KT reports record operating profit on robust AI business in Q2

South Korea’s major mobile carrier KT Corp., which has picked artificial intelligence as its next growth engine, posted record-high quarterly operating profit exceeding 1 trillion won ($719 million) in the second quarter, thanks to a double-digit growth in its AI business.

The company announced in a regulatory filing on Monday that its consolidated operating income came to 1.01 trillion won for the April-June period, more than doubling from the same period last year and breaching the 1 trillion won mark for the first time since its inception.

Revenue climbed 13.5% to 7.43 trillion won, while net profit surged 78.6% to 733.3 billion won.

Profit was partly driven by a one-off gain of 390 billion won from selling the company’s real estate assets.

But KT also attributed brisk sales in the business-to-business unit, especially AI services, to the stellar result.

Sales from its AI and information technology business jumped 13.8% on-year to 317.6 billion won in the quarter, whereas its mainstay wireless service added 1.6% to 1.7 trillion won. Broadband revenue also inched up 2.1%.

KT expects momentum to continue in the second half with the launch of new business-to-business products, including a large language model (LLM) and advanced cloud-computing services.

It also projects stronger subscriber growth in mobile after some SK Telecom Co. users switched carriers to KT following an April data breach that affected all of SK’s 25 million customers.

ACCELERATED TRANSITION INTO AICT COMPANY

The upbeat result in the AI business is expected to accelerate KT’s push to transform into a so-called AICT company, a plan unveiled by KT Chief Executive Kim Young-shub at this year’s MWC Barcelona in March.

AICT service is aimed at bolstering traditional telecommunications services with IT and AI technologies.

KT is Korea’s only company that has formed AI partnerships with both Microsoft Corp. and Palantir Technologies Inc.

It also signed a strategic partnership with Amazon Web Services (AWS) to bolster customized mobile and generative AI services for corporate customers in February last year.

It plans to introduce its LLM under development with Microsoft soon, as well as encrypted cloud services using confidential-computing technology, which processes encrypted data only after verifying a trusted execution environment. 

“In the second half, we will release our encrypted cloud developed with Microsoft and unveil a full AI lineup, including K-ChatGPT, a LLM model,” said Jang Min, KT’s chief financial officer. “The move will help KT cement its position as Korea’s leading AI company.”

COLLABORATION WITH US BIG TECH COMPANIES 

KT’s collaboration with Palantir in AI is also expected to gain further traction.

In March, it became the first Korean company to forge an exclusive strategic partnership with the US tech company.  

KT will incorporate Palantir’s AI and big data platforms with its own cloud and network infrastructure to help AI transformation, or AX, in both public and private businesses.

“We are now the most trusted AX partner in the financial industry,” said a KT official.

The utilization rate at a data center operated by KT Cloud, KT’s cloud service offering subsidiary, has already surpassed 90%, underscoring demand. 

After failing to join the state-led sovereign AI initiative, KT will focus more on the private sector through its collaboration with big tech companies, the company said.

Last week, the Korean government selected five local technology firms, including LG, Naver and SK Telecom, to spearhead the country’s flagship sovereign AI initiative, as Seoul moves to build large-scale AI models independent of US tech giants such as OpenAI, the operator of ChatGPT.

KT joined the race but dropped out of the bid in the second round of evaluation.

Write to Ji-Hee Choi at mymasaki@hankyung.com

Sookyung Seo edited this article.