KT Corporation — FY2022 Form 20-F
Reporting period: Year ended December 31, 2022; filed April 28, 2023. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB. Amounts below are in Korean won (KRW), with “billion” referring to KRW billions unless stated otherwise.
Business context and financial performance
KT is an integrated Korean telecommunications and platform company, with mobile, fixed-line and broadband, media and content, financial services, IT and network services, and real estate operations. It reported 2022 operating revenue of KRW 26,234 billion.
| Metric | 2022 | 2021 |
|---|---|---|
| Operating revenue | KRW 26,234bn | KRW 25,206bn |
| Operating profit / margin | KRW 1,968bn / 7.5% | KRW 1,699bn / 6.7% |
| Profit for the year | KRW 1,386bn | KRW 1,459bn |
| Profit attributable to KT shareholders | KRW 1,260bn | KRW 1,357bn |
| Basic EPS | KRW 5,200 | KRW 5,759 |
| Operating cash flow | KRW 3,597bn | KRW 5,562bn |
| Cash and cash equivalents, year-end | KRW 2,449bn | KRW 3,020bn |
| Total borrowings and debentures, year-end | KRW 10,007bn | KRW 8,438bn |
Profit for the year as a percentage of revenue was 5.3%, versus 5.8% in 2021. EBITDA is not clearly provided in the filing text.
Material changes and liquidity
- Revenue grew 4.1%, while operating profit rose 15.8%; operating expenses increased 3.2%. Higher costs included salaries, commissions, service costs and rent.
- Profit for the year fell 5.1%, despite improved operating profit. Finance costs increased 33.1% to KRW 750bn, and the share of results from associates and joint ventures shifted from KRW 116bn profit to KRW 17bn loss.
- Growth came mainly from “others” (up 15.7%, including data centers and systems integration), media and content (up 10.7%), and financial services (up 4.8%). Fixed-line and VoIP telephone revenue declined 5.9%; handset and other goods revenue declined 3.9%.
- Mobile subscribers increased 5.5% to 24.1 million, including 8.5 million 5G subscribers; average monthly revenue per subscriber rose to KRW 32,803. Broadband subscribers were approximately 9.7 million and IPTV subscribers 9.4 million.
- Operating cash flow declined about 35% year over year. Investing cash outflow was KRW 4,839bn and financing cash inflow KRW 669bn; cash decreased KRW 571bn. Property, equipment and investment-property acquisitions were KRW 3,440bn, with intangible-asset acquisitions of KRW 545bn.
- Year-end total assets were KRW 40,990bn, liabilities KRW 22,577bn and equity KRW 18,413bn. Working capital was positive at KRW 1,991bn; debt-to-equity was 123%, and net debt was approximately KRW 7,558bn.
Outlook, risks and unusual items
- KT expects 2023 capital expenditures for property, equipment, investment property and intangible assets to decrease slightly from 2022 on a standalone basis; actual spending depends on market conditions and 5G build-out plans. No quantified earnings or revenue guidance is given.
- The MSIT cancelled KT’s 28 GHz spectrum license in December 2022, citing failure to meet allocation commitments. KT recorded a KRW 3bn impairment on that license in 2022; earlier impairment was KRW 191bn in 2020. The company also faces continuing 5G investment needs and intense competition, including possible entry of a fourth Korean mobile operator.
- Leadership and governance were unsettled after the CEO and several directors resigned or left office in early 2023. An acting CEO was in place while KT searched for a successor and a board task force reviewed governance and selection processes.
- KT’s 2022 results include KRW 217bn gain on disposal of subsidiary investments, principally contributing to higher other income. The HCN cable-TV acquisition also affected consolidation and segment costs. HCN goodwill impairment was KRW 24bn.
- Legal and compliance exposure includes ongoing Korean proceedings concerning political donations and other allegations. KT appealed a KRW 10m penalty to the Supreme Court. In a separate 2022 SEC settlement, KT paid approximately $2.8m disgorgement and $3.5m civil penalty and agreed to report on compliance remediation for two years.
- At year-end, KT disclosed 189 lawsuits with aggregate claims of KRW 80bn and litigation provisions of KRW 36bn. Other risks include foreign-exchange exposure, cybersecurity and service outages, regulation and pricing pressure, and economic or geopolitical conditions in Korea.
- Management and the auditor reported effective internal control over financial reporting; the auditor issued an unmodified opinion on the financial statements.
Important facts for investors to verify
- Whether the decline in operating cash flow and increase in net debt persist, and how much funding 5G, bandwidth commitments and acquisitions require.
- Execution and financial impact of the cancelled 28 GHz license, and the cost and timing of nationwide 5G expansion.
- Recovery of profitability in satellite TV, where segment operating profit fell from KRW 61bn to KRW 20bn, and performance of newer platform and data-center businesses.
- Resolution of leadership and board vacancies, and any resulting changes to strategy, capital allocation or shareholder returns.
- Developments in political-donation, fiduciary-duty and other litigation, including whether current provisions adequately reflect potential exposure.
- The KRW 1,960 per-share 2022 dividend approved in March 2023 and the announced KRW 300bn treasury-share purchase plan, including the planned KRW 100bn retirement.