As filed with the Securities and Exchange Commission on April 29, 20162021
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
(Mark One)
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, |
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
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 to
Commission file number 1-14418
SK Telecom Co., Ltd.
(Exact name of Registrant as specified in its charter)
SK Telecom Co., Ltd.
(Translation of Registrant’s name into English)
The Republic of Korea
(Jurisdiction of incorporation or organization)
SK T-Tower
65, Eulji-ro, Jung-gu, Seoul, Korea
(Address of principal executive offices)
Ms. Tae Hee KimMr. Wooseok Lee
65, Eulji-ro, Jung-gu, Seoul, Korea
Telephone No.: +82-2-6100-2114
Facsimile No.: +82-2-6100-7830
(Name, telephone, email 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 | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
American Depositary Shares, each representing one-ninth of one share of Common Stock | SKM | New York Stock Exchange | ||
Common Stock, par value | SKM | New York Stock Exchange* |
* Not for trading, but only in connection with the registration of the American Depositary Shares.
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
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
70,609,16071,327,153 shares of common stock, par value₩500 per share (not including 10,136,5519,418,558 shares of common stock held by the company 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. Yesþ☒ 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 Exchange Act of 1934. Yes ¨☐ Noþ☒
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 preceding 12 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 90 days. Yesþ☒ 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 submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 a non-accelerated filer.an emerging growth company. See definitiondefinitions of “accelerated filer, and large” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ☒ 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 the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes☒No ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨☐ International Financial Reporting Standards as issued by the International Accounting Standards Board þ☒ Other ¨☐
IndicateIf “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.Item17¨ ☐ Item18þ ☐
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 ¨☐ Noþ☒
CERTAIN DEFINED TERMS AND CONVENTIONS USED IN THIS ANNUAL REPORT | 1 | |||||
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Item 10.C. | 98 |
(i)
(ii)
CERTAIN DEFINED TERMS AND CONVENTIONS USED IN THIS ANNUAL REPORT
All references to “Korea” contained in this annual report shall mean The Republic of Korea. All references to the “Government” shall mean the government of The Republic of Korea. All references to “we,” “us,” or “our” shall mean SK Telecom Co., Ltd. and, unless the context otherwise requires, its consolidated subsidiaries. References to “SK Telecom” shall mean SK Telecom Co., Ltd., but shall not include its consolidated subsidiaries. All references to “U.S.” shall mean the United States of America.
All references to “MHz” contained in this annual report shall mean megahertz, a unit of frequency denoting one million cycles per second. All references to “GHz” shall mean gigahertz, a unit of frequency denoting one billion cycles per second. All references to “Mbps” shall mean one million bits per second and all references to “Gbps” shall mean one billion bits per second. All references to “GB” shall mean gigabytes, which is one billion bytes. Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding.
All references to “Won,” or “₩” in this annual report are to the currency of Korea and all references to “Dollars”, “U.S. dollar” or “US$” are to the currency of the United States of America, all references to “CHF” or “Franc” are to the currency of Switzerland, all references to “MYR” are to the currency of Malaysia, all references to “euro” or “€” are to the currency of the European Union and all references to “Australian Dollars” or “AUD” are to the currency of the Commonwealth of Australia.America.
Pursuant to amendments to the Government Organization Act and the Act on the Establishment and Operation of Korea Communications Commission, both effective as of March 23, 2013, theThe Ministry of Science and ICT and Future Planning (the “MSIP”“MSIT”) was established. The MSIP is charged with regulating information and telecommunications, which function was formerly performed byand the Korea Communications Commission (the “KCC”) under the previous Government. The KCC, which had taken over the regulatory functions relating to information and telecommunications policies and radio and broadcasting management from the Ministry of Information and Communication (the “MIC”) in 2008, is currently charged with regulating the public interest aspects of and fairness in broadcasting. In this annual report, we refer to the MIC and the KCC as the relevant governmental authorities in connection with any approval granted or action taken by the MIC or the KCC, as applicable, prior to such amendments and to the MSIP or other relevant governmental authority in connection with any approval granted or to be granted or action taken or to be taken by the MSIP or such other relevant governmental authority subsequent to such amendments.
Subscriber information for the wireless and fixed-line telecommunications industry set forth in this annual report are derived from information published by the MSIPMSIT unless expressly stated otherwise.
The consolidated financial statements included in this annual report are prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (the “IASB”). As such, we make an explicit and unreserved statement of compliance with IFRS, as issued by the IASB, with respect to our consolidated financial statements as of December 31, 20152020 and 2014,2019, and for the years ended December 31, 2015, 2014,2020, 2019 and 20132018 included in this annual report.
In accordance with rule amendments adopted by the U.S. Securities and Exchange Commission (the “SEC”), which became effective on March 4, 2008, we are not required to provide a reconciliation to generally accepted accounting principles in the United States, or U.S. GAAP.
Unless expressly stated otherwise, all financial data included in this annual report are presented on a consolidated basis.
This report contains “forward-looking statements,” as defined in Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on our current expectations, assumptions, estimates and projections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally,
these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,” “planning,” “planned,” “project” and similar expressions, or that certain events, actions or results “may,” “might,” “should” or “could” occur, be taken or be achieved.
Forward-looking statements in this annual report include, but are not limited to, statements about the following:
our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including new services that may be introduced, changes in consumer preferences, economic conditions and discount pricing strategies by competitors;
our implementation of long-term evolution (“LTE”) technology, long-term evolution advanced (“LTE-A”) technology and the next-generationfifth generation wireless technology, which we call “5G” technology;
our plans for capital expenditures in 20162021 for a range of projects, including investments to expand and improve and expand our LTEnewly implemented 5G network, investments to maintain our fourth generation long-term evolution (“LTE”) network and LTE-Along-term evolution advanced (“LTE-A”) services, investments to improve and expand our Wi-Fi network, investments to develop our Internet of Things (“IoT”) solutions and platform services business portfolio, including artificial intelligence (“AI”) solutions, investments in data infrastructure, investments in research and development of 5G technology, investments in businesses that can potentially leverage our 5G network, and funding for mid- to long-term research and development projects, as well as other initiatives, primarily related to the development of new growth engines,businesses, as well as initiatives related to our ongoing businesses in the ordinary course;
our efforts to make significant investments to build, develop and broaden our businesses, including developing our three next-generation growth platforms, Internetbusinesses in media, security, commerce, mobility, IoT solutions and other innovative products and services offered through our platform services, including AI solutions, and to create synergies among our businesses, including through the adaptation of Things (“IoT”) solutions, lifestyle enhancement and advanced media;AI technology;
our ability to comply with governmental rules and regulations, including the regulations of the Government related to telecommunications providers, the Mobile Device Distribution Improvement Act (“MDDIA”), rules related to our status as a “market-dominating business entity” under the Korean Monopoly Regulation and Fair Trade Act (the “Fair Trade Act”) and the effectiveness of steps we have taken to comply with such regulations;
our ability to effectively manage our bandwidth and to timely and efficiently implement new bandwidth-efficient technologies and our intention to participate in, and acquire additional bandwidth pursuant to, frequency bandwidth auctions held, or other allocations of bandwidth, by the MSIP;MSIT;
our expectations and estimates related to interconnection fees, rates charged by our competitors, regulatory fees, operating costs and expenditures, working capital requirements, principal repayment obligations with respect to long-term borrowings, bonds and obligations under capital leases,short-term borrowings, and research and development expenditures and other financial estimates;
the success of our various joint ventures and investments;
our ability to successfully manage our acquisition in 2012 of a stake ininvestments, including SK hynixHynix, Inc. (known as Hynix Semiconductor Inc. at the time of such acquisition, “SK(“SK Hynix”), a memory-chip maker;
our ability to successfully complete the acquisition of a stake in CJ HelloVision Co., Ltd. (“CJ HelloVision”), a fixed-line cable TV broadcast service provider,maker, and integrate CJ HelloVision’s business with that of SK Broadband Co., Ltd. (“SK Broadband”);strategic alliances and cooperation;
our ability to successfully attract and retain subscribers;subscribers of our telecommunications-related businesses and customers of our other businesses; and
the growth of the telecommunications industryand other industries in which we operate in Korea and other markets in which we do business and the effect that economic, political or social conditions have on our number of subscribers and customers and results of operations.
We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be incorrect. Risks and uncertainties associated with our business include, but are not limited to, risks related to changes in the regulatory environment, technology changes, potential litigation
and governmental actions, changes in the competitive environment, political changes, foreign exchange currency risks, foreign ownership limitations, credit risks and other risks and uncertainties that are more fully described under the heading “Item 3. Key Information —3.D. Risk Factors” and elsewhere in this annual report. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results 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 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT 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 |
Not applicable.
Item 3. | KEY INFORMATION |
Item 3.A. | Selected Financial Data |
You should read the selected consolidated financial and operating data below in conjunction with the consolidated financial statements and the related notes included elsewhere in this annual report. The selected consolidated financial data set forth below as of and for each of the five years ended December 31, 2015, 2014, 2013, 2012 and 20112020 have been derived from our audited consolidated financial statements and related notes thereto, which have been prepared in accordance with IFRS as issued by the IASB.
In addition to preparing consolidated financial statements in accordance with IFRS as issued by the IASB included in this annual report, we also prepare financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) as adopted by the Korean Accounting Standards Board (the “KASB”), which we are required to file with the Financial Services Commission of Korea (the “FSC”) and the Korea Exchange Inc. (the “Korea Exchange”) under the Financial Investment Services and Capital Markets Act (the “FSCMA”). English translations of such financial statements are furnished to the SECU.S. Securities and Exchange Commission (the “SEC”) on Form 6-K. Beginning with our financial statements prepared in accordance with K-IFRS as of and for the year ended December 31, 2012, we are required to adopt certain amendments to K-IFRS No. 1001, Presentation of Financial Statements, as adopted by the KASB in 2012. The amendments require requires operating income,profit, which is calculated as operating revenue less operating expense, to be separately presented on the consolidated statement of income.Operatingincome.Operating expense represents expenses incurred in our main operating activities and includes cost of products that have been resoldgoods sold and selling, general and administrative expenses.
In our consolidated statements of income prepared in accordance with IFRS as issued by the IASB included in this annual report, such changes in presentation were not adopted. As a result, the The presentation of operating incomeprofit in our consolidated statements of income prepared in accordance with IFRS as issued by the IASB included in this annual report differs from the presentation of operating incomeprofit in the consolidated statements of income prepared in accordance with K-IFRS for the corresponding periods.periods in certain respects. For additional information, see “Item 5.A. Operating Results — Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”
STATEMENT OF INCOME DATA Operating Revenue and Other Income Revenue Other income Operating Expense Operating Income Profit before Income Tax Profit from Continuing Operations Profit (Loss) from Discontinued Operation, net of income taxes Profit for the Year Basic Earnings per Share(1) Diluted Earnings per Share(2) Basic Earnings per Share from Continuing Operations(1) Diluted Earnings per Share from Continuing Operations(2) Dividends Declared per Share (Won) Dividends Declared per Share Weighted Average Number of Shares STATEMENT OF FINANCIAL POSITION DATA Working Capital (Deficit)(4) Property and Equipment, Net Total Assets Non-current Liabilities(5) Share Capital Total Equity OTHER FINANCIAL DATA Capital Expenditures(6) R&D Expense(7) Depreciation and Amortization Expense Net Cash Provided by Operating Activities Net Cash Used in Investing Activities Net Cash Provided by (Used in) Financing Activities Margins (% of total sales): Operating Margin(8) Net Margin(8) Year Ended December 31, 2015 2014 2013 2012 2011 (In billions of Won, except per share and number of shares data) ₩ 17,167.6 ₩ 17,220.3 ₩ 16,677.0 ₩ 16,343.3 ₩ 15,852.8 17,136.7 17,163.8 16,602.1 16,141.4 15,803.2 30.9 56.5 74.9 201.9 49.6 15,672.2 15,612.4 15,098.6 14,605.6 13,690.1 1,495.4 1,607.8 1,578.4 1,737.6 2,162.7 2,035.4 2,253.8 1,827.1 1,519.4 2,212.3 1,515.9 1,799.3 1,426.3 1,231.2 1,610.3 — — 183.2 (115.5 ) (28.3 ) 1,515.9 1,799.3 1,609.5 1,115.7 1,582.1 20,988 25,154 23,211 16,525 22,848 20,988 25,154 23,211 16,141 22,223 20,988 25,154 20,708 18,015 23,339 20,988 25,154 20,708 17,583 22,699 10,000 9,400 9,400 9,400 9,400
(US$)(3) 8.6 8.6 8.9 8.8 8.1 71,551,966 70,936,336 70,247,592 69,694,999 70,591,937 As of December 31, 2015 2014 2013 2012 2011 (In billions of Won) ₩ (96.3 ) ₩ (337.2 ) ₩ (945.8 ) ₩ (880.5 ) ₩ (556.1 ) 10,371.3 10,567.7 10,196.6 9,712.7 9,031.0 28,581.4 27,941.2 26,576.5 25,595.6 24,366.0 7,950.8 7,272.7 6,340.7 6,565.9 4,959.7 44.6 44.6 44.6 44.6 44.6 15,374.1 15,248.3 14,166.6 12,854.8 12,732.7 Year Ended December 31, 2015 2014 2013 2012 2011 (In billions of Won, except percentage data) ₩ 2,478.8 ₩ 3,008.0 ₩ 2,879.1 ₩ 3,394.3 ₩ 2,960.6 322.7 397.8 363.7 346.3 295.9 2,845.3 2,714.7 2,661.6 2,421.1 2,286.6 3,778.1 3,677.4 3,558.6 3,999.7 6,306.4 (2,880.5 ) (3,683.2 ) (2,506.5 ) (5,309.6 ) (4,239.1 ) (964.6 ) (559.4 ) (573.2 ) 585.3 (1,079.3 ) 8.7 % 9.3 % 9.5 % 10.6 % 13.6 % 8.8 % 10.4 % 9.7 % 6.8 % 9.9 %
Year Ended December 31, | ||||||||||||||||||||
2020(21) | 2019(21) | 2018(22) | 2017 | 2016 | ||||||||||||||||
(In billions of Won, except per share and number of shares data) | ||||||||||||||||||||
STATEMENT OF INCOME DATA | ||||||||||||||||||||
Operating Revenue and Other Income | ₩ | 18,724.3 | ₩ | 17,843.5 | ₩ | 16,945.9 | ₩ | 17,552.0 | ₩ | 17,158.3 | ||||||||||
Revenue | 18,624.7 | 17,740.7 | 16,874.0 | 17,520.0 | 17,091.8 | |||||||||||||||
Other income | 99.6 | 102.8 | 71.9 | 32.0 | 66.5 | |||||||||||||||
Operating Expense | 17,619.7 | 16,836.2 | 16,112.1 | 16,327.4 | 15,854.9 | |||||||||||||||
Operating Profit | 1,104.6 | 1,007.3 | 833.8 | 1,224.6 | 1,303.4 | |||||||||||||||
Profit before Income Tax | 1,877.0 | 1,161.0 | 3,976.0 | 3,403.3 | 2,096.1 | |||||||||||||||
Profit from Continuing Operations | 1,500.5 | 860.7 | 3,132.0 | 2,657.6 | 1,660.1 | |||||||||||||||
Profit for the Year | 1,500.5 | 860.7 | 3,132.0 | 2,657.6 | 1,660.1 | |||||||||||||||
Basic Earnings per Share(1) | 20,463 | 12,127 | 44,066 | 36,582 | 23,497 |
SELECTED OPERATING DATA Population of Korea (in millions)(9) Our Wireless Penetration(10) Number of Employees(11) Wireless Subscribers (in thousands) (12) Our LTE Subscribers (in thousands) (13) Our LTE Penetration(14) Average Monthly Data Usage per Subscriber(15) Average Monthly Churn Rate(16) Cell Sites As of or for the Year Ended December 31, 2015 2014 2013 2012 2011 51.5 51.3 51.1 50.9 50.7 55.6 % 55.7 % 53.5 % 52.9 % 52.3 % 25,992 25,689 23,789 22,148 20,955 28,626 28,279 27,352 26,961 26,553 18,980 16,737 13,487 7,530 634 66.3 % 59.2 % 49.3 % 27.9 % 2.4 % 3.9 GB 3.0 GB 2.0 GB 1.8 GB — 1.5 % 2.0 % 2.3 % 2.6 % 2.7 % 55,085 50,158 44,764 35,584 21,999
Year Ended December 31, | ||||||||||||||||||||
2020(21) | 2019(21) | 2018(22) | 2017 | 2016 | ||||||||||||||||
(In billions of Won, except per share and number of shares data) | ||||||||||||||||||||
Diluted Earnings per Share(2) | 20,459 | 12,127 | 44,066 | 36,582 | 23,497 | |||||||||||||||
Basic Earnings per Share from Continuing Operations(1) | 20,463 | 12,127 | 44,066 | 36,582 | 23,497 | |||||||||||||||
Diluted Earnings per Share from Continuing Operations(2) | 20,459 | 12,127 | 44,066 | 36,582 | 23,497 | |||||||||||||||
Dividends Declared per Share (Won) | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 | |||||||||||||||
Dividends Declared per Share (US$)(3) | 9.2 | 8.7 | 9.0 | 9.4 | 8.3 | |||||||||||||||
Weighted Average Number of Shares | 72,795,431 | 72,064,159 | 70,622,976 | 70,609,160 | 70,609,160 | |||||||||||||||
As of December 31, | ||||||||||||||||||||
2020(21) | 2019(21) | 2018(22) | 2017 | 2016 | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
STATEMENT OF FINANCIAL POSITION DATA | ||||||||||||||||||||
Working Capital (Deficit)(4) | ₩ | 597.1 | ₩ | 236.8 | ₩ | 1,111.3 | ₩ | (907.3 | ) | ₩ | (447.5 | ) | ||||||||
Property and Equipment, Net | 13,377.1 | 12,933.5 | 10,718.4 | 10,144.9 | 10,374.2 | |||||||||||||||
Total Assets | 47,907.0 | 45,202.4 | 42,369.1 | 33,428.7 | 31,297.7 | |||||||||||||||
Non-current Liabilities(5) | 15,332.7 | 14,533.8 | 13,172.3 | 8,290.4 | 8,737.1 | |||||||||||||||
Share Capital | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | |||||||||||||||
Total Equity | 24,396.2 | 22,816.9 | 22,349.3 | 18,029.2 | 16,116.4 | |||||||||||||||
As of December 31, | ||||||||||||||||||||
2020(21) | 2019(21) | 2018(22) | 2017 | 2016 | ||||||||||||||||
(In billions of Won, except percentage data) | ||||||||||||||||||||
OTHER FINANCIAL DATA | ||||||||||||||||||||
Capital Expenditures(6) | ₩ | 3,557.8 | ₩ | 3,375.9 | ₩ | 2,792.4 | ₩ | 2,715.9 | ₩ | 2,490.5 | ||||||||||
Research and Development Expense | 416.4 | 391.3 | 387.7 | 395.3 | 344.8 | |||||||||||||||
Depreciation and Amortization Expense(7) | 3,991.1 | 3,856.7 | 3,126.1 | 3,097.5 | 2,941.9 | |||||||||||||||
Net Cash Provided by Operating Activities | 5,821.9 | 4,035.0 | 4,332.6 | 3,855.8 | 4,243.2 | |||||||||||||||
Net Cash Used in Investing Activities | (4,250.4 | ) | (3,581.6 | ) | (4,047.7 | ) | (3,070.6 | ) | (2,462.2 | ) | ||||||||||
Net Cash Used in Financing Activities | (1,457.6 | ) | (686.7 | ) | (238.3 | ) | (826.6 | ) | (1,044.8 | ) | ||||||||||
Margins (% of Operating Revenue and Other Income): | ||||||||||||||||||||
Operating Margin(8) | 5.9 | % | 5.6 | % | 4.9 | % | 7.0 | % | 7.6 | % | ||||||||||
Net Margin(9) | 8.0 | % | 4.8 | % | 18.5 | % | 15.1 | % | 9.7 | % |
As of or for the year ended December 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
SELECTED OPERATING DATA | ||||||||||||||||||||
Population of Korea (in millions)(10) | 51.8 | 51.8 | 51.8 | 51.8 | 51.7 | |||||||||||||||
Our Wireless Penetration(11) | 60.6 | % | 60.8 | % | 59.6 | % | 58.3 | % | 57.2 | % | ||||||||||
Number of Employees(12) | 41,097 | 40,543 | 39,909 | 30,608 | 25,844 | |||||||||||||||
Our Wireless Subscribers (in thousands)(13) | 31,384 | 31,535 | 30,882 | 30,195 | 29,595 | |||||||||||||||
Our 5G Subscribers (in thousands)(14) | 5,476 | 2,084 | — | — | — | |||||||||||||||
Our 5G Penetration(15) | 17.4 | % | 6.6 | % | — | — | — | |||||||||||||
Our LTE Subscribers (in thousands)(16) | 22,848 | 25,022 | 24,796 | 22,865 | 21,078 | |||||||||||||||
Our LTE Penetration(17) | 72.8 | % | 79.3 | % | 80.3 | % | 75.7 | % | 71.2 | % | ||||||||||
Average Monthly Data Usage per 5G Subscriber(18) | 26.6 GB | 28.0 GB | — | — | — | |||||||||||||||
Average Monthly Data Usage per LTE Subscriber(19) | 7.8 GB | 8.2 GB | 7.1 GB | 6.0 GB | 5.2 GB | |||||||||||||||
Average Monthly Churn Rate(20) | 1.2 | % | 1.2 | % | 1.2 | % | 1.5 | % | 1.5 | % | ||||||||||
Cell Sites | 57,932 | 63,066 | 54,203 | 52,132 | 54,986 |
(1) | Basic earnings per share is calculated by dividing profit attributable to owners of SK Telecom by the weighted average number of common shares outstanding during the period. Basic earnings per share from continuing operations is calculated by dividing profit from continuing operations attributable to owners of SK Telecom by the weighted average number of common shares outstanding during the period. |
(2) | Diluted earnings per share is calculated by dividing profit attributable to owners of SK Telecom adjusted for dilution by the potential dilutive weighted average number of common shares outstanding during the period, taking into account the |
(3) | The Dollar amounts shown for the years ended December 31, |
(4) | Working capital means current assets minus current liabilities. |
(5) | Our monetary assets and liabilities denominated in foreign currencies are valued at the exchange rates prevailing at the end of each reporting period. See note |
(6) | Consists of cash outflows for the acquisition of property and equipment. |
(7) |
(8) | Operating |
(9) | Net margin represents profit for the year divided by operating revenue and other income. |
(10) | Population numbers reflect the number of registered residents as published by the Ministry of the Interior and Safety of Korea. |
Our wireless penetration is determined by dividing our wireless subscribers by total estimated population, as of the end of the period. |
Includes regular employees and temporary employees. See “Item 6.D. Employees.” |
Wireless subscribers include those subscribers who are temporarily deactivated, including (i) subscribers who voluntarily deactivate temporarily for a period of up to three months no more than twice a year and (ii) subscribers with delinquent accounts who may be involuntarily deactivated up to two months before permanent deactivation, which we determine based on various factors, including prior payment history. The number of subscribers as of December 31, |
The number of 5G subscribers as of December 31, 2020 includes approximately 400 subscribers of MVNOs that lease our 5G network. |
(15) | Our 5G wireless penetration is determined by dividing our 5G subscribers by our total wireless subscribers, as of the end of the period. |
(16) | The number of LTE subscribers as of December 31, |
Our LTE wireless penetration is determined by dividing our LTE subscribers by our total wireless subscribers, as of the end of the period. |
Average monthly data usage per 5G subscriber is determined by dividing the total GBs of data usage for the last month of the period by the average number of 5G subscribers for such month. |
(19) | Average monthly data usage per LTE subscriber is determined by dividing the total GBs of data usage for the last month of the period by the average number of LTE subscribers for such month. |
The average monthly churn rate for a period is the number calculated by dividing the sum of voluntary and involuntary deactivations during the period by the simple average of the number of subscribers at the beginning and end of the period, then dividing that number by the number of months in the period. Churn includes subscribers who upgrade to a next-generation service, such as |
Exchange Rates
The following table sets forth, for the periods and dates indicated, certain information concerning the noon buying rate for translations of Won amounts into Dollars. We make no representation that the Won or Dollar amounts we refer to in this annual report could have been or could be converted into Dollars or Won, as the case may be, at any particular rate or at all.
Year Ended December 31, | At End of Period | Average Rate(1) | High | Low | ||||||||||||
(Won per US$1.00) | ||||||||||||||||
2011 | 1,158.5 | 1,106.9 | 1,197.5 | 1,049.2 | ||||||||||||
2012 | 1,063.2 | 1,126.2 | 1,185.0 | 1,063.2 | ||||||||||||
2013 | 1,055.3 | 1,094.7 | 1,161.3 | 1,050.1 | ||||||||||||
2014 | 1,090.9 | 1,052.3 | 1,117.7 | 1,008.9 | ||||||||||||
2015 | 1,169.3 | 1,131.0 | 1,196.4 | 1,063.0 |
Past Six Months | ||||||||
High | Low | |||||||
(Won per US$1.00) | ||||||||
October 2015 | 1,180.0 | 1,120.9 | ||||||
November 2015 | 1,172.7 | 1,136.5 | ||||||
December 2015 | 1,188.0 | 1,140.7 | ||||||
January 2016 | 1,217.0 | 1,190.4 | ||||||
February 2016 | 1,242.6 | 1,186.1 | ||||||
March 2016 | 1,229.6 | 1,138.9 | ||||||
April 2016 (through April 22) | 1,158.4 | 1,126.0 |
Source: Federal Reserve Bank of New York.
(21) | We adopted IFRS 16, Leases, in the fiscal year beginning on January 1, 2019 using the modified retrospective method by recognizing the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings as of such date. In the fiscal year beginning on January 1, 2020, we applied the agenda decision, Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment)—November 2019, published by the International Financial Reporting Interpretations Committee (“IFRIC”) on December 16, 2019, as a change in accounting policy, and have retrospectively applied such change and restated our consolidated financial statements as of and for the year ended December 31, 2019. The comparative information presented for 2018, 2017 and 2016 has not been restated. See “Item 5.A. Operating Results — Recently Adopted International Financial Reporting Standards – IFRS 16” and note 3 of the notes to our consolidated financial statements. |
We adopted IFRS 15, Revenue from Contracts with Customers, and IFRS 9, Financial Instruments, in the fiscal year beginning on January 1, 2018. We adopted IFRS 15 and IFRS 9 by recognizing the cumulative effect of initially applying IFRS 15 and IFRS 9 as adjustments to the opening balance of retained earnings as of January 1, 2018. The |
On April 22, 2016, the noon buying rate was Won 1,147.9 to US$1.00.
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 |
Risks Relating to Our Business
Competition may reduce our market share and harm our results of operations and financial condition.
We face substantial competition across all our businesses, including our wireless telecommunications business. We expect competition to intensify as a result of the development of new technologies, products and services. We expect that such trends will continue to put downward pressure on the prevailing rates we can charge our subscribers.
Historically, there has been considerable consolidation in the telecommunications industry, resulting in the current competitive landscape comprising three mobile and fixed network operators in the Korean market, us, KT Corporation (“KT”) and LG Uplus Corp. (“LG U+”). OurEach of our competitors havehas substantial financial, technical, marketing and other resources to respond to our business offerings.
The collective market share of our competitorsKT and LG U+ amounts to approximately 50.6%54.9%, in terms of number of wireless subscribers (including an aggregate of 9.8% attributable to MVNOs that lease KT’s and LG U+’s respective networks), as of December 31, 2015. We also compete2020.
Our competitors for subscriber activations withinclude MVNOs, including MVNOs that lease our networks. MVNOs generally provide rate plans that are relatively cheaper than similar rate plans of the wireless network providers from which they lease their networks, including us. In addition, other companies may enter the telecommunications servicewireless network services market. While new entries into such market by acquiring thehave historically required obtaining requisite licenses from the MSIP. For example,MSIT, pursuant to an amendment to the Telecommunications Business Act that went into effect in October 2015, Sejong Telecom, K Mobile and Quantum Mobile applied for licenses toJune 2019, companies meeting certain regulatory criteria may become Korea’s fourth mobilea network operator.service provider by registering with the MSIT without a separate license requirement. Although such amendment has not yet resulted in any new entries into the MSIP rejectedKorean wireless network services market, it may have the applicationseffect of all three companies in January 2016, the MSIP may continue its efforts to find an eligible applicant to be Korea’s fourth mobile network operatorencouraging new entries in the future.
We believe thethat an increase in market share of MVNOs and the entrance of a new mobile network operatoroperators, if any, in the wireless telecommunications market may further increase competition in the telecommunications sector,
as well as cause downward price pressure on the fees we charge for our services, which, in turn, may have a material adverse effect on our results of operations, financial position and cash flows.
Our fixed-line telephone service competes with KT and LG U+, as well as other providers of voice over Internet protocol (“VoIP”) services. As of December 31, 2015,2020, our market share of the fixed-line telephone and VoIP service market was 16.2%15.8% (including the services provided by SK Broadband Co., Ltd. (“SK Broadband”) and SK Telink Co., Ltd. (“SK Telink”)) in terms of number of subscribers compared to KT with 57.5%56.8% and LG U+ with 17.5%.In19.1%. In addition, our broadband Internet access, and Internet protocol TV (“IPTV”) and cable TV services provided through SK Broadband competescompete with other providers of such services, including KT, LG U+ and cable companies. Furthermore, our IPTV and cable TV services are facing an increasing level of competition from global operators of online video streaming platforms, such as YouTube, Amazon Video and Netflix, and the video services offered by leading domestic online and mobile search and communications platforms including NAVER and Kakao, as such services continue to become increasingly popular to serve as a substitute to traditional television programming. As of December 31, 2015,2020, our market share of the broadband Internet market was 25.1%29.0% in terms of number of subscribers compared to KT with 41.6%41.1% and LG U+ with 17.4%20.3%. As of December 31, 2015,2020, our market share of the pay TV market (which includes IPTV, cable TV and satellite TV) was 12.1%24.4% compared to KT with 22.7%32.2% (including its IPTV and satellite TV services) and LG U+ with 7.9%25.0% (including its IPTV and cable TV services), and the collective market share of other pay TV providers was 18.4%.
Recently, the Korean fixed-line telecommunications industry has been going through significant consolidation involving major pay television service providers. In April 2020, we completed the merger of Tbroad Co., Ltd., a former leading cable television and other fixed-line telecommunication services provider in Korea, and two of its subsidiaries, Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co. Ltd. (collectively, “Tbroad”), with 57.3%.and into SK Broadband. As a result of the merger and the issuance of SK Broadband’s shares to the former shareholders of Tbroad with an aggregate fair value of Won 862.1 billion as of April 30, 2020, we own approximately 74.3% of SK Broadband’s total outstanding shares as of December 31, 2020. In the same month, SK Telecom acquired a 55.0% equity interest in Broadband Nowon Co., Ltd. (formerly known as Tbroad Nowon Broadcasting Co., Ltd.), another subsidiary of Tbroad Co., Ltd., for a purchase price of Won 10.4 billion in cash. As a result of such transactions (the “Tbroad Merger”), we have become the third-largest pay TV provider in Korea in terms of number of subscribers as of December 31, 2020. In December 2019, LG U+ acquired a majority equity stake in CJ Hello Co., Ltd. and changed the acquired company’s name to LG HelloVision Co., Ltd. (“LG HelloVision”) to collectively become the second-largest pay TV provider in Korea in terms of number of subscribers as of December 31, 2020. Such transactions, as well as further consolidation in the fixed-line telecommunications industry, may result in increased competition, as the entities emerging from such consolidation and other remaining players in the industry may actively pursue expanding or protecting their respective market shares.
Furthermore, the Government has historically enforced regulations on cable TV and IPTV service providers that prohibited them from having a market share of more than one-third of the total number of subscribers in the relevant pay TV market on each of their respective platforms. In June 2015, the Government amended the regulation to impose the same limit on the market share of the entire pay TV market, including satellite TV service providers as well. Such amended regulation, however, expired in June 2018. There are bills currently pending in the National Assembly to abolish the previous market share regulations on cable TV and IPTV service providers. It is uncertain whether such bills will be passed.
Continued competition from other wireless and fixed-line service providers has also resulted in, and may continue to result in, a substantial level of deactivations among our subscribers. Subscriber deactivations, or churn, may significantly harm our business and results of operations. In 2015,2020, the monthly churn rate in our wireless telecommunications business ranged from 1.3%1.1% to 2.1%1.4%, with an average monthly churn rate of 1.5%1.2%, which was a decreaseremained unchanged from 2.0% in 2014.Intensification2019. Intensification of competition in the future may cause our churn rates to increase, which in turn may cause us to increase our marketing expenses as a percentage of sales to attract and retain subscribers.
Our physical security business competes with other large physical security service providers, including S-1 Corporation (“S-1”) and KT Telecop Co., Ltd. (“KT Telecop”). As of December 31, 2020, our market share of the physical security services market was 34% in terms of the aggregate revenue of these three companies, compared to
S-1 with 55% and KT Telecop with 11%. Our information security services compete with other providers of similar products and services, such as Ahnlab, Inc., SECUi Corp. and Igloo Security, Inc.
With respect to the commercee-commerce business operated by SK PlanetEleven Street Co., Ltd. (“SK Planet”Eleven Street”), 11st, our marketplace business, faces intense competition from various e-commerce providers, including online open marketplaces such as Gmarket, Auction and Interpark and online social commerce operators such as Coupang, Ticket MonsterGmarket, Auction and Wemakeprice.Interpark. We also face competition from leading online and mobile search and communication platform companies with e-commerce operations, including NAVER and Kakao, as well as traditional retailers with online and mobile shopping portals such as SSG.com and Lotte.com, home shopping providers with online and mobile shopping portals such as CJ Mall by CJ O Shopping, GS Shop by GS Homeshopping and Hyundai Hmall by Hyundai Homeshopping, and various
online marketplaces for specific consumer segments or product groups. Our television shopping (“T-commerce”) business, SK stoa, primarily competes with other home shopping providers such as those listed above, as well as with various e-commerce providers and traditional retailers. The industryindustries in which 11st competes isand SK stoa compete are evolving rapidly and isare intensely competitive, and we face a broad array of competitors domestically and increasingly, internationally.
Our ability to compete successfully in all of the businesses thatin which we operate will depend on our ability to anticipate and respond to various competitive factors affecting the respective industries, including new services that may be introduced, changes in consumer preferences, economic conditions and discount pricing strategies by competitors.
Inability to successfully implement or adapt our network and technology to meet the continuing technological advancements affecting the wireless telecommunications industry will likely have a material adverse effect on our financial condition, results of operation, cash flows and business.
The telecommunications industry has been characterized by continual improvement and advances in technology, and this trend is expected to continue. We and our competitors have continually implemented technology upgrades from our basic code division multiple access (“CDMA”) network to our wideband code division multiple access (“WCDMA”) network, and subsequently to LTE and 5G technologies. Our business could be harmed if we fail to implement, or adapt to, future technological advancements in the telecommunications sector in a timely manner, such as the continued implementation of 5G technology. We commencedlaunched wireless service plans using the 5G network in April 2019 following the commencement of sales of the first 5G-compatible smartphones, and we are in the process of expanding our 5G network coverage, focusing on major commercial LTE services in July 2011 at the same time with LG U+, while KT commenced its commercial LTE services in January 2012. In June 2013, we commenced providing commercial LTE-A services using carrier aggregation technology which combines spectrum frequencies to improve data transmission speeds, and in June 2014, we launched wideband LTE-A services of up to 225 Mbps and expanded coverage nationwide in 2014.
In December 2014, we commenced tri-band LTE-A services, which bundles three different bandwidths to allow faster network service at speeds of up to 300 Mbps in Seouldistricts and other densely-populated areas in the Seoul metropolitan areas. Since then, we have expanded coverage nationwidearea and as of December 31, 2015, the nationwide geographic coverage percentage of our tri-band LTE-A service was approximately 51.9% according to the MSIP.other cities. KT and LG U+ have also launched similar LTE-A services around the same time as us.Therolled out their respective 5G wireless service plans in April 2019. The more successful operation of an LTEa 5G network or development of improved LTE5G technology by a competitor, including better market acceptance of a competitor’s LTE5G services, could materially and adversely affect our existing wireless telecommunications businesses as well as the returns on future investments we may make in our LTE5G network or our other businesses. For a more detailed description of our backbone networks, see “Item 4.B. Business Overview — Cellular Services — Digital Wireless Network.”
Our business could also be harmed if we fail to implement, or adapt to, future technological advancements in the telecommunications sector in a timely manner, such as the implementation of 5G technology. In addition to introducing new technologies and offerings, we must phase out outdated and unprofitable technologies and services. For example, as of January 2019, we discontinued our wireless broadband Internet access (“WiBro”) services, and we also terminated our second generation CDMA wireless services in July 2020. If we are unable to do so on a cost-effective basis, our results of operations could be adversely affected.
Implementation of LTEnew wireless technology hasand enhancement of existing wireless technology have required, and may continue to require, significant capital and other expenditures, which we may not recoup.
We have made, and intend to continue to make, capital investments to develop, launch and enhance our LTE service, including launching LTE-A services.wireless service. In 2015, 20142020, 2019 and 2013,2018, we spent Won 1,022.71,878.6 billion, Won 1,357.22,514.3 billion and Won 1,439.41,735.6 billion, respectively, in capital expenditures to build and enhance our wireless networks.Our continued implementation and expansion of 5G services, which use a higher frequency spectrum than our LTE network. services, will require additional cell sites and other infrastructure, which may result in an increase in our capital expenditures in the future.We also plan to make further capital investments related to our LTE and LTE-Awireless services in the future.future, including services that can potentially leverage our 5G network. In addition, we plan to continue maintaining our LTE network, which we expect will continue to be used broadly by our subscriber base during the near future, as we and our competitors
continue to build up 5G networks and services and wireless service users gradually migrate to the 5G network over time. Our wireless technology-related investment plans are subject to change, and will depend, in part, on market demand for LTE5G and LTE-ALTE services, the competitive landscape for provision of such services and the development of competing technologies. There may not be sufficient demand for services based on our latest wireless technologies, as a result of competition or otherwise, to permit us to recoup or profit from our wireless technology-related capital investments.
Our growth strategy callsbusinesses are subject to extensive Government regulation and any change in Government policy relating to the telecommunications industry could have a material adverse effect on our results of operations, financial condition and cash flows.
Most of our businesses are subject to extensive governmental supervision and regulation.
Rate Regulation. The Government has periodically reviewed the rates charged by wireless telecommunications service providers and has, from time to time, released public policy guidelines or suggested rate reductions. Although these guidelines or suggestions were not binding, we have implemented some rate reductions in response to them. For example, under the MDDIA, wireless telecommunications service providers are obliged to provide certain benefits, such as discounted rates, to subscribers who subscribe to their service without receiving subsidies. In June 2017, the State Affairs Planning Advisory Committee of Korea announced that it would encourage wireless telecommunications service providers, including us, to increase the applicable discount rate offered to subscribers from 20% to 25%, which we adopted in September 2017, and to offer additional discounts to low income customers, including those on government welfare programs and senior citizen recipients of the basic pension, which we implemented in December 2017 and July 2018, respectively. See “Item 4.B. Business Overview — Law and Regulation — Rate Regulation” and “Item 5.A. Operating Results — Overview — Rate Regulations.” Such discounts have contributed to a decrease in the monthly revenue per subscriber of our wireless telecommunications services. See “Item 5.A. Operating Results — Overview — Decrease in Monthly Revenue per Subscriber.” The Government may suggest other rate reductions in the future, including more affordable subscription plans for 5G wireless services, and any further rate reductions we make in response to such suggestion may adversely affect our results of operations.
Technology Standards. The Government also plays an active role in setting the timetable and quality standards for the adoption and implementation of new technologies to be used by telecommunications operators in Korea. For example, the Government provided such guidance in connection with the introduction of LTE and 5G technologies in the past. The Government may provide similar guidance or recommendations in connection with the adoption and implementation of technologies to be used in future telecommunications services, and it is possible that adherence to such guidance or recommendations promoted by the Government in the future may not provide the best commercial returns for us.
Frequency Allocation. The Government sets the policies regarding the use of frequencies and allocates the spectrum of frequencies used for wireless telecommunications. See “Item 4.B. Business Overview — Law and Regulation — Frequency Allocation.” The reallocation of the spectrum to our existing competitors could increase competition among wireless telecommunications service providers, which may have an adverse effect on our business.
MVNOs. Pursuant to the Telecommunications Business Act, certain wireless telecommunications service providers designated by the MSIT, which included only us, were required to lease their networks or allow use of their networks (collectively, a “wholesale lease”) to other network service providers, such as an MVNO, that have requested such a wholesale lease in order to provide their own services using the leased networks until September 2022. Currently, 14 MVNOs provide wireless telecommunications services using the networks leased from us. We believe that leasing a portion of our bandwidth capacity to an MVNO impairs our ability to use our bandwidth in ways that would generate maximum revenues and strengthens our MVNO competitors by granting them access and lowering their costs to enter into and operate in our markets. Accordingly, our profitability has and may continue to be adversely affected.
Interconnection. Our wireless telecommunications services depend, in part, on our interconnection arrangements with domestic and international fixed-line and other wireless networks. Our interconnection
arrangements, including the interconnection rates we pay and interconnection rates we charge, affect our revenues and operating results. The MSIT determines the basic framework for interconnection arrangements, including policies relating to interconnection rates in Korea. The KCC, which determined such basic framework under the previous Government, changed the basic framework for interconnection arrangements several times. We cannot assure you that we will not be adversely affected by the MSIT’s interconnection policies and future changes to such policies. See “Item 4.B. Business Overview — Interconnection — Domestic Calls.”
Regulatory Action. The MSIT may revoke our licenses or suspend any of our businesses if we fail to comply with its rules, regulations and corrective orders, including the rules restricting beneficial ownership and control or any violation of the conditions of our licenses. Alternatively, in lieu of suspension of our business, the KCC may levy a monetary penalty of up to 3.0% of the average of our annual revenue for the preceding three fiscal years. For information about the penalties imposed on us for violating Governmental regulations, see “Item 8.A. Consolidated Statements and Other Financial Information — Legal Proceedings — KCC Proceedings.” Such penalties, which may include the revocation of cellular licenses, suspension of business or imposition of monetary penalties by the KCC, could have a material adverse effect on our business. We believe we are currently in compliance with the material terms of all our cellular licenses.
We are subject to additional regulations as a result of our dominant market position in the wireless telecommunications sector, which could harm our ability to compete effectively.
The Government endeavors to promote competition in the Korean telecommunications markets through measures designed to prevent a dominant service provider from exercising its market power and deterring the emergence and development of viable competitors. We have been designated by the MSIT as the “dominant network service provider” in respect of our wireless telecommunications business. As such, we are subject to additional regulations to which certain of our competitors are not subject. For example, beginning in December 2020, the MSIT has fifteen days to object to any new rates and terms of service reported by us, compared to the prior regulations that required us to obtain prior approval from the MSIT to raise our existing rates or introduce new rates. See “Item 4.B. Business Overview — Law and Regulation — Rate Regulation.” The MSIT could also require us to charge higher usage rates than our competitors for future services or to take certain actions earlier than our competitors, as when the KCC required us to introduce number portability earlier than our competitors, KT and LG U+.
We also qualify as a “market-dominating business entity” under the Fair Trade Act, which subjects us to additional regulations and we are prohibited from engaging in any act of abusing our position as a market-dominating entity. See “Item 4.B. Business Overview — Law and Regulation — Competition Regulation.” The additional regulations to which we are subject has affected our competitiveness in the past and may materially hurt our profitability and impede our ability to compete effectively against our competitors in the future.
The ongoing global pandemic of a new strain of coronavirus (“COVID-19”) and any possible recurrence of other types of widespread infectious diseases may adversely affect our business, financial condition or results of operations.
COVID-19, an infectious disease caused by severe acute respiratory syndrome coronavirus 2 that was first reported to have been transmitted to humans in late 2019 and has since spread globally, has materially and adversely affected the global economy and caused significant volatility in global financial markets to date as well as disrupted our business operations. The World Health Organization declared COVID-19 as a pandemic in March 2020. We have implemented remote work arrangements for most of our employees at our headquarters and certain other locations from time to time in light of the Government’s recommendation for social distancing. In addition, the travel restrictions imposed by governments in response to the COVID-19 pandemic has resulted in a decrease in revenue from roaming services, and the pandemic has also contributed to lower customer demand for new wireless devices, resulting in a decrease in our wireless device sales revenue. While we do not believe that the COVID 19 pandemic and the resulting temporary remote work arrangements or such decreases in revenue have had a material adverse impact on our business to date,a prolonged outbreak of COVID-19 may result in further disruption in the normal operations of our business, including implementation of further work arrangements requiring employees to work remotely and/or temporary closures of our facilities, which may, among others, lead to a reduction in labor
productivity, as well as further decrease in revenue from roaming services or wireless device sales.
Other risks associated with a prolonged outbreak of COVID-19 or other types of widespread infectious diseases include:
an increase in unemployment among, and/or a decrease in disposable income of, our customers, who may not be able to meet payment obligations or otherwise choose to decrease their spending levels, which in turn may decrease demand for some of our products and services or cause an increase in delinquent subscriber accounts;
a slowdown in the rate of subscriber migration to our 5G service, which generally entails higher-priced subscription plans and wireless devices;
disruptions in operations, and/or a decrease in the demand for products and services, of our corporate customers, which in turn may decrease such customers’ demand for our services and products;
service disruptions, outages and performance problems due to capacity constraints caused by an overwhelming number of people accessing our services simultaneously;
disruptions in supply of mobile handsets or telecommunications equipment from our vendors as well as in the installation of our network infrastructure;
unstable global and Korean financial markets, which may adversely affect our ability to meet capital funding needs on a timely and cost-effective basis;
a decrease in the fair value of our investments in new businessescompanies that may be adversely affected by the pandemic; and regions, including businesses
depreciation of the Won against major foreign currencies, which in turn may increase the cost of imported equipment necessary for expansion and regions in which we have limited experience.enhancement of our telecommunications infrastructure.
It is not possible to predict the duration or full magnitude of harm from COVID-19.
We seek growth through investments in new businesses. While we believe In the event that entering into new businesses enables us to diversifyCOVID-19 or other types of widespread infectious diseases cannot be effectively and timely contained, our business, portfolio, wefinancial condition and results of operations may be exposed to additional risks. For example,adversely affected.
Declines in February 2012, we acquired a 21.1%the market value of our equity stakeholdings in SK Hynix and the results of operations of SK Hynix could have a material adverse effect on the market price of our common shares and American Depositary Shares (“ADSs”) as well as our results of operation.
As of December 31, 2020, we held a 20.1% equity interest in SK Hynix, which is listed on the KRX KOSPI Market of the Korea Exchange (the “KRX KOSPI Market”) and is one of the world’s largest memory-chip makers by revenue,
for an aggregate purchase price of approximately Won 3.4 trillion, and became its largest shareholder. From time to time, the memory semiconductor industry has experienced significant and sometimes prolonged downturns, which often occur in connection with a deterioration of global economic conditions, and is subject to intense competition. For example, SK Hynix and its subsidiaries, on a consolidated basis, incurred net losses of Won 158.8 billion and Won 56.0 billion in 2012 and 2011, respectively, primarily due to increased supply and weak demand for semiconductor products. Although the memory semiconductor industry has recovered since then and SK Hynix has been recordingreporting net profits since 2013, the industry is subject to cyclical fluctuations, and we expect that there may be future downturns in the industry. Uncertainty in the global economy has increased in recent years, especially with global financial and capital markets experiencing substantial volatility in light of the ongoing global COVID-19 pandemic. Accordingly, SK Hynix’s operating results would be adversely affected if it fails to compete successfully or decrease manufacturing costs at an adequate level. Since ourOur share of any net losses incurred by SK Hynix would be reflected in our income statement as share of losses related to investments in associates, any significant lossassociates.
Accordingly, declines in the market value of our equity holdings in SK Hynix and the results of operations of SK Hynix could have a material adverse effect on the market price of our common shares and ADSs as well as our results of operations.operation.
We may fail to successfully complete, integrate or realize the anticipated benefits of our new acquisitions, joint ventures or other strategic alternatives or corporate reorganizations, and such transactions may negatively impact our business.
We believecontinue to seek opportunities to develop new businesses that we mustbelieve are complementary to our existing product and service portfolio and expand our global business through selective acquisitions. We also continue to makeseek ways to optimize our corporate structure to maximize the value of our traditional businesses on the one hand and newly developed businesses on the other. Accordingly, we are often engaged in evaluating potential transactions and other strategic alternatives as well as corporate reorganizations, some of which may be significant in size.
For example, we completed the Tbroad Merger in April 2020 and became the third-largest pay TV provider in Korea in terms of number of subscribers as of December 31, 2020. In addition, in June 2019, we acquired a 34.6% interest in Incross Co., Ltd. (“Incross”), a digital advertising company, for an aggregate purchase price of Won 53.7 billion, in light of potential synergies with our media and commerce businesses. Furthermore, in order to strengthen our security business and explore potential synergies with our wireless and fixed-line business portfolio, we acquired a 55.0% interest in Life & Security Holdings Co., Ltd. (“LSH”), which owned 100% of ADT CAPS Co., Ltd. (“Former ADT CAPS”), a leading Korean physical security service company, and two sister companies, CAPSTEC Co., Ltd. and ADT SECURITY Co., Ltd. (which subsequently merged with and into Former ADT CAPS), for Won 696.7 billion in October 2018; a 100% interest in SK Infosec Co., Ltd. (“SK Infosec”), Korea’s leading information security company, in a share exchange transaction pursuant to which we issued 1,260,668 treasury shares with an aggregate book value of Won 281.2 billion in exchange for all of the outstanding common shares of SK Infosec in December 2018 from SK Inc. (which changed its English name from SK Holdings Co., Ltd. to SK Inc. as of March 29, 2021), our largest shareholder; and additional shares of id Quantique SA (“id Quantique”), a leading provider of quantum cryptography solutions for data security based in Switzerland, with Won 55.2 billion in cash and Won 5.7 billion in contribution-in-kind in 2018 and through our participation in its capital increases in 2019 and 2020, as a result of which our equity interest in id Quantique was 68.1% as of December 31, 2020. We have subsequently combined LSH, Former ADT CAPS and SK Infosec into a single entity through a series of mergers that were completed in March 2021, and the surviving entity, SK Infosec, changed its name to ADT CAPS Co., Ltd. (“ADT CAPS”) and has become the principal consolidated subsidiary that operates our security business.
We have also pursued other strategic alternatives, such as forming a strategic alliance in October 2019 with Kakao Corp. (“Kakao”), a Korean Internet company and the operator of Korea’s most popular mobile messaging application, to collaborate in the information and communication technologies (“ICT”) sector through the sale of 1,266,620 of our treasury shares to Kakao, representing a 1.6% interest, for approximately Won 300.0 billion and a concurrent issuance by Kakao of 2,177,401 of its shares, representing a 2.5% interest, to us for approximately Won 302.3 billion.In addition, in September 2019, in furtherance of our efforts to enhance the competitiveness of our media business and to promote its future growth, we acquired a minority equity stake in Content Wavve Co., Ltd. (formerly known as Content Alliance Platform Inc.) (“Content Wavve”), a joint venture established by the three major terrestrial broadcasters in Korea that operated the mobile over-the-top (“OTT”) service “POOQ,” by investing Won 90.9 billion in cash and transferring our former mobile OTT service business “oksusu” to Content Wavve. Content Wavve combined oksusu and POOQ to launch a new integrated mobile OTT service “wavve” in September 2019. As of December 31, 2020, we held 30.0% of the total outstanding shares of Content Wavve.In addition, Eleven Street is currently in discussions with Amazon.com, Inc. regarding a potential partnership.For a more detailed description of our recent investments to build, develop and broaden our existing businesses. Entering intoin new businesses, see “Item 5.B. Liquidity and regionsCapital Resources — Capital Requirements — Investments in New Growth Businesses.”
Furthermore, in December 2020, we spun off our mobility business into a new wholly-owned subsidiary, T map Mobility Co., Ltd. (“T Map Mobility”), in order to enhance its competitiveness and promote its future growth, and we have also formed a strategic partnership with Uber Technologies, Inc. (“Uber”) pursuant to which Uber has invested approximately US$50 million in T Map Mobility and approximately US$100 million in UT LLC, a joint venture formed in April 2021 between T Map Mobility and Uber in which we have limited experience may require ushold a 49.0% interest. Through UT LLC, we will launch a taxi hailing service that integrates our affiliated taxi driver network and mapping and AI technologies with Uber’s ride hailing technology. See “Item 4.B. Business Overview — Other Businesses — Miscellaneous Businesses — Mobility Business.”
In order to make substantial investments,pursue enhancement of shareholder value and despiteacceleration of our growth, we are currently considering a potential corporate restructuring whereby we would split into a wireless and fixed-line telecommunications company (including our interest in, among others, SK Broadband) and a holding company that would hold interests in semiconductor and new ICT businesses (including our interest in, among others, SK Hynix, ADT CAPS, Eleven Street and T Map Mobility) (the “Spin-off Company”). Such restructuring would be implemented through a horizontal spin-off transaction (“injeok bunhal”) under Korean law, whereby the Spin-off Company would be newly incorporated and our existing shareholders would receive shares of the Spin-off Company on a pro rata basis. Further decisions regarding such investments,potential spin-off, if any, are expected to be made in the first half of 2021.
While we are hoping to benefit from a range of synergies from our recent or future acquisitions and corporate reorganizations as well as develop new growth engines for our business, we may still be unsuccessful in these efforts to expand and diversify. We might not be able to recoupsuccessfully complete or profit from our investments inintegrate such acquisitions, new businesses or reorganized entities and regions.may fail to realize the expected benefits in the near term, or at all. For example, in June 2019, we disposed of our entire interest in our consolidated subsidiaries Shopkick Management Company, Inc. (“SMC”) and Shopkick, Inc. (“Shopkick”), a wholly-owned subsidiary of SMC which operates “shopkick,” a mobile reward points-based in-store shopping application, which we had acquired in October 2014, following a prolonged period of unprofitability of the shopkick business. Previously in 2018, we also recognized Won 153.4 billion and Won 52.4 billion of impairment losses for goodwill and intangible assets, respectively, in connection with Shopkick. In addition, when we enter into thesenew businesses and regions with partners through joint ventures or other strategic alliances, we and those partners may have disagreements with respect to strategic directions or other aspects of business, or may otherwise be unable to coordinate or cooperate with each other, any of which could materially and adversely affect our operations in such businesses and regions.
Webusinesses. Our business may be negatively impacted if we fail to successfully completeintegrate or integrate our new acquisitions and joint ventures and may fail to realize the anticipated benefits.benefits of such transactions.
We continue to seek opportunities to develop new businesses that we believe are complementary to our existing product and service portfolio and expand our global business through selective acquisitions.
On November 2, 2015, we entered into a share purchase agreement with CJ O Shopping Co., Ltd. (“CJ O Shopping”) to acquire a 30.0% interest in CJ HelloVision, a fixed-line cable TV broadcast service provider, for an aggregate purchase price of Won 500.0 billion. Upon the acquisition of CJ HelloVision, SK Broadband will be merged with and into CJ HelloVision, after which we will have a 78.3% equity stake in the merged company. The acquisition and subsequent merger are subject to certain closing conditions, including obtaining regulatory approval from the relevant authorities. We may be delayed in, or fail to, obtain the necessary regulatory approvals and in such case, we may not be able to complete the acquisition and subsequent merger as planned.
In 2014 and 2015, we acquired an 83.9% interest in Neosnetworks Co., Ltd. (“Neosnetworks”), a provider of residential and small business electronic security and other related alarm monitoring services, for an aggregate purchase price of approximately Won 64.0 billion and a 49.0% equity stake in Iriver Ltd. (“Iriver”), a manufacturer of digital audio players and other portable media devices, for an aggregate purchase price of approximately Won 54.5 billion. In 2014, a 95.2%-owned subsidiary of SK Planet acquired a 100.0% ownership interest in Shopkick Inc. (“Shopkick”), the developer of “shopkick,” a mobile shopping application that checks in and rewards customers that arrive at a participating retail store in order to penetrate the mobile commerce market in the United States. For a more detailed description of our recent investments in new businesses, see “Item 5.B. Liquidity and Capital Resources — Capital Requirements — Investments in New Businesses and Global Expansion and Other Needs.”
While we are hoping to benefit from a range of synergies from the acquisitions as well as develop new growth engines for our business, we may not be able to successfully complete or integrate such acquisitions or new businesses and may fail to realize the expected benefits in the near term, or at all.
Due to the existing high penetration rate of wireless telecommunications services in Korea, we are unlikely to maintain our subscriber growth rate, which could adversely affect our results of operations.
According to data published by the MSIPMSIT and the historical population data published by the Ministry of the Interior and Safety, the penetration rate for the Korean wireless telecommunications industry as of December 31, 20152020 was approximately 114.4%134.2%, which is relatively high compared to many industrialized countries. Therefore, we expect that the penetration rate for wireless telecommunications service in Korea will remain relatively stable. As a result
of the already high penetration rate in Korea for wireless telecommunications services coupled with our leading market share, we expect our subscriber growth rate to decrease.Slowed growth in the penetration rate without a commensurate increase in revenues through the introduction of new services and increased use of our services by existing subscribers would likely have a material adverse effect on our financial condition, results of operations and cash flows.
Our business and results of operations may be adversely affected if we fail to acquire adequate additional spectrumfrequency usage rights or use our bandwidth efficiently to accommodate subscriber growth and subscriber usage.
One of the principal limitations on a wireless network’s subscriber capacity is the amount of frequency spectrum available for use by the network. We currently use 10 MHzhave acquired a number of frequency usage rights to secure bandwidth in the 800 MHz spectrumcapacity to provide our broad range of services, for our CDMA services, 20 MHz of bandwidth in the 2.1 GHz spectrum for our WCDMA services, 40 MHz of bandwidth in the 2.1 GHz spectrum, 20 MHz of bandwidth in the 800 MHz spectrum and 35 MHz of bandwidth in the 1.8 GHz spectrum for our LTE services,which we typically make an initial payment as well as 27 MHzpay usage fees during the license period. We made frequency usage right fee payments of spectrumWon 136.6 billion in 2020, Won 133.1 billion in 2019 and Won 151.7 billion in 2018. For more information regarding the 2.3 GHz bandvarious bandwidths that we use and the usage right fees for such bandwidths, see “Item 4.B. Business Overview — Law and Regulation — Frequency Allocation,” “Item 5.B. Liquidity and Capital Resources — Capital Requirements — Capital Expenditures” and note 17 of the notes to our wireless broadband Internet (“WiBro”) services.consolidated financial statements.
The growth of our wireless data businesses has been a significant factor in the increased utilization of our bandwidth, since wireless data applications are generally more bandwidth-intensive than voice services. In particular, the increasing popularity of smartphones and data intensive applications among smartphone users has recently been a major factor for the high utilization of our bandwidth. Thisbandwidth in recent years. Although such trend has been offset in
part by the implementation of new technologies such as our tri-band LTE-A technology, which enablesthat enable more efficient usage of our bandwidth, than was possible on our basic LTE network. However, ifwe expect that the current trend of increased data transmission use by our subscribers continues, orwill accelerate in the near future as more subscribers migrate to our 5G network and the volume and sophistication of the multimedia content we offer through our wireless data services substantially grows, our bandwidth capacity requirements are likelycontinue to increase. grow in the 5G environment.While we believe that we can address the capacity constraint issue through system upgrades and efficient allocation of bandwidth, inability to address such capacity constraints in a timely manner may adversely affect our business, results of operations, financial position and cash flows. In the event we are unable to maintain sufficient bandwidth capacity, our subscribers may perceive a general slowdown of wireless telecommunications services. Growth of our wireless telecommunications business will depend in part upon our ability to effectively manage our bandwidth capacity and to implement efficiently and in a timely manner new bandwidth-efficient technologies if they become available. We cannot assure you that bandwidth constraints will not adversely affect the growth of our wireless telecommunications business.
We intendIn November 2020, the MSIT announced plans to participatereallocate a total of 310 MHz of frequency bandwidths whose usage terms are due to expire in the frequency bandwidth auctions2021 to KT, LG U+ and us, 95 MHz of which will be allocated to us. The final consideration to be heldpaid by us for such reallocated bandwidths will depend on the MSIP in 2016number of 5G cell sites constructed by us until 2022, and aimthe aggregate consideration to acquire bandwidths that are complementarybe paid by KT, LG U+ and us is expected to our existing network.range between approximately Won 3.2 trillion and Won 3.8 trillion. We may be required to pay a substantial amount to acquire additional bandwidth capacity in the future in order to meet increasing bandwidth demand or renew the rights to use our existing bandwidth, and we may not be successful in acquiring the necessary bandwidth to meet such demand at commercially attractive terms or at all, which may adversely affect our financial condition and results of operations.
We rely on key researchers and engineers and senior management, and the loss of the services of any such personnel or the inability to attract and retain them may negatively affect our business.
Our success depends to a significant extent upon the continued service of our research and development and engineering personnel, and on our ability to continue to attract, retain and motivate qualified researchers and engineers. In particular, our focus on leading the market in introducing new services has meant that we must aggressively recruit engineers with expertise in cutting-edge technologies. We also depend on the services of experienced key senior management, and if we lose their services, it would be difficult to find and integrate replacement personnel in a timely manner, or at all.
The loss of the services of any of our key research and development and engineering personnel or senior management without adequate replacement, or the inability to attract new qualified personnel, would have a material adverse effect on our operations.
We need to observe certain financial and other covenants under the terms of our debt instruments, the failure to comply with which would put us in default under those instruments.
Certain of our debt instruments contain financial and other covenants with which we are required to comply on an annual and semi-annual basis. The financial covenants with respect to SK Telecom’s debt instruments include, but are not limited to, a maximum net debt-to-EBITDA ratio of 2.753.50 and a minimum EBITDA-to-totalinterest coverageexpense ratio of 4.00, each as determined on a separate financial statement basis.The debt arrangements also contain negative pledge provisions limiting our ability to provide liens on our assets as well as cross-default and cross-acceleration clauses, which give related creditors the right to accelerate the amounts due under such debt if an event of default or acceleration has occurred with respect to our existing or future indebtedness, or if any material part of our indebtedness or indebtedness of our subsidiaries is capable of being declared payable before the stated maturity date. In addition, such covenants restrict our ability to raise future debt financing.
If we breach our financial or other covenants, our financial condition will be adversely affected to the extent we are not able to cure such breaches or repay the relevant debt.
We may have to make further financing arrangements to meet our capital expenditure requirements and debt payment obligations.
As a network-based wireless telecommunications provider, weWe have had, and expect to continue to have, significant capital expenditure requirements as we continue to build out, maintain and upgrade our networks.networks and invest in businesses that complement our wireless and fixed-line
telecommunication businesses. We spent Won 2,478.83,557.8 billion for capital expenditures in 2015.We2020.We expect to spend a similar amount for capital expenditures in 20162021 compared to 20152020 for a range of projects, including investments to expand and improve and expandour newly implemented 5G network, investments to maintain our LTE network and LTE-A services, investments to improve and expand our Wi-Fi network, investments to develop our IoT solutions and platform services business portfolio, including AI solutions, investments in data infrastructure, investments in research and development of 5G technology, investments in businesses that can potentially leverage our 5G network, and funding for mid- to long-term research and development projects, as well as other initiatives, primarily related to the development of new growth engines,businesses, as well as initiatives related to our ongoing businesses in the ordinary course. If we acquire newIn November 2020, the MSIT announced plans to reallocate a total of 310 MHz of frequency bandwidths whose usage terms are due to expire in the frequency bandwidth auctions2021 to KT, LG U+ and us, 95 MHz of which will be allocated to us. The final consideration to be heldpaid by us for such reallocated bandwidths will depend on the MSIP in 2016, we maynumber of 5G cell sites constructed by us until 2022, and the aggregate consideration to be paid by KT, LG U+ and us is expected to range between approximately Won 3.2 trillion and Won 3.8 trillion. We would be required to spend additional amounts on capital expenditures in connection with building out our networks on such newreallocated bandwidths.
In particular, we continue to make significant capital investments to expand and upgrade our wireless networks in response to growing bandwidth demand by our subscribers. Bandwidth usage by our subscribers has rapidly increased in recent years primarily due to the increasing popularity of smartphones and data intensive applications among smartphone users. If heavy usage of bandwidth-intensive services grows beyond our current expectations, we may need to invest more capital than currently anticipated to expand the bandwidth capacity of our networks or our customers may have a suboptimal experience when using our services. Any of these events could adversely affect our competitive position and have a material adverse effect on our business, financial condition, results of operation and cash flow. For a more detailed discussion of our capital expenditure plans and a discussion of other factors that may affect our future capital expenditures, see “Item 5.B. Liquidity and Capital Resources.Resources — Capital Requirements — Capital Expenditures.”
As of December 31, 2015,2020, we had approximately Won 1,601.82,163.4 billion in contractual payment obligations due in 2016, almost all of2021, which mostly involve repayment of debt obligations.obligations, payments related to lease liabilities and other short-term leases and leases of low-value assets and payments related to frequency licenses. See “Item 5.B. Liquidity and Capital Resources — Contractual Obligations and Commitments.”
We have not arranged firm financing for all of our current or future capital expenditure plans and contractual payment obligations. We have, in the past, obtained funds for our proposed capital expenditure and payment obligations from various sources, including our cash flow from operations as well as from financings, primarily debt and equity financings. Any material adverse change in our operational or financial condition could impact our ability to fund our capital expenditure plans and contractual payment obligations. Still volatile financial market conditions may also curtail our ability to obtain adequate funding. Inability to fund such capital expenditure requirements may have a material adverse effect on our financial condition, results of operations and business. In addition, although we currently anticipate that the capital expenditure levels estimated by us will be adequate to meet our business needs, such estimates may need to be adjusted based on developments in technology and markets. In the event we are unable to meet any such increased expenditure requirements or to obtain adequate financing for such requirements, on terms acceptable to us, or at all, this may have a material adverse effect on our financial condition, results of operations and business.
Termination or impairment of our relationship with a small number of key suppliers for network equipment and for leased lines could adversely affect our results of operations, financial position and cash flows.
We purchase wireless network equipment from a small number of suppliers. To date, we have purchased substantially all of the equipment for our networks from Samsung Electronics Co., Ltd. (“Samsung Electronics”), Ericsson-LG Co., Ltd. (“Ericsson-LG”) and Nokia Siemens Networks B.V.Corporation (“Nokia”). We believe Samsung Electronics currently manufactures approximatelymore than half of the wireless handsets sold to our subscribers. Although other manufacturers sell the equipment we require, sourcing such equipment from other manufacturers could result in unanticipated costs in the maintenance and enhancement of our wireless networks. Inability to obtain the equipment needed for our networks in a timely manner may have an adverse effect on our business, financial condition, results of operations and cash flows.
We cannot assure you that we will be able to continue to obtain the necessary equipment from one or more of our suppliers. Any discontinuation or interruption in the availability of equipment from our suppliers for any reason could have an adverse effect on our results of operations. InabilityIn addition, inability to lease adequate lines at commercially reasonable rates may impact the quality of the services we offer and may also damage our reputation and our business.
Our business relies on technology developed by us, and our business will suffer if we are unable to protect our proprietary rights.
We own numerous patents and trademarks worldwide, and have applications for patents pending in many countries, including Korea, Japan, China and the United States, and in Europe.countries. In addition to active research and development efforts, our success depends in part on our ability to obtain patents and other intellectual property rights covering our services.
We may be required to defend against charges of infringement of patent or other proprietary rights of third parties. Although we have not experienced any significant patent or other intellectual property disputes, we cannot be certain that any significant patent or other intellectual property disputes will not occur in the future. Defending our patent and other proprietary rights could require us to incur substantial expense and to divert significant resources of our technical and management personnel, and could result in our loss of rights to employ certain technologies to provide services.
Malicious and abusive Internet practices could impair our services.services and we may be subject to significant legal and financial exposure, damage to our reputation and a loss of confidence of our customers.
Our business involves the storage and transmission of large amounts of confidential information, and cybersecurity breaches expose us to a risk of loss of this information, which may lead to improper use or disclosure of such information, ensuing potential liability and litigation, any of which could harm our reputation and adversely affect our business.
Our cybersecurity measures may also be breached due to employee error, malfeasance or otherwise. Instituting appropriate access controls and safeguards across all our information technology infrastructure is challenging. Furthermore, outside parties may attempt to fraudulently induce employees to disclose sensitive information in order to gain access to our data or our customers’ data or accounts, or may otherwise obtain access to such data or accounts. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our cybersecurity occurs or the market perception of the effectiveness of our cybersecurity measures is harmed, we may incur significant legal and financial exposure, including legal claims and regulatory fines and penalties, damage to our reputation and a loss of confidence of our customers, which could have an adverse effect on our business, financial condition and results of operations.
In addition, our wireless and fixed-line subscribers increasingly utilize our network to access the Internet and, as a consequence, we or they may become victim to common malicious and abusive Internet activities, such as unsolicited mass advertising (i.e.(i.e., “spam”), hacking of personal information and dissemination of viruses, worms and other destructive or disruptive software. These activities could have adverse consequences on our network and our customers, including degradation of service, excessive call volume to call centers and damage to our or our customers’ equipment and data. Significant incidents could lead to customer dissatisfaction and, ultimately, loss of customers or revenue, in addition to increased costs to us to service our customers and protect our network. For example, in July 2011, there was a leak of personal information of subscribers of websites operated by SK Communications Co., Ltd. (“SK Communications”), our consolidated subsidiary. Various lawsuits have been filed against SK Communications alleging that the leak was caused by its poor management of subscribers’ personal information. With respect to three of the lawsuits for which final judgments have been rendered, the relevant courts have rendered judgments in favor of SK Communications. As of December 31, 2015, twelve of the lawsuits, seeking damages of approximately Won 0.8 billion in aggregate, were pending at various district courts, various high courts and the Supreme Court of Korea. Any significant loss of our subscribers or revenue due to incidents of malicious and abusive Internet practices or significant increase in costs of serving those subscribers could adversely affect our business, financial condition and results of operations.
Labor disputes may disrupt our operations.
Although we are not experiencinghave never experienced any significant labor disputes, there can be no assurance that we will not experience labor disputes in the future, including protests and strikes, which could disrupt our business operations and have an adverse effect on our financial condition and results of operation.
Every two years, the union and management negotiate and enter into a new collective bargaining agreement that has a two-year duration, which is focused on employee benefits and welfare. Employee wages are separately negotiated on an annual basis. Although we consider our relations with our employees to be good, there can be no assurance that we will be able to maintain such a working relationship with our employees and will not experience labor disputes resulting from disagreements with the labor union in the future.
Our businesses are subject to extensive Government regulation and any change in Government policy relating to the telecommunications industry could have a material adverse effect on our results of operations, financial condition and cash flows.
Most of our businesses are subject to extensive governmental supervision and regulation. When the current president Park Geun-hye took office in February 2013, she announced that the Government will work toward reducing telecommunications service charges and promoting transparency in the decision making of telecommunications service providers. Accordingly, the Government has set detailed policy objectives to (1) gradually reduce and abolish initial subscription fees by 2015, (2) expand MVNO and mobile VoIP service, (3) intensify regulations on handset subsidies and (4) construct a data-based rate system.
Pursuant to the above policy objectives, the MSIP discussed with us, KT and LG U+ gradually reducing and abolishing initial subscription fees by 2015. Accordingly, we gradually reduced our initial subscription fees by 40% in August 2013 and again by an additional 50% in August 2014. Starting in November 2014, we ceased charging initial subscription fees to new subscribers. KT and LG U+ also gradually reduced the initial subscription fees that they charge and have ceased charging initial subscription fees to new subscribers as of March 31, 2015. Similarly, the Government has periodically reviewed the rates charged by wireless telecommunications service providers and has, from time to time, suggested rate reductions. Although these suggestions were not binding, we have implemented some rate reductions in response to such recommendations. The MSIP may suggest other rate reductions in the future and any further rate reductions we make in response to such suggestion may adversely affect our results of operations.
In furtherance of the above policy objectives, the Government also enacted the MDDIA, which became effective on October 1, 2014. The MDDIA was enacted for the purpose of establishing a transparent and fair distribution practice for mobile devices, and it limits the amount of subsidies a wireless telecommunications service provider can provide to subscribers in order to prevent excessive competition among wireless telecommunications service providers. Pursuant to the MDDIA, wireless telecommunications service providers are prohibited from (i) unfairly providing discriminatory subsidies based on criteria such as type of subscription, subscription plan and characteristics of the subscriber, (ii) providing subsidies exceeding a maximum limit established by the KCC (such limit to be determined between Won 250,000 and Won 350,000, which may be adjusted every six months, with the current limit set at Won 330,000, effective as of April 24, 2015) for the purchase of mobile phone models that were launched within the last 15 months, and (iii) entering into a separate agreement with subscribers imposing obligations to use a specific subscription plan as a condition for providing subsidies. In addition, under the MDDIA, wireless telecommunications service providers are obliged to provide certain benefits, such as discounted rates, to subscribers who subscribe to their service without receiving subsidies. It is difficult to estimate the impact the MDDIA will have on our results of operations as we believe the imposition of the MDDIA may affect the wireless telecommunications industry in various ways that we cannot fully predict, including the impact on our competitors and consumer behavior, which may have an adverse impact on our business. See “Item 5. Operating and Financial Review and Prospects — Item 5.A. Operating Results — Overview — New Regulations Relating to Handset Subsidies.”
The Government also plays an active role in the selection of technology to be used by telecommunications operators in Korea. For example, the MIC adopted the WCDMA and CDMA2000 technologies as the only standards available in Korea for implementing third generation services. The MSIP may impose similar restrictions on the choice of technology used in future telecommunications services, and it is possible that technologies promoted by the Government in the future may not provide the best commercial returns for us.
Furthermore, the Government sets the policies regarding the use of frequencies and allocates the spectrum of frequencies used for wireless telecommunications. See “Item 4.B. Business Overview — Law and Regulation —
Competition Regulation — Frequency Allocation.” The reallocation of the spectrum to our existing competitors could increase competition among wireless telecommunications service providers, which may have an adverse effect on our business.
Pursuant to the Telecommunications Business Act, certain wireless telecommunications service providers designated by the MSIP, which currently include only us, are required to lease their networks or allow use of their networks (collectively, “wholesale lease”) to other network service providers, such as an MVNO, that have requested such wholesale lease in order to provide their own services using the leased networks.To date, thirteen MVNOs have commenced providing wireless telecommunications services using the networks leased from us.We believe that leasing a portion of our bandwidth capacity to an MVNO would impair our ability to use our bandwidth in ways that would generate maximum revenues and would strengthen our MVNO competitors by granting them access and lowering their costs to enter into our markets. Accordingly, our profitability may be adversely affected.
Our wireless telecommunications services depend, in part, on our interconnection arrangements with domestic and international fixed-line and other wireless networks. Our interconnection arrangements, including the interconnection rates we pay and interconnection rates we charge, affect our revenues and operating results. The MSIP determines the basic framework for interconnection arrangements, including policies relating to interconnection rates in Korea. The KCC, which determined such basic framework under the previous Government, changed the basic framework for interconnection arrangements several times. We cannot assure you that we will not be adversely affected by the MSIP’s interconnection policies and future changes to such policies. See “Item 4.B. Business Overview — Interconnection — Domestic Calls.”
In addition, the MSIP may revoke our licenses or suspend any of our businesses if we fail to comply with its rules, regulations and corrective orders, including the rules restricting beneficial ownership and control or any violation of the conditions of our licenses. Alternatively, in lieu of suspension of our business, the MSIP may levy a monetary penalty of up to 3.0% of the average of our annual revenue for the preceding three fiscal years. The KCC had the same authority in the previous Government and exercised such authority to suspend our business and impose fines on us. For information about the penalties imposed on us for violating Governmental regulations, see “Item 8.A. Consolidated Statements and Other Financial Information — Legal Proceedings — KCC and MSIP Proceedings.” Such penalties, which may include the revocation of cellular licenses, suspension of business or imposition of monetary penalties by the MSIP, could have a material adverse effect on our business. We believe we are currently in compliance with the material terms of all our cellular licenses.
We are subject to additional regulations as a result of our dominant market position in the wireless telecommunications sector, which could harm our ability to compete effectively.
The Government endeavors to promote competition in the Korean telecommunications markets through measures designed to prevent a dominant service provider from exercising its market power and deterring the emergence and development of viable competitors. We have been designated by the MSIP as the “dominant network service provider” in respect of our wireless telecommunications business. As such, we are subject to additional regulations to which certain of our competitors are not subject. For example, under current Government regulations, we must obtain prior approval from the MSIP to raise our existing rates or introduce new rates. See “Item 4.B. Business Overview — Law and Regulation — Competition Regulation — Rate Regulation.” The MSIP could also require us to charge higher usage rates than our competitors for future services or to take certain actions earlier than our competitors, as when the KCC required us to introduce number portability earlier than our competitors, KT and LG U+.
We also qualify as a “market-dominating business entity” under the Fair Trade Act, which subjects us to additional regulations, including the application of varied interconnection rates. For more information about the interconnection rates applicable to us and our competitors, see “Item 4.B. Business Overview — Interconnection.”
The additional regulations to which we are subject has affected our competitiveness in the past and may materially hurt our profitability and impede our ability to compete effectively against our competitors in the future.
Concerns that radio frequency emissions may be linked to various health concerns could adversely affect our business and we 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 other transmission equipment have adversely affected share prices of some wireless telecommunications companies in the United States. In May 2011, the International Agency for Research on Cancer (the “IARC”), a part of the World Health Organization, announced that it has classified radiofrequency electromagnetic fields associated with wireless phone use as possibly carcinogenic to humans, based on an increased risk for glioma, a malignant type of brain cancer. The IARC conducts research on the causes of human cancer and the mechanisms of carcinogenesis and aims to develop scientific strategies for cancer control. We cannot assure you that these health concerns will not adversely affect our business. Several class action and personal injury lawsuits have been filed in the United States against several wireless phone manufacturers and carriers, asserting product liability, breach of warranty and other claims relating to radio transmissions to and from wireless phones. Certain of these lawsuits have been dismissed. We could be subject to liability or incur significant costs defending lawsuits brought by our subscribers or other parties who claim to have been harmed by or as a result of our services. In addition, the actual or perceived risk of wireless telecommunications devices could have an adverse effect on our business by reducing the number of our subscribers or the usage per subscriber.
Our ability to deliver services may be disrupted due to a systems failure, shutdown in our networks or natural disasters.disaster.
Our services are currently carried through our wireless and fixed-line networks, which could be vulnerable to damage or interruptions in operations due to fires, floods, earthquakes, power losses, telecommunication failures, network software flaws, unauthorized access, computer viruses and similar events.events, which may occur from time to time. The occurrence of any of these events could impact our ability to deliver services, we may be liable for damages to our customers caused by such interruptions, our reputation may be damaged and our customers may lose confidence in us, which could have a negative effect on our results of operations.
A global or Korean economic downturn may have a material adverse impact on our business and the ability to meet our funding needs, and could cause the market value of our common shares and American Depositary Shares (“ADSs”) to decline.
In recent years, difficulties affecting the global financial sectors, adverse conditions and volatility in the worldwide credit and financial markets, fluctuations in oil and commodity prices and the general weakness of the global economy have increased the uncertainty of global economic prospects in general and have adversely affected the global and Korean economies. In addition, the global financial markets continue to experience significant volatility as a result of, among other things, the slowdown of economic growth and financial instability in China and other major emerging market economies, as well as political and social instability in various countries in the Middle East and Northern Africa, including Iraq, Syria and Egypt, as well as in Ukraine and Russia. In light of the high level of interdependence of the global economy, any of the foregoing factors may continue to negatively impact local economic conditions in Korea and global economic conditions and financial markets, which could have a material adverse effect on our business, financial condition and results of operations.
We are exposed to risks related to changes in the global and Korean economic environments, changes in interest rates and instability in the global financial markets. Adverse global and Korean economic conditions may lead to overall decline and volatility in securities prices of Korean companies, including ours, which may result in trading and valuation losses on our trading and investment securities portfolio. Increases in credit spreads, as well as limitations on the availability of credit resulting from heightened concerns about the stability of the markets generally and the strength of counterparties specifically may lead many lenders and institutional investors to reduce or cease providing funding to borrowers, which may negatively impact our liquidity and results of operations. Major market disruptions and adverse changes in economic conditions and regulatory climate may further impair our ability to meet our desired funding needs. We cannot predict future changes in economic conditions. Adverse developments in the global or Korean economies or financial markets may have a material adverse effect on our business and the ability to meet our funding needs, as well as negatively affect the market value of our common shares and ADSs.
Depreciation of the value of the Won against the Dollar and other major foreign currencies may have a material adverse effect on our results of operations and the market value of our common shares and ADSs.
Substantially all of our revenues are denominated in Won. Depreciation of the Won may materially affect our results of operations because, among other things, it causes:
an increase in the amount of Won required by us to make interest and principal payments on our foreign currency-denominated debt; and
an increase, in Won terms, of the costs of equipment that we purchase from overseas sources which we pay for in Dollars or other foreign currencies.
Fluctuations in the exchange rate between the Won and the Dollar will affect the Dollar equivalent of the Won price of the our common shares on the KRX KOSPI Market of the Korea Exchange (the “KRX KOSPI Market”).Market. These fluctuations also will affect:
the amounts a registered holder or beneficial owner of ADSs will receive from the American Depositary Receipt (“ADR”) depositary in respect of dividends, which will be paid in Won to the ADR depositary and converted by the ADR depositary into Dollars;
the Dollar value of the proceeds that a holder will receive upon sale in Korea of our common shares; and
the secondary market price of our ADSs.
If SK Inc. causes us to breach the foreign ownership limitations on our common shares by being deemed to be a foreign entity, we may experience a change of control.
The Telecommunications Business Act currently sets a 49.0% limit on the aggregate foreign ownership of our issued shares. Under the Telecommunications Business Act, as amended, a Korean entity, such as SK Inc., is deemed to be a foreign entity if its largest shareholder (determined by aggregating the shareholdings of such shareholder and its related parties) is a foreigner and such shareholder (together with the shareholdings of its related parties) holds 15.0% or more of the issued voting stock of the Korean entity. As of December 31, 2020, SK Inc. owned 21,624,120shares of our common stock, or 26.8%, of our issued shares. SK Inc. is currently not deemed to be a foreign entity. However, should SK Inc. be considered to be a foreign shareholder in the future, then its shareholding in us would be included in the calculation of our aggregate foreign shareholding and our aggregate foreign shareholding (based on our foreign ownership level as of December 31, 2020, which we believe was 33.4%) would exceed the 49.0% ceiling on foreign shareholding. As of December 31, 2020, the two largest foreign shareholders of SK Inc. each held a 3.5% stake therein.
If our aggregate foreign shareholding limit is exceeded, the MSIT may issue a corrective order to us, the breaching shareholder (including SK Inc. if the breach is caused by an increase in foreign ownership of SK Inc.) and the foreign shareholder which owns in the aggregate 15.0% or more of SK Inc. Furthermore, if SK Inc. is considered a foreign shareholder, it will be prohibited from exercising its voting rights with respect to the shares held in excess of the 49.0% ceiling, which may result in a change in control of us. In addition, the MSIT will be prohibited from granting us licenses or permits necessary for entering into new telecommunications businesses until our aggregate foreign shareholding is reduced to below 49.0%. For historical exchange rate information,a description of further actions that the MSIT could take, see “Item 3.A. Selected Financial Data4.B. Business Overview — Exchange Rates.Law and Regulation — Foreign Ownership and Investment Restrictions and Requirements.”
Risks Relating to Korea
Unfavorable financial and economic developments in Korea may have an adverse effect on us.
We are incorporated in Korea, and a significantsubstantial portion of our operations is basedand assets are located in Korea. As a result, we are subject to political, economic, legal and regulatory risks specific to Korea. The economic indicators in Korea in recent years have shown mixed signs of growth and uncertainty, and starting in 2020, the overall Korean economy and the economies of Korea’s major trading partners have shown signs of deterioration due to the debilitating effects of the COVID-19 pandemic. See “— The ongoing global pandemic of a new strain of coronavirus (“COVID-19”) and any possible recurrence of other types of widespread infectious diseases may adversely affect our business, financial condition or results of operations.” As a result, future growth of the Korean economy is subject to many factors beyond our control.control, including developments in the global economy.
In recent years, adverse conditions and volatility in the worldwide financial markets, fluctuations in oil and commodity prices and the generalincreasing weakness of the global economy, in particular due to the COVID-19 pandemic, have contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the Korean economy. The value of the Won relative to major foreign currencies in generalhas fluctuated significantly and, the U.S. dollar in particular has also fluctuated widely. See “Item 3.A. Selected Financial Data — Exchange Rates.” A depreciation of the Won increases the cost of imported goods and services and the Won revenue needed by Korean companies to service foreign currency denominated debt. An appreciation of the Won, on the other hand, causes export products of Korean companies to be less competitive by raising their prices in terms of the relevant foreign currency and reduces the Won value of such export sales. Furthermore, as a result of adversedeteriorating global and Korean economic conditions, there has been significant volatility in the stock prices of Korean companies in recent years.recently. Future declines in the Korea Composite Stock Price Index (known as the “KOSPI”) and large amounts of sales of Korean securities by foreign investors and subsequent repatriation of the proceeds of such sales may continue to adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea and the ability of Korean companies to raise capital. Any future deterioration of the Korean or global economy could adversely affect our business, financial condition and results of operations.
Developments that could have an adverse impact on Korea’s economy in the future include:
adverse conditions or developments in the economies of countries and regions that are important export markets for Korea, such as China, the United States, Europe and Japan, or in emerging market economies in Asia or elsewhere, including as a result of deteriorating economic and trade relations between the United States and China as well as increased uncertainties resulting from the United Kingdom’s exit from the European Union;
increased sovereign default risks in select countries and the resulting adverse effects on the global financial markets;
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, theEuro or Japanese yenYen exchange rates or revaluation of the Chinese renminbi exchange rates)Renminbi), interest rates, inflation rates or stock markets;
the occurrence of severe health epidemics in Korea and other parts of the world (such as the ongoing global COVID-19 pandemic);
a continuing rise in the level of household debt and increasing delinquencies and credit defaults by retail or smallsmall- and medium sizedmedium-sized enterprise borrowers;
continuing adverse conditionsborrowers in the economies of countries and regions that are important export markets for Korea, such as the United States, Europe, Japan and China, or in emerging market economies in Asia or elsewhere;
decreases in the market prices of Korean real estate;Korea;
declines in consumer confidence and a slowdown in consumer spending;spending, including as a result of the COVID-19 pandemic;
deterioration in the continued growthfinancial condition or performance of the Chinese economy,small- and medium-sized enterprises and other companies in Korea due to the extent its benefits (such as increased exportsGovernment’s policies to China) are outweighed by its costs (such as competition in export markets orincrease minimum wages and limit working hours of employees;
investigations of large Korean conglomerates and their senior management for foreign investment and the relocation of the manufacturing base from Korea to China), as well as a slowdown in the growth of China’s economy, which is Korea’s most important export market;possible misconduct;
social and labor unrest;
substantial changes in the market prices of Korean real estate;
a substantial decrease in tax revenues andor a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs, that,in particular in light of the Government’s ongoing efforts to provide emergency relief payments to households and emergency loans to corporations in need of funding in light of COVID-19, which, together, would likely lead to a national budget deficit as well as an increased Government budget deficit;increase in the Government’s debt;
financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;
loss of investor confidence arising from corporate accounting irregularities and corporate governance issues concerning certain Korean conglomerates;
increases in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population size in Korea;
the economic impact of any pending or future free trade agreements or any changes to existing free trade agreements;
geo-political uncertainty and the risk of further attacks by terrorist groups around the world;
natural or man-made disasters that have a significant adverse economic or other impact on Korea (such as the sinking of the Sewol ferry in 2014, which significantly dampened consumer sentiment in Korea) or its major trading partners;
the occurrence of severe health epidemics in Korea and other parts of the world, such as the Middle East Respiratory Syndrome outbreak in Korea in 2015;
deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy;policy (such as the ongoing trade disputes with Japan);
political uncertainty or increasing strife among or within political parties in Korea;
hostilities or political or social tensions involving oil producing countries in the Middle East (including a potential escalation of hostilities between the U.S. and Iran) and North Africa and any material disruption in the global supply of oil or sudden increase in the price of oil;
political or social tensions involving Russia and any resulting adverse effects on the global supply of oil or the global financial markets; and
an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.
Escalations in tensions with North Korea could have an adverse effect on us and the market value of our common shares and ADSs.
Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of future events. In particular, since the death of Kim Jong-il in December 2011, there has been increased uncertainty with respect to the future of North Korea’s political leadership and concern regarding its implications for political and economic stability in the region. Although Kim Jong-il’s third son, Kim Jong-un, has assumed power as his father’s designated successor, the long-term outcome of such leadership transition remains uncertain.
In addition, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapon and long-rangeballistic missile programs as well as its hostile military and other actions against Korea. Some of the significant incidents in recent years include the following:
From time to time, North Korea has conducted ballistic missile tests. Most recently in February 2016, North Korea launched a long-range rocket in violation of its agreement with the United States as well as United Nations sanctions barring it from conducting launches that use ballistic missile technology. Despite international condemnation, North Korea released a statement that it intends to continue its rocket launch program.
North Korea renounced its obligations under the Nuclear Non ProliferationNon-Proliferation Treaty in January 2003 and has conducted threesix rounds of nuclear tests betweensince October 2006, to February 2013,including claimed detonations of hydrogen bombs, which increased tensions inare more powerful than plutonium bombs, and warheads that can be mounted on ballistic missiles. Over the region and elicited strong objections worldwide. In January 2016,years, North Korea has also conducted a series of ballistic missile tests, including missiles launched from submarines and intercontinental ballistic missiles that it claims can reach the United States mainland. In response, the Government has repeatedly condemned the provocations and flagrant violations of relevant United Nations Security Council resolutions. In February 2016, the Government also closed the inter-Korea Gaesong Industrial Complex in response to North Korea’s fourth nuclear test claiming that the test involved its first hydrogen bomb, which claim has not been independently verified. In response to such test (as well as North Korea’s long-range rocket launch in February 2016),January 2016. Internationally, the United Nations Security Council unanimouslyhas passed a resolution in March 2016series of resolutions condemning North Korea’s actions and significantly expanding the scope of sanctions applicable to North Korea, most recently in December 2017 in response to North Korea’s intercontinental ballistic missile test in November 2017. Over the years, the United States and the European Union have also expanded their sanctions applicable to North Korea.
In August 2015, two Korean soldiers were injured in a landmine explosion near the Korean demilitarized zone. Claiming the landmines were set by North Koreans, the Korean army re-initiated its propaganda program toward North Korea utilizing loudspeakers near the demilitarized zone. In retaliation, the North Korean army fired artillery rounds on the loudspeakers, resulting in the highest level of military readiness for both Koreas. High-ranking officials from North Korea and Korea subsequently entered into an agreement on August 25, 2015 intended to diffuse military tensions.
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 the Northern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the west coast of the Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea for the 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 pressures within North Korea. ThereAlthough bilateral summit meetings were held between Korea and North Korea in April, May and September 2018 and between the United States and North Korea in June 2018, February 2019 and June 2019, there can be no assurance that the level of tensiontensions affecting the Korean peninsula will not escalate in the future. Any further increase in tensions, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between Korea or the United States and North Korea break down or military hostilities occur, could have a material adverse effect on our business, results of operations and financial condition and the market value of our common shares and ADSs.
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 by shareholders of companies (including us) listed on the KRX KOSPI Market for losses incurred in connection with purchases and sales of securities and other securities transactions arising from (1) false or inaccurate statements provided in the registration statements, prospectuses, businessannual reports, audit reports,semi-annual or quarterly reports and material fact reports and omission of material information in such documents, (2) insider trading, (3) market manipulation and (4) unfair trading. This law permits 50 or more shareholders who collectively hold 0.01% of the shares of a company to bring a class action suit against, among others, the issuer and its directors and officers. Because of the relatively recent enactment of the act, there is not enough judicial precedent to predict how the courts will apply the law. Litigation can be time-consuming and expensive to resolve, and can divert management time and attention from the operation of a business. We are not aware of any basis upon which such suit may be brought against us, nor are any such suits pending or threatened. Any such litigation brought against us could have a material adverse effect on our business, financial condition and results of operations.
There are special risks involved with investing in securities of Korean companies, including the possibility of restrictions being imposed by the Government in emergency circumstances.
As we are a Korean company and operate in a business and cultural environment that is different from that of other countries, there are risks associated with investing in our securities that are not typical for investments in securities of companies in other jurisdictions.
Under the Korean Foreign Exchange Transactions Act, if the Government deems that certain emergency circumstances, including a significant disruption in the international balance of payments and international financial markets or extreme difficulty in carrying out currency, exchange rate or other macroeconomic policies due to the movement of capital between Korea and other countries, are likely to occur, it may impose any necessary restriction such as requiring Korean or foreign investors to obtain prior approval from the Ministry of Economy and Finance (the “MOEF”) for the acquisition of Korean securities or for the repatriation of interest, dividends or sales proceeds arising from Korean securities or from disposition of such securities or other transactions involving foreign exchange. See “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities Regulations.”
Risks Relating to Securities
If SK Holdings causes us to breach the foreign ownership limitations on our common shares, we may experience a change of control.
The Telecommunications Business Act currently sets a 49.0% limit on the aggregate foreign ownership of our issued shares. Under the Telecommunications Business Act, as amended, a Korean entity, such as SK Holdings Co., Ltd. (“SK Holdings”), is deemed to be a foreign entity if its largest shareholder (determined by aggregating the shareholdings of such shareholder and its related parties) is a foreigner and such shareholder (together with the shareholdings of its related parties) holds 15.0% or more of the issued voting stock of the Korean entity. As of December 31, 2015, SK Holdings owned 20,363,452 shares of our common stock, or approximately 25.22%, of our issued shares. If SK Holdings were considered to be a foreign shareholder, then its shareholding in us would be included in the calculation of our aggregate foreign shareholding and our aggregate foreign shareholding (based on our foreign ownership level as of December 31, 2015, which we believe was 39.38%)would exceed the 49.0% ceiling on foreign shareholding. As of December 31, 2015, the two largest foreign shareholders of SK Holdings each held a 3.5% stake therein.
If our aggregate foreign shareholding limit is exceeded, the MSIP may issue a corrective order to us, the breaching shareholder (including SK Holdings if the breach is caused by an increase in foreign ownership of SK Holdings) and the foreign shareholder which owns in the aggregate 15.0% or more of SK Holdings. Furthermore, if SK Holdings is considered a foreign shareholder, it will be prohibited from exercising its voting rights with respect to the shares held in excess of the 49.0% ceiling, which may result in a change in control of us. In addition, the MSIP will be prohibited from granting us licenses or permits necessary for entering into new telecommunications businesses until our aggregate foreign shareholding is reduced to below 49.0%. For a description of further actions that the MSIP could take, see “Item 4.B. Business Overview — Law and Regulation — Foreign Ownership and Investment Restrictions and Requirements.”
Sales of our shares by SK HoldingsInc. and/or other large shareholders may adversely affect the market value of our common shares and ADSs.
Sales of substantial amounts of our common shares, or the perception that such sales may occur, could adversely affect the prevailing market value of our common shares or ADSs or our ability to raise capital through an offering of our common shares.
As of December 31, 2015,2020, SK HoldingsInc. owned 25.22%26.8% of our total issued common shares and has not agreed to any restrictions on its ability to dispose of our shares. See “Item 7.A. Major Shareholders.” We can make no prediction as to the timing or amount of any sales of our common shares. We cannot assure you that future sales of our common shares, or the availability of our common shares for future sale, will not adversely affect the prevailing market value of our common shares or ADSs from time to time.
We believe that we may be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ending December 31, 2020 and that there is a significant risk that we will be classified as a PFIC in the current and future taxable years, which could subject U.S. investors in our common shares or ADSs to significant adverse U.S. federal income tax consequences.
As a result of changes in the composition and value of our assets as implied by the price of our ADSs, we believe that we may be classified as a “passive foreign investment company,” or “PFIC,” for U.S. federal income tax purposes for our taxable year ending December 31, 2020, and that there is a significant risk that we will be a PFIC for the current and future taxable years.
A non-U.S. corporation will be a PFIC if, in any particular taxable year, either (a) 75% or more of its gross income for such year consists of certain types of “passive” income or (b) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive income.
If we are classified as a PFIC in any taxable year, a U.S. holder (as defined in “Item 10.E. Additional Information — Taxation — United States Federal Income Tax Considerations”) may incur significantly increased U.S. federal income tax on gain recognized on the sale or other disposition of the common shares or ADSs and on the receipt of distributions on the common shares or ADSs to the extent such gain or distribution is treated as an “excess distribution” under the U.S. federal income tax rules, and such U.S. holder may be subject to burdensome reporting requirements. The amount of income tax on any excess distributions will be increased by an interest charge to compensate for tax deferral, calculated as if the excess distributions were earned ratably over the period that the U.S. holder holds its common shares or ADSs. Further, if we are a PFIC for any year during which a U.S. holder holds our commons shares or ADSs, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our common shares or ADSs unless we cease to be a PFIC and the U.S. holder makes a special election.
A U.S. holder may be able to avoid the unfavorable rules described above by electing to mark its ADSs to market, provided the ADSs are treated as “marketable stock.” The ADSs generally will be treated as marketable stock if the ADSs are “regularly traded” on a “qualified exchange or other market” (which includes the New York Stock Exchange). Further, it should be noted that only the ADSs and not the common shares are listed on the New York Stock Exchange. Consequently, a U.S. holder that holds common shares that are not represented by ADSs may not be eligible to make a mark-to-market election in respect of those common shares.
U.S. holders are strongly urged to consult their own tax advisors regarding our potential classification as a PFIC and regarding the U.S. federal income tax consequences of acquiring, holding, and disposing of our common shares or ADSs if we are so classified, including the advisability of making a “mark-to-market” election, if available. See “Item 10.E. Additional Information — Taxation — United States Federal Income Tax Considerations — Passive Foreign Investment Company Rules” for more details.
If an investor surrenders his or her ADSs to withdraw the underlying shares, he or she may not be allowed to deposit the shares again to obtain ADSs.
Under the deposit agreement, holders of our common shares may deposit those shares with the ADR depositary’s custodian in Korea and obtain ADSs, and holders of ADSs may surrender ADSs to the ADR depositary and receive our common shares. However, under the terms of the deposit agreement, as amended, the depositary bank is required to obtain our prior consent to any such deposit if, after giving effect to such deposit, the total number of our common shares represented by ADSs, which was 9,259,5526,600,692 shares as of March 31, 2016,2021, exceeds a specified maximum, which was 24,321,893 shares as of March 31, 2021, subject to adjustment under certain circumstances.In addition, the depositary bank or the custodian may not accept deposits of our common shares for issuance of ADSs under certain circumstances, including (1) if it has been determined by us that we should block the deposit to prevent a violation of applicable Korean laws and regulations or our articles of incorporation or (2) if a person intending to make a deposit has been identified as a holder of at least 3.0%4.0% of our common shares. See “Item 10.B. Memorandum and Articles of Association — Description of American Depositary Shares.” It is possible that we may not give the consent. Consequently, an investor who has surrendered his or her ADSs and withdrawn the underlying shares may not be allowed to deposit the shares again to obtain ADSs.
An investor in our ADSs may not be able to exercise preemptive rights for additional new shares and may suffer dilution of his or her equity interest in us.
The Korean Commercial Code and our articles of incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer a right to subscribe for additional new common shares or any other rights of similar nature, the ADR depositary, after consultation with us, may make the rights available to an ADS holder or use reasonable efforts to dispose of the rights on behalf of the ADS holder and make the net proceeds available to the ADS holder. The ADR depositary, however, is not required to make available to an ADS holder any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:
a registration statement filed by us under the Securities Act 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 with respect to any ADSs. If a registration statement is required for an ADS holder to exercise preemptive rights but is not filed by us, the ADS holder will not be able to exercise his or her preemptive rights for additional shares. As a result, ADS holders may suffer dilution of their equity interest in us.
Short selling of our ADSs by purchasers of securities convertible or exchangeable into our ADSs could materially adversely affect the market price of our ADSs.
SK Holdings,Inc., through one or more special purpose vehicles, has engaged and may in the future engage in monetization transactions relating to its ownership interest in us. These transactions have included and may include offerings of securities that are convertible or exchangeable into our ADSs. Many investors in convertible or
exchangeable securities seek to hedge their exposure in the underlying equity securities at the time of acquisition of the convertible or exchangeable securities, often through short selling of the underlying equity securities or similar transactions. Since a monetization transaction could involve debt securities linked to a significant number of our ADSs, we expect that a sufficient quantity of ADSs may not be immediately available for borrowing in the market to facilitate settlement of the likely volume of short selling activity that would accompany the commencement of a monetization transaction. This short selling and similar hedging activity could place significant downward pressure on the market price of our ADSs, thereby having a material adverse effect on the market value of ADSs owned by you.
A holder of our ADSs may not be able to enforce a judgment of a foreign court against us.
We are a corporation with limited liability organized under the laws of Korea. Substantially all of our directors and officers and other persons named in this document reside in Korea, and all or a significant portion of the assets of our directors and officers and other persons named in this document and substantially all of our assets are located in Korea. As a result, it may not be possible for holders of our ADSs to effect service of process within the United States, or to enforce against us any judgments obtained from the United States courts based on the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws.
We are generally subject to Korean corporate governance and disclosure standards, which may differ from those in other countries.
Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies, which may differ in some respects from standards applicable in other countries, including the United States. As a reporting company registered with the SEC and listed on the New York Stock Exchange (the “NYSE”), we are and in the future will be, subject to certain corporate governance standards as mandated by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). However, foreign private issuers, including us, are exempt from certain corporate governance requirements under the Sarbanes-Oxley Act or under the rules of the NYSE. There may also be less publicly available information about Korean companies, such as us, than is regularly made available by public or non-public companies in other countries. Such differences in corporate governance standards and less public information available could result in corporate governance practices or disclosures that are perceived as less than satisfactory by investors in certain countries.
There are special risks involved with investing in securities of Korean companies, including the possibility of restrictions being imposed by the Government in emergency circumstances.
As we are a Korean company and operate in a business and cultural environment that is different from that of other countries, there are risks associated with investing in our securities that are not typical for investments in securities of companies in other jurisdictions.
Under the Korean Foreign Exchange Transactions Law, if the Government deems that certain emergency circumstances, including sudden fluctuations in interest rates or exchange rates, extreme difficulty in stabilizing the balance of payments or substantial disturbance in the Korean financial and capital markets, are likely to occur, it may impose any necessary restriction such as requiring Korean or foreign investors to obtain prior approval from the Minister of Strategy and Finance for the acquisition of Korean securities or for the repatriation of interest, dividends or sales proceeds arising from Korean securities or from disposition of such securities or other transactions involving foreign exchange.
Item 4. | INFORMATION ON THE COMPANY |
Item 4.A. | History and Development of the Company |
As Korea’s first wireless telecommunications service provider, we have a recognized history of leadership and innovation in the domestic telecommunications sector. Today, we remain Korea’s leading wireless telecommunications services provider and have continued to pioneer the commercial development and implementation of state-of-the-art wireless technologies. We had 31.4 million wireless subscribers, including MVNO subscribers leasing our networks, as of December 31, 2020, representing a market share of 45.1%, the largest market share among Korean wireless telecommunications service providers. We believe we are also a leader in developing new products and services that reflect the increasing convergence of telecommunications technologies, as well as the growing synergies between the telecommunications sector and other industries, and are well-positioned to become Korea’s leading platform service provider through our three next-generation growth platforms,businesses in media, security, commerce, mobility, IoT solutions lifestyle enhancement and advanced media.
In 2008 and 2009, we acquired additional equity interests in SK Broadband to increaseother innovative products offered through our total equity interest in SK Broadband to 50.6%. In June 2015, SK Broadband became our wholly-owned subsidiary pursuant to a share exchange transaction (the “Share Exchange”) through which we acquired all of the shares of SK Broadband that we did not otherwise own in exchange for 1,692,824 of our treasury shares and cash.
In September 2009, we completed the acquisition of the leased-line business and related ancillary businesses of SK Networks Co., Ltd. (“SK Networks”) for approximately Won 892.8 billion and assumed Won 611.4 billion of debt as part of the transaction. Historically, we have relied on KT and SK Networks to provide a substantial majority of the transmission lines we lease.platform services, including AI solutions.
In February 2012, we acquired a 21.1%an equity stake in SK Hynix, one of the world’s largest memory-chip makers by revenue, for an aggregate purchase price of approximately Won 3.4 trillion, and became its largest shareholder. As of December 31, 2020, we held a 20.1% equity interest in SK Hynix.
On March 31, 2016,2021, we had a market capitalization of approximately Won 16.822.2 trillion (US$14.819.7 billion, as translated at the noon buying rate of March 31, 2016)2021) or approximately 1.3%1.0% of the total market capitalization on
the KRX KOSPI Market, making us the fifteenth17th largest company listed on the KRX KOSPI Market based on market capitalization on that date.Ourdate. Our ADSs, each representing one-ninth of one share of our common stock, have traded on the NYSE since June 27, 1996.
We are a corporation with limited liability organized under the laws of Korea.We established our telecommunications business in March 1984 under the name of Korea Mobile Telecommunications Co., Ltd. We changed our name to SK Telecom Co., Ltd., effective March 21, 1997. In January 2002, we merged with Shinsegi Telecom Co., Ltd. (“Shinsegi”), which was then the third-largest wireless telecommunications service provider in Korea. Our registered office is at SK T-Tower, 65, Eulji-ro, Jung-gu, Seoul 04539, Korea and our telephone number is +82-2-6100-2114.+82-2-6100-2114. Our website address is http://www.sktelecom.com.
Recent DevelopmentsThe SEC maintains a website (http://www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
On November 2, 2015, we entered into a share purchase agreement with CJ O Shopping to acquire a 30.0% interest in CJ HelloVision, a fixed-line cable TV broadcast service provider, for an aggregate purchase price of Won 500.0 billion. In November 2015, we conducted a tender offer for shares of CJ HelloVision and acquired 6,671,993 shares for Won 80.1 billion. Upon the acquisition of CJ HelloVision, SK Broadband will be merged with and into CJ HelloVision pursuant to a merger agreement dated November 2, 2015, and we will be allocated 0.4761236 shares of the merged company for each share of SK Broadband to have a 78.3% equity stake in the merged company. The acquisition and subsequent merger are subject to certain closing conditions, including obtaining regulatory approval from the relevant authorities.
Following the acquisition and subsequent merger, we expect to develop additional technology and infrastructure to integrate our various media service offerings. As of December 31, 2015, CJ HelloVision had a market share of 14.4% of the pay TV market with approximately 4.2 million cable TV subscribers. For further details regarding the acquisition and subsequent merger, refer to the Form 6-Ks furnished to the SEC on November 3, 2015 entitled “Decision on Acquisition of Shares of CJ HelloVision” and “Decision on Merger of SK Broadband,” the Form 6-K/A furnished to the SEC on February 16, 2016 entitled “Changes to the Merger Ratio and Number of New Shares to be Issued Relating to the Merger of SK Broadband and CJ HelloVision,” theForm 6-K/As furnished to the SEC on April 4, 2016 entitled “Changes to the Number of Shares to be Held after Share Acquisition and Scheduled Acquisition Date” and “Changes to the Merger Schedule Relating to the Merger of SK Broadband and CJ HelloVision.��
Korean Telecommunications Industry
Established in March 1984, we became the first wireless telecommunications service provider in Korea. We remained the sole provider of wireless telecommunications services until April 1996, when Shinsegi commenced cellular service. The Government began to introduce competition into the fixed-line and wireless telecommunications services markets in the early 1990’s. During this period, the Government allowed new competitors to enter the fixed-line sector, sold a controlling stake in us to the SK Group, and granted a cellular license to our first competitor, Shinsegi. In October 1997, three additional companies began providing wireless telecommunications services under Government licenses to provide wireless telecommunications services. In 2000 and 2001, the Korean wireless telecommunications market experienced significant consolidation. In January 2002, Shinsegi was merged into us. Additionally, two of the other wireless telecommunications services providers merged.
There are currently three mobile network operators in Korea: our company, KT and LG U+. As of December 31, 2015,2020, the market share of the Korean wireless telecommunications market, in terms of number of subscribers, of KT and LG U+ was approximately 30.4%31.4% and 20.2%23.5%, respectively (compared to our market share of 49.4%45.1%), each including MVNO subscribers leasing the respective networks. As of December 31, 2015,2020, MVNOs had a combined market share of 10.1%13.1%, of which MVNOs leasing our networks represented 4.6%3.3%, MVNOs leasing KT’s networks represented 4.7%7.1% and MVNOs leasing LG U+’s networks represented 0.8%2.7%.
Telecommunications industry growth in Korea has been among the most rapid in the world, with fixed-line penetration being under five lines per 100 population in 1978 and increasing to 47.9 lines per 100 population as of December 31, 2006 before decreasing to 31.724.8 lines per 100 population as of December 31, 2015,2020, and wireless
penetration increasing from 7.0 subscribers per 100 population in 1996 to 112.4134.2 subscribers per 100 population as of December 31, 2015.The2020. The table below sets forth certain subscription and penetration information regarding the Korean telecommunications industry as of the dates indicated:
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
(In thousands, except for per population amounts) | (In thousands, except for per population amounts) | |||||||||||||||||||||||||||||||||||||||
Population of Korea(1) | 51,529 | 51,328 | 51,141 | 50,948 | 50,734 | |||||||||||||||||||||||||||||||||||
Population of Korea(1) | 51,829 | 51,850 | 51,826 | 51,779 | 51,696 | |||||||||||||||||||||||||||||||||||
Wireless Subscribers | 57,937 | 56,310 | 54,681 | 53,624 | 52,507 | 69,542 | 67,937 | 65,360 | 62,651 | 60,287 | ||||||||||||||||||||||||||||||
Wireless Subscribers per 100 Population | 112.4 | 109.7 | 106.9 | 105.3 | 103.5 | 134.2 | 131.0 | 126.1 | 121.0 | 116.6 | ||||||||||||||||||||||||||||||
Telephone Lines in Service | 16,341 | 16,939 | 17,620 | 18,261 | 18,633 | 12,859 | 13,600 | 14,334 | 15,039 | 15,746 | ||||||||||||||||||||||||||||||
Telephone Lines per 100 Population | 31.7 | 33.0 | 34.5 | 35.8 | 36.7 | 24.8 | 26.2 | 27.7 | 29.0 | 30.5 |
(1) | Source: The Ministry of the |
(2) | Includes subscribers of non-mobile phone wireless services, including services for tablet computers, wearable devices, IoT devices and others. |
Since the introduction of short text messaging in 1998, Korea’s wireless data market has grown rapidly. This growth has been driven, in part, by the rapid development of wireless Internet service since its introduction in the second half of 1999
and the implementation of LTE technologyand 5G technologies providing for fast data transmission speeds and large data transmission capacity. As of December 31, 2015,2020, approximately 53.759.9 million Korean wireless subscribers owned Internet-enabled handsets capable of accessing wireless Internet services, including 43.752.2 million subscribers that own smartphones that have direct access to the Internet using mobile Internet technology.Thetechnology. The table below sets forth certain penetration information regarding the number of Internet-enabled handsets, smartphones and wireless subscribers in Korea as of the dates indicated:
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
(In thousands, except for percentage data) | (In thousands, except for percentage data) | |||||||||||||||||||||||||||||||||||||||
Number of Wireless Internet-Enabled Handsets | 53,737 | 52,833 | 50,858 | 50,420 | 49,297 | 59,886 | 58,812 | 58,074 | 56,576 | 55,085 | ||||||||||||||||||||||||||||||
Number of Smartphones | 43,668 | 40,560 | 37,517 | 32,727 | 22,578 | 52,223 | 51,132 | 49,442 | 48,660 | 46,418 | ||||||||||||||||||||||||||||||
Total Number of Wireless Subscribers | 57,937 | 56,310 | 54,681 | 53,624 | 52,507 | 69,542 | 67,937 | 65,360 | 62,651 | 60,287 | ||||||||||||||||||||||||||||||
Penetration of Wireless Internet-Enabled Handsets | 92.8 | % | 93.8 | % | 93.0 | % | 94.0 | % | 93.9 | % | 86.1 | % | 86.6 | % | 88.9 | % | 90.3 | % | 91.4 | % | ||||||||||||||||||||
Penetration of Smartphones | 75.4 | % | 72.0 | % | 66.9 | % | 61.0 | % | 43.0 | % | 75.1 | % | 75.3 | % | 75.6 | % | 77.7 | % | 77.0 | % |
(1) | Includes subscribers of non-mobile phone wireless services, including services for tablet computers, wearable devices, IoT devices and others. |
In addition to its well-developed wireless telecommunications sector, Korea has one of the largest Internet markets in the Asia Pacific region. According to Korea Internet & Security Agency, the percentage of Internet users in Korea is greater than 80% of the population.From the end of 20052010 to the end of 2015,2020, the number of broadband Internet access subscribers increased from approximately 12.217.2 million to approximately 20.022.3 million.In connection with such growth in broadband Internet usage, the number of IPTV subscribers has also increased rapidly. The table below sets forth certain information regarding broadband Internet access subscribers and IPTV subscribers as of the dates indicated:
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||||||||||||||||||
Number of Broadband Internet Access Subscribers(1) | 20,025 | 19,199 | 18,738 | 18,253 | 17,860 | |||||||||||||||||||||||||||||||||||
Number of Broadband Internet Access Subscribers(1) | 22,330 | 21,906 | 20,989 | 20,349 | 19,818 | |||||||||||||||||||||||||||||||||||
Number of IPTV Subscribers | 12,314 | 10,840 | 8,738 | 6,457 | 4,894 | 19,365 | 17,989 | 16,599 | 15,381 | 11,850 |
(1) | Includes subscribers accessing Internet service using digital subscriber line, or xDSL, connections; cable modem connections; local area network, or LAN, connections; fiber-to-the-home, or FTTH, connections and satellite connections. |
Item 4.B. | Business Overview |
Overview
We are Korea’s leading wireless telecommunications services provider and continue to pioneer the commercial development and implementation of state-of-the-art wireless and fixed-line technologies and services as well as develop our three next-generation growth platforms,businesses in media, security, commerce, mobility, IoT solutions lifestyle enhancement and advanced media.Ourother innovative products offered through our platform services, including AI solutions.Our operations are reported in threefive segments:
cellular services, which include wireless voice and data transmission services, sales of wireless devices, IoT solutions platform services and lifestyle enhancement platform services;
fixed-line telecommunication services, which include fixed-line telephone services, broadband Internet services, advanced media platform services (including IPTV)IPTV and cable TV services) and business communications services; and
security services, which include physical security services and information security services;
commerce services, which include our open marketplace platform, 11st, our T-commerce business, SK stoa, and related ancillary services; and
other businesses, which include our commerceportal service, mobility business, marketing platform business and our hardware business.certain other miscellaneous businesses.
Our Business Strategy
We believe that the current trends in the Korean telecommunications industry are characterized by technological change, evolving consumer needs and increasing digital convergence. Against the backdrop of these industry trends, we aim to maintain our leading position in the Korean market for wireless telecommunications services and actively develop our next-generation growth businesses in media, security, commerce, mobility, IoT solutions and other innovative products offered through our platform services. We plan to further utilize our big data analysis capabilities to create products and services that are tailored to our customers’ evolving needs, as well as actively develop differentiatedincorporate AI capabilities directly into many of the products and services onwe offer. By doing so, we strive to become a socially respected “New ICT Leader” as universally recognized by our growth platforms, comprising our IoT solutions platform, lifestyle enhancement platformcustomers, business partners and advanced media platform, through which we will continue our growth in a rapidly changing business environment. Our corporate vision is to be a “Partner for New Possibilities” for both individuals and businesses by leveraging our network infrastructure and cutting-edge technologies.shareholders. To take advantage of theseevolving industry trends and further realize our corporate vision to become a “New ICT Leader,” we have undertaken the following strategic initiatives.initiatives:
• | Maintain our leadership in the wireless services business by offering |
• |
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Through our IoT solutions platform, we offer “Smart Home,” a home monitoring service platform for residential customers and customized IoT solutions utilizing machine-to-machine (“M2M”) connections to our business customers. We will continue to analyze our users’ lifestyles to provide value-added services that can be integrated in our “Smart Home” users’ daily lives and collaborate with our partners to develop a wide range of compatible appliances and devices. In addition, we endeavor to provide customizedvalue-added services to our business customers and create an ecosystem through which domestic and global
manufacturers can develop innovative hardware for our IoT solutions platform. Through our lifestyle enhancement platform, we provide various value-added services to enhance our customers’ lifestyles. Through our “3C” strategy, we aim to provide high-quality “content” through which customers with similar interests and needs can form “communities” from which we generate “commerce” by marketing and advertising targeted products and services. We believe these services will enable us to increase the retention of our wireless subscribers as well as attract new customers. Furthermore, we will continue to enlarge the scope of our media services and content offerings available on our advanced media platform to provide our subscribers with a vast library of high-quality content that can be accessed through our wireless andfixed-line networks.
• |
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• | Pursue sustainable management to seek mutual growth with the broader society. |
As part of our ongoing efforts to pursue such strategies, we are currently considering a potential corporate restructuring whereby we would split into a wireless and fixed-line telecommunications company (including our interest in, among others, SK Broadband) and the Spin-off Company, which would hold interests in semiconductor and new ICT businesses (including our interest in, among others, SK Hynix, ADT CAPS, Eleven Street and T Map Mobility). Such restructuring would be implemented through a horizontal spin-off transaction (“injeok bunhal”)
under Korean law, whereby the Spin-off Company would be newly incorporated and our existing shareholders would receive shares of the Spin-off Company on a pro rata basis. Further decisions regarding the potential spin-off, if any, are expected to be made in the first half of 2021.
Cellular Services
We offer wireless voice and data transmission services, sell wireless devices and provide IoT solutions and lifestyle enhancementinnovative platform services through our cellular services segment. Our wireless voice and data transmission services are offered through our backbone networks that collectively can be accessed by approximately 99.0% of the Korean population.Wepopulation. We had 28.631.4 million wireless subscribers, including MVNO subscribers leasing our networks, as of December 31, 2015,2020, representing a market share of 49.4%45.1%, the largest market share among Korean wireless telecommunications service providers. We launched our wireless services using our 5G network in April 2019, and we are continually expanding our 5G network coverage and enhancing service quality. The table below sets forth the number of subscribers, including subscribers of MVNOs that lease our wireless networks, using our various digital wireless networks as of the dates indicated:
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||
Network | ||||||||||||||||||||||||||||||||||||||||
5G | 5,476 | 2,084 | — | — | — | |||||||||||||||||||||||||||||||||||
LTE | 18,980 | 16,737 | 13,487 | 7,530 | 634 | 22,848 | 25,022 | 24,796 | 22,865 | 21,078 | ||||||||||||||||||||||||||||||
WCDMA | 7,008 | 8,020 | 9,909 | 14,459 | 19,037 | 2,920 | 3,986 | 5,174 | 5,842 | 6,491 | ||||||||||||||||||||||||||||||
CDMA | 2,638 | 3,521 | 3,957 | 4,972 | 6,882 | |||||||||||||||||||||||||||||||||||
CDMA(1) | 139 | 443 | 912 | 1,488 | 2,026 | |||||||||||||||||||||||||||||||||||
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Total | 28,626 | 28,279 | 27,352 | 26,961 | 26,553 | 31,384 | 31,535 | 30,882 | 30,195 | 29,595 | ||||||||||||||||||||||||||||||
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As part of our initiative to be the leading next-generation platform provider, we aim to continue to develop our IoT solutions platform
(1) | In July 2020, we terminated our second generation wireless services using our CDMA network. CDMA subscribers as of December 31, 2020 consist of subscribers who have not upgraded to our other networks or terminated their subscriptions as of such date. |
In 2020, 2019 and lifestyle enhancement platform to provide services which we believe complement and create synergies with our wireless telecommunications service.
In 2015, 2014 and 2013,2018, our cellular services segment revenue was Won 13,269.312,295.7 billion, Won 13,527.912,177.5 billion and Won 13,315.512,378.9 billion, respectively, representing approximately 77.4%66.0%, 78.8%68.6% and 80.2%73.4%, respectively, of our consolidated revenue.
Wireless Services
We offer wireless voice transmission and data transmission services to our subscribers through our backbone networks. Our wireless telecommunications services are available to our subscribers receiving service under the SK Telecom brand. In addition, customers can obtain wireless telecommunications services that operate on our network from MVNOs that lease our wireless networks. We derive revenues from our wireless telecommunications service principally through monthly plan-based fees as described in “— Rate Plans” below.
To complement our basic voice transmission services, weWe provide a voice-over-LTE service, known as our “HD Voice” service, to all of our LTE subscribers. HD Voice service is a premium communication service which featuresand 5G subscribers featuring high-quality voice transmission, fast call connection, voice-to-video call switching and digital content sharing during calls. In addition, we provide “T phone” service, which is available on most devices running on the Google Android operating system. Our T phone service provides our customers with a number of convenient call functions, including a function to block spam calls and a function called “T114” that informs customers of the
phone numbers of stores, hospitals and other facilities closest in proximity to the customer’s current location. As of December 31, 2015, there were more than 8.0 million subscribers to the T phone service compared to approximately 4.3 million subscribers as of December 31, 2014.
We also offer our subscribers a wide range of wireless data transmissions services. Our messaging service allows our subscribers to send and receive text, graphic, audio and video messages. In addition, our subscribers can access a wide variety of digital content and services through mobile applications providing music, video, gaming, news, commerce and financial services as well as solutions that enable subscribers to access the Internet and e-mail. We intend to continue to build our wireless data services as a platform for growth, extending our portfolio of wireless data services and developing new content for our subscribers.
Through service agreements with various foreign wireless telecommunications service providers, we offer cellular global roaming services, branded as our “T-Roaming”“T-Roaming” service. Global roaming services allow subscribers traveling abroad to make and receive calls using their regular mobile phone numbers. In addition, we provide global roaming service to foreigners traveling to Korea. In such cases, we generally receive a fee from the traveler’s local wireless telecommunications service provider.
Through SK Telink, we also operate our MVNO business under the brand “7Mobile,“SK 7Mobile,” which we believe offers excellent quality at reasonable rates utilizing SK Telecom’s wireless networks. SK Telink is focused on developing low-cost distribution channels and targeting niche customer segments that have a lower average revenue per user than that of SK Telecom’s subscriber base.
In addition, we provide interconnection service to connect our networks to domestic and internationalfixed-line and other wireless networks. See “Item 4.B. Business Overview — Interconnection.”“— Interconnection” below.
Wireless Device Sales
We offer several categories of wireless devices, including smartphones and basic phones, tablets and other Internet access devices and wearable devices.devices that are sold through an extensive distribution network, which consists of authorized exclusive dealers and independent retailers, as well as branch offices and stores directly operated by us through our wholly-owned subsidiary, PS&Marketing Co., Ltd. (“PS&Marketing”). As of December 31, 2015,2020, approximately 20.623.9 million, or 72.0%76.3%, of our subscribers (including MVNO subscribers leasing our networks) owned smartphones that have direct access to the Internet compared to approximately 19.523.6 million subscribers, or 68.1%74.8%, as of December 31, 2014.2019. We purchase a substantial majority of our wireless devices from Samsung Electronics, Apple and LG Electronics.
Smartphones and Basic Phones. All of theWe offer smartphones we offerthat are enabled to utilize our LTE and/or WCDMAdigital wireless networks and run on various operating systems, such as Apple iOS and Google Android. Most of theWe also offer basic phones we offer are enabled to utilize our WCDMA networks andthat have the ability to access wireless Internet services.
Tablets and Other Internet Devices. We offer tablets which can access the Internet via our LTE and/or WCDMAdigital wireless networks and a Wi-Fi connection. The tablets run primarily on the Apple iOS and Google Android operating systems. In addition, we also offer “T Pocket Pie”Pocket-Fi” devices that provide a mobile LTE connection and are capable of connecting multiple Wi-Fi enabled devices to the Internet at one time. We offer targeted rate plans for our T Pocket PiePocket-Fi device. See “— Rate Plans” below.
Wearable Devices. We offer various wearable devices, includingwhich primarily comprise smart watches, “T pet,” our pet tracking device, and “T kids’ phone – Joon”.watches. These devices utilize our WCDMA networkdigital wireless networks and have specific features for the relevant target customer. For example, T pet devices enable pet owners to send voice messages to their pets, track their position using global positioning system (“GPS”) technology as well as track and log their activity. T kids’ phone – Joon is a wearable phone targeted towards children and provides simple calling, messaging and chat services as well as GPS tracking capabilities. We offer targeted rate plans that are specific to these wearable devices. See “— Rate Plans” below.
We purchase a substantial majority of our wireless devices from Samsung Electronics, Apple and LG Electronics.We also offer a number of devices that were designed by us to exclusively run on our networks such as the Luna which was launched in September 2015 and the Sol which was launched in January 2016. The Luna and the Sol were both designed to include convenient features to easily access media contents that are popular among our subscribers and to provide high-quality devices at a relatively low-to-mid range price point. We intend to continue to work with device manufacturers to develop exclusive devices offering high quality and convenience at competitive prices.
IoT Solutions Platform Services
Through our IoT solutions platform,business, we provide a home monitoring service platform for residential customers and network access and enhanced services to support telemetry-type applications, which are characterized by M2Mmassive machine-type communication (“mMTC”) wireless connections, to business customers.
In May 2015, we launched “Smart Home,” a mobile application-based home monitoring service for residential customers. Smart Home is a paid subscription service available not onlyorder to our wireless and fixed-line service subscribers but also to subscriberspromote the growth of our competitors’ wireless and fixed-line services. Through Smart Home, users can control and monitor their home environment from their mobile devices and enhance the safety and convenience of their daily lives. We have partnered with more than 30 electronics and appliance manufacturers, including Samsung Electronics and LG Electronics, to develop a wide range of appliances, electronic devices, door security, heating and lighting systemsIoT solutions business, we deployed networks nationwide that are compatibledesigned to support IoT devices, namely our high-speed LTE-M network in March 2016 and our low-cost Low-Power Wide-Area network based on LoRa technology (our “LoRa network”) in July 2016. In April 2018, we increased the battery efficiency of our IoT devices by launching our LTE Cat.M1 technology, and we have further enhanced our competitiveness in this business with our Smart Home service.newly deployed 5G network.
We also provide network access and customized IoT solutions to our business customers. Our M2MIoT services support devices that are used in a variety of market segments, including retail, utilities, security, automotive, agriculture and data analytics. For example, we provide enhancedour Cloud Energy Management Solution (“Cloud EMS”) business provides a one-stop cloud computing-based energy management platform that collects and analyzes energy usage data from business customers and offers solutions to businesses in order to connect withoptimize and monitorreduce their equipment,energy consumption. As of December 31, 2020, Cloud EMS had approximately 220 customers, mostly from energy-intensive industries such as fleet management devices used to monitor city-operated rental bicycles and utility monitoring devices for smart grid applications.the petrochemical industry as well as the luxury retail industry.
Lifestyle Enhancement Platform Services
Through our lifestyle enhancement platform services business, we seek to provide various value-addedinnovative AI products and services to enhancethat meet our customers’ lifestylesevolving needs in areasan increasingly connected world. In September 2016, we launched NUGU, the first
intelligent AI service launched in Korea with Korean language capabilities based on advanced voice recognition technologies. NUGU is one of the leading AI platforms in Korea, which offers a wide range of devices and services that enhance various aspects of everyday life of our customers, such as shopping, childcare, security, financehomes, cars and education with customized contentmobile phones. Through cloud-based deep-learning technology, NUGU is designed to evolve on its own as it collects more data about its users over time.
We offer a variety of smart devices based on their personal interests. ThroughNUGU, such as “NUGU candle,” an AI light that offers NUGU-based services and changes its color and brightness based on the user’s needs and preferences, “NUGU nemo,” a smart speaker with a touchscreen, “NUGU CHIPS,” a wireless charging dock compatible with certain Samsung Galaxy smartphones that automatically launches a mobile application converting the smartphone being charged into a NUGU-capable device, and “albert AI,” an educational device that teaches children how to code.
We have also integrated NUGU into our “3C” strategy, we aim to provide high-quality “content” through which customers with similar interests and needs can form “communities” from which we generate “commerce” by marketing and advertising targeted products and services. We provide certain services exclusively to our wirelessT map service subscribers as well as certain services to users regardlessour B tv service as further discussed in “— Other Businesses — Miscellaneous Businesses — Mobility Business” and “— Fixed-line Telecommunication Services — Advanced Media Platform (including IPTV and Cable TV Services).”
In addition, we integrated NUGU into our “T phone” service, which offers our customers a number of whether they haveconvenient call functions, such as a wireless service subscription with us.
Examples of services we provide exclusively to our wireless service subscribers are “Club T Kids” and “Petween.” Club T Kids comprises a care service platform for parents through the “T Kids” mobile applicationspam-call blocking function and a communitysearch function that informs customers of the phone numbers of shops, hospitals and other facilities closest to the customer’s current location. The integrated “T phone × NUGU” service allows T phone users to search phone numbers, make calls, send text messages and experience other AI-based services through voice commands. Through Dreamus Company, we also offer “NUGU buds,” which are wireless earbuds that enable users to launch and operate “T phone × NUGU” while wearing them without touching their smartphones.
In 2018, we launched “NUGU developers,” a platform for kids throughon which third-party manufacturers and developers can create and launch new services based on NUGU technology and incorporate NUGU capabilities into their applications or devices. In 2020, we launched “NUGU carecall” in response to the T kids’ phone – Joon. Through the T Kids mobile application, parents can call their children, check their location, sign up for various children’s activity programs and order organic groceries. Through the T kids’ phone – Joon, kids can communicate with their parents, send messages to and chat with their friends, play games and collect character badges. Through Petween,COVID-19 pandemic, which is currently accessiblea service that tracks and records symptoms of persons subject to monitoring through the Petween website, pet owners can communicate with each other, access petcare advice from veterinarians and purchase petcare products.mobile phones. We believe these services provide differentiated valuecontinue to our wireless service subscribers’ lifestyles and enhance their loyalty to us.
Examples of services we provide to users regardless of whether they have a wireless service subscription with us are “Deal Light” and “Beauty Link.” Deal Light, which is accessible through the Deal Light website and mobile application, is an online marketplace for used productsexplore ways in which we participate directly in the purchasecan leverage our NUGU technology to launch new, and sale process and pick up the product from the seller and then verify, clean, package, process payment for, and deliver the product to, the buyer. Beauty Link, which is accessible through a mobile application, provides information about nail salons such as location, service offerings and price as well as customer feedback. We believe we can attract new customers by offering specialized services such as these.
In addition, we provide other value-added services that enhance our customers’ lifestyles. existing, products and services.
Other New Businesses
We provideare preparing to launch a variety of integrated cloud services based on our advanced 5G MEC technology and platform for business customers that require secure and location-basedultra-low latency communications, focusing on the media, logistics, healthcare, finance and manufacturing industries. We completed the construction of MEC infrastructure at four strategic locations during 2020 and we launched our first MEC-based cloud service, “5GX Edge Cloud,” in collaboration with Amazon Web Services in December 2020. We have entered into strategic partnerships with Amazon Web Services and other leading cloud service providers to pursue further collaboration on MEC-based cloud services. We also plan to provide smart factory solutions that can leverage our 5G technology and MEC-based cloud services, such as “T map,” an interactive navigation servicebeginning with SK Hynix, which we provideexpect to our wireless subscribers free of charge and which wireless subscribers to our competitors can subscribe toresult in enhanced efficiency for a monthly fee. T map uses GPS technology to transmit driving directions, real-time traffic updates and emergency rescue assistance to wireless devices. In addition, we provide mobile phone verification services, enabling users to process secure mobile payment transactions.
Rate Plans
We offer our wireless telecommunications services on both a postpaid and prepaid basis. Approximately 94%96.4% of our subscribers received our wireless telecommunications services on a postpaid basis as of December 31, 2015.2020. Postpaid accounts primarily represent retail subscribers under contract with SK Telecom under which a subscriber is billed in advance a monthly fixed rate in return for a monthly network service allowance and usage for outgoing voice calls and wireless data services beyond the allowance is billed in arrears.arrears, where payment of the total amount of the bill is due at the end of the month. The standard contract period for our rate plans is 24 months, although our subscribers have the option to enter into shorter term contracts or nofixed-term contract at all. We provide various subsidies and discounts, including handset subsidies, depending on the length of the contract.contract and the subscriber’s chosen rate plan. Our prepaid service enables individuals to obtain wireless telecommunications services without a fixed-term contract by paying for all services in advance according to expected usage. We do not charge our customers for incoming calls, although we do receive interconnection charges from KT and other
companies for calls from the fixed-line network terminating on our networks and interconnection revenues from other wireless network operators. See “Item 4.B. Business Overview — Interconnection.”“— Interconnection” below.
We also charge our customers a 10.0% value-added tax.tax, which is included in the price of all of our rate plans. We can offset the value-added tax we collect from our customers against value-added tax refundable to us by the Korean tax authorities. We remit taxes we collect from our customers to the Korean tax authorities. We record revenues in our financial statements net of such taxes.
Basic Rate Plans.We offer various postpaid account plans for smartphones and basic phones that are designed to meet a wide range of subscriber needs and interests. As of December 31, 2015, approximately 7 million subscribers have subscribed to “Band Data”Our 5G services are provided through the “5GX” plans, which are our representative smartphone rate plans featuringoffer unlimited domestic voice minutes and text messaging and a fixed or unlimited data transmission allowance per month as well as free access to live TV on “oksusu,” our mobile IPTV service, thatand range from Won 29,00055,000 to Won 125,000 per month. As of December 31, 2020, approximately 4.5 million subscribers have subscribed to the “5GX” plans. Our representative smartphone rate plans for our LTE services are the “T” plans, which feature unlimited domestic voice minutes and text messaging and a fixed or unlimited data transmission allowance per month and range from Won 33,000 to Won 100,000 per month. In 2020, a majority of our new LTE subscribers have subscribed to the “T” plans. In January 2021, we also launched “Un-tact” plans that are exclusively available through our online distribution channel, ranging from Won 38,000 to Won 62,000 per month for 5G services and from Won 22,000 to Won 48,000 per month for LTE services.Our “Voice Free” plans are available for our basic phones and feature a fixed allowance of voice minutes and 50 text messages per month with rates that range from Won 19,00020,900 to Won 94,000103,400 per month month.We also offer a standard rate plan for Won 11,00012,100 per month, through which the subscriber is charged per usage amount, other than on text message usage up to 50 messages per month.
In addition, we provide a variety of differentiated rate plans for our customer segments by age such as children, teenagers and senior citizens. We also offer rate plans for specific customer segments, such as our “Band Data Global Pack”“0” plans for smartphone users who are 24 years old or younger featuring greater data allowance and premium benefits tailored for younger demographics, our “ZEM” plan for children who are 12 years old or younger, our “T Global” rate plans for foreigners featuring unlimited domestic voice minutes and text messaging, a fixed allowance of international voice minutes and data transmission per month and our “Weekend Ting” rate plans for people in the military serviceteenagers featuring unlimited domestic voice minutes, text messaging andmore data transmission for Won 2,000 per day of use whileallowance on leave.weekends.
For our T Pocket PiePocket-Fi device, we provide a fixed monthly data transmission allowance of 10 GB for Won 15,00016,500 per month and 20 GB for Won 22,50024,750 per month.With respect to the wearable devices that we offer, we offer targeted rate plans such as the “T Outdoor” rate plan for smart watches atthat range from Won 10,00011,000 to Won 11,000 per month, the “T pet” rate plan for our T pet device at Won 5,000 per month and the “T kids” rate plan for our T kids’ phone – Joon devices at Won 8,00012,100 per month.
Data Add-on Rate Plans.We offer a variety of optional “add-on”“add-on” rate plans that are designed to meet a wide range of subscriber needs with respect to increased data usage that followed the widespread use of smartphones and faster transmission speeds made possible by LTE technology.speeds. For example, we offer data plans that offer unlimited data based on time, place and occasion such as our “Subway Free” plan, which offers unlimited wireless data usage on subway platforms and inside subways and our “Commuter Free” plan, which offers unlimited wireless data usage during rush hour, each for a fixed rate of Won 9,0009,900 per month. WeFor certain rate plan subscribers, we also offer a daily allowance of 1 GB of oksusuunlimited access and a monthly allowance of 8,000 points to purchase media content on oksusuwavve through our “Band Play Pack”“wavve and Data Plus” plan at no additional cost or for Won 5,0002,400 or Won 12,300 per month.month, depending on the subscribers’ basic rate plan. “Safe Option Premium” offers an additional daily data transmission allowance of 50 MB to subscribers who have used the maximum data transmission on their existing plan without incurring additional data transmission fees for a fixed rate of Won 8,0008,800 per month. We also offer “T Data Coupons,” through which subscribers can purchase a fixed amount of data for a fixed price. T Data Coupons range from Won 2,000 for 100MB of data to Won 33,000 for 5GB of data. As T Data Coupons are valid for one year after first use, we believe they are attractive to sporadic data users. T Data Couponsprice and can also be sent as “gifts” to family
and friends that need additional data allowance. We believe that our data add-on rate plan offerings have contributed to the increase in data usage to 3.9 GB of average monthly data usage per LTE subscriber as of December 31, 2015 from 3.0 GB as of December 31, 2014.
Roaming Plans.We provide fixed-rate Our representative international roaming service plans suchinclude our “baro 3 GB,” “baro 4 GB and “baro 7 GB” plans for long-term travel, which provide fixed data transmission allowances of 3 GB, 4 GB or 7 GB that can be used over a specified number of days in approximately 180 countries for Won 29,000, Won 39,000 and Won 59,000, respectively, as well as our “T“baro OnePass 300” and “baro OnePass 500” plans suitable for short-term travel, which are fixed rate plans that provide data roaming of 300 MB for Won 9,900 per day and 500 MB for Won 16,500 per day, respectively, and are available in 180 countries. We also offer our “baro OnePass VIP” and “baro OnePass Data VIP” plans, which provide unlimited data roaming, 30 minutes of voice calls and 30 text messages per day for Won 19,000 per day and unlimited data roaming for Won 17,600 per day, respectively, in 94 countries. All of our “baro” plans include free high-quality data voice calls to Korea through our T phone
application. We also provide to all of our roaming service subscribers an automatic roaming service called “Safe Automatic T Roaming, Data Unlimited OnePass” plan” which provides data roaming services at different speeds depending on usage amount for Won 9,00030 minutes of voice calls per day using WCDMA networks and is available(including three minutes of free voice calls) for a maximum of Won 10,000 (with voice calls in 148 countries and our “T Roaming LTE Data Unlimited OnePass” plan which provides data roaming services at different speeds depending on usage amount for Won 15,000excess of 30 minutes per day using LTE networks and is available in 55 countries. Our “T Roaming Data OnePass Premium” plan provides data roaming services at different speeds depending on usage amount and a usage charge for outgoing voice calls of Won 500 per minute for Won 12,000 per day using WCDMA networks and is available in 35 countries.incurring additional charges). With respect to international calls placed by a subscriber, unless the subscriber uses one of our fixed-rate international roaming plans, we bill the subscriber the international rate charged by the Korean international telephone service provider through which the call is routed. We remit to that provider the international charge less our usage charges. See “Item 4.B. Business Overview — Interconnection.”“— Interconnection” below.
Digital Wireless Network
We offer wireless voice and data transmission services throughout Korea using digital wireless networks, primarily consisting of our 5G network, LTE network, WCDMA network, CDMAWi-Fi network and Wi-FiLoRa network. We continually upgrade and increase the capacity of our wireless networks to keep pace with advancements in technology, the growth of our subscriber base and the increased usage of voice and wireless data services by our subscribers. For more information about our capital expenditures relating to our wireless networks, see “Item 5.B. Liquidity and Capital Resources — Capital Requirements — Capital Expenditures.”
LTE5G Network. 5G is the state-of-the-art wireless network that enables data to be transmitted at speeds faster than our LTE network with lower latency. We commenced commercial wireless telecommunications services based on LTE technology, which is generally referred to as a fourth generation technology, on July 1, 2011 and expandedbegan the coverage areaoperation of our LTE services to nationwide by the end of April 2012. We launched our LTE multi-carrier service5G network in the 1.8 GHz spectrum in July 2012. In June 2013, we commenced providingDecember 2018 on a limited basis for business customers, beginning with a few major commercial LTE-A services at speeds of up to 150 Mbps using carrier aggregation technology which combines spectrum frequencies to improve data transmission speed and capacity, and in June 2014, we launched wideband LTE-A services at speeds of up to 225 Mbps and expanded coverage nationwide in 2014. In December 2014, we commenced tri-band LTE-A services, which bundles three different bandwidths to allow faster network service at speeds of up to 300 Mbpsdistricts in Seoul and other metropolitan areas. Since then,In April 2019, we have expandedlaunched wireless service plans using the 5G network following the commencement of sales of the first 5G-compatible smartphones, and we are in the process of expanding our 5G network coverage, nationwidefocusing on major commercial districts and other densely-populated areas in the Seoul metropolitan area and other cities. As part of this coverage expansion, as of December 31, 2015,2020, we have established 189 “5G Clusters” with high 5G connectivity at strategic locations where customers are able to experience the nationwide geographic coverage percentagefull potential of our tri-band LTE-A service was approximately 51.9% according to the MSIP. We continue to deploy improved LTE-A technology to increase the5G network through augmented reality and virtual reality services, cloud gaming and other ICT products. Our 5G services provide a maximum data transmission speed of 2.75 Gbps, and our services.LTE5G penetration was 17.4% as of December 31, 2020.We have also deployed our 5G network for mMTC connections relating to our IoT solutions.
We believe that our 5G technology and network infrastructure enable us to provide the fastest 5G data transmission network nationwide. In December 2020, the MSIT announced that our 5G network provided the fastest upload and download speeds among the three mobile network operators, KT, LG U+ and us. The nationwide average download speed of our 5G network was 795.6 Mbps compared to 667.5 Mbps for KT’s 5G network and 608.5 Mbps for LG U+’s 5G network.
LTE Network.LTE technology has become widely accepted globally as the standard fourth generation technology. LTE technology and enables data to be transmitted at speeds faster than our CDMAWCDMA network. Since first commencing our LTE services in July 2011 and WCDMA networks. Our continued upgradesLTE-A services, which use carrier aggregation technology that combines spectrum frequencies to improve data transmission speeds, in June 2013, we have developed and launched various upgraded LTE networks and services providing faster network speeds, enhanced connectivity and broader coverage areas. In February 2018, we launched four-band LTE-A services utilizing 4x4 multiple-input multiple-output (“MIMO”) technology providing for data transmission speeds of up to 1 Gbps, and we commenced five-band LTE-A services using 4x4 MIMO technology that provide data transmission speeds of up to 1.15 Gbps in March 2019 and up to 1.25 Gbps in March 2020.With these developments in LTE technology, our LTE penetration increased to 72.8% as of December 31, 2020 compared to 49.3% as of December 31, 2013. We expect that wireless services based on LTE technology will continue to be used broadly by our users in the near future, as we and our competitors continue to build up 5G networks and services and wireless service users gradually migrate to the 5G network over time, and plan to continue to deploy improved LTE-A technology to increase the maximum data transmission speed of our services.For machine-to-machine connections relating to our IoT solutions, we launched our LTE-M services at speeds of up to 10 Mbps in March 2016, as well as our LTE Cat.M1 services at speeds of up to 0.03 Mbps in April 2018. Upgrades to our LTE technology enablesin recent years have enabled even faster data transmission speeds, as shown below.
Wireless network technology
| Date of commencement of | Maximum | ||||||||
LTE | ||||||||||
| July 2011 | 75 Mbps | ||||||||
| ||||||||||
| June 2013 | 150 Mbps | ||||||||
Wideband LTE-A | June 2014 | 225 Mbps | ||||||||
Tri-band LTE-A | December 2014 | 300 Mbps | ||||||||
Five-band LTE-A | June 2017 | 700 Mbps | ||||||||
Tri-band LTE-A with 4x4 MIMO | June 2017 | 900 Mbps | ||||||||
Four-band LTE-A with 4x4 MIMO | February 2018 | 1 Gbps | ||||||||
Five-band LTE-A with 4x4 MIMO | March 2019 | 1.15 Gbps | ||||||||
Five-band LTE-A with 4x4 MIMO | March 2020 | 1.25 Gbps |
We believe that our advanced LTE technology and dense network infrastructure enable us to provide the fastest LTE data transmission network nationwide. In December 2020, the MSIT announced that our LTE network provided the fastest upload and download speeds among the three mobile network operators, KT, LG U+ and us. The nationwide average download speed of our LTE network was 207.7 Mbps compared to 142.1 Mbps for KT’s LTE network and 109.5 Mbps for LG U+’s LTE network.
The faster data transmission speed of our LTE network has allowed us to offer significantly improved wireless data transmission services, providing our subscribers with faster wireless access to multimedia content. We have been building new access networks and evolved packet cores for our LTE network, while we utilize our existing WCDMA network for other parts of our LTE network. For
WCDMA and CDMA Networks. WCDMA technology enables us to offer significantly faster and higher-quality voice and data transmission and supports more information aboutsophisticated wireless data transmission services than is possible through our capital expenditures relatingformer CDMA network. Since first commencing our WCDMA services in Seoul in 2003, we have expanded our WCDMA network nationwide and implemented various technologies to improve data transmission speeds within our LTE network, see “Item 5.B. Liquidity and Capital Resources.”WCDMA network.
CDMA and WCDMA Networks.CDMA technology is a continuous digital transmission technology that accommodates higher throughput than analog technology by using various coding sequences to allow concurrent transmission of voice and data signals for wireless communication. In January 1996, we launched our first wireless network based on CDMA technology and became the world’s first to commercialize CDMAsecond generation cellular service.
WCDMA technology enables us to offer significantly faster and higher-quality voice and data transmission and supports more sophisticated wireless data transmission services than is possible through ourusing the CDMA network. We commenced provisionAs a result of declining usage and the increasing difficulty of maintaining the network, we terminated our WCDMAsecond generation CDMA wireless services on a limited basis in Seoul at the end of 2003. Since then, we expanded our WCDMA network nationwide and implemented various technologies to improve data transmission speeds within our WCDMA network.July 2020.
Wi-Fi Network.Wi-Fi technology enables our subscribers with Wi-Fi-capable devices such as smartphones, laptops and tablet computers to access mobile Internet. We started to build Wi-Fi access points in 2010 and, as of
December 31, 2015,2020, we had more than 139,000 117,000 Wi-Fi access points in public areas such as shopping malls, restaurants, coffee shops, subways and airports where, generally, the demand for high-speed wireless Internet service is high. While each Wi-Fi access point typically has a radius of approximately 20-30 meters, some of our Wi-Fi hot zones, which have multiple Wi-Fi access points, including those installed at public transportation facilities and amusement parks, have much wider service areas.
LoRa Networks. A Low-Power Wide-Area network based on LoRa technology is a type of telecommunications network designed to support communication among IoT devices. It can transmit data over tens of kilometers while consuming much less power than LTE networks, lowering costs for connectivity as well as lowering battery power usage. We plan to continue to increasecompleted the numbernationwide deployment ofWi-Fi access points our LoRa network in July 2016. We expect that our LoRa network will provide the infrastructure necessary for the growth of not only our own IoT solutions business but also have a WiBro network that we usethe IoT industry as a backhaul for our Wi-Fi network.whole.
Network Infrastructure
The principal components of our wireless networks are:
• | cell sites, which are physical locations equipped with transmitters, receivers and other equipment that communicate by radio signals with wireless handsets within range of the cell (typically a 3 to 40 kilometer radius); |
• | switching stations, which switch voice and data transmissions to their proper destinations, which may be, for instance, a mobile phone of one of our subscribers (for which transmissions would originate and terminate on our wireless networks), a mobile phone of a KT or LG U+ subscriber (for which transmissions would be routed to KT’s or LG U+’s wireless networks, as applicable), a fixed-line telephone number (for which calls would be routed to the public switched telephone network of a fixed-line network operator), an international number (for which calls would be routed to the network of a long distance service provider) or an Internet site; and |
• | transmission lines, which link cell sites to switching stations and switching stations with other switching stations. |
As of December 31, 2015,2020, our 5G, LTE WCDMA, CDMA and WiBroWCDMA networks had an aggregate of 55,085 57,932cell sites. As we continue to expand our 5G network coverage, the number of our cell sites is expected to increase accordingly.
We have purchased substantially all of the equipment for our networks from Samsung Electronics, Ericsson–LG and Nokia Siemens Networks B.V.Nokia. Most of the transmission lines we use, including virtually all of the lines linking switching stations, as well as a portion of the lines linking cell sites to switching stations, comprise optical fiber lines that we own and operate directly. However, we have not undertaken to install optical fiber lines to link every cell site and switching station. In places where we have not installed our own transmission lines, we have leased lines from KT and LG U+.We intend to increase the efficiency of our network utilization and provide optimal services by internalizing transmission lines.
We use a wireless network surveillance system. This system oversees the operation of cell sites and allows us to monitor our main equipment located throughout the country from one monitoring station. The automatic inspection and testing provided to the cell sites lets the system immediately rebalance to the most suitable setting, and the surveillance system provides for automatic dispatch of repair teams and quick recovery in emergency situations.
Marketing, Distribution and Customer Service
Marketing. Our marketing strategy is focused on offering solutions tailored to the needs of our various customer segments, promoting our brand and leveraging our extensive distribution network. Our marketing plan includes a coordinated program of television, print, radio, outdoor signage, Internet and point-of-sale media promotions designed to relay a consistent message across all of our markets. OurWe market our wireless products and services under the “T” brand, which signifies the centrality
of “Telecommunications” and “Technology” to our business and also seeks to emphasize our commitment to providing “Top” quality, “Trustworthy” products and services to our customers. We market our wireless products and services under the “T” brand.
We have implemented certain information technology improvements in connection with our marketing strategy, including customer management systems, as well as more effective information security controls. We believe these upgrades have enhanced our ability to process and utilize marketing- and subscriber-related data, which, in turn, has helped us to develop more effective and targeted marketing strategies. We currently operate a customer information system designed to provide us with an extensive customer database. Our customer information system includes a billing system that provides us with comprehensive account information for internal purposes and enables us to efficiently respond to customer requests. Our customers can also change their rate plans, verify the charges accrued on their accounts, receive their bills online and send text messages to our other subscribers through our website at www.tworld.co.kr and through our “T world” mobile application.
We strive to improve subscriber retention through our T Membership program, which is a membership service available to our wireless subscribers. Our T Membership program provides various membership benefits to its members such as discounts with our membership partners for dining, shopping, entertainment and travel, access to our online membership shopping mall and invitations to various promotional events. Although our competitors also have similar membership programs, we believe that our T Membership program has a competitive advantage over our competitors’ membership programs due to our large subscriber base and breadth of membership benefits.
Distribution.For our distribution network, weWe use a combination of approximately 26an extensive network, including branch offices and 561 stores, directly operated by us through our wholly-owned subsidiary, PS&Marketing, Co., Ltd. (“PS&Marketing”), 4,119more than 3,200 authorized exclusive dealers and an extensive network of independent retailers in order to increase subscriber growth while reducing subscriber acquisition costs.
As part of our initiative to provide a differentiated customer service experience, we operate T Premium Stores that allow our potential and existing subscribers to experience certain of our services such as services that are available through our IoT solutions and platform and lifestyle enhancement platform.services. As of December 31, 2015,2020, we operated 120more than 600 T Premium StoresStores.In October 2020, we opened “T Factory,” a facility that offers a wide range of experiences with wireless devices as well as our subscription services and we intend to further expand the number of T Premium Stores in 2016.also includes an unmanned store that is open seven days a week and 24 hours a day.
In addition, we operate an online distribution channel, “T world Direct Shop,” through which subscribers can conveniently purchase wireless devices and subscribe to our services online. We also operate a dedicated online shop on 11st, our e-commerce marketplace. We intend to continue to develop our online distribution channel to leverage our offline distribution capabilities to provide convenience and additional value to our subscribers. For example, subscribers purchasing wireless devices through T World Direct Shop can opt to pick up their devices at one of our offline stores.
Currently, authorized dealers are entitled to an initial commission for each new subscriber registered by the dealer, as well as an average ongoing commission calculated as a percentage of that subscriber’s monthlyplan-based rate for the first fourfive years. In order to strengthen our relationships with our exclusive dealers, we offer a dealer financing plan, pursuant to which we provide to each authorized dealer an interest-free or low-interesta loan of up to Won 4.0 billion with a repayment period of up to three years. As of December 31, 2015,2020, we had an aggregate of Won 58.696.8 billion outstanding in loans to authorized dealers.
Customer Service.We provide high-quality customer service directly through our two wholly-owned subsidiaries, Service Ace Co., Ltd. and Service Top Co., Ltd., rather than rely on outsourcing. NetworkSK O&S Co., Ltd. operates our switching stations and related transmission and power facilities and offers quality customer service primarily to our business customers. We have held the top position with respect to our telecommunications service and retail sales service in Korea’s leading three customer satisfaction indices, the National Customer Satisfaction Index, the Korean Customer Satisfaction Index and the Korean Standard Service Quality Index, for over 1523 years, each.23 years and 21 years, respectively.
Fixed-line Telecommunication Services
We offer fixed-line telephone, broadband Internet and advanced media platform services (including IPTV)IPTV and cable TV services) and business communications services through our fixed-line telecommunication services segment. Our fixed-line
telecommunications services are provided by our subsidiaries, SK Broadband and SK Telink. The following table sets forth historical information about our subscriber base for our fixed-line telecommunication services for the periods indicated:
As of December 31, | As of December 31, | |||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Fixed-Line Telephone (including VoIP)(1) | 4,672,195 | 4,774,748 | 4,801,047 | |||||||||||||||||||||
Fixed-Line Telephone (including VoIP)(1) | 3,753,246 | 3,913,274 | 4,132,265 | |||||||||||||||||||||
Broadband Internet | 5,036,057 | 4,810,493 | 4,569,105 | 6,475,930 | 5,613,200 | 5,404,866 | ||||||||||||||||||
IPTV(2) | 3,481,969 | 2,819,130 | 2,081,260 | |||||||||||||||||||||
IPTV(2) | 5,657,328 | 5,193,329 | 4,729,238 | |||||||||||||||||||||
Cable TV | 2,928,912 | — | — |
(1) | Includes subscribers to VoIP services of SK Broadband and SK Telink. |
(2) | Includes subscribers to SK Broadband’s B tv service and |
In 2015, 20142020, 2019 and 2013,2018, our fixed-line telecommunication services segment revenue was Won 2,494.53,405.7 billion, Won 2,449.92,940.1 billion and Won 2,324.42,822.3 billion, respectively, representing approximately 14.6%18.3%, 14.3%16.6% and 14.0%16.7%, respectively, of our consolidated revenue. Following the entry into an agreement to transfer SK Broadband’s 100% equity interest in SK stoa Co., Ltd. (“SK Stoa”) to SK Telecom in April 2019 (which transaction was completed in January 2020), the T-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunications services segment in 2018, were reclassified as part of our commerce services segment for 2019. See “— Commerce Services.”
As part of our efforts to enhance our capabilities and increase our market share in the fixed-line business, we completed the Tbroad Merger in April 2020. We currently own approximately 74.3% of SK Broadband’s total outstanding shares. See “Item 3.D. Risk Factors — Risks Relating to Our Business — We may fail to successfully complete, integrate or realize the anticipated benefits of our new acquisitions, joint ventures or other strategic alternatives or corporate reorganizations, and such transactions may negatively impact our business.”
Fixed-line Telephone Services
Our fixed-line telephone services comprise local, domestic long distance, international long distance and VoIP services. VoIP is a technology that transmits voice data through an Internet Protocol network. As of December 31, 2015,2020, we had approximately 4.73.8 million fixed-line telephone subscribers (including subscribers to VoIP services of SK Broadband and SK Telink). Our fixed-line telephone services are primarily offered under the “B phone” brand name. SK Telink also provides affordable international calling services under the brand name “00700.”
Broadband Internet Access Services
Our broadband Internet access network covered more than 80%86% of households in Korea as of December 31, 2015. 2020.As of December 31, 2015,2020, we had approximately 5.06.5 million broadband Internet access subscribers. We offer broadband Internet access products with various throughput speeds, including “band Giga,ranging from “Giga Premium,” which is up to 10 times faster than data transmission speeds on networks utilizing fiber-to-the-home, or FTTH technology and allows for data transmission at a maximum speed of 1 Gbps, to “Giga Premium×10,” which provides data transmission speeds of up to 10 Gbps.
Advanced Media Platform (including IPTV)IPTV and Cable TV Services)
As part of our initiative to be the leading next-generation platform provider, we aim to provide an advanced media platform with various media content and service offerings.
We have offered video-on-demand services since 2006 and launched real-time IPTV services in 2009. We currently offer IPTV services under the brand name “B tv” with access to more than 130 liveas many as 267 high definition channels
depending on the subscription service as of December 31, 2020, as well as video-on-demand service providing a wide range of media content, including recent box office movie releases, popular U.S. and other foreign TV shows and various children’s TV programs. We also offer “B tv UHD,” which is an ultra-high definition IPTV service and has a resolution that is four times as high as the standard high definition broadcasting service in the IPTV industry. As of December 31, 2015,2020, we had approximately 3.55.7 million IPTV subscribers.
In January 2016,2018, we launched “oksusu,B tv × NUGU, which is an all-in-one set top box that incorporates NUGU voice recognition technology and can search for and play media content as well as connect to our Smart Home service through voice commands. In July 2019 and August 2019, respectively, we launched an updated set top box called “Smart 3” set top box, which provides Google Assistant capabilities in addition to our NUGU technology, and “AI 2,” which integrates a mobile IPTV service that is a combination ofstereo system with enhanced audio quality and improved NUGU voice recognition capabilities using beam forming technology.
Following the Tbroad Merger, we also offer cable TV services we previously provided asunder the “B tv mobile” and “hoppin” and provides subscribersCable” brand with access to a wide variety of media contents, including various television programs, movies and other video contents that can be downloaded to wireless devices. Oksusu subscribers have access to more than 100 live TV channels, a wide range of sports contents and popular U.S. and other foreign TV shows, among other contents. We are also collaborating with media content developers to provide original media content for our oksusu service.as many as 213 channels. As of December 31, 2015,2020, we had approximately 4.12.9 million subscriberscable TV subscribers.
In September 2019, we acquired a minority equity stake in Content Wavve, which operated the mobile OTT service “POOQ,” and transferred our former mobile OTT service business “oksusu” to oksusu.Content Wavve. Content Wavve combined oksusu and POOQ to launch a new integrated mobile OTT service “wavve” in September 2019. See “— Other Investments and Relationships — Wavve” below.
We continue to expand the scope of our media services and content offerings to provide our subscribers with a vast library of high-quality content that can be accessed through our wireless networks and our fixed-line network.
Business Communications Services
We offer other business communications services to our business customers, including corporations and government entities. Our business communications services include leased line solutions, Internet data center solutions and network solution services.
Our leased line solutions are exclusive lines that allow point-to-point connection for voice and data traffic between two or more geographically separate points. We hold a license to operate leased line services on a nationwide basis in Korea and also use international transmission lines to provide leased line services to other countries. Our leased line services enable high volumes of data to be transmitted swiftly and reliably. We also provide back-up storage for transmitted data. Through our Internet data center,centers, we provide our business subscribers with server-based support including co-location, dedicated server hosting and cloud computing services. Our network solution service utilizes our network infrastructure and voice platform to provide 24-hour monitoring and control of our customers’ networks. Through this service, we conduct remote monitoring of our customers’ data and voice communications infrastructure and network and traffic conditions, and carry out preventive examinations and on-site visits.
Rate Plans
For our residential customers, we offer both bundled rate plans for a combination of our fixed-line service offerings as well as individual rate plans for each separate service offering. Bundled rate plans are offered at a discount compared to subscribing to the same services through individual rate plans. Approximately 83%86% of subscribers to our fixed-line services subscribe to two or more of our services through our bundled rate plans. Bundled rate plans for a combination of fixed-line telephone, broadband Internet access and IPTV or cable TV services, which are subject to a contract of one to three years, range from Won 20,00030,800 to Won 46,00067,650 per month.month, depending on the services included and the length of the contract. We also offer bundled rate plans combining our fixed-line communication services with our wireless services and physical security services, respectively.
Our “Unlimited Home Phone”“5,000 minute” plan for subscribers to our fixed-line telephone service features unlimited5,000 voice minutes for domestic land-to-land voice minutes calls for a fixed rate and range from Won 7,0007,700 to Won 10,50011,550 per month depending on whether or not the subscriber opts for a contract and if so, the length of the contract period. We offer individual fixed-rate plans for our broadband Internet access service that range from Won 20,00025,410 to Won 50,000104,500 per month depending on the data throughput speed and existence and length of a contract. We offer individual fixed-rate plans for our IPTV serviceand cable TV services that range from Won 6,0004,400 to Won 28,00025,300 per month depending on the number
of channels provided and existence and length of a contract. In addition, subscribers can purchase individual videos on demand or subscribe to certain paid content on a periodic basis.
With respect to our business communications services, we offer rates that are tailored to the specific needs of our business customers. We also charge certain installation fees and equipment rental fees as well as other ancillary fees with respect to certain of our fixed-line telecommunications services.
Marketing, Distribution and Customer Service
We focus on bringing our fixed-line telephone, broadband Internet and advanced media platform services (including IPTV)IPTV and cable TV services) to residential users, and various business communications services to corporate users. We market our fixed-line telecommunications products and services under the “B” brand. Our “B” brand signifies the centrality of “Broadband” to our business and also seeks to emphasize our commitment to providing the “Best” quality products and services to our customers that go “Beyond” expectations, leading to a “Bravo” response. Our “B” brand also strengthens our shared identity with our wireless service’s “T” brand.
We currently outsource a significant portion of our retail sales force needs. We market our services and provide after-sales service support to customers through more than 8060 customer centers and a network of more than 170310 authorized exclusive dealers located throughout Korea. In addition, SK Telecom’s direct retail stores and authorized dealers for wireless telecommunications services also market our fixed-line telephone, broadband Internet and advanced media platform services (including IPTV)IPTV and cable TV services), which we believe has contributed to the increase in the number of subscribers to such services. We have contracts with our customer centers to sell our services exclusively. These centers receive a commission for each service contract and installation contract secured. In addition, we pay these centers for the maintenance and repair work that they perform for our subscribers. Customer
and service centers often enter into sub-contracts with smaller distribution outlets within their area to increase their sales coverage and engage in telemarketing efforts. Authorized dealers are entitled to an initial commission for each new subscriber registered by the dealer.
Sales to business subscribers are handled through our in-house sales group. Our sales teams focus on securing contracts with large commercial complexes, allowing us to install our remote terminals at their premises. After installation, sales teams direct their attention to individual business clients within these premises. Sales teams that have secured contracts with business clients remain the primary contacts for all aspects of the client’s needs, including further installation and customer and follow-up service.
Other BusinessesSecurity Services
We strive to continually diversify our products andOur security business consists of physical security services and develop new growth engines that we believe are complementary toinformation security services provided by ADT CAPS. In 2020, 2019 and 2018, our existing products andsecurity services such as our commerce business, our healthcare business and our hardware business, which we include in our others segment. In 2015, 2014 and 2013, our others segment revenue was Won 1,372.91,246.5 billion, Won 1,186.01,109.5 billion and Won 962.2284.3 billion, respectively, representing approximately 8.0%6.7%, 6.9%6.3% and 5.8%1.7%, respectively, of our consolidated revenue. Our security services businesses, which were previously part of our other businesses segment in 2018, were reclassified as a new security services segment in 2019.
ADP CAPS (formerly known as SK Infosec), the surviving entity resulting from the merger of LSH with and into SK Infosec in December 2020 and the merger of Former ADT CAPS with and into SK Infosec in March 2021, operates our security business. We currently own approximately 62.6% of the equity interest in ADT CAPS. We had acquired Former ADT CAPS, which operated our physical security business prior to such mergers, in October 2018 by acquiring a 55.0% interest in LSH, which owned 100% of Former ADT CAPS, for Won 696.7 billion. In December 2018, we merged NSOK Co., Ltd. (“NSOK”), which became our consolidated subsidiary in 2014 and provided residential and small business electronic security and other related alarm monitoring services, with and into Former ADT CAPS. We had acquired SK Infosec, which operated our information security business prior to the mergers, from SK Inc., our largest shareholder, in a share exchange transaction in December 2018, pursuant to which we transferred 1,260,668 treasury shares with an aggregate book value of Won 281.2 billion to SK Inc. in exchange for all of the issued and outstanding common shares of SK Infosec.
Physical Security
We provide a variety of physical security services utilizing our flagship unmanned surveillance and dispatch platform called the Central Monitoring Services (“CMS”), which are tailored for residential and commercial needs and operate through a centralized monitoring system that provides offsite surveillance through cameras, sensors and emergency alarms. Upon detecting any suspicious activity through such system or upon request, security personnel is dispatched to the relevant subscriber location to provide further onsite manned security.
We provide services that utilize synergies between our security business and other key business segments, such as “T Safe Security,” a CMS-based video surveillance and security guard dispatch service offered through the distribution channels for our wireless services. In addition, we offer bundle-based discounted rate plans such as “T&CAPS” and “B&CAPS,” which bundle our wireless service and broadband Internet service, respectively, with our physical security service. Beginning in June 2019, with the launch of T map Parking, we also operate a parking management and security solutions business. See “— Other Businesses — Miscellaneous Businesses — Mobility Business” below.
In response to the COVID-19 pandemic, we have also launched a range of services in 2020 related to disease preventive measures as well as remote work arrangements, such as “CAPS Smart Check” and “CAPS Smart Walk-In,” access security solutions with face recognition and thermometer functions, “CAPS Cleancare,” a disinfection and extermination service, and “CAPS Office Home,” a remote work office solution with information technology and security infrastructure.
Information Security
Our information security services consist of information security consulting services, managed security services as well as cyber threat intelligence solutions. Our representative product is “Secudium IoT,” a convergence security service that combines information, physical and operational technology security services into a single platform.
Commerce BusinessServices
Our commerce businessservices segment consists primarily of “11st,” our online marketplace business and O2O commerce business operated by Eleven Street, and “SK stoa,” our subsidiary,interactive T-commerce network. In 2020, 2019 and 2018, our commerce services segment revenue was Won 792.9 billion, Won 710.7 billion and Won 728.4 billion, respectively, representing 4.3%, 4.0% and 4.3%, respectively, of our consolidated revenue. Following the entry into an agreement to transfer SK Planet.Broadband’s 100% equity interest in SK Stoa to SK Telecom in April 2019 (which transaction was completed in January 2020), the T-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunications services segment in 2018, were reclassified as part of our commerce services segment for 2019.
MarketplaceE-Commerce. We operate “11st” which
11st is an online open marketplace that offers a wide range of products through an online and mobile platform. Individual consumers can buy a vast array of products such as clothes and accessories, beauty products, groceries, baby products, books, office supplies, furniture, home goods, outdoor and sporting goods, appliances, electronics, travel packages, entertainment tickets and local deals for restaurants and other services from small- to large-sized retailers that operate “mini malls” on the 11st platform. Eleven Street also operates SK Pay, a convenient and secure payment service through which users can register their credit card to simplify payments for online and mobile purchases for many of our services, including 11st.
As of December 31, 2015, the mobile version of2020, 11st was the leading mobilesecond-largest commerce platform in terms of the total number of unique visitors to its mobile and desktop versions, according to Korean Click.Nielsen Koreanclick. The mobile version of 11st, is continuing to grow with an increasewhich has grown significantly in the percentagerecent years, accounted for 68%, 64% and 62% of 11st’s annual gross merchandise volume, which represents the total annual monetary value of customer purchases of goods and services, net of estimated refunds, derived from the mobile platform to 41% in 2015 from 28% in 2014.
We have expanded our online open marketplace business globally to Turkey, Indonesia and Malaysia. In March 2013, Dogus Planet, a joint venture between SK Planet and Dogus Group, a Turkish conglomerate, launched “n11.com” in Turkey. In March 2014, XL Planet, a joint venture between SK Planet and XL Axiata Tbk, an Indonesian mobile telecommunications service provider, launched “elevenia” in Indonesia. Further, in April 2015, Celcom Planet, a joint venture between SK Planet and Celcom Axiata, a Malaysian telecommunications service provider, launched “11street” in Malaysia.
refunds.We intend to continue our efforts to increase usage of the mobile version of 11st, enhance the convenience of our 11st mobile and web user interface and create synergies with our other products and services.
Eleven Street was spun-off as our new consolidated subsidiary from SK Planet Co., Ltd. (“SK Planet”) in September 2018. In connection with such spin-off, Eleven Street received a Won 500 billion equity investment in the form of redeemable convertible preferred shares from a group of financial investors led by H&Q Korea Partners, LLC, pursuant to which such financial investors held an 18.2% equity interest in Eleven Street as of December 31, 2020.
T-Commerce
We also operate a T-commerce network, “SK stoa,” through our consolidated subsidiary SK Stoa, which offers a broad assortment of goods and services through pre-recorded television programming. The goods and services promoted on SK stoa’s T-commerce programming can be purchased through telephone orders, SK stoa’s mobile application or online open marketplace, or a virtual application appearing on the television screen using the viewer’s remote controller. In March 2019, SK Stoa launched “SK stoa ON,” which offers searchable shopping programming that is available to viewers at their convenience by utilizing video-on-demand capabilities. In September 2019, SK Stoa launched “Hellen Karen,” its own private fashion brand. SK stoa also acts as the exclusive T-commerce distributor for certain products and services of SK Group companies, such as food, electronics, home appliances and car rentals.
Other Businesses
We strive to continually diversify our products and services and develop new growth engines that we believe are complementary to our growthexisting products and services, which we include in overseas e-commerce markets.our other businesses segment. In 2020, 2019 and 2018, our other businesses segment revenue was Won 883.9 billion, Won 803.0 billion and Won 660.1 billion, respectively, representing 4.7%, 4.5% and 3.9%, respectively, of our consolidated revenue.
O2O Commerce.Mobility Business
We provide diverse O2O commercemobility services through T Map Mobility, a wholly-owned subsidiary of SK Telecom created as a result of a spin-off of SK Telecom’s mobility business into a newly incorporated entity as of December 29, 2020. As a result of such spin-off, our mobility business, which was previously part of our cellular services segment, became a part of our other businesses segment beginning December 29, 2020.
Our mobility services is offered through our “T map” platform, which is the leading global positioning system (“GPS”) navigation service in Korea provided to our and our competitors’ wireless subscribers free of charge. T map uses GPS technology to transmit driving directions, real-time traffic updates and emergency rescue assistance to wireless devices. As of December 31, 2020, there were approximately 12.4 million monthly average users of our T map service. We have integrated our AI platform, NUGU, into our T map service to enable users to use voice commands to operate its navigation functions as well as their mobile devices, such as calling, text messaging and music streaming, while driving to enhance the convenience and safety of T map users.
T map also offers a taxi-hailing service called “T map Taxi,” as well as “T map Parking,” a parking service launched in June 2019 that combines our ICT technology with ADT CAPS’ parking management and security solutions underto provide users with real-time information related to parking lot locations, availability, rates and discounts, in addition to automatic payment services in the “Syrup” brand name,case of select parking lots, including those operated by ADT CAPS, through a dedicated mobile application. As of December 31, 2020, T map Taxi and T map Parking had approximately 0.6 million and 0.1 million monthly active users, respectively.
We have entered into strategic partnerships with global ride-hailing service providers. In January 2019, we formed Grab Geo Holdings PTE. LTD., a joint venture in which we hold a 30.0% interest, with Grab, the leading ride-hailing service provider in Southeast Asia. Through this joint venture, we launched a navigation service for Grab drivers based on T map’s key technologies, including big data analysis algorithms and ultra-precise GPS solutions, in Singapore, and we plan to expand such service to other countries in which Grab operates. We also formed a strategic partnership with Uber pursuant to which Uber has invested approximately US$50 million in T Map Mobility and approximately US$100 million in UT LLC, a joint venture formed in April 2021 between T Map Mobility and Uber in which we hold a 49.0% interest. Through UT LLC, we will launch a taxi hailing service that integrates our affiliated taxi driver network and mapping and AI technologies with Uber’s ride hailing technology.
In April 2021, T Map Mobility agreed to receive a Won 400 billion equity investment in the form of common shares from financial investors, Affirma Capital and EastBridge Partners, pursuant to which such financial investors will each hold a 14.0% equity interest in T Map Mobility. The transaction is expected to close in May 2021.
Marketing Platform Business
We provide marketing platform services through SK Planet, which include the following:
Syrup Wallet, a mobile wallet service that is the successor to our Smart Wallet service, allows users to conveniently manage membership card points and payment methods such as coupons, credit cards and gift vouchers on their mobile devices for both online and offline purchases and provides shopping information to users in certain shopping areas using advanced location-based technology; and
OK Cashbag, by Syrup, Korea’s largesta loyalty points program in terms of number of members with more than 50,000 participating merchants and 38 million members, which allows members to collect and redeem loyalty points at its partnering merchants and offers differentiated marketing services to such partnering merchants;merchants.
Syrup Pay, a convenient and secure payment service through which users can register their credit card to simplify payments for online and mobile purchases, including through 11st, our online open marketplace;
Syrup Gifticon, an online and mobile gift exchange and delivery service;
Syrup Order, a food ordering service that allows users to conveniently place and pay for orders at restaurants in advance; and
Syrup Table, a location-based restaurant discovery service that provides users with information about nearby restaurants.
The cumulative number of daily average users of our O2O commerce solutions was 3.0 million as of December 31, 2015.
We are also expanding our O2O commerce solutions business globally. In October 2014, a 95.2%-owned subsidiary of SK Planet acquired a 100.0% ownership interest in Shopkick, the developer of “shopkick,” a mobile shopping application that checks in and rewards customers that arrive at a participating retail store, for an aggregate purchase price of Won 230.9 billion and the assumption of Won 18.7 billion in current liabilities.
Hardware BusinessPortal Service
We manufacture projection display devices, high-end audio devices and intelligent agent machines through our hardware business.
Projection Display Devices. We offer projection display devices under the brand name “UO Smart Beam Laser.” The UO Smart Beam Laser is a high definition pico projector that uses laser diodes to deliver bright and sharp images with a liquid crystal on silicon, or LCOS, based engine and is compatible with a wide range of computers and mobile devices. The UO Smart Beam Laser was selected as a 2016 CES Innovation Awards Honoree in the Home Video/Audio Components and Accessories category.
High-end Audio Devices. We offer high-end audio devices under the brand name “Astell&Kern” that are manufactured by our subsidiary, Iriver. Two of Iriver’s audio devices were selected as 2016 CES Innovation Awards Honorees in the Portable Media Player and Accessories category and High Performance Home Audio/Video category, respectively.
In August 2014, we acquired a 39.3% equity interest in Iriver, a manufacturer of digital audio players and other portable media devices, which we increased to 49.0% in December 2014, for an aggregate purchase price of approximately Won 54.5 billion. We also acquired Won 5.0 billion of convertible bonds issued by Iriver, which may be converted into additional equity interests in Iriver when certain conditions are met.
Intelligent Agent Machines. We co-developed educational smart robots, “Atti” and “Albert,” as a learning tool for young children with diverse interactive games and educational content. We have also developed a coding training program utilizing our smart robots to teach children how to develop software in a fun and easy way. We have provided our smart robots to various countries globally, including Spain, France, China, Brazil and Colombia. In October 2015, we signed an agreement to provide Albert to be utilized in 300 preschool classrooms in Costa Rica to make learning more effective and interesting for children.
Miscellaneous Businesses
We offer a portal service under our “Nate” brand name through SK Communications. Nate can be accessed through its website, www.nate.com, or through its mobile application. Nate offers a wide variety of content and services, including Nate Search, an Internet search engine, Nate News, which provides a library of articles about current events, sports, entertainment and culture, Nate Pann, a user-generated content service as well as access to free e-mail accounts through Nate Mail.
Others
We offer high-end audio devices under the brand name “Astell&Kern” that are manufactured by our subsidiary, Dreamus Company (“Dreamus”). Dreamus also operates our personalized music platform “FLO,” which provides a music streaming service with customized music recommendations and user interfaces by analyzing individual user preferences with our AI technology. In 2018, we acquired an additional equity interest in Dreamus for Won 65.0 billion, and as of December 31, 2020, we had a 51.4% equity interest in Dreamus.
We also operate a mobile application marketplace, “T Store.“One Store,” We collaboratedin collaboration with KT, and LG U+ to launch “One Store” in June 2015. One Store is a combination of T Store and the mobile application marketplaces separately operated by KT and LG U+.NAVER Corporation. Through this joint collaboration, we expect to increase the competitiveness of One Store to compete with Google Playstore, the leading mobile application marketplace in Korea. In recent years, we have made offerings of mobile games as the focus of One Store in response to the rapid growth of the mobile game market in Korea.In November 2019, One Store Co., Ltd., our consolidated subsidiary that operates One Store, undertook a capital increase of approximately Won 97.5 billion by issuing convertible preferred shares to a consortium of financial investors including Kiwoom Investment and SKS Private Equity. As of December 31, 2020, we held 52.1% of the total outstanding shares of One Store Co., Ltd.
In addition, in order to strengthen our data security capabilities in light of expected increases in data transmission by wireless service subscribers and users of our IoT solutions through our 5G network, we operateacquired a security and network surveillance business through Neosnetworks,controlling equity interest in id Quantique, a leading provider of residential and small business electronicquantum cryptography solutions for data security based in Switzerland, in 2018. As of December 31, 2020, we held a 68.1% equity interest in id Quantique.
In June 2019, we acquired a 34.6% interest in Incross, a digital advertising company that provides mobile, online and other related alarm monitoring services. In 2014 and 2015, we acquired an 83.9% interest in Neosnetworksforms of digital advertising solutions, for an aggregate purchase price of Won 64.053.7 billion, in light of potential synergies with our media and commerce businesses. Although we own less than a majority of Incross’s outstanding equity interest, Incross is deemed to be our consolidated subsidiary based on our management’s determination that we have sufficient control.
We also provide freight and logistics consulting services to corporate customers through FSK L&S Co. Ltd. (“FSK L&S”), a joint venture with a subsidiary of Foxconn Technology Group of Taiwan, in which we hold a 60.0% equity interest as part of December 31, 2020. We acquired such 60.0% equity interest from SK Inc. in February 2018 for approximately Won 18.0 billion. We accounted for FSK L&S as an associate under the equity method in 2018, but following our initiative to further develop our IoT solutions platform.determination that we have obtained control of FSK L&S during 2019, FSK L&S has become a consolidated subsidiary beginning in 2019.
Interconnection
Our wireless and fixed-line networks interconnect with the public switched telephone networks operated by KT and SK Broadband and, through their networks, with the international gateways of KT and LG U+, as well as the networks of the other wireless telecommunications service providers in Korea. These connections enable our subscribers to make and receive calls from telephones outside our networks. Under Korean law, certain service providers, including us, are required to permit other service providers to interconnect to their networks. If a new service provider desires interconnection with the networks of an existing service provider but the parties are unable to reach an agreement within 90 days, the new service provider can appeal to the KCC.
Domestic Calls
Guidelines issued by the MSIPMSIT require that all interconnection charges levied by a regulated carrier take into account (i) the actual costs to that carrier of carrying a call or (ii) imputed costs. Starting in 2016, the MSIP will determineThe MSIT determines interconnection rates applicable to each carrier based on changes in traffic volume, taking into account other factors such as research results, competition and trends in technology development.
Wireless-to-Fixed-line. According to our interconnection arrangement with KT, for a call from our wireless network to KT’s fixed-line network, we collect the usage rate from our wireless subscriber and in turn pay KT the interconnection charges. Similarly, KT pays interconnection charges to SK Broadband for a call from KT’s wireless network to SK Broadband’s fixed-line network. The interconnection rate applicable to both KT and SK Broadband was Won 13.448.56 per minute, Won 14.739.15 per minute and Won 16.749.99 per minute for 2015, 20142020, 2019 and 2013,2018 respectively.
Fixed-line-to-Wireless. The MSIPMSIT determines interconnection arrangements for calls from a fixed-line network to a wireless network. For a call initiated by a fixed-line user to one of our wireless subscribers, the fixed-line network operator collects our usage fee from the fixed-line user and remits to us an interconnection charge. Interconnection with KT accounts for substantially all of our fixed-line-to-wireless interconnection revenue and expenses.
The interconnection ratesrate paid by fixed-line network service providers to each wireless network service provider are set out below. In December 2010, the KCC announced that a single interconnection rate willwas Won 10.61 per minute, Won 11.64 per minute and Won 13.07 per minute for 2020, 2019 and 2018, respectively.
Wireless-to-Wireless. Interconnection charges also apply to all wireless telecommunications service providers starting from 2013, which will eliminate the cost benefit that KT and LG U+ currently derive from the differences in interconnection rates. However, in November 2012, the KCC announced that it would continue to apply varied interconnection rates for the year 2013 considering the cost difference among wireless network service providers and our position as a dominant network service provider. These regulations currently remain effective; however, it is unclear whether the MSIP will continue to maintain varied interconnection rates due to our dominant market position.
Rate per Minute | ||||||||||||
Applicable Year | SK Telecom | KT | LG U+ | |||||||||
2012 | ₩ | 27.05 | ₩ | 28.03 | ₩ | 28.15 | ||||||
2013 | 26.27 | 26.98 | 27.04 | |||||||||
2014 | 22.22 | 22.73 | 22.78 | |||||||||
2015 | 19.53 | 19.92 | 19.96 |
Wireless-to-Wireless. The MIC implemented interconnection charges for calls between wireless telephone networks in Korea starting in January 2000.Korea. Under these arrangements, the operator originating the call pays an interconnection charge to the operator terminating the call. The applicable interconnection rate is the same as the fixed-line-to-wireless interconnection rate set out in the table above.
Our revenues from the wireless-to-wireless charge were Won 582.6449.1 billion in 2015,2020, Won 651.2463.8 billion in 20142019 and Won 641.2498.5 billion in 2013.Our2018. Our expenses from these charges were Won 579.0451.6 billion in 2015,2020, Won 700.3464.1 billion in 20142019 and Won 615.6494.2 billion in 2013.2018. The charges above were agreed among the parties involved and confirmed by the KCC.
International Calls and International Roaming Arrangements
With respect to international calls, if a call is initiated by our wireless subscribers, we bill the wireless subscriber for the international charges of KT, LG U+ or SK Broadband, and we receive interconnection charges from such operators. If an international call is received by our subscriber, KT, LG U+ or SK Broadband pays interconnection charges to us based on our imputed costs.
To complement the services we provide to our subscribers in Korea, we offer international voice and data roaming services. We charge our subscribers usage fees for global roaming service and, in turn, pay foreign wireless network operators fees for the corresponding usage of their network. For a more detailed discussion of our global roaming services, see “Item 4.B. Business Overview — Cellular Services —“— Wireless Services” above.
Competition
We operate in highly saturated and competitive markets, and we believe that our subscriber growth is affected by many factors, including the expansion and technical enhancement of our networks, the development and deployment of new technologies, the effectiveness of our marketing and distribution strategy, the quality of our
customer service, the introduction of new products and services, competitive pricing of our rate plans, new market entrants and regulatory changes.
Historically, there has been considerable consolidation in the telecommunications industry, resulting in the current competitive landscape comprising three mobile and fixed network operators in the Korean market, KT, LG U+ and us. OurEach of our competitors havehas substantial financial, technical, marketing and other resources to respond to our business offerings.
The following table shows the market share information, based on number of subscribers, as of December 31, 2015,2020, for the following markets.
Market Share (%) | Market Share (%) | |||||||||||||||||||||||||||||||
SK Telecom | KT | LG U+ | Others | SK Telecom | KT | LG U+ | Others | |||||||||||||||||||||||||
Wireless Service(1) | 49.4 | 30.4 | 20.2 | — | ||||||||||||||||||||||||||||
LTE Service(1) | 46.2 | 30.0 | 23.8 | — | ||||||||||||||||||||||||||||
Wireless Service(1) | 45.1 | % | 31.4 | % | 23.5 | % | — | % | ||||||||||||||||||||||||
LTE Service(1) | 43.5 | 30.8 | 25.7 | — | ||||||||||||||||||||||||||||
5G Service(1) | 46.2 | 30.6 | 23.2 | — | ||||||||||||||||||||||||||||
Fixed-Line Telephone (including VoIP) | 16.2 | 57.5 | 17.5 | 8.8 | 15.8 | 56.8 | 19.1 | 8.3 | ||||||||||||||||||||||||
Broadband Internet | 25.1 | 41.6 | 17.4 | 15.9 | 29.0 | 41.1 | 20.3 | 9.6 | ||||||||||||||||||||||||
IPTV(2) | 12.1 | 22.7 | 7.9 | 57.3 | ||||||||||||||||||||||||||||
Pay TV(2) | 24.4 | (3) | 32.2 | (4) | 25.0 | (5) | 18.4 |
(1) | Includes MVNO subscribers that lease the wireless networks of the respective mobile network operator. |
(2) | Includes video-on-demand only service subscribers. Market share is expressed as a percentage of the pay TV market (which includes IPTV, cable TV and satellite TV). |
(3) | Consists of 16.1% from our IPTV service and 8.3% from our cable TV service. |
(4) | Consists of 24.9% from KT’s IPTV service and 7.3% from its satellite TV service provided through KT Skylife Co, Ltd., a subsidiary of KT. |
(5) | Consists of 14.0% from LG U+’s IPTV service and 11.0% from its cable TV service provided through LG HelloVision, a subsidiary of LG U+. |
Cellular Services
As of December 31, 2015,2020, we had 28.631.4 million subscribers, representing a market share of approximately 49.4%45.1%, including MVNO subscribers leasing our networks. As of December 31, 2015,2020, KT and LG U+ had 17.621.8 million and 11.716.3 million subscribers, respectively, representing approximately 30.4%31.4% and 20.2%23.5%, respectively, of the total number of wireless subscribers in Korea on such date, each including MVNO subscribers leasing its networks. As of December 31, 2015,2020, we had 18.95.5 million 5G subscribers and KT and LG U+ had 3.6 million and 2.8 million 5G subscribers, respectively, each including MVNO subscribers leasing its networks. As of December 31, 2020, we had 22.8 million LTE subscribers and KT and LG U+ had 12.216.2 million and 9.713.5 million LTE subscribers, respectively, each including MVNO subscribers leasing its networks.
In 2015,2020, we had 6.04.4 million activations and 5.64.5 million deactivations.For 2015,deactivations. For 2020, our monthly churn rate ranged from 1.3%1.1% to 2.1%1.4%, with an average monthly churn rate of 1.5% for 2015,1.2%, which decreased by 0.5%premained unchanged from 2014.2019. In 2015,2020, we gained 47.7%41.8% of the total number of new wireless subscribers and subscribers that migrated to a different wireless telecommunications service provider, compared to KT with 28.6%30.6% and LG U+ with 23.8%27.6%.
We also competeOur competitors for subscriber activations withinclude MVNOs, including MVNOs that lease our networks. MVNOs generally provide rate plans that are relatively cheaper than similar rate plans of the wireless network providers from which they lease their networks, including us. To date, thirteenCurrently, 14 MVNOs have commenced providingprovide wireless
telecommunications services.services using the networks leased from us. As of December 31, 2015,2020, MVNOs had a combined market share of 10.1%13.1%, of which MVNOs leasing our networks represented 4.6%3.3%, MVNOs leasing KT’s networks represented 4.7%7.1% and MVNOs leasing LG U+’s networks represented 0.8%2.7%.
In addition, other companies may enter the telecommunications servicewireless network services market. New entries in such market by acquiring thehave historically required obtaining requisite licenses from the MSIP. For example,MSIT. However, pursuant to an amendment to the Telecommunications Business Act that went into effect in October 2015, Sejong Telecom, K Mobile and Quantum Mobile applied for licenses toJune 2019, companies meeting certain regulatory criteria
may become Korea’s fourth mobilea network operator. Althoughservice provider by registering with the MSIP rejectedMSIT without a separate license requirement, which may have the applicationseffect of all three companies in January 2016,encouraging new entries into the MSIP may continue its efforts to find an eligible applicant to be Korea’s fourth mobileKorean wireless network operatorservices market in the future. For a description of the risks associated with the competitive environment in which we operate, see “Item 3.D. Risk Factors — Risks Relating to Our Business — Competition may reduce our market share and harm our results of operations and financial condition.”
Prior to 2015,Historically, competition in the wireless telecommunications business had caused us to significantly increase our marketing and advertising expenses. Between 2012 and 2014,expenses from time to time depending on the prevailing competitive landscape, with our marketing expenses as a percentage of SK Telecom’s revenue, on a separate basis, fluctuated heavily between 23.9% to 33.7%, depending on the competitive landscape. However,reaching a peak of 28.2% in 2015, such2012. Such percentage fluctuated between 23.0%was 24.5% in 2018, 25.6% in 2019 and 27.0%.We26.1% in 2020. We attribute such stabilization to the maturity of the LTEoverall wireless telecommunication market and the implementation of the MDDIA, which prohibits wireless telecommunications service providers from unfairly providing discriminatory subsidies based on certain criteria and from providing subsidies exceeding a maximum limit established by the KCC for the purchase of mobile phone models that were launched within the last 15 months, among other restrictions and requirements.Forcriteria. For a more detailed discussion of the MDDIA, see “Item 4.B. Business Overview —“— Law and Regulation — Competition Regulation — Rate Regulation.”
We expect that due to the limitations on subsidies pursuant to the MDDIA, the differentiated product and service offerings we provide, the vast library of high-quality media content we offer and the competitiveness of our T Membership program will continue to play an important role in enhancing the loyalty of our wireless subscribers.Regulation” below.
We face competition from KT and LG U+ as well as other platform service providers in our other cellular service businesses. For example, our Smart Home service competes with KT’s Giga IoT Home service and LG U+’s IoT@Home service. Although it is difficult to determine the markets in which we compete with respect to certain of our lifestyle enhancement platform services, we generally compete with various other Internet or mobile platform service companies such as Naver and Kakao Corp. (“Kakao”) in connection with such services.
Fixed-Line Telecommunication Services
Our fixed-line telephone service competes with KT and LG U+ as well as providers of other VoIP services. As of December 31, 2015,2020, our market share of the fixed-line telephone and VoIP service market was 16.2%15.8% (including the services provided by SK Broadband and SK Telink) in terms of number of subscribers compared to KT with 57.5%56.8% and LG U+ with 17.5%19.1%.
We are the second largest provider of broadband Internet access services in Korea in terms of both revenue and subscribers, and our network covered more than 80%86% of households in Korea as of December 31, 2015.2020. As of December 31, 2015,2020, our market share of the broadband Internet market was 25.1%29.0% in terms of number of subscribers compared to KT with 41.6%41.1% and LG U+ with 17.4%20.3%.
Our IPTV service competesand cable TV services compete with other providers of such pay TV services, including KT, LG U+ and cable companies. As of December 31, 2015,2020, our market share of the pay TV market (which includes IPTV, cable TV and satellite TV) in terms of number of subscribers was 12.1%24.4% compared to KT with 22.7%32.2% (including its IPTV and satellite TV services) and LG U+ with 7.9%25.0% (including its IPTV and cable TV services), and the collective market share of other pay TV providers of 57.3%was 18.4%. With respect toFurthermore, our mobile IPTV business, we face competition from similarand cable TV services provided by KT and LG U+. We also faceare facing an increasing level of competition from global mediaoperators of online video streaming service providersplatforms, such as YouTube, Amazon Video and Netflix, and the video services offered by leading domestic online and mobile search and communications platforms including NAVER and Kakao, as such services continue to become increasingly popular to serve as a substitute to traditional television programming.
Recently, the Korean fixed-line telecommunications industry has been going through significant consolidation involving major pay television service providers. We completed the Tbroad Merger in April 2020, as a result of which launched its serviceswe have become the third-largest pay TV provider in Korea in January 2016.terms of number of subscribers as of December 31, 2020. In December 2019, LG U+ acquired a majority equity stake in LG HelloVision to become the second-largest pay TV provider in Korea in terms of number of subscribers as of December 31, 2020. Such transactions, as well as further consolidation in the fixed-line telecommunications industry, may result in increased competition, as the entities emerging from such consolidation and other remaining players in the industry may actively pursue expanding or protecting their respective market shares.
Furthermore, the Government has historically enforced regulations on cable TV and IPTV service providers that prohibited them from having a market share of more than one-third of the total number of subscribers in the relevant pay TV market on each of their respective platforms. In June 2015, the Government amended the regulation to impose the same limit on the market share of the entire pay TV market, including satellite TV service providers as well. Such amended regulation, however, expired in June 2018. There are bills currently pending in the National Assembly to abolish the previous market share regulations on cable TV and IPTV service providers. It is uncertain whether such bills will be passed.
Other BusinessesSecurity Services
The e-commercephysical security services industry in Korea is expanding rapidly due to the relatively low penetration of physical security services as compared to other developed countries, growing demand for residential security services and the popularization of unmanned services. Our physical security business competes with other large physical security service providers, including S-1 and KT Telecop. As of December 31, 2020, our market share of the physical security services market was 34% in terms of the aggregate revenue of these three companies, compared to S-1 with 55% and KT Telecop with 11%.
The information security services market in Korea is also undergoing rapid growth as various industries become more digitalized and the risk of cybersecurity breaches heightens. Our information security services compete with other providers of similar products and services, such as Ahnlab, Inc., SECUi Corp. and Igloo Security, Inc.
Commerce Services
The commerce industry is evolving rapidly and is intensely competitive, and we face a broad array of competitors domestically and increasingly, internationally. Our marketplace business, 11st, faces intense competition from various e-commerce providers, including online open marketplaces such as Gmarket, Auction and
Interpark and online social commerce operators such as Coupang, Ticket MonsterGmarket, Auction and Wemakeprice.Interpark. We also face competition from leading online and mobile search and communication platform companies with e-commerce operations, including NAVER and Kakao, as well as traditional retailers with online and mobile shopping portals such as SSG.com and Lotte.com, home shopping providers with online and mobile shopping portals such as CJ Mall by CJ O Shopping, GS Shop by GS Homeshopping and Hyundai Hmall by Hyundai Homeshopping, and various online marketplaces for specific consumer segments or product groups. Our T-commerce business, SK stoa, primarily competes with other home shopping providers such as those listed above, as well as with various e-commerce providers and traditional retailers.
The O2O commerce solutions industry is in its early stages of development and is heavily fragmented with a wide range of services being introduced. Thus, it is difficult to determine the markets in which we compete with respect to such services at this stage of the industry’s development.
Other Investments and Relationships
We have investments in several other businesses and companies and have entered into various business arrangements with other companies. Our principal investments fall intoinclude the following categories:following:
SK Hynix
In February 2012,As of December 31, 2020, we acquiredheld a 21.1%20.1% equity stakeinterest in SK Hynix, one of the world’s largest memory-chip makers by revenue, for an aggregate purchase price of approximately Won 3.4 trillion, and became its largest shareholder. By investing in the export-driven semiconductor business, we aim to achieve a more diversified business portfolio, as well as seeking global growth opportunities utilizing SK Hynix’s overseas network.revenue. SK Hynix designs, manufactures and sells advanced memory semiconductor products, including DRAM and NAND flash products, used in various electronic devices. SK Hynix operates four wafer fabrication facilities in Korea and China.
As of December 31, 2020, the fair value of our holding in SK Hynix was Won 17,312.9 billion.We received dividend payments of Won 146.1 billion in 2020, Won 219.2 billion in 2019 and Won 146.1 billion in 2018 related to such shareholding. In 2015, 20142020, 2019 and 2013,2018, SK Hynix and its subsidiaries, on a consolidated basis, hadreported revenues of Won 18,798.031,900.4 billion, Won 17,125.626,990.7 billion and Won 14,165.140,445.1 billion, respectively, profit before income tax of Won 5,269.16,237.0 billion, Won 5,047.72,432.6 billion and Won 3,074.921,341.0 billion, respectively, and profit for the year of Won 4,323.64,758.9 billion, Won 4,195.22,009.1 billion and Won 2,872.915,540.0 billion, respectively. The increase in SK Hynix’s revenues in 2020 was primarily due to increases in the demand for DRAM and NAND flash products, despite decreases in their average selling prices. As of December 31, 2015, 20142020, 2019 and 2013,2018, SK Hynix and its subsidiaries, on a consolidated basis, hadreported total assets of Won 29,677.971,173.9 billion, Won 26,883.365,248.4 billion and Won 20,797.363,658.3 billion, respectively, and total equity of Won 21,387.751,909.1 billion, Won 18,036.347,935.9 billion and Won 13,066.946,852.3 billion, respectively.
Healthcare Business
We believe that the healthcare business is one For a more detailed discussion of the new growth industries as society ages and medical and health technologies evolve and become integrated with information and communication technologies (“ICT”). In 2011, we began pursuing new opportunitiesrisks relating to our shareholding in SK Hynix, see “Item 3.D. Risk Factors — Risks Relating to Our Business — Declines in the healthcare business area by acquiring a 9.3%market value of our equity interestholdings in NanoEnTek Inc. (“NanoEnTek”), a biotechnology and nanotechnology company manufacturing, among others, point-of-care diagnostics devices. In April 2014, we became the largest shareholder of NanoEnTek with a 26.0% equity interest. In January 2016, NanoEnTek acquired Bio Focus Co., Ltd., a manufacturer of in vitro diagnostic products. In January 2012, we established a joint venture, Healthconnect Co., Ltd. (“Healthconnect”), with Seoul National University Hospital to develop a health management service model for mobile device users utilizing ICT and currently hold a 49.5% equity interest in Healthconnect.
We are also seeking opportunities in global healthcare markets. In the first quarter of 2013, we acquired a 49.0% equity interest in X’ian Tianlong Science and Technology Co., Ltd. (“Tianlong”), a Chinese medical device manufacturer, which has since expanded its product portfolio with the development of a new diagnostic product and entry into new business areas. In July 2014, we established the SK Telecom Healthcare R&D Center in Shenzhen, ChinaHynix and the Shenzhen VISTA-SK Medical Center, which we believe will provide us withresults of operations of SK Hynix could have a strong foothold in expanding our healthcare business in China. Shenzhen VISTA-SK Medical Center was established through a joint venture with Vista Medical Center, a major private healthcare service provider based in Beijing, China, and has the capacity to provide medical examinations and checkups to approximately 30,000 people annually. We also collaborate with a hospital in the Wuxi region to operate a Smart Primary Healthcare Center basedmaterial adverse effect on ICT healthcare solutions, and we plan to provide a mobile healthcare clinic to underserved regions. We believe that there are opportunities to create synergies among these centers and the medical device business of Tianlong in expanding our healthcare business in China.
In June 2014, we also entered into a contract to provide medical information systems to six Saudi Arabian hospitals for approximately Won 70.0 billion through a consortium with Seoul National University Bundang Hospital. We established a joint venture in Saudi Arabia in March 2016 to provide medical information systems to additional hospitals and further expand our healthcare business in the Middle East.
Packet One Networks
In July 2010, we acquired a 27.2% equity interest in Packet One Networks (“P1”), a Malaysian fourth generation WiMAX telecommunications company and subsidiary of Green Packet Berhad, for US$101 million. In connection with P1’s plan to increase its capital, we made an additional investment of MYR50 million (approximately US$16.3 million) in 2011, which increased our ownership interest to 28.2%. P1 is the first WiMAX service provider in the country which has established itself as the market leader in high-speed wireless broadband services. In February 2014, Green Packet Berhad entered into a share purchase agreement with Telekom Malaysia Berhad (“TM”), the largest fixed-line telecommunications provider in Malaysia, under which TM became P1’s largest shareholder.price of our common shares and ADSs as well as our results of operation.”
KEBHana CardKEB HanaCard
In February 2010, we purchased shares newly issued by Hana SK Card Co., Ltd. (which was subsequently merged into KEB Card Co., Ltd. and renamed KEBHana CardKEB HanaCard Co., Ltd. (“KEBHana Card”KEB HanaCard”) in November 2014), a credit card services provider, for a total purchase price of Won 400.0 billion. We currently holdAs of December 31, 2020, we held 15.0% of the total outstanding shares of KEBHana Card.KEBHana CardKEB HanaCard. KEB HanaCard offers certain credit card products that provide for discounts on some of our wireless network services and integrate T Membership benefits, among other features.
Other InvestmentsWavve
Our other investments include:
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For more information regarding our investment securities, see note 9efforts to enhance the competitiveness of our media business and to promote its future growth, we acquired a minority equity stake in Content Wavve (formerly known as Content Alliance Platform Inc.), a joint venture established by the three major terrestrial broadcasters in Korea that operated the mobile OTT service “POOQ,” by investing Won 90.9 billion in cash and transferring our former mobile OTT service business “oksusu” to Content Wavve. Content Wavve combined oksusu and POOQ to launch a new integrated mobile OTT service “wavve” in September 2019. As of December 31, 2020, we held 30.0% of the notestotal outstanding shares of Content Wavve.
Wavve offers over 240,000 titles of video-on-demand contents, including a wide variety of real-time and on-demand terrestrial broadcast programs, movies, popular U.S. and other foreign TV shows and professional sporting events, to its subscribers that can be played on mobile devices, television, personal computer and/or Google’s Chromecast. Monthly subscription plans range from Won 7,900 to Won 13,900 per month, depending on the type and number of accessible devices. We also offer wavve-specific data add-on plans for our consolidated financial statements.wireless service subscribers. Certain types of contents, such as movies, can also be purchased individually.
Law and Regulation
Overview
Korea’s telecommunications industry is subject to comprehensive regulation by the MSIP,MSIT, which is responsible for information and telecommunications policies. The MSIPMSIT regulates and supervises a broad range of communications issues, including:
entry into the telecommunications industry;
scope of services provided by telecommunications service providers;
allocation of radio spectrum;
setting of technical standards and promotion of technical standardization;
rates, terms and practices of telecommunications service providers;
interconnection and revenue-sharing between telecommunications service providers;
research and development of policy formulation for information and telecommunications; and
competition among telecommunications service providers.
Pursuant to amendments to the Government Organization Act and the Act on the Establishment and Operation of Korea Communications Commission, both effective as of March 23, 2013, the MSIP was established. The MSIPMSIT is charged with regulating information and telecommunications the function which was formerly performed byand the KCC in the previous Government. The KCC, which had taken over the regulatory functions relating to information and telecommunications policies and radio and broadcasting management from the MIC in 2008, is currently charged with regulating the public interest aspects of and fairness in broadcasting. In this annual report, we refer to the MIC and the KCC as the relevant governmental authorities in connection with any approval granted or action taken by the MIC or the KCC, as applicable, prior to such amendments and to the MSIP or other relevant governmental authority in connection with any approval granted or to be granted or action taken or to be taken by the MSIP or such other relevant governmental authority subsequent to such amendments.
Telecommunications service providers are currently classified into threetwo categories: network service providers value-added service providers, and specificvalue-added service providers. We are classified as a network service provider because we provide telecommunications services with our own telecommunications networks and related facilities. As a network service provider, we arewere previously required to obtain a license from the MSIPMSIT for the services we provide. However, an amendment to the Telecommunications Business Act, pursuant to which companies meeting certain regulatory criteria may become a network service provider without a separate license requirement, went into effect in June 2019. Our licenses permit us to provide cellular services, third generation wireless telecommunications services using WCDMA and WiBro technologies, and fourth generation wireless telecommunications services using LTE technology and fifth generation wireless telecommunication services using 5G technology.
The MSIPMSIT may revoke our licenses or suspend any of our businesses if we fail to comply with its rules, regulations and corrective orders, including the rules restricting beneficial ownership and control and corrective orders issued in connection with any violation of rules restricting beneficial ownership and control or any violation of the conditions of our licenses. Alternatively, in lieu of suspension of our business, the MSIPKCC may levy a monetary penalty of up to 3.0% of the average of our annual revenue for the preceding three fiscal years. A network service provider that wants to cease its business or dissolve must notify its users 60 days prior to the scheduled date of cessation or dissolution and obtain MSIPMSIT approval.
In the past, the Government has stated that its policy was to promote competition in the Korean telecommunications market through measures designed to prevent the dominant service provider in any such market from exercising its market power in such a way as to prevent the emergence and development of viable competitors. While all network service providers are subject to MSIPMSIT regulation, we are subject to increased regulation because of our position as the dominant wireless telecommunications services provider in Korea.
Competition Regulation
The KCC is charged with ensuring that network service providers engage in fair competition and has broad powers to carry out this goal. If a network service provider is found to be in violation of the fair competition requirement, the KCC may take corrective measures it deems necessary, including, but not limited to, prohibiting further violations, requiring amendments to the articles of incorporation or to service contracts with customers, requiring the execution or performance of, or amendments to, interconnection agreements with other network service providers and prohibiting advertisements to solicit new subscribers. The KCC is required to consult withtake into account the opinion of the Minister of the MSIPMSIT before it takes certain corrective measures.
In addition, we qualify as a “market-dominating business entity” under the Fair Trade Act. Accordingly, we are prohibited from engaging in any act of abusing our position as a market-dominating entity, such as unreasonably determining, maintaining or altering service rates, unreasonably controlling the rendering of services, unreasonably interfering with business activities of other business entities, hindering unfairly the entry of newcomers or substantially restricting competition to the detriment of the interests of consumers.
Because we are a member company of the SK Group, which is a large business group as designated by the FTC, we are subject to the following restrictions under the Fair Trade Act:
• | Restriction on debt guarantee among affiliates. Any affiliate within the SK Group may not guarantee the debts of another domestic affiliate, except for certain guarantees prescribed in the Fair Trade Act, such as those relating to the debts of a company acquired for purposes of industrial rationalization, bid deposits for overseas construction work or technology development funds. |
• | Restriction on cross-investment. A member company of the SK Group may not acquire or hold shares in an affiliate belonging to the SK Group that owns shares in the member company. |
• | Restrictions on circular investments. A member company of the SK Group may not acquire or hold shares which would constitute “circular investments” in an affiliate company which also forms part of the SK Group where “circular investments” refer to a cross-affiliate shareholding relationship under which three or more affiliate companies become connected through cross affiliate shareholdings by owning shares in other affiliates or by becoming an entity whose shares are owned by other affiliates. |
• | Public notice of board resolution on large-scale transactions with specially related persons. If a member company of the SK Group engages in a transaction with a specially related person in the amount of 5.0% or more of the member company’s capital or paid-in capital or for Won 5.0 billion or more, the transaction must be approved by a resolution of the member company’s board of directors and the member company must publicly disclose the transaction. |
• | Restrictions on investments by subsidiaries and sub-subsidiaries of holding companies. The Fair Trade Act prohibits subsidiaries of holding companies from investing in, or holding shares of common stock of, domestic affiliates that belong to the same large business group, unless such domestic affiliates are their own subsidiaries. Furthermore, any subsidiaries of a holding company’s subsidiaries (“sub-subsidiaries”) are |
prohibited from investing in, or holding shares of common stock of, domestic affiliates that belong to the same large business group, unless all shares issued by the affiliates are held by the sub-subsidiary. Therefore, we and other subsidiaries of SK |
• | Public notice of the current status of a business group. Under the Fair Trade Act and the Enforcement Decree thereof, a member company of the SK Group must publicly disclose the general status of the SK Group, including the name, business scope and financial status of affiliates, information on the officers of affiliates, information on shareholding and cross-investments between member companies of the SK Group, information on transactions with certain related persons and, if a member company engages in a transaction with an affiliated company in the amount of 5.0% or more of the member company’s quarterly sales or Won 5.0 billion or more, information on transactions with such affiliated company on a quarterly basis. |
Number Portability.Rate Regulation In January 2003, the MIC announced its plan to implement number portability with respect to wireless telecommunications service in Korea. The number portability system allows wireless subscribers to switch wireless telecommunications
Network service providers while retainingwhose sales proceeds exceed the same mobile phone number.
In addition, the Government has been integrating mobile telephone identification numbers into a common prefix identification number “010” and gradually retracting the current mobile service identification numbers which had been unique to each wireless telecommunications service provider, including “011” for our cellular services, since January 1, 2004. All new subscribers have been given the “010” prefix starting January 2004. As the next step in the “010” integration process, the mobile telephone number prefix for all WCDMA and LTE service users has been changed to “010” as of January 1, 2014. The MSIP plans to complete the integration processamount prescribed by around 2018, when all mobile telephone numbers would have the prefix identification number “010.”
Rate Regulation. Most network service providerslaw must report to the MSIPMSIT the rates and contractual terms for each type of service they provide. However,Prior to December 2020, as the dominant network service provider for specific services (based on having the largest market share in terms of number of subscribers and meeting certain revenue thresholds), we musthad to obtain prior approval of the MSIPMSIT on our rates and terms of service; provided, however, that such pre-approval of the MSIP isMSIT was not required if we are planning to reduce the rates for any type of services that we provideprovided under the
MSIP-approved MSIT-approved contractual terms. The MSIP’sMSIT’s policy iswas to approve rates if they arewere appropriate, fair and reasonable (that is, if the rates havehad been reasonably calculated, considering supply costs, profits, classification of costs and profits for each service, cost savings through changes in the way services arewere provided and the influence on fair competition, among others). The MSIP mayMSIT could order changes in the submitted rates if it deemsdeemed the rates to be significantly unreasonable or against public policy. On October 23, 2015,In December 2020, however, the Government proposed a bill to the National AssemblyTelecommunications Business Act was amended to change thesuch approval requirement to a simplereporting requirement. Under the new reporting requirement, which isdoes not apply to other network service providers, the requirement for our competitors. However,MSIT has fifteen days to object to any new rates and terms of service reported by us, and we may implement such new rates and terms of service after the bill is still under review byfifteen-day period expires in the relevant sub-committee and was not passed during the most recent termabsence of the National Assembly and will be automatically repealed on May 31, 2016 if not passed by then. Although the Government may resubmit this bill in the future, there is no assurance as to whether such bill will be passed.MSIT’s objection.
Furthermore, in 2007, the Government announced a “road map” highlighting revisions in regulations to promote deregulation of the telecommunications industry. In accordance with the road map and pursuant to the Combined Sales Regulation, promulgated in May 2007, telecommunications service providers are now permitted to bundle their services, such as wireless data transmission service, wireless voice transmission service, broadband Internet access service, fixed-line telephone service and IPTV service, at a discounted rate; provided, however, that we and KT, as market-dominating business entities under the Telecommunications Business Act, allow other competitors to employ the services provided by us and KT, respectively, so that such competitors can provide similar discounted package services. In September 2007, the regulations and provisions under the Telecommunications Business Act were amended to permit licensed transmission service providers to offer local, domestic long-distance and international telephone services, as well as broadband Internet access and Internet phone services, without additional business licenses.
Moreover, under the amended Telecommunications Business Act, which became effective on September 23, 2010, an MVNO system was adopted for a duration of three years until September 22, 2013. The expiration date ofunder which the system was extended to September 22, 2016 under the amended Telecommunications Business Act, which became effective on August 13, 2013. Under this system, the MSIPMSIT may designate and obligate certain wireless telecommunications services providers to allow an MVNO, at such MVNO’s request, to use their telecommunication network facilities at a rate mutually agreed upon that complies with the standards set by the MSIP.MSIT became effective on March 14, 2017 under the amended Telecommunications Business Act. We were designated as the only wireless telecommunications services provider obligated to allow the other wireless telecommunications services provider to use our telecommunications network facilities. To date, thirteenThe expiration of such system has been extended to September 22, 2022 pursuant to an amendment to the Telecommunications Business Act.Currently, 14 MVNOs have commenced providingprovide wireless telecommunications services using the networks leased from us.
On October 1, 2014, the MDDIA, enacted for the purpose of establishing a transparent and fair mobile distribution practice, became effective. The MDDIA limits the amount of subsidies a wireless telecommunications service provider can provide to subscribers in order to prevent excessive competition among wireless
telecommunications service providers. Pursuant to the MDDIA, wireless telecommunications service providers are prohibited from (i) unfairly providing discriminatory subsidies based on criteria such as type of subscription, subscription plan and characteristics of the subscriber (ii) providing subsidies exceeding a maximum limit established by the KCC (such limit to be determined between Won 250,000 and Won 350,000, which may be adjusted every six months, with the current limit set at Won 330,000, effective as of April 24, 2015) for the purchase of mobile phone models that were launched within the last 15 months, and (iii)(ii) entering into a separate agreement with subscribers imposing obligations to use a specific subscription plan as a condition for providing subsidies.Insubsidies. See “Item 5.A. Operating Results — Overview — Rate Regulations.”
In addition, under the MDDIA, wireless telecommunications service providers are obliged to provide certain benefits, such as discounted rates, to subscribers who subscribe to thetheir service without receiving subsidies. In June 2017, the State Affairs Planning Advisory Committee of Korea announced that it would encourage wireless telecommunications service providers, including us, to increase the applicable discount rate offered to subscribers from 20% to 25%, which we adopted in September 2017, and to offer additional discounts to low income customers, including those on government welfare programs and senior citizen recipients of the basic pension, which we implemented in December 2017 and July 2018, respectively. We cannot provide assurance that we will not provide other rate discounts in the future to comply with the Government’s public policy guidelines or suggestions.
Interconnection.Interconnection
Dominant network service providers such as ourselves that own essential infrastructure facilities or possess a certain market share are required to provide interconnection of their telecommunications network facilities to other service providers upon request. The MSIPMSIT sets and announces the standards for determining the scope, procedures, compensation and other terms and conditions of such provision, interconnection or co-use. We have entered into interconnection agreements with KT, LG U+ and other network service providers permitting these entities to interconnect with our network. We expect that we will be required to enter into additional agreements with new operators as the MSIPMSIT grants permits to additional telecommunications service providers.
Frequency Allocation.Allocation
The MSIPMSIT has the discretion to allocate and adjust the frequency bandwidths for each type of service and may auction off the rights to certain frequency bandwidths. Upon allocation of new frequency bandwidths or adjustment of frequency bandwidths, the MSIPMSIT is required to give a public notice. The MSIPMSIT also regulates the frequency to be used by each radio station, including the transmission frequency used by equipment in our cell sites. All of our frequency allocations are for a definite term. We pay fees to the MSIPMSIT for our frequency usage that are determined based upon our number of subscribers, frequency usage by our networks and other factors. For 2015, 20142020, 2019 and 2013,2018, the fee amounted to Won 189.8136.6 billion, Won 188.1133.1 billion and Won 206.5151.7 billion, respectively.
We currently use 10 MHz of bandwidth in the 800 MHz spectrum for our CDMA services, 20 MHz of bandwidth in the 2.1 GHz spectrum for our WCDMA services, 4030 MHz of bandwidth in the 2.1 GHz spectrum, 20 MHz of bandwidth in the 800 MHz spectrum, and 35 MHz of bandwidth in the 1.8 GHz spectrum and 60 MHz of bandwidth in the 2.6 GHz spectrum for our LTE services, as well as 27100 MHz of spectrumbandwidth in the 2.33.5 GHz bandspectrum for our WiBro services.For5G services. We also plan to use 800 MHz of bandwidth in the 28 GHz spectrum for our 5G services in the future. In 2020, we recognized an impairment loss of Won 186.0 billion in connection with the frequency usage rights for the 800 MHz of bandwidth in the 28 GHz spectrum as the carrying amount exceeded the recoverable amount. For more information regarding the license fees for the various bandwidths that we use, see “Item 5.B. Liquidity and Capital Resources — Capital Requirements — Capital Expenditures” and note 17 of the notes to our consolidated financial statements.
In November 2020, the MSIT announced plans to reallocate a total of 310 MHz of frequency bandwidths whose usage terms are due to expire in 2021 to KT, LG U+ and us, 95 MHz of which will be allocated to us. The final consideration to be paid by us for such reallocated bandwidths will depend on the number of 5G cell sites constructed by us until 2022, and the aggregate consideration to be paid by KT, LG U+ and us is expected to range between approximately Won 3.2 trillion and Won 3.8 trillion.
For risks relating to the maintenance of adequate bandwidth capacity, see “Item 3.D. Risk Factors — Risks Relating to Our Business — Our business and results of operations may be adversely affected if we fail to acquire adequate additional spectrumfrequency usage rights or use our bandwidth efficiently to accommodate subscriber growth and subscriber usage.”
Mandatory Contributions and Obligations
Universal Service Obligation.All telecommunications service providers other than value-added service providers, specific service providers and regional paging service providers or any telecommunications service providers whose net annual revenue is less than an amount determined by the MSIPMSIT (currently set at Won 30.0 billion) are required to provide “universal” telecommunications services including local telephone services, local public telephone services, telecommunications services for remote islands and wireless communication services for ships and telephone services for handicapped and low-income citizens, or contribute toward the supply of such universal services. The MSIPMSIT designates universal services and the service provider who is required to provide each service. Currently, under the MSIPMSIT guidelines, we are required to offer free subscription and a discount of between 30.0% to 50.0% of our monthly fee for wireless telecommunications services to handicapped and low-income citizens.
In addition to such universal services for handicapped and low-income citizens, we are also required to make certain annual monetary contributions to compensate for other service providers’ costs for the universal services. The size of a service provider’s contribution is based on its net annual revenue for the previous year (calculated pursuant to the MSIPMSIT guidelines, which differ from our accounting practices). In 2015, our contribution amount wasWe paid such contributions amounting to Won 21.017.4 billion, for our fiscal year 2014. In 2014, our contribution amount was Won 21.816.1 billion for our fiscal year 2013.In 2013, our contribution amount wasand Won 19.216.7 billion for our fiscal year 2012. in 2020, 2019 and 2018, respectively.As a wireless telecommunications services provider, we are not considered a provider of universal telecommunications services and do not receive funds for providing universal service. Other network service providers that do provide universal services make all or a portion of their “contribution” in the form of expenses related to the universal services they provide.
Foreign Ownership and Investment Restrictions and Requirements
Because we are a network service provider, and the exception for the foreign shareholding limit under the amended Telecommunications Business Act, which became effective on August 13, 2013, does not apply to us, foreign governments, individuals, and entities (including Korean entities that are deemed foreigners, as discussed below) are prohibited from owning more than 49.0% of our voting stock. Korean entities whose largest shareholder is a foreign government or a foreigner (together with any of its related parties) that owns 15.0% or more of the outstanding voting stock of such Korean entities are also deemed foreigners. If this 49.0% ownership limitation is violated, certain of our foreign shareholders will not be permitted to exercise voting rights in excess of the limitation, and the MSIPMSIT may require other corrective action.
As of December 31, 2015,2020, SK HoldingsInc. owned 20,363,45221,624,120 shares of our common stock, or approximately 25.22%26.8% of our issued shares.Asshares. As of December 31, 2015,2020, the two largest foreign shareholders of SK HoldingsInc. each
held a 3.5%3.9% stake therein. If such foreign shareholders increase their shareholdings in SK HoldingsInc. to 15% or more and any such foreign shareholder constitutes the largest shareholder of SK Holdings,Inc., SK HoldingsInc. will be considered a foreign shareholder, and its shareholding in us would be included in the calculation of our aggregate foreign shareholding. If SK Holdings’Inc.’s shareholding in us is included in the calculation of our aggregate foreign shareholding, then our aggregate foreign shareholding, assuming the foreign ownership level as of December 31, 20152020 (which we believe was 39.38%33.4%), would reach 64.60%60.2%, exceeding the 49.0% ceiling on foreign shareholding.
If our aggregate foreign shareholding limit is exceeded, the MSIPMSIT may issue a corrective order to us, the breaching shareholder (including SK HoldingsInc. if the breach is caused by an increase in foreign ownership of SK Holdings)Inc.) and the foreign shareholder which owns in the aggregate 15.0% or more of SK Holdings.Inc. Furthermore, SK HoldingsInc. will be prohibited from exercising its voting rights with respect to the shares held in excess of the 49.0% ceiling, which may result in a change in control of us. In addition, the MSIPMSIT will be prohibited from granting us licenses or permits necessary for entering into new telecommunications businesses until our aggregate foreign shareholding is reduced to below 49.0%. If a corrective order is issued to us by the MSIPMSIT arising from the violation of the foregoing foreign ownership limit, and we do not comply within the prescribed period under such corrective order, the MSIPMSIT may:
revoke our business license;
suspend all or part of our business; or
if the suspension of business is deemed to result in significant inconvenience to our customers or to be detrimental to the public interest, impose a one-time administrative penalty of up to 3.0% of the average of our annual revenue for the preceding three fiscal years.
Additionally, the Telecommunications Business Act also authorizes the MSIPMSIT to assess monetary penalties of up to 0.3% of the purchase price of the shares for each day the corrective order is not complied with, as well as a prison term of up to one yearthree years or a penalty of Won 50150 million. See “Item 3.D. Risk Factors — Risks Relating to SecuritiesOur Business — If SK HoldingsInc. causes us to breach the foreign ownership limitations on our common shares, we may experience a change of control.”
We are required under the Foreign Exchange Transaction Act to file a report with a designated foreign exchange bank or with the Ministry of Strategy and Finance (the “MOSF”),MOEF, in connection with any issue of foreign currency denominated securities by us in foreign countries. Issuances of US$30 million or less require the filing of a report with a designated foreign exchange bank, and issuances that are over US$30 million in the aggregate within one year from the filing of a report with a designated foreign exchange bank require the filing of a report with the MOSF.MOEF.
The Telecommunications Business Act provides for the creation of a Public Interest Review Committee under the MSIPMSIT to review investments in or changes in the control of network service providers. The following events would be subject to review by the Public Interest Review Committee:
the acquisition by an entity (and its related parties) of 15.0% or more of the equity of a network service provider;
a change in the largest shareholder of a network service provider;
agreements by a network service provider or its shareholders with foreign governments or parties regarding important business matters of such network service provider, such as the appointment of officers and directors and transfer of businesses; and
a change in the shareholder that actually controls a network service provider.
If the Public Interest Review Committee determines that any of the foregoing transactions or events would be detrimental to the public interest, then the MSIPMSIT may issue orders to stop the transaction, amend any agreements, suspend voting rights, or divest the shares of the relevant network service provider. Additionally, if a dominant network service provider (which would currently include us and KT), together with its specially related persons (as defined under the FSCMA), holds more than 5.0% of the equity of another dominant network service provider, the voting rights on the shares held in excess of the 5.0% limit may not be exercised.
Patents and Licensed Technology
Access to the latest relevant technology is critical to our ability to offer the most advanced wireless telecommunications services and to design and manufacture competitive products. In addition to active internal and external research and development efforts as described in “Item 5.C. Research and Development, Patents and Licenses, etc.,” our success depends in part on our ability to obtain patents, licenses and other intellectual property rights covering our products. We own numerous patents and trademarks worldwide, and have applications for patents pending in many countries, including Korea, Japan, China and the United States and in Europe.countries. Our patents are mainly related to LTE and 5G technology and wireless Internet applications. We have also acquired a number of patents related to WCDMA and CDMA technologies. There are no licensed patents that are material to our business.
We are not currently involved in any material litigation regarding patent infringement.Forinfringement. For a description of the risks associated with our reliance on intellectual property, see “Item 3.D. Risk Factors — Risks Relating to Our Business — Our business relies on technology developed by us, and our business will suffer if we are unable to protect our proprietary rights.”
Seasonality of the Business
Our business is not affected by seasonality.
Item 4.C. | Organizational Structure |
Organizational Structure
We are a member of the SK Group, based on the definition of “group” under the Fair Trade Act. As of December 31, 2015,2020, SK Group members owned in aggregate 25.2%26.8% of the shares of our issued common stock.The stock. The
SK Group is a diversified group of companies incorporated in Korea with interests in, among other things, telecommunications, trading, energy, chemicals, engineering and leisure industries.
Significant Subsidiaries
For information regarding our subsidiaries, see note 1(2) of the notes to our consolidated financial statements.
Item 4.D. | Property, Plants and Equipment |
The following table sets forth certain information concerning our principal properties as of December 31, 2015:2020:
Location | Primary Use | Approximate Area in Square Feet | ||||
Seoul Metropolitan Area | Corporate Headquarters | 988,447 | ||||
Regional Headquarters | ||||||
Customer Service Centers | 107,277 | |||||
Training Centers | ||||||
Central Research and Development Center | ||||||
Others(1) | ||||||
| Regional Headquarters | |||||
Others(1) | ||||||
| ||||||
Jeolla and Jeju Provinces | Regional Headquarters | 265,614 | ||||
Others(1) | ||||||
Chungcheong Province | Regional Headquarters | |||||
Others(1) |
(1) | Includes cell sites. |
In December 2004, we constructed a building with an area of approximately 82,624 square feet,Our registered office and corporate headquarters, of which we have full ownership, for use as our corporate headquarters.are located at SK T-Tower, 65, Eulji-ro, Jung-gu, Seoul 04539, Korea, which occupy a total land area of approximately 64,515 square feet. In addition, we own or lease various locations for cell sites and switching equipment. We do not anticipate that we will encounter material difficulties in meeting our future needs for any existing or prospective leased space for our cell sites. See “Item 4.B. Business Overview — Cellular Services — Network Infrastructure.”
We maintain a range of insurance policies to cover our assets and employees, including our directors and officers. We are insured against business interruption, fire, lightning, flooding, theft, vandalism, public liability and certain other risks that may affect our assets and employees. We believe that the types and amounts of our insurance coverage are in accordance with general business practices in Korea.
Item 4A. | UNRESOLVED STAFF COMMENTS |
We do not have any unresolved comments from the SEC staff regarding our periodic reports under the Exchange Act.
Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
You should read the following discussion together with our consolidated financial statements and the related notes thereto which appear elsewhere in this annual report. We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. In addition, you should read carefully the section titled “— Critical Accounting Policies, Estimates and Judgments” as well as notenotes 2(4) and 4 of the notes to our consolidated financial statements which provide summaries of certain critical accounting policies that require our management to make difficult, complex or subjective judgments relating to matters which are highly uncertain and that may have a material impact on our financial conditions and results of operations.
Item 5.A. | Operating Results |
Overview
Our operations are reported in threefive segments: (1) cellular services, which include wireless voice and data transmission services, sales of wireless devices, IoT solutions and platform services, and lifestyle enhancement platform services, (2) fixed-line telecommunication services, which include fixed-line telephone services, broadband Internet services, advanced media platform services (including IPTV)IPTV and cable TV services) and business communications services, (3) security services, which include physical and (3)information security services, (4) commerce services, which include our open marketplace platform, 11st, our T-commerce business, SK stoa, and related ancillary services, and (5) other businesses, which include our commerceportal service, mobility business, our hardwaremarketing platform business and certain other operationsmiscellaneous businesses that do not meet the quantitative thresholds to be separately considered reportable segments.
In our cellular services segment, we earn revenue principally from our wireless voice and data transmission services through monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services and value-added service fees paid by our wireless subscribers as well as interconnection fees paid to us by other telecommunications operators for use of our wireless network by their customers and subscribers. We also derive revenue from sales of wireless devices by our subsidiary, PS&Marketing. Other sources of revenue include revenue from our IoT solutions and platform services, and lifestyle enhancement platform servicesincluding AI solutions, as well as other miscellaneous cellular services.
In our fixed-line telecommunication services segment, we earn revenue principally from our fixed-line telephone services and broadband Internet services and advanced media platform services (including IPTV)IPTV and cable TV services) through monthly plan-based fees and usage charges as well as interconnection fees paid to us by other telecommunications operators for use of our fixed-line network by their customers and subscribers. In addition, we derive revenue from international calling services and our business communications services through customized fee arrangements with our business customers. Following the Tbroad Merger in April 2020, the cable TV and broadband Internet services of the former Tbroad have become a part of our fixed-telecommunication services segment.
In our otherssecurity services segment, we earngenerate revenue from our physical and information security services businesses through our subsidiary ADT CAPS. Revenue from our physical security services is generated through monthly plan-based fees and usage charges for value-added services paid by subscribers. Revenue from our information security services is derived primarily through consideration paid by customers under contracts for our information security platform and consulting services and solutions. ADT CAPS (formerly known as SK Infosec) is the surviving entity resulting from the merger of LSH with and into SK Infosec in December 2020 and the merger of Former ADT CAPS with and into SK Infosec in March 2021. We had acquired Former ADT CAPS, which operated our physical security business prior to such mergers, in October 2018 and SK Infosec, which operated our information security business prior to the mergers, in December 2018. See “Item 3.D. Risk Factors — Risks Relating to Our Business — We may fail to successfully complete, integrate or realize the anticipated benefits of our new acquisitions, joint ventures or other strategic alternatives or corporate reorganizations, and such transactions may negatively impact our business.”
In our commerce services segment, we derive revenue from our subsidiaries Eleven Street, which was spun-off as our new consolidated subsidiary from SK Planet in September 2018, and SK Stoa. Eleven Street generates revenue principally from our commerce business through third-party seller fees earned (including commissions) for transactions in which we actit acts as a selling agent to the “mini malls” on 11st, ourits online open marketplace platform, as well as advertising revenue and other commerce solutions from 11st and11st. SK Stoa derives revenues through third-party seller fees earned (including commissions) for transactions in which it acts as a selling agent on SK stoa, its T-commerce network.
In our O2O commerce solutions. Other sources of revenue includeothers segment, we earn revenue from our hardwarethe marketing platform business of SK Planet, the music streaming service and audio device manufacturing businesses through sales of projection display devices, high-end audio devicesDreamus, the mobility business of T Map Mobility and intelligent agent machines, revenue from our security business operated by our subsidiary, Neosnetworks, advertising revenue from our “Nate” portal service operated by our subsidiary, SK Communications, and sales commissions throughCommunications.
Following the spin-off of SK Telecom’s mobility business into T Map Mobility effective as of December 29, 2020, our mobile application marketplaces.mobility business, which was previously part of our cellular services segment, became a part of our others segment beginning on December 29, 2020.
Furthermore, following the entry into an agreement to transfer SK Broadband’s 100% equity interest in SK Stoa to SK Telecom in April 2019 (which transaction was completed in January 2020), the T-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunication services segment in the year ended December 31, 2018, were reclassified as part of our commerce services segment for the year ended December 31, 2019. In addition, our security services businesses, which were previously part of our others segment in the year ended December 31, 2018, were reclassified as a new security services segment for the year ended December 31, 2019. The breakdown of our results of operations by operating segment for the year ended December 31, 2018 in our consolidated audited financial statements have been recast to retroactively apply such changes in segmentation.
Our cellular service revenue and fixed-line telecommunications service revenue depend principally upon the number of our wireless subscribers, the rates we charge for our services, the frequency and volume of subscriber usage of our services and the terms of our interconnection with other telecommunications operators. Our otherssecurity service revenue depends principally upon the number of our subscribers and customers and the rates we charge for our physical security services as well as the number and terms of the contracts pursuant to which our information security services are provided. Our commerce service revenue depends principally upon the gross merchandise volume, which is the total monetary value of customer purchases of goods and services, net of estimated refunds, of 11st and SK stoa and the number of merchants that utilize 11st and our O2O platformsSK stoa to advertise and promote their products and services and the extent of such advertisement and promotion.
Among other factors, management uses operating incomeprofit of each reportable segment presented in accordance with K-IFRS (“segment operating income”profit”) in its assessment of the profitability of each reportable segment. The sum of segment operating incomeprofit for all threefive reportable segments differs from our operating incomeprofit presented in accordance with IFRS as issued by the IASB as segment operating incomeprofit does not include certain items such as donations, gain and loss from disposal of property and equipment and intangible assets and impairment loss on property and equipment and intangible assets. For a reconciliation of operating incomeprofit presented in accordance with IFRS as issued by the IASB and operating incomeprofit presented in accordance with K-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”
In addition to the information set forth below, see note 5 of the notes to our consolidated financial statements for more detailed information regarding each of our reportable segments.
A number of recent developments have had or are expected to have a material impact on our results of operations, financial condition and capital expenditures. These developments include:
NewRate Regulations Relating to Handset Subsidies. We provide handset subsidies to subscribers who agree to use our service for a predetermined service period and purchase handsets on an installment basis. Generally, handset subsidies may be provided to any subscriber that uses our service and purchases handsets either directly from us or through third parties. Prior to the implementation of the MDDIA, there was intense competition among wireless telecommunications service providers to acquire subscribers by providing higher subsidies. In October 2014, the Government started limiting the amount of subsidies a wireless telecommunications service provider can provide to subscribers in order to prevent excessive competition among wireless telecommunications service providers under the MDDIA. Pursuant to the MDDIA, wireless telecommunications service providers are prohibited from (i) unfairly providing discriminatory subsidies based on criteria such as type of subscription, subscription plan and characteristics of the subscriber, (ii) providing subsidies exceeding a maximum limit established by the KCC (such limit to be determined between Won 250,000 and Won 350,000, which may be adjusted every six months, with the current limit set at Won 330,000, effective as of April 24, 2015) for the purchase of mobile phone models that were launched within the last 15 months, and (iii) entering into a separate agreement with subscribers imposing obligations to use a specific subscription plan as a condition for providing subsidies. In addition, underUnder the MDDIA, wireless telecommunications service providers are obliged to provide certain benefits, such as discounted rates, to subscribers who subscribe to their service without receiving handset subsidies. Handset subsidies are provided to subscribers who agree to use our service for a predetermined service period and purchase handsets on an installment basis. In June 2017, the State Affairs Planning Advisory Committee of Korea announced that it would encourage wireless telecommunications service providers, including us, to increase the applicable discount rate offered to subscribers from 20% to 25%, which we adopted in September 2017, and to offer additional discounts to low income customers, including those on government welfare programs and senior citizen recipients of the basic pension, which we implemented in December 2017 and July 2018, respectively.
In 2015,2020, the increase in thetotal number of subscribers who had elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the MDDIA increased due to greater public awareness of the availability of such discounted rates as well as the increase in the applicable discount rate to 20%25%. In 2020, approximately 71% of our new subscribers elected to receive discounted rates in April 2015 from 12%lieu of handset subsidies compared to 55% in October 2014 contributed2019. As of December 31, 2020, a substantial majority of our subscribers who elected to a decrease in revenue. Such increasereceive these discounted rates are receiving the increased 25% rate discount. These Government measures have adversely affected our revenues and results of operations as more subscribers elected to receive the 25% rate discount. On the other hand, this has also led to a decreasereduction of, or partially offset increases in, our marketing expenses in 2015 comparedas the number of subscribers who have elected to 2014.Furthermore, failurereceive handset subsidies has declined, and has contributed to maintaining a stable churn rate.
Failure to comply with the MDDIA may lead to suspension of our business or imposition of monetary penalties. For more information about the MDDIA and the penalties imposed for violating Government regulations, see “Item 4.B. Business Overview — Law and Regulation — Competition Regulation — Rate Regulation” and “Item 8.A. Consolidated Statements and Other Financial Information — Legal Proceedings — KCC and MSIP Proceedings.”
Abolishment of Initial Subscription Fees. Upon recommendation by the MSIP, we, KT and LG U+ agreed to gradually reduce initial subscription fees charged to new customers and in August 2013, reduced the initial subscription fee by 40% and again by an additional 50% in August 2014. Starting in November 2014, we ceased charging any initial subscription fees to new customers. The gradual reduction and ultimate abolishment of initial subscription fees adversely impacted our wireless service revenues in 2014 and 2015 compared to 2013 and may
continue to have a material impact on our results of operations in 2016. For more information about the rates we charge, see “Item 4.B. Business Overview — Cellular Services — Rate Plans” and “Item 4.B. Business Overview — Law and Regulation — Competition Regulation — Rate Regulation.”
Decrease in Interconnection Fees.Fees. Our wireless telecommunications services depend, in part, on our interconnection arrangements with domestic and international fixed-line and other wireless networks. Charges for interconnection affect our revenues and operating results. The MSIPMSIT determines the basic framework for interconnection arrangements, including policies relating to interconnection rates in Korea. Under our interconnection agreements, we are required to make payments in respect of calls which originate from our networks and terminate in the networks of other Korean telecommunications operators, and the other operators are required to make payments to us in respect of calls which originate in their networks and terminate in our network. The MSIPMSIT has continued to gradually decrease the interconnection rates in Korea, which has led to a continued decrease in our interconnection revenue as well as interconnection expenses from 2012 to 20152020 and any further reduction in interconnection rates by the MSIPMSIT may continue to impact our results of operations. Beginning in 2017, a single interconnection rate paid by fixed-line network service providers for fixed-line to wireless calls applies to all wireless telecommunications service providers. For more information about our interconnection revenue and expenses, see “Item 4.B. Business Overview — Interconnection.”
Decrease in Monthly Revenue per Subscriber. We measure monthly average revenue per subscriber using two metrics: billing average monthly per subscriber (“billing ARPU”) and total average monthly revenue per subscriber excluding MVNO subscribers leasing our networks (“total ARPU”). Billing and average monthly revenue per subscriber including such MVNO subscribers (“ARPU including MVNO”). ARPU is derived by dividing the sum of total SK Telecom revenues on a separate basis from voice service and data service for the period (excluding revenue derived from MVNO subscribers leasing our networks) by the monthly average number of subscribers (excluding the number of MVNO subscribers leasing our networks)subscribers) for the period, then dividing that number by the number of months in the period. Total ARPU including MVNO is derived by dividing the sum of total SK Telecom revenues on a separate basis from voice service and data service initial subscription fees and interconnection revenue, as well as other revenues, for the period (including revenue derived from MVNO subscribers) by the monthly average number of subscribers (excluding(including the number of MVNO subscribers leasing our networks)subscribers) for the period, then dividing that number by the number of months in the period.
Our billing ARPU decreased by 1.0% to Won 30,314 in 2020 from Won 30,630 in 2019, which represented a decrease of 5.0% from Won 32,247 in 2018. Our ARPU including MVNO increased by 1.3%1.8% to Won 36,58227,895 in 20152020 from Won 36,10127,412 in 2014 and increased by 4.5% in 20142019, which represented a decrease of 4.2% from Won 34,55128,615 in 2013.2018. The increasesdecreases in billing ARPU and ARPU including MVNO in 2015 and 20142019 were primarily due to the increasea decrease in LTE subscribers who subscribe to data plans with higher monthly basic charges than our other wireless telecommunications services and greater data service usagerevenue attributable to increasesan increase in the number of smartphone users.In 2015, the increase in billing ARPU was partially offset by a decrease in revenue due to the increase in the applicable discount rate for subscribers thatwho elected to receive discounted rates in lieu of receiving handset subsidies according to the MDDIA.
Our total ARPU decreased by 0.3% to Won 43,970 in 2015 from Won 44,124 and increased by 4.1% in 2014 from Won 42,377 in 2013.subsidies. The decrease in total ARPU in 2015 was primarily due to decreases in initial subscription fees and interconnection revenue, which were partially offset by the reasons set forth above relating to the increase in billing ARPU in 2015. The increase in total ARPU in 20142020 was primarily due to an increase in LTEsubscriptions for IoT solutions by corporate customers, from which we derive lower revenue per subscriber. Such decreases were offset in part by an increase in subscribers whothat subscribe to our higher-priced unlimited data usage plans with higher monthly basic charges thanand 5G plans. The increase in ARPU including MVNO in 2020 was primarily attributable to the decrease in the proportion of MVNO subscribers, from whom we derive lower revenue per subscriber.
Effects of COVID-19. Demand for our other wireless telecommunicationsproducts and services may fluctuate in light of the overall economic conditions in Korea. The overall prospects for the Korean economy and, in turn, the market conditions for the industries in which we operate, remain uncertain, especially in light of the ongoing global COVID-19 pandemic, which has had, will likely continue to have, a significant negative effect on the Korean economy. For example, the travel restrictions imposed by governments in response to the COVID-19 pandemic has resulted in a decrease in revenue from roaming services, and greater data service usage attributablethe pandemic has contributed to increaseslower customer demand for new wireless devices, resulting in the number of smartphone users.
Acquisition of SK Hynix Shares. In February 2012, we acquired a 21.1% equity stake in SK Hynix, one of the world’s largest memory chip makers by revenue, for an aggregate purchase price of approximately Won 3.4 trillion, and became its largest shareholder. As of December 31, 2015, we held a 20.1% equity stake in SK Hynix.SK Hynix’s profit for the year was Won 4,323.6 billion in 2015, Won 4,195.2 billion in 2014 and Won 2,872.9 billion in 2013. Our investment in SK Hynix is accounted for using the equity method and the results of SK Hynix’s performance is reflecteddecrease in our operating results as gains (loss) related to investments in subsidiaries and associates.
Acquisition of SK Networks’ Retail Distribution Business. In April 2014, PS&Marketing acquired the retail distribution business of SK Networks. As a result of such acquisition, there were increases in wireless device sales in 2015, due to the reflection of the full year impact of the acquisition, compared to 2014, in which the acquisition only impacted results of operations for part of the year, and in 2014 compared to 2013, along withrevenue. In addition, an increase in various related operating expenses, including costunemployment among, and/or a decrease in disposable income of, our customers resulting from a deterioration of the Korean economy due to COVID-19 may decrease demand for some of our products thatand services or cause an increase in delinquent subscriber accounts. While it is not possible to predict the duration or full magnitude of harm from COVID-19, a continued and prolonged outbreak of COVID-19 may have been resolda material adverse effect on our business, financial condition and labor costs.results of operations. See “Item 3.D. Risk Factors—Risks Relating to Our Business — The ongoing global pandemic of COVID-19
Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS
In addition to preparing consolidated financial statements in accordance with IFRS as issued by the IASB included in this annual report, we also prepare financial statements in accordance with K-IFRS as adopted by the KASB, which we are required to file with the FSC and the Korea Exchange under the FSCMA.
Beginning with our financial statements prepared in accordance with
K-IFRS as of and for the year ended December 31, 2012, we are required to adopt certain amendments to K-IFRS No. 1001, Presentation of Financial Statements, as adopted by KASB in 2012. The amendments require requires operating income,profit, which is calculated as operating revenue less operating expense, to be separately presented on the consolidated statement of income. Operating expense represents expenses incurred in our main operating activities and includes cost of products that have been resold and selling, general and administrative expenses. Accordingly, beginning with our consolidated statements of income prepared in accordance with K-IFRS for the year ended December 31, 2012, we present operating income in accordance with the amended K-IFRS No. 1001, Presentation of Financial Statements.Prior to the adoption of the amendments to K-IFRS No. 1001, Presentation of Financial Statements, the operating income we presented in our consolidated statements of income prepared in accordance with K-IFRS took into account certain other operating revenue and other operating expenses that are no longer included in the calculation of operating income pursuant to these amendments.
In our consolidated statements of income prepared in accordance with IFRS as issued by the IASB included in this annual report, such changes in presentation were not adopted. As a result, theThe presentation of operating incomeprofit in our consolidated statements of income prepared in accordance with IFRS as issued by the IASB included in this annual report differs from the presentation of operating incomeprofit in the consolidated statements of income prepared in accordance with K-IFRS for the corresponding periods.periods in certain respects. The table below sets forth a reconciliation of our operating incomeprofit as presented in our consolidated statements of income prepared in accordance with IFRS as issued by the IASB for each of the three years ended December 31, 2015, 2014 and 20132020 to the operating incomeprofit as presented in the consolidated statements of income prepared in accordance with K-IFRS after giving effect to the amendments toK-IFRSK-IFRS. No. 1001, Presentation of Financial Statements, for each
For the Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In billions of Won) | ||||||||||||
Operating profit pursuant to IFRS as issued by the IASB | ₩ | 1,104.6 | ₩ | 1,007.3 | ₩ | 833.8 | ||||||
Differences: | ||||||||||||
Other income pursuant to IFRS that are classified as other non-operating income pursuant to K-IFRS: | ||||||||||||
Gain on disposal of property and equipment and intangible assets | (35.6 | ) | (8.5 | ) | (38.9 | ) | ||||||
Others | (64.0 | ) | (94.3 | ) | (33.0 | ) | ||||||
(99.6 | ) | (102.8 | ) | (71.9 | ) | |||||||
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Other operating expenses pursuant to IFRS that are classified as other non-operating expenses pursuant to K-IFRS: | ||||||||||||
Loss on impairment of property and equipment and intangible assets | 208.8 | 65.9 | 255.8 | |||||||||
Loss on disposal of property and equipment and intangible assets | 41.5 | 47.8 | 87.3 | |||||||||
Donations | 16.8 | 17.6 | 59.0 | |||||||||
Bad debt for accounts receivable — other | 10.6 | 5.8 | 7.7 | |||||||||
Others | 66.6 | 66.6 | 30.1 | |||||||||
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344.3 | 203.7 | 439.9 | ||||||||||
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Operating profit pursuant to K-IFRS | ₩ | 1,349.3 | ₩ | 1,108.2 | ₩ | 1,201.8 | ||||||
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See note 5(2) of the corresponding years.
For the Year Ended December 31, | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
(In billions of Won) | ||||||||||||
Operating income pursuant to IFRS by IASB | ₩ | 1,495.4 | ₩ | 1,607.9 | ₩ | 1,578.4 | ||||||
Differences: | ||||||||||||
Other income pursuant to IFRS | ||||||||||||
Fee revenues | — | (8.2 | ) | (7.3 | ) | |||||||
Gain on disposal of property and equipment and intangible assets | (7.1 | ) | (8.8 | ) | (8.0 | ) | ||||||
Others | (23.8 | ) | (39.5 | ) | (59.7 | ) | ||||||
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(30.9 | ) | (56.5 | ) | (75.0 | ) | |||||||
Other operating expenses pursuant to IFRS that are classified as other non-operating expenses pursuant to K-IFRS | ||||||||||||
Loss on impairment of property and equipment and intangible assets | 35.8 | 47.5 | 13.8 | |||||||||
Loss on disposal of property and equipment and intangible assets | 21.4 | 33.0 | 267.5 | |||||||||
Donations | 72.5 | 67.8 | 82.1 | |||||||||
Bad debt for accounts receivable — other | 15.3 | 17.9 | 22.2 | |||||||||
Others | 98.5 | 107.5 | 122.2 | |||||||||
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243.5 | 273.8 | 507.7 | ||||||||||
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Operating income pursuant to K-IFRS | ₩ | 1,708.0 | ₩ | 1,825.1 | ₩ | 2,011.1 | ||||||
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notes to our consolidated financial statements. However, there is no impact on profit for the year or earnings per share for each of the three years ended December 31, 2015, 20142020, 2019 and 2013.
Accounting Standards Updates
We have adopted amendments to IAS 19, Employee Benefits, for the years ended December 31, 2015. See note 3 of the notes to our consolidated financial statements for a summary of IAS 19, Employee Benefits. The adoption of these amendments is not expected to have a significant impact on our consolidated results of operations or financial position.
Operating Results
The following table sets forth summary consolidated income statement information, including that expressed as a percentage of operating revenue and other income, for the periods indicated:
For the Year Ended December 31, | ||||||||||||||||||||||||
2015 | 2014 | 2013 | ||||||||||||||||||||||
(In billions of Won, except percentage data) | ||||||||||||||||||||||||
Operating Revenue and Other Income | ₩ | 17,167.6 | 100.0 | % | ₩ | 17,220.3 | 100.0 | % | ₩ | 16,677.0 | 100.0 | % | ||||||||||||
Revenue | 17,136.7 | 99.8 | 17,163.8 | 99.7 | 16,602.1 | 99.6 | ||||||||||||||||||
Other income | 30.9 | 0.2 | 56.5 | 0.3 | 74.9 | 0.4 | ||||||||||||||||||
Operating Expense | 15,672.2 | 91.3 | 15,612.4 | 90.7 | 15,098.6 | 90.5 | ||||||||||||||||||
Operating Income | 1,495.4 | 8.7 | 1,607.8 | 9.3 | 1,578.4 | 9.5 | ||||||||||||||||||
Profit before Income Tax | 2,035.4 | 11.9 | 2,253.8 | 13.1 | 1,827.1 | 11.0 | ||||||||||||||||||
Income Tax Expense from Continuing Operations | 519.5 | 3.0 | 454.5 | 2.6 | 400.8 | 2.4 | ||||||||||||||||||
Profit from Continuing Operations | 1,515.9 | 8.8 | 1,799.3 | 10.4 | 1,426.3 | 8.6 | ||||||||||||||||||
Profit from Discontinued Operation, Net of Income Taxes(1) | — | — | — | — | 183.2 | 1.1 | ||||||||||||||||||
Profit (Loss) for the Year Attributable to: | ||||||||||||||||||||||||
Owners of the Parent Company | 1,518.6 | 8.8 | 1,801.2 | 10.5 | 1,638.9 | 9.8 | ||||||||||||||||||
Non-controlling Interests | (2.7 | ) | (0.0 | ) | (1.9 | ) | (0.0 | ) | (29.4 | ) | (0.2 | ) | ||||||||||||
Profit for the Year | 1,515.9 | 8.8 | 1,799.3 | 10.4 | 1,609.5 | 9.6 |
The following table sets forth additional information about our operations with respect to our reportable segments during the periods indicated:
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Amount | Percentage of Total Revenue | Amount | Percentage of Total Revenue | Amount | Percentage of Total Revenue | |||||||||||||||||||
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Cellular Services Revenue | ||||||||||||||||||||||||
Wireless Service(1) | ₩ | 10,720.50 | 62.6 | % | ₩ | 11,010.6 | 64.2 | % | ₩ | 11,001.1 | 66.3 | % | ||||||||||||
Cellular Interconnection | 710.0 | 4.1 | 817.0 | 4.8 | 845.0 | 5.1 | ||||||||||||||||||
Wireless Device Sales | 963.4 | 5.6 | 761.6 | 4.4 | 645.9 | 3.9 | ||||||||||||||||||
Miscellaneous(2) | 875.4 | 5.1 | 938.6 | 5.5 | 823.5 | 5.0 | ||||||||||||||||||
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Total Cellular Services Revenue | 13,269.3 | 77.4 | 13,527.9 | 78.8 | 13,315.5 | 80.2 | ||||||||||||||||||
Fixed-line Telecommunication Services Revenue | ||||||||||||||||||||||||
Fixed-line Telephone Service | ₩ | 420.6 | 2.5 | % | ₩ | 467.3 | 2.7 | % | ₩ | 474.4 | 2.9 | % | ||||||||||||
Fixed-line Interconnection | 57.1 | 0.3 | 57.4 | 0.3 | 78.7 | 0.5 | ||||||||||||||||||
Broadband Internet Service and Advanced Media Platform Service | 1,308.8 | 7.6 | 1,152.7 | 6.7 | 1,023.2 | 6.2 | ||||||||||||||||||
International Calling Service | 99.1 | 0.6 | 112.0 | 0.7 | 127.0 | 0.8 | ||||||||||||||||||
Miscellaneous(3) | 608.9 | 3.6 | 660.5 | 3.8 | 621.1 | 3.7 | ||||||||||||||||||
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Total Fixed-line Telecommunication Services Revenue | 2,494.5 | 14.6 | 2,449.9 | 14.3 | 2,324.4 | 14.0 | ||||||||||||||||||
Other Revenue | ||||||||||||||||||||||||
Commerce Service(4) | ₩ | 988.5 | 5.8 | % | ₩ | 911.5 | 5.3 | % | ₩ | 742.6 | 4.5 | % | ||||||||||||
Portal Service(5) | 63.9 | 0.4 | 73.0 | 0.4 | 92.2 | 0.6 | ||||||||||||||||||
Miscellaneous(6) | 320.5 | 1.9 | 201.6 | 1.2 | 127.4 | 0.8 | ||||||||||||||||||
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Total Other Revenue | 1,372.9 | 8.0 | 1,186.0 | 6.9 | 962.2 | 5.8 | ||||||||||||||||||
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Total Revenue | ₩ | 17,136.7 | 100.0 | % | ₩ | 17,163.8 | 100.0 | % | ₩ | 16,602.1 | 100.0 | % | ||||||||||||
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Total Revenue Growth | (0.2 | ) % | 3.4 | % | 2.9 | % | ||||||||||||||||||
Segment Operating Expense(7) | ||||||||||||||||||||||||
Cellular Services | ₩ | 11,591.0 | 67.6 | % | ₩ | 11,773.5 | 68.6 | % | ₩ | 11,329.4 | 68.2 | % | ||||||||||||
Fixed-line Telecommunication Services | 2,386.2 | 13.9 | 2,369.5 | 13.8 | 2,268.8 | 13.7 | ||||||||||||||||||
Others | 1,451.5 | 8.5 | 1,195.8 | 7.0 | 992.8 | 6.0 | ||||||||||||||||||
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Total Segment Operating Expense | ₩ | 15,428.7 | 90.0 | % | ₩ | 15,338.7 | 89.4 | % | ₩ | 14,591.0 | 87.9 | % | ||||||||||||
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Segment Operating Income | ||||||||||||||||||||||||
Cellular Services | ₩ | 1,678.3 | 9.8 | % | ₩ | 1,754.4 | 10.6 | % | ₩ | 1,986.1 | 12.0 | % | ||||||||||||
Fixed-line Telecommunication Services | 108.3 | 0.6 | 80.4 | 0.5 | 55.6 | 0.3 | ||||||||||||||||||
Others | (78.6 | ) | (0.4 | ) | (9.8 | ) | (0.1 | ) | (30.6 | ) | (0.2 | ) | ||||||||||||
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Total Segment Operating Income | ₩ | 1,708.0 | 10.0 | % | ₩ | 1,825.1 | 10.6 | % | ₩ | 2,011.1 | 12.1 | % | ||||||||||||
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2015 Compared to 2014
Operating Revenue and Other Income. Our consolidated operating revenue and other income decreased by 0.3% to Won 17,167.6 billion from Won 17,220.3 billion in 2014, due to the following decreases in operating revenue and other income.
Our consolidated operating revenue decreased slightly to Won 17,136.7 billion in 2015 from Won 17,163.8 billion in 2014, primarily due to decreases in wireless service revenue and cellular interconnection revenue, partially offset by increases in wireless device sales and broadband Internet service and advanced media platform service revenue, each as further discussed below.
Our consolidated other income decreased by 45.2% to Won 30.9 billion in 2015 from Won 56.5 billion in 2014 primarily due to a decrease in value-added tax refunds to Won 2.1 billion in 2015 from Won 8.1 billion in 2014 and a decrease in gain on disposal of property and equipment and intangible assets to Won 7.1 billion in 2015 from Won 8.8 billion in 2014.
The following sets forth additional information about our operating revenues with respect to each of our reportable segments.
Cellular services: The revenue of our cellular services segment, which is composed of revenues from wireless service, cellular interconnection, wireless device sales and miscellaneous cellular services, decreased by 1.9% to Won 13,269.3 billion in 2015 from Won 13,527.9 billion in 2014. The decrease in our cellular services revenue was principally due to decreases in our wireless service revenue and cellular interconnection revenue partially offset by an increase in our wireless device sales.
Wireless service revenue decreased by 2.6% to Won 10,720.5 billion in 2015 from Won 11,010.6 billion in 2014, primarily due to the decrease in initial subscription fees which we ceased charging beginning November 2014 and the increase in the number of subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the MDDIA due to the increase in the applicable discount rate to 20% in April 2015 from 12% in October 2014.
Cellular interconnection revenue decreased by 13.1% to Won 710.0 billion in 2015 from Won 817.0 billion in 2014. The decrease was primarily attributable to decreases in interconnection rates and land-to-mobile call volume in 2015.
Wireless device sales increased by 26.5% to Won 963.4 billion in 2015 from Won 761.6 billion in 2014. Such increase was due in part to the reflection of the full year impact of the acquisition by PS&Marketing in April 2014 of the retail distribution business of SK Networks in 2015 compared to 2014 in which the acquisition only impacted revenue for part of the year.
Fixed-line telecommunications services: The revenue of our fixed-line telecommunication services segment, which is composed of revenues from broadband Internet service and advanced media platform service
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Revenue from our broadband Internet service and advanced media platform service (including IPTV) increased by 13.5% to Won 1,308.8 billion in 2015 from Won 1,152.7 billion in 2014, primarily due to an increase in the number of IPTV subscribers to 3.5 million subscribers as of December 31, 2015 from 2.8 million subscribers as of December 31, 2014 and an increase in the purchase of paid media content by IPTV subscribers.
Fixed-line telephone service revenue decreased by 10.0% to Won 420.6 billion in 2015 from Won 467.3 billion in 2014, primarily due to a decrease in residential calling volume. Miscellaneousfixed-line telecommunication services revenue decreased by 7.8% to Won 608.9 billion in 2015 from Won 660.5 billion in 2014, primarily due to a decline in new contracts for business communications services provided by SK Broadband. International calling service revenue decreased by 11.5% to Won 99.1 billion in 2015 from Won 112.0 billion in 2014, primarily due to a decrease in international calling volume.
Others: The revenue of our others segment, which is composed of revenues from our commerce service and portal service and miscellaneous other revenue, increased by 15.8% to Won 1,372.9 billion in 2015 from Won 1,186.0 billion in 2014, due to increases in commerce service revenue and miscellaneous other revenue.
Commerce service revenue increased by 8.4% to Won 988.5 billion in 2015 from Won 911.5 billion in 2014, primarily due to an increase in the annual gross merchandise volume of 11st through its mobile version. Miscellaneous other revenue increased by 59.0% to Won 320.5 billion in 2015 from Won 201.6 billion in 2014, primarily due to increases in revenue from our security business operated by Neosnetworks and revenue from SK Planet’s advertising business.
Operating Expense. Our consolidated operating expense increased by 0.4% to Won 15,672.2 billion in 2015 from Won 15,612.4 billion in 2014, primarily due to a 16.4% increase in cost of products that have been resold to Won 1,955.9 billion in 2015 from Won 1,680.1 billion in 2014, a 14.1% increase in labor cost to Won 1,893.7 billion in 2015 from Won 1,659.8 billion in 2014 and a 4.8% increase in depreciation and amortization to Won 2,845.3 billion in 2015 from Won 2,714.7 billion in 2014. Such increase was partially offset by an 8.5% decrease in commissions paid to Won 5,207.0 billion in 2015 from Won 5,692.7 billion in 2014.
The increase in cost of products that have been resold was primarily due to the reflection of the full year impact of the acquisition by PS&Marketing in April 2014 of the retail distribution business of SK Networks in 2015 compared to 2014 in which the acquisition only impacted associated costs for part of the year and an increase in high-end wireless device sales.
The increase in labor cost was primarily due to one-time severance payments in connection with our early retirement program and the increase in the number of employees at SK Broadband to further expand our advanced media platform service business and in connection with several acquisitions in 2014, including the acquisition by PS&Marketing of the retail distribution business of SK Networks in April 2014 and the acquisition by SK Planet of Shopkick in October 2014.
The increase in depreciation and amortization was primarily due to increased capital investments to upgrade our LTE network and broadband Internet fixed-line network and the increase in amortization of software.
The decrease in commissions paid was attributable mainly to the stabilized competitive environment due to the maturity of the LTE market and the implementation of the MDDIA as well as an increase in the number of subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the MDDIA.
The following sets forth additional information about our segment operating expense with respect to each of our reportable segments, which do not include certain expenses that are classified as other non-operating expenses under K-IFRS. For more information on the difference between our consolidated operating expense pursuant toK-IFRS and pursuant to IFRS as issued by the IASB, see “ — Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”
Cellular services: The segment operating expense for our cellular services segment decreased by 1.6% to Won 11,591.0 billion in 2015 from Won 11,773.5 billion in 2014, primarily due to a decrease in commissions paid, which was partially offset by increases in cost of products that have been resold, labor cost and depreciation and amortization, each for the reasons described above.
Fixed-line telecommunication services: The segment operating expense for our fixed-line telecommunication services segment slightly increased to Won 2,386.2 billion in 2015 from Won 2,369.5 billion in 2014, primarily due to an increase in marketing costs to gain more subscribers to our IPTV service and an increase in labor cost due to an increase in the number of employees related to the expansion of our advanced media platform service business.
Others: The segment operating expense for our others segment increased by 21.4% to Won 1,451.5 billion in 2015 from Won 1,195.8 billion in 2014, primarily due to an increase in marketing costs relating to various promotional events for 11st and our O2O commerce solutions and an increase in labor cost due to the increase in the number of employees pursuant to the acquisition by SK Planet of Shopkick in October 2014.
Operating Income. Our consolidated operating income decreased by 7.0% to Won 1,495.4 billion in 2015 from Won 1,607.8 billion in 2014, due to the decrease in operating revenue and other income and the increase in operating expense.
Our segment operating income with respect to each of our reportable segments is based on K-IFRS and the sum of segment operating income for all three reportable segments differs from our consolidated operating income presented in accordance with IFRS by IASB. For a reconciliation of operating income presented in accordance with IFRS by IASB and operating income presented in accordance with K-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”
Cellular services: The segment operating income of our cellular services segment decreased by 4.3% to Won 1,678.3 billion in 2015 from Won 1,754.4 billion in 2014, primarily due to the decrease in initial subscription fees which we ceased charging beginning November 2014. As a result, the segment operating margin (which, with respect to each reportable segment, is segment operating income divided by revenue from such segment, expressed as a percentage) of our cellular services segment decreased to 12.6% in 2015 from 13.0% in 2014.
Fixed-line telecommunication services: The segment operating income of our fixed-line telecommunication services segment increased by 34.7% to Won 108.3 billion in 2015 from Won 80.4 billion in 2014, primarily due to the increase in revenue from our IPTV service despite the increase in costs to expand our advanced media platform service business. As a result, the segment operating margin of our fixed-line telecommunication services segment increased to 4.3% in 2015 from 3.3% in 2014.
Others: The segment operating loss of our others segment increased to Won 78.6 billion in 2015 from Won 9.8 billion in 2014. As discussed above, while revenue from our commerce service and miscellaneous other revenue increased in 2015, marketing costs related to such services increased to a greater extent, leading to a greater operating loss of our others segment.
Finance Income and Finance Costs. Our finance income decreased by 17.8% to Won 103.9 billion in 2015 from Won 126.3 billion in 2014, primarily due to a 23.5% decrease in interest income to Won 45.9 billion in 2015 from Won 60.0 billion in 2014, which was mainly due to a general decrease in interest rates, and a 77.9% decrease in gain on valuation of derivatives to Won 1.9 billion in 2015 from Won 8.7 billion in 2014. Such decreases were partially offset by a gain on valuation of financial asset at fair value through profit or loss of Won 5.2 billion in 2015 relating to profit recognized from the early redemption of certain structured bonds compared to no such gain in
2014, a 23.4% increase in dividend income to Won 16.1 billion in 2015 from Won 13.0 billion in 2014 and a 16.1% increase in gain on foreign currency transactions to Won 18.9 billion in 2015 from Won 16.3 billion in 2014.
Our finance costs decreased by 9.5% to Won 350.1 billion in 2015 from Won 386.7 billion in 2014 primarily due to an 8.1% decrease in interest expense to Won 297.7 billion in 2015 from Won 323.9 billion in 2014, which was mainly due to a general decrease in interest rates, and a 95.2% decrease in loss relating to financial liability at fair value through profit or loss to Won 0.5 billion in 2015 from Won 10.4 billion in 2014. In 2014, we recognized such loss relating to financial liability at fair value through profit or loss due to the increase in the fair value of debentures in connection with the general decrease in interest rates. Such decreases were partially offset by a significant increase in loss on settlement of derivatives to Won 4.8 billion in 2015 from Won 0.7 billion in 2014.
Gains (Losses) Related to Investments in Subsidiaries and Associates.Gains related to investments in subsidiaries and associates decreased 13.3% to Won 786.1 billion in 2015 from Won 906.3 billion in 2014, primarily due to an 8.1% decrease in share of profits of SK Hynix to Won 842.1 billion in 2015 from Won 916.5 billion in 2014. Such decrease was primarily due to the Won 88.7 billion gain recognized in connection with the dilution of equity interest in 2014 due to the conversion by noteholders of SK Hynix’s convertible bonds to SK Hynix’s common shares compared to no such gain recognized in 2015 despite the 3.1% increase in SK Hynix’s profit for the year to Won 4,323.6 billion in 2015 from Won 4,195.2 billion.
Income Tax. Income tax expense from continuing operations increased by 14.3% to Won 519.5 billion in 2015 from Won 454.5 billion in 2014 notwithstanding a 9.7% decrease in profit before income tax to Won 2,035.4 billion in 2015 from Won 2,253.8 billion in 2014, primarily due to changes in unrealizable deferred taxes which led to an increase in income tax expense of Won 83.6 billion in 2015, mainly related to the dividend in kind made by SK Planet of SK Communication’s common shares to SK Telecom, compared to such changes which led to a decrease in income tax expense of Won 43.8 billion in 2014. Our effective tax rate in 2015 increased by 5.3%p to 25.5% in 2015 from 20.2% in 2014, primarily for the reasons set forth above.
Profit for the Year. Principally as a result of the factors discussed above, our profit for the year decreased by 15.8% to Won 1,515.9 billion in 2015 from Won 1,799.3 billion in 2014. Profit for the year as a percentage of operating revenue and other income was 8.8% in 2015 compared to 10.4% in 2014.
2014 Compared to 2013
Operating Revenue and Other Income. Our consolidated operating revenue and other income increased by 3.3% to Won 17,220.3 billion in 2014 from Won 16,677.0 billion in 2013, due to the following increases in operating revenue and other income.
Our consolidated operating revenue increased by 3.4% to Won 17,163.8 billion in 2014 from Won 16,602.1 billion in 2013, primarily as a result of improved revenues from our consolidated subsidiaries, including an increase in wireless device sales principally due to the acquisition by PS&Marketing of the retail distribution business of SK Networks in April 2014, strong growth of SK Planet’s commerce service businesses such as 11th Street and increased revenue from SK Broadband’s IPTV services, as well as growth in the number of new subscribers to our LTE service and increase in data usage.
Our consolidated other income decreased by 24.7% to Won 56.5 billion in 2014 from Won 74.9 billion in 2013 primarily due to a decrease in value-added tax refunds to Won 8.1 billion in 2014 from Won 10.3 billion in 2013 and other income recognized in 2013 but not in 2014 relating to one-off items such as the receipt of insurance coverage payments for typhoon damage of Won 4.6 billion and gain from sale of property and equipment of Won 4.5 billion.
The following sets forth additional information about our operating revenues with respect to each of our reportable segments.
Cellular services: The revenue of our cellular services segment, which is composed of revenues from wireless service, cellular interconnection, wireless device sales and miscellaneous cellular services, increased by 1.6% to Won 13,527.9 billion in 2014 from Won 13,315.5 billion in 2013.
The increase in our cellular services revenue was principally due to increases in our wireless device sales and miscellaneous cellular services revenue, partially offset by a decrease in cellular interconnection revenue. There was no significant change in wireless service revenue between 2013 and 2014.
Wireless device sales increased by 17.9% to Won 761.6 billion in 2014 from Won 645.9 billion in 2013, primarily due to the acquisition by PS&Marketing of 190 retail stores as part of its acquisition of the retail distribution business of SK Networks in April 2014. Miscellaneous cellular services revenue increased by 14.0% to Won 938.6 billion in 2014 from Won 823.5 billion in 2013, primarily due to an increase in revenue from our Internet solutions business.
Cellular interconnection revenue decreased by 3.3% to Won 817.0 billion in 2014 from Won 845.0 billion in 2013. The decrease was primarily attributable to decreases in interconnection rates in 2014, which was partially offset by an increase in total call volume to mobile devices.
Wireless service revenue remained steady at Won 11,010.6 billion in 2014 compared to Won 11,001.1 billion in 2013. Factors that contributed to an increase in wireless service revenue in 2014 were an increase in the number of subscribers that subscribe to LTE plans, which have higher monthly rates than our other wireless service plans, as well as an increase in the number of LTE subscribers that subscribe to more expensive fixed-rate plans that feature a higher data transmission allowance (in connection with the increased availability of data-intensive wireless contents such as mobile video streaming). A factor that offset this increase and contributed to a decrease in wireless service revenue in 2014 was a decrease in initial subscription fees which we ceased charging beginning November 2014 after gradually decreasing the fee since August 2013.
Fixed-line telecommunication services: The revenue of our fixed-line telecommunication services segment, which is composed of revenues from broadband Internet service and advanced media platform service, fixed-line telephone service, international calling service, fixed-line interconnection and miscellaneous fixed-line telecommunication services, increased by 14.3% to Won 2,449.9 billion in 2014 from Won 2,324.4 billion in 2013, primarily due to an increase in revenue from our broadband Internet service and advanced media platform service and miscellaneous fixed-line telecommunications services, partially offset by decreases in revenue from fixed-line interconnection, international calling service and fixed-line telephone service.
Revenue from our broadband Internet service and advanced media platform service increased by 12.7% to Won 1,152.7 billion in 2014 from Won 1,023.2 billion in 2013, primarily attributable to an increase in the number of IPTV subscribers to 2.8 million subscribers as of December 31, 2014 from 2.1 million subscribers as of December 31, 2013. Revenue from our miscellaneous fixed-line telecommunication services increased by 6.3% to Won 660.5 billion in 2014 from Won 621.1 billion in 2013, primarily due to an increase in subscribers of SK Telink’s MVNO service.
Fixed-line interconnection revenue decreased by 27.1% to Won 57.4 billion in 2014 from Won 78.7 billion in 2013, primarily due to a decrease in residential calling volume. International calling service revenue decreased by 11.8% to Won 112.0 billion in 2014 from Won 127.0 billion in 2013, primarily due to a decrease in international calling volume. Fixed-line telephone service revenue decreased by 1.5% to Won 467.3 billion in 2014 from Won 474.4 billion in 2013, primarily due to a decrease in residential calling volume.
Others: The revenue of our others segment, which is composed of revenues from our commerce service and portal service and miscellaneous other revenue, increased by 3.4% to Won 1,186.0 billion in 2014 from Won 962.2 billion in 2013, due to increases in commerce service revenue and miscellaneous other revenue, partially offset by a decrease in portal service revenue.
Commerce service revenue increased by 22.7% to Won 911.5 billion in 2014 from Won 742.6 billion in 2013, primarily due to an increase in revenue generated by 11th Street. Miscellaneous other revenue increased by 58.2% to Won 201.6 billion in 2014 from Won 127.4 billion in 2013, primarily due to the revenue attributable to Neosnetworks and Iriver, which were acquired by SK Telecom in 2014.
Portal service revenue decreased by 20.8% to Won 73.0 billion in 2014 from Won 92.2 billion in 2013, primarily due to a decrease in advertising revenues from the portal services operated by SK Communications.
Operating Expense. Our consolidated operating expense increased by 3.4% to Won 15,612.4 billion in 2014 from Won 15,098.6 billion in 2013, primarily due to a 29.2% increase in cost of products that have been resold to Won 1,680.1 billion in 2014 from Won 1,300.4 billion in 2013, which was attributable mainly to the acquisition by PS&Marketing of the retail distribution business of SK Networks in April 2014; a 3.5% increase in commissions paid to Won 5,692.7 billion in 2014 from Won 5,498.7 billion in 2013, which was primarily attributable to an increase in marketing expenses to acquire new LTE subscribers in the first half of 2014 amidst intensified competition among us, KT and LG U+; and a 6.3% increase in labor costs to Won 1,659.8 billion in 2014 from Won 1,561.4 billion in 2013, which was primarily due to the significant increase in the number of employees in connection with several acquisitions in 2014, including the acquisition by PS&Marketing of the retail distribution business of SK Networks in April 2014, the acquisitions by SK Telecom of Neosnetworks in April 2014 and Iriver in August 2014 and the acquisition by SK Planet of Shopkick in October 2014. Such increase was partially offset by an 8.8% decrease in other operating expenses to Won 1,592.6 billion in 2014 from Won 1,746.3 billion in 2013, which was attributable mainly to a decrease in loss on disposal of property and equipment and intangible assets to Won 33.0 billion in 2014 from Won 267.5 billion in 2013.
The following sets forth additional information about our segment operating expense with respect to each of our reportable segments, which do not include certain expenses that are classified as other non-operating expenses under K-IFRS. For more information on the difference between our consolidated operating expense pursuant toK-IFRS and pursuant to IFRS as issued by the IASB, see “ — Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”
Cellular services: The segment operating expense for our cellular services segment increased by 3.9% to Won 11,773.5 billion in 2014 from Won 11,329.4 billion in 2013, primarily due to increases in commissions paid, cost of products that have been resold and labor costs, each for the reasons described above, and an increase in depreciation and amortization expenses, which was attributable mainly to an increase in our LTE wireless network equipment and amortization of our frequency licenses.
Fixed-line telecommunication services: The segment operating expense for our fixed-line telecommunication services segment increased by 4.4% to Won 2,369.5 billion in 2014 from Won 2,268.8 billion in 2013, primarily due to an increase in commissions paid related to IPTV contents.
Others: The segment operating expense for our others segment increased by 20.4% to Won 1,195.8 billion in 2014 from Won 992.8 billion in 2013, primarily due to an increase in marketing costs resulting from increased competition in the e-commerce market.
Operating Income. Our consolidated operating income increased by 1.9% to Won 1,607.8 billion in 2014 from Won 1,578.4 billion in 2013, as the increase in operating revenue and other income was slightly greater than the increase in operating expense.
Our segment operating income with respect to each of our reportable segments is based on K-IFRS and the sum of segment operating income for all three reportable segments differs from our consolidated operating income presented in accordance with IFRS by IASB. For a reconciliation of operating income presented in accordance with IFRS by IASB and operating income presented in accordance with K-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”
Cellular services: The segment operating income of our cellular services segment decreased by 11.7% to Won 1,754.4 billion in 2014 from Won 1,986.1 billion in 2013, primarily due to an increase in marketing expenses to acquire new LTE subscribers in the first half of 2014 amidst intensified competition among us, KT and LG U+.As a result, the segment operating margin (which, with respect to each reportable segment, is segment operating income divided by revenue from such segment, expressed as a percentage) of our cellular services segment decreased to 13.0% in 2014 from 14.9% in 2013.
Fixed-line telecommunication services: The segment operating income of our fixed-line telecommunication services segment increased by 44.6% to Won 80.4 billion in 2014 from Won 55.6 billion in 2013, due to an
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Others: The segment operating loss of our others segment decreased to Won 9.8 billion in 2014 from Won 30.6 billion in 2013. As discussed above, while our commerce service revenue increased in 2014, intense competition in the commerce service industry led to increased marketing costs, and thus, the profitability of our commerce service business did not improve in 2014; however, while our portal service revenue decreased in 2014, our operating expenses related to this business decreased to a greater degree such that the profitability of our commerce service business improved in 2014 resulting in the aforementioned decrease in the segment operating loss of our others segment.
Finance Income and Finance Costs. Our finance income increased by 11.4% to Won 126.3 billion in 2014 from Won 113.4 billion in 2013, primarily due to gain on valuation of derivatives of Won 8.7 billion in 2014 compared to no such gain in 2013; a 47.6% increase in gain on foreign currency transactions to Won 16.3 billion in 2014 from Won 11.0 billion and a 50.5% increase in gain on disposal of long-term investment securities to Won 14.0 billion in 2014 from Won 9.3 billion in 2013 attributable primarily to the disposal of equity interests of iHQ, Inc. Such increases were partially offset by an 8.5% decrease in interest income to Won 60.0 billion in 2014 from Won 65.6 billion in 2013, which was mainly due to a general decrease in interest rates and no gain on valuation of financial asset at fair value through profit or loss in 2014 compared to Won 5.2 billion of such gain in 2013, related to the valuation of convertible bonds of NanoEnTek in 2013, which were subsequently converted into equity in 2014. Our finance costs decreased by 32.3% to Won 386.7 billion in 2014 from Won 571.2 billion in 2013 primarily due to a 92.3% decrease in loss relating to financial liability at fair value through profit or loss to Won 10.4 billion in 2014 from Won 134.2 billion in 2013 due to the valuation loss on our exchangeable bonds due to rising stock prices in 2013 and loss on redemption of debentures upon the exercise of exchange claims in 2013.
Gains (Losses) Related to Investments in Subsidiaries and Associates.Gains related to investments in subsidiaries and associates increased 28.3% to Won 906.3 billion in 2014 from Won 706.5 billion in 2013, primarily due to a Won 916.5 billion gain attributable to our investment in SK Hynix, in which we have a 20.1% interest. SK Hynix’s profit for the year increased 46.0% to Won 4,195.2 billion in 2014 from 2,872.9 billion in 2013, primarily as a result of increases in unit sales of its dynamic random-access memory and NAND products.
Income Tax. Income tax expense from continuing operations increased by 13.4% to Won 454.5 billion in 2014 from Won 400.8 billion in 2013, primarily due to a 23.4% increase in profit before income tax to Won 2,253.8 billion in 2014 from Won 1,827.1 billion in 2013. Our effective tax rate in 2014 decreased by 1.7%p to 20.2% in 2014 from 21.9% in 2013, primarily due to an increase in unrecognized deferred tax liabilities in connection with our investments in SK Hynix and income tax refunds received as a result of our successful appeals to the relevant tax authorities.
Profit from Discontinued Operations. We did not recognize any profit or loss from discontinued operations in 2014. In 2013, we recognized profit from discontinued operations of Won 183.2 billion with respect to the disposition by SK Planet of its 52.6% equity stake in Loen Entertainment for an aggregate sale price of approximately Won 265.9 billion.
Profit for the Year. Principally as a result of the factors discussed above, our profit for the year increased by 11.8% to Won 1,799.3 billion in 2014 from Won 1,609.5 billion in 2013. Profit for the year as a percentage of operating revenue and other income was 10.4% in 2014 compared to 9.7% in 2013.
Inflation
We do not consider inflation in Korea to have had a material impact on our results of operations in recent years. According to data published by The Bank of Korea, annual inflation in Korea was 0.7% in 2015, 1.3% in 2014 and 1.3% in 2013.
Liquidity
We had a working capital deficit (current liabilities in excess of current assets) of Won 96.3 billion as of December 31, 2015 and Won 337.2 billion as of December 31, 2014. The working capital deficit as of December 31, 2015 was primarily due to working capital needs in the ordinary course of business.The working capital deficit as of December 31, 2014 was primarily due to cash expenditures in 2014 used to fund SK Planet’s acquisition of Shopkick and SK Telecom’s acquisitions of Neosnetworks and Iriver. We plan to fund our current liabilities with the cash flow generated by our operations, proceeds from the disposal of investment securities or property and equipment that are no longer deemed profitable and proceeds from additional borrowings, as necessary.
We had cash, cash equivalents, short-term financial instruments and short-term investment securities of Won 1,552.3 billion as of December 31, 2015 and Won 1,427.7 billion as of December 31, 2014. We had outstanding short-term borrowings of Won 260.0 billion as of December 31, 2015 and Won 366.6 billion as of December 31, 2014. As of December 31, 2015, we had credit lines with several local banks that provided for borrowing of up to Won 490.0 billion, Won 450.0 billion of which was available for borrowing.
Cash flows from operating activities and debt financing have been our principal sources of liquidity. We had cash and cash equivalents of Won 768.9 billion as of December 31, 2015 and Won 834.4 billion as of December 31, 2014. We believe that we have a variety of alternatives 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.
Year Ended December 31, | Change | |||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2015 to 2014 | 2014 to 2013 | ||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||
Net Cash Provided by Operating Activities | ₩ | 3,778.1 | ₩ | 3,677.4 | ₩ | 3,558.6 | ₩ | 100.7 | 2.7 | % | ₩ | 118.8 | 3.3 | % | ||||||||||||||
Net Cash Used in Investing Activities | (2,880.5 | ) | (3,683.2 | ) | (2,506.5 | ) | 802.7 | (21.8 | ) | (1,176.7 | ) | 46.9 | ||||||||||||||||
Net Cash Used in Financing Activities | (964.6 | ) | (559.4 | ) | (573.2 | ) | (405.2 | ) | 72.4 | 13.8 | (2.4 | ) | ||||||||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents Held in Foreign Currencies | 1.5 | 1.0 | (0.4 | ) | 0.5 | 49.2 | 1.4 | N/A | ||||||||||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (67.0 | ) | (565.2 | ) | 478.9 | 498.2 | (88.2 | ) | (1,044.1 | ) | N/A | |||||||||||||||||
Cash and Cash Equivalents at Beginning of Period | 834.4 | 1,398.6 | 920.1 | (564.2 | ) | (40.3 | ) | 478.5 | 52.0 | |||||||||||||||||||
Cash and Cash Equivalents at End of Period | 768.9 | 834.4 | 1,398.6 | (65.5 | ) | (7.9 | )% | (564.2 | ) | (40.3 | )% |
N/A = Not applicable.
Cash Flows from Operating Activities. Net cash provided by operating activities was Won 3,778.1 billion in 2015, Won 3,677.4 billion in 2014 and Won 3,558.6 billion in 2013. Profit for the year was Won 1,515.9 billion in 2015, Won 1,799.3 billion in 2014 and Won 1,609.5 billion in 2013. Net cash provided by operating activities in 2015 increased slightly by 2.7% from 2014. Net cash provided by operating activities in 2014 increased by 3.3% from 2013, primarily due to an 11.8% increase in profit for the year to Won 1,799.3 billion in 2014 from Won 1,609.5 billion in 2013.
Cash Flows from Investing Activities. Net cash used in investing activities was Won 2,880.5 billion in 2015, Won 3,683.2 billion in 2014 and Won 2,506.5 billion in 2013. Cash inflows from investing activities were Won 914.5 billion in 2015, Won 341.4 billion in 2014 and Won 1,251.8 billion in 2013. Cash inflows in 2015 were primarily attributable to collection of short-term loans of Won 398.3 billion and proceeds from disposals of investments in associates and joint ventures of Won 185.1 billion, mostly in connection with the disposal of 27,725,264 shares of KEBHana Card for Won 176.3 billion. Cash inflows in 2014 were primarily attributable to collection of short-term loans of Won 207.4 billion. Cash inflows in 2013 were primarily attributable to collection of short-term loans of Won 290.9 billion, proceeds from disposal of long-term investment securities of Won 287.8 billion, mostly in connection with the merger of SK Marketing & Co., Ltd. into SK Planet in February 2013, proceeds from disposal of a subsidiary of Won 215.9 billion, mostly attributable to the sale in July 2013 of shares of Loen Entertainment, net proceeds from the disposition of non-current assets held for sale of
Won 190.4 billion, relating to the sale of shares of SKY Property Management, and a decrease in short-term financial instruments, net of Won 186.4 billion, the proceeds of which were used to repay our outstanding debt.
Cash outflows for investing activities were Won 3,795.0 billion in 2015, Won 4,024.6 billion in 2014 and Won 3,758.3 billion in 2013. Cash outflows in 2015, 2014 and 2013 were primarily attributable to expenditures related to the acquisition of property and equipment of Won 2,478.8 billion, Won 3,008.0 billion and Won 2,879.1 billion, respectively, primarily in connection with the acquisition of LTE equipment and the expansion of our LTE network.In 2015, the decrease in cash outflows for the acquisition of property, plant and equipment was partially offset by an increase in cash outflows for the acquisition of long-term investment securities to Won 312.3 billion in 2015 compared to Won 41.3 billion in 2014 and Won 22.1 billion in 2013, primarily due to the acquisition of a 2.06% equity interest in Hana Financial Group Inc.
Cash Flows from Financing Activities. Net cash used in financing activities was Won 964.6 billion in 2015, Won 559.4 billion in 2014 and Won 573.2 billion in 2013.Cash inflows from financing activities were Won 1,375.2 billion in 2015, Won 1,421.0 billion in 2014 and Won 1,852.2 billion in 2013. Such inflows were primarily driven by the issuance of debentures, which provided cash of Won 1,375.0 billion in 2015, Won 1,255.5 billion in 2014 and Won 1,328.7 billion in 2013, proceeds from long-term borrowings, which provided cash of Won 62.6 billion in 2014 and Won 105.1 billion in 2013, and the issuance of hybrid bonds in 2013, which provided cash of Won 398.5 billion. In 2014, we had cash inflows of Won 102.9 billion due to proceeds fromshort-term borrowings.
Cash outflows for financing activities were Won 2,339.8 billion in 2015, Won 1,980.5 billion in 2014 and Won 2,425.4 billion in 2013. Cash outflows for financing activities included payment of dividends, repayments of current portion of long-term debt, repayment of long-term borrowings, repayment of debentures, acquisition of treasury stock and repayment of short-term borrowings, among other items. Payment of dividends were Won 668.5 billion in 2015, Won 666.8 billion in 2014 and Won 655.9 billion in 2013. Repayments of otherlong-term account payables were Won 191.4 billion in 2015, Won 207.8 billion in 2014 and Won 161.6 billion in 2013. Repayment of long-term borrowings were Won 21.9 billion in 2015, Won 23.3 billion in 2014 and Won 467.2 billion in 2013. Repayment of debentures were Won 620.0 billion in 2015, Won 1,039.9 billion in 2014 and Won 772.0 billion in 2013. Decrease in short-term borrowings, net accounted for Won 106.6 billion and Won 340.2 billion of cash outflows for financing activities in 2015 and 2013, respectively. In 2015, we had cash outflows of Won 490.2 billion due to acquisition of treasury stock and cash outflows of Won 220.4 billion related to equity interest transactions, principally in connection with the Share Exchange.
As of December 31, 2015, we had total long-term debt (excluding current portion) outstanding of Won 6,560.7 billion, which included debentures in the amount of Won 6,439.1 billion and bank and institutional borrowings in the amount of Won 121.6 billion.As of December 31, 2014, we had total long-term debt (excluding current portion) outstanding of Won 5,798.9 billion, which included debentures in the amount of Won 5,649.2 billion and bank and institutional borrowings in the amount of Won 149.7 billion. The increase in our long-term debt as of December 31, 2015 was primarily due to an increase in debentures issued during 2015 to acquire treasury stock. For a description of our long-term debt, see note 18 of the notes to our consolidated financial statements.
As of December 31, 2015, we had Won 4,535.7 billion aggregate principal amount of KoreanWon-denominated debentures outstanding, of which SK Telecom issued Won 3,385.7 billion, SK Broadband issued Won 1,120.0 billion and PS&Marketing issued Won 30.0 billion, and Won 2,603.9 billion aggregate principal amount of debentures outstanding denominated in foreign currencies, including U.S. dollars, Swiss Francs and Australian Dollars. The interest rates of our debentures range from 1.75% to 6.63% depending on the offering size, maturity, interest rate environment at the time of the offering and currency, among other factors. We have a diversified maturity profile with respect to our debentures. See “— Contractual Obligations and Commitments” for more details.
As of December 31, 2015, a substantial portion of our foreign currency-denominated long-term borrowings, which amounted to approximately 28.5% of our total outstanding long-term debt, including current portion and present value discount as of such date, was denominated in Dollars.However, substantially all of our revenue and operating expenses are denominated in Won. We generally pay for imported capital equipment in Dollars.
Appreciation of the Won against the Dollar will result in net foreign currency transaction and translation gains, while depreciation of the Won against the Dollar will result in net foreign currency transaction and translation losses. Changes in foreign currency exchange rates will also affect our liquidity because of the effect of such changes on the amount of funds required for us to make interest and principal payments on our foreigncurrency-denominated debt. For a description of swap or derivative transactions we have entered into, among other transactions, to mitigate the effects of such losses, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
Capital Requirements
Historically, capital expenditures, repayment of outstanding debt and research and development expenditures have represented our most significant use of funds. In recent years, we have also increasingly dedicated capital resources to develop and invest in new growth engines, including our three next-generation growth platforms, IoT solutions, lifestyle enhancement and advanced media. In addition, we have used funds for the acquisition of treasury shares, financing of our subscribers’ handset purchases on installment payment plans and payment of retirement and severance benefits.
To fund our scheduled debt repayment and planned capital expenditures over the next several years, we intend to rely primarily on cash flows from operating activities, as well as bank and institutional borrowings, and offerings of debt or equity in the domestic or international markets. We believe that these sources will be sufficient to fund our planned capital expenditures for 2016. Our ability to rely on these alternatives could be affected by the liquidity of the Korean financial markets or by Government policies regarding Won and foreign currency borrowings and the issuance of equity and debt. Our failure to make needed expenditures would adversely affect our ability to sustain subscriber growth and provide quality services and, consequently, our results of operations.
Capital Expenditures. The following table sets forth our actual capital expenditures for 2015, 2014 and 2013:
Year Ended December 31, | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
(In billions of Won) | ||||||||||||
LTE Network | ₩ | 1,022.7 | ₩ | 1,357.2 | ₩ | 1,439.4 | ||||||
WCDMA Network | 90.0 | 92.3 | 124.2 | |||||||||
Fixed-line Network | 393.1 | 399.0 | 403.5 | |||||||||
Other Network(1) | 332.4 | 283.2 | 338.5 | |||||||||
Others(2) | 640.6 | 876.3 | 573.5 | |||||||||
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Total | ₩ | 2,478.8 | ₩ | 3,008.0 | ₩ | 2,879.1 | ||||||
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We set our capital expenditure budget for each upcoming year on an annual basis. Our actual capital expenditures in 2015, 2014 and 2013 were Won 2,478.8 billion, Won 3,008.0 billion and Won 2,879.1 billion, respectively. Of such amounts, we spent approximately 41.3%, 45.1%, 50.0% in 2015, 2014, 2013, respectively, on capital expenditures related to expanding and enhancing the quality of our LTE network. Our other non-network related capital expenditures in 2015, 2014 and 2013 primarily related to developing new products and maintenance and upgrades to our information technology systems.
We were required to pay the cost of our WCDMA license for 2 x 10 MHz of spectrum in the 2.1 GHz band that we acquired in May 2010 in annual installments of Won 17.5 billion each year from 2012 through 2014 after the initial payment of Won 52.6 billion in 2010. We are also required to pay license fees for the additional frequency licenses in the 800 MHz and 1.8 GHz spectrums that we acquired in 2011. The license fee for the 30 MHz bandwidth in the 800 MHz spectrum was Won 416.5 billion, of which Won 208.3 billion was paid in 2011 with the remainder paid in annual installments from 2013 through 2015. The license fee for the 20 MHz of bandwidth in the 1.8 GHz spectrum was Won 995.0 billion, of which Won 74.6 billion, Won 74.6 billion and
Won 248.8 billion was paid in 2013, 2012 and 2011, respectively, and the remainder has been waived in connection with our return of the right to use the 20 MHz bandwidth. The license fee for the 35 MHz of bandwidth in the 1.8 GHz spectrum was Won 1.08 trillion, of which Won 115.2 billion was paid in 2013, and the remainder is payable in annual installments through the end of the license period in 2021. In addition, we were reallocated 27 MHz of spectrum in the 2.3 GHz band for our WiBro service in March 2012. The license fee for such spectrum is Won 17.3 billion, of which Won 8.7 billion was paid in 2012, and the remainder is payable in annual installments from 2014 through 2016. For more information, see note 17 of the notes to our consolidated financial statements.
In addition, we have been making capital expenditures to build more advanced networks based on LTE technology. We commenced commercial LTE services in July 2011 and expanded our LTE network nationwide and launched our LTE multi-carrier technology in 2012.We launched our LTE-A service in June 2013, our wideband LTE-A service in September 2013 and our tri-band LTE-A service in December 2014. For a more detailed description of our LTE network, see “Item 4.B. Business Overview — Digital Wireless Network — LTE Network.” We plan to continue to make capital investments in 2016 to further improve and expand our LTE network and develop related technologies.
We expect that our capital expenditure amount in 2016 will be similar to that of 2015. Our expenditures will be for a range of projects, including investments to improve and expand our LTE network and LTE-A services, investments to improve and expand our Wi-Fi network, investments to develop our platform business portfolio and funding for mid-to long-term research and development projects, as well as other initiatives, primarily related to the development of new growth engines, as well as initiatives related to our ongoing businesses in the ordinary course.However, our overall expenditure levels and our allocation among projects remain subject to many uncertainties. We may increase, reduce or suspend our planned capital expenditures for 2016 or change the timing and area of our capital expenditure spending from the estimates described above in response to market conditions or for other reasons. We may also make additional capital expenditure investments as opportunities arise, including in connection with building out our networks on any new bandwidths we may acquire in the frequency bandwidth auctions to be held by the MSIP in 2016. Accordingly, we periodically review the amount of our capital expenditures and may make adjustments based on the current progress of capital expenditure projects and market conditions. No assurance can be given that we will be able to meet any such increased expenditure requirements or obtain adequate financing for such requirements, on terms acceptable to us, or at all.
Repayment of Outstanding Debt. As of December 31, 2015, our principal repayment obligations with respect to long-term borrowings, bonds and obligations under capital leases outstanding were as follows for the periods indicated:
Year Ending December 31, | Total | |||
(In billions of Won) | ||||
2016 | ₩ | 964.1 | ||
2017 | 867.5 | |||
2018 | 1,606.7 | |||
2019 and thereafter | 4,118.8 |
We note that no commercial bank in Korea may extend credit (including loans, guarantees and purchase of bonds) in excess of 20.0% of its shareholders’ equity to any one borrower. In addition, no commercial bank in Korea may extend credit exceeding 25.0% of the bank’s shareholders’ equity to any one borrower and to any person with whom the borrower shares a credit risk.
Investments in New Growth Engines. We may also require capital for investments to support our development of new growth engines.
In April 2014, we acquired a controlling interest in Neosnetworks, a provider of residential and small business electronic security and other related alarm monitoring services, for an aggregate purchase price of approximately Won 24.0 billion. We acquired additional interests in Neosnetworks in April 2015 for Won 40.0 billion, resulting in an increase in our ownership of Neosnetworks to 83.9%. In August 2014, we acquired a 39.3% equity interest of Iriver, a manufacturer of digital audio players and other portable media devices, which we increased to 49.0% in December 2014, for an aggregate purchase price of approximately Won 54.5 billion. We also acquired Won 5.0 billion of convertible bonds issued by Iriver, which may be converted into additional equity interests of Iriver when certain conditions are met. In October 2014, SK Planet acquired a 100.0% ownership interest through
its less than wholly-owned subsidiary of Shopkick, a developer of a shopping app for mobile devices that provides benefits to customers for visiting stores, in order to penetrate the commerce business in the United States for an aggregate purchase price of Won 230.9 billion and the assumption of Won 18.7 billion in current liabilities.
In addition, upon the completion of the acquisition of a 30.0% interest in CJ HelloVision described in “Item 4. Information on the Company — Item 4.A. History and Development of the Company — Recent Developments,” we will be required to pay the share purchase price of Won 500.0 billion and may need to make additional capital expenditures in connection with the subsequent merger and integration of CJ HelloVision’s business with ours.
From time to time, we may make other investments in telecommunications or other businesses, in Korea or abroad, where we perceive attractive opportunities for investment. From time to time, we may also dispose of existing investments when we believe that doing so would be in our best interest.
Severance Payments. The defined benefit obligation, which is the total accrued and unpaid retirement and severance benefits for our employees, as of December 31, 2015 was Won 98.9 billion.This amount was reflected in our consolidated financial statements as a liability, which is net of deposits with insurance companies totaling Won 426.4 billion to fund a portion of the employees’ severance indemnities.
Also see “Item 6.D. Employees — Employee Benefits” and note 22 of the notes to our consolidated financial statements.
Dividends. Total cash outflows for payments of dividends amounted to Won 668.5 billion in 2015, Won 666.8 billion in 2014 and Won 655.9 billion in 2013.
In April 2016, we distributed annual dividends at Won 9,000 per share to our shareholders for an aggregate payout amount of Won 635.5 billion.
Contractual Obligations and Commitments
The following summarizes our contractual cash obligations at December 31, 2015, and the effect such obligations are expected to have on liquidity and cash flow in future periods:
Payments Due by Period(1) | ||||||||||||||||||||
Total | Less Than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Bonds | ||||||||||||||||||||
Principal | ₩ | 7,139.7 | ₩ | 670.0 | ₩ | 2,410.4 | ₩ | 1,534.8 | ₩ | 2,524.5 | ||||||||||
Interest | 1,374.3 | 227.9 | 317.5 | 254.2 | 574.7 | |||||||||||||||
Long-term borrowings | ||||||||||||||||||||
Principal | 417.4 | 294.1 | 63.8 | 39.3 | 20.2 | |||||||||||||||
Interest | 10.7 | 4.0 | 5.1 | 1.1 | 0.5 | |||||||||||||||
Capital lease obligations | ||||||||||||||||||||
Principal | 0 | 0 | — | — | — | |||||||||||||||
Interest | — | — | — | — | — | |||||||||||||||
Operating leases | — | — | — | — | — | |||||||||||||||
Facility deposits | 5.5 | 0.4 | — | — | 5.1 | |||||||||||||||
Derivatives | 92.5 | 4.9 | 87.6 | — | — | |||||||||||||||
Other long-term payables(2) | ||||||||||||||||||||
Principal | 709.9 | 120.7 | 235.7 | 235.7 | 117.8 | |||||||||||||||
Interest | 69.1 | 19.8 | 29.6 | 16.4 | 3.3 | |||||||||||||||
Short-term borrowings | 260.0 | 260.0 | — | — | — | |||||||||||||||
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Total contractual cash obligations | ₩ | 10,079.1 | ₩ | 1,601.8 | ₩ | 3,149.7 | ₩ | 2,081.5 | ₩ | 3,246.1 | ||||||||||
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See note 37 of the notes to our consolidated financial statements for details related to our other commitments and contingencies.
Critical Accounting Policies, Estimates And Judgments
Our consolidated financial statements are prepared in accordance with IFRS.IFRS as issued by the IASB. The preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments including those related to loss allowances, for doubtful accounts, fair value measurements of financial instruments, estimated useful lives and impairment of long-lived assets, impairment of goodwill, provisions, retirement benefit plans and income taxes. We base our estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies, the following may involve a higher degree of judgment or complexity:
Loss Allowances for Doubtful Accounts
AnA loss allowance for doubtful accounts is provided based on a review of the status of individual receivable accounts at the end of the year. We maintain loss allowances for doubtful accounts for estimated losses that result from the inability of our customers to make required payments. We base our allowances on the likelihood of recoverability of accounts receivable based on the aging of accounts receivablesreceivable at the end of the period, past customer default experience and their credit status, and economic and industrial factors. Allowance for doubtfulIn addition, we use an “expected credit loss” impairment model to estimate our loss allowances based on the above-described criteria. Under such model, loss allowances are recorded prior to experiencing delinquency on our receivable accounts rather than upon actual delinquency. Loss allowance
amounted to Won 344.0365.1 billion in 2015 and Won 328.2 billion in 2014. As there was no significant change in our assumptions and judgments including on the aging of accounts receivables, past customer default experience and credit status, and economic and industrial factors, there was no significant change in the percentage of allowance for doubtful accounts as of December 31, 2015 compared to the prior year.2020 and Won 346.4 billion as of December 31, 2019. If economic or specific industry trends worsen beyond our estimates, the loss allowances for doubtful accounts we have recorded may be materially adjusted in the future. See note 7 of the notes to our consolidated financial statements.
Fair Value Measurement of Financial Instruments
Subsequent to initial recognition, available-for-sale financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income and derivative financial assets are stated at fair value with any gains or losses arising on remeasurement recognized in profit for the period or other comprehensive income. When measuring fair value, we use quoted prices in active markets to the extent such prices exist. The fair values of financial instruments, including derivative instruments, that are not traded in an active market are determined using valuation techniques that require management’s estimates of future cash flows and discount rates. Our management uses its judgment to select a variety of methods and makes assumptions that are mainly based on market conditions existing at the end of each reporting period. See note 4notes 2(4) and 36(3) of the notes to our consolidated financial statements.
Estimated Useful Lives of Long-lived Assets
We estimate the useful lives of long-lived assets in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period. The useful lives are estimated at the time a long-lived asset is acquired and are based on historical experience with similar assets as well as taking into account anticipated technological 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 and amortization expense in future periods. See note 4 of the notes to our consolidated financial statements.
Impairment of Long-lived Assets Including the Frequency Usage Rights
Long-lived assets generally consist of property plant and equipment and definite-lived intangible assets. We review our depreciation and amortization methods, estimated useful lives and residual values of long-lived assets at the end of
each annual reporting period. AnIf any such asset or cash-generating unit is considered to be impaired, the impairment lossto be recognized is recognized whenmeasured as the asset’samount by which the carrying amount of the asset or cash-generating unit exceeds the estimated recoverable amount is less than its carrying amount. The recoverable amount of a long-lived asset is the greater of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are groupedwe review the recoverable amount of an individual asset or, if it is not possible to measure the individual recoverable amount of an asset, at the lowest levels for which there are separately identifiable cash flows (cash-generating units).level of a cash-generating unit. The recoverable amounts of assets or cash-generating units aremay be determined based on value-in-use calculations, which require the use of estimates. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated recovery value.
Our definite-lived intangible assets include our frequency usage rights, which have contractual lives of 6.35 to 13.110.25 years and are amortized from the date commercial service is initiated through the end of their contractual lives. Because the use of frequency usage rights presentsis exposed to risks and challenges toassociated with our business, any or all of which, if realized or not properly addressed, may have a material adverse effect on our financial condition, results of operations and cash flows, we review the frequency usage rights for any indication of impairment on an annual basis. In connection with our review,If any such indication exists, we utilizetest for impairment utilizing the estimated long-term revenue and cash flow forecasts. The use of different assumptions within our cash flow model could result in different recoverable amounts for our frequency usage rights. The results of our review using the testing method described above resulted in noan impairment loss in the amount of Won 198.4 billion of our frequency usage rights in 2015.See2020. See note 17 of the notes to our consolidated financial statements.
Impairment of Goodwill
Goodwill is measured as the excess of the sum of: (1) the consideration transferred, (2) the amount of any non-controlling interests in the acquiree and (3) the fair value of the acquirer’s previously held equity interest in the acquiree (if any), over the net fair value of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is not depreciated,amortized, but tested for impairment at the end of each annual reporting period or whenever there is an indication that the asset may be impaired. Goodwill is carried at cost less accumulated impairment losses and the impairment losses are not reversed. For the purpose of impairment testing, assets are groupedwe review the recoverable amount of an individual asset or, if it is not possible to measure the individual recoverable amount of an asset, at the lowest levels for which there are separately identifiable cash flows, known aslevel of a cash-generating units. Determining whether goodwill is impaired requiresunit. The recoverable amount of an estimation of the value in use of theasset or cash-generating unitsunit to which goodwill has been allocated.allocated is the greater of its value in use and its fair value less costs to sell. The value in use calculation requires our management to estimate the future cash flows expected related to the respective cash-generating unit and the determination of an appropriate discount rate in order to calculate present value.
In 2020, we recognized Won 0.5 billion of impairment losses on goodwill compared to Won 21.1 billion of impairment losses on goodwill in 2019. Impairment losses on goodwill in 2020 were mainly due to our recognition
of impairment losses on goodwill relating to our consolidated subsidiaries Dreamus and Incross. Impairment losses on goodwill in 2019 were mainly due to our recognition of impairment losses on goodwill relating to our consolidated subsidiary Life Design Company Inc. (“Life Design Company”), which operates a celebrity-related merchandise business in Japan.
As of December 31, 2020, the amount of goodwill allocated to our security services cash-generating unit, which is primarily derived from the acquisition of LSH, was Won 1,176.3 billion, which increased slightly from Won 1,173.4 billion as of December 31, 2019. Our management calculated the recoverable amount of such cash-generating unit based on its value in use using a discounted cash flow method. The discounted cash flow method was based on certain key assumptions with respect to relevant revenue growth rates, labor costs, perpetual growth rate and cash flow discount rate that were primarily derived from internal sources as well as historical performance, external market data and industry reports. The estimated revenue growth rates and labor costs were based on 5-year financial budgets that have been approved by management, which took into account external market data, market trends and expectations as well as historical performance. Cash flows beyond 2025 were projected to grow at a perpetual growth rate estimated at 1.0%. Estimating a perpetual growth rate requires significant management judgment about future business strategies as well as micro- and macro-economic environments that are inherently uncertain. Our 5-year cash flow projections with a terminal value were discounted at an appropriate weighted average cost of capital to 7.1%. Based on such calculation, the recoverable amount of the cash-generating unit exceeded its carrying amount, and no impairment loss was recognized on such goodwill in 2020. Future changes in one or more of such assumptions may cause the carrying amount of the cash-generating unit to exceed its recoverable amount, which would require us to recognize impairment losses on goodwill relating to such cash-generating unit as discussed in note 16(2) of the notes to our consolidated financial statements.
See notenotes 4(11) and 16 of the notes to our consolidated financial statements.
Provisions for Handset Subsidy and Restoration
We provide handset subsidies to subscribers who purchase handsets on an installment basis. When the subscribers agree to use our services for a predetermined service period and purchase handsets on an installment basis, the subsidies are paid every month over the installment period and we estimate a provision for handset subsidies to be paid, which is recognized as commissions paid in operating expenses at the time telecommunication service contracts are made. Our provision for handset subsidies was Won 5.7 billion as of December 31, 2015 and Won 26.8 billion as of December 31, 2014.Our provision for handset subsidies has decreased as we gradually reduced the amount of handset subsidies provided to subscribers.
We estimate restoration costs required to restore leased premises on which our cell sites and switching equipment are located after termination of the leases. These restoration costs are calculated on the basis of the identified costs for the current financial year, extrapolated into the future based on management’s best estimates of future trends in prices, inflation, and other factors, and are discounted to present value at a risk-adjusted rate specifically applicable to the relevant liability. Forecasts of estimated future provisions are revised in light of future changes in business conditions or technological requirements. See note 20 of the notes to our consolidated financial statements.
Retirement Benefit Plans
We have defined retirement benefit plans. The costs of providing benefits under the plans are determined using actuarial valuation methods that require management assumptions on discount rates, expected rates of salary increases and expected rates of returns on plan assets. These assumptions involve critical uncertainties due to the long-term nature of the retirement benefit plans. Due to changing market and economic conditions, the underlying
key assumptions may differ from actual developments and may lead to significant changes in our defined retirement benefit plans. We immediately recognize all actuarial gains and losses arising from defined retirement benefit plans in retained earnings. If the estimated average discount rates by actuarial assumptions used in these valuations were increased by 0.5%, then the estimated defined benefit obligations would have decreased by Won 20.7 billion, or 3.9% in total. If the expected rates of salary increase were increased by 0.5%, then the estimated defined benefit obligations would have increased by Won 22.6 billion, or 4.3% in total. Defined benefit liabilities were Won 98.9 billion in 2015 and Won 91.6 billion in 2014. Defined benefit liabilities in 2015 increased by Won 7.8 billion compared to 2014 due to a decrease by 0.55%p of the estimated average discount rate despite a decrease by 0.18%p of the average expected rates of salary increase.See note 22 of the notes to our consolidated financial statements.
Income Taxes
We are required to estimate the amount of tax payable or refundable for the current year and the deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial statements or tax returns. This process requires management to make assessments regarding the timing and probability of the tax impact. Actual income taxes could vary from these estimates due to future changes in income tax law or unpredicted results from the final determination of each year’s liability by taxing authorities.
We believe that the accounting estimate related to assessment of deferred tax assets for recoverability is a “critical accounting estimate” because (1) it requires management to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning opportunities and (2) the impact that changes in actual performance versus these estimates could have on the realization of tax benefits as reported in our results of operations could be material. Management’s assumptions require significant judgment because actual performance has fluctuated in the past and may continue to do so. As of December 31, 20152020 and 2014,2019, unused tax loss carryforwards of Won 1,034.01,042.1 billion and Won 729.61,023.9 billion, respectively, were not recognized as deferred tax assets because we did not believe that their realization would be probable. The increase of Won 304.418.2 billion in unrecognized tax loss carryforwards in 20152020 compared to 20142019 was primarily related to thean increase in unrecognized tax loss carryforwards of SK Planet. See notes 4(24) and 32 of the notes to our consolidated financial statements.
Prepaid Expenses
We pay commissions to our retail stores and authorized dealers in connection with acquiring wireless and fixed-line telecommunications subscriber contracts, which would not have been paid if there were no binding contracts with subscribers. We capitalize certain costs associated with such commissions as prepaid expenses and amortize them over the expected periods over which we expect to maintain such subscribers under contract. Our management assesses such expected contract periods based on our historical experience on the duration of subscriber contracts. If we experience any changes in such historical experience, or if our management decides to use other factors for the determination of the expected contract periods, our estimate of the expected contract period will change, which in turn will affect the rate at which the applicable prepaid expenses are amortized and recognized as our operating expenses. See note 8 of the notes to our consolidated financial statements.
Determination of Stand-Alone Selling Prices in Recognition of Revenue from Cellular Services
For contracts where we sell both a wireless device and subscription plan together to a single customer through our subsidiary PS&Marketing, we allocate revenue proportionately based on the relative stand-alone selling prices of the subscription plan and the device, and we recognize unbilled receivables from wireless device sales as contract assets. See note 9 of the notes to our consolidated financial statements. In determining the stand-alone selling price for the subscription plan, we apply the published price of such subscription plan net of any applicable rate discounts, based on our management’s judgment that arosesuch discounted price represents the appropriate stand-alone selling price of such plan. A significant change in the facts and circumstances upon which we made such judgment on the determination of stand-alone selling prices may have an impact on the allocation of revenues from our cellular services segment.
Determination of Lease Term
Under IFRS 16, we determine lease terms by including periods covered by an option to extend the lease if the lessee is reasonably certain to exercise such option and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise such option. Such determination requires us to assess the likelihood that the lessee will exercise such options, which assessment in turn is made in consideration of whether the lessee would incur a penalty on termination that is more than insignificant. See “— Recently Adopted International Financial Reporting Standards - IFRS 16.”
Based on such assessments, we have concluded that it is reasonably certain that the underlying lease assets or related assets will generally be used by the lessee for the period of their useful lives, and we determine the lease terms of such assets based on such useful lives. For example, in the case of circuits that are part of telecommunication equipment that are leased by us, we have determined their lease term to be eight years based on the useful life of such circuits. In the case of real estate leased by us to install network equipment, we have determined their lease term to be eight years in the case of those related to 5G services and six years for other networks based on their respective useful lives.
Customer Relationship
In connection with the Tbroad Merger, we recognized the acquired customer relationships arising from the business combination as an identifiable intangible asset in 2020. The fair value of such customer relationships amounted to Won 336.0374.0 billion as of April 30, 2020, the acquisition date. The fair value was estimated based on the multi-period excess earnings method (“MPEEM”), which is a valuation technique under the income approach that estimates fair value by discounting the expected future excess earnings attributable to an intangible asset using a risk-adjusted discount rate. The MPEEM uses significant unobservable inputs including estimated revenue per subscriber, future churn rate and weighted average cost of capital, which require a significant degree of judgment by our management. See note 12 of the notes to our consolidated financial statements.
Recently Adopted International Financial Reporting Standards – IFRS 16
We adopted IFRS 16, Leases, in the fiscal year beginning on January 1, 2019 using the modified retrospective method by recognizing the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings as of such date. IFRS 16 introduces a single, on-balance sheet accounting model for lessees. Pursuant to IFRS 16, we recognize right-of-use assets representing our rights to use the underlying assets and lease liabilities representing our obligation to make lease payments in relation to substantially all of our lease arrangements, except for certain short-term leases and leases of low-value assets. Lessor accounting remains similar to previous accounting policies.
In the fiscal year beginning on January 1, 2020, we changed our accounting policy by applying the agenda decision, Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment)—November 2019, published by the IFRIC on December 16, 2019. Prior to such change in accounting policy, we determined a lease term based on the assumption that the right to extend or terminate the lease is no longer enforceable if the lease contract requires the counterparty’s consent to be extended. Under the new accounting policy, we determine the lease term based on the non-cancellable period of a lease in addition to
(i) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option and (ii) periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. In assessing the periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, we consider whether we would incur a penalty on termination that is more than insignificant. We have retrospectively applied such change in accounting policy in connection with the IFRIC agenda decision and restated our consolidated financial statements as of January 1, 2019 and as of and for the year ended December 31, 2019.
The change in accounting policy had the effect of increasing our total assets and total liabilities as of December 31, 2019 by Won 590.7 billion and Won 597.4 billion, respectively. In the case of our consolidated statement of income for the year ended December 31, 2019, the change had the effect of decreasing our operating revenue and other income by Won 3.4 billion and decreasing operating expenses by Won 9.8 billion, resulting in an increase in operating profit by Won 6.4 billion and a decrease in deductible temporary differenceprofit before income tax by Won 1.7 billion. In addition, the change had the effect of decreasing our profit for the year by Won 1.2 billion and decreasing our income tax expense by Won 0.4 billion. In the case of our consolidated statement of cash flows for the year ended December 31, 2019, the change had the effect of increasing cash flows from operating activities by Won 48.9 billion, increasing cash flows from investing activities by Won 0.9 billion and decreasing cash flows from financing activities by Won 49.8 billion.
See notes 3 and 4(12) of the notes to our consolidated financial statements for further details regarding the effects of the change in accounting policy based on the IFRIC agenda decision and significant accounting policies related to leases.
Operating Results
The following table sets forth summary consolidated income statement information, including that expressed as a percentage of operating revenue and other income, for the periods indicated:
For the year ended December 31, | ||||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Operating revenue and other income | ₩ | 18,724.3 | 100.0 | % | ₩ | 17,843.5 | 100.0 | % | ₩ | 16,945.9 | 100.0 | % | ||||||||||||
Revenue | 18,624.7 | 99.5 | 17,740.7 | 99.4 | 16,874.0 | 99.6 | ||||||||||||||||||
Other income | 99.6 | 0.5 | 102.8 | 0.6 | 71.9 | 0.4 | ||||||||||||||||||
Operating expenses | 17,619.7 | 94.1 | 16,836.2 | 94.4 | 16,112.1 | 95.1 | ||||||||||||||||||
Operating profit | 1,104.6 | 5.9 | 1,007.3 | 5.6 | 833.8 | 4.9 | ||||||||||||||||||
Profit before income tax | 1,877.0 | 10.0 | 1,161.0 | 6.5 | 3,976.0 | 23.5 | ||||||||||||||||||
Income tax expense | 376.5 | 2.0 | 300.3 | 1.7 | 844.0 | 5.0 | ||||||||||||||||||
Profit for the year | 1,500.5 | 8.0 | 860.7 | 4.8 | 3,132.0 | 18.5 | ||||||||||||||||||
Attributable to: | ||||||||||||||||||||||||
Owners of the Parent Company | 1,504.4 | 8.0 | 888.7 | 5.0 | 3,127.9 | 18.5 | ||||||||||||||||||
Non-controlling interests | (3.8 | ) | (0.0 | ) | (28.0 | ) | (0.2 | ) | 4.1 | 0.0 |
The following table sets forth additional information about our operations with respect to our reportable segments during the periods indicated:
For the year ended December 31, | ||||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
Amount | Percentage of Total Revenue | Amount | Percentage of Total Revenue | Amount | Percentage of Total Revenue | |||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Cellular Services Revenue | ||||||||||||||||||||||||
Wireless Service(1) | ₩ | 9,801.2 | 52.6 | % | ₩ | 9,532.4 | 53.7 | % | ₩ | 9,770.4 | 57.9 | % | ||||||||||||
Cellular Interconnection | 472.3 | 2.6 | 494.3 | 2.8 | 532.2 | 3.2 | ||||||||||||||||||
Wireless Device Sales | 975.2 | 5.2 | 1,032.1 | 5.8 | 989.1 | 5.9 | ||||||||||||||||||
Miscellaneous(2) | 1,047.0 | 5.6 | 1,118.8 | 6.3 | 1,087.2 | 6.4 | ||||||||||||||||||
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Total Cellular Services Revenue | 12,295.7 | 66.0 | 12,177.5 | 68.6 | 12,378.9 | 73.4 | ||||||||||||||||||
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Fixed-line Telecommunication Services Revenue | ||||||||||||||||||||||||
Fixed-line Telephone Service | 215.8 | 1.2 | 224.5 | 1.3 | 371.3 | 2.2 | ||||||||||||||||||
Fixed-line Interconnection | 85.1 | 0.5 | 92.3 | 0.5 | 95.8 | 0.6 | ||||||||||||||||||
Broadband Internet Service and Advanced Media Platform Service(3) | 2,227.1 | 11.8 | 1,807.5 | 10.2 | 1,760.4 | 10.4 | ||||||||||||||||||
International Calling Service | 160.3 | 0.9 | 137.3 | 0.8 | 152.9 | 0.9 | ||||||||||||||||||
Miscellaneous(4) | 717.4 | 3.9 | 677.8 | 3.8 | 441.9 | 2.6 | ||||||||||||||||||
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Total Fixed-line Telecommunication Services Revenue | 3,405.7 | 18.3 | 2,940.1 | 16.6 | 2,822.3 | 16.7 | ||||||||||||||||||
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Security Services Revenue(5) | 1,246.5 | 6.7 | 1,109.5 | 6.3 | 284.3 | 1.7 | ||||||||||||||||||
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Commerce Services Revenue(4) (6) | 792.9 | 4.3 | 710.7 | 4.0 | 728.4 | 4.3 | ||||||||||||||||||
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Others Revenue(5) (7) | 883.9 | 4.7 | 803.0 | 4.5 | 660.1 | 3.9 | ||||||||||||||||||
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Total Revenue | 18,624.7 | 100.0 | 17,740.7 | 100.0 | 16,874.0 | 100.0 | ||||||||||||||||||
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Total Revenue Growth | 5.0 | % | 5.1 | % | (3.7 | )% | ||||||||||||||||||
Segment Operating Expense(8) | ||||||||||||||||||||||||
Cellular Services | 11,287.8 | 60.6 | 11,261.7 | 63.5 | 11,079.0 | 65.7 | ||||||||||||||||||
Fixed-line Telecommunication Services | 3,161.6 | 17.0 | 2,804.4 | 15.8 | 2,576.8 | 15.3 | ||||||||||||||||||
Security Services | 1,134.1 | 6.1 | 975.9 | 5.5 | 295.6 | 1.8 | ||||||||||||||||||
Commerce Services | 781.9 | 4.2 | 708.7 | 4.0 | 813.4 | 4.8 | ||||||||||||||||||
Others | 909.9 | 4.9 | 881.9 | 5.0 | 907.4 | 5.4 | ||||||||||||||||||
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Total Segment Operating Expense | 17,275.3 | 92.8 | 16,632.5 | 93.8 | 15,672.2 | 92.9 | ||||||||||||||||||
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Segment Operating Profit | ||||||||||||||||||||||||
Cellular Services | 1,007.8 | 5.3 | 915.8 | 5.1 | 1,299.9 | 7.7 | ||||||||||||||||||
Fixed-line Telecommunication Services | 244.1 | 1.3 | 135.7 | 0.8 | 245.5 | 1.5 | ||||||||||||||||||
Security Services | 112.4 | 0.6 | 133.6 | 0.8 | (11.3 | ) | (0.1 | ) | ||||||||||||||||
Commerce Services | 10.9 | 0.1 | 2.0 | 0.0 | (85.0 | ) | (0.5 | ) | ||||||||||||||||
Others | (25.9 | ) | (0.1 | ) | (78.9 | ) | (0.4 | ) | (247.3 | ) | (1.5 | ) | ||||||||||||
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Total Segment Operating Profit | ₩ | 1,349.3 | 7.2 | % | ₩ | 1,108.2 | 6.2 | % | ₩ | 1,201.8 | 7.1 | % | ||||||||||||
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(1) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services and value-added service fees paid by wireless subscribers. |
(2) | Miscellaneous cellular services revenue includes revenue from our IoT solutions as well as other miscellaneous cellular services. |
(3) | Broadband internet service and advanced media platform service revenue includes revenues from our broadband Internet services as well as IPTV and cable TV services. |
(4) | Miscellaneous fixed-line telecommunication services revenue includes revenues from business communications services (other than fixed-line telephone service) provided by SK Broadband and VoIP services provided by SK Telink. Following the entry into an agreement to transfer SK Broadband’s 100% equity interest in SK Stoa to SK Telecom in April 2019 (which transaction was completed in January 2020), the T-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunications services segment in the year ended December 31, 2018, were reclassified as part of our commerce services segment for the year ended December 31, 2019. As a result, our results of operations for the year ended December 31, 2018 have been restated to retroactively apply such reclassification. |
(5) | Security services revenue includes revenues from our former subsidiaries Former ADT CAPS and SK Infosec. Such revenues, which were previously part of our others segment in the year ended December 31, 2018, were separated into a new security services segment for the year ended December 31, 2019. As a result, our results of operations for the year ended December 31, 2018 have been restated to retroactively apply such new segmentation. We have subsequently combined LSH, Former ADT CAPS and SK Infosec into a single entity through a series of mergers that were completed in March 2021, and the combined entity, ADT CAPS, has become the principal consolidated subsidiary that operates our security business. |
(6) | Commerce services revenue includes revenues from Eleven Street and SK Stoa. |
(7) | Others revenue includes revenues from the marketing platform business operations of SK Planet, “Nate,” our online portal service operated by SK Communications, and other businesses. As a result of the spin-off of T Map Mobility, our mobility business, which was previously part of our cellular services segment, became a part of our other businesses segment beginning December 29, 2020. |
(8) | “Segment operating expense” means operating expense for each reportable segment presented in accordance with K-IFRS and therefore does not include certain expenses that are classified as other non-operating expenses under K-IFRS. For more information on the differences between our consolidated operating expense pursuant to K-IFRS and pursuant to IFRS as issued by the IASB, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.” |
2020 Compared to 2019
Operating Revenue and Other Income. Our consolidated operating revenue and other income increased by 4.9% to Won 18,724.3 billion in 2020 from Won 17,843.5 billion in 2019 due to an increase in operating revenue, which was in small part offset by a decrease in other income, as discussed below.
Our consolidated operating revenue increased by 5.0% to Won 18,624.7 billion in 2020 from Won 17,740.7 billion in 2019, primarily due to increases in fixed-line telecommunications services revenue, security services revenue and cellular services revenue, and to a smaller extent, increases in commerce services revenue and others revenue.
Our consolidated other income decreased by 3.1% to Won 99.6 billion in 2020 from Won 102.8 billion in 2019, primarily due to a decrease in gain on business transfer in 2020 as compared to 2019. Such gain on business transfer in 2020 was mainly related to the dividendtransfer of the digital disease management business of Health Connect Co., Ltd. to Invites Healthcare Co., Ltd., while the gain in kind made2019 was mainly related to the transfer of our e-sports business to SK Telecom CS T1 Co., Ltd., a joint venture with Comcast Spectacor that was newly established in February 2019, as well as the transfer of our former mobile OTT service business, “oksusu,” to Content Wavve in September 2019.
The following sets forth additional information about our operating revenues with respect to each of our reportable segments.
Cellular services: The revenue of our cellular services segment, which is composed of revenues from wireless service, cellular interconnection, wireless device sales and miscellaneous cellular services, increased by SK Planet1.0% to Won 12,295.7 billion in 2020 from Won 12,177.5 billion in 2019. The increase in our cellular services revenue was due to an increase in wireless service revenue, partially offset by decreases in miscellaneous revenue, wireless device sales revenue and cellular interconnection revenue.
Wireless service revenue increased by 2.8% to Won 9,801.2 billion in 2020 from Won 9,532.4 billion in 2019, primarily attributable to the increase in the number of subscribers who subscribe to our higher-priced 5G plans. The impact of such increase was partially offset by an increase in the percentage of wireless service subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the MDDIA as well as a decrease in MNVO subscribers.
Miscellaneous cellular services revenue decreased by 6.4% to Won 1,047.0 billion in 2020 from Won 1,118.8 billion in 2019, primarily due to the termination of certain social commerce businesses in 2020.
Wireless device sales revenue decreased by 5.5% to Won 975.2 billion in 2020 from Won 1,032.1 billion in 2019, primarily due to a decrease in sales of handsets as a result of lower customer demand for new devices, which was partly attributable to the COVID-19 pandemic.
Cellular interconnection revenue decreased by 4.5% to Won 472.3 billion in 2020 from Won 494.3 billion in 2019. The decrease was primarily attributable to continued decreases in interconnection rates and land-to-mobile call volume.
Fixed-line telecommunications services: The revenue of our fixed-line telecommunication services segment, which is composed of revenues from broadband Internet service and advanced media platform service (including IPTV and cable TV services), fixed-line telephone service, international calling service, fixed-line interconnection and miscellaneous fixed-line telecommunication services, increased by 15.8% to Won 3,405.7 billion in 2020 from Won 2,940.1 billion in 2019, primarily due to increases in our broadband Internet service and advanced media platform service revenue and miscellaneous fixed-line telecommunication services revenue, partially offset by decreases in fixed-line telephone service revenue and fixed-line interconnection revenue.
Revenue from our broadband Internet service and advanced media platform service (including our IPTV and cable TV services) increased by 23.2% to Won 2,227.1 billion in 2020 from Won 1,807.5 billion in 2019, primarily due to the inclusion of revenue of the former Tbroad following the Tbroad Merger as well as an increase in the number of IPTV subscribers to 5.7 million subscribers as of December 31, 2020 from 5.2 million subscribers as of December 31, 2019.
Miscellaneous fixed-line telecommunication services revenue increased by 5.8% to Won 717.4 billion in 2020 from Won 677.8 billion in 2019, primarily due to an increase in revenue from our business communications services.
Fixed-line telephone service revenue decreased by 3.9% to Won 215.8 billion in 2020 from Won 224.5 billion in 2019, primarily due to decreases in the number of fixed-line telephone subscribers (including subscribers to VoIP services of SK Communication’s common sharesBroadband and SK Telink) to 3.8 million as of December 31, 2020 from 3.9 million as of December 31, 2019 and residential calling volume as a result of shifting consumer preferences toward wireless communication.
Fixed-line interconnection revenue decreased by 7.8% to Won 85.1 billion in 2020 from Won 92.3 billion in 2019, primarily due to a decrease in interconnection rates, as well as decreases in the number of fixed-line telephone subscribers and residential calling volume as described above.
Security services: The revenue of our security services segment, which is composed of revenues from our former subsidiaries Former ADT CAPS and SK Telecom. SeeInfosec (prior to its merger with Former ADT CAPS), increased by 12.3% to Won 1,246.5 billion in 2020 from Won 1,109.5 billion in 2019, primarily due to an increase in the number of subscribers to our CMS products as well as our acquisition of the security equipment construction and security services business of SK hystec inc. in July 2020.
Commerce services: The revenue of our commerce services segment, which is composed of revenues from 11st, our open marketplace platform, and SK stoa, our T-commerce network, increased by 11.6% to
Won 792.9 billion in 2020 from Won 710.7 billion in 2019, primarily due to the expansion of the customer base and product sourcing capabilities of our SK stoa business as well as the growth in general merchandise volume of 11st. |
Others: The revenue of our others segment increased by 10.1% to Won 883.9 billion in 2020 from Won 803.0 billion in 2019, primarily due to increases in revenue of FSK L&S and One Store Co., Ltd.
Operating Expense. Our consolidated operating expense increased by 4.7% to Won 17,619.7 billion in 2020 from Won 16,836.2 billion in 2019, primarily due to a 6.9% increase in commissions to Won 5,347.1 billion in 2020 from Won 5,002.1 billion in 2019, a 16.3% increase in other operating expenses to Won 1,996.4 billion in 2020 to Won 1,716.4 billion in 2019, a 6.5% increase in labor costs to Won 3,006.2 billion from Won 2,822.7 billion in 2019 and a 3.5% increase in depreciation and amortization expenses to Won 3,991.1 billion in 2020 from Won 3,856.7 billion in 2019, partially offset by a 12.3% decrease in cost of goods sold to Won 1,608.5 billion in 2020 from Won 1,833.4 billion in 2019.
The increase in commissions was primarily due to the inclusion of commissions of the former Tbroad following the Tbroad Merger.
The increase in other operating expenses was primarily due to an increase in impairment loss on property and equipment and intangible assets to Won 208.8 billion in 2020 from Won 65.9 billion in 2019, which amount in 2020 mainly reflected impairment losses we recognized on frequency usage rights.
The increase in labor costs was primarily due to the additional personnel on payroll in connection with the Tbroad Merger as well as the expansion of our security and commerce businesses.
The increase in depreciation and amortization expenses was primarily related to our equipment and frequency usage rights for our 5G network.
The decrease in cost of goods sold was primarily due to a decrease in the number of wireless devices sold in 2020.
The following sets forth additional information about our segment operating expense with respect to each of our reportable segments, which do not include certain expenses that are classified as other non-operating expenses under K-IFRS. For more information on the difference between our consolidated operating expense pursuant to K-IFRS and pursuant to IFRS as issued by the IASB, see “ — Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS” and note 315(2) of the notes to our consolidated financial statements.
Cellular services: The segment operating expense for our cellular services segment increased by 0.2% to Won 11,287.8 billion in 2020 from Won 11,261.7 billion in 2019, mainly attributable to an increase in marketing costs to promote our 5G services and increases in depreciation and amortization expenses of our equipment and frequency usage rights for our 5G network.
Fixed-line telecommunication services: The segment operating expense for our fixed-line telecommunication services segment increased by 12.7% to Won 3,161.6 billion in 2020 from Won 2,804.4 billion in 2019, primarily due to the inclusion of operating expenses of the former Tbroad following the Tbroad Merger.
Security services: The segment operating expense for our security services segment increased by 16.2% to Won 1,134.1 billion in 2020 from Won 975.9 billion in 2019, primarily due to an increase in expenses related to the launch of new security services in 2020.
Commerce services: The segment operating expense for our commerce services segment increased by 10.3% to Won 781.9 billion in 2020 from Won 708.7 billion in 2019, primarily due to increases in marketing expenses as well as commissions associated with the increase in general merchandise volume of our 11st business.
Others: The segment operating expense for our others segment increased by 3.2% to Won 909.9 billion in 2020 from Won 881.9 billion in 2019, primarily due to an increase in operating expense of FSK L&S.
Operating Profit. Our consolidated operating profit increased by 9.7% to Won 1,104.6 billion in 2020 from Won 1,007.3 billion in 2019, as the increase in operating revenue and other income outpaced the increase in operating expense in 2020.
The following sets forth additional information about our segment operating profit with respect to each of our reportable segments. Our segment operating profit with respect to each of our reportable segments is based on K-IFRS and the sum of segment operating profit for all five reportable segments differs from our consolidated operating profit presented in accordance with IFRS as issued by the IASB. For a reconciliation of operating profit presented in accordance with IFRS as issued by the IASB and operating profit presented in accordance with K-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS” and note 5(2) of the notes to our consolidated financial statements.
Cellular services: The segment operating profit of our cellular services segment increased by 10.0% to Won 1,007.8 billion in 2020 from Won 915.8 billion in 2019, due to the greater increase in segment operating revenue as compared to the increase in segment operating expense, for the various reasons described above.The segment operating margin (which, with respect to each reportable segment, is segment operating profit (loss) divided by revenue from such segment, expressed as a percentage) of our cellular services segment increased to 8.2% in 2020 from 7.5% in 2019.
Fixed-line telecommunication services: The segment operating profit of our fixed-line telecommunication services segment increased by 79.9% to Won 244.1 billion in 2020 from Won 135.7 billion in 2019, mainly due to the aggregate impact of the Tbroad Merger as described above.As a result, the segment operating margin of our fixed-line telecommunication services segment increased to 7.2% in 2020 from 4.6% in 2019.
Security services: The segment operating profit of our security services segment decreased by 15.9% to Won 112.4 billion in 2020 from Won 133.6 billion in 2019, due to the greater increase in segment operating expense as compared to the increase in segment operating revenue, for the various reasons described above.As a result, the segment operating margin of our security services segment decreased to 9.0% in 2020 from 12.0% in 2019.
Commerce services: The segment operating profit of our commerce services segment increased by 445.0% to Won 10.9 billion in 2020 from Won 2.0 billion in 2019, due to the greater increase in segment operating revenue as compared to the increase in segment operating expense, for the various reasons described above.As a result, the segment operating margin of our commerce services segment increased to 1.4% in 2020 from 0.3% in 2019.
Others: The segment operating loss of our others segment decreased by 67.2% to Won 25.9 billion in 2020 from Won 78.9 billion in 2019, due to the greater increase in segment operating revenue as compared to the increase in segment operating expense as described above. As a result, the segment operating margin of our others segment improved to (2.9)% in 2020 from (9.8)% in 2019.
Finance Income and Finance Costs. Our finance income increased by 69.7% to Won 241.2 billion in 2020 from Won 142.2 billion in 2019, primarily due to an increase in gain on valuation of derivatives to Won 101.3 billion in 2020 from Won 2.5 billion in 2019, which primarily related to an increase in valuation of warrants of Nano-X Imaging Ltd. held by SK Telecom TMT Investment Corp., as well as an increase in gain relating to financial assets at fair value through profit or loss to Won 35.8 billion in 2020 from Won 4.5 billion in 2019, primarily relating to shares of Oceanbridge Co., Ltd. held by Quantum Innovation Fund I. The effect of such increases was partially offset by a decrease in gain on settlement of derivatives to Won 7.8 billion in 2020 from Won 29.3 billion in 2019, which amount in 2019 was primarily related to the share exchange transaction with Kakao in October 2019.
Our finance costs increased by 13.5% to Won 497.2 billion in 2020 from Won 438.0 billion in 2019, primarily due to the incurrence of other financial fees of Won 44.7 billion in 2020 relating to the disposal of certain securities held for trading of Knet Culture and Contents Venture Fund, a consolidated subsidiary, and a loss on valuation of derivatives of Won 13.6 billion in 2020 primarily related to certain share subscription rights granted to financial investors of Eleven Street under an equity interest agreement, compared to no such costs incurred in 2019. The effect of such increases was partially offset by a decrease in interest expense to Won 399.2 billion in 2020 from Won 406.1 billion in 2019 as a result of a decrease in interest rates, as well as a loss on sale of other accounts receivable related to handset installment payments of Won 5.8 billion in 2019 compared to nil in 2020.
Gains (Losses) Related to Investments in Associates and Joint Ventures. Gains related to investments in associates and joint ventures increased by 128.8% to Won 1,028.4 billion in 2020 from Won 449.5 billion in 2019, primarily due to an increase in share of profits of SK Hynix to Won 995.1 billion in 2020 from Won 416.2 billion in 2019. Such increase was due to an increase in SK Hynix’s profit for the year to Won 4,758.9 billion in 2020 from Won 2,009.1 billion in 2019.
Income Tax. Income tax expense increased by 25.4% to Won 376.5 billion in 2020 from Won 300.3 billion in 2019 primarily due to a 61.7% increase in profit before income tax to Won 1,877.0 billion in 2020 from Won 1,161.0 billion in 2019. Our effective tax rate in 2020 decreased to 20.1% from 25.9% in 2019, which was primarily attributable to an increase in the proportion of our gains related to investments in associates and joint ventures in our profit before income tax. When such gains are distributed to us in the form of dividends, the tax rate for such dividends is lower than our statutory tax rate. Our effective tax rates in 2020 and 2019 were lower than the maximum statutory tax rate of 27.5% for both years, primarily due to changes in unrecognized deferred taxes in 2020 and non-taxable income in 2019.
Profit for the Year. Principally as a result of the factors discussed above, our profit for the year increased by 74.3% to Won 1,500.5 billion in 2020 from Won 860.7 billion in 2019. Profit for the year as a percentage of operating revenue and other income was 8.0% in 2020 compared to 4.8% in 2019.
2019 Compared to 2018
Operating Revenue and Other Income. Our consolidated operating revenue and other income increased by 5.3% to Won 17,843.5 billion in 2019 from Won 16,945.9 billion in 2018, due to increases in both operating revenue and other income, as discussed below.
Our consolidated operating revenue increased by 5.1% to Won 17,740.7 billion in 2019 from Won 16,874.0 billion in 2018, primarily due to an increase in security services revenue, and to a much smaller extent, increases in others revenue and fixed-line telecommunications services revenue, which were partially offset by decreases in cellular services revenue and commerce services revenue.
Our consolidated other income increased by 43.0% to Won 102.8 billion in 2019 from Won 71.9 billion in 2018, primarily due to the gain on the transfer of our e-sports business to SK Telecom CS T1 Co., Ltd., a joint venture with Comcast Spectacor that was newly established in February 2019, as well as on the transfer of our former mobile OTT service business, “oksusu,” to Content Wavve in September 2019.
The following sets forth additional information about our operating revenues with respect to each of our reportable segments.
Cellular services: The revenue of our cellular services segment, which is composed of revenues from wireless service, cellular interconnection, wireless device sales and miscellaneous cellular services, decreased by 1.6% to Won 12,177.5 billion in 2019 from Won 12,378.9 billion in 2018. The decrease in our cellular services revenue was due to decreases in wireless service revenue and cellular interconnection revenue, partially offset by increases in wireless device sales revenue and miscellaneous cellular services revenue
Wireless service revenue decreased by 2.4% to Won 9,532.4 billion in 2019 from Won 9,770.4 billion in 2018, primarily attributable to the continued increase in the percentage of wireless service subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the MDDIA. The impact of such decrease was partially offset by an increase in the number of subscribers that subscribe to our higher-priced unlimited data usage plans and 5G plans.
Cellular interconnection revenue decreased by 7.1% to Won 494.3 billion in 2019 from Won 532.2 billion in 2018. The decrease was primarily attributable to continued decreases in interconnection rates and land-to-mobile call volume.
Wireless device sales revenue increased by 4.3% to Won 1,032.1 billion in 2019 from Won 989.1 billion in 2018, primarily due to the launch of our 5G services in April 2019 and the ensuing sales of higher-priced 5G-compatible smartphones.
Miscellaneous cellular services revenue increased by 2.9% to Won 1,118.8 billion in 2019 from Won 1,087.2 billion in 2018, primarily because of an increase in rental income from SK Telecom’s real properties, which is recognized as part of our cellular services segment revenue.
Fixed-line telecommunications services: The revenue of our fixed-line telecommunication services segment, which is composed of revenues from broadband Internet service and advanced media platform service (including IPTV), fixed-line telephone service, international calling service, fixed-line interconnection and miscellaneous fixed-line telecommunication services, increased by 4.2% to Won 2,940.1 billion in 2019 from Won 2,822.3 billion in 2018, primarily due to increases in our miscellaneous fixed-line telecommunications services revenue and broadband Internet service and advanced media platform service revenue, partially offset by a decrease in fixed-line telephone service revenue.
Miscellaneous fixed-line telecommunication services revenue increased by 53.4% to Won 677.8 billion in 2019 from Won 441.9 billion in 2018, primarily due to an increase in revenue from our business communications services.
Revenue from our broadband Internet service and advanced media platform service (including our IPTV service and former mobile OTT service, which was transferred to Content Wavve in September 2019) increased by 2.7% to Won 1,807.5 billion in 2019 from Won 1,760.4 billion in 2018, primarily due to an increase in the number of IPTV subscribers to 5.2 million subscribers as of December 31, 2019 from 4.7 million subscribers as of December 31, 2018 and an increase in the number of premium subscriptions with higher monthly rates and purchases of premium video-on-demand content.
Fixed-line telephone service revenue decreased by 39.5% to Won 224.5 billion in 2019 from Won 371.3 billion in 2018, primarily due to decreases in the number of fixed-line telephone subscribers (including subscribers to VoIP services of SK Broadband and SK Telink) to 3.9 million as of December 31, 2019 from 4.1 million as of December 31, 2018 and residential calling volume as a result of shifting consumer preferences toward wireless communication.
Security services: The revenue of our security services segment, which is composed of revenues from our former subsidiaries Former ADT CAPS and SK Infosec (prior to its merger with Former ADT CAPS), increased by 290.3% to Won 1,109.5 billion in 2019 from Won 284.3 billion in 2018. A substantial majority of such increase was due to the inclusion of revenue of Former ADT CAPS for a full year in 2019 compared to a partial year in 2018 following the addition of Former ADT CAPS as a new consolidated subsidiary in October 2018 and, to a much smaller extent, the inclusion of revenue of SK Infosec as a new consolidated subsidiary starting at the end of December 2018.
Commerce services: The revenue of our commerce services segment, which is composed of revenues from 11st, our open marketplace platform, and SK stoa, our T-commerce network, decreased by 2.4% to Won 710.7 billion in 2019 from Won 728.4 billion in 2018, primarily due to our continued strategic focus to optimize and improve the profitability of our 11st business.
Others: The revenue of our others segment increased by 21.6% to Won 803.0 billion in 2019 from Won 660.1 billion in 2018, primarily due to the inclusion of revenues of newly consolidated subsidiaries, such as FSK L&S and Incross.
Operating Expense. Our consolidated operating expense increased by 4.5% to Won 16,836.2 billion in 2019 from Won 16,112.1 billion in 2018, primarily due to a 23.4% increase in depreciation and amortization expenses to Won 3,856.7 billion in 2019 from Won 3,126.1 billion in 2018 and a 23.3% increase in labor costs to Won 2,822.7 billion from Won 2,288.7 billion in 2018, partially offset by a 70.8% decrease in rent expenses to Won 154.8 billion in 2019 from Won 529.5 billion in 2018, a 3.7% decrease in other operating expenses to Won 1,716.4 billion in 2019 from Won 1,782.4 billion in 2018 and a 6.9% decrease in network interconnection expenses from Won 752.3 billion in 2019 from Won 808.4 billion in 2018.
The increase in depreciation and amortization expenses was primarily due to the recognition of depreciation expenses relating to our right-of-use assets following our adoption of IFRS 16, as well as the commencement of
amortization of our frequency usage rights for our 5G services. See “— Recently Adopted International Financial Reporting Standards - IFRS 16.”
The increase in labor costs was primarily due to the additional personnel on payroll in connection with our acquisitions of Former ADT CAPS in October 2018 and former SK Infosec in December 2018, as well as the expansion of new businesses such as AI solutions and other platform services.
The decrease in rent expenses was primarily due to the adoption of IFRS 16, pursuant to which we recognized payments on certain of our leased real properties in 2019 as depreciation expenses on right-of-use assets instead of as rent expenses. See “— Recently Adopted International Financial Reporting Standards — IFRS 16.”
The decrease in other operating expenses was primarily due to a decrease in impairment loss on property and equipment and intangible assets to Won 65.9 billion in 2019 from Won 255.8 billion in 2018, which amount in 2018 mainly reflected impairment losses we recognized on the goodwill and intangible assets of our former subsidiary Shopkick.
The decrease in network interconnection expenses was mainly attributable to decreases in wireless-to-fixed-line and fixed-line-to-wireless interconnection rates, as well as decreases in the number of fixed-line telephone subscribers and calling volume.
The following sets forth additional information about our segment operating expense with respect to each of our reportable segments, which do not include certain expenses that are classified as other non-operating expenses under K-IFRS. For more information on the difference between our consolidated operating expense pursuant to K-IFRS and pursuant to IFRS as issued by the IASB, see “ — Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS” and note 5(2) of the notes to our consolidated financial statements.
Cellular services: The segment operating expense for our cellular services segment increased by 1.6% to Won 11,261.7 billion in 2019 from Won 11,079.0 billion in 2018, mainly attributable to an increase in marketing costs to promote our 5G services and the commencement of amortization of our frequency usage rights for our 5G services.
Fixed-line telecommunication services: The segment operating expense for our fixed-line telecommunication services segment increased by 8.8% to Won 2,804.4 billion in 2019 from Won 2,576.8 billion in 2018, primarily due to increases in labor costs, marketing costs to gain more subscribers to our ultra-high definition IPTV and high speed broadband Internet services and depreciation and amortization expenses.
Security services: The segment operating expense for our security services segment increased by 230.1% to Won 975.9 billion in 2019 from Won 295.6 billion in 2018, primarily due to the inclusion of operating expenses of Former ADT CAPS for a full year in 2019 compared to a partial year in 2018 following the addition of Former ADT CAPS as a new consolidated subsidiary in October 2018 and, to a much smaller extent, the inclusion of operating expenses of SK Infosec as a new consolidated subsidiary starting at the end of December 2018.
Commerce services: The segment operating expense for our commerce services segment decreased by 12.9% to Won 708.7 billion in 2019 from Won 813.4 billion in 2018, primarily due to our continued strategic focus to optimize and improve the profitability of our 11st business.
Others: The segment operating expense for our others segment decreased by 2.8% to Won 881.9 billion in 2019 from Won 907.4 billion in 2018, primarily as a result of cost-cutting efforts by SK Planet and other subsidiaries in this segment.
Operating Profit. Our consolidated operating profit increased by 20.8% to Won 1,007.3 billion in 2019 from Won 833.8 billion in 2018, as the increase in operating revenue and other income outpaced the increase in operating expense in 2019.
The following sets forth additional information about our segment operating profit with respect to each of our reportable segments. Our segment operating profit with respect to each of our reportable segments is based on K-IFRS and the sum of segment operating profit for all five reportable segments differs from our consolidated
operating profit presented in accordance with IFRS as issued by the IASB. For a reconciliation of operating profit presented in accordance with IFRS as issued by the IASB and operating profit presented in accordance with K-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS” and note 5(2) of the notes to our consolidated financial statements.
Cellular services: The segment operating profit of our cellular services segment decreased by 29.5% to Won 915.8 billion in 2019 from Won 1,299.9 billion in 2018, due to the decrease in segment operating revenue and the increase in segment operating expense, for the various reasons described above.As a result, the segment operating margin (which, with respect to each reportable segment, is segment operating profit (loss) divided by revenue from such segment, expressed as a percentage) of our cellular services segment decreased to 7.5% in 2019 from 10.5% in 2018.
Fixed-line telecommunication services: The segment operating profit of our fixed-line telecommunication services segment decreased by 44.7% to Won 135.7 billion in 2019 from Won 245.5 billion in 2018, due to the greater increase in segment operating expense as compared to the increase in segment operating revenue, for the reasons described above.As a result, the segment operating margin of our fixed-line telecommunication services segment decreased to 4.6% in 2019 from 8.7% in 2018.
Security services: Our security services segment had a segment operating profit of Won 133.6 billion in 2019 compared to a segment operating loss of Won 11.3 billion in 2018, due to the aggregate impact of our acquisitions of Former ADT CAPS and SK Infosec as described above.As a result, the segment operating margin of our security services segment improved to 12.0% in 2019 from (4.0)% in 2018.
Commerce services: Our commerce services segment had a segment operating profit of Won 2.0 billion in 2019 compared to a segment operating loss of Won 85.0 billion in 2018, due to the greater decrease in segment operating expense as compared to the decrease in segment operating revenue, for the reasons described above.As a result, the segment operating margin of our commerce services segment improved to 0.3% in 2019 from (11.7)% in 2018.
Others: The segment operating loss of our others segment decreased by 68.1% to Won 78.9 billion in 2019 from Won 247.3 billion in 2018, due to the increase in segment operating revenue and the decrease in segment operating expense as described above. As a result, the segment operating margin of our others segment improved to (9.8)% in 2019 from (37.5)% in 2018.
Finance Income and Finance Costs. Our finance income decreased by 44.5% to Won 142.2 billion in 2019 from Won 256.4 billion in 2018, primarily due to a decrease in gain relating to financial assets at fair value through profit or loss to Won 4.5 billion in 2019 from Won 83.6 billion in 2018, primarily relating to our disposal of 200,000 redeemable convertible preference shares of KRAFTON Co., Ltd. (formerly known as Bluehole Inc.) (“Krafton”) in 2018, as well as a decrease in dividends to Won 10.0 billion in 2019 from Won 35.1 billion in 2018, which was primarily related to a decrease in dividend payments following SK Planet’s disposal of investments in certain real estate funds as well as our disposal of all of our shares of KB Financial Group Inc. in 2018. The effect of such decrease was partially offset by an increase in gain on settlement of derivatives to Won 29.3 billion in 2019 from Won 20.4 billion in 2018, primarily as a result of exchange rate fluctuations.
Our finance costs increased by 13.7% to Won 438.0 billion in 2019 from Won 385.2 billion in 2018, primarily due to an increase in interest expense to Won 406.1 billion in 2019 from Won 307.3 billion in 2018 as a result of an increase in the aggregate amount of our outstanding debentures, which was partially offset by a decrease in loss on foreign currency transactions to Won 12.7 billion in 2019 from Won 38.9 billion in 2018.
Gains (Losses) Related to Investments in Associates and Joint Ventures. Gains related to investments in associates and joint ventures decreased by 86.3% to Won 449.5 billion in 2019 from Won 3,270.9 billion in 2018, primarily due to a decrease in share of profits of SK Hynix to Won 416.2 billion in 2019 from Won 3,238.1 billion in 2018.Such decrease was primarily due to a decrease in SK Hynix’s profit for the year to Won 2,009.1 billion in 2019 from Won 15,540.0 billion in 2018.
Income Tax. Income tax expense decreased by 64.4% to Won 300.3 billion in 2019 from Won 844.0 billion in 2018 primarily due to a 70.8% decrease in profit before income tax to Won 1,161.0 billion in 2019 from Won 3,976.0 billion in 2018. Our effective tax rate in 2019 increased to 25.9% from 21.2% in 2018. Our
effective tax rates in 2019 and 2018 were lower than the maximum statutory tax rate of 27.5% for both years, primarily due to non-taxable income in 2019 and changes in unrecognized deferred taxes in 2018.
Profit for the Year. Principally as a result of the factors discussed above, our profit for the year decreased by 72.5% to Won 860.7 billion in 2019 from Won 3,132.0 billion in 2018. Profit for the year as a percentage of operating revenue and other income was 4.8% in 2019 compared to 18.5% in 2018.
Inflation
We do not consider inflation in Korea to have had a material impact on our results of operations in recent years. According to the Korean Statistical Information Service, annual inflation in Korea was 0.5% in 2020, 0.4% in 2019 and 1.5% in 2018.
Item 5.B. | Liquidity and Capital Resources |
Liquidity
We had a working capital surplus (current assets in excess of current liabilities) of Won 597.1 billion as of December 31, 2020 and Won 236.8 billion as of December 31, 2019. The increase in our working capital as of December 31, 2020 compared to December 31, 2019 was primarily attributable to an increase in short-term financial instruments, which was mainly due to the replacement of certain time deposits with short-term financial instruments upon their maturity. We plan to fund our current liabilities with the cash flow generated by our operations, proceeds from the disposal of investment securities or property and equipment that are no longer deemed profitable and proceeds from additional borrowings, as necessary.
We had cash and cash equivalents, short-term financial instruments and short-term investment securities of Won 2,947.0 billion as of December 31, 2020 and Won 2,268.1 billion as of December 31, 2019. We had outstanding short-term borrowings and current portion of long-term debt of Won 1,049.2 billion as of December 31, 2020 and 1,037.9 billion as of December 31, 2019. As of December 31, 2020, we had credit lines with several local banks that provided for borrowing of up to Won 480.0 billion, all of which was available for borrowing.
Cash flows from operating activities and debt financing have been our principal sources of liquidity. We had cash and cash equivalents of Won 1,369.6 billion as of December 31, 2020 and Won 1,270.8 billion as of December 31, 2019. We believe that we have a variety of alternatives 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.
Year ended December 31, | Change | |||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2019 to 2020 | 2018 to 2019 | ||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||
Net cash provided by operating activities | ₩ | 5,821.9 | ₩ | 4,035.0 | ₩ | 4,332.6 | ₩ | 1,786.9 | 44.3 | % | ₩ | (297.6 | ) | (6.9 | )% | |||||||||||||
Net cash used in investing activities | (4,250.4 | ) | (3,581.6 | ) | (4,047.7 | ) | (668.8 | ) | 18.7 | 466.1 | (11.5 | ) | ||||||||||||||||
Net cash used in financing activities | (1,457.6 | ) | (686.7 | ) | (238.3 | ) | (770.9 | ) | 112.3 | (448.4 | ) | 188.2 | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 113.9 | (233.3 | ) | 46.6 | 347.2 | N.A. | (279.9 | ) | N.A. | |||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents held in foreign currencies | (15.1 | ) | (2.6 | ) | 2.4 | (12.5 | ) | 480.8 | (5.0 | ) | N.A. | |||||||||||||||||
Cash and cash equivalents at beginning of period | 1,270.8 | 1,506.7 | 1,457.7 | (235.9 | ) | (15.7 | ) | 49.0 | 3.4 | |||||||||||||||||||
Cash and cash equivalents at end of period | 1,369.6 | 1,270.8 | 1,506.7 | 98.8 | 7.8 | (235.9 | ) | (15.7 | ) |
N.A. | = Not available |
Cash Flows from Operating Activities. Net cash provided by operating activities was Won 5,821.9 billion in 2020, Won 4,035.0 billion in 2019 and Won 4,332.6 billion in 2018. Profit for the year was Won 1,500.5 billion in 2020, Won 860.7 billion in 2019 and Won 3,132.0 billion in 2018. Net cash provided by operating activities in 2020 increased by 44.3% from 2019 primarily due to the increase in profit for the year as well as a decrease in accounts payable — other at the year-end 2020 compared to the year-end 2019.Net cash provided by operating activities in 2019 decreased by 6.9% from 2018 primarily due to an increase in prepaid expenses at the year-end 2019 compared to the year-end 2018.
Cash Flows from Investing Activities. Net cash used in investing activities was Won 4,250.4 billion in 2020, Won 3,581.6 billion in 2019 and Won 4,047.7 billion in 2018. Cash inflows from investing activities were Won 428.9 billion in 2020, Won 755.2 billion in 2019 and Won 686.1 billion in 2018. Cash inflows in 2020 were primarily attributable to the net cash inflows from business combinations, which mainly related to the Tbroad Merger, as well as proceeds from disposals of property and equipment, primarily related to the disposal of certain training facilities to SK Hynix. Cash inflows in 2019 were primarily attributable to a decrease in short-term financial instruments, net of Won 254.0 billion, which was mainly in connection with funding our investments in property and equipment, and proceeds from disposals of long-term investment securities of Won 234.7 billion, which was primarily in connection with the disposal of 6,109,000 common shares of Hana Financial Group Inc. for Won 221.1 billion in cash.Cash inflows in 2018 were primarily attributable to proceeds from disposals of long-term investment securities of Won 371.8 billion, primarily in connection with the disposal of all of our shares of KB Financial Group Inc. for Won 179.6 billion in cash and the disposal of redeemable convertible preferred shares of Krafton for Won 130.0 billion in cash and the collection of short-term loans of Won 117.6 billion.
Cash outflows for investing activities were Won 4,679.3 billion in 2020, Won 4,336.8 billion in 2019 and Won 4,733.8 billion in 2018. Cash outflows in 2020, 2019 and 2018 were primarily attributable to expenditures related to the acquisition of property and equipment of Won 3,557.8 billion, Won 3,375.9 billion and Won 2,792.4 billion, respectively, primarily in connection with the acquisition of 5G and LTE equipment, the expansion of our 5G network and the maintenance of our LTE network.
Cash Flows from Financing Activities. Net cash used in financing activities was Won 1,457.6 billion in 2020, Won 686.7 billion in 2019 and Won 238.3 billion in 2018. Cash inflows from financing activities were Won 3,499.6 billion in 2020, Won 2,047.3 billion in 2019 and Won 4,651.7 billion in 2018. Such inflows were primarily driven by proceeds from long-term borrowings, which provided cash of Won 1,947.8 billion in 2020, nil in 2019 and Won 1,920.1 billion in 2018, and the issuance of debentures, which provided cash of Won 1,421.0 billion in 2020, Won 1,633.4 billion in 2019 and Won 1,809.6 billion in 2018. In 2019, we also received proceeds of Won 300.0 billion from the disposal of our treasury shares to Kakao.
Cash outflows for financing activities were Won 4,957.2 billion in 2020, Won 2,733.9 billion in 2019 and Won 4,890.0 billion in 2018. Cash outflows for financing activities included repayment of long-term borrowings, repayment of debentures, payment of dividends, repayments of other long-term payables and acquisition of treasury shares, among other items. Repayment of long-term borrowings were Won 1,950.9 billion in 2020, Won 89.9 billion in 2019 and Won 1,780.7 billion in 2018. Repayment of debentures were Won 975.5 billion in 2020, Won 940.0 billion in 2019 and Won 1,488.0 billion in 2018. Payment of dividends were Won 742.1 billion in 2020, Won 718.7 billion in 2019 and Won 706.1 billion in 2018. Repayments of other long-term payables were Won 428.1 billion in 2020, Won 428.2 billion in 2019 and Won 305.6 billion in 2018. Acquisition of treasury shares was Won 426.7 billion in 2020.
As of December 31, 2020, we had total long term debt (excluding current portion) outstanding of Won 9,669.5 billion, which included debentures in the amount of Won 7,690.2 billion and bank and institutional borrowings in the amount of Won 1,979.3 billion. As of December 31, 2019, we had total long-term debt (excluding current portion) outstanding of Won 9,226.0 billion, which included debentures in the amount of Won 7,253.9 billion and bank and institutional borrowings in the amount of Won 1,972.1 billion. For a description of our long-term debt, see note 18 of the notes to our consolidated financial statements.
As of December 31, 2020, we had (i) Won 6,974.8 billion aggregate principal amount of Korean Won-denominated debentures outstanding, of which SK Telecom issued Won 5,590.0 billion, SK Broadband issued Won 1,360.0 billion and SK Infosec issued Won 24.8 billion, and (ii) Won 1,632.0 billion aggregate principal
amount of debentures outstanding denominated in U.S. dollars. The fixed interest rates of our debentures range from 1.40% to 6.63% depending on the offering size, maturity, interest rate environment at the time of the offering and currency, among other factors. We have a diversified maturity profile with respect to our debentures. See “— Contractual Obligations and Commitments” for more details.
As of December 31, 2020, substantially all of our foreign currency-denominated long-term borrowings and debentures, which in the aggregate amounted to 15.5% of our total outstanding long-term debt, including the current portion and present value discount as of such date, was denominated in Dollars. However, substantially all of our revenue and operating expenses are denominated in Won. We generally pay for imported capital equipment in Dollars. Appreciation of the Won against the Dollar will result in net foreign currency transaction and translation gains, while depreciation of the Won against the Dollar will result in net foreign currency transaction and translation losses. Changes in foreign currency exchange rates will also affect our liquidity because of the effect of such changes on the amount of funds required for us to make interest and principal payments on our foreign currency-denominated debt. For a description of swap or derivative transactions we have entered into, among other transactions, to mitigate the effects of such losses, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
Capital Requirements
Historically, capital expenditures, repayment of outstanding debt, frequency usage payments and research and development expenditures have represented our most significant use of funds. In recent years, we have also increasingly dedicated capital resources to develop and invest in new growth engines, including our next-generation growth businesses in media, security, commerce, IoT solutions and other innovative products and services offered through our platform services, including AI solutions, and to create synergies among our businesses, including through the adaptation of AI technology.
To fund our scheduled debt repayment and planned capital expenditures over the next several years, we intend to rely primarily on cash flows from operating activities, as well as bank and institutional borrowings, and offerings of debt or equity in the domestic or international markets. We believe that these sources will be sufficient to fund our planned capital expenditures for 2021. Our ability to rely on these alternatives could be affected by the liquidity of the Korean financial markets or by Government policies regarding Won and foreign currency borrowings and the issuance of equity and debt. Our failure to make needed expenditures would adversely affect our ability to sustain subscriber growth and provide quality services and, consequently, our results of operations.
Capital Expenditures. The following table sets forth our actual capital expenditures for 2020, 2019 and 2018:
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In billions of Won) | ||||||||||||
Wireless Networks(1) | ₩ | 1,878.6 | ₩ | 2,514.3 | ₩ | 1,735.6 | ||||||
Fixed-line Network(2) | 818.3 | 815.8 | 776.8 | |||||||||
Others(3) | 860.9 | 45.8 | 280.0 | |||||||||
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Total | ₩ | 3,557.8 | ₩ | 3,375.9 | ₩ | 2,792.4 | ||||||
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(1) | Includes investments in wireless networks, primarily our 5G, LTE and Wi-Fi networks, as well as other capital expenditures related to our networks. |
(2) | Includes all capital expenditures made by SK Broadband. |
(3) | Includes non-network related investments such as capital expenditures for product development, upgrades of our information technology systems and equipment and investments in data infrastructure. |
We set our capital expenditure budget for each upcoming year on an annual basis. Our actual capital expenditures in 2020, 2019 and 2018 were Won 3,557.8 billion, Won 3,375.9 billion and Won 2,792.4 billion, respectively. Of such amounts, we spent approximately 52.8%, 74.5% and 62.2% in 2020, 2019 and 2018,
respectively, on capital expenditures related to building and enhancing our wireless networks. Our other non-network related capital expenditures in 2020, 2019 and 2018 primarily related to developing new products, upgrades to our information technology systems and equipment and investments in data infrastructure.
In particular, we have been making capital expenditures to build and expand our 5G network. We commenced commercial 5G services in April 2019. We have also been making capital expenditures to improve our LTE network.For a more detailed description of our 5G and LTE networks, see “Item 4.B. Business Overview — Cellular Services — Digital Wireless Network.” We plan to continue to make capital investments in 2021 to build and expand our 5G network and develop related technologies, as well as to further improve and maintain our LTE network.
The following table sets forth our payment obligations relating to our acquisitions of frequency usage rights.
Spectrum | Technology (width) | Date of Acquisition | Initial Payment Amount (in billions of Won) | Initial Payment Year | Annual Payment Amount (in billions of Won) | Annual Payment Term | ||||||||||||||||
1.8 GHz
| LTE (35 MHz)
| 20 MHz | Dec. 2011 | ₩ | 248.8 | 2011 | ₩ | 74.6 | 2012-2021 | |||||||||||||
15 MHz | Sept. 2013 | 115.3 | 2013 | 43.2 | 2014-2021 | |||||||||||||||||
2.1 GHz | LTE (30 MHz) | Dec. 2016 | 141.2 | 2016 | 85.3 | 2017-2021 | ||||||||||||||||
WCDMA (10 MHz) | ||||||||||||||||||||||
2.6 GHz | LTE (40 MHz + 20 MHz) | Aug. 2016 | 332.5 | 2016 | 99.8 | 2017-2026 | ||||||||||||||||
3.5 GHz | 5G (100 MHz) | Dec. 2018 | 304.6 | 2018 | 91.4 | 2019-2028 | ||||||||||||||||
28 GHz | 5G (800 MHz) | Dec. 2018 | 51.8 | 2018 | 31.1 | 2019-2023 |
In case of the 800 MHz spectrum, for which our frequency usage rights were acquired in June 2011 and will expire in June 2021, we make annual payments amounting to 1.6% of the revenues generated from such spectrum in the previous year. In 2020, we made such annual payment in the amount of Won 27.8 billion. For more information, see note 17 of the notes to our consolidated financial statements.
We expect to spend a similar amount for capital expenditures in 2021 compared to 2020 for a range of projects, including investments to expand and improve our newly implemented 5G network, investments to maintain our LTE network and LTE-A services, investments to improve and expand our Wi-Fi network, investments to develop our IoT solutions and platform services business portfolio, including AI solutions, investments in data infrastructure, investments in research and development of 5G technology, investments in businesses that can potentially leverage our 5G network, and funding for mid- to long-term research and development projects, as well as other initiatives, primarily related to the development of new growth businesses, as well as initiatives related to our ongoing businesses in the ordinary course. In November 2020, the MSIT announced plans to reallocate a total of 310 MHz of frequency bandwidths whose usage terms are due to expire in 2021 to KT, LG U+ and us, 95 MHz of which will be allocated to us. The final consideration to be paid by us for such reallocated bandwidths will depend on the number of 5G cell sites constructed by us until 2022, and the aggregate consideration to be paid by KT, LG U+ and us is expected to range between approximately Won 3.2 trillion and Won 3.8 trillion. We would be required to spend additional amounts on capital expenditures in connection with building out our networks on such reallocated bandwidths. However, our overall expenditure levels and our allocation among projects remain subject to many uncertainties. We may increase, reduce or suspend our planned capital expenditures for 2021 or change the timing and area of our capital expenditure spending from the estimates described above in response to market conditions or for other reasons. We may also make additional capital expenditure investments as opportunities arise. Accordingly, we periodically review the amount of our capital expenditures and may make adjustments based on the current progress of capital expenditure projects and market conditions. No assurance can be given that we will be able to meet any such increased expenditure requirements or obtain adequate financing for such requirements, on terms acceptable to us, or at all.
Repayment of Outstanding Debt. As of December 31, 2020, our principal repayment obligations with respect to long-term borrowings, bonds and short-term borrowings outstanding were as follows for the periods indicated:
Year Ending December 31, | Total | |||
(In billions of Won) | ||||
2021 | ₩ | 1,049.8 | ||
2022 | 1,421.2 | |||
2023 | 1,737.7 | |||
2024 and thereafter | 6,552.8 |
Investments in New Growth Businesses. We may also require capital for investments to support our development of new growth businesses.
We made a capital contribution of Won 65.0 billion in 2018 to Dreamus, a manufacturer of digital audio players and other portable media devices of which we had first acquired a 39.3% equity interest in August 2014. Dreamus also operates our music streaming service platform, FLO. As of December 31, 2020, we had a 51.4% equity interest in Dreamus.
In October 2018, we acquired Former ADT CAPS by acquiring a 55.0% interest in LSH, which owned 100% of Former ADT CAPS, for Won 696.7 billion. In December 2018, we merged NSOK with and into Former ADT CAPS. In December 2018, we acquired SK Infosec, Korea’s leading information security company, in a share exchange transaction pursuant to which we issued 1,260,668 treasury shares with an aggregate book value of Won 281.2 billion in exchange for all of the outstanding common shares of SK Infosec from SK Inc. In December 2020, we merged LSH with and into SK Infosec and held a 62.6% equity interest in SK Infosec as of December 31, 2020. We have subsequently merged Former ADT CAPS with and into SK Infosec in March 2021, and the surviving entity, SK Infosec, changed its name to ADT CAPS and has become the principal consolidated subsidiary that operates our security business.
We also increased our interest in id Quantique through the acquisition of additional shares with Won 55.2 billion in cash and Won 5.7 billion in contribution-in-kind in 2018 and capital contributions in cash amounting to Won 12.2 billion in 2019 and Won 6.4 billion in 2020, respectively. As of December 31, 2020, we held a 68.1% equity interest in id Quantique.
In June 2019, we acquired a 34.6% interest in Incross, a digital advertising company, for an aggregate purchase price of Won 53.7 billion, in light of potential synergies with our media and commerce businesses.
From time to time, we may make other investments in telecommunications or other businesses, in Korea or abroad, where we perceive attractive opportunities for investment. From time to time, we may also dispose of existing investments when we believe that doing so would be in our best interest.
Severance Payments. The defined benefit obligation, which is the total accrued and unpaid retirement and severance benefits for our employees, as of December 31, 2020 was Won 154.9 billion. This amount was reflected in our consolidated financial statements as a liability, which is net of deposits with insurance companies totaling Won 1,127.2 billion to fund a portion of the employees’ severance indemnities.
Also see “Item 6.D. Employees — Employee Benefits” and note 21 of the notes to our consolidated financial statements.
Dividends. Total cash outflows for payments of dividends amounted to Won 742.1 billion in 2020, Won 718.7 billion in 2019 and Won 706.1 billion in 2018.
In April 2021, we distributed annual dividends at Won 9,000 per share (exclusive of an interim dividend of Won 1,000 per share) to our shareholders for an aggregate payout amount of Won 641.9 billion.
Contractual Obligations and Commitments
The following summarizes our contractual cash obligations at December 31, 2020, and the effect such obligations are expected to have on liquidity and cash flow in future periods:
Payments Due by Period(1) | ||||||||||||||||||||
Total | Less Than 1 Year | 1-3 Years | 4-5 Years | More Than 5 Years | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Bonds | ||||||||||||||||||||
Principal | ₩ | 8,606.8 | ₩ | 890.0 | ₩ | 3,115.2 | ₩ | 2,026.4 | ₩ | 2,575.2 | ||||||||||
Interest | 1,143.0 | 216.5 | 334.7 | 204.1 | 387.7 | |||||||||||||||
Long-term borrowings | ||||||||||||||||||||
Principal | 2,044.7 | 49.8 | 43.7 | 1,951.2 | — | |||||||||||||||
Interest | 313.3 | 65.9 | 185.0 | 62.4 | — | |||||||||||||||
Lease liabilities | ||||||||||||||||||||
Principal | 1,451.5 | 354.4 | 486.9 | 295.3 | 314.9 | |||||||||||||||
Interest | 85.7 | 11.5 | 22.3 | 21.8 | 30.1 | |||||||||||||||
Short-term leases and leases of low-value assets | 23.4 | 23.4 | — | — | — | |||||||||||||||
Facility deposits | 14.3 | 10.0 | — | — | 4.3 | |||||||||||||||
Derivatives | 43.1 | 1.7 | 3.3 | 38.1 | — | |||||||||||||||
Other long-term payables(2) | ||||||||||||||||||||
Principal | 1,626.0 | 425.3 | 444.5 | 382.3 | 373.9 | |||||||||||||||
Interest | 17.2 | 4.9 | 6.5 | 3.9 | 1.9 | |||||||||||||||
Short-term borrowings | 110.0 | 110.0 | — | — | — | |||||||||||||||
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Total contractual cash obligations | ₩ | 15,479.0 | ₩ | 2,163.4 | ₩ | 4,642.1 | ₩ | 4,985.5 | ₩ | 3,688.0 | ||||||||||
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(1) | We are contractually obligated to make severance payments to eligible employees we have employed for more than one year, upon termination of their employment, regardless of whether such termination is voluntary or involuntary. Accruals for severance indemnities are recorded based on the amount we would be required to pay in the event the employment of all our employees were to terminate at the balance date. However, we have not yet estimated cash flows for future periods. Accordingly, payments due in connection with severance indemnities have been excluded from this table. |
(2) | Related to acquisition of frequency licenses. See note 19 of the notes to our consolidated financial statements. |
See note 38 of the notes to our consolidated financial statements for details related to our other commitments and contingencies.
Item 5.C. | Research and Development, Patents and Licenses, etc. |
We maintain a high level of spending on our research and development activity. We also donate funds to several Korean research institutes and educational organizations that focus on research and development activity. We believe that we must maintain a substantial in-house technology capability to achieve our strategic goals.
In 2015, 2014 and 2013, our annual research and development expenses were Won 322.7 billion, Won 397.8 billion and Won 363.7 billion, respectively. Such expenses consist of research and development costs that are expensed and costs that are amortized during the respective period.
Our total research and development expenses were approximately 1.9% in 2015, 2.3% in 2014 and 2.1% in 2013, respectively, of operating revenue and other income.
The main focus of our research and development activity is the development of new wireless technologies and services and value-added technologies and services for our 5G network and LTE network, such as wireless data communications, as well as the development of new technologies that reflect the growing convergence between telecommunications and other industries. Ourindustries, such as AI, big data analytics, media, security and mobility. SK Telecom’s research and development activity is centered at a research center with state-of-the-art facilitiesour T3K Center, located at our SK T-Tower corporate headquarters in Seoul and equipmentour Bundang office in Bundang-gu, Seongnam-si, Gyeonggi-do, Korea, which we established in January 1999 in Bundang-gu, Seongnam-si, Gyeonggi-do, Korea.May 2020 by reorganizing our former AIX Center. To more efficiently manage our research and development resources, our research and development centerT3K Center is organized into the following core areas:as follows:
Network Technology R&D Center, through which we research and develop 5G-related technologies as well as technologies for access network, core network, broadband Internet, wireless devices and next-generation open source software;
Future Technology R&D Center, through which we research and develop technologies for human machine interface, artificial intelligence, video, big data and other business solutions;
Platform Technology R&D Center, through which we research and develop technologies for our IoT solutions platform, lifestyle enhancement platform and advanced media platform and quantum technologies; and
Network IT Convergence R&D Center, through which we research and develop technologies that converge network technology and information technology in the ICT area.
Organization | Recent Areas of Focus | |
ESG Tech Product Hub | Planning and development of products based on technologies in environmental, social and corporate governance (“ESG”) areas; establishment of product-focused research and development system | |
5GX Intelligence CO | Development and standardization of new 5G technologies; development of MEC products and location-based technologies | |
AI Transformation CO | Transformation of mobile network operation business based on AI technology; planning and development of products based on AI and big data | |
T3K Innovation CO | Development of vertical full-stack products and vision AI technologies; discovery of new growth opportunities based on technology and enhancement of technological and corporate value | |
Loonshot Task Force | Discovery of future growth engines based on technology (including development of Korean-language model and development and commercialization of AI semiconductors) |
Each business unit also has its own research team that can concentrate on specific short-term research needs.needs, and some of our consolidated subsidiaries also have their own research and development organizations to focus on activities related to their respective business areas. Such research teams permit our research center to concentrate on long-term, technology-intensive research projects. We aim to establish strategic alliances with selected domestic and foreign companies with a view to exchanging or jointly developing technologies, products and services.
Item 5.D. | Trend Information |
These matters are discussed under Item“Item 5.A. Operating Results” and Item“Item 5.B. Liquidity and Capital Resources” above where relevant.
Item 5.E. | Off-Balance Sheet Arrangements |
None.
Item 5.F. | Tabular Disclosure of Contractual Obligations |
These matters are discussed under Item“Item 5.B. Liquidity and Capital Resources” above where relevant.
Item 5.G. | Safe Harbor |
These matters are discussed under “Forward-Looking Statements.”
Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Item 6.A. | Directors and Senior Management |
Directors and Senior Management
Our board of directors has ultimate responsibility for the management of our affairs. Under our articles of incorporation, our board is to consist of at least three but no more than twelve directors, more than half of whom
must be independent non-executive directors. We currently have a total of sixeight directors, fourfive of whom are independent non-executive directors.We directors. We elect our directors at a general meeting of shareholders with the approval of at least a majority of those shares present or represented at such meeting. Such majority must represent at least one-fourth of our total issued and outstanding shares with voting rights.
As required under relevant Korean laws and our articles of incorporation, we have a committee for recommendation of independent non-executive directors within the board of directors, the Independent Director Nomination Committee. Independent non-executive directors are appointed from among those candidates recommended by the Independent Director Nomination Committee.
The term of offices for directors is until the close of the third annual general shareholders meeting convened after he or she commences his or her term. Our directors may serve consecutive terms. The total term of office of independent directors may not exceed six years, and when combined with the term of office at our affiliates, may not exceed nine years. Our shareholders may remove them from office by a resolution at a general meeting of shareholders adopted by the holders of at least two-thirds of the voting shares present or represented at the meeting, and such affirmative votes also represent at least one-third of our total voting shares then issued and outstanding.
Representative directors are directors elected by the board of directors with the statutory power to represent our company.
The following are the names and positions of our standing and non-standing directors. The business address of all of our directors is the address of our registered office at SK T-Tower, 65, Eulji-ro, Jung-gu, Seoul 100-999,04539, Korea.
Standing directors are our full-time employees anddirectors who also serve as our executive officers, and they also comprise the senior management, or the key personnel who manage us. Their names, dates of birth and positions at our company, and other positions and business experience are set forth below:
Name | Date of Birth | Director Since | Expiration of Term | Position | Other Principal | Business Experience | ||||||||||||
Dong Hyun Jang | Aug. 20, 1963 | 2015 | 2018 | President and Chief Executive Officer | — | Chief Operating Officer, SK Planet; Chief Marketing Officer, Chief Finance Officer, and Executive Vice President of Strategy and Planning Division, SK Telecom | ||||||||||||
Dae Sik Cho | Nov. 27, 1960 | 2013 | 2019 | Executive Director | Chief Executive Officer, SK Holdings | Chief Finance Officer, Head of Finance Division and Risk Management & Corporate Auditing Office, SK Holdings; Head of Business Management Office, SK Holdings | ||||||||||||
Our current non-standing directors are as set forth below: | ||||||||||||||||||
Name | Date of Birth | Director Since | Expiration of Term | Position | Other Positions | Business Experience | ||||||||||||
Dae Shick Oh | Nov. 28, 1954 | 2013 | 2019 | Independent Non-executive Director | Advisor, Bae, Kim & Lee LLC | Outside Director, CJ Corporation, Head of Seoul Regional Tax Office; Head of Investigation Department, Korea National Tax Service | ||||||||||||
Jay Young Chung | Oct. 15, 1944 | 2011 | 2017 | Independent Non-executive Director | Honorary Professor, Sung Kyun Kwan University | Chief, Asia-Pacific Economic Association; Vice President, Sung Kyun Kwan University; Independent Non-executive Director, POSCO | ||||||||||||
Jae Hoon Lee | Sep. 26, 1955 | 2014 | 2017 | Independent Non-executive Director | President, Association of Future Strategy Forum on Energy & Resources Development | Vice Minister, Ministry of Knowledge Economy; Vice Minister, Ministry of Commerce, Industry and Energy; Assistant Minister, Ministry of Commerce, Industry and Energy | ||||||||||||
Jae Hyeon Ahn | Feb. 2, 1961 | 2014 | 2017 | Independent Non-executive Director | Vice President, College of Business, KAIST | Dean, College of Information and Media Management, KAIST; President, Korea Media Management Association; Senior Technical Staff Member, AT&T Bell Labs |
Name | Month and Year of Birth | Director Since | Expiration of Term | Position | Other Positions | Business Experience | ||||||||||||
Jung Ho Park | May 1963 | 2017 | 2023 | Executive Director, President and Chief Executive Officer | Chairman of the Board of Directors, SK Hynix; Director, Nano-X Imaging Ltd. | Chief Executive Officer, SK Inc.; Head of Corporate Development Office, SK C&C Co., Ltd.; Head of Business Development Office, SK Telecom | ||||||||||||
Young Sang Ryu | May 1970 | 2018 | 2024 | Executive Director and President of Mobile Network Operations Division | — | Executive Vice President of Business Development Group, SK Inc.; Senior Vice President of Business Development Office, SK Telecom; Head of Corporate Center, SK Telecom |
Our current non-standing directors are as set forth below:
Name | Month and Year of Birth | Director Since | Expiration of Term | Position | Other Positions | Business Experience | ||||||||||||
Dae Sik Cho | Nov. 1960 | 2017 | 2023 | Non-executive Director | Chairman, SK SUPEX Council | Chief Executive Officer, SK Inc.; Chief Finance Officer, Head of Finance Division and Risk Management & Corporate Auditing Office, SK Inc.; Head of Business Management, SK Inc. | ||||||||||||
Jung Ho Ahn | Feb. 1978 | 2017 | 2023 | Independent Non-executive Director | Professor, Graduate School of Convergence Science and Technology, | Visiting Scholar, Google Inc.; Senior Research Scientist, Exascale Computing Lab, HP Labs |
Name | Month and Year of Birth | Director Since | Expiration of Term | Position | Other Positions | Business Experience | ||||||||||||
Seoul National University | ||||||||||||||||||
Youngmin Yoon | Dec. 1963 | 2018 | 2024 | Independent Non-executive Director | Dean of School of Media and Communications and Graduate School of Journalism and Mass Communication, Korea University | Professor, School of Media & Communication, Korea University; Vice-chair, Korean Academic Society for Public Relations; Advisor, Ministry of Land, Infrastructure and Transport Public Relations Division; Advisor, Korea Media Rating Board | ||||||||||||
Seok-Dong Kim | May 1953 | 2019 | 2022 | Independent Non-executive Director | Chairman, JIPYONG Institute of Humanities and Society | Chairman, Financial Services Commission; Vice Minister, Ministry of Finance and Economy; Vice Chairman, Financial Supervisory Commission | ||||||||||||
Yong-Hak Kim | Jan. 1953 | 2020 | 2023 | Independent Non-executive Director | Professor Emeritus, Yonsei University | President, Yonsei University; BK Planning Committee, Ministry of Education; Member, Presidential Advisory Council of Policy Planning; Professor of Sociology, Yonsei University | ||||||||||||
Junmo Kim | Sept. 1976 | 2020 | 2023 | Independent Non-executive Director | Associate Professor of Electrical Engineering, KAIST | Assistant Professor of Electrical Engineering, KAIST; Senior Researcher, Samsung Advanced Institute of Technology |
Other Executive Officers
In addition to our standing directors, we currently have the following executive officers:
Name | Month and | Position | Business Experience | |||
Jong Ryeol Kang | Oct. 1964 | Head of ICT Infrastructure Center | Head of Corporate Culture Division | |||
Chungsik Kang | Nov. 1971 | PR Officer, Public Relations Office | Project Leader, Communication Committee PR Team | |||
Dae Hwan Ko | Sept. 1961 | Director of SK Academy | Head of Business Support Office, SK Incheon Petrochem | |||
Chang Gook Ko | Jan. 1966 | Officer of Corporate Relations Team, SUPEX Council Project | Head of CPR Office 1, SK C&C | |||
Gyeong Nam Kim | Jan. 1974 | Head of S&C Technology Group | PI/Project Manager, HRL Laboratories | |||
Seong Soo Kim | Jun. 1966 | Head of Mobile CO | Head of Distribution Support Office | |||
Seong Joon Kim | Jul. 1970 | Distribution, Mobile CO | Representative, Service Top | |||
Yeong Joon Kim | Sept. 1972 | Head of AI Technology Unit | Head of AI Technology Unit | |||
Yoon Kim | Jun. 1971 | Head of T3K | Siri Manager, Apple | |||
Jeong Gyu Kim | Sept. 1976 | Officer of Malaysia Regional HQ | Project Leader, Global Business Development, SUPEX Council Project | |||
Jeong Bok Kim | Oct. 1965 | Head of Metropolitan Infrastructure Office | Head of Central Infrastructure Office |
Name | Month and | Position | Business Experience | |||
Jung Hoon Kim | Nov. 1963 | Head of Cloud Infrastructure Group | Naver Business Platform | |||
Jiwon Kim | Jun. 1985 | Head of Vision AI Labs, T3K Innovation CO | Professional Researcher, Samsung Advanced Institute of Technology | |||
Jinwoo Kim | Feb. 1971 | Head of Global Business Group | Head of Global Business Office, SK Planet | |||
Jinwon Kim | Sept. 1966 | Head of Financial Strategy & Management Group | Representative, SK USA | |||
Hyuk Kim | Sept. 1967 | Global Media Support, MNO Business | Head of Media Business Support Group | |||
Hyeon Kook Kim | Dec. 1966 | Daegu Regional CP | Head of Metropolitan Area Marketing Office | |||
Hyeong Chan Kim | Aug. 1962 | PD of SK Research Institute for SUPEX Management | Telecommunications Policy Research, Korea Information Society Development Institute | |||
Heesup Kim | Oct. 1968 | Head of Communication Center | AD Office, Chosun Ilbo | |||
SukKwon Na | Nov. 1966 | PD of SK Research Institute for SUPEX Management | Director of Statistical Policy, Statistics Korea | |||
Chan Kyu Noh | Jul. 1965 | Officer of Public Relations Team, SUPEX Council Project | Brand Team, SK Inc. | |||
Man Gang Ra | Jan. 1972 | Head of Motivation Group | Head of Talent Management Team, HR Office | |||
Byung Hoon Ryu | Oct. 1980 | Head of Corporate Strategy Group | PM Group PM2 CoE | |||
Jung Hwan Ryu | Jun. 1970 | Head of 5GX Infrastructure Group | Head of Infrastructure Support Group | |||
Gap In Moon | May 1969 | Head of Smart Device Group | Head of Service Strategy Division Policy Group | |||
Myung Soon Park | Feb. 1969 | Head of Infrastructure Value Innovation Group | Head of Growth Technology Institute | |||
Min Hyung Park | Oct. 1968 | Representative, SKTA | Motorola Inc. | |||
Yong Joo Park | May 1965 | Head of Compliance and Legal Group | Seoul Central District Prosecutor’s Office | |||
Jong Kwan Park | Jul. 1970 | Head of 5GX Intelligence CO | Head of Core Network Lab, Network Technology Institute | |||
Jong Suk Park | Nov. 1971 | Head of Business Planning Group | Head of Business Planning Office, SK Broadband | |||
Ji Soo Park | Jun. 1976 | Officer of Talent Development CoE, SUPEX Council Project | Project Leader, HR Support Team, SUPEX Council Project | |||
Jin Woo So | Dec. 1961 | Chairman of Talent Development Committee, SUPEX Council Project | Representative, SK Planet | |||
Suk Ham Sung | Apr. 1970 | Growth Business Support, CR & Growth Business Support Office | Evaluation Manager of Performance Evaluation Office, MSIT | |||
Jin Soo Seong | May 1968 | Head of Infrastructure Engineering Group | Head of Daegu Infrastructure Office | |||
Gwang Hyeon Song | Mar. 1970 | Head of Digital Communication Office | Head of Business PR Team, Communication Office | |||
Jae Seung Song | Mar. 1979 | Head of Corporate Development Group | Director, Praxis Capital Partners | |||
Sang Kyu Shin | Nov. 1970 | Head of Corporate Culture Center | Head of HR Office | |||
Yongsik Shin | Aug. 1971 | Head of IoT CO | Head of Energy Business Team | |||
Sang Soo Sim | Aug. 1965 | Head of Western Infrastructure Office | Head of Infrastructure Division Network Business Support Group |
Name | Month and | Position | Business Experience | |||
Jeong Yeol Ahn | Aug. 1969 | Head of Supply Chain Management Group | Head of Corporate Center, Eleven Street | |||
Junehyeon Ahn | Nov. 1969 | Officer of Public Relations Team, SUPEX Council Project | Corporate Relations Team, SUPEX Council Project Communication Committee | |||
Maeng Seog Yang | Mar. 1969 | MR Business, MR Service CO | Head of 5GX MNO Business Group | |||
Ji Young Yeo | Sept. 1966 | Open Collaboration, ESG Innovation Group | Head of New Business Promotion Division Design Thinking Team | |||
Sung Jin Yeum | Oct. 1972 | CR Support, CR & Growth Business Support Office | Head of CR Support Team | |||
Yong-Seop Yum | Oct. 1962 | Head of SK Research Institute for SUPEX Management | Head of Future Research Office | |||
Hui Gang Ye | Oct. 1970 | Head of Creative Communication Group | Head of Brand 2 Office, Hyundai Card | |||
Kyung Sik Oh | Mar. 1966 | Head of Sports Marketing Group | Head of Sports Marketing Group | |||
Sehyeon Oh | Jul. 1963 | Head of Authentication CO | Head of C&C DT Business Development Division | |||
Woong Hwan Ryu | May 1971 | Head of ESG Innovation Group | Head of Open Collaboration Center | |||
Sung Eun Yoon | Jan. 1973 | Officer of PR, Public Relations Office | Head of Corporate Relations Strategy Office Policy System Team | |||
Yong Chul Yoon | May 1965 | Officer of PR, Public Relations Office | Head of Department, MBC Newsroom | |||
Poong Young Yoon | Nov. 1974 | Head of Corporate Center 1 | Head of PM Group | |||
Gab Jae Lee | Feb. 1973 | Central Regional CP | Head of Central Marketing Office | |||
Kang Won Lee | Feb. 1970 | Cloud Technology, Cloud CO | Manager of Mobile N/W Analytics, IBM T.J. Watson Research Center | |||
Kiyoon Lee | Dec. 1969 | Head of Customer Value Innovation Office | PL of Customer Value Innovation Office | |||
Sang Gu Lee | Jul. 1970 | Head of Messaging CO | Head of MNO Data Business Team | |||
Sang Heon Lee | Aug. 1965 | Head of Policy Development Office | Head of Corporate Relations Strategy Office | |||
Jongmin Lee | Jul. 1978 | Head of T3K Innovation CO | Head of Media Technology Institute | |||
Joon Ho Lee | Aug. 1968 | ESG Business, ESG Innovation Group | Head of Public Relation Office 2 | |||
Joong Ho Lee | Nov. 1967 | Head of Metropolitan Area CP | Head of Busan Marketing Office | |||
HyunA Lee | Aug. 1971 | Head of AI&CO | Head of Conversational Commerce Division, SK Planet | |||
Bong Ho Lim | Dec. 1966 | Head of Regional CP | Head of Metropolitan Area Marketing Office | |||
Hyoung Do Lim | Jun. 1968 | Head of Change Management Office | Head of Policy Cooperation Office | |||
Hong Sung Chang | Mar. 1969 | Head of Advertising/Data CO | Head of Data Technology Institute | |||
Jinsoo Jeon | Apr. 1975 | Head of MR Service CO | Head of Media Labs | |||
Dae Dug Jeong | Sept. 1967 | Tax, Finance Group | Head of Tax Team | |||
Doh Hee Jung | Sept. 1974 | AI Transformation Products & Business, AI Transformation CO | Head of Data CoE Data Analysis Team 2 | |||
Jae Heon Chung | Jun. 1968 | Head of New Business Legal Group | Chief Judge, Seoul Central District Court | |||
Jae Hyun Chung | Dec. 1959 | Officer of ICT Advisory Board | Head of ICT System TF | |||
Chang Gweon Chung | Jul. 1970 | Head of Infrastructure Business | Head of Infrastructure Engineering Group | |||
Dong Hwan Cho | Nov. 1970 | Head of Cloud Transformation Center | Head of Data CoE | |||
Young Log Cho | Jun. 1971 | Head of CR & Growth Business Support Office | Assistant to Head of External Cooperation Office |
Name | Month and | Position | Business Experience | |||
Jae Yoo Cho | Dec. 1979 | Games, MR Service CO | Representative, LINE Games Japan | |||
Jongwhi Cha | Nov. 1974 | Head of Brand Foundation Group | Head of UX & Design Lab, Hyundai Card | |||
Zonggeun Chai | Jul. 1968 | Head of Ethics Management Office | Head of Compliance Team | |||
Nag Hun Choi | Nov. 1972 | Head of Smart Factory CO | Head of IoT Business Support Group | |||
Woo Seong Chey | Jan. 1974 | Representative, SK Telecom Japan | PL of Unicorn Labs Tokyo Office | |||
Eun Sik Choi | Feb. 1969 | Western Regional CP | Head of Distribution Innovation Support Group | |||
Il Gyu Choi | Nov. 1970 | Head of Cloud CO | Head of Public Business Unit | |||
Jeong Hwan Choi | Jun. 1968 | Asset Optimization, Corporate Development Group | Head of IR, Corporate Development Center | |||
Chang Won Chey | Aug. 1964 | Vice President of SK Research Institute for SUPEX Management | Chief Executive Officer, SK Chemical | |||
Pan Chul Choi | Jan. 1969 | Cloud Business, Cloud CO | Head of Enterprise Business Division Financial Business Team | |||
Min Yong Ha | Sept. 1970 | Officer, Innovation Suite | Head of Global Alliance Group | |||
Seong Ho Ha | Sept. 1968 | Head of Corporate Relations Center | Head of Corporate Relations Strategy Office | |||
Hyoung Il Ha | Aug. 1970 | Head of Corporate Center 2 | Head of Service Innovation Support Division | |||
Myung Jin Han | Oct. 1973 | Head of Subscription Service CO | Head of Global Alliance Group | |||
Geunman Heo | Aug. 1966 | Head of Infrastructure Solutions Group | Head of Gangnam Quality Solution Team | |||
Seok Joon Huh | May 1973 | Head of Private Placement Group | Managing Director, L Catterton Asia (Singapore) | |||
Eunah Hyun | Nov. 1974 | Head of Growth Legal, Corporate Center 2 | Global Business Support Team, SK Inc. | |||
Eric Hartman Davis | Oct. 1980 | Head of Loonshot TF Language Superintelligence Labs | Head of Global AI Development Group | |||
So Jeong Choi | Apr. 1982 | Subscription Media, Subscription Service CO | Mobile Streaming, MNO Marketing Group | |||
Gwan Woo Lee | Jun. 1973 | Head of Cloud Application Group | Head of Data Development Operations Group | |||
Tae Wan Kim | Jan. 1979. | Strategic Alliance, Global Business Group | Strategic Alliance, Integrated Service Group | |||
Yeong Sang Kwon | Mar. 1971 | Head of Policy Cooperation Office | Head of Policy Cooperation Office | |||
Seung Tae Hong | Jul. 1971 | RPA, Business Planning Group | Leader, Portfolio Innovation Team, Business Strategy Group | |||
Gyu Sik Lee | Jan. 1970 | Head of Competency Group | Leader, Change 1 Cell, Change Office | |||
Yong Jin Choi | Feb. 1977 | Head of AI Transformation CO | Head of MNO DT Labs, AI/DT Technology Group | |||
Jeong Tae Kim | Aug. 1972 | Head of Learning Center | Head of Learning Center | |||
Jihoon Kim | Sept. 1978 | Officer, Future Business Team, SUPEX Council Project | Leader, Bundled Product Offering Team | |||
Jaeho Yoo | Dec. 1973 | Portfolio Innovation | Growth Business Group, Eleven Street | |||
Jeong Hoon Lee | May 1974 | SKTA Business Development | Investment Center 2 Group, SK Inc. | |||
Yong Seok Lee | Nov. 1961 | Head of ESG Group, SK Research Institute for SUPEX Management | PD, SK Research Institute for SUPEX Management |
Item 6.B. | Compensation |
The aggregate of the remuneration paid and in-kind benefits granted to theour directors (all standing directors, who also serve as our executive officers, and non-standing directors) during the year ended December 31, 20152020 totaled approximately Won 2.610.0 billion.This amount included
The compensation of our directors who received total annual compensation exceeding Won 163500 million in salary and Won 553 million in bonus paid to our former director and President and Chief Executive Officer, Mr. Sung Min Ha, who has since resigned, and Won 82 million in salary and Won 441 million in bonus paid to our former director and Head of our Corporate Vision Department, Mr. Dong Seob Jee, who has since resigned.
Name | Position | Composition of Total Compensation | Total Compensation | |||||||||||||||||||
Salary | Bonus | Other Earned Income | Severance | |||||||||||||||||||
(in millions of Won) | ||||||||||||||||||||||
Jung Ho Park | Executive Director, President and Chief Executive Officer | ₩ | 1,700 | ₩ | 5,679 | ₩ | 1 | — | ₩ | 7,380 | ||||||||||||
Young Sang Ryu | Executive Director and President of Mobile Network Operations Division | 540 | 1,668 | 21 | — | 2,229 |
Remuneration for theour directors is determined by shareholder resolution. Severance allowances for our directors are determined by the board of directors in accordance with our regulation on severance allowances for officers, which was adopted by shareholder resolution. The regulation provides for monthly salary, performance bonus, severance payment and fringe benefits. The amount of performance bonuses is independently decided by a resolution of the board of directors.
In March 2002, pursuant to resolutionsThe aggregate of the shareholders,remuneration paid and in-kind benefits granted to our executive officers (excluding all standing directors, who also serve as our executive officers) during the year ended December 31, 2020 totaled approximately Won 49.8 billion.
The compensation of the five individuals who received the highest compensation among those who received total annual compensation exceeding Won 500 million in accordance with2020 was as follows:
Name | Position | Composition of Total Compensation | Total Compensation | |||||||||||||||||||
Salary | Bonus | Other Earned Income | Severance | |||||||||||||||||||
(in millions of Won) | ||||||||||||||||||||||
Jung Ho Park | Executive Director, President and Chief Executive Officer | ₩ | 1,700 | ₩ | 5,679 | ₩ | 1 | — | ₩ | 7,380 | ||||||||||||
Jin Woo So | Chairman of Talent Development Committee, SUPEX Council Project | 1,200 | 1,163 | 2 | — | 2,365 | ||||||||||||||||
Young Sang Ryu | Executive Director and President of Mobile Network Operations Division | 540 | 1,668 | 21 | — | 2,229 | ||||||||||||||||
Yoon Kim | Head of T3K | 430 | 1,127 | 83 | — | 1,640 | ||||||||||||||||
Poong Young Yoon | Head of Corporate Center 1 | 400 | 1,105 | 43 | — | 1,548 |
On February 20, 2020, our articlesboard of incorporation,directors resolved to grant options to purchase shares of our common stock to certain directors and executive officers, which was approved by shareholder resolution on March 26, 2020. On February 25, 2021, our board of directors resolved to grant options to purchase shares of our common stock to certain directors and executive officers, which was approved by shareholder resolution on March 25, 2021. The following table summarizes the exercisable stock options granted to our directors and executive officers were granted options to purchase our common shares, which have all expired without being exercised. Since 2003, noneas of our directors and officers have been granted options to purchase our common shares.March 31, 2021:
Recipient | Position | Grant date | Exercise period | Exercise price (per share) | Number of shares issuable | |||||||||||
From | To | |||||||||||||||
Jung Ho Park | Executive Director, President and Chief Executive Officer | March 24, 2017 | March 25, 2019 | March 24, 2022 | ₩ | 246,750 | 22,168 | |||||||||
March 25, 2020 | March 24, 2023 | 266,490 | 22,168 | |||||||||||||
March 25, 2021 | March 24, 2024 | 287,810 | 22,168 | |||||||||||||
March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 111,106 | ||||||||||||
Young Sang Ryu | Executive Director and President of Mobile Network Operations Division | February 20, 2018 | February 21, 2020 | February 20, 2023 | 254,120 | 1,358 | ||||||||||
March 26, 2019 | March 27, 2021 | March 26, 2024 | 254,310 | 1,734 | ||||||||||||
March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 2,353 | ||||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 5,990 | ||||||||||||
Seong Ho Ha | Head of Corporate Relations Center | February 22, 2019 | February 23, 2021 | February 22, 2024 | 265,260 | 1,369 | ||||||||||
March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 1,656 | ||||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 1,920 | ||||||||||||
Hyoung Il Ha | Head of Corporate Center 2 | February 22, 2019 | February 23, 2021 | February 22, 2024 | 265,260 | 1,564 | ||||||||||
March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 1,961 | ||||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 3,760 | ||||||||||||
Poong Young Yoon | Head of Corporate Center 1 | February 22, 2019 | February 23, 2021 | February 22, 2024 | 265,260 | 1,244 | ||||||||||
March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 1,743 | ||||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 3,360 | ||||||||||||
Jong Ryeol Kang | Head of ICT Infrastructure Center | March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 2,048 | ||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 2,350 | ||||||||||||
Yoon Kim | Head of T3K | March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 1,874 | ||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 2,110 | ||||||||||||
Seok Joon Huh | Head of Private Placement Group | March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 1,852 | ||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 2,260 | ||||||||||||
Dong Hwan Cho | Head of Cloud Transformation Center | March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 1,525 | ||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 1,770 | ||||||||||||
HyunA Lee | Head of AI&CO | March 26, 2020 | March 27, 2023 | March 26, 2027 | 192,260 | 1,525 | ||||||||||
March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 2,880 | ||||||||||||
Sang Kyu Shin | Head of Corporate Culture Center | March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 1,530 | ||||||||||
Jae Seung Song | Head of Corporate Development Croup | March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 2,650 | ||||||||||
Myung Jin Han | Head of Subscription Service CO | March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 1,450 | ||||||||||
Byung Hoon Ryu | Head of Corporate Strategy Group | March 25, 2021 | March 26, 2023 | March 25, 2026 | 251,380 | 1,250 |
Item 6.C. | Board Practices |
For information regarding the expiration of each director’s term of appointment, as well as the period from which each director has served in such capacity, see the table set out under “Item 6.A. Directors and Senior Management” above.
Termination of Directors,Directors’ Services
Directors are given a retirement and severance payment upon termination of employment in accordance with our internal regulations on severance payments. Upon retirement, directors who have made significant contributions to our company during their term may be appointed to serve either as an advisor to us or as an officer of an affiliate company.
Audit Committee
Under relevant Korean laws and our articles of incorporation, we are required to have an audit committee under the board of directors. The committee is composed of at least three members, two-thirds of whom must be independent non-executive directors in accordance with applicable rules. The members of the audit committee are appointed annually by a resolution of the general meeting of shareholders. They are required to:
examine the agenda for the general meeting of shareholders;
examine financial statements and other reports to be submitted by the board of directors to the general meeting of shareholders;
review the administration by the board of directors of our affairs; and
examine the operations and asset status of us and our subsidiaries.
In addition, the audit committee must appoint independent auditors to examine our financial statements. An audit and review of our financial statements by independent auditors is required for the purposes of a securities report. Listed companies must provide such report on an annual, semi-annual and quarterly basis to the FSC and the KRX KOSPI Market.
Our audit committee is composed of threefour independent non-executive directors: Dae Shick Oh, Jae Hoon LeeSeok-Dong Kim, Yong-Hak Kim, Jung Ho Ahn and Jae Hyeon Ahn,Youngmin Yoon, each of whom is financially literate and independent under the rules of the NYSE as applicable. Seok-Dong Kim is the chairman of the committee. The board of directors has determined that Dae Shick OhSeok-Dong Kim is an “audit committee financial expert” as defined under the applicable rules of the SEC. See “Item 16A. Audit Committee Financial Expert.”
Independent Director Nomination Committee
This committee is devoted to recommending independent non-executive directors for the board of directors. The objective of the committee is to help promote fairness and transparency in the nomination of candidates for these positions. The board of directors decides from time to time who will comprise the members of this committee. The committee is comprised of one executive director, Dong Hyun Jang,Jung Ho Park, and two independent directors, Jae Hoon LeeSeok-Dong Kim and Jae HyeonJung Ho Ahn.
Capex Review Committee
This committee is responsible for reviewing our business plan (including the budget). It also examines major capital expenditure revisions, and routinely monitors capital expenditure decisions that have already been executed. The committee is comprised of fourone executive director, Young Sang Ryu, and five independent directors, Jae Hoon Lee, Jay Young Chung, Dae Shick OhYong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn and Jae Hyeon Ahn.Youngmin Yoon and Junmo Kim. Jung Ho Ahn is the chairman of the committee.
Compensation Review Committee
This committee oversees our overall compensation scheme for top-level executives and directors. It is responsible for reviewing both the criteria for and level of compensation. It is comprised of three independent directors, Jay Young Chung, Dae Shick OhYong-Hak Kim, Seok-Dong Kim and Jae Hoon Lee.Junmo Kim. Yong-Hak Kim is the chairman of the committee.
Corporate Citizenship Committee
This committee was established to help us achieve world-class sustainable growth and to help us fulfill our corporate social responsibilities. It is comprised of three independent directors, Jae HyeonJung Ho Ahn, Jay Young ChungYoungmin Yoon and Dae Shick Oh.Junmo Kim.Youngmin Yoon is the chairwoman of the committee.
Item 6.D. | Employees |
The following table sets forth the numbers of our regular employees, temporary employees and total employees as of the dates indicated:
Regular Employees | Temporary Employees | Total | ||||||||||
December 31, 2013 | 21,546 | 2,243 | 23,789 | |||||||||
December 31, 2014 | 24,404 | 1,285 | 25,689 | |||||||||
December 31, 2015 | 24,479 | 1,513 | 25,992 |
Regular Employees | Temporary Employees | Total | ||||||||||
December 31, 2018 | 33,999 | 5,910 | 39,909 | |||||||||
December 31, 2019 | 34,548 | 5,995 | 40,543 | |||||||||
December 31, 2020 | 34,847 | 6,250 | 41,097 |
Labor Relations
As of December 31, 2015,2020, SK Telecom had a company union consisting of 1,9682,591 regular employees out of 3,8925,232 total regular employees. We have never experienced a work stoppage of a serious nature. Every two years, the union and management negotiate and enter into a new collective bargaining agreement that has a two-year duration, which is focused on employee benefits and welfare. Employee wages are separately negotiated on an annual basis. Our wage negotiations for 20132018 were completed in October 2013 and resulted in an average wage increase of 1.5% for SK Telecom employees. Our wage negotiations for 2014 were completed in May 2014 and resulted in no change to the average wage of SK Telecom employees. Our wage negotiations for 2015 were completed in November 2015September 2018 and resulted in an average monthly wage increase of Won 80,0002.5% for SK Telecom employees.Ouremployees. Our wage negotiations for 2016 have not commenced yet.2019 were completed in September 2019 and resulted in an average monthly wage increase of 2.0% for SK Telecom employees. Our wage negotiations for 2020 were completed in September 2020 and resulted in an average monthly wage increase of 2.0% for SK Telecom employees.Our wage negotiations for 2021 were completed in March 2021 and resulted in an average monthly wage increase of 3.0% for SK Telecom employees. We consider our relations with our employees to be good.
Employee Benefits
Since April 1999, we have been required to contribute an amount equal to 4.5% of employee wages toward a national pension plan. Employees are eligible to participate in an employee stock ownership association. We are not required to, and we do not, make any contributions to the employee stock ownership association, although we subsidize the employee stock ownership association through the Employee Welfare Fund by providing low interest rate loans to employees who desire to purchase our stock through the plan in the event of a capitalization by the association.
We are required to pay a severance amount to eligible employees who voluntarily or involuntarily cease employment with us, including through retirement. This severance amount is based upon the employee’s length of service with us and the employee’s salary level at the time of severance. As of December 31, 2015,2020, the defined benefit obligation, which is the accrued and unpaid retirement and severance benefits, of Won 525.31,278.6 billion for all of our employees are reflected in our consolidated financial statements as a liability, of which a total of Won 426.41,127.2 billion was funded. Under Korean laws and regulations, we are prevented from involuntarily terminating a
full-time employee except under certain limited circumstances. In September 2002,2000, we entered into an employment stabilization agreement with the union. Among other things, this agreement provides for a one-year guarantee of the same wage level in the event that we reorganize a department into a separate entity or we outsource an employee to a separate entity where the wage is lower.lower, this agreement provides for a guarantee of the same wage level for the year that such an event occurs.
Under the Basic Labor Welfare Act, we may also contribute up to 5.0% of our annual earnings before tax for employee welfare. Contribution amounts are determined annually following negotiation with the union. The contribution amount for 20152020 was set at 2.04%5.00% of SK Telecom’s profit before income tax on a separate basis, or Won 30.050.0 billion. The contribution amount for 20142019 was set at 1.51%3.63% of SK Telecom’s profit before income tax on a separate basis, or Won 20.043.0 billion. The contribution amount for 20132018 was set at 1.64%3.52% of SK Telecom’s profit before income tax on a separate basis, or Won 20.043.0 billion.
In addition, we provide our employees with miscellaneous other fringe benefits including housing loans, free medical examinations, subsidized on-site child care facilitiescost subsidies, family camp programs and sabbatical programs for long-term employees.
Item 6.E. | Share Ownership |
The following table sets forth the share ownership by our standingdirectors and non-standing directorsexecutive officers as of March 31, 2016:2021:
Name | Position | Number of Shares Owned | Percentage of Total Shares Outstanding | Special Voting Rights | Options | |||||||||||||
Standing Directors: | ||||||||||||||||||
Dong Hyun Jang | President & Chief Executive Officer | 251 | 0.0 | % | None | None | ||||||||||||
Dae Sik Cho | Executive Director | 0 | 0 | None | None | |||||||||||||
Non-Standing Directors: | ||||||||||||||||||
Dae Shick Oh | IndependentNon-executive Director | 0 | 0 | None | None | |||||||||||||
Jay Young Chung | IndependentNon-executive Director | 0 | 0 | None | None | |||||||||||||
Jae Hoon Lee | IndependentNon-executive Director | 0 | 0 | None | None | |||||||||||||
Jae Hyeon Ahn | IndependentNon-executive Director | 0 | 0 | None | None |
Name | Position | Number of Shares Owned | Percentage of Total Shares Outstanding | Special Voting Rights | Options | |||||||||||||
Directors: | ||||||||||||||||||
Jung Ho Park | Executive Director, President and Chief Executive Officer | 3,500 | * | None | 177,610 | |||||||||||||
Young Sang Ryu | Executive Director and President of Mobile Network Operations Division | 1,000 | * | None | 11,435 | |||||||||||||
Executive Officers: | ||||||||||||||||||
Jong Ryeol Kang | Head of ICT Infrastructure Center | 784 | * | None | 4,398 | |||||||||||||
Gyeong Nam Kim | Head of S&C Technology Group | 206 | * | None | — | |||||||||||||
Seong Soo Kim | Head of Mobile CO | 300 | * | None | — | |||||||||||||
Seong Joon Kim | Distribution, Mobile CO | 300 | * | None | — | |||||||||||||
Yeong Joon Kim | Head of AI Technology Unit | 200 | * | None | — | |||||||||||||
Yoon Kim | Head of T3K | 1,000 | * | None | 3,984 | |||||||||||||
Jeong Bok Kim | Head of Metropolitan Infrastructure Office | 673 | * | None | — | |||||||||||||
Jung Hoon Kim | Head of Cloud Infrastructure Group | 150 | * | None | — | |||||||||||||
Jiwon Kim | Head of Vision AI Labs, T3K Innovation CO | 300 | * | None | — | |||||||||||||
Jinwoo Kim | Head of Global Business Group | 150 | * | None | — | |||||||||||||
Jinwon Kim | Head of Financial Strategy & Management Group | 700 | * | None | — | |||||||||||||
Hyuk Kim | Global Media Support, MNO Business | 300 | * | None | — | |||||||||||||
Hyeon Kook Kim | Daegu Regional CP | 500 | * | None | — | |||||||||||||
Heesup Kim | Head of Communication Center | 200 | * | None | — | |||||||||||||
Man Gang Ra | Head of Motivation Group | 500 | * | None | — | |||||||||||||
Byung Hoon Ryu | Head of Corporate Strategy Group | 500 | * | None | 1,250 | |||||||||||||
Jung Hwan Ryu | Head of 5GX Infrastructure Group | 450 | * | None | — | |||||||||||||
Gap In Moon | Head of Smart Device Group | 200 | * | None | — | |||||||||||||
Myung Soon Park | Head of Infrastructure Value Innovation Group | 150 | * | None | — | |||||||||||||
Yong Joo Park | Head of Compliance and Legal Group | 1,200 | * | None | — | |||||||||||||
Jong Kwan Park | Head of 5GX Intelligence CO | 200 | * | None | — | |||||||||||||
Jong Suk Park | Head of Business Planning Group | 500 | * | None | — | |||||||||||||
Suk Ham Sung | Growth Business Support, CR & Growth Business Support Office | 500 | * | None | — | |||||||||||||
Jin Soo Seong | Head of Infrastructure Engineering Group | 1,036 | * | None | — | |||||||||||||
Jae Seung Song | Head of Corporate Development Group | 200 | * | None | 2,650 | |||||||||||||
Gwang Hyeon Song | Head of Digital Communication Office | 200 | * | None | — | |||||||||||||
Sang Kyu Shin | Head of Corporate Culture Center | 500 | * | None | 1,530 | |||||||||||||
Yongsik Shin | Head of IoT CO | 408 | * | None | — | |||||||||||||
Sang Soo Sim | Head of Western Infrastructure Office | 300 | * | None | — | |||||||||||||
Jeong Yeol Ahn | Head of Supply Chain Management Group | 421 | * | None | — | |||||||||||||
Maeng Seog Yang | MR Business, MR Service CO | 200 | * | None | — | |||||||||||||
Ji Young Yeo | Open Collaboration, ESG Innovation Group | 316 | * | None | — | |||||||||||||
Sung Jin Yeum | CR Support, CR & Growth Business Support Office | 1,000 | * | None | — | |||||||||||||
Hui Gang Ye | Head of Creative Communication Group | 200 | * | None | — | |||||||||||||
Kyung Sik Oh | Head of Sports Marketing Group | 350 | * | None | — | |||||||||||||
Sehyeon Oh | Head of Authentication CO | 100 | * | None | — | |||||||||||||
Woong Hwan Ryu | Head of ESG Innovation Group | 200 | * | None | — |
Name | Position | Number of Shares Owned | Percentage of Total Shares Outstanding | Special Voting Rights | Options | |||||||||||||
Sung Eun Yoon | Officer of PR, Public Relations Office | 200 | * | None | — | |||||||||||||
Poong Young Yoon | Head of Corporate Center 1 | 800 | * | None | 6,347 | |||||||||||||
Gab Jae Lee | Central Regional CP | 300 | * | None | — | |||||||||||||
Kang Won Lee | Cloud Technology, Cloud CO | 100 | * | None | — | |||||||||||||
Kiyoon Lee | Head of Customer Value Innovation Office | 765 | * | None | — | |||||||||||||
Sang Gu Lee | Head of Messaging CO | 350 | * | None | — | |||||||||||||
Sang Heon Lee | Head of Policy Development Office | 377 | * | None | — | |||||||||||||
Jongmin Lee | Head of T3K Innovation CO | 200 | * | None | — | |||||||||||||
Joon Ho Lee | ESG Business, ESG Innovation Group | 300 | * | None | — | |||||||||||||
Joong Ho Lee | Head of Metropolitan Area CP | 200 | * | None | — | |||||||||||||
HyunA Lee | Head of AI&CO | 100 | * | None | 4,405 | |||||||||||||
Bong Ho Lim | Head of Regional CP | 150 | * | None | — | |||||||||||||
Hyoung Do Lim | Head of Change Management Office | 275 | * | None | — | |||||||||||||
Hong Sung Chang | Head of Advertising/Data CO | 250 | * | None | — | |||||||||||||
Jinsoo Jeon | Head of MR Service CO | 1,000 | * | None | — | |||||||||||||
Dae Dug Jeong | Tax, Finance Group | 350 | * | None | — | |||||||||||||
Doh Hee Jung | AI Transformation Products & Business, AI Transformation CO | 100 | * | None | — | |||||||||||||
Jae Heon Chung | Head of New Business Legal Group | 400 | * | None | — | |||||||||||||
Chang Gweon Chung | Head of Infrastructure Business | 450 | * | None | — | |||||||||||||
Dong Hwan Cho | Head of Cloud Transformation Center | 700 | * | None | 3,295 | |||||||||||||
Young Log Cho | Head of CR & Growth Business Support Office | 700 | * | None | — | |||||||||||||
Jae Yoo Cho | Games, MR Service CO | 600 | * | None | — | |||||||||||||
Jongwhi Cha | Head of Brand Foundation Group | 100 | * | None | — | |||||||||||||
Zonggeun Chai | Head of Ethics Management Office | 900 | * | None | — | |||||||||||||
Nag Hun Choi | Head of Smart Factory CO | 600 | * | None | — | |||||||||||||
Eun Sik Choi | Western Regional CP | 250 | * | None | — | |||||||||||||
Il Gyu Choi | Head of Cloud CO | 150 | * | None | — | |||||||||||||
Jeong Hwan Choi | Asset Optimization, Corporate Development Group | 400 | * | None | — | |||||||||||||
Pan Chul Choi | Cloud Business, Cloud CO | 100 | * | None | — | |||||||||||||
Min Yong Ha | Officer, Innovation Suite | 300 | * | None | — | |||||||||||||
Seong Ho Ha | Head of Corporate Relations Center | 1,000 | * | None | 4,945 | |||||||||||||
Hyoung Il Ha | Head of Corporate Center 2 | 1,000 | * | None | 7,285 | |||||||||||||
Geunman Heo | Head of Infrastructure Solutions Group | 300 | * | None | — | |||||||||||||
Eunah Hyun | Head of Growth Legal, Corporate Center 2 | 200 | * | None | — | |||||||||||||
Myung Jin Han | Head of Subscription Service CO | 1,000 | * | None | 1,450 | |||||||||||||
Seok Joon Huh | Head of Private Placement Group | 700 | * | None | 4,112 | |||||||||||||
Seung Tae Hong | RPA, Business Planning Group | 150 | * | None | — | |||||||||||||
Gyu Sik Lee | Head of Competency Group | 200 | * | None | — | |||||||||||||
So Jeong Choi | Subscription Media, Subscription Service CO | 100 | * | None | — | |||||||||||||
Gwan Woo Lee | Head of Cloud Application Group | 250 | * | None | — | |||||||||||||
Tae Wan Kim | Strategic Alliance, Global Business Group | 280 | * | None | — | |||||||||||||
Yeong Sang Kwon | Head of Policy Cooperation Office | 250 | * | None | — | |||||||||||||
Yong Jin Choi | Head of AI Transformation CO | 200 | * | None | — | |||||||||||||
Jihoon Kim | Officer, Future Business Team, SUPEX Council Project | 67 | * | None | — | |||||||||||||
Jaeho Yoo | Portfolio Innovation | 120 | * | None | — | |||||||||||||
|
|
|
|
|
| |||||||||||||
Total | 37,178 | * | 234,696 |
* | Less than 1%. |
See “Item 6.B. Compensation” for information regarding the exercisable stock options granted to our directors and executive officers.
Item 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Item 7.A. | Major Shareholders |
As of the close of our shareholders’ registry on December 31, 2015,2020, approximately 60.62%66.7% of our issued shares were held in Korea by approximately 61,372154,707 shareholders. According to Citibank, N.A. (“Citibank”), depositary for our ADRs, as of December 31, 2015,2020, there were 34,173 U.S.at least 100 record holders of our ADRs evidencing ADSs resident in the United States to the best of Citibank’s knowledge, and 9,245,1416,791,254 shares of our common stock were held in the form of ADSs.As of such date, outstanding ADSs represented approximately 13.1%8.4% of our outstanding common shares.
The following table sets forth certain information as of MarchDecember 31, 20162020 with respect to any person known to us to be the beneficial owner of more than 5.0% of our common shares and with respect to the total amount of such shares owned by our officers and directors, as a group:shares:
Shareholder/Category | Number of Shares | Percentage Total Shares Issued | Percentage Total Shares Outstanding | |||||||||
Domestic Shareholders | ||||||||||||
SK Holdings | 20,363,452 | 25.22 | % | 28.84 | % | |||||||
Treasury shares(1) | 10,136,551 | 12.55 | 14.36 | |||||||||
Officers and Directors | 251 | 0.00 | — | |||||||||
Other Domestic Shareholders | 17,740,302 | 21.97 | 25.12 | |||||||||
Foreign Shareholders(2) | ||||||||||||
Shareholders holding ADRs | 9,259,552 | 11.47 | 13.11 | |||||||||
Shareholders holding common stock | 23,245,603 | 28.79 | 32.92 | |||||||||
Total Issued Shares | 80,745,711 | 100 | % | — | ||||||||
Total Outstanding Shares(3) | 70,609,160 | — | 100 | % |
Shareholder | Number of Shares | Percentage of Total Shares Issued(3) | Percentage of Total Shares Outstanding(4) | |||||||||
SK Inc. | 21,624,120 | 26.8 | % | 30.3 | % | |||||||
National Pension Service | 8,853,906 | 11.0 | 12.4 | |||||||||
Treasury shares(1) (2) | 9,418,558 | 11.7 | — |
(1) | Treasury shares do not have any voting rights. |
(2) | We repurchased an additional 288,000 common shares under the |
(3) | Calculated based on 80,745,711 total issued shares, |
(4) | Calculated based on 71,327,153 total outstanding shares as of December 31, 2020. |
The following table sets forth significant changes in the percentage ownership held by our major shareholders during the past three years:
As of December 31, | As of December 31, | |||||||||||||||||||||||
Shareholder | 2015 | 2014 | 2013 | 2020 | 2019 | 2018 | ||||||||||||||||||
(As a percentage of total issued shares)(1) | (As a percentage of total issued shares)(1) | |||||||||||||||||||||||
SK Group(2) | 25.22 | % | 25.22 | % | 25.22 | % | ||||||||||||||||||
SK Holdings | 25.22 | 25.22 | 25.22 | |||||||||||||||||||||
SK Group(2) | 26.8 | % | 26.8 | % | 26.8 | % | ||||||||||||||||||
SK Inc. | 26.8 | 26.8 | 26.8 | |||||||||||||||||||||
National Pension Service | 8.62 | 7.09 | 5.90 | 11.0 | 11.1 | 9.8 |
(1) | Includes |
(2) | SK Group’s ownership interest as of December 31, |
Except as described above, other than companies in the SK Group, no other persons or entities known by us to be acting in concert, directly or indirectly, jointly or severally, own in excess of 5.0% of our total shares outstanding or exercise control or could exercise control over our business.
On July 1, 2007, the company formerly known as SK Corporation underwent a corporate reorganization, pursuant to which SK Corporation spun off substantially all of its operating business divisions into a newly established corporation named SK Energy Co., Ltd. The surviving company currently operates as a holding company, renamed SK Holdings. Ownership of all our shares held by SK Corporation immediately preceding the reorganization passed to SK Holdings as of July 1, 2007. On August 1, 2015, SK Holdings merged with and into SK C&C and the merged entity was renamed SK Holdings.
As of March 31, 2016,2021, SK HoldingsInc. held 25.22%26.8% of our total issued shares of common stock. For a description of our foreign ownership limitation, see “Item 3.D. Risk Factors — Risks Relating to SecuritiesOur Business — If SK HoldingsInc. causes us to breach the foreign ownership limitations on our common shares, we may experience a change of control”control.” and “Item 4.B. Business Overview — Law and Regulation — Foreign Ownership and Investment Restrictions and
Requirements.” In the event that SK HoldingsInc. announces plans of a sale of our shares, we expect to be able to discuss the details of such sale with them in advance and will endeavor to minimize any adverse effects on our share prices as a result of such sale.
As of March 31, 2016,2021, the total number of our common shares outstanding was 70,609,160.71,160,143.
Other than as disclosed herein, there are no other arrangements, to the best of our knowledge, which would result in a material change in the control of us. Our major shareholders do not have different voting rights.
Item 7.B. | Related Party Transactions |
We are part of the SK Group of affiliated companies. See “Item 7.A. Major Shareholders.” As disclosed in note 3637 of the notes to our consolidated financial statements, we had related party transactions with a number of affiliated companies of the SK Group during the year ended December 31, 2015.2020.
SK Networks
In September 2009, we acquired the leased-line business and related ancillary businesses from SK Networks for Won 892.8 billion and assumed Won 611.4 billion of debt as part of the transaction. Prior to such acquisition, KT and SK Networks provided a substantial majority of our leased lines. For a more detailed discussion of the lines we lease from fixed-line operators, see “Item 4.B. Business Overview — Cellular Services — Network Infrastructure.” In addition, PS&Marketing acquired the retail distribution business of SK Networks in April 2014.
As of December 31, 2015,2020, we had Won 1.62.2 billion of accounts receivable from SK Networks. As of the same date, we had Won 208.3108.2 billion of accounts payable to SK Networks, mainly relating to payments for wireless devices by PS&M.&Marketing. The aggregate fees we paid to SK Networks for dealer commissions amounted to Won 1,258.01,023.0 billion in 2020, Won 1,509.01,088.4 billion in 2019 and Won 1,463.31,189.4 billionin 2015, 2014 and 2013.2018.
SK HoldingsInc.
We enter into agreements with SK HoldingsInc. from time to time for specific information technology-related projects.projects, and we also pay SK Inc. for use of the SK brand. The aggregate fees we paid to SK HoldingsInc. for such information technology services and the use of the SK brand amounted to Won 324.1380.3 billion in 2015,2020, Won 360.8396.0 billion in 20142019 and Won 357.9397.5 billion in 2013.2018. We also purchase various information technology-related equipment from SK HoldingsInc. from time to time. The total amount of such purchases was Won 236.476.5 billion in 2015,2020, Won 168.895.4 billion in 20142019 and Won 206.3151.5 billion in 2013.2018. We are a party to several service agreements with SK HoldingsInc. relating to the development and maintenance of our information technologies systems. We also pay
In December 2018, we acquired SK HoldingsInfosec from SK Inc. in a share exchange transaction, pursuant to which we transferred 1,260,668 treasury shares with an aggregate book value of Won 281.2 billion to SK Inc. in exchange for useall of the issued and outstanding common shares of SK brand.Infosec.
SK TNS
SK TNS Co., Ltd. (“SK TNS”) provides us with network construction and maintenance services and related equipment. The total amount of network equipment purchased from SK TNS was Won 496.5 billion in 2020, Won 607.5 billion in 2019 and Won 493.8 billion in 2018. As of December 31, 2020, we had Won 89.9 billion of accounts payable to SK TNS, mainly relating to payments for such services and equipment.
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 G-71.G-99.
Legal Proceedings
FTC Proceedings
In March 2012,On February 24, 2021, the FTC finedimposed a fine of Won 6.4 billion on us Won 21.9 billionfor allegedly colludingand issued a correctional order in connection with KT, LG U+, Samsung Electronics, LG Electronics and Pantech (which were also assessed separate fines) to inflate the pricespayment by SK Telecom of handsets while advertisinga portion of sales commissions for IPTV services of SK Broadband in the course of selling bundled rate plans that the handsets are offered at a discount through subsidy plans. We paid such finecombine our wireless services with IPTV services in September 2012 and filed an appeal at the Seoul High Court, which ruled against us in October 2014. We appealed the decision to the Supreme Court of Korea, where the case is currently pending.
In July 2012, the FTC fined us Won 25.0 billion for alleged violation of Article 23 of the Fair Trade Act relatingAct. While we expect to pay the paymentfine by the due date, we plan to apply for a stay of system managementexecution of the correctional order and operation fees. We paid such fineinitiate administrative proceedings in November 2012connection with the correctional order and filed an appeal at the Seoul High Court, which ruled in favor of us in May 2014. The FTC appealed the decision to the Supreme Court of Korea, which ruled in favor of us in March 2016.fine.
KCC and MSIP Proceedings
Prior to the implementation of the MDDIA,On January 24, 2018, the KCC and the MSIP imposed suspensions on acquiring new subscribers and finesan aggregate fine of Won 21.4 billion on us for providing discriminatory subsidies to subscribers which were not universally available. In 2013,in violation of the KCC imposed fines on us of Won 96.3 billion in aggregate. In 2014, the KCC and the MSIP suspended us from acquiring new subscribers for an aggregate of 52 days and imposed fines on us of Won 54.6 billion in aggregate.MDDIA.
On March 26, 2015,20, 2019, the KCC imposed a fine of Won 23.5 billion975 million on us and imposedissued a suspension on acquiring new subscribers for a period of seven dayscorrectional order for providing discriminatory subsidies to subscribers in excessviolation of the amounts permitted under the MDDIA. We suspended acquisition of new customers during the period from October 1, 2015 to October 7, 2015. On May 13, 2015,June 26, 2019, the KCC imposed a fine of Won 3.6231 million on us and issued a correctional order relating to restrictions on subscription cancelations. On July 9, 2019, the KCC imposed a fine of Won 1.5 million on us and issued a correctional order for failing to maintain the amount of subsidies for the minimum period in violation of the MDDIA.
On June 4, 2020, the KCC imposed a fine of Won 4 million on us and issued a correctional order for obtaining consent from subscribers for collection of personal information through contracts with material omissions in violation of the Location Information Act of Korea. On July 8, 2020, the KCC imposed a fine of Won 22.3 billion on us and issued a correctional order for violating its obligationsproviding handset subsidies that were in excess of their officially announced amounts and were discriminatory in nature, as well as unlawfully requiring subscribers to protect personal information. Weenroll to certain subscription plans or purchase certain value-added services in return, in connection with attracting new subscribers of 5G wireless services during the period between April 2019 and August 2019 in violation of the MDDIA. On September 9, 2020, the KCC imposed a fine of Won 76 million on us and issued a correctional order for false, exaggerated or deceptive advertising in violation of the Telecommunications Business Act.
With respect to the fines imposed by the KCC set forth above, we have paid such finefines in July 2015full. With respect to the correctional orders issued by the KCC set forth above, we have implemented remedial measures pursuant to such correctional orders and reported to the KCC on the implementation of actions pursuant to the correctional order in September 2015. On May 28, 2015 and December 10, 2015, the KCC imposed a fine of Won 350 million and Won 560 million, respectively, on us and issued a correctional order for misleading and exaggerated advertisement of bundled wireless and fixed-line telecommunications products. On January 14, 2016, the KCC imposed a fine of Won 15 million on us and issued a correctional order for failure to comply with the retention period for our subscribers’ personal information.
KT Interconnection Fee Litigation
In December 2010, we filed a lawsuit in the Seoul Central District Court against KT alleging that they paid us lower interconnection fees for intentionally bypassing our WCDMA spectrum and using our CDMA network rather than our WCDMA network. In response, KT filed a counterclaim against us, alleging that we failed to respond to their request for information and that we intentionally delayed the interconnection for calls from fixed-line KT users to our wireless subscribers and seeking damages of Won 33.7 billion. In September 2012, the Seoul Central District Court dismissed our lawsuit against KT and rendered a judgment that accepted KT’s claims in part. We filed an appeal at the Seoul High Court in October 2012, and in January 2014, the Seoul High Court overturned the District Court’s decision and rendered a judgment that accepted our claims in part. We and KT each filed an appeal at the Supreme Court of Korea in February 2014.
SK Communications Litigation
In July 2011, there was a leak of personal information of subscribers of NATE and Cyworld websites operated by SK Communications, our consolidated subsidiary. Various lawsuits have been filed against SK Communications alleging that the leak was caused by its poor management of subscribers’ personal information. With respect to three of the lawsuits for which final judgments have been rendered, the relevant courts have rendered judgments in favor of SK Communications. As of December 31, 2015, twelve of the lawsuits, seeking damages of approximately Won 0.8 billion in aggregate, were pending at various district courts, various high courts and the Supreme Court of Korea.such measures.
Except as described above, neither we nor any of our subsidiaries are involved in any litigation, arbitration or administrative proceedings relating to claims which may have, or have had during the twelve months preceding the date hereof, a significant effect on our financial position or the financial position of our subsidiaries taken as a whole, and, so far as we are aware, no such litigation, arbitration or administrative proceedings are pending or threatened.
Dividends
Annual dividends, if any, on our outstanding shares must be approved at the annual general meeting of shareholders. This meeting is generally held in March of the following year, and the annual dividend is generally paid shortly after the meeting. Since our shareholders have discretion to declare annual dividends, we cannot give
any assurance as to the amount of dividends per share or that any dividends will be declared at all. Interim dividends, if any, cancould be approved by a resolution of our board of directors. We replaced the interim dividend system with a quarterly dividend system pursuant to an amendment to our articles of incorporation at our annual general meeting of shareholders held on March 25, 2021. Once declared, dividends must be claimed within five years, after which the right to receive the dividends is extinguished and reverted to us.
We pay cash dividends to the ADR depositary in Won. Under the terms of the deposit agreement, cash dividends received by the ADR depositary generally are to be converted by the ADR depositary into Dollars and distributed to the holders of the ADSs, less withholding tax, other governmental charges and the ADR depositary’s fees and expenses. The ADR depositary’s designated bank in Korea must approve this conversion and remittance of cash dividends. See “Item 10.B. Memorandum and Articles of Association — Description of American Depositary Shares” and “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities Regulations.”
The following table sets forth the dividend per share and the aggregate total amount of dividends declared (including any interim dividends), as well as the number of outstanding shares entitled to dividends, with respect to the years indicated. The dividends set out for each of the years below were paid in the immediately following year.
Year Ended December 31, | Dividend per Share | Total Amount of Dividends | Number of Shares Entitled to Dividend | |||||||||
(In Won) | (In billions of Won) | |||||||||||
2011 | 9,400 | 656.5 | 69,694,999 | (1) | ||||||||
2012 | 9,400 | 655.1 | 69,694,999 | |||||||||
2013 | 9,400 | 666.4 | 70,936,336 | |||||||||
2014 | 9,400 | 666.8 | 70,936,336 | |||||||||
2015 | 10,000 | 708.1 | 70,609,160 | (2) |
Year Ended December 31, | Dividend per Share | Total Amount of Dividends | Number of Shares Entitled to Dividend | |||||||||
(In Won) | (In billions of Won) | |||||||||||
2016 | ₩ | 10,000 | ₩ | 706.1 | 70,609,160 | |||||||
2017 | 10,000 | 706.1 | 70,609,160 | |||||||||
2018 | 10,000 | 717.4 | 71,869,828 | (1) | ||||||||
2019 | 10,000 | 730.1 | 73,136,448 | (2) | ||||||||
2020 | 10,000 | 715.1 | 71,327,153 | (3) |
(1) | The number of shares entitled to the interim dividend was |
(2) | The number of shares entitled to the interim dividend was |
(3) | The number of shares entitled to the interim dividend was 73,136,448. |
We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. Our common shares represented by the ADSs have the same dividend rights as other outstanding common shares.
Holders of non-voting shares are entitled to receive dividends in priority to the holders of common shares. The dividend on the non-voting shares is between 9.0% and 25.0% of the par value as determined by the board of directors at the time of their issuance. If the dividends for common shares exceed the dividends for non-voting shares, the holders of non-voting shares will be entitled to participate in the distribution of such excess amount with the holders of common shares. If the amount available for dividends is less than the aggregate amount of the minimum required dividend, holders of non-voting shares will be entitled to receive such accumulated unpaid dividend from dividends payable in the next fiscal year before holders of common shares. There are no non-voting shares issued or outstanding.
We declare dividends annually at the annual general meeting of shareholders which is generally held within three months after the end of the fiscal year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record or registered pledges as of the end of the preceding fiscal year. We may distribute the annual dividend in cash or in shares. However, a dividend of shares must be distributed at par value. Dividends in shares may not exceed one-half of the annual dividend. Our obligation to pay dividend expires if no claim to dividend is made for five years from the payment date.
Under the Korean Commercial Code, we may pay an annual dividend only out of the excess of our net assets, on a non-consolidated basis, over the sum of (1) our stated capital, (2) the total amount of our capital surplus reserve, (3) legal reserve accumulated up to the end of the relevant dividend period and (4) the increase in our net asset value resulting from the evaluation of our assets and liabilities that has not been offset against unrealized losses. In addition, we may not pay an annual dividend unless we have set aside as a legal reserve an amount equal to at least 10.0% of the cash portion of the annual dividend or until we have accumulated a legal reserve of not less than one-half of our stated capital. We may not use our legal reserve to pay cash dividends but may transfer amounts from our legal reserve to capital stock or use our legal reserve to reduce an accumulated deficit.
In addition, the Korean Commercial CodeFSCMA and our articles of incorporation provide that, in addition to annual dividends, we may pay interim dividends once during each fiscal year.quarterly dividends. Unlike annual dividends, the decision to pay interimquarterly dividends can be made by a resolution of the board of directors and is not subject to shareholder approval. Any interimquarterly dividends must be paid in cash to the shareholders of record as of March 31, June 30 or September 30 of the relevant fiscal year. In July 2014, we distributed such interim dividends at Won 1,000 per share to our shareholders for a total amount of approximately Won 71.0 billion.
Under the Korean Commercial Code,FSCMA, the total amount of interimquarterly dividends payable in a fiscal year shall not be more than the net assets on the balance sheet of the immediately preceding fiscal year, after deducting (1) a company’s capital in the immediately preceding fiscal year, (2) the aggregate amount of its capital reserves and legal reserves accumulated up to the immediately preceding fiscal year, (3) the amount of earnings for dividend payments confirmed at the general shareholders’ meeting with respect to the immediately preceding fiscal year and (4) the
amount of legal reserve that should be set aside for the current fiscal year following the interimquarterly dividend payment. Furthermore, the rate of interimquarterly dividends for non-voting shares must be the same as that for our common shares. In addition, no quarterly dividends can be paid if there is a concern over the net assets of the current fiscal year falling short of the aggregate sum of (1) our stated capital, (2) the total amount of our capital surplus reserve, (3) legal reserve accumulated up to the end of the current fiscal year and (4) the increase in our net asset value resulting from the evaluation of our assets and liabilities that has not been offset against unrealized losses.
Our obligation to pay interimquarterly dividends expires if no claims to such dividends are made for a period of five years from the payment date.
Item 8.B. | Significant Changes |
None.
Item 9. | THE OFFER AND LISTING |
Item 9.A. | Offering and Listing Details |
These matters are described under “Item 9.C. Markets” below where relevant.
Item 9.B. | Plan of Distribution |
Not applicable.
These matters are described under Item 9.C. below where relevant.
Not applicable.
Item 9.C. | Markets |
The principal trading market for our common shares is the KRX KOSPI Market. Our common shares are traded on the KRX KOSPI Market under the identification code 017670. As of March 31, 2016, 70,609,1602021, 71,160,143 shares of our common stock were outstanding.
The ADSs are traded on the NYSE and the London Stock Exchange. The ADSs have been issued by the ADR depositary and are traded on the NYSE under the ticker symbol “SKM”.“SKM.” Each ADS represents one-ninth of one share of our common stock. As of March 31, 2016,2021, ADSs representing 9,259,5526,600,692 shares of our common stock were outstanding.
Shares of Common Stock
The following table sets forth the high, low and closing prices and the average daily trading volume of our common shares on the KRX KOSPI Market since January 1, 2011:
Prices | Average Daily Trading Volume | |||||||||||||||
Calendar Year | High(1) | Low(1) | Close | |||||||||||||
(Won per shares) | (Number of shares) | |||||||||||||||
2011 | 172,500 | 131,000 | 141,500 | 214,788 | ||||||||||||
First Quarter | 172,500 | 156,000 | 163,500 | 124,796 | ||||||||||||
Second Quarter | 169,000 | 152,500 | 161,500 | 160,839 | ||||||||||||
Third Quarter | 161,500 | 131,000 | 149,500 | 324,018 | ||||||||||||
Fourth Quarter | 165,000 | 141,500 | 141,500 | 249,500 | ||||||||||||
2012 | 161,000 | 120,500 | 152,500 | 216,031 | ||||||||||||
First Quarter | 146,000 | 134,500 | 139,500 | 193,924 | ||||||||||||
Second Quarter | 142,500 | 120,500 | 125,000 | 284,712 | ||||||||||||
Third Quarter | 153,000 | 125,000 | 147,000 | 208,276 | ||||||||||||
Fourth Quarter | 161,000 | 145,500 | 152,500 | 177,955 | ||||||||||||
2013 | 238,500 | 150,000 | 230,000 | 212,769 | ||||||||||||
First Quarter | 185,500 | 150,000 | 180,500 | 234,684 | ||||||||||||
Second Quarter | 225,500 | 172,000 | 210,000 | 245,151 | ||||||||||||
Third Quarter | 226,500 | 202,000 | 218,500 | 175,670 | ||||||||||||
Fourth Quarter | 238,500 | 211,500 | 230,000 | 195,925 | ||||||||||||
2014 | 298,500 | 196,500 | 268,000 | 170,709 | ||||||||||||
First Quarter | 229,000 | 196,500 | 215,500 | 184,185 | ||||||||||||
Second Quarter | 243,500 | 198,000 | 236,500 | 180,743 | ||||||||||||
Third Quarter | 298,500 | 236,000 | 290,000 | 152,740 | ||||||||||||
Fourth Quarter | 298,500 | 259,000 | 268,000 | 165,710 | ||||||||||||
2015 | 301,500 | 214,000 | 215,500 | 185,999 | ||||||||||||
First Quarter | 301,500 | 261,500 | 272,500 | 151,786 | ||||||||||||
Second Quarter | 293,500 | 236,500 | 250,000 | 209,931 | ||||||||||||
Third Quarter | 263,000 | 236,000 | 263,000 | 185,542 | ||||||||||||
Fourth Quarter | 267,000 | 214,000 | 215,500 | 195,488 | ||||||||||||
2016 (through April 22) | 234,000 | 191,500 | 201,500 | 199,721 | ||||||||||||
First Quarter | 234,000 | 191,500 | 208,500 | 212,966 | ||||||||||||
January | 216,000 | 191,500 | 209,000 | 217,493 | ||||||||||||
February | 233,500 | 199,500 | 233,500 | 253,416 | ||||||||||||
March | 234,000 | 206,000 | 208,500 | 175,756 | ||||||||||||
Second Quarter (through April 22) | 212,000 | 201,000 | 201,500 | 146,741 | ||||||||||||
April (through April 22) | 212,000 | 201,000 | 201,500 | 146,741 |
Item 9.D. | Selling Shareholders |
Source: Korea ExchangeNot applicable.
Dilution |
American Depositary Shares
The following table sets forth the high, low and closing prices and the average daily trading volume of the ADSs on the NYSE since January 1, 2011:
Prices | Average Daily Trading Volume | |||||||||||||||
Calendar Year | High | Low | Close | |||||||||||||
(US$ per ADS) | (Number of ADSs) | |||||||||||||||
2011 | 19.80 | 13.47 | 13.61 | 1,866,528 | ||||||||||||
First Quarter | 18.81 | 16.83 | 18.81 | 1,639,731 | ||||||||||||
Second Quarter | 19.80 | 17.36 | 18.70 | 1,640,469 | ||||||||||||
Third Quarter | 18.77 | 13.47 | 14.07 | 2,125,730 | ||||||||||||
Fourth Quarter | 15.89 | 13.49 | 13.61 | 2,060,180 | ||||||||||||
2012 | 16.48 | 11.14 | 15.83 | 1,758,414 | ||||||||||||
First Quarter | 14.60 | 12.90 | 13.91 | 1,644,366 | ||||||||||||
Second Quarter | 14.13 | 11.14 | 12.10 | 2,135,473 | ||||||||||||
Third Quarter | 15.06 | 12.23 | 14.54 | 1,836,959 | ||||||||||||
Fourth Quarter | 16.48 | 14.48 | 15.83 | 1,409,508 | ||||||||||||
2013 | 25.16 | 15.69 | 24.62 | 1,407,958 | ||||||||||||
First Quarter | 18.69 | 15.69 | 17.87 | 1,884,190 | ||||||||||||
Second Quarter | 22.37 | 17.05 | 20.33 | 1,724,433 | ||||||||||||
Third Quarter | 22.70 | 19.47 | 22.70 | 848,082 | ||||||||||||
Fourth Quarter | 25.16 | 22.16 | 24.62 | 1,204,890 | ||||||||||||
2014 | 31.75 | 20.76 | 27.01 | 905,341 | ||||||||||||
First Quarter | 24.07 | 20.76 | 22.57 | 952,847 | ||||||||||||
Second Quarter | 26.50 | 20.76 | 25.94 | 908,195 | ||||||||||||
Third Quarter | 31.75 | 25.54 | 30.34 | 963,636 | ||||||||||||
Fourth Quarter | 30.62 | 27.01 | 27.01 | 803,932 | ||||||||||||
2015 | 30.07 | 20.15 | 20.15 | 600,919 | ||||||||||||
First Quarter | 29.76 | 26.22 | 27.21 | 787,402 | ||||||||||||
Second Quarter | 30.07 | 23.96 | 24.79 | 598,632 | ||||||||||||
Third Quarter | 25.22 | 22.08 | 24.40 | 515,965 | ||||||||||||
Fourth Quarter | 25.49 | 20.15 | 20.15 | 508,946 | ||||||||||||
2016 (through April 22) | 20.98 | 17.89 | 19.39 | 739,569 | ||||||||||||
First Quarter | 20.98 | 17.89 | 20.17 | 674,693 | ||||||||||||
January | 19.99 | 17.89 | 19.71 | 759,842 | ||||||||||||
February | 20.82 | 18.78 | 20.82 | 689,515 | ||||||||||||
March | 20.98 | 19.60 | 20.17 | 587,682 | ||||||||||||
Second Quarter (through April 22) | 20.20 | 19.27 | 19.39 | 986,906 | ||||||||||||
April (through April 22) | 20.20 | 19.27 | 19.39 | 986,906 |
The Korean Securities Market
The Korea Exchange Inc.
With the enactment of the Korea Stock and Futures Exchange Act, which came into effect on January 27, 2005, the three existing spot and futures exchanges (which were the Korea Stock Exchange, Korean Futures Exchange, and KOSDAQ) and KOSDAQ Committee, a sub-organization of Korea Securities Dealers Association, were merged and integrated into the Korea Exchange as a joint stock company. There are four different markets run by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, the KRX KONEX Market and the KRX Derivatives Market. The Korea Exchange has three trading floors located in Seoul, one for the KRX KOSPI Market, one for the KRX KOSDAQ Market and one for the KRX KONEX Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a limited liability company, the shares of which are held by (1) securities companies and futures companies that were formerly members of the Korea Stock Exchange or the Korea Futures Exchange, (2) the Small & Medium Business Corporation, (3) the Korea Securities Finance
Corporation and (4) the Korea Financial Investment Association. Currently, the Korea Exchange is the only stock exchange in Korea and is run by membership, having most of Korean securities companies and some Korean branches of foreign securities companies as its members.
As of December 31, 2015, the aggregate market value of equity securities listed on the KRX KOSPI Market was approximately Won 1,242.8 trillion. For the year ended December 31, 2015, the average daily trading volume of equity securities was approximately 455.3 million shares with an average trading value of Won 5,351.7 billion. For the year ended December 31, 2014, the average daily trading volume of equity securities was approximately 278.1 million shares with an average trading value of Won 3,983.6 billion. For the year ended December 31, 2013, the average daily trading volume of equity securities was approximately 328.3 million shares with an average trading value of Won 3,993.4 billion.
The Korea Exchange has the power in some circumstances to suspend trading in the shares of a given company or to de-list a security. The Korea Exchange also restricts share price movements. All listed companies are required to file accounting reports annually, semi-annually and quarterly and to release immediately all information that may affect trading in a security.
The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community that can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers an excess capacity in a particular industry and induced private companies to publicly offer their securities.
The Korea Exchange publishes the KOSPI, every ten seconds, which is an index of all equity securities listed on the KRX KOSPI Market. On January 1, 1983, the method of computing KOSPI was changed from the Dow Jones method to the aggregate value method. In the new method, the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed 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 to earnings ratios:
Period Average | ||||||||||||||||||||||||
Year | Opening | High | Low | Closing | Dividend Yield(1) (%) | Price to Earnings(2) | ||||||||||||||||||
1980 | 100.00 | 119.36 | 100.00 | 106.87 | 20.9 | 2.6 | ||||||||||||||||||
1981 | 97.95 | 165.95 | 93.14 | 131.37 | 13.2 | 3.1 | ||||||||||||||||||
1982 | 123.60 | 134.49 | 106.00 | 127.31 | 10.5 | 3.4 | ||||||||||||||||||
1983 | 122.52 | 134.46 | 115.59 | 121.21 | 6.9 | 3.8 | ||||||||||||||||||
1984 | 116.73 | 142.46 | 114.37 | 142.46 | 5.1 | 4.5 | ||||||||||||||||||
1985 | 139.53 | 163.37 | 131.40 | 163.37 | 5.3 | 5.2 | ||||||||||||||||||
1986 | 161.40 | 279.67 | 153.85 | 272.61 | 4.3 | 7.6 | ||||||||||||||||||
1987 | 264.82 | 525.11 | 264.82 | 525.11 | 2.6 | 10.9 | ||||||||||||||||||
1988 | 532.04 | 922.56 | 527.89 | 907.20 | 2.4 | 11.2 | ||||||||||||||||||
1989 | 919.61 | 1,007.77 | 844.75 | 909.72 | 2.0 | 13.9 | ||||||||||||||||||
1990 | 908.59 | 928.77 | 566.27 | 696.11 | 2.2 | 12.8 | ||||||||||||||||||
1991 | 679.75 | 763.10 | 586.51 | 610.92 | 2.6 | 11.2 | ||||||||||||||||||
1992 | 624.23 | 691.48 | 459.07 | 678.44 | 2.2 | 10.9 | ||||||||||||||||||
1993 | 697.41 | 874.10 | 605.93 | 866.18 | 1.6 | 12.7 | ||||||||||||||||||
1994 | 879.32 | 1,138.75 | 860.47 | 1,027.37 | 1.2 | 16.2 | ||||||||||||||||||
1995 | 1,013.57 | 1,016.77 | 847.09 | 882.94 | 1.2 | 16.4 | ||||||||||||||||||
1996 | 888.85 | 986.84 | 651.22 | 651.22 | 1.3 | 17.8 | ||||||||||||||||||
1997 | 653.79 | 792.29 | 350.68 | 376.31 | 1.5 | 17.0 | ||||||||||||||||||
1998 | 385.49 | 579.86 | 280.00 | 562.46 | 1.9 | 10.8 | ||||||||||||||||||
1999 | 587.57 | 1,028.07 | 498.42 | 1,028.07 | 1.1 | 13.5 |
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (through April 22) Period Average Opening High Low Closing Dividend
Yield(1)
(%) Price to
Earnings(2) 1,059.04 1,059.04 500.60 504.62 2.4 15.3 520.95 704.50 468.76 693.70 1.7 29.3 724.95 937.61 584.04 829.44 1.8 15.6 635.17 822.16 515.24 810.71 2.1 10.1 821.26 936.06 719.59 895.92 2.1 15.8 893.71 1,379.37 870.84 1,379.37 1.7 11.0 1,389.27 1,464.70 1,192.09 1,434.46 1.7 11.4 1,435.26 2,064.85 1,355.79 1,897.13 1.4 16.8 1,853.45 1,888.88 938.75 1,124.47 2.6 9.0 1,157.4 1,718.88 1,018.81 1,682.77 1.2 23.7 1,696.14 2,052.97 1,532.68 2,051.00 1.1 17.8 2,070.08 2,228.96 1,652.71 1,825.74 1.6 10.9 1,826.37 2,049.28 1,769.31 1,997.05 1.3 12.9 2,031.10 2,059.58 1,780.63 2,011.34 1.2 13.5 2,013.11 2,093.08 1,881.73 1,915.59 1.1 15.3 1,926.44 2,173.41 1,829.81 1,961.31 1.2 16.1 1,918.76 2,022.10 1,835.28 2,015.49 1.3 15.5
Source: Korea ExchangeNot applicable.
KOSPI closed at 2,015.49 on April 22, 2016.
Shares are quoted “ex-dividend” on the first trading day of the relevant company’s accounting period. Since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of 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,” upward and downward movements in share prices of any category of shares on any day are limited under the rules of the Korea Exchange to 15.0% of the previous day’s closing price of the shares, rounded down as set out below:
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As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may not reflect 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.
The brokerage commission rate on equity securities transactions may be determined by the parties, subject to commission schedules being filed with the Korea Exchange by the securities companies. In addition, a securities transaction tax of 0.15% of the sales price will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares. A special agricultural and fishery 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.E. Taxation — Korean Taxation.”
The following table sets forth the number of companies listed on the KRX KOSPI Market, the corresponding total market capitalization and the average daily trading volume at the end of the periods indicated:
Market Capitalization on the Last Day of Each Period | Average Daily Trading Volume, Value | |||||||||||||||||||||||
Year | Number of Listed Companies | (Billions of Won) | (Millions of US$)(1) | Thousands of Shares | (Millions of Won) | (Thousands of US$)(1) | ||||||||||||||||||
1981 | 343 | ₩ | 2,959 | US$ | 4,223 | 10,565 | ₩ | 8,708 | US$ | 12,427 | ||||||||||||||
1982 | 334 | 3,001 | 4,012 | 9,704 | 6,667 | 8,914 | ||||||||||||||||||
1983 | 328 | 3,490 | 4,361 | 9,325 | 5,941 | 7,425 | ||||||||||||||||||
1984 | 336 | 5,149 | 6,207 | 14,847 | 10,642 | 12,829 | ||||||||||||||||||
1985 | 342 | 6,570 | 7,362 | 18,925 | 12,315 | 13,798 | ||||||||||||||||||
1986 | 355 | 11,994 | 13,863 | 31,755 | 32,870 | 37,991 | ||||||||||||||||||
1987 | 389 | 26,172 | 32,884 | 20,353 | 70,185 | 88,183 | ||||||||||||||||||
1988 | 502 | 64,544 | 93,895 | 10,367 | 198,364 | 288,571 | ||||||||||||||||||
1989 | 626 | 95,477 | 140,119 | 11,757 | 280,967 | 412,338 | ||||||||||||||||||
1990 | 669 | 79,020 | 109,872 | 10,866 | 183,692 | 255,412 | ||||||||||||||||||
1991 | 686 | 73,118 | 95,541 | 14,022 | 214,263 | 279,973 | ||||||||||||||||||
1992 | 688 | 84,712 | 107,027 | 24,028 | 308,246 | 389,445 | ||||||||||||||||||
1993 | 693 | 112,665 | 138,870 | 35,130 | 574,048 | 707,566 | ||||||||||||||||||
1994 | 699 | 151,217 | 190,762 | 36,862 | 776,257 | 979,257 | ||||||||||||||||||
1995 | 721 | 141,151 | 181,943 | 26,130 | 487,762 | 628,721 | ||||||||||||||||||
1996 | 760 | 117,370 | 138,490 | 26,571 | 486,834 | 928,418 | ||||||||||||||||||
1997 | 776 | 70,989 | 41,881 | 41,525 | 555,759 | 327,881 | ||||||||||||||||||
1998 | 748 | 137,799 | 114,261 | 97,716 | 660,429 | 547,619 | ||||||||||||||||||
1999 | 725 | 349,504 | 307,662 | 278,551 | 3,481,620 | 3,064,806 | ||||||||||||||||||
2000 | 704 | 188,042 | 148,415 | 306,163 | 2,602,211 | 2,053,837 | ||||||||||||||||||
2001 | 689 | 255,850 | 194,785 | 473,241 | 1,997,420 | 1,520,685 | ||||||||||||||||||
2002 | 683 | 258,681 | 216,071 | 857,245 | 3,041,598 | 2,540,590 | ||||||||||||||||||
2003 | 684 | 355,363 | 298,624 | 542,010 | 2,216,636 | 1,862,719 | ||||||||||||||||||
2004 | 683 | 412,588 | 398,597 | 372,895 | 2,232,109 | 2,156,419 | ||||||||||||||||||
2005 | 702 | 655,075 | 648,589 | 467,629 | 3,157,662 | 3,126,398 | ||||||||||||||||||
2006 | 731 | 704,588 | 757,622 | 279,096 | 3,435,180 | 3,693,742 | ||||||||||||||||||
2007 | 746 | 951,900 | 1,017,205 | 363,732 | 5,539,588 | 5,919,697 | ||||||||||||||||||
2008 | 765 | 576,888 | 457,122 | 355,205 | 5,189,644 | 4,112,238 | ||||||||||||||||||
2009 | 770 | 887,316 | 762,528 | 485,657 | 5,795,552 | 4,980,494 | ||||||||||||||||||
2010 | 777 | 1,114,882 | 1,260,486 | 379,171 | 5,607,749 | 6,340,121 | ||||||||||||||||||
2011 | 791 | 1,041,999 | 899,438 | 353,759 | 6,863,146 | 5,924,166 | ||||||||||||||||||
2012 | 784 | 1,154,294 | 1,085,679 | 486,734 | 4,824,610 | 4,537,819 | ||||||||||||||||||
2013 | 777 | 1,185,974 | 1,123,826 | 328,325 | 3,993,422 | 3,784,158 | ||||||||||||||||||
2014 | 773 | 1,192,253 | 1,092,908 | 278,082 | 3,983,580 | 3,651,646 | ||||||||||||||||||
2015 | 770 | 1,242,832 | 1,062,885 | 455,256 | 5,351,734 | 4,576,870 | ||||||||||||||||||
2016 (through April 22) | 769 | 1,276,836 | 1,112,372 | 361,995 | 4,586,928 | 3,996,104 |
Source: Korea Exchange
The Korean securities markets are principally regulated by the FSC and became subject to the FSCMA beginning in February 2009. The law imposes restrictions on insider trading and price manipulation, requires specified information 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
Stock index futures market was opened on May 3, 1996 and a stock index option market was opened on July 7, 1997, in each case at the Korea Stock Exchange. Remittance and repatriation of funds in connection with investment in stock index futures and options are subject to regulations similar to those that govern remittance and repatriation in the context of foreign investment in Korean stocks.
In addition, the Korea Stock Exchange opened new option markets for stocks of seven companies including our shares of common stock and common stock of six other companies on January 28, 2002. Foreigners will be permitted to invest in such options for individual stocks subject to certain procedural requirements.
Starting from May 1, 1996, foreign investors were permitted to invest in warrants representing the right to subscribe for shares of a company listed on the Korea Stock Exchange or registered on the KOSDAQ, subject to certain investment limitations. A foreign investor may not acquire such warrants with respect to shares of a class of a company for which the ceiling on aggregate investment by foreigners has been reached or exceeded.
As of December 30, 1997, foreign investors were permitted to invest in all types of corporate bonds, bonds issued by national or local governments and bonds issued in accordance with certain special laws without being subject to any aggregate or individual investment ceiling. The FSC sets forth procedural requirements for such investments. The Government announced on February 8, 1998 its plans for the liberalization of the money market with respect to investment in money market instruments by foreigners in 1998. According to the plan, foreigners have been permitted to invest in money market instruments issued by corporations, including commercial paper, starting February 16, 1998 with no restrictions as to the amount. Starting May 25, 1998, foreigners have been permitted to invest in certificates of deposit and repurchase agreements.
Currently, foreigners are permitted to invest in securities including shares of most Korean companies that are not listed on the KRX KOSPI Market or the KRX KOSDAQ Market and in bonds that are not listed.
Protection of Customer’s Interest in Case of Insolvency of Financial Investment Companies with a Brokerage License
Under Korean law, the relationship between a customer and a financial investment company with a brokerage license in connection with a securities sell or buy order is deemed to be consignment and the securities acquired by a consignment agent (i.e., the financial investment company with a brokerage license) through such sell or buy 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 rehabilitation procedure involving a financial investment company with a brokerage license, the customer of such financial investment company is entitled to the proceeds of the securities sold by such financial investment company.
When a customer places a sell order with a financial investment company with a brokerage license which is not a member of the Korea Exchange and this financial investment company places a sell order with another financial investment company with a brokerage license which is a member of the Korea Exchange, the customer is still entitled to the proceeds of the securities sold received by the non-member company from the member company regardless of the bankruptcy or rehabilitation of the non-member company.
Under the FSCMA, the Korea Exchange is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a financial investment company with a brokerage license which is a member of the Korea Exchange breaches its obligation in connection with a buy order, the Korea Exchange is obliged to pay the purchase price on behalf of 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 a member company, the customer has the legal right to the securities received by the non-member company from the member company because the purchased securities are regarded as belonging to the customer in so far as the customer and the non-member company’s creditors are concerned.
As the cash deposited with a financial investment company with a brokerage license is regarded as belonging to such financial investment company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the financial investment company with a brokerage license if a bankruptcy or
rehabilitation procedure is instituted against such financial investment company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that Korea Deposit Insurance Corporation will, upon the request of the investors, pay investors up to Won 50 million per investor in case of such financial investment company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events. Pursuant to the FSCMA, subject to certain exceptions, financial investment companies with a brokerage license are required to deposit the cash received from their customers with the Korea Securities Finance Corporation, a special entity established pursuant to the FSCMA. Set-off or attachment of cash deposits by financial investment companies with a brokerage license is prohibited. The premiums related to this insurance under the Depositor Protection Act are paid by financial investment companies with a brokerage license.
Not Applicable.
Not Applicable.
Item 9.F. | Expenses of the Issue |
Not Applicable.applicable.
Item 10. | ADDITIONAL INFORMATION |
Item 10.A. | Share Capital |
Not Applicable.applicable.
Item 10.B. | Memorandum and Articles ofAssociation |
Description of Capital Stock
This section provides information relating to our capital stock, including brief summaries of material provisions of our articles of incorporation, the FSCMA, the Korean Commercial Code, the Telecommunications Business Act and related laws of Korea, all as currently in effect. The following summaries are subject to, and are qualified in their entirety by reference to, our articles of incorporation and the applicable provisions of the FSCMA, the Korean Commercial Code and the Telecommunications Business Act. We have filed copiesa copy of our articles of incorporation and the Telecommunications Business Act as exhibitsan exhibit to our annual reports on Form 20-F.
General
The name of our company is SK Telecom Co., Ltd. We are registered under the laws of Korea under the commercial registry number of 110111-0371346. As specified in Article 2 (Objectives) of our articles of incorporation, as amended, and approved at our general shareholders meeting held on March 18, 2016, our objectives are the rational management of the telecommunications business, development of telecommunications technology, and contribution to public welfare and convenience. In order to achieve these objectives, we are engaged in the following:
information and communication business;
sale and lease of subscriber handsets;
new media business;
advertising business;
mail order sales business;
real estate business (development, management and leasing, etc.) and chattel leasing business;
research and technology development relating to the first four items above;
overseas and import/export business relating to the first four items above;
manufacture and distribution business relating to the first four items above;
travel business;
electronic financial services business;
film business (production, import, distribution and screening);
lifetime education and management of lifetime educational facilities;
electric engineering business;
information- and communication-related engineering business;
ubiquitous city construction and related service business;
any related business through investment, management and operation of our Korean or offshore subsidiaries and investment companies;
construction business, including the machine and equipment business;
export/import business and export/import intermediation/agency business;
electrical business such as intelligent electrical grid business; and
any business or undertaking incidental or conducive to the attainment of the objectives stated above.
Currently, our authorized share capital is 220,000,000 shares, which consists of shares of common stock, par value Won 500 per share, and shares of non-voting stock, par value Won 500 per share (common shares and non-voting shares together are referred to as “shares”). Under our articles of incorporation, we are authorized to issue up to 5,500,000 non-voting preferred shares. As of March 31, 2016,2021, 80,745,711 common shares were issued, of which 10,136,5519,585,568 shares were held by us in treasury. PursuantFrom September 2020 to January 2021, we repurchased 2,097,295 common shares under the Share Exchange in June 2015,Repurchase Agreement, and we exchanged 1,692,824disposed of 120,990 treasury shares for the common sharesas bonus payment to certain of SK Broadband. In the fourth quarter of 2015, we acquired 2,020,000 treasury shares on the market through a share buy-back program to further increase shareholder value. our officers and employees in February 2021.We have never issued any non-voting preferred shares. All of the issued and outstanding common 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.
Board of Directors
Meetings of the board of directors are convened by the representative director as he or she deems necessary or upon the request of three or more directors. The board of directors determines all important matters relating to our
business. In addition, the prior approval of the majority of the independent non-executive directors is required for certain matters, which include:
investment by us or any of our subsidiaries in a foreign company in equity or acquisition of such foreign company’s other overseas assets in an amount equal to 5.0% or more of our equity under our most recent balance sheet; and
contribution of capital, loans or guarantees, acquisition of our subsidiaries’ assets or similar transactions with our affiliated companies in excess of Won 10.0 billion through one or a series of transactions.
Resolutions of the board are adopted in the presence of a majority of the directors in office and by the affirmative vote of a majority of the directors present. No director who has an interest in a matter for resolution may exercise his or her vote upon such matter.
There are no specific shareholding requirements for director’s qualification. Directors are elected at a general meeting of shareholders if the approval of the holders of the majority of the voting shares present at such meeting is obtained and if such majority also represents at least one-fourth of the total number of shares outstanding. Under the
Korean Commercial Code, unless otherwise stated in the articles of incorporation, holders of an aggregate of 1.0% or more of the outstanding shares with voting rights may request cumulative voting in any election for two or more directors. Our articles of incorporation do not permit cumulative voting for the election of directors.
The term of office for directors is until the close of the third annual general shareholders meeting convened after he or she commences his or her term. Our directors may serve consecutive terms and our shareholders may remove them from office at any time by a special resolution adopted at a general meeting of shareholders. The total term of office of independent directors may not exceed six years, and when combined with the term of office at our affiliates, may not exceed nine years.
Dividends
We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. Our common shares represented by the ADSs have the same dividend rights as other outstanding common shares. For a detailed discussion of our dividend policy, see “Item 8.A. Consolidated Statements and Other Financial Information — Dividends.”
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 an amount transferred from our capital surplus or legal reserve to our stated capital in the form of free shares. We must distribute such free shares to all our shareholders in proportion to their existing shareholdings.
Preemptive Rights and Issuance of Additional Shares
We may at times issue authorized but unissued shares, unless otherwise provided in the Korean Commercial Code, on terms determined by our board of directors. All our shareholders are generally entitled to subscribe to any newly-issued shares in proportion to their existing shareholdings. We must offer new shares on uniform terms to all shareholders who have preemptive rights and are listed on our shareholders’ registry as of the relevant record date. We must give public notice of the preemptive rights regarding new shares and their transferability at least two weeks before the relevant record date. Our board of directors may determine how to distribute shares for which preemptive rights have not been exercised or where fractions of shares occur.
Under the Korean Commercial Code and our articles of incorporation, we may issue new shares pursuant to a board resolution to persons other than existing shareholders only if (1) the new shares are issued for the purpose of issuing depositary receipts in accordance with the relevant regulations or through an offering to public investors and (2) the purpose of such issuance is deemed necessary by us to achieve a business purpose, including, but not limited to, the introduction of new technology or the improvement of our financial condition. If we make an allotment of new shares to persons other than our existing shareholders, we are required by the Korean Commercial Code to notify our existing shareholders of (a) the class and number of new shares, (b) the issuance price of new shares and
the date set for the payment thereof, (c) in cases of no par value shares, the amount to be included in the paid-up capital out of the issuance price of new shares and (d) the method of subscription to new shares by no later than two weeks before the date of payment of the subscription price, or publicly announce such information. Under our articles of incorporation, only our board of directors is authorized to set the terms and conditions with respect to such issuance of new shares.
In addition, under our articles of incorporation, we may issue convertible bonds or bonds with warrants, each up to an aggregate principal amount of Won 400.0 billion, to persons other than existing shareholders, where such issuance is deemed necessary by us to achieve a business purpose, including, but not limited to, the introduction of new technology or the improvement of our financial condition.
Members of our employee stock ownership association, whether or not they are our shareholders, generally have a preemptive right 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 the total number of shares so acquired and held by members of our employee stock ownership association does not exceed 20.0% of the sum of the number of shares then outstanding and the number of newly-issued shares.
General Meeting of Shareholders
We generally hold the annual general meeting of shareholders within three months after the end of each fiscal year. Subject to a board resolution or court approval, we may hold an extraordinary general meeting of shareholders:
as necessary;
at the request of holders of an aggregate of 3.0% or more of our outstanding common shares;
at the request of shareholders holding an aggregate of 1.5% or more of our outstanding shares and preferred shares for at least six months; or
at the request of our audit committee.
Holders of non-voting preferred shares may request a general meeting of shareholders only after the non-voting shares become entitled to vote or “enfranchised,” as described under “— Voting Rights” below.
We must give shareholders written notice setting out the date, place and agenda of the meeting at least two weeks before the date of the general meeting of shareholders. However, for holders of less than 1.0% of the total number of issued and outstanding voting shares, we may give notice by placing at least two public notices in at least two daily newspapers at least two weeks in advance of the meeting. Currently, we use The Korea Economic Daily News and Maeil Business Newspaper, both published in Seoul, for this purpose, but we may give notice in the future through electronic means. Shareholders who are not on the shareholders’ registry as of the record date are not entitled to receive notice of the general meeting of shareholders or attend or vote at the meeting. Holders of non-voting preferred shares, unless enfranchised, are not entitled to receive notice of or vote at general meetings of shareholders.
Our general meetings of shareholders have historically been held in or near Seoul.
Voting Rights
Holders of our common shares are entitled to one vote for each common share, except that voting rights of common shares held by us (including treasury shares and shares held by bank trust funds controlled by us), or by a corporate shareholder in which we own more than 10.0% equity interest, either directly or indirectly, may not be exercised. The Korean Commercial Code, unless otherwise stated in the articles of incorporation, permits cumulative voting, which would allow each shareholder to have multiple voting rights corresponding to the number of directors to be appointed in the voting and to exercise all voting rights cumulatively to elect one director. Our articles of incorporation do not permit cumulative voting for the election of directors.
Our shareholders may adopt resolutions at a general meeting by an affirmative majority vote of the voting shares present or represented at the meeting if such affirmative votes also represent at least one-fourth of our total
voting shares then issued and outstanding. However, under the Korean Commercial Code and our articles of incorporation, the following matters, among others, require approval by the holders of at least two-thirds of the voting shares present or represented at a meeting, and such affirmative votes must also represent at least one-third of our total voting shares then issued and outstanding:
amending our articles of incorporation;
removing a director;
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 a part of the business of any other company having a material effect on our business;
reducing our capital; or
issuing any new shares at a price lower than their par value.
In general, holders of non-voting preferred shares are not entitled to vote on any resolution or receive notice of any general meeting of shareholders.
However, in case of amendments to our articles of incorporation, or any merger or consolidation of us, or in some other cases which affect the rights or interests of the non-voting preferred shares, approval of the holders of non-voting preferred shares is required. We may obtain the approval by a resolution of holders of at least two-thirds of the non-voting preferred shares present or represented at a class meeting of the holders of non-voting preferred shares, where the affirmative votes also represent at least one-third of our total issued and outstanding non-voting shares. In addition, if we are unable to pay dividends on non-voting preferred shares as provided in our articles of incorporation, the holders of non-voting shares will become enfranchised and will be entitled to exercise voting rights beginning at the next general meeting of shareholders to be held after the declaration of non-payment of dividends is made until such dividends are paid. The holders of enfranchised non-voting preferred shares will have the same rights as holders of common shares to request, receive notice of, attend and vote at a general meeting of shareholders.
Shareholders may exercise their voting rights by proxy. A shareholder may give proxies only to another shareholder, except that a corporate shareholder may give proxies to its officers or employees.
Holders of ADRs exercise their voting rights through the ADR depositary, an agent of which is the record holder of the underlying common shares. Subject to the provisions of the deposit agreement, ADR holders are entitled to instruct the ADR depositary how to vote our common shares underlying their ADSs.
Limitation on Shareholdings
The Telecommunications Business Act prohibits foreign governments, individuals, and entities (including Korean entities that are deemed foreigners, as discussed below) from owning more than 49.0% of our voting stock. Korean entities whose largest shareholder is a foreign government or a foreigner (together with any of its related parties) that owns 15.0% or more of such Korean entities’ outstanding voting stock are deemed foreigners. A foreigner who has acquired shares of our voting stock in excess of such limitation may not exercise the voting rights with respect to the shares exceeding such limitation and may be subject to the MSIP’sMSIT’s corrective orders.
Rights of Dissenting Shareholders
Under Financial Investment Services and Capital Market Act, in some limited circumstances, including the transfer of all or a significant part of our business or our merger or consolidation with another company (with certain exceptions), dissenting shareholders have the right to require us to purchase their shares. To exercise this right, shareholders, including holders of non-voting shares, must submit to us a written notice of their intention to dissent before the general meeting of shareholders. Then, within 20 days after the relevant resolution is passed at a meeting, the dissenting shareholders must request us in writing to purchase their shares. We are obligated to
purchase the shares of such dissenting shareholders within one month after the expiration of the 20-day period. The purchase price for the shares is required to be determined through negotiation between the dissenting shareholders and us. If we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily share prices on the KRX KOSPI Market for the two-month period before the date of the adoption of the relevant board resolution, (2) the weighted average of the daily share price on the KRX KOSPI Market for the one month period before the date of the adoption of the relevant resolution and (3) the weighted average of the daily share price on the KRX KOSPI Market for the one week period before the date of the adoption of the relevant resolution. However, a court may determine the purchase price if we or dissenting shareholders do not accept the purchase price.
Registry of Shareholders and Record Dates
Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It records and registers transfers of shares on the register of shareholders upon presentation of the share certificates.shareholders.
The record date for annual dividends is December 31. For the purpose of determining the shareholders entitled to annual dividends, the registry of shareholders is closed for the period from January 1 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 onset a record date with at least two weeks’ prior public notice setby a record date and/or close the registerresolution of shareholders for not more than three months. The tradingour board of shares and the delivery of share certificates may continue while the register of shareholders is closed.directors.
Annual Report
AtWhen sending a written notice for the general meeting of shareholders, we must attach our annual report prepared under the FSCMA and audit report prepared under the Act on External Audit of Stock Companies. Alternatively, we may inform the shareholders of the annual report and audit report by email or uploading them to our website one week before the general meeting of shareholders. Furthermore, at least one week before the annual general meeting of shareholders, we must make our annualbusiness reports and audited non-consolidated financial statements available for inspection at our principal office and at all of our branch offices. In addition, copies of annualbusiness reports, the audited non-consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.
Under the FSCMA, we must file with the FSC and the Korea Exchange (1) an annual securities report within 90 days after the end of our fiscal year, (2) a mid-year report within 45 days after the end of the first six months of our fiscal year, and (3) quarterly reports within 45 days after the end of the third month and the ninth month of our fiscal year. Copies of these reports are or will be available for public inspection at the FSC and the Korea Exchange.
Transfer of Shares
Under the Korean Commercial Code and the Act on Electronic Registration of Stocks, Bonds, etc., the transfer of shares is effected by registration on the delivery of share certificates.electronic registration ledger. However, to assert shareholders’ rights against us, the transferee must have his or her name, seal and address registered on our registry of shareholders, maintained by our transfer agent. A non-Korean shareholder may file a sample signature in place of a seal, unless he or she is a citizen of a country with a sealing system similar to that of Korea. In addition, a non-resident shareholder must appoint an agent in Korea authorized to receive notices on his or her behalf and file his or her mailing address in Korea.
Under current Korean regulations, the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and internationally recognized custodians may act as agents and provide related services for foreign shareholders. Certain foreign exchange controls and securities regulations apply to the transfer of shares by non-residents or non-Korean citizens. See “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities Regulations.”
Our transfer agent is Kookmin Bank, located at 24, Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul, Korea.
Restrictions Applicable to Shares
Pursuant to the Telecommunications Business Act, the maximum aggregate foreign shareholding in us is limited to 49.0%. See “Item 4.B. Business Overview — Law and Regulation — Foreign Ownership and Investment
Restrictions and Requirements.” In addition, certain foreign exchange controls and securities regulations apply to the acquisition of securities by non-residents or non-Korean citizens. See “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities Regulations.”
Acquisition of Shares by Us
We may acquire our own shares pursuant to an approval at the general meeting of shareholders, through purchases on the Korea Exchange or a tender offer, or by acquiring the interests in a trust account holding our own shares through agreements with trust companies and asset management companies. The aggregate purchase price for the shares may not exceed the total amount available for distribution as dividends as of the end of the preceding fiscal year less the amount of dividends and mandatory reserves required to be set aside for that fiscal year, subject to certain procedural requirements.
Under the Korean Commercial Code, we may resell or transfer any shares acquired by us to a third party pursuant to an approval by the Board of Directors. In general, corporate entities in which we own a 50.0% or more equity interest may not acquire our common stock. Under the FSCMA, we are subject to certain selling restrictions with respect to the shares acquired by us.
Liquidation Rights
In the event of our liquidation, remaining assets after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to their shareholdings. Holders of non-voting preferred shares have no preference in liquidation. Holders of debt securities have no preference over other creditors in the event of liquidation.
Description of American Depositary Shares
The following is a summary of the deposit agreement dated as of May 31, 1996, as amended by amendment no. 1 dated as of March 15, 1999, amendment no. 2 dated as of April 24, 2000 and amendment no. 3 dated as of July 24, 2002, among us, Citibank, as ADR depositary, and all holders and beneficial owners of ADSs, as supplemented by side letters dated as of July 25, 2002, October 1, 2002 and October 1, 2007. The deposit agreement is governed by the laws of the State of New York. Because it is a summary, this description does not contain all the information that may be important to you. For more complete information, you should read the entire deposit agreement and the ADR. The deposit agreement has been filed as an exhibit to our registration statement on Form F-3 (File No. 333-91304) filed with the SEC. Copies of the deposit agreement are available for inspection at the principal New York office of the ADR depositary, currently located at 388 Greenwich Street, 14th Floor, New York, New York 10013, United States of America, and at the principal London office of the ADR depositary, currently located at Canada Square, Canary Wharf, London, E14 5LB, England.
American Depositary Receipts
The ADR depositary may execute and deliver ADRs evidencing the ADSs. Each ADR evidences a specified number of ADSs, each ADS representing one-ninth of one share of our common stock to be deposited with the ADR depositary’s custodian in Seoul. Korea Securities Depository is the institution authorized under applicable law to effect book-entry transfers of our common shares, known as the “Custodian”. The Custodian is located at 358-8, Hosu-ro, Ilsandong-gu, Goyang-si, Gyeonggi-do 411-770, Korea. An ADR may represent any number of ADSs. We and the ADR depositary will treat only persons in whose names ADRs are registered on the books of the registrar as holders of ADRs.
Deposit and Withdrawal of Shares of Common Stock
Notwithstanding the provisions described below, under the terms of the deposit agreement, the deposit of shares and issuance of ADSs may only be made if the total number of shares represented by ADSs after such deposit does not exceed a specified maximum, 24,321,893 shares as of March 31, 2016. This limit will be adjusted in certain circumstances, including (1) upon the cancellation of existing ADSs, (2) upon future offerings of ADSs by us or our shareholders, (3) rights offerings and (4) adjustments for share reclassifications. The limit also may be decreased in certain circumstances. As of March 31, 2016, the outstanding ADSs represented 9,259,552 shares of our common stock. Notwithstanding the foregoing, the ADR depositary and the Custodian may not accept deposits of shares of common stock for issuance of ADSs if it has been notified by us in writing that we block deposits to prevent a violation of applicable Korean laws or regulations or a violation of our articles of incorporation. In addition, the ADR depositary may not accept deposits of shares of common stock for issuance of ADSs from a person who identifies him-, her- or itself to the depositary, and has been identified in writing by us, as a holder of at least 3.0% of our shares of common stock.
The shares of common stock underlying the ADSs are delivered to the ADR depositary’s Custodian in book-entry form. Accordingly, no share certificates will be issued but the ADR depositary will hold the shares of common stock through the book-entry settlement system of the Custodian. The delivery of the shares of common stock pursuant to the deposit agreement will take place through the facilities of the Custodian in accordance with its applicable settlement procedures. The ADR depositary will execute and deliver ADSs if you or your broker deposit shares or evidence of rights to receive shares of common stock with the Custodian. Upon payment of fees and expenses and any taxes or charges, such as stamp taxes or stock transfer taxes, the ADR depositary will register the appropriate number of ADSs in the names you designate. The ADR depositary and the ADR depositary’s Custodian will refuse to accept shares of common stock for deposit whenever we restrict transfer of shares of common stock to comply with ownership restrictions under applicable law or our articles of incorporation or whenever the deposit
would cause the total number of shares of common stock deposited to exceed a level we determine from time to time. We may instruct the ADR depositary to take certain actions with respect to a holder of ADSs who holds in excess of the ownership limitation set forth in the deposit agreement, including the mandatory sale or disposition of the shares represented by the ADSs in excess of such ownership limitations if, and to the extent, permitted by applicable law.
You may surrender your ADRs to the ADR depositary to withdraw the underlying shares of our common stock. Upon payment of the fees and any governmental charges and taxes provided in the deposit agreement, and subject to applicable laws and regulations of Korea and our articles of incorporation, you will be entitled to physical delivery or electronic delivery to an account in Korea or, if permissible under applicable Korean law, outside the United States, of the shares of common stock evidenced by the ADRs and any other property at the time represented by ADR you surrendered. If you surrender an ADR evidencing a number of ADSs not evenly divisible by nine, the ADR depositary will deliver the appropriate whole number of shares of common stock represented by the surrendered ADSs and will execute and deliver to you a new ADR evidencing ADSs representing any remaining fractional shares of common stock.
If you request withdrawal of shares of common stock, you must deliver to the ADR depositary a written order directing the ADR depositary to cause the shares of common stock being withdrawn to be delivered or to cause such delivery upon the written order of the person designated in your order, subject to applicable Korean laws and the provisions of the deposit agreement.
Under the provisions of the deposit agreement, the ADR depositary may not lend shares of common stock or ADSs. However, subject to the provisions of the deposit agreement and limitations established by the ADR depositary, the ADR depositary may execute and deliver ADSs before deposit of the underlying shares of common stock. This is called a pre-release of the ADS. The ADR depositary may also deliver shares of common stock upon cancellation of pre-released ADSs (even if the cancellation occurs before the termination of the pre-release). The ADR depositary may pre-release ADSs only under the following circumstances:
before or at the time of the pre-release, the person to whom the pre-release is being made must represent to the ADR depositary in writing that the person, or, in case of an institution its customer, owns the shares of common stock or ADSs to be deposited and show evidence of the ownership to the ADR depositary’s satisfaction;
before or at the time of such pre-release, the person to whom the pre-release is being made must agree in writing that he or she will hold the shares of common stock or ADSs in trust for the ADR depositary until their delivery to the ADR depositary or Custodian, reflect on his or her records the ADR depositary as owner of such shares of common stock or ADSs and deliver such shares of common stock upon the ADR depositary’s request;
the pre-release must be fully collateralized with cash or U.S. government securities;
the ADR depositary must be able to terminate the pre-release on not more than five business days’ notice; and
the pre-release is subject to further indemnities and credit regulations as the ADR depositary deems appropriate.
The ADR depositary may retain for its own account any compensation received by it in connection with the pre-release, such as earnings on the collateral.
If you want to withdraw the shares of common stock from the depositary facility, you must register your identity with the Financial Supervisory Service of Korea (the “FSS”) before you acquire the shares of common stock unless you intend to sell the shares of common stock within three months. See “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities Regulations — Restrictions Applicable to Shares.”
Dividends, Other Distributions and Rights
If the ADR depositary can, in its judgment and pursuant to applicable law, convert Won (or any other foreign currency) into Dollars on a reasonable basis and transfer the resulting Dollars to the United States, the ADR
depositary will as promptly as practicable convert all cash dividends and other cash distributions received by it on the deposited shares of common stock into Dollars and distribute the Dollars to you in proportion to the number of ADSs representing shares of common stock held by you, after deduction of the fees and expenses of the ADR depositary. If the ADR depositary determines that in its judgment any currency other than Dollars it receives from us cannot be converted and distributed on a reasonable basis, the ADR depositary may distribute the currency it receives to the extent permitted under applicable law or hold the currency for your account if you are entitled to receive the distribution. The ADR depositary will not be liable for any interest. Before making a distribution, the ADR depositary will deduct any withholding taxes that must be paid.
In the event that the ADR depositary or the ADR depositary’s Custodian receives any distribution upon any deposited shares of common stock in property or securities (other than shares of common stock, non-voting preferred stock or rights to receive shares of common stock or non-voting preferred stock), the ADR depositary will distribute the property or securities to you in proportion to your holdings in any manner that the ADR depositary deems, after consultation with us, equitable and practicable. If the ADR depositary determines that any distribution of property or securities (other than shares of common stock, non-voting preferred stock or rights to receive shares of common stock or non-voting preferred stock) cannot be made proportionally, or if for any other reason the ADR depositary deems the distribution not to be feasible, the ADR depositary may, after consultation with us, dispose of all or a portion of the property or securities in such amounts and in such manner, including by public or private sale, as the ADR depositary deems equitable or practicable. The ADR depositary will distribute to you the net proceeds of any such sale, or the balance of the property or securities, after the deduction of the fees and expenses of the ADR depositary.
If a distribution by us consists of a dividend in, or free distribution of, our shares of common stock, the ADR depositary may, with our approval, and will, if we request, deposit the shares of common stock and either (1) distribute to you, in proportion to your holdings, additional ADSs representing those shares of common stock, or (2) reflect on the records of the ADR depositary the increase in the aggregate number of ADSs representing those number of shares of common stock, in both cases, after the deduction of the fees and expenses of the ADR depositary. If the ADR depositary deems that such distribution for any reason is not feasible, the ADR depositary may adopt, after consultation with us, any method as it may deem equitable and practicable, including by public or private sale of all or part of the shares of common stock received. The ADR depositary will distribute to you the net proceeds of any such sale in the same way as it does with cash. The ADR depositary will only distribute whole ADSs. If the ADR depositary does not distribute additional ADSs, then each outstanding ADS will also represent the new shares so distributed.
If a distribution by us consists of a dividend in, or free distribution of, shares of non-voting preferred stock, the ADR depositary will deposit such shares of non-voting preferred stock under a non-voting preferred stock deposit agreement to be entered into among us, the ADR depositary and all holders and beneficial owners of depositary shares. The ADR depositary will deliver to you, in proportion to your holdings of ADSs, depositary shares issued under the non-voting preferred stock deposit agreement representing the number of non-voting shares received as such dividend or distribution. If the ADR depositary deems such distribution for any reason is not feasible, the ADR depositary may adopt, after consultation with us, any method as it may deem equitable and practicable, including by public or private sale of all or part of the nonvoting shares received. The ADR depositary will distribute to you the net proceeds of any such sale in the same way as it does with cash. The ADR depositary will only distribute whole depositary shares. We are not obligated to list depositary shares representing non-voting shares on any exchange.
If we offer holders of our securities any rights to subscribe for additional shares of common stock or any other rights, the ADR depositary may make these rights available to you. The ADR depositary must first determine whether it is lawful and feasible to do so. If the ADR depositary determines that it is not lawful or feasible to make these rights available to you, then upon our request, the ADR depositary will sell the rights and distribute the proceeds in the same way as it would do with cash. The ADR depositary may allow these rights that are not distributed or sold to lapse. In that case, you will receive no value for these rights.
If we issue any rights with respect to non-voting shares, the securities issuable upon any exercise of such rights by holders or beneficial owners will be depositary shares representing those non-voting shares issued under the provisions of a non-voting preferred stock deposit agreement.
If a registration statement under the Securities Act is required with respect to the securities to which any rights relate in order for us to offer the rights to you and to sell the securities represented by these rights, the ADR depositary will not offer such rights to you until such a registration is in effect, or unless the offering and sale of such securities and such rights to you are exempt from the registration requirements of the Securities Act or any required filing, report, approval or consent has been submitted, obtained or granted. We or the ADR depositary will not be obligated to register the rights or securities under the Securities Act or to submit, obtain or request any filing, report, approval or consent.
The ADR depositary may not be able to convert any currency or to sell or dispose of any distributed or offered property or rights in a timely manner or at a specified price, or at all.
Record Dates
The ADR depositary will fix a record date, after consultation with us, in each of the following situations:
any cash dividend or other cash distribution becomes payable;
any distribution other than cash is made;
rights are issued with respect to deposited shares of common stock;
the ADR depositary causes a change in the number of shares of common stock that are represented by each ADS; or
the ADR depositary receives notice of any shareholders’ meeting.
The record date will, to the extent practicable, be as near as the record date fixed by us for the shares of common stock. The record date will determine (1) the ADR holders who are entitled to receive the dividend, distribution or rights, or the net proceeds of the sale of the rights; or (2) the ADR holders who are entitled to receive notices or exercise rights.
Voting of the Underlying Shares of Common Stock
We will give the ADR depositary a notice of any meeting or solicitation of shareholder proxies immediately after we finalize the form and substance of such notice but not less than 14 days before the meeting. As soon as practicable after it receives our notice, the ADR depositary will fix a record date, and upon our written request, the ADR depositary will mail to you a notice that will contain the following:
the information contained in our notice to the ADR depositary including an English translation, or, if requested by us, a summary of the information provided by us;
a statement that the ADR holders as of the close of business on a specified record date will be entitled to instruct the ADR depositary as to how to exercise their voting rights for the number of shares of deposited shares of common stock, subject to the provisions of applicable Korean law and our articles of incorporation, which provisions, if any, will be summarized in the notice to the extent that they are material; and
a statement as to the manner in which the ADR holders may give their instructions.
Upon your written request received on or before the date set by the ADR depositary for this purpose, the ADR depositary will endeavor, in so far as practicable, to vote or cause to be voted the deposited shares of common stock in accordance with the instructions set forth in your written requests. The ADR depositary may not itself exercise any voting discretion over any deposited shares of common stock. You may only exercise the voting rights in respect of nine ADSs or multiples of nine ADSs. ADR holders may not be entitled to give instruction to vote the shares represented by the ADSs if, and to the extent, the total number of shares represented by the ADSs of an ADR holder exceeds the limit set under applicable law. We can give no assurance to you, however, that we will notify the ADR depositary sufficiently in advance of the scheduled date of a meeting or solicitation of consents or proxies to enable the ADR depositary to make a timely mailing of notices to you, or that you will receive the notices sufficiently in advance of a meeting or solicitation of consents or proxies to give instructions to the ADR depositary.
Inspection of Transfer Books
The ADR depositary will keep books at its principal New York office, which is currently located at 388 Greenwich Street, 14th Floor, New York, New York 10013, for the registration and transfer of ADRs. You may inspect the books of the ADR depositary as long as the inspection is not for the purpose of communicating with holders in the interest of a business or object other than our business or a matter related to the deposit agreement or the ADRs.
Reports and Notices
On or before the first date on which we give notice, by publication or otherwise, of any meeting of shareholders, or of any adjourned meeting of shareholders, or of the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of the shares of common stock, we will transmit to the Custodian and the ADR depositary sufficient copies of the notice in English in the form given or to be given to shareholders. We will furnish to the ADR depositary English language versions of any reports, notices and other communications that we generally transmit to holders of our common stock, including our annual reports, with annual audited consolidated financial statements prepared in conformity with IFRS and unaudited non-consolidated semiannual financial statements prepared in conformity with IFRS. The ADR depositary will arrange for the prompt mailing of copies of these documents, or, if we request, a summary of any such notice provided by us to you or, at our request, make notices, reports (other than the annual reports and semiannual financial statements) and other communications available to you on a basis similar to that for the holders of our common stock or on such other basis as we may advise the ADR depositary according to any applicable law, regulation or stock exchange requirement.
Notices to you under the deposit agreement will be deemed to have been duly given if personally delivered or sent by mail or cable, telegraph or facsimile transmission, confirmed by letter, addressed to you at your address as it appears on the transfer books of the ADR depositary or at such other address as you have notified the ADR depositary.
In addition, the ADR depositary will make available for inspection by holders at its principal New York office and its principal London office any notices, reports or communications, including any proxy soliciting materials, received from us that we generally transmit to the holders of our common stock or other deposited securities, including the ADR depositary. The ADR depositary will also send to you copies of reports and communications we will provide as provided in the deposit agreement.
Changes Affecting Deposited Shares of Common Stock
In case of a change in the par value, or a split-up, consolidation or any other reclassification of our common shares or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting us, any securities received by the ADR depositary or the Custodian in exchange for, in conversion of or in respect of deposited shares of our common stock will be treated as new deposited shares of common stock under the deposit agreement. In that case, ADSs will, subject to the terms of the deposit agreement and applicable laws and regulations, including any registration requirements under the Securities Act, represent the right to receive the new deposited shares of common stock, unless additional ADRs are issued, as in the case of a stock dividend, or unless the ADR depositary calls for the surrender of outstanding ADRs to be exchanged for new ADRs.
Amendment and Termination of the Deposit Agreement
We may agree with the ADR depositary to amend the deposit agreement and the ADSs without your consent for any reason. If the amendment adds or increases fees or charges, except for taxes and other governmental charges or certain expenses of the ADR depositary, or prejudices any substantial existing right of ADR holders, it will only become effective 30 days after the ADR depositary notifies you of the amendment. If you continue to hold your ADSs at the time an amendment becomes effective, you will be considered to have agreed to the amendment and to be bound by the deposit agreement as amended. Except as otherwise required by any mandatory provisions of applicable law, no amendment may impair your right to surrender your ADSs and to receive the underlying deposited securities.
The ADR depositary will terminate the deposit agreement if we ask it to do so with 90 days’ prior written notice. The ADR depositary may also terminate the deposit agreement if the ADR depositary has notified us at least 90 days in advance that it would like to resign and we have not appointed a new depositary. In both cases, the ADR depositary must notify you at least 30 days before the termination date.
If any ADRs remain outstanding after the date of termination, the ADR depositary will stop performing any further acts under the deposit agreement, except:
to collect dividends and other distributions pertaining to the deposited shares of common stock;
to sell property and rights and the conversion of deposited shares of common stock into cash as provided in the deposit agreement; and
to deliver deposited shares of common stock, together with any dividends or other distributions received with respect to the deposited shares of common stock and the net proceeds of the sale of any rights or other property represented by those ADSs in exchange for surrendered ADRs.
At any time after the expiration of six months from the date of termination, the ADR depositary may sell any remaining deposited shares of common stock and hold uninvested the net proceeds in an unsegregated account, together with any other cash or property then held, without liability for interest, for the pro rata benefit of the holders of ADSs that have not been surrendered by then.
Charges of ADR Depositary
The fees and expenses of the ADR depositary as agreed between us and the ADR depositary include:
taxes and other governmental charges;
registration fees applicable to transfers of shares of common stock on our shareholders’ register, or that of any entity acting as registrar for the shares, to the name of the ADR depositary or its nominee, or the Custodian or its nominee, when making deposits or withdrawals under the deposit agreement;
cable, telegraph and facsimile transmission expenses that are expressly provided in the deposit agreement;
expenses incurred by the ADR depositary in the conversion of foreign currency into Dollars under the deposit agreement;
a fee of up to US$5.00 per 100 ADSs, or portion thereof, for execution and delivery of ADSs and the surrender of ADRs under the deposit agreement; and
a fee of up to US$0.02 per ADS held for cash distributions, a sale or exercise of rights or the taking of any other corporate action involving distributions to shareholders.
For a detailed description of fees and charges payable by the holders of ADSs under the deposit agreement, see “Item 12.D. American Depositary Shares — Fees and Charges under Deposit Agreement.”
General
Neither we nor the ADR depositary will be liable to you if prevented or delayed by law, governmental authority, any provision of our articles of incorporation or any circumstances beyond our or its control in performing our or its obligations under the deposit agreement. The deposit agreement provides that the ADR depositary will hold the shares of common stock for your sole benefit. Our obligations and those of the ADR depositary under the deposit agreement are expressly limited to performing, in good faith and without negligence, our and its respective duties specified in the deposit agreement.
The ADSs are transferable on the books of the ADR depositary, provided that the ADR depositary may, after consultation with us, close the transfer books at any time or from time to time, when deemed expedient by it in connection with the performance of its duties. As a condition precedent to the execution and delivery of any ADSs, registration of transfer, split-up, combination of any ADR or surrender of any ADS for the purpose of withdrawal of deposited shares of common stock, the ADR depositary or the Custodian may require payment from the depositor of
the shares of common stock or a holder of ADSs of a sum sufficient to reimburse the ADR depositary for any tax or other governmental charge and any stock transfer or registration fee and payment of any applicable fees payable by the holders of ADSs.
Any person depositing shares of common stock, any holder of an ADS or any beneficial owner may be required from time to time to file with the ADR depositary or the Custodian a proof of citizenship, residence, exchange control approval, payment of applicable Korean or other taxes or governmental charges, or legal or beneficial ownership and the nature of their interest, to provide information relating to the registration on our shareholders’ register (or our appointed agent for the transfer and registration of shares of common stock) of the shares of common stock presented for deposit or other information, to execute certificates and to make representations and warranties as we or the ADR depositary may deem necessary or proper or to enable us or the ADR depositary to perform our and its obligations under the deposit agreement. The ADR depositary may withhold the execution or delivery or registration of transfer of all or part of any ADR or the distribution or sale of any dividend or other distribution of rights or of the proceeds from their sale or the delivery of any shares deposited under the deposit agreement and any other securities, property and cash received by the ADR depositary or the Custodian until the proof or other information is filed or the certificates are executed or the representations and warranties are made. The ADR depositary shall provide us, unless otherwise instructed by us, in a timely manner, with copies of any of these proofs and certificates and these written representations and warranties.
The delivery and surrender of ADSs and transfer of ADSs generally may be suspended during any period when our or the ADR depositary’s transfer books are closed or, if that action is deemed necessary or advisable by us or the ADR depositary, at any time or from time to time in accordance with the deposit agreement. We may restrict, in a manner as we deem appropriate, transfers of shares of common stock where the transfers may result in ownership of shares of common stock in excess of limits under applicable law. Except as described in “Deposit and Withdrawal of Shares of Common Stock” above, notwithstanding any other provision of the deposit agreement, the surrender of outstanding ADRs and withdrawal of Deposited Securities (as defined in the deposit agreement) represented by the ADRs may be suspended, but only as required in connection with (1) temporary delays caused by closing the transfer books of the ADR depositary or the issuer of any Deposited Securities (or the appointed agent or agents for such issuer for the transfer and registration of such Deposited Securities) in connection with voting at a shareholders’ meeting or the payment of dividends, (2) payment of fees, taxes and similar charges, or (3) compliance with any United States or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of the Deposited Securities.
Governing Law
The deposit agreement and the ADRs will be interpreted under, and all rights under the deposit agreement or the ADRs are governed by, the laws of the State of New York.
We have irrevocably submitted to the non-exclusive jurisdiction of New York State or United States Federal Courts located in New York City and waived any objection to legal actions or proceedings in these courts whether on the ground of venue or on the ground that the proceedings have been brought in an inconvenient forum.
This submission was made for the benefit of the ADR depositary and the holders and will not limit the right of any of them to take legal actions or proceedings in any other court of competent jurisdiction nor will the taking of legal actions or proceedings in one or more jurisdictions preclude the taking of legal actions or proceedings in any other jurisdiction (whether concurrently or not), to the extent permitted under applicable law.
Information Relating to the ADR Depositary
Citibank has been appointed as ADR depositary pursuant to the deposit agreement. Citibank is an indirect wholly-owned subsidiary of Citigroup Inc., a Delaware corporation whose principal office is located in New York, New York. Citibank is a global financial services organization serving individuals, businesses, governments and financial institutions in approximately 100 countries around the world.
Citibank was originally organized on June 16, 1812, and now is a national banking association organized under the National Bank Act of 1864 of the United States of America. Citibank is primarily regulated by the United States Office of the Comptroller of the Currency. Its principal office is at 399 Park Avenue, New York, NY 10022.
The consolidated balance sheets of Citibank are set forth in Citigroup’s most recent annual report on Form 10-K and quarterly report on Form 10-Q, each on file with the SEC.
Citibank’s Articles of Association and By-laws, each as currently in effect, together with Citigroup’s most recent annual and quarterly reports will be available for inspection at the Depositary Receipt office of Citibank, N.A., 388 Greenwich Street, 14th Floor, New York, New York 10013.
Item 10.C. | Material Contracts |
We have not entered into any material contracts since January 1, 2015,during the two years immediately preceding the date of this annual report, other than in the ordinary course of our business. For information regarding our agreements and transactions with entities affiliated with the SK Group, see “Item 7.B. Related Party Transactions” and note 3637 of the notes to our consolidated financial statements. For a description of certain agreements entered into during the past three years related to our capital commitments and obligations, see “Item 5B.5.B. Liquidity and Capital Resources.”
Item 10.D. | Exchange Controls |
Korean Foreign Exchange Controls and Securities Regulations
General
The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree, collectively referred to as the Foreign Exchange Transaction Laws, regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean companies. Non-residents may invest in Korean securities pursuant to the Foreign Exchange Transaction Laws. The FSC has also adopted, pursuant to its authority under the FSCMA, regulations that restrict investment by foreigners in Korean securities and regulate issuance of securities outside Korea by Korean companies.
Subject to certain limitations, the MOSFMOEF has authority to take the following actions under the Foreign Exchange Transaction Laws:
if the Government deems it necessary on account of war, armed conflict, natural disaster or grave and sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the MOSFMOEF may temporarily suspend performance under any or all foreign exchange transactions, in whole or in part, to which the Foreign Exchange Transaction Laws apply (including suspension of payment and receipt of foreign exchange) or, impose an obligation to deposit, safe-keep or sell any means of payment to The Bank of Korea, a foreign exchange stabilization fund, certain other governmental agencies or financial companies;companies or impose an obligation on a resident that holds a claim against a non-resident to collect such claim to enable the recovery of the relevant debt back to Korea; and
if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience significant disruption or that the movement of capital between Korea and other countries are likely to adversely affect the Won, exchange rate or other macroeconomic policies, the MOSFMOEF may take action to require any person who intends to effect or effects a capital transaction to deposit all or a portion of the means of payment acquired in such transactions with The Bank of Korea, a foreign exchange stabilization fund, certain other governmental agencies or financial companies.
Under the regulations of the FSC amended on February 4, 2009, (1) if a company listed on the KRX KOSPI Market or a company listed on the KRX KOSDAQ Market has submitted a public disclosure of material matters to a foreign financial investment supervisory authority pursuant to the laws of the foreign jurisdiction, then it must submit a copy of the public disclosure and a Korean translation thereof to the FSC and the Korea Exchange, and (2) if a KRX KOSPI Market-listed company or KRX KOSDAQ Market-listed company is approved for listing on a foreign stock market or determined to be de-listed from the foreign stock market or actually listed on, or de-listed from a foreign stock market, then it must submit a copy of any document, which it submitted to or received from the relevant foreign government, foreign financial investment supervisory authority or the foreign stock market, and a Korean translation thereof to the FSC and the Korea Exchange.
Government Review of Issuances of ADSs
In order for us to issue ADSs in excess of US$30 million, we are required to submit a report to the MOSFMOEF with respect to the issuance of the ADSs prior to and after such issuance; provided that such US$30 million threshold amount would be reduced by the aggregate principal amount of any foreign currency loans borrowed, and any securities offered and issued, outside Korea during the one-year period immediately preceding the report’s submission date. The MOSFMOEF may at its discretion direct us to take necessary measures to avoid exchange rate fluctuation in connection with its acceptance of report of the issuance of the ADSs.
Under current Korean laws and regulations, the depositary is required to obtain our prior consent for any proposed deposit of common shares if the number of shares to be deposited in such proposed deposit exceeds the number of common shares initially deposited by us for the issuance of ADSs (including deposits in connection with the initial and all subsequent issuances of ADSs by us or with our consent and stock dividends or other distributions related to the ADSs).
In addition to such restrictions under Korean laws and regulations, there are also restrictions on the deposits of our common shares for issuance of ADSs. See “Item 10.B. Memorandum and Articles of Incorporation — Description of American Depositary Shares.” Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs.
We submitted a report to and obtained acceptance thereof by the MOSFMOEF for the issuance of ADSs up to an amount corresponding to 24,321,893 common shares. No additional Korean governmental approval is necessary for the issuance of ADSs except that if the total number of our common shares on deposit for conversion into ADSs exceeds 24,321,893 common shares, we may be required to file a report to and obtain acceptance thereof by the MOSFMOEF with respect to the increase of such limit and the issuance of additional ADSs.
Reporting Requirements for Holders of Substantial Interests
Under the FSCMA, any person whose direct or beneficial ownership of shares with voting rights, certificates representing the rights to subscribe for shares and equity-related debt securities including convertible bonds and bonds with warrants (collectively referred to as “equity securities”), together with the equity securities beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5.0% or more of the total outstanding equity securities is required to report the status and purpose (in terms of whether the purpose of shareholding is to affect control over management of the issuer) of the holdings to the FSC and the Korea Exchange within five business days after reaching the 5.0% ownership interest threshold and promptly deliver a copy of such report to the issuer. In addition, any change (1) in the ownership interest subsequent to the report which equals or exceeds 1.0% of the total outstanding equity securities, or (2) in the shareholding purpose is required to be reported to the FSC and the Korea Exchange within five business days from the date of the change. However, the reporting deadline of such reporting requirement is extended tofor (1) certain professional investors, as specified under the
FSCMA, or (2) persons who hold shares for purposes other than management control by up to the tenth day of the month immediately following the last month of the quarter in which the share acquisition or change in their shareholding.shareholding occurred. Those who reported the purpose of shareholding is to affect control over management of the issuer are prohibited from exercising their voting rights and acquiring additional shares for five days subsequent to the report under the FSCMA.
Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment and may result in a loss of voting rights with respect to the ownership of unreported equity securities exceeding 5.0%. Furthermore, the FSC may issue an order to dispose of such non-reported equity securities.
In addition to the reporting requirements described above, any person whose direct or beneficial ownership of our common shares accounts for 10.0% or more of the total issued and outstanding shares with voting rights (a “major shareholder”) must report the status of his or her shareholding to the Securities and Futures Commission and the Korea Exchange within five business days after he or she becomes a major shareholder. In addition, any change in the ownership interest subsequent to the report must be reported to the Securities and Futures Commission and the Korea Exchange by the fifth business day of any changes in his or her shareholding. Violations of these reporting requirements may subject a person to criminal sanctions, such as fines or imprisonment.
Restrictions Applicable to ADSs
No Korean governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares underlying ADSs and the delivery of shares in Korea in connection with the withdrawal, provided that a foreigner who intends to acquire the shares must obtain an investment registration card from the FSS,Financial Supervisory Service of Korea (the “FSS”), as described below. The acquisition of the shares by a foreigner must be reported by the foreigner or his or her standing proxy in Korea immediately to the Governor of the FSS (the “Governor”).
Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares without any further governmental approval.
In addition, we are required to file a securities registration statement with the FSC and such securities registration statement has to become effective pursuant to the FSCMA in order for us to issue shares represented by ADSs, except in certain limited circumstances.
Restrictions Applicable to Shares
As a result of amendments to the Foreign Exchange Transaction Laws and the regulations of the FSC, together referred to as the Investment Rules, adopted in connection with the stock market opening from January 1992 and after that date, foreigners may invest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRX KOSPI Market or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRX KOSPI Market or the KRX KOSDAQ Market only through the KRX KOSPI Market or the KRX KOSDAQ Market, except in limited circumstances, including, among others:
odd-lot trading of shares;
acquisition of shares by a foreign company as a result of a merger;
acquisition or disposal of shares in connection with a tender offer;
acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company (“converted shares”);
acquisition of shares through exercise of rights under securities issued outside of Korea;
acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights 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 by foreigners, as explained below, has been reached or exceeded;
acquisition of shares by direct investment under the Foreign Investment Promotion Law;
acquisition and disposal of shares on an overseas stock exchange market, if such shares are simultaneously listed on the KRX KOSPI Market or KRX KOSDAQ Market and such overseas stock exchange;
arm’s length transactions between foreigners in the event all such foreigners belong to an investment group managed by the same person; and
acquisition and disposal of shares through alternative trading systems.
For over-the-counter transactions of shares between foreigners outside the KRX KOSPI Market or the KRX KOSDAQ Market for shares with respect to which the limit on aggregate foreign ownership has been reached or exceeded, a financial investment company with a brokerage license in Korea must act as an intermediary. Odd-lot trading of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market must involve a financial investment company with a dealing license in Korea as the other party. Foreign investors are prohibited from engaging in margin transactions through borrowing shares from financial investment companies 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 for the first time on the KRX KOSPI Market or the KRX KOSDAQ Market (including converted shares) and shares being publicly offered for initial listing on the KRX KOSPI Market or the KRX KOSDAQ Market to register its identity with the FSS 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 such converted shares within three months from the date of acquisition of the converted shares or who acquire the shares in an over-the-counter transaction or dispose of shares where such acquisition or disposal is deemed to be a foreign direct investment pursuant to the Foreign Investment Promotion Law. Upon registration, the FSS will issue to the foreign investor an investment registration card which must be presented each time the foreign investor opens a brokerage account with a financial investment company or financial institution in Korea. Foreigners eligible to obtain an investment registration card include foreign nationals who have not been residing in Korea for a consecutive period of six months or longer, foreign governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organizations, corporations incorporated under foreign laws and any person in any additional category designated by decree promulgated under the FSCMA. All Korean offices of a foreign corporation as a group are treated as a separate foreigner from the offices of the corporation outside Korea for the purpose of investment registration. However, a foreign corporation or depositary issuing depositary receipts may obtain one or more investment registration cards in its name in certain circumstances 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 report by the investor is required because the investment registration card system is designed to control and oversee foreign investment through a computer system. However, where a foreign investor acquires or sells shares outside the KRX KOSPI Market and the KRX KOSDAQ Market, such acquisition or sale of shares must be reported by the foreign investor or such foreign investor’s standing proxy to the Governor at the time of each such acquisition or sale; provided, however, that a foreign investor must ensure that any acquisition or sale of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market in the case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor by the Korea Securities Depository, financial investment companies with a dealing or brokerage license or securities finance companies engaged to facilitate such transaction. In the event a foreign investor desires to acquire or sell shares outside the KRX KOSPI Market or the KRX KOSDAQ Market and the circumstances in connection with such sale or acquisition do not fall within the exceptions made for certain limited circumstances described above, then the foreign investor must obtain the prior approval of the Governor. In addition, in the event a foreign investor acquires or sells shares outside the KRX KOSPI Market or the KRX KOSDAQ Market, a prior report to the Bank of Korea may also be required in certain circumstances. A foreign investor must appoint one or more standing proxies among the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment
companies with a dealing, brokerage or collective investment license and certain eligible foreign custodians which will act as a standing proxy to exercise shareholders’ rights, or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. Generally, a foreign investor may not permit any person, other than his, her or its standing proxy, to exercise rights relating to its shares or perform any tasks related thereto on his, her or its behalf. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor in cases deemed inevitable by reason of conflict between laws of Korea and the home country of the foreign investor.
Certificates evidencing sharesShares of Korean companies must be kept in custodyelectronically registered with an eligible custodian in Korea. The Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and certain eligible foreign custodians are eligible to act as a custodian of shares for a non-resident or foreign investor. A foreign investor must ensure that his, her or its custodian deposits the shares with the Korea Securities Depository. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor in circumstances where compliance with that requirement is made impracticable, including cases where compliance would contravene the laws of the home country of such foreign investor.
Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a Korean company without being subject to any foreign investment ceiling. As one such exception, designated public
corporations are subject to a 40.0% ceiling on the acquisition of shares by foreigners in the aggregate. Designated public corporations may set a ceiling on the acquisition of shares by a single person within 3.0% of the total number of shares in their articles of incorporation. Currently, Korea Electric Power Corporation is the only designated public corporation which has set such a ceiling. Furthermore, an investment by a foreign investor of not less than 10.0% of the outstanding shares with voting rights of a Korean company is defined as a direct foreign investment under the Foreign Investment Promotion Law, which is, in general, subject to the report to, and acceptance by, the Ministry of Trade, Industry and Energy of Korea, which delegates its authority to foreign exchange banks or the Korea Trade-Investment Promotion Agency under the relevant regulations. The acquisition of our shares by a foreign investor is also subject to the restrictions prescribed in the Telecommunications Business Act. The Telecommunications Business Act generally limits the maximum aggregate foreign shareholdings in us to 49.0% of the outstanding shares. A foreigner who has acquired shares in excess of such restriction described above may not exercise the voting rights with respect to the shares exceeding such limitations and may be subject to corrective orders.
Under the Foreign Exchange Transaction Laws, a foreign investor who intends to make a portfolio investment in shares of a Korean company listed on the KRX KOSPI Market or the KRX KOSDAQ Market must designate a foreign exchange bank at which he, she or it must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the foreign currency account may be remitted 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 the Won proceeds of the sale of, any such shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any such shares held by a non-resident of Korea must be deposited either in a Won account with the investor’s financial investment companies with a securities dealing, brokerage or collective investment license or the investor’s Won account. Funds in the investor’s Won account may be transferred to such investor’s foreign currency account or withdrawn for local living expenses, provided that any withdrawal of local living expenses in excess of a certain amount is reported to the tax authorities by the foreign exchange bank at which the Won account is maintained. Funds in the investor’s Won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.
Financial investment companies with a securities dealing, brokerage or collective investment license are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these financial investment companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors, without the investors having to open their own accounts with foreign exchange banks.
Item 10.E. | Taxation |
United States Taxation
This summary describes certain material U.S. federal income tax consequences for a U.S. holder (as defined below) of acquiring, owning, and disposing of common shares or ADSs. This summary applies to you only if you hold our common shares or ADSs as capital assets for tax purposes. This summary does not apply to you if you are a member of a class of holders subject to special rules, such as:
a dealer in securities or currencies;
a trader in securities that elects to use a mark-to-market method of accounting for securities holdings;
a bank;bank or other financial institution;
a life insurance company;
a tax-exempt organization;
a person that holds common shares or ADSs that are a hedge or that are hedged against interest rate or currency risks;
a person that holds common shares or ADSs as part of a straddle or conversion transaction for tax purposes;
a person whose functional currency for tax purposes is not the U.S. dollar; or
a person that owns or is deemed to own 10.0% or more of any class of our stock.stock (by vote or value); or
an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes (or partners therein).
This summary is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations promulgated thereunder, and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisers concerning the U.S. federal, state, local, and other tax consequences of purchasing, owning, and disposing of common shares or ADSs in your particular circumstances.
For purposes of this summary, you are a “U.S. holder” if you are the beneficial owner of a common share or an ADS and are:
a citizen or resident of the United States;
a U.S. domestic corporation; or
otherwise subject to U.S. federal income tax on a net income basis with respect to income from the common share or ADS.
In general, if you are the beneficial owner of ADSs, you will be treated as the beneficial owner of the common shares represented by those ADSs for U.S. federal income tax purposes, and no gain or loss will be recognized if you exchange an ADS for the common share represented by that ADS.
Dividends
The gross amount of cash dividends that you receive (prior to deduction of Korean taxes) generally will be subject to U.S. federal income taxation as foreign source “passive income” dividend income and will not be eligible for the dividends received deduction. Dividends paid in Won will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of your receipt of the dividend, in the case of common shares, or the depositary’s receipt, in the case of ADSs, regardless of whether the payment is in fact converted into U.S. dollars. If such a dividend is converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual with respect to the ADSs will be subject to taxation at a maximumpreferential rate of 20.0% if the dividends are “qualified
“qualified dividends”. Dividends paid on the ADSs will be treated as qualified dividends if (1) the ADSs are readily tradable on an established securities market in the United States and (2) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company as defined for U.S. federal income tax purposes (“PFIC”)., as discussed below under “— Passive Foreign Investment Company Rules.” The ADSs are listed on the NYSE, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. Based on our audited financial statements, as well as relevant market and shareholder data,As described below under “Passive Foreign Investment Company Rules”, we believe that we were notmay be classified as a PFIC with respect to our 2015 taxable year. In addition, based on our audited financial statementsyear ending December 31, 2020 and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data,that there is a significant risk that we do not anticipate becomingwill be a PFIC for the current and future taxable years. Accordingly, U.S. holders of commons shares or ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate for dividends with respect to our 2016 taxable year.common shares or ADSs.
Distributions of additional shares in respect of common shares or ADSs that are made as part of a pro-rata distribution to all of our stockholders generally will not be subject to U.S. federal income tax.
Sale or Other Disposition
ForSubject to the discussion below under “Passive Foreign Investment Company Rules,” for U.S. federal income tax purposes, gain or loss you realize on a sale or other disposition of common shares or ADSs generally will be treated as U.S. source capital gain or loss, and will be long-term capital gain or loss if the
common shares or ADSs were held for more than one year. Your ability to offset capital losses against ordinary income is limited. Long-term capital gain recognized by an individual U.S. holder generally is subject to taxation at reduced rates.
Passive Foreign Investment Company Rules
Special U.S. tax rules apply to companies that are considered to be PFICs. We will be classified as a PFIC in a particular taxable year if either (i) 75 percent or more of our gross income for the taxable year is passive income; or (ii) the average percentage of the value of our assets that produce or are held for the production of passive income is at least 50 percent. Investments in companies in which we own less than 25 percent of the stock (by value) are considered to be assets that produce passive income.
The determination whether we are a PFIC is made annually based on the particular facts and circumstances, such as the composition of our income and the valuation of our assets. Due to fluctuations in our stock price and changes in the value and composition of our assets, including our substantial investment in the stock of SK Hynix, which is treated as a passive asset for this purpose, we believe that we may be classified as a PFIC for U.S. federal income tax purposes for our taxable year ending December 31, 2020 and that there is a significant risk that we will be a PFIC for the current and future taxable years. Recent stock market volatility could exacerbate these considerations. See “Item 3.D. Risk Factors — Risks Relating to Our Business — The ongoing global pandemic of a new strain of coronavirus (“COVID-19”) and any possible recurrence of other types of widespread infectious diseases may adversely affect our business, financial condition or results of operations.” and “Item 3.D. Risk Factors — Risks Relating to Our Business — Declines in the market value of our equity holdings in SK Hynix and the results of operations of SK Hynix could have a material adverse effect on the market price of our common shares and American Depositary Shares (“ADSs”) as well as our results of operation.”
You should consult your own tax advisors regarding our classification as a PFIC for 2020 or in the current or future years.
If we are classified as a PFIC, and you do not make a mark-to-market election, as described in the following paragraph, you will be subject to a special tax at ordinary income tax rates on “excess distributions” (generally, any distributions that you receive in a taxable year that are greater than 125 percent of the average annual distributions that you have received in the preceding three taxable years, or your holding period, if shorter), including gain that you recognize on the sale of your shares or ADSs. The amount of income tax on any excess distributions will be increased by an interest charge to compensate for tax deferral, calculated as if the excess distributions were earned ratably over the period you hold your shares or ADSs. Classification as a PFIC may also have other adverse tax consequences, including, in the case of individuals, the denial of a step-up in the basis of your shares or ADSs at death.
Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year during which a U.S. holder holds our common shares or ADSs, such U.S. holder will generally be subject to the unfavorable rules described above for that year and for each subsequent year in which such U.S. holder holds the common shares or ADSs (even if we do not qualify as a PFIC in such subsequent years). However, if we cease to be a PFIC, a U.S. holder can avoid the continuing impact of the PFIC rules by making a special election to recognize gain as if such U.S. holder’s common shares or ADSs had been sold on the last day of the last taxable year during which we were a PFIC. U.S. holders should consult their own tax advisor about the advisability of making this election.
A U.S. holder may be able to avoid the unfavorable rules described above by electing to mark its ADSs to market, provided the ADSs are treated as “marketable stock.” The ADSs generally will be treated as marketable stock if the ADSs are “regularly traded” on a “qualified exchange or other market” (which includes the New York Stock Exchange). Further, it should also be noted that only the ADSs and not the common shares are listed on the New York Stock Exchange. Consequently, a U.S. holder that holds common shares that are not represented by ADSs may not be eligible to make a mark-to-market election in respect of those common shares. If the U.S. holder makes a mark-to-market election, the U.S. holder will be required in any year in which we are a PFIC to include as ordinary income the excess of the fair market value of its ADSs at year-end over the U.S. holder’s basis in those ADSs. If at the end of the U.S. holder’s taxable year, the U.S. holder’s basis in the shares or ADSs exceeds their fair market value, the U.S. holder will be entitled to deduct the excess as an ordinary loss, but only to the extent of the U.S. holder’s net mark-to-market gains from previous years. A U.S. holder’s adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. In addition, any gain the U.S. holder recognizes upon the sale of the U.S. holder’s ADSs in a year in which we are a PFIC will be taxed as ordinary income in the year of sale and any loss will be treated as an ordinary loss to the extent of the U.S. holder’s net mark-to-market gains from previous years. If a U.S. holder makes a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a “qualified exchange or other market” or the Internal Revenue Service (“IRS”) consents to the revocation of the election. If a U.S. holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. holder will not be required to take into account the mark-to-market gain or loss described above during any period that such corporation is not classified as a PFIC. Because a mark-to-market election generally cannot be made for any lower-tier PFICs that we may own (unless shares of such lower-tier PFIC are themselves “marketable”), a U.S. holder who makes a mark-to-market election with respect to our common shares may continue to be subject to the general PFIC rules with respect to such U.S. holder’s indirect interest in any of our non-United States subsidiaries that is classified as a PFIC. U.S. holders are urged to consult their own tax advisors about the availability of the mark-to-market election, the consequences of not making a mark-to-market election for the first year during which a U.S. holder holds interests in our common shares or ADSs and we are a PFIC, and whether making the election would be advisable in their particular circumstances.
Although a U.S. holder can also avoid the unfavorable PFIC rules described above by electing to treat its common shares or ADSs as interests in a qualified electing fund (“QEF”), we do not intend to provide the information that would allow a U.S. holder to make such an election. Accordingly, in the event that we are treated as a PFIC, a U.S. holder will not be able to make a “QEF election.”
A U.S. holder that owns an equity interest in a PFIC must annually file IRS Form 8621, and may be required to file other IRS forms. A failure to file one or more of these forms as required may toll the running of the statute of limitations in respect of each of the U.S. holder’s taxable years for which such form is required to be filed. As a result, the taxable years with respect to which the U.S. holder fails to file the form may remain open to assessment by the IRS indefinitely, until the form is filed.
The U.S. federal income tax rules relating to PFICs are complex. U.S. holders are strongly urged to consult their own tax advisors regarding our potential classification as a PFIC and regarding the U.S. federal income tax consequences of acquiring, holding and disposing of our common shares or ADSs if we are so classified, including the advisability of making a mark-to-market election, if available.
Foreign Tax Credit Considerations
You should consult your own tax advisers to determine whether you are subject to any special rules that limit your ability to make effective use of foreign tax credits, including the possible adverse impact of failing to take advantage of benefits under the income tax treaty between the United States and Korea. If no such rules apply, you may claim a credit against your U.S. federal income tax liability for Korean taxes withheld from dividends on the common shares or ADSs, so long as you have owned our common shares or ADSs (and not entered into specified kinds of hedging transactions) for at least a 16-day period that includes the ex-dividend date. Instead of claiming a credit, you may, if you so elect, deduct such Korean taxes in computing your taxable income, subject to generally applicable limitations under U.S. tax law. Korean taxes withheld from a distribution of additional shares that is not subject to U.S. tax may be treated for U.S. federal income tax purposes as imposed on “general category” income. Such treatment could affect your ability to utilize any available foreign tax credit in respect of such taxes.
Any Korean securities transaction tax or agricultureagricultural and fishery special surtax that you pay will not be creditable for foreign tax credit purposes.
Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions in securities and may not be allowed in respect of arrangements in which a U.S. holder’s expected economic profit is insubstantial.
The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions involve the application of complex rules that depend on a U.S. holder’s particular circumstances. You should consult your own tax advisers regarding the creditability or deductibility of such taxes.
Specified Foreign Financial Assets
Certain U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of U.S.$50,000 on the last day of the taxable year or U.S.$75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on IRS Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the common shares or ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders who fail to report the required information could be subject to substantial penalties. Prospective investors should consult their own tax advisers concerning the application of these rules to their investment in the common shares or ADSs, including the application of the rules to their particular circumstances.
U.S. Information Reporting and Backup Withholding Rules
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the holder (1) is a corporation or other exempt recipient and demonstrates this when required or (2) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons generally are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of its non-U.S. status in connection with payments received within the United States or through a U.S.-related financial intermediary.
Korean Taxation
The following is a summary of the principal Korean tax consequences to owners of the common shares or ADSs, as the case may be, who are non-resident individuals or non-Korean corporations without a permanent establishment in Korea to which the relevant income is attributable or with which the relevant income is effectively connected (“(“Non-resident Holders”). The statements regarding Korean tax laws set forth below are based on the laws in force and as interpreted by the Korean taxation authorities as of the date hereof. This summary is not exhaustive of all possible tax considerations which may apply to a particular investor and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of the
common shares or ADSs, including specifically the tax consequences under Korean law, the laws of the jurisdiction of which they are resident, and any tax treaty between Korea and their country of residence, by consulting their own tax advisors.
Tax on Dividends
Dividends on the common shares or ADSs paid (whether in cash or in shares) to a Non-resident Holder will be subject to Korean withholding taxes at the rate of 22.0% (including local income tax) or such lower rate as is applicable under a treaty between Korea and such Non-resident Holder’s country of tax residence. Free distributions of shares representing a capitalization of certain capital surplus reserves may be subject to Korean withholding taxes.
The tax is withheld by the payer of the dividend. SinceWhile it is the payer that is required to withhold the tax, Korean law does not entitlegenerally entitles the person who was subject to the withholding of Korean tax to recover from the Government any part of the Korean tax withheld even if it subsequently producesupon providing evidence that it was entitled to have tax withheld at a lower rate except inif certain limited circumstances.conditions are met.
Tax on Capital Gains
As a general rule, capital gains earned by Non-resident Holders upon transfer of the common shares or ADSs are subject to Korean withholding tax at the lower of (1) 11.0% (including local income tax) of the gross proceeds realized or (2) 22.0% (including local income tax) of the net realized gains (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs), unless exempt from Korean income taxation under the effective Korean tax treaty with the Non-resident Holder’s country of tax residence.
However, a Non-resident Holder will not be subject to Korean income taxation on capital gains realized upon the sale of the common shares through the KRX KOSPI Market if the Non-resident Holder (1) has no permanent establishment in Korea and (2) did not or has not owned (together with any shares owned by any entity with certain special relationship with such Non-resident Holder) 25.0% or more of the total issued and outstanding shares of us at any time during the calendar year in which the sale occurs and during the five calendar years prior to the calendar year in which the sale occurs.
It should be noted that capital gains earned by you (regardless of whether you have a permanent establishment in Korea) from a transfer of ADSs outside Korea will generally be exempt from Korean income taxation, provided that the ADSs are deemed to have been issued overseas. If and when an owner of the underlying common shares transfers the ADSs following the conversion of the underlying shares for ADSs, such person will not be exempt from Korean income taxation.
Inheritance Tax and Gift Tax
Korean inheritance tax is imposed upon (1) all assets (wherever located) of the deceased if at the time of his death he was domiciled ina tax resident of Korea and (2) all property located in Korea which passes on death (irrespective of the domicile of the deceased). Gift tax is imposed in similar circumstances to the above. The taxes are imposed if the value of the relevant property is above a certain limit and vary according todepending on the value of the property and the identity of the parties involved.
Under Korean inheritance and gift tax laws, securities issued by a Korean corporation are deemed to be located in Korea irrespective of where they are physically located or by whom they are owned.
Securities Transaction Tax
Securities transaction tax is imposed on the transfer of shares issued by a Korean corporation or the right to subscribe for such shares generally at the rate of 0.43% of the sales price (or 0.5% of the sales price.price if such shares were sold before April 1, 2020; 0.45% of the sales price if such shares were sold before January 1, 2021). In the case of the transfer of shares listed on the KRX KOSPI Market (such as our common shares), the securities transaction tax is imposed generally at the rate of (1) 0.3%0.23% of the sales price of such shares (or 0.25% of the sales price if such shares were sold after June 3, 2019 and before January 1, 2021) (including agricultural and fishery
special surtax thereon) if traded on the KRX KOSPI Market or (2) subject to certain exceptions, 0.43% of the sales price of such shares (or 0.5% of the sales price of such shares were sold before April 1, 2020; 0.45% of the sales price if such shares were sold before January 1, 2021) if traded outside the KRX KOSPI Market.
Securities transaction tax or the agricultural and fishery special surtax is not applicable if (1) the shares or rights to subscribe for shares are listed on a designated foreign stock exchange and (2) the sale of the shares takes place on such exchange.
Securities transaction tax, if applicable, must be paid by the transferor of the shares or rights, in principle. When the transfer is effected through a securities settlement company, such settlement company is generally required to withhold and pay (to the tax authority) the tax, and when such transfer is made through a financial investment company with a brokerage license only, such company is required to withhold and pay the tax. Where the transfer is effected by a Non-resident Holder without a permanent establishment in Korea, other than through a securities settlement company or a financial investment company with a brokerage license, the transferee is required to withhold the securities transaction tax. Failure to do so will result in the imposition of penalties equal to the sum of (1) between 10.0% to 40.0% of the tax amount due, depending on the nature of the improper reporting, and (2) 10.95%9.125% per annum on the tax amount due for the default period.
Tax Treaties
Currently, Korea has income tax treaties with a number of countries, inter alia, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Luxembourg, Ireland, the Netherlands, New Zealand, Norway, Singapore, Sweden, Switzerland, the United Kingdom and the United States under which the rate of withholding tax on dividend and interest is reduced, generally to between 5.0% and 16.5% (including local income tax), and the tax on capital gains derived by a non-resident from the transfer of securities issued by a Korean company is often eliminated.
Each Non-resident Holder of common shares should inquire for itself whether it is entitled to the benefits of a tax treaty with Korea. It is the responsibility of the party claiming the benefits of a tax treaty in respect of interest, dividend, capital gains or “other income” to submit to us (or our agent), the purchaser or the financial investment company with a brokerage license, as the case may be, prior to or at the time of payment, such evidence of tax residence of the party claiming the treaty benefit as the Korean tax authorities may require in support of its claim for treaty protection. In the absence of sufficient proof, we (or our agent), the purchaser or the financial investment company with a brokerage license, as the case may be, must withhold tax at the normal rates.
Furthermore, in order for a non-resident of Korea to obtain the benefits of tax exemption on certain Korean source income (e.g., capital gains and interest) under an applicable tax treaty, Korean tax law requires such non-resident (or its agent) to submit to the payer of such Korean source income an application for a tax exemption along with a certificate of tax residency of such non-resident issued by a competent authority of the non-resident’s country of tax residence, subject to certain exceptions. The payer of such Korean source income, in turn, is required to submit such application to the relevant district tax office by the ninth day of the month following the date of the first payment of such income.
For a non-resident of Korea to obtain the benefits of treaty-reduced tax rates on certain Korean source income (e.g., capital gains and interest) under an applicable tax treaty, Korean tax law requires such non-resident (or its agents) to submit to the payer of such Korean source income an application for treaty-reduced tax rates prior to receipt of such Korean source income; provided, however, that an owner of ADSs who is a non-resident of Korea is not required to submit such application, if the Korean source income on the ADSs is paid through an account opened at the Korea Securities Depository by a foreign depository.
At present, Korea has not entered into any tax treaty relating to inheritance or gift tax.
Item 10.F. | Dividends and Paying Agents |
Not applicable.
Item 10.G. | Statements by Experts |
Not applicable.
Item 10.H. | Documents on Display |
We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Any filings we make electronically will be available to the public over the Internet at the SEC’s Website at http://www.sec.gov.
Documents filed with annual reports and documents filed or submitted to the SEC are also available for inspection at our principal business office during normal business hours. Our principal business office is located at SK T-Tower, 65, Eulji-ro, Jung-gu, Seoul 100-999,04539, Korea.
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 risk primarily associated with underlying liabilities and to equity price risk as a result of our investment in equity instruments.
We have entered into a floating-to-fixed cross currency interest rate swap contractscontract to hedge foreign currency and interest rate risks with respect to long-term borrowings of US$300 million of bonds issued in March 2013, US$300 million of bonds issued in October 2013 and US$74.8 million of bonds issued in December 2013.2020. In addition, we have entered into fixed-to-fixed cross currency swap contracts to hedge the foreign currency risks of US$400 million of bonds issued in July 2007, CHF US$17.2 million of borrowings from December 2013, US$500 million of bonds issued in April 2018 and US$300 million of bonds issued in June 2012, US$700 millionAugust 2018. We also entered into floating-to-fixed interest rate swap contracts to hedge interest rate risks with respect to Won 12.3 billion of bonds issued in November 2012borrowings from December 2016, Won 25.0 billion of borrowings from December 2017 and AUD 300 millionWon 37.5 billion of bonds issued in January 2013.Seeborrowings from December 2018. See note 2322 of the notes to our consolidated financial statements. We may consider in the future entering into other such transactions solely for hedging purposes.
The following discussion and tables, which constitute “forward looking statements” that involve risks and uncertainties, summarize our market-sensitive financial instruments including fair value, maturity and contract terms. These tables address market risk only and do not present other risks which we face in the normal course of business, including country risk, credit risk and legal risk.
Exchange Rate Risk
Korea is our main market and, therefore, substantially all of our cash flow is denominated in Won. We are exposed to foreign exchange risk related to foreign currency denominated liabilities. These liabilities relate primarily to foreign currency denominated debt, primarily in Dollars, Franc and Australian Dollars. A 10.0% increase in the exchange rate between the Won and all foreign currencies would result in an increase in profit before income tax of approximately 0.6%, or Won 12.77.5 billion, with a decrease of 10.0% in the exchange rate having the opposite effect, as of December 31, 2015.2020. For a further discussion of our exchange rate risk exposures, see note 35(1)36(1) of the notes to our consolidated financial statements.
Interest Rate Risk
We are also subject to market risk exposure arising from changing interest rates. The following table summarizes the carrying amounts and fair values, maturity and contract terms of our exchange rate and interest sensitive short-term and long-term liabilities as of December 31, 2015:2020:
Maturities | Maturities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | Total | Fair Value | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
(In billions of Won, except for percentage data) | (In billions of Won, except for percentage data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Local currency: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed-rate | ₩ | 929.5 | ₩ | 239.7 | ₩ | 416.2 | ₩ | 767.0 | ₩ | 428.5 | ₩ | 2,049.4 | ₩ | 4,830.3 | ₩ | 5,031.5 | ₩ | 952.6 | ₩ | 1,387.8 | ₩ | 2,787.4 | ₩ | 848.1 | ₩ | 847.4 | ₩ | 2,133.5 | ₩ | 8,956.8 | ₩ | 9,431.4 | ||||||||||||||||||||||||||||||||
Average weighted rate(1) | 4.08 | % | 3.71 | % | 3.48 | % | 3.02 | % | 2.39 | % | 3.12 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate(1) | 2.66 | % | 2.20 | % | 2.93 | % | 2.41 | % | 1.92 | % | 2.38 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable rate | 84.3 | | — | | 37.4 | — | — | — | 121.7 | 121.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate(1) | 2.22 | % | — | 1.48 | % | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sub-total | 929.5 | 239.7 | 416.2 | 767.0 | 428.5 | 2,049.4 | 4,830.3 | 5,031.5 | 1,036.9 | 1,387.8 | 2,824.8 | 848.1 | 847.4 | 2,133.5 | 9,078.5 | 9,553.0 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Foreign currency: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed-rate | 13.5 | 623.5 | 1,178.1 | 13.5 | 13.5 | 482.6 | 2,324.7 | 2,560.3 | 12.4 | 6.2 | 865.5 | — | — | 431.3 | 1,315.4 | 1,489.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate(1) | 1.70 | % | 2.98 | % | 2.36 | % | 1.70 | % | 1.70 | % | 6.51 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate(1) | 1.70 | % | 1.70 | % | 3.80 | % | — | — | 6.63 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable rate | — | — | — | — | 350.5 | — | 350.5 | 350.5 | — | — | — | — | 324.8 | — | 324.8 | 324.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate(1) | — | — | — | — | 1.49 | % | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate(1) | — | — | — | — | 1.15 | % | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sub-total | 13.5 | 623.5 | 1,178.1 | 13.5 | 364.0 | 482.6 | 2,675.2 | 2,910.8 | 12.4 | 6.2 | 865.5 | — | 324.8 | 431.3 | 1,640.2 | 1,814.6 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total | ₩ | 943.0 | ₩ | 863.2 | ₩ | 1,594.3 | ₩ | 780.5 | ₩ | 792.5 | ₩ | 2,532.0 | ₩ | 7,505.5 | ₩ | 7,942.3 | ₩ | 1,049.3 | ₩ | 1,394.0 | ₩ | 3,690.3 | ₩ | 848.1 | ₩ | 1,172.2 | ₩ | 2,564.8 | ₩ | 10,718.7 | ₩ | 11,367.6 | ||||||||||||||||||||||||||||||||
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(1) | Weighted average rates of the portfolio at the period end. |
A 1.0% point increase in interest rates would result in a decrease in profit before income tax of approximately Won 0.20.5 billion with a 1.0% point decrease in interest rates having the opposite effect, as of December 31, 2015.2020. For a further discussion of our interest rate risk exposures, see note 35(1)36(1) of the notes to our consolidated financial statements.
Equity Price Risk
We are also subject to market risk exposure arising from changes in the equity securities market, which affect the fair value of our equity portfolio. As of December 31, 2015, 20142020, 2019 and 2013,2018, a 10.0% increase in the equity indices where our available-for-sale equity instrumentsinvestments at fair value through other comprehensive income are listed, with all other variables held constant, would have increased our total equity by Won 89.894.6 billion, Won 54.240.8 billion and Won 63.429.4 billion, respectively, with a 10.0% decrease in the equity index having the opposite effect.The foregoing sensitivity analysis assumes that all variables other than changes in the equity index are held constant, and that our available-for-sale equity instrumentsinvestments at fair value through other comprehensive income had moved according to the historical correlation to the index, and as such, does not reflect any correlation between the equity index and other variables. For a further discussion of our equity price risk exposures, see note 35(1) of the notes to our consolidated financial statements.
Item 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 Deposit Agreement
The ADR depositary will charge the party receiving ADSs up to US$5.00 per 100 ADSs (or fraction thereof), provided that the ADR depositary has agreed to waive such fee as would have been payable by us in the case of (1) an offering of ADSs by us or (2) any distribution of shares of common stock or any rights to subscribe for additional shares of common stock. The ADR depositary will not charge the party to whom ADSs are delivered against deposits. The ADR depositary will charge the party surrendering ADSs for delivery of deposited securities up to US$5.00 per 100 ADSs (or fraction thereof) surrendered. The ADR depositary will also charge the party to whom any cash distribution, or for whom the sale or exercise of rights or other corporate action involving distributions to shareholders, is made with respect to ADSs up to US$0.02 per ADS held plus the expenses of the ADR depositary on a per-ADS basis. We will pay the expenses of the ADR depositary and any entity acting as registrar for the shares only as specified in the deposit agreement. The ADR depositary will pay any other charges and expenses of the ADR depositary and the entity acting as registrar for the shares.
Holders of ADRs must pay (1) taxes and other governmental charges, (2) share transfer registration fees on deposits of shares of common stock, (3) such cable, telex, facsimile transmission and delivery expenses as are expressly provided in the deposit agreement to be at the expense of persons depositing shares of common stock or holders of ADRs and (4) such reasonable expenses as are incurred by the ADR depositary in the conversion of foreign currency into United States dollars.
Notwithstanding any other provision of the deposit agreement, in the event that the ADR depositary determines that any distribution in property (including shares or rights to subscribe therefor or other securities) is subject to any tax or governmental charges which the ADR depositary is obligated to withhold, the ADR depositary may dispose of all or a portion of such property (including shares and rights to subscribe therefor) in such amounts and in such manner as the ADR depositary deems necessary and practicable to pay such taxes or governmental charges, including by public or private sale, and the ADR depositary will distribute the net proceeds of any such sale or the balance of any such property after deduction of such taxes or governmental charges to the holders of ADSs entitled thereto in proportion to the number of ADSs held by them respectively.
All such charges may be changed by agreement between the ADR depositary and us at any time and from time to time, subject to the deposit agreement. The right of the ADR depositary to receive payment of fees, charges and expenses shall survive the termination of this deposit agreement and, as to any depositary, the resignation or removal of such depositary pursuant to the deposit agreement.
For a detailed summary of the deposit agreement, see “Item 10.B. Memorandum and Articles of Association — Description of American Depositary Shares.”
Payments made by ADSADR Depositary
AllThe ADR depositary reimburses us for certain expenses we incur in connection with our ADR program, subject to certain ceilings. These reimbursable expenses currently include expenses relating to the preparation of SEC filings and submissions, listing fees, education and training fees, corporate action expenses and other direct and indirect payments reimbursed bymiscellaneous fees. In the fiscal year 2020, we received US$782,300 from the ADR depositary are as following:in connection with such reimbursements.
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Item 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
None.
Item 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
None.
Item 15. | CONTROLS AND PROCEDURES |
Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2015.2020. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required 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, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as of December 31, 2015.2020. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS as issued by the IASB. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2015.2020.
Report of the Independent Registered Public Accounting Firm on the Effectiveness of Our Internal Control Over Financial Reporting
The report of our independent registered public accounting firm, KPMG Samjong Accounting Corp. (“KPMG Samjong”), on the effectiveness of our internal control over financial reporting as of December 31, 20152020 is included in Item 18 of this Form 20-F.
Changes in Internal Control Over Financial Reporting
ThereBeginning January 1, 2020, we changed our accounting policy by applying the agenda decision, Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment) — November 2019, published by the IFRIC on December 16, 2019 and implemented significant new systems, processes and internal controls over lease accounting to assist us in the application of such change. Other than as
discussed above, there has been no change in our internal control over financial reporting during 20152020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16. | RESERVED |
Item 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
Dae Shick OhSeok-Dong Kim is the chairman of our audit committee and was elected and designateddetermined to be an “audit committee financial expert” within the meaning of this Item 16A at a meeting ofby the board of directors in April 2014.directors. The board of directors have further determined that Dae Shick OhSeok-Dong Kim is independent within the meaning of applicable SEC rules and the listing standards of the NYSE.See “Item 6.C. Board Practices — Audit Committee” for additional information regarding our audit committee.
Item 16B. | CODE OF ETHICS |
Code of Ethics for Chief Executive Officer, Chief Financial Officer and Controller
We have a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, senior accounting officers and employees. We also have internal control and disclosure policy designed to promote full, fair, accurate, timely and understandable disclosure in all of our reports and publicly filed documents. A copy of our code of ethics is available on our website at www.sktelecom.com. If we amend the provisions of our code of ethics that apply to our Chief Executive Officer, Chief Financial Officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website.
Item 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The table sets forth the fees we paid to our independent registered public accounting firm KPMG Samjong and its affiliates for the years ended December 31, 20152020 and 2014:2019:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of Won) | (In millions of Won) | |||||||||||||||
Audit Fees | ₩ | 3,325 | ₩ | 3,522 | ₩ | 5,157 | ₩ | 4,299 | ||||||||
Audit-Related Fees | ₩ | 36 | ₩ | 12 | 16 | 3 | ||||||||||
Tax Fees | ₩ | 289 | ₩ | 408 | 372 | 305 | ||||||||||
All Other Fees | ₩ | 0 | ₩ | 50 | 93 | — | ||||||||||
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Total | ₩ | 3,650 | ₩ | 3,992 | ₩ | ₩ | 4,607 | |||||||||
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“Audit Fees” are the aggregate fees billed by KPMG Samjong for the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements.
“Audit-Related Fees” are fees charged by KPMG Samjong for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” This category comprises fees billed for advisoryaudit services associatedof documents related to the use of certain government grants in 2020 and assurance services, including verification of the consistency of financial information submitted to relevant governmental authorities with our consolidated annual financial reporting.statements, in 2019.
“Tax Fees” are fees for professional services rendered by KPMG Samjong for tax compliance, tax advice on actual or contemplated transactions and tax planning services.
Fees disclosed under the category “All Other FeesFees”” are fees for professional services renderedbilled by KPMG Samjong primarily for benchmarking services related to new types of business consultingassociation models for the purpose of enhancing social values in connection with our internal control over financial reporting.2020.
Pre-Approval of Audit and Non-Audit Services Provided by Independent Registered Public Accounting Firm
Our audit committee pre-approves all audit services to be provided by KPMG Samjong, our independent registered public accounting firm. Our audit committee’s policy regarding the pre-approval of non-audit services to
be provided to us by our independent auditors is that all such services shall be pre-approved by our audit committee. Non-audit services that are prohibited to be provided to us by our independent auditors under the rules of the SEC and applicable law may not be pre-approved. In addition, prior to the granting of any pre-approval, our audit committee must be satisfied that the performance of the services in question will not compromise the independence of our independent registered public accounting firm.
Our audit committee did not pre-approve any non-audit services under thede minimis exception ofRule 2-01 (c)(7)(i)(C) of Regulation S-X as promulgated by the SEC.
Item 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not applicable.
Item 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Neither we nor any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased anyThe following table sets forth information regarding purchases by us of our equity securitiescommon shares during the period covered by this annual report.fiscal year ended December 31, 2020.
Period | Total Number of Shares Purchased(1) | Average Price Paid per Share(2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs(3) | ||||||||||||
(In billions of Won) | ||||||||||||||||
September 1, 2020 – September 30, 2020 | 496,870 | ₩ | 239,411 | 496,870 | ₩ | 381.0 | ||||||||||
October 1, 2020 – October 31, 2020 | 612,425 | 234,594 | 612,425 | 237.4 | ||||||||||||
November 1, 2020 – November 30, 2020 | 420,000 | 228,741 | 420,000 | 141.3 | ||||||||||||
December 1, 2020 – December 31, 2020 | 280,000 | 242,734 | 280,000 | 73.3 | ||||||||||||
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Total | 1,809,295 | ₩ | 235,818 | 1,809,295 | ₩ | 73.3 | ||||||||||
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(1) | Repurchases made in the open market pursuant to the Share Repurchase Agreement, pursuant to which we are authorized to repurchase up to Won 500 billion of our common shares from August 28, 2020 to August 27, 2021. |
(2) | Average price paid per share is a weighted average calculation using the aggregate price, excluding commissions and fees. |
(3) | Remaining under the Share Repurchase Agreement at the end of the period. |
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 NYSE’s corporate governance standards and those that we follow under Korean law.
NYSE Corporate Governance Standards | Our Corporate Governance Practice | |
Director Independence | ||
Listed companies must have a majority of independent directors. | Of the |
NYSE Corporate Governance Standards | Our Corporate Governance Practice | |
Executive Session | ||
Non-management directors must meet in regularly scheduled executive sessions without management. Independent directors should meet alone in an executive session at least once a year. | Our audit committee, which is comprised solely of | |
Nomination/Corporate Governance Committee | ||
Listed companies must have a nomination/corporate governance committee composed entirely of independent directors. The committee must have a charter that addresses the purpose, responsibilities (including development of corporate governance guidelines) and annual performance evaluation of the committee. | Although we do not have a separate nomination/corporate governance committee, we maintain an independent director nomination committee composed of two independent directors and one management director. | |
Compensation Committee | ||
Listed companies must have a compensation committee composed entirely of independent directors. The committee must have a charter that addresses the purpose, responsibilities and annual performance evaluation of the committee. The charter must be made available on the company’s website. In addition, in accordance with the | We maintain a compensation review committee comprised of three independent directors. |
|
| ||
Audit Committee | |||
Listed companies must have an audit committee that satisfies the independence and other requirements of Rule | We maintain an audit committee comprised solely of | ||
Audit Committee Additional Requirements | |||
Listed companies must have an audit committee that is composed of at least three directors. | Our audit committee has | ||
Shareholder Approval of Equity Compensation Plan | |||
Listed companies must allow its shareholders to exercise their voting rights with respect to any material revision to the company’s equity compensation plan. | We currently have two equity compensation plans: a stock option plan for officers and directors and employee stock ownership plan for employees (“ESOP”). We manage such compensation plans in compliance with the applicable laws and our articles of incorporation, provided that, under certain limited circumstances, the grant of stock options or matters relating to ESOP are not subject to shareholders’ approval under Korean law. | ||
Shareholder Approval of Equity Offerings | |||
Listed companies must allow its shareholders to exercise their voting rights with respect to equity offerings that do not qualify as public offerings for cash, and offerings of equity of related parties. | Pursuant to the Korean Commercial Code and the FSCMA, our shareholders are generally entitled to preemptive rights with respect to the issuance of new shares. Exceptions include public offerings as prescribed in the FSCMA and allotments to third |
NYSE Corporate Governance Standards | Our Corporate Governance Practice | |
parties in cases necessary for the achievement of a business purpose, such as the introduction of new technology and the improvement of our financial condition. | ||
Corporate Governance Guidelines | ||
Listed companies must adopt and disclose corporate governance guidelines. | ||
Code of Business Conduct and Ethics | ||
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or executive officers. | We have adopted a Code of Business Conduct and Ethics for all of our directors, officers and employees, and such code is also available on our website at |
Item 16H. | MINE SAFETY DISCLOSURE |
Not applicable.
Item 17. | FINANCIAL STATEMENTS |
Not applicable.
Item | FINANCIAL STATEMENTS |
Not applicable.
Item 19. | EXHIBITS |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
SK TELECOM CO., LTD. | ||
(Registrant) | ||
/s/ Joongsuk Oh | ||
Name: | Joongsuk Oh | |
Title: | Senior Vice President, Head of IR Planning |
Date: April 29, 2021
Report of Independent Registered Public Accounting Firm
To Thethe Shareholders and the Board of Directors and Shareholders
SK Telecom Co., Ltd.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of SK Telecom Co., Ltd. and subsidiaries (the Group) as of December 31, 20152020 and 2014, and2019, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2015. 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 29, 2021 expressed an unqualified opinion on the effectiveness of the Group’s internal control over financial reporting.
Changes in Accounting Principle
As discussed in Note 3 to the consolidated financial statements, during 2019 and 2020, the Group changed its method of accounting for leases as of January 1, 2019 due to the adoption of IFRS 16, Leases, and the related interpretations published by International Financial Reporting Interpretations Committee, respectively.
Basis for Opinion
These consolidated financial statements are the responsibility of SK Telecom Co., Ltd.’sthe Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error of fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements referredthat were communicated or required to above present fairly,be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in all material respects,any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
(i) Evaluation of impairment analysis for goodwill in the security services cash generating unit
As discussed in Notes 4 (11) and 16 to the consolidated financial statements, the amount of goodwill that is allocated to the security services cash generating unit (“CGU”) amounts to ₩1,176,274 million as of December 31, 2020. The Group performs impairment test for goodwill at least annually or when there is an indication of possible impairment by comparing the recoverable amount and the carrying amount of a CGU to which goodwill is allocated. The recoverable amount of security services CGU was determined based on value-in-use (“VIU”).
We identified the evaluation of impairment analysis for goodwill in the security services CGU as a critical audit matter. Estimation of key assumptions involves a high degree of subjectivity and uncertainty and therefore, involved a high degree of subjective and complex auditor judgment. Specifically, estimates of revenue growth rates, labor costs, perpetual growth rate and discount rate used to estimate the VIU of the security services CGU were challenging to test.
The following are the primary procedures we performed to address this critical audit matter.
We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s goodwill impairment analysis. This included controls related to the development of revenue growth rates, labor costs, perpetual growth rate and discount rate assumptions.
We performed sensitivity analyses over both the discount rate and the perpetual growth rate applied to the discounted cash flow forecast to assess the impact of changes in these key assumptions on the Group’s determination of the VIU of the security services CGU.
We evaluated estimated revenue growth rates and labor costs by comparison with the financial positionbudgets approved by the Group and comparing the forecasted revenue growth rates and forecasted labor costs prepared in prior year with the actual results to assess the Group’s ability to accurately forecast.
We involved our valuation professionals with specialized skills and knowledge, who assisted in (1) evaluating estimated revenue growth rates, labor costs and perpetual growth rate by comparison with industry reports as well as historical performance and (2) evaluating the discount rate by comparing with the discount rate that was independently developed using publicly available market data for comparable entities.
(ii) Evaluation of fair value of intangible assets - Customer relationships
As discussed in Note 12 (1) to the consolidated financial statements, as a result of the merger between SK Broadband Co., Ltd., a subsidiary of SK Telecom Co., Ltd., and subsidiariesTbroad Co., Ltd. and Tbroad Dongdaemun Broadcasting Co., Ltd., the Group recognized customer relationships as identifiable intangible assets. The fair value of customer relationships amounts to ₩374,019 million as of December 31, 2015 and 2014, andApril 30, 2020, the resultsacquisition date. The Group estimated the fair value of their operations and their cash flows for eachcustomer relationships using the multi-period excess earnings method (“MPEEM”), which estimates fair value by discounting the expected future excess earnings attributable to an intangible asset using risk adjusted discount rate.
We identified the evaluation of fair value of customer relationships as a critical audit matter. The evaluation of the yearsfair value involved a high degree of challenging and complex auditor judgements. Specifically, the estimated revenue per user of relevant revenue streams, estimated future churn rates and discount rates used to estimate the fair value of customer relationships were challenging to test as minor changes to those assumptions would have had a significant impact on the fair value of the customer relationships.
The following are the primary procedures we performed to address this critical audit matter:
We evaluated the design and tested operating effectiveness of certain internal controls related to the Group’s process for determining the fair value of customer relationships. This included controls related to determination of estimated revenue per user of relevant revenue streams, estimated future churn rates and discount rates.
We assessed estimated revenue per user of relevant revenue streams and future churn rates by comparing them with the actual results subsequent to the acquisition date.
We performed sensitivity analyses over both the estimated revenue per user of relevant revenue streams and estimated future churn rates applied to the discounted expected future excess earnings to assess the impact of changes in these key assumptions on the three-year period ended December 31, 2015Group’s determination of the fair value of customer relationships.
We involved our valuation professionals with specialized skills and knowledge, who assisted in accordance(1) assessing the estimated revenue per user of relevant revenue streams and future churn rates by comparing them with International Financial Reporting Standards as issuedthe acquirees’ historical performance; and (2) assessing the discount rates by comparing with the Internationaldiscount rates that were independently developed using publicly available market data for comparable entities.
/s/ KPMG Samjong Accounting Standards Board.Corp.
We have also audited, in accordance withserved as the standardsGroup’s auditor since 2012.
Seoul, Korea
April 29, 2021
Report of Independent Registered Public Accounting Firm
On Internal Control Over Financial Reporting
To the Public Company Accounting OversightShareholders and the Board (United States), the effectiveness of Directors
SK Telecom Co., Ltd.’s:
Opinion on Internal Control Over Financial Reporting
We have audited SK Telecom Co., Ltd. and subsidiaries’ (the Group) internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 28, 2016, expressed an unqualified opinion on SK Telecom Co., Ltd.’s internal control over financial reporting.
/s/ KPMG Samjong Accounting Corp.
Seoul, Korea
April 28, 2016
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Shareholders
SK Telecom Co., Ltd.:
We have audited the internal control over financial reporting of SK Telecom Co., Ltd. as of December 31, 2015,2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. SK Telecom Co.In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), Ltd.’sthe consolidated statements of financial position of the Group as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements) and our report dated April 29, 2021, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on SK Telecom Co., Ltd.’sthe Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, andrisk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition 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 of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, SK Telecom Co., Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), consolidated statements of financial position of SK Telecom Co., Ltd. and its subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated April 28, 2016, expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG Samjong Accounting Corp.
Seoul, Korea
April 28, 201629, 2021
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 20152020 and 20142019
(In millions of won) | Note | December 31, 2015 | December 31, 2014 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 34,35 | ₩ | 768,922 | 834,429 | ||||||||
Short-term financial instruments | 6,34,35,36,37 | 691,090 | 313,068 | |||||||||
Short-term investment securities | 9,34,35 | 92,262 | 280,161 | |||||||||
Accounts receivable — trade, net | 7,34,35,36 | 2,344,867 | 2,392,150 | |||||||||
Short-term loans, net | 7,34,35,36 | 53,895 | 74,512 | |||||||||
Accounts receivable — other, net | 7,34,35,36 | 673,739 | 690,527 | |||||||||
Prepaid expenses | 151,978 | 134,404 | ||||||||||
Inventories, net | 8,37 | 273,556 | 267,667 | |||||||||
Assets classified as held for sale | 10 | — | 10,510 | |||||||||
Advanced payments and other | 7,9,34,35,36 | 109,933 | 85,720 | |||||||||
|
|
|
| |||||||||
Total Current Assets | 5,160,242 | 5,083,148 | ||||||||||
|
|
|
| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 6,34,35,37 | 10,623 | 631 | |||||||||
Long-term investment securities | 9,34,35 | 1,207,226 | 956,280 | |||||||||
Investments in associates and joint ventures | 13 | 6,896,293 | 6,298,088 | |||||||||
Property and equipment, net | 14,36,37 | 10,371,256 | 10,567,701 | |||||||||
Investment property, net | 15 | 15,071 | 14,997 | |||||||||
Goodwill | 16 | 1,908,590 | 1,917,595 | |||||||||
Intangible assets, net | 17 | 2,304,784 | 2,483,994 | |||||||||
Long-term loans, net | 7,34,35,36 | 62,454 | 55,728 | |||||||||
Long-term accounts receivable — other | 7,34,35 | 2,420 | 3,596 | |||||||||
Long-term prepaid expenses | 37 | 76,034 | 51,961 | |||||||||
Guarantee deposits | 6,7,34,35,36 | 297,281 | 285,144 | |||||||||
Long-term derivative financial assets | 23,34,35 | 166,399 | 70,035 | |||||||||
Deferred tax assets | 31 | 17,257 | 25,083 | |||||||||
Other non-current assets | 7,34,35 | 85,457 | 127,252 | |||||||||
|
|
|
| |||||||||
Total Non-Current Assets | 23,421,145 | 22,858,085 | ||||||||||
|
|
|
| |||||||||
Total Assets | ₩ | 28,581,387 | 27,941,233 | |||||||||
|
|
|
|
(In millions of won) | Note | December 31, 2020 | December 31, 2019 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 35,36 | ₩ | 1,369,653 | 1,270,824 | ||||||||
Short-term financial instruments | 6,35,36,38 | 1,426,952 | 830,647 | |||||||||
Short-term investment securities | 11,35,36 | 150,392 | 166,666 | |||||||||
Accounts receivable — trade, net | 7,35,36,37 | 2,188,893 | 2,230,979 | |||||||||
Short-term loans, net | 7,35,36,37 | 97,464 | 66,123 | |||||||||
Accounts receivable — other, net | 3,7,35,36,37,38 | 979,044 | 903,509 | |||||||||
Contract assets | 9,36 | 100,606 | 127,499 | |||||||||
Prepaid expenses | 3,8 | 2,128,349 | 2,018,690 | |||||||||
Prepaid income taxes | 32 | 1,984 | 63,748 | |||||||||
Derivative financial assets | 22,35,36,39 | 8,704 | 26,253 | |||||||||
Inventories, net | 10 | 171,443 | 162,882 | |||||||||
Advanced payments and others | 3,7,35,36 | 151,602 | 220,687 | |||||||||
|
|
|
| |||||||||
8,775,086 | 8,088,507 | |||||||||||
|
|
|
| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 6,35,36 | 893 | 990 | |||||||||
Long-term investment securities | 11,35,36 | 1,648,837 | 857,215 | |||||||||
Investments in associates and joint ventures | 13 | 14,354,113 | 13,385,264 | |||||||||
Property and equipment, net | 3,14,15,37,38 | 13,377,077 | 12,933,460 | |||||||||
Goodwill | 12,16 | 3,357,524 | 2,949,530 | |||||||||
Intangible assets, net | 17 | 4,436,194 | 4,866,092 | |||||||||
Long-term contract assets | 9,36 | 47,675 | 64,359 | |||||||||
Long-term loans, net | 7,35,36,37 | 40,233 | 33,760 | |||||||||
Long-term accounts receivable — other | 3,7,35,36,37,38 | 332,803 | 351,663 | |||||||||
Long-term prepaid expenses | 3,8 | 1,063,711 | 1,239,865 | |||||||||
Guarantee deposits | 3,7,35,36,37 | 172,474 | 164,652 | |||||||||
Long-term derivative financial assets | 22,35,36,39 | 155,991 | 124,707 | |||||||||
Deferred tax assets | 32 | 105,088 | 109,057 | |||||||||
Defined benefit assets | 21 | 3,557 | 1,125 | |||||||||
Other non-current assets | 7,35,36 | 35,701 | 32,122 | |||||||||
|
|
|
| |||||||||
39,131,871 | 37,113,861 | |||||||||||
|
|
|
| |||||||||
Total Assets | ₩ | 47,906,957 | 45,202,368 | |||||||||
|
|
|
|
F-4
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position — (Continued)
As of December 31, 2015 and 2014
(In millions of won) | Note | December 31, 2015 | December 31, 2014 | |||||||||
Liabilities and Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Short-term borrowings | 18,34,35 | ₩ | 260,000 | 366,600 | ||||||||
Current installments of long-term debt, net | 18,34,35 | 703,087 | 590,714 | |||||||||
Current installments of finance lease liabilities | 21,34,35 | 26 | 3,804 | |||||||||
Current installments of long-term payables — other | 19,34,35 | 120,185 | 189,389 | |||||||||
Accounts payable — trade | 34,35,36 | 279,782 | 275,495 | |||||||||
Accounts payable — other | 34,35,36 | 1,323,434 | 1,381,850 | |||||||||
Withholdings | 34,35,36 | 865,327 | 1,053,063 | |||||||||
Accrued expenses | 34,35 | 920,739 | 952,418 | |||||||||
Income tax payable | 31 | 381,794 | 99,236 | |||||||||
Unearned revenue | 224,233 | 327,003 | ||||||||||
Provisions | 20 | 40,988 | 51,075 | |||||||||
Advanced receipts | 136,844 | 129,255 | ||||||||||
Liabilities classified as held for sale | 10 | — | 408 | |||||||||
Other current liabilities | 54 | — | ||||||||||
|
|
|
| |||||||||
Total Current Liabilities | 5,256,493 | 5,420,310 | ||||||||||
|
|
|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 18,34,35 | 6,439,147 | 5,649,158 | |||||||||
Long-term borrowings, excluding current installments | 18,34,35 | 121,553 | 149,720 | |||||||||
Long-term payables — other | 19,34,35 | 581,697 | 684,567 | |||||||||
Long-term unearned revenue | 2,842 | 19,659 | ||||||||||
Finance lease liabilities | 21,34,35 | — | 26 | |||||||||
Defined benefit liabilities | 22 | 98,856 | 91,587 | |||||||||
Long-term derivative financial liabilities | 23,34,35 | 89,296 | 130,889 | |||||||||
Long-term provisions | 20 | 29,217 | 36,013 | |||||||||
Deferred tax liabilities | 31 | 538,114 | 444,211 | |||||||||
Other non-current liabilities | 34,35 | 50,076 | 66,823 | |||||||||
|
|
|
| |||||||||
Total Non-Current Liabilities | 7,950,798 | 7,272,653 | ||||||||||
|
|
|
| |||||||||
Total Liabilities | 13,207,291 | 12,692,963 | ||||||||||
|
|
|
| |||||||||
Equity | ||||||||||||
Share capital | 1,24 | 44,639 | 44,639 | |||||||||
Capital surplus (deficit) and other capital adjustments | 24,25 | (209,008 | ) | (120,520 | ) | |||||||
Hybrid bonds | 26 | 398,518 | 398,518 | |||||||||
Retained earnings | 27 | 15,007,627 | 14,188,591 | |||||||||
Reserves | 28 | 9,303 | (4,489 | ) | ||||||||
|
|
|
| |||||||||
Equity attributable to owners of the Parent Company | 15,251,079 | 14,506,739 | ||||||||||
Non-controlling interests | 123,017 | 741,531 | ||||||||||
|
|
|
| |||||||||
Total Equity | 15,374,096 | 15,248,270 | ||||||||||
|
|
|
| |||||||||
Total Liabilities and Equity | ₩ | 28,581,387 | 27,941,233 | |||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of IncomeFinancial Position — (Continued)
For the years endedAs of December 31, 2015, 20142020 and 20132019
(In millions of won except for per share data) | Note | 2015 | 2014 | 2013 | ||||||||||||
Continuing operations | ||||||||||||||||
Operating revenue and other income: | 5,36 | |||||||||||||||
Revenue | ₩ | 17,136,734 | 17,163,798 | 16,602,054 | ||||||||||||
Other income | 29 | 30,935 | 56,471 | 74,954 | ||||||||||||
|
|
|
|
|
| |||||||||||
17,167,669 | 17,220,269 | 16,677,008 | ||||||||||||||
|
|
|
|
|
| |||||||||||
Operating expense: | 36 | |||||||||||||||
Labor cost | 22 | 1,893,745 | 1,659,777 | 1,561,358 | ||||||||||||
Commissions paid | 5,206,951 | 5,692,680 | 5,498,695 | |||||||||||||
Depreciation and amortization | 5 | 2,845,295 | 2,714,730 | 2,661,623 | ||||||||||||
Network interconnection | 957,605 | 997,319 | 1,043,733 | |||||||||||||
Leased line | 389,819 | 399,014 | 448,833 | |||||||||||||
Advertising | 405,005 | 415,857 | 394,066 | |||||||||||||
Rent | 493,586 | 460,309 | 443,639 | |||||||||||||
Cost of products that have been resold | 1,955,861 | 1,680,110 | 1,300,375 | |||||||||||||
Other operating expenses | 29 | 1,524,377 | 1,592,647 | 1,746,283 | ||||||||||||
|
|
|
|
|
| |||||||||||
15,672,244 | 15,612,443 | 15,098,605 | ||||||||||||||
|
|
|
|
|
| |||||||||||
Operating income | 5 | 1,495,425 | 1,607,826 | 1,578,403 | ||||||||||||
Finance income | 5,30 | 103,900 | 126,337 | 113,392 | ||||||||||||
Finance costs | 5,30 | (350,100 | ) | (386,673 | ) | (571,203 | ) | |||||||||
Gain related to investments in subsidiaries, associates and joint ventures, net | 1,5,13 | 786,140 | 906,338 | 706,509 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit before income tax | 2,035,365 | 2,253,828 | 1,827,101 | |||||||||||||
|
|
|
|
|
| |||||||||||
Income tax expense from continuing operations | 31 | 519,480 | 454,508 | 400,797 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit from continuing operations | 1,515,885 | 1,799,320 | 1,426,304 | |||||||||||||
|
|
|
|
|
| |||||||||||
Discontinued operation | ||||||||||||||||
Profit from discontinued operations, net of income taxes | 38 | — | — | 183,245 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit for the year | ₩ | 1,515,885 | 1,799,320 | 1,609,549 | ||||||||||||
|
|
|
|
|
| |||||||||||
Attributable to : | ||||||||||||||||
Owners of the Parent Company | ₩ | 1,518,604 | 1,801,178 | 1,638,964 | ||||||||||||
Non-controlling interests | (2,719 | ) | (1,858 | ) | (29,415 | ) | ||||||||||
Earnings per share | 32 | |||||||||||||||
Basic earnings per share (in Won) | ₩ | 20,988 | 25,154 | 23,211 | ||||||||||||
|
|
|
|
|
| |||||||||||
Diluted earnings per share (in Won) | ₩ | 20,988 | 25,154 | 23,211 | ||||||||||||
|
|
|
|
|
| |||||||||||
Earnings per share — Continuing operations | 32 | |||||||||||||||
Basic earnings per share (in Won) | ₩ | 20,988 | 25,154 | 20,708 | ||||||||||||
|
|
|
|
|
| |||||||||||
Diluted earnings per share (in Won) | ₩ | 20,988 | 25,154 | 20,708 | ||||||||||||
|
|
|
|
|
|
(In millions of won) | Note | December 31, 2020 | December 31, 2019 | |||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable — trade | 35,36,37 | ₩ | 372,909 | 438,297 | ||||||||
Accounts payable — other | 35,36,37 | 2,484,466 | 2,521,474 | |||||||||
Withholdings | 35,36,37 | 1,410,239 | 1,350,244 | |||||||||
Contract liabilities | 9 | 229,892 | 191,225 | |||||||||
Accrued expenses | 3,35,36 | 1,554,889 | 1,424,833 | |||||||||
Income tax payable | 32 | 219,766 | 5,450 | |||||||||
Derivative financial liabilities | 22,35,36,39 | 77 | — | |||||||||
Provisions | 3,20,38 | 69,363 | 86,320 | |||||||||
Short-term borrowings | 18,35,36,39 | 109,998 | 20,603 | |||||||||
Current portion of long-term debt, net | 18,35,36,39 | 939,237 | 1,017,327 | |||||||||
Current portion of long-term payables — other | 19,35,36,39 | 424,600 | 423,839 | |||||||||
Lease liabilities | 3,35,36,37,39 | 359,936 | 371,742 | |||||||||
Other current liabilities | 2,595 | 319 | ||||||||||
|
|
|
| |||||||||
8,177,967 | 7,851,673 | |||||||||||
|
|
|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current portion, net | 18,35,36,39 | 7,690,169 | 7,253,894 | |||||||||
Long-term borrowings, excluding current portion, net | 18,35,36,38,39 | 1,979,261 | 1,972,149 | |||||||||
Long-term payables — other | 19,35,36,39 | 1,142,354 | 1,550,167 | |||||||||
Long-term lease liabilities | 3,35,36,37,39 | 1,076,841 | 919,265 | |||||||||
Long-term contract liabilities | 9 | 30,704 | 32,231 | |||||||||
Defined benefit liabilities | 21 | 154,944 | 172,258 | |||||||||
Long-term derivative financial liabilities | 22,35,36,39 | 375,083 | 1,043 | |||||||||
Long-term provisions | 3,20,38 | 81,514 | 78,841 | |||||||||
Deferred tax liabilities | 3,32 | 2,709,075 | 2,463,861 | |||||||||
Other non-current liabilities | 3,35,36,37 | 92,802 | 90,052 | |||||||||
|
|
|
| |||||||||
15,332,747 | 14,533,761 | |||||||||||
|
|
|
| |||||||||
Total Liabilities | 23,510,714 | 22,385,434 | ||||||||||
|
|
|
| |||||||||
Shareholders’ Equity: | ||||||||||||
Share capital | 1,23 | 44,639 | 44,639 | |||||||||
Capital surplus and others | 12,23,24,26 | 278,444 | 607,722 | |||||||||
Hybrid bonds | 25 | 398,759 | 398,759 | |||||||||
Retained earnings | 3,27 | 22,981,913 | 22,228,683 | |||||||||
Reserves | 28 | 40,139 | (329,576 | ) | ||||||||
Equity attributable to owners of the Parent Company | 23,743,894 | 22,950,227 | ||||||||||
Non-controlling interests | 652,349 | (133,293 | ) | |||||||||
|
|
|
| |||||||||
Total Shareholders’ Equity | 24,396,243 | 22,816,934 | ||||||||||
|
|
|
| |||||||||
Total Liabilities and Shareholders’ Equity | ₩ | 47,906,957 | 45,202,368 | |||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | Note | 2015 | 2014 | 2013 | ||||||||||||
Profit for the year | ₩ | 1,515,885 | 1,799,320 | 1,609,549 | ||||||||||||
Other comprehensive income (loss) | ||||||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||||||
Remeasurement of defined benefit liabilities | 22 | (14,489 | ) | (32,942 | ) | 5,946 | ||||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||||||
Net change in unrealized fair value of available-for-sale financial assets | 28,30 | (3,661 | ) | 27,267 | 2,009 | |||||||||||
Net change in other comprehensive income of investments in associates and joint ventures | 13,28 | (5,709 | ) | 8,187 | 3,034 | |||||||||||
Net change in unrealized fair value of derivatives | 23,28,30 | (1,271 | ) | (45,942 | ) | 11,222 | ||||||||||
Foreign currency translation differences for foreign operations | 28 | 26,965 | 14,944 | (3,714 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) for the year | 1,835 | (28,486 | ) | 18,497 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income | ₩ | 1,517,720 | 1,770,834 | 1,628,046 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income attributable to: | ||||||||||||||||
Owners of the Parent Company | ₩ | 1,522,280 | 1,777,519 | 1,655,570 | ||||||||||||
Non-controlling interests | (4,560 | ) | (6,685 | ) | (27,524 | ) |
(In millions of won except for per share data) | Note | 2020 | 2019 | 2018 | ||||||||||||
Operating revenue and other income: | ||||||||||||||||
Revenue | 3,5,37 | ₩ | 18,624,651 | 17,740,716 | 16,873,960 | |||||||||||
Other income | 3,5,30,37 | 99,648 | 102,821 | 71,950 | ||||||||||||
|
|
|
|
|
| |||||||||||
18,724,299 | 17,843,537 | 16,945,910 | ||||||||||||||
|
|
|
|
|
| |||||||||||
Operating expenses: | 3,37 | |||||||||||||||
Labor | 3,006,172 | 2,822,673 | 2,288,655 | |||||||||||||
Commissions | 8 | 5,347,086 | 5,002,066 | 5,002,598 | ||||||||||||
Depreciation and amortization | 3,5 | 3,991,083 | 3,856,662 | 3,126,118 | ||||||||||||
Network interconnection | 770,712 | 752,334 | 808,403 | |||||||||||||
Leased lines | 3 | 294,722 | 263,367 | 309,773 | ||||||||||||
Advertising | 431,679 | 434,561 | 468,509 | |||||||||||||
Rent | 3 | 173,294 | 154,843 | 529,453 | ||||||||||||
Cost of goods sold | 1,608,470 | 1,833,362 | 1,796,146 | |||||||||||||
Others | 3,5,30 | 1,996,447 | 1,716,411 | 1,782,404 | ||||||||||||
|
|
|
|
|
| |||||||||||
17,619,665 | 16,836,279 | 16,112,059 | ||||||||||||||
|
|
|
|
|
| |||||||||||
Operating profit | 5 | 1,104,634 | 1,007,258 | 833,851 | ||||||||||||
Finance income | 3,5,31 | 241,196 | 142,155 | 256,435 | ||||||||||||
Finance costs | 3,5,31 | (497,193 | ) | (437,955 | ) | (385,232 | ) | |||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 5,13 | 1,028,403 | 449,543 | 3,270,912 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit before income tax | 5 | 1,877,040 | 1,161,001 | 3,975,966 | ||||||||||||
|
|
|
|
|
| |||||||||||
Income tax expense | 3,32 | 376,502 | 300,268 | 843,978 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit for the year | 1,500,538 | 860,733 | 3,131,988 | |||||||||||||
|
|
|
|
|
| |||||||||||
Attributable to-: | ||||||||||||||||
Owners of the Parent Company | ₩ | 1,504,352 | 888,698 | 3,127,887 | ||||||||||||
Non-controlling interests | (3,814 | ) | (27,965 | ) | 4,101 | |||||||||||
Earnings per share | 3,33 | |||||||||||||||
Basic earnings per share (in won) | ₩ | 20,463 | 12,127 | 44,066 | ||||||||||||
Diluted earnings per share (in won) | 20,459 | 12,127 | 44,066 |
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | ||||||||||||||||||||||||||||||||
Controlling interest | Non- controlling interests | |||||||||||||||||||||||||||||||
Share capital | Capital surplus (deficit) and other capital adjustments | Hybrid bonds | Retained earnings | Reserves | Sub-total | Total equity | ||||||||||||||||||||||||||
Balance, January 1, 2013 | ₩ | 44,639 | (288,883 | ) | — | 12,124,657 | (25,636 | ) | 11,854,777 | 1,000,005 | 12,854,782 | |||||||||||||||||||||
Cash dividends | — | — | — | (655,946 | ) | — | (655,946 | ) | (2,242 | ) | (658,188 | ) | ||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||
Profit (loss) for the year | — | — | — | 1,638,964 | — | 1,638,964 | (29,415 | ) | 1,609,549 | |||||||||||||||||||||||
Other comprehensive income | — | — | — | 3,240 | 13,366 | 16,606 | 1,891 | 18,497 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | — | — | 1,642,204 | 13,366 | 1,655,570 | (27,524 | ) | 1,628,046 | ||||||||||||||||||||||||
Issuance of hybrid bonds | — | — | 398,518 | — | — | 398,518 | — | 398,518 | ||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | (8,420 | ) | — | (8,420 | ) | — | (8,420 | ) | |||||||||||||||||||||
Treasury stock | — | 271,536 | — | — | — | 271,536 | — | 271,536 | ||||||||||||||||||||||||
Business combination under common control | — | (61,854 | ) | — | — | — | (61,854 | ) | — | (61,854 | ) | |||||||||||||||||||||
Changes in ownership in subsidiaries | — | (1,809 | ) | — | — | — | (1,809 | ) | (256,054 | ) | (257,863 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, December 31, 2013 | ₩ | 44,639 | (81,010 | ) | 398,518 | 13,102,495 | (12,270 | ) | 13,452,372 | 714,185 | 14,166,557 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, January 1, 2014 | ₩ | 44,639 | (81,010 | ) | 398,518 | 13,102,495 | (12,270 | ) | 13,452,372 | 714,185 | 14,166,557 | |||||||||||||||||||||
Cash dividends | — | — | — | (666,802 | ) | — | (666,802 | ) | (170 | ) | (666,972 | ) | ||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||
Profit (loss) for the year | — | — | — | 1,801,178 | — | 1,801,178 | (1,858 | ) | 1,799,320 | |||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | (31,440 | ) | 7,781 | (23,659 | ) | (4,827 | ) | (28,486 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | — | — | 1,769,738 | 7,781 | 1,777,519 | (6,685 | ) | 1,770,834 | ||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | (16,840 | ) | — | (16,840 | ) | — | (16,840 | ) | |||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | 23,667 | 23,667 | ||||||||||||||||||||||||
Business combination under common control | — | (28,641 | ) | — | — | — | (28,641 | ) | — | (28,641 | ) | |||||||||||||||||||||
Changes in ownership in subsidiaries | — | (10,869 | ) | — | — | — | (10,869 | ) | 10,534 | (335 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, December 31, 2014 | ₩ | 44,639 | (120,520 | ) | 398,518 | 14,188,591 | (4,489 | ) | 14,506,739 | 741,531 | 15,248,270 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Changes in Equity — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | ||||||||||||||||||||||||||||||||
Controlling interest | Non- controlling interests | |||||||||||||||||||||||||||||||
Share capital | Capital surplus (deficit) and other capital adjustments | Hybrid bonds | Retained earnings | Reserves | Sub-total | Total equity | ||||||||||||||||||||||||||
Balance, January 1, 2015 | ₩ | 44,639 | (120,520 | ) | 398,518 | 14,188,591 | (4,489 | ) | 14,506,739 | 741,531 | 15,248,270 | |||||||||||||||||||||
Cash dividends | — | — | — | (668,494 | ) | — | (668,494 | ) | (143 | ) | (668,637 | ) | ||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||
Profit (loss) for the year | — | — | — | 1,518,604 | — | 1,518,604 | (2,719 | ) | 1,515,885 | |||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | (13,402 | ) | 17,078 | 3,676 | (1,841 | ) | 1,835 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | — | — | 1,505,202 | 17,078 | 1,522,280 | (4,560 | ) | 1,517,720 | ||||||||||||||||||||||||
Interest on hybrid bond | — | — | — | (16,840 | ) | — | (16,840 | ) | — | (16,840 | ) | |||||||||||||||||||||
Acquisition of treasury stock | — | (490,192 | ) | — | — | — | (490,192 | ) | — | (490,192 | ) | |||||||||||||||||||||
Disposal of treasury stock | — | 425,744 | — | — | 425,744 | — | 425,744 | |||||||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | (5,226 | ) | (5,226 | ) | ||||||||||||||||||||||
Changes in ownership in subsidiaries | — | (24,040 | ) | — | (832 | ) | (3,286 | ) | (28,158 | ) | (608,585 | ) | (636,743 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, December 31, 2015 | ₩ | 44,639 | (209,008 | ) | 398,518 | 15,007,627 | 9,303 | 15,251,079 | 123,017 | 15,374,096 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash FlowsComprehensive Income
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | 2015 | 2014 | 2013 | |||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities | ||||||||||||
Profit for the year | ₩ | 1,515,885 | 1,799,320 | 1,609,549 | ||||||||
Adjustments for income and expenses (Note 39) | 3,250,143 | 2,978,995 | 3,275,376 | |||||||||
Changes in assets and liabilities related to operating activities (Note 39) | (685,734 | ) | (707,333 | ) | (969,870 | ) | ||||||
|
|
|
|
|
| |||||||
Sub-total | 4,080,294 | 4,070,982 | 3,915,055 | |||||||||
Interest received | 43,400 | 56,706 | 64,078 | |||||||||
Dividends received | 62,973 | 13,048 | 10,197 | |||||||||
Interest paid | (275,796 | ) | (280,847 | ) | (300,104 | ) | ||||||
Income tax paid | (132,742 | ) | (182,504 | ) | (130,656 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 3,778,129 | 3,677,385 | 3,558,570 | |||||||||
|
|
|
|
|
| |||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | — | 5,627 | 186,425 | |||||||||
Decrease in short-term investment securities, net | 105,158 | — | — | |||||||||
Collection of short-term loans | 398,308 | 207,439 | 290,856 | |||||||||
Decrease in long-term financial instruments | 7,424 | 2,535 | 16 | |||||||||
Proceeds from disposals of long-term investment securities | 149,310 | 65,287 | 287,777 | |||||||||
Proceeds from disposals of investments in associates and joint ventures | 185,094 | 7,333 | 43,249 | |||||||||
Proceeds from disposals of property and equipment | 36,586 | 25,143 | 12,579 | |||||||||
Proceeds from disposals of intangible assets | 3,769 | 10,917 | 2,256 | |||||||||
Proceeds from disposal of assets held for sale | 1,009 | 3,667 | 190,393 | |||||||||
Collection of long-term loans | 2,132 | 4,454 | 13,104 | |||||||||
Decrease in deposits | 14,635 | 8,891 | 8,509 | |||||||||
Proceeds from disposals of other non-current assets | 607 | 94 | 683 | |||||||||
Proceeds from disposals of subsidiaries | 155 | — | 215,939 | |||||||||
Increase in cash due to acquisitions of subsidiaries | 10,355 | — | — | |||||||||
|
|
|
|
|
| |||||||
Sub-total | 914,542 | 341,387 | 1,251,786 | |||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term financial instruments, net | (385,612 | ) | — | — | ||||||||
Increase in short-term investment securities, net | — | (174,209 | ) | (45,032 | ) | |||||||
Increase in short-term loans | (370,378 | ) | (202,501 | ) | (279,926 | ) | ||||||
Increase in long-term loans | (16,701 | ) | (4,341 | ) | (4,050 | ) | ||||||
Increase in long-term financial instruments | (10,008 | ) | (2,522 | ) | (7,510 | ) | ||||||
Acquisitions of long-term investment securities | (312,261 | ) | (41,305 | ) | (22,141 | ) | ||||||
Acquisitions of investments in associates and joint ventures | (65,080 | ) | (60,020 | ) | (97,366 | ) | ||||||
Acquisitions of property and equipment | (2,478,778 | ) | (3,008,026 | ) | (2,879,126 | ) | ||||||
Acquisitions of intangible assets | (127,948 | ) | (130,667 | ) | (243,163 | ) | ||||||
Cash held by disposal group classified as held for sale | — | (552 | ) | — | ||||||||
Increase in deposits | (12,536 | ) | (6,903 | ) | (83,314 | ) | ||||||
Increase in other non-current assets | (2,542 | ) | (18,233 | ) | (1,830 | ) | ||||||
Acquisitions of businesses, net of cash acquired | (13,197 | ) | (375,273 | ) | (94,805 | ) | ||||||
|
|
|
|
|
| |||||||
Sub-total | (3,795,041 | ) | (4,024,552 | ) | (3,758,263 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash used in investing activities | ₩ | (2,880,499 | ) | (3,683,165 | ) | (2,506,477 | ) | |||||
|
|
|
|
|
|
(In millions of won) | Note | 2020 | 2019 | 2018 | ||||||||||||
Profit for the year | ₩ | 1,500,538 | 860,733 | 3,131,988 | ||||||||||||
Other comprehensive income (loss) |
| |||||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||||||
Remeasurement of defined benefit liabilities | 21 | (2,637 | ) | (72,605 | ) | (41,490 | ) | |||||||||
Net change in other comprehensive income (loss) of investments in associates and joint ventures | 13,28 | 271 | (19,269 | ) | (16,330 | ) | ||||||||||
Valuation loss on financial assets at fair value through other comprehensive income | 28,31 | 579,678 | (17,943 | ) | (130,035 | ) | ||||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||||||
Net change in other comprehensive income (loss) of investments in associates and joint ventures | 13,28 | (114,478 | ) | 75,763 | 1,753 | |||||||||||
Net change in unrealized fair value of derivatives | 22,28,31 | 19,138 | 40,681 | 32,227 | ||||||||||||
Foreign currency translation differences for foreign operations | 28 | (20,150 | ) | (5,618 | ) | 12,291 | ||||||||||
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) for the year, net of taxes | 461,822 | 1,009 | (141,584 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income | ₩ | 1,962,360 | 861,742 | 2,990,404 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income (loss) attributable to: |
| |||||||||||||||
Owners of the Parent Company | ₩ | 1,869,075 | 891,051 | 3,000,503 | ||||||||||||
Non-controlling interests | 93,285 | (29,309 | ) | (10,099 | ) |
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows — (Continued)Changes in Equity
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | 2015 | 2014 | 2013 | |||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Increase in short-term borrowings, net | ₩ | — | 102,868 | — | ||||||||
Proceeds from issuance of debentures | 1,375,031 | 1,255,468 | 1,328,694 | |||||||||
Proceeds from long-term borrowings | — | 62,552 | 105,055 | |||||||||
Proceeds from issuance of hybrid bonds | — | — | 398,518 | |||||||||
Cash inflows from settlement of derivatives | 175 | 200 | 19,970 | |||||||||
|
|
|
|
|
| |||||||
Sub-total | 1,375,206 | 1,421,088 | 1,852,237 | |||||||||
Cash outflows for financing activities: | ||||||||||||
Decrease in short-term borrowings, net | (106,600 | ) | — | (340,245 | ) | |||||||
Repayments of long-term account payables-other | (191,436 | ) | (207,791 | ) | (161,575 | ) | ||||||
Repayments of debentures | (620,000 | ) | (1,039,938 | ) | (771,976 | ) | ||||||
Repayments of long-term borrowings | (21,924 | ) | (23,284 | ) | (467,217 | ) | ||||||
Cash outflows from settlement of derivatives | (655 | ) | (6,444 | ) | — | |||||||
Payments of finance lease liabilities | (3,206 | ) | (19,388 | ) | (20,342 | ) | ||||||
Payments of dividends | (668,494 | ) | (666,802 | ) | (655,946 | ) | ||||||
Payments of interest on hybrid bonds | (16,840 | ) | (16,840 | ) | — | |||||||
Acquisitions of treasury stock | (490,192 | ) | — | — | ||||||||
Cash outflows related to equity interest transactions | (220,442 | ) | — | (8,093 | ) | |||||||
|
|
|
|
|
| |||||||
Sub-total | (2,339,789 | ) | (1,980,487 | ) | (2,425,394 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash used in financing activities | (964,583 | ) | (559,399 | ) | (573,157 | ) | ||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in cash and cash equivalents | (66,953 | ) | (565,179 | ) | 478,936 | |||||||
Cash and cash equivalents at beginning of the year | 834,429 | 1,398,639 | 920,125 | |||||||||
Effects of exchange rate changes on cash and cash equivalents | 1,446 | 969 | (422 | ) | ||||||||
|
|
|
|
|
| |||||||
Cash and cash equivalents at end of the year | ₩ | 768,922 | 834,429 | 1,398,639 | ||||||||
|
|
|
|
|
|
(In millions of won) | Attributable to owners | Non-controlling interests | Total equity | |||||||||||||||||||||||||||||
Share capital | Capital surplus (deficit) and others | Hybrid bonds | Retained earnings | Reserves | Total | |||||||||||||||||||||||||||
Balance, December 31, 2017 | ₩ | 44,639 | (202,237 | ) | 398,518 | 17,835,946 | (234,727 | ) | 17,842,139 | 187,056 | 18,029,195 | |||||||||||||||||||||
Impact of adopting IFRS 15 | — | — | — | 1,900,049 | — | 1,900,049 | — | 1,900,049 | ||||||||||||||||||||||||
Impact of adopting IFRS 9 | — | — | — | 60,026 | (68,804 | ) | (8,778 | ) | — | (8,778 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, January 1, 2018 | 44,639 | (202,237 | ) | 398,518 | 19,796,021 | (303,531 | ) | 19,733,410 | 187,056 | 19,920,466 | ||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | 3,127,887 | — | 3,127,887 | 4,101 | 3,131,988 | ||||||||||||||||||||||||
Other comprehensive loss (note 13,21,22,28,31) | — | — | — | (57,473 | ) | (69,911 | ) | (127,384 | ) | (14,200 | ) | (141,584 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | — | — | 3,070,414 | (69,911 | ) | 3,000,503 | (10,099 | ) | 2,990,404 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends (note 34) | — | — | — | (635,482 | ) | — | (635,482 | ) | — | (635,482 | ) | |||||||||||||||||||||
Interim dividends (note 34) | — | — | — | (70,609 | ) | — | (70,609 | ) | — | (70,609 | ) | |||||||||||||||||||||
Share option (note 26) | — | 593 | — | — | — | 593 | 196 | 789 | ||||||||||||||||||||||||
Interest on hybrid bonds (note 25) | — | — | — | (15,803 | ) | — | (15,803 | ) | — | (15,803 | ) | |||||||||||||||||||||
Repayments of hybrid bonds (note 25) | — | (1,482 | ) | (398,518 | ) | — | — | (400,000 | ) | — | (400,000 | ) | ||||||||||||||||||||
Proceeds from issuance of hybrid bonds (note 25) | — | — | 398,759 | — | — | 398,759 | — | 398,759 | ||||||||||||||||||||||||
Comprehensive stock exchange (note 12) | — | 129,595 | — | — | — | 129,595 | — | 129,595 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries | — | 329,856 | — | — | — | 329,856 | (298,725 | ) | 31,131 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | 458,562 | 241 | (721,894 | ) | — | (263,091 | ) | (298,529 | ) | (561,620 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, December 31, 2018 | ₩ | 44,639 | 256,325 | 398,759 | 22,144,541 | (373,442 | ) | 22,470,822 | (121,572 | ) | 22,349,250 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.statements.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements of Changes in Equity — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | Attributable to owners | Non-controlling interests | Total equity | |||||||||||||||||||||||||||||
Share capital | Capital surplus (deficit) and others | Hybrid bonds | Retained earnings | Reserves | Total | |||||||||||||||||||||||||||
Balance, December 31, 2018 | ₩ | 44,639 | 256,325 | 398,759 | 22,144,541 | (373,442 | ) | 22,470,822 | (121,572 | ) | 22,349,250 | |||||||||||||||||||||
Impact of adopting IFRS 16 in 2019 | — | — | — | (24,186 | ) | — | (24,186 | ) | (503 | ) | (24,689 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, January 1, 2019(As reported) | 44,639 | 256,325 | 398,759 | 22,120,355 | (373,442 | ) | 22,446,636 | (122,075 | ) | 22,324,561 | ||||||||||||||||||||||
Changes in accounting policies (note 3) | — | — | — | (5,393 | ) | — | (5,393 | ) | — | (5,393 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, January 1, 2019(Restated) | 44,639 | 256,325 | 398,759 | 22,114,962 | (373,442 | ) | 22,441,243 | (122,075 | ) | 22,319,168 | ||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | 888,698 | — | 888,698 | (27,965 | ) | 860,733 | |||||||||||||||||||||||
Other comprehensive income (loss) (note 13,21,22,28,31) | — | — | — | (41,513 | ) | 43,866 | 2,353 | (1,344 | ) | 1,009 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | — | — | 847,185 | 43,866 | 891,051 | (29,309 | ) | 861,742 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends (note 34) | — | — | — | (646,828 | ) | — | (646,828 | ) | (21,150 | ) | (667,978 | ) | ||||||||||||||||||||
Interim dividends (note 34) | — | — | — | (71,870 | ) | — | (71,870 | ) | (8,650 | ) | (80,520 | ) | ||||||||||||||||||||
Share option (note 26) | — | 295 | — | — | — | 295 | 764 | 1,059 | ||||||||||||||||||||||||
Interest on hybrid bonds (note 25) | — | — | — | (14,766 | ) | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||
Disposal of treasury shares (note 24) | — | 300,000 | — | — | — | 300,000 | — | 300,000 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries (note 12) | — | 51,102 | — | — | — | 51,102 | 47,127 | 98,229 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | 351,397 | — | (733,464 | ) | — | (382,067 | ) | 18,091 | (363,976 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, December 31, 2019 | ₩ | 44,639 | 607,722 | 398,759 | 22,228,683 | (329,576 | ) | 22,950,227 | (133,293 | ) | 22,816,934 | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Changes in Equity — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won) | Attributable to owners | Non-controlling interests | Total equity | |||||||||||||||||||||||||||||
Share capital | Capital surplus (deficit) and others | Hybrid bonds | Retained earnings | Reserves | Total | |||||||||||||||||||||||||||
Balance, January 1, 2020 | ₩ | 44,639 | 607,722 | 398,759 | 22,228,683 | (329,576 | ) | 22,950,227 | (133,293 | ) | 22,816,934 | |||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | 1,504,352 | — | 1,504,352 | (3,814 | ) | 1,500,538 | |||||||||||||||||||||||
Other comprehensive income (loss) (note 13,21,22,28,31) | — | — | — | (4,992 | ) | 369,715 | 364,723 | 97,099 | 461,822 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | — | — | 1,499,360 | 369,715 | 1,869,075 | 93,285 | 1,962,360 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends (note 34) | — | — | — | (658,228 | ) | — | (658,228 | ) | (5,771 | ) | (663,999 | ) | ||||||||||||||||||||
Interim dividends (note 34) | — | — | — | (73,136 | ) | — | (73,136 | ) | — | (73,136 | ) | |||||||||||||||||||||
Share option (note 26) | — | 179 | — | — | — | 179 | 1,256 | 1,435 | ||||||||||||||||||||||||
Interest on hybrid bonds (note 25) | — | — | — | (14,766 | ) | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||
Acquisition of treasury shares (note 24) | — | (426,664 | ) | — | — | — | (426,664 | ) | — | (426,664 | ) | |||||||||||||||||||||
Changes in ownership in subsidiaries (note 12) | — | 97,207 | — | — | — | 97,207 | 696,872 | 794,079 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
— | (329,278 | ) | — | (746,130 | ) | — | (1,075,408 | ) | 692,357 | (383,051 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance, December 31, 2020 | ₩ | 44,639 | 278,444 | 398,759 | 22,981,913 | 40,139 | 23,743,894 | 652,349 | 24,396,243 | |||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2020, 2019 and 2018
(In millions of won) | Note | 2020 | 2019 | 2018 | ||||||||||
Cash flows from operating activities: | ||||||||||||||
Cash generated from operating activities | ||||||||||||||
Profit for the year | ₩ | 1,500,538 | 860,733 | 3,131,988 | ||||||||||
Adjustments for income and expenses | 39 | 4,256,654 | 4,435,039 | 1,568,919 | ||||||||||
Changes in assets and liabilities related to operating activities | 39 | 302,458 | (856,130 | ) | 25,949 | |||||||||
|
|
|
|
|
| |||||||||
6,059,650 | 4,439,642 | 4,726,856 | ||||||||||||
Interest received | 41,832 | 56,392 | 59,065 | |||||||||||
Dividends received | 166,019 | 241,117 | 195,671 | |||||||||||
Interest paid | (397,351 | ) | (360,439 | ) | (255,189 | ) | ||||||||
Income tax paid | (48,274 | ) | (341,728 | ) | (393,823 | ) | ||||||||
|
|
|
|
|
| |||||||||
Net cash provided by operating activities | 5,821,876 | 4,034,984 | 4,332,580 | |||||||||||
|
|
|
|
|
| |||||||||
Cash flows from investing activities: | ||||||||||||||
Cash inflows from investing activities: | ||||||||||||||
Decrease in short-term financial instruments, net | — | 253,971 | — | |||||||||||
Decrease in short-term investment securities, net | 17,684 | 29,503 | — | |||||||||||
Collection of short-term loans | 77,114 | 113,345 | 117,610 | |||||||||||
Decrease in long-term financial instruments | 99 | 231 | 5 | |||||||||||
Proceeds from disposals of long-term investment securities | 46,065 | 234,683 | 371,816 | |||||||||||
Proceeds from disposals of investments in associates and joint ventures | 2,715 | 220 | 74,880 | |||||||||||
Proceeds from disposals of property and equipment | 102,526 | 18,478 | 58,256 | |||||||||||
Proceeds from disposals of intangible assets | 39,654 | 7,327 | 5,851 | |||||||||||
Collection of long-term loans | 4,608 | 4,435 | 10,075 | |||||||||||
Decrease in deposits | 16,244 | 9,180 | 7,490 | |||||||||||
Proceeds from settlement of derivatives | 845 | 601 | — | |||||||||||
Collection of lease receivables | — | 27,712 | — | |||||||||||
Proceeds from disposals of other non-current assets | — | — | 1,186 | |||||||||||
Proceeds from disposals of subsidiaries | 165 | 4,802 | — | |||||||||||
Cash inflow from business combination | 115,834 | 5,016 | 38,925 | |||||||||||
Cash inflow from transfers of business | 5,395 | 45,658 | — | |||||||||||
|
|
|
|
|
| |||||||||
428,948 | 755,162 | 686,094 | ||||||||||||
Cash outflows for investing activities: | ||||||||||||||
Increase in short-term financial instruments, net | (596,025 | ) | — | (373,450 | ) | |||||||||
Increase in short-term investment securities, net | — | — | (49,791 | ) | ||||||||||
Increase in short-term loans | (103,604 | ) | (116,320 | ) | (112,319 | ) | ||||||||
Increase in long-term loans | (11,044 | ) | (11,541 | ) | (6,057 | ) | ||||||||
Increase in long-term financial instruments | (2 | ) | — | (2 | ) | |||||||||
Acquisitions of long-term investment securities | (95,474 | ) | (383,976 | ) | (19,114 | ) | ||||||||
Acquisitions of investments in associates and joint ventures | (170,292 | ) | (264,015 | ) | (206,340 | ) | ||||||||
Acquisitions of property and equipment | (3,557,800 | ) | (3,375,883 | ) | (2,792,390 | ) | ||||||||
Acquisitions of intangible assets | (129,976 | ) | (141,010 | ) | (503,229 | ) | ||||||||
Increase in deposits | (12,175 | ) | (6,164 | ) | (8,591 | ) | ||||||||
Increase in other non-current assets | — | — | (5,927 | ) | ||||||||||
Cash outflow for business combinations | (2,958 | ) | (36,910 | ) | (654,685 | ) | ||||||||
Cash outflow for disposal and liquidation of subsidiaries | — | (927 | ) | (1,924 | ) | |||||||||
|
|
|
|
|
| |||||||||
(4,679,350 | ) | (4,336,746 | ) | (4,733,819 | ) | |||||||||
|
|
|
|
|
| |||||||||
Net cash used in investing activities | ₩ | (4,250,402 | ) | (3,581,584 | ) | (4,047,725 | ) | |||||||
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won) | Note | 2020 | 2019 | 2018 | ||||||||||
Cash flows from financing activities: | ||||||||||||||
Cash inflows from financing activities: | ||||||||||||||
Proceeds from short-term borrowings, net | ₩ | 76,375 | — | — | ||||||||||
Proceeds from issuance of debentures | 1,420,962 | 1,633,444 | 1,809,641 | |||||||||||
Proceeds from long-term borrowings | 1,947,848 | — | 1,920,114 | |||||||||||
Proceeds from issuance of hybrid bonds | — | — | 398,759 | |||||||||||
Cash inflows from settlement of derivatives | 36,691 | 12,426 | 23,247 | |||||||||||
Proceeds from disposals of treasury shares | — | 300,000 | — | |||||||||||
Transactions with non-controlling shareholders | 17,766 | 101,398 | 499,926 | |||||||||||
|
|
|
|
|
| |||||||||
3,499,642 | 2,047,268 | 4,651,687 | ||||||||||||
Cash outflows for financing activities: | ||||||||||||||
Repayments of short-term borrowings, net | — | (59,860 | ) | (87,701 | ) | |||||||||
Repayments of long-term payables – other | (428,100 | ) | (428,153 | ) | (305,644 | ) | ||||||||
Repayments of debentures | (975,500 | ) | (940,000 | ) | (1,487,970 | ) | ||||||||
Repayments of long-term borrowings | (1,950,874 | ) | (89,882 | ) | (1,780,708 | ) | ||||||||
Repayments of hybrid bonds | — | — | (400,000 | ) | ||||||||||
Cash outflows from settlement of derivatives | — | — | (29,278 | ) | ||||||||||
Payments of dividends | (742,136 | ) | (718,698 | ) | (706,091 | ) | ||||||||
Payments of interest on hybrid bonds | (14,766 | ) | (14,766 | ) | (15,803 | ) | ||||||||
Repayments of lease liabilities | (412,666 | ) | (443,238 | ) | — | |||||||||
Acquisition of treasury shares | (426,664 | ) | — | — | ||||||||||
Transactions with non-controlling shareholders | (6,515 | ) | (39,345 | ) | (76,805 | ) | ||||||||
|
|
|
|
|
| |||||||||
(4,957,221 | ) | (2,733,942 | ) | (4,890,000 | ) | |||||||||
|
|
|
|
|
| |||||||||
Net cash used in financing activities | (1,457,579 | ) | (686,674 | ) | (238,313 | ) | ||||||||
|
|
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents | 113,895 | (233,274 | ) | 46,542 | ||||||||||
Cash and cash equivalents at beginning of the year | 1,270,824 | 1,506,699 | 1,457,735 | |||||||||||
Effects of exchange rate changes on cash and cash equivalents | (15,066 | ) | (2,601 | ) | 2,422 | |||||||||
|
|
|
|
|
| |||||||||
Cash and cash equivalents at end of the year | ₩ | 1,369,653 | 1,270,824 | 1,506,699 | ||||||||||
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020, 2019 and 2018
1. | Reporting Entity |
(1) General
SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to engage in providingprovide cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications services in Korea. The head office of the Parent Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of December 31, 2015,2020, the Parent Company’s total issued shares are held by the following:following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Holdings Co., Ltd.(*) | 20,363,452 | 25.22 | ||||||
National Pension Service | 6,963,591 | 8.63 | ||||||
Institutional investors and other minority stockholders | 43,282,117 | 53.60 | ||||||
Treasury stock | 10,136,551 | 12.55 | ||||||
|
|
|
| |||||
Total number of shares | 80,745,711 | 100.00 | ||||||
|
|
|
|
(*) During the year ended December 31, 2015, SK C&C Co., Ltd., the ultimate controlling entity’s investee accounted using the equity method, merged SK Holdings Co., Ltd., the ultimate controlling entity of the Parent Company, and changed its name to SK Holdings Co., Ltd.
Number of shares | Percentage of total shares issued (%) | |||||||
SK Holdings Co., Ltd.(*) | 21,624,120 | 26.78 | ||||||
National Pension Service | 8,853,906 | 10.97 | ||||||
Institutional investors and other shareholders | 39,582,507 | 49.02 | ||||||
Kakao Co., Ltd. | 1,266,620 | 1.57 | ||||||
Treasury shares | 9,418,558 | 11.66 | ||||||
|
|
|
| |||||
80,745,711 | 100.00 | |||||||
|
|
|
|
These consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individualsindividually as “Group entities”entity”). SK Holdings Co., Ltd. is the ultimate controlling entity of the Parent Company.
(*) SK Holdings Co., Ltd. has changed its legal name from SK Holdings Co., Ltd. to SK Inc. effective March 29, 2021
(2) List of subsidiaries
The list of subsidiaries as of December 31, 20152020 and 20142019 is as follows:
Ownership (%) | ||||||||||||
Subsidiary | Location | Primary business | Dec. 31, 2015 | Dec. 31, 2014 | ||||||||
SK Telink Co., Ltd. | Korea | Telecommunication and MVNO service | 83.5 | 83.5 | ||||||||
M&Service Co., Ltd. | Korea | Data base and internet website service | 100.0 | 100.0 | ||||||||
SK Communications Co., Ltd. | Korea | Internet website services | 64.6 | 64.6 | ||||||||
Stonebridge Cinema Fund | Korea | Investment association | 55.2 | 56.0 | ||||||||
Commerce Planet Co., Ltd. | Korea | Online shopping mall operation agency | 100.0 | 100.0 | ||||||||
SK Broadband Co., Ltd.(*1,4) | Korea | Telecommunication services | 100.0 | 50.6 | ||||||||
K-net Culture and Contents Venture Fund | Korea | Investment association | 59.0 | 59.0 | ||||||||
Fitech Focus Limited Partnership II | Korea | Investment association | 66.7 | 66.7 | ||||||||
Open Innovation Fund | Korea | Investment association | 98.9 | 98.9 | ||||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||||
Service Ace Co., Ltd. | Korea | Customer center management service | 100.0 | 100.0 | ||||||||
Service Top Co., Ltd. | Korea | Customer center management service | 100.0 | 100.0 | ||||||||
Network O&S Co., Ltd. | Korea | Base station maintenance service | 100.0 | 100.0 | ||||||||
BNCP Co., Ltd.(*5) | Korea | Internet website services | — | 100.0 | ||||||||
Iconcube Holdings, Inc.(*5) | Korea | Investment association | — | 100.0 | ||||||||
Iconcube, Inc.(*5) | Korea | Internet website services | — | 100.0 |
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Dec. 31, 2020 | Dec. 31, 2019 | ||||||||||
Subsidiaries owned by the Parent Company | SK Telink Co., Ltd. | Korea | Telecommunication and Mobile Virtual Network Operator service | 100.0 | 100.0 | |||||||||
SK Communications Co., Ltd. | Korea | Internet website services | 100.0 | 100.0 | ||||||||||
SK Broadband Co., Ltd.(*2) | Korea | Telecommunication services | 74.3 | 100.0 | ||||||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||||||
SERVICE ACE Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SERVICE TOP Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SK O&S Co., Ltd. | Korea | Base station maintenance service | 100.0 | 100.0 | ||||||||||
SK Telecom China Holdings Co., Ltd. | China | Investment (Holdings company) | 100.0 | 100.0 | ||||||||||
SK Global Healthcare Business Group, Ltd. | Hong Kong | Investment | 100.0 | 100.0 | ||||||||||
YTK Investment Ltd. | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
Atlas Investment | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
SKT Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
One Store Co., Ltd.(*3) | Korea | Telecommunication services | 52.1 | 52.7 | ||||||||||
SK Planet Co., Ltd. | Korea | Telecommunication services, system software development and supply services | 98.7 | 98.7 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Ownership (%) | ||||||||||||
Subsidiary | Location | Primary business | Dec. 31, 2015 | Dec. 31, 2014 | ||||||||
SK Planet Co., Ltd. | Korea | Telecommunication service | 100.0 | 100.0 | ||||||||
Neosnetworks Co., Ltd.(*2) | Korea | Guarding of facilities | 83.9 | 66.7 | ||||||||
IRIVER LIMITED(*3) | Korea | Manufacturing digital audio players and other portable media devices. | 49.0 | 49.0 | ||||||||
Iriver CS Co., Ltd.(*5) | Korea | After-sales service and logistics agency | — | 100.0 | ||||||||
iriver Enterprise Ltd. | Hong Kong | Management of Chinese subsidiary | 100.0 | 100.0 | ||||||||
iriver America Inc. | USA | Marketing and sales in North America | 100.0 | 100.0 | ||||||||
iriver Inc. | USA | Marketing and sales in North America | 100.0 | 100.0 | ||||||||
iriver China Co., Ltd. | China | Sales and manufacturing MP3,4 in China | 100.0 | 100.0 | ||||||||
Dongguan iriver Electronics Co., Ltd. | China | Sales and manufacturing e-book in China | 100.0 | 100.0 | ||||||||
Groovers JP Ltd.(*5) | Japan | Digital music contents sourcing and distribution service | 100.0 | — | ||||||||
SK Telecom China Holdings Co., Ltd. | China | Investment association | 100.0 | 100.0 | ||||||||
Shenzhen E-eye High Tech Co., Ltd.(*5) | China | Manufacturing | — | 65.5 | ||||||||
SK Global Healthcare Business Group, Ltd. | Hong Kong | Investment association | 100.0 | 100.0 | ||||||||
SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 100.0 | 100.0 | ||||||||
SKT Vietnam PTE. Ltd. | Singapore | Telecommunication service | 73.3 | 73.3 | ||||||||
SK Planet Global PTE. Ltd. | Singapore | Digital contents sourcing service | 100.0 | 100.0 | ||||||||
SKP GLOBAL HOLDINGS PTE. LTD. | Singapore | Investment association | 100.0 | 100.0 | ||||||||
SKT Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||
SKP America LLC. | USA | Digital contents sourcing service | 100.0 | 100.0 | ||||||||
YTK Investment Ltd. | Cayman | Investment association | 100.0 | 100.0 | ||||||||
Atlas Investment | Cayman | Investment association | 100.0 | 100.0 | ||||||||
Technology Innovation Partners, L.P. | USA | Investment association | 100.0 | 100.0 | ||||||||
SK Telecom China Fund I L.P. | Cayman | Investment association | 100.0 | 100.0 | ||||||||
Entrix Co., Ltd.(*5) | Korea | Cloud streaming services | 100.0 | — | ||||||||
shopkick Management Company, Inc. | USA | Investment association | 95.2 | 95.2 | ||||||||
shopkick, Inc. | USA | Mileage-based online transaction app development | 100.0 | 100.0 |
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Dec. 31, 2020 | Dec. 31, 2019 | ||||||||||
Eleven Street Co., Ltd.(*4) | Korea | E-commerce | 80.3 | 80.3 | ||||||||||
DREAMUS COMPANY | Korea | Manufacturing digital audio players and other portable media devices | 51.4 | 51.4 | ||||||||||
SK Infosec Co., Ltd.(*5) | Korea | Information security service | 62.6 | 100.0 | ||||||||||
Life & Security Holdings Co., Ltd.(*5,6) | Korea | Investment (Holdings company) | — | 55.0 | ||||||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
id Quantique SA(*7) | Switzerland | Quantum information and communications service | 68.1 | 66.8 | ||||||||||
SK Telecom TMT Investment Corp. | USA | Investment | 100.0 | 100.0 | ||||||||||
FSK L&S Co., Ltd. | Korea | Freight and logistics consulting business | 60.0 | 60.0 | ||||||||||
Incross Co., Ltd. | Korea | Media representative business | 34.6 | 34.6 | ||||||||||
Happy Hanool Co., Ltd. | Korea | Service | 100.0 | 100.0 | ||||||||||
SK stoa Co., Ltd.(*8) | Korea | Other telecommunication retail business | 100.0 | — | ||||||||||
Broadband Nowon Co., Ltd.(*6) | Korea | Cable broadcasting services | 55.0 | — | ||||||||||
T map Mobility Co., Ltd.(*6) | Korea | Mobility business | 100.0 | — | ||||||||||
Subsidiaries owned by SK Planet Co., Ltd. | SK m&service Co., Ltd. | Korea | Database and Internet website service | 100.0 | 100.0 | |||||||||
SK Planet Global Holdings Pte. Ltd. | Singapore | Investment (Holdings company) | 100.0 | 100.0 | ||||||||||
SKP America LLC. | USA | Digital contents sourcing service | 100.0 | 100.0 | ||||||||||
K-net Culture and Contents Venture Fund | Korea | Capital investing in startups | 59.0 | 59.0 | ||||||||||
Subsidiaries owned by DREAMUS COMPANY | iriver Enterprise Ltd. | Hong Kong | Management of Chinese subsidiaries | 100.0 | 100.0 | |||||||||
iriver China Co., Ltd. | China | Sales and manufacturing of MP3 and 4 | 100.0 | 100.0 | ||||||||||
Dongguan iriver Electronics Co., Ltd. | China | Sales and manufacturing of e-book devices | 100.0 | 100.0 | ||||||||||
LIFE DESIGN COMPANY Inc. | Japan | Sales of goods in Japan | 100.0 | 100.0 | ||||||||||
Subsidiary owned by SK Infosec Co., Ltd. | SKinfosec Information Technology(Wuxi) Co., Ltd. | China | System software development and supply services | 100.0 | 100.0 | |||||||||
ADT CAPS Co., Ltd. | Korea | Unmanned security | 100.0 | 100.0 | ||||||||||
CAPSTEC Co., Ltd. | Korea | Manned security | 100.0 | 100.0 | ||||||||||
ADT SECURITY Co., Ltd.(*6) | Korea | Sales and trade of anti-theft devices and surveillance devices | — | 100.0 | ||||||||||
Subsidiary owned by SK Telink Co., Ltd. | SK TELINK VIETNAM Co., Ltd.(*6) | Vietnam | Communications device retail business | — | 100.0 | |||||||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | Korea | Operation of information and communication facility | 100.0 | 100.0 | |||||||||
SK stoa Co., Ltd.(*8) | Korea | Other telecommunication retail business | — | 100.0 | ||||||||||
Subsidiary owned by Quantum Innovation Fund I | Pan Asia Semiconductor Materials LLC (*6, 9) | Korea | Investment | 66.4 | — | |||||||||
Subsidiary owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 79.8 | 79.8 | |||||||||
Subsidiary owned by id Quantique SA | Id Quantique LLC | Korea | Quantum information and communications service | 100.0 | 100.0 | |||||||||
Subsidiaries owned by FSK L&S Co., Ltd. | FSK L&S(Shanghai) Co., Ltd. | China | Logistics business | 66.0 | 66.0 | |||||||||
FSK L&S(Hungary) Co., Ltd. | Hungary | Logistics business | 100.0 | 100.0 | ||||||||||
FSK L&S VIETNAM COMPANY LIMITED(*6) | Vietnam | Logistics business | 100.0 | — |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Dec. 31, 2020 | Dec. 31, 2019 | ||||||||||
Subsidiaries owned by Incross Co., Ltd. | Infra Communications Co., Ltd. | Korea | Service operation | 100.0 | 100.0 | |||||||||
Mindknock Co., Ltd. | Korea | Software development | 100.0 | 100.0 | ||||||||||
Others(*10) | SK Telecom Innovation Fund, L.P. | USA | Investment | 100.0 | 100.0 | |||||||||
SK Telecom China Fund I L.P. | Cayman Islands | Investment | 100.0 | 100.0 |
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company. |
(*2) | On |
(*3) | The ownership interest has changed as third-party share option of One Store Co., Ltd. was exercised during the year ended December 31, 2020. |
(*4) | 80.3% of the shares issued by Eleven Street Co., Ltd. are owned by the Parent Company and 18.2% of redeemable convertible preferred shares with voting rights by non-controlling shareholders. For the year ended December 31, 2019, Eleven Street Co., Ltd. acquired 1.5% of its outstanding shares from SK Planet Co., Ltd., which is currently held as treasury |
(*5) | SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve management efficiency on December 30, 2020. The Group acquired 34,200,560 shares of SK Infosec Co., Ltd. based on the exchange ratio on December 30, 2020. As a result of merger, the Group’s ownership interest of SK Infosec Co,, Ltd. has changed from 100% to 62.6%. |
(*6) | Details of changes in |
(*7) | The Parent Company participated in a third-party allotment offering and acquired 4,166,667 shares on July 23, 2020. |
(*8) | The Parent Company acquired 3,631,355 shares (100%) of SK stoa Co., Ltd. from SK Broadband Co., Ltd., a subsidiary of the Parent Company, |
(* | PanAsia Semiconductor Materials LLC increased its capital by a third-party allotment, which has changed the |
(* |
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
In accordance with the Group’s accounting policy relating to the scope of consolidation, small-sized subsidiaries including IM Shopping Inc. were excluded from the list of subsidiaries as the effects on the Group’s consolidated financial statements are not material considering both individual and overall quantitative and qualitative effects.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(3) Condensed financial information of subsidiaries
Condensed financial information of significant subsidiaries as of and for the year ended December 31, 20152020 is as follows:
(In millions of won) | ||||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity (deficit) | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd. | ₩ | 309,955 | 113,878 | 196,077 | 431,368 | 55,781 | ||||||||||||||
M&Service Co., Ltd. | 89,452 | 42,414 | 47,038 | 143,255 | 5,549 | |||||||||||||||
SK Communications Co., Ltd. | 152,496 | 35,014 | 117,482 | 80,147 | (14,826 | ) | ||||||||||||||
Stonebridge Cinema Fund | 7,797 | 523 | 7,274 | — | 3,290 | |||||||||||||||
Commerce Planet Co., Ltd. | 26,291 | 33,660 | (7,369 | ) | 78,647 | (3,003 | ) | |||||||||||||
SK Broadband Co., Ltd. | 3,291,707 | 2,170,484 | 1,121,223 | 2,731,344 | 10,832 | |||||||||||||||
K-net Culture and Contents Venture Fund | 13,169 | — | 13,169 | — | (421 | ) | ||||||||||||||
Fitech Focus Limited Partnership II | 18,249 | — | 18,249 | — | (1,085 | ) | ||||||||||||||
Open Innovation Fund | 19,455 | — | 19,455 | — | (2,348 | ) | ||||||||||||||
PS&Marketing Corporation | 509,580 | 300,364 | 209,216 | 1,791,944 | 4,835 | |||||||||||||||
Service Ace Co., Ltd. | 65,424 | 34,240 | 31,184 | 206,338 | 2,778 | |||||||||||||||
Service Top Co., Ltd. | 61,897 | 38,482 | 23,415 | 197,092 | 4,396 | |||||||||||||||
Network O&S Co., Ltd. | 77,426 | 48,069 | 29,357 | 210,676 | 6,466 | |||||||||||||||
SK Planet Co., Ltd. | 2,406,988 | 784,631 | 1,622,357 | 1,624,630 | (75,111 | ) | ||||||||||||||
Neosnetworks Co., Ltd. | 68,361 | 15,583 | 52,778 | 61,092 | (5,615 | ) | ||||||||||||||
IRIVER LIMITED(*1) | 60,434 | 12,377 | 48,057 | 55,637 | 635 | |||||||||||||||
SK Telecom China Holdings Co., Ltd. | 37,748 | 2,111 | 35,637 | 10,764 | (10,124 | ) | ||||||||||||||
SK Global Healthcare Business Group, Ltd. | 25,768 | — | 25,768 | — | (106 | ) | ||||||||||||||
SK Planet Japan, K. K. | 5,068 | 1,021 | 4,047 | 699 | (4,988 | ) | ||||||||||||||
SKT Vietnam PTE. Ltd. | 4,523 | 1,371 | 3,152 | — | — | |||||||||||||||
SK Planet Global PTE. Ltd. | 1,570 | 218 | 1,352 | 1 | (4,069 | ) | ||||||||||||||
SKP GLOBAL HOLDINGS PTE. LTD. | 28,320 | 16 | 28,304 | — | (23,918 | ) | ||||||||||||||
SKT Americas, Inc. | 51,138 | 837 | 50,301 | 9,132 | (3,204 | ) | ||||||||||||||
SKP America LLC. | 380,141 | — | 380,141 | — | 791 | |||||||||||||||
YTK Investment Ltd. | 16,318 | — | 16,318 | — | (3,210 | ) | ||||||||||||||
Atlas Investment(*2) | 77,750 | 199 | 77,551 | — | (2,429 | ) | ||||||||||||||
Entrix Co., Ltd. | 30,876 | 3,186 | 27,690 | 4,895 | (1,826 | ) | ||||||||||||||
shopkick Management Company, Inc. | 306,248 | 7 | 306,241 | 7 | (2,455 | ) | ||||||||||||||
shopkick, Inc. | 25,388 | 32,243 | (6,855 | ) | 33,851 | (52,390 | ) |
Subsidiary SK Telink Co., Ltd. Eleven Street Co., Ltd. SK m&service Co., Ltd. SK Broadband Co., Ltd. K-net Culture and Contents Venture Fund PS&Marketing Corporation SERVICE ACE Co., Ltd. SERVICE TOP Co., Ltd. SK O&S Co., Ltd. SK Planet Co., Ltd. DREAMUS COMPANY(*1) SK Infosec Co., Ltd.(*2)(In millions of won) As of December 31, 2020 2020 Total assets Total liabilities Total
equity Revenue Profit (loss) ₩ 176,872 60,702 116,170 351,334 18,010 999,225 542,534 456,691 545,556 (29,623 ) 129,738 74,962 54,776 214,949 2,759 5,765,808 3,119,489 2,646,319 3,713,021 150,694 377,683 65,896 311,787 — (44,737 ) 470,521 257,809 212,712 1,427,218 (847 ) 96,258 71,890 24,368 206,612 2,905 69,496 51,584 17,912 195,479 2,592 88,663 54,012 34,651 278,948 778 536,981 214,846 322,135 276,462 1,305 172,443 76,642 95,801 226,329 (23,068 ) 2,927,396 2,550,936 376,460 1,327,150 14,227
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | As of December 31, 2020 | 2020 | ||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
One Store Co., Ltd. | 243,442 | 99,943 | 143,499 | 155,218 | 1,952 | |||||||||||||||
Home & Service Co., Ltd. | 124,197 | 88,740 | 35,457 | 397,754 | (20 | ) | ||||||||||||||
SK stoa Co., Ltd. | 107,982 | 79,339 | 28,643 | 268,693 | 17,154 | |||||||||||||||
FSK L&S Co., Ltd.(*3) | 66,117 | 35,192 | 30,925 | 205,623 | 3,022 | |||||||||||||||
Incross Co., Ltd.(*4) | 179,308 | 104,778 | 74,530 | 39,440 | 12,307 |
(*1) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY. |
(*2) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd. and two other subsidiaries of SK Infosec Co., Ltd. and including profit and loss which Life Security & Holdings Co., Ltd. recognized prior to the merger. |
(*3) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and two other subsidiaries of FSK L&S Co., Ltd. |
(*4) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd. |
Condensed financial information of significant subsidiaries as of and for the year ended December 31, 20142019 is as follows:
(In millions of won) | ||||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity (deficit) | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd. | ₩ | 324,028 | 184,074 | 139,954 | 465,463 | 13,073 | ||||||||||||||
M&Service Co., Ltd. | 78,826 | 36,817 | 42,009 | 133,789 | 7,458 | |||||||||||||||
SK Communications Co., Ltd. | 176,168 | 41,987 | 134,181 | 93,910 | (18,386 | ) | ||||||||||||||
Stonebridge Cinema Fund | 11,137 | 320 | 10,817 | — | 383 | |||||||||||||||
Commerce Planet Co., Ltd. | 26,078 | 27,259 | (1,181 | ) | 64,509 | 933 | ||||||||||||||
SK Broadband Co., Ltd. | 3,109,991 | 1,988,379 | 1,121,612 | 2,654,381 | 4,307 | |||||||||||||||
K-net Culture and Contents Venture Fund | 21,094 | 4 | 21,090 | — | 4,920 | |||||||||||||||
Fitech Focus Limited Partnership II | 19,301 | — | 19,301 | — | (2,055 | ) | ||||||||||||||
Open Innovation Fund | 21,765 | — | 21,765 | — | (6,266 | ) | ||||||||||||||
PS&Marketing Corporation | 544,292 | 336,221 | 208,071 | 1,627,217 | 2,817 | |||||||||||||||
Service Ace Co., Ltd. | 66,336 | 37,770 | 28,566 | 207,427 | 3,570 | |||||||||||||||
Service Top Co., Ltd. | 57,032 | 36,723 | 20,309 | 188,835 | 3,503 | |||||||||||||||
Network O&S Co., Ltd. | 71,348 | 45,770 | 25,578 | 211,916 | 3,823 | |||||||||||||||
BNCP Co., Ltd. | 6,785 | 5,887 | 898 | 12,869 | (1,505 | ) | ||||||||||||||
Iconcube Holdings, Inc.(*1) | 1,415 | 515 | 900 | 630 | (2,284 | ) | ||||||||||||||
SK Planet Co., Ltd. | 2,579,286 | 746,832 | 1,832,454 | 1,512,492 | 1,593 | |||||||||||||||
Neosnetworks Co., Ltd. | 31,633 | 13,251 | 18,382 | 33,302 | (1,989 | ) | ||||||||||||||
IRIVER LIMITED(*2) | 61,945 | 14,392 | 47,553 | 53,192 | 2,345 | |||||||||||||||
SK Telecom China Holdings Co., Ltd. | 37,877 | 2,335 | 35,542 | 12,420 | 1,058 | |||||||||||||||
Shenzhen E-eye High Tech Co., Ltd. | 15,566 | 408 | 15,158 | 3,637 | (1,143 | ) | ||||||||||||||
SK Global Healthcare Business Group, Ltd. | 25,874 | — | 25,874 | — | (689 | ) | ||||||||||||||
SK Planet Japan, K. K. | 5,222 | 1,638 | 3,584 | 93 | (4,561 | ) | ||||||||||||||
SKT Vietnam PTE. Ltd. | 4,242 | 1,286 | 2,956 | — | (73 | ) | ||||||||||||||
SK Planet Global PTE. Ltd. | 4,215 | 64 | 4,151 | 87 | (2,543 | ) | ||||||||||||||
SKP GLOBAL HOLDINGS PTE. LTD. | 29,529 | 11 | 29,518 | — | (9,716 | ) | ||||||||||||||
SKT Americas, Inc. | 42,159 | 554 | 41,605 | 9,100 | (5 | ) | ||||||||||||||
SKP America LLC. | 297,981 | 67 | 297,914 | — | (2,370 | ) | ||||||||||||||
YTK Investment Ltd. | 27,944 | — | 27,944 | — | (15,259 | ) | ||||||||||||||
Atlas Investment(*3) | 66,825 | 94 | 66,731 | — | (6,626 | ) | ||||||||||||||
shopkick Management Company, Inc. | 230,925 | — | 230,925 | — | — | |||||||||||||||
shopkick, Inc. | 28,216 | 13,698 | 14,518 | — | — |
(In millions of won) | As of December 31, 2019 | 2019 | ||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd.(*1) | ₩ | 265,725 | 77,378 | 188,347 | 363,627 | 3,010 | ||||||||||||||
Eleven Street Co., Ltd. | 923,424 | 446,432 | 476,992 | 530,489 | (5,077 | ) | ||||||||||||||
SK m&service Co., Ltd. | 109,699 | 58,605 | 51,094 | 218,848 | 2,448 | |||||||||||||||
SK Broadband Co., Ltd. | 4,565,732 | 2,930,482 | 1,635,250 | 3,170,691 | 47,701 | |||||||||||||||
K-net Culture and Contents Venture Fund | 151,493 | 21,163 | 130,330 | — | (294 | ) | ||||||||||||||
PS&Marketing Corporation | 439,947 | 225,942 | 214,005 | 1,684,576 | 96 | |||||||||||||||
SERVICE ACE Co., Ltd. | 80,844 | 55,133 | 25,711 | 206,080 | 3,906 | |||||||||||||||
SERVICE TOP Co., Ltd. | 66,932 | 50,060 | 16,872 | 193,377 | 2,230 | |||||||||||||||
SK O&S Co., Ltd. | 96,446 | 62,086 | 34,360 | 281,634 | 1,724 | |||||||||||||||
SK Planet Co., Ltd. | 595,838 | 278,438 | 317,400 | 275,544 | 1,214 | |||||||||||||||
DREAMUS COMPANY(*2) | 171,586 | 53,669 | 117,917 | 196,961 | (48,006 | ) | ||||||||||||||
Life & Security Holdings Co., Ltd.(*3) | 2,639,781 | 2,330,920 | 308,861 | 913,301 | 12,703 | |||||||||||||||
SK Infosec Co., Ltd.(*4) | 158,424 | 61,644 | 96,780 | 270,423 | 18,520 | |||||||||||||||
One Store Co., Ltd. | 236,329 | 93,625 | 142,704 | 135,116 | (5,415 | ) | ||||||||||||||
Home & Service Co., Ltd. | 121,202 | 84,378 | 36,824 | 351,154 | (427 | ) | ||||||||||||||
SK stoa Co., Ltd. | 70,754 | 59,207 | 11,547 | 196,063 | 875 | |||||||||||||||
FSK L&S Co., Ltd.(*5) | 47,550 | 19,651 | 27,899 | 130,872 | 306 | |||||||||||||||
Incross Co., Ltd.(*6) | 144,263 | 78,519 | 65,744 | 19,787 | 5,756 |
(*1) | The condensed financial information of |
(*2) | The condensed financial information of |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(*3) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries of Life & Security Holdings Co., Ltd. |
(*4) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SK infosec Information Technology (Wuxi) Co., Ltd. |
(*5) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and another subsidiary of FSK L&S Co., Ltd. |
(*6) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary from the date of acquisition to December 31, 2019. |
Condensed financial information of the significant subsidiaries as of and for the year ended December 31, 20132018 is as follows:
(In millions of won) | ||||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity (deficit) | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd. | ₩ | 252,475 | 125,807 | 126,668 | 433,276 | 16,024 | ||||||||||||||
M&Service Co., Ltd. | 68,587 | 32,626 | 35,961 | 130,178 | 4,176 | |||||||||||||||
SK Communications Co., Ltd. | 205,792 | 53,755 | 152,037 | 128,272 | (41,893 | ) | ||||||||||||||
Stonebridge Cinema Fund | 11,974 | 377 | 11,597 | 1 | 1,320 | |||||||||||||||
Commerce Planet Co., Ltd. | 26,237 | 27,333 | (1,096 | ) | 56,565 | 587 | ||||||||||||||
SK Broadband Co., Ltd. | 3,044,349 | 1,916,721 | 1,127,628 | 2,539,366 | 12,306 | |||||||||||||||
K-net Culture and Contents Venture Fund | 16,181 | 12 | 16,169 | — | (16,595 | ) | ||||||||||||||
Fitech Focus Limited Partnership II | 21,446 | — | 21,446 | — | (1,179 | ) | ||||||||||||||
Open Innovation Fund | 27,996 | — | 27,996 | — | (15,408 | ) | ||||||||||||||
PS&Marketing Corporation | 277,300 | 141,356 | 135,944 | 1,095,647 | 1,369 | |||||||||||||||
Service Ace Co., Ltd. | 56,276 | 30,667 | 25,609 | 187,961 | 2,995 | |||||||||||||||
Service Top Co., Ltd. | 48,369 | 30,634 | 17,735 | 159,364 | 3,484 | |||||||||||||||
Network O&S Co., Ltd. | 56,677 | 32,353 | 24,324 | 198,664 | 2,060 | |||||||||||||||
BNCP Co., Ltd. | 12,108 | 6,433 | 5,675 | 14,819 | (9,019 | ) | ||||||||||||||
SK Planet Co., Ltd. | 2,528,054 | 766,841 | 1,761,213 | 1,378,211 | 201,556 | |||||||||||||||
SK Telecom China Holdings Co., Ltd. | 36,261 | 2,052 | 34,209 | 17,025 | 613 | |||||||||||||||
Shenzhen E-eye High Tech Co., Ltd. | 17,894 | 1,841 | 16,053 | 7,703 | (789 | ) | ||||||||||||||
SK Global Healthcare Business Group, Ltd. | 27,625 | — | 27,625 | — | 831 | |||||||||||||||
SK Planet Japan, K. K. | 1,793 | 280 | 1,513 | 394 | (1,635 | ) | ||||||||||||||
SKT Vietnam PTE. Ltd. | 11,773 | 8,862 | 2,911 | — | (28,086 | ) | ||||||||||||||
SK Planet Global PTE. Ltd. | 697 | 149 | 548 | 331 | (1,420 | ) | ||||||||||||||
SKP GLOBAL HOLDINGS PTE. LTD. | 20,713 | 9 | 20,704 | — | 1,542 | |||||||||||||||
SKT Americas, Inc. | 33,876 | 1,315 | 32,561 | 9,207 | (6,544 | ) | ||||||||||||||
SKP America LLC. | 22,399 | 12 | 22,387 | — | — | |||||||||||||||
YTK Investment Ltd. | 42,118 | — | 42,118 | — | (21,764 | ) | ||||||||||||||
Atlas Investment(*) | 40,218 | 101 | 40,117 | — | (8,248 | ) |
(In millions of won) | As of December 31, 2018 | 2018 | ||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd.(*1) | ₩ | 493,972 | 107,565 | 386,407 | 373,019 | 39,962 | ||||||||||||||
Eleven Street Co., Ltd.(*2) | 1,045,946 | 495,907 | 550,039 | 228,000 | (9,507 | ) | ||||||||||||||
SK m&service Co., Ltd. | 97,924 | 48,182 | 49,742 | 208,936 | (119 | ) | ||||||||||||||
SK Communications Co., Ltd. | 79,646 | 28,458 | 51,188 | 41,604 | (10,323 | ) | ||||||||||||||
SK Broadband Co., Ltd. | 4,266,458 | 2,682,236 | 1,584,222 | 3,158,877 | 154,999 | |||||||||||||||
K-net Culture and Contents Venture Fund | 147,691 | 20,873 | 126,818 | — | 58,584 | |||||||||||||||
PS&Marketing Corporation | 432,699 | 216,624 | 216,075 | 1,587,203 | 76 | |||||||||||||||
SERVICE ACE Co., Ltd. | 76,770 | 45,229 | 31,541 | 198,164 | 4,217 | |||||||||||||||
SERVICE TOP Co., Ltd. | 74,452 | 49,400 | 25,052 | 205,574 | 5,276 | |||||||||||||||
SK O&S Co., Ltd. | 81,773 | 42,257 | 39,516 | 265,183 | 1,089 | |||||||||||||||
SK Planet Co., Ltd. | 753,630 | 436,501 | 317,129 | 672,648 | (436,106 | ) | ||||||||||||||
DREAMUS COMPANY(*3) | 204,479 | 44,620 | 159,859 | 137,849 | (21,314 | ) | ||||||||||||||
SKP America LLC. | 383,697 | — | 383,697 | — | (370 | ) | ||||||||||||||
Life & Security Holdings Co., Ltd.(*4) | 2,611,838 | 2,261,456 | 350,382 | 197,487 | 6,038 | |||||||||||||||
SK Infosec Co., Ltd.(*5) | 183,896 | 54,301 | 129,595 | — | — | |||||||||||||||
One Store Co., Ltd. | 116,716 | 65,890 | 50,826 | 110,284 | (13,903 | ) | ||||||||||||||
Home & Service Co., Ltd. | 87,159 | 45,341 | 41,818 | 325,177 | (1,264 | ) | ||||||||||||||
SK stoa Co., Ltd. | 41,305 | 37,560 | 3,745 | 116,459 | (16,987 | ) |
(* | The condensed financial information of |
(*2) | The condensed financial information of |
(*3) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and six other subsidiaries of |
(*4) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries, including 3 months of revenue and profit and loss since Life & Security Holdings Co., Ltd. was acquired by the Parent Company on October 1, 2018. |
(*5) | SK Infosec Co., Ltd. was acquired by the Parent Company and newly included in consolidation as of December 27, 2018. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(4) Changes in subsidiaries
1) The list of subsidiaries that were newly included in consolidation during the year ended December 31, 20152020 is as follows:
Subsidiary | Reason | |
| ||
| Established by | |
Pan Asia Semiconductor Materials LLC | Established by Quantum Innovation Fund I | |
T map Mobility Co., | Spin-off from the Parent |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
2) The list of subsidiaries that were excluded from subsidiariesconsolidation during the year ended December 31, 20152020 is as follows:
Subsidiary | Reason | |
| ||
| ||
| ||
| Merged into | |
| Disposed | |
Life & Security Holdings Co., Ltd. | Merged into SK Infosec Co, Ltd. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(5) The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows. There were no dividends paid during the years ended December 31, 2015, 2014 and 2013 by subsidiaries of which non-controlling interests are significant.follows:
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(In millions of won) | DREAMUS COMPANY | One Store Co., Ltd. | Eleven Street Co., Ltd. | SK Infosec Co., Ltd.(*) | Incross Co., Ltd. | SK Broadband Co., Ltd. | ||||||||||||||||||
Ownership of non-controlling interests (%) | 48.6 | 47.4 | 18.2 | 37.4 | 55.2 | 24.9 | ||||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||
Current assets | ₩ | 146,278 | 215,672 | 896,828 | 306,520 | 165,668 | 1,179,743 | |||||||||||||||||
Non-current assets | 26,165 | 27,770 | 102,397 | 2,620,876 | 13,640 | 4,586,065 | ||||||||||||||||||
Current liabilities | (72,762 | ) | (96,139 | ) | (508,427 | ) | (417,194 | ) | (101,065 | ) | (1,279,132 | ) | ||||||||||||
Non-current liabilities | (3,880 | ) | (3,804 | ) | (34,107 | ) | (2,133,742 | ) | (3,713 | ) | (1,840,357 | ) | ||||||||||||
Net assets | 95,801 | 143,499 | 456,691 | 376,460 | 74,530 | 2,646,319 | ||||||||||||||||||
Fair value adjustment and others | — | — | (14,297 | ) | (1,227,442 | ) | — | — | ||||||||||||||||
Net assets on the consolidated financial statements | 95,801 | 143,499 | 442,394 | (850,982 | ) | 74,530 | 2,646,319 | |||||||||||||||||
Carrying amount of non-controlling interests | 47,452 | 68,573 | 81,754 | (318,267 | ) | 46,010 | 665,020 | |||||||||||||||||
2020 | ||||||||||||||||||||||||
Revenue | ₩ | 226,329 | 155,218 | 545,556 | 1,327,150 | 39,440 | 3,713,021 | |||||||||||||||||
Profit (loss) for the year | (23,068 | ) | 1,952 | (29,623 | ) | 14,227 | 12,307 | 150,694 | ||||||||||||||||
Depreciation of the fair value adjustment and others | — | — | (492 | ) | (19,229 | ) | — | — | ||||||||||||||||
Profit (loss) for the year on the consolidated financial statements | (23,068 | ) | 1,952 | (30,115 | ) | (5,002 | ) | 12,307 | 150,694 | |||||||||||||||
Total comprehensive income (loss) | (22,740 | ) | 2,278 | (15,793 | ) | (3,758 | ) | 12,145 | 151,417 | |||||||||||||||
Profit (loss) attributable to non-controlling interests | (10,770 | ) | 930 | (5,565 | ) | (12,432 | ) | 7,568 | 27,240 | |||||||||||||||
Net cash provided by operating activities | ₩ | 15,223 | 38,006 | 65,499 | 248,524 | 24,629 | 1,035,474 | |||||||||||||||||
Net cash provided by (used in) investing activities | (2,471 | ) | (62,816 | ) | (71,644 | ) | (229,130 | ) | (2,284 | ) | (844,454 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (2,329 | ) | (2,499 | ) | (18,059 | ) | 11,134 | (4,278 | ) | (93,259 | ) | |||||||||||||
Effects of exchange rate changes on cash and cash equivalents | (2,053 | ) | — | (385 | ) | (554 | ) | — | — | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | 8,370 | (27,309 | ) | (24,589 | ) | 29,974 | 18,067 | 97,761 | ||||||||||||||||
Dividend paid to non-controlling interests during the year ended December 31, 2020 | ₩ | — | — | 5,000 | 17,273 | — | — |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||
December 31, 2014 | ||||||||
SK Communications Co., Ltd. | SK Broadband Co., Ltd. | |||||||
Ownership of non-controlling interests (%) | 35.4 | 49.4 | ||||||
Current assets | ₩ | 89,135 | 463,764 | |||||
Non-current assets | 87,033 | 2,646,227 | ||||||
Current liabilities | (41,252 | ) | (881,886 | ) | ||||
Non-current liabilities | (735 | ) | (1,106,493 | ) | ||||
Net assets | 134,181 | 1,121,612 | ||||||
Adjustment for fair value | — | 111,561 | ||||||
Net assets of consolidated entities | 134,181 | 1,233,173 | ||||||
Carrying amount of non-controlling interests | 47,577 | 609,638 | ||||||
Revenue | ₩ | 93,910 | 2,654,381 | |||||
Profit (loss) for the period | (18,386 | ) | 4,307 | |||||
Amortization of fair value adjustment | — | (1,916 | ) | |||||
Profit (loss) of the consolidated entities | (18,386 | ) | 2,391 | |||||
Total comprehensive income (loss) | 530 | (10,324 | ) | |||||
Profit (loss) attributable to non-controlling interests | (6,519 | ) | 1,182 | |||||
Net cash provided by (used in) operating activities | ₩ | (5,962 | ) | 431,760 | ||||
Net cash used in investing activities | (17,927 | ) | (599,016 | ) | ||||
Net cash provided by financing activities | — | 119,484 | ||||||
Net decrease in cash and cash equivalents | (23,889 | ) | (47,772 | ) |
(*) | The condensed financial information of SK Infosec Co., Ltd. includes profit and loss, cash flows which Life Security & Holdings Co., Ltd. recognized prior to the merger. |
(In millions of won) | (In millions of won) | DREAMUS COMPANY | One Store Co., Ltd. | Eleven Street Co., Ltd. | Life & Security Holdings Co., Ltd. | Incross Co., Ltd. | ||||||||||||||||||||||
Ownership of non-controlling interests (%) | 48.6 | 47.3 | 18.2 | 45.0 | 65.4 | |||||||||||||||||||||||
December 31, 2013 | ||||||||||||||||||||||||||||
SK Communications Co., Ltd. | SK Broadband Co., Ltd. | As of December 31, 2019 | ||||||||||||||||||||||||||
Ownership of non-controlling interests (%) | 35.4 | 49.4 | ||||||||||||||||||||||||||
Current assets | ₩ | 108,100 | 533,597 | ₩ | 136,269 | 208,527 | 779,568 | 126,437 | 133,741 | |||||||||||||||||||
Non-current assets | 97,692 | 2,510,752 | 35,317 | 27,802 | 143,856 | 2,513,344 | 10,522 | |||||||||||||||||||||
Current liabilities | (51,868 | ) | (938,385 | ) | (49,776 | ) | (88,842 | ) | (420,022 | ) | (279,403 | ) | (77,530 | ) | ||||||||||||||
Non-current liabilities | (1,887 | ) | (978,336 | ) | (3,893 | ) | (4,783 | ) | (26,410 | ) | (2,051,517 | ) | (989 | ) | ||||||||||||||
Net assets | 152,037 | 1,127,628 | 117,917 | 142,704 | 476,992 | 308,861 | 65,744 | |||||||||||||||||||||
Adjustment for fair value | — | 113,478 | ||||||||||||||||||||||||||
Net assets of consolidated entities | 152,037 | 1,241,106 | ||||||||||||||||||||||||||
Fair value adjustment and others | — | — | (18,805 | ) | (1,219,701 | ) | — | |||||||||||||||||||||
Net assets on the consolidated financial statements | 117,917 | 142,704 | 458,187 | (910,840 | ) | 65,744 | ||||||||||||||||||||||
Carrying amount of non-controlling interests | 53,856 | 613,560 | 57,175 | 67,742 | 84,673 | (409,878 | ) | 41,074 | ||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||
Revenue | ₩ | 128,272 | 2,539,366 | ₩ | 196,961 | 135,116 | 530,489 | 913,301 | 19,787 | |||||||||||||||||||
Profit (loss) for the period | (41,893 | ) | 12,306 | |||||||||||||||||||||||||
Amortization of fair value adjustment | — | (30,977 | ) | |||||||||||||||||||||||||
Loss of the consolidated entities | (41,893 | ) | (18,671 | ) | ||||||||||||||||||||||||
Total comprehensive loss | (43,318 | ) | (13,059 | ) | ||||||||||||||||||||||||
Loss attributable to non-controlling interests | (14,853 | ) | (9,231 | ) | ||||||||||||||||||||||||
Profit (loss) for the year | (48,006 | ) | (5,415 | ) | (5,077 | ) | 12,703 | 5,756 | ||||||||||||||||||||
Depreciation of the fair value adjustment and others | — | — | (614 | ) | (14,913 | ) | — | |||||||||||||||||||||
Profit (loss) for the year on the consolidated financial statements | (48,006 | ) | (5,415 | ) | (5,691 | ) | (2,210 | ) | 5,756 | |||||||||||||||||||
Total comprehensive income (loss) | (47,971 | ) | (5,856 | ) | (13,590 | ) | (5,413 | ) | 5,396 | |||||||||||||||||||
Profit (loss) attributable to non-controlling interests | (23,281 | ) | (2,256 | ) | (1,064 | ) | (978 | ) | 3,630 | |||||||||||||||||||
Net cash provided by (used in) operating activities | ₩ | (22,867 | ) | 440,036 | ₩ | (1,387 | ) | 14,426 | 7,980 | 238,378 | (9,331 | ) | ||||||||||||||||
Net cash provided by (used in) investing activities | 41,788 | (329,346 | ) | (2,596 | ) | (87,275 | ) | 102,366 | (194,472 | ) | 5,053 | |||||||||||||||||
Net cash provided by (used in) financing activities | 19 | (129,181 | ) | (2,965 | ) | 96,189 | (72,686 | ) | (51,129 | ) | (4,644 | ) | ||||||||||||||||
Effects on exchange rate changes on cash and cash equivalents | 197 | 2 | 35 | — | — | |||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 18,940 | (18,491 | ) | (6,751 | ) | 23,342 | 37,695 | (7,223 | ) | (8,922 | ) | |||||||||||||||||
Dividend paid to non-controlling interests during the year ended December 31, 2019 | ₩ | — | — | 17,500 | 28,786 | — |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | K-net Culture and Contents Venture Fund | DREAMUS COMPANY | One Store Co., Ltd. | Eleven Street Co., Ltd. | Life & Security Holdings Co., Ltd.(*) | |||||||||||||||
Ownership of non-controlling interests (%) | 41.0 | 47.4 | 34.5 | 18.2 | 45.0 | |||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||
Current assets | ₩ | 118 | 150,014 | 92,844 | 923,153 | 124,091 | ||||||||||||||
Non-current assets | 147,573 | 54,465 | 23,872 | 122,793 | 2,487,747 | |||||||||||||||
Current liabilities | (20,873 | ) | (41,957 | ) | (63,440 | ) | (486,391 | ) | (243,064 | ) | ||||||||||
Non-current liabilities | — | (2,663 | ) | (2,450 | ) | (9,516 | ) | (2,018,392 | ) | |||||||||||
Net assets | 126,818 | 159,859 | 50,826 | 550,039 | 350,382 | |||||||||||||||
Fair value adjustment and others | — | — | — | (23,191 | ) | (1,216,347 | ) | |||||||||||||
Net assets on the consolidated financial statements | 126,818 | 159,859 | 50,826 | 526,848 | (865,965 | ) | ||||||||||||||
Carrying amount of non-controlling interests | 51,995 | 76,204 | 17,711 | 95,811 | (389,684 | ) | ||||||||||||||
2018 | ||||||||||||||||||||
Revenue | ₩ | — | 137,849 | 110,284 | 228,000 | 197,487 | ||||||||||||||
Profit (loss) for the year | 58,584 | (21,314 | ) | (13,903 | ) | (9,507 | ) | 6,038 | ||||||||||||
Depreciation of the fair value adjustment and others | — | — | — | (161 | ) | (2,954 | ) | |||||||||||||
Profit (loss) for the year on the consolidated financial statements | 58,584 | (21,314 | ) | (13,903 | ) | (9,668 | ) | 3,084 | ||||||||||||
Total comprehensive income (loss) | 27,773 | (21,125 | ) | (14,386 | ) | (8,897 | ) | (991 | ) | |||||||||||
Profit (loss) attributable to non-controlling interests | 24,019 | (10,094 | ) | (4,791 | ) | (1,758 | ) | 1,387 | ||||||||||||
Net cash provided by (used in) operating activities | ₩ | 115,566 | 13,635 | 7,181 | (69,347 | ) | (23,451 | ) | ||||||||||||
Net cash provided by (used in) investing activities | 600 | (10,169 | ) | (11,482 | ) | (470,211 | ) | (139,430 | ) | |||||||||||
Net cash provided by (used in) financing activities | (116,150 | ) | 69,267 | 5 | 494,923 | 124,076 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | 16 | 72,733 | (4,296 | ) | (44,635 | ) | (38,805 | ) | ||||||||||||
Dividend paid to non-controlling interests during the year ended December 31, 2018 | ₩ | 36,178 | — | — | — | — |
The financial information of Life & Security Holdings Co., Ltd. is related to the period subsequent to the acquisition by the Parent Company on October 1, 2018 and includes fair value adjustments from the business combination. |
2. | Basis of |
(1) Statement of compliance
These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
The
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
These consolidated financial statements were authorized for issuanceissue by the Board of Directors on February 3, 2016.2, 2021 for statutory shareholders’ approval purpose, and re-authorized for issue by management in connection with the filing with the U.S. Securities Exchange Commission on April 29, 2021.
(2) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statementsstatement of financial position:
derivative financial instruments are measured at fair valuevalue;
financial instruments measured at fair value through profit or loss are(“FVTPL”);
financial instruments measured at fair value
available-for-sale financial assets are measured at fair value through other comprehensive income (“FVOCI”);
liabilities (assets) for defined benefit plans are recognized at the net of the total present value of defined benefit obligations less the net of the fair value of plan assets
(3) Functional and presentation currency
Financial statements of Group entities within the Group are presentedprepared in functional currency andof each group entity, which is the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Company’s functional and presentation currency.
(4) Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.prospectively
1) Critical judgments
Information about critical judgments in applying accounting policies that have the most significant effecteffects on the amounts recognized in the consolidated financial statements is included in Note 4notes for the following areas: revenue, consolidation: whetherconsolidation (whether the Group has de facto control over an investee, and classificationinvestee), determination of lease.stand-alone selling prices.
2) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: loss allowance for doubtful accounts,(notes 7 and 36), estimated useful lives of costs to obtain a contract (notes 8), property and equipment and intangible assets (notes 4 (7), (9), 14 and 17), impairment of goodwill (notes 4 (11) and 16), recognition of provision (notes 4 (17) and 20), measurement of defined benefit liabilities (notes 4 (16) and 21), and recognition of deferred tax assets (liabilities) (notes 4 (24) and 32).
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
3) Fair value measurement
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established control frameworkpolicies and processes with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements,values including Level 3 fair values, and reportsthe measurement of fair values is reviewed and is directly reported to the finance executive.executives.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
The valuation teamGroup regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation teamGroup assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).; and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in Note 35.
(5) Common control transactions
SK Holdings Co., Ltd. (“the Ultimate Controlling Entity”) is the Ultimate Controlling Entity of the Parent Company because it controls the Parent Company. Accordingly, gainsnote 22 and losses from business acquisitions and dispositions involving entities that are under the control of the Ultimate Controlling Entity are accounted for as common control transactions within equity.note 36.
3. | Changes in |
Except for the changes below, theThe Group has consistently appliedinitially adopted the accounting policies set out in Note 4amendments to all periods presented in thesethe ’Definition of a Business’(Amendments to IFRS 3, Business Combination) and ‘Interest Rate Benchmark Reform’(Amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instrument — Recognition and Measurement, IFRS 7, Financial Instruments — Disclosures) from January 1, 2020. A number of other amended standards are effective from January 1, 2020, but they do not have a material effect on the Group’s consolidated financial statements.
The Group has adopted the following amendmentsapplied Definition of a Business (Amendments to standards with a date of initial application ofIFRS 3) to business combinations whose acquisition dates are on or after January 1, 2015.2020 in assessing whether it had acquired a business or a group of assets. Details of the accounting policies are summarized in Note 4 (2).
1) IAS 19 ‘Employee Benefits’ — Employee contributions
AmendmentsThe Group applied the interest rate benchmark reform amendments retrospectively to IAS 19 introduced a practical expedient to accounting for defined benefit plan, when employeeshedging relationships that existed at January 1, 2020 or third parties pay contributions if certain criteriawere designated thereafter and that are met. Accordingdirectly affected by interest rate benchmark reform. The amendment also applied to the amendments,gain or loss accumulated in the entity is permitted to recognize those contributions as a reductioncash flow hedging reserve that existed at January 1, 2020. The details of the service costaccounting policies are disclosed in Note 4 (6). See also Note 36 for related disclosures about risks and hedge accounting.
The Group has applied IFRS 16, Leases from January 1, 2019 using the modified retrospective method with the cumulative effect of initially applying this standard recognized as an adjustment to the retained earnings as at January 1, 2019. Accordingly, the comparative information presented for 2018 has been presented, as previously reported, under IAS 17, Leases and has not been restated.
During the annual period ended December 31, 2020, the Group changed its accounting policy by applying agenda decision, Lease Term and Useful Life of Leasehold Improvements(IFRS 16 Leases and IAS 16 Property, Plant and Equipment) — November 2019, published by International Financial Reporting Interpretations Committee (“IFRIC”) on December 16, 2019.
Prior to the change in whichaccounting policy, the related service is rendered, instead of forecast future contributions from employeesGroup determined the lease term based on the assumption that the right to extent or third parties and attribute them to periods or service as negative benefits.
Thereterminate the lease is no material impactlonger enforceable if a lease contract requires the counterparty’s consent to be extended. The Group now determines the lease term as the non-cancellable period of the application of this amendment on the consolidated financial statements.a lease, plus both:
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. In the assessing the periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, the Company considered if it would incur a penalty on termination that is more than insignificant.
The Group has retrospectively applied the changes in its accounting policies in connection with the IFRIC agenda decision in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors and restated its comparative consolidated financial statements.
The following table summarizes the impacts of the change in accounting policies on the Group’s consolidated financial statements on the current and prior period.
(1) Consolidated statements of financial position
(In millions of won) | ||||||||||||
(Unaudited) | As of September 30, 2020(*) | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Assets | ||||||||||||
Accounts receivable — other, net | ₩ | 1,225,398 | 12,919 | 1,238,317 | ||||||||
Prepaid expenses and others | 3,511,068 | (13,086 | ) | 3,497,982 | ||||||||
Property and equipment, net | 12,190,268 | 827,569 | 13,017,837 | |||||||||
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|
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| |||||||
₩ | 16,926,734 | 827,402 | 17,754,136 | |||||||||
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| |||||||
Liabilities | ||||||||||||
Accrued expenses and others | ₩ | 1,557,433 | (273 | ) | 1,557,160 | |||||||
Provisions | 130,181 | 24,279 | 154,460 | |||||||||
Lease liabilities | 641,334 | 818,652 | 1,459,986 | |||||||||
Deferred tax liabilities | 2,733,327 | (4,061 | ) | 2,729,266 | ||||||||
|
|
|
|
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| |||||||
₩ | 5,062,275 | 838,597 | 5,900,872 | |||||||||
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| |||||||
Shareholder’s Equity | ||||||||||||
Retained earnings | ₩ | 22,595,716 | (11,195 | ) | 22,584,521 |
Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won) | ||||||||||||
As of December 31, 2019 | ||||||||||||
As reported | Adjustments | Restated | ||||||||||
Assets | ||||||||||||
Accounts receivable — other, net | ₩ | 1,250,098 | 5,074 | 1,255,172 | ||||||||
Prepaid expenses and others | 3,619,033 | (13,506 | ) | 3,605,527 | ||||||||
Property and equipment, net | 12,334,280 | 599,180 | 12,933,460 | |||||||||
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|
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| |||||||
₩ | 17,203,411 | 590,748 | 17,794,159 | |||||||||
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|
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| |||||||
Liabilities | ||||||||||||
Accrued expenses and others | ₩ | 1,515,300 | (415 | ) | 1,514,885 | |||||||
Provisions | 143,229 | 21,932 | 165,161 | |||||||||
Lease liabilities | 712,740 | 578,267 | 1,291,007 | |||||||||
Deferred tax liabilities | 2,466,295 | (2,434 | ) | 2,463,861 | ||||||||
|
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₩ | 4,837,564 | 597,350 | 5,434,914 | |||||||||
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| |||||||
Shareholder’s Equity | ||||||||||||
Retained earnings | ₩ | 22,235,285 | (6,602 | ) | 22,228,683 |
(In millions of won) | ||||||||||||
As of January 1, 2019 | ||||||||||||
As reported(*) | Adjustments | Restated | ||||||||||
Assets | ||||||||||||
Accounts receivable — other, net | ₩ | 1,243,245 | 12,803 | 1,256,048 | ||||||||
Prepaid expenses and others | 2,944,245 | (39,010 | ) | 2,905,235 | ||||||||
Property and equipment, net | 11,371,690 | 218,320 | 11,590,010 | |||||||||
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| |||||||
₩ | 15,559,180 | 192,113 | 15,751,293 | |||||||||
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| |||||||
Liabilities | ||||||||||||
Accrued expenses and others | ₩ | 1,357,339 | (1,388 | ) | 1,355,951 | |||||||
Provisions | 187,208 | 20,319 | 207,527 | |||||||||
Lease liabilities | 663,827 | 180,456 | 844,283 | |||||||||
Deferred tax liabilities | 2,260,433 | (1,881 | ) | 2,258,552 | ||||||||
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₩ | 4,468,807 | 197,506 | 4,666,313 | |||||||||
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Shareholder’s Equity | ||||||||||||
Retained earnings | ₩ | 22,120,355 | (5,393 | ) | 22,114,962 |
(*) | Includes impact of initial adoption of IFRS 16 in 2019. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(2) Consolidated statement of income
(In millions of won) | ||||||||||||
(Unaudited) | For the nine-month period ended September 30, 2020(*) | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Operating revenue and other income | ||||||||||||
Revenue | ₩ | 13,784,051 | 1,322 | 13,785,373 | ||||||||
Other income | 55,506 | (641 | ) | 54,865 | ||||||||
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13,839,557 | 681 | 13,840,238 | ||||||||||
Operating expenses: | ||||||||||||
Depreciation and amortization | 2,948,492 | 40,383 | 2,988,875 | |||||||||
Rent | 148,437 | (31,272 | ) | 117,165 | ||||||||
Leased lines | 206,577 | (1,857 | ) | 204,720 | ||||||||
Others | 9,535,803 | (8,087 | ) | 9,527,716 | ||||||||
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12,839,309 | (833 | ) | 12,838,476 | |||||||||
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| |||||||
Operating profit | 1,000,248 | 1,514 | 1,001,762 | |||||||||
Finance income | 90,985 | 46 | 91,031 | |||||||||
Finance costs | 324,952 | 7,780 | 332,732 | |||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 673,800 | — | 673,800 | |||||||||
|
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| |||||||
Profit before income tax | ₩ | 1,440,081 | (6,220 | ) | 1,433,861 | |||||||
Income tax expense | 305,405 | (1,907 | ) | 303,498 | ||||||||
|
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| |||||||
Profit for the year | ₩ | 1,134,676 | (4,313 | ) | 1,130,363 | |||||||
|
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| |||||||
Earnings per share: | ||||||||||||
Basic earnings per share (in won) | ₩ | 15,218 | (59 | ) | 15,159 | |||||||
Diluted earnings per share (in won) | 15,215 | (59 | ) | 15,156 |
(*) | Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to continue to prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won) | 2019 | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Operating revenue and other income | ||||||||||||
Revenue | ₩ | 17,743,702 | (2,986 | ) | 17,740,716 | |||||||
Other income | 103,230 | (409 | ) | 102,821 | ||||||||
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| |||||||
17,846,932 | (3,395 | ) | 17,843,537 | |||||||||
Operating expenses: | ||||||||||||
Depreciation and amortization | 3,771,486 | 85,176 | 3,856,662 | |||||||||
Rent | 231,934 | (77,091 | ) | 154,843 | ||||||||
Leased lines | 272,616 | (9,249 | ) | 263,367 | ||||||||
Others | 12,570,003 | (8,596 | ) | 12,561,407 | ||||||||
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| |||||||
16,846,039 | (9,760 | ) | 16,836,279 | |||||||||
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| |||||||
Operating profit | 1,000,893 | 6,365 | 1,007,258 | |||||||||
Finance income | 141,977 | 178 | 142,155 | |||||||||
Finance costs | 429,758 | 8,197 | 437,955 | |||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 449,543 | — | 449,543 | |||||||||
|
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| |||||||
Profit before income tax | ₩ | 1,162,655 | (1,654 | ) | 1,161,001 | |||||||
Income tax expense | 300,713 | (445 | ) | 300,268 | ||||||||
|
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| |||||||
Profit for the year | ₩ | 861,942 | (1,209 | ) | 860,733 | |||||||
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| |||||||
Earnings per share: | ||||||||||||
Basic earnings per share (in won) | ₩ | 12,144 | (17 | ) | 12,127 | |||||||
Diluted earnings per share (in won) | 12,144 | (17 | ) | 12,127 |
(3) Consolidated statement changes in equity
The consolidated statement of changes in equity for the year ended December 31, 2019 has been restated to reflect the change in accounting policy.
(4) Consolidated statements of cash flows
(In millions of won)
(Unaudited) | For the nine-month period ended September 30, 2020(*1) | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Cash flows from operating activities(*2) | ₩ | 4,525,676 | 21,102 | 4,546,778 | ||||||||
Cash flows from investing activities | (3,047,428 | ) | — | (3,047,428 | ) | |||||||
Cash flows from financing activities(*3) | (870,621 | ) | (21,102 | ) | (891,723 | ) |
(*1) | Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to continue prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information. |
(*2) | Prepaid expenses related to lease contracts which were additionally recognized as leases as a result of the change in lease terms have been reclassified as financing activities. |
(*3) | Repayment of lease liabilities increased as additional contracts were recognized as lease contracts as a result of the change in lease terms. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won) | 2019 | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Cash flows from operating activities(*1) | ₩ | 3,986,082 | 48,902 | 4,034,984 | ||||||||
Cash flows from investing activities(*2) | (3,582,523 | ) | 939 | (3,581,584 | ) | |||||||
Cash flows from financing activities(*3) | (636,834 | ) | (49,840 | ) | (686,674 | ) |
(*1) | Prepaid expenses related to lease contracts which were additionally recognized as leases as a result of the change in lease terms have been reclassified as financing activities. |
(*2) | The effect of changes in accounting policies resulted in an increase in lease receivables from ₩26,773 million to ₩27,712 million. |
(*3) | Repayment of lease liabilities increased as additional contracts were recognized as lease contracts as a result of the change in lease terms. |
4. | Significant Accounting Policies |
The significant accounting policies applied by the Group in the preparation of its consolidated financial statements in accordance with IFRS are included below. The significant accounting policies set out below have been applied consistently to all periods presentedby the Group in these consolidated financial statements have been consistently applied for all periods presented, except for those asthe changes described in Note 3.note 3 and below.
(1) Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group has threefive reportable segments which consist of cellular services, fixed-line telecommunication services and others, as described in Notenote 5. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
The group’s chief operating decision maker receives and reviews operating income based on Korean IFRS as the measure of segment profit and loss for each operating segment. Segment operating income differs from consolidated operating income from continuing operations used in the Group’s consolidated statements of income. Segment operating income does not include certain items such as fee revenues, gain/loss from disposal of property, plant, equipment and intangible assets, impairment losses on property, plant, equipment and intangible assets, donations, bad debt expense and penalties. The chief operating decision maker does not receive any information about segment assets and liabilities. Segment information does not include the Group’s discontinued operations information. See Note 38 for details on discontinued operations.
(2) Basis of consolidation
(i)(a) Business combination
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.
Consideration transferred is generally measured at fair value, identical to the measurement of identifiable net assets acquired at fair value. IfThe difference between the acquired company’s fair value and the consideration transferred is accounted for goodwill. Any goodwill incurs asthat arises is tested annually for impairment. Any gain on a result of business combination, the Group performs impairment test on an annual basis and recognizes gain from bargain purchases throughpurchase is recognized in profit or loss.loss immediately. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received excluding costs to issue debt or equity securities recognized based on IAS 32 and 39.IFRS 9.
Consideration transferred does not include the amount settled in relation to the pre-existing relationship and the amount settled in relation to the pre-existing relationship is relationship. Such amounts are generally recognized through profit or loss.
Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration and recognizes through profit or loss.
Entire or certain portion of market-based measure of replacement award for share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the acquirer is included in measurement of contingent considerations. Portion of a replacement award that is part of the consideration transferred for the acquiree and the portion that is remuneration for post-combination service is determined by comparing market-based measure of the awards of acquire and replacement awards that is attributable to pre-combination service.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(ii)(b) Non-controlling interests
The Group measureNon-controlling interests are measured at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s identifiable net assets.assets at the date of acquisition.
Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.
(iii)(c) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.
(iv)(d) Loss of control
If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.
(v)(e) Interest in investees accounted for using the equity method
Interest in investees accounted for using the equity method composed of interest in associates and joint ventures. An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement havehas rights to the net assets of the arrangement.
The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.
The investment in an associate and a joint venture is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
significant financial difficulty of the associate or joint venture;
a breach of contract, such as a default or delinquency in payments by the associate or joint venture;
the entity, for economic or legal reasons relating to its associate’s or joint venture’s financial difficulty, granting to the associate or joint venture a concession that the entity would not otherwise consider;
it becoming probable that the associate or joint venture will enter bankruptcy or other financial reorganization; or
the disappearance of an active market for the net investment because of financial difficulties of the associate or joint venture.
(vi)(f) Intra-group transactions
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(vii)(g) Business combinations under common control
SK Holdings Co., Ltd. is the ultimate controlling entity of the Group. The assets and liabilities acquired from theunder business combination of entities or business under common control are recognized at the carrying amounts in the ultimate controlling shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from other capital adjustments.surplus and others.
(3) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, and call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(4) Inventories
Inventories are statedinitially recognized at the acquisition cost and subsequently measured using the weighted average method. During the period, a perpetual inventory system is used to value inventories,track inventory quantities, which is adjusted tobased on the physical inventory counts performed at the period end. When the net realizable value of inventories is less than the acquisition cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current operationsperiod as operating expenses. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(5) Non-derivative financial assets
The Group recognizes(a) Recognition and measures non-derivativeinitial measurement
Accounts receivable — trade and debt investments issued are initially recognized when they are originated. All other financial assets by the following four categories:and financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The Group recognizes financial assets in the consolidated statement of financial positionliabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.
Upon initial recognition, non-derivativeA financial assets areasset (unless an accounts receivable — trade without a significant financing component) or financial liability is initially measured at their fair value plus, in the case of a financial assetfor an item not at fair value through profit or loss,FVTPL, transaction costs that are directly attributable to the asset’sits acquisition or issuance.issue. An accounts receivable — trade without a significant financing component is initially measured at the transaction price.
(i) (b) Classification and subsequent measurement
On initial recognition, a financial asset is classified as measured at:
FVTPL
FVOCI — equity investment
FVOCI — debt investment
Financial assets at fair value through profit or lossamortized cost
A financial asset is classified asbased on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, transaction costs are recognizedreclassified on the first day of the first reporting period following the change in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
(ii) Held-to-maturity investmentsthe business model.
A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Group has the positive intention and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments areis measured at amortized cost usingif it meets both of the effectivefollowing conditions and is not designated as at FVTPL:
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
its contractual terms give rise to cash flows that are solely payments of principal and interest rate method.on the principal amount outstanding on specified dates.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
(iii) Loans
it is held within a business model whose objective is achieved by both collecting contractual cash flows and receivablesselling financial assets; and
its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.
Loans and receivables areAll financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables areclassified as measured at amortized cost using the effective interest method except for loans and receivables of which the effect of discounting is immaterial.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are designatedor FVOCI as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables. Subsequent to initial recognition, theydescribed above are measured at fair value, which changes in fair value, net of any tax effect, recorded in other comprehensive income in equity. Investments in equity instrumentsFVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that do not have a quoted market price in an active market and whose fair value cannototherwise meets the requirements to be reliably measured are measured at cost.amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
(v) De-recognitionThe following accounting polices apply to the subsequent measurement of financial assets.
Financial assets at FVTPL | These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. | |
Financial assets at amortized cost | These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. | |
Debt investments at FVOCI | These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. | |
Equity investments at FVOCI | These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss. |
(c) Impairment
The Group derecognizesestimates the expected credit losses (ECL) for the debt instruments measured at amortized cost and FVOCI based on the Group’s historical experience and informed credit assessment that includes forward-looking information. The impairment approach is decided based on the assessment of whether the credit risk of a financial asset has increased significantly since initial recognition. However, the Group applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for accounts receivable — trade and lease receivables from the initial recognition.
ECL is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
At each reporting date, the Group assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the assets.
(d) Derecognition
Financial assets are derecognized if the Group’s contractual rights to the cash flows from the assetfinancial assets expire or itif the Group transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
another party without retaining control or transfers substantially all of the risks and rewards of ownership of the financial assetasset.
The transferred assets are transferred. Any interest in transferred financial assets that is created or retained bynot derecognized when the Group isenters into transactions whereby it transfers assets recognized as a separate asset or liability. If the Groupin its statement of financial position but retains substantially all of the risks and rewards of ownership of the transferred financial assets, the Group continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.assets.
(vi)(e) Offsetting between financial assets and financial liabilities
Financial assets and financial liabilities are offset, and the net amount is presented in the consolidated statement of financial position only when the Group currently has a legally enforceable right to offset the recognized amounts and there is the intentionit intends either to settle on a net basis or to settle the liability and realize the asset and settle the liability simultaneously.
A financial asset and a financial liability is offset only when the right to set off the amount is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.
(6) Derivative financial instruments, including hedge accounting
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.
(i)(a) Hedge accounting
The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designateddesignates derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currencycash flow risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
Fair value hedgeHedges directly affected by interest rate benchmark reform
Changes inFor the fair valuepurpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Group assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.
For a cash flow hedge of a derivative hedging instrumentforecast transaction, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit and loss. In determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur, the Group assumes that the interest rate benchmark cash flows designated as a fair value hedge are recognized in profit or loss. will not be altered as a result of interest rate benchmark reform.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
The gain or loss from remeasuringGroup will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument at fair value for(i) to a derivativehedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the gainamount of the interest rate benchmark-based cash flows of the respective item or loss oninstrument or (ii) when the hedging relationship is discontinued.
For its highly probable assessment of the hedged item, attributable to the hedged risk are recognized in profit or loss inGroup will no longer apply the same line itemspecific policy when the uncertainty arising from interest rate benchmark reform about the timing and the amount of the consolidated statementinterest rate benchmark-based future cash flows of income. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable tois no longer present, or when the hedged risk is amortized to profit or loss from the date the hedge accountinghedging relationship is discontinued.
Cash flow hedge
When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(ii) Separable embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately only if the following criteria have been met:
(b) |
Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
(iii) Other derivative financial instruments
Changes in the fair value of otherOther derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.
(7) Impairment of financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. However, losses expected as a result of future events, regardless of likelihood, are not recognized.
Objective evidence that a financial asset is impaired includes following loss events:
significant financial difficulty of the issuer or obligor;
a breach of contract, such as default or delinquency in interest or principal payments;
the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
it becoming 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 group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group
In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
If financial assets have objective evidence that they are impaired, impairment losses should be measured and recognized.
(i) Financial assets measured at amortized cost
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. If it is not practicable to obtain the instrument’s estimated future cash flows, impairment losses would be measured by using prices from any observable current market transactions. The Group
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
can recognize impairment losses directly or establish a provision to cover impairment losses. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss shall be reversed either directly or by adjusting an allowance account.
(ii) Financial assets carried at cost
If there is objective evidence that an impairment loss has occurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses shall not be reversed.
(iii) Available-for-sale financial assets
When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale shall not be reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss.
(8) Property plant and equipment
Property plant and equipment are initially measured at cost and after initial recognition, are carried at cost less accumulated depreciation and accumulated impairment losses.cost. The cost of property plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent to initial recognition, an item of property, plantProperty and equipment, issubsequently, are carried at its cost less any accumulated depreciation and any accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of property plant and equipment at cost or, if appropriate, as a separate itemsitem if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Property plant and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property plant and equipment is depreciated over its separate useful life.
Gains and losses on disposal of an item of property plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property plant and equipment and are recognized as othernon-operating income (loss).
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
The estimated useful lives of the Group’s property plant and equipment are as follows:
Useful lives (years) | ||||
Buildings and structures | 15 ~ 40 | |||
Machinery | 3 ~ 15, | 30 | ||
Other property | 2 ~10 | |||
Right-of-use assets | 1 ~ 50 |
Depreciation methods, useful lives, and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.
(9)(8) Borrowing costs
The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are manufactured or otherwise produced over a short period of time are not qualifying assets. Assetsassets, and assets that are ready for their intended use or sale when acquired are not qualifying assets.assets either.
To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group shall determinedetermines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate shall beis the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period shalldo not exceed the amount of borrowing costs incurred during thatthe period.
(10)(9) Intangible assets
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Amortization of intangibleIntangible assets, except for goodwill, is calculatedare amortized on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships and brand are expected to be available for use as there are no foreseeable limits to the periods over which club membershipsperiods. These intangible assets are expected to be available for use, this intangible asset is determined as having indefinite useful lives and, therefore, not amortized.
The estimated useful lives of the Group’s intangible assets are as follows:
Useful lives (years) | ||
Frequency | ||
Land | 5 | |
Industrial rights | ||
Development costs | 3 ~ 5 | |
Facility usage rights | ||
Customer relations | 3 ~ | |
Other | 3 ~ 20 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.
Expenditures on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.
(11)(10) Government grants
Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grant’s conditions and that the grant will be received.
(i)1) Grants related to assets
Government grants whose primary condition is that the Group purchase, constructpurchases, constructs, or otherwise acquireacquires a long-term assetsasset are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense.
(ii)2) Grants related to income
Government grants which are intended to compensate the Group for expenses incurred are deducted from the related expenses.
(12) Investment property
Property held for the purpose of earning rentals or benefiting from capital appreciation is classified as investment property. Investment property is initially measured at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at depreciated cost less any accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Investment property except for land, are depreciated on a straight-line basis over 15~40 years as estimated useful lives.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.
(13)(11) Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amountamounts to their carrying amount.amounts.
The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, then the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflectreflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss ifto the extent the carrying amount of anthe asset or a CGU exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergiessynergy arising from the goodwillbusiness acquired. Any impairment identified at the CGU level will first reduce the
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
carrying valueamount of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(14)(12) Leases - Policies applicable from January 1, 2019
The Group has applied IFRS 16, Leases from January 1, 2019 using the modified retrospective method with the cumulative effect of initially applying this standard recognized as an adjustment to the retained earnings as at January 1, 2019. Accordingly, the comparative information presented for 2018 has been presented, as previously reported, under IAS 17, Leases and has not been restated.
A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract transfers the right to control the identified asset, the Group uses the definition of a lease in IFRS 16, Leases.
(a) As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at of before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
Fixed payments, including in-substance fixed payments
Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date
Amounts expected to be payable under a residual value guarantee
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘property and equipment’ in the statement of financial position.
The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments associated with lease as an expense on a straight-line basis over the lease term.
(b) As a lessor
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operation lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, is accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in the contract.
The Group applies derecognition and impairment requirements in IFRS 9 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.
(13) Leases — Policies applied before January 1, 2019
The Group classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases whereunder which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(i)(a) Finance leases — lessee
At the commencement of the lease term, the Group recognizes as finance assets and finance liabilities in its consolidated statementsstatement of financial position, the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance chargecost and the reduction of the outstanding liability. The finance chargecost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lesseeGroup adopts for depreciable assets that are owned. If there is no reasonable certainty that the lesseeGroup will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. The Group reviews to determine whether the leased asset may be impaired.assets are impaired at the reporting date.
(ii)(b) Operating leases
Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are recognized in profit or loss on a straight-line basis over the period of the lease.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(iii)(c) Determining whether an arrangement contains a lease
Determining whether an arrangement is, or contains, a lease shall beis based on the substance of the arrangement and requires an assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset or assets (the asset) and the arrangement conveys a right to use the asset.
At inception or reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a financial lease that it is impracticable to separate the payments reliably, the Group recognizes an asset and a liability at an amount equal to the fair value of the underlying asset that was identified as the subject of the lease. Subsequently, the liability shall beis reduced as payments are made and an imputed finance charge on the liability is recognized using the purchaser’sGroup’s incremental borrowing rate of interest.
(15)(14) Non-current assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through salesales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assetassets (or disposal group)groups) must be available for immediate sale in itstheir present condition and itstheir sale must be highly probable. The assets or disposal groupgroups that are classified as non-current assets held for sale are measured at the lower of their carrying amountamounts and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of an assetassets (or disposal group)groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized in accordance with IAS 36, ‘ImpairmentImpairment of Assets’Assets.
A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
(16)(15) Non-derivative financial liabilities
The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangementarrangement. The Group
SK TELECOM CO., LTD. and Subsidiaries
Notes to the definitions of financial liabilities. The Group Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.
(i)(a) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financialthese liabilities at fair value through profit or loss are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and changes therein are recognizedthe remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisitionissue of the financial liability are recognized in profit or loss as incurred.
(ii)(b) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition.issue of the financial liability. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.
(c) Derecognition of financial liability
The Group derecognizesextinguishes a financial liability from the consolidated statement of financial position when it is extinguished (i.e.only when the contractual obligation specifiedis fulfilled, canceled or expires. The Group recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.
When a financial liability is derecognized, the difference between the carrying amount and the consideration paid (including any transferred non-cash assets or liabilities assumed) is recognized in the contract is discharged, cancelledprofit or expires).
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(17)(16) Employee benefits
(i)(a) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service.services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
(ii)(b) Other long-term employee benefits
Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render the related service, and are calculated at the present valueservices. The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. Any changes from remeasurementsThat benefit is discounted to determine its present value. Remeasurements are recognized throughin profit or loss in the period in which they arise.
(iii)(c) Retirement benefits: defined contribution plans
When an employee has rendered a service to the Group during a period, the Group recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Group recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(iv)(d) Retirement benefits: defined benefit plans
As ofAt the end of reporting period, defined benefitsbenefit liabilities relating to defined benefit plans are recognized asat present value of defined benefit obligations net of fair value of plan assets.
The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligations,obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.
Remeasurements of the net defined benefit liability (asset), which comprise of actuarial gains and losses, the return on plan assets excluding amounts included in net interest on the net defined benefit liability,(excluding interest) and any change in the effect of the asset ceiling (if any, excluding amounts included in net interest on the net defined benefit liability andinterest), are recognized immediately in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.
When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.
(v)(e) Termination benefits
The Group recognizes a liability and expense for termination benefits at the earlier of the period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring that involves the payment of termination benefits. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(18)(17) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. WhereIf the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
WhereIf some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement shall beis recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall beis treated as a separate asset.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
A provision shall beis used only for expenditures for which the provision was originally recognized.
(19) Foreign(18) Transactions in foreign currencies
(i)(a) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currenciescurrency of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
functional currency using the exchange rate at the reporting date’s exchange rate. date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.instruments.
(ii)(b) Foreign operations
If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate.rate at the reporting date.
When a foreign operation is disposed, of, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.
(20) Equity(19) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
When the GroupParent Company repurchases its share capital,own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The profitsgains or losses from the purchase, disposal, reissue, or retirement of treasury shares are not recognized as current profit or loss. If the Group acquires and retains treasury shares, the consideration paid or received is directly recognized in equity.equity being as transaction with owners.
(21)(20) Hybrid bond
The Group recognizes a financial instrument issued by the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.
(22) Revenue(21) Share-based Payment
Revenue from the sale of goods, rendering of services or use of the Group assets is measured at
For equity-settled share-based payment transaction, if the fair value of the considerationgoods or services received or receivable. Returns, trade discounts and volume rebates are recognized as a reduction of revenue.
(i) Services
Revenue from cellular services consists of revenue from basic charges, voice charges, data charges,data-roaming services and interconnection charges. Such revenues are recognized as services are performed. Revenues received forcannot be reliably estimated, the activation of service are deferred and recognized overGroup measures the average customer retention period.
Revenue from fixed-line services includes domestic short and long distance charges, international phone connection charges, and broadband internet services. Such revenues are recognized as the related services are performed.
Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.
(ii) Goods sold
Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
(iii) Customer loyalty programmes
For customer loyalty programmes, the fair value of the consideration received or receivable in respect of the initial sale is allocated between the award credits and the other components of the sale. The amount allocated to the award credits is estimatedindirectly by reference to the fair value of the servicesequity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be provided with respect tomet, such that the redeemable award credits. amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
The fair value of the servicesamount payable to be providedemployees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with respecta corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the redeemable portionfair value of the award credits granted toshare appreciation rights. Any changes in the customersliability are recognized in accordance with customer loyalty programmes is estimated taking into account the expected redemption rate and timing of the expected redemption. Considerations allocated to the award credits are deferred and revenue is recognized when the award credits are recovered and the Group performs its obligationprofit or loss.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(22) Revenue
(a) Identification of performance obligations in contracts with customers
The Group identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless telecommunications services, (2) sale of handsets and (3) providing other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to provideone customer, the Group allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The amounthandset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of revenue recognized isthe contract term as stated in the subscription contract.
(b) Allocation of the transaction price to each performance obligation
The Group allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Group uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service. As an exception, the Group uses “expected cost plus a margin approach” for insignificant transactions.
(c) Incremental costs of obtaining a contract
The Group pays commissions to its retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Group’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Group capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods.
(d) Customer loyalty programs
The Group provides customer loyalty points to customers based on the relative sizeusage of the total award credits that are expectedservice to which the Group allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount to be redeemedallocated to the loyalty program is measured according to the relative stand-alone selling price of the customer loyalty points. The amount allocated to the loyalty program is deferred as a contract liability and is recognized as revenue when loyalty points are redeemed.
(e) Consideration payable to a customer
Based on the redeemed award credits in exchangesubscription contract, a customer who uses the Group’s wireless telecommunications services may receive discount for services.purchasing goods or services from a designated third party. The Group pays a portion of the price discounts that the customer receives to the third party which is viewed as consideration payable to a customer. The Group accounts for the amounts payable to the third party as a reduction of the wireless telecommunications service revenue.
(iv) Bundled arrangements
When the Group sells both handsets and wireless services to subscribers, the Group recognizes these transactions separately as sales for handset sales and wireless telecommunication services.
(23) Finance income and financeFinance costs
Finance income comprises interest income on funds invested (including available-for-sale financial assets)assets measured at fair value), dividend income, gains on the disposal of available-for-sale financial assets at FVTPL, changes in the fair value of financial assetsinstruments at fair value through profit or loss,FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss onwhen the date that the Group’s right to receive paymentthe dividend is established.
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assetsinstruments at fair value through profit or loss,FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures areis recognized as it accrues in profit or loss using the effective interest rate method.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(24) Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.OCI.
The Group pays income tax in accordance with the tax-consolidation system when the Parent Company and its subsidiaries are economically unified.
(i)(a) Current tax
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustmentincludes interests and fines related to tax payable in respect of previous years.income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.
(ii)(b) Deferred tax
Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Group and the reversal of existing temporary differences are considered in determining the future taxable profit.
The Group reviews the carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if (a) there isthe Group has a legally enforceable right to offset the related current tax liabilitiesamount recognized and assets, (b) they relateintends to income taxes levied bysettle the same tax authority and (c) they intend to settle current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.
(c) Uncertainty over income tax treatments
The Group assesses the uncertainty over income tax treatments pursuant to IAS 12. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflects the effect of
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:
The most likely amount: the single most likely amount in a range of possible outcomes.
The expected value: the sum of the probability-weighted amounts in a range of possible outcomes.
(25) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.employees, if any.
(26) Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. When an operation is classified as a discontinued operation, the comparative consolidated statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative period.
(27) New standards and interpretationsStandards issued but not yet adoptedeffective
The following accountingnew standards are issued and will be effective for annual periods beginning after January 1, 2016,2020 and haveearlier application is permitted; however, the Group has not been adopted the following new standards early in preparing thesethe accompanying consolidated financial statements.
Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instrument—Recognition and Measurement, IFRS 7, Financial Instruments- Disclosures, IFRS 4, Insurance Contracts and IFRS 16, Leases)
The amendments address issued that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in IFRS 9, Financial Instruments, IAS 39, Financial Instrument- Recognition and Measurement, IFRS 7, Financial Instruments- Disclosures, IFRS 4, Insurance Contracts and IFRS 16, Leases relating to changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities and hedge accounting.
The amendment will require the Group to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability.
As of December 31, 2015, management is2020, the Group has LIBOR floating rate notes amounting to ₩326,400 million that will be subject to IBOR reform. The Group has not determined an alternative interest rate benchmark to LIBOR for these notes as of December 31, 2020 and these amendments are not expected to have a significant impact on the Group’s statement of income.
The amendments provide exceptions to the hedge accounting requirement in the processfollowing areas.
Allow amendment of evaluating the impactdesignation of applying these standards on its financial position and results of operations.a hedging relationship to reflect changes that are required by the reform.
1) IFRS 9 ‘Financial Instruments’
IFRS 9, publishedWhen a hedged item in July 2014, replacesa cash flow hedge is amended to reflect the existing guidancechanges that are required by the reform, the amount accumulated in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidancethe cash flow hedge reserve will be deemed to be based on the classificationalternative benchmark rate on which the hedged future cash flows are determined.
When a group of items is designated as a hedged item and measurement of financial instruments, a new expected credit loss model for calculating impairmentan item in the Group is amended to reflect the changes that are required by the reform, the hedged items are allocated to sub- groups based on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted.benchmark rates being hedged.
2) IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
If an entity reasonably expects that an alternative benchmark rate will be separately identifiable within a period of 24 months, it is not prohibited from designating the rate as a 3) IFRS 16 ‘Leases’non-contractually specified risk component if it is not separately identifiable at the designation date.
IFRS 16, publishedAs of December 31, 2020, the Group has cash flow hedges of LIBOR risk. The Group has not identified the alternative interest rate benchmark to LIBOR for indexation of the hedged items and hedging instruments. When LIBOR is replaced by the alternative interest rate, the Group expects to apply the amendments related to hedge accounting. However, there is uncertainty about when and how replacement may occur. When the change occurs to the hedged item or the hedging instrument, the Group will remeasure the cumulative change in January 2016, replacesfair value of the existing guidance in IAS 17, Leases. IFRS 16 eliminateshedged item or the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases andoff-balance sheet operating leases. Instead,fair value of the interest rate swap, respectively, based on the alternative interest rate to LIBOR. Hedging relationships may experience hedge ineffectiveness if there is a single, on-balance sheet accounting modeltiming or other mismatch between the transition. The Group does not expect that is similarthe amounts accumulated in the cash flow hedge reserve will be immediately reclassified to current finance lease accounting. IFRS 16 is effective for annual reporting periods beginning onprofit or afterloss because of IBOR transition.
The amendments will require the Group to disclose additional information about the Group’s exposure to risks arising from interest rate benchmark reform and related risk management activities.
The Group plans to apply the amendments from January 1, 2019, with early adoption permitted.2021. Application will not impact amounts reported for 2020 or prior periods.
The following new and amended standards are not expected to have a significant impact on the Group’s consolidated financial statements.
5. Operating SegmentsCOVID-19-Related Rent Concessions (Amendment to IFRS 16).
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).
Reference to Conceptual Framework (Amendments to IFRS 3).
Classification of Liabilities as Current or Non-current (Amendments to IAS 1).
• | IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts. |
5. | Operating Segments |
The Group’s operating segments have been determinedidentified to be each business unit, forby which the Group provides independent services and merchandise. The Group’s reportable segments are: 1)are cellular services, which include cellular voice service, wireless voicedata service and data transmission services, sales of wireless devices, loT solutions platform services, and 2)internet services; fixed-line telecommunication services, which include fixed-line telephone services, broadband Internetinternet services, advanced media platformand leased line services; security services, (including IPTV) and business communications services. All other operating segments, which include commerce businessunmanned security services, manned security services and hardware business, dosystem software development; Commerce services, the open marketplace platform; and all other businesses, which include the Group’s internet portal services and other immaterial operations, each of which does not meet the quantitative thresholdsthreshold to be considered as a reportable segmentssegment and are presented collectively as Others.others.
(1) Segment information as of and for the years ended December 31, 2015, 2014 and 2013 is as follows:
(In millions of won) | ||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||
Cellular services | Fixed-line telecommu- nication services | Others | Total segments | Consolidation adjustments | Consolidated amount | |||||||||||||||||||
Total revenue | ₩ | 14,962,689 | 3,162,712 | 2,113,543 | 20,238,944 | (3,102,210 | ) | 17,136,734 | ||||||||||||||||
Internal revenue | 1,693,411 | 668,139 | 740,660 | 3,102,210 | (3,102,210 | ) | — | |||||||||||||||||
External revenue | 13,269,278 | 2,494,573 | 1,372,883 | 17,136,734 | — | 17,136,734 | ||||||||||||||||||
Depreciation and amortization | 2,174,819 | 531,106 | 139,370 | 2,845,295 | — | 2,845,295 | ||||||||||||||||||
Operating income (loss) | 1,678,339 | 108,252 | (78,585 | ) | 1,708,006 | (212,581 | ) | 1,495,425 | ||||||||||||||||
Gain related to investments in subsidiaries, associates and joint ventures, net | 786,140 | |||||||||||||||||||||||
Finance income | 103,900 | |||||||||||||||||||||||
Finance costs | (350,100 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
Profit from continuing operations before income tax | 2,035,365 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||
Cellular services | Fixed-line telecommu- nication services | Others | Total segments | Consolidation adjustments | Consolidated amount | |||||||||||||||||||
Total revenue | ₩ | 15,248,039 | 3,119,845 | 1,884,784 | 20,252,668 | (3,088,870 | ) | 17,163,798 | ||||||||||||||||
Internal revenue | 1,720,158 | 669,925 | 698,787 | 3,088,870 | (3,088,870 | ) | — | |||||||||||||||||
External revenue | 13,527,881 | 2,449,920 | 1,185,997 | 17,163,798 | — | 17,163,798 | ||||||||||||||||||
Depreciation and amortization | 2,113,510 | 501,623 | 99,597 | 2,714,730 | — | 2,714,730 | ||||||||||||||||||
Operating income (loss) | 1,754,433 | 80,423 | (9,751 | ) | 1,825,105 | (217,279 | ) | 1,607,826 | ||||||||||||||||
Gain related to investments in subsidiaries, associates and joint ventures, net | 906,338 | |||||||||||||||||||||||
Finance income | 126,337 | |||||||||||||||||||||||
Finance costs | (386,673 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
Profit from continuing operations before income tax | 2,253,828 |
(1) | Segment information for the years ended December 31, 2020, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cellular services | Fixed-line telecommu- nication services | Others | Total segments | Consolidation adjustments | Consolidated amount | Cellular services | Fixed-line telecommu- nication services | Security services | Commerce services | Others | Sub-total | Adjustments (*2) | Total | |||||||||||||||||||||||||||||||||||||||||||
Total revenue | ₩ | 14,501,829 | 2,972,642 | 1,741,599 | 19,216,070 | (2,614,016 | ) | 16,602,054 | ₩ | 13,853,274 | 4,467,863 | 1,332,363 | 814,250 | 1,186,015 | 21,653,765 | (3,029,114 | ) | 18,624,651 | ||||||||||||||||||||||||||||||||||||||
Internal revenue | 1,186,297 | 648,253 | 779,466 | 2,614,016 | (2,614,016 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Inter-segment revenue | 1,557,590 | 1,062,187 | 85,846 | 21,399 | 302,092 | 3,029,114 | (3,029,114 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||
External revenue | 13,315,532 | 2,324,389 | 962,133 | 16,602,054 | — | 16,602,054 | 12,295,684 | 3,405,676 | 1,246,517 | 792,851 | 883,923 | 18,624,651 | — | 18,624,651 | ||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 2,019,531 | 522,155 | 119,937 | 2,661,623 | — | 2,661,623 | 2,892,460 | 874,562 | 210,092 | 35,742 | 62,403 | 4,075,259 | (84,176 | ) | 3,991,083 | |||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | 1,986,106 | 55,625 | (30,622 | ) | 2,011,109 | (432,706 | ) | 1,578,403 | ||||||||||||||||||||||||||||||||||||||||||||||||
Gain related to investments in subsidiaries, associates and joint ventures, net | 706,509 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit (loss) | 1,031,887 | 258,973 | 137,830 | 11,000 | (21,299 | ) | 1,418,391 | (313,757 | ) | 1,104,634 | ||||||||||||||||||||||||||||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 1,028,403 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance income | 113,392 | 241,196 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance costs | (571,203 | ) | (497,193 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit from continuing operations before income tax | 1,827,101 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit before income tax | 1,877,040 |
(In millions of won) | ||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||
Cellular services | Fixed-line telecommu- nication services(*1) | Security services(*1) | Commerce services(*1) | Others(*1) | Sub-total | Adjustments (*2) | Total | |||||||||||||||||||||||||
Total revenue | ₩ | 13,787,009 | 3,944,260 | 1,183,724 | 726,552 | 1,069,685 | 20,711,230 | (2,970,514 | ) | 17,740,716 | ||||||||||||||||||||||
Inter-segment revenue | 1,609,467 | 1,004,193 | 74,247 | 15,899 | 266,708 | 2,970,514 | (2,970,514 | ) | — | |||||||||||||||||||||||
External revenue | 12,177,542 | 2,940,067 | 1,109,477 | 710,653 | 802,977 | 17,740,716 | — | 17,740,716 | ||||||||||||||||||||||||
Depreciation and amortization | 2,828,285 | 792,334 | 193,247 | 35,939 | 63,765 | 3,913,570 | (56,908 | ) | 3,856,662 | |||||||||||||||||||||||
Operating profit (loss) | 963,207 | 144,739 | 153,843 | 1,840 | (77,892 | ) | 1,185,737 | (178,479 | ) | 1,007,258 | ||||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 449,543 | |||||||||||||||||||||||||||||||
Finance income | 142,155 | |||||||||||||||||||||||||||||||
Finance costs | (437,955 | ) | ||||||||||||||||||||||||||||||
Profit before income tax | 1,161,001 |
(In millions of won) | ||||||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||||||
Cellular Services | Fixed-line telecommu- nications Services(*1) | Security Services(*1) | Commerce Services(*1) | Others(*1) | Sub-total | Adjustments (*2) | Total | |||||||||||||||||||||||||
Total revenue | ₩ | 13,961,762 | 3,857,074 | 286,089 | 790,818 | 912,776 | 19,808,519 | (2,934,559 | ) | 16,873,960 | ||||||||||||||||||||||
Inter-segment revenue | 1,582,865 | 1,034,769 | 1,801 | 62,446 | 252,678 | 2,934,559 | (2,934,559 | ) | — | |||||||||||||||||||||||
External revenue | 12,378,897 | 2,822,305 | 284,288 | 728,372 | 660,098 | 16,873,960 | — | 16,873,960 | ||||||||||||||||||||||||
Depreciation and amortization | 2,341,862 | 643,813 | 52,887 | 19,051 | 62,659 | 3,120,272 | 5,846 | 3,126,118 | ||||||||||||||||||||||||
Operating profit (loss) | 1,320,726 | 240,572 | (7,571 | ) | (85,041 | ) | (240,782 | ) | 1,227,904 | (394,053 | ) | 833,851 | ||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 3,270,912 | |||||||||||||||||||||||||||||||
Finance income | 256,435 | |||||||||||||||||||||||||||||||
Finance costs | (385,232 | ) | ||||||||||||||||||||||||||||||
Profit before income tax | 3,975,966 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Reconciliation of total segment operating income to consolidated operating income from continuing operations for the years ended December 31, 2015, 2014 and 2013 are as follows:
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Total segment operating income | ₩ | 1,708,006 | 1,825,105 | 2,011,109 | ||||||||
Other operating income: | ||||||||||||
Fees revenues | — | 8,199 | 7,303 | |||||||||
Gain on disposal of property and equipment and intangible assets | 7,140 | 8,792 | 7,991 | |||||||||
Others(*1) | 23,795 | 39,480 | 59,660 | |||||||||
|
|
|
|
|
| |||||||
30,935 | 56,471 | 74,954 | ||||||||||
Other operating expenses: | ||||||||||||
Impairment loss on property and equipment and intangible assets | (35,845 | ) | (47,489 | ) | (13,770 | ) | ||||||
Loss on disposal of property and equipment and intangible assets | (21,392 | ) | (32,950 | ) | (267,468 | ) | ||||||
Donations | (72,454 | ) | (67,823 | ) | (82,057 | ) | ||||||
Bad debt for accounts receivable – other | (15,323 | ) | (17,943 | ) | (22,155 | ) | ||||||
Others(*2) | (98,502 | ) | (107,545 | ) | (122,210 | ) | ||||||
|
|
|
|
|
| |||||||
(243,516 | ) | (273,750 | ) | (507,660 | ) | |||||||
|
|
|
|
|
| |||||||
Consolidated operating income from continuing operations | ₩ | 1,495,425 | 1,607,826 | 1,578,403 | ||||||||
|
|
|
|
|
|
(*1) | During the year ended December 31, 2019, due to the change in the categorization of information reviewed by the chief operating decision maker in 2019, the Group reclassified SK stoa Co., Ltd. from Fixed-line telecommunication Service segment to Commerce Services segment. In addition, operating segment for Life & Security Holdings Co., Ltd. and SK Infosec Co., Ltd. was separately presented as a reportable segment (Security Services) and no longer included in Others segment. Segment information for the years ended December 31, 2018 was restated to conform to the 2019 reclassifications. |
(*2) | Adjustments for operating profit (loss) are the amount differences from operating profit (loss) included in CODM report which is based on Korean IFRS to operating profit (loss) under IFRS. The reconciliation of these amounts is included in note 5-(2). Adjustments for depreciation and amortization and operating profit (loss) also included the amount due to the consolidation adjustments, such as internal transactions. |
(2) | Reconciliation of total segment operating profit to consolidated operating profit from continuing operations for the years ended December 31, 2020, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Total segment operating profit (Before adjustments) | ₩ | 1,418,391 | 1,185,737 | 1,227,904 | ||||||||
Adjustments(*1) | (69,067 | ) | (77,560 | ) | (26,144 | ) | ||||||
|
|
|
|
|
| |||||||
Total segment operating profit | 1,349,324 | 1,108,177 | 1,201,760 | |||||||||
Other operating income: | ||||||||||||
Gain on disposal of property and equipment and intangible assets | 35,644 | 8,533 | 38,933 | |||||||||
Others(*2) | 64,004 | 94,288 | 33,017 | |||||||||
|
|
|
|
|
| |||||||
99,648 | 102,821 | 71,950 | ||||||||||
Other operating expenses: | ||||||||||||
Impairment loss on property and equipment and intangible assets | (208,834 | ) | (65,935 | ) | (255,839 | ) | ||||||
Loss on disposal of property and equipment and intangible assets | (41,598 | ) | (47,760 | ) | (87,257 | ) | ||||||
Donations | (16,774 | ) | (17,557 | ) | (59,012 | ) | ||||||
Bad debt for accounts receivable — other | (10,559 | ) | (5,802 | ) | (7,718 | ) | ||||||
Others(*3) | (66,573 | ) | (66,686 | ) | (30,033 | ) | ||||||
|
|
|
|
|
| |||||||
(344,338 | ) | (203,740 | ) | (439,859 | ) | |||||||
|
|
|
|
|
| |||||||
Consolidated operating profit from continuing operations | ₩ | 1,104,634 | 1,007,258 | 833,851 | ||||||||
|
|
|
|
|
|
(*1) | Adjustments for operating profit included the amount due to the consolidation adjustments, such as internal transactions. |
(*2) | Others for the years ended December 31, |
(* | Others for the years ended December 31, |
Intersegment sales and purchases are conducted on an arms-length basis and eliminated on consolidation. Since there are no intersegment sales of inventory or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. Domestic revenue for the years ended December 31, 2015, 20142020, 2019 and 20132018 amounts to ₩17,083₩18,608 billion, ₩17,073₩17,680 billion and ₩16,557₩16,656 billion, respectively. Domestic non-current assets (excluding financial assets, investments in associates and joint ventures and deferred tax assets) as of December 31, 2015, 20142020, 2019 and 20132018 amount to ₩14,474₩22,242 billion, ₩14,817₩20,678 billion and ₩14,762₩20,040 billion, and non-current assets outside of Korea amount to ₩287₩63 billion, ₩278₩63 billion and ₩1₩72 billion, respectively.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
No single customer contributed 10% or more to the Group’s total sales for the years ended December 31, 2015, 20142020, 2019 and 2013.2018.
Though theThe Group is expanding into new geographic regions, as of December 31, 2015, the Group still principally operates its businesses in its domestic market in Korea.
SK TELECOM CO., LTD.Korea and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.
The Group’s operating revenue by service type
(3) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows: |
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Cellular revenue | ||||||||||||
Wireless service(*1) | ₩ | 10,720,518 | 11,010,639 | 11,001,123 | ||||||||
Cellular interconnection | 710,026 | 817,038 | 844,977 | |||||||||
Wireless device sales | 963,354 | 761,629 | 645,914 | |||||||||
Miscellaneous(*2) | 875,380 | 938,575 | 823,518 | |||||||||
|
|
|
|
|
| |||||||
13,269,278 | 13,527,881 | 13,315,532 | ||||||||||
Fixed-line telecommunication services revenue | ||||||||||||
Fixed line telephone service | 420,611 | 467,333 | 474,430 | |||||||||
Fixed line interconnection | 57,130 | 57,401 | 78,731 | |||||||||
Broadband internet service and advanced media platform service | 1,308,789 | 1,152,708 | 1,023,156 | |||||||||
International calling service | 99,106 | 111,983 | 127,005 | |||||||||
Miscellaneous(*3) | 608,937 | 660,495 | 621,067 | |||||||||
|
|
|
|
|
| |||||||
2,494,573 | 2,449,920 | 2,324,389 | ||||||||||
Others revenue | ||||||||||||
Commerce service(*4) | 988,524 | 911,487 | 742,616 | |||||||||
Portal service(*5) | 63,880 | 72,984 | 92,153 | |||||||||
Miscellaneous(*6) | 320,479 | 201,526 | 127,364 | |||||||||
|
|
|
|
|
| |||||||
1,372,883 | 1,185,997 | 962,133 | ||||||||||
|
|
|
|
|
| |||||||
Consolidated operating revenue | ₩ | 17,136,734 | 17,163,798 | 16,602,054 | ||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||||
2020 | 2019 | 2018 | ||||||||||||
Goods and services transferred at a point in time: |
| |||||||||||||
Cellular revenue | Goods(*1) | ₩ | 975,247 | 1,142,868 | 1,124,143 | |||||||||
Fixed-line telecommunication revenue | Goods | 90,459 | 145,314 | 125,959 | ||||||||||
Security services revenue | Goods | 136,504 | 79,732 | 12,332 | ||||||||||
Commerce services revenue | Goods | 71,519 | 56,699 | 45,837 | ||||||||||
Commerce | 218,468 | 151,690 | 77,539 | |||||||||||
Other revenue | Goods | 60,002 | 86,793 | 81,311 | ||||||||||
Products | 37,657 | 44,336 | 51,214 | |||||||||||
Others(*2) | 505,076 | 497,768 | 275,431 | |||||||||||
|
|
|
|
|
| |||||||||
2,094,932 | 2,205,200 | 1,793,766 | ||||||||||||
|
|
|
|
|
| |||||||||
Goods and services transferred over time: |
| |||||||||||||
Cellular revenue | Wireless service(*3) | 9,801,194 | 9,532,377 | 9,770,423 | ||||||||||
Cellular interconnection | 472,215 | 494,267 | 532,156 | |||||||||||
Other(*4) | 1,047,028 | 1,008,030 | 952,175 | |||||||||||
Fixed-line telecommunication revenue | Fixed-line service | 215,827 | 224,453 | 371,224 | ||||||||||
Cellular interconnection | 85,130 | 92,396 | 95,865 | |||||||||||
Internet Protocol Television(*5) | 1,623,095 | 1,285,831 | 1,171,104 | |||||||||||
International calls | 160,293 | 137,902 | 152,918 | |||||||||||
Internet service and miscellaneous(*6) | 1,230,872 | 1,054,171 | 905,235 | |||||||||||
Security services revenue | Service(*7) | 1,110,013 | 1,029,745 | 271,956 | ||||||||||
Commerce services revenue | Commerce service | 502,864 | 502,264 | 604,996 | ||||||||||
Other revenue | Miscellaneous(*2) | 281,188 | 174,080 | 252,142 | ||||||||||
|
|
|
|
|
| |||||||||
16,529,719 | 15,535,516 | 15,080,194 | ||||||||||||
|
|
|
|
|
| |||||||||
₩ | 18,624,651 | 17,740,716 | 16,873,960 | |||||||||||
|
|
|
|
|
|
(*1) | Cellular revenue includes revenue from sales of handsets and other electronic accessories. |
(*2) | Miscellaneous other revenue includes revenue from considerations received for the development and maintenance of system software, and digital contents platform services. |
(*3) | Wireless service |
(* | Other revenue includes revenue from |
(*5) | IPTV service revenue includes |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Internet service includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
(*7) | Service includes revenue from rendering security services. |
6. | Restricted Deposits |
Deposits which are restricted in use as of December 31, 20152020 and 20142019 are summarized as follows:
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Short-term financial instruments | ||||||||
Charitable fund(*) | ₩ | 79,500 | 86,000 | |||||
Other | 2,969 | 4,321 | ||||||
Long-term financial instruments | 10,596 | 612 | ||||||
Guarantee deposits | 280 | 280 | ||||||
|
|
|
| |||||
₩ | 93,345 | 91,213 | ||||||
|
|
|
|
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Short-term financial instruments(*) | ₩ | 98,057 | 95,034 | |||||
Long-term financial instruments(*) | 890 | 988 | ||||||
|
|
|
| |||||
₩ | 98,947 | 96,022 | ||||||
|
|
|
|
(*) | Financial instruments include charitable trust fund |
7. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of December 31, |
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
December 31, 2015 | December 31, 2020 | |||||||||||||||||||||||
Gross amount | Allowances for impairment | Carrying amount | Gross amount | Loss allowance | Carrying amount | |||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Accounts receivable — trade | ₩ | 2,583,558 | (238,691 | ) | 2,344,867 | ₩ | 2,453,149 | (264,256 | ) | 2,188,893 | ||||||||||||||
Short-term loans | 54,377 | (482 | ) | 53,895 | 98,366 | (902 | ) | 97,464 | ||||||||||||||||
Accounts receivable — other | 752,731 | (78,992 | ) | 673,739 | ||||||||||||||||||||
Accounts receivable — other(*) | 1,034,119 | (55,075 | ) | 979,044 | ||||||||||||||||||||
Accrued income | 10,753 | — | 10,753 | 3,418 | (166 | ) | 3,252 | |||||||||||||||||
Others | 1,861 | — | 1,861 | |||||||||||||||||||||
Guarantee deposits (Other current assets) | 112,733 | — | 112,733 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
3,403,280 | (318,165 | ) | 3,085,115 | 3,701,785 | (320,399 | ) | 3,381,386 | |||||||||||||||||
Non-current assets: | ||||||||||||||||||||||||
Long-term loans | 87,501 | (25,047 | ) | 62,454 | 84,355 | (44,122 | ) | 40,233 | ||||||||||||||||
Long-term accounts receivable — other | 2,420 | — | 2,420 | |||||||||||||||||||||
Long-term accounts receivable — other(*) | 332,803 | — | 332,803 | |||||||||||||||||||||
Guarantee deposits | 297,281 | — | 297,281 | 172,774 | (300 | ) | 172,474 | |||||||||||||||||
Long-term accounts receivable — trade | 46,047 | (804 | ) | 45,243 | ||||||||||||||||||||
Long-term accounts receivable — trade (Other non-current assets) | 25,702 | (242 | ) | 25,460 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
433,249 | (25,851 | ) | 407,398 | 615,634 | (44,664 | ) | 570,970 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 3,836,529 | (344,016 | ) | 3,492,513 | ₩ | 4,317,419 | (365,063 | ) | 3,952,356 | |||||||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable — other as of December 31, 2020 include ₩517,175 million of financial instruments classified as FVTPL. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | December 31, 2014 | |||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Gross amount | Allowances for impairment | Carrying amount | Gross amount | Loss allowance | Carrying amount | |||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Accounts receivable — trade | ₩ | 2,614,059 | (221,909 | ) | 2,392,150 | ₩ | 2,480,419 | (249,440 | ) | 2,230,979 | ||||||||||||||
Short-term loans | 75,199 | (687 | ) | 74,512 | 66,706 | (583 | ) | 66,123 | ||||||||||||||||
Accounts receivable — other | 769,115 | (78,588 | ) | 690,527 | ||||||||||||||||||||
Accounts receivable — other(*) | 951,888 | (48,379 | ) | 903,509 | ||||||||||||||||||||
Accrued income | 10,134 | — | 10,134 | 3,977 | (166 | ) | 3,811 | |||||||||||||||||
Others | 3,865 | — | 3,865 | |||||||||||||||||||||
Guarantee deposits (Other current assets) | 145,039 | — | 145,039 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
3,472,372 | (301,184 | ) | 3,171,188 | 3,648,029 | (298,568 | ) | 3,349,461 | |||||||||||||||||
Non-current assets: | ||||||||||||||||||||||||
Long-term loans | 82,735 | (27,007 | ) | 55,728 | 81,231 | (47,471 | ) | 33,760 | ||||||||||||||||
Long-term accounts receivable — other | 3,596 | — | 3,596 | |||||||||||||||||||||
Long-term accounts receivable — other(*) | 351,663 | — | 351,663 | |||||||||||||||||||||
Guarantee deposits | 285,144 | — | 285,144 | 164,951 | (299 | ) | 164,652 | |||||||||||||||||
Long-term accounts receivable — trade | 68,536 | — | 68,536 | |||||||||||||||||||||
Long-term accounts receivable — trade (Other non-current assets) | 16,977 | (61 | ) | 16,916 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
440,011 | (27,007 | ) | 413,004 | 614,822 | (47,831 | ) | 566,991 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 3,912,383 | (328,191 | ) | 3,584,192 | ₩ | 4,262,851 | (346,399 | ) | 3,916,452 | |||||||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable — other as of December 31, 2019 include ₩532,225 million of financial instruments classified as FVTPL. |
(2) | Changes in |
(In millions of won) | ||||||||
2015 | 2014 | |||||||
Balance at January 1 | ₩ | 328,191 | 323,984 | |||||
Increase of bad debt allowances | 75,773 | 63,697 | ||||||
Write-offs | (87,798 | ) | (89,529 | ) | ||||
Collection of receivables previously written-off | 27,364 | 29,213 | ||||||
Net exchange differences and changes in consolidation scope | 486 | 826 | ||||||
|
|
|
| |||||
Balance at December 31 | ₩ | 344,016 | 328,191 | |||||
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||
Beginning balance | Impairment | Write-offs(*) | Collection of receivables previously written-off | Business combination and others | Ending Balance | |||||||||||||||||||
2020 | ₩ | 249,501 | 48,625 | (48,278 | ) | 12,771 | 1,879 | 264,498 | ||||||||||||||||
2019 | ₩ | 260,157 | 28,841 | (55,756 | ) | 14,772 | 1,487 | 249,501 |
The Group writes off the trade and other |
(In millions of won) | ||||||||||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||
Accounts receivable — trade | Other receivables | Accounts receivable — trade | Other receivables | |||||||||||||
Neither overdue nor impaired | ₩ | 1,841,442 | 1,053,096 | 1,831,243 | 1,089,001 | |||||||||||
Overdue but not impaired | 77,008 | 5,155 | 76,671 | 3,481 | ||||||||||||
Impaired | 711,155 | 148,673 | 774,681 | 137,306 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
2,629,605 | 1,206,924 | 2,682,595 | 1,229,788 | |||||||||||||
Allowances for doubtful accounts | (239,495 | ) | (104,521 | ) | (221,909 | ) | (106,282 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 2,390,110 | 1,102,403 | 2,460,686 | 1,123,506 | ||||||||||||
|
|
|
|
|
|
|
|
The Group establishes allowances for doubtful accounts based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period, past customer default experience, customer credit status, and economic and industrial factors.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
The |
(In millions of won) | ||||||||||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||
Accounts receivable — trade | Other receivables | Accounts receivable — trade | Other receivables | |||||||||||||
Less than 1 month | ₩ | 20,908 | 2,770 | 25,254 | 1,795 | |||||||||||
1 ~ 3 months | 21,941 | 924 | 26,469 | 213 | ||||||||||||
3 ~ 6 months | 7,043 | 265 | 11,641 | 608 | ||||||||||||
More than 6 months | 27,116 | 1,196 | 13,307 | 865 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 77,008 | 5,155 | 76,671 | 3,481 | ||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||
Less than 6 months | 6 months ~ 1 year | 1 ~ 3 years | More than 3 years | |||||||||||||||
Telecommunications service revenue | Expected credit loss rate | 2.04 | % | 70.29 | % | 86.21 | % | 99.18 | % | |||||||||
Gross amount | ₩ | 1,400,316 | 49,583 | 127,275 | 25,195 | |||||||||||||
Loss allowance | 28,574 | 34,854 | 109,727 | 24,988 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Other revenue | Expected credit loss rate | 2.82 | % | 77.52 | % | 61.76 | % | 56.19 | % | |||||||||
Gross amount | ₩ | 802,081 | 6,753 | 8,250 | 59,398 | |||||||||||||
Loss allowance | 22,652 | 5,235 | 5,095 | 33,373 | ||||||||||||||
|
|
|
|
|
|
|
|
As the Group is a wireless and fixed-line telecommunications service provider, the Group’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified.
8. | Prepaid expenses |
The Group pays commissions to its retail stores and authorized dealers for wireless and fixed-line telecommunications services. The Group capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.
(1) Details of inventoriesprepaid expenses as of December 31, 20152020 and 20142019 are as follows:
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Current assets: | ||||||||
Incremental costs of obtaining contracts | ₩ | 2,016,570 | 1,897,233 | |||||
Others | 111,779 | 121,457 | ||||||
|
|
|
| |||||
2,128,349 | 2,018,690 | |||||||
|
|
|
| |||||
Non-current assets: | ||||||||
Incremental costs of obtaining contracts | 982,952 | 1,152,748 | ||||||
Others | 80,759 | 87,117 | ||||||
|
|
|
| |||||
₩ | 1,063,711 | 1,239,865 | ||||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(2) Incremental costs of obtaining contracts
The amortization and impairment losses in connection with incremental costs of obtaining contracts recognized during the years ended December 31, 2020, 2019 and 2018 are as follows:
(In millions of won) | ||||||||||||||||||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||||||||||
Acquisition cost | Write- down of inventory | Carrying amount | Acquisition cost | Write- down of inventory | Carrying amount | |||||||||||||||||||
Merchandise | ₩ | 247,294 | (5,064 | ) | 242,230 | 252,063 | (5,325 | ) | 246,738 | |||||||||||||||
Finished goods | 3,530 | (179 | ) | 3,351 | 1,930 | (216 | ) | 1,714 | ||||||||||||||||
Work in process | 1,976 | (149 | ) | 1,827 | 1,144 | (131 | ) | 1,013 | ||||||||||||||||
Raw materials and supplies | 27,296 | (1,148 | ) | 26,148 | 19,242 | (1,040 | ) | 18,202 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 280,096 | (6,540 | ) | 273,556 | 274,379 | (6,712 | ) | 267,667 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Amortization and impairment losses recognized | ₩ | 2,418,947 | 2,193,333 | 2,002,460 |
9. | Contract assets and liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The amount of the inventory write-downs charged to statements of incomeGroup recognized receipts in advance for prepaid telecommunications services and write-off of inventories areunearned revenue for customer loyalty programs as follows:contract liabilities.
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Charged to cost of products that have been resold | ₩ | 1,983 | 2,052 | 1,498 | ||||||||
Write-off upon sale | (2,095 | ) | (1,326 | ) | (95 | ) |
(1) | Details of contract assets and liabilities as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | ₩ | 148,281 | 191,858 | |||||
Contract liabilities: | ||||||||
Wireless service contracts | 22,026 | 20,393 | ||||||
Customer loyalty programs | 16,709 | 21,945 | ||||||
Fixed-line service contracts | 106,916 | 65,315 | ||||||
Security services | 30,597 | 32,026 | ||||||
Others | 84,348 | 83,777 | ||||||
|
|
|
| |||||
₩ | 260,596 | 223,456 | ||||||
|
|
|
|
(2) | The amount of revenue recognized during the year ended December 31, 2020 related to the contract liabilities carried forward from the prior period is ₩142,144 million and during the year ended December 31, 2019 related to the contract liabilities carried forward from the prior period is ₩ 117,409 million. Details of revenue expected to be recognized from contract liabilities as of December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||
Less than 1 year | 1 ~ 2 years | More than 2 years | Total | |||||||||||||
Wireless service contracts | ₩ | 22,026 | — | — | 22,026 | |||||||||||
Customer loyalty programs | 13,704 | 2,123 | 882 | 16,709 | ||||||||||||
Fixed-line service contracts | 91,966 | 9,687 | 5,263 | 106,916 | ||||||||||||
Security services | 22,953 | 5,764 | 1,880 | 30,597 | ||||||||||||
Others | 79,243 | 1,798 | 3,307 | 84,348 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 229,892 | 19,372 | 11,332 | 260,596 | ||||||||||||
|
|
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
10. | Inventories |
(1) | Details of inventories as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||
Acquisition cost | Write- down | Carrying amount | Acquisition cost | Write- down | Carrying amount | |||||||||||||||||||
Merchandise | ₩ | 172,762 | (10,566 | ) | 162,196 | 162,485 | (14,557 | ) | 147,928 | |||||||||||||||
Finished goods | 3,730 | (1,879 | ) | 1,851 | 4,264 | (2,265 | ) | 1,999 | ||||||||||||||||
Work in process | 2,579 | (818 | ) | 1,761 | 2,674 | (539 | ) | 2,135 | ||||||||||||||||
Raw materials | 11,921 | (6,905 | ) | 5,016 | 12,369 | (7,967 | ) | 4,402 | ||||||||||||||||
Supplies | 619 | — | 619 | 7,112 | (694 | ) | 6,418 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 191,611 | (20,168 | ) | 171,443 | 188,904 | (26,022 | ) | 162,882 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2) | The amount of the inventory write-downs and write-off of inventories charged to statement of income are as follows: |
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Charged to cost of products that have been resold | ₩ | (1,560 | ) | 15,019 | 2,509 | |||||||
Write-off upon sale | (3,312 | ) | (1,101 | ) | (2,396 | ) |
There are no significant reversals of inventory write-downs for the periods presented.
Inventories recognized as operating expenses for the years ended December 31, 2020, 2019, and 2018 are ₩1,385,016 million, ₩1,498,249 million, and ₩1,411,986 million, respectively, which are included in the cost of goods sold. |
11. | Investment Securities |
(1) | Details of short-term investment securities as of December 31, |
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Beneficiary certificates(*) | ₩ | 92,262 | 277,003 | |||||
Current portion of long-term investment securities | — | 3,158 | ||||||
|
|
|
| |||||
₩ | 92,262 | 280,161 | ||||||
|
|
|
|
(In millions of won) | ||||||||||
Category | December 31, 2020 | December 31, 2019 | ||||||||
Beneficiary certificates | FVTPL | ₩ | 150,392 | 166,666 |
Details of long-term investment securities as of December 31, |
(In millions of won) | ||||||||||||
Category | December 31, 2020 | December 31, 2019 | ||||||||||
Equity instruments | FVOCI(*) | ₩ | 1,454,361 | 710,272 | ||||||||
FVTPL | 67,833 | 1,011 | ||||||||||
|
|
|
| |||||||||
1,522,194 | 711,283 | |||||||||||
Debt instruments | FVOCI | 1,080 | 4,627 | |||||||||
FVTPL | 125,563 | 141,305 | ||||||||||
|
|
|
| |||||||||
126,643 | 145,932 | |||||||||||
|
|
|
| |||||||||
₩ | 1,648,837 | 857,215 | ||||||||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(2) Details of long-term investment securities as of December 31, 2015 and 2014 are as follows:
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Equity securities: | ||||||||
Marketable equity securities | ₩ | 897,958 | 657,286 | |||||
Unlisted equity securities(*1) | 96,899 | 56,236 | ||||||
Equity investments(*2) | 207,916 | 209,120 | ||||||
|
|
|
| |||||
1,202,773 | 922,642 | |||||||
Debt securities: | ||||||||
Public bonds(*3) | — | 158 | ||||||
Investment bonds(*4) | 4,453 | 36,638 | ||||||
|
|
|
| |||||
4,453 | 36,796 | |||||||
|
|
|
| |||||
Total | 1,207,226 | 959,438 | ||||||
Less current portion of long-term investment securities | — | (3,158 | ) | |||||
|
|
|
| |||||
Long-term investment securities | ₩ | 1,207,226 | 956,280 | |||||
|
|
|
|
(* | The Group designated investment in equity |
Business Combinations |
2020 |
1) | Merger of |
On April 30, 2020, SK Broadband Co., Ltd., a subsidiary of the Parent Company, merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. in order to strengthen the competitiveness and enhance the synergy as a comprehensive media company. The considerations transferred included shares of SK Broadband Co., Ltd. transferred based on the merger ratio and the obligations and rights pursuant to the shareholders’ agreement between the Parent Company and the acquiree’s shareholders, both measured at fair value as of April 30, 2020. The Group recognized the difference between the fair value of net assets acquired and the consideration transferred amounting to ₩405,639 million as goodwill.
The Group’s consolidated revenue and profit for the year would have been ₩18,831,147 million and ₩1,516,857 million, respectively, if the acquisition has occurred on January 1, 2020. The Group cannot reasonably identify the acquiree’s revenue and profit for the year included in the consolidated statement of income, as the business of Tbroad Co., Ltd. and the other two companies were merged with the Group’s subsidiary, SK Broadband Co., Ltd., and no separate financial information post acquisition is available.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(i) | Considerations transferred, identifiable assets acquired and liabilities assumed at the |
(In millions of won) | ||||||||
|
During the year ended December 31, 2014, the Group entered into a disposal contract regarding the Group’s ownership interests in Shenzhen E-eye High Tech Co., Ltd., the Parent Company’s subsidiary. Assets and liabilities of the subsidiary amounting to ₩10,510 million and ₩408 million, were reclassified to assets and liabilities held for sale, respectively, and the carrying amount in excess of the fair value less cost to sell was recognized as impairment loss. The ownership interests of Shenzhen E-eye High Tech Co., Ltd. were disposed during the year ended December 31, 2015.
On April 1, 2015, Neosnetworks Co., Ltd., a subsidiary of the Parent Company, acquired an unmanned machine security business of Joeun Safe Co., Ltd., which manages facility guarding services, in order to expand infrastructure and enhance competitiveness of its security business.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
The Group recognized the acquired assets and liabilities at fair value and the difference between the consideration and fair value of net assets as goodwill.
Consideration paid and assets in succession recognized at the acquisition date are as follows:
Fair value of | ₩ | 862,147 | |||||
Fair value of derivative liability(*1) | |||||||
| |||||||
Cash and cash equivalents | |||||||
Short-term financial instruments | 6 | ||||||
Accounts receivable — trade and other | 66,241 | ||||||
Prepaid expenses | 36,324 | ||||||
Contract assets | 14,033 | ||||||
Long-term investment securities | 6,239 | ||||||
Investments in associates and joint ventures | 13,637 | ||||||
Property and equipment, net | 245,654 | ||||||
Intangible assets, net(*2) | 423,515 | ||||||
Other assets | 3,261 | ||||||
Deferred tax assets | 1,296 | ||||||
Accounts payable — trade and other | ) | ||||||
Contract liabilities | (1,674 | ) | |||||
Income tax payable | (18,065 | ) | |||||
Provisions | (2,755 | ) | |||||
Defined benefit liabilities | (30 | ) | |||||
Other liabilities | (15,655 | ) | |||||
|
| ||||||
₩ | |||||||
| |||||||
| |||||||
| |||||||
| |||||||
|
| ||||||
III. Goodwill(I - II) | 405,639 | ||||||
|
|
The Parent Company has recognized fair value of obligations and rights in connection with the shareholders’ agreement with the acquiree’s shareholders as consideration for the business combination. (See note 22) |
The Parent Company acquired the ownership interests of Neosnetworks Co., Ltd., IRIVER LIMITED and shopkick, Inc. and they were newly included in the list of subsidiaries during the year ended December 31, 2014.
Identifiable intangible asset recognized by the Group in the business combination included customer relationships related to Tbroad Co., Ltd. and Tbroad Dongdaemun Broadcasting Co., Ltd. measured at fair value on the date of merger amounting to ₩374,019 million. Fair value of the customer relationships was estimated based on the multi-period excess earnings method (“MPEEM”). MPEEM is a valuation technique under income approach which estimates fair value by discounting the expected future excess earnings attributable to an intangible asset using risk adjusted discount rate. The following table shows the details of valuation technique used in measuring fair values as well as the significant unobservable inputs used. |
On April 2, 2014, the Parent Company acquired the ownership interest of 66.7% of Neosnetworks Co., Ltd., which manages facility guarding services, in order to secure new growth engine in physical security market and obtained the control over Neosnetworks Co., Ltd.
Neosnetworks Co., Ltd. recognized revenue of ₩25,743 million and loss of ₩2,277 million, respectively, from the acquisition date to December 31, 2014.
On August 13, 2014, the Parent Company obtained ownership interests of 39.3% by acquiring 10,241,722 shares of IRIVER LIMITED from investment companies in order to develop smart phone applications and media devices such as Bluetooth speakers and ear phones for future growth and additionally acquired 4,960,317 shares by participating in the capital increase. As of the end of December 31, 2014, the Parent Company has the ownership interest of 49% of IRIVER LIMITED. After the Group acquired control over IRIVER LIMITED, IRIVER LIMITED has recognized revenue of ₩16,311 million and a net profit of ₩4,066 million.
On October 10, 2014, shopkick Management Company, Inc., of which SKP America LLC., a subsidiary of the Parent Company, has the ownership interest of 95.2%, obtained control over shopkick, Inc. by purchasing the ownership interest of 100% of shopkick, Inc. for the purpose of acquiring the platform of its mobile commerce business in the United States and expansion of the Group’s global market position.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Type | Valuation | Significant unobservable inputs | Interrelationship between key unobservable fair value measurement | |||
Customer relationships | MPEEM | • Estimated revenue per user • Future churn rates • Weighted average cost of capital (“WACC”) (7.7% for Tbroad Co., Ltd. and 8.3% for Tbroad Dongdaemun Broadcasting Co., Ltd.) | • The fair value of customer relationship will increase if expected revenue per subscriber increases and customer churn rate in the future and WACC decrease. • The fair value of customer relationship will decrease if expected revenue per subscriber decreases and customer churn rate in the future and WACC increase. |
2) |
Consideration paid and identifiable assets acquired and liabilities assumed recognized at the acquisition date are as follows:
(In millions of won) | ||||||||||||
Neosnetworks Co., Ltd. | IRIVER LIMITED | shopkick, Inc. | ||||||||||
Consideration paid | ||||||||||||
Cash and cash equivalents | ₩ | 23,968 | 29,503 | 230,925 | ||||||||
Other current liabilities | — | — | 18,686 | |||||||||
Long-term payables — other (*) | 14,500 | — | — | |||||||||
|
|
|
|
|
| |||||||
38,468 | 29,503 | 249,611 | ||||||||||
|
|
|
|
|
| |||||||
Fair value of assets acquired and liabilities assumed | ||||||||||||
Cash and cash equivalents | ₩ | 16,631 | 3,098 | 13,881 | ||||||||
Accounts receivable — trade, net | 111 | 11,687 | 6,541 | |||||||||
Inventories, net | — | 11,780 | 727 | |||||||||
Property, equipment and intangible assets | 11,489 | 3,153 | 81,972 | |||||||||
Other assets | 1,289 | 6,824 | 6,236 | |||||||||
Accounts payable — trade | (3,411 | ) | (7,113 | ) | (796 | ) | ||||||
Borrowings and debentures | (2,150 | ) | (2,293 | ) | — | |||||||
Other liabilities | (3,305 | ) | (6,268 | ) | (13,008 | ) | ||||||
|
|
|
|
|
| |||||||
₩ | 20,654 | 20,868 | 95,553 | |||||||||
|
|
|
|
|
| |||||||
Controlling interests | 20,654 | 8,193 | 91,006 | |||||||||
Non-controlling interests | — | 12,675 | 4,547 |
Acquisition of |
DuringThe Parent Company has obtained control by acquiring 627,000 shares(55%) of Tbroad Nowon Broadcasting Co., Ltd. and Tbroad Nowon Broadcasting Co., Ltd. changed its name to Broadband Nowon Co., Ltd. during the year ended December 31, 2015, hoppin service division2020. The consideration transferred was ₩10,421 million in cash and the difference between the fair value of SK Planetnet assets acquired and the consideration transferred amounting to ₩733 million was recognized as other non-operating income. Subsequent to the acquisition, Broadband Nowon Co., Ltd., a subsidiary recognized revenue of the Parent Company, was spun off from SK Planet Co., Ltd.₩5,756 million and was merged into SK Broadband, Co., Ltd., a subsidiarynet profit of the Parent Company. There is no impact on the consolidated financial statements as it is a business combination under common control.₩426 million.
Summary of the acquiree |
Information of Acquiree | ||
Corporate name | Broadband Nowon Co., Ltd. | |
Location | 21, 81gil, Dobong-ro, Gangbuk-gu, Seoul, Korea | |
CEO | Yoo, Chang-Wan | |
Industry | Cable broadcasting services |
PS&Marketing Corporation, a subsidiary of the Parent Company, acquired the retail distribution business of IT service department of SK Networks Co., Ltd. on April 30, 2014 in order to strengthen the mid/long-term distribution competitiveness by expanding the retail infrastructure and enlarging the direct management network.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
Revenues and profit or loss recognized after the acquisition date by the acquired businesses of PS&Marketing Corporation are not disclosed as the estimate is practically impossible.
As the business combination which occurred during the years ended December 31, 2014 was a business combination between entities under common control, the difference between the consideration and book value of net assets was recognized as a capital deficit and other capital adjustments.
Considerations transferred, identifiable assets acquired and liabilities |
Consideration paid and assets and liabilities transferred as ofassumed at the acquisition date are as follows:
(In millions of won) | |||||
I. Consideration | |||||
Cash and cash equivalents | ₩ | ||||
| |||||
| |||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| ||||
| |||||
Cash and cash equivalents | |||||
Accounts receivable — trade and other | |||||
| |||||
Property and equipment, | |||||
Intangible assets, net | 360 | ||||
Other assets | |||||
Accounts payable — trade and other | ( | ) | |||
Other liabilities | ( | ) | |||
|
| ||||
III. Non-controlling interests: | 9,126 | ||||
IV. Gain on bargain purchase (I - II+III) | ₩ | (733 | ) | ||
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
3) | Acquisition of security equipment construction and security services business of SK hystec inc. by ADT CAPS Co., Ltd. |
ADT CAPS Co., Ltd., a subsidiary of the Parent Company, acquired the security equipment construction and security services business from SK hystec inc., a related party of the Group, in order to strengthen the expertise and the competitiveness of security business during the year ended December 31, 2020. The consideration transferred was ₩8,047 million, among which ₩2,958 million was paid in cash during the year ended December 31, 2020 and the remaining balance will be paid at ₩3,000 million annually in July 2021 and July 2022. The Group recognized the difference between the fair value of net assets acquired and the consideration transferred amounting to ₩2,892 million as goodwill.
(i) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ₩ | 8,047 | ||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Accounts receivable — trade and other | 6,787 | |||
Property and equipment, net | 363 | |||
Intangible assets, net | 6,460 | |||
Other assets | 4 | |||
Accounts payable — trade and other | (5,306 | ) | ||
Defined benefit liabilities | (1,227 | ) | ||
Deferred tax liabilities | (1,554 | ) | ||
Other liabilities | (372 | ) | ||
5,155 | ||||
III. Goodwill (I - II) | ₩ | 2,892 | ||
4) | Business combination under common control: Merger of Life & Security Holdings Co., Ltd. by SK Infosec Co., Ltd. |
SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve business management efficiency on December 30, 2020. As this transaction is a business combination under common control, the acquired assets and liabilities were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements and there is no effect on the assets and liabilities of consolidated financial statements. As a result of the merger, the Parent Company’s ownership interest of SK Infosec Co., Ltd. has changed from 100% to 62.6%.
(2) | 2019 |
1) | Acquisition of Incross Co., Ltd. by the Parent Company |
The Parent Company acquired 2,786,455 shares of Incross Co., Ltd. at ₩53,722 million in cash during the year ended December 31, 2019 in order to expand digital advertising business through the integration of the Group’s technological capabilities. Although the Parent Company owns less than 50% of the investee, the management has determined that the Parent Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders’ meetings, and the fact that the Parent Company has a right to appoint the majority of the members of board of directors by the virtue of an agreement with the investee’s
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
other shareholders. Incross Co., Ltd. reported ₩19,787 million of revenue and ₩5,756 million of profit since the Group obtained control.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | Incross Co., Ltd. | |
Location | 5th floor, 1926, Nambusunhwan-ro, Gwanak-gu, Seoul, Korea | |
CEO | Lee, Jae-won | |
Industry | Media representative business |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amount | ||||
I. Considerations transferred: | ||||
Cash and cash equivalents | ₩ | 53,722 | ||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 17,400 | |||
Short-term financial instruments | 24,941 | |||
Accounts receivable — trade and other | 67,259 | |||
Property and equipment, net | 2,411 | |||
Intangible assets, net | 2,709 | |||
Other assets | 9,254 | |||
Accounts payable — trade and other | (57,309 | ) | ||
Other liabilities | (1,984 | ) | ||
64,681 | ||||
III. Non-controlling interests: | 40,592 | |||
|
| |||
| ₩ | |||
|
|
(3) | 2018 |
1) | Acquisition of id Quantique SA by the Parent Company: |
As of April 30, 2018, the Parent Company acquired additional 41,157,506 shares in exchange of ₩55,249 million in cash, which resulted in the Parent Company’s obtaining control over id Quantique SA with 44,157,506 shares and 58.1% ownership of the outstanding shares, in aggregate. Taking control of id Quantique SA will enable the Parent Company to increase its corporate value as the leading mobile telecommunication operator in Korea and to generate profit in overseas markets by utilizing quantum cryptographic technologies.
In addition, the Parent Company acquired additional 16,666,666 shares in exchange for assets amounting to ₩5,672 million resulting in the increase of the ownership to 65.6%.
id Quantique SA has recognized ₩9,935 million in revenue and ₩5,220 million in net losses since the Group obtained control. Meanwhile, the existing shares were reclassified into the investment in a subsidiary from the FVOCI equity instrument with the valuation gain on FVOCI equity instrument of ₩1,636 million reclassified into the retained earnings.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | id Quantique SA | |
Location | 3, CHEMIN DE LA MARBRERIE, 1227 CAROUGE, SWITZERLAND | |
CEO | Gregoire Ribordy | |
Industry | Quantum information and communications industry |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amount | ||||
I. Considerations transferred: | ||||
Cash and cash equivalents | ₩ | 55,249 | ||
Existing shares(financial assets at FVOCI) at fair value | 3,965 | |||
59,214 | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 1,538 | |||
Accounts receivable — trade and other | 13,609 | |||
Inventories | 2,003 | |||
Property and equipment, net | 415 | |||
Intangible assets, net | 7,566 | |||
Other assets | 447 | |||
Accounts payable — trade and other | (1,569 | ) | ||
Other liabilities | (2,880 | ) | ||
21,129 | ||||
III. Non-controlling interests: | 9,290 | |||
IV. Goodwill(I - II+III) | ₩ | 47,375 | ||
2) | Acquisition of Life & Security Holdings Co., Ltd. by the Parent Company |
As of October 1, 2018, the Parent Company obtained control by acquiring 55% ownership of Life & Security Holdings Co., Ltd which owns 100% ownership of ADT CAPS Co., Ltd. in order to strengthen the security business and expand residential customer base. The consideration for the business combination was ₩696,665 million in cash, and the difference between the fair value of net assets acquired and the consideration paid amounting to ₩1,155,037 million was recognized as goodwill. Subsequent to the acquisition, Life & Security Holdings Co., Ltd. recognized revenue of ₩197,487 million, and net profit of ₩6,038 million. In addition, assuming that the business combination occurred at the beginning of the reporting period, the Group would have additionally recognized revenue of ₩763,375 million, and net loss of ₩19,548 million.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | Life & Security Holdings Co., Ltd. | |
Location | 323, Incheon tower-daero, | |
CEO | Choi, Jin-hwan | |
Industry | Holding company of subsidiaries in security business |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amount | ||||
I. Considerations transferred: | ||||
Cash and cash equivalents | ₩ | 696,665 | ||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 101,896 | |||
Accounts receivable — trade and other | 40,241 | |||
Inventories | 2,440 | |||
Property and equipment, net | 427,752 | |||
Intangible assets, net | 1,019,503 | |||
Other assets | 3,956 | |||
Accounts payable — trade and other | (296,660 | ) | ||
Borrowings | (1,744,839 | ) | ||
Deferred tax liabilities | (229,207 | ) | ||
Other liabilities | (158,042 | ) | ||
(832,960 | ) | |||
III. Non-controlling interests: | (374,588 | ) | ||
IV. Goodwill(I - II+III) | ₩ | 1,155,037 | ||
3) Business combination under common control: Acquisition of SK Infosec Co., Ltd.
The Group acquired 100% ownership of SK Infosec Co., Ltd. from SK Holdings Co., Ltd., the ultimate controlling entity of the Parent Company, in order to create synergy in the security business and increase corporate value. As this transaction is a business combination under common control, the acquired assets and liabilities were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements. Considerations transferred and assets and liabilities recognized at the acquisition date are as follows:
(In millions of won) | Amount | |||
I. Considerations transferred: | ||||
Treasury shares of the Parent Company(*) | ₩ | 281,151 | ||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 30,762 | |||
Accounts receivable — trade and other | 62,448 | |||
Inventories | 1,293 | |||
Property and equipment, net | 8,047 | |||
Intangible assets, net | 5,528 | |||
Other assets | 79,951 | |||
Accounts payable — trade and other | (38,431 | ) | ||
Other liabilities | (20,003 | ) | ||
129,595 | ||||
III. Deduction of capital surplus and others (I — II) | ₩ | 151,556 | ||
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(*) | The Parent Company provided 1,260,668 shares of its treasury shares as considerations, and the fair value of the considerations was ₩335,338 million at the transfer date. |
In addition, assuming that the business combination occurred at the beginning of the reporting period, the Group would have additionally recognized revenue of ₩172,905 million and net profit of ₩19,512 million.
4) Business combination under common control: Acquisition of Device business unit by SK Telink Co., Ltd.
During the year ended December 31, 2018, SK Telink Co., Ltd., the subsidiary owned by the Parent Company, acquired a device business in exchange of ₩4,450 million in cash from SK Holdings Co., Ltd., the ultimate controlling entity of the Parent Company. As this transaction is a business combination under common control, the difference between the consideration and carrying amount of net assets amounting to ₩1,018 million was deducted from capital surplus and others.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
13. | Investments in Associates and Joint Ventures |
(1) Investments in associates and joint ventures accounted for using the equity method as of December 31, 2020 and 2019 are as follows:
(In millions of won) | December 31, 2015 | December 31, 2014 | ||||||||||||||||
Country | Ownership percentage | Carrying amount | Ownership percentage | Carrying amount | ||||||||||||||
Investments in associates | ||||||||||||||||||
SK China Company Ltd.(*1) | China | 9.6 | ₩ | 43,814 | 9.6 | ₩ | 35,817 | |||||||||||
Korea IT Fund(*2) | Korea | 63.3 | 260,456 | 63.3 | 240,676 | |||||||||||||
KEB HanaCard Co., Ltd.(*1,3) | Korea | 15.0 | 254,177 | 25.4 | 425,140 | |||||||||||||
Candle Media Co., Ltd. | Korea | 35.1 | 20,144 | 35.1 | 19,486 | |||||||||||||
NanoEnTek, Inc. (*4) | Korea | 28.6 | 45,008 | 26.0 | 36,527 | |||||||||||||
SK Industrial Development China Co., Ltd. | Hong Kong | 21.0 | 86,324 | 21.0 | 79,394 | |||||||||||||
Packet One Network(*5) | Malaysia | — | — | 13.6 | 53,670 | |||||||||||||
SK Technology Innovation Company | Cayman | 49.0 | 45,891 | 49.0 | 44,052 | |||||||||||||
HappyNarae Co., Ltd. | Korea | 42.5 | 17,095 | 42.5 | 15,551 | |||||||||||||
SK hynix Inc. | Korea | 20.1 | 5,624,493 | 20.1 | 4,849,159 | |||||||||||||
SK MENA Investment B.V. | Netherlands | 32.1 | 14,929 | 32.1 | 14,015 | |||||||||||||
SKY Property Mgmt. Ltd. | Virgin Island | 33.0 | 251,166 | 33.0 | 248,534 | |||||||||||||
Xinan Tianlong Science and Technology Co., Ltd. | China | 49.0 | 25,767 | 49.0 | 25,874 | |||||||||||||
Daehan Kanggun BcN Co., Ltd. and others | — | — | 161,058 | — | 158,725 | |||||||||||||
|
|
|
| |||||||||||||||
Sub-total | 6,850,322 | 6,246,620 | ||||||||||||||||
|
|
|
| |||||||||||||||
Investments in joint ventures | ||||||||||||||||||
Dogus Planet, Inc.(*6) | Turkey | 50.0 | 15,118 | 50.0 | 11,441 | |||||||||||||
PT. Melon Indonesia | Indonesia | 49.0 | 4,339 | 49.0 | 3,564 | |||||||||||||
Television Media Korea Ltd.(*7) | Korea | — | — | 51.0 | 6,944 | |||||||||||||
Celcom Planet | Malaysia | 51.0 | 3,406 | 51.0 | 16,605 | |||||||||||||
PT XL Planet Digital(*6) | Indonesia | 50.0 | 23,108 | 50.0 | 12,914 | |||||||||||||
|
|
|
| |||||||||||||||
Sub-total | 45,971 | 51,468 | ||||||||||||||||
|
|
|
| |||||||||||||||
Total | ₩ | 6,896,293 | ₩ | 6,298,088 | ||||||||||||||
|
|
|
|
December 31, 2020 | December 31, 2019 | |||||||||||||||||||
(In millions of won) | Country | Ownership (%) | Carrying amount | Ownership (%) | Carrying amount | |||||||||||||||
Investments in associates: | ||||||||||||||||||||
SK China Company Ltd. | China | 27.3 | ₩ | 555,133 | 27.3 | ₩ | 568,459 | |||||||||||||
Korea IT Fund(*1) | Korea | 63.3 | 323,294 | 63.3 | 311,552 | |||||||||||||||
KEB HanaCard Co., Ltd.(*2) | Korea | 15.0 | 314,930 | 15.0 | 294,756 | |||||||||||||||
SK Telecom CS T1 Co., Ltd.(*1) | Korea | 54.9 | 53,010 | 54.9 | 60,305 | |||||||||||||||
NanoEnTek, Inc.(*3) | Korea | 28.4 | 43,190 | 28.6 | 42,127 | |||||||||||||||
UniSK | China | 49.0 | 15,700 | 49.0 | 14,342 | |||||||||||||||
SK Technology Innovation Company | | Cayman Islands | | 49.0 | 41,579 | 49.0 | 43,997 | |||||||||||||
SK MENA Investment B.V. | Netherlands | 32.1 | 14,043 | 32.1 | 14,904 | |||||||||||||||
SK hynix Inc. | Korea | 20.1 | 12,251,861 | 20.1 | 11,425,325 | |||||||||||||||
SK Latin America Investment S.A. | Spain | 32.1 | 13,930 | 32.1 | 13,698 | |||||||||||||||
Grab Geo Holdings PTE. LTD. | Singapore | 30.0 | 30,063 | 30.0 | 31,269 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*4) | Singapore | 20.0 | 311,990 | 20.0 | 250,034 | |||||||||||||||
Pacific Telecom Inc.(*2) | USA | 15.0 | 39,723 | 15.0 | 40,016 | |||||||||||||||
S.M. Culture & Contents Co., Ltd.(*5) | Korea | 23.3 | 62,248 | 23.4 | 63,469 | |||||||||||||||
Content Wavve Co., Ltd. | Korea | 30.0 | 75,803 | 30.0 | 83,640 | |||||||||||||||
Hello Nature Co., Ltd.(*6) | Korea | 49.9 | 11,969 | 49.9 | 13,620 | |||||||||||||||
Digital Games International Pte. Ltd.(*7) | Singapore | 33.3 | 6,449 | — | — | |||||||||||||||
Invites Healthcare Co., Ltd.(*8) | Korea | 43.5 | 25,536 | — | — | |||||||||||||||
Nam Incheon Broadcasting Co., Ltd.(*9) | Korea | 27.3 | 10,902 | — | — | |||||||||||||||
NANO-X IMAGING LTD.(*2,10) | Israel | 5.6 | 28,484 | — | — | |||||||||||||||
Home Choice Corp.(*2,9) | Korea | 17.8 | 3,585 | — | — | |||||||||||||||
Carrot General Insurance Co., Ltd. (Formerly, Carrot Co., Ltd)(*11) | Korea | 21.4 | 13,469 | 9.9 | 6,459 | |||||||||||||||
12CM JAPAN and others(*2,8,12) | — | — | 65,750 | — | 58,884 | |||||||||||||||
|
|
|
| |||||||||||||||||
14,312,641 | 13,336,856 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||
Dogus Planet, Inc.(*13) | Turkey | 50.0 | 15,071 | 50.0 | 15,921 | |||||||||||||||
Finnq Co., Ltd.(*13) | Korea | 49.0 | 13,342 | 49.0 | 22,880 | |||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC(*13) | USA | 50.0 | 5,850 | 50.0 | 7,961 | |||||||||||||||
NEXTGEN ORCHESTRATION, LLC(*13) | USA | 50.0 | 1,600 | 50.0 | 1,646 | |||||||||||||||
Techmaker GmbH(*13) | Germany | 50.0 | 5,609 | — | — | |||||||||||||||
|
|
|
| |||||||||||||||||
41,472 | 48,408 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
₩ | 14,354,113 | ₩ | 13,385,264 | |||||||||||||||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(*1) | Investments in Korea IT Fund and SK Telecom CS T1 Co., Ltd. were classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | These investments were classified as investments in associates as the Group can exercise significant influence through |
(*3) | The ownership interest has changed as third-party share option was exercised and convertible bonds were converted during the year ended December 31, |
(*4) | The Group additionally contributed ₩119,770 million in cash during the year ended December 31, |
(*5) | The ownership interest has changed as S.M. Culture & Contents Co., Ltd. issued 549,094 shares of common stock as a result of the merger with Hoteltrees Co., Ltd. during the year ended December 31, |
(*6) | The Group additionally contributed ₩9,980 million in cash during the year ended December 31, 2020, but there is no change in the ownership interest. |
(*7) | The Group newly invested ₩8,810 million in cash during the year ended December 31, 2020. |
(*8) | The Group transferred the entire shares of Health Connect Co., Ltd. and assets related to the digital disease management business during the year ended December 31, 2020. The Group acquired 279,999 shares of common stock and 140,000 shares of convertible preferred stock of Invites Healthcare Co., Ltd. in consideration of the transfer and recognized ₩9,372 million of gain on investments in associates and ₩12,451 million of gain on the business transfer. After the transaction, Invites Healthcare Co., Ltd. increased its capital by a third-party allotment which changed the Group’s ownership interest. |
(*9) | The Group acquired the shares of Nam Incheon Broadcasting Co., Ltd. and Home Choice Corp. from the merger with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. |
(*10) | The Group obtained significant influence by contributing ₩24,015 million in cash for the year ended December 31, 2020 and reclassified ₩3,621 million from financial assets at FVOCI to investments in associates. Meanwhile, NANO-X IMAGING LTD. has been listed on NASDAQ since the Group obtained significant influence. The ownership interest of the Group has changed due to issuance of new shares through listing and the exercise of right to acquire new shares by a third party. |
(*11) | Group acquired 1,360,000 shares of common stock and 2,640,000 shares of preferred stock of Carrot General Insurance Co., Ltd. (formerly, Carrot Co., Ltd.) at ₩6,800 million and ₩13,200 million, respectively, during the year ended December 31, 2019, and has converted the entire preferred stock into common stock during the year ended December 31, 2020. |
(*12) | The Group disposed the entire shares of SK Telecom Smart City Management Co., Ltd. and recognized ₩4,485 million of gain relating to investments in associates during the year ended December 31, 2020. |
(*13) | These investments were classified as investments in joint ventures as the Group |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won, except for share and per share data) | ||||||||||||||||||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||||||||||
Market value per share (In won) | Number of shares | Market price | Market value per share (In won) | Number of shares | Market price | |||||||||||||||||||
Candle Media Co., Ltd. | ₩ | 1,170 | 21,620,360 | 25,296 | ₩ | 734 | 21,620,360 | 15,869 | ||||||||||||||||
NanoEnTek, Inc. | 7,300 | 6,960,445 | 50,811 | 5,710 | 5,870,290 | 33,519 | ||||||||||||||||||
SK hynix Inc. | 30,750 | 146,100,000 | 4,492,575 | 47,750 | 146,100,000 | 6,976,275 |
(In millions of won) | As of and for the year ended December 31, 2015 | |||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. | |||||||
Current assets | ₩ | 9,760,030 | 6,228,076 | |||||
Non-current assets | 19,917,876 | 509,579 | ||||||
Current liabilities | 4,840,698 | 1,103,873 | ||||||
Non-current liabilities | 3,449,505 | 4,297,289 | ||||||
Revenue | 18,797,998 | 1,472,830 | ||||||
Profit from continuing operations | 4,323,595 | 10,119 | ||||||
Other comprehensive income (loss) | 40,215 | (547 | ) | |||||
Total comprehensive income | 4,363,810 | 9,572 |
(In millions of won) | As of and for the year ended December 31, 2014 | |||||||
SK hynix Inc. | KEB HanaCard Co., Ltd.(*) | |||||||
Current assets | ₩ | 10,363,514 | 6,716,612 | |||||
Non-current assets | 16,519,764 | 568,065 | ||||||
Current liabilities | 5,765,304 | 848,140 | ||||||
Non-current liabilities | 3,081,671 | 5,109,888 | ||||||
Revenue | 17,125,566 | 305,756 | ||||||
Profit (loss) from continuing operations | 4,195,169 | (11,196 | ) | |||||
Other comprehensive income (loss) | (52,360 | ) | (734 | ) | ||||
Total comprehensive income (loss) | 4,142,809 | (11,930 | ) |
(2) The market value of investments in listed associates as of December 31, 2020 and 2019 are as follows:
December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||
(In millions of won, except for share data) | Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | ||||||||||||||||||
NanoEnTek, Inc. | ₩ | 8,620 | 7,600,649 | 65,518 | 5,620 | 7,600,649 | 42,716 | |||||||||||||||||
SK hynix Inc. | 118,500 | 146,100,000 | 17,312,850 | 94,100 | 146,100,000 | 13,748,010 | ||||||||||||||||||
S.M.Culture & Contents Co.,Ltd. | 1,630 | 22,033,898 | 35,915 | 1,530 | 22,033,898 | 33,712 | ||||||||||||||||||
NANO-X IMAGING LTD. | 49,678 | 2,607,466 | 129,534 | — | — | — |
(3) The condensed financial information of significant associates as of and for the years ended December 31, 2020, 2019 and 2018 are as follows:
(In millions of won) | SK hynix Inc.(*) | KEB HanaCard Co., Ltd.(*) | Korea IT Fund | SK China Company Ltd.(*) | SK South East Asia Investment Pte. Ltd.(*) | |||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||
Current assets | ₩ | 16,570,953 | 7,910,517 | 107,652 | 380,413 | 797,045 | ||||||||||||||
Non-current assets | 54,602,900 | 298,438 | 402,812 | 1,706,634 | 1,672,412 | |||||||||||||||
Current liabilities | 9,072,360 | 897,594 | — | 51,025 | 67 | |||||||||||||||
Non-current liabilities | 10,192,396 | 5,531,968 | — | 308,606 | — | |||||||||||||||
2020 | ||||||||||||||||||||
Revenue | ₩ | 31,900,418 | 1,231,815 | 52,330 | 107,791 | — | ||||||||||||||
Profit (loss) for the year | 4,758,914 | 154,521 | 36,615 | 20,369 | (158,680 | ) | ||||||||||||||
Other comprehensive income (loss) | (107,378 | ) | (4,283 | ) | 9,647 | 42,921 | (390,851 | ) | ||||||||||||
Total comprehensive income (loss) | 4,651,536 | 150,238 | 46,262 | 63,290 | (549,531 | ) |
(In millions of won) | SK hynix Inc.(*) | KEB HanaCard Co., Ltd.(*) | Korea IT Fund | SK China Company Ltd.(*) | SK South East Asia Investment Pte. Ltd.(*) | |||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||
Current assets | ₩ | 14,457,602 | 7,974,407 | 113,233 | 615,028 | 81,065 | ||||||||||||||
Non-current assets | 50,331,892 | 207,284 | 378,691 | 1,442,748 | 1,797,239 | |||||||||||||||
Current liabilities | 7,874,033 | 1,015,657 | — | 59,395 | 94 | |||||||||||||||
Non-current liabilities | 8,972,266 | 5,537,850 | — | 215,354 | — | |||||||||||||||
2019 | ||||||||||||||||||||
Revenue | ₩ | 26,990,733 | 1,236,678 | 70,565 | 116,269 | — | ||||||||||||||
Profit for the year | 2,016,391 | 56,281 | 53,867 | 23,474 | 1,190 | |||||||||||||||
Other comprehensive income (loss) | 94,023 | (4,458 | ) | 6,132 | (15,093 | ) | 97,508 | |||||||||||||
Total comprehensive income | 2,110,414 | 51,823 | 59,999 | 8,381 | 98,698 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | SK hynix Inc.(*) | KEB HanaCard Co., Ltd.(*) | Korea IT Fund | SK China Company Ltd.(*) | SK South East Asia Investment Pte. Ltd.(*) | |||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||
Current assets | ₩ | 19,894,146 | 7,781,888 | 118,024 | 677,686 | 559,050 | ||||||||||||||
Non-current assets | 43,764,189 | 202,251 | 326,740 | 1,221,736 | — | |||||||||||||||
Current liabilities | 13,031,852 | 1,122,538 | — | 71,396 | — | |||||||||||||||
Non-current liabilities | 3,774,152 | 5,286,179 | — | 117,094 | — | |||||||||||||||
2018 | ||||||||||||||||||||
Revenue | ₩ | 40,445,066 | 1,642,133 | 57,430 | 117,132 | — | ||||||||||||||
Profit for the year | 15,539,984 | 106,675 | 45,110 | 30,274 | — | |||||||||||||||
Other comprehensive income (loss) | (67,219 | ) | (4,344 | ) | (13,422 | ) | (16,149 | ) | — | |||||||||||
Total comprehensive income | 15,472,765 | 102,331 | 31,688 | 14,125 | — |
The |
(4) The condensed financial information of significant joint ventures as of and for the years ended December 31, 2020, 2019 and 2018 are as follows:
(In millions of won) | ||||||||||||||||
As of and for the year ended December 31, 2015 | ||||||||||||||||
Dogus Planet, Inc. | PT. Melon Indonesia | PT XL Planet Digital | Celcom Planet | |||||||||||||
Current assets | ₩ | 46,248 | 12,805 | 9,500 | 21,416 | |||||||||||
Cash and cash equivalents | 8,091 | 4,027 | 5,034 | 19,371 | ||||||||||||
Non-current assets | 18,088 | 2,657 | 46,013 | 5,519 | ||||||||||||
Current liabilities | 34,022 | 6,416 | 8,583 | 20,257 | ||||||||||||
Account payable, other payables and provision | 4,317 | 3,396 | 3,648 | 5,889 | ||||||||||||
Non-current liabilities | 78 | 140 | 714 | — | ||||||||||||
Account payable, other payables and provisions | — | — | — | — | ||||||||||||
Revenue | 38,944 | 17,094 | 5,536 | 1,647 | ||||||||||||
Depreciation and amortization | (5,318 | ) | (132 | ) | (2,746 | ) | (1,332 | ) | ||||||||
Interest income | 465 | 288 | 525 | 345 | ||||||||||||
Interest expense | — | — | — | — | ||||||||||||
Income tax benefit | — | — | 7,025 | — | ||||||||||||
Profit (loss) from continuing operations | (32,713 | ) | 1,853 | (21,381 | ) | (25,881 | ) | |||||||||
Total comprehensive income(loss) | (32,713 | ) | 1,853 | (21,381 | ) | (25,881 | ) |
(In millions of won) | (In millions of won) | Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||||||||||||||||||||
As of and for the year ended December 31, 2014 | ||||||||||||||||||||||||||||
Television Media Korea Ltd. | Dogus Planet, Inc. | PT. Melon Indonesia | PT XL Planet Digital | Celcom Planet | As of December 31, 2020 | |||||||||||||||||||||||
Current assets | ₩ | 16,252 | 38,641 | 10,022 | 9,241 | 30,407 | ₩ | 55,951 | 26,781 | |||||||||||||||||||
Cash and cash equivalents | 5,104 | 6 | 4,763 | 6,710 | 30,400 | 9,083 | 23,936 | |||||||||||||||||||||
Non-current assets | 4,543 | 13,011 | 3,094 | 14,589 | 3,343 | 30,408 | 8,530 | |||||||||||||||||||||
Current liabilities | 7,188 | 28,406 | 5,689 | 4,198 | 1,182 | 46,186 | 7,367 | |||||||||||||||||||||
Account payable, other payables and provisions | 265 | 3,648 | — | — | — | |||||||||||||||||||||||
Accounts payable, other payables and provisions | 28,145 | 5,094 | ||||||||||||||||||||||||||
Non-current liabilities | 464 | 377 | 102 | 124 | — | 10,031 | 879 | |||||||||||||||||||||
Account payable, other payables and provisions | 464 | 377 | — | 124 | — | |||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||
Revenue | 16,403 | 23,897 | 11,826 | 1,019 | — | ₩ | 177,084 | 3,937 | ||||||||||||||||||||
Depreciation and amortization | (3,732 | ) | (2,402 | ) | (928 | ) | (1,452 | ) | (1 | ) | (4,642 | ) | (4,417 | ) | ||||||||||||||
Interest income | 254 | 1,154 | 268 | — | — | 1,878 | 29 | |||||||||||||||||||||
Interest expense | — | (6 | ) | — | — | — | (555 | ) | (51 | ) | ||||||||||||||||||
Income tax benefit | — | — | — | 5,334 | — | |||||||||||||||||||||||
Profit (loss) from continuing operations | (3,361 | ) | (37,146 | ) | 523 | (15,596 | ) | (1,479 | ) | |||||||||||||||||||
Total comprehensive income (loss) | (3,361 | ) | (37,146 | ) | 523 | (15,596 | ) | (1,479 | ) | |||||||||||||||||||
Profit (loss) for the year | 7,030 | (19,426 | ) | |||||||||||||||||||||||||
Total comprehensive loss | (1,659 | ) | (19,426 | ) |
(In millions of won) | Dogus Planet, Inc. | Finnq Co., Ltd. | ||||||
As of December 31, 2019 | ||||||||
Current assets | ₩ | 59,632 | 42,995 | |||||
Cash and cash equivalents | 13,422 | 40,619 | ||||||
Non-current assets | 25,247 | 11,389 | ||||||
Current liabilities | 52,238 | 6,756 | ||||||
Accounts payable, other payables and provisions | 35,459 | 5,062 | ||||||
Non-current liabilities | 800 | 1,099 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
2019 | ||||||||
Revenue | ₩ | 136,777 | 1,968 | |||||
Depreciation and amortization | (5,487 | ) | (4,769 | ) | ||||
Interest income | 1,455 | 12 | ||||||
Interest expense | (92 | ) | (198 | ) | ||||
Profit (loss) for the year | 9,294 | (17,079 | ) | |||||
Total comprehensive income (loss) | 9,294 | (17,361 | ) |
(In millions of won) | ||||||||||||||||||||
December 31, 2015 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
Associates: | ||||||||||||||||||||
SK hynix Inc.(*1,2) | ₩ | 21,386,863 | 20.1 | 4,425,794 | 1,198,699 | 5,624,493 | ||||||||||||||
KEB HanaCard Co., Ltd. | 1,336,493 | 15.0 | 200,474 | 53,703 | 254,177 | |||||||||||||||
SKY Property Mgmt. Ltd.(*1) | 537,847 | 33.0 | 177,490 | 73,676 | 251,166 | |||||||||||||||
Korea IT Fund | 411,246 | 63.3 | 260,456 | — | 260,456 |
(In millions of won) | Dogus Planet, Inc. | Finnq Co., Ltd. | ||||||
As of December 31, 2018 | ||||||||
Current assets | ₩ | 43,127 | 11,985 | |||||
Cash and cash equivalents | 42,416 | 10,434 | ||||||
Non-current assets | 20,239 | 15,435 | ||||||
Current liabilities | 37,105 | 5,070 | ||||||
Accounts payable, other payables and provisions | 28,432 | 87 | ||||||
Non-current liabilities | 1,287 | 7,579 | ||||||
2018 | ||||||||
Revenue | ₩ | 99,770 | 232 | |||||
Depreciation and amortization | (5,427 | ) | (3,490 | ) | ||||
Interest income | 1,635 | 5 | ||||||
Interest expense | — | (301 | ) | |||||
Profit (Loss) for the year | 642 | (17,995 | ) | |||||
Total comprehensive income (loss) | 642 | (18,166 | ) |
(5) Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of December 31, 2020 and 2019 are as follows:
December 31, 2020 | ||||||||||||||||||||
(In millions of won) | Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | |||||||||||||||
SK hynix Inc.(*1,2) | ₩ | 51,883,236 | 20.1 | 11,082,048 | 1,169,813 | 12,251,861 | ||||||||||||||
KEB HanaCard Co., Ltd. | 1,779,393 | 15.0 | 266,909 | 48,021 | 314,930 | |||||||||||||||
Korea IT Fund | 510,464 | 63.3 | 323,294 | — | 323,294 | |||||||||||||||
SK China Company Ltd.(*1) | 1,725,949 | 27.3 | 470,687 | 84,446 | 555,133 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) | 1,559,951 | 20.0 | 311,990 | — | 311,990 | |||||||||||||||
(In millions of won) | December 31, 2019 | |||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
SK hynix Inc.(*1,2) | ₩ | 47,928,415 | 20.1 | 10,237,314 | 1,188,011 | 11,425,325 | ||||||||||||||
KEB HanaCard Co., Ltd. | 1,628,184 | 15.0 | 244,228 | 50,528 | 294,756 | |||||||||||||||
Korea IT Fund | 491,924 | 63.3 | 311,552 | — | 311,552 | |||||||||||||||
SK China Company Ltd.(*1) | 1,772,419 | 27.3 | 483,360 | 85,099 | 568,459 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) | 1,250,168 | 20.0 | 250,034 | — | 250,034 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(*1) | Net assets of these entities represent net assets excluding those attributable to their non-controlling interests. |
(*2) | The ownership interest is based on the number of shares owned by the Parent Company |
(In millions of won) | ||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
Associates: | ||||||||||||||||||||
SK hynix Inc.(*) | ₩ | 18,036,453 | 20.1 | 3,619,666 | 1,229,493 | 4,849,159 | ||||||||||||||
KEB HanaCard Co., Ltd. | 1,326,649 | 25.4 | 337,266 | 87,874 | 425,140 | |||||||||||||||
SKY Property Mgmt. Ltd.(*) | 527,479 | 33.0 | 174,068 | 74,466 | 248,534 | |||||||||||||||
Korea IT Fund | 380,170 | 63.3 | 240,676 | — | 240,676 |
(6) Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2020 and 2019 are as follows:
2020 | ||||||||||||||||||||||||||||
(In millions of won) | Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other compre- hensive income (loss) | Other increase (decrease) | Business Combina -tion | Ending balance | |||||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||||||
SK China Company Ltd. | ₩ | 568,459 | — | 3,752 | (17,078 | ) | — | — | 555,133 | |||||||||||||||||||
Korea IT Fund(*1) | 311,552 | — | 23,189 | 6,110 | (17,557 | ) | — | 323,294 | ||||||||||||||||||||
KEB HanaCard Co., Ltd. | 294,756 | — | 20,671 | (497 | ) | — | — | 314,930 | ||||||||||||||||||||
SK Telecom CS T1 Co., Ltd. | 60,305 | — | (7,282 | ) | (13 | ) | — | — | 53,010 | |||||||||||||||||||
NanoEnTek, Inc. | 42,127 | 143 | 830 | 90 | — | — | 43,190 | |||||||||||||||||||||
UniSK(*1) | 14,342 | — | 1,403 | 168 | (213 | ) | — | 15,700 | ||||||||||||||||||||
SK Technology Innovation Company | 43,997 | — | 184 | (2,602 | ) | — | — | 41,579 | ||||||||||||||||||||
SK MENA Investment B.V. | 14,904 | — | — | (861 | ) | — | — | 14,043 | ||||||||||||||||||||
SK hynix Inc.(*1) | 11,425,325 | — | 995,117 | (22,481 | ) | (146,100 | ) | — | 12,251,861 | |||||||||||||||||||
SK Latin America Investment S.A. | 13,698 | — | (40 | ) | 272 | — | — | 13,930 | ||||||||||||||||||||
Grab Geo Holdings PTE. LTD. | 31,269 | — | (425 | ) | (781 | ) | — | — | 30,063 | |||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 250,034 | 119,770 | 11,250 | (69,064 | ) | — | — | 311,990 | ||||||||||||||||||||
Pacific Telecom Inc.(*1) | 40,016 | — | 2,307 | (1,621 | ) | (979 | ) | — | 39,723 | |||||||||||||||||||
S.M. Culture & Contents Co., Ltd. | 63,469 | (162 | ) | (813 | ) | (246 | ) | — | — | 62,248 | ||||||||||||||||||
Content Wavve Co., Ltd. | 83,640 | — | (7,837 | ) | — | — | — | 75,803 | ||||||||||||||||||||
Hello Nature Co., Ltd.(*2) | 13,620 | 9,980 | (11,118 | ) | (79 | ) | (434 | ) | — | 11,969 | ||||||||||||||||||
Digital Games International Pte. Ltd. | — | 8,810 | (2,038 | ) | (323 | ) | — | — | 6,449 | |||||||||||||||||||
Invites Healthcare Co., Ltd. | — | 28,000 | (2,645 | ) | 181 | — | — | 25,536 | ||||||||||||||||||||
Nam Incheon Broadcasting Co., Ltd. | — | — | 676 | — | — | 10,226 | 10,902 | |||||||||||||||||||||
NANO-X IMAGING LTD.(*3) | — | 28,515 | (747 | ) | — | 716 | — | 28,484 | ||||||||||||||||||||
Home Choice Corp. | — | — | 174 | — | — | 3,411 | 3,585 | |||||||||||||||||||||
Carrot General Insurance Co., Ltd. (Formerly, Carrot Co., Ltd.)(*4) | 6,459 | 31 | (6,188 | ) | (33 | ) | 13,200 | — | 13,469 | |||||||||||||||||||
12CM JAPAN and others(*5) | 58,884 | (1,508 | ) | (2,134 | ) | (2,302 | ) | 12,810 | — | 65,750 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
13,336,856 | 193,579 | 1,018,286 | (111,160 | ) | (138,557 | ) | 13,637 | 14,312,641 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition and disposition | Share of profits (losses) | Other compre- hensive income (loss) | Impair- ment loss | Other increase (decrease) | Ending balance | ||||||||||||||||||||||
Investments in associates | ||||||||||||||||||||||||||||
SK China Company Ltd. | ₩ | 35,817 | — | 4,361 | 3,636 | — | — | 43,814 | ||||||||||||||||||||
Korea IT Fund(*) | 240,676 | — | 11,971 | 9,912 | — | (2,103 | ) | 260,456 | ||||||||||||||||||||
KEB HanaCard Co., Ltd. | 425,140 | (174,475 | ) | 3,275 | 237 | — | — | 254,177 | ||||||||||||||||||||
Candle Media Co., Ltd. | 19,486 | — | 550 | 70 | — | 38 | 20,144 | |||||||||||||||||||||
NanoEnTek, Inc. | 36,527 | 10,000 | (1,649 | ) | 130 | — | — | 45,008 | ||||||||||||||||||||
SK Industrial Development China Co., Ltd. | 79,394 | — | 3,380 | 3,550 | — | — | 86,324 | |||||||||||||||||||||
Packet One Network | 53,670 | — | (8,714 | ) | (3,030 | ) | — | (41,926 | ) | — | ||||||||||||||||||
SK Technology Innovation Company | 44,052 | — | (2,907 | ) | 4,746 | — | — | 45,891 | ||||||||||||||||||||
HappyNarae Co., Ltd. | 15,551 | — | 1,589 | (45 | ) | — | — | 17,095 | ||||||||||||||||||||
SK hynix Inc.(*) | 4,849,159 | — | 842,086 | (22,922 | ) | — | (43,830 | ) | 5,624,493 | |||||||||||||||||||
SK MENA Investment B.V. | 14,015 | — | 3 | 911 | — | — | 14,929 | |||||||||||||||||||||
SKY Property Mgmt. Ltd. | 248,534 | — | 6,408 | (3,776 | ) | — | — | 251,166 | ||||||||||||||||||||
Xinan Tianlong Science and Technology Co., Ltd. | 25,874 | — | (107 | ) | — | — | — | 25,767 | ||||||||||||||||||||
Daehan Kanggun BcN Co., Ltd. and others(*) | 158,725 | 12,320 | (15,726 | ) | 1,689 | (1,305 | ) | 5,355 | 161,058 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Sub-total | 6,246,620 | (152,155 | ) | 844,520 | (4,892 | ) | (1,305 | ) | (82,466 | ) | 6,850,322 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Investments in joint ventures | ||||||||||||||||||||||||||||
Dogus Planet, Inc. | 11,441 | 16,419 | (16,357 | ) | 3,615 | — | — | 15,118 | ||||||||||||||||||||
PT. Melon Indonesia | 3,564 | — | 908 | (133 | ) | — | — | 4,339 | ||||||||||||||||||||
Television Media Korea Ltd. | 6,944 | (6,712 | ) | (232 | ) | — | — | — | — | |||||||||||||||||||
Celcom Planet | 16,605 | — | (13,199 | ) | — | — | — | 3,406 | ||||||||||||||||||||
PT XL Planet Digital | 12,914 | 20,884 | (10,690 | ) | — | — | — | 23,108 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Sub-total | 51,468 | 30,591 | (39,570 | ) | 3,482 | — | — | 45,971 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 6,298,088 | (121,564 | ) | 804,950 | (1,410 | ) | (1,305 | ) | (82,466 | ) | 6,896,293 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 | ||||||||||||||||||||||||||||
(In millions of won) | Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other compre- hensive income (loss) | Other increase (decrease) | Business Combina- tion | Ending balance | |||||||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||||||
Dogus Planet, Inc. | 15,921 | — | 3,453 | (4,303 | ) | — | — | 15,071 | ||||||||||||||||||||
Finnq Co., Ltd. | 22,880 | — | (9,538 | ) | — | — | — | 13,342 | ||||||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC | 7,961 | — | (1,769 | ) | — | (342 | ) | — | 5,850 | |||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC | 1,646 | — | 57 | — | (103 | ) | — | 1,600 | ||||||||||||||||||||
Techmaker GmbH | — | 5,609 | — | — | — | — | 5,609 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
48,408 | 5,609 | (7,797 | ) | (4,303 | ) | (445 | ) | — | 41,472 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
₩ | 13,385,264 | 199,188 | 1,010,489 | (115,463 | ) | (139,002 | ) | 13,637 | 14,354,113 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(* | Dividends |
(*2) | The Group recognized ₩434 million of impairment loss for the investments in Hello Nature Co., Ltd. for the year ended December 31, 2020. |
(*3) | As the Group obtained significant influence, ₩3,621 million of financial assets at FVOCI are reclassified to the investment in associates for the year ended December 31, 2020. |
(*4) | The Group acquired 1,360,000 of common shares and 2,640,000 of preferred shares of Carrot General Insurance Co., Ltd.(Formerly, Carrot Co., Ltd.) at ₩6,800 million and ₩13,200 million, respectively, in cash during the year ended December 31, 2019 and the entire preferred shares were converted to common shares during the year ended December 31, 2020. |
(*5) | The acquisitions for the year ended December 31, 2020 include ₩1,600 million of cash investment in Laguna Dynamic Game Contents Fund and ₩1,342 million of cash investment in KDX Korea Data Exchange and ₩708 million relating to contribution of WALDEN SKT VENTURE FUND. The disposals for the year ended December 31, 2020 include ₩1,142 million relating to transfer of the shares of Health Connect Co., Ltd. and ₩2,056 million relating to liquidation of 2010 KIF-Stonebridge IT Fund and ₩1,984 million relating to disposal of the entire shares of SK Telecom Smart City Management Co., Ltd. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition and disposition | Share of profits (losses) | Other compre- hensive income (loss) | Impair- ment loss | Other increase (decrease) | Ending balance | ||||||||||||||||||||||
Investments in associates | ||||||||||||||||||||||||||||
SK China Company Ltd. | ₩ | 37,434 | — | (365 | ) | (1,252 | ) | — | — | 35,817 | ||||||||||||||||||
Korea IT Fund | 231,402 | — | 3,243 | 6,031 | — | — | 240,676 | |||||||||||||||||||||
Etoos Co., Ltd. | 12,029 | — | 346 | — | — | (12,375 | ) | — | ||||||||||||||||||||
KEB HanaCard Co., Ltd. | 378,616 | — | (739 | ) | (2,031 | ) | — | 49,294 | 425,140 | |||||||||||||||||||
Candle Media Co., Ltd. | 21,241 | — | (1,701 | ) | (54 | ) | — | — | 19,486 | |||||||||||||||||||
NanoEnTek, Inc. | 9,312 | 7,778 | 284 | (27 | ) | — | 19,180 | 36,527 | ||||||||||||||||||||
SK Industrial Development China Co., Ltd. | 77,517 | — | (791 | ) | 2,668 | — | — | 79,394 | ||||||||||||||||||||
Packet One Network | 60,706 | — | (11,845 | ) | 4,809 | — | — | 53,670 | ||||||||||||||||||||
SK Technology Innovation Company | 53,874 | — | (9,822 | ) | — | — | — | 44,052 | ||||||||||||||||||||
HappyNarae Co., Ltd. | 13,935 | — | 1,688 | (72 | ) | — | — | 15,551 | ||||||||||||||||||||
SK hynix Inc. | 3,943,232 | — | 916,486 | (10,559 | ) | — | — | 4,849,159 | ||||||||||||||||||||
SK MENA Investment B.V. | 13,477 | — | (4 | ) | 542 | — | — | 14,015 | ||||||||||||||||||||
SKY Property Mgmt. Ltd. | 238,278 | — | 3,438 | 6,818 | — | — | 248,534 | |||||||||||||||||||||
Xinan Tianlong Science and Technology Co., Ltd. | 26,562 | — | (688 | ) | — | — | — | 25,874 | ||||||||||||||||||||
Daehan Kanggun BcN Co., Ltd. and others | 164,976 | 14,172 | (18,126 | ) | 1,324 | (2,363 | ) | (1,258 | ) | 158,725 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Sub-total | 5,282,591 | 21,950 | 881,404 | 8,197 | (2,363 | ) | 54,841 | 6,246,620 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Investments in joint ventures | ||||||||||||||||||||||||||||
Dogus Planet, Inc. | 10,105 | 19,677 | (18,573 | ) | 232 | — | — | 11,441 | ||||||||||||||||||||
PT. Melon Indonesia | 3,230 | — | 256 | 78 | — | — | 3,564 | |||||||||||||||||||||
Television Media Korea Ltd. | 8,659 | — | (1,715 | ) | — | — | — | 6,944 | ||||||||||||||||||||
Celcom Planet | — | 17,433 | (656 | ) | — | — | (172 | ) | 16,605 | |||||||||||||||||||
PT XL Planet Digital | 20,712 | — | (7,798 | ) | — | — | — | 12,914 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Sub-total | 42,706 | 37,110 | (28,486 | ) | 310 | — | (172 | ) | 51,468 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 5,325,297 | 59,060 | 852,918 | 8,507 | (2,363 | ) | 54,669 | 6,298,088 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 | ||||||||||||||||||||||||
(In millions of won) | Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other compre- hensive income (loss) | Other increase (decrease) | Ending balance | ||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | ₩ | 551,548 | — | 4,916 | 11,995 | — | 568,459 | |||||||||||||||||
Korea IT Fund(*1) | 281,684 | — | 34,116 | 3,884 | (8,132 | ) | 311,552 | |||||||||||||||||
KEB HanaCard Co., Ltd. | 288,457 | — | 6,827 | (528 | ) | — | 294,756 | |||||||||||||||||
SK Telecom CS T1 Co., Ltd. | — | 60,305 | — | — | — | 60,305 | ||||||||||||||||||
NanoEnTek, Inc. | 40,974 | (43 | ) | 1,220 | (24 | ) | — | 42,127 | ||||||||||||||||
UniSK(*1) | 13,486 | — | 728 | 347 | (219 | ) | 14,342 | |||||||||||||||||
SK Technology Innovation Company | 42,469 | — | 89 | 1,439 | — | 43,997 | ||||||||||||||||||
SK MENA Investment B.V. | 14,420 | — | 4 | 480 | — | 14,904 | ||||||||||||||||||
SK hynix Inc.(*1) | 11,208,315 | — | 416,168 | 20,008 | (219,166 | ) | 11,425,325 | |||||||||||||||||
SK Latin America Investment S.A. | 13,313 | — | 74 | 311 | — | 13,698 | ||||||||||||||||||
Grab Geo Holdings PTE. LTD. | — | 30,518 | (17 | ) | 768 | — | 31,269 | |||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 111,000 | 113,470 | 6,062 | 19,502 | — | 250,034 | ||||||||||||||||||
Pacific Telecom Inc. | 37,075 | — | 2,689 | 252 | — | 40,016 | ||||||||||||||||||
S.M.Culture & Contents Co., Ltd. | 63,801 | — | 464 | (796 | ) | — | 63,469 | |||||||||||||||||
Content Wavve Co., Ltd. | — | 90,858 | (7,218 | ) | — | — | 83,640 | |||||||||||||||||
Hello Nature Co., Ltd.(*2) | 28,549 | — | (6,580 | ) | (16 | ) | (8,333 | ) | 13,620 | |||||||||||||||
Health Connect Co., Ltd. and others(*1,3) | 96,522 | 7,444 | (17,142 | ) | 3,101 | (24,582 | ) | 65,343 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
12,791,613 | 302,552 | 442,400 | 60,723 | (260,432 | ) | 13,336,856 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||
Dogus Planet, Inc. | 12,487 | (81 | ) | 4,628 | (1,113 | ) | — | 15,921 | ||||||||||||||||
Finnq Co., Ltd. | 7,671 | 24,500 | (8,441 | ) | (850 | ) | — | 22,880 | ||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC | — | 8,160 | (144 | ) | — | (55 | ) | 7,961 | ||||||||||||||||
NEXTGEN ORCHESTRATION, LLC | — | 1,748 | (91 | ) | — | (11 | ) | 1,646 | ||||||||||||||||
Celcom Planet(*4) | — | 6,141 | (6,141 | ) | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
20,158 | 40,468 | (10,189 | ) | (1,963 | ) | (66 | ) | 48,408 | ||||||||||||||||
|
|
|
|
|
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₩ | 12,811,771 | 343,020 | 432,211 | 58,760 | (260,498 | ) | 13,385,264 | |||||||||||||||||
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Dividends received from the associates are deducted from the carrying amount during the year ended December 31, 2019. |
(*2) | The Group |
(*3) | The acquisition for the year ended December 31, 2019 includes ₩6,800 million of cash investments in Carrot General Insurance Co., Ltd.(Formerly, Carrot Co., Ltd.), and others. Other increase (decrease) includes the |
(In millions of won) | ||||||||||||||||
Unrealized loss | Unrealized change in equity | |||||||||||||||
Year ended December 31, 2015 | Accumulated | Year ended December 31, 2015 | Accumulated | |||||||||||||
Wave City Development Co., Ltd. | ₩ | 2,894 | 4,538 | — | — | |||||||||||
SK Wyverns Co., Ltd. and others | 1,193 | 6,510 | — | 365 | ||||||||||||
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₩ | 4,087 | 11,048 | — | 365 | ||||||||||||
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(*4) | Investment in Celcom Planet was disposed during year ended December 31, 2019. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(7) The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of December 31, 2020 are as follows:
(In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||
2020 | Cumulative loss | 2020 | Cumulative loss | |||||||||||||
Wave City Development Co., Ltd. | ₩ | (1,970 | ) | 2,400 | — | — | ||||||||||
Daehan Kanggun BcN Co., Ltd. and others | 295 | 10,947 | 14 | (124 | ) | |||||||||||
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₩ | (1,675 | ) | 13,347 | 14 | (124 | ) | ||||||||||
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14. | Property and Equipment |
(1) Property and equipment as of December 31, 2020 and 2019 are as follows:
December 31, 2020 | ||||||||||||||||||||||||||||||||
(In millions of won) | Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | ||||||||||||||||||||||||||||
December 31, 2015 | ||||||||||||||||||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | |||||||||||||||||||||||||||||
Land | ₩ | 812,947 | — | — | 812,947 | ₩ | 1,039,323 | — | — | 1,039,323 | ||||||||||||||||||||||
Buildings | 1,563,069 | (651,940 | ) | — | 911,129 | 1,747,445 | (888,389 | ) | (450 | ) | 858,606 | |||||||||||||||||||||
Structures | 763,122 | (418,901 | ) | — | 344,221 | 913,102 | (594,098 | ) | (1,601 | ) | 317,403 | |||||||||||||||||||||
Machinery | 28,624,842 | (21,281,400 | ) | (1,433 | ) | 7,342,009 | 36,152,031 | (27,761,449 | ) | (14,370 | ) | 8,376,212 | ||||||||||||||||||||
Other | 1,511,304 | (1,036,780 | ) | (1,086 | ) | 473,438 | 2,047,405 | (1,391,201 | ) | (2,588 | ) | 653,616 | ||||||||||||||||||||
Right-of-use assets | 1,961,346 | (489,311 | ) | — | 1,472,035 | |||||||||||||||||||||||||||
Construction in progress | 487,512 | — | — | 487,512 | 659,882 | — | — | 659,882 | ||||||||||||||||||||||||
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₩ | 33,762,796 | (23,389,021 | ) | (2,519 | ) | 10,371,256 | ₩ | 44,520,534 | (31,124,448 | ) | (19,009 | ) | 13,377,077 | |||||||||||||||||||
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(In millions of won) | December 31, 2019 | |||||||||||||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | |||||||||||||||||||||||||
Land | ₩ | 766,780 | — | — | 766,780 | ₩ | 981,389 | — | — | 981,389 | ||||||||||||||||||||||
Buildings | 1,537,042 | (603,175 | ) | — | 933,867 | 1,715,619 | �� | (847,761 | ) | (450 | ) | 867,408 | ||||||||||||||||||||
Structures | 737,494 | (384,705 | ) | — | 352,789 | 910,049 | (561,379 | ) | (1,601 | ) | 347,069 | |||||||||||||||||||||
Machinery | 27,088,067 | (19,775,784 | ) | (1,468 | ) | 7,310,815 | 34,120,057 | (26,161,923 | ) | (33,742 | ) | 7,924,392 | ||||||||||||||||||||
Other | 1,461,201 | (960,450 | ) | (1,701 | ) | 499,050 | 2,079,265 | (1,345,074 | ) | (3,125 | ) | 731,066 | ||||||||||||||||||||
Right-of-use assets | 1,665,923 | (339,295 | ) | — | 1,326,628 | |||||||||||||||||||||||||||
Construction in progress | 704,400 | — | — | 704,400 | 755,508 | — | — | 755,508 | ||||||||||||||||||||||||
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₩ | 32,294,984 | (21,724,114 | ) | (3,169 | ) | 10,567,701 | ₩ | 42,227,810 | (29,255,432 | ) | (38,918 | ) | 12,933,460 | |||||||||||||||||||
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(2) | Changes in property and equipment for the years ended December 31, |
(In millions of won) | (In millions of won) | (In millions of won) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Impairment | Business combination | Change of consolidation scope | Ending balance | Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Impairment(*1) | Business combination(*2) | Ending balance | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Land | ₩ | 766,780 | 6,629 | (2,031 | ) | 41,569 | — | — | — | — | 812,947 | ₩ | 981,389 | 525 | (20,415 | ) | 37,532 | — | — | 40,292 | 1,039,323 | |||||||||||||||||||||||||||||||||||||||||||||||
Buildings | 933,867 | 6,042 | (6,839 | ) | 27,500 | (49,441 | ) | — | — | — | 911,129 | 867,408 | 3,034 | (21,811 | ) | 48,160 | (55,215 | ) | — | 17,030 | 858,606 | |||||||||||||||||||||||||||||||||||||||||||||||
Structures | 352,789 | 9,776 | (57 | ) | 16,104 | (34,391 | ) | — | — | — | 344,221 | 347,069 | 2,542 | (4,417 | ) | 9,167 | (36,995 | ) | — | 37 | 317,403 | |||||||||||||||||||||||||||||||||||||||||||||||
Machinery | 7,310,815 | 645,986 | (22,518 | ) | 1,538,235 | (2,133,193 | ) | (524 | ) | 3,208 | — | 7,342,009 | 7,924,392 | 553,052 | (32,369 | ) | 2,180,445 | (2,419,522 | ) | (1,745 | ) | 171,959 | 8,376,212 | |||||||||||||||||||||||||||||||||||||||||||||
Other | 499,050 | 786,531 | (16,721 | ) | (652,022 | ) | (143,288 | ) | (4 | ) | — | (108 | ) | 473,438 | 731,066 | 945,499 | (6,486 | ) | (817,819 | ) | (203,376 | ) | — | 4,732 | 653,616 | |||||||||||||||||||||||||||||||||||||||||||
Right-of-use assets | 1,326,628 | 736,157 | (163,217 | ) | — | (436,231 | ) | — | 8,698 | 1,472,035 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction in progress | 704,400 | 1,063,169 | (1,522 | ) | (1,271,762 | ) | — | (6,773 | ) | — | — | 487,512 | 755,508 | 1,625,218 | (16,162 | ) | (1,709,735 | ) | — | — | 5,053 | 659,882 | ||||||||||||||||||||||||||||||||||||||||||||||
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₩ | 10,567,701 | 2,518,133 | (49,688 | ) | (300,376 | ) | (2,360,313 | ) | (7,301 | ) | 3,208 | (108 | ) | 10,371,256 | ₩ | 12,933,460 | 3,866,027 | (264,877 | ) | (252,250 | ) | (3,151,339 | ) | (1,745 | ) | 247,801 | 13,377,077 | |||||||||||||||||||||||||||||||||||||||||
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(*1) | The Group recognized impairment losses for obsolete assets during the year ended December 31, 2020. |
(*2) | Includes assets from the acquisition of Broadband Nowon Co., Ltd. and from the merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Impairment(*1) | Business Combina -tion(*2) | Disposal of subsidiaries | Ending balance | ||||||||||||||||||||||||||||
Land | ₩ | 938,344 | 3,297 | (275 | ) | 39,454 | — | — | 569 | — | 981,389 | |||||||||||||||||||||||||
Buildings | 863,294 | 8,117 | (2,886 | ) | 52,775 | (54,100 | ) | (450 | ) | 658 | — | 867,408 | ||||||||||||||||||||||||
Structures | 356,039 | 18,246 | (48 | ) | 10,582 | (36,149 | ) | (1,601 | ) | — | — | 347,069 | ||||||||||||||||||||||||
Machinery | 7,129,154 | 821,576 | (25,595 | ) | 2,349,133 | (2,316,598 | ) | (33,278 | ) | — | — | 7,924,392 | ||||||||||||||||||||||||
Other | 847,483 | 1,443,327 | (5,816 | ) | (1,355,232 | ) | (199,106 | ) | (147 | ) | 557 | — | 731,066 | |||||||||||||||||||||||
Right-of-use assets | 890,339 | 1,141,349 | (257,226 | ) | — | (448,817 | ) | — | 1,080 | (97 | ) | 1,326,628 | ||||||||||||||||||||||||
Construction in | 565,357 | 1,515,617 | (22,338 | ) | (1,303,128 | ) | — | — | — | — | 755,508 | |||||||||||||||||||||||||
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₩ | 11,590,010 | 4,951,529 | (314,184 | ) | (206,416 | ) | (3,054,770 | ) | (35,476 | ) | 2,864 | (97 | ) | 12,933,460 | ||||||||||||||||||||||
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(*1) | The Group recognized impairment losses for obsolete assets during the year ended December 31, 2019. |
(*2) | Includes assets from the acquisitions of FSK L&S Co., Ltd. and Incross Co., Ltd. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Impairment | Classified as held for sale | Change of consolidation scope | Ending balance | ||||||||||||||||||||||||||||
Land | ₩ | 732,206 | 8,306 | (12 | ) | 24,178 | — | — | — | 2,102 | 766,780 | |||||||||||||||||||||||||
Buildings | 956,691 | 5,862 | (451 | ) | 16,885 | (48,745 | ) | — | — | 3,625 | 933,867 | |||||||||||||||||||||||||
Structures | 364,951 | 8,909 | (39 | ) | 11,919 | (32,951 | ) | — | — | — | 352,789 | |||||||||||||||||||||||||
Machinery | 6,847,059 | 572,764 | (28,101 | ) | 1,979,590 | (2,065,368 | ) | (2,879 | ) | (6 | ) | 7,756 | 7,310,815 | |||||||||||||||||||||||
Other | 533,181 | 1,124,067 | (6,188 | ) | (1,022,999 | ) | (135,213 | ) | (49 | ) | (245 | ) | 6,496 | 499,050 | ||||||||||||||||||||||
Construction in progress | 762,519 | 1,101,691 | (11,277 | ) | (1,147,666 | ) | — | (691 | ) | (176 | ) | — | 704,400 | |||||||||||||||||||||||
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₩ | 10,196,607 | 2,821,599 | (46,068 | ) | (138,093 | ) | (2,282,277 | ) | (3,619 | ) | (427 | ) | 19,979 | 10,567,701 | ||||||||||||||||||||||
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15. | Lease |
(1) | As a lessee |
1) Details of the right-of-use assets as of December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||||||
December 31, 2015 | ||||||||||||
Acquisition cost | Accumulated depreciation | Carrying amount | ||||||||||
Land | ₩ | 10,634 | — | 10,634 | ||||||||
Buildings | 7,531 | (3,094 | ) | 4,437 | ||||||||
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₩ | 18,165 | (3,094 | ) | 15,071 | ||||||||
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(In millions of won) | ||||||||||||
December 31, 2014 | ||||||||||||
Acquisition cost | Accumulated depreciation | Carrying amount | ||||||||||
Land | ₩ | 10,418 | — | 10,418 | ||||||||
Buildings | 7,379 | (2,800 | ) | 4,579 | ||||||||
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₩ | 17,797 | (2,800 | ) | 14,997 | ||||||||
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(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Land, buildings and structures | ₩ | 1,269,753 | 1,131,035 | |||||
Others | 202,282 | 195,593 | ||||||
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| |||||
₩ | 1,472,035 | 1,326,628 | ||||||
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2) Details of amounts recognized in the consolidated statements of income for the years ended December 31, 2020 and 2019 as a lessee are as follows:
(In millions of won) | 2020 | 2019 | ||||||
Depreciation of right-of-use assets: | ||||||||
Land, buildings and structures | ₩ | 347,166 | 359,755 | |||||
Others | 89,065 | 89,062 | ||||||
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| |||||
₩ | 436,231 | 448,817 | ||||||
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| |||||
Interest expense on lease liabilities | ₩ | 22,976 | 25,981 | |||||
Expenses related to short-term leases | 20,193 | 19,098 | ||||||
Expenses related to leases of low-value assets except for short-term leases | 3,297 | 2,550 |
The total cash outflows due to lease payments for the years ended December 31, |
(In millions of won) | ||||||||||||||||
2015 | ||||||||||||||||
Beginning balance | Transfer | Depreciation | Ending balance | |||||||||||||
Land | ₩ | 10,418 | 216 | — | 10,634 | |||||||||||
Buildings | 4,579 | 98 | (240 | ) | 4,437 | |||||||||||
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₩ | 14,997 | 314 | (240 | ) | 15,071 | |||||||||||
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(2) | As a lessor |
1) Finance lease
The Group recognized interest income of ₩2,223 million and ₩1,712 million on lease receivables for the years ended December 31, 2020 and 2019, respectively.
The following table sets out a maturity analysis for lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2020.
(In millions of won) | ||||||||||||||||
2014 | ||||||||||||||||
Beginning balance | Transfer | Depreciation | Ending balance | |||||||||||||
Land | ₩ | 10,822 | (404 | ) | — | 10,418 | ||||||||||
Buildings | 4,989 | (172 | ) | (238 | ) | 4,579 | ||||||||||
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₩ | 15,811 | (576 | ) | (238 | ) | 14,997 | ||||||||||
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|
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ₩ | 26,004 | ||
1 ~ 2 years | 15,732 | |||
2 ~ 3 years | 6,794 | |||
3 ~ 4 years | 3,044 | |||
4 ~ 5 years | 678 | |||
More than 5 years | 13 | |||
Undiscounted lease payments | 52,265 | |||
Unrealized finance income | 1,941 | |||
Net investment in the lease | ₩ | 50,324 | ||
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
2) Operating lease
The Group recognized lease income of ₩238,545 million and ₩168,482 million for the years ended December 31, 2020 and 2019, respectively, of which variable lease payment received are ₩21,715 million and ₩25,228 million, respectively.
The following table sets out a maturity analysis of lease payments, presenting the undiscounted lease payments to be received subsequent to December 31, 2020.
(In millions of |
(In millions of won) | ||||||||||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
Land | ₩ | 10,634 | 6,009 | 10,418 | 6,056 | |||||||||||
Buildings | 4,437 | 4,261 | 4,579 | 4,288 | ||||||||||||
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| |||||||||
₩ | 15,071 | 10,270 | 14,997 | 10,344 | ||||||||||||
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The fair value of investment property was appraised on the basis of market price by an independent appraisal company.
Amount | ||||
Less than 1 year | ₩ | 201,828 | ||
1 ~ 2 years | 125,681 |
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Rent revenue | ₩ | 850 | 896 | 1,373 | ||||||||
Operating expense | (240 | ) | (239 | ) | (476 | ) |
2 ~ 3 years
3 ~ 4 years
4 ~ 5 years
More than 5 years
₩ | 369,211 | |||
Goodwill |
(1) Goodwill as of December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Goodwill related to acquisition of Shinsegi Telecom, Inc. | ₩ | 1,306,236 | 1,306,236 | |||||
Goodwill related to acquisition of SK Broadband Co., Ltd. | 358,443 | 358,443 | ||||||
Other goodwill | 243,911 | 252,916 | ||||||
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|
|
| |||||
₩ | 1,908,590 | 1,917,595 | ||||||
|
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|
|
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Goodwill related to merger of Shinsegi Telecom, Inc. | ₩ | 1,306,236 | 1,306,236 | |||||
Goodwill related to acquisition of SK Broadband Co., Ltd. | 764,082 | 358,443 | ||||||
Goodwill related to acquisition of Life & Security Holdings Co., Ltd. | 1,176,274 | 1,173,382 | ||||||
Other goodwill | 110,932 | 111,469 | ||||||
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|
|
| |||||
₩ | 3,357,524 | 2,949,530 | ||||||
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|
|
(2) Details of the impairment testing of Goodwill as of December 31, 2020 is as follows:
Goodwill is allocated to the following CGUs for the purpose of the impairment testing.
goodwill related to Shinsegi Telecom, Inc.(*1): cellular servicesCellular services;
goodwill related to SK Broadband Co., Ltd.(*2): fixed-line telecommunication servicesFixed-line telecommunications services;
Other: othergoodwill related to Life & Security Holdings Co., Ltd.(*3): Security services; and
other goodwill: Others.
(*1) | Goodwill related to merger of Shinsegi Telecom, Inc. |
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 6.3%(4.9% in prior year) to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of 0.62%(-)0.2%((-)0.6% in prior year) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the Group’s long-term wireless telecommunication businessindustry growth rate. Management of the Group does not expect the total carrying amount of the CGU will exceed the total recoverable amount due to reasonably possible changes from the major assumptions used to estimate the recoverable amount.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(*2) | Goodwill related to acquisition of SK Broadband Co., Ltd. |
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 6.9%(5.0% in 2019) to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of 1.0%(1.0% in 2019) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term fixed-line telecommunication industry growth rate. Management of the Group does not expect the total carrying amount of the CGU will exceed the total recoverable amount due to reasonably possible changes from the major assumptions used to estimate the recoverable amount.
(* | Goodwill related to acquisition of |
The recoverable amount of the CGU is based on its value in use, calculated by applyingwhich is estimated based on using key assumptions including estimated revenue growth rates, labor costs, annual growth rate applied for the annualcash flows expected to be incurred after five years (“perpetual growth rate”), and discount rate. The discount rate of 5.4% to the estimatedapplied for future cash flows based on financial budgets for the next five years. Anyears is 7.1% (7.29% in 2019). The estimated revenue growth rates and labor costs are based on past performance, business plans and its expectation of future market changes. In addition, an annual growth
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
rate of 1.0%, the Group’s long-term fixed-line telecommunication business growth rate, (1.0% in 2019) was applied for the cash flows expected to be incurred after five years.years and does not exceed the long-term growth rate in the security service industry. Management of the Group does not expect the total carrying amount of the CGU will exceed the total recoverable amount due toas a result of reasonably possible changes from the major assumptions used to estimate the recoverable amount.these assumptions.
Details of the changes in goodwill for the years ended December 31, |
(In millions of won) | ||||||||||||||||
2015 | 2014 | 2020 | 2019 | |||||||||||||
Beginning balance | ₩ | 1,917,595 | 1,733,261 | ₩ | 2,949,530 | 2,938,563 | ||||||||||
Increase due to business acquisition | 1,758 | 193,202 | ||||||||||||||
Impairment loss | (19,245 | ) | (8,868 | ) | ||||||||||||
Acquisition(*1) | 408,531 | 30,962 | ||||||||||||||
Impairment loss(*2) | (519 | ) | (21,065 | ) | ||||||||||||
Other | 8,482 | — | (18 | ) | 1,070 | |||||||||||
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| |||||||||||||
Ending balance | ₩ | 3,357,524 | 2,949,530 | |||||||||||||
₩ | 1,908,590 | 1,917,595 |
|
| ||||||||||||
|
|
Accumulated impairment losses as of December 31, 2015 and 2014 are ₩17,269 million and ₩18,849 million, respectively.
It consists of goodwill recognized as SK Broadband Co., Ltd., a subsidiary of the Parent Company, merged with Tbroad Co., Ltd. and two other companies and goodwill recognized from ADT CAPS Co., Ltd.’s acquisition of security equipment construction and security services business from SK hystec inc. during the year ended December 31, 2020. (See Note 12) |
As a result of |
As of December 31, 2020 and 2019, accumulated impairment losses are ₩85,764 million and ₩85,245 million, respectively.
(In millions of won) | ||||||||||||||||
December 31, 2015 | ||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment | Carrying amount | |||||||||||||
Frequency use rights | ₩ | 3,033,879 | (1,930,362 | ) | — | 1,103,517 | ||||||||||
Land use rights | 74,217 | (47,641 | ) | — | 26,576 | |||||||||||
Industrial rights | 159,926 | (43,384 | ) | — | 116,542 | |||||||||||
Development costs | 140,226 | (132,754 | ) | — | 7,472 | |||||||||||
Facility usage rights | 149,841 | (101,822 | ) | — | 48,019 | |||||||||||
Customer relations | 16,528 | (9,353 | ) | — | 7,175 | |||||||||||
Memberships(*1) | 126,622 | — | (35,115 | ) | 91,507 | |||||||||||
Other(*2) | 3,101,622 | (2,197,646 | ) | — | 903,976 | |||||||||||
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|
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|
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| |||||||||
₩ | 6,802,861 | (4,462,962 | ) | (35,115 | ) | 2,304,784 | ||||||||||
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(In millions of won) | ||||||||||||||||
December 31, 2014 | ||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment | Carrying amount | |||||||||||||
Frequency use rights | ₩ | 3,033,879 | (1,649,835 | ) | — | 1,384,044 | ||||||||||
Land use rights | 64,136 | (38,783 | ) | — | 25,353 | |||||||||||
Industrial rights | 144,497 | (36,737 | ) | — | 107,760 | |||||||||||
Development costs | 162,493 | (144,215 | ) | (9,947 | ) | 8,331 | ||||||||||
Facility usage rights | 146,112 | (93,476 | ) | — | 52,636 | |||||||||||
Customer relations | 17,147 | (10,743 | ) | — | 6,404 | |||||||||||
Memberships(*1) | 128,274 | — | (34,155 | ) | 94,119 | |||||||||||
Other(*2) | 3,029,590 | (2,223,627 | ) | (616 | ) | 805,347 | ||||||||||
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|
|
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| |||||||||
₩ | 6,726,128 | (4,197,416 | ) | (44,718 | ) | 2,483,994 | ||||||||||
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|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
17. | Intangible Assets |
(1) | Intangible assets as of December 31, 2020 and 2019 are as follows: |
(In millions of won) |
| |||||||||||||||
December 31, 2020 | ||||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment | Carrying amount | |||||||||||||
Frequency usage rights(*1) | ₩ | 6,210,882 | (4,079,729 | ) | (198,388 | ) | 1,932,765 | |||||||||
Land usage rights | 50,503 | (45,783 | ) | — | 4,720 | |||||||||||
Industrial rights | 116,889 | (45,300 | ) | (147 | ) | 71,442 | ||||||||||
Development costs | 67,989 | (54,771 | ) | (3,854 | ) | 9,364 | ||||||||||
Facility usage rights | 159,865 | (137,985 | ) | — | 21,880 | |||||||||||
Customer relations | 1,091,146 | (171,283 | ) | — | 919,863 | |||||||||||
Club memberships(*2) | 139,349 | — | (32,484 | ) | 106,865 | |||||||||||
Brands(*2) | 374,096 | — | — | 374,096 | ||||||||||||
Other(*3) | 4,604,077 | (3,586,596 | ) | (22,282 | ) | 995,199 | ||||||||||
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| |||||||||
₩12,814,796 | (8,121,447) | (257,155) | 4,436,194 | |||||||||||||
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|
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(In millions of won) | ||||||||||||||||
December 31, 2019 | ||||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment | Carrying amount | |||||||||||||
Frequency usage rights | ₩ | 6,210,882 | (3,563,381 | ) | — | 2,647,501 | ||||||||||
Land usage rights | 53,265 | (45,916 | ) | — | 7,349 | |||||||||||
Industrial rights | 110,380 | (43,522 | ) | (34 | ) | 66,824 | ||||||||||
Development costs | 63,840 | (50,127 | ) | (2,567 | ) | 11,146 | ||||||||||
Facility usage rights | 157,664 | (131,832 | ) | — | 25,832 | |||||||||||
Customer relations | 607,435 | (16,064 | ) | — | 591,371 | |||||||||||
Club memberships(*2) | 112,571 | — | (32,161 | ) | 80,410 | |||||||||||
Brands(*2) | 374,096 | — | — | 374,096 | ||||||||||||
Other(*3) | 4,397,319 | (3,313,263 | ) | (22,493 | ) | 1,061,563 | ||||||||||
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| |||||||||
₩12,087,452 | (7,164,105) | (57,255) | 4,866,092 | |||||||||||||
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|
(*1) | During the year ended December 31, 2020, the Ministry of Science and Information and Communication Technology approved the discontinuance of 2G service. The Group recognized an impairment loss of ₩12,388 million related to 800MHz frequency usage rights used for 2G service. In addition, as of December 31, 2020, due to the change in its business environment, the Group expects that it is no longer probable that its 28GHz frequency usage rights will be in the condition necessary for it to be capable of operating in the manner intended by management. As a result, the Group performed impairment test over the frequency usage rights. As a result, the recoverable amount (determining based on value in use) exceeded the carrying value, and an impairment loss of ₩186,000 million was recognized. |
(*2) | Club memberships and Brands are classified as intangible assets with indefinite useful |
(* | Other intangible assets primarily consist of computer software and |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(2) | Details of the changes in intangible assets for the years ended December 31, |
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment(*) | Business combination | Change of consolidation scope | Ending balance | Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment(*1) | Business combination(*2) | Ending balance | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Frequency use rights | ₩ | 1,384,044 | — | — | — | (280,527 | ) | — | — | — | 1,103,517 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land use rights | 25,353 | 11,956 | (1,314 | ) | — | (9,419 | ) | — | — | — | 26,576 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Frequency usage rights | ₩ | 2,647,501 | — | — | — | (516,348 | ) | (198,388 | ) | — | 1,932,765 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land usage rights | 7,349 | 550 | (100 | ) | — | (3,079 | ) | — | — | 4,720 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Industrial rights | 107,760 | 5,878 | (22 | ) | 8,935 | (6,009 | ) | — | — | — | 116,542 | 66,824 | 1,836 | (513 | ) | 8,281 | (4,825 | ) | (161 | ) | — | 71,442 | ||||||||||||||||||||||||||||||||||||||||||||||
Development costs | 8,331 | 3,737 | — | 23 | (4,563 | ) | (56 | ) | — | — | 7,472 | 11,146 | 1,141 | (294 | ) | 3,302 | (4,644 | ) | (1,287 | ) | — | 9,364 | ||||||||||||||||||||||||||||||||||||||||||||||
Facility usage rights | 52,636 | 2,721 | (23 | ) | 1,177 | (8,492 | ) | — | — | — | 48,019 | 25,832 | 1,810 | (3 | ) | 434 | (6,193 | ) | — | — | 21,880 | |||||||||||||||||||||||||||||||||||||||||||||||
Customer relations | 6,404 | — | — | — | (4,689 | ) | — | 8,486 | (3,026 | ) | 7,175 | 591,371 | 2,014 | (1,604 | ) | 491 | (52,849 | ) | — | 380,440 | 919,863 | |||||||||||||||||||||||||||||||||||||||||||||||
Memberships | 94,119 | 1,137 | (1,802 | ) | 68 | — | (2,015 | ) | — | — | 91,507 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Club memberships | 80,410 | 11,821 | (35,432 | ) | 544 | — | (323 | ) | 49,845 | 106,865 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brands(*3) | 374,096 | — | — | — | — | — | — | 374,096 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 805,347 | 103,137 | (1,772 | ) | 323,933 | (319,234 | ) | (7,228 | ) | — | (207 | ) | 903,976 | 1,061,563 | 112,011 | (13,729 | ) | 272,433 | (430,719 | ) | (6,410 | ) | 50 | 995,199 | ||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||
₩ | 2,483,994 | 128,566 | (4,933 | ) | 334,136 | (632,933 | ) | (9,299 | ) | 8,486 | (3,233 | ) | 2,304,784 | ₩4,866,092 | 131,183 | (51,675) | 285,485 | (1,018,657) | (206,569) | 430,335 | 4,436,194 | |||||||||||||||||||||||||||||||||||||||||||||||
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(* | The Group recognized the difference between recoverable amount and the carrying amount of |
(In millions of won) | ||||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment | Change of consolidation scope | Ending balance | |||||||||||||||||||||||||
Frequency use rights | ₩ | 1,664,571 | — | — | — | (280,527 | ) | — | — | 1,384,044 | ||||||||||||||||||||||
Land use rights | 16,590 | 15,560 | (573 | ) | — | (8,483 | ) | — | 2,259 | 25,353 | ||||||||||||||||||||||
Industrial rights | 58,763 | 5,048 | (180 | ) | — | (4,584 | ) | — | 48,713 | 107,760 | ||||||||||||||||||||||
Development costs | 10,127 | 1,253 | (25 | ) | 63 | (4,048 | ) | (398 | ) | 1,359 | 8,331 | |||||||||||||||||||||
Facility usage rights | 58,828 | 1,890 | (30 | ) | 382 | (8,434 | ) | — | — | 52,636 | ||||||||||||||||||||||
Customer relations | 6,333 | 779 | — | (39 | ) | (3,063 | ) | — | 2,394 | 6,404 | ||||||||||||||||||||||
Memberships(*) | 128,452 | 5,629 | (5,810 | ) | (264 | ) | — | (34,155 | ) | 267 | 94,119 | |||||||||||||||||||||
Other | 807,118 | 102,322 | (9,919 | ) | 171,858 | (300,216 | ) | (449 | ) | 34,633 | 805,347 | |||||||||||||||||||||
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| |||||||||||||||||
₩ | 2,750,782 | 132,481 | (16,537 | ) | 172,000 | (609,355 | ) | (35,002 | ) | 89,625 | 2,483,994 | |||||||||||||||||||||
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(*2) | Includes assets from the acquisition of Broadband Nowon Co., Ltd. and from the merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(*3) | Brands are recognized in connection with the acquisition of Life & Security Holdings Co., Ltd. and are tested for impairment by comparing the recoverable amounts of CGU to the carrying amounts. (See note 16) |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment(*1) | Business combination(*2) | Disposal of subsidiaries | Ending balance | ||||||||||||||||||||||||||||
Frequency usage rights | ₩ | 3,139,978 | — | — | — | (492,477 | ) | — | — | — | 2,647,501 | |||||||||||||||||||||||||
Land usage rights | 10,511 | 2,017 | (442 | ) | — | (4,737 | ) | — | — | — | 7,349 | |||||||||||||||||||||||||
Industrial rights | 83,627 | 1,409 | (1,540 | ) | 2,491 | (4,696 | ) | — | 158 | (14,625 | ) | 66,824 | ||||||||||||||||||||||||
Development costs | 8,990 | 2,218 | — | 1,468 | (5,359 | ) | (961 | ) | 4,790 | — | 11,146 | |||||||||||||||||||||||||
Facility usage rights | 31,027 | 2,093 | (25 | ) | 236 | (7,499 | ) | — | — | — | 25,832 | |||||||||||||||||||||||||
Customer relations | 625,091 | 250 | (367 | ) | 304 | (33,907 | ) | — | — | — | 591,371 | |||||||||||||||||||||||||
Club memberships | 80,475 | 2,437 | (1,574 | ) | (1,200 | ) | — | (916 | ) | 1,188 | — | 80,410 | ||||||||||||||||||||||||
Brands | 374,096 | — | — | — | — | — | — | — | 374,096 | |||||||||||||||||||||||||||
Other | 1,157,441 | 134,911 | (5,154 | ) | 209,322 | (417,571 | ) | (7,517 | ) | 1,100 | (10,969 | ) | 1,061,563 | |||||||||||||||||||||||
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| |||||||||||||||||||
₩5,511,236 | 145,335 | (9,102) | 212,621 | (966,246) | (9,394) | 7,236 | (25,594) | 4,866,092 | ||||||||||||||||||||||||||||
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(* | The Group recognized the difference between recoverable amount and the carrying amount of |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(*2) | Includes assets from the Parent Company’s acquisitions of FSK L&S Co., Ltd. and Incross Co., Ltd. |
(3) | Research and development |
2015 | 2014 | 2013 | ||||||||||
Research and development costs expensed as incurred | ₩ | 315,790 | 390,943 | 352,385 |
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Research and development costs expensed as incurred | ₩ | 416,445 | 391,327 | 387,675 |
(4) | Details of frequency usage rights as of December 31, |
(In millions of won) | ||||||||||||||||
Amount | Description | |||||||||||||||
| of amortization | amortization | ||||||||||||||
| ||||||||||||||||
800MHz license | ₩ | CDMA and LTE service | Jul. 2011 | Jun. 2021 | ||||||||||||
1.8GHz license | LTE service | Sept. 2013 | Dec. 2021 | |||||||||||||
| LTE service | Dec. 2026 | ||||||||||||||
2.1GHz license | 94,963 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||||||||
3.5GHz license(*) | 953,474 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||||
28GHz license(*) | 16,683 | 5G service | — | Nov. 2023 | ||||||||||||
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| |||||||||||||||
₩ | ||||||||||||||||
|
|
The Group participated in the frequency license allocation auction hosted by Ministry of Science and |
(In millions of won) | ||||||||||||||
Lender | Annual interest rate (%) | December 31, 2015 | December 31, 2014 | |||||||||||
Commercial Paper | KTB Investment and Securities Co., Ltd., etc. | 1.76~1.84 | ₩220,000 | 206,000 | ||||||||||
Short-term borrowings | Kookmin Bank, etc. | 2.47 | 40,000 | 160,600 | ||||||||||
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|
|
| |||||||||||
₩260,000 | 366,600 | |||||||||||||
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|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Borrowings and Debentures |
(1) | Short-term borrowings as of December 31, |
(In millions of won, thousands of U.S. dollars) | ||||||||||||
Lender | Annual interest rate (%) | Maturity | December 31, 2015 | December 31, 2014 | ||||||||
Shinhan Bank | 2.39 | Jun. 15, 2015 | ₩ | — | 1,712 | |||||||
Kookmin Bank | 1.98 | Jun. 15, 2016 | 1,625 | 4,874 | ||||||||
Kookmin Bank | 1.98 | Mar. 15, 2017 | 2,498 | 4,496 | ||||||||
Kookmin Bank | 1.98 | Mar. 15, 2018 | 6,450 | 8,600 | ||||||||
Shinhan Bank(*1) | 6M bank debenture rate+1.58 | Apr. 30, 2016 | 10,000 | 10,000 | ||||||||
Korea Finance Corporation | 3.32 | Jul. 30 ,2019 | 39,000 | 39,000 | ||||||||
Korea Finance Corporation | 2.94 | Jul. 30 ,2019 | 10,000 | 10,000 | ||||||||
Export Kreditnamnden(*2) | 1.7 | Apr. 29, 2022 | 87,685 | 94,903 | ||||||||
(USD 74,817 | ) | (USD 86,338 | ) | |||||||||
|
|
|
| |||||||||
Sub-total | 157,258 | 173,585 | ||||||||||
Less present value discount on long-term borrowings | (2,124 | ) | (2,623 | ) | ||||||||
|
|
|
| |||||||||
155,134 | 170,962 | |||||||||||
Less current portion of long-term | (33,581 | ) | (21,242 | ) | ||||||||
|
|
|
| |||||||||
Long-term borrowings | ₩ | 121,553 | 149,720 | |||||||||
|
|
|
|
(In millions of won, and thousands of other currency) | ||||||||||||
Lender | Annual interest rate (%) | December 31, 2020 | December 31, 2019 | |||||||||
Short-term borrowings | Citibank | 2.45 | ₩ | 50,000 | — | |||||||
KEB Hana Bank(*1) | FTP 1M + 1.51 | 27,000 | — | |||||||||
KEB Hana Bank(*2) | 6M financial I (bank) + 1.59 | 5,000 | — | |||||||||
Shinhan Bank(*2) | 6M financial I (bank) + 1.35 | 15,000 | — | |||||||||
Shinhan Bank(*2) | 6M financial I (bank) + 1.60 | — | 15,000 | |||||||||
KEB Hana Bank(*3) | 3M CD + 1.75 | — | 5,000 | |||||||||
Hana Financial Investment Co., Ltd. | 4.50 | 4,642 | — | |||||||||
DB Financial Investment Co., Ltd. | 4.50 | 2,785 | — | |||||||||
Shinhan Financial Investment Co., Ltd. | 4.50 | 5,571 | — | |||||||||
Woori Bank | 7.50 | — | | 603 (VND 12,068,234 | ) | |||||||
|
|
|
| |||||||||
₩ | 109,998 | 20,603 | ||||||||||
�� |
|
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|
|
(*1) | 1M FTP rate is 1.14% as of December 31, |
(*2) | 6M financial I(bank) rate are 0.92% and 1.52% as of December 31, |
(*3) | 3M CD rate is 1.53% as of December 31, 2019. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(2) | Long-term borrowings |
(In millions of won and thousands of other currencies) | ||||||||||||||||
Lender | Annual interest rate (%) | Maturity | December 31, 2020 | December 31, 2019 | ||||||||||||
Korea Development Bank(*1,2) | 3M CD + 0.61 | Dec. 20, 2021 | ₩ | 12,250 | 24,500 | |||||||||||
Korea Development Bank(*1,3) | 3M CD + 0.71 | Dec. 21, 2022 | 25,000 | 37,500 | ||||||||||||
Credit Agricole CIB(*1,4) | 3M CD + 0.82 | Dec. 14, 2023 | 37,500 | 50,000 | ||||||||||||
Shinhan Bank and others(*5) | 4.21 | Sept. 30, 2023 | — | 1,750,000 | ||||||||||||
KDB Capital and others(*5) | 7.20 | Sept. 30, 2023 | — | 150,000 | ||||||||||||
Export Kreditnamnden(*6) | 1.70 | Apr. 29, 2022 | | 18,726 (USD 17,211 | ) | | 33,266 (USD 28,732 | ) | ||||||||
Shinhan Bank and others | 3.20 | Oct. 5, 2025 | 1,950,000 | — | ||||||||||||
UBS | 0.00 | Mar. 28, 2025 | | 617 (CHF 500 | ) | — | ||||||||||
FAE | 0.00 | May. 7, 2025 | | 617 (CHF 500 | ) | — | ||||||||||
|
|
|
| |||||||||||||
2,044,710 | 2,045,266 | |||||||||||||||
Less present value discount | (15,786 | ) | (22,729 | ) | ||||||||||||
|
|
|
| |||||||||||||
2,028,924 | 2,022,537 | |||||||||||||||
Less current installments | (49,663 | ) | (50,388 | ) | ||||||||||||
|
|
|
| |||||||||||||
₩ | 1,979,261 | 1,972,149 | ||||||||||||||
|
|
|
|
(*1) | 3M CD rate are 0.66% and 1.53% as of December 31, 2020 and 2019, respectively. |
(*2) | The long-term borrowings are |
(*3) | The long-term borrowings are to be repaid by installments on an annual basis from 2018 to 2022. |
(*4) | The long-term borrowings are to be repaid by installments on an annual basis from 2020 to 2023. |
(*5) | The long-term borrowings were repaid before maturity during the year ended December 31, 2020. |
(*6) | The long-term borrowings are to be repaid by installments on an annual basis from 2014 to 2022. |
Debentures as of December 31, 2020 and 2019 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2020 | December 31, 2019 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2021 | 4.22 | ₩ | 190,000 | 190,000 | ||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2022 | 3.30 | 140,000 | 140,000 | |||||||||||||
Unsecured corporate bonds | 2032 | 3.45 | 90,000 | 90,000 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2023 | 3.03 | 230,000 | 230,000 | |||||||||||||
Unsecured corporate bonds | 2033 | 3.22 | 130,000 | 130,000 | ||||||||||||||
Unsecured corporate bonds | 2024 | 3.64 | 150,000 | 150,000 | ||||||||||||||
Unsecured corporate bonds | Refinancing fund | 2021 | 2.66 | 150,000 | 150,000 | |||||||||||||
Unsecured corporate bonds | 2024 | 2.82 | 190,000 | 190,000 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2022 | 2.40 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds | 2025 | 2.49 | 150,000 | 150,000 | ||||||||||||||
Unsecured corporate bonds | 2030 | 2.61 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 2.66 | 70,000 | 70,000 | |||||||||||||
Unsecured corporate bonds | 2030 | 2.82 | 90,000 | 90,000 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won, thousands of U.S. dollars and thousands of other currencies) | ||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2015 | December 31, 2014 | ||||||||||
Unsecured private bonds | Refinancing fund | 2016 | 5.00 | ₩ | 200,000 | 200,000 | ||||||||
Unsecured private bonds | Other fund | 2015 | 5.00 | — | 200,000 | |||||||||
Unsecured private bonds | 2018 | 5.00 | 200,000 | 200,000 | ||||||||||
Unsecured private bonds | 2016 | 5.54 | 40,000 | 40,000 | ||||||||||
Unsecured private bonds | 2016 | 5.92 | 230,000 | 230,000 | ||||||||||
Unsecured private bonds | Operating fund | 2016 | 3.95 | 110,000 | 110,000 | |||||||||
Unsecured private bonds | 2021 | 4.22 | 190,000 | 190,000 | ||||||||||
Unsecured private bonds | Operating and | 2019 | 3.24 | 170,000 | 170,000 | |||||||||
Unsecured private bonds | refinancing fund | 2022 | 3.30 | 140,000 | 140,000 | |||||||||
Unsecured private bonds | 2032 | 3.45 | 90,000 | 90,000 | ||||||||||
Unsecured private bonds | Operating fund | 2023 | 3.03 | 230,000 | 230,000 | |||||||||
Unsecured private bonds | 2033 | 3.22 | 130,000 | 130,000 | ||||||||||
Unsecured private bonds | 2019 | 3.30 | 50,000 | 50,000 | ||||||||||
Unsecured private bonds | 2024 | 3.64 | 150,000 | 150,000 | ||||||||||
Unsecured private bonds(*5,6) | 2029 | 4.73 | — | 55,188 | ||||||||||
Unsecured private bonds(*5) | 2029 | 4.72 | 54,695 | 55,177 | ||||||||||
Unsecured private bonds | Refinancing fund | 2019 | 2.53 | 160,000 | 160,000 | |||||||||
Unsecured private bonds | 2021 | 2.66 | 150,000 | 150,000 | ||||||||||
Unsecured private bonds | 2024 | 2.82 | 190,000 | 190,000 | ||||||||||
Unsecured private bonds | Operating and | 2022 | 2.40 | 100,000 | — | |||||||||
Unsecured private bonds | refinancing fund | 2025 | 2.49 | 150,000 | — | |||||||||
Unsecured private bonds | 2030 | 2.61 | 50,000 | — | ||||||||||
Unsecured private bonds | Operating fund | 2018 | 1.89 | 90,000 | — | |||||||||
Unsecured private bonds | 2025 | 2.66 | 70,000 | — | ||||||||||
Unsecured private bonds | 2030 | 2.82 | 90,000 | — | ||||||||||
Unsecured private bonds(*5) | 2030 | 3.40 | 50,485 | — | ||||||||||
Unsecured private bonds | Operating and | 2018 | 2.07 | 80,000 | — | |||||||||
Unsecured private bonds | refinancing fund | 2025 | 2.55 | 100,000 | — | |||||||||
Unsecured private bonds | 2035 | 2.75 | 70,000 | — | ||||||||||
Unsecured private bonds(*5) | 2030 | 3.10 | 50,524 | — | ||||||||||
Unsecured private bonds(*1) | Operating fund | 2015 | 4.62 | — | 10,000 | |||||||||
Unsecured private bonds(*2) | 2015 | 4.09 | — | 110,000 | ||||||||||
Unsecured private bonds(*2) | 2015 | 4.14 | — | 110,000 | ||||||||||
Unsecured private bonds(*2) | 2017 | 4.28 | 100,000 | 100,000 | ||||||||||
Unsecured private bonds(*2) | 2015 | 3.14 | — | 130,000 | ||||||||||
Unsecured private bonds(*2) | 2017 | 3.27 | 120,000 | 120,000 | ||||||||||
Unsecured private bonds(*2) | 2016 | 3.05 | 80,000 | 80,000 | ||||||||||
Unsecured private bonds(*2) | 2019 | 3.49 | 210,000 | 210,000 | ||||||||||
Unsecured private bonds(*2) | 2019 | 2.76 | 130,000 | 130,000 | ||||||||||
Unsecured private bonds(*2) | 2018 | 2.23 | 50,000 | — | ||||||||||
Unsecured private bonds(*2) | 2020 | 2.49 | 160,000 | — | ||||||||||
Unsecured private bonds(*2) | 2020 | 2.43 | 140,000 | — | ||||||||||
Unsecured private bonds(*2) | 2020 | 2.18 | 130,000 | — | ||||||||||
Unsecured private bonds(*3) | 2015 | 3.12 | — | 10,000 | ||||||||||
Unsecured private bonds(*3) | 2016 | 3.24 | 10,000 | 10,000 | ||||||||||
Unsecured private bonds(*3) | 2017 | 3.48 | 20,000 | 20,000 | ||||||||||
Foreign global bonds | 2027 | 6.63 | 468,800 | 439,680 | ||||||||||
(USD 400,000 | ) | (USD 400,000 | ) | |||||||||||
Swiss unsecured private bonds | 2017 | 1.75 | 355,617 | 333,429 | ||||||||||
(CHF 300,000 | ) | (CHF 300,000 | ) |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2020 | December 31, 2019 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2025 | 2.55 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds | 2035 | 2.75 | 70,000 | 70,000 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2021 | 1.80 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds | 2026 | 2.08 | 90,000 | 90,000 | ||||||||||||||
Unsecured corporate bonds | 2036 | 2.24 | 80,000 | 80,000 | ||||||||||||||
Unsecured corporate bonds | 2021 | 1.71 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | 2026 | 1.97 | 120,000 | 120,000 | ||||||||||||||
Unsecured corporate bonds | 2031 | 2.17 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Refinancing fund | 2020 | 1.93 | — | 60,000 | |||||||||||||
Unsecured corporate bonds | 2022 | 2.17 | 120,000 | 120,000 | ||||||||||||||
Unsecured corporate bonds | 2027 | 2.55 | 100,000 | 100,000 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2032 | 2.65 | 90,000 | 90,000 | |||||||||||||
Unsecured corporate bonds | Refinancing fund | 2020 | 2.39 | — | 100,000 | |||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2022 | 2.63 | 80,000 | 80,000 | |||||||||||||
Unsecured corporate bonds | Refinancing fund | 2027 | 2.84 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds | 2021 | 2.57 | 110,000 | 110,000 | ||||||||||||||
Unsecured corporate bonds | 2023 | 2.81 | 100,000 | 100,000 | ||||||||||||||
Unsecured corporate bonds | 2028 | 3.00 | 200,000 | 200,000 | ||||||||||||||
Unsecured corporate bonds | 2038 | 3.02 | 90,000 | 90,000 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2021 | 2.10 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds | 2023 | 2.33 | 150,000 | 150,000 | ||||||||||||||
Unsecured corporate bonds | 2038 | 2.44 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2022 | 2.03 | 180,000 | 180,000 | |||||||||||||
Unsecured corporate bonds | 2024 | 2.09 | 120,000 | 120,000 | ||||||||||||||
Unsecured corporate bonds | 2029 | 2.19 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | 2039 | 2.23 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2022 | 1.40 | 120,000 | 120,000 | |||||||||||||
Unsecured corporate bonds | 2024 | 1.49 | 60,000 | 60,000 | ||||||||||||||
Unsecured corporate bonds | 2029 | 1.50 | 120,000 | 120,000 | ||||||||||||||
Unsecured corporate bonds | 2039 | 1.52 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | 2049 | 1.56 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2022 | 1.69 | 230,000 | 230,000 | |||||||||||||
Unsecured corporate bonds | 2024 | 1.76 | 70,000 | 70,000 | ||||||||||||||
Unsecured corporate bonds | 2029 | 1.79 | 40,000 | 40,000 | ||||||||||||||
Unsecured corporate bonds | 2039 | 1.81 | 60,000 | 60,000 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2023 | 1.64 | 170,000 | — | |||||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 1.75 | 130,000 | — | |||||||||||||
Unsecured corporate bonds | 2030 | 1.83 | 50,000 | — | ||||||||||||||
Unsecured corporate bonds | 2040 | 1.87 | 70,000 | — | ||||||||||||||
Unsecured corporate bonds | Refinancing fund | 2025 | 1.40 | 140,000 | — | |||||||||||||
Unsecured corporate bonds | 2030 | 1.59 | 40,000 | — | ||||||||||||||
Unsecured corporate bonds | 2040 | 1.76 | 110,000 | — |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won, thousands of U.S. dollars and thousands of other currencies) | ||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2015 | December 31, 2014 | ||||||||||
Foreign global bonds | Operating fund | 2018 | 2.13 | ₩ | 820,400 | 769,440 | ||||||||
(USD 700,000 | ) | (USD 700,000 | ) | |||||||||||
Australia unsecured private | 2017 | 4.75 | 255,930 | 269,727 | ||||||||||
(AUD 300,000 | ) | (AUD 300,000 | ) | |||||||||||
Floating rate notes(*4) | 2020 | 3M Libor + 0.88 | 351,600 | 329,760 | ||||||||||
(USD 300,000 | ) | (USD 300,000 | ) | |||||||||||
Foreign global bonds(*2) | 2018 | 2.88 | 351,600 | 329,760 | ||||||||||
(USD 300,000 | ) | (USD 300,000 | ) | |||||||||||
|
|
|
| |||||||||||
Sub-total | 7,139,651 | 6,252,161 | ||||||||||||
Less discounts on bonds | (30,998 | ) | (33,531 | ) | ||||||||||
|
|
|
| |||||||||||
7,108,653 | 6,218,630 | |||||||||||||
Less current portion of bonds | (669,506 | ) | (569,472 | ) | ||||||||||
|
|
|
| |||||||||||
₩ | 6,439,147 | 5,649,158 | ||||||||||||
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|
|
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2020 | December 31, 2019 | ||||||||||||||
Unsecured corporate bonds(*1) | Operating fund | 2020 | 2.49 | — | 160,000 | |||||||||||||
Unsecured corporate bonds(*1) | 2020 | 2.43 | — | 140,000 | ||||||||||||||
Unsecured corporate bonds(*1) | 2020 | 2.18 | — | 130,000 | ||||||||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2021 | 1.77 | 120,000 | 120,000 | |||||||||||||
Unsecured corporate bonds(*1) | Operating fund | 2022 | 2.26 | 150,000 | 150,000 | |||||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2020 | 2.34 | — | 30,000 | |||||||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2022 | 2.70 | 140,000 | 140,000 | |||||||||||||
Unsecured corporate bonds(*1) | 2021 | 2.59 | 70,000 | 70,000 | ||||||||||||||
Unsecured corporate bonds(*1) | 2023 | 2.93 | 80,000 | 80,000 | ||||||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2022 | 2.00 | 50,000 | 50,000 | |||||||||||||
Unsecured corporate bonds(*1) | 2024 | 2.09 | 160,000 | 160,000 | ||||||||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2022 | 1.71 | 80,000 | 80,000 | |||||||||||||
Unsecured corporate bonds(*1) | 2024 | 1.71 | 100,000 | 100,000 | ||||||||||||||
Unsecured corporate bonds(*1) | 2026 | 1.86 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2023 | 1.48 | 100,000 | — | |||||||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2025 | 1.64 | 100,000 | — | |||||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2025 | 1.41 | 160,000 | — | |||||||||||||
Private placement corporate bonds(*2) | Operating fund | 2023 | — | 6,292 | 6,292 | |||||||||||||
Private placement corporate bonds(*2) | Operating fund | 2023 | — | 6,222 | 6,222 | |||||||||||||
Private placement corporate bonds(*2) | Operating fund | 2023 | — | 6,168 | — | |||||||||||||
Private placement corporate bonds(*2) | Operating fund | 2023 | — | 6,100 | — | |||||||||||||
Unsecured global bonds | Operating fund | 2027 | 6.63 | | 435,200 (USD |
| | 463,120 (USD | |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2020 | December 31, 2019 | ||||||||||||||
Unsecured global bonds | 2023 | 3.75 | | 544,000 (USD | | | 578,900 (USD | | ||||||||||
Unsecured global bonds(*1) | Refinancing fund | 2023 | 3.88 | | 326,400 (USD | | | 347,340 (USD | | |||||||||
Floating rate notes(*3) | Operating fund | 2020 | | 3M LIBOR + 0.88 |
| — | | 347,340 (USD | | |||||||||
Floating rate notes(*3) | Operating fund | 2025 | | 3M LIBOR + 0.91 | | | 326,400 (USD | | — | |||||||||
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|
|
| |||||||||||||||
8,606,782 | 8,249,214 | |||||||||||||||||
Less discounts on bonds | (27,039 | ) | (28,381 | ) | ||||||||||||||
|
|
|
| |||||||||||||||
8,579,743 | 8,220,833 | |||||||||||||||||
Less current installments of bonds | (889,574 | ) | (966,939 | ) | ||||||||||||||
|
|
|
| |||||||||||||||
7,690,169 | 7,253,894 | |||||||||||||||||
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|
(*1) | Unsecured |
(*2) | Private placement corporate bonds were issued by SK Infosec Co., Ltd., a subsidiary of the Parent Company. |
(*3) | 3M LIBOR rates are 0.24% and 1.91% as of |
The difference between the carrying amount of the designated financial liabilities at fair value through profit or loss and the amount required to pay at maturity is ₩5,704 million as of December 31, 2015.
Long-term Payables — |
(1) | Long-term payables — other as of December 31, |
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Payables related to acquisition of W-CDMA licenses | ₩ | 550,964 | 657,001 | |||||
Other(*) | 30,733 | 27,566 | ||||||
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| |||||
₩ | 581,697 | 684,567 | ||||||
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|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Payables related to acquisition of frequency usage rights | ₩ | 1,141,723 | 1,544,699 | |||||
Other | 631 | 5,468 | ||||||
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|
| |||||
₩ | 1,142,354 | 1,550,167 | ||||||
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|
|
(2) | As of December 31, |
(In millions of won) | ||||||||||||||||
Period of repayment | Coupon rate | Annual effective interest rate(*) | December 31, 2015 | December 31, 2014 | ||||||||||||
800MHz | 2013~2015 | 3.51% | 5.69% | — | 69,416 | |||||||||||
2.3GHz | 2014~2016 | 3.00% | 5.80% | 2,882 | 5,766 | |||||||||||
1.8GHz | 2012~2021 | 2.43~3.00% | 4.84~5.25% | 707,006 | 824,841 | |||||||||||
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| |||||||||||||
709,888 | 900,023 | |||||||||||||||
Present value discount on long-term | (38,739 | ) | (53,633 | ) | ||||||||||||
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| |||||||||||||
671,149 | 846,390 | |||||||||||||||
Current portion of long-term | (120,185 | ) | (189,389 | ) | ||||||||||||
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| |||||||||||||
Carrying amount at December 31 | ₩ | 550,964 | 657,001 | |||||||||||||
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|
Long-term payables — other Present value discount on long-term payables — other Current installments of long-term payables — other Carrying amount at December 31 (In millions of won) December 31, 2020 December 31, 2019 ₩ 1,626,040 2,051,389 (59,717 ) (82,851 ) (424,600 ) (423,839 ) ₩ 1,141,723 1,544,699
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(3) | The principal amounts of the long-term payables — other repaid during the years ended December 31, 2020 and 2019 are ₩425,349 million, respectively. The repayment schedule of the principal amount of long-term payables |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ₩ | |||
1~3 years | ||||
3~5 years | ||||
More than 5 years | ||||
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| |||
₩ | ||||
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20. | Provisions |
Changes in provisions for the years ended December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2020 | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business Combination | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration | ₩ | 102,519 | 15,616 | (3,610 | ) | (1,492 | ) | (6 | ) | 626 | 113,653 | 42,348 | 71,305 | |||||||||||||||||||||||
Emission allowance | 5,257 | 7,400 | — | (5,233 | ) | — | — | 7,424 | 7,424 | — | ||||||||||||||||||||||||||
Other provisions(*) | 57,385 | 3,250 | (30,861 | ) | (1,904 | ) | (199 | ) | 2,129 | 29,800 | 19,591 | 10,209 | ||||||||||||||||||||||||
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| |||||||||||||||||||
₩ | 165,161 | 26,266 | (34,471 | ) | (8,629 | ) | (205 | ) | 2,755 | 150,877 | 69,363 | 81,514 | ||||||||||||||||||||||||
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(*) | ₩18,717 million of current provisions are included in the other provisions relating to SK Planet Co., Ltd.’s onerous contracts. (See note 38) |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2019 | As of December 31, 2019 | |||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business Combination | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration | ₩ | 98,060 | 9,424 | (3,409 | ) | (1,711 | ) | 115 | 40 | 102,519 | 48,391 | 54,128 | ||||||||||||||||||||||||
Emission allowance | 2,238 | 5,037 | (1,086 | ) | (932 | ) | — | — | 5,257 | 5,257 | — | |||||||||||||||||||||||||
Other provisions(*) | 107,229 | 7,609 | (45,260 | ) | (163 | ) | (12,030 | ) | — | 57,385 | 32,672 | 24,713 | ||||||||||||||||||||||||
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| |||||||||||||||||||
₩ | 207,527 | 22,070 | (49,755 | ) | (2,806 | ) | (11,915 | ) | 40 | 165,161 | 86,320 | 78,841 | ||||||||||||||||||||||||
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₩32,104 million of current provisions and ₩18,018 million of non-current provisions are included in the other provisions |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the year ended December 31, 2015 | As of December 31, 2015 | |||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Change of consolida- tion scope | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for handset subsidy(*1) | ₩ | 26,799 | 1,641 | (5,004 | ) | (17,766 | ) | — | — | 5,670 | 2,232 | 3,438 | ||||||||||||||||||||||||
Provision for | 59,727 | 4,983 | (1,135 | ) | (5,433 | ) | 1,812 | — | 59,954 | 34,336 | 25,618 | |||||||||||||||||||||||||
Emission allowance(*3) | — | 1,477 | — | — | — | — | 1,477 | 1,477 | — | |||||||||||||||||||||||||||
Other provisions | 562 | 3,795 | (510 | ) | (472 | ) | — | (271 | ) | 3,104 | 2,943 | 161 | ||||||||||||||||||||||||
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| |||||||||||||||||||
₩ | 87,088 | 11,896 | (6,649 | ) | (23,671 | ) | 1,812 | (271 | ) | 70,205 | 40,988 | 29,217 | ||||||||||||||||||||||||
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||||||||||||
For the year ended December 31, 2014 | As of December 31, 2014 | |||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Ending balance | Current | Non-current | |||||||||||||||||||||||||
Provision for handset subsidy(*1) | ₩ | 53,923 | 41,802 | (68,926 | ) | — | — | 26,799 | 14,844 | 11,955 | ||||||||||||||||||||||
Provision for restoration(*2) | 40,507 | 20,098 | (702 | ) | (34 | ) | (142 | ) | 59,727 | 35,865 | 23,862 | |||||||||||||||||||||
Other provisions | 451 | 155 | (225 | ) | — | 181 | 562 | 366 | 196 | |||||||||||||||||||||||
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| |||||||||||||||||
₩ | 94,881 | 62,055 | (69,853 | ) | (34 | ) | 39 | 87,088 | 51,075 | 36,013 | ||||||||||||||||||||||
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21. Defined Benefit Liabilities (Assets)
(1) | Details of defined benefit liabilities (assets) as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Present value of defined benefit obligations | ₩ | 1,278,550 | 1,136,787 | |||||
Fair value of plan assets | (1,127,163 | ) | (965,654 | ) | ||||
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| |||||
Defined benefit assets(*) | (3,557 | ) | (1,125 | ) | ||||
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| |||||
Defined benefit liabilities | ₩ | 154,944 | 172,258 | |||||
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(* | Since the Group |
The amount recognized as a provision for handset subsidies is the Group’s best estimate of the expenditure required to settle the current obligations to the relevant subscribers at the end of the reporting period, which is calculated as the sum of the present values of the monthly balances for handset subsidies over the relevant service periods, taking into account the customer retention rate for the relevant subscribers. The discount rate used in calculating the present values is based on AAA-rated corporate bonds with a two-year maturity. The customer retention rate is based on the Group’s historical retention rate.
(2) | Principal actuarial assumptions as of December 31, 2020 and 2019 are |
| ||
| ||
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(1) Finance Leases
The Group has leased telecommunication equipment under finance lease agreements with Cisco Systems Capital Korea Ltd. Finance lease liabilities as of December 31, 2015 and 2014 are as follows:
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Finance Lease Liabilities | ||||||||
Current portion of long-term finance lease liabilities | ₩ | 26 | 3,804 | |||||
Long-term finance lease liabilities | — | 26 | ||||||
|
|
|
| |||||
₩ | 26 | 3,830 | ||||||
|
|
|
|
The Group’s related interest and principal as of December 31, 2015 and 2014 are as follows:
(In millions of won) | ||||||||||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||
Minimum lease payment | Present value | Minimum lease payment | Present value | |||||||||||||
Less than 1 year | ₩ | 26 | 26 | 3,909 | 3,804 | |||||||||||
1~5 years | — | — | 26 | 26 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total | 26 | 26 | 3,935 | 3,830 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Current portion of long-term finance lease liabilities | (26 | ) | (3,804 | ) | ||||||||||||
|
|
|
| |||||||||||||
Long-term finance lease liabilities | ₩ | — | 26 | |||||||||||||
|
|
|
|
(2) Operating Leases
The Group entered into operating leases and sublease agreements in relation to rented office space and the expected future lease payments and lease revenues as of December 31, 2015 and 2014 (included in other non-operating income in the accompanying consolidated statements of income) are as follows:
(In millions of won) | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Lease payments | Lease revenues | Lease payments | Lease revenues | |||||||||||||
Less than 1 year | ₩ | 32,416 | 1,876 | 29,233 | 3,496 | |||||||||||
1~5 years | 75,568 | 1,026 | 76,306 | 1,390 | ||||||||||||
More than 5 years | 33,602 | 577 | 49,582 | 1,043 | ||||||||||||
|
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|
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|
|
| |||||||||
₩ | 141,586 | 3,479 | 155,121 | 5,929 | ||||||||||||
|
|
|
|
|
|
|
|
(3) Sale and Leaseback Transaction
During the year ended December 31, 2012, the Group disposed a portion of its property and equipment and investment property, and entered into lease agreements with respect to those assets. This sale and leaseback transaction is considered as an operating lease. The Group recognized ₩14,539 million and ₩14,075 million of lease payments in relation to the operating lease agreement for the years ended December 31, 2015 and 2014, respectively, and ₩2,393 million and ₩2,469 million of lease revenues in relation to the sublease agreement for the years ended December 31, 2015 and 2014, respectively. Expected future lease payments and lease revenues are included in Note 21-(2).
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Present value of defined benefit obligations | ₩ | 525,269 | 437,844 | |||||
Fair value of plan assets | (426,413 | ) | (346,257 | ) | ||||
|
|
|
| |||||
₩ | 98,856 | 91,587 | ||||||
|
|
|
|
December 31, | December 31, | |||||||
Discount rate for defined benefit obligations | 1.83 ~ | % | 1.77 ~ | % | ||||
Expected rate of salary increase | 2.04 ~ | % | 1.53 ~ | % |
Discount rate for defined benefit obligationsobligation is determined based on the Group’s credit ratings and yield ratemarket yields of high-quality corporate bonds with similar maturities for estimated payment term of defined benefit obligations.obligation. Expected rate of salary increase is determined based on the Group’s historical promotion index, inflation rate and salary increase ratio in accordance with salary agreement.ratio.
(3) | Changes in defined benefit obligations for the years ended December 31, |
(In millions of won) | For the year ended December 31 | |||||||||||||||
2015 | 2014 | 2020 | 2019 | |||||||||||||
Beginning balance | ₩ | 437,844 | 312,494 | ₩ | 1,136,787 | 926,302 | ||||||||||
Current service cost | 106,764 | 109,625 | 193,078 | 171,197 | ||||||||||||
Past service cost | 815 | — | ||||||||||||||
Interest cost | 12,292 | 12,630 | 25,958 | 23,685 | ||||||||||||
Remeasurement | ||||||||||||||||
- Demographic assumption | 732 | 2,859 | 2,071 | 19,344 | ||||||||||||
- Financial assumption | 5,900 | 28,287 | (18,266 | ) | 56,265 | |||||||||||
- Adjustment based on experience | 15,100 | 9,932 | 17,364 | 14,363 | ||||||||||||
Business combinations | 1,742 | 3,653 | ||||||||||||||
Benefit paid | (58,513 | ) | (46,531 | ) | (76,987 | ) | (84,098 | ) | ||||||||
Others(*) | 5,150 | 8,548 | (4,012 | ) | 6,076 | |||||||||||
|
|
|
| |||||||||||||
Ending balance | ₩ | 525,269 | 437,844 | ₩ | 1,278,550 | 1,136,787 | ||||||||||
|
|
|
|
(*) | Others include changes of liabilities due to employee’s transfers among affiliates for the |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(4) | Changes in plan assets for the years ended December 31, |
(In millions of won) | ||||||||
2015 | 2014 | |||||||
Beginning balance | ₩ | 346,257 | 238,293 | |||||
Interest income | 9,035 | 9,538 | ||||||
Actuarial gain | 3,146 | 50 | ||||||
Contributions by employer directly to plan assets | 115,640 | 117,558 | ||||||
Benefits paid | (47,809 | ) | (20,711 | ) | ||||
Others(*) | 144 | 1,529 | ||||||
|
|
|
| |||||
Ending balance | ₩ | 426,413 | 346,257 | |||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | For the year ended December 31 | |||||||
2020 | 2019 | |||||||
Beginning balance | ₩ | 965,654 | 816,699 | |||||
Interest income | 21,057 | 19,717 | ||||||
Remeasurement | (1,385 | ) | (5,366 | ) | ||||
Contributions | 213,298 | 204,186 | ||||||
Benefit paid | (68,084 | ) | (73,396 | ) | ||||
Business combinations | 485 | 3,207 | ||||||
Others | (3,862 | ) | 607 | |||||
|
|
|
| |||||
Ending balance | ₩ | 1,127,163 | 965,654 | |||||
|
|
|
|
The Group expects to make a contribution of ₩82,220contribute ₩214,088 million to the defined benefit plans during the next financial year.in 2021.
(5) | Total cost of benefit plan, which is recognized in profit and loss (included in labor |
(In millions of won) | For the year ended December 31 | |||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | ||||||||||||||||
Current service cost | ₩ | 106,764 | 109,625 | 89,802 | ₩ | 193,078 | 171,197 | |||||||||||||
Past service cost | 815 | — | ||||||||||||||||||
Net interest cost | 3,257 | 3,092 | 3,038 | 4,901 | 3,968 | |||||||||||||||
|
|
|
|
| ||||||||||||||||
₩ | 110,021 | 112,717 | 92,840 | ₩ | 198,794 | 175,165 | ||||||||||||||
|
|
|
|
|
The above costsCosts related to the defined benefit except for the amounts transferred to construction in progress are recognized inincluded labor cost, researchexpenses and Research and development or capitalized intoconstruction-in-progress.expenses.
(6) | Details of plan assets as of December 31, |
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Equity instruments | ₩ | 1,086 | 1,746 | |||||
Debt instruments | 81,867 | 70,778 | ||||||
Short-term financial instruments, etc. | 343,460 | 273,733 | ||||||
|
|
|
| |||||
₩ | 426,413 | 346,257 | ||||||
|
|
|
|
Actual return on plan assets for the years ended December 31, 2015 and 2014 amounted to ₩12,181 million and ₩9,588 million, respectively.
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Equity instruments | ₩ | 15,770 | 29,489 | |||||
Debt instruments | 228,839 | 207,504 | ||||||
Short-term financial instruments, etc. | 882,554 | 728,661 | ||||||
|
|
|
| |||||
₩ | 1,127,163 | 965,654 | ||||||
|
|
|
|
(7) | As of December 31, |
(In millions of won) | ||||||||
Increase | Decrease | |||||||
Discount rate (if changed by 0.5%) | ₩ | (20,669 | ) | 22,690 | ||||
Expected salary increase rate (if changed by 0.5%) | 22,604 | (20,851 | ) |
(In millions of won) | ||||||||
0.5% Increase | 0.5% Decrease | |||||||
Discount rate | ₩ | (58,830 | ) | 65,732 | ||||
Expected salary increase rate | 65,338 | (59,315 | ) |
The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan and provides approximate values of sensitivity for the assumptions used.
Weighted
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
A weighted average durationsduration of defined benefit obligations as of December 31, 20152020 and 20142019 are 9.359.49 years and 9.109.52 years, respectively.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
Derivative Instruments |
(1) | Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, |
(In millions of won and thousands of | ||||||||||||||
Borrowing |
| Hedged risk |
|
| Duration of | |||||||||
Jul. 20, 2007 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000) | Foreign currency risk | Morgan Stanley and | Jul. 20, 2007 ~ Jul. 20, 2027 | ||||||||||
Dec. 16, 2013 | Fixed-to-fixed cross currency (U.S. dollar borrowing amounting to USD 17,211) | Foreign currency risk | ||||||||||||
2018 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD | Foreign currency risk | ||||||||||||
|
| |||||||||||||
|
(U.S. | Foreign currency risk and | Mar. Jun. 4, 2025 | |||||||||||
Aug. 13, 2018 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000) | Foreign currency risk | ||||||||||||
Dec. |
(Korean won borrowing amounting to KRW 12,250) | Dec. 20, 2016~ Dec. 20, 2021 | ||||||||||||
Dec. 21, 2017 | Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 25,000) | Interest rate risk | Korea Development Bank | Dec. 21, 2017~ Dec. 21, 2022 | ||||||||||
Dec. 19, 2018 | Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 37,500) | Interest rate risk | Credit Agricole CIB | Mar.19, 2019~ Dec.14, 2023 |
(2) | SK Broadband Co., Ltd., a subsidiary of the Parent Company, entered into Total Return Swap(TRS) contract amounting to ₩270,000 million and ₩64,000 million with beneficiary certificates as underlying asset with IGIS Professional Investment Type Private Real Estate Investment Trust No. 156 and Hana Professional Alternative Investment Type Private Real Estate Investment Trust No. 62, respectively. The contract consists of the settlement of the difference resulting from the change in the value of the real estate on the maturity date of the contract and the settlement of the difference between the dividend and the standard dividend during the |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(3) | The Group has entered into an agreement regarding a share in order to establish a partnership for the growth of e-commerce business operated by Eleven Street Co., Ltd., a subsidiary of the Parent Company, whereby the Group is allowed to grant right to the counterparty to acquire new preferred shares when conditions of business performance or a stock listing are met. Exercise period of the right is 5 years from July 1, 2020, which is the date of the agreement. The Group determined the agreement is a derivative financial liability in accordance with IFRS 9 and recognized the liability amounting to ₩12,115 million as of December 31, |
(In millions of won and thousands of foreign currencies) | ||||||||||||||||||||||||
Fair value | ||||||||||||||||||||||||
Cash flow hedge | Held for trading purpose | Total | ||||||||||||||||||||||
Hedged item | Accumulated gain (loss) on valuation of derivatives | Tax effect | Accumulated foreign currency translation (gain) loss | Others (*) | ||||||||||||||||||||
Non-current assets: | ||||||||||||||||||||||||
Structured bond (face value of KRW 150,000) | ₩ | — | — | — | — | 6,277 | 6,277 | |||||||||||||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000) | (46,616 | ) | (14,883 | ) | 11,180 | 129,806 | — | 79,487 | ||||||||||||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000) | (18,705 | ) | (5,971 | ) | 56,738 | — | — | 32,062 | ||||||||||||||||
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000) | (5,748 | ) | (1,835 | ) | 26,439 | — | — | 18,856 | ||||||||||||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000) | (6,394 | ) | — | 32,870 | — | — | 26,476 | |||||||||||||||||
Fixed-to-fixed long-term borrowings (U.S. dollar denominated bonds face value of USD 74,817) | (4,072 | ) | (1,300 | ) | 8,613 | — | — | 3,241 | ||||||||||||||||
|
| |||||||||||||||||||||||
Total assets | ₩ | 166,399 | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
Non-current liabilities: | ||||||||||||||||||||||||
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000) | ₩ | (3,678 | ) | (1,174 | ) | (7,851 | ) | — | — | (12,703 | ) | |||||||||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of AUD 300,000) | 2,013 | 642 | (79,248 | ) | — | — | (76,593 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
Total liabilities | ₩ | (89,296 | ) | |||||||||||||||||||||
|
|
(4) | In relation to the business acquisition by SK Broadband Co., Ltd. (see note 12 (1)) in 2020, the Parent Company has entered into a shareholders’ agreement with the shareholders of the acquirees. Pursuant to the agreement, when certain conditions are met within a period of time subsequent to the business combination, the shareholders of the acquirees can exercise their drag-along rights and require the Parent Company to sell its shares in SK Broadband Co., Ltd. Should the shareholders exercise their drag-along rights, the Parent Company also can exercise its call options over the shares held by those shareholders. The Group recognized a derivative financial liability of ₩320,984 million for the rights included in the shareholders’ agreement as of December 31, 2020. |
The fair value of SK Broadband Co., Ltd.’s common stock(Post-merger) was estimated using 5-year projected cash flows discounted at 6.9% per annum. The fair value of the derivative financial liability was determined by using the Binomial Model based on various assumptions including the price of common stock and its price fluctuations. The difference in fair values between the acquisition date and December 31, 2020 is insignificant. The significant unobservable inputs used in the fair value measurement and inter-relationship between significant unobservable inputs and fair value measurement are as below:
Significant unobservable inputs | Correlations between inputs and fair value measurements | |
Fair value of SK Broadband Co., Ltd.’s common stock | The estimated fair value of derivative liabilities would decrease (increase) if the fair value of common stock would increase (decrease) | |
Volatility | The estimated fair value of derivative liabilities would decrease (increase) if the volatility of stock price increase (decrease) |
(5) | The Group has entered into the agreement with Newberry Global Limited, whereby the Group has been |
(6) | The Group has been granted subscription right to |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
The fair value of derivative financial instruments to which the Group applies cash flow hedge is recorded in the financial statements as long-term derivative financial assets, derivative financial liabilities and long-term derivative financial liabilities. As of December 31, 2020, details of fair values of the derivatives assets and liabilities are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||
Hedging instrument (Hedged item) | Cash flow hedge | Fair value | ||||||
Non-current assets: | ||||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000) | ₩ | 32,059 | 32,059 | |||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 500,000) | 30,247 | 30,247 | ||||||
Fixed-to-fixed cross currency swap (U.S dollar denominated bonds face value of USD 300,000) | 2,830 | 2,830 | ||||||
|
|
|
| |||||
₩ | 65,136 | ₩ | 65,136 | |||||
|
|
|
| |||||
Current liabilities: | ||||||||
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 12,250) | ₩ | (77) | (77 | ) | ||||
Non-current liabilities: | ||||||||
Fixed-to-fixed cross currency swap (U.S dollar borrowing amounting to USD 17,211) | ₩ | (453) | (453 | ) | ||||
Floating-to-fixed cross currency interest rate swap (U.S dollar denominated bonds face value of USD 300,000) | (40,565 | ) | (40,565 | ) | ||||
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 25,000) | (360 | ) | (360 | ) | ||||
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 37,500) | (606 | ) | (606 | ) | ||||
|
|
|
| |||||
₩ | (42,061 | ) | ₩ | (42,061 | ) | |||
|
|
|
|
(8) | The fair value of derivatives held for trading is recorded in the financial statements as derivative financial assets, long-term derivative financial assets and long-term derivative financial liabilities. As of December 31, 2020, details of fair values of the derivative assets and liabilities are as follows: |
(In millions of won) | ||||||||
Hedging instrument (Hedged item) | Held for trading | Fair value | ||||||
Current assets: | ||||||||
Contingent subscription right | ₩ | 8,704 | 8,704 | |||||
Non-current assets: | ||||||||
Total return swap | ₩ | 5,488 | 5,488 | |||||
Subscription right | 85,367 | 85,367 | ||||||
|
|
|
| |||||
₩ | 99,559 | ₩ | 99,559 | |||||
|
|
|
| |||||
Non-current liabilities: | ||||||||
Drag-along and call option right | (320,984 | ) | (320,984 | ) | ||||
Contingent subscription right | (12,115 | ) | (12,115 | ) | ||||
|
|
|
| |||||
₩ | (333,099 | ) | ₩ | (333,099 | ) | |||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
23. | Share Capital and Capital Surplus |
The Parent Company’s outstanding share capital consists entirely of common stockshares with a par value of ₩500. The number of authorized, issued and outstanding common shares and the details of capital surplus and other capital adjustmentsothers as of December 31, 20152020 and 20142019 are as follows:
(In millions of won, except for share data) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Authorized shares | 220,000,000 | 220,000,000 | ||||||
Issued shares(*1) | 80,745,711 | 80,745,711 | ||||||
Share capital | ||||||||
Common stock | ₩ | 44,639 | 44,639 | |||||
Capital surplus and other capital adjustments: | ||||||||
Paid-in surplus | 2,915,887 | 2,915,887 | ||||||
Treasury stock (Note 25) | (2,260,626 | ) | (2,139,683 | ) | ||||
Loss on disposal of treasury stock | — | (18,087 | ) | |||||
Others(*2) | (864,269 | ) | (878,637 | ) | ||||
|
|
|
| |||||
₩ | (209,008 | ) | (120,520 | ) | ||||
|
|
|
|
(In millions of won, except for share data) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Number of authorized shares | 220,000,000 | 220,000,000 | ||||||
Number of issued shares(*1) | 80,745,711 | 80,745,711 | ||||||
Share capital: | ||||||||
Common share | ₩ | 44,639 | 44,639 | |||||
Capital surplus and others: | ||||||||
Paid-in surplus | 2,915,887 | 2,915,887 | ||||||
Treasury shares(Note 24) | (2,123,661 | ) | (1,696,997 | ) | ||||
Hybrid bonds(Note 25) | 398,759 | 398,759 | ||||||
Share option(Note 26) | 1,481 | 1,302 | ||||||
Others(*2) | (515,263 | ) | (612,470 | ) | ||||
|
|
|
| |||||
₩ | 677,203 | 1,006,481 | ||||||
|
|
|
|
(*1) | In 2002 and 2003, |
(*2) | Others primarily consist of the excess of the consideration paid by the Group over the carrying |
There were no changes in share capital forduring the years ended December 31, 20152020 and 2014. Changes in number2019 and details of shares outstanding for the years ended December 31, 2015 and 2014 as follows:
(In shares) | ||||||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||||||
Issued shares | Treasury stock | Outstanding shares | Issued shares | Treasury stock | Outstanding shares | |||||||||||||||||||
Beginning issued shares | 80,745,711 | 9,809,375 | 70,936,336 | 80,745,711 | 9,809,375 | 70,936,336 | ||||||||||||||||||
Disposal of treasury stock | — | (1,692,824 | ) | 1,692,824 | — | — | — | |||||||||||||||||
Acquisition of treasury stock | — | 2,020,000 | (2,020,000 | ) | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending issued shares | 80,745,711 | 10,136,551 | 70,609,160 | 80,745,711 | 9,809,375 | 70,936,336 | ||||||||||||||||||
|
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|
The Parent Company acquired treasury stock to provide stock dividends, merge with Shinsegi Telecom, Inc. and SK IMT Co, Ltd., increase shareholder value and to stabilize its stock prices when needed.
Treasury stock as of December 31, 20152020 and 20142019 are as follows:
(In millions of won, shares) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Number of shares | 10,136,551 | 9,809,375 | ||||||
Amount | ₩ | 2,260,626 | 2,139,683 |
(In shares) | 2020 | 2019 | ||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 80,745,711 | 9,418,558 | 71,327,153 | 80,745,711 | 7,609,263 | 73,136,448 |
24. | Treasury Shares |
Treasury shares as of December 31, 2020 and 2019 are as follows:
(In millions of won, except for share data) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Number of shares(*) | 9,418,558 | 7,609,263 | ||||||
Acquisition cost | ₩ | 2,123,661 | 1,696,997 |
(*) | The Parent Company acquired 1,809,295 of its treasury shares for ₩426,664 million in an effort to increase shareholder value by stabilizing its stock price during the year ended December 31, 2020 and disposed 1,266,620 of its treasury shares to Kakao Co., Ltd. in exchange for ₩300,000 million in cash and acquired 2,177,401 shares of Kakao Co., Ltd. for ₩302,321 million during the year ended December 31, 2019 in order to solidify the future ICT business cooperation. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 2013
On June 9, 2015, the Parent Company granted 1,692,824 shares of its treasury stock (acquisition cost: ₩369,249 million) in order to acquire shares of SK Broadband Co., Ltd. In addition, from September 30, 2015 to December 11, 2015, the Parent Company newly acquired 2,020,000 shares of its treasury stock amounting to ₩490,192 million in order to stabilize stock price.2018
Hybrid Bonds |
Hybrid bonds classified as equity as of December 31, 20152020 and 2019 are as follows:
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| ||||||||||||
(In millions of won) | ||||||||||||||||||
Type | Issuance date | Maturity(*1) | Annual interest rate(%)(*2) | December 31, 2020 | December 31, 2019 | |||||||||||||
Series 2-1 hybrid bonds | Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.70 | ₩ | 300,000 | 300,000 | |||||||||||
Series 2-2 hybrid bonds | Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.65 | 100,000 | 100,000 | ||||||||||||
Issuance costs | (1,241 | ) | (1,241 | ) | ||||||||||||||
|
|
|
| |||||||||||||||
₩ | 398,759 | 398,759 | ||||||||||||||||
|
|
|
|
Hybrid bonds issued by the Parent Company is classified as equity asAs there is no contractual obligation for delivery ofto deliver financial assets to the bond holders.holders of hybrid bonds, the Group classified the hybrid bonds as equity. These are subordinated bonds which rank before common shareholdersshares in the event of a liquidation or reorganization of the Parent Company.
(*1) | The Parent Company has a right to extend the maturity |
(*2) | Annual interest rate is |
Share option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Parent Company | ||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3(*) | 4 | 5 | ||||||||
Grant date | March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | March 26, 2020 | |||||||||
Types of shares to be issued | Registered common shares | |||||||||||||
Grant method | Reissue of treasury shares, cash settlement | |||||||||||||
Number of shares (in shares) | 22,168 | 22,168 | 22,168 | 1,358 | 4,177 | 1,734 | 127,643 | |||||||
Exercise price | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||
Exercise period | Mar. 25, 2019 ~ Mar. 24, 2022 | Mar. 25, 2020 ~ Mar. 24, 2023 | Mar. 25, 2021 ~ Mar. 24, 2024 | Feb. 21, 2020 ~ Feb. 20, 2023 | Feb. 23, 2021 ~ Feb. 22, 2024 | Mar. 27, 2021 ~ Mar. 26, 2024 | Mar. 27, 2023 ~ Mar. 26, 2027 | |||||||
Vesting conditions | 2 years’ service from the grant date | 3 years’ service from the | 4 years’ service from the grant date | 2 years’ service from | 2 years’ service from | 2 years’ service from the grant date | 3 years’ service from the grant date |
(*) | Parts of the grant that have not met the vesting conditions have been forfeited during the year ended December 31, 2019. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
One Store Co., Ltd. | DREAMUS COMPANY | |||||||
1-1 | 1-2 | 1-3 | ||||||
Grant date | April 27, 2018 | March 28, 2019 | March 28, 2019 | March 28, 2019 | ||||
Types of shares to be issued | Common shares of One Store Co., Ltd. | Common shares of DREAMUS COMPANY | ||||||
Grant method | Issuance of new shares | Issuance of new shares, reissue of treasury shares, cash settlement | ||||||
Number of shares | 712,150 | 366,679 | 366,672 | 366,649 | ||||
Exercise price (in won) | 5,390 | 9,160 | 9,160 | 9,160 | ||||
Exercise period | Apr. 28, 2020 ~ Apr. 27, 2024 | Mar. 29, 2021 ~ Mar. 28, 2024 | Mar. 29, 2022 ~ Mar. 28, 2025 | Mar. 29, 2023 ~ Mar. 28, 2026 | ||||
Vesting conditions | 2 years’ service from the grant date | (a) 2 years’ service from the grant date (b) Average stock price for the exercise period is more than 150% of the exercise price | (a) 3 years’ service from the grant date (b) Average stock price for the exercise period is more than 150% of the exercise price | (a) 4 years’ service from the grant date (b) Average stock price for the exercise period is more than 150% of the exercise price |
Incross Co., Ltd. | ||||||||||||||||||||||||||||
3 | 4 | 5 | 6 | 7 | 8 | 9 | ||||||||||||||||||||||
Grant date | March 30, 2016 | March 7, 2017 | March 7, 2018 | March 7, 2019 | | October 15, 2019 | | March 10, 2020 | | October 20, 2020 | | |||||||||||||||||
Types of shares to be issued | Common shares of Incross Co., Ltd. | |||||||||||||||||||||||||||
Grant method | Issuance of new shares, reissue of treasury shares, cash settlement | |||||||||||||||||||||||||||
Number of shares | 5,000 | 29,625 | 9,900 | 6,600 | 59,225 | 19,800 | 3,300 | |||||||||||||||||||||
Exercise price | 10,571 | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | 45,280 | |||||||||||||||||||||
Exercise period | | Mar. 30, 2019 ~ Mar. 30, 2022 | | | Mar. 7, 2020 ~ Mar. 6, 2023 | | | Mar. 7, 2021 ~ Mar. 6, 2024 | | | Mar. 7, 2022 ~ Mar. 6, 2025 | | | Oct. 15, 2022 ~ Oct. 14, 2025 | | | Mar. 10, 2023 ~ Mar. 9, 2026 | | | Oct. 20, 2023 ~ Oct. 19, 2026 | | |||||||
Vesting conditions | | 3 years’ service from the grant date |
| | 3 years’ service from the grant date |
| | 3 years’ service from the grant date |
| | 3 years’ service from the grant date |
| | 3 years’ service from the grant date |
| | 3 years’ service from the grant date |
| | 3 years’ service from the grant date |
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
SK Infosec Co., Ltd.(*2) | ||||||||
1-1 | 1-2 | 1-3 | 1-4 | |||||
Grant date | August 22, 2019 | |||||||
Types of shares to be issued | Registered common shares of SK Infosec. Co., Ltd. | |||||||
Grant method | Cash settlement | |||||||
Number of shares | 161,541 | 87,562 | 230,581 | 203,223 | ||||
Exercise price (in won) | 20,579 | 20,579 | 22,225 | 24,003 | ||||
Exercise period | 1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. | |||||||
2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. | ||||||||
3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. | ||||||||
Vesting conditions | Service provided until December 31, 2019 | Service provided until December 31, 2020 | Service provided until December 31, 2020 | Service provided until December 31, 2021 |
SK Infosec Co., Ltd.(*2) | ||||||||||||||||||||
2-1 | 2-2 | 2-3 | 2-4 | FSK L&S Co., Ltd. | ||||||||||||||||
Grant date | December 30, 2020 | May 31, 2019 | ||||||||||||||||||
Types of shares to be issued | Registered common shares of SK Infosec. Co., Ltd. | | Common shares of FSK L&S Co., Ltd. |
| ||||||||||||||||
Grant method | Cash settlement | | Issuance of new shares | | ||||||||||||||||
Number of shares (in shares)(*1) | 23,097 | 9,648 | 32,744 | 23,094 | 43,955 | |||||||||||||||
Exercise price (in won) | 20,807 | 20,807 | 22,472 | 24,270 | 10,000 | |||||||||||||||
Exercise period | | 1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. |
| | June 1, 2022 ~ May 31, 2025 |
| ||||||||||||||
| 2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. |
| ||||||||||||||||||
| 3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. |
| ||||||||||||||||||
Vesting conditions | | Service provided until December 31, 2020 | | | Service provided until December 31, 2021 | | | Service provided until December 31, 2021 | | | Service provided until December 31, 2022 | | | 3 years’ service from the grant date | |
(*1) | Some of stock options granted by One Store Co., Ltd., DREAMUS COMPANY and SK Infosec Co., Ltd. that have not met the vesting conditions have been forfeited, and some of the stock options granted by One Store Co., Ltd. and Incross Co., Ltd. have been exercised during the year ended December 31, 2020. Some of stock options granted by One Store Co., Ltd. and DREAMUS COMPANY that have not met the vesting conditions have been forfeited during the year ended December 31, 2019. |
(*2) | The share option has transferred from Life & Security Holdings Co., Ltd. due to the business combination. As a result of the business combination, number of shares and exercise price of the share option and the expected listing date have changed. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(2) | Share compensation expense recognized during the year ended December 31, 2020 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | Share compensation expense | |||
As of December 31, 2019 | ₩ | 3,276 | ||
During the year ended December 31, 2020 | 4,313 | |||
In subsequent periods | 2,259 | |||
₩ | 9,848 | |||
(3) | The Group used binomial option pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows: |
(In won) | Parent Company | |||||||||||||||||||||||||||
Series | ||||||||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | ||||||||||||||||||||||
Risk-free interest rate | 1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | ||||||||||||||
Estimated option’s life | 5 years | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | |||||||||||||||||||||
Share price (Closing price on the preceding day) | 262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | 174,500 | |||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | ||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | ||||||||||||||
Exercise price | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||||||||||||||||
Per-share fair value of the option | 27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 | 962 |
(In won) | DREAMUS COMPANY | |||||||||||||||
One Store Co., Ltd. | 1-1 | 1-2 | 1-3 | |||||||||||||
Risk-free interest rate | 2.58 | % | 1.73 | % | 1.77 | % | 1.82 | % | ||||||||
Estimated option’s life | 6 years | — | — | — | ||||||||||||
Share price (Closing price on the preceding day) | 4,925 | 8,950 | 8,950 | 8,950 | ||||||||||||
Expected volatility | 9.25 | % | 32.34 | % | 32.34 | % | 32.34 | % | ||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Exercise price | 5,390 | 9,160 | 9,160 | 9,160 | ||||||||||||
Per-share fair value of the option | 566 | 1,976 | 2,189 | 2,356 |
(In won) | Incross Co., Ltd. | . | ||||||||||||||||||||||||||||||
3 | 4 | 5 | 6 | 7 | 8 | 9 | FSK L&S Co., Ltd | |||||||||||||||||||||||||
Risk-free interest rate | 2.09 | % | 1.35 | % | 1.50 | % | 1.76 | % | 1.41 | % | 1.16 | % | 1.23 | % | 1.64 | % | ||||||||||||||||
Estimated option’s life | 6 years | 6 years | 6 years | 6 years | 6 years | 6 years | 6 years | — | ||||||||||||||||||||||||
Share price (Closing price on the preceding day) | 17,993 | 43,843 | 27,300 | 17,000 | 22,050 | 21,800 | 40,300 | 10,455 | ||||||||||||||||||||||||
Expected volatility | 20.67 | % | 18.67 | % | 21.28 | % | 25.58 | % | 42.37 | % | 41.69 | % | 51.16 | % | 16.20 | % | ||||||||||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||||
Exercise price | 10,571 | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | 45,280 | 10,000 | ||||||||||||||||||||||||
Per-share fair value of the option | 1,965 | 9,423 | 7,277 | 4,887 | 9,209 | 7,813 | 18,491 | 1,420 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In won) | ||||||||||||
SK Infosec. Co., Ltd.(*) | ||||||||||||
1-1, 1-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price | 26,787 | 26,787 | 26,787 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 20,579 | 20,579 | 20,579 | |||||||||
Per-share fair value of the option | 6,051 | 7,448 | 7,571 |
(In won) | ||||||||||||
SK Infosec. Co., Ltd.(*) | ||||||||||||
1-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price | 26,787 | 26,787 | 26,787 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 22,225 | 22,225 | 22,225 | |||||||||
Per-share fair value of the option | 5,521 | 6,531 | 6,720 |
(In won) | ||||||||||||
SK Infosec. Co., Ltd.(*) | ||||||||||||
1-4 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price | 26,787 | 26,787 | 26,787 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 24,003 | 24,003 | 24,003 | |||||||||
Per-share fair value of the option | 4,948 | 5,663 | 5,909 |
(In won) | ||||||||||||
SK Infosec. Co., Ltd.(*) | ||||||||||||
2-1, 2-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price | 26,787 | 26,787 | 26,787 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 20,807 | 20,807 | 20,807 | |||||||||
Per-share fair value of the option | 5,977 | 7,321 | 7,454 |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In won) | ||||||||||||
SK Infosec. Co., Ltd.(*) | ||||||||||||
2-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price | 26,787 | 26,787 | 26,787 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 22,472 | 22,472 | 22,472 | |||||||||
Per-share fair value of the option | 5,441 | 6,393 | 6,592 |
(In won) | ||||||||||||
SK Infosec. Co., Ltd.(*) | ||||||||||||
2-4 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price | 26,787 | 26,787 | 26,787 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 24,270 | 24,270 | 24,270 | |||||||||
Per-share fair value of the option | 4,862 | 5,547 | 5,800 |
(*) | The share option has transferred from Life & Security Holdings Co., Ltd. due to the business combination. |
As One Store Co., Ltd., FSK L&S Co., Ltd., and SK Infosec Co., Ltd., the subsidiaries of the Parent Company, are unlisted, the share price is calculated using the discounted cash flow model.
27. | Retained Earnings |
(1) | Retained earnings as of December 31, |
(In millions of won) | December 31, 2020 | December 31, 2019 | ||||||||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||
Appropriated: | ||||||||||||||||
Legal reserve | ₩ | 22,320 | 22,320 | ₩ | 22,320 | 22,320 | ||||||||||
Reserve for research & manpower development | 87,301 | 151,533 | ||||||||||||||
Reserve for business expansion | 9,671,138 | 9,476,138 | 11,631,138 | 11,531,138 | ||||||||||||
Reserve for technology development | 2,616,300 | 2,416,300 | 4,365,300 | 4,265,300 | ||||||||||||
|
|
|
| |||||||||||||
12,397,059 | 12,066,291 | 16,018,758 | 15,818,758 | |||||||||||||
Unappropriated | 2,610,568 | 2,122,300 | 6,963,155 | 6,409,925 | ||||||||||||
|
|
|
| |||||||||||||
₩ | 15,007,627 | 14,188,591 | ₩ | 22,981,913 | 22,228,683 | |||||||||||
|
|
|
|
(2) | Legal reserve |
The Korean Commercial Act requires the Parent Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
The reserve for research and manpower development was appropriated in order to recognize certain tax deductible benefits through the early recognition of future expenditures for tax purposes. These reserves will be reversed from appropriated and retained earnings in accordance with the relevant tax laws. Such reversal will be included in taxable income in the year of reversal.
Reserves
(1) | Details of reserves, net of taxes, as of December 31, |
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Unrealized fair value of available-for-sale financial assets | ₩ | 232,316 | 235,385 | |||||
Other comprehensive loss of investments in associates | (169,520 | ) | (163,808 | ) | ||||
Unrealized fair value of derivatives | (83,200 | ) | (77,531 | ) | ||||
Foreign currency translation differences for foreign operations | 29,707 | 1,465 | ||||||
|
|
|
| |||||
₩ | 9,303 | (4,489 | ) | |||||
|
|
|
|
(In millions of won) | December 31, 2020 | December 31, 2019 | ||||||
Valuation gain (loss) on FVOCI | ₩ | 438,979 | (47,086 | ) | ||||
Other comprehensive loss of investments in associates and joint ventures | (392,333 | ) | (278,142 | ) | ||||
Valuation gain (loss) on derivatives | 17,615 | (920 | ) | |||||
Foreign currency translation differences for foreign operations | (24,122 | ) | (3,428 | ) | ||||
|
|
|
| |||||
₩ | 40,139 | (329,576 | ) | |||||
|
|
|
|
(2) | Changes in reserves for the years ended December 31, |
(In millions of won) | ||||||||||||||||||||
2015 | ||||||||||||||||||||
Unrealized fair value of available-for- sale financial assets | Other compre- hensive loss of investments in associates | Unrealized fair value of derivatives | Foreign currency translation differences for foreign operations | Total | ||||||||||||||||
Balance at January 1, 2015 | ₩ | 235,385 | (163,808 | ) | (77,531 | ) | 1,465 | (4,489 | ) | |||||||||||
Changes | (5,530 | ) | (5,649 | ) | (5,221 | ) | 28,242 | 11,842 | ||||||||||||
Tax effect | 2,461 | (63 | ) | (448 | ) | — | 1,950 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at December 31, 2015 | ₩ | 232,316 | (169,520 | ) | (83,200 | ) | 29,707 | 9,303 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI | Other comprehensive income(loss) of investments in associates and joint ventures | Valuation gain (loss) on derivatives | Foreign currency translation differences for foreign operations | Total | ||||||||||||||||
Balance at January 1, 2019 | ₩ | (124 | ) | (334,637 | ) | (41,601 | ) | 2,920 | (373,442 | ) | ||||||||||
Changes, net of taxes | (46,962 | ) | 56,495 | 40,681 | (6,348 | ) | 43,866 | |||||||||||||
Balance at December 31, 2019 | ₩ | (47,086 | ) | (278,142 | ) | (920 | ) | (3,428 | ) | (329,576 | ) | |||||||||
Changes, net of taxes | 486,065 | (114,191 | ) | 18,535 | (20,694 | ) | 369,715 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at December 31, 2020 | ₩ | 438,979 | (392,333 | ) | 17,615 | (24,122 | ) | 40,139 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Unrealized fair value of available-for- sale financial assets | Other compre- hensive loss of investments in associates | Unrealized fair value of derivatives | Foreign currency translation differences for foreign operations | Total | ||||||||||||||||
Balance at January 1, 2014 | ₩ | 208,529 | (172,117 | ) | (35,429 | ) | (13,253 | ) | (12,270 | ) | ||||||||||
Changes | 30,945 | 8,381 | (54,290 | ) | 14,718 | (246 | ) | |||||||||||||
Tax effect | (4,089 | ) | (72 | ) | 12,188 | — | 8,027 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at December 31, 2014 | ₩ | 235,385 | (163,808 | ) | (77,531 | ) | 1,465 | (4,489 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
(3) | Changes in valuation gain (loss) on financial assets at FVOCI for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Balance at January 1 | ₩ | (47,086 | ) | (124 | ) | |||
Amount recognized as other comprehensive income (loss) during the year, net of taxes | 486,440 | (18,472 | ) | |||||
Amount reclassified to retained earnings, net of taxes | (375 | ) | (28,490 | ) | ||||
|
|
|
| |||||
Balance at December 31 | ₩ | 438,979 | (47,086 | ) | ||||
|
|
|
|
(4) | Changes in valuation gain (loss) on derivatives for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Balance at January 1 | ₩ | (920 | ) | (41,601 | ) | |||
Amount recognized as other comprehensive income during the year, net of taxes | 15,414 | 34,209 | ||||||
Amount reclassified to profit, net of taxes | 3,121 | 6,472 | ||||||
|
|
|
| |||||
Balance at December 31 | ₩ | 17,615 | (920 | ) | ||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Redeemable Convertible Preferred Stocks |
Eleven street Co., Ltd., a subsidiary of the Parent Company, issued redeemable convertible preferred stocks on September 7, 2018 according to the board of directors’ resolution. The details of the issuance are as follows:
Information of | ||
Issuer | Eleven Street Co., Ltd. | |
Number of shares issued | 1,863,093 | |
Issue price | ₩268,371 per share | |
Voting rights | 1 voting right per 1 share | |
Dividend rate(*) | 6% of the issue price per annum (cumulative, non-participating) The obligatory dividend rate of the Parent Company is 1% of the issue price per annum | |
Conversion period | From 6 months after the date of issue to 1 business day before the expiration date of the redemption period | |
Conversion ratio | [Issue price ÷ Conversion price at the date of conversion] per share | |
Conversion price | ₩268,371 per share | |
Refixing clauses | • In the case when spin-off, merger, split merger of the company, comprehensive stock exchange or transfer and decrease in • In the case when this preferred share is split or merged, the conversion prices is subject to refixing to correspond with the split or merge ratio. | |
Redemption period | Two months from September 30, 2023 to December 31, | |
Redemption party | Eleven Street Co., Ltd. | |
Redemption price | Amounts realizing the internal rate of return to be 3.5% at the date of actual redemption | |
Liquidation preference | Preferential to the common shares |
(In millions of won) | ||||||||||||
2015 | ||||||||||||
Before taxes | Income tax effect | After taxes | ||||||||||
Balance at January 1, 2015 | ₩ | 306,608 | (71,223 | ) | 235,385 | |||||||
Amount recognized as other comprehensive loss during the year | (3,902 | ) | 2,067 | (1,835 | ) | |||||||
Amount reclassified to profit or loss | (1,628 | ) | 394 | (1,234 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at December 31, 2015 | ₩ | 301,078 | (68,762 | ) | 232,316 | |||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||
2014 | ||||||||||||
Before taxes | Income tax effect | After taxes | ||||||||||
Balance at January 1, 2014 | ₩ | 275,663 | (67,134 | ) | 208,529 | |||||||
Amount recognized as other comprehensive income during the year | 40,785 | (6,470 | ) | 34,315 | ||||||||
Amount reclassified to profit or loss | (9,840 | ) | 2,381 | (7,459 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at December 31, 2014 | ₩ | 306,608 | (71,223 | ) | 235,385 | |||||||
|
|
|
|
|
|
The present value of |
(In millions of won) | ||||||||||||
2015 | ||||||||||||
Before taxes | Income tax effect | After taxes | ||||||||||
Balance at January 1, 2015 | ₩ | (102,501 | ) | 24,970 | (77,531 | ) | ||||||
Amount recognized as other comprehensive loss during the year | (4,714 | ) | (570 | ) | (5,284 | ) | ||||||
Amount reclassified to profit or loss | (507 | ) | 122 | (385 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at December 31, 2015 | ₩ | (107,722 | ) | 24,522 | (83,200 | ) | ||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||
2014 | ||||||||||||
Before taxes | Income tax effect | After taxes | ||||||||||
Balance at January 1, 2014 | ₩ | (48,211 | ) | 12,782 | (35,429 | ) | ||||||
Amount recognized as other comprehensive loss during the year | (46,535 | ) | 10,311 | (36,224 | ) | |||||||
Amount reclassified to profit or loss | (7,755 | ) | 1,877 | (5,878 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at December 31, 2014 | ₩ | (102,501 | ) | 24,970 | (77,531 | ) | ||||||
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Other Operating Income and Expenses |
Details of other operating income andexpensesandexpenses for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Other Operating Income: | ||||||||||||||||||||||||
Reversal of allowance for doubtful accounts | ₩ | — | — | 359 | ||||||||||||||||||||
Gain on disposal of property and equipment and intangible assets | 7,140 | 8,792 | 7,991 | ₩ | 35,644 | 8,533 | 38,933 | |||||||||||||||||
Others(*1) | 23,795 | 47,679 | 66,604 | |||||||||||||||||||||
Others(*) | 64,004 | 94,288 | 33,017 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 30,935 | 56,471 | 74,954 | ₩ | 99,648 | 102,821 | 71,950 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Other Operating Expenses: | ||||||||||||||||||||||||
Communication expenses | ₩ | 43,979 | 58,622 | 62,193 | ||||||||||||||||||||
Communication | ₩ | 41,138 | 43,606 | 35,507 | ||||||||||||||||||||
Utilities | 270,621 | 247,919 | 227,593 | 341,045 | 320,474 | 297,049 | ||||||||||||||||||
Taxes and dues | 36,118 | 33,500 | 29,873 | 40,831 | 44,761 | 37,290 | ||||||||||||||||||
Repair | 312,517 | 260,533 | 252,344 | 384,328 | 358,758 | 353,321 | ||||||||||||||||||
Research and development | 315,790 | 390,943 | 352,385 | 416,445 | 391,327 | 387,675 | ||||||||||||||||||
Training | 37,278 | 42,781 | 40,446 | 35,802 | 35,004 | 35,574 | ||||||||||||||||||
Bad debt for accounts receivables — trade | 60,450 | 45,754 | 53,344 | |||||||||||||||||||||
Bad debt for accounts receivable — trade | 48,625 | 28,841 | 38,211 | |||||||||||||||||||||
Travel | 27,860 | 28,912 | 31,762 | 15,652 | 30,746 | 27,910 | ||||||||||||||||||
Supplies and other | 176,248 | 209,933 | 189,224 | 328,243 | 259,155 | 130,008 | ||||||||||||||||||
Loss on disposal of property and equipment and intangible assets | 21,392 | 32,950 | 267,468 | 41,598 | 47,760 | 87,257 | ||||||||||||||||||
Impairment loss on other investment securities | 42,966 | 22,749 | 6,137 | — | 1,670 | 3,157 | ||||||||||||||||||
Impairment loss on property and equipment and intangible assets | 35,845 | 47,489 | 13,770 | 208,834 | 65,935 | 255,839 | ||||||||||||||||||
Donations | 72,454 | 67,823 | 82,057 | 16,774 | 17,557 | 59,012 | ||||||||||||||||||
Bad debt for accounts receivable — other | 15,323 | 17,943 | 22,155 | 10,559 | 5,802 | 7,718 | ||||||||||||||||||
Others(*2) | 55,536 | 84,796 | 115,532 | |||||||||||||||||||||
Others(*) | 66,573 | 65,015 | 26,876 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 1,524,377 | 1,592,647 | 1,746,283 | ₩ | 1,996,447 | 1,716,411 | 1,782,404 | |||||||||||||||||
|
|
|
|
|
|
(* | See note 5 (2). |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Finance Income and Costs |
(1) | Details of finance income and costs for the years ended December 31, |
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Finance Income: | ||||||||||||||||||||||||
Interest income | ₩ | 45,884 | 60,006 | 65,560 | ₩ | 50,357 | 63,579 | 69,936 | ||||||||||||||||
Gain on sale of accounts receivable — other | 22,605 | 15,855 | 20,023 | |||||||||||||||||||||
Dividends | 16,102 | 13,048 | 10,197 | 1,170 | 10,011 | 35,143 | ||||||||||||||||||
Gain on foreign currency transactions | 18,923 | 16,301 | 11,041 | 13,120 | 11,798 | 17,990 | ||||||||||||||||||
Gain on foreign currency translations | 5,090 | 6,277 | 4,401 | 8,928 | 4,576 | 2,776 | ||||||||||||||||||
Gain on disposal of long-term investment securities | 10,786 | 13,994 | 9,300 | |||||||||||||||||||||
Gain on valuation of derivatives | 1,927 | 8,713 | — | 101,343 | 2,499 | 6,532 | ||||||||||||||||||
Gain on settlement of derivatives | — | 7,998 | 7,716 | 7,829 | 29,277 | 20,399 | ||||||||||||||||||
Gain relating to financial asset at fair value through profit or loss | — | — | 5,177 | |||||||||||||||||||||
Gain relating to financial liability at fair value through profit or loss | 5,188 | — | — | |||||||||||||||||||||
Gain relating to financial assets at FVTPL (*) | 35,844 | 4,504 | 83,636 | |||||||||||||||||||||
Gain relating to financial liabilities at FVTPL | — | 56 | — | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 103,900 | 126,337 | 113,392 | ₩ | 241,196 | 142,155 | 256,435 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Finance Costs: | ||||||||||||||||||||||||
Interest expense | ₩ | 297,662 | 323,910 | 331,834 | ₩ | 399,176 | 406,087 | 307,319 | ||||||||||||||||
Loss on sale of accounts receivable — other | — | 5,823 | — | |||||||||||||||||||||
Loss on foreign currency transactions | 17,931 | 18,053 | 16,430 | 13,373 | 12,660 | 38,920 | ||||||||||||||||||
Loss on foreign currency translations | 4,750 | 5,079 | 2,634 | 12,730 | 4,948 | 2,397 | ||||||||||||||||||
Loss on disposal of long-term investment securities | 2,599 | 2,694 | 31,909 | 98 | — | — | ||||||||||||||||||
Loss on valuation of derivatives | — | 10 | 2,106 | 13,551 | — | — | ||||||||||||||||||
Loss on settlement of derivatives | 4,845 | 672 | — | 2,637 | 641 | 12,554 | ||||||||||||||||||
Loss relating to financial asset at fair value through profit or loss | — | 1,352 | — | |||||||||||||||||||||
Loss relating to financial liability at fair value through profit or loss(*1) | 526 | 10,370 | 134,232 | |||||||||||||||||||||
Other finance costs(*2) | 21,787 | 24,533 | 52,058 | |||||||||||||||||||||
Loss relating to financial assets at FVTPL | 10,894 | 7,753 | 22,507 | |||||||||||||||||||||
Loss relating to financial liabilities at FVTPL | — | 43 | 1,535 | |||||||||||||||||||||
Other financial fees | 44,734 | — | — | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 350,100 | 386,673 | 571,203 | ₩ | 497,193 | 437,955 | 385,232 | |||||||||||||||||
|
|
|
|
|
|
(* | Gain relating to financial |
₩58,000 million.
(2) | Details of interest income included in finance income for the years ended December 31, |
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Interest income on cash equivalents and deposits | ₩ | 20,009 | 33,417 | 41,907 | ||||||||
Interest income on installment receivables and others | 25,875 | 26,589 | 23,653 | |||||||||
|
|
|
|
|
| |||||||
₩ | 45,884 | 60,006 | 65,560 | |||||||||
|
|
|
|
|
|
(In millions of won) | 2020 | 2019 | 2018 | |||||||||
Interest income on cash equivalents and short-term financial instruments | ₩ | 24,378 | 29,854 | 33,808 | ||||||||
Interest income on loans and others | 25,979 | 33,725 | 36,128 | |||||||||
|
|
|
|
|
| |||||||
₩ | 50,357 | 63,579 | 69,936 | |||||||||
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(3) | Details of interest |
(In millions of won) | 2020 | 2019 | 2018 | |||||||||||||||||||||
2015 | 2014 | 2013 | ||||||||||||||||||||||
Interest expense on bank overdrafts and borrowings | ₩ | 19,577 | 26,360 | 28,600 | ||||||||||||||||||||
Interest expense on borrowings | ₩ | 116,397 | 104,991 | 10,796 | ||||||||||||||||||||
Interest expense on debentures | 238,450 | 247,972 | 258,962 | 225,309 | 224,765 | 222,195 | ||||||||||||||||||
Interest on finance lease liabilities | 58 | 504 | 1,333 | |||||||||||||||||||||
Others | 39,577 | 49,074 | 42,939 | 57,470 | 76,331 | 74,328 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 297,662 | 323,910 | 331,834 | ₩ | 399,176 | 406,087 | 307,319 | |||||||||||||||||
|
|
|
|
|
|
(4) | Finance income and costs by |
(i)1) Finance income and costs
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Financial Assets: | ||||||||||||
Financial assets at fair value through profit or loss | ₩ | 1,927 | 8,713 | 5,177 | ||||||||
Available-for-sale financial assets | 31,220 | 32,227 | 23,311 | |||||||||
Loans and receivables | 64,749 | 57,685 | 62,211 | |||||||||
Derivative financial instruments designated as hedged item | — | 7,998 | 7,716 | |||||||||
|
|
|
|
|
| |||||||
97,896 | 106,623 | 98,415 | ||||||||||
|
|
|
|
|
| |||||||
Financial Liabilities: | ||||||||||||
Financial liabilities at fair value through profit or loss | 5,188 | — | — | |||||||||
Financial liabilities measured at amortized cost | 816 | 19,714 | 14,977 | |||||||||
|
|
|
|
|
| |||||||
6,004 | 19,714 | 14,977 | ||||||||||
|
|
|
|
|
| |||||||
₩ | 103,900 | 126,337 | 113,392 | |||||||||
|
|
|
|
|
|
(ii) Finance costs
(In millions of won) | ||||||||
2020 | ||||||||
Finance income | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | ₩ | 161,835 | 10,894 | |||||
Financial assets at FVOCI | 993 | 44,832 | ||||||
Financial assets at amortized cost | 64,554 | 24,601 | ||||||
Derivatives designated as hedging instrument | — | 1,867 | ||||||
|
|
|
| |||||
227,382 | 82,194 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | — | 12,115 | ||||||
Financial liabilities at amortized cost | 6,434 | 400,678 | ||||||
Derivatives designated as hedging instrument | 7,380 | 2,206 | ||||||
|
|
|
| |||||
13,814 | 414,999 | |||||||
|
|
|
| |||||
₩ | 241,196 | 497,193 | ||||||
|
|
|
|
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Financial Assets: | ||||||||||||
Financial assets at fair value through profit or loss | ₩ | 4,188 | 1,361 | 276 | ||||||||
Available-for-sale financial assets | 24,386 | 27,227 | 83,967 | |||||||||
Loans and receivables | 15,861 | 18,182 | 16,479 | |||||||||
Derivative financial instruments designated as hedged item | 657 | 672 | 1,830 | |||||||||
|
|
|
|
|
| |||||||
45,092 | 47,442 | 102,552 | ||||||||||
|
|
|
|
|
| |||||||
Financial Liabilities: | ||||||||||||
Financial liabilities at fair value through profit or loss | 526 | 10,370 | 134,232 | |||||||||
Financial liabilities measured at amortized cost | 304,482 | 328,861 | 334,419 | |||||||||
|
|
|
|
|
| |||||||
305,008 | 339,231 | 468,651 | ||||||||||
|
|
|
|
|
| |||||||
₩ | 350,100 | 386,673 | 571,203 | |||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||
2019 | ||||||||
Finance income | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | ₩ | 56,953 | 13,577 | |||||
Financial assets at FVOCI | 9,924 | — | ||||||
Financial assets at amortized cost | 75,119 | 17,488 | ||||||
|
|
|
| |||||
141,996 | 31,065 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | 56 | 43 | ||||||
Financial liabilities at amortized cost | 103 | 406,206 | ||||||
Derivatives designated as hedging instrument | — | 641 | ||||||
|
|
|
| |||||
159 | 406,890 | |||||||
|
|
|
| |||||
₩ | 142,155 | 437,955 | ||||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||
2018 | ||||||||
Finance income | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | ₩ | 134,841 | 22,507 | |||||
Financial assets at FVOCI | 35,143 | — | ||||||
Financial assets at amortized cost | 86,032 | 20,018 | ||||||
|
|
|
| |||||
256,016 | 42,525 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | — | 1,535 | ||||||
Financial liabilities at amortized cost | 419 | 328,618 | ||||||
Derivatives designated as hedging instrument | — | 12,554 | ||||||
|
|
|
| |||||
419 | 342,707 | |||||||
|
|
|
| |||||
₩ | 256,435 | 385,232 | ||||||
|
|
|
|
(iii)2) Other comprehensive income (loss)
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Financial Assets: | ||||||||||||||||||||||||
Available-for-sale financial assets | ₩ | (3,661 | ) | 26,856 | 2,009 | |||||||||||||||||||
Derivative financial instruments designated as hedged item | (3,248 | ) | (20,301 | ) | 12,240 | |||||||||||||||||||
Financial assets at FVOCI | ₩ | 579,678 | (17,943 | ) | (130,035 | ) | ||||||||||||||||||
Derivatives designated as hedging instrument | 24,320 | 41,305 | 17,180 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
(6,909 | ) | 6,555 | 14,249 | 603,998 | 23,362 | (112,855 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||
Derivative financial instruments designated as hedged item | 1,977 | (21,801 | ) | (1,018 | ) | |||||||||||||||||||
Derivatives designated as hedging instrument | (5,182 | ) | (624 | ) | 15,047 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
1,977 | (21,801 | ) | (1,018 | ) | ₩ | 598,816 | 22,738 | (97,808 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | (4,932 | ) | (15,246 | ) | 13,231 | |||||||||||||||||||
|
|
|
(5) | Details of impairment losses for financial assets for the years ended December 31, |
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Available-for-sale financial assets(*) | ₩ | 21,787 | 24,533 | 52,058 | ||||||||
Bad debt for accounts receivable — trade | 60,450 | 45,754 | 53,344 | |||||||||
Bad debt for accounts receivable — other | 15,323 | 17,943 | 22,167 | |||||||||
|
|
|
|
|
| |||||||
₩ | 97,560 | 88,230 | 127,569 | |||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Current tax expense | ||||||||||||
Current tax payable | ₩ | 417,022 | 181,273 | 145,457 | ||||||||
Adjustments recognized in the period for current tax of prior periods | (4,124 | ) | (19,938 | ) | (16,696 | ) | ||||||
|
|
|
|
|
| |||||||
412,898 | 161,335 | 128,761 | ||||||||||
|
|
|
|
|
| |||||||
Deferred tax expense | ||||||||||||
Changes in net deferred tax assets | 102,305 | 276,049 | 266,601 | |||||||||
Tax directly charged to equity | 4,669 | 16,929 | (3,584 | ) | ||||||||
Changes in scope of consolidation | (575 | ) | — | 8,919 | ||||||||
Others (exchange rate differences, etc.) | 183 | 195 | 100 | |||||||||
|
|
|
|
|
| |||||||
106,582 | 293,173 | 272,036 | ||||||||||
|
|
|
|
|
| |||||||
Income tax for continuing operation | ₩ | 519,480 | 454,508 | 400,797 | ||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Accounts receivable — trade | ₩ | 48,625 | 28,841 | 38,211 | ||||||||
Other receivables | 10,559 | 5,802 | 7,718 | |||||||||
|
|
|
|
|
| |||||||
₩ | 59,184 | 34,643 | 45,929 | |||||||||
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
32. | Income Tax Expense |
(1) | Income tax expenses for the years ended December 31, 2020, 2019 and 2018 consist of the following: |
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Current tax expense: | ||||||||||||
Current year | ₩ | 286,717 | 105,859 | 362,265 | ||||||||
Current tax of prior years(*) | 14,536 | (6,855 | ) | (22,575 | ) | |||||||
|
|
|
|
|
| |||||||
301,253 | 99,004 | 339,690 | ||||||||||
|
|
|
|
|
| |||||||
Deferred tax expense: | ||||||||||||
Changes in net deferred tax assets | 75,249 | 201,264 | 504,288 | |||||||||
|
|
|
|
|
| |||||||
Income tax expense | ₩ | 376,502 | 300,268 | 843,978 | ||||||||
|
|
|
|
|
|
(*) | Current tax of prior years are mainly composed of the income tax refund due to a change in the interpretation of the tax authority in relation to the income tax previously recognized by the Group. |
(2) | The difference between income taxes computed using the statutory corporate income tax rates and the |
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Income taxes at statutory income tax rate | ₩ | 492,096 | 544,964 | 441,697 | ₩ | 505,824 | 308,913 | 1,083,029 | ||||||||||||||||
Non-taxable income | (85,589 | ) | (32,277 | ) | (35,632 | ) | (41,084 | ) | (92,666 | ) | (19,450 | ) | ||||||||||||
Non-deductible expenses | 44,770 | 61,580 | 74,311 | 31,882 | 14,630 | 26,724 | ||||||||||||||||||
Tax credit and tax reduction | (25,756 | ) | (33,581 | ) | (37,893 | ) | (48,774 | ) | (32,877 | ) | (17,580 | ) | ||||||||||||
Changes in unrealizable deferred taxes | 83,623 | (43,820 | ) | (13,285 | ) | |||||||||||||||||||
Additional income tax payable (refund) for prior periods | 8,131 | (44,459 | ) | (23,162 | ) | |||||||||||||||||||
Deferred tax effect from statutory tax rate change for future periods | 2,205 | 2,101 | (5,239 | ) | ||||||||||||||||||||
Changes in unrecognized deferred taxes | (69,776 | ) | 83,940 | (177,902 | ) | |||||||||||||||||||
Changes in tax rate | 24,537 | 4,050 | (3,983 | ) | ||||||||||||||||||||
Income tax refund and others | (26,107 | ) | 14,278 | (46,860 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Income tax for continuing operation | ₩ | 519,480 | 454,508 | 400,797 | ||||||||||||||||||||
Income tax expense | ₩ | 376,502 | 300,268 | 843,978 | ||||||||||||||||||||
|
|
|
|
|
|
(3) | Deferred taxes directly charged to (credited |
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Net change in fair value of available-for-sale financial assets | ₩ | 2,461 | (4,089 | ) | (1,281 | ) | ||||||
Share of other comprehensive income of associates | (63 | ) | (72 | ) | 1,673 | |||||||
Gain or loss on valuation of derivatives | (448 | ) | 12,188 | (3,265 | ) | |||||||
Remeasurement of defined benefit liabilities | 2,719 | 8,902 | (466 | ) | ||||||||
Loss on disposal of treasury stock | — | — | (245 | ) | ||||||||
|
|
|
|
|
| |||||||
₩ | 4,669 | 16,929 | (3,584 | ) | ||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Valuation gain (loss) on financial assets measured at fair value | ₩ | (166,612 | ) | 2,983 | 41,461 | |||||||
Share of other comprehensive income (loss) of associates and joint ventures | (14 | ) | 2,279 | 278 | ||||||||
Valuation loss on derivatives | (6,886 | ) | (16,083 | ) | (9,223 | ) | ||||||
Remeasurement of defined benefit liabilities | (164 | ) | 22,733 | 10,843 | ||||||||
|
|
|
|
|
| |||||||
₩ | (173,676 | ) | 11,912 | 43,359 | ||||||||
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, |
(In millions of won) | ||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||
Beginning | Changes in scope of consolidation | Deferred tax expense (income) | Directly added to (deducted from) equity | Other | Ending | |||||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences | ||||||||||||||||||||||||
Allowance for doubtful accounts | ₩ | 53,578 | — | 6,379 | — | — | 59,957 | |||||||||||||||||
Accrued interest income | (2,450 | ) | — | (117 | ) | — | — | (2,567 | ) | |||||||||||||||
Available-for-sale financial assets | (4,824 | ) | — | 32,728 | 2,461 | — | 30,365 | |||||||||||||||||
Investments in subsidiaries and associates | (211,043 | ) | — | (144,167 | ) | (63 | ) | — | (355,273 | ) | ||||||||||||||
Property and equipment (depreciation) | (372,332 | ) | — | 44,760 | — | — | (327,572 | ) | ||||||||||||||||
Provisions | 7,587 | — | (5,102 | ) | — | — | 2,485 | |||||||||||||||||
Retirement benefit obligation | 27,361 | — | (1,753 | ) | 2,719 | — | 28,327 | |||||||||||||||||
Gain or loss on valuation of derivatives | 24,969 | — | — | (448 | ) | — | 24,521 | |||||||||||||||||
Gain or loss on foreign currency translation | 19,324 | — | 193 | — | — | 19,517 | ||||||||||||||||||
Tax free reserve for research and manpower development | (7,162 | ) | — | — | — | — | (7,162 | ) | ||||||||||||||||
Goodwill relevant to leased line | 4,433 | — | (720 | ) | — | — | 3,713 | |||||||||||||||||
Unearned revenue (activation fees) | 25,977 | — | (23,912 | ) | — | — | 2,065 | |||||||||||||||||
Others | (15,682 | ) | (575 | ) | (7,708 | ) | — | 183 | (23,782 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(450,264 | ) | (575 | ) | (99,419 | ) | 4,669 | 183 | (545,406 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Deferred tax assets related to unused tax loss carryforwards and unused tax credit carryforwards | ||||||||||||||||||||||||
Tax loss carryforwards | 31,712 | — | (7,163 | ) | — | — | 24,549 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | (418,552 | ) | (575 | ) | (106,582 | ) | 4,669 | 183 | (520,857 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
2020 | ||||||||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Business combinations | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||||||
Loss allowance | ₩ | 88,913 | 1,326 | — | 1,046 | 91,285 | ||||||||||||||
Accrued interest income | (2,039 | ) | 435 | — | (27 | ) | (1,631 | ) | ||||||||||||
Financial assets measured at fair value | 98,101 | (17,586 | ) | (166,612 | ) | 5,042 | (81,055 | ) | ||||||||||||
Investments in subsidiaries, associates and joint ventures | (1,613,048 | ) | (60,844 | ) | (14 | ) | — | (1,673,906 | ) | |||||||||||
Property and equipment and intangible assets | (371,489 | ) | (47,468 | ) | — | (92,905 | ) | (511,862 | ) | |||||||||||
Provisions | 2,543 | 3,751 | — | — | 6,294 | |||||||||||||||
Retirement benefit obligation | 100,194 | 1,873 | (164 | ) | 382 | 102,285 | ||||||||||||||
Valuation gain on derivatives | 17,507 | 4,146 | (6,886 | ) | — | 14,767 | ||||||||||||||
Gain or loss on foreign currency translation | 22,005 | (231 | ) | — | — | 21,774 | ||||||||||||||
Incremental costs to acquire a contract | (829,055 | ) | 21,224 | — | — | (807,831 | ) | |||||||||||||
Contract assets and liabilities | (28,030 | ) | 25,424 | — | — | (2,606 | ) | |||||||||||||
Right-of-use assets | (390,936 | ) | 18,639 | — | — | (372,297 | ) | |||||||||||||
Lease liabilities | 385,394 | (22,918 | ) | — | — | 362,476 | ||||||||||||||
Others | 64,620 | (30,310 | ) | — | 86,204 | 120,514 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2,455,320 | ) | (102,539 | ) | (173,676 | ) | (258 | ) | (2,731,793 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: | ||||||||||||||||||||
Tax loss carryforwards | 91,136 | (2,913 | ) | — | — | 88,223 | ||||||||||||||
Tax credit | 9,380 | 30,203 | — | — | 39,583 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
100,516 | 27,290 | — | — | 127,806 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | (2,354,804 | ) | (75,249 | ) | (173,676 | ) | (258 | ) | (2,603,987 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Beginning | Deferred tax expense (benefit) | Directly added to (deducted from) equity | Other | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences | ||||||||||||||||||||
Allowance for doubtful accounts | ₩ | 56,427 | (2,700 | ) | — | (149 | ) | 53,578 | ||||||||||||
Accrued interest income | (2,831 | ) | 381 | — | — | (2,450 | ) | |||||||||||||
Available-for-sale financial assets | (589 | ) | (146 | ) | (4,089 | ) | — | (4,824 | ) | |||||||||||
Investments in subsidiaries and associates | (44,844 | ) | (165,663 | ) | (72 | ) | (464 | ) | (211,043 | ) | ||||||||||
Property and equipment (depreciation) | (333,633 | ) | (38,690 | ) | — | (9 | ) | (372,332 | ) | |||||||||||
Provisions | 14,303 | (6,699 | ) | — | (17 | ) | 7,587 | |||||||||||||
Retirement benefit obligation | 16,089 | 2,390 | 8,902 | (20 | ) | 27,361 | ||||||||||||||
Gain or loss on valuation of derivatives | 12,779 | 2 | 12,188 | — | 24,969 | |||||||||||||||
Gain or loss on foreign currency translation | 19,572 | (248 | ) | — | — | 19,324 | ||||||||||||||
Tax free reserve for research and manpower development | (40,011 | ) | 32,849 | — | — | (7,162 | ) | |||||||||||||
Goodwill relevant to leased line | 31,025 | (26,592 | ) | — | — | 4,433 | ||||||||||||||
Unearned revenue (activation fees) | 53,412 | (27,435 | ) | — | — | 25,977 | ||||||||||||||
Others | 44,738 | (61,274 | ) | — | 854 | (15,682 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(173,563 | ) | (293,825 | ) | 16,929 | 195 | (450,264 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred tax assets related to unused tax loss carryforwards and unused tax credit carryforwards | ||||||||||||||||||||
Tax loss carryforwards | 31,060 | 652 | — | — | 31,712 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | (142,503 | ) | (293,173 | ) | 16,929 | 195 | (418,552 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
2019 | ||||||||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Business combinations | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||||||
Loss allowance | ₩ | 102,276 | (13,698 | ) | — | 335 | 88,913 | |||||||||||||
Accrued interest income | (2,713 | ) | 691 | — | (17 | ) | (2,039 | ) | ||||||||||||
Financial assets measured at fair value | 79,757 | 15,099 | 2,983 | 262 | 98,101 | |||||||||||||||
Investments in subsidiaries, associates and joint ventures | (1,580,087 | ) | (35,222 | ) | 2,279 | (18 | ) | (1,613,048 | ) | |||||||||||
Property and equipment and intangible assets | (415,327 | ) | 43,841 | — | (3 | ) | (371,489 | ) | ||||||||||||
Provisions | 2,494 | 49 | — | — | 2,543 | |||||||||||||||
Retirement benefit obligation | 84,034 | (6,643 | ) | 22,733 | 70 | 100,194 | ||||||||||||||
Valuation gain on derivatives | 31,415 | 2,175 | (16,083 | ) | — | 17,507 | ||||||||||||||
Gain or loss on foreign currency translation | 21,948 | 57 | — | — | 22,005 | |||||||||||||||
Incremental costs to acquire a contract | (640,840 | ) | (188,215 | ) | — | — | (829,055 | ) | ||||||||||||
Contract assets and liabilities | (26,458 | ) | (1,572 | ) | — | — | (28,030 | ) | ||||||||||||
Right-of-use assets | (263,528 | ) | (127,408 | ) | — | — | (390,936 | ) | ||||||||||||
Lease liabilities | 248,244 | 137,150 | — | — | 385,394 | |||||||||||||||
Others | 54,341 | 10,273 | — | 6 | 64,620 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2,304,444 | ) | (163,423 | ) | 11,912 | 635 | (2,455,320 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: | ||||||||||||||||||||
Tax loss carryforwards | 122,899 | (31,763 | ) | — | — | 91,136 | ||||||||||||||
Tax credit | 15,458 | (6,078 | ) | — | — | 9,380 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
138,357 | (37,841 | ) | — | — | 100,516 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | (2,166,087 | ) | (201,264 | ) | 11,912 | 635 | (2,354,804 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(5) | Details of temporary differences, unused tax loss carryforwards and unused tax credits carryforwards which are not recognized as deferred tax assets(liabilities), |
(In millions of won) | ||||||||||||||||
December 31, 2015 | December 31, 2014 | December 31, 2020 | December 31, 2019 | |||||||||||||
Allowance for doubtful accounts | ₩ | 182,266 | 155,634 | |||||||||||||
Investments in subsidiaries and associates | 281,719 | 422,033 | ||||||||||||||
Loss allowance | ₩ | 102,085 | 96,006 | |||||||||||||
Investments in subsidiaries, associates and joint ventures | 8,365 | (128,339 | ) | |||||||||||||
Other temporary differences | 285,845 | 314,188 | 68,415 | 145,692 | ||||||||||||
Unused tax loss carryforwards | 1,034,070 | 729,570 | 1,042,063 | 1,023,907 | ||||||||||||
Unused tax credit carryforwards | 2,271 | 2,438 | 1,037 | 1,192 | ||||||||||||
|
| |||||||||||||||
₩ | 1,786,171 | 1,623,863 | ||||||||||||||
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(6) | The |
(In millions of won) | ||||||||
Unused tax loss carryforwards | Unused tax credit carryforwards | |||||||
Less than 1 year | ₩ | 4,894 | 1,041 | |||||
1 ~ 2 years | — | 155 | ||||||
2 ~ 3 years | — | 870 | ||||||
More than 3 years | 1,029,176 | 205 | ||||||
|
|
|
| |||||
₩ | 1,034,070 | 2,271 | ||||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | ||||||||
Unused tax loss carryforwards | Unused tax credit carryforwards | |||||||
Less than 1 year | ₩ | 79,725 | 20 | |||||
1 ~ 2 years | 88,794 | 172 | ||||||
2 ~ 3 years | 70,834 | 116 | ||||||
More than 3 years | 802,710 | 729 | ||||||
|
|
|
| |||||
₩ | 1,042,063 | 1,037 | ||||||
|
|
|
|
Earnings per Share |
(1) Basic earnings per share
1) | Basic earnings per share for the years ended December 31, |
(In millions of won, shares) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Basic earnings per share attributable to owners of the Parent Company from continuing operation: | ||||||||||||
Profit attributable to owners of the Parent Company from continuing operations | ₩ | 1,518,604 | 1,801,178 | 1,463,097 | ||||||||
Interest on hybrid bonds | (16,840 | ) | (16,840 | ) | (8,420 | ) | ||||||
|
|
|
|
|
| |||||||
Profit attributable to owners of the Parent Company from continuing operations on common shares | 1,501,764 | 1,784,338 | 1,454,677 | |||||||||
Weighted average number of common shares outstanding | 71,551,966 | 70,936,336 | 70,247,592 | |||||||||
|
|
|
|
|
| |||||||
Basic earnings per share from continuing operations (In won) | ₩ | 20,988 | 25,154 | 20,708 | ||||||||
|
|
|
|
|
| |||||||
Basic earnings per share attributable to owners of the Parent Company: | ||||||||||||
Profit attributable to owners of the Parent Company | ₩ | 1,518,604 | 1,801,178 | 1,638,964 | ||||||||
Interest on hybrid bond | (16,840 | ) | (16,840 | ) | (8,420 | ) | ||||||
|
|
|
|
|
| |||||||
Profit attributable to owners of the Parent Company on common shares | 1,501,764 | 1,784,338 | 1,630,544 | |||||||||
Weighted average number of common shares outstanding | 71,551,966 | 70,936,336 | 70,247,592 | |||||||||
|
|
|
|
|
| |||||||
Basic earnings per share (In won) | ₩ | 20,988 | �� | 25,154 | 23,211 | |||||||
|
|
|
|
|
|
(In millions of won, except for share data) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Basic earnings per share attributable to owners of the Parent Company: | ||||||||||||
Profit attributable to owners of the Parent Company | ₩ | 1,504,352 | 888,698 | 3,127,887 | ||||||||
Interest on hybrid bonds | (14,766 | ) | (14,766 | ) | (15,803 | ) | ||||||
|
|
|
|
|
| |||||||
Profit attributable to owners of the Parent Company on common shares | 1,489,586 | 873,932 | 3,112,084 | |||||||||
Weighted average number of common shares outstanding | 72,795,431 | 72,064,159 | 70,622,976 | |||||||||
|
|
|
|
|
| |||||||
Basic earnings per share (in won) | ₩ | 20,463 | 12,127 | 44,066 | ||||||||
|
|
|
|
|
|
2) |
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Profit attributable to owners of the Parent Company | ₩ | 1,518,604 | 1,801,178 | 1,638,964 | ||||||||
Results of discontinued operation attributable to owners of the Parent Company | — | — | (175,867 | ) | ||||||||
|
|
|
|
|
| |||||||
Profit attributable to owners of the Parent Company from continuing operation | ₩ | 1,518,604 | 1,801,178 | 1,463,097 | ||||||||
|
|
|
|
|
|
The weighted average number of common shares outstanding for the years ended December 31, |
(In shares) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Outstanding common shares | 80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Weighted number of treasury stocks | (9,193,745 | ) | (9,809,375 | ) | (10,498,119 | ) | ||||||
|
|
|
|
|
| |||||||
Weighted average number of common shares outstanding | 71,551,966 | 70,936,336 | 70,247,592 | |||||||||
|
|
|
|
|
|
(In shares) | ||||||||
2020 | ||||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2020 | 80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2020 | (7,609,263 | ) | (7,609,263 | ) | ||||
Acquisition of treasury shares | (1,809,295 | ) | (341,017 | ) | ||||
|
|
|
| |||||
71,327,153 | 72,795,431 | |||||||
|
|
|
|
(In shares) | ||||||||
2019 | ||||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2019 | 80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2019 | (8,875,883 | ) | (8,875,883 | ) | ||||
Disposal of treasury shares | 1,266,620 | 194,331 | ||||||
|
|
|
| |||||
73,136,448 | 72,064,159 | |||||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(2) Diluted earnings per share
For the years ended December 31, 20152020, 2019 and 2014, there were no potentially dilutive shares. The number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds is excluded from the diluted2018
(In shares) | ||||||||
2018 | ||||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2018 | 80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2018 | (10,136,551 | ) | (10,136,551 | ) | ||||
Disposal of treasury shares | 1,260,668 | 13,816 | ||||||
|
|
|
| |||||
71,869,828 | 70,622,976 | |||||||
|
|
|
|
(2) Diluted earnings per share calculation for the year ended December 31, 2013 as the effect would have been anti-dilutive (diluted shares of 688,744). Therefore, diluted
1) | Diluted earnings per share for the years ended December 31, 2020 are calculated as follows: |
(In millions of won, except for share data) | ||||
2020 | ||||
Profit for the year on common shares | ₩ | 1,489,586 | ||
Adjusted weighted average number of common shares outstanding | 72,808,379 | |||
Diluted earnings per share (in won) | ₩ | 20,459 | ||
2) | The adjusted weighted average number of common shares outstanding for the years ended December 31, 2020 are calculated as follows: |
(In shares) | ||||
2020 | ||||
Outstanding shares at January 1, 2020 | 73,136,448 | |||
Effect of treasury shares | (341,017 | ) | ||
Effect of share option | 12,948 | |||
Adjusted weighted average number of common shares outstanding | 72,808,379 | |||
For the years ended December 31, 2015, 20142019 and 20132018 diluted earnings per share are the same as basic earnings per share.share as there are no dilutive potential common shares.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won, shares) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Results of discontinued operation attributable to owners of the Parent Company | ₩ | — | — | 175,867 | ||||||||
Weighted average number of common shares outstanding | 71,551,966 | 70,936,336 | 70,247,592 | |||||||||
|
|
|
|
|
| |||||||
Basic earnings per share (In won) | ₩ | — | — | 2,503 | ||||||||
|
|
|
|
|
|
Diluted earnings per share from discontinued operation is the same as basic loss per share from discontinued operation.34. Dividends
(1) Details of dividends declared
Details of dividend declared for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
(In millions of won, except for face value and share data) | ||||||||||||||||||
Year | Dividend type | Number of shares outstanding | Face value (In won) | Dividend ratio | Dividends | |||||||||||||
2015 | Cash dividends (Interim) | 72,629,160 | 500 | 200% | ₩ | 72,629 | ||||||||||||
Cash dividends (Year-end) | 70,609,160 | 500 | 1800% | 635,482 | ||||||||||||||
|
| |||||||||||||||||
₩ | 708,111 | |||||||||||||||||
|
| |||||||||||||||||
2014 | Cash dividends (Interim) | 70,936,336 | 500 | 200% | ₩ | 70,937 | ||||||||||||
Cash dividends (Year-end) | 70,936,336 | 500 | 1,680% | 595,865 | ||||||||||||||
|
| |||||||||||||||||
₩ | 666,802 | |||||||||||||||||
|
| |||||||||||||||||
2013 | Cash dividends (Interim) | 70,508,482 | 500 | 200% | ₩ | 70,508 | ||||||||||||
Cash dividends (Year-end) | 70,936,336 | 500 | 1,680% | 595,865 | ||||||||||||||
|
| |||||||||||||||||
₩ | 666,373 | |||||||||||||||||
|
|
(In millions of won, except for face value and share data) | ||||||||||||||||||
Year | Dividend type | Number of shares outstanding | Face value (in won) | Dividend ratio | Dividends | |||||||||||||
2020 | Cash dividends (Interim) | 73,136,448 | 500 | 200 | % | ₩ | 73,136 | |||||||||||
Cash dividends (Year-end) | 71,327,153 | 500 | 1,800 | % | 641,944 | |||||||||||||
|
| |||||||||||||||||
₩ | 715,080 | |||||||||||||||||
|
| |||||||||||||||||
2019 | Cash dividends (Interim) | 71,869,828 | 500 | 200 | % | ₩ | 71,870 | |||||||||||
Cash dividends (Year-end) | 73,136,448 | 500 | 1,800 | % | 658,228 | |||||||||||||
|
| |||||||||||||||||
₩ | 730,098 | |||||||||||||||||
|
| |||||||||||||||||
2018 | Cash dividends (Interim) | 70,609,160 | 500 | 200 | % | ₩ | 70,609 | |||||||||||
Cash dividends (Year-end) | 71,869,828 | 500 | 1,800 | % | 646,828 | |||||||||||||
|
| |||||||||||||||||
₩ | 717,437 | |||||||||||||||||
|
|
(2) Dividends payout ratio
Dividends payout ratios for the years ended December 31, 2015, 2014 and 2013 are as follows:
(In millions of won) | ||||||||||||
Year | Dividends calculated | Profit | Dividends payout ratio | |||||||||
2015 | ₩ | 708,111 | 1,518,604 | 46.63 | % | |||||||
2014 | ₩ | 666,802 | 1,801,178 | 37.02 | % | |||||||
2013 | ₩ | 666,373 | 1,638,964 | 40.66 | % |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(3) Dividends yield ratio
Dividends yield ratios for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
(In won) | ||||||||
Year | Dividend type | Dividend per share | Closing price at settlement | Dividend yield ratio | ||||
2015 | Cash dividend | 10,000 | 215,500 | 4.64% | ||||
2014 | Cash dividend | 9,400 | 268,000 | 3.51% | ||||
2013 | Cash dividend | 9,400 | 230,000 | 4.09% |
(In won) | ||||||||
Year | Dividend type | Dividend per share | Closing price at year-end | Dividend yield ratio | ||||
2020 | Cash dividends | 10,000 | 238,000 | 4.20% | ||||
2019 | Cash dividends | 10,000 | 238,000 | 4.20% | ||||
2018 | Cash dividends | 10,000 | 269,500 | 3.71% |
35. Categories of Financial Instruments
(1) | Financial assets by |
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||
December 31, 2015 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss | Available- for-sale financial assets | Loans and receivables | Derivative financial instruments designated as hedged item | Total | Financial assets at FVTPL | Equity instruments at FVOCI | Debt instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents | ₩ | — | — | 768,922 | — | 768,922 | ₩ | — | — | — | 1,369,653 | — | 1,369,653 | |||||||||||||||||||||||||||||||
Financial instruments | — | — | 701,713 | — | 701,713 | — | — | — | 1,427,845 | — | 1,427,845 | |||||||||||||||||||||||||||||||||
Short-term investment securities | — | 92,262 | — | — | 92,262 | 150,392 | — | — | — | — | 150,392 | |||||||||||||||||||||||||||||||||
Long-term investment securities | — | 1,207,226 | — | — | 1,207,226 | |||||||||||||||||||||||||||||||||||||||
Long-term investment securities(*) | 193,396 | 1,454,361 | 1,080 | — | — | 1,648,837 | ||||||||||||||||||||||||||||||||||||||
Accounts receivable — trade | — | — | 2,390,110 | — | 2,390,110 | — | — | — | 2,214,353 | — | 2,214,353 | |||||||||||||||||||||||||||||||||
Loans and other receivables(*) | — | — | 1,102,403 | — | 1,102,403 | |||||||||||||||||||||||||||||||||||||||
Loans and other receivables | 517,175 | — | — | 1,220,828 | — | 1,738,003 | ||||||||||||||||||||||||||||||||||||||
Derivative financial assets | 6,277 | — | — | 160,122 | 166,399 | 99,559 | — | — | — | 65,136 | 164,695 | |||||||||||||||||||||||||||||||||
|
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|
| ||||||||||||||||||||||||||||||||||
₩ | 6,277 | 1,299,488 | 4,963,148 | 160,122 | 6,429,035 | ₩ | 960,522 | 1,454,361 | 1,080 | 6,232,679 | 65,136 | 8,713,778 | ||||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||
Financial assets at fair value through profit or loss | Available- for-sale financial assets | Loans and receivables | Derivative financial instruments designated as hedged item | Total | ||||||||||||||||
Cash and cash equivalents | ₩ | — | — | 834,429 | — | 834,429 | ||||||||||||||
Financial instruments | — | — | 313,699 | — | 313,699 | |||||||||||||||
Short-term investment securities | — | 280,161 | — | — | 280,161 | |||||||||||||||
Long-term investment securities | 7,817 | 948,463 | — | — | 956,280 | |||||||||||||||
Accounts receivable — trade | — | — | 2,460,686 | — | 2,460,686 | |||||||||||||||
Loans and other receivables(*) | — | — | 1,123,507 | — | 1,123,507 | |||||||||||||||
Derivative financial assets | 8,713 | — | — | 61,322 | 70,035 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 16,530 | 1,228,624 | 4,732,321 | 61,322 | 6,038,797 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated ₩1,454,361 million of equity instruments that are not held for trading as financial assets at FVOCI. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Debt instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | |||||||||||||||||||
Cash and cash equivalents | ₩ | — | — | — | 1,270,824 | — | 1,270,824 | |||||||||||||||||
Financial instruments | — | — | — | 831,637 | — | 831,637 | ||||||||||||||||||
Short-term investment securities | 166,666 | — | — | — | — | 166,666 | ||||||||||||||||||
Long-term investment securities(*) | 142,316 | 710,272 | 4,627 | — | — | 857,215 | ||||||||||||||||||
Accounts receivable — trade | — | — | — | 2,247,895 | — | 2,247,895 | ||||||||||||||||||
Loans and other receivables | 532,225 | — | — | 1,136,332 | — | 1,668,557 | ||||||||||||||||||
Derivative financial assets | 6,074 | — | — | — | 144,886 | 150,960 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 847,281 | 710,272 | 4,627 | 5,486,688 | 144,886 | 7,193,754 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated ₩710,272 million of |
(2) | Financial liabilities by category as of December 31, |
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Short-term loans | ₩ | 53,895 | 74,512 | |||||
Accounts receivable — other | 673,739 | 690,527 | ||||||
Accrued income | 10,753 | 10,134 | ||||||
Other current assets | 1,861 | 3,866 | ||||||
Long-term loans | 62,454 | 55,728 | ||||||
Long-term accounts receivable — other | 2,420 | 3,596 | ||||||
Guarantee deposits | 297,281 | 285,144 | ||||||
|
|
|
| |||||
₩ | 1,102,403 | 1,123,507 | ||||||
|
|
|
|
(In millions of won) | ||||||||||||||||
December 31, 2020 | ||||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable — trade | ₩ | — | 372,909 | — | 372,909 | |||||||||||
Derivative financial liabilities | 333,099 | — | 42,061 | 375,160 | ||||||||||||
Borrowings | — | 2,138,922 | — | 2,138,922 | ||||||||||||
Debentures | — | 8,579,743 | — | 8,579,743 | ||||||||||||
Lease liabilities(*) | — | 1,436,777 | — | 1,436,777 | ||||||||||||
Accounts payable — other and others | — | 6,051,550 | — | 6,051,550 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 333,099 | 18,579,901 | 42,061 | 18,955,061 | ||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||
December 31, 2015 | ||||||||||||||||
Financial liabilities at fair value through profit or loss | Financial liabilities measured at amortized cost | Derivative financial instruments designated as hedged item | Total | |||||||||||||
Accounts payable — trade | ₩ | — | 279,782 | — | 279,782 | |||||||||||
Derivative financial liabilities | — | — | 89,296 | 89,296 | ||||||||||||
Borrowings | — | 415,134 | — | 415,134 | ||||||||||||
Debentures(*1) | 155,704 | 6,952,949 | — | 7,108,653 | ||||||||||||
Accounts payable — other and others(*2) | — | 2,970,801 | — | 2,970,801 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 155,704 | 10,618,666 | 89,296 | 10,863,666 | ||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||||||
December 31, 2014 | December 31, 2019 | |||||||||||||||||||||||||||
Financial liabilities at fair value through profit or loss | Financial liabilities measured at amortized cost | Derivative financial instruments designated as hedged item | Total | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||||||||
Accounts payable — trade | ₩ | — | 275,495 | — | 275,495 | ₩ | 438,297 | — | 438,297 | |||||||||||||||||||
Derivative financial liabilities | — | — | 130,889 | 130,889 | — | 1,043 | 1,043 | |||||||||||||||||||||
Borrowings | — | 537,562 | — | 537,562 | 2,043,140 | — | 2,043,140 | |||||||||||||||||||||
Debentures(*1) | 110,365 | 6,108,265 | — | 6,218,630 | ||||||||||||||||||||||||
Accounts payable — other and others(*2) | — | 3,241,615 | — | 3,241,615 | ||||||||||||||||||||||||
Debentures | 8,220,833 | — | 8,220,833 | |||||||||||||||||||||||||
Lease liabilities(*) | 1,291,007 | — | 1,291,007 | |||||||||||||||||||||||||
Accounts payable — other and others | 6,562,612 | — | 6,562,612 | |||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||
₩ | 110,365 | 10,162,937 | 130,889 | 10,404,191 | ₩ | 18,555,889 | 1,043 | 18,556,932 | ||||||||||||||||||||
|
|
|
| �� |
|
|
|
(* | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Accounts payable — other | ₩ | 1,323,434 | 1,381,850 | |||||
Withholdings | 1,178 | 1,760 | ||||||
Accrued expenses | 920,739 | 952,418 | ||||||
Current portion of long-term payables — other | 120,211 | 193,193 | ||||||
Long-term payables — other | 581,697 | 684,567 | ||||||
Finance lease liabilities | — | 26 | ||||||
Other non-current liabilities | 23,542 | 27,801 | ||||||
|
|
|
| |||||
₩ | 2,970,801 | 3,241,615 | ||||||
|
|
|
|
Financial Risk Management |
(1) Financial risk management
The Group is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates and equity prices.rates. The Group implements a risk management system to monitor and manage these specific risks.
The Group’s financial assets under financial risk management consist of cash and cash equivalents, financial instruments, available-for-sale financial assets,investment securities, accounts receivable — trade and other receivables.others, etc. Financial liabilities consist of tradeaccounts payable — other, borrowings, debentures, lease liabilities and other payables, borrowings, and debentures.others.
1) | Market risk |
(i) Currency risk
The Group is exposedincurs exchange position due to revenue and expenses from its global operations. Major foreign currencies where the currency risk mainly on exchange fluctuations on recognized assetsoccur are USD, EUR and liabilities.JPY. The Group managesdetermines the currency risk by currency forward, etc. if needed to hedgemanagement policy after considering the nature of business and the presence of methods that mitigate the currency risk on business transactions.for each Group entities. Currency risk occurs on forecasted transactiontransactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Group.each Group entity. The Group manages currency risk arising from business transactions by using currency forwards, etc.
Monetary foreign currency assets and liabilities denominated in foreign currencies as of December 31, 20152020 are as follows:
(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies) | ||||||||||||||||||||||||||||||||
(In millions of won, thousands of foreign currencies) | (In millions of won, thousands of foreign currencies) | |||||||||||||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||||||||
Foreign currencies | Won translation | Foreign currencies | Won translation | Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||||||||||||||
USD | 162,322 | ₩ | 189,763 | 1,836,860 | ₩ | 2,152,800 | 84,581 | ₩ | 92,025 | 1,541,544 | ₩ | 1,677,200 | ||||||||||||||||||||
EUR | 23,421 | 30,005 | 257 | 328 | 10,903 | 14,591 | 2,519 | 3,370 | ||||||||||||||||||||||||
JPY | 24,462 | 238 | 695 | 7 | 672,311 | 7,088 | 22,778 | 240 | ||||||||||||||||||||||||
AUD | — | — | 299,023 | 255,097 | ||||||||||||||||||||||||||||
CHF | — | — | 299,403 | 354,909 | ||||||||||||||||||||||||||||
Others | 4,995 | 1,148 | 291 | 121 | — | 2,702 | — | 606 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
₩ | 221,154 | ₩ | 2,763,262 | ₩ | 116,406 | ₩ | 1,681,416 | |||||||||||||||||||||||||
|
|
|
|
In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (Refer to Note 23)
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(See note 22)
As of December 31, 2015, effects on2020, a hypothetical change in exchange rates by 10% would have increased (reduced) the Group’s income (loss) before income tax as a result of change in exchange rate by 10% are as follows:
(In millions of won) | ||||||||||||||||
If increased by 10% | If decreased by 10% | If increased by 10% | If decreased by 10% | |||||||||||||
USD | ₩ | 9,600 | (9,600 | ) | ₩ | 5,507 | (5,507 | ) | ||||||||
EUR | 2,934 | (2,934 | ) | 1,122 | (1,122 | ) | ||||||||||
JPY | 23 | (23 | ) | 685 | (685 | ) | ||||||||||
Others | 100 | (100 | ) | 210 | (210 | ) | ||||||||||
|
|
|
| |||||||||||||
₩ | 12,657 | (12,657 | ) | ₩ | 7,524 | (7,524 | ) | |||||||||
|
|
|
|
(ii) Equity price risk
The Group has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of December 31, 2015, available-for-sale equity instruments measured at fair value amount to ₩1,076,291 million.
(iii) Interest rate risk
The interest rate risk of the Group arises from borrowings, debenture and long-term payables — other. Since the Group’s interest bearing assets are mostly fixed-interest bearing assets, as such, the Group’s revenue and operating cash flowflows from the interest-bearing assets are not influenced by the changes in market interest rates. However,
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Group still has interest rate risk arising from borrowingsConsolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and debentures.2018
Accordingly, the
The Group performs various analysis of interest rate risk, which includes refinancing, renewal, alternative financing and hedging instrument option, to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Group takes various measures such as refinancing, renewal, alternative financing and hedging.
The interest rate risk arises from the Group’s floating-rate borrowings and bonds agreements. As of December 31, 2015,2020, the floating-rate borrowings and bonds of the Group are ₩20,573₩121,750 million and ₩351,600₩326,400 million, respectively, and the Group has entered into interest rate swap agreements, as described in Note 23,note 22, for the most of all floating-rate bondsborrowings and debentures to hedge interest rate risk. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes would change by ₩470 million in relation to interest expenses on floating-rate borrowings that are exposed to interest rate risk, which would also change the year-end balance of shareholder’s equity by the same amount.
As of December 31, 2020, the floating-rate bonds. On thelong-term payables – other hand, ifare ₩1,626,040 million. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes for the year ended December 31, 2015, fluctuates2020 would change by ₩16,260 million in relation to floating-rate long-term payables – other that are exposed to interest rate risk.
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (“IBOR”s) with alternative nearly risk-free rates (referred to as much“IBOR reform”). The Group has exposures to IBORs on its financial instruments that will be replaced or reformed as ₩206 million duepart of these market-wide initiatives. There is uncertainty over the timing and the methods of transition in some jurisdictions that the Group operates in. The Group anticipates that IBOR reform will impact its risk management and hedge accounting.
Derivatives
The Group holds interest rate swaps for risk management purposes which are designated in cash flow hedging relationships. The interest rate swaps have floating legs that are indexed to LIBOR. The Group’s derivative instruments are governed by contracts based on the International Swaps and Derivatives Association (“ISDA”)’s master agreements.
ISDA is currently reviewing its standardized contracts in the light of IBOR reform and plans to amend certain floating-rate options in the 2006 ISDA definitions to include fallback clauses that would apply on the permanent discontinuation of certain key IBORs. ISDA is expected to publish an IBOR fallback supplement to amend the 2006 ISDA definitions and an IBOR fallback protocol to facilitate multilateral amendments to include the amended floating-rate options in derivative transactions that were entered into before the date of the supplement. The Group currently plans to adhere to the interest expense on floating-rate borrowingsprotocol if and when it is finalized and to monitor whether its counterparties will also adhere. If this plan changes or there are counterparties who will not adhere to the protocol, the Group will negotiate with them bilaterally about including new fallback clauses.
Hedge accounting
The Group has evaluated the extent to which its cash flow hedging relationships are subject to uncertainty driven by IBOR reform as of December 31, 2020. The Group’s hedged items and hedging instruments continue to be indexed to LIBOR. These benchmark rates are quoted each day and the IBOR cash flows are exchanged with counterparties as usual.
However, the Group’s LIBOR cash flow hedging relationships extend beyond the anticipated cessation date for LIBOR. The Group expects that haveLIBOR will be discontinued after the end of 2021. As of December 31, 2020, the Group has not entered into andetermined the alternative interest rate swap agreement.benchmark to LIBOR and there is uncertainty about when and how replacement may occur with respect to the relevant hedged items and hedging instruments. Such uncertainty may impact the hedging relationship. The Group applies the amendments to IFRS 9, Financial Instruments issued in 2020 to those hedging relationships directly affected by IBOR reform.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
Hedging relationships impacted by IBOR reform may experience ineffectiveness attributable to market participants’ expectations of when the shift from the existing IBOR benchmark rate to an alternative benchmark interest rate will occur. This transition may occur at different times for the hedged item and hedging instrument, which may lead to hedge ineffectiveness. The Group has measured its hedging instruments indexed to LIBOR using available quoted market rates for LIBOR-based instruments of the same tenor and similar maturity and has measured the cumulative change in the present value of hedged cash flows attributable to changes in LIBOR on a similar basis.
2) | Credit risk |
The maximum credit exposure as of December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Cash and cash equivalents | ₩ | 1,369,423 | 1,270,572 | |||||
Financial instruments | 1,427,845 | 831,637 | ||||||
Investment securities | 4,154 | 13,548 | ||||||
Accounts receivable — trade | 2,214,353 | 2,247,895 | ||||||
Contract assets | 148,281 | 191,858 | ||||||
Loans and other receivables | 1,738,003 | 1,668,557 | ||||||
Derivative financial assets | 164,695 | 150,960 | ||||||
|
|
|
| |||||
₩ | 7,066,754 | 6,375,027 | ||||||
|
|
|
|
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet his/herits contractual obligations. The maximum credit exposure as of December 31, 2015 and 2014 are as follows:
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Cash and cash equivalents | ₩ | 768,794 | 833,129 | |||||
Financial instruments | 701,713 | 313,699 | ||||||
Available-for-sale financial assets | 3,430 | 15,498 | ||||||
Accounts receivable — trade | 2,390,110 | 2,460,686 | ||||||
Loans and receivables | 1,102,403 | 1,123,507 | ||||||
Derivative financial assets | 166,399 | 70,035 | ||||||
Financial assets at fair value through profit or loss | — | 7,817 | ||||||
|
|
|
| |||||
₩ | 5,132,849 | 4,824,371 | ||||||
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors; basedfactors. Based on such information, the Group establishes credit limits for each customer or counterparty.
For(i) Accounts receivable — trade and contract assets
The Group establishes a loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Details of changes in loss allowance during the year ended December 31, 2015,2020 are included in note 7.
(ii) Debt investments
The credit risk arises from debt investments included in ₩1,427,845 million of financial instruments, ₩4,154 million of investment securities and ₩1,738,003 million of loans and other receivables. To limit the exposure to this risk, the Group has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Group believes that the possibility of default is remote. Also, the Group’s credit risk can rise due to transactionstransacts only with financial institutions relatedwith credit ratings that are considered to be low credit risk.
Most of the Group’s debt investments are considered to have a low risk of default and the borrower has a strong capacity to meet its contractual cash and cash equivalents, financial instruments and derivatives. To minimize such risk,flow obligations in the near term. Thus the Group has a policymeasured the loss allowance for the debt investments at an amount equal to deal with high12-month expected credit worthy financial institutions.losses.
Meanwhile, the Group monitors changes in credit risk at each reporting date. The Group recognized the loss allowance at an amount ofequal to lifetime expected credit losses when the credit risk on the debt investments is assumed to have increased significantly if it is more than 30 days past due.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
The Group’s maximum exposure to credit risk is equal to each financial asset’s carrying amount. The gross carrying amounts of each financial asset except for the Group is the carrying amount ofaccounts receivable – trade and derivative financial assets as of December 31, 2015.2020 are as follows.
In addition,
(In millions of won) | ||||||||||||||||||||
Financial assets at FVTPL | Financial assets at FVOCI | At amortized cost | ||||||||||||||||||
12-month ECL | Lifetime ECL — not credit impaired | Lifetime ECL — credit impaired | ||||||||||||||||||
Gross amount | ₩ | 520,249 | 1,080 | 2,517,685 | 105,878 | 125,674 | ||||||||||||||
Loss allowance | — | — | (3,751 | ) | (7,995 | ) | (88,819 | ) | ||||||||||||
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|
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|
| |||||||||||
Carrying amount | ₩ | 520,249 | 1,080 | 2,513,934 | 97,883 | 36,855 | ||||||||||||||
|
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|
|
|
|
|
|
|
Changes in the agingloss allowance for the debt investments during the year ended December 31, 2020 are as follows:
(In millions of won) | ||||||||||||||||
12-month ECL | Lifetime ECL — not credit impaired | Lifetime ECL — credit impaired | Total | |||||||||||||
December 31, 2019 | ₩ | 4,241 | 8,704 | 83,953 | 96,898 | |||||||||||
Remeasurement of loss allowance, net | 834 | 2,321 | 7,404 | 10,559 | ||||||||||||
Transfer to lifetime ECL — not credit impaired | (334 | ) | 334 | — | — | |||||||||||
Transfer to lifetime ECL — credit impaired | (990 | ) | (2,357 | ) | 3,347 | — | ||||||||||
Amounts written off | — | — | (12,208 | ) | (12,208 | ) | ||||||||||
Recovery of amounts written off | — | — | 6,323 | 6,323 | ||||||||||||
Others | — | (1,007 | ) | — | (1,007 | ) | ||||||||||
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| |||||||||
December 31, 2020 | ₩ | 3,751 | 7,995 | 88,819 | 100,565 | |||||||||||
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(iii) Cash and cash equivalents
The Group has ₩1,369,423 million as of tradeDecember 31, 2020 (₩1,270,572 million as of December 31, 2019) cash and other receivables that are overdue atcash equivalents with banks and financial institutions above specific credit ratings.
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the endshort maturities of the reporting period but not impaired is stated in Note 7exposures. The Group considered that its cash and cash equivalents have low credit risk based on the analysis of financial assets that are individually determined to be impaired at the endcredit ratings of the reporting period is stated in Note 30.counterparties assigned by external credit rating agencies.
3) | Liquidity risk |
The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Group maintains flexibly enough liquidity underwithin credit lines through active operating activities.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
Contractual maturities of financial liabilities as of December 31, 20152020 are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Accounts payable — trade | ₩ | 279,782 | 279,782 | 279,782 | — | — | ||||||||||||||
Borrowings(*1) | 415,134 | 428,012 | 298,118 | 109,200 | 20,694 | |||||||||||||||
Debentures(*1) | 7,108,653 | 8,514,028 | 897,895 | 4,516,896 | 3,099,237 | |||||||||||||||
Accounts payable — other and others(*2) | 2,970,801 | 3,030,356 | 2,330,565 | 578,643 | 121,148 | |||||||||||||||
|
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|
|
|
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|
|
| |||||||||||
₩ | 10,774,370 | 12,252,178 | 3,806,360 | 5,204,739 | 3,241,079 | |||||||||||||||
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(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Accounts payable — trade | ₩ | 372,909 | 372,909 | 372,909 | — | — | ||||||||||||||
Borrowings(*) | 2,138,923 | 2,467,988 | 225,657 | 2,242,331 | — | |||||||||||||||
Debentures(*) | 8,579,743 | 9,749,762 | 1,106,505 | 5,680,403 | 2,962,854 | |||||||||||||||
Lease liabilities | 1,436,777 | 1,537,279 | 365,925 | 826,331 | 345,023 | |||||||||||||||
Accounts payable — other and others(*) | 6,051,550 | 6,145,185 | 4,920,324 | 849,013 | 375,848 | |||||||||||||||
|
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|
|
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|
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| |||||||||||
₩ | 18,579,902 | 20,273,123 | 6,991,320 | 9,598,078 | 3,683,725 | |||||||||||||||
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(*) | Includes interest payables. |
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of December 31, 2015,2020, periods in which cash flows from cash flow hedge derivatives are expected to be incurredoccur are as follows:
(In millions of won) | (In millions of won) | (In millions of won) | ||||||||||||||||||||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 -5 years | More than 5 years | Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | |||||||||||||||||||||||||||||||
Assets | ₩ | 160,122 | 171,808 | 1,894 | 138,980 | 30,934 | ₩ | 65,136 | 65,637 | 20,211 | 52,651 | (7,225 | ) | |||||||||||||||||||||||||||
Liabilities | (89,296 | ) | (92,498 | ) | (4,882 | ) | (87,616 | ) | — | (42,061 | ) | (43,076 | ) | (1,740 | ) | (41,336 | ) | — | ||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
₩ | 70,826 | 79,310 | (2,988 | ) | 51,364 | 30,934 | ₩ | 23,075 | 22,561 | 18,471 | 11,315 | (7,225 | ) | |||||||||||||||||||||||||||
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(2) | Capital management |
The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance.structure. The overall strategy of the Group is the same as that of the groupGroup as of and for the year ended December 31, 2014.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
2019.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity whichequity; both are extracted from the financial statements.
Debt-equity ratio as of December 31, 20152020 and 20142019 are as follows:
(In millions of won) | ||||||||
December 31, 2015 | December 31, 2014 | |||||||
Liabilities | ₩ | 13,207,291 | 12,692,963 | |||||
Equity | 15,374,096 | 15,248,270 | ||||||
|
|
|
| |||||
Debt-equity ratio | 85.91 | % | 83.24 | % | ||||
|
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|
|
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Total liabilities | ₩ | 23,510,714 | 22,385,434 | |||||
Total equity | 24,396,243 | 22,816,934 | ||||||
|
|
|
| |||||
Debt-equity ratios | 96.37 | % | 98.11 | % | ||||
|
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|
|
(3) Fair value
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, |
(In millions of won) | ||||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that can be measured at fair value | ||||||||||||||||||||
Financial assets at fair value through profit or loss | ₩ | 6,277 | — | 6,277 | — | 6,277 | ||||||||||||||
Derivative financial assets | 160,122 | — | 160,122 | — | 160,122 | |||||||||||||||
Available-for-sale financial assets | 1,076,291 | 897,958 | 47,262 | 131,071 | 1,076,291 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 1,242,690 | 897,958 | 213,661 | 131,071 | 1,242,690 | |||||||||||||||
|
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|
|
|
|
|
|
| |||||||||||
Financial assets that cannot be measured at fair value | ||||||||||||||||||||
Cash and cash equivalents(*1) | ₩ | 768,922 | — | — | — | — | ||||||||||||||
Available-for-sale financial assets(*1,2) | 223,197 | — | — | — | — | |||||||||||||||
Accounts receivable — trade and others(*1) | 3,492,513 | — | — | — | — | |||||||||||||||
Financial instruments(*1) | 701,713 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 5,186,345 | — | — | — | — | |||||||||||||||
|
|
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|
|
|
|
|
|
| |||||||||||
Financial liabilities that can be measured at fair value | ||||||||||||||||||||
Financial liabilities at fair value through profit or loss | ₩ | 155,704 | — | 155,704 | — | 155,704 | ||||||||||||||
Derivative financial liabilities | 89,296 | — | 89,296 | — | 89,296 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 245,000 | — | 245,000 | — | 245,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that cannot be measured at fair value | ||||||||||||||||||||
Accounts payable — trade(*1) | ₩ | 279,782 | — | — | — | — | ||||||||||||||
Borrowings | 415,134 | — | 416,702 | — | 416,702 | |||||||||||||||
Debentures | 6,952,949 | — | 7,411,909 | — | 7,411,909 | |||||||||||||||
Accounts payable — other and others(*1) | 2,970,801 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 10,618,666 | — | 7,828,611 | — | 7,828,611 | |||||||||||||||
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|
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|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | ||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 960,522 | 60,473 | 629,732 | 270,317 | 960,522 | ||||||||||||||
Derivatives hedging instruments | 65,136 | — | 65,136 | — | 65,136 | |||||||||||||||
FVOCI | 1,455,441 | 885,452 | — | 569,989 | 1,455,441 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 2,481,099 | 945,925 | 694,868 | 840,306 | 2,481,099 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 333,099 | — | — | 333,099 | 333,099 | ||||||||||||||
Derivatives hedging instruments | 42,061 | — | 42,061 | — | 42,061 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 375,160 | — | 42,061 | 333,099 | 375,160 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | ₩ | 2,138,923 | — | 2,282,316 | — | 2,282,316 | ||||||||||||||
Debentures | 8,579,743 | — | 9,085,324 | — | 9,085,324 | |||||||||||||||
Long-term payables — other | 1,566,954 | — | 1,582,805 | — | 1,582,805 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 12,285,620 | — | 12,950,445 | — | 12,950,445 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
2) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, |
(In millions of won) | ||||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that can be measured at fair value | ||||||||||||||||||||
Financial assets at fair value through profit or loss | ₩ | 16,530 | — | 8,713 | 7,817 | 16,530 | ||||||||||||||
Derivative financial assets | 61,322 | — | 61,322 | — | 61,322 | |||||||||||||||
Available-for-sale financial assets | 846,614 | 657,286 | 47,002 | 142,326 | 846,614 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 924,466 | 657,286 | 117,037 | 150,143 | 924,466 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial assets that cannot be measured at fair value | ||||||||||||||||||||
Cash and cash equivalents(*1) | ₩ | 834,429 | — | — | — | — | ||||||||||||||
Available-for-sale financial assets(*1,2) | 382,010 | — | — | — | — | |||||||||||||||
Accounts receivable — trade and others(*1) | 3,584,193 | — | — | — | — | |||||||||||||||
Financial instruments(*1) | 313,699 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 5,114,331 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that can be measured at fair value | ||||||||||||||||||||
Financial liabilities at fair value through profit or loss | ₩ | 110,365 | — | 110,365 | — | 110,365 | ||||||||||||||
Derivative financial liabilities | 130,889 | — | 130,889 | — | 130,889 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 241,254 | — | 241,254 | — | 241,254 | |||||||||||||||
|
|
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|
|
|
|
|
|
| |||||||||||
Financial liabilities that cannot be measured at fair value | ||||||||||||||||||||
Accounts payable — trade(*1) | ₩ | 275,495 | — | — | — | — | ||||||||||||||
Borrowings | 537,562 | — | 549,083 | — | 549,083 | |||||||||||||||
Debentures | 6,108,265 | — | 6,514,832 | — | 6,514,832 | |||||||||||||||
Accounts payable — other and others(*1) | 3,241,615 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 10,162,937 | — | 7,063,915 | — | 7,063,915 | |||||||||||||||
|
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|
|
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|
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|
|
(In millions of won) | ||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 847,281 | — | 668,891 | 178,390 | 847,281 | ||||||||||||||
Derivatives hedging instruments | 144,886 | — | 144,886 | — | 144,886 | |||||||||||||||
FVOCI | 714,899 | 407,651 | — | 307,248 | 714,899 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 1,707,066 | 407,651 | 813,777 | 485,638 | 1,707,066 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivatives hedging instruments | ₩ | 1,043 | — | 1,043 | — | 1,043 | ||||||||||||||
|
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|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | ₩ | 2,043,140 | — | 2,191,037 | — | 2,191,037 | ||||||||||||||
Debentures | 8,220,833 | — | 8,714,408 | — | 8,714,408 | |||||||||||||||
Long-term payables — other | 1,974,006 | — | 2,008,493 | — | 2,008,493 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 12,237,979 | — | 12,913,938 | — | 12,913,938 | |||||||||||||||
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (available-for-sale financial(financial assets financial liabilities at fair value through profit or loss, etc.)FVOCI) is measured based on the bid price at the end of the reporting date.
The Group uses various valuation methods for valuationdetermination of fair value of financial instruments that are not traded in an active market. Fair value of available-for-sale securities is determined using the market approach methods and financial assets through profit or loss are measured using the option pricing model. In addition, derivativeDerivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities being evaluated.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
Fair values of accounts receivable — trade, and accounts payable — trade are considered to be carrying amount less impairment and fair value of financial liabilities for the disclosure purpose is estimated by discounting contractual future cash flows using the current market interest rate used for the similar financial instruments by the Group.measured.
Interest rates used by the Group for the fair value measurement as of December 31, 20152020 are as follows:
Interest rate | ||||
Derivative instruments | 0.14% ~ | |||
Borrowings and debentures | 0.99% ~ | |||
Long-term payables — other | 0.90% ~ 1.72% |
3) | There have been no transfers |
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at Jan. 1 | Acquisition | Loss for the period | Other comprehensive loss | Disposal | Others | Balance at Dec.31 | Balance at January 1, 2020 | Gain(loss) for the year | OCI | Acquisition | Disposal | Transfer | Business combination | Balance at December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale financial assets | ₩ | 142,326 | 3,103 | (449 | ) | (2,379 | ) | (30,359 | ) | 18,829 | 131,071 | |||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets | Financial assets |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FVTPL | ₩ | 178,390 | 103,327 | (8,266 | ) | 60,576 | (39,570 | ) | (24,156 | ) | 16 | 270,317 | ||||||||||||||||||||||||||||||||||||||||||||||||
FVOCI | 307,248 | (98 | ) | 230,526 | 37,381 | (5,154 | ) | (6,137 | ) | 6,223 | 569,989 | |||||||||||||||||||||||||||||||||||||||||||||||||
|
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|
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|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
₩ | 485,638 | 103,229 | 222,260 | 97,957 | (44,724 | ) | (30,293 | ) | 6,239 | 840,306 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial liabilities | Financial liabilities |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
₩ | — | (12,115 | ) | — | — | — | — | (320,984 | ) | (333,099 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
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|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 20152020 and 2019 are as follows:
(In millions of won) | ||||||||||||||||||||||||
Gross financial instruments recognized | Gross offset financial instruments recognized | Net financial instruments presented on the statements of financial position | Relevant amount not offset on the statements of financial position | Net amount | ||||||||||||||||||||
Financial instruments | Cash collaterals received | |||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||
Derivatives(*) | ₩ | 55,673 | — | 55,673 | (55,673 | ) | — | — | ||||||||||||||||
Accounts receivable — trade and others | 129,527 | (113,003 | ) | 16,524 | — | — | 16,524 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 185,200 | (113,003 | ) | 72,197 | (55,673 | ) | — | 16,524 | ||||||||||||||||
|
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|
|
|
|
|
| |||||||||||||
Financial liabilities: | ||||||||||||||||||||||||
Derivatives(*) | ₩ | 89,734 | — | 89,734 | (55,673 | ) | — | 34,061 | ||||||||||||||||
Accounts payable — other and others | 113,003 | (113,003 | ) | — | — | — | — | |||||||||||||||||
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|
|
| |||||||||||||
₩ | 202,737 | (113,003 | ) | 89,734 | (55,673 | ) | — | 34,061 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2014 are as follows:
(In millions of won) | ||||||||||||||||||||||||
Gross financial instruments recognized | Gross offset financial instruments recognized | Net financial instruments presented on the statements of financial position | Relevant amount not offset on the statements of financial position | Net amount | ||||||||||||||||||||
Financial instruments | Cash collaterals received | |||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||
Derivatives(*) | ₩ | 48,057 | — | 48,057 | (45,892 | ) | — | 2,165 | ||||||||||||||||
Accounts receivable — trade and others | 128,794 | (117,568 | ) | 11,226 | — | — | 11,226 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 176,851 | (117,568 | ) | 59,283 | (45,892 | ) | — | 13,391 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Financial liabilities: | ||||||||||||||||||||||||
Derivatives(*) | ₩ | 45,892 | — | 45,892 | (45,892 | ) | — | — | ||||||||||||||||
Accounts payable — others | 117,568 | (117,568 | ) | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 163,460 | (117,568 | ) | 45,892 | (45,892 | ) | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statements of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Derivative instruments(*) | ₩ | 8,015 | — | 8,015 | (453 | ) | 7,562 | |||||||||||||
Accounts receivable — trade and others | 317,332 | (203,403 | ) | 113,929 | — | 113,929 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 325,347 | (203,403 | ) | 121,944 | (453 | ) | 121,491 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities: | ||||||||||||||||||||
Derivative instruments(*) | ₩ | 453 | — | 453 | (453 | ) | — | |||||||||||||
Accounts payable — other and others | 301,996 | (203,403 | ) | 98,593 | — | 98,593 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 302,449 | (203,403 | ) | 99,046 | (453 | ) | 98,593 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The |
ISDA agreements do not allow the Group to exercise rights of set-off unless credit events such as bankruptcy occur. Therefore, assets and liabilities recognized in accordance with the agreements cannot be offset as the Group does not have enforceable rights of set-off.
(In millions of won) | ||||||||||||
December 31, 2019 | ||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statements of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable — trade and others | ₩ | 102,241 | (100,895 | ) | 1,346 | |||||||
Financial liabilities: | ||||||||||||
Accounts payable — other and others | ₩ | 100,895 | (100,895 | ) | — |
Transactions with Related Parties |
(1) List of related parties
Relationship | Company | |
Ultimate Controlling Entity | SK Holdings Co., Ltd. | |
Joint | Dogus Planet, Inc. and | |
Associates | SK hynix Inc. and | |
Others | The Ultimate Controlling Entity’s subsidiaries and associates, etc. |
For the periods presented, the Group belongs to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Group.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(2) Compensation for the key management
The Parent Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operating,operations, and controllingrelevant controls of the business as key management. The compensation given to such key management for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Salaries | ₩ | 1,971 | 2,600 | 2,263 | ₩ | 10,029 | 5,969 | 4,488 | ||||||||||||||||
Provision for retirement benefits | 626 | 907 | 1,012 | |||||||||||||||||||||
Defined benefits plan expenses | 3,459 | 1,237 | 920 | |||||||||||||||||||||
Share option | 158 | 325 | 548 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 2,597 | 3,507 | 3,275 | ₩ | 13,646 | 7,531 | 5,956 | |||||||||||||||||
|
|
|
|
|
|
Compensation for the key management includes salaries, non-monetary salaries and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
(3) | Transactions with related parties for the years ended December 31, 2020, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||
2020 | ||||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd.(*2) | ₩ | 40,717 | 596,509 | 76,534 | |||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | 3,484 | 51,228 | — | ||||||||||
SK hynix Inc.(*3) | 316,001 | 267 | — | |||||||||||
KEB HanaCard Co., Ltd. | 683 | 3,065 | — | |||||||||||
SK Wyverns Co., Ltd. | 1,279 | 19,354 | — | |||||||||||
Content Wavve Co., Ltd. | 446 | 56,631 | — | |||||||||||
Others(*4) | 65,431 | 12,511 | 78 | |||||||||||
|
|
|
|
|
| |||||||||
387,324 | 143,056 | 78 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | 12,349 | 238 | — | ||||||||||
SK Innovation Co., Ltd. | 38,999 | 18,464 | — | |||||||||||
SK Networks Co., Ltd.(*5) | 13,893 | 1,022,976 | 32 | |||||||||||
SK Networks Services Co., Ltd. | 6,936 | 76,653 | 2,023 | |||||||||||
SK Telesys Co., Ltd. | 388 | 10,751 | 30,453 | |||||||||||
SK TNS Co., Ltd. | 1,118 | 43,767 | 496,460 | |||||||||||
SK Energy Co., Ltd. | 16,009 | 296 | — | |||||||||||
SK hynix Semiconductor (China) Ltd. | 73,683 | — | — | |||||||||||
SK Battery Hungary Krt | 19,394 | — | — | |||||||||||
SK Global Chemical Co., Ltd. | 20,667 | 9 | — | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | 15,898 | 8 | — | |||||||||||
HappyNarae Co., Ltd. | 9,871 | 17,361 | 129,621 | |||||||||||
Others | 102,141 | 128,268 | 83,693 | |||||||||||
|
|
|
|
|
| |||||||||
331,346 | 1,318,791 | 742,282 | ||||||||||||
|
|
|
|
|
| |||||||||
₩ | 759,387 | 2,058,356 | 818,894 | |||||||||||
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Compensation for the key management includes salaries, non-monetary salaries and contributions made in relation to the pension plan.
(3) Transactions with related parties for the years ended December 31, 2015, 2014 and 2013 are as follows:
(In millions of won) | ||||||||||||||||||||||
2015 | ||||||||||||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others | Acquisition of property and equipment | Loans | Loans collection | ||||||||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd. (formerly, SK C&C Co., Ltd.)(*1) | ₩20,260 | 324,078 | 236,414 | — | — | ||||||||||||||||
SK Holdings Co., Ltd. (formerly, SK Holdings Co., Ltd.)(*2,3) | 1,299 | 212,378 | 117 | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
21,559 | 536,456 | 236,531 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Associates | F&U Credit information Co., Ltd. | 2,510 | 43,967 | — | — | — | ||||||||||||||||
HappyNarae Co., Ltd. | 297 | 6,886 | 13,495 | — | — | |||||||||||||||||
SK hynix Inc.(*4) | 55,949 | 2,384 | — | — | — | |||||||||||||||||
SK Wyverns Baseball Club., Ltd. | 3,849 | 18,544 | — | — | 204 | |||||||||||||||||
KEB HanaCard Co., Ltd. | 21,414 | 16,057 | — | — | — | |||||||||||||||||
Xian Tianlong Science and Technology Co., Ltd. | — | — | — | 8,287 | — | |||||||||||||||||
Others(*5) | 6,397 | 11,917 | 1,864 | 690 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
90,416 | 99,755 | 15,359 | 8,977 | 204 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other | SK Engineering & Construction Co., Ltd. | 15,598 | 27,243 | 240,701 | — | — | ||||||||||||||||
SK Networks Co., Ltd. | 11,923 | 1,257,975 | 2 | — | — | |||||||||||||||||
SK Networks Services Co., Ltd. | 10,491 | 94,097 | 6,472 | — | — | |||||||||||||||||
SK Telesys Co., Ltd. | 397 | 48,900 | 141,870 | — | — | |||||||||||||||||
SK Energy Co., Ltd. | 9,930 | 978 | — | — | — | |||||||||||||||||
SK Gas Co., Ltd. | 3,561 | 2 | — | — | — | |||||||||||||||||
Others | 29,409 | 71,314 | 194,945 | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
81,309 | 1,500,509 | 583,990 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩193,284 | 2,136,720 | 835,880 | 8,977 | 204 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*1) | Operating expense and others include lease payments by the |
(*2) |
Operating expense and others include |
(*3) | Operating revenue and others include ₩146,100 million of dividends received from SK hynix Inc. which was deducted from the investment in associates and ₩70,495 million of disposal amounts of Yongin SK Academy training facility. |
(*4) | Operating revenue and others include |
(*5) | Operating expenses and others include costs for handset purchases amounting to ₩961,167 million. |
(In millions of won) | ||||||||||||||
2019 | ||||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd.(*2) | ₩ | 53,507 | 612,248 | 95,426 | |||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | 2,293 | 55,179 | — | ||||||||||
SK hynix Inc.(*3) | 273,047 | 481 | — | |||||||||||
KEB HanaCard Co., Ltd. | 832 | 1,901 | — | |||||||||||
SK Wyverns Co., Ltd. | 1,399 | 21,528 | — | |||||||||||
Others(*4) | 17,286 | 13,864 | 457 | |||||||||||
|
|
|
|
|
| |||||||||
294,857 | 92,953 | 457 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | 13,339 | 1,601 | 7,400 | ||||||||||
SK Innovation Co., Ltd. | 26,697 | 2,777 | — | |||||||||||
SK Networks Co., Ltd.(*5) | 29,321 | 1,088,443 | 449 | |||||||||||
SK Networks Services Co., Ltd. | 1,056 | 76,671 | 4,979 | |||||||||||
SK Telesys Co., Ltd. | 474 | 9,686 | 59,392 | |||||||||||
SK TNS Co., Ltd. | 240 | 35,824 | 607,546 | |||||||||||
SK Energy Co., Ltd. | 16,294 | 516 | — | |||||||||||
SK hynix Semiconductor (China) Ltd. | 73,542 | — | — | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | 14,535 | 131 | — | |||||||||||
HappyNarae Co., Ltd. | 6,943 | 18,121 | 168,286 | |||||||||||
Others | 90,307 | 105,569 | 109,189 | |||||||||||
|
|
|
|
|
| |||||||||
272,748 | 1,339,339 | 957,241 | ||||||||||||
|
|
|
|
|
| |||||||||
₩ | 621,112 | 2,044,540 | 1,053,124 | |||||||||||
|
|
|
|
|
|
(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include ₩216,241 million of dividends paid by the Parent Company. |
(*3) | Operating revenue and others include |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||
2014 | ||||||||||||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others | Acquisition of property and equipment | Loans | Loans collection | ||||||||||||||||
Ultimate Controlling Entity | SK Holding Co., Ltd.(*1) | ₩ | 530 | 226,772 | — | — | — | |||||||||||||||
Associates | F&U Credit information Co., Ltd. | 2,395 | 45,417 | — | — | — | ||||||||||||||||
HappyNarae Co., Ltd. | 253 | 6,492 | 10,418 | — | — | |||||||||||||||||
SK hynix Inc. | 12,964 | 3,391 | — | — | — | |||||||||||||||||
SK USA, Inc. | — | 2,153 | — | — | — | |||||||||||||||||
SK Wyverns Baseball Club., Ltd. | 901 | 22,402 | — | — | 204 | |||||||||||||||||
KEB HanaCard Co., Ltd.(*2) | 39,828 | 5,416 | — | — | — | |||||||||||||||||
Others | 5,852 | 15,150 | — | 45 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
62,193 | 100,421 | 10,418 | 45 | 204 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other | SK Engineering & Construction Co., Ltd. | 3,385 | 42,964 | 460,783 | — | — | ||||||||||||||||
SK C&C Co., Ltd. | 18,309 | 360,842 | 168,778 | — | — | |||||||||||||||||
SK Networks Co., Ltd. | 16,230 | 1,509,017 | 5,388 | — | — | |||||||||||||||||
SK Networks Services Co., Ltd. | 13,017 | 106,273 | 2,583 | — | — | |||||||||||||||||
SK Telesys Co., Ltd. | 494 | 64,038 | 205,538 | — | — | |||||||||||||||||
SK Energy Co., Ltd. | 22,650 | 944 | — | — | — | |||||||||||||||||
SK Gas Co., Ltd. | 10,115 | — | — | — | — | |||||||||||||||||
Others | 25,537 | 38,868 | 12,628 | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
109,737 | 2,122,946 | 855,698 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 172,460 | 2,450,139 | 866,116 | 45 | 204 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*4) | Operating revenue and others include ₩11,955 million of dividends declared by Korea IT Fund, UniSK and KIF-Stonebridge IT Investment Fund which was deducted from the investments in associates. |
(*5) | Operating expenses and others include costs for handset purchases amounting to ₩1,043,902 million. |
(In millions of won) | ||||||||||||||||||
2018 | ||||||||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others | Acquisition of property and equipment | Collection of loans | |||||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd.(*1) | ₩ | 20,050 | 601,176 | 151,502 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Associates | F&U Credit information Co., Ltd. | 2,777 | 54,857 | — | — | |||||||||||||
HappyNarae Co., Ltd.(*2) | 1,002 | 20,286 | 88,327 | — | ||||||||||||||
SK hynix Inc.(*3) | 179,708 | 313 | — | — | ||||||||||||||
KEB HanaCard Co., Ltd. | 15,046 | 15,387 | — | — | ||||||||||||||
Others(*4) | 5,924 | 35,296 | 1,202 | 204 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
204,457 | 126,139 | 89,529 | 204 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Others | SK Engineering & Construction Co., Ltd. | 4,662 | 1,122 | 8,700 | — | |||||||||||||
SK Innovation Co., Ltd.(*5) | 44,010 | 996 | — | — | ||||||||||||||
SK Networks Co., Ltd.(*6) | 23,078 | 1,189,404 | 460 | — | ||||||||||||||
SK Networks Services Co., Ltd. | 774 | 90,723 | 5,478 | — | ||||||||||||||
SK Telesys Co., Ltd. | 362 | 10,945 | 127,840 | — | ||||||||||||||
SK TNS Co., Ltd. | 140 | 31,220 | 493,793 | — | ||||||||||||||
SK Energy Co., Ltd.(*5) | 15,134 | 897 | — | — | ||||||||||||||
SK Gas Co., Ltd. | 7,653 | 2 | — | — | ||||||||||||||
SKC Infra Service Co., Ltd. | 57 | 50,829 | 24,761 | — | ||||||||||||||
Others(*5) | 55,224 | 19,323 | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
151,094 | 1,395,461 | 661,032 | — | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
₩ | 375,601 | 2,122,776 | 902,063 | 204 | ||||||||||||||
|
|
|
|
|
|
|
|
(*1) | Operating expense and others include |
(*2) | Transactions with HappyNarae Co., Ltd. occurred before disposal. |
(*3) | Operating revenue and others include ₩146,100 million of dividends received from SK hynix Inc. which was deducted from the |
(*4) | Operating revenue and others include ₩4,587 million of dividends received from Korea IT Fund, KIF-Stonebridge IT Investment Fund and UniSK which were deducted from the investments in associates. |
(*5) | Operating revenue and others include ₩68,500 million received from disposal of the real estate investment fund to |
(*6) | Operating expenses and others include costs for handset purchases amounting to ₩1,100,370 million. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||
2013 | ||||||||||||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others | Acquisition of property and equipment | Loans | Loans collection | ||||||||||||||||
Ultimate Controlling Entity | SK Holding Co., Ltd.(*) | ₩ | 1,912 | 226,023 | — | — | — | |||||||||||||||
Associates | F&U Credit information Co., Ltd. | 1,753 | 43,931 | — | — | — | ||||||||||||||||
HappyNarae Co., Ltd. | 281 | 6,217 | 10,542 | — | — | |||||||||||||||||
SK hynix Inc. | 3,178 | 1,160 | — | — | — | |||||||||||||||||
SK USA, Inc. | — | 2,086 | — | — | — | |||||||||||||||||
SK Wyverns Baseball Club., Ltd. | 363 | — | — | — | 204 | |||||||||||||||||
HanaSK Card Co., Ltd. | 11,129 | 14,342 | — | — | — | |||||||||||||||||
Others | 3,171 | 3,734 | 125 | 1,200 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
19,875 | 71,470 | 10,667 | 1,200 | 204 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other | SK Engineering & Construction Co., Ltd. | 5,564 | 37,978 | 484,006 | — | — | ||||||||||||||||
SK C&C Co., Ltd. | 4,041 | 357,945 | 206,298 | — | — | |||||||||||||||||
SK Networks Co., Ltd. | 51,996 | 1,463,341 | 6,241 | — | — | |||||||||||||||||
SK Networks Services Co., Ltd. | 6,165 | 108,972 | 3,057 | — | — | |||||||||||||||||
SK Telesys Co., Ltd. | 1,554 | 99,381 | 234,319 | — | — | |||||||||||||||||
SK Energy Co., Ltd. | 20,831 | 2,422 | — | — | — | |||||||||||||||||
SK Gas Co., Ltd. | 6,656 | — | — | — | — | |||||||||||||||||
Others | 30,905 | 43,759 | 11,724 | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
127,712 | 2,113,798 | 945,645 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 149,499 | 2,411,291 | 956,312 | 1,200 | 204 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(4) | Account balances with related parties as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||
December 31, 2020 | ||||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable — trade, etc | Accounts payable — other, etc | ||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd. | ₩ | — | 6,449 | 64,373 | |||||||||
Associates | F&U Credit information Co., Ltd. | — | 10 | 4,699 | ||||||||||
SK hynix Inc. | — | 33,773 | 128 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 25,782 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 2,779 | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 352 | 145,328 | |||||||||||
Content Wavve Co., Ltd. | — | 283 | 2,491 | |||||||||||
Others | — | 9,098 | 1,686 | |||||||||||
|
|
|
|
|
| |||||||||
22,147 | 72,077 | 154,332 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | — | 1,521 | 152 | ||||||||||
SK Innovation Co., Ltd. | — | 11,737 | 44,105 | |||||||||||
SK Networks. Co., Ltd. | — | 2,245 | 108,233 | |||||||||||
SK Networks Services Co., Ltd. | — | 579 | 7,103 | |||||||||||
SK Telesys Co., Ltd. | — | 37 | 9,253 | |||||||||||
SK TNS Co., Ltd. | — | 263 | 89,915 | |||||||||||
SK Energy Co., Ltd. | — | 3,502 | 1,837 | |||||||||||
SK hystec Co., Ltd. | — | 494 | 6,085 | |||||||||||
SK hynix Semiconductor (China) Ltd. | — | 5,896 | — | |||||||||||
SK Battery Hungary Krt | — | 2,075 | — | |||||||||||
SK Global Chemical Co., Ltd. | — | 1,142 | 5 | |||||||||||
SK Global Chemical InternationalTrading (Shanghai) Co., Ltd. | — | 795 | 21 | |||||||||||
HappyNarae Co., Ltd. | — | 720 | 16,534 | |||||||||||
Others | — | 15,564 | 120,575 | |||||||||||
|
|
|
|
|
| |||||||||
— | 46,570 | 403,818 | ||||||||||||
|
|
|
|
|
| |||||||||
₩ | 22,147 | 125,096 | 622,523 | |||||||||||
|
|
|
|
|
|
(* | As of |
(*2) | As of December 31, 2020, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(In millions of won) | ||||||||||||||||||||||||||||
2015 | December 31, 2019 | |||||||||||||||||||||||||||
Accounts receivable | Accounts payable | Receivables | Payables | |||||||||||||||||||||||||
Scope | Company | Loans | Accounts receivable-trade, and others | Accounts payable-other, and others | Company | Loans | Accounts receivable — trade, etc | Accounts payable — other, etc | ||||||||||||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd. (formerly, SK C&C Co., Ltd.) (*) | ₩ | — | 1,836 | 160,133 | SK Holdings Co., Ltd. | ₩ | — | 7,941 | 87,458 | ||||||||||||||||||
Associates | HappyNarae Co., Ltd. | — | 12 | 6,162 | F&U Credit information Co., Ltd. | — | 2 | 4,869 | ||||||||||||||||||||
F&U Credit information Co., Ltd. | — | 66 | 934 | SK hynix Inc. | — | 21,510 | 100 | |||||||||||||||||||||
SK hynix Inc. | — | 4,360 | 155 | Wave City Development Co., Ltd.(*1) | — | 31,523 | — | |||||||||||||||||||||
SK Wyverns Baseball Club Co., Ltd. | 1,017 | 4,502 | — | Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 5,359 | — | |||||||||||||||||||||
Wave City Development Co., Ltd. | 1,890 | 38,412 | — | KEB HanaCard Co., Ltd. | — | 1,025 | 9,474 | |||||||||||||||||||||
Daehan Kanggun BcN Co., Ltd. | 22,148 | — | — | Others | 204 | 2,490 | 2,262 | |||||||||||||||||||||
KEB HanaCard Co., Ltd. | — | 1,771 | 9,042 |
|
|
| ||||||||||||||||||||||
Xian Tianlong Science and Technology Co., Ltd. | 8,287 | — | — | 22,351 | 61,909 | 16,705 | ||||||||||||||||||||||
Others | — | 299 | 964 |
|
|
| ||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||
33,342 | 49,422 | 17,257 | ||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||
Other | SK Engineering & Construction Co., Ltd. | — | 1,005 | 14,877 | ||||||||||||||||||||||||
Others | SK Engineering & Construction Co., Ltd. | — | 4,422 | 97 | ||||||||||||||||||||||||
SK Networks. Co., Ltd. | — | 1,569 | 208,291 | SK Innovation Co., Ltd. | — | 7,496 | 43,791 | |||||||||||||||||||||
SK Networks Services Co., Ltd. | — | — | 9,414 | SK Networks. Co., Ltd. | — | 3,469 | 76,993 | |||||||||||||||||||||
SK Telesys Co., Ltd. | — | 140 | 37,491 | SK Networks Services Co., Ltd. | — | — | 10,900 | |||||||||||||||||||||
SK Innovation Co., Ltd. | — | 2,159 | 1,424 | SK Telesys Co., Ltd. | — | 30 | 16,337 | |||||||||||||||||||||
SK Energy Co., Ltd. | — | 1,681 | 173 | SK TNS Co., Ltd. | 14 | 200,703 | ||||||||||||||||||||||
SK Gas Co., Ltd. | — | 1,830 | 9 | SK Energy Co., Ltd. | — | 2,757 | 1,954 | |||||||||||||||||||||
Others | — | 2,886 | 58,088 | SK hystec Co., Ltd. | — | 848 | 687 | |||||||||||||||||||||
|
|
| SK hynix Semiconductor (China) Ltd. | — | 8,556 | — | ||||||||||||||||||||||
— | 11,270 | 329,767 | Others | — | 23,264 | 88,813 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Total | ₩ | 33,342 | 62,528 | 507,157 | ||||||||||||||||||||||||
|
|
| — | 50,856 | 440,275 | |||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||
₩ | 22,351 | 120,706 | 544,438 | |||||||||||||||||||||||||
|
|
|
(* | As of December 31, 2019, the Parent Company |
(*2) | As of December 31, 2019, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
(In millions of won) | ||||||||||||||
2014 | ||||||||||||||
Accounts receivable | Accounts payable | |||||||||||||
Scope | Company | Loans | Accounts receivable-trade, and others | Accounts payable-trade, and others | ||||||||||
Ultimate Controlling Entity | SK Holding Co., Ltd. | ₩ | — | 90 | — | |||||||||
Associates | HappyNarae Co., Ltd. | — | 13 | 2,650 | ||||||||||
F&U Credit information Co., Ltd. | — | 148 | 797 | |||||||||||
SK hynix Inc. | — | 2,800 | 2,840 | |||||||||||
SK Wyverns Baseball Club Co., Ltd. | 1,221 | — | — | |||||||||||
Wave City Development Co., Ltd. | 1,200 | 38,412 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 22,148 | �� | — | — | ||||||||||
KEB HanaCard Co., Ltd. | — | 1,998 | 59 | |||||||||||
Others | — | 543 | 1,285 | |||||||||||
|
|
|
|
|
| |||||||||
24,569 | 43,914 | 7,631 | ||||||||||||
|
|
|
|
|
| |||||||||
Other | SK Engineering & Construction Co., Ltd. | — | 897 | 27,282 | ||||||||||
SK C&C Co., Ltd. | — | 1,393 | 121,145 | |||||||||||
SK Networks. Co., Ltd. | — | 2,608 | 238,351 | |||||||||||
SK Networks Services Co., Ltd. | — | 16 | 2,922 | |||||||||||
SK Telesys Co., Ltd. | — | 321 | 3,037 | |||||||||||
SK Innovation Co., Ltd. | — | 1,641 | 271 | |||||||||||
SK Energy Co., Ltd. | — | 4,781 | 79 | |||||||||||
SK Gas Co., Ltd. | — | 2,143 | 47 | |||||||||||
Others | — | 2,813 | 9,342 | |||||||||||
|
|
|
|
|
| |||||||||
— | 16,613 | 402,476 | ||||||||||||
|
|
|
|
|
| |||||||||
Total | ₩ | 24,569 | 60,617 | 410,107 | ||||||||||
|
|
|
|
|
|
(5) |
SK Telink Co., Ltd., a subsidiary of the Parent Company, |
The details of additional investments and disposal of associates and joint ventures for the year ended December 31, |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Commitments and |
(1) Collateral assets and commitments
SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of ₩10,193₩1,568 million as of December 31, 2015.2020.
In addition, SK BroadbandInfosec Co., Ltd., a subsidiary of the Parent Company, has guaranteedpledged its shares of ADT CAPS Co., Ltd., CAPSTEC Co., Ltd., and ADT SECURITY Co., Ltd. for employees’the long-term borrowings relating to employee stock ownershipwith a face value of ₩1,950,000 million and providedIncross Co., Ltd., a subsidiary of the Parent Company, has pledged ₩20,057 million of short-term financial instruments amounting to ₩1,219 million as collateralinstrument for performance guarantee as of December 31, 2015.2020.
(2) Legal claims and litigations
As of December 31, 2020 the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. ForIn connection with those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation, for these matters, nor is it expected any of these claims or litigation will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.
(3) Guarantee provided
PS&Marketing Corporation, a subsidiaryMeanwhile, the pending litigation over the validity of the Parent Company, obtained ₩3,000 million of payment guarantees from Shinhan Bank, in relation to handsets purchased from the Apple Computer Korea Ltd.
(1) Discontinued operations
During the year ended December 31, 2013,partnership contract that SK Planet Co., Ltd., a subsidiary of the Parent Company, sold 52.6%was involved as the defendant (Plaintiff: Nonghyup Bank) was settled by the agreement between the parties during the year ended December 31, 2018. As a result of its ownership interests (13,294,369 shares) in Loen Entertainment, Inc., to Star Invest Holdings Limited. Consideration for the sale amounted to ₩265,887 million. Loen Entertainment was a subsidiary ofsettlement, the credit card business partnership between SK Planet Co., Ltd. and Nonghyup Bank will be maintained until April 2021, and the Group is engaged inobligated to pay the release of music discs as its primary business, The Group’s ownership interests aftercommission fees based on the disposition is 15.0% and Loen Entertainment, Inc. was excluded fromcustomers’ credit card usage until September 2021, the Group’s consolidated financial statements as of theexpiration date of the sale.credit cards. The resultsGroup determined that the contract and the subsidiary agreements meet the definition of operationsan onerous contract according to IAS 37, for which the Group recognized provisions with the best estimate of Loen Entertainment, Inc. priorthe expenditure required to settle the present obligation at the end of the reporting period. In this regard, ₩18,717 million are recognized as current provisions as of December 31, 2020.
(3) Accounts receivable from sale of handsets
The sales agents of the Parent Company sell handsets to the dateParent Company’s subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivables from handset sales with retail stores and authorized dealers and to transfer the accounts receivables from handset sales to special purpose companies which were established with the purpose of disposalliquidating receivables, respectively.
The accounts receivables from sale of handsets amounting to ₩571,004 million and ₩646,837 million as of December 31, 2020 and 2019, respectively, which the Group’s controlling interest is presentedParent Company purchased according to the relevant comprehensive agreement are recognized as a discontinued operation.accounts receivable – other and long-term accounts receivable — other.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 2013
(2) Results of discontinued operations
Results of discontinued operations included in the consolidated statements of income for the year ended December 31, 2013 is as follows.2018
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39. | ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
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| ||||
|
(3) Cash flows from discontinued operations
Cash flows from discontinued operations for the year ended December 31, 2013 is as follows:
| ||||
| ||||
| ||||
| ||||
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| ||||
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 2014 and 2013
Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the years ended December 31, |
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Interest income | ₩ | (45,884 | ) | (60,006 | ) | (67,359 | ) | ₩ | (50,357 | ) | (63,579 | ) | (69,936 | ) | ||||||||||
Dividend | (16,102 | ) | (13,048 | ) | (10,197 | ) | ||||||||||||||||||
Gain on foreign currency translation | (5,090 | ) | (6,277 | ) | (4,401 | ) | ||||||||||||||||||
Gain on disposal of long-term investment securities | (10,786 | ) | (13,994 | ) | (9,300 | ) | ||||||||||||||||||
Dividends | (1,170 | ) | (10,011 | ) | (35,143 | ) | ||||||||||||||||||
Gain on foreign currency translations | (8,928 | ) | (4,576 | ) | (2,776 | ) | ||||||||||||||||||
Gain on valuation of derivatives | (1,927 | ) | (8,713 | ) | — | (101,343 | ) | (2,499 | ) | (6,532 | ) | |||||||||||||
Gain on settlement of derivatives | — | (7,998 | ) | (7,716 | ) | (7,829 | ) | (29,277 | ) | (20,399 | ) | |||||||||||||
Gain related to investments in subsidiaries and associates, net | (786,140 | ) | (906,338 | ) | (921,861 | ) | ||||||||||||||||||
Gain on disposal of property, equipment and intangible assets | (7,140 | ) | (8,792 | ) | (7,991 | ) | ||||||||||||||||||
Gain on valuation of financial assets at fair value through profit or loss | — | — | (5,177 | ) | ||||||||||||||||||||
Gain relating to financial liabilities at fair value through profit or loss | (5,188 | ) | — | — | ||||||||||||||||||||
Reversal of allowance for doubtful accounts | — | — | (359 | ) | ||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | (1,028,403 | ) | (449,543 | ) | (3,270,912 | ) | ||||||||||||||||||
Gain on sale of accounts receivable — other | (22,605 | ) | (15,855 | ) | (20,023 | ) | ||||||||||||||||||
Gain on disposal of property and equipment and intangible assets | (35,644 | ) | (8,533 | ) | (38,933 | ) | ||||||||||||||||||
Gain on business transfer | (12,455 | ) | (69,522 | ) | — | |||||||||||||||||||
Gain relating to financial assets at FVTPL | (35,844 | ) | (4,504 | ) | (83,636 | ) | ||||||||||||||||||
Gain relating to financial liabilities at FVTPL | — | (56 | ) | — | ||||||||||||||||||||
Other income | (7,577 | ) | (608 | ) | (3,951 | ) | (4,220 | ) | (1,875 | ) | (952 | ) | ||||||||||||
Interest expenses | 297,662 | 323,910 | 331,834 | |||||||||||||||||||||
Loss on foreign currency translation | 4,750 | 5,079 | 2,634 | |||||||||||||||||||||
Interest expense | 399,176 | 406,087 | 307,319 | |||||||||||||||||||||
Loss on foreign currency translations | 12,730 | 4,948 | 2,397 | |||||||||||||||||||||
Loss on disposal of long-term investment securities | 2,599 | 2,694 | 31,909 | 98 | — | — | ||||||||||||||||||
Other finance costs | 21,787 | 24,533 | 52,058 | |||||||||||||||||||||
Loss on sale of accounts receivable — other | — | 5,823 | — | |||||||||||||||||||||
Income tax expense | 376,502 | 300,268 | 843,978 | |||||||||||||||||||||
Expense related to defined benefit plan | 198,794 | 175,165 | 147,722 | |||||||||||||||||||||
Share option | 4,313 | 2,073 | 789 | |||||||||||||||||||||
Depreciation and amortization | 4,169,996 | 4,021,016 | 3,284,339 | |||||||||||||||||||||
Bad debt expense | 48,625 | 28,841 | 38,211 | |||||||||||||||||||||
Loss on disposal of property and equipment and intangible assets | 41,598 | 47,760 | 87,257 | |||||||||||||||||||||
Impairment loss on property and equipment and intangible assets | 208,833 | 65,935 | 255,839 | |||||||||||||||||||||
Bad debt for accounts receivable — other | 10,559 | 5,802 | 7,718 | |||||||||||||||||||||
Loss on valuation of derivatives | — | 10 | 2,106 | 13,551 | — | — | ||||||||||||||||||
Loss on settlement of derivatives | 4,845 | 672 | — | 2,637 | 641 | 12,554 | ||||||||||||||||||
Income tax expense | 519,480 | 454,508 | 461,922 | |||||||||||||||||||||
Expense related to defined benefit plan | 110,021 | 112,717 | 92,840 | |||||||||||||||||||||
Depreciation and amortization | 2,993,486 | 2,891,870 | 2,829,784 | |||||||||||||||||||||
Bad debt expenses | 60,450 | 45,754 | 57,163 | |||||||||||||||||||||
Loss on disposal of property and equipment and intangible assets | 21,392 | 32,950 | 267,702 | |||||||||||||||||||||
Impairment loss on property and equipment and intangible assets | 35,845 | 47,489 | 14,399 | |||||||||||||||||||||
Loss relating to financial assets at fair value through profit or loss | — | 1,352 | — | |||||||||||||||||||||
Loss relating to financial liabilities at fair value through profit or loss | 526 | 10,370 | 134,232 | |||||||||||||||||||||
Bad debt for accounts receivable — other | 15,323 | 17,943 | 22,167 | |||||||||||||||||||||
Impairment loss on other investment securities | 42,966 | 22,749 | 6,136 | |||||||||||||||||||||
Loss relating to financial assets at FVTPL | 10,894 | 7,753 | 22,507 | |||||||||||||||||||||
Loss relating to financial liabilities at FVTPL | — | 43 | 1,535 | |||||||||||||||||||||
Loss on impairment of investment assets | — | 1,670 | 3,157 | |||||||||||||||||||||
Other expenses | 4,845 | 10,169 | 6,802 | 67,146 | 21,044 | 102,839 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 3,250,143 | 2,978,995 | 3,275,376 | ₩ | 4,256,654 | 4,435,039 | 1,568,919 | |||||||||||||||||
|
|
|
|
|
|
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2015, 20142020, 2019 and 20132018
(2) | Changes in assets and liabilities from operating activities for the years ended December 31, |
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Accounts receivable — trade | ₩ | 7,554 | (168,839 | ) | (267,754 | ) | ₩ | (33,410 | ) | (211,712 | ) | 175,841 | ||||||||||||
Accounts receivable — other | (11,108 | ) | (52,137 | ) | (41,243 | ) | (50,003 | ) | 48,399 | 319,913 | ||||||||||||||
Accrued income | 116 | 14 | (502 | ) | — | 151 | — | |||||||||||||||||
Advance payments | (35,906 | ) | (62,873 | ) | (26,064 | ) | ||||||||||||||||||
Advanced payments | (945 | ) | (12,204 | ) | 13,393 | |||||||||||||||||||
Prepaid expenses | (40,464 | ) | (36,808 | ) | (1,583 | ) | 112,270 | (680,925 | ) | (3,597 | ) | |||||||||||||
V.A.T. refund receivable | 1,385 | 7,200 | (5,442 | ) | ||||||||||||||||||||
Inventories | (7,814 | ) | (171 | ) | (39,610 | ) | (7,219 | ) | 115,893 | (13,429 | ) | |||||||||||||
Long-term accounts receivables — other | — | 80 | — | |||||||||||||||||||||
Long-term accounts receivable — other | 26,027 | (56,216 | ) | 11,064 | ||||||||||||||||||||
Contract assets | 1,528 | (68,805 | ) | 9,161 | ||||||||||||||||||||
Guarantee deposits | (11,238 | ) | (12,699 | ) | 59,431 | 26,122 | 6,392 | (258 | ) | |||||||||||||||
Accounts payable — trade | 12,442 | (37,790 | ) | (4,708 | ) | 3,023 | (23,607 | ) | (58,487 | ) | ||||||||||||||
Accounts payable — other | (107,114 | ) | (296,875 | ) | (131,142 | ) | 311,737 | 167,595 | (271,128 | ) | ||||||||||||||
Advanced receipts | 6,421 | 20,701 | (2,916 | ) | ||||||||||||||||||||
Withholdings | (191,209 | ) | 306,515 | 22,025 | 33,348 | (31,545 | ) | 129,492 | ||||||||||||||||
Contract liabilities | 35,426 | 33,574 | 11,328 | |||||||||||||||||||||
Deposits received | (9,661 | ) | (4,395 | ) | (1,745 | ) | (1,028 | ) | (3,112 | ) | (333 | ) | ||||||||||||
Accrued expenses | (28,845 | ) | (79,831 | ) | 98,081 | 61,848 | 116,949 | (102,246 | ) | |||||||||||||||
V.A.T. payable | 3,494 | 2,711 | (3,901 | ) | ||||||||||||||||||||
Unearned revenue | (115,187 | ) | (140,295 | ) | (188,589 | ) | ||||||||||||||||||
Provisions | (30,562 | ) | (38,469 | ) | (226,644 | ) | (30,773 | ) | (36,478 | ) | (4,298 | ) | ||||||||||||
Long-term provisions | (4,447 | ) | 29,532 | (72,398 | ) | (548 | ) | (1,699 | ) | 1,193 | ||||||||||||||
Plan assets | (67,831 | ) | (96,847 | ) | (61,856 | ) | (145,214 | ) | (130,790 | ) | (123,075 | ) | ||||||||||||
Retirement benefit payment | (58,513 | ) | (46,531 | ) | (42,948 | ) | (76,987 | ) | (84,098 | ) | (63,957 | ) | ||||||||||||
Others | 2,753 | 474 | (30,362 | ) | 37,256 | (3,892 | ) | (4,628 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | (685,734 | ) | (707,333 | ) | (969,870 | ) | ₩ | 302,458 | (856,130 | ) | 25,949 | |||||||||||||
|
|
|
|
|
|
(3) | Significant non-cash transactions for the years ended December 31, |
(In millions of won) | ||||||||||||
2015 | 2014 | 2013 | ||||||||||
Transfer of construction in progress to property and equipment, and intangible assets | ₩ | 2,002,231 | 2,238,620 | 2,320,528 | ||||||||
Transfer of other property and equipment and others to construction in progress | 730,469 | 1,090,954 | 1,188,826 | |||||||||
Increase(decrease) of accounts payable — other related to acquisition of property and equipment and intangible assets | 39,973 | (184,614 | ) | 350,735 | ||||||||
Return of the existing 1.8GHz frequency use rights | — | — | 614,600 |
(In millions of won) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Increase(decrease) in accounts payable — other relating to acquisition of property and equipment and intangible assets | ₩ | (426,723 | ) | 438,622 | 1,162,301 | |||||||
Increase of right-of-use assets | 736,157 | 1,141,349 | — | |||||||||
Contribution in kind for investments | 4,702 | 78,900 | — | |||||||||
Investment in subsidiary from comprehensive stock exchange | — | — | 129,595 | |||||||||
Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd. | 1,072,487 | — | — |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
Reconciliation of liabilities arising from financing activities for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||
January 1, 2020 | Cash flows | Non-cash transactions | ||||||||||||||||||||||||||
Exchange rate changes(*) | Fair value changes | Business combinations | Other changes | December 31, 2020 | ||||||||||||||||||||||||
Total liabilities from financing activities: | ||||||||||||||||||||||||||||
Short-term borrowings | ₩ | 20,603 | 76,375 | 13,020 | — | — | — | 109,998 | ||||||||||||||||||||
Long-term borrowings | 2,022,537 | (3,026 | ) | (14,208 | ) | — | — | 23,621 | 2,028,924 | |||||||||||||||||||
Debentures | 8,220,833 | 445,462 | (94,391 | ) | — | — | 7,839 | 8,579,743 | ||||||||||||||||||||
Lease liabilities | 1,291,007 | (412,666 | ) | — | — | 7,696 | 550,740 | 1,436,777 | ||||||||||||||||||||
Long-term payables — other | 1,971,609 | (428,100 | ) | — | — | — | 23,445 | 1,566,954 | ||||||||||||||||||||
Derivative financial liabilities | 1,043 | 8,191 | — | 44,942 | — | — | 54,176 | |||||||||||||||||||||
Derivative financial assets | (144,886 | ) | 28,500 | — | 51,250 | — | — | (65,136 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
₩ | 13,382,746 | (285,264 | ) | (95,579 | ) | 96,192 | 7,696 | 605,645 | 13,711,436 | |||||||||||||||||||
Other cash flows from financing activities: | ||||||||||||||||||||||||||||
Payments of cash dividends | ₩ | (742,136 | ) | |||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||||||
Acquisition of treasury shares | (426,664 | ) | ||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders | 17,766 | |||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders | (6,515 | ) | ||||||||||||||||||||||||||
(1,172,315 | ) | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
₩ | (1,457,579 | ) | ||||||||||||||||||||||||||
|
|
(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2020, 2019 and 2018
(In millions of won) | ||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||
January 1, 2019 | Cash flows | Non-cash transactions | ||||||||||||||||||||||||||
Exchange rate changes(*) | Fair value changes | Business combinations | Other changes | December 31, 2019 | ||||||||||||||||||||||||
Total liabilities from financing activities: | ||||||||||||||||||||||||||||
Short-term borrowings | ₩ | 80,000 | (59,860 | ) | (2 | ) | — | 465 | — | 20,603 | ||||||||||||||||||
Long-term borrowings | 2,104,996 | (89,882 | ) | 1,129 | — | — | 6,294 | 2,022,537 | ||||||||||||||||||||
Debentures | 7,466,852 | 693,444 | 59,157 | 223 | — | 1,157 | 8,220,833 | |||||||||||||||||||||
Lease liabilities | 844,283 | (443,238 | ) | — | — | 955 | 889,007 | 1,291,007 | ||||||||||||||||||||
Long-term payables – other | 2,393,027 | (428,153 | ) | (84 | ) | — | — | 6,819 | 1,971,609 | |||||||||||||||||||
Derivative financial liabilities | 4,184 | 626 | — | (3,767 | ) | — | — | 1,043 | ||||||||||||||||||||
Derivative financial assets | (55,457 | ) | 11,800 | — | (98,958 | ) | — | (2,271 | ) | (144,886 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
₩ | 12,837,885 | (315,263 | ) | 60,200 | (102,502 | ) | 1,420 | 901,006 | 13,382,746 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Other cash flows from financing activities: | ||||||||||||||||||||||||||||
Payments of cash dividends | ₩ | (718,698 | ) | |||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||||||
Disposal of treasury shares | 300,000 | |||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders | 101,398 | |||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders | (39,345 | ) | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
(371,411 | ) | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
₩ | (686,674 | ) | ||||||||||||||||||||||||||
|
|
(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
40. | Cash Dividends paid to the Parent Company |
Cash dividends paid to the Parent Company for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
(In millions of won) | ||||||||||||||||||||||||
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
Cash dividends received from consolidated subsidiaries | ₩ | — | — | 13,657 | ₩ | 119,036 | 287,549 | 61,985 | ||||||||||||||||
Cash dividends received from associates | 46,390 | 939 | — | 164,850 | 227,500 | 149,815 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩46,390 | 939 | 13,657 | ₩ | 283,886 | 515,049 | 211,800 | ||||||||||||||||||
|
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|
|
|
|
41. | Subsequent Events |
(1) Merge of ADT Caps Co., Ltd. by SK Infosec Co., Ltd.
On January 13, 2021, the board of directors of SK Infosec Co., Ltd., a subsidiary of the Parent Company, resolved to approve SK Infosec Co., Ltd.’s merger with ADT CAPS Co., Ltd. SK Infosec Co., Ltd. On March 4, 2021, SK Infosec Co., Ltd. merged with ADT CAPS Co., Ltd. pursuant to a resolution from the board of directors meeting held in January 2021.
(2) Sale of ownership interest for SK Wyverns
On January 26, 2021, the Parent Company entered into a memorandum of understanding (“MOU”) with E-MART Inc. to sell its entire 1,000,000 common stock of SK Wyverns Co., Ltd., in addition to land and buildings for ₩100,000 million and ₩35,280 million, respectively. In accordance with the MOU, the sale and purchase agreement of stock has been executed on February 23, 2021 and the agreement to sell land and building with SK Wyverns Co., Ltd. was executed on February 26, 2021.
Report of Independent Registered Public Accounting Firm
TheTo the Board of Directors and Shareholders
SK hynix, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of SK hynix, Inc. and subsidiaries (the Group) as of December 31, 20152020 and 2014, and2019, the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2020 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2015. 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Changes in Accounting Principle
As discussed in Note 3-(26) to the consolidated financial statements, during 2019 and 2020, the Group changed its method of accounting for leases as of January 1, 2019 due to the adoption of IFRS 16, Leases, and the related interpretations published by Internal Financial Reporting Interpretations Committee, respectively.
Basis for Opinion
These consolidated financial statements are the responsibility of SK hynix, Inc.’sthe Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements referredthat was communicated or required to above present fairly, in allbe communicated to the audit committee and that: (1) relates to accounts or disclosures that are material respects,to the financial positionstatements and (2) involved our especially challenging, subjective or complex judgments. The communication of SK hynix, Inc.a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and subsidiarieswe are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Measurement of fair value of long-term investment assets related to KIOXIA Holdings Corporation (“KIOXIA”)
As discussed in Note 6 and Note 12 to the consolidated financial statements, the Group holds ₩ 3,595,494 million of equity investment in BCPE Pangea Intermediate Holdings Cayman, L.P. (“SPC1”), and ₩ 2,351,225 million of convertible bonds investment in BCPE Pangea Cayman2 Limited (“SPC2”), as of December 31, 20152020. Fair values of these long-term investment assets are measured based on the equity value of KIOXIA. Specifically, the fair value of equity investment in SPC1 is measured using an option pricing model allocating the estimated fair value of KIOXIA equity between investors, together with consideration of expected KIOXIA initial public offering and 2014SPC1 liquidation. The fair value of convertible bonds investment in SPC2 is measured based on the estimated KIOXIA’s equity value and SPC2’s equity ownership in KIOXIA.
We identified the measurement of fair values of long-term investment assets related to KIOXIA as a critical audit matter. Estimation of equity value of KIOXIA, an unlisted company, and fair values of the financial instruments in SPC1 and SPC2 involved the application of significant judgment and measurement uncertainty therefore requires a high degree of auditor judgment, and involvement of professionals with specialized skill and knowledge. Specifically, determination of valuation methods in measuring the fair value of the financial instruments, the assumptions of estimated future revenue, operating profit, discount rate, and volatility of KIOXIA’s equity value, and the resultsexpected timing of their operationsliquidation of SPC1 were challenging to test and their cash flows for eachinvolved subjective auditor judgment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal control related to the yearsprocess over measurement of fair values of long-term investment assets related to KIOXIA. We compared assumptions of estimated future revenue, and operating profit used in the three-year period ended December 31, 2015,forecasted cash flow in conformityprior year to the actual results in current year to assess the Group’s ability to accurately forecast. We performed sensitivity analyses over discount rate, and volatility of KIOXIA’s equity value, and expected timing of liquidation of SPC1 to assess the impact of changes in those assumptions on the fair value measurement. We involved our valuation professionals with International Financial Reporting Standards as issuedspecialized skills and knowledge, who assisted us in the following:
assessing the valuation methods used in measuring the fair value for the financial instruments in SPC1 and SPC2 by considering the International Accounting Standards Board.availability of relevant observable inputs;
assessing the estimated future revenue, and operating profit by comparing them with relevant industry data;
assessing the discount rate by comparing it against independently developed rates using publicly available market data for comparable entities;
assessing the volatility of KIOXIA’s equity value by comparing it against the volatilities for other public comparable companies.
/s/ KPMG Samjong Accounting Corp.
We have served as the Group’s auditor since 2012.
Seoul, Korea
April 27, 201629, 2021
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 20152020 and 20142019
Note | 2015 | 2014 | Note | 2020 | 2019 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||
Cash and cash equivalents | 5,6 | ₩ | 1,175,719 | 436,761 | 5,6 | ₩ | 2,975,989 | 2,306,070 | ||||||||||||||||
Short-term financial instruments | 5,6,7 | 3,615,554 | 3,618,014 | 5,6,7 | 436,708 | 298,350 | ||||||||||||||||||
Short-term investment assets | 5,6 | 1,535,518 | 1,390,293 | |||||||||||||||||||||
Trade receivables, net | 5,6,8,32 | 2,628,448 | 3,732,926 | 5,6,8,34 | 4,931,322 | 4,261,674 | ||||||||||||||||||
Loans and other receivables, net | 5,6,8,32 | 61,613 | 691,529 | 5,6,8,34 | 69,194 | 23,508 | ||||||||||||||||||
Inventories, net | 9 | 1,923,376 | 1,497,563 | 9 | 6,136,318 | 5,295,835 | ||||||||||||||||||
Current tax assets | 1,394 | 1,629 | 202 | 199,805 | ||||||||||||||||||||
Assets held for sale | 10 | — | 27,661 | |||||||||||||||||||||
Other current assets | 11 | 353,926 | 357,431 | 10 | 485,672 | 682,037 | ||||||||||||||||||
Other financial assets | 5,6,7 | 30 | 30 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
9,760,030 | 10,363,514 | 16,570,953 | 14,457,602 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||
Equity-accounted investees | 12 | 122,609 | 97,090 | |||||||||||||||||||||
Available-for-sale financial assets | 5,6,13 | 131,354 | 127,314 | |||||||||||||||||||||
Investments in associates and joint ventures | 11 | 1,166,244 | 768,767 | |||||||||||||||||||||
Long-term trade receivables, net | 5,6,8 | — | 44,775 | |||||||||||||||||||||
Long-term investment assets | 5,6,12 | 6,139,627 | 4,381,812 | |||||||||||||||||||||
Loans and other receivables, net | 5,6,8,32 | 62,919 | 58,989 | 5,6,8,34 | 75,589 | 109,079 | ||||||||||||||||||
Other financial assets | 5,6,7 | 430 | 323 | 5,6,7 | 353 | 901 | ||||||||||||||||||
Property, plant and equipment, net | 14,21,33 | 16,966,252 | 14,090,334 | 13,16,35 | 41,230,562 | 39,949,940 | ||||||||||||||||||
Right-of-use assets, net | 3,14 | 1,707,645 | 1,706,658 | |||||||||||||||||||||
Intangible assets, net | 15,29 | 1,704,896 | 1,336,680 | 15 | 3,400,278 | 2,571,049 | ||||||||||||||||||
Investment property, net | 14,16 | 2,679 | 28,456 | 13,16 | 209,417 | 258 | ||||||||||||||||||
Deferred tax assets | 21,30 | 361,204 | 272,102 | 22,32 | 556,194 | 673,640 | ||||||||||||||||||
Employee benefit assets, net | 21 | 61,962 | 3,406 | |||||||||||||||||||||
Other non-current assets | 11 | 565,533 | 508,476 | 10,35 | 55,029 | 580,463 | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
19,917,876 | 16,519,764 | 54,602,900 | 50,790,748 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total assets | ₩ | 29,677,906 | 26,883,278 | ₩ | 71,173,853 | 65,248,350 | ||||||||||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Financial Position, continued
As of December 31, 2020 and 2019
Note | 2020 | 2019 | ||||||||||
(In millions of won) | ||||||||||||
Liabilities | ||||||||||||
Current liabilities | ||||||||||||
Trade payables | 5,6,34 | ₩ | 1,046,159 | 1,042,542 | ||||||||
Other payables | 5,6,34 | 2,348,909 | 2,367,673 | |||||||||
Other non-trade payables | 5,6,17,34 | 1,367,193 | 1,257,895 | |||||||||
Borrowings | 5,6,18,35 | 3,114,250 | 2,737,770 | |||||||||
Provisions | 20 | 13,797 | 10,701 | |||||||||
Current tax liabilities | 636,649 | 89,217 | ||||||||||
Lease liabilities | 3,5,6,14 | 347,464 | 293,171 | |||||||||
Other current liabilities | 19 | 197,395 | 162,997 | |||||||||
Other financial liabilities | 5,6 | 544 | — | |||||||||
|
|
|
| |||||||||
9,072,360 | 7,961,966 | |||||||||||
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||
Long-term other payables | 5,6 | 272,396 | — | |||||||||
Other non-trade payables | 5,6,17 | 29,923 | 18,266 | |||||||||
Borrowings | 5,6,18,35 | 8,137,398 | 7,785,736 | |||||||||
Defined benefit liabilities, net | 21 | 2,739 | 53,624 | |||||||||
Deferred tax liabilities | 22,32 | 266,640 | 15,743 | |||||||||
Lease liabilities | 3,5,6,14 | 1,296,252 | 1,373,828 | |||||||||
Other financial liabilities | 5,6,23 | 88,121 | 15,532 | |||||||||
Other non-current liabilities | 19 | 98,927 | 87,773 | |||||||||
|
|
|
| |||||||||
10,192,396 | 9,350,502 | |||||||||||
|
|
|
| |||||||||
Total liabilities | 19,264,756 | 17,312,468 | ||||||||||
|
|
|
| |||||||||
Equity | ||||||||||||
Equity attributable to owners of the Parent Company | ||||||||||||
Capital stock | 24 | 3,657,652 | 3,657,652 | |||||||||
Capital surplus | 24 | 4,143,736 | 4,143,736 | |||||||||
Other equity | 24,37 | (2,503,122 | ) | (2,504,713 | ) | |||||||
Accumulated other comprehensive loss | 25 | (405,453 | ) | (298,935 | ) | |||||||
Retained earnings | 26 | 46,995,728 | 42,923,362 | |||||||||
|
|
|
| |||||||||
Total equity attributable to owners of the Parent Company | 51,888,541 | 47,921,102 | ||||||||||
Non-controlling interests | 20,556 | 14,780 | ||||||||||
|
|
|
| |||||||||
Total equity | 51,909,097 | 47,935,882 | ||||||||||
|
|
|
| |||||||||
Total liabilities and equity | ₩ | 71,173,853 | 65,248,350 | |||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2020, 2019 and 2018
Note | 2020 | 2019 | 2018 | |||||||||||||
(In millions of won, except per share information) | ||||||||||||||||
Revenue | 4,27,34 | ₩ | 31,900,418 | 26,990,733 | 40,445,066 | |||||||||||
Cost of sales | 29,34 | 21,089,789 | 18,818,814 | 15,180,838 | ||||||||||||
|
|
|
|
|
| |||||||||||
Gross profit | 10,810,629 | 8,171,919 | 25,264,228 | |||||||||||||
Selling and administrative expenses | 28,29 | (5,798,005 | ) | (5,452,740 | ) | (4,420,478 | ) | |||||||||
Finance income | 5,30 | 3,327,905 | 1,247,640 | 1,691,955 | ||||||||||||
Finance expenses | 5,30 | (1,980,411 | ) | (1,531,417 | ) | (1,142,134 | ) | |||||||||
Share of profit of equity-accounted investees | 11 | (36,279 | ) | 22,633 | 13,007 | |||||||||||
Other income | 31 | 84,773 | 88,179 | 112,810 | ||||||||||||
Other expenses | 31 | (171,575 | ) | (113,575 | ) | (178,358 | ) | |||||||||
|
|
|
|
|
| |||||||||||
Profit before income tax | 6,237,037 | 2,432,639 | 21,341,030 | |||||||||||||
Income tax expense | 32 | 1,478,123 | 423,561 | 5,801,046 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit for the year | 4,758,914 | 2,009,078 | 15,539,984 | |||||||||||||
Other comprehensive income (loss) | ||||||||||||||||
Item that will never be reclassified to profit or loss: | ||||||||||||||||
Remeasurements of defined benefit liability, net of tax | 21 | 1,266 | (90,211 | ) | (77,029 | ) | ||||||||||
Items that are or may be reclassified to profit or loss: | ||||||||||||||||
Foreign operations – foreign currency translation differences, net of tax | 25 | (47,407 | ) | 150,037 | 7,534 | |||||||||||
Gain (loss) on valuation of derivatives, net of tax | 23,25 | (417 | ) | 12,753 | — | |||||||||||
Equity-accounted investees – share of other comprehensive income (loss), net of tax | 11,25 | (60,820 | ) | 21,444 | 2,276 | |||||||||||
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) for the year, net of tax | (107,378 | ) | 94,023 | (67,219 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income for the year | ₩ | 4,651,536 | 2,103,101 | 15,472,765 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit or loss attributable to: | ||||||||||||||||
Owners of the Parent Company | ₩ | 4,755,102 | 2,005,975 | 15,540,111 | ||||||||||||
Non-controlling interests | 3,812 | 3,103 | (127 | ) | ||||||||||||
Total comprehensive income attributable to: | ||||||||||||||||
Owners of the Parent Company | 4,649,850 | 2,099,648 | 15,471,792 | |||||||||||||
Non-controlling interests | 1,686 | 3,453 | 973 | |||||||||||||
Earnings per share | ||||||||||||||||
Basic earnings per share (in won) | 33 | 6,952 | 2,933 | 22,255 | ||||||||||||
Diluted earnings per share (in won) | 33 | 6,950 | 2,932 | 22,252 |
See accompanying notes to the consolidated financial statements
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2020, 2019 and 2018
Attributable to owners of the Parent Company | ||||||||||||||||||||||||||||||||||||
Notes | Capital stock | Capital surplus | Other equity | Accumulated other comprehensive income (loss) | Retained earnings | Total | Non-controlling interests | Total equity | ||||||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||||||
Balance at January 1, 2018 | ₩ | 3,657,652 | 4,143,736 | (771,100 | ) | (491,529 | ) | 27,276,521 | 33,815,280 | 5,639 | 33,820,919 | |||||||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 15,540,111 | 15,540,111 | (127 | ) | 15,539,984 | |||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 8,710 | (77,029 | ) | (68,319 | ) | 1,100 | (67,219 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total comprehensive income | — | — | — | 8,710 | 15,463,082 | 15,471,792 | 973 | 15,472,765 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Transactions with owners of the Parent Company | ||||||||||||||||||||||||||||||||||||
Acquisition of treasury shares | — | (1,736,514 | ) | — | — | (1,736,514 | ) | — | (1,736,514 | ) | ||||||||||||||||||||||||||
Dividends paid | 26 | — | — | — | — | (706,002 | ) | (706,002 | ) | — | (706,002 | ) | ||||||||||||||||||||||||
Share-based payment transactions | 37 | — | — | 1,163 | — | — | 1,163 | — | 1,163 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total transactions with owners of the Parent Company | — | — | (1,735,351 | ) | — | (706,002 | ) | (2,441,353 | ) | — | (2,441,353 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance at December 31, 2018 | 3,657,652 | 4,143,736 | (2,506,451 | ) | (482,819 | ) | 42,033,601 | 46,845,719 | 6,612 | 46,852,331 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance at January 1, 2019 | 3,657,652 | 4,143,736 | (2,506,451 | ) | (482,819 | ) | 42,033,601 | 46,845,719 | 6,612 | 46,852,331 | ||||||||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 2,005,975 | 2,005,975 | 3,103 | 2,009,078 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | 25 | — | — | — | 183,884 | (90,211 | ) | 93,673 | 350 | 94,023 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total comprehensive income | — | — | — | 183,884 | 1,915,764 | 2,099,648 | 3,453 | 2,103,101 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Transactions with owners of the Parent Company | ||||||||||||||||||||||||||||||||||||
Increase of non-controlling interests | — | — | — | — | — | — | 4,715 | 4,715 | ||||||||||||||||||||||||||||
Dividends paid | 26 | — | — | — | — | (1,026,003 | ) | (1,026,003 | ) | — | (1,026,003 | ) | ||||||||||||||||||||||||
Share-based payment transactions | 37 | — | — | 1,738 | — | — | 1,738 | — | 1,738 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total transactions with owners of the Parent Company | — | — | 1,738 | — | (1,026,003 | ) | (1,024,265 | ) | 4,715 | (1,019,550 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance at December 31, 2019 | ₩ | 3,657,652 | 4,143,736 | (2,504,713 | ) | (298,935 | ) | 42,923,362 | 47,921,102 | 14,780 | 47,935,882 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Financial Position,Changes in Equity, continued
As ofFor the years ended December 31, 20152020, 2019 and 20142018
Note | 2015 | 2014 | ||||||||||
(In millions of won) | ||||||||||||
Liabilities | ||||||||||||
Current liabilities | ||||||||||||
Trade payables | 5,6 | ₩ | 791,373 | 787,822 | ||||||||
Other payables | 5,6,32 | 1,337,803 | 1,358,816 | |||||||||
Other non-trade payables | 5,6 | 1,001,171 | 1,182,956 | |||||||||
Borrowings | 5,6,17,32 | 1,013,372 | 1,755,020 | |||||||||
Other financial liabilities | 5,6,22 | — | 30 | |||||||||
Provisions | 19,33 | 25,276 | 25,932 | |||||||||
Current tax liabilities | 627,260 | 583,529 | ||||||||||
Other current liabilities | 18 | 44,443 | 71,199 | |||||||||
|
|
|
| |||||||||
4,840,698 | 5,765,304 | |||||||||||
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||
Other non-trade payables | 5,6 | 89,891 | 132,947 | |||||||||
Borrowings | 5,6,17,32 | 2,805,223 | 2,419,739 | |||||||||
Other financial liabilities | 5,6,22 | 683 | 708 | |||||||||
Defined benefit liabilities, net | 20 | 484,977 | 465,350 | |||||||||
Deferred tax liabilities | 21 | 7,582 | 3,463 | |||||||||
Other non-current liabilities | 18 | 61,149 | 59,464 | |||||||||
|
|
|
| |||||||||
3,449,505 | 3,081,671 | |||||||||||
|
|
|
| |||||||||
Total liabilities | 8,290,203 | 8,846,975 | ||||||||||
|
|
|
| |||||||||
Equity | ||||||||||||
Equity attributable to owners of the Parent Company | ||||||||||||
Capital stock | 1,23 | 3,657,652 | 3,657,652 | |||||||||
Capital surplus | 23 | 4,143,736 | 4,143,736 | |||||||||
Other equity | 23 | (771,913 | ) | (24 | ) | |||||||
Accumulated other comprehensive loss | 24 | (1,600 | ) | (41,815 | ) | |||||||
Retained earnings | 25 | 14,358,988 | 10,276,904 | |||||||||
|
|
|
| |||||||||
Total equity attributable to owners of the Parent Company | 21,386,863 | 18,036,453 | ||||||||||
Non-controlling interests | 840 | (150 | ) | |||||||||
|
|
|
| |||||||||
Total equity | 21,387,703 | 18,036,303 | ||||||||||
|
|
|
| |||||||||
Total liabilities and equity | ₩ | 29,677,906 | 26,883,278 | |||||||||
|
|
|
|
Attributable to owners of the Parent Company | ||||||||||||||||||||||||||||||||||||
Notes | Capital stock | Capital surplus | Other equity | Accumulated other comprehensive income (loss) | Retained earnings | Total | Non-controlling interests | Total equity | ||||||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | ₩ | 3,657,652 | 4,143,736 | (2,504,713 | ) | (298,935 | ) | 42,923,362 | 47,921,102 | 14,780 | 47,935,882 | |||||||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 4,755,102 | 4,755,102 | 3,812 | 4,758,914 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | 25 | — | — | — | (106,518 | ) | 1,266 | (105,252 | ) | (2,126 | ) | (107,378 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total comprehensive income | — | — | — | (106,518 | ) | 4,756,368 | 4,649,850 | 1,686 | 4,651,536 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Transactions with owners of the Parent Company | ||||||||||||||||||||||||||||||||||||
Increase of non-controlling interests | — | — | — | — | — | — | 4,090 | 4,090 | ||||||||||||||||||||||||||||
Dividends paid | 26 | — | — | — | — | (684,002 | ) | (684,002 | ) | — | (684,002 | ) | ||||||||||||||||||||||||
Share-based payment transactions | 37 | — | — | 1,591 | — | — | 1,591 | — | 1,591 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total transactions with owners of the Parent Company | — | — | 1,591 | — | (684,002 | ) | (682,411 | ) | 4,090 | (678,321 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance at December 31, 2020 | ₩ | 3,657,652 | 4,143,736 | (2,503,122 | ) | (405,453 | ) | 46,995,728 | 51,888,541 | 20,556 | 51,909,097 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Comprehensive IncomeCash Flows
For the years ended December 31, 2015, 20142020, 2019 and 20132018
Note | 2015 | 2014 | 2013 | |||||||||||||
(In millions of won, except per share information) | ||||||||||||||||
Revenue | 4,32 | ₩ | 18,797,998 | 17,125,566 | 14,165,102 | |||||||||||
Cost of sales | 27,32 | 10,515,353 | 9,461,725 | 8,864,587 | ||||||||||||
|
|
|
|
|
| |||||||||||
Gross profit | 8,282,645 | 7,663,841 | 5,300,515 | |||||||||||||
Selling and administrative expense | 26,27 | (2,946,545 | ) | (2,554,375 | ) | (1,920,730 | ) | |||||||||
Finance income | 28 | 846,752 | 678,570 | 560,570 | ||||||||||||
Finance expenses | 28 | (829,913 | ) | (799,771 | ) | (747,329 | ) | |||||||||
Share of profit of equity-accounted investees | 12 | 24,642 | 23,145 | 19,256 | ||||||||||||
Other income | 29 | 40,479 | 618,684 | 368,513 | ||||||||||||
Other expenses | 29 | (148,939 | ) | (582,424 | ) | (505,870 | ) | |||||||||
|
|
|
|
|
| |||||||||||
Profit before income tax | 5,269,121 | 5,047,670 | 3,074,925 | |||||||||||||
Income tax expense | 30 | 945,526 | 852,501 | 202,068 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit for the year | 4,323,595 | 4,195,169 | 2,872,857 | |||||||||||||
Other comprehensive income (loss) | ||||||||||||||||
Item that will never be reclassified to profit or loss: | ||||||||||||||||
Remeasurements of defined benefit liability, net of tax | 20 | (21,871 | ) | (119,874 | ) | 15,587 | ||||||||||
Items that are or may be reclassified to profit or loss: | ||||||||||||||||
Available-for-sale financial assets — unrealized net change in fair value, net of tax | 13,24 | — | (7,824 | ) | (655 | ) | ||||||||||
Foreign operations — foreign currency translation differences, net of tax | 24 | 33,479 | 71,631 | 8,419 | ||||||||||||
Equity-accounted investees — share of other comprehensive income (loss), net of tax | 12,24 | 6,487 | 3,706 | (1,226 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) for the year, net of tax | 18,095 | (52,361 | ) | 22,125 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income for the year | ₩ | 4,341,690 | 4,142,808 | 2,894,982 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit (loss) attributable to: | ||||||||||||||||
Owners of the Parent Company | ₩ | 4,322,356 | 4,195,456 | 2,872,470 | ||||||||||||
Non-controlling interests | 1,239 | (287 | ) | 387 | ||||||||||||
Total comprehensive income attributable to: | ||||||||||||||||
Owners of the Parent Company | 4,340,700 | 4,142,574 | 2,894,652 | |||||||||||||
Non-controlling interests | 990 | 234 | 330 | |||||||||||||
Earnings per share | ||||||||||||||||
Basic and diluted earnings per share (in won) | 31 | 6,002 | 5,842 | 4,045 |
Note | 2020 | 2019 | 2018 | |||||||||||||
(In millions of won) | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||
Cash generated from operating activities | 36 | ₩ | 12,916,771 | 11,895,834 | 25,825,017 | |||||||||||
Interest received | 40,635 | 30,543 | 81,323 | |||||||||||||
Interest paid | (288,565 | ) | (238,314 | ) | (126,029 | ) | ||||||||||
Dividends received | 16,365 | 14,891 | 15,258 | |||||||||||||
Income tax paid | (370,635 | ) | (5,153,218 | ) | (3,568,370 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net cash provided by operating activities | 12,314,571 | 6,549,736 | 22,227,199 | |||||||||||||
|
|
|
|
|
| |||||||||||
Cash flows from investing activities | ||||||||||||||||
Net change in short-term financial instruments | (140,810 | ) | 225,447 | 4,174,667 | ||||||||||||
Net change in short-term investment assets | (115,122 | ) | 4,164,793 | (4,519,395 | ) | |||||||||||
Decrease in other financial assets | 773 | — | 116 | |||||||||||||
Increase in other financial assets | (205 | ) | (627 | ) | (100 | ) | ||||||||||
Collection of loans and other receivables | 36,722 | 13,057 | 21,824 | |||||||||||||
Increase in loans and other receivables | (238,727 | ) | (57,482 | ) | (48,424 | ) | ||||||||||
Proceeds from disposal of long-term investment assets | 708 | 4,316 | 7,118 | |||||||||||||
Acquisition of long-term investment assets | (93,846 | ) | (81,447 | ) | (4,012,799 | ) | ||||||||||
Proceeds from disposal of property, plant and equipment | 59,089 | 53,840 | 131,754 | |||||||||||||
Acquisition of property, plant and equipment | (10,068,662 | ) | (13,920,244 | ) | (16,036,146 | ) | ||||||||||
Proceeds from disposal of intangible assets | 695 | 183 | 2,532 | |||||||||||||
Acquisition of intangible assets | (800,729 | ) | (673,356 | ) | (933,139 | ) | ||||||||||
Proceeds from business transfer | 2,958 | — | — | |||||||||||||
Receipt of government grants | — | — | 17,081 | |||||||||||||
Acquisition of investments in associates | (483,237 | ) | (176,954 | ) | (200,508 | ) | ||||||||||
Acquisition of subsidiary, net of cash acquired | — | — | (33,330 | ) | ||||||||||||
Net cash outflow from business combination | — | (2,462 | ) | — | ||||||||||||
|
|
|
|
|
| |||||||||||
Net cash used in investing activities | (11,840,393 | ) | (10,450,936 | ) | (21,428,749 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Cash flows from financing activities | ||||||||||||||||
Proceeds from borrowings | 36 | 5,173,016 | 9,833,882 | 3,125,721 | ||||||||||||
Repayments of borrowings | 36 | (3,921,310 | ) | (4,585,425 | ) | (2,078,522 | ) | |||||||||
Payments of lease liabilities | 36 | (319,740 | ) | (390,501 | ) | — | ||||||||||
Acquisition of treasury shares | — | — | (1,736,514 | ) | ||||||||||||
Dividends paid | (684,002 | ) | (1,026,003 | ) | (706,002 | ) | ||||||||||
Increase of non-controlling interests | 4,090 | 4,715 | — | |||||||||||||
|
|
|
|
|
| |||||||||||
Net cash provided by (used in) financing activities | 252,054 | 3,836,668 | (1,395,317 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||
Effect of movements in exchange rates on cash and cash equivalents | (56,313 | ) | 21,283 | (3,805 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Net increase (decrease) in cash and cash equivalents | 669,919 | (43,249 | ) | (600,672 | ) | |||||||||||
Cash and cash equivalents at beginning of the year | 2,306,070 | 2,349,319 | 2,949,991 | |||||||||||||
|
|
|
|
|
| |||||||||||
Cash and cash equivalents at end of the year | ₩ | 2,975,989 | 2,306,070 | 2,349,319 | ||||||||||||
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Changes in Equity
For the year ended December 31, 2013
Attributable to owners of the Parent Company | ||||||||||||||||||||||||||||||||
Capital stock | Capital surplus | Other components of equity | Accumulated other comprehensive income (loss) | Retained earnings | Total | Non- controlling interests | Total equity | |||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2013 | ₩ | 3,488,419 | 3,053,874 | — | (115,402 | ) | 3,313,265 | 9,740,156 | (714 | ) | 9,739,442 | |||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 2,872,470 | 2,872,470 | 387 | 2,872,857 | ||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 6,595 | 15,587 | 22,182 | (57 | ) | 22,125 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total comprehensive income | — | — | — | 6,595 | 2,888,057 | 2,894,652 | 330 | 2,894,982 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Transactions with owners of the Parent Company | ||||||||||||||||||||||||||||||||
Exercise of conversion rights | 80,226 | 352,209 | — | — | — | 432,435 | — | 432,435 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total transactions with owners of the Parent Company | 80,226 | 352,209 | — | — | — | 432,435 | — | 432,435 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at December 31, 2013 | ₩ | 3,568,645 | 3,406,083 | — | (108,807 | ) | 6,201,322 | 13,067,243 | (384 | ) | 13,066,859 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2015 and 2014
Attributable to owners of the Parent Company | ||||||||||||||||||||||||||||||||
Capital stock | Capital surplus | Other components of equity | Accumulated other comprehensive income (loss) | Retained earnings | Total | Non- controlling interests | Total equity | |||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2014 | ₩ | 3,568,645 | 3,406,083 | — | (108,807 | ) | 6,201,322 | 13,067,243 | (384 | ) | 13,066,859 | |||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 4,195,456 | 4,195,456 | (287 | ) | 4,195,169 | |||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 66,992 | (119,874 | ) | (52,882 | ) | 521 | (52,361 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total comprehensive income | — | — | — | 66,992 | 4,075,582 | 4,142,574 | 234 | 4,142,808 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Transactions with owners of the Parent Company | ||||||||||||||||||||||||||||||||
Issue of ordinary shares related to acquisition of a subsidiary | 6,793 | 47,277 | — | — | — | 54,070 | — | 54,070 | ||||||||||||||||||||||||
Exercise of conversion rights | 82,214 | 690,376 | — | — | — | 772,590 | — | 772,590 | ||||||||||||||||||||||||
Acquisition of treasury shares | — | — | (24 | ) | — | — | (24 | ) | — | (24 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total transactions with owners of the Parent Company | 89,007 | 737,653 | (24 | ) | — | — | 826,636 | — | 826,636 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at December 31, 2014 | ₩ | 3,657,652 | 4,143,736 | (24 | ) | (41,815 | ) | 10,276,904 | 18,036,453 | (150 | ) | 18,036,303 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at January 1, 2015 | ₩ | 3,657,652 | 4,143,736 | (24 | ) | (41,815 | ) | 10,276,904 | 18,036,453 | (150 | ) | 18,036,303 | ||||||||||||||||||||
Total comprehensive income | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 4,322,356 | 4,322,356 | 1,239 | 4,323,595 | ||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 40,215 | (21,871 | ) | 18,344 | (249 | ) | 18,095 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total comprehensive income | — | — | — | 40,215 | 4,300,485 | 4,340,700 | 990 | 4,341,690 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Transactions with owners of the Parent Company | ||||||||||||||||||||||||||||||||
Dividends paid | — | — | — | — | (218,401 | ) | (218,401 | ) | — | (218,401 | ) | |||||||||||||||||||||
Acquisition of treasury shares | — | — | (771,889 | ) | — | — | (771,889 | ) | — | (771,889 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total transactions with owners of the Parent Company | — | — | (771,889 | ) | — | (218,401 | ) | (990,290 | ) | — | (990,290 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at December 31, 2015 | ₩ | 3,657,652 | 4,143,736 | (771,913 | ) | (1,600 | ) | 14,358,988 | 21,386,863 | 840 | 21,387,703 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2015, 2014 and 2013
Note | 2015 | 2014 | 2013 | |||||||||||||
(In millions of won) | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||
Cash generated from operating activities | 34 | ₩ | 10,357,267 | 6,305,229 | 6,521,553 | |||||||||||
Interest received | 51,610 | 35,658 | 58,888 | |||||||||||||
Interest paid | (124,304 | ) | (151,551 | ) | (199,553 | ) | ||||||||||
Dividends received | 17,045 | 17,134 | 17,414 | |||||||||||||
Income tax paid | (982,098 | ) | (339,779 | ) | (26,246 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net cash provided by operating activities | 9,319,520 | 5,866,691 | 6,372,056 | |||||||||||||
|
|
|
|
|
| |||||||||||
Cash flows from investing activities | ||||||||||||||||
Decrease (increase) in short-term financial instruments, net | 39,533 | (1,407,752 | ) | (1,028,615 | ) | |||||||||||
Collection of loans and other receivables | 10,692 | 3,501 | 2,728 | |||||||||||||
Increase in loans and other receivables | (14,134 | ) | (15,735 | ) | (5,969 | ) | ||||||||||
Proceeds from disposal of available-for-sale financial assets | 1,319 | 28,602 | 331 | |||||||||||||
Acquisition of available-for-sale financial assets | (5,359 | ) | (1,415 | ) | (115,564 | ) | ||||||||||
Decrease in other financial assets | — | 275,422 | 29,681 | |||||||||||||
Increase in other financial assets | — | (29,611 | ) | (276,591 | ) | |||||||||||
Cash inflows from derivative transactions | 1,672 | 2,371 | 3,656 | |||||||||||||
Cash outflows from derivative transactions | (2,088 | ) | (4,534 | ) | (6,550 | ) | ||||||||||
Proceeds from disposal of property, plant and equipment | 220,097 | 198,959 | 15,509 | |||||||||||||
Acquisition of property, plant and equipment | (6,774,625 | ) | (4,800,722 | ) | (3,205,797 | ) | ||||||||||
Proceeds from disposal of intangible assets | 7,963 | 286 | 200 | |||||||||||||
Acquisition of intangible assets | (623,743 | ) | (336,291 | ) | (301,496 | ) | ||||||||||
Proceeds from disposal of assets held for sale | 22,630 | — | — | |||||||||||||
Receipt of government grants | 406 | 20,241 | — | |||||||||||||
Cash outflows from business combinations | — | (19,682 | ) | (3,648 | ) | |||||||||||
Cash outflows from disposal of investments in a subsidiary | — | (1,467 | ) | — | ||||||||||||
Investments in associates | (9,893 | ) | — | — | ||||||||||||
|
|
|
|
|
| |||||||||||
Net cash used in investing activities | ₩ | (7,125,530 | ) | (6,087,827 | ) | (4,892,125 | ) | |||||||||
|
|
|
|
|
| |||||||||||
Cash flows from financing activities | ||||||||||||||||
Proceeds from borrowings | ₩ | 3,933,056 | 3,848,816 | 3,528,687 | ||||||||||||
Repayments of borrowings | (4,405,023 | ) | (3,820,449 | ) | (5,028,676 | ) | ||||||||||
Acquisition of treasury shares | (771,889 | ) | (24 | ) | — | |||||||||||
Dividends paid | (218,401 | ) | — | — | ||||||||||||
|
|
|
|
|
| |||||||||||
Net cash provided by (used in) financing activities | (1,462,257 | ) | 28,343 | (1,499,989 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Effect of movements in exchange rates on cash and cash equivalents | 7,225 | (2,313 | ) | (6,462 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Net increase (decrease) in cash and cash equivalents | 738,958 | (195,106 | ) | (26,520 | ) | |||||||||||
Cash and cash equivalents at beginning of the year | 436,761 | 631,867 | 658,387 | |||||||||||||
|
|
|
|
|
| |||||||||||
Cash and cash equivalents at end of the year | ₩ | 1,175,719 | 436,761 | 631,867 | ||||||||||||
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
1. Reporting Entity
(1) General information about SK hynix, Inc. (the “Parent Company” or the “Company”) and its subsidiaries (collectively the “Group”) is as follows:
The Parent Company, incorporated in October 15, 1949, is engaged in the manufacture,manufactures, distribution and sales of semiconductor products and its shares have been listed on the Korea Exchange since 1996. The Parent Company’s headquarters is located at 2091 Gyeongchung-daero, Bubal-eup, Icheon-si, Gyeonggi-do, South Korea, and the Group has manufacturing facilities in Icheon-si and Cheongju-si, South Korea, and Wuxi and Chongqing, China.
As of December 31, 2015,2020, the shareholders of the Parent Company are as follows:
Shareholder | Number of shares | Percentage of ownership (%) | Number of shares | Percentage of ownership (%) | ||||||||||||
SK Telecom Co., Ltd. | 146,100,000 | 20.07 | 146,100,000 | 20.07 | ||||||||||||
National Pension Service | 59,898,134 | 8.23 | 79,883,313 | 10.97 | ||||||||||||
Share Management Council1 | 5,097,667 | 0.70 | ||||||||||||||
Other investors | 494,905,994 | 67.98 | 458,018,482 | 62.92 | ||||||||||||
Treasury shares | 22,000,570 | 3.02 | 44,000,570 | 6.04 | ||||||||||||
|
|
|
| |||||||||||||
728,002,365 | 100.00 | 728,002,365 | 100.00 | |||||||||||||
|
|
|
|
|
Shareholder | Number of shares | Percentage of ownership (%) | ||||||
KEB Hana Bank (formerly, Korea Exchange Bank) | 5,092,500 | 0.70 | ||||||
Other financial institutions | 5,167 | 0.00 | ||||||
|
|
|
| |||||
5,097,667 | 0.70 | |||||||
|
|
|
|
According toThe Parent Company’s common shares and depositary receipts (DRs) are listed on the share purchase agreement dated November 14, 2011, between SK Telecom Co., Ltd.Stock Market of Korea Exchange and the Share Management Council, the Share Management Council should exercise its voting right on its shares following SK Telecom Co., Ltd.’s decision in designating officers of the Company or other matters unless this conflicts with the Share Management Council’s interest.Luxembourg Stock Exchange, respectively.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
1. Reporting Entity, continued
(2) Details of the Group’s consolidated subsidiaries as of December 31, 20152020 and 20142019 are as follows:
Ownership(%) | ||||||||||||
Company | Location | Business | 2015 | 2014 | ||||||||
SK hyeng Inc. | Korea | Domestic subsidiary | 100.00 | 100.00 | ||||||||
SK hystec Inc. | Korea | Domestic subsidiary | 100.00 | 100.00 | ||||||||
Siliconfile Technologies Inc. | Korea | Development and manufacturing of electronic component | 100.00 | 100.00 | ||||||||
SK hynix America Inc. (SKHYA) | U.S.A. | Overseas sales subsidiary | 97.74 | 97.74 | ||||||||
Hynix Semiconductor Manufacturing America Inc. (HSMA)1 | U.S.A. | Discontinued subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Deutschland GmbH (SKHYD) | Germany | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix U.K. Ltd. (SKHYU) | U.K. | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Asia Pte. Ltd. (SKHYS) | Singapore | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor India Pvt. Ltd. (SKHYIS)2 | India | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor Hong Kong Ltd. (SKHYH) | Hong Kong | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor (Shanghai) Co., Ltd. (SKHYCS) | China | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Japan Inc. (SKHYJ) | Japan | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor Taiwan Inc. (SKHYT) | Taiwan | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor (China) Ltd. (SKHYCL) | China | Overseas manufacturing subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor (Wuxi) Ltd. (SKHYMC) | China | Overseas manufacturing subsidiary | 100.00 | 100.00 | ||||||||
SK hynix (Wuxi) Semiconductor Sales Ltd. (SKHYCW) | China | Overseas sales subsidiary | 100.00 | 100.00 | ||||||||
SK hynix Italy S.r.l (SKHYIT) | Italy | Overseas R&D center | 100.00 | 100.00 | ||||||||
SK hynix memory solutions Inc. (SKHMS) | U.S.A. | Overseas R&D center | 100.00 | 100.00 | ||||||||
SK hynix Flash Solution Taiwan (SKHYFST) | Taiwan | Overseas R&D center | 100.00 | 100.00 | ||||||||
SK APTECH Ltd. (SKAPTECH) | Hong Kong | Holding company | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor (Chongqing) Ltd. (SKHYCQL)3 | China | Overseas manufacturing subsidiary | 100.00 | 100.00 | ||||||||
Softeq Flash Solutions LLC.(SOFTEQ) | Belarus | Overseas R&D center | 100.00 | 100.00 | ||||||||
MMT (Money Market Trust) | Korea | Money Market Trust | 100.00 | 100.00 |
Ownership (%) | ||||||||||||
Company | Location | Business | 2020 | 2019 | ||||||||
SK hyeng Inc. | Korea | Construction service | 100.00 | 100.00 | ||||||||
SK hystec Inc. | Korea | Business support service | 100.00 | 100.00 | ||||||||
Happymore Inc. | Korea | Manufacturing and cleaning cleanroom suits | 100.00 | 100.00 | ||||||||
SK hynix system ic Inc. | Korea | Semiconductor manufacturing and sales | 100.00 | 100.00 | ||||||||
HAPPYNARAE Co., Ltd. | Korea | Industrial material supply | 100.00 | 100.00 | ||||||||
SK hynix America Inc. | U.S.A. | Semiconductor sales | 97.74 | 97.74 | ||||||||
SK hynix Deutschland GmbH | Germany | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix Asia Pte. Ltd. | Singapore | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor Hong Kong Ltd. | Hong Kong | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix U.K. Ltd. | U.K. | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor Taiwan Inc. | Taiwan | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix Japan Inc. | Japan | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor (Shanghai) Co., Ltd. | China | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor India Private Ltd.1 | India | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix (Wuxi) Semiconductor Sales Ltd. | China | Semiconductor sales | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor (China) Ltd. | China | Semiconductor manufacturing | 100.00 | 100.00 | ||||||||
SK hynix Semiconductor (Chongqing) Ltd.2 | China | Semiconductor manufacturing | 100.00 | 100.00 | ||||||||
SK hynix Italy S.r.l | Italy | Semiconductor research and development | 100.00 | 100.00 | ||||||||
SK hynix memory solutions America Inc. | U.S.A. | Semiconductor research and development | 100.00 | 100.00 | ||||||||
SK hynix memory solutions Taiwan Ltd. | Taiwan | Semiconductor research and development | 100.00 | 100.00 | ||||||||
SK hynix memory solutions Eastern Europe LLC. | Belarus | Semiconductor research and development | 100.00 | 100.00 | ||||||||
SK APTECH Ltd. | Hong Kong | Overseas investment | 100.00 | 100.00 | ||||||||
SK hynix Ventures Hong Kong Limited | Hong Kong | Overseas investment | 100.00 | 100.00 | ||||||||
SK hynix (Wuxi) Investment Ltd.3 | China | Overseas investment | 100.00 | 100.00 | ||||||||
SK hynix (Wuxi) Industry Development Ltd. 4 | China | Foreign hospital construction | 100.00 | 100.00 | ||||||||
SK hynix Happiness (Wuxi) Hospital Management Ltd.4 | China | Foreign hospital operation | 70.00 | 70.00 | ||||||||
SK hynix system ic (Wuxi) Co., Ltd.5 | China | Overseas Semiconductor manufacturing and sales | 100.00 | 100.00 | ||||||||
SK hynix cleaning (Wuxi) Ltd.4 | China | Building maintenance | 100.00 | 100.00 | ||||||||
SUZHOU HAPPYNARAE Co., Ltd.6 | China | Overseas industrial material supply | 100.00 | 100.00 | ||||||||
CHONGQING HAPPYNARAE Co., Ltd.7 | China | Overseas industrial material supply | 100.00 | 100.00 |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
1. Reporting Entity, continued
Ownership (%) | ||||||||||||
Company | Location | Business | 2020 | 2019 | ||||||||
SkyHigh Memory Limited5 | Hong Kong | Overseas manufacturing and sales of semiconductor | 60.00 | 60.00 | ||||||||
SK hynix (Wuxi) Education Technology Co., Ltd.4 | China | Education | 100.00 | 100.00 | ||||||||
Gauss Labs Inc.8 | U.S.A | Telecommunication of information | 100.00 | — | ||||||||
MMT (Money Market Trust) | Korea | Money Market Trust | 100.00 | 100.00 |
1 |
|
Subsidiary of SK hynix Asia Pte. Ltd. |
Subsidiary of SK APTECH Ltd. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
1. Reporting Entity, continued
3 | Subsidiary of SK hynix Semiconductor (China) Ltd. |
4 | Subsidiary of SK hynix (Wuxi) Investment Ltd. |
5 | Subsidiary of SK hynix system ic Inc. |
6 | Subsidiary of HAPPYNARAE Co., Ltd. |
7 | Subsidiary of SUZHOU HAPPYNARAE Co., Ltd. |
8 | Gauss Labs Inc. has been established during the year ended December 31, 2020. |
(3) There is no changeChanges in the consolidated subsidiaries for the year ended December 31, 2015.2020 are as follows:
Company | Description | |||
Newly included | Gauss Labs Inc. | Newly established |
(4) Major subsidiaries’ summarized separate statements of financial position as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||||||||||||||||||
Assets | Liabilities | Equity | Assets | Liabilities | Equity | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
SK hynix America Inc.(SKHYA) | ₩ | 1,504,882 | 1,333,291 | 171,591 | 1,711,746 | 1,634,047 | 77,699 | |||||||||||||||||
SK hynix Asia Pte. Ltd.(SKHYS) | 269,286 | 190,155 | 79,131 | 386,135 | 313,152 | 72,983 | ||||||||||||||||||
SK hynix Semiconductor Hong Kong Ltd.(SKHYH) | 529,095 | 431,074 | 98,021 | 563,598 | 478,449 | 85,149 | ||||||||||||||||||
SK hynix Japan Inc.(SKHYJ) | 245,142 | 183,277 | 61,865 | 285,122 | 227,860 | 57,262 | ||||||||||||||||||
SK hynix Semiconductor Taiwan Inc.(SKHYT) | 299,834 | 277,520 | 22,314 | 628,791 | 605,861 | 22,930 | ||||||||||||||||||
SK hynix Semiconductor (China) Ltd.(SKHYCL) | 3,718,832 | 503,776 | 3,215,056 | 4,179,186 | 1,197,588 | 2,981,598 | ||||||||||||||||||
SK hynix Deutschland GmbH(SKHYD) | 75,152 | 38,697 | 36,455 | 135,384 | 98,477 | 36,907 | ||||||||||||||||||
SK hynix U.K. Ltd.(SKHYU) | 155,531 | 138,918 | 16,613 | 194,318 | 179,990 | 14,328 | ||||||||||||||||||
SK hynix Semiconductor (Chongqing) Ltd.(SKHYCQL) | 406,552 | 224,672 | 181,880 | 341,984 | 174,936 | 167,048 |
2020 | 2019 | |||||||||||||||||||||||
Assets | Liabilities | Equity | Assets | Liabilities | Equity | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
SK hynix system ic Inc. | ₩ | 998,154 | 368,517 | 629,636 | 684,261 | 150,527 | 533,734 | |||||||||||||||||
SK hynix America Inc. | 2,722,417 | 2,330,715 | 391,702 | 1,801,366 | 1,436,975 | 364,391 | ||||||||||||||||||
SK hynix Asia Pte. Ltd. | 284,115 | 197,442 | 86,673 | 387,860 | 298,657 | 89,203 | ||||||||||||||||||
SK hynix Semiconductor Hong Kong Ltd. | 282,273 | 134,019 | 148,254 | 195,262 | 44,405 | 150,857 | ||||||||||||||||||
SK hynix U.K. Ltd. | 303,729 | 283,833 | 19,896 | 217,160 | 197,293 | 19,867 | ||||||||||||||||||
SK hynix Semiconductor Taiwan Inc. | 273,651 | 247,895 | 25,756 | 247,671 | 219,056 | 28,615 | ||||||||||||||||||
SK hynix Japan Inc. | 348,336 | 278,622 | 69,714 | 305,770 | 235,243 | 70,527 | ||||||||||||||||||
SK hynix (Wuxi) Semiconductor Sales Ltd. | 1,250,087 | 1,024,006 | 226,081 | 1,646,998 | 1,510,156 | 136,842 | ||||||||||||||||||
SK hynix Semiconductor (China) Ltd. | 11,862,866 | 6,685,079 | 5,177,787 | 9,605,890 | 4,937,517 | 4,668,373 | ||||||||||||||||||
SK hynix Semiconductor (Chongqing) Ltd. | 920,531 | 317,216 | 603,315 | 837,339 | 309,283 | 528,056 | ||||||||||||||||||
HAPPYNARAE Co., Ltd. | 171,026 | 116,728 | 54,298 | 182,747 | 132,925 | 49,822 |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
1. Reporting Entity, continued
(5) Major subsidiaries’ summarized separate statements of comprehensive income for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | ||||||||||||
Revenue | Profit | Total comprehensive income | ||||||||||
(In millions of won) | ||||||||||||
SK hynix America Inc. (SKHYA) | ₩ | 7,599,679 | 89,716 | 89,716 | ||||||||
SK hynix Asia Pte.Ltd. (SKHYS) | 1,612,550 | 1,303 | 1,303 | |||||||||
SK hynix Semiconductor Hong Kong Ltd. (SKHYH) | 4,181,208 | 6,909 | 6,909 | |||||||||
SK hynix Japan Inc. (SKHYJ) | 934,001 | 1,116 | 1,322 | |||||||||
SK hynix Semiconductor Taiwan Inc. (SKHYT) | 1,915,465 | 5,852 | 5,852 | |||||||||
SK hynix Semiconductor (China) Ltd. (SKHYCL) | 2,273,536 | 206,446 | 206,446 | |||||||||
SK hynix Deutschland GmbH (SKHYD) | 414,489 | 1,072 | 1,072 | |||||||||
SK hynix U.K. Ltd. (SKHYU) | 702,329 | 1,289 | 1,289 | |||||||||
SK hynix Semiconductor (Chongqing) Ltd. (SKHYCQL) | 350,110 | 13,328 | 13,328 |
2020 | ||||||||||||
Revenue | Profit (Loss) | Total comprehensive income (loss) | ||||||||||
(In millions of won) | ||||||||||||
SK hynix system ic Inc. | ₩ | 702,979 | 97,317 | 95,903 | ||||||||
SK hynix America Inc. | 12,761,911 | 53,448 | 53,448 | |||||||||
SK hynix Asia Pte. Ltd. | 1,858,091 | 3,055 | 3,055 | |||||||||
SK hynix Semiconductor Hong Kong Ltd. | 1,746,160 | 6,320 | 6,320 | |||||||||
SK hynix U.K. Ltd. | 994,299 | 1,331 | 1,331 | |||||||||
SK hynix Semiconductor Taiwan Inc. | 1,917,103 | 4,657 | 4,657 | |||||||||
SK hynix Japan Inc. | 551,890 | (181 | ) | (212 | ) | |||||||
SK hynix (Wuxi) Semiconductor Sales Ltd. | 10,423,701 | 90,303 | 90,303 | |||||||||
SK hynix Semiconductor (China) Ltd. | 3,936,769 | 484,677 | 484,677 | |||||||||
SK hynix Semiconductor (Chongqing) Ltd. | 699,558 | 73,048 | 73,048 | |||||||||
HAPPYNARAE Co., Ltd. | 981,466 | 4,314 | 4,475 |
2019 | ||||||||||||
Revenue | Profit | Total comprehensive income | ||||||||||
(In millions of won) | ||||||||||||
SK hynix system ic Inc. | ₩ | 661,511 | 76,195 | 76,400 | ||||||||
SK hynix America Inc. | 8,353,658 | 47,947 | 47,947 | |||||||||
SK hynix Asia Pte. Ltd. | 1,662,315 | 1,965 | 1,965 | |||||||||
SK hynix Semiconductor Hong Kong Ltd. | 1,579,680 | 2,493 | 2,493 | |||||||||
SK hynix U.K. Ltd. | 907,945 | 1,057 | 1,057 | |||||||||
SK hynix Semiconductor Taiwan Inc. | 1,455,320 | 8,127 | 8,127 | |||||||||
SK hynix Japan Inc. | 672,393 | 701 | 700 | |||||||||
SK hynix (Wuxi) Semiconductor Sales Ltd. | 10,882,152 | 94,768 | 94,768 | |||||||||
SK hynix Semiconductor (China) Ltd. | 3,177,415 | 18,551 | 18,551 | |||||||||
SK hynix Semiconductor (Chongqing) Ltd. | 477,849 | 39,102 | 39,102 | |||||||||
HAPPYNARAE Co., Ltd. | 1,107,524 | 8,473 | 8,162 |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
1. Reporting Entity, continued
2014 | ||||||||||||
Revenue | Profit | Total comprehensive income | ||||||||||
(In millions of won) | ||||||||||||
SK hynix America Inc. (SKHYA) | ₩ | 6,360,992 | 21,385 | 21,385 | ||||||||
SK hynix Asia Pte.Ltd. (SKHYS) | 1,638,396 | 2,773 | 2,773 | |||||||||
SK hynix Semiconductor Hong Kong Ltd. (SKHYH) | 3,714,085 | 12,941 | 12,941 | |||||||||
SK hynix Japan Inc. (SKHYJ) | 843,383 | 9,890 | 10,478 | |||||||||
SK hynix Semiconductor Taiwan Inc. (SKHYT) | 2,176,739 | 7,599 | 7,599 | |||||||||
SK hynix Semiconductor (China) Ltd. (SKHYCL) | 1,914,452 | 381,729 | 381,729 | |||||||||
SK hynix Deutschland GmbH (SKHYD) | 551,528 | 6,197 | 6,197 | |||||||||
SK hynix U.K. Ltd. (SKHYU) | 575,959 | 1,813 | 1,813 | |||||||||
SK hynix Semiconductor (Chongqing) Ltd. (SKHYCQL) | 109,769 | 6,813 | 6,813 |
2013 | ||||||||||||
Revenue | Profit | Total comprehensive income | ||||||||||
(In millions of won) | ||||||||||||
SK hynix America Inc. (SKHYA) | ₩ | 5,187,848 | 23,547 | 23,547 | ||||||||
SK hynix Asia Pte.Ltd. (SKHYS) | 1,203,290 | 2,385 | 2,385 | |||||||||
SK hynix Semiconductor Hong Kong Ltd. (SKHYH) | 3,022,397 | 19,471 | 19,471 | |||||||||
SK hynix Japan Inc. (SKHYJ) | 790,736 | 10,335 | 10,447 | |||||||||
SK hynix Semiconductor Taiwan Inc. (SKHYT) | 1,769,055 | 6,680 | 6,680 | |||||||||
SK hynix Semiconductor (China) Ltd. (SKHYCL) | 1,718,074 | 23,611 | 23,611 | |||||||||
SK hynix Deutschland GmbH (SKHYD) | 594,166 | 2,440 | 2,440 | |||||||||
SK hynix U.K. Ltd. (SKHYU) | 494,305 | 1,743 | 1,743 |
2018 | ||||||||||||
Revenue | Profit (Loss) | Total comprehensive income (loss) | ||||||||||
(In millions of won) | ||||||||||||
SK hynix system ic Inc. | ₩ | 554,264 | 60,649 | 60,360 | ||||||||
SK hynix America Inc. | 14,296,762 | 30,800 | 30,800 | |||||||||
SK hynix Asia Pte. Ltd. | 3,531,313 | 3,999 | 3,999 | |||||||||
SK hynix Semiconductor Hong Kong Ltd. | 3,710,359 | 11,486 | 11,486 | |||||||||
SK hynix U.K. Ltd. | 1,517,706 | 1,005 | 1,005 | |||||||||
SK hynix Semiconductor Taiwan Inc. | 2,955,717 | 2,475 | 2,475 | |||||||||
SK hynix Japan Inc. | 1,084,079 | (410 | ) | (467 | ) | |||||||
SK hynix Semiconductor (Shanghai) Co., Ltd. | 7,291,257 | 49,634 | 49,634 | |||||||||
SK hynix (Wuxi) Semiconductor Sales Ltd. | 4,832,879 | 43,163 | 43,163 | |||||||||
SK hynix Semiconductor (China) Ltd. | 2,518,849 | 84,089 | 84,089 | |||||||||
SK hynix Semiconductor (Chongqing) Ltd. | 406,839 | 27,125 | 27,125 | |||||||||
HAPPYNARAE Co., Ltd. | 1,094,778 | 12,117 | 11,942 |
(6) There are no significant non-controlling interests to the Group as of December 31, 2015, 20142020, 2019 and 2013.2018.
2. Basis of Preparation
(1) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements were authorized for issuance by the board of directors on January 25, 201628, 2021 for statutory shareholder approval purpose, and re-authorized for issuance by Parent Company’s management on April 29, 2021.
(2)(1) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statements of financial position:
derivative financial instruments are measured at fair value
financial instruments at fair value through profit or loss are measured at fair value
assets or liabilities for defined benefit plans are recognized at the net of the total present value of defined benefit obligations less the fair value of plan assets
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
2. Basis of Preparation, continued
(3)(2) Functional and presentation currency
Financial statements of entities within the Group are presented in functional currency and the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Company’s functional and presentation currency.
(4)(3) Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
2. Basis of Preparation, continued
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
(a) Critical judgmentsJudgments
Information about critical judgments made in applying accounting policies that have the most significant effectseffect on the amounts recognized in the consolidated financial statements is included in the note for investments in associates and joint ventures.
(b) Assumptions and estimation uncertainties
Preparation of consolidated financial statements requires assumptions and estimates of the future, and the management requires judgement to apply the Group’s accounting policies. The estimates and assumptions are continuously assessed, considering historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next future financial year are addressed below.
During 2020, the spread of Coronavirus disease 2019 (“COVID-19”) has a material impact on the global economy. It may have a negative impact; such as, decrease in productivity, decrease or delay in sales, collection of existing receivables and others. Accordingly, it may have a negative impact on the financial position and financial performance of the Group.
Assumptions and estimates applied in the preparation of the consolidated financial statements can be adjusted depending on changes in the uncertainty from COVID-19. Also, the ultimate effect of COVID-19 to the Group’s business, financial position and financial performance cannot presently be determined.
The following notes:are estimates and assumptions about management decisions and significant risks that may affect the adjustment of the carrying amount of assets and liabilities in the following financial years: Additional information on significant judgements and estimates for some items is included in the separate footnotes.
(i) | Fair value of financial instruments |
In principle, the fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group is making judgments on the selection and assumptions of various evaluation techniques based on important market conditions as of the end of the reporting period (see note 6).
(ii) | Corporate income tax |
There is uncertainty in determining the final tax effect as corporate tax on the Group’s taxable income is calculated by applying various national tax laws and tax authorities’ decisions. The Group recognized the corporate tax effect, which is expected to be borne in the future as a result of business activities until the end of the reporting period, as current tax and deferred tax after the best estimation process. However, the actual future final corporate tax burden may not be consistent with the assets and liabilities recognized, and this difference may affect current and deferred tax assets and liabilities when the final tax effect is confirmed.
The Group will pay additional corporate taxes calculated by the method prescribed by the tax law when a certain amount of taxable income is not used for investment, salary increase, etc. for a certain period of time. Therefore, when measuring current and deferred taxes during the period, the tax effects should be reflected, and the corporate tax to be borne by the Group depends on the level of investment and salary growth in each year, so there is uncertainty in calculating the final tax effect.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
2. Basis of Preparation, continued
In accordance with IAS 12, the Group reviews uncertainty in its tax treatment and reflects the impact of uncertainty in its financial statements if the tax authorities conclude that uncertainty is unlikely to be accepted, using a method that expects better prediction of uncertainty:
Note 3:Most likely: the single most likely amount within the range of possible outcomes
Expected value: the sum of all amounts in the range of possible outcomes multiplied by each probability
(iii) | Provisions |
The Group calculates provisions related to litigation costs as of the end of the reporting period, which are determined by estimates based on past experience (see note 20).
(iv) | Net defined benefit liabilities |
The present value of the net defined benefit liability is affected by various factors determined by the actuarial method, especially changes in the discount rate (see note 21).
(v) | Inventories |
Estimating the net realizable value of inventories is based on the most reliable evidence available as of the estimated date for the amount feasible from inventories. In addition, if the Group confirms the circumstances in which an event exists at the end of the reporting period, it shall estimate the change in price or cost directly related to the event.
(vi) | Revenue recognition |
A refund liability and a right to the returned goods are recognized for the products expected to be returned once they are sold. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method), and the Group’s revenue is affected by changes in expected return rate.
Sales of goods are recognized based on considerations specified in the contract, net of sales incentives, when control of the products has transferred. The sales deduction, which affects the Company’s revenue, is reasonably estimated based on historical experience and past contracts.
(vii) | Development cost |
The recoverable amounts of development cost have been determined based on value-in-use calculations, and those calculations are based on estimates.
(vii) | Depreciation of property, plant, and equipment and Intangible assets |
The depreciation method, residual values and useful lives of property, plant and equipment and intangibleIntangible assets are reviewed, and adjusted if appropriate, at the end of each reporting period. If the resulting estimates differ from previous estimates, the difference is accounted for as a change in accounting estimates in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.
(ix) | Goodwill |
The recoverable amount of cash-generating units to review goodwill for impairment is determined on the basis of their net fair value.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
2. Basis of Preparation, continued
(x) | Lease |
In determining the lease term, the Group considers all relevant facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For warehouses, retail stores, and equipment leases, the most relevant factors are generally as follows:
If a significant penalty is to be paid to terminate (not to extend), it is generally quite certain that the Group exercises the option to extend (not to extend).
Note 5: classification of financial instruments
(b) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertaintiesIt is generally fairly certain that the Group exercises the option to extend (not exercise the option to terminate) if the lease is expected to have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:
Note 9: net realizable value of inventoriesresidual value.
Note 15: impairmentIn other cases than the above, the Group will consider other factors, including the lease duration and costs, and the discontinuation required to replace the leased asset.
Most extension options in office and vehicle transport leases are not included in lease liabilities because the Group can replace the asset without significant cost or business interruption.
Reevaluate the lease term if the option is actually exercised (or not exercised) or the Group is liable to exercise (not exercised) the option. Only when significant events occur or there are significant changes in the circumstances that affect the lessee’s control of goodwillthe lease term, the consolidator changes its judgment to ensure that the option to extend (or will not be exercised) is significant.
Note 19: recognition and measurement of provisions
Note 20: measurement of defined benefit obligations
Note 21: recognition of deferred tax assets and liabilities
(c) Fair value measurement
The Group establishes fair value measurement policies and procedures as its accounting policies and disclosures require fair value measurements for various financial and non-financial assets and liabilities. Such policies and procedures are executed by the valuation department, which is responsible for the review of significant fair value measurements including fair values classified as level 3 in the fair value hierarchy.
The valuation department regularly reviews significant unobservable significant inputs and valuation adjustments. If third party information, such as prices available from an exchange, dealer, broker industry group,quotes or pricing service or regulatory agencyservices, is used forto measure fair value measurements,values, then the valuation department reviews whetherassesses the valuation based onevidence obtained from the third party information includes classifications by levels withinparties to support the conclusion that these valuations meet the requirements of IFRS, including the level in the fair value hierarchy and meetsin which the requirements for the relevant standards.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
2. Basis of Preparation, continued
valuations should be classified.
The Group reports significant valuation issues to the audit committee.
When measuring the fair value of an asset or a liability, the Group uses the best observable inputs in market when measuring fair values of assets or liabilities.data as far as possible. Fair values are classified within thecategorized into different levels in a fair value hierarchy based on the inputs used in the valuation methodstechniques as follows:follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
If various inputs used to measure fair value of assets or liabilities fall into different levels of the fair value hierarchy, the Group classifies the assets and liabilities at the lowest level of inputs among the fair value hierarchy, which is significant to the entire measured value. The Group recognizes transfers between levels at the end of the reporting period of which such transfers occurred.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
2. Basis of Preparation, continued
Information about assumptions used for fair value measurements areis included in note 6.6 financial risk management.
3. Significant Accounting Policies
The significant accounting policies applied by the Group in preparation of its consolidated financial statements are explained below. TheExcept for the new accounting standards that are effective for annual periods beginning on or after January 1, 2020, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
(1) Operating Segments
An operating segment is a component of the Group that: 1) engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with other components of the Group, 2) whose operating results are reviewed regularly by the Group’s chief operating decision makerChief Operating Decision Maker (“CODM”) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. The Group’s CODM is the board of directors, who do not receive and therefore do not review discrete financial information for any component of the Group. Consequently,Accordingly, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic, product and customer information are provided in note 4.4 and 27.
(2) Basis of consolidationConsolidation
(a) Business combination
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred and during period of service, except if related to the issue of debt or equity securities.securities according to IAS 32 and IFRS 9.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.
(b) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
(c) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an investeeentity when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.entity. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.
(d) Loss of control
If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.
(e) Interests in equity-accounted investees
The Group’s interest in equity-accounted investees comprise interests in an associate and a joint venture. An associate is an entityare these entities in which the Group has significant influence, but not control or joint control, over the entity’s financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in an associateassociates and athe joint venture are initially recognized at cost including transaction costs. Subsequent to initial recognition, their carrying amounts are increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture. Distributions from equity-accounted investees are accounted for as deduction from the carrying amounts.
(f) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with equity-accounted investees are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.
(g) Business combinations under common control
The assets and liabilities acquired in the combination of entities or business under common control are recognized at the carrying amounts recognized previously in the consolidated financial statements of the ultimate parent. The difference between consideration transferred and carrying amounts of net assets acquired is added to or deducted from other capital adjustments.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(3) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
(4) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average method (except for goods in-transit that is based on the specific identification method), and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing inventories to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However, the normal capacity is used for the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. The amount of any write-down of inventories to net realizable value and all losses of inventories shall be recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, shall be recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.
(5) Non-derivative financial assets
The Group recognizes(a) Initial recognition and measures non-derivativemeasurement
Trade and other receivables, and debt investment are initially recognized when they are originated. Other financial assets by the following four categories:and financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The Group recognizes financial assets in the consolidated statement of financial positionliabilities are recognized when the Group becomes a party to the contractual provisions of the instrument.instruments.
Upon initial recognition, non-derivativeA financial assetsasset and financial liability (unless it is an account receivable—trade without a significant financing component that is initially measured at the transaction price) are initially measured at fair value plus, for an item not at fair value through profit or loss are measured at their fair value plus(FVTPL), transaction costs that are directly attributable to the asset’sits acquisition.
(a) Financial assets at(b) Classification and subsequent measurements
On initial recognition, a financial asset is classified as measured at: amortized cost; fair value through profitother comprehensive income (FVOCI)—debt investment; FVOCI—equity investment; or lossFVTPL. The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. In case of changing its business model, all affected financial asset are reclassified on the first day of the first reporting period after the change in the business model.
A financial asset is classified as financial assets at fair value through profit or loss if it is held for trading or designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
(b) Held-to-maturity investments
A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Group has the positive intention and ability to hold to maturity, is classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost usingif it meets both of the effective interest rate method.following conditions and is not designated as at FVTPL:
(c) Loans
it is held within a business model whose objective is to hold assets to collect contractual cash flow; and receivables
Loans and receivables are financial assets with fixed or determinable payments
its contractual terms give rise on specified dates to cash flows that are not quoted in an active market. Subsequent to initial recognition, loanssolely payments of principal and receivables areinterest on the principal amount outstanding.
A debt investment is measured at amortized cost usingFVOCI if it meets both of the effective interest rate method.following conditions and is not designated as at FVTPL:
(d) Available-for-sale
it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assetsassets; and
Available-for-sale financial assets are those non-derivative financial assets
its contractual terms give rise on specified dates to cash flows that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments or loanssolely payments of principal and interest on the principal amount outstanding.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
3. Significant Accounting Policies, continued
and receivables. Subsequent toOn initial recognition they are measured atof an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value and changes in their fair value, net of any tax effect, are recorded in other comprehensive income. InvestmentsThis election is made on an investment-by-investment basis and irrevocable election can be made at initial recognition.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
The Group makes an assessment of the objective of the business model in equity instrumentswhich, financial assets is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:
the stated policies and objectives for the portfolio and the operation of those policies in practice;
how the performance of the business model and the financial assets held within that business model are evaluated and reported to the entity’s key management personnel;
the risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way in which those risks are managed;
how managers of the business are compensated (e.g. whether the compensation is based on the fair value of the assets managed or on the contractual cash flows collected); and
the frequency, volume and timing of sales of financial assets in prior periods, the reason for those sales and expectation about future sales activity for financial asset.
Transfers of financial assets to third parties in transactions that do not have a quoted market price in an active market and whosequalify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets.
For the purposes of this assessment, ‘principal’ is defined as the fair value cannot be reliably measuredof the financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are measuredsolely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:
contingent events that would change the amount or timing of cash flows;
terms that may adjust the contractual coupon rate, including variable-rate features;
prepayment and extension features; and
terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).
A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at cost.a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.
(e) De-recognition
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
The following accounting policies apply to subsequent measurements of financial assets.
Financial assets at FVTPL | These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. | |
Financial assets at amortized cost | These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. | |
Debt investments at FVOCI | These assets are subsequently measured at fair value. Interest income is calculated using the effective interest method. Foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. | |
Equity investments at FVOCI | These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss. |
(c) De-recognition
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Iftransferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership of the financial assets, it derecognizes the financial assets whenand it does not retain control overof the transferred financial assets. If theasset.
The Group has retained control over the transferredenters into transactions whereby it transfers assets recognized in its statement of financial assets, it continues to recognize the assets to the extent of its continuing involvement. If the Group retainsposition, but retain either all or substantially all of the risks and rewards of ownership of the transferred financial assets, the Group continues to recognizeassets. In these cases, the transferred financial assets and recognizes financial liabilities for the consideration received.are not derecognized.
(f)(d) Offsetting between financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Group currently has a legally enforceable right to offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.
(6) Derivative financial instruments
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes in the fair value of derivatives therein are accounted for as described below.
(a) Embedded derivativesHedge accounting
Embedded derivatives are separated from the hostThe Group enters into a fixed-to-fixed cross currency swap contract and accounted for separately only ifa floating-to-fixed cross currency interest rate swap contract to hedge interest rate risk and currency risk.
SK HYNIX, INC. and Subsidiaries
Notes to the following criteria have been met:Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction. In addition, the document includes hedging instruments; hedged items; initial commencement date of those hedge relationship; fair value of hedged items based on hedged risk during the subsequent period; and the method of valuation on hedging instruments offsetting changes in cash flow.
the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract;Cash flow hedge
When a separate instrumentderivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability, the same terms as the embedded derivative would meet the definitioneffective portion of a derivative; and
the hybrid instrument is not measured at fair value with changes in fair value recognized in profit or loss.
Changes in the fair value of separable embedded derivatives arethe derivative is recognized in other comprehensive income, net of tax, and presented in accumulated other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods which the forecasted transaction occurs.
(b) Other derivative financial instruments
Changes in the fair value of otherOther derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.
(7) Impairment of financial assets
(a) Recognition of impairment on financial assets
The Group recognizes loss allowances for expected credit losses (ECLs) on:
financial assets measured at amortized costs; and
contract assets.
The Group measures impairment losses at an amount equal to lifetime ECLs except for the below assets, which are measured at 12-month ELCs.
credit risk of debt instruments is low at the end of reporting date
credit risk has not increased significantly since the initial recognition of debt investment (lifetime ECL: ECL that resulted from all possible default events over the expected life of a financial instrument)
The Group adopted an accounting policy to recognize loss allowances at an amount equal to lifetime expected credit losses for trade receivables and contract assets.
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition and estimating expected credit loss, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.
Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from all default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.
(b) Measurement of expected credit loss
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial instrument.
(c) Credit-impaired financial instrument
A financial asset notdebt instrument carried at amortized cost and fair value through profit or lossother comprehensive income (FVOCI) is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A financial asset is credit- impaired if objective evidence
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
indicateswhen one or more events that have a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effectdetrimental impact on the estimated future cash flows of that asset that can be estimated reliably. However, losses expected as a result of future events, regardless of likelihood, are not recognized.have occurred.
Objective evidence that a financial asset is impaired includes:
significant financial difficulty of the issuer or obligor;borrower;
a breach of contract, such as default or delinquency in interest or principal payments;
the lender,Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lenderGroup would not otherwise consider;
it becoming probable that the borrower will enter bankruptcy or other financial reorganization; or
the disappearance of an active market for thatthe financial asset because of financial difficulties; ordifficulties
observable data indicating that there is a measurable decrease in the estimated future cash flows from a group(d) Presentation of credit loss allowance on financial assets since the initial recognition of those assets, although the decrease cannot be identified with the individualposition
Loss allowances for financial assets in the group
In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
If there is objective evidence that financial assets are impaired, impairment losses are measured and recognized.
(a) Financial assets measured at amortized cost
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. If it is not practicable to obtain the financial asset’s estimated future cash flows, impairment losses would be measured based on prices from any observable current market transactions. Impairment losses are deducted through an allowance account or directly from the carrying amount. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss either directly or by adjusting an allowance account.
(b) Financial assets carried at cost
The amount of the impairment loss is measured as the difference between thegross carrying amount of the assets.
(e) Write-off
The Group writes off a financial asset andwhen it has no reasonable expectations of recovering the present value of estimated futurecontractual cash flows discounted at the current market rate of return foron a similar financial asset. Such impairment losses are not reversed.
(c) Available-for-sale financial assets
When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive incomeits entirety or a portion thereof. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is objective evidencea reasonable expectation of recovery. However financial assets that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is reclassified from equityare written off could still be subject to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.
SK HYNIX, INC. and Subsidiaries
Notescollection activities according to the Consolidated Financial StatementsGroup’s past due collection process.
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(8) Property, plant and equipment
Property, plant and equipment are initially measured at cost. The cost of property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent to initial recognition, an item of property, plant and equipment is carried at its cost less any accumulated depreciation and any accumulated impairment losses.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
Subsequent costs are recognized in the carrying amount of property, plant and equipment at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the cost will flow to the Group and it can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day repair and maintenance are recognized in profit or loss as incurred.
Property, plant and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized as other income or expenses.
The estimated useful lives of the Group’s property, plant and equipment are as follows:
��
Useful lives (years) | ||||
Buildings | 10 | |||
Structures | 10 | |||
Machinery | ||||
Vehicles | ||||
|
Depreciation methods, useful lives, and residual values are reviewed at the end of each reporting period and, if appropriate, accounted for as changes in accounting estimates.
(9) Borrowing costs
The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are manufactured or otherwise produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.
To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(10) Intangible assets
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Goodwill arising from business combinations is recognized as the excess of the consideration transferred in the acquisition over the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, certain intangible assets are determined as having indefinite useful lives and not amortized as there is no foreseeable limit to the period over which the assets are expected to be available for use.
The estimated useful lives of the Group’s intangible assets are as follows:
Useful lives (years) | ||
Industrial rights | 5 - 10 | |
Development costs | ||
|
1 | Other intangible assets include royalty payments with useful lives of 4 to 20 years. |
Useful lives and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for as changes in accounting estimates.
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands,others, are recognized in profit or loss as incurred.
(11) Government grants
Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grant’s conditions and that the grant will be received.
(a) Grants related to assets
Government grants whose primary condition is that the Group purchases, constructs or otherwise acquires non-current assets are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the useful lives of depreciable assets.
(b) Grants related to income
Government grants which are intended to compensate the Group for expenses incurred are recognized in profit or loss by as deduction of the related expenses.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(12) Investment property
Property held for the purpose of earning rental income or benefiting from capital appreciation is classified as investment property. Investment property is initially measured at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at cost less accumulated depreciation and impairment losses.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the cost will flow to the Group and it can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day repair and maintenance are recognized in profit or loss as incurred.
Investment property except for land, areis depreciated on a straight-line basis over estimated useful lives.40 years.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and, if appropriate, accounted for as changes in accounting estimates.
(13) Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets, other than assets arising from employee benefits, inventories, and deferred tax assets, and non-current assets held for sale, are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.
The Group estimates the recoverable amount of an individual asset; however if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.
The value in use is estimated by applying a pre-tax discount rate that reflectreflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss if the carrying amount of an asset or a CGU exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from business combination. Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis.
Except for impairment losses in respect of goodwill, which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(14) Leases
The Group classifiesassesses whether a contract is or contains a lease at inception of a contract. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
(a) As a lessee
The Group recognizes for a right-of-use asset and accountsa lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, the initial amount of the lease liability, adjusted for any lease
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove of the underlying asset, or to restore the underlying asset or the site on which the underlying asset is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In case that ownership of the right-of-use asset is transferred at the end of the lease term, or the cost of the right-of-use asset includes the exercise price of a purchase option, the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset may be reduced by an impairment loss or adjusted for remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. The Group generally uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability consist of the following:
fixed payments (including in-substance fixed payments)
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date
amounts expected to be payable under a residual value guarantee
the exercise price under a purchase option that the Group is reasonably certain to exercise
lease payments in an optional renewal period, if the Group is reasonably certain to exercise extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is subsequently increased by the interest expense recognized for the lease liability and decreased by reflecting the payment of the lease. The lease liability is remeasured when there is a change in future lease payments arising from changes in an index or a rate (interest rate), if there’s a change in the Group’s estimate of the amount expected to be paid under a residual value guarantee, or if the Group changes in the assessment of whether the option to buy or extend is reasonably certain to be exercised or not to exercise the termination option.
When the lease liabilities are remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
A lessee shall remeasure the lease liability as an adjustment to the right-of-use asset, if either:
a change in the lease term or a change in circumstances or significant events that result in a change in the assessment of the exercise of the purchase option. In such cases, the lease liability is remeasured by discounting the modified lease payment at the revised discount rate;
the lease payment changes due to changes in the index or rate (interest rate) or the amount expected to be paid according to the residual value guarantee. In such cases, the lease liability measures the modified lease fee again by discounting it at an unchanged discount rate. However, if a change in the variable interest rate causes a change in the lease payments, the revised discount rate that reflects the change in interest rates is used; or
the lease agreement changes and is not accounted for as a separate lease. In such cases, the lease liability is remeasured by discounting the modified lease payment at the revised discount rate as of the effective date of the lease change, based on the lease term of the modified lease.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
The Group has elected not to recognize right-of-use assets and lease liabilities for some leases of low-value assets and short-term leases. The Group recognizes the lease payments associated with these leases as eitheran expense on a straight-line basis over the lease term.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. However, for certain agreements, the Group has elected practical expedient not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group separately presents right-of-use assets that do not meet the definition of investment property in the statement of financial position.
Subsequently, the right-of-use asset is accounted for consistently with the accounting policies applicable to the asset.
(b) As a lessor
As a lessor, the Group determines whether the lease is a finance lease or an operating lease depending onat the terms. Leases whereinception of the lease.
To classify each lease, the Group assumes substantially allgenerally determines whether the lease transfers most of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(a) Finance leases
At the commencement of the lease term, the Group recognizes as finance lease assets and finance lease liabilities in its consolidated statements of financial position, the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the amount recognized as anunderlying asset.
Minimum lease payments are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. The Group reviews whether the leased asset is impaired.
(b) Operating leases
Leases where the lessor retains a significant portionmost of the risks and rewards of ownership of the underlying asset are transferred to the lessee, the lease is classified as a finance lease, otherwise the lease is classified as an operating leases. Payments made underlease. As part of this assessment, the Group considers whether the lease term represents a significant portion of the economic life of the underlying asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. In addition, the classification of a lease is determined by the right-of-use asset arising from the head lease, not the underlying asset. If a head lease is a short-term lease to which the Group applies the recognition exemption, then the sub-lease is classified as an operating lease.
The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ to allocate consideration in the contract to each lease and non-lease components.
The Group recognizes the lease payments received from operating leases (net of any incentives received from the lessor) are recognized in profit or loss on a straight-line basis over the period of the lease.lease term as revenue in ‘other revenue’.
(c) Determining whether an arrangement contains a lease
Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset or assets (the asset) and the arrangement conveys a right to use the asset.
At inception or reassessment of the arrangement,The accounting policies that the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a financial lease that it is impracticable to separate the payments reliably, the Group recognizes an asset and a liability at an amount equalhas applied to the fair value of the underlying asset that was identifiedcomparative period as the subject of the lease. Subsequently, the liability is reduced as paymentslessors are made and an imputed finance expense on the liability recognized using the purchaser’s incremental borrowing rate of interest.not different from those in IFRS 16.
(15) Non-current assets held for saleNon-derivative
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. The assets or disposal group that are classified as non-current assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.
A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(16) Non-derivative financial liabilities
The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.
(a) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, any directly attributable transaction costs are recognized in profit or loss as incurred.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
(b) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest rate method.
(c) Derecognition of financial liability
The Group derecognizes financial liability when its contractual obligations are discharged, cancelled or expire. The Group also derecognizes a financial liability, fromwhen its terms are modified and the consolidated statementscash flows of the modified liability are substantially different, in which case a new financial position when itliability based on the modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished (i.e. whenand the obligation specifiedconsideration paid (including any non-cash assets transferred of liabilities assumed) is recognized in the contract is discharged, cancelledprofit or expires).loss.
(17)(16) Employee benefits
(a) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the reporting period in which the employees render the related service. When an employee has rendered service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
(b) Other long-term employee benefits
Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the reporting period in which the employees render the related service, and are calculated at the present value of the amount of future benefit that employees have earned in return for their service in the current and prior periods. Any changes from remeasurementsRemeasurements are recognized throughin profit or loss in the period in which they arise.
(c) Retirement benefits: defined benefit plans
As of the end of reporting period, defined benefits liabilities relating to defined benefit plans are recognized as present value of defined benefit obligations, net of fair value of plan assets.
The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.
Remeasurements of the net defined benefit liability (asset) comprise of actuarial gains and losses, the return on plan assets excluding amounts included in net interest on the net defined benefit liability (asset), and any change in the effect of
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset), and are recognized in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.
When the benefits of a plan amendmentare changed or curtailment occurs, gains or losses on amendment or curtailmentwhen a plan is curtailed, the resulting change in benefits for thebenefit that relates to past service provided areor the gain or loss on curtailment is recognized throughimmediately in profit or loss. The Group recognizes gaingains or losslosses on a settlement when the settlement of defined benefit plan when the settlement occurs.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
(d) Retirement benefits: defined contribution plans
When an employee has provided service for a certain period of time in relation to the defined contribution plan, the contribution to the defined contribution plan is recognized in profit or loss except to be included in the cost of the asset. The contributions to be paid are recognized as liabilities (accrued expenses) less the contributions that have been already paid.
(e) Termination benefits
The Group recognizes a liability and expense for termination benefits at the earlier of the period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring. If benefits are not payable within 12 months after the end of the reporting period, then they are discounted to their present value.
(18)(17) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
Where some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entityGroup settles the obligation. The reimbursement is treated as a separate asset.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
A provision is used only for expenditures for which the provision was originally recognized.
(18) Emissions Rights
The Group accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission in Korea.
(a) Greenhouse Gases Emission Right
Greenhouse Gases Emission Right consists of emission allowances, which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.
Emission rights held for the purpose of performing the obligation are classified as intangible asset and are initially measured at cost and after initial recognition are carried at cost less accumulated impairment losses. Emission rights held for short-swing profits are classified as current asset and are measured at fair value with any changes in fair value recognized as profit or loss in the respective reporting period.
The Group derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
(b) Emission liability
Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. Emission liability is recognized when it is probable that outflows of resources will be required to settle the obligation and the costs required to perform the obligation are reliably estimable. Emission liability is an amount of estimated obligations for emission rights to be submitted to the government for the performing period. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting period.
(19) Foreign currencies
(a) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency usingat the exchange rate at the reporting date’s exchange rate. data. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on the settlement or retranslation of monetary items are recognized in profit or loss, except for differences arising on the retranslation of the net investment in a foreign operation, which are recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(b) Foreign operations
If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the end of reporting date.period. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the exchange rates at the end of reporting date.
When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.
(20) Equity capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares is recognized as a deduction from equity, net of any tax effects.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
When the Group repurchases its share capital, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The profits or losses from the purchase, disposal, reissue, or retirement of treasury shares are not recognized as current profit or loss. If the Group acquires and retainsdisposes treasury shares, the consideration paid or received is directly recognized in equity.
(21) RevenueShare-based payment
Revenue fromThe Group has granted shares or share options to its employees. For equity-settled share-based payment transactions, the sale ofGroup measures the goods rendering ofor services or use of assets is measuredreceived, and the corresponding increase in equity as a capital adjustment at the fair value of the considerationgoods or services received, unless that fair value cannot be estimated reliably. If the Group cannot reliably estimate the fair value of the goods or receivable, net of returns, trade discountsservices received, the Group measures their value, and volume rebates.
(a) Sale of goods
Revenue is recognized when persuasive evidence exists, usuallythe corresponding increase in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferredequity, indirectly, by reference to the buyer, recoveryfair value of the consideration is probable,equity instruments granted. If the associated costs and possible returnfair value of goods canthe equity instruments cannot be estimated reliably there is no continuing management involvement withat the measurement date, the Group measures them at their intrinsic value and recognizes the goods or services received based on the number of equity instruments that ultimately vest.
For cash-settled share-based payment transactions, the Group measures the goods or services acquired and the amountliability incurred at the fair value of revenue can be measured reliably.
(b) Salethe liability. Until the liability is settled, the Group remeasures the fair value of services
Revenue from services rendered isthe liability at each reporting date and at the date of settlement, with changes in fair value recognized in profit or loss for the period.
The Group accounts for share-based payment, with options to choose either cash-settled or equity-settled share-based payment, in proportion toaccordance with the stagesubstance of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.transactions.
(22) Revenue from contracts with customers
The Group’s accounting policies relating to revenue from contracts with customers are described in note 27.
(23) Finance income and finance expenses
FinanceThe Group’s finance income comprises interest and dividend incomefinance expenses include:
Interest income;
Interest expense;
Dividend income;
The net gain or loss on funds invested (including available-for-sale financial assets), gains on the disposal of available-for-sale financial assets and changes in the fair value of
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
financial instruments at fair value through profit or loss. Interest income is recognized as it accrues in profitloss;
Gain or loss usingon foreign exchange (currency) translation for financial asset and liabilities;
Impairment losses and reversals on investment in debt securities carried at amortized cost method; and
The gain on the remeasurement to fair value of any pre-existing interest in an acquire in a business combination
The Group uses effective interest rate method.method for recognizing interest income and expense. Dividend income is recognized in profit or loss on the date that the Group’s right to receive dividend is established.
Finance expenses compriseThe ‘effective interest expense on borrowings, unwindingrate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the discount on provisions,financial instrument to:
The gross carrying amount of the financial asset; or
The amortized cost of the financial liability
SK HYNIX, INC. and changes inSubsidiaries
Notes to the fair value of financial instruments at fair value through profit or loss. InterestConsolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
In calculating interest income and expense, on borrowings and debentures are recognized in profit or loss using the effective interest rate method.is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
(23)(24) Income taxes
Income tax expense comprises current and deferred tax. Current and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
(a) Current tax
Current tax is the expected tax payable or refundable on the taxable profitincome or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The amount of current tax payable or receivable is the best estimate of tax amount expected to be paid or received that reflects uncertainty related to income taxes. The taxable profitincome is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit. The tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period.
(b) Deferred tax
Deferred tax is recognized, using the asset-liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The Group recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes deferred tax assets for all deductible temporary differences including unused tax loss and tax credit to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
settle current tax liabilities and assets on a net basis. If there are any additional income tax expense incurred in accordance with dividend payments, such income tax expense is recognized when liabilities relating to the dividend payments are recognized.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
3. Significant Accounting Policies, continued
(24)(25) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of outstanding ordinary shares, outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares including convertible notes.stock options.
(25) Standards(26) Changes in accounting policies
The Group has initially adopted IFRS 16 ‘Leases’ from January 1, 2019. The Group recognized the cumulative effect of the initial application of IFRS 16 in right-of-use assets and lease liabilities as of January 1, 2019 (the date of initial application). Accordingly, the comparative information presented for 2018 has not been restated - i.e. it is presented, as previously reported, under IAS 17 and related interpretations.
From January 1, 2020, the Group has changed its accounting policy by adopting accounting treatments in accordance with agenda decisions for ‘Lease Term and Useful Life of Leasehold Improvements’ issued butby IFRS Interpretations Committee on December 16, 2019. The Group determines the lease term as the non-cancellable period of a lease, together with both (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b) periods covered by an option to terminate the lease if the lessee is reasonably certain not yetto exercise that option. When the lessee and the lessor each has the right to terminate the lease without permission from the other party, the Group has considered a termination penalty in determining the period for which the contract is enforceable.
The Group has adopted the above decisions made by IFRS Interpretations Committee as a change in accounting policies, and the main effects of such changes for the relevant periods are as follows:
Back-end Process Service Contracts and Machinery Rental Contracts
For the determination of lease terms of certain back-end process service contracts and machinery rental contracts, the Group identified the contract period as the enforceable lease period during the initial adoption of IFRS 16 in 2019 since the leaseholder’s consent was required to extend such contracts. However, upon adoption of aforementioned accounting policy, considering the economic loss the Group would incur if the contract was not extended, more extended period was identified as lease period. Due to this change of accounting policies, the lease period has been extended and related lease liabilities and right-of-use assets have increased.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
The adoption of change in accounting policy based on the guidance issued by IFRS Interpretation Committee has been retrospectively applied as of January 1, 2019 for prior and current periods and the impacts are as follows:
January 1, 2019 | ||||||||||||
As reported | Adoption | Adjusted | ||||||||||
(In millions of won) | ||||||||||||
Current assets | ₩ | 19,894,146 | ₩ | — | ₩ | 19,894,146 | ||||||
Non-current assets | 44,878,908 | 435,423 | 45,314,331 | |||||||||
Right-of-use assets, net | 1,193,370 | 435,423 | 1,628,793 | |||||||||
Total Assets | 64,773,054 | 435,423 | 65,208,477 | |||||||||
|
|
|
|
|
| |||||||
Current liabilities | 13,257,271 | 100,315 | 13,357,586 | |||||||||
Lease liabilities | 244,644 | 100,315 | 344,959 | |||||||||
Non-current liabilities | 4,663,452 | 335,108 | 4,998,560 | |||||||||
Lease liabilities | 946,935 | 335,108 | 1,282,043 | |||||||||
|
|
|
|
|
| |||||||
Total Liabilities | 17,920,723 | 435,423 | 18,356,146 | |||||||||
|
|
|
|
|
| |||||||
Total Equity | ₩ | 46,852,331 | ₩ | — | ₩ | 46,852,331 | ||||||
|
|
|
|
|
|
December 31, 2019 | ||||||||||||
As reported | Adoption | Adjusted | ||||||||||
(In millions of won) | ||||||||||||
Current assets | ₩ | 14,457,602 | ₩ | — | ₩ | 14,457,602 | ||||||
Non-current assets | 50,331,892 | 458,856 | 50,790,748 | |||||||||
Right-of-use assets, net | 1,250,576 | 456,082 | 1,706,658 | |||||||||
Deferred tax assets | 670,866 | 2,774 | 673,640 | |||||||||
|
|
|
|
|
| |||||||
Total Assets | 64,789,494 | 458,856 | 65,248,350 | |||||||||
|
|
|
|
|
| |||||||
Current liabilities | 7,874,033 | 87,933 | 7,961,966 | |||||||||
Lease liabilities | 205,238 | 87,933 | 293,171 | |||||||||
Non-current liabilities | 8,972,266 | 378,236 | 9,350,502 | |||||||||
Lease liabilities | 995,592 | 378,236 | 1,373,828 | |||||||||
|
|
|
|
|
| |||||||
Total Liabilities | 16,846,299 | 466,169 | 17,312,468 | |||||||||
|
|
|
|
|
| |||||||
Total Equity | ₩ | 47,943,195 | ₩ | (7,313 | ) | ₩ | ||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
December 31, 2020 | ||||||||||||
Amount based on previous policy | Adjustment | Reported amount | ||||||||||
(In millions of won) | ||||||||||||
Current assets | ₩ | 16,570,953 | ₩ | — | ₩ | 16,570,953 | ||||||
Non-current assets | 54,209,482 | 393,418 | 54,602,900 | |||||||||
Right-of-use assets, net | 1,314,227 | 393,418 | 1,707,645 | |||||||||
Total Assets | 70,780,435 | 393,418 | 71,173,853 | |||||||||
|
|
|
|
|
| |||||||
Current liabilities | 8,953,989 | 118,371 | 9,072,360 | |||||||||
Lease liabilities | 229,093 | 118,371 | 347,464 | |||||||||
Non-current liabilities | 9,925,184 | 267,212 | 10,192,396 | |||||||||
Deferred tax liabilities | 263,668 | 2,972 | 266,640 | |||||||||
Lease liabilities | 1,032,012 | 264,240 | 1,296,252 | |||||||||
|
|
|
|
|
| |||||||
Total Liabilities | 18,879,173 | 385,583 | 19,264,756 | |||||||||
|
|
|
|
|
| |||||||
Total Equity | ₩ | 51,901,262 | ₩ | 7,835 | ₩ | 51,909,097 | ||||||
|
|
|
|
|
|
Year ended December 31, 2019 | ||||||||||||
As reported | Adoption | Adjusted | ||||||||||
(In millions of won) | ||||||||||||
Revenue | ₩ | 26,990,733 | ₩ | — | ₩ | 26,990,733 | ||||||
Cost of sales | 18,825,275 | (6,461 | ) | 18,818,814 | ||||||||
Gross profit | 8,165,458 | 6,461 | 8,171,919 | |||||||||
Selling and administrative expenses | 5,452,740 | — | 5,452,740 | |||||||||
Operating profit | 2,712,718 | 6,461 | 2,719,179 | |||||||||
Finance income | 1,247,640 | — | 1,247,640 | |||||||||
Finance expenses | 1,514,869 | 16,548 | 1,531,417 | |||||||||
Share of profit of equity-accounted investees | 22,633 | — | 22,633 | |||||||||
Other income | 88,179 | — | 88,179 | |||||||||
Other expenses | 113,575 | — | 113,575 | |||||||||
Profit before income tax | 2,442,726 | (10,087 | ) | 2,432,639 | ||||||||
Income tax expense | 426,335 | (2,774 | ) | 423,561 | ||||||||
Profit for the year | 2,016,391 | (7,313 | ) | 2,009,078 | ||||||||
Other comprehensive income (loss) | 94,023 | — | 94,023 | |||||||||
Basic earnings per share (in won) | 2,943 | (10 | ) | 2,933 | ||||||||
Diluted earnings per share (in won) | 2,943 | (11 | ) | 2,932 |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
Year ended December 31, 2020 | ||||||||||||
Amount based on previous policy | Adjustment | Reported amount | ||||||||||
(In millions of won) | ||||||||||||
Revenue | ₩ | 31,900,418 | ₩ | — | ₩ | 31,900,418 | ||||||
Cost of sales | 21,098,992 | (9,203 | ) | 21,089,789 | ||||||||
Gross profit | 10,801,426 | 9,203 | 10,810,629 | |||||||||
Selling and administrative expenses | 5,798,005 | — | 5,798,005 | |||||||||
Operating profit | 5,003,421 | 9,203 | 5,012,624 | |||||||||
Finance income | 3,327,905 | — | 3,327,905 | |||||||||
Finance expenses | 1,992,102 | (11,691 | ) | 1,980,411 | ||||||||
Share of profit of equity-accounted investees | (36,279 | ) | — | (36,279 | ) | |||||||
Other income | 84,773 | — | 84,773 | |||||||||
Other expenses | 171,575 | — | 171,575 | |||||||||
Profit before income tax | 6,216,143 | 20,894 | 6,237,037 | |||||||||
Income tax expense | 1,475,151 | 2,972 | 1,478,123 | |||||||||
Profit for the year | 4,740,992 | 17,922 | 4,758,914 | |||||||||
Other comprehensive income (loss) | (107,378 | ) | — | (107,378 | ) | |||||||
Basic earnings per share (in won) | 6,926 | 26 | 6,952 | |||||||||
Diluted earnings per share (in won) | 6,924 | 26 | 6,950 |
Year ended December 31, 2019 | ||||||||||||
As reported | Adoption | Adjusted | ||||||||||
(In millions of won) | ||||||||||||
Cash flows from operating activities | ₩ | 6,483,188 | ₩ | 66,548 | ₩ | 6,549,736 | ||||||
Cash flows from investing activities | (10,450,936 | ) | — | (10,450,936 | ) | |||||||
Cash flows from financing activities | 3,903,216 | (66,548 | ) | 3,836,668 |
(27) New and amended standards adopted by the Group
A number ofThe following new standards and amendments to standards are effective for annualaccounting periods beginning on or after January 1, 2015.2020 and earlier application is permitted. The Group has not early adoptedimpacts on the consolidated financial statements in adopting the following new standards are not expected to be significant.
(a) Amendments to IAS 1 ‘Presentation of Financial Statements’ and IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ — Definition of Material
The amendments clarify the definition of material. Information is material if omitting, misstating or amended standards in preparing theseobscuring it could reasonably be expected to influence the decisions that the primary users of general-purpose financial statements make on the basis of those financial statements. The amendments do not have a significant impact on the consolidated financial statements.
(a)(b) Amendments to IFRS 9,3 ‘Business Combination’ — Definition of a Business
The amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and the definition of output excludes the returns in the form of lower costs and other economic benefits. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, an entity may elect to apply an
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
3. Significant Accounting Policies, continued
optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The amendments do not have a significant impact on the consolidated financial statements.
(c) Amendments to IFRS 1109 ‘Financial Instruments’
IFRS 9, published in July 2014, replaces the existing guidance in, IAS 39 ‘Financial Instruments: Recognition and Measurement’. and IFRS 7 ‘Financial Instruments: Disclosure’ — Interest Rate Benchmark Reform
The amendments allow to apply the exceptions when forward-looking analysis is performed in relation the application of hedge accounting while uncertainties arising from interest rate benchmark reform exist. The exceptions require the Group assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based on is not altered as a result of interest rate benchmark reform, when determining whether the expected cash flows are highly probable, whether an economic relationship between the hedged item and the hedging instrument exists, and when assessing the hedging relationship is highly effective. The amendments do not have a significant impact on the consolidated financial statements.
(28) New and amended standards not yet adopted by the Group
The following new accounting standards and interpretations that have been published that are not mandatory for December 31, 2020 reporting period and have not been early adopted by the Group.
(a) Amendments to IFRS 16 ‘Lease’ — Practical expedient for COVID-19-Related Rent Exemption, Concessions, Suspension
As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, and the amounts recognized in profit or loss as a result of applying this exemption should be disclosed. The amendments should be applied for annual periods beginning on or after June 1, 2020, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the consolidated financial statements.
(b) Amendments to IFRS 9 includes revised guidance on‘Financial Instruments’, IAS 39 ‘Financial Instruments: Recognition and Measurement’, IFRS 7 ‘Financial Instruments: Disclosure’, IFRS 4 ‘Insurance Contracts’ and IFRS 16 ‘Lease’ — Interest Rate Benchmark Reform
In relation to interest rate benchmark reform, the classification and measurementamendments provide exceptions including adjust effective interest rate instead of book amounts when interest rate benchmark of financial instruments including a new expected credit loss model for calculating impairment on financial assets,at amortized costs is replaced, and new generalapply hedge accounting requirements. It also carries forwardwithout discontinuance although the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9interest rate benchmark is effectivereplaced in hedging relationship. The amendments should be applied for annual reporting periods beginning on or after January 1, 2018, with early adoption2021, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the consolidated financial statements.
(c) Amendments to IFRS 3 ‘Business Combination’ — Reference to the Conceptual Framework
The Group isamendments update a reference of definition of assets and liabilities qualify for recognition in revised Conceptual Framework for Financial Reporting. However, the processamendments add an exception for the recognition of assessingliabilities and contingent liabilities within the potential impact on its consolidated financial statements resulting fromscope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and IFRSC 2121 ‘Levies’. The amendments also confirm that contingent assets should not be recognized at the application of IFRS 9.
(b) IFRS 15, ‘Revenue from Contracts with Customers’
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18, ‘Revenue’, IAS 11, ‘Construction Contracts’ and IFRIC 13, ‘Customer Loyalty Programmes’. IFRS 15 is effectiveacquisition date. The amendments should be applied for annual reporting periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018 with early adoption permitted.
3. Significant Accounting Policies, continued
(d) Amendments to IAS 16 ‘Property, plant and equipment’ — Proceeds before intended use
The Group is in the process of assessing the potential impact on its consolidated financial statements resultingamendments prohibit an entity from deducting from the applicationcost of IFRS 15.
(c) IFRS 16 ‘Leases’
IFRS 16, publishedan item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, in January 2016, replaces the existing guidance in IAS 17, Leases. IFRS 16 eliminates the current dual accounting modelprofit or loss. The amendments should be applied for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019, with early adoption2022, and earlier application is permitted.
The Group is inevaluating the processimpact of these amendments on the consolidated financial statements.
(e) Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ — Onerous Contracts : Cost of Fulfilling a Contract
The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the potentialcontract is onerous. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on itsthe consolidated financial statements resultingstatements.
(f) Annual Improvements to ‘Framework 2018-2020’
Annual improvements of ‘Framework 2018-2020’ cycle should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the consolidated financial statements.
• | IFRS 1 ‘First time Adoption of International Financial Reporting Standards’ — Subsidiaries that are first-time adopters |
• | IFRS 9 ‘Financial Instruments’ — Fees related to the 10% test for derecognition of financial liabilities |
• | IFRS 6 ‘Leases’ — Lease incentives |
• | IAS 41’Agriculture’ — Measuring fair value |
(g) Amendments to IAS 1001 ‘Presentation of Financial Statements’—Classification of Liabilities as Current or Non-current
The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Group is reviewing the impact of IFRS 16.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
4. Geographic Product and Customer Information
The Group has a single reportable segment that is engaged in the manufacture and sale of semiconductor products.
(1) Details The Board of Directors of the Group’s revenue forGroup reviews the years ended December 31, 2015, 2014 and 2013 are as follows:
2015 | 20141 | 20131 | ||||||||||
(In millions of won) | ||||||||||||
Sale of goods | ₩ | 18,739,177 | 17,054,031 | 14,093,027 | ||||||||
Sale of services | 58,821 | 71,535 | 72,075 | |||||||||
|
|
|
|
|
| |||||||
₩ | 18,797,998 | 17,125,566 | 14,165,102 | |||||||||
|
|
|
|
|
|
|
(2) Detailsoperating results of the semiconductor business for reporting information used and reviewed when establishing the Group’s revenue by product and service types for the years ended December 31, 2015, 2014 and 2013 are as follows:business strategy.
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
DRAM | ₩ | 14,045,339 | 13,311,628 | 10,211,993 | ||||||||
NAND Flash | 4,148,315 | 3,320,658 | 3,391,561 | |||||||||
Other | 604,344 | 493,280 | 561,548 | |||||||||
|
|
|
|
|
| |||||||
₩ | 18,797,998 | 17,125,566 | 14,165,102 | |||||||||
|
|
|
|
|
|
(3) The Group’s revenue information by region based on the location of selling entities for the years ended December 31, 2015, 2014 and 2013 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Korea | ₩ | 1,204,642 | 1,179,949 | 1,105,083 | ||||||||
China | 4,496,357 | 3,825,747 | 3,038,355 | |||||||||
Taiwan | 1,899,649 | 2,155,005 | 1,765,343 | |||||||||
Asia (other than China and Taiwan) | 2,536,009 | 2,482,716 | 1,986,394 | |||||||||
U.S.A. | 7,549,622 | 6,359,461 | 5,191,619 | |||||||||
Europe | 1,111,719 | 1,122,688 | 1,078,308 | |||||||||
|
|
|
|
|
| |||||||
₩ | 18,797,998 | 17,125,566 | 14,165,102 | |||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
4. Geographic Product and Customer Information, continued
(4)(1) The Group’s non-current assets (excluding financial assets, loans and other receivables, equity-accounted investees and deferred tax assets) information by region based on the locationlocations of subsidiaries as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Korea | ₩ | 15,648,779 | 12,356,735 | ₩ | 35,954,666 | 35,565,747 | ||||||||||
China | 3,208,908 | 3,255,550 | 10,302,196 | 8,814,465 | ||||||||||||
Taiwan | 7,007 | 5,831 | ||||||||||||||
Asia (other than China and Taiwan) | 770 | 798 | ||||||||||||||
Asia (other than China) | 20,397 | 21,497 | ||||||||||||||
U.S.A. | 365,024 | 333,908 | 373,767 | 395,772 | ||||||||||||
Europe | 8,874 | 11,124 | 13,868 | 14,293 | ||||||||||||
|
|
|
| |||||||||||||
₩ | 19,239,362 | 15,963,946 | ₩ | 46,664,894 | 44,811,774 | |||||||||||
|
|
|
|
(5)(2) Revenue from customer A, B and BC each constitutes more than 10% of the Group’s consolidated revenue for the year ended December 31, 20152020 and amounts to ₩3,485,795₩3,655,937 million (2014: ₩2,959,663(2019: ₩4,947,483 million 2013: ₩2,457,867and 2018: ₩5,265,807 million), and ₩3,510,469 million(2019: ₩3,051,211 million and 2018: ₩5,407,782 million) and ₩2,078,835₩3,190,135 million, respectively.
5. Categories of Financial Instruments
(1) Categories of financial assets as of December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss | Available- for-sale financial assets | Loans and receivables | Total | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income or loss | Financial assets at amortized cost | Total | |||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||
Cash and cash equivalents | ₩ | — | — | 1,175,719 | 1,175,719 | ₩ | — | — | 2,975,989 | 2,975,989 | ||||||||||||||||||||||
Short-term financial instruments | 1,047,277 | — | 2,568,277 | 3,615,554 | 227,500 | — | 209,208 | 436,708 | ||||||||||||||||||||||||
Trade receivables | — | — | 2,628,448 | 2,628,448 | ||||||||||||||||||||||||||||
Short-term investment assets | 1,535,518 | — | — | 1,535,518 | ||||||||||||||||||||||||||||
Trade receivables1 | — | 512,458 | 4,418,864 | 4,931,322 | ||||||||||||||||||||||||||||
Loans and other receivables | — | — | 124,532 | 124,532 | — | — | 144,783 | 144,783 | ||||||||||||||||||||||||
Other financial assets | — | — | 430 | 430 | — | — | 383 | 383 | ||||||||||||||||||||||||
Available-for-sale financial assets | — | 131,354 | — | 131,354 | ||||||||||||||||||||||||||||
Long-term investment assets | 6,139,627 | — | — | 6,139,627 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
₩ | 1,047,277 | 131,354 | 6,497,406 | 7,676,037 | ₩ | 7,902,645 | 512,458 | 7,749,227 | 16,164,330 | |||||||||||||||||||||||
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1 | The Group transferred certain portion of trade receivables, which are from specific customers, and derecognized the trade receivables from the financial statements as all the risks and rewards are substantially transferred. Accordingly, the Group recognized gain or loss on disposal of trade receivables. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
5. Categories of Financial Instruments, continued
2014 | ||||||||||||||||
Financial assets at fair value through profit or loss | Available- for-sale financial assets | Loans and receivables | Total | |||||||||||||
(In millions of won) | ||||||||||||||||
Cash and cash equivalents | ₩ | — | — | 436,761 | 436,761 | |||||||||||
Short-term financial instruments | 1,842,020 | — | 1,775,994 | 3,618,014 | ||||||||||||
Trade receivables | — | — | 3,732,926 | 3,732,926 | ||||||||||||
Loans and other receivables | — | — | 750,518 | 750,518 | ||||||||||||
Other financial assets | — | — | 323 | 323 | ||||||||||||
Available-for-sale financial assets | — | 127,314 | — | 127,314 | ||||||||||||
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| |||||||||
₩ | 1,842,020 | 127,314 | 6,696,522 | 8,665,856 | ||||||||||||
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2019 | ||||||||||||
Financial assets at fair value through profit or loss | Financial assets at amortized cost | Total | ||||||||||
(In millions of won) | ||||||||||||
Cash and cash equivalents | ₩ | — | 2,306,070 | 2,306,070 | ||||||||
Short-term financial instruments | — | 298,350 | 298,350 | |||||||||
Short-term investment assets | 1,390,293 | — | 1,390,293 | |||||||||
Trade receivables | — | 4,306,449 | 4,306,449 | |||||||||
Loans and other receivables | — | 132,587 | 132,587 | |||||||||
Other financial assets | — | 931 | 931 | |||||||||
Long-term investment assets | 4,381,812 | — | 4,381,812 | |||||||||
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| |||||||
₩ | 5,772,105 | 7,044,387 | 12,816,492 | |||||||||
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(2) Categories of financial liabilities as of December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||
Financial liabilities at fair value through profit or loss | Financial liabilities measured at amortized cost | Total | Financial liabilities measured at amortized cost | Other financial liabilities | Total | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Trade payables | ₩ | — | 791,373 | 791,373 | ₩ | 1,046,159 | — | 1,046,159 | ||||||||||||||||
Other payables | — | 1,337,803 | 1,337,803 | 2,621,305 | — | 2,621,305 | ||||||||||||||||||
Other non-trade payables1 | — | 1,091,062 | 1,091,062 | |||||||||||||||||||||
Other non-trade payables | 1,397,116 | — | 1,397,116 | |||||||||||||||||||||
Borrowings | — | 3,818,595 | 3,818,595 | 11,251,648 | — | 11,251,648 | ||||||||||||||||||
Lease liabilities | 1,643,716 | — | 1,643,716 | |||||||||||||||||||||
Other financial liabilities | 683 | — | 683 | 3,958 | 84,707 | 88,665 | ||||||||||||||||||
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| |||||||||||||||||||
₩ | 683 | 7,038,833 | 7,039,516 | ₩ | 17,963,902 | 84,707 | 18,048,609 | |||||||||||||||||
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|
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2014 | 2019 | |||||||||||||||||||||||
Financial liabilities at fair value through profit or loss | Financial liabilities measured at amortized cost | Total | Financial liabilities at fair value through profit or loss | Financial liabilities measured at amortized cost | Total | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Trade payables | ₩ | — | 787,822 | 787,822 | ₩ | — | 1,042,542 | 1,042,542 | ||||||||||||||||
Other payables | — | 1,358,816 | 1,358,816 | 13,006 | 2,354,667 | 2,367,673 | ||||||||||||||||||
Other non-trade payables1 | — | 1,315,903 | 1,315,903 | |||||||||||||||||||||
Other non-trade payables | — | 1,276,161 | 1,276,161 | |||||||||||||||||||||
Borrowings | — | 4,174,759 | 4,174,759 | — | 10,523,506 | 10,523,506 | ||||||||||||||||||
Lease liabilities | — | 1,666,999 | 1,666,999 | |||||||||||||||||||||
Other financial liabilities | 738 | — | 738 | 15,532 | — | 15,532 | ||||||||||||||||||
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|
| |||||||||||||||||||
₩ | 738 | 7,637,300 | 7,638,038 | ₩ | 28,538 | 16,863,875 | 16,892,413 | |||||||||||||||||
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
5. Categories of Financial Instruments, continued
|
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Current | ||||||||
Accrued expenses | ₩ | 1,001,171 | 1,182,956 | |||||
Non-current | ||||||||
Long-term other payables | 87,036 | 130,566 | ||||||
Rent deposits payable | 2,855 | 2,357 | ||||||
Long-term accrued expenses | — | 24 | ||||||
|
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|
| |||||
89,891 | 132,947 | |||||||
|
|
|
| |||||
₩ | 1,091,062 | 1,315,903 | ||||||
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|
(3) Finance incomeDetails of gain and expensesloss on financial assets and liabilities by categoriescategory for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | ||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||
Loans and receivables | ||||||||||||||||||||
Financial assets at amortized cost | ||||||||||||||||||||
Interest income | ₩ | 40,715 | 50,804 | 59,262 | ₩ | 27,872 | 30,062 | |||||||||||||
Foreign exchange differences | 300,163 | 200,390 | (61,819 | ) | (959,065 | ) | 229,649 | |||||||||||||
Reversal of impairment (loss) | 82 | (5,463 | ) | 2,250 | ||||||||||||||||
Impairment | (555 | ) | — | |||||||||||||||||
Reversal of impairment | 5 | 85 | ||||||||||||||||||
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|
|
| ||||||||||||||||
340,960 | 245,731 | (307 | ) | (931,743 | ) | 259,796 | ||||||||||||||
|
|
| ||||||||||||||||||
Available-for-sale financial assets | ||||||||||||||||||||
Other comprehensive loss | — | — | (966 | ) | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||||||
Dividend income | 1,325 | 429 | ||||||||||||||||||
Gain on disposal | — | 6,553 | 205 | 27,510 | 59,217 | |||||||||||||||
Dividend income | 1,265 | 1,233 | 2,381 | |||||||||||||||||
|
|
| ||||||||||||||||||
1,265 | 7,786 | 1,620 | ||||||||||||||||||
|
|
| ||||||||||||||||||
Held-to-maturity financial assets | ||||||||||||||||||||
Interest income | — | 1,318 | 853 | |||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||||||
Interest income | — | — | 6,296 | |||||||||||||||||
Gain on valuation | 2,280 | 6,920 | — | |||||||||||||||||
Gain from derivative instruments | — | — | 73 | |||||||||||||||||
Gain on disposal | 33,814 | 28,493 | — | |||||||||||||||||
|
|
| ||||||||||||||||||
Gain (loss) on valuation | 1,736,345 | (227,423 | ) | |||||||||||||||||
Foreign exchange differences | (40,222 | ) | 209,563 | |||||||||||||||||
36,094 | 35,413 | 6,369 |
|
| ||||||||||||||||
|
|
| 1,724,958 | 41,786 | ||||||||||||||||
Financial liabilities measured at amortized cost | ||||||||||||||||||||
Interest expenses | (118,505 | ) | (170,363 | ) | (256,623 | ) | (253,468 | ) | (245,440 | ) | ||||||||||
Loss on redemption of debentures | — | (2,924 | ) | — | ||||||||||||||||
Foreign exchange differences | (242,532 | ) | (71,870 | ) | 169,509 | 809,001 | (339,834 | ) | ||||||||||||
|
|
|
|
| ||||||||||||||||
(361,037 | ) | (245,157 | ) | (87,114 | ) | 555,533 | (585,274 | ) | ||||||||||||
|
|
|
|
| ||||||||||||||||
Financial liabilities at fair value through profit or loss | ||||||||||||||||||||
Loss from derivative instruments | (361 | ) | (171,754 | ) | (93,546 | ) | ||||||||||||||
|
|
| ₩ | 1,348,748 | (283,692 | ) | ||||||||||||||
₩ | 16,921 | (126,663 | ) | (172,125 | ) |
|
| |||||||||||||
|
|
|
2018 | ||||
(In millions of won) | ||||
Financial assets at amortized cost | ||||
Interest income | ₩ | 62,478 | ||
Foreign exchange differences | 573,349 | |||
Reversal of impairment | 44 | |||
635,871 | ||||
Financial assets at fair value through profit or loss | ||||
Dividend income | 2,136 | |||
Gain on disposal | 41,853 | |||
Gain on valuation | 197,919 | |||
Foreign exchange differences | 122,375 | |||
364,283 | ||||
Financial liabilities measured at amortized cost | ||||
Interest expenses | (94,635 | ) | ||
Foreign exchange differences | (355,654 | ) | ||
(450,289 | ) | |||
549,865 | ||||
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
6. Financial Risk Management
(1) Financial risk management
The Group’s activities are exposed to a variety of financial risks: market risk (including currencyforeign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by the Parent Company’s corporate finance division in accordance with policies approved by the board of directors. The Parent Company’s corporate finance division identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. The board of directors provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk;risk, use of derivative financial instruments and non-derivative financial instruments;instruments, and the investment of excess liquidity.
(a) Market risk
(i) Foreign exchangecurrency risk
The Group operates internationally and is exposed to foreign exchangecurrency risk arising from various currency exposures, primarily with respect to the US dollar, Chinese Yuan, Euro and Japanese Yen. Foreign exchangecurrency risk arises from future commercial transactions;transactions, recognized assets and liabilities in foreign currencies;currencies, and net investments in foreign operations.
Monetary foreign currency assets and liabilities as of December 31, 20152020 are as follows:
Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||||||||
Foreign currencies | Korean won equivalent | Foreign currencies | Korean won equivalent | Foreign currencies | Korean won equivalent | Foreign currencies | Korean won equivalent | |||||||||||||||||||||||||
(In millions of won and millions of foreign currencies) | (In millions of won and millions of foreign currencies) | |||||||||||||||||||||||||||||||
USD | 4,299 | ₩ | 5,038,126 | 3,261 | ₩ | 3,821,703 | 10,370 | ₩ | 11,283,027 | 10,913 | ₩ | 11,873,394 | ||||||||||||||||||||
JPY | 385 | 4,062 | 140,716 | 1,483,515 | ||||||||||||||||||||||||||||
CNY | 1,779 | 297,021 | 27 | 4,525 | ||||||||||||||||||||||||||||
EUR | — | 115 | 148 | 189,031 | 10 | 12,791 | 34 | 45,167 | ||||||||||||||||||||||||
JPY | 6,194 | 60,204 | 37,445 | 363,967 |
Also, as described in note 23, the Group entered into a fixed-to-fixed cross currency swap and a floating-to-fixed cross currency interest rate swap to hedge foreign currency rate risk relating to bonds and borrowings denominated in foreign currencies.
As of December 31, 2015,2020, effects on profit before income tax as a result of change in exchange ratestrengthening or weakening of the foreign currencies by 10% are as follows:
If increased by 10% | If decreased by 10% | If strengthening by 10% | If weakening by 10% | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
USD | ₩ | 121,642 | (121,642 | ) | ₩ | 49,200 | (49,200 | ) | ||||||||
JPY | (147,945 | ) | 147,945 | |||||||||||||
CNY | 29,250 | (29,250 | ) | |||||||||||||
EUR | (18,892 | ) | 18,892 | (3,238 | ) | 3,238 | ||||||||||
JPY | (30,376 | ) | 30,376 |
(ii) Interest rate risk
Interest rate risk of the Group is defined as the risk that the interest expenses arising from borrowings will fluctuate because of changes in future market interest rate. The interest rate risk mainly arises through floating rate borrowings, and is partially offset by interests received from floating rate financial assets.borrowings.
The Group manages its interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (primarily quarterly), the difference between interests of fixed rates and floating rates, which are calculated based on the agreed notional amounts.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
6. Financial Risk Management, continued
The Group is managing cash flow interest rate risk using floating-to-fixed cross currency interest rate swaps. These interest rate swaps have an economic effect of converting floating interest borrowings into fixed interest borrowings. Generally, the Group borrows at a floating interest rate and then swaps at a fixed rate. Under the swap agreement, the Group will settle the difference between fixed interest costs and the floating interest costs calculated according to the principal agreed upon for each counterparty and specific period (mainly quarterly).
The Group is partially exposed to the risk of changing net interest costs due to changes in interest rates as of December 31, 2020. The Group has signed a currency interest rate swap contract on floating interest rate borrowings of ₩544,000 million and interest rate swap contract on floating interest rate borrowings of ₩108,800 million. Therefore, the changes in interest costs subject to fluctuation of interest rates do not have an impact on the profit before income tax for the year ended December 31, 2020.
As of December 31, 2015, the Group is partially exposed to a risk of increase in interest rates. If2020, if interest rates on borrowings werehad been 100 basis points higher/lower with all other variables held constant, profit before income tax for the following year would be ₩17,771have been ₩50,270 million (2014: ₩15,267(2019 : ₩55,093 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and interest income on floating rate financial assets.
(iii) Price risk
AsThe Group invests in equity and debt securities resulted from its business needs and the purpose of liquidity management. The Group’s equity and debt securities are exposed to price risk as of December 31, 2015, there are no available-for-sale equity securities measured at fair value held by the Group. Accordingly,2020.
Equity investments that the Group is not exposed to anyowns are all unlisted equities and the effect of the equity securities price risk.investments on the Group’s profit for the year and other comprehensive income are explained in note 12.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly from operating and investing activities. In order to manage credit risk, the Group periodically evaluates the creditworthinesscredit worthiness of each customer or counterparty through the analysis of its financial information, historical transaction records and other factors, based on which the Group establishes credit limits for each customer or counterparty.
(i) Trade and other receivables
For each new customer, the Group individually analyzes its credit worthiness before standard payment and delivery terms and conditions are offered. In addition, the Group is consistently managing trade and other receivables by reevaluating the overseas customer’s credit worthiness and securing collaterals in order to limit its credit risk exposure.
The Group reviews at the end of each reporting period whether trade and other receivables are impaired and maintains credit insurance policies to manage credit risk exposure from oversea customers. The maximum exposure to credit risk as of December 31, 20152020 is the carrying amount of trade and other receivables.
(ii) Other financial assets
Credit risk also arises from other financial assets such as cash and cash equivalents;equivalents, short-term financial instruments;instruments, and deposits with banks and financial institutions as well as short-term and long-term loans mainly due to the bankruptcy of each counterparty to those financial assets. The maximum exposure to credit risk as of December 31, 20152020 is the carrying amount of those financial assets. The Group transacts only with banks and financial institutions with high credit ratings, including Shinhan Bank, and accordingly management does not expect any significant losses from non-performance by these counterparties.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
6. Financial Risk Management, continued
(c) Liquidity risk
Liquidity risk is defined as the risk that the Group is unablewill encounter difficulty in having sufficient funds needed to meet obligations associated with its short-term payment obligations on time due to deterioration of its business performance or inability to access financing.financial contracts until maturity. The Group forecasts its cash flow and liquidity status and sets action plans on a regular basis to manage liquidity risk proactively.
The Group invests surplus cash in interest-bearing current accounts, time deposits, and demand deposits, marketable available-for-sale securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined bybased on the above-mentioned forecasts.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
6. Financial Risk Management, continued
Contractual maturities of financial liabilities as of December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||
Less than 1 year | 1 - 2 years | 2 - 5 years | More than 5 years | Total | Less than 1 year | 1 – 2 years | 2 – 5 years | More than 5 years | Total | |||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||
Borrowings (other than finance lease liabilities) | ₩ | 1,012,385 | 735,424 | 2,025,522 | 156,995 | 3,930,326 | ||||||||||||||||||||||||||||||||||
Finance lease liabilities | 98,927 | 26,654 | 16,050 | 24,075 | 165,706 | |||||||||||||||||||||||||||||||||||
Borrowings1 | ₩ | 3,309,009 | 2,317,331 | 5,136,314 | 1,121,480 | 11,884,134 | ||||||||||||||||||||||||||||||||||
Lease liabilities | 352,201 | 250,840 | 391,356 | 848,315 | 1,842,712 | |||||||||||||||||||||||||||||||||||
Trade payables | 791,373 | — | — | — | 791,373 | 1,046,159 | — | — | — | 1,046,159 | ||||||||||||||||||||||||||||||
Other payables | 1,346,469 | — | — | — | 1,346,469 | 2,348,909 | 56,902 | 160,488 | 78,336 | 2,644,635 | ||||||||||||||||||||||||||||||
Other non-trade payables | 1,001,077 | 83,536 | 10,877 | — | 1,095,490 | 1,346,254 | 17,896 | 12,028 | — | 1,376,178 | ||||||||||||||||||||||||||||||
Derivatives | 683 | — | — | — | 683 | |||||||||||||||||||||||||||||||||||
Derivative Liabilities | (3,538 | ) | (3,839 | ) | 77,573 | 13,460 | 83,656 | |||||||||||||||||||||||||||||||||
Other financial liabilities | 117,106 | — | — | — | 117,106 | |||||||||||||||||||||||||||||||||||
Financial guarantee contract | 8 | — | — | — | 8 | 87,040 | — | — | — | 87,040 | ||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||||
₩ | 4,250,922 | 845,614 | 2,052,449 | 181,070 | 7,330,055 | ₩ | 8,603,140 | 2,639,130 | 5,777,759 | 2,061,591 | 19,081,620 | |||||||||||||||||||||||||||||
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|
|
|
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|
| |||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||||||||||
Less than 1 year | 1 - 2 years | 2 - 5 years | More than 5 years | Total | ||||||||||||||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
Borrowings (other than finance lease liabilities) | ₩ | 1,765,674 | 795,191 | 1,675,663 | — | 4,236,528 | ||||||||||||||||||||||||||||||||||
Finance lease liabilities | 106,318 | 92,024 | 24,253 | — | 222,595 | |||||||||||||||||||||||||||||||||||
Trade payables | 787,822 | — | — | — | 787,822 | |||||||||||||||||||||||||||||||||||
Other payables | 1,369,959 | — | — | — | 1,369,959 | |||||||||||||||||||||||||||||||||||
Other non-trade payables | 1,182,957 | 78,625 | 54,297 | — | 1,315,879 | |||||||||||||||||||||||||||||||||||
Derivatives | 738 | — | — | — | 738 | |||||||||||||||||||||||||||||||||||
Financial guarantee contract | 27 | — | — | — | 27 | |||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
₩ | 5,213,495 | 965,840 | 1,754,213 | — | 7,933,548 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
1 | The cash flow includes payment of interest under terms and conditions of borrowing. |
2019 | ||||||||||||||||||||
Less than 1 year | 1 – 2 years | 2 – 5 years | More than 5 years | Total | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Borrowings1 | ₩ | 2,988,176 | 2,974,910 | 4,535,800 | 794,687 | 11,293,573 | ||||||||||||||
Lease liabilities | 296,419 | 294,633 | 443,049 | 849,095 | 1,883,196 | |||||||||||||||
Trade payables | 1,042,542 | — | — | — | 1,042,542 | |||||||||||||||
Other payables | 2,367,673 | — | — | — | 2,367,673 | |||||||||||||||
Other non-trade payables | 1,257,895 | 15,611 | 2,655 | — | 1,276,161 | |||||||||||||||
Other financial liabilities | (15,826 | ) | (13,862 | ) | (16,732 | ) | 5,522 | (40,898 | ) | |||||||||||
Financial guarantee contract | 69,468 | — | — | — | 69,468 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 8,006,347 | 3,271,292 | 4,964,772 | 1,649,304 | 17,891,715 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
1 | The cash flow includes payment of interest under terms and conditions of borrowing contracts. |
The table above analyzes the Group’s non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity groups based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and includesinclude estimated interest payments. The Group’s derivative instruments have been included at their fair value of ₩683 million (2014: ₩738 million) within
SK HYNIX, INC. and Subsidiaries
Notes to the less than one-year time bucket as of Consolidated Financial Statements
December 31, 2015. These contracts are managed on a net-fair value basis rather than by maturity date. Net settled derivatives comprise interest rate swaps used by the Group to manage the Group’s interest rate risk.2020, 2019 and 2018
6. Financial Risk Management, continued
(2) Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends to shareholders, proceeds and repayments of borrowings, issue new shares or sell assets to reducerepay debt.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
6. Financial Risk Management, continued
The debt-to-equity ratio and net borrowing ratio as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Total liabilities (A) | ₩ | 8,290,203 | 8,846,975 | ₩ | 19,264,756 | 17,312,468 | ||||||||||
Total equity (B) | 21,387,703 | 18,036,303 | 51,909,097 | 47,935,882 | ||||||||||||
Cash and cash equivalents and short-term financial instruments (C) | 4,791,273 | 4,054,775 | ||||||||||||||
Cash and cash equivalents; short-term financial instruments; and short-term investment asset (C) | 4,948,215 | 3,994,713 | ||||||||||||||
Total borrowings (D) | 3,818,595 | 4,174,759 | 11,251,648 | 10,523,506 | ||||||||||||
Debt-to-equity ratio (A/B) | 39 | % | 49 | % | 37.11% | 36.12% | ||||||||||
Net borrowing ratio (D-C)/B | -5 | % | 1 | % | 12.14% | 13.62% |
(3) Fair value
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
6. Financial Risk Management, continued
(a) The following table presents the carrying amounts and fair values of financial instruments by categories, including their levels in the fair value hierarchy, as of December 31, 20152020 and 2014:2019:
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||
Carrying amounts | Level 1 | Level 2 | Level 3 | Total | Carrying amounts | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||
Financial assets measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Short-term financial instruments | ₩ | 1,047,277 | — | 1,047,277 | — | 1,047,277 | ₩ | 227,500 | — | — | 227,500 | 227,500 | ||||||||||||||||||||||||||||
Short-term investment asset | 1,535,518 | — | 1,535,518 | — | 1,535,518 | |||||||||||||||||||||||||||||||||||
Trade receivables1 | 512,458 | — | 512,458 | — | 512,458 | |||||||||||||||||||||||||||||||||||
Long-term investment asset | 6,139,627 | — | — | 6,139,627 | 6,139,627 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
1,047,277 | — | 1,047,277 | — | 1,047,277 | 8,415,103 | — | 2,047,976 | 6,367,127 | 8,415,103 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Financial assets not measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents1 | 1,175,719 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Short-term financial instruments1 | 2,568,277 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Trade receivables1 | 2,628,448 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Loans and other receivables1 | 124,532 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other financial assets1 | 430 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Available-for-sale financial assets1,2 | 131,354 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Cash and cash equivalents2 | 2,975,989 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Short-term financial instruments2 | 209,208 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Trade receivables2 | 4,418,864 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Loans and other receivables2 | 144,783 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other financial assets2 | 383 | — | — | — | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
6,628,760 | — | — | — | — | 7,749,227 | — | — | — | — | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total financial asset | 16,164,330 | — | 2,047,976 | 6,367,127 | 8,415,103 | |||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Financial liabilities measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Other financial liabilities | 683 | — | 683 | — | 683 | 84,707 | — | 84,707 | — | 84,707 | ||||||||||||||||||||||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Trade payables2 | 1,046,159 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other payables2 | 2,621,305 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other non-trade payables2 | 1,397,116 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Borrowings | 11,251,648 | — | 11,372,509 | — | 11,372,509 | |||||||||||||||||||||||||||||||||||
Lease liabilities2 | 1,643,716 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other financial liabilities2 | 3,958 | — | — | — | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
683 | — | 683 | — | 683 | 17,963,902 | — | 11,372,509 | — | 11,372,509 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Trade payables1 | 791,373 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other payables1 | 1,337,803 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other non-trade payables1 | 1,091,062 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Borrowings | 3,818,595 | — | 3,869,536 | — | 3,869,536 | |||||||||||||||||||||||||||||||||||
Total financial liabilities | ₩ | 18,048,609 | — | 11,457,216 | — | 11,457,216 | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
₩ | 7,038,833 | — | 3,869,536 | — | 3,869,536 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
1 | The Group transferred some of the trade receivables and majority of the risks and rewards to the customer. Accordingly, the Group derecognized trade receivables from the financial statement on the date of assets transfer and recognized gain or loss on disposal of trade receivables. |
2 | The Group did not include fair values of financial assets and liabilities of which carrying amounts are considered to be a reasonable approximation of fair values. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
6. Financial Risk Management, continued
2014 | ||||||||||||||||||||
Carrying amounts | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Financial assets measured at fair value | ||||||||||||||||||||
Short-term financial instruments | ₩ | 1,842,020 | — | 1,842,020 | — | 1,842,020 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1,842,020 | — | 1,842,020 | — | 1,842,020 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial assets not measured at fair value | ||||||||||||||||||||
Cash and cash equivalents1 | 436,761 | — | — | — | — | |||||||||||||||
Short-term financial instruments1 | 1,775,994 | — | — | — | — | |||||||||||||||
Trade receivables1 | 3,732,926 | — | — | — | — | |||||||||||||||
Loans and other receivables1 | 750,518 | — | — | — | — | |||||||||||||||
Other financial assets1 | 323 | — | — | — | — | |||||||||||||||
Available-for-sale financial assets1,2 | 127,314 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
6,823,836 | — | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities measured at fair value | ||||||||||||||||||||
Other financial liabilities | 738 | — | 738 | — | 738 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
738 | — | 738 | — | 738 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||
Trade payables1 | 787,822 | — | — | — | — | |||||||||||||||
Other payables1 | 1,358,816 | — | — | — | — | |||||||||||||||
Other non-trade payables1 | 1,315,903 | — | — | — | — | |||||||||||||||
Borrowings | 4,174,759 | — | 4,243,974 | — | 4,243,974 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 7,637,300 | — | 4,243,974 | — | 4,243,974 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a) The following table presents the carrying amounts and fair values of financial instruments by categories, including their levels in the fair value hierarchy, as of December 31, 2020 and 2019, Continued:
2019 | ||||||||||||||||||||
Carrying amounts | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Financial assets measured at fair value | ||||||||||||||||||||
Short-term investment asset | ₩ | — | 1,390,293 | — | 1,390,293 | |||||||||||||||
Long-term investment asset | 4,381,812 | — | — | 4,381,812 | 4,381,812 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
5,772,105 | — | 1,390,293 | 4,381,812 | 5,772,105 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial assets not measured at fair value | ||||||||||||||||||||
Cash and cash equivalents1 | 2,306,070 | — | — | — | — | |||||||||||||||
Short-term financial instruments1 | 298,350 | — | — | — | — | |||||||||||||||
Trade receivables1 | 4,306,449 | — | — | — | — | |||||||||||||||
Loans and other receivables1 | 132,587 | — | — | — | — | |||||||||||||||
Other financial assets1 | 931 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
7,044,387 | — | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total financial asset | 12,816,492 | — | 1,390,293 | 4,381,812 | 5,772,105 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities measured at fair value | ||||||||||||||||||||
Other financial liabilities | 15,532 | — | 15,532 | — | 15,532 | |||||||||||||||
Other payables | 13,006 | — | — | 13,006 | 13,006 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
28,538 | — | 15,532 | 13,006 | 28,538 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||
Trade payables1 | 1,042,542 | — | — | — | — | |||||||||||||||
Other payables1 | 2,354,667 | — | — | — | — | |||||||||||||||
Other non-trade payables1 | 1,276,161 | — | — | — | — | |||||||||||||||
Borrowings | 10,523,506 | — | 10,585,029 | — | 10,585,029 | |||||||||||||||
Lease liabilities1 | 1,666,999 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
16,863,875 | — | 10,585,029 | — | 10,585,029 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total financial liabilities | ₩ | 16,892,413 | — | 10,600,561 | 13,006 | 10,613,567 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
1 |
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
6. Financial Risk Management, continued
|
(b) Valuation Techniques
The valuation techniques of recurring and non-recurring fair value measurements and quoted prices classified as level 2 or level 3 are as follows:
Fair value | Level | Valuation Techniques | ||||||||
(In millions of won) | ||||||||||
Short-term financial instruments: | ||||||||||
Financial assets at fair value through profit or loss | ₩ | 1,047,277 | 2 | The present value method | ||||||
Derivative financial Liabilities: | ||||||||||
Interest swap | 683 | 2 | The present value method |
Fair value | Level | Valuation Techniques | ||||||||||
(In millions of won) | ||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||
Short-term investment assets | ₩ | 1,535,518 | 2 | Present value technique | ||||||||
Long-term investment assets | 6,139,627 | 3 | Present value technique and others | |||||||||
Short-term financial instruments | 227,500 | 3 | Present value technique | |||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||
Trade receivables | ₩ | 512,458 | 2 | Present value technique | ||||||||
Financial liabilities at fair value through other comprehensive income | ||||||||||||
Other financial liabilities | ₩ | 84,707 | 2 | Present value technique |
Long-term investments measured at Level 3 in the fair value hierarchy include investments in special purpose companies of BCPE Pangea Intermediate Holdings Cayman, L.P. (“SPC1”) amounting to ₩3,595,494 million and BCPE Pangea Cayman2 Limited (“SPC2”) amounting to ₩2,351,225 million in connection with the Group’s investments in acquisition of KIOXIA Holdings Corporation (“KIOXIA”, formerly Toshiba Memory Corporation) (see note 12). The fair value of the long-term investments is measured based on the equity value of the underlying asset, KIOXIA estimated utilizing present value discount model.
The fair value of equity investment in SPC1 is measured using an option pricing model allocating the estimated fair value of KIOXIA equity between investors based on distribution priority pursuant to the underlying investment arrangement together with consideration of expected KIOXIA initial public offering and SPC1 liquidation.
The fair value of debt investment in SPC2 convertible bonds is measured based on the estimated KIOXIA’s equity value and SPC2’s equity ownership in KIOXIA (15.0%).
The valuation techniques used to measure equity investments in SPC1 and SPC2 convertible bonds have changed in the current year in response to a change in estimate of the likelihood of KIOXIA’s initial public offering.
The valuation techniques and key inputs used in valuation of the equity investment in SPC1 and investment in SPC2 convertible bonds are as follows:
Fair value | Valuation Techniques | Level 3 inputs | Input Range | |||||||||
(In millions of won) | ||||||||||||
Equity investment in SPC1 | ₩ | 3,595,494 |
| Present value technique and option-pricing method | Terminal growth rate | 0 | % | |||||
Discount rate (Weighted-average capital cost) | 7.8 | % | ||||||||||
Expected timing of liquidation of the SPC (years) | 2.92 | |||||||||||
Volatility | 42.0 | % | ||||||||||
SPC2 convertible | Risk free rate | -0.13 | % | |||||||||
Present value technique | Terminal growth rate | 0 | % | |||||||||
2,351,225 | Discount rate (Weighted-average capital cost) | 7.8 | % |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
6. Financial Risk Management, continued
Other significant unobservable inputs used in the present value discount model also include estimated future revenue and operating profit of KIOXIA. In these level 3 significant unobservable inputs, the higher in terminal growth rate, future revenue, and operating profit or the lower in weighted-average capital cost will result the higher fair value of the equity investment in SPC1, while any change in volatility and risk free rate may have either positive or negative impact on the fair value of the investment in SPC1. In addition, the higher in terminal growth rate and the lower in weighted-average capital cost will result in the higher fair value of the investment in SPC2 convertible bonds.
Any positive or negative changes in the above inputs will have a significant and direct impact on the fair value of investments in SPC1 and SPC2, respectively. They are significant, but unobservable. Accordingly, the investments are classified as fair value hierarchy Level 3 and the above inputs may have a significant impact on the value of investments in SPC1 and SPC2.
The sensitivity analysis results for the effect of changes in each long-term investment input classified as Level 3 under sensitivity analysis on fair value are as follows:
Positive fluctuation | Negative fluctuation | |||||||
(In millions of won) | ||||||||
Equity investment in SPC11 | ₩ | 906,367 | ₩ | (738,474 | ) | |||
SPC2 convertible bonds1 | 590,076 | (456,627 | ) |
1 | The changes in fair value are calculated by increasing or decreasing the terminal growth rate and weighted-average capital costs, which are major unobservable inputs by 0.5%. |
(c) There was no transfer between fair value hierarchy levels forduring the year ended December 31, 2015.
Beginning Balance | Acquisition | Disposals | Payments | Gain on Valuation | Foreign Exchange Difference | Transfer1 | Ending Balance | |||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||||||
Short-term Financial instruments | ₩ | — | — | — | — | — | — | 227,500 | 227,500 | |||||||||||||||||||||||
Long-term investment assets | 4,381,812 | 95,332 | (706 | ) | — | 1,733,783 | (44,214 | ) | (26,380 | ) | 6,139,627 | |||||||||||||||||||||
Other payables | 13,006 | — | — | 14,605 | — | (27,611 | ) | — | — |
1 | Certain long-term investment assets were transferred to associates and joint ventures. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
7. Restricted Financial Instruments
Details of restricted financial instruments as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | Description | 2020 | 2019 | Description | |||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||
Short-term financial instruments | ₩ | — | 3 | Restricted for government grants | ₩ | 227,500 | 227,500 | Restricted for supporting small businesses | ||||||||||||
77,500 | 46,000 | Restricted for supporting small business | ||||||||||||||||||
22,190 | 21,655 | Pledged for borrowings | ||||||||||||||||||
5,832 | 4,601 | Pledged for consumption tax | ||||||||||||||||||
— | 4,764 | Pledged for letter of credit | 8,434 | 6,381 | Pledged for consumption tax | |||||||||||||||
2,843 | 584 | Deposit for import duties | 84,419 | — | Guarantee deposits for repayments of borrowings | |||||||||||||||
|
|
|
| |||||||||||||||||
108,365 | 77,607 | 320,353 | 233,881 | |||||||||||||||||
|
|
|
| |||||||||||||||||
Other financial assets | 308 | 308 | Pledged for borrowings | 11 | 11 | Bank overdraft guarantee deposit | ||||||||||||||
12 | 12 | Bank overdraft guarantee deposit | 305 | 269 | Others | |||||||||||||||
110 | 3 | Others |
|
| ||||||||||||||||
|
| 316 | 280 | |||||||||||||||||
430 | 323 |
|
| |||||||||||||||||
|
| ₩ | 320,669 | 234,161 | ||||||||||||||||
₩ | 108,795 | 77,930 |
|
| ||||||||||||||||
|
|
8. Trade Receivables and Loans and Other Receivables
(1) Details of trade receivables as of December 31, 2020 and 2019 are as follows:
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Current | ||||||||
Trade receivables | ₩ | 4,873,602 | 4,175,470 | |||||
Trade receivables to be collected from related parties | 57,720 | 86,204 | ||||||
|
|
|
| |||||
4,931,322 | 4,261,674 | |||||||
|
|
|
| |||||
Non-current | ||||||||
Trade receivables | — | 44,775 | ||||||
|
|
|
| |||||
₩ | 4,931,322 | 4,306,449 | ||||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
8. Trade Receivables and Loans and Other Receivables, continued
(2) Details of loans and other receivables as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Current | ||||||||||||||||
Other receivables1 | ₩ | 37,427 | 655,112 | |||||||||||||
Other receivables | ₩ | 13,603 | 11,104 | |||||||||||||
Accrued income | 18,126 | 28,337 | 2,570 | 2,043 | ||||||||||||
Short-term loans | 3,786 | 3,504 | 5,045 | 6,816 | ||||||||||||
Short-term guarantee and other deposits | 2,274 | 4,576 | 47,976 | 3,545 | ||||||||||||
|
|
|
| |||||||||||||
61,613 | 691,529 | 69,194 | 23,508 | |||||||||||||
|
|
|
| |||||||||||||
Non-current | ||||||||||||||||
Long-term other receivables | 22,921 | 22,880 | 2,977 | 2 | ||||||||||||
Long-term loans | 6,104 | 7,199 | 37,838 | 35,299 | ||||||||||||
Guarantee deposits | 33,637 | 28,585 | 34,558 | 73,550 | ||||||||||||
Long-term deposits | 257 | 325 | ||||||||||||||
Others | 216 | 228 | ||||||||||||||
|
|
|
| |||||||||||||
62,919 | 58,989 | 75,589 | 109,079 | |||||||||||||
|
|
|
| |||||||||||||
₩ | 124,532 | 750,518 | ₩ | 144,783 | 132,587 | |||||||||||
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
8. Trade Receivables and Loans and Other Receivables, continued
(2)(3) Trade receivables and loans and other receivables, net of provision for impairment, as of December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||
Gross amount | Provision for impairment | Carrying amount | Gross amount | Provision for impairment | Carrying amount | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Trade receivables | ₩ | 2,631,422 | (2,974 | ) | 2,628,448 | ₩ | 4,931,366 | (44 | ) | 4,931,322 | ||||||||||||||
Current loans and other receivables | 63,046 | (1,433 | ) | 61,613 | 70,472 | (1,278 | ) | 69,194 | ||||||||||||||||
Non-current loans and other receivables | 69,062 | (6,143 | ) | 62,919 | 76,743 | (1,154 | ) | 75,589 | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 2,763,530 | (10,550 | ) | 2,752,980 | ₩ | 5,078,581 | (2,476 | ) | 5,076,105 | |||||||||||||||
|
|
|
|
|
|
2014 | 2019 | |||||||||||||||||||||||
Gross amount | Provision for impairment | Carrying amount | Gross amount | Provision for impairment | Carrying amount | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Trade receivables | ₩ | 3,735,845 | (2,919 | ) | 3,732,926 | ₩ | 4,306,458 | (9 | ) | 4,306,449 | ||||||||||||||
Current loans and other receivables | 693,197 | (1,668 | ) | 691,529 | 24,788 | (1,280 | ) | 23,508 | ||||||||||||||||
Non-current loans and other receivables | 65,023 | (6,034 | ) | 58,989 | 110,241 | (1,162 | ) | 109,079 | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 4,494,065 | (10,621 | ) | 4,483,444 | ₩ | 4,441,487 | (2,451 | ) | 4,439,036 | |||||||||||||||
|
|
|
|
|
|
(3)
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
8. Trade Receivables and Loans and Other Receivables, continued
(4) Details of provision for impairment
MovementsChanges in the provision for impairment of trade receivables for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Beginning balance | ₩ | 2,919 | 3,446 | ₩ | 9 | 48 | ||||||||||
Provision for receivables impairment | 88 | 525 | ||||||||||||||
Receivables written off during the year as uncollectible | — | (885 | ) | |||||||||||||
Bad debt expense | 555 | — | ||||||||||||||
Reversal | — | (40 | ) | |||||||||||||
Write-off | (517 | ) | — | |||||||||||||
Foreign exchange difference | (33 | ) | (167 | ) | (3 | ) | 1 | |||||||||
|
|
|
| |||||||||||||
Ending balance | ₩ | 2,974 | 2,919 | ₩ | 44 | 9 | ||||||||||
|
|
|
|
MovementsChanges in the provision for impairment of current loans and other receivables for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Beginning balance | ₩ | 1,668 | 2,062 | |||||
Provision for receivables impairment | — | 302 | ||||||
Unused amounts reversed | (234 | ) | (1 | ) | ||||
Receivables written off during the year as uncollectible | — | (697 | ) | |||||
Foreign exchange difference | (1 | ) | 2 | |||||
|
|
|
| |||||
Ending balance | ₩ | 1,433 | 1,668 | |||||
|
|
|
|
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Beginning balance | ₩ | 1,280 | 1,323 | |||||
Reversal | (2 | ) | (45 | ) | ||||
Foreign exchange difference | — | 2 | ||||||
|
|
|
| |||||
Ending balance | ₩ | 1,278 | 1,280 | |||||
|
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|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
8. Trade Receivables and Loans and Other Receivables, continued
MovementsChanges in the provision for impairment of non-current loans and other receivables for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Beginning balance | ₩ | 6,034 | 12,510 | ₩ | 1,162 | 1,117 | ||||||||||
Provision for receivables impairment | 68 | 4,636 | ||||||||||||||
Unused amounts reversed | (4 | ) | — | |||||||||||||
Receivables written off during the year as uncollectible | (6 | ) | (10,891 | ) | ||||||||||||
Reversal | (3 | ) | — | |||||||||||||
Write-off | 64 | — | ||||||||||||||
Foreign exchange difference | 51 | (221 | ) | (69 | ) | 45 | ||||||||||
|
|
|
| |||||||||||||
Ending balance | ₩ | 6,143 | 6,034 | ₩ | 1,154 | 1,162 | ||||||||||
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|
|
(4)
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
8. Trade Receivables and Loans and Other Receivables, continued
(5) The aging analysesanalysis of trade receivables and loans and other receivables as of December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Not impaired | Not impaired | |||||||||||||||||||||||||||||||||||||||||||||||
Overdue | Overdue | |||||||||||||||||||||||||||||||||||||||||||||||
Not Past due | Less than 3 months | Over 3 months and less than 6 months | Over 6 months | Impaired | Total | Not past due | Less than 3 months | Over 3 months and less than 6 months | Over 6 months | Impaired | Total | |||||||||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||||||
Trade receivables | ₩ | 2,606,603 | 24,819 | — | — | — | 2,631,422 | ₩ | 4,931,328 | — | — | — | 38 | 4,931,366 | ||||||||||||||||||||||||||||||||||
Current loans and other receivables | 61,753 | — | — | — | 1,293 | 63,046 | 69,194 | — | — | — | 1,278 | 70,472 | ||||||||||||||||||||||||||||||||||||
Non-current loans and other receivables | 43,953 | — | — | — | 25,109 | 69,062 | 75,589 | — | — | — | 1,154 | 76,743 | ||||||||||||||||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||||||||||||||||
₩ | 2,712,309 | 24,819 | — | — | 26,402 | 2,763,530 | ₩ | 5,076,111 | — | — | — | 2,470 | 5,078,581 | |||||||||||||||||||||||||||||||||||
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|
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|
|
2014 | ||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||
Overdue | ||||||||||||||||||||||||
Not Past due | Less than 3 months | Over 3 months and less than 6 months | Over 6 months | Impaired | Total | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
Trade receivables | ₩ | 3,731,621 | 3,809 | 415 | — | — | 3,735,845 | |||||||||||||||||
Current loans and other receivables | 691,918 | — | — | — | 1,279 | 693,197 | ||||||||||||||||||
Non-current loans and other receivables | 41,599 | — | — | — | 23,424 | 65,023 | ||||||||||||||||||
|
|
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|
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|
| |||||||||||||
₩ | 4,465,138 | 3,809 | 415 | — | 24,703 | 4,494,065 | ||||||||||||||||||
|
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|
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|
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|
|
2019 | ||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||
Overdue | ||||||||||||||||||||||||
Not past due | Less than 3 months | Over 3 months and less than 6 months | Over 6 months | Impaired | Total | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
Trade receivables | ₩ | 4,306,453 | — | — | — | 5 | 4,306,458 | |||||||||||||||||
Current loans and other receivables | 23,508 | — | — | — | 1,280 | 24,788 | ||||||||||||||||||
Non-current loans and other receivables | 109,079 | — | — | — | 1,162 | 110,241 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 4,439,040 | — | — | — | 2,447 | 4,441,487 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
9. Inventories
(1) Details of inventories as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Merchandise | ₩ | 2,173 | 2,822 | |||||||||||||
Finished goods | ₩ | 613,382 | 408,256 | 1,078,967 | 1,058,434 | |||||||||||
Work-in-process | 848,199 | 762,421 | 3,584,955 | 2,988,762 | ||||||||||||
Raw materials | 222,742 | 188,037 | 724,482 | 625,779 | ||||||||||||
Supplies | 164,156 | 102,705 | 588,009 | 521,068 | ||||||||||||
Goods in transit | 74,897 | 36,144 | 157,732 | 98,970 | ||||||||||||
|
|
|
| |||||||||||||
₩ | 1,923,376 | 1,497,563 | ₩6,136,318 | 5,295,835 | ||||||||||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
9. Inventories, continued
(2) The amount of the inventories recognized as cost of sales is as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Inventories recognized as cost of sales | ₩ | 10,350,548 | 9,448,374 | 8,594,938 |
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Inventories recognized as cost of sales | ₩ | 21,313,696 | 18,547,022 | 15,178,673 |
(3) The changes in inventory valuation allowance during the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Beginning balance | ₩ | 68,528 | 73,116 | ₩ | 647,498 | 377,992 | ||||||||||
Charged to cost of sales | 119,764 | 20,924 | 79,560 | 273,820 | ||||||||||||
Write-off upon sales | (46 | ) | (25,512 | ) | ||||||||||||
Utilization upon sales | (306,072 | ) | (4,314 | ) | ||||||||||||
|
|
|
| |||||||||||||
Ending balance | ₩ | 188,246 | 68,528 | ₩ | 420,986 | 647,498 | ||||||||||
|
|
|
|
There were no significant reversals of inventory write-downs recognized during 20152020 and 2014.2019.
10. Non-current assets held for sale
Details of changes in non-current assets held for sale for the years ended December 31, 2015 and 2014 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Beginning balance | ₩ | 27,661 | 26,557 | |||||
Disposal1 | (27,661 | ) | — | |||||
Other | — | 1,104 | ||||||
|
|
|
| |||||
Ending balance | ₩ | — | 27,661 | |||||
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
11. Other Current and Non-current Assets
Details of other current and non-current assets as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Current | ||||||||||||||||
Advance payments | ₩ | 2,033 | 4,501 | ₩ | 51,047 | 64,429 | ||||||||||
Prepaid expenses | 212,766 | 156,590 | 145,298 | 218,365 | ||||||||||||
Value added tax refundable1 | 131,673 | 190,356 | ||||||||||||||
Value added tax refundable | 235,602 | 343,434 | ||||||||||||||
Contract assets | 53,605 | 55,715 | ||||||||||||||
Others | 7,454 | 5,984 | 120 | 94 | ||||||||||||
|
|
|
| |||||||||||||
353,926 | 357,431 | 485,672 | 682,037 | |||||||||||||
|
|
|
| |||||||||||||
Non-current | ||||||||||||||||
Long-term prepaid expenses2 | 558,058 | 494,908 | ||||||||||||||
Long-term advance payments | 36,985 | 44,746 | ||||||||||||||
Long-term prepaid expenses | 14,961 | 535,717 | ||||||||||||||
Others | 7,475 | 13,568 | 3,083 | — | ||||||||||||
|
|
|
| |||||||||||||
565,533 | 508,476 | 55,029 | 580,463 | |||||||||||||
|
|
|
| |||||||||||||
₩ | 919,459 | 865,907 | ₩ | 540,701 | 1,262,500 | |||||||||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
|
|
12.11. Investments in Associates and Joint Ventures
(1) Details of investments in associates and joint ventures as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||||||||||||
Type | Investee | Ownership (%) | Net asset value | Carrying amount | Carrying amount | |||||||||||||
(In millions of won) | ||||||||||||||||||
Associate | Stratio, Inc.1 | 9.10 | ₩ | 171 | 2,171 | — | ||||||||||||
Gemini Partners Pte. Ltd.2 | 20.00 | 6,228 | 7,976 | — | ||||||||||||||
Joint venture | HITECH Semiconductor (Wuxi) Co., Ltd. (HITECH) | 45.00 | 112,462 | 112,462 | 97,090 | |||||||||||||
|
|
|
|
|
| |||||||||||||
₩ | 118,861 | 122,609 | 97,090 | |||||||||||||||
|
|
|
|
|
|
Type | Investee | Location | Business | |||
Associate | Stratio, Inc. | U.S.A | Development and manufacture of semiconductor parts | |||
SK China Company Limited | China | Consulting and investment | ||||
Gemini Partners Pte. Ltd. | Singapore | Consulting | ||||
TCL Fund | China | Investment | ||||
SK South East Asia Investment Pte. Ltd. | Singapore | Consulting and investment | ||||
Hushan Xinju (Chengdu) Venture Investment Center(Smartsource) | China | Venture Capital | ||||
Prume Social Farm, Co., Ltd. | Korea | Growing crops | ||||
Wuxi xinfa IC industry park., Ltd. | China | Developing Science-Technological Park | ||||
Magnus Private Investment Co.,Ltd | Korea | Investment | ||||
L&S (No.10) Early Stage III Investment Association | Korea | Investment | ||||
SiFive Inc. | U.S.A | Design and manufacture of semiconductor | ||||
YD-SK-KDB Social Value | Korea | Investment | ||||
Joint venture | HITECH Semiconductor (Wuxi) Co., Ltd. | China | Manufacture of semiconductor parts | |||
Hystars Semiconductor (Wuxi) Co., Ltd. | China | Foundry factory construction | ||||
Specialized Investment-type Private Equity Investment Trust For Growth Of Semiconductor | Korea | Investment | ||||
Specialized Investment-type Private Equity Investment Trust For Win-win System Semiconductor | Korea | Investment |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
11. Investments in Associates and Joint Ventures, continued
2020 | 2019 | |||||||||||||||||||||
Type | Investee | Ownership (%) | Net asset value | Carrying amount | Ownership (%) | Carrying amount | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||||
Associate | Stratio, Inc.1 | 9.12 | ₩ | 101 | 407 | 9.12 | ₩ | 395 | ||||||||||||||
SK China Company Limited2 | 11.87 | 204,877 | 257,474 | 11.87 | 259,272 | |||||||||||||||||
Gemini Partners Pte. Ltd. | 20.00 | 1,771 | 1,771 | 20.00 | 2,735 | |||||||||||||||||
TCL Fund1 | 11.05 | 11,191 | 11,538 | 11.06 | 4,995 | |||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 20.00 | 325,006 | 325,006 | 20.00 | 237,599 | |||||||||||||||||
Hushan Xinju (Chengdu) Venture Investment Center (Smartsource)2 | 16.67 | 7,970 | 7,970 | 16.67 | 5,659 | |||||||||||||||||
Prume Social Farm, Co., Ltd.3 | 35.52 | 1,657 | 2,221 | 31.95 | 1,000 | |||||||||||||||||
Wuxi xinfa IC industry park., Ltd.4 | 30.00 | 20,952 | 20,952 | — | — | |||||||||||||||||
Magnus Private Investment Co.,Ltd.5 | 49.76 | 150,840 | 150,840 | — | — | |||||||||||||||||
L&S (No.10) Early Stage III Investment Association | 24.39 | 2,609 | 2,609 | — | — | |||||||||||||||||
SiFive Inc.7 | 7.87 | 8,062 | 34,372 | — | — | |||||||||||||||||
YD-SK-KDB Social Value6 | 23.26 | 2,566 | 2,566 | — | — | |||||||||||||||||
Joint venture | HITECH Semiconductor(Wuxi) Co., Ltd.8 | 45.00 | 115,367 | 113,430 | 45.00 | 114,518 | ||||||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd.8 | 50.10 | 193,833 | 195,423 | 50.10 | 142,594 | |||||||||||||||||
Specialized Investment-type Private Equity Investment Trust For Growth Of Semiconductor9 | 33.33 | 24,818 | 24,818 | — | — | |||||||||||||||||
Specialized Investment-type Private Equity Investment Trust For Win-win System Semiconductor10 | 37.50 | 14,847 | 14,847 | — | — | |||||||||||||||||
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|
|
| |||||||||||||||||
₩ | 1,086,467 | 1,166,244 | ₩ | 768,767 | ||||||||||||||||||
|
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|
|
1 |
|
2 |
|
3 | WooYoung Farm Co., Ltd. has changed its name to “Prume Social Farm, Co., Ltd.” during the year ended December 31, 2020. |
4 | The Group has acquired |
5 | The Group has acquired 49.76% of the Magnus Private Investment Co., Ltd.’s interest for the year ended December 31, 2020, and the entity has been classified as an associate as the Group has significant influence. |
6 | It has been reclassified from long-term investment assets to associates for the year ended December 31, 2020. |
7 | The Group has acquired 7.87% of ownership in SiFive during the year ended December 31, 2020. It has been classified as an associate since the Group is able to exercise significant influence through its right to appoint a director to the Board of Directors of the investee. |
8 | Since the relevant contract stipulates that important matters have to be resolved unanimously, the Group has classified it as a joint venture. |
9 | It was reclassified from long-term investment assets to joint venture for the year ended December 31, 2020, as it is stated in the agreement that unanimous vote is required for relevant activities. |
10 | The Group has acquired 37.5% of ownership in Specialized Investment-type Private Equity Investment Trust For Win-win System Semiconductor’s interest during the year ended December 31, 2020. It has been classified as a joint venture since it is stated in the agreement that unanimous vote is required for relevant activities. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
12.11. Investments in Associates and Joint Ventures, continued
(2) Changes in investments in associates and joint ventures for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition (disposal) | Share of profit (loss) | Other equity movement | Dividend | Ending balance | Beginning balance | Acquisition | Transfer | Share of profit (loss) | Other equity movement | Dividend | Ending balance | ||||||||||||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stratio, Inc. | ₩ | — | 2,194 | (35 | ) | 12 | — | 2,171 | ₩ | 395 | — | — | 19 | (7 | ) | — | 407 | |||||||||||||||||||||||||||||||||||
SK China Company Limited | 259,272 | — | — | 5,746 | (7,544 | ) | — | 257,474 | ||||||||||||||||||||||||||||||||||||||||||||
Gemini Partners Pte. Ltd. | — | 7,976 | — | — | — | 7,976 | 2,735 | — | — | (872 | ) | (92 | ) | — | 1,771 | |||||||||||||||||||||||||||||||||||||
TCL Fund | 4,995 | 5,280 | — | 999 | 264 | — | 11,538 | |||||||||||||||||||||||||||||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 237,599 | 121,450 | — | 10,889 | (44,932 | ) | — | 325,006 | ||||||||||||||||||||||||||||||||||||||||||||
Hushan Xinju (Chengdu) Venture Investment Center(Smartsource) | 5,659 | 2,565 | — | (233 | ) | (14 | ) | (7 | ) | 7,970 | ||||||||||||||||||||||||||||||||||||||||||
Prume Social Farm, Co., Ltd. | 1,000 | 1,000 | — | 221 | — | — | 2,221 | |||||||||||||||||||||||||||||||||||||||||||||
Wuxi xinfa IC industry park., Ltd. | — | 21,860 | — | (86 | ) | (822 | ) | — | 20,952 | |||||||||||||||||||||||||||||||||||||||||||
Magnus Private Investment Co.,Ltd. | — | 207,346 | — | (56,506 | ) | — | — | 150,840 | ||||||||||||||||||||||||||||||||||||||||||||
L&S (No.10) Early Stage III Investment Association | — | 2,250 | 500 | (141 | ) | — | — | 2,609 | ||||||||||||||||||||||||||||||||||||||||||||
SiFive Inc. | — | 35,709 | — | (880 | ) | (457 | ) | — | 34,372 | |||||||||||||||||||||||||||||||||||||||||||
YD-SK-KDB Social Value | — | 1,400 | 1,400 | (234 | ) | — | — | 2,566 | ||||||||||||||||||||||||||||||||||||||||||||
HITECH Semiconductor (Wuxi) Co., Ltd. | 97,090 | — | 24,677 | 6,475 | (15,780 | ) | 112,462 | 114,518 | — | — | 21,241 | (7,296 | ) | (15,033 | ) | 113,430 | ||||||||||||||||||||||||||||||||||||
Hystars Semiconductor | 142,594 | 69,377 | — | (16,627 | ) | 79 | — | 195,423 | ||||||||||||||||||||||||||||||||||||||||||||
Specialized Investment-type Private Equity Investment Trust For Growth Of Semiconductor | — | — | 24,480 | 338 | — | — | 24,818 | |||||||||||||||||||||||||||||||||||||||||||||
Specialized Investment-type Private Equity Investment Trust For Win-win System Semiconductor | — | 15,000 | — | (153 | ) | — | — | 14,847 | ||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||
₩ | 97,090 | 10,170 | 24,642 | 6,487 | (15,780 | ) | 122,609 | ₩ | 768,767 | 483,237 | 26,380 | (36,279 | ) | (60,821 | ) | (15,040 | ) | 1,166,244 | ||||||||||||||||||||||||||||||||||
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
11. Investments in Associates and Joint Ventures, continued
2014 | ||||||||||||||||||||||||
Beginning balance | Acquisition (disposal) | Share of profit (loss) | Other equity movement | Dividend | Ending balance | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
Siliconfile Technologies Inc. | ₩ | 10,962 | (10,319 | ) | (579 | ) | 171 | (235 | ) | — | ||||||||||||||
HITECH Semiconductor (Wuxi) Co., Ltd. | 96,135 | — | 13,084 | 3,535 | (15,664 | ) | 97,090 | |||||||||||||||||
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₩ | 107,097 | (10,319 | ) | 12,505 | 3,706 | (15,899 | ) | 97,090 | ||||||||||||||||
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2019 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Share of profit (loss) | Other equity movement | Dividend | Impairment | Ending balance | ||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||
Stratio, Inc. | ₩ | 2,079 | — | 8 | 3 | — | (1,695 | ) | 395 | |||||||||||||||||||
SK China Company Limited | 246,052 | — | 3,358 | 9,862 | — | — | 259,272 | |||||||||||||||||||||
Gemini Partners Pte. Ltd. | 2,601 | — | (10 | ) | 144 | — | — | 2,735 | ||||||||||||||||||||
TCL Fund | 3,464 | 1,406 | 84 | 41 | — | — | 4,995 | |||||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 111,810 | 113,470 | 5,752 | 6,567 | — | — | 237,599 | |||||||||||||||||||||
Hushan Xinju (Chengdu) Venture Investment Center (Smartsource) | 3,241 | 2,531 | (67 | ) | (46 | ) | — | — | 5,659 | |||||||||||||||||||
WooYoung Farm Co., Ltd. | — | 1,000 | — | — | — | — | 1,000 | |||||||||||||||||||||
HITECH Semiconductor | 109,708 | — | 15,725 | 3,543 | (14,458 | ) | — | 114,518 | ||||||||||||||||||||
Hystars Semiconductor | 83,239 | 58,547 | (522 | ) | 1,330 | — | — | 142,594 | ||||||||||||||||||||
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₩ | 562,194 | 176,954 | 24,328 | 21,444 | (14,458 | ) | (1,695 | ) | 768,767 | |||||||||||||||||||
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(3) AssociateAssociates and joint venture’sventures’ summarized statements of financial position as of December 31, 20152020 and 20142019 are as follows:
2015 | ||||||||||||||||
Current assets | Non-current assets | Current liabilities | Non-current liabilities | |||||||||||||
(In millions of won) | ||||||||||||||||
Stratio, Inc. | ₩ | 962 | 921 | — | 1 | |||||||||||
Gemini Partners Pte. Ltd. | 27,762 | 14,694 | 3,444 | 7,867 | ||||||||||||
HITECH Semiconductor (Wuxi) Co., Ltd. | 270,959 | 314,464 | 89,034 | 246,478 |
2014 | ||||||||||||||||
Current assets | Non-current assets | Current liabilities | Non-current liabilities | |||||||||||||
(In millions of won) | ||||||||||||||||
HITECH Semiconductor (Wuxi) Co., Ltd. | ₩ | 251,443 | 306,344 | 289,990 | 52,042 |
2020 | ||||||||||||||||
Current assets | Non-current assets | Current liabilities | Non-current liabilities | |||||||||||||
(In millions of won) | ||||||||||||||||
Stratio, Inc. | ₩ | 411 | 731 | 32 | — | |||||||||||
SK China Company Limited | 380,413 | 1,706,634 | 51,485 | 308,147 | ||||||||||||
Gemini Partners Pte. Ltd. | 4,419 | 4,532 | 96 | — | ||||||||||||
TCL Fund | 42,747 | 63,649 | 5,117 | — | ||||||||||||
SK South East Asia Investment Pte. Ltd. | 797,045 | 1,672,412 | 67 | — | ||||||||||||
Hushan Xinju (Chengdu) Venture Investment Center (Smartsource) | 3,943 | 43,904 | 27 | — | ||||||||||||
Prume Social Farm, Co., Ltd. | 2,972 | 2,007 | 315 | — | ||||||||||||
Wuxi xinfa IC industry park., Ltd. | 69,823 | 2 | (17 | ) | — | |||||||||||
Magnus Private Investment Co., Ltd. | 175,007 | 522,600 | 85,754 | 461,012 | ||||||||||||
L&S (No.10) Early Stage III Investment Association | 945 | 9,751 | — | — | ||||||||||||
SiFive Inc. | 134,171 | 42,432 | 45,152 | 29,050 | ||||||||||||
YD-SK-KDB Social Value | 49 | 10,986 | 2 | — | ||||||||||||
HITECH Semiconductor (Wuxi) Co., Ltd. | 208,103 | 380,648 | 129,135 | 203,246 | ||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | 89,629 | 555,551 | 31,557 | 226,732 | ||||||||||||
Specialized Investment-type Private Equity Investment Trust For Growth Of Semiconductor | 38,920 | 36,162 | 629 | — | ||||||||||||
Specialized Investment-type Private Equity Investment Trust For Win-win System Semiconductor | 27,236 | 12,800 | 443 | — |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
12.11. Investments in Associates and Joint Ventures, continued
2019 | ||||||||||||||||
Current assets | Non-current assets | Current liabilities | Non-current liabilities | |||||||||||||
(In millions of won) | ||||||||||||||||
Stratio, Inc. | ₩ | 431 | 715 | 169 | — | |||||||||||
SK China Company Limited | 604,127 | 1,357,238 | 46,747 | 170,812 | ||||||||||||
Gemini Partners Pte. Ltd. | 6,851 | 6,912 | 54 | 33 | ||||||||||||
TCL Fund | 12,652 | 35,809 | 3,256 | — | ||||||||||||
SK South East Asia Investment Pte. Ltd. | 108,465 | 1,705,297 | 91 | — | ||||||||||||
Hushan Xinju (Chengdu) Venture Investment Center (Smartsource) | 20,623 | 13,657 | 329 | — | ||||||||||||
WooYoung Farm Co., Ltd. | 1,016 | 610 | 2 | 222 | ||||||||||||
HITECH Semiconductor (Wuxi) Co., Ltd. | 193,377 | 442,510 | 84,071 | 297,330 | ||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | 167,238 | 388,318 | 48,984 | 225,075 |
(4) Summary of associateAssociates and joint venture’s statements ofventures’ summarized comprehensive income (loss) for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||
Revenue | Profit (loss) for the year | Revenue | Profit (loss) for the year | Revenue | Profit for the year | Revenue | Profit (loss) for the year | Revenue | Profit (loss) for the year | Revenue | Profit (loss) for the year | |||||||||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||||||
Stratio, Inc. | ₩ | — | (385 | ) | — | — | — | — | ₩ | 341 | 208 | 242 | 81 | 88 | (330 | ) | ||||||||||||||||||||||||||||||||
SK China Company Limited | 154,355 | 48,427 | 120,317 | 28,309 | 94,966 | 20,176 | ||||||||||||||||||||||||||||||||||||||||||
Gemini Partners Pte. Ltd. | — | (747 | ) | — | — | — | — | — | (4,361 | ) | — | (49 | ) | — | 1,279 | |||||||||||||||||||||||||||||||||
TCL Fund | — | 9,141 | — | 759 | — | 713 | ||||||||||||||||||||||||||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 9,467 | 54,448 | 10,294 | 28,763 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Hushan Xinju (Chengdu) Venture Investment Center(Smartsource) | — | (1,395 | ) | — | (837 | ) | — | (31 | ) | |||||||||||||||||||||||||||||||||||||||
Prume Social Farm, Co., Ltd. | — | 763 | 19 | (105 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||
Wuxi xinfa IC industry park., Ltd. | — | (288 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Magnus Private Investment Co., Ltd. | 164,662 | (56,505 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
L&S (No.10) Early Stage III Investment Association | 9 | (579 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
SiFive Inc. | 101,602 | (11,182 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
YD-SK-KDB Social Value | 15 | (1,006 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
HITECH Semiconductor (Wuxi) Co., Ltd. | 677,284 | 54,835 | 608,300 | 29,077 | 566,065 | 38,008 | 622,653 | 51,871 | 657,741 | 36,398 | 621,528 | 27,438 | ||||||||||||||||||||||||||||||||||||
Siliconfile Technologies Inc.1 | — | — | 40,339 | (2,072 | ) | 131,914 | 7,708 | |||||||||||||||||||||||||||||||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | — | (33,188 | ) | — | (1,044 | ) | — | (658 | ) | |||||||||||||||||||||||||||||||||||||||
Specialized Investment-type Private Equity Investment Trust For Growth Of Semiconductor | 391 | (240 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Specialized Investment-type Private Equity Investment Trust For Win-win System Semiconductor | 37 | (407 | ) | — | — | — | — |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
|
13. Available-for-sale Financial12. Long-term Investment Assets
(1) Details of available-for-sale financiallong-term investment assets as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||||||||||||||
Ownership | Ownership (%) | Acquisition cost | Book value | Book value | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
ProMos | 201,600,000 | 7.93 | ₩ | 21,847 | — | — | ||||||||||||||
JNT Frontier Private Equity Unit | Certificate | — | 1,213 | 1,213 | 1,307 | |||||||||||||||
SV M&A No.1 Equity Unit | Certificate | — | 1,120 | 1,120 | 1,196 | |||||||||||||||
Daishin Aju IB Investment Co., Ltd. | Certificate | — | 699 | 699 | 1,265 | |||||||||||||||
Seoul Investment Early & Green Venture Fund | Certificate | — | 1,678 | 1,678 | 1,760 | |||||||||||||||
TS 2011-4 Technology Transfer & Business | Certificate | — | 1,262 | 1,262 | 1,262 | |||||||||||||||
IMM Investment | Certificate | — | 620 | 620 | 1,040 | |||||||||||||||
L&S Venture Capital | Certificate | — | 1,849 | 1,849 | 1,899 | |||||||||||||||
KTC-NP-Growth | Certificate | — | 2,271 | 2,271 | 516 | |||||||||||||||
Intellectual Discovery, Ltd. | 800,000 | 7.05 | 4,000 | 4,000 | 4,000 | |||||||||||||||
SKY Property Mgmt. Ltd. | 5,745 | 15.00 | 112,360 | 112,360 | 112,360 | |||||||||||||||
Equity investment in a construction guarantee association | 526 | 0.01 | 709 | 709 | 709 | |||||||||||||||
China Walden Venture Investments II | Certificate | — | 3,573 | 3,573 | — | |||||||||||||||
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₩ | 153,201 | 131,354 | 127,314 | |||||||||||||||||
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2020 | 2019 | |||||||||||||||
Type | Acquisition cost | Book value | Book value | |||||||||||||
(In millions of won) | ||||||||||||||||
ProMOS Technologies Inc. | Equity securities | ₩ | 21,847 | — | — | |||||||||||
Intellectual Discovery | Equity securities | 4,000 | 2,182 | 2,392 | ||||||||||||
China Walden Venture Investments II, L.P. | Certificate | 8,496 | 10,965 | 9,138 | ||||||||||||
China Walden Venture Investments III, L.P. | Certificate | 6,522 | 7,085 | 5,790 | ||||||||||||
Keyssa,Inc | Equity securities | 6,174 | 189 | 822 | ||||||||||||
BCPE Pangea Intermediate Holdings Cayman, L.P.1 | Certificate | 2,738,393 | 3,595,494 | 2,780,758 | ||||||||||||
BCPE Pangea Cayman2, Ltd.1 | Convertible bond | 1,281,780 | 2,351,225 | 1,435,460 | ||||||||||||
FemtoMetrix, Inc. | Convertible bond | 4,387 | 4,387 | 4,387 | ||||||||||||
GigaIO Networks, Inc. | Equity securities | 4,066 | 3,103 | 4,066 | ||||||||||||
Inpria Corporation | Equity securities | 4,753 | 4,729 | 1,214 | ||||||||||||
Shanghai IoT Phase II Venture Capital Fund Partnership, L.P | Certificate | 8,266 | 13,262 | 7,729 | ||||||||||||
Beijing Horizon Robotics Technology Co., Ltd. | Equity securities | 55,091 | 56,190 | 63,550 | ||||||||||||
Shanghi Sitrus Microelectronics Technology Co., Ltd. | Equity securities | 5,254 | 1,314 | 1,360 | ||||||||||||
Jiangsu Jiequan Junhai Rongxin Investment Partnership | Certificate | 20,506 | 20,035 | — | ||||||||||||
Impact Venture Capital I, L.P. | Certificate | 4,223 | 5,881 | 4,010 | ||||||||||||
Lion Semiconductor Inc. | Equity securities | 4,077 | 3,754 | 3,474 | ||||||||||||
Others | — | 58,663 | 59,832 | 57,662 | ||||||||||||
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₩ | 4,236,498 | 6,139,627 | 4,381,812 | |||||||||||||
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1 | In 2017, the Group participated in a consortium that includes Bain Capital in connection with acquisition of a stake in Toshiba Memory Corporation (“TMC”). On March 1, 2019, Toshiba Memory Holdings Corporation (“TMCHD”) was established as the holding company for TMC. Subsequently TMCHD and TMC were renamed KIOXIA Holdings Corporation (“KIOXIA”) and KIOXIA Corporation respectively. As of December 31, 2020, the Group holds equity interests in SPC1, which holds equity interests in KIOXIA, and convertible bonds issued by SPC2, which may be later convertible to 15% stake in KIOXIA. Management and decision-making rights of the Group for SPC1 and SPC2 are limited. Accordingly, the Group does not control or have any significant influence on SPC1 and SPC2. The investments in SPC1 and SPC2 are classified as financial assets which are debt instruments measured at fair value through profit or loss. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
12. Long-term Investment Assets, continued
(2) Changes in the carrying amount of available-for-sale financiallong-term investment assets for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Beginning balance | ₩ | 127,314 | 158,770 | |||||
Acquisition | 5,359 | 1,414 | ||||||
Disposal | (1,319 | ) | (32,870 | ) | ||||
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Ending balance | ₩ | 131,354 | 127,314 | |||||
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2020 | 2019 | |||||||
(In millions of won) | ||||||||
Beginning balance | ₩ | 4,381,812 | 4,325,550 | |||||
Acquisition | 95,333 | 82,861 | ||||||
Disposal | (706 | ) | (3,884 | ) | ||||
Gain (loss) on valuation | 1,733,753 | (233,234 | ) | |||||
Foreign exchange difference | (44,185 | ) | 210,519 | |||||
Transfer | (26,380 | ) | — | |||||
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Ending balance | ₩ | 6,139,627 | 4,381,812 | |||||
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
14.13. Property, Plant and Equipment
(1)Changes in property, plant and equipment for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land | Buildings | Structures | Machinery | Vehicles | Others | Construction -in-progress | Total | Land | Buildings | Structures | Machinery | Vehicles | Others | Construction- in-progress | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning net book amount | ₩ | 542,952 | 1,433,541 | 282,191 | 9,974,301 | 863 | 254,129 | 1,602,357 | 14,090,334 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additions | — | — | 907 | 48,005 | 94 | 11,030 | 6,699,838 | 6,759,874 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receipt of government grants | — | — | — | (378 | ) | — | — | — | (378 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | ₩ | 1,041,771 | 5,547,744 | 1,619,064 | 26,974,270 | 43,096 | 764,043 | 3,959,952 | 39,949,940 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | 38,075 | 476,831 | 284,113 | 6,044,813 | 55 | 192,353 | 3,012,558 | 10,048,798 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposals | (4 | ) | (71 | ) | (271 | ) | (204,220 | ) | — | (12,759 | ) | (7,665 | ) | (224,990 | ) | (9,231 | ) | (327 | ) | (73 | ) | (17,095 | ) | — | (884 | ) | (37,850 | ) | (65,460 | ) | ||||||||||||||||||||||||||||||||||
Depreciation | — | (88,013 | ) | (27,851 | ) | (3,476,825 | ) | (371 | ) | (101,385 | ) | — | (3,694,445 | ) | — | (233,909 | ) | (114,307 | ) | (7,888,654 | ) | (3,351 | ) | (274,913 | ) | — | (8,515,134 | ) | ||||||||||||||||||||||||||||||||||||
Transfers1 | 23,908 | 1,198,576 | 167,970 | 5,271,980 | 783 | 243,497 | (6,881,650 | ) | 25,064 | (96,096 | ) | 1,222,639 | 21,076 | 1,367,213 | 753 | 45,476 | (2,767,284 | ) | (206,223 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Impairments | — | (22,050 | ) | — | — | — | (5 | ) | — | (22,055 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange differences | 758 | 3,058 | 1,663 | 26,345 | — | 1,431 | (407 | ) | 32,848 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange differences and others | (2,913 | ) | 5,271 | 2,234 | 10,495 | 4 | (1,250 | ) | 4,800 | 18,641 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Ending net book amount | ₩ | 567,614 | 2,525,041 | 424,609 | 11,639,208 | 1,369 | 395,938 | 1,412,473 | 16,966,252 | 971,606 | 7,018,249 | 1,812,107 | 26,491,042 | 40,557 | 724,825 | 4,172,176 | 41,230,562 | |||||||||||||||||||||||||||||||||||||||||||||||
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Acquisition cost | 567,614 | 3,243,654 | 792,270 | 39,376,245 | 3,659 | 966,111 | 1,412,473 | 46,362,026 | 971,606 | 8,459,016 | 2,494,982 | 74,141,182 | 48,860 | 2,045,915 | 4,172,176 | 92,333,737 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated depreciation | — | (672,563 | ) | (348,493 | ) | (27,479,837 | ) | (2,290 | ) | (568,466 | ) | — | (29,071,649 | ) | — | (1,401,792 | ) | (663,771 | ) | (47,485,857 | ) | (8,292 | ) | (1,321,067 | ) | — | (50,880,779 | ) | ||||||||||||||||||||||||||||||||||||
Accumulated impairment | — | (45,749 | ) | (19,168 | ) | (250,883 | ) | — | (1,509 | ) | — | (317,309 | ) | — | (23,699 | ) | (19,104 | ) | (162,276 | ) | — | (23 | ) | — | (205,102 | ) | ||||||||||||||||||||||||||||||||||||||
Government grants | — | (301 | ) | — | (6,317 | ) | — | (198 | ) | — | (6,816 | ) | — | (15,276 | ) | — | (2,007 | ) | (11 | ) | — | — | (17,294 | ) | ||||||||||||||||||||||||||||||||||||||||
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₩ | 567,614 | 2,525,041 | 424,609 | 11,639,208 | 1,369 | 395,938 | 1,412,473 | 16,966,252 | ₩ | 971,606 | 7,018,249 | 1,812,107 | 26,491,042 | 40,557 | 724,825 | 4,172,176 | 41,230,562 | |||||||||||||||||||||||||||||||||||||||||||||||
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1 |
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
14.13. Property, Plant and Equipment, continued
2014 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land | Buildings | Structures | Machinery | Vehicles | Others | Construction -in-progress | Total | Land | Buildings | Structures | Machinery | Vehicles | Others | Construction- in-progress | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning net book amount | ₩ | 504,398 | 1,309,816 | 207,299 | 9,222,376 | 227 | 209,111 | 676,570 | 12,129,797 | ₩ | 1,020,229 | 4,529,947 | 1,281,816 | 22,642,498 | 11,315 | 623,311 | 4,843,501 | 34,952,617 | ||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additions | — | 59,216 | 12,454 | 160,039 | 71 | 26,552 | 5,160,807 | 5,419,139 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receipt of government grants | — | — | — | (502 | ) | — | — | — | (502 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination and disposal of a subsidiary | — | — | (468 | ) | (5,945 | ) | 27 | 1,462 | (242 | ) | (5,166 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Impacts on transition to IFRS 16 | — | — | — | (73,069 | ) | — | — | — | (73,069 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Beginning net book amount after transition adjustments | 1,020,229 | 4,529,947 | 1,281,816 | 22,569,429 | 11,315 | 623,311 | 4,843,501 | 34,879,548 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | 16,882 | 375,243 | 325,189 | 8,428,185 | 1,715 | 328,079 | 3,100,165 | 12,575,458 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposals | — | (1,114 | ) | (1,437 | ) | (197,242 | ) | (14 | ) | (734 | ) | (5,231 | ) | (205,772 | ) | (48 | ) | (447 | ) | (432 | ) | (37,468 | ) | (3 | ) | (1,110 | ) | (337 | ) | (39,845 | ) | |||||||||||||||||||||||||||||||||
Depreciation | — | (55,986 | ) | (21,260 | ) | (3,117,150 | ) | (177 | ) | (73,893 | ) | — | (3,268,466 | ) | — | (211,287 | ) | (95,114 | ) | (6,952,920 | ) | (2,124 | ) | (250,349 | ) | — | (7,511,794 | ) | ||||||||||||||||||||||||||||||||||||
Transfers1 | 38,097 | 139,858 | 83,673 | 3,874,433 | 730 | 90,310 | (4,228,187 | ) | (1,086 | ) | 3,051 | 848,071 | 106,110 | 2,982,080 | 32,184 | 62,397 | (4,032,788 | ) | 1,105 | |||||||||||||||||||||||||||||||||||||||||||||
Impairments | — | (23,620 | ) | (1,777 | ) | (4,139 | ) | — | — | — | (29,536 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange differences | 457 | 5,371 | 3,707 | 42,431 | (1 | ) | 1,321 | (1,360 | ) | 51,926 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange differences and others | 1,657 | 6,217 | 1,495 | (15,036 | ) | 9 | 1,715 | 49,411 | 45,468 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Ending net book amount | ₩ | 542,952 | 1,433,541 | 282,191 | 9,974,301 | 863 | 254,129 | 1,602,357 | 14,090,334 | 1,041,771 | 5,547,744 | 1,619,064 | 26,974,270 | 43,096 | 764,043 | 3,959,952 | 39,949,940 | |||||||||||||||||||||||||||||||||||||||||||||||
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Acquisition cost | 542,952 | 2,020,429 | 621,345 | 34,956,922 | 3,037 | 772,844 | 1,602,357 | 40,519,886 | 1,041,771 | 6,794,238 | 2,193,817 | 67,650,975 | 48,061 | 1,882,254 | 3,959,952 | 83,571,068 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated depreciation | — | (562,724 | ) | (319,991 | ) | (24,721,171 | ) | (2,174 | ) | (516,775 | ) | — | (26,122,835 | ) | — | (1,207,184 | ) | (555,649 | ) | (40,510,568 | ) | (4,949 | ) | (1,118,187 | ) | — | (43,396,537 | ) | ||||||||||||||||||||||||||||||||||||
Accumulated impairment | — | (23,847 | ) | (19,163 | ) | (254,597 | ) | — | (1,646 | ) | — | (299,253 | ) | — | (23,699 | ) | (19,104 | ) | (163,270 | ) | — | (24 | ) | — | (206,097 | ) | ||||||||||||||||||||||||||||||||||||||
Government grants | — | (317 | ) | — | (6,853 | ) | — | (294 | ) | — | (7,464 | ) | — | (15,611 | ) | — | (2,867 | ) | (16 | ) | — | — | (18,494 | ) | ||||||||||||||||||||||||||||||||||||||||
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₩ | 542,952 | 1,433,541 | 282,191 | 9,974,301 | 863 | 254,129 | 1,602,357 | 14,090,334 | ₩ | 1,041,771 | 5,547,744 | 1,619,064 | 26,974,270 | 43,096 | 764,043 | 3,959,952 | 39,949,940 | |||||||||||||||||||||||||||||||||||||||||||||||
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1 |
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(2) Details of depreciation expense allocation for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Cost of sales | ₩ | 3,365,460 | 3,040,674 | 2,616,341 | ||||||||
Selling and administrative expenses | 263,938 | 197,196 | 154,673 | |||||||||
Other expenses1 | 8,050 | 4,902 | 122,471 | |||||||||
Development costs and other | 56,997 | 25,694 | 27,481 | |||||||||
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₩ | 3,694,445 | 3,268,466 | 2,920,966 | |||||||||
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2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Cost of sales | ₩ | 7,749,569 | 6,878,303 | 5,421,324 | ||||||||
Selling and administrative expenses | 725,791 | 574,961 | 365,508 | |||||||||
Other expenses | 7,418 | 14,923 | 10,152 | |||||||||
Development costs and others | 32,356 | 43,607 | 107,172 | |||||||||
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₩ | 8,515,134 | 7,511,794 | 5,904,156 | |||||||||
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(3) During 2014, Impairment of ₩4,139 million (2013: ₩101,532 million) has been charged to casualty losses caused by a fire on the manufacturing facilities in Wuxi, China, which is included in other expenses (Note 29).
(4) Certain property, plantmachinery and equipmentothers are pledged as collaterals for borrowings of the Group as of December 31, 2015 (Note 33)2020 (see note 35).
(5) During 2015, the(4) The Group capitalized borrowing costs amounting to ₩18,892₩53,311 million (2014: ₩20,762(2019: ₩36,302 million and 2013: ₩7,6872018: ₩33,086 million) on qualifying assets.assets during the year ended December 31, 2020. Borrowing costs were calculated using a capitalization rate of 4.83% (2014: 5.08%1.93% (2019: 2.84% and 2013: 3.87%2018: 3.08%) for the year ended December 31, 2015.2020.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
14.13. Property, Plant and Equipment, continued
(6) The Group leases certain machinery and others from ME Semiconductor Rental First L.L.C. and other under finance lease agreements.
The book value(5) Details of the machinery and others subject to finance lease agreement amounted to ₩136,134 millioninsured assets as of December 31, 2015 (as of December 31, 2014: ₩165,414 million). The machinery and others2020 are pledged as collateral for the finance lease liabilities.
The Group leases certain machinery and others from Macquarie Capital and others under operating lease agreements. The payment schedule of minimum lease payments under operating lease agreements as of December 31, 2015 is as follows:
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(7) As of December 31, 2015, certain inventories; property, plant and equipment; and investment properties are insured and details of insured assets is as follows:
Insured assets | Insured amount | Insurance Company | ||||||
(In millions of won) | ||||||||
Package insurance | Property, plant and | ₩ | Hyundai Marine & Fire Insurance Co., Ltd. and others | |||||
Fire insurance | Property, plant and | 73,349 | ||||||
Erection all risks insurance | Property, plant and equipment | 5,448,476 | ||||||
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In addition to the assets stated above, vehicles are insured by vehicle comprehensive insurance and liability insurance.
(6) The Group provides certain property, plant, and equipment as operating leases.Rental income from the property, plant and equipment during the year ended December 31, 2020 are ₩27,737 million (2019: ₩29,746 million and 2018:₩15,277 million).
14. Leases
(1) Leases as lessee
(a) Changes in right-of-use assets for the year ended December��31, 2020 and 2019 are as follows:
2020 | ||||||||||||||||||||||||
Properties | Structures | Machinery | Vehicles | Others | Total | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
Beginning net book amount | ₩ | 97,855 | 975,996 | 609,529 | 11,491 | 11,787 | 1,706,658 | |||||||||||||||||
Increase | 26,358 | 159,166 | 52,849 | 25,881 | 20,212 | 284,466 | ||||||||||||||||||
Others | 6,607 | (7,706 | ) | 15,823 | (4,746 | ) | — | 9,978 | ||||||||||||||||
Depreciation | (18,686 | ) | (83,522 | ) | (172,750 | ) | (14,436 | ) | (6,824 | ) | (296,218 | ) | ||||||||||||
Foreign exchange difference | (274 | ) | 4,274 | (912 | ) | 17 | (344 | ) | 2,761 | |||||||||||||||
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Ending net book amount | 111,860 | 1,048,208 | 504,539 | 18,207 | 24,831 | 1,707,645 | ||||||||||||||||||
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Acquisition cost | 169,300 | 1,210,800 | 811,315 | 29,684 | 40,787 | 2,261,886 | ||||||||||||||||||
Accumulated amortization | (26,193 | ) | (162,592 | ) | (306,776 | ) | (11,477 | ) | (15,956 | ) | (522,994 | ) | ||||||||||||
Government grants | (31,247 | ) | — | — | — | — | (31,247 | ) | ||||||||||||||||
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₩ | 111,860 | 1,048,208 | 504,539 | 18,207 | 24,831 | 1,707,645 | ||||||||||||||||||
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
14. Leases, continued
2019 | ||||||||||||||||||||||||
Properties | Structures | Machinery | Vehicles | Others | Total | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
Beginning net book amount | ₩ | — | — | — | — | — | — | |||||||||||||||||
Adjustment on initial application of IFRS 16 | 31,652 | 867,864 | 279,952 | 10,688 | 3,214 | 1,193,370 | ||||||||||||||||||
Impacts of changes in accounting policies | ||||||||||||||||||||||||
(Interpretation of lease period) | — | — | 435,423 | — | — | 435,423 | ||||||||||||||||||
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Beginning net book amount after transition adjustments | 31,652 | 867,864 | 715,375 | 10,688 | 3,214 | 1,628,793 | ||||||||||||||||||
Increase | 79,295 | 170,887 | 105,729 | 11,776 | — | 367,687 | ||||||||||||||||||
Others | 4,163 | — | — | 1,250 | 13,647 | 19,060 | ||||||||||||||||||
Depreciation | (16,949 | ) | (67,586 | ) | (211,551 | ) | (12,255 | ) | (5,074 | ) | (313,415 | ) | ||||||||||||
Foreign exchange difference | (306 | ) | 4,831 | (24 | ) | 32 | — | 4,533 | ||||||||||||||||
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Ending net book amount | 97,855 | 975,996 | 609,529 | 11,491 | 11,787 | 1,706,658 | ||||||||||||||||||
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Acquisition cost | 144,208 | 1,058,738 | 757,107 | 17,959 | 16,330 | 1,994,342 | ||||||||||||||||||
Accumulated amortization | (14,546 | ) | (82,742 | ) | (147,578 | ) | (6,468 | ) | (4,543 | ) | (255,877 | ) | ||||||||||||
Government grants | (31,807 | ) | — | — | — | — | (31,807 | ) | ||||||||||||||||
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₩ | 97,855 | 975,996 | 609,529 | 11,491 | 11,787 | 1,706,658 | ||||||||||||||||||
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(b) Changes in lease liabilities for the year ended December 31, 2020 and 2019 are as follows:
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Beginning net book amount | ₩ | 1,666,999 | — | |||||
Impacts on transition to IFRS 16 | — | 1,191,579 | ||||||
Impacts of changes in accounting policies | ||||||||
(Interpretation of lease period) | — | 435,423 | ||||||
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Beginning net book amount after transition adjustments | 1,666,999 | 1,627,002 | ||||||
Increase | 284,466 | 367,687 | ||||||
Others | 9,389 | 19,357 | ||||||
Interest expense | 34,435 | 32,588 | ||||||
Payments | (326,665 | ) | (401,058 | ) | ||||
Foreign exchange difference | (24,908 | ) | 21,423 | |||||
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Ending net book amount | ₩ | 1,643,716 | 1,666,999 | |||||
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
14. Leases, continued
(c) The details of the minimum lease payment to be paid in the future for each period in connection with lease liabilities, present value and current/non-current classification of lease liabilities as of December 31, 2020 are as follows:
2020 | ||||
(In millions of won) | ||||
Less than 1 year | ₩ | 352,201 | ||
1~5 years | 642,196 | |||
More than 5 years | 848,315 | |||
Total lease liabilities undiscounted as of December 31, 2020 | 1,842,712 | |||
Present value of lease liabilities recognized as of December 31, 2020 | 1,643,716 | |||
Current lease liabilities | 347,464 | |||
Non-current lease liabilities | 1,296,252 |
(d) The amounts recognized in profit or loss in relation to right-of-use assets and lease liabilities for the year ended December 31, 2020 and 2019 are as follows:
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Depreciation of right-to-use assets | ₩ | 296,218 | 313,415 | |||||
Interest expenses of lease liabilities | 34,435 | 32,588 | ||||||
Expenses relating to short-term leases | 17,911 | 14,489 | ||||||
Expenses relating to leases of low-value assets | 1,733 | 1,234 |
(2) Leases as lessor
The Group provides certain property, plant, and equipment and investment property as leases (See note 13 and 16). All leases are classified as operating leases.
Details of the undiscounted operating lease payments to be received in the future periods subsequent to December 31, 2020 are as follows:
Property, plant and equipment | Investment Property | Total | ||||||||||
(In millions of won) | ||||||||||||
Less than 1 year | ₩ | 11,503 | 9,857 | 21,360 | ||||||||
1~2 years | 9,476 | 9,763 | 19,239 | |||||||||
2~3 years | 3,948 | 9,763 | 13,711 | |||||||||
3~4 years | — | 9,763 | 9,763 | |||||||||
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₩ | 24,927 | 39,146 | 64,073 | |||||||||
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
15. Intangible Assets
(1) Changes in intangible assets for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||
Goodwill | Industrial property rights | Development costs | Others1 | Total | Goodwill | Industrial property rights | Development costs | Others | Total | |||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||
Beginning net book amount | ₩ | 704,185 | 83,750 | 319,824 | 228,921 | 1,336,680 | ₩ | 720,197 | 85,724 | 931,788 | 833,340 | 2,571,049 | ||||||||||||||||||||||||||||
Changes during 2015 | ||||||||||||||||||||||||||||||||||||||||
Changes during 2020 | ||||||||||||||||||||||||||||||||||||||||
Internal development | — | — | 349,264 | — | 349,264 | — | — | 259,020 | — | 259,020 | ||||||||||||||||||||||||||||||
Separate acquisition | — | 31,604 | — | 242,875 | 274,479 | |||||||||||||||||||||||||||||||||||
External acquisition | — | 13,693 | — | 412,524 | 426,217 | |||||||||||||||||||||||||||||||||||
Disposals | — | (12,859 | ) | — | (597 | ) | (13,456 | ) | — | (3,782 | ) | — | (8,504 | ) | (12,286 | ) | ||||||||||||||||||||||||
Amortization | — | (16,001 | ) | (576,334 | ) | (368,215 | ) | (960,550 | ) | |||||||||||||||||||||||||||||||
Impairment | — | (2 | ) | (1,606 | ) | (163 | ) | (1,771 | ) | — | — | (16,544 | ) | — | (16,544 | ) | ||||||||||||||||||||||||
Amortization | — | (12,800 | ) | (184,167 | ) | (61,111 | ) | (258,078 | ) | |||||||||||||||||||||||||||||||
Others | 16,570 | 94 | 15 | 1,099 | 17,778 | |||||||||||||||||||||||||||||||||||
Transfers | — | 6,493 | — | (9,720 | ) | (3,227 | ) | |||||||||||||||||||||||||||||||||
Others1 | (18,601 | ) | — | — | 1,155,200 | 1,136,599 | ||||||||||||||||||||||||||||||||||
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Ending net book amount | 720,755 | 89,787 | 483,330 | 411,024 | 1,704,896 | 701,596 | 86,127 | 597,930 | 2,014,625 | 3,400,278 | ||||||||||||||||||||||||||||||
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Acquisition cost | 720,755 | 160,180 | 1,126,505 | 585,500 | 2,592,940 | 701,596 | 195,637 | 3,185,403 | 3,110,632 | 7,193,268 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | — | (70,393 | ) | (643,175 | ) | (137,621 | ) | (851,189 | ) | — | (109,510 | ) | (2,587,473 | ) | (1,096,007 | ) | (3,792,990 | ) | ||||||||||||||||||||||
Government grants | — | — | — | (36,855 | ) | (36,855 | ) | |||||||||||||||||||||||||||||||||
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₩ | 720,755 | 89,787 | 483,330 | 411,024 | 1,704,896 | ₩ | 701,596 | 86,127 | 597,930 | 2,014,625 | 3,400,278 | |||||||||||||||||||||||||||||
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2014 | ||||||||||||||||||||||||||||||||||||||||
Goodwill | Industrial property rights | Development costs | Others1 | Total | ||||||||||||||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
Beginning net book amount | ₩ | 632,311 | 73,860 | 276,930 | 127,302 | 1,110,403 | ||||||||||||||||||||||||||||||||||
Changes during 2014 | ||||||||||||||||||||||||||||||||||||||||
Internal development | — | — | 181,287 | — | 181,287 | |||||||||||||||||||||||||||||||||||
Separate acquisition | — | 32,229 | — | 122,775 | 155,004 | |||||||||||||||||||||||||||||||||||
Receipt of government grants | — | — | — | (19,739 | ) | (19,739 | ) | |||||||||||||||||||||||||||||||||
Business combinations | 62,618 | — | — | 21,858 | 84,476 | |||||||||||||||||||||||||||||||||||
Disposals | — | (9,428 | ) | — | (380 | ) | (9,808 | ) | ||||||||||||||||||||||||||||||||
Impairment | — | — | — | (529 | ) | (529 | ) | |||||||||||||||||||||||||||||||||
Amortization | — | (13,374 | ) | (138,389 | ) | (22,512 | ) | (174,275 | ) | |||||||||||||||||||||||||||||||
Others | 9,256 | 463 | (4 | ) | 146 | 9,861 | ||||||||||||||||||||||||||||||||||
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Ending net book amount | 704,185 | 83,750 | 319,824 | 228,921 | 1,336,680 | |||||||||||||||||||||||||||||||||||
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Acquisition cost | 704,185 | 173,828 | 777,226 | 301,252 | 1,956,491 | |||||||||||||||||||||||||||||||||||
Accumulated amortization and impairment | — | (90,078 | ) | (457,402 | ) | (34,987 | ) | (582,467 | ) | |||||||||||||||||||||||||||||||
Government grants | — | — | — | (37,344 | ) | (37,344 | ) | |||||||||||||||||||||||||||||||||
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₩ | 704,185 | 83,750 | 319,824 | 228,921 | 1,336,680 | |||||||||||||||||||||||||||||||||||
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1 | Others include |
(2) Amortization of ₩12,811 million (2014: ₩3,106 million and 2013: ₩501 million) is included in the cost of sales and ₩244,978 million (2014: ₩171,169 million and 2013: ₩155,775 million) in selling and
2019 | ||||||||||||||||||||
Goodwill | Industrial property rights | Development costs | Others | Total | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Beginning net book amount | ₩709,811 | 96,065 | 1,153,956 | 718,938 | 2,678,770 | |||||||||||||||
Impacts on transition to IFRS 16 | — | — | — | (5,582 | ) | (5,582 | ) | |||||||||||||
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Beginning net book amount after transition adjustments | 709,811 | 96,065 | 1,153,956 | 713,356 | 2,673,188 | |||||||||||||||
Changes during 2019 | ||||||||||||||||||||
Internal development | — | — | 332,888 | — | 332,888 | |||||||||||||||
External acquisition | — | 9,626 | — | 331,704 | 341,330 | |||||||||||||||
Business combination | — | — | — | 18,333 | 18,333 | |||||||||||||||
Disposals | — | (3,964 | ) | — | (6,589 | ) | (10,553 | ) | ||||||||||||
Amortization | — | (16,003 | ) | (555,056 | ) | (224,110 | ) | (795,169 | ) | |||||||||||
Impairment | — | — | — | (71 | ) | (71 | ) | |||||||||||||
Exchange differences | 10,386 | — | — | 717 | 11,103 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending net book amount | 720,197 | 85,724 | 931,788 | 833,340 | 2,571,049 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquisition cost | 720,197 | 184,942 | 2,926,382 | 1,568,718 | 5,400,239 | |||||||||||||||
Accumulated amortization | — | (99,218 | ) | (1,994,594 | ) | (735,378 | ) | (2,829,190 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩720,197 | 85,724 | 931,788 | 833,340 | 2,571,049 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
15. Intangible Assets, continued
administrative expenses in the statements(2) Details of comprehensive incomeamortization expense allocation for the yearyears ended December 31, 2015. Amortization of ₩289 million (20142020, 2019 and 2013 : nil) is capitalized2018 are as development cost.follows:
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Cost of sales | ₩ | 219,851 | 88,445 | 65,885 | ||||||||
Selling and administrative expenses | 739,247 | 705,383 | 456,269 | |||||||||
Development costs | 1,452 | 1,341 | 1,941 | |||||||||
|
|
|
|
|
| |||||||
₩ | 960,550 | 795,169 | 524,095 | |||||||||
|
|
|
|
|
|
(3) Among costs associated with development activities, ₩349,264 million (2014: ₩181,287 million and 2013: ₩190,271 million) that met capitalization criteria, were capitalized as development cost for the year ended December 31, 2015. In addition, costs associated with research activities and other development expenditures that did not meet the criteria and amounted to ₩1,620,324 million (2014: ₩1,409,530 million and 2013: ₩968,804 million) were recognized as expenses for the year ended December 31, 2015.
(4) Goodwill impairment tests
GoodwillThe Group performs goodwill impairment tests are undertaken annually. AsFor the Group has only one CGU,purpose of impairment tests, goodwill wasis allocated to one CGU. RecoverableThe recoverable amount of the CGU as of December 31, 2020 was determined based on fair value less costs to sell, which was determined using the current stock price as of December 31, 2015.2020. No impairment loss of goodwill was recognized since the recoverable amount is higher than the carrying value of the CGU as of December 31, 2015.2020.
(4) Details of development costs
(a) Detailed criteria for capitalization of development costs
The Group’s development projects for a new product proceeds in the process of review and planning phases (Phase 0 ~ 4) and product design and mass production phases (Phase 5 ~ 8). The Group recognizes expenditures incurred after Phase 4 in relation with the development for new technology is recognized as an intangible asset. Expenditures incurred at phase 0 through 4 are recognized as expenses.
(b) Development cost capitalized and expenses on research and development
Among costs associated with development activities, ₩259,020 million (2019: ₩332,888 million 2018: ₩610,954 million) that met capitalization criteria, were capitalized as development cost for the year ended December 31, 2020. In addition, costs associated with research activities and other development expenditures that did not meet the criteria in the amount of ₩3,111,298 million (2019: ₩2,855,643 million and 2018: ₩2,284,000 million) were recognized as expenses for the year ended December 31, 2020.
(c) Details of development costs as of December 31, 2020 and 2019 are as follows:
2020 | ||||||
Book value | Residual amortization period | |||||
(In millions of won) | ||||||
DRAM | ₩ | 46,995 | 11 months | |||
60,549 | 1 | |||||
NAND | 296,317 | 18 months | ||||
124,328 | 1 | |||||
CIS | 43,883 | 2~12 months | ||||
25,858 | 1 | |||||
|
| |||||
₩597,930 | ||||||
|
|
1 | Amortization has not started as of December 31, 2020 |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
15. Intangible Assets, continued
2019 | ||||||
Book value | Residual amortization period | |||||
(In millions of won) | ||||||
DRAM | ₩ | 263,262 | 11 ~23 months | |||
1,068 | 1 | |||||
NAND | 203,307 | 12 months | ||||
351,745 | 1 | |||||
CIS | 19,613 | 1~14 months | ||||
92,793 | 1 | |||||
|
| |||||
₩931,788 | ||||||
|
|
1 | Amortization has not started as of December 31, 2019 |
(d) The Group recognized₩16,544 million impairment loss in development costs for the year ended December 31, 2020. There are no accumulated impairment losses in development costs as of December 31, 2020, as the development costs impaired during 2020 were written off subsequent to the recognition of impairment. The Group did not recognize impairment loss in development costs for the year ended December 31, 2019.
16. Investment Property
(1) Changes in investment property duringfor the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Beginning net book amount | ₩ | 28,456 | 28,609 | ₩ | 258 | 1,400 | ||||||||||
Changes for the year | ||||||||||||||||
Depreciation | (713 | ) | (1,239 | ) | (291 | ) | (37 | ) | ||||||||
Transfer1 | (25,064 | ) | 1,086 | 209,450 | (1,105 | ) | ||||||||||
|
|
|
| |||||||||||||
Ending net book amount | 2,679 | 28,456 | 209,417 | 258 | ||||||||||||
|
|
|
| |||||||||||||
Acquisition cost | — | 50,839 | 249,135 | 511 | ||||||||||||
Accumulated depreciation | — | (22,383 | ) | (39,718 | ) | (253 | ) | |||||||||
|
|
|
| |||||||||||||
Ending net book amount | ₩ | 209,417 | 258 | |||||||||||||
₩ | 2,679 | 28,456 |
|
| ||||||||||||
|
|
1 |
|
(2) The depreciation expense of ₩713₩291 million was charged to cost of sales for the year ended December 31, 2015 (2014: ₩1,2392020 (2019: ₩37 million and 2013: ₩1,2792018: ₩84 million).
(3) Rental income from investment property during the year ended December 31, 20152020 was ₩2,627₩1,235 million (2014: ₩4,534(2019: ₩123 million and 2013: ₩4,2832018: ₩308 million).
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
17. Other Payables
Details of other payables as of December 31, 2020 and 2019 are as follows:
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Current | ||||||||
Accrued expenses | ₩ | 1,367,193 | 1,257,895 | |||||
|
|
|
| |||||
Non-current | ||||||||
Rent deposits payable | 6,360 | 13,487 | ||||||
Long-term accrued expenses | 23,563 | 4,779 | ||||||
|
|
|
| |||||
29,923 | 18,266 | |||||||
|
|
|
| |||||
₩ | 1,397,116 | 1,276,161 | ||||||
|
|
|
|
18. Borrowings
(1) Details of borrowings as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Current | �� | |||||||||||||||
Short-term borrowings | ₩ | 147,948 | 734,165 | ₩ | 179,579 | 1,168,354 | ||||||||||
Current portion of long-term borrowings | 465,561 | 820,855 | 2,604,724 | 1,259,593 | ||||||||||||
Current portion of debentures | 399,863 | 200,000 | 329,947 | 309,823 | ||||||||||||
|
|
|
| |||||||||||||
1,013,372 | 1,755,020 | 3,114,250 | 2,737,770 | |||||||||||||
|
|
|
| |||||||||||||
Non-current | ||||||||||||||||
Long-term borrowings | 1,512,003 | 1,262,772 | 4,526,968 | 5,040,371 | ||||||||||||
Debentures | 1,293,220 | 1,156,967 | 3,610,430 | 2,745,365 | ||||||||||||
|
|
|
| |||||||||||||
2,805,223 | 2,419,739 | 8,137,398 | 7,785,736 | |||||||||||||
|
|
|
| |||||||||||||
₩ | 3,818,595 | 4,174,759 | ₩ | 11,251,648 | 10,523,506 | |||||||||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
18. Borrowings, continued
(2) Details of short-term borrowings as of December 31, 20152020 and 20142019 are as follows:
Financial Institutions | Interest rate per annum in 2015 (%) | 2015 | 2014 | |||||||||
(In millions of won) | ||||||||||||
Import finance | Woori Bank | — | ₩ | — | 22,060 | |||||||
Borrowings on trade receivables collateral | Shinhan Bank and others | 3M LIBOR + 1.20 ~ 3.30 | 1,160 | 220,663 | ||||||||
NongHyup Bank | KORIBOR + 1.1 | 1,916 | — | |||||||||
Refinancing and others | China Construction Bank and others | 1.23 ~ 3.20 | 144,872 | 491,442 | ||||||||
|
|
|
| |||||||||
₩ | 147,948 | 734,165 | ||||||||||
|
|
|
|
Financial Institutions | Maturity date | Interest rate per annum in 2020 (%)1 | 2020 | 2019 | ||||||||||
(In millions of won) | ||||||||||||||
General borrowings | Shinhan Bank | 2021.09.27 | 2.47~2.52 | ₩ | 4,000 | 4,000 | ||||||||
Hyundai Card | 2020.01.17 ~ 2020.03.18 | — | — | 215,073 | ||||||||||
Usance | Hana Bank and others | 2020.04.20 ~ 2020.05.15 | — | — | 569,164 | |||||||||
Foreign general borrowings | Cypress | 2021.12.31 | 4.60 | 6,924 | — | |||||||||
Industrial & Commercial Bank of China | 2021.01.20 | 3M USD LIBOR + 0.60 | 32,682 | — | ||||||||||
China Construction Bank and others | 2021.02.26 | 3M USD LIBOR + 0.60 | 76,258 | — | ||||||||||
City Bank | 2021.07.14 ~ 2021.11.25 | 3M USD LIBOR +1.00 | 59,715 | 22,536 | ||||||||||
The Export-Import Bank of China | 2020.11.24 ~ 2020.12.04 | — | — | 107,731 | ||||||||||
Bank of China and others | 2020.08.14 ~ 2020.11.11 | — | — | 249,850 | ||||||||||
|
|
|
| |||||||||||
₩ | 179,579 | 1,168,354 | ||||||||||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
17.18. Borrowings, continued
(3) Details of long-term borrowings as of December 31, 20152020 and 20142019 are as follows:
Financial institutions | Interest rate per annum in 2015 (%)1 | 2015 | 2014 | |||||||||
(In millions of won) | ||||||||||||
Local currency borrowings: | ||||||||||||
Borrowing for housing | Kookmin Bank | — | ₩ | — | 10 | |||||||
Borrowings for childcare facilities | NongHyup Bank | 2.00 | 123 | 185 | ||||||||
Funds for equipment | Korea Development Bank (formerly Korea Finance Corporation) | Industrial financial debentures (4 years) + 0.93 | 166,667 | 250,000 | ||||||||
Funds for equipment2 | KEB Hana Bank (formerly Korea Exchange Bank) | CD (91days) +1.31 | 40,000 | 50,000 | ||||||||
Commercial paper | KEB Hana Bank (formerly Korea Exchange Bank) | — | — | 200,000 | ||||||||
Finance lease liabilities | Hansu Technical Service Ltd. | 3.70 | 42,775 | — | ||||||||
Finance lease liabilities | ME Semiconductor Rental First L.L.C. | 5.00 | 74,898 | 147,870 | ||||||||
|
|
|
| |||||||||
324,463 | 648,065 | |||||||||||
Foreign currency borrowings: | ||||||||||||
General borrowings | Export-Import Bank of Korea | 3M LIBOR + 1.00 ~ 3.15 | 488,333 | 274,800 | ||||||||
General borrowings | Standard Chartered Bank Korea Ltd. | — | — | 12,366 | ||||||||
General borrowings | Woori Bank | 3M LIBOR + 0.98 | 175,800 | — | ||||||||
General borrowings | Korea Development Bank | Exchange equalization fund rate + 0.60 | 117,200 | 109,920 | ||||||||
General borrowings | Korea Development Bank | 3M LIBOR + 0.95 | 175,800 | — | ||||||||
General borrowings | NongHyup Bank and others | Exchange equalization fund rate + 0.63 | 187,520 | 175,872 | ||||||||
General borrowings | NongHyup Bank and others | 3M LIBOR + 3.19 | 234,400 | 274,800 | ||||||||
General borrowings | Agricultural Bank of China and other | — | — | 182,841 | ||||||||
Syndicated loans | Development Bank of China and others | 3M LIBOR + 2.95 | 65,340 | 209,348 | ||||||||
Funds for equipment | Standard Chartered Bank Korea Ltd. | 3M LIBOR + 3.45 | 172,688 | 118,653 | ||||||||
Mortgage loans | HITECH Semiconductor (Wuxi) Co., Ltd. | — | — | 18,162 | ||||||||
Finance lease liabilities | Goodmemory First L.L.C. | 4.70 | 36,020 | 59,415 | ||||||||
|
|
|
| |||||||||
1,653,101 | 1,436,177 | |||||||||||
|
|
|
| |||||||||
1,977,564 | 2,084,242 | |||||||||||
|
|
|
| |||||||||
Less: Discount on present value | — | (615 | ) | |||||||||
Current maturities | (465,561 | ) | (820,855 | ) | ||||||||
|
|
|
| |||||||||
₩ | 1,512,003 | 1,262,772 | ||||||||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
17. Borrowings, continued
Financial institutions | Maturity date | Interest rate per annum in 2020 (%)1 | 2020 | 2019 | ||||||||||||||
(In millions of won) | ||||||||||||||||||
Local currency borrowings: | ||||||||||||||||||
Funds for equipment | Korea Development Bank | | 2021.09.29 ~ 2025.04.14 | | 1.98 ~ 2.50 | ₩ | 725,000 | 500,000 | ||||||||||
The Export-Import Bank of Korea | | 2022.10.23 ~ 2025.05.15 | | 1.31 ~ 2.00 | 600,000 | — | ||||||||||||
Shinhan Bank and others | | 2025.03.31 ~ 2026.12.19 | | 1.00 ~ 2.96 | 3,573 | 2,008 | ||||||||||||
Commercial Paper | Shinhan Bank General Finance Department | 2023.11.19 | CD(91 days) + 0.67 | 300,000 | — | |||||||||||||
|
|
|
| |||||||||||||||
1,628,573 | 502,008 | |||||||||||||||||
|
|
|
| |||||||||||||||
Foreign currency borrowings: | ||||||||||||||||||
General borrowings | The Export-Import Bank of Korea | 2021.05.31 | 3M JPY LIBOR + 0.57 | 843,408 | 850,776 | |||||||||||||
The Export-Import Bank of Korea | 2023.02.03 | 3M USD LIBOR + 1.30 | 108,800 | — | ||||||||||||||
Funds for equipment | The Export-Import Bank of Korea | | 2021.02.25 ~ 2022.03.10 | | 3M USD LIBOR + 1.10 ~ 1.40 | 244,800 | 607,845 | |||||||||||
The Export-Import Bank of Korea | | 2021.12.25 ~ 2021.12.27 | | 3M USD LIBOR + 1.30 | 272,349 | 289,059 | ||||||||||||
Korea Development Bank | 2026.10.02 | 3M USD LIBOR + 1.10 | 544,000 | 622,318 | ||||||||||||||
Woori Bank | 2020.03.11 | — | — | 43,417 | ||||||||||||||
China Development Bank | | 2023.05.25 ~ 2023.11.27 | 6M USD LIBOR + 1.00 | 212,432 | — | |||||||||||||
China Bank | 2022.11.28 | | 3M USD LIBOR + 0.80 ~ 1.70 | 187,376 | 124,873 | |||||||||||||
Syndicated loan | Industrial & Commercial Bank of China and others | 2024.04.24 | 3M USD LIBOR + 1.65 | 3,097,974 | 3,272,146 | |||||||||||||
|
|
|
| |||||||||||||||
5,511,139 | 5,810,434 | |||||||||||||||||
|
|
|
| |||||||||||||||
7,139,712 | 6,312,442 | |||||||||||||||||
|
|
|
| |||||||||||||||
Less: Current portion | (2,604,724 | ) | (1,259,593 | ) | ||||||||||||||
Less: Present value discount | (8,020 | ) | (12,478 | ) | ||||||||||||||
|
|
|
| |||||||||||||||
₩ | 4,526,968 | 5,040,371 | ||||||||||||||||
|
|
|
|
1 | As of December 31, |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
18. Borrowings, continued
Type | Interest rate per annum as of December 31, | |||
| ||||
| ||||
| % | |||
3M JPY LIBOR | % | |||
| % |
|
(4) Details of debentures as of December 31, 20152020 and 20142019 are as follows:
Maturity date | Interest rate per annum in 2015 (%) | 2015 | 2014 | |||||||||
(In millions of won) | ||||||||||||
Unsecured notes in local currency: | ||||||||||||
210th | Jan. 14, 2015 | 6.35 | ₩ | — | 200,000 | |||||||
211th | May 6, 2016 | 6.20 | 400,000 | 400,000 | ||||||||
212th | May 30, 2019 | 5.35 | 450,000 | 450,000 | ||||||||
213th | Sep. 4, 2017 | 3.72 | 200,000 | 200,000 | ||||||||
214-1st | Aug. 26, 2020 | 2.27 | 210,000 | — | ||||||||
214-2nd | Aug. 26, 2022 | 2.63 | 140,000 | — | ||||||||
215-1st | Nov. 25, 2018 | 2.26 | 70,000 | — | ||||||||
215-2nd | Nov. 25, 2020 | 2.56 | 100,000 | — | ||||||||
215-3rd | Nov. 25, 2020 | 2.75 | 10,000 | — | ||||||||
Secured notes in foreign currency | ||||||||||||
Foreign 8th1 | Jun. 20, 2017 | 3M LIBOR + 2.85 | 117,200 | 109,920 | ||||||||
|
|
|
| |||||||||
1,697,200 | 1,359,920 | |||||||||||
Less: Discounts on debentures | (4,117 | ) | (2,953 | ) | ||||||||
Current portion | (399,863 | ) | (200,000 | ) | ||||||||
|
|
|
| |||||||||
₩ | 1,293,220 | 1,156,967 | ||||||||||
|
|
|
|
|
Unsecured notes in local currency: Unsecured corporate bonds 214-1st Unsecured corporate bonds 214-2nd Unsecured corporate bonds 215-2nd Unsecured corporate bonds 215-3rd Unsecured corporate bonds 216-2nd Unsecured corporate bonds 216-3rd Unsecured corporate bonds 217-2nd Unsecured corporate bonds 218th Unsecured corporate bonds 219-1st Unsecured corporate bonds 219-2nd Unsecured corporate bonds 220-1st Unsecured corporate bonds 220-2nd Unsecured corporate bonds 220-3rd Unsecured corporate bonds 220-4rd Unsecured corporate bonds 221-1st Unsecured corporate bonds 221-2nd Unsecured corporate bonds 221-3rd Unsecured corporate bonds 221-4th Unsecured corporate bonds 222-1st Unsecured corporate bonds 222-2nd Unsecured notes in foreign currency: Unsecured global bonds 9th Less: Discounts on debentures Less: Current portion (5) Finance lease liability Maturity date Interest rate per
annum in 2020 (%) 2020 2019 (In millions of won) 2020.08.26 — — 210,000 2022.08.26 2.63 140,000 140,000 2020.11.25 — — 100,000 2022.11.25 2.75 10,000 10,000 2021.02.19 2.22 180,000 180,000 2023.02.19 2.53 80,000 80,000 2021.05.27 2.30 150,000 150,000 2023.03.14 3.01 300,000 300,000 2023.08.27 2.48 250,000 250,000 2025.08.27 2.67 90,000 90,000 2022.05.09 1.96 410,000 410,000 2024.05.09 1.99 200,000 200,000 2026.05.09 2.17 120,000 120,000 2029.05.09 2.54 250,000 250,000 2023.02.14 1.61 340,000 — 2025.02.14 1.72 360,000 — 2027.02.14 1.93 130,000 — 2030.02.14 2.21 230,000 — 2030.11.10 2.33 70,000 — 2035.11.10 2.73 100,000 — 3,410,000 2,490,000 2024.09.17 3.00 544,000 578,900 3,954,000 3,068,900 (13,623 ) (13,712 ) (329,947 ) (309,823 ) ₩ 3,610,430 2,745,365
Lease liabilities are effectively secured as the rights to the leased asset belong to the lessor.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 2013
17. Borrowings, continued2018
Details of future minimum lease payments to the lessor as of December 31, 2015 and 2014 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Total minimum lease payment | ||||||||
No later than 1 year | ₩ | 98,927 | 106,318 | |||||
Between 1 and 5 years | 66,779 | 116,277 | ||||||
|
|
|
| |||||
165,706 | 222,595 | |||||||
|
|
|
| |||||
Discount on present value | (12,013 | ) | (16,346 | ) | ||||
Net minimum lease payment | ||||||||
No later than 1 year | 93,770 | 97,567 | ||||||
Between 1 and 5 years | 59,923 | 108,682 | ||||||
|
|
|
| |||||
₩ | 153,693 | 206,249 | ||||||
|
|
|
|
(6) Details of book value and fair value of non-current borrowings as of December 31, 2015 and 2014 are as follows:
2015 | 2014 | |||||||||||||||
Book value | Fair value | Book value | Fair value | |||||||||||||
(In millions of won) | ||||||||||||||||
Long-term borrowings | ₩ | 1,512,003 | 1,517,683 | 1,262,772 | 1,271,718 | |||||||||||
Debentures | 1,293,220 | 1,338,481 | 1,156,967 | 1,217,236 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 2,805,223 | 2,856,164 | 2,419,739 | 2,488,954 | ||||||||||||
|
|
|
|
|
|
|
|
18.19. Other Current and Non-current Liabilities
Details of other current and non-current liabilities as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Current | ||||||||
Advance receipts | ₩ | 2,867 | 2,682 | |||||
Unearned income | 374 | 322 | ||||||
Withholdings | 35,938 | 67,174 | ||||||
Deposits received | 1,256 | 858 | ||||||
Others | 4,008 | 163 | ||||||
|
|
|
| |||||
44,443 | 71,199 | |||||||
|
|
|
| |||||
Non-current | ||||||||
Other long-term employee benefits | 61,149 | 59,464 | ||||||
|
|
|
| |||||
₩ | 105,592 | 130,663 | ||||||
|
|
|
|
December 31, 2020 | December 31, 2019 | |||||||
(In millions of won) | ||||||||
Current | ||||||||
Advance receipts | ₩ | 13,006 | 9,901 | |||||
Unearned income | 404 | 190 | ||||||
Withholdings | 67,043 | 59,186 | ||||||
Deposits received | 14,063 | 1,341 | ||||||
Contract liabilities | 96,378 | 86,999 | ||||||
Others | 6,501 | 5,380 | ||||||
|
|
|
| |||||
197,395 | 162,997 | |||||||
|
|
|
| |||||
Non-current | ||||||||
Other long-term employee benefits | 94,026 | 82,873 | ||||||
Long-term advance receipts | 4,901 | 4,900 | ||||||
|
|
|
| |||||
98,927 | 87,773 | |||||||
|
|
|
| |||||
₩ | 296,322 | 250,770 | ||||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
19.20. Provisions
(1) Details of changes in provisions for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other1 | Ending balance | Beginning balance | Increase | Utilization | Reversal | Ending Balance | ||||||||||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||||||||||
Warranty | ₩ | 6,886 | 2,910 | (4,346 | ) | (2,514 | ) | — | 2,936 | ₩ | 4,081 | 1,087 | (2,153 | ) | — | 3,015 | ||||||||||||||||||||||||||||
Sales returns | 14,646 | 53,642 | (53,552 | ) | — | — | 14,736 | |||||||||||||||||||||||||||||||||||||
Legal claims | 4,400 | 1,440 | (4,370 | ) | (30 | ) | 83 | 1,523 | ||||||||||||||||||||||||||||||||||||
Emission allowances | — | 6,081 | — | — | — | 6,081 | 6,620 | 13,070 | (8,908 | ) | — | 10,782 | ||||||||||||||||||||||||||||||||
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₩ | 25,932 | 64,073 | (62,268 | ) | (2,544 | ) | 83 | 25,276 | ₩ | 10,701 | 14,157 | (11,061 | ) | — | 13,797 | |||||||||||||||||||||||||||||
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2014 | ||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Warranty | ₩ | 13,914 | 10,862 | (17,890 | ) | — | 6,886 | |||||||||||||
Sales returns | 12,564 | 51,148 | (49,066 | ) | — | 14,646 | ||||||||||||||
Legal claims | 26,106 | — | (21,031 | ) | (675 | ) | 4,400 | |||||||||||||
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| |||||||||||
₩ | 52,584 | 62,010 | (87,987 | ) | (675 | ) | 25,932 | |||||||||||||
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(2) Provisions for warranty
The Group estimates the expected warranty costs based on historical results and accrues provisions for warranty.
(3) Provisions for sales returns
The Group estimates the expected sales returns based on historical results
SK HYNIX, INC. and adjusts sales and cost of sales, respectively. Accordingly, related gross profit and estimated expenses relatedSubsidiaries
Notes to the return (such as transportation costs) are recorded as provisions for sales returns.Consolidated Financial Statements
(4)December 31, 2020, 2019 and 2018
20. Provisions, continued
(3) Provisions for legal claims
The Group recognizes provisions for legal claims when the Group has a present legal or constructive obligation as a result of past events and an outflow of resources required to settle the obligation is probable and the amount can be reliably estimated.
(5)(4) Provision for emission allowances
The Group recognizes estimated future payment for the number of emission certificates required to settle the Group’s obligation exceeding the actual number of certificates on hand as emission allowances according to the Act on Allocation and Trading of Greenhouse Gas Emission Permits.
20.21. Defined Benefit Liabilities
Under the defined benefit plan, the Group pays employee benefits to retired employees in the form of a lump sum that are based on their salaries and years of service at the time of their retirement. Accordingly, the Group is
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
20. Defined Benefit Liabilities, continued
exposed to a variety of actuarial assumption risks such as risk associated with expected years of service, interest risk, and market (investment) risk.
(1) Details of defined benefit liabilities (assets) as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | December 31, 2020 | December 31, 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Present value of defined benefit obligations | ₩ | 1,055,340 | 887,277 | ₩ | 2,169,154 | 1,936,868 | ||||||||||
Fair value of plan assets | (570,363 | ) | (421,927 | ) | (2,228,377 | ) | (1,886,650 | ) | ||||||||
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| |||||||||||||
Net defined benefit liabilities | ₩ | (59,223) | 50,218 | |||||||||||||
₩ | 484,977 | 465,350 | �� |
|
| |||||||||||
|
| |||||||||||||||
Defined benefit liabilities | 2,739 | 53,624 | ||||||||||||||
Defined benefit assets1 | (61,962 | ) | (3,406 | ) |
1 | The Parent Company and certain subsidiaries’ fair value of plan assets in excess of the present value of defined benefit obligations amounted to ₩61,962 million and ₩3,406 million as of December 31, 2020 and 2019 are presented as defined benefit assets. |
(2) Principal actuarial assumptions as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||
Discount rate for defined benefit obligations1 | 2.89% ~ 4.10% | 3.19% ~ 4.50% | ||||||
Expected rate of salary increase | 2.20% ~ 5.52% | 4.92% ~ 5.81% |
|
2020 (%) | 2019 (%) | |||||||
Discount rate for defined benefit obligations | 1.96 ~ 3.56 | 1.92 ~ 3.47 | ||||||
Expected rate of salary increase | 3.00 ~ 5.51 | 2.70 ~ 5.94 |
(3) Weighted average durations of defined benefit obligations as of December 31, 20152020 and 20142019 are 12.3911.77 and 12.6711.48 years, respectively.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
21. Defined Benefit Liabilities, continued
(4) Changes in defined benefit obligations for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Beginning balance | ₩ | 887,277 | 656,080 | |||||
Current service cost | 139,486 | 109,403 | ||||||
Interest cost | 39,243 | 35,442 | ||||||
Benefits paid | (24,459 | ) | (35,529 | ) | ||||
Remeasurements: | ||||||||
Demographic assumption | (1,860 | ) | 7 | |||||
Financial assumption | 33,632 | 119,206 | ||||||
Adjustment based on experience | (18,561 | ) | 262 | |||||
Business combinations and disposal of a subsidiary | — | 1,711 | ||||||
Transfer from associates | 576 | 757 | ||||||
Effect of movements in exchange rates | 6 | (62 | ) | |||||
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| |||||
Ending balance | ₩ | 1,055,340 | 887,277 | |||||
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|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
20. Defined Benefit Liabilities, continued
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Beginning balance | ₩ | 1,936,868 | 1,609,055 | |||||
Current service cost | 250,098 | 220,870 | ||||||
Past service cost | (714 | ) | — | |||||
Interest expense | 65,002 | 59,683 | ||||||
Transfer from associates | (2,205 | ) | 2,408 | |||||
Remeasurements: | (25,036 | ) | 97,434 | |||||
Demographic assumption | 39,198 | 67 | ||||||
Financial assumption | (35,429 | ) | 76,241 | |||||
Adjustment based on experience | (28,805 | ) | 21,126 | |||||
Benefits paid | (54,824 | ) | (52,609 | ) | ||||
Effect of movements in exchange rates | (35 | ) | 27 | |||||
|
|
|
| |||||
Ending balance | ₩ | 2,169,154 | 1,936,868 | |||||
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|
|
(5) Changes in plan assets for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Beginning balance | ₩ | 421,927 | 20,340 | ₩ | 1,886,650 | 1,608,832 | ||||||||||
Contributions | 355,664 | 279,751 | ||||||||||||||
Interest income | 18,545 | 1,413 | 62,834 | 59,554 | ||||||||||||
Contributions | 153,566 | 402,894 | ||||||||||||||
Transfer from associates | 231 | 3,430 | ||||||||||||||
Benefits paid | (15,137 | ) | (1,385 | ) | (53,588 | ) | (38,008 | ) | ||||||||
Remeasurements | (8,661 | ) | (399 | ) | (23,373 | ) | (26,909 | ) | ||||||||
Business combinations and disposal of a subsidiary | — | (1,133 | ) | |||||||||||||
Transfer from associates | 123 | 197 | ||||||||||||||
Foreign exchange differences | (41 | ) | — | |||||||||||||
|
|
|
| |||||||||||||
Ending balance | ₩ | 570,363 | 421,927 | ₩ | 2,228,377 | 1,886,650 | ||||||||||
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|
|
(6) The amounts recognized in profit or loss for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Current service cost | ₩ | 139,486 | 109,403 | 98,095 | ₩ | 250,098 | 220,870 | 179,689 | ||||||||||||||||
Past service cost | (714 | ) | — | — | ||||||||||||||||||||
Net interest expense | 20,698 | 34,029 | 27,400 | 2,168 | 129 | (186 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 160,184 | 143,432 | 125,495 | ₩ | 251,552 | 220,999 | 179,503 | |||||||||||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
21. Defined Benefit Liabilities, continued
(7) The amounts in which defined benefit plan related expenses are included for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Cost of sales (manufacturing costs) | ₩ | 88,415 | 82,922 | 73,950 | ||||||||||||||||||||
Cost of sales | ₩ | 135,999 | 120,736 | 101,944 | ||||||||||||||||||||
Selling and administrative expenses | 71,769 | 60,510 | 51,545 | 115,553 | 100,263 | 77,559 | ||||||||||||||||||
|
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|
|
|
| |||||||||||||||||||
₩ | 160,184 | 143,432 | 125,495 | ₩ | 251,552 | 220,999 | 179,503 | |||||||||||||||||
|
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|
|
|
|
(8) Details of plan assets as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Deposits | ₩ | 568,790 | 420,300 | ₩ | 2,227,196 | 1,884,630 | ||||||||||
Other | 1,573 | 1,627 | ||||||||||||||
Others | 1,181 | 2,020 | ||||||||||||||
|
|
|
| |||||||||||||
₩ | 570,363 | 421,927 | ₩ | 2,228,377 | 1,886,650 | |||||||||||
|
|
|
|
Actual return on plan assets for the year ended December 31, 20152020 amounted to ₩9,884₩39,461 million (2014: ₩1,014(2019 : ₩32,645 million and 2013: ₩4922018: ₩24,167 million).
(9) As of December 31, 2015,2020, the Group funded defined benefit obligations through insurance plans with Mirae Asset Life Insurance Co., Ltd. and other insurance companies. The Group’s minimum requiredreasonable estimation of contribution to the plan assets for the year ending December 31, 20162021 is ₩239,780₩326,470 million under the assumption that the Group maintains the defined benefit plan.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
20. Defined Benefit Liabilities, continued
(10) The sensitivity analysis of the defined benefit obligations as of December 31, 20152020 to changes in the principal assumptions is as follows:
Effects on defined benefit obligation | Effects on defined benefit obligation | |||||||||||||||
Increase of rate | Decrease of rate | Increase of rate | Decrease of rate | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Discount rate (if changed by 1%) | ₩ | (115,409 | ) | 136,562 | ₩ | (228,838 | ) | 270,446 | ||||||||
Expected rate of salary increase (if changed by 1%) | 136,638 | (117,540 | ) | 269,436 | (232,219 | ) |
The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan and provides approximate values of sensitivity for the assumptions used.
(11) Information about the maturity profile of the defined benefit obligation as of December 31, 20152020 is as follows:
2015 | ||||||||||||||||||||
Less than 1 year | 1 - 5 years | 5 - 10 years | 10 - 20 years | Total | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Benefits paid | ₩ | 32,397 | 208,589 | 592,188 | 2,567,869 | 3,401,043 |
Less than 1 year | 2 - 5 years | 6 - 10 years | More than 11 years | Total | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Benefits paid | ₩ | 122,429 | 321,072 | 644,612 | 2,353,885 | 3,441,998 |
Information about the maturity profile is based on the undiscounted and vested amount of defined benefit obligation as of December 31, 2020, and classified toby employee’s expected years of remaining services.
21. Deferred Income Tax
(1) Changes in deferred taxes(12) The Group adopted defined contribution plan for retirement benefit for employees subject to peak wage system. Contributions to defined contribution plans amounting to ₩931 million (2019: ₩455 million) was expensed for the yearsyear ended December 31, 2015 and 2014 are as follows:2020.
2015 | 2014 | |||||||
(In millions of won) | ||||||||
At January 1 | ₩ | 268,639 | 198,570 | |||||
Recorded in profit or loss | 81,265 | 69,176 | ||||||
Exchange differences | 3,718 | 893 | ||||||
|
|
|
| |||||
At December 31 | ₩ | 353,622 | 268,639 | |||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
21.
22. Deferred Income Tax continued
(2)(1) Changes in deferred income tax assets and liabilities for the years ended December 31, 20152020 and 20142019 without taking into consideration the offsetting of balances within the same tax jurisdiction,authority, are as follows:
2015 | ||||||||||||||||
January 1, 2015 | Profit or loss | Currency translation differences | December 31, 2015 | |||||||||||||
(In millions of won) | ||||||||||||||||
Deferred tax liabilities: | ||||||||||||||||
Advanced depreciation provision | ₩ | (55,666 | ) | — | — | (55,666 | ) | |||||||||
Valuation of derivatives | (208 | ) | 135 | — | (73 | ) | ||||||||||
Gains on foreign currency translation | (2,325 | ) | 1,513 | (25 | ) | (837 | ) | |||||||||
Plan assets | (96,902 | ) | (33,524 | ) | — | (130,426 | ) | |||||||||
Others | (16,967 | ) | 7,041 | (133 | ) | (10,059 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
(172,068 | ) | (24,835 | ) | (158 | ) | (197,061 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Deferred tax assets: | ||||||||||||||||
Loss on valuation of inventories | 18,001 | 22,329 | 5 | 40,335 | ||||||||||||
Valuation of equity-method investments | 250,682 | (17,550 | ) | 4,477 | 237,609 | |||||||||||
Accumulated depreciation | 79,819 | (757 | ) | 416 | 79,478 | |||||||||||
Net defined benefits | 186,627 | 36,492 | 16 | 223,135 | ||||||||||||
Deemed investments and others | 161,995 | — | — | 161,995 | ||||||||||||
Provisions and others | 1,066 | (716 | ) | — | 350 | |||||||||||
Impairment of available-for-sale financial assets | 37,238 | (735 | ) | — | 36,503 | |||||||||||
Losses on foreign currency translation | 2,522 | (2,329 | ) | — | 193 | |||||||||||
Property, plant and equipment | 3,381 | (3,960 | ) | — | (579 | ) | ||||||||||
Losses on valuation of derivative | 386 | (148 | ) | — | 238 | |||||||||||
Tax loss carryforwards | 23,581 | 7,277 | 1,562 | 32,420 | ||||||||||||
Others | 246,606 | (49,816 | ) | 9,976 | 206,766 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
1,011,904 | (9,913 | ) | 16,452 | 1,018,443 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Deferred tax assets, net | 839,836 | (34,748 | ) | 16,294 | 821,382 | |||||||||||
Deferred tax assets not recognized | (750,313 | ) | 165,453 | (12,788 | ) | (597,648 | ) | |||||||||
Tax credit carryforwards recognized | 179,116 | (49,440 | ) | 212 | 129,888 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Deferred tax assets recognized | ₩ | 268,639 | 81,265 | 3,718 | 353,622 | |||||||||||
|
|
|
|
|
|
|
|
2020 | ||||||||||||||||||||||||
Beginning | Adjustment | Profit or loss | Equity | Foreign exchange differences | Ending | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
Inventories, net | ₩ | 176,742 | — | (52,937 | ) | — | (464 | ) | 123,341 | |||||||||||||||
Property, plant and equipment, net | 208,478 | 27,188 | 201,165 | — | (159 | ) | 436,672 | |||||||||||||||||
Defined benefits liabilities, net | 7,756 | — | (9,798 | ) | 169 | (3 | ) | (1,876 | ) | |||||||||||||||
Short-term and long-term investment assets and others | (27,555 | ) | — | (514,745 | ) | — | — | (542,300 | ) | |||||||||||||||
Employee benefits | 46,537 | — | 12,936 | — | (2 | ) | 59,471 | |||||||||||||||||
Provisions | 3,589 | — | (13,006 | ) | — | (24 | ) | (9,441 | ) | |||||||||||||||
Other assets and other liabilities | 11,629 | — | 7,632 | — | 117 | 19,378 | ||||||||||||||||||
Accrued expenses | 92,408 | — | 8,306 | — | — | 100,714 | ||||||||||||||||||
Others | 14,681 | — | (2,410 | ) | — | (456 | ) | 11,815 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Deferred tax assets for temporary differences, net | 534,265 | 27,188 | (362,857 | ) | 169 | (991 | ) | 197,774 | ||||||||||||||||
Tax credit carryforwards recognized | 6,251 | — | (2,192 | ) | — | (160 | ) | 3,899 | ||||||||||||||||
Tax loss carryforwards recognized | 117,381 | — | (24,561 | ) | — | (4,939 | ) | 87,881 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Deferred tax assets recognized, net | ₩ | 657,897 | 27,188 | (389,610 | ) | 169 | (6,090 | ) | 289,554 | |||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
2019 | ||||||||||||||||||||
Beginning | Profit or loss | Equity | Foreign exchange differences | Ending | ||||||||||||||||
(In millions of won) | ||||||||||||||||||||
Inventories, net | ₩ | 102,812 | 73,691 | — | 240 | 176,743 | ||||||||||||||
Property, plant and equipment, net | 140,762 | 74,433 | — | (6,718 | ) | 208,477 | ||||||||||||||
Defined benefits liabilities, net | (609 | ) | (25,776 | ) | 34,132 | 10 | 7,757 | |||||||||||||
Short-term and long-term investment assets and others | (32,984 | ) | 5,429 | — | — | (27,555 | ) | |||||||||||||
Employee benefits | 39,954 | 6,583 | — | — | 46,537 | |||||||||||||||
Provisions | 19,169 | (15,599 | ) | — | 19 | 3,589 | ||||||||||||||
Other assets and other liabilities | 24,583 | (12,872 | ) | — | (82 | ) | 11,629 | |||||||||||||
Accrued expenses | 48,883 | 43,526 | — | — | 92,409 | |||||||||||||||
Others | 56,653 | (35,239 | ) | — | (6,734 | ) | 14,680 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred tax assets for temporary differences, net | 399,223 | 114,176 | 34,132 | (13,265 | ) | 534,266 | ||||||||||||||
Tax credit carryforwards recognized | 15,189 | (9,542 | ) | — | 604 | 6,251 | ||||||||||||||
Tax loss carryforwards recognized | 123,007 | (10,023 | ) | — | 4,396 | 117,380 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred tax assets recognized, net | ₩ | 537,419 | 94,611 | 34,132 | (8,265 | ) | 657,897 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
21.22. Deferred Income Tax, continued
2014 | ||||||||||||||||
January 1, 2014 | Profit or loss | Currency translation differences | December 31, 2014 | |||||||||||||
(In millions of won) | ||||||||||||||||
Deferred tax liabilities: | ||||||||||||||||
Advanced depreciation provision | ₩ | (55,666 | ) | — | — | (55,666 | ) | |||||||||
Valuation of derivatives | (5,452 | ) | 5,244 | — | (208 | ) | ||||||||||
Gains on foreign currency translation | (2,597 | ) | 261 | 11 | (2,325 | ) | ||||||||||
Conversion rights adjustment | (6,827 | ) | 6,827 | — | — | |||||||||||
Plan assets | (725 | ) | (96,177 | ) | — | (96,902 | ) | |||||||||
Others | (13,897 | ) | (2,996 | ) | (74 | ) | (16,967 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
(85,164 | ) | (86,841 | ) | (63 | ) | (172,068 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Deferred tax assets: | ||||||||||||||||
Loss on valuation of inventories | 18,876 | (873 | ) | (2 | ) | 18,001 | ||||||||||
Valuation of equity-method investments | 216,334 | 35,920 | (1,572 | ) | 250,682 | |||||||||||
Accumulated depreciation | 120,960 | (41,917 | ) | 776 | 79,819 | |||||||||||
Net defined benefits | 137,578 | 49,091 | (42 | ) | 186,627 | |||||||||||
Deemed investments and others | 162,390 | (395 | ) | — | 161,995 | |||||||||||
Provisions and others | 5,816 | (4,750 | ) | — | 1,066 | |||||||||||
Impairment of available-for-sale financial assets | 40,134 | (2,896 | ) | — | 37,238 | |||||||||||
Losses on foreign currency translation | 2,546 | (24 | ) | — | 2,522 | |||||||||||
Property, plant and equipment | 15,217 | (11,836 | ) | — | 3,381 | |||||||||||
Losses on valuation of derivative | 31,367 | (30,981 | ) | — | 386 | |||||||||||
Tax loss carryforwards | 72,736 | (50,412 | ) | 1,257 | 23,581 | |||||||||||
Others | 209,967 | 30,701 | 5,938 | 246,606 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
1,033,921 | (28,372 | ) | 6,355 | 1,011,904 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Deferred tax assets, net | 948,757 | (115,213 | ) | 6,292 | 839,836 | |||||||||||
Deferred tax assets not recognized | (827,313 | ) | 82,399 | (5,399 | ) | (750,313 | ) | |||||||||
Tax credit carryforwards recognized | 77,126 | 101,990 | — | 179,116 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Deferred tax assets recognized | ₩ | 198,570 | 69,176 | 893 | 268,639 | |||||||||||
|
|
|
|
|
|
|
|
(3) Deferred tax assets are recognized for deductible temporary differences, tax loss carryforwards and tax credit carryforwards to the extent that the realization of the related tax benefit through future taxable profits is probable.
(2) As of December 31, 20152020 and 2019, the Group did not recognize deferred tax assets of ₩597,648 million (2014: ₩750,313 million) associated with deductable temporary differences amounting to ₩2,469,626 million (2014: ₩3,100,467 million).
As of December 31, 2015, the unused tax credits that wereare not recognized as deferred tax assets amounted to ₩234,632 million (2014: ₩387,088 million).
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
21. Deferred Income Tax, continued(liabilities) are as follows:
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Deductible temporary differences | ₩ | 2,637,294 | 2,443,911 | |||||
Taxable temporary differences | (3,130,362 | ) | (2,788,357 | ) | ||||
|
|
|
| |||||
Investments in subsidiaries, associates, and joint ventures | (493,068 | ) | (344,446 | ) | ||||
|
|
|
| |||||
Other deductible temporary differences | 12,790 | 18,863 | ||||||
|
|
|
|
(4) Expiration schedule(3) Details of tax credit carryforwards that were not recognized asperiod when the deferred income tax assets (liabilities) are recovered (settled) as of December 31, 2015 is2020 and 2019 are as follows:
Tax credit carryforwards | ||||
(In millions of won) | ||||
2018 | ₩ | 10,277 | ||
2019 | 120,010 | |||
2020 | 104,345 | |||
|
| |||
₩ | 234,632 | |||
|
|
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Deferred income tax assets to be recovered after more than 12 months | ₩ | 1,410,835 | 1,110,617 | |||||
Deferred income tax assets to be recovered within 12 months | 142,651 | 202,665 | ||||||
|
|
|
| |||||
Deferred income tax assets recognized | 1,553,486 | 1,313,282 | ||||||
|
|
|
| |||||
Deferred income tax liabilities to be recovered after more than 12 months | (1,263,264 | ) | (655,003 | ) | ||||
Deferred income tax liabilities to be settled within 12 months | (668 | ) | (382 | ) | ||||
|
|
|
| |||||
Deferred income tax liabilities recognized | (1,263,932 | ) | (655,385 | ) | ||||
|
|
|
| |||||
Net income deferred tax assets (liabilities) recognized | ₩ | 289,554 | 657,897 | |||||
|
|
|
|
22.23. Derivative Financial Instruments
(1) Details of derivative financial liabilitiesinstruments applying cash flow hedge accounting as of December 31, 2015 and 20142020 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Current | ||||||||
Interest rates swap | ₩ | — | 30 | |||||
Non-current | ||||||||
Interest rates swap | 683 | 708 | ||||||
|
|
|
| |||||
₩ | 683 | 738 | ||||||
|
|
|
|
(2) Details of gains and losses from derivative instruments for the years ended December 31, 2015, 2014 and 2013 are follows:
Hedged items | Hedging instruments | |||||||||
Borrowing date | Financial | Hedged risk | Type of contract | Financial institution | Contract period | |||||
(In thousands of foreign currencies) | ||||||||||
2019.09.17 | Foreign currency denominated bond with fixed rate (Par value: USD 500,000) | Foreign currency risk | Fixed-to-fixed cross currency swap | Kookmin Bank and other | 2019.09.17~ 2024.09.17 | |||||
2019.10.02 | Foreign currency denominated borrowing for equipment with floating rate (Par value: USD 500,000) | Foreign currency and interest rate risk | Floating-to-fixed cross currency interest rate swap | Korea Development Bank | 2019.10.02~ 2026.10.02 |
2015 | ||||||||||||||||
Gain on valuation | Loss on valuation | Gain on transaction | Loss on transaction | |||||||||||||
(In millions of won) | ||||||||||||||||
Interest rates swap | ₩ | 25 | — | 1,672 | 2,058 |
2014 | ||||||||||||||||
Gain on valuation | Loss on valuation | Gain on transaction | Loss on transaction | |||||||||||||
(In millions of won) | ||||||||||||||||
Interest rates swap | ₩ | 215 | 980 | 2,955 | 237 | |||||||||||
Embedded derivative instruments1 | — | 171,016 | — | 2,691 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 215 | 171,996 | 2,955 | 2,928 | ||||||||||||
|
|
|
|
|
|
|
|
2013 | ||||||||||||||||
Gain on valuation | Loss on valuation | Gain on transaction | Loss on transaction | |||||||||||||
(In millions of won) | ||||||||||||||||
Foreign currency forward contract | ₩ | — | — | 3,630 | 5,308 | |||||||||||
Interest rates swap | 2,507 | — | 26 | 1,242 | ||||||||||||
Embedded derivative instruments1 | — | 93,085 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 2,507 | 93,085 | 3,656 | 6,550 | ||||||||||||
|
|
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
22.23. Derivative Financial Instruments, continued
Hedged items | Hedging instruments | |||||||||
Borrowing date |
| Hedged risk | Type of contract | Financial institution | Contract period | |||||
(In thousands of foreign currencies) | ||||||||||
2020.02.03 | Foreign currency denominated borrowing with floating rate (Par value: USD 50,000) | Interest rate risk | Interest rate swap | Woori Bank | 2020.02.03~ 2023.02.03 | |||||
2020.03.18 | Foreign currency denominated borrowing with floating rate (Par value: USD 50,000) | Interest rate risk | Interest rate swap | Woori Bank | 2020.03.18~ 2023.02.03 |
(2) The derivative financial instruments held by the Group are presented in 23.non-current other financial liabilities in the consolidated financial statements of financial position and the details are as follows:
Type of contract | Hedged items | Cash flow hedge | Fair value | |||||||
(In millions of won and thousands of foreign currencies) | ||||||||||
Fixed-to-fixed cross currency swap | Foreign currency denominated bond with fixed rate (Par value: USD 500,000) | ₩ | 23,018 | 23,018 | ||||||
Floating-to-fixed cross currency interest rate swap | Foreign currency denominated borrowing for equipment with floating rate (Par value: USD 500,000) | 59,478 | 59,478 | |||||||
Interest rate swap | Foreign currency denominated borrowing with floating rate (Par value: USD 50,000) | 1,539 | 1,539 | |||||||
Interest rate swap | Foreign currency denominated borrowing with floating rate (Par value: USD 50,000) | 672 | 672 | |||||||
|
| |||||||||
₩ | 84,707 | |||||||||
|
|
As of December 31, 2020, changes of fair value of the derivative is recognized in other comprehensive income or loss as all of designated hedging instruments are effective for foreign currency risk or foreign currency and interest rate risk.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
24. Capital Stock, Capital Surplus and Other Equity
(1) DetailsThe Parent Company has 9,000,000,000 authorized shares and the face value per share is ₩5,000 as of capitalDecember 31, 2020. The number of shares issued, common stock, capital surplus and other equitycapital as of December 31, 20152020 and 20142019, are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won, thousands of shares) | (In millions of won, thousands of shares) | |||||||||||||||
Authorized shares | 9,000,000 | 9,000,000 | ||||||||||||||
Issued shares1 | 731,530 | 731,530 | 731,530 | 731,530 | ||||||||||||
Capital stock: | ||||||||||||||||
Common stock | ₩ | 3,657,652 | 3,657,652 | ₩ | 3,657,652 | 3,657,652 | ||||||||||
Capital surplus: | ||||||||||||||||
Additional paid in capital | 3,625,797 | 3,625,797 | 3,625,797 | 3,625,797 | ||||||||||||
Consideration for conversion rights | 42,928 | 42,928 | ||||||||||||||
Others | 475,011 | 475,011 | 517,939 | 517,939 | ||||||||||||
|
|
|
| |||||||||||||
4,143,736 | 4,143,736 | 4,143,736 | 4,143,736 | |||||||||||||
Other equity | ||||||||||||||||
|
| |||||||||||||||
Other equity: | ||||||||||||||||
Acquisition cost of treasury shares | ₩ | (771,913 | ) | (24 | ) | (2,508,427 | ) | (2,508,427 | ) | |||||||
Stock option | 5,305 | 3,714 | ||||||||||||||
|
| |||||||||||||||
₩ | (2,503,122 | ) | (2,504,713 | ) | ||||||||||||
|
| |||||||||||||||
Number of treasury shares | 22,001 | 1 | 44,001 | 44,001 |
1 | As of December 31, |
(2) Changes inThe number of outstanding shares, which deducted treasury shares held by the Parent Company from listed shares, is 684,002 thousands as of December 31, 20152020 and December 31, 2014 are as follows:2019.
2015 | 2014 | |||||||
(In thousands of shares) | ||||||||
Beginning | 728,002 | 710,201 | ||||||
Issue of ordinary shares related to the acquisition of a subsidiary | — | 1,358 | ||||||
Exercise of conversion rights | — | 16,443 | ||||||
Acquisition of treasury shares | (22,000 | ) | — | |||||
|
|
|
| |||||
Ending | 706,002 | 728,002 | ||||||
|
|
|
|
24.25. Accumulated Other Comprehensive Loss
(1) Details of accumulated other comprehensive loss as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | |||||||
(In millions of won) | ||||||||
Equity-accounted investees — share of other comprehensive income (loss) | ₩ | 1,856 | (4,631 | ) | ||||
Foreign operations — foreign currency translation differences | (3,456 | ) | (37,184 | ) | ||||
|
|
|
| |||||
₩ | (1,600 | ) | (41,815 | ) | ||||
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
24. Accumulated Other Comprehensive Loss, continued
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Equity-accounted investees — share of other comprehensive income (loss) | ₩ | (57,542) | 3,278 | |||||
Foreign operations — foreign currency translation differences | (360,247 | ) | (314,966 | ) | ||||
Gain on valuation of derivatives | 12,336 | 12,753 | ||||||
|
|
|
| |||||
₩ | (405,453 | ) | (298,935 | ) | ||||
|
|
|
|
(2) Changes in accumulated other comprehensive income (loss) for the years ended December 31, 20152020 and 20142019 are as follows:
2015 | 2020 | |||||||||||||||||||||||
Beginning | Change | Ending | Beginning | Change | Ending | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Equity-accounted investees — share of other comprehensive income (loss) | ₩ | (4,631 | ) | 6,487 | 1,856 | ₩ | 3,278 | (60,820 | ) | (57,542 | ) | |||||||||||||
Foreign operations — foreign currency translation differences | (37,184 | ) | 33,728 | (3,456 | ) | (314,966 | ) | (45,281 | ) | (360,247 | ) | |||||||||||||
Gain (loss) on valuation of derivatives | 12,753 | (417 | ) | 12,336 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | (41,815 | ) | 40,215 | (1,600 | ) | ₩ | (298,935 | ) | (106,518 | ) | (405,453 | ) | ||||||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
25. Accumulated Other Comprehensive Loss, continued
2014 | ||||||||||||
Beginning | Change | Ending | ||||||||||
(In millions of won) | ||||||||||||
Available-for-sale financial assets — unrealized net change in fair value | ₩ | 7,824 | (7,824 | ) | — | |||||||
Equity-accounted investees — share of other comprehensive loss | (8,337 | ) | 3,706 | (4,631 | ) | |||||||
Foreign operations — foreign currency translation differences | (108,294 | ) | 71,110 | (37,184 | ) | |||||||
|
|
|
|
|
| |||||||
₩ | (108,807 | ) | 66,992 | (41,815 | ) | |||||||
|
|
|
|
|
|
2019 | ||||||||||||
Beginning | Change | Ending | ||||||||||
(In millions of won) | ||||||||||||
Equity-accounted investees — share of other comprehensive income (loss) | ₩ | (18,166) | 21,444 | 3,278 | ||||||||
Foreign operations — foreign currency translation differences | (464,653 | ) | 149,687 | (314,966 | ) | |||||||
Gain on valuation of derivatives | — | 12,753 | 12,753 | |||||||||
|
|
|
|
|
| |||||||
₩ | (482,819 | ) | 183,884 | (298,935 | ) | |||||||
|
|
|
|
|
|
25.26. Retained Earnings and Dividends
(1) Details of retained earnings as of December 31, 20152020 and 20142019 are as follows:
2015 | 2014 | 2020 | 2019 | |||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||
Legal reserve1 | ₩ | 30,694 | 8,854 | ₩ | 349,954 | 281,555 | ||||||||||
Discretionary reserve2 | 235,506 | 235,506 | 235,506 | 235,506 | ||||||||||||
Unappropriated retained earnings | 14,092,788 | 10,032,544 | 46,410,268 | 42,406,301 | ||||||||||||
|
|
|
| |||||||||||||
₩ | 14,358,988 | 10,276,904 | ₩ | 46,995,728 | 42,923,362 | |||||||||||
|
|
|
|
1 | The Commercial Code of the Republic of Korea requires the Parent Company to appropriate for each financial |
2 | Discretionary reserve is a reserve for technology development. |
(2) Dividends of the Parent Company
(a) Details of dividends for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won and In thousands of shares) | ||||||||||||
Type of dividends | Cash Dividends | Cash Dividends | — | |||||||||
Outstanding ordinary shares | 706,002 | 728,002 | 710,201 | |||||||||
Par value (in won) | ₩ | 5,000 | 5,000 | 5,000 | ||||||||
Dividend rate | 10 | % | 6 | % | — | |||||||
Total dividends | ₩ | 353,001 | 218,401 | — |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
2020 | 2019 | 2018 | ||||||||||
(In millions of won and in thousands of shares) | ||||||||||||
Type of dividends | Cash Dividends | Cash Dividends | Cash Dividends | |||||||||
Outstanding ordinary shares | 684,002 | 684,002 | 684,002 | |||||||||
Par value (in won) | ₩ | 5,000 | 5,000 | 5,000 | ||||||||
Dividend rate | 23% | 20% | 30% | |||||||||
Total dividends | ₩ | 800,282 | 684,002 | 1,026,003 |
(b) Dividend payout ratio for the years ended December 31, 2015, 20142020, 2019 and 2013 is2018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Dividends | ₩ | 353,001 | 218,401 | — | ₩ | 800,282 | 684,002 | 1,026,003 | ||||||||||||||||
Profit attributable to owners of the Parent Company | 4,322,356 | 4,195,456 | 2,872,470 | 4,755,102 | 2,005,975 | 15,540,111 | ||||||||||||||||||
Dividend payout ratio | 8.17 | % | 5.21 | % | — | 16.83% | 34.10% | 6.60% |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
26. Retained Earnings and Dividends, continued
(c) Dividend yield ratio for the years ended December 31, 2015, 20142020, 2019 and 2013 is2018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In won) | (In won) | |||||||||||||||||||||||
Dividends per share | ₩ | 500 | 300 | — | ₩ | 1,170 | 1,000 | 1,500 | ||||||||||||||||
Closing stock price | 30,750 | 47,750 | 36,800 | 118,500 | 94,100 | 60,500 | ||||||||||||||||||
Dividend yield ratio | 1.63 | % | 0.63 | % | — | 0.99% | 1.06% | 2.48% |
26.27. Revenue
(1) Details of the Group’s revenue for the years ended December 31, 2020, 2019 and 2018 are as follows:
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Sale of goods | ₩ | 31,837,538 | 26,922,416 | 40,388,846 | ||||||||
Providing services | 62,880 | 68,317 | 56,220 | |||||||||
|
|
|
|
|
| |||||||
₩ | 31,900,418 | 26,990,733 | 40,445,066 | |||||||||
|
|
|
|
|
|
(2) Details of the Group’s revenue by product and service types for the years ended December 31, 2020, 2019 and 2018 are as follows:
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
DRAM | ₩ | 22,536,404 | 20,292,687 | 32,370,936 | ||||||||
NAND Flash | 7,471,242 | 5,139,563 | 7,420,857 | |||||||||
Other | 1,892,772 | 1,558,483 | 653,273 | |||||||||
|
|
|
|
|
| |||||||
₩ | 31,900,418 | 26,990,733 | 40,445,066 | |||||||||
|
|
|
|
|
|
(3) The Group’s revenue information by region based on the location of selling entities for the years ended December 31, 2020, 2019 and 2018 are as follows:
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Korea | ₩ | 1,452,006 | 1,446,997 | 840,491 | ||||||||
China | 12,217,634 | 12,570,278 | 15,785,993 | |||||||||
Taiwan | 1,905,650 | 1,444,188 | 2,950,067 | |||||||||
Asia (other than China and Taiwan) | 2,416,321 | 2,301,314 | 4,609,601 | |||||||||
U.S.A. | 12,686,108 | 8,141,151 | 14,278,161 | |||||||||
Europe | 1,222,699 | 1,086,805 | 1,980,753 | |||||||||
|
|
|
|
|
| |||||||
₩ | 31,900,418 | 26,990,733 | 40,445,066 | |||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
27. Revenue, continued
(4) Details of the Group’s revenue by the timing of revenue recognition for the years ended December 31, 2020, 2019 and 2018 are as follows:
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Performance obligations satisfied at a point in time | ₩ | 31,837,538 | 26,922,416 | 40,388,846 | ||||||||
Performance obligations satisfied over time | 62,880 | 68,317 | 56,220 | |||||||||
|
|
|
|
|
| |||||||
₩ | 31,900,418 | 26,990,733 | 40,445,066 | |||||||||
|
|
|
|
|
|
(5) Revenue recognition policies and performance obligations
Revenue is measured based on the promised consideration specified in a contract with a customer. The Group recognizes revenue when the Group transfers a promised good or service to a customer.
Revenue recognition policies regarding the nature and timing of performance obligation satisfaction in the contract are as follows:
Nature and timing of performance | Revenue recognition policies | |||
Sale of goods | Revenue is recognized when the customer obtains control of that asset, which is typically upon delivery or shipment depending on the terms of the contract. When the good is defective, the customer is granted the right to return the defective goods in exchange for a functioning product or cash. | Revenue is measured at the amount of consideration for the sale of goods, reflecting the expected amount of return estimated through historical information. The Group’s right to recover products from customers and refund liability are recognized. Refund liability is initially measured at the former carrying amount of the product less any expected costs to recover those products. Refund liability is included in other current liabilities (See note 19) and right to recover products from customers is included in other current assets (See note 10).The Group reviews its estimate of expected returns at the end of each reporting period and updates the amounts of the asset and liabilities accordingly. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
28. Selling and Administrative Expenses
Selling and administrative expenses for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Salaries | ₩ | 385,281 | 351,318 | 265,137 | ||||||||
Defined benefit plan related | 25,499 | 22,801 | 19,132 | |||||||||
Employee benefits | 81,606 | 60,277 | 60,459 | |||||||||
Commission | 212,129 | 211,111 | 158,107 | |||||||||
Depreciation | 89,879 | 58,608 | 51,240 | |||||||||
Amortization | 239,227 | 169,844 | 155,313 | |||||||||
Research and development | 1,620,324 | 1,409,530 | 968,804 | |||||||||
Freight and custody charge | 41,999 | 37,453 | 33,201 | |||||||||
Legal cost | 7,722 | 7,210 | 11,374 | |||||||||
Rental | 18,698 | 11,521 | 14,650 | |||||||||
Taxes and dues | 18,436 | 15,145 | 17,912 | |||||||||
Training | 20,314 | 42,737 | 26,863 | |||||||||
Sales promotional | 46,169 | 31,018 | 28,414 | |||||||||
Utility | 13,595 | 5,673 | 10,804 | |||||||||
Supplies | 51,630 | 42,737 | 26,863 | |||||||||
Repair | 9,629 | 9,994 | 19,890 | |||||||||
Other | 64,408 | 67,398 | 52,567 | |||||||||
|
|
|
|
|
| |||||||
₩ | 2,946,545 | 2,554,375 | 1,920,730 | |||||||||
|
|
|
|
|
|
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Selling and administrative expenses: | ||||||||||||
Salaries | ₩ | 592,894 | 516,226 | 564,923 | ||||||||
Defined benefit plan | 40,927 | 34,692 | 27,200 | |||||||||
Employee benefits | 159,600 | 141,104 | 115,892 | |||||||||
Commission | 334,570 | 460,644 | 369,307 | |||||||||
Depreciation | 245,858 | 206,429 | 130,229 | |||||||||
Amortization | 719,652 | 687,365 | 442,389 | |||||||||
Freight and custody charge | 48,617 | 40,222 | 27,412 | |||||||||
Legal cost | 20,323 | 31,679 | 34,032 | |||||||||
Rental | 8,944 | 6,933 | 13,301 | |||||||||
Taxes and dues | 56,934 | 54,525 | 31,785 | |||||||||
Training | 67,626 | 43,217 | 32,636 | |||||||||
Advertising | 95,158 | 92,792 | 92,025 | |||||||||
Utilities | 13,688 | 12,193 | 11,603 | |||||||||
Supplies | 100,748 | 99,029 | 103,384 | |||||||||
Repair | 26,541 | 29,546 | 24,938 | |||||||||
Travel and transportation | 4,692 | 16,731 | 15,483 | |||||||||
Others | 149,935 | 123,770 | 99,939 | |||||||||
|
|
|
|
|
| |||||||
2,686,707 | 2,597,097 | 2,136,478 | ||||||||||
|
|
|
|
|
| |||||||
Research and development: | ||||||||||||
Expenditure on research and development | 3,370,318 | 3,188,531 | 2,894,954 | |||||||||
Development cost capitalized | (259,020 | ) | (332,888 | ) | (610,954 | ) | ||||||
|
|
|
|
|
| |||||||
3,111,298 | 2,855,643 | 2,284,000 | ||||||||||
|
|
|
|
|
| |||||||
₩ | 5,798,005 | 5,452,740 | 4,420,478 | |||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
27.29. Expenses by Nature
Nature of expenses for the years ended December 31, 2015, 20142020, 2019 and 20132018 is as follows:
2015 | 20142 | 20132 | 2020 | 20192 | 20182 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Changes in finished goods and work-in-process | ₩ | (290,904 | ) | (216,403 | ) | 292,330 | ₩ | (616,725 | ) | (523,777 | ) | (1,473,125 | ) | |||||||||||
Raw materials and consumables | 3,537,227 | 2,857,555 | 2,312,998 | |||||||||||||||||||||
Raw materials, supplies and consumables | 7,649,164 | 6,787,445 | 5,709,613 | |||||||||||||||||||||
Employee benefit | 2,485,372 | 2,353,196 | 1,896,843 | 3,833,439 | 3,411,234 | 3,669,809 | ||||||||||||||||||
Depreciation and amortization | 3,887,900 | 3,413,636 | 2,928,559 | |||||||||||||||||||||
Royalty | 210,902 | 167,167 | 187,611 | |||||||||||||||||||||
Depreciation and others | 9,764,776 | 8,605,492 | 6,418,184 | |||||||||||||||||||||
Commission | 802,432 | 712,492 | 442,628 | 2,149,025 | 2,113,753 | 1,736,422 | ||||||||||||||||||
Utility | 656,251 | 608,523 | 543,516 | |||||||||||||||||||||
Utilities | 1,459,346 | 1,366,041 | 1,167,291 | |||||||||||||||||||||
Repair | 625,383 | 749,949 | 1,012,702 | 1,129,642 | 1,080,705 | 1,050,340 | ||||||||||||||||||
Outsourcing | 982,358 | 1,017,970 | 952,336 | 1,188,589 | 1,128,458 | 1,072,222 | ||||||||||||||||||
Other | 564,977 | 352,015 | 215,794 | |||||||||||||||||||||
Others | 639,284 | 650,002 | 897,246 | |||||||||||||||||||||
Transfer: capitalized development cost and others | (308,746 | ) | (347,799 | ) | (646,686 | ) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total1 | ₩ | 13,461,898 | 12,016,100 | 10,785,317 | ₩ | 26,887,794 | 24,271,554 | 19,601,316 | ||||||||||||||||
|
|
|
|
|
|
1 | Total expenses consist of cost of sales and selling and administrative expenses. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
29. Expenses by Nature, continued
2 | Expenses for the years ended December 31, |
28.30. Finance Income and Expenses
Finance income and expenses for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Finance income: | ||||||||||||
Interest income | ₩ | 40,715 | 52,122 | 66,410 | ||||||||
Dividend income | 1,265 | 1,233 | 2,381 | |||||||||
Gain on disposal of available-for-sale financial assets | — | 10,054 | 205 | |||||||||
Gain on disposal of financial assets at fair value through profit or loss | 33,814 | 28,493 | — | |||||||||
Foreign exchange differences | 766,981 | 576,577 | 485,411 | |||||||||
Gain from derivative instruments | 1,697 | 3,170 | 6,163 | |||||||||
Gain on valuation of financial assets at fair value through profit or loss | 2,280 | 6,921 | — | |||||||||
|
|
|
|
|
| |||||||
846,752 | 678,570 | 560,570 | ||||||||||
|
|
|
|
|
| |||||||
Finance expenses: | ||||||||||||
Interest expenses | 118,505 | 170,363 | 256,623 | |||||||||
Loss on disposal of available-for-sale financial assets | — | 3,500 | — | |||||||||
Foreign exchange differences | 709,350 | 448,060 | 391,071 | |||||||||
Loss on redemption of debentures | — | 2,924 | — | |||||||||
Loss from derivative instruments | 2,058 | 174,924 | 99,635 | |||||||||
|
|
|
|
|
| |||||||
829,913 | 799,771 | 747,329 | ||||||||||
|
|
|
|
|
| |||||||
Net finance income (expense) | ₩ | 16,839 | (121,201 | ) | (186,759 | ) | ||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Finance income: | ||||||||||||
Interest income | ₩ | 27,872 | 30,062 | 62,478 | ||||||||
Dividend income | 1,325 | 429 | 2,136 | |||||||||
Foreign exchange differences1 | 1,527,580 | 1,143,099 | 1,386,287 | |||||||||
Gain on valuation of short-term investment assets | 2,592 | 5,811 | 16,740 | |||||||||
Gain on valuation of long-term investment assets | 1,741,026 | 8,237 | 182,461 | |||||||||
Gain on disposal of short-term investment assets | 27,510 | 58,784 | 36,349 | |||||||||
Gain on disposal of short-term investment assets | — | 1,218 | 5,504 | |||||||||
|
|
|
|
|
| |||||||
3,327,905 | 1,247,640 | 1,691,955 | ||||||||||
|
|
|
|
|
| |||||||
Finance expenses: | ||||||||||||
Interest expenses | 253,468 | 245,440 | 94,635 | |||||||||
Foreign exchange differences2 | 1,717,989 | 1,043,720 | 1,046,217 | |||||||||
Loss on disposal of long-term investment assets | — | 786 | — | |||||||||
Loss on valuation of long-term investment assets | 7,273 | 241,471 | 1,282 | |||||||||
Loss on valuation of financial liabilities | 1,681 | — | — | |||||||||
|
|
|
|
|
| |||||||
1,980,411 | 1,531,417 | 1,142,134 | ||||||||||
|
|
|
|
|
| |||||||
Net finance income (expense) | ₩ | 1,347,494 | (283,777 | ) | 549,821 | |||||||
|
|
|
|
|
|
1 | Gain on foreign currency translation related to fair value of long-term investment assets amounting to ₩40 million is included for the years ended December 31, 2020 (2019: ₩212,450 million and 2018: 87,546), respectively. |
29.
2 | Loss on foreign currency translation related to fair value of long-term investment assets amounting to ₩44,185 million is included for the years ended December 31, 2020 (2019: ₩1,931 million and 2018: ₩300), respectively. |
31. Other Income and Expenses
(1) Other income for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Gain on disposal of property, plant and equipment | ₩ | 16,554 | 5,611 | 9,560 | ||||||||
Gain on disposal of intangible assets | — | — | 191 | |||||||||
Insurance compensation1 | — | 587,429 | 327,659 | |||||||||
Other | 23,925 | 25,644 | 31,103 | |||||||||
|
|
|
|
|
| |||||||
₩ | 40,479 | 618,684 | 368,513 | |||||||||
|
|
|
|
|
|
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Gain on disposal of property, plant and equipment | ₩ | 38,585 | 26,158 | 39,403 | ||||||||
Others | 46,188 | 62,021 | 73,407 | |||||||||
|
|
|
|
|
| |||||||
₩ | 84,773 | 88,179 | 112,810 | |||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
31. Other Income and Expenses, continued
(2) Other expenses for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Loss on disposal of property, plant and equipment | ₩ | 19,540 | 11,522 | 7,952 | ₩ | 44,955 | 11,531 | 59,738 | ||||||||||||||||
Loss on disposal of intangible assets | 5,493 | 9,522 | 17,278 | 4,841 | 7,668 | 5,545 | ||||||||||||||||||
Loss on disposal of trade receivables | 6,320 | 8,564 | 9,031 | |||||||||||||||||||||
Loss on impairment of intangible assets | 16,544 | 71 | 4,483 | |||||||||||||||||||||
Donation | 55,131 | 16,111 | 3,222 | 70,461 | 59,522 | 62,041 | ||||||||||||||||||
Loss on disposal of trade receivables | 1,413 | 3,756 | 3,317 | |||||||||||||||||||||
Loss on impairment of property, plant and equipment | 22,055 | 25,397 | — | |||||||||||||||||||||
Loss on impairment of intangible assets | 1,771 | 529 | 183 | |||||||||||||||||||||
Casualty losses1 | — | 123,957 | 450,752 | |||||||||||||||||||||
Other2 | 43,536 | 391,630 | 23,166 | |||||||||||||||||||||
Others | 28,454 | 26,219 | 37,520 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 148,939 | 582,424 | 505,870 | ₩ | 171,575 | 113,575 | 178,358 | |||||||||||||||||
|
|
|
|
|
|
|
|
30.32. Income Tax Expense
(1) Income tax expense for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Current tax: | ||||||||||||
Current tax on profits for the year | ₩ | 1,026,791 | 922,228 | 22,728 | ||||||||
Adjustments in respect of prior years | — | (551 | ) | (1,588 | ) | |||||||
|
|
|
|
|
| |||||||
1,026,791 | 921,677 | 21,140 | ||||||||||
|
|
|
|
|
| |||||||
Deferred tax: | ||||||||||||
Origination and reversal of temporary differences | (81,265 | ) | (69,176 | ) | 180,928 | |||||||
|
|
|
|
|
| |||||||
Income tax expense | ₩ | 945,526 | 852,501 | 202,068 | ||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
30. Income Tax Expense, continued
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Current tax: | ||||||||||||
Current tax on profits for the year | ₩ | 1,113,166 | 603,692 | 5,728,798 | ||||||||
Adjustments for the current tax liabilities attributable to prior year, but recognized in current year | (24,653 | ) | (85,520 | ) | (13,661 | ) | ||||||
|
|
|
|
|
| |||||||
1,088,513 | 518,172 | 5,715,137 | ||||||||||
|
|
|
|
|
| |||||||
Deferred tax: | ||||||||||||
Changes in net deferred tax assets | 389,610 | (94,611 | ) | 85,909 | ||||||||
|
|
|
|
|
| |||||||
Income tax expense | ₩ | 1,478,123 | 423,561 | 5,801,046 | ||||||||
|
|
|
|
|
|
(2) The relationship between income tax expense and accounting profit for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Profit before tax | ₩ | 5,269,121 | 5,047,670 | 3,074,925 | ||||||||||||||||||||
Profit before income tax | ₩ | 6,237,037 | 2,432,639 | 21,341,030 | ||||||||||||||||||||
Tax calculated at domestic tax rates applicable to profits in the respective countries | 1,266,293 | 1,181,621 | 744,847 | 1,704,823 | 658,614 | 5,858,421 | ||||||||||||||||||
Tax effects of: | ||||||||||||||||||||||||
Tax-exempt income | (24 | ) | (13 | ) | 76 | (70,922 | ) | (36,618 | ) | (39,732 | ) | |||||||||||||
Non-deductible expenses | 6,614 | 71,531 | 13,545 | 19,977 | 11,694 | 10,008 | ||||||||||||||||||
Tax credit | (104,425 | ) | (148,052 | ) | (108,433 | ) | ||||||||||||||||||
Changes in unrecognized deferred tax assets | (252,088 | ) | (260,437 | ) | (450,113 | ) | 8,667 | (93,041 | ) | 88,614 | ||||||||||||||
Tax credits | (118,011 | ) | (102,755 | ) | (173,826 | ) | ||||||||||||||||||
Adjustments for the current tax liabilities attributable to prior year, but recognized in current year | (24,653 | ) | (85,520 | ) | (13,661 | ) | ||||||||||||||||||
Others | 29,156 | 7,851 | 2,146 | (41,758 | ) | 71,187 | 71,222 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Income tax expense | ₩ | 945,526 | 852,501 | 202,068 | ₩ | 1,478,123 | 423,561 | 5,801,046 | ||||||||||||||||
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|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
32. Income Tax Expense, continued
(3) The incomeIncome taxes recordedrecognized directly in equity for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Recognized in other comprehensive income: Gains on valuation of available-for-sale financial assets | ₩ | — | — | 311 |
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Remeasurements of defined benefit liabilities | ₩ | 169 | 34,132 | 29,182 | ||||||||
Gain on valuation of derivatives | (680 | ) | (4,837 | ) | — | |||||||
|
|
|
|
|
| |||||||
₩ | (511 | ) | 29,295 | 29,182 | ||||||||
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|
|
|
|
|
31.33. Earnings Perper Share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Parent Company by the weighted average number of outstanding ordinary shares for years ended December 31, 2020 and 2019.
(1) Basic earnings per share for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won, except for shares and per share amounts) | ||||||||||||
Profit attributable to ordinary shareholders | ₩ | 4,322,356 | 4,195,456 | 2,872,470 | ||||||||
Weighted average number of outstanding ordinary shares1 | 720,143,294 | 718,197,377 | 710,200,891 | |||||||||
Basic earnings per share | ₩ | 6,002 | 5,842 | 4,045 |
2020 | 2019 | 2018 | ||||||||||
(In millions of won, except for shares and per share information) | ||||||||||||
Profit attributable to ordinary shareholders of the Parent Company | ₩ | 4,755,102 | 2,005,975 | 15,540,111 | ||||||||
Weighted average number of outstanding ordinary shares1 | 684,001,795 | 684,001,795 | 698,278,083 | |||||||||
Basic earnings per share (in won) | ₩ | 6,952 | 2,933 | 22,255 |
1 | Weighted average number of outstanding ordinary shares is calculated as follows: |
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In shares) | (In shares) | |||||||||||||||||||||||
Outstanding ordinary shares | 728,001,795 | 710,200,891 | 694,155,767 | 728,002,365 | 728,002,365 | 728,002,365 | ||||||||||||||||||
Exercise of conversion rights | — | 7,051,443 | 16,045,124 | |||||||||||||||||||||
Issue of ordinary shares related to the acquisition of a subsidiary | — | 945,393 | — | |||||||||||||||||||||
Acquisition of treasury shares | (7,858,501 | ) | (350 | ) | — | (44,000,570 | ) | (44,000,570 | ) | (29,724,282 | ) | |||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Weighted average number of outstanding ordinary shares | 720,143,294 | 718,197,377 | 710,200,891 | 684,001,795 | 684,001,795 | 698,278,083 | ||||||||||||||||||
|
|
|
|
|
|
(2) There is no potential ordinary shares with dilutive effect during the years ended December 31, 2015, 2014 and 2013. Accordingly, dilutedDiluted earnings per share for the years ended December 31, 2015, 20142020, 2019 and 20132018 are the same as basic earnings per share.
2020 | 2019 | 2018 | ||||||||||
(In millions of won, except for shares and per share amounts) | ||||||||||||
Profit attributable to ordinary shareholders of the Parent Company | ₩ | 4,755,102 | 2,005,975 | 15,540,111 | ||||||||
Weighted average number of diluted outstanding ordinary shares1 | 684,139,222 | 684,089,944 | 698,364,251 | |||||||||
Diluted earnings per share (in won) | ₩ | 6,950 | 2,932 | 22,252 |
1 | Weighted average number of diluted ordinary shares outstanding is calculated as follows: |
2020 | 2019 | 2018 | ||||||||||
(In shares) | ||||||||||||
Weighted average number of outstanding ordinary shares | 684,001,795 | 684,001,795 | 698,278,083 | |||||||||
Stock options | 137,427 | 88,149 | 86,168 | |||||||||
|
|
|
|
|
| |||||||
Weighted average number of diluted outstanding ordinary shares | 684,139,222 | 684,089,944 | 698,364,251 | |||||||||
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|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
32.34. Transactions with Related Party TransactionsParties and Others
(1) Details of joint venture and other related parties as of December 31, 20152020 are as follows:
Type | Name of related parties | |
Associates | Stratio, Inc., SK China Company Limited, Gemini Partners Pte. Ltd., TCL Fund, SK South East Asia Investment Pte. Ltd., Hushan Xinju (Chengdu) Venture Investment Center (Smartsource), Prume Social Farm, Co., Ltd, Wuxi xinfa IC industry park., Ltd., Magnus Private Investment Co., Ltd., L&S (No.10) Early Stage III Investment Association, SiFive Inc., YD-SK-KDB Social Value | |
Joint | HITECH Semiconductor (Wuxi) Co., Ltd., Hystars Semiconductor (Wuxi) Co., Ltd., Specialized Investment-type Private Equity Investment Trust For Growth Of Semiconductor, Specialized Investment-type Private Equity Investment Trust For Win-win System Semiconductor | |
Other related parties | SK Telecom Co., Ltd., which has significant influence over the Group, SK Holdings Co., Ltd., which has control over SK Telecom Co., Ltd., and their subsidiaries |
(2) Significant transactions for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | For the year ended December 31, 2020 | |||||||||||||||||||||||||||||||||||
Company | Operating revenue and others | Operating expense and others | Dividend income | Asset acquisition | Company | Operating revenue and others | Operating expense and others | Asset acquisition | Dividend income | |||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||
Joint venture | HITECH Semiconductor (Wuxi) Co., Ltd. | ₩ | 1,364 | 675,112 | 15,780 | — | ||||||||||||||||||||||||||||||
Associate | SK China Company Limited | ₩ | 18 | 8,019 | — | — | ||||||||||||||||||||||||||||||
Joint ventures | HITECH Semiconductor (Wuxi) Co., Ltd. | 4,766 | 543,575 | 21,780 | 15,033 | |||||||||||||||||||||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | 168 | — | — | — | ||||||||||||||||||||||||||||||||
Other related parties | SK Telecom Co., Ltd.1 | 2,384 | 52,944 | — | 3,984 | SK Telecom Co., Ltd.1 | 135,050 | 166,019 | 82,044 | — | ||||||||||||||||||||||||||
SK Holdings Co., Ltd.2 | 199 | 81,997 | — | 76,398 | SK Holdings Co., Ltd.2 | 20,905 | 264,994 | 272,980 | — | |||||||||||||||||||||||||||
ESSENCORE Limited | 147,992 | — | — | — | ESSENCORE Limited | 675,915 | — | — | — | |||||||||||||||||||||||||||
SK Engineering & Construction Co., Ltd. | 1,923 | 1,378 | — | 1,084,554 | SK Engineering & Construction Co., Ltd. | 42,814 | 8,507 | 1,375,083 | — | |||||||||||||||||||||||||||
SK Energy Co., Ltd. | 5,245 | 44,893 | — | — | SK Energy Co., Ltd. | 50,035 | 72,386 | — | — | |||||||||||||||||||||||||||
SK Networks Co., Ltd. | — | 3,627 | — | — | SK Networks Co., Ltd. | 6,638 | 9,434 | 526 | — | |||||||||||||||||||||||||||
Ko-one energy service Co., Ltd. | — | 2,685 | — | 7 | SKC Solmics Co., Ltd. | 623 | 93,862 | 178 | — | |||||||||||||||||||||||||||
SKC solmics Co., Ltd. | — | 36,055 | — | 269 | Chungcheong energy service Co., Ltd. | 118 | 24,335 | — | — | |||||||||||||||||||||||||||
Chungcheong energy service Co., Ltd. | — | 24,292 | — | — | SK Materials Co., Ltd. | 4,349 | 95,007 | — | — | |||||||||||||||||||||||||||
HAPPYNARAE Co., Ltd. | 3,176 | 83,258 | — | 21,448 | SK Siltron Co., Ltd. | 32,429 | 380,571 | — | — | |||||||||||||||||||||||||||
Others | 493 | 63,845 | — | 14,516 | SK Airgas Co., Ltd. | 13,220 | 75,990 | 110,858 | — | |||||||||||||||||||||||||||
|
|
|
| Others | 173,971 | 631,656 | 65,385 | — | ||||||||||||||||||||||||||||
₩ | 162,776 | 1,070,086 | 15,780 | 1,201,176 |
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
| ₩ | 1,161,019 | 2,374,355 | 1,928,834 | 15,033 | ||||||||||||||||||||||||||||
|
|
|
|
1 | Operating expense and others include dividend payments of |
2 |
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
32.34. Transactions with Related Party Transactions,Parties and Others, continued
2014 | 2019 | |||||||||||||||||||||||||||||||||||
Company | Operating revenue and others | Operating expense and others | Dividend income | Asset acquisition | Company | Operating revenue and others | Operating expense and others | Asset acquisition | Dividend income | |||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||
Associate | Siliconfile Technologies Inc.1 | ₩ | 25,109 | 411 | 236 | — | SK China Company Limited | ₩ | 15 | 10,954 | — | — | ||||||||||||||||||||||||
Joint venture | HITECH Semiconductor (Wuxi) Co., Ltd. | 1,734 | 612,890 | 15,664 | — | |||||||||||||||||||||||||||||||
Joint ventures | HITECH Semiconductor (Wuxi) Co., Ltd. | 4,362 | 656,911 | 1,616 | 14,458 | |||||||||||||||||||||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | 238 | — | — | — | ||||||||||||||||||||||||||||||||
Other related parties | SK Telecom Co., Ltd. | 3,391 | 7,493 | — | 2,685 | SK Telecom Co., Ltd.1 | 167,878 | 242,559 | 10,699 | — | ||||||||||||||||||||||||||
SK Holdings Co., Ltd. | — | 33,273 | — | — | SK Holdings Co., Ltd.2 | 25,912 | 265,496 | 259,280 | — | |||||||||||||||||||||||||||
SK C&C Co., Ltd.2 | 70 | 5,879 | — | 12,225 | ESSENCORE Limited | 708,497 | — | — | — | |||||||||||||||||||||||||||
SK Engineering & Construction Co., Ltd. | 481 | 44,928 | — | 959,985 | SK Engineering & Construction Co., Ltd. | 60,886 | 1,249 | 1,851,230 | — | |||||||||||||||||||||||||||
SK Energy Co., Ltd. | 5,121 | 44,664 | — | — | SK Energy Co., Ltd. | 62,220 | 73,717 | — | — | |||||||||||||||||||||||||||
SK Networks Co., Ltd. | — | 2,777 | — | 2,772 | SK Networks Co., Ltd. | 12,704 | 12,698 | — | — | |||||||||||||||||||||||||||
Ko-one energy service Co., Ltd. | — | 3,074 | — | — | SKC Solmics Co., Ltd. | 676 | 82,814 | 1,067 | — | |||||||||||||||||||||||||||
SKC solmics Co., Ltd. | — | 28,023 | — | 718 | Chungcheong energy service Co., Ltd. | 215 | 27,215 | — | — | |||||||||||||||||||||||||||
Chungcheong energy service Co., Ltd. | — | 27,496 | — | — | SK Materials Co., Ltd. | 4,118 | 79,000 | — | — | |||||||||||||||||||||||||||
HAPPYNARAE Co., Ltd. | 53 | 63,398 | — | 10,187 | SK Siltron Co., Ltd. | 32,411 | 397,327 | — | — | |||||||||||||||||||||||||||
Others | 427 | 19,837 | — | 1,548 | SK Airgas Co., Ltd. | 106 | 72,675 | — | — | |||||||||||||||||||||||||||
|
|
|
| Others | 163,648 | 484,678 | 68,445 | — | ||||||||||||||||||||||||||||
₩ | 36,386 | 894,143 | 15,900 | 990,120 |
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
| ₩ | 1,243,886 | 2,407,293 | 2,192,337 | 14,458 | ||||||||||||||||||||||||||||
|
|
|
|
1 |
|
2 | For the year ended December 31, 2019, royalty paid for the use of the SK |
2013 | 2018 | |||||||||||||||||||||||||||||||||||
Company | Operating revenue and others | Operating expense and others | Dividend Income | Asset acquisition | Company | Operating revenue and others | Operating expense and others | Asset acquisition | Dividend income | |||||||||||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||||||||||||||
Associate | Siliconfile Technologies Inc. | ₩ | 100,975 | 1,585 | — | — | SK China Company Limited | ₩ | — | 9,699 | — | — | ||||||||||||||||||||||||
Joint venture | HITECH Semiconductor (Wuxi) Co., Ltd. | 61,368 | 581,374 | 15,033 | — | |||||||||||||||||||||||||||||||
Joint ventures | HITECH Semiconductor (Wuxi) Co., Ltd. | 3,442 | 621,986 | 1,901 | 13,120 | |||||||||||||||||||||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | 162 | — | — | — | ||||||||||||||||||||||||||||||||
Other related parties | SK Telecom Co., Ltd. | 954 | 2,811 | — | 230 | SK Telecom Co., Ltd.1 | 313 | 162,342 | 46,122 | — | ||||||||||||||||||||||||||
SK Holdings Co., Ltd. | — | 20,583 | — | — | SK Holdings Co., Ltd.2 | 1,465 | 231,180 | 539,447 | — | |||||||||||||||||||||||||||
SK C&C Co., Ltd. | 150 | 22,374 | — | 30,522 | ESSENCORE Limited | 917,320 | — | — | — | |||||||||||||||||||||||||||
SK Engineering & Construction Co., Ltd. | 637 | 12,056 | — | 166,423 | SK Engineering & Construction Co., Ltd. | 4,038 | 25,882 | 2,484,366 | — | |||||||||||||||||||||||||||
SK Energy Co., Ltd. | 13,103 | 28,258 | — | — | SK Energy Co., Ltd. | 4,040 | 71,059 | — | — | |||||||||||||||||||||||||||
SK Networks Co., Ltd.1 | — | 927 | — | 112,360 | SK Networks Co., Ltd. | — | 7,190 | 10,600 | — | |||||||||||||||||||||||||||
Ko-one energy service Co., Ltd. | — | 20,452 | — | — | SKC Solmics Co., Ltd. | — | 21,724 | 1,439 | — | |||||||||||||||||||||||||||
SKC solmics Co., Ltd. | — | 24,041 | — | 300 | Chungcheong energy service Co., Ltd. | — | 19,112 | 203 | — | |||||||||||||||||||||||||||
Chungcheong energy service Co., Ltd. | — | 28,231 | — | — | SK Materials Co., Ltd. | — | 68,957 | — | — | |||||||||||||||||||||||||||
HAPPYNARAE Co., Ltd. | 62 | 59,624 | — | 7,763 | SK Siltron Co., Ltd. | 4,392 | 338,741 | — | — | |||||||||||||||||||||||||||
Others | 261 | 9,095 | — | 332 | SK Airgas Co., Ltd. | 2 | 37,610 | 259 | — | |||||||||||||||||||||||||||
|
|
|
| Others | 459 | 321,325 | 68,205 | — | ||||||||||||||||||||||||||||
Other | HAPPYNARAE Co., Ltd.3 | 39 | 576,043 | 68,630 | — | |||||||||||||||||||||||||||||||
₩ | 177,510 | 811,411 | 15,033 | 317,930 |
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
| ₩ | 935,672 | 2,512,850 | 3,221,172 | 13,120 | ||||||||||||||||||||||||||||
|
|
|
|
1 | Operating expense and others include dividend payments of ₩146,100 million. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
32.34. Transactions with Related Party Transactions,Parties and Others, continued
For the year ended December 31, 2018, royalty paid for the use of the SK brand amounted to ₩61,955 million. |
3 | The |
The above related party transactions include transactions executed based on agreements executed in the course of the Group’s business activities such as purchase or contruction of property, plant and equipment, procurements of gas and raw materials, and system developments and maintenance services.
(3) The balances of significant transactions as of December 31, 20152020 and December 31,20142019 are as follows:
2015 | 2020 | |||||||||||||||||||
Company | Trade receivables and others | Other payables and others | Company | Trade receivables and others | Other payables and others | |||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||
Joint venture | HITECH Semiconductor (Wuxi) Co., Ltd.1 | ₩ | 15,628 | 108,519 | ||||||||||||||||
Associate | SK China Company Limited | ₩ | 7 | 8,771 | ||||||||||||||||
Joint ventures | HITECH Semiconductor (Wuxi) Co., Ltd. | 198 | 417,730 | |||||||||||||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | 7 | — | ||||||||||||||||||
Other related parties | SK Telecom Co., Ltd. | 155 | 2,797 | SK Telecom Co., Ltd. | 10,747 | 7,920 | ||||||||||||||
SK Holdings Co., Ltd. | 103 | 98,798 | SK Holdings Co., Ltd. | 1,757 | 176,752 | |||||||||||||||
ESSENCORE Limited | 142 | — | ESSENCORE Limited | 55,500 | — | |||||||||||||||
SK Engineering & Construction Co., Ltd. | 1,049 | 236,875 | SK Engineering & Construction Co., Ltd. | 3,397 | 592,630 | |||||||||||||||
SK Energy Co., Ltd. | 474 | 5,962 | SK Energy Co., Ltd. | 1,204 | 22,328 | |||||||||||||||
SK Networks Co., Ltd. | — | 954 | SK Networks Co., Ltd. | 289 | 1,712 | |||||||||||||||
SKC solmics Co., Ltd. | — | 9,544 | SKC solmics Co., Ltd. | 74 | 24,128 | |||||||||||||||
Chungcheong energy service Co., Ltd. | — | 1,425 | Chungcheong energy service Co., Ltd. | 69 | 3,295 | |||||||||||||||
HAPPYNARAE Co., Ltd. | 275 | 24,148 | SK Materials Co., Ltd. | 411 | 10,130 | |||||||||||||||
Others | 102 | 29,339 | SK Siltron Co., Ltd.1 | 44,847 | 36,792 | |||||||||||||||
|
| SK Airgas Co., Ltd. | 12 | 390,967 | ||||||||||||||||
₩ | 17,928 | 518,361 | Others | 31,324 | 124,499 | |||||||||||||||
|
|
|
| |||||||||||||||||
₩ | 149,843 | 1,817,654 | ||||||||||||||||||
|
|
1 |
|
2014 | ||||||||||||||
Company | Trade receivables and others | Other payables and others | Borrowings1 | |||||||||||
(In millions of won) | ||||||||||||||
Joint venture | HITECH Semiconductor (Wuxi) Co., Ltd. | ₩ | 18,393 | 113,257 | 22,552 | |||||||||
Other related parties | SK Telecom Co., Ltd. | 2,763 | 2,622 | — | ||||||||||
SK Holdings Co., Ltd. | — | 3,080 | — | |||||||||||
SK Engineering & Construction Co., Ltd. | 23 | 561,004 | — | |||||||||||
SK Energy Co., Ltd. | 462 | 5,961 | — | |||||||||||
SK Networks Co., Ltd. | — | 479 | — | |||||||||||
SKC solmics Co., Ltd. | — | 9,258 | — | |||||||||||
Chungcheong energy service Co., Ltd. | — | 3,295 | — | |||||||||||
HAPPYNARAE Co., Ltd. | 1 | 14,606 | — | |||||||||||
Others | 32 | 14,455 | — | |||||||||||
|
|
|
|
|
| |||||||||
₩ | 21,674 | 728,017 | 22,552 | |||||||||||
|
|
|
|
|
|
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
32.34. Transactions with Related Party Transactions,Parties and Others, continued
2019 | ||||||||||
Company | Trade receivables and others | Other payables and others | ||||||||
(In millions of won) | ||||||||||
Associate | SK China Company Limited | ₩ | 1 | 10,883 | ||||||
Joint ventures | HITECH Semiconductor (Wuxi) Co., Ltd. | 357 | 799,545 | |||||||
Hystars Semiconductor (Wuxi) Co., Ltd. | — | — | ||||||||
Other related parties | SK Telecom Co., Ltd. | 9,334 | 7,342 | |||||||
SK Holdings Co., Ltd. | 3,668 | 151,940 | ||||||||
ESSENCORE Limited | 37,823 | — | ||||||||
SK Engineering & Construction Co., Ltd. | 6,012 | 855,621 | ||||||||
SK Energy Co., Ltd. | 3,207 | 24,203 | ||||||||
SK Networks Co., Ltd. | 897 | 7,243 | ||||||||
SKC solmics Co., Ltd. | 55 | 17,463 | ||||||||
Chungcheong energy service Co., Ltd. | 13 | 3,599 | ||||||||
SK Materials Co., Ltd. | 360 | 7,681 | ||||||||
SK Siltron Co., Ltd.1 | 99,203 | 36,395 | ||||||||
SK Airgas Co., Ltd. | 43 | 277,059 | ||||||||
Others | 20,486 | 102,535 | ||||||||
|
|
|
| |||||||
₩ | 181,459 | 2,301,509 | ||||||||
|
|
|
|
1 | Trade receivable and others include ₩96,216 million advance paid for the purchase of wafers (See note 35-(9)). |
(4) Key management compensation
Key management includesThe Group considers registered directors memberswho have authority and responsibility for planning, directing and controlling the activities of the board of directors, chief financial officer, subsidiary’s executives and internal auditors.Group as key management. The compensation paid to key management for employee services for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
Details | 2015 | 2014 | 2013 | 2020 | 2019 | 2018 | ||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Salaries | ₩ | 73,013 | 74,599 | 30,909 | ₩ | 5,006 | 3,849 | 2,999 | ||||||||||||||||
Defined benefit plan related expenses | 7,250 | 7,061 | 4,546 | 545 | 406 | 351 | ||||||||||||||||||
Others | 15 | 19 | 6 | |||||||||||||||||||||
Share-based payment | 1,156 | 954 | 51 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
₩ | 80,278 | 81,679 | 35,461 | ₩ | 6,707 | 5,209 | 3,401 | |||||||||||||||||
|
|
|
|
|
|
(5) The 33.right-of-use assets and lease liabilities recognized regarding the lease agreements entered with the Joint venture, HITECH Semiconductor (Wuxi) Co., Ltd, for the year ended December 31, 2020 amount to ₩17,051 million and ₩17,051 million, respectively, and lease payments to the related parties amount to ₩90,627 million for the year ended December 31, 2020. The right-of-use assets and lease liabilities recognized regarding the lease agreements entered with SK Air Gas Co., and other related parties for the year ended December 31, 2020 amount to ₩132,080 million and ₩132,080 million, respectively, and lease payments to the related parties amount to ₩41,593 million for the year ended December 31, 2020.
(6) The Group provides payment guarantee amounting to RMB 702 million for Hystars Semiconductor (Wuxi) Co., Ltd., a joint venture of the Group. (See note 35-(7))
(7) The establishment of the subsidiary is explained in Note 1, and the acquisitions and additional investments of associates and joint ventures are explained in Note 11.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
35. Commitments and Contingencies
(1) Significant pending litigations and claims of the Group as of December 31, 20152020 are as follows:
(a) Lawsuit from SanDisk CorporationNetlist, Inc. (“SanDisk”Netlist”)
SanDiskNetlist filed a lawsuit against the Parent Company and its subsidiaries (SKincluding SK hynix America Inc. and SK hynix memory solutions America Inc. alleging infringement of multiple patents to the U.S. International Trade Commission (“U.S. ITC”) in Santa Clara Superior, on September 1, 2016 and on October 31, 2017.
The lawsuit filed to the U.S. ITC on September 1, 2016 was provisionally concluded on January 16, 2018 that the Parent Company and its subsidiaries, SK hynix America Inc. and SK hynix memory solutions America Inc., did not infringe the patents of Netlist. Netlist filed an appeal against the conclusion; however, the U.S. Federal Court of Appeals rejected the United Statespetition on December 12, 2019; accordingly, it is finally concluded that the Parent Company and its subsidiaries, SK hynix America Inc. and SK hynix memory solutions America Inc. did not infringe the patents.
Regarding the patent infringement case that was filed on October 31, 2017, the U.S. ITC determined that the Group and its subsidiaries, SK Hynix America Inc. and SK Hynix memory solutions America Inc. did not infringe the patents of Netlist on April 7, 2020. Netlist filed for an appeal on April 29, 2020 and withdrew the appeal on June 23, 2020; accordingly, it is finally concluded that the Parent Company and its subsidiaries, SK hynix America alleging misappropriationInc. and SK hynix memory solutions America Inc. did not infringe the patents.
In addition, Netlist filed lawsuits against the Parent Company and its subsidiaries, SK hynix America Inc. and SK hynix memory solutions America Inc., with the U.S. District Court for the Central District of trade secrets jointly owned by SanDisk and Toshiba Corporation, on March 13, 2014 (“SanDisk lawsuit”). MeanwhileCalifornia on August 4, 2015, SanDisk agreed to withdraw the31, 2016 and June 14, 2017, and filed a lawsuit against the Parent Company and its subsidiaries,subsidiary, SK hynix America Inc., with the U.S. District Court for the Western District of Texas on March 17, 2020 and therefore,June 15, 2020 for infringement of U.S. patent of Netlist. Subsequent to December 31, 2020, Netlist and the lawsuit has been terminated.Group jointly moved to dismiss the lawsuits on April 20, 2021 and the process is currently ongoing.
(b) Lawsuit regarding ordinary wagesPrice-fixing class-action lawsuits in North America
On August 1, 2014, some of the Parent Company’s employees filedApril 27, 2018, a class action lawsuit against the Parent Company and its subsidiary, SK hynix America Inc., for price fixing by major DRAM companies (period from June 1, 2016 to February 1, 2018) was filed with the U.S. District Court for the Northern District of California. Similar class action lawsuits have been filed with the U.S. District Court for the Northern District of California, the Supreme Court of British Columbia, the Quebec District Court, the Ontario Federal and District Court and the Israel Court. In December 2020, the U.S. District Court in Northern California ruled against all lawsuits filed by plaintiffs, but due to the Suwon District Court, seeking additional paymentpossibility of overtime allowanceplaintiffs’ disobedience, the Group cannot predict the outcome of these lawsuits as of December 31, 2020.
(c) The antitrust investigation in relationChina
The State Administration for Market Regulation of China initiated to ordinary wages. The Parent Company submitted a written responseinvestigate the violation of the antitrust law regarding on September 5, 2014primary DRAM businesses’ sales in China in May 2018, and oral pleadingthe investigation has been processed several times after that date.started. The court’s decision to exclude additional payment such as regular bonus from ordinary wages has been made aspending case currently is under investigation. As of November 12, 2015. SinceDecember 31, 2020, the plaintiff decided not to appealGroup cannot predict the case, the lawsuit has been terminated.outcome of these investigation.
(c)(d) Other patent infringement claims and litigation
TheIn addition to the above litigations, the Group has responded to various disputes related to intellectual property rights and recognizes liabilities when it represents a present obligation as a result of past event and it is involved in various alleged patent infringement claimsprobable that an outflow of resources will arise and litigation. No provisions have been made asa loss can be reliably estimated.
SK HYNIX, INC. and Subsidiaries
Notes to the final outcome of these matters cannot be determined or predicted given that these claims and litigation are at their the early stage as of Consolidated Financial Statements
December 31, 2015.2020, 2019 and 2018
35. Commitments and Contingencies, continued
(2) Technology and patent license agreements
The Group has entered into a number of patent license agreements with several companies. The related royalties are paid inon a lump-sum or running basis in accordance with the respective agreements. Lump-sum royaltiesThe lump-sum royalty payables are expensed overrecognized as intangible assets, and the contractamount is amortized on a straight-line basis for the patent license agreement period using the straight-line method.and recognized as amortization expense.
(3) Contract for supply of industrial water
In March 2001, theThe Group andhas entered into a renewal contract with Veolia Water Industrial Development Co., Ltd. (“VWID”Veolia”) entered into a contract forunder which the purpose of purchasingGroup purchases industrial water from VWID for 12 years from March 2001 to March 2013. In December 2006,Veolia during the contract was extended to Marchperiod of June 2018 and subsequently amended due to the establishment
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
33. Commitments and Contingencies, continued
of additional plants.through May 2023. According to the amended contract, the Group is obligated to pay base service charges, which are predetermined and additional service charges which are variable according to the amount of water used.
(4) Post-processBack-end process service contract with HITECH Semiconductor (Wuxi) Co., Ltd. (“HITECH”)
In 2009, theThe Group has entered into an agreement with HITECH to be provided with post-process service by HITECH. The conditions of the service provided includes package, package test, modules and others. As the agreement has been expired in June, 2015, the Group extended the agreement for the next five years and main terms of the agreement such as the conditions of the service and preemptive rights to use HITECH equipments are equivalent to those of the former agreement. According to the agreement, the Group is liable to guarantee a certain level of margin to HITECH.HITECH as the Group has priority to use HITECH’s equipment.
(5) Assets provided as collateral
Details of assets provided as collateral as of December 31, 20152020 are as follows:
Book value | Pledged amount | Remark | ||||||||
(In millions of won) | ||||||||||
Land | ₩ | 45,750 | ||||||||
Buildings | 115,194 | 1,404,275 | Borrowings for equipment and others | |||||||
Machinery | 872,957 | |||||||||
|
|
|
| |||||||
₩ | 1,033,901 | 1,404,275 | ||||||||
|
|
|
|
Book value | Pledged amount | |||||||||||||||||||||
Category | Currency | Amount | Currency | Amount in USD | Amount in KRW | Remark | ||||||||||||||||
(In millions of won and millions of foreign currencies) | ||||||||||||||||||||||
Land and buildings | KRW | 55,526 | USD | 54 | 58,422 | | Borrowings for equipment and others | | ||||||||||||||
KRW | — | 5,854 | ||||||||||||||||||||
Machinery | KRW | 5,115,322 | USD | 7,328 | 7,973,377 | |||||||||||||||||
KRW | — | 1,020,000 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
USD | 7,382 | 8,031,799 | ||||||||||||||||||||
KRW | 5,170,848 | KRW | — | 1,025,854 | ||||||||||||||||||
|
|
|
|
|
|
Other than
SK HYNIX, INC. and Subsidiaries
Notes to the above assets provided as collateral, the finance lease assets of the Group are pledged as collateral for the finance lease liabilities in accordance with the finance lease contracts.Consolidated Financial Statements
December 31, 2020, 2019 and 2018
35. Commitments and Contingencies, continued
(6) Financing agreements
Details of credit lines with financial institutions as of December 31, 20152020 are as follows:
Financial Institution | Commitment | Currency | Amount | |||||||
(In millions of won and millions of foreign currencies) | ||||||||||
The Parent Company | and others | Import finance including usance | USD | |||||||
USD | ||||||||||
Overdrafts with banks | ||||||||||
Accounts receivable factoring contracts which have no right to recourse | KRW | 140,000 | ||||||||
SK | Agricultural Bank of China and others | Import finance including usance | RMB USD | | 490 | |||||
SK | Citibank and others | Accounts receivable factoring | USD | |||||||
Domestic subsidiaries | and others | |||||||||
Loans | KRW | |||||||||
The Group has entered into trade receivables discounting agreements with several financial institutions. There are outstanding trade receivables discounted corresponding to ₩3,076 million as of December 31, 2015 (as of December 31, 2014: ₩220,663 million). The Group is obliged to redeem discounted receivables to financial
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 2014 and 2013
33. Commitments and Contingencies, continued
institutions in case of the default of the counterparties and accordingly, accounted for the above transactions as collateralized borrowings.
(7) Details of guarantees provided to others as of December 31, 20152020 are as follows:
Currency | Amount | Remark | ||||||
(In millions of | ||||||||
Taiwan Semiconductor Manufacturing Company, Limited.1 | USD | |||||||
| Guarantees for | |||||||
Wuxi Xinfa Group Co., Ltd.2 | RMB | 701 | Guarantees for borrowing |
1 | The Group received a deposit of ₩1,000 million as collateral from ADTechnology Inc. regarding payment guarantee for Taiwan Semiconductor Manufacturing Company, Limited. |
2 | The Group provides payment guarantee to Wuxi Xinfa Group Co., Ltd. for borrowings and accrued interests of Hystars Semiconductor (Wuxi) Co., Ltd., a joint venture of the Group. |
(8) Capital commitments
AsThe Group’s commitments in relation to capital expenditures on property, plant and equipment as of December 31, 2015, the Group has ₩300,0412020 are ₩3,404,386 million (as of December 31, 2014: ₩348,8022019: ₩232,387 million).
(9) Long-term purchase agreement for raw materials
The Group has entered into a procurement agreement with SK Siltron Co., Ltd. from 2019 to 2023 for a stable supply of commitmentswafer with an advanced payment of ₩150,000 million made in relation2017. The advanced payment used in connection with the purchase of wafer during the current period is ₩53,784 million, and the balance of the advance payment as of December 31, 2020, is ₩42,432 million. Meanwhile, SK Siltron Co., Ltd. is providing a certain portion of its property, plant and equipment as collateral to secure the advanced payment.
SK HYNIX, INC. and Subsidiaries
Notes to the capital expendituresConsolidated Financial Statements
December 31, 2020, 2019 and 2018
35. Commitments and Contingencies, continued
(10) Investment in KIOXIA Holdings Corporation (“KIOXIA”)
In regards to the Group’s interests in KIOXIA through its investments in BCPE Pangea Intermediate holdings Cayman, L.P. and BCPE Pangea Cayman2 Limited, equity shares in KIOXIA owned, directly or indirectly, by the Group are limited to a certain percentage during certain periods after the date of acquisition. In addition, during the same periods, the Group does not have the right in appointing KIOXIA’s directors and is unable to exercise significant influence over decision-making for KIOXIA’s operation and management.
(11) Acquisition of the entire NAND business division of Intel Corporation
Pursuant to the resolution of Board of Directors on fixed assets.October 20, 2020, the Group decided to acquire the entire NAND business division of Intel Corporation excluding the Optane division of Non-Volatile Memory Solutions Group. The Group entered into a business transfer agreement with Intel Corporation on October 20, 2020. The entire business division is expected to be transferred in two separate processes through subsidiaries that will be newly established overseas, and payment will be made in two installments. Total consideration amount of US$ 9 billion will be paid with the first installment of US$ 7 billion by the end of 2021 and the second installment of US$ 2 billion by March 2025. The closing of the business transfer depends on the satisfaction of an agreed upon set of conditions that include regulatory approvals of governmental authorities and the agreed termination fee shall be paid when the contract is terminated under certain circumstances.
34.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
36. Statements of Cash Generated from Operating ActivitiesFlows
(1) Reconciliations between profit for the year and net cash inflow from operating activities for the years ended December 31, 2015, 20142020, 2019 and 20132018 are as follows:
2015 | 2014 | 2013 | 2020 | 2019 | 2018 | |||||||||||||||||||
(In millions of won) | (In millions of won) | |||||||||||||||||||||||
Profit for the year | ₩4,323,595 | 4,195,169 | 2,872,857 | ₩ | 4,758,914 | 2,009,078 | 15,539,984 | |||||||||||||||||
Adjustment | ||||||||||||||||||||||||
Income tax expense | 945,526 | 852,501 | 202,068 | 1,478,123 | 423,561 | 5,801,046 | ||||||||||||||||||
Defined benefit plan related expenses | 160,184 | 143,432 | 125,495 | 251,552 | 220,999 | 179,503 | ||||||||||||||||||
Depreciation of property, plant and equipment and investment property | 3,695,158 | 3,269,705 | 2,922,245 | |||||||||||||||||||||
Depreciation of property, plant and equipment | 8,515,134 | 7,511,794 | 5,904,156 | |||||||||||||||||||||
Depreciation of investment property | 291 | 37 | 84 | |||||||||||||||||||||
Amortization | 258,078 | 174,275 | 156,276 | 960,550 | 795,169 | 524,095 | ||||||||||||||||||
Loss on impairment of property, plant and equipment | 22,055 | — | — | |||||||||||||||||||||
Depreciation of right-of-use assets | 296,218 | 313,415 | — | |||||||||||||||||||||
Share-based compensation expenses | 1,591 | 1,738 | 1,163 | |||||||||||||||||||||
Loss on disposal of property, plant and equipment | 44,955 | 11,531 | 59,738 | |||||||||||||||||||||
Loss on disposal of intangible assets | 4,841 | 7,668 | 5,545 | |||||||||||||||||||||
Loss on impairment of intangible assets | 16,544 | 71 | 4,483 | |||||||||||||||||||||
Loss on valuation of long-term investment asset | 7,273 | 241,471 | 1,282 | |||||||||||||||||||||
Impairment loss on associate investment | — | 1,695 | 1,695 | |||||||||||||||||||||
Loss on valuation of financial liabilities | 1,681 | — | — | |||||||||||||||||||||
Interest expense | 253,468 | 245,440 | 94,635 | |||||||||||||||||||||
Loss on foreign currency translation | 143,768 | 116,726 | 24,415 | 375,504 | 250,974 | 181,210 | ||||||||||||||||||
Interest expense | 118,505 | 170,363 | 256,623 | |||||||||||||||||||||
Loss on disposal of trade receivables | 6,320 | 8,564 | 9,031 | |||||||||||||||||||||
Loss(gain) on equity method investments, net | 36,279 | (24,328 | ) | (14,702 | ) | |||||||||||||||||||
Gain on disposal of property, plant and equipment | (38,585 | ) | (26,158 | ) | (39,403 | ) | ||||||||||||||||||
Gain on disposal of intangible assets | (122 | ) | — | — | ||||||||||||||||||||
Gain on valuation of short-term investment assets | (2,592 | ) | (5,811 | ) | (16,740 | ) | ||||||||||||||||||
Gain on disposal of short-term investment assets | (27,510 | ) | (58,784 | ) | (36,349 | ) | ||||||||||||||||||
Gain on valuation of long-term investment assets | (1,741,026 | ) | (8,237 | ) | (182,461 | ) | ||||||||||||||||||
Gain on disposal of long-term investment assets | — | (1,218 | ) | (5,504 | ) | |||||||||||||||||||
Interest income | (27,872 | ) | (30,062 | ) | (62,478 | ) | ||||||||||||||||||
Gain on foreign currency translation | (58,658 | ) | (79,678 | ) | (94,175 | ) | (595,266 | ) | (263,012 | ) | (126,094 | ) | ||||||||||||
Interest income | (40,715 | ) | (52,122 | ) | (66,410 | ) | ||||||||||||||||||
Loss on derivative instruments, net | 361 | 171,754 | 93,473 | |||||||||||||||||||||
Gain on equity method investments, net | (24,642 | ) | (12,506 | ) | (19,256 | ) | ||||||||||||||||||
Others, net | (18,231 | ) | 13,072 | 116,735 | (9,646 | ) | 99 | (1,984 | ) | |||||||||||||||
Changes in operating assets and liabilities | ||||||||||||||||||||||||
Decrease (increase) in trade receivables | 1,260,172 | (1,628,665 | ) | (278,141 | ) | (935,346 | ) | 2,214,776 | (547,255 | ) | ||||||||||||||
Decrease (increase) in loans and other receivables | 724,149 | (753,278 | ) | (214,701 | ) | 5,303 | 41,676 | 38,102 | ||||||||||||||||
Decrease (increase) in inventories | (414,830 | ) | (314,547 | ) | 333,179 | |||||||||||||||||||
Increase in other assets | (177,316 | ) | (10,210 | ) | (239,553 | ) | ||||||||||||||||||
Increase in inventories | (843,842 | ) | (851,735 | ) | (1,782,384 | ) | ||||||||||||||||||
Decrease (increase) in other assets | 47,350 | 114,792 | (98,632 | ) | ||||||||||||||||||||
Increase (decrease) in trade payables | (156,074 | ) | 69,290 | 113,552 | 222,036 | (278,529 | ) | 58,773 | ||||||||||||||||
Increase (decrease) in other payables | (60,252 | ) | (105,971 | ) | 74,666 | |||||||||||||||||||
Decrease in other payables | (6,583 | ) | (16,623 | ) | (16,161 | ) | ||||||||||||||||||
Increase (decrease) in other non-trade payables | (147,392 | ) | 498,152 | 309,974 | 158,514 | (645,164 | ) | 542,437 | ||||||||||||||||
Decrease in provisions | (6,889 | ) | (26,793 | ) | (127,052 | ) | ||||||||||||||||||
Increase (decrease) in other liabilities | (29,327 | ) | 51,598 | 8,567 | ||||||||||||||||||||
Increase (decrease) in provisions | 12,008 | (42,787 | ) | (25,183 | ) | |||||||||||||||||||
Increase in other liabilities | 46,961 | 17,605 | 118,986 | |||||||||||||||||||||
Payment of defined benefit liabilities | (6,392 | ) | (34,144 | ) | (45,171 | ) | (585 | ) | (4,120 | ) | (8,862 | ) | ||||||||||||
Contribution to plan assets | (153,566 | ) | (402,894 | ) | (4,113 | ) | ||||||||||||||||||
Contributions to plan assets | (355,664 | ) | (279,751 | ) | (276,739 | ) | ||||||||||||||||||
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Cash generated from operating activities | ₩ | 10,357,267 | 6,305,229 | 6,521,553 | ₩ | 12,916,771 | 11,895,834 | 25,825,017 | ||||||||||||||||
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SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2015, 20142020, 2019 and 20132018
34.36. Statements of Cash Generated from Operating Activities,Flows, continued
(2) Details of significant transactions without inflows and outflows of cash for the years ended December 31, 20152020, 2019 and 20142018 are as follows:
2015 | 2014 | 2013 | ||||||||||
(In millions of won) | ||||||||||||
Other payables related to acquisition of property, plant and equipment | ₩ | — | 588,435 | 190,667 | ||||||||
Issue of ordinary shares related to the acquisition of a subsidiary | — | 54,070 | — | |||||||||
Exercise of conversion rights | — | 772,590 | 432,434 | |||||||||
Transferred to non-current convertible bond due to expiration of early redemption rights | — | — | 486,569 |
2020 | 2019 | 2018 | ||||||||||
(In millions of won) | ||||||||||||
Increase in other payables related to acquisition of property, plant and equipment | 1,721,481 | 1,786,787 | 954,918 | |||||||||
Transfer of investment property to property, plant and equipment | — | 1,105 | 984 | |||||||||
Transfer of property, plant and equipment to investment property | 209,450 | — | — |
SIGNATURES
The registrant hereby certifies that it meets all of(3) Changes in liabilities arising from financing activities for the requirements for filing on Form 20-Fyears ended December 31, 2020 and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.2019 are as follows:
2020 | 2019 | |||||||
(In millions of won) | ||||||||
Beginning balance | 12,190,505 | 5,281,937 | ||||||
Adjustments on initial application of IFRS 161 | — | 1,123,422 | ||||||
Impacts of changes in accounting policies2 | — | 435,423 | ||||||
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Beginning balance after adjustments | ₩ | 12,190,505 | 6,840,782 | |||||
Cash flows from financing activities | ||||||||
Proceeds from borrowings | 5,173,016 | 9,833,882 | ||||||
Repayments of borrowings | (3,921,310 | ) | (4,585,425 | ) | ||||
Payments of lease liabilities | (319,740 | ) | (390,501 | ) | ||||
Increase of lease liabilities | 293,855 | 367,687 | ||||||
Foreign currency differences | (557,923 | ) | 100,129 | |||||
Present value discount (interest expense) | 43,885 | 34,508 | ||||||
Interest paid | (6,924 | ) | (10,557 | ) | ||||
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Ending balance | ₩ | 12,895,364 | 12,190,505 | |||||
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1 | Lease liabilities are recognized upon adoption of IFRS 16 as of January 1, 2019. |
2 | Lease liabilities are adjusted considering the enforceable period of lease contracts upon adoption of IFRS 16 interpretation. |
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2020, 2019 and 2018
37. Share-based payment
(1) The Parent Company accounts granted equity-settled share options to the Parent Company’s key management during the year ended December 31, 2020 and the details of share options as of December 31, 2020 are as follows:
Total numbers of share option granted | Exercised | Forfeited or Cancelled | Outstanding at December 31, 2020 | |||||||||||||
(In shares) | ||||||||||||||||
1st | 99,600 | — | — | 99,600 | ||||||||||||
2nd | 99,600 | — | — | 99,600 | ||||||||||||
3rd | 99,600 | — | — | 99,600 | ||||||||||||
4th | 7,747 | — | — | 7,747 | ||||||||||||
5th | 7,223 | — | — | 7,223 | ||||||||||||
6th | 8,171 | — | 8,171 | — | ||||||||||||
7th | 61,487 | — | — | 61,487 | ||||||||||||
8th | 61,487 | — | — | 61,487 | ||||||||||||
9th | 61,487 | — | — | 61,487 | ||||||||||||
10th | 54,020 | — | — | 54,020 | ||||||||||||
11th | 6,397 | — | — | 6,397 | ||||||||||||
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566,819 | — | 8,171 | 558,648 | |||||||||||||
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Service Period for Vesting | Exercisable Period | Exercise price (in Korean Won) | ||||||||||||
| March 24, 2017 | March 24, 2017—March 24, 2019 | March 25, 2019—March 24, 2022 | ₩ | 48,400 | |||||||||
| March 24, 2017 | March 24, 2017—March 24, 2020 | March 25, 2020—March 24, 2023 | 52,280 | ||||||||||
3rd | March 24, 2017 | March 24, 2017—March 24, 2021 | March 25, 2021—March 24, 2024 | 56,460 | ||||||||||
4th | January 1, 2018 | January 1, 2018—December 31, 2019 | January 1, 2020—December 31, 2022 | 77,440 | ||||||||||
5th | March 28, 2018 | March 28, 2018—March 28, 2020 | March 29, 2020—March 28, 2023 | 83,060 | ||||||||||
6th | Feb 28, 2019 | February 28, 2019—February 28, 2021 | March 1, 2021—February 29, 2024 | 73,430 | ||||||||||
7th | March 22, 2019 | March 22, 2019—March 22, 2021 | March 23, 2021—March 22, 2024 | 71,560 | ||||||||||
8th | March 22, 2019 | March 22, 2019—March 22, 2022 | March 23, 2022—March 22, 2025 | 77,290 | ||||||||||
9th | March 22, 2019 | March 22, 2019—March 22, 2023 | March 23, 2023—March 22, 2026 | 83,470 | ||||||||||
10th | March 20, 2020 | March 20, 2020—March 20, 2023 | March 21, 2023—March 20, 2027 | 84,730 | ||||||||||
11th | March 20, 2020 | March 20, 2020—March 20, 2023 | March 21, 2023—March 20, 2027 | 84,730 |
(2) Measurement of fair value
The compensation cost is calculated by applying a binomial option-pricing model in estimating the fair value of the option at grant date. The inputs used are as follows:
1st | 2nd | 3rd | 4th | 5th | 6th | 7th | 8th | 9th | 10th | 11th | ||||||||||||||||||||||||||||||||||
Expected volatility | 23.23 | % | 23.23 | % | 23.23 | % | 22.50 | % | 25.30 | % | 25.60 | % | 26.17 | % | 26.17 | % | 26.17 | % | 26.15 | % | 26.15 | % | ||||||||||||||||||||||
Estimated fair value of share options (in Korean won) | ₩ | 10,026 | 9,613 | 9,296 | 16,687 | 18,362 | 16,505 | 17,744 | 16,888 | 16,093 | 11,786 | 11,786 | ||||||||||||||||||||||||||||||||
Dividend yield ratio | 1.20 | % | 1.20 | % | 1.20 | % | 0.78 | % | 1.23 | % | 1.36 | % | 1.98 | % | 1.98 | % | 1.98 | % | 2.10 | % | 2.10 | % | ||||||||||||||||||||||
Risk free rate | 1.86 | % | 1.95 | % | 2.07 | % | 2.38 | % | 2.46 | % | 1.89 | % | 1.82 | % | 1.88 | % | 1.91 | % | 1.59 | % | 1.59 | % |
(3) The compensation expense for the year ended December31, 2020 was ₩1,591 million (2019: ₩1,738 million and 2018: ₩1,163 million).
G-99
Date: April 29, 2016