Joonsop Kim: My name is Joonsop Kim from KB Securities. I have a question regarding IDC business. So, what is KT’s view in terms of the supply and demand situation of IDC in Korea? There are multiple operators and many new data centers have been completed recently. At the same time, the data center projects, some of them are falling apart before they are completed. So, what is KT’s view in terms of mid-long-term market outlook? And what would be the strategy of KT and KT Cloud in this area?
Young-Jin Kim: Thank you for the question, Mr. Kim. Your question was regarding the mid long-term outlook of the Korean IDC market and the strategy of KT Cloud. So, if you look at the Korean IDC and cloud market, corporates in Korea continuously are showing demand for digital transformation which generates more demand for data centers. At the same time, the introduction of large AI models are continuing to support this growth momentum. So, if you look at the mid long-term market outlook here, if you compare the demand and the supply, the demand is definitely outpacing the supply. So, I think the key strategy should be the ability to respond to this strong demand in a timely manner and this trend should continue for the time being.
KT will leverage the key competitiveness in the IDC market to continuously pioneer and dominate the IDC market in Korea. KT has more than 20-plus years of experience in building IDCs. We have the most superb network infrastructure in Korea and our 7 IDCs are located in geographically accessible Seoul and larger Seoul Metropolitan Area. So currently, we have around 150-megawatts. In the next 5 years, we plan to add 100-megawatts. And so by actively expanding the capacity, we plan to address the strong demand coming for these type of services. So, KT is the only operator in Korea that can offer services that combine IDC, cloud and network. And therefore, we have the ability to satisfy all types of various demands of customers. And this is key strength and we will be leveraging these key strengths to further grow in this area.
Seung-Hoon Chi: Next question, please.
Operator: Following question will be presented by Seyon Park from Morgan Stanley.
Seyon Park: And I have also a question regarding KT Cloud. So, KT Cloud has been showing very strong quarterly growth. And I was wondering the reason behind it. Is it due to some one-off factor? Or is this 30% to 35% growth sustainable? What is your outlook for Q4 and 2024? And also, I would also like to know a little bit more around the profit levels and the margins that you expect for KT Cloud.
Young-Jin Kim: Thank you for the question, Mr. Park. So, regarding KT Cloud, there were extensive amounts of orders that we won last year in the public cloud and private cloud markets. And those previously secured orders are now turning into revenue. Also, the IDC in Yongsan has been completed. So, due to these factors, in Q3, KT Cloud recorded 34.5% growth in revenue in Y-o-Y terms. We believe that this growth momentum will continue as we solidify our leadership in the Public Cloud segment as we continue the growth in the AI service business by offering the full stack AI and also, we are continuously adding new IDCs and implementing the price of strategy. So in 2022, KT Cloud’s revenue amounted KRW550 billion. We expect double-digit growth for this year.
And this type of growth trend should be continued for the time being next year as well. You also asked about the profit and margin of KT Cloud. So, if you compare the operating margin of KT Cloud to the group average, it is slightly higher. But recently, there has been some upfront investment. And also, we have been attracting high-quality talent as well which can increase the overall cost levels that can bring down the margin. But like I’ve just mentioned, we are seeing strong growth coming from the cloud and IDC business and so on. So, the margin should show the upward trend again and continue to show that trend for the time being.
Seung-Hoon Chi: If there are no more questions, we will conclude the Q&A session. Thank you for your questions and interest in KT. Thank you once again for attending today’s earnings call despite your busy schedule. We will conclude the earnings call for KT for the third quarter of 2023. Thank you.
