD country.

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, 2022, 42.63% 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 88.8% of our subscribers as of December 31, 2022 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, 2022, we offer various credit card processing and related financial services. BC Card is regulated and supervised as a 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 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. 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 services and technologies related to IoT and artificial intelligence. 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, 2022, the net book value of our

property and equipment was ￦14,772 billion, of which ￦3,827 billion is accounted for by the net book value of our land, buildings and structures. As of December 31, 2022, the net book value of our investment properties, which is accounted for separately from our property and equipment, was ￦1,933 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.

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 21.3 million lines connected to local exchanges and 2.4 million lines connected to toll exchanges as of December 31, 2022.

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 34.4 Tbps as of December 31, 2022. Our IP premium network enables us to more reliably support IPTV, VoIP and other IP-related services. As of December 31, 2022, our IP premium network had capacity of 4.2 Tbps to support LTE data, IPTV, voice and virtual private network (“VPN”) service traffic. In addition, our 5G backbone network had capacity of 3.6 Tbps to support 5G data service traffic.

Access Lines

As of December 31, 2022, we had 24.6 million access lines installed, which allow us to reach virtually all homes and businesses in Korea. As of December 31, 2022, we had approximately

24.5 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 917,114 kilometers of fiber optic cables as of December 31, 2022 of which 135,028 kilometers of fiber optic cables are used to connect our backbone network and 782,086 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 52 relay sites as of December 31, 2022.

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, 2022, our international telecommunications networks were directly linked to 286 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, 2022, our international Internet backbone with capacity of approximately 7,310 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 0.96 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, 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 five 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;

•

the real estate segment, which engages in real property development and leasing 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) miscellaneous 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 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. For example, in December 2022, the MSIT cancelled our bandwidth license for the use of the 28 GHz spectrum, noting that we had failed to meet certain agreements made with the MSIT at the time of the license allocation in December 2018.

For all of our bandwidth licenses, we made aggregate payments of ￦367 billion in 2020, ￦603 billion in 2021 and ￦319 billion in 2022. The following table sets forth our outstanding payment obligations relating to our bandwidth licenses as of December 31, 2022.

Spectrum

Bandwidth

License
Acquisition
Date

Total
Payable
Amount
(in billions
of Won)

Total
remaining
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

￦

2021

￦

2021 to 2026

1.8 GHz

35 MHz

July 1, 2021

￦

548

￦

329

￦

137

2021

￦

2021 to 2026

1.8 GHz

20 MHz

Aug. 4, 2016

￦

470

￦

141

￦

118

2016

￦

2016 to 2026

2.1 GHz

40 MHz

Dec. 6, 2021

￦

412

￦

247

￦

103

2021

￦

2021 to 2026

3.5 GHz

100 MHz

Dec. 1, 2018

￦

968

￦

436

￦

242

2018

￦

2018 to 2028

28 GHz⁽¹⁾

800 MHz

Dec. 1, 2018

￦

208

￦

2018

￦

2018 to 2023

(1)	We recognized an impairment loss of ￦191 billion in 2020 and ￦3 billion in 2022 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 ￦230 billion in 2020, ￦213 billion in 2021 and ￦231 billion in 2022. We plan to continue to invest in researching and implementing network upgrades, which will entail additional operating expenses as well as capital expenditures.

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 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.

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, 2022, completed its acquisition of a 100.00% interest in HCN, which is Korea’s fifth largest cable operator. 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 ￦2,470 billion in 2020, ￦2,515 billion in 2021 and ￦2,550 billion in 2022. 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.

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, 2020, 2021 and 2022 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,
	2020			2021			2022
	(In billions of Won)
Operating profit under IFRS as issued by the IASB	￦	1,022		￦	1,699		￦	1,968
Effect of changes in operating profit presentation		218			(28	)		(280	)
Revenue recognition of development, sale of real estate, etc.		(57	)		—			3

Operating profit under K-IFRS	￦	1,184		￦	1,672		￦	1,690


	For the Year Ended December 31,
	2020			2021		2022
	(In billions of Won)
Net income under IFRS as issued by the IASB	￦	746		￦	1,459	￦	1,386
Profit before income tax.		(57	)		—		3
Income tax		14			—		1

Profit for the year under K-IFRS	￦	703		￦	1,459	￦	1,388

Changes in Accounting Policies

For a summary of new standards, amendments and interpretations issued under IFRS as issued by the IASB, 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:

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

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);

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

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;

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

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 web 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, 2022;

•

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.

Operating Results—2021 Compared to 2022

The following table presents selected income statement data and changes therein for 2021 and 2022:


	For the Year Ended December 31,					Changes
	For the Year Ended December 31,					2021 vs. 2022
	2021		2022			Amount			%
	(In billions of Won)
Operating revenue	￦	25,206	￦	26,234		￦	1,029			4.1	%
Operating expenses		23,506		24,266			760			3.2

Operating profit		1,699		1,968			269			15.8
Finance income		726		690			(36	)		(4.9	)
Finance costs		563		750			187			33.1
Share of net profits of associates and joint ventures		116		(17	)		(133	)		N.A.	⁽¹⁾

Profit before income tax		1,978		1,891			(87	)		(4.4	)
Income tax expense		519		506			(13	)		(2.6	)

Profit for the year	￦	1,459	￦	1,386		￦	(74	)		(5.1	)%

(1)	N.A. means not applicable.

Operating Revenue

The following table presents a breakdown of our operating revenue and changes therein for 2021 and 2022:


	For the Year Ended December 31,				Changes
	For the Year Ended December 31,				2021 vs. 2022
Products and services	2021		2022		Amount			%
	(In billions of Won)
Mobile services	￦	6,936	￦	7,014	￦	77			1.1	%
Fixed-line services:
Fixed-line and VoIP telephone services		1,465		1,378		(87	)		(5.9	)
Broadband Internet access services		2,344		2,505		161			6.9
Data communication services		1,152		1,173		22			1.9

Sub-total		4,960		5,057		96			1.9

Media and content services		2,801		3,100		299			10.7
Financial services		3,662		3,837		175			4.8
Others		3,313		3,834		520			15.7
Sale of goods⁽¹⁾		3,533		3,394		(139	)		(3.9	)

Total operating revenue	￦	25,206	￦	26,234	￦	1,029			4.1	%

(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 4.1%, or ￦1,029 billion, from ￦25,206 billion in 2021 to ￦26,234 billion in 2022, 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), media and content services, financial 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 1.1%, or ￦77 billion, from ￦6,936 billion in 2021 to ￦7,014 billion in 2022, primarily due to increases in the number of our mobile subscribers and our average revenue per subscriber.

We recorded a 5.5% increase in our mobile subscribers from approximately 22.8 million (including 6.4 million subscribers of 5G services) as of December 31, 2021 to approximately 24.1 million (including 8.5 million subscribers of 5G services) as of December 31, 2022.

Our average revenue per user increased by 1.6%, or ￦509, from ￦32,294 in 2021 to ￦32,803 in 2022 mainly due to an increase in our users subscribing to 5G services.

Fixed-line Services

Our fixed-line services revenue increased by 1.9%, or ￦96 billion, from ￦4,960 billion in 2021 to ￦5,057 billion in 2022, reflecting increases in revenue from broadband Internet access services and data communication services, the impact of which was partially offset by a decrease in revenue from fixed-line and VoIP telephone services.

Fixed-line and VoIP Telephone Services. Our fixed-line and VoIP telephone services revenue decreased by 5.9%, or ￦87 billion, from ￦1,465 billion in 2021 to ￦1,378 billion in 2022 primarily due to a decrease in the number of PSTN and VoIP lines in service from 13.1 million as of December 31, 2021 to 12.5 million as of December 31, 2022.

Broadband Internet Access Services. Our broadband Internet access services revenue increased by 6.9%, or ￦161 billion, from ￦2,344 billion in 2021 to ￦2,505 billion in 2022, 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 6.2 million as of December 31, 2021 to approximately 6.5 million as of December 31, 2022.

Data Communication Services. Our data communication services revenue increased by 1.9%, or ￦22 billion, from ￦1,152 billion in 2021 to ￦1,173 billion in 2022 primarily due to increases in revenue from (i) major content service providers that experienced increases in traffic volume and (ii) provision of additional backbone lines to global content service providers.

Media and Content Services

Our media and content services revenue increased by 10.7%, or ￦299 billion, from ￦2,801 billion in 2021 to ￦3,100 billion in 2022 primarily due to consolidation of revenue of HCN following KT Skylife’s acquisition in September 2021 as well as an increase in the number of IPTV subscribers from approximately 9.1 million as of December 31, 2021 to approximately 9.4 million as of December 31, 2022.

Financial Services

Financial services revenue increased by 4.8%, or ￦175 billion, from ￦3,662 billion in 2021 to ￦3,837 billion in 2022 primarily due to an increase in fees from credit card services of BC Card.

Others

Other operating revenue increased by 15.7%, or ￦520 billion, from ￦3,313 billion in 2021 to ￦3,834 billion in 2022, 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 3.9%, or ￦139 billion, from ￦3,533 billion in 2021 to ￦3,394 billion in 2022, primarily reflecting a decline in sales of mobile handsets.

Operating Expenses

The following table presents a breakdown of our operating expenses and changes therein for 2021 and 2022:


	For the Year Ended December 31,					Changes
	For the Year Ended December 31,					2021 vs. 2022
	2021		2022			Amount			%
	(In billions of Won)
Salaries and wages	￦	4,216	￦	4,496		￦	280			6.6	%
Depreciation		2,606		2,637			32			1.2
Depreciation of right-of-use assets		399		396			(3	)		(0.6	)
Amortization of intangible assets		603		622			19			3.1
Commissions		1,126		1,295			169			15.1
Interconnection charges		508		480			(28	)		(5.5	)
International interconnection fee		192		186			(6	)		(3.0	)
Purchase of inventories		3,754		3,656			(98	)		(2.6	)
Changes of inventories		20		(195	)		(216	)		N.A.	⁽¹⁾
Sales commissions		2,343		2,354			11			0.4
Service costs		2,296		2,334			38			1.7
Utilities		364		368			4			1.1
Taxes and dues		269		277			8			3.1
Rent		123		161			38			30.5
Insurance premium		67		68			2			2.3
Installation fees		155		150			(4	)		(2.8	)
Advertising expenses		171		196			24			14.1
Research and development expenses		169		175			6			3.5
Card service costs		3,114		3,128			14			0.4
Loss on disposal of property and equipment		71		81			10			14.0
Loss on disposal of intangible assets		4		7			3			80.6
Loss on disposal of right-of-use assets		11		2			(9	)		(79.5	)
Direct cost of government subsidies		43		44			1			3.0
Loss on disposal of investments in subsidiaries		14		—			(14	)		(100.0	)
Impairment loss on property and equipment		2		16			14			660.9
Impairment loss on intangible assets		4		31			27			726.4
Donations		11		16			5			42.4
Other allowance for bad debts		28		18			(11	)		(37.5	)
Others		823		1,266			443			53.8

Total operating expenses	￦	23,506	￦	24,266		￦	760			3.2	%

(1)	N.A. means not applicable.

Total operating expenses increased by 3.2%, or ￦760 billion, from ￦23,506 billion in 2021 to ￦24,266 billion in 2022 primarily due to increases in other expenses, salaries and wages, commissions, service costs and rent expenses, which impact was partially offset by fluctuations in changes of inventories and decrease in purchase of inventories. Specifically:

•

Other expenses increased by 53.8%, or ￦443 billion, from ￦823 billion in 2021 to ￦1,226 billion in 2022 primarily due to increases in repair costs, communication expenses and interest costs.

•

Salaries and wages increased by 6.6%, or ￦280 billion, from ￦4,216 billion in 2021 to ￦4,496 billion in 2022 primarily due to inclusion of salaries and wages of employees of subsidiaries acquired by us (including HCN in September 2021).

•

Commissions increased by 15.1%, or ￦169 billion, from ￦1,126 billion in 2021 to ￦1,295 billion in 2022 primarily due to increases in information and technology commissions related to development of new services and commissions that we paid to outsourced call centers.

•

Service costs increased by 1.7%, or ￦38 billion, from ￦2,296 billion in 2021 to ￦2,334 billion in 2022 primarily due to increases in service costs related to expansion of corporate messaging services and other B2B services.

•

Rent expenses increased by 30.5%, or ￦38 billion, from ￦123 billion in 2021 to ￦161 billion in 2022 primarily due to an increase in leased space related to expansion of our business.

These factors were partially offset by the following:

•

We recorded changes of inventories of ￦20 billion in 2021 compared to changes of inventories of ￦(195) billion in 2022 primarily reflecting a decrease in our sales of wired and wireless goods.

•

Purchase of inventories decreased by 2.6%, or ￦98 billion, from ￦3,754 billion in 2021 to ￦3,656 billion in 2022 primarily due to a decrease in purchase of mobile handsets used in connection with subscription of our mobile services.

Operating Profit

Due to the factors described above, our operating profit increased by 15.8%, or ￦269 billion, from ￦1,699 billion in 2021 to ￦1,968 billion in 2022. Our operating margin, which is operating profit as a percentage of operating revenue, was 6.7% in 2021 and 7.5% in 2022.

Finance Income (Costs)

The following table presents a breakdown of our finance income and costs and changes therein for 2021 and 2022:


	For the Year Ended December 31,				Changes
	For the Year Ended December 31,				2021 vs. 2022
	2021		2022		Amount			%
	(In billions of Won)
Interest income	￦	273	￦	272	￦	(2	)		(0.6	)%
Gain on foreign currency transactions		20		68		48			240.3
Gain on foreign currency translation		33		43		10			31.5
Gain on settlement of derivatives		2		51		48			2,187.5
Gain on valuation of derivatives		255		183		(72	)		(28.3	)
Gain on valuation of financial instruments		91		31		(60	)		(65.8	)
Others		52		43		(9	)		(17.9	)

Total finance income	￦	726	￦	690	￦	(36	)		(4.9	)

Interest expenses	￦	263	￦	294	￦	30			11.6	%
Loss on foreign currency transactions		13		81		68			519.4
Loss on foreign currency translation		214		200		(14	)		(6.4	)
Loss on settlement of derivatives		6		24		18			287.0
Loss on valuation of derivatives		16		22		6			35.5
Loss on disposal of trade receivables		22		63		40			176.1
Loss on valuation of financial instruments		26		66		40			152.6
Others		2		0		(2	)		(78.0	)

Total finance costs	￦	563	￦	750	￦	187			33.1

We recorded net gain on valuation of financial instruments of ￦65 billion in 2021 compared to net loss on valuation of financial instruments of ￦35 billion in 2022 primarily due to a general increase in interest rates in 2022 that decreased the valuation of our financial instruments.

We recorded net gain on foreign currency transactions of ￦7 billion in 2021 compared to net loss on foreign currency transactions of ￦13 billion in 2022, as the depreciation in the average value of the Won against the Dollar in 2022 was greater than in 2021. In terms of the market average exchange rates announced by Seoul Money Brokerage Services, Ltd., the market average exchange rate, which was ￦1,088.0 to US$1.00 as of December 31, 2020, depreciated during 2021 to an average of ￦1,144.4 to US$1.00 in 2021 and further depreciated during 2022 to an average of ￦1,292.0 to US$1.00 in 2022. In addition, our net loss on foreign currency translation decreased by 13.2%, or ￦24 billion, from ￦181 billion in 2021 to ￦157 billion in 2022, as the Won depreciated against the Dollar at year end in 2021 and further depreciated at year end in 2022. In terms of the market average exchange rates, the Won depreciated against the Dollar from ￦1,088.0 to US$1.00 as of December 31, 2020 to ￦1,185.5 to US$1.00 as of December 31, 2021, and further depreciated to ￦1,267.3 to US$1.00 as of December 31, 2022. Against such fluctuations, our net gain on valuation of derivatives decreased by 32.5%, or ￦78 billion, from ￦239 billion in 2021 to ￦161 billion in 2022, and we recognized net loss on derivative transactions of ￦4 billion in 2021 compared to net gain on derivative transactions of ￦26 billion in 2022.

Our loss on disposal of trade receivables increased by 176.1%, or ￦40 billion, from ￦23 billion in 2021 to ￦63 billion in 2022 primarily due to an increase in loss from our sale of handset receivables.

Share of Net Profits (Losses) of Associates and Joint Venture

We recognized net profit of associates and joint ventures of ￦116 billion in 2021 compared to net loss of associates and joint ventures of ￦17 billion in 2022. 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. In 2022, our share of net loss of associates and joint ventures consisted primarily of our share of loss from Megazone Cloud Corporation of ￦23 billion as well as various other associates, the impact of which was partially offset by our share of profit from K Bank of ￦29 billion.

Income Tax Expense

Income tax expense decreased by 2.6%, or ￦13 billion, from ￦519 billion in 2021 to ￦506 billion in 2022, as our profit before income tax decreased by 4.4%, or ￦87 billion, from ￦1,978 billion in 2021 to ￦1,891 billion in 2022. Our effective tax rate was 26.2% in 2021 and 26.7% in 2022. 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 decreased by 5.1%, or ￦74 billion, from ￦1,459 billion in 2021 to ￦1,386 billion in 2022. Our net profit margin, which is net profit for the year as a percentage of operating revenue, was 5.8% in 2021 and 5.3% in 2022.

Segment Results—ICT

The operating revenue for our ICT segment, prior to adjusting for inter-segment transactions, decreased by 0.2%, or ￦37 billion, from ￦18,734 billion in 2021 to ￦18,697 billion in 2022, primarily due to decreases in revenue from our mobile services and fixed-line and VoIP telephone services, the impact of which was offset in part by increases in revenue from our broadband Internet access services and IPTV services, as described above.

The operating profit for our ICT segment, prior to adjusting for inter-segment transactions, increased by 15.1%, or ￦176 billion, from ￦1,171 billion in 2021 to ￦1,347 billion in 2022, as the

￦214 billion decrease in the segment’s operating expenses outpaced the ￦37 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 6.3% in 2021 to 7.2% in 2022.

Depreciation and amortization for our ICT segment, prior to adjusting for inter-segment transactions, decreased by 3.5%, or ￦112 billion, from ￦3,218 billion in 2021 to ￦3,106 billion in 2022.

Segment Results—Finance

The operating revenue for our finance segment, prior to adjusting for inter-segment transactions, increased by 2.5%, or ￦89 billion, from ￦3,527 billion in 2021 to ￦3,615 billion in 2022, due to an increase in standalone revenue of BC Card’s value added network business.

The operating profit for our finance segment, prior to adjusting for inter-segment transactions, increased by 14.6%, or ￦15 billion, from ￦105 billion in 2021 to ￦120 billion in 2022, as the ￦89 billion increase in the segment’s operating revenue outpaced the ￦73 billion increase in operating revenue. For this segment, operating margin increased from 3.0% in 2021 to 3.3% in 2022.

Depreciation and amortization for our finance segment, prior to adjusting for inter-segment transactions, increased by 3.1%, or ￦1 billion, from ￦46 billion in 2021 to ￦48 billion in 2022.

Segment Results—Satellite TV

The operating revenue for our satellite TV segment, prior to adjusting for inter-segment transactions, increased by 6.6%, or ￦44 billion, from ￦665 billion in 2021 to ￦709 billion in 2022 due to an increase in standalone operating revenue of KT Skylife.

The operating profit for our satellite TV segment, prior to adjusting for inter-segment transactions, decreased by 67.8%, or ￦42 billion, from ￦61 billion in 2021 to ￦20 billion in 2022, as the ￦86 billion increase in the segment’s operating expenses outpaced the ￦44 billion increase in operating revenue. Operating margin for this segment decreased from 9.2% in 2021 to 2.8% in 2022 primarily due to an increase in expenses related to procurement of programs for our channels.

Depreciation and amortization for our satellite TV segment, prior to adjusting for inter-segment transactions, decreased by 4.2%, or ￦3 billion, from ￦61 billion in 2021 to ￦58 billion in 2022.

Segment Results—Real Estate

The operating revenue for our real estate segment, prior to adjusting for inter-segment transactions, increased by 41.3%, or ￦139 billion, from ￦336 billion in 2021 to ￦475 billion in 2022 primarily due to increases in revenues from disposal of real estate and hotel operations.

The operating profit for our real estate segment, prior to adjusting for inter-segment transactions, increased by 311.4%, or ￦86 billion, from ￦27 billion in 2021 to ￦113 billion in 2022, as the ￦139 billion increase in the segment’s operating revenue outpaced the ￦53 billion increase in operating expenses. Operating margin for this segment increased from 8.2% in 2021 to 23.8% in 2022 primarily due to increases in operating profits from disposal of real estate and hotel operations.

Depreciation and amortization for our real estate segment, prior to adjusting for inter-segment transactions, increased by 8.3%, or ￦5 billion, from ￦60 billion in 2021 to ￦65 billion in 2022.

Segment Results—Others

The operating revenue for our others segment, prior to adjusting for inter-segment transactions, increased by 22.9%, or ￦1,485 billion, from ￦6,475 billion in 2021 to ￦7,960 billion in 2022, 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.

The operating profit for our others segment, prior to adjusting for inter-segment transactions, increased by 21.1%, or ￦82 billion, from ￦391 billion in 2021 to ￦473 billion in 2022, as the ￦1,485 billion increase in the segment’s operating revenue outpaced the ￦1,403 billion increase in the segment’s operating expenses. Operating margin for this segment slightly deceased from 6.0% in 2021 to 5.9% in 2022.

Depreciation and amortization for this segment, prior to adjusting for inter-segment transactions, increased by 75.7%, or ￦248 billion, from ￦327 billion in 2021 to ￦575 billion in 2022. Such increase was primarily due to consolidation of depreciation and amortization expenses of HCN following KT Skylife’s acquisition in September 2021.

Operating Results—2020 Compared to 2021

For a discussion of our operating results of 2020 compared to 2021, please see “Item 5.A. Operating Results—Operating Results—2020 Compared to 2021” of our Form 20-F for the fiscal year ended December 31, 2021, which we filed with the Securities and Exchange Commission on April 28, 2022.

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,
	2020			2021			2022
	(In billions of Won)
Net cash inflow from operating activities	￦	4,740		￦	5,562		￦	3,597
Net cash outflow from investing activities		(3,761	)		(5,137	)		(4,839	)
Net cash inflow (outflow) from financing activities		(648	)		(41	)		669
Cash and cash equivalents at beginning of the year		2,306			2,635			3,020
Cash and cash equivalents at end of the year		2,635			3,020			2,449
Net increase (decrease) in cash and cash equivalents		329			384			(571	)

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 ￦3,208 billion in 2020, ￦3,495 billion in 2021 and ￦3,440 billion in 2022, for the acquisition of property and equipment and investment properties. In addition, we used cash of ￦511 billion in 2020, ￦752 billion in 2021 and ￦545 billion in 2022 for the acquisition of intangible assets, which consisted primarily of acquisition of bandwidth licenses. In our financing activities, we used cash of ￦1,627 billion in 2020, ￦1,999 billion in 2021 and ￦2,843 billion in 2022, 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 ￦311 billion in 2020, ￦350 billion in 2021 and ￦477 billion in 2022.

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 2023 to decrease slightly compared to those in 2022 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.

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.

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 ￦746 billion in 2020, ￦1,459 billion in 2021 and ￦1,386 billion in 2022 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 ￦3,668 billion in 2020, ￦3,647 billion in 2021 and ￦3,711 billion in 2022, 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 ￦168 billion in 2020, ￦900 billion in 2021 and ￦1,391 billion in 2022. Long-term borrowings, excluding current installments, were ￦5,898 billion as of December 31, 2020, ￦6,706 billion in December 31, 2021 and ￦8,180 billion in December 31, 2022. Total short-term borrowings were ￦1,418 billion as of December 31, 2020, ￦1,731 billion as of December 31, 2021 and ￦1,827 billion as of December 31, 2022. 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 by total equity, was 116% as of December 31, 2020, 124% as of December 31, 2021 and 123% as of December 31, 2022.

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 ￦15,551 billion as of December 31, 2020, ￦16,567 billion as of December 31, 2021 and ￦18,413 billion as of December 31, 2022.

Liquidity

We had a working capital (current assets minus current liabilities) surplus of ￦1,962 billion as of December 31, 2020, ￦1,786 billion as of December 31, 2021 and ￦1,991 billion as of December 31, 2022.

The following table sets forth the summary of our significant current assets for the years indicated:


	As of December 31,
	2020		2021		2022
	(In billions of Won)
Cash and cash equivalents	￦	2,635	￦	3,020	￦	2,449
Trade and other receivables, net		4,902		5,087		6,098
Inventories, net		535		514		709
Other financial assets		1,203		1,186		1,322

Our cash and cash equivalents (substantially all of which are in Won) totaled ￦2,635 billion as of December 31, 2020, ￦3,020 billion as of December 31, 2021 and ￦2,449 billion as of December 31, 2022. As of December 31, 2022, on a standalone basis, we held approximately 98.7% 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,
	2020		2021		2022
	(In billions of Won)
Trade and other payables	￦	6,210	￦	6,641	￦	7,333
Borrowings		1,418		1,731		1,827

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, 2022, we entered into various commitments with financial institutions totaling ￦3,278 billion, US$2,983 million, EUR 8 million and SGD 284 million, of which ￦516 billion, US$2,143 million, EUR 8 million and SGD 284 million were used. See Note 20 of the notes to the Consolidated Financial Statements. Of the ￦10,006 billion total book value of debentures and borrowings outstanding as of December 31, 2022, ￦3,140 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 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, 2022, KT Corporation had 4,033 domestic and 1,764 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 ￦230 billion in 2020, ￦214 billion in 2021 and ￦231 billion in 2022.

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.

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.

According to our articles of incorporation, 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.

As of December 31, 2022, our board of directors consisted of two inside directors (including our chief executive officer) and eight outside directors. Subsequently, Hyeon-Mo Ku, our representative director and chief executive officer, resigned on March 28, 2023 and four of our outside directors (Dae-You Kim, Gang-Cheol Lee, Hee-Yol Yu and Benjamin Hong) resigned between January 2023 to March 2023 for personal reasons. In addition, Kyoung-Lim Yun, who was our inside director and a candidate for the position of chief executive officer, resigned and withdrew his candidacy on March 27, 2023. Of the four remaining outside directors, the terms of office for three outside directors (Hyun-Myung Pyo, Chung-Gu Kang and Eun-Jung Yeo) expired in March 2023, resulting in only one outside director (Yong-Hun Kim) remaining as the sole member of our board of directors. No additional directors were elected at our annual shareholders’ meeting held on March 31, 2023.

In accordance with Articles 386 of the Commercial Code of Korea, a director whose term has expired or who has resigned may continue to have the rights and obligations of a director until a newly elected director takes office, if the number of directors remaining on the board would otherwise become fewer than three. Accordingly, the three outside directors (Hyun-Myung Pyo, Chung-Gu Kang and Eun-Jung Yeo) whose terms of office expired in March 2023 and Hyeon-Mo Ku, together with outside director Yong-Hun Kim (whose term expires in March 2025), are currently serving on our board of directors. In addition, starting March 31, 2023, Jong Ook Park, our head of corporate planning group, is serving as our acting chief executive officer while we search for a successor chief executive officer.

On April 17, 2023, our board of directors created a task force that will review and recommend ways to enhance our corporate governance. The task force consists of (i) five independent corporate

governance experts selected by our board of directors from candidates recommended by our shareholders, (ii) our general counsel and (iii) our chief financial officer. The board of directors completed a comprehensive review of candidates, taking into consideration their expertise in corporate governance, diversity of the task force membership and expertise in ESG management. The five independent corporate governance experts are (i) Jun-Ki Kim, professor at Seoul National University Graduate School of Public Administration and president of the Korean Society of Public Enterprises, (ii) Suk-Ho Sonu, professor emeritus at Hongik University and former chairman of the board of KB Financial Group, (iii) Myeong-Hyeon Cho, professor of business administration at Korea University and former head of the Korean Corporate Governance Service, (iv) Hyung-Hwan Joo, visiting professor at Sejong University and former minister of Trade, Industry and Energy and (v) Alicia Ogawa, assistant adjunct professor at Columbia University School of International and Public Affairs. The task force, which we currently expect will operate until July 2023, will make recommendations regarding our corporate governance, including refinement of the selection process for our next chief executive officer and directors.

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

March 2020

January 13, 1964

N.A.

⁽²⁾

Outside Directors⁽¹⁾

Hyun-Myung Pyo

Outside Director, Hankook Tire & Technology Co.,Ltd.

March 2020

October 21, 1958

N.A.

⁽²⁾

Chung-Gu Kang

Professor, School of Electrical Engineering, Korea University

March 2020

December 12, 1962

N.A.

⁽²⁾

Eun-Jung Yeo

Professor, School of Business, Chung-Ang University

March 2020

February 15, 1973

N.A.

⁽²⁾

Yong-Hun Kim

Partner Lawyer, DR & AJU Law Group

March 2022

March 29, 1955

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.

(2)	Term of office will continue until election of new directors at the shareholders’ meeting, following implementation of recommendations made by the task force, which was launched on April 17, 2023 by our board of directors to review and recommend ways to enhance our corporate governance.

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 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 March 31, 2023:


Name	Title and Responsibilities	Year of Birth
Kook-Hyun Kang	President, Customer Business Group		1963
Jong-Ook Park	President, 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 & 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, D-TF		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
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


Name	Title and Responsibilities	Year of Birth
Jae-Kwon Kim	Senior Vice President, Biz Customer Business Unit		1968
Jun-Ho Kim	Senior Vice President, Public/Finance Customer Business Unit		1965
Jin-Chul Kim	Senior Vice President, Jeonnam / Jeonbuk Customer Sales Headquarter		1967
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		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 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
Tae-Sung Oh	Senior Vice President, On External Training		1968
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 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
Seong-Hwan Yi	Senior Vice President, Western Seoul Network O&M Headquarter		1968
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, Industry Biz 2 P-TF		1966
Dae-Jin Jang	Senior Vice President, C-TF		1971
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, AI / Big Data Business Unit		1974
Ja-Kyung Hahn	Senior Vice President, Industry Biz 1 P-TF		1971
Suk-Zoon Huh	Senior Vice President, Institute of Economic & Business Research		1967
Tae-Jun Heo	Senior Vice President, Enterprise Business Consulting & Implementation Unit		1970
Sung-Pil Hong	Senior Vice President, Group Real Estate Unit		1965

Item 6.B. Compensation

Compensation of Directors and Executive Officers

In 2022, the aggregate compensation paid and accrued to all directors and executive officers was approximately ￦47.2 billion and the aggregate amount set aside or accrued by us to provide pension and retirement benefits to such persons was approximately ￦4.9 billion.

The compensation of our five highest compensated directors and executive officers who received total annual compensation exceeding ￦500 million in 2022 was as follows:


Name	Position	Total Compensation in 2022	Composition of Total Compensation
		(In millions of Won)
Hyeon-Mo Ku	Chief Executive Officer	￦1,561	￦556 (salary); ￦973 (bonus); ￦32 (benefits)
Jong-Ook Park	President	￦1,114	￦440 (salary); ￦650 (bonus); ￦24 (benefits)
Kook-Hyun Kang	President	￦1,107	￦440 (salary); ￦639 (bonus); ￦28 (benefits)
Soo-Jung Shin	Senior Executive Vice President	￦899	￦411 (salary); ￦472 (bonus); ￦16 (benefits)
Hyun-Yok Sheen	Senior Executive Vice President	￦887	￦398 (salary); ￦454 (bonus); ￦35 (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, 2023, 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, Hyun-Myung Pyo, Chung-Gu Kang, Eun-Jung Yeo, Yong-Hun Kim and Hyun-Mo Ku. The chairperson is Chung-Gu Kang. 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 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

Operation of the Representative Director Candidate Examination Committee, which is expected to be comprised of all of our outside directors and one inside director, is temporarily suspended until the election of new directors at the shareholders’ meeting. Such shareholders’ meeting will take place following implementation of recommendations made by the task force, which was launched on April 17, 2023 by our board of directors to review and recommend ways to enhance our corporate governance. 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

Operation of the Outside Director Candidate Nominating Committee is temporarily suspended until the election of new directors at the shareholders’ meeting. The Outside Director Candidate Nominating Committee is expected to be comprised 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 three outside directors, Chung-Gu Kang, Hyun-Myung Pyo and Yong-Hun Kim. The chairperson is Hyun-Myung Pyo. 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

Operation of the Management Committee, which requires two inside directors pursuant to Articles 393 of the Commercial Code of Korea, is temporarily suspended until our election of new inside directors. Until such time, decisions of the Management Committee is made by the board of directors. The committee’s duties include (i) the authorization of establishment and management of

branch offices, (ii) the disposal and sale of stocks of our subsidiaries, which have a market value between Won 15 billion and Won 30 billion, not including any sale for stocks with market value of Won 10 billion or more that involves a change of control, (iii) making investments between Won 50 billion to Won 100 billion in third parties, subject to certain exceptions, (iv) making investments between Won 15 billion to Won 30 billion in third parties for the acquisition of interest in excess of 30%, subject to certain exceptions, (v) the acquisition and disposal of real estate having market value between Won 15 billion to Won 30 billion, and (vi) the issuance of certain debt securities.

Related-Party Transactions Committee

The Related-Party Transactions Committee is currently comprised of three outside directors, Chung-Gu Kang, Eun-Jung Yeo and Yong-Hun Kim. The chairperson is Chung-Gu Kang. 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.

Sustainability Management Committee

The Sustainability Management Committee is currently comprised of three outside directors and one inside director, Hyun-Myung Pyo, Eun-Jung Yeo, Yong-Hun Kim and Hyun-Mo Ku. 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, 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 standalone basis, we had 20,544 employees as of December 31, 2022, compared to 21,759 employees as of December 31, 2021 and 22,720 employees as of December 31, 2020.

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, 2022, about 78.6% of the employees of KT Corporation were members of labor unions. The representative of the labor unions 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.

KT Trade 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.

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 3.9% of our issued shares as of December 31, 2022.

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 ￦124 billion as of December 31, 2022. 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.”

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 85 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 reimbursements to select employees who pursue graduate programs in Korea, as well as provide financial assistance to those who pursue work-related professional licenses or study foreign languages.

Item 6.E. Share Ownership

Ordinary Shares

The persons who currently serve as our directors or executive officers held, as a group, 522,001 ordinary shares as of April 17, 2023. The table below shows the ownership of our ordinary shares by our directors and executive officers as of April 17, 2023:


Shareholders	Number of Ordinary Shares Owned
Hyeon-Mo Ku		36,571
Kyoung-Lim Yun		1,100
Gang-Cheol Lee		1,892
Dae-You Kim		1,979
Hee-Yol Yu		1,421
Hyun-Myung Pyo		11,633
Chung-Gu Kang		949
Eun-Jung Yeo		949
Kook-Hyun Kang		15,348
Jong-Ook Park		17,957
Byung-Sam Park		12,618
Chang-Seok Seo		13,914
Jae-Ho Song		11,461
Soo-Jung Shin		12,607
Hyun-Yok Sheen		13,320
Sang-Don Ahn		4,418
Bong-Gyun Kim		7,599
Young-Woo Kim		5,990
Young-Jin Kim		10,326
Yi-Han Kim		7,539
Chae-Hee Kim		7,574
Hoon-Bae Kim		5,201
Chang-Yong Ahn		6,996
Chi-Yong Ahn		11,102
Yul-Mo Yang		7,030
Kyung-Hwa Ok		7,930
Kong-Hwan Lee		1,905
Sun-Joo Lee		5,502
Chang-Ho Yi		7,307


Shareholders	Number of Ordinary Shares Owned
Hyeon-Seuk Lee		10,062
Jong-Taek Lim		8,677
Sang-Kwi Chang		10,381
Jung-Soo Jung		8,072
Hoon Cho		2,500
Jung-Yong Ji		10,127
Chan-Ki Choi		10,334
Jun Koh		81
Gang-Bon Koo		3,991
Jae-Hyung Koo		95
O-Ryung Kwon		36
Hye-Jin Kwon		2,145
Hee-Keun Kwon		127
Kwang-Dong Kim		875
Moo-Seong Kim		3,426
Byung-Kyun Kim		4,720
Bong-Ki Kim		6,192
Sang-Kyoon Kim		4,387
Seong-Il Kim		1,887
Young-Sool Kim		81
Young-Sik Kim		16
Young-In Kim		4,813
Jae-Kwon Kim		6,734
Jun-Ho Kim		3,594
Gil-Hyun Ryu		450
Pyeong Ryu		10,035
Sang-Ryong Moon		102
Sung-Uk Moon		4,104
Young-Il Moon		5,575
Hye-Byung Min		6,396
Sun-Ha Park		46
Yong-Man Park		6,178
Jeong-Jun Park		4,549
Jung-Ho Park		234
Jong-Ho Park		4,238
Hyo-Il Park		6,408
Soon-Min Bae		5,516
Seung-Yun Paik		2,856
Ki-Hong Seo		81
Young-Soo Seo		6,999
Jeong-Hyun Seo		194
Won-Je Sung		81
Hoon-Joo Shin		2,345
Jin-Ho Yang		3,813
Jae-Min Eom		4,003
Hun-Yong Oh		8,045
Heung-Jae Won		5,934
Yong-Kyu Yoo		6,434
Chang-Kyu Yoo		6,552
Kyeong-Mo Youn		55
Jin-Hyoun Youn		94
Mi-Hee Lee		5,265
Sang-Il Lee		6,511
Young-Jun Lee		81
Young-Jin Lee		81
Yong-Gyoo Lee		4,948
Jong-Sik Lee		4,691
Seung-Hyouk Yim		4,384
Jang-Mi Lim		1,973
Dae-Jin Jang		3,807


Shareholders	Number of Ordinary Shares Owned
Kil-Sung Jung		91
Jae-Wook Jeong		8,035
Seong-Eun Cho		3,614
Young-Sim Jin		2,048
Kang-Rim Choi		4,205
Sung-Wook Choi		3,403
Si-Hwan Choi		3,391
Joon-Ki Choi		3,038
Ja-Kyung Hahn		2,263
Suk-Zoon Huh		2,843
Tae-Jun Heo		81
Sung-Pil Hong		2,440

		522,001

Stock Options

We have not granted any stock options to our current directors and executive officers.

Item 6.F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation

Not applicable.

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, 2022:


Shareholders	Number of Shares		Percent of Total Shares Issued
National Pension Corporation		26,412,967		10.12	%
Shinhan Financial Group Co., Ltd		14,557,393		5.58	%
Silchester International Investors LLP		12,969,308		4.97	%
Hyundai Motor Company		12,251,234		4.69	%
Employee stock ownership association		10,088,264		3.86	%
Hyundai Mobis Co., Ltd.		8,094,466		3.10	%
Directors as a group		522,001		0.20	%
Public		171,127,045		65.54	%
KT Corporation (held in the form of treasury stock)		5,089,130		1.95	%

Total issued shares		261,111,808		100.00	%

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-119.

Legal Proceedings

In September 2010, we entered into a contract with Enspert, Co., Ltd.(“Enspert”), a consumer electronics manufacturer, to purchase approximately 170,000 tablet PCs, which we cancelled in March 2011. In April 2017, Enspert filed a lawsuit against us at the Seoul Central District Court, alleging damages of approximately ￦95 billion caused by such cancellation. In February 2020, the Seoul Central District 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. In September 2022, the Supreme Court dismissed appeals from both parties, and the judgment of the Seoul High Court became final and conclusive.

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. In April 2020, several plaintiffs, including the Government and Korea Racing Authority, filed lawsuits alleging damages. There are nine pending lawsuits related to such matters, alleging damages in aggregate of approximately ￦7.3 billion, which remains subject to adjustments. We intend to vigorously defend against such lawsuits.

In April, June and September 2021, 549 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 political donations and other incidents and allegations could have a material adverse effect on our business, reputation and stock price.”

As of December 31, 2022, we have established provisions relating to litigation proceedings of ￦36 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)
2018	￦	1,100		—	￦	1,100
2019		1,100		—		1,100
2020		1,350		—		1,350
2021		1,910		—		1,910
2022		1,960		—		1,960

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 annual general meeting of shareholders. This meeting is generally held in March of the following year and if our shareholders at such annual 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.”

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.

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, 2022, 261,111,808 Ordinary Shares were issued, of which 5,069,130 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

According to the Commercial Code of Korea, 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 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.

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;

•

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, 2022, 3.9% 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.

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;

•

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.

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.

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.

Under our articles of incorporation, we are required to report the purpose of holding our own Shares and plans for disposition at each annual general meeting of shareholders. We are also required to obtain approval at the annual general meeting of shareholders if we acquire cross-held shares of another company through a sale or exchange of treasury stock.

In general, corporate entities in which we own a 50.0% or more equity interest may not acquire our Shares.

As of December 31, 2022, there were 5,069,130 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.

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.

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:

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odd-lot trading of shares;

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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;

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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;

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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;

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

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

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disposal of shares in connection with a tender offer;

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

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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;

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

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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 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 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:

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a resident of Korea;

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a corporation organized under Korean law; or

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

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 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, provided that if such tax exemption is being sought to be applied to an amount that is ￦1 billion or more (including where the aggregate amount exempted within one year from the last day of the month in which the payment was made, is ￦1 billion or more), in addition to the certificate of your tax residence issued by a competent authority of your residence country, you will also be required to submit the names and addresses of all of the members of your board of directors, the identities and shareholding percentages of all of your shareholders (provided that if you have more than 100 shareholders, you may instead provide a statement showing the total number of shareholders and aggregate investment amount from each country), and audit reports for the most recent three years (or, if your entity has been in existence for less than three years, audit reports since incorporation). 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 0.05% for any transfers made during 2023, 0.03% for any transfers made during 2024 (transfers made on and after January 1, 2025 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 0.35% 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 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:

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a citizen or resident of the United States;

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a United States domestic corporation; or

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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:

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a dealer in securities or currencies;

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a financial institution;

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a regulated investment company;

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a real estate investment trust;

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an insurance company;

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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;

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

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a person liable for alternative minimum tax;

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

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

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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 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.

Subject to generally applicable limitations and conditions, Korean tax on dividends paid at the appropriate rate applicable to the U.S. Holder may be eligible for a credit against such U.S. Holder’s U.S. federal income tax liability. These generally applicable limitations and conditions include new requirements recently adopted by the U.S. Internal Revenue Service (“IRS”) and any Korean tax will need to satisfy these requirements in order to be eligible to be a creditable tax for a U.S. Holder. In the case of a U.S. Holder that is eligible for, and properly elects, the benefits of the Treaty, the Korean tax on dividends may be treated as meeting the new requirements and therefore as a creditable tax. The application of these requirements to the Korean tax on dividends is uncertain and we have not determined whether these requirements have been met, including requirements applicable to the Treaty. Dividends paid on the ordinary shares will be treated as income from sources outside the United States and, for U.S. Holders that elect to claim foreign tax credits, will generally constitute passive category income for U.S. foreign tax credit purposes. If the Korean dividend tax is not a creditable tax for a U.S. Holder or the U.S. Holder does not elect to claim a foreign tax credit for any foreign income taxes paid or accrued in the same taxable year, a U.S. Holder may elect to deduct the Korean tax in computing such U.S. Holder’s taxable income for U.S. federal income tax purposes. The rules governing the foreign tax credit and deductions for foreign taxes depend on a U.S. Holder’s particular circumstances and involve the application of complex rules to those circumstances. You are urged to consult your tax advisors regarding the availability and calculation of the foreign tax credit under your particular situations.

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:

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

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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. 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:

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

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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

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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 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 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 tax 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 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.

Item 10.J. Annual Report to Security Holders

Not applicable.

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 details regarding the assets, liabilities, gains and losses recorded relating to our derivative contracts outstanding as of December 31 2020, 2021, and 2022, see Notes 4 and 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, 2020, 2021, and 2022:


	As of December 31,
	2020				2021				2022
(in thousands of foreign currencies)	Financial assets		Financial liabilities		Financial assets		Financial liabilities		Financial assets		Financial liabilities
U.S. Dollar		400,046		1,937,935		245,759		2,302,642		106,426		2,336,607
Special Drawing Right		255		728		255		722		255		722
Japanese Yen		209,376		46,000,009		29,227		30,000,763		32,801		400,002
British Pound		—		—		—		1,005		30		83
Euro		316		162		3,943		10,801		185		7,832
Chinese Yuan		458		491		—		—		—		—
Rwandan Franc		646		—		586		—		15,521		13,025
Thai Bhat		535		—		2,160		—		265		—
Tanzanian Shilling		1,019		—		1,644		—		1,464		—
Botswana Pula		212		—		93		—		183		—
Hong Kong Dollar		—		198		—		105		37		—
Polish Zloty		26		—		—		—		—		—
Vietnamese Dong		242,370		—		257,895		—		280,226		—
Central African Franc		16,229		—		—		—		—		—
Singapore Dollar		6		284,000		13		284,000		448		284,000
Taiwan Dollar		—		—		—		226		—		—
Swiss Franc		—		—		—		161		—		—
Ringgit Malaysia		—		—		—		—		1		—
Bulgarian Lev.		—		—		—		—		62		—

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. As of December 31, 2022, 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 ￦6 billion, and decreased our total equity by ￦16 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, 2022 which are sensitive to exchange rates and/or interest rates. The information is presented in Won, which is our reporting currency:


																December 31, 2022
	2023			2024			2025			2026			Thereafter			Total			Fair Value
	(in millions of Won, except rates)
Local currency:
Fixed rate		1,426,215			1,585,500			1,516,646			530,015			1,750,000			6,808,376			6,711,815
Average weighted rate⁽¹⁾		3.36	%		2.50	%		3.49	%		1.76	%		2.90	%		2.94	%
Variable rate		30,000			—			—			—			—			30,000			30,000
Average weighted rate⁽¹⁾		5.73	%		—			—			—			—			5.73	%

Sub-total		1,456,215			1,585,500			1,516,646			530,015			1,750,000			6,838,376			6,741,815

Foreign currency:
Fixed rate		5,665			25,509			1,140,570			506,920			506,920			2,185,584			3,733,230
Average weighted rate⁽¹⁾		1.90	%		4.13	%		2.67	%		2.50	%		2.66	%		2.64	%
Variable rate		424,573			512,519			—			—			23,844			960,936			991,597
Average weighted rate⁽¹⁾		5.01	%		5.52	%		—			—			3.47	%		5.25	%

Subtotal		430,238			538,028			1,140,570			506,920			530,764			3,146,520			4,724,827

Total		1,886,453			2,123,528			2,657,216			1,036,935			2,280,764			9,984,896			11,466,642

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

As of December 31, 2020, 2021 and 2022 a 100 basis point increase in the market interest rate, with all other variables held constant, would have increased our income before income tax by ￦1.0 billion, ￦0.8 billion and ￦0.6 billion, respectively. As of December 31, 2020, 2021 and 2022 such increase, with all other variables held constant, would have increased our total equity by ￦19 billion, increased our total equity by ￦6 billion and decreased our total equity by ￦2 billion, respectively.

As of December 31, 2020, 2021 and 2022, a 100 basis point decrease in the market interest rates, with all other variables held constant, would have decreased our income before income tax by ￦1.0 billion, ￦0.7 billion and ￦0.7 billion, respectively. As of December 31, 2020, 2021 and 2022, 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, decreased our total equity by ￦6 billion and increased our total equity by ￦2 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, 2020, 2021 and 2022, a 10% increase in the equity indices where our marketable equity securities are listed, with all other variables held constant, would have increased our income before income tax by ￦3 billion, ￦2 billion and ￦3 billion, respectively, with a 10% decrease in the equity index having the opposite effect. As of December 31, 2020, 2021 and 2022, 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 ￦3 billion, ￦5 billion and ￦114 billion, respectively, with a 10% decrease in the equity index having the opposite effect. In 2022, such amounts increased significantly due to our acquisition of shares in Shinhan Financial Group Co., Ltd., Hyundai Motor Company and Hyundai Mobis Co., Ltd. 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

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.

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 2022, we received the following payments, after deduction of applicable U.S. taxes, from the depositary:


Reimbursement of NYSE listing fees	$	150,825

Reimbursement of SEC filing fees	$	0

Reimbursement of proxy process expenses (printing, postage and distribution)	$	186,843

Reimbursement of legal fees (reimbursement received in 2022 in respect of 2021)	$	4,744

Contributions toward our investor relations efforts (including non-deal roadshows, investor conferences and investor relations agency fees)	$	218,073

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, 2022. 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 acting chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2022. 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.

Our management has performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022, 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, 2022.

Samil PricewaterhouseCoopers, an independent registered public accounting firm, which also audited our consolidated financial statements as of, and for the year ended December 31, 2022, 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 2022 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, 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.

100

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, 2021 and 2022.


	Year Ended December 31,
	2021		2022
	(In millions)
Audit fees ⁽¹⁾	￦	4,255	￦	5,808
Tax fees ⁽²⁾		219		97
All other fees		10		406

Total fees		4,484		6,311

(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.

101

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 2022:

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

—

￦

—

￦

—

February 1 to February 29

—

March 1 to March 31

—

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

—

￦

—

￦

—

In February 2023, we entered into a trust agreement with Shinhan Securities Co., Ltd., pursuant to which our agent may acquire our common shares as treasury shares for up to ￦300 billion during the period from February 10, 2023 to August 9, 2023.

Item 16F. Change in Registrant’s Certifying Accountant

On November 15, 2022, our Audit Committee approved the appointment of Deloitte Anjin as our principal accountant to audit our consolidated financial statements prepared in accordance with IFRS as issued by the IASB for the fiscal years ending December 31, 2023, 2024 and 2025, subject to the completion of the consolidated financial statements for the fiscal year ending December 31, 2022, and dismissed Samil PricewaterhouseCoopers, our former independent registered public accountants (including for the fiscal years ending December 31, 2020, 2021 and 2022) effective April 28, 2023, the date of completion of its audit of our financial statements for the fiscal year ending December 31, 2022 and the issuance of its report thereon. Deloitte Anjin was engaged on April 28, 2023 as our principal accountant to audit our consolidated financial statements prepared in accordance with IFRS as issued by the IASB.

The decision of our Audit Committee to dismiss Samil PricewaterhouseCoopers, and to appoint Deloitte Anjin, as our principal accountant to audit our financial statements prepared in accordance with IFRS, as issued by the IASB, was largely driven by the FSC’s designation of Deloitte Anjin as our external auditor in December 2022 pursuant to the requirement of the amended Act on External Audit of Stock Companies, which became effective in November 2018. The Act on External Audit of Stock Companies, as amended, requires that a publicly listed Korean company that was audited by an external auditor of its choice for six consecutive years change its external auditor to one designated by the FSC for a period of three consecutive years.

Samil PricewaterhouseCoopers’ reports on our consolidated financial statements for each of the two most recent fiscal years ended December 31, 2022 and 2021 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the two most recent fiscal years ended December 31, 2022 and 2021 and the subsequent interim period through April 28, 2023, there were: (i) no disagreements between us and Samil PricewaterhouseCoopers on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the

102

satisfaction of Samil PricewaterhouseCoopers, would have caused Samil PricewaterhouseCoopers to make reference to the subject matter of the disagreements in its reports on our consolidated financial statements; and (ii) no “reportable events” as defined in Item 16F(a)(1)(v) of Form 20-F.

During the two most recent fiscal years ended December 31, 2022 and 2021 and the subsequent interim period through April 28, 2023, neither we nor anyone on our behalf consulted Deloitte Anjin regarding either (i) the application of IFRS as issued by the IASB to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements (and neither a written report nor oral advice was provided to us that Deloitte Anjin concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue under IFRS, as issued by the IASB) or (ii) any matter that was either the subject of a “disagreement” (as defined in Item 16F(a)(1)(iv) of Form 20-F and the related instructions to Item 16F) or a “reportable event” (as described in Item 16F(a)(1)(v) of Form 20-F).

We provided a copy of the disclosure in this Item 16F to Samil PricewaterhouseCoopers and requested that Samil PricewaterhouseCoopers furnish us with a letter addressed to the Securities and Exchange Commission stating whether it agrees with such disclosure, and if it does not agree, stating the respects in which it does not agree. A copy of Samil PricewaterhouseCoopers’ letter dated April 28, 2023 is filed as Exhibit 15.1 to this annual report for the fiscal year ended December 31, 2022.

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 4 out of 5 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. Operation of the Outside Director Candidate Nominating Committee is temporarily suspended until the election of new directors at the shareholders’ meeting. 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.
Compensation Committee

Listed companies must have a compensation committee composed entirely of independent directors.		We maintain an Evaluation and Compensation Committee composed of three outside directors.

103



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 three 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.

104

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 (PCAOB ID 1103)		F-2
Consolidated Statements of Financial Position as of December 31, 2021 and December 31, 2022		F-6
Consolidated Statements of Profit or Loss for the Years Ended December 31, 2020, 2021 and 2022		F-8
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2021 and 2022		F-9
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2021 and 2022		F-10
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2021 and 2022		F-13
Notes to the Consolidated Financial Statements		F-14

105

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

15.1		Letter of Samil PricewaterhouseCoopers dated April 28, 2023

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, 2022, has been formatted in Inline XBRL

*	Filed previously.

(P)	Paper filing.

106

INDEX TO

ONSOLIDATED FINANCIAL STATEMENTS


	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 1103)		F-2
Consolidated Statements of Financial Position as of December 31, 2021 and December 31, 2022		F-6
Consolidated Statements of Profit or Loss for the Years Ended December 31, 2020, 2021 and 2022		F-8
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2021 and 2022		F-9
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2021 and 2022		F-10
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2021 and 2022		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, 2022 and 2021,

and the related consolidated

statements of profit or loss, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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, 2022 and 2021

and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022

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, 2022, based on criteria established in

Internal Control—Integrated Framework

(2013) issued by the COSO.

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 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.

F-2

Table of Contents

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 17,902,012 million. A large portion of the Company’s property and equipment and intangible assets is related to 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 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.

F-3

Table of Contents

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.

Cash-Generating Units Impairment Assessment—Cable television service (HCN Co., Ltd.) Segment

As described in Notes 2.16, 13 and 35 to the consolidated financial statements, the Company’s goodwill balance was KRW 708,223 million. A large portion of the Company’s goodwill is related to the Cash-Generating Unit in the Cable television service segment (the “CGU”). The Company performs its impairment assessment for assets attributed to the CGU when impairment indicators exist or in the case of goodwill and indefinite lived intangible assets at least annually. The Company compared the carrying value of the CGU to the estimated recoverable amount. The recoverable amount of the CGU 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. As a result of the impairment test, KRW 24,006 million of the impairment loss was distributed as goodwill in full and reflected in other expenses during the year.

The principal considerations for our determination that performing procedures relating to the CGU 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 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.

F-4

Table of Contents

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 CGU, 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.

/s/ Samil PricewaterhouseCoopers

Seoul, Korea

April 28, 2023

We have served as the Company’s auditor since 2010.

F-5

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Financial Position

Years Ended December 31, 2021 and 2022


(In millions of Korean won)	Notes		December 31, 2021		December 31, 2022

Assets

Current assets
Cash and cash equivalents		4,5,38	￦	3,019,592	￦	2,449,062
Trade and other receivables, net		4,6,38		5,087,490		6,098,072
Other financial assets		4,7,38		1,185,659		1,322,452
Current income tax assets				5,954		1,543
Inventories, net		8		514,145		717,673
Assets held for sale		10		1,187		—
Other current assets		9		2,044,323		2,101,212

Total current assets				11,858,350		12,690,014

Non-current assets
Trade and other receivables, net		4,6,38		1,091,326		1,491,046
Other financial assets		4,7,38		822,379		2,501,484
Property and equipment, net		11		14,464,886		14,772,179
Right-of-use assets		21		1,248,308		1,280,334
Investment properties, net		12,38		1,720,654		1,933,358
Intangible assets, net		13		3,447,333		3,129,833
Investments in associates and joint ventures		14		1,288,429		1,480,722
Deferred income tax assets		30		423,728		579,090
Net defined benefit assets		18		17,585		311,142
Other non-current assets		9		776,363		820,608

Total non-current assets				25,300,991		28,299,796

Total assets			￦	37,159,341	￦	40,989,810

F-

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Financial Position (Continued)

Years Ended December 31, 2021 and 2022


(In millions of Korean won)	Notes		December 31, 2021			December 31, 2022

Liabilities

Current liabilities
Trade and other payables		4,15	￦	6,641,422		￦	7,333,165
Borrowings		4,16		1,731,422			1,827,042
Other financial liabilities		4,7		72,807			8,791
Current income tax liabilities				266,430			232,382
Provisions		17		171,316			109,133
Deferred revenue				64,742			55,737
Other current liabilities		9		1,124,293			1,133,018

Total current liabilities				10,072,432			10,699,268

Non-current liabilities
Trade and other payables		4,15		1,338,781			1,064,099
Borrowings		4,16		6,706,281			8,179,643
Other financial liabilities		4,7		424,859			412,650
Defined benefit liabilities, net		18		197,883			51,654
Provisions		17		86,081			91,233
Deferred revenue				194,309			165,186
Deferred income tax liabilities		30		643,958			967,650
Other non-current liabilities		9		927,596			945,731

Total non-current liabilities				10,519,748			11,877,846

Total liabilities				20,592,180			22,577,114

Equity
Share capital		22		1,564,499			1,564,499
Share premium				1,440,258			1,440,258
Retained earnings		23		13,287,390			14,255,316
Accumulated other comprehensive income		24		117,469			(77,776	)
Other components of equity		24		(1,433,080	)		(572,152	)

Equity attributable to owners of the Controlling Company				14,976,536			16,610,145

Non-controlling interest				1,590,625			1,802,551

Total equity				16,567,161			18,412,696

Total liabilities and equity			￦	37,159,341		￦	40,989,810

The above consolidated statements of financial position should be read in conjunction with the accompanying notes.

F-

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Profit or Loss

Years Ended December 31, 2020, 2021 and 2022


(In millions of Korean won)	Notes	2020			2021			2022

Operating revenue	26	￦	24,440,647		￦	25,205,659		￦	26,234,206
Revenue			24,099,394			24,898,005			25,638,855
Other income	27		341,253			307,654			595,351
Operating expenses	28		23,418,314			23,506,262			24,266,049

Operating profit			1,022,333			1,699,397			1,968,157
Finance income	29		498,614			726,283			690,428
Finance costs	29		(507,383	)		(563,330	)		(749,908	)
Share of net profits of associates and joint ventures	14		18,041			116,061			(17,285	)

Profit before income tax			1,031,605			1,978,411			1,891,392
Income tax expense	30		285,349			519,016			505,757

Profit for the year		￦	746,256		￦	1,459,395		￦	1,385,635

Profit for the year attributable to:
Owners of the Controlling Company		￦	700,889		￦	1,356,878		￦	1,260,470
Non-controlling interest		￦	45,367		￦	102,517		￦	125,165
Earnings per share attributable to the equity holders of the Controlling Company during the year (in Korean won):
Basic earnings per share	31	￦	2,858		￦	5,759		￦	5,200
Diluted earnings per share	31	￦	2,858		￦	5,747		￦	5,196

The above consolidated statements of profit or loss should be read in conjunction with the accompanying notes.

F-

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2020, 2021 and 2022


(In millions of Korean won)
	Notes		2020			2021			2022

Profit for the year			￦	746,256		￦	1,459,395		￦	1,385,635
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurements of the net defined benefit liability		18		(60,181	)		55,822			181,429
Shares of remeasurement gain (loss) of associates and joint ventures				786			(1,596	)		(332	)
Gain (loss) on valuation of equity instruments at fair value through other comprehensive income				51,696			144,890			(141,944	)
Items that may be subsequently reclassified to profit or loss:
Loss on valuation of debt instruments at fair value through other comprehensive income				(9,699	)		(15,110	)		(16,630	)
Valuation gain (loss) on cash flow hedge				(84,044	)		141,855			64,091
Other comprehensive income (loss) from cash flow hedges reclassified to profit (loss)				111,431			(136,583	)		(95,421	)
Share of other comprehensive income (loss) from associates and joint ventures				15,932			(24,216	)		(10,851	)
Exchange differences on translation of foreign operations				(2,666	)		505			17,464

Total other comprehensive income				23,255			165,567			(2,194	)

Total comprehensive income for the year			￦	769,511		￦	1,624,962		￦	1,383,441

Total comprehensive income for the year attributable to:
Owners of the Controlling Company				727,077			1,510,373			1,234,651
Non-controlling interest				42,434			114,589			148,790

The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.

F-

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Changes in Equity

Years ended December 31, 2020, 2021 and 2022


			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.

F-

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Changes in Equity (Continued)

Years ended December 31, 2020, 2021 and 2022


			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 loss of associates and joint ventures				—		—		—			(19,718	)		—			(19,718	)		(4,498	)		(24,216	)
Valuation gain 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-

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Changes in Equity (Continued)

Years ended December 31, 2020, 2021 and 2022


			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, 2022			￦	1,564,499	￦	1,440,258	￦	13,287,390		￦	117,469		￦	(1,433,080	)	￦	14,976,536		￦	1,590,625		￦	16,567,161

Comprehensive income
Profit for the year				—		—		1,260,470			—			—			1,260,470			125,165			1,385,635
Remeasurements of net defined benefit liabilities		18		—		—		165,524			—			—			165,524			15,905			181,429
Share of gain on remeasurements of associates and joint ventures				—		—		(189	)		—			—			(189	)		(143	)		(332	)
Share of other comprehensive loss of associates and joint ventures				—		—		—			(8,291	)		—			(8,291	)		(2,560	)		(10,851	)
Valuation loss on cash flow hedge		4,7		—		—		—			(32,140	)		—			(32,140	)		810			(31,330	)
Loss on valuation of financial instruments at fair value through other comprehensive income		4,7		—		—		4,091			(160,785	)		—			(156,694	)		(1,880	)		(158,574	)
Exchange differences on translation of foreign operations				—		—		—			5,971			—			5,971			11,493			17,464

Total comprehensive income for the year				—		—		1,429,896			(195,245	)		—			1,234,651			148,790			1,383,441


Transactions with owners
Dividends paid by the Controlling Company				—		—		(450,393	)		—			—			(450,393	)		—			(450,393	)
Dividends paid to non-controlling interest of subsidiaries				—		—		—			—			—			—			(26,407	)		(26,407	)
Changes in scope of consolidation				—		—		—			—			—			—			3,152			3,152
Changes in ownership interest in subsidiaries				—		—		—			—			88,924			88,924			32,695			121,619
Appropriations of loss on disposal of treasury stock				—		—		(11,577	)		—			11,577			—			—			—
Acquisition of treasury stock				—		—		—			—			763,081			763,081			—			763,081
Conversion of redeemable convertible preferred shares of subsidiaries to common shares				—		—		—			—						—			51,476			51,476
Others				—		—		—			—			(2,654	)		(2,654	)		2,220			(434	)

Subtotal				—		—		(461,970	)		—			860,928			398,958			63,136			462,094

Balance as at December 31, 2022			￦	1,564,499	￦	1,440,258	￦	14,255,316		￦	(77,776	)	￦	(572,152	)	￦	16,610,145		￦	1,802,551		￦	18,412,696

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

F-

Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Years ended December 31, 2020, 2021 and 2022


(In millions of Korean won)
	Notes		2020			2021			2022
Cash flows from operating activities
Cash generated from operations		33	￦	4,745,293		￦	5,829,607		￦	3,835,879
Interest paid				(254,852	)		(257,809	)		(263,520	)
Interest received				259,836			272,061			307,091
Dividends received				19,623			74,441			68,827
Income tax paid				(30,073	)		(356,466	)		(351,212	)

Net cash inflow from operating activities				4,739,827			5,561,834			3,597,065

Cash flows from investing activities
Collection of loans				63,435			54,934			44,287
Loans granted				(48,731	)		(54,128	)		(43,694	)
Disposal of financial assets at fair value through profit or loss				528,655			609,849			1,298,621
Disposal of financial assets at amortized cost				528,746			690,457			1,046,115
Disposal of financial assets at fair value through other comprehensive income				351,065			244,994			97,932
Disposal of assets held-for-sale				83,241			—			4,600
Disposal of investments in associates and joint ventures				24			10,880			34,828
Acquisition of investments in associates and joint ventures				(273,411	)		(487,828	)		(280,988	)
Disposal of property and equipment, and investment properties				49,832			174,413			178,063
Acquisition of property and equipment, and investment properties				(3,207,566	)		(3,495,021	)		(3,439,857	)
Acquisition of financial assets at fair value through profit or loss				(521,142	)		(753,907	)		(1,317,175	)
Acquisition of financial assets at amortized cost				(759,180	)		(623,924	)		(1,450,442	)
Acquisition of financial assets at fair value through other comprehensive income				(14,092	)		(131,674	)		(449,504	)
Disposal of intangible assets				13,362			11,624			20,088
Disposal of right-of-use assets				2,023			318			97
Discontinued operations				205			—			—
Acquisition of intangible assets				(511,094	)		(752,181	)		(545,190	)
Acquisition of right-of-use assets				(5,824	)		(4,261	)		(2,090	)
Decrease in cash due to changes in scope of consolidation				(41,018	)		(671,359	)		(41,088	)
Increase in cash due to changes in scope of consolidation				—			39,340			6,754

Net cash outflow from investing activities				(3,761,470	)		(5,137,474	)		(4,838,643	)

Cash flows from financing activities		3 4
Proceeds from borrowings and debentures				1,795,221			2,899,567			4,234,570
Repayments of borrowings and debentures				(1,627,354	)		(1,999,173	)		(2,843,249	)
Settlement of derivative assets and liabilities, net				36,594			(1,496	)		35,083
Cash inflow from consolidated equity transactions				—			67,693			125,066
Cash outflow from consolidated equity transactions				(1,192	)		(11,001	)		(28,848	)
Cash inflow from other financing activities				35,854			2,556			2,193
Dividends paid to shareholders				(310,567	)		(350,334	)		(476,800	)
Acquisition of treasury stock				(114,683	)		(193,626	)		—
Cash outflow from other financing activities				—			(60,901	)		—
Decrease in leases liabilities				(447,784	)		(394,567	)		(378,684	)
Decrease in other liabilities				(13,674	)		—			—

Net cash outflow from financing activities				(647,585	)		(41,282	)		669,331

Effect of exchange rate change on cash and cash equivalents				(2,042	)		1,890			1,717

Net increase (decrease) in cash and cash equivalents				328,730			384,968			(570,530	)
Cash and cash equivalents
Beginning of the year		5		2,305,894			2,634,624			3,019,592

End of the year		5	￦	2,634,624		￦	3,019,592		￦	2,449,062

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

F-

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

1.	General Information

The consolidated financial statements as of December 31, 2022 include the accounts of KT Corporation, which is the controlling company as defined under IFRS 10, Consolidated Financial Statements, and its 85 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

telecommunication

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

in the Controlling Company.

1.2

Consolidated Subsidiaries

The consolidated subsidiaries as at December 31, 2021 and 2022, are as follows:


			Controlling percentage ownership 1 (%)
Subsidiary	Type of business	Location	December 31, 2021			December 31, 2022			Closing month
KT Linkus Co., Ltd.	Public telephone maintenance	Korea		92.4	%		92.4	%	December
KT Submarine Co., Ltd. 2,4	Submarine cable construction and maintenance	Korea		39.3	%		32.9	%	December
KT Telecop Co., Ltd.	Security service	Korea		86.8	%		86.8	%	December
KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) 4	Data communication	Korea		73.0	%		73.0	%	December
KT Service Bukbu Co., Ltd.	Opening services of fixed line	Korea		67.3	%		67.3	%	December
KT Service Nambu Co., Ltd.	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
BC Card Co., Ltd.	Credit card business	Korea		69.5	%		69.5	%	December

F-

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


			Controlling percentage ownership 1 (%)
Subsidiary	Type of business	Location	December 31, 2021			December 31, 2022			Closing month
VP Inc. 4	Payment security service for credit card, others	Korea		50.9	%		69.7	%	December
H&C Network	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	%		61.3	%	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	%		95.6	%	December
KT M&S Co., Ltd.	PCS distribution	Korea		100.0	%		100.0	%	December
GENIE Music Corporation 3,4	Online music production and distribution	Korea		36.2	%		36.0	%	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 4	Satellite TV	Korea		50.3	%		50.2	%	December
Skylife TV Co., Ltd.	TV contents provider	Korea		100.0	%		100.0	%	December
KT Estate Inc.	Residential building development and supply	Korea		100.0	%		100.0	%	December
KT Investment Management Inc . (KT AMC Co., Ltd.)	Asset management, real estate and consulting services	Korea		100.0	%		100.0	%	December
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 Co., Ltd.	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 Co., Ltd.	Management of sports teams	Korea		100.0	%		100.0	%	December
KT Music Contents Fund No.2	Music and contents investment business	Korea		100.0	%		100.0	%	December
KT-Michigan Global Content Fund	Content investment business	Korea		88.6	%		88.6	%	December
KTCS Corporation 2,4	Database and online information provider	Korea		32.2	%		34.1	%	December
KTIS Corporation 2,4	Database and online information provider	Korea		31.4	%		33.3	%	December
KT M Mobile Co., Ltd.	Special category telecommunications operator and sales of communication device	Korea		100.0	%		100.0	%	December
KT Investment Co., Ltd.	Financing business for new technology	Korea		100.0	%		100.0	%	December
PlayD Co., Ltd.	Advertising agency	Korea		70.4	%		70.4	%	December
Next Connect PFV	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
AOS Ltd.	System integration and maintenance	Rwanda		51.0	%		51.0	%	December
KT Japan Co., Ltd.	Foreign investment business and local counter work	Japan		100.0	%		100.0	%	December
East Telecom LLC	Wireless/fixed line internet business	Uzbekistan		91.6	%		91.6	%	December

F-

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated

Financial

Statements

December 31, 2020, 2021 and 2022


			Controlling percentage ownership 1 (%)
Subsidiary	Type of business	Location	December 31, 2021			December 31, 2022			Closing month
KT America, Inc.	Foreign investment business and local counter work	USA		100.0	%		100.0	%	December
PT. BC Card Asia Pacific	Software development and supply	Indonesia		99.9	%		99.9	%	December
KT Hongkong Telecommunications Co., Ltd.	Fixed line telecommunication business	Hong Kong		100.0	%		100.0	%	December
Korea Telecom Singapore Pte. Ltd.	Foreign investment business and local counter work	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 Huimangjieum	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.	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	%		90.9	%	December
KHS Corporation	Operation and maintenance of facilities	Korea		100.0	%		100.0	%	December
Lolab Co., Ltd.	Truck transportation and trucking arrangement business	Korea		80.0	%		79.8	%	December
HCN Co., Ltd.	Cable television service	Korea		100.0	%		100.0	%	December
Millie Seojae 3	Book contents service	Korea		38.6	%		38.6	%	December
KT ES Pte. Ltd.	Foreign investment business	Singapore		57.6	%		57.6	%	December
Epsilon Global Communications PTE. Ltd.	Network service industry	Singapore		100.0	%		100.0	%	December
Epsilon Telecommunications (SP) PTE. Ltd.	Fixed line telecommunication business	Singapore		100.0	%		100.0	%	December
Epsilon Telecommunications (US) PTE. Ltd.	Fixed line telecommunication business	Singapore		100.0	%		100.0	%	December
Epsilon Telecommunications Limited	Fixed line telecommunication business	UK		100.0	%		100.0	%	December
Epsilon Telecommunications (HK) Limited	Fixed line telecommunication business	Hong Kong		100.0	%		100.0	%	December
Epsilon US Inc.	Fixed line telecommunication business	USA		100.0	%		100.0	%	December
Epsilon Telecommunications (BG) EOOD	Employee support service	Bulgaria		100.0	%		100.0	%	December
Epsilon M E A General Trading LLC 3	Local counter work	United Arab Emirates		49.0	%		49.0	%	December
Nasmedia-KT Alpha Future Growth Strategic Investment Fund	Investment fund	Korea		100.0	%		100.0	%	December
KT Strategic Investment Fund 6	Investment fund	Korea		100.0	%		100.0	%	December
Altimedia Corporation	Software development and delivery	Korea		100.0	%		100.0	%	December
Alticast B.V.	Software development and delivery	Netherlands		100.0	%		100.0	%	December
Alticast Company Limited	Software development and delivery	Vietnam		100.0	%		100.0	%	December
BCCARD VIETNAM LTD.	Software sales business	Vietnam		100.0	%		100.0	%	December
KTP SERVICES INC.	Fixed line telecommunication business	Philippines		100.0	%		100.0	%	December
KT RUS LLC	Foreign investment business	Russia		—			100.0	%	December
Hangang Real Estate Investment Trust No. 24	Investment fund	Korea		—			75.0	%	December

F-

Table of Contents

KT Corporation and

Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Controlling percentage
ownership

(%)

Subsidiary

Type of business

Location

December 31,
2021

December 31,
2022

Closing

month

KT DX Vietnam Company Limited

Software development

Vietnam

—

100.0

December

kt cloud Co., Ltd.

Information telecommunication business

Korea

—

100.0

December

Pocheon Jeonggyori Development Co., Ltd.

Residential building development

Korea

—

80.9

December

Alpha DX Solution Co., Ltd.

Data communication service

Korea

—

100.0

December

PT CRANIUM ROYAL ADITAMA

Software development

Indonesia

—

67.0

December

KT Primorye IDC LLC

Data processing and associated service delivery

Russia

—

99.0

December

Juice Inc.

Online information provider/Software development and delivery

Korea

—

41.2

December

SPARK AND ASSOCIATES INC.

Network service industry

Korea

—

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, 2022:


Changes	Location	Name of Subsidiary	Reason
Included	Russia	KT RUS LLC	Newly established
Included	Korea	Hangang Real Estate Investment Trust No. 24	Newly established
Included	Vietnam	KT DX Vietnam Company Limited	Newly established
Included	Korea	kt cloud Co., Ltd.	Newly established
Included	Korea	Pocheon Jeonggyori Development Co., Ltd.	Newly established
Included	Korea	Alpha DX Solution Co., Ltd.	Split-off
Included	Indonesia	PT CRANIUM ROYAL ADITAMA	Transferred
Included	Russia	KT Primorye IDC LLC	Newly established
Included	Korea	SPARK AND ASSOCIATES INC.	Transferred
Included	Korea	Juice Inc.	Transferred
Excluded	Korea	MEDIA GENIE Co., Ltd.	Merged
Excluded	Korea	kt seezn Co., Ltd.	Merged
Excluded	UK	7D Digital Limited	Liquidated
Excluded	Korea	Whowho&Company Co., Ltd.	Merged

F-1

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Summarized information for consolidated subsidiaries as at and for the years ended December 31, 2020, 2021 and 2022 is as follows:


( 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 Co., Ltd.		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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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


(In millions of Korean won)	December 31, 2021
	Total assets		Total liabilities		Operating revenues 3		Profit (loss) for the year 3
KT Linkus Co., Ltd	￦	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,		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

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


( i n millions of Korean won)	December 31, 2022
	Total assets		Total liabilities		Operating revenues 3		Profit (loss) for the year 3
KT Linkus Co., Ltd.	￦	47,734	￦	47,498	￦	76,135	￦	(614	)
KT Submarine Co., Ltd.		120,255		7,884		42,848		(12,126	)
KT Telecop Co., Ltd.		370,004		230,965		517,406		4,267
KT Alpha Co., Ltd. 1 (KT Hitel Co., Ltd.)		406,236		172,211		516,737		13,115
KT Service Bukbu Co., Ltd.		74,673		65,820		252,304		3,227
KT Service Nambu Co., Ltd.		80,450		66,479		301,720		3,067
BC Card Co., Ltd. 1		5,666,075		4,109,200		3,897,090		148,341
H&C Network		82,737		6,640		27,392		992
Nasmedia Co., Ltd. 1		516,945		275,730		153,211		27,691
KTDS Co., Ltd. 1		401,932		228,474		723,161		30,941
KT M&S Co., Ltd.		255,310		204,336		730,802		8,105
KT MOS Bukbu Co., Ltd.		38,684		22,553		83,085		4,607
KT MOS Nambu Co., Ltd.		42,011		25,416		83,330		5,035
KT Skylife Co., Ltd. 1		1,359,166		503,679		1,038,468		20,941
KT Estate Inc. 1		2,480,333		833,842		478,188		58,780
KT GDH Co., Ltd.		12,059		1,596		4,323		451
KT Sat Co., Ltd.		677,980		89,644		185,313		28,073
KT Sports Co., Ltd.		28,220		15,461		65,350		(7,302	)
KT Music Contents Fund No.2		15,718		277		1,040		735
KT-Michigan Global Content Fund		2,371		27		33		(1,095	)
KT M Mobile Co., Ltd.		152,114		49,816		262,918		4,731
KT Investment Co., Ltd. 1		103,354		79,182		15,136		2,840
KTCS Corporation 1		419,726		228,618		1,031,010		17,634
KTIS Corporation		396,208		199,204		536,229		15,917
Next Connect PFV		624,734		277,967		3		(3,712	)
KT Japan Co., Ltd. 1		1,888		3,141		3,263		226
KT America, Inc.		5,945		843		8,070		37
KT Rwanda Networks Ltd. 2		126,721		267,369		30,834		(27,467	)
AOS Ltd. 2		10,972		905		8,049		1,274
KT Hong Kong Telecommunications Co., Ltd.		10,505		4,768		20,413		51
KT Huimangjieum 1		6,984		2,582		22,860		494
KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.)		141,463		89,853		258,435		10,302
KT Studio Genie Co., Ltd. 1		987,270		268,911		723,580		189,498
Lolab Co., Ltd.		35,091		17,247		74,881		(7,985	)
East Telecom LLC 1		42,691		21,645		27,030		6,419
KT ES Pte. Ltd. 1		240,721		88,640		78,815		(23,957	)
KTP SERVICES INC.		3,832		2,044		776		(255	)
Altimedia Corporation 1		44,861		15,777		47,203		6,035
KT RUS LLC 1		967		16		5		(871	)
KT DX Vietnam Company Limited		1,815		6		—		26
kt cloud Co., Ltd. 1		1,348,684		245,872		432,118		14,712

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.

3	Profit or loss is included from the date of acquisition of control to the end of the reporting period.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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.

Management

also

needs

to exercise

judgement

in 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, 2022.

- Amendments to IFRS 16

Leases – 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. A lessee shall apply the practical expedient consistently to eligible contracts with similar characteristics and in similar circumstances. The amendments do not have a significant impact on the consolidated financial statements.

- Amendments to IFRS 3

Business Combination – Reference to the Conceptual Framework

The amendments update a reference of definition of assets and liabilities to be recognized in a business combination 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 clarify that contingent assets should not be recognized at the acquisition date. The amendments do not have a significant impact on the consolidated financial statements.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

- 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 do not have a significant impact on the consolidated 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 do not have a significant impact on the consolidated 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

(2) New standards and interpretations not yet adopted by the Group

The following new accounting standards and interpretations that have been published are not mandatory for December 31, 2022 reporting periods and have not been early adopted by the Group.

- 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 recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1,

2024

, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements.

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

- 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 will 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.

IAS 1 Presentation of Financial Statements – Disclosure of Gain or Loss on Valuation of Financial Liabilities Subject to Adjustment of Exercise Price

If the entire or a part of financial instrument, whose exercise price is subject to change due to the issuer’s share price, is classified as a financial liability, the carrying amount of the financial liability and related gains and losses shall be disclosed. 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

wil

have a significant impact on the consolidated financial statements.

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.

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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 loss of control

Any differences between the amount of the adjustment to non-controlling interest that do not result in 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 have control over a subsidiary, 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 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.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

(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 35). 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.

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

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

•

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 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’

‘

finance costs’ and impairment loss in ‘finance

costs’

‘

operating expenses’.

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

•

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’

‘

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’

‘

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.

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 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.

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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 38.

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 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.

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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 – 10 years
Tools		2 – 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 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 5 to 40 years.

2.13

Intangible Assets

(1) Goodwill

Goodwill is measured as explained in Note 2.3 (1) 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.

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December 31, 2020, 2021 and 2022

(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

), subscription rights, broadcast license, facility-use rights, and transportation rights

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		3 – 7 years
Software		3 – 7 years
Frequency usage rights		5 – 10 years
Others 1		1 – 50 years

Membership rights (condominium membership and golf membership), subscription rights, broadcast license, facility usage rights and transportation 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 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 deferred and

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

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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.

Borrowings are

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 (

net of

transaction cost) and the

redemption

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

draw-down occurs

. There is a high possibility that

borrowings

will be executed as part or all of the borrowing limit agreement (relevant fees to the extent that there is no evidence) are recognized as assets as advance payments for liquidity

services

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

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December 31, 2020, 2021 and 2022

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.

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

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December 31, 2020, 2021 and 2022

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.

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.

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December 31, 2020, 2021 and 2022

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

(a) Lessee

The Group leases various repeater server rack, offices, communication line facilities, machinery, cars, and others.

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.

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

•

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.

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December 31, 2020, 2021 and 2022

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

vehicles, machinery,

and

others

. 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 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.

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

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December 31, 2020, 2021 and 2022

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 mainly provides telecommunication services and sells handsets. The Group identifies performance obligations with a customer such as providing telecommunication services, selling handsets, and others. 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.

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 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

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December 31, 2020, 2021 and 2022

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.

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 2022 were approved for issuance by the Board of Directors on April 13, 2023 and are subject to change with the approval of shareholders at their Annual General Meeting.

3.	Critical Accounting Estimates and Assumptions

The preparation of financial statements requires the Group to make estimates and assum

ptio

concerning

the future. Management also needs to exercise judgement in applying the Group’s

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December 31, 2020, 2021 and 2022

accounting policies. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. As the resulting accounting estimates will, by definition, seldom equal the actual results, it poses significant risk of resulting in a material adjustment.

Estimates and assumptions that have significant risks 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

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.

3.3

Fair Value of 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 3

3.4

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)

3.5

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.

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3.6

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).

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, 202

1 an

d 2022, are as follows:


(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


(in 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

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December 31, 2020, 2021 and 2022


(in millions of Korean won)	December 31, 2022
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	￦	2,449,062	￦	—	￦	—	￦	—	￦	2,449,062
Trade and other receivables		7,459,994		—		129,124		—		7,589,118
Other financial assets		1,060,058		1,064,856		1,508,192		190,830		3,823,936

(in millions of Korean won)	December 31, 2022
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	￦	8,397,264	￦	—	￦	—	￦	—	￦	8,397,264
Borrowings		10,006,685		—		—		—		10,006,685
Other financial liabilities		246,606		141,280		33,555		—		421,441
Lease liabilities		—		—		—		1,172,038		1,172,038

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December 31, 2020, 2021 and 2022

Gains or losses arising from financial instruments by category for the years ended December 31, 2020, 2021 and 2022, are as follows:


(in millions of Korean won)	2020			2021			2022
Financial assets at amortized cost
Interest income 1	￦	55,742		￦	74,937		￦	144,505
Gain (loss) on foreign currency transactions 4		(19,244	)		12,826			23,824
Gain (loss) on foreign currency translation		(3,895	)		2,911			(2,151	)
Gain (loss) on disposal		138			35			(81	)
Loss on valuation		(140,474	)		(110,286	)		(132,102	)
Financial assets at fair value through profit or loss
Interest income 1		6,548			3,673			6,008
Dividend income 5		4,379			21,499			4,600
Gain (loss) on valuation 6		59,044			64,659			(29,282	)
Gain (loss) on disposal		(329	)		29,974			2,347
Gain (loss) on foreign currency transactions 4		(38	)		—			1,100
Gain on foreign currency translation		—			17,794			13,711
Financial assets at fair value through other comprehensive income
Interest income 1		227,736			222,290			190,281
Dividend income 5		56			1,365			9,522
Loss on valuation		—			—			(61	)
Loss on disposal		(8,152	)		(22,712	)		(62,183	)
Other comprehensive income (loss) for the year 2		41,997			129,780			(158,574	)
Derivatives used for hedging
Gain on transactions		6,050			—			27,628
Loss (gain) on valuation 7		(2,707	)		203,961			150,699
Other comprehensive income (loss) for the year 2		(2,373	)		144,967			88,048
Reclassified to profit or loss from other comprehensive income (loss) for the year 2,3		3,645			(143,305	)		(110,616	)
Financial liabilities at fair value through profit or loss
Gain on valuation		119			42,447			30,031
Gain on disposal		799			2,136			—
Interest expense 1		—			—			(4,046	)
Gain (loss) on foreign currency transactions 4		—			(2	)		24
Derivatives used for hedging
Gain (loss) on transactions		1,141			(6,208	)		(1,291	)
Loss on valuation		(161,003	)		(7,206	)		(17,237	)
Other comprehensive loss for the year 2		(81,671	)		(3,112	)		(23,957	)
Reclassified to profit or loss from other comprehensive income for the year 2,3		107,786			6,722			15,195
Financial liabilities at amortized cost
Interest expense 1		(220,945	)		(232,197	)		(275,302	)
Loss on foreign currency transactions 4		(10,717	)		(3,580	)		(34,574	)
Gain (loss) on foreign currency translation		141,849			(201,623	)		(168,577	)
Lease liabilities
Interest expense 1		(44,091	)		(36,650	)		(41,469	)

Total	￦	(38,610	)	￦	215,095		￦	(353,980	)

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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

￦

68,869

million (2020: ￦20,854 million, 2021:

￦

27,440 million) and related interest expense recognized as operating expense is

￦

27,060

million (2020: ￦1,456 million, 2021:

￦

5,458 million) for the year ended December 31, 2022.

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.

BC Card Co., Ltd., a subsidiary of the Group, recognized foreign currency transaction gain and loss and as operating revenue and expense. In relation to this, foreign currency transaction gain and loss recognized as operating revenue and expense amount to foreign exchange gain

￦

3,569

million (2020: transaction loss ￦19,687 million, 2021 foreign exchange gain and loss:

￦

2,373 million), respectively, for the year ended December 31, 2022.

5	BC Card Co., Ltd., a subsidiary of the Group, recognized dividend income as operating revenue. Related dividend income recognized as operating revenue is ￦ 2,299 million (2020: ￦2,059 million, 2021: ￦ 1,340 million) for the year ended December 31, 2022.

KT Investment Co., Ltd., etc., subsidiaries of the Group, recognized gain and loss on valuation of financial instruments measured at fair value through profit or loss as operating income and expenses. In relation to this, valuation gain and loss recognized as operating revenue and expense amount to valuation loss

￦

7,860

million (2020: valuation gain ￦40,822 million, 2021 valuation loss:

￦

15,459 million), for the year ended December 31, 2022.

7	BC Card Co., Ltd., a subsidiary of the Group, recognized gain and loss on valuation of derivatives as operating income and expenses. Related valuation gain and loss recognized as operating revenue and expense is ￦ 418 million for the year ended December 31, 2022.

5.	Cash and Cash Equivalents

Restricted cash and cash equivalents as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021	December 31, 2022	Description
Bank deposits	￦ 28,219	￦ 29,874	Deposit restricted for government project and others

Cash and cash equivalents in the

consolidated statements

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

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

6.	Trade and Other Receivables

Trade and other receivables as at December 31, 2021 and 2022, are as follows:


	December 31, 2021
( i n 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

Total	￦	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

Total	￦	1,233,849	￦	(110,987	)	￦	(31,536	)	￦	1,091,326


	December 31, 2022
( i n millions of Korean won)	Total amounts		Provision for impairment			Present value discount			Carrying amount
Current assets
Trade receivables	￦	3,439,542	￦	(342,539	)	￦	(6,926	)	￦	3,090,077
Other receivables		3,092,261		(82,243	)		(2,023	)		3,007,995

Total	￦	6,531,803	￦	(424,782	)	￦	(8,949	)	￦	6,098,072

Non-current assets
Trade receivables	￦	408,098	￦	(1,199	)	￦	(11,540	)	￦	395,359
Other receivables		1,249,096		(136,300	)		(17,109	)		1,095,687

Total	￦	1,657,194	￦	(137,499	)	￦	(28,649	)	￦	1,491,046

The fair values of trade and other receivables with original maturities less than one year

are

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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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Details of changes in provision for impairment for the years ended December 31, 2021 and 2022, are as follows:


	2021						2022
(in millions of Korean won)	Trade receivables			Other receivables			Trade receivables			Other receivables
Beginning balance	￦	327,315		￦	204,604		￦	349,725		￦	201,387
Provision		82,329			23,015			64,522			65,941
Reversal		—			(508	)		—			(850	)
Write-off/transfer		(62,564	)		(25,900	)		(69,430	)		(49,904	)
Changes in consolidation scope		416			(300	)		(43	)		—
Others		2,229			476			(1,036	)		1,969

Ending balance	￦	349,725		￦	201,387		￦	343,738		￦	218,543

Provisions for impairment on trade and other receivables are recognized as operating expenses and finance costs.

Details of other receivables as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Loans	￦	101,718		￦	98,953
Receivables 1		1,872,467			2,668,545
Accrued income		5,933			32,218
Refundable deposits		349,360			339,450
Loans receivable		328,753			1,013,428
Finance lease receivables		85,370			105,690
Others		61,288			63,941
Less: Provision for impairment		(201,387	)		(218,543	)

	￦	2,603,502		￦	4,103,682

1	The settlement receivables of BC Card Co., Ltd. amounting to ￦ 1,960,579 million (December 31, 2021: ￦ 1,108,936 million) are included.

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, 2022.

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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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

7.	Other Financial Assets and Liabilities

Details of other financial assets and liabilities as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Other financial assets
Financial assets at amortized cost 1	￦	608,389		￦	1,060,058
Financial assets at fair value through profit or loss 1,2		952,319			1,064,856
Financial assets at fair value through other comprehensive income 1		347,877			1,508,192
Derivatives used for hedging		99,453			190,830
Less: Non-current		(822,379	)		(2,501,484	)

Current	￦	1,185,659		￦	1,322,452

Other financial liabilities
Financial liabilities at amortized cost 3	￦	263,500		￦	246,606
Financial liabilities at fair value through profit or loss		216,040			141,280
Derivatives used for hedging		18,126			33,555
Less: Non-current		(424,859	)		(412,650	)

Current	￦	72,807		￦	8,791

1	As at December 31, 2022, the Group’s other financial assets amounting to ￦ 102,215 million (December 31, 2021: ￦ 115,033 million), which consist of checking account deposits, time deposits and others, are subject to withdrawal restrictions.

2	As at December 31, 2022, the Group provided investments in Korea Software Financial Cooperative amounting to ￦ 5,626 million as a collateral for the payment guarantee provided by the Cooperative.

3	The amount includes liabilities related to the obligation to acquire additional shares in Epsilon Global Communications Pte. Ltd. and MILLIE Co., Ltd. (Note 20).

Details of financial assets at fair value through profit or loss as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Equity Instruments (Listed)	￦	24,285		￦	26,647
Equity Instruments (Unlisted)		64,835			72,517
Debt securities		862,481			942,274
Derivatives held for trading 1		718			23,418

Total		952,319			1,064,856
Less: non-current		(488,040	)		(609,887	)

Current	￦	464,279		￦	454,969

1	During the year ended December 31, 2022, derivative assets amount to ￦ 18,996 million, which is recognized by an agreement with LS Cable & System Ltd. In connection with KT Submarine Co., Ltd. (Note 20).

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, 2022.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Details of financial assets at fair value through other comprehensive income as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Equity Instruments (Listed) 1	￦	19,079		￦	1,006,476
Equity Instruments (Unlisted)		234,048			496,284
Debt securities		94,750			5,432

Total		347,877			1,508,192
Less: non-current		(259,435	)		(1,508,192	)

Current	￦	88,442		￦	—

1	As at December 31, 2022, financial assets at fair value through other comprehensive income include shares of Shinhan Financial Group Co., Ltd., HYUNDAI MOBIS, and HYUNDAI MOTOR COMPANY.

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.

Details of valuation of derivatives

used for hedging as at December 31, 2021 and 2022, are as follows:


	December 31, 2021						December 31, 2022
( i n millions of Korean won)	Assets			Liabilities			Assets			Liabilities
Interest rate swap 1, 3	￦	—		￦	77		￦	4,236		￦	—
Currency swap 2, 3		99,453			18,049			186,594			33,555

Total		99,453			18,126			190,830			33,555
Less: non-current		(67,889	)		(242	)		(147,141	)		(33,555	)

Current	￦	31,564		￦	17,884		￦	43,689		￦	—

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 assets ￦ 100,537 million, liabilities ￦ 500 million and the Group is assessing the impact of switching to an alternative interest rate indicator.

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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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

The valuation gains and losses on the derivatives contracts for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020							2021						2022
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	￦	—	￦	—	￦	(567	)	￦	—	￦	—	￦	1	￦	63	￦	490	￦	4,666
Currency swap		—		161,661		(113,175	)		203,961		7,206		191,569		154,611		20,723		79,781
Currency forwards		—		2,049		—			—		—		—		—		—		754

Total	￦	—	￦	163,710	￦	(113,742	)	￦	203,961	￦	7,206	￦	191,570	￦	154,674	￦	21,213	￦	85,201

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

The ineffective portion recognized in profit or loss on the cash flow

hedges are

valuation

gains

￦

2,707 million for the

year ended December 31, 2022

(2020: valuation loss of

￦

2,711 million, 2021: valuation gain of

￦

11,825 million).

The unsettled amount of derivative instruments for the years ended December 31, 2021 and 2022, are as follows:

(i) Hedging instruments


( i n 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


( i n millions of Korean won and thousands of foreign currencies)	2022
					Book value of hedging instruments				Changes in fair value to calculate the ineffective portion of hedges
Currency	Foreign currency		Contract amount		Assets		Liabilities
USD		2,111,509	￦	2,527,626	￦	160,243	￦	32,936	￦	170,856
JPY		400,000		4,357		—		409		(308	)
SGD		284,000		245,208		26,351		—		20,511
EUR		7,700		10,283		—		210		129
KRW		—		170,000		4,236		—		4,717

Total			￦	2,957,474	￦	190,830	￦	33,555	￦	195,905

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

(ii) Hedged item


( i n millions of Korean won)
( i n millions of Korean won)	2021							2022
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	￦	2,401,943	￦	(177,120	)	￦	21,826	￦	2,675,885	￦	(170,010	)	￦	(13,947	)
JPY		309,072		7,199			269		3,813		308			116
SGD		249,108		(15,570	)		3,071		267,843		(18,720	)		3,406
EUR		10,336		(53	)		18		10,404		(121	)		582
KRW		—		—			—		101,035		(4,655	)		4,385

Total	￦	2,970,459	￦	(185,544	)	￦	25,184	￦	3,058,980	￦	(193,198	)	￦	(5,458	)

1	The amount is after the deferred tax directly added or subtracted to the capital is reflected.

Details of financial liabilities at fair value through profit or loss as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021		December 31, 2022
Derivatives held for trading 1,2,3	￦	216,040	￦	141,280

The Group signed a shareholder-to-share agreement with financial investors participating in the paid-in capital increase of K Bank Inc. for the year period ended December 31, 2021. According to the Drag-Along Right, if K Bank Inc. 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 convertible bonds issued by the Group (Note 16).

3	During the year ended December 31, 2022, derivative liabilities recognized amount to ￦ 930 million, which is recognized by an agreement with LS Cable & System Ltd. in connection with KT Submarine Co., Ltd. (Note 20).

The valuation gain and loss on financial liabilities at fair value through profit or loss for the years ended December 31, 2020, 2021 and 2022, are as follows:

2020

2021

2022

(

n millions of Korean won)

Valuation

gain

Valuation

loss

Valuation

gain

Valuation

loss

Valuation

gain

Valuation

loss

Derivatives held for trading

￦

172

￦

51,187

￦

8,741

￦

24,683

￦

1,800

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

8.	Inventories

Inventories as at December 31, 2021 and 2022, are as follows:


	December 31, 2021							December 31, 2022
( i n millions of Korean won)	Acquisition cost		Valuation allowance			Book amount		Acquisition cost		Valuation Allowance			Book amount
Merchandise	￦	601,360	￦	(120,304	)	￦	481,056	￦	768,748	￦	(96,010	)	￦	672,738
Others		33,089		—			33,089		44,935		—			44,935

Total	￦	634,449	￦	(120,304	)	￦	514,145	￦	813,683	￦	(96,010	)	￦	717,673

Cost of inventories recognized as expenses for year ended December 31, 2022, amounts to

￦

3,485,288 million (2020:

￦

3,938,842 million, 2021:

￦

3,787,203 million) and reversal of valuation loss on inventory recognized amounts to

￦

24,294 million for year ended December 31, 2022 (2020: valuation loss on inventory amounts to

￦

11,214 million, 2021: valuation loss on inventory amounts to

￦

12,920 million).

9.	Other Assets and Liabilities

Other assets and liabilities as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Other assets
Advance payments	￦	151,266		￦	181,150
Prepaid expenses		100,697			107,775
Contract cost		1,801,244			1,817,678
Contract assets		745,085			802,253
Others		22,212			12,964
Less: Non-current		(776,363	)		(820,608	)

Current	￦	2,044,323		￦	2,101,212

Other liabilities
Advances received 1	￦	372,375		￦	387,986
Withholdings		135,160			155,017
Unearned revenue 1		35,577			46,493
Lease liabilities		1,159,369			1,172,038
Contract liabilities		323,651			284,107
Others		25,757			33,108
Less: Non-current		(927,596	)		(945,731	)

Current	￦	1,124,293		￦	1,133,018

1	The amounts include adjustments arising from adoption of IFRS 15 R evenue from Contracts with Customers (Note 26).

10.	Assets Held for Sale

With the decision to sell certain properties and other assets during the year ended December 31, 2021, the Group has classified

￦

1,187 million as assets held for sale. During the year ended December 31, 2021, the Group recognized impairment loss of

￦

11 million for assets held, and classified them as other expenses (impairment loss on assets held for sale). The assets were

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

disposed during the period ended December 31, 2022, and the Group recognized gain on disposal of

￦

3,305 million for assets held. There are no assets held for sale as of the end of reporting period.

11.	Property and Equipment

Changes in property and equipment for the years ended December 31, 2021 and 2022, are as follows:


	2021
( i n 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	)

	2022
( i n millions of Korean won)	Land			Buildings and structures			Machinery and equipment			Others			Construction- in-progress			Total
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	)

Beginning, net		1,315,797			2,517,422			9,316,571			221,238			1,093,858			14,464,886
Acquisition and capital expenditure		11,392			32,030			129,754			67,921			3,105,283			3,346,380
Disposal and termination		(2,556	)		(4,338	)		(76,608	)		(4,695	)		(3,926	)		(92,123	)
Depreciation		—			(147,620	)		(2,413,191	)		(79,376	)		—			(2,640,187	)
Impairment		—			—			(6,084	)		(7,825	)		(2,247	)		(16,156	)
Transfer in (out)		24,647			230,955			2,660,753			31,036			(3,010,193	)		(62,802	)
Transfer from (to) investment properties		(63,278	)		(140,229	)		—			—			(2,676	)		(206,183	)
Changes in scope of consolidation		—			—			(4,386	)		(481	)		(3,720	)		(8,587	)
Others		(13,194	)		66,341			7,020			(4,382	)		(68,834	)		(13,049	)

Ending, net	￦	1,272,808		￦	2,554,561		￦	9,613,829		￦	223,436		￦	1,107,545		￦	14,772,179

Acquisition cost	￦	1,272,940		￦	4,830,853		￦	42,091,573		￦	1,276,779		￦	1,108,043		￦	50,580,188
Less: Accumulated depreciation (including accumulated impairment loss and others)		(132	)		(2,276,292	)		(32,477,744	)		(1,053,343	)		(498	)		(35,808,009	)

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Details of property and equipment provided as collateral as at December 31, 2021 and 2022, are as follows:

(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

(

n millions of Korean won)

December 31, 2022

Carrying
amount

Secured
amount

Related line
item

Related
amount

Secured

party

Land and Buildings

￦

11,353

￦

15,774

Borrowings

￦

3,228

Industrial
Bank of
Korea,

Korea
Development
Bank

The borrowing costs capitalized for qualifying assets amount to

￦

9,954 million (2020:

￦

8,452 million, 2021:

￦

5,360 million), for the year ended December 31, 2022. The interest rate applied to calculate the capitalized borrowing costs is 3.10% (2020: 2.36%, 2021: 2.04%), for the year ended December 31, 2022.

12.	Investment Properties

Changes in investment properties for the years ended December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	2021
( i n millions of Korean won)	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	)

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


( i n millions of Korean won)	2022
( i n millions of Korean won)	Land			Buildings			Construction- in-progress			Total
Acquisition cost	￦	815,331		￦	1,424,066		￦	66,801		￦	2,306,198
Less: Accumulated depreciation		(1,568	)		(583,976	)		—			(585,544	)

Beginning, net		813,763			840,090			66,801			1,720,654
Acquisition		14,569			17,351			55,478			87,398
Disposal and termination		(14,725	)		(5,858	)		(17	)		(20,600	)
Depreciation		—			(47,004	)		—			(47,004	)
Transfer from(to) property and equipment		63,278			140,229			2,676			206,183
Changes in consolidation scope
Transfer and others		2,907			(28,350	)		12,170			(13,273	)

Ending, net	￦	879,792		￦	916,458		￦	137,108		￦	1,933,358

Acquisition cost	￦	881,360		￦	1,577,736		￦	137,108		￦	2,596,204
Less: Accumulated depreciation		(1,568	)		(661,278	)		—			(662,846	)

The fair value of investment properties is

￦

5,370,047 million as at December 31, 2022 (December 31, 2021:

￦

4,263,381 million). The fair value of investment properties is estimated based on the expected cash flow.

Rental income from investment properties is

￦

206,127 million

in 2022

(2021:

￦

185,877 million) and direct operating

expense

(including repairs and maintenance) arising from investment properties that generated rental income during the period are recognized as operating expenses.

As at December 31, 2022, 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

￦

57,981 million for one year or less,

￦

107,386 million more than one year and less than five years,

￦

26,491 million over five years, and

￦

191,858 million in total.

Details of investment properties provided as collateral as at December 31, 2021 and 2022, are as follows:

(

n 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

(

n millions of Korean won)

December 31, 2022

Carrying
amount

Secured
amount

Related
account

Related
amount

Land and Buildings

￦

460,166

￦

61,733

Deposits

￦

52,662

Land and Buildings

￦

2,546

￦

3,326

Borrowings

￦

2,772

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

13.	Intangible Assets

Changes in intangible assets for the years ended December 31, 2021 and 2022, are as follows:


	2021
( i n 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	)


	2022
( i n millions of Korean won)	Goodwill			Development costs			Software			Frequency usage rights			Others			Total
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	)

Beginning, net	￦	696,872		￦	228,373		￦	139,425		￦	1,839,131		￦	543,532		￦	3,447,333
Acquisition and capital expenditure		19,455			45,997			55,651			—			225,886			346,989
Disposal and termination		—			(5,503	)		(48	)		—			(20,117	)		(25,668	)
Amortization		—			(93,374	)		(54,748	)		(350,265	)		(128,874	)		(627,261	)
Impairment		(24,006	)		(744	)		(508	)		—			(5,416	)		(30,674	)
Changes in scope of consolidation		—			(2,320	)		(802	)		—			(7,144	)		(10,266	)
Others		15,902			(573	)		16,106			(610	)		(1,445	)		29,380

Ending, net	￦	708,223		￦	171,856		￦	155,076		￦	1,488,256		￦	606,422		￦	3,129,833

Acquisition cost		1,037,887			1,803,687			1,156,951			2,617,707			1,532,061			8,148,293
Less: Accumulated amortization (including accumulated impairment loss and others)		(329,664	)		(1,631,831	)		(1,001,875	)		(1,129,451	)		(925,639	)		(5,018,460	)

The carrying amount of membership rights with an indefinite useful life not subject to amortization, except for goodwill, is

￦

210,114 million as at December 31, 2022 (December 31, 2021:

￦

219,204 million).

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Goodwill is allocated to the Group’s cash-generating unit which is

identified

by operating segments. As at December 31, 2022, goodwill allocated to each cash-generating unit is as follows:


( i n millions of Korean won)
Cash generating Unit	Amount

Mobile services 1,9	￦	65,057
BC Card Co., Ltd. 2		41,234
HCN Co., Ltd. 3		228,674
GENIE Music Corporation 4		50,214
MILLIE Co., Ltd. 5		54,725
PlayD Co., Ltd. 6		42,745
KT Telecop Co., Ltd. 7		15,418
Epsilon Global Communications Pte. Ltd. 8		160,033
KT MOS Bukbu Co., Ltd and others		50,123

Total	￦	708,223

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 1.13% 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 8.48% 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, 2020, 2021 and 2022.

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 1.57% 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 5.32% 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, 2020, 2021 and 2022.

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 f

ive

years based on financial budgets. A terminal growth rate of 0.0% was applied for the cash flows expected to be incurred after f

ive

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 6.60% based on past performance and its expectation of future market changes.

In addition, management estimated the cash flow based on past performance and its

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

expectation of market growth, and the discount rates 10.14% used reflected specific risks relating to the relevant CGU. As a result of the impairment test, HCN’s recoverable amount was KRW

228,674

million, which was less than the carrying amount, and KRW 24,006 million of the impairment loss was distributed as goodwill in full and reflected in other expenses.

The recoverable amounts of GENIE Music Corporation are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next f

ive

years based on financial budgets. A terminal growth rate of 0.0% was applied for the cash flows expected to be incurred after f

ive

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 (-)0.41% 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 15.72% 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 GENIE Music Corporation for the years ended December 31, 2022.

The recoverable amounts of MILLIE

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 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 27.83% 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 18.75% 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 MILLIE

Co., Ltd.

for the years ended December 31, 2022.

The recoverable amounts of PlayD Co., Ltd. are calculated based on value-in use calculations. These calculations use discounted cash flow projections for the next f

ive

years based on financial budgets. A terminal growth rate of 1.0% was applied for the cash flows expected to be incurred after f

ive

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 9.16% 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 15.30% 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 PlayD Co., Ltd. for the years ended December 31, 2022.

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 3.05% 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 10.23% 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

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

not recognize an impairment loss on goodwill on KT Telecop Co., Ltd. for the years ended December 31, 2020, 2021 and 2022.

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 12.10% 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 9.74% 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, 2022.

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 1.13% ~ 4.31% 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 rate 8.48%. Accordingly, the Group did not recognize an impairment loss on ICT reporting segment for the years ended December 31, 2020, 2021 and 2022.

14.	Investments in Associates and Joint Ventures

Details of associates that are material to the Group as at December 31, 2021 and 2022, are as follows:


	Percentage of ownership (%)						Location		Closing month
	December 31, 2021			December 31, 2022
KIF Investment Fund		33.3	%		33.3	%		Korea		December
K Bank Inc.		33.7	%		33.7	%		Korea		December
Hyundai Robotics Co., Ltd. 1		10.0	%		10.0	%		Korea		December
Megazone Cloud Corporation 1		—			6.8	%		Korea		December
IGIS No. 468-1 General Private Real Estate Investment Company		—			44.6	%		Korea		December
KT-DSC Creative Economy Youth Start-up Investment Fund		28.6	%		28.6	%		Korea		December
IGIS Professional Investors Private Investment Real Estate Investment LLC No. 395		35.3	%		35.3	%		Korea		December

As at December 31, 2022, although the Group has less than 20% ownership in ordinary share, this entity is included in investments in associates as the Group has significant influence in determining the operational and financial policies.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Changes in investments in associates and joint ventures for the years ended December 31, 2021 and 2022, are as follows:


	2021
( i n millions of Korean won)	Beginning		Acquisition (Disposal)			Share of net profit (loss) from associates and joint ventures 1			Others			Ending
KIF Investment 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 Inc. 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


	2022
( i n millions of Korean won)	Beginning		Acquisition (Disposal)			Share of net profit (loss) from associates and joint ventures 1			Others			Ending
KIF Investment Fund	￦	178,935	￦	—		￦	2,502		￦	(10,458	)	￦	170,979
K Bank Inc.		831,737		—			29,010			(7,991	)		852,756
Hyundai Robotics Co., Ltd.		48,725		—			798			(151	)		49,372
Megazone Cloud Corporation		—		130,001			(22,555	)		28,753			136,199
IGIS No. 468-1 General Private Real Estate Investment Company		—		25,000			(1,411	)		—			23,589
KT-DSC Creative Economy Youth Start-up Investment Fund		22,138		—			(13	)		(2	)		22,123
IGIS Professional Investors Private Investment Real Estate Investment LLC No . 395		17,084		—			(464	)		—			16,620
Others 1		189,810		100,040			(24,688	)		(56,078	)		209,084

	￦	1,288,429	￦	255,041		￦	(16,821	)	￦	(45,927)		￦	1,480,722

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

￦

464 million (2020: net gain of

￦

279 million, 2021: net gain of

￦

113 million) recognized as operating revenue during the period.

2	During the year ended December 31, 2021, the amount increased due to the settlement of derivative liabilities, resulting from a shareholder agreement among financial investors participating in the paid-in capital increase of K-Bank Inc.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Summarized financial information of associates and joint ventures as at and for the years ended December 31, 2021 and 2022, is as follows:


( i n millions of Korean won)	December 31, 2021
	Current assets		Non-current assets		Current liabilities		Non-current liabilities
KIF Investment Fund	￦	117,172	￦	419,632	￦	—	￦	—
KT-IBKC Future Investment Fund 1		24,163		—		—		—
K Bank Inc.		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		—		—		—

(in millions of Korean won)	December 31, 2022
	Current assets		Non-current assets		Current liabilities		Non-current liabilities
KIF Investment Fund	￦	98,132	￦	414,804	￦	—	￦	—
K Bank Inc.		16,562,742		71,265		14,830,983		2,168
Hyundai Robotics Co., Ltd.		278,413		135,380		63,009		64,335
Megazone Cloud Corporation		857,089		202,767		330,619		94,202
IGIS No. 468-1 General Private Real Estate Investment Company		52,851		—		12		—
KT-DSC Creative Economy Youth Start-up Investment Fund		908		76,884		362		—
IGIS Professional Investors Private Investment Real Estate Investment LLC No. 395		9,344		127,321		90,545		—


( i n millions of Korean won)	2021
	Operating revenue		Profit (loss) for the year			Other comprehensive income (loss)			Total comprehensive income (loss)			Dividends received from associates
KIF Investment 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 Inc.		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

F-5

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


( i n millions of Korean won)	2022
	Operating revenue		Profit (loss) for the year			Other comprehensive income (loss)			Total comprehensive income (loss)			Dividends received from associates
KIF Investment Fund	￦	19,916	￦	7,505		￦	(11,779	)	￦	(4,274	)	￦	6,531
K Bank Inc.		558,872		86,498			(24,888	)		61,610			—
Hyundai Robotics Co., Ltd.		181,944		9,332			(49	)		9,283			—
Megazone Cloud Corporation		1,261,228		(293,186	)		(6,609	)		(299,795	)		—
IGIS No. 468-1 General Private Real Estate Investment Company		9		(3,161	)		—			(3,161	)		—
KT-DSC Creative Economy Youth Start-up Investment Fund		19,931		(53	)		—			(53	)		—
IGIS Professional Investors Private Investment Real Estate Investment LLC No . 395		—		(474	)		—			(474	)		—

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, 2021 and 2022, are as follows:


( i n millions of Korean won)	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)
KIF Investment 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 Inc.		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

(in millions of Korean won)	2022
	Net assets (a)		Percentage of ownership (b)			Share in net assets (c)=(a)x(b)		Intercompany transaction and others (d)		Book amount (c)+(d)
KIF Investment Fund	￦	512,936		33.33	%	￦	170,979	￦	—	￦	170,979
K Bank Inc.		1,800,856		33.72	%		607,276		245,480		852,756
Hyundai Robotics Co., Ltd.		286,449		10.00	%		28,645		20,727		49,372
Megazone Cloud Corporation		635,035		6.83	%		43,360		92,839		136,199
IGIS No. 468-1 General Private Real Estate Investment Company		52,839		44.64	%		23,589		—		23,589
KT-DSC Creative Economy Youth Start-up Investment Fund		77,430		28.57	%		22,123		—		22,123
IGIS Professional Investors Private Investment Real Estate Investment LLC No . 395		46,120		35.29	%		16,278		342		16,620

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Due to discontinuance of equity method of accounting, the Group has not recognized loss from associates and joint ventures of

￦

909 million for the year ended December 31, 2022 (for the year ended December 31, 2021:

￦

717 million). The accumulated comprehensive loss of associates and joint ventures as at December 31, 2022, which was not recognized by the Group is

￦

9,915 million (as at December 31, 2021:

￦

9,006 million).

15.	Trade and Other Payables

Details of trade and other payables as at December 31, 2021 and

2022

, are as follows:


( i n millions of Korean won)	December 31, 2021		December 31, 2022
Current liabilities
Trade payables	￦	1,537,148	￦	1,150,515
Other payables		5,104,274		6,182,650

Total	￦	6,641,422	￦	7,333,165

Non-current liabilities
Other payables	￦	1,338,781	￦	1,064,099

Total	￦	1,338,781	￦	1,064,099

Details of other payables as at December 31, 2021 and 2022 are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Non-trade payables 1	￦	4,378,445		￦	4,981,300
Accrued expenses		1,037,616			1,234,023
Operating deposits		814,613			818,603
Others		212,381			212,823
Less: non-current		(1,338,781	)		(1,064,099	)

Current	￦	5,104,274		￦	6,182,650

1	Settlement payables of BC Card Co., Ltd., a subsidiary of the Group, of ￦ 1,754,075 million related to credit card transactions are included as at December 31, 2022 (2021: ￦ 1,086,996 million ).

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

16.	Borrowings

Details of borrowings as at December 31, 2021 and 2022, are as follows:

Debentures


( i n millions of Korean won and thousands of foreign currencies)			December 31, 2021				December 31, 2022
Type	Maturity	Annual interest rates	Foreign currency		Korean won		Foreign currency		Korean won
MTNP notes 1	Sep. 7, 2034	6.500%	USD	100,000	￦	118,550	USD	100,000	￦	126,730
MTNP notes	Jul. 18, 2026	2.500%	USD	400,000		474,200	USD	400,000		506,920
MTNP notes	Aug. 7, 2022	—	USD	400,000		474,200		—		—
FR notes 2	Aug. 23, 2023	LIBOR(3M)+0.900%	USD	100,000		118,550	USD	100,000		126,730
MTNP notes	Jul. 19, 2022	—	JPY	29,600,000		304,951		—		—
MTNP notes	Jul. 19, 2024	0.330%	JPY	400,000		4,121	JPY	400,000		3,813
MTNP notes	Sep. 1, 2025	1.000%	USD	400,000		474,200	USD	400,000		506,920
FR notes 2	Nov. 1, 2024	LIBOR(3M)+0.980%	USD	350,000		414,925	USD	350,000		443,555
FR notes 2	Jun. 19, 2023	SOR(6M)+0.500%	SGD	284,000		249,108	SGD	284,000		267,843
MTNP notes	Jan. 21, 2027	1.375%	USD	300,000		355,650	USD	300,000		380,190
MTNP notes	Aug. 08, 2025	4.000%		—		—	USD	500,000		633,650
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 189-3rd Public bond	Jan. 28, 2026	2.203%		—		100,000		—		100,000
The 189-4th Public bond	Jan. 28, 2036	2.351%		—		70,000		—		70,000
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	—		—		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	—		—		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		—		130,000
The 194-2nd Public bond	Jan. 27, 2026	1.452 %		—		140,000		—		140,000
The 194-3rd Public bond	Jan. 27, 2031	1.849 %		—		50,000		—		50,000
The 194-4th Public bond	Jan. 25, 2041	1.976 %		—		80,000		—		80,000
The 195-1st Public bond	Jun. 10, 2024	1.387 %		—		180,000		—		180,000
The 195-2nd Public bond	Jun. 10, 2026	1.806 %		—		80,000		—		80,000
The 195-3rd Public bond	Jun. 10, 2031	2.168 %		—		40,000		—		40,000
The 196-1st Public bond	Jan. 27, 2025	2.596 %		—		—		—		270,000
The 196-2nd Public bond	Jan. 27, 2027	2.637 %		—		—		—		100,000
The 196-3rd Public bond	Jan. 27, 2032	2.741 %		—		—		—		30,000

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


(in millions of Korean won and thousands of foreign currencies)			December 31, 2021				December 31, 2022
Type	Maturity	Annual interest rates	Foreign currency		Korean won		Foreign currency		Korean won



The 197-1st Public bond	Jun. 27, 2025	4.191%		—		—		—		280,000

The 197-2nd Public bond	Jun. 29, 2027	4.188%		—		—		—		120,000
The 18-1st Won-denominated unsecured bond	Jul. 2, 2024	1.844%		—		100,000		—		100,000
The 18-2nd Won-denominated unsecured bond	Jul. 2, 2026	2.224%		—		50,000		—		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. 8, 2024	1.440%		—		70,000		—		70,000
The 149-2nd Won-denominated unsecured bond	Mar. 10, 2026	1.756%		—		30,000		—		30,000
The 150-1st Won-denominated unsecured bond	Apr. 7, 2023	1.154%		—		20,000		—		20,000
The 150-2nd Won-denominated unsecured bond	Apr. 8, 2024	1.462%		—		30,000		—		30,000
The 151-1st Won-denominated unsecured bond	May 12, 2023	1.191%		—		10,000		—		10,000
The 151-2nd Won-denominated unsecured bond	May 14, 2024	1.432%		—		40,000		—		40,000
The 152-1st Won-denominated unsecured bond	Aug. 30, 2024	1.813%		—		80,000		—		80,000
The 152-2nd Won-denominated unsecured bond	Aug. 28, 2026	1.982%		—		20,000		—		20,000
The 153-1st Won denominated unsecured bond	Nov. 10, 2023	2.310%		—		30,000		—		30,000
The 153-2nd Won-denominated unsecured bond	Nov. 11, 2024	2.425%		—		70,000		—		70,000
The 154th Won-denominated unsecured bond	Jan. 23, 2025	2.511%		—		40,000		—		40,000
The 155-1st Won-denominated unsecured bond	Feb. 29, 2024	2.615%		—		—		—		50,000
The 155-2nd Won-denominated unsecured bond	Sep. 2, 2024	2.745%		—		—		—		20,000
The 155-3rd Won-denominated unsecured bond	Feb. 28, 2025	2.880%		—		—		—		20,000
The 156-1st Won-denominated unsecured bond 3	Mar. 25, 2025	5Y CMS+0.404 %		—		—		—		60,000
The 156-2nd Won-denominated unsecured bond 3	Mar. 25, 2032	10Y CMS+0.965 %		—		—		—		40,000
The 157-1st Won-denominated unsecured bond	Apr. 28, 2023	2.588 %		—		—		—		30,000
The 157-2nd Won-denominated unsecured bond	Oct. 27, 2023	3.024 %		—		—		—		30,000
The 158th Won-denominated unsecured bond	Jan. 27, 2025	4.421 %		—		—		—		50,000
The 159-1st Won-denominated unsecured bond	Aug. 09, 2024	4.267 %		—		—		—		30,000
The 159-2nd Won-denominated unsecured bond	Aug. 11, 2027	4.505 %		—		—		—		30,000
The 160-1st Won-denominated unsecured bond	Jun. 14, 2024	5.615 %		—		—		—		20,000
The 160-2nd Won-denominated unsecured bond	Dec. 13, 2024	5.667 %		—		—		—		20,000

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


(in millions of Korean won and thousands of foreign currencies)			December 31, 2021					December 31, 2022
Type	Maturity	Annual interest rates	Foreign currency		Korean won			Foreign currency		Korean won



The 160-3rd Won-denominated unsecured bond	Dec. 12, 2025	5.769%		—		—			—		30,000
The 161-1st Won-denominated unsecured bond	Jun. 21, 2024	5.527%		—		—			—		10,000
The 161-2nd Won-denominated unsecured bond	Dec. 20, 2024	5.557%		—		—			—		20,000
The 161-3rd Won-denominated unsecured bond	Jun. 20, 2025	5.594%		—		—			—		30,000
The 161-4th Won-denominated unsecured bond	Dec. 22, 2025	5.615%		—		—			—		10,000
The 162-1st Won-denominated unsecured bond	Dec. 27, 2023	5.066%		—		—			—		50,000
The 162-2nd Won-denominated unsecured bond	Jan. 26, 2024	5.069%		—		—			—		40,000
The 162-3rd Won-denominated unsecured bond	Apr. 26, 2024	5.080%		—		—			—		10,000
Subtotal						7,558,455					8,406,351
Less: Current portion						(1,337,714	)				(1,154,101	)
Discount on bonds						(22,093	)				(23,728	)
Total					￦	6,198,648				￦	7,228,522

As at December 31, 2022, 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 4.767% and 4.429%, respectively as at December 31, 2022. The loan has not been converted to an alternative indicator interest rate, and the Group is assessing the impact of switching to an alternative indicator interest rate as of December 31, 2022.

2	The CMS (5Y) and CMS (10Y) is approximately 3.588% and 3.490%, respectively as at December 31, 2022. The loan has not been converted to an alternative indicator interest rate.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Convertible bonds


(in millions of Korean won)
Type	Issuance Date		Maturity		Annual interest Rate		December 31, 2021			December 31, 2022
The 1st CB (Private) 1		Jun. 5, 2020		Jun. 5, 2025		2	￦	8,000		￦	8,000
The 1st unsecured CB 3		Jul. 25, 2022		Jan. 25, 2025		4		—			30,000
Redemption premium								2,267			4,565
Bond discount issuance								(3,825	)		(7,206	)

Subtotal								6,442			35,359

Current portion								—			—

Total							￦	6,442		￦	35,359

1	Common shares of Storywiz are subject to conversion (appraisal period : June 5, 2021~May 4, 2025).

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

3	Common shares of KT cloud are subject to conversion (appraisal period: July 27, 2022~December 25, 2024).

4	Nominal interest rate and maturity yield is approximately 0% and 3%, respectively, and the sum of principal and interest will be settled on maturity.

Short-term borrowings


(in millions of Korean won)			December 31, 2021				December 31, 2022
Type	Financial institution	Annual interest rates	Foreign currency		Korean won		Foreign currency		Korean won
Operational	Shinhan Bank 1	3.840%~6.440%		—	￦	4,500		—	￦	105,000
		CD(91D)+1.750%		—		—		—		30,000
	Woori Bank 1,2	KORIBOR(3M)+1.960 %		—		20,000		—		20,000
		CD(91D)+1.430 %		—		—		—		30,000
	Korea Development Bank	4.630 %~ 6.200 %		—		16,000		—		27,201
	Industrial Bank of Korea	4.880 %		—		6,000		—		6,000
	Hana Bank 1	CD(91D)-0.020 %		—		5,000		—		5,000
	KB SECURITIES	5.904 %		—		71,000		—		94,822
	Shinhan Investment	—		—		73,000		—		—
	KIWOOM Securities	—		—		63,000		—		—
	NH INVESTMENT & SECURITIES	5.070 %		—		53,000		—		20,000
	Korea Investment & Securities	—		—		10,000		—		—
	HSBC	5.090 %		USD 14,700		17,427	USD	18,500		23,451
	NongHyup Bank 2	4.690 %~ 4.940 %		—		—		—		9,000
		COFIX(6M)+1.780 %		—		—		—		15,000
	IBK Securities	5.070 %		—		—		—		20,000
	Hi Investment & Securities and others	3.710 %		—		—		—		99,524

	Total				￦	338,927			￦	504,998

1	CD (91D) is approximately 3.980% as at December 31, 2022.

2	KORIBOR (3M) and COFIX (6M) are approximately 4.040% and 4.340%, respectively, as at December 31, 2022.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Long-term borrowings


(in millions of Korean won and thousands of foreign currencies)				December 31, 2021					December 31, 2022
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%		—	￦	2,467			—	￦	1,974
CA-CIB	Long-term CP		1.260%~3.380%		—		100,000			—		200,000
JPM	Long-term CP		2.700 %		—		—			—		100,000
DBS	Long-term CP		4.109%		—		—			—		100,000
Shinhan Bank	General loans		—	USD	25,918		30,726			—		—
	General loans 2		LIBOR(3M)+1.650 %	USD	8,910		10,563		USD	8,910		11,292
	General loans 2		LIBOR(3M)+1.847 %	USD	13,000		15,412		USD	13,000		16,475
	General loans 2		LIBOR(3M)+2.130 %	USD	25,000		29,638		USD	25,000		31,683
	General loans		1.900%~3.230 %	USD	31,472		37,345		USD	31,472		39,855
	General loans 3		4.490 %		—		—			—		62,398
	General loans 2		Term SOFR(3M)+1.300%		—		—		USD	21,127		26,774
Woori Bank	General loans 2		EURIBOR(3M)+0.900%	EUR	7,700		10,336		EUR	7,700		10,404
	General loans		3.320%		—		15,000			—		15,000
	PF loans		2.000%~3.470%		—		23,614			—		40,682
Hi Investment & Securities and others	CP		2.302%~3.622%		—		88,510			—		182,569
Korea Development Bank	General loans		3.000%~3.610%		—		39,000			—		38,000
NH Jayang	PF loans 2		CD(91D)+1.150 %		—		46,267			—		59,066
Kyobo Life Insurance	PF loans 2		CD(91D)+1.150%~3.450%		—		41,640			—		66,390
Standard Chartered Bank Korea	PF loans 2		CD(91D)+1.150%~3.450%		—		27,760			—		44,260
Samsung Life Insurance	PF loans		1.860%~4.160%		—		23,133			—		36,883
Kookmin Bank and others	Facility loans		—	USD	9,771		11,584			—		—

Subtotal							552,995					1,083,705
Less: Current portion							(51,803	)				(167,943	)

						￦	501,192				￦	915,762

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

2	LIBOR (3M), EURIBOR (3M), Term SOFR (3M) and CD (91D) are approximately 4.767%, 2.132%, 4.587% and 3.980%, respectively, as at December 31, 2022.

3	The general loans are repayable in installments over 4 years after a three-year grace period.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Repayment schedule of the Group’s

debentures and

borrowings including the portion of current liabilities as at December 31, 2022 is as follows:


(in 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, 2023~Dec. 31, 2023	￦	760,000	￦	394,573	￦	1,154,573	￦	590,040	￦	82,900	￦	672,940	￦	1,827,513
Jan. 1, 2024~Dec. 31, 2024		1,380,000		447,368		1,827,368		455,899		51,687		507,586		2,334,954
Jan. 1, 2025~Dec. 31, 2025		1,138,000		1,140,570		2,278,570		182,432		—		182,432		2,461,002
Jan. 1, 2026~Dec. 31, 2026		420,000		506,920		926,920		111,817		—		111,817		1,038,737
After Jan. 1, 2027		1,750,000		506,920		2,256,920		88,581		25,346		113,927		2,370,847

Total	￦	5,448,000	￦	2,996,351	￦	8,444,351	￦	1,428,769	￦	159,933	￦	1,588,702	￦	10,033,053

17.	Provisions

Changes in provisions for the years ended December 31, 2021 and 2022, are as follows:


	2021
( i n 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	)
Scope change		—			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

	2022
( i n millions of Korean won)	Litigation			Restoration cost			Others			Total
Beginning balance	￦	80,165		￦	107,358		￦	69,874		￦	257,397
Increase (Transfer)		6,005			13,027			5,847			24,879
Usage		(6,155	)		(8,143	)		(15,783	)		(30,081	)
Reversal		(43,686	)		(3,685	)		(4,418	)		(51,789	)
Others		—			405			(445	)		(40	)

Ending balance	￦	36,329		￦	108,962		￦	55,075		￦	200,366

Current	￦	34,730		￦	19,918		￦	54,485		￦	109,133
Non-current		1,599			89,044			590			91,233

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

18.	Net Defined Benefit Liabilities

The amounts recognized in the statements of financial position as at December 31, 2021 and 2022, are determined as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Present value of defined benefit obligations	￦	2,494,930		￦	2,218,655
Fair value of plan assets		(2,314,632	)		(2,478,143	)

Liabilities	￦	197,883		￦	51,654

Assets	￦	17,585		￦	311,142

Changes in the defined benefit obligations for the years ended December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	2021			2022
Beginning	￦	2,556,712		￦	2,494,930
Current service cost		249,125			238,068
Interest expense		44,905			59,041
Benefit paid		(310,766	)		(316,047	)
Changes due to settlements of plan & Past Service Cost		(681	)		(701	)
Remeasurements:
Actuarial gains and losses arising from changes in demographic assumptions		(8,375	)		(13,048	)
Actuarial gains and losses arising from changes in financial assumptions		(61,002	)		(323,501	)
Actuarial gains and losses arising from experience adjustments		(5,271	)		80,845
Changes in scope of consolidation , etc.		30,283			(932	)

Ending	￦	2,494,930		￦	2,218,655

Changes in the fair value of plan assets for the years ended December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	2021			2022
Beginning	￦	2,189,375		￦	2,314,632
Interest income		39,858			55,902
Remeasurements:
Return on plan assets (excluding amounts included in interest income)		(130	)		(8,542	)
Benefits paid		(271,506	)		(287,419	)
Employer contributions		325,818			401,358
Changes in scope of consolidation , etc.		31,217			2,212

Ending	￦	2,314,632		￦	2,478,143

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Amounts recognized in the consolidated statements of profit or loss for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020			2021			2022
Current service cost	￦	248,047		￦	249,125		￦	238,068
Net Interest cost		6,494			5,047			3,139
Changes due to settlements of plan & Past Service Cost		1,075			(681	)		(701	)
Transfer out		(16,514	)		(16,660	)		(15,102	)

Total expenses	￦	239,102		￦	236,831		￦	225,404

Principal actuarial assumptions used are as follows:


	December 31, 2020		December 31, 2021		December 31, 2022
Discount rate		1.93%		2.55%		5.05%
Salary growth rate		4.88%		5.10%		5.15%

The sensitivity of the defined benefit obligations as at December 31, 2022, 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		￦ (108,725)	￦	117,362
Salary growth rate	0.5% point		113,037		(105,541	)

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 analys

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, 2023, are

￦

281,118 million.

The expected maturity analysis of undiscounted pension benefits as at December 31, 2022, is as follows:

(

n millions of Korean won)

Less than

1 year

Between

1-2

years

Between

2-5

years

Over 5 years

Total

Pension benefits

￦

231,594

￦

336,926

￦

855,642

￦

1,922,089

￦

3,346,251

The weighted average duration of the defined benefit obligations is 6.0 years.

19.	Defined Contribution Plan

Recognized expense related to the defined contribution plan for the year ended December 31, 2022, is

￦

72,576 million (2020:

￦

61,912 million, 2021:

￦

71,068 million).

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

20.	Commitments and Contingencies

As at December 31, 2022, major commitments with local financial institutions are as follows:


(in millions of Korean won and foreign currencies in thousands)	Financial institution	Limit		Used amount
Bank overdraft	Kookmin Bank and others		372,000		—
Inter-Korean Cooperation Fund	Export-Import Bank of Korea		37,700		1,974
Economic Cooperation Business Insurance	Export-Import Bank of Korea		3,240		1,732
Collateralized loan on electronic accounts receivable-trade	Kookmin Bank and others		567,150		28,298
Plus electronic notes payable	Industrial Bank of Korea		50,000		1,663
Working capital loan	Korea Development Bank and others		1,415,600		165,100
	Shinhan Bank	USD	72,507	USD	72,507
	Woori Bank	EUR	7,700	EUR	7,700
Facility loans	Shinhan Bank and others		824,000		309,680
Derivatives transaction limit	Shinhan Bank		8,000		8,000
	Korea Development Bank and others	USD	2,510,510	USD	1,970,000
	DBS Bank	SGD	284,000	SGD	284,000
	Citi Bank	USD	400,000	JPY	400,000
				USD	100,000

Total	KRW		3,277,690		516,447
	USD		2,983,017		2,142,507
	EUR		7,700		7,700
	SGD		284,000		284,000
	JPY		—		400,000

F-6

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

As at December 31, 2022, guarantees received from financial institutions are as follows:


(in millions of Korean won and foreign currencies in thousands)	Financial institution		Limit
Hana Bank	Guarantee for payment in Korean currency			4,000
	Comprehensive credit line and others			3,100
	Guarantee for payment in foreign currency	USD		273
	Comprehensive credit line and others	USD		10,300
Kookmin Bank	Guarantee for payment in foreign currency	USD		6,484
Shinhan Bank	Guarantee for payment in Korean currency and others			36,298
	Guarantee for payment in foreign currency and others	USD		77,837
Woori Bank	Guarantee for payment in Korean currency			5,200
	Guarantee for payment in foreign currency	USD		7,000
Korea Development Bank	Refund guarantee for advances received	USD		6,880
HSBC	Guarantees for depositions	USD		871
Seoul Guarantee Insurance Company	Performance guarantee and others			783,247
Korea Software Financial Cooperative	Performance guarantee and others			1,445,072
Korea Specialty Contractor Financial Cooperative	Performance guarantee and others			531
Korea Housing Finance Corporation	Performance guarantee and others			14,464
Information & Communication Financial Cooperative	Performance guarantee and others			28,027

Total		KRW		2,319,939
		USD		109,645

As at December 31, 2022, 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.

Gasan Solar Power Plant Inc.

Shinhan Bank

4,700

672

Jan. 7, 2010
~

Jan. 8, 2025

KT Engineering Co., Ltd.

SPP Inc.

Suhyup Bank

3,250

345

Feb. 17, 2014
~

Feb. 16, 2024

KT Engineering Co., Ltd.

Korea Cell Inc.

Suhyup Bank

3,250

338

Feb. 17, 2014
~

Feb. 16, 2024

KT Engineering Co., Ltd.

San-Ya Agricultural

Association Corporation

Suhyup Bank

3,250

345

Feb. 17, 2014
~

Feb. 16, 2024

KT Alpha Co., Ltd.

(KT Hitel Co., Ltd.)

Cash payers

T-commerce
cash payers

860

—

Apr. 14, 2022
~ Apr. 14, 2023

Nasmedia Co., Ltd.

Stockholders Association

Members

Korea Securities
Finance Corp

5,654

986

—

According to the above payment guarantee, KT Engineering, a subsidiary of the Group, will have an obligation for repayment if the principal borrower does not repay the borrowing.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

As at December 31, 2022, the details of the issuance of real estate collateral trust and beneficiary certificates of the Group are as follows:


(in millions of Korean won)				Commitment (limit) amount		Amount provided as collateral for beneficiary rights
Collateral assets	Placing		Trust collateral beneficiary	Commitment (limit) amount		Amount provided as collateral for beneficiary rights
Real Estate Collateral Trust 1		1st place	NongHyup Bank	￦	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

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.

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, 2022, the Controlling Company and KT Sat Inc. are jointly and severally liable for reimbursement of

￦

653 million.

For the years ended December 31, 2021 and 2022, the Group made agreements with the Securitization Specialty Companies (2022: First 5G 61

to 66

Securitization Specialty Co., Ltd., 2021: First 5G 55

to 60

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, 2022, the Group is a defendant in 189 lawsuits with the total claimed amount of

￦

80,279 million (2021:

￦

101,597 million). As at December 31, 2022, litigation provisions of

￦

36,329 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, 2020, 2021 and 2022

At the end of the reporting period, contract amount of property and equipment acquisition agreement made but not yet recognized amounts to

￦

1,294,823 million (2021:

￦

1,336,758 million).

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, 2022, the Group entered into an agreement with the seller, who participated in the acquisition of shares in MILLIE

Co., Ltd

. 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, 2022, 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. For the year ended December 31, 2022, the remaining amount of

￦

5,473 million and USD 34,050 thousand will be invested in the Capital Call

method later.

The Group has an obligation to provide financial support as a construction investor during the construction period with respect to K Defense Co., Ltd. established in accordance with the Private Investment Act on Social Infrastructure, and there is a joint responsibility obligation. During the operating period, as an operating investor, the group has an obligation to provide financial support.

As at December 31, 2022, the Group entered into a shareholders’ agreement with CJ ENM Co., Ltd., which signed a business cooperation contract with KT Studio Genie Co., Std. If certain conditions under the agreement are not satisfied, CJ ENM Co., Ltd. may exercise its stock purchase right of the Group.

As at December 31, 2022, the Group entered into a stock sale contract with HYUNDAI MOBIS and HYUNDAI MOTOR COMPANY. If a certain period of time has elapsed from the date of the contract and the acquired stocks are to be disposed to a third party, HYUNDAI MOBIS and HYUNDAI MOTOR COMPANY may exercise a preferential purchase right to designate a buyer with priority.

As at December 31, 2022, the Group entered into an agreement with LS Cable & System Ltd., which participated in the stock acquisition contract of KT Submarine Co., Ltd. Under the agreement, LS Cable & System Ltd. may exercise a call-option to the Group in the future and the Group may exercise a

put-option

to LS Cable & System Ltd. (Note 7).

21.

Leases

Set out below is information for leases when the Group is a lessee. Information on leases when the Group is a lessor is provided in Note 12

(i)

Amounts recognized in the consolidated

statements

of financial position

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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


( i n millions of Korean won)	December 31, 2021		December 31, 2022
Right-of-use assets
Property and building	￦	1,086,133	￦	1,081,067
Machinery and communication line facilities		64,443		50,794
Others		97,732		148,473

Total	￦	1,248,308	￦	1,280,334

Investment property (buildings)		1		—


( i n millions of Korean won)	December 31, 2021		December 31, 2022
Lease liabilities 1
Current	￦	332,702	￦	315,892
Non-Current		826,667		856,146

Total	￦	1,159,369	￦	1,172,038

Included in the line items ‘Other current liabilities and other non-current liabilities’ in the consolidated statement

of financial position (Notes 9).

For the years ended December 31, 2022 and 2021, right-of-use assets increased to

￦

405,453

million and

￦

426,854 million, respectively.

(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:


( i n millions of Korean won)	December 31, 2020		December 31, 2021		December 31, 2022
Depreciation of Right-of-use assets
Property and building	￦	290,168	￦	303,984	￦	305,120
Machinery and communication line facilities		58,419		41,794		31,140
Others		55,588		52,938		59,954

Total	￦	404,175	￦	398,716	￦	396,214

Depreciation of Investment Properties	￦	19,113	￦	1,794	￦	15
Interest expense relating to lease liabilities		44,091		36,651		41,469
Expense relating to short-term leases		10,998		7,984		12,876
Expense relating to leases of low-value assets that are not short-term leases		25,894		26,033		26,813
Expense relating to variable lease payments not included in lease liabilities		8,096		8,400		4,827

The total cash outflow for leases for the year ended December 31, 2022 amounts to

￦

464,337 million (2020:

￦

492,772 million, 2021:

￦

468,360 million).

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

22.	Share Capital

As at December 31, 2021 and 2022, the Group’s number of authorized shares is one billion.

December 31, 2021

December 31, 2022

Number of

issued

Par value

per share

(Korean won)

Ordinary
Shares

(in millions of

Korean won)

Number of

issued
shares

Par value

per share

(Korean won)

Ordinary
Shares

(in millions of

Korean won)

Ordinary shares

261,111,808

￦

5,000

￦

1,564,499

261,111,808

￦

5,000

￦

1,564,499

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, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021		December 31, 2022
Legal reserve 1	￦	782,249	￦	782,249
Voluntary reserves 2		4,651,362		4,651,362
Unappropriated retained earnings		7,853,779		8,821,705

Total	￦	13,287,390	￦	14,255,316

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.

In accordance with the Restrictions on Special Taxation Act, R&D and HR related reserves under the voluntary reserves are separately accumulated when retained earnings from tax reserve funds are disposed, when income tax is recalculated from tax return adjustments. Reversal of these provisions can be paid out as dividends according to the related tax law.

24.	Accumulated Other Comprehensive Income and Other Components of Equity

As at December 31, 2021 and 2022, the details of the Controlling Company’s accumulated other comprehensive income are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Changes in investments in associates and joint ventures	￦	(3,461	)	￦	(11,752	)
Gain ( loss ) on derivatives valuation		25,031			(7,109	)
Gain (loss) on valuation of financial assets at fair value through other comprehensive income		108,685			(52,100	)
Exchange differences on translation for foreign operations		(12,786	)		(6,815	)

Total	￦	117,469		￦	(77,776	)

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Changes

in accumulated other comprehensive income for the years ended December 31, 2021 and 2022, are as follows:


	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 ( 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


	2022
( i n millions of Korean won)	Beginning			Increase (decrease)			Reclassification to gain or loss			Ending
Changes in investments in associates and joint ventures	￦	(3,461	)	￦	(8,291	)	￦	—		￦	(11,752	)
Gain (loss) on derivatives valuation		25,031			63,281			(95,421	)		(7,109	)
Gain (loss) on valuation of financial assets at fair value through other comprehensive income		108,685			(160,785	)		—			(52,100	)
Exchange differences on translation for foreign operations		(12,786	)		5,971			—			(6,815	)

Total	￦	117,469		￦	(99,824	)	￦	(95,421	)	￦	(77,776	)

The Group’s other components of equity as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Treasury stock 1	￦	(1,009,798	)	￦	(202,295	)
Gain or loss on disposal of treasury stock 2		(8,658	)		(41,503	)
Share-based payments		4,068			6,222
Others 3		(418,692	)		(334,576	)

Total	￦	(1,433,080	)	￦	(572,152	)

During the year ended December 31, 2022, the Group

granted

20,105,609 treasury shares

as exchange of shares with HYUNDAI MOBIS and HYUNDAI MOTOR COMPANY

and granted 128,923 treasury shares as share-based payment

(Notes 7 and 20).

The amount directly reflected in equity i

￦

14,886

million for the year ended December 31, 2022 (2021:

￦

4,080 million).

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

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

As at December 31, 2021 and 2022, the details of treasury stock are as follows:


	December 31, 2021		December 31, 2022
Number of shares (in shares)		25,303,662		5,069,130
Amounts (in millions of Korean won)	￦	1,009,798	￦	202,295

Treasury stocks held as at December 31, 2022, are expected to be used for stock compensation for the Group’s directors, employees, and other purposes.

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

Directors

for the years ended December 31, 2021 and 2022, are as follows:


		2021
( i n share)		15th grant
Grant date		June 17, 2021
Grantee		CEO , 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)		￦ 32,397
Total compensation costs (in Korean won)		￦ 5,005 million
Estimated exercise date (exercise date)		May 11, 2022
Valuation method		Fair value method

( i n 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

		2022
(in share)		16th grant
Grant date		June 9, 2022
Grantee		CEO, 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)		￦ 36,941
Total compensation costs (in Korean won)		￦ 6,222 million
Estimated exercise date (exercise date)		During 2023
Valuation method		Fair value method

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Changes in the number of stock options and the weighted-average exercise price as at December 31, 2021 and 2022, are as follows:


(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		—


(In share)	2022
	Beginning		Grant		Expired			Exercised 1			Ending		Number of shares exercisable
15th grant		284,209		—		(155,286	)		(128,923	)		—		—
16th grant		—		258,509		—			—			258,509		—

Total		284,209		258,509		(155,286	)		(128,923	)		258,509		—

The weighted average price of ordinary shares at the time of exercise

, during the year ended December 31,

2022

￦

35,450 (2021:

￦

31,122).

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:


( i n millions of Korean won)	2020		2021		2022
Revenue from contracts with customers	￦	23,895,631	￦	24,712,128	￦	25,432,727
Revenue from other sources		203,763		185,877		206,128
Other income (Note 27)		341,253		307,654		595,351

Total revenue	￦	24,440,647	￦	25,205,659	￦	26,234,206

Operating revenues for the years ended December 31, 2020, 2021 and 2022 are as follows:


( i n millions of Korean won)	2020		2021		2022
Mobile services	￦	6,805,218	￦	6,936,485	￦	7,013,889
Fixed-line services		4,827,015		4,960,338		5,056,513
Fixed-line and VoIP telephone services		1,463,553		1,465,059		1,378,265
Broadband Internet access services		2,256,188		2,343,591		2,504,833
Data communication services		1,107,274		1,151,689		1,173,415
Media and content		2,637,691		2,800,630		3,099,776
Financial services		3,493,920		3,661,896		3,836,589
Sale of goods		3,593,127		3,532,973		3,393,646
Others		3,083,676		3,313,337		3,833,793

Total	￦	24,440,647	￦	25,205,659	￦	26,234,206

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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.

The contract assets and liabilities recognized in relation to the revenues from contracts with customers are as follows:


( i n millions of Korean won)	December 31, 2021		December 31, 2022
Contract assets 1	￦	821,901	￦	963,133
Contract liabilities 1		360,098		344,869
Deferred revenue 2	￦	81,136	￦	81,653

The Group recognized contract assets of

￦

160,880 million and contract liabilities of

￦

60,762 million for long term construction contracts as at December 31, 2022 (2021: contract assets of

￦

76,816 million and contract liabilities of

￦

36,447 million). The Group recognizes contract assets as trade and other receivables, and contract liabilities as other current liabilities.

Deferred revenue recognized relating to government grant is excluded.

The contract costs recognized as assets are as follows:


( i n millions of Korean won)	2020		2021		2022
Incremental cost of contract establishment	￦	1,726,191	￦	1,726,401	￦	1,744,096
Cost of Contract performance		78,757		74,843		73,582

As at December 31, 2022, the Group recognized

￦

1,793,013 million (2020:

￦

1,831,638 million, 2021:

￦

1,842,621 million) of operating expenses related to contract cost assets.

F-7

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

The recognized revenue arising from carried-forward contract liabilities from prior year is as follows:


( i n millions of Korean won)	2020		2021		2022
Allocation of the transaction price	￦	251,975	￦	275,965	￦	246,843
Deferred revenue of joining/installment fee		42,685		42,100		44,204

Total	￦	294,660	￦	318,065	￦	291,047

27.	Other Income from Operating Revenue

Other income for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020		2021		2022
Gains on disposal of property and equipment and investment properties	￦	20,289	￦	54,007	￦	52,603
Gains on disposal of intangible assets		2,961		1,726		622
Gain on disposal of right-of-use assets		5,797		3,138		3,326
Compensation on property and equipment		168,263		148,927		159,849
Gains on government subsidies		31,906		43,822		44,473
Gain on disposal of investments in subsidiaries		—		244		216,591
Reversal of other allowance for bad debts		890		508		850
Others		111,147		55,282		117,037

Total	￦	341,253	￦	307,654	￦	595,351

F-7

Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

28.	Operating Expenses

Operating expenses for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020		2021		2022
Salaries and wages	￦	4,123,680	￦	4,215,810	￦	4,495,885
Depreciation		2,605,128		2,605,594		2,637,463
Depreciation of right-of-use assets		404,175		398,716		396,214
Amortization of intangible assets		624,982		603,327		622,202
Commissions		965,461		1,125,944		1,295,434
Interconnection charges		500,081		507,567		479,500
International interconnection fee		172,529		192,008		186,253
Purchase of inventories		3,681,801		3,753,792		3,656,040
Changes of inventories		257,041		20,491		(195,046	)
Sales commission		2,337,127		2,343,375		2,353,909
Service cost		2,102,875		2,296,324		2,334,386
Utilities		360,797		364,373		368,348
Taxes and dues		283,197		268,651		276,962
Rent		136,355		123,246		160,848
Insurance premium		71,018		66,717		68,245
Installation fee		132,117		154,542		150,140
Advertising expenses		132,466		171,400		195,519
Research and development expenses		156,940		168,969		174,936
Card service cost		2,941,669		3,114,047		3,127,673
Loss on disposal of property and equipment		75,879		71,417		81,415
Loss on disposal of intangible assets		3,207		3,885		7,015
Loss on disposal of right-of-use assets		7,844		11,457		2,348
Direct cost of government subsidies		31,447		42,732		44,022
Loss on disposal of investments in subsidiaries		—		13,727		—
Impairment loss on property and equipment		79,775		2,115		16,094
Impairment loss on intangible assets		211,637		3,747		30,965
Donations		20,745		10,981		15,642
Other allowance for bad debts		51,333		28,066		17,551
Others		947,008		823,242		1,266,086

Total	￦	23,418,314	￦	23,506,262	￦	24,266,049

Details of salaries and wages for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020		2021		2022
Short-term employee benefits	￦	3,770,786	￦	3,837,359	￦	4,161,874
Post-employment benefits(Defined benefit plan)		239,102		236,831		225,404
Post-employment benefits(Defined contribution plan)		61,912		71,068		72,576
Share-based payment		28,604		47,415		16,799
Others		23,276		23,137		19,232

Total	￦	4,123,680	￦	4,215,810	￦	4,495,885

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

29.	Financial Income and Costs

Details of financial income for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020		2021		2022
Interest income	￦	270,571	￦	273,460	￦	271,925
Gain on foreign currency transactions		17,493		19,976		67,976
Gain on foreign currency translation		164,351		32,768		43,092
Gain on derivative transactions		9,397		2,215		50,668
Gain on valuation of derivatives		172		255,149		182,998
Gain on valuation of financial instruments		33,868		90,653		31,032
Others		2,762		52,062		42,737

Total	￦	498,614	￦	726,283	￦	690,428

Details of financial costs for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020		2021		2022
Interest expenses	￦	263,579	￦	263,389	￦	293,854
Loss on foreign currency transactions		27,805		13,105		81,171
Loss on foreign currency translation		26,340		213,689		200,109
Loss on derivative transactions		1,406		6,287		24,331
Loss on valuation of derivatives		163,763		15,947		21,601
Loss on disposal of trade receivables		8,152		22,712		62,697
Loss on valuation of financial instruments		15,646		25,994		65,660
Others		692		2,207		485

Total	￦	507,383	￦	563,330	￦	749,908

30.	Deferred Income Tax and income Tax Expense

The analysis of deferred tax assets and deferred tax liabilities as at December 31, 2021 and 2022, is as follows:


( i n millions of Korean won)	December 31, 2021			December 31, 2022
Deferred tax assets
Deferred tax assets to be recovered within 12 months	￦	398,329		￦	398,710
Deferred tax assets to be recovered after more than 12 months		1,754,113			1,907,690

Deferred tax assets before offsetting		2,152,442			2,306,400

Deferred tax liabilities
Deferred tax liabilities to be recovered within 12 months		(642,954	)		(586,522	)
Deferred tax liabilities to be recovered after more than 12 months		(1,729,718	)		(2,108,438	)

Deferred tax liabilities before offsetting		(2,372,672	)		(2,694,960	)

Deferred tax assets after offsetting	￦	423,728		￦	579,090

Deferred tax liabilities after offsetting	￦	643,958		￦	967,650

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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)	2021
	Beginning			Statement of profit or loss			Other comprehensive income			Ending
Deferred tax liabilities
Investments in associates and joint ventures		(181,564	)		(68,166	)		9,097			(240,633	)
Depreciation and impairment loss		(4,175	)		(84,413	)		—			(88,588	)
Plan assets		(521,257	)		(17,340	)		(331	)		(538,928	)
Advanced depreciation provision		(311,918	)		(27,087	)		—			(339,005	)
Contract assets		(509,509	)		15,592			—			(493,917	)
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	)
Others		(472,153	)		(150,013	)		(1,578	)		(623,744	)

Total	￦	(2,031,826	)	￦	(364,403	)	￦	23,557		￦	(2,372,672	)

Deferred tax assets
Depreciation and impairment loss		226,960			(1,139	)		—			225,821
Contract liabilities		140,494			7,960			—			148,454
Defined benefit liabilities		598,364			(8,663	)		(18,365	)		571,336
Provisions		167,384			5,487			—			172,871
Others		758,060			141,727			(244	)		899,543

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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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


(in millions of Korean won)	2022
	Beginning			Statement of profit or loss			Other comprehensive income			Ending
Deferred tax liabilities
Investments in subsidiaries, associates and joint ventures		(240,633	)		(18,299	)		3,748			(255,184	)
Depreciation and impairment loss		(88,588	)		(62,845	)		—			(151,433	)
Plan assets		(538,928	)		(5,294	)		1,322			(542,900	)
Advanced depreciation provision		(339,005	)		(182,934	)		—			(521,939	)
Contract assets		(493,917	)		69,615			—			(424,302	)
Financial assets at fair value through profit or loss		(336	)		(73	)		(11	)		(420	)
Financial assets at fair value through other comprehensive income		(47,521	)		(71,396	)		58,288			(60,629	)
Others		(623,744	)		(111,135	)		(3,274	)		(738,153	)

Total	￦	(2,372,672	)	￦	(382,361	)	￦	60,073		￦	(2,694,960	)


Deferred tax assets
Depreciation and impairment loss		225,821			(36,989	)		—			188,832
Contract liabilities		148,454			(27,165	)		—			121,289
Defined benefit liabilities		571,336			(22,423	)		(67,055	)		481,858
Provisions		172,871			(20,894	)		(22	)		151,955
Others		899,543			351,317			8,635			1,259,495

Total	￦	2,018,025		￦	243,846		￦	(58,442	)	￦	2,203,429

Temporary difference, net		(354,647	)		(138,515	)		1,631			(491,531	)
Tax credit carryforwards		134,417			(31,446	)		—			102,971

Total net balance	￦	(220,230	)	￦	(169,961	)	￦	1,631		￦	(388,560	)

The tax impacts recognized directly to equity as at December 31, 2020, 2021, and 2022, are as follows:


	December 31, 2020									December 31, 2021									December 31, 2022
( i n millions of Korean won)	Before recognition			Tax effect			After recognition			Before recognition			Tax effect			After recognition			Before recognition			Tax effect			After recognition
Gain (loss) on valuation of financial assets at fair value through other comprehensive income	￦	54,969		￦	(12,972	)	￦	41,997		￦	163,892		￦	(34,112	)	￦	129,780		￦	(216,862	)	￦	58,288		￦	(158,574	)
Gain (loss) on valuation of hedge instruments		37,247			(9,860	)		27,387			6,916			(1,644	)		5,272			(42,510	)		11,180			(31,330	)
Remeasurements of net defined benefit liabilities		(77,382	)		17,201			(60,181	)		74,518			(18,696	)		55,822			247,162			(65,733	)		181,429
Share of gain (loss) of associates and joint ventures, and others		25,538			(8,820	)		16,718			(34,909	)		9,097			(25,812	)		(14,931	)		3,748			(11,183	)
Exchange differences on translation for foreign operations		(3,614	)		948			(2,666	)		683			(178	)		505			23,316			(5,852	)		17,464
Gain or loss on disposal of treasury stock		(27,786	)		7,288			(20,498	)		(15,657	)		4,080			(11,577	)		(59,308	)		14,886			(44,422	)

Total	￦	8,972		￦	(6,215	)	￦	2,757		￦	195,443		￦	(41,453	)	￦	153,990		￦	(63,133	)	￦	16,517		￦	(46,616	)

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Details of income tax expense for the years ended December 31, 2020, 2021 and 2022, are calculated as follows:


( i n millions of Korean won)	2020		2021		2022
Current income tax expense	￦	213,225	￦	289,471	￦	335,796
Impact of change in deferred taxes		72,124		229,545		169,961

Income tax expense	￦	285,349	￦	519,016	￦	505,757

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:


( i n millions of Korean won)	2020			2021			2022
Profit before income tax expense	￦	1,031,605		￦	1,978,411		￦	1,891,392

Statutory income tax expense	￦	273,329		￦	533,701		￦	509,771
Tax effect
Income not taxable for taxation purposes		(24,657	)		(4,307	)		(47,550	)
Non-deductible expenses		31,741			20,570			53,398
Tax credit		(47,056	)		(31,517	)		(54,895	)
Additional payment of income taxes		429			(221	)		11,744
Adjustments in deferred tax from changes in tax rate		—			—			(41,545	)
Tax effect and adjustment on consolidation
Goodwill impairment		—			—			5,809
Eliminated dividend income form subsidiaries		20,682			7,264			—
Changes of out-side tax effect		38,552			4,738			29,922
Intangible Asset impairment and amortization		3,790			796			5,276
Reversal expenses of contract cost assets		(6,643	)		(2,932	)		(4,800	)
Change in scope of consolidation		—			(5,128	)		—
Others		(4,818	)		(3,948	)		38,627

Income tax expense	￦	285,349		￦	519,016		￦	505,757

Details of deferred tax assets and liabilities that are not recognized as at December 31, 2021 and 2022, are as follows:


( i n millions of Korean won)	2021		2022
Deductible temporary differences
Investment in subsidiaries, associates, and joint ventures	￦	2,355,539	￦	3,384,295
Unused tax loss		106,853		103,326
Unused Tax credit		1,376		1,988
Others		119,265		387,084

Total	￦	2,583,033	￦	3,876,693

Taxable temporary differences
Investment in subsidiaries, associates, and joint ventures	￦	568,540	￦	857,076
Others		—		216,660

Total	￦	568,540	￦	1,073,736

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

The expected period of expiry for unused tax losses not recognized in deferred tax assets as at December 31, 2021 and 2022, is as follows:


( i n millions of Korean won)	2021		2022
2022	￦	4,249	￦	—
2023		76,133		72,512
2024		4,484		5,011
2025		2,836		3,701
2026		2,390		2,112
2027		3,419		2,534
2028		2,091		396
2029		2,579		617
2030		3,111		2,198
2031		1,841		1,360
Atter 2032		3,720		12,885

Total	￦	106,853	￦	103,326

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, 2020, 2021 and 2022, is calculated as follows:


	2020		2021		2022
Profit attributable to ordinary shares of owners of the Controlling Company (in millions of Korean won)	￦	700,889	￦	1,354,537	￦	1,259,686
Weighted average number of ordinary shares outstanding (in number of shares)		245,207,307		235,201,782		242,235,332
Basic earnings per share (in Korean won)	￦	2,858	￦	5,759	￦	5,200

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

bond

and

other share-based payments.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Diluted earnings per share from operations for the years ended December 31, 2020, 2021 and 2022 is calculated as follows:


	2020		2021		2022
Profit attributable to ordinary shares of owners of the Controlling Company (in millions of Korean won)	￦	700,889	￦	1,354,537	￦	1,259,686
Adjustment to net income attributable to ordinary shares ( i n millions of Korean won)		—		—		(496	)
Diluted profit attributable to ordinary shares (in millions of Korean won)		700,889		1,354,537		1,259,190
Number of dilutive potential ordinary shares outstanding (in number of shares)		69,598		483,760		91,931
Weighted average number of ordinary shares outstanding (in number of shares)		245,276,905		235,685,542		242,327,263
Diluted earnings per share (in Korean won)	￦	2,858	￦	5,747	￦	5,196

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.

32.

Dividend

The dividends paid by the Group in 2022, 2021 and 2020 were

￦

450,394

million (

￦

1,910

per share),

￦

326,487

million (

￦

1,350

per share),

￦

269,659

million (

￦

1,100

per share), respectively. A dividend in respect of the year ended December 31, 2022, of

￦

1,960

per share, amounting to a total dividend of

￦

501,844

million, was approved at the shareholders’ meeting on March 31, 2023.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Cash Generated from Operations

Cash flows from operating activities for the years ended December 31, 2020, 2021 and 2022, are as follows:


(in millions of Korean won)	2020			2021			2022
1. Profit for the year	￦	746,256		￦	1,459,395			1,385,635
2. Adjustments to reconcile net income
Income tax expense		285,349			519,016			505,757
Interest income 1		(291,425	)		(300,900	)		(340,794	)
Interest expense 1		265,035			268,847			320,914
Dividends income 2		(4,442	)		(21,525	)		(14,121	)
Depreciation		2,635,307			2,643,894			2,687,191
Amortization of intangible assets		628,154			604,744			627,261
Depreciation of right-of-use assets		404,174			398,716			396,214
Provision for severance benefits		255,615			253,491			240,506
Impairment losses on trade receivables		139,957			105,344			132,102
Share of net profit or loss of associates and joint ventures		(18,041	)		(116,061	)		16,821
Loss(gain) on disposal of associates and joint ventures		111			1			(38,024	)
Loss(gain) on the disposal of subsidiaries		—			13,483			(216,591	)
Loss(gain) on disposal of right-of-use assets		2,047			8,319			(978	)
Impairment losses on assets held for sale		—			11			—
Impairment loss on property and equipment and investment in properties		—			2,115			16,094
Loss on disposal of property and equipment and investment in properties 3		55,590			17,410			(66,317	)
Loss on disposal of intangible assets		246			2,159			6,393
Loss on impairment of intangible assets		211,637			3,747			30,674
Loss(gain) on foreign currency translation		(138,011	)		180,921			157,017
Loss(gain) on valuation and settlement of derivatives, net		155,600			(235,130	)		(205,381	)
Loss on disposal of financial assets at fair value through profit or loss		(29,974	)		(29,974	)		(2,347	)
Loss(Gain) on valuation of financial assets at fair value through profit or loss		(64,660	)		(64,660	)		44,833
Loss(gain) on disposal of financial assets at amortized cost 4		(138	)		(35	)		3
Others		127,949			84,625			(49,891	)
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		66,462			327,031			(43,787	)
Decrease( i ncrease) in other receivables		685,209			(328,610	)		(1,598,216	)
Decrease(increase) in other current assets		9,089			(89,230	)		(101,947	)
Decrease(increase) in other non-current assets		(86,039	)		(143,087	)		(120,054	)
Decrease(increase) in inventories		288,507			32,798			(179,255	)
Increase(decrease) in trade payables		(135,760	)		289,044			(368,355	)
Increase(decrease) in other payables		(1,232,646	)		207,583			1,103,113
Increase(decrease) in other current liabilities		127,076			107,993			(30,375	)
Decrease in other non-current liabilities		(56,319	)		(14,915	)		(1,015	)
Increase(decrease) in provisions		2,264			(4,668	)		(22,115	)
Increase (decrease ) in deferred revenue		(1,948	)		3,696			(384	)
Increase in plan assets		(136,336	)		(114,631	)		(90,771	)
Payment of post-employment benefits		(186,520	)		(241,350	)		(343,931	)

4. Cash generated from operations (1+2+3)	￦	4,745,293		￦	5,829,607		￦	3,835,879

BC Card CO., Ltd. and other subsidiaries of the Group recognize interest income and expense as operating revenue and expense, respectively, including interest income of

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

￦

68,869 million (2021:

￦

27,440 million) and interest expense of

￦

27,060 million that are recognized as operating revenue and expense, respectively, for the year ended December 31, 2022 (2021:

￦

5,458 million).

BC Card Co., Ltd. Recognized dividend income as operating revenue, including dividend income of

￦

2,299 million that is recognized as operating revenue for the year ended December 31, 2022 (2021:

￦

1,340 million).

KT Estate Inc. recognized gain and loss on disposal of investment properties as operating revenue and expense, respectively, including gain on disposal of investment properties of

￦

95,129 million that is recognized as operating revenue for the year ended December 31, 2022.

KT Investment CO., Ltd. and other subsidiaries of the Group recognized gain and loss on valuation of financial assets at fair value through profit or loss as operating revenue and expense, respectively, including loss on valuation of financial assets at fair value through profit or loss of

￦

7,859 million that is recognized as operating expense for the year ended December 31, 2022.

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.

Significant transactions not affecting cash flows for the years ended December 31, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020			2021			2022
Reclassification of the current portion of borrowings	￦	1,229,359		￦	1,303,543		￦	1,004,818
Reclassification of construction-in-progress to property and equipment		3,011,519			2,916,888			3,167,965
Reclassification of accounts payable from property and equipment		22,052			(149,512	)		(7,055	)
Reclassification of accounts payable from intangible assets		(345,675	)		524,040			(197,389	)
Reclassification of payable from defined benefit liabilities		72,346			69,415			(32,417	)
Reclassification of payable from plan assets		66,046			(60,320	)		28,532
Disposal of treasury stock related to acquisition of financial assets		—			—			747,161
Acquisition of financial assets related to disposal of a subsidiary		—			—			250,000

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

34.	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, 2020, 2021 and 2022, are as follows:


( i n millions of Korean won)	2020
							Non-cash
	Beginning			Cash flows			Newly acquired		Exchange difference			Fair Value changes			Changes in consolidati - on scope		Others			Ending
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


( i n millions of Korean won)	2021
	Beginning			Cash flows			Non-cash													Ending
	Beginning			Cash flows			Newly acquired		Exchange difference			Fair Value changes			Changes in consolidati - on scope		Others			Ending
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


(in millions of Korean won)	2022
	Beginning			Cash flows			Non-cash Ending
	Beginning			Cash flows			Newly acquired			Exchange difference			Fair value change		Changes in consolidati- on scope		Others



Borrowing	￦	8,437,703		￦	1,391,32		￦	—		￦	146,108		￦	939	￦	—	￦	30,614		￦	10,006,685
Lease liabilities		1,159,369			(378,684	)		427,398			—			—		—		(36,045	)		1,172,038
Derivative liabilities		75,176			(41,197	)		—			19,858			12,941		—		(33,223	)		33,555
Derivative assets		(99,453	)		76,280			(754	)		(147,161	)		30,341		—		(50,083	)		(190,830	)

Total	￦	9,572,795		￦	1,047,72		￦	426,644		￦	18,805		￦	44,221	￦	—	￦	(88,737	)	￦	11,021,448

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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
Satellite TV		Satellite TV business
Real estate		Residential building development and supply
Others		Cable television service , IT, facility security and global business, and others

Details of each segment for the years ended December 31, 2020, 2021 and 2022, are as follows:


	2020
( i n millions of Korean won)	Operating revenues			Operating Income			Depreciation and Amortization 1
ICT	￦	18,275,765		￦	809,741		￦	3,233,878
Finance		3,344,286			101,825			41,693
Satellite TV		668,320			64,627			58,181
Real estate		543,587			76,431			56,205
Others		5,780,960			122,546			328,165

		28,612,918			1,175,170			3,718,122
Elimination		(4,172,271	)		(152,837	)		(83,838	)

Consolidated amount	￦	24,440,647		￦	1,022,333		￦	3,634,284


	2021
( i n millions of Korean won)	Operating revenues			Operating Income			Depreciation and Amortization 1
ICT	￦	18,734,342		￦	1,170,920		￦	3,217,643
Finance		3,526,743			104,511			46,223
Satellite TV		665,081			61,398			60,980
Real estate		336,218			27,498			60,459
Others		6,474,858			390,903			327,202

		29,737,242			1,755,230			3,712,507
Elimination		(4,531,583	)		(55,833	)		(104,869	)

Consolidated amount	￦	25,205,659		￦	1,699,397		￦	3,607,638

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


	2022
( i n millions of Korean won)	Operating revenues			Operating Income			Depreciation and Amortization 1
ICT	￦	18,697,269		￦	1,347,405		￦	3,105,807
Finance		3,615,307			119,805			47,638
Satellite TV		709,160			19,797			58,413
Real estate		474,954			113,134			65,457
Others		7,960,143			473,276			575,035

		31,456,833			2,073,417			3,852,350
Elimination		(5,222,627	)		(105,260	)		(196,471	)

Consolidated amount	￦	26,234,206		￦	1,968,157		￦	3,655,879

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

For the year ended December 31, 2022, the Group changed certain operating segments for efficient business operation, and comparative information on the relevant segments was restated as the changed operating segments.

Operating revenues for the years ended December 31, 2020, 2021 and 2022 and non-current assets as at December 31, 2021 and 2022 by geographical regions, are as follows:


(In millions of Korean won)	Operating revenues						Non-current assets 1
Location	2020		2021		2022		2021.12.31		2022.12.31
Domestic	￦	24,368,729	￦	25,114,719	￦	26,074,349	￦	20,627,543	￦	20,845,214
Overseas		71,918		90,940		159,857		253,638		270,490

Total	￦	24,440,647	￦	25,205,659	￦	26,234,206	￦	20,881,181	￦	21,115,704

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

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Related Party Transactions

The list of related party of the Group as at December 31, 2022, is as follows:


Relationship		Name of Entity
Associates and joint ventures		KIF Investment Fund, QTT Global (Group) Company Limited, CU Industrial Development Co., Ltd., KD Living, Inc., LoginD Co., Ltd., K Bank Inc., 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., 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 I, 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, Daemuga Limited Company Specializing in the Cultural Industry, Megazone Cloud Corporation, SuseoyeokwhanseungcenterbokhapDevelopment, TeamFresh Corp., KORAMKO No. 143 General Private Real Estate Investment Company, Jumbo Film, KB Three Telecommunications Companies ESG Fund, IGIS No. 468-1 General Private Real Estate Investment Company, Pacific No. 68 General Private Real Estate Investment Company, Kiamco Data Center Blind Fund, Mastern No.172 Seongsu Office PFV Co. Ltd., OASISALPHA Corporation, Shinhan EZ General Insurance, Ltd . , New Media Tech Fund, SH-KT Logistics Investment Type Private Real Estate Investment Trust No.1, K-Realty Qualified Private Real Estate Investment Trust No. 1, GRANDWEST PFV Co., Ltd.

Others 1		Goody Studio Co., Ltd., Rebellion Inc., Digital Pharm Co., Ltd.

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.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Outstanding balances of receivables and payables in relations to transactions with related parties as at December 31, 2021 and 2022, are as follows:


		December 31, 2021
		Receivables				Payables
(in millions of Korean won)		Trade receivables		Other receivables		Trade payables		Other payables		Lease liabilities
Associates and joint ventures	K Bank, Inc.	￦	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	￦	—


		December 31, 2022
		Receivables				Payables
(in millions of Korean won)		Trade receivables		Other receivables		Trade payables		Other payables		Lease liabilities
Associates and joint ventures	K Bank, Inc.	￦	682	￦	258,999	￦	—	￦	299	￦	—
	Little Big Pictures		1,454		7,645		—		9		—
	K-Realty 11th Real Estate Investment Trust Company		151		1,283		—		—		8,824
	Others		2,285		2		3,235		2,932		—

Total		￦	4,572	￦	267,929	￦	3,235	￦	3,240	￦	8,824

Significant transactions with related parties for the years ended December 31, 2020, 2021 and 2022, are as follows:


		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, Inc.		15,658		8,227
	Others		809		10,272

Total		￦	18,765	￦	18,499

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


		2020
(in 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, Inc.		14		—		—
	Others		—		—		43

Total		￦	14	￦	917	￦	17,345

mounts include acquisition of property and equipment

, and other


		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, Inc.		24,247		15,164
	Others 2 ,3		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, Inc.		—		—		—
	Others 2 ,3		—		—		8,637

Total		￦	223	￦	205	￦	48,779

mounts include acquisition of property and equipment

, and others.

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

Includes transactions of Oscar Ent. before it was excluded as associates and joint ventures of the Group.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


		2022
( i n millions of Korean won)		Operating Revenue		Purchases 1
Associates and joint ventures	K- Realty CR-REITs No.1 2	￦	—	￦	—
	K Bank, Inc.		29,536		11,007
	Hyundai Robotics Co., Ltd. 1		94		3,799
	K-Realty 11th Real Estate Investment Trust Company		330		1,674
	Others 3		11,964		37,742
Others	Digital Pharm Co., Ltd.		1		—

Total			41,925		54,222


		2022
(in millions of Korean won )		Acquisition of right-of- use assets		Interest income		Interest expense		Dividend income
Associates and joint ventures	K- Realty CR-REITs No.1 2	￦	—	￦	—	￦	—	￦	45,549
	K Bank, Inc.		—		3,052		—		—
	Hyundai Robotics Co., Ltd. 1		—		—		—		—
	K-Realty 11th Real Estate Investment Trust Company		1,966		—		260		162
	Others 3		—		—		—		9,158

Total		￦	1,966	￦	3,052	￦	260	￦	54,869

Amounts include acquisition of property and equipment

, and others.

Includes transactions of the entity before it was excluded as an associate and joint venture of the Group.

Includes transactions of StorySoop Inc. before it was excluded as associates and joint ventures of the Group.

Key management compensation for the years ended December 31, 2020, 2021 and 2022, consists of:


(in millions of Korean won)	2020		2021		2022
Salaries and other short-term benefits	￦	2,086	￦	2,189	￦	1,855
Post-employment benefits		390		412		294
Share-based compensation		625		669		976

Total	￦	3,101	￦	3,270	￦	3,125

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Fund transactions with related parties for the years ended December 31, 2020, 2021 and 2022, are as follows:


	2020
	Borrowing transactions 1				Equity contributions in cash
(in millions of Korean won)	Borrowings		Repayments		Equity contributions in cash
Associates and joint ventures

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, Inc.		—		—		195,011
Gyeonggi-KT Yoojin Superman Fund		—		—		1,000
Hyundai Robotics Co. Ltd.		—		—		50,000

Total	￦	—	￦	20,304	￦	255,302

Borrowing transactions include lease transactions.


	202 1
	Borrowing transactions 1				Equity contributions in cash
(in millions of Korean won )	Borrowings		Repayments		Equity contributions in cash
Associates and joint ventures
K- REALTY CR REIT 1	￦	—	￦	15,964	￦	—
K Bank, Inc.		—		—		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 2		—		—		18,176

Total	￦	—	￦	15,964	￦	462,888

Borrowing transaction

include lease transactions.

Others include transactions before exclusion as associates and joint ventures of the Group.

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KT Corporation

and

Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


	2022
	Borrowing transactions 1				Equity contributions in cash
(in millions of Korean won)	Borrowings		Repayments		Equity contributions in cash
Associates and joint ventures
Megazone Cloud Corporation	￦	30,000	￦	—	￦	130,001
IBK-KT Emerging Digital Industry Investment Fund		—		—		10,800
Mastern KT Multi-Family Real Estate Private Equity Investment Fund I		—		—		18,859
IGIS No. 468-1 General Private Real Estate Investment Company		—		—		25,000
K-Realty 11th Real Estate Investment Trust Company		1,916		771		—
Others		—		—		93,478

Total	￦	31,916	￦	771	￦	278,138

Borrowing transactions include lease transactions.

The Group has an obligation to invest in Real Estate Investment Company No.167, a related party, and others according to the agreement. As at December 31, 2022, the Group is planning to make an additional investment of

￦

53,120 million.

As at December 31, 2022, the limit of the credit card contract provided by the Group to K Bank, Inc. is

￦

1,000 million (December 31, 2021:

￦

1,000 million).

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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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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, 2020, 2021 and 2022, 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	Impact on profit before income tax 1			Impact on equity


2020.12.31	10%	￦	25,220		￦	36,961
2020.12.31	-10%		(25,220	)		(36,961	)
2021.12.31	10%	￦	(3,433	)	￦	8,692
2021.12.31	-10%		3,433			(8,692	)
2022.12.31	10%	￦	(5,841	)	￦	(15,836	)
2022.12.31	-10%		5,841			15,836

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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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Details of financial assets and liabilities in foreign currencies as at December 31, 2020, 2021 and 2022, are as follows:


(In thousands of foreign currencies)	2020				2021				2022
(In thousands of foreign currencies)	Financial assets		Financial liabilities		Financial assets		Financial liabilities		Financial assets		Financial liabilities
USD		400,046		1,937,935		245,759		2,302,642		106,426		2,336,607
SDR 1		255		728		255		722		255		722
JPY		209,376		46,000,009		29,227		30,000,763		32,801		400,002
GBP		—		—		—		1,005		30		83
EUR		316		162		3,943		10,801		185		7,832
CNY		458		491		—		—		—		—
RWF 2		646		—		586		—		15,521		13,025
THB 3		535		—		2,160		—		265		—
MMK 4		—		—		—		—		—		—
TZS 5		1,019		—		1,644		—		1,464		—
BWP 6		212		—		93		—		183		—
HKD 7		—		198		—		105		37		—
BDT 8		—		—		—		—		—		—
PLN 9		26		—		—		—		—		—
VND 10		242,370		—		257,895		—		280,226		—
XAF 11		16,229		—		—		—		—		—
SGD 12		6		284,000		13		284,000		448		284,000
TWD 13		—		—		—		226		—		—
CHF 14		—		—		—		161		—		—
MYR 15		—		—		—		—		1		—
BGN 16		—		—		—		—		62		—

Special Drawing Rights.

Rwanda Franc.

Thailand Bhat.

Myanmar Kyat.

Tanzanian Shilling.

Botswana Pula.

Hong Kong Dollar.

Bangladesh Taka.

Polish Zloty.

Vietnam Dong.

Central African Franc.

Singapore Dollar.

Taiwan Dollar.

Swiss Franc.

Ringgit Malaysia.

Bulgarian Lev.

(iii) Price risk

As at December 31, 2020, 2021 and 2022, 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

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

increased/decreased by 10% with all other variables held constant, the effects on profit before income tax and equity would have been as follows:


(in millions of Korean won)	Fluctuation of price	Impact on profit before income tax			Impact on equity

2020.12.31	10%	￦	2,811		￦	3,472
2020.12.31	-10%		(2,811	)		(3,472	)
2021.12.31	10%	￦	2,000		￦	4,588
2021.12.31	-10%		(2,000	)		(4,588	)
2022.12.31	10%	￦	2,660		￦	113,948
2022.12.31	-10%		(2,660	)		(113,948	)

The analysis above 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, 2020, 2021 and 2022, 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		Impact on profit before income tax			Impact on equity


2020.12.31		+ 100 bp	￦	973		￦	18,584
2020.12.31		- 100 bp		(973	)		(19,377	)
2021.12.31		+ 100 bp	￦	753		￦	5,549
2021.12.31		- 100 bp		(731	)		(5,675	)
2022.12.31		+ 100 bp	￦	635		￦	(2,045	)
2022.12.31		- 100 bp		(669	)		2,100

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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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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 value through other comprehensive income, and

•

other financial assets carried at amortized cost.

While cash equivalents are also subject to the impairment requirement, the identified expected credit loss was immaterial.

The maximum exposure to credit risk of the Group’s financial instruments without considering value of collaterals as at December 31, 2021 and 2022, are as follows:


(in millions of Korean won)	December 31, 2021		December 31, 2022
Cash and cash equivalents (except for cash on hand)	￦	2,989,713	￦	2,437,629
Trade and other receivables
Financial assets at amortized costs		5,687,103		7,459,994
Financial assets at fair value through other comprehensive income		491,713		129,124
Contract assets		745,085		802,253
Other financial assets
Derivatives financial assets for hedging		99,453		190,830
Financial assets at fair value through profit or loss		862,481		942,274
Financial assets at fair value through other comprehensive income		94,750		5,432
Financial assets at amortized costs		608,389		1,060,058

Total	￦	11,578,687	￦	13,027,594

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

The Group is exposed to credit risk for financial guarantee contracts. As at December 31, 2022, the Group’s maximum exposure amount is

￦

26,206 million (2021:

￦

71,697 million).

(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, 2022. 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 meet 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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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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, 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

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, 2022
(in millions of Korean won)	Less than 1 year		1-5 years		More than 5 years		Total
Trade and other payables	￦	7,386,703	￦	1,009,559	￦	86,848	￦	8,483,110
Borrowings(including debentures)		2,028,207		6,972,077		2,016,472		11,016,756
Lease liabilities		313,162		615,766		407,833		1,336,761
Other non-derivative financial liabilities		33,279		209,155		93,744		336,178
Financial guarantee contracts 1		21,618		—		4,588		26,206

Total	￦	9,782,969	￦	8,806,557	￦	2,609,485	￦	21,199,011

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, 2020

(

n millions of Korean won)

Less than

1 year

1-5 years

More than
5 years

Total

Derivatives settled gross

Outflow

￦

248,300

￦

2,179,046

￦

498,619

￦

2,925,965

Inflow

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

Outflows

￦

—

￦

158,284

￦

—

￦

158,284

Derivatives settled gross

Outflows

￦

843,489

￦

1,857,942

￦

377,302

￦

3,078,733

Inflows

856,508

1,917,236

394,134

3,167,878

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

December 31, 2022

(in millions of Korean won)

Less than
1 year

1-5 years

More than
5 years

Total

Derivatives held for trading

Outflows

￦

—

￦

101,994

￦

930

￦

102,924

Derivatives settled gross

Outflows

￦

472,005

￦

2,493,858

￦

28,786

￦

2,994,649

Inflows

550,478

2,670,002

37,873

3,258,353

During the year ended December 31, 2022, 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 managed based on net fair value, their contractual maturities are not necessarily taking into consideration to understand the timing of cash flows.

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

Meanwhile, as at December 31, 2022, the Group is obligated to invest

￦

53,120

million in IBK-KT Emerging Digital Industry Investment Fund, a related party, and others, and

￦

5,473

million and USD

34,050

thousand to be paid in the future Capital Call method to Future Innovation Private Equity Fund No.3 (Notes 20 and 3

(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, 2021 and 2022, are as follows:


(in millions of Korean won)	December 31, 2021			December 31, 2022
Total liabilities	￦	20,592,180		￦	22,577,114
Total equity		16,567,161			18,412,696
Debt-to-equity ratio		124	%		123	%

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.

The gearing ratios as at December 31, 2021 and 2022, are as follows:


(in millions of Korean won, %)	December 31, 2021			December 31, 2022
Total borrowings	￦	8,437,703		￦	10,006,685
Less: cash and cash equivalents		(3,019,592	)		(2,449,062	)

Net debt		5,418,111			7,557,623
Total equity		16,567,161			18,412,696
Total capital		21,985,272			25,970,319
Gearing ratio		25	%		29	%

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

(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, 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


(in millions of Korean won)	December 31, 2022
	Gross assets		Gross liabilities offset			Net amounts presented in the statement of financial position		Amounts not offset					Net amount
	Gross assets		Gross liabilities offset					Financial instruments			Cash collateral		Net amount
Trade receivables	￦	60,512	￦	—		￦	60,512	￦	(44,518	)	￦	—	￦	15,994
Other financial assets		764		(764	)		—		—			—		—

Total	￦	61,276	￦	(764	)	￦	65,012	￦	(44,518	)	￦	—	￦	15,994

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, 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

Total

￦

69,944

￦

—

￦

69,955

￦

(65,592

)

￦

—

￦

4,352

(in millions of Korean won)

December 31, 2022

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

￦

47,271

￦

(764

)

￦

46,507

￦

(44,518

)

￦

—

￦

1,989

Total

￦

47,271

￦

(764

)

￦

46,507

￦

(44,518

)

￦

—

￦

1,989

These include price subject to netting arrangements on facility interconnection and data sharing among telecommunication companies.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial

Statemen

December 31, 2020, 2021 and 2022

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, 2021 and 2022, are as follows:


	December 31, 2021				December 31, 2022
(in millions of Korean won)	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets
Cash and cash equivalents	￦	3,019,592		1	￦	2,449,062		1
Trade and other receivables
Financial assets measured at amortized cost 2		5,610,377		1		7,364,516		1
Financial assets at fair value through other comprehensive income		491,713		491,713		129,124		129,124
Other financial assets
Financial assets measured at amortized cost		608,389		1		1,060,058		1
Financial assets at fair value through profit or loss		952,319		952,319		1,064,856		1,064,856
Financial assets at fair value through other comprehensive income		347,877		347,877		1,508,192		1,508,192
Derivative financial assets for hedging purpose		99,453		99,453		190,830		190,830

Total	￦	11,129,720			￦	13,766,638

Financial liabilities
Trade and other payables	￦	7,980,203		1	￦	8,397,264		1
Borrowings		8,437,703		8,578,827		10,006,685		9,405,992
Other financial liabilities
Financial liabilities at amortized cost		263,500		1		246,606		1
Financial liabilities at fair value through profit or loss		216,040		216,040		141,280		141,280
Derivative financial liabilities for hedging purpose		18,126		18,126		33,555		33,555

Total	￦	16,915,572			￦	18,825,390

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

With the application of IFRS 7, lease receivables are excluded from

fair value disclosure.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

38.2

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 active market

is determined

using val

uation 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, 2021 and 2022, are as follows:


	December 31, 2021
(in millions of Korean won)	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		350,949		577,085		952,319
Financial assets at fair value through other comprehensive income		17,328		7,176		323,373		347,877
Derivative financial assets for hedging purpose		—		67,888		31,565		99,453
Investment properties		—		—		4,263,381		4,263,381

Total	￦	41,613	￦	917,726	￦	5,195,404	￦	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 purpose		—		18,126		—		18,126

Total	￦	—	￦	8,597,661	￦	215,332	￦	8,812,993

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Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


(in millions of Korean won)	December 31, 2022
(in millions of Korean won)	Level 1		Level 2		Level 3		Total
Assets
Trade and other receivables
Financial assets at fair value through other comprehensive income	￦	—	￦	129,124	￦	—	￦	129,124
Other financial assets
Financial assets at fair value through profit or loss		26,647		426,140		612,069		1,064,856
Financial assets at fair value through other comprehensive income		1,005,900		5,163		497,129		1,508,192
Derivative financial assets for hedging purpose		—		189,717		1,113		190,830
Investment properties		—		—		5,370,047		5,370,047

Total	￦	1,032,547	￦	750,144	￦	6,480,358	￦	8,263,049

Liabilities
Borrowings	￦	—	￦	9,405,992	￦	—	￦	9,405,992
Other financial liabilities
Financial liabilities at fair value through profit or loss		—		—		141,280		141,280
Derivative financial liabilities for hedging purpose		—		33,555		—		33,555

Total	￦	—	￦	9,439,547	￦	141,280	￦	9,580,827

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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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements as at December 31, 2021 and 2022, are as follows:


	2021
	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			Derivative financial assets for hedging			Financial liabilities at fair value through profit or loss
Beginning balance	￦	432,509		￦	50,789		￦	(4,194	)	￦	2,637
Acquisition		492,842			118,648			—			205,323
Reclassification		(25,757	)		14,633			—			—
Changes in c onsolidation s cope		353			(3,051	)		—			46,208
Disposal		(418,029	)		(5,325	)		—			—
Amount recognized in profit or loss 1, 2		95,167			71			43,150			(38,836	)
Amount recognized in other comprehensive income 2		—			147,608			(7,391	)		—

Ending balance	￦	577,085		￦	323,373		￦	31,565		￦	215,332

The recognition of gains and losses on derivatives financial liabilities (assets) for hedging purposes consists entirely of derivatives valuation losses.

The recognition of gains and losses on financial liabilities measured at fair value through profit or loss consists of derivative valuation losses.


	2022
	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			Derivative financial assets for hedging			Financial liabilities at fair value through profit or loss
Beginning balance	￦	577,085		￦	323,373		￦	31,565		￦	215,332
Acquisition		226,310			262,408			—			3,046
Reclassification		(8,962	)		8,122			—			(54,921	)
Changes in consolidation scope		—			(40	)		—			—
Disposal		(179,740	)		(97,426	)		(31,565	)		—
Amount recognized in profit or loss 1,		(2,624	)		18			—			(22,177	)
Amount recognized in other comprehensive income 2		—			674			1,113			—

Ending balance	￦	612,069		￦	497,129		￦	1,113		￦	141,280

The recognition of gains and losses on financial liabilities measured at fair value through profit or loss consists of derivative valuation gains and losses.

The recognition of gains and losses on derivatives financial liabilities for hedging purposes consists entirely of derivatives valuation gains.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

38.4

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, 2021 and 2022, are as follows:

December 31, 2021

(in millions of Korean won)

Fair value

Level

Valuation techniques

Inputs

Assets

Trade and other receivables

Financial assets at fair value
through other comprehensive
income

￦

491,713

DCF Model

Guaranteed bond interest
rate

Other financial assets

Financial assets at fair value
through profit or loss

928,034

2,3

DCF Model,
Adjusted Net Asset Model

Bond interest rate,

Underlying asset price

Financial assets at fair value
through other comprehensive
income

330,549

2,3

DCF Model,
Market approach Model

Discount rate

Derivative financial assets for
hedging

99,453

2,3

Hull-White Model,
DCF Model

Market observation

discount rate

Investment properties

4,263,381

DCF Model

Liabilities

Borrowings

￦

8,578,827

DCF Model

Bond interest rate

Other financial liabilities

Financial liabilities at fair value
through profit or loss

216,040

2,3

DCF Model,
Binomial Option Pricing Model

Forward rate,

Market interest rate

Derivative financial liabilities for
hedging

18,126

DCF Model

Market observation
discount rate

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

December 31, 2022

(in millions of Korean won)

Fair value

Level

Valuation techniques

Inputs

Assets

Trade and other receivables

Financial assets at fair value

through
other comprehensive

income

￦

129,124

DCF Model

Guaranteed bond interest
rate

Other financial assets

Financial assets at fair value

through
profit or loss

1,038,209

2,3

DCF Model,
Adjusted Net Asset

Model,
Monte-Carlo Simulation

Market Interest rate,

Underlying asset price

Financial assets at fair value through
other comprehensive income

502,292

2,3

DCF Model,
Market approach Model

Discount rate

Derivative financial assets for hedging

190,830

2,3

Hull-White Model,
DCF Model

Market observation

discount rate,

Swap interest rate

Investment properties

5,370,047

DCF Model

Liabilities

Borrowings

￦

9,405,992

DCF Model

Bond interest rate

Other financial liabilities

Financial liabilities at fair value through profit or loss

141,280

2,3

DCF Model,

Binomial Option Pricing Model,

Monte-Carlo Simulation

Derivative financial liabilities for hedging

33,555

DCF Model

Market observation
discount rate

38.5

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 closing dates.

38.6

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.

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

In relation to this, details and changes of the total deferred difference for the years ended December 31, 2021 and 2022, are as follows:


(in millions of Korean won)	2021					2022
(in millions of Korean won)	Derivatives used for hedging			Derivative held for trading		Derivatives used for hedging			Derivative held for trading
I. Beginning balance	￦	2,257		￦	—	￦	832		￦	—
II. New transactions		—			—		—			—
III. Recognized at fair value through profit or loss		(1,425	)		—		(832	)		—

IV. Ending balance (I+II+III)	￦	832		￦	—	￦	—		￦	—

39.	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, 202 2 , 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, 2022, 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, 2020, 2021 and 2022

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, 2021 and 2022, are as follows:


(in millions of Korean won)	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

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.


(in millions of Korean won)	December 31, 2022
(in millions of Korean won)	Real Estate Finance		PEF and Investment Funds		Asset Securitization		Total
Total assets of unconsolidated structured entities	￦	3,539,827	￦	5,580,445	￦	2,044,989	￦	11,165,261
Assets recognized in statement of financial position
Other financial assets	￦	77,819	￦	237,907	￦	—	￦	315,726
Joint ventures and associates		123,138		268,275		—		391,413

Total	￦	200,957	￦	506,182	￦	—	￦	707,139

Maximum loss exposure 1
Investment assets	￦	200,957	￦	506,182	￦	—	￦	707,139
Investment agreement, etc		40,914		91,224		—		132,138

Total	￦	241,871	￦	597,406	￦	—	￦	839,277

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

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, 2020, 2021 and 2022 are as follows:


(In millions of Korean won)	December 31, 2020
(In millions of Korean won)	Non- controlling Interests rate (%)			Accumulated non-controlling interests at the beginning of the year		Profit or loss allocated to non-controlling interests			Dividend s 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
(In millions of Korean won)	Non- controlling Interests rate (%)			Accumulated non-controlling interests at the beginning of the year		Profit or loss allocated to non-controlling interests		Dividend s 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		79.7	%		129,502		21,394		(2,211	)		(3,574	)		145,111
Nasmedia, Co., Ltd.		56.0	%		112,549		15,185		(3,808	)		255			124,181


(In millions of Korean won)	December 31, 2022
(In millions of Korean won)	Non- controlling Interests rate (%)			Accumulated non-controlling interests at the beginning of the year		Profit or loss allocated to non-controlling interests		Dividend s paid to non- controlling interests			Others			Accumulated non-controlling interests at the end of the year
KT Skylife C o., Ltd .		49.8	%	￦	410,695	￦	7,127	￦	(8,284	)	￦	13,651		￦	423,189
BC Card Co., Ltd.		30.5	%		498,928		47,909		(7,641	)		(14,539	)		524,657
KTIS Corporation		66.7	%		135,240		14,965		(2,226	)		(6,577	)		141,402
KTCS Corporation		78.3	%		145,111		18,888		(2,721	)		(7,397	)		153,881
Nasmedia Co., Ltd		56.0	%		124,181		15,610		(4,187	)		(179	)		135,425

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

.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, 2020, 2021 and 2022, are as follows:


	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 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

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022


	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	%		79.7	%		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 for the year		62,309			120,308			24,944			19,034			27,120
Total comprehensive income		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, 2020, 2021 and 2022


	December 31, 2022
(in millions of Korean won)	KT Skylife Co., Ltd.			BC Card Co., Ltd.			KTIS Corporation			KTCS Corporation			Nasmedia, Co., Ltd.
Non-controlling Interests rate (%)		49.8	%		30.5	%		66.7	%		78.3	%		56.0	%
Current assets	￦	420,701		￦	3,152,622		￦	102,121		￦	296,209		￦	435,359
Non-current assets		938,465			2,513,453			294,087			123,517			81,586
Current liabilities		274,637			2,879,551			103,698			188,379			261,381
Non-current liabilities		229,042			1,229,649			95,506			40,240			14,349
Equity		855,487			1,556,875			197,004			191,107			241,215
Operating revenue		1,038,468			3,897,090			536,229			1,031,010			153,210
Profit for the year		20,941			148,341			15,917			17,634			27,691
Total comprehensive income		34,485			143,055			13,502			17,500			26,996
Cash flows from operating activities		176,407			(798,043	)		13,809			19,423			22,015
Cash flows from investing activities		(78,928	)		(7,733	)		9,813			13,245			3,845
Cash flows from financing activities		(79,455	)		914,441			(29,199	)		(35,578	)		(11,136	)
Net increase (decrease) in cash and cash equivalents		18,024			108,665			(5,577	)		(2,910	)		14,724
Cash and cash equivalents at beginning of year		80,672			326,482			30,521			63,884			71,396
Exchange differences		(1	)		(100	)		—			840			13
Cash and cash equivalents at end of year		98,695			435,047			24,944			61,814			86,133

40.3 Transactions with Non-controlling Interests

The effect of changes in the ownership interest on the equity attributable to owners of the Group for the years ended December 31, 2020, 2021 and 2022 is summarized as follows:


(in millions of Korean won)	2020		2021		2022
Carrying amount of non-controlling interests acquired	￦	1,750	￦	14,702	￦	19,272
Consideration paid to non-controlling interests		9,878		1,095		69,652

Effect of changes in equity (net amount)	￦	11,628	￦	15,797	￦	88,924

41.	Business Combination

Kt cloud Co., Ltd., a subsidiary of the Group, acquired

100,000

common shares

(100

%) of SPARK AND ASSOCIATES INC. for

￦

20,328

million on October 4, 2022 to secure business capabilities of the car cloud business and also gain first mover advantage in the multi/hybrid cloud market.

The details of major business combinations that occurred for the year ended December 31, 2022, are as follows

(in millions of Korean won)

Major transfer business

Business
combination
date

Transfer price

SPARK AND ASSOCIATES INC.

Network service industry

Oct. 4, 2022

20,328

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

The values of assets and liabilities acquired on the acquisition date from major business combinations for the year ended December 31, 2022, are as follows:


(in millions of Korean won)	SPARK AND ASSOCIATES INC.

I. Total transfer price (A)	￦	20,328
II. Amount recognized as identifiable assets and liabilities
Fair value of identifiable assets		11,446
Cash and cash equivalents		427
Trade and other receivables, net		1,039
Property and equipment, net		23
Intangible assets, net		9,715
Other assets		242
Fair value of identifiable liabilities		2,793
Trade and other payables		410
Current income tax liabilities		32
Net defined benefit liabilities		21
Other liabilities		2,330
Total identifiable net assets (B)		8,653
III. Non-controlling interest (C)		—
IV. Fair value of net assets acquired (D=B-C)		8,653

V. Goodwill (E=A-D)	￦	11,675

Intangible assets additionally identified by the Group as a result of major business combinations for the year

ended December 31, 2022, are as follows:


(in millions of Korean won)	Goodwill		Customer relationship
SPARK AND ASSOCIATES INC.	￦	11,675	￦	9,715

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, 2022, are as follows:

(in millions of Korean won)

After business
combination

2022

Operating
revenue

Profit (loss) for
the year

Operating
revenue

Profit (loss) for
the year

SPARK AND ASSOCIATES INC.

￦

1,637

￦

413

￦

6,856

￦

670

Operating revenue and profit or loss of the entity for the current reporting period as though th

e acquisition date f

or all business combinations that occurred during the year had been as at the beginning of the annual reporting period.

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020, 2021 and 2022

Events After Reporting Period

The Group has issued the following bonds since the end of the reporting period.

Type

Issuance date

Face value

(in millions
of Korean
won)

Interest
rate

Redemption
date

The 198-1st Public bond

Jan. 12, 2023

￦

70,000

3.847

Jan. 10, 2025

The 198-2nd Public bond

Jan. 12, 2023

150,000

3.869

Jan. 12, 2026

The 198-3rd Public bond

Jan. 12, 2023

80,000

3.971

Jan. 12, 2028

The Group decided to acquire treasury stocks equivalent to

￦

300,000 million, in accordance with the resolution of the Board of Directors on February 9, 2023, to enhance shareholder value. Treasury stocks amounting to

￦

100,000 million of th

e acquired

treasury stocks will be retired in August 2023.

F-11

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/ JONG-OOK PARK
Name: Jong-Ook Park
Title:		Acting Chief Executive Officer and President

Date: April 28, 2023

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

15.1		Letter of Samil PricewaterhouseCoopers dated April 28, 2023

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, 2022, has been formatted in Inline XBRL

*	Filed previously.

(P)	Paper filing.