KT Corporation — FY2021 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021; filed April 28, 2022. This is an annual report, not a standalone fourth-quarter filing. Quarterly Q4 results are not clearly provided in the filing text. Financial statements are audited and prepared under IFRS as issued by the IASB. Unless noted, amounts below are in Korean won (KRW).
Business context
KT is an integrated Korean telecommunications and platform company. Its businesses include mobile and fixed-line communications, broadband, media and content, financial services (primarily BC Card), IT/network services and real estate. Management’s strategy is to expand digital-platform businesses, particularly B2B, media, content and financial services.
Financial and operating highlights
| Metric | FY2021 | Comparison |
|---|---|---|
| Operating revenue | KRW 25.206 trillion | Up 3.1% from 2020 |
| Operating profit | KRW 1.699 trillion | Up 66.2%; operating margin 6.7%, versus 4.2% |
| Profit for the year | KRW 1.459 trillion | Up 95.6%; net margin 5.8%, versus 3.1% |
| Profit attributable to KT shareholders | KRW 1.357 trillion | Basic EPS KRW 5,759, versus KRW 2,858 |
| Net cash from operating activities | KRW 5.562 trillion | Up from KRW 4.740 trillion |
| Net cash used in investing activities | KRW 5.137 trillion | Outflow increased from KRW 3.761 trillion |
| Net cash used in financing activities | KRW 41 billion | Outflow decreased from KRW 648 billion |
| Cash and cash equivalents | KRW 3.020 trillion | Up from KRW 2.635 trillion |
| Total assets / liabilities / equity | KRW 37.159 trillion / KRW 20.592 trillion / KRW 16.567 trillion | At December 31, 2021 |
| Borrowings | KRW 8.438 trillion | Up from KRW 7.316 trillion; KRW 3.134 trillion denominated in foreign currencies |
| Liquidity | Working-capital surplus KRW 1.786 trillion | Versus KRW 1.962 trillion in 2020 |
Debt-to-equity was 124% at year-end, compared with 116% in 2020; net debt, calculated as borrowings less cash, was approximately KRW 5.418 trillion. KT paid KRW 1,910 per share in 2021 dividends, approved March 31, 2022. The filing reports 2021 capital spending of KRW 3.495 trillion for property, equipment and investment property, and KRW 752 billion for intangible assets, primarily bandwidth licenses.
Material changes versus 2020
- Revenue growth was led by other businesses, financial services, media and content, and fixed-line services. Mobile revenue rose 1.9%; average monthly revenue per mobile subscriber increased 1.9% to KRW 32,294, and mobile subscribers grew 2.2% to 22.8 million.
- 5G subscribers rose to 6.4 million from 3.6 million. Broadband Internet revenue increased 3.9%, IPTV revenue increased 6.2%, and IT/network services contributed to higher revenue in “others.”
- Operating expenses increased only 0.4%. Service costs, card service costs and commissions rose, while inventory changes and intangible-asset impairment expense declined. The 2020 comparison included a KRW 193 billion impairment of frequency usage rights; 2021 had no comparable charge.
- Finance income increased, including a KRW 255 billion valuation gain on derivatives in 2021, while foreign-currency translation moved from a net gain in 2020 to a net loss in 2021. Share of profits of associates and joint ventures rose to KRW 116 billion, including gains from K-Realty CR-REITs No. 1.
- KT Skylife acquired cable operator HCN for KRW 491 billion in September 2021. KT’s 57.6%-owned KT ES acquired Epsilon for US$135 million. KTH and KT mhows merged into KT alpha in July 2021.
Outlook, risks and unusual items
- Outlook: KT expected 2022 capital expenditures for property/equipment, investment property and intangible assets to be comparable to 2021 on a standalone basis. Actual spending could change with market conditions, results and 5G network plans. No specific revenue or earnings guidance is provided in the filing text.
- Competition and investment: Competition among Korea’s three network operators, pay-TV providers and global OTT services could pressure pricing and raise marketing and network costs. Further 5G expansion and bandwidth needs may require substantial spending; 2021 bandwidth-license payments were KRW 603 billion.
- Network event: A network maintenance error on October 25, 2021 disrupted broadband Internet nationwide and some telecommunications services for about 1.5 hours. KT refunded subscription fees to affected individual and small-business customers.
- Regulatory and legal matters: In February 2022, KT settled an SEC investigation concerning books-and-records/internal-control allegations, including matters involving certain payments for Vietnamese government contracts. Without admitting or denying most findings, KT agreed to cease and desist, paid approximately US$2.8 million in disgorgement and interest plus a US$3.5 million civil penalty, and agreed to report remediation progress to SEC staff for two years. Korean political-funds proceedings involving KT and current/former executives remained pending; the company and executives deny no specific finding here beyond the filing’s stated procedural status.
- Other litigation: At year-end KT was defendant in 219 lawsuits with claimed amounts totaling KRW 101.6 billion and had litigation provisions of KRW 80.2 billion. The filing also describes an appealed HCN/Enspert damages judgment of approximately KRW 9.0 billion, a KRW 5.7 billion competition-law surcharge with criminal proceedings ongoing, and 5G service-quality class actions by 555 subscribers seeking KRW 0.5 billion.
- Other risks: COVID-19 and variants, cybersecurity incidents, service outages, foreign-exchange movements, Korean economic and geopolitical conditions, labor relations, government regulation and integration of acquisitions are identified as potential risks. The Won weakened against the U.S. dollar at year-end 2021; KT uses derivatives to manage currency and interest-rate exposure.
- Audit and controls: The independent auditor issued an unqualified opinion on the IFRS financial statements and concluded internal control over financial reporting was effective as of December 31, 2021. The audit identified impairment testing of ICT cash-generating units and purchase accounting for HCN and Epsilon as critical audit matters.
Investor verification priorities
- Confirm the annual-versus-quarterly basis: the filing covers FY2021 and does not present clearly stated standalone Q4 financial results.
- Assess whether the sharp operating-profit improvement is repeatable, given the lower 2021 impairment charge and the contribution of derivative valuation gains and associate profits.
- Review 2022 capital needs, bandwidth-license commitments, acquisition integration and the increase in borrowings and net debt.
- Track the SEC remediation obligations and status/outcomes of Korean political-funds matters and other significant litigation.
- Verify the dividend approval and payment details, and monitor cash conversion and working capital alongside the reported operating cash flow.