Moody's current ratings on KT Corporation are:

Senior Unsecured (foreign currency) ratings of A3

Senior Unsecured MTN Program (foreign currency) rating of (P)A3

RATINGS RATIONALE

The A3 rating reflects KT's leading position in the South Korean telecommunications market. It commands a large share of the fixed-line/broadband market, a position from which Moody's believes it would be difficult to dislodge without aggressive regulatory action. In addition, KT is the second largest mobile operator in Korea with an approximate market share of 31.5%.

The rating also considers the challenges associated with a highly competitive environment in a largely mature market. This has resulted in downward pressure on margins for a number of years and which may continue due to ongoing competition across the key areas of wireless and broadband technologies. Furthermore, the high level of wireless and broadband penetration in South Korea has resulted in the industry seeking to create revenue growth by rapidly adopting new technologies which has resulted in ongoing capex requirements. Moody's notes that debt/EBITDA (excluding KT Capital) has been increasing over the past few years due to ongoing capex and increased handset receivables as well as sluggish growth in earnings.

Rating Outlook

The outlook on the ratings is negative reflecting Moody's concerns over KT's stressed financial metrics and our expectation of ongoing heightened competitive tension in the Korean telecommunications space.

What Could Change the Rating - Up

Given the negative outlook, an upgrade is unlikely in the near-to-medium term. However the outlook could revert to stable should KT manage its competitive position whilst implementing measures to improve its financial position. Specific indicators that Moody's would consider include: adjusted debt/EBITDA (excluding KT Capital but adding back for capital and/or liquidity calls) below 2.0x on a consistent basis and adjusted EBITDA margins to return to 30%. Moody's would also look for interest cover, as measured by (EBITDA-capex) / interest to rise above 4.0x.

What Could Change the Rating - Down

Further downward pressure could emerge should KT's financial metrics deteriorate further such that adjusted debt/EBITDA (excluding KT Capital but adding back for capital and/or liquidity calls) remain above 2.0-2.1x; EBITDA margins remain below 25%; and (EBITDA-capex) / interest to remain below 3.0x.

The principal methodology used in rating KT Corporation was the Global Telecommunications Industry Methodology published in December 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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