CONTENTS WORDS 04. Vision & Strategy 14. CEO Message 18. Corporate Governance 20. Board of Directors ACTIONS 28. Our Business 36. Our Value 42. Our Responsibility RESULTS 48. Financial Review COMPANY PROFILE Just over a decade after the 1997 launch of KT Freetel, the company boasts more than 13 million subscribers and annual revenues of over KRW 8 trillion. Our new mobile communications services, marketed under the brand name “SHOW”, have been welcomed by customers as an integral part of their daily lives. SHOW services are delivered over the company’s next- generation 3G WCDMA network, which we launched in 2007. KTF is becoming a leader in the ICET industry (Information, Communication, Entertainment and Transaction). Our customers rely on us to make their lives more convenient, fruitful and fun, and our innovative spirit knows no bounds. Now, KTF is preparing to make its next leap forward by merging with KT, Korea’s top fixed-line service provider. A WINNER WORDS TO ACTIONS, AND TO RESULTS KTF is a company that says what we mean, and we do what we say. We promised that we would become a world-class ICET (Information, Communication, Entertainment, and Transaction) company that defines the cutting edge of mobile communications. We said it, and we are doing it. Here we present the words we have spoken and the promises we made. More important, we share with you the outstanding results we have achieved for our shareholders. KTF brings talent, drive and leadership to the impending merger with KT, and the integrity of our words and deeds will continue on, undiluted, in the strong new company we will build together. KTF sums up its business with the simple, direct phrase “More than mobile”. KTF will be with TRANSACTION our customers through every step of the exciting evolution of humanity’s digital lifestyle. People’s mobile handsets have NT tremendous capability E INFORMATION NM to connect their I users to information, RTA E communication, NT E entertainment and more than mobile transactions–what we A WORLD-CLASS ICET COMPANY call ICET. Our vision is to VISION THat MAKES LIFE MORE ABUNDANT rank among the world’s FOR ITS CUSTOMERS leading ICET companies, opening up new horizons and bringing joy to our customers’ lives. CET I Our Creativity (inventing a new vision for tomorrow) Tapping into new markets by challenging ourselves and creating new business opportunities • Securing future growth engines • Creating value for customers by integrating our services into every part of their lives • Establishing the foundation for ubiquitous wireless transactions Innovation (leading the market through innovation) COMMUNICATION GY Sharpening our competitive edge with ever-improving products and services and maximizing customer value TE RA • Leading the WCDMA market with unique value offerings ST • Catering to large corporate customers • Mounting effective campaigns to attract new customers Global (developing global competitiveness) Expanding internationally with a willingness to take on the world • Developing new business opportunities as a Mobile Network Operator (MNO) in emerging markets • Diversifying through global export of ICET technology solutions • Gaining momentum for overseas growth based on partnership and cooperation A WORLD-CLASS To secure growth engines for the company’s future, KTF is acquiring ICET COMPANY skills and technologies across the full spectrum of ICET (Information, Communication, Entertainment and Transaction). In our home country and around the world, KTF is determined to bring the wonders of full ICET service to mobile users everywhere. I/E INFOTAINMENT (Ubiquitous Digital Entertainment) Showing customers the joy of digital life Responding immediately to customer needs with a ubiquitous network carrying music, games, videos and more SECURITY • N IO T U L O S P PERSONAL O T S - HUB E N O • E S U F E O A S E C COMMUNICATION (WCDMA / Mobile Solutions / Digital Ecosystem) Sharing a digital communication lifestyle A wider range of communication options that go beyond basic customer needs to give them everything they want T GLOBAL (Global Communication / Global COMMUNICATION Convergence / Global Platform) Introducing customers worldwide to the wonders of unlimited handheld connectivity Providing an astonishing range of quality ICET services as a personal hub of digital life anytime, anywhere TRANSACTION (Personal Financial Management / Digital Infrastructure) Realizing the value of unlimited personal freedom G Making financial life more convenient with an ever- growing list of online and offline transaction services KTF does not compete for a small slice of the pie – we bring forward innovations that grow the size of the pie. We have won numerous customer service awards over the years, being recognized by industry experts and consumers alike as a company that puts its customers at the heart of its business. The Far Eastern Economic Review, published by Dow Jones, has called KTF the company “which most innovatively responded to customer needs”. We are especially proud of our No. 1 ranking in the telecom category of the 2008 National Customer Satisfaction Index (NCSI) survey. It is also innovation that propelled KTF to the top of Korea’s WCDMA market. THINKING outside the box <KT-KTF Merger – Innovation Once Again> KTF is now gearing up for another innovative leap: a merger with Korea’s No.1 wired communications company. The diversified strengths of the new company will enable us to respond faster and more effectively to changes in market conditions, and establish a better position to take advantage of the era of convergence. KTF is preparing to launch a new smart phone that not only supports KT’s WiBro wireless internet, but also SHOW, KTF’s 3rd-generation mobile communications service. After that, we will proceed quickly with our launch of mobile IPTV and other cutting-edge mobile services. SHOW represents a new concept in digital living. A 3G WCDMA mobile communication service launched in March of 2007, SHOW ambitiously extended the utility of mobile phones beyond voice communication and into the realm of watch-and-enjoy entertainment and video chatting. Leaving behind the crowded 2G market, SHOW brought KTF into a new business paradigm where competition is based on brand identity and customer value. The service immediately dominated the market, capturing 8.27 million subscribers by the end of 2008. MAKING MAKING the magic happen <The Brand that Dominates the SHOW> The success of SHOW’s launch owes as much to creative branding as it does to service innovation. The logo design and promotional campaign were carefully crafted to convey not just the enhanced functionality of video telephony, but also the joy of sharing closer connections with people and the world. Beyond advertising, the brand was extended to remodeled storefronts, sales floor layouts and shop interior color schemes. Unique SHOW promo items were distributed; the SHOW umbrella even won a 2008 design award from the Korea Institute of Design Production. LOOKING Just as wireless signals reach beyond the horizon, KTF’s growth ambitions extend beyond our native borders to the global market. Our first expansion is into Southeast Asia, where consumers share similar preferences to Koreans and market entry is smoothed by the ‘Korean Wave’, as the surging popularity of Korean pop culture is known. Then, using Asia as a springboard, KTF will leverage the success of its WCDMA network to bring 3G services to mobile customers in markets worldwide. Along with entertainment and transactions, overseas growth will be one of the company’s top three growth drivers in coming years. into the bigger picture <Do the SHOW in Malaysia> KTF is the manager of Malaysia’s “U-Mobile” service, which is in the process of a remarkably successful entry into the global market. U-Mobile was launched with attractive incentives, such as Malaysia’s first-ever free calls within a network, steep discounts on short messaging services and reduced fees on other call charges. These incentives and direct marketing helped U-Mobile to attract more than 500,000 subscribers by December, 2008, just seven months after its launch. KTF will continue to lead the international penetration of mobile services after the merger with KT. KTF is a company that values its image and reputation as a caring corporate citizen. We are enthusiastic supporters of the arts & culture, and contribute generously to social welfare programs. To boost the effectiveness of our CSR efforts, KTF looks for areas where its competencies as an ICET service provider can add the most value. We also imprint all our customer-centric services and products with our distinctive “Good Time Management” and “Design Management”. Recently, we have amplified our results using the SHOW platform to encourage our customers to join the company’s social contribution campaigns. WORKING for better tommorrow <Sharing Our Love and Caring with Customers> Following the splash SHOW made in 3G communi- cations, KTF is strengthening SHOW’s brand power with creative social contribution activities that customers can participate in. Together with KTF staff and management, SHOW subscribers traveled to Inner Mongolia to help with tree-planting efforts to combat desertification and reduce the effects of the annual Asian dust storms. Our customers also gave enthusiastic support to the company’s “SHOW Sharing” children’s fundraiser and “SHOW 1004” (1004 is pronounced the same as ‘angel’ in Korean), which provides free video calls for our underprivi- leged neighbors. CEO Message To our shareholders and customers, Let me first extend my heartfelt thanks for all the support you have given KTF, and wish you and your family health and happiness in 2009. Last year, KTF overcame the challenges of the spreading economic downturn to record excellent business results. Service revenue climbed 7.4% in 2008, reaching KRW 5.95 trillion, while total revenue including handset sales rose 14.4% to KRW 8.35 trillion. This was a landmark achievement for our company, representing the first time since KT Freetel’s establishment in 1997 that revenues passed the KRW 8 trillion mark.