kt corp form 20-f filed 2018-04-30

Business Address206 JUNGJA DONG,BUNDANG GU,SUNGNAM, KYUNGGI DO,463-711,KOREA M5 M5 463-71182-31-727-0114

Mailing AddressKT GWANGHWAMUNBUILDING EAST,33 JONGNO-3-GIL, JONGNO-GU,SEOUL, 110-130, KOREA M5M5 110-130

SECURITIES AND EXCHANGE COMMISSION

FORM 20-FAnnual and transition report of foreign private issuers pursuant to sections 13 or 15(d)

Filing Date: 2018-04-30 | Period of Report: 2017-12-31SEC Accession No. 0001193125-18-141554

(HTML Version on secdatabase.com)

FILERKT CORPCIK:892450| IRS No.: 000000000 | Fiscal Year End: 1231Type: 20-F | Act: 34 | File No.: 001-14926 | Film No.: 18787606SIC: 4813 Telephone communications (no radiotelephone)

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Table of ContentsAs filed with the Securities and Exchange Commission on April 30, 2018

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 20-F☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2017OR

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

☐ 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 toCommission 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 East33, Jong-ro 3-Gil, Jongno-gu

03155 Seoul, Korea(Address of principal executive offices)

Kyung-Keun YoonKT Gwanghwamun Building East

33, Jong-ro 3-Gil, Jongno-gu03155 Seoul, Korea

Telephone: +82-31-727-0114; E-mail: [email protected]; [email protected](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 Name of each exchange on which registeredAmerican Depositary Shares, each representing New York Stock Exchange, Inc.

one-half of one share of ordinary shareOrdinary share, par value￦5,000 per share* 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, 2017, there were 245,097,055 ordinary shares, par value ￦5,000 per share, outstanding(not including 16,014,753 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 ☒ No ☐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 ExchangeAct of 1934. Yes ☐ No ☒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 preceding12 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 90days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submittedand posted 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 tosubmit and post such files). Yes ☒ No ☐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 theextended transition period for complying with any new or revised financial accounting standards� provided pursuant to Section 13(a) of the Exchange Act. ☐

� The term �new or revised financial accounting standard� refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codificationafter April 5, 2012.

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 tofollow. Item 17 ☐ Item 18 ☐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 ☐ No ☒

* Not for trading, but only in connection with the registration of the American Depositary Shares.



Table of ContentsTABLE OF CONTENTS

Page

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. Selected Financial Data 2

Item 3.B. Capitalization and Indebtedness 6

Item 3.C. Reasons for the Offer and Use of Proceeds 6

Item 3.D. Risk Factors 6

ITEM 4. INFORMATION ON THE COMPANY 25

Item 4.A. History and Development of the Company 25

Item 4.B. Business Overview 25

Item 4.C. Organizational Structure 55

Item 4.D. Property, Plants and Equipment 55

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 59

Item 5.A. Operating Results 59

Item 5.B. Liquidity and Capital Resources 85

Item 5.C. Research and Development, Patents and Licenses, Etc. 89

Item 5.D. Trend Information 90

Item 5.E. Off-balance Sheet Arrangements 90

Item 5.F. Tabular Disclosure of Contractual Obligations 90

Item 5.G. Safe Harbor 90

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 90

Item 6.A. Directors and Senior Management 90

Item 6.B. Compensation 94

Item 6.C. Board Practices 95

Item 6.D. Employees 97

Item 6.E. Share Ownership 98

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Table of ContentsPage

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 99

Item 7.A. Major Shareholders 99

Item 7.B. Related Party Transactions 99

Item 7.C. Interests of Experts and Counsel 99

ITEM 8. FINANCIAL INFORMATION 99

Item 8.A. Consolidated Statements and Other Financial Information 99

Item 8.B. Significant Changes 102

ITEM 9. THE OFFER AND LISTING 102

Item 9.A. Offer and Listing Details 102

Item 9.B. Plan of Distribution 104

Item 9.C. Markets 104

Item 9.D. Selling Shareholders 109

Item 9.E. Dilution 109

Item 9.F. Expenses of the Issuer 109

ITEM 10. ADDITIONAL INFORMATION 109

Item 10.A. Share Capital 109

Item 10.B. Memorandum and Articles of Association 109

Item 10.C. Material Contracts 115

Item 10.D. Exchange Controls 115

Item 10.E. Taxation 120

Item 10.F. Dividends and Paying Agents 127

Item 10.G. Statements by Experts 127

Item 10.H. Documents on Display 127

Item 10.I. Subsidiary Information 128

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 128

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 131

Item 12.A. Debt Securities 131

Item 12.B. Warrants and Rights 131

Item 12.C. Other Securities 131

Item 12.D. American Depositary Shares 131

PART II 133

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 133

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 133

ii



Table of ContentsPage

ITEM 15. CONTROLS AND PROCEDURES 133

ITEM 16. [RESERVED] 134

Item 16A. Audit Committee Financial Expert 134

Item 16B. Code of Ethics 134

Item 16C. Principal Accountant Fees and Services 135

Item 16D. Exemptions from the Listing Standards for Audit Committees 135

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 136

Item 16F. Change in Registrant�s Certifying Accountant 136

Item 16G. Corporate Governance 136

Item 16H. Mine Safety Disclosure 137

PART III 138

ITEM 17. FINANCIAL STATEMENTS 138

ITEM 18. FINANCIAL STATEMENTS 138

ITEM 19. EXHIBITS 138

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Table of ContentsPRESENTATION

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.

All references to �Won� or �￦� in this annual report are to the currency of the Republic and all references to �Dollars,� �$,��US$� or �U.S. dollars� are to the currency of the United States of America. Our monetary assets and liabilities denominated in foreigncurrency are translated into Won at the market average exchange rate announced by Seoul Money Brokerage Services, Ltd. (the �MarketAverage Exchange Rate�) on the balance sheet dates, which were, for U.S. dollars, ￦1,172.0 to US$1.00,￦1,208.5 to US$1.00 and￦1,071.4 to US$1.00 on December 31, 2015, 2016 and 2017, respectively. Our consolidated financial statements are expressed in Wonand, solely for the convenience of the reader, the consolidated financial statements as of and for the year ended December 31, 2017 havebeen translated into United States dollars at the rate of￦1,071.4 to US$1.00, the Market Average Exchange Rate in effect onDecember 29, 2017.

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 subscribersannounced by the Ministry of Science and ICT (the �MSIT�) (ICT standing for Information & Communication Technology), the KoreaCommunications 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.

1



Table of ContentsItem 3. Key Information

Item 3.A. Selected Financial Data

You should read the selected consolidated financial data below in conjunction with the consolidated financial statements(�Consolidated Financial Statements�) as of December 31, 2016 and 2017 and for each of the years in the three-year period endedDecember 31, 2017, and the report of the independent registered public accounting firm on these statements included herein. Theseaudited financial statements and the related notes have been prepared under International Financial Reporting Standards (�IFRS�) asissued by the International Accounting Standards Board (�IASB�). The selected consolidated financial data for the three years endedDecember 31, 2017 have been derived from our audited consolidated financial statements. We have derived the selected consolidatedfinancial data as of December 31, 2015, 2014 and 2013 and for the years ended December 31, 2014 and 2013 from our historicalconsolidated financial statements not included in this annual report.

In addition to preparing financial statements in accordance with IFRS as issued by the IASB included in this annual report, wealso prepare financial statements in accordance with IFRS as adopted by the Republic of Korea (�K-IFRS�), which we are required to filewith the Financial Services Commission and the Korea Exchange under the Financial Investment Services and Capital Markets Act ofKorea (�FSCMA�). English translations of such financial statements are furnished to the Securities and Exchange Commission underForm 6-K. See �Item 5. Operating and Financial Review and Prospects�Item 5.A. Operating Results�Explanatory Note RegardingPresentation of Certain Financial Information under K-IFRS� for additional information.

The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunctionwith �Item 5. Operating and Financial Review and Prospects� and our Consolidated Financial Statements and related notes included inthis annual report.

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Table of ContentsConsolidated statement of operations data

Year Ended December 31,2013 2014 2015 2016 2017 2017(1)

(In billions of Won and millions of Dollars, except per share data)Continuing Operations:Operating revenue ￦23,146 ￦22,613 ￦22,700 ￦23,121 ￦23,547 US$21,978Revenue 22,818 22,359 22,212 22,755 23,260 21,709Others 328 253 488 366 287 269Operating expenses 22,911 23,392 21,623 21,781 22,478 20,980Operating profit 235 (779 ) 1,077 1,340 1,069 998Finance income 278 253 273 296 406 379Finance costs (633 ) (792 ) (645 ) (515 ) (645 ) (602 )Income from jointly controlled entities and associates 7 19 6 3 (14 ) (12 )Profit (loss) from continuing operations before income tax (114 ) (1,299 ) 711 1,123 817 763Income tax expense (benefit) 12 (271 ) 227 328 271 253Profit (loss) for the year from the continuing operations (126 ) (1,028 ) 484 795 546 510Discontinued operations:Profit (loss) from discontinued operations 38 86 141 � � �

Profit (loss) for the year ￦(88 ) ￦(941 ) ￦625 ￦795 ￦546 US$510Profit (loss) for the year attributable to:Equity holders of the parent company ￦(190 ) ￦(1,030 ) ￦546 ￦708 ￦462 US$431

Profit (loss) from continuing operations (216 ) (1,094 ) 404 708 462 431Profit (loss) from discontinued operations 26 64 142 � � �

Non-controlling interest ￦102 ￦89 ￦78 ￦87 ￦85 US$79Profit from continuing operations 90 66 80 87 85 79Profit (loss) from discontinued operations 12 22 (1 ) � � �

Earnings per share attributable to the equity holders of the ParentCompany during the period:

Basic earnings (loss) per share ￦(779 ) ￦(4,215 ) ￦2,231 ￦2,893 ￦1,884 US$2From continuing operations (885 ) (4,477 ) 1,650 2,893 1,884 2From discontinued operations 106 262 581 � � �

Diluted earnings (loss) per share ￦(782 ) ￦(4,215 ) ￦2,231 ￦2,891 ￦1,883 US$2From continuing operations (888 ) (4,477 ) 1,650 2,891 1,883 2From discontinued operations 106 262 581 � � �

3



Table of ContentsConsolidated statement of financial position data

As of December 31,Selected Statement of Financial Position Data 2013 2014 2015 2016 2017 2017(1)

(In billions of Won and millions of Dollars)Assets:Current assets:Cash and cash equivalents ￦2,071 ￦1,889 ￦2,559 ￦2,900 ￦1,928 US$1,800Trade and other receivables, net 6,373 5,780 4,854 5,327 5,814 5,427Other financial assets 480 333 293 721 973 908Current income tax assets 35 4 4 2 9 8Inventories, net 674 419 617 455 642 599Current assets held for sale � � � � 7 7Other current assets 340 350 317 311 305 284Total current assets 9,972 8,774 8,643 9,716 9,678 9,033

Non-current assets:Trade and other receivables, net 1,739 1,759 704 709 829 774Other financial assets 673 705 658 665 755 705Property and equipment, net 16,387 16,468 14,479 14,312 13,562 12,659Investment property, net 1,105 1,060 1,102 1,148 1,190 1,110Intangible assets, net 3,827 3,544 2,600 3,023 2,633 2,457Investments in jointly controlled entities and associates 364 339 270 284 279 261Deferred income tax assets 707 1,079 845 701 712 665Other non-current assets 76 72 102 106 107 99Total non-current assets 24,878 25,025 20,761 20,948 20,067 18,730Total assets ￦34,850 ￦33,799 ￦29,404 ￦30,664 ￦29,745 US$27,763Liabilities and Equity:Current liabilities:Trade and other payables ￦7,433 ￦6,428 ￦6,335 ￦7,140 ￦7,424 US$6,929Borrowings 3,021 2,956 1,726 1,820 1,573 1,469Other financial liabilities 64 24 44 1 37 35Current income tax liabilities 100 46 81 89 69 64Provisions 115 111 104 96 78 73Deferred income 144 144 98 36 18 17Other current liabilities 348 279 311 342 258 241Total current liabilities 11,224 9,987 8,699 9,524 9,458 8,828Non-current liabilities:Trade and other payables 1,108 944 669 1,188 1,001 935Borrowings 8,463 9,860 6,909 6,301 5,110 4,770Other financial liabilities 179 191 104 108 149 139Retirement benefit liabilities 586 594 524 378 395 369Provisions 134 106 91 101 125 117Deferred income 148 147 96 85 92 86Deferred income tax liabilities 169 144 130 138 128 120Other non-current liabilities 2 39 27 59 237 220Total non-current liabilities 10,789 12,025 8,550 8,358 7,238 6,756Total liabilities ￦22,013 ￦22,012 ￦17,249 ￦17,882 ￦16,696 US$15,584Equity attributable to owners of the Parent CompanyPaid-in capital

Share capital ￦1,564 ￦1,564 ￦1,564 ￦1,564 ￦1,564 US$1,460Share premium 1,440 1,440 1,440 1,440 1,440 1,344

Retained earnings 10,019 8,568 9,050 9,644 9,827 9,172Accumulated other comprehensive income (expense) 25 26 14 (1 ) 31 29Other components of equity (1,321 ) (1,261 ) (1,233 ) (1,218 ) (1,205 ) (1,125 )

11,728 10,338 10,836 11,430 11,657 10,880Non-controlling interest 1,110 1,449 1,320 1,353 1,392 1,299Total equity 12,837 11,788 12,156 12,783 13,049 12,179Total liabilities and equity ￦34,850 ￦33,799 ￦29,404 ￦30,664 ￦29,745 US$27,763

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Table of ContentsConsolidated statement of cash flow data

Year Ended December 31,2013 2014 2015 2016 2017 2017(1)

(In billions of Won and millions of Dollars)Net cash generated from operating activities ￦4,111 ￦1,916 ￦4,230 ￦4,771 ￦3,878 US$3,621Net cash provided by (used in) investing activities (3,783) (3,171) (2,402) (3,485) (3,483) (3,252)Net cash provided by (used in) financing activities (312 ) 1,072 (1,164) (943 ) (1,363) (1,274)

Operating Data

As of December 31,2013 2014 2015 2016 2017

Lines installed (thousands) (2) 24,264 23,930 23,607 24,858 24,343Lines in service (thousands) (2) 14,032 13,713 12,440 11,871 11,220Lines in service per 100 inhabitants (2) 27.4 26.7 24.6 23.0 21.7Mobile subscribers (thousands) 16,454 17,300 18,038 18,892 20,015Broadband Internet subscribers (thousands) 8,067 8,129 8,328 8,516 8,781

(1) For convenience, the Won amounts are expressed in U.S. dollars at the rate of￦1,071.4 to US$1.00, the Market Average Exchange Rate in effect on December 29,2017. This translation should not be construed as a representation that the Won amounts represent, have been or could be converted into U.S. dollars at that rate orany other rate.

(2) Including public telephones.

Exchange Rate Information

The following table sets out information concerning the Market Average Exchange Rate for the periods and dates indicated:

PeriodAt End

of PeriodAverageRate (1) High Low(Won per US$1.00)

2011 1,153.3 1,108.1 1,199.5 1,049.52012 1,071.1 1,126.9 1,181.8 1,071.12013 1,055.3 1,095.0 1,159.1 1,051.52014 1,099.2 1,053.2 1,118.3 1,008.92015 1,172.0 1,131.5 1,203.1 1,068.12016 1,208.5 1,160.5 1,240.9 1,093.22017 1,071.4 1,130.8 1,208.5 1,071.4

October 1,125.0 1,131.6 1,145.7 1,124.7November 1,082.4 1,105.0 1,121.2 1,082.4December 1,071.4 1,085.8 1,093.4 1,071.4

2018 (through April 16) 1,070.0 1,071.0 1,094.3 1,057.6January 1,071.5 1,066.7 1,071.5 1,061.3February 1,071.0 1,079.6 1,094.3 1,068.0March 1,066.5 1,071.9 1,081.9 1,064.3April (through April 16) 1,070.0 1,064.0 1,070.0 1,057.6

Source: Seoul Money Brokerage Services, Ltd.

(1) Represents the average of the Market Average Exchange Rates on each business day during the relevant period (or portion thereof).

Our monetary assets and liabilities denominated in foreign currency are translated into Won at the Market Average ExchangeRate on the balance sheet dates, which were, for U.S. dollars, ￦1,172.0 to US$1.00,￦1,208.5 to US$1.00 and￦1,071.4 to US$1.00, atDecember 31, 2015, 2016 and 2017, respectively.

Our consolidated financial statements are expressed in Won and, solely for the convenience of the reader, the consolidatedfinancial statements as of and for the year ended December 31, 2017

5



Table of Contentshave been translated into United States dollars at the rate of ￦1,071.4 to US$1.00, the Market Average Exchange Rate in effect onDecember 29, 2017.

We make no representation that the Won or Dollar amounts contained in this annual report could have been or could beconverted into Dollar or Won, as the case may be, at any particular rate or at all.

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 factors.

Risks Relating to Our Company and Business

Competition in the Korean telecommunications industry is intense.

Competition in the telecommunications sector in Korea is intense. Business combinations in the telecommunications industrysignificantly changed the competitive landscape of the Korean telecommunications industry. Currently, we compete with two otherintegrated telecommunications service providers, SK Telecom Co., Ltd. (�SK Telecom�) and LG U+. SK Telecom acquired a controllingstake in Hanarotelecom Incorporated in 2008, which was renamed SK Broadband Co., Ltd. (�SK Broadband�). The acquisition enabledSK Telecom to provide fixed-line telecommunications, broadband Internet access and Internet Protocol Television (�IPTV�) servicestogether with its mobile telecommunications services. In January 2010, LG Dacom Corporation (�LG Dacom�) and LG Powercom Co., Ltd.(�LG Powercom�) merged into LG Telecom Co., Ltd., which subsequently changed its name to LG U+. The merger enabled LG U+ toprovide a similar range of services as SK Telecom and us. Our inability to compete against such competitors could have a materialadverse effect on our business, financial condition and results of operations.

In addition, we face increasing competition from specific service providers, such as Internet phone service providers, Internettext message service providers, voice resellers and call-back service providers. In recent years, the increasing popularity of freemessaging services, Internet phone and other communications services offered by Google, Facebook, Kakao Talk, Line and Skype hashad a negative impact on demand for our telecommunications and text message services while creating additional data transmissionusage by our Internet and mobile subscribers. Our inability to adapt to such changes in the competitive landscape could have a materialadverse effect on our business, financial condition and results of operations.

Mobile Service. We provide mobile services based on Wideband Code Division Multiple Access (�W-CDMA�) technology(commonly known as the third-generation (�3G�) mobile telecommunications technology) and Long-Term Evolution (�LTE�) technology(commonly known as the fourth-generation (�4G�) mobile telecommunications technology). Competitors in the mobile telecommunicationsservice industry are SK Telecom and LG U+. We had a market share of 31.4% as of December 31, 2017, making us the second largestmobile telecommunications service provider in Korea. SK Telecom had a market share of 47.8% as of December 31, 2017. Mobilesubscribers are

6



Table of Contentsallowed to switch their service provider while retaining the same mobile phone number. Mobile service providers also grant subsidies tosubscribers who purchase new handsets and agree to a minimum subscription period. Such mobile number portability and handsetsubsidies previously intensified competition among the mobile service providers and increased their marketing expenses. In addition, widevariation in subsidy amounts paid to subscribers led to concerns relating to consumer discrimination over time. Consequently, in order toenhance transparency in subsidy amounts paid to subscribers, the Act on Improvement of Mobile Telecommunication Device DistributionSystem (the �Handset Distribution Reform Act�), which imposed upper limit on the amount of handset subsidies offered by serviceproviders, was enacted in October 2014. However, the upper limit on the handset subsidies was phased out on October 1, 2017. As aresult, price competition through handset subsidies which became less prevalent after the passage of the Handset Distribution Reform Actmay intensify again and such competition could lead to a decrease in our net profit margins.

Since 2011, SK Telecom, LG U+ and we have launched 4G mobile telecommunications services based on LTE technology,which has further intensified competition among the three companies and resulted in an increase in marketing expenses and capitalexpenditures related to implementing and providing 4G LTE services. We are also competing with the other two companies to introducefifth-generation (�5G�) mobile telecommunications services as early as 2019, one year ahead of our initial plan. As SK Telecom, LG U+and we continue to compete to improve network quality and to introduce new technologies in order to accommodate increased data usageof subscribers, we may incur significant expenses to acquire additional bandwidth spectrums and various fixed assets and to expandtechnological know-how and capacity. Furthermore, on April 10, 2018, to facilitate expedient establishment of 5G services infrastructure,the Government announced its initiatives to facilitate co-use and sharing of telecommunications infrastructure as follows: (i) we shouldpermit fixed-line telecommunication service providers and mobile service providers (such as SK Telecom and LG U+) to co-use ourtelecommunications infrastructure necessary for provision of 5G services, (ii) the Government determined that we, SK Telecom and LG U+possessed essential infrastructure with respect to the interval between the cable entry at a building and the initial occurrence ofconnection within the building and required that the three companies share such infrastructure throughout buildings in Korea with eachother, and (iii) fixed-line telecommunications service providers and mobile service providers are required to participate in joint efforts toconstruct additional fixed-line and mobile network architecture. We believe that the continuing intense competition among majortelecommunications operators in Korea may have a material adverse impact on our results of operations.

Fixed-line Telephone Services. Before December 1991, we were the sole provider of local, domestic long-distance andinternational long-distance telephone services in Korea. Since then, various competitors have entered the local, domestic long-distanceand international long-distance telephone service markets in Korea, which have eroded our market shares. LG U+ and SK Broadbandcurrently provide local, domestic long-distance and international long-distance telephone services. In addition, Sejong Telecom, Inc.(formerly, Onse Telecom Corporation) and SK Telink, Inc. currently provide domestic long-distance and international long-distancetelephone services. We also compete with specific service providers, such as Internet phone service providers, voice resellers and call-back service providers that offer international long-distance service in Korea. While we offer our own Internet phone service, the entry ofthese and other potential competitors into the local, domestic long-distance and international long-distance telephone service markets hashad and may continue to have a material adverse effect on our revenues and profitability from these services. As of December 31, 2017,we had a market share in local telephone service of 80.5% and a market share in domestic long distance service of 79.8%. Furtherincrease in competition may decrease our market shares in such services. As part of our efforts to improve our operational efficiencies, wetransferred all operations relating to fixed-line sales activities (including on-site sales, line activation, after service, and customer centeroperations) to our subsidiaries in 2014.

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Table of ContentsInternet Services. The Korean broadband Internet access service market has experienced significant growth in the past

decade. SK Broadband (formerly Hanarotelecom) entered the broadband market in 1999 offering both Hybrid Fiber Coaxial (�HFC�) andAsymmetric Digital Subscriber Line (�ADSL�) services. We also began offering broadband Internet access service in 1999, followed byDreamline, Sejong and LG U+. In recent years, numerous cable television operators have also begun to offer HFC-based services at rateslower than ours. We had a market share of 41.3% as of December 31, 2017. As a result of having to compete with a number ofcompetitors and the maturing of the Internet access service market, we currently encounter, and we expect to encounter, pressure toincrease marketing expenses in the future.

The market for other Internet-related services in Korea, including IPTV and Internet phone services, is also very competitive. Weanticipate that competition will continue to intensify as the usage and popularity of the Internet grows and as domestic and internationalcompetitors newly enter the Internet industry in Korea or expand product offerings such as gigabit Internet service. The substantial growthof the Internet industry in Korea has attracted many competitors and as a result may lead to increasing price competition to provideInternet-related services. Increased competition in the Internet industry could have a material adverse effect on the number of subscribersof our Internet-related service and on our results of operations.

Failure to renew existing bandwidth spectrum, acquire adequate additional bandwidth spectrum or use our bandwidthefficiently 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 spectrum allocated to aservice provider. We currently use 40 MHz of bandwidth in the 2.1 GHz spectrum, of which 20 MHz is used for our 4G LTE services andthe remaining 20 MHz of bandwidth for our IMT-2000 services based on W-CDMA wireless network standards. We also use (i) 20 MHz ofbandwidth in the 900 MHz spectrum and 35 MHz of bandwidth in the 1.8 GHz spectrum for our 4G LTE services; (ii) 20 MHz of bandwidthin the 1.8 GHz spectrum, which we acquired in May 2016 for our Wideband LTE-A services; and (iii) 30 MHz of bandwidth in the 2.3 GHzspectrum for our WiBro services. The MSIT announced its plan to auction additional bandwidth starting in 2018 to enable provision of 5Gservices and our ability to commercialize and provide 5G services depends in part on acquisition of adequate bandwidth spectrum at suchauctions. For more information on our licenses to bandwidth spectrum, see �Item 4. Information on the Company�Item 4.D. Property,Plants and Equipment�Mobile Networks.�

The growth of our mobile telecommunications business and the increase in usage of wireless data transmission services havebeen 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 multimediacontents are likely to put additional strain on the bandwidth capacity of mobile service providers. In the event we are unable to maintainsufficient bandwidth capacity by renewing existing bandwidth spectrum, receiving additional bandwidth allocation, or cost-effectivelyimplementing technologies that enhance bandwidth usage efficiency, our subscribers may perceive a general decrease in quality of mobiletelecommunications services. No assurance can be given that bandwidth constraints will not adversely affect the growth of our mobiletelecommunications business. Furthermore, we may be required to pay a substantial amount to acquire bandwidth capacity in order tomeet increasing bandwidth demand, which may adversely affect our financial condition and results of operations.

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Table of ContentsIntroduction of new services, including our 4G LTE services and 5G services to be commercialized, poses challenges andrisks 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 telecommunication services to maintainour competitiveness. For example, we have been building more advanced mobile telecommunications networks based on LTE technology,which is generally referred to as 4G technology, and commenced providing commercial 4G LTE services in the Seoul metropolitan area inJanuary 2012, while subsequently expanding the coverage and increasing the transmission speed of our services thereafter. We havemade extensive efforts to develop advanced technologies as well as to provide a variety of services with enhanced speed, latency andconnectivity. 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. FTTH is a telecommunication architecture in which acommunication path is provided over optical fiber cables extending from the telecommunications operator�s switching equipment to theboundary of home or office. FTTH uses fiber optic cable, which is able to carry a high-bandwidth signal for longer distances withoutdegradation. FTTH also enables us to deliver digital media content, such as IPTV, with higher stability.

In recent years, we have been making capital expenditures and investing in additional research and development to roll out 5Gtelecommunication services by 2019, one year earlier than our initial plan. However, no assurance can be given that our new services willgain broad market acceptance such that we will be able to derive revenues from such services to justify the license fee, capitalexpenditures and other investments required to provide such services. For example, in March 2005, we acquired a license to providewireless broadband Internet access (�WiBro�) service, and commercially launched our service in June 2006 to expand the WiBro servicecoverage nationwide by 2011. However, the number of our WiBro subscribers have decreased in the recent years as more WiBrosubscribers chose to access the Internet using our 4G LTE network rather than WiBro following the proliferation of 4G LTE services since2013. If our new services do not gain broad market acceptance, our results of operations and financial condition may be adverselyaffected.

We may not be able to successfully pursue our strategy to acquire businesses and enter into joint ventures that complementor 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 thatcomplement or diversify our current business. In March 2014, the investment business division of KT Capital Co., Ltd., including 3,059,560common shares of BC Card Co., Ltd. that KT Capital Co., Ltd. held, was spun off and merged into KT Corporation. On August 20, 2015,we and our consolidated subsidiary, KT Hitel Co., Ltd., sold the entire 100% stake of KT Capital Co., Ltd. to JCF III K Holdings LLC for atotal of￦299 billion. In January 2011, we acquired 5,600,000 shares of redeemable convertible preferred stock with voting rights andconvertible bonds that were convertible into 5,600,000 shares of common stock of KT Skylife Co., Ltd. (�KT Skylife�), a provider ofsatellite TV service which may also be packaged with our IPTV services, from Dutch Savings Holdings B.V. for approximately￦246 billion. We exercised the conversion rights on the redeemable convertible preferred stock and the convertible bonds in March 2011,and owned a 50.3% interest in KT Skylife as of December 31, 2017. In March 2015, KT Media Hub Co., Ltd. was merged into KTCorporation to increase management efficiency and promote synergy among our existing businesses.

While we plan to continue our search for other suitable acquisition and joint venture opportunities, we cannot provide assurancethat we will be able to identify additional attractive opportunities or that we will successfully complete the transactions, withoutencountering

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Table of Contentsadministrative, technical, political, financial or other difficulties, or at all. Even if we were to successfully complete the transactions,success of an acquisition or a joint venture depends largely on our ability to achieve the anticipated synergies, cost savings and growthopportunities from integrating the business of the acquired company or the joint venture with our business. There can be no assurancethat we will achieve the anticipated benefits of the transaction, which may adversely affect our business, financial condition and results ofoperations.

Pursuing acquisitions or joint venture transactions also requires significant capital, and as we pursue further growth opportunitiesfor the future, we may need to raise additional capital through incurring loans or through issuances of bonds or other securities in theinternational capital markets.

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 andprofitability by disposing of non-core businesses and reducing our employee base. Although we have not experienced any significant labordisputes or unrests in recent years, there can be no assurance that we will not experience labor disputes or unrests in the future, includingextended protests and strikes, which could disrupt our business operations and have an adverse effect on our financial condition andresults of operations.

We also negotiate collective bargaining agreements every two years with our labor union and annually negotiate a wageagreement. Our current collective bargaining agreement expires on October 9, 2019. Although we have been able to reach collectivebargaining agreements and wage agreements with our labor union in recent years, there can be no assurance that we will not experiencelabor disputes and unrests resulting from disagreements with the labor union in the future.

The Korean telecommunications and Internet protocol broadcasting industries are subject to extensive Governmentregulations, and changes in Government policy relating to these industries could have a material adverse effect on ouroperations and financial condition.

The Government, primarily through the MSIT and the KCC, has authority to regulate the telecommunications industry. UntilMarch 2013, regulation of the telecommunications industry had mainly been the responsibility of the KCC. With the establishment of thenewly created the Ministry of Science, ICT & Future Planning (the predecessor to the MSIT, the �MSIP�) on March 23, 2013, however,such regulatory responsibility has mostly been transferred to the MSIP (and later to MSIT). The MSIT�s policy is to promote competition inthe Korean telecommunications markets through measures designed to prevent the dominant service provider in any such market fromexercising its market power in such a way as to prevent the emergence and development of viable competitors.

Under the current Government regulations, if a network service provider has the largest market share for a specified type ofservice and its revenue from that service for the previous year exceeds a specific revenue amount set by the MSIT, it must obtain priorapproval from the MSIT for the rates and the general terms for that service. Each year, the MSIT designates service providers whose ratesand general terms of service must be approved by the MSIT. In 1997, the MSIT had designated us for local telephone service and SKTelecom for mobile service, and the MSIT, in consultation with the Ministry of Strategy and Finance, currently approves rates charged byus and SK Telecom for such services. The form of our standard agreement for providing local network service and each agreement forinterconnection with other service providers must also be reported to the MSIT.

The MSIT currently does not regulate our domestic long-distance, international long-distance, broadband Internet access andmobile service rates, but the inability to freely set our local telephone service rates may hurt profits from such business and impede ourability to compete effectively against

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Table of Contentsour competitors. See �Item 4. Information on the Company�Item 4.B. Business Overview�Regulation�Rates.� In addition, the MSIT mayperiodically announce public policy guidelines or suggestions that we take into consideration in setting our tariffs for non-regulatedservices. In March 2015, we completely abolished our activation fee relating to our mobile services. In July 2016, we lowered our earlytermination fee for our broadband Internet access service, Internet phone or IPTV or such products bundled with our fixed-line telephoneservice. On December 22, 2017, we started to provide additional tariff reductions of￦11,000 per month to certain subscribers onGovernment welfare. In July 2017, the MSIT announced its plan to adopt �universal� mobile subscription fees sometime in 2018 inconnection with the Government�s efforts to reduce mobile service fees paid by individuals. According to the draft version of the proposedrevision to the Telecommunications Business Act, subject to approval by the National Assembly, the dominant network service provider(SK Telecom) shall be required to provide a mobile subscription plan priced at￦20,000 per month (at a significant discount to currentlyavailable mobile subscription plans) which allows data use of between 1 and 1.4 GB and 200 call minutes. Furthermore, in response to asocial interest group�s lawsuit against the MSIT to lower consumers� telecommunication bills, it is expected that, in May 2018, the MSITwill make public disclosure of previously non-public regulatory financial reports and other supporting and evaluation materials submitted bythe network service providers (including us) for determining tariffs of various 2G and 3G mobile subscription plans for a six-year periodending in May 2011. There can be no assurance that we will not adopt other tariff-reducing measures in the future to comply with theGovernment�s public policy guidelines or suggestions.

The MSIT may revoke our licenses or suspend any of our businesses if we fail to comply with its rules, regulations and correctiveorders, including the rules restricting beneficial ownership and control or any violation of the conditions of our licenses. Alternatively, in lieuof suspension of our business, the MSIT may levy a monetary penalty of up to 3.0% of the average of our annual revenue for thepreceding three fiscal years. For example, on March 12, 2015, the KCC imposed a fine of￦870 million for violation of restrictions onhandset subsidies relating to our compensation program for used handsets. On June 24, 2015, the KCC imposed a fine of￦52 million forviolating privacy related regulations and undermining consumer interests. On July 31, 2015 and January 19, 2016, the KCC imposed afine of￦350 million and￦560 million, respectively, on us for infringing upon consumer interests by advertising false and exaggeratedinformation about bundled products. On March 8, 2016, the KCC imposed a fine of￦32 million on us for offering excessively reducedrates and waivers to certain customers. On December 6, 2016, the KCC imposed a combined fine of approximately￦10.7 billion on SKTelecom, LG U+, SK Broadband, t-broad, D�live, CJ HelloVision and us (our fine being approximately￦2.3 billion) and ordered to takecorrective measures for providing excessive promotional gifts to bundled products customers. In April 2017, the Fair Trade Commissionimposed a combined fine of approximately￦47 million on us for failing to include developments relating to our management in our publicdisclosures. In October 2017, the Fair Trade Commission imposed a fine of approximately￦360 million on us for not includingtransactions between our affiliates in our public disclosures. On January 24, 2018, the KCC imposed a combined fine of approximately￦50.6 billion on SK Telecom, LG U+ and us (our fine being approximately￦12.5 billion) for violation of regulations relating to handsetsales in the form of wholesale, online sale and others. For more information about the penalties imposed for violating Governmentregulations, see �Item 8. Financial Information�Item 8.A. Consolidated Statements and Other Financial Information�Legal Proceedings.�The revocation of our licenses, suspension of our business or imposition of monetary penalties by the MSIT could have a material adverseeffect on our business.

On October 1, 2014, the Handset Distribution Reform Act went into effect. The Handset Distribution Reform Act regulates,among other matters, the sale and subsidies of mobile devices such as smartphones, with one of its purposes being to inducetelecommunication operators to compete in lowering the costs of communications and encourage the manufacturers to reduce handsetfactory prices, while improving service quality. Under the Handset Distribution Reform Act, consumers may not

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Table of Contentsbe discriminated in terms of subsidies based on their age, place of residence or monthly subscription plan when using their existing mobilephones, buying a new phone or switching their mobile carriers. Furthermore, everyone, regardless of their status, is entitled to receiveeither a handset subsidy for the purchase of mobile phone models that were launched within the last 15 months, or a tariff discount (withthe current discount rate set at 25%, effective since September 15, 2017). Since April 8, 2015, the maximum amount of handset subsidythat telecommunications operators and handset manufacturers may offer was￦330,000. The maximum amount of the handset subsidywas phased out on October 1, 2017. On September 15, 2017, in compliance with the policy initiatives announced by the MSIT, weincreased the maximum tariff discount to 25% from the prior 20% (which had been in effect since April 24, 2015). According to theGovernment, excessive handset subsidies may cause mobile subscribers to subscribe to more expensive monthly plans in return forgreater handset subsidies or may cause handset vendors to provide discriminatory subsidies based on consumers� age, residence andsubscription plan, among others. It was reported that the Government plans to introduce measures to curb excessive competition forhandset subsidies such as guidelines on subsidies for online handset sales and requirement for public disclosure of the portion or amountof handset subsidies provided by each party involved in handset sales.

The Government also sets the policies regarding the use of radio frequencies and allocates the spectrum of radio frequenciesused for wireless telecommunications by an auction process or by a planned allocation. For a discussion of the Government�s recentpolicies and practices on bandwidth spectrum allocation, see ��Item 3.D. Risk Factors�Failure to renew existing bandwidth spectrum,acquire adequate additional bandwidth spectrum or use our bandwidth efficiently may adversely affect our mobile telecommunicationsbusiness and results of operations.� The new allocations of bandwidth could increase competition among wireless service providers,which may have an adverse effect on our business.

We also plan to put more focus on the Internet protocol (�IP�) media market, and we began offering IPTV services in November2008. IPTV is a service which combines video-on-demand services with real-time high definition broadcasting via broadband networks.The MSIT and the KCC have the authority to regulate IPTV services. Under the Internet Multimedia Broadcasting Services Act, anyoneintending to engage in the IPTV services business must first obtain a license from the MSIT. Moreover, anyone intending to provide linearchannel programs focused on news or contents that generally combine news, culture entertainment, and any other similar contents withIPTV providers, must obtain approval from the KCC. Furthermore, anyone intending to provide contents relating to the introduction ofconsumer products and other similar marketing linear channel programs with IPTV providers must obtain additional approval from theMSIT. In addition, KT Skylife (formerly Korea Digital Satellite Broadcasting Co., Ltd.), which became our consolidated subsidiary starting inJanuary 2011, offers satellite TV services, which may also be packaged with our IPTV services. KT Skylife is also subject to regulation bythe MSIT and the KCC pursuant to the Korea Broadcasting Act. In March 2015, amendments to the Internet Multimedia BroadcastingServices Act were promulgated. Under such amendments, a single pay TV operator (including its affiliates) may not have more thanone-third of the market share of all pay TV subscribers in Korea. The restriction on market share is in effect until June 27, 2018, subject tothe Government�s decision to renew the market share restriction or phase out the restriction as originally planned.

Government policies and regulations relating to the above as well as other regulations involving the Korean telecommunicationsand IP broadcasting industries (including as a result of the implementation of free trade agreements between Korea and other countries,including the United States and the European Union) could impose restrictions on our business operations, which could have a materialadverse effect on our operations and financial condition, and may also change in ways that could materially and adversely affect us. See�Item 4. Information on the Company�Item 4.B. Business Overview�Regulation.�

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Table of ContentsThe pending legal cases against Mr. Suk-chae Lee, our former chief executive officer, and other former executive officers ordirectors��and related adverse publicity��could have a material adverse effect on our business, reputation and stock price.

In April 2014, the Seoul Central District prosecutor�s office charged Mr. Suk-chae Lee, our former chief executive officer whoresigned in November 2013, with embezzlement and breach of fiduciary duty. Mr. Il Yung Kim, our former standing director and formerpresident of the KT Corporate Center, was charged as a co-conspirator in the breach of fiduciary duty by Mr. Lee, and Mr. Yu-yeol Seo,our former president of Home Business Group, was charged as a co-conspirator in Mr. Lee�s embezzlement. On September 24, 2015, theSeoul District Court acquitted Mr. Lee of the charges of embezzlement and breach of fiduciary duty. Mr. Kim and Mr. Seo were alsoacquitted of the conspiracy charges. The prosecution has appealed the judgments and on May 27, 2016, the Seoul High Court foundMr. Lee and Mr. Seo guilty of embezzlement and sentenced them to 18 months of prison term, to be suspended for 2 years, for havingembezzled and created off-the-books funds of￦1.1 billion between 2009 and 2013, using such funds for personal purposes such aspayments at weddings and funerals of Mr. Lee�s friends and acquaintances and Mr. Seo�s living and entertainment expenses. However,Mr. Lee and Mr. Kim were acquitted on the charge of breach of fiduciary duty. These judgments have been appealed by the prosecution aswell as by Mr. Lee and Mr. Seo to the Supreme Court of Korea, which, on May 30, 2017, confirmed the acquittal of Mr. Lee and Mr. Kim onthe charge of breach of fiduciary duty, and vacated the appellate judgment against Mr. Lee and Mr. Seo on the charge of embezzlementand remanded the case back to the Seoul High Court. On April 26, 2018, the Seoul High Court acquitted Mr. Lee and Mr. Seo on thecharge of embezzlement.

The legal cases against Mr. Lee, Mr. Seo, and Mr. Kim do not involve charges of wrongdoing by us. Nevertheless, an adversedetermination in any such case or proceeding may harm our reputation and adversely affect the trading price of our shares. The outcomeof any related claims, investigations and proceedings is inherently uncertain and there can be no assurance that any further developmentsin the legal proceedings against Mr. Lee, Mr. Seo, and Mr. Kim, including adverse publicity, will not adversely affect our business,reputation or stock price.

Our charitable or political donations, employment of certain individuals and engagement of an advertising agencyconnected to a scandal involving Ms. Soon-sil Choi, a confidante of former President Geun-hye Park, and other incidentsand allegations could have a material adverse effect on our business, reputation and stock price.

In March 2017, the Constitutional Court of Korea found that many Korean corporations, including the Company, made donationsto two non-profit foundations, Mir Foundation and K-Sports Foundation, at former President Park�s request. Our contributions comprised￦1.1 billion of the total￦48.6 billion given to Mir Foundation and￦700 million of the total￦28.8 billion given to K-Sports Foundation.The Constitutional Court also found that an aide of former President Park, at the direction of the former President, on several occasionsasked our chief executive officer to hire (and later to promote) two individuals, Mr. Dong-Soo Lee and Ms. Hye-Sung Shin: Mr. Lee washired and later promoted to the head of a business unit in charge of our marketing and advertisement campaigns and Ms. Shin was hiredto another position in the same business unit. Subsequently, the same presidential aide also requested that Mr. Lee and our other officersaward advertising contracts to Playground Communications Co., Ltd. (�Playground�), an advertising agency over which Ms. Soon-sil Choi,a confidante of former President Park, effectively owns 70% equity interest, according to the Constitutional Court. The Constitutional Courtfurther held that the companies receiving the purported �requests� from former President Park�s aide appeared to have felt immensepressure to comply with the requests and could not easily have rejected them. Playground was awarded seven advertising contracts for atotal of approximately￦6.8 billion in 2016, amounting to approximately 3.7% of our annual advertising spending in 2016. In 2016, ourpayments to Playground amounted to approximately

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Table of Contents￦517 million. We have not awarded additional advertising contract to Playground since September 2016, and Mr. Lee and Ms. Shinresigned from the Company in November 2016 and May 2016, respectively.

In April 2017, the Korean prosecution indicted former President Park on charges of bribery, coercion and abuse of power, amongothers. On April 6, 2018, the Seoul Central Court sentenced the former President to 24 years of prison term and monetary fine of￦18 billion, having found the former President guilty on many of the charges, including the coercion charges relating to the same eventsunderlying the Constitutional Court decisions described above: (i) employment and promotions of Mr. Lee and Ms. Shin at KT Corporation,(ii) entry into advertising contracts with Playground and (iii) donations to Mir Foundation and K-Sports Foundation by us and other Koreancorporations. The prosecution appealed the trial court�s decision.

On January 18, 2018, the Korean prosecution indicted Mr. Byung-Hun Jun, a former member of the National Assembly, forcharges of bribery, corruption and coercion, among others. One of the allegations is that Mr. Jun, during his term as a member of theformer Science, ICT, Future Planning, Broadcasting, and Communications Committee (currently the Science, ICT, Broadcasting andCommunications Committee) of the National Assembly, solicited donations or financial sponsorship from various corporations, includingus, to an organization where he used to serve as the president. While the prosecution indicted Mr. Jun for these allegations, no indictmentor charges of wrongdoing were brought against us or any of our executives or employees in connection with Mr. Jun�s indictment.

In January 2018, the Korean police commenced an investigation in connection with the allegations that our current and formerexecutives and employees violated the Political Funds Act of Korea, by making certain donations to various lawmakers using corporatefunds. This investigation is currently ongoing.

We cannot be certain at this time how the above-described matters and the publicity around them will develop. While we havenot been charged with wrongdoing in connection with the above-mentioned matters, related allegations, claims, investigations andproceedings remain a possibility, and we cannot provide any assurances as to likely outcomes. There can be no assurance that anyfurther developments relating to the above-mentioned matters, including adverse publicity, will not adversely affect our business,reputation or stock price.

The reported investigation, insolvency proceedings of and any adverse publicity associated with our previous subsidiary,KT ENGCORE, could have a material adverse effect on our business, reputation and stock price.

An employee of KT ENGCORE Co., Ltd. (formerly known as KT ENS Corporation until April 2015) (�KT ENGCORE�), ourconsolidated subsidiary until August 2014, and several companies, some of which are KT ENGCORE�s subcontractors, allegedly workedtogether to forge documents, including a forged proof of accounts receivable, to incur borrowings, of which ￦290 billion remains unpaid,from 16 Korean banks since 2008 in over 460 transactions, which were allegedly secured by the forged accounts receivable and endorsedby KT ENGCORE. KT ENGCORE�s management neither had knowledge of nor approved such transactions. On February 11, 2014,police raided the offices of the subcontractors in connection with their investigation of the loans. Upon discovery of the incident, KTENGCORE immediately suspended the employee in question without pay, pending the results of the investigations for any furtherdisciplinary actions. The employee and several other persons involved in the incident were sentenced to prison terms by the Seoul CentralDistrict Court in August 2014 and by the appellate court subsequently.

In March 2014, KT ENGCORE filed for court receivership with the Seoul Central District Court, based on its inability to payapproximately￦49 billion in commercial paper that became due after early

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Table of Contentsredemption rights were exercised. The commercial paper had been issued in connection with construction of a solar power plant by acontractor of the project and guaranteed by KT ENGCORE. KT ENGCORE faced difficulties in preventing such exercise of redemptionrights following the above incident, and we declined to provide additional financial support to KT ENGCORE to repay the redeemedcommercial paper. In August 2014, the Seoul Central District Court approved KT ENGCORE�s restructuring plan, and determined that KTENGCORE is only responsible for 15% to 20% of the borrowings which remain unpaid, or approximately ￦46 billion. Pursuant to the plan,KT ENGCORE is expected to repay all of its currently outstanding obligations. The banks had appealed the decision of the Seoul CentralDistrict Court, and it was determined that KT ENGCORE is responsible for 30% to 40% of the borrowings which remain unpaid. The courtdecision was appealed and in February 2017, the Seoul High Court found that KT ENGCORE is responsible for 40% of the borrowingswhich remain unpaid. Such appellate court decision was subsequently affirmed by the Supreme Court of Korea in June 2017. While KTENGCORE�s restructuring is unlikely to have a material impact on our results of operations or financial condition on a consolidated basis,as KT ENGCORE has not been our consolidated subsidiary since 2014 due to its filing for court receivership, and our interest in KTENGCORE was classified as available-for-sale securities, any future legal proceedings against KT ENGCORE and/or us may lead tosignificant losses. Such losses, as well as any adverse publicity associated with the incident, could have a material adverse effect on ourbusiness, reputation and stock price.

The data breach incidents involving us in recent years have resulted in government investigations and civil litigation, and ifour efforts to protect personal information of our subscribers are unsuccessful, future issues may result in furthergovernment enforcement actions and civil litigation and may significantly impact our results of operation and reputation.

The nature of our business involves the receipt and storage of personal information of our subscribers. The uninterruptedoperation of our information systems and confidentiality of the customer information that resides in such systems are critical to oursuccessful operations. As such, we have a program in place to detect and respond to data security incidents. However, even though wemay take all steps we believe are necessary to protect personal information, hardware, software or applications we develop or procurefrom third parties may contain defects in design, manufacturing defects or other problems that could unexpectedly compromise informationsecurity. Unauthorized parties may also attempt to circumvent our security measures to gain access to our systems or facilities throughfraud, trickery or other forms of deceiving our employees, contractors and temporary staff. In addition, because the techniques used toobtain unauthorized access or sabotage systems change frequently and may be difficult to detect for long periods of time, we may beunable to anticipate these techniques or implement adequate preventive measures.

For example, in July 2012, the police arrested two third-party individuals in connection with the alleged theft of personalinformation relating to approximately 8.7 million of our mobile phone subscribers. The individuals in question stole personal informationthrough a series of hackings starting from February 2012 into our New Service and Technology Evolution Program (�N-STEP�), ourmobile customer information system. Since the incident, approximately 29,800 of our mobile phone subscribers filed a total of 16 lawsuitsagainst us in connection with the N-STEP hackings, alleging that we failed to protect their personal information, and are seeking totaldamages of approximately￦15 billion. From August 2014 to October 2016, various district courts have awarded damages of ￦100,000per plaintiff for 14 of the cases involving a total of approximately 29,000 of the subscribers, resulting in damages of approximately￦3 billion to us, while the remaining two trials are currently ongoing at various district courts. We have appealed the district courts�decisions. We won three of the appeals without further appellate proceedings. The other appeal which we won has been appealed to

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Table of Contentsthe Supreme Court. We lost one of the appeals and we appealed such decision to the Supreme Court. The other nine appeals arecurrently ongoing at the Seoul High Court or the Seoul Central Court.

Furthermore, in March 2014, the police arrested three third-party individuals in connection with their alleged theft of personalinformation relating to approximately 9.8 million of our subscribers. The individuals in question stole the personal information of oursubscribers through a series of hackings into our main homepage starting from February 2014. Since the incident, approximately 15,000subscribers filed 22 lawsuits against us in connection with the information theft, seeking total damages of approximately ￦7 billion. FromNovember 2016 to January 2018, we won 17 trials, lost two trials and the remaining three trials are currently ongoing at various districtcourts. The plaintiffs of nine of the 17 cases have appealed the district courts� decisions to the Seoul High Court or the Seoul DistrictCourt. We appealed the district courts� decisions of the two trials where we lost. In June 2014, we were fined ￦85 million by the KCC andwere ordered to take corrective measures in connection with the most recent hacking incident. We filed an administrative appeal in August2014 in connection with the KCC fine and prevailed. The KCC appealed the administrative decision and the appeal is currently ongoing atthe Seoul High Court.

We are unable to predict with any meaningful degree of certainty the outcome of these incidents at this time, including the scopeof investigations or the maximum potential exposure. However, if we experience additional significant data security breaches or fail todetect and appropriately respond to significant data security breaches, we could be subject to additional government enforcement actions,regulatory sanctions and litigation in the future. In addition, our mobile subscribers could lose confidence in our ability to protect theirinformation, which could cause them to discontinue using our services altogether. Furthermore, adverse final determinations, decisions orresolutions regarding such matters could encourage other parties to bring related claims and actions against us. Accordingly, the outcomeof these incidents may materially and adversely impact our business, reputation, results of operations and financial condition.

We are subject to various laws and regulations in Korea and other jurisdictions, including the Monopoly Regulation and FairTrade Act of Korea and other laws and regulations governing our business activities and acts of our management andemployees.

Our business operations and acts of our management, employees and other relevant parties are subject to various laws andregulations in and outside Korea. These laws are complicated and sometimes conflicting and our efforts to comply with these laws couldincrease 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 enforcedby the Korea Fair Trade Commission to prohibit or restrict actions that impede competition and fair trade. The Korea Fair TradeCommission designated us as a large business group under the Monopoly Regulation and Fair Trade Act on April 1, 2002. Our businessrelationships and transactions with our subsidiaries, affiliates and other companies within the KT group are subject to ongoing scrutiny bythe Fair Trade Commission as to, among other things, whether such relationships and transactions constitute undue financial supportamong companies of the same business group. We are also subject to the fair trade regulations limiting debt guarantees for otherdomestic member companies of the same group and cross-shareholdings among domestic member companies of the same group, as wellas requiring disclosure of the status of such cross-shareholdings. Additionally, we are subject to a prohibition, in effect since July 25, 2014,against circular shareholding among any three or more entities within our business group. For example, in 2015, we were fined ￦2 billionby the Korea Fair Trade Commission for using monopolistic status to exclude competitors in the corporate messaging business. However,the sentence was revoked by the

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Table of ContentsSeoul High Court in 2018, subject to the disposition by the Supreme Court of Korea. In 2016, we were issued consent orders by the KoreaFair Trade Commission for unfairly comparative advertisements on quality and coverage of our LTE service. Any future determination bythe Korea Fair Trade Commission that we have engaged in transactions that violate the fair trade laws and regulations may result in finesor other punitive measures and may have a material adverse effect on our reputation and our business.

Certain of our business activities or acts of our management, employees or other relevant parties, including, without limitation,investigations, claims or legal proceedings involving our former chief executive officer Mr. Lee and incidents relating to the employment ofcertain executives and execution of certain advertising contracts described above, may raise concerns about compliance with laws ofKorea and other relevant jurisdictions, including the United States. These various and sometimes conflicting laws and regulations includethe U.S. Foreign Corrupt Practices Act and other laws prohibiting corrupt payments to governmental officials and commercialcounterparties. Compliance with complex Korean and foreign laws and regulations that apply to our operations increases our cost of doingbusiness. Failure to comply with these laws and regulations could also result in fines, penalties and criminal sanctions against us, ourofficers, or our employees, prohibitions on conduct of our business, and damage to our reputation. Criminal or civil investigation by Koreanor other authorities may result in a material impact to our business or reputation, which in turn could impact our relationships with certainof our customers and business partners, and which potentially could give rise to additional regulatory inquiries in Korea or elsewhere.Defending us against any allegations or charges of wrongdoing also could be both costly and time-consuming, and could significantlydivert the efforts and resources of our management and other personnel. There can be no assurance that we or our employees and otherrelevant parties will always be in full compliance with these laws and regulations, or that future legal or regulatory developments applicableto us will not have an adverse impact on our business, reputation or stock price.

Concerns that radio frequency emissions may be linked to various health concerns could adversely affect our business andwe 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 othertransmission equipment have adversely affected share prices of some wireless telecommunications companies in the United States. InMay 2011, the International Agency for Research on Cancer (�IARC�) announced that it has classified radiofrequency electromagneticfields associated with wireless phone use as possibly carcinogenic to humans, based on an increased risk for glioma, a malignant type ofbrain cancer. The IARC is part of the World Health Organization that conducts research on the causes of human cancer and themechanisms of carcinogenesis, and aims to develop scientific strategies for cancer control. We cannot assure you that such healthconcerns will not adversely affect our business. Several class action and personal injury lawsuits have been filed in the United Statesagainst several wireless phone manufacturers and carriers, asserting product liability, breach of warranty and other claims relating to radiotransmissions to and from wireless phones. Certain of these lawsuits have been dismissed. In addition, to protect pre-school andelementary school children, the Office of Education in Gyeonggi-do, one of Korea�s highly populated provinces, implemented anordinance named �Protective Ordinance for Social Groups Vulnerable to Electromagnetic Radiation� in April 2016. The ordinanceprohibits installation of cellular towers near pre-schools and elementary schools in Gyeonggi-do. In December 2016, the minister of theMSIP filed a petition with the Supreme Court to invalidate the ordinance. The provincial assembly of Gyeonggi-do decided to file a criminalcomplaint against the minister of the MSIP. In December 2017, the Supreme Court of Korea ruled that the ordinance is invalid as theordinance has no legal basis. We could be subject to liability or incur significant costs defending lawsuits brought by our subscribers orother parties who claim to have been harmed by or as a result of our services. In

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Table of Contentsaddition, the actual or perceived risk of wireless telecommunications devices could have an adverse effect on us by reducing our numberof 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 adverseeffect 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 ouroperations because, among other things, it causes an increase in the amount of Won required by us to make interest and principalpayments on our foreign-currency-denominated debt, the costs of telecommunications equipment that we purchase from overseassources, net settlement payments to foreign carriers and certain payments related to our derivative instruments entered into for foreignexchange risk hedging purposes. Of the￦6,684 billion total book value of debentures and borrowings outstanding as of December 31,2017,￦2,062 billion was denominated in foreign currencies. The interest rates of such debt denominated in foreign currencies rangedfrom 0.48% (Japanese Yen 15 billion bond due 2018) to 6.50% (US$100 million fixed rate notes due 2034 issued under our suspendedmedium-term note program). Upon identification and evaluation of our currency risk exposures, we, having considered variouscircumstances, enter into derivative financial instruments to try to manage some of such risks. Although the impact of exchange ratefluctuations has in the past been partially mitigated by such strategies, our results of operations have historically been affected byexchange rate fluctuations and there can be no assurance that such strategies will be sufficient to reduce or eliminate the adverse impactof such fluctuations in the future. See ��Item 3.A. Selected Financial Data�Exchange Rate Information�, �Item 5. Operating and FinancialReview and Prospects�Item 5.B. Liquidity and Capital Resources� and �Item 11. Quantitative and Qualitative Disclosures About MarketRisk�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 ourordinary shares on the KRX Korea Composite Stock Price Index (�KOSPI�) Market and, as a result, will likely affect the market price of theADSs. These fluctuations will also affect the Dollar conversion by the depositary for the American Depositary Receipts (�ADRs�) of cashdividends, 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 theSupreme 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 statutorybenefits and entitlements in Korea. Increasing or decreasing the amount of compensation included in employees� ordinary wages has theeffect of increasing or decreasing the amounts of various statutory entitlements that are calculated based on �ordinary wage,� such asovertime premium pay. Under guidelines previously issued by the Ministry of Employment and Labor, prior to the Supreme Court decisiondescribed below, an employee�s ordinary wage included base salary and certain fixed monthly allowances for work performed overtimeduring night shifts and holidays. Prior to the Supreme Court of Korea�s decision described below, companies in Korea had typicallyinterpreted 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.

On December 18, 2013, the Supreme Court of Korea ruled that regular bonuses (including those that are paid other than on amonthly basis) shall be deemed ordinary wages if these bonuses are paid �regularly� and �uniformly� on a �fixed basis� notwithstandingdifferential amounts based on seniority. Under this decision, any collective bargaining agreement or labor-management agreement whichattempts to exclude such regular bonuses from employees� ordinary wages will be deemed void for violation of the mandatory provisionsof Korean law. However, the Supreme Court of Korea further

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Table of Contentsruled that, in certain limited situations, an employee�s claim of underpayment under the expanded scope of ordinary wages for the pastthree years may be denied based on the principles of good faith, even though 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 OrdinaryWages on January 23, 2014. A bill for amendment to the Labor Standard Act, which includes a definition of �ordinary wages� as �entiremoney and valuables determined in advance to be provided to the employee by the employer as wages, regardless of its name, inexchange of the prescribed or total work of the employee,� is currently pending at the sub-committee level of the National Assembly.

While we currently are not subject to any claims of underpayment from our current or former employees, the Supreme Courtdecision may result in additional labor costs for us in the form of additional payments required under the expanded scope of ordinarywages, both those incurred during the past three years and those to be incurred in the future. Any such additional payments may have anadverse effect on our financial condition and results of operation.

Risks Relating to Korea

Korea is our most important market, and our current business and future growth could be materially and adversely affectedif economic or political conditions in Korea deteriorate.

Substantially all of our operations, customers and assets are located in Korea. Accordingly, the performance and successfulfulfillment of our operational strategies are necessarily dependent on the overall Korean economy and the resulting impact on the demandfor telecommunications services. The economic indicators in Korea in recent years have shown mixed signs of growth and uncertainty,and future growth of the Korean economy is subject to many factors beyond our control, including developments in the global economyand domestic political scandals.

The Korean economy is closely integrated with, and is significantly affected by, developments in the global economy andfinancial markets. Substantial uncertainties remain for the global and Korean economy in the form of continued tightening of the U.S.monetary policy, continued fiscal and financial challenges for the European, U.S. and global economies, fluctuations in oil and commodityprices, trade tensions involving Korea�s trading partners, signs of cooling of the Chinese economy and a rise of military and politicaltension in the Middle East, the Eastern Europe and former members of the Soviet Union. Accordingly, the overall prospects for the Koreanand global economy in 2018 and beyond remain uncertain. Any future deterioration of the global economy may have an adverse impacton the Korean economy, which in turn could adversely affect our business, financial condition and results of operations. As Korea�seconomy is highly dependent on the health and direction of the global economy, investors� reactions to developments in one country canhave adverse effects on the securities price of companies in other countries. Factors that determine economic and business cycles of theKorean or global economy are for the most part beyond our control and inherently uncertain. In light of the high level of interdependenceof the global economy, any of the foregoing developments could have a material adverse effect on the Korean economy and financialmarkets, and in turn on the our business and profitability.

Developments that could have an adverse impact on Korea�s economy in the future also include:

� continued volatility or deterioration in Korea�s credit and capital markets;

� difficulties in the financial sectors in Europe, China and elsewhere and increased sovereign default risks in selectedcountries and the resulting adverse effects on the global financial markets;

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Table of Contents� global market volatility in connection with �Brexit,� the United Kingdom�s vote to leave the European Union in a

referendum held in June 2016 and the continuing negotiation between the United Kingdom and the European Union tocomplete the United Kingdom�s exit by mid-2019;

� 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 Japanese Yen exchange rates or revaluation of the Chinese Renminbi),interest rates, inflation rates or stock markets;

� increasing levels of household debt;

� continuing adverse conditions in the economies of countries and regions that are important export markets for Korea, suchas the United States, Europe, Japan and China, or in emerging market economies in Asia or elsewhere;

� further decreases in the market prices of Korean real estate;

� increasing delinquencies and credit defaults by consumer and small- and medium-sized enterprise borrowers;

� declines in consumer confidence and a slowdown in consumer spending;

� social and labor unrest;

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

� the economic impact of any pending or future free trade agreements;

� geo-political uncertainty and risk of further attacks by terrorist groups around the world;

� the occurrence of severe health epidemics in Korea or other parts of the world, including the recent Ebola, Middle EastRespiratory Syndrome and Zika virus outbreaks;

� deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deteriorationresulting from territorial or trade disputes or disagreements in foreign policy and the recent diplomatic tension betweenKorea and China with respect to the deployment of the Terminal High Altitude Area Defense (THAAD) system in Korea;

� political uncertainty or increasing strife among or within political parties in Korea, and political gridlock within theGovernment or in the legislature, which prevent or disrupt timely and effective policy making;

� natural disasters that have a significant adverse economic or other impact on Korea or its major trading partners;

� hostilities or political or social tensions involving countries in the Middle East and North Africa and any material disruptionin the supply of oil or significant decrease or increase in the price of oil; and

� an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.

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Table of ContentsEscalations in tensions with North Korea could have an adverse effect on us.

Relations between Korea and North Korea have been tense throughout Korea�s modern history. The level of tension betweenthe two Koreas has fluctuated and may increase abruptly as a result of future events. In particular, there continues to be uncertaintyregarding the long-term stability of North Korea�s political leadership since the succession of Kim Jong-un to power following the death ofhis father in December 2011, which has raised concerns with respect to the political and economic future of the region. In February 2017,Kim Jong-un�s half-brother, Kim Jong-nam, was reported to have been assassinated in an international airport in Malaysia. On April 27,2018, Kim Jong-un and the President of South Korea attended a summit held in the Demilitarized Zone of the Korean peninsula.

In addition, there have been heightened security concerns in recent years stemming from North Korea�s nuclear weapon andlong-range missile programs as well as its hostile military actions against Korea. Some of the significant incidents in recent years includethe following:

� North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted threerounds of nuclear tests between October 2006 to February 2013, which increased tensions in the region and elicited strongobjections worldwide. Subsequently, North Korea continued to engage in provocative behaviors. In January 2016, NorthKorea announced that it had successfully tested a hydrogen bomb, its fourth nuclear test and allegedly first test usinghydrogen, which is more explosive than plutonium. In February 2016, North Korea tested its intercontinental ballisticmissile technology and launched a long-range missile, which it claimed to have launched a satellite into orbit. In response,the Government condemned the provocations and flagrant violations of relevant United Nations Security Councilresolutions and withdrew Korean personnel from the inter-Korea Kaesong industrial complex (the �Complex�) andannounced its closing. In March 2016, the United Nations Security Council unanimously passed a resolution condemningNorth Korea�s actions and significantly expanding the scope of sanctions applicable to North Korea. In September 2016,North Korea announced that it had successfully tested a nuclear warhead that could be mounted on ballistic missiles. Inresponse, the Government condemned the test, and in November 2016, the United Nations Security Council unanimouslypassed a resolution imposing additional sanctions on North Korea. In March 2017, North Korea launched four midrangemissiles aimed at the U.S. military bases in Japan, which landed off the east coast of the Korean peninsula. In late March2017, the United States sanctioned 11 North Korean individuals and one North Korean coal company for their ties to NorthKorea�s nuclear weapons program. In April 2017, North Korea launched two ballistic missiles which landed off the eastcoast of the Korean peninsula. In response to the missile launches, representatives of the Government, the United Statesand China expressed their plans to impose stronger sanctions on North Korea. In July 2017, North Korea conducted twointercontinental ballistic missile tests which displayed further development of its long-range ballistic missile capabilities thatpotentially enable it to target certain areas of the United States as well as other neighboring countries in the Asia-Pacificregion. In response, the United Nations Security Council unanimously adopted stronger sanctions against North Korea. InSeptember 2017, North Korea conducted its sixth nuclear test, prompting the United Nations Security Council to adoptadditional sanctions against North Korea. In November 2017, North Korea conducted a test launch of anotherintercontinental ballistic missile, which, due to its improved size, power and range of distance, may potentially enable NorthKorea to target the United States mainland.

� In August 2015, two Korean soldiers were injured in a landmine explosion near the South Korean demilitarized zone.Claiming the landmines were set by North Koreans, the South Korean army re-initiated its propaganda program towardNorth Korea utilizing loudspeakers near the demilitarized zone. In retaliation, the North Korean army fired

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Table of Contentsartillery rounds on the loudspeakers, resulting in the highest level of military readiness for both Koreas. High-rankingofficials from the Government and North Korea subsequently met for discussions intending to diffuse military tensions andreleased a joint statement whereby, among other things, North Korea expressed regret over the landmine explosions thatwounded the Korean soldiers.

� 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 theNorthern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the west coast ofthe Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea forthe 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 pressure within NorthKorea. There can be no assurance that the level of tension affecting the Korean peninsula will not escalate in the future. Any furtherincrease in tensions such as North Korea�s belligerent tactics, dissolution of high level contacts between Korea and North Korea oroccurrence of military hostilities, could have a material adverse effect on our business, results of operations and financial condition.

In addition, since 2005, we have provided fixed-line telephone services, through various fixed-line telephone equipment that weinstalled, to certain South Korean companies located at the Complex, which was established pursuant to an agreement made during thesummit meeting of the two Koreas in June 2000. The Complex was the largest economic project between the two Koreas and wasdesigned to combine the Republic�s capital and entrepreneurial expertise with the availability of land and labor of North Korea.

For the year ended December 31, 2015, our revenue from the services provided for the Complex was approximately ￦1.17billion. We had no revenue from such services for the year ended December 31, 2016 and 2017. Our investment in the Complex wasapproximately￦1.88 billion as of December 31, 2015 and we have not made additional investments since the closure of the Complex.However, our services have been suspended since February 11, 2016 following the Government�s decision to halt operations of theComplex to impede North Korea�s utilization of funds from the Complex to finance its nuclear and missile programs. No assurance can begiven that we will not experience any material losses as a result of the suspension of this project or failure of the project as a result of abreakdown or escalation of hostilities in the relationship between the Republic and North Korea.

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 byshareholders of companies (including us) listed on the KRX KOSPI Market for losses incurred in connection with purchases and sales ofsecurities 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 materialinformation in such documents, (2) insider trading, (3) market manipulation and (4) unfair trading. This law permits 50 or moreshareholders who collectively hold 0.01% of the shares of a company to bring a class action suit against, among others, the issuer and itsdirectors and officers. Because of the relatively recent enactment of the act, there is not enough judicial precedent to predict

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Table of Contentshow the courts will apply the law. Litigation can be time-consuming and expensive to resolve, and can divert management time andattention from business operation. We are not aware of any basis upon which such suit may be brought against us, nor are any such suitspending or threatened. Any such litigation brought against us could have a material adverse effect on our business, financial condition andresults of operations.

We are generally subject to Korean corporate governance and disclosure standards, which differ in significant respects fromthose in other countries.

Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies whichdiffer in some respects from standards applicable in other countries, including the United States. As a reporting company registered withthe Securities and Exchange Commission and listed on the New York Stock Exchange, we are, and will continue to be, subject to certaincorporate governance standards as mandated by the Sarbanes-Oxley Act of 2002, as amended. However, foreign private issuers,including us, are exempt from certain corporate governance standards required under the Sarbanes-Oxley Act or the rules of the NewYork Stock Exchange. For a description of significant differences in corporate governance standards, see �Item 16G. CorporateGovernance.� There may also be less publicly available information about Korean companies, such as us, than is regularly madeavailable by public or non-public companies in other countries.

Risks Relating to the Securities

If an investor surrenders his ADSs to withdraw the underlying shares, he may not be allowed to deposit the shares again toobtain ADSs.

Korean law currently limits foreign ownership of the ADSs and our shares. In addition, under our deposit agreement, thedepositary bank cannot accept deposits of shares and deliver ADSs representing those shares unless (1) we have consented to suchdeposit or (2) Korean counsel has advised the depositary bank that the consent required under (1) is no longer required under Koreanlaws and regulations. Under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for thenumber of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number ofshares deposited by us or with our consent for the issuance of ADSs (including deposits in connection with the initial and all subsequentofferings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with thedepositary 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 tothe amount allowed under current Korean laws and regulations. Until such time, however, the depositary bank will continue to obtain ourconsent for such deposits of shares and delivery of ADSs, which we may not provide. Consequently, if an investor surrenders his ADSs towithdraw the underlying shares, he may not be allowed to deposit the shares again to obtain ADSs. See �Item 10. AdditionalInformation�Item 10.D. Exchange Controls.�

A foreign investor may not be able to exercise voting rights with respect to common shares exceeding the number ofcommon shares held by our largest domestic shareholder.

Under the Telecommunications Business Act, a foreign shareholder who holds 15.0% or more of our total shares is prohibitedfrom becoming our largest shareholder. However, any foreign shareholder who held 15.0% or more of our total shares and was our largestshareholder on or prior to May 9, 2004 is exempt from the regulations, provided that such foreign shareholder may not acquire any moreof our shares. Under the Telecommunications Business Act, the MSIT may, if it deems it

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Table of Contentsnecessary to preserve substantial public interests, prohibit a foreign shareholder from being our largest shareholder. In addition, theForeign Investment Promotion Act prohibits any foreign shareholder from being our largest shareholder if such shareholder owns 5.0% ormore of our shares with voting rights. In the event that any foreigner or foreign government acquires our shares in violation of the aboveprovisions, 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 specifiedperiod of six months or less. See �Item 10. Additional Information�Item 10.B. Memorandum and Articles of Association.�

Holders of ADSs will not be able to exercise appraisal rights unless they have withdrawn the underlying ordinary shares andbecome our direct shareholders.

In some limited circumstances, including the transfer of the whole or any significant part of our business and our merger orconsolidation with another company, dissenting shareholders have the right to require us to purchase their shares under Korean law. Aholder of ADSs will not be able to exercise appraisal rights unless he has withdrawn the underlying ordinary shares and become our directshareholder. 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 interestin us.

The Commercial Code of Korea and our articles of incorporation require us, with some exceptions, to offer shareholders the rightto subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer any rights tosubscribe for additional ordinary shares or any rights of any other nature, the depositary bank, after consultation with us, may make therights available to an ADS holder or use reasonable efforts to dispose of the rights on behalf of the ADS holder and make the net proceedsavailable to the ADS holder. The depositary bank, however, is not required to make available to an ADS holder any rights to purchase anyadditional 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 exercisepreemptive 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, estimatesand projections about us and the industries in which we operate. The forward-looking statements are subject to various risks anduncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as�anticipate,� �believe,� �estimate,� �expect,� �intend,� �project,� �should,� and similar expressions. Those statements include, amongother 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

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Table of Contentsthat although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of thoseassumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could beincorrect. The uncertainties in this regard include, but are not limited to, those identified in the risk factors discussed above. In light ofthese and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financialresults 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 thatit previously directly operated. Under the Korea Telecom Act and the Government-Invested Enterprises Management Basic Act, theGovernment exercised substantial control over our business and affairs. Effective October 1, 1997, the Korea Telecom Act was repealedand the Government-Invested Enterprises Management Basic Act became inapplicable to us. As a result, we became a corporation underthe Commercial Code, and our corporate organization and shareholders� rights were governed by the Privatization Law and theCommercial Code. Among other things, we began to exercise greater autonomy in setting our annual budget and making investments inthe telecommunications industry, and our shareholders began electing our directors, who had previously been appointed by theGovernment 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, theGovernment disposed of all of its equity interest in us, and the Privatization Law ceased to apply to us in August 2002. We amended ourlegal 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 telephoneservices in Korea. The Government began to introduce competition in the telecommunications services market in the early 1990�s. As aresult, including ourselves, there are currently three local telephone service providers, five domestic long-distance carriers and numerousinternational long-distance carriers (including voice resellers) in Korea. In addition, the Government awarded licenses to several serviceproviders to promote competition in other telecommunications business areas such as mobile telephone services and data networkservices. In June 2009, KTF, a subsidiary providing mobile telephone services, merged into KT Corporation, with KT Corporation survivingthe merger, with the objective of maximizing management efficiencies of our fixed-line and mobile telecommunications operations as wellas more effectively responding to the convergence trends in the telecommunications industry. See �Item 4. Information on theCompany�Item 4.B. Business Overview�Competition.�

Our legal and commercial name is KT Corporation. Our principal executive offices are located at KT Gwanghwamun BuildingEast, 33, Jong-ro 3-gil, Jongno-gu, 03155, Seoul, Korea and our telephone number is (8231) 727-0114.

Item 4.B. Business Overview

We are the leading telecommunications service provider in Korea and one of the largest and most advanced in Asia. As anintegrated telecommunications service provider, our principal services include:

� mobile voice and data telecommunications services based on 3G W-CDMA technology and 4G LTE technology;

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Table of Contents� fixed-line services, which include:

Ø telephone services, including local, domestic long-distance and international long-distance fixed-line and Voice overInternet Protocol (�VoIP�) telephone services (i.e., provision of communication services over the Internet, and notover the fixed-line network) and interconnection services to other telecommunications companies;

Ø broadband Internet access service and other Internet-related services, including IPTV services; and

Ø data communication services, including leased line service and dedicated broadband Internet connection service toinstitutional customers;

� credit card processing and other financial services through BC Card Co., Ltd.; and

� various other services, including satellite service (through KT Sat Co., Ltd. (�KT SAT�)) and information technology, realestate business (mainly through KT Estate Inc. (�KT Estate�)), satellite TV service (through KT Skylife), media contentsbusiness and network services such as cloud computing services.

Leveraging on our dominant position in the fixed-line telephone services market and our established customer base in Korea, wehave successfully pursued new growth opportunities during the past decade and obtained strong market positions in each of our principallines of business. In particular:

� in the mobile services market in Korea, we achieved a market share of 31.4% with approximately 20 million subscribers asof December 31, 2017;

� in the fixed-line telephone services market in Korea, we continue to be the dominant provider with approximately24.3 million installed lines, of which approximately 11.2 million lines were in service as of December 31, 2017. As of suchdate, our market share of the local market was 80.5% and our market share of the domestic long-distance market was79.8%;

� we are Korea�s largest broadband Internet access provider with approximately 8.8 million subscribers (excluding WiBroand ollehWifi subscribers) as of December 31, 2017, representing a market share of 41.3%; and

� we are also the leading provider of data communication services in Korea.

For the year ended December 31, 2017, our operating revenues were￦23,547 billion, our profit for the period was￦546 billionand our basic profit per share was￦1,884. As of December 31, 2017, our total assets were￦29,745 billion, total liabilities were￦16,696 billion and total equity was￦13,049 billion.

Business Strategy

We believe the telecommunications market in Korea is nearing saturation, despite certain areas of growth remaining due toKorea�s growing economy, consumers� willingness to adopt new technologies, relatively high income and a relatively large middle class.To maintain our competitiveness, we believe we need to pursue growth in other areas, while maintaining our strength in

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Table of Contentsexisting businesses. In order to enhance the management efficiencies of our mobile and fixed-line telecommunications operations as wellas more effectively respond to the convergence trends in the telecommunications industry, KTF merged into KT Corporation in June 2009,with KT Corporation surviving the merger. As part of our efforts to improve our operational efficiencies, we transferred all operationsrelating to fixed-line sales activities (including on-site sales, line activation, after service, and customer center operations) to oursubsidiaries in 2014.

Since 2016, our main strategical focus was on promotion of services that converge information & communication technology withother fields such as energy, security, media, healthcare, transportation and financial transactions, utilizing our fixed-line and wirelessinfrastructure installed for our olleh GiGA Internet Service and LTE mobile services. In addition, we have focused on artificial intelligenceand big data and plan to leverage our platforms like IPTV and network assets to introduce innovative convergence services. For example,we launched �GiGA Genie� using an artificial-intelligence based IPTV set-top box that allows users to voice-command to watch TV, usethe Internet and control other Internet-connected appliances. In 2017, we launched an interactive video security service, called�GiGAeyes.� In addition, the first Internet-only bank in Korea, called K bank, over which we own a minority interest, began operation inApril 2017 and seeks to operate as a virtual bank whose operation is based on its mobile application and the Internet, while promotinggreater user accessibility through the convenience stores of one of our other consortium members. K bank also plans to differentiate itselffrom other conventional banks by utilizing big data and offering competitive products and interest rates.

Our strategical focus on convergence services builds on our �GiGAtopia� corporate vision, which refers to our goal to create aworld where humans and all things are connected through ultra-fast �GiGA� infrastructure and ICT eco-system, enhanced by convergenceservices, industrial development and innovation. We launched our olleh GiGA Internet service, which provides transmission speed of up to1 Gbps, in October 2014 (�olleh GiGA Internet Service�). In June 2015, we also announced the mobile data service known as �GiGALTE,� which utilizes multipath transmission control protocol (MPTCP) technology. We continue to expand GiGA coverage, initially focusingon metropolitan areas, and further expand to other regions in Korea. By promoting our convergence services, we aim to contribute inchanging the current subsidy-based Korean telecommunication market competition to one based on innovative technology, products andenhanced services.

We believe development of 5G technology will be a key driver for future innovations, fueled also by the increasing importance ofbig data. With our leadership in providing highly advanced 4G LTE services, we have made extensive efforts to develop and presentvarious further advanced technologies. At the PyeongChang 2018 Winter Olympics, we unveiled the world�s first 5G trial services. Weshowcased a variety of services with enhanced speed, latency, and connectivity, such as broadcasting from the viewpoint of players with a360-degree panoramic view or broadcasting from multiple viewpoints. As an official telecommunications services partner of thePyeongChang 2018 Winter Olympics, we made utmost efforts to realize the vision of 5G and capture truly memorable moments of theOlympics. In this effort, we announced our plan to commercialize the 5G services by 2019, one year ahead of our initial plan. In October2017, �5G Network Slice Orchestration� technology, independently developed by us, was approved by the InternationalTelecommunication Union, a specialized Information & Communication Technology agency of the United Nations, as part of the 5Gstandard technology.

In 2017, we organized our �customer-facing� business (as compared to the internal supporting business, such as legal,accounting and investor relations departments, and operational support functions for designing and developing global network servicesand maintaining overseas branches and subsidiaries) into five business groups, the Marketing Group, the Customer Group, the EnterpriseBusiness Group, the Future Convergence Business Group and the Platform Business Group, so that

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Table of Contentswe may achieve higher synergies, more effectively address differing needs of our customer segments, as well as strengthen ourcompetitiveness and discover new growth opportunities. We aim to pursue the following strategies for our business groups:

� Marketing Group. Through our Marketing Group, we aim to expand our telecommunication and convergence operationsby (i) improving our fixed-line and wireless telecommunication market shares and average revenue per user, (ii) developingbusiness strategies and plans specifically related to telecommunications and convergence, (iii) strengthening ourcompetitiveness over products, customer service and other related services and (iv) developing and executing efficientmarketing strategies. We also focus on expanding our wireless data communication business to meet rising demand forbroadband Internet access using advanced wireless data communications devices such as smartphones. We are workingclosely with handset manufacturers to expand our offerings of smartphones and handsets designed to promoteconvergence of fixed-line and mobile telecommunications services, as well as to promote development of variousapplications for such devices.

We plan to take advantage of our industry-leading network infrastructure to attract more customers as thetelecommunication and convergence markets further develop. In addition, we aim to further enhance our position in themobile telecommunications market by leveraging on our strong brand, nationwide marketing network, competitive datausage rates, call centers dedicated to smartphone users, creative marketing strategies that address our potentialcustomers� needs and ability to bundle various mobile and fixed-line services. We also plan to further expand our contentsand applications for smartphone users and mobile data users by cooperating with application developers in Korea andabroad, in order to further solidify our position as a leader in the convergence market.

In 2016, we launched Y24 plans which offer discounted fees and tailored data offerings for customers of age 24 oryounger. We aim to differentiate ourselves from our competitors by providing broadband Internet access service usinghigh-speed FTTH connection and offering Internet phone service with value-added features such as video communication,short message service and phone banking. We began offering real-time broadcasting service on our IPTV service inNovember 2008 and we were the first in the IPTV industry to achieve approximately 7.5 million subscribers in 2017. In2017, we also introduced a new technology to minimize a smartphone�s power consumption while running on the LTEwireless network. The launch and growth of GiGA Genie services in 2017 will help us to further grow our subscriber baseand strengthen our platform business.

We believe that convergence of fixed-line and mobile communications technologies provides a competitive advantage to usbecause we have the technological know-how and experience to design and construct a unified delivery platform for a newgeneration of value-added services. We plan to make such platform more readily available to others so that they maycreate additional contents and convenience solutions such as electronic commerce and digital transaction applications thatcan be utilized anywhere using various media and communications devices.

� Customer Group. Through our Customer Group, we aim to improve our marketing and customer service efforts for all ofour products and services by (i) planning and executing strategy for each product that we offer and our marketing efforts,(ii) contributing to expanding our market shares by strengthening our marketing and customer service efforts,(iii) maximizing customer satisfaction by providing high quality customer service and (iv) transforming our customer servicebased on technologies such as service automation and self-installation.

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Table of Contents� Enterprise Business Group. Through our Enterprise Business Group, we aim to provide our large corporate, small- and

medium-sized enterprise and government agency customers with one-stop solution services, including designing datacommunications and information technology infrastructure and overseeing their day-to-day operations with the objective ofachieving operational efficiencies and cost savings, as well as establishing and executing business plans for our globaloperations. Furthermore, in conjunction with our Future Convergence Business Group, we seek to expand our operationsin the fields of smart energy, unified security systems and oversized data management.

� Future Convergence Business Group. Due to the saturation within the Korean telecommunication market and limitationson growth in the traditional telecommunications services market, through our Future Convergence Business Group, we aimto concentrate our existing business capabilities in achieving new synergies by converging information & communicationtechnology with other fields, such as smart energy, unified security systems, next-generation media, healthcare andintelligent traffic control. In the field of smart energy, through our convergence energy optimization project named �KTMicro-Energy Grid System,� we seek to contribute in preventing energy crisis and to increase energy efficiency. In the fieldof unified security systems, we seek to contribute to the establishment of national response systems for natural and otherdisasters, as well as enhancing personal and corporate security. For example, in 2017, we launched an interactive securitysystem, called �GiGAeyes�, which analyzes surveillance video and autonomously detects suspicious activities. In the fieldof next-generation media, we seek to contribute to the development of next-generation media contents and new mediatechnology, thereby supporting the expansion of Korean media contents to overseas markets. We are also seeking ways todevelop personalized treatment systems to provide enhanced healthcare, as well as to create intelligent traffic controlsystems to reduce traffic. We are planning to develop services based on virtual or augmented reality.

� Platform Business Group. Through our Platform Business Group, we strive to transform into a platform-based businessfocusing on online-to-offline commerce, financial technology (�Fintech�) and Internet of Things (�IoT�). As part of ourFintech business initiatives, in 2016, we launched an online payment application, which provides a method of onlineauthentication that uses biometric data such as finger prints or voice instead of complex passwords. With regard to IoT, wewill continue to deploy the Industrial IoT business model, which explores opportunities to converge services with otherindustries. We also plan to strengthen our IoT service relating to household goods.

The Telecommunications Industry in Korea

The Korean telecommunications industry is one of the most developed in Asia. According to the information announced by theKCC and the MSIT, the number of mobile subscribers in Korea was approximately 63.7 million and the number of broadband Internetaccess subscribers in Korea was approximately 21.2 million as of December 31, 2017. Based on the information announced by theMinistry of the Interior and Safety of Korea, the KCC and the MSIT, as of December 31, 2017, the mobile penetration rate, which iscalculated by dividing the number of mobile subscriber accounts (including multiple counting of those who subscribe to more than onemobile service) by the population of Korea, was 124.9%, and the broadband Internet penetration rate, which is calculated by dividing thenumber of broadband Internet access service subscriber accounts (including multiple counting of those who subscribe to more than onebroadband Internet access service) by the number of households in Korea, was 108.6%.

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Table of ContentsMobile Telecommunications Service Market

The Korean cellular market was formally established in 1984 when SK Telecom, formerly Korea Mobile Telecom, became thefirst mobile telephone operator in Korea. SK Telecom remained the only cellular operator in Korea until Shinsegi Telecom began service in1994. In order to encourage further market growth and competition, the Government awarded three 2G licenses in June 1996. KTF wasawarded a license alongside LG U+ and Hansol M.com, and commercial 2G service was launched in October 1997.

Since the introduction of three new operators in 1997, the Korean mobile market has undergone consolidation and significantgrowth. Following SK Telecom�s purchase of a controlling stake in Shinsegi, we acquired a 47.9% interest in Hansol M.com in 2000 andrenamed the company KT M.com. KT M.com merged into KTF in May 2001 and Shinsegi merged into SK Telecom in January 2002. InJune 2009, KTF merged into KT Corporation, with KT Corporation surviving the merger. KT Corporation and SK Telecom offer third-generation, high-capacity HSDPA-based IMT-2000 wireless Internet and video multimedia communications services that use significantlygreater bandwidth capacity. In July 2011, SK Telecom and LG U+ began offering 4G communications services based on LTE technology,which enables data transmission at a speed faster than W-CDMA or WiBro networks, and we began our 4G LTE services in January 2012.Additionally, in September 2013, we commenced providing wideband LTE services, which utilizes our adjoining 20 MHz of bandwidths inthe 1.8 GHz spectrum to provide transmission speed of up to 150 Mbps (for downloading), twice faster than those offered under standardLTE services. SK Telecom also began providing its wideband LTE services in September 2013 and LG U+ commenced providing itswideband LTE services in January 2014. We expanded our wideband LTE services to all of Korea in July 2014. Furthermore, in March2014, we commercialized Wideband LTE-A services, which interconnects our 20 MHz of bandwidth in the 1.8 GHz spectrum used to offerwideband LTE services with the 10 MHz of bandwidth in the 900 MHz spectrum used to offer standard LTE services by utilizing inter-bandcarrier aggregation technology to support transmission speed of up to 225 Mbps (for downloading), and began additionally interconnecting10 MHz of bandwidth in the 2.1 GHz spectrum in January 2015 to support transmission speed of up to 300 Mbps (for downloading) underthe �Wideband LTE-A X4� service. In June 2015, we commercialized GiGA LTE services which link �Wideband LTE-A X4� and our WiFinetwork to provide a faster WiFi connection in June 2015. In 2016, we won various awards for our GiGA LTE services and agreed toprovide GiGA LTE technology to Turk Telekom Group, a leading telecommunications provider in Turkey.

In April 2014, LG U+, SK Telecom and we began offering various unlimited mobile service packages, offering mobile subscriberswith unlimited voice calls, text messaging, and LTE data. As of December 31, 2017, the number of LTE subscribers in Korea exceeded50 million. Due to the high mobile penetration rate in Korea, we expect the growth of new subscribers to be limited. We believe that thecontinuing intense competition among major telecommunications operators in Korea and the resulting pressure on our fees may have amaterial adverse impact on our results of operations.

The table below gives the subscription and penetration information of the mobile telecommunications industry for the periodsindicated:

As of December 31,2013 2014 2015 2016 2017

Total Korean Population (thousands) (1) 51,141 51,328 51,529 51,696 50,977Mobile Subscribers (thousands) (2) 54,681 57,290 58,935 61,296 63,659Mobile Subscriber Growth Rate 2.0 % 4.8 % 2.9 % 4.0 % 3.9 %Mobile Penetration (3) 106.9 % 111.6 % 114.4 % 118.6 % 124.9 %

(1) Based on the number of registered residents as published by the Ministry of the Interior and Safety of Korea.

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Table of Contents(2) Based on information announced by the KCC and MSIT.

(3) Penetration is determined by dividing mobile subscribers by total Korean population.

Broadband Internet Access Market

With the advancement of broadband technology, the Korean broadband Internet access market has experienced significantgrowth. The principal technologies used in providing high speed Internet access services are xDSL, HFC and fiber optic LAN. xDSL refersto various types of digital subscriber lines, including ADSL and VDSL. xDSL offers an access solution over existing telephone lines using aspecialized modem while HFC service involves the use of two-way cable networks. Fiber optic LAN is a technology that combines fiberoptic cables and Unshielded Twisted Pair (�UTP�) cables. Fiber optic cables are connected to residential and commercial buildings withUTP cable-based LAN capabilities. While xDSL and HFC are more widely used technologies because of their relative reliability, ease ofprovisioning and cost effectiveness, fiber optic LAN usage in Korea has been steadily increasing in recent years.

Since the subscribers of two-way cable networks share a limited bandwidth, the downstream speed tends to slow down as thenumber of subscribers increases, thereby decreasing the quality of HFC-based service. While xDSL technology was commerciallyintroduced after HFC technology, it has surpassed HFC to become the prevalent broadband access platform in Korea. VDSL, ADSL-based technology with enhanced downstream speed, became commercialized in 2002. Some of the service providers have upgraded theirbroadband network to provide fiber optic LAN-based service to their subscribers, which further enhances data transmission speed up to 1Gbps as well as improves connection quality, and enables such service providers to offer video-on-demand services with real-time highdefinition broadcasting.

In recent years, broadband Internet access service providers and mobile telecommunications service providers have focusedtheir attention on providing wireless Internet connection capabilities. They have introduced WiFi with speed of up to 1.3 Gbps, which isdesigned to integrate fixed-line and wireless services by offering high speed wireless Internet access to laptops and smartphones inhot-spot zones and at home. In addition, we expect our competitors would focus their attention on upgrading data transmission capacity oftheir Internet services as the Government and the network service providers including us, SKT and LG U+ announced the plan to enhancetransmission capacity by ten-fold (up to 10 Gbps) in 2018. See ��Our Services�Fixed-line Services�Internet Services.�

Our Services

Mobile Service

We provide mobile services based on 3G W-CDMA technology and 4G LTE technology. Prior to the merger of KTF into KTCorporation, we provided such services through KTF, which was formerly a consolidated subsidiary. KTF obtained one of the threelicenses to provide nationwide 2G service in June 1996 and began offering 2G service in October 1997. In June 2009, KTF merged intoKT Corporation, with KT Corporation surviving the merger, with the objective of maximizing management efficiencies of our fixed-line andmobile telecommunications operations as well as more effectively responding to the convergence trends in the telecommunicationsindustry. We currently offer HSDPA-based IMT-2000 services, which are third-generation, high-capacity wireless Internet and videomultimedia communications services based on W-CDMA wireless network standards. Several wireless carriers in the United States,Europe and Asia commenced LTE services in recent years and LTE technology is currently widely accepted as the standard 4Gtechnology. LTE technology enables data to be transmitted faster than W-CDMA, generally providing a downloading speed of 75 Mbps per10 MHz. In January 2012, we also began offering 4G LTE services in the Seoul metropolitan area,

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Table of Contentsfollowing the termination of our 2G services. We completed the expansion of our 4G LTE service coverage nationwide in October 2012and commenced providing wideband LTE services in September 2013, and commercialized Wideband LTE-A services in March 2014. Webegan offering �Wideband LTE-A X4� services in January 2015 and also launched �GiGA LTE� services which links �Wideband LTE-AX4� and our wireless LAN service (�WiFi�) signals to provide a faster WiFi connection in June 2015. In addition, our use of 20 MHz ofbandwidth in the 1.8 GHZ spectrum, acquired in May 2016, further enhances the quality of our LTE services through intra-band carrieraggregation technology. We believe that the faster data transmission speed of the LTE network allows us to offer significantly improvedwireless data transmission services with faster wireless access to multimedia content. Accordingly, we have made extensive efforts todevelop advanced technologies as well as to provide a variety of services with enhanced speed, latency and connectivity.

Revenues related to mobile service accounted for 30.2% of our operating revenues in 2017. In addition, our goods sold, whichare primarily from mobile handset sales, accounted for 14.8% of our operating revenues in 2017. The following table shows selectedinformation concerning the usage of our network during the periods indicated and the number of our subscribers as of the end of suchperiods:

As of or for the Year Ended December 31,2015 2016 2017

Average Monthly Revenue per Subscriber (1) ￦ 35,308 ￦ 35,524 ￦ 34,444Number of Subscribers (in thousands) (2) 18,038 18,892 20,015

(1) The average monthly revenue per subscriber is computed by dividing total monthly fees, usage charges, interconnection fees and value-added service fees for theperiod by the weighted average number of subscribers and dividing the quotient by the number of months in the period.

(2) Includes our LTE subscribers of approximately 12 million, 13 million, and 14 million, in 2015, 2016 and 2017, respectively.

We compete with SK Telecom, a mobile service provider that has a longer operating history than us, and LG U+ which began itsservice at around the same time as KTF. As of December 31, 2017, we had approximately 20 million subscribers, or a market share of31.4%, which was the second largest among the three mobile service providers.

We market our mobile services primarily through independent exclusive dealers located throughout Korea. As of December 31,2017, there were approximately 2,600 shops managed by our independent exclusive dealers. In addition to assisting new subscribers toactivate mobile service and purchase handsets, authorized dealers are connected to our database and are able to assist customers withtheir account information. Although most of these dealers sell exclusively our products and services, sub-dealers hired by exclusivedealers may sell products and services offered by other mobile telecommunications service providers. Authorized dealers are entitled to acommission for each new subscriber registered, as well as ongoing commissions for the first five years based primarily on thesubscriber�s monthly fee, usage charges and length of subscription. The handsets sold by us to the dealers cannot be returned to usunless they are defective. If a handset is defective, it may be exchanged for a new one within 14 days from the date of purchase. OnOctober 1, 2014, the Handset Distribution Reform Act, which regulates the sale and subsidies of mobile telecommunication devices, wentinto effect but was phased out in September 2017. See ��Regulation�Rates�.

In response to the diversification of our customers� demands and their increasing sophistication, we have also selectivelyengaged in opportunities to expand our internal sales channels in recent years. In 2007, we established a wholly-owned subsidiary, KTM&S Co., Ltd., that operates approximately 260 customer plazas that engage in mobile service sales activities as well as provide aone-stop shop for a wide range of other services and products that we offer. We also operate a website to promote and advertise ourproducts and services to the general public and in particular to younger customers who are more familiar with the Internet.

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Table of ContentsWe 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 banksand credit agencies such as the National Information and Credit Evaluation Corporation. Applicants who do not meet the minimum criteriacan only subscribe to the mobile service by using a pre-paid card.

Fixed-line Services

We provide a variety of fixed-line communication services, including various telephone services, broadband and other Internetservices and data communication services.

Fixed-line Telephone Services

We utilize our extensive nationwide telephone network to provide fixed-line telephone services, which consist of local, domesticlong-distance, international long-distance services and land-to-mobile interconnection services. These fixed-line telephone servicesaccounted for 7.8% of our operating revenues in 2017. Our telephone network includes exchanges, long-distance transmission equipmentand fiber optic and copper cables. The following table gives some basic measures of the development of our telephone system. In recentyears, the proliferation of mobile phones, as well as the availability of increasingly lower wireless pricing plans, some of which includeunlimited voice minutes, has led to significant decreases in our domestic long-distance call minutes and local call pulses.

As of or for the Year Ended December 31,2013 2014 2015 2016 2017

Total Korean population (thousands) (1) 51,141 51,328 51,529 51,696 50,977Lines installed (thousands) (2) 24,264 23,930 23,607 24,858 24,343Lines in service (thousands) (2) 14,032 13,713 12,440 11,871 11,220Lines in service per 100 inhabitants (3) 27.4 26.7 24.6 23.0 21.7Fiber optic cable (kilometers) 636,347 673,783 695,546 732,873 764,802Number of public telephones installed (thousands) 94 88 83 74 71Domestic long-distance call minutes (millions) (4) 3,803 2,743 2,113 1,507 1,126Local call pulses (millions) (4) 5,765 4,038 3,034 2,161 1,611

(1) Based on the number of registered residents as published by the Ministry of the Interior and Safety of Korea.

(2) Including lines used for public telephones but excluding lines dedicated to centralized extension system services for corporate subscribers.

(3) Determined based on lines in service and total Korean population.

(4) 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 datatransmissions. Compared to conventional materials such as coaxial cable, fiber optic cable provides significantly greater transmissioncapacity with less signal fading, thus requiring less frequent amplification. All of our lines are connected to exchanges capable of handlingdigital signal technology. A principal limitation of the older analog technology is that applications other than voice communications, such asthe transmission of text and computer data, require either separate networks or conversion equipment. Digital systems permit a range ofvoice, text and data applications to be transmitted simultaneously on the same network.

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Table of ContentsThe following table shows the number of minutes of international long-distance calls recorded by us and specific service

providers utilizing our international long-distance network in each specified category for each year in the five-year period endedDecember 31, 2017:

Year Ended December 31,2013 2014 2015 2016 2017

(In millions of billed minutes)Incoming international long-distance calls 628.4 549.4 390.5 352.3 286.4Outgoing international long-distance calls 244.2 212.2 179.0 155.1 125.9Total 872.6 761.6 569.5 507.4 412.3

Japan (33.0%), China (21.5%) and the United States (9.2%) accounted for the greatest percentage of our international long-distance call traffic measured in minutes in 2017. In recent years, the volume of our incoming calls has exceeded the volume of ouroutgoing calls. The agreed settlement rate is applied to the call minutes to determine the applicable net settlement payment.

Interconnection. Under the Telecommunications Business Act, we are required to permit other service providers to interconnectto our fixed-line network. Currently, the principal users of this interconnection capacity include SK Broadband and LG U+ (offering local,domestic long-distance and international long-distance services, and transmitting calls to and from their mobile networks), Sejong and SKTelink (offering international and domestic long-distance services), and SK Telecom. We recognize as land-to-mobile interconnectionrevenue the entire amount of the usage charge collected from the landline user and recognize as an expense the amount ofinterconnection charge paid to the mobile service provider.

Internet Phone Services. The volume of calls made through Internet phone services has significantly increased since Internetphone service was first introduced in Korea in 1998. We provide Internet phone services that enable VoIP phone devices with broadbandconnection to make domestic and international calls. In order to differentiate our Internet phone services from our competitors� services,we provide value-added services such as video communication, short message service, phone banking and a variety of traffic and localnews information. As of December 31, 2017, we had approximately 3.4 million subscribers.

Internet Services

Broadband Internet Access Service. Leveraging on our nationwide network of approximately 764,800 kilometers of fiber opticcable network, we have achieved a leading market position in the broadband Internet access market in Korea. We believe we have acompetitive advantage over other broadband Internet access service providers because, unlike our competitors, we can utilize our existingnetworks nationwide to provide broadband Internet access service. Our broadband Internet access service accounted for 8.8% of ouroperating revenues in 2017. Our principal Internet access services include:

� ADSL, VDSL, Ethernet and FTTH services under the �olleh Internet� and �olleh GiGA Internet� brand names;

� WiFi service under the �ollehWiFi� brand name, which is designed to integrate fixed-line and wireless services by offeringhigh speed wireless Internet access to laptops and smartphones in hot-spot zones and olleh Internet service in fixed-lineenvironments. OllehWiFi enables subscribers to access the Internet at a speed of up to 1.3 Gbps. We sponsoredapproximately 107,000 hot-spot zones nationwide for wireless connection as of December 31, 2017; and

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Table of Contents� olleh 4G WiBro Internet access service, which enables two-way WiBro Internet access to portable computers, mobile

phones and other portable devices at a speed averaging 6 Mbps per user.

We had approximately 8.8 million broadband Internet subscribers and approximately 2.8 million ollehWiFi service subscribers asof December 31, 2017. In March 2005, we commercially launched our WiBro service in June 2006. We completed the upgrade of our 4GWiBro network and expanded our WiBro service coverage to 84 cities nationwide and major highways in March 2011, which we believeallows us to provide WiBro services at speeds that are approximately three times faster than our previous 3G network at a lower cost. Thenumber of our WiBro subscribers decreased from approximately 934,000 subscribers as of December 31, 2013 to approximately 289,000subscribers as of December 31, 2017, as more WiBro subscribers chose to access the Internet using our 4G LTE network rather thanWiBro following the proliferation of 4G LTE services since 2013. Furthermore, we focused our subscriber retention efforts on our mobilesubscribers rather than our WiBro subscribers. The term of our license to 30 MHz of bandwidth in the 2.3 GHz spectrum for the WiBroservices shall expire as of March 2019. We launched our olleh GiGA Internet Service, which provides transmission speed of up to 1 Gbps,and had approximately 3.9 million subscribers as of December 31, 2017.

Our olleh Internet service utilizes ADSL technology, which is a technology that converts existing copper twisted-pair telephonelines into access paths for multimedia and high-speed data communications. ADSL transforms the existing public telephone network fromone limited to voice, text and low-resolution graphics to a system capable of bringing multimedia to subscriber premises without newcabling. The asymmetric design optimizes the bandwidth by maximizing the downstream speed for downloading information from theInternet. While ADSL technology was commercially introduced after HFC-based technology, it has surpassed HFC to become theprevalent access platform in Korea. VDSL, ADSL-based technology with enhanced downstream speed, became commercialized in July2002. We are continually upgrading our broadband network to enable better FTTH connection, which further enhances data transmissionspeed of up to 1 Gbps and connection quality. FTTH is a telecommunication architecture in which a communication path is provided overoptical fiber cables extending from the telecommunications operator�s switching equipment to the boundary of home or office. FTTH usesfiber optic cable, which is able to carry a high-bandwidth signal for longer distances without degradation. FTTH enables us to deliverenhanced products and services that require high bandwidth, such as IPTV, and other digital media content with higher stability.

The high-speed downstream rates can reach up to 100 Mbps for VDSL and 1 Gbps for FTTH. In October 2016, wecommercialized GiGA Wire 2.0 Internet service solutions on copper wires to provide data transmission speed of up to 1 Gbps. We aremaking efforts to offer data transmission speed of up to 10 Gbps, by the end of 2018. Downstream rates depend on a number of factors.For a constant wire gauge, the data rate decreases as the length of the copper wire increases. Generally, if the separation between thetelephone office and the subscriber is greater than four kilometers, line attenuation is so severe that broadband speeds can no longer beachieved. Fiber optic cable used by FTTH, on the other hand, uses laser light to carry signals that travel long distances inside fiber opticcable without degradation.

Other Internet-related Services. Our other Internet-related services focus primarily on providing infrastructure and solutions forbusiness enterprises, as well as IPTV and network portal services. Our other Internet-related services accounted for 9.1% of our operatingrevenues in 2017.

We operate 12 data centers located throughout Korea and provide a wide range of computing services to companies which needservers, storage and leased lines. Data centers are facilities used to house, protect and maintain network server computers that store anddeliver Internet and other

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Table of Contentsnetwork content, such as web pages, applications and data. Our data centers are designed to meet international standards, and areequipped with temperature and humidity control systems, regulated and reliable power supplies, mechanical equipment, fire detection andsuppression equipment, security monitoring and wide-bandwidth connections to the Internet. Data centers allow corporations to outsourcetheir application and server hardware management.

Our data centers offer network outsourcing services, server operation services and system support services. Our networkoutsourcing services include co-location, which is the installation of our customers� network equipment at our data centers. Co-location isdesigned to increase customers� Internet connection speed and reduce connection time and costs by directly connecting the customers�server to the Internet backbone switch at our data centers. Our server operation services include optimal server management service andtechnical support service we provide with respect to the leased servers that are linked directly to our Internet backbone switch. We alsolease servers and network equipment for a fixed monthly fee. Our system support services include providing system resources for a widerange of Internet computing services, such as application transfer, network storage, video streaming and application download, as well assending short text messages and messages containing multimedia objects, such as images, audio and video.

We also offer a service called Bizmeka to develop and commercialize business-to-business solutions targeting small- andmedium-sized business enterprises in Korea. Bizmeka is an applied application service provider which provides industry standard andspecialized business solutions, including integrated business administration solutions and intranet collaboration solutions.

We also offer high definition video-on-demand and real-time broadcasting IPTV services under the brand name �olleh TV,� andbegan offering ultra-high-definition (�UHD�) IPTV services, which offer resolutions up to four times those offered under high-definitiontelevision services, under the brand name �olleh GiGA UHD TV� starting in September 2014. Our IPTV service offers access to an arrayof digital media contents, including movies, sports, news, educational programs and TV replay, for a fixed monthly fee or on apay-per-view basis. Through a digital set-top box that we rent to our customers, our customers are able to browse the catalogue of digitalmedia contents and view selected media streams on their television. A set-top box provides two-way communications on an IP networkand decodes video streaming data. We had approximately 7.5 million olleh TV subscribers as of December 31, 2017. In December 2015,amendments to the Internet Multimedia Broadcasting Services Act were promulgated. Under such amendments, a single broadcastingoperator, together with its affiliates, may not have more than one-third of the market share of all paid broadcasting subscribers in Korea.The market share restriction will be in effect until June 27, 2018, subject to the Government�s decision to renew the market sharerestriction or phase out the restriction as originally planned. The proposed amendment to the Internet Multimedia Broadcasting ServicesAct that aims to preserve the restriction on market share is currently pending at the National Assembly.

Data Communication Services

Our data communication services involve offering exclusive lines that allow point-to-point connection for voice and data trafficbetween two or more geographically separate points. As of December 31, 2017, we leased over 249,817 lines to domestic andinternational businesses. The data communication service accounted for 4.5% of our operating revenues in 2017.

We provide dedicated and secure broadband Internet connection service to institutional customers under the �Kornet� brandname. We provide high-speed connection up to 10.0 Gbps connected to our Internet backbone network with capacity of 9.0 Tbps, as wellas rent to our customers and install necessary routers to ensure reliable Internet connection and enhanced security. We provide

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Table of Contentsdiscount rates to qualified customers, including small- and medium-sized enterprises, businesses engaging in Internet access servicesand government agencies.

Financial Services

Our financial services accounted for 15.4% of our operating revenues in 2017. To further diversify our business and to createsynergies through utilization of our mobile telecommunications network in financial services, we, through our former subsidiary KT CapitalCo., Ltd., acquired 1,622,520 additional shares of common stock of BC Card Co., Ltd. from Woori Bank, Busan Bank and Shinhan Cardfor approximately￦252 billion in October 2011. As we were deemed to have control over BC Card Co., Ltd., it became our consolidatedsubsidiary starting in October 2011. We acquired an additional 1,349,920 common shares of BC Card Co., Ltd. in January 2012 forapproximately￦287 billion, and owned a 69.5% interest in BC Card Co., Ltd. as of December 31, 2017. BC Card Co., Ltd. offers variouscredit card and related financial services. BC Card Co., Ltd. had consolidated operating revenues of ￦3,629 billion and net income of￦156 billion for the year ended December 31, 2017 and consolidated assets of￦4,048 billion and liabilities of￦2,955 billion as ofDecember 31, 2017. In March 2014, the investment business division of KT Capital Co., Ltd., including 3,059,560 common shares of BCCard Co., Ltd. that KT Capital Co., Ltd. held, was spun off and merged into KT Corporation, to further strengthen the synergy betweentelecommunication and finance operations within the KT group and increase shareholder value. To focus on our core telecommunicationsbusiness, we and our consolidated subsidiary, KT Hitel Co., Ltd., disposed of the entire 100% stake in KT Capital Co., Ltd. in August 2015for a total of￦299 billion.

In November 2015, the Government announced plans to introduce Internet-only banks and granted preliminary approval to twoconsortiums, K bank consortium and Kakao Bank consortium. The K bank consortium, over which we own a minority interest as one of 20shareholding companies including Woori Bank, NH Investment & Securities, Co., Ltd., GS Retail Co., Ltd. and Hanwha Life Insurance Co.,Ltd., received the final approval from the Government to operate the first Internet-only bank in Korea in December 2016. The Kakao Bankconsortium, K bank�s competitor, received the final approval from the Government in April 2017 and began its operation in July 2017. Kbank began its operation in April 2017 as a virtual bank whose operation is primarily based on its mobile application and the Internet, whilepromoting greater user accessibility through the convenience stores of one of our other consortium members. K bank also makes efforts todifferentiate itself from other conventional banks by utilizing big data and offering competitive products and interest rates. As ofDecember 31, 2017, K bank had deposits of￦1,089 billion while Kakao Bank had deposits of￦5,048 billion. As of December 31, 2017, Kbank provided loans of￦856 billion while Kakao Bank provided loans of￦4,622 billion.

Under the current Korean law, as a non-financial institution, we are not allowed to own in excess of 4% voting interest in K bank,and our combined voting and non-voting interest may not exceed 10%. In 2016, the National Assembly did not adopt a pending bill whichwould have allowed non-financial institutions to own more than 4% interest in Internet banks.

Other Businesses

We also engage in various business activities that extend beyond telephone services and data communication services,including satellite services, information technology and network services, satellite TV services, with the consolidation of KT Skylife startingin January 2011, and media contents business with the establishment of KT Media Hub Co., Ltd. in December 2012. We merged KTMedia Hub Co., Ltd. into KT Corporation in March 2015, to enhance shareholder value by increasing management efficiency andpromoting synergy among our existing businesses. Our other businesses accounted for 9.3% of our operating revenues for 2017.

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Table of ContentsWe provide transponder leasing, broadcasting, video distribution and data communication services through Koreasat 5A,

Koreasat 6, Koreasat 7 and Koreasat 8 (also known as ABS-2). We also lease satellite capacity from other satellite operators to offersatellite services to both domestic and international customers.

In August 2006, we launched Koreasat 5, a combined civil and governmental communications satellite with a design life of 15years, to replace Koreasat 2 (launched in 1996 with a design life of ten years). In December 2010, we launched Koreasat 6, with a designlife of 15 years, to replace Koreasat 3 (originally launched in 1999, with a design life of 12 years). Koreasat 6 began its commercialoperation in February 2011 and carries transponders that are mainly used for direct-to-home satellite broadcasting, video distributions anddata communication services. Most of the direct-to-home satellite broadcasting transponders are utilized by KT Skylife. In August 2010,we procured from Asia Broadcast Satellite Holdings, Ltd. (�ABS�), a Hong Kong-based satellite operator, four transponders on ABS-1satellite and eight additional transponders on ABS-2 satellite in order to provide satellite services with a broader global scope. In thesecond half of 2014, we exchanged our ownership rights of four transponders on ABS-1 with ownership rights of four transponders onABS-2 satellite. As a result, we own 12 transponders on ABS-2 satellite (also called Koreasat 8). In May 2017, we launched Koreasat 7, acivil communications satellite with a design life of 17 years. In October 2017, we launched Koreasat 5A, a civil communications satellitewith a design life of 17 years which replaced Koreasat 5.

We entered into an agreement with ABS to sell Koreasat 3 to ABS, as Koreasat 3 was expected to reach the end of its designlife. In December 2013, the MSIP declared the sales contract regarding Koreasat 3 null and void on the ground that the said contract wasmade without prior government approval. Shortly after, ABS filed a request for arbitration against us and KT SAT and we, together with KTSAT have been involved in the International Chamber of Commerce arbitration against ABS. In July 2017, the International Chamber ofCommerce concluded that ABS has title to Koreasat 3 (such decision, �Partial Award�). In October 2017, we and KT SAT petitioned theU.S. District Court for the Southern District of New York to vacate the Partial Award. In March 2018, the International Chamber ofCommerce issued an award of US$748,564 in damages, US$287,673.2 in pre-award interest and post-award interest of 9 percent peryear to ABS (�Final Award�). We and KT SAT plan to petition the New York federal court to vacate the Final Award. With regard to thePartial Award, on April 10, 2018, the court dismissed the petition filed by KT SAT and us to vacate the Partial Award. We and KT SAT planto file an appeal of the foregoing decision. In December 2012, we spun off our satellite service business by establishing KT SAT in aneffort to enhance operational specialization and to foster management efficiency, enabling us to respond more promptly to the changingmarket environments and increasing competitiveness.

We offer a broad array of integrated information technology and network services to our business customers. Our range ofservices includes consulting, designing, building and maintaining systems and communication networks that satisfy the individual needs ofour customers in the public and private sectors.

We own land and real estate in various locations nationwide. Technological developments have enhanced the coverage area ofindividual telecommunications facilities, which enable us to better utilize our existing land and other real estate holdings. In recent years,we have engaged in the planning and development of commercial and office buildings and condominiums on our unused sites, as well asin the leasing of buildings we own. We established KT Estate in August 2010 to oversee the planning, development and operation of ourreal estate assets, and established KT AMC Co., Ltd., an asset management company, in September 2011 as a subsidiary of KT Estate tocreate additional synergies with our real estate assets. We made a contribution in-kind of￦1,254 billion to KT Estate in December 2012 tofurther strengthen KT Estate�s competitiveness and to better utilize our assets. KT

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Table of ContentsEstate currently provides over 2,000 rental units in its 4 apartment complexes, under the �Remarkville� brand, located in Seoul andBusan, Korea. The complexes are managed by KD Living Inc., 51% of whose equity interest is owned by us and the rest by a third-partyrental management company, Daiwa Living Co. Revenues from lease of rental units are recognized as revenues from our otherbusinesses. KT Estate also engages in the business of developing and selling residential and commercial units. In 2017, KT Estatedeveloped and sold several residential and commercial units in various metropolitan areas in Korea and such revenues are recognized asrevenues from goods sold.

To respond to the trend of convergence in the telecommunications and broadcasting industries, and to seek additional synergieswith our existing operations, we acquired 5,600,000 shares of redeemable convertible preferred stock with voting rights and convertiblebonds that were convertible into 5,600,000 shares of common stock of KT Skylife from Dutch Savings Holdings B.V. in January 2011 forapproximately￦246 billion. We exercised the conversion rights on the redeemable convertible preferred stock and the convertible bondsin March 2011, and owned a 50.3% interest in KT Skylife as of December 31, 2017. KT Skylife offers satellite TV services, which may alsobe packaged with our IPTV services as further described below.

Revenues and Rates

The table below shows the percentage of our revenues derived from each category of services for each of the years from 2015to 2017:

Year Ended December 31,2015 2016 2017

Mobile services 32.0 % 31.9 % 30.2 %Fixed-line services 29.8 29.9 30.2

Fixed-line telephone services:Monthly basic charges 2.9 2.7 3.0Monthly usage charges 4.5 3.7 3.3Others 2.8 2.5 1.5

Sub-total 10.2 8.9 7.8Internet services:

Broadband Internet access service 8.3 8.8 8.8Other Internet-related services (1) 6.5 7.8 9.1

Sub-total 14.8 16.6 17.9Data communication services (2) 4.7 4.4 4.5

Goods sold (3) 12.1 12.1 14.8Financial services 15.3 15.4 15.4Other businesses (4) 10.8 10.6 9.3Operating revenues 100.0% 100.0% 100.0%

(1) Includes revenues from services provided by our data centers, Bizmeka and olleh TV.

(2) Includes revenues from Kornet Internet connection service and satellite services.

(3) Includes mobile handset sales and sales of residential and commercial units developed by KT Estate.

(4) Includes revenues from satellite services, information technology and network services and security services as well as from real property leases.

Mobile Services

We derive revenues from mobile services principally from:

� monthly fees;

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Table of Contents� usage charges for outgoing calls;

� usage charges for wireless data transmission;

� contents download fees;

� value-added monthly service fees; and

� mobile-to-mobile interconnection charges.

We offer various rate plans, including those that offer a specified amount of free data transmission per month in return for highermonthly fees as well as plans that are geared toward business customers. We completely abolished our activation fee in March 2015.

We introduced rate plans specifically for smartphone users starting in September 2009. We also introduced new rate plansspecifically for LTE phone users in connection with the rollout of our 4G LTE services in January 2012. In June 2013, we introduced theEveryone olleh rate plan, which permits users to make unlimited voice calls within our wireless network, and the Fixed-Line and WirelessUnlimited rate plan, which permits users to make unlimited voice calls within both our fixed-line and wireless networks. We began offeringLTE unlimited data plans in March 2014, which allows unlimited LTE data usage within certain transmission speeds after the monthlyquota at the highest LTE data transmission speed has been exhausted. Starting from November 2014, we began offering our majorsmartphone plans at discounted rates which were previously offered only to subscribers who signed on for mandatory subscription periodsranging from one to two years, thereby eliminating the need to sign on for any mandatory subscription period to benefit from ourdiscounted plans and removing any early termination penalties. We believe such changes allow our subscribers a wider flexibility inchoosing mobile plans based on their needs. In May 2015, we began offering the LTE data choice plan, through which users choose a300MB to unlimited monthly quota for data transmission and enjoy unlimited voice calls and messages. With the LTE data choice plan, wealso introduced the �Push-and-Pull� service, which allows users to carry over unused data to the following month or pull up additional datafrom the following month�s allotment. In March 2016, we began offering the Y24 plans for customers under the age of 24. Many of the Y24plans offer free data transmission for three hours a day and additional data service at discounted rates.

The following table summarizes the charges associated with our representative LTE smartphone service plans:

Free Airtime Minutes

VoiceCalls

VideoCallsand

VoiceCalls toSpecial

NumbersFree Data

Transmission (1)Additional

ServiceMonthly

FeeLTE data choice 299 50 300MB mobile TV ￦29,900LTE data choice 349 50 1GB mobile TV 34,900LTE data choice 399 50 2GB mobile TV 39,900LTE data choice 449 50 3GB mobile TV 44,900LTE data choice 499 50 6GB mobile TV 49,900LTE data choice 599 200 mobile TV 59,900LTE data choice 699 200 mobile TV 69,900LTE data choice 799 200 VIP membership 79,900LTE data choice 999 200 Unlimited (2) Device insurance(3) 99,900

Unlimited

Fee discounts forone additional

device(4)

(1) We do not charge for data transmission in wireless LAN zones. We charge￦0.01 per 0.5 kilobyte for any additional data transmission exceeding the free monthlyquota, up to a maximum of￦150,000.

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Table of Contents(2) Provides an additional daily quota of 2GB after the free monthly quota has been exhausted, and also provides unlimited use of data with speed of up to 3 Mbps or 5

Mbps after the daily quota of 2GB has been exhausted.

(3) Device insurance can be deducted from the customer�s membership points of up to￦5,500 per month at the customer�s option.

(4) Customers using the LTE data choice 699 plan receive 50% off the monthly data fees of one additional smart device such as tablets or GiGA Genie LTE. Customersusing the LTE data choice 799 and 999 plans receive 100% off the monthly data fees of one additional smart device.

We also provide plans specially designed for elderly and pre-teen subscribers as well as special discounts to subscribers withphysical disabilities. On December 22, 2017, we started providing special discounts to subscribers on Government welfare. For details,see ��Regulation�Rates�. Plans specialized for feature phone users such as a standard rate plan are provided as well. Under thestandard rate plan, we charge a monthly fee of￦11,000, a voice calling usage charge of￦1.8 per second and a video calling usagecharge of￦3 per second, without any free voice or video call airtime minutes.

We also offer plans for new devices such as tablets and wearable devices. Since 2010, we have been offering a specialized planfor tablets which provides a 1.6GB to unlimited monthly quota of data transmission for a monthly fee of ￦18,000 to￦99,900. InNovember 2014, we began offering a specialized plan for wearable devices, which charges a fixed monthly fee of ￦8,000 for a 100MBmonthly quota of data transmission and 50 minutes of voice calls. For other new devices, we also provide a data sharing service thatallows users to share data provided as part of their smartphone plans with other devices.

Mobile-to-mobile Interconnection. For a call initiated by a mobile subscriber of our competitor to our mobile subscriber, themobile service provider 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 our competitor, we collect from our subscriber our normal rate andremit to the mobile service provider a mobile-to-mobile interconnection charge.

The following table shows the interconnection charges we paid per minute (exclusive of value-added taxes) to mobile operators,and the charges received per minute (exclusive of value-added taxes) from mobile operators for mobile to mobile calls:

Effective StartingJanuary 1, 2015 January 1, 2016 January 1, 2017

SK Telecom ￦ 19.5 ￦ 17.1 ￦ 14.6LG U+ 20.0 17.0 14.6KT 19.9 17.2 14.6

We recognize as mobile-to-mobile interconnection revenue the entire amount of the usage charge collected from the mobile userand recognize as expense the amount of interconnection charge paid to the mobile service provider.

Fixed-line Services

Fixed-line Telephone Services

Local Telephone Service. Our revenues from local telephone service consist primarily of:

� service initiation fees for new lines;

� monthly basic charges; and

� monthly usage charges based on the number of call pulses.

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Table of ContentsThe rates we charge for local calls are currently subject to approval by the MSIT after consultation with the Ministry of Strategy

and Finance. The rates are identical for residential and commercial customers. All calls are currently measured by call pulses. Each pulseis determined by the duration of the call and the time of the day at which the call is made. Our current local usage rates, which have beenin effect since May 2002, are￦39 per pulse for regular service and￦70 per pulse for public telephones. For local calls, a pulse istriggered at the beginning of each local call and every three minutes thereafter from 8:00 a.m. to 9:00 p.m. on weekdays and every 258seconds thereafter on weekends, holidays and from 9:00 p.m. to 8:00 a.m. on weekdays.

We also charge a monthly basic charge ranging from￦3,000 to￦5,200, depending on location, and a non-refundable serviceinitiation fee of￦60,000 to new subscribers. The non-refundable service initiation fee is waived for the new subscribers who subscribe toour local service through our online application process. Until April 2001, we charged refundable service initiation deposits, which wererefunded upon termination of service. As of December 31, 2017, we had￦342 billion in refundable service initiation deposits outstandingand 1.6 million subscribers who are enrolled under the mandatory deposit plan and are eligible to switch to the no deposit plan andreceive their service initiation deposit back (less the non-refundable service initiation fees).

Domestic Long-distance Telephone Service. Our revenues from domestic long-distance service consist of charges for callsplaced, charged for the duration, time of day and day of the week a call is placed, and the distance covered by the call. We are able to setour own rates for domestic long-distance service without approval from the MSIT.

Our current basic domestic long-distance rates, which have been in effect since November 2001, are￦39 per three minutes fordistances of up to 30 kilometers and￦14.5 per ten seconds (equivalent to￦261 per three minutes) for distances in excess of 30kilometers. For domestic long-distance calls for distances of up to 30 kilometers, a pulse is triggered at the beginning of each call andevery three minutes thereafter. For domestic long-distance calls for distances in excess of 30 kilometers, a pulse is triggered at thebeginning of each call and every 10 seconds thereafter. Rates for domestic long-distance calls for distances up to 30 kilometers arecurrently discounted by an adjustment in the period between pulses, by approximately 11% (utilizing a pulse rate of 200 seconds) from6:00 a.m. to midnight on holidays and from 6:00 a.m. to 8:00 a.m. on weekdays, and by approximately 43% (utilizing a pulse rate of 258seconds) from midnight to 6:00 a.m. every day. Rates for domestic long-distance calls for distances in excess of 30 kilometers arecurrently discounted by approximately 10% (utilizing a rate of￦13.1 per ten seconds) from 6:00 a.m. to midnight on holidays and from6:00 a.m. to 8:00 a.m. on weekdays, and by approximately 30% (utilizing a rate of ￦10.2 per ten seconds) from midnight to 6:00 a.m.every day.

In recent years, we have begun to offer optional flat rate plans, discount plans and bundled product plans in order to mitigate theimpact from lower usage of local and domestic long-distance calls and stabilize our revenues from fixed-line telephone services. For adiscussion of our bundled products, see ��Bundled Products.� Some of our flat rate and discount plans that we currently offer include thefollowing:

� a subscriber who elects to subscribe to our fixed-line phone service for a three year mandatory subscription period is ableto make local and domestic long-distance calls at a flat rate of￦39 per three minutes;

� a subscriber who elects to subscribe to our broadband Internet access service or mobile service for a three year mandatorysubscription period is able to make local, domestic long-distance and land-to-mobile calls of up to￦150,000 with a flat ratepayment of￦50,000 or such calls up to￦50,000 with a flat rate payment of￦10,000. Standard rates apply to calls thatexceed the capped amounts; and

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Table of Contents� a subscriber who elects to pay a monthly flat rate ranging from￦7,500 to￦15,000, depending on the types of calls the

subscriber wishes to make, is able to use 3,000 minutes per month of local, domestic long-distance, land-to-VoIP andland-to-KT mobile calls.

International Long-distance Service. Our revenues from international long-distance service consist of:

� amounts we bill to customers for outgoing calls made to foreign countries (including customers who make calls to Koreafrom foreign countries under our home country direct-dial service);

� amounts we bill to foreign telecommunications carriers for connection to the Korean telephone network in respect ofincoming calls (including calls placed in Korea by customers of the foreign carriers for home country direct-dial service);and

� other revenues, including revenues from international calls placed from public telephones.

We bill outgoing calls made by customers in Korea (and calls made to Korea from foreign countries under our home countrydirect-dial service) in accordance with our international long-distance rate schedule for the country called. These rates vary depending onthe time of day at which a call is placed. We bill outgoing international calls on the basis of one-second increments. We are able to set ourown rates for international long-distance service without approval from the MSIT.

For incoming calls (including calls placed in Korea by customers of the foreign carriers for home country direct-dial service), wereceive settlement payments from the relevant foreign carrier at the applicable settlement rate specified under the agreement with theforeign carrier. We have entered into numerous bilateral agreements with foreign carriers. We negotiate the settlement rates under theseagreements with each foreign carrier, subject to the MSIT�s approval. It is the practice among international carriers for the carrier in thecountry in which the call is billed to collect payments due in respect of the use of overseas networks. Although we record the grossamounts due to and from us in our financial statements, we make settlements with most carriers monthly or quarterly on a net basis.

Land-to-mobile Interconnection. We provide other telecommunications service providers, including mobile operators and otherfixed-line operators, interconnection to our fixed-line network. For a call initiated by a landline user to a mobile service subscriber, wecollect from the landline user the land-to-mobile usage charge and remit to the mobile service provider a land-to-mobile interconnectioncharge. The MSIT periodically issues orders setting the interconnection charge calculation method applicable to interconnections withmobile service providers. The MSIT determines the land to mobile interconnection charge by calculating the long run incremental cost ofmobile service providers, taking into consideration technology development and future expected costs.

The following table shows the interconnection charges we paid per minute (exclusive of value-added taxes) to mobile operatorsfor landline to mobile calls:


SK Telecom ￦ 19.5 ￦ 17.0 ￦ 14.6LG U+ 20.0 17.2 14.6

Since September 2004, the usage charges per minute collected from a landline user for a call initiated by a landline user to amobile service subscriber are￦87.0 during weekdays,￦82.0 during

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Table of Contentsweekends and￦77.2 during evenings (defined as 12:00 a.m. to 6:00 a.m. every day). We recognize as land-to-mobile interconnectionrevenue the entire amount of the usage charge collected from the landline user and recognize as expense the amount of interconnectioncharge paid to the mobile service provider.

Land-to-land and Mobile-to-land Interconnection. For a call initiated by a landline subscriber of our competitor to our fixed-lineuser, the landline service provider collects from its subscriber its normal rate and remits to us a land-to-land interconnection charge. Inaddition, for a call initiated by a mobile service subscriber to our landline user, the mobile service provider collects from its subscriber itsnormal 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, asdetermined by the MSIT:


Local access (1) ￦ 11.9 ￦ 10.9 ￦ 9.7Single toll access (2) 13.4 12.0 10.9Double toll access (3) 16.0 15.5 14.8

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.

Internet Services

Broadband Internet Access Service. We offer broadband Internet access service that primarily uses existing telephone lines toprovide both voice and data transmission. We charge monthly fixed fees to customers of broadband Internet service. In addition, wecharge customers a one-time installation fee per site of￦20,000 and modem rental fee of up to￦8,000 on a monthly basis. Our fixed-linebroadband internet service plans range from￦30,000 to￦50,000 per month and our wireless broadband Internet service plans rangefrom￦10,000 to￦30,000 per month.

olleh TV Services. We charge our subscribers an installation fee per site of￦24,000, which is waived with a three-year contract,a set-top box rental fee ranging from￦2,000 to￦9,000 on a monthly basis and a monthly subscription fee. The rates we charge for ollehTV services are subject to approval by the MSIT. Our olleh TV service plans range from￦15,000 to￦50,000 per month.

Data Communication Services

We charge customers of domestic leased-lines on a monthly fixed-cost basis, based on the distance of the leased line, thecapacity of the line measured in bits per second, the type of the line provided and whether the service site is local or long-distance. Inaddition, we charge customers a one-time installation fee per line, ranging from￦56,000 to￦40 million, depending on the capacity of theline.

Bundled Products

We utilize our extensive customer relationships and market knowledge to expand our revenue base by cross-selling ourtelecommunications products and services. In order to attract additional subscribers to our new services, we bundle our services, such asour broadband Internet access

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Table of Contentsservice with IPTV, Internet phone, fixed-line telephone service and mobile services, at a discount. In July 2016, we lowered our earlytermination fee for our broadband Internet access service, Internet phone or IPTV or such products bundled with our fixed-line telephoneservice.

The following table summarizes our various basic bundled packages that we currently offer. The packages require subscribers toagree to a subscription period of three years:

Monthly RatesFlat Rate (2) Mobile Monthly Fee

Internet / Internet Phone / Mobile ￦ 21,000Internet / Fixed-Line Phone / Mobile 24,000Internet / IPTV / Mobile (1) 30,000Internet / Fixed-Line Phone / IPTV / Mobile (1) 31,000

Discounts are between￦3,000 and￦25,100 per account (excluding￦5,000 for the Internet discount), depending on type of the Internet servicesand total amount of bundled mobile fee plans (up to 5 mobile numbers) (3)

(1) Assuming selection of olleh Internet and olleh TV Live 10 package.

(2) Flat Rate excludes mobile monthly fee, explanation of which is set forth in the rightmost column.

(3) Bundled rate plans are available for olleh 3G, LTE subscribers and some specific wearable device plan subscribers.

We believe that subscribers who sign up for bundled products are less likely to cancel our services than subscribers whosubscribe to individual services. Subscription fees paid for our bundled products are allocated to each service in proportion to their fairvalue and the allocated amount is recognized as revenue according to the revenue recognition policy for each service.

Competition

Competition in the telecommunications sector in Korea is intense. Business combinations in the telecommunications industryhave significantly changed the competitive landscape of the Korean telecommunications industry. In particular, SK Telecom acquired acontrolling stake in Hanarotelecom Incorporated in 2008, which was renamed SK Broadband. The acquisition enabled SK Telecom toprovide fixed-line telecommunications, broadband Internet access and IPTV services together with its mobile telecommunicationsservices. In January 2010, LG Dacom and LG Powercom merged into LG Telecom Co., Ltd., which subsequently changed its name to LGU+. The merger enabled LG U+ to provide a similar range of services as SK Telecom and us. Furthermore, telecommunications providersincluding us are competing to be the first to introduce innovative services such as those based on 5G technologies.

Under the Framework Act on Telecommunications and the Telecommunications Business Act, telecommunications serviceproviders in Korea are currently classified into network service providers, value-added service providers and specific service providers.See ��Regulation.�

Network Service Providers

All network service providers in Korea are permitted to set the rates for international or domestic long-distance services on theirown without the MSIT�s approval. Many of our competitors have set their rates lower than ours. Currently, we can compete freely withother providers on the basis of rates in all services except for rates we charge for local calls, which require advance approval from theMSIT. In all service areas, we compete by endeavoring to provide superior customer service and superior technical quality, takingadvantage of our broad customer base and our ability to provide various telecommunication services.

We and SK Telecom have been designated as market-dominating business entities in the local telephone service and cellularservice markets, respectively, under the Telecommunications Business Act. Under this Act, a market-dominating business entity may notengage in any act of abuse, such as

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Table of Contentsunreasonably interfering with business activities of other business entities, hindering unfairly the entry of newcomers or substantiallyrestricting competition to the detriment of the interests of consumers. The KCC has also issued guidelines on fair competition of thetelecommunications companies. If any telecommunications service provider breaches the guidelines, the KCC may take necessarycorrective measures against it after a hearing at which the service provider may defend its action.

Mobile Service. Competition in the mobile telecommunications industry in Korea is intense among SK Telecom, LG U+ and us.Such competition has intensified in recent years due to the implementation of mobile number portability, which enabled mobile subscribersto switch their service provider while retaining the same mobile phone number, as well as payments of handset subsidies to purchasers ofnew handsets who agree to minimum subscription periods and the recent rollout of 4G mobile services based on LTE technology by SKTelecom, LG U+ and us. The price competition through handset subsidies became less prevalent since the enactment of the HandsetDistribution Reform Act in October 2014, which limited the maximum amount of handset subsidies until September 2017. However, suchmaximum amount of handset subsidies phased out on October 1, 2017 and the price competition through handset subsidies may intensify.

The following table shows the market shares in the mobile telecommunications market (including market shares ofmiscellaneous telecommunications services) as of the dates indicated:

Market Share (%)KT

Corporation SK Telecom LG U+December 31, 2015 30.6 49.1 20.3December 31, 2016 30.8 48.8 20.4December 31, 2017 31.4 47.9 20.7

Source:The MSIT.

We offer various rate plans, including those that offer a specified number of free airtime minutes per month in return for a highermonthly fee and those that are geared toward business customers. Our competitors also offer similar plans at competitive rates.

Local Telephone Service. We compete with SK Broadband and LG U+ in the local telephone service business. SK Broadbandbegan providing local telephone service in 1999, followed by LG U+ in 2004. In addition, the services provided by mobile service providershave had a material adverse effect on us in terms of our revenues from fixed-line telephone services. We expect this trend to continue.

The following table shows the market shares in the local telephone service market as of the dates indicated:

Market Share (%)KT

Corporation SK Broadband LG U+December 31, 2015 80.6 16.3 3.1December 31, 2016 80.6 16.2 3.2December 31, 2017 80.5 16.1 3.4

Source:Korea Telecommunications Operators Association.

Although the local usage charge of our competitors and us is the same at ￦39 per pulse (generally three minutes), ourcompetitors� non-refundable telephone service initiation charges are lower than ours. Our customers pay a non-refundable telephoneservice initiation charge of￦60,000

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Table of Contentswhile customers of our competitors pay a non-refundable telephone service initiation charge of￦30,000. Also, the basic monthly chargeof our competitors is￦4,500 compared to our basic charge of￦5,200.

Domestic Long-distance Telephone Service. We compete with SK Broadband, LG U+, Sejong and SK Telink in the domesticlong-distance market. LG U+ began offering domestic long-distance service in 1996, followed by Sejong in 1999 and SK Broadband andSK Telink in 2004. The following table shows the market shares in the domestic long-distance market as of the dates indicated:

Market Share (%)KT

Corporation SK Broadband LG U+ Sejong SK TelinkDecember 31, 2015 78.9 15.0 2.7 0.9 2.6December 31, 2016 78.9 15.0 2.7 0.8 2.6December 31, 2017 79.8 14.5 2.6 0.8 2.4

Source:Korea Telecommunications Operators Association.

Our competitors and we charge￦39 per three minutes for domestic long-distance calls up to 30 kilometers. For domestic long-distance calls greater than 30 kilometers, our competitors typically charge between 3% to 5% less than us. The following table is acomparison of our standard long-distance usage charges per 10 seconds with the standard rates of our competitors as of December 31,2017:

KTCorporation

SKBroadband LG U+ Sejong SK Telink

30 kilometers or longer ￦ 14.5 ￦ 13.9 ￦14.1 ￦13.8 ￦ 13.8

Source:The KCC.

International Long-Distance Telephone Service. Four companies, SK Broadband, LG U+, Sejong and SK Telink, directlycompete with us in the international long-distance market. LG U+ began offering international long-distance service in 1991, followed bySejong in 1997 and SK Broadband in 2004. SK Telink, which only provides Internet phone service, entered the international long-distancemarket in 2003 and offers its services at rates lower than those for network-based international long-distance telephone services. Theentry of Internet phone service providers and other telecommunications service providers, such as voice resellers, that can offertelecommunications services at rates lower than ours has increased competition in the international long-distance market and adverselyaffected our revenues and profitability from international long-distance services. See ��Specific Service Providers.�

Our competitors generally charge less than us for international long-distance calls. The following table is a comparison of ourstandard long-distance usage charges per one minute with the standard rates of our competitors as of December 31, 2017:

KTCorporation

SKBroadband LG U+ Sejong SK Telink

United States ￦ 282 ￦ 276 ￦288 ￦276 ￦ 180Japan 696 672 678 672 612China 990 984 996 984 990Australia 1,086 1,044 1,086 1,044 810Great Britain 1,008 966 996 966 900Germany 948 912 942 912 900

Source:KT Corporation.

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Table of ContentsBroadband Internet Access Service. The Korean broadband Internet access market has experienced significant growth in the

past decade. SK Broadband entered the broadband market in 1999 offering both HFC and ADSL services, and we entered the marketwith our ADSL services in 1999, followed by Dreamline, Sejong and LG U+. In addition, the entry of cable television providers that offerHFC-based broadband Internet access services at rates lower than ours has increased competition in the broadband Internet accessmarket. We expect industry consolidation among our competitors in the near future, and smaller competitors in the broadband markettoday may become larger competitors.

The following table shows the market share in the broadband Internet access market as of the dates indicated:

Market Share (%)KT

CorporationSK

Broadband LG U+ OthersDecember 31, 2015 41.6 25.1 17.4 15.9December 31, 2016 41.4 25.3 17.6 15.7December 31, 2017 41.3 25.7 18.0 15.0

Source:The MSIT.

Our competitors generally charge less than us for broadband Internet access service. The following table is a comparison of feesfor our olleh Internet Lite service with three year mandatory subscription period with fees of our competitors for comparable services as ofDecember 31, 2017:

KTCorporation

SKBroadband LG U+

CableProviders (1)

Monthly subscription fee ￦ 22,000 ￦ 22,000 ￦22,000 ￦ 20,000Monthly modem rental fee None None None 1,000Additional installation fee upon moving 27,500 11,000 22,000 20,000

Source:KT Corporation.

(1) These are typical fees charged by cable providers.

Data Communication Service.

In recent years, the data communications services market has become more competitive with limited growth during the pastdecade, and we primarily compete with SK Broadband and LG U+.

Value-Added Service Providers

Value-added service providers may commence operations following filing of a report to the MSIT. The scope of business of avalue-added service provider includes specific value-added telecommunications activities (other than services reserved for networkservice providers), such as data communications utilizing telecommunications facilities leased from network service providers.

Specific Service Providers

Specific service providers, such as Internet phone service providers and voice resellers, started operations in Korea in 1998. Webegan providing Internet phone service for international long-distance calls in May 1998. Our Internet phone service also competes withinternational long-distance services provided by voice resellers who have also seen sharp increases in demand for their services.

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Table of ContentsInternet-only Banking

In November 2015, the Government announced plans to introduce Internet-only banks and granted preliminary approval to twoconsortiums, K bank consortium and Kakao Bank consortium. The K bank consortium, over which we own a minority interest as one of 20shareholding companies including Woori Bank, NH Investment & Securities, Co., Ltd., GS Retail Co., Ltd. and Hanwha Life Insurance Co.,Ltd., received the final approval from the Government to operate the first Internet-only bank in Korea in December 2016 and began itsoperation in April 2017. The Kakao Bank consortium, K bank�s competitor, received the final approval from the Government in April 2017and began its operation in July, 2017. As of December 31, 2017, K bank had deposits of￦1,089 billion while Kakao Bank had deposits of￦5,048 billion. As of December 31, 2017, K bank provided loans of￦856 billion while Kakao Bank provided loans of￦4,622 billion.

Regulation

With the establishment of the MSIP in March 2013, many of the regulatory responsibilities formerly handled by the KCC havebeen transferred to the MSIP. On July 26, 2017, the MSIP was renamed as the Ministry of Science and ICT. Under the Framework Act onTelecommunications and the Telecommunications Business Act, the MSIT continues to have comprehensive regulatory authority over thetelecommunications industry and all network service providers.

Since the establishment of its predecessor, the MSIP, the MSIT has assumed primary policy and regulatory responsibility formatters such as: (i) licensing of network service providers (the MSIT authorizes the licensing of IPTV service providers and, with theconsent of the KCC, authorizes the licensing of satellite broadcasting companies); (ii) regulation of mergers and acquisitions, as well aslicense suspension and termination of network service providers; (iii) providing oversight on foreign ownership ratios in network serviceproviders; and (iv) reviewing telecommunication matters as they relate to the public interest and approving ancillary telecommunicationbusiness activities. Additionally, the MSIT is responsible for a broad range of other policy and regulatory matters, including theadministration and supervision of regulatory reporting by telecommunications companies, examination and analysis of accounting andbusiness management practices in the industry, establishment and administration of policies governing telecommunications service fees,value-added service providers and specific service providers, as well as supervision of reporting requirements of standardtelecommunications service/user contracts.

Under the supervisory framework, a network service provider must be licensed by the MSIT. Our license as a network serviceprovider permits us to engage in a wide range of telecommunications services.

The KCC�s overall policy role is to play a key role in regulatory activities aimed at protecting service users in the broadcast andtelecommunications market and it continues to be responsible for investigations and sanctions regarding violations by telecommunicationscompanies, as well as for mediating disputes between service providers and users. The KCC is established under the direct jurisdiction ofthe President of Korea and is comprised of five standing commissioners. Commissioners of the KCC are appointed by the President, andthe appointment of the Chairperson must be approved at a confirmation hearing at the National Assembly.

Under the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc.,telecommunications service providers are also required to protect personal information of their customers. Generally, when atelecommunications service provider intends to collect or use its customer�s personal information, such telecommunications serviceprovider, with certain exceptions, must notify and receive the customers� consent in relation to the purpose of

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Table of Contentscollection, the use of the collected personal information, types of personal information collected and period during which the personalinformation will be possessed and used. Korean telecommunications providers may not use their customers� personal information for anypurpose other than the purpose their customers have consented to. In addition, there are various internal processes that thetelecommunications 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 IP media market, including IPTV services. We began offering IPTV services withreal-time high definition broadcasting in November 2008. Under the Internet Multimedia Broadcasting Services Act, anyone intending toengage in the IP media broadcasting business must obtain a license from the MSIT. The ownership of the shares of an IP mediabroadcasting company by a newspaper, a news agency or a foreigner is limited. In March 2015, amendments to the Internet MultimediaBroadcasting Services Act were promulgated. Under such amendments, a single broadcasting operator together with their affiliates maynot have more than one-third of the market share of all paid broadcasting subscribers in Korea. The restriction on market share will be ineffect until June 27, 2018. The proposed amendment to the Internet Multimedia Broadcasting Services Act that aims to preserve therestriction on market share is currently pending at the National Assembly.

Rates

Under current regulations implementing the Telecommunications Business Act, a network service provider may set its rates at itsdiscretion, although it must report to the MSIT the rates and the general terms and conditions for each type of network service provided byit. There is, however, one exception to this general rule: if a network service provider has the largest market share for a specified type ofservice and its revenue from that service for the previous year exceeds a specific revenue amount set by the MSIT, it must obtain priorapproval from the MSIT for the rates and the general terms for that service. Each year the MSIT designates the service providers and thetypes of services for which the rates and the general terms must be approved by the MSIT. In 1997, the MSIP designated us for localtelephone service and SK Telecom for mobile service, which currently remains in effect. The MSIT, in consultation with the Ministry ofStrategy and Finance, is required to approve the rates proposed by a network service provider if (1) the proposed rates are appropriate,fair and reasonable and (2) the calculation method for the rates are appropriate and transparent. The form of our standard agreement forproviding local network service and each agreement for interconnection with other service providers must also be reported to the MSIT.

On October 1, 2014, the Handset Distribution Reform Act, which seeks to lower the cost of communication for the general publicand reduce handset factory prices by establishing fair and transparent order in the distribution of mobile telecommunication devices, wentinto effect. The Handset Distribution Reform Act regulates, among other matters, the sale and subsidies of mobile devices such assmartphones, with one of its purposes being to induce telecommunication operators to compete in lowering the costs of communicationsand encourage the manufacturers to reduce handset factory prices, while improving service quality. Under the Handset DistributionReform Act, consumers may not be discriminated in terms of subsidies based on their age, place of residence or monthly subscription planwhen using their existing mobile phones, buying a new phone or switching their mobile carriers. Furthermore, everyone, regardless of theirstatus, is entitled to receive either a handset subsidy for the purchase of mobile phone models that were launched within the last 15months, or a tariff discount (with the current discount rate set at 25%, effective since September 15, 2017). Prior to October 1, 2017, themaximum amount of handset subsidy that telecommunications operators and handset manufacturers may offer was determined by Koreantelecommunication regulators (such limit to be determined between￦250,000 and￦350,000, and may be adjusted every six months,with the limit set at￦330,000, effective since April 8, 2015 until September 14, 2017). The

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Table of Contentsmaximum amount of the handset subsidy was phased out on October 1, 2017 as initially scheduled under the Handset Distribution ReformAct. On September 15, 2017, in compliance with the policy initiatives announced by the MSIT, we, SK Telecom, and LG U+ increased themaximum tariff discount to 25% from the prior 20% (which was in effective since April 24, 2015). According to the Government, excessivehandset subsidies may cause mobile subscribers to subscribe to more expensive monthly plans in return for greater handset subsidies ormay cause handset vendors to provide discriminatory subsidies based on consumers� age, residence and subscription plan, amongothers. It was reported that the Government plans to introduce measures to curb excessive competition for handset subsidies such asguidelines on subsidies for online handset sales and requirement for public disclosure of the portion or amount of handset subsidiesprovided by each party involved in handset sales. Telecommunications operators are also required to publicly announce the amount ofhandset subsidy that they offer, which may not be readjusted within one week after such announcement. In addition, telecommunicationsoperators are prohibited from using misleading or exaggerated advertisements, such as advertisements that mobile phones are freewithout adequately explaining that it is preconditioned on signing up for high-priced monthly subscription plans.

On May 10, 2017, Mr. Jae-in Moon was inaugurated as the 19th President of Korea. In connection with the campaign promisesof President Moon to reduce the mobile service fees paid by individuals, in September 2017, the MSIT confirmed its policy directives toprovide additional tariff reductions of￦11,000 per month to certain low-income mobile subscribers on Government welfare. OnDecember 22, 2017, the network service providers including us started to provide additional tariff reductions of￦11,000 per month toindividuals on Government welfare. As of December 31, 2017, we provided such additional tariff reductions to approximately 0.8 millionsubscribers of our services.

Furthermore, on July 21, 2017, the MSIT announced its plan to adopt �universal� mobile subscription fees sometime in 2018 inconnection with the Government�s efforts to reduce mobile service fees and rates. According to the current draft of the proposed revisionto the Telecommunications Business Act, subject to approval by the National Assembly, the dominant network service provider (which isSK Telecom) shall be required to provide a mobile subscription plan priced at￦20,000 per month (at a significant discount to the rates forcurrently available mobile subscription plans) which allows data use of between 1 and 1.4 GB and 200 call minutes. On November 10,2017, the MSIT formed a policy discussion group, the Committee on the Household Telecommunications Expenditure (the �TelecomPolicy Committee�), with approximately 20 committee members, including industry experts from us, SK Telecom, LG U+, customerrepresentatives, researchers and government officials. The Telecom Policy Committee held discussion sessions twice per month untilFebruary 2018 to review and discuss the Government�s plan to adopt �universal� mobile subscription fees and other policy ideas of theGovernment to reduce mobile service fees paid by individuals (such as providing additional tariff discount to the elderly, lowering the entrybarriers to new telecommunications service providers and introduction of the �Terminal Self-Sufficiency System� under which mobilesubscribers can purchase unlocked smartphones that are not tied to mobile service providers from manufacturers or vendors). In March2018, the Telecom Policy Committee submitted the summary of its discussions to the MSIT and the National Assembly.

On April 12, 2018, in a lawsuit brought by a social interest group in efforts to lower consumers� telecommunication bills, theSupreme Court of Korea affirmed a lower court decision which requires the MSIT to make public disclosure of previously non-publicinformation submitted by network service providers, including us, to the MSIT, detailing cost of sales for 2G and 3G mobile services. As aresult, it is expected that, in May 2018, the MSIT will make public disclosure of regulatory financial reports and other supporting andevaluation materials for determining tariffs for various 2G and 3G mobile subscription plans for a six-year period ending in May 2011.

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Table of ContentsOther Activities

A network service provider, such as us, must obtain the permission of the MSIT in order to:

� manage certain businesses specified under the Telecommunications Business Act, such as the manufacturing ofcommunications equipment and design and maintenance services for information and communication constructionbusiness;

� 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 itscustomers by a different telecommunications service provider and, in connection therewith, may provide its telecommunications servicesto, or authorize the use of all or a portion of its telecommunications facilities by, such other telecommunications service provider. The MSITcan revoke our licenses or order the suspension of any of our businesses if we do not comply with the regulations of the MSIT under theTelecommunications 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 totelecommunications research institutes in Korea.

In addition, all network service providers (other than regional paging service providers) are obligated to contribute toward thesupply of �universal� telecommunications services in Korea. Telecommunications service providers designated as �universal serviceproviders� by the MSIT are required to provide universal telecommunications services such as local services, local public telephoneservices, discount services for persons with disabilities and for certain low-income persons, telecommunications services for remoteislands and wireless communication services for ships. We have been designated as a universal service provider. The costs and lossesrecognized by universal service providers in connection with providing these universal telecommunications services, except for discountservices for persons with disabilities and for certain low-income persons, will be shared on an annual basis by all network serviceproviders (other than regional paging service providers), including us, on a pro rata basis based on their respective net annual revenuecalculated pursuant to a formula set by the MSIT. As for the costs and losses recognized by a universal service provider in connection withproviding discount services for persons with disabilities and for certain low-income persons, such costs and losses will be borne by suchuniversal service provider.

Prior to April 2018, in accordance with the MSIT�s determination that we possessed essential infrastructure, we were requiredus to permit other fixed-line communications service providers to co-use our fixed-line telecommunication infrastructure, upon the requestof such other fixed-line telecommunications service providers. On April 10, 2018, to facilitate expedient establishment of 5G

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Table of Contentsservices infrastructure, the Government announced its initiatives to amend the co-use system, as follows: (i) we should permit not onlyfixed-line telecommunication service providers, but also mobile service providers such as SK Telecom and LG U+ to co-use ourtelecommunications infrastructure necessary for provision of 5G services, (ii) the Government determined that we, SK Telecom and LG U+possessed essential infrastructure with respect to the interval between the cable entry at a building and the initial occurrence ofconnection within the building and required that the three companies share such infrastructure throughout buildings in Korea with eachother, and (iii) fixed-line telecommunications service providers and mobile service providers are required to participate in joint efforts toconstruct additional fixed-line and mobile network architecture. For more information on our mobile network architecture, see �Item 4.D.Property, Plants 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 theportion of our copper lines that represent our excess capacity to other companies upon their request at rates that are determined by theMSIT based on our cost, and taking into consideration an appropriate rate of return, to enable them to provide voice and broadbandservices. Revenues from local loop unbundling, if any, are recognized as revenues from other businesses.

Foreign Investment

The Telecommunications Business Act restricts the ownership and control of network service providers by foreign shareholders.Foreigners, foreign governments and �foreign invested companies� may not own more than 49.0% of the issued shares with voting rightsof a network service provider, including us, and a foreign shareholder may not become our largest shareholder if such shareholder holds15.0% or more of our shares. For purposes of the Telecommunications Business Act, the term �foreign invested company� means acompany in which foreigners and foreign governments hold 15.0% or more shares with voting rights in the aggregate and a foreigner or aforeign government is the largest shareholder, provided, however, that such company will not be counted as a foreign shareholder for thepurposes of the above-referenced 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 largest shareholder of such company is a government or foreign entity of a country that is a counterparty to a free tradeagreement with Korea, as publicly announced by the MSIT, and the MSIT determines that the fact that such foreign government or entityholds a 15.0% or greater shareholding in such company does not present a risk of harm to the public interest. (However, the calculation ofthe above-referenced 49% ceiling will apply to: (x) any foreign entities that have entered into any major management-related agreementwith a network service provider or the shareholder(s) thereof; and (y) foreign entities that have entered into any agreement pertaining tothe settlement of fees relating to the handling of international electronic telecommunications services). As of December 31, 2017, 48.5% ofour common shares were owned by foreign investors. In the event that a network service provider violates the shareholding restrictions, itsforeign shareholders cannot exercise voting rights for their shares in excess of such limitation, and the MSIT may require correctivemeasures be taken to comply with the ownership restrictions. There is no restriction on foreign ownership for specific service providersand value-added service providers.

Individual Shareholding Limit

Under the Telecommunications Business Act, a foreign shareholder who holds 15.0% or more of our total shares is prohibitedfrom becoming our largest shareholder. However, any foreign shareholder who held 15.0% or more of our total shares and was our largestshareholder on or prior to May 9, 2004 is exempt from the regulations, provided that such foreign shareholder may not acquire any moreof our shares. In addition, under the Telecommunications Business Act, the MSIT may, if it deems it necessary to preserve substantialpublic interests, prohibit a foreign shareholder from being

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Table of Contentsour largest shareholder. In the event that any foreigner or foreign government acquires our shares in violation of the above provisions, theTelecommunications Business Act restricts such foreign shareholder from exercising his or her voting rights with respect to commonshares exceeding such threshold. The MSIT may also order us or the foreign shareholder to take corrective measures in respect of theexcess 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-casebasis, 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-debitservice that automatically deducts the monthly payment from a subscriber�s designated bank account, or through a direct-charge servicethat automatically charges the monthly payment to a subscriber�s designated credit card account. Approximately 84.6% of our subscribersas of December 31, 2017 pay through the direct-debit service. Accounts of subscribers who fail to pay our invoice are transferred to acollection agency, which sends out a notice of payment. If such charges are not paid after notice, we cease to provide outgoing service tosuch subscribers after a period of time determined by the type of subscribed service. If charges are still not paid two to three months afteroutgoing service is cut off, we cease all services to such subscribers. After service is ceased, the overdue charges that are not collectedby the collection agency are written off.

Insurance

We carry insurance against loss or damage to all significant buildings and automobiles. Except for our insurance coverage of oursatellites and data centers, we do not carry insurance covering losses to outside plants or to equipment because we believe the cost ofsuch insurance is excessive and the risk of material loss or damage is insignificant. We do not have any provisions or reserves againstsuch 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 corporationswhose 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 liabilitiesfor 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 ineffectively 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. In order to respond more effectively to a changing business environment, anenterprise resource planning system (the �ERP System�) was implemented in July 2012. We are committed to continually investing in andenhancing our information technology systems, which provide support to many aspects of our businesses. In June 2017, a new businesssupport system, called KT One System (�KOS�), was completed and implemented. KOS is our wired/wireless system integration programthat 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, and we are establishingvarious plans to effectively utilize the KOS and to stabilize our business control processes in connection with the KOS.

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Table of ContentsPatents and Licensed Technology

The ability to obtain and protect intellectual property rights to the latest telecommunications technology is important for ourbusiness. We own or have licenses to various patents and trademarks in Korea and overseas, and have applications for patents pendingin Korea and other select countries such as the United States, Europe, China and Japan. A majority of our patents registered in Korea andoverseas relate to our wireless and fixed-line telecommunications, media and IoT technologies. In addition, we operate several researchand development (�R&D�) laboratories to develop latest technology and additional platforms, as described in �Item 5.C. Research andDevelopment, 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, Plants and Equipment

Our principal fixed asset is our integrated telecommunications networks. In addition, we own buildings and real estate throughoutKorea. As of December 31, 2017, the net book value of our property and equipment was￦13,562 billion, of which￦3,281 billion isaccounted for the net book value of our land, buildings and structures. As of December 31, 2017, the net book value of investmentproperty, which is accounted for separately from our property and equipment was￦1,190 billion. Other than described in this annualreport, no significant amount of our properties is leased. There are no material encumbrances on our properties including the fixed assetsbelow.

Our fixed-line equipment vendors and mobile equipment suppliers include well-known international and local suppliers such asSamsung Electronics, LG Electronics, Cisco Systems and Apple Inc.

Mobile Networks

Our mobile network architecture includes the following components:

� cell sites, which are physical locations equipped with base transceiver stations consisting of transmitters, receivers andother equipment used to communicate through radio channels with subscribers� mobile telephone handsets within therange of a cell;

� base station controllers, which connect to and control, the base transceiver stations;

� mobile switching centers, which in turn control the base station controllers and the routing of telephone calls; and

� transmission lines, which connect the mobile switching centers, base station controllers, base transceiver stations and thepublic switched telephone network.

We have a license to use 40 MHz of bandwidth in the 2.1 GHz spectrum, of which 20 MHZ is used to provide IMT-2000 servicesbased on W-CDMA wireless network standards and the remaining

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Table of Contents20 MHZ for our 4G LTE services. Such license was renewed in December 2016, and we are required to pay approximately ￦569 billionfor use of such bandwidth during the license period of 5 years. In April 2010, the KCC announced its decision to allocate 20 MHz ofbandwidth in the 900 MHz spectrum to us, which became effective in July 2011, for which we are required to pay a portion of the actualsales generated from using the bandwidth in the 900 MHz spectrum during the license period of 10 years as a usage fee for thebandwidth, as well as a portion of expected sales that was determined by the KCC at the time of allocation. In June 2011, our right to use40 MHz of bandwidth in the 1.8 GHz spectrum expired, and the KCC allocated back to us the right to use 20 MHz of such bandwidth in the1.8 GHz spectrum upon expiration pursuant to our application, for which we are required to pay a portion of the actual sales generatedfrom using the bandwidth in the 1.8 GHz spectrum during the license period of 10 years as a usage fee for the bandwidth, as well as aportion of expected sales that was determined by the KCC at the time of allocation. We began using the 20 MHz of bandwidth in the 1.8GHz spectrum, which became available upon termination of our 2G services, to provide our 4G LTE services starting in January 2012.

In August 2011, the KCC auctioned the right to use the remaining 20 MHz of bandwidth in the 1.8 GHz spectrum that werelinquished, 10 MHz of additional bandwidth in the 800 MHz spectrum and 20 MHz of additional bandwidth in the 2.1 GHz spectrum. Weacquired the right to use the 10 MHz of bandwidth in the 800 MHz spectrum, for a total usage fee of ￦261 billion to be paid during thelicense period of 10 years, SK Telecom acquired the right to use the 20 MHz of bandwidth in the 1.8 GHz spectrum and LG U+ acquiredthe right to use the 20 MHz of bandwidth in the 2.1 GHz spectrum. We have not utilized 10 MHz of bandwidth in the 800 MHz spectrumdue to the unavailability of requisite technologies and have recorded impairment loss of ￦185 billion for the non-usage in 2015. Due tosuch non-usage, in January 2018, the MSIT decided to shorten the licensing period from 10 years to 8 years. In March 2012, our right touse 30 MHz of bandwidth in the 2.3 GHz spectrum that we had been using to provide WiBro services was renewed with the licensingperiod of 7 years for the license to expire in March 2019.

In August 2013, MSIP further auctioned 50 MHz of bandwidth in the 1.8 GHz spectrum, which had been used by governmentalentities such as the military, and 80 MHz of bandwidth in the 2.6 GHz spectrum, which had been used for digital multimedia broadcastingservices. We acquired the right to use 15 MHz of bandwidth in the 1.8 GHz spectrum, for which we are required to pay a total usage fee ofapproximately￦900 billion during a license period of eight years. SK Telecom acquired the right to use 35 MHz of bandwidth in the 1.8GHz spectrum and LG U+ acquired the right to use 40 MHz of bandwidth in the 2.6 GHz spectrum. Acquiring the right to use additionalbandwidth in the 1.8 GHz spectrum has enabled us to provide wideband LTE services beginning in September 2013, as 15 MHz of thenewly acquired bandwidth in the 1.8 GHz spectrum was adjacent to our existing 20 MHz of bandwidth in the 1.8 GHz spectrum.

In May 2016, the MSIP auctioned 40 MHz of bandwidth in the 700 MHz spectrum, 20 MHz of bandwidth in the 1.8 GHzspectrum, 20 MHz of bandwidth in the 2.1 GHz spectrum, 40 MHz of bandwidth in the 2.6 GHz spectrum and 20 MHz of bandwidth in the2.6 GHz spectrum. We acquired the right to use 20 MHz of bandwidth in the 1.8 GHz spectrum for which we are required to pay a totalusage fee of approximately￦470 billion during a license period of 10 years. SK Telecom acquired the right to use 40 MHz of bandwidth inthe 2.6 GHz spectrum and 20 MHz of bandwidth in the 2.6 GHz spectrum and LG U+ acquired the right to use 20 MHz of bandwidth in the2.1 GHz spectrum. The right to use 40 MHz of bandwidth in the 700 MHz spectrum was not purchased by any company. We currently use20 MHz of bandwidth in the 1.8 GHz spectrum to provide Wideband LTE-A services.

In December 2017, the MSIT made an announcement that it plans to auction additional bandwidth in 2018 to enable provision of5G services by telecommunications companies.

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Table of ContentsExchanges

Exchanges include local exchanges and �toll� exchanges that connect local exchanges to long-distance transmission facilities.We had 25 million lines connected to local exchanges and 2.1 million lines connected to toll exchanges as of December 31, 2017.

All of our exchanges are fully automatic. We completed replacement of all electromechanical analog exchanges with digitalexchanges in June 2003 in order to provide higher speed and larger volume services. Starting in 2006, we also began conversion of ourexchanges to be compatible to IP platform in preparation for building our next generation broadband convergence network by 2021. As ofDecember 31, 2017, 100% 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 accesssubscribers, data centers and Internet exchange system at any given moment of up to 10.6 Tbps as of December 31, 2017. We have setup contingent plans to prepare against various incidents that could affect reliable Internet access service. Starting in 2005, we have alsobegun deploying our IP premium network that enables us to more reliably support olleh TV, WiBro, Internet Phone, upgraded VoIPservices and other IP services. As of December 31, 2017, our IP premium network had 2,808 lines installed to provide 3G and LTE mobiledata services, 1,258 lines installed to provide IPTV services and a total capacity to handle up to 3.1 Tbps of IPTV, voice, mobile data,virtual private network (VPN) and WiBro service traffic.

Access Lines

As of December 31, 2017, we had 21.4 million access lines installed, which allow us to reach virtually all homes and businessesin Korea. As part of our broadband deployment strategy, we have upgraded many of our access lines by equipping them with broadbandcapability using xDSL and FTTH technology. As of December 31, 2017, we had approximately 21 million broadband lines with speed of atleast 50 Mbps that enable us to deliver broadband Internet access and multimedia content to our customers.

Transmission Network

Our domestic fiber optic cable network consisted of approximately 764,800 kilometers of fiber optic cables as of December 31,2017 of which approximately 118,800 kilometers of fiber optic cables are used to connect our backbone network and approximately645,970 kilometers are used to connect the backbone network to our subscribers. Our backbone network utilizes 64 Tbp Long-haulReconfigurable Optical Add Drop Multiplexer (�ROADM�) technology for connecting cities. ROADM technology improves bandwidthefficiency by enabling data to be transmitted from multiple signals across one fiber strand in a cable and carrying each signal on aseparate wavelength. We enhanced our backbone network connecting six major cities in Korea by implementing an optical cross-connector (OXC) and access network by implementing multi-service provisioning platform (MSPP) architecture in 2008. During 2013, wecompleted the construction of our next generation broadband convergence network by installing carrier ethernet architecture.

Our extensive domestic long-distance network is supplemented by our fully digital domestic microwave network, which consistedof 55 relay sites as of December 31, 2017.

International Network

Our international network infrastructure consists of both submarine cables and satellite transmission systems, including twosubmarine cable-landing stations in Busan and Keoje and two

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Table of Contentssatellite teleports in Kumsan and Boeun. Data services such as international private lease circuits, IP and very small aperture terminalsare provided through submarine cables and satellite transmission. In order to guarantee high quality services to our end customers, oursubmarine cables and satellite transmission systems are linked to various points-of-presence in the United States, Asia and Europe. Inaddition, our international telecommunications networks are directly linked to approximately 210 telecommunications service providers invarious international destinations and are routed through our three international switching centers in Seoul, Daejeon and Busan.

Our international Internet backbone with capacity of 1,088 Gbps is connected to approximately 200 Internet service providersthrough our two Internet gateways in Hyehwa and Guro. In addition, we operate a video backbone with capacity of 1.5 Gbps to transmitvideo signals from Korea to the rest of the world.

Satellites

Koreasat 6 (launched in 2010), Koreasat 8 (launched in 2014 and of which we own 12 transponders), Koreasat 7 (launched inMay 2017) and Koreasat 5A (launched in October 2017) are all in operation, providing broadcasting, video distribution and broadbanddata services in selected areas. The rights and interests regarding Koreasat 3 are currently subject to an International Chamber ofCommerce arbitration and a proceeding in the U.S. district court in New York. See ��Item 4.B. Business Overview�Our Services�OtherBusinesses� and �Item 8. Financial Information�Item 8.A. Consolidated Financial Statements and Other Financial Information�LegalProceedings.�

International Submarine Cable Networks

International traffic is handled by telecommunications satellites and submarine cables. Because of the high cost of laying asubmarine cable, the usual practice is for multiple carriers to jointly commission a new cable and share the costs and the capacity. Weown interests in several international fiber optic submarine cable networks, including:

� a 1.4% interest in the 29,000-kilometer FLAG Europe-Asia network connecting Korea, Southeast Asia, the Middle East andEurope, activated since April 1997;

� a 1.7% interest in the 39,000-kilometer Southeast Asia-Middle East-Western Europe 3 Cable Network linking 34 countries,activated since December 1999;

� a 4.0% interest in the 19,000-kilometer Asia Pacific Cable Network 2 connecting Korea, China, Japan, Taiwan, Hong Kong,Philippines, Singapore and Malaysia, activated since December 2001;

� a 20.0% interest in the 500-kilometer Korea-Japan Cable Network linking Korea and Japan, activated since March 2002;

� a 13.1% interest in the 16,500-kilometer Trans Pacific Express Cable Network linking Korea, China, Taiwan and the UnitedStates, activated since September 2008;

� a 8.5% interest in the 11,000-kilometer Asia Pacific Gateway linking Korea, China, Japan, Thailand, Taiwan, Hong Kong,Vietnam, Singapore and Malaysia, activated since October 2016; and

� a 16.7% interest in the 14,000-kilometer New Cross Pacific linking Korea, China, Japan, Taiwan and the United States,which is expected to be activated in the first quarter of 2018.

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Table of ContentsWe have also invested in four other international fiber optic submarine cables around the world.

Item 4A. Unresolved Staff Comments

We do not have any unresolved comments from the Securities and Exchange Commission staff regarding our periodic reportsunder the Exchange Act of 1934.

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 inaccordance with IFRS as issued by the IASB.

Overview

We are an integrated provider of telecommunications services. Our principal services include mobile service and fixed-lineservices, including fixed-line telephone services, broadband Internet access service and data communication service. The principal factorsaffecting our revenues from these services have been our rates for, and the usage volume of, these services, as well as the number ofsubscribers. For information on rates we charge for our services, see �Item 4. Information on the Company�Item 4.B. BusinessOverview�Revenues and Rates.� In addition, we derive revenues from handset sales and non-telecommunications services, includingfinancial services.

Since 2016, our operating segments for financial reporting purposes have been organized as the following:

� the Customer/Marketing Group, which engages in providing various telecommunication services to individual/home/corporate customers and the convergence business,

� the Finance Group, which engages in providing various financial services such as credit card services,

� the Satellite TV Group, which engages in satellite TV services, and

� the Others Group, which includes (i) security services, (ii) satellite service, (iii) information technology and networkservices, (iv) global business services that provides global network services to multinational or domestic corporatecustomers and telecommunications companies, (v) sale of handsets and (vi) real property development and leasingservices and other services provided by our subsidiaries.

Prior to 2016, we had three operating segments: (i) Customer/Marketing Group, (ii) Finance Group and (iii) Others Group. In2016, our satellite TV services was classified as a new segment, the Satellite TV Group, in accordance with the requirements of IFRS 8(Operating Segments). The segment results for 2015, 2016 and 2017 are reported in accordance with the current segment classification offour operating segments. See Note 33 to the Consolidated Financial Statements.

We disposed of our interests in two of our subsidiaries, KT Rental Co., Ltd. and KT Capital Co., Ltd., in June 2015 and August2015, respectively. The profit and loss on the related operations of KT Rental Co., Ltd. and KT Capital Co., Ltd. are presented asdiscontinued operations.

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Table of ContentsOne of the major factors contributing to our historical performance was the growth of the Korean economy, and our future

performance will depend at least in part on Korea�s general economic growth and prospects. For a description of recent developmentsthat have had and may continue to have an adverse effect on our results of operations and financial condition, see �Item 3. KeyInformation�Item 3.D. Risk Factors�Korea is our most important market, and our current business and future growth could be materiallyand adversely affected if economic or political conditions in Korea deteriorate.� A number of other developments have had or are expectedto have a material impact on our results of operations, financial condition and capital expenditures. These developments include:

� acquisition of new bandwidths and usage fees for such bandwidths;

� researching and implementing technology upgrades and additional telecommunication services such as 5G technologies;

� changes in the rate structure for our services;

� acquisitions and disposals of interests in subsidiaries and joint ventures; and

� handset subsidies.

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 and Usage Fees for Such Bandwidths

One of the principal limitations on a wireless network�s subscriber capacity is the amount of bandwidth spectrum allocated to aservice provider. The growth of our mobile telecommunications business and the increase in usage of wireless data transmission serviceshave 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 multimediacontent is likely to put additional strain on the bandwidth capacity of mobile service providers. We have acquired various licenses in recentyears to secure additional bandwidth capacity to provide our broad range of services, for which we typically pay a portion of the actualsales generated from using the bandwidth during the license period as a usage fee, as well as a portion of expected sales as determinedby the MSIT at the time of allocation.

In August 2011, the KCC auctioned the rights to use the 20 MHz of bandwidth in the 1.8 GHz spectrum that we relinquished inJune 2011, 10 MHz of additional bandwidth in the 800 MHz spectrum and 20 MHz of additional bandwidth in the 2.1 GHz spectrum. Weacquired the right to use the 10 MHz of bandwidth in the 800 MHz spectrum, for a total usage fee of ￦261 billion to be paid during thelicense period of 10 years. We have not utilized 10 MHz of bandwidth in the 800 MHz spectrum due to the unavailability of requisitetechnologies and have recorded impairment loss of￦185 billion for the non-usage in 2015. Due to such non-usage, in January 2018, theMSIT decided to shorten the license period from 10 years to 8 years. In March 2012, our right to use 30 MHz of bandwidth in the 2.3 GHzspectrum that we had been using to provide WiBro services was renewed with the licensing period of 7 years for the license to expire inMarch 2019.

In August 2013, the MSIP further auctioned 50 MHz of bandwidth in the 1.8 GHz spectrum, which had been used bygovernmental entities such as the military, and 80 MHz of bandwidth in the 2.6 GHz spectrum, which had been used for digital multimediabroadcasting services. We acquired the right to use 15 MHz of bandwidth in the 1.8 GHz spectrum, for which we are required to pay atotal

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Table of Contentsusage fee of approximately￦900 billion during a license period of eight years. SK Telecom acquired the right to use 35 MHz of bandwidthin the 1.8 GHz spectrum and LG U+ acquired the right to use 40 MHz of bandwidth in the 2.6 GHz spectrum. In September 2013, wecommenced providing wideband LTE services, which utilizes our adjoining 20 MHz of bandwidth in the 1.8 GHz spectrum to providetransmission speed of up to 150 Mbps, twice faster than those offered under standard LTE services. SK Telecom also began providing itswideband LTE services in September 2013 and LG U+ commenced providing its wideband LTE services in January 2014. In March 2014,our wideband LTE services covered five metropolitan cities in Korea, and we expanded our wideband LTE services to all of Korea in July2014. Furthermore, in March 2014, we commercialized Wideband LTE-A services, which interconnects our 20 MHz of bandwidth in the 1.8GHz spectrum used to offer wideband LTE services with the 10 MHz of bandwidth in the 900 MHz spectrum used to offer standard LTEservices by utilizing inter-band carrier aggregation technology to support transmission speed of up to 225 Mbps, and began additionallyinterconnecting 10 MHz of bandwidth in the 2.1 GHz spectrum in January 2015 to support transmission speed of up to 300 Mbps underthe �Wideband LTE-A X4� service.

In May 2016, the MSIP auctioned 40 MHz of bandwidth in the 700 MHz spectrum, 20 MHz of bandwidth in the 1.8 GHzspectrum, 20 MHz of bandwidth in the 2.1 GHz spectrum, 40 MHz of bandwidth in the 2.6 GHz spectrum and 20 MHz of bandwidth in the2.6 GHz spectrum. We acquired the right to use 20 MHz of bandwidth in the 1.8 GHz spectrum for which we are required to pay a totalusage fee of approximately￦470 billion during a license period of 10 years. SK Telecom acquired the right to use 40 MHz of bandwidth inthe 2.6 GHz spectrum and 20 MHz of bandwidth in the 2.6 GHz spectrum and LG U+ acquired the right to use 20 MHz of bandwidth in the2.1 GHz spectrum. The right to use 40 MHz of bandwidth in the 700 MHz spectrum was not purchased by any company. We currently use20 MHz of bandwidth in the 1.8 GHz spectrum to provide Wideband LTE-A services.

In December 2017, the MSIT made an announcement that it plans to auction additional bandwidth in June 2018 to enableprovision of 5G services by telecommunications companies.

Researching and Implementing Technology Upgrades and Additional Telecommunication Services

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 telecommunication services to maintainour competitiveness. For example, we are continually upgrading our broadband network to enable better FTTH connection, which providesspeed of up to 1 Gbps and better connection quality. FTTH is a telecommunication architecture in which a communication path is providedover optical fiber cables extending from the telecommunications operator�s switching equipment to the boundary of home or office. FTTHuses fiber optic cable, which is able to carry a high-bandwidth signal for longer distances without degradation. FTTH enables us to deliverenhanced products and services that require high bandwidth, such as IPTV, and other digital media content with stronger stability.

In addition, we have been building more advanced mobile telecommunications networks based on LTE technology, generallyreferred to as �4G� technology, and commenced providing commercial 4G LTE services in the Seoul metropolitan area in January 2012.We completed the expansion of our 4G LTE service coverage nationwide in October 2012. We commenced providing wideband LTEservices in September 2013, which we expanded nationwide in July 2014, and commercialized Wideband LTE-A services in March 2014,and began additionally interconnecting 10 MHz of bandwidth in the 2.1 GHz spectrum in January 2015 to support transmission speed ofup to 300 Mbps under the �Wideband LTE-A X4� service, as discussed above. Furthermore, we are continuing our efforts to develop thefifth generation, �5G� technology, to carry out our plan to commercialize the 5G services by the end of 2019, one year ahead of our initialplan. In this effort, we unveiled the world�s first 5G trial

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Table of Contentsservices at the PyeongChang 2018 Winter Olympics. In October 2017, �5G Network Slice Orchestration� technology, independentlydeveloped by us, was approved by the International Telecommunication Union, a specialized Information & Communication Technologyagency of the United Nations, as part of the 5G standard technology.

Changes in the Rate Structure and Fee Discounts for Our Services

Periodically, we adjust our rate structure for our services. For example, we completely abolished our mobile activation fee inMarch 2015 in line with government policy objectives. In order to mitigate the impact from lower usage charges of local and domestic long-distance calls, we have increased our basic monthly charges and offer various optional flat rate plans for our fixed-line subscribers. Suchadjustments in the rate structure have increased the portion of fixed income and stabilized our cash flow. In addition, because the growinguse of mobile telecommunications services has decreased the usage of our fixed-line telephone services, we believe we are able tomaximize our revenues from fixed-line telephone services by adjusting the rate structure so as to increase our basic monthly charges. Wealso provide bundled packages of our various services at a discount in order to attract additional subscribers to our new services. Wecurrently bundle our broadband Internet access service with IPTV, Internet phone, fixed-line telephone service, and mobile services, at adiscount. In July 2016, we lowered our early termination fee for our broadband Internet access service, Internet phone or IPTV or suchproducts bundled with our fixed-line telephone service.

The MSIT, in consultation with the Ministry of Strategy and Finance, currently approves rates charged by us for local telephoneservice. The form of our standard agreement for providing local network service and each agreement for interconnection with other serviceproviders must also be reported to the MSIT. In addition, the MSIT currently does not regulate our domestic long-distance, internationallong-distance, broadband Internet access and mobile service rates, but it periodically announces public policy guidelines or suggestionson tariffs for non-regulated services, which we have followed in the past. For a discussion of adjustments in our rate structure, see �Item 4.Information on the Company�Item 4.B. Business Overview�Revenues and Rates.�

After the inauguration of the new President of Korea, Mr. Jae-in Moon, the Government announced plans to reducetelecommunication service fees and rates. On July 21, 2017, the MSIT announced its plan to require provision of �universal� mobilesubscription plans sometime in 2018. According to the current draft of the proposed revision to the Telecommunications Business Act,subject to approval by the National Assembly, the dominant network service provider (which is SK Telecom) shall be required to provide amobile subscription plan priced at￦20,000 per month (at a significant discount to the rates for currently available mobile subscriptionplans) which allows data use of between 1 and 1.4 GB and 200 call minutes. On November 10, 2017, the MSIT formed a policy discussiongroup, the Telecom Policy Committee, with approximately 20 committee members, including industry experts from us, SK Telecom, LGU+, customer representatives, researchers and government officials. The Telecom Policy Committee held discussion sessions twice permonth until February 2018 to review and discuss the Government�s plan to adopt �universal� mobile subscription fees and other policyideas of the Government to reduce mobile service fees paid by individuals (such as providing additional tariff discount to the elderly,lowering the entry barriers to new telecommunications service providers and introduction of the �Terminal Self-Sufficiency System� underwhich mobile subscribers can purchase unlocked smartphones that are not tied to mobile service providers from manufacturers orvendors). In March 2018, the Telecom Policy Committee submitted the summary of its discussions to the MSIT and the National Assembly.In addition, in September 2017, the MSIT confirmed its policy directives to increase the maximum tariff discount to 25% from the prior 20%(see ��Handset Subsidies�) and to provide additional tariff reductions of￦11,000 per month to certain low-income subscribers onGovernment welfare. In response to the policy directives, we increased the maximum tariff discount to 25% on September 15, 2017 andstarted to provide

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Table of Contentsadditional tariff reductions of￦11,000 per month to the subscribers on Government welfare on December 22, 2017. As of December 31,2017, we provided the additional tariff reductions to approximately 0.8 million subscribers on Government welfare.

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 thatcomplement or diversify our current business, as well as disposal or termination of such businesses from time to time. The followingsummarizes our recent acquisitions and disposals:

� in October 2011, we, through our former subsidiary KT Capital Co., Ltd., acquired an additional 1,622,520 common sharesof BC Card Co., Ltd. from Woori Bank, Busan Bank and Shinhan Card for approximately￦252 billion, to further diversifyour business and to create synergies through utilization of our mobile telecommunications network in financial services,thereby increasing our ownership interest in BC Card Co., Ltd. to 38.9%, making it our consolidated subsidiary as a resultof deemed control starting in October 2011. We acquired an additional 1,349,920 common shares of BC Card Co., Ltd. inJanuary 2012 for approximately￦287 billion, and owned a 69.5% interest in BC Card Co., Ltd. as of December 31, 2017.The profit and loss on the related operations of KT Capital Co. Ltd. are presented as discontinued operations.

� in October 2014, we acquired 4,000,000 treasury shares of ktis Corporation, an equity-method investee which providestelephone number directory services, for approximately￦14 billion (and the book value of the company being￦36 billionat the time of the consolidation), thereby increasing our ownership percentage to 29.3% of all issued and outstandingcapital as of December 31, 2015 and making it our consolidated subsidiary as a result of deemed control starting fromOctober 2014. See Note 1 to the Consolidated Financial Statements.

� in October 2014, we, through our subsidiary KT Hitel Co., Ltd., acquired 4,800,000 treasury shares of ktcs Corporation, anequity-method investee which provides telephone number directory services, for approximately￦14 billion (and the bookvalue of the company being￦37 billion at the time of consolidation), thereby increasing our ownership percentage to30.9% of all issued and outstanding capital as of December 31, 2015 and making it our consolidated subsidiary as a resultof deemed control starting from October 2014. See Note 1 to the Consolidated Financial Statements.

� starting in July 2012, KT Rental Co., Ltd., our then-58.0% owned subsidiary, became our consolidated subsidiary as aresult of the acquisition of KT Rental Co., Ltd.�s common stock by Hana Daetoo Securities Co., Ltd. and other investorsfrom the then-second largest shareholder in July 2012, and the restriction on our control over KT Rental Co., Ltd. pursuantto a shareholders� agreement being resolved as a result. The sale of KT Rental Co., Ltd. to the Lotte Group for ￦1.01trillion (with proceeds to KT Corporation being￦763 billion) was completed in June 2015. The profit and loss on therelated operations of KT Rental Co. Ltd. are presented as discontinued operations. See Note 39 to the ConsolidatedFinancial Statements.

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 pursuefurther growth opportunities for the future, we may need to raise additional capital by incurring loans or through the issuances of bonds orother securities in the international capital markets, which may lead to increased levels of debt and debt servicing costs in the future.

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Table of ContentsHandset Subsidies

In March 2008, the Government removed a prohibition on the provision of handset subsidies and allowed mobile serviceproviders to subsidize the purchase of new handsets by certain qualifying customers. We began providing such handset subsidies, whichincreased, and may in the future increase, our marketing expenses. We provide handset subsidies to subscribers who agree to use ourservice for a predetermined service period and purchase handsets on an installment basis. Generally, handset subsidies may be providedto any subscriber that uses our service and purchases handsets either directly from us or through third parties. Since we do not recognizerevenues from sales of handsets by third parties, the trends between our handset sales and our provision for handset subsidies are notnecessarily correlated. The amount recognized as a provision for handset subsidies is our best estimate of the expenditure required tosettle current obligations to relevant subscribers at the end of the reporting period. This subsidy amount is the sum of the present valuesof the monthly balances for handset subsidies over the relevant service periods, taking into account the customer retention rate forrelevant subscribers. In May 2010, the KCC announced a guideline recommending that telecommunication service providers limit theirmarketing expenses to 22.0% of their annual sales, and the limit was subsequently lowered to 20.0% of their annual sales for the years2013, 2012 and 2011. Such marketing expenses included initial commissions, monthly commissions and retention commissions paid toour authorized dealers and subscribers, including handset subsidies, but did not include advertising expenses. While the guideline was notbinding, we, as well as our competitors, nonetheless tried to adhere to such guideline when feasible. Furthermore, failure to comply withrules, regulations and corrective orders may lead to suspension of our business or imposition of monetary penalties.

For example, in December 2013, the KCC imposed a combined fine of approximately ￦106 billion on SK Telecom, LG U+ andus (our fine being approximately￦30 billion), which is the largest fine ever imposed by the KCC on local mobile operators for providingexcessive subsidies to new subscribers. In March 2014, the MSIP imposed a 45-day suspension on each of us, SK Telecom and LG U+from accepting new subscribers as a result of continuing to offer excessive handset subsidies to new subscribers, despite the order fromthe KCC prohibiting such subsidies. In August 2014, the KCC imposed a combined fine of approximately ￦58 billion on SK Telecom, LGU+ and us (our fine being approximately￦11 billion) for providing excessive handset subsidies, and also imposed temporary suspensionson accepting new subscribers for seven days on SK Telecom and LG U+. In December 2014, the KCC imposed a fine of approximately￦8 billion on each of SK Telecom, LG U+ and us for providing excessive handset subsidies. In March 2015, the KCC also imposed acombined fine of approximately￦34 billion on SK Telecom, LG U+ and us (our fine being approximately￦9 billion) for violation ofregulations relating to handset sales, in connection with a used handset buyback program that we and the other telecommunicationsoperators were promoting. On March 12, 2015, the KCC imposed a fine of￦870 million for violation of restrictions on handset subsidiesrelating to our compensation program for used handsets. Any further suspension of our business or imposition of monetary penalties bythe Government could have a material adverse effect on our business.

Furthermore, on October 1, 2014, the Handset Distribution Reform Act, which seeks to lower the cost of communication for thegeneral public and reduce handset factory prices by establishing fair and transparent order in the distribution of mobile telecommunicationdevices, went into effect. The Handset Distribution Reform Act regulates, among other matters, the sale and subsidies of mobile devicessuch as smartphones, with one of its purposes being to induce telecommunication operators to compete in lowering the costs ofcommunications and encourage the manufacturers to reduce handset factory prices, while improving service quality. Under the HandsetDistribution Reform Act, consumers may not be discriminated in terms of subsidies based on their age, place of residence or monthlysubscription plan when using their existing mobile phones, buying a new phone or switching their mobile carriers. Furthermore, everyone,regardless of their status, is entitled to receive either a

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Table of Contentshandset subsidy for the purchase of mobile phone models that were launched within the last 15 months, or a tariff discount (with thecurrent discount rate set at 25%, effective since September 15, 2017). Prior to October 1, 2017, the maximum amount of handset subsidythat telecommunications operators and handset manufacturers may offer was determined by Korean telecommunication regulators (suchlimit to be determined between￦250,000 and￦350,000, and may be adjusted every six months, with the limit set at ￦330,000, effectivesince April 8, 2015). The maximum amount of the handset subsidy was phased out as of October 1, 2017 as initially scheduled under theHandset Distribution Reform Act. On September 15, 2017, in compliance with the policy initiatives announced by the MSIT, we increasedthe maximum tariff discount to 25% from the prior 20% (which was in effective since April 24, 2015). According to the Government,excessive handset subsidies may cause mobile subscribers to subscribe to more expensive monthly plans in return for greater handsetsubsidies or may cause handset vendors to provide discriminatory subsidies based on consumers� age, residence and subscription plan,among others. It was reported that the Government plans to introduce measures to curb excessive competition for handset subsidies suchas guidelines on subsidies for online handset sales and requirement for public disclosure of the portion or amount of handset subsidiesprovided by each party involved in handset sales. Telecommunications operators are also required to publicly announce the amount ofhandset subsidy that they offer, which may not be readjusted within one week after such announcement. In addition, telecommunicationsoperators are prohibited from using misleading or exaggerated advertisements, such as advertisements that mobile phones are freewithout adequately explaining that it is preconditioned on signing up for high-priced monthly subscription plans.

Critical Accounting Policies

We have prepared our consolidated financial statements in accordance with IFRS as issued by the IASB. These accountingprinciples require our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the yearsreported. We based our estimates on historical experience and on various other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are notreadily apparent from other sources. On an on-going basis, management evaluates its estimates. Actual results may differ from thoseestimates under different assumptions and conditions.

The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our businessactivities. To aid in that understanding, our management has identified �critical accounting estimates.� These estimates have the potentialto have a more significant impact on our financial statements, either because of the significance of the financial statement item to whichthey relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time,events which are continuous in nature.

These critical accounting estimates include:

� allowances for doubtful accounts;

� useful lives of property, equipment, intangible assets and investment property;

� impairment of long-lived assets, including goodwill;

� valuation and impairment of investment securities;

� income taxes;

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Table of Contents� deferred revenue relating to service installation fees and initial subscription fees;

� post-employment benefit liabilities; and

� provisions.

Allowances for Doubtful Accounts

Allowance for doubtful accounts is our best estimate of the amount of impairment losses incurred on our existing notes andaccounts receivable. We determine the allowance for doubtful notes and accounts receivable based on an aging analysis of balances,historical write-off experience, customer�s or counterparty�s credit ratings and changes in payment terms. Account balances are chargedoff against the allowance when all means of collection have been exhausted and the potential for recovery is considered remote. Our pastexperience shows that the possibility of collection is remote after three years of collection effort.

Changes in the allowances for doubtful accounts for our trade and other receivables in the three-year period endedDecember 31, 2017 are summarized as follows:

Year Ended December 31,2015 2016 2017

(In millions of Won)Balance at beginning of year ￦838,699 ￦719,583 ￦612,487Provision 141,555 92,711 44,697Reversal or written-off (168,663) (189,156) (131,341)Changes in the scope of consolidation (86,484 ) 271 (142 )Others (5,524 ) (10,922 ) (1,902 )Balance at end of year ￦719,583 ￦612,487 ￦523,799

If economic or specific industry trends change, we would adjust our allowances for doubtful accounts by recording additionalexpense or benefit.

Useful Lives of Property, Equipment, Intangible Assets and Investment Property

Property and equipment, intangible assets and investment properties (excluding land, condominium memberships, golf clubmemberships and broadcasting concession) are depreciated using the straight-line method over their useful lives as disclosed in Note 3.8to the Consolidated Financial Statements. An asset�s residual value and useful lives are reviewed and adjusted at the end of eachfinancial reporting period, and are based on historical experience with similar assets as well as taking into account anticipatedtechnological or other changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated,the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense infuture periods. A decrease of remaining estimated useful life by one year of our property and equipment would result in an increase ofdepreciation expense of approximately￦200 billion in 2017.

Impairment of Long-Lived Assets, including Goodwill

Long-lived assets generally consist of property and equipment and intangible assets, including goodwill. We review long-livedassets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not berecoverable. In addition, we evaluate our long-lived assets for impairment each year as part of our annual forecasting process. Animpairment loss would be recognized when the asset�s recoverable amount is less than its carrying amount. The recoverable amount of along-lived asset is the greater of an asset�s fair value less costs to sell and its

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Table of Contentsvalue in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiablecash flows (cash-generating units). The recoverable amounts of cash-generating units are based on their value in use calculated byapplying the annual discount rate ranging from 8.95% to 14.62% (depending on the segment) to the estimated future cash flows based onfinancial budgets for the next five years. An annual growth rate of 0.0% to 1.0% was applied for the cash flows expected to be incurredafter five years. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which thecarrying amount of the assets exceeds the estimated recovery value. For example, in 2015, we recognized ￦185 billion of impairmentloss in connection with the non-usage of 10 MHz of bandwidth in the 800 MHz spectrum. We also recognized￦78 billion of impairmentloss on goodwill allocated to our Satellite TV segment and￦29 billion on indefinite-lived intangible assets which resulted from increasingcompetition among providers of Internet, IPTV, cable TV services.

Goodwill represents the excess of purchase price paid over the fair value assigned to the identifiable net assets of acquiredbusinesses. The determination of the fair values of goodwill is based on management�s judgment on the expected cash flows of the cash-generating units to which the goodwill is allocated, taking market demand, competition and other economic factors into consideration. Thedetermination of impairments of goodwill involves the use of estimates that include, but are not limited to, the cause, timing and amount ofthe impairment. Impairment is based on a large number of factors, such as changes in current competitive conditions, expectations ofgrowth in the telecommunications industry, a decline in our expected future cash flows, changes in the future availability of financing,technological obsolescence, discontinuance of services, current replacement costs and prices paid in comparable transactions. Forexample, in 2017, we recognized impairment losses of￦78 billion on goodwill allocated to KT Skylife primarily due to a decrease in theexpected recoverable amount resulting from a decrease in KT Skylife�s market value in 2017. See Note 12 of the Consolidated FinancialStatements.

Valuation and Impairment of Financial Assets

The fair value of financial instruments, including derivative instruments, which are not traded in an active market, is determinedby using valuation techniques. Our management uses its judgment to select a variety of methods and makes assumptions that are mainlybased on market conditions existing at the end of each reporting period.

We record rights and obligations arising from derivative instruments as assets and liabilities, which are stated at fair value. Gainsand losses that result from a change in the fair value of derivative instruments are recognized in current earnings. However, for derivativeinstruments that qualify for cash flow hedge accounting, the effective portion of the gain or loss on the derivative instruments are recordedas gain or loss on valuation of derivatives for cash flow hedge included in accumulated other comprehensive income or loss, asapplicable.

For financial assets, including assets carried at amortized cost and those classified as available-for-sale, we make an annualassessment at the end of each reporting date whether there is objective evidence that a financial asset or a group of financial assets isimpaired. For financial assets carried at amortized cost and available-for-sale debt assets, such asset is considered impaired andimpairment losses are incurred only if there is objective evidence of impairment as a result of one or more events (a �loss event�) thatoccurred after the initial recognition of the financial asset, which had an impact on the estimated future cash flows of the financial assetthat can reliably be estimated. For equity investments classified as available-for-sale, a significant or prolonged decline in the fair value ofthe security below its cost, in addition to circumstances described below, may be considered as evidence that the asset is impaired.

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Table of ContentsFor assets carried at amortized cost, the amount of impairment is measured as the difference between the asset�s carrying

amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at theasset�s original effective interest rate, and the carrying amount of the asset is reduced and the amount of loss is recognized in thestatement of income. Loss on such asset may also be measured based on observable market price if there is an active market for theasset. For assets classified as available-for-sale, the cumulative loss, measured as the difference between the acquisition cost and thecurrent fair value and recognized as accumulated other comprehensive income, less any impairment loss on such financial assetpreviously recognized in profit or loss, is removed from equity and recognized in the statement of income.

Significant management judgment is involved in evaluating whether a loss event has occurred. The estimates and assumptionsused by management to evaluate whether a loss event has occurred can be impacted by many factors, such as the financial condition,earnings capacity and near-term prospects of the company in which we have invested, breach of contract such as default or delinquencyin payments, disappearance of an active market for the financial asset and other adverse changes in the payment status of borrowers inthe portfolio. The evaluation of these investments is also subject to the overall condition of the economy and its impact on the capitalmarkets.

Income Taxes

We are required to estimate the amount of tax payable or refundable for the current year and the deferred income tax liabilitiesand assets for the future tax consequences of events that have been reflected in our financial statements or tax returns. This processrequires management to make assessments regarding the timing and probability of the tax impact. Actual income taxes could vary fromthese estimates due to future changes in income tax law or unpredicted results from the final determination of each year�s liability bytaxing authorities.

We believe that the accounting estimate related to assessing the realizability of deferred tax assets is a �critical accountingestimate� because: (1) it requires management to make assessments about the timing of future events, including the probability ofexpected future taxable income and available tax planning opportunities, and (2) the impact that changes in actual performance versusthese estimates could have on the realization of tax benefits as reported in our results of operations could be material. Management�sassumptions require significant judgment because actual performance has fluctuated in the past and may continue to do so.

Deferred Revenue relating to Service Installation Fees and Initial Subscription Fees

We charge service installation fees and initial subscription fees related to activation of many of our services, which are deferredand recognized as revenue over the expected terms of customer relationships. Our estimate of expected terms of customer relationship isbased on the historical rate, which may differ in the future. If the management�s estimation is amended, it may cause significantdifferences in the timing of revenue recognition and amount recognized.

Post-employment Benefit Liabilities

Our accounting of post-employment benefits, which mainly consist of a defined benefit plan (we began offering a definedcontribution plan in December 2012), involves judgments about uncertain events including discount rates, life expectancy and future payinflation. Any changes in these assumptions will impact the carrying amount of the defined benefit liability. The discount rates used todetermine the present value of estimated future cash outflows expected to be required to settle the defined benefit liability, are determinedat the end of each reporting period by reference to the yield at the reporting date on high-quality corporate bonds that have maturity datesapproximating the terms of

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Table of Contentsour benefits obligations and that are denominated in the same currency in which the benefits are expected to be paid. Other keyassumptions for defined benefit liability are based in part on current market conditions. For defined contribution plans, we paycontributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis, and we have nofurther payment obligations once the contributions have been paid.

Provisions

We recognize provisions at the end of the reporting period when we have a present legal or constructive obligation, such aslitigation or assets retirement obligations, as a result of past events and an outflow of resources required to settle the obligation isprobable and can be reliably estimated. We measure provisions at the present value of the expenditures expected to be required to settlethe obligation, which are estimated based on factors such as historical experience. We do not recognize provisions for future operatinglosses and recognize as interest expense any increase in the provisions due to passage of time. See Notes 2.22, 3.7 and 16 to theConsolidated Financial Statements.

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, wealso prepare financial statements in accordance with K-IFRS, which we are required to file with the Financial Services Commission andthe Korea Exchange under the FSCMA.

In relation to presentation of operating profit, certain accounts or transactions which are included in operating income orexpenses under IFRS as issued by the IASB, are excluded from operating income or expenses under K-IFRS. Additionally, under K-IFRS,revenue from the development and sale of real estate is recognized using the percentage of completion method. However, under IFRS asissued by the IASB, revenue from the development and sale of real estate is recognized when an individual unit of residential real estate isdelivered to the buyer. As a result, the presentation of operating results in our consolidated statements of operations prepared inaccordance with IFRS as issued by the IASB included in this annual report differs from the presentation of operating results in ourconsolidated statements of operations prepared in accordance with K-IFRS. The table below sets forth a reconciliation of our operatingprofit and net income or loss as presented in our consolidated statements of operations prepared in accordance with IFRS as issued bythe IASB for each of the years ended December 31, 2015, 2016 and 2017 to our operating profit and net income or loss in ourconsolidated statements of operations prepared in accordance with K-IFRS, for each of the corresponding years, taking into account suchdifferences:

For the Year Ended December 31,2015 2016 2017

(In millions of Won)Operating profit (loss) under IFRS as issued by the IASB ￦1,077,068 ￦1,339,780 ￦1,069,092

Effect of changes in operating income presentation 207,165 96,602 286,161Revenue recognition of development and sale of real estate 8,711 3,597 20,033

Operating profit (loss) under K-IFRS ￦1,292,944 ￦1,439,979 ￦1,375,286

For the Year Ended December 31,2015 2016 2017

(In millions of Won)Net income (loss) under IFRS as issued by the IASB ￦ 624,685 ￦ 795,117 ￦ 546,341

Profit before income taxRevenue recognition of development and sale of real estate 8,711 3,597 20,033

Income tax (2,108 ) (870 ) (4,848 )Net income (loss) under K-IFRS ￦ 631,288 ￦ 797,844 ￦ 561,526

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Table of ContentsRecent Accounting Pronouncements under IFRS

For a summary of new standards, amendments and interpretations issued under IFRS as issued by the IASB but not effective for2017, and which have not been adopted early by us, see Note 2.2 to the Consolidated Financial Statements.

Operating Revenues and Operating Expenses

Operating Revenues

Our operating revenues primarily consist of:

� fees related to our mobile services, including monthly fees, usage charges for outgoing calls, usage charges for wirelessdata transmission, contents download fees, mobile-to-mobile interconnection revenues and value-added monthly servicefees;

� fees from our fixed-line services, including:

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

Ø monthly basic charges, which are one-time or monthly fixed charges primarily consisting of (i) non-refundableinstallation fees; and (ii) basic monthly charges from local telephone services (or fixed monthly charges fordiscount plans);

Ø 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 revenues, (primarily (a) amounts we bill to our customers for outgoing calls made to foreigncountries, (b) amounts we bill to foreign telecommunications carriers for connection to the domestic telephonenetwork in respect of incoming calls at the applicable settlement rate, and (c) other revenues, includingrevenues from international leased lines); (iii) land-to-mobile and land-to-land interconnection revenues;(iv) interconnection fees we charge to fixed-line and mobile service providers and voice resellers for their use ofour local, domestic long-distance and international networks in providing their services; and

Ø other revenues from (i) value-added services, including �1588� intelligent network call services, local telephonedirectory assistance, call waiting and caller identification services; and (ii) local, domestic long-distance andinternational calls placed from public telephones.

Ø Internet service revenues which consist of:

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

Ø other Internet-related service revenues related to our infrastructure and solution services for businessenterprises, IPTV and network portal services;

Ø data communication service revenues, primarily consisting of installation fees and basic monthly charges for ourleased line services and Kornet Internet connection service and revenues from our satellite services;

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Table of Contents� revenues from goods sold that are generated primarily by sale of mobile handsets and specially designed phones for fixed-

line and mobile convergence services, net of any subsidies paid directly to customers, as well as certain sales by ourconsolidated subsidiaries, such as sale of real estate properties developed by KT Estate;

� financial service revenues, primarily consisting of fees from credit card services provided by BC Card Co., Ltd., ourconsolidated subsidiary; and

� other revenues that are primarily derived from information technology and network services, satellite services, securityservices and real estate leasing services.

Operating Expenses

Our operating expenses primarily include:

� salaries and wages, including post-employment benefits, termination benefits (including severance benefits for voluntaryand special early retirements) and share-based payments;

� depreciation expenses incurred primarily in connection with our telecommunications network facilities;

� purchase of inventories, primarily consisting of (i) inventories purchased for our sale of mobile handsets and speciallydesigned phones for fixed-line mobile convergence services and (ii) development expenses of KT Estate for real estateunits to be sold, and changes of inventories, which reflects increases or decreases of inventories of handsets, phones andfor-sale real estate units during the applicable period;

� card service costs, primarily consisting of costs in connection with credit card services provided by BC Card Co., Ltd.,including fees paid to member credit card companies in our network for marketing expenses and for costs associated withthe present value and default risks of installment card charges which are borne by such member companies;

� sales commissions, primarily consisting of sales commissions to third-party dealers related to procurement of mobilesubscribers and mobile handset sales;

� commissions, primarily consisting of commission-based payments for certain third-party outsourcing services, includingcommissions to the outsourced call center staff;

� service cost, primarily consisting of payments for certain third-party outsourcing services, including payments for softwaredevelopment and design, data analysis and processing, and installment and maintenance of IT and satellite equipment;and

� interconnection charges, which are interconnection payments to telecommunication service providers for calls from landlineusers and our mobile subscribers to our competitors� subscribers.

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Table of ContentsOperating Results��2016 Compared to 2017

The following table presents selected income statement data and changes therein for 2016 and 2017:

ChangesFor the Year EndedDecember 31, 2016 vs. 2017

2016 2017 Amount %(In billions of Won)

Operating revenues ￦23,121 ￦23,547 ￦ 426 1.8 %Revenue 22,755 23,260 505 2.2Others 366 287 (79 ) (21.6)

Operating expenses 21,781 22,478 697 3.2Operating profit (loss) 1,340 1,069 (271 ) (20.2)Finance income 296 406 110 37.2Finance costs (515 ) (645 ) (130 ) 25.2Income from joint ventures and associates 3 (14 ) (17 ) N.M.Profit (loss) from continuing operations before income tax 1,123 817 (306 ) (27.2)Income tax expense (benefit) 328 271 (57 ) (17.4)Profit (loss) for the period from continuing operations 795 546 (249 ) (31.3)Profit from discontinued operations � � � �

Profit (Loss) for the period ￦795 ￦546 ￦ (249 ) (31.3)

N.M. means not meaningful.

Operating Revenues

The following table presents a breakdown of our operating revenues and changes therein for 2016 and 2017:



Mobile services ￦7,366 ￦7,122 ￦ (244 ) (3.3 )%Fixed-line services 6,917 7,121 204 2.9

Fixed-line telephone services:Monthly Basic Charges 616 705 89 14.4Monthly Usage Charges 855 770 (85 ) (9.9 )Others 581 359 (222 ) (38.2)

Sub-total 2,053 1,834 (219 ) (10.7)Internet services:

Broadband Internet access service 2,040 2,082 42 2.1Other Internet-related services 1,799 2,139 340 18.9

Sub-total 3,839 4,221 392 10.2Data communication services 1,025 1,066 41 4.0

Sale of goods 2,808 3,489 681 24.3Financial services 3,568 3,629 61 1.7Other 2,462 2,186 (276 ) (11.2)

Total operating revenues ￦23,121 ￦23,547 ￦ 426 1.8 %

Total operating revenues increased by 1.8%, or￦426 billion, from￦23,121 billion in 2016 to￦23,547 billion in 2017 primarilydue to increases in the revenues from sale of goods and our Internet services, the impact of which was partially offset in part by decreasesin the revenues from our mobile services and fixed-line telephone services.

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Table of ContentsMobile Services

Our mobile services revenues decreased by 3.3%, or￦244 billion, from￦7,366 billion in 2016 to￦7,122 billion in 2017primarily due to a decrease in our average revenue per user and, to a lesser extent, an increase in the maximum tariff discount to 25%from the prior 20%. Our average revenue per user decreased mainly due to many of our new mobile subscribers being subscribers fortheir second mobile devices with economic rate plans providing lower monthly rates. The increase in the maximum tariff discount cameinto effect as of September 15, 2017 and many of our subscribers paid lower fees since then. The decrease in mobile service revenueswas partially offset by a 5.9% increase in our mobile subscribers from approximately 18,892,000 as of December 31, 2016 toapproximately 20,015,000 as of December 31, 2017.

Fixed-line Services

Our fixed-line services revenues in the aggregate increased by 2.9%, or￦204 billion, from￦6,917 billion in 2016 to￦7,121 billion in 2017 primarily due to increases in Internet services revenues and data communication services revenues, the impact ofwhich was partially offset by a decrease in our fixed-line telephone services revenues.

Fixed-line Telephone Services. Our fixed-line telephone services revenues decreased by 10.7%, or￦219 billion, from￦2,053 billion in 2016 to￦1,834 billion in 2017 due to decreases in other fixed-line telephone services revenues and monthly usagecharges, which was partially offset by an increase in monthly basic charges. Our other fixed-line telephone service revenue decreasedprimarily due to the continuing erosion of fixed-line services by mobile telephone services, Internet phone services and other VoIPservices, as well as a decrease in the number of lines in service from 11.9 million in 2016 to 11.2 million in 2017. Our monthly usagecharges decreased primarily due to the continuing decrease in the usage of fixed-line services. Our domestic long-distance call minutesdecreased from 1.5 billion in 2016 to 1.1 billion in 2017 and local call pulses from 2.2 billion in 2016 to 1.6 billion in 2017. Our monthlybasic charges increased primarily due to an increase in subscribers to our unlimited fixed-line telephone service plan in 2017 which offersunlimited call minutes for fixed monthly basic charges priced higher than previous plans with lower monthly basic charges and additionalusage charges.

Internet Services. Our Internet service revenues increased by 10.0%, or￦382 billion, from￦3,839 billion in 2016 to￦4,221 billion in 2017 primarily due to an increase in the number of IPTV subscribers from approximately 7.0 million as of December 31,2016 to approximately 7.5 million as of December 31, 2017 and an increase in the number of our olleh GiGA Internet Service subscribersfrom approximately 2.4 million as of December 31, 2016 to approximately 3.9 million as of December 31, 2017.

Data Communication Services. Our data communication services revenues increased by 4.0%, or￦41 billion, from￦1,025 billion in 2016 to￦1,066 billion in 2017 primarily due to an increase in revenues from our co-location and server leasing servicesoffered to corporate customers.

Sale of Goods

Revenues from sale of goods increased by 24.3%, or￦681 billion, from￦2,808 billion in 2016 to￦3,489 billion in 2017primarily due to an increase in the sale of mobile handsets in 2017 compared to 2016 and, to a lesser extent, an increase in revenuesfrom development and sale of real estate by KT Estate. The sale of mobile handsets in 2017 increased largely due to an increase in thenumber of handset units sold and, to a lesser extent, an increase in the per-unit price of premium handsets.

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Table of ContentsFinancial Services

Financial services revenues increased by 1.7%, or￦61 billion, from￦3,568 billion in 2016 to￦3,629 billion in 2017 primarilydue to an increase in commission revenues from our financial subsidiaries, in particular BC Card Co., Ltd., primarily as a result ofincreased usage of credit cards and an increase in disposal of available-for-sale financial assets, primarily related to the sale of capitalstock in MasterCard, previously owned by BC Card Co., Ltd, which was partially offset by a decreased usage by incoming tourists inKorea of foreign credit cards processed through BC Card Co., Ltd. in 2017, as compared to 2016.

Others

Other operating revenues decreased by 11.2%, or￦276 billion, from￦2,462 billion in 2016 to￦2,186 billion in 2017 primarilydue to a decrease in revenues from our systems integration business.

Operating Expenses

The following table presents a breakdown of our operating expenses and changes therein for 2016 and 2017:



Salaries and wages ￦3,478 ￦3,568 ￦ 90 2.6 %Depreciation 2,763 2,746 (17 ) (0.6 )Commissions 1,099 1,086 (13 ) (1.2 )Interconnection charges 690 641 (49 ) (7.1 )Purchase of inventories 3,407 4,054 647 19.0Changes of inventories 162 (187 ) (349 ) N.M.Sales commission 1,968 2,202 234 11.9Service cost 1,322 1,428 106 8.0Card service costs 3,050 3,095 45 1.5Insurance premium 178 69 (109 ) (61.2)Others (1) 3,664 3,777 113 3.1

Total operating expenses ￦21,781 ￦22,478 ￦ 697 3.2 %


(1) Including other operating expenses (which include other expenses) amortization of intangible assets, rent, utilities, international interconnection fee, installation fee,taxes and dues, research and development expenses and advertising expenses.

Total operating expenses increased by 3.2%, or￦697 billion, from￦21,781 billion in 2016 to￦22,478 billion in 2017 primarilydue to increases in purchase of inventories, sales commission and service cost, the impact of which was partially offset by decreases inchanges of inventories and insurance premium described below. Specifically:

� Purchase of inventories increased by 19.0%, or￦647 billion, from￦3,407 billion in 2016 to￦4,054 billion in 2017primarily due to an increase in purchase of mobile handsets (consisting of an increase in the total number of mobilehandsets (mostly smartphones) purchased and an increase in the per-unit price of handsets) and, to a lesser extent, anincrease in development expenses of for-sale real estate units.

� Sales commission increased by 11.9%, or￦234 billion, from￦1,968 billion in 2016 to￦2,202 billion in 2017 primarily dueto an increase in sales commissions that we paid to

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Table of Contentsthird-party dealers for procurement of mobile subscribers and mobile handset sales, both of which increased in 2017.

� Service cost, increased by 8.0%, or￦106 billion, from￦1,322 billion in 2016 to￦1,428 billion in 2017, primarily due to anincrease in service costs relating to our IPTV and mobile services such as purchases of contents to meet increased anddiversified demand from customers and an increase in installation fees as more sophisticated technologies andcorresponding higher fees were required for the installation of certain new equipment and facilities.

These factors were partially offset by the following:

� Changes of inventories, which reflects inventory changes during a period by calculating inventories at the beginning ofperiod minus those at the end of period, amounted to￦162 billion in 2016 and￦(187) billion in 2017, which meansinventories increased by￦187 billion in 2017 while they decreased by￦162 billion in 2016. This was primarily due to anincrease in purchase of handsets in 2017 compared to 2016 as described above, which was partially offset by an increasein the sale of handsets in 2017 compared to 2016. Cost of sale of goods (which is the sum of changes of inventories andpurchase of inventories) in 2017 increased by 8.3% to￦3,867 billion from￦3,569 billion in 2016, primarily reflecting anincrease in handset unit sales and an increase in per-unit cost of handsets, in each case in 2017 compared to 2016.Per-unit cost of handsets increased primarily due to the higher per-unit cost of premium handsets, which was partiallyoffset by the lower per-unit cost of second device purchased by certain of our mobile subscribers. The increase in thehandset unit sales was primarily due to the unusually lower handset unit sales in 2016 (due to mechanical defects ofGalaxy Note 7 in 2016 as further explained in ��Operating Results�2015 Compared to 2016�Operating Expenses�). Thehandset unit sales were normalized in 2017 in the absence of such one-off event.

� Insurance premium decreased by 61.2%, or￦109 billion, from￦178 billion in 2016 to￦69 billion in 2017 primarily due toa decrease in insurance premium rates for our handsets.

Operating Profit

Due to the factors described above, our operating profit decreased by 20.2%, or ￦271 billion, from￦1,340 billion in 2016 to￦1,069 billion in 2017. Our operating margin, which is operating profit as a percentage of operating revenues, was 5.8% in 2016 and4.5% in 2017.

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Table of ContentsFinance Income (Costs)

The following table presents a breakdown of our finance income and costs and changes therein for 2016 and 2017:



Interest income ￦ 116 ￦ 93 ￦ (23 ) (19.5)%Interest expense (337 ) (302 ) 35 10.3Net foreign currency transaction gain (loss) (13 ) 39 52 N.M.Net foreign currency translation gain (loss) (110 ) 213 323 N.M.Net gain (loss) on settlement of derivatives 8 (59 ) (67 ) N.M.Net gain (loss) on valuation of derivatives 109 (210 ) (319 ) N.M.Net other finance costs (1) 8 (12 ) (20 ) N.M.

Net finance costs ￦ (219 ) ￦ (238 ) ￦ (19 ) 8.8 %


(1) Including net other finance income and expenses, loss on disposal of trade receivables and impairment loss on available-for-sale financial assets.

Our net finance costs decreased by 8.8%, or￦19 billion, from￦219 billion in 2016 to￦238 billion in 2017, primarily due to anincrease in net foreign currency translation gain, the impact of which was mostly offset by an increase in loss on valuation of derivatives.To a lesser extent, the decrease in our net finance costs in 2017 was also attributable to an increase in net foreign currency transactiongain and a decrease in net interest expense, partially offset by an increase in loss on settlement of derivative. Specifically:

� We recognized a net foreign currency translation gain of￦213 billion in 2017, whereas we recognized a net loss of￦110 billion in 2016. Such increase in net gain was primarily due to appreciation of the Won against the U.S. dollar andthe Japanese Yen in 2017, while the Won depreciated against such currencies in 2016. In general, we recognize netforeign currency translation gain when the Won appreciates against foreign currencies, especially the U.S. dollar, primarilybecause of our foreign currency-denominated debt and foreign currency-denominated payables to overseas equipmentsellers and foreign carriers. The Market Average Exchange Rate of the Won against the U.S. dollar appreciated from￦1,208.5 to US$1.00 as of December 30, 2016 to￦1,071.4 to US$1.00 as of December 31, 2017. In 2017, the impact ofnet foreign currency translation gain was largely offset by a net loss on valuation of derivatives.

� We recognized a net loss on valuation of derivatives of￦210 billion in 2017, whereas we recognized a net gain of￦109 billion in 2016. Such increase in net loss was primarily due to an increase in a loss from our currency swap contractsas a result of appreciation of the Won against the U.S. dollar and the Japanese Yen in 2017 compared to depreciation ofthe Won against such currencies in 2016. We entered into derivative instruments for foreign exchange risk hedgingpurposes and generally recognize net loss on valuation of derivatives when the Won appreciates against foreigncurrencies.

Income from Joint Ventures and Associates

We recognized loss from share of net profits from associates and joint ventures of ￦14 billion in 2017, whereas we recognized again of￦3 billion in 2016.

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Table of ContentsIncome Tax Expense

Income tax expense decreased by 17.4%, or￦57 billion, from￦328 billion in 2016 to￦271 billion in 2017, primarily due to adecrease in profit before income tax, which decreased by￦306 billion, from￦1,123 billion in 2016 to￦817 billion in 2017. See Note 28to the Consolidated Financial Statements.

Profit from Discontinued Operations

We did not have any profit from discontinued operations in 2016 and 2017.

Profit for the Period

Due to the factors described above, our profit for the period decreased by 31.3%, or ￦249 billion, from￦795 billion in 2016 to￦546 billion in 2017. Our net profit margin, which is net profit for the period as a percentage of operating revenues was 3.5% in 2016 and2.3% in 2017.

Segment Results��Customer/Marketing Group

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, increased slightly by 0.6%, or￦99 billion, from￦16,144 billion in 2016 to￦16,243 billion in 2017 primarily due to increases in revenues from our Internet services anddata communication services, which was partially offset by decreases in revenues from our mobile services and fixed-line telephoneservices, all as described above.

Our operating income for this segment, prior to adjusting for inter-segment transactions, decreased by 3.0%, or ￦31 billion, from￦1,050 billion in 2016 to￦1,019 billion in 2017, as the￦130 billion increase in operating expenses outpaced the￦99 billion increase inthe segment�s operating revenues. For this segment, operating margin, which is operating income as a percentage of total operatingrevenues prior to adjusting for inter-segment transactions, was 6.5% in 2016 and 6.3% in 2017.

Depreciation and amortization, prior to adjusting for inter-segment transactions, increased by 0.9%, or ￦26 billion, from￦2,870 billion in 2016 to￦2,896 billion in 2017.

Segment Results��Finance Group

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, increased by 1.7%, or ￦60 billion,from￦3,578 billion in 2016 to￦3,638 billion in 2017 primarily due to an increase in commission revenues of and an increase in disposalof available-for-sale assets by BC Card Co., Ltd., our financial subsidiary, which was partially offset by a decreased usage of foreign creditcards processed through BC Card Co., Ltd., as described above.

Our operating income for this segment, prior to adjusting for inter-segment transactions, decreased by 1.4%, or ￦3 billion, from￦209 billion in 2016 to￦206 billion in 2017, as the￦63 billion increase in operating expenses outpaced the￦60 billion increase in thesegment�s operating revenues. Operating margin for this segment decreased from 5.8% in 2016 to 5.7% in 2017.

Depreciation and amortization, prior to adjusting for inter-segment transactions, decreased by 0.1%, or ￦41 million, from￦29 billion in 2016 to￦29 billion in 2017.

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Table of ContentsSegment Results��Satellite TV Group

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, increased by 2.5%, or ￦17 billion,from￦669 billion in 2016 to￦686 billion in 2017, primarily due to an increase in revenues from an increase in the number of TVshopping channels and other fee-generating platforms.

Our operating income for this segment, prior to adjusting for inter-segment transactions, decreased by 6.3%, or ￦5 billion, from￦80 billion in 2016 to￦75 billion in 2017, as the￦22 billion increase in operating expenses outpaced the￦17 billion increase in thesegment�s operating revenues. Operating margin for this segment decreased from 12.0% in 2016 to 10.9% in 2017.

Depreciation and amortization, prior to adjusting for inter-segment transactions, increased by 0.3%, or ￦0.3 billion, from￦99 billion in 2016 to￦99 billion in 2017.

Segment Results��Others

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, increased by 5.5%, or ￦344 billion,from￦6,308 billion in 2016 to￦6,652 billion in 2017, primarily due to an increase in sale of handsets and an increase in revenues fromthe development and sale of real estate by our consolidated subsidiary.

For this segment, prior to adjusting for inter-segment transactions, we recorded an operating income of ￦40 billion in 2016,compared to an operating loss of￦187 billion in 2017, as the￦571 billion increase in operating expenses outpaced the￦344 billionincrease in the segment�s operating revenues in 2017. For this segment, operating margin was 0.6% in 2016 and the operating lossmargin (operating loss as a percentage of total operating revenues prior to adjusting for inter-segment transactions) was (2.8)% in 2017.

Depreciation and amortization, prior to adjusting for inter-segment transactions, decreased by 2.1%, or ￦7 billion, from￦339 billion in 2017 to￦332 billion in 2016.

Operating Results��2015 Compared to 2016

The following table presents selected income statement data and changes therein for 2015 and 2016:



Operating revenues ￦22,700 ￦23,121 ￦ 421 1.9 %Revenue 22,212 22,755 543 2.4Others 488 366 (122 ) (25.0)

Operating expenses 21,623 21,781 158 0.7Operating profit (loss) 1,077 1,340 263 24.4Finance income 273 296 23 8.4Finance costs (645 ) (515 ) 130 (20.2)Income from joint ventures and associates 6 3 (3 ) (50.0)Profit (loss) from continuing operations before income tax 711 1,123 412 57.9Income tax expense (benefit) 227 328 101 44.5Profit (loss) for the period from continuing operations 484 795 311 64.3Profit from discontinued operations 141 � (141 ) N.M.Profit (Loss) for the period ￦625 ￦795 ￦ 170 27.2


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Table of ContentsOperating Revenues

The following table presents a breakdown of our operating revenues and changes therein for 2015 and 2016:



Mobile services ￦7,260 ￦7,366 ￦ 106 1.5 %Fixed-line services 6,755 6,917 162 2.4

Fixed-line telephone services:Monthly Basic Charges 650 616 (34 ) (5.2 )Monthly Usage Charges 1,022 855 (167 ) (16.3)Others 646 581 (65 ) (10.1)

Sub-total 2,318 2,053 (265 ) (11.4)Internet services:

Broadband Internet access service 1,882 2,040 158 8.4Other Internet-related services 1,479 1,799 320 21.6

Sub-total 3,361 3,839 478 14.2Data communication services 1,076 1,025 (51 ) (4.7 )

Sale of goods 2,756 2,808 52 1.9Financial services 3,483 3,568 85 2.4Other 2,446 2,462 16 0.7

Total operating revenues ￦22,700 ￦23,121 ￦ 421 1.9 %

Total operating revenues increased by 1.9%, or￦421 billion, from￦22,700 billion in 2015 to￦23,121 billion in 2016 primarilydue to increases in the revenues from our Internet services and mobile services, the impact of which was offset in part by a decrease inthe revenues from our fixed-line telephone services.

Mobile Services

Our mobile services revenues increased by 1.5%, or￦106 billion, from￦7,260 billion in 2015 to￦7,366 billion in 2016primarily due to a 4.7% increase in our mobile subscribers from approximately 18,038,000 as of December 31, 2015 to approximately18,892,000 as of December 31, 2016. Such increase in our mobile subscribers was slightly enhanced by an increase in our averagerevenue per user. However, the magnitude of the increase in our average revenue per user in 2016 was smaller, as compared to 2015because many of our new mobile subscribers in 2016 purchased economical rate plans for their secondary mobile devices. Accordingly,although the increase in our mobile subscribers in 2016 was larger, as compared to 2015, the increase in our mobile services revenues in2016 was smaller than the increase in our mobile services revenues in 2015 primarily due to a decrease in the magnitude of the increasein our average revenue per user in 2016, as compared to 2015.

Fixed-line Services

Our fixed-line services revenues in the aggregate increased by 2.4%, or￦162 billion, from￦6,755 billion in 2015 to￦6,917 billion in 2016 primarily due to an increase in Internet services revenues, the impact of which was partially offset by decreases inour fixed-line telephone services revenues and data communication services revenues.

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Table of ContentsFixed-line Telephone Services. Our fixed-line telephone services revenues decreased by 11.4%, or￦265 billion, from

￦2,318 billion in 2015 to￦2,053 billion in 2016 due to decreases in monthly usage charges, other fixed-line telephone services revenuesand monthly basic charges. Specifically:

� Monthly usage charges decreased by 16.3%, or￦167 billion, from￦1,022 billion in 2015 to￦855 billion in 2016 primarilydue to the continuing decrease in the usage of fixed-line services resulting from the continuing increase in the usage ofmobile telephone services, Internet phone services and other VoIP services such as Kakao Talk, Line and Skype, which ledto a decrease in domestic long-distance call minutes from 2.1 billion in 2015 to 1.5 billion in 2016 and a decrease in localcall pulses from 3.0 billion in 2015 to 2.2 billion in 2016.

� Other fixed-line telephone service revenue decreased by 10.1%, or￦65 billion, from￦646 billion in 2015 to￦581 billionin 2016 primarily due to the continuing erosion of fixed-line services, including public telephones, by mobile telephoneservices, Internet phone services and other VoIP services, as well as a decrease in the number of lines in service from2015 to 2016.

� Monthly basic charges decreased by 5.2%, or￦34 billion, from￦650 billion in 2015 to￦616 billion in 2016 primarily dueto a decrease in the number of our telephone lines in service from 12.4 million in 2015 to 11.9 million in 2016.

Internet Services. Our Internet service revenues increased by 14.2%, or￦478 billion, from￦3,361 billion in 2015 to￦3,839 billion in 2016 primarily due to an increase in the number of IPTV subscribers from approximately 6.6 million as of December 31,2015 to approximately 7.0 million as of December 31, 2016 and an increase in the number of our olleh GiGA Internet Service subscribersfrom approximately 1.0 million as of December 31, 2015 to approximately 2.4 million as of December 31, 2016.

Data Communication Services. Our data communication services revenues decreased by 4.7%, or￦51 billion, from￦1,076 billion in 2015 to￦1,025 billion in 2016 primarily due to a decrease in revenues from our leased lines, resulting from increasedcompetition in the data communications market in Korea.

Sale of Goods

Revenues from sale of goods increased by 1.9%, or￦52 billion, from￦2,756 billion in 2015 to￦2,808 billion in 2016 primarilydue to an increase in revenues from development and sale of real estate by KT Estate Inc. which was partially offset by a decrease in thesale of mobile handsets in 2016 compared to 2015. The number of mobile handsets sold in 2016 decreased largely due to ordercancellation and customer returns of Samsung Galaxy Note 7 handsets, caused by the handsets� explosive battery issue.

Financial Services

Financial services revenues increased by 2.4%, or￦85 billion, from￦3,483 billion in 2015 to￦3,568 billion in 2016 primarilydue to an increase in commission revenues from our financial subsidiaries, in particular BC Card Co., Ltd., primarily as a result ofincreased usage of credit cards.

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Table of ContentsOthers

Other operating revenues increased by 0.7%, or￦16 billion, from￦2,446 billion in 2015 to￦2,462 billion in 2016 primarily dueto increases in revenues from our real estate lease business and systems integration business.

Operating Expenses

The following table presents a breakdown of our operating expenses and changes therein for 2015 and 2016:



Salaries and wages ￦3,303 ￦3,478 ￦ 175 5.3 %Depreciation 2,756 2,763 7 0.3Commissions 1,037 1,099 62 6.0Interconnection charges 689 690 1 0.1Purchase of inventories 3,963 3,407 (556 ) (14.0)Changes of inventories (198 ) 162 360 N.M.Sales commission 1,857 1,968 111 6.0Service cost 1,164 1,322 158 13.6Card service costs 2,960 3,050 90 3.0Others (1) 4,092 3,842 (250 ) (6.1 )

Total operating expenses ￦21,623 ￦21,781 ￦ 158 0.7 %


(1) Including other operating expenses (which include other expenses) amortization of intangible assets, rent, insurance premium, utilities, international interconnection fee,installation fee, taxes and dues, research and development expenses and advertising expenses.

Total operating expenses increased by 0.7%, or￦158 billion, from￦21,623 billion in 2015 to￦21,781 billion in 2016 primarilydue to increases in changes of inventories, salaries and wages and service cost, the impact of which was largely offset by decreases inpurchase of inventories and certain other operating expenses described below. Specifically:

� Changes of inventories, which reflects inventory changes during a period by calculating inventories at the beginning ofperiod minus those at the end of period, amounted to￦(198) billion in 2015 and￦162 billion in 2016, which meansinventories decreased by￦162 billion in 2016 while they increased by￦198 billion in 2015. This was primarily due to adecrease in purchase of handsets in 2016 compared to 2015 as described below, which was offset in large part by adecrease in the sale of handsets in 2016 compared to 2015. Cost of sale of goods (which is the sum of changes ofinventories and purchase of inventories) in 2016 decreased by 5.2% to￦3,569 billion from￦3,765 billion in 2015,primarily reflecting a decrease in the cost of handsets and the decreased handset sales, in each case in 2016 compared to2015. The decreases in the cost of handsets and handset sales were primarily due to a decrease in sales of new handsetmodels (which generally have higher prices than older models) such as Galaxy Note 7 due to the models� mechanicaldefects as explained below in connection with the decrease in purchase of inventories in 2016 compared to 2015.

� Salaries and wages increased by 5.3%, or￦175 billion, from￦3,303 billion in 2015 to￦3,478 billion in 2016 primarilydue to an increase in salaries and wages based on seniority and promotions.

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Table of Contents� Service cost, increased by 13.6%, or￦158 billion, from￦1,164 billion in 2015 to￦1,322 billion in 2016, primarily due to

an increase in service costs relating to our IPTV and mobile services such as purchases of contents to meet increased anddiversified demand from customers and an increase in installation fees as more sophisticated technologies andcorresponding higher fees were required for the installation of certain new equipment and facilities.


� Purchase of inventories decreased by 14.0%, or￦556 billion, from￦3,963 billion in 2015 to￦3,407 billion in 2016primarily due to a decrease in the total number of mobile handsets (mostly smartphones) purchased, which was largelyattributable to the returns of Samsung Galaxy Note 7 handsets, which had an explosive battery issue, to the manufacturer.We purchased Galaxy Note 7 handsets for sale to customers but when our customers returned the handsets or cancelledorders, we returned those handsets to the manufacturer resulting in the reduction in purchase of inventories. We recognizethe purchase of mobile handsets as operating expenses during the period when such handsets are purchased regardlessof whether they are actually sold during that period. As a result, the periods when purchase of inventories is recognizedand when the revenue from their sales is recognized could be different.

� Other operating expenses decreased by 6.1%, or￦250 billion, from￦4,092 billion in 2015 to￦3,842 billion in 2016,primarily due to decreases in installation fees of and insurance premiums. Installation fees decreased by 37.2%, or￦93 billion, from￦249 billion in 2015 to￦157 billion in 2016, primarily due to the consolidation of KT Service Bukbu Co.,Ltd. and KT Service Nambu Co., Ltd. in August 2015. The installation fees that we previously paid to the two subsidiariesbefore consolidation were no longer recognized as installation fees upon consolidation; instead, installation expensesincurred by the subsidiaries have been classified as other expenses such as salaries and wages. Insurance premiumsdecreased by 15.6%, or￦33 billion, from￦211 billion in 2015 to￦178 billion in 2016, primarily due to a decrease ininsurance premium rates for our handsets.

Operating Profit

Due to the factors described above, our operating profit increased by 24.4%, or ￦263 billion, from￦1,077 billion in 2015 to￦1,340 billion in 2016. Our operating margin, which is operating profit as a percentage of operating revenues, was 4.7% in 2015 and5.8% in 2016.

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Table of ContentsFinance Income (Costs)

The following table presents a breakdown of our finance income and costs and changes therein for 2015 and 2016:



Interest income ￦ 70 ￦ 116 ￦ 46 65.7 %Interest expense (386 ) (337 ) 49 (12.7)Net foreign currency transaction gain (loss) (24 ) (13 ) 11 (45.8)Net foreign currency translation gain (loss) (164 ) (110 ) 54 (32.9)Net gain (loss) on settlement of derivatives (6 ) 8 14 N.M.Net gain on valuation of derivatives 140 109 (31 ) (22.1)Net other finance costs (1) (2 ) 8 10 N.M.

Net finance costs ￦ (372 ) ￦ (219 ) ￦ 153 (41.1)%


(1) Including net other finance income and expenses, loss on disposal of trade receivables and impairment loss on available-for-sale financial assets.

Our net finance costs decreased by 41.1%, or￦153 billion, from￦372 billion in 2015 to￦219 billion in 2016, primarily due todecreases in net foreign currency translation loss and interest expense and an increase in interest income, the impact of which waspartially offset by a decrease in net gain on valuation of derivatives. Specifically:

� Our net foreign currency translation loss decreased by 32.9%, or￦54 billion, from￦164 billion in 2015 to￦110 billion in2016, primarily due to smaller depreciation of the Won against the U.S. dollar and the Japanese Yen in 2016 compared to2015. The Market Average Exchange Rate of the Won against the U.S. dollar depreciated from￦1,099.2 to US$1.00 as ofDecember 31, 2014 to￦1,172.0 to US$1.00 as of December 31, 2015 and￦1,208.5 to US$1.00 as of December 30,2016. In general, we recognize net foreign currency translation loss when the Won depreciates against foreign currencies,especially the U.S. dollar, primarily because of our foreign currency-denominated debt and foreign currency-denominatedpayables to overseas equipment sellers and foreign carriers. In 2016, the impact of such net foreign currency translationloss was largely offset by the decrease in net gain on valuation of derivatives discussed below.

� Our interest expense decreased by 12.7%, or￦49 billion, from￦386 billion in 2015 to￦337 billion in 2016 primarily dueto a decrease in borrowings and, to a lesser extent, decreased interest rates.

� Our interest income increased by 65.7%, or￦46 billion, from￦70 billion in 2015 to￦116 billion in 2016 primarily due toan increase in the average balance of interest-bearing financial assets we held, including as a result of an increase ininterest rate payment received in connection with reimbursement of certain value added tax in 2016.


� Our net gain on valuation of derivatives decreased by 22.1%, or￦31 billion, from￦140 billion in 2015 to￦109 billion in2016, primarily due to a decrease in gains from our currency swap contracts as a result of smaller depreciation of the Wonagainst the

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Table of ContentsJapanese Yen and the U.S. dollar in 2016 compared to 2015. We entered into derivative instruments for foreign exchangerisk hedging purposes and generally recognize net gain on valuation of derivatives when the Won depreciates againstforeign currencies as described above in the explanation of foreign currency translation loss.

Income from Joint Ventures and Associates

Income from joint ventures and associates decreased by 50.0%, or￦3 billion, from￦6 billion in 2015 to￦3 billion in 2016,primarily due to a loss from joint ventures and associates recognized in connection with a sale of certain real estate by our wholly-ownedsubsidiary KT Estate Inc. to one of our associates and joint ventures, K-Realty Rental Housing REIT 2.

Income Tax Expense

Income tax expense increased by 44.5%, or￦101 billion, from￦227 billion in 2015 to￦328 billion in 2016, primarily due to anincrease in profit before income tax, which increased by￦412 billion, from￦711 billion in 2015 and￦1,123 billion in 2016. See Note 28to the Consolidated Financial Statements.

Profit from Discontinued Operations

We did not have any profit from discontinued operations in 2016, whereas our profit from discontinued operations in 2015 was￦141 billion, primarily due to recognition of net proceeds from the sale of capital stock of KT Rental Co., Ltd and KT Capital Co., Ltd. asprofit from discontinued operations in 2015.

Profit for the Period

Due to the factors described above, our profit for the period increased by 27.2%, or ￦170 billion, from￦625 billion in 2015 to￦795 billion in 2016. Our net profit margin, which is net profit for the period as a percentage of operating revenues was 2.8% in 2015 and3.5% in 2016.

Segment Results��Customer/Marketing Group

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, increased slightly by 0.1%, or￦14 billion, from￦16,130 billion in 2015 to￦16,144 billion in 2016 primarily due to increase in revenues from our Internet services andmobile services, primarily due to an increase in subscribers, which was partially offset by a decrease in the fixed-line services revenues,all as described above.

Our operating income for this segment, prior to adjusting for inter-segment transactions, increased by 28.6%, or ￦233 billion,from￦817 billion in 2015 to￦1,050 billion in 2016, as the segment�s operating expenses decreased by￦219 billion while thesegment�s operating revenue increased by￦14 billion as described above. For this segment, operating margin, which is operatingincome as a percentage of total operating revenues prior to adjusting for inter-segment transactions, was 5.1% in 2015 and 6.5% in 2016.

Depreciation and amortization, prior to adjusting for inter-segment transactions, decreased by 1.0%, or ￦28 billion, from￦2,898 billion in 2015 to￦2,870 billion in 2016.

Segment Results��Finance Group

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, increased by 1.9%, or ￦65 billion,from￦3,513 billion in 2015 to￦3,578 billion in 2016 primarily due

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Table of Contentsto an increase in commission revenues from our financial subsidiaries, in particular BC Card Co., Ltd, as described above.

Our operating income for this segment, prior to adjusting for inter-segment transactions, decreased by 25.6%, or ￦72 billion,from￦281 billion in 2015 to￦209 billion in 2016, as the￦137 billion increase in operating expenses outpaced the￦65 billion increasein the segment�s operating revenues. Operating margin for this segment decreased from 8.0% in 2015 to 5.8% in 2016.

Depreciation and amortization, prior to adjusting for inter-segment transactions, increased by 16.0%, or ￦4 billion, from￦25 billion in 2015 to￦29 billion in 2016.

Segment Results��Satellite TV Group

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, slightly increased by 0.1%, or￦0.4 billion, from￦668.5 billion in 2015 to￦668.9 billion in 2016, primarily due to an increase in revenues from an increase in thenumber of TV shopping channels and other fee-generating platforms.

Our operating income for this segment, prior to adjusting for inter-segment transactions, decreased by 18.1%, or ￦18 billion,from￦98 billion in 2015 to￦80 billion in 2016, as the￦18 billion increase in operating expenses outpaced the￦0.4 billion increase inthe segment�s operating revenues. Operating margin for this segment decreased from 14.6% in 2015 to 12.0% in 2016.


Segment Results��Others

Our operating revenues for this segment, prior to adjusting for inter-segment transactions, increased by 3.1%, or ￦192 billion,from￦6,116 billion in 2015 to￦6,308 billion in 2016, primarily due to increases in revenues from the development and sale of real estateby our consolidated subsidiary.

For this segment, prior to adjusting for inter-segment transactions, we recorded an operating loss of ￦100 billion in 2015,compared to an operating income of￦40 billion in 2016, as the￦192 billion increase in operating revenues outpaced the￦52 billionincrease in the segment�s operating expenses in 2016. For this segment, operating loss margin (operating loss as a percentage of totaloperating revenues prior to adjusting for inter-segment transactions) was (1.6)% in 2015 and the operating margin was 0.6% in 2016.


Item 5.B. Liquidity and Capital Resources

The following table sets forth the summary of our cash flows for the periods indicated:

For the Years Ended December 31,2015 2016 2017

(In billions of Won)Net cash provided by operating activities ￦ 4,230 ￦ 4,771 ￦ 3,878Net cash used in investing activities (2,402 ) (3,485 ) (3,483 )Net cash provided by (used in) financing activities (1,164 ) (943 ) (1,363 )Cash and cash equivalents at beginning of period 1,889 2,559 2,900Cash and cash equivalents at end of period 2,559 2,900 1,928Net increase (decrease) in cash and cash equivalents 670 341 (972 )

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Table of ContentsCapital Requirements

Historically, our capital requirements consisted principally of purchases of property and equipment and other assets andrepayments of borrowings. In our investing activities, we used cash of￦3,116 billion in 2015,￦2,764 billion in 2016 and￦2,442 billion in2017 for the acquisition of property and equipment and investment properties. In our financing activities, we used cash of ￦6,648 billion in2015,￦1,769 billion in 2016 and￦1,780 billion in 2017 for repayment of borrowings and debentures.

From time to time, we may also require capital for investments involving acquisitions, including shares of our affiliates, andstrategic relationships. For example, in October 2011, we, through our former subsidiary KT Capital Co., Ltd., acquired an additional1,622,520 common shares of BC Card Co., Ltd. from Woori Bank, Busan Bank and Shinhan Card for approximately￦252 billion. Weacquired an additional 1,349,920 common shares of BC Card Co., Ltd. in January 2012 for approximately ￦287 billion, and owned 69.5%interest in BC Card Co., Ltd. as of December 31, 2017. Any such additional investments or acquisitions may require significant capital.

Our cash dividends paid to shareholders and non-controlling interests amounted to￦42 billion in 2015,￦184 billion in 2016and￦243 billion in 2017.

We anticipate that capital expenditures and repayment of outstanding contractual obligations and commitments will represent themost significant use of funds for the next several years. We may also require capital for purchase of shares of our affiliates as well asinvestments involving acquisitions and strategic relationships. We compete in the telecommunications sector in Korea, which is rapidlyevolving. In recent years, competition among us, SK Telecom and LG U+ to commercialize 5G services has intensified and we have madeand will continue to make capital expenditure to develop 5G service capabilities and technologies. We may need to incur additional capitalexpenditures to keep up with unexpected developments in rapidly evolving telecommunications technology. There can be no assurancethat we will be able to secure funds on satisfactory terms from financial institutions or other sources that are sufficient for our unanticipatedneeds.

Payments of contractual obligations and commitments will also require considerable resources. In our ordinary course ofbusiness, we routinely enter into commercial commitments for various aspects of our operations, including repair and maintenance. Wehave also provided guarantees to our affiliates. See Note 19 to the Consolidated Financial Statements for a disclosure of the guaranteesprovided.

The following table sets forth selected information regarding our contractual obligations to make future payments as ofDecember 31, 2017:

Payments Due by Period

Contractual Obligations (1) TotalLess than

1 Year1-3

Years4-5

YearsAfter 5Years

(In billions of Won)Long-term debt obligations (including current portion of long-term debt) ￦6,575 ￦ 1,446 ￦1,763 ￦1,436 ￦1,930Finance lease obligations (including any interests) 220 88 103 29 �Operating lease obligations 377 109 174 92 2Severance payment obligations (2) 4,714 143 377 430 3,764Asset retirement obligations 115 32 14 9 60Long-term accounts payable�others 1,086 222 446 277 141Total ￦13,087 ￦ 2,040 ￦2,877 ￦2,273 ￦5,897Estimate of interest payment based on contractual interest rates effective as of December 31,

2017 ￦1,006 ￦ 183 ￦270 ￦172 ￦381

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(1) Contractual obligations represent contractual liabilities as of the consolidated balance sheet date excluding refundable deposits for telephone installation and accrualsfor customer call bonus points, which do not have definitive payment schedules.

(2) The amount represents undiscounted pension benefit as of December 31, 2017.

Capital Resources

We have traditionally met our working capital and other capital requirements principally from cash provided by operations, whileraising the remainder of our requirements primarily through debt financing. From time to time, we have also disposed of our treasuryshares to meet our capital requirements.

Our major sources of cash have been net cash provided by operating activities, including profits for the period, expenses notinvolving cash payments such as depreciation and amortization, and proceeds from issuance of bonds and borrowings. We expect thatthese sources will continue to be our principal sources of cash in the future. We recorded profits for the period of￦625 billion in 2015,￦795 billion in 2016 and￦546 billion in 2017, as discussed in �Item 5.A. Operating Results.� Non-cash expense adjustments in ourstatement of cash flows from depreciation and amortization of intangible assets amounted to ￦3,640 billion in 2015,￦3,422 billion in2016 and￦3,438 billion in 2017, primarily reflecting our capital investment activities during the recent years, including our purchase ofbandwidths for our operations, investments in LTE-related structures and acquisition of real estate. Cash proceeds from borrowings anddebentures were￦5,675 billion in 2015,￦1,123 billion in 2016 and￦616 billion in 2017. As of December 31, 2017, we held 16,014,753treasury shares.

Since 2012, we have disposed 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 also entered into asset management agreements with each of thesespecial purpose companies, and will be receiving management fees from such companies. See Note 19 to the Consolidated FinancialStatements.

We believe that we have sufficient working capital available to us for our current requirements and that we have a variety ofalternatives 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. For example, wesuccessfully issued (i) three series of notes for an aggregate amount of￦450 billion in January 2015, (ii) Japanese Yen 15 billion of0.48% notes due 2018 in February 2015, (iii) US$400 million of 2.500% notes due 2026 in July 2016 and (iv) US$400 million of 2.625%notes due 2022 in August 2017. See Note 15 to the Consolidated Financial Statements. However, our ability to rely on some of thesealternatives could be affected by factors such as the liquidity of the Korean and the global financial markets, prevailing interest rates, ourcredit rating and the Government�s policies regarding Won currency and foreign currency borrowings. Other factors which could materiallyaffect our liquidity in the future include unanticipated increase in capital expenditures and decrease in cash provided by operationsresulting from a significant decrease in demand for our services. We may also need to raise additional capital sooner than we expect inorder to fund unanticipated investments and acquisitions.

Our total equity was￦12,156 billion as of December 31, 2015,￦12,783 billion as of December 31, 2016 and￦13,049 billionas of December 31, 2017.

Liquidity

We had a working capital (current assets minus current liabilities) deficit of ￦56 billion as of December 31, 2015 and a workingcapital surplus of￦193 billion as of December 31, 2016 and

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Table of Contents￦220 billion as of December 31, 2017. The following table sets forth the summary of our significant current assets for the periodsindicated:

As of December 31,2015 2016 2017

(In billions of Won)Cash and cash equivalents ￦2,559 ￦2,900 ￦1,928Trade and other receivables, net 4,854 5,327 5,814Inventories, net 617 455 642Other financial assets 293 721 973

Our cash and cash equivalents (substantially all of which are in Won) totaled￦2,559 billion as of December 31, 2015,￦2,900 billion as of December 31, 2016 and￦1,928 billion as of December 31, 2017. Under IFRS as issued by IASB, bank deposits heldat call and all other highly liquid temporary cash instruments within maturities of three months are considered as cash equivalents. Othercurrent financial assets primarily consist of financial instruments, available-for-sale financial assets and derivatives used for hedge.

The following table sets forth the summary of our significant current liabilities for the periods indicated:

As of December 31,2015 2016 2017

(In billions of Won)Trade and other payables ￦6,335 ￦7,140 ￦7,424Borrowings 1,726 1,820 1,573

Substantially all of our revenues are denominated in Won. Depreciation of the Won would have an adverse effect on our theresults of operations as a result of, among other things, increases in the amount of Won required to make interest and principal paymentson our foreign currency-denominated debt, the prices in Won 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 exchangerisk hedging purposes. As of December 31, 2017, we entered into various commitments with financial institutions totaling ￦2,881 billionand US$254 million. See Note 19 to the Consolidated Financial Statements. As of December 31, 2017,￦563 billion and US$181 millionwas used under these facilities. Of the￦6,684 billion total book value of debentures and borrowings outstanding as of December 31,2017,￦2,062 billion was denominated in foreign currencies. Upon identification and evaluation of our currency risk exposures, we, havingconsidered various circumstances, enter into derivative financial instruments to try to manage some of such risks. See and �Item 11.Quantitative and Qualitative Disclosures About Market Risk�Exchange Rate Risk and Interest Rate Risk.� We have not had, and do notbelieve that we will have, difficulty gaining access to short-term financing sufficient to meet our current requirements.

Capital Expenditures

We used cash of￦3,116 billion in 2015,￦2,764 billion in 2016 and￦2,442 billion in 2017 for the acquisition of property, plantand equipment and investment property.

Our current capital expenditure plan, on a separate basis, calls for the expenditure of approximately ￦2,300 billion in 2018,which may be adjusted depending on market conditions and our results of operations. The principal components of our capital investmentplans are:

� approximately￦1,150 billion in capital investments for our access network;

� approximately￦450 billion in capital investments for our backbone network;

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Table of Contents� approximately￦400 billion in capital investments for our business-to-business services; and

� approximately￦300 billion in capital investments for other services including R&D costs.

Inflation

We do not consider that inflation in Korea has had a material impact on our results of operations in recent years. According todata published by the Bank of Korea, annual inflation in Korea was 0.7% in 2015, 1.0% in 2016 and 1.9% in 2017. See �Item 3. KeyInformation�Item 3.D. Risk Factors�Korea is our most important market, and our current business and future growth could be materiallyand adversely affected if economic or political conditions in Korea deteriorate.�

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

In order to maintain our leadership in the converging telecommunications business environment and develop additionalplatforms, services and applications, we operate:

� An artificial intelligence R&D laboratory;

� A block-chain R&D laboratory;

� a new business development and incubation center;

� an infrastructure R&D laboratory;

� a service R&D laboratory; and

� a convergence R&D laboratory.

As of December 31, 2017, KT Corporation had 5,019 registered patents domestically and 1,044 registered patentsinternationally.

The MSIT has the authority to recommend to network service providers that they provide funds for national research anddevelopment of telecommunications technology and related projects. The required annual contribution is 0.5% (0.75% for marketdominant service providers like us) of revenues attributable to key communications services (excluding revenues from telecommunicationsservice using an allotted frequency if the consideration for such allotted frequency has been paid) from wireless subscribers for theprevious year, and is applicable only to those network service providers who have at least ￦30 billion in total sales for the previous yearand have recorded no net loss in the current period. Under the policy, the maximum amount of the annual contribution to be made cannotexceed 70.0% of the net profit for the corresponding period of each company. Including such contributions, total expenditures (whichinclude capitalized expenses) on research and development were￦225 billion in 2015,￦204 billion in 2016 and￦416 billion in 2017.

In recent years, we have focused our research and development efforts in the following areas:

� Launching 5G trial services at PyeongChang 2018 Winter Olympics and developing commercialized 5G network andservices;

� simplifying complex core networks and reducing costs;

� integrating in-building management solutions for fixed-line and wireless networks;

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Table of Contents� aggregating heterogeneous wireless access for double network throughput;

� a broadband Internet solution that is 10 times faster using legacy copper and fiber lines;

� a telecommunication cloud solution which combines network resource virtualization with cloud computing resource;

� finding solutions for ultra-definition television set top box and additional solutions for smart IPTV;

� smart home networking solutions for multiple devices, such as smartphones, tablets, computers and IPTV, as well aselectric home appliances;

� environment-friendly energy technologies including a smart-grid platform;

� core technologies for convergence services such as IoT, big data, security, networked automobiles, healthcare andbio-informatics; and

� creating a new convergence business model based on ICT and incubating new businesses.

Item 5.D. Trend Information

These matters are discussed under Item 5.A. above where relevant.

Item 5.E. Off-balance Sheet Arrangements

These matters are discussed under Item 5.B. above where relevant.

Item 5.F. Tabular Disclosure of Contractual Obligations

These matters are discussed under Item 5.B. above where relevant.

Item 5.G. Safe Harbor

See �Item 3. Key Information�Item 3.D. Risk Factors�Forward-looking statements may prove to be inaccurate.�

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 fora board of directors consisting of:

� up to three standing directors, including the chief executive officer; 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 KOSPIMarket exceed￦2,000 billion as of the end of the preceding year,

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Table of Contentswhich is the case with us, the Commercial Code of Korea requires such company to have more than three outside directors, with outsidedirectors being the majority of the board of directors. The term of office for a director is up to three years, but the term is extended to theclose of the annual shareholders� meeting convened with respect to the last full fiscal year of a director�s term of office. If the term ofoffice for a director is not completed and ends before the close of the annual general shareholders� meeting and a new director isappointed in his or her place, the term of office for such replacement director will coincide with the uncompleted remaining term of office ofhis or her predecessor.

Under the Commercial Code of Korea, we must establish a committee to nominate candidates for outside directors within theboard of directors, and outside directors must make up more than half of the total members of the outside director candidate nominatingcommittee. According to our articles of incorporation, such committee must consist of one standing 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 directorwhose term is expiring may not be a member of the committee. Our Outside Director Candidate Nominating Committee nominates outsidedirector candidates for appointment at the general shareholders� meeting.

Upon the request of any director (to the extent that the board of directors does not separately authorize only a particular directorto make such request), a meeting of the board of directors will be assembled. The chairperson of the board of directors is elected fromamong the outside directors by a resolution of the board of directors. The term of office of the chairperson is one year.

Our current directors are as follows:

Name PositionDirector

Since Date of Birth

Expirationof

Term ofOffice

Standing Directors (1)

Chang-Gyu Hwang Chief Executive Officer January 2014 January 23, 1953 2020Hyeon Mo Ku President, Chief Strategy Officer March 2016 January 13, 1964 2019Seong Mok Oh President, Network Group March 2018 August 20, 1960 2019

Outside Directors (1)

Do Kyun Song Senior Advisor, Bae, Kim & Lee LLC March 2013 September 20, 1943 2019Sang Kyun Cha Professor, Department of Electrical and Computer

Engineering, Seoul National UniversityMarch 2012 February 19, 1958 2019

Jong-Gu Kim Corporate lawyer, New Dimension Law Group March 2014 July 7, 1941 2020Suk-Gwon Chang Dean, School of Business, Hanyang University March 2014 February 21, 1956 2020Gae-Min Lee Former Editor-in-Chief, The Korea Economic Daily March 2017 November 1, 1946 2020Il Im Professor, Business Administration, Yonsei University March 2017 March 20, 1966 2020Dae-you Kim Former Vice Chairman, Wonik Investment Partners March 2018 July 21, 1951 2021Gang-chul Lee Independent Director, Ultra V Co., Ltd. March 2018 May 6, 1947 2021

(1) All of our standing and outside directors beneficially own less than one percent of the issued shares of KT Corporation in the aggregate.

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Table of ContentsChang-Gyu Hwang has served as our standing director since 2014 and has served as our chief executive officer since January

2014. Prior to joining us, he served as a Distinguished Chair Professor at Sungkyunkwan University, president and National ChiefTechnology Officer of the Office of Strategic Research and Development Planning at the former Ministry of Knowledge and Economy,president and chief technology officer of the Corporate Technology Office at Samsung Electronics Co., Ltd. and as president and chiefexecutive officer of the Semiconductor Business at Samsung Electronics Co., Ltd. Mr. Hwang holds a bachelor�s degree and a master�sdegree in electric engineering from Seoul National University and a Ph.D. in electronic and computer engineering from the University ofMassachusetts, Amherst.

Hyeon Mo Ku has served as our standing director since March 2016 and has served as our president and chief strategy officersince December 2015. He has previously served as chief secretary to our chief executive officer since 2014. Before that, he served aschief operating officer of the Telecom & Convergence Business department. Mr. Ku holds a bachelor�s degree in Industrial Engineeringfrom Seoul National University and a Ph. D. in Management Engineering from Korea Advanced Institute of Science and Technology.

Seong Mok Oh has served as our standing director since 2018 and has served as the president and head of the Network Groupsince 2013. He has previously served as an executive officer of our mobile network business unit and mobile operation and managementsales unit since 2009. Mr. Oh holds bachelor�s, masters and Ph.D. degrees in electrical engineering from Yonsei University.

Do Kyun Song has served as our outside director since March 2013. He is currently a senior advisor to the law firm of Bae,Kim & Lee LLC. He was formerly a standing member of the KCC and the chief executive officer of Seoul Broadcasting System Co., Ltd.Mr. Song holds a bachelor�s degree in Spanish literature from Hankuk University of Foreign Studies.

Sang Kyun Cha has served as our outside director since March 2012. He is currently a professor of electrical and computerengineering at Seoul National University. Previously, he founded Transact In Memory, Inc., a next-generation memory databasemanagement system development company in the United States which was acquired by SAP AG in 2005, and was subsequentlytransformed into SAP Labs Korea, Inc. Mr. Cha holds a bachelor�s degree in electronic engineering from Seoul National University and aPh.D. in database systems from Stanford University.

Jong-Gu Kim has served as our outside director since March 2014. He is currently a corporate lawyer at the New DimensionLaw Group. Previously, he served as the minister of the Ministry of Justice and as the head of the Seoul Supreme Prosecutors� Office.Mr. Kim holds both a bachelor�s degree in law from Seoul National University and a Ph.D. in law from Dongguk University.

Suk-Gwon Chang has served as our outside director since March 2014. He is currently the dean of the School of Business atHanyang University. Mr. Chang was formerly the dean of Hanyang Cyber University Graduate School and the president of the KoreaAssociation for Telecommunication Policy and Korea Media Management Association. Mr. Chang holds a bachelor�s degree in industrialengineering from Seoul National University and a Ph.D. in management science from Korea Advanced Institute of Science andTechnology.

Gae-Min Lee has served as our outside director since March 2017. He was formerly an advisor to the Korea News Editors�Association Fund, editor-in-chief of The Korea Economic Daily and chief executive officer of Hankyung.com. Mr. Lee holds a bachelor�sdegree and a Ph.D. in Economics from Kyung Hee University.

Il Im has served as our outside director since March 2017. He is currently a professor of business administration at YonseiUniversity, a vice headmaster of the Yonsei Graduate School of

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Table of ContentsBusiness and a vice chairman of the Korean Academic Society of Business Administration. Mr. Im holds bachelor�s and master�s degreesin business administration from Seoul National University and a Ph. D in information systems from the University of Southern California.

Dae-you Kim has served as our outside director since March 2018. He formerly served as the vice chairman of WonikInvestment Partners and a professor of Hanyang University. He also previously served as a presidential secretary for economic policies tothe President of Korea. Mr. Kim holds a bachelor�s degree in export studies at Seoul National University and a masters� degree in publicpolicy from the University of Wisconsin.

Gang-chul Lee has served as our outside director since March 2018. He is currently an independent director of Ultra V Co., Ltd.and previously served as a presidential secretary of civil society policies to the President of Korea. Mr. Lee holds a bachelor�s degree inpolitical science and diplomacy from Kyungpook National University.

For the purposes of the Korean Commercial Code, our chief executive officer is deemed to be the �representative director� whois authorized to perform all judicial and extra-judicial acts relating to our business. Our shareholders elect the chief executive officer inaccordance with the provisions of the Commercial Code and our articles of incorporation. In March 2018, we amended our articles ofincorporation in efforts to add more rigor and transparency to the process of selecting our chief executive officer. Our CorporateGovernance Committee conducts investigation and composition of a pool of candidates and selects chief executive officer candidateswhose candidacy will be further examined. Subsequently, the President Candidate Examination Committee examines and selects chiefexecutive officer candidates and submits examination report of such candidates to our board of directors. A chief executive officercandidate 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 andthe 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 thechief executive officer. In such case, the chairperson of the board of directors, on our behalf, signs the management contract.

The board of directors may conduct performance review discussions to determine if the new chief executive officer performed hisor her duties under the management contract, or hire a professional evaluation agency for such purpose. If the board of directorsdetermines, based on the results of the performance review, that the new chief executive officer has failed to achieve the managementgoals, it may propose to dismiss the chief executive officer at a shareholders� meeting.

Senior Management

Our executive officers consist of presidents and senior executive vice presidents. The executive officers other than the standingdirectors are appointed by the chief executive officer.

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Table of ContentsThe current executive officers are as follows:

Name (1) Title and Responsibilities

CurrentPosition Held

Since

Yearswith the

Company (2) Date of BirthDong-Myun Lee President, Institute of Convergence Technology January 2014 26 October 15, 1962Cheol-Soo Kim Senior Executive Vice President, Customer Business Group December 2015 4 February 7, 1963Yoon-Young Park Senior Executive Vice President, Enterprise Business Group December 2017 25 April 18, 1962Pill-Jai Lee Senior Executive Vice President, Marketing Group December 2017 30 October 3, 1961Soo-Jung Shin Senior Executive Vice President, IT Planning Office December 2015 3 January 26, 1965Kyoung-Lim Yun Senior Executive Vice President, Future Convergence

Business OfficeDecember 2014 11 June 14, 1963

Dae-San Lee Senior Executive Vice President, Chief Operating Office,Corporate Management Group

January 2015 31 January 10, 1961

Jong-Jin Yoon Senior Executive Vice President, Public Relations Office December 2017 3 February, 9 1964Sang-Bong Nam Senior Executive Vice President, Ethics Office January 2014 5 October 19, 1963In-Hoe Kim Senior Executive Vice President, CEO Office December 2015 4 June 25, 1964

(1) All of our executive officers beneficially own less than one percent of the issued shares of KT Corporation in the aggregate.

(2) Does not include period of employment by KT Corporation�s affiliates.

Item 6.B. Compensation

Compensation of Directors

In 2017, the total amount of salaries, bonuses (including long-term performance-based incentives for directors) and allowancespaid to all directors of KT Corporation for services in all capacities was approximately ￦4.2 billion, which were paid on a cash basis.

Until February 2010, we had no incentive based compensation program for outside directors. Instead, compensation was paid tooutside directors in fixed amounts as an allowance for any expenses they incurred in executing their duties. The board of directorsintroduced a new compensation program for outside directors in March 2010, which consists of cash and stock grants and requires a oneyear lock-up period, at a ratio of 3 to 1. The total cash basis remuneration for outside directors for 2017 was recorded at ￦692 million.

The compensation of our directors who received total annual compensation exceeding￦500 million in 2017 was as follows:

Name PositionTotal Compensation

in 2017Composition of Total

Compensation(In millions of Won)

Chang-Gyu Hwang Chief Executive Officer ￦2,358 ￦573 (salary);￦1,776 (bonus);￦9(benefits)

Heon Moon Lim President ￦1,006 ￦375 (salary);￦598 (bonus);￦34(benefits)

Hyun Mo Ku President ￦858 ￦365 (salary);￦477 (bonus);￦16(benefits)

The chairperson of our board of directors enters into an employment agreement on our behalf with our chief executive officer.The employment agreement sets certain management targets to be

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Table of Contentsachieved by the chief executive officer as determined by the Evaluation and Compensation Committee each year, including a target for theamount 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 ourcompetitors. Failure to achieve certain thresholds below the targets will allow the board of directors to take actions with respect to the chiefexecutive officer�s employment, including proposing at the shareholders� meeting an early termination of his employment. In addition, thehead of each of our functional departments, the president of each of our subsidiaries and the heads of each regional head office haveentered into employment agreements with the chief executive officer that provide for similar management targets to be achieved by eachof our departments, subsidiaries and regional head offices.

Item 6.C. Board Practices

As of March 23, 2018, none of our standing or outside directors maintained directors� service contracts with us or with any of oursubsidiaries providing for benefits upon termination of employment.

Corporate Governance Committee

The Corporate Governance Committee is comprised of four outside directors and one standing director, Gae-Min Lee, Do KyunSong, Jong-Gu Kim, Suk-Gwon Chang and Hyeon Mo Ku. The chairperson is Gae-Min Lee. The committee is responsible for the reviewof matters with respect to our Corporate Governance Guidelines and our performance under such guidelines to monitor effectiveness ofour corporate governance. The committee is also responsible for authorization of investigation and composition of a pool of internal andexternal chief executive officer candidates and selection of the chief executive officer candidates, who shall be further examined by thePresident Candidate Examination Committee, pursuant to the examination criteria determined by our board of directors. The committeemembers are elected by the board after the annual meeting, and the term of the committee members is one year.

President Candidate Examination Committee

The President Candidate Examination Committee is comprised of one standing director and all of our outside directors. Nomember of this committee shall become a candidate for the position of the chief executive officer during his or her term as a member ofthe committee. The committee�s duties include examining the chief executive officer candidates selected under the examination criteriadetermined by our board of directors, selecting the chief executive officer candidates pursuant to such criteria and reporting to the board ofdirectors the outcome of the examination.

Outside Director Candidate Nominating Committee

The Outside Director Candidate Nominating Committee consists of one standing director and all of our outside directors, otherthan for election of an outside director resulting from the expiration of the term of the office, in which case such outside director whoseterm is expiring may not be a member of the committee. The committee�s duties include reviewing the qualifications of potentialcandidates and proposing nominees to serve as outside directors on our board of directors to the shareholders at the generalshareholders� meeting. The committee members� terms expire immediately after the adjournment of the shareholders� meeting wherethe outside directors are elected.

Evaluation and Compensation Committee

The Evaluation and Compensation Committee is currently comprised of four outside directors, Do Kyun Song, Gae-Min Lee,Gang-chul Lee and Dae-you Kim. The chairperson is Do Kyun Song.

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Table of ContentsThe committee�s duties include prior review of the chief executive officer�s management goals, terms and conditions proposed forinclusion in the management contract of the chief executive officer, including, but not limited to, determining whether the chief executiveofficer has achieved the management goals, and the determination of compensation for the chief executive officer and the standingdirectors. The committee members are elected by the board after the closing of the annual meeting, and the term of the committeemembers is one year.

Executive Committee

The Executive Committee is currently comprised of Chang-Gyu Hwang, Hyeon Mo Ku and Seong Mok Oh. The chairperson isChang-Gyu Hwang. The committee�s duties include the authorization of establishment and management of branch offices, the disposaland sale of stocks of our subsidiaries, which have a market value between￦15 billion and￦30 billion, provided that no change of controlwith respect to such subsidiary occurs as a result of such disposal or sale for stocks with market value of ￦10 billion or more, makinginvestments and providing guarantees between￦15 billion to￦30 billion, the acquisition and disposal of real estate having market valuebetween￦15 billion to￦30 billion, and the issuance of certain debt securities.

Related-Party Transactions Committee

The Related-Party Transactions Committee is currently comprised of four outside directors, Il Lim, Do Kyun Song, Gae-Min Leeand Dae-you Kim. The chairperson is Il Lim. This committee�s duties include reviews of transactions between KT Corporation and itssubsidiaries and ensures compliance with applicable antitrust laws. The committee members are elected by the board after the annualmeeting, and the term of the committee members is one year.

Sustainability Management Committee

The Sustainability Management Committee is currently comprised of four outside directors and one standing director, Sang KyunCha, Gang-chul Lee, Suk-Gwon Chang, Il Im and Seong Mok Oh. The chairperson is Sang Kyun Cha. The committee�s duties includereviews of sustainable management plan, the authorization of establishment of medium- and long-term sustainable managementstrategies, sustainable management results, regular reporting and risk management of sustainable management activities and charitablecontributions between￦100 million to￦1 billion. The committee members are elected by the board after the annual meeting, and theterm 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 committeecomprised 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 Suk-Gwon Chang, Jong-Gu Kim, Sang Kyun Cha and Il Lim. The chairpersonand the financial expert is Suk-Gwon Chang. 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 independent auditors;

� approving the appointment and recommending the dismissal of the internal auditor;

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Table of Contents� evaluating performance of independent auditors;

� approving services to be provided by the independent auditors;

� reviewing annual financial statements;

� reviewing audit results and reports;

� reviewing and evaluating our system of internal controls and policies; and

� examining improprieties or suspected improprieties.

In addition, regarding the shareholders� meeting, the committee may examine the agenda, financial statement and other reportsto be submitted by the board of directors at each shareholders� meeting.

Item 6.D. Employees

On a non-consolidated basis, we had 23,817 employees as of December 31, 2017, compared to 23,575 employees as ofDecember 31, 2016 and 23,531 employees as of December 31, 2015.

Labor Relations

We consider our current relations with our work force to be good. However, in the past, we have experienced opposition from ourlabor union for our strategy of restructuring to improve our efficiency and profitability by disposing of non-core businesses and reducingour employee base.

As of December 31, 2017, about 78.5% of the employees of KT Corporation were members of the KT Trade Union. On behalf ofits members, the union negotiates with us a collective bargaining agreement every two years, and our current collective bargainingagreement expires on October 9, 2019. The current collective bargaining agreement provides that even in the event of a strike, theminimum number of employees necessary to operate the telecommunications business must continue to work.

The union also negotiates with us an annual agreement on wages on behalf of its members. Under the Act of the Promotion ofWorker�s Participation and Cooperation, our Employee-Employer Cooperation Committees, which are composed of representatives ofmanagement and labor for each business unit and regional office, meet quarterly to discuss employee grievances, working conditions andpotential employee-initiated improvements in service or management.

The Trade Union and Labor Relations Adjustment Act (�Labor Act�) allow multiple labor unions to be formed within onecompany. Therefore, additional labor unions may be formed by our employees. Pursuant to such amendments, our employees formed anew labor union called �KT New Union� in July 2011. The Labor Act also requires such multiple unions to consolidate themselves into asingle channel when negotiating with the company on behalf of their members and to enter into a single collective bargaining agreementwith the company. As a result of the recent consolidation of labor unions, KT Trade Union was selected as the bargaining representative ofthe labor unions. Its term as the bargaining representative will last for two years from January 1, 2018.

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 ourshares offered publicly in Korea. The employee stock ownership association owned 0.5% of our issued shares as of December 31, 2017.

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Table of ContentsIn 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. Ouremployees, including executive officers as well as non-executive employees, are subject to a pension insurance system, under which wemake monthly contributions to the pension accounts of the employees, and upon retirement, such employees are paid the pension amountdue from their pension accounts. Prior to April 2011, our executive and non-executive employees were subject to a lump-sum severancepayment system, under which they were entitled to receive a lump-sum severance payment upon termination of their employment, basedon their length of service and salary level at the time of termination. Starting in April 2011, in accordance with the Korean EmployeeRetirement Income Security Act, we replaced such lump-sum severance payment system with our current pension insurance system inthe form of a defined benefit plan, and also introduced a defined contribution plan in December 2012, with a total combined unfundedportion of approximately￦1,566 billion as of December 31, 2017. Lump-sum severance amounts previously accrued prior to our adoptionof 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 welfarefund, industrial disaster insurance, cultural and athletic facilities, physical education grants, meal allowances, medical examinations andtraining 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 and technology specialists who are able to create value for ourcustomers. In order to develop skills of our employees, we require 85 hours of training per year from most of our employees, usingindividually-tailored curriculums based on individual assessments. We also operate Cyber Academy to provide online classes to ouremployees, as well as offer various foreign language classes to our employees. In addition, we provide tuition and living expensereimbursements to our high potential employees who pursue graduate programs in Korea and abroad, as well as provide financialassistance to those who pursue work-related professional licenses or participate in after-work study programs.

Item 6.E. Share Ownership

Ordinary Shares

The persons who currently serve as our directors held, as a group, 75,209 ordinary shares as of April 25, 2018, the most recentdate for which this information is available. The table below shows the ownership of our ordinary shares by directors:

ShareholdersNumber of Ordinary

Shares OwnedChang-Gyu Hwang 39,074Hyun Mo Ku 10,507Seong-Mok Oh 14,978Do Kyun Song 1,632Sang Kyun Cha 6,428Jong-Gu Kim 1,295Suk-Gwon Chang 1,295Gae Min Lee �Il Im �Dae-you Kim �Gang-chul Lee �

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Table of ContentsStock Options

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

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, 2017:

ShareholdersNumber of

Shares

Percent ofTotal

Shares IssuedNational Pension Corporation 28,555,130 10.94 %NTTDoCoMo, Inc. 14,257,813 5.46 %Silchester International Investors LLP 13,397,056 5.13 %Employee stock ownership association 1,298,579 0.50 %Directors as a group 73,199 0.03 %Public 187,515,278 71.81 %KT Corporation (held in the form of treasury stock) 16,014,753 6.13 %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 34 to the ConsolidatedFinancial 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- 102.

Legal Proceedings

In July 2012, the Fair Trade Commission issued to us an administrative fine of approximately￦5 billion as well as certaincorrective orders, after investigating certain pricing and subsidy practices of mobile service carriers and handset manufacturers. SamsungElectronics Co., Ltd., LG Electronics Co., Ltd., Pantech Curitel Co., Ltd., SK Telecom and LG U+ were also issued administrative fines asa result of the investigation. We filed for a stay of execution of the Fair Trade Commission�s decision, and in September 2012, the SeoulHigh Court granted a stay of execution with respect to the corrective order, and denied the stay of execution with respect to theadministrative fine. We paid the entire fine in September 2012. In September 2012, we filed a lawsuit with the Seoul High Court againstthe Fair Trade Commission to appeal the administrative fine and the corrective order, and on February 6, 2014, the Seoul High Court ruledagainst us on our appeal. In February 2014, we filed another appeal with respect to the administrative fine with the Supreme Court ofKorea and filed for a stay of execution with respect to the corrective order in March 2014, which was accepted and became effective inApril 2014. The appeal is currently ongoing. The outcome of this case will not result in any fine in addition to the fine we already paid inSeptember 2012.

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Table of ContentsIn December 2013, the KCC imposed a combined fine of approximately￦106 billion on SK Telecom, LG U+ and us (our fine

being approximately￦30 billion), which is the largest fine ever imposed by the KCC on local mobile operators for providing excessivesubsidies to new subscribers. On March 7, 2014, the MSIP imposed a temporary suspension on us for 45 days (from March 13, 2014 toApril 26, 2014), SK Telecom for 45 days (from April 5, 2014 to May 19, 2014), and LG U+ for 45 days (from March 13, 2014 to April 4,2014 and again from April 27, 2014 to May 18, 2014) from accepting new subscribers as a result of continuing to offer excessive handsetsubsidies to new subscribers, despite the order from the KCC prohibiting such subsidies. Additionally, the MSIP announced that it plans tobring criminal charges with fines of up to￦150 million and imprisonment of less than three years against any carrier and responsiblepersonnel that fails to adhere to the suspension or continues to offer illegal subsidies after the suspension is completed. In August 2014,the KCC imposed a fine of approximately￦58 billion on SK Telecom, LG U+ and us (our fine being approximately￦11 billion) forcontinuing to provide excessive subsidies to new subscribers. In December 2014, the KCC further imposed a fine of approximately￦8 billion on each of SK Telecom, LG U+ and us for providing excessive handset subsidies. In March 2015, the KCC also imposed acombined fine of approximately￦34 billion on SK Telecom, LG U+ and us (our fine being approximately￦9 billion) for violation ofregulations relating to handset sales, in connection with a used handset buyback program that we and the other telecommunicationsoperators were promoting. On June 24, 2015, the KCC imposed a fine of￦52 million for violating privacy related regulations andundermining consumer interests. On July 31, 2015 and January 19, 2016, the KCC imposed a fine of￦350 million and￦560 million,respectively, on us for infringing upon consumer interests by advertising false and exaggerated information about bundled products. OnMarch 8, 2016, the KCC imposed a fine of￦32 million on us for offering excessively reduced rates and waivers to certain customers. OnDecember 6, 2016, the KCC imposed a combined fine of approximately￦10.7 billion on SK Telecom, LG U+, SK Broadband, t-broad,D�live, CJ HelloVision and us (our fine being approximately￦2.3 million) and ordered to take corrective measures for providing excessivepromotional gifts to bundled products customers. In April 2017, the Fair Trade Commission imposed a combined fine of approximately￦47 million on us for failing to include developments relating to our management in our public disclosures. In October 2017, the FairTrade Commission imposed a fine of approximately￦360 million on us for not including transactions between our affiliates in our publicdisclosures. On March 21, 2017, the KCC imposed a combined fine of approximately￦2.1 billion on SK Telecom, LG U+ and us (our finebeing approximately￦361 million) for violation of regulations relating to handset sales and for offering excessive handset subsidies incase of sales to foreigners. On December 6, 2017, the KCC ordered SK Telecom, LG U+, SK Broadband and us to take correctivemeasures in regard to restriction on termination of broadband Internet access service and bundled product agreement. On January 24,2018, the KCC imposed a combined fine of approximately￦50.6 billion on SK Telecom, LG U+ and us (our fine being approximately￦12.5 billion) for violation of regulations relating to handset sales in case of wholesale, online sale, etc. We have paid all of such fines asof the date hereof.

For example, in July 2012, the police arrested two third-party individuals in connection with the alleged theft of personalinformation relating to approximately 8.7 million of our mobile phone subscribers. The individuals in question stole personal informationthrough a series of hackings starting from February 2012 into our New Service and Technology Evolution Program (�N-STEP�), ourmobile customer information system. Since the incident, approximately 29,800 of our mobile phone subscribers filed a total of 16 lawsuitsagainst us in connection with the N-STEP hackings, alleging that we failed to protect their personal information, and are seeking totaldamages of approximately￦15 billion. From August 2014 to October 2016, various district courts have awarded damages of ￦100,000per plaintiff for 14 of the cases involving a total of approximately 29,000 of the subscribers, resulting in damages of approximately￦3 billion to us, while the remaining two trials are currently ongoing at various district courts. We won three of the appeals without furtherappellate proceedings. The other appeal which we won has been appealed to the Supreme Court. We lost one of the

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Table of Contentsappeals and we appealed such decision to the Supreme Court. The other nine appeals are currently ongoing at the Seoul High Court orthe Seoul Central Court.

Furthermore, in March 2014, the police arrested three third-party individuals in connection with their alleged theft of personalinformation relating to approximately 9.8 million of our subscribers. The individuals in question stole the personal information of oursubscribers through a series of hackings into our main homepage starting from February 2014. Since the incident, approximately 15,000subscribers filed 22 lawsuits against us in connection with the information theft, seeking total damages of approximately ￦7 billion. FromNovember 2016 to January 2018, we won 17 trials, lost two trials and the remaining three trials are currently ongoing at various districtcourts. The plaintiffs of nine of the 17 cases have appealed the district courts� decisions to the Seoul High Court or the Seoul DistrictCourt. We appealed the district courts� decisions of the two trials where we lost. In June 2014, we were fined ￦85 million by the KCC andwere ordered to take corrective measures in connection with the most recent hacking incident. We filed an administrative appeal in August2014 in connection with the KCC fine and prevailed. The KCC appealed the administrative decision and the appeal is currently ongoing atthe Seoul High Court.

In December 2013, the MSIP declared that the contracts over our sale of Koreasat 3 were null and void, on the grounds that thesatellite was sold without obtaining proper government approval. We are currently involved in an International Chamber of Commercearbitration against ABS over the Koreasat 3 satellite ownership and contract violation claims. In July 2017, the International Chamber ofCommerce concluded that ABS has title to Koreasat 3 (such decision, �Partial Award�). In October 2017, we and KT SAT petitioned theU.S. District Court for the Southern District of New York to vacate the Partial Award. In March 2018, the International Chamber ofCommerce issued an award of US$748,564 in damages, US$287,673.2 in pre-award interest and post-award interest of 9 percent peryear to ABS (�Final Award�). We and KT SAT plan to petition the New York federal court to vacate the Final Award. With regard to thePartial Award, on April 10, 2018, the court dismissed the petition filed by KT SAT and us to vacate the Partial Award. We and KT SAT planto file an appeal of the foregoing decision.

In 2009, we entered into a contract with Enspert, Co., Ltd.(�Enspert�), a consumer electronics manufacturer, to purchaseapproximately 200,000 tablet PCs. Due to defects with the tablet PCs, we cancelled our contract and the outstanding order forapproximately 170,000 tablet PCs, for which we would have paid approximately ￦51 billion. In June 2014, the Korea Fair TradeCommission imposed a fine of approximately￦2 billion on us, finding that we cancelled our contract with Enspert without cause. Weappealed such decision but the decision was confirmed by the Seoul High Court and the Supreme Court in May 2016 and September2016, respectively. In April 2017, Enspert filed a lawsuit against us at the Seoul Central Court, claiming damages of approximately￦47 billion allegedly caused by our cancellation of the contract between Enspert and us for the tablet PCs.

We are a defendant in various other court proceedings involving claims for civil damages arising in the ordinary course of ourbusiness. We are a defendant in an ongoing court proceeding filed by the Industrial Bank of Korea on March 18, 2015. In connection withthe filing of court receivership by KT ENGCORE, Industrial Bank of Korea claims that we are liable for ￦10 billion of the￦65.8 billionasset-backed commercial papers of a renewable energy project for which KT ENGCORE was a contractor and guarantor. In October2017, the Seoul Central Court ruled against the claims of Industrial Bank of Korea, finding we were not to be held liable for the losses ofthe plaintiff in connection with the bankruptcy of KT ENGCORE.

As of December 31, 2017, we have established provisions relating to litigations of￦18 billion. See Note 19 to the ConsolidatedFinancial Statements. While we are unable to predict the ultimate disposition of these claims, in the opinion of our management, theultimate disposition of these claims will not have a material adverse effect on our business, financial condition and results of operations.

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Table of ContentsDividends

The table below sets out the annual dividends declared on the outstanding ordinary shares to shareholders of record onDecember 31 of the years indicated and the interim dividends declared on the outstanding ordinary shares to shareholders of record onJune 30 of the years indicated:

YearAnnual Dividend per

Ordinary ShareInterim Dividend per

Ordinary Share

Average TotalDividend per Ordinary

Share(In Won) (In Won) (In Won)

2013 800 � 8002014 0 � 02015 500 � 5002016 800 � 8002017 1,000 � 1,000

If sufficient profits are available, the board of directors may propose annual dividends on the outstanding ordinary shares, whichour shareholders must approve by a resolution at the ordinary general meeting of shareholders. This meeting is generally held in March ofthe following year and if our shareholders at such ordinary general meeting of shareholders approve the annual dividend, we must paysuch dividend within one month following the date of such resolution. Typically, we pay such dividends shortly after the meeting. Thedeclaration of annual dividends is subject to the vote of our shareholders, and consequently, there can be no assurance as to the amountof dividends per ordinary share or that any such dividends will be declared. Interim dividends paid in cash can be declared by a resolutionof the board of directors. See �Item 10. Additional Information�Item 10.B. Memorandum and Articles of Association�Dividends� and �Item12. 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, majorshareholders may consent to receive dividend distributions at a lesser rate than minor shareholders. Previously, the Governmentconsented to receiving a smaller dividend compared to other shareholders. The Government no longer holds any interest in us.

Any cash dividends relating to the shares held in the form of ADSs will be paid to the depositary bank in Won. The depositagreement provides that, except in certain circumstances, cash dividends received by the depositary bank will be converted by thedepositary bank into Dollars and distributed to the holders of the ADRs, less withholding tax, other governmental charges and thedepositary bank�s fees and expenses. See �Item 12. Description of Securities Other than Equity Securities�Item 12.D. AmericanDepositary 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 ouraudited 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. The price of the shares on the KRX KOSPI Market asof the close of trading on April 16, 2018 was￦26,850 per share.

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Table of ContentsThe table below shows the high and low closing prices and the average daily volume of trading activity on the KRX KOSPI Market for theshares since January 2012:

PriceHigh Low

Average DailyTrading Volume

(In Won) (Number of shares)2013 40,850 29,950 1,149,1432014 36,800 28,300 1,051,3962015 32,250 28,250 963,8252016 33,250 26,350 547,426

First quarter 29,800 26,350 619,422Second quarter 32,550 29,150 654,800Third quarter 32,750 29,850 454,623Fourth quarter 33,250 29,400 466,237

2017 35,400 28,700 638,754First quarter 33,250 28,900 567,549Second quarter 32,800 31,050 587,826Third quarter 35,400 28,700 740,160Fourth quarter 31,300 28,900 655,955

November 30,450 29,100 596,418December 31,300 30,250 699,659

2018 (through April 16) 30,400 26,700 693,532First quarter 30,400 26,950 725,268

January 30,400 29,500 688,747February 29,550 27,450 993,625March 27,850 26,950 553,507

Second quarter (through April 16) 27,700 26,700 517,544April (through April 16) 27,700 26,700 517,544

Source: KRXKOSPI Market.

ADSs

The outstanding ADSs, each of which represents one-half of one share of our ordinary share, have been traded on the New YorkStock Exchange and the London Stock Exchange since May 25, 1999 until September 18, 2015, the date on which the ADSs weredelisted from the London Stock Exchange. The ADSs, including those previously listed on the London Stock Exchange, continue to betradable on the New York Stock Exchange.

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Table of ContentsThe price of the ADSs on the New York Stock Exchange as of the close of trading on April 16, 2018 was $13.46 per ADS. The

table below shows the high and low trading prices and the average daily volume of trading activity on the New York Stock Exchange forour ADSs since January 2012:

PriceHigh Low

Average DailyTrading Volume

(In US$) (Number of ADSs)2013 18.16 14.33 528,2912014 17.46 13.24 440,0202015 14.85 11.83 336,7112016 16.73 11.03 608,543

First quarter 13.54 11.03 505,970Second quarter 14.71 13.22 591,603Third quarter 16.73 14.17 674,686Fourth quarter 16.31 13.66 657,875

2017 17.11 13.84 864,768First quarter 17.10 13.84 840,494Second quarter 17.11 15.63 775,662Third quarter 18.6 13.87 1,298,422Fourth quarter 15.78 13.9 891,759

November 15.6 13.91 842,314December 15.78 15.31 671,375

2018 (through April 16) 16.01 12.9 1,037,449First quarter 16.01 12.9 1,079,164

January 16.01 14.95 850,010February 15.13 12.9 1,546,663March 13.7 13.0 885,343

Second quarter (through April 16) 14.13 13.31 805,986April (through April 16) 14.13 13.31 805,986

Source: NewYork Stock Exchange.

Item 9.B. Plan of Distribution

Not applicable.

Item 9.C. Markets

The KRX KOSPI Market

On January 27, 2005, the Korea Exchange was established pursuant to the Korea Securities and Futures Exchange Act throughthe consolidation of the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc. (the �KOSDAQ�) and theKOSDAQ Committee within the Korea Securities Dealers Association, which was in charge of the management of the KOSDAQ. Thereare four different markets operated by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, the KRX KONEX Marketand the KRX Derivatives Market. The Korea Exchange has three trading floors located in Seoul, one for the KRX KOSPI Market, one forthe KRX KOSDAQ Market, one for the KRX KONEX Market, and one trading floor in Busan for the KRX Derivatives Market. The KoreaExchange is a limited liability company, the shares of which are held by (i) securities companies and futures companies that were formerlymembers of the Korea Stock Exchange or the Korea Futures Exchange, (ii) the Small & Medium Business Corporation, (iii) the KoreaSecurities Finance Corporation and (iv) the Korea Financial Investment Association. Currently, the Korea Exchange is the only stockexchange in Korea and is operated by membership, having as its members most of the Korean securities companies and some Koreanbranches of foreign securities companies.

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Table of ContentsThe KRX KOSPI Market has the power in some circumstances to suspend trading in the shares of a given company or to de-list

a security. The KRX KOSPI Market also restricts share price movements. All listed companies are required to file accounting reportsannually and quarterly and to release immediately all information that may affect trading in a security.

The KRX KOSPI Market publishes the KOSPI every ten seconds, which is an index of all equity securities listed on the KRXKOSPI Market. The KOSPI is calculated using the aggregate value method, in which the market capitalizations of all listed companies areaggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of alllisted companies as of the base date, January 4, 1980.

Movements in KOSPI are set out in the following table together with the associated dividend yields and price earnings ratios:

Period Average

Year Opening High Low Closing

DividendYield (1)(2)(Percent)

PriceEarningsRatio (2)(3)

1985 139.53 163.37 131.40 163.37 5.3 5.21986 161.40 279.67 153.85 272.61 4.3 7.61987 264.82 525.11 264.82 525.11 2.6 10.91988 532.04 922.56 527.89 907.20 2.4 11.21989 919.61 1,007.77 844.75 909.72 2.0 13.91990 908.59 928.82 566.27 696.11 2.2 12.81991 679.75 763.10 586.51 610.92 2.6 11.21992 624.23 691.48 459.07 678.44 2.2 10.91993 697.41 874.10 605.93 866.18 1.6 12.71994 879.32 1,138.75 855.37 1,027.37 1.2 16.21995 1,027.45 1,016.77 847.09 882.94 1.2 16.41996 882.29 986.84 651.22 651.22 1.3 17.81997 647.67 792.29 350.68 376.31 1.5 17.01998 374.41 579.86 280.00 562.46 1.9 10.81999 565.10 1,028.07 498.42 1,028.07 1.1 13.52000 1,028.33 1,059.04 500.60 504.62 2.1 12.92001 503.31 704.50 468.76 693.70 1.7 16.42002 698.00 937.61 584.04 627.55 1.6 15.22003 633.03 822.16 515.24 810.71 2.0 11.82004 821.26 936.06 719.59 895.92 2.0 13.82005 896.00 1,379.37 870.84 1,379.37 1.8 10.62006 1,383.32 1,464.70 1,203.86 1,434.46 1.6 11.12007 1,438.89 2,064.85 1,355.79 1,897.13 1.4 15.82008 1,891.45 1,888.88 938.75 1,124.47 2.6 8.92009 1,132.87 1,718.88 1,018.81 1,682.77 1.2 22.92010 1,696.14 2,051.00 1,552.79 2,051.00 1.1 18.02011 2,078.08 2,228.96 1,652.71 1,825.74 1.5 10.52012 1,826.37 2,049.28 1,769.31 1,997.05 1.3 12.32013 2,031.10 2,059.58 1,780.63 2,011.34 1.1 12.82014 1,967.19 2,082.61 1,886.85 1,915.59 1.2 13.22015 1,926.44 2,173.41 1,829.81 1,961.31 1.4 14.42016 1,918.76 2,068.72 1,835.28 2,026.46 1.6 13.52017 2,026.16 2,557.97 2,026.16 2,467.49 1.4 14.32018 (through April 16) 2,479.65 2,598.19 2,363.77 2,457.49 1.3 13.1

Source: TheKRX KOSPI Market

(1) Dividend yields are based on daily figures. Dividend yields after January 3, 1985 include cash dividends only.

(2) Starting in April 2000, dividend yield and price earnings ratio are calculated based on KOSPI 200, an index of 200 equity securities listed on the KRX KOSPI Market.Starting in April 2000, KOSPI 200 excludes classified companies, companies

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Table of Contentswhich did not submit annual reports to the KRX KOSPI Market, and companies which received qualified opinion from external auditors.

(3) The price earnings ratio is based on figures for companies that record a profit in the preceding year.

Shares are quoted �ex-dividend� on the first trading day of the relevant company�s accounting period; since the calendar year isthe accounting period for the majority of listed companies, this may account for the drop in the KOSPI between its closing level at the endof one calendar year and its opening level at the beginning of the following calendar year.

With certain exceptions, principally to take account of a share being quoted �ex-dividend� and �ex-rights,� permitted upward anddownward movements in share prices of any category of shares on any day are limited under the rules of the KRX KOSPI Market to 30%of the previous day�s closing price of the shares, rounded down as set out below:

Previous Days�� Closing PriceRoundedDown To

Less than￦5,000 ￦ 5￦5,000 to less than￦10,000 ￦ 10￦10,000 to less than￦50,000 ￦ 50￦50,000 to less than￦100,000 ￦ 100￦100,000 to less than￦500,000 ￦ 500￦500,000 or more ￦ 1,000

As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may notreflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares.Orders are executed on an auction system with priority rules to deal with competing bids and offers.

Due to a deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securitiestransactions may be determined by the parties, subject to commission schedules being filed with the KRX KOSPI Market by the securitiescompanies. In addition, a securities transaction tax will generally be imposed on the transfer of shares or certain securities representingrights to subscribe for shares at the rate of 0.15% if such transfer is made through the KRX KOSPI Market. A special agricultural andfishery tax of 0.15% of the sales prices will also be imposed on transfer of these shares and securities on the KRX KOSPI Market. See�Item 10. Additional Information�Item 10.E. Taxation�Korean Taxation.�

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Table of ContentsThe number of companies listed on the KRX KOSPI Market, the corresponding total market capitalization at the end of the

periods indicated and the average daily trading volume for those periods are set forth in the following table:

Market Capitalizationon the Last Day of Each Period Average Daily Trading Volume, Value

Year

Number ofListed

Companies(Billionsof Won)

(Millions ofDollars) (1)

Thousandsof Shares

(Millionsof Won)

(Thousandsof Dollars) (1)

1985 342 6,570 7,381 18,925 12,315 13,8341986 355 11,994 13,924 31,755 32,870 38,1591987 389 26,172 33,033 20,353 70,185 88,5831988 502 64,544 94,348 10,367 198,364 289,9631989 626 95,477 140,490 11,757 280,967 414,4301990 669 79,020 110,301 10,866 183,692 256,4111991 686 73,118 96,107 14,022 214,263 281,6291992 688 84,712 107,448 24,028 308,246 390,9771993 693 112,665 139,420 35,130 574,048 710,3671994 699 151,217 191,730 36,862 776,257 984,2231995 721 141,151 182,201 26,130 487,762 629,6131996 760 117,370 139,031 26,571 486,834 575,6801997 776 70,989 50,162 41,525 555,759 392,7071998 748 137,799 114,091 97,716 660,429 546,8031999 725 349,504 305,137 278,551 3,481,620 3,039,6552000 704 188,042 149,275 306,163 2,602,211 2,065,7392001 689 253,843 191,421 473,241 1,997,420 1,506,2372002 683 258,681 215,496 857,245 3,041,598 2,533,8152003 684 355,363 296,679 542,010 2,216,636 1,850,5892004 683 412,588 395,275 372,895 2,232,109 2,138,4452005 702 655,075 646,668 467,629 3,157,662 3,117,1392006 731 704,588 757,948 279,096 3,435,180 3,695,3322007 746 951,887 1,014,589 363,732 5,539,588 5,904,4852008 765 576,888 458,757 355,205 5,189,644 4,126,9532009 770 887,316 759,949 483,902 5,783,552 4,953,3672010 777 1,141,885 1,002,621 380,859 5,619,768 4,934,3822011 791 1,041,999 903,493 353,760 6,863,146 5,950,8772012 784 1,154,294 1,077,672 486,480 4,823,643 4,503,4482013 777 1,185,974 1,123,826 328,325 3,993,422 3,784,1582014 773 1,192,253 1,084,655 278,082 3,983,580 3,624,0722015 770 1,242,832 1,060,437 455,256 5,351,734 4,566,3262016 779 1,308,440 1,082,698 376,772 4,523,044 3,742,6932017 774 1,605,821 1,498,806 340,457 5,325,760 4,970,8422018 (through April 16) 777 1,638,626 1,531,426 393,456 7,031,950 6,571,916

Source:The KRX KOSPI Market

(1) Converted at the Concentration Base Rate of The Bank of Korea or the Market Average Exchange Rate as announced by Seoul Money Brokerage Services Limited, asthe case may be, at the end of the periods indicated.

The Korean securities markets are principally regulated by the Financial Services Commission of Korea and the FSCMA. TheSecurities and Exchange Act which regulated the securities markets in the past was replaced with the FSCMA on February 4, 2009. Thenew law, as did the Securities and Exchange Act, imposes restrictions on insider trading and price manipulation, requires specifiedinformation to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation,takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests.

Further Opening of the Korean Securities Market

A stock index futures market was opened on May 3, 1996 and a stock index option market was opened on July 7, 1997, in eachcase at the KRX KOSPI Market. Remittance and repatriation of funds

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Table of Contentsin connection with investment in stock index futures and options are subject to regulations similar to those that govern remittance andrepatriation in the context of foreign investment in Korean stocks.

Foreign investors are permitted to invest in warrants representing the right to subscribe for shares of a company listed on theKRX KOSPI Market or registered on the KRX KOSDAQ Market, subject to certain investment limitations. A foreign investor may notacquire such warrants with respect to shares of a class of a company for which the ceiling on aggregate investment by foreigners hasbeen reached or exceeded.

Foreign investors are permitted to invest in all types of corporate bonds, bonds issued by national or local governments andbonds issued in accordance with certain special laws without being subject to any aggregate or individual investment ceiling. TheFinancial Services Commission sets forth procedural requirements for such investments. Foreigners are permitted to invest in certificatesof deposit and repurchase agreements.

Currently, foreigners are permitted to invest in securities including shares of all Korean companies which are not listed on theKRX KOSPI Market nor registered on the KRX KOSDAQ Market and in bonds which are not listed.

Protection of Customer��s Interest in Case of Insolvency of Securities Companies

Under Korean law, the relationship between a customer and a securities company in connection with a securities sell or buyorder is deemed to be consignment and the securities acquired by a consignment agent (i.e., the securities company) through such sell orbuy order are regarded as belonging to the customer in so far as the customer and the consignment agent�s creditors are concerned.Therefore, in the event of a bankruptcy or reorganization procedure involving a securities company, the customer of the securitiescompany is entitled to the proceeds of the securities sold by the securities company.

When a customer places a sell order with a securities company which is not a member of the KRX KOSPI Market and thissecurities company places a sell order with another securities company which is a member of the KRX KOSPI Market, the customer is stillentitled to the proceeds of the securities sold received by the non-member company from the member company regardless of thebankruptcy or reorganization of the non-member company.

Under the FSCMA, the KRX KOSPI Market is obliged to indemnify any loss or damage incurred by a counterparty as a result ofa breach by its members. If a securities company which is a member of the KRX KOSPI Market breaches its obligation in connection witha buy order, the KRX KOSPI Market is obliged to pay the purchase price on behalf of the breaching member. Therefore, the customer canacquire the securities that have been ordered to be purchased by the breaching member.

When a customer places a buy order with a non-member company and the non-member company places a buy order with amember company, the customer has the legal right to the securities received by the non-member company from the member companybecause the purchased securities are regarded as belonging to the customer in so far as the customer and the non-member company�screditors are concerned.

As the cash deposited with a securities company is regarded as belonging to the securities company, which is liable to return thesame at the request of its customer, the customer cannot take back deposited cash from the securities company if a bankruptcy orreorganization procedure is instituted against the securities company and, therefore, can suffer from loss or damage as a result.

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Table of ContentsHowever, the Depositor Protection Act provides that Korea Deposit Insurance Corporation will, upon the request of the investors, payinvestors up to￦50 million in case of the securities company�s bankruptcy, liquidation, cancellation of securities business license or otherinsolvency events. Pursuant to the FSCMA, securities companies are required to deposit the cash received from its customers to theextent the amount not covered by the insurance with the Korea Securities Finance Corporation, a special entity established pursuant tothe Securities and Exchange Act.

Set-off or attachment of cash deposits by securities companies is prohibited. The premiums related to this insurance are paid bysecurities companies.

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 andNon-Voting Shares together are referred to as �Shares.� Under our articles of incorporation, we are authorized to issue Non-VotingShares up to one-fourth of our total issued share capital. As of December 31, 2017, 261,111,808 Ordinary Shares were issued, of which16,014,753 shares were held by the treasury stock fund or us as treasury shares. We have never issued any Non-Voting Shares. All of theissued Ordinary Shares are fully-paid and non-assessable and are in registered form. We issue share certificates in denominations of 1, 5,10, 50, 100, 500, 1,000 and 10,000 shares.

Item 10.B. Memorandum and Articles of Association

This section provides information relating to our share capital, including brief summaries of material provisions of our articles ofincorporation, the FSCMA, the Commercial Code and related laws of Korea, all as currently in effect. The following summaries are subjectto, and are qualified in their entirety by reference to, our articles of incorporation and the applicable provisions of the FSCMA and theCommercial Code. We have filed a copy of our articles of incorporation as an exhibit to registration statements under the Securities Act orthe Securities Exchange Act previously filed by us.

Dividends

We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. No dividends aredistributed with respect to shares held by us or our treasury stock fund. The Ordinary Shares represented by the ADSs have the samedividend rights as other outstanding Ordinary Shares.

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Table of ContentsHolders 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 thatif the dividends on the Ordinary Shares exceed those on the Non-Voting Shares, the Non-Voting Shares will also participate in thedistribution of such excess dividend amount in the same proportion as the Ordinary Shares. If the amount available for dividends is lessthan the aggregate amount of such minimum dividend, the holders of Non-Voting Shares will be entitled to receive such accumulatedunpaid 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 the end ofthe fiscal year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record as of the end of thepreceding fiscal year. We may distribute the annual dividend in cash or in Shares. However, a dividend of Shares must be distributed atpar value. If the market price of the Shares is less than their par value, dividends in Shares may not exceed one-half of the annualdividend. We may pay interim dividends in cash once a year to shareholders or registered pledgees who are registered in the registry ofshareholders as of June 30 of each fiscal year by a resolution of the board of directors. We have no obligation to pay any annual dividendunclaimed 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 �LegalReserve�) accumulated up to the end of the relevant dividend period. In addition, we may not pay any dividend unless we have set asideas earned surplus reserve an amount equal to at least 10% of the cash portion of the dividend or unless we have accumulated an earnedsurplus reserve of not less than one-half of our stated capital. We may not use the Legal Reserve to pay cash dividends but may transferamounts 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 anamount transferred from the Legal Reserve to our stated capital in the form of free shares. We must distribute such free shares to all ourshareholders 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 ourboard of directors may determine. Subject to the limitation described in �Limitation on Shareholdings� below, all our shareholders aregenerally entitled to subscribe for any newly issued Shares in proportion to their existing shareholdings. We must offer new Shares onuniform 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 ofshares. We must give notice to all persons who are entitled to exercise preemptive rights regarding new Shares and their transferability atleast two weeks before the relevant record date. Our board of directors may determine how to distribute Shares for which preemptiverights 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 personsother than the existing shareholders solely for the purpose of achieving managerial objectives. Under our articles of incorporation, we mayissue new Shares

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Table of Contentspursuant to a board resolution to persons other than existing shareholders, who in these circumstances will not have preemptive rights, ifthe 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 than10% 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 preemptiveright 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 thetotal number of Shares so acquired and held by members of our employee stock ownership association does not then exceed 20.0% ofthe total number of Shares then issued (including in such total both: (i) all issued and outstanding Shares at the time the preemptive rightsare exercised; and (ii) all Shares to be newly issued in the applicable share issuance transaction in connection with which such preemptiverights are exercised). As of December 31, 2017, 0.5% of the issued Shares were held by members of our employee stock ownershipassociation.

Limitation on Shareholdings

The Telecommunications Business Act permits maximum aggregate foreign shareholding in us to be 49.0% of our total issuedand outstanding Shares with voting rights (including equivalent securities with voting rights, e.g., depositary certificates and certain otherequity 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� asdetermined under the FSCMA) or a foreign government, in circumstances where (i) such foreign person or foreign government holds, inaggregate, 15.0% or more of such company�s total voting shares, and (ii) such company holds at least 1.0% of our total issued andoutstanding Shares with voting rights. For the avoidance of doubt, both of conditions (i) and (ii) in the foregoing item (3) must exist for sucha company to be counted as a �foreign shareholder� for the purposes of calculating whether the 49.0% foreign shareholding threshold isreached under the Telecommunications Business Act. In addition, the Telecommunications Business Act prohibits a foreign shareholderfrom being our largest shareholder if such shareholder owns 5.0% or more of our Shares with voting rights. For the purposes of thisrestriction, any two or more foreign persons or foreign governments who enter into an agreement to act in concert in the exercise of theirvoting rights

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Table of Contentswill be counted together and prohibited from becoming our largest shareholder in the event that they collectively hold 5.0% or more of ourShares. For the purposes of this restriction under the Foreign Investment Promotion Act, a �foreign shareholder� is defined in the samemanner 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 ourShares (see item (3)(ii) above in this paragraph). A foreigner who has acquired the Shares in excess of such ceiling described above maynot exercise its voting rights for shares in excess of such limitation, and the MSIT may require corrective measures to comply with theownership restrictions.

General Meeting of Shareholders

We hold the annual general meeting of shareholders within three months after the end of each fiscal year. Subject to a boardresolution 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 thedate of the general meeting of shareholders. However, for holders of less than 1.0% of the total number of issued and outstandingOrdinary Shares, we may give notice by placing at least two public notices in at least two daily newspapers at least two weeks in advanceof the meeting. Currently, we use Seoul Shinmun, Maeil Business Newspaper and The Korea Economic Daily published in Seoul for thispurpose. Shareholders not on the shareholders� register as of the record date are not entitled to receive notice of the general meeting ofshareholders or attend or vote at the meeting. Holders of Non-Voting Shares are not entitled to receive notice of general meetings ofshareholders, 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 Sharesheld by us, or by a corporate shareholder that is more than 10.0% owned by us either directly or indirectly, may not be exercised. TheCommercial Code permits cumulative voting, under which voting method each shareholder has multiple voting rights corresponding to thenumber of directors to be appointed in the voting and may exercise all voting rights cumulatively to elect one director. Our articles ofincorporation permit cumulative voting at our shareholders� meeting. Under the Commercial Code of Korea, any shareholder holdingshares equivalent to not less than 1/100 of the total number of shares issued may apply to us for selecting and appointing such directorsby cumulative voting.

Our shareholders may adopt resolutions at a general meeting by an affirmative majority vote of the voting shares present orrepresented at the meeting, where the affirmative votes also represent at

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Table of Contentsleast one-fourth of our total voting shares then outstanding. However, under the Commercial Code and our articles of incorporation, thefollowing matters, among others, require approval by the holders of at least two-thirds of the voting shares present or represented at ameeting, 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 othercompany 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 ofshareholders. However, in the case of amendments to our articles of incorporation, any merger or consolidation of us, or in some othercases that affect the rights or interests of the Non-Voting Shares, approval of the holders of Non-Voting Shares is required. We may obtainsuch approval by a resolution of holders of at least two-thirds of the Non-Voting Shares present or represented at a class meeting of theholders 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 ofattorney prior to the start of the general meeting of shareholders. Additionally, shareholders may exercise their voting rights in absentia bysubmission of signed write-in voting forms. To make it possible for our shareholders to proceed with voting on a write-in basis, we arerequired to attach the appropriate write-in voting form and related informational material to the notices distributed to shareholders forconvening the relevant general meeting of shareholders. Any of our shareholders who desire to vote on such write-in basis must submittheir completed and signed write-in voting forms to us no later than one day prior to the date that the relevant general meeting ofshareholders is convened.

Holders of ADRs exercise their voting rights through the ADR depositary, an agent of which is the record holder of the underlyingOrdinary Shares. Subject to the provisions of the deposit agreement, ADR holders are entitled to instruct the ADR depositary how to votethe Ordinary Shares underlying their ADSs. See �Item 12. Description of Securities Other than Equity Securities�Item 12.D. AmericanDepositary Shares.�

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 orconsolidation 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 daysafter the relevant resolution is passed at a meeting, the dissenting shareholders must request us in writing to purchase their Shares. Weare obligated to purchase the Shares of dissenting shareholders

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Table of Contentswithin one month after the expiration of the 20-day period. The purchase price for the Shares is required to be determined throughnegotiation between the dissenting shareholders and us. If we cannot agree on a price through negotiation, the purchase price will be theaverage of (1) the weighted average of the daily Share prices on the KRX KOSPI Market for the two-month period before the date of theadoption of the relevant board resolution, (2) the weighted average of the daily Share price on the KRX KOSPI Market for the one monthperiod before the date of the adoption of the relevant board resolution and (3) the weighted average of the daily Share price on the KRXKOSPI Market for the one week period before the date of the adoption of the relevant board resolution. However, if we or any of thedissenting shareholders do not accept the purchase price calculated using the above method, the rejecting party may request the court todetermine the purchase price. Holders of ADSs will not be able to exercise appraisal rights unless they have withdrawn the underlyingordinary shares and become our direct shareholders.

Register of Shareholders and Record Dates

Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It registers transfers ofShares on the register of shareholders on presentation of the Share certificates.

The record date for annual dividends is December 31. For the purpose of determining the shareholders entitled to annualdividends, the register of shareholders may be closed for the period from the day after the record date to January 31 of the following year.Further, for the purpose of determining the shareholders entitled to some other rights pertaining to the Shares, we may, on at least twoweeks� public notice, set a record date and/or close the register of shareholders for not more than three months. The trading of Sharesand 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 consolidatedfinancial statements available for inspection at our principal office and at all of our branch offices. In addition, copies of annual reports, theaudited consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to ourshareholders.

Under the FSCMA, we must file with the Financial Services Commission and the KRX KOSPI Market (1) an annual report within90 days after the end of our fiscal year and (2) interim reports with respect to the three month period, six month period and nine monthperiod from the beginning of each fiscal year within 45 calendar days following the end of each period. Copies of these reports are or willbe available for public inspection at the Financial Services Commission and the KRX KOSPI Market.

Transfer of Shares

Under the Commercial Code, the transfer of Shares is effected by delivery of share certificates. However, to assertshareholders� rights against us, the transferee must have his name and address registered on our register of shareholders. For thispurpose, a shareholder is required to file his name, address and seal with our transfer agent. A non-Korean shareholder may file aspecimen signature in place of a seal, unless he is a citizen of a country with a sealing system similar to that of Korea. In addition, anon-resident shareholder must appoint an agent authorized to receive notices on his behalf in Korea and file a mailing address in Korea.The above requirements do not apply to the holders of ADSs.

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Table of ContentsUnder 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 foreigncustodians and the Korea Securities Depository may act as agents and provide related services for foreign shareholders. Certain foreignexchange controls and securities regulations apply to the transfer of Shares by non-residents or non-Koreans. See �Item 10. AdditionalInformation�Item 10.D. Exchange Controls.�

Our transfer agent 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) purchasingfrom shareholders on a pro rata basis in accordance with the number of shares held by each shareholder. The aggregate purchase pricefor the Shares may not exceed the total amount available for distribution of dividends at the end of the preceding fiscal year. Moreover, wemust 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 shareholderson a pro rata basis in accordance with the number of shares held by each shareholder, or (iii) receiving Shares returned to us upon thecancellation or termination of a trust agreement with a trustee who acquired the Shares by either of the methods indicated above. Theaggregate purchase price for the Shares may not exceed the total amount available for distribution of dividends at the end of thepreceding fiscal year.

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

As of December 31, 2017, there were 16,014,753 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 distributedamong shareholders in proportion to their shareholdings. Holders of Non-Voting Shares have no preference in liquidation.

Item 10.C. Material Contracts

We have not entered into any material contracts since January 1, 2012, other than in the ordinary course of our business. Forinformation regarding our agreements and transactions with certain related parties, see �Item 7. Major Shareholders and Related PartyTransactions�Item 7.B. Related Party Transactions� and Note 36 to the Consolidated Financial Statements. For a description of certainagreements entered into during the past two years related to our capital commitments and obligations, see �Item 5. Operating andFinancial Review and Prospects�Item 5.B. Liquidity and Capital Resources.�

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

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Table of Contentssecurities by non-residents and issuance of securities outside Korea by Korean companies. Under the Foreign Exchange TransactionLaws, 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 Ministry of Strategy and Finance. 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 theissuance of securities outside Korea by Korean companies.

Under the Foreign Exchange Transaction Laws, if the Government deems that certain emergency circumstances, including, butnot limited to, the outbreak of natural calamities, wars or grave and sudden changes in domestic or foreign economies, are likely to occur,the Ministry of Strategy and Finance 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 theGovernment deems that it is confronted or is likely to be confronted with serious difficulty in movement of capital between Korea andabroad which will bring serious obstacles in carrying out its currency policies, exchange rate policies and other macroeconomic policies,the Ministry of Strategy and Finance may take measures to require any person who performs transactions to deposit such capital tocertain 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 Ministry ofStrategy and Finance if our securities and borrowings denominated in foreign currencies issued during the one-year period precedingsuch filing date exceed US$30 million in aggregate. No further Korean governmental approval is necessary for the initial offering andissuance of the ADSs.

Under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of sharesto be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by usor with the consent of us for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSsand stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary bank at thetime of such proposed deposit. We can give no assurance that we would grant our consent, if our consent is required. Therefore, a holderof 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 therights 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 concertwith the person accounts for 5.0% or more of the total issued Equity Securities is required to report the status of the holdings to theFinancial Services Commission and the KRX KOSPI Market within five business days after reaching the 5.0% ownership interest. Inaddition, any change in the ownership interest subsequent to the report which equals or exceeds 1.0% of the total issued Equity Securitiesis required to be reported to the Financial Services Commission and the KRX KOSPI Market within five business days from the date of thechange. The required information to be included in the 5.0% report may be different if the acquisition of such shareholding interest is forthe purpose of exercising influence over the management, as opposed to an acquisition for investment purposes. Any person reporting theholding of 5.0% or more of the total issued Equity Securities and any person reporting the

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Table of Contentschange in the ownership interest which equals or exceeds 1.0% of the total issued Equity Securities pursuant to the requirementsdescribed 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 mayresult in a loss of voting rights with respect to the unreported ownership of Equity Securities exceeding 5.0%. Furthermore, the FinancialServices 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 forthe withdrawal of shares underlying ADSs and the delivery inside Korea of shares in connection with the withdrawal, provided that aforeigner who intends to acquire the shares must obtain an investment registration certificate from the Financial Supervisory Service asdescribed below. In general, the acquisition of the shares by a foreigner must be reported by the foreigner or his standing proxy in Koreaimmediately to the Governor of the Financial Supervisory Service; provided, however, that in cases where a foreigner acquires sharesthrough the exercise of rights as a holder of ADSs (or other depositary certificates), the foreigner must cause such report to the Governorof 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 preemptiverights 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 adoptedin connection with the stock market opening from January 1992, which we refer to collectively as the Investment Rules, foreigners mayinvest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRXKOSPI Market or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRXKOSPI Market or the KRX KOSDAQ Market only through the KRX KOSPI Market or the KRX KOSDAQ Market, except in limitedcircumstances, including:

� odd-lot trading of shares;

� acquisition of shares (�Converted Shares�) by exercise of warrant, conversion right under convertible bonds or withdrawalright under depositary receipts issued outside of Korea by a Korean company;

� acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders� rights, including preemptiverights or rights to participate in free distributions and receive dividends;

� over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition byforeigners, as explained below, has been reached or exceeded;

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

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

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Table of Contents� disposal of shares in connection with a tender offer;

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

� acquisition and disposal of shares through overseas stock exchange market if such shares are simultaneously listed on theKRX KOSPI Market or the KRX KOSDAQ Market and such overseas stock exchange;

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

� arm�s length transactions between foreigners, if all of such foreigners belong to an investment group managed by thesame person.

For over-the-counter transactions of shares between foreigners outside the KRX KOSPI Market or the KRX KOSDAQ Market forshares with respect to which the limit on aggregate foreign ownership has been reached or exceeded, an investment broker licensed inKorea must act as an intermediary. Odd-lot trading of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market must involve alicensed investment trader in Korea as the other party. Foreign investors are prohibited from engaging in margin transactions throughborrowing 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 KOSDAQMarket (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 suchConverted Shares within three months from the date of acquisition of the Converted Shares or who acquire the shares in anover-the-counter transaction or dispose of shares where such acquisition or disposal is a foreign direct investment as defined in theForeign Investment Promotion Act. Upon registration, the Financial Supervisory Service will issue to the foreign investor an investmentregistration certificate that must be presented each time the foreign investor opens a brokerage account with a financial investmentbusiness entity. Foreigners eligible to obtain an investment registration certificate include foreign nationals who are individuals residingabroad for more than six months, foreign governments, foreign municipal authorities, foreign public institutions, corporations incorporatedunder foreign laws, international organizations, funds and associations as defined under the FSCMA. All Korean offices of a foreigncorporation as a group are treated as a separate entity from the offices of the corporation outside Korea. However, a foreign corporation ordepositary bank issuing depositary receipts may obtain one or more investment registration certificates in its name in certaincircumstances 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 reportby the investor is required because the investment registration certificate system is designed to control and oversee foreign investmentthrough a computer system. However, a foreign investor�s acquisition or sale of shares outside the KRX KOSPI Market or the KRXKOSDAQ Market (as discussed above) must be reported by the foreign investor or his standing proxy to the Governor of the FinancialSupervisory Service at the time of each such acquisition or sale; provided, however, that in cases where a foreigner acquires sharesthrough the exercise of rights as a holder of ADSs (or other depositary certificates), the foreigner must cause such report to the Governorof the Financial Supervisory Service to be filed by the Korea Securities Depository; and further provided that a foreign investor mustensure that any acquisition or sale by it of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market in the case of trades inconnection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership

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Table of Contentslimit has been reached or exceeded, is reported to the Governor of the Financial Supervisory Service by the investment trader, theinvestment broker, the Korea Securities Depository or the financial securities company engaged to facilitate such transaction. A foreigninvestor may appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks, includingdomestic branches of foreign banks, investment traders, investment brokers, the Korea Securities Depository, financial securitiescompanies 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 KoreaSecurities 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 FSCMAare eligible to act as a custodian of shares for a non-resident or foreign investor. A foreign investor must ensure that his custodiandeposits its shares with the Korea Securities Depository. However, a foreign investor may be exempted from complying with this depositrequirement with the approval of the Governor of the Financial Supervisory Service in circumstances where compliance with thatrequirement is made impracticable, including cases where compliance would contravene the laws of the home country of such foreigninvestor.

Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a Korean company without beingsubject to any foreign investment ceiling. As one such exception, designated public corporations are subject to a 40.0% ceiling on theacquisition of shares by foreigners in the aggregate and a ceiling on the acquisition of shares by a single foreign investor pursuant to thearticles of incorporation of such corporation. Currently, Korea Electric Power Corporation is the only designated public corporation whichhas 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 aKorean company is defined as a direct foreign investment under the Foreign Investment Promotion Act, which is, in general, subject to thereport to, and acceptance, by the Ministry of Trade Industry & Energy. The acquisition of shares of a Korean company by a foreign investormay also be subject to certain foreign shareholding restrictions in the event that the restrictions are prescribed in each specific law whichregulates the business of the Korean company. A foreigner who has acquired our ordinary shares in excess of this ceiling may notexercise 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 foreignexchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval isrequired for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may betransferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchasetransaction to a Won account opened at an investment broker or an investment trader. Funds in the foreign currency account may beremitted 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 theWon proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the saleof, any shares held by a non-resident of Korea must be deposited either in a Won account with the investor�s investment broker orinvestment trader or his Won Account. Funds in the investor�s Won Account may be transferred to his foreign currency account orwithdrawn for local living expenses up to certain limitations. Funds in the Won Account may also be used for future investment in shares orfor 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 banksexclusively for accommodating foreign investors� stock investments in Korea.

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Table of ContentsThrough these accounts, these investment brokers and investment traders may enter into foreign exchange transactions on a limitedbasis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors, withoutthe 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 thisannual 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 taxconsequences 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:

� a resident of Korea;

� a corporation organized under Korean law; or

� 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 incash 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 withKorea, you may qualify for a reduced rate of Korean withholding tax under such a treaty. For example, if you are a qualified resident of theUnited States for purposes of the US-Korea Tax Treaty (the �Treaty�) and you are the beneficial owner of a dividend, a reducedwithholding tax rate of 16.5% (including local income tax) generally will apply. You will not be entitled to claim treaty benefits if you are notthe 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 dividendpayment date, an application for entitlement to a reduced tax rate. If you hold ADSs and receive the dividends through a depositary, youare 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 solicitationby way of acquiring, disposing, or otherwise investing in any such assets and distributes the yield therefrom to investors), you must submitto us a report of the OIV and a schedule of beneficial owners together with their applications for entitlement to a reduced tax rate, whichyou should collect from each beneficial owner. Excess taxes withheld may be recoverable if you subsequently produce satisfactoryevidence 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-incapital, that distribution may be a deemed dividend subject to Korean tax.

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Table of ContentsCapital Gains

Capital gains from a sale of ordinary shares will generally be exempt from Korean taxation if you have owned, together withcertain related parties, less than 25.0% of our total issued shares during the year of sale and the five calendar years before the year ofsale, and the sale is made through the KRX KOSPI Market, and you have no permanent establishment in Korea. Capital gains earned bya non-Korean holder from a sale of ADSs outside of Korea are exempt from Korean taxation by virtue of the Special Tax TreatmentControl 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 awithdrawal, your gain will be calculated based on your cost of acquiring the ADSs representing the ordinary shares, although there are nospecific 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 realizationproceeds 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 awithdrawal, and you sell your ordinary shares or ADSs, the purchaser or, in the case of a sale of ordinary shares on the KRX KOSPIMarket or through a licensed securities company in Korea, the licensed securities company, is required to withhold Korean tax from thesales price in an amount equal to 11% (including local income tax) of the gross realization proceeds and to make payment thereof to theKorean tax authorities, unless you establish your entitlement to an exemption from taxation under an applicable tax treaty or producesatisfactory evidence of your acquisition cost and the transaction costs for the ordinary shares or ADSs. In order to obtain the benefit of anexemption from tax pursuant to a tax treaty, you must submit to the purchaser or the securities company (or through the depositary), asthe case may be, prior to the first payment, an exemption application, together with a certificate of your tax residence issued by acompetent authority of your residence country. If you are an OIV, you must submit a report of the OIV and a schedule of beneficial ownerstogether with their applications for exception, which you should collect from each beneficial owner. The withholding obligor must submit theapplication 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 subsequentlyproduce 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 ordinaryshares. However, Korea�s tax treaties with Japan, Austria, Spain and a few other countries do not provide an exemption from such capitalgains tax. For example, Article 13 of Korea�s tax treaty with Japan provides that if a taxpayer holding 25% or more (including those sharesheld 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 byany related party of the taxpayer) of total issued shares of the same company in the same taxable year, the country where the company isa 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 wasdomiciled in Korea or had resided in Korea for at least 183 days immediately prior to his death and (b) all property located in Korea whichpasses on death (irrespective

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Table of Contentsof 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 ofwhere they are physically located or by whom they are owned. It remains unclear whether, for Korean inheritance and gift tax purposes, anon-resident holder of ADSs will be treated as the owner of the shares underlying the ADSs. If such non-resident is treated as the ownerof the shares, the heir or donee of such non-resident (or in certain circumstances, the non-resident as the donor) will be subject to Koreaninheritance 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 0.15%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 ordinaryshares and your transfer is not made on the KRX KOSPI Market you will generally be subject to the securities transaction tax at a rate of0.5% 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 depositaryreceipts (such as the ADSs) constitute share certificates subject to the securities transaction tax. In May 2007, the Seoul AdministrativeCourt held that depositary receipts do not constitute share certificates subject to the securities transaction tax. In 2008, the SeoulAdministrative Court�s holding was upheld by the Seoul High Court and was further upheld by the Supreme Court. Subsequent to thisseries of rulings, however, the Securities Transaction Tax Law was amended to expressly provide that depositary receipts constituted aform of share certificates subject to the securities transaction tax. However, the sale price of ADSs from a transfer of depositary receiptslisted on the New York Stock Exchange, the Nasdaq National Market or other qualified foreign exchanges are exempt from the securitiestransaction tax.

United States Federal Income Taxation

The following discussion describes the material United States federal income tax consequences of the ownership of our ADSsand ordinary shares as of the date hereof. This discussion deals only with ADSs and ordinary shares that are held as capital assets by aUnited States Holder (as defined below). In addition, the discussion set forth below is applicable only to United States Holders (i) who areresidents 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.

As used herein, the term �United States Holder� means a beneficial owner of our ADSs or ordinary shares that is, for UnitedStates federal income tax purposes, any of the following:

� an individual citizen or resident of the United States;

� a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organizedin or under the laws of the United States, any state thereof or the District of Columbia;

� an estate the income of which is subject to United States federal income taxation regardless of its source; or

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Table of Contents� a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States

persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect underapplicable United States Treasury regulations to be treated as a United States person.

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. Those authorities may be changed, perhaps retroactively, so as to result inUnited States federal income tax consequences different from those summarized below. In addition, this discussion is based, in part, uponrepresentations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will beperformed in accordance with their terms.

This discussion does not represent a detailed description of the United States federal income tax consequences applicable toyou if you are subject to special treatment under the United States federal income tax laws, including if you are:

� a dealer in securities or currencies;

� a financial institution;

� a regulated investment company;

� a real estate investment trust;

� an insurance company;

� a tax-exempt organization;

� a person holding our ADSs or ordinary shares as part of a hedging, integrated or conversion transaction, a constructivesale or a straddle;

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

� a person liable for alternative minimum tax;

� a person who owns or is deemed to own 10% or more of our voting stock;

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

� 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 orordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Ifyou are a partner of a partnership holding our ADSs or ordinary shares, you should consult your tax advisors.

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Table of ContentsThis 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 Medicare tax on net investment income or the effects of any state, local ornon-United States tax laws. If you are considering the purchase of our ADSs or ordinary shares, you should consult your own taxadvisors concerning the particular United States federal income tax consequences to you of the purchase, ownership anddisposition of our ADSs or ordinary shares, as well as the consequences to you arising under other United States federal taxlaws 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 underlyingordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject toUnited States federal income tax.

Taxation of Dividends

The gross amount of distributions on the ADSs or ordinary shares (including any amounts withheld to reflect Korean withholdingtaxes) will be taxable as dividends to the extent paid out of our current or accumulated earnings and profits, as determined under UnitedStates federal income tax principles. To the extent that the amount of any distribution exceeds our current and accumulated earnings andprofits for a taxable year, the distribution will first be treated as a tax-free return of capital, causing a reduction in the tax basis of the ADSsor ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gainrecognized on a sale or exchange. We do not, however, expect to determine earnings and profits in accordance with United States federalincome tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend.

Any dividends that you receive (including any withheld taxes) will be includable in your gross income as ordinary income on theday actually or constructively received by you, in the case of ordinary shares, or by the depositary, in the case of ADSs. Such dividendswill not be eligible for the dividends received deduction allowed to corporations under the Code. With respect to non-corporate UnitedStates investors, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation. A qualifiedforeign corporation includes a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the UnitedStates which the United States Treasury Department determines to be satisfactory for these purposes and which includes an exchange ofinformation provision. The United States Treasury Department has determined that the Treaty meets these requirements, and we believewe are eligible for the benefits of the Treaty. However, non-corporate holders that do not meet a minimum holding period requirementduring which they are not protected from the risk of loss or that elect to treat the dividend income as �investment income� pursuant toSection 163(d)(4) of the Code will not be eligible for the reduced rates of taxation. In addition, the rate reduction will not apply to dividendsif the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. Thisdisallowance applies even if the minimum holding period has been met. You should consult your own tax advisors regarding theapplication of these rules to your particular circumstances.

Non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us if we area 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).

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Table of ContentsThe 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 ofADSs, regardless of whether the Won are converted into United States dollars. If the Won received as a dividend are converted intoUnited States dollars on the date they are received, you generally will not be required to recognize foreign currency gain or loss in respectof the dividend income. If the Won received as a dividend are not converted into United States dollars on the date of receipt, you will havea 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 orother disposition of the Won will be treated as United States source ordinary income or loss.

Subject to certain conditions and limitations (including a minimum holding period requirement), Korean withholding taxes ondividends may be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes ofcalculating the foreign tax credit, dividends paid on the ADSs or ordinary shares will be treated as income from sources outside the UnitedStates and will generally constitute passive category income. The rules governing the foreign tax credit are complex. You are urged toconsult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.

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 wewould have been a passive foreign investment company, or PFIC, for our most recent taxable year if we were taxable as a corporation forUnited States federal income tax purposes, and we 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:

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

� at least 50% of the value (determined based on a quarterly average) of our assets is attributable to assets that produce orare held for the production of passive income.

For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rentsderived in the active conduct of a trade or business and not derived from a related person). If we own at least 25% (by value) of the stockof another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of theother 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. Accordingly, it is possible that we may become a PFIC in thecurrent or any future taxable year due to changes in our asset or income composition. If we are a PFIC for any taxable year during whichyou hold our common 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 common shares and you do not make a timely mark-to-marketelection, as described below, you will be subject to special tax rules with respect to any �excess distribution� received and any gainrealized from a sale or other disposition, including a pledge, of common shares. Distributions received in a taxable year will be treated asexcess distributions to the extent that they are greater than 125% of the average annual distributions received during the shorter of thethree preceding taxable years or your holding period for the common shares. Under these special tax rules:

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

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Table of Contents� 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

� the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interestcharge 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 holdour common shares, you will generally be subject to the special tax rules described above for that year and for each subsequent year inwhich you hold the common 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 common shares had beensold 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 thiselection.

In lieu of being subject to the special tax rules discussed above, you may make a mark-to-market election with respect to yourcommon shares provided such common shares are treated as �marketable stock.� The common shares generally will be treated asmarketable stock if they are regularly traded on a �qualified exchange or other market� (within the meaning of the applicable Treasuryregulations).

If you make an effective mark-to-market election, for each taxable year that we are a PFIC you will include as ordinary incomethe excess of the fair market value of your common shares at the end of the year over your adjusted tax basis in the common shares. Youwill be entitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the common shares over their fairmarket value at the end of the year, but only to the extent of the net amount previously included in income as a result of themark-to-market election. Your adjusted tax basis in the common shares will be increased by the amount of any income inclusion anddecreased by the amount of any deductions under the mark-to-market rules. In addition, upon the sale or other disposition of yourcommon 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, butonly to the extent of the net amount of previously included income 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 subsequenttaxable years unless the common shares are no longer regularly traded on a qualified exchange or other market, or the Internal RevenueService consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-marketelection, 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 electingfund� under Section 1295 of the Code. However, this option is not available to you because we do not intend to comply with therequirements necessary to permit you to make this election.

If we are a PFIC for any taxable year during which you hold our common shares and any of our non-United States subsidiaries isalso a PFIC, you will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of theapplication 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 Internal Revenue Service Form 8621 if you hold our common shares in any year in which weare classified as a PFIC. You are urged to consult your tax

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Table of Contentsadvisors concerning the United States federal income tax consequences of holding common shares if we are considered a PFIC in anytaxable year.

Taxation of Capital Gains

For United States federal income tax purposes, you will recognize taxable gain or loss on any sale or exchange of the ADSs orordinary shares in an amount equal to the difference between the amount realized for the ADSs or ordinary shares and your tax basis inthe ADSs or ordinary shares. Such gain or loss will generally be capital gain or loss and will generally be long-term capital gain or loss ifyou have held the ADSs or ordinary shares for more than one year. Long-term capital gains of non-corporate United States Holders(including individuals) are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or lossrecognized by you will generally be treated as United States source gain or loss.

You should note that any Korean securities transaction tax will not be treated as a creditable foreign tax for United States federalincome tax purposes, although you may be entitled to deduct such taxes, subject to applicable limitations under the Code.

Information Reporting and Backup Withholding

In general, information reporting will apply to dividends in respect of our ADSs or ordinary shares and the proceeds from thesale, exchange or other disposition of our ADSs or 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 providea 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 arefund or a credit against your United States federal income tax liability provided the required information is timely furnished to the InternalRevenue Service.

Item 10.F. Dividends and Paying Agents

See �Item 8. Financial Information�Item 8.A. Consolidated Statements and Other Financial Information�Dividends� forinformation concerning our dividend policies and our payment of dividends. See ��Item 10.B. Memorandum and Articles ofAssociation�Dividends� for a discussion of the process by which dividends are paid on our ordinary shares. See �Item 12. Description ofSecurities Other than Equity Securities�Item 12.D. American Depositary Shares� for a discussion of the process by which dividends arepaid 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 U.S. Securities Exchange Act of 1934, as amended, and, in accordancetherewith, are required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities and ExchangeCommission. These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission�spublic reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.

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Table of ContentsPlease call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. We are required to make filings withthe Commission by electronic means, which will be available to the public over the Internet at the Commission�s web site athttp://www.sec.gov.

Item 10.I. Subsidiary Information

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 equityprice 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. Thesecontracts are entered into with major financial institutions, thereby minimizing the risk of credit loss. The activities of our finance divisionare subject to policies approved by our foreign exchange and interest rate risk management committee. These policies address the use ofderivative financial instruments, including the approval of counterparties, setting of limits and investment of excess liquidity. Our generalpolicy is to hold or issue derivative financial instruments largely for hedging purposes.

For our trading financial instruments, we recognized a valuation gain of￦0 and a valuation loss of￦2 billion in 2015, avaluation gain of￦1 billion and a valuation loss of￦8 billion in 2016 and a valuation gain of￦0 billion and a valuation loss of￦4 billionin 2017. For our hedging derivative contracts, we recognized a valuation gain of ￦142 billion, a valuation loss of￦2 billion andaccumulated other comprehensive income of￦148 billion in 2015, a valuation gain of￦109 billion, a valuation loss of￦0.1 billion andaccumulated other comprehensive income of￦85 billion in 2016 and a valuation gain of￦0.1 billion, a valuation loss of￦210 billion andaccumulated other comprehensive loss of￦147 billion in 2017. For further details regarding the assets, liabilities, gains and lossesrecorded relating to our derivative contracts outstanding as of December 31, 2015, 2016 and 2017, see Note 7 to the ConsolidatedFinancial Statements.

Exchange Rate Risk

Substantially all of our cash flow is denominated in Won. We are exposed to foreign exchange risk related to foreign currencydenominated liabilities and anticipated foreign exchange payments. Anticipated foreign exchange payments, mostly in U.S. Dollars, relateprimarily to payments of foreign currency denominated debt, net settlements paid to foreign telecommunication carriers and payments forequipment purchased from foreign suppliers. We have entered into several currency swap contracts, combined interest currency swapcontracts and currency forward contracts to hedge our foreign currency risks.

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Table of ContentsThe following table shows our assets and liabilities denominated in foreign currency as of December 31, 2015, 2016 and 2017:

As of December 31,2015 2016 2017

(in thousands of foreign currencies)Financial

assetsFinancialliabilities

Financialassets

Financialliabilities

Financialassets


U.S. Dollar 183,254 2,351,003 210,474 2,536,090 236,476 1,908,831Special Drawing Right 444 849 311 737 306 738Japanese Yen 73,716 40,279,411 80,555 21,802,051 28,267 21,801,443British Pound 8 888 1 151 � 74Euro 29 29 40 2,571 186 3,625Algerian Dinar � � 471 � 47 �Chinese Yuan 15,562 107 15,262 381 46,555 10Uzbekistani Som � � 39,531 � 136,787 �Rwandan Franc � � 1,203 � 3,346 �Indonesian Rupiah � � 15,646,011 53,142,167 14,886,393 710,162Myanmar Kyat � � 2,750 � 84 �Tanzanian Shilling � � 29,987 � 317,348 �Botswana Pula � � 15 � 42 �Hong Kong Dollar 9 � 254 � � �Bangladeshi Taka 6 � 69,473 � 38,074 �Polish Zloty 207,273 � 106,025 � 338 �Vietnamese Dong 270,000 � 515,412 � 311,649 �Swiss Franc � � � � � 12

As of December 31, 2015, 2016 and 2017, a 10% increase 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 ￦52 billion,￦28 billion and￦10 billion,respectively, and total equity by￦46 billion,￦24 billion and￦7 billion, respectively, with a 10% decrease in the exchange rate having theopposite effect. The foregoing sensitivity analysis assumes that all variables other than foreign exchange rates are held constant, and assuch, does not reflect any correlation between foreign exchange rates and other variables, nor our decision to decrease the risk. See Note35 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 fairvalue of our debt portfolio, which is primarily of a fixed interest nature. We use, to a limited extent, interest rate swap contracts andcombined interest rate and currency swap contracts to reduce interest rate volatility on some of our debt and manage our interest expenseby achieving a balanced mixture of floating and fixed rate debt. We entered into several interest rate swap contracts in which we exchangefixed interest rate payments with variable interest rate payments for a specified period, as well as entered into the combined interest rateand currency swap contracts to hedge our interest rate risk.

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Table of ContentsThe 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, 2017 which are sensitive to exchange rates and/or interestrates. The information is presented in Won, which is our reporting currency:

December 31, 2017

2018 2019 2020 2021 Thereafter TotalFair

Value(in millions of Won, except rates)

Local currency:Fixed rate 1,039,266 582,318 501,875 992,368 1,692,475 4,808,302 4,830,307Average weighted rate (1) 3.86 % 2.83 % 3.20 % 4.04 % 3.12 % 3.45 % �Variable rate � � � � � � �Average weighted rate (1) � % � % � % � % � % � % � %Sub-total 1,039,266 582,318 501,875 992,368 1,692,475 4,808,302 4,830,307

Foreign currency:Fixed rate 206,906 375,015 518 25 974,753 1,557,217 1,564,967Average weighted rate (1) 0.60 % 2.63 % 1.52 % 2.00 % 3.01 % 2.60 % �Variable rate 327,848 6,428 3,214 � � 337,490 343,052Average weighted rate (1) 2.84 % 2.40 % 2.40 % � % � % 2.82 % �

Subtotal 534,754 381,443 3,732 25 974,753 1,894,707 1,908,019Total 1,574,020 963,761 505,607 992,393 2,667,228 6,703,009 6,738,326

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

As of December 31, 2015, 2016 and 2017, a 100 basis point increase in the market interest rate, with all other variables heldconstant, would have decreased our profit before income tax by￦4 billion and￦3 billion and increased our profit before income tax by￦2 billion, respectively. As of December 31, 2015, 2016 and 2017, such increase, with all other variables held constant, would havedecreased our shareholders� equity by￦245 million and￦2 billion and increased our shareholders� equity by￦5 billion, respectively.

As of December 31, 2015, 2016 and 2017, a 100 basis point decrease in the market interest rates, with all other variables heldconstant, would have increased our profit before income tax by￦4 billion and￦3 billion and decreased our profit before income tax by￦2 billion, respectively. As of December 31, 2015, 2016 and 2017, a 100 basis point decrease in the market interest rates, with all othervariables held constant, would have decreased our shareholders� equity by￦6 billion,￦5 billion and￦5 billion, respectively. Theforegoing sensitivity analysis assumes that all variables other than market interest rates are held constant, and as such, does not reflectany correlation between market interest rates and other variables, nor our decision to decrease the risk, but reflects the effects ofderivative 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 ofour equity portfolio. As of December 31, 2015, 2016 and 2017, a 10% increase in the equity indices where our marketable equitysecurities are listed, with all other variables held constant, would have increased our total equity by ￦3 billion,￦0.5 billion and￦0.7 billion, respectively, with a 10% decrease in the equity index having the opposite effect. The foregoing sensitivity analysis assumesthat all variables other than changes in the equity index are held constant, and that our marketable equity instruments had movedaccording to the historical correlation to the index, and as such, does not reflect any correlation between the equity index and othervariables.

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Table of ContentsItem 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 FeesIssuance 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 andgovernmental 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 behalfof their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs tothe depositary for surrender. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributionsof cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as ofthe applicable ADS record date.

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Table of ContentsThe 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 holdersconcurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in directregistration), the depositary sends invoices to the applicable record-date ADS holders. In the case of ADSs held in brokerage andcustodian accounts (via the Depository Trust Company, or DTC), the depositary generally collects its fees through the systems providedby DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTCaccounts. The brokers and custodians who hold their clients� ADSs in DTC accounts in turn charge their clients� accounts the amount ofthe 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 toprovide the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be madeto 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 bythe depositary. Holders of our ADSs will receive prior notice of such changes.

Fees and Payments from the Depositary to Us

In 2017, we received the following payments, after deduction of applicable U.S. taxes, from the depositary:

Reimbursement of NYSE listing fees $92,582.00

Reimbursement of SEC filing fees $148,532.41

Reimbursement of settlement infrastructure fees (including maintenance fees) $104,870.57

Reimbursement of proxy process expenses (printing, postage and distribution) $29,983.01

Reimbursement of legal fees (reimbursement received in April 2017 in respect of 2016) $322,255.59

Contributions toward our investor relations efforts (including non-deal roadshows, investor conferences and investor relations agency fees) $473,715.68

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Table of ContentsPART 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 effectivenessof our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as ofDecember 31, 2017. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including thepossibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosurecontrols and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our chiefexecutive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2017.Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file orsubmit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission�srules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure thatinformation required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicatedto our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regardingrequired 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 internalcontrol over financial reporting is a process designed by, and under the supervision of, our principal executive, principal operating andprincipal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance ofrecords, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of ourmanagement 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 amisstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

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Table of ContentsOur management has performed an assessment of the effectiveness of our internal control over financial reporting as of

December 31, 2017, utilizing the criteria discussed in the Internal Control�Integrated Framework 2013 issued by the Committee ofSponsoring Organizations of the Treadway Commission. Based on this assessment, we concluded that our internal control over financialreporting was effective as of December 31, 2017.

Samil PricewaterhouseCoopers, an independent registered public accounting firm, which also audited our consolidated financialstatements as of, and for the year ended December 31, 2017, as stated in their report which is included herein, has issued an attestationreport 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 overfinancial 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 2017 that has materially affected, or isreasonably 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 Suk-Gwon Chang, Jong-Gu Kim, Sang Kyun Cha and Il Lim. The board of directors hasdetermined that Suk-Gwon Chang is the financial expert of the Audit Committee. Suk-Gwon Chang is independent as such term is definedin Section 303A.02 of the NYSE Listed Company Manual, Rule 10A-3 under the Exchange Act and the Korea Stock Exchange listingstandards.

Item 16B. Code of Ethics

We have adopted a code of ethics, as defined in Item 16B. of Form 20-F under the Securities Exchange Act of 1934, asamended. Our code of ethics applies to our chief executive officer, chief financial officer and persons performing similar functions, as wellas to our directors, other officers and employees. Our code of ethics is available on our web site at www.kt.com. If we amend theprovisions of our code of ethics that apply to our chief executive officer, chief financial officer and persons performing similar functions, or ifwe grant any waiver of such provisions, we will disclose such amendment or waiver on our website.

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Table of ContentsItem 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 publicaccounting firm, during the fiscal year ended December 31, 2016 and 2017. Such fees exclude the fees billed for work associated with ourforeign subsidiaries which Samil PricewaterhouseCoopers did not provide services and with our former subsidiaries.

Year EndedDecember 31,

2016 2017(In millions)

Audit fees (1) ￦3,090 ￦3,373Audit-related fees � �Tax fees (2) 78 68All other fees � �

Total fees ￦3,168 ￦3,441

(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 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 bySamil PricewaterhouseCoopers, our independent registered public accounting firm. Our Audit Committee�s policy regarding thepre-approval of non-audit services to be provided to us by our independent registered public accounting firm is that all such services shallbe pre-approved by our Audit Committee. Non-audit services that are prohibited to be provided to us by our independent registered publicaccounting firm under the rules of the SEC and applicable law may not be pre-approved. In addition, prior to the granting of anypre-approval, our Audit Committee must be satisfied that the performance of the services in question will not compromise theindependence of our independent registered public accounting firm and does not include delegation of the Audit Committee�sresponsibilities to the management under the Securities Exchange Act of 1934, as amended.

Our Audit Committee did not pre-approve any non-audit services under the de minimis exception of Rule 2-01 (c)(7)(i)(C) ofRegulation S-X as promulgated by the SEC.

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

Not applicable.

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Table of ContentsItem 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 the fiscal year endedDecember 31, 2017:

Period

Total Numberof Shares

Purchased

Average PricePaid per Share

(In Won)

Total Number ofShares Purchasedas Part of PubliclyAnnounced Plans

Maximum Number ofShares that May Yetbe Purchased Under

the PlansJanuary 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 � � � �

Neither we nor any �affiliated purchaser,� as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equitysecurities during the period covered by this annual report.

Item 16F. Change in Registrant��s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

The following is a summary of the significant differences between the New York Stock Exchange�s corporate governancestandards and those that we follow under Korean law:

NYSE Corporate Governance Standards KT Corporation��s Corporate Governance PracticeDirector Independence

Independent directors must comprise a majority of the board. The Commercial Code of Korea requires that our board of directors mustcomprise no less than a majority of outside directors. Our outside directors mustmeet the criteria for outside directorship set forth under the Commercial Code ofKorea.

The majority of our board of directors is independent (as defined in accordancewith the New York Stock Exchange�s standards), and 8 out of 11 directors areoutside directors.

Nominating/Corporate Governance Committee

Listed companies must have a nominating/corporate governance committee composedentirely of independent directors.

We have not established a nominating/corporate governance committeecomposed entirely of independent directors. However, we maintain an OutsideDirector Candidate Nominating Committee composed of all of our outsidedirectors and one standing director. We also maintain a Corporate GovernanceCommittee comprised of four outside directors and one standing director. Thecommittee is responsible for the review of matters with respect to our CorporateGovernance Guidelines and our performance under such guidelines to monitoreffectiveness of our corporate governance.

136



Table of ContentsNYSE Corporate Governance Standards KT Corporation��s Corporate Governance PracticeCompensation Committee

Listed companies must have a compensation committee composed entirely ofindependent directors.

We maintain an Evaluation and Compensation Committee composed of fouroutside directors.

Executive Session

Non-management directors must meet in regularly scheduled executive sessionswithout management.

Our outside directors hold meetings solely attended by outside directors inaccordance with the charter of our board of directors.

Audit Committee

Listed companies must have an audit committee which has a minimum of threedirectors and satisfy the requirements of Rule 10A-3 under the Exchange Act.

We maintain an Audit Committee comprised of four outside directors who meetthe applicable independence criteria set forth under Rule 10A-3 under theExchange Act.

Shareholder Approval of Equity Compensation Plan

Listed companies must allow their shareholders to exercise their voting rights withrespect to any material revision to the company�s equity compensation plan.

We currently have two equity compensation plans: one providing for the grant ofstock options to officers and standing directors; and an employee stock ownershipassociation program.

All material matters related to the granting stock options are provided in ourarticles of incorporation, and any amendments to the articles of incorporation aresubject to shareholders� approval. Matters related to the employee stockownership association program are not subject to shareholders� approval underKorean law.

Corporate Governance Guidelines

Listed companies must adopt and disclose corporate governance guidelines. We have adopted Corporate Governance Guidelines in March 2007 setting forthour practices with respect to corporate governance matters. Our CorporateGovernance Guidelines are in compliance with Korean law but do not meet allrequirements established by the New York Stock Exchange for U.S. companieslisted on the exchange. A copy of our Corporate Governance Guidelines inKorean 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 fordirectors, officers and employees, and promptly disclose any waivers of the code forexecutive officers.

We have adopted a Code of Ethics for all directors, officers and employees. Acopy of our Code of Ethics in Korean is available on our website at www.kt.com

Item 16H. Mine Safety Disclosure

Not applicable.

137



Table of ContentsPART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OF KT CORPORATION

PageReport of Independent Registered Public Accounting Firm F-2Consolidated Statements of Financial Position as of December 31, 2016 and 2017 F-4Consolidated Statements of Operations for the Years Ended December 31, 2015, 2016 and 2017 F-6Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2016 and 2017 F-7Consolidated Statements of Changes in Equity for the Years Ended December 31, 2015, 2016 and 2017 F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2016 and 2017 F-11Notes to Consolidated Financial Statements F-12

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 allHolders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issuedthereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(i) of theRegistrant�s Registration Statement (Registration No. 333-13578) on Form F-6)

2.2* Form of Amendment No. 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 AmericanDepositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by referenceto 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 pre-release of the American depositary receipts(incorporated herein by reference to the Registrant�s Registration Statement (Registration No. 333-10330) on Form F-6)(P)

2.4* Letter from Citibank, N.A., as depositary, to the Registrant relating to the establishment of a direct registration system forADSs and the issuance of uncertified ADSs as part of the direct registration system. (incorporated herein by reference toExhibit 2.4 of the Registrant�s Annual Report on Form 20-F filed on June 30, 2008)

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

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Table of Contents13.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

15.1 The Framework Act on Telecommunications (English translation)

15.2* Enforcement Decree of the Framework Act on Telecommunications (English translation) (incorporated herein by reference toExhibit 15.2 of the Registrant�s Annual Report on Form 20-F filed on April 29, 2015)

15.3 The Telecommunications Business Act (English translation)

15.4 Enforcement Decree of the Telecommunications Business Act (English translation)

101 Interactive Data Files (XBRL-Related Documents)

* Filed previously.(P) Paper filing.

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Table of ContentsSIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused andauthorized the undersigned to sign this annual report on its behalf.

KT CORPORATION(Registrant)

/s/ CHANG-GYU HWANGName: Chang-Gyu HwangTitle: Chief Executive Officer

Date: April 30, 2018

140



Table of ContentsINDEX TO FINANCIAL STATEMENTS

PageReport of Independent Registered Public Accounting Firm F-2Consolidated Statements of Financial Position as of December 31, 2016 and 2017 F-4Consolidated Statements of Operations for the Years Ended December 31, 2015, 2016 and 2017 F-6Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2015, 2016 and 2017 F-7Consolidated Statements of Changes in Equity for the Years Ended December 31, 2015, 2016 and 2017 F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2016 and 2017 F-11Notes to the Consolidated Financial Statements F-12

F-1



Table of ContentsReport of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders 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 as ofDecember 31, 2017 and 2016, and the related consolidated statements of operations, of comprehensive income (loss), of changes inequity and of cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectivelyreferred to as the �consolidated financial statements�). We also have audited the Company�s internal control over financial reporting as ofDecember 31, 2017, based on criteria established in Internal Control�Integrated Framework (2013) issued by the Committee ofSponsoring 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 theCompany as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in theperiod ended December 31, 2017 in conformity with International Financial Reporting Standards as issued by the International AccountingStandards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reportingas of December 31, 2017, 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 overfinancial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Management�sAnnual Report on Internal Control Over Financial Reporting in Item 15 of Form 20-F. Our responsibility is to express opinions on theCompany�s consolidated financial statements and on the Company�s internal control over financial reporting based on our audits. We area public accounting firm registered with the Public Company Accounting Oversight Board (United States) (�PCAOB�) and are required tobe independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulationsof 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 toobtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to erroror 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 theconsolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such proceduresincluded examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our auditsalso included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F-2



Table of ContentsDefinition 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 offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company�s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of the company�s assets that could have a material effect on the financialstatements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Samil PricewaterhouseCoopers

Seoul, KoreaApril 30, 2018

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

F-3



Table of ContentsKT Corporation and Subsidiaries

Consolidated Statements of Financial PositionDecember 31, 2016 and 2017

(in millions of Korean won) Notes 2016 2017

Assets

Current assetsCash and cash equivalents 4, 5 ￦2,900,311 ￦1,928,182Trade and other receivables, net 4, 6 5,327,352 5,814,283Other financial assets 4, 7 720,555 972,631Current income tax assets 2,079 9,030Inventories, net 8 454,588 642,027Current assets held for sale � 7,230Other current assets 9 311,135 304,860

Total current assets 9,716,020 9,678,243

Non-current assetsTrade and other receivables, net 4, 6 709,011 828,832Other financial assets 4, 7 664,726 754,992Property, plant and equipment, net 10, 20 14,312,111 13,562,319Investment properties, net 11 1,148,044 1,189,531Intangible assets, net 12 3,022,803 2,632,704Investments in associates and joint ventures 13 284,075 279,431Deferred income tax assets 28 701,409 712,222Other non-current assets 9 106,099 107,165

Total non-current assets 20,948,278 20,067,196Total assets ￦30,664,298 ￦29,745,439

F-4




Consolidated Statements of Financial Position (Continued)December 31, 2016 and 2017

(in millions of Korean won) Notes 2016 2017

Liabilities

Current liabilitiesTrade and other payables 4, 14 ￦7,139,771 ￦7,424,134Borrowings 4, 15 1,820,001 1,573,474Other financial liabilities 4,7 233 37,223Current income tax liabilities 28 88,739 68,880Provisions 16 96,485 78,172Deferred revenue 35,617 17,906Other current liabilities 9 342,291 258,315

Total current liabilities 9,523,137 9,458,104Non-current liabilities

Trade and other payables 4, 14 1,188,311 1,001,369Borrowings 4, 15 6,300,790 5,110,188Other financial liabilities 4,7 108,431 149,267Defined benefit liabilities, net 17 378,404 395,079Provisions 16 100,694 124,858Deferred revenue 85,372 91,698Deferred income tax liabilities 28 137,680 128,462Other non-current liabilities 9 58,761 237,284

Total non-current liabilities 8,358,443 7,238,205Total liabilities 17,881,580 16,696,309

Equity

Share capital 21 1,564,499 1,564,499Share premium 1,440,258 1,440,258Retained earnings 22 9,644,483 9,826,926Accumulated other comprehensive income 23 (1,432 ) 30,985Other components of equity 23 (1,217,934 ) (1,205,302 )

Equity attributable to owners of the Controlling Company 11,429,874 11,657,366Non-controlling interest 1,352,844 1,391,764

Total equity 12,782,718 13,049,130Total liabilities and equity ￦30,664,298 ￦29,745,439

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

F-5




Consolidated Statements of OperationsYears ended December 31, 2015, 2016 and 2017

(in millions of Korean won, except per share amounts)Notes 2015 2016 2017

Continuing operations:Operating revenue 25 ￦22,699,856 ￦23,120,878 ￦23,546,929

Revenue 22,211,673 22,755,006 23,259,541Others 488,183 365,872 287,388

Operating expenses 26 21,622,788 21,781,098 22,477,837Operating profit 1,077,068 1,339,780 1,069,092

Finance income 27 272,860 296,139 406,328Finance costs 27 (645,331 ) (515,087 ) (644,531 )Share of net profits of associates and joint venture 13 6,144 2,599 (13,892 )

Profit from continuing operations before income tax 710,741 1,123,431 816,997Income tax expense 28 227,131 328,314 270,656

Profit from continuing operations 483,610 795,117 546,341

Discontinued OperationsProfit from discontinued operations 141,075 � �

Profit for the year ￦624,685 ￦795,117 ￦546,341Profit for the year attributable to:

Owners of the Controlling Company ￦546,361 ￦708,362 ￦461,559Profit from continuing operations 404,045 708,362 461,559Profit from discontinued operations 142,316 � �

Non-controlling interest ￦78,324 ￦86,755 ￦84,782Profit from continuing operations 79,565 86,755 84,782Loss from discontinued operations (1,241 ) � �

Earnings per share attributable to the equity holders of the ControllingCompany during the year(in Korean won):

Basic earnings per share 29 ￦2,231 ￦2,893 ￦1,884From continuing operations 1,650 2,893 1,884From discontinued operations 581 � �

Diluted earnings per share 29 ￦2,231 ￦2,891 ￦1,883From continuing operations 1,650 2,891 1,883From discontinued operations 581 � �


F-6




Consolidated Statements of Comprehensive IncomeYears ended December 31, 2015, 2016 and 2017

(in millions of Korean won)Notes 2015 2016 2017

Profit for the year ￦624,685 ￦795,117 ￦546,341Other comprehensive incomeItems that will not be reclassified to profit or loss:

Remeasurements of the net defined benefit liability 17 (37,872 ) 4,213 (83,962 )Shares of remeasurement gain (loss) of associates and joint ventures (2,407 ) 116 (115 )

Items that may be subsequently reclassified to profit or loss:Changes in value of available-for-sale financial assets 47,381 10,925 51,235Other comprehensive income from available-for sale financial assets reclassified to loss (83,397 ) (3,840 ) (55,450 )Net gain (loss) on cash flow hedges 111,914 64,796 (111,083)Other comprehensive income (loss) from cash flow hedges reclassified to gain (loss) (97,962 ) (75,871 ) 141,929Shares of other comprehensive income (loss) from associates and joint ventures (1,608 ) (602 ) 10,280Exchange differences on translation of foreign operations (4,884 ) (5,407 ) (21,122 )

Total other comprehensive loss (68,835 ) (5,670 ) (68,288 )Total comprehensive income for the year ￦555,850 ￦789,447 ￦478,053Total comprehensive income for the year attributable to:

Owners of the Controlling Company 495,139 701,685 413,149Non-controlling interest 60,711 87,762 64,904


F-7




Consolidated Statements of Changes in EquityYears ended December 31, 2015, 2016 and 2017

Attributable to owners of the Controlling Company

(in millions of Korean won) NotesSharecapital

Sharepremium

Retainedearnings

Accumulatedother

comprehensiveincome

Othercomponents

of equity Total

Non-controlling

interestTotal

equityBalance as of January 1, 2015 ￦ 1,564,499 ￦1,440,258 ￦8,568,399 ￦ 25,790 ￦(1,260,709) ￦10,338,237 ￦1,449,320 ￦11,787,557Comprehensive income

Profit for the year � � 546,361 � � 546,361 78,324 624,685Changes in value of available-for-sale

financial assets 4,7 � � � (24,310 ) � (24,310 ) (11,706 ) (36,016 )Remeasurements of the net defined

benefit liability 17 � � (37,914 ) � � (37,914 ) 42 (37,872 )Valuation loss on cash flow hedge 4,7 � � � 13,924 � 13,924 28 13,952Shares of other comprehensive losses

of joint ventures and associates � � � (1,357 ) � (1,357 ) (251 ) (1,608 )Shares of gain on remeasurements of

joint ventures and associates � � (2,109 ) � � (2,109 ) (298 ) (2,407 )Exchange differences on translation of

foreign operations � � � (177 ) � (177 ) (4,707 ) (4,884 )Total comprehensive income for the year � � 506,338 (11,920 ) � 494,418 61,432 555,850

Transactions with equity holdersDividends paid to non-controlling

interest of subsidiaries � � � � � � (41,575 ) (41,575 )Appropriation of loss on disposal of

treasury stock � � (24,766 ) � 24,766 � � �Changes in consolidation scope � � � � � � (154,188 ) (154,188 )Change in ownership interest in

subsidiaries � � � � (2,968 ) (2,968 ) 2,699 (269 )Others � � � � 6,048 6,048 2,708 8,756

Subtotal � � (24,766 ) � 27,846 3,080 (190,356 ) (187,276 )Balance as of December 31, 2015 ￦1,564,499 ￦1,440,258 ￦9,049,971 ￦ 13,870 ￦(1,232,863) ￦10,835,735 ￦1,320,396 ￦12,156,131


F-8




Consolidated Statements of Changes in Equity (Continued)Years ended December 31, 2015, 2016 and 2017



Sharepremium

Retainedearnings

Accumulatedother

comprehensiveincome

Othercomponents

of equity Total

Non-controlling

interestTotal

equityBalance as of January 1, 2016 ￦ 1,564,499 ￦1,440,258 ￦9,049,971 ￦ 13,870 ￦(1,232,863) ￦10,835,735 ￦1,320,396 ￦12,156,131Comprehensive income

Profit for the year � � 708,362 � � 708,362 86,755 795,117Changes in value of available-

for-sale financial assets 4,7 � � � 1,691 1,691 5,394 7,085Remeasurements of the net

defined benefit liability 17 � � 8,531 � � 8,531 (4,318 ) 4,213Valuation loss on cash flow

hedge 4,7 � � � (11,075 ) � (11,075 ) � (11,075 )Shares of other

comprehensive losses ofjoint ventures andassociates � � � (571 ) � (571 ) (31 ) (602 )

Shares of gain onremeasurements of jointventures and associates � � 94 � � 94 22 116

Exchange differences ontranslation of foreignoperations � � � (5,347 ) � (5,347 ) (60 ) (5,407 )

Total comprehensive income forthe year � � 716,987 (15,302 ) � 701,685 87,762 789,447

Transactions with equity holdersDividends paid by the

Controlling Company � � (122,425 ) � � (122,425 ) � (122,425 )Dividends paid to non-

controlling interest ofsubsidiaries � � � � � � (61,674 ) (61,674 )

Changes in consolidationscope � � � � 11,369 11,369 (15,550 ) (4,181 )

Change in ownership interestin subsidiaries � � (50 ) � 50 � � �

Appropriation of loss ondisposal of treasury stock � � � � � � 21,769 21,769

Others � � � � 3,510 3,510 141 3,651Subtotal � � (122,475 ) � 14,929 (107,546 ) (55,314 ) (162,860 )Balance at December 31, 2016 ￦1,564,499 ￦1,440,258 ￦9,644,483 ￦ (1,432 ) ￦(1,217,934) ￦11,429,874 ￦1,352,844 ￦12,782,718


F-9




Consolidated Statements of Changes in Equity (Continued)Years ended December 31, 2015, 2016 and 2017



Sharepremium

Retainedearnings

Accumulatedother

comprehensiveincome

Othercomponents

of equity Total

Non-controlling

interestTotal

equityBalance as of January 1, 2017 ￦ 1,564,499 ￦1,440,258 ￦9,644,483 ￦ (1,432 ) ￦(1,217,934) ￦11,429,874 ￦1,352,844 ￦12,782,718Comprehensive income

Profit for the year � � 461,559 � � 461,559 84,782 546,341Changes in value of available-for-sale

financial assets 4,7 � � � (1,433 ) (1,433 ) (2,782 ) (4,215 )Remeasurements of the net defined

benefit liability 17 � � (80,711 ) � � (80,711 ) (3,251 ) (83,962 )Valuation gains on cashflow hedge 4,7 � � � 30,846 � 30,846 � 30,846Shares of other comprehensive income

of associates and joint ventures � � � 10,148 � 10,148 132 10,280Shares of loss on remeasurements of

associates and joint ventures � � (116 ) � � (116 ) 1 (115 )Exchange differences on translation of

foreign operations � � � (7,144 ) � (7,144 ) (13,978 ) (21,122 )Total comprehensive income for the year � � 380,732 32,417 � 413,149 64,904 478,053Transactions with owners

Dividends paid by the ControllingCompany � � (195,977 ) � � (195,977 ) � (195,977 )

Dividends paid to non-controllinginterest of subsidiaries � � � � � � (47,162 ) (47,162 )

Changes in consolidation scope � � � � � � 250 250Change in ownership interest in

subsidiaries � � � � 5,441 5,441 21,242 26,683Appropriations of loss on disposal of

treasury stock � � (2,312 ) � 2,312 � � �Others � � � � 4,879 4,879 (314 ) 4,565

Subtotal � � (198,289 ) � 12,632 (185,657 ) (25,984 ) (211,641 )Balance as of December 31, 2017 ￦ 1,564,499 ￦1,440,258 ￦9,826,926 ￦ 30,985 ￦(1,205,302) ￦11,657,366 ￦1,391,764 ￦13,049,130


F-10




Consolidated Statements of Cash FlowsYears ended December 31, 2015, 2016 and 2017

(in millions of Korean won)Notes 2015 2016 2017

Cash flows from operating activitiesCash generated from operations 31 ￦4,579,260 ￦5,202,520 ￦4,318,884Interest paid (436,363 ) (372,525 ) (252,405 )Interest received 128,422 104,679 93,769Dividends received 35,768 10,824 10,843Income tax paid (77,122 ) (174,748 ) (293,342 )

Net cash inflow from operating activities 4,229,965 4,770,750 3,877,749Cash flows from investing activities

Collection of loans 38,856 47,887 55,190Loans granted (79,136 ) (57,400 ) (59,800 )Disposal of derivatives 176,681 � �Disposal of available-for-sale financial assets 243,125 35,791 146,429Acquisition of available-for-sale financial assets (99,111 ) (44,302 ) (89,027 )Disposal of investments in associates and joint ventures 42,946 11,074 59,818Acquisition of investments in associates and joint ventures (12,238 ) (38,675 ) (41,780 )Disposal of current and non-current financial instruments 363,260 293,283 645,686Acquisition of current and non-current financial instruments (341,373 ) (597,345 ) (1,231,917)Disposal of property and equipment, and investment properties 28,303 93,401 68,229Acquisition of property and equipment, and investment properties (3,115,728) (2,764,346) (2,442,223)Disposal of intangible assets 25,841 17,891 22,680Acquisition of intangible assets (399,377 ) (455,763 ) (613,556 )Increase in cash due to exclusion from consolidation scope 741,834 � �Cash inflow(outflow) from changes in scope of consolidation (15,751 ) (26,454 ) (2,974 )

Net cash outflow from investing activities (2,401,868) (3,484,958) (3,483,245)Cash flows from financing activities

Proceeds from borrowings and debentures 5,675,302 1,122,898 616,257Repayments of borrowings and debentures (6,648,177) (1,768,768) (1,780,174)Settlement of derivative assets and liabilities, net (3,371 ) (33,199 ) 71,370Cash inflow from consolidated capital transactions � 800 27,261Cash outflow from consolidated capital transactions � (5,140 ) (300 )Cash inflow from other financing activities � � 16,962Dividends paid to shareholders (41,575 ) (184,099 ) (243,140 )Decrease in finance leases liabilities (146,175 ) (75,763 ) (71,735 )

Net cash outflow from financing activities (1,163,996) (943,271 ) (1,363,499)Effect of exchange rate change on cash and cash equivalents 6,700 (1,674 ) (3,134 )Net increase (decrease) in cash and cash equivalents 670,801 340,847 (972,129 )Cash and cash equivalents

Beginning of the year 1,888,663 2,559,464 2,900,311End of the year ￦2,559,464 ￦2,900,311 ￦1,928,182


F-11




Notes to the Consolidated Financial StatementsDecember 31, 2015, 2016 and 2017

1. General Information

The consolidated financial statements include the accounts of KT Corporation, which is the controlling company as defined underIFRS 10, Consolidated Financial Statements, and its 59 controlled subsidiaries as described in Note 1.2 (collectively referred to asthe �Group�).

The Controlling Company

KT Corporation (the �Controlling Company�) commenced operations on January 1, 1982, when it spun off from the KoreaCommunications Commission (formerly the Korean Ministry of Information and Communications) to provide telephone services andto engage in the development of advanced communications services under the Act of Telecommunications of Korea. Theheadquarters are located in Seongnam City, Gyeonggi Province, Republic of Korea, and the address of its registered head office is90, Buljeong-ro, Bundang-gu, Seongnam City, Gyeonggi Province.

On October 1, 1997, upon the announcement of the Government-Investment Enterprises Management Basic Act and thePrivatization 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, theadditional 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�sprivatization plan. As of the end of the reporting period, the Korean government does not own any share in the Controlling Company.

F-12





Consolidated Subsidiaries

The consolidated subsidiaries as of December 31, 2016 and 2017, are as follows:

Controlling percentageownership1 (%)

Subsidiary Type of Business LocationDecember 31,

2016December 31,

2017Closingmonth

KT Powertel Co., Ltd. 2 Trunk radio system business Korea 44.8% 44.8% DecemberKT Linkus Co., Ltd. Public telephone maintenance Korea 91.4% 91.4% DecemberKT Submarine Co., Ltd. 2,3 Submarine cable construction and

maintenanceKorea 39.3% 39.3% December

KT Telecop Co., Ltd. Security service Korea 86.8% 86.8% DecemberKT Hitel Co., Ltd. Data communication Korea 67.1% 67.1% DecemberKT Service Bukbu Co., Ltd. Opening services of fixed line Korea 67.3% 67.3% DecemberKT Service Nambu Co., Ltd. Opening services of fixed line Korea 77.3% 77.3% DecemberKT Commerce Inc. B2C, B2B service Korea 100.0% 100.0% DecemberKT New Business Fund No.1 Investment fund Korea 100.0% 100.0% DecemberKT Strategic Investment Fund No.1 Investment fund Korea 100.0% 100.0% DecemberKT Strategic Investment Fund No.2 Investment fund Korea 100.0% 100.0% DecemberKT Strategic Investment Fund No.3 Investment fund Korea 100.0% 100.0% DecemberKT Strategic Investment Fund No.4 Investment fund Korea � 100.0% DecemberBC Card Co., Ltd. Credit card business Korea 69.5% 69.5% DecemberVP Inc. Payment security service for credit

card, othersKorea 50.9% 50.9% December

H&C Network Call centre for financial sectors Korea 100.0% 100.0% DecemberBC Card China Co., Ltd. Software development and data

processingChina 100.0% 100.0% December

INITECH Co., Ltd.4 Internet banking ASP and securitysolutions

Korea 58.2% 58.2% December

Smartro Co., Ltd. VAN (Value Added Network)business


KTDS Co., Ltd.4 System integration andmaintenance


KT M Hows Co., Ltd. Mobile marketing Korea 90.0% 90.0% DecemberKT M&S Co., Ltd. PCS distribution Korea 100.0% 100.0% DecemberGENIE Music Corporation(KT Music

Corporation)2Online music production anddistribution


KT Skylife Co., Ltd.4 Satellite broadcasting business Korea 50.3% 50.3% DecemberSkylife TV Co., Ltd. TV contents provider Korea 92.6% 92.6% DecemberKT Estate Inc. Residential building development

and supplyKorea 100.0% 100.0% December

KT AMC Co., Ltd. Asset management and consultingservices


NEXR Co., Ltd. Cloud system implementation Korea 100.0% 100.0% December

F-13







2016December 31,

2017Closingmonth

KTSB Data service Data centre development andrelated service


KT Sat Co., Ltd. Satellite communication business Korea 100.0% 100.0% DecemberKT Innoedu Co E-learning business Korea 96.8% � DecemberNasmedia, Inc.3 Online advertisement Korea 42.8% 42.8% DecemberKT Sports Management of sports group Korea 100.0% 100.0% DecemberKT Music Contents Fund No.1 Music contents investment

businessKorea 80.0% 80.0% December

KT Music Contents Fund No.2 Music contents investmentbusiness

Korea � 100.0% December

KT-Michigan Global Content Fund Content investment business Korea 88.6% 88.6% DecemberAutopion Co., Ltd. Service for information and

communicationKorea 100.0% 100.0% December

KTCS Corporation 2,4 Database and online informationprovider


KTIS Corporation 2,4 Database and online informationprovider


KT M mobile Special categorytelecommunications operator andsales of communication device


KT Investment Co., Ltd. Technology business finance Korea 100.0% 100.0% DecemberNgenBio Medicine and Pharmacy

development businessBelgium 49.8% � December

Whowho&Company Co., Ltd. Software development and supply Korea 100.0% 100.0% DecemberPlayD Co., Ltd.(N Search Marketing Co., Ltd.)

Advertising agency business Korea 100.0% 100.0% December

KT Rwanda Networks Ltd. Network installation andmanagement

Rwanda 51.0% 51.0% December

AOS Ltd. System integration andmaintenance


KT Belgium Foreign investment business Belgium 100.0% 100.0% DecemberKT ORS Belgium Foreign investment business Belgium 100.0% 100.0% DecemberKorea Telecom Japan Co., Ltd. Foreign telecommunication

businessJapan 100.0% 100.0% December

KBTO sp.zo.o. Electronic communication business Poland 75.0% 94.0% DecemberKorea Telecom China Co., Ltd. Foreign telecommunication

businessChina 100.0% 100.0% December

KT Dutch B.V Super iMax and East Telecommanagement

Netherlands 100.0% 100.0% December

Super iMax LLC Wireless high speed internetbusiness

Uzbekistan 100.0% 100.0% December

East Telecom LLC Fixed line telecommunicationbusiness


F-14







2016December 31,

2017Closingmonth

Korea Telecom America, Inc. Foreign telecommunicationbusiness

USA 100.0% 100.0% December

PT. KT Indonesia Foreign telecommunicationbusiness

Indonesia 99.0% 99.0% December

PT. BC Card Asia Pacific Software development and supply Indonesia 99.9% 99.9% DecemberKT Hongkong TelecommunicationsCo., Ltd.

Fixed line communication business Hong Kong 100.0% 100.0% December

KT Hong kong Limited Foreign investment business Hong Kong 100.0% 100.0% DecemberKorea Telecom Singapore Pte.Ltd. Foreign investment business Singapore 100.0% 100.0% DecemberTexnoprosistem LLP. Fixed line internet business Uzbekistan 100.0% 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 atthe shareholders� meetings.

3 Although the Controlling Company owns less than 50% ownership in this entity, this entity is consolidated as the ControllingCompany 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 percentageownership.

Changes in scope of consolidation in 2017 are as follows:

Changes Location Subsidiary ReasonIncluded Korea KT Strategic Investment Fund No.4 Newly established

KT Music Contents Investment Fund No.2 Newly establishedExcluded Korea KT Innoedu Co., Ltd. Shares disposed

NgeneBio Percentage of ownership decreased

F-15





Summarized information for consolidated subsidiaries as of and for the years ended December 31, 2015, 2016 and 2017, follows:

(in millions of Korean won) 2015

Total assetsTotal

liabilitiesOperatingrevenues

Profit (loss)For the year

KT Powertel Co., Ltd. ￦113,515 ￦21,182 ￦104,527 ￦(32,417 )KT Linkus Co., Ltd. 77,141 65,745 116,095 3,449KT Submarine Co., Ltd. 160,314 63,518 67,268 4,145KT Telecop Co., Ltd. 269,191 134,966 302,844 (7,593 )KT Hitel Co.,Ltd. 235,757 33,938 162,155 7,258KT Service Bukbu Co., Ltd2 31,879 22,627 89,498 (4,630 )KT Service Nambu Co., Ltd2 20,729 10,567 110,129 (5,055 )BC Card Co., Ltd.1 2,963,952 1,945,634 3,504,946 218,969H&C Network1 248,189 70,635 241,008 19,513Nasmedia, Inc. 141,733 72,202 45,630 9,916KTDS Co., Ltd.1 162,518 116,654 423,015 12,836KT M Hows Co., Ltd. 25,093 17,980 19,352 1,728KT M&S Co., Ltd. 256,246 217,892 853,011 (18,776 )GENIE Music Corporation(KT Music Corporation) 90,518 30,704 90,005 3,446KT Skylife Co., Ltd.1 711,294 217,850 668,521 72,987KT Estate Inc.1 1,603,438 260,292 254,776 27,487KTSB Data service 23,063 1,730 4,390 (2,444 )KT Innoedu Co., Ltd. 5,858 7,585 18,156 (4,288 )KT Sat Co., Ltd. 679,959 210,110 133,326 27,174KT Sports 15,341 11,643 51,801 (3,836 )KT Music Contents Fund No.1 10,206 47 468 (111 )KT-Michigan Global Content Fund 5,401 � 861 (209 )Autopion Co., Ltd. 7,102 3,317 10,585 1,123KT M mobile 64,756 13,121 42,478 (36,725 )KT Investment Co., Ltd 49,485 30,827 4,704 (219 )NgeneBio 7,894 4,683 � (434 )KTCS Corporation1 346,949 194,367 1,066,556 13,685KTIS Corporation 211,164 55,370 473,892 15,041Korea Telecom Japan Co., Ltd. 13,889 14,393 25,652 (248 )Korea Telecom China Co., Ltd. 909 198 1,748 (95 )KT Dutch B.V.1 29,402 27 161 118Super iMax LLC 14,962 8,186 8,291 (2,220 )East Telecom LLC 30,833 17,066 24,066 664Korea Telecom America, Inc. 6,016 1,378 6,391 156PT. KT Indonesia 22 � � (9 )Olleh Rwanda Networks Ltd. 188,951 147,653 7,299 (28,721 )KT Belgium 77,058 4 � (127 )KT ORS Belgium 1,996 20 � (75 )KBTO sp.zo.o. 1,471 1,817 � (328 )Africa Olleh Services Ltd. 11,928 12,187 8,712 (923 )

F-16





(In millions of Korean won) 2016

Total assets Total liabilitiesOperatingrevenues


KT Powertel Co., Ltd. ￦113,725 ￦19,899 ￦81,390 ￦202KT Linkus Co., Ltd. 64,318 56,953 117,587 (3,830 )KT Submarine Co., Ltd. 156,993 55,573 84,137 5,146KT Telecop Co., Ltd. 265,553 132,344 315,948 143KT Hitel Co., Ltd. 249,202 46,941 198,994 4,298KT Service Bukbu Co., Ltd. 32,863 24,580 182,952 694KT Service Nambu Co., Ltd. 32,621 24,282 218,602 772BC Card Co., Ltd.1 3,651,065 2,602,404 3,567,512 163,131H&C Network1 272,110 80,983 266,613 14,749Nasmedia, Inc.1 263,925 159,502 70,037 11,972KTDS Co., Ltd.1 197,970 151,644 476,379 10,838KT M Hows Co., Ltd. 28,539 18,466 19,922 2,865KT M&S Co., Ltd. 247,854 227,507 724,144 (12,955 )GENIE Music Corporation(KT Music Corporation) 110,080 41,953 111,450 8,235KT Skylife Co., Ltd.1 777,948 231,452 668,945 68,863KT Estate Inc.1 1,734,729 375,341 405,417 46,815KTSB Data service 20,075 759 5,136 (1,983 )KT Innoedu Co., Ltd. 6,477 7,259 15,599 103KT Sat Co., Ltd. 744,653 253,041 144,594 36,266KT Sports 16,925 13,573 48,476 (198 )KT Music Contents Fund No.1 10,592 331 349 103KT-Michigan Global Content Fund 16,250 163 133 (514 )Autopion Co., Ltd. 6,163 2,794 7,772 (409 )KT M mobile 131,446 20,369 112,532 (40,041 )KT Investment Co., Ltd.1 39,506 23,123 10,130 (1,832 )NgeneBio 6,361 4,733 244 (1,833 )KTCS Corporation1 322,768 166,642 955,050 7,892KTIS Corporation 221,176 63,871 436,914 9,991Korea Telecom Japan Co., Ltd. 3,592 5,374 5,122 (1,391 )Korea Telecom China Co., Ltd. 532 188 930 60KT Dutch B.V 34,197 73 166 85Super iMax LLC 10,308 6,734 10,759 (1,802 )East Telecom LLC 31,885 16,554 27,492 3,257Korea Telecom America, Inc. 4,464 1,306 7,113 181PT. KT Indonesia 16 � � (7 )KT Rwanda Networks Ltd. 167,112 138,651 13,435 (31,455 )KT Belguium 79,391 7 � (67 )KT ORS Belgium 2,013 23 � (46 )KBTO sp.zo.o. 1,166 2,378 21 (2,587 )AOS Ltd. 10,025 3,179 14,481 (1,123 )KT Hongkong Telecommunications Co., Ltd. 1,571 956 1,568 120

F-17






Total assets Total liabilitiesOperatingrevenue

Profit (loss)for the year

KT Powertel Co., Ltd. 115,125 18,937 69,234 2,112KT Linkus Co., Ltd. 59,344 51,516 112,043 725KT Submarine Co., Ltd. 142,797 34,056 73,985 8,243KT Telecop Co., Ltd. 264,353 131,633 317,591 2,885KT Hitel Co., Ltd. 258,240 52,943 227,884 3,225KT Service Bukbu Co., Ltd. 29,281 22,096 194,837 688KT Service Nambu Co., Ltd. 36,076 26,412 232,996 875BC Card Co., Ltd.1 4,048,263 2,955,038 3,628,995 156,109H&C Network1 273,856 65,446 277,622 16,104Nasmedia, Inc.1 315,967 188,197 120,667 26,676KTDS Co., Ltd.1 144,922 93,343 459,266 11,584KT M Hows Co., Ltd. 42,738 28,489 24,610 4,097KT M&S Co., Ltd. 242,388 231,151 734,420 (9,707 )GENIE Music Corporation(KT Music Corporation) 139,686 48,512 156,163 (3,401 )KT Skylife Co., Ltd.1 792,893 210,550 687,752 57,314KT Estate Inc.1 1,869,194 502,915 428,446 52,416KTSB Data service 18,306 605 4,950 (1,651 )KT Sat Co., Ltd. 742,391 220,804 147,649 29,601KT Sports 11,131 7,805 53,357 (199 )KT Music Contents Fund No.1 13,804 1,041 370 (499 )KT Music Contents Fund No.2 7,500 11 � (11 )KT-Michigan Global Content Fund 14,575 147 159 (426 )Autopion Co., Ltd. 6,306 3,530 6,679 (618 )KT M mobile 93,601 21,453 159,684 (38,883 )KT Investment Co., Ltd.1 54,673 38,313 8,794 (619 )KTCS Corporation1 348,334 188,764 968,186 7,385KTIS Corporation 223,818 62,569 438,597 8,337Korea Telecom Japan Co., Ltd.1 1,554 2,788 2,772 536Korea Telecom China Co., Ltd. 665 32 1,030 348KT Dutch B.V 30,312 50 206 169Super iMax LLC 3,449 4,886 7,314 (4,584 )East Telecom LLC1 11,672 11,748 19,663 (9,118 )Korea Telecom America, Inc. 3,694 791 6,783 109PT. KT Indonesia 8 � � (6 )KT Rwanda Networks Ltd.2 151,359 139,561 15,931 (22,762 )KT Belguium 86,455 8 49 (2 )KT ORS Belgium 1,769 14 10 (10 )KBTO sp.zo.o. 3,311 2,268 67 (3,456 )AOS Ltd.2 9,437 4,519 8,952 (682 )KT Hongkong Telecommunications Co., Ltd. 2,578 1,497 7,304 494

1 These companies are the intermediate controlling companies of other subsidiaries and the above financial information is from theirconsolidated financial statements.

F-18





2 At the end of the reporting period, convertible preferred stock issued by subsidiaries included in liabilities.

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Group in the preparation of its financial statements.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 ReportingStandards(�IFRS�) as issued by the International Accounting Standards Board (�IASB�).

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requiresmanagement to exercise judgment in the process of applying the Group�s accounting policies. The areas involving a higher degreeof judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements aredisclosed in Note 3.

2.2 Changes in Accounting Policy and Disclosures

(1) New standards and amendments adopted by the Group

The Group has applied the following standards and amendments for the first time for their annual reporting period commencingJanuary 1, 2017. The adoption of these amendments did not have any material impact on the financial statements.

- Amendments to IAS 7, Statement of Cash Flows

Amendments to IAS 7, Statement of Cash Flows requires to provide disclosures that enable used of financial statements to evaluatechanges in liabilities arising from financing activities, including both changes arising from cash flows and non-cash flows (Note 32)

- Amendments to IAS 12, Income Tax

Amendments to IAS 12 clarify how to account for deferred tax assets related to debt instruments measured at fair value. IAS 12provides requirements on the recognition and measurement of current or deferred tax liabilities or assets. The amendments issuedclarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice

- Amendments to IFRS 12, Disclosures of Interests in Other Entities

Amendments to IFRS 12 clarify when an entity�s interest in a subsidiary, a joint venture or an associate is classified as held for salesin accordance with IFRS 5, the entity is required to disclose other information except for summarized financial information inaccordance with IFRS 12.

F-19





(2) New standards, amendments and interpretations not yet adopted

Certain new accounting standards and interpretations that have been published that are not mandatory for annual reporting periodcommencing January 1, 2017 and have not been early adopted by the Group are set out below.

- Amendments to IAS 28, Investments in Associates and Joint Ventures

When an investment in an associate or a joint venture is held by, or it held indirectly through, an entity that is a venture capitalorganization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect tomeasure that investment at fair value through profit or loss in accordance with IFRS 9. The amendments clarify that an entity shallmake this election separately for each associate of joint venture, at initial recognition of the associate or joint venture. The Group willapply these amendments retrospectively for annual periods beginning on or after January 1, 2018, and early adoption is permitted.The Group does not expect the amendments to have a significant impact on the financial statements.

- Amendment to IAS 40, Transfers of Investment Property

Paragraph 57 of IAS 40 clarifies that a transfer to, or from, investment property, including property under construction, can only bemade if there has been a change in use that is supported by evidence, and provides a list of circumstances as examples. Theamendment will be effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Group doesnot expect the amendment to have a significant impact on the financial statements.

- Amendments to IFRS 2, Share-based Payment

Amendments to IFRS 2 clarify accounting for a modification to the terms and conditions of a share-based payment that changes theclassification of the transaction from cash-settled to equity-settled. Amendments also clarify that the measurement approach shouldtreat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. The amendments will beeffective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Group does not expect theamendments to have a significant impact on the financial statements.

- Enactments to IFRIC 22, Foreign Currency Transaction and Advance Consideration

According to these enactments, the date of the transaction for the purpose of determining the exchange rate to use on initialrecognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetaryasset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments orreceipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. Theseenactments will be effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Group doesnot expect the enactments to have a significant impact on the financial statements.

- Enactment of IFRS 16, Leases

IFRS 16 Leases issued on May 22, 2017 is effective for annual periods beginning on or after January 1, 2019, with early adoptionpermitted. This standard will replace IAS 17 Leases, IFRIC 4

F-20





Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives, and SIC-27 Evaluating the Substanceof Transactions Involving the Legal Form of a Lease.

At inception of a contract, the entity shall assess whether the contract is, or contains, a lease. Also, at the date of initial application,the entity shall assess whether the contract is, or contains, a lease in accordance with the standard. However, the entity will not needto reassess all contracts with applying the practical expedient. As practical expedient, the entity can elect to apply the new guidanceregarding the definition of a lease only to contracts entered into (or changed) on or after the date of initial application. Existing leasecontracts will not need to be reassessed. This expedient must be consistently applied to all contracts.

For a contract that is, or contains, a lease, the entity shall account for each lease component within the contract as a leaseseparately from non-lease components of the contract. A lessee is required to recognize a right-of-use asset representing its right touse the underlying leased asset and a lease liability representing its obligation to make lease payments. The lessee may elect not toapply the requirements to short-term lease (a lease term of 12 months or less at the commencement date) and low value assets (e.g.underlying assets below $ 5,000). In addition, as a practical expedient, the lessee may elect, by class of underlying asset, not toseparate non-lease components from lease components, and instead account for each lease component and any associatednon-lease components as a single lease component.

(1) Lessee accounting

A lessee shall apply this standard to its leases either:

� retrospectively to each prior reporting period presented applying IAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors (Full retrospective application); or

� retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application.

The Group has not yet elected the application method.

The Group performed an impact assessment to identify potential financial effects of applying IFRS 16. The assessment wasperformed based on available information as at December 31, 2017 to identify effects on 2017 financial statements. The Group isanalyzing the effects on the financial statements; however, it is difficult to provide reasonable estimates of financial effects until theanalyses is complete.

(2) Lessor accounting

The Company expects the effect on the financial statements applying the new standard will not be significant

- IFRS 9, Financial Instruments

The new standard for financial instruments issued on September 25, 2015 are effective for annual periods beginning on or afterJanuary 1, 2018 with early application permitted. This standard will replace IAS 39, Financial Instruments: Recognition andMeasurement. The Group will apply the standards for annual periods beginning on or after January 1, 2018

F-21





The standard requires retrospective application with some exceptions. For example, an entity is not required to restate prior period inrelation to classification and measurement (including impairment) of financial instruments. The standard requires prospectiveapplication of its hedge accounting requirements for all hedging relationships except the accounting for time value of options andother exceptions.

IFRS 9, Financial Instruments requires all financial assets to be classified and measured on the basis of the entity�s business modelfor managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model, anexpected credit loss model, is introduced and any subsequent changes in expected credit losses will be recognized in profit or loss.Also, hedge accounting rules amended to extend the hedging relationship, which consists only of eligible hedging instruments andhedged items, qualifies for hedge accounting.

An effective implementation of IFRS 9 requires preparation processes including financial impact assessment, accounting policyestablishment, accounting system development and the system stabilization. The impact on the Group�s financial statements due tothe application of the standard is dependent on judgements made in applying the standard, financial instruments held by the Groupand macroeconomic variables.

The Group performed an impact assessment to identify potential financial effects of applying IFRS 9. The assessment wasperformed based on available information as at December 31, 2017, and the results of the assessment are explained as below.

(a) Classification and Measurement of Financial Assets

When implementing IFRS 9, the classification of financial assets will be driven by the Group�s business model for managing thefinancial assets and contractual terms of cash flow. The following table shows the classification of financial assets measuredsubsequently at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. If a hybridcontract contains a host that is a financial asset, the classification of the hybrid contract shall be determined for the entire contractwithout separating the embedded derivative.

Business model for thecontractual cash flows

characteristicsSolely represent payments of

principal and interest All otherHold the financial asset for the collection of thecontractual cash flows

Measured at amortized cost1

Hold the financial asset for the collection of thecontractual cash flows and sale

Recognized at fair value through othercomprehensive income1

Hold for sale Recognized at fair value through profit or loss

Recognized at fairvalue through profit orloss2

F-22





1 A designation at fair value through profit or loss is allowed only if such designation mitigates an accounting mismatch(irrevocable)

2 Equity investments not held for trading can be recorded in other comprehensive income (irrevocable).

With the implementation of IFRS 9, the criteria to classify the financial assets at amortized cost or at fair value through othercomprehensive income are more strictly applied than the criteria applied with IAS 39. Accordingly, the financial assets at fair valuethrough profit or loss may increase by implementing IFRS 9 and may result an extended fluctuation in profit or loss.

As of December 31, 2017, the Group owns loan and trade receivables of￦ 9,653,443 million, financial assets available-for-sales of￦ 380,953 million.

According to IFRS 9, a debt instrument is measured at amortized cost if: a) the objective of the business model is to hold thefinancial asset for the collection of the contractual cash flows, and b) the contractual cash flows under the instrument solelyrepresent payments of principal and interest. Also, a debt instrument is measured at fair value through other comprehensive incomeif the objective of the business model is achieved both by collecting contractual cash flows and selling financial assets; and thecontractual cash flows represents solely payments of principal and interest on a specific date under contract terms. Based on resultsfrom the impact assessment of IFRS 9, the application of the new standard as at December 31, 2017 does not have a materialimpact on the Group�s financial statements.

According to IFRS 9, equity instruments that are not held for trading, the Group plans to elect an irrevocable election at initialrecognition to classify the instruments as assets measured at fair value through other comprehensive income, which all subsequentchanges in fair value being recognized in other comprehensive income and not recycled to profit or loss. As at December 31, 2017,the Group holds equity instruments of￦ 371,054 million classified as financial assets available-for-sale. Based on results from theimpact assessment of IFRS 9, the Group expects the application of IFRS 9 on these financial assets will not have a material impacton the financial statements.

According to IFRS 9, debt instruments those contractual cash flows do not represent solely payments of principal and interest andheld for trading, and equity instruments that are not designated as instruments measured at fair value through other comprehensiveincome are measured at fair value through profit or loss.

(b) Impairment: Financial Assets and Contract Assets

The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than onlyincurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortized cost, debt instrumentsmeasured at fair value through other comprehensive income, lease receivables, contract assets, loan commitments and certainfinancial guarantee contracts.

As at December 31, 2017, the Group owns debt investment carried at amortized cost of ￦ 9,653,594 million (loans and receivablesof￦ 9,653,443 million, financial asset held-to-maturity of￦ 151 million). And, the Group recognized loss allowance of￦523,799 million for these assets.

F-23





As a result of the impact assessment, the Group expects the application of the new standard as at December 31, 2017 does nothave a material impact on the Group�s financial statements.

(c) Hedge Accounting

Hedge accounting mechanics (fair value hedges, cash flow hedges and hedge of net investments in a foreign operations) requiredby IAS 39 remains unchanged in IFRS 9, however, the new hedge accounting rules will align the accounting for hedging instrumentsmore closely with the Group�s risk management practices. As a general rule, more hedge relationships might be eligible for hedgeaccounting, as the standard introduces a more principles-based approach. IFRS 9 allows more hedging instruments and hedgeditems to qualify for hedge accounting, and relaxes the hedge accounting requirement by removing two hedge effectiveness tests thatare a prospective test to ensure that the hedging relationship is expected to be highly effective and a quantitative retrospective test(within range of 80-125 %) to ensure that the hedging relationship has been highly effective throughout the reporting period. As ofDecember 31, 2017, the Group applies the hedge accounting to its assets, liabilities that amount to ￦ 7,389 million,￦ 93,770 million respectively.

The Group has performed an impact assessment with an assumption that the Group applies hedge accounting in accordance withIFRS 9. As a result of the impact assessment, the Group expects the application of the new standard as at December 31, 2017 doesnot have a material impact on the Group�s financial statements.

- IFRS 15 Revenue from Contracts with Customers

The Group will apply IFRS 15 Revenue from Contracts with Customers issued on November 6, 2015 for annual reporting periodsbeginning on or after January 1, 2018, and earlier application is permitted. This standard replaces IAS 18 Revenue, IAS 11Construction Contracts, SIC-31, Revenue-Barter Transactions Involving Advertising Services, IFRIC 13 Customer Loyalty Programs,IFRIC 15 Agreements for the Construction of Real Estate and IFRIC 18 Transfers of assets from customers. The Group must applyIFRS 15 Revenue from Contracts with Customers within annual reporting periods beginning on or after January 1, 2018, and willelect the modified retrospective approach which will recognize the cumulative impact of initially applying the revenue standard as anadjustment to retained earnings as at January 1, 2018, the period of initial application.

IAS 18 and other current revenue standard identify revenue as income that arises in the course of ordinary activities of an entity andprovides guidance on a variety of different types of revenue, such as, sale of goods, rendering of services, interest, dividends,royalties and construction contracts. However, the new standard is based on the principle that revenue is recognized when control ofa good or service transfers to a customer so the notion of control replaces the existing notion of risks and rewards. A new five-stepprocess must be applied before revenue from contract with customers can be recognized:

� Identify contracts with customers

� Identify the separate performance obligation

� Determine the transaction price of the contract

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� Allocate the transaction price to each of the separate performance obligations, and

� Recognize the revenue as each performance obligation is satisfied.

The Group formed a task force team since fourth quarter of 2014 for preparation of implementing IFRS 15 Revenue from Contractswith Customers. Also the Group develops the internal control system and implements accounting process system by analyzing theGroup�s revenue structure with accounting experts and IT specialists. IFRS 15 will affect not only accounting treatments but also thegeneral business practice including sales strategy and operational structures. Therefore, the Group accomplished an orientationprogram for both Group�s directors and employees, and periodically reported to the managements about implementation plan andprogress.

Group identified the following areas are likely to be affected in general.

(a) Identifying performance obligations

The Group provides telecommunication services and sells handsets as their main business. With the implementation of IFRS15, the Group identifies performance obligations with a customer such as providing telecommunication services, sellinghandsets and other. The timing of revenue recognition depends on a performance obligation is satisfied at a point in time orover time. Where a performance obligation is satisfied over time, the related revenue is also recognized over time.

(b) Allocation the transaction price and Revenue recognition

With implementation of IFRS 15, the Group allocated the transaction price to each performance obligation identified in acontract based on the relative stand-alone selling prices of the goods or services being provided to the customer. To allocatethe 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 contractand allocate the transaction price in proportion to those stand-alone selling price. The stand-alone selling price is the price atwhich the Group would sell a promised good or service separately to the customer. The best evidence of a stand-alone sellingprice is the observable price of a good or service when the Group sells that good or service separately in similar circumstancesand to similar customers. The Group recognizes the allocated amount as contract assets or contract liabilities, and amortizes itthrough the remaining period which is adjusted in operating income.

(c) Incremental costs of obtaining a contract

The Group pays the commission fees when new customer subscribe for telecommunication services. The incremental contractacquisition costs are those commission fees that the Group incurs to acquire a contract with a customer that it would not haveincurred if the contract had not been acquired.

According to IFRS 15, the Group recognizes as an asset the incremental contract acquisition costs and amortize it over theexpected period of benefit. However, as a practical expedient, the Group may recognize the incremental contract acquisitioncosts as an expense when incurred if the amortization period of the asset is one year or less.

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With implementation of IFRS 15, the Group�s operating income and expenses are expected to be decreased. Under themodified retrospective method, we will apply the rules to all open contracts existing as of January 1, 2018, recognizing inbeginning retained earnings for 2018 an adjustment between￦900 billion and￦1,100 billion for the cumulative effect of thechange.

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 over which the Group has control. The Group controls an entity when the Group is exposed to, or hasrights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct theactivities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They aredeconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred ismeasured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilitiesassumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes anynon-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controllinginterest�s proportionate share of the acquired entity�s net identifiable assets. All other non-controlling interests are measured at fairvalues, 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 valueof any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill.If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognizeddirectly in profit or loss as a bargain purchase.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealizedlosses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies ofsubsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(2) Changes in ownership interests in subsidiaries without change of control

Any difference between the amount of the adjustment to non-controlling interest that do not result in a loss of control and anyconsideration 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 consolidate for a subsidiary because of a loss of control, any retained interest in the subsidiary isremeasured to its fair value with the change in carrying amount recognized in profit or loss.

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(4) Associates

Associates are all entities over which the Group has significant influence, and investments in associates are initially recognized atacquisition cost using the equity method. Unrealized gains on transactions between the Group and its associates are eliminated tothe extent of the Group�s interest in the associates. If there is any objective evidence that the investment in the associate isimpaired, the Group recognizes the difference between the recoverable amount of the associate and its book amount as impairmentloss.

(5) Joint arrangement

A joint arrangement, wherein two or more parties have joint control, is classified as either a joint operation or a joint venture. A jointoperator recognizes its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly heldor incurred assets, liabilities, revenues and expenses. A joint venturer has rights to the net assets relating to the joint venture andaccounts 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 chiefoperating decision-maker (Note 33). The chief operating decision-maker is responsible for allocating resources and assessingperformance 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 economicenvironment in which the each entity operates (the �functional currency�). The consolidated financial statements are presented inKorean 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 assetsand liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date whenthe fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fairvalue gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair valuethrough profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetaryassets such as equities classified as available-for-sale financial assets are recognized in other comprehensive income.

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(3) Translation to the presentation currency

The results and financial position of foreign operations that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:

� assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of thereporting period,

� income and expenses for each statement of profit or loss are translated at average exchange rates for the period,

� equity is translated at the historical exchange rate, and

� all resulting exchange differences are recognized in other comprehensive income.

2.6 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly liquid investmentswith original maturities of less than three months.

2.7 Financial Assets

(1) Classification and measurement

The Group classifies its financial assets into the following categories: financial assets at fair value through profit or loss,available-for-sale financial assets, loans and receivables, and held-to-maturity financial assets. Regular way purchases and sales offinancial assets are recognized on trade-date, the date on which the Group commits to purchase or sell the asset.

The Group may designate the entire hybrid (combined) contract as a financial asset at fair value through profit or loss for a contractthat contains one or more embedded derivatives.

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair valuethrough profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs offinancial assets carried at fair value through profit or loss are expensed in profit or loss. Available-for-sale financial assets andfinancial assets at fair value through profit or loss are subsequently carried at fair value. And, loans and receivables andheld-to-maturity investments are subsequently carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are recognized in profit orloss within other income or other expenses. Gains or losses arising from changes in the available-for-sale financial assets arerecognized in other comprehensive income, and amounts are reclassified to profit or loss when the associated assets are sold orimpaired.

(2) Impairment

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group offinancial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only ifthere is objective evidence of

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impairment as a result of one or more events that occurred after the initial recognition of the asset (a �loss event�) and that lossevent (or events) has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can bereliably estimated.

Impairment of loans and receivables is presented as a deduction in an allowance account. Impairment of other financial assets isdirectly deducted from their carrying amount. The Group writes off financial assets when the assets are determined to be no longerrecoverable.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

� Significant financial difficulty of the issuer or obligor;

� A breach of contract, such as a default or delinquency in interest or principal payments;

� For economic or legal reasons relating to the borrower�s financial difficulty, granting to the borrower a concession thatthe lender would not otherwise consider;

� It becomes probable that the borrower will enter bankruptcy or other financial reorganization;

� The disappearance of an active market for that financial asset because of financial difficulties; or

� Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio offinancial assets since the initial recognition of those assets, although the decrease cannot yet be identified with theindividual financial assets in the portfolio.

(3) Derecognition

If the Group transfers a financial asset and the transfer does not result in derecognition because the Group has retained substantiallyof all risks and rewards of ownership of the transferred asset due to a recourse in the event the debtor defaults, the Group continuesto recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received. The relatedfinancial liability is classified as �borrowings� in the statement of financial position.

(4) 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 legallyenforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settlethe liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in thenormal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.

2.8 Derivative Instruments

Derivatives are initially recognized at fair value on the date when a derivative contract is entered into and are subsequentlyremeasured at their fair value. Changes in the fair value of the derivatives that are not qualified for hedge accounting are recognizedin the statement of profit or loss within �other income (expenses)� and �finance income (expenses)� according to the nature oftransactions.

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If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initialrecognition of the financial instrument, there may be a difference between the transaction price and the amount determined usingthat valuation technique (Day 1 profit and loss). In these circumstances, the fair value of the financial instrument is recognized as thetransaction price and the difference is amortized by using the straight-line method over the life of the financial instrument. If the fairvalue of the financial instrument is subsequently determined using observable market inputs, the remaining deferred amount isrecognized in profit or loss in the statement of profit or loss.

The Group applies cash flow hedge accounting to hedge the risks of foreign exchange and interest rates of the variable rate foreigncurrency bonds. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedgesis recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately asfinance income (expenses) in the statement of profit or loss. Amounts of changes in fair value of effective hedging instrumentsaccumulated in other comprehensive income are recognized as �finance income (expenses)� for the periods when thecorresponding transactions affect profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain orloss that is reported in other comprehensive income is recognized as �finance income (expenses)�.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which theeffective interest method is used is amortized to profit or loss over the period to maturity.

2.9 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the moving average method, except forinventories in-transit which is determined using the specific identification method.

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 is to be recoveredprincipally through a sale transaction and a sale is considered highly probable. The assets are measured at the lower amountbetween their carrying amount and the fair value less costs to sell.

2.11 Property and Equipment

Property and equipment are stated at its cost less accumulated depreciation and accumulated impairment losses. Historical costincludes expenditures that is directly attributable to the acquisition of the items.

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Depreciation of all property, plant, 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:

Estimated Useful LifeBuildings 5 � 40 yearsStructures 5 � 40 yearsMachinery and equipment(Telecommunications equipment and others)Others

2 � 40 years

Vehicles 4 � 6 yearsTools 4 � 6 yearsOffice equipment 2 � 6 years

The depreciation method, residual values and useful lives of property and equipment are reviewed at the end of each reportingperiod and, if appropriate, accounted for as changes in accounting estimates.

2.12 Investment Property

Investment property is a property held to earn rentals or for capital appreciation. An investment property is measured initially at itscost. 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 10 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 inintangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

(2) Intangible assets except goodwill

Intangible assets, except for goodwill, are initially recognized at its historical cost, and carried at cost less accumulated amortizationand accumulated impairment losses. Membership rights (condominium membership and golf membership) and broadcast rights thathave an indefinite useful life are not subject to amortization because there is no foreseeable limit to the period over which the assetsare expected to be utilized. The Group amortizes intangible assets with a limited useful life using the straight-line method over thefollowing periods:

Estimated Useful LifeDevelopment costs 5 � 6 yearsSoftware 6 yearsFrequency usage rights 5 �10 yearsOthers1 2 � 50 years

1 Membership rights (condominium membership and golf membership) and broadcast license included in others are classified asintangible assets with indefinite useful life.

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2.14 Borrowing Costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying assetare capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Investmentincome earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted fromthe 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 receivedand the Group will comply with all attached conditions. Government grants related to assets are presented in the statement offinancial position by setting up the grant as deferred income that is recognized in profit or loss on a systematic basis over the usefullife of the asset. Grants related to income 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 that have an indefinite useful life are not subject to amortization and are tested annually forimpairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are testedfor impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Animpairment loss is recognized for the amount by which the asset�s carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of an asset�s fair value less costs to sell and value in use. Non-financial assets, other thangoodwill, that suffered impairment are reviewed for possible reversal of the impairment at the end of reporting period.

2.17 Financial Liabilities


The Group�s financial liabilities at fair value through profit or loss are financial instruments held for trading and designated asfinancial liabilities at fair value through profit or loss. Financial liabilities held for trading are financial liabilities that are incurredprincipally for the purpose of repurchasing them in the near term and derivatives that are not designated as hedges or bifurcatedfrom financial instruments containing embedded derivatives. Financial liabilities that the Group designated as at fair value throughprofit or loss are structured financial liabilities containing embedded derivatives issued by the Group.

As it was unable to measure the embedded derivatives separately from its host contract, the Group designated the entire hybridcontact as at fair value through profit or loss. The financial liability that the Group designated as at fair value through profit or loss isa foreign convertible bond.

The Group classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss, financialguarantee contracts and financial liabilities that arise when a

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transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortized cost and presented as �tradepayables�, �borrowings�, and �other financial liabilities� in the statement of financial position.

Preferred shares that provide for a mandatory redemption at a particular date are classified as liabilities. Interest expenses on thesepreferred shares calculated 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.

(2) Derecognition

Financial liabilities are removed from the statement of financial position when it is extinguished, for example, when the obligationspecified in the contract is discharged or cancelled or expired or when the terms of an existing financial liability are substantiallymodified.

2.18 Financial Guarantee Contracts

Financial guarantees contracts provided by the Group are initially measured at fair value on the date the guarantee was given.Subsequent to initial recognition, the Group�s liabilities under such guarantees are measured at the higher of the amounts belowand recognized as �other financial liabilities�:

� the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; or

� the amount initially recognized less cumulative amortization in accordance with IAS 18 Revenue.

2.19 Compound Financial Instruments

Compound financial instruments are convertible bonds that can be converted into equity instruments at the option of the holder. Theliability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not havean equity conversion option. The equity component is recognized initially on the difference between the fair value of the compoundfinancial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocatedto the liability and equity components in proportion to their initial carrying amounts.

2.20 Employee Benefits

(1) Post-employment benefits

The Group operates both defined benefit and defined contribution plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The contributionsare 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 afterthe completion of employment, and the benefit amount

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depended on the employee�s age, periods of service or salary levels. The liability recognized in the statement of financial position inrespect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period lessthe fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unitcredit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflowsusing interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and thathave terms approximating to the terms of the related obligation. Remeasurement gains and losses arising from experienceadjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensiveincome.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognizedimmediately 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 anemployee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits at the earlier ofthe following dates: when the entity can no longer withdraw the offer of those benefits or when the entity recognizes costs for arestructuring.

2.21 Share-based payments

Equity-settled share-based payment is recognized at fair value of equity instruments on grant date, and employee benefit expense isrecognized over the vesting period. At the end of each period, the Group revises its estimates of the number of options that areexpected to vest based on the non-market vesting and service conditions. It recognizes the impact of the revision to originalestimates, if any, in profit or loss, with a corresponding adjustment to equity.

When the options are exercised, the Group issues new shares. The proceeds received, net of any directly attributable transactioncosts, are recognized as share capital (nominal value) and share premium.

2.22 Provisions

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, and the increase inthe provision due to passage of time is recognized as interest expense.

2.23 Leases

(1) Lessee

A lease is an agreement, whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use anasset for an agreed period of time. Leases where all the risks and rewards of ownership are not transferred to the Group areclassified as operating leases. Lease payments under operating leases are recognized as expenses on a straight-line basis over thelease term.

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Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leasesare capitalized as lease assets and liabilities at the lease�s inception at the fair value of the leased property or, if lower, the presentvalue of the minimum lease payments.

(2) Lessor

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership at the inception ofthe lease. A lease other than a finance lease is classified as an operating lease. Lease income from operating leases is recognizedin income on a straight-line basis over the lease term. Initial direct costs incurred by the lessor in negotiating and arranging anoperating lease is added to the carrying amount of the leased asset and recognized as an expense over the lease term on the samebasis as the lease income.

2.24 Share Capital

The Group 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 reissued. When thesetreasury shares are reissued, any consideration received is including in equity attributable to the equity holders of the ControllingCompany.

2.25 Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or rendering of servicesarising from the normal activities of the Group. Amounts disclosed as revenue are net of value added taxes, returns, rebates anddiscounts and after elimination of intra-group transactions.

The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economicbenefits will flow to the Group; and when specific criteria have been met for each of the Group�s activities, as described below. TheGroup bases its estimate on historical results, taking into consideration the type of customer, the type of transaction and the specificsof each arrangement.

(1) Rendering of Services

When providing interconnection or telecommunications service to a customer based on service plans, the related revenue isrecognized at the time service is provided. When providing the telecommunications equipment rental service to a customer based onservice plans, the related revenue is recognized on straight-line basis over the contract period. Revenue related to the othertelecommunications services is recognized when the service is provided to the customer.

For other services, when the outcome of a transaction involving the rendering of services can be estimated reliably, revenueassociated with such a transaction is recognized by reference to the stage of performance of the services. When the outcome of thetransaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of the expensesrecognized that are recoverable.

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Total consideration for combined services is allocated to each service in proportion to its fair value and the allocated amount isrecognized as revenue according to revenue recognition policy for the service.

(2) Sales of goods

The Group sells a range of handsets. Revenue from the sale of goods is recognized when products are delivered to the purchaser.

(3) Interest income

Interest income is recognized using the effective interest method according to the time passed. When a loan and receivable isimpaired, the Group reduces the carrying amount to its recoverable amount and continues unwinding the discount as interestincome. Interest income on impaired loans and receivables is recognized using the original effective interest rate.

(4) Commission fees

Commission fees related to credit card business are recognized when it is probable that future economic benefits will flow to theentity and these benefits can be reliably measured. Revenues from acquiree fee, agent fee, optional service fees, member servicefees and credit card service charge are measured at the fair value of the consideration received and recognized on an accrual basis.

(5) Royalty income

Royalty income is recognized on an accrual basis in accordance with the substance of the relevant agreements.

(6) Dividend income

Dividend income is recognized when the right to receive payment is established.

(7) Customer loyalty program

The Group operates a customer loyalty program where customers accumulate points for purchases made which entitle them todiscounts on future purchases. The reward points are recognized as a separately identifiable component of the initial saletransaction. The fair value of the consideration received or receivable in respect of the initial sale is allocated between the rewardpoints and the other components of the sale. The fair value of the reward points is measured by taking into account the proportion ofthe reward points that are not expected to be redeemed by customers. Revenue from the reward points is recognized when thepoints are redeemed.

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2.26 Current and Deferred Income Tax

The tax expense for the period consists of current and deferred tax. Tax is recognized on the profit for the period in the statement ofprofit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case,the tax is also recognized in other comprehensive income or directly in equity, respectively. The tax expense is calculated on thebasis of the tax laws enacted or substantively enacted at the end of the reporting period.

Management periodically evaluates tax policies that are applied in tax returns in which applicable tax regulation is subject tointerpretation. The Group recognizes current income tax on the basis of the amount expected to be paid to the tax authorities.

Deferred tax is recognized for temporary differences arising between the tax bases of assets and liabilities and their carryingamounts as expected tax consequences at the recovery or settlement of the carrying amounts of the assets and liabilities. However,deferred tax assets and liabilities are not recognized if they arise from initial recognition of an asset or liability in a transaction otherthan a business combination that at the time of the transaction affects neither accounting 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 temporarydifferences and losses.

Deferred tax liability is recognized for taxable temporary differences associated with investments in subsidiaries, associates, andinterests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary differenceand it is probable that the temporary difference will not reverse in the foreseeable future. In addition, deferred tax asset is recognizedfor deductible temporary differences arising from such investments to the extent that it is probable the temporary difference willreverse 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 against current taxliabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority oneither the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.27 Dividend

Dividend distribution to the Group�s shareholders is recognized as a liability in the financial statements in the period in which thedividends are approved by the Group�s shareholders.

2.28 Approval of Issuance of the Financial Statements

The issuance of the December 31, 2017 consolidated financial statements of the Group was approved by the Board of Directors onApril 27, 2018.

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3. Critical Accounting Estimates and Assumptions

The Group makes estimates and assumptions concerning the future. The estimates and assumptions are continuously evaluatedwith consideration to factors such as events reasonably predictable in the foreseeable future within the present circumstanceaccording to historical experience. The resulting accounting estimates will, by definition, seldom equal the related actual results. Theestimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets andliabilities within the next financial year are addressed below.

3.1 Impairment of Goodwill

The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of cash-generatingunits (CGUs) is determined based on value-in-use calculations (Note 12).

3.2 Income Taxes

The Group is operating in numerous countries and the income generated from these operations is subject to income taxes based ontax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which theultimate tax determination is uncertain (Note 28).

If certain portion of the taxable income is not used for investments or increase in wages or dividends in accordance with the TaxSystem For Recirculation of Corporate Income, the Group is liable to pay additional income tax calculated based on the tax laws.The new tax system is effective for three years from 2015. Accordingly, the measurement of current and deferred income tax isaffected by the tax effects from the new system. As the Group�s income tax is dependent on the investments, increase in wages anddividends, there is an uncertainty in measuring the final tax effects.

3.3 Fair Value of Derivatives and Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Groupuses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at theend of each reporting period (Note 36).

3.4 Provision for Impairment

The Group recognizes provisions for accounting of estimated loss in customers� insolvency. When the provision for impairment isestimated, it is based on the aging analysis of trade receivables balances, incurred loss experience, customers� credit rates andchanges of payment terms. If the customer�s financial position becomes worse, the actual loss amount will be increased more thanthe estimated.

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3.5 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 anumber of assumptions including the discount rate (Note 17).

3.6 Deferred Revenue

Service installation fees and initial subscription fees related to activation of service are deferred and recognized as revenue over theexpected periods of customer relationships. The estimate of the expected terms of customer relationship is based on the historicaldata. If management�s estimate changes, it may cause significant differences in the timing of revenue recognition and amountsrecognized.

3.7 Provisions

As described in Note 16, the Group records provisions for litigation and assets retirement obligations at the end of the reportingperiod. The provisions are estimated based on the factors such as the historical experiences.

3.8 Useful Lives of Property and Equipment and Investment Property

The property and equipment, intangible assets, and investment properties, excluding land, goodwill, condominium memberships andgolf club memberships, are depreciated using the straight-line method over their useful lives. The estimated useful lives aredetermined based on expected usage of the assets and the estimates can be materially affected by technical changes and otherfactors. The Group will increase depreciation expenses if the useful lives are considered shorter than the previously estimated usefullives.

4. Financial Instruments by Category

Financial instruments by category as of December 31, 2016 and 2017, are as follows:


Financial assets

Loansand

receivables

Assets at fairvalue through

profitand loss

Derivativesused forhedge

Available-for-sale

Held-to-Maturity Total

Cash and cash equivalents ￦2,900,311 ￦ � ￦� ￦� ￦� ￦2,900,311Trade and other

receivables 6,036,363 � � � � 6,036,363Other financial assets 716,769 6,277 227,318 404,774 30,143 1,385,281


Financial liabilities

Liabilities atfair value

through profitand loss


Financialliabilities at

amortized cost TotalTrade and other payables ￦ � ￦� ￦8,328,082 ￦8,328,082Borrowings � � 8,120,791 8,120,791Other financial liabilities 1,973 14,928 91,763 108,664

F-39






Financial assets

Loansand

receivables


profitand loss


Available-for-sale


Cash and cash equivalents ￦1,928,182 ￦ � ￦ � ￦� ￦ � ￦1,928,182Trade and other receivables 6,643,115 � � � � 6,643,115Other financial assets 1,333,317 5,813 7,389 380,953 151 1,727,623







amortized cost TotalTrade and other payables ￦ � ￦� ￦8,425,503 ￦8,425,503Borrowings � � 6,683,662 6,683,662Other financial liabilities 5,051 93,770 87,669 186,490

Gains or losses arising from financial instruments by category for the years ended December 31, 2015, 2016 and 2017, are asfollows:

(In millions of Korean won) 2015 2016 2017Loans and receivables

Interest income1, 4 ￦85,603 ￦129,813 ￦108,608Loss on foreign currency transaction (365 ) (7,493 ) (11,949 )Gain(loss) on foreign currency translation 1,921 3,083 (12,354 )Loss on disposal (2,539 ) (15,838 ) (20,351 )Loss on valuation (141,555) (92,589 ) (44,219 )

Assets at fair value through profit or lossDividend income � � 1Gain on disposal 368 186 153Loss on valuation � (7,184 ) (464 )

Derivatives used for hedgingLoss on transaction (5,157 ) � (58,569 )Gain(loss) on valuation 141,512 109,436 (63,640 )Other comprehensive income for the year2 100,401 60,501 (44,429 )Reclassified to profit or loss from other comprehensive income for the year2,3 (88,003 ) (71,915 ) 50,231

Available-for-saleInterest income1,4 73 40 453Dividend income 7,733 3,926 5,174Gain on disposal 131,045 22,695 89,598Impairment loss (1,471 ) (966 ) (6,137 )Other comprehensive income for the year2 47,381 10,925 51,235Reclassified to profit or loss from other comprehensive income for the year2 (83,397 ) (3,840 ) (55,450 )

F-40





(In millions of Korean won) 2015 2016 2017Held-to-Maturity

Interest income1,4 226 213 �Liabilities at fair value through profit and loss

Gain(loss) on disposal (850 ) (632 ) �Gain(loss) on valuation (2,006 ) 33 (3,078 )

Derivatives used for hedgingGain(loss) on transactions (273 ) 8,329 �Loss on valuation (1,733 ) (138 ) (145,885)Other comprehensive income for the year2 11,513 4,295 (66,624 )Reclassified to profit or loss from other comprehensive income for the year

2,3 (9,959 ) (3,956 ) 91,698Financial liabilities at amortized cost

Interest expense4 (385,925) (337,219) (302,464)Gain(loss) foreign currency transaction (23,416 ) (7,518 ) 62,347Gain(loss) foreign currency translation (166,254) (112,864) 225,695

Total ￦(385,127) ￦(308,677) ￦(150,420)

1 BC Card, a subsidiary of the Group, recognized interest income as operating revenue. Interest income recognized as operatingrevenue is￦ 15,561 million (2015:￦ 15,867 million, 2016:￦ 14,380 million) for the year ended December 31, 2017.

2 The amounts directly reflected in equity after adjustments of deferred income tax.3 During the year, certain derivatives of the Group were 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.4 BC Card recognized gain/loss on foreign currency transaction as operating income and expenses. During the year, related gain/loss

on foreign currency transaction recognized as operating income and expense is￦ 11,049 million (2016: (-)￦ 1,987 million).

5. Cash and Cash Equivalents

Restricted cash and cash equivalents as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) Type 2016 2017 DescriptionRestricted cash andcash equivalents

Restricteddeposit

￦19,920 ￦16,837 Deposit restricted for governmental projectand others

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

F-41





6. Trade and Other Receivables

Trade and other receivables as of December 31, 2016 and 2017, are as follows:

2016

(In millions ofKorean won)

Totalamounts

Allowancefor

doubtfulaccounts

Presentvalue

discountCarryingamount

Current assetsTrade receivables ￦3,161,234 ￦(470,239) ￦(5,343 ) ￦2,685,652Other receivables 2,763,942 (121,972) (270 ) 2,641,700

￦5,925,176 ￦(592,211) ￦(5,613 ) ￦5,327,352Non-current assets

Trade receivables ￦263,367 ￦(632 ) ￦(12,835) ￦249,900Other receivables 507,251 (19,644 ) (28,496) 459,111

770,618 (20,276 ) (41,331) 709,011

2017


Totalamounts

Allowancefor

doubtfulaccounts

Presentvalue


Current assetsTrade receivables ￦3,286,169 ￦(438,817) ￦(7,508 ) ￦2,839,844Other receivables 3,041,028 (66,402 ) (187 ) 2,974,439

￦6,327,197 ￦(505,219) ￦(7,695 ) ￦5,814,283Non-current assets

Trade receivables ￦366,107 ￦(610 ) ￦(12,803) ￦352,694Other receivables 522,459 (17,970 ) (28,351) 476,138

￦888,566 ￦(18,580 ) ￦(41,154) ￦828,832

Details of changes in allowance for doubtful accounts the years ended December 31, 2016 and 2017, are as follows:

2015 2016 2017(In millions ofKorean won)

Tradereceivables

Otherreceivables

Tradereceivables

Otherreceivables

Tradereceivables

Otherreceivables

Beginning balance ￦527,617 ￦311,082 ￦468,741 ￦250,842 ￦470,871 ￦141,616Provision 95,489 46,066 84,975 7,736 38,888 5,809Reversal or written-off (135,318) (33,282 ) (80,518 ) (108,638) (70,121 ) (61,220 )Changes in the scope of

consolidation (16,752 ) (69,732 ) 215 56 (107 ) (35 )Others (2,232 ) (3,272 ) (2,542 ) (8,380 ) (104 ) (1,798 )Ending balance ￦468,741 ￦250,842 ￦470,871 ￦141,616 ￦439,427 ￦84,372

F-42





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

Details of aging analysis of trade receivables as of December 31, 2016 and 2017, are as follows:

(in millions of Korean won) 2016 2017Neither past due nor impaired ￦2,377,637 ￦2,661,406Past due and impaired

Up to 6 months 685,288 701,0326 months to 12 months 87,547 70,190Over 12 months 255,951 199,337

1,028,786 970,559Less: Allowance for doubtful accounts (470,871 ) (439,427 )

￦2,935,552 ￦3,192,538

Details of other receivables as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017Loans ￦80,308 ￦84,682Receivables1 2,709,177 2,970,346Accrued income 9,903 12,186Refundable deposits 390,035 391,458Loans receivable 10,355 34,273Finance lease receivables 16,280 20,526Others 26,369 21,478Less: Allowance for doubtful accounts (141,616 ) (84,372 )

￦3,100,811 ￦3,450,577

1 The settlement receivables of BC Card Co., Ltd. of￦2,262,829 million (2016:￦1,962,880 million) are included.

Details of aging analysis of other receivables as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017Neither past due nor impaired ￦2,971,239 ￦3,271,949Past due and impaired


271,188 263,000Less: Allowance for doubtful accounts (141,616 ) (84,372 )

Total ￦3,100,811 ￦3,450,577

The maximum exposure of trade and other receivables to credit risk is the carrying amount of each class of receivables mentionedabove as of December 31, 2017.

F-43





7. Other Financial Assets and Liabilities

Details of other financial assets and liabilities as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017Other financial assets

Financial assets at fair value through profit or loss ￦6,277 ￦5,813Derivatives used for hedge 227,318 7,389Financial instruments1 716,769 1,333,317Available-for-sale financial assets1 404,774 380,953Held-to-maturity investments 30,143 151Less: Non-current (664,726) (754,992 )Current ￦720,555 ) ￦972,631 )

Other financial liabilitiesFinancial liabilities at fair value through the profit or

loss ￦1,973 ￦5,051Derivatives used for hedge 14,928 93,770Other financial liabilities 91,763 87,669Less: Non-current (108,431) (149,267 )Current ￦233 ￦37,223

1 As of December 31, 2017, MMW(Money Market Wrap) and MMT(Money Market Trust) amounting to￦870,453 million is included inother financial assets. As of December 31, 2017, the Group�s financial instruments amounting to￦59,660 million (December 31,2016:￦49,721 million), which consist of certain proceeds from the disposal of Ustream Inc. deposited in an escrow account,checking account deposits and deposits for Win-win Growth Cooperative loans, are subject to withdrawal restrictions.

Financial instruments at fair value through profit or loss as of December 31, 2016 and 2017, are as follows:

2016 2017(In millions of Korean won) Assets Liabilities Assets LiabilitiesFinancial instruments at fair value through profit and loss ￦ 6,277 ￦� ￦ 5,813 ￦�Other derivatives liabilities ￦� ￦1,973 ￦� ￦ 5,051

The valuation gains and losses on financial assets and liabilities at fair value through profit or loss and held for trading for the yearsended December 31, 2015, 2016 and 2017, are as follows:

Financial instruments at fair value through profit or loss

2015 2016 2017

(in millions of Korean won)Valuation

gainsValuation

lossesValuation

gainsValuation

lossesValuation

gainsValuation

lossesValuation gains and losses on financial assets ￦� ￦� ￦470 ￦7,654 ￦� ￦464

Total ￦ � ￦ � ￦ 470 ￦ 7,654 ￦ � ￦ 464

F-44





Held for trading

2015 2016 2017


gainsValuation

lossesValuation

gainsValuation

lossesValuation

gainsValuation

lossesValuation gains and losses on financial assets ￦ � ￦2,006 ￦33 ￦� ￦� ￦3,078

Total ￦� ￦ 2,006 ￦ 33 ￦ � ￦ � ￦ 3,078

The maximum exposure of debt securities of financial instruments at fair value through profit or loss to credit risk is carrying amountas of December 31, 2017.

Derivatives used for hedge as of December 31, 2016 and 2017, are as follows:

2016 2017(in millions of Korean won) Assets Liabilities Assets LiabilitiesInterest rate swap1 ￦� ￦3,278 ￦� ￦2,633Currency swap2 214,648 11,650 7,389 81,300Currency forwards3 12,670 � � 9,837

Total 227,318 14,928 7,389 93,770Less: non-current (97,220 ) (14,695) (4,675) (56,547)

Current ￦130,098 ￦233 ￦2,714 ￦37,223

1 The interest rate swap contract is to hedge the risk of variability in future fair value of the bond.2 The currency swap contract is to hedge the risk of variability in cash flow from the bond. In applying the cash flow hedge

accounting, the Group hedges its exposures to cash flow fluctuation until September 7, 2034.3 The currency forward contract is to hedge the risk of variability in cash flow from transactions in foreign currencies due to

changes in foreign exchange rate.

The full value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item ismore than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.

The valuation gains and losses on the derivatives contracts for the years ended December 31, 2015, 2016 and 2017, are as follows:

(in millions ofKorean won) 2015 2016 2017

Type ofTransaction

Valuationgain

Valuationloss

Othercomprehensive

income1Valuation

gainValuation

loss

Othercomprehensive

income1Valuation

gainValuation

loss

Othercomprehensive

income1

Interest rate swap ￦� ￦� ￦ (2,858 ) ￦� ￦ 148 ￦ (142 ) ￦ 38 ￦� ￦ 637Currency swap 141,512 1,733 150,255 97,158 (10 ) 85,479 19 187,468 (146,752 )Currency forwards � � 247 12,278 � 146 � 22,114 (393 )

Total ￦141,512 ￦1,733 ￦ 147,644 ￦109,436 ￦ 138 ￦ 85,483 ￦ 57 ￦209,582 ￦ (146,508 )

F-45





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

The ineffective portion recognized in profit or loss on the cash flow hedge is valuation gain of ￦1,961 million for the current period(2015: valuation income of￦2,663 million, 2016: valuation gain of￦1,637 million).

Details of available-for-sale financial assets as of December 31, 2016, and 2017 are as follows:

(In millions of Korean won) 2016 2017Marketable equity securities ￦ 5,387 ￦ 6,859Non-marketable equity securities 372,703 364,195Debt securities 26,684 9,899

Total 404,774 380,953Less: non-current (384,798) (379,488)

Current ￦ 19,976 ￦1,465

Changes of available-for-sale financial assets for the years ended December 31, 2016, and 2017 are as follows:

(In millions of Korean won) 2016 2017Beginning ￦360,037 ￦404,774Acquisition 44,302 89,027Disposal (18,161 ) (129,682 )Valuation1 14,413 67,593Impairment (966 ) (6,137 )Reclassification 5,149 (44,622 )Changes in scope of consolidation � �

Ending ￦ 404,774 ￦ 380,953

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

The maximum exposure of debt securities of available-for-sale financial assets to credit risk is carrying amount as of December 31,2017.

Available-for-sale financial assets are measured at fair value. However, non-marketable equity securities that do not have quotedmarket prices in an active market and the fair value of which cannot be reliably measured are recognized at cost and the impairmentloss is recognized if any.

Investment in Korea Software Financial Cooperative amounting to￦1,000 million is provided as collateral as consideration forpayment guarantees provided by Korea Software Financial Cooperative (Note 19).

F-46





8. Inventories

Inventories as of December 31, 2016 and 2017, are as follows:

2016 2017

(In millions of Korean won)Acquisition

costValuationallowance

Bookamount

Acquisitioncost

Valuationallowance

Bookamount

Merchandise ￦403,938 ￦(46,634) ￦357,304 ￦504,321 ￦(58,293) ￦446,028Others 97,778 (494 ) 97,284 195,999 � 195,999

Total ￦501,716 ￦(47,128) ￦454,588 ￦700,320 ￦(58,293) ￦642,027

Cost of inventories recognized as expenses for year ended December 31, 2017, amounts to￦3,855,089 million (2015:￦3,760,892 million, 2016:￦3,589,809 million) and valuation loss on inventory on inventory recognized amounts to ￦11,165 millionfor year ended December 31, 2017 (2015: valuation loss on inventory amounts to￦4,116 million, 2016: reversal of valuationallowance of￦20,223 million).

9. Other Assets and Liabilities

Other assets and liabilities as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017Other assetsAdvance payments ￦148,299 ￦164,950Prepaid expenses 255,464 241,078Others 13,471 5,998Less: Non-current (106,099) (107,166)

Current ￦311,135 ￦304,860Other liabilitiesAdvances received ￦281,071 ￦375,792Withholdings 89,679 85,142Unearned revenue 24,142 23,036Others 6,160 11,629Less: Non-current (58,761 ) (237,284)

Current ￦342,291 ￦258,315

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10. Property, Plant and Equipment

Changes in property, plant and equipment for the years ended December 31, 2016 and 2017, are as follows:

2016

(in millions of Korean won) Land

Buildingsand

structures

Machineryand

equipment OthersConstruction-in-progress Total

Acquisition cost ￦1,287,749 ￦3,558,460 ￦34,388,584 ￦1,951,749 ￦1,033,777 ￦42,220,319Less: Accumulated depreciation (including accumulated

impairment loss and others) (132 ) (1,459,416) (24,879,791) (1,400,766) (1,300 ) (27,741,405)Beginning, net 1,287,617 2,099,044 9,508,793 550,983 1,032,477 14,478,914Acquisition 291 3,608 247,431 146,471 2,297,346 2,695,147Disposal/Abandonment (855 ) (1,650 ) (112,135 ) (8,155 ) (3,357 ) (126,152 )Depreciation � (135,389 ) (2,498,837 ) (143,978 ) � (2,778,204 )Impairment � � 361 (47,086 ) � (46,725 )Transfer in (out) 4,274 136,041 2,060,936 11,073 (2,212,324 ) �Inclusion in scope of consolidation � � 68 764 � 832Others 17,625 23,078 53,568 14,851 (20,823 ) 88,299Ending, net ￦1,308,952 ￦2,124,732 ￦9,260,185 ￦524,923 ￦1,093,319 ￦14,312,111Acquisition cost ￦1,309,084 ￦3,729,228 ￦35,106,184 ￦1,895,332 ￦1,093,941 ￦43,133,769Less: Accumulated depreciation(including accumulated impairment loss and others) (132 ) (1,604,496) (25,845,999) (1,370,409) (622 ) (28,821,658)

2017

(In millions of Korean won) Land

Buildingsand

structures

Machineryand


Acquisition cost ￦1,309,084 ￦3,729,228 ￦35,106,184 ￦1,895,332 ￦1,093,941 ￦43,133,769Less: Accumulated depreciation(including accumulated impairment loss and others) (132 ) (1,604,496) (25,845,999) (1,370,409) (622 ) (28,821,658)Beginning, net 1,308,952 2,124,732 9,260,185 524,923 1,093,319 14,312,111Acquisition 1,948 120 237,218 129,464 2,262,681 2,631,431Disposal and termination (4,656 ) (4,022 ) (176,085 ) (8,242 ) (3,133 ) (196,138 )Depreciation � (135,242 ) (2,469,459 ) (150,535 ) � (2,755,236 )Impairment (Recovery of impairment) � � (9,256 ) (1 ) (28 ) (9,285 )Transfer in (out) 26,764 25,305 2,227,808 10,344 (2,600,908 ) (310,687 )Exclusion from scope of consolidation � (19 ) (772 ) (120 ) (34 ) (945 )Transfer from(to) investment properties (64,449 ) 1,793 � 1,184 � (61,472 )Others 98 (245 ) (8,830 ) (179 ) (38,304 ) (47,460 )Ending, net ￦1,268,657 ￦2,012,422 ￦9,060,809 ￦506,838 ￦713,593 ￦13,562,319Acquisition cost ￦1,268,789 ￦3,750,861 ￦35,971,877 ￦1,920,571 ￦714,706 ￦43,626,804Less: Accumulated depreciation(including accumulated impairment loss and others) (132 ) (1,738,439) (26,911,068) (1,413,733) (1,113 ) (30,064,485)

F-48





Details of property, plant and equipment provided as collateral as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016Carryingamount

Securedamount

Relatedline item

Relatedamount Secured party

Land and Buildings ￦13,337 ￦16,009 Borrowings ￦11,540 StandardChartered

BankKorea

DevelopmentBank

Others 55,951 43,506 25,379 Shinhan Bank


Securedamount

Relatedline item


Land and Buildings 13,115 15,995 Borrowings 2,730 StandardChartered

BankKorea

DevelopmentBank


The borrowing costs capitalized for qualifying assets amount to￦8,473 million (2016:￦16,451 million) in 2017. The interest rateapplied to calculate the capitalized borrowing costs in 2017 is 3.37% to 3.54% (2016: 2.29% to 3.50%).

11. Investment Properties

Changes in investment properties for the years ended December 31, 2016 and 2017, are as follows:

2016

(In millions of Korean won) Land BuildingsConstruction-in-

progress TotalAcquisition cost ￦340,790 ￦1,011,236 ￦ 74,208 ￦1,426,234Less: Accumulated depreciation � (324,164 ) � (324,164 )Beginning 340,790 687,072 74,208 1,102,070Acquisition 51 417 160,138 160,606Disposal/Abandonment (5,837 ) (1,802 ) � (7,639 )Depreciation � (43,575 ) � (43,575 )Transfer (32,254 ) 124,417 (155,581 ) (63,418 )Ending ￦302,750 ￦766,529 ￦ 78,765 ￦1,148,044Acquisition cost ￦302,750 ￦1,119,885 ￦ 78,765 ￦1,501,400Less: Accumulated depreciation � ￦(353,356 ) � ￦(353,356 )

F-49





2017


progress TotalAcquisition cost ￦302,750 ￦1,119,885 ￦ 78,765 ￦1,501,400Less: Accumulated depreciation � (353,356 ) � (353,356 )Beginning 302,750 766,529 78,765 1,148,044Acquisition � 775 48,075 48,850Disposal/Abandonment (3,493 ) (6,434 ) � (9,927 )Depreciation � (47,295 ) � (47,295 )Transfer from(to) property, plant and equipment 64,449 (1,793 ) (1,184 ) 61,472Transfer and others (6,916 ) 80,986 (85,683 ) (11,613 )Ending ￦356,790 ￦792,768 ￦ 39,973 ￦1,189,531Acquisition cost ￦358,358 ￦1,191,687 ￦ 39,973 ￦1,590,018Less: Accumulated depreciation(include. Accumulated impairment) (1,568 ) (398,919 ) � (400,487 )

The fair value of investment properties is￦1,755,600 million as of December 31, 2017 (2016:￦1,962,779 million). The fair value ofinvestment properties is estimated based on the expected cash flow.

Rental income from investment properties is￦205,993 million in 2017 (2016:￦184,670 million) and direct operating expenses(including repairs and maintenance) arising from investment properties that generated rental income during the period arerecognized as operating expenses.

Details of investment properties provided as collateral as of December 31, 2016 and 2017, are as follows:


Securedamount

Relatedaccount

Relatedamount

Buildings ￦711,989 ￦98,543 Deposits ￦84,334Land and Buildings ￦8,035 ￦7,891 Borrowings ￦5,260


Securedamount

Relatedaccount

Relatedamount


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12. Intangible Assets

Changes in intangible assets for the years ended December 31, 2016 and 2017, are as follows:

2016

(In millions of Korean won) GoodwillDevelopment

costs1 SoftwareFrequency

usage rights Others TotalAcquisition cost 449,379 1,487,420 805,387 2,591,229 1,109,085 6,442,500Less: Accumulated amortization (including

accumulated impairment loss and others) (107,038) (1,025,877) (574,003) (1,618,459) (517,372 ) (3,842,749)Beginning, net ￦342,341 ￦461,543 ￦231,384 ￦972,770 ￦591,713 ￦2,599,751Acquisition and capital expenditure � 36,075 35,631 978,309 74,312 1,124,327Disposal and termination � (8,600 ) (1,928 ) � (16,397 ) (26,925 )Amortization � (162,682 ) (78,643 ) (273,790 ) (84,606 ) (599,721 )Impairment (131,600) � (46 ) � (3,618 ) (135,264 )Inclusion in scope of consolidation 42,745 � 2,462 � 16,015 61,222Others � 8,340 8,278 � (17,205 ) (587 )Ending, net ￦253,486 ￦334,676 ￦197,138 ￦1,677,289 ￦560,214 ￦3,022,803Acquisition cost 492,105 1,483,205 838,532 2,531,654 1,154,993 6,500,489

(238,619) (1,148,529) (641,394) (854,365 ) (594,779 ) (3,477,686)

2017

(In millions of Korean won) GoodwillDevelopment

costs1 SoftwareFrequency

usage rights Others TotalAcquisition cost 492,105 1,483,205 838,532 2,531,654 1,154,993 6,500,489Less: Accumulated amortization (including

accumulated impairment loss and others) (238,619) (1,148,529) (641,394) (854,365 ) (594,779 ) (3,477,686)Beginning, net ￦253,486 ￦334,676 ￦197,138 ￦1,677,289 ￦560,214 ￦3,022,803Acquisition and capital expenditure � 247,863 60,475 � 78,373 386,711Disposal and termination � (14,806 ) (548 ) � (11,859 ) (27,213 )Amortization � (151,718 ) (73,174 ) (311,146 ) (99,112 ) (635,150 )Impairment (84,606 ) � (3 ) � (31,486 ) (116,095 )Inclusion in scope of consolidation � (332 ) (3,216 ) � (1,374 ) (4,922 )Others � 2,876 9,569 (1,201 ) (4,674 ) 6,570Ending, net ￦168,880 ￦418,559 ￦190,241 ￦1,364,942 ￦490,081 ￦2,632,704Acquisition cost 474,908 1,643,886 893,500 2,530,341 1,171,378 6,714,014Less; Accumulated amortization (including

accumulated impairment loss and others) (306,028) (1,225,327) (703,259) (1,165,399) (681,297 ) (4,081,310)

1 The Company�s development costs mainly consist of acquisition costs to develop a combined billing system and an informationmanagement system.

The carrying amount of membership rights with indefinite useful life not subject to amortization is ￦238,053 million (2016:￦268,350million) as of December 31, 2017.

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Goodwill is allocated to the Group�s cash-generating unit which is identified by operating segments. As of December 31, 2017,goodwill allocated to each cash-generation unit is as follows:

(In millions of Korean won)Cash generating Unit AmountMarketing/Customer

Telecom Wireless business1 ￦65,057Finance and Rental

BC Card Co., Ltd. 2 41,234Others

PlayD Co., Ltd. (N search Marketing Co., Ltd) 3 42,745Genie Music Corporation (KT Music Corporation) and others 19,844

Total ￦168,880

1 The recoverable amounts of mobile business are calculated based on value-in use calculations. These calculations use cashflow projections for the next five years based on financial budgets. An annual growth rate of 0.0% was applied for the cashflows expected to be incurred after five year. This growth rate does not exceed the long-term average growth rate of theindustry which the cash-generate unit belongs in. The Group estimated its revenue growth rate -2.46% based on pastperformance and its expectation of future market changes. In addition, management estimated the cash flow based on pastperformance and its expectation of market growth, and the discount rates 8.95% used reflected specific risks relating to therelevant CGUs. As a result of the impairment test, the Group concluded that the carrying amount of CGUs does not exceed therecoverable amount. Accordingly, the Group did not recognise the impairment loss on goodwill on mobile business for the yearsended December 31, 2017 and 2016.

2 The recoverable amounts of BC Card Co., Ltd. are calculated based on value-in use calculations. These calculations use cashflow projections for the next five years based on financial budgets. An annual growth rate of 0.0% was applied for the cashflows expected to be incurred after five year. This growth rate does not exceed the long-term average growth rate of theindustry which the cash-generate unit belongs in. The Group estimated its revenue growth rate 0.11% based on pastperformance and its expectation of future market changes. In addition, management estimated the cash flow based on pastperformance and its expectation of market growth, and the discount rates 14.62% used reflected specific risks relating to therelevant CGUs. As a result of the impairment test, the Group concluded that the carrying amount of CGUs does not exceed therecoverable amount. Accordingly, the Group did not recognise the impairment loss on goodwill on BC Card Co., Ltd. for theyears ended December 31, 2017 and 2016.

3 The recoverable amounts of PlayD Co., Ltd. (N search Marketing Co., Ltd.) are calculated based on value-in use calculations.These calculations use cash flow projections for the next five years based on financial budgets. An annual growth rate of 1.0%was applied for the cash flows expected to be incurred after five year. This growth rate does not exceed the long-term averagegrowth rate of the industry which the cash-generate unit belongs in. The Group estimated its revenue growth rate 4.27% basedon past performance and its expectation of future market changes. In addition, management estimated the cash flow based onpast performance and its expectation of market growth, and the discount rates 9.5% used reflected specific risks relating to therelevant CGUs. As a result of the impairment test, the Group

F-52





concluded that the carrying amount of CGUs does not exceed the recoverable amount. Accordingly, the Group did notrecognise the impairment loss on goodwill on PlayD Co., Ltd. (N search Marketing Co., Ltd.) for the years ended December 31,2017 and 2016.

As a result of the impairment test, the Group recognized the impairment losses of ￦78,200 million on entire balance ofgoodwill allocated to Satellite TV segment and￦29,325 million on indefinite-lived intangible assets, and recognized the lossesas operating expenses in the consolidated statement of profit or loss. It is resulted from intense competition between internets,IPTV, Cable TV service providers.

The recoverable amounts of Satellite TV segment are calculated based on value-in use calculations or fair value less costs tosell. These calculations use cash flow projections for the next five years based on financial budgets. An annual growth rate of0.0% was applied for the cash flows expected to be incurred after five year. This growth rate does not exceed the long-termaverage growth rate of the industry which the cash-generate unit belongs in. The Group estimated its revenue growth rate(-0.77%) based on past performance and its expectation of future market changes. The Group determined cash flowprojections based on past performance and its estimation of market growth. Specific risk of related operating segment isreflected in its 13.25% discount rate.

13. Investments in Associates and Joint Ventures

Details of associates as of December 31, 2017, are as follows:

Percentage of ownership (%) Location

Date offinancial

statements2016 2017

Korea Information & Technology Fund 33.3 % 33.3 % Korea 31-DecKT-SB Venture Investment1 50.0 % 50.0 % Korea 31-DecMongolian Telecommunications1 40.0 % � Mongolia 31-DecKT Wibro Infra Co., Ltd. 26.2 % � Korea 31-DecKT-IBKC Future Investment Fund 11 50.0 % 50.0 % Korea 31-DecKT-CKP New Media Investment Fund 49.7 % 49.7 % Korea 31-DecK Bank Inc.1 � 10.0 % Korea 31-Dec

1 At the end of the reporting period, even though the Group (KT-SB Venture Investment Fund and KT-IBKC Future Investment Fund 1)has 50% ownership, the equity method of accounting has been applied as the Group, which is a limited partner of investment fund,cannot participate in determining the operating and financial policies. As of December 31, 2017, the entire shares of MongolianTelecommunications is classified as assets held for sale, and KT Wibro Infra Co., Ltd. was liquidated during 2017. Also, 8% of non-voting convertible stock are excluded from percentage of ownership for K bank Inc.

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Changes in investments in associates and joint ventures for the years ended December 31, 2016 and 2017, are as follows:

2016

(In millions of Korean won) BeginningAcquisition(Disposal)

Share of net profitfrom associates and

joint ventures1 Impairment Others EndingKorea Information & Technology

Fund ￦127,583 ￦� ￦ 7,446 ￦� ￦(60 ) ￦134,969KT-SB Venture Investment 4,861 � (125 ) � � 4,736Mongolian Telecommunications 7,483 � 32 � (1,271) 6,244KT Wibro Infra Co., Ltd. 69,328 � � (17,128) � 52,200KT-CKP New Media Investment

Fund 3,860 � 594 � � 4,454Others 56,914 29,052 (5,400 ) � 906 81,472

￦270,029 ￦29,052 ￦ 2,547 ￦(17,128) ￦(425 ) ￦284,075

2017



joint ventures1 Impairment Others EndingKorea Information & Technology Fund ￦134,969 ￦� ￦ 4,275 ￦� ￦290 ￦139,534KT-SB Venture Investment 4,736 (1,069 ) (725 ) � � 2,942Mongolian Telecommunications 6,244 � (348 ) � (5,896 ) �KT Wibro Infra Co., Ltd. 52,200 (52,200) � � � �KT-IBKC Future Investment Fund 1 3,621 7,500 (296 ) � � 10,825KT-CKP New Media Investment Fund 4,454 (2,970 ) 810 � � 2,294K Bank Inc. � 26,543 (17,244 ) � 32,809 42,108Others 77,851 3,178 (1,952 ) (3,662 ) 6,313 81,728

￦284,075 ￦(19,018) ￦ (15,480 ) ￦ (3,662 ) ￦33,516 ￦279,431

1 KT investment Co., Ltd., a subsidiary of the Group, recognized its share in net profit from associates and joint ventures as operatingrevenue and expense. These include its share in gain from associates and joint ventures of ￦1,588 million (2016:￦52 million)recognized as operating income during the period.

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Summarized financial information of associates and joint ventures as of and for the years ended December 31, 2016 and 2017, is asfollows:

(In millions of Korean won) 2016Currentassets

Non-currentassets

Currentliabilities

Non-currentliabilities

Korea Information & Technology Fund ￦154,651 ￦250,257 ￦� ￦ �KT-SB Venture Investment 1,009 8,704 242 �Mongolian Telecommunications 9,852 9,055 3,296 �KT Wibro Infra Co., Ltd. 274,811 6 4,996 52KT-CKP New Media Investment Fund 1,801 7,170 4 �


Operatingrevenue


Othercomprehensive

income

Totalcomprehensive

income

Dividendreceived from

associatesKorea Information & Technology Fund ￦26,942 ￦22,338 ￦ (9,425 ) ￦ 12,913 ￦ 3,201KT-SB Venture Investment 2 (251 ) � (251 ) �Mongolian Telecommunications 10,336 81 3,178 3,259 �KT Wibro Infra Co., Ltd. 391 5,025 � 5,025 �KT-CKP New Media Investment Fund 1,684 1,195 � 1,195 �


Non-currentassets

Currentliabilities


Korea Information & Technology Fund ￦144,874 ￦273,727 ￦� ￦ �KT-SB Venture Investment 120 5,770 6 �KT-IBKC Future Investment Fund 1 5,499 16,302 152 �KT-CKP New Media Investment Fund 287 4,333 � �K Bank Inc. 1,258,969 92,137 1,116,154 1,177


Operatingrevenue


Othercomprehensive

income

Totalcomprehensive

income


associatesKorea Information & Technology Fund ￦36,462 ￦12,825 ￦ 1,868 ￦ 14,693 ￦ 739KT-SB Venture Investment 3 (1,449 ) � (1,449 ) �KT-IBKC Future Investment Fund 1 15 (593 ) � (593 ) �KT-CKP New Media Investment Fund 1,593 1,632 � 1,632 �K Bank Inc. 20,926 (83,787) (746 ) (84,533 ) �

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Details of a reconciliation of the summarized financial information to the carrying amount of interests in the associates and jointventures as of and for the years end December 31, 2016 and 2017, are as follows:

2016

(In millions of Korean won) Net assetsPercentage of

ownershipShare in net

assets

Intercompanytransactionand others

Carryingamount

Korea Information & Technology Fund ￦404,908 33.3 % ￦134,969 ￦ � ￦134,969KT-SB Venture Investment 9,471 50.0 % 4,736 � 4,736Mongolian Telecommunications 15,610 40.0 % 6,244 � 6,244KT Wibro Infra Co., Ltd. 269,769 26.2 % 70,679 (18,479 ) 52,200KT-CKP New Media Investment Fund 8,967 49.7 % 4,454 � 4,454

2017



assets


Carryingamount

Korea Information & Technology Fund ￦418,601 33.3 % ￦139,534 ￦ � ￦139,534KT-SB Venture Investment 5,884 50.0 % 2,942 � 2,942KT-IBKC Future Investment Fund 1 21,649 50.0 % 10,825 � 10,825KT-CKP New Media Investment Fund 4,620 49.7 % 2,294 � 2,294K Bank Inc.1 233,775 10.0 % 42,108 � 42,108

1 8% of non-voting convertible stock are excluded from percentage of ownership for K bank Inc

Due to discontinuance of equity method of accounting, the Group has not recognized loss from associates and joint ventures of￦4,391 million for the year (2015:￦601 million, 2016:￦1,354 million,). The accumulated comprehensive loss of associates andjoint ventures as of December 31, 2017, which was not recognized by the Group is￦17,045 million (2015:￦51,597 million, 2016:￦18,096 million).

14. Trade and other payables

Details of trade and other payables as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) December 31, 2016 December 31, 2017Current liabilitiesTrade payables ￦ 1,235,955 ￦ 1,399,287Other payables 5,903,816 6,024,847

Total ￦ 7,139,771 ￦ 7,424,134Non-current liabilitiesTrade payables ￦ 8,041 ￦ 4,787Other payables 1,180,270 996,582

Total ￦ 1,188,311 ￦ 1,001,369

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Details of other payables as of December 31, 2016 and 2017 are as follows:

(In millions of Korean won) 2016 2017Non-trade payables1 ￦4,803,642 ￦4,773,223Accrued expenses 1,061,002 1,011,089Operating deposits 861,739 850,999Others 357,703 386,118Less: non-current (1,180,270) (996,582 )Current ￦5,903,816 ￦6,024,847

1 Settlement payables of BC Card Co., Ltd. of￦2,365,477 million related to credit card transactions included as of December 31,2017 (2016:￦2,095,989 million).

15. Borrowings

Details of borrowings as of December 31, 2016 and 2017, are as follows:

Debentures

(In millions of Korean won and thousands of foreign currencies) 2016 2017

Type MaturityAnnual interest

ratesForeign

currencyKorean

wonForeign

currencyKorean

wonMTNP notes1 Sept. 07, 2034 6.50% USD 100,000 ￦120,850 USD 100,000 ￦107,140MTNP notes Jan. 20, 2017 � USD 350,000 422,975 � �FR notes2 Aug. 28, 2018 LIBOR(3M)+1.15% USD 300,000 362,550 USD 300,000 321,420MTNP notes Apr. 22, 2017 � USD 650,000 785,525 � �MTNP notes Apr. 22, 2019 2.63% USD 350,000 422,975 USD 350,000 374,990MTNP notes Jan. 29, 2018 0.86% JPY 6,800,000 70,503 JPY 6,800,000 64,539MTNP notes Feb. 23, 2018 0.48% JPY 15,000,000 155,522 JPY 15,000,000 142,367MTNP notes July 18, 2026 2.50% USD 400,000 483,400 USD 400,000 428,560MTNP notes Aug 07, 2022 2.63% � � USD 400,000 428,560The 173-2nd Public bond Aug. 06, 2018 6.62% � 100,000 � 100,000The 177-3rd Public bond Feb. 09, 2017 � � 170,000 � �The 179th Public bond Mar. 29, 2018 4.47% � 260,000 � 260,000The 180-2nd Public bond Apr. 26, 2021 4.71% � 380,000 � 380,000The 181-2nd Public bond Aug. 26, 2018 3.99% � 90,000 � 90,000The 181-3rd Public bond Aug. 26, 2021 4.09% � 250,000 � 250,000The 182-2nd Public bond Oct. 28, 2021 4.31% � 100,000 � 100,000The 183-2nd Public bond Dec. 22, 2021 4.09% � 90,000 � 90,000The 183-3rd Public bond Dec. 22, 2031 4.27% � 160,000 � 160,000The 184-1st Public bond Apr. 10, 2018 2.74% � 120,000 � 120,000The 184-2nd Public bond Apr. 10, 2023 2.95% � 190,000 � 190,000The 184-3rd Public bond Apr. 10, 2033 3.17% � 100,000 � 100,000The 185-1st Public bond Sept. 16, 2018 3.46% � 200,000 � 200,000The 185-2nd Public bond Sept. 16, 2020 3.65% � 300,000 � 300,000The 186-1st Public bond June 26, 2017 � � 120,000 � �The 186-2nd Public bond June 26, 2019 3.08% � 170,000 � 170,000The 186-3rd Public bond June 26, 2024 3.42% � 110,000 � 110,000The 186-4th Public bond June 26, 2034 3.70% � 100,000 � 100,000The 187-1st Public bond Sept. 02, 2017 � � 110,000 � �The 187-2nd Public bond Sept. 02, 2019 2.97% � 220,000 � 220,000The 187-3rd Public bond Sept. 02, 2024 3.31% � 170,000 � 170,000

F-57







ratesForeign

currencyKorean

wonForeign

currencyKorean

wonThe 187-4th Public bond Sept. 02, 2034 3.55% � 100,000 � 100,000The 188-1st Public bond Jan. 29, 2020 2.26% � 160,000 � 160,000The 188-2nd Public bond Jan. 29, 2025 2.45% � 240,000 � 240,000The 188-3rd Public bond Jan. 29, 2035 2.71% � 50,000 � 50,000The 189-1st Public bond Jan. 27, 2019 1.76% � 100,000 � 100,000The 189-2nd Public bond Jan. 27, 2021 1.95% � 130,000 � 130,000The 189-3rd Public bond Jan. 27, 2026 2.20% � 100,000 � 100,000The 189-4rd Public bond Jan. 27, 2036 2.35% � 70,000 � 70,000The 17th unsecured bond Apr. 22, 2018 1.89% � 60,000 � 60,000

7,344,300 5,987,576Less: Current portion (1,607,570 ) (1,357,776 )

Discount on bonds (20,852 ) (19,347 )Total ￦ 5,715,878 ￦ 4,610,453

1 As of December 31, 2017, the Controlling Company has outstanding notes in the amount of USD 100 million with fixed interest ratesunder Medium Term Note Program (�MTNP�) registered in the Singapore Stock Exchange, which allowed issuance of notes of up toUSD 2,000 million. However, the MTN Program has been suspended since 2007.

2 Libor (3M) are approximately 1.695 % as of December 31, 2017.

Short-term borrowings

(In millions of Korean won)Type Financial institution Annual interest rates 2016 2017

Operational Shinhan Bank 2.99% ~ 4.41% ￦120,300 ￦113,300Standard Charted Bank � 8,000 �

Korea Development Bank 3.97% 20,800 12,000Indutrial Bank of Korea � 1,000 �

SooHyup Bank 4.22% 3,000 3,000Total ￦153,100 ￦128,300

Long-term borrowings


Financial institution Type Annual interest ratesForeign

currencyKorean

wonForeign

currencyKorean

wonExport-ImportBank of Korea

Inter-Korean CooperationFund1 1.50% � ￦5,181 � ￦4,688

Shinhan Bank General loans 2.50% � 31,000 � 30,000Facility loans 2.56% � 6,493 � 6,000

Vessel facility loans2 LIBOR(3M)+0.706% USD 21,000 25,379 USD 15,000 16,071KEB Hana Bank General loans 3.95% � 3,000 � 3,000

Standard Charted Bank General loans 3.16% � � � 8,000Woori Bank General loans � � 13,000 � �

NongHyup Bank General loans 2.86% � � � 8,000Facility loans 2.00% 123 � 123

F-58






Financial institution TypeAnnual

interest ratesForeign

currencyKorean

wonForeign

currencyKorean

wonKorea Development Bank General loans 3.27% � 30,000 � 30,000

Kookmin Bank Facility loans 2.59% � 7,000 � 2,333NH Investment & Security Co., Ltd. Commercial papers 3.17% � 300,000 � 300,000

Others Redeemable convertiblepreferred stock3 � � 950 � 950

Kookmin Bank and other2 3.15% USD 183,796 222,117 USD 166,108 177,968￦644,243 ￦587,133

Less: Current portion ￦(59,331 ) ￦(87,398 )

Total ￦584,912 ￦499,735

1 The Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period.2 LIBOR(3M) is approximately 1.695% as of December 31, 2017.3 Skylife TV Co., Ltd., a subsidiary of the Group, issued 1,900,000 of redeemable convertible preferred stock with a par value per share of ￦500 in

2010.

Repayment schedule of the Group�s borrowings including the portion of current liabilities as of December 31, 2017, is as follows:

(in millions of Korean won)Debentures Borrowings Total

In localcurrency

In foreigncurrency Sub- total

In localcurrency


Jan 1, 2018 ~ Dec 31, 2018 ￦830,000 ￦528,326 ￦1,358,326 ￦167,395 ￦48,303 ￦215,698 ￦1,574,024Jan 1, 2019 ~ Dec 31, 2019 490,000 374,990 864,990 343,465 48,303 391,768 1,256,758Jan 1, 2020 ~ Dec 31, 2020 460,000 � 460,000 1,518 45,089 46,607 506,607Jan 1, 2021 ~ Dec 31, 2021 950,000 � 950,000 1,518 41,875 43,393 993,393After 2022 1,390,000 964,260 2,354,260 7,498 10,469 17,967 2,372,227

￦4,120,000 ￦1,867,576 ￦5,987,576 ￦521,394 ￦ 194,039 ￦715,433 ￦6,703,009

F-59





Carrying amount and fair value of the Group�s debentures and borrowings as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017

TypeCarryingAmount

FairValue

CarryingAmount

FairValue

Debentures ￦7,323,448 ￦7,387,085 ￦5,968,229 ￦6,022,551Long-term borrowings (Including current portion of long-term

borrowings) 644,243 644,010 587,133 587,475Short-term borrowings 153,100 153,100 128,300 128,300

Total ￦8,120,791 ￦8,184,195 ￦6,683,662 ￦6,738,326

The fair values of debentures and long-term borrowings are calculated by discounting the expected future cash flows at weightedaverage borrowing rate. The weighted average borrowing rate is approximately 3.37% (2016: 3.38%) as of December 31, 2017. Thecarrying amount of borrowings of subsidiaries is the reasonable approximately amount of the fair value.

16. Provisions

Changes in provisions for the years ended December 31, 2016 and 2017, are as follows:

2016(In millions of Korean won) Litigation Restoration cost Others TotalBeginning balance ￦17,524 ￦ 91,827 ￦85,921 ￦195,272

Increase (transfer) 3,392 13,653 40,293 57,338Usage (640 ) (3,378 ) (37,378) (41,396 )Reversal (1,238 ) (790 ) (12,007) (14,035 )

Ending balance ￦19,038 ￦ 101,312 ￦76,829 ￦197,179Current 18,988 2,334 75,163 96,485Non-current 50 98,978 1,666 100,694


Increase (Transfer) 3,842 2,827 41,550 48,219Usage (1,740 ) (2,178 ) (22,382) (26,300 )Reversal (2,834 ) (1,723 ) (11,467) (16,024 )Change in scope of consolidation � (22 ) (22 ) (44 )

Ending balance ￦18,306 ￦ 100,216, ￦84,508 ￦203,030Current 17,238 1,766 59,168 78,172Non-current 1,068 98,450 25,340 124,858

17. Net Defined Benefit Liabilities

The amounts recognized in the statements of financial position are determined as follows:

(in millions of Korean won) 2016 2017Present value of defined benefit obligations ￦1,713,184 ￦1,911,166Fair value of plan assets (1,334,780) (1,519,779)Liabilities ￦378,404 ￦396,079Assets in the statement of financial position ￦� ￦3,692

F-60





Changes in the defined benefit obligations for the years ended December 31, 2016 and 2017, are as follows:

(in millions of Korean won) 2016 2017Beginning ￦1,601,974 ￦1,713,184Current service cost 205,114 210,336Interest expense 37,378 38,994Benefit paid (127,581 ) (154,600 )Changes due to settlements of plan (424 ) (61 )Remeasurements:

Actuarial gains and losses arising from changes in demographic assumptions (53,407 ) 3,353Actuarial gains and losses arising from changes in financial assumptions 26,717 36,946Actuarial gains and losses arising from experience adjustments 18,809 63,583

Changes in scope of Consolidation 4,604 (569 )Ending ￦1,713,184 ￦1,911,166

Changes in the fair value of plan assets for the years ended December 31, 2016 and 2017, are as follows:

(in millions of Korean won) 2016 2017Beginning ￦1,077,891 ￦1,334,780Interest income 25,237 30,303Remeasurements:

Return on plan assets (excluding amounts included in interest income) (2,323 ) (5,557 )Benefits paid (88,876 ) (130,510 )Employer contributions 322,851 290,895Changes in scope of consolidation � (132 )Ending ￦1,334,780 ￦1,519,779

For the year ended December 31, 2018, reasonable estimation for expected employer contributions is￦197,942 million.

Amounts recognized in the statement of profit or loss for the years ended December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Current service cost ￦200,994 ￦205,114 ￦210,336Net Interest cost 16,793 12,141 8,691Past service cost � 424 (61 )Transfer out (11,942 ) (8,737 ) (9,196 )Transfer to discontinued operation (3,031 ) � �

Total expenses ￦202,814 ￦208,942 ￦209,770

F-61





Principal actuarial assumptions used are as follows:

2015.12.31 2016.12.31 2017.12.31Discount rate 2.43 % 2.43 % 2.76 %Future salary increase 4.06 % 4.10 % 4.51 %

The sensitivity of the defined benefit obligations as of December 31, 2017, to changes in the principal assumptions is:

(in percentage, in millions of Korean won ) Effect on defined benefit obligation

Changes inassumption

Increase inassumption

Decreasein

assumptionDiscount rate 0.5% point ￦(62,000) ￦76,560Salary growth rate 0.5% point 71,273 (57,848)

A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of theplans� bond holdings.

The above sensitivity analyses are based on an assumption while holding all other assumptions constant. In practice, this is unlikelyto occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes inprincipal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating thedefined 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 arisingfrom the pension obligations. Expected contributions to post-employment benefit plans for the year ending December 31, 2018, are￦197,942 million.

The expected maturity analysis of undiscounted pension benefits as at December 31, 2017, is as follows:

(in millions of Korean won)Less than

1 yearBetween1-2 years

Between2-5 years Over 5 years Total

Pension benefits ￦142,963 ￦179,612 ￦627,302 ￦3,763,601 ￦4,713,478

The weighted average duration of the defined benefit obligations is 7.6 years.

18. Defined Contribution PlanRecognized expense related to the defined contribution plan for the year ended December 31, 2017, is￦45,936 million (2015:￦35,699 million, 2016:￦46,023 million).

F-62





19. Commitments and Contingencies

As of December 31, 2017, major commitments with local financial institutions are as follows:

(In millions of Korean won andforeign currencies in thousands) Financial institution Currency Limit Used amountBank overdraft Kookmin Bank and others KRW 1,730,000 72Commercial papers NH Investment & Securities

Co., Ltd. KRW 370,000 300,000Collateralized loan on accounts receivable-trade NongHyup Bank and others KRW 35,560 �Collateralized loan on electronic accounts receivable-trade Shinhan Bank and others KRW 343,000 42,350Plus electronic notes payable Industrial Bank of Korea KRW 50,000 140Loans for working capital Korea Development Bank

and others KRW 306,500 207,300Green energy factoring Shinhan Bank KRW 16 16FX forward trading commitment Shinhan Bank USD 11,500 �Facility loans Kookmin Bank and others KRW 8,456 8,456

USD 212,000 166,108Facility loans on ships Shinhan Bank USD 30,000 15,000Inter-Korean Cooperation Fund Export-Import Bank of Korea KRW 37,700 4,688

Total KRW 2,881,232 563,022USD 253,500 181,108

As of December 31, 2017, guarantees received from financial institutions are as follows:

(In millions of Korean won andthousands of foreign currencies) Financial institution Currency LimitPerformance guarantee Seoul Guarantee Insurance and others KRW 116,787

USD 1,275Guarantee for import letters of credit Industrial Bank of Korea and others USD 5,980Guarantee for payment in foreign currency KEB Hana and others USD 54,072

PLN 1 23,000Guarantee for advances received Export-Import Bank of Korea USD 7,414Comprehensive credit line KEB Hana Bank and others KRW 55,000Bid guarantee KEB Hana Bank USD 400Bid guarantee Korea Software Financial Cooperative KRW 96,911Performance guarantee /Warranty Guarantee KRW 302,062Guarantee for advances received/others Korea Software Financial Cooperative

and others KRW 99,228Warranty guarantee Seoul Guarantee Insurance KRW 2,962Guarantees for licensing KRW 4,077Guarantees for public sale KRW 50Guarantees for deposits Seoul Guarantee Insurance and others KRW 4,203

Total KRW 681,280USD 69,141PLN 1 23,000

F-63





1 Polish Zloty.

As of December 31, 2017, 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 PeriodKT Estate Inc. Busan Gaya Centreville Buyers Shinhan

Bank￦48,536 ￦8,309 Nov 10, 2017

~Oct. 31, 2020KT Estate Inc. Daegu Beomeo -Crossroads

SeohanIDaum BuyersShinhan

Bank81,722 14,237 Oct 29, 2017

~Nov. 30, 2020KT Hitel Co., Ltd. KEB Hana Bank Cash

payers384 � Apr 19, 2017

~ Apr 19, 2018

The Controlling Company is jointly and severally obligated with KT Sat Co., Ltd. to pay KT Sat Co., Ltd.�s liabilities prior to spin-off.As of December 31, 2017, the Controlling Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement of￦4,328 million.

For the year ended December 31, 2017, the Group entered into agreements with GIGA LTE Thirty-first to Thirty-sixth SecuritizationSpecialty Co., Ltd. and KT M Mobile 1st Securitization Specialty Co., Ltd. (2016: Olleh KT Twenty-fifth to Twenty-sixth SecuritizationSpecialty Co., Ltd. and GIGA LTE Twenty-seventh to Thirtieth Securitization Specialty Co., Ltd.), and disposed its trade receivablesrelated to handset sales. The Group also made asset management agreements with each securitization specialty company and willreceive the related management fees.

As of December 31, 2017, the Group is a defendant in 187 lawsuits with an total claims of ￦112,639 million (2016:￦77,461 million).As of December 31, 2017, litigation provisions of￦18,306 million for various pending lawsuits and unasserted claims are recordedas liabilities for potential loss in the ordinary course of business. The final outcome of the case cannot be estimated as at the end ofthe reporting period.

On December 24, 2013, Asia Broadcast Satellite Holdings Ltd. (�ABS�) filed a request for arbitration with the International Centre forDispute Resolution of the American Arbitration Association for the compensation of damages from the relocation of the groundequipment and the alleged breach of the entrustment control contract related to the satellite Koreasat-3, which was made andentered into with the Controlling Company and its subsidiary, KT Sat Co., Ltd. Subsequently on December 31, 2013, ABS filedanother request for arbitration with the International Court of Arbitration of the International Chamber of Commerce (ICC) for theclaim on the ownership of the satellite Koreasat-3 and compensation for the damages from the alleged breach of the sales contractentered into with the Controlling Company and its subsidiary, KT Sat Co., Ltd. These two cases were combined by the ICC to betreated as a single case for the arbitration. On July 18, 2017, the ICC issued a partial ruling in favor of ABS that ABS has theownership right to the Koreasat-3 satellite. Following the ruling, on October 12, 2017, the Controlling Company and KT Sat Co., Ltd.,as joint defendants to the arbitration, filed a lawsuit for cancellation of the arbitration ruling at the New York Court of Appeals in theUnited States. On March 9, 2018, the ICC made the final ruling in favor of ABS that the Controlling Company and KT Sat Co., Ltd.should compensate ABS for the damage of $748,564 and the accumulated interest of $287,673.15 for the period from December 1,2013 to March 9, 2018, and the interest for delay at 9% per annum. As the final ruling by the ICC was based on the presumption thatthe partial ruling that the satellite belongs to ABS is valid, the Controlling Company and KT Sat Co., Ltd. are contemplating to file anadditional appeal for the arbitration rulings at the New York Court of

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Appeals. At the end of the current reporting period, the final outcome of these claims cannot be reasonably estimated.

According to the financial and other covenants included in certain debentures and borrowings, the Group is required to maintaincertain 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 is offering construction completion guarantee agreement to development of NonsanHwagidong apartment complex. If a contingent event occurs in between November 24, 2017 and to August 9, 2019, the Groupcollaterally guarantees the debt of AbleNS 1st Co. up to￦9,000 million.

At the end of the reporting period, the Group participates in Algerie Sidi Abdela new town development consortium (percentageownership: 2.5%) and has joint liability with other consortium participants.

At the end of the reporting period, contract amount of property, plant and equipment acquisition agreement made but not yetrecognized as liabilities amounts to￦622,059 million (2016:￦489,753 million).

20. Lease

The Group�s non-cancellable lease arrangements are as follows:

The Group as the LesseeFinance Lease

Details of finance lease assets as of December 31, 2016 and 2017, are as follows:

(in millions of Korean won) 2016 2017Acquisition costs ￦298,631 ￦325,975Less: Accumulated depreciation (105,013) (126,091)Net balance ￦193,618 ￦199,884

As of December 31, 2017, the Group recognized financial lease assets as other property and equipment. The related depreciationamounted to￦58,535 million (2016:￦50,704 million) for the year ended December 31, 2017.

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Details of future minimum lease payments As of December 31, 2016 and 2017, under finance lease contracts are summarizedbelow:

(in millions of Korean won) 2016 2017Total amount of minimum lease paymentsWithin one year ￦79,644 ￦88,441From one year to five years 131,813 132,113More than five years � 81

211,457 220,635Unrealized interest expense 30,743 43,758Net amount of minimum lease paymentsWithin one year 64,008 68,651From one year to five years 116,706 108,146More than five years � 80Total ￦180,714 ￦176,877

Operating Lease

Details of future minimum lease payments As of December 31, 2016 and 2017, under operating lease contracts are summarizedbelow:

(in millions of Korean won) 2016 2017Within one year ￦102,015 ￦109,258From one year to five years 270,462 266,434Thereafter 16,549 1,635Total ￦389,026 ￦377,327

Operating lease expenses incurred for the years ended December 31, 2015, 2016 and 2017, amounted to￦111,776 million,￦121,852 million and￦126,250 million, respectively.

21. Share Capital

As of December 31, 2016 and 2017, the Group�s number of authorized shares is one billion.

2016 2017Number of

outstandingshares

Par valueper share

(Korean won)

Ordinary Shares(in millions ofKorean won)

Number ofoutstanding

shares

Par valueper share

(Korean won)


Ordinary shares1 261,111,808 ￦ 5,000 ￦1,564,499 261,111,808 ￦ 5,000 ￦1,564,499

1 The Group retired 51,787,959 treasury shares against retained earnings. Therefore, the ordinary shares amount differs fromthe amount resulting from multiplying the number of shares issued by￦5,000 par value per share of ordinary shares.

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22. Retained Earnings

Details of retained earnings as of December 31, 2016 and 2017, are as follows:

(in millions of Korean won) 2016 2017Legal reserve1 ￦782,249 ￦782,249Voluntary reserves2 4,651,362 4,651,362Unappropriated retained earnings 4,210,872 4,393,315

Total ￦9,644,483 ￦9,826,926

1 The Commercial Code of the Republic of Korea requires the Group to appropriate, as a legal reserve, an amount equal to aminimum of 10% of cash dividends paid until such reserve equals 50% of its issued capital stock. The reserve is not availablefor the payment of cash dividends, but may be transferred to capital stock with the approval of the Group�s Board of Directorsor used to reduce accumulated deficit, if any, with the ratification of the Group�s majority shareholders.

2 The provision of research and development of human is separately accumulated with tax reserve fund during earned surplusdisposal by Tax Reduction and Exemption Control Act of Korea. Reversal of this provision can be paid out as dividendsaccording to related tax law.

23. Accumulated Other Comprehensive Income and Other Components of Equity

As of December 31, 2016 and 2017, the details of the Controlling Company�s accumulated other comprehensive income are asfollows:

(in millions of Korean won) 2016 2017Changes in investments in associates and joint ventures ￦(10,883) ￦(735 )Loss on derivatives valuation (34,309) (3,463 )Gain of valuation on available-for-sale 54,106 52,673Foreign currency translation adjustment (10,346) (17,490)

Total ￦(1,432 ) ￦30,985

Changes in accumulated other comprehensive income for the years ended December 31, 2016 and 2017, are as follows:

2016

(in millions of Korean won) BeginningIncrease

/decreaseReclassified to

gain or loss EndingChanges in investments in associates and

joint ventures ￦(10,312) ￦(571 ) ￦ � ￦(10,883)Gain or loss on derivatives valuation (23,234) 64,796 (75,871 ) (34,309)Gain or loss of valuation on available-for-sale 52,415 5,204 (3,513 ) 54,106Foreign currency translation adjustment (4,999 ) (5,347 ) � (10,346)

Total ￦13,870 ￦64,082 ￦ (79,384 ) ￦(1,432 )

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2017



gain or loss EndingChanges in investments in associates and

joint ventures ￦(10,883) ￦10,148 ￦ � ￦(735 )Gain or loss on derivatives valuation (34,309) (111,083) 141,929 (3,463 )Gain or loss of valuation on available-for-sale 54,106 54,017 (55,450 ) 52,673Foreign currency translation adjustment (10,346) (7,144 ) � (17,490)

Total ￦(1,432 ) ￦(54,062 ) ￦ 86,479 ￦30,985

As of December 31, 2016 and 2017, the other components of equity are as follows:

(in millions of Korean won) 2016 2017Treasury stock1 ￦(859,789 ) ￦(853,108 )Loss on disposal of treasury stock2 607 873Share-based payments 5,762 6,483Others3 (364,514 ) (359,550 )

Total ￦(1,217,934) ￦(1,205,302)

1 During the year ended December 31, 2017, the Group granted 125,412 treasury shares as share-based payment.2 The amount directly reflected in equity is￦653 million (2016:￦738 million) as of December 31, 2017.3 Profit or loss incurred from transactions with non-controlling interest and investment difference incurred from change in

proportion of subsidiaries are included.

As of December 31, 2016 and 2017, the details of treasury stock are as follows:

2016 2017Number of shares 16,140,165 16,014,753Amounts (In millions of Korean won) ￦859,789 ￦853,108

Treasury stock is expected to be used for the stock compensation for the Group�s directors and employees and other purposes.

24. Share-based Payments

Details of share-based payments as of December 31, 2017, are as follows:

11thGrant date July 27, 2017Grantee CEO, inside directors, outside directors, executivesVesting conditions Service condition: 1 year

Non-market performance condition: achievement of performanceFair value per option (in Korean won) ￦34,400Total compensation costs (in Korean won) ￦6,483 millionEstimated exercise date (exercise date) After July 27, 2018Valuation method Fair value method

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Changes in the number of stock options and the weighted-average exercise price as of December 31, 2016 and 2017, are asfollows:

2016Beginning Granted Expired Forfeited Exercised1 Ending Number of

sharesexercisable

9th grant ￦263,123 ￦54,913 ￦181,685 ￦ � ￦136,351 ￦� ￦ �10th grant � 318,506 � � � 318,506 �

Total ￦263,123 ￦373,419 ￦181,685 ￦ � ￦136,351 ￦318,506 ￦ �


sharesexercisable

10th grant ￦318,506 ￦� ￦193,094 ￦ � ￦125,412 ￦� ￦ �11th grant � 316,949 � � � 316,949 �

Total ￦318,506 ￦316,949 ￦193,094 ￦ � ￦125,412 ￦316,949 ￦ �

1 The weighted average price of ordinary shares at the time of exercise during 2017 was ￦31,797 (2016:￦31,750).

25. Operating Revenues

Operating revenues for the years ended December 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Services provided ￦19,455,693 ￦19,935,865 ￦19,898,725Sale of goods 2,755,980 2,819,141 3,360,816Others 488,183 365,872 287,388

Total ￦22,699,856 ￦23,120,878 ￦23,546,929

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26. Operating Expenses

Operating expenses for the years ended December 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Salaries and wages ￦3,303,484 ￦3,477,596 ￦3,568,456Depreciation 2,756,131 2,762,773 2,745,969Amortization of intangible assets 582,467 582,493 618,533Commissions 1,036,852 1,099,429 1,085,865Interconnection charges 689,293 690,285 640,612International interconnection fee 231,060 216,633 214,058Purchase of inventories 3,963,036 3,407,263 4,053,693Changes of inventories (198,028 ) 162,323 (187,439 )Sales commission 1,856,595 1,968,035 2,201,778Service cost 1,163,887 1,322,337 1,428,405Utilities 319,303 323,406 323,313Taxes and dues 256,958 255,480 279,574Rent 469,950 455,457 448,772Insurance premium 211,104 178,231 69,384Installation fee 249,413 156,669 146,783Advertising expenses 177,348 185,560 197,114Research and development expenses 183,821 167,881 168,635Card service cost 2,959,765 3,049,559 3,094,894Others 1,410,349 1,319,688 1,379,438

Total ￦21,622,788 ￦21,781,098 ￦22,477,837

Details of employee benefits for the years ended December 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Short-term employee benefits ￦3,055,699 ￦3,206,904 ￦3,297,944Post-employment benefits(Defined benefit plan) 202,814 208,942 209,770Post-employment benefits(Defined contribution plan) 35,699 46,023 45,936Post-employment benefits(Others) 5,535 8,017 6,949Share-based payment 3,737 7,710 7,660

Total ￦3,303,484 ￦3,477,596 ￦3,568,259

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27. Financial Income and Costs

Details of financial income for the years ended December 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Interest income ￦70,035 ￦115,686 ￦93,078Gain on foreign currency transactions 18,766 24,915 79,653Gain on foreign currency translation 11,280 12,165 225,580Gain on settlement of derivatives 368 8,515 �Gain on valuation of derivatives 141,512 109,436 57Others 30,899 25,422 7,960

Total ￦272,860 ￦296,139 ￦406,328

Details of financial expenses for the years ended December 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Interest expenses ￦385,925 ￦337,219 ￦302,464Loss on foreign currency transactions 42,831 37,936 40,303Loss on foreign currency translation 175,613 121,949 12,239Loss on settlement of derivatives 6,280 632 58,569Loss on valuation of derivatives 1,733 138 209,582Loss on disposal of trade receivables 2,539 15,838 20,355Impairment loss on available-for-sale financial assets 1,805 966 9Others 28,605 409 1,010

￦645,331 ￦515,087 ￦644,531

28. Deferred Income Tax and Income Tax Expense

The analysis of deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2017, is as follows:

(In millions of Korean won) 2016 2017Deferred tax assets

Deferred tax assets to be recovered within 12 months ￦265,997 ￦318,339Deferred tax assets to be recovered after

more than 12 months 1,124,420 1,140,252￦1,390,417 ￦1,458,591

Deferred tax liabilitiesDeferred tax liability to be recovered within 12 months (48,033 ) (15,705 )Deferred tax liability to be recovered after

more than 12 months (778,655 ) (859,126 )(826,688 ) (874,831 )

Deferred tax assets after offsetting ￦701,409 ￦712,222Deferred tax liabilities after offsetting ￦137,680 ￦128,462

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The gross movements on the deferred income tax account for the years ended December 31, 2016 and 2017, are calculated asfollows:

(In millions of Korean won) 2016 2017Beginning ￦715,747 ￦563,729Charged(credited) to the statement of profit or loss (152,102) (1,771 )Charged(credited) to other comprehensive income 84 21,802Ending ￦563,729 ￦583,760

The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting ofbalances within the same tax jurisdiction, is as follows:


BeginningStatement ofoperations

Othercomprehensive

income EndingDeferred tax liabilities

Derivative instruments ￦(19,155 ) ￦ (33,569 ) ￦ 3,536 ￦(49,188 )Available-for-sale financial assets (29,430 ) (10 ) (2,262 ) (31,702 )Investment in subsidiaries, associates and

joint ventures (50,235 ) (666 ) 155 (50,746 )Depreciation (53,872 ) 14,374 � (39,498 )Advanced depreciation provision (231,692) 6,005 � (225,687)Deposits for severance benefits (251,924) (55,806 ) � (307,730)Accrued income (1,808 ) (216 ) � (2,024 )Reserve for technology and human

resource development (1,216 ) 469 � (747 )Others (135,802) 16,436 � (119,366)

(775,134) (52,983 ) 1,429 (826,688)Deferred tax assets

Provisions for impairment on tradereceivables 136,743 (26,467 ) � 110,276

Inventory valuation 56 (8 ) � 48Contribution for construction 19,618 (1,527 ) � 18,091Accrued expenses 64,117 16,239 � 80,356Provisions 20,353 (132 ) � 20,221Property, plant and equipment 239,791 (6,876 ) � 232,915Retirement benefit obligations 331,980 41,857 (1,345 ) 372,492Withholding of facilities expenses 7,360 (450 ) � 6,910Accrued payroll expenses 21,634 4,281 � 25,915Deduction of installment receivables 10,513 3,374 � 13,887Assets retirement obligation 16,974 1,112 � 18,086Gain or loss foreign currency translation 43,283 24,418 � 67,701Deferred revenue 43,792 (17,679 ) � 26,113Real-estate sales 2,980 871 � 3,851

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Othercomprehensive

income EndingTax credit carryforwards 212,820 (13,221 ) � 199,599Accumulated deficit 107,485 (107,485) � �Others 211,382 (17,426 ) � 193,956

1,490,881 (99,119 ) (1,345 ) 1,390,417Net balance ￦715,747 ￦(152,102) ￦ 84 ￦563,729


Beginning

Statementof

operations

Othercomprehensive


Derivative instruments ￦(49,188 ) ￦49,188 ￦ � ￦�Available-for-sale financial assets (31,702 ) (164 ) 1,346 (30,520 )Investment in subsidiaries, associates and

joint ventures (50,746 ) (42,659) (3,245 ) (96,650 )Depreciation (39,498 ) 39,498 � �Advanced depreciation provision (225,687) (22,905) � (248,592)Deposits for severance benefits (307,730) (80,126) � (387,856)Accrued income (2,024 ) (126 ) � (2,150 )Reserve for technology and human

resource development (747 ) 433 � (314 )Others (119,366) 10,617 � (108,749)

(826,688) (46,244) (1,899 ) (874,831)Deferred tax assets

Derivative instruments � 34,572 (9,848 ) 24,724Provisions for impairment on trade

receivables 110,276 11,380 � 121,656Inventory valuation 48 (48 ) � �Contribution for construction 18,091 180 � 18,271Accrued expenses 80,356 10,683 � 91,039Provisions 20,221 3,858 � 24,079Property, plant and equipment 232,915 (841 ) � 232,074Retirement benefit obligations 372,492 67,751 26,806 467,049Withholding of facilities expenses 6,910 472 � 7,382Accrued payroll expenses 25,915 (10,786) � 15,129Deduction of installment receivables 13,887 (13,887) � �Assets retirement obligation 18,086 2,750 � 20,836Gain or loss foreign currency translation 67,701 (67,558) � 143Deferred revenue 26,113 221 � 26,334Real-estate sales 3,851 4,847 � 8,698Tax credit carryforwards 199,599 (48,823) � 150,776Deficit carried over � 2,699 � 2,699

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Beginning

Statementof

operations

Othercomprehensive

income EndingOthers 193,956 47,003 6,743 247,702

1,390,417 44,473 23,701 1,458,591Net balance ￦563,729 ￦(1,771 ) ￦ 21,802 ￦583,760

The tax impacts recognized directly to equity as of December 31, 2015, 2016 and 2017, are as follows:


Beforerecognition

Taxeffect

Afterrecognition

Beforerecognition

Taxeffect

Afterrecognition

Beforerecognition

Taxeffect

Afterrecognition

Available-for-sale valuationgain(loss) ￦ (47,515 ) ￦11,499 ￦ (36,016 ) ￦ 9,347 ￦(2,262) ￦ 7,085 ￦(5,561 ) ￦1,346 ￦ (4,215 )

Hedge instruments valuationgain(loss) 18,406 (4,454 ) 13,952 (14,611 ) 3,536 (11,075 ) 40,694 (9,848 ) 30,846

Remeasurements from netdefined benefit liabilities (49,963 ) 12,091 (37,872 ) 5,558 (1,345) 4,213 (110,768 ) 26,806 (83,962 )

Shares of gain(loss) of associatesand joint ventures (5,297 ) 1,282 (4,015 ) (641 ) 155 (486 ) 13,410 (3,245 ) 10,165

Foreign currency translationadjustment (6,443 ) 1,559 (4,884 ) (7,133 ) 1,726 (5,407 ) (27,865 ) 6,743 (21,122 )

Total ￦ (90,812 ) ￦21,977 ￦ (68,835 ) ￦ (7,480 ) ￦1,810 ￦ (5,670 ) ￦(90,090 ) ￦21,802 ￦ (68,288 )

Details of income tax expense(benefit) for the years ended December 31, 2015, 2016 and 2017, are calculated as follows:

(In millions of Korean won) 2015 2016 2017Current income tax expense(benefit) ￦(5,003 ) ￦176,212 ￦268,885Impact of change in deferred taxes 232,134 152,102 1,771Income tax expense ￦227,131 ￦328,314 ￦270,656

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The tax on the Group�s profit before tax differs from the theoretical amount that would arise using the weighted average tax rateapplicable to profits of the entities as follows:

2015 2016 2017Profit before income tax expense ￦710,741 ￦1,123,431 ￦816,997Statutory income tax expense ￦171,999 ￦271,870 ￦197,251Tax effect

Income not taxable for taxation purposes (21,881 ) (28,093 ) (19,268 )Non-deductible expenses 28,849 21,947 39,746Tax credit (9,660 ) (13,764 ) (27,211 )Additional payment of income taxes 997 (4,780 ) 976Tax effect and adjustment on consolidation

Goodwill impairment 23,185 31,847 20,475Eliminated dividend income form subsidiaries 20,452 40,087 34,305Changes of out-side tax effect 9,844 (567 ) 17,990

Others 3,346 9,767 6,392Income tax expense ￦227,131 ￦328,314 ￦270,656

29. Earnings per Share

Basic earnings per share is calculated by dividing the profit from operations attributable to equity holders of the Group by theweighted average number of ordinary shares outstanding during the period, excluding ordinary shares purchased by the Group andheld as treasury stock.

Basic earnings per share from operations for the years ended December 31, 2015, 2016 and 2017, is calculated as follows:

2015 2016 2017Profit attributable to ordinary shares (In millions of

Korean won) ￦546,361 ￦708,362 ￦461,559Profit from continuing operations attributable to ordinary

shares 404,045 708,362 461,559Profit from discontinued operations attributable to

ordinary shares 142,316 � �Weighted average number of ordinary shares

outstanding (In number of shares) 244,854,364 244,892,313 245,017,175Basic earnings per share (In Korean won) 2,231 2,893 1,884Basic earnings per share from continuing operations 1,650 2,893 1,884Basic earnings per share from discontinued operations 581 � �

Diluted earnings per share from operations is calculated by adjusting the weighted average number of ordinary shares outstanding toassume conversion of all dilutive potential ordinary shares. The Controlling Company has dilutive potential ordinary shares fromconvertible preferred stocks, stock options and other share-based payments.

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Diluted earnings per share from operations for the years ended December 31, 2015, 2016 and 2017 is calculated as follows:

2015 2016 2017Profit attributable to ordinary shares (In millions of

Korean won) ￦546,361 ￦708,362 ￦461,559Adjusted net income attributable to ordinary shares (In

millions of Korean won) (75 ) (67 ) �Diluted profit attributable to ordinary shares (In millions

of Korean won) 546,286 708,295 461,559Diluted profit from continuing operations attributable to

ordinary shares 403,970 708,295 461,559Diluted income from discontinued operations

attributable to ordinary shares 142,316 � �Number of dilutive potential ordinary shares

outstanding (In number of shares) 1,104 84,245 79,880Weighted average number of ordinary shares

outstanding (In number of shares) 244,855,468 244,976,558 245,097,055Diluted earnings per share (In Korean won) 2,231 2,891 1,883Diluted earnings per share from continuing operations 1,650 2,891 1,883Diluted earnings per share from discontinued

operations 581 � �

30. Dividend

The dividends paid by the Group in 2017 and 2016 were￦195,977 million (￦800 per share) and￦122,425 million (￦500 pershare), respectively. There were no dividends paid in 2015. A dividend in respect of the year ended December 31, 2017, of￦1,000per share, amounting to a total dividend of￦245,097 million, was approved at the shareholders� meeting on March 23, 2018.

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31. Cash Generated from Operations

Cash flows from operating activities for the years ended December 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 20171. Profit for the year ￦624,685 ￦795,117 ￦546,3412. Adjustments to reconcile net income

Income tax expense 346,146 328,314 270,656Interest income (161,123 ) (130,066 ) (108,639 )Interest expense 445,814 337,219 302,464Dividends income (11,371 ) (3,926 ) (4,785 )Depreciation 3,030,821 2,821,779 2,802,531Amortization of intangible assets 609,185 599,721 635,150Provision for severance benefits 217,787 217,255 218,966Impairment losses on trade receivables 161,448 92,711 45,704Share of net profit or loss of associates and joint ventures (5,562 ) (2,547 ) 15,480Loss(gain) on disposal of associates and joint ventures (4,848 ) (1,450 ) 979Impairment loss of associates and joint ventures � 17,128 3,662Gain on disposal of subsidiaries (256,230 ) � �Loss on disposal of property, plant and equipment and investment in

properties 129,466 74,913 150,293Loss on disposal of intangible assets 33,978 7,703 4,271Loss on impairment of intangible assets 292,345 135,264 116,095Loss on foreign currency translation 164,374 109,784 (213,341 )Loss(gain) on valuation of derivatives (306,538 ) (117,181 ) 268,094Impairment losses on available-for-sale financial assets 1,805 966 9Gain on disposal of available-for-sale financial assets (131,041 ) (22,695 ) (89,598 )Others 24,140 64,863 (251,193 )

3. Changes in operating assets and liabilitiesDecrease(increase) in trade receivables 112,674 252,196 (303,340 )Increase in other receivables (21,749 ) (770,893 ) (346,013 )Decrease(increase) in other current assets (19,701 ) 48,549 11,792Increase in other non-current assets (137,532 ) (51,765 ) (43,790 )Decrease(increase) in inventories (270,343 ) 167,873 (205,403 )Increase(decrease) in trade payables 81,295 (114,838 ) 162,110Increase(decrease) in other payables (48,680 ) 705,807 214,689Increase(decrease) in other current liabilities (9,452 ) 37,798 288,553Increase in other non-current liabilities 119,836 30,762 174,618Decrease in provisions (8,902 ) (12,583 ) (12,574 )Decrease in deferred revenue (82,582 ) (69,179 ) (13,086 )Increase in plan assets (223,194 ) (224,244 ) (203,420 )Payment of severance benefits (117,691 ) (121,835 ) (118,391 )

4. Cash generated from operations (1+2+3) ￦4,579,260 ￦5,202,520 4,318,884

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The Group made agreements with securitization specialty companies and disposed of its trade receivables related to handset sales(Note 19). Cash flows from the disposals are presented in cash generated from operations.

Significant transactions not affecting cash flows for the years ended December 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Reclassification of the current portion of debentures ￦1,551,300 ￦1,617,175 ￦1,416,066Reclassification of construction-in-progress to property, plant and

equipment 2,373,023 2,212,324 2,686,591Reclassification of accounts payable from property, plant and equipment 78,663 91,407 225,601Reclassification of accounts payable from intangible assets (170,870 ) 668,564 (227,108 )Reclassification of payable from defined benefit liability 1,675 5,746 36,209Reclassification of payable from plan assets 13,717 (9,731 ) 43,035

32. Changes in Liabilities Arising from Financing Activities

Changes in liabilities arising from financial activities for the periods ended December 31, 2017, are as follows:

2017Non-cash Ending

(in millions of Koreanwon) Beginning Cash flows

Newlyacquired

Exchangedifference

Fair valuechange

Otherchanges

Borrowing ￦8,120,791 ￦(1,163,917) ￦� ￦(221,495) ￦� ￦(51,717 ) ￦6,683,662Financial lease liabilities 180,714 (71,735 ) 68,938 � � (1,039 ) 176,878Derivative assets 227,318 (71,370 ) � (76,552 ) 2,687 (74,694 ) 7,389Derivative liabilities 16,901 � � 130,674 (28,015 ) (20,740 ) 98,820Total ￦8,545,724 ￦(1,307,022) ￦68,938 ￦(167,373) ￦(25,328 ) ￦(148,190) ￦6,966,749

33. Segment Information

The Group�s operating segments are as follows:

Details Business serviceMarketing/Customer Mobile/fixed line telecommunication service and convergence businessFinance Credit card businessSatellite TV Satellite broadcasting businessAll other segments Information technology business, security business, global business and other businesses operated

by subsidiaries

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Details of each segment for the years ended December 31, 2015, 2016 and 2017, are as follows:

2015

(In millions of Korean won)Operatingrevenues

Operatingincome(loss)

Depreciationand Amortization

Marketing/Customer ￦16,130,454 ￦816,679 ￦ 2,897,876Finance 3,512,721 281,477 25,466Satellite TV 668,521 97,701 95,951All other segments 6,115,520 (99,601 ) 314,691

26,427,216 1,096,256 3,333,984Elimination (3,727,360 ) (19,188 ) 4,614Consolidated amount ￦22,699,856 ￦1,077,068 ￦ 3,338,598

2016




Marketing/Customer ￦16,144,415 ￦1,050,053 ￦ 2,870,161Finance 3,577,549 208,566 28,868Satellite TV 668,945 79,987 98,895All other segments 6,308,203 40,047 339,429


2017


Operatingincome


Marketing/Customer ￦16,242,552 ￦1,018,593 ￦ 2,895,930Finance 3,637,917 205,678 28,827Satellite TV 685,822 75,373 99,216All other segments 6,651,552 (187,090 ) 332,153


Operating revenues for the year ended December 31, 2015, 2016 and 2017 and non-current assets as of December 31, 2016 and2017 by geographical regions, are as follows:

(In millions ofKorean won) Operating revenues Non-current assets1

Location 2015 2016 2017 2016.12.31 2017.12.31Domestic ￦22,628,778 ￦23,026,255 ￦23,481,703 ￦18,308,310 ￦17,246,640Overseas 71,078 94,623 65,226 174,648 137,914

Total ￦22,699,856 ￦23,120,878 ￦23,546,929 ￦18,482,958 ￦17,384,554

1 Non-current assets include property, plant and equipment, intangible assets and investment properties.

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34. Related Party Transactions

The list of related party of the Group as of December 31, 2017, is as follows:

Relationship Name of EntryAssociates and joint

venturesKorea Information & Technology Investment Fund, K- Realty CR-REITs No.1, KT-SB Venture InvestmentFund, Boston Global Film & Contents Fund L.P., QTT Global (Group) Company Limited, CU IndustrialDevelopment Co., Ltd., PHI Healthcare., KD Living, Inc., MOS GS Co., Ltd., MOS Daegu Co., Ltd., MOSChungcheong Co., Ltd., MOS Gangnam Co., Ltd., MOS GB Co., Ltd., MOS BS Co., Ltd., MOS Honam Co.,Ltd., Oscar Ent. Co., Ltd., KT-CKP New Media Investment Fund, LoginD Co., Ltd., K-REALTY CR-REIT 6, KBank, Inc., NgeneBio, ISU-kth Contents Investment Fund, Daiwon Broadcasting Co., Ltd., KT-DSC creativeeconomy youth start-up investment fund, Gyeonggi-KT Green Growth Fund, Korea electronic Vehiclecharging service, PT. Mitra Transaksi Indonesia, K-REALTY RENTAL HOUSING REIT 2, KT-IBKC futureinvestment fund 1, AI RESEARCH INSTITUTE, Gyeonggi-KT Yoojin Superman Fund, FUNDA Co., Ltd.,FUNDA Co., Ltd., CHAMP IT Co.,Ltd., GE Premier 1st Corporate Restructuring Real Estate Investment TrustCompany, Alliance Internet Corp.

Outstanding balances of receivables and payables in relations to transactions with related parties as of December 31, 2016 and2017, are as follows:

2016Receivables Payables

(In millions of Korean won)Trade

receivablesLoans Other

receivablesTrade

payablesOther

payablesKT Wibro Infra Co., Ltd. ￦ � ￦� ￦� ￦ � ￦43,394K-Realty CR-REITs No.1 882 � 33,110 � �

MOS GS Co., Ltd. 9 � 1 � 1,494MOS Daegu Co., Ltd. 1 � � � 1,082MOS Chungcheong Co., Ltd. 6 � 1 � 2,065MOS Gangnam Co., Ltd. 6 � 1 � 1,129MOS GB Co., Ltd. 19 � 5 � 2,167MOS BS Co., Ltd. 34 � 1 � 1,114MOS Honam Co., Ltd. 2 � � � 1,289Others 481 � 179 3 1,266

Associates andjoint ventures

Total ￦ 1,440 ￦� ￦33,298 ￦ 3 ￦55,000

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receivablesTrade

payablesOther

payablesK-Realty CR-REITs No.1 ￦ 778 ￦� ￦33,800 ￦ � ￦�MOS GS Co., Ltd. 17 � � � 392MOS Daegu Co., Ltd. 1 � � � 1,388MOS Chungcheong Co., Ltd. 1 � 290 � 1,827MOS Gangnam Co., Ltd. 6 � 1 � 287MOS GB Co., Ltd. 17 � 1 � 778MOS BS Co., Ltd. 34 � 1 � 46MOS Honam Co., Ltd. 2 � 1 � 384K Bank, Inc. 1,338 � 7,994 � 296NgeneBio 1 2,510 � � 3

Associates andjoint ventures

Others 54 � 1,281 � 2,135Total ￦ 2,249 ￦2,510 ￦43,369 ￦ � ￦7,536

Significant transactions with related parties for the years ended December 31, 2015, 2016 and 2017, are as follows:

2015(In millions of Korean won) Sales Purchases2

KT Service Bukbu1 ￦2,143 ￦28,550Associates and jointventures Information Technology Solution Nambu Corporation1 2,707 24,025

Information Technology Solution Seobu Corporation1 2,324 20,031Information Technology Solution Busan Corporation1 1,496 14,049KT Service Nambu1 1,972 21,133Information Technology Solution Honam Corporation1 2,050 29,538Information Technology Solution Daegu Corporation1 1,256 18,272KT Wibro Infra Co., Ltd. 11 814Smart Channel Co., Ltd. 6,545 4,722K- Realty CR-REITs No.1 2,133 38,167MOS GS Co., Ltd. 752 17,474MOS Daegu Co., Ltd. 357 12,227MOS Chungcheong Co., Ltd. 310 12,735MOS Gangnam Co., Ltd. 454 15,829MOS GB Co., Ltd. 964 21,582MOS BS Co., Ltd. 453 15,482MOS Honam Co., Ltd. 470 17,004Others 4,394 13,510

Total3 ￦30,791 ￦325,144

1 The transactions for the year ended December 31, 2015, after KT Service Bukbu Co., Ltd. and KT Service Nambu Co., Ltd.were merged and included in the consolidation scope.

2 The amount includes acquisition of property, plant and equipment, and others.

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3 Operating income amounting to￦6,634 million of KT Capital Co., Ltd. and KT Rental that were classified as discontinuedoperations during the year ended December 31, 2015, is included.


KT Wibro Infra Co., Ltd. ￦11 ￦391Smart Channel Co., Ltd. 1 766 �K- Realty CR-REITs No.1 1,989 37,469MOS GS Co., Ltd. 663 17,361MOS Daegu Co., Ltd. 291 12,220MOS Chungcheong Co., Ltd. 408 13,469MOS Gangnam Co., Ltd. 412 15,797MOS GB Co., Ltd. 891 21,802MOS BS Co., Ltd. 441 15,346MOS Honam Co., Ltd. 418 14,389

Associates and jointventures

Others 1,719 29,422Total ￦8,009 ￦177,666

1 The transactions for the year ended December 31, 2016, before Smart Channel Co., Ltd. was included in the consolidationscope.



K- Realty CR-REITs No.1 ￦2,233 ￦35,532MOS GS Co., Ltd. 704 16,946MOS Daegu Co., Ltd. 335 8,514MOS Chungcheong Co., Ltd. 455 15,542MOS Gangnam Co., Ltd. 484 16,380MOS GB Co., Ltd. 987 21,651MOS BS Co., Ltd. 460 15,957MOS Honam Co., Ltd. 493 14,294K Bank, Inc.3 29,939 59NgeneBio2 43 �

Associates and jointventures

Others 1,149 11,384Total ￦37,282 ￦156,259

1 The amount includes acquisition of property, plant and equipment and others.2 It is the amount after excluded from consolidation during the year.3 The sales amount consists of providing services of IT system construction to K Bank, Inc.

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Key management compensation for the years ended December 31, 2015, 2016 and 2017, consists of:

(In millions of Korean won) 2015 2016 2017Salaries and other short-term benefits ￦2,455 ￦2,629 ￦2,879Post-employment benefits 413 381 311Stock-based compensation 997 1,237 1,331

Total ￦3,865 ￦4,247 ￦4,521

Fund transactions with related parties for the years ended December 31, 2016 and 2017, are as follows:

2016

(In millions of Korean won)

Equitycontributions

in cashDividendincome

Associates and joint venturesKT-DSC creative economy youth start-up investment fund ￦ 6,000 ￦�PT. Mitra Transaksi Indonesia 16,626 �K-REALTY RENTAL HOUSING REIT 2 5,500 �AI RESEARCH INSTITUTE 3,000 �KT-IBKC future investment fund 1 3,750 �Gyeonggi-KT Yoojin Superman Fund 1,000 �FUNDA Co., Ltd. 2,799 �K-Realty CR-REITs No.1 � 4,186Korea Information & Technology Investment Fund � 3,201Daiwon Broadcasting Co., Ltd. � 85Others � 82

Total ￦ 38,675 ￦7,554

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2017


Equitycontributions


Associates and joint venturesPT. Mitra Transaksi Indonesia ￦ 5,194 ￦�KT-IBKC future investment fund 1 7,500 �CHAMP IT Co.,Ltd. 750 �Korea Electronic Vehicle Charging Service 864 �Gyeonggi-KT Yoojin Superman Fund 1,000 �K-REALTY CR REIT 1 � 5,392K Bank, Inc. 26,543 �Korea Information & Technology Investment Fund � 739MOS GS Co., Ltd. � 12MOS Daegu Co., Ltd. � 12MOS Chungcheong Co., Ltd. � 12MOS Gangnam Co., Ltd. � 10MOS GB Co., Ltd. � 15MOS BS Co., Ltd. � 10MOS Honam Co., Ltd. � 10

Total ￦ 41,851 ￦6,212

35. Financial Risk Management

(1) Financial Risk Factors

The Group�s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cashflow interest rate risk and price risk), credit risk and liquidity risk. The Group�s overall risk management program focuses on theunpredictability of financial markets and seeks to minimize potential adverse effects on the Group�s financial performance. TheGroup uses derivative financial instruments to hedge certain risk exposures.

The Group�s financial policy is set up in the long-term perspective and annually reported to the Board of Directors. The financial riskmanagement is carried out by the Value Management Office, which identifies, evaluates and hedges financial risks. The treasurydepartment in the Value Management Office considers various finance market conditions to estimate the effect from the marketchanges.

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 exchangerate 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 therelevant risk variable such as prevailing market interest rates,

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currency rates, equity prices or commodity prices are estimated and if the rate of change in the underlying risk variable is stable, theGroup does not alter the chosen reasonably possible change in the risk variable. The reasonably possible change does not includeremote 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 ismanaged within the range of the possible effect on the Group�s cash flows. Foreign exchange risk unaffecting the Group�s cashflows is not hedged but can be hedged at a particular situation.

As of December 31, 2015, 2016 and 2017, if the foreign exchange rate had strengthened/weakened by 10% with all other variablesheld constant, the effects on profit before income tax and shareholders� equity would have been as follows:


Fluctuation offoreign exchange

rate Income before tax Shareholders�� equity10 % ￦ (52,157 ) ￦ (45,632 )2015.12.31-10 % 52,157 45,63210 % (28,134 ) (23,817 )2016.12.31-10 % 28,134 23,81710 % (10,132 ) (7,273 )2017.12.31-10 % 10,132 7,273

The above analysis is a simple sensitivity analysis which assumes that all the variables other than foreign exchange rates are heldconstant. Therefore, the analysis does not reflect any correlation between foreign exchange rates and other variables, nor themanagement�s decision to decrease the risk.

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Details of financial assets and liabilities in foreign currencies as of December 31, 2015, 2016 and 2017, are as follows:

2015 2016 2017

(In thousands)Financial


Financialassets


Financialassets


USD 183,254 2,351,003 210,474 2,536,090 236,476 1,908,831SDR1 444 849 311 737 306 738JPY 73,716 40,279,411 80,555 21,802,051 28,267 21,801,443GBP 8 888 1 151 � 74EUR 29 29 40 2,571 186 3,625DZD2 � � 471 � 47 �CNY 15,562 107 15,262 381 46,555 10UZS3 � � 39,531 � 136,787 �RWF4 � � 1,203 � 3,346 �IDR5 � � 15,646,011 53,142,167 14,886,393 710,162MMK6 � � 2,750 � 84 �TZS7 � � 29,987 � 317,348 �BWP8 � � 15 � 42 �HKD 9 � 254 � � �BDT9 6 � 69,473 � 38,074 �PLN10 207,273 � 106,025 � 338 �VND11 270,000 � 515,412 � 311,649 �CHF12 � � � � � 12

1 Special Drawing Rights.2 Algeria Dinar.3 Uzbekistan Sum.4 Rwanda Franc.5 Indonesia Rupiah.6 Myanmar Kyat.7 Tanzanian Shilling.8 Botswana Pula.9 Bangladesh Taka.10 Polish Zloty.11 Vietnam Dong.12 Confoederatio Helvetia Franc.

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(iii) Price risk

As of December 31, 2015, 2016 and 2017, the Group is exposed to equity securities price risk because the securities held by theGroup are traded in active markets. If the market prices had increased/decreased by 10% with all other variables held constant, theeffects on profit before income tax and shareholders� equity would have been as follows:

(In millions of Korean won) Fluctuation of price Income before tax Equity10% ￦ � ￦3,4692015.12.31-10% � (3,469)10% ￦ � ￦5392016.12.31-10% � (539 )10% ￦ � ￦6862017.12.31-10% � (686 )

The above analysis is based on the assumption that the equity index had increased/decreased by 10% with all other variables heldconstant and all the Group�s marketable equity instruments had moved according to the historical correlation with the index.

(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 foreigncurrency 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 andoperates to minimize the uncertainty of the changes in interest rates and financial costs.

As of December 31, 2015, 2016 and 2017, if the market interest rate had increased/decreased by 100bp with other variables heldconstant, the effects on profit before income tax and shareholders� equity would be as follows:


Fluctuationof

interestrate Income before tax

Shareholders��equity

+ 100 bp ￦ (3,601 ) ￦ (245 )2015.12.31- 100 bp 3,615 (5,764 )+ 100 bp ￦ (3,456 ) ￦ (1,673 )2016.12.31- 100 bp 3,445 (5,025 )+ 100 bp ￦ 1,942 ￦ 4,8682017.12.31- 100 bp (1,954 ) (5,198 )

The above analysis is a simple sensitivity analysis which assumes that all the variables other than market interest rates are heldconstant. Therefore, the analysis does not reflect any correlation between market interest rates and other variables, nor themanagement�s decision to decrease the risk.

2) Credit risk

Credit risk is managed on the Group basis with the purpose of minimizing financial loss. Credit risk arises from the normaltransactions and investing activities, where clients or other party fails to discharge an obligation on contract conditions. To managecredit risk, the Group considers the counterparty�s credit based on the counterparty�s financial conditions, default history and otherimportant factors.

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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.

As of December 31, 2016 and 2017, maximum exposure to credit risk is as follows.

(In millions of Korean won) 2016 2017Cash equivalents(except cash on hand) ￦2,875,383 ￦1,926,620Trade and other receivables 6,036,363 6,643,115Other financial assets

Financial assets at fair value through profit or loss 6,277 5,813Derivative used for hedging 227,318 7,389Time deposits and others 716,769 1,333,317Available-for-sale financial assets 26,684 9,899Held-to-maturity financial assets 30,143 151

Financial guarantee contracts 1 56,373 143,969Total ￦9,975,310 ￦10,070,273

1 Total amounts guaranteed by the Group according to the guarantee contracts.

3) Liquidity risk

The Group manages its liquidity risk by liquidity strategy and plans. The Group considers the maturity of financial assets andfinancial liabilities and the estimated cash flows from operations.

The table below analyzes the Group�s liabilities (including interest expenses) into relevant maturity groups based on the remainingperiod at the date of the end of each reporting period to the contractual maturity date. These amounts are contractual undiscountedcash flows.

2016.12.31

(In millions of Korean won) Less than 1 year 1-5 yearsMore than 5

years TotalTrade and other payables ￦7,682,604 ￦1,121,452 ￦217,411 ￦9,021,467Borrowings(including debentures) 2,034,524 4,834,151 2,458,749 9,327,424Other non-derivative financial liabilities 233 3,272 22,917 26,422Financial guarantee contracts1 56,373 � � 56,373

Total ￦9,773,734 ￦5,958,875 ￦2,699,077 ￦18,431,686

2017.12.31


years TotalTrade and other payables ￦7,880,906 ￦1,219,835 ￦161,497 ￦9,262,238Borrowings(including debentures) 1,623,996 3,666,726 2,317,209 7,607,931Other non-derivative financial liabilities 4,117 8,452 � 12,569Financial guarantee contracts1 26,738 � � 26,738

Total ￦9,535,757 ￦4,895,013 ￦2,478,706 ￦16,909,476

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1 Total amount guaranteed by the Group according to guarantee contracts. Cash flow from financial guarantee contracts isclassified as the maturity group in the earliest period when the financial guarantee contracts can be executed.

Cash outflow and inflow of derivatives settled gross or net are undiscounted contractual cash flow and can differ from the amount inthe financial statements.

2015.12.31

(In millions of Korean won) Less than 1 year 1-5 yearsMore than

5 years TotalOutflow ￦ 335,970 ￦2,138,379 ￦38,184 ￦2,512,533Inflow 276,066 2,284,219 46,194 2,606,479

2016.12.31


5 years TotalOutflow ￦1,174,147 ￦1,176,715 ￦536,005 ￦2,886,867Inflow 1,302,112 1,306,199 588,559 3,196,870

2017.12.31


years TotalOutflow ￦ 638,171 ￦546,791 ￦526,633 ￦1,711,595Inflow 608,270 568,976 509,558 1,686,804

(2) Management of Capital Management

The Group�s objectives when managing capital are to safeguard the Group�s ability to continue as a going concern in order toprovide returns for shareholders and benefits for other shareholders and to maintain an optimal capital structure to reduce the cost ofcapital.

The Group�s capital structure consists of liabilities including borrowings, cash and cash equivalents, and shareholders� equity. Thetreasury department monitors the Group�s capital structure and considers cost of capital and risks related each capital component.

The debt-to-equity ratios as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017Total liabilities ￦17,881,580 ￦16,696,309Total equity 12,782,718 13,049,130Debt-to-equity ratio 140 % 128 %

The Group manages capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt iscalculated as total borrowings less cash and cash equivalents. Total capital is calculated as �equity� in the statement of financialposition plus net debt.

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The gearing ratios as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won, %) 2016 2017Total borrowings ￦8,301,505 ￦6,860,539Less: cash and cash equivalents (2,900,311 ) (1,928,182 )Net debt 5,401,194 4,932,357Total equity 12,782,718 13,049,130Total capital 18,183,912 17,981,487Gearing ratio 30 % 27 %

(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 asfollows:

(In millions of Korean won) 2016Amounts not offset

Grossassets

Grossliabilities

offset

Net amountspresented in

the statementof financial

positionFinancial

instrumentsCash

collateralNet

amountDerivative assets for hedging

purpose1 ￦35,334 ￦ � ￦35,334 ￦(5,707 ) ￦ � ￦29,627Trade receivables2 95,865 � 95,865 (91,662 ) � 4,203

￦131,199 ￦ � ￦131,199 ￦(97,369 ) ￦ � ￦33,830


Grossassets

Grossliabilities

offset



positionFinancial

instrumentsCash

collateralNet

amountDerivative assets for hedging

purpose1 ￦3,284 ￦� ￦ 3,284 ￦(3,284 ) ￦ � ￦�Trade receivables2 85,755 (5,010) 80,745 (73,109 ) � 7,636Other financial assets 8,680 (436 ) 8,244 (5,307 ) � 2,937

￦97,719 ￦(5,446) ￦ 92,273 ￦(81,700 ) ￦ � ￦10,573

1 The amount applied with master netting arrangements under the standard contract of International Swap and DerivativesAssociation (ISDA).

2 The amount applied with netting arrangements under the reference offer of the telecommunication facility interconnection andsharing data among telecommunications companies.

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The Group�s recognized financial liabilities subject to enforceable master netting arrangements or similar agreements are as follows:


Grossliabilities

Grossassetsoffset



positionFinancial

instrumentsCash

collateralNet

amountDerivative liabilities for hedging purpose 1 ￦20,627 ￦ � ￦20,627 ￦(20,627 ) ￦ � ￦�Trade payables2 90,435 � 90,435 (86,184 ) � 4,251Other payables2 48 (4 ) 44 � � 44

￦111,110 ￦ (4 ) ￦111,106 ￦(106,811) ￦ � ￦4,295


Grossliabilities

Grossassetsoffset



positionFinancial

instrumentsCash

collateralNet

amountDerivative liabilities for hedging purpose 1 ￦26,135 ￦� ￦26,135 ￦(3,284 ) ￦ � ￦22,851Trade payables2 80,829 (5,217) 75,612 (73,109 ) � 2,503Other financial liabilities 5,549 (229 ) 5,320 (5,307 ) � 13

￦112,513 ￦(5,446) ￦107,067 ￦(81,700 ) ￦ � ￦25,367

1 The amount applied with master netting arrangements under the standard contract of International Swap and DerivativesAssociation (ISDA).

2 The amount applied with netting arrangements under the reference offer of the telecommunication facility interconnection andsharing data among telecommunications companies.

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36. Fair Value

36.1 Fair Value of Financial Instruments by Category

Carrying amount and fair value of financial instruments by category as of December 31, 2016 and 2017, are as follows:

2016 2017

(In millions of Korean won)Carryingamount Fair value

Carryingamount Fair value

Financial assetsCash and cash equivalents1 ￦2,900,311 ￦� ￦1,928,182 ￦�Trade and other receivables1 6,036,363 � 6,643,115 �

Other financial assetsFinancial instruments at fair value through profit or loss 6,277 6,277 5,813 5,813Derivative financial instruments for hedging purpose 227,318 227,318 7,389 7,389Time deposits and others1 716,769 � 1,333,317 �Held-to-maturity 30,143 30,143 151 151Available-for-sale financial assets2 299,001 299,001 319,402 319,402

￦10,216,182 ￦� ￦10,237,369 ￦�Financial liabilities

Trade and other liabilities1 ￦8,328,082 ￦� ￦8,425,503 ￦�Borrowings 8,120,791 8,184,195 6,683,662 6,738,326

Other financial liabilitiesFinancial instruments at fair value through profit or loss 1,973 1,973 5,051 5,051Derivative financial instruments for hedging purpose 14,928 14,928 93,770 93,770Other1 91,763 � 87,670 �

￦16,557,537 ￦� ￦15,295,656 ￦�

1 The Group did not conduct fair value estimation since the book amount is a reasonable approximation of the fair value.2 Equity instruments that do not have a quoted price in an active market are measured at cost because their fair value cannot be

measured reliably and excluded from the fair value disclosures.

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36.2 Financial Instruments Measured at Cost

Available-for-sale financial assets measured at cost as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017K-Bank ￦36,500 ￦�IBK-AUCTUS Green Growth Private Equity Fund 9,506 8,518WALDEN No.6 Fund 4,710 4,670TRANSLINK No.2 Fund 9,395 9,395Storm IV Fund 7,550 8,453CBC II Fund 8,601 7,298Others 29,511 23,217

￦105,773 ￦61,551

The range of cash flow estimates is significant and the probabilities of the various estimates cannot be reasonably assessed andtherefore, these instruments are measured at cost.

The Group does not have any plans to dispose of the above-mentioned equities instruments in the near future. These instrumentswill be measured at fair value when the Group can develop a reliable estimate of the fair value.

36.3 Fair Value Hierarchy

Assets measured at fair value or for which the fair value is disclosed are categorized within the fair value hierarchy, and the definedlevels are as follows:

� Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

� Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is,prices) or indirectly (that is, derived from prices) (Level 2).

� Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

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Fair value hierarchy classifications of the financial assets and financial liabilities that are measured at fair value or its fair value isdisclosed as of December 31, 2016 and 2017, are as follows:

2016(In millions of Korean won) Level 1 Level 2 Level 3 TotalRecurring fair value measurements

Other financial assetsFinancial assets at fair value through profit or loss ￦� ￦� ￦6,277 ￦6,277Derivative financial assets for hedging purpose � 227,318 � 227,318Available-for-sale financial assets 5,387 5,725 287,889 299,001

5,387 233,043 294,166 532,596Disclosed fair value

Associates and joint ventures 3,940 � � 3,940Investment properties1 � � 1,962,779 1,962,779

3,940 � 1,962,779 1,966,719￦9,327 ￦233,043 ￦2,256,945 ￦2,499,315

Recurring fair value measurementsOther financial liabilities

Financial liabilities at fair value through profit or loss ￦� ￦� ￦1,973 ￦1,973Derivative financial liabilities for hedging purpose � 14,928 � 14,928

� 14,928 1,973 16,901Disclosed fair value

Borrowings � � 8,184,195 8,184,195� � 8,184,195 8,184,195

￦� ￦14,928 ￦8,186,168 ￦8,201,096

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Other financial assetsFinancial assets at fair value through profit or loss ￦� ￦� ￦5,813 ￦5,813Derivative financial assets for hedging purpose � 7,389 � 7,389Available-for-sale financial assets 6,859 5,466 307,077 319,402

6,859 12,855 312,890 332,604Disclosed fair value

Investment properties1 � � 1,755,600 1,755,600� � 1,755,600 1,755,600

￦6,859 ￦12,855 ￦2,068,490 ￦2,088,204Recurring fair value measurements

Other financial liabilitiesFinancial liabilities at fair value through profit or loss ￦� ￦� ￦5,051 ￦5,051Derivative financial liabilities for hedging purpose � 76,045 17,725 93,770

� 76,045 22,776 98,821Disclosed fair value

Borrowings � � 6,738,326 6,738,326� � 6,738,326 6,738,326

￦� ￦76,045 ￦6,761,102 ￦6,837,147

1 The highest and best use of a non-financial asset does not differ from its current use.

36.4 Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements

(a) Details of transfers between Level 1 and Level 2 of the fair value hierarchy for the recurring fair value measurements are asfollows:

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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(b) Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements are as follows:

2016


Financial assetsat fair value

throughprofit or loss Available-for-sale

Other derivativefinancialliabilities

Beginning balance ￦ 18 ￦ 267,337 ￦ 2,006Reclassification � 5,723 �Amount recognized in other comprehensive income � 15,099 �Purchases 13,461 1,561 �Amount recognized in profit or loss (7,184 ) (426 ) (33 )Sales (18 ) (1,405 ) �

Ending balance ￦ 6,277 ￦ 287,889 ￦ 1,973

2017


Financial assets atfair value through

profit or loss Available-for-saleOther derivative

financial liabilities

Derivative financialliabilities for

hedging purposeBeginning balance ￦ 6,277 ￦ 287,889 ￦ 1,973 ￦ �Reclassification � (277 ) � �Amount recognized in

other comprehensiveincome � 58,450 � (1,909 )

Purchases � 85,287 � �Amount recognized in

profit or loss (464 ) (113 ) 3,078 19,634Sales � (124,159 ) � �

Ending balance ￦ 5,813 ￦ 307,077 ￦ 5,051 ￦ 17,725

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36.5 Valuation Technique and the Inputs

Valuation techniques and inputs used in the recurring, non-recurring fair value measurements and disclosed fair values categorizedwithin Level 2 and Level 3 of the fair value hierarchy as of December 31, 2016 and 2017, are as follows:

2016(In millions of Korean won) Fair value Level Valuation techniquesAssetsRecurring fair value measurements

Other financial assetsDerivative financial assets for hedging purpose ￦227,318 2 Discounted cash flow modelAvailable-for-sale financial assets 293,614 2,3 Discounted cash flow modelOthers 6,277 3 Discounted cash flow model

Disclosed fair valueInvestment properties 1,962,779 3 Discounted cash flow model

LiabilitiesRecurring fair value measurements

Other financial liabilitiesDerivative financial liabilities for hedging purpose 14,928 2 Discounted cash flow modelOther derivative financial liabilities 1,973 3 Discounted cash flow model

Comparable CompanyAnalysis

Disclosed fair valueBorrowings 8,184,195 3 Discounted cash flow model


Other financial assetsDerivative financial assets for hedging purpose ￦7,389 2 Discounted cash flow modelAvailable-for-sale financial assets 312,543 2,3 Discounted cash flow modelOthers 5,813 3 Discounted cash flow model



Other financial liabilitiesDerivative financial liabilities for hedging

purpose 93,770 2,3 Hull-White Model,Discounted cash flow model

Other derivative financial liabilities 5,051 3 Discounted cash flow modelComparable Company Analysis


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36.6 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. Externalexperts report directly to the chief financial officer (CFO), and discusses valuation processes and results with the CFO in line with theGroup�s reporting dates.

36.7 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 fairvalue calculated by the said valuation technique differs from the transaction price, then the fair value of the financial instruments isrecognized as the transaction price. The difference between the fair value at initial recognition and the transaction price is deferredand amortized using a straight-line method by maturity of the financial instruments. However, in the case that inputs of the valuationtechniques become observable in markets, the remaining deferred difference is immediately recognized in full in profit for the year.

In relation to this, details and changes of the total deferred difference for the years ended December 31, 2016 and 2017, are asfollows:

(In millions of Korean won) 2016 2017Other derivativefinancial assets

Other derivativefinancial liabilities

Other derivativefinancial assets


Beginning balance ￦ 11,293 ￦ � ￦ 8,470 ￦ �

New transactions � � � 7,126Disposal (2,823 ) � (2,823 ) (594 )Ending balance ￦ 8,470 ￦ � ￦ 5,647 ￦ 6,532

37. Interests in Unconsolidated Structured Entities

Details of information about its interests in unconsolidated structured entities, which the Group does not have control over, includingthe nature, purpose and activities of the structured entity and how the structured entity is financed, are as follows:

Classesofentities Nature, purpose, activities and othersReal 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 ABCP due in three months), and based on these, the structured entityimplements activities such as real estate acquisition, development and mortgage loans. The structured entityrepays loan principals with funds incurred from instalment house sales after the completion of real estatedevelopment or with collection of the principal of mortgage loan. The remaining shares are distributed toinvestors. As of December 31, 2017, this entity is engaged in real estate finance structured entity, andgenerates revenues by receiving dividends from direct investments in or receiving interests on loans to thestructured entity. Financial institutions, including the Entity, are provided with guarantees including jointguarantees or real estate collateral from investors and others.

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Remarks Nature, purpose, activities and othersConsequently, the entity is a priority over other parties in the preservation of claim. However, when the creditrating of investors and others decreases or when the value of real estate decreases, the entity may beobliged to cover losses.

PEF and investmentfunds

Minority investors including managing members contribute to PEF and investment funds incorporated for thepurpose of providing funds to the small, medium, or venture entities, and the managing member implementsactivities such as investments in equity or loans based on the contributions. As of December 31, 2017, theentity is engaged in PEF and investment funds structured entity, and after contributing to PEF andinvestment funds, the entity receives dividends for operating revenues from these contributions. The entity isprovided with underlying assets of PEF and investment funds as collateral. However, when the value of theunderlying assets decreases, the entity may be obliged to cover losses.

M&A finance A structured entity incorporated for the purpose of supporting a certain group�s financial structureimprovement or acquiring equity or convertible bonds is provided with funds by investors� investments inequity and long-term or short-term borrowings from financial institutions, and based on these, the structuredentity acquires shares held by the entity, which has plans to improve its financial structure, or to disposeconvertible bonds and others. The structured entity repays loan principals with funds incurred from disposalsof holding shares after a certain period. The remaining shares are distributed to investors. As ofDecember 31, 2017, the entity is engaged in M&A finance structured entity, and receives interests. Financialinstitutions are provided with guarantees including joint guarantees or shares subject to M&A from investorsand 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 shares provided as collateraldecreases, the Group may be obliged to cover losses.

Asset securitization The Group transfers accounts receivable for handset sales to its Special Purpose Company (�SPC�) forasset securitization. SPC issues the asset-backed securities with accounts receivable for handset sales asan underlying asset, and makes payment for the underlying asset acquired.

Other There are other structured entity types, which the entity is engaged in, such as shipping finance, SPAC andothers. Interest income is realized from the entity�s loans to the relevant structured entity. When the creditrating of the shipping group decreases, or the value of vessels decreases, the entity may be obliged to coverlosses. When SPAC is listed or merged after the entity invests in shares or convertible bonds issued by therelevant structured entity, revenues are realized from disposal of the shares of the convertible bonds.However, the entity may be obliged to cover losses when SPAC is liquidated if the SPAC is not listed ormerged.

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Details of scale of unconsolidated structured entities and nature of the risks associated with an entity�s interests in unconsolidatedstructured entities as of December 31, 2016 and 2017, are as follows:

2016

(In millions of Korean won) Real Estate FinancePEF &Investment

FundAsset-backedSecuritization Total

Total assets of Unconsolidated StructuredEntities ￦ 1,075,471 ￦ 3,759,246 ￦2,841,886 ￦7,676,603

Assets recognized in statement of financialposition

Other financial assets ￦ 21,932 ￦ 60,782 ￦� ￦82,714Joint ventures and Associates 10,086 165,638 � 175,724Total ￦ 32,018 ￦ 226,420 ￦� ￦258,438

Maximum loss exposure1Investment Assets ￦ 32,018 ￦ 226,420 ￦� ￦258,438

Total ￦ 32,018 ￦ 226,420 ￦� ￦258,438

1 Maximum exposure to loss includes the investments recognized in the Group�s financial statements and the amounts whichare probable to be determined when certain conditions are met by agreements including purchase agreements, credit grantingand others.

2017

(In millions of Korean won) Real Estate FinancePEF &Investment

FundAsset-backedSecuritization Total

Total assets of UnconsolidatedStructured Entities ￦ 1,426,620 ￦ 3,779,377 ￦2,619,445 ￦7,825,442

Assets recognized in statementof financial position

Other financial assets ￦ 21,800 ￦ 52,666 � ￦74,466Joint ventures and Associates 10,168 164,030 � 174,198

Total ￦ 31,968 ￦ 216,696 ￦� ￦248,664Maximum loss exposure1Investment Assets ￦ 31,968 ￦ 216,696 � ￦248,664

Total ￦ 31,968 ￦ 216,696 ￦� ￦248,664

1 Maximum exposure to loss includes the investments recognized in the Group�s financial statements and the amounts whichare probable to be determined when certain conditions are met by agreements including purchase agreements, credit grantingand others.

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38. Information About Non-controlling Interests

38.1 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 theGroup for the years ended December 31, 2015, 2016 and 2017 are as follows:

2015


Non-controllingInterestsrate(%)

Accumulatednon-controllinginterests at the

beginning ofthe year

Profit or lossallocated to

non-controllinginterests

Dividend paidto non-

controllinginterests

Others Accumulatednon-controllinginterests at theend of the year

KT Skylife Co., Ltd. 49.73 % ￦ 297,300 ￦ 27,032 ￦ (8,325 ) ￦873 ￦ 316,880BC Card Co., Ltd. 30.46 % 292,931 62,943 (22,650 ) (10,303) 322,921KT Powertel Co., Ltd. 55.15 % 70,231 (17,880 ) (1,118 ) (307 ) 50,926KT Hitel Co.,Ltd. 36.30 % 51,136 (608 ) � 161 50,689KT Telecop Co., Ltd. 13.18 % 104,821 (1,000 ) � (393 ) 103,428

2016










KT Skylife Co., Ltd. 49.73 % ￦ 316,880 ￦ 22,445 ￦ (8,279 ) ￦(1,370) ￦ 329,676BC Card Co., Ltd. 30.46 % 322,921 47,068 (44,637 ) 3,986 329,338KT Powertel Co., Ltd. 55.15 % 50,926 112 � 713 51,751KT Hitel Co.,Ltd. 35.27 % 50,689 1,274 � (165 ) 51,798KT Telecop Co., Ltd. 13.18 % 103,428 19 � 85 103,532

2017










KT Skylife Co., Ltd. 49.73 % ￦ 329,676 ￦ 9,395 ￦ (9,817 ) ￦(952 ) ￦ 328,302BC Card Co., Ltd. 30.46 % 329,338 43,961 (29,490 ) (4,742) 339,067KT Powertel Co., Ltd. 55.15 % 51,751 1,165 � 137 53,053KT Hitel Co.,Ltd. 32.87 % 51,798 870 � 478 53,146KT Telecop Co., Ltd. 13.18 % 103,532 381 � (445 ) 103,468

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38.2 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 of December 31, 2015, 2016 and 2017, are as follows:

2015

(In millions of Korean won)KT SkylifeCo., Ltd.

BC CardCo., Ltd.

KT PowertelCo., Ltd.

KT HitelCo., Ltd.

KT TelecopCo., Ltd.

Non-controlling Interests rate(%) 49.73 % 30.46 % 55.15 % 36.30 % 13.18 %Current assets ￦279,480 ￦2,291,047 ￦65,739 ￦157,355 ￦58,457Non-current assets 431,814 672,905 47,776 78,402 210,734Current liabilities 143,511 1,882,363 16,016 33,656 82,353Non-current liabilities 74,339 63,271 5,166 282 52,613

Equity 493,444 1,018,318 92,333 201,819 134,225Accumulated non-controlling interests 316,880 322,921 50,926 50,689 103,428Operating revenue 668,521 3,504,946 104,527 162,155 302,844Profit or loss for the year 72,987 218,969 (32,417 ) 7,258 (7,593 )Total comprehensive income 73,147 188,360 (32,417 ) 6,769 (7,593 )The profit or loss allocated to

non-controlling interests 27,032 62,943 (17,880 ) (608 ) (1,000 )Cash flows from operating activities 157,762 128,927 (12,016 ) 22,556 36,216Cash flows from investing activities (92,350 ) 73,118 10,691 (19,949 ) (91,846 )Cash flows from financing activities

before dividend paid tonon-controlling interests (35,984 ) (75,121 ) (2,015 ) � (32,491 )

Dividend paid to non-controllinginterests (8,325 ) (22,650 ) (1,118 ) � �

Net (decrease)/increase in cash andcash equivalents 29,428 126,924 (3,340 ) 2,607 (88,121 )

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2016


BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.

Non-controlling Interests rate(%) 49.73 % 30.46 % 55.15 % 35.27 % 13.18 %Current assets ￦352,980 ￦2,945,584 ￦69,046 ￦158,210 ￦63,802Non-current assets 424,968 705,480 44,679 90,992 201,751Current liabilities 151,329 2,530,832 17,910 45,277 53,903Non-current liabilities 80,123 71,571 1,989 1,664 78,441Equity 546,496 1,048,661 93,826 202,261 133,209Accumulated non-controlling interests 329,676 329,338 51,751 51,798 103,532Operating revenue 668,945 3,567,512 81,390 198,994 315,948Profit or loss for the year 68,863 163,131 202 4,298 143Total comprehensive income 68,785 178,744 202 1,399 143The profit or loss allocated to

non-controlling interests 22,445 47,068 112 1,274 19Cash flows from operating activities 155,399 92,818 7,271 28,987 60,461Cash flows from investing activities (210,480) (37,313 ) (8,191 ) (33,238 ) (45,243 )Cash flows from financing activities

before dividend paid tonon-controlling interests (16,647 ) (147,306 ) � � �

Dividend paid to non-controllinginterests (8,279 ) (44,637 ) � � �

Gain or loss foreign currencytranslation � (178 ) � 3 �

Net (decrease)/increase in cash andcash equivalents (71,728 ) (91,801 ) (920 ) (4,251 ) 15,218

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2017


BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.

Non-controlling Interests rate(%) 49.73 % 30.46 % 55.15 % 32.87 % 13.18 %Current assets ￦324,632 ￦3,225,262 ￦73,527 ￦150,368 ￦73,023Non-current assets 468,261 823,001 41,598 107,872 191,330Current liabilities 185,995 2,868,669 18,450 49,922 90,569Non-current liabilities 24,555 86,369 487 3,021 41,064Equity 582,343 1,093,225 96,188 205,297 132,720Accumulated non-controlling interests 328,302 339,067 53,053 53,146 103,468Operating revenue 687,752 3,628,995 69,234 227,884 317,591Profit or loss for the year 57,314 156,109 2,112 3,225 2,885Total comprehensive income 55,586 141,719 2,362 3,036 (490 )The profit or loss allocated to

non-controlling interests 9,395 43,961 1,165 870 381Cash flows from operating activities 99,269 108,203 13,895 28,320 57,262Cash flows from investing activities (81,758 ) (568,518 ) (17,354 ) (36,086 ) (43,483 )Cash flows from financing activities

before dividend paid tonon-controlling interests (19,739 ) (97,221 ) � � �

Dividend paid to non-controllinginterests (9,817 ) (29,490 ) � � �

Gain or loss foreign currencytranslation � (184 ) � (47 ) �

Net (decrease)/increase in cash andcash equivalents (2,228 ) (557,536 ) (3,459 ) (7,766 ) 13,779

38.3 Transactions with Non-controlling Interests

The effect of changes in the ownership interest on the equity attributable to owners of the Group during 2015, 2016 and 2017 issummarized as follows:

(in millions of Korean won) 2015 2016 2017Carrying amount of non-controlling interests acquired ￦� ￦4,022 ￦(732 )Consideration paid to non-controlling interests 2,699 7,347 6,173Excess of consideration paid recognized in parent�s equity ￦2,699 ￦11,369 ￦5,441

39. Events after Reporting Period

Subsequent to the reporting period, public bonds issued are as follow:

December 31, 2017(in millions of Korean won) Issue date Carrying amount Interest rate Redemption dateThe 190-1st Public bond 2018.01.30 110,000 2.55 % 2021.01.29The 190-2nd Public bond 2018.01.30 150,000 2.75 % 2023.01.30The 190-3rd Public bond 2018.01.30 170,000 2.95 % 2028.01.30The 190-4th Public bond 2018.01.30 70,000 2.93 % 2038.01.30

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In accordance with a resolution of the board of directors on April 9, 2018, the Group decided to take over unmanned securitybusiness of SG Safety Corporation for the consideration of￦28,000 million, with May 31, 2018 as the acquisition date. The Grouphas signed the acquisition contract on April 10, 2018.

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Exhibit 1

THE ARTICLES OF INCORPORATION

OF

KT Corporation

Adopted on October 1, 1997

Amended on December 8, 1997

September 18, 1998

March 19, 1999

March 24, 2000

March 21, 2001

March 22, 2002

August 20, 2002

March 14, 2003

March 12, 2004

March 11, 2005

August 19, 2005

March 10, 2006

March 16, 2007

January 14, 2009

March 27, 2009

March 12, 2010

March 11, 2011

March 16, 2012

March 15, 2013

March 27, 2015

March 25, 2016

March 24, 2017

March 23 , 2018



CHAPTER I. GENERAL PROVISIONS

Article 1. (Name) The name of the Corporation shall be �Chusik Hoesa KT�, which shall be written in English as �KT Corporation�(hereafter �KT�).

Article 2. (Purpose) The objective of KT is to engage in the following business activities:

1. Information and communications business

2. New media business and Internet Multimedia Broadcasting Business

3. Development and sale of software and contents

4. Sale and distribution of information communication equipment

5. Testing and inspection of information communication equipment, device or facilities

6. Advertisement business

7. Retail business via telephone, mail order or online

8. IT facility construction business, electrical construction business and fire protection facility business

9. Real estate and housing business

9-1. Business facilities management and Business support services

10. Electronic banking and finance business

11. Education and learning service business

12. Security service business (Machinery system surveillance service, Facilities security service, etc)

13. Research and technical development, education, training and promotion, overseas businesses, and export and import,manufacture and distribution related to activities mentioned in Subparagraphs 1 through 12

14. Frequency-based telecommunications services and other telecommunications services

15. Value-added telecommunications business

16. Manufacture, provision (screening) and distribution of contents such as musical records, music videos, movies, videos andgames

17. Issuance and management of pre-paid electronic payment instruments, and businesses related to electronic finance such aspayment gateway services

18. Sales and leasing of equipment and facilities related to the activities mentioned in Subparagraphs 14 through 17

19. Any overseas business or export and import business related to activities mentioned in Subparagraphs 14 through 18

20. Tourism

21. (Deleted)

22. New and renewable energy, energy generation business, electrical system design business and agency business for electricalsafety management



23. Health Informatics business

24. Manufacture of communication equipment, device or facilities for military purpose

25. Energy examination business, Energy service company(ESCO) business, and other R of energy use related businesses

26. Business related to Information Security & Certification Service

27. Activities of management consultancy

28. Warehousing and storage

29. General construction business

30. Specialized design business

31. Any and all other activities or businesses incidental to or necessary for attainment of the foregoing.

Article 3. (Location of Offices) The head office of KT (the �head office�) shall be located in Seoul or Kyunggi Province. KT mayestablish requisite sub-offices at site(s) pursuant to resolution of the Board of Directors.

Article 4. (Method of Public Notice) Public notices by KT shall be given in The Seoul Shinmun circulated in Seoul, Republic ofKorea. Provided, however, that if the public notices cannot be published in The Seoul Shinmun due to unavoidable circumstances, suchpublic notices may be given in any daily newspaper published in Seoul, Republic of Korea.

CHAPTER II. SHARES OF STOCK

Article 5. (Amount of Authorized Capital)

The total number of shares authorized to be issued by KT shall be one billion shares.

Article 6. (Par Value and Types of Shares and Share Certificates)

(1) Par value per share issued by KT shall be 5,000 Korean Won. The type of shares shall be common shares and preferred shares, bothof which shall be in registered form.

(2) Share certificates shall be in eight (8) denominations of one (1), five (5), ten (10), fifty (50), one hundred (100), five hundred (500),one thousand (1000) and ten thousand (10,000) shares.

Article 7. (Shares to be Issued at the Time of Incorporation)

The total number of shares to be issued by KT at the time of incorporation shall be 395,675,369 shares.



Article 8. (Number and Description of Preferred Shares)

(1) The total number of Preferred Shares to be issued by KT shall be up to one-fourth (1/4) of the total number of shares issued andoutstanding, which shall be without voting rights.

(2) Dividends on Preferred Shares shall be an amount not less than nine (9) percent p.a. of the par value as determined by the Board ofDirectors at the time of issuance.

(3) If the dividends on the Common Shares exceed those on Preferred Shares, the excess dividend amount shall also be paid to theholders of Preferred Shares commensurate to the rate applicable to Common Shares.

(4) If dividends on Preferred Shares are not paid for any fiscal year, the holders of such Preferred Shares shall be entitled to receive suchaccumulated unpaid dividend in priority to the holders of Common Shares from the dividends payable in the next fiscal year.

Article 9. (Preemptive Rights)

(1) When KT issues new shares, the shareholders of KT shall be entitled to subscribe for such new shares in proportion to their existingshareholdings.

(2) Notwithstanding Paragraph (1) above, new shares may be issued to persons other than the shareholders of KT, in the followingcases:

1. When the new shares are issued by public offering or subscribed by underwriters pursuant to Article 4 and Article 119 of theFinancial Investment Services and Capital Markets Act (�FSCMA�);

2. When the members of the Employee Stock Ownership Association of KT have preemptive rights to subscribe for such newshares pursuant to Article 165-7 of the FSCMA;

3. When the new shares are represented by depositary receipt pursuant to Article 165-16 of the FSCMA

4. When the new shares are issued by the exercise of stock options set forth in Article 10 of these Articles of Incorporation;

5. When the new shares are issued in order to accomplish specific business purposes such as strategic alliance, inducement offoreign funds, other capital raising requirements, introduction of new technology, and improvement of financial structure.

6. When the new shares are issued by a resolution of the Board of Directors through a general public offering pursuant toArticle 165-6 of the FSCMA. However, in such case, the total number of the shares to be issued shall not exceed ten percent(10%) of the total number of KT issued and outstanding; or



7. When there exists an immediate need for the company to raise funds, new shares can be issued to domestic and foreignfinancial institutions (enacted on March 21, 2001).

(3) The method of disposition of shares in respect of which preemptive rights have not been exercised or where fractions of shares occurshall be determined by a resolution of the Board of Directors.

(4) Notwithstanding Paragraph (1) above, shareholders who acquire shares in violation of any laws and regulations or these Articles ofIncorporation shall not be entitled to subscribe for new shares in respect of such shares.

Article 10. (Stock Options)

(1) KT may grant stock options to its officers and employees who have contributed, or are capable of contributing, to the establishment,management or technical innovation of KT, except for officers or employees in any of the following cases, by a Special Resolution ofthe General Meeting of Shareholders pursuant to Article 340-2 and Article 542-3 of the Commercial Code of Korea, to the extent notexceeding fifteen percent (15%) of the total number of issued shares, provided that KT may grant stock options by a resolution of theBoard of Directors adopted by affirmative votes of two-thirds (2/3) of the directors in offices, to the extent not exceeding one percent(1%) of the total number of issued shares. In such case, the provision of the latter part of the Proviso of Paragraph 1 of Article 38 shallapply mutatis mutandis:

1. The largest shareholder of KT and the Related Person thereto (refers to the Related Person as prescribed in Paragraph 2-5,Article 542-8 of the Commercial Code of Korea. The same shall apply in this Article);

2. Major Shareholders (refers to the Major Shareholders as prescribed in Paragraph (2-6) of Article 542-8 of the CommercialCode of Korea. The same shall apply hereinafter) and the Related Person thereto; or

3. Any person who shall become a Major Shareholder of KT by exercising his/her stock options.

(2) The proviso of Paragraph (1) shall not apply to the directors of KT, and the grant of stock options pursuant to the proviso ofParagraph (1) shall be approved by the General Meeting of Shareholders which is held after such grant of stock options.



(3) The shares to be issued to the officers or employees by the exercise of their stock options (in case where KT pays in cash or sharesthe difference between the exercise price of stock options and the market price, refers to the shares which are the basis for suchcalculation) shall be Common Shares in registered form.

(4) The number of officers and employees of KT who are granted with stock options shall not exceed ninety nine percent (99%) of thetotal number of officers and employees in office. Stock options granted to one single officer or employee shall not exceed ten percent(10%) of total number of shares issued and outstanding.

(5) The exercise price per share of the stock options shall not be less than the price as set forth in the Commercial Code of Korea.

(6) Unless otherwise provided for by the relevant laws, the exercise period of stock options shall be determined by separate agreements,to the extent that such exercise periods shall not exceed seven (7) years from the date two (2) years have elapsed after the date of theGeneral Meeting of Shareholders or the Meeting of the Board of Directors at which a resolution to grant such stock option rights isadopted.

(7) KT may cancel the grant of stock options by a resolution of the Board of Directors in any of the following cases:

1. When the relevant officer or employee of KT voluntarily retires from his/her office within two (2) years after the date of theGeneral Meeting of Shareholders or the Meeting of the Board of Directors at which a resolution to grant such stock optionrights is adopted;

2. When the relevant officer or employee of KT is dismissed for substantial damages incurred to KT due to his/her willfulmisconduct or gross negligence; or

3. When any event for the cancellation set forth in the agreement for granting such stock options occurs.

Article 11. (Base Date Regarding Dividends of the New Shares) In case KT issues new shares through right issues, bonus issues andstock dividends, with respect to the distribution of dividends on the new shares, the new shares shall be deemed to have been issued atthe end of the fiscal year immediately prior to the fiscal year during which the new shares are issued.

Article 12. (Transfer Agent)

(1) KT may appoint a transfer agent to make entries in the register of shareholders.

(2) The transfer agent, and the place and scope of business of the transfer agent shall be determined by a resolution of the Board ofDirectors, and a public notice shall be given thereof.



Article 13. (Report of Names, Addresses and Seals of Shareholders)

(1) Shareholders and registered pledgees shall report their names, addresses, and seals to the transfer agent referred to in Article 12. Anychanges thereto shall also be reported.

(2) Shareholders and registered pledgees who reside in foreign countries shall appoint and report the place where, and an agent towhom, notices will be given in Korea. Any changes there to shall also be reported.

Article 14. (Closing of the Register of Shareholders and the Record Date)

(1) KT shall suspend the entries of any changes into the register of shareholders regarding any rights on Shares from January 1 toJanuary 31 of each year.

(2) KT shall let the shareholders who are entered into the register of shareholders on December 31 of each year exercise their rightsthereof at the Ordinary General Meeting of Shareholders.

(3) KT may, for convening an Extraordinary General Meeting of Shareholders or when necessary, by a resolution of the Board ofDirectors, set the record date or close the register of shareholders for a certain period not exceeding three (3) months by giving at leasttwo (2) weeks� prior public notice.

CHAPTER III. DEBENTURES

Article 15. (Issuance of Convertible Bonds)

(1) KT may issue convertible bonds to persons other than shareholders to the extent that the aggregate face value of the convertiblebonds so issued shall not exceed 2 trillion (2,000,000,000,000) Korean Won. Provided that, the issuance of convertible bonds to personsother than shareholders may be made in cases provided for by any of the Subparagraphs of Paragraph (2) of Article 9.

(2) The Board of Directors may determine that the convertible bonds referred to in Paragraph (1) may be issued on the condition thatconversion rights will be attached to only a portion of the convertible bonds.

(3) The type of shares to be issued upon conversion of convertible bonds shall be common shares. The conversion price, which shall beequivalent to or more than the par value of the shares, shall be determined by the Board of Directors at the time of issuance.



(4) The period during which conversion rights may be exercised shall commence on the date set forth in the FSCMA after the date ofissuance of the relevant convertible bonds and end on the date immediately preceding the redemption date thereof. However, the Boardof Directors may adjust the conversion period in accordance with relevant laws within the above period by its resolution.

(5) For the purposes of any distribution of dividends on the shares issued upon conversion or any payment of interest on the convertiblebonds, the convertible bonds shall be deemed to have been converted into shares at the end of the fiscal year immediately preceding thefiscal year in which the relevant conversion rights are exercised.

Article 16. (Issuance of Bonds with Warrants)

(1)KT may issue bonds with warrants to persons other than shareholders to the extent that the aggregate face value of the bonds withwarrants so issued shall not exceed 2 trillion (2,000,000,000,000) Korean Won. Provided that, the issuance of bonds with warrants topersons other than shareholders may be made in only in cases provided for by Subparagraphs of Paragraph (2) of Article 9.

(2) The amount of new shares which can be subscribed by the holders of the bonds with warrants shall be determined by the Board ofDirectors, provided that the maximum amount of such new shares shall not exceed the aggregate face value of the bonds with warrants.

(3) The type of shares to be issued upon exercise of warrants shall be common shares. The issue price, which shall be equivalent to ormore than the par value of the shares, shall be determined by the Board of Directors at the time of issuance.

(4) The period during which warrants may be exercised shall commence on the date set forth in the FSCMA after the date of issuance ofthe relevant bonds with warrants and end on the date immediately preceding the redemption date thereof. Provided that, the Board ofDirectors may adjust the conversion period in accordance with the relevant laws within the above period by its resolution.

(5) For the purposes of any distribution of dividends on the shares issued upon exercise of warrants, shares shall be deemed to havebeen issued at the end of the fiscal year immediately preceding the fiscal year in which the subscription monies therefor are fully paid.



Article 17. (Applicable Provisions regarding Issuance of Bonds) The provisions of Articles 12 and 13 shall apply mutatis mutandis tothe issuance of bonds.

CHAPTER IV. GENERAL MEETING OF SHAREHOLDERS

Article 18. (Convening of General Meeting)

(1) Ordinary General Meeting of Shareholders shall be convened within three (3) months after the end of each fiscal year, andExtraordinary General Meeting of Shareholders may be convened at any time, by the Representative Director President (hereafter�hwejang�) pursuant to a resolution of the Board of Directors except as otherwise provided by the relevant laws and regulations.Provided, however, that Article (29), Paragraph (2) shall apply mutatis mutandis in the event the President (hwejang) fails to perform hisduties.

(2) Notice of the General Meeting of Shareholders specifying the time, place and purpose thereof shall be sent to each shareholder two(2) weeks prior to the date set for the General Meeting of Shareholders. However, such notice to the shareholders who hold less thanone-hundredth (1/100) of the total number of shares with voting rights may be given in the form of a public notice of the meetingappearing twice or more in The Seoul Shinmun, The Maeil Business Newspaper and The Korean Economic Daily instead.

(3) General Meeting of Shareholders shall be held at the location of the head office, Seoul or its neighboring place.

Article 19. (Chairman) The President (hwejang) shall preside at the General Meeting of Shareholders; provided, however, thatParagraph (2) of Article 29 shall apply mutatis mutandis in the event that the President (hwejang) fails to perform his duties.

Article 20. (Chairman��s Right to Maintain Order)

(1) The Chairman shall suspend or cancel the proposal of any person who intentionally disrupts, by speech or behavior, the proceedingsof the General Meeting of Shareholders or shall order such person to leave the General Meeting of Shareholders.

(2) If the Chairman deems it necessary for the smooth proceeding of the General Meeting of Shareholders, the Chairman may restrictthe time and frequency of a shareholder�s proposal.



Article 21. (Voting by Proxy)

(1) A shareholder may exercise its voting rights by proxy.

(2) The proxy described in Paragraph (1) must file with KT a power of attorney before the opening of the General Meeting.

Article 22. (Method of Adoption of Resolutions) Resolutions of the General Meetings of Shareholders, except as otherwise providedby the relevant laws and regulations, shall be adopted if the approval of a majority vote of the shareholders present at such meeting isobtained and such majority also represents at least one-fourth (1/4) of the total number of shares issued and outstanding.

Article 22-2 (Exercise of Voting Rights by Writing)

(1) The Shareholders may exercise their voting rights by writing without attending the General Meetings of Shareholders in person.

(2) In case of Paragraph (1) above, KT shall send the notice of convening the General Meeting of Shareholders, together with writtendocuments and reference materials necessary for the Shareholders to exercise their voting rights.

(3) The Shareholders desiring to exercise their voting rights by writing shall enter necessary matters in the written documents underparagraph (2) and submit them to KT by the date immediately preceding the date set for the Meeting.

Article 23. (Minutes of the General Meeting)

With respect to the proceedings of the General Meeting of Shareholders, the details of the proceedings and its resolutions shall berecorded in the minutes which shall bear the names and seals or signatures of the Chairman and the Directors present, and shall bepreserved at the head office and branches.

CHAPTER V. DIRECTORS

Article 24. (Number of Directors) KT shall have not more than eleven (11) directors. The number of inside directors, including thehwejang, shall not exceed three (3), and the number of outside directors shall not exceed eight (8).

Article 25. (Election of President (hwejang), Representative Director and Directors)

(1) The President (hwejang) shall be elected by a resolution of the General Meeting of Shareholders among those who are recommendedby the Board of Directors. However, if deemed necessary, one (1) inside director recommended by the President (hwejang) may beadditionally elected as a representative director by a resolution of the Board of Directors.



(2) The dismissal of the President (hwejang) requires a resolution by the General Meeting of Shareholders adopted by the affirmativevote of two-thirds (2/3) of the voting rights of the shareholders in attendance at the Meeting; provided, however, that such votes shallrepresent at least one-third (1/3) of the total number of issued shares of KT. Dismissal of the Representative Director other than thePresident (hwejang) shall be in accordance with the resolution under Article 38 of these Articles of Incorporation.

(3) Inside directors other than the President (hwejang) shall be elected at the General Meeting of Shareholders among the managingofficers under the provision of Article 35 of these Articles of Incorporation who are recommended by the President (hwejang) with theconsent of the Board of Directors. The President (hwejang) may propose to the General Meeting of Shareholders with the consent of theBoard of Directors the dismissal of any inside director even during his/her term of office, when any of the following event occurs. Inthis case, the inside directors other than the President (hwejang) shall not participate in the resolution of the Board of Directors:

1. Inability to perform his/her duties for a period not less than one (1) year due to his/her physical and/or mental disorders; or

2. Remarkably poor results of his/her business management due to deficient management abilities.

(4) Notwithstanding Paragraph 3 above, if the Board of Directors has recommended a candidate for the President (hwejang), thecandidate for the President (hwejang) shall recommend candidates for the inside directors with the consent of the Board of Directors.Provided, however, that the candidate for the President (hwejang) is not elected as the President (hwejang) at the General Meeting ofShareholders, his recommendation of the candidacy for the inside directorship shall become null and void.

(5) Outside directors shall be elected by the General Meeting of Shareholders from among those who have professionalism andknowledge and are recommended by the Outside Director Recommendation Committee pursuant to Article 42 after considering any ofthe following criteria:

1. He/she has sufficient hands-on-background or professional knowledge in his/her relevant field such as informationcommunications, finance, economy, management, accounting, or law that are necessary to perform his/her duties as anoutside director;

2. He/she is not bound by special interest as an outside director and is able to fairly perform his/her duties for the benefitof KT and its shareholders;



3. He/she has a sense of ethics and responsibility that is fit to perform his/her duties as an outside director;

4. He/she is able to spare his/her time and efforts necessary to faithfully perform his/her duties as an outside director.

(6) Any person who falls under any of the following categories shall not become a director of KT, and upon any elected director of KTfalling under any of the following categories, such director shall be dismissed:

1. Person who retired from his/her office within the last three (3) years due to his/her own faults or business responsibilities;

2. Person who is sentenced to imprisonment or more severe punishment, and three (3) years have not elapsed after theexpiration of the execution of such imprisonment or determination not to execute such imprisonment;

3. Person who is currently under the suspension of pronouncement or suspension of execution, or who is sentenced toprobation, and two (2) years have not elapsed after the expiration of the probation period;

(7) Any person who falls under any of the following disqualification criteria shall not become an outside director of KT, and any electedoutside director shall be dismissed if he or she falls under any of the following disqualification criteria:

1. The same person and his or her related party as defined in the Monopoly Regulation and Fair Trade Act (�MRFTA�) whocontrols a company in competition with KT�s major business areas (however, with respect to the definition of competitor ofKT used herein, if the company engages in the same business as KT and belongs to the same enterprise group of KT, suchcompany is not deemed to be in competition with KT. This shall have the same meaning hereafter);

2. (Deleted)

3. (Deleted)

4. Any person who falls under the disqualification criteria under the Commercial Code of Korea and other relevant laws andregulations

Article 26. (Staggered Term of Office of Outside Director) One-third of the total number of the outside directors shall be electedevery year.

Article 27. (Term of Office of Directors)

(1) The term of office of directors shall be not more than three (3) years; where the term of office expires before the closing date of theOrdinary General Meeting of Shareholders in the last fiscal year of such term, the term of office shall be extended to the closing date ofsuch General Meeting.



(2) The aggregated term of office of an outside director shall be not more than ten (10) years. However, this shall not apply in the eventthat the extension of the term of office is determined by the proviso of paragraph 1.

Article 28. (By-election of Directors)

(1) In case of any vacancy in the office of a director, a director shall be elected to fill such vacancy at the General Meeting ofShareholders, provided that election thereof may not be made unless such vacancy results in lack of the requisite number of the directorsor a difficulty in the administration of business.

(2) The term of office of an outside director elected to fill a vacancy shall be the remainder of the term of office of his/her predecessor.

Article 29. (Duties of the President (hwejang) and Directors)

(1) The President (hwejang) shall represent KT, execute businesses resolved by the Board of Directors and manage all businesses of KT.The Board of Directors shall determine the scope of duties and authorities of the Representative Director additionally elected throughrecommendation of the President (hwejang) in consideration of his/her necessity.

(2) Inside directors shall assist the President (hwejang) and shall perform their duties. In the event the President (hwejang) fails toperform his duties, an inside director shall perform his/her duties in accordance with the order as provided in the Office Regulation.However, in the event both the President (hwejang) and inside directors fail to perform their duties, a director shall perform his/herduties in accordance with the order as provided in the Office Regulation.

(3) If a director becomes aware of any event which may cause a material damage to KT, such director should immediately report to theAuditors� Committee thereof.

Article 30. (Duties of Directors)

(1) Directors shall perform their duties faithfully for the good of KT in accordance with the applicable laws and regulations and theprovisions of these Articles of Incorporation.

(2) The directors shall not disclose any business secret of KT that they obtained in the course of performance of their duties, during andafter their terms of offices.

Article 31. (Remuneration and Severance Allowance for Directors)

(1) The Remuneration for the directors shall be determined by a resolution of the General Meeting of Shareholders, and suchremuneration may be paid either in cash or in combination of cash and stock.



(2) The criteria for remuneration for the President (hwejang) and the inside directors, and the method of payment thereof shall bedetermined by a resolution of the Board of Directors, which shall be reported to the General Meeting of Shareholders.

(3) The President (hwejang) and the inside directors shall not participate in the resolution of the Board of Directors as set forth inParagraph (2) above.

(4) Severance allowances for directors shall be paid in accordance with KT�s regulations for payment of officers� severance allowanceadopted at the General Meeting of Shareholders.

(5) The Outside directors may be reimbursed for expenses necessary for the performance of their duties.

Article 32. (President (hwejang) Candidate Examination Committee)

(1) KT shall organize the President (hwejang) Candidate Examination Committee in order to examine the President (hwejang)candidates subject to examination, which shall consist of all of the outside directors and one (1) inside director. However, any personwho is elected as a member of the President (hwejang) Candidate Examination Committee shall not be a candidate for the President(hwejang), and the same shall apply in the event of serving a consecutive term.

(2) The President (hwejang) Candidate Examination Committee shall be organized by not later than three (3) months prior to the date ofexpiration of the term of office of the President (hwejang) (or before the elapse of two (2) weeks from the date of retirement of thePresident (hwejang)) when such retirement is due to reasons other than the expiration of the term of office thereof), and shall bedissolved after the execution of management agreement between the President (hwejang) so elected and the chairman of the Board ofDirectors.

(3) The chairman of the President (hwejang) Candidate Examination Committee shall be elected by the Board of Directors from amongits members who hold the position of outside directors of KT. In this case, the President (hwejang) and the inside directors shall notparticipate in the resolution of the Board of Directors.

(4) The Board of Directors shall, in consideration of the following requirements, determine the examination criteria for the examinationof the President (hwejang) candidates and the President (hwejang) Candidate Examination Committee shall examine all of the President(hwejang) candidates on the basis of such criteria:

1. Experiences and scholastic achievements under which his/her knowledge with respect to the field of business managementand economics can be evaluated in objective point of view;



2. Past business results and the management period of being in office under which his/her corporate management experiencecan be evaluated in objective point of view;

3. Any requirements to evaluate qualification and ability as a chief executive officer; and

4. Any requirements to evaluate professional knowledge and experience with respect to the telecommunications and relatedfields.

(5) The composition, operation and other details relating to the President (hwejang) Candidate Examination Committee shall bedetermined through the resolution of the Board of Directors.

Article 33. (Election of President (hwejang))

(1) President (hwejang) shall be elected from among CEO-qualified candidates who have a knowledge of management and economicsor who have much managerial work experience.

(2) The Corporate Governance Committee, pursuant to paragraph 2 of Article 41 shall investigate and compose internal and externalPresident (hwejang) candidate pool and shall select the President (hwejang) examination candidates in compliance with the decision ofthe Board of Directors.

(3) The President (hwejang) Candidate Examination Committee shall examine the President (hwejang) candidates selected underparagraph 2 in accordance with the examination criteria determined under paragraph 4 of Article 32, select the President (hwejang)candidates in compliance with the decision of the Board of the Directors and shall report to the Board of Directors the outcome of theexamination thereof.

(4) The Board of Directors shall confirm one (1) person as the President (hwejang) candidate from the President (hwejang) candidatesper paragraph 3 above and recommend such person so selected, to the General Shareholders� Meeting.

(5) The Board of Directors shall, in confirming the president candidate, consult and decide with such candidates the terms ofemployment contract including the management goals.



(6) The Board of Directors shall recommend a president candidate to the General Shareholders� Meeting and concurrently submit adraft employment contract.

(7) The President (hwejang) and the inside directors shall not participate in the resolution of the Board of Directors determining theterms of employment contract including the management goals pursuant to paragraph 5 above.

(8) The Board of Directors may decide upon matters not stipulated herein this Article and which concern the appointment andreappointment of the President (hwejang).

Article 34. (Execution of Employment Contract with the Candidate for President (hwejang))

(1) When the draft employment contract submitted pursuant to Paragraph 6 of Article 33 above is approved at the GeneralShareholders� Meeting, KT shall enter into such management contract with the candidate for President (hwejang). In such case, theChairman of the Board of Directors shall, on behalf of KT, sign the management contract.

(2) The Board of Directors may conduct a performance review to determine if the new President (hwejang) has performed his/her dutiesunder the management contract as provided in Paragraph 1 or hire a professional evaluation agency for such purpose.

(3) When the Board of Directors determines, based on the result of performance review under the provision of Paragraph 2 above, thatthe new President (hwejang) has failed to achieve the management goal, it may propose to dismiss the President (hwejang) at theGeneral Shareholders� Meeting.

(4) The management goal shall include revenue increase, profitability improvement, investment plan and other related businessobjectives and shall be determined, on a yearly basis, at the Board of Directors� Meeting in order to achieve the mid to long-term plansapproved by the Board of Directors. Such management goal may be established on a numerical basis, if possible.

(5) The performance review prescribed in Paragraph 2 above, shall be conducted by the Board of Directors at the closing of each fiscalyear or may be delegated by the Board of Directors to a professional evaluation agency; provided, however, that if the Board ofDirectors deems necessary, it may conduct the performance review during any fiscal year.



(6) The Board of Directors shall report the result of the performance review prescribed in Paragraph 2 above to the General Meeting ofShareholders.

(7) The President (hwejang) and the inside directors may not attend the Board of Directors� Meeting for the resolution of the agendaprescribed in Paragraphs 2 through 4.

Article 35. (Managing Officers)

(1) For the efficient operation, KT shall have managing officers including inside directors.

(2) The managing officers shall consist of positions determined by the Board of Directors.

(3) The number and remuneration of the managing officers who do not hold the position of inside directors of KT shall be determinedby the Board of Directors. The severance allowance for the said managing officers shall be paid in accordance with KT�s regulations forpayment of officers� severance allowance adopted at a General Meeting of Shareholders.

(4) Managing officers who do not hold the position of inside directors of KT shall be elected by the President (hwejang) of KT, whoseterm of office shall not exceed three (3) years.

(5) All matters concerning the respective duties of managing officers shall be determined by the President (hwejang).

Article 36. (Advisor, etc.) The President (hwejang) may employ an Advisor or appoint an Advisory Council in order to receive adviceand suggestions regarding important matters concerning the operation of KT�s businesses.

CHAPTER VI. BOARD OF DIRECTORS

Article 37. (Organization and Operation)

(1) The Board of Directors shall consist of the directors, and shall resolve important matters related to the execution of business of KTas prescribed in the laws and regulations and these Articles of Incorporation, which were submitted by a director as an agenda.

(2) The Board of Directors� Meeting shall be convened by each director. However, this shall not apply in the event that a director toconvene the Board of Directors� Meeting is determined by a resolution of the Board of Directors� Meeting.



(3) The rest of directors may request the director designated under Paragraph 2 above to convene the Board of Directors� Meeting.However, if the designated director refuses to convene the Board of Directors� Meeting without any justifiable reason therefor, otherdirectors may convene the Board of Directors� Meeting.

(4) In convening a meeting of Board of Directors, the notice thereof shall be given at least three (3) days prior to the date set for suchmeeting to each director; provided, however, that the above procedure may be omitted with the consent of all of the directors.

(5) Matters necessary for the operation of the Board of Directors shall be set forth in the Regulations of the Board of Directors.

(6) For the efficient management of the Board of Directors, a self-evaluation regarding the activities of the Board of Directors may beconducted, and detailed matters therefor, including the evaluation method, etc. shall be determined by a resolution of the Board ofDirectors.

Article 38. (Resolution and Delegation)

(1) A resolution at a meeting of Board of Directors shall be adopted by the presence of a majority of all directors in offices and by theaffirmative votes of a majority of the directors present. However, the resolution on the sale of equity in any subsidiary of KTaccompanying transfer of management rights, which is for more than 10 billion (10,000,000,000) Korean Won of the subsidiary�sequity, shall be adopted by affirmative votes of two-thirds (2/3) of the directors in office, and the resolution on the dismissal of thePresident shall be adopted by the affirmative votes of two-thirds (2/3) of the outside directors in offices.

(2) The Board of Directors may delegate part of its authorities to the President (hwejang).

Article 39. (Chairman)

(1) The chairman of the Board of Directors shall be elected from among the outside directors by a resolution of the Board of Directors.

(2) The term of office of the chairman shall be one (1) year.



Article 40. (Minutes of the Board of Directors) The proceeding and the result of meeting of the Board of Directors shall be recordedin the minutes, which shall bear the names, seals or signatures of the Chairman and the directors present at the meeting, and shall bekept at the head office.

Article 41. (Committees within the Board of Directors)

(1) The Board of Directors may have expert committees under its control by its resolution, in order to deliberate or decide with respectto the specific matters submitted to the Board of Directors.

1. President (hwejang) Candidate Examination Committee;

2. CG (Corporate Governance) Committee (the �CG Committee�);

3. Outside Director Candidates Recommendation Committee;

4. Audit Committee; and

5. Other Committees which the Board of Directors deems necessary.

(2) Any necessary matters, including those regarding the composition, authority or operation, of a committee under the Board ofDirectors described in Paragraph 1 above shall be determined by a resolution of the Board of Directors.

Article 41-2. (CG Committee)

(1) The CG Committee shall be composed of four (4) outside directors and one (1) inside director. However, the member of theCommittee who belongs to the President (hwejang) candidate pool under paragraph 2 of Article 33 shall not participate in any resolutionregarding the election of President (hwejang).

(2) The CG Committee shall deliberate and decide overall matters relating to the corporate governance of the Company.

(3) Specific issues, such as the operation of the CG Committee, shall be determined by a resolution of the Board of Directors.

Article 42. (Outside Director Candidates Recommendation Committee)

(1) The Outside Director Candidates Recommendation Committee shall consist of one (1) inside director and all of the outside directors;provided that in case of election of an outside director due to the expiration of the term of office of an outside director, the relevantoutside director the expiration of whose term has caused the need for such election may not be a member of the Committee.

(2) The Outside Director Candidates Recommendation Committee shall recommend outside director candidates to the GeneralShareholders� Meeting.



(3) Any other detailed matters regarding organization and operation of the Outside Director Candidates Recommendation Committeeshall be determined by a resolution of the Board of Directors.

Article 43. (Audit Committee)

(1) The Audit Committee shall consist of not less than three (3) outside directors.

(2) The Audit Committee shall perform an audit of KT�s accounting books and records, and of other aspects of its business operations.

(3) Any other detailed matters regarding organization and operation of the Audit Committee shall be determined by a resolution of theBoard of Directors.

Article 44. (Managing Officers�� Meeting)

(1) KT may convene managing officers� meeting in order to consider and resolve matters delegated by the Board of Directors.

(2) Matters necessary for the organization and operation of the managing officers� meeting set forth in Paragraph 1 above shall bedetermined by a resolution of the Board of Directors.

CHAPTER VII. ACCOUNTING

Article 45. (Fiscal Year) The fiscal year of KT shall be from January 1 to December 31 of each year.

Article 46. (Preparation, Submission and Maintenance of the Financial Statements)

(1) The President (hwejang) of KT shall prepare the following documents and supplementary documents thereto and the business reportfor each fiscal year, and submit such documents, after approved by the Board of Directors, to the Audit Committee, six (6) weeks priorto the date of the Ordinary General Meeting of Shareholders:

1. A balance sheet;

2. A statement of profit and loss; and

3. Other documents, as defined by the Commercial Code and enforcement ordinance, that reflect financial position andmanagement performance of the company

4. Consolidated financial statements of the company

(2) The Audit Committee shall submit an auditor�s report to the President (hwejang) at least one (1) week before the GeneralShareholders� Meeting.



(3) The President (hwejang) shall keep each document listed in Paragraph (1) together with the business report and the auditor�s reportat the head office for a period of five (5) years, commencing from one week prior to the date of the Ordinary General Meeting ofShareholders. Certified copies of these documents shall be kept in each respective branch office for a period of three (3) years.

(4) The President (hwejang) shall submit each document listed in Paragraph (1) to the Ordinary General Meeting of Shareholders andrequest approval therefor. With respect to the business report, he/she shall report the contents thereof to the Ordinary General Meetingof Shareholders.

(5) When the approval of the General Meeting of Shareholders is obtained for the documents listed in Paragraph (1), the President(hwejang) shall, without delay, give a public notice of the balance sheet and the audit opinion thereon of an independent auditor.

Article 47. (Disposition of Profits) The unappropriated retained earnings for each fiscal year of KT shall be disposed of as followingorder:

1. Legal Reserves;

2. Other statutory reserves;

3. Amortization by way of the appropriation of the retained earnings;

4. Dividends; and

5. Voluntary reserve.

Article 48 (Retirement of Shares)

Pursuant to Article (165-3) of the FSCMA, KT may, by a resolution of the Board of Directors, retire the shares within the scope ofprofits attributable to the shareholders.

Article 49. (Payment of Dividends)

(1) Dividends may be paid either in cash or in shares.

(2) In case of stock dividends, if KT has issued several types of shares, different types of shares may be allotted by a resolution of theGeneral Meeting of Shareholders.

(3) Pursuant to a resolution of the Board of Directors, KT may pay interim dividends in cash once during a fiscal year with June 30 as abase date (referred to as the fixed interim dividend date).

(4) The dividends referred to in Paragraphs (1) and (3) shall be paid to the shareholders or registered pledgees who are registered in theregistry of shareholders as of the end of each fiscal year or as of the fixed interim dividend date.

(5) The rights to dividends shall be extinguished if it is not exercised within five (5) years from the date when the relevant dividend wasdeclared, and such unclaimed dividends shall belong to KT.



CHAPTER VIII. SUPPLEMENTARY PROVISIONS

Article 50. (Guarantee of Personnel Status)

(1) Any employee of KT shall not receive a dismissal, suspension, reduction in compensation, reprimand and other disadvantageousorders, without any justifiable reasons therefor.

(2) The retirement age of company employees shall be as prescribe by THE ACT ON PROHIBITION OF AGE DISCRIMINATION INEMPLOYMENT AND AGED EMPLOYMENT PROMOTION.

Article 51. (Publication of Management Information)

KT shall make public any and all matters deemed to be necessary for the promotion of transparency in management.



ADDENDUM

Article 1. (Enforcement Date) These Articles of Incorporation shall be effective from October 1, 1997.

Article 2. (Term of Office of the First President and Standing Directors) Notwithstanding Paragraph (1), Article (29) hereof, theterm of office of the first President and the standing directors to be elected at the General Meeting of Shareholders convened after theexecution of these Articles of Incorporation shall be extended until the end of the Ordinary General Meeting of Shareholders convenedafter the expiration of the said term of office.

Article 3. (Term of Office of First Non-Standing Director) (1) Pursuant to Article (3) of the Addenda of the Special Act, candidatesfor non-standing directors who are recommended by the Temporary Non-standing Directors Recommendation Committee shall beclassified into three groups, i.e., first, second and third groups, which shall consist of one, two and three persons, respectively.

(2) Notwithstanding Article (29), Paragraph (1) hereof, the term of office of a non-standing director in the first group shall expire at theclose of the first Ordinary General Meeting of Shareholders convened after one (1) year has elapsed. The term of office of non-standingdirectors in the second and third group shall expire at the close of the first Ordinary General Meetings of Shareholders convened aftertwo (2) and three (3) years have elapsed, respectively.

Article 4. (Special Provisions for Term of Office of Standing Directors succeed to the Term of Office of an Executive Officer) Inthe event that a former executive officer who has been elected prior to the date of enforcement of these Articles of Incorporation iselected as a first standing director of KT after the enforcement of these Articles, his/her term of office may be shortened to theremainder of the term of office of an executive officer prior to the date of enforcement of these Articles of Incorporation.

ADDENDUM (December 8, 1997)

These articles of Incorporation shall be effective from the date of resolution of the general meeting of shareholders thereon.



ADDENDUM (September 18, 1998)

Article 1. (Enforcement Date)These Articles of Incorporation shall be effective from the date of resolution thereon of the generalmeetings of shareholders.

Article 2. (Interim Measures for the Acquisition of Shares of KT by Foreigners) Those provisions of Paragraph (3), Article(10) hereof shall not be applicable where Foreigners have acquired any shares of KT prior to the date of enforcement of these Articles ofIncorporation pursuant to the relevant laws and regulations. In this regard, the number of shares so acquired shall be included in themaximum aggregate shareholdings ceiling prescribed in Item 1, Paragraph (2), Article (10) above.

ADDENDUM (March 19, 1999)

Article 1. (Enforcement Date) These Articles of Incorporation shall be effective from the date of resolution thereon of the generalmeetings of shareholders.

Article 2. (Interim Measure) The cumulative voting system provided for in Article (382-2) of the Commercial Code shall not apply untileach of the requirements set forth in Paragraph (1), Article (21) of the Special Act has been satisfied.


These Articles of Incorporation shall be effective from the date of resolution thereon of the general meeting of shareholders.




These Articles of Incorporation shall be effective as of the date of resolution of the general meeting of Shareholders.



ADDENDUM (August 20, 2002)

Article1. (Enforcement Date) These Articles of Incorporation shall become effective from the date on which a resolution on theforegoing amendments is adopted at the General Meeting of Shareholders. Provided, however, that the amended provision of Article41-3 shall become effective from the date following the day on which the first General Meeting of Shareholders is convened afterenforcement of these amended Articles of Incorporation.

Article 2. (Interim Measures regarding Auditor) (1) The amended provisions regarding auditor of Articles 27, 28, 29, 30, 32, 33, 37and 40 shall remain invalid, concurrently upon establishment of the Audit Committee.

(2) The term, �auditor� referred in Paragraph 3 of Article 31 and Article 44, shall be interpreted to be �Audit Committee�, respectively,concurrently upon establishment of the Audit Committee.

Article3. (Interim Measures on Increase in Number of Outside Directors)

Notwithstanding the amended provision of Article 26, a candidate for outside director recommended by the Shareholders� Committeeestablished in accordance with the previous AOI, shall be deemed to have been recommended by the Outside Director RecommendationCommittee, and the term of office of such additionally appointed outside director in the above shall be until the date on which theOrdinary General Meeting of Shareholders is held in the year of 2005.




These Articles of Incorporation shall become effective as of the date of resolution of the General Meeting of Shareholders.


These Articles of Incorporation shall become effective as of the date when the General Meeting of Shareholders resolved adoptionhereof.



ADDENDUM (August 19, 2005)

These Articles of Incorporation shall take effect upon approval by the General Meeting of Shareholders.






Article 1. (Enforcement Date) These Articles of Incorporation shall become effective upon resolution of the General Meeting ofShareholders approving the amendment hereof.

Article 2. (Interim Measure) The person who is �President (sajang)� as of the amendment date of these Articles of Incorporation willbecome the �President (hwejang)�, and in applying Article 32(1)-2 �ex-Presidents (sajang)� prior to the amendment date will beinterpreted as �ex-Presidents (hwejang)�.








These Articles of Incorporation shall become effective as of the date of resolution of the General Meeting of Shareholders.Notwithstanding the foregoing, Clause 1 of Article 46, shall become effective as of April 15, 2012













Exhibit 8.1

List of Subsidiaries of KT Corporation(As of December 31, 2017)

NameJurisdiction ofIncorporation

KT Powertel Co., Ltd. Korea

KT Linkus Co., Ltd. Korea

KT Submarine Co., Ltd. Korea

KT Telecop Co., Ltd. Korea

KT Hitel Co., Ltd. Korea

KT Service Bukbu Co., Ltd. Korea

KT Service Nambu Co., Ltd. Korea

KT Commerce Inc. Korea

KT New Business Fund No.1 Korea

KT Strategic Investment Fund No.1 Korea




BC Card Co., Ltd. Korea

VP Inc. Korea

H&C Network Korea

BC Card China Co., Ltd. China

INITECH Co., Ltd. Korea

Smartro Co., Ltd. Korea

KTDS Co., Ltd. Korea

KT M Hows Co., Ltd. Korea

KT M&S Co., Ltd. Korea

GENIE Music Corporation (KT Music Corporation) Korea

KT Skylife Co., Ltd. Korea

Skylife TV Co., Ltd. Korea

KT Estate Inc. Korea

KT AMC Co., Ltd. Korea

NEXR Co., Ltd. Korea

KTSB Data service Korea

KT Sat Co., Ltd. Korea

KT Innoedu Co Korea



Nasmedia, Inc. Korea

KT Sports Korea

KT Music Contents Fund No.1 Korea

KT Music Contents Fund No.2 Korea

KT-Michigan Global Content Fund Korea

Autopion Co., Ltd. Korea

KTCS Corporation Korea

KTIS Corporation Korea

KT M mobile Korea

KT Investment Co., Ltd. Korea

NgenBio Belgium

Whowho&Company Co., Ltd. Korea

PlayD Co., Ltd. (N Search Marketing Co., Ltd.) Korea

KT Rwanda Networks Ltd. Rwanda

AOS Ltd. Rwanda

KT Belgium Belgium

KT ORS Belgium Belgium

Korea Telecom Japan Co., Ltd. Japan

KBTO sp.zo.o. Poland

Korea Telecom China Co., Ltd. China

KT Dutch B.V Netherlands

Super iMax LLC Uzbekistan

East Telecom LLC Uzbekistan

Korea Telecom America, Inc. USA

PT. KT Indonesia Indonesia

PT. BC Card Asia Pacific Indonesia

KT Hongkong Telecommunications Co., Ltd. Hong Kong

KT Hong kong Limited Hong Kong

Korea Telecom Singapore Pte.Ltd. Singapore

Texnoprosistem LLP. Uzbekistan



Exhibit 12.1

CERTIFICATION

I, Chang-Gyu Hwang, certify that:

1. I have reviewed this annual report on Form 20-F of KT Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading withrespect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presentedin this report;

4. The company�s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in ExchangeAct Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company�s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and

(d) Disclosed in this report any change in the company�s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the company�s internalcontrol over financial reporting; and

5. The company�s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the company�s auditors and the audit committee of the company�s board of directors (or persons performing theequivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the company�s ability to record, process, summarize and report financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in thecompany�s internal control over financial reporting.


/s/ CHANG-GYU HWANGChang-Gyu Hwang

Chief Executive Officer



Exhibit 12.2

CERTIFICATION

I, Kyung-Keun Yoon, certify that:

1. I have reviewed this annual report on Form 20-F of KT Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading withrespect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presentedin this report;

4. The company�s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in ExchangeAct Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company�s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and

(d) Disclosed in this report any change in the company�s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the company�s internalcontrol over financial reporting; and

5. The company�s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the company�s auditors and the audit committee of the company�s board of directors (or persons performing theequivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the company�s ability to record, process, summarize and report financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in thecompany�s internal control over financial reporting.


/s/ KYUNG-KEUN YOONKyung-Keun Yoon

Executive Vice President andChief Financial Officer



Exhibit 13.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of section 1350, chapter 63 of title 18, UnitedStates Code), the undersigned officer of KT Corporation, a corporation organized under the laws of the Republic of Korea (the�Company�), does hereby certify, to such officer�s knowledge, that:

The annual report on Form 20-F for the year ended December 31, 2017 (the �Form 20-F�) fully complies with the requirements ofsection 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Form 20-F fairly presents, in allmaterial respects, the financial condition and results of operation of the Company.

/s/ CHANG-GYU HWANGChang-Gyu Hwang

Chief Executive Officer


/s/ KYUNG-KEUN YOONKyung-Keun Yoon

Executive Vice President andChief Financial Officer


A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to KTCorporation and will be retained by KT Corporation and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 15.1

FRAMEWORK ACT ON TELECOMMUNICATIONS

[Enforced on July 26, 2017] [Amended by Act No. 14839, July 26, 2017, Amendment by other Acts]

Ministry of Science and ICT (Policy Coordination Division), 02-2110-2824

CHAPTER I GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to contribute to the enhancement of the public welfare by managing telecommunications efficiently andstimulating the development of telecommunications by providing basic matters on telecommunications.

Article 2 (Definitions)

The definitions of the terms as used in this Act shall be as follows:

1. The term �telecommunications� means transmission or reception of code, words, sound or image through wired, wireless, optic,and other electro-magnetic processes;

2. The term �telecommunications facilities and equipment� means machinery, appliances, lines for telecommunications, and otherfacilities necessary for telecommunications;

3. The term �telecommunications line facilities and equipment� means the facilities and equipment which constitutecommunications channels between sending and receiving points for telecommunications among the telecommunications facilities andequipment, and the transmission and line facilities and equipment, with the exchange facilities installed as one body of the transmissionand line facilities, and all facilities attached thereto;

4. The term �telecommunications business facilities and equipment� means the telecommunications facilities and equipment to beprovided for telecommunications businesses;

5. The term �private telecommunications facilities and equipment� means the telecommunications facilities and equipment otherthan the telecommunications business facilities and equipment, installed by an individual to be used for his own telecommunications;

6. The term �telecommunications equipments� means apparatus, machinery, parts or line equipments, etc. used by thetelecommunications facilities and equipment;



7. The term �telecommunications service� means services that mediate a third party�s communication through thetelecommunications facilities and equipment or to provide the telecommunications facilities and equipment for the third party�stelecommunications; and

8. The term �telecommunications business� means a business that provides telecommunications services.

Article 3 (Supervision of Telecommunications)

The matters concerning telecommunications shall be governed by Minister of Science and ICT, except the ones stipulatedspecifically by this Act or other Acts. <Amended on Dec. 30, 1996, Feb. 29, 2008, Mar. 23, 2013, Jul. 26, 2017>

Article 4 (Government Policies)

Minister of Science and ICT shall devise basic and comprehensive government policies concerning telecommunications toattain the purpose of this Act. <Amended on Dec. 30, 1996, Feb. 29, 2008, Mar. 23, 2013, Jul. 26, 2017>

Article 5 (Establishment of Basic Telecommunications Plans)

(1) Minister of Science and ICT shall establish and publicly notify basic telecommunications plans (hereinafter referred to as the�basic plan�) for smooth development of telecommunications and the promotion of the information society. <Amended on Dec. 30,1996, Feb. 29, 2008, Mar. 23, 2013, Jul. 26, 2017>

(2) The following matters shall be included in the basic plan of paragraph (1):

1. Matters concerning utilization efficiency of telecommunications;

2. Matters concerning maintenance of telecommunications order;

3. Matters concerning telecommunications business;

4. Matters concerning telecommunications facilities and equipment;

5. Matters concerning promotion of telecommunications technology (including technology about telecommunicationsconstruction; hereinafter the same shall apply); and

6. Other basic matters concerning telecommunications.

(3) Minister of Science and ICT shall consult in advance with the heads of administrative agencies concerned, when establishingthe basic plan for the matters of paragraph (2) 4 and 5 of this Article. <Amended on Dec. 30, 1996, Feb. 29, 2008, Mar. 23, 2013, Jul.26, 2017>

Article 6 Deleted <May 21, 2009>



Article 7 (Classification of Telecommunications Business Operator)

The telecommunications business operator shall be classified as the key communications business operator, the specialcommunications business operator and the value-added communications business operator pursuant to the TelecommunicationsBusiness Act. <Amended on Aug. 28, 1997>

[This Article Wholly Amended by Act No. 4905, Jan. 5, 1995]

CHAPTER II Deleted <May 22, 2009>







Article 14 Deleted <Dec. 30, 1996>


Article 15-2 Deleted <Jan. 29, 1999>

CHAPTER III Deleted <Mar. 22, 2010>

SECTION 1 Deleted < Mar. 22, 2010>

Article 16 Deleted < Mar. 22, 2010>




















Article 30-2 Deleted < Mar. 22, 2010>


Article 30-4 Deleted <Dec. 26, 2002>



CHAPTER IV MANAGEMENT OF TELECOMMUNICATIONS EQUIPMENTS

Article 33 Deleted <Jul. 23, 2010>

Article 33-2 Deleted < Jul. 23, 2010>


Article 34 Deleted <Jan. 28, 2000>




Article 35 Deleted < Jul. 23, 2010>

Article 36 Deleted < Jul. 23, 2010>

CHAPTER V Deleted <Feb. 29, 2008> <Feb. 29, 2008>

Article 37 Deleted <Feb. 29, 2008>











CHAPTER VI SUPPLEMENTARY PROVISIONS


Article 45-2 Deleted <July 23, 2010>

Article 46 (Delegation and Entrustment of Authority)

(1) Part of the authority of Minister of Science and ICT under this Act may be delegated or commissioned to the head of therelated agencies or of the Korea Post under the conditions as prescribed by the Enforcement Decree. <Amended on Mar. 23,2013, Jul. 26, 2017>

(2) Deleted < Mar. 22, 2010>



CHAPTER VII PENAL PROVISIONS

Article 47 (Penal Provisions)

(1) Deleted <Dec. 22, 2015>

(2) A person who has publicly made a false communication over the telecommunications facilities and equipment for the purposeof benefiting himself or the third party or inflicting damages on the third party shall be punished by imprisonment for not more thanthree years or by a fine not exceeding thirty million won. <Amended by Act No. 5219, Dec. 30, 1996>

(3) In case where the false communication under paragraph (2) is of a telegraphic remittance, it shall be punished by imprisonmentfor not more than five years or by a fine not exceeding fifty million won. <Amended by Act No. 5219, Dec. 30, 1996>

(4) When a person engaged in the telecommunications business commits the act under paragraph (3), he shall be punished byimprisonment for not more than ten years or by a fine not exceeding 100 million won, and in case of committing the act under paragraph(2), he shall be punished by imprisonment for not more than five years or by a fine not exceeding fifty million won. <Amended on Dec.22, 2015>

[The Article 47(1) which the Constitutional Court found as of December 28, 2010 unconstitutional is deleted under Act No. 13586 onDecember 22, 2015.]

Article 48 Deleted <July 23, 2010>

Article 48-2 Deleted <Jan. 16, 2001>


Article 50 Deleted <Jan. 28, 2000>




ADDENDA <Amended by Act No. 14839, July 26, 2017>

Article 1 (Enforcement Date) (1) This Act shall enter into force on the date of its promulgation; provided, however, that among the Actsto be amended in accordance with Article 5 of the Addenda, the amended provisions of the Acts promulgated before this Act enter intoforce, but whose enforcement dates have not arrived yet, shall enter into force on the respective enforcement date of each Act.

Articles 2 through 4 Omitted.

Article 3 (Amendment of other Acts) (1) through <341> Omitted.



<342> The Framework Act on Telecommunications shall be partially amended as follows:

�Minister of Science, ICT and Future Planning� in Articles 3, 4, 5(1) and (3), and 46 shall be amended as �Minister ofScience and ICT.�

<343> through <382> Omitted.

Article 6 Omitted.



Exhibit 15.3

TELECOMMUNICATIONS BUSINESS ACT

[Enforced on March 15, 2018] [Amended by Act No. 14576, March 14, 2017, Partial Amendments]

Ministry of Science and ICT (Telecommunications Policy Planning Division), 02-2110-2885Korea Communications Commission (Consumer Policy Coordination Division � prohibited acts), 02-2110-1476, 1475

Korea Communications Commission (Examination Support Team � telecommunications dispute reconciliation), 02-2110-1552, 1551

CHAPTER I GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to contribute to the promotion of public welfare by encouraging sound development of telecommunicationsbusiness and ensuring convenience to the users of telecommunications service through proper management of such business.

Article 2 (Definitions)

For the purpose of this Act, <Amended on May 19, 2011, Mar. 23, 2013, Aug. 13, 2013, Oct. 15, 2014, Jul. 26, 2017>

1. The term �telecommunication� means sending and receiving of sign, wording, sound or image through wired, wireless, opticor other electronic means;

2. The term �telecommunication facilities� means equipment, devices, lines and other facilities necessary fortelecommunication;

3. The term �telecommunication line facilities� means telecommunication line portion of the telecommunication facilities whichis necessary for sending, receiving and routing telecommunication and include exchange equipment and other annexed facilities;

1



4. The term �commercial telecommunication facilities� means telecommunication facilities for providing telecommunicationbusiness;

5. The term �proprietary telecommunication facilities� means telecommunication facilities other than commercialtelecommunication facilities that a person installs for his own telecommunication use;

6. The term �telecommunication service� means connecting of customer�s communication through the use oftelecommunication facilities or providing telecommunication facilities for customer�s communication;

7. The term �telecommunication business� means the business of providing telecommunication service;

8. The term �telecommunications business operator� means a person who provides telecommunications service with holding alicense or making a registration or report under this Act;

9. The term �user� means a person who has made a contract for the use of any telecommunications service with thetelecommunications business operator in order to receive a provision of telecommunications service;

10. The term �universal service� means the basic telecommunications service which any user may receive at reasonable feesanytime and anywhere;

11. The term �key communication service� means the telecommunication service such as telephone and internet services whichtransmit or receive voice, data, image, etc. without changing their content and the telecommunication service where telecommunicationline facilities is lent for transmission and receipt of voice, data, image, etc.; provided, however, that individual telecommunicationservices(individual service of telecommunication service under subparagraph 6 of Article 2) determined and announced by the Ministerof Science and ICT are excluded;

12. The term �value-added telecommunication services� means telecommunication services other than key communicationservices;

2



13. The term �value-added telecommunication services of a special type� means the service that falls under any of thefollowings:

A. The value-added telecommunication services of an online service provider of a special type under Article 104 of theCopyright Act;

B. The value-added telecommunication services that send text messages by directly or indirectly linking a text messagesending system to the telecommunication facilities of a telecommunications business operator.

14. The term �telecommunication number� means identification numbers that enable to identify each of telecommunicationsnetworks, telecommunication services, regions, users, etc. by differentiating their number in order to provide or use telecommunicationservices.

Article 3 (Duty of Providing Services, etc.)

(1) A telecommunications business operator shall not refuse to provide any telecommunications service, without justifiablereasons.

(2) A telecommunications business operator shall guarantee the fairness, speediness and accuracy in performing his business.

(3) A fee for telecommunications service shall be reasonably fixed so as to ensure a smooth development of telecommunicationsbusiness and to provide the users with convenient and diverse telecommunications services in the fair and inexpensive manner.

Article 4 (Universal Service)

(1) All telecommunications business operators shall have the obligation to provide universal service or to replenish the lossesincurred by such provisions.

(2) The Minister of Science and ICT may, notwithstanding the provisions of Paragraph (1), exempt the telecommunicationsbusiness operator determined by the Enforcement Decree as a telecommunications business operator for whom an imposition ofobligation under Paragraph (1) is deemed inadequate in view of the peculiarity of telecommunications service, or thetelecommunications business operator whose turnover of telecommunications service is less than the amount as determined by theEnforcement Decree within the limit of 1/100 of total turnover of the telecommunications services, from the relevant obligations. <Amended on Mar. 23, 2013, Jul. 26, 2017>

3



(3) The details of universal service shall be determined by the Enforcement Decree in consideration of the following matters:

1. Level of the development of information and communications technology;

2. Level of the dissemination of telecommunications service;

3. Public interest and safety;

4. Promotion of social welfare; and

5. Acceleration of informatization.

(4) In order to provide effective, stable universal service, the Minister of Science and ICT may, in consideration of size andquality of universal service, level of price and the technical capability of a telecommunications business operator, designate atelecommunications business operator through the method and procedure prescribed by the Enforcement Decree. < Amended on Mar.23, 2013, Jul. 26, 2017>

(5) Under the method and procedure prescribed by the Enforcement Decree, the Minister of Science and ICT may have atelecommunications business operator bear compensation for losses incurred in the course of providing universal service based on thetotal sales. < Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 4-2 (Telecommunications Relay Service for Disabled Persons)

(1) Operators who have to secure relay and provide services using telecommunications equipment and facilities (hereinafter the�telecommunications relay service�) pursuant to Article 21(4) of the Act on the Prohibition of Discrimination of Disabled Persons,Remedy Against Infringement of Their Rights, etc. may provide the telecommunications relay service directly to the disabled personsor indirectly by entrusting such service to the agency designated by the Minister of Science and ICT. <Amended on Jul. 26, 2017>

4



(2) Operators who have to secure relay and provide the telecommunications relay service shall submit the plans to provide thetelecommunications relay service to the Minister of Science and ICT within 1 month after the commencement of every fiscal period.<Amended on Jul. 26, 2017>

(3) Operators who have been engaging or once engaged in the telecommunications relay service shall not disclose another�ssecret which has come to their knowledge in the course of the practice of the service.

(4) The Minister of Science and ICT may provide necessary supports including financial and technical supports to the operatorwho falls under one of the following: <Amended on Jul. 26, 2017>

1. A key communications business operator who provides the telecommunications relay service directly to the disabledpersons or indirectly by entrusting such service to the agency; or

2. An agency entrusted to provide the telecommunications relay service.

(5) Details regarding the criteria, proceedings and methods of the designation of the agency under Paragraph (1) shall be set forthand publicly notified by the Minister of Science and ICT. <Amended on Jul. 26, 2017>

[This Article Newly Inserted on Aug. 13, 2013]

CHAPTER II TELECOMMUNICATIONS BUSINESS

SECTION 1 General Provisions

Article 5 (Classification, etc. of Telecommunications Business)

(1) The telecommunications businesses shall be classified into a key communications business, a specific communicationsbusiness and a value-added communications business.

5



(2) The key communications business shall be the business to install telecommunication line facilities, and thereby provide keycommunication services.

(3) The specific communications business shall correspond to one of the following subparagraphs:

1. Business which provides a key communications service by making use of telecommunication line facilities, etc. of aperson who has obtained a license for key communications business under Article 6 (hereinafter referred to as a �key communicationsbusiness operator�); and

2. Business which installs the telecommunications facilities in the premises as determined by the Enforcement Decree, andprovides a telecommunications service therein by making use of the said facilities.

(4) The value-added communications business shall be the business providing value-added communication services.

SECTION 2 Key Communications Business

Article 6 (License etc. of Key Communications Business Operator)

(1) A person who intends to run a key communications business shall obtain a license from the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The Minister of Science and ICT shall, in granting a license under Paragraph (1), comprehensively examine the mattersfalling under each of the following subparagraphs: < Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Financial capability necessary for implementing the key communication service plan;

2. Technical capability necessary for implementing the key communication service plan,

3. Plans for a user protection;

6



4. Other matters relevant to capacity for providing stable key communication services as determined under the EnforcementDecree of the Act.

(3) The Minister of Science and ICT may formulate every year a master plan for licenses for key communications businessoperators by considering the results of the evaluation of competition among key communications business operators under Article 34(2)and by considering the plan for the utilization of frequencies under Article 8(3)2 of the Radio Waves Act. <This Article Newly Insertedon Oct. 15, 2014, Amended on Jul. 26, 2017>

(4) A person, who desires to newly conduct a key communications business after obtaining allocation of frequencies underArticle 10 of the Radio Waves Act, shall file an application for allocation of frequencies, together with an application for license of keycommunications business, with The Minister of Science and ICT after a public announcement about allocation of frequencies. <ThisArticle Newly Inserted Oct. 15, 2014, Amended on Jul. 26, 2017>

(5) The Minister of Science and ICT shall set forth the detailed examination criteria by examining item under Paragraph (2),period for license and outline of application for license, and make a public announcement thereof. < Amended on Mar. 23, 2013, Oct.15, 2014, Jul. 26, 2017>

(6) The Minister of Science and ICT may, in case where it grants a license for key communications business under Paragraph(1), attach the conditions necessary for the promotion of fair competition, protection of users, improvement of service quality andefficient employment of resources for information and communication, in this case such conditions shall be published on its officialpublication and official webpage. < Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(7) A person subject to a license under Paragraph (1) shall be limited to a juristic person. <Amended on Oct. 15, 2014>

(8) Procedures for a license under Paragraph (1) and other necessary matters shall be determined by the Enforcement Decree. <Amended on Oct. 15, 2014>

7



Article 7 (Reasons for Disqualification for License)

Persons falling under each of the following subparagraphs shall not be entitled to obtain the license for a key communications businessas referred to in Article 6:

1. The State or local governments;

2. Foreign governments or foreign corporations; and

3. Corporations whose stocks are owned by foreign governments or foreigners in excess of the restrictions on stock possessionsas referred to in Article 8 (1).

Article 8 (Restrictions on Stock Possessions of Foreign Governments or Foreigners)

(1) The stocks of a key communications business operator (excluding non-voting class of stocks under Article 344-3(1) of theCommercial Act, and including the stock equivalents with voting rights, such as stock depositary receipts, etc. and investment equities;hereinafter the same shall apply) shall not be owned in excess of 49/100 of the gross number of issued stocks, when adding up all ofthose owned by the foreign governments or foreigners. < Amended on Aug. 13, 2013>

(2) A corporation, whose largest stockholder under Article 9(1)1 of the Capital Markets and Financial Investment Business Act(hereinafter the �largest shareholder�) is a foreign government or a foreigner (including, throughout this Act, a specially-related personunder Article 9(1)1 of the same Act) and whose largest shareholder owns more than 15/100 of the gross number of its issued stocks(hereinafter referred to as the �fictitious corporation of foreigners�), shall be regarded as a foreigner. < Amended on Aug. 13, 2013>

(3) A corporation that falls under one of the following subparagraphs shall not be regarded as a foreigner, even if it is equippedwith the requirements as referred to in Paragraph (2); provided, however, that this shall not apply to the foreigners under Article-1(3)and Article 86(3): < Amended on Aug. 13, 2013, Jul. 26, 2017>

1. A corporation holding less than 1/100 of the gross number of stocks issued by the key communications business operator; or

8



2. A corporation whose Largest Shareholder is a foreign government which is a signatory nation to a free trade agreemententered effect into between the Republic of Korea and one or more other countries and set forth and publicly notified by theMinister of Science and ICT or a foreigner and whose Largest Shareholder owns more than 15/100 of the gross number of itsissued stocks but decided by the Minister of Science and ICT as not being harmful to public interest after the examination ofpublic interest under Article 10.

Article 9 (Grounds for Disqualifying Officers)

(1) Any person falling under each of the following subparagraphs shall be disqualified to serve as an officer of any keycommunications business operator: < Amended on Oct. 15, 2014>

1. A minor/incompetent person under the adult guardianship, or a quasi-incompetent person under the limited guardianship;

2. A person who has yet to be reinstated after having been declared bankrupt;

3. A person who has been sentenced to imprisonment without prison labor or a heavier punishment on charges of violating thisAct, the Framework Act on Telecommunications, the Radio Waves Act or the Act on Promotion of Information and CommunicationsNetwork Utilization and Information Protection (excluding matters not directly related to telecommunication business, hereinafter �thisAct, etc.�), and for whom three years have yet to pass from the date on which the execution of the sentence is terminated (including acase where the execution of the sentence is deemed to be terminated) or the execution of the sentence is exempted;

4. A person who is in a stay period after having been sentenced to a stay of the execution of the imprisonment without prisonlabor or a heavier punishment on charges of violating this Act, etc.;

5. A person who has been sentenced to a fine on charges of violating this Act, etc. and for whom one years have yet to pass fromthe date of such sentence;

6. A person who has been subject to a disposition taken to revoke all or part of his permission in accordance with Article 20 (1),a disposition taken to revoke his registration in accordance with Article 27 (1) or an order given in accordance with Paragraph (2) of thesame Article to discontinue his business and for whom three years have yet to pass from the date of such disposition or order. In the caseof a corporation, the person refers to the person who commits the act of causing the disposition to revoke permission, the disposition torevoke registration or the order to discontinue business, and its representative.

9



(2) In the event that any officer is found to fall under each subparagraph of Paragraph (1) or is found to fall under eachsubparagraph of Paragraph (1) at the time that he is selected and appointed as an officer, he shall rightly resign from the office.

(3) Any act in which any officer has been involved prior to his resignation under Paragraph (2) shall not lose its legal efficacy.

Article 10 (Examination of Public Interest Nature of Stock Acquisition, etc. by Key Communications Business Operator)

(1) The Public Interest Nature Examination Committee (hereinafter referred to as the �Committee�) shall be established in theMinistry of Science and ICT in order to make an examination regarding whether or not what falls under each of the followingsubparagraphs impedes the public interests as prescribed by the Enforcement Decree (hereinafter referred to as the �examination ofpublic interest nature�), such as the national safety guarantee and maintenance of public peace and order, etc.: < Amended on Mar. 23,2013, Aug. 13, 2013, Jul. 26, 2017>

1. Where the principal comes to own not less than 15/100 of the gross number of stocks issued by a key communicationsbusiness operator, when adding up those owned by the specially-related person as referred to in Article 9 Paragraph (1) subparagraph 1of the Capital Market Integration Act(hereinafter referred to as the �specially-related person�);

2. Where the largest stockholder of a key communications business operator is altered;

3. Where a key communications business operator or any stockholder of a key communications business operator concludes acontract for important management matters as prescribed by the Enforcement Decree, such as the appointment and dismissal ofexecutives and the transfer or takeover, etc. of business of the relevant key communications business operator, with a foreigngovernment or a foreigner;

4. Other cases as prescribed by the Enforcement Decree, where there exists a change in the persons who have de factomanagement rights of a key communications business operator. < Amended on Aug. 13, 2013>

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(2) Where a key communications business operator or any stockholder of a key communications business operator comes to fallunder each of subparagraphs of Paragraph (1), he shall file a report thereon with the Minister of Science and ICT within thirty days fromthe time when such a fact took place. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) Where a key communications business operator or any stockholder of a key communications business operator is to come tofall under each of subparagraphs of Paragraph (1), he may, prior to the said situation, request the Minister of Science and ICT to makean examination as referred to in Paragraph (1). < Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) Where the Minister of Science and ICT has received a report as referred to in Paragraph (2) or a request for examination asreferred to in Paragraph (3), it shall refer it to the Committee. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(5) Where the Minister of Science and ICT judges that there exists a danger of impeding the public interests by the cases fallingunder each of subparagraphs of Paragraph (1) in view of the result of examination as referred to in Paragraph (1), it may order thealteration of contract detail and suspension of its implementation, the suspension of exercise of voting rights, or the sale of relevantstocks. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(6) The scope of key communications business operators who have to report as referred to in Paragraph (2) or (3), or can requestthe examination of public interest shall be as following: < Amended on Aug. 13, 2013, Jul. 26, 2017>

1. Key communications business operators operating and managing important communications provided inSubparagraph 3 of Article 92(2);

2. Key communications business operators owning man-made satellites in which space stations under Article 20-2(3) ofthe Radio Waves Act and Subparagraph 30 of Article 29 of the Enforcement Decree of the same Act are established

3. Key communications business operators designated as the key communications business operators in Subparagraph 1and 3 of Article 35(2), Article 39(3), Article 41(3) and Article 42(3) and publicly notified by the Minister of Scienceand ICT;

11



4. Key communications business operators providing telecommunication services by utilizing the frequencies allottedunder the Radio Waves Act; provided, however, that any key communications operators whose turnover oftelecommunications service of the preceding year is less than the amount as determined by the Enforcement Decree inconsideration of the market conditions, market share etc. shall be excluded; and

5. Key communications business operators whose turnover of telecommunications service of the preceding year is morethan KRW 30,000,000,000 and at the same time, exceeds the amount publicly notified by the Minister of Science andICT in consideration of the market conditions, market share etc. < This Article Newly Inserted on Aug. 13, 2013>

(7) Proceedings and details regarding the report and the examination of public interest in Paragraph (2) or (3) shall be stipulatedby the Enforcement Decree. < This Article Newly Inserted on Aug. 13, 2013>

Article 11 (Composition and Operation, etc. of Public Interest Nature Examination Committee)

(1) The Committee shall consist of not less than five but not more than fifteen members including one Chairman. < Amended onAug. 13, 2013>

(2) One of the Vice Ministers of Science and ICT nominated by the Minister of Science and ICT shall hold office as theChairman, and the members shall be the persons commissioned by the Chairman from among the public officials ranking Grade III orhigher grade of related central administrative agencies or public officials who belong to senior executive service as specified by theEnforcement Decree of the Act, and falling under each of the following subparagraphs: < Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Persons having profound knowledge and experiences in the information and communications;

2. Persons recommended by the Government-contributed research institutes relating to the national safety guarantee andmaintenance of public peace and order;

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3. Persons recommended by the nonprofit non-governmental organizations as referred to in Article 2 of the Assistance forNonprofit Non-Governmental Organizations Act;

4. Other persons deemed necessary by the Chairman.

(3) The Committee may conduct necessary investigations for the examination of public interest nature, or request the interestedparties or the reference witnesses to provide the data. In such case, the relevant interested parties or the reference witnesses shall complywith it unless they have any justifiable reasons.

(4) Where the Committee deems it necessary, it may have the interested parties or the reference witnesses attend the Committee,and hear their opinions. In such case, the relevant interested parties or the reference witnesses shall comply with it unless they have anyjustifiable reasons.

(5) Matters necessary for the organization or operation, etc. of the Committee shall be prescribed by the Enforcement Decree.

Article 12 (Restrictions, etc. on Stockholders of Excessive Possession)

(1) Where a foreign government or a foreigner has acquired the stocks in contravention of the provisions of Article 8 (1), novoting rights shall be exercised for the stocks under the said excessive possession.

(2) The Minister of Science and ICT may order the stockholder who has acquired stocks in contravention of the provisions ofArticle 86 (1), a key communications business operator wherein exists the said stockholder, or the stock-holder of the fictitiouscorporation of foreigners, to make corrections in the relevant matters, with specifying the period within the limit of six months <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) Persons subjected to the order for corrections as referred to in Paragraph (2) shall make corrections in the relevant matterswithin the specified period.

(4) With regard to the stockholder in contravention of the provisions of Article 8 (1), a key communications business operatormay refuse any renewals for the excessive portion in the register of stockholders or of members.

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Article 13 (Charge for Compelling Execution)

(1) Against the persons who were subjected to the orders as referred to in Articles 10 (5) or 12 (2) or 18 (8)(hereinafter referredto as the �corrective orders�) and has failed to comply with them within the specified period, the Minister of Science and ICT may levythe charge for compelling the execution. In such case, the charge for compelling the execution leviable per day shall be not more than3/1,000 of purchase prices of relevant possessed stocks, but in the case not related with the stock possession, it shall be the amount notexceeding 100 million won. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The period subject to a levy of the charge for compelling the execution as referred to in Paragraph (1) shall be from the daynext to the date of expiration of the period set in the corrective orders to the date of implementing the corrective orders. In such case, alevy of the charge for compelling the execution shall be made within 30 days from the day next to the expiration date of the period set inthe corrective orders, except for the case where there exists a special reason.

(3) Provisions of Article 53 (5) and (7) shall apply mutatis mutandis to the collection of the charge for compelling the execution.< Amended on Oct. 15, 2014>

(4) Matters necessary for the levy, payment, refund, etc. of the charge for compelling the execution shall be prescribed by theEnforcement Decree.

Article 14 (Issuance of Stocks)

A key communications business operator shall, in a case of an issuance of stocks, issue the registered ones.

Article 15 (Obligation of Commencing Business)

(1) A key communications business operator shall install telecommunications facilities and commence business within the periodas fixed by the Minister of Science and ICT. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(2) The Minister of Science and ICT may, in case where the said business operator is unable to commence business within theperiod under Paragraph (1) due to force majeure and other unavoidable reasons, extend the relevant period only once, upon anapplication of the key communications business operator. < Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 16 (Modification of License)

(1) Where a key communications business operator intends to modify the important matters prescribed by the EnforcementDecree from among the matters licensed under Article 6, he shall obtain a modified license from the Minister of Science and ICT, underthe conditions as prescribed by the Enforcement Decree. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The provisions of Article 6 (6) and Article 15 shall be applicable mutatis mutandis to a modified license for change underParagraph (1). < Amended on Oct. 15, 2014>

Article 17 (Concurrent Operation of Business)

(1) A key communications business operator shall, in case where he intends to run any of the businesses set forth in thefollowing subparagraphs, obtain approval from the Minister of Science and ICT; provided, however, that this provision shall not applyto any key communications business operator with less than 30,000,000,000 Korean Won in turnover of services. < Amended on Mar.23, 2013, Jul. 26, 2017>

1. Communications equipment manufacturing business;

2. Information and communications construction business pursuant to Paragraph 3 of Article 2 of the Information andCommunications Work Business Act (excluding renovation and consolidation work for electronic telecommunications network);

3. Service business pursuant to subparagraph 6 of Article 2 of the Information and Communications Work Business Act(excluding renovation and consolidation of electronic telecommunications network).

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(2) The Minister of Science and ICT shall grant approval under Paragraph (1), in case where deemed that a key communicationsbusiness operator is not likely to cause any impediments to the operation of telecommunications service by running a business underParagraph (1), and that it is required for the development of telecommunications. < Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 18 (Takeover of Business and Merger of Juristic Persons etc.)

(1) Any person who belongs to any one of the categories set forth in the following Paragraphs shall obtain an authorization fromthe Minister of Science and ICT under the conditions as prescribed by the Enforcement Decree; provided, however, that notwithstandingsubparagraph 3 below, that in case that person sells telecommunications circuit installations except the ones prescribed by theEnforcement Decree, he shall report it to the Minister of Science and ICT under the conditions as determined by the EnforcementDecree < Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Any person who takes or intends to take over the whole or part of a business of a key communications business operator;

2. Any person who intends to merge with a juristic person which is a key communications business operator;

3. Any key communications business operator intending to sell the telecommunications circuit installations necessary forprovision of key communications service;

4. Any person who, along with a certain related person intends to become the [largest shareholder of a key communicationsbusiness operator or own 15% of more of the issued shares of the key communications business operator;

5. Any person seeking to acquire control over a key communication business operator by acquiring shares or entering into anagreement, as specified by the Enforcement Decree of the Act;

6. Any key communication business operator seeking to establish a company to provide part of the key communication servicesprovided under authorization through such company.

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(2) The Minister of Science and ICT shall, in case where it intends to grant authorization or approval under Paragraph (1),comprehensively examine the matters falling under each of the following subparagraphs; provided, however, that the Minister may omitsome part of the examination in case the impact of a takeover of a key communications business, a merger with a key communicationsbusiness, etc. is negligible on competition among key communications business operators. <Amended on Mar. 23, 2013, Oct. 15, 2014,Jul. 26, 2017>

1. Appropriateness of management of resources for information and communications, such as frequencies andtelecommunications numbers, etc.;

2. Impact on the competition of key communications business;

3. Impact on the protection of users and the public interests; and

4. Impact on public interests, such as the use of telecommunications facilities and communication networks, efficiency ofresearch and development and international competitive power of the communications industry, etc.

(3) Matters necessary for the detailed examination standards by examination items and the examination procedures, etc. underParagraph (2) shall be fixed and publicly announced by the Minister of Science and ICT. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) Any person falling under any of the following shall succeed to the telecommunication licensee status of the keycommunication business operator:

1. Any person who has taken over the business of a key communications business operator by obtaining an authorization underParagraph (1);

2. Any juristic person surviving a merger or that established by a merger, or that established by obtaining an authorization underParagraph (2);

3. Any company incorporated to provide part of key communication services with the approval under Paragraph (1)6.

(5) The Minister of Science and ICT may, in case where it grants authorization or authorization under Paragraph (1), attachconditions under Article 6(6). < Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

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(6) The Minister of Science and ICT shall, in case where it intends to grant an authorization under Paragraph (1), go through aconsultation with the Fair Trade Commission. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(7) In regard to the criteria for rejection of authorization in Paragraph (1), Article 7 shall be applicable mutatis mutandis.

(8) In the event any person/entity subject to Article 1(4) or (5) fails to acquire the permit pursuant thereto, the Minister ofScience and ICT may order suspension of its voting right or sale of the applicable shares, and if the conditions attached under Paragraph(5) are not carried out, may order such performance within a specific time frame. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(9) A person seeking authorization under Paragraph (1) shall not do each of the following:

1. Unify communications networks;

2. Appoint officers;

3. Execute other activities such as transferring, consolidating, entering into contract concerning disposing of facilities; or

4. Take follow-up measures regarding establishment of a company prior to obtaining such authorization or approval.

(10) Where any person falling under Paragraph (1) is subject to the examination on public benefits, he/.she may present thedocuments required to be submitted for the examination on public benefits, when applying for authorization under Paragraph (1).

(11) Cases in which the impact on competition among key communications business operators is negligible under the proviso ofParagraph (2), and matters necessary for the procedure of omitting some part of examination shall be determined by the EnforcementDecree. <This Article Newly Inserted on Oct. 15, 2014>

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Article 19 (Suspension or Discontinuation of Business)

(1) A key communications business operator shall, in case where he intends to suspend or discontinue the whole or part of a keycommunications business run by him, as specified by the Enforcement Decree of the Act notify the users at least 60 days prior to thedate of termination and obtain approval of such suspension or discontinuation from the Minister of Science and ICT. < Amended onMar. 23, 2013, Jul. 26, 2017>

(2) In the event separate measures of protection is deemed to be necessary for the protection of users upon suspension ordiscontinuance of the relevant key communications business, the Minister of Science and ICT may order such measures (includingassistance for membership change, bearing expenses, termination of membership) to be taken. < Amended on Mar. 23, 2013, Jul. 26,2017>

(3) The Minister of Science and ICT shall, in case where an application for approval or authorization under Paragraph (1) ismade, grant the relevant approval or authorization, except for each of the following subparagraphs. <Amended on Oct. 15, 2014, Jul. 26,2017>

1. Where there is a flaw in the documents required by the Enforcement Decree, including the details of the business intended to besuspended or discontinued and the drawing of business area;

2. Where the notice to users regarding suspension or discontinuance plan is considered inappropriate;

3. Where suspension or discontinuance is expected to inflict significant damage to users due to insufficient user protectionmeasures and insufficient implementation of the said measures;

4. Where it is recognized that it is urgently needed to maintain a relevant key communications business to respond to a war orengagement or other similar national emergencies or to prevent or recover from a serious disaster.

Article 20 (Cancellation of License, etc.)

(1) The Minister of Science and ICT may, in case where a key communications business operator falls under any one of thefollowing subparagraphs, cancel the relevant license or give an order to suspend the whole or part of business with fixing a period of nomore than one year; provided, however, that the license shall be cancelled entirely or partially if Paragraph 1 is applicable: < Amendedon Mar. 23, 2013, Oct. 15, 2014, Jan. 27, 2016, Jul. 26, 2017>

1. Where he has obtained a license by deceit and other illegal means;

19



2. Where he has failed to implement the conditions under Articles 6 (6) and 18 (5);

3. Where he has failed to observe the orders under Article 12 (2);

4. Where he has failed to commence business within the period under Article 15 (1) (in case of obtaining an extension of theperiod under Article 15 (2), the extended period);

4-2. Where he has failed to continuously provide key communications services for the period exceeding the period as determinedby the Enforcement Decree without obtaining approval under Article 19(1);

5. Where he has failed to comply with the standardized use contract, that is authorized or reported under Article 28 (1) and (2);and

6. Where he fails to comply with an order for correction under Article 92 (1) without any justifiable reasons.

(2) Criteria and procedures for the dispositions under Paragraph (1) and other necessary matters shall be determined by theEnforcement Decree.

(3) In case the Minister of Ministry of Science, ICT and Future Planning cancels all or part of a license or orders the suspensionof all or part of a business under Paragraph (1), the Minister may order user protection measures under Article 19(2). <This ArticleNewly Inserted on Oct. 15, 2014>

SECTION 3 Specific Communications Business and Value-Added Communications Business

Article 21 (Registration of Specific Communications Business Operator)

(1) A person who intends to operate a specific communications service shall register the following matters with the Minister ofScience and ICT (including registration through information network) under the conditions as determined by the Enforcement Decree: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Financial and technical capability;

20



2. Plans for a user protection; and

3. Business plans, etc. and other matters as determined by the Enforcement Decree.

(2) The Minister of Science and ICT may, upon receipt of the registration of a specific communications business underParagraph (1), attach the conditions necessary for the promotion of fair competition, protection of users, improvement of service qualityand efficient employment of resources for information and communication. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) The Minister of Science and ICT shall accept the registration under Paragraph (1) unless the person falls under one of thefollowing subparagraphs. <Amended on Oct. 15, 2014, Jul. 26, 2017>

1. Where matters provided in each subparagraph of Paragraph (1) are not satisfied;

2. Where there is a flaw in the documents required by the Enforcement Decree including the articles of incorporation of acompany and the standardized use contract;

3. Where the applicant for registration is not a corporation.

(4) A person subject to the registration of specific communications business under Paragraph (1) shall be limited to a juristicperson.

(5) A person who registered his specific communications business under Paragraph (1) (hereinafter referred to as a �specificcommunications business operator�) shall commence operation within 1 year from the registration date.

(6) Procedures and requirements for the registration under Paragraph (1) and other necessary matters shall be determined by theEnforcement Decree.

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Article 22 (Report, etc. of Value-Added Communications Business Operator)

(1) A person who intends to run a value-added communications business shall report to the Minister of Science and ICT(including reports via information network), according to the requirements and procedures as prescribed by the Enforcement Decree: <Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(2) Notwithstanding Paragraph (1), a person who intends to run a value-added communications business shall register under theMinister of Science and ICT (including reports via information network), by fulfilling below each item: <Newly inserted on May 19,2011, Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

1. Plan for implementation of technical measures for performance of Article 22(3)1 and Article 104 of the Copyright Act(This subparagraph shall apply only to the person who falls under Article 2(13)A);

1-2. Plan for implementation of technical measures to prevent caller�s telephone number from being falsely displayed viaalteration, etc. thereof (This subparagraph shall apply only to the person who falls under Article 2(13)B);

2. Personnel and physical facilities necessary for work performance;

3. Financial solvency; and

4. Other matters determined by the Enforcement Decree such as business plan.

(3) When the Minister of Science and ICT has received an application for registration of value-added communications businesspursuant to Paragraph (2), the Minister may add conditions necessary for the performance of a plan pursuant to subparagraph 1 or 1-2 ofthe same Paragraph. <Newly Inserted on May 19, 2011, Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(4) Notwithstanding Paragraph (1), if a person falls under any of the following subparagraphs, the person shall be deemed tohave reported his/her value-added communications business. <Amended on Oct. 15, 2014>

1. A person who intends to carry on small-scale value-added communications business, whose capital, etc. fall under thecriteria set by the Enforcement Decree;

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2. A key communications business operator who intends to carry on a value-added communications business.

(5) A person who reported value-added communications business under Paragraph (1) and a person who registered value-addedcommunications business under Paragraph (2) shall commence operation within 1 year from the reporting or registration date.<Amended on May 19, 2011, Oct. 15, 2014>

(6) A report pursuant to Paragraph (1), registration requirements and procedures pursuant to Paragraph (2) and other necessarymatters shall be determined by the Enforcement Decree. <Newly Inserted on May 19, 2011, Oct. 15, 2014>

Article 22-2 (Reasons for Disqualification from Registration)

Any person or legal entity not exceeding three years from the date of registration cancelation pursuant to Article 27(2) or a person whowas the majority shareholder of such corporation (investors determined by the Enforcement Decree) at the time of such cancelation maynot make a registration pursuant to Article 22(2).

[This Article Newly Inserted on May 19, 2011]

Article 22-3 (Technical Measures, etc. of Value-Added Communications Business of a Special Type)

(1) A person who has registered a value-added communications business of a special type under Article 22(2) (hereinafter referto �value-added communications business of a special type� in this article), and who falls under Article 2(13)A, shall take each of thefollowing technical measures. <Amended on Dec. 1, 2015>

1. Technical measures for performance of Article 42, Article 42-2 and Article 45 of the Act on Promotion of Informationand Communications Network Utilization and Information Protection, Etc.;

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2. Technical measures determined by the Enforcement Decree to prevent circulation of unlawful information under Article44-7(1)1 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, Etc.

(2) No person shall intentionally or negligently incapacitate�via removal or alteration, or circumvention of�the technicalmeasures of Paragraph (1) without reasonable authority, except for any of the following cases:

1. Where it is necessary for central administrative agencies or local governments to conduct work under laws andregulations;

2. Where it is necessary for an investigative agency, or a chief information protection officer, National InternetDevelopment Agency, etc. under the Act on Promotion of Information and Communications Network Utilization and InformationProtection, Etc. to respond to the occurrence of information and communications network infringements including computer hacking.

(3) A person who carries on a value-added communications business of a special type (limited to the person who falls underArticle 2(13)A) shall ensure that the status of operation and management of the technical measures of Paragraph (1) is automaticallyrecorded in a system, and shall keep the record for the period determined by the Enforcement Decree.

(4) Depending on its relevant business, the Minister of Science and ICT or the Korea Communications Commission may orderits officials to examine the status of operation and management of the technical measures of Paragraph (1), or order a person carrying ona value-added communications business of a special type to submit necessary documents including the record of Paragraph (3). In thiscase, Article 51 shall apply mutatis mutandis to the examination procedure and method. <Amended on Dec. 1, 2015, Jul. 26, 2017>

(5) No person shall damage, counterfeit or alter the record in Paragraph (3) above without just power.

[This Article Newly Inserted on Oct. 15, 2014]

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Article 22-4 (Value-Added Telecommunication Services Required to Make Fee Report)

(1) If telecommunications business operators provide a value-added telecommunication serviceas described in Article 2(13)B, they shall make a report on their service fees to the Minister of Science and ICT (including modifiedreport; hereinafter in this Article the same shall apply.), unless their revenue from the value-added telecommunication service is lessthan the amount determined in consideration of market situation, market share, etc. and publicly announced by the Minister of Scienceand ICT. <Amended on Jul. 26, 2017>

(2) Telecommunications business operators shall disclose the content of their reports made under Paragraph (1).

(3) The procedure and method of the report under Paragraph (1) and the disclosure under Paragraph (2) shall be determined bythe Enforcement Decree.

[This Article Newly Inserted on Jan. 27, 2016]

Article 23 (Modification of Registered or Reported Matters)

Specific communications business operator a person who has made a report of a value-added communications business operator underArticle 22(1) or has registered value-added communications business under Paragraph (2) of the same Act shall, when he intends tomodify the matters as determined by the Enforcement Decree from among the relevant registered or reported matters, make in advance amodified registration or modified report (including modified registration or modified report through information network) to theMinister of Science and ICT under the conditions as prescribed by the Enforcement Decree. <Amended on May 19, 2011, Mar. 23,2013, Oct. 15, 2014, Jul. 26, 2017>

Article 24 (Transfer or Takeover, etc. of Business)

In case where there exists a transfer or takeover of the whole or part of a specific communications business or a value-addedcommunications business, or a merger or succession of a juristic person which is a specific communications business operator or avalue-added communications business operator (a person who has reported value-added communications services pursuant to Article22(1), has registered value-added communications services pursuant to Paragraph (2) of the same Act, or is deemed to have made suchreporting under Paragraph (4) of the same Article, hereinafter refer to the same), each of the following persons shall make the reportthereon (including reports through information network) to the Minister of Science and ICT, according to the requirements andprocedures as prescribed by the Enforcement Decree; provided, however, that the foregoing shall not apply to such person who isregarded as having reported a value-added communications business under Article 22(4) due to the transfer or takeover of the whole orpart of a value-added communications business or due to the merger or succession of a juristic person who is a value-addedcommunications business operator. <Amended on May, 19, 2011, Mar. 23, 2013, Oct. 15, 2014, Oct. 15, 2014, Jul. 26, 2017>

1. A person who has taken over the relevant business,

25



2. The juristic person surviving the merger, the juristic person founded by the merger, or

3. The successor to the business in question

Article 25 (Succession of Business)

In case where there have existed a transfer or takeover of a specific communications business or a value-added communicationsbusiness, a merger of a juristic person which is a specific communications business or a value-added communications business operator,or a succession of a value-added communications business, under Article 24, each of the following persons shall succeed to the status ofa former specific communications business operator or a value-added communications business operator.

1. A person who has taken over the business;

2. A juristic person surviving a merger, or a juristic person founded by a merger; or

3. A successor of the relevant business.

Article 26 (Suspension or Closedown, etc. of Business)

(1) A specific communications business operator or a value-added communications business operator shall, in case where heintends to suspend or close down the whole or part of his business, in a manner determined in the Enforcement Decree of the Act, notifythe relevant contents to the users of relevant services, and report thereon to the Minister of Science and ICT (including reports throughinformation network) not later than thirty days prior to the slated date of the relevant suspension or closedown In this case, the businessshall not be maintained for more than 1 year. < Amended on Mar. 23, 2013, Jul. 26, 2017>

26



(2) Where a juristic person which is a specific communications business operator or a value-added communications businessoperator is dissolved for reasons other than a merger, a relevant liquidator (referred to a trustee in a bankruptcy, when it is dissolved bybankruptcy) shall report thereon without delay to the Minister of Science and ICT (including reports through information network). <Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 27 (Cancellation of Registration and Order for Closedown of Business)

(1) The Minister of Science and ICT may, when a specific communications business operator falls under any of the followingsubparagraphs, cancel his registration wholly or partially, or suspend his business wholly or partially by specifying the period of notmore than one year; provided, however, that when he falls under the subparagraph 1, the Minister of Ministry of Science, ICT andFuture Planning shall cancel his registration: < Amended on Mar. 23, 2013, Jan. 27, 2016, Jul. 26, 2017>

1. Where he makes a registration by deceit and other illegal means;

2. Where he fails to implement the conditions under Article 21 (2);

3. Where he fails to commence business within one year from the date on which a registration was made under Article 21 (4), orin violation of the latter part of Article 26(1) continually suspends business operation for not less than one year;

4. Where he fails to comply with an order for correction Article 92 (1) without any justifiable reasons;

(2) The Minister of Science and ICT may, when a value added communications business operator falls under any of thefollowing subparagraphs, issue an order to him for a closedown of the whole or part of business (in case of a special type of value-addedtelecommunications business operator, the cancelation of the whole or part of the registration) or for a suspension of the whole or part ofbusiness by specifying a period of not more than one year; provided, however, that where he falls under any one of the followingsubparagraphs, the said Minister shall issue an order to him for a closedown of whole or part of business <Amended on May 19, 2011,Mar. 23, 2013, Oct. 15, 2014, Jan. 27, 2016, Jul. 26, 2017>:

1. Where he makes a report or registration by deceit and other illegal means;

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2. Where he fails to perform conditions under Article 22(3);

3. Where he fails to commence the business within one year from the reporting or registration date under Article 22(5), or inviolation of the latter part of Article 26(1) suspend the business operation for not less than one year;

3-2. Where there is a request from the Korea Communications Commission because the business operator failed to take technicalmeasures under Article 22(3)1.

4. Where he fails to comply with a correction order under Article 92 (1) without any justifiable reasons;

5. Where he fails to comply with an order under Article 64(4) of the Act on Promotion of Information and CommunicationsNetwork Utilization and Information Protection, etc. without any justifiable reasons; and

6. Where a person who had been punished by a fine for negligence more than three times pursuant to Article 142(1) and Article142(2)3 became subject to the disposition of fine for negligence again and where the Minister of Culture, Sports and Tourism requestsafter the deliberation of the Korea Copyright Commission pursuant to Article 112 of the same Act.

(3) Criteria and procedures for dispositions taken under Paragraph (1) or (2) and other necessary matters shall be determined bythe Enforcement Decree.

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CHAPTER III TELECOMMUNICATIONS SERVICE

Article 28 (Report, etc. of Standardized Use Contract)

(1) A key communications business operator shall set forth the fees and other terms for use by service with respect to thetelecommunications service which he intends to provide (hereinafter referred to as the �standardized use contract�), and report thereon(including a modified report) to the Minister of Science and ICT. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) Notwithstanding Paragraph (1), in a case of a key communications service whose size of business and market sharecorrespond to the standards as determined by the Enforcement Decree, it shall obtain an authorization of the Minister of Science andICT (including a modified authorization; provided, however, that any decrease in the service-specific charges included the approvedstandard terms and conditions of usage shall be reported to the Minister of Science and ICT. < Amended on Mar. 23, 2013, Jul. 26,2017>

(3) In regard to the main body of Paragraph (2), the Minister of Science and ICT shall authorize the standardized use contract, ifit falls under the criteria of every following subparagraph: < Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Fees for telecommunications service shall be reasonably calculated considering but not limited to costs of supply, profits,classification of costs/ profits by labor, cost savings achieved by methods of provision of labor, and effects on fair competitiveenvironments;

2. Matters concerning the responsibility of key communications business operators and relevant users, cost-sharing methodsconcerning the installation work of telecommunications facilities and other works shall not be unreasonably disadvantageous to users.

3. Forms of use of telecommunication line facilities by other telecommunications business operators or users shall not be undulyrestricted;

4. Undue discriminatory treatments shall not be made to specific persons; and

5. Matters on securing the important communications under Article 85 shall take into consideration matters such as achievingefficient performance of State�s function.

(4) A person intending to acquire the approval under Paragraph (!) and (2) or file a report with respect to the telecommunicationsservices shall submit the supporting data for calculation of fee (including subscription fee, basic fee, usage fee, value-added service fee,and actual expense). In case of business change, a table comparing the old (before change) and new (after change) supporting datashould be submitted to the Minister of Science and ICT for comparison. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(5) Details necessary and not otherwise specified in Paragraphs (1) through (4) in regard to the scope of and procedures ofreporting and authorization shall be specified under the Enforcement Decree of the Act.

Article 29 (Reduction or Exemption of Fees)

A key communications business operator may reduce or exempt the fees for telecommunications service under the conditions prescribedby the Enforcement Decree, such as national security guarantee, disaster relief, social welfare and public interest.

Article 30 (Restriction on Use by Others)

No person shall intermediate other�s communications or provide for other�s communications by making use of telecommunicationsservices provided by a telecommunications business operator; provided, however, that the same shall not apply to the case falling underany of the following subparagraphs:

1. Where it is needed to ensure the prevention and rescue from disaster, traffic and communication, and the supply of electricity,and to maintain order in a national emergency situation;

2. Where telecommunications services are incidentally rendered to clients while running a business other than thetelecommunications business;

3. Where it is allowed to use on a trial basis for the purpose of developing and marketing telecommunications facilities, such asterminal devices, etc. which enable to use the telecommunications services;

4. Where any user permits any third party to use to the extent that the latter does not use repeatedly; and

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5. Where it is necessary for the public interests or where the business run by any telecommunications business operator is notimpeded, which is prescribed by the Enforcement Decree.

Article 31 (Use of Transmission or Line Equipment, etc.)

(1) The composite cable TV business operator, transmission network business operator, or relay cable broadcasting businessoperator under the Broadcasting Act may provide the transmission or line equipment or the cable broadcasting equipment possessedunder the methods prescribed by the Enforcement Decree to the key communications business operators.

(2) The composite cable TV business operator, transmission network business operator, or relay cable broadcasting businessoperator under the Broadcasting Act shall, when he intends to provide value-added communications services by making use of thetransmission or line equipments or cable broadcasting equipment, make a report thereon to the Minister of Science and ICT pursuant toArticle 22. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) The provisions of Articles 33-5 through 35 and 37 shall be applicable mutatis mutandis to the transmission or line equipmentor cable broadcasting facilities under Paragraph (1).

(4) The provisions of Article 28 (2) through (7) of the Framework Act on Telecommunications shall be applicable mutatismutandis to the offer of services under Paragraph (2).

Article 32 (Protection of Users)

(1) A telecommunications business operator shall make efforts to prevent users from damage and immediately address users�reasonable opinions or dissatisfactions, with respect to the telecommunications service. In this case, if it is difficult to take a promptmeasure, he shall notify the users of the reasons thereof and the schedule for measures. <Amended on Oct. 15, 2014>

(2) The Korea Communications Commission may disclose the results after evaluating the user protection measures of Paragraph(1). In this case, the Korea Communications Commission may order the relevant telecommunications business operator to submitnecessary documents for the evaluation. <Amended on Oct. 15, 2014>

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(3) In case the telecommunications business operator who is determined by the Enforcement Decree in consideration of the typeof telecommunication service, business size, user protection measures, etc., enters into a contract with users concerning the use oftelecommunication services (including amended contract), the operator shall send the copy of the contract to users via in writing or viainformation and communications network as determined by the Enforcement Decree. <Newly Inserted Oct. 15, 2014>

(4) A telecommunications business operator providing key communications services shall subscribe a guarantee insurance withthe person designated by the Minister of Science and ICT as beneficiary in an amount determined in accordance with the criteriaspecified under the Enforcement Decree of the Act and not exceeding the aggregate prepaid phone service charges to be received priorto providing prepaid phone services to be able to compensate losses to users arising from not being able to provide services afterreceiving service charges in advance; provided, however, that the foregoing requirement may be waived in the case specified under theEnforcement Decree of the Act where such telecommunications business operator�s financial capacity and services charges are taken inconsideration. < Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(5) The person designated as beneficiary under Paragraph (4) shall distribute insurance proceeds received under the guaranteeinsurance under Paragraph (4) to users who have not received services after paying service charges in advance. <Amended on Oct. 15,2014>

(6) Matters necessary in regard to the target, criteria and procedure of evaluation of user protection measures, the utilization ofevaluation results, the procedure of sending the copy of a contract, and the subscription, renewal and distribution of insurance proceedsunder Paragraph (2) and (5) shall be specified in the Enforcement Decree. <Amended on Oct. 15, 2014>

Article 32-2 (Notification of Excess of Maximum Fee Limit)

(1) Any operator of telecommunication business who uses frequencies allocated in accordance with the Radio Waves Act shallgive notice to users in such cases where falling under any of the following subparagraphs:

1. Where the maximum fee limit by telecommunication services which the user initially agreed to is exceeded; and

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2. Where any fee incurred by international telecommunication services including international call is imposed.

(2) Matters necessary for object and means of notification under Paragraph (1) shall be determined and publicly announcedby the Minister of Science and ICT. < Amended on Mar. 23, 2013, Jul. 26, 2017>


Article 32-3 (Limitation on Provision of Telecommunication Services)

(1) The Minister of Science and ICT may order a telecommunications business operator to suspend its provision oftelecommunication service for relevant telecommunication number, in case a relevant administrative agency�s head makes any of thefollowing requests. < Amended on Jan. 27, 2016, Jul. 26, 2017>

1. Request for suspension of provision of telecommunication service under Article 9-6 of the Act on Registration of CreditBusiness, etc. and Protection of Finance Users;

2. Request for suspension of provision of telecommunication service under Article 13-3 of the Special Act on Refund of Amountof Damage Caused by Telecommunications Bank Fraud;

3. Request for suspension of provision of telecommunication service under Article 6-2 of Electronic Financial Transactions Act.

(2) The telecommunications business operator who receives the order from the Minister of Science and ICT under Paragraph(1) shall obey it, and in this case, the business operator shall notify its telecommunication services users of the administrative agencyrequesting the suspension of service, the causes of request, and the procedure of raising objection, before suspending the provision oftelecommunication service. <Amended on Jul. 26, 2017>

(3) Matters necessary for method, etc. of notifying the procedure of raising objection under Paragraph (2) shall be determined bythe Enforcement Decree.


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Article 32-4 (Prevention, etc. of Misuse of Mobile Communications Terminal)

(1) No person shall conduct an act that falls under any of the following subparagraphs.

1. An act of using telecommunication service provided to a mobile communications terminal or using a mobile communicationsterminal to collect the relevant funds, after opening a mobile communications terminal (i.e., a terminal required to use a keycommunications service that uses the frequencies allocated under the Radio Waves Act; hereinafter, the same shall apply.) by enteringinto a contract concerning provision of telecommunication service in another�s name on condition that he will provide or finance funds;

2. An act of soliciting, arranging or mediating, or advertising a contract concerning the provision of telecommunication servicerequired for the use of a mobile communications terminal on condition of providing or financing funds.

(2) If a telecommunications business operator determined by the Enforcement Decree in consideration of type oftelecommunication service, business size, user protection, etc. enters into a contract concerning provision of telecommunication services(including entering to a contract via agency or entrusted agency which represents the telecommunications business operator or isentrusted with providing telecommunication services), the telecommunication business operator shall confirm the identity of thecounterparty by using the system for prevention of unlawful subscription, etc. under Article 32-5(1) with the consent of thecounterparty. If the counterparty is not the person himself or rejects such confirmation procedure, the telecommunication businessoperator may reject the conclusion of contract. The same shall apply where a user is changed due to assignment of the provision oftelecommunication services, succession of user status, etc., to the new user of telecommunication services.

(3) When a telecommunications business operator checks the identity of a counterparty under Paragraph (2), thetelecommunications business operator may request the counterparty to present certificates and documents including resident ID card,driver�s license, etc. that may confirm the identity.

(4) Details of the method of confirming the identity under Paragraph (2), and the type of certificates and documents used for theidentity check under Paragraph (3) shall be determined by the Enforcement Decree.


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Article 32-5 (Establishment of System for Prevention of Unlawful Subscription)

(1) The Minister of Science and ICT shall establish a system required to confirm the identity of a subscriber to preventtelecommunication service contracts from being entered into by unlawful means (�system for prevention of unlawful subscription�) andshall enable telecommunications business operators under Article 32-4 (2) to use the system. <Amended on Jul. 26, 2017>

(2) To establish and operate the system for prevention of unlawful subscription, the Minister of Science and ICT may, based onthe common use of administrative information under Article 36(1) of the Electronic Government Act, request the head of a governmentagency or a public organization that holds the following information necessary for the identity check of a subscriber (including agent bylaw) to verify the authenticity of certificates, etc. submitted under Article 32-4(3). In this case, the requested head of the governmentagency or public organization shall accept the request unless there is no reasonable cause to reject: <Amended on Jul. 26, 2017>

1. Information about an individual�s resident registration and family members;

2. Information about a corporation�s registration and business registration;

3. Information about foreigners� or Korean nationals� registration/address report and entry/departure;

4. Other information about certificates and documents submitted under Article 32-4(3).

(3) The Minister of Science and ICT may, as determined by the Enforcement Decree, entrust the task of establishment andoperation of the system for prevention of unlawful subscription to the Korea Association for ICT Promotion (�Korea Association forICT Promotion�) under Article 15 of the Framework Act on Broadcasting Communications Development. <Amended on Jul. 26, 2017>


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Article 32-6 (Provision, etc. of Identity Theft Prevention Service)

(1) A telecommunications business operator that provides key communications services shall provide a user with the servicethat informs the user, by text message or registered mail, of the fact that a telecommunication service use contract has been concluded inthe name of, and with the consent of, the user (�identity theft prevention service�); provided, however, that such identity theftprevention service shall be provided by means of registered mail to users who cannot receive a text message, such as those who do nothave any mobile device subscribing under their name or those who reported loss of their mobile devices. <Amended on Mar. 14, 2017>

(2) To support the provision of identity theft prevention service, the Minister of Science and ICT may designate the KoreaAssociation for ICT Promotion as an organization in charge. <Amended on Jul. 26, 2017>

(3) Matters necessary for the contents, procedure, etc. of the identity theft prevention service shall be determined and announcedby the Minister of Science and ICT. <Amended on Jul. 26, 2017>[This Article Newly Inserted on Oct. 15, 2014]

Article 32-7 (Blocking of Media Product, etc. Harmful to Juveniles)

(1) If a telecommunications business operator using the frequencies allocated under the Radio Waves Act enters into atelecommunication service use contract with a juvenile as defined in the Juvenile Protection Act, the telecommunications businessoperator shall provide the means to block the media product harmful to juveniles under Article 2(3) of the Juvenile Protection Act andto block information with an obscene content under Article 44-7(1)1 of the Act on Promotion of Information and CommunicationsNetwork Utilization and Information Protection, Etc.

(2) The Korea Communications Commission may inspect the status of provision of the said means under Paragraph (1).

(3) Matters necessary for the method and procedure of providing the means to block the harmful media product, etc. underParagraph (1) shall be determined by the Enforcement Decree.


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Article 32-8 (Call Forwarding Service)

(1) A telecommunications business operator may provide users with a telecommunication service that forwards a call, etc.received by a user�s telecommunication number to a specific telecommunication number set in advance by the user (hereinafter the�Call Forwarding Service�).

(2) The telecommunications business operator providing the Call Forwarding Service under Paragraph (1) above shall make areport on the details of the service, the procedure of subscription and setting of the service, etc. to the Minister of Science and ICT.<Amended on Jul. 26, 2017>

(3) The telecommunications business operator providing the Call Forwarding Service under Paragraph (1) shall not provide theCall Forwarding Service which is different from the Call Forwarding Service reported under Paragraph (2) above.

(4) The telecommunications business operator providing the Call Forwarding Service under Paragraph (1) shall not arbitrarilyestablish such service without user�s application.


Article 33 (Compensation for Damages)

A telecommunications business operator shall make compensations when he inflicts any damages on the users with regard to theprovision of telecommunications services or the occurrence of a cause leading to users� comments or complaints under Article32(1) andthe delay in addressing them; provided, however, that if such damages are the results of force majeure, or of intent or negligence of theusers, the relevant liability for compensations shall be reduced or exempted. <Amended on Oct. 15, 2014>

CHAPTER IV PROMOTION OF COMPETITION AMONG THE TELECOMMUNICATIONS BUSINESS

Article 34 (Promotion of Competition)

(1) The Minister of Science and ICT shall exert efforts to construct an efficient competition system and to promote faircompetitive environments, in the telecommunications services< Amended on Mar. 23, 2013, Jul. 26, 2017>

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(2) The Minister of Science and ICT shall conduct annual evaluation of competition system with respect to key communicationsbusiness in order to construct an efficient competition system and to promote fair competition in the telecommunication servicesindustry pursuant to Paragraph 1 above. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) The specific evaluation standards, procedure and method for evaluating competition system under Paragraph 2 above shall beprescribed by the Enforcement Decree.

Article 35 (Provision of Facilities, etc.)

(1) A key communications business operator or an institution constructing, operating and managing road, railroad, subway, watersupply/sewage, electric poles, cables, telecommunications line facilities (�facility management institution�) may, upon receipt of arequest for the provision of conduit line, common duct, electric poles, cables, operation sites and other facilities (includingtelecommunication facilities, hereinafter the same) or facilities (�facilities, etc.� from other key communications business operator,provide the facilities, etc. by concluding an agreement with him.

(2) A key communications business operator falling under any of the following subparagraphs shall, upon receipt of a requestunder Paragraph (1), provide the telecommunications facilities by concluding an agreement, notwithstanding the provisions ofParagraph (1) ; provided, however, that the foregoing is not applicable in case there is a usage plan, etc. of the facility managementinstitution:

1. A key communications business operator who possesses the equipments which are indispensable for other telecommunicationsbusiness operators in providing the telecommunications services; and

2. Each of the following facility management institutions owning conduit line, common duct, electric pole, cable and otherfacilities, etc.

A. The Korea Expressway Corporation organized under the Korea Highway Corporation Act;

B. The Korea Water Resources Corporation organized under the Korea Water Resources Corporation Act;

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C. The Korea Electric Power Corporation organized under the Korea Electric Power Corporation Act;

D. The Korea Rail Network Authority organized under the Korea Rail Network Authority Act;

E. Local public enterprises under Local Public Enterprise Act;

F. Municipalities under Local Autonomy Act;

G. The Regional Construction Management Administration under the Road Act.

3. A key communications business operator whose business scale and market shares, etc. of key communications services areequivalent to the criteria as determined by the Enforcement Decree.

(3) The Minister of Science and ICT shall set forth and publicly notify the scope of facilities, etc., the conditions, procedures andmethods for the provision of facilities, and the standards for calculation of prices under Paragraphs (1) and (2). In this case, the scope offacilities, etc. to be provided under Paragraph (2) shall be determined in view of the demand for facilities, etc. by the keycommunications business operators falling under each subparagraph of the same Paragraph. < Amended on Mar. 23, 2013, Jul. 26,2017>

(4) A telecommunications business operator who wants to be provided with the telecommunications facilities shall conclude anagreement in advance under Paragraph (1) above, and may install the apparatus enhancing the efficiency of the relevant facilities withinthe limit necessary for the provision of the telecommunications services. In this case, the telecommunications business operator shallnotify in advance a key communications business operator or a facility management institution, which provides the relevant facilities, asdetermined in the Enforcement Decree, and shall remove the apparatus upon the termination of the aforesaid agreement or upon theexpiration of the period of use. <Amended Jan. 20, 2015>

(5) For efficient use and management of facilities, etc., the Minister of Science and ICT may conduct a site inspection of thestatus of provision and use of facilities, etc. In this case, Article 51 (3) through (6) shall apply mutatis mutandis to the procedure andmethod of site inspection. <Newly Inserted on Oct. 15, 2014, Jul. 26, 2017>

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(6) < Deleted on Dec. 1, 2015>

(7) For provision of facilities, etc. under Paragraphs (1) and (2), the Minister of Science and ICT may appoint an expertinstitution. < Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(8) Details necessary for appointment and operation guidelines for expert institutions under Paragraph (7) shall be determinedand announced by the Minister of Science and ICT. < Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

Article 35-2 (Obligations to Repair and Maintain Aerial Cableway)

(1) Telecommunications business operators and facility management institutions shall repair and maintain cables installed inelectric poles for city appearance (hereinafter in this Article �aerial cableway�).

(2) The Minister of Science and ICT shall every year establish a plan for repairing and maintenance of aerial cableway(hereinafter in this Article �repairing and maintenance plan�) to ensure systematic repairing and maintenance under Paragraph(1) above. In this case, the repairing and maintenance plan shall require the deliberation by the deliberation committee on repairing andmaintenance of aerial cableway consisting of relevant ministries, relevant telecommunications business operators, etc. <Amended onJul. 26, 2017>

(3) Telecommunications business operators and facility management institutions shall comply with the aforesaid repairing andmaintenance plan, and the cost required for implementing the repairing and maintenance plan shall be shared by the persons whoprovide/use relevant facilities, etc. as determined by the Enforcement Decree.

(4) Matters related to constitution and operation of the deliberation committee on repairing and maintenance of aerial cablewayunder Paragraph (2) above shall be determined by the Enforcement Decree.


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Article 36 (Joint Utilization of Subscriber��s Lines)

(1) A key communications business operator shall, in case where other telecommunications business operators as determined andpublicly noticed by the Minister of Science and ICT have made a request for a joint utilization with respect to the lines installed in thesection from the exchange facilities directly connected with the users to the users (hereafter in this Article, referred to as the�subscriber�s lines�), allow it. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The Minister of Science and ICT shall set forth and publicly notify the scope of joint utilization of the subscriber�s linesunder Paragraph (1), its conditions, procedures and methods, and the standards for calculation of prices. < Amended on Mar. 23, 2013,Jul. 26, 2017>

Article 37 (Joint Utilization of Radio Communications Facilities)

(1) A key communications business operator may, upon receipt of a request for the joint utilization of radio communicationsfacilities (hereinafter referred to as the �joint utilization�) from other key communications business operators, allow it by concluding anagreement. In this case, the prices for the joint utilization among the key communications business operators as set forth and publiclynotified by Minister of Science and ICT shall be computed and settled accounts by a fair and reasonable means. < Amended on Mar. 23,2013, Jul. 26, 2017>

(2) The key communications business operators as determined and publicly notified by the Minister of Science and ICT shall,upon receipt of a request for the joint utilization from other key communications business operators as determined and publicly notifiedby the Korea Communications Commission, allow it by concluding an agreement, notwithstanding the provisions of Paragraph (1), inorder to enhance the efficiency of the telecommunications business and to protect the users. < Amended on Mar. 23, 2013, Jul. 26,2017>

(3) The Minister of Science and ICT shall set forth and publicly notify the standard for computing the prices for joint utilizationunder the latter part of Paragraph (1) and its procedures and payment methods, etc., and the scope of joint utilization under Paragraph(2), its conditions, procedures and methods, and the computation of prices, etc. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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Article 38 (Wholesale Provision of Telecommunication Services)

(1) Upon request from other telecommunication business operator, a key communications business operator may enter into anagreement to allow such telecommunication business operator to resell the telecommunication services it provides to users (�resale�) byproviding such services to such other telecommunication business operator or permitting part or all of the telecommunication facilitiesnecessary for such provision of telecommunication services (�wholesale provision�).

(2) To encourage competition in the telecommunication industry, the Minister of Science and ICT may, upon request from atelecommunication business operator, designate and announce telecommunication s services (�designated wholesale services�) of a keycommunications business provider which would need to enter into an agreement for wholesale provision (�designated wholesaleprovider�). In this case, designated wholesale services of the designated wholesale provider shall be selected from telecommunicationservices of key communications business providers satisfying the criteria specified in the Enforcement Decree of the Act which wouldtake into consideration business size and market share. < Newly Inserted on Mar. 14, 2017, Amended on Jul. 26, 2017>

(3) After evaluating the competition status of the communications market each year, if the Minister of Science and ICTdetermines that the competition in the telecommunications industry has increased to the degree where the sufficient wholesale oftelecommunications services have been provided or the set criteria are not met, it may withdraw its designation of designated wholesaleservices of the designated wholesale provider. < Newly Inserted on Mar. 14, 2017, Amended on Jul. 26, 2017>

(4) The Minister of Science and ICT shall determine and announce the terms and conditions of the wholesale provision when thedesignated wholesale provider enters into an agreement about the designated wholesale services. In this case, the consideration shall becalculated on the basis of subtracting avoidable costs (costs that the key communications business operator can avoid when notproviding services directly to users) from retail prices of the designated wholesale services. < Newly Inserted on Mar. 14, 2017,Amended on Jul. 26, 2017>

(5) Upon request for wholesale provision from other telecommunications business operator, a key communications businessoperator shall enter into an agreement within 90 days unless there are special reasons and shall report such agreement to the Minister ofScience and ICT in a manner specified in the Enforcement Decree of the Act within 30 days from the execution of such agreement. Thesame applies in the case of a change or abolition of the agreement. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(6) An agreement under Paragraph (5) shall satisfy the criteria announced by the Minister of Science and ICT under Paragraph(4). < Amended on Mar. 23, 2013, Jul. 26, 2017>

[Paragraph (2) through (4) shall be effective until September 22, 2019 under the Article 2 of the Addenda to the Act No. 14576 (Mar.14, 2017)]

Article 39 (Interconnection)

(1) A telecommunications business operator may allow the interconnection by concluding an agreement, upon a request fromother telecommunications business operators for an interconnection of telecommunications facilities.

(2) The Minister of Science and ICT shall set forth and publicly notify the scope of interconnections of telecommunicationsfacilities, the conditions, procedures and methods, and the standards for calculation of prices under Paragraph (1). < Amended on Mar.23, 2013, Jul. 26, 2017>

(3) Notwithstanding the provisions of Paragraphs (1) and (2), the key communication business operators falling under any of thefollowing subparagraphs shall allow the interconnection by concluding an agreement, upon receipt of a request under Paragraph (1):

1. A key communications business operator who possesses such facilities as are indispensable for a provision oftelecommunications services by other telecommunications business operators; and

2. A key communications business operator whose business size of key communications services and the ratio of market sharesare compatible with the standards as determined by the Enforcement Decree.

Article 40 (Prices of Interconnection)

(1) Prices for using the interconnection shall be calculated by a fair and proper means and deducted from each other�s accounts.The detailed standards for such calculation, their procedures and methods shall be governed by the standards of Article 39 (2).

43



(2) A key communications business operator may deduct the prices for interconnection from each other�s accounts under theconditions as prescribed by the standards under Article 39 (2), if he suffers any disadvantages due to the causes of no liability on hispart, in the method of interconnection, the quality of connected conversations, or the provision of information required forinterconnection, etc.

Article 41 (Joint Use, etc. of Telecommunications Facilities)

(1) A key communications business operator may allow an access to or a joint use of the telecommunications equipment orfacilities by concluding an agreement, upon receipt of a request from other telecommunications business operators for an access to or ajoint use of the telecommunications equipment or facilities such as pipes, cables, poles, or stations of the relevant key communicationsbusiness operator, for the establishment or operation of facilities required for interconnection of telecommunications facilities.

(2) The Minister of Science and ICT shall set forth, and make a public notice of, the scope, conditions, procedures and methodsfor an access to or a joint use of telecommunications equipment or facilities, and the standards for computation of prices underParagraph (1). < Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) Notwithstanding the provisions of Paragraph (1), a key communications business operator falling under any of the followingsubparagraphs shall allow an access to or a joint use of the telecommunications equipment or facilities under Paragraph (1) byconcluding an agreement, upon a receipt of request under Paragraph (1):



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Article 42 (Provision of Information)

(1) A key communications business operator may provide requested information by concluding an agreement, upon a receipt ofrequest from other telecommunications business operators for a provision of information related to technological information or theuser�s personal matters which are required for a provision of telecommunications facilities, interconnection, or joint use, etc. andimposition and collection of fees and a guide to the telecommunications number.

(2) The Minister of Science and ICT shall set forth, and make a public notice of, the scope, conditions, procedures and methodsfor a provision of information, and the standards for computation of prices under Paragraph (1). < Amended on Mar. 23, 2013, Jul. 26,2017>

(3) Notwithstanding the provisions of Paragraph (1), a key communications business operator falling under any of the followingsubparagraphs shall provide the requested information by concluding an agreement, upon a receipt of request under Paragraph (1):



(4) A key communications business operator under Paragraph (3) shall set forth the technical standards required for a use byother telecommunications business operators or users by means of a connection of a monitor and other telecommunications equipmenton the relevant telecommunications facilities, the standards for use and provision, and other standards required for a creation of faircompetitive environments, and make a public notice thereof by obtaining approval from the Minister of Science and ICT. < Amended onMar. 23, 2013, Jul. 26, 2017>

(5) A key communications business operator providing telecommunication services by utilizing the frequencies allotted underthe Radio Waves Act shall, to the extent necessary for manufacture, import, distribution or sales of the telecommunications terminationequipment (refers to the termination equipment which allows use of telecommunication services by utilizing the frequencies allottedunder the Radio Waves Act) purchased by the users without going through the relevant key communications business operator, provideinformation regarding telecommunications services standards upon request of manufacturer, importer or distributor. < Newly Insertedon Aug. 13, 2013>

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(6) Necessary matters for scope and method of the provision of information under Paragraph (5) shall be stipulated by theEnforcement Decree. < Newly Inserted on Aug. 13, 2013>

Article 43 (Prohibition of the Use of Information Other Than the Purpose)

A telecommunications business operator shall use the technological information provided under Articles 42 (1) and (3) only for thepurpose of provision and may not use it unjustly, or provide it to the third parties.

<Wholly Amended on Dec. 1, 2015>

Article 44 (Report, etc. of Agreement on Interconnection, etc.)

(1) A key communications business operator and facility management institution shall conclude an agreement under Article 35(1) and (2), the earlier part of 37 (1), 39 (1), 41 (3) or 42 (1) within ninety days unless there exist any special reasons and report it to theMinister of Science and ICT in a manner specified in the Enforcement Decree of the Act within 30 days from the execution of suchagreement, upon receipt of a request from other telecommunications business operators for a provision, a joint utilization, aninterconnection or a joint use, etc. of telecommunications facilities, or a provision of information. The same applies in the case of achange or abolition of the agreement. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) Notwithstanding the provision of Paragraph (1), in case of an agreement in which a key communications business operatorunder the latter part of Article 37 (1) and (2), Articles 39 (3), 41 (3), and 42 (3) is a party concerned, shall enter into an agreementwithin 90 days upon receipt of the request, unless there is a special reason, and the key communications business operator receiving therequest shall apply for authorization to the Minister of Science and ICT in a manner specified in the Enforcement Decree of the Actwithin 30 days from the execution of the Agreement and reveal the contents of the agreement within 30 days from the authorizationdate. The same applies in the case of a change or abolition of the agreement < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(3) Notwithstanding Paragraph (2), in case a supplementary agreement is entered into, based on an authorized agreement, to addnew services, it shall be reported to the Minister of Science and ICT as determined by the Enforcement Decree within 30 days of theexecution date, and the contents of the supplementary agreement shall be disclosed within 30 days of the reporting date. The foregoingshall apply to the amendment or abolishment of the supplementary agreement. <Newly Inserted on Oct. 15, 2014, Jul. 26, 2017>

(4) The agreement under Paragraphs (1) through (3) shall meet the standards which are publicly notified by the Minister ofScience and ICT under Articles 35 (3), 37 (3), 39 (2), 41 (2)or 42 (2). < Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(5) The Minister of Science and ICT may, if any application for authorization, or any report, referred to in Paragraph (2) orParagraph (3) needs supplemented, order such application for authorization or report supplemented for a fixed period. < Amended onMar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(6) The agreement under Articles 41 (1) and 42 (1) may be concluded by an inclusion in the agreement under Article 39 (1).<Amended on Oct. 15, 2014>

(7) Notwithstanding Paragraphs (1) through (3), in case the agreement is modified for the matter of minor importance asdetermined and announced by the Minister of Science and ICT, including modification without a change in the price for uses, suchmodification shall not be subject to obtaining authorization or making a report. In this case, the modified contents of the agreement shallbe disclosed within 30 day of the date of modification. <Newly Inserted on Oct. 15, 2014, Amended on Jul. 26, 2017>

Article 45 (Ruling of the Korea Communications Commission)

(1) A telecommunications business operator or user may request to the Korea Communications Commission for an arbitration ifthey fail to agree on are not able to agree on any of the following:

1. Indemnification under Article 33;

2. Execution of an agreement within a 90-day period regarding provision of facilities, etc. interconnection ,joint use or provisionof information ,etc.;

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3. Performance or indemnification under an agreement regarding provision of facilities, etc. interconnection ,joint use orprovision of information ,etc.;

4. Other disputes concerning telecommunications business or matters specified as subject to the Korea CommunicationsCommission�s ruling under other bodies of law.

(2) Upon receipt of the request under Paragraph (1), the Korea Communications commission shall notify the parties of that factand set a timeline for providing them with a chance to make their cases; provided, however, that the foregoing is not applicable if arelevant party does not submit to the procedures without any justifiable reason.

(3) The Korea Communications Commission shall make a ruling within 90 days from the request for arbitration provided thatsuch period may be extended by one additional 90-days upon the resolution of the Korea Communications Commission if it is notpossible to make a ruling within the original 90-day period for any unavoidable reason.

(4) If any part to the arbitration files a suit during the arbitration proceeding, the Korea Communications Commission the KoreaCommunications Commission shall suspend the arbitration proceeding and notify the other party of that fact. The same applies if it isfound out that a lawsuit was filed prior to the receipt of request for arbitration.

(5) When it has made a ruling for the request made under Paragraph (1), the Korea Communications Commission shall providesuch written ruling to the parties without delay.

(6) Within 60 days from the date on which the originals of written ruling of the Korea Communications Commission were sent tothe parties, if no lawsuit regarding the dispute between the parties to the arbitration has been filed or such lawsuit has been withdrawn orthe parties clearly indicate their acceptance of the ruling to the Korea Communications Commission, an agreement equivalent to thecontents of the ruling shall be deemed to have been made.

Article 46 (Solicitation for Outside Arbitration)

If the Korea Communications Commission, upon receiving request for arbitration under Article 45(1), deems that it is inappropriate toconduct arbitration or is necessary for other reasons, it may form a separate commission for each dispute and solicit for outsidearbitration.

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Article 47 (Demand for Attendance, Hearing, etc.)

(1) When necessary for proceeding with the arbitration case, the Korea Communications Commission may on its own motion orupon request from a party take any of the following actions: < Amended on Aug. 13, 2013>

1. Demand for attendance of a party or witness and hold a hearing;

2. Demand for appraisal to an appraiser;

3. Demand for submission of documents or objects relevant for the dispute and provisional seizure of the documents or objectsso submitted.

(2) Necessary details for proceedings of ruling and referral by the Korea Communications Commission other than mattersstipulated by Paragraph (1), Article 45 and 46 shall be set forth and publicly notified by the Korea Communications Commission. <Newly Inserted on Aug. 13, 2013>

Article 48 (Management Plan for Telecommunications Number Resources)

(1) The Minister of Science and ICT shall formulate and enforce the management plan for telecommunications numberresources, which includes matters about telecommunications number system and the allocation, collection, integration, etc. oftelecommunications numbers, in order to make an efficient provision of telecommunications service, promote user�s convenience,create the environments of fair competition among telecommunications business operators, and efficiently use telecommunicationsnumber resources, a limited resource of the country. < Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(2) The Minister of Science and ICT shall, when he has formulated the plans under Paragraph (1), make a public notice thereof.This shall also apply to any alterations in the established plan. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) A telecommunications business operator shall observe the matters publicly noticed under Paragraph (2).

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[Heading Amended on Oct. 15, 2014]

Article 48-2 (Prohibition of Sale/Purchase of Telecommunication Number)

(1) No one shall sell/purchase telecommunication numbers which are the limited national resources.

(2) If information about the sale/purchase of telecommunication number in violation of Paragraph (1) above is posted on aninformation and communications network, the Minister of Science and ICT may order the provider of information and communicationsservice, as defined in Article 2(1)3 of the Act on Promotion of Information and Communications Network Utilization and InformationProtection, Etc., to close the service or restrict postings. <Amended on Jul. 26, 2017>


Article 49 (Accounting Adjustment)

(1) A key communications business operator shall adjust the accounting, prepare a business report for the preceding year by theend of within 3 months after the end of each fiscal year, and submit it to the Minister of Science and ICT, under the conditions asdetermined by the Enforcement Decree, and keep the related books and authoritative documents. < Amended on Mar. 23, 2013, Jul. 26,2017>

(2) The Minister of Science and ICT shall, when it intends to determine the matters of accounting adjustments under Paragraph(1), go in advance through a consultation with the Minister of Strategy and Finance. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) The Minister of Science and ICT may verify contents of any business report submitted by any key communications businessoperator in accordance with Paragraph (1). < Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) The Minister of Science and ICT may, if it is necessary to conduct the verification referred to in Paragraph (3), order therelevant key communications business operator to submit related material or launch inspection necessary to ascertain the facts. <Amended on Mar. 23, 2013, Jul. 26, 2017>

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(5) The Minister of Science and ICT shall, when it intends to launch inspection in accordance with Paragraph (4), notify therelevant key communications business operator of the plans of such inspection including inspection period, reasons, and contents of theinspection within seven (7) days prior to the scheduled date of inspection. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(6) A person verifying the contents pursuant to Paragraph (4) shall present the proof of the authorization therefor and givedocuments indicating his name, stay period and purpose of entrance to related party at the time of his first entrance.

Article 50 (Prohibited Act)

(1) A telecommunications business operator shall not commit any of the following acts (hereinafter referred to as �prohibitedact�) which undermines or is feared to undermine fair competition or users� interests, or have other telecommunications businessoperators or the third parties commit such act: < Amended on Jan. 27, 2016>

1. Act of imposing unfair or unreasonable condition or restriction in a provision, a joint utilization, a joint using, aninterconnection, a joint use or a wholesale provision of facilities, etc. or a provision of information, etc.;

2. Act of unfairly refusing a conclusion of agreement, or act of non-performance of the concluded agreement without anyjustifiable reasons in a provision, a joint utilization, a joint using, an interconnection, a joint use or a wholesale provision of facilities,etc. or a provision of information, etc.;

3. Act of unfairly diverting the information of other telecommunications business operators to his own business activities, whichhave been known to him in the course of a provision, a joint utilization, a joint using, an interconnection, a joint use or a wholesaleprovision of facilities, etc., or a provision of information, etc.;

4. Act of computing the fees, etc. for a use of telecommunications services, or the prices for a provision, a joint utilization, ajoint using, an interconnection, a joint use or a wholesale provision of facilities, etc. or a provision of information, by unfairly itemizingthe expenses or revenues;

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5. Act of rendering the telecommunications services in a manner different from the standardized use contract (the standardizeduse contract refers to only those of which was reported or approved as pursuant to the Article 28(1) and (2)) or act of rendering thetelecommunications services in a manner which significantly undermines the profits of users;

5-2. Act of not explaining or not notifying or act of falsely explaining or falsely notifying users of important matters including theprices for use of service, the terms and condition of agreement, and fee discount;

6. Act of setting and maintaining the compensation for a provision, a joint utilization, a joint using, an interconnection, a jointuse or a wholesale provision of facilities, etc. or a provision of information, unreasonably high compared to its supply costs

7. Act of refusing or restricting fair allocation of income in a transaction where telecommunications services using the radiowaves assigned under the Radios Wave Act are to be used to provide digital contents

(2) When any person acting on behalf of any telecommunications business operator under a contract therewith in executingcontracts between such telecommunications business operator and its users (including making any amendment to such contracts)commits any act falling under Article 5(1) and 5-2, his act shall be deemed the act committed by such telecommunications businessoperator and only the provisions of Articles 52(1) and 53 shall apply to such act; provided, however, that the same shall not apply to acase where the relevant telecommunications business operator has paid reasonable attention to the prevention of such act.

(3) Necessary matters concerning categories of and standards for the prohibited act referred to in Paragraph (1) shall beprescribed by the Enforcement Decree.

Article 50 (Prohibited Act)

(1) A telecommunications business operator shall not commit any of the following acts (hereinafter referred to as �prohibitedact�) which undermines or is feared to undermine fair competition or users� interests, or have other telecommunications businessoperators or the third parties commit such act:

1. Act of imposing unfair or unreasonable condition or restriction in a provision, a joint utilization, a joint using, aninterconnection, a joint use or a wholesale provision of facilities, etc. or a provision of information, etc.;

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2. Act of unfairly refusing a conclusion of agreement, or act of non-performance of the concluded agreement without anyjustifiable reasons in a provision, a joint utilization, a joint using, an interconnection, a joint use or a wholesale provision of facilities,etc. or a provision of information, etc.;

3. Act of unfairly diverting the information of other telecommunications business operators to his own business activities, whichhave been known to him in the course of a provision, a joint utilization, a joint using, an interconnection, a joint use or a wholesaleprovision of facilities, etc., or a provision of information, etc.;

4. Act of computing the fees, etc. for a use of telecommunications services, or the prices for a provision, a joint utilization, ajoint using, an interconnection, a joint use or a wholesale provision of facilities, etc. or a provision of information, by unfairly itemizingthe expenses or revenues;

5. Act of rendering the telecommunications services in a manner different from the standardized use contract (the standardizeduse contract refers to only those of which was reported or approved as pursuant to the Article 28 (1) and (2)) or act of rendering thetelecommunications services in a manner which significantly undermines the profits of users;

6. Act of setting and maintaining the compensation for a provision, a joint utilization, a joint using, an interconnection, a jointuse or a wholesale provision of facilities, etc. or a provision of information, unreasonably high compared to its supply costs

7. Act of refusing or restricting fair allocation of income in a transaction where telecommunications services using the radiowaves assigned under the Radios Wave Act are to be used to provide digital contents

(2) When any person acting on behalf of any telecommunications business operator under a contract therewith in executingcontracts between such telecommunications business operator and its users (including making any amendment to such contracts)commits any act falling under Paragraph (1)5, his act shall be deemed the act committed by such telecommunications business operatorand only the provisions of Articles 52 and 53 shall apply to such act; provided, however, that the same shall not apply to a case wherethe relevant telecommunications business operator has paid reasonable attention to the prevention of such act.

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(3) Necessary matters concerning categories of and standards for the prohibited act referred to in Paragraph (1) shall beprescribed by the Enforcement Decree.

Article 51 (Investigation of Fact)

(1) In the event the Korea Communications Commission believes that activities in violation of Article 50(1) have beencommitted, it may order the relevant public official belonging to the Korea Communications Commission to conduct investigationthereof.

(2) The Korea Communications Commission may order public officials belonging to the Korea Communications Commission toenter into the offices or workplaces of the telecommunications business operators or the workplaces of the persons entrusted withhandling of the business of telecommunications business operators (limited, throughout this Article, to telecommunications businessoperators entrusted with work related to Article 50) and inspect books, documents and other data and objects.

(3) In the event any investigation is to be conducted pursuant to Paragraph (1), the Korea Communications Commission shallnotify the relevant telecommunications business operator at least seven (7) days prior to the expected date of investigation withinformation on the duration, purpose and content of the investigation; provided, however, that this provision may not apply in the eventof emergency or if there is risk that the evidence will be destroyed.

(4) A person who investigates by visiting the offices or workplaces of the telecommunications business operators, or theworkplaces of the persons handling, under an entrustment, the business of telecommunications business operators, under Paragraph(2) shall carry a certificate indicating the authority, and present it to the persons concerned. He also should be accompanied by theperson of the corresponding offices or workplaces.

(5) A public official who investigates pursuant to Paragraph (2) may order telecommunications business operators or personsentrusted with handling of the business of telecommunications business operators to submit any necessary information or object. In theevent there is a possibility of abandonment, concealment, or replacement of the information or object so submitted, the public officialmay temporarily take them into custody.

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(6) The Korea Communications Commission shall immediately return the information or object under its custody if it falls underany one of the following:

1. It is deemed, after an examination of the information or object under the custody, that it has no relevance to the currentinvestigation;

2. The purpose of investigation is fully accomplished so that keeping the information or object under its custody is no longernecessary.

Article 52 (Measures on Prohibited Acts)

(1) The Korea Communications Commission may order any telecommunication business operator to take the measures fallingunder each of the following subparagraphs when it is recognized that any act in violation of Paragraph 1 of Article 50 has beencommitted; provided, however, that where it orders a measure under subparagraphs 1 through 5, 8 and 9, it shall consider the opinion ofthe Minister of Science and ICT: < Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Separation of the supply system of telecommunications service;

2. Change of internal accounting regulations, etc. concerning telecommunications service;

3. Disclosure of information concerning telecommunications service;

4. Conclusion, performance or change of contents of the agreement between the telecommunications business operators;

5. Change of the standardized use contract and the articles of incorporation of the telecommunications business operators;

6. Suspension of prohibited acts;

7. Public announcement of a fact of receiving a correction order due to committing the prohibited acts;

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8. Measures necessary for restoring the violated matters due to the prohibited acts to their original status, such as the removal oftelecommunications facilities which have caused the prohibited acts;

9. Improvement of business conduct procedures regarding telecommunications service;

10. Prohibition of soliciting new users (for a period not exceeding 3 months and limited to cases where the same violation hasoccurred for 3 times or more despite sanctions under Paragraph 1 through 9 or where such sanctions are deemed insufficient to preventharm to users); and

11. Such other matters prescribed by the Enforcement Decree as may be necessary for the measures referred to in subparagraphs1 through 10.

(2) The telecommunications business operators shall execute any order issued by the Korea Communications Commission underParagraph (1) within the period specified by the Enforcement Decree; provided, however, that the Korea Communications Commissionmay extend the relevant period only once, if it is deemed that the telecommunications business operators are unable to carry out theorder within the specified period due to natural disasters and other unavoidable causes.

(3) The Korea Communications Commission shall, before ordering the measures under Paragraph (1), notify the partiesconcerned of the content of relevant measures, and provide them with an opportunity to make a statement within a specified period, andmay hear, where deemed necessary, demand for attendance of an interest party or witness, hearing or appraiser by an appraiser;provided, however, that this shall not apply when the parties concerned fail to respond without any justifiable reasons. >

(4) If the Korea Communications Commission orders an measure under Paragraphs (1) through (3) above, it shall notify theMinister of Science and ICT of it. <Newly Inserted on Jan. 27, 2016, Amended on Jul. 26, 2017>

(5) If a telecommunications business operator fails to implement an order under Paragraph (1) within the period under Paragraph(2) without justifiable reason, the Minister of Science and ICT may order partial suspension of business to the telecommunicationsbusiness operator. <Newly Inserted on Jan. 27, 2016, Amended on Jul. 26, 2017>

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(6) The standards and procedure of the disposition under Paragraph (5) and other necessary matters related thereto shall bedetermined by the Enforcement Decree. <Newly Inserted on Jan. 27, 2016>

(7) If the Minister of Science and ICT orders partial suspension of business to a telecommunications business operator underParagraph (5), the Minister may order the measures necessary to protect users under Article 19(2). <Newly Inserted on Jan. 27, 2016,Amended on Jul. 26, 2017>

(8) In the event five (5) years have passed from the date on which any acts committed in violation of Paragraph (1) of Article 50have been terminated, the Korea Communications Commission shall not order any measures pursuant to Paragraph 1 or impose apenalty surcharge pursuant to Article 53; provided, however, that this provision under this Paragraph 4 of Article 37-1 shall not apply ifany measure or imposition of penalty surcharge is cancelled by court order and a new measure is to be taken pursuant to that court order.<Amended on Jan. 27, 2016>

Article 52-2 (Charge for Compelling the Performance with regard to the Measures on Prohibited Acts)

(1) The Minister of Science and ICT may impose the charge for compelling the performance on the person, who fails to complywith an order given under Article 52(1) (hereinafter in this Article �correction order�) within the period prescribed in the correctionorder, to the extent that a day�s charge does not exceed 3/1000 of the person�s total revenue. In this case, the criteria for calculating theaforesaid revenue shall be determined by the Enforcement Decree in consideration of relevance of violation, and the period and numberof violence. <Amended on Jul. 26, 2017>

(2) If the Minister of Science and ICT imposes the charge for compelling the performance under Paragraph (1), the Ministershall send a written notice in advance that it will impose and collect such charge. <Amended on Jul. 26, 2017>

(3) When the Minister of Science and ICT imposes the charge for compelling the performance under Paragraph (1), it shall putdown in writing the amount of the charge, reason for imposition, payment due date, receiving agency, and method of raising objectionand agency with which objection may be filed. <Amended on Jul. 26, 2017>

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(4) The Minister of Science and ICT may impose and collect the charge for compelling the performance under Paragraph (1),every 90 days from the initial date of the said correction order until the correction order is performed. <Amended on Jul. 26, 2017>

(5) If the person receiving the correction order performs the correction order, the Minister of Science and ICT shall immediatelystop imposing the charge for compelling the performance; provided, however, that the charge already imposed shall be collected.<Amended on Jul. 26, 2017>

(6) If the person receiving the charge for compelling the performance under Paragraph (1) fails to pay the charge within thepayment due date, the Minister of Science and ICT shall collect the charge according to the example of a disposition taken to collect thenational taxes in arrears. <Amended on Jul. 26, 2017>

(7) Matters necessary for imposition, payment, collection, objection procedure, etc. with regard to the charge for compelling theperformance shall be determined by the Enforcement Decree.


Article 53 (Imposition, etc. of Penalty Surcharge on Prohibited Acts)

(1) The Korea Communications Commission may, in case where there exists any act in violation of Paragraph 1 of Article 50,impose a penalty surcharge not exceeding 3/100 of the turnover as prescribed by the Enforcement Decree on the relevanttelecommunications business operator. If the telecommunications business operator refuses to submit the data used for calculation of theamount of turnover or submits erroneous data, an estimate of the amount can be assessed based on the financial statement of those whoprovide similar services in the same industry (accounting documents, number of subscribers, usage fee and business operation status);provided, however, that where there is no turnover or it is difficult to calculate the turnover as prescribed by the Enforcement Decree, itmay impose the penalty surcharge not exceeding one billion won.

(2) The Minister of Science and ICT may impose on a key communications business operator that submits a business reportunder Article 49 a find up to 3% of its revenue as determined in a manner specified under the Enforcement Decree of the Act if itcommits any of the following: < Amended on Mar. 23, 2013, Jul. 26, 2017>

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1. Failure to submit a business report under Article 49 or to abide by an order to submit relevant information;

2. Omission of a material item or inclusion of a false statement in a business report under Article 49;

3. Failure to adjust the accounting or keep the related books and authoritative documents in violation of Article 49(1).

(3) The Minister of Science and ICT or the Korea Communications Commission shall, in the event of imposing a penaltysurcharge under Paragraph (1) or (2), take each of the following into consideration. < Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Details of violation and the extent thereof;

2. Duration and frequency of violation;

3. Amount of profit obtained in connection with the violation;

4. The amount of turnover obtained as a result of the prohibited activities of the telecommunications business operator.

(4) A penalty surcharge under Paragraph (1) or (2) shall be calculated taking Paragraph (3) into consideration; provided,however, that specific calculation standard and procedure shall be set forth by the Enforcement Decree.

(5) The Minister of Science and ICT or the Korea Communications Commission shall, where a person liable to pay a penaltysurcharge under Paragraph (1) or (2) fails to do so by the payment deadline, collect an additional due equivalent to 6/100 per year, withrespect to the penalty surcharge in arrears, from the day following the expiry of such payment deadline. < Amended on Mar. 23, 2013,Jul. 26, 2017>

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(6) The Minister of Science and ICT or the Korea Communications Commission shall, where a person liable to pay a penaltysurcharge under Paragraph (1) or (2) fails to do so by the payment deadline, demand him to pay it with fixing a period, and if he fails topay the penalty surcharge and an additional due under Paragraph (5) within the fixed period, collect them according to the example of adisposition taken to collect the national taxes in arrears. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(7) The period for payment of an additional due under Paragraph (5) shall not exceed 60 months. <Amended on Oct. 15, 2014>

(8) In the event the penalty surcharge imposed under Paragraph (1) or (2) is to be returned pursuant to the court order, anadditional due equivalent to 6/100 per year with respect to the penalty surcharge in arrears(accrued from the day of payment to the dayof payment) shall be paid. <Amended on Oct. 15, 2014>

Article 54 (Relations with Other Acts)

In case where a measure is taken under Article 52(1) or a penalty surcharge is imposed under Article 53 against the acts in violation ofParagraph (1) of Article 50, a corrective measure or an imposition of penalty surcharge under the Monopoly Regulation and Fair TradeAct shall not be made under the same grounds against the same acts of the relevant business operator. . <Amended on Jan. 27, 2016>


In case where a correction measure has been taken under Article 52 (1), a person who is damaged by the prohibited act may claim forcompensation against the telecommunications business operator who conducted the prohibited act, and the relevant telecommunicationsbusiness operator may not shirk liability unless he can prove that there was no malicious intention or negligence.

Article 56 (Quality Improvement of Telecommunications Services)

(1) A telecommunications business operator shall endeavor to make a quality improvement of the telecommunications serviceshe provides.

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(2) The Minister of Science and ICT shall devise the required policy measures, such as an evaluation of quality of thetelecommunications services, in order to improve a quality of telecommunications services and to enhance the conveniences of users. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) The Minister of Science and ICT may order the telecommunications business operator to furnish data necessary for anevaluation of quality of the telecommunications services, etc. under Paragraph (2). < Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 56-2 (Provision of Information on Telecommunication Service)

(1) A telecommunications business operator shall provide users the information necessary for users to choose atelecommunication service, including as the area where telecommunication service is available and the method of service provision.

(2) The type of information and the method and procedure of provision of information under Paragraph (1) shall be determinedand publicly announced by the Minister of Science and ICT. <Amended on Jul. 26, 2017>

(3) The Minister of Science and ICT shall regularly check the status of provision of information under Paragraph (1) and publicannounce the result every year. <Amended on Jul. 26, 2017>[Newly Inserted on Jan. 27, 2016]

Article 57 (Prior Selection Systems)

(1) The Minister of Science and ICT shall perform the systems in which the users may select in advance the telecommunicationsbusiness operator from whom they desire to receive the telecommunications service (hereinafter referred to as the �prior selectionsystems�). In this case, the telecommunications service shall refer to the telecommunications service as determined by the EnforcementDecree from among the same telecommunications service provided by the plural number of telecommunications business operators. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The telecommunications business operator shall not force the users to select in advance a specified telecommunicationsbusiness operator, or commit the acts to recommend or induce by unlawful means.

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(3) The Minister of Science and ICT may, for the purpose of performing the prior selection systems efficiently and neutrally,designate the specialized institutes performing the registration or alteration affairs of the prior selection (hereinafter referred to as the�prior selection registration center�), and matters necessary for the designation of the prior selection registration center shall be set forthand publicly notified by the Minister of Science and ICT. < Amended on Mar. 23, 2013, Dec. 1, 2015, Jul. 26, 2017>

(4) Deleted <Dec. 1, 2015>

Article 58 (Mobility of Telecommunication Numbers)

(1) The Minister of Science and ICT may, in order that the users are able to maintain their previous telecommunications numbersdespite of the changes of the telecommunications business operators, etc., devise and perform the plans for mobility oftelecommunications numbers (hereafter in this Article, referred to as the �plans for mobility of numbers�). < Amended on Mar. 23,2013, Jul. 26, 2017>

(2) The plans for mobility of numbers shall contain the contents falling under any of the following subparagraphs:

1. Kinds of services subject to the mobility of telecommunications numbers;

2. Time for introduction by service subject to the mobility of telecommunications numbers; and

3. Matters on sharing the expenses required for the performance of mobility of telecommunications numbers bytelecommunications business operator.

(3) The Minister of Science and ICT may, in order to perform the plans for mobility of numbers, order the relevanttelecommunications business operators to take the necessary measures. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) The Minister of Science and ICT may designate an institution specializing in the work of registration and alteration of themobility of numbers (hereinafter referred to as the �mobility of numbers management institution�) to efficiently and neutrallyimplement the mobility of numbers of the telecommunications. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(5) The Minister of Science and ICT shall prescribe and publish necessary matters concerning the implementation of themobility of numbers of the telecommunications, the designation of any mobility of numbers management institution and its work, etc. <Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 59 (Restrictions, etc. on Mutual Possession of Stocks)

(1) Where a key communications business operator falling under Article 39 (3) 1 or 2 (including the specially-related persons)possesses in excess of 5/100 of the gross number of voting stocks issued by the mutually different key communications businessoperators, shall not be allowed to exercise any voting rights with regard to the stocks in excess of the relevant ceiling.

(2) Provisions of Paragraph (1) shall not apply to the relation of possessions between a key communications business operatorfalling under Article 39 (3) 1 or 2 and the key communications business operator established by the said key communications businessoperator by becoming the largest stockholder.

Article 60 (Provision of Number Guidance Service)

(1) The telecommunications business operator shall provide an information service of guiding the general public to thetelecommunications numbers of the users by means of voice, booklets or Internet, etc. (hereinafter referred to as the �number guidanceservice�) by obtaining a consent of the users; provided, however, that the same shall not apply to the minor business determined andpublicly announced by the Minister of Science and ICT by taking account of the numbers of the users and the turnovers, etc. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) If necessary for the protection of private personal information, the Minister of Science and ICT may limit the provision of thenumber guidance service. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(3) Matters necessary for a provision of the number guidance service may be stipulated by the Enforcement Decree.

Article 60-2 (Suspension of Use of Telecommunications Termination Equipment Reported Lost, etc.)

(1) A key communications business operator providing telecommunication services by utilizing the frequencies allotted underthe Radio Wave Act shall, for the purpose of the suspension of use of telecommunications termination equipment reported lost or stolento such communications business operator, share the international identification number of the relevant telecommunications terminationequipment (hereinafter, the �identification number�) with each other.

(2) The Minister of Science and ICT may designate specialized agency for efficient sharing of the identification number.<Amended on Jul. 26, 2017>

(3) If necessary, the Minister of Science and ICT shall, for the purpose of the suspension of use of telecommunicationstermination equipment reported lost or stolen to communications business operators, request cooperation from the head of relevantadministrative agency and public agency. <Amended on Jul. 26, 2017>

(4) Necessary matters for designation of and management of business of the specialized agency under Paragraph (2) shall be setforth by the Enforcement Decree.


Article 60-3 (Prohibition against Damage, etc. of Identification Number)

No person shall damage, counterfeit or alter the identification number of the telecommunications termination equipment, for the purposeof disturbing the suspension of use of telecommunications termination equipment reported lost or stolen to communications businessoperators.


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CHAPTER V TELECOMUNICATIONS FACILITIES

Section 1. Commercial Telecommunication Facilities

Article 61 (Maintenance and Repair of Telecommunications Facilities)

For stable provision of its telecommunications services, a telecommunications business operator shall maintain and repair thetelecommunications facilities it provides up to technical specifications specified under the Enforcement Decree of the Act for stablesupply of telecommunications.

Article 62 (Report and Authorization of Telecommunications Facilities Installation)

(1) When a key communications business operator seeks to install or modify a significant telecommunications facilities, it shallreport it to the Minister of Science and ICT in a manner specified under the Enforcement Decree of the Act; provided, however, that forthe telecommunications facilities installed for the first time for new telecommunication technology, an authorization from the Ministerof Science and ICT shall be obtained in a manner specified in the Enforcement Decree of the Act. < Amended on Mar. 23, 2013, Jul. 26,2017>

(2) The scope of significant telecommunications facilities under Paragraph (1) shall be determined and announced by theMinister of Science and ICT . < Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 63 (Joint Installation of Telecommunications Facilities)

(1) A key communications business operator may agree with another key communications business operator to jointly install anduse telecommunications facilities.

(2) Key communications business operators that fall under the criteria, including business size, determined by the EnforcementDecree shall compose and operate a council to negotiate with each other about joint installation of telecommunication facilities underParagraph (1). < Amended on Oct. 15, 2014>

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(3) The Minister of Science and ICT shall determine and announce the criteria regarding the procedure of composition andoperation of the council under Paragraph (2) and regarding the scope of target facilities and areas of negotiations. < Amended on Oct.15, 2014, Jul. 26, 2017>

(4) For efficient conduct of joint installation of telecommunication facilities under Paragraph (1), the Minister of Science andICT may designate an agency responsible for the relevant task. <Newly Inserted on Oct. 15, 2014, Amended on Jul. 26, 2017>

(5) Matters necessary for the designation of the responsible agency under Paragraph (4) and for the method of conducting thetask shall be determined and announced by the Minister of Science and ICT. <Newly Inserted on Oct. 15, 2014, Amended on Jul. 26,2017>

(6) The Minister of Science and ICT may recommend joint installation of telecommunications facilities under Paragraphs (1) and(2) to key communications business operators in a manner specified under the Enforcement Decree in any of the following cases: <Amended on Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

1. Where no agreement is reached under Paragraph (1) and request is made by one of the key communications businessoperators;

2. Where it is deemed necessary for the public good.

(7) If a key communications business operator fails to reach an agreement on the use of land or buildings owned by thegovernment, public agencies under the Act on the Management of Public Agencies (�public agencies� in this Article) oranother key communications business operator when such use is necessary for joint installation of telecommunicationsfacilities, it may request for help from the Minister of Science and ICT on use of such land or building. < Amended on Mar.23, 2013, Oct. 15, 2014, Jul. 26, 2017>

(8) Upon receiving the request for help under Paragraph (7), the Minister of Science and ICT may make a demand to the head ofthe government entities, municipalities, public agencies or the other key communications business operator for reaching anagreement with the use of relevant land or building with the key communications business operator making the request forhelp, in this case the head of the government entities, municipalities, public agencies or the other key communicationsbusiness operator shall make such agreement unless there is a justifiable reason. < Amended on Mar. 23, 2013, Oct. 15, 2014,Jul. 26, 2017>

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Section 2. PROPRIETARY TELECOMMUNICATIONS FACILITIES

Article 64 (Installation of Proprietary Telecommunications Facilities)

(1) A person seeking to install proprietary telecommunications facilities shall make a report to the Special Metropolitan CityMayor, a Metropolitan City Mayor, a Special Self-Governing City Mayor, a Do Governor, or the Governor of a Special Self-GoverningProvince (hereinafter referred to as �Mayor/Do Governor�) having jurisdiction over where the office in which the main facilities areinstalled is located in a manner specified under the Enforcement Decree of the Act. The same applies when an important aspect ofreporting items as specified under the Enforcement Decree is sought to be modified. < Amended on Mar. 23, 2013, Dec. 1, 2015>

(2) Notwithstanding Paragraph (1), in case of wireless proprietary telecommunications facilities and militarytelecommunications facilities and others where other bodies of law are applicable, such bodies of law shall be applicable.

(3) A person who has made a report on installation or modification of proprietary telecommunications facilities under Paragraph(1) shall receive confirmation from Mayor/Do Governor in a manner specified under the Enforcement Decree of the Act when suchinstallation or modification construction is complete and before commencement of its use. < Amended on Mar. 23, 2013, Dec. 1, 2015>

(4) Notwithstanding Paragraph (1), certain proprietary telecommunications facilities specified under the Enforcement Decree ofthe Act may be installed without filing a report.

Article 65 (Restriction on Non-Proprietary Use)

(1) A person who has installed proprietary telecommunications facilities may not use such facilities to interconnect other�scommunication or operate it outside its installation purposes; provided, however, that the foregoing is not applicable in cases whereother bodies of law have special provisions of any of the following is applicable: < Amended on Mar. 23, 2013, Jul. 26, 2017>

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1. Use by a person in law enforcement of disaster rescue industries for law enforcement or emergency rescue operation;

2. Use by a specially related person of the installer of proprietary telecommunications facilities as announced by theMinister of Science and ICT.

(2) A person who has installed proprietary telecommunications facilities may provide telecommunications facilities such asconduit line to a key communications business operator in a manner specified under the Enforcement Decree of the Act.

(3) Articles 35, 44 (excluding Paragraph (5) and 45 through 47 shall be applicable in case of provision of facilities underParagraph (2). <Amended on Oct. 2014>

(4) If a person who has installed proprietary telecommunications facilities fails to abide by Paragraph (1) above, the Minister ofScience and ICT may order a cessation of use for a period not exceeding one year. In such case, the Minister of Science and ICT shallgive a notice of such cessation to the Mayor/Do Governor having jurisdiction over the applicable location. <Newly Inserted on Dec. 1,2015, Amended on Jul. 26, 2017>

Article 66 (Securing Communication Lines in Case of Emergency)

(1) When a war, accident or natural disaster or other national emergency has happened or is likely to happen, the Minister ofScience and ICT may order a person who has installed proprietary telecommunications facilities to engage in telecommunicationsservices or other important communications services or connect the telecommunications facilities to other telecommunications facilities.In this case, Articles 28 through 32 and Article 33 through 55 shall be applicable. < Amended on Mar. 23, 2013, Aug. 13, 2013, Jul. 26,2017>

(2) When the Minister of Science and ICT deems necessary for the purposes of Paragraph (1), may order a key communicationsbusiness operator to handle such task. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(3) The costs of performing the task or interconnecting facilities under Paragraph (1) shall be borne by the government;provided, however, that when proprietary telecommunications facilities are used for telecommunications services, the keycommunications business operator receiving such service shall bear its costs.

Article 67 (Order on the Person Installing Proprietary Telecommunications Facilities, Etc.)

(1) When a person who has installed proprietary telecommunications facilities fails to abide by the Act or order under this Act inconnection with the installment, change and operation of proprietary telecommunications facilities (except for the operation ofproprietary telecommunications facilities in breach of Article 65(1) hereof), the Mayor/Do Governor may order a corrective measure tobe carried out within a specific time frame. < Amended on Mar. 23, 2013, Dec. 1, 2015>

(2) If a person who has installed proprietary telecommunications facilities falls under any of the following, the Mayor/DoGovernor may order a cessation of use for a period not exceeding one year: < Amended on Mar. 23, 2013, Dec. 1, 2015>

1. Failure to carry out the corrective order under Paragraph (1);

2. Use of proprietary telecommunications facilities without receiving confirmation in violation of Article 64(3);

3. Deleted <Dec. 1, 2015>

(3) When the Mayor/Do Governor deems that proprietary telecommunications facilities are interfering with other�stelecommunications or likely to harm other�s telecommunications facilities, it may order the person who installed such facilities to stopusing, modify, repair or take other corrective measures. < Amended on Mar. 23, 2013, Dec. 1, 2015>

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Section 3. JOINT ESTABLLISHMENT OF TELECOMMUNICATIONS FACILITIES , ETC.

Article 68 (Installation of Common Duct or Conduit Line, etc.)

(1) A person installing or arranging any of the following (�facility installer�) shall solicit and reflect an opinion from a keycommunications business operator about installing a common duct or conduit line for telecommunications facilities; provided, however,that the forgoing obligation does not apply when there is a special reason for not being able to honor the key communications businessoperator�s opinion. <Amended on Jan. 7, 2014, Jan, 14, 2014, Mar. 29, 2016, Jul. 26, 2017>

1. Road under Article 2(1) of the Road Act;

2. Railroad under Article 2(1) of the Railroad Enterprise Act;

3. Urban railroad under Article 2(2) of the Urban Railroad Act;

4. Industrial complex under Article 2(5) of the Industrial Sites and Development Act;

5. Free trade zone under Article 2(1) of the Act on Designation and Management of Free Trade Zone;

6. Airport area under Article 2(4) of the Airport Facilities Act;

7. Port area under Article 2(4) of the Harbor Act;

8. Other facilities or land as specified under the Enforcement Decree of the Act.

(2) An opinion set forth by key communications business operator about installation of common duct or conduit line underParagraph (1) shall satisfy the installation requirements for common duct specified under the Enforcement Decree of the Act.

(3) Articles 35, 44 (excluding Paragraph (5) and 45 through 47 shall be applicable in case of provision of facilities underParagraph (2).shall be applicable to provision of common duct or conduit line installed under Paragraph (1). <Amended on Oct. 15,2014>

(4) When a facility installer is unable to reflect the opinion of key communications business operator under Paragraph (1), itshall notify the key communications business operator of the reason for such inability within 30 days from the receipt of such opinion.

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(5) When a facility installer does not reflect the opinion of key communications business under Paragraph (1), the keycommunications business operator may ask for reconciliation from the Minister of Science and ICT. < Amended on Mar. 23, 2013,Jul. 26, 2017>

(6) When attempting reconciliation upon receipt of the reconciliation request under Paragraph (5), the Minister of Science andICT shall consult with the head of relevant administrative organization in advance. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(7) Details necessary for reconciliation under Paragraphs (5) and (6) shall be specified under the Enforcement Decree of the Act.

<br>[Enforcement Date: Mar. 30, 2017] Article 68

Article 69 (Installation of Telecommunication: Line Facilities for Internal Routing, etc.)

(1) A building under Article 2(1)2 of the Building Act shall install telecommunication line facilities for internal routing and setaside a certain area for connection with telecommunication grid facilities.

(2) Details on the scope of building, standards for installing telecommunication line facilities and the setting aside of a certainarea for connection with telecommunication grid facilities shall be specified under the Enforcement Decree of the Act.

Article 69-2 (Installation of Mobile Telecommunications Facilities for Internal Routing)

(1) The mobile telecommunications facilities for internal routing (referring to the telecommunications facilities required for theuse of the key communication service using frequencies allocated pursuant to the Radio Waves Act) shall be installed in any of thefollowing facilities:

1. Buildings under Article 2(1)(1) of the Building Act, having a total floor area of 1,000 or more square meters, asdetermined by the Enforcement Decree;

2. Housing complex under Article 2(12) of the Housing Act, consisting of 500 or more households, as determined by theEnforcement Decree; and

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3. Urban railroad facilities under Article 2(3) of the Urban Railroad Act.

(2) Matters related to the type of the mobile telecommunications facilities for internal routing, standards and procedures forinstalling thereof shall be specified under the Enforcement Decree.[This Article Newly Inserted on Jan. 27, 2016]



Section 4. Installation and Preservation of Telecommunications Facilities

Article 72 (Use of Land, etc.)

(1) A key communications business operator may, when necessary for the installation of line tracks, antenna and the appurtenantfacilities to be available for telecommunications service (hereinafter referred to as the �line tracks, etc.�), make use of others� land, orbuildings and structures appurtenant thereto, and surface and bottom of the water (hereinafter referred to as the �land, etc.�). In thiscase, a key communications business operator shall make a consultation with owners or possessors of the relevant land, etc. in advance.< Amended on Dec. 1, 2015>

(2) Where a consultation under Paragraph (1) is not or cannot be made, a key communications business operator may use theland, etc. owned by others, pursuant to the Act on the Acquisition of Land, etc. for Public Works and the Compensation therefor.

Article 73 (Temporary Use of Land, etc.)

(1) A key communications business operator may, when necessary for the measurement of line tracks, etc. and the installation orpreservation works of the telecommunications facilities, temporarily use the private, national or public telecommunications facilities,and the land, etc., within the limit of not substantially impeding a current use.

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(2) No one may, without any justifiable reason, interfere with the temporary use of telecommunications facilities, and land, etc.,for the purposes of the measurement of line tracks, etc. and the installation or preservation works of the telecommunications facilitiesunder Paragraph (1).

(3) A key communications business operator shall, when intending to temporarily use the private, national or public propertyunder Paragraph (1), notify the possessors, in advance, of the purposes and period of such use; provided, however, that in case where itis difficult to make a prior notification, a prompt notification shall be made during or after its use, and in case where such notificationmay not be made due to an obscurity of address and whereabouts of possessors, a public notice thereof shall be made.

(4) The temporary period of use of the land, etc. under Paragraph (1) shall not exceed six months.

(5) A person who temporarily uses the private, national or public telecommunication facilities or the land, etc. under Paragraph(1) shall carry the certificate indicating the authority, and present it to the persons related.

Article 74 (Entry to Land, etc.)

(1) A key communications business operator may enter others� land, etc., when necessary for a measurement, examination, etc.,for the installation and preservation of his telecommunications facilities; provided, however, that in case where the place intended forsuch entry is a residential building, a consent from residents shall be obtained.

(2) No one may, without any justifiable reason, interfere with the temporary entry of telecommunications facilities, and land,etc., for the purposes of the measurement, examination, etc., for the installation and preservation of telecommunications facilities underParagraph (1).

(3) Article 73(3) and (5) shall be applicable in regard to providing notice and showing an identification when a person doingmeasurement or examination under Paragraph (1) enters private or public land, etc.

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Article 75 (Request for Elimination of Obstacles, etc.)

(1) A key communications business operator may request the owners or possessors of gas pipes, water pipes, drain pipes, electriclamp lines, electricity lines or private telecommunications facilities, which impede or are likely to impede the installation of line tracks,etc. or telecommunications facilities themselves (hereinafter referred to as the �obstacles, etc.�), for the removal, remodeling, repair andother measures with respect to the relevant obstacles, etc.

(2) A key communications business operator may request the owners or possessors to remove the plants, when they may impedeor are likely to impede the installation or maintenance of line tracks, etc. or telecommunications themselves.

(3) A key communications business operator may, when the owners or possessors of the plants do not comply with the requestunder Paragraph (2) or there exist any other unavoidable reasons, fell or transplant the relevant plants by obtaining permission from theMinister of Science and ICT. In this case, a prompt notification shall be made to the owners or possessors of the relevant plants. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) The owners or possessors of the obstacles, etc., which impede or are likely to impede the telecommunications facilities of akey communications business operator, shall make a consultation in advance with the key communications business operator, when theyare in need of a new construction, enlargement, improvement, removal or alteration of the relevant obstacles, etc.

Article 76 (Obligation for Restoration to Original State)

A key communications business operator shall restore the relevant land, etc. to its original state, when a use of the land, etc. underArticles 72 and 73 is finished or a need of providing the land, etc. for telecommunications service is gone, and in case where arestoration to the original state becomes impossible, make a proper compensation for damages suffered by the owners or possessors.


A key communications business operator shall, in case of incurring damages on others in case of Article 73 (1), 74 (1) or 75, make aproper compensation to the suffered person.

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Article 78 (Procedures for Compensation for Damages on Land, etc.)

(1) When a key communications business operator compensates under Article 76 or 77 for any of the following reasons, it shallconsult with the person has incurred losses.

1. Temporary use of land under Article 73(1);

2. Entry in land, etc. under Article 74(1);

3. Moving, modifying repairing obstacles or plans under Article 75;

4. Inability to restore to the original state under Article 76.

(2) When a consultation under Paragraph (1) is not or cannot be made, an application for adjudications shall be filed with thecompetent Land Expropriation Commission under the Act on the Acquisition of Land, etc. for Public Works and the Compensationtherefor.

(3) Except for those as otherwise prescribed by this Act, the provisions of the Act on the Acquisition of Land, etc. for PublicWorks and the Compensation therefor shall be applied mutatis mutandis to the criteria, methods and procedures regarding acompensation for damages, etc. to the land, etc. under Paragraph (1), and an application for adjudications under Paragraph (2).

Article 79 (Protection of Telecommunications Facilities)

(1) No person shall destruct the telecommunications facilities, and obstruct the flow of telecommunications by impeding thefunction of telecommunications facilities by means of having other objects contact them or by any other devices.

(2) No person shall stain the telecommunications facilities or damage the measurement marks of the telecommunicationsfacilities by means of throwing objects to the telecommunications facilities or fastening an animal, vessel or a log raft thereto.

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(3) A key communications business operator may, if necessary for the protection of submarine communications cable and theirperipheral equipment (the �Submarine Cable�), file an application to the Minister of Science and ICT for the designation of alert areasfor the Submarine Cable. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) Upon receiving an application pursuant to Paragraph (3), the Minister of Science and ICT may consider the necessity of suchdesignation and may designate and publicly notify the alert areas for the Submarine Cable through consultation with the relevant stateadministrative agency. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(5) Designation applications, methods and procedures of such designation and its public notification, and methods of alert areaindication shall be determined by the Enforcement Decree.

Article 80 (Moving of Facilities, etc.)

(1) The owners or possessors of the land, etc. may, in case where the telecommunications facilities of a key communicationsbusiness operator have become an obstacle to a use of the land, etc. due to changes in the purpose of use or in the methods of using theland, etc. where such facilities are located, or the land adjacent to it, request a key communications business operator to move thetelecommunications facilities, and take other measures necessary for removing the obstacles.

(2) A key communications business operator shall, upon receipt of a request under Paragraph (1), take necessary measures,except for the cases where such measures are difficult to be taken for a business performance or technologies.

(3) Expenses necessary for taking the measures under Paragraph (2) shall be borne by the person who provided the cause for themove or taking other measures necessary for removing the obstacles after the installation of the subject telecommunication facilities;provided, however, that in the event the person who bears the expenses is the owner or possessor of the land and falls under any one ofthe following subparagraphs, the key communication business operator may reduce or exempt the person�s expenses, considering theindemnification amount paid at the time of installation of the telecommunication facilities and the amount of time it took to build thetelecommunication facilities:

1. Where the key communication business operator establishes and implements a plan to move the telecommunication facilitiesor remove other obstacles;

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2. Where the moving the telecommunication facilities or removal of other obstacles is beneficial to other telecommunicationfacilities;

3. Where the state or a local autonomous entity demands such moving of telecommunication facilities or removal of otherobstacles; or

4. Where the telecommunication facilities within private land are being removed because they greatly obstruct the use of suchland.

Article 81 (Cooperation of Other Organizations, etc.)

A key communications business operator may ask the related public agencies for a cooperation, in case where the operation of vehicles,vessels, airplanes and other carriers for the installation and preservation of his telecommunications facilities is necessary. In this case,the public agency in receipt of a request for cooperation shall comply with it, unless there exist any justifiable reasons.

Article 82 (Inspection, Report, Etc.)

(1) When necessary for establishing telecommunication policies and other cases specified under the Enforcement Decree of theAct, the Minister of Science and ICT may inspect the facility status, accounting books and documents of installers oftelecommunications facilities or demand them to make a report on the facilities. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) When there is an installer telecommunications facilities in violation of this Act, the Minister of Science and ICT may orderthe removal of the relevant facilities or other necessary actions. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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CHAPTER VI SUPPLEMENTARY PROVISIONS

Article 83 (Protection of Communication Secrecy)

(1) No person shall infringe on or divulge the secrecy of communication dealt with by telecommunications business operator.

(2) A person who is or has been engaged in the telecommunications service shall not divulge others� secrecy obtained withrespect to communication while in office.

(3) A telecommunications business operator may comply with a request for the perusal or the provision of the data falling undereach of the following subparagraphs (hereinafter referred to as the �supply of communication data�) from a court, a prosecutor, the headof an investigation agency (including the head of any military investigation agency, the commissioner of the National Tax Service andthe commissioners of regional Tax Offices); hereinafter the same shall apply) and the head of an intelligence and investigation agency,who intends to collect information or intelligence for the purpose of the prevention of any threat to a trial, an investigation (including aninvestigation of any transgression taken place during commission of any crime falling under Article 10(1), (3) or (4) of the Punishmentof Tax Evaders Act), the execution of a sentence or the guarantee of the national security:

1. Names of users;

2. Resident registration numbers of users;

3. Addresses of users;

4. Phone numbers of users;

5. IDs of users (referring to the identification codes of users that are used to identify the rightful users of computer systems orcommunications networks); and

6. Dates on which users subscribe or terminate their subscriptions.

(4) The request for supply of communication data under Paragraph (3) shall be made in writing (hereinafter referred to as a�written request for data supply�), which states a reason for such request, relation with the relevant user and the scope of necessarydata; provided, however, that where an urgent reason exists that makes a request in writing impossible, such request may be madewithout resorting to writing, and when such reason disappears, a written request for data supply shall be promptly filed with thetelecommunications business operator.

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(5) A telecommunications business operator shall, where he has supplied the communication data pursuant to the procedures ofParagraphs (3) and (4), keep the ledgers as prescribed by the Enforcement Decree, which contain necessary matters such as the facts ofsupplies of communication data, and the related data such as the written requests for data supply, etc.

(6) A telecommunications business operator shall report, to the Minister of Science and ICT, twice a year the current status, etc.of supplying the communication data, by the methods prescribed by the Enforcement Decree, and the Minister of Science and ICT maycheck whether the content of a report made by a telecommunications business operator is authentic and the management status ofrelated data according to Paragraph (5). < Amended on Mar. 23, 2013, Jul. 26, 2017>

(7) A telecommunications business operator shall, by the methods prescribed by the Enforcement Decree, notify the contentsentered in the ledgers according to Paragraph (5) to the head of a central administrative agency whereto a person requesting supply ofcommunications data according to Paragraph (3) belongs; provided, however, that in the event that a person who asks for providing thecommunications data is a court, the relevant telecommunications business operator shall notify the Minister of the Court Administrationthereof.

(8) A telecommunications business operator shall establish and operate a setup in full charge of the affairs related to the users�communication secrets; and the matters concerning the function and composition, etc. of the relevant setup shall be prescribed by theEnforcement Decree.

(9) Matters necessary for the scope of persons holding the decisive power on information request shall be prescribed by theEnforcement Decree.

Article 84 (Notice of Transmitter��s Telephone Number)

(1) The telecommunications business operator may, upon request from the recipient, notify him of the transmitter�s telephonenumber, etc.; provided, however, that this shall not apply to the case where the transmitter expresses his content to refuse thetransmission of his telephone number.

(2) Notwithstanding the proviso of Paragraph (1), the telecommunications business operator may, in any of the following casesnotify the recipient of the transmitter�s telephone number

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1. Where the recipient requests according to the requisites and procedures set by the Enforcement Decree in order to protect therecipients from the violent language, intimidations, harassments, etc.;

2. Where it is prescribed by Enforcement Decree for national security, crime prevention, disaster relief, etc. when providingphone services with special numbers.

(3) Deleted <Oct., 15, 2014>

(4) Deleted <Oct. 15, 2014>

Article 84-2 (Prevention of False Display of Telephone Number and Protection of Users)

(1) No person shall fraudulently display outgoing telephone number by altering, etc. the telephone number, when he makes a call(including text messages; hereinafter in this article, the same shall apply.) in order to take a profit in property by cheatinganother person or to inflict harm including violent language, intimidations, harassments, etc.

(2) No person shall provide, for profit, the service that enables another person to fraudulently display�by altering, etc.�outgoingtelephone number; provided, however, that this provision under Paragraph (2) shall not apply in the event any justifiablegrounds for exception exist (e.g., for public interest or recipient�s convenience).

(3) Telecommunications business operators shall take each of the following measures to prevent users from being damaged byfraudulently displayed telephone number; provided, however, that the foregoing shall not apply in case there exist justifiablegrounds under the proviso of Paragraph (2). <Amended on Jul. 26, 2017>

1. Measure to block a caller from sending fraudulently displayed�via altering, etc.�telephone number or to correct thefraudulently displayed caller�s phone number before transmitting it to the recipient;

2. Measure to inform that a call is made from a foreign country, in case the call is from overseas;

3. Measure to suspend the provision of telecommunication services to the relevant line of the caller who fraudulently displayed,via altering, etc., his telephone number;

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4. Other matters determined to protect users by the Minister of Science and ICT;

(4) The Minister of Science and ICT may request a telecommunications business operator to submit, or enable the Minister toread, the following materials or may conduct a necessary examination, to confirm the implementation of the measure under Paragraph(3) or to prevent the spread of damage to users. <Amended on Jul. 26, 2017>

1. Blocked telephone number, blocking time, and the name of an entity that made the call, in case the telecommunications businessoperator has blocked a caller�s telephone number that was fraudulently displayed, via alteration, etc.;

2. The name of the entity that made a call, in case a recipient has made a report on fraudulently displayed, via alteration, etc.telephone number;

3. Other relevant materials that may confirm the implementation of each measure under Paragraph (3).

(5) To confirm the implementation of the measures under Paragraph (3) and enforce the measures under Paragraph (4), theMinister of Science and ICT may entrust the National Internet Development Agency under Article 52 of the Act on Promotion ofInformation and Communications Network Utilization and Information Protection, etc. with tasks as determined by the EnforcementDecree. <Amended on Jul. 26, 2017>

(6) The Minister of Science and ICT may determine and announce the justifiable grounds under the proviso of Paragraph (2) andspecific procedures and methods for implementation of the measures under each of subparagraphs of Paragraph (3) and implementationof Paragraph (4). <Amended on Jul. 26, 2017>

(7) Article 64, Article 64-2, and Article 69 of the Act on Promotion of Information and Communications Network Utilizationand Information Protection, Etc. shall apply mutatis mutandis to the perusal or provision of the materials under Paragraph (4).


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Article 85 (Restriction and Suspension of Business)

The Minister of Science and ICT may order the telecommunications business operators to restrict or suspend the whole or part oftelecommunications service under the conditions as prescribed by the Enforcement Decree, when there occurs or is likely to occur anational emergency of war, incident, natural calamity, or that corresponding to them, or when other unavoidable causes exist, and whennecessary for securing important communications. < Amended on Mar. 23, 2013, Jul. 26, 2017>

Article 86 (Approval for International Telecommunications Services)

(1) When there exist special provisions in the treaties or agreements on international telecommunications business joined by theGovernment, those provisions shall govern.

(2) A telecommunications business operator shall, where he intends to conclude international telecommunications business asprescribed by the contract on cross-border provision of key communications services under Article 87(1) and the Enforcement Decree,obtain approval from the Minister of Science and ICT fulfilling the requisites prescribed by the Enforcement Decree and the same shallapply to the case where he intends to alter or abolish such agreement or contract; provided, however, that such telecommunicationsbusiness operator who has satisfied each of the following requirements may enter into a contract without approval of the Minister ofScience and ICT: < Amended on Mar. 23, 2013, Aug. 13, 2013, Jul. 26, 2017>

1. A person who intends to provide key communications services is a citizen of a signatory nation to a free trade agreemententered effect into between the Republic of Korea and one or more other countries and set forth and publicly notified by the Minister ofScience and ICT;

2. Key communications services transmitting sounds, data, videos, etc. regarding television broadcast or radio broadcast betweenTV business operators are provided through man-made satellites; and

3. Such operator does not provide key communications service between domestic TV business operators.

(3) A telecommunications business operator providing key communications services shall, where he concludes an agreement or acontract with a foreign government or a foreigner with respect to the adjustments of fees following the handling of internationaltelecommunications services, report such to the Minister of Science and ICT; provided, however, that the foregoing is not applicable incase the size of telecommunications facilities, paid-in capital, number assignment ,etc. satisfy the standards specified under theEnforcement Decree of the Act. < Amended on Mar. 23, 2013, Jul. 26, 2017>

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(4) Deleted. < on Aug. 13, 2013>

(5) Details on the report under Paragraph (3) shall be determined and publicly announced by the Minister of Science and ICT. <Amended on Mar. 23, 2013, Aug. 13, 2013, Jul. 26, 2017>

Article 87 (Cross-Border Provision of Key Communications Services)

(1) A person, who intends to provide key communications service from abroad into the homeland without establishing adomestic business place (hereinafter referred to as the �cross-border provision of key communications services�), shall conclude acontract on cross-border provision of key communications services with a domestic key communications business operator or a specificcommunications business operator who provides the same key communications service.

(2) The provisions of Articles 28, 32, 33, 45 through 47, 50 through 55, 83, 84, 84-2, 85, 88, and 92, and Article 44-7 of the Acton Promotion of Information and Communications Network Utilization and Information Protection, etc. shall apply mutatis mutandis tothe provision of services as determined in a contract by a key communications business operator or a specific communications businessoperator who has concluded the contract under Paragraph (1). <Amended on Oct. 15, 2014>

(3) Where a person, who intends to provide a cross-border key communications service under Paragraph (1), or a keycommunications business operator or a specific communications business operator, who has concluded a contract with him, violates therelevant provisions which applies mutatis mutandis under Paragraph (2), the Minister of Science and ICT may cancel approval underArticle 86 (2), or issue an order to suspend a cross-border provision of the whole or part of key communications services as determinedin the relevant contract, with fixing a period of not more than one year. < Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) Criteria and procedures for dispositions under Paragraph (3) and other necessary matters shall be determined by theEnforcement Decree.

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Article 87-2 (Display, etc. of Warning)

(1) Any person who manufactures or imports/sells mobile communications terminals may display, on a mobile communicationsterminal, a warning of the danger of using a mobile communications terminal on the move.

(2) The government may provide necessary support including the cost required under Paragraph (1).

(3) Matters necessary for the content, method, etc. of displaying a warning under Paragraph (1) shall be determined andannounced by the Minister of Science and ICT. <Amended on Jul. 26, 2017>


Article 88 (Report, etc. on Statistics)

(1) A telecommunications business operator shall report the statistics on a provision of telecommunications service as prescribedby the Enforcement Decree, such as a current status of facilities by telecommunications service, subscription record, current status ofusers, and the data related to telephone traffic required for the imposition and collection of fees, to the Minister of Science and ICTunder the conditions as determined by the Enforcement Decree, and keep the related data available. < Amended on Mar. 23, 2013, Jul.26, 2017>

(2) A key communications business operator and stockholders thereof, or the specific communications business operator andstockholders thereof shall submit the related data necessary for a verification of the facts of Article 8, pursuant to the provisions of theEnforcement Decree. < Amended on Mar. 23, 2013>

(3) The Minister of Science and ICT may, in order to verify the facts under Paragraph (2), or to examine the genuineness of thedata submitted, request the administrative agencies and other related agencies to examine the data submitted or to submit the relateddata. In this case, the agencies in receipt of such request shall accede thereto unless there exist any justifiable reasons. < Amended onMar. 23, 2013, Jul. 26, 2017>

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(4) Mayor/Do Governor shall report the following to the Minister of Science and ICT and keep related materials as prescribed bythe Enforcement Decree. <Newly Inserted on Dec. 1, 2015, Amended on Jul. 26, 2017>:

1. Current state of reporting of installation, and change of installation, of proprietary telecommunications facilities under Article64(1);

2. Current state of correction, cessation of use, modification, repair and other measures in regard to proprietarytelecommunications facilities under Article 67;

3. Current state of imposition of penalty surcharge under Article 90(2); and

4. Current state of imposition of fine for negligence under Article 104(5)10

Article 89 (Hearing)

The Minister of Science and ICT shall, in case where he intends to make a disposition falling under any of the following subparagraphs,hold a hearing: < Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Cancellation, in whole or part, of license for a key communications business operator under Article 20 (1);

2. Cancellation, in whole or part, of registration of a specific communications business under Article 27 (1);

3. Closedown, in whole or part, of a value-added communications business under Article 27 (2); and

4. Cancellation of approval under Article 87 (3).

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Article 90 (Imposition, etc. of Penalty Surcharge)

(1) The Minister of Science and ICT may impose a penalty surcharge equivalent to the amount of not more than 3/100 of thesales amount that is calculated under the conditions as prescribed by the Enforcement Decree in lieu of the relevant business suspension,in case where he has to order a business suspension to a telecommunications business operator who falls under subparagraphs of Article20 (1) or any of subparagraphs of Article 27 (1) and (2) or Article 52(5), or a suspension of relevant business is likely to causesubstantial inconveniences to the users, etc. of relevant business or to harm other public interests. If the telecommunications businessoperator refuses to submit the data used for calculation of turnover or submits erroneous data, an estimate of the turnover can beassessed based on the financial statement of those who provide similar services in the same industry (accounting documents, number ofsubscribers, usage fee and business operation status; provided, however, that in the event that the sales amount is nonexistent or difficultto calculate the sales amount, as prescribed by the Enforcement Decree, the Minister of Information and Communication may impose apenalty surcharge not exceeding 1 billion won. < Amended on Mar. 23, 2013, Jan. 27, 2016, Jul. 26, 2017>

(2) When the Minister of Science and ICT and Mayor/Do Governor orders cessation of use in regard to proprietarytelecommunications facilities under Article 65(4) and Article 67(2), it may replace such order with a fine not exceeding 1 billion won ifsuch order causes significant inconvenience to users of telecommunication services provided with the use of the relevant proprietarytelecommunications facilities or other public harm is expected. < Amended on Mar. 23, 2013, Dec. 1, 2015, Jul. 26, 2017>

(3) Specific standards for the imposition of penalty surcharge under Paragraph (1) and (2) shall be determined by theEnforcement Decree.

(4) Article 53(5) through (8) shall apply in regard to penalty surcharge, demand for payment and return surcharge. <Amended onOct. 15, 2014>

Article 91 (Extension of Time Limit of Payment of Penalty Surcharge and Payment in Installments)

(1) Where a penalty surcharge to be paid by a telecommunications business operator under Articles 53 and Article 90 exceedsthe amount as prescribed by the Enforcement Decree, and where deemed that a person liable for a payment of penalty surcharge finds itdifficult to pay it in a lump sum due to the reasons falling under any one of the following subparagraphs, the Minister of Science andICT or the Korea Communications Commission may either extend the time limit of payment, or have him pay it in installments. In thiscase, the Minister of Science and ICT or the Korea Communications Commission may, if deemed necessary, have him put up a securitytherefor: < Amended on Mar. 23, 2013, Jul. 26, 2017>

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1. Where he suffers a severe loss of property due to natural disasters or fire;

2. Where his business faces a serious crisis due to an aggravation of his business environments; and

3. Where it is expected that he will be in great financial difficulty if he pays the penalty surcharge in a lump sum.

(2) Matters necessary for an extension of the deadline for payment of a penalty surcharge, the payment in installments and thelaying of a security shall be prescribed by the Enforcement Decree.

Article 92 (Correction Orders, etc.)

(1) The Minister of Science and ICT or Korea Communications Commission shall issue correction orders in case where atelecommunications business operator or a facility management institution falls under any of the following subparagraphs: < Amendedon Mar. 23, 2013, Aug. 13, 2013, Oct. 15, 2014, Jan. 20, 2015, Dec. 1, 2015 and Jan.27, 2016, Jul. 26, 2017>

1. Where it violates Articles 3, 4, , 4-2, 6, 9 through 11, 14 through 22, 22-3, 22-4. 23, 24, 26 through 28, 30 through 32, 32-3,32-4, 32-6, 32-7, 32-8, 33 through 35, 35-2, 36 through 44, 47 through 49, 51, 56 through 60, 60-2, 60-3, 61, 62, 64 through 66, 69, 73through 75, 79 or 82 through 84, 84-2, 85 through 87, and 88 or any order thereunder;

2. Where the procedures for business performances of telecommunications business operator are deemed to inflict significantharms on the users� interests; and

3. Where he fails to take swift measures necessary for removing obstructions such as repairs, etc. when impediments haveoccurred to the supply of telecommunications services.

(2) The Minister of Science and ICT may order a telecommunications business operator to conduct the matters of the followingsubparagraphs, when necessary for development of telecommunications: < Amended on Mar. 23, 2013, Aug. 13, 2013, Jul. 26, 2017>

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1. Integrated operation and management of telecommunications facilities, etc.;

2. Expansion of communications facilities for the enhancement of social welfare;

3. Construction and management of communications networks for important communications necessary to achieve efficientperformance of State�s functions, determined by the Enforcement Decree; and

4. Other matters as prescribed by the Enforcement Decree.

(3) The Minister of Science and ICT may order the persons falling under any of the following subparagraphs to take measures,such as the suspension of acts to provide telecommunications service or the removal of telecommunications facilities, etc.: <Amendedon Mar. 23, 2013, Oct. 15, 2014, Jul. 26, 2017>

1. Persons who operate a key communications business without obtaining a permit under Article 6 (1);

2. Persons who operate a specific communications business without making a registration under Article 21 (1);

3. Persons who operate a value-added communications business without making a report under Article 22 (1);

4. Persons who operate a value-added communications business of a special type without making a registration under Article 22(2).

(4) The Minister of Science and ICT or the Korea Communications Commission may extend the period only once in case it isacknowledged that a telecommunications business operator cannot implement the order within the period provided by the order underParagraphs (1) through (3) due to natural disaster or other unavoidable reason. < Newly Inserted on Oct. 15, 2014, Amended on Jul. 26,2017>

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(5) The government may subsidize the expenses for construction and management of the important communications in order tosecure the important communications in Subparagraph 3 of Paragraph (2). < Newly Inserted on Aug. 13, 2013, Oct. 15, 2014>

Article 93 (Delegation and Consignment of Authority)

(1) The following authority of the Minister of Science and ICT shall be consigned to the Korea CommunicationsCommission: <Amended on Jul. 26, 2017>

1. Order for partial suspension of business against a telecommunications business operator under Article 52(5);

2. Imposition and collection of the charge for compliance under Article 52-2; or

3. Imposition of the penalty under Article 90(1) (which shall be limited to the cases where such penalty is imposed as asubstitution for a partial suspension of business under Article 52(5);

(2) The authority of the Minister of Science and ICT under this Act (except for the authority consigned to the KoreaCommunications Commission pursuant to Paragraph (1)) or the authority of the Korea Communications Commission maypartially be delegated to the head of affiliated agency, as prescribed by the Enforcement Decree. <Amended on Jul. 26, 2017>

[Wholly amended on Jan. 27, 2016]

Article 93-2 (Legal Fiction in Application of Penalty) any member of the committee who is not a public official shall be deemed to be apublic official when the provisions of Articles 129 through 132 of the Criminal Act shall apply.


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CHAPTER VII PENAL PROVISIONS


A person falling under any of the following subparagraphs shall be punished by imprisonment for not more than five years or by a finenot exceeding 200 million won:

1. A person who runs a key communications business without obtaining a license under Article 6 (1);

2. A person who has operated key communications services in violation of partial cancellation of license under Article 20(1);

3. A person who obstructs the flow of telecommunications by impeding a function of telecommunications facilities by means ofdamaging telecommunications facilities, or having the objects contacted thereon and other methods, in violation of Article 79 (1);

4. A person who divulges other�s secrets with respect to communications which have been known to him while in office, inviolation of Article 83 (2);

5. A person who supplies communication data, and person who receives such supply, in violation of Article 83 (3).


A person falling under any of the following subparagraphs shall be punished by imprisonment for not more than three years or by a finenot exceeding 150 million won: <Amended on May 19, 2011, Jan. 27, 2016>

1. A person who refuses a provision of telecommunications service without any justifiable reasons, in violation of Article 3 (1);

2. A person who violates a disposition taken to suspend his business under Article 20 (1);

3. A person who operates a specific communications business without making a registration under Article 21 (1);

3-2. A person who operated a value-added telecommunications business without making a registration under Article 22 (2);

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4. A person who has operated specific communications services in violation of partial cancellation of license under Article 27(1);

5. A person who fails to implement an order under Article 52 (2);

5-2. A person who violates an order for partial suspension of business under Article 52(5);

6. A person who obstructs the measurement of line tracks, etc. and the installation and preservation activities oftelecommunications facilities under Article 73 (2);

7. A person who encroaches upon or divulges a secret of communications handled by telecommunications business operator, inviolation of Article 83 (1).

Article 95-2 (Penal Provisions)

A person falling under any of the following subparagraphs shall be punished by imprisonment for not more than three years or by a finenot exceeding 100 million won: <Amended on October, 15, 2014, Jan. 27, 2016>

1. A person who has disclosed another�s secret during his term of office in violation of Article 4-2(3);

2. A person who, in violation of Article 32-4 (1) 1, opens a mobile communications terminal in another�s name on conditionthat he would provide or finance funds and uses the telecommunication service provided to the mobile communicationsterminal or uses the mobile communications terminal to collect the relevant funds;

3. A person who, in violation of Article 32-4 (1) 2, solicits, arranges or mediates, or advertises a contract concerning theprovision of telecommunication service required for the use of a mobile communications terminal on condition that he willprovide or finance funds;

4. A person who, in violation of Article 84-2 (1), fraudulently displays outgoing telephone number by altering, etc. it when hemakes a call (including text messages) in order to take a profit in property by cheating another person or inflict harmincluding violent language, intimidations, harassments, etc.

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5. A person who, in violation of Article 84-2 (2), provides, for profit, the service that enables another person to fraudulentlydisplay�by altering, etc.�outgoing telephone number.



A person falling under any of the following subparagraphs shall be punished by imprisonment for not more than two years or by a finenot exceeding 100 million won: < Amended on Aug. 13, 2013, Oct. 15, 2014, Dec. 1, 2015>

1. A person who fails to obtain a modified license under Article 16;

2. A person who fails to obtain approval under Articles 17 (1) and 42 (4);

3. A person who fails to obtain an authorization under the text of Article 18 (1) other than sub-paragraphs or approval accordingto Article 19 (1);

4. A person who violates Article 18 (9) by unifying communication networks, appointing officers, executing any other activitiessuch as transferring, consolidating, enforcing a facilities sales contract or taking follow-up measures relating to establishment of acompany before receiving a license;

5. A person who violates user protection measures ordered under Article 19(2) or Article 20(3);

6. A person who runs the value-added communications business without making a report under Article 22(1);

6-2. A person who violates Article 22-3(2) by incapacitating�via removal or alteration, or circumvention of�the technicalmeasures under Article 22-3 (1) without reasonable authority;

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7. A person who violates a disposition taken to suspend his business under Article 27(1);

8. A person who fails to execute the order given to discontinue his business under Article 27 (2);

9. A person who fails to subscribe for a guarantee insurance in violation of Article 32(4);

10. A person who discloses, uses or provides the information, in violation of the text of Article 43;

10-2. A person who, for the purpose of disturbing the suspension of use of telecommunications termination equipment reportedlost or stolen to communications business operators, damages, counterfeits or alters the Identification number of the telecommunicationstermination equipment, in violation of Article 60-3;

11. A person who fails to implement the partial restriction or cessation measure ordered pursuant to Article 85;

12. A person who fails to obtain approval, approval for alteration, or approval for abolition, under Article 86 (2).


A person falling under any of the following subparagraphs shall be punished by imprisonment for not more than one year or by a finenot exceeding 50 million won: <Oct. 15, 2014>

1. A person who fails to execute the order given under Articles 10(5), 18 (8) or 12 (2) (including a case where the provisions areapplied mutatis mutandis under Article 4 (4) of the Addenda of the Telecommunications Business Act amended by Act No. 5385) orArticle 13(9);

2. A person who fails to make a report under provisos of Article 18 (1) other than sub-paragraphs;

3. A person who fails to make a modified registration under Article 23;

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4. A person who fails to make a report under Article 24;

5. A person who violates a disposition taken to suspend his business under Article 27 (2);

6. A person who provides telecommunications service without making a report or modification report under Article 28(1) andthe proviso of (2) or receiving an authorization or modification approval under Paragraph (2) of the same Article;

7. A person who intermediates other person�s communication or furnishes for use by other person, by making use oftelecommunications services rendered by the telecommunications business operator, in contravention of the provisions of the text ofArticle 30 other than subparagraphs.


A person falling under any of the following subparagraphs shall be punished by imprisonment for not more than one year or by a finenot exceeding 10 million won <Amended on Jan. 27, 2016>:

1. A person who fails to report on charges in violation of Article 22-4(1) or provides telecommunications services not inaccordance with those reported;

2. A person who installs or modifies significant telecommunications facilities without making a report under the main text ofArticle 62(1) or has installed telecommunications facilities without obtaining approval under the proviso of the same Article;

3. A person who installs proprietary telecommunications facilities without making a report or modification report under Article64(1);

4. A person who interconnects other�s communication through proprietary telecommunication facilities or uses it outside itspurpose in violation of Article 65(1);

5. A person who violates an order under Article 66(1) to handle telecommunication services or other communication services orconnect the pertinent facilities to other telecommunications facilities;

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6. A person violates a usage cessation order under Article 67(2) or an order under Paragraph (3) of the same article;

7. A person violates an order for removal of telecommunications facilities or other corrective measures under Article 82(2).

Article99 (Penal Provisions)

A person who commits any of the prohibited acts under Article 50(1) (excluding an act of providing telecommunications services not inaccordance with the standard usage terms and conditions under Article 50(1)5 or those under Article 50(1)5(2)) shall be punished by afine not exceeding 300 million won <Amended on Jan. 27, 2016>.

Article 100 Deleted <Oct. 15, 2014>


A person who stains the telecommunications facilities or damages the measurement marks of the telecommunications facilities, inviolation of Article 79 (2) shall be punished by a fine not exceeding one million won.

Article 102 (Attempted Criminal)

An attempted criminal under subparagraphs 3 and 4 of Article 94 and subparagraph 7 of Article 95 shall be punished.

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Article 103 (Joint Penal Provisions)

When a representative of a juristic person or an agent, an employee or any other employed person of the juristic person or individualcommits violation under Articles 94, 95, 95-2 and 96 through 99 in connection with the business of such juristic person or individual,then a fine under the related Article shall be imposed on the juristic person or individual, in addition to the punishment of the violatorexcept in cases where such juristic person or individual has not been lax in exercising due care and supervision in regard to the relevantbusiness to prevent such violation. < Amended on Aug. 13, 2013, Oct. 15, 2014>

Article 104 (Fine for Negligence)

(1) A person who rejects or interferes with or avoids the inspection under Article 51(2) shall be punished by a fine for negligencenot exceeding 50 million won. <Newly Inserted on Oct. 15, 2014>

(2) A person who falls under any one of the following subparagraphs shall be punished by a fine for negligence not exceeding30 million won: < Amended on Oct. 15, 2014, Jan. 27, 2016>

1. A person who sells or purchases a telecommunication number in violation of Article 48-2(1);

2. A person who refuses or impedes a temporary use of private telecommunications facilities or lands under Article 73 (2),without justifiable reasons;

3. A person who refuses or impedes an entry to the land, etc. under Article 74 (2), without justifiable reasons;

4. A person who refuses the moving, alteration, repair and other measures on the obstacles, etc. under Article 75 (1), or therequest for removal of the plants under Article 75 (2), without justifiable reasons;

5. A person who fails to take measures under each of the subparagraphs under Article 84-2(3).

(3) A person who falls under any one of the following subparagraphs shall be punished by a fine for negligence not exceeding20 million won: <Amended on Oct. 15, 2014>

1. A person who violates Article 22(3)1 by failing to take technical measures or violates Article 22(3)3 by failing to record/manage the status of the operation/management of technical measures;

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2. A person who violates Article 32-3(2) by failing to not suspend the provision of telecommunication services;

3. A person who violates Article 44(2) by failing to apply for approval in regard to execution of an agreement.

(4) A person falling under any of the following shall be punished by a fine not exceeding 15 million won: <Amended on Oct. 15,2014>

1. A person who fails to report in regard to execution of an agreement in violation of Article 44(1) or Article 44(3);

2. A person who fails to make a report under the main text of Article 86(3).

(5) A person who falls under any one of the following subparagraphs shall be punished by a fine for negligence not exceedingten million won: < Amended on Mar. 23, 2013, Aug. 13, 2013, Oct. 15, 2014, Jan. 20, 2015, Jan. 27, 2016, Jul. 26, 2017>

1. A person who fails to make a report as referred to in Article 10 (2) or to comply with a request for providing the data or anorder to attend as referred to in Article 11 (3) or (4);

2. A person who, in violation of Article 19 (1), fails to notify the user 60 days prior to the expected date of termination;

2-2. A person who fails to respond to the Korea Communications Commission�s order to submit data under Article 22-3(4) or whosubmits false data;

3. A person who fails to make a report under Article 26;

4. A person who violates the obligation (excluding the effort to prevent users from being damaged) concerning the protection ofusers under Article 32 (1);

4-2. A person who fails to implement the order of submission of data under the latter part of Article 32(2);

4-3. A person who fails to send the copy of a contract in violation of Article 32(3);

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4-4. A person who fails to make a notification of excess of maximum fee limit, etc. under Article 32(2)1.

4.5. A person who fails to make a report or provides any telecommunication service which is different from the reported service inviolation of Article 32-8;

5. <Deleted on Dec. 1, 2015>;

6. A person who fails to make a public announcement of the technical standards, and the standards for use and provision, or thestandards for a creation of fair competitive environments, in violation of Article 42 (4);

6-2. A person who fails to provide information regarding telecommunications services standards in violation of Article 42(5);

7. A person who fails to observe the publicly announced matters under Article 48(2), in violation of Article 48 (3);

7-2. A person who fails to comply with an order for closing of the service, or restriction of postings issued by the Minister ofScience and ICT under Article 48-2(2);

8. A person who refuses, avoids, or intervenes with the order to submit information or object under Article 51 (5), or thetemporary custody of the information or object submitted under the same Article;

9. A person who fails to execute orders given to furnish related data under the provisions of Article 56 (3);

10. A person who has used proprietary telecommunications facilities without receiving confirmation under Article 64(3);

11. A person who refuses or interferes with inspection under Article 82(1);

12. A person who fails to report under Article 82(1) or makes a false report;

13. A person who fails to keep related data or makes false entries in such data, in contravention of the provisions ofArticle 83(5);

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14. A person who does not report the contents in the ledgers, including provision of telecommunications data, to the head ofcentral administrative agency in violation Article 83(7);

15. A person who fails to respond to the perusal/submission and inspection of the data under Article 84-2(4) or submits falsedata;

16. A person who fails to make reports or submit the data under Article 88, or falsely do such acts;

17. A person who fails to follow correction orders, etc., under Article 92(1) to (3).

(6) The fine for negligence under Paragraphs (2) through (5) shall be imposed and collected by the Minister of Science and ICT,under the conditions as prescribed by the Enforcement Decree; provided, however, that the fine for negligence under Paragraph (1),Paragraph (3)1, and subparagraphs 2-2, 4-2, and 8 of Paragraph (5) shall be imposed and collected by the Korea CommunicationsCommission and the fine for negligence under subparagraph 17 of Paragraph (5) shall be imposed and collected by the Minister ofScience and ICT or the Korea Communications Commission in accordance with the business affairs under the control of each of them. <Amended on Mar. 23, 2013, Oct. 15, 2014, Dec. 1, 2015>

ADDENDA <No. 14576, Mar. 14, 2017>

Article 1 (Enforcement Date) This Act shall enter into force one year after the date of its promulgation; provided, however, that theamended provisions of Article 38(2) through (4) shall enter into force on the date of their promulgation.

Article 2 (Validity) The amended provisions of Article 38(2) through (4) shall remain valid until September 22, 2019.

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Exhibit 15.4

ENFORCEMENT DECREE OFTHE TELECOMMUNICATIONS BUSINESS ACT

[Enforced on September 5, 2017] [Amended by Enforcement Decree No. 28283, September 5, 2017, Amendment by other Acts]

Korea Communications Commission (Consumer Policy Coordination Division �prohibited acts), 02-2110-1476, 1475

Korea Communications Commission (Examination Support Team �telecommunications dispute reconciliation), 02-2110-1552, 1551

Ministry of Science and ICT (Telecommunications Policy Planning Division), 02-2110-1916

Chapter 1. General Provisions

Article 1 (Purpose)

The purpose of this Decree is to provide for matters delegated under the Telecommunications Business Act and matters necessary for itsenforcement.

Article 2 (Contents of Universal Service)

(1) Pursuant to Article 4(3) of the Telecommunications Business Act (the �Act�), the contents of universal services shall be asfollows.

1. Wire telephone services;

2. Telephone services for emergency communications; and

3. Services of which fees are reduced or exempted for the disabled and the low income class.

1



(2) The detailed contents of universal services under paragraph (1) shall be as follows. <Amended on Mar. 23, 2013, May 31,2013, May 8, 2017, Jul. 26, 2017>

1. Wire telephone services are telephone services within an area publicly notified by the Minister of Science and ICT based onmethods and conditions of use (the �Calling Area�), falling under any one of the following:

(a) a local telephone service which is a telephone service (excluding, throughout this Enforcement Decree, the islandcommunication service referred to in (c) below) enabling communication through subscription telephones;

(b) a public telephone service which is a telephone service enabling communication through public telephones; or

(c) an island communication service which is a telephone service enabling radio communication between shore and an island orbetween islands.

2. Telephone services for emergency communications are telephone services necessary for maintaining social order andsecuring human life, falling under any of the following:

(a) a special telephone number service, among the key communications services, publicly notified by the Minister of Scienceand ICT; or

(b) a wireless telephone service for vessels which is a telephone service, among the key communications services, enablingcommunication between shore and a vessel or between vessels.

3. Services of which fees are reduced or exempted for the disabled and the low income class are services offered to the disabledand the low income class for the purpose of improving social welfare, falling under any of the following:

(a) a local telephone service and a telephone service between the Calling Areas (the �Long Distance Telephone Service�);

2



(b) a directory assistant service which is a service incidental to a local telephone service and the Long Distance TelephoneService;

(c) a mobile telephone service, a personal communication service, IMT-2000 service or a LTE service among the keycommunications services; or

(d) an Internet subscriber connection service;

(e) an Internet phone service.

(f) Mobile Internet Service

(3) Any of the following shall be entitled to the services of which fees are reduced or exempted pursuant to subparagraph 3 ofparagraph (2); provided, however, that the services for which fees are reduced or exempt pursuant to subparagraphs 8 and 9 below shallbe limited to the mobile telephone service, the personal communication service, the IMT-2000 service, and the LTE service: <Amendedon Mar. 23, 2013, May 31, 2013, Jan. 7, 2014, Nov. 30, 2015, Jul. 26, 2017>

1. the disabled under Article 32 of the Welfare of Disabled Persons Act or welfare institutions or groups for the disabled underthe same Act); provided, however, that a family which includes the disabled as a member of the family shall be exemptedfrom paying service fees of the local phone service, long distance phone service, internet subscriber access service andinternet phone service;

2. special schools under the Elementary and Secondary Education Act;

3. child welfare institutions under the Child Welfare Act;

4. the recipients of livelihood benefits under Article 7(1)1 of the National Basic Livelihood Security Act or the recipients ofmedical benefits under Article 7(1)3 of the same Act); provided, however, that in the event of a local telephone service, theLong Distance Telephone Service, Internet subscriber connection service or Interne Phone Service, households composed ofsuch persons.

3



5. the Korean Association of Wounded Soldiers and Police Officials or the Association Commemorating the April 19Democratic Revolution under the Act on Establishment of Organizations for Persons, etc. of Distinguished Services to theState;

6. soldiers or policemen wounded in action, soldiers or policemen wounded on duty, wounded activists of the April 19Revolution, public officials wounded on duty, wounded special contributor to national and social development or woundedanticommunist captive under the Act on Honorable Treatment and Support of Persons, etc. of Distinguished Services to theState); provided, however, that a family which includes the disabled as a member of the family shall be exempted frompaying service fees of the local phone service, long distance phone service, internet subscriber access service and internetphone service; or

7. wounded activists of the May 18 Democratization Movement among the persons of distinguished services to the May 18democratization movement under the Act on Honorable Treatment of Persons of Distinguished Services to the May 18Democratization Movement); provided, however, that a family which includes the disabled as a member of the family shallbe exempted from paying service fees of the local phone service, long distance phone service, internet subscriber accessservice, and internet phone service.

8. members of a family having at least one of its members fitting any of the descriptions below qualifying as a member of thenext needy class under Article 2(10) of the National Basic Livelihood Security Act; and the number of family memberseligible for fee reduction or exemption for such family shall be determined by the Minister of Science and ICT:

(a) a person taking part in the project required for self-support pursuant to Article 9(5) of the National Basic Livelihood SecurityAct;

(b) a person having a rare and serious disease as described item (d) of section 3 in Table 2 and is eligible for reduction in his orher share of fees;

4



(c) <Deleted on Jan. 7, 2014>

(d) <Deleted on May 31, 2013>

(e) a person receiving disability allowances pursuant to Article 49 of the Welfare of the Disabled Persons Act and a personreceiving allowances for raising and protecting disabled children pursuant to Article 50(1) of the same Act; and

(f) a person requiring protection under Article 5 of the Single-Parent Family Assistance Act, including a person who has ratio ofrecognized income to median income of 52 or below to 100.

(g) A person receiving disability support pension pursuant to Article 10 of the Pension Act for the Disabled.

(h) A person who belongs to the working poor class in the Social Security Information System under Article 37 Paragraph 2 ofthe Framework Act on Social Security and is relevant to conditions, determined and publicly notified by the Minister ofScience and ICT.

9. Recipients under the National Basic Livelihood Security Act who do not receive the livelihood benefits under Article 7(1)1of the National Basic Livelihood Security Act or the medical benefits under Article 7(1)3 of the same Act (including thefamily members of the recipients of educational benefits under subparagraph 4 of the same paragraph). The number of familymembers eligible for fee reduction or exemption for such family shall be determined by the Minister of Science and ICT.

(4) Any person of followings shall apply for the service fees exemption under the Paragraph 2 Subparagraph 3 <Amended, Nov. 30,2015>:

1. In case where the service fee is exempt under Paragraph 3 Subparagraph 1, 4, or 7, either a person exempted from payingservice fees or a head of a household among members of the family;

5



2. Deleted <Nov. 30, 2015>;

3. In case where the service fees exemption is applied under situations, other than situations, prescribed in Subparagraph 1, aperson exempted from paying service fees (In case of Paragraph 3 Subparagraphs 8 and 9, each of members of the household)

(5) The Minister of Science and ICT shall publicly notify the standard of service fee exemption, prescribed in Paragraph 2 Subparagraph3, and this public notice shall be based on the consideration of the business scale, the level of service fee, etc., of the service provider.<Newly inserted on May 31, 2013, Amended on Jul. 26, 2017>[Wholly amended on Feb. 28, 2012]

Article 3 (Designation of Telecommunications Business Operator who Provides Universal Services)

(1) If the Minister of Science and ICT intends to designate a telecommunications business operator who provides universalservices (the �Business Operator Providing Universal Services�) under Article 4 (4) of the Act, it can do so after taking intoconsideration such operator�s opinion. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) To confirm the status of the provision of universal services, the Minister of Science and ICT may request a telecommunicationsbusiness operator who is designated as a Business Operator Providing Universal Services under paragraph (1) shall to submit data aboutthe results of provision of universal services, the cost relevant to the provision, etc. In this case, the Business Operator ProvidingUniversal Services shall respond to the request without justifiable reasons. <Amended on Dec. 23, 2014, Jul. 26, 2017>

[Wholly Amended on Feb. 28, 2012]

6



Article 4 (Compensation for Losses Incurred through Provision of Universal Services)

(1) The Minister of Science and ICT may have the telecommunications business operators who are not Business OperatorsProviding Universal Services bear part of the expenses for compensating whole or part of the losses incurred through a provision ofuniversal services by Business Operators Providing Universal Services (the �Compensation For Losses Incurred Through UniversalServices�) in proportion to their respective sales. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) A Business Operator Providing Universal Services who intends to receive the Compensation For Losses Incurred ThroughUniversal Services shall submit a report on the actual results of a provision of universal services, including expenditures for, andincomes and losses from, the provision thereof, to the Minister of Science and ICT within three months after the expiration of therelevant fiscal year. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) The Minister of Science and ICT may, if deemed necessary for the verification of the report on the actual results of a provisionof universal services submitted pursuant to paragraph (2), consult a professional institution to examine it. <Amended on Mar. 23, 2013,Jul. 26, 2017>

Article 5 (Universal Services Entitled To Compensation For Losses Incurred Through Universal Services)

(1) The scope of universal services entitled to the Compensation For Losses Incurred Through Universal Services shall be any ofthe following: <Amended on Mar. 23, 2013, May 8, 2017, Jul. 26, 2017>

1. among local telephone services pursuant to Article 2(2)1(a) hereof, a local telephone service offered in areas selected basedon the criteria determined and publicly announced by the Minister of Science and ICT in consideration of the expenses andincome resulting from the provision of services (referring to the expenses and income calculated in accordance with themethod publicly notified by the Minister of Science and ICT in consideration of such factors as the efficiency of managingcommunication lines; hereafter the same shall apply in Article 6);

7



2. among public telephone services pursuant to Article 2(2)1(b) hereof, a public telephone service offered in areas selectedbased on the criteria determined and publicly notified by the Minister of Science and ICT inconsideration of thecharacteristics of the location;

3. an island communication service pursuant to Article 2(2)1(c) hereof; or

4. a wireless telephone service for vessels pursuant to Article 2(2)2(b) hereof.

(2) In Article 4 (2) 1 of the Act, �the telecommunications business operators prescribed under the Enforcement Decree of the Act�means value-added communications business operators or regional wireless call operators.

(3) In Article 4 (2) 2 of the Act, �the amount prescribed under the Enforcement Decree of the Act� means 30 billion won.[Wholly Amended on Feb. 28, 2012]

Article 6 (Methods for Computing the Compensation For Losses Incurred Through Universal Services)

(1) Losses incurred through provision of the universal services prescribed under each of the paragraphs in Article 5(1) hereof shallbe the amount of expenses of providing the relevant service less the relevant income. In such cases, for calculating the losses incurredthrough provision of the universal services under Article 5(1)2, the income shall include indirect benefits such as brand value andsubscribers� increased preference. <Amended on May 8, 2017>

(2) The provisional Compensation For Losses Incurred Through Universal Services shall be computed by multiplying the amountobtained under paragraph (1) and the rate of compensation for losses determined and publicly notified by the Minister of Science andICT); provided, however, that with respect to a wireless telephone service for vessels under Article 5(1)4 hereof, the target amount forefficient management determined and publicly notified by the Minister of Science and ICT shall be the provisional Compensation ForLosses Incurred Through Universal Services. <Amended on Mar. 23, 2013, Jul. 26, 2017>

8



(3) The Compensation For Losses Incurred Through Universal Services shall be the amount of the provisional Compensation ForLosses Incurred Through Universal Services computed pursuant to paragraph (2) subtracted by each of the amounts described below:<Amended on Mar. 23, 2013, Jul. 26, 2017>

1. the amount paid by telecommunications business operators providing any of the universal services prescribed under each ofthe subparagraphs of Article 5(1) hereof based on their sales from telecommunications services other than the relevantuniversal service provided (excluding value-added communications services); and

2. the amount computed by the Minister of Science and ICT considering the payment capacity of telecommunications businessoperators paying for the Compensation For Losses Incurred Through Universal Services (the �Business Operators PayingFor Losses�).

(4) The Business Operators Paying For Losses shall pay for the Compensation For Losses Incurred Through Universal Servicescomputed pursuant to paragraph (3) in proportion to their respective sales relating to telecommunications services (excluding value-added communications services).

(5) The Minister of Science and ICT shall determine and announce all other necessary details with respect to the rates by whichtelephone services fees are reduced or exempted for the disabled and the low income class and the methods for computing theCompensation For Losses Incurred Through Universal Services. <Amended on Mar. 23, 2013, Jul. 26, 2017>


Chapter 2. Telecommunications Business

Article 7 < Deleted by Enforcement Decree No. 22616 Oct. 1, 2010>

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Article 8 (Scope of Premises)

The �premises determined under the Enforcement Decree of the Act� in Article 5(3)2 of the Act means any of the following:<Amended on Mar. 23, 2013, Jul. 26, 2017>

1. a building;

2. a site (limited to that owned by one person or owned through common ownership) and any building located on such site;

3. two or more buildings possessed by one person and the site on which such buildings are located, limited to those buildingsthe distance between which is not more than 500 meters; or

4. any buildings or sites adjacent to the buildings or sites prescribed under paragraphs 1-3 and publicly notified by the Ministerof Science and ICT.

[WhollyAmended on Feb. 28, 2012]

Article 9 (Permit Application, etc.)

(1) A person who wishes to obtain a permit under Article 6(1) of the Act may make an application in the name of therepresentative of a corporation or the representative, such as a shareholder, etc., of a corporation to be established. <Amended byEnforcement Decree No. 22616 Oct. 1, 2010>

(2) The �premises determined under the Enforcement Decree of the Act� in Article 6(2)4 of the Act means the following<Amended by Enforcement Decree No. 22616 Oct. 1, 2010, Amended on Mar. 23, 2013, Jul. 26, 2017>

1. matters concerning the suitability of investment plan in advancing telecommunication facilities;

2. matters concerning the stability and expertise of supply plan for key communication services; and

3. matters similar to paragraph 1 or 2 as determined and announced by the Minister of Science and ICT.

10



Article 10 (Documents to be Attached to Permit Application)

(1) A person who wishes to obtain a permit for a key communications business under Article 6(1) of the Act shall submit to theMinister of Science and ICT a key communications business permit application with each of the following documentation attachedthereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. articles of incorporation of the corporation (including, throughout this Article 10, the corporation to be incorporated);

2. shareholder register, or documentation relating to ownership of shares, etc. by shareholders, etc., of the corporation; and

3. a business proposal.

(2) The Minister of Science and ICT receiving a permit application pursuant to paragraph (1) shall verify the commercial registryextracts by using the public administrative information made available under Article 36(1) of the E-Government Act. <Amended onMar. 23, 2013, Jul. 26, 2017>[Wholly Amended on Feb. 28, 2012]

Article 11 <Deleted by Enforcement Decree No. 22616 Oct. 1, 2010>

Article 12 (Issuance of License)

(1) When permitting a key communications business under Article 6(1) of the Act or modification of license under Article 16(1)of the Act, the Minister of Science and ICT shall issue a key communications business operator�s license upon making recordation ofeach of the following in a license registry of key communications business operators: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. number and date of license;

11



2. title or trade name of the business and name of the representative;

3. the areas where the telecommunications service is offered;

4. location of the principal office;

5. capital or asset valuation amount;

6. details of major business facilities and equipment and the locations where such facilities and equipment are installed;

7. details concerning technical personnel; and

8. any conditions upon which the license is issued.

(2) A key communications business operator whose license, issued pursuant to paragraph (1), is either lost or worn out to theextent it can no longer be used may apply for reissuance of the license to the Minister of Science and ICT by writing the reason for suchloss or damage in its application thereto. <Amended on Mar. 23, 2013, Jul. 26, 2017>


Article 13 (Criteria for Examination of Public Interest Aspect)

(1) The term �public interests as prescribed under the Enforcement Decree of the Act� in parts other than each subparagraph ofArticle 10 (1) of the Act means the maintenance of national security, public peace and social order.

(2) The term �important management matters, including the key communication provider�s appointment of officer, transfer orbusiness, etc., prescribed under the Enforcement Decree of the Act� in Article 10(1)3 of the Act means the matters falling under each ofthe following subparagraphs:

1. appointment and dismissal of the representative director of a key communications business operator, or appointment anddismissal of one third or more of the officers;

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2. transfer and takeover of a key communications business; and

3. entrance by a key communications business operator into a new key communications business.

(3) The term �case prescribed under the Enforcement Decree of the Act� in Article 10(1)4 of the Act means any of thefollowing.

1. the case where a de facto change is made in the management right of a key communications business operator by anagreement of shareholders who are not the largest shareholder of such key communications business operator to jointlyexercise voting rights; or

2. the control of the holding company (as that term is defined under Article 2(1)2 of the Monopoly Regulation and Fair TradeAct) of the key communication provider has actually changed hands.

3. In case where the control of the key telecommunications business operator is, in fact, changed since there are any changes in thelargest shareholders of the business operator

4. In case where the control of the key telecommunications business operator is actually changed by an agreement, related to theexercise of voting right, by and between a person who is not a shareholder of the business operator and a shareholder of thebusiness operator (or a person who actually controls the business operator).


13



Article 15 (Procedures for Examination of Public Interest Aspect)

(1) A person who wishes to file a report or request a screening pursuant to Article 10(2) or 10(3) of the Act shall submit to theMinister of Science and ICT documentation indicating each of the following: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. name and address of the person filing a report or requesting a screening (in the case of a corporation, the name and address of(i) such corporation and (ii) the representative of such corporation);

2. purpose of, and reason for, the report or screening request; and

3. details of any of the facts falling under each of the subparagraphs of Article 10(1) of the Act.

(2) The Minister of Science and ICT may, where it deems necessary, request for the documentation already submitted to it to besupplemented within a period reasonably fixed. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) Except under special circumstances, with respect to any matter the Minister of Science and ICT referred to the public interestaspect examination committee, the public interest aspect examination committee shall notify the Minister of Science and ICT of theresult of its screening within 3 months of the date of such referral. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) The Minister of Science and ICT shall notify the person filing a report or requesting a screening of the result of examinationof public interest aspect under paragraph (3). <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly Amended on Feb. 28, 2012]

Article 16 (Composition etc. of Public Interest Aspect Examination Committee)

(1) The term �related central administrative agencies prescribed under the Enforcement Decree of the Act� in parts other than eachsubparagraph of Article 11(2) of the Act means the agencies falling under each of the following: <Amended on Mar. 23, 2013, Jul. 26,2017>

1. the Ministry of Strategy and Finance;

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2. the Ministry of Foreign Affairs;

3. the Ministry of Justice;

4. the Ministry of National Defense;

5. the Ministry of the Interior and Safety;

6. the Ministry of Trade, Industry and Energy.

7. the Fair Trade Commission

8. the National Police Agency

(2) The term of office of the members shall be two years and consecutive appointment may be permitted); provided, however,that the term of office of the members who are public officials shall be the period of service in their positions as public officials.


Article 16-2 (Dismissal of Members of Public Interest Aspect Examination Committee)

Where a member of the Public Interest Aspect Examination Committee as prescribed in Article 11(2) of the Act falls under any of thefollowing, the chairman of the Public Interest Aspect Examination Committee may dismiss or withdraw nomination of the concernedmember from the Public Interest Aspect Examination Committee:

1. Where the member becomes unable to perform his/her duties as a member of the Public Interest Aspect ExaminationCommittee;

2. Where the member has committed a misdeed in connection with his/her duties;

3. Where the member is deemed unsuitable as a member of Public Interest Aspect Examination Committee due to his/herneglect of duties, injury to dignity or other reasons; or

15



4. Where the member voluntarily expresses that it is impracticable to conduct his/her duties.

[Newly inserted on January 17, 2017]

Article 17 (Operation etc. of Public Interest Aspect Examination Committee)

(1) The chairman of the Public Interest Aspect Examination Committee shall represent the Public Interest Aspect ExaminationCommittee and exercise an overall control of its affairs.

(2) If the chairman is inevitably unable to perform his duties, a member previously appointed by the chairman shall act on her orhis behalf.

(3) The chairman shall convene and preside over a meeting of the Public Interest Aspect Examination Committee.

(4) Deliberation of a meeting of the Public Interest Aspect Examination Committee shall start by the attendance of a majority of allincumbent members, and its resolution shall require the consent of a majority of those present.

(5) The Public Interest Aspect Examination Committee shall have one secretary general in order to deal with its affairs, but thesecretary general shall be appointed by the chairman among the public officials belonging to the Ministry of Science and ICT.<Amended on Mar. 23, 2013, Jul. 26, 2017>

(6) Any matters necessary for the operation of the Public Interest Aspect Examination Committee shall be determined by thechairman through a resolution of the Public Interest Aspect Examination Committee.[Wholly Amended on Feb. 28, 2012]

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Article 18 (Imposition and Payment etc. of Charges for Compelling Execution)

(1) When determining the amount of charges for compelling execution pursuant to Article 13 of the Act, the Minister of Scienceand ICT shall take into account such factors as the reasons for failure to comply with corrective orders and the scale of benefits to begained by such failure. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The date of compliance with corrective orders pursuant to Article 13(2) of the Act shall be determined by the classificationsfalling under each of the following:

1. delivery date of shares in the case of disposal of shares;

2. date of executing a contract in the case of amending details of a contract;

3. date of suspending the relevant acts in the case of suspending the acts impeding public benefits; and

4. date of satisfying relevant conditions in the case of conditional performance.

(3) Where the Minister of Science and ICT wishes to impose charges for compelling execution pursuant to Article 13 of the Act, itshall furnish a notification thereof in writing, indicating such matters as the amount of charges for compelling execution per day, reasonsfor imposition, payment term and receiving agency, methods of raising objections, and agencies to where such objections must bedirected. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) Any person who has been notified under paragraph (3) shall pay the charges for compelling execution within 30 days of thedate of receiving such notice); provided, however, that in the event such person is unable to pay the charges for compelling executionwithin said period due to a natural disaster or other unavoidable circumstances, such person shall pay the charges for compellingexecution within 30 days of the day on which said causes have disappeared.

(5) In collecting charges for compelling execution and in the event a corrective order has not been complied with after 90 dayselapsed from the date of expiration of the period set by the corrective order, the Minister of Science and ICT may collect charges forcompelling execution based on the dates on which each 90 day period elapses from said expiration date. <Amended on Mar. 23, 2013,Jul. 26, 2017>

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(6) Article 49 hereof shall apply mutatis mutandis to any reminder of charges for compelling execution.


Article 19 (Permit to Change)

(1) A person who wishes to obtain a permit to change to a key communications business pursuant to Articles 16 (1) of the Actshall submit to the Minister of Science and ICT an application for a permit to change to a key communications business with supportingdocuments confirming proposed changes attached thereto: <Amended on Feb. 28, 2012, Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The Minister of Science and ICT shall issue public notice with respect to details about application guidelines, submissionprocedures, submission method, etc. for a permit to change to a key communications business under Article 16(1) of the Act.<Amended on Feb. 28, 2012, Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) Deleted <October 1, 2010>.

(4) The �material aspects prescribed under the Enforcement Decree of the Act� in Article 16(1) of the Act means each of thefollowing; <Amended on Apr. 14, 2015>

1. matters concerning changes to key communication business pursuant to Article 6(1) of the Act (including the case whereservices cancelled under Article 20(1) of the Act are to be resumed); and

2. matters concerning the permission criteria under Article 6(6) of the Act.[Title of this Article Amended on Feb. 28, 2012]

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Article 20 (Approval Application for Transfer, Merger, etc.)

(1) A person who wishes to obtain approval of the transfer of the whole or part of a key communications business pursuant toArticle 18(1)1 of the Act shall submit to the Minister of Science and ICT an approval application for the transfer of a keycommunications business with each of the following documentation attached thereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. a copy of the transfer agreement;

2. articles of incorporation of the transferor and the transferee, and documentation supporting the transfer;

3. shareholder register, or documentation related to ownership of shares, etc. by shareholders, etc., of the transferee;

4. present status of the transferor and the transferee; and

5. post-transfer business proposal.

(2) A person who wishes to obtain approval of the merger with a corporation that is a key communications business pursuant toArticle 18(1)2 of the Act shall submit to the Minister of Science and ICT an approval application for the merger with a keycommunications business with each of the following documentation attached thereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. a copy of the merger agreement;

2. articles of incorporation of the parties to the merger agreement, and documentation supporting the merger;

3. shareholder register, or documentation related to ownership of shares, etc. by shareholders, etc., of the corporation that shallcontinue to exist after the merger or be incorporated through the merger;

4. present status of the parties to the merger agreement; and

5. post-merger business proposal.

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(3) A key communications business operator who wishes to obtain approval of the sale of telecommunications line facilities andequipment pursuant to Article 18(1)3 of the Act shall submit to the Minister of Science and ICT an approval application for the sale oftelecommunications line facilities and equipment with each of the following documentation attached thereto: <Amended on Mar. 23,2013, Jul. 26, 2017>

1. a copy of the sale and purchase agreement concerning telecommunications line facilities and equipment, and otherdocumentation supporting such agreement;

2. articles of incorporation of the seller and the purchaser, and documentation supporting the sale and purchase;

3. shareholder register, or documentation related to ownership by shareholders, etc., of the purchaser;

4. present status of the seller and the purchaser; and

5. post-sale business proposal.

(4) A person who wishes to own 15% or more of the total outstanding shares of a key communications business operator orbecome the largest shareholder of a key communications business operator pursuant to Article 18(1)4 of the Act shall submit to theMinister of Science and ICT an approval application for the ownership of shares, or for becoming the largest shareholder, of a keycommunications business with each of the following documentation attached thereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. documentation supporting the share purchase, such as a copy of the share purchase agreement;

2. articles of incorporation of the share purchaser, or the person seeking to be the largest shareholder, and the counterparty tothe share purchase agreement;

3. present status of the shareholders of the share purchaser, or the person seeking to be the largest shareholder, and thecounterparty to the share purchase agreement;

20



4. present status of the share purchaser, or the person seeking to be the largest shareholder, and the counterparty to the sharepurchase agreement;

5. purpose of, reasons for and an analysis of the effect of acquisition of the shares;

6. proposal for dual appointment of officers (only when considering dual appointment of an officer of the counterparty); and

7. post-share acquisition business proposal (only when seeking to become the largest shareholder).

(5) A person who wishes to obtain approval for purchase of shares or execution of an agreement under Article 18(1)5 shall attachthe following to an approval application and submit them to the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jul. 26,2017>

1. documents confirming the acquisition of managerial control such as copies of share purchase agreement or otheragreement, etc.

2. articles of incorporation of the purchaser or the party to the agreement and the counterparty;

3. shareholders registers of the purchaser or the party to the agreement and the counterparty

4. descriptions of businesses of the purchaser or the party to the agreement and the counterparty

5. purposes of and impact analysis of the share purchase or execution of the agreement;

6. a plan for overlapping officers and directors (applicable when such officers or directors also act as officers or directors thecounterparty); and

21



7. a business plan for the period following the-share acquisition or execution of the agreement.

(6) The �premises determined under the Enforcement Decree of the Act� in Article 18(1)5 of the Act means any of the following.

1. where one person alone or together with his specially related persons seek to acquire shares issued by the largestshareholder of a key communications business operator and effectively exercises the voting rights of such largestshareholder;

2. where persons (including specially related persons) with the common aim of controlling a key communications businessoperator seek to acquire more shares than the voting rights held by the largest shareholder of such key communicationsbusiness operator;

3. where the control of a key communications business operator is sought by way of business lease, delegation of managerialcontrol or other agreements with the key communications business operator or its largest shareholder; and

4. where a shareholder of a key communications business operator seeks enter into an agreement with other shareholders,except the largest shareholder to exercise jointly more voting rights than the largest shareholder.

(7) A key communications business operator that seeks to receive an approval to establish a corporation to provide part of the keycommunications services it has provided with the approval under Article 18(1)6 shall attach the following documents to anincorporation approval application and submit them to the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. articles of incorporation of the corporation to be incorporated

2. shareholder register, or documentation relating to ownership of shares, etc. by shareholders, etc., of the corporation to beincorporated;

22



3. business status of the services to be provided (applicable only to the key communications business that already providesthe services to be provided by the corporation to be incorporated; and

4. a business plan of the corporation to be incorporated.

(8) The approval application and attachments under paragraphs (1) through (5) and (7) may be submitted electronically.

(9) The Minister of Science and ICT receiving an approval application for transfer, merger, sale, share acquisition or changing thelargest shareholder pursuant to paragraphs (1)-(7) shall verify the commercial registry extracts of the party seeking to transfer, merge,sell, become the largest shareholder, acquire shares, execute an agreement or incorporate a corporation by using the publicadministrative information made available under Article 21(1) of the E-Government Act. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(10) The Minister of Science and ICT shall issue a key communications business operator�s license upon approving the approvalapplication for transfer, merger or incorporation pursuant to paragraph (1) , (2) or (7). <Amended on Mar. 23, 2013, Jul. 26, 2017>


(11) If a person falling in each subparagraph of Article 18(1) of the Act (excluding a person falling in Article 18, subparagraphs 3and 6 of the Act and a key communication business operator designated and announced in accordance with Article 39(3) of the Act,called hereinafter in this Article as �the Transferee�) conducts any of the activities falling in each subparagraph of Article 18(1) of theAct (excluding any activity falling in Article 18, subparagraph 3 or 6 of the Act, called hereinafter in this Article as �Transfer &Merger�) with respect to a key communications operator whose sales in the preceding year recorded KRW10 billion or less to lead toany of the following results, such will be seen to have trivial effect on competition of key communications business under provisoclauses to each subparagraph of Article 18(2) or Article 18(11) of the Act: <Newly inserted on Apr.14, 2015>

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1. When the relevant Transfer & Merger does not create any of the relationships (�Controlling Relationship�) falling in any ofthe following items:

a. When the shares (including interests, the same below in this Article) of the Transferee account for 50/100 or more; or

b. When the shares of the Transferee account for less than 50/100 and the Transferee is one of the following persons:

1) If the Transferee is the largest shareholder and may in view of the stock dispersion level control the Company throughexercise of the shareholder�s rights; or

2) If the Transferee supplies more than 50/100 of the raw materials and is a market dominant enterprise under Article 2,subparagraph 7 of the Monopoly Regulation and Fair Trade Act in the field of production of raw materials.

2. When the Transferee acquires key communications business of a key communications business operator having already formedControlling Relationship; or;

3. When the Transferee merges a corporation being a key communications business operator having already formed ControllingRelationship.

(12) In accordance with proviso clauses to each subparagraph of Article 18(2) or Article 18(11) of the Act, the Minister of Scienceand ICT may with respect to a person falling in paragraph (11) in the above approve Transfer & Merger after consulting with the FairTrade Commission under Article 18(6) of the Act only upon examination as to whether the protective measures of users are properunder Article 18(2)4 of the Act. <Newly inserted on Apr. 14, 2015, Jul. 26, 2017>[Wholly amended on Feb. 28, 2012]

Article 21 (Criteria for Major Telecommunications Line Facilities and Equipment)

The �major telecommunications line facilities and equipment prescribed under the Enforcement Decree of the Act� in provisos otherthan each subparagraph of Article 18(1) of the Act means facilities and equipment for exchange, transmission and wire pursuant toArticle 3(1)8-10 of the Regulations on Telecommunications Facilities and Equipment of which the sum of the sales prices is not lessthan 5 billion won. <Amended by Enforcement Decree No. 22616 Oct. 1, 2010; No. 22616 Jan. 4, 2011>

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Article 22 (Report on Sale of Telecommunications Line Facilities and Equipment)

A person who wishes to file a report on sale of telecommunications line facilities and equipment pursuant to provisos other than eachsubparagraph of Article 18(1) of the Act shall submit to the Minister of Science and ICT a report on sale of telecommunications linefacilities and equipment(including electronic application) with each of the following documentation(including electronic application)attached thereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. documentation supporting the sale, such as a copy of the sales agreement concerning telecommunications line facilities andequipment;

2. types, details and prices of the facilities and equipment being sold; and

3. plans for service provision and user protection subsequent to the sale.


Article 23 <Deleted on Oct. 1, 2010>

Article 24 (Application for a Permit to Suspend Business, etc.)

(1) A person who wishes to obtain authorization to suspend or discontinue business pursuant to Article 19(1) of the Act shall submit tothe Minister of Science and ICT each of the following documentation at least 60 days prior to the expected suspension ordiscontinuation date. <Amended on Mar. 23, 2013, Apr. 14, 2015, Jul. 26, 2017>

1. details of the business to be suspended or discontinued, and drawings of such business�s territories;

2. documentation indicating details of major telecommunications facilities and equipment relating to the business to besuspended or discontinued;

25



3. written permission (only where the whole business is discontinued); and

4. statement of reasons for such suspension or discontinuation.

5. notice about the proposed suspension or discontinuation; and

6. documentation stating a plan for customer protection in connection with the proposed suspension or disconsolation.

(2) �Documents required by the Presidential Decree including the details of the business to be suspended or discontinued, and drawingsof such business�s territories� under Article 19(3)1 of the Act shall mean each of the documents under paragraph (1) in the above.<Newly inserted on Apr. 14, 2015>[Wholly Amended on Feb. 28, 2012]

Article 25 (Criteria, Procedures, etc. for Revocation of Permits)

(1) The period prescribed by the Presidential Decree pursuant to Article 20(1)4-2 of the Act shall means six (6) months. <Newlyinserted on Apr. 14, 2015>

(2) The criteria for revocation of permits, cancellation of registration and suspension or discontinuation of business pursuant toArticles 20(2) and 27(3) of the Act are as provided in Table 1 attached hereto. <Amended on Apr.14, 2015>

(3) Upon revocation of permits, cancellation of registration or suspension or discontinuation of business under paragraph (2), theMinister of Science and ICT shall issue public notification thereof without delay, and notify the relevant telecommunications businessoperator in writing. <Amended on Feb. 28, 2012, Mar. 23, 2013, Apr. 14, 2015, Jul. 26, 2017>

[Title of this Article amended on Feb. 28, 2012]

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Article 26 (Application for Registration)

(1) A person who wishes to register as a specific communications business operator pursuant to Article 21(1) of the Act shallsubmit to the Minister of Science and ICT an application (including an electronic application) to register as a specific communicationsbusiness operator with each of the following documentation (including electronic documentation) attached thereto: <Amended on Mar.23, 2013, Jul. 26, 2017>

1. a business proposal relating to a specific communications business;

2. articles of incorporation of the corporation (including, throughout this Article, the corporation to be established);

3. details, installment locations and a network map of major business facilities and equipment;

4. terms of use containing provisions relating to user protection (including a provision for the aggregated issue amount ofprepaid calling cards), and details of, and a management proposal for, an office for user protection; and

(2) The Minister of Science and ICT receiving who receives a registration application pursuant to paragraph (1) shall verify thecommercial registry extracts and national technical qualification certificates of the technical personnel by using the publicadministrative information available pursuant to Article 36(1) of the E-Government Act); provided, however, that in the event theapplicant does not consent to such verification method, such applicant shall be required to attach the relevant documentation copiesthereof to its license application. <Amended on Mar. 23, 2013, Jul. 26, 2017>


27



Article 27 (Issuance of Certificates of Registration)

(1) Upon receipt of a registration application under Article 26(1) hereof, the Minister of Science and ICT shall verify whethersuch registration application meets the registration requirements under Article 28 hereof, make recordation of each of the following in aregistration registry of specific communications business operators and issue to the applicant a certificate of registration as a specificcommunications business operator within 30 days of the date of application: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. number and date of registration;



4. capital;

5. types of services provided;


7. details concerning technical personnel;

8. any conditions upon which the registration is authorized.

(2) The Minister of Science and ICT may, where it deems necessary, request for a registration application already submitted to itunder Article 26 hereof to be supplemented or revised by no later than 7 days thereafter); provided, however, that such period may beextended upon request of the applicant and may not count towards the processing time referred to in paragraph (1). <Amended on Mar.23, 2013, Jul. 26, 2017>

(3) A specific communications business operator whose certificate of registration, issued pursuant to paragraph (1), is either lostor worn out to the extent it can no longer be used may apply for reissuance of the certificate of registration to the Minister of Scienceand ICT. <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly Amended on Feb. 28, 2012]

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Article 28 (Registration Requirements for Specific Communications Business)

The registration requirements for a specific communications business pursuant to Article 21(5) of the Act are as provided in Table 2attached hereto.


Article 29 (Reporting Procedures, etc. of Value-Added Communications Business)

(1) A person who wishes to file a report of a value-added communications business under the former part of Article 22(1) of theAct shall submit to the Minister of Science and ICT a value-added communications business report (including an electronic report) andeach of the following documentation (including an electronic report) : <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. a network map diagram (including an electronic diagram, but applicable only where new types of value-addedcommunications services are reported and the Minister of Science and ICT deems such diagram to be necessary and requestsfor it); and

2. a report about the privacy protection system (applicable only when personal data are handled).

(2) A person who wishes to register a value-added telecommunication business of a special type under the former part of Article22(2) of the Act shall submit to the Minister of Science and ICT an application form for the registration of a value-addedtelecommunications business of a special type (including an electronic report) and each of the following documentation (including anelectronic report) : <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. articles of corporation (only for the legal entity including a corporation to be incorporated); and

2. documentation supporting the registration application meets the registration requirements under each of the subparagraphs ofArticle 22(2) hereof.

29



(3) the Minister of Science and ICT receiving report under paragraph (1) or registration application under paragraph (2) shallconfirm a certificate of details of corporate register through joint use of administrative information under Article 36(1) of the ElectronicGovernment Act. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) When there is an error in a value-added telecommunications business report under paragraph (1) or an application form for theregistration of a value-added telecommunication business operator of a special type pursuant under paragraph (2) or the documentationattached to such report is insufficient, the Minister of Science and ICT may request for such report or application to be supplemented byno later than 10 days thereafter); provided, however, that such period may be extended upon request by the person filing the report orapplying for the registration. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(5) Upon receipt of a value-added communications business report under paragraph (1), the Minister of Science and ICT shallissue a report certificate to the person filing such report. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(6) Upon receipt of a registration application under paragraph (2) hereof, the Minister of Science and ICT shall verify whethersuch registration application meets the registration requirements under paragraph (9) hereof, make recordation of each of the followingin a registration registry of a value-added telecommunication business operators of a special type and issue to the applicant a certificateof registration as a special-type of value-added telecommunications business operator within 30 days of the date of application:<Amended on Mar. 23, 2013, Jul. 26, 2017>

1. number and date of registration;



4. capital;


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7. any conditions upon which the registration is authorized.

(7) A value-added communications business operator whose report certificate, issued pursuant to paragraph (5) or certificate ofregistration issued pursuant to paragraph (6), is either lost or worn out to the extent it can no longer be used may apply for reissuance ofthe certificate of report to the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(8) �Matters determined by the Presidential Decree such as business plan� under Article 22(2)4 constitutes a business plan and auser protection plan.

(9) The registration requirements for a value-added telecommunication business of a special type under Article 22(2) are shown inTable 3.


Article 30 (Exemption from Value-added Communications Business Operator Report)

(1) The �small-scale value-added communications business meeting the criteria prescribed under the Enforcement Decree of theAct� in Article 22(4)1 of the Act means value-added communications business operators who provide value-added communicationsservices using the Internet and where the capital is 100 million won or less who satisfy each of the following criteria. <Amended onApr. 14, 2015>

(2) In the event a value-added communications business operator who is exempted from filing a report pursuant to paragraph(1) comes to have more than 100 million won as its capital, such value-added communications business operator shall file a report,within 1 month of the date on which it ceased to satisfy such criteria, to the Minister of Science and ICT in accordance with Article 22(1) of the Act. <Amended on Mar. 23, 2013, Apr.14, 2015, Jul. 26, 2017>[Wholly Amended on Feb. 28, 2012]

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Article 30-2 (Reasons for Disqualification from Registration)

�An investor determined by the Presidential Decree� under Article 22(2) means a person falling under each of the followingsubparagraphs: <Amended on Sep. 5, 2017>

1. A person who holds the larger amount of shares for his own account regardless of the title thereof between a person whoowns issued shares having the voting right of the corresponding legal entity or shares invested (referred to as �shares, etc.� inthis Article) and a person with special relationship falling under any one of the subparagraphs of Article 3(1) of theEnforcement Decree of the Act on Corporate Governance of Financial Companies.

2. Any person who owns more than 10/100 of the corresponding legal entity�s shares for his own account regardless of thetitle thereof or a shareholder who exercises its power on the management of the corporation by way of appointment ofexecutives, etc. and falling under Article 2, Subparagraph 6(b) of the Enforcement Decree of the Act on CorporateGovernance of Financial Companies.

<Newly inserted on Nov. 14, 2011> <Enforcement Date: Nov. 20, 2011>

Article 30-3 (Technical Measures, Etc. to Prevent Distribution of Illegal Obscene Information)

(1) Technical measures prescribed by the Presidential Decree under Article 22-3(1) of the Act shall include any of the followingmeasures:

1. Measures allowing a person (�Operator�, below in this Article) providing services under Article 2, subparagraph 13, item a of the Actamong those who have registered a special type of value-added communications business in accordance with Article 22(2) of the Act torecognize any information as illegal information (�Illegal Obscene Information�) under Article 44-7(1)1 of the Act on Promotion ofInformation and Communications Network Utilization and Information Protection, etc. based on review of titles and characteristics, etc.of such information;

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2. Measures restricting search or transmission and receipt of the relevant information by users in order to prevent distribution of illegalobscene information recognized by the Operator in accordance with subparagraph 1 in the above;

3. In case the Operator finds the illegal obscene information being distributed due to failure to recognize such informationnotwithstanding the measures under subparagraph 1, measures of restricting search or transmission and receipt by users; and

4. The Operator�s sending of warnings to transmitters of illegal obscene information on prohibition of distribution of illegal obsceneinformation.

(2) The period prescribed by the Presidential Decree under Article 22-3(3) of the Act shall mean two (2) years.

[Newly inserted on Apr. 14, 2015]

Article 30-4 (Report and Disclosure of Value-Added Telecommunication Services Fees)

(1) If telecommunications business operators intend to make a report of their service fees for the value-added telecommunicationservices as described in Article 2(13)B of the Act to the Minister of Science and ICT (including modified report), the followingdocuments shall be submitted for the purpose set forth below: <Amended on Jul. 26, 2017>

1. Report of Service Fees: Grounds for calculation of service fees

2. Report of Change in Service Fees: Details and grounds for change in services fees

(2) If telecommunications business operators intend to disclose the content of their reports made under Article 22-4(1) of the Actpursuant to Article 22-4(2) of the Act, telecommunications business operators shall publish details thereof on their website.

[Newly Inserted on July 28, 2016]

Article 31 (Amendment of Registration or Report)

(1) �As prescribed under the Enforcement Decree of the Act� in Article 23 of the Act means each of the following:

1. title or trade name, and address;

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2. representative;


4. capital (for specific communications business operators only);

5. expert personnel (for specific communications business operators only);

6. user agreements (only for specific communications business operators who concluded an agreement with a keycommunications business operator using frequency allocated pursuant to the Radio Waves Act);

7. changes to specific communications business or added-value communications business under Article 21(1), former part ofArticle 22(1) or paragraph (2) of the same Act (includes cases where businesses which have been subject to partialcancellation of the registration or partial suspension under main bodies of Article 27(1) and (2) are sought to be resumed ).

(1) In order to amend any of the information set forth in paragraph (1), an application to register amendment to the specificcommunications business, or a report of amendment to the value-added communications business or an application to registeramendment to the value-added telecommunication business of a special type (including an electronic application or report), anddocumentation (including electronic documentation) supporting the relevant amendment shall be submitted to the Minister of Science,ICT and Future Planning. <Amended on Mar. 23, 2013>

(2) Upon receipt and registration, or receipt and processing, of an application to register amendment or a report of amendment,the Minister of Science and ICT shall issue either a registration certificate on which the relevant amendment is recorded or a reportcertificate. <Amended on Mar. 23, 2013, Jul. 26, 2017>

34



(3) The Minister of Science and ICT receiving an application to register amendment or a report of amendment pursuant toparagraph (2) shall verify the commercial registry extracts or business registration certificate by using the public administrativeinformation available pursuant to Article 36(1) of the E-Government Act); provided, however, that in the event the applicant or personfiling the report does not consent to such verification method, such applicant or person shall be required to attach the corporate registryor business registration certificate to its report. <Amended on Mar. 23, 2013>

(4) Upon receipt of an application to register amendment or a report of amendment pursuant to paragraph (2), the Minister ofScience and ICT shall verify the certificate of details of corporate register or certificate of business registration through the system forjoint use of administrative information under Article 36(1) of the Electronic Government Act); provided, however, that if the relevantapplicant does not consent to verification of the certificate of business registration, the Minister shall require the applicant to attach suchdocument. <Amended on Mar. 23, 2013, Jul. 26, 2017>


Article 32 (Report on Transfer of Business)

(1) A person who wishes to file a report on transfer of a specific communications business or a value-added communicationsbusiness pursuant to Article 24 of the Act shall within 30 days from the date on which a business transfer agreement is executed submitto the Minister of Science and ICT business transfer application (including an electronic application) with each of the followingdocumentation (including electronic documentation) attached thereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. a copy of the business transfer agreement;

2. documentation prescribed under each of the subparagraphs of Article 26(1) or Article 29(1) and (2); and

3. a registration certificate or a report certificate.

(2) A person who wishes to file a report on merger of a corporation that is either a specific communications business operator ora value-added communications business operator pursuant to Article 24 of the Act shall within 30 days from the date on which a mergeragreement is executed submit to the Minister of Science and ICT a merger application (including an electronic application) with each ofthe following documentation (including electronic documentation) attached thereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

35



1. a copy of the merger agreement;

2. documentation prescribed under each of the subparagraphs of Article 26(1) or 29(1) & (2) hereof; and

3. a registration certificate or a report certificate.

(3) A person who wishes to file a report on inheritance of a value-added communications business operator pursuant to Article24 of the Act shall within 30 days from the date on which the cause for the inheritance has occurred submit to the Minister of Scienceand ICT an inheritance report (including an electronic application) with documentation (including electronic documentation)demonstrating that she or he is the heir attached thereto. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) The Minister of Science and ICT receiving a report under paragraphs (1)-(3) shall verify, through the information sharingchannel under Article 36(1) of the Electronic Government Act, the commercial registry extracts of the transferor or party to a mergeragreement (meaning the existing or newly established corporation), national technical qualification certificates of the technicalpersonnel or a certificate of the heir�s family register); provided, however, that in the event the person filing the report does not consentto such verification method, such person shall be required to attach the relevant documentation (copies of national technicalqualification certificates or a certificate of the heir�s family register) to its report. . <Amended on Mar. 23, 2013, Jul. 26, 2017>

(5) Upon receipt of a report to register on transfer or merger of a specific communications business or a value-addedcommunications business under paragraph (1) or (2), the Minister of Science and ICT shall issue either a specific communicationsbusiness registration certificate, a value-added telecommunication business report certificate or the certificate of registration of a value-added telecommunication business of a special type. <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly Amended on Feb. 28, 2012]

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Article 33 (Report on Suspension or Discontinuation of Business)

(1) A person who wishes to file a report on either (i) suspension or discontinuation of a specific communications business ora value-added communications business or (ii) dissolution of a corporation that is a specific communications business operator or avalue-added communications business operator pursuant to Article 26(1) shall at least 15 days prior to the expected suspension ordiscontinuation date submit to the Minister of Science and ICT a report on suspension or discontinuation of a specific communicationsbusiness or a value-added communications business (including an electronic application) with documentation (including electronicdocumentation) demonstrating that users have been notified of such suspension or discontinuation attached thereto); provided, however,that in the event the information contained in any of such documentation can be verified through the public administrative informationavailable pursuant to Article 36(1) of the E-Government Act, such verification may substitute for the relevant documentation.<Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) A person who wishes to file a report on dissolution of a corporation that is a specific communications business operatoror a value-added communications business operator pursuant to Article 26(2) shall submit to the Minister of Science and ICT a reporton dissolution of a specific communications business or a value-added communications business (including an electronic application)without delay. <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly Amended on Feb. 28, 2012]

Chapter 3. Telecommunications Operation

Article 34 (Approval of Terms of Use)

(1) The services for which key communications business operators must obtain approval of terms of use pursuant to the text ofArticle 28(2) of the Act shall be any of the following: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. Among the key telecommunications services provided by the key communications business operator with the highest marketshare with respect to the aggregate national sales based on sales from each service in the preceding year, in the unit market,defined in Article 38, the service publicly notified by the Minister of Science and ICT whose public notice is based onconsideration of the market scale, the number of users, competition status, etc., ; or

37



2. if a key communications business operator providing the service prescribed under subparagraph 1 completes businessconsolidation with another key communications business operator pursuant to Article 12(1)1 or 12(1)4 of the MonopolyRegulation and Fair Trade Act, the service prescribed under subparagraph 1 provided by such other key communicationsbusiness operator.

(2) By 31. December each year, the Minister of Science and ICT shall designate and issue public notification of the keycommunications business operators and services prescribed under paragraph (1) ); provided, however, that the Minister of Science andICT shall designate and issue public notification of the key communications business operators and services falling under subparagraph2 of paragraph (1) immediately after the date of report on business consolidation thereunder. <Amended on Mar. 23, 2013, Jul. 26,2017>

(3) Notwithstanding the provisions under paragraph (1), a key communications business operator who wishes to amend minoraspects of terms of use as prescribed by the Minister of Science and ICT may file a report with the Minister of Science and ICT.<Amended on Mar. 23, 2013, Jul. 26, 2017>


Article 35 (Application for Approval of Terms of Use)

A person who wishes to file a report (including a report on amendment) or obtain an approval (including an approval of amendment) onterms of use with respect to telecommunications services pursuant to the proviso of Article 28(1) or (2) of the Act shall submit to theMinister of Science and ICT terms of use containing each of the following with documentation demonstrating the bases for pricecomputation pursuant to Article 28 (4) of the Act attached thereto: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. types and details of telecommunications services;

38



2. areas in which telecommunications services are provided;

3. prices of telecommunications services, including fees and actual expenses;

4. details concerning the responsibilities of telecommunications business operators and users of telecommunications services;and

5. any other information necessary the provision or use of the relevant telecommunications services.


Article 36 (Services Entitled to Exemption of Fees)

Telecommunications services entitled to the exemption of fees pursuant to Article 29 of the Act shall be as follows.

1. Telecommunications services for the communications concerning the rescue of human lives and properties in danger, and therescue from disasters or for the communications by the victims of disasters;

2. Telecommunications services for the whole or part of exclusive line communications used by such agencies, in case wherethe exclusive line communications of agencies which are fully responsible for military, public order and national security,and a part of self-communications network of public institutions under the Enforcement Decree of the Act on theManagement of Public Institutions of the State, local governments or government-invested institutions are integrated into thetelecommunications net-work of a key communications business;

3. Telecommunications services for the communications required for military operations in wartime;

39



4. Newspapers under the Act on the Promotion of Newspapers, news communications under the Act on the Promotion of NewsCommunications, and telecommunications services for reports by the broadcasting stations under the Broadcasting Act.

5. Telecommunications services for a communication which is required for facilitating the use, and for diffusing thedistribution, of information communications;

6. Telecommunications services for a communication by those who are in need of the protection for the improvement of socialwelfare;

7. Telecommunications services for a communication which is required for the promotion of interchange and cooperationbetween North and South Korea; and

8. Telecommunications services for a communication which is specially required for the operation of postal services.

[Wholly amended on Feb. 28, 2012]

Article 37 (Provision of Transmission or Line Facilities and Equipment, etc.)

Pursuant to Article 31(1) of the Act, a CATV broadcasting business operator, signal transmission network business operator or CATVrelay broadcasting business operator under the Broadcasting Act may provide transmission or line facilities and equipment or the CATVbroadcasting facilities and equipment (the �Transmission or Line Facilities and Equipment, etc.�) to key communications businessoperators in a manner falling under one of the following:

1. sale or lease of transmission or line facilities, etc.;

2. commissioned performance of the communications or exchange operations, etc. by making use of transmission or linefacilities, etc.; or

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3. manners corresponding to subparagraphs 1 and 2, which are determined by a consultation between a CATV broadcastingbusiness operator, a signal transmission network business operator, or a CATV relay broadcasting business operator.

[Whollyamended on Feb. 28, 2012]

Article 37-2 (Evaluation of User Protection Duties) (1) When the Korea Communications Commission evaluates the user protectionduty of telecommunications service providers in accordance with Article 32(2) of the Act, the Commission shall select providers subjectto evaluation based on overall consideration of the following matters:

1. Size of users per telecommunications service of telecommunications service providers;

2. Frequencies of complaints raised by users; and

3. Frequencies of acts harming benefit of users including prohibited acts under Article 50(1) of the Act.

(2) The Korea Communications Commission shall each year evaluate user protection duty of the telecommunications serviceproviders subject to evaluation under paragraph (1) in the above in accordance with the following criteria of evaluation:

1. Adequacy of the user protection duty managing system;

2. Records of compliance with the applicable laws in connection with user protection duty;

3. Records of activities preventing harm to users;

4. Records of handling with opinions or complaints from users; and

5. Any other relevant matters to user protection duty

(3) The Korea Communications Commission shall give a written notice of the evaluation plan setting out the evaluation scheduleand particulars to the persons subject to evaluation under paragraph (1) in the above not later than 10 days prior to the date set for suchevaluation and may order the evaluated person to submit necessary data.

41



(4) The Korea Communications Commission shall notify each evaluated person of the evaluation result of user protection duty inaccordance with paragraph (2), and shall reflect such result on the pursuit of the relevant policies.


[The former provision of Article 37-2 is transferred to Article 37-2 <Apr. 14, 2015>]

Article 37-3 (Operators Required to Deliver a Copy of the Contract and the Method of Delivery) (1) Telecommunications serviceproviders prescribed by the Presidential Decree under Article 32(3) of the Act shall mean telecommunications service providersproviding key communications service); provided, however, that a telecommunications service provider who directly delivers contractsto users in accordance with terms of use shall be excluded.

(2) Telecommunications service providers under the main body of foregoing paragraph (1) shall send a copy of the contractto users by way of any of the following methods selected by users within one (1) month from the execution date in accordance withArticle 32(3) of the Act); provided, however, that if the user does not select any of the following methods, the copy shall be sent by wayof the method under subparagraph 1:

1. Mail or facsimile or

2. Notice by way of information communications network under Article 2(1)1 of the Act on Promotion of Information andCommunications Network Utilization and Information Protection, etc. including e-mail.[Newly inserted on Apr. 14, 2015]

Article 37-4 (Prepaid phone services and subscription of guarantee insurance)

(1) A key communications services operator that seeks to provide telecommunications services on a prepaid basis (�prepaid phoneservices�) pursuant to the main body of Article 32(4) shall submit each of the following items to the Minister of Science and ICT,provided that a specific communications business operator shall submit it to the head of the Central Radio Management Office.<Amended on Mar. 23, 2013, Apr. 14, 2015, Jul. 26, 2017>

1. a copy of guarantee insurance;

42



2. data about the aggregate service charges for the prepaid phone services for the pertinent year (�prepaid phone service charges�);

3. guide for the use of the prepaid phone services;

4. other materials specified and announced by the Minister of Science and ICT for prepaid phone services business standards andcustomer protection, etc.

(2) A telecommunications business operator seeking to provide the prepaid phone services under paragraph (1) shall abide by eachof the following: <Amended on Mar. 23, 2013>

1. the prepaid phone services shall be provided within the coverage period of the guarantee insurance;

2. if additional prepaid phone services are to be provided within the coverage period of the guarantee insurance, such additionalprepaid phone services shall be provided within the actually used portion of the prepaid phone service charges;

3. if the prepaid phone service charges are to be changed, the guarantee insurance shall be renewed at least 30 days prior to suchchange. In this case, a copy of the renewed guarantee insurance policy shall be provided to the Minister of Science and ICT or thehead of the Central Radio Management Office within 7 days of such renewal;

4. if the services are to be provided after the expiration of the guarantee insurance, the guarantee insurance shall be renewed atleast 30 days prior to the expiration date. In this case, financial statements and other materials specified by the Minister of Scienceand ICT shall be provided to the Minister of Science and ICT or the head of the Central Radio Management Office within seven;and

5. measures to make paragraph (1)3 and 4 easily comprehensible to users shall be taken.

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(3) The �amount calculated according to standards specified under the Enforcement Decree of the Act� in the main body of Article32(4) is an amount not less than 50% of the prepaid phone service charges and determined in accordance with the standards announcedby the Minister of Science and ICT, taking into consideration the prepaid phone service provider�s pain-in capital and the prepaid phoneservice charges. <Amended on Mar. 23, 2013, Apr.14, 2015, Jul. 26, 2017>

(4) The �case specified under the Enforcement Decree of the Act� in the proviso of Article 32(4) means each of the followingcase: <Amended on Apr. 14, 2015>

1. average annual revenue from telecommunication services provided by a telecommunications business operator for the recent3-year period is 30 billion won or more;

2. aggregate prepaid phone service charges is less than 10% of the annual revenue from telecommunication services provided by atelecommunications business in the past year; and

3. provision of prepaid phone services in the past 3-year period without suspension or discontinuation.

(5) When the beneficiary receives insurance proceeds, such shall be distributed to users within 60 days from the date of receiptunder Article 32(5) of the Act); provided, however, that if the distributions payable amount exceeds the insurance proceeds, theinsurance proceeds will be distributed in proportion to loss amounts. <Amended on Apr. 14, 2015>

(6) business standards and methods concerning the guarantee insurance and insurance proceeds not otherwise specified inparagraph (2 )and (5) shall be determined and announced by the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jul. 26,2017>


[Transferred from Article 37-2 <Apr.14, 2015>]

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Article 37-5 (Particulars and Method of Raising Objections) (1) A telecommunications service provider in receipt of an order forsuspension of telecommunications service from the Minister of Science and ICT in accordance with Article 32-3(1) of the Act shallnotify the users of each of the following matters in accordance with Article 32(2) of the Act: <Amended on Jul. 6, 2016, Jul. 28, 2016,Jul. 26, 2017>

1. Name, department in charge and telephone number of the administrative authority requesting suspension of therelevant telecommunications service;

2. Reasons of suspending the provision of the relevant telecommunications service; and

3. The period and process of raising objections as per the following classification:

a. Request for suspension under Article 32-3(1)1 of the Act: the period and process of raising objections in accordancewith Article 6-5(2) of the Enforcement Decree of the Act on Registration of Credit Business, Etc.

b. Request for suspension under Article 32-3(1)2 of the Act: the period and process of raising objections in accordancewith Article 10-2(1) of the Enforcement Decree of the Special Act on the Prevention of Loss Caused byTelecommunications-Based Financial Fraud and Refund for Loss

c. Request for suspension under Article 32-3(1)3 of the Act: the period and process of raising objections in accordancewith Article 6-2(1) of the Enforcement Decree of the Electronic Financial Transactions Act

(2) In accordance with Article 32-3(3) of the Act, a telecommunications service provider shall notify the users of the relevanttelecommunications service of the process of raising objections under foregoing paragraph (1) by way of any of the following methods:

1. Mail or facsimile;

2. E-mail; or

3. Telephone or text message.


45



Article 37-6 (Identity Verification at the Time of Entering into Contracts) (1) Telecommunications Service Providers prescribed bythe Presidential Decree under Article 32-4(2) of the Act shall mean the telecommunications service providers providing mobilecommunications service under Article 2, subparagraph 1 of the Act on the Mobile Device Distribution Improvement Act.

(2) The telecommunications service providers under paragraph (1) shall verify the identification of the counterparty (including his/her/its legal representatives) through any of the certificates and documents set out in the following subparagraphs to be submitted by thecounterparty in accordance with Article 32-4, paragraphs (3) and (4) of the Act. Such verification may be replaced by official electronicsignature under Article 2, subparagraph 3 of the Digital Signature Act when a contract is entered into by way of communicationsnetwork system:

1. Individual: Resident registration I.D. certificate, driver�s license certificate, disabled persons� registration certificate,national honoree certificate, independence patriot certificate, 5 � 18 democracy contribution certificate or passport of Korean national;

2. Corporation: Business registration certificate or unique number certificate;

3. Entities not being a corporation: Unique number certificate; or

4. Foreigners and Korean residents abroad: Unique number certificate.

(3) Telecommunications service providers under paragraph (1) shall check the genuineness of the documents and the certificates underforegoing paragraph (2) by way of the System for Prevention of Unlawful Subscription under Article 32-5(1) of the Act.

(4) In case where the counterparty may not submit the certificates or the documents under foregoing paragraph (2) or genuineness ofsuch certificates or documents cannot be checked by ways of the System for Prevention of Unlawful Subscription, thetelecommunications service provider under paragraph (1) shall notwithstanding paragraph (2) or (3) verify the identification of thecounterparty through certificates, etc. under the terms of use equivalent to the certificates or documents set out in paragraph (2) in theabove.


46



Article 37-7 (Entrustment of Establishment and Operation of the System for Prevention of Unlawful Subscription) (1) TheMinister of Science and ICT shall entrust the duties relating to establishment and operation of the system for prevention of unlawfulsubscription to the Korea Association for ICT Promotion under Article 15 of the Framework Act on Broadcasting CommunicationsDevelopment in accordance with Article 32-5(3) of the Act. <Amended on Jul. 26, 2017>

(2) The Minister of Science and ICT may assist expenses incurred for the conduct of the duties entrusted in accordance with foregoingparagraph (1). <Amended on Jul. 26, 2017>


Article 37-8 (Method and Process of Provision of Media Products Harmful to Juveniles) (1) A telecommunications serviceprovider entering into the telecommunications service provision contract with the juveniles under the Juvenile Protection Act shallprovide in their mobile communications terminals software, etc. blocking media products harmful to juveniles under Article 2,subparagraph 3 of the Juvenile Protection Act in order to block access by the juveniles to media products and illegal obsceneinformation harmful to juveniles (�media products harmful to juveniles�) in accordance with Article 32-7(1) of the Act.

(2) Provision of the blocking means in accordance with foregoing paragraph (1) shall be done in the following process:

1. Upon execution of the contract:

a. Notification to the juveniles and their legal representatives of the means and particulars of blocking means; and

b. Confirmation of installation of the blocking means

2. After execution of the contract: If the blocking means are deleted or not operational for 15 days, notification thereof eachmonth to the legal representative.


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Chapter 4. Promoting Competition In Telecommunications Business

Article 38 (Criteria and Procedures for, and Methods of, Evaluating Competition Status)

(1) When making determination concerning unit markets for the purpose of evaluating competition status pursuant to Article 34(2)of the Act, all of the following factors shall be considered:

1. demand substitutability and supply substitutability of the services;

2. geographical scope of the services provided;

3. transaction stages of the services provided such as retail (meaning transactions between telecommunications businessoperators and ultimate users of the services provided by such telecommunications business operators) and wholesale(meaning transactions through which telecommunications facilities and equipment, etc., installed to provide wholesaleservices, are offered to other telecommunications business operators); and

4. special characteristics of users such as differences in purchasing power and negotiating edge or uniqueness of demand.

(2) Evaluation of competition status with respect to the unit markets determined under paragraph (1) shall be implemented bycomprehensively considering each of the following factors:

1. market structure such as market share and entrance barrier;

2. response capacity of users such as accessibility of information related to service use and ease of switching service providers;

48



3. activities of telecommunications business operators such as those relating to price and quality competition and technologyinnovation; and

4. market performances such as the level of price and quality and the size of excess profits made by telecommunicationsbusiness operators.

(3) Where it deems necessary for evaluating competition status, the Minister of Science and ICT may invite opinions from relevantprofessionals and related parties. <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly amended on Feb. 28, 2012]

Article 39 (Criteria applicable to Key Communications Business Operators, etc.)

(1) The �key communications business operators satisfying the criteria prescribed under the Enforcement Decree of the Act� inArticles 35(2)3, 39(3)2, 41(3)2 and 42(3)2 of the Act means, key communications business operators with the highest marketshare with respect to the aggregate national sales based on sales from each service in the preceding year, in the unit market,defined in Article 38, who are determined by public notification by the Minister of Science and ICT in consideration of themarket size, number of users, status competition, etc. <Amended on May 31, 2013, May 8, 2017, Jul. 26, 2017>

(2) A facility management institution under Article 35(2)3 is a facility management institution whose the aggregate size offacilities, etc. under Article 35(1) (�facilities, etc.�) owned last year or revenue from providing facilities, etc. exceeds certain thresholdsannounced by the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) By 31. December, each year, the Minister of Science and ICT shall designate and issue public notification of the keycommunications business operators prescribed under Articles 35(2)1 and 3, 39(3), 41(3) and 42(3) of the Act and facilities managementinstitution prescribed under Article 35(2)3 of the Act. <Amended on Mar. 23, 2013, Jul. 26, 2017>


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Article 39-2 (Procedures for Installation of Apparatus for Facilities, Etc.)

(1) If a telecommunications business operator who has been provided with equipment and facilities by concluding a contract underArticle 35(1) of the Act pursuant to the former part of Article 35(4) of the Act (hereinafter referred to as the �user� in this Article)intends to install the apparatus enhancing the efficiency of the relevant equipment and facilities, such telecommunications businessoperator shall notify the key communications business operator or the facility management authority providing the equipment andfacilities (hereinafter referred to as the �provider� in this Article) of the following information at least one day prior to the date ofinstallation:

1. Type, specifications and quantity of the apparatus;

2. Place and period of installation of the apparatus; and

3. Other matters relating to the installation of the apparatus.

(2) The user who has installed the apparatus under paragraph (1) above shall remove the apparatus within thirty (30) days from the dateon which the contract under Article 35(1) of the Act is terminated or the period of installation of the apparatus expires.

(3) Notwithstanding paragraphs (1) and (2) above, if the user and the provider otherwise determine the period and details of the noticeregarding the apparatus or the period for removal by mutual consultation, the matters determined so shall apply.

[Newly Inserted on Jul. 20, 2015]

[The former Article 39-2 moved to Article 39-3 <Jul. 20, 2015>]

Article 39-3 Deleted <May 31, 2016>

Article 39-4 (Composition and Operation of Aerial Cable Maintenance Council)

(1) The aerial cable maintenance council under the latter part of Article 35-2(2) of the Act (hereinafter referred to as the �maintenancecouncil� in this Article and Article 39-5) shall consist of not more than fifteen (15) members including one Chairman.

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(2) The 2nd Vice Minister of Science and ICT shall be the Chairman of the maintenance council (hereinafter referred to as the�Chairman� in this Article and Article 39-5), and members of the maintenance council (hereinafter referred to as �members� in thisArticle) shall be appointed by the Minister of Science and ICT from among the following persons: <Amended on Jul. 26, 2017>

1. Public officials in general service belonging to the Senior Civil Service of the Ministry of Science and ICT;

2. Persons nominated by the head of the relevant agency from among public officials in general service belonging to the Senior CivilService of the Ministry of Trade, Industry and Energy and the Ministry of Land, Infrastructure and Transport;

3. Persons nominated by the head of the relevant agency from among public officials ranking Grade III of any special city, metropolitancity, special self-governing city or Do, or special self-governing Do;

4. Persons belonging to a telecommunications business operator, a facility management authority or an aerial cable maintenanceorganization who have extensive expert knowledge and experience in aerial cable maintenance; or

5. Other persons who have extensive expert knowledge and experience in the beauty of a city and aerial cable maintenance.

(3) The term of office of members under subparagraphs 4 and 5 of paragraph (2) shall be two years, and the members may bereappointed only once.

(4) The Chairman shall represent the maintenance council and generally manage the business of the council); provided, however, that ifthe Chairman is unable to perform his/her duties for unavoidable reasons, the member nominated by the Chairman in advance shall actfor the Chairman.

(5) Any matters necessary for the composition and operation of the maintenance council other than those set forth in paragraphs(1) through (4) above shall be determined by the Chairman by a resolution of the maintenance council.[Newly Inserted on Jul. 20, 2015]

Article 39-5 (Functions of Maintenance Council)

(1) The maintenance council shall deliberate on the following matters:

1. Matters relating to the basic direction and policy for aerial cable maintenance;

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2. Matters relating to medium- and long-term plan for aerial cable maintenance;

3. Matters relating to the establishment of an annual aerial cable maintenance plan (referring to the aerial cable maintenance plan underArticle 35-2(2); hereinafter referred to as the �maintenance plan�);

4. Matters relating to aerial cable maintenance system improvement;

5. Matters relating to the inspection and evaluation of the progress of aerial cable maintenance; and

6. Other matters deemed by the Chairman necessary for the efficient implementation of aerial cable maintenance and submitted to ameeting of the council for deliberation.

(2) If it is necessary for the purpose of deliberating on the matters referred to in each subparagraph of paragraph (1) above, themaintenance council may listen to opinions of the head of the relevant central administrative agency, the head of the local government,the telecommunications business operator, the facility management authority and experts, etc.


Article 39-6 (Sharing of Expenses for Aerial Cable Maintenance)

The telecommunications business operator and the facility management authority shall each bear maintenance expenses for their ownequipment and facilities among the expenses incurred in relation to the implementation of the maintenance plan under Article 35-2(3) ofthe Act.


Article 39-7 (Standards for Providing Obligatory Wholesale Services)

(1) The �telecommunications services of a key communications business operator applicable to the standard prescribed in thePresidential Decree� in Article 38 Paragraph 2 of the Act means services of the key communications business operator with the highestmarket share of the aggregate domestic revenue on the basis of revenue per service last year in the unit market, defined in Article 38 andservices publicly notified by the Minister of Science and ICT. The public notice of the Minister is based on consideration of the marketscale, the number of users, competition status, etc., of the telecommunication services

(2) The Minister of Science and ICT shall designate and announce key communications business operators under paragraph (1) byDecember 31 of each year. <Amended on Mar. 23, 2013, Jul. 26, 2017>

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[Moved from Article 39-3 <Jul. 20, 2015>]

Article 40 (Report on Accord, etc. concerning Interconnections, etc.)

(1) A person who wishes, under Article 38(5) or 44(1) to (3) of the Act, to file a report on, or obtain an approval of wholesaleprovision, provision, common use or interconnection of facilities, etc. and equipment or the execution or termination of, or anamendment to, an accord on provision of information shall submit to the Minister of Science and ICT each of the followingdocumentation to the Minister of Science and ICT); provided, however, that in case of termination, only paragraphs 1 and 6 need to besubmitted: <Amended on Mar. 23, 2013, Apr. 14, 2015, Jul. 26, 2017>

1. copy of the accord;

2. documentation demonstrating the amounts due from, or payable to, the parties to the accord, the computation methods withrespect to such amounts and how the accord shall be implemented;

3. documentation demonstrating wholesale provision, provision, common use or interconnection of, or conditions upon whichinformation shall be provided on, facilities, etc. and equipment, and any other costs related to the accord;

4. drawings indicating wholesale provision, provision, facilities, etc. provision, common use or interconnection of, or asummary of the information (including outlay of connection grid and connection points) to be provided on, facilities, etc. andequipment; and

5. documentation comparing the new accord against the old (applicable only to filing of a report of amendment or applying foran approval of amendment).

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6. documentation confirming discontinuation (including electronic documentation)

(2) Upon receipt of documentation under paragraph (1), the Minister of Science and ICT shall examine whether suchdocumentation comply with the criteria for provision, common use, wholesale provision or interconnection of, or provision ofinformation on, facilities, etc. and equipment pursuant to Article 35(3), 37(3), 38(4), 39(2), 41(2) or 42(2) of the Act. <Amended onMar. 23, 2013, Jul. 26, 2017>

(3) A key communications business operator that has received approval for execution, amendment or termination of anagreement under Article 44(2) of the Act and a key communications business operator who has submitted a report on the execution,amendment or termination of the contract under Article 44(3) of the Act shall publish details of such on its website. <Newly Inserted byAct No. 22616 Oct. 1, 2010> <Amended on Apr. 14, 2015>

(4) Pursuant to Article 65(3) of the Framework Act on Telecommunications, upon receipt of documentation under paragraph (1),the Minister of Science and ICT shall examine whether such documentation complies with the criteria for provision, common use orinterconnection of, or provision of information on, telecommunications facilities and equipment pursuant to Article 35(3) of the Act,and whether the private telecommunications facilities and equipment provided were installed by an individual to be used for her or hisown telecommunications. <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly amended on Feb. 28, 2012]

Article 40-2 (Request for Arbitration)

(1) A person wishing to make a request for arbitration under Article 45(1) of the Act shall attach each of the followingdocumentation to its arbitration application and submit them to the Korea Communications Commission); provided, however, that theitem under paragraph 3 shall be submitted only in the case of the request under Article 45(1)3.

1. documents about overview of the arbitration request;

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2. documents about negotiation between the parties; and

3. each of the documentation under Article 40(1).

(2) After reviewing the application documents under paragraph (1), the Korea Communications Commission may demand theapplicant to submit additional information within a reasonable period of time for any of the following reasons:

1. in the case where any required document is missing

2. in the case where any entry in the application and attachments is vague.

(3) If the applicant fails to provide additional information within the time period specified under paragraph (2), the KoreaCommunications Commission shall return the application along with a reason for such return.[Wholly amended on Feb. 28, 2012]

Article 40-3 (Arbitration Decision)

(1) An arbitration decision by the Korea Communications Commission shall be made in writing.

(2) The arbitration decision under paragraph (1) shall state the ruling, reason and date of decision, be signed by theCommissioner of the Korea Communications Commission and commission members who attended the arbitration deliberation and besent to the parties to the dispute.


Article 40-4 (Provision of standardized information of the telecommunication service)

(1) The telecommunication service, object to provision of the standardized information under the Article 42 Paragraph 5 of the Act, is asfollows: <Amended on Jul. 26, 2017>

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1. Voice communication and video communication service (including voice communication service via LTE communicationnetwork)

2. Short message and multi-media message service (including short message and multi-media message service based on theinternet protocol multi-media system)

3. Emergent telephone service

4. The caller identification service, call restriction service, call transition service, call holding service, and call waiting service

5. The telecommunication service which requires the information of the standard of the manufacture, supply, import, anddistribution, in order to manufacture, supply, import, and distribute the hand terminal under the Article 42 Paragraph 5, and ispublicly notified by the Minister of Science and ICT,

(2)A request for information as to the standard of the telecommunication service under Article 42 Paragraph 5 (hereinafter the�standard information�), shall include provisions, prescribed in following subparagraphs:

1. Name (in case where a company requests for the standard information, company�s name and trade name shall beincluded) and address of a person who requests for the standard information

2. Scope, use purpose and time for provision of the standard information

(3) The key telecommunications business operator who provides telecommunications services, by using frequencies, allocatedunder the Radio Waves Act, shall provide the requested standard information within 7 days from the receipt of the requestunder Paragraph 2); provided, however, that it is unable to provide the standard information within 7 days, the standardinformation may be provided within 30 days from the receipt of the request, but the reason for the delay shall be notified tothe person who requests for the standard information.

(4) Methods of the standard information shall be online transmission, transmission by a booklet, and other methods, agreed byparties.

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Article 41 (Reporting Offenses)

(1) Any person recognizing any of the offenses prescribed under Article 50(1) of the Act may report to the KoreaCommunications Commission of such act and request any measures prescribed under each of the subparagraphs of Article 52(1) of theAct to be taken.

(2) A person who wishes to make a report under paragraph (1) shall submit to the Korea Communications Commissiondocumentation indicating each of the following:

1. name (if a corporation, the name of the corporation and its representative) and address of the person making the report;

2. trade name, or name (if a corporation, the name of its representative), and address of the person being reported;

3. details of the offense; and

4. measures necessary for addressing the offense.

(3) The Korea Communications Commission may, where it deems necessary, request that the documentation submitted to itunder paragraph (2) be supplemented within a reasonable period.

(4) The details of handling procedures and methods concerning application, supplementation, prohibition and violation underparagraphs (1) through (3) shall be demined and announced by the Korea Communications Commission.[Wholly amended on Feb. 28, 2012]

Article 42 (Types of and Criteria for Offenses)

(1) The types of, and criteria for, the offenses pursuant to Article 50(3) of the Act shall be as provided in Table 4 attached hereto.

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(2) The Korea Communications Commission may, where it deems necessary for the purpose of applying to specifictelecommunications fields or specific offenses, determine and issue public notification of the details concerning the types of, and criteriafor, the offenses under paragraph (1).



Article 44 (Measures Taken, etc. on Offenses)

The term �other matters prescribed under the Enforcement Decree of the Act� in Article 52(1)11 of the Act refers to each of thefollowing:

1. submission of a plan for implementing the provisions under Article 52(1)1-10 of the Act; and

2. report on the results of the implementation of the provisions under Article 52(1)1-10 of the Act.

3. Conservation of material necessary for the implementation of the provisions under Article 52(1)8 of the Act and reporton damages incurred to the users.


Article 44-2 (Announcement of Corrective Order)

The details of contents and method of announcement about corrective order made under Article 52(1)8 shall be determined by the KoreaCommunications Commission.

[This Article Newly Inserted by Act No. 22616 Oct. 1, 2010]

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Article 45 (Implementation Period of Corrective Orders)

The period by the end of which telecommunications business operators shall implement the corrective order issued by the KoreaCommunications Commission pursuant to Article 52(2) of the Act shall be as provided in Table 4 attached hereto.


Article 45-2 (Criteria, Procedures, etc. for Partial Suspension of Business)

(1) The criteria for partial suspension of business pursuant to Article 52(5) of the Act are as provided in Table 5-2 attached hereto.

(2) If the Korea Communications Commission orders partial suspension of business pursuant to Article 52(5) of the Act, the KoreaCommunications Commission shall immediately notify the relevant telecommunications business operators in writing and issue publicnotification thereof.


Article 45-3 (Imposition etc. of Charges for Compelling Execution)

(1) The turnover under Article 52-2(1) of the Act shall be the turnover arising from services directly or indirectly affected by theactivities in violation of Article 50(1) of the Act occurring during the period in which the relevant telecommunications business operatorbreaches Article 50(1) of the Act (the �Relevant Turnover�).

(2) If any person to whom the charges for compelling execution are imposed pursuant to Article 52-2(1) of the Act intends to raisean objection thereto, such person shall do so within 30 days from the date of receipt of the notification of the imposition of the chargesfor compelling execution under Article 52-2(3) of the Act.

(3) Article 49 hereof shall apply mutatis mutandis to any reminder of charges for compelling execution. In this case, the penaltiesin arrear shall be deemed to be the charges for compelling execution in arrear.

(4) Matters related to the calculation of the Relevant Turnover and imposition of the charges for compelling execution not set forthin Paragraphs (1) through (3) above shall be determined and notified by the Korea Communications Commission.

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[Newly inserted on Jul., 28, 2016]

Article 46 (Offenses Subject to Imposition of Penalties and Amount of Such Penalties, etc.)

(1) The classifications of offenses subject to imposition of penalties, the upper limit of such penalties and the criteria forimposition of such penalties pursuant to Article 53(1) of the Act shall be as provided in Table 6 attached hereto.

(2) The types of violation subject to fine under Article 53(2) of the Act, maximum fine amount and fine calculation method are setforth in Table 7.


Article 47 (Computation Methods and Procedures of Penalties)

(1) The term �sales as prescribed under the Enforcement Decree of the Act� in the former part of text of Article 53(1) of the Actmeans the average annual sales for the 3 preceding fiscal years of the telecommunications services related to the offense committed bythe relevant telecommunications business operator and the �sales as prescribed under the Enforcement Decree of the Act� in Article53(2) of the Act means the average annual sales for the 3 preceding fiscal years of the telecommunications services related to theoffense committed by the relevant telecommunications business operator); provided, however, that if, as of the first day of theapplicable fiscal year, less than 3 years have elapsed since the commencement of the relevant business as of the first day of the relevantfiscal year, such term shall mean the sales of the period from the commencement of the relevant business until the last day of thepreceding fiscal year, converted into annual average sales, or if the relevant business has been commenced in the applicable fiscal year,such term shall mean sales of the period from the commencement date of the relevant business until the date of commission of theoffense, converted into annual sales.

(2) The term �the time prescribed under the Enforcement Decree of the Act� in the proviso of Article 53(1) of the Act means anyof the following:

1. where there has been no sales result due to such reasons as non-commencement or suspension of business; or

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2. where it is difficult to make an objective computation of sales.

(3) If it is necessary for the calculation of the turnover in the former part of text of Article 53(1) of the Act, the KoreaCommunications Commission may demand the relevant telecommunications business operator to submit accounting documentsincluding financial statements and materials related to business state within a period of 20 days. <Newly inserted on Jul. 28, 2016>

[Wholly amended on Feb. 28, 2012][Title amended on Jul. 28, 2016]

Article 48 (Imposition and Payment of Penalties)

(1) The Minister of Science and ICT or the Korea Communications Commission shall, where it intends to impose penaltiespursuant to Article 53 of the Act and subsequent to its investigation and verification of the relevant offense, notify, in writing, the personsubject to such penalties of the fact of offense, the amount thereof and the method of, and the period for, raising objection thereto.<Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) A person who receives a notification under paragraph (1) shall pay the relevant penalties to a financial company designated bythe Minister of Science and ICT or the Korea Communications Commission within 20 days from the date of receiving such anotification); provided, however, that if the person is unable to pay the penalties within such period due to a natural disaster or otherunavoidable circumstances, the person shall pay the penalties within 7 days from the date on which said reason ceases to exist.<Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) A financial company in receipt of a payment of penalties under paragraph (2) shall deliver a receipt thereof to the person whopaid the penalties.


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Article 49 (Demand for Penalties)

(1) A demand for penalties pursuant to Article 53(6) of the Act shall be made in writing within 7 days from the date on which thepayment deadline expires.

(2) Where a demand note is issued under paragraph (1), a deadline for payment of any penalties in arrear shall be within 10 daysfrom the date on which such demand note is issued.


Article 50 (Services Subject To Prior Selection)

The �telecommunications services prescribed under the Enforcement Decree of the Act� in the latter part of Article 57(1) of the Actmeans the Long Distance Telephone Service. <Amended by Enforcement Decree No. 22616 Oct. 1, 2010>[The title of this Article amended on 2010.10.1]

Article 50-2 (Provision of Directory Assistant Service)

(1) Telecommunications business operators providing a directory assistant service pursuant to Article 60(1) of the Act mayfurnish any of the following information:

1. name or trade name of the user;

2. telephone number of the user; or

3. address of the user up to Eup/Myeon/Dong or Road name address, under Article 3 subparagraph 1 through subparagraph 4 ofthe Road Name Address Act); provided, however, that the user subscribes to the service with the trade name, address of Eup/Myeon/Dong (including building name, apartment and flat number) or road name address, under Article 3 subparagraph 1through 7 may be used.

(2) Telecommunications business operators shall obtain users� consent to a directory assistant service through a method that canbe used to verify as to whether such consent has been indeed given by the user, such as the user�s handwritten or electronic signature,and to prove at a later date that such consent has been given.

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(3) Users may withdraw their consent given under paragraph (2) at any time, and telecommunications business operators shall,without any delay, take the necessary measures so that a directory assistance service shall not be provided with respect to such userswho withdrew their consent); provided, however, that where the pertinent directory assistance service is provided through a writtenmaterial, a user shall have to withdraw her consent at least 30 days prior to the print date of such written material for the withdrawal totake effect.


Article 51 (Unique identification Number Sharing Specialized Institute)

(1) A specialized Institute, appointed to efficiently share a unique international identification number of a handy terminal(hereinafter �unique identification number�), under Article 60-2, Paragraph 2 of the Act, shall establish the Integrated Control Center ofunique identification number, and perform following duties:

1. Establishment and management of the information system to share unique identification number of handy terminal whichis reported for loss, theft, or etc. (hereinafter �reported handy terminal�), with telecommunications service business operatorswho provide telecommunications service, by using frequencies, allocated under the Radio Wave Act (hereinafter �IntegratedControl System of unique identification number�).

2. Support for provision of and enquiry into information to prevent usage of reported handy terminal.

3. Support for sharing of unique identification number with foreign governments, etc.

(2) The telecommunications service business operator who provides telecommunication services with using frequencies,allocated under the Radio Wave Act, shall register the unique identification number of the reported handy terminal to the IntegratedControl System of unique identification number. In case where the reporter requests for deregistration, the registered information shallbe deleted.

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(3) The telecommunications service business operator who provides telecommunication service with using frequencies,allocated under the Radio Wave Act shall check whether or not the reported handy terminal accesses to the network via the IntegratedControl System of unique identification number and shall prevent the reported handy terminal from providing telecommunicationservices.

(4) The Minister of Science and ICT may support for expense, necessary to establishment and management of theIntegrated Control System of unique identification number, under Paragraph 1. <Amended on Jul. 26, 2017>

Chapter 5. Telecommunications Facilities and Equipment

<Amended by Enforcement Decree No. 22616 Oct. 1, 2010>

Article 51-2 (Report and Approval of Telecommunication Facilities Installation)

(1) A key communications business operator seeking to install or change material telecommunication facilities under the mainbody of Article 62(1) of the Act shall submit an installation or change application (including electronic application) and each of thefollowing documentation (including electronic documentation) as attachment to the Minister of Science and ICT. <Amended on Mar.23, 2013, Jul. 26, 2017>

1. details of installation or change of telecommunication facilities (diagram of connection grid included); and

2. security plan for telecommunication facilities.

(2) A key communications business operator seeking to receive approval for telecommunication facilities installed under theproviso of Article 62(1) of the Act shall submit an installation approval application (including electronic application) and each of thefollowing documentation (including electronic documentation) as attachment to the Minister of Science and ICT. <Amended on Mar.23, 2013, Jul. 26, 2017>

1. business plan

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2. security plan for telecommunication facilities

3. domestic and international specifications and technological profile of the pertinent telecommunications facilities;

4.. research status of the pertinent telecommunications facilities; and

5. agreement (if installed or used jointly with other domestic or international business operator).

(3) After receiving an application under paragraph (2), the Minister of Science and ICT shall notify the applicant of its decisionwithin 15 days of the submission date after reviewing the items as below: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. validity of business plan;

2. appropriateness of security plan for telecommunication facilities;

3. suitability of domestic and international technology standards; and

4. legality of agreement.


Article 51-3 (Council for Join Installation of Telecommunication Facilities)

(1) The term �key communications business operators falling under the standards as prescribed by Presidential Decree� inArticle 63(2) of the Act means key communications business operators who provide both a local telephone service under Article2(2)3(a) hereof and an Internet subscriber connection service under Article 2(2)3(d) hereof.

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(2) Any key communications business operators other than the key communications business operators under paragraph(1) above may participate in the council under Article 63(2) of the Act.

[Wholly Amended on Apr. 14, 2015]

Article 51-4 Deleted. <Apr. 14, 2015>

Article 51-5 (Recommendation of Joint Installation of Telecommunication Facilities)

(1) In the event the Minister of Science and ICT recommends joint installation of telecommunication facilities to keycommunications business operator under Article 63(6) of the Act, such recommendation shall include specific telecommunicationfacilities to be installed, installation area, installation interval, installation period. <Amended on Mar. 23, 2013, Apr. 14, 2015, Jul. 26,2017>

(2) A key communications business operator requesting a joint installation of telecommunication under Article 64(6)1 shall submiteach of the following documentation to the Minister of Science and ICT: <Amended on Mar. 23, 2013, Apr. 14, 2015, Jul. 26, 2017>

1. plan for the joint installation of telecommunication facilities;

2. economic impact of the joint installation of telecommunication facilities

3. matters not yet agreed with the key communications business operator participating in the joint installation oftelecommunication facilities and proposed solutions

(3) A key communications business operator that has received a recommendation for joint installation of telecommunicationfacilities from the Minister of Science and ICT shall notify the Minister of Science and ICT on whether it is accepting therecommendation and, if it is being rejected, reason for such rejection within 21 days from the receipt of such recommendation.<Amended on Mar. 23, 2013, Jul. 26, 2017>


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Article 51-6 (Report of proprietary telecommunication facilities)

(1) A person desiring to install proprietary telecommunication facilities under Article 64 of the Act shall submit to the SpecialMetropolitan City Mayor, a Metropolitan City Mayor, a Special Self-Governing City Mayor, a Do Governor, or the Governor of aSpecial Self-Governing Province (hereinafter referred to as �Mayor/Do Governor�) having jurisdiction over where the office in whichthe main facilities are installed is located at least 21 days prior to the start of such installation a proprietary telecommunicationinstallation application (including electronic application) including all of the following with blueprints of the installation attached.<Amended on Mar. 23, 2013, May 31, 2016>

1. Applicant

2. type of business

3. purpose of installation

4. electronic communication method

5. installation site

6. overview of telecommunication facilities

7. operation or expected date of facilities

(2) The �material items specified in the Enforcement Decree of the Act� in the bottom text of the Article 64(1) of the Act meansitems under paragraphs (1)2 to (6).

(3) If a person who reported the installation of proprietary telecommunication facilities seeks to amend items in paragraph (2) shallsubmit to the Mayor/Do Governor an modification application (including electronic application) with blue prints (including acomparison of pre- and post-modification) of installation proprietary telecommunication facilities at least 21 days prior to the effectivedate of such modification (in case of modification to any of paragraph (1)4 through (6), the start date of construction regarding suchmodification). <Amended on Mar. 23, 2013, May 31, 2016>

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(4) Upon receiving an installation or installation modification application under paragraph (1) or (3), the Mayor/Do Governorreviews the following: <Amended on Mar. 23, 2013, May 31, 2016>

1. whether it satisfies technological standards under Article 28(2) of the Base Act on Broadcasting CommunicationAdvancement

2. whether the purpose and reason for installing telecommunication facilities is for the use of proprietary telecommunication

(5) The Mayor/Do Governor shall issue an installation/modification certificate if it concludes, after conducting a review, that all criteriaunder paragraph (4) are satisfied. <Amended on Mar. 23, 2013, May 31, 2016>[Wholly amended on Feb. 28, 2012]

Article 51-7 (Confirmation of Installation)

(1) A person who filed an installation or modification application in regard to proprietary telecommunication facilities underArticle 64(3) shall receive confirmation from the Mayor/Do Governor within seven days from the completion of installation ormodification construction. <Amended on Mar. 23, 2013, May 31, 2016>

(2) A person desiring to receive confirmation of proprietary telecommunication facilities under paragraph (1) shall submit to theMayor/Do Governor a proprietary telecommunication facilities confirmation application (including electronic application) with each ofthe following documentation (including electronic documentation) as attachment. <Amended on Mar. 23, 2013, May 31, 2016>

1. documentation showing that the construction was completed in satisfaction of the technological standards under Article 28(1) ofthe Base Act on Broadcasting Communication Advancement

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2. documentation showing that the construction was completed in accordance with blue prints under Article 28(3) of the Base Acton Broadcasting Communication Advancement

3. copy of construction firm�s license

(3) After reviewing the application documents under paragraph (2), the Mayor/Do Governor may demand the applicant to submitadditional information within a reasonable period of time for any of the following reasons: <Amended on Mar. 23, 2013, May 31, 2016>

1. in the case where any required document is missing; and

2. in the case where any entry in the application and attachments is vague.[Wholly amended on Feb. 28, 2012]

Article 51-8 (Exemption from Proprietary Telecommunication Facilities Installation Application)

Under Article 64(4) of the Act, proprietary telecommunication facilities may be installed without filing an application in any of thefollowing cases:.

1. proprietary telecommunication facilities consisting of main equipment and terminals within one building and its lot;

2. proprietary telecommunication facilities consisting of main equipment and terminals within two or more buildings and their lotsowned by 1 person and whose shortest distance between them is shorter than 100 meters (excluding those buildings or lotsseparated by road or water stream); and

3. proprietary telecommunication facilities installed for police action and is used for less than 1 month.


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Article 51-9 (Supply of Proprietary Telecommunication Facilities)

(1) A person who installed proprietary telecommunication facilities may provide excess capacity provided by the proprietarytelecommunication facilities installed in the interval requested by a key communications business operator under Article 65(2) of theAct over his need to the key communications business operator.

(2) If the proprietary telecommunication facilities are provided to a key communications business operator under paragraph (1),the compensation for such supply shall not exceed the sum of the installation costs, maintenance expenses and investment return andshall be determined in accordance with the criteria announced by the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jul. 26,2017>


Article 51-10 (Standards for Cessation Order)

The standards for cessation order under Articles 65(4) and 67(2) of the Act are set forth in Table 5-3. <Amended on May 31, 2016>


Article 51-11 (Facilities subject to Public Space Needs)

The �facilities or areas specified under the Enforcement Decree of the Act� under Article 68(1)8 of the Act means each of thefollowing: <Amended on Jul. 16, 2014>

1. passenger car terminal under the Passenger Transport Service Act

2. logistics terminal and logistics complex under the Act on the Development and Management of Logistics Facilities

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3. small and medium enterprise joint complex under the Small and Medium Enterprises Promotion Act

4. tourist site or complex under the Tourism Promotion Act

5. sewage culvert under the Sewerage Act


Article 51-12 (Adjustment for Public Space Needs)

(1) When the Minister of Science and ICT drafts a corrective plan upon the request under Article 68(5) of the Act, it shall solicitopinions from the head of relevant administrative bodies and the parties involved. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) Upon drafting a corrective plan under paragraph (1), the Minister of Science and ICT shall notify the parties of such plan andrecommend their adoption of the plan within a fixed period of at least 30 days. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) When the parties adopt the corrective plan under paragraph (2), the Minister of Science and ICT shall draft a correctiveagreement including the following items and have it executed by the parties. <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. case number

2. names and addresses of the parties, their representatives or agents

3. reason for corrective adjustment

4. provisions amended

5. date of the agreement


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Article 52 (Designation of Alert Areas for Submarine Cable)

(1) A key communications business operator who wishes to apply for designation of alert areas for submarine cable underArticle 79(3) of the Act shall submit to the Minister of Science and ICT documentation demonstrating each of the following: <Amendedon Mar. 23, 2013, Jul. 26, 2017>

1. need to designate alert areas; and

2. legs and width of the alert areas indicated by using coordinates of latitude and longitude.

(2) The Minister of Science and ICT may, where necessary for designation of alert areas for submarine cable, request additionalinformation further to the documentation prescribed under paragraph (1) from any key communications business operator who appliesfor such designation. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(3) Upon receipt of the documentation submitted to it under paragraphs (1) and (2), the Minister of Science and ICT shall sendsuch documentation to the heads of the relevant state administrative organs prescribed under Article 79(4) of the Act for consultation.<Amended on Mar. 23, 2013, Jul. 26, 2017>

(4) Except under ordinary circumstances, the Minister of Science and ICT shall, within 60 days of the date of application fordesignation of an alert area for submarine cable, notify the key communications business operator making such application, and if suchdesignation is approved, issue, without any delay, public notification of the newly designated alert area. <Amended on Mar. 23, 2013,Jul. 26, 2017>

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(5) Once the Minister of Science and ICT designates and issues public notification of a new alert area under paragraph (4), thekey communications business operator who applied for such designation shall disclose the location of the new alert area on its website,etc., and may place buoys, etc. in the new alert area for marking purposes. <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly amended on Feb. 28, 2012]

Article 52-2 (Inspection and Report of Telecommunication Facilities)

(1) The �cases necessary for the implementation of telecommunication policies specified under the Enforcement Decree of theAct� in Article 82(1) of the Act shall mean each of the following

1. in case where necessary for the implementation of telecommunication policies

2. in case where necessary for verifying the suitability of installation and management of telecommunication facilities

3. in case where necessary for securing communication channels in case of national emergency and disasters

(2) When an inspection is made pursuant to Article 82(1) of the Act, an inspection plan specifying inspection period, purposeand items shall be sent to the person who installed the telecommunication facilities being inspected at least 7 days prior to suchinspection); provided, however, that the foregoing requirement is waived if necessary for emergency or for the purpose of preventingdestruction of evidence which would thwart the purpose of inspection. .

(3) A public servant carrying out the inspection under paragraph (2) shall carry evidence of his authority and show it to relevantparties and provide at the time of entrance a document stating the time and purpose of the entrance to relevant parties.


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Chapter 6. Supplementary Provisions

Article 53 (Protection of Communication Secrets)

(1) Telecommunications business operators shall preserve the ledger of communications data supplied, prescribed under Article83(5) of the Act, for a period of 1 year.

(2) Reports on, and notification of, the status of communications data supplied pursuant to Articles 83(6) and 83(7) of the Actrespectively, must be provided within 30 days after the expiration of each half-year.

(3) An office dedicated to protection of communication secrets pursuant to Article 83(8) of the Act (the �Dedicated Office�)shall undertake to perform each of the following:

1. oversee tasks related to communication secrets of users;

2. regulate illegal or undue infringement of communication secrets of users by employees of telecommunications businessoperators or third parties;

3. report on the present status of communications information supplied under Article 83(6) of the Act;

4. furnish notification of the recordation in the ledger of communications data supplied under Article 83(7) of the Act;

5. address complaints or opinions from users with respect to communication secrets;

6. train the employees in charge of tasks connected with communication secrets; and

7. any other matters necessary for protection of communication secrets of users.

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(4) The Dedicated Office shall be based at the headquarters of each telecommunications business operator with the officersthereof in charge.

(5) An authorized signatory for application for communication data under Article 83(9) of the Act shall be either (i) a judge, aprosecutor or an investigatory entity (including, throughout this Enforcement Decree, a military investigatory body, the National TaxService and regional tax services) (ii) a public official of Grade 4 or higher who belongs to an intelligence agency (including a publicofficial of Grade 5 who is the head of an investigatory body or intelligence agency) or (iii) a public official who belongs to seniorexecutive service); provided, however, that (x) with respect to the police and cost guard, such authorized signatory shall be a publicofficer whose position is senior superintendent or higher (including a superintendent who is the head of a district policy agency) and(y) with respect to a military investigatory body, it shall be a military prosecutor or a person whose rank is lieutenant colonel or higher(including a major with respect to a military investigatory body at which a major is the commanding officer). <Amended on Nov. 19,2014, Jul. 26, 2017>

(6) The application for communication data prescribed under Article 83(9) of the Act shall clearly indicate the authorizedsignatory�s name and rank); provided, however, that with respect to intelligence agencies prescribed under Article 2(6) of theRegulation on Planning and Coordination of Information Security, only the title of the authorized signatory shall be indicated, and withrespect to courts, the title and name of the authorized signatory shall be indicated.[Wholly amended on Feb. 28, 2012]

Article 54 (Caller Identification, etc.)

(1) Telecommunications business operators may not impose charges on users who choose, pursuant to the proviso of Article84(1) of the Act, not to allow their telephone numbers to be identified when making telephone calls.

(2) A person who wishes to be informed of the telephone number of the caller pursuant to Article 84(2)1 of the Act shall make awritten request therefor to the pertinent telecommunications business operator with any of the following documentation demonstratingin detail that the person has been subjected to abusive language, threats or harassment over the telephone attached thereto:

1. written records of the date, time and contents of threats, etc. over the telephone;

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2. voice records of threats, etc. over the telephone;

3. documentation supporting that a crime report has been filed with the police in connection with threats, etc. over thetelephone;

4. documentation supporting that advice has been sought from a clinic with respect to the damages incurred from threats, etc.over the telephone;

5. any other documentation equivalent or similar to those set forth in subparagraphs 1-4.

(3) �As prescribed under the Enforcement Decree of the Act� in Article 84(2)2 of the Act means where each of the followingtelephone services is used:

1. to report international terror-related crime (111);

2. to report crime (112);

3. to report spies (113);

4. to report cyber terror and seek advice in relation thereto (118);

5. to report fire or seek emergency rescue (119);

6. to report marine accidents or crime (122);

7. to report smuggling (125); or

8. Deleted. <on May 8, 2017>


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Article 54-2 (Entrustment of Affairs Relating to Prohibition, Etc. on False Indication of Caller��s Phone Number)

Pursuant to Article 84-2(5) of the Act, the Minister of Science and ICT shall entrust any of the following affairs relating to theprohibition on false indication of a caller�s phone number to Korea Internet & Security Agency under Article 52 of the Act onPromotion of Information and Communications Network Utilization and Information Protection, etc.: <Amended on Jul. 26, 2017>

1. Affairs relating to the verification of whether actions under Article 84-2(3) of the Act have been taken; or

2. Affairs relating to request for inspection and submission of data and inspection of data under Article 84-2(4) of the Act.

[Newly Inserted on Apr. 14, 2015]

Article 55 (Restriction on and Suspension of Service)

(1) Where the Minister of Science and ICT issues, under Article 85 of the Act, an order to restrict or suspend the whole or part ofthe telecommunications business of telecommunications business operators, it may allow communications for undertaking the matterfalling under each of the following in the order of their priority, in proportion to the scope and severity of the relevant restriction orsuspension: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. top priority

(a) national security;

(b) military affairs and public security;

(c) transmission of the civil defense alarm; and

(d) electronic wave control;

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2. second priority

(a) disaster relief;

(b) telecommunications, navigation safety, weather, fire fighting, electricity, gas, water service, transportation and thepress;

(c) affairs of the State and local government, except for those mentioned in items (a) and (b); and

(d) affairs of the foreign diplomatic missions and the organizations of the United Nations in Korea;

3. third priority

(a) affairs of the enterprises subject to resources control and the firms of defense industry; and

(b) affairs of public institutions and medical institutions under the Act on the Management of Public Institutions; and

4. forth priority: matters other than those listed in subparagraphs 1 through 3.

(2) The restriction or suspension on the telecommunication services under paragraph (1) shall be the least of those required forsecuring the important communications.

(3) A telecommunications business operator shall, in case where he restricts or suspends the whole or part of telecommunicationsservices under paragraph (1), report the content thereof without delay to the Minister of Science and ICT. <Amended on Mar. 23, 2013,Jul. 26, 2017>


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Article 56 (Approval, etc. for International Telecommunications Services)

(1) The term �international telecommunications business as prescribed under the Enforcement Decree of the Act� in otherprovisions than as provided in subparagraphs of Article 86(2) of the Act means establishment and lease of satellite for the provision ofinternational telecommunications service.

(2) A person who intends to obtain approval under other parts than as provided in subparagraphs of Article 86(2) of the Act shallsubmit the following documents to the Minister of Science and ICT: <Amended on Mar. 23, 2013, Jan. 7, 2014, Jul. 26, 2017>

1. duplicate copy of written agreement or contract;

2. comparative table between new and old agreements or contracts (limited to the cases where an application for modifiedapproval is filed); and

3. document certifying the fact that the agreements or contracts have been abrogated (limited to the cases where an applicationfor approval of abrogation is filed).

4. Business Plan (only applicable where the approval is applied for cross-border supply agreement of key telecommunicationsservice under Article 87-1 of the Act.)

(3) In accordance of other parts than as provided in subparagraphs of Article 86 Paragraph 2, the Minister of Science and ICT shallsynthetically examine following provisions to approve the cross-border supply agreement of key telecommunications service,under Article 87 Paragraph 1. <Newly inserted on Jan. 7, 2014, Amended on Jul. 26, 2017>

1. Possibility to provide stable service

2. Effect on competition of domestic telecommunication market

3. Protection of users

(4) The �criteria specified by the Enforcement Decree of the Act� in the proviso of Article 86(3) means telecommunicationbusiness operators whose capital is less than 300 million won and who do not have an international calling identification number issuedby the Minister of Science and ICT. <Amended on Mar. 23, 2013, Jan. 7, 2014, Jul. 26, 2017>


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Article 57 (Revocation of Approval for Agreement to Provide Transboundary Key Communications Services)

(1) The criteria for revocation of approval for agreements to provide transboundary key communications services and forsuspension of provision of transboundary key communications services pursuant to Article 87(4) of the Act shall be as follows.

1. first violation shall result in suspension of 6 months or less, or suspension of invitation of new users; and

2. second violation shall result in revocation of approval.

(2) Upon revoking approval or ordering suspension, the Minister of Science and ICT shall issue public notification and notify therelevant telecommunications business operator in writing thereof. <Amended on Mar. 23, 2013, Jul. 26, 2017>[Wholly amended on Feb. 28, 2012]

Article 58 (Report on Statistics)

(1) The types of statistics telecommunications business operators must report to the Minister of Science and ICT pursuant toArticle 88(1) of the Act are as follows. <Amended on Mar. 23, 2013, May 31, 2013, Dec. 30, 2016, Jul. 26, 2017>

1. present status of telecommunications facilities, including those for exchange, transmission, wire and power per service;

2. use records of telecommunications, including sales and times of use per service, period, distance stage, time zone, country(including the use records per foreign telecommunications business operator) and Calling Area and between Calling Areas;

3. present status of telecommunications users, including the number of subscribers per service, city and province and CallingArea;

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4. information related to call volume, including (i) call volume between Calling Areas and per service, period, distance stage,time zone, city and province, country (including the call volume per foreign telecommunications business operator) andCalling Area and (ii) information on provision of facilities and equipment and on interconnection;

4-2. Materials, related to the Data usage: Materials, related to the Data usage, with respect to each technique method, period,traffic loading to the telecommunication equipment and facilities;

5. information related to accounting, including a sales report prepared for each service and business provided; and

6. aggregated issue amount of prepaid calling cards and use records of the Calling Areas (applicable only to specificcommunications business operators).

(2) The Minister of Science and ICT shall determine and publicly notify the preparation, format, submission method andreporting deadline of the relevant statistics under paragraph (1) and any other matters related thereto. <Amended on Mar. 23, 2013,May 31, 2013, Jul. 26, 2017>

Article 59 (Submission of Documentation)

(1) Pursuant to Article 88(2) of the Act, key communications business operators and their shareholders shall submit to theMinister of Science and ICT each of the following: <Amended on Mar. 23, 2013, Jul. 26, 2017>

4. present status of the corporation�s outstanding shares (including, throughout this Article, equities);

5. present shareholding (including, throughout this Article, equity investment ratios) status of shareholders owning thecorporation�s outstanding shares (including, throughout this Article, equity investors) and their related parties;

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6. purpose of shareholding and reasons for the change (applicable only to shareholders of key communications businessoperators);

7. date of acquiring the shares and details of capital used for such acquisition (applicable only to shareholders of keycommunications business operators);

8. form of shareholding (applicable only to shareholders of key communications business operators); and

9. documentation certifying any of the information set forth in subparagraphs 1-5.

(2) Business operators obliged to submit documentation under paragraph (1) shall submit such documentation to the Minister ofScience and ICT by each of the following dates: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. A business operator who is a key communications business operator whose share certificates are listed on a stock exchangeunder Article 9(15)3 of the Financial Investment Services and Capital Markets Act: within 30 days from the date itsshareholder registry is closed; or

2. A business operator who is a key communications business operator not falling under subparagraph 1: by January 30 of eachyear.

[This Article Wholly Amended on Feb. 28, 2012]

Article 59-2 (Report of Current State of Reporting of Installation of Proprietary Telecommunications Facilities)

Pursuant to Article 88(4) of the Act, the Mayor/Do Governor shall report the materials set forth in each of the subparagraph of Article88(4) of the Act to the Minister of Science and ICT in quarterly basis within 30 days from the last day of each quarter. <Amended onJul. 26, 2017>

[Newly inserted on May 31, 2016]

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Article 60 (Methods for Computing Penalties)

(1) The term �sales calculated under the conditions prescribed under the Enforcement Decree of the Act� in the former part ofArticle 90(1) of the Act means the annual average sales for 3 fiscal years immediately preceding of the telecommunications services bythe relevant telecommunications business operator); provided, however, that where 3 years have not elapsed since the start of businessas of the first day of the relevant fiscal year, it shall mean sales from the period from the start of the relevant business until the end of theimmediately preceding fiscal year, converted into annual average sales; and where a business was started in the relevant fiscal year, itshall mean sales from the period from the date of starting the business until the date of an offense, converted into annual sales.

(2) The term � where it is prescribed under the Enforcement Decree of the Act� in the proviso of Article 90 (1) of the Act meansthe case falling under any of the following: <Amended by Enforcement Decree No. 22616 Oct. 1, 2010>

1. where there exists no business record due to a failure of starting a business or a suspension of business, etc.;

2. where a telecommunications business operator has refused to submit the data for computing sales or has submitted false data;or

3. other cases where it is difficult to compute the amount of objective sales.


Article 61 (Offenses Subject to Imposition of Penalties and Amount of Penalties, etc.)

(1) Classifications of offenses subject to the imposition of a penalty and the amount of a penalty under Article 90(1) of the Actshall be as provided in Table 9 attached hereto.

(2) The types of violation subject to fine under Article 90(2) of the Act and fine amounts are set forth in Table 10.

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(3) In determining the amount of penalties under paragraph (1) or (2), the Minister of Science and ICT and the Mayor/DoGovernor may increase or decrease such amount by up to 50% after taking the following items into consideration); provided, however,that even in case of increase, the total penalty amount cannot exceed the maximum penalty amount specified under Article 90(1) or(2) of the Act. <Amended on Mar. 23, 2013, May 31, 2016, Jul. 26, 2017>

1. the peculiarities of providing telecommunications services

2. the severity and frequency of each offense.

3. willfulness of violation

4. reason and contents of violation

5. prior penalties received for violation of law

(4) The provisions under Articles 48 and 49 hereof shall apply mutatis mutandis to the imposition, payment and demand ofpenalties under Article 90 of the Act. In this case, the Minister of Science and ICT or the Korea Communications Commission underArticles 48(1) and 48(2) shall be deemed to be the Minister of Science and ICT or the Mayor/Do Governor. <Amended on May 31,2016, Jul. 26, 2017>


Article 62 (Extension of Payment Due Date, and Installment Payment, of Penalties)

(1) A person who intends to extend the payment due date of a penalty or pay it in installments under Article 91 of the Act shallmake an application to the Minister of Science and ICT or the Korea Communications Commission along with the document certifyinggrounds of the extension of payment due date or the payment in installments not later than 10 days prior to the relevant due date ofpayment. <Amended on Mar. 23, 2013, Jul. 26, 2017>

(2) The term �amount as prescribed under the Enforcement Decree of the Act� in Article 91(1) of the Act means either the amountequal to the sales under Article 47 multiplied by 1%, or 300 million won.

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(3) The extension of the payment due date of a penalty under Article 91 of the Act shall not exceed 1 year from the dayimmediately following said payment due date.

(4) When making installment payments under Article 91 of the Act, each of the intervals between the respective installmentpayment due dates shall not exceed 4 months, and the frequency of installments shall not exceed three times. <Amended byEnforcement Decree No. 22616 Oct. 1, 2010>

(5) The Minister of Science and ICT or the Korea Communications Commission may, if a person liable for a payment of a penaltyfor whom the payment due date has been extended or installment payments have been permitted under Article 91 of the Act comes tofall under any of the following, revoke such extension of payment due date, or the decision to allow such installment payments, andcollect it in a lump sum: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. where the person fails to pay a penalty for which the payment in installments has been decided, within the payment due datethereof;

2. where the person fails to implement an order necessary for a change of security or other security integrity, which is given bythe Minister of Science and ICT or the Korea Communications Commission; or

3. where it is deemed that the whole or remainder of a penalty is uncollectible, such as the compulsory execution,commencement of auction, adjudication of bankruptcy, dissolution of a juristic person or dispositions on national or localtaxes in arrears, etc.


Article 63 (Classification and Appraisal, etc. of Securities)

The provisions of Articles 29 through 34 of the Framework Act on National Taxes, and of Articles 13 through 17 of its EnforcementDecree shall apply mutatis mutandis to the provision of security under Article 91 of the Act.[This Article Wholly Amended on Feb. 28, 2012]

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Article 64 (Important Communications)

(1) The term important communications in Article 92(2)3 of the Act means: <Amended on Mar. 23, 2013, Jul. 26, 2017>

1. business telecommunications related to the national security, military affairs, public peace and order, civil defense alarmtransmission and radio wave control; or

2. other communications publicly notified by the Minister of Science and ICT in order to efficiently perform the State affairs.


Article 65 (Delegation of Authority)

The Minister of Science and ICT shall delegate the authority falling under any of the following to the Director General of the CentralRadio Management Office pursuant to Article 93(2) of the Act: <Amended on Mar. 23, 2013, Apr. 14, 2015, May 31, 2016, Jul. 28,2016, Jul. 26, 2017>

1. registration and imposition of registration criteria of specific communications business under Article 21 of the Act;

2. acceptance of a report on the value-added communications business under the text of Article 22(1) of the Act;

3. registration and imposition of registration criteria for a value-added telecommunications business of a special type under thetext of Article 22 (2) and (3) of the Act;

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4. a modified registration for the specific communications business and for the value-added telecommunications business of aspecial type, and acceptance of a modified report for value-added communications business, under Article 23 of the Act;

5. acceptance of a report on the transfer or takeover of a specific communications business or a value-added communicationsbusiness, and on the merger or succession of a juristic person, under Article 24 of the Act;

6. acceptance of a report on the suspension or discontinuation of a specific communications business or a value-addedcommunications business, and on the dissolution of a juristic person under Article 26 of the Act;

7. order to cancel registration of or suspend a specific communications business under Article 27(1) of the Act;

8. order to closedown a value added communications business or to cancel registration of or suspend the value-addedtelecommunications business of a special type under Article 27(2) of the Act;

8-2. matters related to order to suspend the provision of telecommunication service under Article 32-3(1) of the Act;

8-3 on-site investigation of the status of provision and use of equipment, etc. under Article 35(5) of the Act;

9. order to cease the use of the proprietary telecommunications facilities under the former part of Article 65(4) of the Act andnotice of cessation of use to the Mayor/Do Governor under the latter part of Article 65(4);

10. Deleted <May 31, 2016>

11. Deleted <May 31, 2016>

12. Deleted <May 31, 2016>

13. Deleted <May 31, 2016>

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14. permission for a felling or transplanting of the plants under the former part of Article 75 (3) of the Act;

15. inspection of and demand for reports from persons who have installed telecommunication facilities under Article 82(1) of theAct

16. telecommunication facilities removal or other corrective order under Article 82(2) of the Act

17. acceptance of applications by specific communication business operators for agreements on settlement of charges forinternational telecommunication services under Article 86(3) of the Act

18. hearing on the order to cancel registration of a specific communications business or to close down a value-addedcommunications business under Article 89(2) and (3) of the Act;

19. imposition and collection of surcharge under Article 90(1) of the Act (excluding surcharge imposed in lieu of the partialsuspension of business under Article 52(5) of the Act) and permission for extension of time limit for payment of and paymentin installment of such surcharge under Article 91 of the Act, except against a key communications business operator;

19-2. imposition and collection of surcharge under Article 90(2) of the Act (limited to the surcharge imposed in lieu of the order ofcessation of use to a person who has installed proprietary telecommunications facilities under Article 65(4) of the Act);

20. correction order under Article 92(1) of the Act, except against a key communications business operator;

21. order to suspend the provision of telecommunications service or to remove telecommunications facilities under Article 92(3)of the Act, except against a key communications business operator;

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22. imposition and collection of surcharge under Article 104 of the Act, except against a key communications business operator.


Article 65-2 (Processing of Unique Identifier Information)

(1) The Minister of Science and ICT, including those who hold the authority delegated by the Minister of Science and ICT under Article65, or the Korea Communications Commission, may process data comprising resident registration numbers or foreigner registrationnumbers as defined under Article 19 (1) or (4) of the Enforcement Decree of Personal Data Protection Act if processing of such isrequired in order to perform the following operations: <Amended on Mar. 23, 2013, Jan. 7, 2014, Aug. 6, 2014, Jul. 28, 2016, Jul. 26,2017>

1. those relevant to granting a license for a key communications business under Article 6 of the Act;

2. those relevant to confirming the disqualification reason of a key communications business operator�s officer under Article 9of the Act;

3. those relevant to granting a modified license for a key communications business under Article 16 of the Act;

4. those relevant to approval or report of takeover or merger of a key communications business under Article 18 of the Act;

5. those relevant to approval of suspension or closedown of a key communications business under Article 19 of the Act;

6. those relevant to registration of a specific communications business under Article 21 of the Act;

7. those relevant to report and registration of a value-added communications business under Article 22 of the Act;

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8. those relevant to modified registration of a specific communications business or to modified report and registration of avalue-added communications business under Article 23 of the Act;

9. those relevant to report of transfer or takeover of a specific communications business or a value-added communicationsbusiness under Article 24 of the Act;

10. those relevant to report of dissolution of a juristic person or of suspension or closedown of a specific communicationsbusiness or a value-added communications business under Article 26 of the Act;

11. Deleted. <Apr. 14, 2015>

12. those relevant to investigation of fact under Article 51 of the Act;

12-2.thoserelevant to imposition and collection of the charge for compelling the performance under Article 52-2 of the Act

13. those relevant to imposition/collection of penalty surcharge under Article 53 of the Act;

14. Deleted. <Apr. 14, 2015>

15. Deleted. <Apr. 14, 2015>

16. those relevant to extension of time limit of payment of penalty surcharge and payment in installments under Article 91 of theAct.

(2) A telecommunication business operator who provides key communications services or the Korea Association for ICT Promotionmay handle the data which contains the resident registration number or foreigner registration number under Article 19(1) or Article19(5) of the Enforcement Decree to Personal Information Protection Act, in order to conduct each of the following affairs: <NewlyInserted on Aug. 6, 2014, Apr. 14, 2015, July 28, 2016>

1. affairs relevant to the provision of services of which fees are reduced or exempted under Article 4 of the Act and Article 2(2)3of the Enforcement Decree;

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2. affairs relevant to the reduction/exemption of fees under Article 29 of the Act;

3. affairs relevant to the prevention of an act of entering into a use contract without confirmation of a user�s intention ofsubscription and an act of providing different telecommunication services from a standardized use contract (limited to the standarduse contract�s provisions concerning the return of fees) among many prohibited acts under Article 50(1)5 of the Act;

4. affairs relevant to the prevention of an prohibited act under Article 50(1)5-2 of the Act.

(3) The head of pre-selection registration center, prescribed in Article 57 Paragraph 3 of the Act, may dispose materials, includingresident registration or foreigner registration number under Article 19 Subparagraph 1 or 4 of the Enforcement Decree of the PersonalInformation Protection Act, if necessary to register pre-selection or to modify thereto. <Newly Inserted on Jan. 7, 2014, Aug. 6, 2014>

(4) The head of number portability management institution, prescribed in Article 58 Paragraph 4 of the Act, may dispose materials,including resident registration or foreigner registration number under Article 19 Subparagraph 1 or 4 of the Enforcement Decree of thePerson Information Protection Act, if necessary to register number portability and to modify thereto. <Newly Inserted on Jan. 7, 2014,Aug. 6, 2014>

[This Article Newly Inserted on January 6, 2012]

Article 65-3 (Review of Regulations)

(1) The Minister of Science and ICT shall take measures (improvements, etc.) on each of the following matters after reviewingfeasibility thereof every three years (before the same day as the base date by every three years) calculated based on the base dateprovided in each of the following subparagraphs: <Amended on Jul. 26, 2017>

1. Request to a Business Operator Providing Universal Services for submission of data under Article 3(2): January 1, 2017.

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2. Submission of the report on actual results of the provision of universal services under Article 4: January 1, 2017.

3. Imposition and payment of charges for compelling execution under Article 18: January 1, 2017.

4. Attachments to the approval application for transfer, merger, etc. under Article 20: January 1, 2017.

5. Registration requirements for the specific communications business under Article 28: January 1, 2017.

6. Reporting documentations of a value-added communications business, matters to be stated in the registry by a value-addedcommunications business operator of special type, and registration requirements for a value-added communications businessoperator of special type under Article 29: January 1, 2017.

7. Matters registered or reported regarding the value-added communications business under Article 31: January 1, 2017.

8. Scope of the services subject to approval of terms of use under Article 34: January 1, 2017.

9. Attachments to report and approval of telecommunication facilities installation and matters to be considered regardingtelecommunication facilities under Article 51-2: January 1, 2017.

10. Matters mentioned in the proprietary telecommunication application and matters to be reviewed upon receiving installationor installation modification application under Article 51-6: January 1, 2017.

11. Types of reports on statistics under Article 58: January 1, 2017

[Wholly amended on Dec. 30, 2016]

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Chapter 7. PENAL PROVISIONS <Newly Inserted by Act No. 22616 Oct. 1, 2010>

Article 66 (Imposition Criteria for Fine)

The imposition criteria for fine imposed under Article 104(1) through (5) of the Act are set forth in Table 11. <Amended on Jul. 20,2015>


ADDENDA <Enforcement Decree No. 28283, Sep. 5, 2017>

Article 1 (Enforcement Date) This Decree shall enter into force three months after the date of its promulgation); provided, however,that Article 6 of the Addenda shall enter into force on the date of its promulgation.

Articles 2 through 5 Omitted.

Article 6 (Amendment of other Acts) (1) through (3) Omitted.

(4) The Enforcement Decree of the Telecommunications Business Act shall be partially amended as follows:

In Article 30-2, Subparagraph 1, �each subparagraph of Article 8 of the Enforcement Decree of the Financial Investment Services andCapital Markets Act� shall be amended as �each subparagraph of Article 3(1) of the Enforcement Decree of the Act on CorporateGovernance of Financial Companies; and in Article 30-2, Subparagraph 2, �any subparagraph of Article 9 of the Enforcement Decree ofthe Financial Investment Services and Capital Markets Act� as �Article 2, Subparagraph 6(b) of the Act on Corporate Governance ofFinancial Companies.�

(5) and (6) Omitted.

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12 Months EndedDocument and EntityInformation Dec. 31, 2017

sharesDocument - Document and Entity Information [Abstract]Document Type 20-FAmendment Flag falseDocument Period End Date Dec. 31, 2017Document Fiscal Year Focus 2017Document Fiscal Period Focus FYTrading Symbol KTEntity Registrant Name KT CorporationEntity Central Index Key 0000892450Current Fiscal Year End Date --12-31Entity Well-known Seasoned Issuer YesEntity Current Reporting Status YesEntity Filer Category Large Accelerated FilerEntity Common Stock, Shares Outstanding 245,097,055


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Consolidated Statements ofFinancial Position - KRW

(₩)₩ in Millions

Dec. 31, 2017 Dec. 31, 2016

Current assetsCash and cash equivalents ₩ 1,928,182 ₩ 2,900,311Trade and other receivables, net 5,814,283 5,327,352Other financial assets 972,631 720,555Current income tax assets 9,030 2,079Inventories, net 642,027 454,588Current assets held for sale 7,230Other current assets 304,860 311,135Total current assets 9,678,243 9,716,020Non-current assetsTrade and other receivables, net 828,832 709,011Other financial assets 754,992 664,726Property, plant and equipment, net 13,562,319 14,312,111Investment properties, net 1,189,531 1,148,044Intangible assets, net 2,632,704 3,022,803Investments in associates and joint ventures 279,431 284,075Deferred income tax assets 712,222 701,409Other non-current assets 107,165 106,099Total non-current assets 20,067,196 20,948,278Total assets 29,745,439 30,664,298Current liabilitiesTrade and other payables 7,424,134 7,139,771Borrowings 1,573,474 1,820,001Other financial liabilities 37,223 233Current income tax liabilities 68,880 88,739Provisions 78,172 96,485Deferred revenue 17,906 35,617Other current liabilities 258,315 342,291Total current liabilities 9,458,104 9,523,137Non-current liabilitiesTrade and other payables 1,001,369 1,188,311Borrowings 5,110,188 6,300,790Other financial liabilities 149,267 108,431Defined benefit liabilities, net 395,079 378,404Provisions 124,858 100,694Deferred revenue 91,698 85,372Deferred income tax liabilities 128,462 137,680Other non-current liabilities 237,284 58,761Total non-current liabilities 7,238,205 8,358,443Total liabilities 16,696,309 17,881,580


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EquityShare capital 1,564,499 1,564,499Share premium 1,440,258 1,440,258Retained earnings 9,826,926 9,644,483Accumulated other comprehensive income 30,985 (1,432)Other components of equity (1,205,302) (1,217,934)Equity attributable to owners of the Controlling Company 11,657,366 11,429,874Non-controlling interest 1,391,764 1,352,844Total equity 13,049,130 12,782,718Total liabilities and equity ₩ 29,745,439 ₩ 30,664,298


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12 Months EndedConsolidated Statements ofOperations - KRW (₩)

₩ in MillionsDec. 31,

2017Dec. 31,

2016Dec. 31,

2015Profit or loss [abstract]Operating revenue ₩

23,546,929₩23,120,878

₩22,699,856

Revenue 23,259,54122,755,00622,211,673Others 287,388 365,872 488,183Operating expenses 22,477,83721,781,09821,622,788Operating profit 1,069,092 1,339,780 1,077,068Finance income 406,328 296,139 272,860Finance costs (644,531) (515,087) (645,331)Share of net profits of associates and joint venture (13,892) 2,599 6,144Profit from continuing operations before income tax 816,997 1,123,431 710,741Income tax expense 270,656 328,314 227,131Profit from continuing operations 546,341 795,117 483,610Profit from discontinued operations 141,075Profit for the year 546,341 795,117 624,685Profit for the year attributable to:Profit (loss) for the year attributable to Owners of the Controlling Company 461,559 708,362 546,361Profit from continuing operations 461,559 708,362 404,045Profit from discontinued operations 142,316Profit (loss) for the year attributable to Non-controlling interest 84,782 86,755 78,324Profit from continuing operations 84,782 86,755 79,565Loss from discontinued operations (1,241)Profit for the year ₩ 546,341 ₩ 795,117 ₩ 624,685Earnings per share attributable to the equity holders of the ControllingCompany during the year (in Korean won):Basic earnings per share ₩ 1,884 ₩ 2,893 ₩ 2,231From continuing operations 1,884 2,893 1,650From discontinued operations 581Diluted earnings per share 1,883 2,891 2,231From continuing operations ₩ 1,883 ₩ 2,891 1,650From discontinued operations ₩ 581


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12 Months EndedConsolidated Statements ofComprehensive Income -

KRW (₩)₩ in Millions

Dec. 31,2017

Dec. 31,2016

Dec. 31,2015

Statement of comprehensive income [abstract]Profit for the year ₩ 546,341 ₩ 795,117 ₩ 624,685Other comprehensive income Items that will not be reclassified to profitor loss:Remeasurements of the net defined benefit liability (83,962) 4,213 (37,872)Shares of remeasurement gain (loss) of associates and joint ventures (115) 116 (2,407)Other comprehensive income, Items that may be subsequentlyreclassified to profit or loss:Changes in value of available-for-sale financial assets 51,235 10,925 47,381Other comprehensive income from available-for sale financial assetsreclassified to loss (55,450) (3,840) (83,397)

Net gain (loss) on cash flow hedges (111,083) 64,796 111,914Other comprehensive income (loss) from cash flow hedges reclassified togain (loss) 141,929 (75,871) (97,962)

Shares of other comprehensive income (loss) from associates and jointventures 10,280 (602) (1,608)

Exchange differences on translation of foreign operations (21,122) (5,407) (4,884)Total other comprehensive loss (68,288) (5,670) (68,835)Total comprehensive income for the year 478,053 789,447 555,850Total comprehensive income for the year attributable to:Owners of the Controlling Company 413,149 701,685 495,139Non-controlling interest 64,904 87,762 60,711Total comprehensive income for the year ₩ 478,053 ₩ 789,447 ₩ 555,850


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Consolidated Statements ofChanges in Equity - KRW

(₩)₩ in Millions

TotalSharecapital

[member]

Sharepremium[member]

Retainedearnings

[member]

Accumulatedother

comprehensiveincome

[member]

Othercomponents

of equity[member]

Totalattributableto owners

of theControllingCompany[member]

Non-controlling

interest[member]

Beginning balance at Dec. 31,2014

₩11,787,557

₩1,564,499

₩1,440,258

₩8,568,399 ₩ 25,790 ₩

(1,260,709)₩10,338,237

₩1,449,320

Comprehensive incomeProfit for the year 624,685 546,361 546,361 78,324Changes in value of available-for-sale financial assets (36,016) (24,310) (24,310) (11,706)

Remeasurements of netdefined benefit liability (37,872) (37,914) (37,914) 42

Valuation gains (losses) oncashflow hedge 13,952 13,924 13,924 28

Shares of other comprehensiveincome (losses) of jointventures and associates

(1,608) (1,357) (1,357) (251)

Shares of remeasurement gain(loss) of associates and jointventures

(2,407) (2,109) (2,109) (298)

Exchange differences ontranslation of foreignoperations

(4,884) (177) (177) (4,707)

Total comprehensive incomefor the year 555,850 506,338 (11,920) 494,418 61,432

Transactions with equityholdersDividends paid to non-controlling interest ofsubsidiaries

(41,575) (41,575)

Changes in consolidationscope (154,188) (154,188)

Change in ownership interestin subsidiaries (269) (2,968) (2,968) 2,699

Appropriation of loss ondisposal of treasury stock (24,766) 24,766

Others 8,756 6,048 6,048 2,708Subtotal (187,276) (24,766) 27,846 3,080 (190,356)Ending balance at Dec. 31,2015 12,156,1311,564,499 1,440,258 9,049,971 13,870 (1,232,863) 10,835,735 1,320,396

Comprehensive incomeProfit for the year 795,117 708,362 708,362 86,755Changes in value of available-for-sale financial assets 7,085 1,691 1,691 5,394

Remeasurements of netdefined benefit liability 4,213 8,531 8,531 (4,318)

Valuation gains (losses) oncashflow hedge (11,075) (11,075) (11,075)


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(602) (571) (571) (31)


116 94 94 22


(5,407) (5,347) (5,347) (60)

Total comprehensive incomefor the year 789,447 716,987 (15,302) 701,685 87,762

Transactions with equityholdersDividends paid by theControlling Company (122,425) (122,425) (122,425)

Dividends paid to non-controlling interest ofsubsidiaries

(61,674) (61,674)

Changes in consolidationscope (4,181) 11,369 11,369 (15,550)

Change in ownership interestin subsidiaries (50) 50

Appropriation of loss ondisposal of treasury stock 21,769 21,769

Others 3,651 3,510 3,510 141Subtotal (162,860) (122,475) 14,929 (107,546) (55,314)Ending balance at Dec. 31,2016 12,782,7181,564,499 1,440,258 9,644,483 (1,432) (1,217,934) 11,429,874 1,352,844

Comprehensive incomeProfit for the year 546,341 461,559 461,559 84,782Changes in value of available-for-sale financial assets (4,215) (1,433) (1,433) (2,782)

Remeasurements of netdefined benefit liability (83,962) (80,711) (80,711) (3,251)

Valuation gains (losses) oncashflow hedge 30,846 30,846 30,846


10,280 10,148 10,148 132


(115) (116) (116) 1


(21,122) (7,144) (7,144) (13,978)

Total comprehensive incomefor the year 478,053 380,732 32,417 413,149 64,904

Transactions with equityholdersDividends paid by theControlling Company (195,977) (195,977) (195,977)


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Dividends paid to non-controlling interest ofsubsidiaries

(47,162) (47,162)

Changes in consolidationscope 250 250

Change in ownership interestin subsidiaries 26,683 5,441 5,441 21,242

Appropriation of loss ondisposal of treasury stock (2,312) 2,312

Others 4,565 4,879 4,879 (314)Subtotal (211,641) (198,289) 12,632 (185,657) (25,984)Ending balance at Dec. 31,2017

₩13,049,130

₩1,564,499

₩1,440,258

₩9,826,926 ₩ 30,985 ₩

(1,205,302)₩11,657,366

₩1,391,764


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12 Months EndedConsolidated Statements ofCash Flows - KRW (₩)

₩ in Millions Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015

Cash flows from operating activitiesCash generated from operations ₩ 4,318,884 ₩ 5,202,520 ₩ 4,579,260Interest paid (252,405) (372,525) (436,363)Interest received 93,769 104,679 128,422Dividends received 10,843 10,824 35,768Income tax paid (293,342) (174,748) (77,122)Net cash inflow from operating activities 3,877,749 4,770,750 4,229,965Cash flows from investing activitiesCollection of loans 55,190 47,887 38,856Loans granted (59,800) (57,400) (79,136)Disposal of derivatives 176,681Disposal of available-for-sale financial assets 146,429 35,791 243,125Acquisition of available-for-sale financial assets (89,027) (44,302) (99,111)Disposal of investments in associates and joint ventures 59,818 11,074 42,946Acquisition of investments in associates and joint ventures (41,780) (38,675) (12,238)Disposal of current and non-current financial instruments 645,686 293,283 363,260Acquisition of current and non-current financial instruments (1,231,917) (597,345) (341,373)Disposal of property and equipment, and investment properties 68,229 93,401 28,303Acquisition of property and equipment, and investment properties (2,442,223) (2,764,346) (3,115,728)Disposal of intangible assets 22,680 17,891 25,841Acquisition of intangible assets (613,556) (455,763) (399,377)Increase in cash due to exclusion from consolidation scope 741,834Cash inflow(outflow) from changes in scope of consolidation (2,974) (26,454) (15,751)Net cash outflow from investing activities (3,483,245) (3,484,958) (2,401,868)Cash flows from financing activitiesProceeds from borrowings and debentures 616,257 1,122,898 5,675,302Repayments of borrowings and debentures (1,780,174) (1,768,768) (6,648,177)Settlement of derivative assets and liabilities, net 71,370 (33,199) (3,371)Cash inflow from consolidated capital transactions 27,261 800Cash outflow from consolidated capital transactions (300) (5,140)Cash inflow from other financing activities 16,962Dividends paid to shareholders (243,140) (184,099) (41,575)Decrease in finance leases liabilities (71,735) (75,763) (146,175)Net cash outflow from financing activities (1,363,499) (943,271) (1,163,996)Effect of exchange rate change on cash and cash equivalents (3,134) (1,674) 6,700Net increase (decrease) in cash and cash equivalents (972,129) 340,847 670,801Cash and cash equivalents, Beginning of the year 2,900,311 2,559,464 1,888,663Cash and cash equivalents, End of the year ₩ 1,928,182 ₩ 2,900,311 ₩ 2,559,464


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12 Months EndedGeneral Information Dec. 31, 2017Text block1 [abstract]General Information 1. General Information

The consolidated financial statements include the accounts of KTCorporation, which is the controlling company as defined under IFRS 10,Consolidated Financial Statements, and its 59 controlled subsidiaries asdescribed in Note 1.2 (collectively referred to as the “Group”).

The Controlling Company

KT Corporation (the “Controlling Company”) commenced operations onJanuary 1, 1982, when it spun off from the Korea CommunicationsCommission (formerly the Korean Ministry of Information andCommunications) to provide telephone services and to engage in thedevelopment of advanced communications services under the Act ofTelecommunications of Korea. The headquarters are located in SeongnamCity, Gyeonggi Province, Republic of Korea, and the address of itsregistered 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 underthe Commercial Code of Korea.

On December 23, 1998, the Controlling Company’s shares were listed onthe Korea Exchange.

On May 29, 1999, the Controlling Company issued 24,282,195 additionalshares and issued American Depository Shares (ADS), representing newshares and 20,813,311 government-owned shares, at the New York StockExchange. On July 2, 2001, the additional ADS representing 55,502,161government-owned shares were issued at the New York Stock Exchange.

In 2002, the Controlling Company acquired the entire government-ownedshares in accordance with the Korean government’s privatization plan. As ofthe end of the reporting period, the Korean government does not own anyshare in the Controlling Company.

Consolidated Subsidiaries

The consolidated subsidiaries as of December 31, 2016 and 2017, are asfollows:



2016December 31,

2017Closingmonth

KT Powertel Co.,Ltd. 2

Trunk radio systembusiness


KT Linkus Co., Ltd. Public telephonemaintenance


KT Submarine Co.,Ltd. 2,3

Submarine cableconstruction andmaintenance


KT Telecop Co., Ltd. Security service Korea 86.8% 86.8% DecemberKT Hitel Co., Ltd. Data



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KT Service BukbuCo., Ltd.

Opening servicesof fixed line


KT Service NambuCo., Ltd.



KT Commerce Inc. B2C, B2B service Korea 100.0% 100.0% DecemberKT New Business

Fund No.1Investment fund Korea 100.0% 100.0% December

KT StrategicInvestment FundNo.1

Investment fund Korea 100.0% 100.0% December






Investment fund Korea — 100.0% December

BC Card Co., Ltd. Credit cardbusiness


VP Inc. Payment securityservice for creditcard, others


H&C Network Call centre forfinancial sectors


BC Card China Co.,Ltd.

Softwaredevelopment anddata processing

China 100.0% 100.0% December

INITECH Co., Ltd.4 Internet bankingASP and securitysolutions


Smartro Co., Ltd. VAN (Value AddedNetwork) business


KTDS Co., Ltd.4 System integrationand maintenance


KT M Hows Co., Ltd. Mobile marketing Korea 90.0% 90.0% DecemberKT M&S Co., Ltd. PCS distribution Korea 100.0% 100.0% DecemberGENIE Music

Corporation(KTMusic Corporation)2

Online musicproduction anddistribution


KT Skylife Co., Ltd.4 Satellitebroadcastingbusiness


Skylife TV Co., Ltd. TV contentsprovider


KT Estate Inc. Residential buildingdevelopment andsupply


KT AMC Co., Ltd. Asset managementand consultingservices


NEXR Co., Ltd. Cloud systemimplementation


KTSB Data service Data centredevelopment andrelated service


KT Sat Co., Ltd. Satellitecommunicationbusiness


KT Innoedu Co E-learning business Korea 96.8% — DecemberNasmedia, Inc.3 Online

advertisementKorea 42.8% 42.8% December

KT Sports Management ofsports group




KT Music ContentsFund No.1

Music contentsinvestmentbusiness




Korea — 100.0% December

KT-Michigan GlobalContent Fund

Content investmentbusiness


Autopion Co., Ltd. Service forinformation andcommunication


KTCS Corporation 2,4 Database andonline informationprovider


KTIS Corporation 2,4 Database andonline informationprovider


KT M mobile Special categorytelecommunicationsoperator and salesof communicationdevice


KT Investment Co.,Ltd.

Technologybusiness finance


NgenBio Medicine andPharmacydevelopmentbusiness

Belgium 49.8% — December

Whowho&CompanyCo., Ltd.

Softwaredevelopment andsupply


PlayD Co., Ltd.(N Search Marketing

Co., Ltd.)

Advertising agencybusiness


KT Rwanda NetworksLtd.

Network installationand management


AOS Ltd. System integrationand maintenance


KT Belgium Foreign investmentbusiness

Belgium 100.0% 100.0% December

KT ORS Belgium Foreign investmentbusiness


Korea Telecom JapanCo., Ltd.

Foreigntelecommunicationbusiness

Japan 100.0% 100.0% December

KBTO sp.zo.o. Electroniccommunicationbusiness

Poland 75.0% 94.0% December

Korea Telecom ChinaCo., Ltd.



KT Dutch B.V Super iMax andEast Telecommanagement


Super iMax LLC Wireless highspeed internetbusiness


East Telecom LLC Fixed linetelecommunicationbusiness


Korea TelecomAmerica, Inc.





PT. KT Indonesia Foreigntelecommunicationbusiness


PT. BC Card AsiaPacific



KT HongkongTelecommunications

Co., Ltd.

Fixed linecommunicationbusiness

Hong Kong 100.0% 100.0% December

KT Hong kong Limited Foreign investmentbusiness


Korea TelecomSingapore Pte.Ltd.

Foreign investmentbusiness

Singapore 100.0% 100.0% December

Texnoprosistem LLP. Fixed line internetbusiness


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 votingrights in its decision-making process at all times considering the historical votingpattern at the shareholders’ meetings.

3 Although the Controlling Company owns less than 50% ownership in this entity, thisentity is consolidated as the Controlling Company holds the majority of voting rightbased on an agreement with other investors.

4 The number of subsidiaries’ treasury stock is deducted from the total number ofshares when calculating the controlling percentage ownership.



KT Music Contents InvestmentFund No.2

Newly established

Excluded Korea KT Innoedu Co., Ltd. Shares disposedNgeneBio Percentage of ownership

decreased

Summarized information for consolidated subsidiaries as of and for theyears ended December 31, 2015, 2016 and 2017, follows:


Total assetsTotal



KT Powertel Co., Ltd. ￦113,515 ￦21,182 ￦104,527 ￦(32,417 )KT Linkus Co., Ltd. 77,141 65,745 116,095 3,449KT Submarine Co., Ltd. 160,314 63,518 67,268 4,145KT Telecop Co., Ltd. 269,191 134,966 302,844 (7,593 )KT Hitel Co.,Ltd. 235,757 33,938 162,155 7,258KT Service Bukbu Co.,

Ltd2 31,879 22,627 89,498 (4,630 )KT Service Nambu Co.,

Ltd2 20,729 10,567 110,129 (5,055 )BC Card Co., Ltd.1 2,963,952 1,945,634 3,504,946 218,969H&C Network1 248,189 70,635 241,008 19,513Nasmedia, Inc. 141,733 72,202 45,630 9,916KTDS Co., Ltd.1 162,518 116,654 423,015 12,836KT M Hows Co., Ltd. 25,093 17,980 19,352 1,728KT M&S Co., Ltd. 256,246 217,892 853,011 (18,776 )GENIE Music

Corporation(KTMusic Corporation) 90,518 30,704 90,005 3,446



KT Skylife Co., Ltd.1 711,294 217,850 668,521 72,987KT Estate Inc.1 1,603,438 260,292 254,776 27,487KTSB Data service 23,063 1,730 4,390 (2,444 )KT Innoedu Co., Ltd. 5,858 7,585 18,156 (4,288 )KT Sat Co., Ltd. 679,959 210,110 133,326 27,174KT Sports 15,341 11,643 51,801 (3,836 )KT Music Contents

Fund No.1 10,206 47 468 (111 )KT-Michigan Global

Content Fund 5,401 — 861 (209 )Autopion Co., Ltd. 7,102 3,317 10,585 1,123KT M mobile 64,756 13,121 42,478 (36,725 )KT Investment Co., Ltd 49,485 30,827 4,704 (219 )NgeneBio 7,894 4,683 — (434 )KTCS Corporation1 346,949 194,367 1,066,556 13,685KTIS Corporation 211,164 55,370 473,892 15,041Korea Telecom Japan

Co., Ltd. 13,889 14,393 25,652 (248 )Korea Telecom China

Co., Ltd. 909 198 1,748 (95 )KT Dutch B.V.1 29,402 27 161 118Super iMax LLC 14,962 8,186 8,291 (2,220 )East Telecom LLC 30,833 17,066 24,066 664Korea Telecom

America, Inc. 6,016 1,378 6,391 156PT. KT Indonesia 22 — — (9 )Olleh Rwanda

Networks Ltd. 188,951 147,653 7,299 (28,721 )KT Belgium 77,058 4 — (127 )KT ORS Belgium 1,996 20 — (75 )KBTO sp.zo.o. 1,471 1,817 — (328 )Africa Olleh Services

Ltd. 11,928 12,187 8,712 (923 )




KT Powertel Co., Ltd. ￦113,725 ￦19,899 ￦81,390 ￦202KT Linkus Co., Ltd. 64,318 56,953 117,587 (3,830 )KT Submarine Co.,

Ltd. 156,993 55,573 84,137 5,146KT Telecop Co., Ltd. 265,553 132,344 315,948 143KT Hitel Co., Ltd. 249,202 46,941 198,994 4,298KT Service Bukbu Co.,

Ltd. 32,863 24,580 182,952 694KT Service Nambu

Co., Ltd. 32,621 24,282 218,602 772BC Card Co., Ltd.1 3,651,065 2,602,404 3,567,512 163,131H&C Network1 272,110 80,983 266,613 14,749Nasmedia, Inc.1 263,925 159,502 70,037 11,972KTDS Co., Ltd.1 197,970 151,644 476,379 10,838KT M Hows Co., Ltd. 28,539 18,466 19,922 2,865KT M&S Co., Ltd. 247,854 227,507 724,144 (12,955 )GENIE Music


KT Skylife Co., Ltd.1 777,948 231,452 668,945 68,863KT Estate Inc.1 1,734,729 375,341 405,417 46,815KTSB Data service 20,075 759 5,136 (1,983 )



KT Innoedu Co., Ltd. 6,477 7,259 15,599 103KT Sat Co., Ltd. 744,653 253,041 144,594 36,266KT Sports 16,925 13,573 48,476 (198 )KT Music Contents

Fund No.1 10,592 331 349 103KT-Michigan Global

Content Fund 16,250 163 133 (514 )Autopion Co., Ltd. 6,163 2,794 7,772 (409 )KT M mobile 131,446 20,369 112,532 (40,041 )KT Investment Co.,

Ltd.1 39,506 23,123 10,130 (1,832 )NgeneBio 6,361 4,733 244 (1,833 )KTCS Corporation1 322,768 166,642 955,050 7,892KTIS Corporation 221,176 63,871 436,914 9,991Korea Telecom Japan

Co., Ltd. 3,592 5,374 5,122 (1,391 )Korea Telecom China

Co., Ltd. 532 188 930 60KT Dutch B.V 34,197 73 166 85Super iMax LLC 10,308 6,734 10,759 (1,802 )East Telecom LLC 31,885 16,554 27,492 3,257Korea Telecom

America, Inc. 4,464 1,306 7,113 181PT. KT Indonesia 16 — — (7 )KT Rwanda Networks

Ltd. 167,112 138,651 13,435 (31,455 )KT Belguium 79,391 7 — (67 )KT ORS Belgium 2,013 23 — (46 )KBTO sp.zo.o. 1,166 2,378 21 (2,587 )AOS Ltd. 10,025 3,179 14,481 (1,123 )KT Hongkong

TelecommunicationsCo., Ltd. 1,571 956 1,568 120




KT Powertel Co., Ltd. 115,125 18,937 69,234 2,112KT Linkus Co., Ltd. 59,344 51,516 112,043 725KT Submarine Co., Ltd. 142,797 34,056 73,985 8,243KT Telecop Co., Ltd. 264,353 131,633 317,591 2,885KT Hitel Co., Ltd. 258,240 52,943 227,884 3,225KT Service Bukbu Co., Ltd. 29,281 22,096 194,837 688KT Service Nambu Co., Ltd. 36,076 26,412 232,996 875BC Card Co., Ltd.1 4,048,263 2,955,038 3,628,995 156,109H&C Network1 273,856 65,446 277,622 16,104Nasmedia, Inc.1 315,967 188,197 120,667 26,676KTDS Co., Ltd.1 144,922 93,343 459,266 11,584KT M Hows Co., Ltd. 42,738 28,489 24,610 4,097KT M&S Co., Ltd. 242,388 231,151 734,420 (9,707 )GENIE Music Corporation(KT

Music Corporation) 139,686 48,512 156,163 (3,401 )KT Skylife Co., Ltd.1 792,893 210,550 687,752 57,314KT Estate Inc.1 1,869,194 502,915 428,446 52,416KTSB Data service 18,306 605 4,950 (1,651 )KT Sat Co., Ltd. 742,391 220,804 147,649 29,601KT Sports 11,131 7,805 53,357 (199 )KT Music Contents Fund No.1 13,804 1,041 370 (499 )KT Music Contents Fund No.2 7,500 11 — (11 )



KT-Michigan Global ContentFund 14,575 147 159 (426 )

Autopion Co., Ltd. 6,306 3,530 6,679 (618 )KT M mobile 93,601 21,453 159,684 (38,883 )KT Investment Co., Ltd.1 54,673 38,313 8,794 (619 )KTCS Corporation1 348,334 188,764 968,186 7,385KTIS Corporation 223,818 62,569 438,597 8,337Korea Telecom Japan Co., Ltd.1 1,554 2,788 2,772 536Korea Telecom China Co., Ltd. 665 32 1,030 348KT Dutch B.V 30,312 50 206 169Super iMax LLC 3,449 4,886 7,314 (4,584 )East Telecom LLC1 11,672 11,748 19,663 (9,118 )Korea Telecom America, Inc. 3,694 791 6,783 109PT. KT Indonesia 8 — — (6 )KT Rwanda Networks Ltd.2 151,359 139,561 15,931 (22,762 )KT Belguium 86,455 8 49 (2 )KT ORS Belgium 1,769 14 10 (10 )KBTO sp.zo.o. 3,311 2,268 67 (3,456 )AOS Ltd.2 9,437 4,519 8,952 (682 )KT Hongkong

Telecommunications Co., Ltd. 2,578 1,497 7,304 494

1 These companies are the intermediate controlling companies of other subsidiariesand the above financial information is from their consolidated financial statements.

2 At the end of the reporting period, convertible preferred stock issued by subsidiariesincluded in liabilities.



12 Months EndedSignificant AccountingPolicies Dec. 31, 2017

Text block1 [abstract]Significant AccountingPolicies

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed bythe Group in the preparation of its financial statements. These policies havebeen consistently applied to all the years presented, unless otherwisestated.

2.1 Basis of Preparation

The consolidated financial statements of the Group have been prepared inaccordance with International Financial Reporting Standards(“IFRS”) asissued by the International Accounting Standards Board (“IASB”).

The preparation of the consolidated financial statements requires the use ofcertain critical accounting estimates. It also requires management toexercise judgment in the process of applying the Group’s accountingpolicies. The areas involving a higher degree of judgment or complexity, orareas where assumptions and estimates are significant to the consolidatedfinancial statements are disclosed in Note 3.



The Group has applied the following standards and amendments for thefirst time for their annual reporting period commencing January 1, 2017.The adoption of these amendments did not have any material impact on thefinancial statements.


Amendments to IAS 7, Statement of Cash Flows requires to providedisclosures that enable used of financial statements to evaluate changes inliabilities arising from financing activities, including both changes arisingfrom cash flows and non-cash flows (Note 32)


Amendments to IAS 12 clarify how to account for deferred tax assetsrelated to debt instruments measured at fair value. IAS 12 providesrequirements on the recognition and measurement of current or deferredtax liabilities or assets. The amendments issued clarify the requirements onrecognition of deferred tax assets for unrealized losses, to address diversityin practice


Amendments to IFRS 12 clarify when an entity’s interest in a subsidiary, ajoint venture or an associate is classified as held for sales in accordancewith IFRS 5, the entity is required to disclose other information except forsummarized financial information in accordance with IFRS 12.



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Certain new accounting standards and interpretations that have beenpublished that are not mandatory for annual reporting period commencingJanuary 1, 2017 and have not been early adopted by the Group are set outbelow.


When an investment in an associate or a joint venture is held by, or it heldindirectly through, an entity that is a venture capital organization, or amutual fund, unit trust and similar entities including investment-linkedinsurance funds, the entity may elect to measure that investment at fairvalue through profit or loss in accordance with IFRS 9. The amendmentsclarify that an entity shall make this election separately for each associateof joint venture, at initial recognition of the associate or joint venture. TheGroup will apply these amendments retrospectively for annual periodsbeginning on or after January 1, 2018, and early adoption is permitted. TheGroup does not expect the amendments to have a significant impact on thefinancial statements.


Paragraph 57 of IAS 40 clarifies that a transfer to, or from, investmentproperty, including property under construction, can only be made if therehas been a change in use that is supported by evidence, and provides a listof circumstances as examples. The amendment will be effective for annualperiods beginning on or after January 1, 2018, with early adoptionpermitted. The Group does not expect the amendment to have a significantimpact on the financial statements.


Amendments to IFRS 2 clarify accounting for a modification to the termsand conditions of a share-based payment that changes the classification ofthe transaction from cash-settled to equity-settled. Amendments also clarifythat the measurement approach should treat the terms and conditions of acash-settled award in the same way as for an equity-settled award. Theamendments will be effective for annual periods beginning on or afterJanuary 1, 2018, with early adoption permitted. The Group does not expectthe amendments to have a significant impact on the financial statements.

- Enactments to IFRIC 22, Foreign Currency Transaction and AdvanceConsideration

According to these enactments, the date of the transaction for the purposeof determining the exchange rate to use on initial recognition of the relatedasset, expense or income (or part of it) is the date on which an entity initiallyrecognizes the non-monetary asset or non-monetary liability arising fromthe payment or receipt of advance consideration. If there are multiplepayments or receipts in advance, the entity shall determine a date of thetransaction for each payment or receipt of advance consideration. Theseenactments will be effective for annual periods beginning on or afterJanuary 1, 2018, with early adoption permitted. The Group does not expectthe enactments to have a significant impact on the financial statements.


IFRS 16 Leases issued on May 22, 2017 is effective for annual periodsbeginning on or after January 1, 2019, with early adoption permitted. This



standard will replace IAS 17 Leases, IFRIC 4 Determining whether anArrangement contains a Lease, SIC-15 Operating Leases-Incentives,and SIC-27Evaluating the Substance of Transactions Involving the LegalForm of a Lease.

At inception of a contract, the entity shall assess whether the contract is, orcontains, a lease. Also, at the date of initial application, the entity shallassess whether the contract is, or contains, a lease in accordance with thestandard. However, the entity will not need to reassess all contracts withapplying the practical expedient. As practical expedient, the entity can electto apply the new guidance regarding the definition of a lease only tocontracts entered into (or changed) on or after the date of initial application.Existing lease contracts will not need to be reassessed. This expedientmust be consistently applied to all contracts.

For a contract that is, or contains, a lease, the entity shall account for eachlease component within the contract as a lease separatelyfrom non-lease components of the contract. A lessee is required torecognize a right-of-use asset representing its right to use the underlyingleased asset and a lease liability representing its obligation to make leasepayments. The lessee may elect not to apply the requirements to short-termlease (a lease term of 12 months or less at the commencement date) andlow value assets (e.g. underlying assets below $ 5,000). In addition, as apractical expedient, the lessee may elect, by class of underlying asset, notto separate non-lease components from lease components, and insteadaccount for each lease component and anyassociated non-lease components as a single lease component.



• retrospectively to each prior reporting period presented applying IAS 8Accounting Policies, Changes in Accounting Estimates and Errors (Fullretrospective application); or

• retrospectively with the cumulative effect of initially applying the standardrecognized at the date of initial application.


The Group performed an impact assessment to identify potential financialeffects of applying IFRS 16. The assessment was performed based onavailable information as at December 31, 2017 to identify effects on 2017financial statements. The Group is analyzing the effects on the financialstatements; however, it is difficult to provide reasonable estimates offinancial effects until the analyses is complete.


The Company expects the effect on the financial statements applying thenew standard will not be significant


The new standard for financial instruments issued on September 25, 2015are effective for annual periods beginning on or after January 1, 2018 withearly application permitted. This standard will replace IAS 39, FinancialInstruments: Recognition and Measurement. The Group will apply thestandards for annual periods beginning on or after January 1, 2018



The standard requires retrospective application with some exceptions. Forexample, an entity is not required to restate prior period in relation toclassification and measurement (including impairment) of financialinstruments. The standard requires prospective application of its hedgeaccounting requirements for all hedging relationships except the accountingfor time value of options and other exceptions.

IFRS 9, Financial Instruments requires all financial assets to be classifiedand measured on the basis of the entity’s business model for managingfinancial assets and the contractual cash flow characteristics of the financialassets. A new impairment model, an expected credit loss model, isintroduced and any subsequent changes in expected credit losses will berecognized in profit or loss. Also, hedge accounting rules amended toextend the hedging relationship, which consists only of eligible hedginginstruments and hedged items, qualifies for hedge accounting.

An effective implementation of IFRS 9 requires preparation processesincluding financial impact assessment, accounting policy establishment,accounting system development and the system stabilization. The impacton the Group’s financial statements due to the application of the standard isdependent on judgements made in applying the standard, financialinstruments held by the Group and macroeconomic variables.

The Group performed an impact assessment to identify potential financialeffects of applying IFRS 9. The assessment was performed based onavailable information as at December 31, 2017, and the results of theassessment are explained as below.


When implementing IFRS 9, the classification of financial assets will bedriven by the Group’s business model for managing the financial assets andcontractual terms of cash flow. The following table shows the classificationof financial assets measured subsequently at amortized cost, at fair valuethrough other comprehensive income and at fair value through profit or loss.If a hybrid contract contains a host that is a financial asset, the classificationof the hybrid contract shall be determined for the entire contract withoutseparating the embedded derivative.



principal and interest All otherHold the financial asset for thecollection of the contractualcash flows


Hold the financial asset for thecollection of the contractualcash flows and sale

Recognized at fair value throughother comprehensive income1

Hold for sale Recognized at fair value throughprofit or loss

Recognized atfair valuethrough profitor loss2

1 A designation at fair value through profit or loss is allowed only if suchdesignation mitigates an accounting mismatch (irrevocable)

2 Equity investments not held for trading can be recorded in other comprehensiveincome (irrevocable).

With the implementation of IFRS 9, the criteria to classify the financialassets at amortized cost or at fair value through other comprehensiveincome are more strictly applied than the criteria applied with IAS 39.Accordingly, the financial assets at fair value through profit or loss may



increase by implementing IFRS 9 and may result an extended fluctuation inprofit or loss.

As of December 31, 2017, the Group owns loan and trade receivablesof￦ 9,653,443 million, financialassets available-for-sales of￦ 380,953 million.

According to IFRS 9, a debt instrument is measured at amortized cost if: a)the objective of the business model is to hold the financial asset for thecollection of the contractual cash flows, and b) the contractual cash flowsunder the instrument solely represent payments of principal and interest.Also, a debt instrument is measured at fair value through othercomprehensive income if the objective of the business model is achievedboth by collecting contractual cash flows and selling financial assets; andthe contractual cash flows represents solely payments of principal andinterest on a specific date under contract terms. Based on results from theimpact assessment of IFRS 9, the application of the new standard as atDecember 31, 2017 does not have a material impact on the Group’sfinancial statements.

According to IFRS 9, equity instruments that are not held for trading, theGroup plans to elect an irrevocable election at initial recognition to classifythe instruments as assets measured at fair value through othercomprehensive income, which all subsequent changes in fair value beingrecognized in other comprehensive income and not recycled to profit orloss. As at December 31, 2017, the Group holds equity instrumentsof￦ 371,054 million classified as financial assets available-for-sale. Basedon results from the impact assessment of IFRS 9, the Group expects theapplication of IFRS 9 on these financial assets will not have a materialimpact on the financial statements.

According to IFRS 9, debt instruments those contractual cash flows do notrepresent solely payments of principal and interest and held for trading, andequity instruments that are not designated as instruments measured at fairvalue through other comprehensive income are measured at fair valuethrough profit or loss.


The new impairment model requires the recognition of impairmentprovisions based on expected credit losses (ECL) rather than only incurredcredit losses as is the case under IAS 39. It applies to financial assetsclassified at amortized cost, debt instruments measured at fair valuethrough other comprehensive income, lease receivables, contract assets,loan commitments and certain financial guarantee contracts.

As at December 31, 2017, the Group owns debt investment carried atamortized cost of￦ 9,653,594 million (loans and receivablesof￦ 9,653,443 million, financial asset held-to-maturity of￦ 151 million).And, the Group recognized loss allowance of￦ 523,799 million for theseassets.

As a result of the impact assessment, the Group expects the application ofthe new standard as at December 31, 2017 does not have a materialimpact on the Group’s financial statements.


Hedge accounting mechanics (fair value hedges, cash flow hedges andhedge of net investments in a foreign operations) required by IAS 39remains unchanged in IFRS 9, however, the new hedge accounting rules



will align the accounting for hedging instruments more closely with theGroup’s risk management practices. As a general rule, more hedgerelationships might be eligible for hedge accounting, as the standardintroduces a more principles-based approach. IFRS 9 allows more hedginginstruments and hedged items to qualify for hedge accounting, and relaxesthe hedge accounting requirement by removing two hedge effectivenesstests that are a prospective test to ensure that the hedging relationship isexpected to be highly effective and a quantitative retrospective test (withinrange of 80-125 %) to ensure that the hedging relationship has been highlyeffective throughout the reporting period. As of December 31, 2017, theGroup applies the hedge accounting to its assets, liabilities that amountto￦ 7,389 million,￦ 93,770 million respectively.

The Group has performed an impact assessment with an assumption thatthe Group applies hedge accounting in accordance with IFRS 9. As a resultof the impact assessment, the Group expects the application of the newstandard as at December 31, 2017 does not have a material impact on theGroup’s financial statements.


The Group will apply IFRS 15 Revenue from Contracts withCustomers issued on November 6, 2015 for annual reporting periodsbeginning on or after January 1, 2018, and earlier application is permitted.This standard replaces IAS 18 Revenue, IAS 11 ConstructionContracts, SIC-31, Revenue-Barter Transactions Involving AdvertisingServices, IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements forthe Construction of Real Estate and IFRIC 18 Transfers of assets fromcustomers. The Group must apply IFRS 15 Revenue from Contracts withCustomers within annual reporting periods beginning on or after January 1,2018, and will elect the modified retrospective approach which willrecognize the cumulative impact of initially applying the revenue standardas an adjustment to retained earnings as at January 1, 2018, the period ofinitial application.

IAS 18 and other current revenue standard identify revenue as income thatarises in the course of ordinary activities of an entity and provides guidanceon a variety of different types of revenue, such as, sale of goods, renderingof services, interest, dividends, royalties and construction contracts.However, the new standard is based on the principle that revenue isrecognized when control of a good or service transfers to a customer so thenotion of control replaces the existing notion of risks and rewards. A newfive-step process must be applied before revenue from contract withcustomers can be recognized:

• Identify contracts with customers

• Identify the separate performance obligation

• Determine the transaction price of the contract

• Allocate the transaction price to each of the separate performance obligations,and

• Recognize the revenue as each performance obligation is satisfied.

The Group formed a task force team since fourth quarter of 2014 forpreparation of implementing IFRS 15 Revenue from Contracts withCustomers. Also the Group develops the internal control system andimplements accounting process system by analyzing the Group’s revenuestructure with accounting experts and IT specialists. IFRS 15 will affect notonly accounting treatments but also the general business practice including



sales strategy and operational structures. Therefore, the Groupaccomplished an orientation program for both Group’s directors andemployees, and periodically reported to the managements aboutimplementation plan and progress.



The Group provides telecommunication services and sellshandsets as their main business. With the implementation ofIFRS 15, the Group identifies performance obligations with acustomer such as providing telecommunication services,selling handsets and other. The timing of revenue recognitiondepends on a performance obligation is satisfied at a point intime or over time. Where a performance obligation is satisfiedover time, the related revenue is also recognized over time.


With implementation of IFRS 15, the Group allocated thetransaction price to each performance obligation identified in acontract based on the relative stand-alone selling prices of thegoods or services being provided to the customer. To allocatethe transaction price to each performance obligation on arelative stand-alone price basis, the Group determines thestand-alone selling price at contract inception of the distinctgood or service underlying each performance obligation in thecontract and allocate the transaction price in proportion tothose stand-alone selling price. The stand-alone selling price isthe price at which the Group would sell a promised good orservice separately to the customer. The best evidence of astand-alone selling price is the observable price of a good orservice when the Group sells that good or service separately insimilar circumstances and to similar customers. The Grouprecognizes the allocated amount as contract assets or contractliabilities, and amortizes it through the remaining period whichis adjusted in operating income.


The Group pays the commission fees when new customersubscribe for telecommunication services. The incrementalcontract acquisition costs are those commission fees that theGroup incurs to acquire a contract with a customer that it wouldnot have incurred if the contract had not been acquired.

According to IFRS 15, the Group recognizes as an asset theincremental contract acquisition costs and amortize it over theexpected period of benefit. However, as a practical expedient,the Group may recognize the incremental contract acquisitioncosts as an expense when incurred if the amortization periodof the asset is one year or less.

With implementation of IFRS 15, the Group’s operating incomeand expenses are expected to be decreased. Under themodified retrospective method, we will apply the rules to allopen contracts existing as of January 1, 2018, recognizing inbeginning retained earnings for 2018 an adjustment



between￦900 billion and￦1,100 billion for the cumulativeeffect of the change.

2.3 Consolidation

The Group has prepared the consolidated financial statements inaccordance with IFRS 10 Consolidated Financial Statements.

(1) Subsidiaries

Subsidiaries are all entities over which the Group has control. The Groupcontrols an entity when the Group is exposed to, or has rights to, variablereturns from its involvement with the entity and has the ability to affect thosereturns through its power to direct the activities of the entity. Subsidiariesare fully consolidated from the date on which control is transferred to theGroup. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for businesscombinations by the Group. The consideration transferred is measured atthe fair values of the assets transferred, and identifiable assets acquiredand liabilities and contingent liabilities assumed in a business combinationare measured initially at their fair values at the acquisition date. The Grouprecognizes any non-controlling interest in the acquired entity onan acquisition-by-acquisition basis either at fair value or atthe non-controlling interest’s proportionate share of the acquired entity’s netidentifiable assets. All other non-controllinginterests are measured at fairvalues, unless otherwise required by other standards. Acquisition-relatedcosts are expensed as incurred.

The excess of consideration transferred, amount ofany non-controlling interest in the acquired entity and acquisition-date fairvalue of any previous equity interest in the acquired entity over the fairvalue of the net identifiable assets acquired is recorded as goodwill. If thoseamounts are less than the fair value of the net identifiable assets of thebusiness acquired, the difference is recognized directly in profit or loss as abargain purchase.

Intercompany transactions, balances and unrealized gains on transactionsbetween group companies are eliminated. Unrealized losses are alsoeliminated unless the transaction provides evidence of an impairment of thetransferred asset. Accounting policies of subsidiaries have been changedwhere necessary to ensure consistency with the policies adopted by theGroup.


Any difference between the amount of the adjustmentto non-controlling interest that do not result in a loss of control and anyconsideration paid or received is recognized in a separate reserve withinequity attributable to owners of the Controlling Group.


When the Group ceases to consolidate for a subsidiary because of a loss ofcontrol, any retained interest in the subsidiary is remeasured to its fair valuewith the change in carrying amount recognized in profit or loss.

(4) Associates



Associates are all entities over which the Group has significant influence,and investments in associates are initially recognized at acquisition costusing the equity method. Unrealized gains on transactions between theGroup and its associates are eliminated to the extent of the Group’s interestin the associates. If there is any objective evidence that the investment inthe associate is impaired, the Group recognizes the difference between therecoverable amount of the associate and its book amount as impairmentloss.


A joint arrangement, wherein two or more parties have joint control, isclassified as either a joint operation or a joint venture. A joint operatorrecognizes its direct right to the assets, liabilities, revenues and expensesof joint operations and its share of any jointly held or incurred assets,liabilities, revenues and expenses. A joint venturer has rights to the netassets relating to the joint venture and accounts for that investment usingthe equity method.

2.4 Segment Reporting

Information of each operating segment is reported in a manner consistentwith the business segment reporting provided to the chief operatingdecision-maker (Note 33). The chief operating decision-maker isresponsible for allocating resources and assessing performance of theoperating segments.

2.5 Foreign Currency Translation


Items included in the financial statements of each of the Group’s entities aremeasured using the currency of the primary economic environment in whichthe each entity operates (the “functional currency’). The consolidatedfinancial statements are presented in Korean won, which is the ControllingCompany’s functional and presentation currency.


Foreign currency transactions are translated into the functional currencyusing the exchange rates at the dates of the transactions. Foreignexchange gains and losses resulting from the settlement of suchtransactions and from the translation of monetary assets and liabilitiesdenominated in foreign currencies at year end exchange rates are generallyrecognized in profit or loss.

Non-monetary items that are measured at fair value in a foreign currencyare translated using the exchange rates at the date when the fair value wasdetermined. Translation differences on assets and liabilities carried at fairvalue are reported as part of the fair value gain or loss. For example,translation differences on non-monetary assets and liabilities such asequities held at fair value through profit or loss are recognized in profit orloss as part of the fair value gain or loss and translation differenceson non-monetary assets such as equities classifiedas available-for-sale financial assets are recognized in othercomprehensive income.




The results and financial position of foreign operations that have afunctional currency different from the presentation currency are translatedinto the presentation currency as follows:

• assets and liabilities for each statement of financial position presented aretranslated at the closing rate at the end of the reporting period,

• income and expenses for each statement of profit or loss are translated ataverage exchange rates for the period,

• equity is translated at the historical exchange rate, and

• all resulting exchange differences are recognized in other comprehensiveincome.

2.6 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call withbanks, and other short-term highly liquid investments with original maturitiesof less than three months.

2.7 Financial Assets


The Group classifies its financial assets into the following categories:financial assets at fair value through profit orloss, available-for-sale financial assets, loans and receivables,and held-to-maturity financial assets. Regular way purchases and sales offinancial assets are recognized on trade-date, the date on which the Groupcommits to purchase or sell the asset.

The Group may designate the entire hybrid (combined) contract as afinancial asset at fair value through profit or loss for a contract that containsone or more embedded derivatives.

At initial recognition, the Group measures a financial asset at its fair valueplus, 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 thefinancial asset. Transaction costs of financial assets carried at fair valuethrough profit or loss are expensed in profit orloss. Available-for-sale financial assets and financial assets at fair valuethrough profit or loss are subsequently carried at fair value. And, loans andreceivables and held-to-maturity investments are subsequently carried atamortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of financial assets atfair value through profit or loss are recognized in profit or loss within otherincome or other expenses. Gains or losses arising from changes inthe available-for-sale financial assets are recognized in othercomprehensive income, and amounts are reclassified to profit or loss whenthe associated assets are sold or impaired.

(2) Impairment

The Group assesses at the end of each reporting period whether there isobjective evidence that a financial asset or a group of financial assets isimpaired. A financial asset or a group of financial assets is impaired andimpairment losses are incurred only if there is objective evidence ofimpairment as a result of one or more events that occurred after the initialrecognition of the asset (a ‘loss event’) and that loss event (or events) has



an impact on the estimated future cash flows of the financial asset or agroup of financial assets that can be reliably estimated.

Impairment of loans and receivables is presented as a deduction in anallowance account. Impairment of other financial assets is directly deductedfrom their carrying amount. The Group writes off financial assets when theassets are determined to be no longer recoverable.

The criteria that the Group uses to determine that there is objectiveevidence of an impairment loss include:

• Significant financial difficulty of the issuer or obligor;

• A breach of contract, such as a default or delinquency in interest or principalpayments;

• For economic or legal reasons relating to the borrower’s financial difficulty,granting to the borrower a concession that the lender would not otherwiseconsider;

• It becomes probable that the borrower will enter bankruptcy or other financialreorganization;

• The disappearance of an active market for that financial asset because offinancial difficulties; or

• Observable data indicating that there is a measurable decrease in theestimated future cash flows from a portfolio of financial assets since the initialrecognition of those assets, although the decrease cannot yet be identifiedwith the individual financial assets in the portfolio.

(3) Derecognition

If the Group transfers a financial asset and the transfer does not result inderecognition because the Group has retained substantially of all risks andrewards of ownership of the transferred asset due to a recourse in the eventthe debtor defaults, the Group continues to recognize the transferred assetin its entirety and recognizes a financial liability for the considerationreceived. The related financial liability is classified as ‘borrowings’ in thestatement of financial position.


Financial assets and liabilities are offset and the net amount reported in thestatements of financial position where there is a legally enforceable right tooffset the recognized amounts and there is an intention to settle on a netbasis or realize the assets and settle the liability simultaneously. The legallyenforceable right must not be contingent on future events and must beenforceable in the normal course of business and in the event of default,insolvency or bankruptcy of the Group or the counterparty.

2.8 Derivative Instruments

Derivatives are initially recognized at fair value on the date when aderivative contract is entered into and are subsequently remeasured at theirfair value. Changes in the fair value of the derivatives that are not qualifiedfor hedge accounting are recognized in the statement of profit or loss within‘other income (expenses)’ and ‘finance income (expenses)’ according to thenature of transactions.

If the Group uses a valuation technique that incorporates data not obtainedfrom observable markets for the fair value at initial recognition of the



financial instrument, there may be a difference between the transactionprice and the amount determined using that valuation technique (Day 1profit and loss). In these circumstances, the fair value of the financialinstrument is recognized as the transaction price and the difference isamortized by using the straight-line method over the life of the financialinstrument. If the fair value of the financial instrument is subsequentlydetermined using observable market inputs, the remaining deferred amountis recognized in profit or loss in the statement of profit or loss.

The Group applies cash flow hedge accounting to hedge the risks of foreignexchange and interest rates of the variable rate foreign currency bonds.The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges is recognized in othercomprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately as finance income (expenses) in the statement ofprofit or loss. Amounts of changes in fair value of effective hedginginstruments accumulated in other comprehensive income are recognized as‘finance income (expenses)’ for the periods when the correspondingtransactions affect profit or loss. When a forecast transaction is no longerexpected to occur, the cumulative gain or loss that is reported in othercomprehensive income is recognized as ‘finance income (expenses)’.

If the hedge no longer meets the criteria for hedge accounting, theadjustment to the carrying amount of a hedged item for which the effectiveinterest method is used is amortized to profit or loss over the period tomaturity.

2.9 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost isdetermined using the moving average method, except forinventories in-transit which is determined using the specific identificationmethod.

2.10Non-current Assets (or Disposal Group) Held-for-sale

Non-current assets (or disposal group) are classified asassets held-for-sale when their carrying amount is to be recoveredprincipally through a sale transaction and a sale is considered highlyprobable. The assets are measured at the lower amount between theircarrying amount and the fair value less costs to sell.

2.11Property and Equipment

Property and equipment are stated at its cost less accumulateddepreciation and accumulated impairment losses. Historical cost includesexpenditures that is directly attributable to the acquisition of the items.

Depreciation of all property, plant, and equipment, except for land iscalculated using the straight-line method to allocate their cost, net of theirresidual values, over their estimated useful lives, as follows:

Estimated Useful LifeBuildings 5 – 40 yearsStructures 5 – 40 yearsMachinery and equipment(Telecommunications equipment and others)Others

2 – 40 years

Vehicles 4 – 6 years



Tools 4 – 6 yearsOffice equipment 2 – 6 years

The depreciation method, residual values and useful lives of property andequipment are reviewed at the end of each reporting period and, ifappropriate, accounted for as changes in accounting estimates.

2.12Investment Property

Investment property is a property held to earn rentals or for capitalappreciation. An investment property is measured initially at its cost. Afterrecognition as an asset, investment property is carried at cost lessaccumulated depreciation and impairment losses. Investment property,except for land, is depreciated using the straight-line method over theiruseful lives from 10 to 40 years.

2.13Intangible Assets

(1) Goodwill

Goodwill is measured as explained in Note 2.3 (1) and goodwill arising fromacquisition of subsidiaries and business are included in intangible assets.Goodwill is tested annually for impairment and carried at cost lessaccumulated impairment losses.


Intangible assets, except for goodwill, are initially recognized at its historicalcost, and carried at cost less accumulated amortization and accumulatedimpairment losses. Membership rights (condominium membership and golfmembership) and broadcast rights that have an indefinite useful life are notsubject to amortization because there is no foreseeable limit to the periodover which the assets are expected to be utilized. The Group amortizesintangible assets with a limited useful life using the straight-line methodover the following periods:

Estimated Useful LifeDevelopment costs 5 – 6 yearsSoftware 6 yearsFrequency usage rights 5 –10 yearsOthers1 2 – 50 years

1 Membership rights (condominium membership and golf membership) andbroadcast license included in others are classified as intangible assets withindefinite useful life.

2.14Borrowing Costs

General and specific borrowing costs that are directly attributable to theacquisition, construction or production of a qualifying asset are capitalizedduring the period of time that is required to complete and prepare the assetfor its intended use or sale. Investment income earned on the temporaryinvestment of specific borrowings pending their expenditure on qualifyingassets is deducted from the borrowing costs eligible for capitalization. Otherborrowing costs are expensed in the period in which they are incurred.

2.15Government Grants



Grants from the government are recognized at their fair value where thereis a reasonable assurance that the grant will be received and the Group willcomply with all attached conditions. Government grants related to assetsare presented in the statement of financial position by setting up the grantas deferred income that is recognized in profit or loss on a systematic basisover the useful life of the asset. Grants related to income are presented asa credit in the statement of profit or loss within ‘other income’.

2.16Impairment of Non-Financial Assets

Goodwill and intangible assets that have an indefinite useful life are notsubject to amortization and are tested annually for impairment, or morefrequently if events or changes in circumstances indicate that they might beimpaired. Other assets are tested for impairment whenever events orchanges in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognized for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recoverableamount is the higher of an asset’s fair value less costs to sell and value inuse. Non-financialassets, other than goodwill, that suffered impairment arereviewed for possible reversal of the impairment at the end of reportingperiod.

2.17Financial Liabilities


The Group’s financial liabilities at fair value through profit or loss arefinancial instruments held for trading and designated as financial liabilitiesat fair value through profit or loss. Financial liabilities held for trading arefinancial liabilities that are incurred principally for the purpose ofrepurchasing them in the near term and derivatives that are not designatedas hedges or bifurcated from financial instruments containing embeddedderivatives. Financial liabilities that the Group designated as at fair valuethrough profit or loss are structured financial liabilities containing embeddedderivatives issued by the Group.

As it was unable to measure the embedded derivatives separately from itshost contract, the Group designated the entire hybrid contact as at fairvalue through profit or loss. The financial liability that the Group designatedas at fair value through profit or loss is a foreign convertible bond.

The Group classifies non-derivative financial liabilities, except for financialliabilities at fair value through profit or loss, financial guarantee contractsand financial liabilities that arise when a transfer of financial assets does notqualify for derecognition, as financial liabilities carried at amortized cost andpresented as ‘trade payables’, ‘borrowings’, and ‘other financial liabilities’ inthe statement of financial position.

Preferred shares that provide for a mandatory redemption at a particulardate are classified as liabilities. Interest expenses on these preferredshares calculated using the effective interest method are recognized in thestatement of profit or loss as ‘finance costs’, together with interest expensesrecognized from other financial liabilities.

(2) Derecognition

Financial liabilities are removed from the statement of financial positionwhen it is extinguished, for example, when the obligation specified in the



contract is discharged or cancelled or expired or when the terms of anexisting financial liability are substantially modified.

2.18Financial Guarantee Contracts

Financial guarantees contracts provided by the Group are initially measuredat fair value on the date the guarantee was given. Subsequent to initialrecognition, the Group’s liabilities under such guarantees are measured atthe higher of the amounts below and recognized as ‘other financialliabilities’:

• the amount determined in accordance with IAS 37 Provisions, ContingentLiabilities and Contingent Assets; or

• the amount initially recognized less cumulative amortization in accordancewith IAS 18 Revenue.

2.19Compound Financial Instruments

Compound financial instruments are convertible bonds that can beconverted into equity instruments at the option of the holder. The liabilitycomponent of a compound financial instrument is recognized initially at thefair value of a similar liability that does not have an equity conversionoption. The equity component is recognized initially on the differencebetween the fair value of the compound financial instrument as a whole andthe fair value of the liability component. Any directly attributable transactioncosts are allocated to the liability and equity components in proportion totheir initial carrying amounts.

2.20Employee Benefits



A defined contribution plan is a pension plan under which the Group paysfixed contributions into a separate entity. The contributions are recognizedas employee benefit expenses when an employee has rendered service.

A defined benefit plan is a pension plan that is not a defined contributionplan. Generally, post-employment benefits are payable after the completionof employment, and the benefit amount depended on the employee’s age,periods of service or salary levels. The liability recognized in the statementof financial position in respect of defined benefit pension plans is thepresent value of the defined benefit obligation at the end of the reportingperiod less the fair value of plan assets. The defined benefit obligation iscalculated annually by independent actuaries using the projected unit creditmethod. The present value of the defined benefit obligation is determinedby discounting the estimated future cash outflows using interest rates ofhigh-quality corporate bonds that are denominated in the currency in whichthe benefits will be paid, and that have terms approximating to the terms ofthe related obligation. Remeasurement gains and losses arising fromexperience adjustments and changes in actuarial assumptions arerecognized in the period in which they occur, directly in othercomprehensive income.

Changes in the present value of the defined benefit obligation resulting fromplan amendments or curtailments are recognized immediately in profit orloss as past service costs.




Termination benefits are payable when employment is terminated by theGroup before the normal retirement date, or whenever an employeeaccepts voluntary redundancy in exchange for these benefits. The Grouprecognizes termination benefits at the earlier of the following dates: whenthe entity can no longer withdraw the offer of those benefits or when theentity recognizes costs for a restructuring.

2.21Share-based payments

Equity-settled share-based payment is recognized at fair value of equityinstruments on grant date, and employee benefit expense is recognizedover the vesting period. At the end of each period, the Group revises itsestimates of the number of options that are expected to vest based onthe non-marketvesting and service conditions. It recognizes the impact ofthe revision to original estimates, if any, in profit or loss, with acorresponding adjustment to equity.

When the options are exercised, the Group issues new shares. Theproceeds received, net of any directly attributable transaction costs, arerecognized as share capital (nominal value) and share premium.

2.22Provisions

Provisions are measured at the present value of the expenditures expectedto be required to settle the obligation, and the increase in the provision dueto passage of time is recognized as interest expense.

2.23Leases

(1) Lessee

A lease is an agreement, whereby the lessor conveys to the lessee, inreturn for a payment or series of payments, the right to use an asset for anagreed period of time. Leases where all the risks and rewards of ownershipare not transferred to the Group are classified as operating leases. Leasepayments under operating leases are recognized as expenses on astraight-line basis over the lease term.

Leases where the Group has substantially all the risks and rewards ofownership are classified as finance leases. Finance leases are capitalizedas lease assets and liabilities at the lease’s inception at the fair value of theleased property or, if lower, the present value of the minimum leasepayments.

(2) Lessor

A lease is classified as a finance lease if it transfers substantially all therisks and rewards incidental to ownership at the inception of the lease. Alease other than a finance lease is classified as an operating lease. Leaseincome from operating leases is recognized in income on a straight-linebasis over the lease term. Initial direct costs incurred by the lessor innegotiating and arranging an operating lease is added to the carryingamount of the leased asset and recognized as an expense over the leaseterm on the same basis as the lease income.



2.24Share Capital

The Group classifies ordinary shares as equity. Where the ControllingCompany purchases its own shares, the consideration paid, including anydirectly attributable incremental costs, is deducted from equity until theshare are cancelled or reissued. When these treasury shares are reissued,any consideration received is including in equity attributable to the equityholders of the Controlling Company.

2.25Revenue Recognition

Revenue is measured at the fair value of the consideration received orreceivable for the sale of goods or rendering of services arising from thenormal activities of the Group. Amounts disclosed as revenue are net ofvalue added taxes, returns, rebates and discounts and after elimination ofintra-group transactions.

The Group recognizes revenue when the amount of revenue can be reliablymeasured; when it is probable that future economic benefits will flow to theGroup; and when specific criteria have been met for each of the Group’sactivities, as described below. The Group bases its estimate on historicalresults, taking into consideration the type of customer, the type oftransaction and the specifics of each arrangement.


When providing interconnection or telecommunications service to acustomer based on service plans, the related revenue is recognized at thetime service is provided. When providing the telecommunicationsequipment rental service to a customer based on service plans, the relatedrevenue is recognized on straight-line basis over the contract period.Revenue related to the other telecommunications services is recognizedwhen the service is provided to the customer.

For other services, when the outcome of a transaction involving therendering of services can be estimated reliably, revenue associated withsuch a transaction is recognized by reference to the stage of performanceof the services. When the outcome of the transaction involving therendering of services cannot be estimated reliably, revenue is recognizedonly to the extent of the expenses recognized that are recoverable.

Total consideration for combined services is allocated to each service inproportion to its fair value and the allocated amount is recognized asrevenue according to revenue recognition policy for the service.

(2) Sales of goods

The Group sells a range of handsets. Revenue from the sale of goods isrecognized when products are delivered to the purchaser.

(3) Interest income

Interest income is recognized using the effective interest method accordingto the time passed. When a loan and receivable is impaired, the Groupreduces the carrying amount to its recoverable amount and continuesunwinding the discount as interest income. Interest income on impairedloans and receivables is recognized using the original effective interest rate.

(4) Commission fees



Commission fees related to credit card business are recognized when it isprobable that future economic benefits will flow to the entity and thesebenefits can be reliably measured. Revenues from acquiree fee, agent fee,optional service fees, member service fees and credit card service chargeare measured at the fair value of the consideration received and recognizedon an accrual basis.

(5) Royalty income

Royalty income is recognized on an accrual basis in accordance with thesubstance of the relevant agreements.

(6) Dividend income

Dividend income is recognized when the right to receive payment isestablished.


The Group operates a customer loyalty program where customersaccumulate points for purchases made which entitle them to discounts onfuture purchases. The reward points are recognized as a separatelyidentifiable component of the initial sale transaction. The fair value of theconsideration received or receivable in respect of the initial sale is allocatedbetween the reward points and the other components of the sale. The fairvalue of the reward points is measured by taking into account the proportionof the reward points that are not expected to be redeemed by customers.Revenue from the reward points is recognized when the points areredeemed.

2.26Current and Deferred Income Tax

The tax expense for the period consists of current and deferred tax. Tax isrecognized on the profit for the period in the statement of profit or loss,except to the extent that it relates to items recognized in othercomprehensive income or directly in equity. In this case, the tax is alsorecognized in other comprehensive income or directly in equity,respectively. The tax expense is calculated on the basis of the tax lawsenacted or substantively enacted at the end of the reporting period.

Management periodically evaluates tax policies that are applied in taxreturns in which applicable tax regulation is subject to interpretation. TheGroup recognizes current income tax on the basis of the amount expectedto be paid to the tax authorities.

Deferred tax is recognized for temporary differences arising between the taxbases of assets and liabilities and their carrying amounts as expected taxconsequences at the recovery or settlement of the carrying amounts of theassets and liabilities. However, deferred tax assets and liabilities are notrecognized if they arise from initial recognition of an asset or liability in atransaction other than a business combination that at the time of thetransaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognized only if it is probable that future taxableamount will be available to utilize those temporary differences and losses.

Deferred tax liability is recognized for taxable temporary differencesassociated with investments in subsidiaries, associates, and interests injoint ventures, except to the extent that the Group is able to control thetiming of the reversal of the temporary difference and it is probable that the



temporary difference will not reverse in the foreseeable future. In addition,deferred tax asset is recognized for deductible temporary differences arisingfrom such investments to the extent that it is probable the temporarydifference will reverse in the foreseeable future and taxable profit will beavailable against which the temporary difference can be utilized.

Deferred tax assets and liabilities are offset when there is a legallyenforceable right to offset current tax assets against current tax liabilitiesand when the deferred income taxes assets and liabilities relate to incometaxes levied by the same taxation authority on either the same taxableentity or different taxable entities where there is an intention to settle thebalances on a net basis.

2.27Dividend

Dividend distribution to the Group’s shareholders is recognized as a liabilityin the financial statements in the period in which the dividends are approvedby the Group’s shareholders.

2.28Approval of Issuance of the Financial Statements

The issuance of the December 31, 2017 consolidated financial statementsof the Group was approved by the Board of Directors on April 27, 2018.



12 Months EndedCritical AccountingEstimates and Assumptions Dec. 31, 2017

Text block1 [abstract]Critical Accounting Estimatesand Assumptions

3. Critical Accounting Estimates and Assumptions

The Group makes estimates and assumptions concerning the future. The estimatesand assumptions are continuously evaluated with consideration to factors such asevents reasonably predictable in the foreseeable future within the presentcircumstance according to historical experience. The resulting accounting estimateswill, by definition, seldom equal the related actual results. The estimates andassumptions that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year are addressedbelow.

3.1 Impairment of Goodwill

The Group tests whether goodwill has suffered any impairment on an annual basis.The recoverable amount of cash-generating units (CGUs) is determined based onvalue-in-use calculations (Note 12).

3.2 Income Taxes

The Group is operating in numerous countries and the income generated from theseoperations is subject to income taxes based on tax laws and interpretations of taxauthorities in numerous jurisdictions. There are many transactions and calculationsfor which the ultimate tax determination is uncertain (Note 28).

If certain portion of the taxable income is not used for investments or increase inwages or dividends in accordance with the Tax System For Recirculation ofCorporate Income, the Group is liable to pay additional income tax calculated basedon the tax laws. The new tax system is effective for three years from 2015.Accordingly, the measurement of current and deferred income tax is affected by thetax effects from the new system. As the Group’s income tax is dependent on theinvestments, increase in wages and dividends, there is an uncertainty in measuringthe final tax effects.

3.3 Fair Value of Derivatives and Financial Instruments

The fair value of financial instruments that are not traded in an active market isdetermined by using valuation techniques. The Group uses its judgment to select avariety of methods and make assumptions that are mainly based on marketconditions existing at the end of each reporting period (Note 36).

3.4 Provision for Impairment

The Group recognizes provisions for accounting of estimated loss in customers’insolvency. When the provision for impairment is estimated, it is based on the aginganalysis of trade receivables balances, incurred loss experience, customers’ creditrates and changes of payment terms. If the customer’s financial position becomesworse, the actual loss amount will be increased more than the estimated.

3.5 Net defined benefit liability

The present value of net defined benefit liability depends on a number of factors thatare determined on an actuarial basis using a number of assumptions including thediscount rate (Note 17).


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3.6 Deferred Revenue

Service installation fees and initial subscription fees related to activation of serviceare deferred and recognized as revenue over the expected periods of customerrelationships. The estimate of the expected terms of customer relationship is basedon the historical data. If management’s estimate changes, it may cause significantdifferences in the timing of revenue recognition and amounts recognized.

3.7 Provisions

As described in Note 16, the Group records provisions for litigation and assetsretirement obligations at the end of the reporting period. The provisions areestimated based on the factors such as the historical experiences.

3.8 Useful Lives of Property and Equipment and Investment Property

The property and equipment, intangible assets, and investment properties, excludingland, goodwill, condominium memberships and golf club memberships, aredepreciated using the straight-line method over their useful lives. The estimateduseful lives are determined based on expected usage of the assets and theestimates can be materially affected by technical changes and other factors. TheGroup will increase depreciation expenses if the useful lives are considered shorterthan the previously estimated useful lives.



12 Months EndedFinancial Instruments byCategory Dec. 31, 2017

Text block1 [abstract]Financial Instruments byCategory

4. Financial Instruments by Category


(In millions ofKorean won) 2016

Financialassets

Loansand

receivables


profitand loss


Available-for-sale


Cash andcashequivalents ￦2,900,311 ￦ — ￦— ￦— ￦— ￦2,900,311

Trade andotherreceivables 6,036,363 — — — — 6,036,363

Otherfinancialassets 716,769 6,277 227,318 404,774 30,143 1,385,281

(In millions of Koreanwon) 2016






amortized cost TotalTrade and other

payables ￦ — ￦— ￦8,328,082 ￦8,328,082Borrowings — — 8,120,791 8,120,791Other financial

liabilities 1,973 14,928 91,763 108,664


Financialassets

Loansand

receivables


profitand loss


Available-for-sale




Otherfinancialassets 1,333,317 5,813 7,389 380,953 151 1,727,623









liabilities 5,051 93,770 87,669 186,490


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Gains or losses arising from financial instruments by category for the years endedDecember 31, 2015, 2016 and 2017, are as follows:


Interest income1, 4 ￦85,603 ￦129,813 ￦108,608Loss on foreign currency transaction (365 ) (7,493 ) (11,949 )Gain(loss) on foreign currency

translation 1,921 3,083 (12,354 )Loss on disposal (2,539 ) (15,838 ) (20,351 )Loss on valuation (141,555) (92,589 ) (44,219 )

Assets at fair value through profit or lossDividend income — — 1Gain on disposal 368 186 153Loss on valuation — (7,184 ) (464 )

Derivatives used for hedgingLoss on transaction (5,157 ) — (58,569 )Gain(loss) on valuation 141,512 109,436 (63,640 )Other comprehensive income for the

year2 100,401 60,501 (44,429 )Reclassified to profit or loss from other

comprehensive income for theyear2,3 (88,003 ) (71,915 ) 50,231

Available-for-saleInterest income1,4 73 40 453Dividend income 7,733 3,926 5,174Gain on disposal 131,045 22,695 89,598Impairment loss (1,471 ) (966 ) (6,137 )Other comprehensive income for the

year2 47,381 10,925 51,235Reclassified to profit or loss from other

comprehensive income for the year2 (83,397 ) (3,840 ) (55,450 )Held-to-Maturity

Interest income1,4 226 213 —Liabilities at fair value through profit and

lossGain(loss) on disposal (850 ) (632 ) —Gain(loss) on valuation (2,006 ) 33 (3,078 )

Derivatives used for hedgingGain(loss) on transactions (273 ) 8,329 —Loss on valuation (1,733 ) (138 ) (145,885)Other comprehensive income for the


comprehensive income for the year2,3 (9,959 ) (3,956 ) 91,698

Financial liabilities at amortized costInterest expense4 (385,925) (337,219) (302,464)Gain(loss) foreign currency transaction (23,416 ) (7,518 ) 62,347Gain(loss) foreign currency translation (166,254) (112,864) 225,695

Total ￦(385,127) ￦(308,677) ￦(150,420)

1 BC Card, a subsidiary of the Group, recognized interest income as operating revenue.Interest income recognized as operating revenue is￦ 15,561 million (2015:￦15,867 million, 2016:￦ 14,380 million) for the year ended December 31, 2017.

2 The amounts directly reflected in equity after adjustments of deferred income tax.



3 During the year, certain derivatives of the Group were settled and the related gain orloss on valuation of cash flow hedge in other comprehensive income was reclassified toprofit or loss for the year.

4 BC Card recognized gain/loss on foreign currency transaction as operating income andexpenses. During the year, related gain/loss on foreign currency transaction recognizedas operating income and expense is￦ 11,049 million (2016: (-)￦ 1,987 million).



12 Months EndedCash and Cash Equivalents Dec. 31, 2017Text block1 [abstract]Cash and Cash Equivalents 5. Cash and Cash Equivalents

Restricted cash and cash equivalents as of December 31, 2016 and 2017, are asfollows:

(In millions of Koreanwon) Type 2016 2017 DescriptionRestricted cash andcash equivalents

Restricteddeposit

￦19,920 ￦16,837 Deposit restricted forgovernmental project and

others

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


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12 Months EndedTrade and Other Receivables Dec. 31, 2017Text block1 [abstract]Trade and Other Receivables 6. Trade and Other Receivables


2016


Totalamounts

Allowancefor

doubtfulaccounts

Presentvalue


Current assetsTrade

receivables ￦3,161,234 ￦(470,239) ￦(5,343 ) ￦2,685,652Other

receivables 2,763,942 (121,972) (270 ) 2,641,700￦5,925,176 ￦(592,211) ￦(5,613 ) ￦5,327,352

Non-current assetsTrade

receivables ￦263,367 ￦(632 ) ￦(12,835) ￦249,900Other

receivables 507,251 (19,644 ) (28,496) 459,111770,618 (20,276 ) (41,331) 709,011

2017


Totalamounts

Allowancefor

doubtfulaccounts

Presentvalue


Current assetsTrade


receivables 3,041,028 (66,402 ) (187 ) 2,974,439￦6,327,197 ￦(505,219) ￦(7,695 ) ￦5,814,283



receivables 522,459 (17,970 ) (28,351) 476,138￦888,566 ￦(18,580 ) ￦(41,154) ￦828,832

Details of changes in allowance for doubtful accounts the years ended December 31,2016 and 2017, are as follows:


Tradereceivables

Otherreceivables

Tradereceivables

Otherreceivables

Tradereceivables

Otherreceivables

Beginningbalance ￦527,617 ￦311,082 ￦468,741 ￦250,842 ￦470,871 ￦141,616

Provision 95,489 46,066 84,975 7,736 38,888 5,809Reversal or

written-off (135,318) (33,282 ) (80,518 ) (108,638) (70,121 ) (61,220 )Changes in the

scope ofconsolidation (16,752 ) (69,732 ) 215 56 (107 ) (35 )

Others (2,232 ) (3,272 ) (2,542 ) (8,380 ) (104 ) (1,798 )


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Endingbalance ￦468,741 ￦250,842 ￦470,871 ￦141,616 ￦439,427 ￦84,372

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

Details of aging analysis of trade receivables as of December 31, 2016 and 2017, areas follows:



1,028,786 970,559Less: Allowance for doubtful

accounts (470,871 ) (439,427 )￦2,935,552 ￦3,192,538

Details of other receivables as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017Loans ￦80,308 ￦84,682Receivables1 2,709,177 2,970,346Accrued income 9,903 12,186Refundable deposits 390,035 391,458Loans receivable 10,355 34,273Finance lease receivables 16,280 20,526Others 26,369 21,478Less: Allowance for doubtful

accounts (141,616 ) (84,372 )￦3,100,811 ￦3,450,577


Details of aging analysis of other receivables as of December 31, 2016 and 2017, areas follows:



271,188 263,000Less: Allowance for doubtful

accounts (141,616 ) (84,372 )Total ￦3,100,811 ￦3,450,577

The maximum exposure of trade and other receivables to credit risk is the carryingamount of each class of receivables mentioned above as of December 31, 2017.



12 Months EndedOther Financial Assets andLiabilities Dec. 31, 2017

Text block1 [abstract]Other Financial Assets andLiabilities

7. Other Financial Assets and Liabilities

Details of other financial assets and liabilities as of December 31, 2016 and 2017, are asfollows:


Financial assets at fair valuethrough profit or loss ￦6,277 ￦5,813

Derivatives used for hedge 227,318 7,389Financial instruments1 716,769 1,333,317Available-for-sale financial

assets1 404,774 380,953Held-to-maturity investments 30,143 151Less: Non-current (664,726) (754,992 )Current ￦720,555 ) ￦972,631 )

Other financial liabilitiesFinancial liabilities at fair value

through the profit or loss ￦1,973 ￦5,051Derivatives used for hedge 14,928 93,770Other financial liabilities 91,763 87,669Less: Non-current (108,431) (149,267 )Current ￦233 ￦37,223

1 As of December 31, 2017, MMW(Money Market Wrap) and MMT(Money Market Trust) amountingto￦870,453 million is included in other financial assets. As of December 31, 2017, the Group’sfinancial instruments amounting to￦59,660 million (December 31, 2016:￦49,721 million),which consist of certain proceeds from the disposal of Ustream Inc. deposited in an escrowaccount, checking account deposits and deposits for Win-win Growth Cooperative loans, aresubject to withdrawal restrictions.

Financial instruments at fair value through profit or loss as of December 31, 2016 and2017, are as follows:

2016 2017(In millions of Korean won) Assets Liabilities Assets LiabilitiesFinancial instruments at fair value through

profit and loss ￦ 6,277 ￦— ￦ 5,813 ￦—Other derivatives liabilities ￦— ￦1,973 ￦— ￦ 5,051

The valuation gains and losses on financial assets and liabilities at fair value throughprofit or loss and held for trading for the years ended December 31, 2015, 2016 and2017, are as follows:


2015 2016 2017


gainsValuation

lossesValuation

gainsValuation

lossesValuation

gainsValuation

lossesValuation gains and losses

on financial assets ￦— ￦— ￦470 ￦7,654 ￦— ￦464Total ￦ — ￦ — ￦ 470 ￦ 7,654 ￦ — ￦ 464

Held for trading

2015 2016 2017


gainsValuation

lossesValuation

gainsValuation

lossesValuation

gainsValuation

losses


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Valuation gains and losses onfinancial assets ￦ — ￦2,006 ￦33 ￦— ￦— ￦3,078

Total ￦— ￦ 2,006 ￦ 33 ￦ — ￦ — ￦ 3,078

The maximum exposure of debt securities of financial instruments at fair value throughprofit or loss to credit risk is carrying amount as of December 31, 2017.


2016 2017(in millions of Korean won) Assets Liabilities Assets LiabilitiesInterest rate swap1 ￦— ￦3,278 ￦— ￦2,633Currency swap2 214,648 11,650 7,389 81,300Currency forwards3 12,670 — — 9,837


Current ￦130,098 ￦233 ￦2,714 ￦37,223

1 The interest rate swap contract is to hedge the risk of variability in future fair value of thebond.

2 The currency swap contract is to hedge the risk of variability in cash flow from the bond. Inapplying the cash flow hedge accounting, the Group hedges its exposures to cash flowfluctuation until September 7, 2034.

3 The currency forward contract is to hedge the risk of variability in cash flow from transactionsin foreign currencies due to changes in foreign exchange rate.

The full value of a hedging derivative is classified as a non-current asset or liability if theremaining maturity of the hedged item is more than 12 months and, as a current asset orliability, if the maturity of the hedged item is less than 12 months.

The valuation gains and losses on the derivatives contracts for the years endedDecember 31, 2015, 2016 and 2017, are as follows:


Type ofTransaction

Valuationgain

Valuationloss

Othercomprehensive

income1Valuation

gainValuation

loss

Othercomprehensive

income1Valuation

gainValuation

loss

Othercomprehensive

income1

Interestrateswap ￦— ￦— ￦ (2,858 ) ￦— ￦ 148 ￦ (142 ) ￦ 38 ￦— ￦ 637

Currencyswap 141,512 1,733 150,255 97,158 (10 ) 85,479 19 187,468 (146,752 )

Currencyforwards — — 247 12,278 — 146 — 22,114 (393 )

Total ￦141,512 ￦1,733 ￦ 147,644 ￦109,436 ￦ 138 ￦ 85,483 ￦ 57 ￦209,582 ￦ (146,508 )

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

The ineffective portion recognized in profit or loss on the cash flow hedge is valuationgain of￦1,961 million for the current period (2015: valuation income of￦2,663 million,2016: valuation gain of￦1,637 million).

Details of available-for-sale financial assets as of December 31, 2016, and 2017 are asfollows:



Current ￦ 19,976 ￦1,465

Changes of available-for-sale financial assets for the years ended December 31, 2016,and 2017 are as follows:



(In millions of Korean won) 2016 2017Beginning ￦360,037 ￦404,774Acquisition 44,302 89,027Disposal (18,161 ) (129,682 )Valuation1 14,413 67,593Impairment (966 ) (6,137 )Reclassification 5,149 (44,622 )Changes in scope of consolidation — —Ending ￦ 404,774 ￦ 380,953

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

The maximum exposure of debt securities of available-for-sale financial assets to creditrisk is carrying amount as of December 31, 2017.

Available-for-sale financial assets are measured at fair value. However, non-marketableequity securities that do not have quoted market prices in an active market and the fairvalue of which cannot be reliably measured are recognized at cost and the impairmentloss is recognized if any.

Investment in Korea Software Financial Cooperative amounting to￦1,000 million isprovided as collateral as consideration for payment guarantees provided by KoreaSoftware Financial Cooperative (Note 19).



12 Months EndedInventories Dec. 31, 2017Text block1 [abstract]Inventories 8. Inventories

Inventories as of December 31, 2016 and 2017, are as follows:

2016 2017(In millions ofKorean won)

Acquisitioncost

Valuationallowance

Bookamount

Acquisitioncost

Valuationallowance

Bookamount

Merchandise ￦403,938 ￦(46,634) ￦357,304 ￦504,321 ￦(58,293) ￦446,028Others 97,778 (494 ) 97,284 195,999 — 195,999

Total ￦501,716 ￦(47,128) ￦454,588 ￦700,320 ￦(58,293) ￦642,027

Cost of inventories recognized as expenses for year ended December 31,2017, amounts to￦3,855,089 million (2015:￦3,760,892 million,2016:￦3,589,809 million) and valuation loss on inventory on inventoryrecognized amounts to￦11,165 million for year ended December 31, 2017(2015: valuation loss on inventory amounts to￦4,116 million, 2016:reversal of valuation allowance of￦20,223 million).


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12 Months EndedOther Assets and Liabilities Dec. 31, 2017Text block1 [abstract]Other Assets and Liabilities 9. Other Assets and Liabilities

Other assets and liabilities as of December 31, 2016 and 2017, are as follows:



Current ￦342,291 ￦258,315


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12 Months EndedProperty, Plant andEquipment Dec. 31, 2017

Text block1 [abstract]Property, Plant and Equipment 10. Property, Plant and Equipment

Changes in property, plant and equipment for the years endedDecember 31, 2016 and 2017, are as follows:

2016

(in millions ofKorean won) Land

Buildingsand

structures

Machineryand


Acquisition cost ￦1,287,749 ￦3,558,460 ￦34,388,584 ￦1,951,749 ￦1,033,777 ￦42,220,319Less:

Accumulateddepreciation(includingaccumulatedimpairmentloss andothers) (132 ) (1,459,416) (24,879,791) (1,400,766) (1,300 ) (27,741,405)

Beginning, net 1,287,617 2,099,044 9,508,793 550,983 1,032,477 14,478,914Acquisition 291 3,608 247,431 146,471 2,297,346 2,695,147Disposal/

Abandonment (855 ) (1,650 ) (112,135 ) (8,155 ) (3,357 ) (126,152 )Depreciation — (135,389 ) (2,498,837 ) (143,978 ) — (2,778,204 )Impairment — — 361 (47,086 ) — (46,725 )Transfer in (out) 4,274 136,041 2,060,936 11,073 (2,212,324 ) —Inclusion in

scope ofconsolidation — — 68 764 — 832

Others 17,625 23,078 53,568 14,851 (20,823 ) 88,299Ending, net ￦1,308,952 ￦2,124,732 ￦9,260,185 ￦524,923 ￦1,093,319 ￦14,312,111Acquisition cost ￦1,309,084 ￦3,729,228 ￦35,106,184 ￦1,895,332 ￦1,093,941 ￦43,133,769Less:

Accumulateddepreciation

(includingaccumulatedimpairmentloss andothers) (132 ) (1,604,496) (25,845,999) (1,370,409) (622 ) (28,821,658)

2017

(In millions ofKorean won) Land

Buildingsand

structures

Machineryand





Beginning, net 1,308,952 2,124,732 9,260,185 524,923 1,093,319 14,312,111Acquisition 1,948 120 237,218 129,464 2,262,681 2,631,431Disposal and

termination (4,656 ) (4,022 ) (176,085 ) (8,242 ) (3,133 ) (196,138 )Depreciation — (135,242 ) (2,469,459 ) (150,535 ) — (2,755,236 )Impairment

(Recovery ofimpairment) — — (9,256 ) (1 ) (28 ) (9,285 )

Transfer in(out) 26,764 25,305 2,227,808 10,344 (2,600,908 ) (310,687 )


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Exclusion fromscope ofconsolidation — (19 ) (772 ) (120 ) (34 ) (945 )

Transferfrom(to)investmentproperties (64,449 ) 1,793 — 1,184 — (61,472 )

Others 98 (245 ) (8,830 ) (179 ) (38,304 ) (47,460 )Ending, net ￦1,268,657 ￦2,012,422 ￦9,060,809 ￦506,838 ￦713,593 ￦13,562,319Acquisition cost ￦1,268,789 ￦3,750,861 ￦35,971,877 ￦1,920,571 ￦714,706 ￦43,626,804Less:


(includingaccumulatedimpairmentloss andothers) (132 ) (1,738,439) (26,911,068) (1,413,733) (1,113 ) (30,064,485)

Details of property, plant and equipment provided as collateral as ofDecember 31, 2016 and 2017, are as follows:


Carryingamount

Securedamount

Relatedline item


Land andBuildings

￦13,337 ￦16,009 Borrowings ￦11,540 StandardChartered

BankKorea

DevelopmentBank



Securedamount

Relatedline item



BankKorea

DevelopmentBank


The borrowing costs capitalized for qualifying assets amountto￦8,473 million (2016:￦16,451 million) in 2017. The interest rate appliedto calculate the capitalized borrowing costs in 2017 is 3.37% to 3.54%(2016: 2.29% to 3.50%).



12 Months EndedInvestment Properties Dec. 31, 2017Text block1 [abstract]Investment Properties 11. Investment Properties

Changes in investment properties for the years ended December 31, 2016and 2017, are as follows:

2016


progress TotalAcquisition cost ￦340,790 ￦1,011,236 ￦ 74,208 ￦1,426,234Less: Accumulated

depreciation — (324,164 ) — (324,164 )Beginning 340,790 687,072 74,208 1,102,070Acquisition 51 417 160,138 160,606Disposal/

Abandonment (5,837 ) (1,802 ) — (7,639 )Depreciation — (43,575 ) — (43,575 )Transfer (32,254 ) 124,417 (155,581 ) (63,418 )Ending ￦302,750 ￦766,529 ￦ 78,765 ￦1,148,044Acquisition cost ￦302,750 ￦1,119,885 ￦ 78,765 ￦1,501,400Less: Accumulated

depreciation — ￦(353,356 ) — ￦(353,356 )

2017


progress TotalAcquisition cost ￦302,750 ￦1,119,885 ￦ 78,765 ￦1,501,400Less: Accumulated

depreciation — (353,356 ) — (353,356 )Beginning 302,750 766,529 78,765 1,148,044Acquisition — 775 48,075 48,850Disposal/

Abandonment (3,493 ) (6,434 ) — (9,927 )Depreciation — (47,295 ) — (47,295 )Transfer from(to)

property, plant andequipment 64,449 (1,793 ) (1,184 ) 61,472

Transfer and others (6,916 ) 80,986 (85,683 ) (11,613 )Ending ￦356,790 ￦792,768 ￦ 39,973 ￦1,189,531Acquisition cost ￦358,358 ￦1,191,687 ￦ 39,973 ￦1,590,018Less: Accumulated

depreciation(include. Accumulated

impairment) (1,568 ) (398,919 ) — (400,487 )

The fair value of investment properties is￦1,755,600 million as ofDecember 31, 2017 (2016:￦1,962,779 million). The fair value ofinvestment properties is estimated based on the expected cash flow.

Rental income from investment properties is￦205,993 million in 2017(2016:￦184,670 million) and direct operating expenses (including repairsand maintenance) arising from investment properties that generated rentalincome during the period are recognized as operating expenses.


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Details of investment properties provided as collateral as of December 31,2016 and 2017, are as follows:


Securedamount

Relatedaccount

Relatedamount



Securedamount

Relatedaccount

Relatedamount




12 Months EndedIntangible Assets Dec. 31, 2017Text block1 [abstract]Intangible Assets 12. Intangible Assets

Changes in intangible assets for the years ended December 31, 2016 and2017, are as follows:

2016(In millions ofKorean won) Goodwill

Developmentcosts1 Software

Frequencyusage rights Others Total

Acquisitioncost 449,379 1,487,420 805,387 2,591,229 1,109,085 6,442,500

Less:Accumulatedamortization(includingaccumulatedimpairmentloss andothers) (107,038) (1,025,877) (574,003) (1,618,459) (517,372 ) (3,842,749)

Beginning, net ￦342,341 ￦461,543 ￦231,384 ￦972,770 ￦591,713 ￦2,599,751Acquisition and

capitalexpenditure — 36,075 35,631 978,309 74,312 1,124,327

Disposal andtermination — (8,600 ) (1,928 ) — (16,397 ) (26,925 )

Amortization — (162,682 ) (78,643 ) (273,790 ) (84,606 ) (599,721 )Impairment (131,600) — (46 ) — (3,618 ) (135,264 )Inclusion in

scope ofconsolidation 42,745 — 2,462 — 16,015 61,222

Others — 8,340 8,278 — (17,205 ) (587 )Ending, net ￦253,486 ￦334,676 ￦197,138 ￦1,677,289 ￦560,214 ￦3,022,803Acquisition

cost 492,105 1,483,205 838,532 2,531,654 1,154,993 6,500,489(238,619) (1,148,529) (641,394) (854,365 ) (594,779 ) (3,477,686)





Less:Accumulatedamortization(includingaccumulatedimpairmentloss andothers) (238,619) (1,148,529) (641,394) (854,365 ) (594,779 ) (3,477,686)

Beginning, net ￦253,486 ￦334,676 ￦197,138 ￦1,677,289 ￦560,214 ￦3,022,803Acquisition and

capitalexpenditure — 247,863 60,475 — 78,373 386,711

Disposal andtermination — (14,806 ) (548 ) — (11,859 ) (27,213 )

Amortization — (151,718 ) (73,174 ) (311,146 ) (99,112 ) (635,150 )Impairment (84,606 ) — (3 ) — (31,486 ) (116,095 )Inclusion in

scope ofconsolidation — (332 ) (3,216 ) — (1,374 ) (4,922 )

Others — 2,876 9,569 (1,201 ) (4,674 ) 6,570


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Ending, net ￦168,880 ￦418,559 ￦190,241 ￦1,364,942 ￦490,081 ￦2,632,704Acquisition

cost 474,908 1,643,886 893,500 2,530,341 1,171,378 6,714,014Less;

Accumulatedamortization(includingaccumulatedimpairmentloss andothers) (306,028) (1,225,327) (703,259) (1,165,399) (681,297 ) (4,081,310)

1 The Company’s development costs mainly consist of acquisition costs to develop acombined billing system and an information management system.

The carrying amount of membership rights with indefinite useful life not subjectto amortization is￦238,053 million (2016:￦268,350 million) as ofDecember 31, 2017.

Goodwill is allocated to the Group’s cash-generating unit which is identified byoperating segments. As of December 31, 2017, goodwill allocated to eachcash-generation unit is as follows:





Total ￦168,880

1 The recoverable amounts of mobile business are calculated based on value-in usecalculations. These calculations use cash flow projections for the next five yearsbased on financial budgets. An annual growth rate of 0.0% was applied for the cashflows expected to be incurred after five year. This growth rate does not exceed thelong-term average growth rate of the industry which the cash-generate unit belongsin. The Group estimated its revenue growth rate -2.46% based on past performanceand its expectation of future market changes. In addition, management estimatedthe cash flow based on past performance and its expectation of market growth, andthe discount rates 8.95% used reflected specific risks relating to the relevant CGUs.As a result of the impairment test, the Group concluded that the carrying amount ofCGUs does not exceed the recoverable amount. Accordingly, the Group did notrecognise the impairment loss on goodwill on mobile business for the years endedDecember 31, 2017 and 2016.

2 The recoverable amounts of BC Card Co., Ltd. are calculated based on value-inuse calculations. These calculations use cash flow projections for the next fiveyears based on financial budgets. An annual growth rate of 0.0% was applied forthe cash flows expected to be incurred after five year. This growth rate does notexceed the long-term average growth rate of the industry which the cash-generateunit belongs in. The Group estimated its revenue growth rate 0.11% based on pastperformance and its expectation of future market changes. In addition, managementestimated the cash flow based on past performance and its expectation of marketgrowth, and the discount rates 14.62% used reflected specific risks relating to therelevant CGUs. As a result of the impairment test, the Group concluded that thecarrying amount of CGUs does not exceed the recoverable amount. Accordingly,the Group did not recognise the impairment loss on goodwill on BC Card Co., Ltd.for the years ended December 31, 2017 and 2016.



3 The recoverable amounts of PlayD Co., Ltd. (N search Marketing Co., Ltd.) arecalculated based on value-in use calculations. These calculations use cash flowprojections for the next five years based on financial budgets. An annual growthrate of 1.0% was applied for the cash flows expected to be incurred after five year.This growth rate does not exceed the long-term average growth rate of the industrywhich the cash-generate unit belongs in. The Group estimated its revenue growthrate 4.27% based on past performance and its expectation of future marketchanges. In addition, management estimated the cash flow based on pastperformance and its expectation of market growth, and the discount rates 9.5%used reflected specific risks relating to the relevant CGUs. As a result of theimpairment test, the Group concluded that the carrying amount of CGUs does notexceed the recoverable amount. Accordingly, the Group did not recognise theimpairment loss on goodwill on PlayD Co., Ltd. (N search Marketing Co., Ltd.) forthe years ended December 31, 2017 and 2016.

As a result of the impairment test, the Group recognized theimpairment losses of￦78,200 million on entire balance ofgoodwill allocated to Satellite TV segment and￦29,325 millionon indefinite-lived intangible assets, and recognized the losses asoperating expenses in the consolidated statement of profit orloss. It is resulted from intense competition between internets,IPTV, Cable TV service providers.

The recoverable amounts of Satellite TV segment are calculatedbased on value-in use calculations or fair value less costs to sell.These calculations use cash flow projections for the next fiveyears based on financial budgets. An annual growth rate of 0.0%was applied for the cash flows expected to be incurred after fiveyear. This growth rate does not exceed the long-term averagegrowth rate of the industry which the cash-generate unit belongsin. The Group estimated its revenue growth rate (-0.77%) basedon past performance and its expectation of future marketchanges. The Group determined cash flow projections based onpast performance and its estimation of market growth. Specificrisk of related operating segment is reflected in its 13.25%discount rate.



12 Months EndedInvestments in Associatesand Joint Ventures Dec. 31, 2017

Text block1 [abstract]Investments in Associates andJoint Ventures

13. Investments in Associates and Joint Ventures



Date offinancial

statements2016 2017

Korea Information & Technology Fund 33.3 % 33.3 % Korea 31-DecKT-SB Venture Investment1 50.0 % 50.0 % Korea 31-DecMongolian Telecommunications1 40.0 % — Mongolia 31-DecKT Wibro Infra Co., Ltd. 26.2 % — Korea 31-DecKT-IBKC Future Investment Fund 11 50.0 % 50.0 % Korea 31-DecKT-CKP New Media Investment Fund 49.7 % 49.7 % Korea 31-DecK Bank Inc.1 — 10.0 % Korea 31-Dec

1 At the end of the reporting period, even though the Group (KT-SB Venture Investment Fund andKT-IBKC Future Investment Fund 1) has 50% ownership, the equity method of accounting hasbeen applied as the Group, which is a limited partner of investment fund, cannot participate indetermining the operating and financial policies. As of December 31, 2017, the entire shares ofMongolian Telecommunications is classified as assets held for sale, and KT Wibro Infra Co., Ltd.was liquidated during 2017. Also, 8% of non-voting convertible stock are excluded frompercentage of ownership for K bank Inc.

Changes in investments in associates and joint ventures for the years endedDecember 31, 2016 and 2017, are as follows:

2016



joint ventures1 Impairment Others EndingKorea Information &

Technology Fund ￦127,583 ￦— ￦ 7,446 ￦— ￦(60 ) ￦134,969KT-SB Venture

Investment 4,861 — (125 ) — — 4,736Mongolian

Telecommunications 7,483 — 32 — (1,271) 6,244KT Wibro Infra Co.,

Ltd. 69,328 — — (17,128) — 52,200KT-CKP New Media

Investment Fund 3,860 — 594 — — 4,454Others 56,914 29,052 (5,400 ) — 906 81,472

￦270,029 ￦29,052 ￦ 2,547 ￦(17,128) ￦(425 ) ￦284,075

2017




Technology Fund ￦134,969 ￦— ￦ 4,275 ￦— ￦290 ￦139,534KT-SB Venture

Investment 4,736 (1,069 ) (725 ) — — 2,942Mongolian

Telecommunications 6,244 — (348 ) — (5,896 ) —KT Wibro Infra Co.,

Ltd. 52,200 (52,200) — — — —KT-IBKC Future

Investment Fund 1 3,621 7,500 (296 ) — — 10,825KT-CKP New Media

Investment Fund 4,454 (2,970 ) 810 — — 2,294K Bank Inc. — 26,543 (17,244 ) — 32,809 42,108


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Others 77,851 3,178 (1,952 ) (3,662 ) 6,313 81,728￦284,075 ￦(19,018) ￦ (15,480 ) ￦ (3,662 ) ￦33,516 ￦279,431

1 KT investment Co., Ltd., a subsidiary of the Group, recognized its share in net profit fromassociates and joint ventures as operating revenue and expense. These include its share in gainfrom associates and joint ventures of￦1,588 million (2016:￦52 million) recognized asoperating income during the period.

Summarized financial information of associates and joint ventures as of and for theyears ended December 31, 2016 and 2017, is as follows:


Non-currentassets

Currentliabilities


Korea Information & Technology Fund ￦154,651 ￦250,257 ￦— ￦ —KT-SB Venture Investment 1,009 8,704 242 —Mongolian Telecommunications 9,852 9,055 3,296 —KT Wibro Infra Co., Ltd. 274,811 6 4,996 52KT-CKP New Media Investment Fund 1,801 7,170 4 —


Operatingrevenue


Othercomprehensive

income

Totalcomprehensive

income


associatesKorea Information &

Technology Fund ￦26,942 ￦22,338 ￦ (9,425 ) ￦ 12,913 ￦ 3,201KT-SB Venture

Investment 2 (251 ) — (251 ) —Mongolian

Telecommunications 10,336 81 3,178 3,259 —KT Wibro Infra Co.,

Ltd. 391 5,025 — 5,025 —KT-CKP New Media

Investment Fund 1,684 1,195 — 1,195 —


Non-currentassets

Currentliabilities


Korea Information & TechnologyFund ￦144,874 ￦273,727 ￦— ￦ —

KT-SB Venture Investment 120 5,770 6 —KT-IBKC Future Investment Fund

1 5,499 16,302 152 —KT-CKP New Media Investment

Fund 287 4,333 — —K Bank Inc. 1,258,969 92,137 1,116,154 1,177


Operatingrevenue


Othercomprehensive

income

Totalcomprehensive

income



Technology Fund ￦36,462 ￦12,825 ￦ 1,868 ￦ 14,693 ￦ 739KT-SB Venture

Investment 3 (1,449 ) — (1,449 ) —KT-IBKC Future

Investment Fund1 15 (593 ) — (593 ) —

KT-CKP New MediaInvestment Fund 1,593 1,632 — 1,632 —

K Bank Inc. 20,926 (83,787) (746 ) (84,533 ) —



Details of a reconciliation of the summarized financial information to the carryingamount of interests in the associates and joint ventures as of and for the years endDecember 31, 2016 and 2017, are as follows:

2016



assets


Carryingamount

Korea Information &Technology Fund ￦404,908 33.3 % ￦134,969 ￦— ￦134,969

KT-SB VentureInvestment 9,471 50.0 % 4,736 — 4,736

MongolianTelecommunications 15,610 40.0 % 6,244 — 6,244

KT Wibro Infra Co.,Ltd. 269,769 26.2 % 70,679 (18,479 ) 52,200

KT-CKP New MediaInvestment Fund 8,967 49.7 % 4,454 — 4,454

2017



assets


Carryingamount

Korea Information &Technology Fund ￦418,601 33.3 % ￦139,534 ￦ — ￦139,534


KT-IBKC FutureInvestment Fund 1 21,649 50.0 % 10,825 — 10,825


K Bank Inc.1 233,775 10.0 % 42,108 — 42,108


Due to discontinuance of equity method of accounting, the Group has not recognizedloss from associates and joint ventures of￦4,391 million for the year(2015:￦601 million, 2016:￦1,354 million,). The accumulated comprehensive loss ofassociates and joint ventures as of December 31, 2017, which was not recognized bythe Group is￦17,045 million (2015:￦51,597 million, 2016:￦18,096 million).



12 Months EndedTrade and other payables Dec. 31, 2017Text block1 [abstract]Trade and other payables 14. Trade and other payables

Details of trade and other payables as of December 31, 2016 and 2017, are asfollows:



Total ￦ 1,188,311 ￦ 1,001,369

Details of other payables as of December 31, 2016 and 2017 are as follows:


1 Settlement payables of BC Card Co., Ltd. of￦2,365,477 million related to creditcard transactions included as of December 31, 2017 (2016:￦2,095,989 million).


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12 Months EndedBorrowings Dec. 31, 2017Text block1 [abstract]Borrowings 15. Borrowings

Details of borrowings as of December 31, 2016 and 2017, are as follows:

Debentures



ratesForeign

currencyKorean

wonForeign

currencyKorean

wonMTNP notes1 Sept. 07, 2034 6.50% USD 100,000 ￦120,850 USD 100,000 ￦107,140MTNP notes Jan. 20, 2017 — USD 350,000 422,975 — —FR notes2 Aug. 28, 2018 LIBOR(3M)+1.15% USD 300,000 362,550 USD 300,000 321,420MTNP notes Apr. 22, 2017 — USD 650,000 785,525 — —MTNP notes Apr. 22, 2019 2.63% USD 350,000 422,975 USD 350,000 374,990MTNP notes Jan. 29, 2018 0.86% JPY 6,800,000 70,503 JPY 6,800,000 64,539MTNP notes Feb. 23, 2018 0.48% JPY 15,000,000 155,522 JPY 15,000,000 142,367MTNP notes July 18, 2026 2.50% USD 400,000 483,400 USD 400,000 428,560MTNP notes Aug 07, 2022 2.63% — — USD 400,000 428,560The 173-2nd Public bond Aug. 06, 2018 6.62% — 100,000 — 100,000The 177-3rd Public bond Feb. 09, 2017 — — 170,000 — —The 179th Public bond Mar. 29, 2018 4.47% — 260,000 — 260,000The 180-2nd Public bond Apr. 26, 2021 4.71% — 380,000 — 380,000The 181-2nd Public bond Aug. 26, 2018 3.99% — 90,000 — 90,000The 181-3rd Public bond Aug. 26, 2021 4.09% — 250,000 — 250,000The 182-2nd Public bond Oct. 28, 2021 4.31% — 100,000 — 100,000The 183-2nd Public bond Dec. 22, 2021 4.09% — 90,000 — 90,000The 183-3rd Public bond Dec. 22, 2031 4.27% — 160,000 — 160,000The 184-1st Public bond Apr. 10, 2018 2.74% — 120,000 — 120,000The 184-2nd Public bond Apr. 10, 2023 2.95% — 190,000 — 190,000The 184-3rd Public bond Apr. 10, 2033 3.17% — 100,000 — 100,000The 185-1st Public bond Sept. 16, 2018 3.46% — 200,000 — 200,000The 185-2nd Public bond Sept. 16, 2020 3.65% — 300,000 — 300,000The 186-1st Public bond June 26, 2017 — — 120,000 — —The 186-2nd Public bond June 26, 2019 3.08% — 170,000 — 170,000The 186-3rd Public bond June 26, 2024 3.42% — 110,000 — 110,000The 186-4th Public bond June 26, 2034 3.70% — 100,000 — 100,000The 187-1st Public bond Sept. 02, 2017 — — 110,000 — —The 187-2nd Public bond Sept. 02, 2019 2.97% — 220,000 — 220,000The 187-3rd Public bond Sept. 02, 2024 3.31% — 170,000 — 170,000The 187-4th Public bond Sept. 02, 2034 3.55% — 100,000 — 100,000The 188-1st Public bond Jan. 29, 2020 2.26% — 160,000 — 160,000The 188-2nd Public bond Jan. 29, 2025 2.45% — 240,000 — 240,000The 188-3rd Public bond Jan. 29, 2035 2.71% — 50,000 — 50,000The 189-1st Public bond Jan. 27, 2019 1.76% — 100,000 — 100,000The 189-2nd Public bond Jan. 27, 2021 1.95% — 130,000 — 130,000The 189-3rd Public bond Jan. 27, 2026 2.20% — 100,000 — 100,000The 189-4rd Public bond Jan. 27, 2036 2.35% — 70,000 — 70,000The 17th unsecured bond Apr. 22, 2018 1.89% — 60,000 — 60,000


Discount on bonds (20,852 ) (19,347 )Total ￦5,715,878 ￦4,610,453

1 As of December 31, 2017, the Controlling Company has outstanding notes in the amount of USD 100 million with fixed interest rates underMedium Term Note Program (“MTNP”) registered in the Singapore Stock Exchange, which allowed issuance of notes of up to USD 2,000million. However, the MTN Program has been suspended since 2007.

2 Libor (3M) are approximately 1.695 % as of December 31, 2017.

Short-term borrowings


Operational Shinhan Bank 2.99% ~ 4.41% ￦120,300 ￦113,300Standard Charted Bank — 8,000 —

Korea Development Bank 3.97% 20,800 12,000Indutrial Bank of Korea — 1,000 —


Long-term borrowings

(In millions of Korean won and thousands of foreign currencies) 2016 2017Financialinstitution Type Annual interest rates

Foreigncurrency

Koreanwon

Foreigncurrency

Koreanwon

Export-ImportBank of Korea

Inter-KoreanCooperation Fund1 1.50% — ￦5,181 — ￦4,688

Shinhan Bank General loans 2.50% — 31,000 — 30,000Facility loans 2.56% — 6,493 — 6,000

Vessel facility loans2 LIBOR(3M)+0.706% USD 21,000 25,379 USD 15,000 16,071KEB Hana

Bank General loans 3.95% — 3,000 — 3,000Standard

ChartedBank General loans 3.16% — — — 8,000

Woori Bank General loans — — 13,000 — —NongHyup

Bank General loans 2.86% — — — 8,000Facility loans 2.00% 123 — 123


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KoreaDevelopment

Bank General loans 3.27% — 30,000 — 30,000Kookmin Bank Facility loans 2.59% — 7,000 — 2,333

NHInvestment &Security Co.,

Ltd. Commercial papers 3.17% — 300,000 — 300,000Others Redeemable

convertible preferredstock3 — — 950 — 950

Kookmin Bankand other2 3.15% USD 183,796 222,117 USD 166,108 177,968

￦644,243 ￦587,133Less: Current portion ￦(59,331 ) ￦(87,398 )

Total ￦584,912 ￦499,735

1 The Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period.2 LIBOR(3M) is approximately 1.695% as of December 31, 2017.3 Skylife TV Co., Ltd., a subsidiary of the Group, issued 1,900,000 of redeemable convertible preferred stock with a par value per share of ￦500 in 2010.

Repayment schedule of the Group’s borrowings including the portion of current liabilities as of December 31, 2017, is as follows:


In localcurrency


In localcurrency


Jan 1, 2018 ~ Dec 31, 2018 ￦830,000 ￦528,326 ￦1,358,326 ￦167,395 ￦48,303 ￦215,698 ￦1,574,024Jan 1, 2019 ~ Dec 31, 2019 490,000 374,990 864,990 343,465 48,303 391,768 1,256,758Jan 1, 2020 ~ Dec 31, 2020 460,000 — 460,000 1,518 45,089 46,607 506,607Jan 1, 2021 ~ Dec 31, 2021 950,000 — 950,000 1,518 41,875 43,393 993,393After 2022 1,390,000 964,260 2,354,260 7,498 10,469 17,967 2,372,227

￦4,120,000 ￦1,867,576 ￦5,987,576 ￦521,394 ￦ 194,039 ￦715,433 ￦6,703,009

Carrying amount and fair value of the Group’s debentures and borrowings as of December 31, 2016 and 2017, are as follows:


TypeCarryingAmount

FairValue

CarryingAmount

FairValue



Total ￦8,120,791 ￦8,184,195 ￦6,683,662 ￦6,738,326

The fair values of debentures and long-term borrowings are calculated by discounting the expected future cash flows at weighted averageborrowing rate. The weighted average borrowing rate is approximately 3.37% (2016: 3.38%) as of December 31, 2017. The carrying amountof borrowings of subsidiaries is the reasonable approximately amount of the fair value.



12 Months EndedProvisions Dec. 31, 2017Text block1 [abstract]Provisions 16. Provisions

Changes in provisions for the years ended December 31, 2016 and 2017, are asfollows:





Increase (Transfer) 3,842 2,827 41,550 48,219Usage (1,740 ) (2,178 ) (22,382) (26,300 )Reversal (2,834 ) (1,723 ) (11,467) (16,024 )Change in scope of

consolidation — (22 ) (22 ) (44 )Ending balance ￦18,306 ￦ 100,216, ￦84,508 ￦203,030

Current 17,238 1,766 59,168 78,172Non-current 1,068 98,450 25,340 124,858


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12 Months EndedNet Defined BenefitLiabilities Dec. 31, 2017

Text block1 [abstract]Net Defined Benefit Liabilities 17. Net Defined Benefit Liabilities

The amounts recognized in the statements of financial position aredetermined as follows:

(in millions of Korean won) 2016 2017Present value of defined benefit obligations ￦1,713,184 ￦1,911,166Fair value of plan assets (1,334,780) (1,519,779)Liabilities ￦378,404 ￦396,079Assets in the statement of financial position ￦— ￦3,692

Changes in the defined benefit obligations for the years endedDecember 31, 2016 and 2017, are as follows:


Actuarial gains and losses arising from changesin demographic assumptions (53,407 ) 3,353

Actuarial gains and losses arising from changesin financial assumptions 26,717 36,946

Actuarial gains and losses arising fromexperience adjustments 18,809 63,583


Changes in the fair value of plan assets for the years ended December 31,2016 and 2017, are as follows:


Return on plan assets (excluding amountsincluded in interest income) (2,323 ) (5,557 )

Benefits paid (88,876 ) (130,510 )Employer contributions 322,851 290,895Changes in scope of consolidation — (132 )Ending ￦1,334,780 ￦1,519,779

For the year ended December 31, 2018, reasonable estimation forexpected employer contributions is￦197,942 million.

Amounts recognized in the statement of profit or loss for the years endedDecember 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Current service cost ￦200,994 ￦205,114 ￦210,336Net Interest cost 16,793 12,141 8,691Past service cost — 424 (61 )


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Transfer out (11,942 ) (8,737 ) (9,196 )Transfer to discontinued operation (3,031 ) — —Total expenses ￦202,814 ￦208,942 ￦209,770



The sensitivity of the defined benefit obligations as of December 31, 2017,to changes in the principal assumptions is:

(in percentage, in millions of Korean won ) Effect on defined benefit obligation



Decreasein


A decrease in corporate bond yields will increase plan liabilities, althoughthis will be partially offset by an increase in the value of the plans’ bondholdings.

The above sensitivity analyses are based on an assumption while holdingall other assumptions constant. In practice, this is unlikely to occur, andchanges in some of the assumptions may be correlated. The sensitivity ofthe defined benefit obligation to changes in principal actuarial assumptionsis calculated using the projected unit credit method, the same methodapplied when calculating the defined benefit obligations recognized on thestatement of financial position.

The Group actively monitors how the duration and the expected yield of theinvestments match the expected cash outflows arising from the pensionobligations. Expected contributions to post-employment benefit plans for theyear ending December 31, 2018, are￦197,942 million.

The expected maturity analysis of undiscounted pension benefits as atDecember 31, 2017, is as follows:

(in millions of Koreanwon)

Less than1 year

Between1-2 years


Pension benefits ￦142,963 ￦179,612 ￦627,302 ￦3,763,601 ￦4,713,478

The weighted average duration of the defined benefit obligations is 7.6years.



12 Months EndedDefined Contribution Plan Dec. 31, 2017Text block1 [abstract]Defined Contribution Plan 18. Defined Contribution Plan

Recognized expense related to the defined contribution plan for the yearended December 31, 2017, is￦45,936 million (2015:￦35,699 million,2016:￦46,023 million).


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12 Months EndedCommitments andContingencies Dec. 31, 2017

Text block1 [abstract]Commitments andContingencies

19. Commitments and Contingencies

As of December 31, 2017, major commitments with local financial institutions are as follows:


Co., Ltd. KRW 370,000 300,000Collateralized loan on accounts receivable-trade NongHyup Bank and others KRW 35,560 —Collateralized loan on electronic accounts receivable-

tradeShinhan Bank and others KRW 343,000 42,350

Plus electronic notes payable Industrial Bank of Korea KRW 50,000 140Loans for working capital Korea Development Bank

and others KRW 306,500 207,300Green energy factoring Shinhan Bank KRW 16 16FX forward trading commitment Shinhan Bank USD 11,500 —Facility loans Kookmin Bank and others KRW 8,456 8,456


Total KRW 2,881,232 563,022USD 253,500 181,108






Total KRW 681,280USD 69,141PLN 1 23,000

1 Polish Zloty.


(in millions of Korean won) Subject to payment guarantees Creditor Limit Used amount PeriodKT Estate Inc. Busan Gaya Centreville Buyers Shinhan

Bank￦48,536 ￦8,309 Nov 10, 2017

~Oct. 31, 2020KT Estate Inc. Daegu Beomeo -Crossroads SeohanIDaum

BuyersShinhan

Bank81,722 14,237 Oct 29, 2017

~Nov. 30, 2020KT Hitel Co., Ltd. KEB Hana Bank Cash

payers384 — Apr 19, 2017

~ Apr 19, 2018

The Controlling Company is jointly and severally obligated with KT Sat Co., Ltd. to pay KT Sat Co., Ltd.’sliabilities prior to spin-off. As of December 31, 2017, the Controlling Company and KT Sat Co., Ltd. arejointly and severally liable for reimbursement of￦4,328 million.

For the year ended December 31, 2017, the Group entered into agreements with GIGA LTE Thirty-first toThirty-sixth Securitization Specialty Co., Ltd. and KT M Mobile 1st Securitization Specialty Co., Ltd. (2016:Olleh KT Twenty-fifth to Twenty-sixth Securitization Specialty Co., Ltd. and GIGA LTE Twenty-seventh toThirtieth Securitization Specialty Co., Ltd.), and disposed its trade receivables related to handset sales. TheGroup also made asset management agreements with each securitization specialty company and willreceive the related management fees.

As of December 31, 2017, the Group is a defendant in 187 lawsuits with an total claims of￦112,639 million(2016:￦77,461 million). As of December 31, 2017, litigation provisions of￦18,306 million for variouspending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course ofbusiness. The final outcome of the case cannot be estimated as at the end of the reporting period.


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On December 24, 2013, Asia Broadcast Satellite Holdings Ltd. (“ABS”) filed a request for arbitration with theInternational Centre for Dispute Resolution of the American Arbitration Association for the compensation ofdamages from the relocation of the ground equipment and the alleged breach of the entrustment controlcontract related to the satellite Koreasat-3, which was made and entered into with the Controlling Companyand its subsidiary, KT Sat Co., Ltd. Subsequently on December 31, 2013, ABS filed another request forarbitration with the International Court of Arbitration of the International Chamber of Commerce (ICC) for theclaim on the ownership of the satellite Koreasat-3 and compensation for the damages from the allegedbreach of the sales contract entered into with the Controlling Company and its subsidiary, KT Sat Co., Ltd.These two cases were combined by the ICC to be treated as a single case for the arbitration. On July 18,2017, the ICC issued a partial ruling in favor of ABS that ABS has the ownership right to the Koreasat-3satellite. Following the ruling, on October 12, 2017, the Controlling Company and KT Sat Co., Ltd., as jointdefendants to the arbitration, filed a lawsuit for cancellation of the arbitration ruling at the New York Court ofAppeals in the United States. On March 9, 2018, the ICC made the final ruling in favor of ABS that theControlling Company and KT Sat Co., Ltd. should compensate ABS for the damage of $748,564 and theaccumulated interest of $287,673.15 for the period from December 1, 2013 to March 9, 2018, and theinterest for delay at 9% per annum. As the final ruling by the ICC was based on the presumption that thepartial ruling that the satellite belongs to ABS is valid, the Controlling Company and KT Sat Co., Ltd. arecontemplating to file an additional appeal for the arbitration rulings at the New York Court of Appeals. At theend of the current reporting period, the final outcome of these claims cannot be reasonably estimated.

According to the financial and other covenants included in certain debentures and borrowings, the Group isrequired to maintain certain financial ratios such as debt-to-equity ratio, use the funds for the designatedpurpose and report to the creditors periodically. The covenant also contains restriction on provision ofadditional collateral and disposal of certain assets.

At the end of the reporting period, the Group is offering construction completion guarantee agreement todevelopment of Nonsan Hwagidong apartment complex. If a contingent event occurs in between November24, 2017 and to August 9, 2019, the Group collaterally guarantees the debt of AbleNS 1st Co. up to￦9,000million.

At the end of the reporting period, the Group participates in Algerie Sidi Abdela new town developmentconsortium (percentage ownership: 2.5%) and has joint liability with other consortium participants.

At the end of the reporting period, contract amount of property, plant and equipment acquisition agreementmade but not yet recognized as liabilities amounts to￦622,059 million (2016:￦489,753 million).



12 Months EndedLease Dec. 31, 2017Text block1 [abstract]Lease 20. Lease

The Group’s non-cancellable lease arrangements are as follows:

The Group as the LesseeFinance Lease

Details of finance lease assets as of December 31, 2016 and 2017, are asfollows:


As of December 31, 2017, the Group recognized financial lease assets asother property and equipment. The related depreciation amountedto￦58,535 million (2016:￦50,704 million) for the year endedDecember 31, 2017.

Details of future minimum lease payments As of December 31, 2016 and2017, under finance lease contracts are summarized below:

(in millions of Korean won) 2016 2017Total amount of minimum lease paymentsWithin one year ￦79,644 ￦88,441From one year to five years 131,813 132,113More than five years — 81

211,457 220,635Unrealized interest expense 30,743 43,758Net amount of minimum lease paymentsWithin one year 64,008 68,651From one year to five years 116,706 108,146More than five years — 80Total ￦180,714 ￦176,877

Operating Lease

Details of future minimum lease payments As of December 31, 2016 and2017, under operating lease contracts are summarized below:


Operating lease expenses incurred for the years ended December 31,2015, 2016 and 2017, amounted to￦111,776 million,￦121,852 millionand￦126,250 million, respectively.


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12 Months EndedShare Capital Dec. 31, 2017Text block1 [abstract]Share Capital 21. Share Capital

As of December 31, 2016 and 2017, the Group’s number of authorized shares is one billion.

2016 2017Number of

outstandingshares

Par valueper share

(Korean won)



shares

Par valueper share

(Korean won)


Ordinaryshares1 261,111,808 ￦ 5,000 ￦1,564,499 261,111,808 ￦ 5,000 ￦1,564,499

1 The Group retired 51,787,959 treasury shares against retained earnings. Therefore, theordinary shares amount differs from the amount resulting from multiplying the number ofshares issued by￦5,000 par value per share of ordinary shares.


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12 Months EndedRetained Earnings Dec. 31, 2017Text block1 [abstract]Retained Earnings 22. Retained Earnings



Total ￦9,644,483 ￦9,826,926

1 The Commercial Code of the Republic of Korea requires the Group toappropriate, as a legal reserve, an amount equal to a minimum of 10% of cashdividends paid until such reserve equals 50% of its issued capital stock. Thereserve is not available for the payment of cash dividends, but may be transferredto capital stock with the approval of the Group’s Board of Directors or used toreduce accumulated deficit, if any, with the ratification of the Group’s majorityshareholders.

2 The provision of research and development of human is separately accumulatedwith tax reserve fund during earned surplus disposal by Tax Reduction andExemption Control Act of Korea. Reversal of this provision can be paid out asdividends according to related tax law.


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12 Months EndedAccumulated OtherComprehensive Income andOther Components of Equity Dec. 31, 2017

Text block1 [abstract]Accumulated Other ComprehensiveIncome and Other Components ofEquity

23.Accumulated Other Comprehensive Income and Other Components ofEquity

As of December 31, 2016 and 2017, the details of the Controlling Company’saccumulated other comprehensive income are as follows:

(in millions of Korean won) 2016 2017Changes in investments in associates and

joint ventures ￦(10,883) ￦(735 )Loss on derivatives valuation (34,309) (3,463 )Gain of valuation on available-for-sale 54,106 52,673Foreign currency translation adjustment (10,346) (17,490)

Total ￦(1,432 ) ￦30,985

Changes in accumulated other comprehensive income for the years endedDecember 31, 2016 and 2017, are as follows:

2016(in millions of Koreanwon) Beginning

Increase/decrease

Reclassified togain or loss Ending

Changes ininvestments inassociates andjoint ventures ￦(10,312) ￦(571 ) ￦— ￦(10,883)

Gain or loss onderivativesvaluation (23,234) 64,796 (75,871 ) (34,309)

Gain or loss ofvaluation onavailable-for-sale 52,415 5,204 (3,513 ) 54,106

Foreign currencytranslationadjustment (4,999 ) (5,347 ) — (10,346)

Total ￦13,870 ￦64,082 ￦ (79,384 ) ￦(1,432 )


Increase/decrease


Changes ininvestments inassociates andjoint ventures ￦(10,883) ￦10,148 ￦— ￦(735 )

Gain or loss onderivativesvaluation (34,309) (111,083) 141,929 (3,463 )


Foreign currencytranslationadjustment (10,346) (7,144 ) — (17,490)

Total ￦(1,432 ) ￦(54,062 ) ￦ 86,479 ￦30,985


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As of December 31, 2016 and 2017, the other components of equity are asfollows:


Total ￦(1,217,934) ￦(1,205,302)

1 During the year ended December 31, 2017, the Group granted 125,412treasury shares as share-based payment.

2 The amount directly reflected in equity is￦653 million (2016:￦738million) as of December 31, 2017.

3 Profit or loss incurred from transactions with non-controlling interest andinvestment difference incurred from change in proportion of subsidiariesare included.

As of December 31, 2016 and 2017, the details of treasury stock are asfollows:


Treasury stock is expected to be used for the stock compensation for theGroup’s directors and employees and other purposes.



12 Months EndedShare-based Payments Dec. 31, 2017Text block1 [abstract]Share-based Payments 24. Share-based Payments


11thGrant date July 27, 2017Grantee CEO, inside directors, outside directors,

executivesVesting conditions Service condition: 1 year

Non-market performance condition:achievement of performance

Fair value per option (in Korean won) ￦34,400Total compensation costs (in Korean

won) ￦6,483 millionEstimated exercise date (exercise

date) After July 27, 2018Valuation method Fair value method

Changes in the number of stock options and the weighted-average exercise price as ofDecember 31, 2016 and 2017, are as follows:


sharesexercisable

9thgrant ￦263,123 ￦54,913 ￦181,685 ￦ — ￦136,351 ￦— ￦ —

10thgrant — 318,506 — — — 318,506 —

Total ￦263,123 ￦373,419 ￦181,685 ￦ — ￦136,351 ￦318,506 ￦ —


sharesexercisable

10thgrant ￦318,506 ￦— ￦193,094 ￦ — ￦125,412 ￦— ￦ —

11thgrant — 316,949 — — — 316,949 —

Total ￦318,506 ￦316,949 ￦193,094 ￦ — ￦125,412 ￦316,949 ￦ —

1 The weighted average price of ordinary shares at the time of exercise during 2017was￦31,797 (2016:￦31,750).


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12 Months EndedOperating Revenues Dec. 31, 2017Text block1 [abstract]Operating Revenues 25. Operating Revenues

Operating revenues for the years ended December 31, 2015, 2016 and 2017, are asfollows:


Total ￦22,699,856 ￦23,120,878 ￦23,546,929


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12 Months EndedOperating Expenses Dec. 31, 2017Text block1 [abstract]Operating Expenses 26. Operating Expenses

Operating expenses for the years ended December 31, 2015, 2016 and 2017, are asfollows:

(In millions of Korean won) 2015 2016 2017Salaries and wages ￦3,303,484 ￦3,477,596 ￦3,568,456Depreciation 2,756,131 2,762,773 2,745,969Amortization of intangible assets 582,467 582,493 618,533Commissions 1,036,852 1,099,429 1,085,865Interconnection charges 689,293 690,285 640,612International interconnection fee 231,060 216,633 214,058Purchase of inventories 3,963,036 3,407,263 4,053,693Changes of inventories (198,028 ) 162,323 (187,439 )Sales commission 1,856,595 1,968,035 2,201,778Service cost 1,163,887 1,322,337 1,428,405Utilities 319,303 323,406 323,313Taxes and dues 256,958 255,480 279,574Rent 469,950 455,457 448,772Insurance premium 211,104 178,231 69,384Installation fee 249,413 156,669 146,783Advertising expenses 177,348 185,560 197,114Research and development

expenses 183,821 167,881 168,635Card service cost 2,959,765 3,049,559 3,094,894Others 1,410,349 1,319,688 1,379,438

Total ￦21,622,788 ￦21,781,098 ￦22,477,837

Details of employee benefits for the years ended December 31, 2015, 2016 and2017, are as follows:

(In millions of Korean won) 2015 2016 2017Short-term employee benefits ￦3,055,699 ￦3,206,904 ￦3,297,944Post-employment benefits(Defined

benefit plan) 202,814 208,942 209,770Post-employment benefits(Defined

contribution plan) 35,699 46,023 45,936Post-employment benefits(Others) 5,535 8,017 6,949Share-based payment 3,737 7,710 7,660

Total ￦3,303,484 ￦3,477,596 ￦3,568,259


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12 Months EndedFinancial Income and Costs Dec. 31, 2017Text block1 [abstract]Financial Income and Costs 27. Financial Income and Costs

Details of financial income for the years ended December 31, 2015, 2016 and 2017,are as follows:

(In millions of Korean won) 2015 2016 2017Interest income ￦70,035 ￦115,686 ￦93,078Gain on foreign currency transactions 18,766 24,915 79,653Gain on foreign currency translation 11,280 12,165 225,580Gain on settlement of derivatives 368 8,515 —Gain on valuation of derivatives 141,512 109,436 57Others 30,899 25,422 7,960

Total ￦272,860 ￦296,139 ￦406,328

Details of financial expenses for the years ended December 31, 2015, 2016 and2017, are as follows:

(In millions of Korean won) 2015 2016 2017Interest expenses ￦385,925 ￦337,219 ￦302,464Loss on foreign currency transactions 42,831 37,936 40,303Loss on foreign currency translation 175,613 121,949 12,239Loss on settlement of derivatives 6,280 632 58,569Loss on valuation of derivatives 1,733 138 209,582Loss on disposal of trade receivables 2,539 15,838 20,355Impairment loss on available-for-sale

financial assets 1,805 966 9Others 28,605 409 1,010

￦645,331 ￦515,087 ￦644,531


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12 Months EndedDeferred Income Tax andIncome Tax Expense Dec. 31, 2017

Text block1 [abstract]Deferred Income Tax andIncome Tax Expense

28. Deferred Income Tax and Income Tax Expense

The analysis of deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2017, is asfollows:



more than 12 months 1,124,420 1,140,252￦1,390,417 ￦1,458,591


more than 12 months (778,655 ) (859,126 )(826,688 ) (874,831 )


The gross movements on the deferred income tax account for the years ended December 31, 2016 and2017, are calculated as follows:


The movement in deferred income tax assets and liabilities during the year, without taking into considerationthe offsetting of balances within the same tax jurisdiction, is as follows:



Othercomprehensive


Derivative instruments ￦(19,155 ) ￦ (33,569 ) ￦ 3,536 ￦(49,188 )Available-for-sale financial assets (29,430 ) (10 ) (2,262 ) (31,702 )Investment in subsidiaries,

associates and joint ventures (50,235 ) (666 ) 155 (50,746 )Depreciation (53,872 ) 14,374 — (39,498 )Advanced depreciation provision (231,692) 6,005 — (225,687)Deposits for severance benefits (251,924) (55,806 ) — (307,730)Accrued income (1,808 ) (216 ) — (2,024 )Reserve for technology and

human resource development (1,216 ) 469 — (747 )Others (135,802) 16,436 — (119,366)

(775,134) (52,983 ) 1,429 (826,688)Deferred tax assets

Provisions for impairment ontrade receivables 136,743 (26,467 ) — 110,276

Inventory valuation 56 (8 ) — 48Contribution for construction 19,618 (1,527 ) — 18,091Accrued expenses 64,117 16,239 — 80,356Provisions 20,353 (132 ) — 20,221Property, plant and equipment 239,791 (6,876 ) — 232,915Retirement benefit obligations 331,980 41,857 (1,345 ) 372,492Withholding of facilities expenses 7,360 (450 ) — 6,910Accrued payroll expenses 21,634 4,281 — 25,915Deduction of installment

receivables 10,513 3,374 — 13,887Assets retirement obligation 16,974 1,112 — 18,086Gain or loss foreign currency

translation 43,283 24,418 — 67,701Deferred revenue 43,792 (17,679 ) — 26,113Real-estate sales 2,980 871 — 3,851



Othercomprehensive

income Ending


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Tax credit carryforwards 212,820 (13,221 ) — 199,599Accumulated deficit 107,485 (107,485) — —Others 211,382 (17,426 ) — 193,956

1,490,881 (99,119 ) (1,345 ) 1,390,417Net balance ￦715,747 ￦(152,102) ￦ 84 ￦563,729


Beginning

Statementof

operations

Othercomprehensive


Derivative instruments ￦(49,188 ) ￦49,188 ￦ — ￦—Available-for-sale financial assets (31,702 ) (164 ) 1,346 (30,520 )Investment in subsidiaries,

associates and joint ventures (50,746 ) (42,659) (3,245 ) (96,650 )Depreciation (39,498 ) 39,498 — —Advanced depreciation provision (225,687) (22,905) — (248,592)Deposits for severance benefits (307,730) (80,126) — (387,856)Accrued income (2,024 ) (126 ) — (2,150 )Reserve for technology and

human resource development (747 ) 433 — (314 )Others (119,366) 10,617 — (108,749)

(826,688) (46,244) (1,899 ) (874,831)Deferred tax assets

Derivative instruments — 34,572 (9,848 ) 24,724Provisions for impairment on

trade receivables 110,276 11,380 — 121,656Inventory valuation 48 (48 ) — —Contribution for construction 18,091 180 — 18,271Accrued expenses 80,356 10,683 — 91,039Provisions 20,221 3,858 — 24,079Property, plant and equipment 232,915 (841 ) — 232,074Retirement benefit obligations 372,492 67,751 26,806 467,049Withholding of facilities expenses 6,910 472 — 7,382Accrued payroll expenses 25,915 (10,786) — 15,129Deduction of installment

receivables 13,887 (13,887) — —Assets retirement obligation 18,086 2,750 — 20,836Gain or loss foreign currency

translation 67,701 (67,558) — 143Deferred revenue 26,113 221 — 26,334Real-estate sales 3,851 4,847 — 8,698Tax credit carryforwards 199,599 (48,823) — 150,776Deficit carried over — 2,699 — 2,699


Beginning

Statementof

operations

Othercomprehensive


1,390,417 44,473 23,701 1,458,591Net balance ￦563,729 ￦(1,771 ) ￦ 21,802 ￦583,760

The tax impacts recognized directly to equity as of December 31, 2015, 2016 and 2017, are as follows:


Beforerecognition

Taxeffect

Afterrecognition

Beforerecognition

Taxeffect

Afterrecognition

Beforerecognition

Taxeffect

Afterrecognition

Available-for-sale valuationgain(loss) ￦ (47,515 ) ￦11,499 ￦ (36,016 ) ￦ 9,347 ￦(2,262) ￦ 7,085 ￦(5,561 ) ￦1,346 ￦ (4,215 )

Hedge instruments valuationgain(loss) 18,406 (4,454 ) 13,952 (14,611 ) 3,536 (11,075 ) 40,694 (9,848 ) 30,846

Remeasurements from netdefined benefit liabilities (49,963 ) 12,091 (37,872 ) 5,558 (1,345) 4,213 (110,768 ) 26,806 (83,962 )

Shares of gain(loss) ofassociates and jointventures (5,297 ) 1,282 (4,015 ) (641 ) 155 (486 ) 13,410 (3,245 ) 10,165

Foreign currency translationadjustment (6,443 ) 1,559 (4,884 ) (7,133 ) 1,726 (5,407 ) (27,865 ) 6,743 (21,122 )

Total ￦ (90,812 ) ￦21,977 ￦ (68,835 ) ￦ (7,480 ) ￦1,810 ￦ (5,670 ) ￦(90,090 ) ￦21,802 ￦ (68,288 )

Details of income tax expense(benefit) for the years ended December 31, 2015, 2016 and 2017, arecalculated as follows:

(In millions of Korean won) 2015 2016 2017Current income tax expense(benefit) ￦(5,003 ) ￦176,212 ￦268,885Impact of change in deferred taxes 232,134 152,102 1,771



Income tax expense ￦227,131 ￦328,314 ￦270,656

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using theweighted average tax rate applicable to profits of the entities as follows:







12 Months EndedEarnings per Share Dec. 31, 2017Text block1 [abstract]Earnings per Share 29. Earnings per Share

Basic earnings per share is calculated by dividing the profit from operationsattributable to equity holders of the Group by the weighted average number ofordinary shares outstanding during the period, excluding ordinary shares purchasedby the Group and held as treasury stock.

Basic earnings per share from operations for the years ended December 31, 2015,2016 and 2017, is calculated as follows:

2015 2016 2017Profit attributable to

ordinary shares (Inmillions of Koreanwon) ￦546,361 ￦708,362 ￦461,559

Profit from continuingoperations attributableto ordinary shares 404,045 708,362 461,559

Profit from discontinuedoperations attributableto ordinary shares 142,316 — —

Weighted averagenumber of ordinaryshares outstanding (Innumber of shares) 244,854,364 244,892,313 245,017,175

Basic earnings per share(In Korean won) 2,231 2,893 1,884

Basic earnings per sharefrom continuingoperations 1,650 2,893 1,884

Basic earnings per sharefrom discontinuedoperations 581 — —

Diluted earnings per share from operations is calculated by adjusting the weightedaverage number of ordinary shares outstanding to assume conversion of all dilutivepotential ordinary shares. The Controlling Company has dilutive potential ordinaryshares from convertible preferred stocks, stock options and other share-basedpayments.

Diluted earnings per share from operations for the years ended December 31, 2015,2016 and 2017 is calculated as follows:

2015 2016 2017Profit attributable to

ordinary shares (Inmillions of Koreanwon) ￦546,361 ￦708,362 ￦461,559

Adjusted net incomeattributable toordinary shares (Inmillions of Koreanwon) (75 ) (67 ) —


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Diluted profit attributableto ordinary shares (Inmillions of Koreanwon) 546,286 708,295 461,559

Diluted profit fromcontinuing operationsattributable toordinary shares 403,970 708,295 461,559

Diluted income fromdiscontinuedoperationsattributable toordinary shares 142,316 — —

Number of dilutivepotential ordinaryshares outstanding(In number of shares) 1,104 84,245 79,880

Weighted averagenumber of ordinaryshares outstanding(In number of shares) 244,855,468 244,976,558 245,097,055

Diluted earnings pershare (In Koreanwon) 2,231 2,891 1,883

Diluted earnings pershare from continuingoperations 1,650 2,891 1,883

Diluted earnings pershare fromdiscontinuedoperations 581 — —



12 Months EndedDividend Dec. 31, 2017Text block1 [abstract]Dividend 30. Dividend

The dividends paid by the Group in 2017 and 2016 were￦195,977 million(￦800 per share) and￦122,425 million (￦500 per share), respectively.There were no dividends paid in 2015. A dividend in respect of the yearended December 31, 2017, of￦1,000 per share, amounting to a totaldividend of￦245,097 million, was approved at the shareholders’ meetingon March 23, 2018.


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12 Months EndedCash Generated fromOperations Dec. 31, 2017

Text block1 [abstract]Cash Generated fromOperations

31. Cash Generated from Operations

Cash flows from operating activities for the years ended December 31, 2015, 2016and 2017, are as follows:

(In millions of Korean won) 2015 2016 20171. Profit for the year ￦624,685 ￦795,117 ￦546,3412. Adjustments to reconcile net

incomeIncome tax expense 346,146 328,314 270,656Interest income (161,123 ) (130,066 ) (108,639 )Interest expense 445,814 337,219 302,464Dividends income (11,371 ) (3,926 ) (4,785 )Depreciation 3,030,821 2,821,779 2,802,531Amortization of intangible

assets 609,185 599,721 635,150Provision for severance

benefits 217,787 217,255 218,966Impairment losses on trade

receivables 161,448 92,711 45,704Share of net profit or loss of

associates and jointventures (5,562 ) (2,547 ) 15,480

Loss(gain) on disposal ofassociates and jointventures (4,848 ) (1,450 ) 979

Impairment loss of associatesand joint ventures — 17,128 3,662

Gain on disposal ofsubsidiaries (256,230 ) — —

Loss on disposal of property,plant and equipment andinvestment in properties 129,466 74,913 150,293

Loss on disposal of intangibleassets 33,978 7,703 4,271

Loss on impairment ofintangible assets 292,345 135,264 116,095

Loss on foreign currencytranslation 164,374 109,784 (213,341 )

Loss(gain) on valuation ofderivatives (306,538 ) (117,181 ) 268,094

Impairment losses onavailable-for-sale financialassets 1,805 966 9

Gain on disposal ofavailable-for-sale financialassets (131,041 ) (22,695 ) (89,598 )

Others 24,140 64,863 (251,193 )3. Changes in operating assets

and liabilitiesDecrease(increase) in trade

receivables 112,674 252,196 (303,340 )Increase in other receivables (21,749 ) (770,893 ) (346,013 )


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Decrease(increase) in othercurrent assets (19,701 ) 48,549 11,792

Increase in other non-currentassets (137,532 ) (51,765 ) (43,790 )

Decrease(increase) ininventories (270,343 ) 167,873 (205,403 )

Increase(decrease) in tradepayables 81,295 (114,838 ) 162,110

Increase(decrease) in otherpayables (48,680 ) 705,807 214,689

Increase(decrease) in othercurrent liabilities (9,452 ) 37,798 288,553

Increase in other non-currentliabilities 119,836 30,762 174,618

Decrease in provisions (8,902 ) (12,583 ) (12,574 )Decrease in deferred revenue (82,582 ) (69,179 ) (13,086 )Increase in plan assets (223,194 ) (224,244 ) (203,420 )Payment of severance

benefits (117,691 ) (121,835 ) (118,391 )4. Cash generated from operations

(1+2+3) ￦4,579,260 ￦5,202,520 4,318,884

The Group made agreements with securitization specialty companies and disposedof its trade receivables related to handset sales (Note 19). Cash flows from thedisposals are presented in cash generated from operations.

Significant transactions not affecting cash flows for the years ended December 31,2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Reclassification of the current

portion of debentures ￦1,551,300 ￦1,617,175 ￦1,416,066Reclassification of

construction-in-progress toproperty, plant and equipment 2,373,023 2,212,324 2,686,591

Reclassification of accountspayable from property, plant andequipment 78,663 91,407 225,601

Reclassification of accountspayable from intangible assets (170,870 ) 668,564 (227,108 )

Reclassification of payable fromdefined benefit liability 1,675 5,746 36,209

Reclassification of payable fromplan assets 13,717 (9,731 ) 43,035



12 Months EndedChanges in LiabilitiesArising from Financing

Activities Dec. 31, 2017

Text block1 [abstract]Changes in Liabilities Arisingfrom Financing Activities

32.Changes in Liabilities Arising from Financing Activities

Changes in liabilities arising from financial activities for the periods endedDecember 31, 2017, are as follows:

2017Non-cash Ending(in millions

of Koreanwon) Beginning Cash flows

Newlyacquired

Exchangedifference

Fair valuechange

Otherchanges

Borrowing ￦8,120,791 ￦(1,163,917) ￦— ￦(221,495) ￦— ￦(51,717 ) ￦6,683,662Financial

leaseliabilities 180,714 (71,735 ) 68,938 — — (1,039 ) 176,878

Derivativeassets 227,318 (71,370 ) — (76,552 ) 2,687 (74,694 ) 7,389

Derivativeliabilities 16,901 — — 130,674 (28,015 ) (20,740 ) 98,820

Total ￦8,545,724 ￦(1,307,022) ￦68,938 ￦(167,373) ￦(25,328 ) ￦(148,190) ￦6,966,749


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12 Months EndedSegment Information Dec. 31, 2017Text block1 [abstract]Segment Information 33. Segment Information

The Group’s operating segments are as follows:

Details Business serviceMarketing/

Customer Mobile/fixed line telecommunication service and convergence businessFinance Credit card businessSatellite TV Satellite broadcasting businessAll other

segmentsInformation technology business, security business, global businessand other businesses operated by subsidiaries

Details of each segment for the years ended December 31, 2015, 2016 and 2017,are as follows:

2015






2016






2017


Operatingincome




Operating revenues for the year ended December 31, 2015, 2016 and 2017 andnon-current assets as of December 31, 2016 and 2017 by geographical regions, areas follows:



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Total ￦22,699,856 ￦23,120,878 ￦23,546,929 ￦18,482,958 ￦17,384,554

1 Non-current assets include property, plant and equipment, intangible assets andinvestment properties.



12 Months EndedRelated Party Transactions Dec. 31, 2017Text block1 [abstract]Related Party Transactions 34. Related Party Transactions

The list of related party of the Group as of December 31, 2017, is asfollows:

Relationship Name of EntryAssociates

and jointventures

Korea Information & Technology InvestmentFund, K- Realty CR-REITs No.1, KT-SB Venture Investment Fund,Boston Global Film & Contents Fund L.P., QTT Global (Group)Company Limited, CU Industrial Development Co., Ltd., PHIHealthcare., KD Living, Inc., MOS GS Co., Ltd., MOS Daegu Co.,Ltd., MOS Chungcheong Co., Ltd., MOS Gangnam Co., Ltd., MOSGB Co., Ltd., MOS BS Co., Ltd., MOS Honam Co., Ltd., Oscar Ent.Co., Ltd., KT-CKP New Media Investment Fund, LoginD Co.,Ltd., K-REALTY CR-REIT 6, K Bank, Inc.,NgeneBio, ISU-kth Contents Investment Fund, Daiwon BroadcastingCo., Ltd., KT-DSC creative economy youth start-up investmentfund, Gyeonggi-KT Green Growth Fund, Korea electronic Vehiclecharging service, PT. Mitra Transaksi Indonesia, K-REALTY RENTALHOUSING REIT 2, KT-IBKC future investment fund 1, AI RESEARCHINSTITUTE, Gyeonggi-KT Yoojin Superman Fund, FUNDA Co., Ltd.,FUNDA Co., Ltd., CHAMP IT Co.,Ltd., GE Premier 1st CorporateRestructuring Real Estate Investment Trust Company, AllianceInternet Corp.

Outstanding balances of receivables and payables in relations totransactions with related parties as of December 31, 2016 and 2017, are asfollows:




receivablesTrade

payablesOther

payablesKT Wibro Infra Co., Ltd. ￦— ￦— ￦— ￦ — ￦43,394K-Realty CR-REITs No.1 882 — 33,110 — —MOS GS Co., Ltd. 9 — 1 — 1,494MOS Daegu Co., Ltd. 1 — — — 1,082MOS Chungcheong Co.,Ltd. 6 — 1 — 2,065MOS Gangnam Co.,Ltd. 6 — 1 — 1,129MOS GB Co., Ltd. 19 — 5 — 2,167MOS BS Co., Ltd. 34 — 1 — 1,114MOS Honam Co., Ltd. 2 — — — 1,289Others 481 — 179 3 1,266

Associatesand jointventures

Total ￦ 1,440 ￦— ￦33,298 ￦ 3 ￦55,000




receivablesTrade

payablesOther

payablesK-Realty CR-REITs No.1￦ 778 ￦— ￦33,800 ￦ — ￦—MOS GS Co., Ltd. 17 — — — 392

Associatesand jointventures MOS Daegu Co., Ltd. 1 — — — 1,388


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MOS Chungcheong Co.,Ltd. 1 — 290 — 1,827MOS Gangnam Co.,Ltd. 6 — 1 — 287MOS GB Co., Ltd. 17 — 1 — 778MOS BS Co., Ltd. 34 — 1 — 46MOS Honam Co., Ltd. 2 — 1 — 384K Bank, Inc. 1,338 — 7,994 — 296NgeneBio 1 2,510 — — 3Others 54 — 1,281 — 2,135

Total ￦ 2,249 ￦2,510 ￦43,369 ￦ — ￦7,536

Significant transactions with related parties for the years endedDecember 31, 2015, 2016 and 2017, are as follows:


KT Service Bukbu1 ￦2,143 ￦28,550Associatesand jointventures

Information Technology Solution NambuCorporation1 2,707 24,025Information Technology Solution SeobuCorporation1 2,324 20,031Information Technology Solution BusanCorporation1 1,496 14,049KT Service Nambu1 1,972 21,133Information Technology Solution HonamCorporation1 2,050 29,538Information Technology Solution DaeguCorporation1 1,256 18,272KT Wibro Infra Co., Ltd. 11 814Smart Channel Co., Ltd. 6,545 4,722K- Realty CR-REITs No.1 2,133 38,167MOS GS Co., Ltd. 752 17,474MOS Daegu Co., Ltd. 357 12,227MOS Chungcheong Co., Ltd. 310 12,735MOS Gangnam Co., Ltd. 454 15,829MOS GB Co., Ltd. 964 21,582MOS BS Co., Ltd. 453 15,482MOS Honam Co., Ltd. 470 17,004Others 4,394 13,510

Total3 ￦30,791 ￦325,144

1 The transactions for the year ended December 31, 2015, after KT Service BukbuCo., Ltd. and KT Service Nambu Co., Ltd. were merged and included in theconsolidation scope.

2 The amount includes acquisition of property, plant and equipment, and others.3 Operating income amounting to￦6,634 million of KT Capital Co., Ltd. and KT

Rental that were classified as discontinued operations during the year endedDecember 31, 2015, is included.


KT Wibro Infra Co., Ltd. ￦11 ￦391Smart Channel Co., Ltd. 1 766 —K- Realty CR-REITs No.1 1,989 37,469MOS GS Co., Ltd. 663 17,361MOS Daegu Co., Ltd. 291 12,220MOS Chungcheong Co., Ltd. 408 13,469


MOS Gangnam Co., Ltd. 412 15,797



MOS GB Co., Ltd. 891 21,802MOS BS Co., Ltd. 441 15,346MOS Honam Co., Ltd. 418 14,389Others 1,719 29,422

Total ￦8,009 ￦177,666

1 The transactions for the year ended December 31, 2016, before Smart ChannelCo., Ltd. was included in the consolidation scope.



K- Realty CR-REITs No.1 ￦2,233 ￦35,532MOS GS Co., Ltd. 704 16,946MOS Daegu Co., Ltd. 335 8,514MOS Chungcheong Co., Ltd. 455 15,542MOS Gangnam Co., Ltd. 484 16,380MOS GB Co., Ltd. 987 21,651MOS BS Co., Ltd. 460 15,957MOS Honam Co., Ltd. 493 14,294K Bank, Inc.3 29,939 59NgeneBio2 43 —


Others 1,149 11,384Total ￦37,282 ￦156,259

1 The amount includes acquisition of property, plant and equipment and others.2 It is the amount after excluded from consolidation during the year.3 The sales amount consists of providing services of IT system construction to K

Bank, Inc.

Key management compensation for the years ended December 31, 2015,2016 and 2017, consists of:


Total ￦3,865 ￦4,247 ￦4,521

Fund transactions with related parties for the years ended December 31,2016 and 2017, are as follows:

2016


Equitycontributions


Associates and joint venturesKT-DSC creative economy youth start-up investment

fund ￦ 6,000 ￦—PT. Mitra Transaksi Indonesia 16,626 —K-REALTY RENTAL HOUSING REIT 2 5,500 —AI RESEARCH INSTITUTE 3,000 —KT-IBKC future investment fund 1 3,750 —Gyeonggi-KT Yoojin Superman Fund 1,000 —FUNDA Co., Ltd. 2,799 —K-Realty CR-REITs No.1 — 4,186Korea Information & Technology Investment Fund — 3,201Daiwon Broadcasting Co., Ltd. — 85Others — 82



Total ￦ 38,675 ￦7,554

2017


Equitycontributions


Associates and joint venturesPT. Mitra Transaksi Indonesia ￦ 5,194 ￦—KT-IBKC future investment fund 1 7,500 —CHAMP IT Co.,Ltd. 750 —Korea Electronic Vehicle Charging Service 864 —Gyeonggi-KT Yoojin Superman Fund 1,000 —K-REALTY CR REIT 1 — 5,392K Bank, Inc. 26,543 —Korea Information & Technology Investment Fund — 739MOS GS Co., Ltd. — 12MOS Daegu Co., Ltd. — 12MOS Chungcheong Co., Ltd. — 12MOS Gangnam Co., Ltd. — 10MOS GB Co., Ltd. — 15MOS BS Co., Ltd. — 10MOS Honam Co., Ltd. — 10

Total ￦ 41,851 ￦6,212



12 Months EndedFinancial Risk Management Dec. 31, 2017Text block1 [abstract]Financial Risk Management 35. Financial Risk Management

(1) Financial Risk Factors

The Group’s activities expose it to a variety of financial risks: market risk (includingcurrency risk, fair value interest rate risk, cash flow interest rate risk and price risk),credit risk and liquidity risk. The Group’s overall risk management program focuseson the unpredictability of financial markets and seeks to minimize potential adverseeffects on the Group’s financial performance. The Group uses derivative financialinstruments to hedge certain risk exposures.

The Group’s financial policy is set up in the long-term perspective and annuallyreported to the Board of Directors. The financial risk management is carried out bythe Value Management Office, which identifies, evaluates and hedges financial risks.The treasury department in the Value Management Office considers various financemarket conditions to estimate the effect from the market changes.

1) Market risk

The Group’s market risk management focuses on controlling the extent of exposureto the risk in order to minimize revenue volatility. Market risk is a risk that decreasesvalue or profit of the Group’s portfolio due to changes in market interest rate, foreignexchange rate and other factors.

(i) Sensitivity analysis

Sensitivity analysis is performed for each type of market risk to which the Group isexposed. Reasonably possible changes in the relevant risk variable such asprevailing market interest rates, currency rates, equity prices or commodity pricesare estimated and if the rate of change in the underlying risk variable is stable, theGroup does not alter the chosen reasonably possible change in the risk variable. Thereasonably 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 andfinancing activities. Foreign exchange risk is managed within the range of thepossible effect on the Group’s cash flows. Foreign exchange risk unaffecting theGroup’s cash flows is not hedged but can be hedged at a particular situation.

As of December 31, 2015, 2016 and 2017, if the foreign exchange rate hadstrengthened/weakened by 10% with all other variables held constant, the effects onprofit before income tax and shareholders’ equity would have been as follows:

(In millions of Koreanwon)


rate Income before tax Shareholders’ equity10 % ￦ (52,157 ) ￦ (45,632 )2015.12.31-10 % 52,157 45,63210 % (28,134 ) (23,817 )2016.12.31-10 % 28,134 23,81710 % (10,132 ) (7,273 )2017.12.31-10 % 10,132 7,273

The above analysis is a simple sensitivity analysis which assumes that all thevariables other than foreign exchange rates are held constant. Therefore, the


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analysis does not reflect any correlation between foreign exchange rates and othervariables, nor the management’s decision to decrease the risk.

Details of financial assets and liabilities in foreign currencies as of December 31,2015, 2016 and 2017, are as follows:

2015 2016 2017



Financialassets


Financialassets


USD 183,254 2,351,003 210,474 2,536,090 236,476 1,908,831SDR1 444 849 311 737 306 738JPY 73,716 40,279,411 80,555 21,802,051 28,267 21,801,443GBP 8 888 1 151 — 74EUR 29 29 40 2,571 186 3,625DZD2 — — 471 — 47 —CNY 15,562 107 15,262 381 46,555 10UZS3 — — 39,531 — 136,787 —RWF4 — — 1,203 — 3,346 —IDR5 — — 15,646,011 53,142,167 14,886,393 710,162MMK6 — — 2,750 — 84 —TZS7 — — 29,987 — 317,348 —BWP8 — — 15 — 42 —HKD 9 — 254 — — —BDT9 6 — 69,473 — 38,074 —PLN10 207,273 — 106,025 — 338 —VND11 270,000 — 515,412 — 311,649 —CHF12 — — — — — 12


(iii) Price risk

As of December 31, 2015, 2016 and 2017, the Group is exposed to equity securitiesprice risk because the securities held by the Group are traded in active markets. Ifthe market prices had increased/decreased by 10% with all other variables heldconstant, the effects on profit before income tax and shareholders’ equity would havebeen as follows:

(In millions of Korean won) Fluctuation of price Income before tax Equity10% ￦ — ￦3,4692015.12.31-10% — (3,469)10% ￦ — ￦5392016.12.31-10% — (539 )10% ￦ — ￦6862017.12.31-10% — (686 )

The above analysis 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 withthe index.

(iv) Cash flow and fair value interest rate risk

The Group’s interest rate risk arises from liabilities in foreign currency such asforeign currency debentures. Debentures in foreign currency issued at variable ratesexpose the Group to cash flow interest rate risk which is partially offset by swaptransactions. Debentures and borrowings issued at fixed rates expose the Group tofair value interest rate risk. The Group sets the policy and operates to minimize theuncertainty of the changes in interest rates and financial costs.

As of December 31, 2015, 2016 and 2017, if the market interest rate had increased/decreased by 100bp with other variables held constant, the effects on profit beforeincome tax and shareholders’ equity would be as follows:


Fluctuationof


Shareholders’equity

+ 100 bp ￦ (3,601 ) ￦ (245 )2015.12.31- 100 bp 3,615 (5,764 )+ 100 bp ￦ (3,456 ) ￦ (1,673 )2016.12.31- 100 bp 3,445 (5,025 )+ 100 bp ￦ 1,942 ￦ 4,8682017.12.31- 100 bp (1,954 ) (5,198 )

The above analysis is a simple sensitivity analysis which assumes that all thevariables other than market interest rates are held constant. Therefore, the analysisdoes 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 managed on the Group basis with the purpose of minimizing financialloss. Credit risk arises from the normal transactions and investing activities, whereclients or other party fails to discharge an obligation on contract conditions. Tomanage credit risk, the Group considers the counterparty’s credit based on thecounterparty’s financial conditions, default history and other important factors.

Credit risk arises from cash and cash equivalents, derivative financial instrumentsand deposits with banks and financial institutions, as well as outstanding receivables.To minimize such risk, only the financial institutions with strong credit ratings areaccepted.



Financial assets at fair value through profit orloss 6,277 5,813

Derivative used for hedging 227,318 7,389Time deposits and others 716,769 1,333,317Available-for-sale financial assets 26,684 9,899Held-to-maturity financial assets 30,143 151




1 Total amounts guaranteed by the Group according to the guarantee contracts.

3) Liquidity risk

The Group manages its liquidity risk by liquidity strategy and plans. The Groupconsiders the maturity of financial assets and financial liabilities and the estimatedcash flows from operations.

The table below analyzes the Group’s liabilities (including interest expenses) intorelevant maturity groups based on the remaining period at the date of the end ofeach reporting period to the contractual maturity date. These amounts arecontractual undiscounted cash flows.

2016.12.31


years TotalTrade and other

payables ￦7,682,604 ￦1,121,452 ￦217,411 ￦9,021,467Borrowings(including

debentures) 2,034,524 4,834,151 2,458,749 9,327,424Other non-derivative

financial liabilities 233 3,272 22,917 26,422Financial guarantee

contracts1 56,373 — — 56,373Total ￦9,773,734 ￦5,958,875 ￦2,699,077 ￦18,431,686

2017.12.31





financial liabilities 4,117 8,452 — 12,569Financial guarantee

contracts1 26,738 — — 26,738Total ￦9,535,757 ￦4,895,013 ￦2,478,706 ￦16,909,476

1 Total amount guaranteed by the Group according to guarantee contracts. Cashflow from financial guarantee contracts is classified as the maturity group in theearliest period when the financial guarantee contracts can be executed.

Cash outflow and inflow of derivatives settled gross or net are undiscountedcontractual cash flow and can differ from the amount in the financial statements.

2015.12.31


5 years TotalOutflow ￦ 335,970 ￦2,138,379 ￦38,184 ￦2,512,533Inflow 276,066 2,284,219 46,194 2,606,479

2016.12.31


5 years TotalOutflow ￦1,174,147 ￦1,176,715 ￦536,005 ￦2,886,867Inflow 1,302,112 1,306,199 588,559 3,196,870

2017.12.31





(2) Management of Capital Management

The Group’s objectives when managing capital are to safeguard the Group’s ability tocontinue as a going concern in order to provide returns for shareholders and benefitsfor other shareholders and to maintain an optimal capital structure to reduce the costof capital.

The Group’s capital structure consists of liabilities including borrowings, cash andcash equivalents, and shareholders’ equity. The treasury department monitors theGroup’s capital structure and considers cost of capital and risks related each capitalcomponent.



The Group manages capital on the basis of the gearing ratio. This ratio is calculatedas net debt divided by total capital. Net debt is calculated as total borrowings lesscash and cash equivalents. Total capital is calculated as ‘equity’ in the statement offinancial position plus net debt.

The gearing ratios as of December 31, 2016 and 2017, are as follows:


(3) Offsetting Financial Assets and Financial Liabilities

Details of the Group’s recognized financial assets subject to enforceable masternetting arrangements or similar agreements are as follows:


Amounts not offset

Grossassets

Grossliabilities

offset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

assets forhedgingpurpose1 ￦35,334 ￦ — ￦35,334 ￦(5,707 ) ￦ — ￦29,627

Tradereceivables2 95,865 — 95,865 (91,662 ) — 4,203

￦131,199 ￦ — ￦131,199 ￦(97,369 ) ￦ — ￦33,830




Amounts not offset

Grossassets

Grossliabilities

offset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

assets forhedgingpurpose1 ￦3,284 ￦— ￦ 3,284 ￦(3,284 ) ￦ — ￦—

Tradereceivables2 85,755 (5,010) 80,745 (73,109 ) — 7,636

Other financialassets 8,680 (436 ) 8,244 (5,307 ) — 2,937

￦97,719 ￦(5,446) ￦ 92,273 ￦(81,700 ) ￦ — ￦10,573

1 The amount applied with master netting arrangements under the standardcontract of International Swap and Derivatives Association (ISDA).

2 The amount applied with netting arrangements under the reference offer of thetelecommunication facility interconnection and sharing data amongtelecommunications companies.

The Group’s recognized financial liabilities subject to enforceable master nettingarrangements or similar agreements are as follows:


Amounts not offset

Grossliabilities

Grossassetsoffset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

liabilities forhedgingpurpose 1 ￦20,627 ￦— ￦20,627 ￦(20,627 ) ￦ — ￦—

Tradepayables2 90,435 — 90,435 (86,184 ) — 4,251

Otherpayables2 48 (4 ) 44 — — 44

￦111,110 ￦(4 ) ￦111,106 ￦(106,811) ￦ — ￦4,295


Amounts not offset

Grossliabilities

Grossassetsoffset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

liabilitiesforhedgingpurpose 1 ￦26,135 ￦— ￦26,135 ￦(3,284 ) ￦ — ￦22,851

Tradepayables2 80,829 (5,217) 75,612 (73,109 ) — 2,503

Otherfinancialliabilities 5,549 (229 ) 5,320 (5,307 ) — 13

￦112,513 ￦(5,446) ￦107,067 ￦(81,700 ) ￦ — ￦25,367



12 Months EndedFair Value Dec. 31, 2017Text block1 [abstract]Fair Value 36. Fair Value

36.1Fair Value of Financial Instruments by Category

Carrying amount and fair value of financial instruments by category as ofDecember 31, 2016 and 2017, are as follows:

2016 2017



Financial assetsCash and cash equivalents1 ￦2,900,311 ￦— ￦1,928,182 ￦—Trade and other receivables1 6,036,363 — 6,643,115 —

Other financial assetsFinancial instruments at fair

value through profit or loss 6,277 6,277 5,813 5,813Derivative financial

instruments for hedgingpurpose 227,318 227,318 7,389 7,389

Time deposits and others1 716,769 — 1,333,317 —Held-to-maturity 30,143 30,143 151 151Available-for-sale financial

assets2 299,001 299,001 319,402 319,402￦10,216,182 ￦— ￦10,237,369 ￦—

Financial liabilitiesTrade and other liabilities1 ￦8,328,082 ￦— ￦8,425,503 ￦—Borrowings 8,120,791 8,184,195 6,683,662 6,738,326

Other financial liabilitiesFinancial instruments at fair



Other1 91,763 — 87,670 —￦16,557,537 ￦— ￦15,295,656 ￦—

1 The Group did not conduct fair value estimation since the book amount is areasonable approximation of the fair value.

2 Equity instruments that do not have a quoted price in an active market aremeasured at cost because their fair value cannot be measured reliably andexcluded from the fair value disclosures.

36.2Financial Instruments Measured at Cost

Available-for-sale financial assets measured at cost as of December 31,2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017K-Bank ￦36,500 ￦—IBK-AUCTUS Green Growth Private Equity Fund 9,506 8,518WALDEN No.6 Fund 4,710 4,670TRANSLINK No.2 Fund 9,395 9,395Storm IV Fund 7,550 8,453CBC II Fund 8,601 7,298


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Others 29,511 23,217￦105,773 ￦61,551

The range of cash flow estimates is significant and the probabilities of thevarious estimates cannot be reasonably assessed and therefore, theseinstruments are measured at cost.

The Group does not have any plans to dispose of the above-mentionedequities instruments in the near future. These instruments will be measuredat fair value when the Group can develop a reliable estimate of the fair value.

36.3Fair Value Hierarchy

Assets measured at fair value or for which the fair value is disclosed arecategorized within the fair value hierarchy, and the defined levels are asfollows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities(Level 1).

• Inputs other than quoted prices included within Level 1 that are observable for theasset or liability, either directly (that is, prices) or indirectly (that is, derived fromprices) (Level 2).

• Inputs for the asset or liability that are not based on observable market data (thatis, unobservable inputs) (Level 3).

Fair value hierarchy classifications of the financial assets and financialliabilities that are measured at fair value or its fair value is disclosed as ofDecember 31, 2016 and 2017, are as follows:


Other financial assetsFinancial assets at fair value

through profit or loss ￦— ￦— ￦6,277 ￦6,277Derivative financial assets

for hedging purpose — 227,318 — 227,318Available-for-sale financial

assets 5,387 5,725 287,889 299,0015,387 233,043 294,166 532,596

Disclosed fair valueAssociates and joint ventures 3,940 — — 3,940Investment properties1 — — 1,962,779 1,962,779

3,940 — 1,962,779 1,966,719￦9,327 ￦233,043 ￦2,256,945 ￦2,499,315


Financial liabilities at fairvalue through profit orloss ￦— ￦— ￦1,973 ￦1,973

Derivative financial liabilitiesfor hedging purpose — 14,928 — 14,928

— 14,928 1,973 16,901Disclosed fair value

Borrowings — — 8,184,195 8,184,195— — 8,184,195 8,184,195

￦— ￦14,928 ￦8,186,168 ￦8,201,096







assets 6,859 5,466 307,077 319,4026,859 12,855 312,890 332,604

Disclosed fair valueInvestment properties1 — — 1,755,600 1,755,600

— — 1,755,600 1,755,600￦6,859 ￦12,855 ￦2,068,490 ￦2,088,204



Derivative financial liabilitiesfor hedging purpose — 76,045 17,725 93,770


Borrowings — — 6,738,326 6,738,326— — 6,738,326 6,738,326

￦— ￦76,045 ￦6,761,102 ￦6,837,147

1 The highest and best use of a non-financial asset does not differ from its currentuse.

36.4Transfers Between Fair Value Hierarchy Levels of Recurring Fair ValueMeasurements

(a) Details of transfers between Level 1 and Level 2 of the fair value hierarchy for therecurring fair value measurements are as follows:

There are no transfers between Level 1 and Level 2 of the fair valuehierarchy for the recurring fair value measurements.

(b) Details of changes in Level 3 of the fair value hierarchy for the recurring fair valuemeasurements are as follows:

2016





Beginning balance ￦ 18 ￦ 267,337 ￦ 2,006Reclassification — 5,723 —Amount recognized in

other comprehensiveincome — 15,099 —

Purchases 13,461 1,561 —Amount recognized in

profit or loss (7,184 ) (426 ) (33 )Sales (18 ) (1,405 ) —Ending balance ￦ 6,277 ￦ 287,889 ￦ 1,973



2017






hedging purposeBeginning

balance ￦ 6,277 ￦ 287,889 ￦ 1,973 ￦ —Reclassification — (277 ) — —Amount

recognized inothercomprehensiveincome — 58,450 — (1,909 )

Purchases — 85,287 — —Amount

recognized inprofit or loss (464 ) (113 ) 3,078 19,634

Sales — (124,159 ) — —Ending balance ￦ 5,813 ￦ 307,077 ￦ 5,051 ￦ 17,725

36.5Valuation Technique and the Inputs

Valuation techniques and inputs used in the recurring, non-recurring fairvalue measurements and disclosed fair values categorized within Level 2and Level 3 of the fair value hierarchy as of December 31, 2016 and 2017,are as follows:


Other financial assetsDerivative financial assets

for hedging purpose ￦227,318 2 Discounted cash flow modelAvailable-for-sale financial

assets 293,614 2,3 Discounted cash flow modelOthers 6,277 3 Discounted cash flow model



Other financial liabilitiesDerivative financial liabilities

for hedging purpose 14,928 2 Discounted cash flow modelOther derivative financial

liabilities1,973 3 Discounted cash flow model

Comparable CompanyAnalysis



Other financial assetsDerivative financial assets

for hedging purpose ￦7,389 2Discounted cashflow model

Available-for-sale financialassets 312,543 2,3

Discounted cashflow model



Others5,813 3

Discounted cashflow model

Disclosed fair value

Investment properties 1,755,600 3Discounted cashflow model


Other financial liabilitiesDerivative financial liabilities

for hedging purpose 93,770 2,3 Hull-White Model,Discounted cashflow model

Other derivative financialliabilities

5,051 3 Discounted cashflow modelComparableCompany Analysis

Disclosed fair valueBorrowings 6,738,326 3 Discounted cash

flow model

36.6Valuation Processes for Fair Value Measurements Categorized WithinLevel 3

The Group uses external experts that perform the fair value measurementsrequired for financial reporting purposes. External experts report directly tothe chief financial officer (CFO), and discusses valuation processes andresults with the CFO in line with the Group’s reporting dates.

36.7Gains and losses on valuation at the transaction date

In the case that the Group values derivative financial instruments usinginputs not based on observable market data, and the fair value calculated bythe said valuation technique differs from the transaction price, then the fairvalue of the financial instruments is recognized as the transaction price. Thedifference between the fair value at initial recognition and the transactionprice is deferred and amortized using a straight-line method by maturity ofthe financial instruments. However, in the case that inputs of the valuationtechniques become observable in markets, the remaining deferred differenceis immediately recognized in full in profit for the year.

In relation to this, details and changes of the total deferred difference for theyears ended December 31, 2016 and 2017, are as follows:

(In millions ofKorean won) 2016 2017





Beginningbalance

￦ 11,293 ￦ — ￦ 8,470 ￦ —

Newtransactions

— — — 7,126

Disposal (2,823 ) — (2,823 ) (594 )Ending

balance￦ 8,470 ￦ — ￦ 5,647 ￦ 6,532



12 Months EndedInterests in UnconsolidatedStructured Entities Dec. 31, 2017

Text block1 [abstract]Interests in UnconsolidatedStructured Entities

37. Interests in Unconsolidated Structured Entities

Details of information about its interests in unconsolidated structured entities, whichthe Group does not have control over, including the nature, purpose and activities ofthe structured entity and how the structured entity is financed, are as follows:

Classesofentities Nature, purpose, activities and othersReal estate

financeA structured entity incorporated for the purpose of real estatedevelopment is provided with funds by investors’ investments inequity and borrowings from financial institutions (including long-termand short-term loans and issuance of ABCP due in three months),and based on these, the structured entity implements activities suchas real estate acquisition, development and mortgage loans. Thestructured entity repays loan principals with funds incurred frominstalment house sales after the completion of real estatedevelopment or with collection of the principal of mortgage loan. Theremaining shares are distributed to investors. As of December 31,2017, this entity is engaged in real estate finance structured entity,and generates revenues by receiving dividends from directinvestments in or receiving interests on loans to the structured entity.Financial institutions, including the Entity, are provided withguarantees including joint guarantees or real estate collateral frominvestors and others.

Remarks Nature, purpose, activities and othersConsequently, the entity is a priority over other parties in thepreservation of claim. However, when the credit rating of investorsand others decreases or when the value of real estate decreases,the entity may be obliged to cover losses.

PEF andinvestmentfunds

Minority investors including managing members contribute to PEFand investment funds incorporated for the purpose of providingfunds to the small, medium, or venture entities, and the managingmember implements activities such as investments in equity orloans based on the contributions. As of December 31, 2017, theentity is engaged in PEF and investment funds structured entity,and after contributing to PEF and investment funds, the entityreceives dividends for operating revenues from these contributions.The entity is provided with underlying assets of PEF and investmentfunds as collateral. However, when the value of the underlyingassets decreases, the entity may be obliged to cover losses.


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M&A finance A structured entity incorporated for the purpose of supporting acertain group’s financial structure improvement or acquiring equityor convertible bonds is provided with funds by investors’investments in equity and long-term or short-term borrowings fromfinancial institutions, and based on these, the structured entityacquires shares held by the entity, which has plans to improve itsfinancial structure, or to dispose convertible bonds and others. Thestructured entity repays loan principals with funds incurred fromdisposals of holding shares after a certain period. The remainingshares are distributed to investors. As of December 31, 2017, theentity is engaged in M&A finance structured entity, and receivesinterests. Financial institutions are provided with guaranteesincluding joint guarantees or shares subject to M&A from investorsand others. Consequently, the entity is a priority over other partiesin the preservation of claim. However, when the credit rating ofinvestors and others decreases or when the value of sharesprovided as collateral decreases, the Group may be obliged tocover losses.

Assetsecuritization

The Group transfers accounts receivable for handset sales to itsSpecial Purpose Company (“SPC”) for asset securitization. SPCissues the asset-backed securities with accounts receivable forhandset sales as an underlying asset, and makes payment for theunderlying asset acquired.

Other There are other structured entity types, which the entity is engagedin, such as shipping finance, SPAC and others. Interest income isrealized from the entity’s loans to the relevant structured entity.When the credit rating of the shipping group decreases, or the valueof vessels decreases, the entity may be obliged to cover losses.When SPAC is listed or merged after the entity invests in shares orconvertible bonds issued by the relevant structured entity, revenuesare realized from disposal of the shares of the convertible bonds.However, the entity may be obliged to cover losses when SPAC isliquidated if the SPAC is not listed or merged.

Details of scale of unconsolidated structured entities and nature of the risksassociated with an entity’s interests in unconsolidated structured entities as ofDecember 31, 2016 and 2017, are as follows:

2016(In millions of Koreanwon) Real Estate Finance

PEF &InvestmentFund

Asset-backedSecuritization Total

Total assets ofUnconsolidatedStructuredEntities ￦ 1,075,471 ￦ 3,759,246 ￦2,841,886 ￦7,676,603

Assetsrecognized instatementof financialposition

Otherfinancialassets ￦ 21,932 ￦ 60,782 ￦— ￦82,714

JointventuresandAssociates 10,086 165,638 — 175,724



Total ￦ 32,018 ￦ 226,420 ￦— ￦258,438Maximum loss

exposure1Investment

Assets ￦ 32,018 ￦ 226,420 ￦— ￦258,438Total ￦ 32,018 ￦ 226,420 ￦— ￦258,438

1 Maximum exposure to loss includes the investments recognized in the Group’sfinancial statements and the amounts which are probable to be determined whencertain conditions are met by agreements including purchase agreements, creditgranting and others.


PEF &InvestmentFund




Other financialassets ￦ 21,800 ￦ 52,666 — ￦74,466

Joint venturesand Associates 10,168 164,030 — 174,198


exposure1Investment

Assets ￦ 31,968 ￦ 216,696 — ￦248,664Total ￦ 31,968 ￦ 216,696 ￦— ￦248,664




12 Months EndedInformation About Non-controlling Interests Dec. 31, 2017

Text block1 [abstract]Information About Non-controlling Interests

38. Information About Non-controlling Interests

38.1Changes in Accumulated Non-controlling Interests

Profit or loss allocated to non-controlling interests and accumulated non-controllinginterests of subsidiaries that are material to the Group for the years ended December 31,2015, 2016 and 2017 are as follows:

2015










KT SkylifeCo., Ltd. 49.73 % ￦ 297,300 ￦ 27,032 ￦ (8,325 ) ￦873 ￦ 316,880

BC CardCo., Ltd. 30.46 % 292,931 62,943 (22,650 ) (10,303) 322,921

KTPowertelCo., Ltd. 55.15 % 70,231 (17,880 ) (1,118 ) (307 ) 50,926

KT HitelCo.,Ltd. 36.30 % 51,136 (608 ) — 161 50,689

KTTelecopCo., Ltd. 13.18 % 104,821 (1,000 ) — (393 ) 103,428

2016










KT SkylifeCo., Ltd. 49.73 % ￦ 316,880 ￦ 22,445 ￦ (8,279 ) ￦(1,370) ￦ 329,676

BC CardCo., Ltd. 30.46 % 322,921 47,068 (44,637 ) 3,986 329,338

KTPowertelCo., Ltd. 55.15 % 50,926 112 — 713 51,751

KT HitelCo.,Ltd. 35.27 % 50,689 1,274 — (165 ) 51,798

KTTelecopCo., Ltd. 13.18 % 103,428 19 — 85 103,532

2017










KT SkylifeCo., Ltd. 49.73 % ￦ 329,676 ￦ 9,395 ￦ (9,817 ) ￦(952 ) ￦ 328,302

BC CardCo., Ltd. 30.46 % 329,338 43,961 (29,490 ) (4,742) 339,067

KTPowertelCo., Ltd. 55.15 % 51,751 1,165 — 137 53,053


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KT HitelCo.,Ltd. 32.87 % 51,798 870 — 478 53,146

KTTelecopCo., Ltd. 13.18 % 103,532 381 — (445 ) 103,468

38.2Summarized Financial Information on Subsidiaries

The summarized financial information for each subsidiary with non-controlling intereststhat are material to the Group before inter-company eliminations is as follows:

Summarized consolidated statements of financial position as of December 31, 2015, 2016and 2017, are as follows:

2015(In millions of Koreanwon)

KT SkylifeCo., Ltd.

BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.

Non-controllingInterestsrate(%) 49.73 % 30.46 % 55.15 % 36.30 % 13.18 %

Current assets ￦279,480 ￦2,291,047 ￦65,739 ￦157,355 ￦58,457Non-current

assets 431,814 672,905 47,776 78,402 210,734Current liabilities 143,511 1,882,363 16,016 33,656 82,353Non-current

liabilities 74,339 63,271 5,166 282 52,613

Equity 493,444 1,018,318 92,333 201,819 134,225Accumulated

non-controllinginterests 316,880 322,921 50,926 50,689 103,428

Operatingrevenue 668,521 3,504,946 104,527 162,155 302,844

Profit or loss forthe year 72,987 218,969 (32,417 ) 7,258 (7,593 )

Totalcomprehensiveincome 73,147 188,360 (32,417 ) 6,769 (7,593 )

The profit or lossallocated tonon-controllinginterests 27,032 62,943 (17,880 ) (608 ) (1,000 )

Cash flows fromoperatingactivities 157,762 128,927 (12,016 ) 22,556 36,216

Cash flows frominvestingactivities (92,350 ) 73,118 10,691 (19,949 ) (91,846 )

Cash flows fromfinancingactivitiesbeforedividend paidtonon-controllinginterests (35,984 ) (75,121 ) (2,015 ) — (32,491 )

Dividend paid tonon-controllinginterests (8,325 ) (22,650 ) (1,118 ) — —



Net (decrease)/increase incash and cashequivalents 29,428 126,924 (3,340 ) 2,607 (88,121 )


KT SkylifeCo., Ltd.

BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.




liabilities 80,123 71,571 1,989 1,664 78,441Equity 546,496 1,048,661 93,826 202,261 133,209Accumulated



Profit or loss forthe year 68,863 163,131 202 4,298 143

Totalcomprehensiveincome 68,785 178,744 202 1,399 143

The profit or lossallocated tonon-controllinginterests 22,445 47,068 112 1,274 19

Cash flows fromoperatingactivities 155,399 92,818 7,271 28,987 60,461

Cash flows frominvestingactivities (210,480) (37,313 ) (8,191 ) (33,238 ) (45,243 )

Cash flows fromfinancingactivitiesbeforedividend paidtonon-controllinginterests (16,647 ) (147,306 ) — — —

Dividend paid tonon-controllinginterests (8,279 ) (44,637 ) — — —

Gain or lossforeigncurrencytranslation — (178 ) — 3 —

Net (decrease)/increase incash and cashequivalents (71,728 ) (91,801 ) (920 ) (4,251 ) 15,218


KT SkylifeCo., Ltd.

BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.






liabilities 24,555 86,369 487 3,021 41,064Equity 582,343 1,093,225 96,188 205,297 132,720Accumulated



Profit or loss forthe year 57,314 156,109 2,112 3,225 2,885

Totalcomprehensiveincome 55,586 141,719 2,362 3,036 (490 )

The profit or lossallocated tonon-controllinginterests 9,395 43,961 1,165 870 381


Cash flows frominvestingactivities (81,758 ) (568,518 ) (17,354 ) (36,086 ) (43,483 )



Gain or lossforeigncurrencytranslation — (184 ) — (47 ) —

Net (decrease)/increase incash and cashequivalents (2,228 ) (557,536 ) (3,459 ) (7,766 ) 13,779

38.3Transactions with Non-controlling Interests

The effect of changes in the ownership interest on the equity attributable to owners of theGroup during 2015, 2016 and 2017 is summarized as follows:

(in millions of Korean won) 2015 2016 2017Carrying amount of non-controlling interests

acquired ￦— ￦4,022 ￦(732 )Consideration paid to non-controlling interests 2,699 7,347 6,173Excess of consideration paid recognized in parent’s

equity ￦2,699 ￦11,369 ￦5,441



12 Months EndedEvents after ReportingPeriod Dec. 31, 2017

Text block1 [abstract]Events after Reporting Period 39. Events after Reporting Period

Subsequent to the reporting period, public bonds issued are as follow:

December 31, 2017(in millions of Korean won) Issue date Carrying amount Interest rate Redemption dateThe 190-1st Public

bond 2018.01.30 110,000 2.55 % 2021.01.29The 190-2nd Public

bond 2018.01.30 150,000 2.75 % 2023.01.30The 190-3rd Public

bond 2018.01.30 170,000 2.95 % 2028.01.30The 190-4th Public

bond 2018.01.30 70,000 2.93 % 2038.01.30

In accordance with a resolution of the board of directors on April 9, 2018,the Group decided to take over unmanned security business of SG SafetyCorporation for the consideration of￦28,000 million, with May 31, 2018 asthe acquisition date. The Group has signed the acquisition contract onApril 10, 2018.


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12 Months EndedSignificant AccountingPolicies (Policies) Dec. 31, 2017

Text block1 [abstract]Basis of Preparation 2.1 Basis of Preparation

The consolidated financial statements of the Group have been prepared inaccordance with International Financial Reporting Standards(“IFRS”) asissued by the International Accounting Standards Board (“IASB”).

The preparation of the consolidated financial statements requires the use ofcertain critical accounting estimates. It also requires management toexercise judgment in the process of applying the Group’s accountingpolicies. The areas involving a higher degree of judgment or complexity, orareas where assumptions and estimates are significant to the consolidatedfinancial statements are disclosed in Note 3.

Changes in Accounting Policyand Disclosures



The Group has applied the following standards and amendments for thefirst time for their annual reporting period commencing January 1, 2017.The adoption of these amendments did not have any material impact on thefinancial statements.


Amendments to IAS 7, Statement of Cash Flows requires to providedisclosures that enable used of financial statements to evaluate changes inliabilities arising from financing activities, including both changes arisingfrom cash flows and non-cash flows (Note 32)


Amendments to IAS 12 clarify how to account for deferred tax assetsrelated to debt instruments measured at fair value. IAS 12 providesrequirements on the recognition and measurement of current or deferredtax liabilities or assets. The amendments issued clarify the requirements onrecognition of deferred tax assets for unrealized losses, to address diversityin practice


Amendments to IFRS 12 clarify when an entity’s interest in a subsidiary, ajoint venture or an associate is classified as held for sales in accordancewith IFRS 5, the entity is required to disclose other information except forsummarized financial information in accordance with IFRS 12.


Certain new accounting standards and interpretations that have beenpublished that are not mandatory for annual reporting period commencingJanuary 1, 2017 and have not been early adopted by the Group are set outbelow.


When an investment in an associate or a joint venture is held by, or it heldindirectly through, an entity that is a venture capital organization, or a


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mutual fund, unit trust and similar entities including investment-linkedinsurance funds, the entity may elect to measure that investment at fairvalue through profit or loss in accordance with IFRS 9. The amendmentsclarify that an entity shall make this election separately for each associateof joint venture, at initial recognition of the associate or joint venture. TheGroup will apply these amendments retrospectively for annual periodsbeginning on or after January 1, 2018, and early adoption is permitted. TheGroup does not expect the amendments to have a significant impact on thefinancial statements.


Paragraph 57 of IAS 40 clarifies that a transfer to, or from, investmentproperty, including property under construction, can only be made if therehas been a change in use that is supported by evidence, and provides a listof circumstances as examples. The amendment will be effective for annualperiods beginning on or after January 1, 2018, with early adoptionpermitted. The Group does not expect the amendment to have a significantimpact on the financial statements.


Amendments to IFRS 2 clarify accounting for a modification to the termsand conditions of a share-based payment that changes the classification ofthe transaction from cash-settled to equity-settled. Amendments also clarifythat the measurement approach should treat the terms and conditions of acash-settled award in the same way as for an equity-settled award. Theamendments will be effective for annual periods beginning on or afterJanuary 1, 2018, with early adoption permitted. The Group does not expectthe amendments to have a significant impact on the financial statements.

- Enactments to IFRIC 22, Foreign Currency Transaction and AdvanceConsideration

According to these enactments, the date of the transaction for the purposeof determining the exchange rate to use on initial recognition of the relatedasset, expense or income (or part of it) is the date on which an entity initiallyrecognizes the non-monetary asset or non-monetary liability arising fromthe payment or receipt of advance consideration. If there are multiplepayments or receipts in advance, the entity shall determine a date of thetransaction for each payment or receipt of advance consideration. Theseenactments will be effective for annual periods beginning on or afterJanuary 1, 2018, with early adoption permitted. The Group does not expectthe enactments to have a significant impact on the financial statements.


IFRS 16 Leases issued on May 22, 2017 is effective for annual periodsbeginning on or after January 1, 2019, with early adoption permitted. Thisstandard will replace IAS 17 Leases, IFRIC 4 Determining whether anArrangement contains a Lease, SIC-15 Operating Leases-Incentives,and SIC-27Evaluating the Substance of Transactions Involving the LegalForm of a Lease.

At inception of a contract, the entity shall assess whether the contract is, orcontains, a lease. Also, at the date of initial application, the entity shallassess whether the contract is, or contains, a lease in accordance with thestandard. However, the entity will not need to reassess all contracts withapplying the practical expedient. As practical expedient, the entity can elect



to apply the new guidance regarding the definition of a lease only tocontracts entered into (or changed) on or after the date of initial application.Existing lease contracts will not need to be reassessed. This expedientmust be consistently applied to all contracts.

For a contract that is, or contains, a lease, the entity shall account for eachlease component within the contract as a lease separatelyfrom non-lease components of the contract. A lessee is required torecognize a right-of-use asset representing its right to use the underlyingleased asset and a lease liability representing its obligation to make leasepayments. The lessee may elect not to apply the requirements to short-termlease (a lease term of 12 months or less at the commencement date) andlow value assets (e.g. underlying assets below $ 5,000). In addition, as apractical expedient, the lessee may elect, by class of underlying asset, notto separate non-lease components from lease components, and insteadaccount for each lease component and anyassociated non-lease components as a single lease component.



• retrospectively to each prior reporting period presented applying IAS 8Accounting Policies, Changes in Accounting Estimates and Errors (Fullretrospective application); or

• retrospectively with the cumulative effect of initially applying the standardrecognized at the date of initial application.


The Group performed an impact assessment to identify potential financialeffects of applying IFRS 16. The assessment was performed based onavailable information as at December 31, 2017 to identify effects on 2017financial statements. The Group is analyzing the effects on the financialstatements; however, it is difficult to provide reasonable estimates offinancial effects until the analyses is complete.


The Company expects the effect on the financial statements applying thenew standard will not be significant


The new standard for financial instruments issued on September 25, 2015are effective for annual periods beginning on or after January 1, 2018 withearly application permitted. This standard will replace IAS 39, FinancialInstruments: Recognition and Measurement. The Group will apply thestandards for annual periods beginning on or after January 1, 2018

The standard requires retrospective application with some exceptions. Forexample, an entity is not required to restate prior period in relation toclassification and measurement (including impairment) of financialinstruments. The standard requires prospective application of its hedgeaccounting requirements for all hedging relationships except the accountingfor time value of options and other exceptions.

IFRS 9, Financial Instruments requires all financial assets to be classifiedand measured on the basis of the entity’s business model for managingfinancial assets and the contractual cash flow characteristics of the financial



assets. A new impairment model, an expected credit loss model, isintroduced and any subsequent changes in expected credit losses will berecognized in profit or loss. Also, hedge accounting rules amended toextend the hedging relationship, which consists only of eligible hedginginstruments and hedged items, qualifies for hedge accounting.

An effective implementation of IFRS 9 requires preparation processesincluding financial impact assessment, accounting policy establishment,accounting system development and the system stabilization. The impacton the Group’s financial statements due to the application of the standard isdependent on judgements made in applying the standard, financialinstruments held by the Group and macroeconomic variables.

The Group performed an impact assessment to identify potential financialeffects of applying IFRS 9. The assessment was performed based onavailable information as at December 31, 2017, and the results of theassessment are explained as below.


When implementing IFRS 9, the classification of financial assets will bedriven by the Group’s business model for managing the financial assets andcontractual terms of cash flow. The following table shows the classificationof financial assets measured subsequently at amortized cost, at fair valuethrough other comprehensive income and at fair value through profit or loss.If a hybrid contract contains a host that is a financial asset, the classificationof the hybrid contract shall be determined for the entire contract withoutseparating the embedded derivative.



principal and interest All otherHold the financial asset for thecollection of the contractualcash flows


Hold the financial asset for thecollection of the contractualcash flows and sale

Recognized at fair value throughother comprehensive income1

Hold for sale Recognized at fair value throughprofit or loss

Recognized atfair valuethrough profitor loss2

1 A designation at fair value through profit or loss is allowed only if suchdesignation mitigates an accounting mismatch (irrevocable)

2 Equity investments not held for trading can be recorded in other comprehensiveincome (irrevocable).

With the implementation of IFRS 9, the criteria to classify the financialassets at amortized cost or at fair value through other comprehensiveincome are more strictly applied than the criteria applied with IAS 39.Accordingly, the financial assets at fair value through profit or loss mayincrease by implementing IFRS 9 and may result an extended fluctuation inprofit or loss.

As of December 31, 2017, the Group owns loan and trade receivablesof￦ 9,653,443 million, financialassets available-for-sales of￦ 380,953 million.

According to IFRS 9, a debt instrument is measured at amortized cost if: a)the objective of the business model is to hold the financial asset for thecollection of the contractual cash flows, and b) the contractual cash flowsunder the instrument solely represent payments of principal and interest.



Also, a debt instrument is measured at fair value through othercomprehensive income if the objective of the business model is achievedboth by collecting contractual cash flows and selling financial assets; andthe contractual cash flows represents solely payments of principal andinterest on a specific date under contract terms. Based on results from theimpact assessment of IFRS 9, the application of the new standard as atDecember 31, 2017 does not have a material impact on the Group’sfinancial statements.

According to IFRS 9, equity instruments that are not held for trading, theGroup plans to elect an irrevocable election at initial recognition to classifythe instruments as assets measured at fair value through othercomprehensive income, which all subsequent changes in fair value beingrecognized in other comprehensive income and not recycled to profit orloss. As at December 31, 2017, the Group holds equity instrumentsof￦ 371,054 million classified as financial assets available-for-sale. Basedon results from the impact assessment of IFRS 9, the Group expects theapplication of IFRS 9 on these financial assets will not have a materialimpact on the financial statements.

According to IFRS 9, debt instruments those contractual cash flows do notrepresent solely payments of principal and interest and held for trading, andequity instruments that are not designated as instruments measured at fairvalue through other comprehensive income are measured at fair valuethrough profit or loss.


The new impairment model requires the recognition of impairmentprovisions based on expected credit losses (ECL) rather than only incurredcredit losses as is the case under IAS 39. It applies to financial assetsclassified at amortized cost, debt instruments measured at fair valuethrough other comprehensive income, lease receivables, contract assets,loan commitments and certain financial guarantee contracts.

As at December 31, 2017, the Group owns debt investment carried atamortized cost of￦ 9,653,594 million (loans and receivablesof￦ 9,653,443 million, financial asset held-to-maturity of￦ 151 million).And, the Group recognized loss allowance of￦ 523,799 million for theseassets.

As a result of the impact assessment, the Group expects the application ofthe new standard as at December 31, 2017 does not have a materialimpact on the Group’s financial statements.


Hedge accounting mechanics (fair value hedges, cash flow hedges andhedge of net investments in a foreign operations) required by IAS 39remains unchanged in IFRS 9, however, the new hedge accounting ruleswill align the accounting for hedging instruments more closely with theGroup’s risk management practices. As a general rule, more hedgerelationships might be eligible for hedge accounting, as the standardintroduces a more principles-based approach. IFRS 9 allows more hedginginstruments and hedged items to qualify for hedge accounting, and relaxesthe hedge accounting requirement by removing two hedge effectivenesstests that are a prospective test to ensure that the hedging relationship isexpected to be highly effective and a quantitative retrospective test (withinrange of 80-125 %) to ensure that the hedging relationship has been highlyeffective throughout the reporting period. As of December 31, 2017, the



Group applies the hedge accounting to its assets, liabilities that amountto￦ 7,389 million,￦ 93,770 million respectively.

The Group has performed an impact assessment with an assumption thatthe Group applies hedge accounting in accordance with IFRS 9. As a resultof the impact assessment, the Group expects the application of the newstandard as at December 31, 2017 does not have a material impact on theGroup’s financial statements.


The Group will apply IFRS 15 Revenue from Contracts withCustomers issued on November 6, 2015 for annual reporting periodsbeginning on or after January 1, 2018, and earlier application is permitted.This standard replaces IAS 18 Revenue, IAS 11 ConstructionContracts, SIC-31, Revenue-Barter Transactions Involving AdvertisingServices, IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements forthe Construction of Real Estate and IFRIC 18 Transfers of assets fromcustomers. The Group must apply IFRS 15 Revenue from Contracts withCustomers within annual reporting periods beginning on or after January 1,2018, and will elect the modified retrospective approach which willrecognize the cumulative impact of initially applying the revenue standardas an adjustment to retained earnings as at January 1, 2018, the period ofinitial application.

IAS 18 and other current revenue standard identify revenue as income thatarises in the course of ordinary activities of an entity and provides guidanceon a variety of different types of revenue, such as, sale of goods, renderingof services, interest, dividends, royalties and construction contracts.However, the new standard is based on the principle that revenue isrecognized when control of a good or service transfers to a customer so thenotion of control replaces the existing notion of risks and rewards. A newfive-step process must be applied before revenue from contract withcustomers can be recognized:

• Identify contracts with customers

• Identify the separate performance obligation

• Determine the transaction price of the contract

• Allocate the transaction price to each of the separate performance obligations,and

• Recognize the revenue as each performance obligation is satisfied.

The Group formed a task force team since fourth quarter of 2014 forpreparation of implementing IFRS 15 Revenue from Contracts withCustomers. Also the Group develops the internal control system andimplements accounting process system by analyzing the Group’s revenuestructure with accounting experts and IT specialists. IFRS 15 will affect notonly accounting treatments but also the general business practice includingsales strategy and operational structures. Therefore, the Groupaccomplished an orientation program for both Group’s directors andemployees, and periodically reported to the managements aboutimplementation plan and progress.





The Group provides telecommunication services and sellshandsets as their main business. With the implementation ofIFRS 15, the Group identifies performance obligations with acustomer such as providing telecommunication services,selling handsets and other. The timing of revenue recognitiondepends on a performance obligation is satisfied at a point intime or over time. Where a performance obligation is satisfiedover time, the related revenue is also recognized over time.


With implementation of IFRS 15, the Group allocated thetransaction price to each performance obligation identified in acontract based on the relative stand-alone selling prices of thegoods or services being provided to the customer. To allocatethe transaction price to each performance obligation on arelative stand-alone price basis, the Group determines thestand-alone selling price at contract inception of the distinctgood or service underlying each performance obligation in thecontract and allocate the transaction price in proportion tothose stand-alone selling price. The stand-alone selling price isthe price at which the Group would sell a promised good orservice separately to the customer. The best evidence of astand-alone selling price is the observable price of a good orservice when the Group sells that good or service separately insimilar circumstances and to similar customers. The Grouprecognizes the allocated amount as contract assets or contractliabilities, and amortizes it through the remaining period whichis adjusted in operating income.


The Group pays the commission fees when new customersubscribe for telecommunication services. The incrementalcontract acquisition costs are those commission fees that theGroup incurs to acquire a contract with a customer that it wouldnot have incurred if the contract had not been acquired.

According to IFRS 15, the Group recognizes as an asset theincremental contract acquisition costs and amortize it over theexpected period of benefit. However, as a practical expedient,the Group may recognize the incremental contract acquisitioncosts as an expense when incurred if the amortization periodof the asset is one year or less.

With implementation of IFRS 15, the Group’s operating incomeand expenses are expected to be decreased. Under themodified retrospective method, we will apply the rules to allopen contracts existing as of January 1, 2018, recognizing inbeginning retained earnings for 2018 an adjustmentbetween￦900 billion and￦1,100 billion for the cumulativeeffect of the change.

Consolidation 2.3 Consolidation

The Group has prepared the consolidated financial statements inaccordance with IFRS 10 Consolidated Financial Statements.

(1) Subsidiaries


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Subsidiaries are all entities over which the Group has control. The Groupcontrols an entity when the Group is exposed to, or has rights to, variablereturns from its involvement with the entity and has the ability to affect thosereturns through its power to direct the activities of the entity. Subsidiariesare fully consolidated from the date on which control is transferred to theGroup. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for businesscombinations by the Group. The consideration transferred is measured atthe fair values of the assets transferred, and identifiable assets acquiredand liabilities and contingent liabilities assumed in a business combinationare measured initially at their fair values at the acquisition date. The Grouprecognizes any non-controlling interest in the acquired entity onan acquisition-by-acquisition basis either at fair value or atthe non-controlling interest’s proportionate share of the acquired entity’s netidentifiable assets. All other non-controllinginterests are measured at fairvalues, unless otherwise required by other standards. Acquisition-relatedcosts are expensed as incurred.

The excess of consideration transferred, amount ofany non-controlling interest in the acquired entity and acquisition-date fairvalue of any previous equity interest in the acquired entity over the fairvalue of the net identifiable assets acquired is recorded as goodwill. If thoseamounts are less than the fair value of the net identifiable assets of thebusiness acquired, the difference is recognized directly in profit or loss as abargain purchase.

Intercompany transactions, balances and unrealized gains on transactionsbetween group companies are eliminated. Unrealized losses are alsoeliminated unless the transaction provides evidence of an impairment of thetransferred asset. Accounting policies of subsidiaries have been changedwhere necessary to ensure consistency with the policies adopted by theGroup.


Any difference between the amount of the adjustmentto non-controlling interest that do not result in a loss of control and anyconsideration paid or received is recognized in a separate reserve withinequity attributable to owners of the Controlling Group.


When the Group ceases to consolidate for a subsidiary because of a loss ofcontrol, any retained interest in the subsidiary is remeasured to its fair valuewith the change in carrying amount recognized in profit or loss.

(4) Associates

Associates are all entities over which the Group has significant influence,and investments in associates are initially recognized at acquisition costusing the equity method. Unrealized gains on transactions between theGroup and its associates are eliminated to the extent of the Group’s interestin the associates. If there is any objective evidence that the investment inthe associate is impaired, the Group recognizes the difference between therecoverable amount of the associate and its book amount as impairmentloss.




A joint arrangement, wherein two or more parties have joint control, isclassified as either a joint operation or a joint venture. A joint operatorrecognizes its direct right to the assets, liabilities, revenues and expensesof joint operations and its share of any jointly held or incurred assets,liabilities, revenues and expenses. A joint venturer has rights to the netassets relating to the joint venture and accounts for that investment usingthe equity method.

Segment Reporting 2.4 Segment Reporting

Information of each operating segment is reported in a manner consistentwith the business segment reporting provided to the chief operatingdecision-maker (Note 33). The chief operating decision-maker isresponsible for allocating resources and assessing performance of theoperating segments.

Foreign Currency Translation 2.5 Foreign Currency Translation


Items included in the financial statements of each of the Group’s entities aremeasured using the currency of the primary economic environment in whichthe each entity operates (the “functional currency’). The consolidatedfinancial statements are presented in Korean won, which is the ControllingCompany’s functional and presentation currency.


Foreign currency transactions are translated into the functional currencyusing the exchange rates at the dates of the transactions. Foreignexchange gains and losses resulting from the settlement of suchtransactions and from the translation of monetary assets and liabilitiesdenominated in foreign currencies at year end exchange rates are generallyrecognized in profit or loss.

Non-monetary items that are measured at fair value in a foreign currencyare translated using the exchange rates at the date when the fair value wasdetermined. Translation differences on assets and liabilities carried at fairvalue are reported as part of the fair value gain or loss. For example,translation differences on non-monetary assets and liabilities such asequities held at fair value through profit or loss are recognized in profit orloss as part of the fair value gain or loss and translation differenceson non-monetary assets such as equities classifiedas available-for-sale financial assets are recognized in othercomprehensive income.


The results and financial position of foreign operations that have afunctional currency different from the presentation currency are translatedinto the presentation currency as follows:

• assets and liabilities for each statement of financial position presented aretranslated at the closing rate at the end of the reporting period,

• income and expenses for each statement of profit or loss are translated ataverage exchange rates for the period,

• equity is translated at the historical exchange rate, and

• all resulting exchange differences are recognized in other comprehensiveincome.


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Cash and Cash Equivalents 2.6 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call withbanks, and other short-term highly liquid investments with original maturitiesof less than three months.

Financial Assets 2.7 Financial Assets


The Group classifies its financial assets into the following categories:financial assets at fair value through profit orloss, available-for-sale financial assets, loans and receivables,and held-to-maturity financial assets. Regular way purchases and sales offinancial assets are recognized on trade-date, the date on which the Groupcommits to purchase or sell the asset.

The Group may designate the entire hybrid (combined) contract as afinancial asset at fair value through profit or loss for a contract that containsone or more embedded derivatives.

At initial recognition, the Group measures a financial asset at its fair valueplus, 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 thefinancial asset. Transaction costs of financial assets carried at fair valuethrough profit or loss are expensed in profit orloss. Available-for-sale financial assets and financial assets at fair valuethrough profit or loss are subsequently carried at fair value. And, loans andreceivables and held-to-maturity investments are subsequently carried atamortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of financial assets atfair value through profit or loss are recognized in profit or loss within otherincome or other expenses. Gains or losses arising from changes inthe available-for-sale financial assets are recognized in othercomprehensive income, and amounts are reclassified to profit or loss whenthe associated assets are sold or impaired.

(2) Impairment

The Group assesses at the end of each reporting period whether there isobjective evidence that a financial asset or a group of financial assets isimpaired. A financial asset or a group of financial assets is impaired andimpairment losses are incurred only if there is objective evidence ofimpairment as a result of one or more events that occurred after the initialrecognition of the asset (a ‘loss event’) and that loss event (or events) hasan impact on the estimated future cash flows of the financial asset or agroup of financial assets that can be reliably estimated.

Impairment of loans and receivables is presented as a deduction in anallowance account. Impairment of other financial assets is directly deductedfrom their carrying amount. The Group writes off financial assets when theassets are determined to be no longer recoverable.

The criteria that the Group uses to determine that there is objectiveevidence of an impairment loss include:

• Significant financial difficulty of the issuer or obligor;

• A breach of contract, such as a default or delinquency in interest or principalpayments;


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• For economic or legal reasons relating to the borrower’s financial difficulty,granting to the borrower a concession that the lender would not otherwiseconsider;

• It becomes probable that the borrower will enter bankruptcy or other financialreorganization;

• The disappearance of an active market for that financial asset because offinancial difficulties; or

• Observable data indicating that there is a measurable decrease in theestimated future cash flows from a portfolio of financial assets since the initialrecognition of those assets, although the decrease cannot yet be identifiedwith the individual financial assets in the portfolio.

(3) Derecognition

If the Group transfers a financial asset and the transfer does not result inderecognition because the Group has retained substantially of all risks andrewards of ownership of the transferred asset due to a recourse in the eventthe debtor defaults, the Group continues to recognize the transferred assetin its entirety and recognizes a financial liability for the considerationreceived. The related financial liability is classified as ‘borrowings’ in thestatement of financial position.


Financial assets and liabilities are offset and the net amount reported in thestatements of financial position where there is a legally enforceable right tooffset the recognized amounts and there is an intention to settle on a netbasis or realize the assets and settle the liability simultaneously. The legallyenforceable right must not be contingent on future events and must beenforceable in the normal course of business and in the event of default,insolvency or bankruptcy of the Group or the counterparty.

Derivative Instruments 2.8 Derivative Instruments

Derivatives are initially recognized at fair value on the date when aderivative contract is entered into and are subsequently remeasured at theirfair value. Changes in the fair value of the derivatives that are not qualifiedfor hedge accounting are recognized in the statement of profit or loss within‘other income (expenses)’ and ‘finance income (expenses)’ according to thenature of transactions.

If the Group uses a valuation technique that incorporates data not obtainedfrom observable markets for the fair value at initial recognition of thefinancial instrument, there may be a difference between the transactionprice and the amount determined using that valuation technique (Day 1profit and loss). In these circumstances, the fair value of the financialinstrument is recognized as the transaction price and the difference isamortized by using the straight-line method over the life of the financialinstrument. If the fair value of the financial instrument is subsequentlydetermined using observable market inputs, the remaining deferred amountis recognized in profit or loss in the statement of profit or loss.

The Group applies cash flow hedge accounting to hedge the risks of foreignexchange and interest rates of the variable rate foreign currency bonds.The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges is recognized in othercomprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately as finance income (expenses) in the statement ofprofit or loss. Amounts of changes in fair value of effective hedging


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instruments accumulated in other comprehensive income are recognized as‘finance income (expenses)’ for the periods when the correspondingtransactions affect profit or loss. When a forecast transaction is no longerexpected to occur, the cumulative gain or loss that is reported in othercomprehensive income is recognized as ‘finance income (expenses)’.

If the hedge no longer meets the criteria for hedge accounting, theadjustment to the carrying amount of a hedged item for which the effectiveinterest method is used is amortized to profit or loss over the period tomaturity.

Inventories 2.9 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost isdetermined using the moving average method, except forinventories in-transit which is determined using the specific identificationmethod.

Non-current Assets (orDisposal Group) Held-for-sale

2.10Non-current Assets (or Disposal Group) Held-for-sale

Non-current assets (or disposal group) are classified asassets held-for-sale when their carrying amount is to be recoveredprincipally through a sale transaction and a sale is considered highlyprobable. The assets are measured at the lower amount between theircarrying amount and the fair value less costs to sell.

Property and Equipment 2.11Property and Equipment

Property and equipment are stated at its cost less accumulateddepreciation and accumulated impairment losses. Historical cost includesexpenditures that is directly attributable to the acquisition of the items.



2 – 40 years

Vehicles 4 – 6 yearsTools 4 – 6 yearsOffice equipment 2 – 6 years

The depreciation method, residual values and useful lives of property andequipment are reviewed at the end of each reporting period and, ifappropriate, accounted for as changes in accounting estimates.

Investment Property 2.12Investment Property

Investment property is a property held to earn rentals or for capitalappreciation. An investment property is measured initially at its cost. Afterrecognition as an asset, investment property is carried at cost lessaccumulated depreciation and impairment losses. Investment property,except for land, is depreciated using the straight-line method over theiruseful lives from 10 to 40 years.

Intangible Assets 2.13Intangible Assets

(1) Goodwill

Goodwill is measured as explained in Note 2.3 (1) and goodwill arising fromacquisition of subsidiaries and business are included in intangible assets.Goodwill is tested annually for impairment and carried at cost lessaccumulated impairment losses.


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Intangible assets, except for goodwill, are initially recognized at its historicalcost, and carried at cost less accumulated amortization and accumulatedimpairment losses. Membership rights (condominium membership and golfmembership) and broadcast rights that have an indefinite useful life are notsubject to amortization because there is no foreseeable limit to the periodover which the assets are expected to be utilized. The Group amortizesintangible assets with a limited useful life using the straight-line methodover the following periods:



Borrowing Costs 2.14Borrowing Costs

General and specific borrowing costs that are directly attributable to theacquisition, construction or production of a qualifying asset are capitalizedduring the period of time that is required to complete and prepare the assetfor its intended use or sale. Investment income earned on the temporaryinvestment of specific borrowings pending their expenditure on qualifyingassets is deducted from the borrowing costs eligible for capitalization. Otherborrowing costs are expensed in the period in which they are incurred.

Government Grants 2.15Government Grants

Grants from the government are recognized at their fair value where thereis a reasonable assurance that the grant will be received and the Group willcomply with all attached conditions. Government grants related to assetsare presented in the statement of financial position by setting up the grantas deferred income that is recognized in profit or loss on a systematic basisover the useful life of the asset. Grants related to income are presented asa credit in the statement of profit or loss within ‘other income’.

Impairment of Non-FinancialAssets

2.16Impairment of Non-Financial Assets

Goodwill and intangible assets that have an indefinite useful life are notsubject to amortization and are tested annually for impairment, or morefrequently if events or changes in circumstances indicate that they might beimpaired. Other assets are tested for impairment whenever events orchanges in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognized for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recoverableamount is the higher of an asset’s fair value less costs to sell and value inuse. Non-financialassets, other than goodwill, that suffered impairment arereviewed for possible reversal of the impairment at the end of reportingperiod.

Financial Liabilities 2.17Financial Liabilities


The Group’s financial liabilities at fair value through profit or loss arefinancial instruments held for trading and designated as financial liabilitiesat fair value through profit or loss. Financial liabilities held for trading are


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financial liabilities that are incurred principally for the purpose ofrepurchasing them in the near term and derivatives that are not designatedas hedges or bifurcated from financial instruments containing embeddedderivatives. Financial liabilities that the Group designated as at fair valuethrough profit or loss are structured financial liabilities containing embeddedderivatives issued by the Group.

As it was unable to measure the embedded derivatives separately from itshost contract, the Group designated the entire hybrid contact as at fairvalue through profit or loss. The financial liability that the Group designatedas at fair value through profit or loss is a foreign convertible bond.

The Group classifies non-derivative financial liabilities, except for financialliabilities at fair value through profit or loss, financial guarantee contractsand financial liabilities that arise when a transfer of financial assets does notqualify for derecognition, as financial liabilities carried at amortized cost andpresented as ‘trade payables’, ‘borrowings’, and ‘other financial liabilities’ inthe statement of financial position.

Preferred shares that provide for a mandatory redemption at a particulardate are classified as liabilities. Interest expenses on these preferredshares calculated using the effective interest method are recognized in thestatement of profit or loss as ‘finance costs’, together with interest expensesrecognized from other financial liabilities.

(2) Derecognition

Financial liabilities are removed from the statement of financial positionwhen it is extinguished, for example, when the obligation specified in thecontract is discharged or cancelled or expired or when the terms of anexisting financial liability are substantially modified.

Financial Guarantee Contracts 2.18Financial Guarantee Contracts

Financial guarantees contracts provided by the Group are initially measuredat fair value on the date the guarantee was given. Subsequent to initialrecognition, the Group’s liabilities under such guarantees are measured atthe higher of the amounts below and recognized as ‘other financialliabilities’:

• the amount determined in accordance with IAS 37 Provisions, ContingentLiabilities and Contingent Assets; or

• the amount initially recognized less cumulative amortization in accordancewith IAS 18 Revenue.

Compound FinancialInstruments

2.19Compound Financial Instruments

Compound financial instruments are convertible bonds that can beconverted into equity instruments at the option of the holder. The liabilitycomponent of a compound financial instrument is recognized initially at thefair value of a similar liability that does not have an equity conversionoption. The equity component is recognized initially on the differencebetween the fair value of the compound financial instrument as a whole andthe fair value of the liability component. Any directly attributable transactioncosts are allocated to the liability and equity components in proportion totheir initial carrying amounts.

Employee Benefits 2.20Employee Benefits




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A defined contribution plan is a pension plan under which the Group paysfixed contributions into a separate entity. The contributions are recognizedas employee benefit expenses when an employee has rendered service.

A defined benefit plan is a pension plan that is not a defined contributionplan. Generally, post-employment benefits are payable after the completionof employment, and the benefit amount depended on the employee’s age,periods of service or salary levels. The liability recognized in the statementof financial position in respect of defined benefit pension plans is thepresent value of the defined benefit obligation at the end of the reportingperiod less the fair value of plan assets. The defined benefit obligation iscalculated annually by independent actuaries using the projected unit creditmethod. The present value of the defined benefit obligation is determinedby discounting the estimated future cash outflows using interest rates ofhigh-quality corporate bonds that are denominated in the currency in whichthe benefits will be paid, and that have terms approximating to the terms ofthe related obligation. Remeasurement gains and losses arising fromexperience adjustments and changes in actuarial assumptions arerecognized in the period in which they occur, directly in othercomprehensive income.

Changes in the present value of the defined benefit obligation resulting fromplan amendments or curtailments are recognized immediately in profit orloss as past service costs.


Termination benefits are payable when employment is terminated by theGroup before the normal retirement date, or whenever an employeeaccepts voluntary redundancy in exchange for these benefits. The Grouprecognizes termination benefits at the earlier of the following dates: whenthe entity can no longer withdraw the offer of those benefits or when theentity recognizes costs for a restructuring.

Share-based payments 2.21Share-based payments

Equity-settled share-based payment is recognized at fair value of equityinstruments on grant date, and employee benefit expense is recognizedover the vesting period. At the end of each period, the Group revises itsestimates of the number of options that are expected to vest based onthe non-marketvesting and service conditions. It recognizes the impact ofthe revision to original estimates, if any, in profit or loss, with acorresponding adjustment to equity.

When the options are exercised, the Group issues new shares. Theproceeds received, net of any directly attributable transaction costs, arerecognized as share capital (nominal value) and share premium.

Provisions 2.22Provisions

Provisions are measured at the present value of the expenditures expectedto be required to settle the obligation, and the increase in the provision dueto passage of time is recognized as interest expense.

Leases 2.23Leases

(1) Lessee

A lease is an agreement, whereby the lessor conveys to the lessee, inreturn for a payment or series of payments, the right to use an asset for anagreed period of time. Leases where all the risks and rewards of ownershipare not transferred to the Group are classified as operating leases. Leasepayments under operating leases are recognized as expenses on astraight-line basis over the lease term.


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Leases where the Group has substantially all the risks and rewards ofownership are classified as finance leases. Finance leases are capitalizedas lease assets and liabilities at the lease’s inception at the fair value of theleased property or, if lower, the present value of the minimum leasepayments.

(2) Lessor

A lease is classified as a finance lease if it transfers substantially all therisks and rewards incidental to ownership at the inception of the lease. Alease other than a finance lease is classified as an operating lease. Leaseincome from operating leases is recognized in income on a straight-linebasis over the lease term. Initial direct costs incurred by the lessor innegotiating and arranging an operating lease is added to the carryingamount of the leased asset and recognized as an expense over the leaseterm on the same basis as the lease income.

Share Capital 2.24Share Capital

The Group classifies ordinary shares as equity. Where the ControllingCompany purchases its own shares, the consideration paid, including anydirectly attributable incremental costs, is deducted from equity until theshare are cancelled or reissued. When these treasury shares are reissued,any consideration received is including in equity attributable to the equityholders of the Controlling Company.

Revenue Recognition 2.25Revenue Recognition

Revenue is measured at the fair value of the consideration received orreceivable for the sale of goods or rendering of services arising from thenormal activities of the Group. Amounts disclosed as revenue are net ofvalue added taxes, returns, rebates and discounts and after elimination ofintra-group transactions.

The Group recognizes revenue when the amount of revenue can be reliablymeasured; when it is probable that future economic benefits will flow to theGroup; and when specific criteria have been met for each of the Group’sactivities, as described below. The Group bases its estimate on historicalresults, taking into consideration the type of customer, the type oftransaction and the specifics of each arrangement.


When providing interconnection or telecommunications service to acustomer based on service plans, the related revenue is recognized at thetime service is provided. When providing the telecommunicationsequipment rental service to a customer based on service plans, the relatedrevenue is recognized on straight-line basis over the contract period.Revenue related to the other telecommunications services is recognizedwhen the service is provided to the customer.

For other services, when the outcome of a transaction involving therendering of services can be estimated reliably, revenue associated withsuch a transaction is recognized by reference to the stage of performanceof the services. When the outcome of the transaction involving therendering of services cannot be estimated reliably, revenue is recognizedonly to the extent of the expenses recognized that are recoverable.

Total consideration for combined services is allocated to each service inproportion to its fair value and the allocated amount is recognized asrevenue according to revenue recognition policy for the service.


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(2) Sales of goods

The Group sells a range of handsets. Revenue from the sale of goods isrecognized when products are delivered to the purchaser.

(3) Interest income

Interest income is recognized using the effective interest method accordingto the time passed. When a loan and receivable is impaired, the Groupreduces the carrying amount to its recoverable amount and continuesunwinding the discount as interest income. Interest income on impairedloans and receivables is recognized using the original effective interest rate.

(4) Commission fees

Commission fees related to credit card business are recognized when it isprobable that future economic benefits will flow to the entity and thesebenefits can be reliably measured. Revenues from acquiree fee, agent fee,optional service fees, member service fees and credit card service chargeare measured at the fair value of the consideration received and recognizedon an accrual basis.

(5) Royalty income

Royalty income is recognized on an accrual basis in accordance with thesubstance of the relevant agreements.

(6) Dividend income

Dividend income is recognized when the right to receive payment isestablished.


The Group operates a customer loyalty program where customersaccumulate points for purchases made which entitle them to discounts onfuture purchases. The reward points are recognized as a separatelyidentifiable component of the initial sale transaction. The fair value of theconsideration received or receivable in respect of the initial sale is allocatedbetween the reward points and the other components of the sale. The fairvalue of the reward points is measured by taking into account the proportionof the reward points that are not expected to be redeemed by customers.Revenue from the reward points is recognized when the points areredeemed.

Current and Deferred IncomeTax

2.26Current and Deferred Income Tax

The tax expense for the period consists of current and deferred tax. Tax isrecognized on the profit for the period in the statement of profit or loss,except to the extent that it relates to items recognized in othercomprehensive income or directly in equity. In this case, the tax is alsorecognized in other comprehensive income or directly in equity,respectively. The tax expense is calculated on the basis of the tax lawsenacted or substantively enacted at the end of the reporting period.

Management periodically evaluates tax policies that are applied in taxreturns in which applicable tax regulation is subject to interpretation. TheGroup recognizes current income tax on the basis of the amount expectedto be paid to the tax authorities.


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Deferred tax is recognized for temporary differences arising between the taxbases of assets and liabilities and their carrying amounts as expected taxconsequences at the recovery or settlement of the carrying amounts of theassets and liabilities. However, deferred tax assets and liabilities are notrecognized if they arise from initial recognition of an asset or liability in atransaction other than a business combination that at the time of thetransaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognized only if it is probable that future taxableamount will be available to utilize those temporary differences and losses.

Deferred tax liability is recognized for taxable temporary differencesassociated with investments in subsidiaries, associates, and interests injoint ventures, except to the extent that the Group is able to control thetiming of the reversal of the temporary difference and it is probable that thetemporary difference will not reverse in the foreseeable future. In addition,deferred tax asset is recognized for deductible temporary differences arisingfrom such investments to the extent that it is probable the temporarydifference will reverse in the foreseeable future and taxable profit will beavailable against which the temporary difference can be utilized.

Deferred tax assets and liabilities are offset when there is a legallyenforceable right to offset current tax assets against current tax liabilitiesand when the deferred income taxes assets and liabilities relate to incometaxes levied by the same taxation authority on either the same taxableentity or different taxable entities where there is an intention to settle thebalances on a net basis.

Dividend 2.27Dividend

Dividend distribution to the Group’s shareholders is recognized as a liabilityin the financial statements in the period in which the dividends are approvedby the Group’s shareholders.

Approval of Issuance of theFinancial Statements

2.28Approval of Issuance of the Financial Statements

The issuance of the December 31, 2017 consolidated financial statementsof the Group was approved by the Board of Directors on April 27, 2018.


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12 Months EndedGeneral Information(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of ConsolidatedSubsidiaries

The consolidated subsidiaries as of December 31, 2016 and 2017, are asfollows:



2016December 31,

2017Closingmonth

KT Powertel Co.,Ltd. 2

Trunk radio systembusiness


KT Linkus Co., Ltd. Public telephonemaintenance


KT Submarine Co.,Ltd. 2,3

Submarine cableconstruction andmaintenance


KT Telecop Co., Ltd. Security service Korea 86.8% 86.8% DecemberKT Hitel Co., Ltd. Data


KT Service BukbuCo., Ltd.



KT Service NambuCo., Ltd.



KT Commerce Inc. B2C, B2B service Korea 100.0% 100.0% DecemberKT New Business

Fund No.1Investment fund Korea 100.0% 100.0% December








Investment fund Korea — 100.0% December

BC Card Co., Ltd. Credit cardbusiness


VP Inc. Payment securityservice for creditcard, others


H&C Network Call centre forfinancial sectors


BC Card China Co.,Ltd.

Softwaredevelopment anddata processing


INITECH Co., Ltd.4 Internet bankingASP and securitysolutions


Smartro Co., Ltd. VAN (Value AddedNetwork) business


KTDS Co., Ltd.4 System integrationand maintenance


KT M Hows Co., Ltd. Mobile marketing Korea 90.0% 90.0% DecemberKT M&S Co., Ltd. PCS distribution Korea 100.0% 100.0% DecemberGENIE Music

Corporation(KTMusic Corporation)2

Online musicproduction anddistribution



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KT Skylife Co., Ltd.4 Satellitebroadcastingbusiness


Skylife TV Co., Ltd. TV contentsprovider


KT Estate Inc. Residential buildingdevelopment andsupply


KT AMC Co., Ltd. Asset managementand consultingservices


NEXR Co., Ltd. Cloud systemimplementation


KTSB Data service Data centredevelopment andrelated service


KT Sat Co., Ltd. Satellitecommunicationbusiness


KT Innoedu Co E-learning business Korea 96.8% — DecemberNasmedia, Inc.3 Online

advertisementKorea 42.8% 42.8% December

KT Sports Management ofsports group







Korea — 100.0% December

KT-Michigan GlobalContent Fund

Content investmentbusiness


Autopion Co., Ltd. Service forinformation andcommunication


KTCS Corporation 2,4 Database andonline informationprovider


KTIS Corporation 2,4 Database andonline informationprovider


KT M mobile Special categorytelecommunicationsoperator and salesof communicationdevice


KT Investment Co.,Ltd.

Technologybusiness finance


NgenBio Medicine andPharmacydevelopmentbusiness

Belgium 49.8% — December

Whowho&CompanyCo., Ltd.



PlayD Co., Ltd.(N Search Marketing

Co., Ltd.)

Advertising agencybusiness


KT Rwanda NetworksLtd.

Network installationand management


AOS Ltd. System integrationand maintenance


KT Belgium Foreign investmentbusiness




KT ORS Belgium Foreign investmentbusiness


Korea Telecom JapanCo., Ltd.


Japan 100.0% 100.0% December

KBTO sp.zo.o. Electroniccommunicationbusiness

Poland 75.0% 94.0% December

Korea Telecom ChinaCo., Ltd.



KT Dutch B.V Super iMax andEast Telecommanagement


Super iMax LLC Wireless highspeed internetbusiness


East Telecom LLC Fixed linetelecommunicationbusiness


Korea TelecomAmerica, Inc.



PT. KT Indonesia Foreigntelecommunicationbusiness


PT. BC Card AsiaPacific



KT HongkongTelecommunications

Co., Ltd.

Fixed linecommunicationbusiness


KT Hong kong Limited Foreign investmentbusiness


Korea TelecomSingapore Pte.Ltd.

Foreign investmentbusiness

Singapore 100.0% 100.0% December

Texnoprosistem LLP. Fixed line internetbusiness


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 votingrights in its decision-making process at all times considering the historical votingpattern at the shareholders’ meetings.

3 Although the Controlling Company owns less than 50% ownership in this entity, thisentity is consolidated as the Controlling Company holds the majority of voting rightbased on an agreement with other investors.

4 The number of subsidiaries’ treasury stock is deducted from the total number ofshares when calculating the controlling percentage ownership.



KT Music Contents InvestmentFund No.2

Newly established

Excluded Korea KT Innoedu Co., Ltd. Shares disposedNgeneBio Percentage of ownership

decreased

Summarized information for consolidated subsidiaries as of and for theyears ended December 31, 2015, 2016 and 2017, follows:




Total assetsTotal



KT Powertel Co., Ltd. ￦113,515 ￦21,182 ￦104,527 ￦(32,417 )KT Linkus Co., Ltd. 77,141 65,745 116,095 3,449KT Submarine Co., Ltd. 160,314 63,518 67,268 4,145KT Telecop Co., Ltd. 269,191 134,966 302,844 (7,593 )KT Hitel Co.,Ltd. 235,757 33,938 162,155 7,258KT Service Bukbu Co.,

Ltd2 31,879 22,627 89,498 (4,630 )KT Service Nambu Co.,

Ltd2 20,729 10,567 110,129 (5,055 )BC Card Co., Ltd.1 2,963,952 1,945,634 3,504,946 218,969H&C Network1 248,189 70,635 241,008 19,513Nasmedia, Inc. 141,733 72,202 45,630 9,916KTDS Co., Ltd.1 162,518 116,654 423,015 12,836KT M Hows Co., Ltd. 25,093 17,980 19,352 1,728KT M&S Co., Ltd. 256,246 217,892 853,011 (18,776 )GENIE Music


KT Skylife Co., Ltd.1 711,294 217,850 668,521 72,987KT Estate Inc.1 1,603,438 260,292 254,776 27,487KTSB Data service 23,063 1,730 4,390 (2,444 )KT Innoedu Co., Ltd. 5,858 7,585 18,156 (4,288 )KT Sat Co., Ltd. 679,959 210,110 133,326 27,174KT Sports 15,341 11,643 51,801 (3,836 )KT Music Contents

Fund No.1 10,206 47 468 (111 )KT-Michigan Global

Content Fund 5,401 — 861 (209 )Autopion Co., Ltd. 7,102 3,317 10,585 1,123KT M mobile 64,756 13,121 42,478 (36,725 )KT Investment Co., Ltd 49,485 30,827 4,704 (219 )NgeneBio 7,894 4,683 — (434 )KTCS Corporation1 346,949 194,367 1,066,556 13,685KTIS Corporation 211,164 55,370 473,892 15,041Korea Telecom Japan

Co., Ltd. 13,889 14,393 25,652 (248 )Korea Telecom China

Co., Ltd. 909 198 1,748 (95 )KT Dutch B.V.1 29,402 27 161 118Super iMax LLC 14,962 8,186 8,291 (2,220 )East Telecom LLC 30,833 17,066 24,066 664Korea Telecom

America, Inc. 6,016 1,378 6,391 156PT. KT Indonesia 22 — — (9 )Olleh Rwanda

Networks Ltd. 188,951 147,653 7,299 (28,721 )KT Belgium 77,058 4 — (127 )KT ORS Belgium 1,996 20 — (75 )KBTO sp.zo.o. 1,471 1,817 — (328 )Africa Olleh Services

Ltd. 11,928 12,187 8,712 (923 )




KT Powertel Co., Ltd. ￦113,725 ￦19,899 ￦81,390 ￦202



KT Linkus Co., Ltd. 64,318 56,953 117,587 (3,830 )KT Submarine Co.,

Ltd. 156,993 55,573 84,137 5,146KT Telecop Co., Ltd. 265,553 132,344 315,948 143KT Hitel Co., Ltd. 249,202 46,941 198,994 4,298KT Service Bukbu Co.,

Ltd. 32,863 24,580 182,952 694KT Service Nambu

Co., Ltd. 32,621 24,282 218,602 772BC Card Co., Ltd.1 3,651,065 2,602,404 3,567,512 163,131H&C Network1 272,110 80,983 266,613 14,749Nasmedia, Inc.1 263,925 159,502 70,037 11,972KTDS Co., Ltd.1 197,970 151,644 476,379 10,838KT M Hows Co., Ltd. 28,539 18,466 19,922 2,865KT M&S Co., Ltd. 247,854 227,507 724,144 (12,955 )GENIE Music


KT Skylife Co., Ltd.1 777,948 231,452 668,945 68,863KT Estate Inc.1 1,734,729 375,341 405,417 46,815KTSB Data service 20,075 759 5,136 (1,983 )KT Innoedu Co., Ltd. 6,477 7,259 15,599 103KT Sat Co., Ltd. 744,653 253,041 144,594 36,266KT Sports 16,925 13,573 48,476 (198 )KT Music Contents

Fund No.1 10,592 331 349 103KT-Michigan Global

Content Fund 16,250 163 133 (514 )Autopion Co., Ltd. 6,163 2,794 7,772 (409 )KT M mobile 131,446 20,369 112,532 (40,041 )KT Investment Co.,

Ltd.1 39,506 23,123 10,130 (1,832 )NgeneBio 6,361 4,733 244 (1,833 )KTCS Corporation1 322,768 166,642 955,050 7,892KTIS Corporation 221,176 63,871 436,914 9,991Korea Telecom Japan

Co., Ltd. 3,592 5,374 5,122 (1,391 )Korea Telecom China

Co., Ltd. 532 188 930 60KT Dutch B.V 34,197 73 166 85Super iMax LLC 10,308 6,734 10,759 (1,802 )East Telecom LLC 31,885 16,554 27,492 3,257Korea Telecom

America, Inc. 4,464 1,306 7,113 181PT. KT Indonesia 16 — — (7 )KT Rwanda Networks

Ltd. 167,112 138,651 13,435 (31,455 )KT Belguium 79,391 7 — (67 )KT ORS Belgium 2,013 23 — (46 )KBTO sp.zo.o. 1,166 2,378 21 (2,587 )AOS Ltd. 10,025 3,179 14,481 (1,123 )KT Hongkong

TelecommunicationsCo., Ltd. 1,571 956 1,568 120




KT Powertel Co., Ltd. 115,125 18,937 69,234 2,112



KT Linkus Co., Ltd. 59,344 51,516 112,043 725KT Submarine Co., Ltd. 142,797 34,056 73,985 8,243KT Telecop Co., Ltd. 264,353 131,633 317,591 2,885KT Hitel Co., Ltd. 258,240 52,943 227,884 3,225KT Service Bukbu Co., Ltd. 29,281 22,096 194,837 688KT Service Nambu Co., Ltd. 36,076 26,412 232,996 875BC Card Co., Ltd.1 4,048,263 2,955,038 3,628,995 156,109H&C Network1 273,856 65,446 277,622 16,104Nasmedia, Inc.1 315,967 188,197 120,667 26,676KTDS Co., Ltd.1 144,922 93,343 459,266 11,584KT M Hows Co., Ltd. 42,738 28,489 24,610 4,097KT M&S Co., Ltd. 242,388 231,151 734,420 (9,707 )GENIE Music Corporation(KT

Music Corporation) 139,686 48,512 156,163 (3,401 )KT Skylife Co., Ltd.1 792,893 210,550 687,752 57,314KT Estate Inc.1 1,869,194 502,915 428,446 52,416KTSB Data service 18,306 605 4,950 (1,651 )KT Sat Co., Ltd. 742,391 220,804 147,649 29,601KT Sports 11,131 7,805 53,357 (199 )KT Music Contents Fund No.1 13,804 1,041 370 (499 )KT Music Contents Fund No.2 7,500 11 — (11 )KT-Michigan Global Content

Fund 14,575 147 159 (426 )Autopion Co., Ltd. 6,306 3,530 6,679 (618 )KT M mobile 93,601 21,453 159,684 (38,883 )KT Investment Co., Ltd.1 54,673 38,313 8,794 (619 )KTCS Corporation1 348,334 188,764 968,186 7,385KTIS Corporation 223,818 62,569 438,597 8,337Korea Telecom Japan Co., Ltd.1 1,554 2,788 2,772 536Korea Telecom China Co., Ltd. 665 32 1,030 348KT Dutch B.V 30,312 50 206 169Super iMax LLC 3,449 4,886 7,314 (4,584 )East Telecom LLC1 11,672 11,748 19,663 (9,118 )Korea Telecom America, Inc. 3,694 791 6,783 109PT. KT Indonesia 8 — — (6 )KT Rwanda Networks Ltd.2 151,359 139,561 15,931 (22,762 )KT Belguium 86,455 8 49 (2 )KT ORS Belgium 1,769 14 10 (10 )KBTO sp.zo.o. 3,311 2,268 67 (3,456 )AOS Ltd.2 9,437 4,519 8,952 (682 )KT Hongkong

Telecommunications Co., Ltd. 2,578 1,497 7,304 494

1 These companies are the intermediate controlling companies of other subsidiariesand the above financial information is from their consolidated financial statements.

2 At the end of the reporting period, convertible preferred stock issued by subsidiariesincluded in liabilities.



12 Months EndedSignificant AccountingPolicies (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Estimated UsefulLives of Property, Plant andEquipment



2 – 40 years

Vehicles 4 – 6 yearsTools 4 – 6 yearsOffice equipment 2 – 6 years

Summary of Amortization ofIntangible Assets WithLimited Useful Life

The Group amortizes intangible assets with a limited useful life using thestraight-line method over the following periods:




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12 Months EndedFinancial Instruments byCategory (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of FinancialInstruments by Category



Financialassets

Loansand

receivables


profitand loss


Available-for-sale




Otherfinancialassets 716,769 6,277 227,318 404,774 30,143 1,385,281









liabilities 1,973 14,928 91,763 108,664


Financialassets

Loansand

receivables


profitand loss


Available-for-sale




Otherfinancialassets 1,333,317 5,813 7,389 380,953 151 1,727,623









liabilities 5,051 93,770 87,669 186,490


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Summary of Gains or LossesArising From FinancialInstruments by Category

Gains or losses arising from financial instruments by category for the years endedDecember 31, 2015, 2016 and 2017, are as follows:


Interest income1, 4 ￦85,603 ￦129,813 ￦108,608Loss on foreign currency transaction (365 ) (7,493 ) (11,949 )Gain(loss) on foreign currency

translation 1,921 3,083 (12,354 )Loss on disposal (2,539 ) (15,838 ) (20,351 )Loss on valuation (141,555) (92,589 ) (44,219 )

Assets at fair value through profit or lossDividend income — — 1Gain on disposal 368 186 153Loss on valuation — (7,184 ) (464 )

Derivatives used for hedgingLoss on transaction (5,157 ) — (58,569 )Gain(loss) on valuation 141,512 109,436 (63,640 )Other comprehensive income for the


comprehensive income for theyear2,3 (88,003 ) (71,915 ) 50,231

Available-for-saleInterest income1,4 73 40 453Dividend income 7,733 3,926 5,174Gain on disposal 131,045 22,695 89,598Impairment loss (1,471 ) (966 ) (6,137 )Other comprehensive income for the

year2 47,381 10,925 51,235Reclassified to profit or loss from other

comprehensive income for the year2 (83,397 ) (3,840 ) (55,450 )Held-to-Maturity

Interest income1,4 226 213 —Liabilities at fair value through profit and

lossGain(loss) on disposal (850 ) (632 ) —Gain(loss) on valuation (2,006 ) 33 (3,078 )

Derivatives used for hedgingGain(loss) on transactions (273 ) 8,329 —Loss on valuation (1,733 ) (138 ) (145,885)Other comprehensive income for the


comprehensive income for the year2,3 (9,959 ) (3,956 ) 91,698

Financial liabilities at amortized costInterest expense4 (385,925) (337,219) (302,464)Gain(loss) foreign currency transaction (23,416 ) (7,518 ) 62,347Gain(loss) foreign currency translation (166,254) (112,864) 225,695

Total ￦(385,127) ￦(308,677) ￦(150,420)

1 BC Card, a subsidiary of the Group, recognized interest income as operating revenue.Interest income recognized as operating revenue is￦ 15,561 million (2015:￦15,867 million, 2016:￦ 14,380 million) for the year ended December 31, 2017.

2 The amounts directly reflected in equity after adjustments of deferred income tax.


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3 During the year, certain derivatives of the Group were settled and the related gain orloss on valuation of cash flow hedge in other comprehensive income was reclassified toprofit or loss for the year.

4 BC Card recognized gain/loss on foreign currency transaction as operating income andexpenses. During the year, related gain/loss on foreign currency transaction recognizedas operating income and expense is￦ 11,049 million (2016: (-)￦ 1,987 million).



12 Months EndedCash and Cash Equivalents(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Restricted Cash andCash Equivalents

Restricted cash and cash equivalents as of December 31, 2016 and 2017, areas follows:

(In millions of Koreanwon) Type 2016 2017 DescriptionRestricted cash

andcash equivalents

Restricteddeposit

￦19,920 ￦16,837 Deposit restricted forgovernmental project and

others


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12 Months EndedTrade and Other Receivables(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Trade and OtherReceivables


2016


Totalamounts

Allowancefor

doubtfulaccounts

Presentvalue


Current assetsTrade


receivables 2,763,942 (121,972) (270 ) 2,641,700￦5,925,176 ￦(592,211) ￦(5,613 ) ￦5,327,352



receivables 507,251 (19,644 ) (28,496) 459,111770,618 (20,276 ) (41,331) 709,011

2017


Totalamounts

Allowancefor

doubtfulaccounts

Presentvalue


Current assetsTrade


receivables 3,041,028 (66,402 ) (187 ) 2,974,439￦6,327,197 ￦(505,219) ￦(7,695 ) ￦5,814,283



receivables 522,459 (17,970 ) (28,351) 476,138￦888,566 ￦(18,580 ) ￦(41,154) ￦828,832

Summary of Changes inAllowance for DoubtfulAccounts

Details of changes in allowance for doubtful accounts the years ended December 31,2016 and 2017, are as follows:


Tradereceivables

Otherreceivables

Tradereceivables

Otherreceivables

Tradereceivables

Otherreceivables

Beginningbalance ￦527,617 ￦311,082 ￦468,741 ￦250,842 ￦470,871 ￦141,616

Provision 95,489 46,066 84,975 7,736 38,888 5,809Reversal or

written-off (135,318) (33,282 ) (80,518 ) (108,638) (70,121 ) (61,220 )Changes in the

scope ofconsolidation (16,752 ) (69,732 ) 215 56 (107 ) (35 )

Others (2,232 ) (3,272 ) (2,542 ) (8,380 ) (104 ) (1,798 )


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Endingbalance ￦468,741 ￦250,842 ￦470,871 ￦141,616 ￦439,427 ￦84,372

Summary of Aging Analysisof Trade Receivables

Details of aging analysis of trade receivables as of December 31, 2016 and 2017, areas follows:



1,028,786 970,559Less: Allowance for doubtful

accounts (470,871 ) (439,427 )￦2,935,552 ￦3,192,538

Summary of OtherReceivables Details of other receivables as of December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2016 2017Loans ￦80,308 ￦84,682Receivables1 2,709,177 2,970,346Accrued income 9,903 12,186Refundable deposits 390,035 391,458Loans receivable 10,355 34,273Finance lease receivables 16,280 20,526Others 26,369 21,478Less: Allowance for doubtful

accounts (141,616 ) (84,372 )￦3,100,811 ￦3,450,577


Summary of Aging Analysisof Other Receivables

Details of aging analysis of other receivables as of December 31, 2016 and 2017, areas follows:



271,188 263,000Less: Allowance for doubtful

accounts (141,616 ) (84,372 )Total ￦3,100,811 ￦3,450,577


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12 Months EndedOther Financial Assets andLiabilities (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Other FinancialAssets and Liabilities

Details of other financial assets and liabilities as of December 31, 2016 and 2017, are as follows:


Financial assets at fair valuethrough profit or loss ￦6,277 ￦5,813

Derivatives used for hedge 227,318 7,389Financial instruments1 716,769 1,333,317Available-for-sale financial

assets1 404,774 380,953Held-to-maturity investments 30,143 151Less: Non-current (664,726) (754,992 )Current ￦720,555 ) ￦972,631 )

Other financial liabilitiesFinancial liabilities at fair value

through the profit or loss ￦1,973 ￦5,051Derivatives used for hedge 14,928 93,770Other financial liabilities 91,763 87,669Less: Non-current (108,431) (149,267 )Current ￦233 ￦37,223

1 As of December 31, 2017, MMW(Money Market Wrap) and MMT(Money Market Trust) amountingto￦870,453 million is included in other financial assets. As of December 31, 2017, the Group’sfinancial instruments amounting to￦59,660 million (December 31, 2016:￦49,721 million),which consist of certain proceeds from the disposal of Ustream Inc. deposited in an escrowaccount, checking account deposits and deposits for Win-win Growth Cooperative loans, aresubject to withdrawal restrictions.

Summary of FinancialInstruments at Fair ValueThrough Profit or Loss

Financial instruments at fair value through profit or loss as of December 31, 2016 and 2017, areas follows:

2016 2017(In millions of Korean won) Assets Liabilities Assets LiabilitiesFinancial instruments at fair value through

profit and loss ￦ 6,277 ￦— ￦ 5,813 ￦—Other derivatives liabilities ￦— ￦1,973 ￦— ￦ 5,051

Summary of Financial Assetsand Liabilities at Fair ValueThrough Profit or Loss


2015 2016 2017


gainsValuation

lossesValuation

gainsValuation

lossesValuation

gainsValuation

lossesValuation gains and losses

on financial assets ￦— ￦— ￦470 ￦7,654 ￦— ￦464Total ￦ — ￦ — ￦ 470 ￦ 7,654 ￦ — ￦ 464

Summary of Financial AssetsHeld for Trading

Held for trading

2015 2016 2017


gainsValuation

lossesValuation

gainsValuation

lossesValuation

gainsValuation

lossesValuation gains and losses on

financial assets ￦ — ￦2,006 ￦33 ￦— ￦— ￦3,078Total ￦— ￦ 2,006 ￦ 33 ￦ — ￦ — ￦ 3,078

Summary of DerivativeFinancial Assets andLiabilities


2016 2017(in millions of Korean won) Assets Liabilities Assets Liabilities


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Interest rate swap1 ￦— ￦3,278 ￦— ￦2,633Currency swap2 214,648 11,650 7,389 81,300Currency forwards3 12,670 — — 9,837


Current ￦130,098 ￦233 ￦2,714 ￦37,223

1 The interest rate swap contract is to hedge the risk of variability in future fair value of thebond.

2 The currency swap contract is to hedge the risk of variability in cash flow from the bond. Inapplying the cash flow hedge accounting, the Group hedges its exposures to cash flowfluctuation until September 7, 2034.

3 The currency forward contract is to hedge the risk of variability in cash flow from transactionsin foreign currencies due to changes in foreign exchange rate.

Summary of Valuation Gainsand Losses on DerivativesContracts

The valuation gains and losses on the derivatives contracts for the years ended December 31,2015, 2016 and 2017, are as follows:


Type ofTransaction

Valuationgain

Valuationloss

Othercomprehensive

income1Valuation

gainValuation

loss

Othercomprehensive

income1Valuation

gainValuation

loss

Othercomprehensive

income1

Interestrateswap ￦— ￦— ￦ (2,858 ) ￦— ￦ 148 ￦ (142 ) ￦ 38 ￦— ￦ 637

Currencyswap 141,512 1,733 150,255 97,158 (10 ) 85,479 19 187,468 (146,752 )

Currencyforwards — — 247 12,278 — 146 — 22,114 (393 )

Total ￦141,512 ￦1,733 ￦ 147,644 ￦109,436 ￦ 138 ￦ 85,483 ￦ 57 ￦209,582 ￦ (146,508 )

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

Summary of Available-For-Sale Financial Assets

Details of available-for-sale financial assets as of December 31, 2016, and 2017 are as follows:



Current ￦ 19,976 ￦1,465

Summary of Changes inAvailable-for-Sale FinancialAssets

Changes of available-for-sale financial assets for the years ended December 31, 2016, and 2017are as follows:

(In millions of Korean won) 2016 2017Beginning ￦360,037 ￦404,774Acquisition 44,302 89,027Disposal (18,161 ) (129,682 )Valuation1 14,413 67,593Impairment (966 ) (6,137 )Reclassification 5,149 (44,622 )Changes in scope of consolidation — —Ending ￦ 404,774 ￦ 380,953

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


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12 Months EndedInventories (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Inventories Net Inventories as of December 31, 2016 and 2017, are as follows:

2016 2017(In millions ofKorean won)

Acquisitioncost

Valuationallowance

Bookamount

Acquisitioncost

Valuationallowance

Bookamount

Merchandise ￦403,938 ￦(46,634) ￦357,304 ￦504,321 ￦(58,293) ￦446,028Others 97,778 (494 ) 97,284 195,999 — 195,999

Total ￦501,716 ￦(47,128) ￦454,588 ￦700,320 ￦(58,293) ￦642,027


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12 Months EndedOther Assets and Liabilities(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Other Assets andLiabilities

Other assets and liabilities as of December 31, 2016 and 2017, are asfollows:



Current ￦342,291 ￦258,315


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12 Months EndedProperty, Plant andEquipment (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Changes inProperty, Plant and Equipment

Changes in property, plant and equipment for the years ended December 31, 2016and 2017, are as follows:

2016

(in millions ofKorean won) Land

Buildingsand

structures

Machineryand



Accumulateddepreciation(includingaccumulatedimpairmentloss andothers) (132 ) (1,459,416) (24,879,791) (1,400,766) (1,300 ) (27,741,405)

Beginning, net 1,287,617 2,099,044 9,508,793 550,983 1,032,477 14,478,914Acquisition 291 3,608 247,431 146,471 2,297,346 2,695,147Disposal/

Abandonment (855 ) (1,650 ) (112,135 ) (8,155 ) (3,357 ) (126,152 )Depreciation — (135,389 ) (2,498,837 ) (143,978 ) — (2,778,204 )Impairment — — 361 (47,086 ) — (46,725 )Transfer in (out) 4,274 136,041 2,060,936 11,073 (2,212,324 ) —Inclusion in

scope ofconsolidation — — 68 764 — 832

Others 17,625 23,078 53,568 14,851 (20,823 ) 88,299Ending, net ￦1,308,952 ￦2,124,732 ￦9,260,185 ￦524,923 ￦1,093,319 ￦14,312,111Acquisition cost ￦1,309,084 ￦3,729,228 ￦35,106,184 ￦1,895,332 ￦1,093,941 ￦43,133,769Less:



2017

(In millions ofKorean won) Land

Buildingsand

structures

Machineryand


Acquisitioncost ￦1,309,084 ￦3,729,228 ￦35,106,184 ￦1,895,332 ￦1,093,941 ￦43,133,769

Less:Accumulateddepreciation


Beginning, net 1,308,952 2,124,732 9,260,185 524,923 1,093,319 14,312,111Acquisition 1,948 120 237,218 129,464 2,262,681 2,631,431Disposal and

termination (4,656 ) (4,022 ) (176,085 ) (8,242 ) (3,133 ) (196,138 )Depreciation — (135,242 ) (2,469,459 ) (150,535 ) — (2,755,236 )Impairment

(Recovery ofimpairment) — — (9,256 ) (1 ) (28 ) (9,285 )

Transfer in(out) 26,764 25,305 2,227,808 10,344 (2,600,908 ) (310,687 )


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Exclusion fromscope ofconsolidation — (19 ) (772 ) (120 ) (34 ) (945 )

Transferfrom(to)investmentproperties (64,449 ) 1,793 — 1,184 — (61,472 )

Others 98 (245 ) (8,830 ) (179 ) (38,304 ) (47,460 )Ending, net ￦1,268,657 ￦2,012,422 ￦9,060,809 ￦506,838 ￦713,593 ￦13,562,319Acquisition

cost ￦1,268,789 ￦3,750,861 ￦35,971,877 ￦1,920,571 ￦714,706 ￦43,626,804Less:


(includingaccumulatedimpairmentloss andothers) (132 ) (1,738,439) (26,911,068) (1,413,733) (1,113 ) (30,064,485)

Summary of the Details ofProperty, Plant and EquipmentProvided

Details of property, plant and equipment provided as collateral as of December 31,2016 and 2017, are as follows:


Carryingamount

Securedamount

Relatedline item


Land andBuildings

￦13,337 ￦16,009 Borrowings ￦11,540 StandardChartered

BankKorea

DevelopmentBank



Securedamount

Relatedline item



BankKorea

DevelopmentBank



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12 Months EndedInvestment Properties(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of InvestmentProperties

Changes in investment properties for the years ended December 31, 2016 and 2017, are as follows:

2016


progress TotalAcquisition cost ￦340,790 ￦1,011,236 ￦ 74,208 ￦1,426,234Less: Accumulated depreciation — (324,164 ) — (324,164 )Beginning 340,790 687,072 74,208 1,102,070Acquisition 51 417 160,138 160,606Disposal/Abandonment (5,837 ) (1,802 ) — (7,639 )Depreciation — (43,575 ) — (43,575 )Transfer (32,254 ) 124,417 (155,581 ) (63,418 )Ending ￦302,750 ￦766,529 ￦ 78,765 ￦1,148,044Acquisition cost ￦302,750 ￦1,119,885 ￦ 78,765 ￦1,501,400Less: Accumulated depreciation — ￦(353,356 ) — ￦(353,356 )

2017


progress TotalAcquisition cost ￦302,750 ￦1,119,885 ￦ 78,765 ￦1,501,400Less: Accumulated depreciation — (353,356 ) — (353,356 )Beginning 302,750 766,529 78,765 1,148,044Acquisition — 775 48,075 48,850Disposal/Abandonment (3,493 ) (6,434 ) — (9,927 )Depreciation — (47,295 ) — (47,295 )Transfer from(to) property, plant and equipment 64,449 (1,793 ) (1,184 ) 61,472Transfer and others (6,916 ) 80,986 (85,683 ) (11,613 )Ending ￦356,790 ￦792,768 ￦ 39,973 ￦1,189,531Acquisition cost ￦358,358 ￦1,191,687 ￦ 39,973 ￦1,590,018Less: Accumulated depreciation(include. Accumulated impairment) (1,568 ) (398,919 ) — (400,487 )

Summary of InvestmentProperties Provided asCollateral

Details of investment properties provided as collateral as of December 31, 2016 and 2017, are as follows:


Securedamount

Relatedaccount

Relatedamount



Securedamount

Relatedaccount

Relatedamount



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12 Months EndedIntangible Assets (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Intangible Assets Changes in intangible assets for the years ended December 31, 2016 and 2017, are as

follows:





Less:Accumulatedamortization(includingaccumulatedimpairmentloss andothers) (107,038) (1,025,877) (574,003) (1,618,459) (517,372 ) (3,842,749)

Beginning, net ￦342,341 ￦461,543 ￦231,384 ￦972,770 ￦591,713 ￦2,599,751Acquisition and

capitalexpenditure — 36,075 35,631 978,309 74,312 1,124,327

Disposal andtermination — (8,600 ) (1,928 ) — (16,397 ) (26,925 )

Amortization — (162,682 ) (78,643 ) (273,790 ) (84,606 ) (599,721 )Impairment (131,600) — (46 ) — (3,618 ) (135,264 )Inclusion in

scope ofconsolidation 42,745 — 2,462 — 16,015 61,222

Others — 8,340 8,278 — (17,205 ) (587 )Ending, net ￦253,486 ￦334,676 ￦197,138 ￦1,677,289 ￦560,214 ￦3,022,803Acquisition

cost 492,105 1,483,205 838,532 2,531,654 1,154,993 6,500,489(238,619) (1,148,529) (641,394) (854,365 ) (594,779 ) (3,477,686)





Less:Accumulatedamortization(includingaccumulatedimpairmentloss andothers) (238,619) (1,148,529) (641,394) (854,365 ) (594,779 ) (3,477,686)

Beginning, net ￦253,486 ￦334,676 ￦197,138 ￦1,677,289 ￦560,214 ￦3,022,803Acquisition and

capitalexpenditure — 247,863 60,475 — 78,373 386,711

Disposal andtermination — (14,806 ) (548 ) — (11,859 ) (27,213 )

Amortization — (151,718 ) (73,174 ) (311,146 ) (99,112 ) (635,150 )Impairment (84,606 ) — (3 ) — (31,486 ) (116,095 )Inclusion in

scope ofconsolidation — (332 ) (3,216 ) — (1,374 ) (4,922 )

Others — 2,876 9,569 (1,201 ) (4,674 ) 6,570


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Ending, net ￦168,880 ￦418,559 ￦190,241 ￦1,364,942 ￦490,081 ￦2,632,704Acquisition

cost 474,908 1,643,886 893,500 2,530,341 1,171,378 6,714,014Less;

Accumulatedamortization(includingaccumulatedimpairmentloss andothers) (306,028) (1,225,327) (703,259) (1,165,399) (681,297 ) (4,081,310)

1 The Company’s development costs mainly consist of acquisition costs to develop acombined billing system and an information management system.

Summary of GoodwillAllocated to Each Cash-Generation Unit

Goodwill is allocated to the Group’s cash-generating unit which is identified byoperating segments. As of December 31, 2017, goodwill allocated to each cash-generation unit is as follows:





Total ￦168,880

1 The recoverable amounts of mobile business are calculated based on value-in usecalculations. These calculations use cash flow projections for the next five yearsbased on financial budgets. An annual growth rate of 0.0% was applied for the cashflows expected to be incurred after five year. This growth rate does not exceed thelong-term average growth rate of the industry which the cash-generate unit belongsin. The Group estimated its revenue growth rate -2.46% based on past performanceand its expectation of future market changes. In addition, management estimatedthe cash flow based on past performance and its expectation of market growth, andthe discount rates 8.95% used reflected specific risks relating to the relevant CGUs.As a result of the impairment test, the Group concluded that the carrying amount ofCGUs does not exceed the recoverable amount. Accordingly, the Group did notrecognise the impairment loss on goodwill on mobile business for the years endedDecember 31, 2017 and 2016.

2 The recoverable amounts of BC Card Co., Ltd. are calculated based on value-inuse calculations. These calculations use cash flow projections for the next fiveyears based on financial budgets. An annual growth rate of 0.0% was applied forthe cash flows expected to be incurred after five year. This growth rate does notexceed the long-term average growth rate of the industry which the cash-generateunit belongs in. The Group estimated its revenue growth rate 0.11% based on pastperformance and its expectation of future market changes. In addition, managementestimated the cash flow based on past performance and its expectation of marketgrowth, and the discount rates 14.62% used reflected specific risks relating to therelevant CGUs. As a result of the impairment test, the Group concluded that thecarrying amount of CGUs does not exceed the recoverable amount. Accordingly,the Group did not recognise the impairment loss on goodwill on BC Card Co., Ltd.for the years ended December 31, 2017 and 2016.


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3 The recoverable amounts of PlayD Co., Ltd. (N search Marketing Co., Ltd.) arecalculated based on value-in use calculations. These calculations use cash flowprojections for the next five years based on financial budgets. An annual growthrate of 1.0% was applied for the cash flows expected to be incurred after five year.This growth rate does not exceed the long-term average growth rate of the industrywhich the cash-generate unit belongs in. The Group estimated its revenue growthrate 4.27% based on past performance and its expectation of future marketchanges. In addition, management estimated the cash flow based on pastperformance and its expectation of market growth, and the discount rates 9.5%used reflected specific risks relating to the relevant CGUs. As a result of theimpairment test, the Group concluded that the carrying amount of CGUs does notexceed the recoverable amount. Accordingly, the Group did not recognise theimpairment loss on goodwill on PlayD Co., Ltd. (N search Marketing Co., Ltd.) forthe years ended December 31, 2017 and 2016.



12 Months EndedInvestments in Associatesand Joint Ventures (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Details ofAssociates



Date offinancial

statements2016 2017

Korea Information & Technology Fund 33.3 % 33.3 % Korea 31-DecKT-SB Venture Investment1 50.0 % 50.0 % Korea 31-DecMongolian Telecommunications1 40.0 % — Mongolia 31-DecKT Wibro Infra Co., Ltd. 26.2 % — Korea 31-DecKT-IBKC Future Investment Fund 11 50.0 % 50.0 % Korea 31-DecKT-CKP New Media Investment Fund 49.7 % 49.7 % Korea 31-DecK Bank Inc.1 — 10.0 % Korea 31-Dec

1 At the end of the reporting period, even though the Group (KT-SB Venture Investment Fund andKT-IBKC Future Investment Fund 1) has 50% ownership, the equity method of accounting hasbeen applied as the Group, which is a limited partner of investment fund, cannot participate indetermining the operating and financial policies. As of December 31, 2017, the entire shares ofMongolian Telecommunications is classified as assets held for sale, and KT Wibro Infra Co., Ltd.was liquidated during 2017. Also, 8% of non-voting convertible stock are excluded frompercentage of ownership for K bank Inc.

Summary of Changes inInvestments in Associates andJoint Ventures

Changes in investments in associates and joint ventures for the years ended December 31,2016 and 2017, are as follows:

2016




Technology Fund ￦127,583 ￦— ￦ 7,446 ￦— ￦(60 ) ￦134,969KT-SB Venture

Investment 4,861 — (125 ) — — 4,736Mongolian

Telecommunications 7,483 — 32 — (1,271) 6,244KT Wibro Infra Co.,

Ltd. 69,328 — — (17,128) — 52,200KT-CKP New Media

Investment Fund 3,860 — 594 — — 4,454Others 56,914 29,052 (5,400 ) — 906 81,472

￦270,029 ￦29,052 ￦ 2,547 ￦(17,128) ￦(425 ) ￦284,075

2017




Technology Fund ￦134,969 ￦— ￦ 4,275 ￦— ￦290 ￦139,534KT-SB Venture

Investment 4,736 (1,069 ) (725 ) — — 2,942Mongolian

Telecommunications 6,244 — (348 ) — (5,896 ) —KT Wibro Infra Co.,

Ltd. 52,200 (52,200) — — — —KT-IBKC Future

Investment Fund 1 3,621 7,500 (296 ) — — 10,825KT-CKP New Media

Investment Fund 4,454 (2,970 ) 810 — — 2,294K Bank Inc. — 26,543 (17,244 ) — 32,809 42,108Others 77,851 3,178 (1,952 ) (3,662 ) 6,313 81,728


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￦284,075 ￦(19,018) ￦ (15,480 ) ￦ (3,662 ) ￦33,516 ￦279,431

1 KT investment Co., Ltd., a subsidiary of the Group, recognized its share in net profit fromassociates and joint ventures as operating revenue and expense. These include its share in gainfrom associates and joint ventures of￦1,588 million (2016:￦52 million) recognized asoperating income during the period.

Summary of FinancialInformation of Associates andJoint Ventures

Summarized financial information of associates and joint ventures as of and for the years endedDecember 31, 2016 and 2017, is as follows:


Non-currentassets

Currentliabilities


Korea Information & Technology Fund ￦154,651 ￦250,257 ￦— ￦ —KT-SB Venture Investment 1,009 8,704 242 —Mongolian Telecommunications 9,852 9,055 3,296 —KT Wibro Infra Co., Ltd. 274,811 6 4,996 52KT-CKP New Media Investment Fund 1,801 7,170 4 —


Operatingrevenue


Othercomprehensive

income

Totalcomprehensive

income



Technology Fund ￦26,942 ￦22,338 ￦ (9,425 ) ￦ 12,913 ￦ 3,201KT-SB Venture

Investment 2 (251 ) — (251 ) —Mongolian

Telecommunications 10,336 81 3,178 3,259 —KT Wibro Infra Co.,

Ltd. 391 5,025 — 5,025 —KT-CKP New Media

Investment Fund 1,684 1,195 — 1,195 —


Non-currentassets

Currentliabilities


Korea Information & TechnologyFund ￦144,874 ￦273,727 ￦— ￦ —

KT-SB Venture Investment 120 5,770 6 —KT-IBKC Future Investment Fund

1 5,499 16,302 152 —KT-CKP New Media Investment

Fund 287 4,333 — —K Bank Inc. 1,258,969 92,137 1,116,154 1,177


Operatingrevenue


Othercomprehensive

income

Totalcomprehensive

income



Technology Fund ￦36,462 ￦12,825 ￦ 1,868 ￦ 14,693 ￦ 739KT-SB Venture

Investment 3 (1,449 ) — (1,449 ) —KT-IBKC Future

Investment Fund1 15 (593 ) — (593 ) —

KT-CKP New MediaInvestment Fund 1,593 1,632 — 1,632 —

K Bank Inc. 20,926 (83,787) (746 ) (84,533 ) —Summary of Reconciliation ofCarrying Amount of Interestsin the Associates and JointVentures

Details of a reconciliation of the summarized financial information to the carrying amount ofinterests in the associates and joint ventures as of and for the years end December 31, 2016and 2017, are as follows:

2016


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assets


Carryingamount

Korea Information &Technology Fund ￦404,908 33.3 % ￦134,969 ￦— ￦134,969


MongolianTelecommunications 15,610 40.0 % 6,244 — 6,244

KT Wibro Infra Co.,Ltd. 269,769 26.2 % 70,679 (18,479 ) 52,200


2017



assets


Carryingamount

Korea Information &Technology Fund ￦418,601 33.3 % ￦139,534 ￦ — ￦139,534


KT-IBKC FutureInvestment Fund 1 21,649 50.0 % 10,825 — 10,825


K Bank Inc.1 233,775 10.0 % 42,108 — 42,108




12 Months EndedTrade and other payables(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Trade and OtherPayables

Details of trade and other payables as of December 31, 2016 and 2017, are asfollows:



Total ￦ 1,188,311 ￦ 1,001,369

Summary of Other Payables Details of other payables as of December 31, 2016 and 2017 are as follows:


1 Settlement payables of BC Card Co., Ltd. of￦2,365,477 million related to creditcard transactions included as of December 31, 2017 (2016:￦2,095,989 million).


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12 Months EndedBorrowings (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Borrowings Details of borrowings as of December 31, 2016 and 2017, are as follows:

Debentures



ratesForeign

currencyKorean

wonForeign

currencyKorean

wonMTNP notes1 Sept. 07, 2034 6.50% USD 100,000 ￦120,850 USD 100,000 ￦107,140MTNP notes Jan. 20, 2017 — USD 350,000 422,975 — —FR notes2 Aug. 28, 2018 LIBOR(3M)+1.15% USD 300,000 362,550 USD 300,000 321,420MTNP notes Apr. 22, 2017 — USD 650,000 785,525 — —MTNP notes Apr. 22, 2019 2.63% USD 350,000 422,975 USD 350,000 374,990MTNP notes Jan. 29, 2018 0.86% JPY 6,800,000 70,503 JPY 6,800,000 64,539MTNP notes Feb. 23, 2018 0.48% JPY 15,000,000 155,522 JPY 15,000,000 142,367MTNP notes July 18, 2026 2.50% USD 400,000 483,400 USD 400,000 428,560MTNP notes Aug 07, 2022 2.63% — — USD 400,000 428,560The 173-2nd Public bond Aug. 06, 2018 6.62% — 100,000 — 100,000The 177-3rd Public bond Feb. 09, 2017 — — 170,000 — —The 179th Public bond Mar. 29, 2018 4.47% — 260,000 — 260,000The 180-2nd Public bond Apr. 26, 2021 4.71% — 380,000 — 380,000The 181-2nd Public bond Aug. 26, 2018 3.99% — 90,000 — 90,000The 181-3rd Public bond Aug. 26, 2021 4.09% — 250,000 — 250,000The 182-2nd Public bond Oct. 28, 2021 4.31% — 100,000 — 100,000The 183-2nd Public bond Dec. 22, 2021 4.09% — 90,000 — 90,000The 183-3rd Public bond Dec. 22, 2031 4.27% — 160,000 — 160,000The 184-1st Public bond Apr. 10, 2018 2.74% — 120,000 — 120,000The 184-2nd Public bond Apr. 10, 2023 2.95% — 190,000 — 190,000The 184-3rd Public bond Apr. 10, 2033 3.17% — 100,000 — 100,000The 185-1st Public bond Sept. 16, 2018 3.46% — 200,000 — 200,000The 185-2nd Public bond Sept. 16, 2020 3.65% — 300,000 — 300,000The 186-1st Public bond June 26, 2017 — — 120,000 — —The 186-2nd Public bond June 26, 2019 3.08% — 170,000 — 170,000The 186-3rd Public bond June 26, 2024 3.42% — 110,000 — 110,000The 186-4th Public bond June 26, 2034 3.70% — 100,000 — 100,000The 187-1st Public bond Sept. 02, 2017 — — 110,000 — —The 187-2nd Public bond Sept. 02, 2019 2.97% — 220,000 — 220,000The 187-3rd Public bond Sept. 02, 2024 3.31% — 170,000 — 170,000The 187-4th Public bond Sept. 02, 2034 3.55% — 100,000 — 100,000The 188-1st Public bond Jan. 29, 2020 2.26% — 160,000 — 160,000The 188-2nd Public bond Jan. 29, 2025 2.45% — 240,000 — 240,000The 188-3rd Public bond Jan. 29, 2035 2.71% — 50,000 — 50,000The 189-1st Public bond Jan. 27, 2019 1.76% — 100,000 — 100,000The 189-2nd Public bond Jan. 27, 2021 1.95% — 130,000 — 130,000The 189-3rd Public bond Jan. 27, 2026 2.20% — 100,000 — 100,000The 189-4rd Public bond Jan. 27, 2036 2.35% — 70,000 — 70,000The 17th unsecured bond Apr. 22, 2018 1.89% — 60,000 — 60,000


Discount on bonds (20,852 ) (19,347 )Total ￦5,715,878 ￦4,610,453

1 As of December 31, 2017, the Controlling Company has outstanding notes in the amount of USD 100 million with fixed interest rates underMedium Term Note Program (“MTNP”) registered in the Singapore Stock Exchange, which allowed issuance of notes of up to USD 2,000million. However, the MTN Program has been suspended since 2007.

2 Libor (3M) are approximately 1.695 % as of December 31, 2017.Summary of Short-termBorrowings Short-term borrowings


Operational Shinhan Bank 2.99% ~ 4.41% ￦120,300 ￦113,300Standard Charted Bank — 8,000 —

Korea Development Bank 3.97% 20,800 12,000Indutrial Bank of Korea — 1,000 —


Summary of Long-termBorrowings Long-term borrowings

(In millions of Korean won and thousands of foreign currencies) 2016 2017Financialinstitution Type Annual interest rates

Foreigncurrency

Koreanwon

Foreigncurrency

Koreanwon

Export-ImportBank of Korea

Inter-KoreanCooperation Fund1 1.50% — ￦5,181 — ￦4,688

Shinhan Bank General loans 2.50% — 31,000 — 30,000Facility loans 2.56% — 6,493 — 6,000

Vessel facility loans2 LIBOR(3M)+0.706% USD 21,000 25,379 USD 15,000 16,071KEB Hana

Bank General loans 3.95% — 3,000 — 3,000Standard

ChartedBank General loans 3.16% — — — 8,000

Woori Bank General loans — — 13,000 — —NongHyup

Bank General loans 2.86% — — — 8,000Facility loans 2.00% 123 — 123


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KoreaDevelopment

Bank General loans 3.27% — 30,000 — 30,000Kookmin Bank Facility loans 2.59% — 7,000 — 2,333

NHInvestment &Security Co.,

Ltd. Commercial papers 3.17% — 300,000 — 300,000Others Redeemable

convertible preferredstock3 — — 950 — 950

Kookmin Bankand other2 3.15% USD 183,796 222,117 USD 166,108 177,968

￦644,243 ￦587,133Less: Current portion ￦(59,331 ) ￦(87,398 )

Total ￦584,912 ￦499,735

1 The Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period.2 LIBOR(3M) is approximately 1.695% as of December 31, 2017.3 Skylife TV Co., Ltd., a subsidiary of the Group, issued 1,900,000 of redeemable convertible preferred stock with a par value per share of ￦500 in 2010.

Summary of Repayment ofBorrowings Including theCurrent Liabilities

Repayment schedule of the Group’s borrowings including the portion of current liabilities as of December 31, 2017, is as follows:


In localcurrency


In localcurrency


Jan 1, 2018 ~ Dec 31, 2018 ￦830,000 ￦528,326 ￦1,358,326 ￦167,395 ￦48,303 ￦215,698 ￦1,574,024Jan 1, 2019 ~ Dec 31, 2019 490,000 374,990 864,990 343,465 48,303 391,768 1,256,758Jan 1, 2020 ~ Dec 31, 2020 460,000 — 460,000 1,518 45,089 46,607 506,607Jan 1, 2021 ~ Dec 31, 2021 950,000 — 950,000 1,518 41,875 43,393 993,393After 2022 1,390,000 964,260 2,354,260 7,498 10,469 17,967 2,372,227

￦4,120,000 ￦1,867,576 ￦5,987,576 ￦521,394 ￦ 194,039 ￦715,433 ￦6,703,009

Summary of Carrying Amountand Fair Value of Debenturesand Borrowings

Carrying amount and fair value of the Group’s debentures and borrowings as of December 31, 2016 and 2017, are as follows:


TypeCarryingAmount

FairValue

CarryingAmount

FairValue



Total ￦8,120,791 ￦8,184,195 ￦6,683,662 ￦6,738,326


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12 Months EndedProvisions (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Changes inProvisions

Changes in provisions for the years ended December 31, 2016 and 2017, are asfollows:





Increase (Transfer) 3,842 2,827 41,550 48,219Usage (1,740 ) (2,178 ) (22,382) (26,300 )Reversal (2,834 ) (1,723 ) (11,467) (16,024 )Change in scope of

consolidation — (22 ) (22 ) (44 )Ending balance ￦18,306 ￦ 100,216, ￦84,508 ￦203,030

Current 17,238 1,766 59,168 78,172Non-current 1,068 98,450 25,340 124,858


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12 Months EndedNet Defined BenefitLiabilities (Tables) Dec. 31, 2017

Summary of Amount Recognized in theStatements of Financial Position

The amounts recognized in the statements of financial positionare determined as follows:

(in millions of Korean won) 2016 2017Present value of defined benefit

obligations ￦1,713,184 ￦1,911,166Fair value of plan assets (1,334,780) (1,519,779)Liabilities ￦378,404 ￦396,079Assets in the statement of financial

position ￦— ￦3,692

Summary of Changes in the DefinedBenefit Obligations

Changes in the defined benefit obligations for the years endedDecember 31, 2016 and 2017, are as follows:


Actuarial gains and losses arisingfrom changes in demographicassumptions (53,407 ) 3,353

Actuarial gains and losses arisingfrom changes in financialassumptions 26,717 36,946

Actuarial gains and losses arisingfrom experience adjustments 18,809 63,583


Summary of Changes in the Fair Value ofPlan Assets

Changes in the fair value of plan assets for the years endedDecember 31, 2016 and 2017, are as follows:


Return on plan assets (excludingamounts included in interestincome) (2,323 ) (5,557 )

Benefits paid (88,876 ) (130,510 )Employer contributions 322,851 290,895Changes in scope of consolidation — (132 )Ending ￦1,334,780 ￦1,519,779

Summary of Amounts Recognized in theStatement of Profit or Loss Amounts recognized in the statement of profit or loss for the years

ended December 31, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Current service cost ￦200,994 ￦205,114 ￦210,336Net Interest cost 16,793 12,141 8,691


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Past service cost — 424 (61 )Transfer out (11,942 ) (8,737 ) (9,196 )Transfer to discontinued

operation (3,031 ) — —Total expenses ￦202,814 ￦208,942 ￦209,770

Summary of Principal ActuarialAssumptions



Summary of Expected Maturity Analysisof Undiscounted Pension Benefits The expected maturity analysis of undiscounted pension benefits as at

December 31, 2017, is as follows:

(in millionsof Koreanwon)

Less than1 year

Between1-2 years


Pensionbenefits ￦142,963 ￦179,612 ￦627,302 ￦3,763,601 ￦4,713,478

Defined benefit obligations [Member]Summary of Sensitivity of the DefinedBenefit Obligations

The sensitivity of the defined benefit obligations as of December 31,2017, to changes in the principal assumptions is:

(in percentage, in millions of Koreanwon ) Effect on defined benefit obligation



Decreasein



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12 Months EndedCommitments andContingencies (Tables) Dec. 31, 2017

Text block1 [abstract]Summary Of MajorCommitments With LocalFinancial Institutions

As of December 31, 2017, major commitments with local financial institutions are asfollows:


Co., Ltd. KRW 370,000 300,000Collateralized loan on accounts

receivable-tradeNongHyup Bank and others KRW 35,560 —

Collateralized loan on electronicaccounts receivable-trade

Shinhan Bank and others KRW 343,000 42,350

Plus electronic notes payable Industrial Bank of Korea KRW 50,000 140Loans for working capital Korea Development Bank

and others KRW 306,500 207,300Green energy factoring Shinhan Bank KRW 16 16FX forward trading commitment Shinhan Bank USD 11,500 —Facility loans Kookmin Bank and others KRW 8,456 8,456


Total KRW 2,881,232 563,022USD 253,500 181,108

Summary of GuaranteesReceived from FinancialInstitutions






Total KRW 681,280USD 69,141PLN 1 23,000

1 Polish Zloty.Summary Of GuaranteesProvided By The Group ForThird Parties


(in millions of Korean won) Subject to payment guarantees Creditor Limit Used amount PeriodKT Estate Inc. Busan Gaya Centreville

BuyersShinhan

Bank￦48,536 ￦8,309 Nov 10, 2017

~Oct. 31, 2020KT Estate Inc. Daegu Beomeo

-CrossroadsSeohanIDaum Buyers

ShinhanBank

81,722 14,237 Oct 29, 2017~Nov. 30, 2020

KT Hitel Co., Ltd. KEB Hana Bank Cashpayers

384 — Apr 19, 2017~ Apr 19, 2018


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12 Months EndedLease (Tables) Dec. 31, 2017Text block1 [abstract]Summary Of Details Of Finance Lease Assets Details of finance lease assets as of December 31, 2016 and 2017,

are as follows:


Summary Of Details Of Future MinimumLease Payments Under Finance LeaseContracts

Details of future minimum lease payments As of December 31, 2016and 2017, under finance lease contracts are summarized below:

(in millions of Korean won) 2016 2017Total amount of minimum lease paymentsWithin one year ￦79,644 ￦88,441From one year to five years 131,813 132,113More than five years — 81

211,457 220,635Unrealized interest expense 30,743 43,758Net amount of minimum lease paymentsWithin one year 64,008 68,651From one year to five years 116,706 108,146More than five years — 80Total ￦180,714 ￦176,877

Summary Of Details Of future MinimumLease Payments Under Operating LeaseContracts

Details of future minimum lease payments As of December 31, 2016and 2017, under operating lease contracts are summarized below:



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12 Months EndedShare Capital (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Share Capital As of December 31, 2016 and 2017, the Group’s number of authorized shares is one billion.

2016 2017Number of

outstandingshares

Par valueper share

(Korean won)



shares

Par valueper share

(Korean won)


Ordinaryshares1 261,111,808 ￦ 5,000 ￦1,564,499 261,111,808 ￦ 5,000 ￦1,564,499

1 The Group retired 51,787,959 treasury shares against retained earnings. Therefore, theordinary shares amount differs from the amount resulting from multiplying the number ofshares issued by￦5,000 par value per share of ordinary shares.


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12 Months EndedRetained Earnings (Tables) Dec. 31, 2017Text block1 [abstract]Summary of RetainedEarnings



Total ￦9,644,483 ￦9,826,926

1 The Commercial Code of the Republic of Korea requires the Group toappropriate, as a legal reserve, an amount equal to a minimum of 10% of cashdividends paid until such reserve equals 50% of its issued capital stock. Thereserve is not available for the payment of cash dividends, but may be transferredto capital stock with the approval of the Group’s Board of Directors or used toreduce accumulated deficit, if any, with the ratification of the Group’s majorityshareholders.

2 The provision of research and development of human is separately accumulatedwith tax reserve fund during earned surplus disposal by Tax Reduction andExemption Control Act of Korea. Reversal of this provision can be paid out asdividends according to related tax law.


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12 Months EndedAccumulated OtherComprehensive Income andOther Components of Equity

(Tables)Dec. 31, 2017

Text block1 [abstract]Summary of Accumulated OtherComprehensive Income

As of December 31, 2016 and 2017, the details of the Controlling Company’saccumulated other comprehensive income are as follows:

(in millions of Korean won) 2016 2017Changes in investments in associates and joint

ventures ￦(10,883) ￦(735 )Loss on derivatives valuation (34,309) (3,463 )Gain of valuation on available-for-sale 54,106 52,673Foreign currency translation adjustment (10,346) (17,490)

Total ￦(1,432 ) ￦30,985

Summary of Changes inAccumulated Other ComprehensiveIncome

Changes in accumulated other comprehensive income for the years endedDecember 31, 2016 and 2017, are as follows:

2016



gain or loss EndingChanges in

investments inassociates andjoint ventures ￦(10,312) ￦(571 ) ￦— ￦(10,883)

Gain or loss onderivativesvaluation (23,234) 64,796 (75,871 ) (34,309)


Foreign currencytranslationadjustment (4,999 ) (5,347 ) — (10,346)

Total ￦13,870 ￦64,082 ￦ (79,384 ) ￦(1,432 )


Increase/decrease


Changes ininvestments inassociates andjoint ventures ￦(10,883) ￦10,148 ￦— ￦(735 )

Gain or loss onderivativesvaluation (34,309) (111,083) 141,929 (3,463 )


Foreign currencytranslationadjustment (10,346) (7,144 ) — (17,490)

Total ￦(1,432 ) ￦(54,062 ) ￦ 86,479 ￦30,985


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Summary of Other Components ofEquity

As of December 31, 2016 and 2017, the other components of equity are asfollows:


Total ￦(1,217,934) ￦(1,205,302)

1 During the year ended December 31, 2017, the Group granted 125,412treasury shares as share-based payment.

2 The amount directly reflected in equity is￦653 million (2016:￦738 million)as of December 31, 2017.

3 Profit or loss incurred from transactions with non-controlling interest andinvestment difference incurred from change in proportion of subsidiaries areincluded.

Summary of Treasury Stock As of December 31, 2016 and 2017, the details of treasury stock are as follows:



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12 Months EndedShare-based Payments(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Details of Share-Based Payments


11thGrant date July 27, 2017Grantee CEO, inside directors, outside directors,

executivesVesting conditions Service condition: 1 year

Non-market performance condition:achievement of performance

Fair value per option (in Korean won) ￦34,400Total compensation costs (in Korean

won) ￦6,483 millionEstimated exercise date (exercise

date) After July 27, 2018Valuation method Fair value method

Summary of Changes in theNumber of Stock Options andthe Weighted-AverageExercise Price

Changes in the number of stock options and the weighted-average exercise price as ofDecember 31, 2016 and 2017, are as follows:


sharesexercisable

9thgrant ￦263,123 ￦54,913 ￦181,685 ￦ — ￦136,351 ￦— ￦ —

10thgrant — 318,506 — — — 318,506 —

Total ￦263,123 ￦373,419 ￦181,685 ￦ — ￦136,351 ￦318,506 ￦ —


sharesexercisable

10thgrant ￦318,506 ￦— ￦193,094 ￦ — ￦125,412 ￦— ￦ —

11thgrant — 316,949 — — — 316,949 —

Total ￦318,506 ￦316,949 ￦193,094 ￦ — ￦125,412 ￦316,949 ￦ —

1 The weighted average price of ordinary shares at the time of exercise during 2017was￦31,797 (2016:￦31,750).


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12 Months EndedOperating Revenues (Tables) Dec. 31, 2017Text block1 [abstract]Summary of OperatingRevenues

Operating revenues for the years ended December 31, 2015, 2016 and 2017, are asfollows:


Total ￦22,699,856 ￦23,120,878 ￦23,546,929


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12 Months EndedOperating Expenses (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Operating Expenses Operating expenses for the years ended December 31, 2015, 2016 and 2017, are

as follows:

(In millions of Korean won) 2015 2016 2017Salaries and wages ￦3,303,484 ￦3,477,596 ￦3,568,456Depreciation 2,756,131 2,762,773 2,745,969Amortization of intangible

assets 582,467 582,493 618,533Commissions 1,036,852 1,099,429 1,085,865Interconnection charges 689,293 690,285 640,612International interconnection

fee 231,060 216,633 214,058Purchase of inventories 3,963,036 3,407,263 4,053,693Changes of inventories (198,028 ) 162,323 (187,439 )Sales commission 1,856,595 1,968,035 2,201,778Service cost 1,163,887 1,322,337 1,428,405Utilities 319,303 323,406 323,313Taxes and dues 256,958 255,480 279,574Rent 469,950 455,457 448,772Insurance premium 211,104 178,231 69,384Installation fee 249,413 156,669 146,783Advertising expenses 177,348 185,560 197,114Research and development

expenses 183,821 167,881 168,635Card service cost 2,959,765 3,049,559 3,094,894Others 1,410,349 1,319,688 1,379,438

Total ￦21,622,788 ￦21,781,098 ￦22,477,837

Summary of Details of EmployeeBenefits

Details of employee benefits for the years ended December 31, 2015, 2016 and2017, are as follows:

(In millions of Korean won) 2015 2016 2017Short-term employee benefits ￦3,055,699 ￦3,206,904 ￦3,297,944Post-employment

benefits(Defined benefit plan) 202,814 208,942 209,770Post-employment

benefits(Defined contributionplan) 35,699 46,023 45,936

Post-employmentbenefits(Others) 5,535 8,017 6,949

Share-based payment 3,737 7,710 7,660Total ￦3,303,484 ￦3,477,596 ￦3,568,259


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12 Months EndedFinancial Income and Costs(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Details of FinancialIncome

Details of financial income for the years ended December 31, 2015, 2016 and2017, are as follows:

(In millions of Korean won) 2015 2016 2017Interest income ￦70,035 ￦115,686 ￦93,078Gain on foreign currency transactions 18,766 24,915 79,653Gain on foreign currency translation 11,280 12,165 225,580Gain on settlement of derivatives 368 8,515 —Gain on valuation of derivatives 141,512 109,436 57Others 30,899 25,422 7,960

Total ￦272,860 ￦296,139 ￦406,328

Summary of Details of FinancialExpense Details of financial expenses for the years ended December 31, 2015, 2016 and

2017, are as follows:

(In millions of Korean won) 2015 2016 2017Interest expenses ￦385,925 ￦337,219 ￦302,464Loss on foreign currency transactions 42,831 37,936 40,303Loss on foreign currency translation 175,613 121,949 12,239Loss on settlement of derivatives 6,280 632 58,569Loss on valuation of derivatives 1,733 138 209,582Loss on disposal of trade receivables 2,539 15,838 20,355Impairment loss on available-for-sale

financial assets 1,805 966 9Others 28,605 409 1,010

￦645,331 ￦515,087 ￦644,531


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12 Months EndedDeferred Income Tax andIncome Tax Expense (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Analysis ofDeferred Tax Assets andDeferred Tax Liabilities

The analysis of deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2017, is asfollows:



more than 12 months 1,124,420 1,140,252￦1,390,417 ￦1,458,591


more than 12 months (778,655 ) (859,126 )(826,688 ) (874,831 )


Summary of GrossMovements on the DeferredIncome Tax Account

The gross movements on the deferred income tax account for the years ended December 31, 2016 and 2017,are calculated as follows:


Summary of Movement inDeferred Income Tax Assetsand Liabilities

The movement in deferred income tax assets and liabilities during the year, without taking into considerationthe offsetting of balances within the same tax jurisdiction, is as follows:



Othercomprehensive


Derivative instruments ￦(19,155 ) ￦ (33,569 ) ￦ 3,536 ￦(49,188 )Available-for-sale financial

assets (29,430 ) (10 ) (2,262 ) (31,702 )Investment in subsidiaries,

associates and jointventures (50,235 ) (666 ) 155 (50,746 )

Depreciation (53,872 ) 14,374 — (39,498 )Advanced depreciation

provision (231,692) 6,005 — (225,687)Deposits for severance

benefits (251,924) (55,806 ) — (307,730)Accrued income (1,808 ) (216 ) — (2,024 )Reserve for technology and

human resourcedevelopment (1,216 ) 469 — (747 )

Others (135,802) 16,436 — (119,366)(775,134) (52,983 ) 1,429 (826,688)

Deferred tax assetsProvisions for impairment on

trade receivables 136,743 (26,467 ) — 110,276Inventory valuation 56 (8 ) — 48Contribution for construction 19,618 (1,527 ) — 18,091Accrued expenses 64,117 16,239 — 80,356Provisions 20,353 (132 ) — 20,221Property, plant and

equipment 239,791 (6,876 ) — 232,915Retirement benefit

obligations 331,980 41,857 (1,345 ) 372,492Withholding of facilities

expenses 7,360 (450 ) — 6,910Accrued payroll expenses 21,634 4,281 — 25,915


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Deduction of installmentreceivables 10,513 3,374 — 13,887

Assets retirement obligation 16,974 1,112 — 18,086Gain or loss foreign currency

translation 43,283 24,418 — 67,701Deferred revenue 43,792 (17,679 ) — 26,113Real-estate sales 2,980 871 — 3,851



Othercomprehensive

income EndingTax credit carryforwards 212,820 (13,221 ) — 199,599Accumulated deficit 107,485 (107,485) — —Others 211,382 (17,426 ) — 193,956

1,490,881 (99,119 ) (1,345 ) 1,390,417Net balance ￦715,747 ￦(152,102) ￦ 84 ￦563,729


Beginning

Statementof

operations

Othercomprehensive


Derivative instruments ￦(49,188 ) ￦49,188 ￦ — ￦—Available-for-sale financial

assets (31,702 ) (164 ) 1,346 (30,520 )Investment in subsidiaries,

associates and jointventures (50,746 ) (42,659) (3,245 ) (96,650 )

Depreciation (39,498 ) 39,498 — —Advanced depreciation

provision (225,687) (22,905) — (248,592)Deposits for severance

benefits (307,730) (80,126) — (387,856)Accrued income (2,024 ) (126 ) — (2,150 )Reserve for technology and

human resourcedevelopment (747 ) 433 — (314 )

Others (119,366) 10,617 — (108,749)(826,688) (46,244) (1,899 ) (874,831)

Deferred tax assetsDerivative instruments — 34,572 (9,848 ) 24,724Provisions for impairment on

trade receivables 110,276 11,380 — 121,656Inventory valuation 48 (48 ) — —Contribution for construction 18,091 180 — 18,271Accrued expenses 80,356 10,683 — 91,039Provisions 20,221 3,858 — 24,079Property, plant and

equipment 232,915 (841 ) — 232,074Retirement benefit

obligations 372,492 67,751 26,806 467,049Withholding of facilities

expenses 6,910 472 — 7,382Accrued payroll expenses 25,915 (10,786) — 15,129Deduction of installment

receivables 13,887 (13,887) — —Assets retirement obligation 18,086 2,750 — 20,836Gain or loss foreign currency

translation 67,701 (67,558) — 143Deferred revenue 26,113 221 — 26,334Real-estate sales 3,851 4,847 — 8,698Tax credit carryforwards 199,599 (48,823) — 150,776Deficit carried over — 2,699 — 2,699


Beginning

Statementof

operations

Othercomprehensive


1,390,417 44,473 23,701 1,458,591Net balance ￦563,729 ￦(1,771 ) ￦ 21,802 ￦583,760



Summary of Tax ImpactsRecognized Directly To Equity The tax impacts recognized directly to equity as of December 31, 2015, 2016 and 2017, are as follows:


Beforerecognition

Taxeffect

Afterrecognition

Beforerecognition

Taxeffect

Afterrecognition

Beforerecognition

Taxeffect

Afterrecognition

Available-for-salevaluationgain(loss) ￦ (47,515 ) ￦11,499 ￦ (36,016 ) ￦ 9,347 ￦(2,262) ￦ 7,085 ￦(5,561 ) ￦1,346 ￦ (4,215 )

Hedge instrumentsvaluationgain(loss) 18,406 (4,454 ) 13,952 (14,611 ) 3,536 (11,075 ) 40,694 (9,848 ) 30,846

Remeasurementsfrom net definedbenefit liabilities (49,963 ) 12,091 (37,872 ) 5,558 (1,345) 4,213 (110,768 ) 26,806 (83,962 )

Shares ofgain(loss) ofassociates andjoint ventures (5,297 ) 1,282 (4,015 ) (641 ) 155 (486 ) 13,410 (3,245 ) 10,165

Foreign currencytranslationadjustment (6,443 ) 1,559 (4,884 ) (7,133 ) 1,726 (5,407 ) (27,865 ) 6,743 (21,122 )

Total ￦ (90,812 ) ￦21,977 ￦ (68,835 ) ￦ (7,480 ) ￦1,810 ￦ (5,670 ) ￦(90,090 ) ￦21,802 ￦ (68,288 )

Summary of Details of IncomeTax Expense (Benefit) Details of income tax expense(benefit) for the years ended December 31, 2015, 2016 and 2017, are

calculated as follows:

(In millions of Korean won) 2015 2016 2017Current income tax expense(benefit) ￦(5,003 ) ￦176,212 ￦268,885Impact of change in deferred taxes 232,134 152,102 1,771Income tax expense ￦227,131 ￦328,314 ￦270,656

Summary of Tax on theGroup's Profit Before Tax

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using theweighted average tax rate applicable to profits of the entities as follows:






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12 Months EndedEarnings per Share (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Basic and Diluted Earningsper Share From Operations

Basic earnings per share from operations for the years endedDecember 31, 2015, 2016 and 2017, is calculated as follows:

2015 2016 2017Profit attributable

to ordinaryshares (Inmillions ofKorean won) ￦546,361 ￦708,362 ￦461,559

Profit fromcontinuingoperationsattributable toordinary shares 404,045 708,362 461,559

Profit fromdiscontinuedoperationsattributable toordinary shares 142,316 — —

Weighted averagenumber ofordinary sharesoutstanding (Innumber ofshares) 244,854,364 244,892,313 245,017,175

Basic earnings pershare (InKorean won) 2,231 2,893 1,884

Basic earnings pershare fromcontinuingoperations 1,650 2,893 1,884

Basic earnings pershare fromdiscontinuedoperations 581 — —Diluted earnings per share from operations for the years endedDecember 31, 2015, 2016 and 2017 is calculated as follows:

2015 2016 2017Profit attributable

to ordinaryshares (Inmillions ofKorean won) ￦546,361 ￦708,362 ￦461,559

Adjusted netincomeattributable toordinary shares(In millions ofKorean won) (75 ) (67 ) —


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Diluted profitattributable toordinary shares(In millions ofKorean won) 546,286 708,295 461,559

Diluted profit fromcontinuingoperationsattributable toordinary shares 403,970 708,295 461,559

Diluted incomefromdiscontinuedoperationsattributable toordinary shares 142,316 — —

Number ofdilutivepotentialordinary sharesoutstanding (Innumber ofshares) 1,104 84,245 79,880

Weightedaveragenumber ofordinary sharesoutstanding (Innumber ofshares) 244,855,468 244,976,558 245,097,055

Diluted earningsper share (InKorean won) 2,231 2,891 1,883

Diluted earningsper share fromcontinuingoperations 1,650 2,891 1,883

Diluted earningsper share fromdiscontinuedoperations 581 — —



12 Months EndedCash Generated fromOperations (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Cash Flows fromOperating Activities

Cash flows from operating activities for the years ended December 31,2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 20171. Profit for the year ￦624,685 ￦795,117 ￦546,3412. Adjustments to reconcile

net incomeIncome tax expense 346,146 328,314 270,656Interest income (161,123 ) (130,066 ) (108,639 )Interest expense 445,814 337,219 302,464Dividends income (11,371 ) (3,926 ) (4,785 )Depreciation 3,030,821 2,821,779 2,802,531Amortization of

intangible assets 609,185 599,721 635,150Provision for

severance benefits 217,787 217,255 218,966Impairment losses on

trade receivables 161,448 92,711 45,704Share of net profit or

loss of associatesand joint ventures (5,562 ) (2,547 ) 15,480

Loss(gain) on disposalof associates andjoint ventures (4,848 ) (1,450 ) 979

Impairment loss ofassociates and jointventures — 17,128 3,662

Gain on disposal ofsubsidiaries (256,230 ) — —

Loss on disposal ofproperty, plant andequipment andinvestment inproperties 129,466 74,913 150,293

Loss on disposal ofintangible assets 33,978 7,703 4,271

Loss on impairment ofintangible assets 292,345 135,264 116,095

Loss on foreigncurrency translation 164,374 109,784 (213,341 )

Loss(gain) on valuationof derivatives (306,538 ) (117,181 ) 268,094

Impairment losses onavailable-for-salefinancial assets 1,805 966 9

Gain on disposal ofavailable-for-salefinancial assets (131,041 ) (22,695 ) (89,598 )

Others 24,140 64,863 (251,193 )3. Changes in operating

assets and liabilitiesDecrease(increase) in

trade receivables 112,674 252,196 (303,340 )


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Increase in otherreceivables (21,749 ) (770,893 ) (346,013 )

Decrease(increase) inother current assets (19,701 ) 48,549 11,792

Increase in othernon-current assets (137,532 ) (51,765 ) (43,790 )

Decrease(increase) ininventories (270,343 ) 167,873 (205,403 )

Increase(decrease) intrade payables 81,295 (114,838 ) 162,110

Increase(decrease) inother payables (48,680 ) 705,807 214,689

Increase(decrease) inother currentliabilities (9,452 ) 37,798 288,553

Increase in othernon-current liabilities 119,836 30,762 174,618

Decrease in provisions (8,902 ) (12,583 ) (12,574 )Decrease in deferred

revenue (82,582 ) (69,179 ) (13,086 )Increase in plan assets (223,194 ) (224,244 ) (203,420 )Payment of severance

benefits (117,691 ) (121,835 ) (118,391 )4. Cash generated from

operations (1+2+3) ￦4,579,260 ￦5,202,520 4,318,884

Summary of Significant Transactionsnot Affecting Cash Flows

Significant transactions not affecting cash flows for the years endedDecember 31, 2015, 2016 and 2017, are as follows:

(In millions of Korean won) 2015 2016 2017Reclassification of the

current portion ofdebentures ￦1,551,300 ￦1,617,175 ￦1,416,066

Reclassification ofconstruction-in-progressto property, plant andequipment 2,373,023 2,212,324 2,686,591

Reclassification of accountspayable from property,plant and equipment 78,663 91,407 225,601

Reclassification of accountspayable from intangibleassets (170,870 ) 668,564 (227,108 )

Reclassification of payablefrom defined benefitliability 1,675 5,746 36,209

Reclassification of payablefrom plan assets 13,717 (9,731 ) 43,035


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12 Months EndedChanges in LiabilitiesArising from Financing

Activities (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Changes inLiabilities Arising from FinancialActivities

Changes in liabilities arising from financial activities for the periods endedDecember 31, 2017, are as follows:

2017Non-cash Ending(in millions

of Koreanwon) Beginning Cash flows

Newlyacquired

Exchangedifference

Fair valuechange

Otherchanges

Borrowing ￦8,120,791 ￦(1,163,917) ￦— ￦(221,495) ￦— ￦(51,717 ) ￦6,683,662Financial

leaseliabilities 180,714 (71,735 ) 68,938 — — (1,039 ) 176,878

Derivativeassets 227,318 (71,370 ) — (76,552 ) 2,687 (74,694 ) 7,389

Derivativeliabilities 16,901 — — 130,674 (28,015 ) (20,740 ) 98,820

Total ￦8,545,724 ￦(1,307,022) ￦68,938 ￦(167,373) ￦(25,328 ) ￦(148,190) ￦6,966,749


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12 Months EndedSegment Information(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of SegmentInformation

Details of each segment for the years ended December 31, 2015, 2016 and 2017,are as follows:

2015






2016






2017


Operatingincome




Summary of Operating Revenuesand Non Current Assets byGeographical Regions

Operating revenues for the year ended December 31, 2015, 2016 and 2017 andnon-current assets as of December 31, 2016 and 2017 by geographical regions,are as follows:



Total ￦22,699,856 ￦23,120,878 ￦23,546,929 ￦18,482,958 ￦17,384,554

1 Non-current assets include property, plant and equipment, intangible assetsand investment properties.


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12 Months EndedRelated Party Transactions(Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Related PartiesOutstanding Balances ofReceivables and Payables

Outstanding balances of receivables and payables in relations totransactions with related parties as of December 31, 2016 and 2017, are asfollows:




receivablesTrade

payablesOther

payablesKT Wibro Infra Co., Ltd. ￦— ￦— ￦— ￦ — ￦43,394K-Realty CR-REITs No.1 882 — 33,110 — —MOS GS Co., Ltd. 9 — 1 — 1,494MOS Daegu Co., Ltd. 1 — — — 1,082MOS Chungcheong Co.,Ltd. 6 — 1 — 2,065MOS Gangnam Co.,Ltd. 6 — 1 — 1,129MOS GB Co., Ltd. 19 — 5 — 2,167MOS BS Co., Ltd. 34 — 1 — 1,114MOS Honam Co., Ltd. 2 — — — 1,289Others 481 — 179 3 1,266


Total ￦ 1,440 ￦— ￦33,298 ￦ 3 ￦55,000




receivablesTrade

payablesOther

payablesK-Realty CR-REITs No.1￦ 778 ￦— ￦33,800 ￦ — ￦—MOS GS Co., Ltd. 17 — — — 392MOS Daegu Co., Ltd. 1 — — — 1,388MOS Chungcheong Co.,Ltd. 1 — 290 — 1,827MOS Gangnam Co.,Ltd. 6 — 1 — 287MOS GB Co., Ltd. 17 — 1 — 778MOS BS Co., Ltd. 34 — 1 — 46MOS Honam Co., Ltd. 2 — 1 — 384K Bank, Inc. 1,338 — 7,994 — 296NgeneBio 1 2,510 — — 3


Others 54 — 1,281 — 2,135Total ￦ 2,249 ￦2,510 ￦43,369 ￦ — ￦7,536

Summary of SignificantTransactions With RelatedParties

Significant transactions with related parties for the years endedDecember 31, 2015, 2016 and 2017, are as follows:


KT Service Bukbu1 ￦2,143 ￦28,550Associatesand jointventures

Information Technology Solution NambuCorporation1 2,707 24,025Information Technology Solution SeobuCorporation1 2,324 20,031Information Technology Solution BusanCorporation1 1,496 14,049


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KT Service Nambu1 1,972 21,133Information Technology Solution HonamCorporation1 2,050 29,538Information Technology Solution DaeguCorporation1 1,256 18,272KT Wibro Infra Co., Ltd. 11 814Smart Channel Co., Ltd. 6,545 4,722K- Realty CR-REITs No.1 2,133 38,167MOS GS Co., Ltd. 752 17,474MOS Daegu Co., Ltd. 357 12,227MOS Chungcheong Co., Ltd. 310 12,735MOS Gangnam Co., Ltd. 454 15,829MOS GB Co., Ltd. 964 21,582MOS BS Co., Ltd. 453 15,482MOS Honam Co., Ltd. 470 17,004Others 4,394 13,510

Total3 ￦30,791 ￦325,144

1 The transactions for the year ended December 31, 2015, after KT Service BukbuCo., Ltd. and KT Service Nambu Co., Ltd. were merged and included in theconsolidation scope.

2 The amount includes acquisition of property, plant and equipment, and others.3 Operating income amounting to￦6,634 million of KT Capital Co., Ltd. and KT

Rental that were classified as discontinued operations during the year endedDecember 31, 2015, is included.


KT Wibro Infra Co., Ltd. ￦11 ￦391Smart Channel Co., Ltd. 1 766 —K- Realty CR-REITs No.1 1,989 37,469MOS GS Co., Ltd. 663 17,361MOS Daegu Co., Ltd. 291 12,220MOS Chungcheong Co., Ltd. 408 13,469MOS Gangnam Co., Ltd. 412 15,797MOS GB Co., Ltd. 891 21,802MOS BS Co., Ltd. 441 15,346MOS Honam Co., Ltd. 418 14,389


Others 1,719 29,422Total ￦8,009 ￦177,666

1 The transactions for the year ended December 31, 2016, before Smart ChannelCo., Ltd. was included in the consolidation scope.



K- Realty CR-REITs No.1 ￦2,233 ￦35,532MOS GS Co., Ltd. 704 16,946MOS Daegu Co., Ltd. 335 8,514MOS Chungcheong Co., Ltd. 455 15,542MOS Gangnam Co., Ltd. 484 16,380MOS GB Co., Ltd. 987 21,651MOS BS Co., Ltd. 460 15,957MOS Honam Co., Ltd. 493 14,294K Bank, Inc.3 29,939 59NgeneBio2 43 —


Others 1,149 11,384



Total ￦37,282 ￦156,259

1 The amount includes acquisition of property, plant and equipment and others.2 It is the amount after excluded from consolidation during the year.3 The sales amount consists of providing services of IT system construction to K

Bank, Inc.Summary of Key ManagementCompensation

Key management compensation for the years ended December 31, 2015, 2016 and2017, consists of:


Total ￦3,865 ￦4,247 ￦4,521

Summary of FundTransactions With RelatedParties

Fund transactions with related parties for the years ended December 31, 2016 and2017, are as follows:

2016


Equitycontributions


Associates and joint venturesKT-DSC creative economy youth start-up investment

fund ￦ 6,000 ￦—PT. Mitra Transaksi Indonesia 16,626 —K-REALTY RENTAL HOUSING REIT 2 5,500 —AI RESEARCH INSTITUTE 3,000 —KT-IBKC future investment fund 1 3,750 —Gyeonggi-KT Yoojin Superman Fund 1,000 —FUNDA Co., Ltd. 2,799 —K-Realty CR-REITs No.1 — 4,186Korea Information & Technology Investment Fund — 3,201Daiwon Broadcasting Co., Ltd. — 85Others — 82

Total ￦ 38,675 ￦7,554

2017


Equitycontributions


Associates and joint venturesPT. Mitra Transaksi Indonesia ￦ 5,194 ￦—KT-IBKC future investment fund 1 7,500 —CHAMP IT Co.,Ltd. 750 —Korea Electronic Vehicle Charging Service 864 —Gyeonggi-KT Yoojin Superman Fund 1,000 —K-REALTY CR REIT 1 — 5,392K Bank, Inc. 26,543 —Korea Information & Technology Investment Fund — 739MOS GS Co., Ltd. — 12MOS Daegu Co., Ltd. — 12MOS Chungcheong Co., Ltd. — 12MOS Gangnam Co., Ltd. — 10MOS GB Co., Ltd. — 15MOS BS Co., Ltd. — 10MOS Honam Co., Ltd. — 10

Total ￦ 41,851 ￦6,212


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12 Months EndedFinancial Risk Management(Tables) Dec. 31, 2017

Summary of MaximumExposure to Credit Risk



Financial assets at fair value through profit orloss 6,277 5,813

Derivative used for hedging 227,318 7,389Time deposits and others 716,769 1,333,317Available-for-sale financial assets 26,684 9,899Held-to-maturity financial assets 30,143 151


1 Total amounts guaranteed by the Group according to the guarantee contracts.Summary of ContractualUndiscounted Cash Flows

The table below analyzes the Group’s liabilities (including interest expenses) intorelevant maturity groups based on the remaining period at the date of the end ofeach reporting period to the contractual maturity date. These amounts arecontractual undiscounted cash flows.

2016.12.31





financial liabilities 233 3,272 22,917 26,422Financial guarantee

contracts1 56,373 — — 56,373Total ￦9,773,734 ￦5,958,875 ￦2,699,077 ￦18,431,686

2017.12.31





financial liabilities 4,117 8,452 — 12,569Financial guarantee

contracts1 26,738 — — 26,738Total ￦9,535,757 ￦4,895,013 ￦2,478,706 ￦16,909,476

1 Total amount guaranteed by the Group according to guarantee contracts. Cashflow from financial guarantee contracts is classified as the maturity group in theearliest period when the financial guarantee contracts can be executed.

Summary of Cash Outflow andInflow of Derivatives Settled

2015.12.31


5 years Total


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Gross or Net are UndiscountedContractual Cash Flow

Outflow ￦ 335,970 ￦2,138,379 ￦38,184 ￦2,512,533Inflow 276,066 2,284,219 46,194 2,606,479

2016.12.31(In millions of Koreanwon) Less than 1 year 1-5 years

More than5 years Total

Outflow ￦1,174,147 ￦1,176,715 ￦536,005 ￦2,886,867Inflow 1,302,112 1,306,199 588,559 3,196,870

2017.12.31



Summary of Debt-to-equityRatios



Summary of Gearing Ratios The gearing ratios as of December 31, 2016 and 2017, are as follows:


Summary of Group'sRecognized Financial AssetsSubject to Enforceable MasterNetting Arrangements orSimilar Agreements

Details of the Group’s recognized financial assets subject to enforceable masternetting arrangements or similar agreements are as follows:


Amounts not offset

Grossassets

Grossliabilities

offset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

assets forhedgingpurpose1 ￦35,334 ￦ — ￦35,334 ￦(5,707 ) ￦ — ￦29,627

Tradereceivables2 95,865 — 95,865 (91,662 ) — 4,203

￦131,199 ￦ — ￦131,199 ￦(97,369 ) ￦ — ￦33,830


Amounts not offset

Grossassets

Grossliabilities

offset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

assets forhedgingpurpose1 ￦3,284 ￦— ￦ 3,284 ￦(3,284 ) ￦ — ￦—


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Tradereceivables2 85,755 (5,010) 80,745 (73,109 ) — 7,636

Other financialassets 8,680 (436 ) 8,244 (5,307 ) — 2,937

￦97,719 ￦(5,446) ￦ 92,273 ￦(81,700 ) ￦ — ￦10,573



Summary of Group'sRecognized FinancialLiabilities Subject toEnforceable Master NettingArrangements or SimilarAgreements

The Group’s recognized financial liabilities subject to enforceable master nettingarrangements or similar agreements are as follows:


Amounts not offset

Grossliabilities

Grossassetsoffset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

liabilities forhedgingpurpose 1 ￦20,627 ￦— ￦20,627 ￦(20,627 ) ￦ — ￦—

Tradepayables2 90,435 — 90,435 (86,184 ) — 4,251

Otherpayables2 48 (4 ) 44 — — 44

￦111,110 ￦(4 ) ￦111,106 ￦(106,811) ￦ — ￦4,295


Amounts not offset

Grossliabilities

Grossassetsoffset



positionFinancial

instrumentsCash

collateralNet

amountDerivative

liabilitiesforhedgingpurpose 1 ￦26,135 ￦— ￦26,135 ￦(3,284 ) ￦ — ￦22,851

Tradepayables2 80,829 (5,217) 75,612 (73,109 ) — 2,503

Otherfinancialliabilities 5,549 (229 ) 5,320 (5,307 ) — 13

￦112,513 ￦(5,446) ￦107,067 ￦(81,700 ) ￦ — ￦25,367



Currency risk [Member]


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Summary of Exposures toRisks, Effects on Profit beforeIncome Tax and Shareholders'Equity

As of December 31, 2015, 2016 and 2017, if the foreign exchange rate hadstrengthened/weakened by 10% with all other variables held constant, the effectson profit before income tax and shareholders’ equity would have been as follows:



rate Income before tax Shareholders’ equity10 % ￦ (52,157 ) ￦ (45,632 )2015.12.31-10 % 52,157 45,63210 % (28,134 ) (23,817 )2016.12.31-10 % 28,134 23,81710 % (10,132 ) (7,273 )2017.12.31-10 % 10,132 7,273

Summary of Details ofFinancial Assets and Liabilitiesin Foreign Currencies

Details of financial assets and liabilities in foreign currencies as of December 31,2015, 2016 and 2017, are as follows:

2015 2016 2017



Financialassets


Financialassets


USD 183,254 2,351,003 210,474 2,536,090 236,476 1,908,831SDR1 444 849 311 737 306 738JPY 73,716 40,279,411 80,555 21,802,051 28,267 21,801,443GBP 8 888 1 151 — 74EUR 29 29 40 2,571 186 3,625DZD2 — — 471 — 47 —CNY 15,562 107 15,262 381 46,555 10UZS3 — — 39,531 — 136,787 —RWF4 — — 1,203 — 3,346 —IDR5 — — 15,646,011 53,142,167 14,886,393 710,162MMK6 — — 2,750 — 84 —TZS7 — — 29,987 — 317,348 —BWP8 — — 15 — 42 —HKD 9 — 254 — — —BDT9 6 — 69,473 — 38,074 —PLN10 207,273 — 106,025 — 338 —VND11 270,000 — 515,412 — 311,649 —CHF12 — — — — — 12


Equity price risk [Member]Summary of Exposures toRisks, Effects on Profit beforeIncome Tax and Shareholders'Equity

As of December 31, 2015, 2016 and 2017, the Group is exposed to equitysecurities price risk because the securities held by the Group are traded in activemarkets. If the market prices had increased/decreased by 10% with all othervariables held constant, the effects on profit before income tax and shareholders’equity would have been as follows:

(In millions of Korean won) Fluctuation of price Income before tax Equity10% ￦ — ￦3,4692015.12.31-10% — (3,469)


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10% ￦ — ￦5392016.12.31-10% — (539 )10% ￦ — ￦6862017.12.31-10% — (686 )

Interest rate risk [Member]Summary of Exposures toRisks, Effects on Profit beforeIncome Tax and Shareholders'Equity

As of December 31, 2015, 2016 and 2017, if the market interest rate had increased/decreased by 100bp with other variables held constant, the effects on profit beforeincome tax and shareholders’ equity would be as follows:


Fluctuationof


Shareholders’equity

+ 100 bp ￦ (3,601 ) ￦ (245 )2015.12.31- 100 bp 3,615 (5,764 )+ 100 bp ￦ (3,456 ) ￦ (1,673 )2016.12.31- 100 bp 3,445 (5,025 )+ 100 bp ￦ 1,942 ￦ 4,8682017.12.31- 100 bp (1,954 ) (5,198 )


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12 Months EndedFair Value (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Carrying Amountand Fair Value of FinancialInstruments by Category

Carrying amount and fair value of financial instruments by category as ofDecember 31, 2016 and 2017, are as follows:

2016 2017



Financial assetsCash and cash equivalents1 ￦2,900,311 ￦— ￦1,928,182 ￦—Trade and other receivables1 6,036,363 — 6,643,115 —

Other financial assetsFinancial instruments at fair



Time deposits and others1 716,769 — 1,333,317 —Held-to-maturity 30,143 30,143 151 151Available-for-sale financial

assets2 299,001 299,001 319,402 319,402￦10,216,182 ￦— ￦10,237,369 ￦—

Financial liabilitiesTrade and other liabilities1 ￦8,328,082 ￦— ￦8,425,503 ￦—Borrowings 8,120,791 8,184,195 6,683,662 6,738,326

Other financial liabilitiesFinancial instruments at fair



Other1 91,763 — 87,670 —￦16,557,537 ￦— ￦15,295,656 ￦—

1 The Group did not conduct fair value estimation since the book amount is areasonable approximation of the fair value.

2 Equity instruments that do not have a quoted price in an active market aremeasured at cost because their fair value cannot be measured reliably andexcluded from the fair value disclosures.

Summary of Available-for-saleFinancial Assets Measured atCost

Available-for-sale financial assets measured at cost as of December 31, 2016 and2017, are as follows:

(In millions of Korean won) 2016 2017K-Bank ￦36,500 ￦—IBK-AUCTUS Green Growth Private Equity Fund 9,506 8,518WALDEN No.6 Fund 4,710 4,670TRANSLINK No.2 Fund 9,395 9,395Storm IV Fund 7,550 8,453CBC II Fund 8,601 7,298Others 29,511 23,217

￦105,773 ￦61,551


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Summary of Fair ValueHierarchy Classifications ofFinancial Assets and FinancialLiabilities That are Measuredat Fair Value

Fair value hierarchy classifications of the financial assets and financialliabilities that are measured at fair value or its fair value is disclosed as ofDecember 31, 2016 and 2017, are as follows:





assets 5,387 5,725 287,889 299,0015,387 233,043 294,166 532,596

Disclosed fair valueAssociates and joint ventures 3,940 — — 3,940Investment properties1 — — 1,962,779 1,962,779

3,940 — 1,962,779 1,966,719￦9,327 ￦233,043 ￦2,256,945 ￦2,499,315



Derivative financial liabilitiesfor hedging purpose — 14,928 — 14,928


Borrowings — — 8,184,195 8,184,195— — 8,184,195 8,184,195

￦— ￦14,928 ￦8,186,168 ￦8,201,096





assets 6,859 5,466 307,077 319,4026,859 12,855 312,890 332,604

Disclosed fair valueInvestment properties1 — — 1,755,600 1,755,600

— — 1,755,600 1,755,600￦6,859 ￦12,855 ￦2,068,490 ￦2,088,204



Derivative financial liabilitiesfor hedging purpose — 76,045 17,725 93,770

— 76,045 22,776 98,821


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Disclosed fair valueBorrowings — — 6,738,326 6,738,326

— — 6,738,326 6,738,326￦— ￦76,045 ￦6,761,102 ￦6,837,147

1 The highest and best use of a non-financial asset does not differ from its currentuse.

Summary of Changes in Level3 of Fair Value Hierarchy forRecurring Fair ValueMeasurements

(b) Details of changes in Level 3 of the fair value hierarchy for the recurring fair valuemeasurements are as follows:

2016





Beginning balance ￦ 18 ￦ 267,337 ￦ 2,006Reclassification — 5,723 —Amount recognized in

other comprehensiveincome — 15,099 —

Purchases 13,461 1,561 —Amount recognized in

profit or loss (7,184 ) (426 ) (33 )Sales (18 ) (1,405 ) —Ending balance ￦ 6,277 ￦ 287,889 ￦ 1,973

2017






hedging purposeBeginning

balance ￦ 6,277 ￦ 287,889 ￦ 1,973 ￦ —Reclassification — (277 ) — —Amount

recognized inothercomprehensiveincome — 58,450 — (1,909 )

Purchases — 85,287 — —Amount

recognized inprofit or loss (464 ) (113 ) 3,078 19,634

Sales — (124,159 ) — —Ending balance ￦ 5,813 ￦ 307,077 ￦ 5,051 ￦ 17,725

Summary of ValuationTechniques and Inputs

Valuation techniques and inputs used in the recurring, non-recurring fair valuemeasurements and disclosed fair values categorized within Level 2 and Level 3 of thefair value hierarchy as of December 31, 2016 and 2017, are as follows:

2016(In millions of Korean won) Fair value Level Valuation techniquesAssetsRecurring fair value

measurementsOther financial assets

Derivative financialassets forhedging purpose ￦227,318 2 Discounted cash flow model


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Available-for-salefinancial assets 293,614 2,3 Discounted cash flow model

Others 6,277 3 Discounted cash flow modelDisclosed fair value

Investmentproperties 1,962,779 3 Discounted cash flow model

LiabilitiesRecurring fair value

measurementsOther financial liabilities

Derivative financialliabilities forhedging purpose 14,928 2 Discounted cash flow model


1,973 3 Discounted cash flow modelComparable CompanyAnalysis


2017(In millions of Korean won) Fair value Level Valuation techniquesAssetsRecurring fair value

measurementsOther financial assets

Derivative financialassets for hedgingpurpose ￦7,389 2

Discounted cash flowmodel

Available-for-salefinancial assets 312,543 2,3


Others5,813 3


Disclosed fair value

Investment properties 1,755,600 3Discounted cash flowmodel

LiabilitiesRecurring fair value

measurementsOther financial liabilities

Derivative financialliabilities for hedgingpurpose 93,770 2,3 Hull-White Model,



5,051 3 Discounted cash flowmodelComparable CompanyAnalysis

Disclosed fair valueBorrowings 6,738,326 3 Discounted cash flow

modelSummary of Details andChanges of Total DeferredDifference

In relation to this, details and changes of the total deferred difference for the yearsended December 31, 2016 and 2017, are as follows:

(In millions ofKorean won) 2016 2017






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Beginningbalance

￦ 11,293 ￦ — ￦ 8,470 ￦ —

Newtransactions

— — — 7,126

Disposal (2,823 ) — (2,823 ) (594 )Ending

balance￦ 8,470 ￦ — ￦ 5,647 ￦ 6,532



12 Months EndedInterests in UnconsolidatedStructured Entities (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of UnconsolidatedStructured Entities and Natureof Risks

Details of scale of unconsolidated structured entities and nature of the risksassociated with an entity’s interests in unconsolidated structured entities as ofDecember 31, 2016 and 2017, are as follows:


PEF &InvestmentFund




Otherfinancialassets ￦ 21,932 ￦ 60,782 ￦— ￦82,714

JointventuresandAssociates 10,086 165,638 — 175,724


exposure1Investment

Assets ￦ 32,018 ￦ 226,420 ￦— ￦258,438Total ￦ 32,018 ￦ 226,420 ￦— ￦258,438



PEF &InvestmentFund




Other financialassets ￦ 21,800 ￦ 52,666 — ￦74,466

Joint venturesand Associates 10,168 164,030 — 174,198

Total ￦ 31,968 ￦ 216,696 ￦— ￦248,664


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Maximum lossexposure1

InvestmentAssets ￦ 31,968 ￦ 216,696 — ￦248,664

Total ￦ 31,968 ￦ 216,696 ￦— ￦248,664




12 Months EndedInformation About Non-controlling Interests (Tables) Dec. 31, 2017Text block1 [abstract]Summary of Changes inAccumulated Non-controllingInterests

Profit or loss allocated to non-controlling interests and accumulated non-controllinginterests of subsidiaries that are material to the Group for the years ended December 31,2015, 2016 and 2017 are as follows:

2015










KT SkylifeCo., Ltd. 49.73 % ￦ 297,300 ￦ 27,032 ￦ (8,325 ) ￦873 ￦ 316,880

BC CardCo., Ltd. 30.46 % 292,931 62,943 (22,650 ) (10,303) 322,921

KTPowertelCo., Ltd. 55.15 % 70,231 (17,880 ) (1,118 ) (307 ) 50,926

KT HitelCo.,Ltd. 36.30 % 51,136 (608 ) — 161 50,689

KTTelecopCo., Ltd. 13.18 % 104,821 (1,000 ) — (393 ) 103,428

2016










KT SkylifeCo., Ltd. 49.73 % ￦ 316,880 ￦ 22,445 ￦ (8,279 ) ￦(1,370) ￦ 329,676

BC CardCo., Ltd. 30.46 % 322,921 47,068 (44,637 ) 3,986 329,338

KTPowertelCo., Ltd. 55.15 % 50,926 112 — 713 51,751

KT HitelCo.,Ltd. 35.27 % 50,689 1,274 — (165 ) 51,798

KTTelecopCo., Ltd. 13.18 % 103,428 19 — 85 103,532

2017










KT SkylifeCo., Ltd. 49.73 % ￦ 329,676 ￦ 9,395 ￦ (9,817 ) ￦(952 ) ￦ 328,302

BC CardCo., Ltd. 30.46 % 329,338 43,961 (29,490 ) (4,742) 339,067

KTPowertelCo., Ltd. 55.15 % 51,751 1,165 — 137 53,053

KT HitelCo.,Ltd. 32.87 % 51,798 870 — 478 53,146


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KTTelecopCo., Ltd. 13.18 % 103,532 381 — (445 ) 103,468

Summary of FinancialInformation on Subsidiaries

Summarized consolidated statements of financial position as of December 31, 2015, 2016and 2017, are as follows:


KT SkylifeCo., Ltd.

BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.




liabilities 74,339 63,271 5,166 282 52,613




Profit or loss forthe year 72,987 218,969 (32,417 ) 7,258 (7,593 )

Totalcomprehensiveincome 73,147 188,360 (32,417 ) 6,769 (7,593 )

The profit or lossallocated tonon-controllinginterests 27,032 62,943 (17,880 ) (608 ) (1,000 )

Cash flows fromoperatingactivities 157,762 128,927 (12,016 ) 22,556 36,216

Cash flows frominvestingactivities (92,350 ) 73,118 10,691 (19,949 ) (91,846 )

Cash flows fromfinancingactivitiesbeforedividend paidtonon-controllinginterests (35,984 ) (75,121 ) (2,015 ) — (32,491 )

Dividend paid tonon-controllinginterests (8,325 ) (22,650 ) (1,118 ) — —

Net (decrease)/increase incash and cashequivalents 29,428 126,924 (3,340 ) 2,607 (88,121 )


KT SkylifeCo., Ltd.

BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.


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liabilities 80,123 71,571 1,989 1,664 78,441Equity 546,496 1,048,661 93,826 202,261 133,209Accumulated



Profit or loss forthe year 68,863 163,131 202 4,298 143

Totalcomprehensiveincome 68,785 178,744 202 1,399 143

The profit or lossallocated tonon-controllinginterests 22,445 47,068 112 1,274 19


Cash flows frominvestingactivities (210,480) (37,313 ) (8,191 ) (33,238 ) (45,243 )



Gain or lossforeigncurrencytranslation — (178 ) — 3 —

Net (decrease)/increase incash and cashequivalents (71,728 ) (91,801 ) (920 ) (4,251 ) 15,218


KT SkylifeCo., Ltd.

BC CardCo., Ltd.


KT HitelCo., Ltd.

KT TelecopCo., Ltd.



assets 468,261 823,001 41,598 107,872 191,330Current liabilities 185,995 2,868,669 18,450 49,922 90,569



Non-currentliabilities 24,555 86,369 487 3,021 41,064




Profit or loss forthe year 57,314 156,109 2,112 3,225 2,885

Totalcomprehensiveincome 55,586 141,719 2,362 3,036 (490 )

The profit or lossallocated tonon-controllinginterests 9,395 43,961 1,165 870 381


Cash flows frominvestingactivities (81,758 ) (568,518 ) (17,354 ) (36,086 ) (43,483 )



Gain or lossforeigncurrencytranslation — (184 ) — (47 ) —

Net (decrease)/increase incash and cashequivalents (2,228 ) (557,536 ) (3,459 ) (7,766 ) 13,779

Summary of Changes inOwnership Interest on theEquity Attributable to Owners

The effect of changes in the ownership interest on the equity attributable to owners of theGroup during 2015, 2016 and 2017 is summarized as follows:

(in millions of Korean won) 2015 2016 2017Carrying amount of non-controlling interests

acquired ￦— ￦4,022 ￦(732 )Consideration paid to non-controlling interests 2,699 7,347 6,173Excess of consideration paid recognized in parent’s

equity ￦2,699 ￦11,369 ￦5,441


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12 Months EndedEvents after ReportingPeriod (Tables) Dec. 31, 2017

Text block1 [abstract]Summary of Public Bonds IssuedAfter Reporting Period

Subsequent to the reporting period, public bonds issued are asfollow:

December 31, 2017(in millions of Korean won) Issue date Carrying amount Interest rate Redemption dateThe 190-1st Public

bond 2018.01.30 110,000 2.55 % 2021.01.29The 190-2nd Public

bond 2018.01.30 150,000 2.75 % 2023.01.30The 190-3rd Public

bond 2018.01.30 170,000 2.95 % 2028.01.30The 190-4th Public

bond 2018.01.30 70,000 2.93 % 2038.01.30


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General Information -Additional Information

(Detail) - sharesJul. 02, 2001 May 09, 1999

Disclosure of general information [line items]Number of additional shares issued 55,502,161 24,282,195Government Owned shares [member]Disclosure of general information [line items]Number of additional shares issued 20,813,311


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12 Months EndedGeneral Information -Summary of Consolidated

Subsidiaries (Detail) - KRW(₩)

₩ in Millions

Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015

Disclosure of subsidiaries[Line Items]Total assets ₩ 29,745,439 ₩ 30,664,298Total liabilities 16,696,309 17,881,580Operating revenues 23,546,929 23,120,878 ₩ 22,699,856Profit (loss) for the year ₩ 546,341 ₩ 795,117 ₩ 624,685KT Powertel Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Powertel Co., Ltd. KT Powertel Co., Ltd. KT Powertel Co., Ltd.Total assets ₩ 115,125 ₩ 113,725 ₩ 113,515Type of Business Trunk radio system businessTotal liabilities ₩ 18,937 19,899 21,182Location KoreaOperating revenues ₩ 69,234 ₩ 81,390 104,527Controlling percentageownership 44.80% 44.80%

Profit (loss) for the year ₩ 2,112 ₩ 202 ₩ (32,417)Closing month DecemberKT Linkus Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Linkus Co., Ltd. KT Linkus Co., Ltd. KT Linkus Co., Ltd.Total assets ₩ 59,344 ₩ 64,318 ₩ 77,141Type of Business Public telephone maintenanceTotal liabilities ₩ 51,516 56,953 65,745Location KoreaOperating revenues ₩ 112,043 ₩ 117,587 116,095Controlling percentageownership 91.40% 91.40%

Profit (loss) for the year ₩ 725 ₩ (3,830) ₩ 3,449Closing month DecemberKT Submarine Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Submarine Co., Ltd. KT Submarine Co.,

Ltd.KT Submarine Co.,Ltd.

Total assets ₩ 142,797 ₩ 156,993 ₩ 160,314


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Type of Business Submarine cable construction andmaintenance

Total liabilities ₩ 34,056 55,573 63,518Location KoreaOperating revenues ₩ 73,985 ₩ 84,137 67,268Controlling percentageownership 39.30% 39.30%

Profit (loss) for the year ₩ 8,243 ₩ 5,146 ₩ 4,145Closing month DecemberKT Telecop Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Telecop Co., Ltd. KT Telecop Co., Ltd. KT Telecop Co., Ltd.Total assets ₩ 264,353 ₩ 265,553 ₩ 269,191Type of Business Security serviceTotal liabilities ₩ 131,633 132,344 134,966Location KoreaOperating revenues ₩ 317,591 ₩ 315,948 302,844Controlling percentageownership 86.80% 86.80%

Profit (loss) for the year ₩ 2,885 ₩ 143 ₩ (7,593)Closing month DecemberKT Hitel Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Hitel Co., Ltd. KT Hitel Co., Ltd. KT Hitel Co.,Ltd.Total assets ₩ 258,240 ₩ 249,202 ₩ 235,757Type of Business Data communicationTotal liabilities ₩ 52,943 46,941 33,938Location KoreaOperating revenues ₩ 227,884 ₩ 198,994 162,155Controlling percentageownership 67.10% 67.10%

Profit (loss) for the year ₩ 3,225 ₩ 4,298 ₩ 7,258Closing month DecemberKT service bukbu Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Service Bukbu Co., Ltd. KT Service Bukbu

Co., Ltd.KT Service BukbuCo., Ltd2

Total assets ₩ 29,281 ₩ 32,863 ₩ 31,879Type of Business Opening services of fixed lineTotal liabilities ₩ 22,096 24,580 22,627


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Location KoreaOperating revenues ₩ 194,837 ₩ 182,952 89,498Controlling percentageownership 67.30% 67.30%

Profit (loss) for the year ₩ 688 ₩ 694 ₩ (4,630)Closing month DecemberKT service nambu Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Service Nambu Co., Ltd. KT Service Nambu

Co., Ltd.KT Service NambuCo., Ltd2

Total assets ₩ 36,076 ₩ 32,621 ₩ 20,729Type of Business Opening services of fixed lineTotal liabilities ₩ 26,412 24,282 10,567Location KoreaOperating revenues ₩ 232,996 ₩ 218,602 110,129Controlling percentageownership 77.30% 77.30%

Profit (loss) for the year ₩ 875 ₩ 772 ₩ (5,055)Closing month DecemberKT Commerce Inc. [Member]Disclosure of subsidiaries[Line Items]Subsidiary KT Commerce Inc.Type of Business B2C, B2B serviceLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberKT New Business Fund No.1[Member]Disclosure of subsidiaries[Line Items]Subsidiary KT New Business Fund No.Type of Business Investment fundLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberKT Strategic Investment FundNo.1 [Member]Disclosure of subsidiaries[Line Items]Subsidiary KT Strategic Investment Fund No.1


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Type of Business Investment fundLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberKT Strategic Investment FundNo.2 [Member]Disclosure of subsidiaries[Line Items]Subsidiary KT Strategic Investment Fund No.2Type of Business Investment fundLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberKT Strategic Investment FundNo.3 [Member]Disclosure of subsidiaries[Line Items]Subsidiary KT Strategic Investment Fund No.3Type of Business Investment fundLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberKT strategic investment fundnumber four [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Strategic Investment Fund No.4Type of Business Investment fundLocation KoreaControlling percentageownership 100.00%

Closing month DecemberBC Card Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary BC Card Co., Ltd. BC Card Co., Ltd. BC Card Co., Ltd.1Total assets ₩ 4,048,263 ₩ 3,651,065 ₩ 2,963,952Type of Business Credit card businessTotal liabilities ₩ 2,955,038 2,602,404 1,945,634Location KoreaOperating revenues ₩ 3,628,995 ₩ 3,567,512 3,504,946


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Controlling percentageownership 69.50% 69.50%

Profit (loss) for the year ₩ 156,109 ₩ 163,131 ₩ 218,969Closing month DecemberVP Inc. [Member]Disclosure of subsidiaries[Line Items]Subsidiary VP Inc.Type of Business Payment security service for credit

card, othersLocation KoreaControlling percentageownership 50.90% 50.90%

Closing month DecemberH&C Network [member]Disclosure of subsidiaries[Line Items]Subsidiary H&C Network H&C Network H&C NetworkTotal assets ₩ 273,856 ₩ 272,110 ₩ 248,189Type of Business Call centre for financial sectorsTotal liabilities ₩ 65,446 80,983 70,635Location KoreaOperating revenues ₩ 277,622 ₩ 266,613 241,008Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 16,104 ₩ 14,749 ₩ 19,513Closing month DecemberBC Card China Co., Ltd.[Member]Disclosure of subsidiaries[Line Items]Subsidiary BC Card China Co., Ltd.Type of Business Software development and data

processingLocation ChinaControlling percentageownership 100.00% 100.00%

Closing month DecemberINITECH Co., Ltd. [Member]Disclosure of subsidiaries[Line Items]Subsidiary INITECH Co., Ltd.4Type of Business Internet banking ASP and security

solutionsLocation Korea


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Closing month DecemberSmartro Co., Ltd. [Member]Disclosure of subsidiaries[Line Items]Subsidiary Smartro Co., Ltd.Type of Business VAN (Value Added Network)

businessLocation KoreaControlling percentageownership 81.10% 81.10%

Closing month DecemberKTDS Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary KTDS Co., Ltd. KTDS Co., Ltd. KTDS Co., Ltd.Total assets ₩ 144,922 ₩ 197,970 ₩ 162,518Type of Business System integration and

maintenanceTotal liabilities ₩ 93,343 151,644 116,654Location KoreaOperating revenues ₩ 459,266 ₩ 476,379 423,015Controlling percentageownership 95.50% 95.50%

Profit (loss) for the year ₩ 11,584 ₩ 10,838 ₩ 12,836Closing month DecemberKT M Hows Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT M Hows Co., Ltd. KT M Hows Co., Ltd. KT M Hows Co., Ltd.Total assets ₩ 42,738 ₩ 28,539 ₩ 25,093Type of Business Mobile marketingTotal liabilities ₩ 28,489 18,466 17,980Location KoreaOperating revenues ₩ 24,610 ₩ 19,922 19,352Controlling percentageownership 90.00% 90.00%

Profit (loss) for the year ₩ 4,097 ₩ 2,865 ₩ 1,728Closing month DecemberKT M&S Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary KT M&S Co., Ltd. KT M&S Co., Ltd. KT M&S Co., Ltd.


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Total assets ₩ 242,388 ₩ 247,854 ₩ 256,246Type of Business PCS distributionTotal liabilities ₩ 231,151 227,507 217,892Location KoreaOperating revenues ₩ 734,420 ₩ 724,144 853,011Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (9,707) ₩ (12,955) ₩ (18,776)Closing month DecemberG E N I E Music CorporationK T Music Corporation[member]Disclosure of subsidiaries[Line Items]Subsidiary GENIE Music Corporation(KT

Music Corporation)Type of Business Online music production and

distributionLocation KoreaControlling percentageownership 42.50% 49.90%

Closing month DecemberKT Skylife Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Skylife Co., Ltd. KT Skylife Co., Ltd. KT Skylife Co., Ltd.Total assets ₩ 792,893 ₩ 777,948 ₩ 711,294Type of Business Satellite broadcasting businessTotal liabilities ₩ 210,550 231,452 217,850Location KoreaOperating revenues ₩ 687,752 ₩ 668,945 668,521Controlling percentageownership 50.30% 50.30%

Profit (loss) for the year ₩ 57,314 ₩ 68,863 ₩ 72,987Closing month DecemberSkylife TV Co., Ltd.[Member]Disclosure of subsidiaries[Line Items]Subsidiary Skylife TV Co., Ltd.Type of Business TV contents providerLocation KoreaControlling percentageownership 92.60% 92.60%

Closing month December


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KT Estate Inc. [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Estate Inc. KT Estate Inc. KT Estate Inc.Total assets ₩ 1,869,194 ₩ 1,734,729 ₩ 1,603,438Type of Business Residential building development

and supplyTotal liabilities ₩ 502,915 375,341 260,292Location KoreaOperating revenues ₩ 428,446 ₩ 405,417 254,776Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 52,416 ₩ 46,815 ₩ 27,487Closing month DecemberKT AMC Co., Ltd. [Member]Disclosure of subsidiaries[Line Items]Subsidiary KT AMC Co., Ltd.Type of Business Asset management and consulting

servicesLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberNEXR Co., Ltd. [Member]Disclosure of subsidiaries[Line Items]Subsidiary NEXR Co., Ltd.Type of Business Cloud system implementationLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberKTSB Data service [member]Disclosure of subsidiaries[Line Items]Subsidiary KTSB Data service KTSB Data service KTSB Data serviceTotal assets ₩ 18,306 ₩ 20,075 ₩ 23,063Type of Business Data centre development and

related serviceTotal liabilities ₩ 605 759 1,730Location KoreaOperating revenues ₩ 4,950 ₩ 5,136 4,390Controlling percentageownership 51.00% 51.00%


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Profit (loss) for the year ₩ (1,651) ₩ (1,983) ₩ (2,444)Closing month DecemberKT Sat Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Sat Co., Ltd. KT Sat Co., Ltd. KT Sat Co., Ltd.Total assets ₩ 742,391 ₩ 744,653 ₩ 679,959Type of Business Satellite communication businessTotal liabilities ₩ 220,804 253,041 210,110Location KoreaOperating revenues ₩ 147,649 ₩ 144,594 133,326Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 29,601 ₩ 36,266 ₩ 27,174Closing month DecemberK T Innoedu Co [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Innoedu Co KT Innoedu Co., Ltd.Total assets ₩ 5,858Type of Business E-learning businessTotal liabilities 7,585Location KoreaOperating revenues 18,156Controlling percentageownership 96.80%

Profit (loss) for the year ₩ (4,288)Closing month DecemberNasmedia, Inc. [member]Disclosure of subsidiaries[Line Items]Subsidiary Nasmedia, Inc. Nasmedia, Inc. Nasmedia, Inc.Total assets ₩ 315,967 ₩ 263,925 ₩ 141,733Type of Business Online advertisementTotal liabilities ₩ 188,197 159,502 72,202Location KoreaOperating revenues ₩ 120,667 ₩ 70,037 45,630Controlling percentageownership 42.80% 42.80%

Profit (loss) for the year ₩ 26,676 ₩ 11,972 ₩ 9,916Closing month DecemberKT sports [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Sports KT Sports KT Sports


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Total assets ₩ 11,131 ₩ 16,925 ₩ 15,341Type of Business Management of sports groupTotal liabilities ₩ 7,805 13,573 11,643Location KoreaOperating revenues ₩ 53,357 ₩ 48,476 51,801Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (199) ₩ (198) ₩ (3,836)Closing month DecemberKT music contents fund no.1[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Music Contents Fund No.1 KT Music Contents

Fund No.1KT Music ContentsFund No.1

Total assets ₩ 13,804 ₩ 10,592 ₩ 10,206Type of Business Music contents investment businessTotal liabilities ₩ 1,041 331 47Location KoreaOperating revenues ₩ 370 ₩ 349 468Controlling percentageownership 80.00% 80.00%

Profit (loss) for the year ₩ (499) ₩ 103 ₩ (111)Closing month DecemberK T Music Contents FundNo.2 [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Music Contents Fund No.2Type of Business Music contents investment businessLocation KoreaControlling percentageownership 100.00%

Closing month DecemberKT-Michigan global contentfund [member]Disclosure of subsidiaries[Line Items]Subsidiary KT-Michigan Global Content Fund KT-Michigan Global

Content FundKT-Michigan GlobalContent Fund

Total assets ₩ 14,575 ₩ 16,250 ₩ 5,401Type of Business Content investment businessTotal liabilities ₩ 147 163Location KoreaOperating revenues ₩ 159 ₩ 133 861


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Profit (loss) for the year ₩ (426) ₩ (514) ₩ (209)Closing month DecemberAutopion Co., Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary Autopion Co., Ltd. Autopion Co., Ltd. Autopion Co., Ltd.Total assets ₩ 6,306 ₩ 6,163 ₩ 7,102Type of Business Service for information and

communicationTotal liabilities ₩ 3,530 2,794 3,317Location KoreaOperating revenues ₩ 6,679 ₩ 7,772 10,585Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (618) ₩ (409) ₩ 1,123Closing month DecemberKTCS Corporation [member]Disclosure of subsidiaries[Line Items]Subsidiary KTCS Corporation KTCS Corporation KTCS CorporationTotal assets ₩ 348,334 ₩ 322,768 ₩ 346,949Type of Business Database and online information

providerTotal liabilities ₩ 188,764 166,642 194,367Location KoreaOperating revenues ₩ 968,186 ₩ 955,050 1,066,556Controlling percentageownership 30.90% 30.90%

Profit (loss) for the year ₩ 7,385 ₩ 7,892 ₩ 13,685Closing month DecemberKTIS Corporation [member]Disclosure of subsidiaries[Line Items]Subsidiary KTIS Corporation KTIS Corporation KTIS CorporationTotal assets ₩ 223,818 ₩ 221,176 ₩ 211,164Type of Business Database and online information

providerTotal liabilities ₩ 62,569 63,871 55,370Location KoreaOperating revenues ₩ 438,597 ₩ 436,914 473,892Controlling percentageownership 30.10% 30.10%

Profit (loss) for the year ₩ 8,337 ₩ 9,991 ₩ 15,041


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Closing month DecemberKT M mobile [member]Disclosure of subsidiaries[Line Items]Subsidiary KT M mobile KT M mobile KT M mobileTotal assets ₩ 93,601 ₩ 131,446 ₩ 64,756Type of Business Special category

telecommunications operator andsales of communication device

Total liabilities ₩ 21,453 20,369 13,121Location KoreaOperating revenues ₩ 159,684 ₩ 112,532 42,478Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (38,883) ₩ (40,041) ₩ (36,725)Closing month DecemberKT Investment Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Investment Co., Ltd. KT Investment Co.,

Ltd.KT Investment Co.,Ltd

Total assets ₩ 54,673 ₩ 39,506 ₩ 49,485Type of Business Technology business financeTotal liabilities ₩ 38,313 23,123 30,827Location KoreaOperating revenues ₩ 8,794 ₩ 10,130 4,704Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (619) ₩ (1,832) ₩ (219)Closing month DecemberNgen bio [member]Disclosure of subsidiaries[Line Items]Subsidiary NgenBioType of Business Medicine and Pharmacy

development businessLocation BelgiumControlling percentageownership 49.80%

Closing month DecemberWhowho&Company Co., Ltd.[Member]Disclosure of subsidiaries[Line Items]


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Subsidiary Whowho&Company Co., Ltd.Type of Business Software development and supplyLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberPlayD Co., Ltd. (N SearchMarketing Co., Ltd.)[Member]Disclosure of subsidiaries[Line Items]Subsidiary PlayD Co., Ltd. (N Search

Marketing Co., Ltd.)Type of Business Advertising agency businessLocation KoreaControlling percentageownership 100.00% 100.00%

Closing month DecemberKT Rwanda Networks Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Rwanda Networks Ltd. KT Rwanda Networks

Ltd.Olleh RwandaNetworks Ltd.

Total assets ₩ 151,359 ₩ 167,112 ₩ 188,951Type of Business Network installation and

managementTotal liabilities ₩ 139,561 138,651 147,653Location RwandaOperating revenues ₩ 15,931 ₩ 13,435 7,299Controlling percentageownership 51.00% 51.00%

Profit (loss) for the year ₩ (22,762) ₩ (31,455) ₩ (28,721)Closing month DecemberAOS Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary AOS Ltd. AOS Ltd. Africa Olleh Services

Ltd.Total assets ₩ 9,437 ₩ 10,025 ₩ 11,928Type of Business System integration and

maintenanceTotal liabilities ₩ 4,519 3,179 12,187Location RwandaOperating revenues ₩ 8,952 ₩ 14,481 8,712


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Profit (loss) for the year ₩ (682) ₩ (1,123) ₩ (923)Closing month DecemberKT Belgium [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Belgium KT Belguium KT BelgiumTotal assets ₩ 86,455 ₩ 79,391 ₩ 77,058Type of Business Foreign investment businessTotal liabilities ₩ 8 ₩ 7 4Location BelgiumOperating revenues ₩ 49Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (2) ₩ (67) ₩ (127)Closing month DecemberKT ORS Belgium [member]Disclosure of subsidiaries[Line Items]Subsidiary KT ORS Belgium KT ORS Belgium KT ORS BelgiumTotal assets ₩ 1,769 ₩ 2,013 ₩ 1,996Type of Business Foreign investment businessTotal liabilities ₩ 14 ₩ 23 20Location BelgiumOperating revenues ₩ 10Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (10) ₩ (46) ₩ (75)Closing month DecemberKorea Telecom Japan Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary Korea Telecom Japan Co., Ltd. Korea Telecom Japan

Co., Ltd.Korea Telecom JapanCo., Ltd.

Total assets ₩ 1,554 ₩ 3,592 ₩ 13,889Type of Business Foreign telecommunication

businessTotal liabilities ₩ 2,788 5,374 14,393Location JapanOperating revenues ₩ 2,772 ₩ 5,122 25,652Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 536 ₩ (1,391) ₩ (248)


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Closing month DecemberKBTO sp.zo.o. [member]Disclosure of subsidiaries[Line Items]Subsidiary KBTO sp.zo.o. KBTO sp.zo.o. KBTO sp.zo.o.Total assets ₩ 3,311 ₩ 1,166 ₩ 1,471Type of Business Electronic communication businessTotal liabilities ₩ 2,268 2,378 1,817Location PolandOperating revenues ₩ 67 ₩ 21Controlling percentageownership 94.00% 75.00%

Profit (loss) for the year ₩ (3,456) ₩ (2,587) ₩ (328)Closing month DecemberKorea Telecom China Co.,Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary Korea Telecom China Co., Ltd. Korea Telecom China

Co., Ltd.Korea Telecom ChinaCo., Ltd.

Total assets ₩ 665 ₩ 532 ₩ 909Type of Business Foreign telecommunication

businessTotal liabilities ₩ 32 188 198Location ChinaOperating revenues ₩ 1,030 ₩ 930 1,748Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 348 ₩ 60 ₩ (95)Closing month DecemberKT Dutch B.V [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Dutch B.V KT Dutch B.V KT Dutch B.V.Total assets ₩ 30,312 ₩ 34,197 ₩ 29,402Type of Business Super iMax and East Telecom

managementTotal liabilities ₩ 50 73 27Location NetherlandsOperating revenues ₩ 206 ₩ 166 161Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 169 ₩ 85 ₩ 118Closing month DecemberSuper iMax LLC [member]


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Disclosure of subsidiaries[Line Items]Subsidiary Super iMax LLC Super iMax LLC Super iMax LLCTotal assets ₩ 3,449 ₩ 10,308 ₩ 14,962Type of Business Wireless high speed internet

businessTotal liabilities ₩ 4,886 6,734 8,186Location UzbekistanOperating revenues ₩ 7,314 ₩ 10,759 8,291Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ (4,584) ₩ (1,802) ₩ (2,220)Closing month DecemberEast Telecom LLC [member]Disclosure of subsidiaries[Line Items]Subsidiary East Telecom LLC East Telecom LLC East Telecom LLCTotal assets ₩ 11,672 ₩ 31,885 ₩ 30,833Type of Business Fixed line telecommunication

businessTotal liabilities ₩ 11,748 16,554 17,066Location UzbekistanOperating revenues ₩ 19,663 ₩ 27,492 24,066Controlling percentageownership 91.00% 91.00%

Profit (loss) for the year ₩ (9,118) ₩ 3,257 ₩ 664Closing month DecemberKorea Telecom America, Inc.[member]Disclosure of subsidiaries[Line Items]Subsidiary Korea Telecom America, Inc. Korea Telecom

America, Inc.Korea TelecomAmerica, Inc.

Total assets ₩ 3,694 ₩ 4,464 ₩ 6,016Type of Business Foreign telecommunication

businessTotal liabilities ₩ 791 1,306 1,378Location USAOperating revenues ₩ 6,783 ₩ 7,113 6,391Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 109 ₩ 181 ₩ 156Closing month DecemberPT. KT Indonesia [member]


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Disclosure of subsidiaries[Line Items]Subsidiary PT. KT Indonesia PT. KT Indonesia PT. KT IndonesiaTotal assets ₩ 8 ₩ 16 ₩ 22Type of Business Foreign telecommunication

businessLocation IndonesiaControlling percentageownership 99.00% 99.00%

Profit (loss) for the year ₩ (6) ₩ (7) ₩ (9)Closing month DecemberPT. BC Card Asia Pacific[Member]Disclosure of subsidiaries[Line Items]Subsidiary PT. BC Card Asia PacificType of Business Software development and supplyLocation IndonesiaControlling percentageownership 99.90% 99.90%

Closing month DecemberKT HongkongTelecommunications Co., Ltd.[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Hongkong

Telecommunications Co., Ltd.

KT HongkongTelecommunicationsCo., Ltd.

Total assets ₩ 2,578 ₩ 1,571Type of Business Fixed line communication businessTotal liabilities ₩ 1,497 956Location Hong KongOperating revenues ₩ 7,304 ₩ 1,568Controlling percentageownership 100.00% 100.00%

Profit (loss) for the year ₩ 494 ₩ 120Closing month DecemberKT Hong kong Limited[member]Disclosure of subsidiaries[Line Items]Subsidiary KT Hong kong LimitedType of Business Foreign investment businessLocation Hong Kong


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Closing month DecemberKorea Telecom SingaporePte.Ltd. [member]Disclosure of subsidiaries[Line Items]Subsidiary Korea Telecom Singapore Pte.Ltd.Type of Business Foreign investment businessLocation SingaporeControlling percentageownership 100.00% 100.00%

Closing month DecemberTexnoprosistem LLP.[member]Disclosure of subsidiaries[Line Items]Subsidiary Texnoprosistem LLP.Type of Business Fixed line internet businessLocation UzbekistanControlling percentageownership 100.00% 100.00%

Closing month DecemberGENIE Music Corporation(KTMusic Corporation) [Member]Disclosure of subsidiaries[Line Items]Subsidiary GENIE Music Corporation(KT

Music Corporation)

GENIE MusicCorporation(KTMusic Corporation)

GENIE MusicCorporation(KTMusic Corporation)

Total assets ₩ 139,686 ₩ 110,080 ₩ 90,518Total liabilities 48,512 41,953 30,704Operating revenues 156,163 111,450 90,005Profit (loss) for the year ₩ (3,401) ₩ 8,235 ₩ 3,446NgeneBio [Member]Disclosure of subsidiaries[Line Items]Subsidiary NgeneBio NgeneBioTotal assets ₩ 6,361 ₩ 7,894Total liabilities 4,733 4,683Operating revenues 244Profit (loss) for the year ₩ (1,833) ₩ (434)KT Innoedu Co., Ltd.[Member]Disclosure of subsidiaries[Line Items]


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Subsidiary KT Innoedu Co., Ltd.Total assets ₩ 6,477Total liabilities 7,259Operating revenues 15,599Profit (loss) for the year ₩ 103KT music contents fundnumber two [member]Disclosure of subsidiaries[Line Items]Subsidiary KT Music Contents Fund No.2Total assets ₩ 7,500Total liabilities 11Profit (loss) for the year ₩ (11)


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12 Months EndedSignificant AccountingPolicies - Additional

Information (Detail) - KRW(₩)

₩ in Millions

Jan. 01,2018 Dec. 31, 2017

Dec.31,

2016

Dec.31,

2015

Disclosure of significant accounting policies [lineitems]Short-term lease description A lease term of 12 months or

less at the commencementdate

Low value assets description Underlying assets below $5,000

Loans and receivables ₩ 9,653,443Financial assets available-for-sales 380,953 ₩

404,774₩360,037

Debt instruments held with entity 9,653,594Loss allowance recognized for credit losses offinancial assets 523,799

Hedging instrument, assets 7,389Hedging instrument, liabilities ₩ 93,770Useful lives of investment property, excluding landdepreciated cost model 10 to 40 Years

Minimum [member] | Increase (decrease) due tochanges in accounting policy required by IFRSs[member]Disclosure of significant accounting policies [lineitems]Cumulative effect of change in operating income andexpenses under modified retrospective method

₩900,000

Maximum [member] | Increase (decrease) due tochanges in accounting policy required by IFRSs[member]Disclosure of significant accounting policies [lineitems]Cumulative effect of change in operating income andexpenses under modified retrospective method

₩1,100,000

Available-for-sale [member]Disclosure of significant accounting policies [lineitems]Equity instruments held with entity ₩ 371,054Loans and receivables [member]Disclosure of significant accounting policies [lineitems]Debt instruments held with entity 9,653,443Held-to-maturity financial assets [member]


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