Good morning and good evening. Thank you all for joining this conference call, and now we will begin the conference of the fiscal year 2025 Fourth Quarter Earnings Results by LG Uplus. This conference will start with a presentation followed by a divisional Q&A session. Our call is being webcasted on our homepage so that you can follow the conference simultaneously. Today's conference call will be presented for one hour, and due to schedule, we would appreciate if questions are limited to two per person. Now, we will begin the presentation on LG Uplus's Fourth Quarter of Fiscal Year 2025 Earnings Results.
Good morning, this is Sangheum Mun, head of the IR team at LG Uplus. Thank you for joining our Fourth Quarter 2025 Earnings Report of LG Uplus. Do follow along the presentation, and for the benefit of ease of comparison, we're presenting our revenue breakdown and operating expense on the basis that excludes LG HelloVision. Also, be reminded that all of the projections we are providing today may change depending on macroeconomic and market backdrop. We will also be providing consecutive interpretation for the benefit of our overseas investors. We will first begin with FY 2025 performance highlights, followed by Q&A. I will now turn it over to CFO Myung-hee Yeo, who will run through Q4 2025 earnings and business results.
[Foreign language]Thank you to analysts and investors for joining the earnings conference call of LG U+. I am CFO Myung-hee Yeo. [Foreign language] Last year, LG Uplus strengthened its corporate-wide execution to drive tangible results across all its businesses. Supported by expansion of mobile subscription, we drove Giga Internet, as well as AIDC growth, enabling solid volume growth. Also, ixi-O, the AI voice service, reached above 1 million subscriber target, broadening the customer touch point to be established as differentiated services. Improvement efforts continued in terms of business efficiency. By restructuring low-margin businesses and focusing on select core business, we drove profitability enhancements. Underpinned by AICC, we are seeking to scale up contact center, reorganized customer support workflow, speeding up AX of online and offline distribution, which helped to drive up efficiency. LG Uplus intends to innovate business processes through AX and achieve greater operational productivity and cost efficiency.
We are hence focused on enhancing customer value and securing growth engine for the future, and in particular, we will actively utilize EXAONE, which drove strong results from the government-led homegrown foundation model project, in order to accelerate LG U+'s AI transformation and solidify business competitiveness. Now, moving on to financial performance for FY 2025. FY 2025 service revenue for LG U+ on a consolidated basis was up 3.5% year-over-year, outperforming the guidance of 2% presented last year. 3.4% [Foreign language] Consolidated operating profit was up 3.4% year-over-year, reaching KRW 892.1 billion, and considering KRW 150 billion of structural cost improvement booked in Q3, the extent of improvement was actually higher than this figure.
[Foreign language] . Net profit on a consolidated basis showed a notable increase of 61.9% year- over- year, reaching KRW 509.2 billion. [Foreign language] . Consolidated debt to equity ratio improved 7.7 percentage points year- to- date versus end of 2024, reporting 117.1%, attesting to stronger financial stability. [Foreign language] . FY 2025 Capex was KRW 1.75 trillion, and with the portion of AIDC investment deferred to next year, Capex fell 8.9% year- over- year.
[Foreign language] That was a report on business highlights and the financials of the company. We will now have the management team report on performance and outlook of each business. Head of the Mobile and Digital Business Group.
First, on mobile business, and I am Jin-wook Kang, Head of Mobile and Digital Business Group. 2020 mobile service revenue grew 4.1% year-over-year to KRW 6.3709 trillion. FY 2025 mobile service revenue was up 4.1% YOY to KRW 6,370.9 billion. [Foreign language] Total mobile subscription count was up 7.7% year-over-year to 30,711,000 on the back of MNO and MVNO subscription count growth of 6.6% and 10.5% respectively. 5G handset subscription count also showed sustained uptrend with penetration of 83.1%.
[Foreign language] In FY 2025, marketing expense increased 4.8% year-over-year to KRW 2,314.3 billion on the back of subscriber growth. Marketing expense share of service revenue recorded 20.2%, similar to that of last year, with marketing spend efficiency continuing. [Foreign language] Uplus was chosen as number one provider, most recommended by customers in 2025 in mobile, IPTV, and broadband Internet, respectively, selected by Korea Management Association Consulting last December. In mobile, we see improvements in customer satisfaction driven by AI services such as ixi-O, which is gaining high praise from the customers, which in turn is further fortifying service offering competitiveness. [Foreign language]
Also, last October, we introduced U+One, bringing together services that used to be under customer contact center and membership separately, so as to deliver simple and streamlined experiences. We designed U+One under the new brand philosophy of Simply U+, seeking customer-driven experience that is easy and convenient, doing away with complexities and friction that leads to user complaints. U+One will strive to deliver digital experience that is easy and convenient by making the usage journey simple around features most frequently used by customers[Foreign language]
In 2026, LG Uplus will bring more innovative and differentiated services, fully aligning with customer convenience and satisfaction. We will make detailed analysis of usage patterns and wide ranging customer needs in creating the ultimate customer experience that everyone can relate to and trust. of Home Business Group.
Next is Smart Home. I'm Chan-sung Park, Head of Home Business Group. [Foreign language] . IPTV revenue reported KRW 1,327.1 billion, sustaining a steady trend year-on-year, while internet broadband revenue increased 7.3% year-over-year to KRW 1,224.3 billion, driven by robust growth of Giga Internet subscribers. [Foreign language]
In terms of subscribers, both IPTV and broadband subscribers all went up, with IPTV up 2.9% to 5,739,000 subscribers, and broadband up 4.2% to 5,578,000 subscribers. Share of high value customers using above 1 Giga plan was 32.6%, up 4.8 percentage points versus FY 2024, driving the uptrend. [Foreign language] In Q4, we reorganized our basic rate scheme to enable quality growth for IPTV. Movies, dramas, global documentary channels were added on top of the current offering, strengthening greater value for customers, and we're also looking forward to additional growth in the top line revenue.
[Foreign language] . Also, by using AI technology, we introduced interactive conversation based voice search, improving customers' viewing experience while strengthening the product competitiveness. As we scale up voice search, we were able to quickly deliver content and information that customers are seeking to their liking, enabling the best viewing experience as well as convenience. [Foreign language] Our smart home business will continue to focus on improving user experience as well as offer differentiated content to overcome the constraints of subdued pay TV market to acquire high value subscribers. We will also drive improvements in cost competitiveness to ensure better profitability mid to longer term.
[Foreign language]Next, on enterprise infrastructure, I'm Hyeong-kyun Ahn, Head of Enterprise AI Business Group. [Foreign language] . FY 2025 enterprise infrastructure revenue was up 6% year-over-year to KRW 1,807.8 billion.[Foreign language] . AIDC saw 18.4% year-over-year growth, which underpinned overall enterprise infrastructure business growth on the back of steady growth from our own data centers, as well as business endeavors for the new DBO business. [Foreign language]
Solutions business saw revenue growth from NI, network infrastructure business, which drove 4.5% year-over-year growth, while enterprise line sustained its top line trend with 1.6% YoY growth.[Foreign language] Paju Data Center broke ground last year, and we are working under the goal of bolstering competitiveness by way of expanding co-location business for this next generation data center. DBO business, our new business endeavor, has secured stable operational revenue stream from development and operation of third-party assets, starting with K Square Gasan Data Center, and we are further cementing the market positioning as we speak. [Foreign language] We also added more momentum behind digital transformation with the launch of Agentic AICC, which is AI-powered call center solution.
Agentic AICC provides automated customer support in a context-aware manner with an understanding of customer's intent, and we plan to increase its adoption across various sectors, including manufacturing, retail, hospitals, and universities, et cetera. We are planning on launching Agentic CallBot Pro this year, and expect it can further strengthen productivity and drive enterprise customers' digital transition. On the basis of solid growth of our data center business in 2026, enterprise infrastructure business will seek DBO business expansion, further fortifying competitive edge in data center infrastructure business. And through AICC and other new business endeavors, we will respond to changing market backdrop with agility and flexibility so as to sustain growth that is unrivaled. This ends the briefing by each business division. I will now invite back the CFO for 2026 outlook.
[Foreign language] LG Uplus, in 2026, will speed up structural improvement with a focus on profitability, while at the same time strategically focus on strengthening the fundamental competitiveness of the telecom business. [Foreign language] Our key approach will be to redesign the work process by adopting AX and upgrade operational system to minimize business operational risk and optimize resource input from ROI point of view to structurally bolster profitability. To that end, we plan to bring AX automation across the company's business flow to maximize efficiency and innovate and transform the business structure to connect performance analysis to monitoring of signs of abnormal behaviors. [Foreign language] We would like to guide above 2% growth in standalone service revenue for 2026, and we will exert corporate-wide effort behind meaningful profit enhancement through efficient investments and optimization of cost.
[Foreign language] In 2026, we will make stronger investment to reinforce the fundamental resilience around security and make AIDC investment, which is the engine for future growth. [Foreign language] We are declaring FY 2025 DPS of KRW 661, inclusive of interim dividend, with payout ratio of 51.9% on a separate net profit basis.... Despite factors causing performance drag, such as structural enhancements, we were able to maintain a sustainable dividend policy underpinned by long-term profitability through slight upward adjustment of DPS.
[Foreign language] . Over the past year, we believe we achieved meaningful outcome in terms of business performance and corporate value enhancements. To continue this positive trend onwards, we will input more resources into future growth and building fundamental resilience, strengthen profit-driven operations, and do our utmost in improving shareholder value and attaining sustainable growth. Thank you.
[Foreign language] This ends the report on the performance. We are now open for Q&A.
[Foreign language] Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone.[Foreign language] . The first question will be provided by Hye-jin Kim from Daishin Securities. Please go ahead with your question.
[Foreign language] . I am Hye-jin Kim from Daishin Securities. I'm submitting two questions. First, is there any point in regards to your performance from 2025 that you wish to highlight? And also, after the data breach incident, we have seen significant change in the market share of subscribers in 2025. Do you think that in 2026 you will be able to lock in those subscribers? Second question has to do with your plan for adopting 5G standalone SA. What will be the amount of investment that would be required for 5G SA? And up until the time of spectrum reallocation for 5G in 2028, what do you forecast would be the size of your investment?
[Foreign language] So this is the CFO responding to your question about any points that I can highlight for 2025 performance and the outlook that we have for 2026. In looking back at 2025, previously the mobile growth rate was quite weak, but last year what we did was by expanding the subscriber base for our mobile business, we were able to expand our mobile business, but by about 4%, and also, supported by the good infrastructure business, enterprise infrastructure business that is underpinned by AIDC initiatives, we were able to outperform our total top line or volume guidance that we had previously communicated. At the same time, we had readjusted our business portfolio, and we have carried on with achieving greater efficiency through AX operation, which drove down the cost as well.
Also, during the third quarter, we carried out structural enhancement efforts, and if we were to take those one-off costs out, there was a quite notable operating profit uptrend of around 20%.[Foreign language] In regards to the outlook for 2026, in B2C, because the growth there was quite sizable compared to 2025, in 2026, we believe that the growth rate is going to moderate. However, on B2B side, still we are targeting, you know, at least the same or above the growth that we have seen in the B2B domain, supported by AIDC. This year, meaning to 2026, we are going to speed up our efforts around improving profitability and also really focus our efforts on strengthening our fundamental business resilience for the telecom business.
[Foreign language] Yes, hello, I am in charge of the network planning. Responding to your question about the adoption of 5G SA.
Currently, the company has completed the preparation for technical commercialization in terms of the network support to provide the 5G SA services. With regards to the SA handsets, we will go through SA service quality inspection, as well as carry out network connection test within the end of this year, so that we may commercialize it before the end of the year. Basically, the SA service does not require a significant build-out investment, as was the case for 5G. Simply, we need to just upgrade the software. So up until the timing of reallocation of the 5G spectrum, basically, the investment will be more of a recurring investment, a normalized level of investment, making investment for a stable operation of the existing infrastructure and expanding the coverage around a newly built apartment.
Next question, please.
[Foreign language] The following question will be presented by Joon-seop Kim from KB Securities. Please go ahead with your question.
[Foreign language] Thank you for taking my question. I am Joon-seop Kim from KB Securities. My questions relate to your AIDC and your AI solution business. First, on AIDC, would like to know any changes that you are currently identifying in the overall data center business backdrop, especially, we are now seeing multiple providers coming into, especially the DBO business, like Samsung SDS on top of KT and LG CNS. Would like to know, as to whether you are sensing any changes in the market backdrop, and are there any changes that you've made to your data center roadmap, and are you seeing any changes in the demand profile? Second question has to do with AI solutions, particularly on AICC and AI agent, your ixi-O. You did mention that briefly in the presentation, but can you share a little more detail on this?
What is the extent you think AICC is going to contribute to your B2B revenue going forward, and do you have a certain timeline target?
[Foreign language] Responding to your question on our data center, our understanding of how the data center market is evolving, I am Hyeong-kyun Ahn from Enterprise AI Business Group, giving you the answer to this question. Basically, if you look at the changes in the data center environment, we are now moving from a colocation-centric services that was provided by the incumbent, three telcos, to a very fast evolution into an infrastructure asset-based investment market, where we are seeing significant amount of capital coming in from the FIs, the financial investors, as well as global specialized data center providers....
And also recently, there's a lot of talk and discussion and interest that has been put on distributed energy models, as well as having a site on a non-metropolitan area in light of the electricity-related supply regulations that is applied to the metropolitan area, because there is going to be a significant amount of demand that is going to be required to respond to this high level of AI demand. Now, if you look at the DBO market, we are seeing that the current providers have taken on an asset-light approach in order to minimize the capital requirement, and the FIs are really showing preference towards a specialized operational capabilities, and that is the direction toward which the market seems to be expanding.
And also, for the large scale SI companies, they are currently utilizing their SI, system integration capabilities and operational capabilities, and applying that to data center business. These providers have seemed to selected this approach as their strategic direction forward. Thus, we believe that for the DBO market, competition may intensify, so here a key competitive edge will be who will successfully win large-scale customers, large enterprises, and as well as the global and domestic CSPs. And also going forward, supported by customer demand, from our perspective at LG Uplus, we are planning on continuing that collaboration with both domestic and global FIs. [Foreign language] You also asked about the data center demand going forward and our roadmap.
If you look at the demand, we are projecting a continuous growth, supported by higher demand for GPUs from global big techs and the need for the sovereign AI. Also from our perspective, we are at this point, in terms of our roadmap, we have Paju Data Center, data hall number one, where currently new investment is being carried out. Through that, we're tapping into customer demand, and we expect there will be additional demand coming through. So we're at this point, reviewing a potential expansion into the second phase investment. [Foreign language] You also asked about the details of our AI agent and solution, related sales and, business approach. Basically, if you look at the core aspect of LG Uplus's AICC approach, it is to leverage our capabilities in terms of building out and operating Korea's biggest, contact and customer center.
Based upon the know-how that we have from internalized technology, we eventually wish to provide our in-sourced products, the products that we develop internally. So at this point, we are expanding on AICC in-sourced products. So in 2025, we've seen a growth above about 30% on a year-over-year basis when it comes to AICC revenue. In 2026, we're expecting about more than 50% growth on a YoY basis.
And also, under the collaboration between OpenAI and LG AI Research, we were able to release in December of 2025 Agentic AICC that is supported by generative AI. And also we are in the process of expanding U+ Super School, which is an AI agent providing support to the teachers in elementary and junior high school, supporting them with administrative efficiency so that the teachers can solely focus on providing education to students.
Next question, please.
[Foreign language]The following question will be presented by Hee-jin Lim from Citi Securities. Please go ahead with your question.
[Foreign language] Thank you. I am Hee-jin from Citi. Would like to ask you one question on your shareholder return stance for 2026. Would like to know as to whether you have a cancellation plan and a timing for the shares that you've bought back in the amount of KRW 80 billion so far, and also what would be your DPS stance, dividend per share stance for 2026?
[Foreign language] Thank you for that question. This is the CFO responding to your question. If you look at 2025, we had implemented structural enhancements, which led to a one-off expense, and also because of that, the number of distributable shares actually fell, also because of the buyback of our shares, which was done to enhance our corporate value. But despite all of this, we had slightly increased our dividend per share, and have continued on with a sustainable dividend policy, supported by long-term profitability. This year as well, we will be based upon our corporate value enhancement plan, and once we complete our detailed review on the cancellation of the shares, as well as the size of the share buyback, once the details are ironed out, we will communicate that with the market.
Just our overarching approach is that there is not going to be a change to the shareholder return policy that we had previously communicated, and there is no change to the plan on share buyback and cancellation. Our approach for DPS for 2026 will be underpinned by our profitability enhancements. So from a mid to longer term perspective, we will work under the objective of expanding the shareholder return and attaining sustainable growth. Thank you.
[Foreign language] Well, this brings us to the end of the earnings conference call of LG Uplus for Q4 of 2025. If you have any further questions, please feel free to contact us at the IR team. Once again, thank you everyone for joining.