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.

~~For historical exchange rate information, see “Item 3.A. Selected Financial Data — Exchange Rates.”~~

If SK Holdings 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 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, ~~2017,~~2019, SK Holdings owned ~~20,363,452 shares~~21,624,120shares of our common stock, or ~~25.22%~~26.8%, of our issued shares. If SK Holdings ~~were~~is currently not deemed to be a foreign entity. However, should SK Holdings 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, ~~2017,~~2019, which we believe was ~~41.4%~~37.2%)would exceed the 49.0% ceiling on foreign shareholding. As of December 31, ~~2017,~~2019, the two largest foreign shareholders of SK Holdings 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 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 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 a description of further actions that the MSIT could take, see “Item 4.B. Business Overview — 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 ~~significant~~substantial portion of our operations ~~is based~~and 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 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, increases in interest rates globally and the general weakness of the global economy 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 has fluctuated significantly. ~~See “Item 3.A. Selected Financial Data — Exchange Rates.”~~ Furthermore, as a result of adverse global and Korean economic conditions, there has been volatility in the stock prices of Korean companies in recent years. 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 include:

adverse conditions or ~~uncertainty~~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 ~~uncertainty in the wake of a referendum in~~uncertainties resulting from the United ~~Kingdom in June 2016, in which the majority of voters voted in favor of an~~Kingdom’s exit from the European Union ~~(“Brexit”);~~on January 31, 2020;

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, ~~euro, Chinese yuan~~Euro or Japanese ~~yen~~Yen exchange rates ~~and the overall impact of Brexit on the value~~or revaluation of the ~~Korean Won)~~Chinese 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 ongoingCOVID-19 pandemic);

a continuing rise in the level of household debt and increasing delinquencies and credit defaults by retail or ~~small- and~~small-and medium-sized enterprise ~~borrowers;~~borrowers in Korea;

declines in consumer confidence and a slowdown in consumer spending;

the continued growth of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China);

investigations of large Korean conglomerates and their senior management for possible misconduct;

social and labor unrest;

decreases in the market prices of Korean real estate;

a decrease in tax revenues or a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs that would lead to an increased Government budget deficit;

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 changes in 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 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 (such as the controversy between Korea and China regarding the deployment of a Terminal High Altitude Area Defense system in Korea by the United States commencing in March 2017 and the economic and other retaliatory measures imposed by China against Korea during the remainder of 2017)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;

increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners;

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, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapon and ballistic missile programs as well as its hostile military actions against Korea. Some of the significant incidents in recent years include the following:

North Korea renounced its obligations under the NuclearNon-Proliferation Treaty in January 2003 and has conducted six rounds of nuclear tests since October 2006, including claimed detonations of hydrogen bombs, which are more powerful than plutonium bombs, and warheads that can be mounted on ballistic missiles. Over the 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 in January 2016. Internationally, the United Nations Security Council has passed a series 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.

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. Although a bilateral summit meetings were held between ~~the two Koreas was held on~~Korea and North Korea in April, ~~27,~~May and September 2018 and ~~there has been an announcement in March 2018 of a potential summit~~ between the United States and North Korea in June 2018, February 2019 and June 2019, there can be no assurance that the level of ~~tension~~tensions 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, business 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 ~~sudden fluctuations~~a significant disruption in ~~interest rates~~the international balance of payments and international financial markets or ~~exchange rates,~~ extreme difficulty in ~~stabilizing~~carrying out currency, exchange rate or other macroeconomic policies due to the ~~balance~~movement of ~~payments or substantial disturbance in the Korean financial~~capital between Korea and ~~capital markets,~~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 ~~Strategy~~Economy and Finance (the ~~“MOSF”~~“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

Sales of our shares by SK Holdings 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, ~~2017,~~2019, SK Holdings 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.

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 ~~8,804,190~~7,982,904 shares as of March 31, ~~2018,~~2020, exceeds a specified maximum, which was 24,321,893 shares as of March 31, 2020, subject to adjustment under certain ~~circumstances.In~~

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, 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 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 ornon-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.

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 ofstate-of-the-art wireless technologies. We had ~~30.2~~31.5 million wireless subscribers, including MVNO subscribers leasing our networks, as of December 31, ~~2017,~~2019, representing a market share of ~~48.2%~~46.4%, 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 next-generation growth businesses in media, security, commerce, IoT solutions ~~media ande-commerce~~ and other innovative products offered through our platform services, including ~~artificial intelligence~~AI solutions.

In February 2012, we acquired an equity stake in SK Hynix, one of the world’s largest memory-chip makers by revenue, for an aggregate purchase price of Won 3.4 trillion, and became its largest shareholder. As of December 31, ~~2017,~~2019, we held a 20.1% equity interest in SK Hynix.

On March 31, ~~2018,~~2020, we had a market capitalization of approximately Won ~~18.9~~14.3 trillion (US$~~17.7~~11.7 billion, as translated at the noon buying rate of March 31, ~~2018)~~2020) or approximately 1.2% of the total market capitalization on the KRX KOSPI Market, making us the ~~nineteenth~~15th largest company listed on the KRX KOSPI Market based on market capitalization on that date. Our ADSs, each representingone-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 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 SKT-Tower, 65,Eulji-ro,Jung-gu, Seoul 04539, Korea and our telephone number is+82-2-6100-2114. Our website address is http://www.sktelecom.com.

The 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.

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, ~~2017,~~2019, the market share of the Korean wireless telecommunications market, in terms of number of subscribers, of KT and LG U+ was approximately ~~31.2%~~31.6% and ~~20.6%~~22.0%, respectively (compared to our market share of ~~48.2%~~46.4%), each including MVNO subscribers leasing the respective networks. As of December 31, ~~2017,~~2019, MVNOs had a combined market share of ~~12.0%~~11.4%, of which MVNOs leasing our networks represented ~~5.5%~~4.2%, MVNOs leasing KT’s networks represented 5.6% and MVNOs leasing LG U+’s networks represented ~~0.9%~~1.6%.

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 ~~29.0~~26.2 lines per 100 population as of December 31, ~~2017,~~2019, and wireless penetration increasing from 7.0 subscribers per 100 population in 1996 to ~~121.0~~131.0 subscribers per 100 population as of December 31, ~~2017.~~2019. 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,
	2017		2016		2015		2014		2013		2019		2018		2017		2016		2015
	(In thousands, except for per population amounts)										(In thousands, except for per population amounts)
Population of Korea⁽¹⁾		51,779		51,696		51,529		51,328		51,141		51,850		51,826		51,779		51,696		51,529
Wireless Subscribers(2)		62,651		60,287		57,937		56,310		54,681		67,937		65,360		62,651		60,287		57,937
Wireless Subscribers per 100 Population		121.0		116.6		112.4		109.7		106.9		131.0		126.1		121.0		116.6		112.4
Telephone Lines in Service		15,039		15,746		16,341		16,939		17,620		13,600		14,334		15,039		15,746		16,341
Telephone Lines per 100 Population		29.0		30.5		31.7		33.0		34.5		26.2		27.7		29.0		30.5		31.7

(1)	Source: The Ministry of the Interior and Safety.

(2)	Includes subscribers ofnon-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 1999 and the implementation of LTE technology providing for fast data transmission speeds and large data transmission capacity. As of December 31, ~~2017,~~2019, approximately ~~57.1~~58.8 million Korean wireless subscribers owned Internet-enabled handsets capable of accessing wireless Internet services, including ~~48.6~~51.1 million subscribers that own smartphones that have direct access to the Internet using mobile Internet technology.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,
	2017			2016			2015			2014			2013			2019			2018			2017			2016			2015
	(In thousands, except for percentage data)															(In thousands, except for percentage data)
Number of Wireless Internet-Enabled Handsets		57,089			55,085			53,737			52,833			50,858			58,812			58,074			56,576			55,085			53,737
Number of Smartphones		48,607			46,418			43,668			40,560			37,517			51,132			49,442			48,660			46,418			43,668
Total Number of Wireless Subscribers(1)		62,651			60,287			57,937			56,310			54,681			67,937			65,360			62,651			60,287			57,937
Penetration of Wireless Internet-Enabled Handsets		91.1	%		91.4	%		92.8	%		93.8	%		93.0	%		86.6	%		88.9	%		90.3	%		91.4	%		92.8	%
Penetration of Smartphones		77.6	%		77.0	%		75.4	%		72.0	%		66.9	%		75.3	%		75.6	%		77.7	%		77.0	%		75.4	%

(1)	Includes subscribers ofnon-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. From the end of ~~2005~~2010 to the end of ~~2017,~~2019, the number of broadband Internet

access subscribers increased from approximately ~~12.2~~17.2 million to approximately ~~21.2~~21.9 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,
   2017    2016    2015    2014    2013
   (In thousands)
Number of Broadband Internet Access Subscribers⁽¹⁾
   21,225    20,556    20,025    19,199    18,738
Number of IPTV Subscribers
   15,381    11,850    10,991    9,670    8,738


	As of December 31,
	2019		2018		2017		2016		2015
	(In thousands)
Number of Broadband Internet Access Subscribers⁽¹⁾		21,906		21,286		20,989		20,349		19,818
Number of IPTV Subscribers		18,021		16,599		15,381		11,850		10,991

(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 ofstate-of-the-art wireless and fixed-line technologies and services as well as develop our next-generation growth businesses in media, security, commerce, IoT solutions ~~media ande-commerce~~ and other innovative products offered through our platform services, including ~~artificial intelligence~~AI solutions.Our operations are reported in ~~four~~five segments:

cellular services, which include wireless voice and data transmission services, sales of wireless devices, IoT solutions and platform services;

fixed-line telecommunication services, which include fixed-line telephone services, broadband Internet services, advanced media platform services (including IPTV) and business communications services;

~~e-commerce~~

security services, which include ~~11st,~~physical security services and information security services;

commerce services, which include our open marketplace platform, 11st, ourT-commercebusiness, SK stoa, and ~~other commerce solutions;~~related ancillary services; and

other businesses, which include our portal service, marketing platform business and 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, IoT solutions ~~media ande-commerce~~ 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 incorporate ~~artificial intelligence~~AI capabilities directly into many of the products and services we offer.

~~Our corporate vision is~~ By doing so, we strive to ~~“Create Customer’s Pride”~~become a socially respected “New ICT Leader” as universally recognized by our customers, business partners and ~~provide enhanced customer value through integrated products and services that better meet our customers’ needs.~~shareholders. To take advantage of ~~these~~evolving industry trends and further realize our corporate vision ~~and~~to become a ~~leader in information and communication technologies (“ICT”),~~“New ICT Leader,” we have undertaken the following strategic ~~initiatives.~~initiatives:

•

Maintain our leadership in the wireless services business by offering innovative 5G services and customer-oriented products and services. We plan to maintain our leadership in the wireless services business by ~~accurately analyzing~~offering innovative 5G services that provide differentiated subscriber experiences, such as our “5G Clusters.” We also plan to promote the proliferation of 5G services by offering services and content that are specialized for the 5G environment, such as cloud gaming, hands-on experience services and e-sports. In addition, we will continue to analyze the needs of our subscribers leveraging our AI technology and ~~providing~~ provide

products and services that meet such needs. We also plan to strengthen our customer relationships ~~by engaging~~with our ~~subscribers to~~diverse range of offerings that integrate our ~~service offerings~~wireless services with our products and services in ~~various aspects of their daily lives such as “T map,”~~ our ~~interactive navigation service which we provide to all users free of charge~~media, security and “oksusu,” our mobile IPTV service with a wide range of unique media offerings. We also provide bundled subscriptions to our wireless and fixed-line service offerings, and we believe such bundled subscriptions contribute to increased customer retention and acquisition of new subscribers for both our wireless and fixed-line services due to convenience. In addition, we believe our “T Membership” program, our membership service, also contributes to our subscriber retention with the breadth of membership benefits we provide through our membership partners.commerce businesses.

•

Develop our next-generation growth businessesthrough hyper-collaboration. We believe that we have evolved from being a domestic telecommunications provider in Korea to possessing the fundamental capabilities that enable us to pursue a broad range of collaboration in the field of ICT with both domestic and international partners. We have formed strategic partnerships with industry leaders to create synergies in various areas, such as 5G cloud gaming, mobile edge computing (“MEC”) and e-sports, and we are continually expanding the areas for collaboration. We aim to create an environment for “hyper-collaboration” to develop and foster our next-generation growth ~~businesses in IoT solutions, media ande-commerce~~ and other innovative products offered through our platform services, including artificial intelligence solutions, which we believe complement and create synergies with our wireless and fixed-line services and through which we can generate new sources of revenue growth. We believe these services will enable us to increase the retention of our wireless subscribers as well as attract new customers.businesses.

•

Develop our technological capabilities and new products and services to support our ~~future~~ 5G network.We aim to ~~research and develop~~continue developing cutting-edge 5G technologies that will be adopted as the technological standard for 5G ~~and to acquire the necessary bandwidth to launch 5G~~ services. In addition, we will seek to apply our 5G infrastructure and capabilities to our various other key businesses such as media, security and commerce to create unique new products and services geared to serve evolving customer needs. Furthermore, we aim to collaborate with various partners to identify new business opportunities that can potentially leverage our ~~future~~ 5G network.

•

Pursue sustainable management to seek mutual growth with the broader society. The SK Management System, which is the business philosophy and foundation of corporate culture of the SK Group, includes as a key component the goal of growing together with the broader society by contributing to its economic growth and creating social value. Based on a socially accountable governance system led by the Corporate Citizenship Committee of our board of directors, we aim to pursue the “double bottom line” of achieving long-term shareholder value as well as creating social value by leveraging our business capabilities, thereby contributing to the well-being of all stakeholders and the enhancement of our corporate value in the long-term. We have also amended our articles of incorporation at our annual general meeting of shareholders held on March 26, 2020 to incorporate such goal as a core business purpose.

Cellular Services

We offer wireless voice and data transmission services, sell wireless devices and provide IoT solutions and innovative 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. We had ~~30.2~~31.5 million wireless subscribers, including MVNO subscribers leasing our networks, as of December 31, ~~2017,~~2019, representing a market share of ~~48.2%~~46.4%, the largest market share among Korean wireless telecommunications service ~~providers.~~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,
	2017		2016		2015		2014		2013		2019		2018		2017		2016		2015
	(in thousands)										(in thousands)
Network
5G												2,084		—		—		—		—
LTE		22,865		21,078		18,980		16,737		13,487		25,022		24,796		22,865		21,078		18,980
WCDMA		5,842		6,491		7,008		8,020		9,909		3,986		5,174		5,842		6,491		7,008
CDMA		1,488		2,026		2,638		3,521		3,957
CDMA⁽¹⁾												443		912		1,488		2,026		2,638

Total		30,195		29,595		28,626		28,278		27,353		31,535		30,882		30,195		29,595		28,626

(1)	In November 2019, we submitted an application to the MSIT to terminate our second generation wireless services using our CDMA network, which is pending approval by the MSIT.

In ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, our cellular services segment revenue was Won ~~13,262.1~~12,172.4 billion, Won ~~13,004.9~~12,378.9 billion and Won ~~13,269.3~~13,262.1 billion, respectively, representing ~~75.7%~~68.6%, ~~76.1%~~73.4% and ~~77.4%~~75.7%, 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.

We provide avoice-over-LTE service, known as our “HD Voice” service, to all of our LTE and 5G subscribers featuring high-quality voice transmission, fast call connection,voice-to-video call switching and digital content sharing during calls. 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 ande-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” 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 “SK 7Mobile,” which we believe offers excellent quality at reasonable rates utilizing SK Telecom’s wireless networks. SK Telink is focused on developinglow-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 international fixed-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 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, ~~2017,~~2019, approximately ~~23.0~~23.6 million, or ~~76.1%~~74.8%, of our subscribers (including MVNO subscribers leasing our networks) owned smartphones that have direct access to the Internet compared to approximately ~~21.9~~23.1 million subscribers, or ~~73.9%~~74.7%, as of December 31, ~~2016.We~~2018. We purchase a substantial majority of our wireless devices from Samsung Electronics, Apple and LG Electronics.

Smartphones and Basic Phones. We offer smartphones that are enabled to utilize our digital wireless networks and run on various operating systems, such as Apple iOS and Google Android. We also offer basic phones that have the ability to access wireless Internet services.

Tablets and Other Internet Devices.We offer tablets which can access the Internet via our digital wireless networks and aWi-Fi connection. The tablets run primarily on the Apple iOS and Google Android operating systems. In addition, we also offer “TPocket-Fi” devices that provide a mobile LTE connection and are capable of connecting multipleWi-Fi enabled devices to the Internet at one time. We offer targeted rate plans for our TPocket-Fi device. See “— Rate Plans” below.

Wearable Devices. We offer various wearable devices including smart watches and “T kids’ phone-Joon.” These devices utilize our digital wireless networks and have specific features for the relevant target customer.For

example, T kids’ phone-Joon is a wearable phone targeted towards children and provides simple calling, messaging and chat services as well as global positioning system (“GPS”) tracking capabilities. We offer targeted rate plans that are specific to these wearable devices. See “— Rate Plans” below.

IoT Solutions

Through our IoT solutions 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 bymachine-to-machine (“M2M”) wireless connections, to business customers. In order to promote the growth of our IoT solutions business, we deployed networks nationwide that are designed to support IoT devices, namely our high-speedLTE-M network in March 2016 and our~~low-cost~~low-costLow-Power ~~Low Power Wide Area Network~~Wide-Area network based on LoRa technology (our “LoRa network”) in July 2016. In April 2018, we ~~expect to increase~~increased the battery efficiency of our IoT devices by launching our LTE Cat.M1 technology and further ~~enhance~~enhanced our competitiveness in this business.

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 only to our wireless and fixed-line service subscribers but also to subscribers of our competitors’ wireless and fixed-line services. Through partnerships with more than 35 construction companies, we provided~~built-in~~ Smart Home services to more than 14,000 homes as of December 31, 2017.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 also partnered with more than 70 electronics and appliance manufacturers, including Samsung Electronics and LG Electronics, to develop a wide range of appliances, electronic devices, door security, heating and lighting systems that are compatible with our Smart Home service.

~~We also~~ provide network access and customized IoT solutions to our business customers. Our M2M services support devices that are used in a variety of market segments, including retail, utilities, security, automotive, agriculture and data analytics. For example, ~~in 2016, we partnered with Renault Samsung Motors, SsangYong Motor, Jaguar Land Rover~~our Cloud Energy Management Solution (“Cloud EMS”) business provides aone-stop cloud computing-based energy management platform that collects and ~~Kia Motors to integrateT-map~~ ~~with theirin-vehicle~~ ~~navigation systems,~~analyzes energy usage data from business customers and ~~we expect to further expand our “connected car” technologies over the next few years. In addition, we provide enhanced~~offers solutions to ~~businesses in order to connect with~~optimize and ~~monitor~~reduce their ~~equipment,~~energy consumption. As of December 31, 2019, Cloud EMS had approximately 210 customers, mostly from energy-intensive industries such as ~~fleet management devices used to monitor city-operated rental bicycles~~the petrochemical and ~~utility monitoring devices for smart grid applications.~~cement industries.

Platform Services

Through our platform services business, we seek to provide innovative products and services that meet our customers’ evolving needs in an increasingly connected world. For example, we provide location-based services such as T map, which we provide 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, ~~2017,~~2019, there were approximately ~~10.4~~12.5 million monthly average users of our T map service. ~~As discussed in “— IoT Solutions”, in 2016, we integrated our T map services with our automotive IoT solutions.~~ In September 2017, we also integrated NUGU, described in more detail below, into our T map service enabling users to use voice commands to operate their mobile devices while driving.

In ~~addition,~~May 2018, we ~~provide “T phone” service, which provides our customers with a number of convenient call~~added calling and text messaging 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~~ to the ~~customer’s current location.~~NUGU capabilities available on T map to enhance the convenience and safety of T map users. 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 plan to launch a navigation service for Grab drivers based on T map’s key technologies, including big data analysis algorithms and ultra-precise GPS solutions.

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 to provide users with real-time information related to parking lot locations, availability, rates and discounts, in addition to automatic payment services in the case of select parking lots, including those operated by ADT Caps, through a dedicated mobile application. As of December 31, 2019, T map Taxi and T map Parking had approximately 0.8 million and 0.2 million monthly active users, respectively.

We also offer ~~artificial intelligence~~AI solutions through our platform services business. For example, in September 2016, we launched NUGU, the first intelligent virtual assistant service launched in Korea with Korean language capabilities based on advanced voice recognition technologies. NUGU currently offers a wide range of services including music streaming, connectivity with “Smart Home” and other IoT solutions for the home, ~~ordering~~educational contents for children, food deliveries, and informational and other personal assistance services, and we plan to continually enhance its functionalities through software updates. 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 have integrated NUGU into our T map service as discussed above as well as our B tv service as further discussed in “— Fixed-line Telecommunication Services — Advanced Media Platform (including IPTV).”

We offer a variety of smart devices based on NUGU, 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.

In October 2018, we launched “NUGU developers,” a platform on which third-party developers can create and launch new services based on NUGU technology. Through NUGU developers, we provide the “NUGU SDK” service, which enables third-party developers to incorporate NUGU capabilities into their applications or devices. We continue to explore ways in which we can leverage our NUGU technology to enhance our existing products and services.

We also provide a “T phone” service, which offers our customers a number of convenient call functions, such as a spam-call blocking function and a search function that informs customers of the phone numbers of shops, hospitals and other facilities closest to the customer’s current location.

Other New Businesses

We are preparing to launch integrated cloud services based on our advanced 5G MEC technology and platform for business customers that require secure andultra-low latency communications, focusing on the media, logistics, healthcare, finance and manufacturing industries. In connection with such preparation, we have entered into strategic partnerships with Amazon Web Services and other leading cloud service providers to pursue collaboration onMEC-based cloud services. We also plan to provide smart factory solutions that can leverage our 5G technology andMEC-based cloud services, beginning with SK Hynix, which we expect to result in enhanced efficiency for its semiconductor manufacturing process.

Rate Plans

We offer our wireless telecommunications services on both a postpaid and prepaid basis. Approximately ~~93.4%~~94.7% of our subscribers received our wireless telecommunications services on a postpaid basis as of December 31, ~~2017.~~2019. 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, 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 no fixed-term contract at all. We provide various subsidies and discounts, including handset subsidies, depending on the length of the 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, 2017, approximately 15 million subscribers have subscribed to “Band Data”~~Our 5G services are provided through the “5GX” plans, which ~~are our representative smartphone rate plans featuring~~offer 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, that~~and range from Won ~~29,900~~55,000 to Won ~~69,000~~125,000 per ~~month.Our~~month. As of December 31, 2019, approximately 2.1 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 2019, a majority of our new LTE subscribers have subscribed to the “T” plans. 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 ~~19,000~~20,900 to Won ~~94,000~~103,400 per month.We also offer a standard rate plan for Won ~~11,000~~12,100 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 such as our “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 teenagers featuring more data transmission allowance on weekends. We also provide “T Signature” rate plans for customers seeking unlimited wireless data usage for fixed rates and a multitude of other premium benefits such as mobile device insurance coverage and mobile device upgrades.

For our TPocket-Fi device, we provide a fixed monthly data transmission allowance of 10 GB for Won ~~15,000~~16,500 per month and 20 GB for Won ~~22,500~~24,750 per month.With respect to the wearable devices that we offer, we offer targeted rate plans for smart watches that range from Won ~~10,000~~11,000 to Won ~~11,000~~12,100 per month, and the ~~“Cookiz”~~“ZEM” rate plans for our T kids’ phone-Joon devices that range from Won ~~8,000~~8,800 to Won ~~18,000~~19,800 per month.

DataAdd-on Rate Plans. We offer a variety of optional“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. 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 ~~9,000~~9,900 per month. For certain rate plan subscribers, we also offer ~~a daily allowance of 1 GB of oksusu~~unlimited access ~~and a monthly allowance of 8,000 points~~ to ~~purchase media content on oksusu~~wavve through our ~~“oksusu Safe”~~“wavve and Data Plus” plan at no additional cost or for Won ~~5,000~~2,400 or Won ~~8,000~~12,300 per 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 ~~8,000~~8,800 per month. We also offer “T Data Coupons,” through which subscribers can purchase a fixed amount of data for a fixed price and can also be sent as “gifts” to family and friends that need additional data allowance. We believe that our dataadd-on rate plan offerings have contributed to the increase in data usage to ~~6.0~~8.2 GB of average monthly data usage per LTE subscriber as of December 31, ~~2017~~2019 from ~~5.2~~7.1 GB as of December 31, ~~2016.~~2018.

Roaming Plans. ~~We provide fixed-rate~~Our representative international roaming service plans ~~such as~~include our ~~“T Roaming Data OnePass”~~“baro OnePass 300” and “baro OnePass 500” plans, which are fixed rate plans that provide data roaming ~~services at different speeds depending on usage amount~~of 300 MB for Won ~~9,000 to~~9,900 per day and 500 MB for Won ~~15,000~~16,500 per day, respectively, and are available in up175 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 89 countries, as well as our “baro” plans, 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 110 countries, ranging from Won 29,000 to ~~160 countries, depending on the specific plan chosen.~~Won 59,000. Our “baro” plans include free high-quality data voice calls to Korea through our T phone application. We also provide an automatic roaming service called “Safe Automatic T Roaming,” which provides 30 minutes of voice calls per day (including three minutes of free voice calls) for a maximum of Won 10,000 (with voice calls in excess of 30 minutes per day incurring additional charges) and data transmission at a rate of Won 563 per MB with a daily data transmission charge ceiling of Won 5,000. 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, CDMA network,Wi-Fi network and LoRa 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.”

5G Network.5G is the next generation wireless network that enables data to be transmitted at speeds faster than our LTE network with lower latency. We began the operation of our 5G network in December 2018 on a

limited basis for business customers, beginning with a few major commercial districts in Seoul and other metropolitan areas. In April 2019, we launched wireless service plans using the 5G network following the commencement of sales of the first5G-compatible smartphones, and we are in the process of expanding our 5G network coverage, focusing on major commercial districts and other densely-populated areas in the Seoul metropolitan area and other major cities. As part of this coverage expansion, as of December 31, 2019, we have established approximately 70 “5G Clusters” with high 5G connectivity at strategic locations where customers are able to experience the full potential of our 5G network through augmented reality and virtual reality services, cloud gaming and other ICT products. Our 5G services provide a maximum data transmission speed of 2.7 Gbps, and our 5G penetration was 6.6% as of December 31, 2019.

LTE Network. LTE technology has become widely accepted globally as the standard fourth generation technology and enables data to be transmitted at speeds faster than our CDMA and WCDMA networks. ~~We commenced commercial wireless telecommunications~~Since first commencing our LTE services ~~based on LTE technology~~ in July 2011 and expanded the coverage area of our LTE services to nationwide by the end of April 2012. We launched our LTE multi-carrier service in the 1.8 GHz spectrum in July 2012. In June 2013, we commenced providing commercialLTE-A services, ~~at speeds of up to 150 Mbps using~~which use carrier aggregation technology ~~which~~that combines spectrum frequencies to improve data transmission ~~speed and capacity, and~~speeds, in June ~~2014,~~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 ~~wideband~~ four-bandLTE-A services atutilizing 4x4 multiple-input multiple-output (“MIMO”) technology providing for data transmission speeds of up to ~~225 Mbps~~1 Gbps, and ~~expanded coverage nationwide~~ in ~~2014. In December 2014, we commencedtri-bandLTE-A~~ ~~services, which bundled three different bandwidths to allow faster network service at speeds of up to 300 Mbps. In June 2017,~~March 2019, we commenced five-bandLTE-A services ~~which bundles five different bandwidths to allow even faster network service at speeds of up to 700 Mbps as well as enhancedtri-bandLTE-A~~

~~services utilizing~~using 4x4 MIMO technology ~~providing~~that provide data transmission speeds of up to ~~900 Mbps.With~~1.2 Gbps.With these developments in LTE technology, our LTE penetration increased to ~~75.7%~~79.3% as of December 31, ~~2017~~2019 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 improvedLTE-A technology to increase the maximum data transmission speed of our ~~services.In March 2016,~~services.For M2M connections relating to our IoT solutions, we ~~also~~ launched ourLTE-M services at speeds of up to 10 Mbps ~~for M2M connections relating~~in March 2016, as well as our LTE Cat.M1 services at speeds of up to ~~our IoT solutions.Our continued upgrades~~0.03 Mbps in April 2018. Upgrades to our LTE technology ~~enables~~in recent years have enabled even faster data transmission speeds, as shown below.


Wireless network technology (	Date of commencement of ~~services)~~ services		Maximum ~~download~~data transmission speed ~~for data~~ ~~transmission~~			~~Maximum upload speed for data~~ ~~transmission~~
LTE ~~(July 2011)~~		~~75 Mbps~~			~~37.5 Mbps~~
~~LTE-A~~ ~~(June 2013)~~		~~150 Mbps~~	July 2011		75 Mbps
~~Wideband~~LTE-A ~~(June 2014)~~		~~225 Mbps~~			~~112.5 Mbps~~
~~Tri-bandLTE-A~~ ~~(December 2014)~~		~~300 Mbps~~	June 2013		150 Mbps
WidebandLTE-A	June 2014			225 Mbps
Tri-bandLTE-A	December 2014			300 Mbps
Five-bandLTE-A ~~(June 2017)~~	June 2017			700 ~~Mbps~~			~~350~~ Mbps
Tri-bandLTE-A with 4x4 MIMO ~~(June 2017)~~	June 2017			900 Mbps
Four-bandLTE-A with 4x4 MIMO	February 2018			~~450 Mbps~~1 Gbps
Five-bandLTE-A with 4x4 MIMO	March 2019			1.2 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 ~~2017,~~2019, 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 ~~163.9~~211.4 Mbps compared to ~~131.0~~153.6 Mbps for KT’s LTE network and ~~105.3~~110.6 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 more information about our capital expenditures relating to our LTE network, see “Item 5.B. Liquidity and Capital Resources.”~~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 second generation cellular services using the CDMA ~~cellular service.~~network. As a result of declining usage and the increasing difficulty of maintaining the network, we submitted an application to the MSIT in November 2019 to terminate our second generation CDMA wireless services, which is pending approval by the MSIT.

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 our CDMA network. ~~We commenced provision of~~Since first commencing our WCDMA services ~~on a limited basis~~ in Seoul ~~at the end of 2003. Since then,~~in 2003, we have expanded our WCDMA network nationwide and implemented various technologies to improve data transmission speeds within our WCDMA network.

Wi-Fi Network.Wi-Fi technology enables our subscribers withWi-Fi-capable devices such as smartphones, laptops and tablet computers to access mobile Internet. We started to buildWi-Fi access points in 2010 and, as of December 31, ~~2017,~~2019, we had more than ~~142,000~~112,000Wi-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~~high. While eachWi-Fi access point typically has a radius of approximately20-30 meters, some of ourWi-Fi hot zones, which have multipleWi-Fi access points, including those installed at public transportation facilities and amusement parks, have much wider service areas. ~~We also have a WiBro network that we use as a backhaul for ourWi-Fi~~ ~~network.~~

LoRa Networks. ALow-Power Wide-Area ~~Network~~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 completed the nationwide deployment of 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 the IoT industry as a 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, ~~2017,~~2019, our 5G, LTE, WCDMA ~~CDMA~~ and ~~WiBro~~CDMA networks had an aggregate of ~~57,758~~63,066 cell 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.Most~~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 andpoint-of-sale media promotions designed to relay a consistent message across all of our markets. We 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 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.We use a combination of an extensive network, including branch offices and stores, directly operated by us through our subsidiary, PS&Marketing, more than ~~3,700~~3,300 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 services. As of December 31, ~~2017,~~2019, we operated more than ~~320~~560 T Premium ~~Stores and we intend to further expand the number of T Premium Stores in 2018.~~Stores.

In addition, we operate an online distribution channel, “T World Direct,” through which subscribers can conveniently purchase wireless devices and subscribe to our services online. We also operate a dedicated online shop on 11st, oure-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 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 monthly plan-based rate for the first ~~four~~five 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 a loan of up to Won 4.0 billion with a repayment period of up to three years.As of December 31, ~~2017,~~2019, we had an aggregate of Won ~~61.9~~65.7 billion outstanding in loans to authorized dealers.

Customer Service.We provide high-quality customer service directly through our two subsidiaries, Service Ace Co., Ltd. and Service Top Co., Ltd., rather than rely on outsourcing. Network 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 23 years, 22 years and 20 years, ~~20 years and 18 years,~~ respectively.

Fixed-line Telecommunication Services

We offer fixed-line telephone, broadband Internet and advanced media platform services (including IPTV) 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,
	2017		2016		2015		2019		2018		2017
Fixed-Line Telephone (including VoIP)⁽¹⁾		4,322,767		4,494,766		4,672,195		3,913,274		4,132,265		4,322,767
Broadband Internet		5,439,272		5,207,495		5,036,057		5,613,200		5,404,866		5,232,648
IPTV⁽²⁾		4,370,416		3,967,603		3,489,077		5,193,329		4,729,238		4,370,416

(1)	Includes subscribers to VoIP services of SK Broadband and SK Telink.

(2)	Includes subscribers to SK Broadband’s B tv service andvideo-on-demand only service subscribers.

In ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, our fixed-line telecommunication services segment revenue was Won ~~2,724.2~~2,948.2 billion, Won ~~2,651.2~~2,822.3 billion and Won ~~2,494.5~~2,719.4 billion, respectively, representing ~~15.5%~~16.6%, ~~15.5%~~16.7% and ~~14.6%~~15.5%, 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), theT-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunications services segment in 2018 and 2017, 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, in April 2019, we entered into an agreement with Tbroad, a leading cable television and other fixed-line telecommunication services provider in Korea, pursuant to which Tbroad will merge with and into SK Broadband. Upon the completion of such merger, we expect to own approximately 74.4% of SK Broadband’s total outstanding shares. In addition, SK Telecom signed a separate share purchase agreement with Tbroad Co., Ltd. to acquire a 55.0% equity interest in Tbroad Nowon. The transactions have obtained all requisite regulatory and shareholder approvals and are expected to be completed as of April 30, 2020 and April 29, 2020, respectively.

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, ~~2017,~~2019, we had approximately ~~4.3~~3.9 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, ~~2017. As~~2019.As of December 31, ~~2017,~~2019, we had approximately ~~5.4~~5.6 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)

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 offeredvideo-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 ~~our standard 56 live~~as many as 260 high definition channels ~~and to as many as 219 channels~~

depending on the subscription service as of December 31, 2019, as well asvideo-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~~industry. As of December 31, ~~2017,~~2019, we had approximately ~~4.4~~5.2 million IPTV subscribers. In January 2018, we launched ~~Btv~~B tv NUGU, which is anall-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 stereo system with enhanced audio quality and improved NUGU voice recognition capabilities using beam forming technology.

In ~~January 2016,~~September 2019, we ~~launched “oksusu~~,”acquired a minority equity stake in Content Wavve, which operated the mobile ~~IPTV~~OTT service ~~that is~~“POOQ,” and transferred our former mobile OTT service business “oksusu” to Content Wavve. Content Wavve combined oksusu and POOQ to launch a ~~combination of the services we previously provided as “B tv mobile”~~new integrated mobile OTT service “wavve” in September 2019. See “— Other Investments and “hoppin” and provides subscribers 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 90 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 of December 31, 2017, we had approximately 8.6 million subscribers to oksusu.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 allowpoint-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 provideback-up storage for transmitted data. Through our Internet data center, we provide our business subscribers with server-based support includingco-location, dedicated server hosting and cloud computing services. Our network solution service utilizes our network infrastructure and voice platform to provide24-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 andon-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 ~~84%~~77% of subscribers to our fixed-line services subscribe to two or more of our services through our bundled rate ~~plans.Bundled~~plans. Bundled rate plans for a combination of fixed-line telephone, broadband Internet access and IPTV services, which are subject to a contract of one to three years, range from Won ~~32,000~~30,800 to Won ~~60,750~~123,750 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” plan for subscribers to our fixed-line telephone service features unlimited domesticland-to-land voice minutes for a fixed rate and range from Won ~~7,000~~7,700 to Won ~~10,500~~11,550 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 ~~20,000~~36,300 to Won ~~50,000~~82,500 per month depending on the data throughput speed and existence and length of a contract. We offer individual fixed-rate plans for our IPTV service that range from Won ~~6,000~~11,000 to Won ~~28,000~~16,500 per month depending on the number of channels provided and existence and length of a ~~contract.In~~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) 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 9070 customer centers and a network of more than ~~250~~170 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), 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 intosub-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 ourin-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 andfollow-up service.

~~E-Commerce~~Security Services

Our~~e-commerce~~ security business consists of physical security services ~~segment consists primarily of~~provided by ADT Caps and information security services provided by SK Infosec. In 2019, 2018 and 2017, our ~~marketplace business operated by our subsidiary, SK Planet. In 2017, 2016 and 2015, oure-commerce~~security services segment revenue was Won ~~1,044.2~~1,109.5 billion, Won ~~1,001.3~~284.3 billion and Won ~~1,060.0~~92.0 billion, respectively, representing ~~6.0%~~6.3%, ~~5.9%~~1.7% and ~~6.2%~~0.5%, respectively, of our consolidated revenue.

Our security services businesses, which were previously part of our other businesses segment in 2018 and 2017, were reclassified as a new security services segment in 2019.

~~Marketplace~~Physical Security

ADT Caps provides a variety of physical security services utilizing its flagship unmanned surveillance and dispatch platform called the Central Monitoring Services (“CMS”).CMS-based services, which accounted for approximately 71% and 70% of ADT Caps’ revenues in 2019 and 2018, respectively, 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.

Following our acquisition of ADT Caps, we have explored and continue to explore synergies between our security business and other key business segments. For example, we launched “T Safe Security,” aCMS-based video surveillance and security guard dispatch service offered through the distribution channels for our wireless services, in October 2018. In addition, we introduced our bundle-based discounted rate plans “T&Caps” in November 2018 and “B&Caps” in January 2019, which bundle our wireless service and broadband Internet service,

respectively, with ADT Caps’ security service. Beginning in June 2019, with the launch of T map Parking, ADT Caps also operates a parking management and security solutions business. See “— Cellular Services — Platform Services” above.

We ~~operate “11st”~~acquired ADT Caps in October 2018 by acquiring a 55.0% interest in LSH, which owns 100% of 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 ADT CAPS Co., Ltd.

Information Security

We offer information security solutions through our subsidiary SK Infosec. SK Infosec provides information security consulting services, managed security services as well as cyber threat intelligence solutions. SK Infosec’s representative product is “Secudium IoT,” a convergence security service that combines information, physical and operational technology security services into a single platform.

We acquired SK Infosec from SK Holdings, 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 Holdings in exchange for all of the issued and outstanding common shares of SK Infosec.

Commerce Services

Our commerce services segment consists primarily of “11st,” our online marketplace business operated by Eleven Street, and “T stoa,” our interactiveT-commerce network. In 2019, 2018 and 2017, our commerce services segment revenue was Won 710.7 billion, Won 728.4 billion and Won 651.8 billion, respectively, representing 4.0%, 4.3% and 3.7%, respectively, of our consolidated revenue. 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), theT-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunications services segment in 2018 and 2017, were reclassified as part of our commerce services segment for 2019.

E-Commerce

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- tolarge-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, ~~2017, the mobile version of~~2019, 11st was the leading ~~mobile~~ commerce platform in terms of the total number of unique visitors to its mobile and desktop versions, according to ~~Korean Click.The~~Nielsen Koreanclick. The mobile version of 11st is continuing to grow with an increase in the percentage of 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 68% in 2019 from 65% in 2018 and 61% in ~~2017 from 52% in 2016 and 41% in 2015.~~

We have expanded our online open marketplace business globally to Turkey, Malaysia and Thailand. In March 2013, Dogus Planet, a joint venture between SK Planet and Dogus Group, a Turkish conglomerate, launched “n11.com” in Turkey. In April 2015, Celcom Planet, a joint venture between SK Planet and Celcom Axiata, a Malaysian telecommunications service provider, launched “11street” in Malaysia. Our online marketplaces in Turkey and Malaysia have rapidly grown into top tier players. In February 2017, SK Planet launched 11street in Thailand through a wholly-owned subsidiary.

We2017.We intend to continue our efforts to increase usage of the mobile version of 11st, ~~and~~ enhance the convenience of our 11st mobile and web user interface and ~~maintain~~create synergies with our ~~growth in overseas~~other products and services.

Eleven Street was~~e-commerce~~spun-off ~~markets.~~

~~Other Commerce Solutions.~~ ~~We provide other commerce solutions, which include the following:~~

~~Syrup Wallet, a mobile wallet service that is the successor to~~as 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;

OK Cashbag, a loyalty points program which allows members to collect and redeem loyalty points at its partnering merchants and offers differentiated marketing services to such partnering merchants; and

11Pay, 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.

~~We have also expanded our commerce solutions business globally. In October 2014, a 95.2%-owned~~new consolidated subsidiary offrom SK Planet ~~acquired~~Co., Ltd. (“SK Planet”) in September 2018. In connection with suchspin-off, Eleven Street received a ~~100.0% ownership~~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 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. As of December 31, 2017, shopkick had 24.9 million subscribers compared to 24.3 million subscribersEleven Street as of December 31, ~~2016.~~2019.

T-Commerce

We also operate aT-commerce network, “SK stoa,” through our consolidated subsidiary SK Stoa, which offers a broad assortment of goods and services throughpre-recorded television programming. The goods and services

promoted on SK stoa’sT-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 utilizingvideo-on-demand capabilities. In September 2019, SK Stoa launched “Hellen Karen,” its own private fashion brand. SK stoa also acts as the exclusiveT-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 existing products and services, such as our portal service and other miscellaneous businesses, which we include in our ~~others~~other businesses segment. In 2019, 2018 and 2017, ~~2016 and 2015,~~ our ~~others~~other businesses segment revenue was Won ~~489.5~~802.9 billion, Won ~~434.4~~660.1 billion and Won ~~312.9~~794.7 billion, respectively, representing ~~2.8%~~4.5%, ~~2.5%~~3.9% and ~~1.8%~~4.5%, respectively, of our consolidated revenue.

Portal Service

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 freee-mail accounts through Nate Mail.

Miscellaneous Businesses

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, a loyalty points program which allows members to collect and redeem loyalty points at its partnering merchants and offers differentiated marketing services to such partnering merchants.

Others. We offerhigh-end audio devices under the brand name “Astell&Kern” that are manufactured by our subsidiary, ~~Iriver.~~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 ~~2016, two of Iriver’s audio devices were selected as CES Innovation Awards Honorees in the Portable Media Player~~2017 and Accessories category and High Performance Home Audio/Video category, respectively, and in 2017, an Iriver audio device was selected as an CES Innovation Awards Honoree in the Accessories category. In 2014 and 2017,2018, we acquired additional equity interests in ~~Iriver, a manufacturer of digital audio players~~Dreamus for Won 25.0 billion and ~~other portable media devices,~~Won 65.0 billion, respectively, and as of December 31, ~~2017,~~2019, we had a ~~45.9%~~51.4% equity interest in ~~Iriver.~~

In addition, we operate a security and network surveillance business through NSOK, a provider of residential and small business electronic security and other related alarm monitoring services. In 2014 and 2015, we acquired an 83.9% interest in NSOK for an aggregate of Won 64.0 billion, as part of our initiative to further develop our IoT solutions business. In October 2016, we acquired the remaining 16.1% interest in NSOK through SK Telink.Dreamus.

We also operate a mobile application marketplace, “One ~~Store”~~Store,” in collaboration with KT, LG U+ and 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, ~~2017,~~2019, we held 52.7% 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 acquired a controlling equity interest in id Quantique, a leading provider of quantum cryptography solutions for data security based in Switzerland, in 2018. As of December 31, 2019, we held a ~~65.5%~~66.8% equity interest in ~~One Store.~~id Quantique.

In June 2019, we acquired a 34.6% interest in Incross, a digital advertising company that provides mobile, online and other forms of digital advertising solutions, for an aggregate purchase price of Won 53.7 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 of December 31, 2019. We acquired such 60.0% equity interest from SK Holdings 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 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 MSIT 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~~The 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 ~~11.98~~9.15 per minute, Won ~~11.98~~9.99 per minute and Won ~~13.44~~10.86 per minute for ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, respectively.

Fixed-line-to-Wireless. The MSIT 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 ourfixed-line-to-wireless interconnection revenue and expenses.

The interconnection ~~rates~~rate paid by fixed-line network service providers to each wireless network service provider ~~are set out below. Beginning in~~was Won 11.64 per minute, Won 13.07 per minute and Won 14.56 per minute for 2019, 2018 and 2017, a single interconnection rate applies to all wireless telecommunications service providers, which will eliminate the cost benefit that KT and LG U+ had historically derived from the higher interconnection rates they had received.respectively.

   Rate per Minute (in Won)
Applicable Year
   SK Telecom    KT    LG U+
2013
   ￦ 26.27    ￦ 26.98    ￦ 27.04
2014
   22.22    22.73    22.78
2015
   19.53    19.92    19.96
2016
   17.03    17.14    17.17
2017
   14.56    14.56    14.56
2018
   14.56    14.56    14.56

Wireless-to-Wireless. Interconnection charges also apply to calls between wireless telephone networks in 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 thefixed-line-to-wireless interconnection rate set out in the table above.

Our revenues from thewireless-to-wireless charge were Won 463.8 billion in 2019, Won 498.5 billion in 2018 and Won 505.1 billion in ~~2017, Won 540.3 billion in 2016 and Won 582.6 billion in 2015.Our~~2017. Our expenses from these charges were Won 464.1 billion in 2019, Won 494.2 billion in 2018 and Won 512.2 billion in ~~2017, Won 548.1 billion in 2016 and Won 579.0 billion in 2015.~~2017. 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. Each of our competitors has 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, ~~2017,~~2019, for the following markets.


	Market Share (%)								Market Share (%)
	SK Telecom		KT		LG U+		Others		SK Telecom			KT			LG U+			Others
Wireless Service⁽¹⁾		48.2		31.2		20.6		—		46.4	%		31.6	%		22.0	%		—	%
LTE Service⁽¹⁾		45.3		30.6		24.1		—		45.3			30.6			24.1			—
5G Service⁽¹⁾										44.7			30.4			24.9			—
Fixed-Line Telephone (including VoIP)		16.1		58.0		17.4		8.5		15.9			57.2			17.5			9.4
Broadband Internet		25.7		41.3		18.0		15.0		25.6			40.9			19.6			13.9
IPTV⁽²⁾		13.4		23.0		10.9		52.7
Pay TV⁽²⁾										14.9			31.4	⁽³⁾		24.9	⁽⁴⁾		28.8

(1)	Includes MVNO subscribers that lease the wireless networks of the respective mobile network operator.

(2)	Includesvideo-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 24.0% from KT’s IPTV service and 7.4% from its satellite TV service provided through KT Skylife Co, Ltd., a subsidiary of KT.

(4)	Consists of 12.9% from LG U+’s IPTV service and 12.0% from its cable TV service provided through LG HelloVision, a subsidiary of LG U+.

Cellular Services

As of December 31, ~~2017,~~2019, we had ~~30.2~~31.5 million subscribers, representing a market share of approximately ~~48.2%~~46.4%, including MVNO subscribers leasing our networks. As of December 31, ~~2017,~~2019, KT and LG U+ had ~~19.6~~21.4 million and ~~12.9~~15.0 million subscribers, respectively, representing approximately ~~31.2%~~31.6% and ~~20.6%~~22.0%, respectively, of the total number of wireless subscribers in Korea on such date, each including MVNO subscribers leasing its networks. As of December 31, ~~2017,~~2019, we had ~~22.9~~2.1 million 5G subscribers and KT and LG U+ had 1.4 million and 1.2 million 5G subscribers, respectively. As of December 31, 2019, we had 25.0 million LTE subscribers and KT and LG U+ had ~~15.4~~17.2 million and ~~12.1~~13.5 million LTE subscribers, respectively, each including MVNO subscribers leasing its networks.

In ~~2017,~~2019, we had 5.8 million activations and 5.2 million deactivations. For ~~2017,~~2019, our monthly churn rate ranged from ~~1.4%~~1.0% to ~~1.5%~~1.4%, with an average monthly churn rate of ~~1.5% for 2017,~~1.2%, which remained unchanged from ~~2016.~~2018. In ~~2017,~~2019, we gained ~~39.2%~~43.5% of the total number of new wireless subscribers and subscribers that migrated to a different wireless telecommunications service provider, compared to KT with ~~33.1%~~29.0% and LG U+ with 27.6%.

~~We also compete~~Our competitors for subscriber activations ~~with~~include 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,~~Currently, thirteen MVNOs ~~have commenced providing~~provide wireless telecommunications services using the networks leased from us. As of December 31, ~~2017,~~2019, MVNOs had a combined market share of ~~12.0%~~11.4%, of which MVNOs leasing our networks represented ~~5.5%~~4.2%, MVNOs leasing KT’s networks represented 5.6% and MVNOs leasing LG U+’s networks represented ~~0.9%~~1.6%.

In addition, other companies may enter the ~~telecommunications service~~wireless network services market. New entries in such market ~~by acquiring the~~have historically required obtaining requisite licenses from the MSIT. ~~For example,~~However, pursuant to an amendment to the Telecommunications Business Act that went into effect in ~~October 2015, three~~June 2019, companies ~~applied for licenses to~~meeting certain regulatory criteria may become ~~Korea’s fourth mobile~~a network ~~operator. Although~~service provider by registering with the MSIT ~~rejected~~without a separate license requirement, which may have the ~~applications~~effect of ~~all three companies in January 2016,~~encouraging new entries into the ~~MSIT may continue its efforts to find an eligible applicant to be Korea’s fourth mobile~~Korean wireless network ~~operator~~services 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.~~reaching a peak of 28.2% in 2012. Such percentage was ~~24.3% in 2015, 23.9% in 2016 and~~ 25.0% in ~~2017. We~~2017, 24.5% in 2018 and 25.7% in 2019.We attribute such stabilization to the maturity of the ~~LTE~~overall 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.However, the prohibition from providing handset subsidies exceeding the amount set by the KCC expired in September 2017 pursuant to the expiration of the three-year effective period of the relevant provision of the MDDIA. For a more detailed discussion of the MDDIA, see ~~“Item 4.B. Business Overview —~~“— Law and Regulation — ~~Competition Regulation —~~ Rate ~~Regulation.”~~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.

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, ~~2017,~~2019, our market share of the fixed-line telephone and VoIP service market was ~~16.1%~~15.9% (including the services provided by SK Broadband and SK Telink) in terms of number of subscribers compared to KT with ~~58.0%~~57.2% and LG U+ with ~~17.4%~~17.5%.

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, ~~2017.~~2019. As of December 31, ~~2017,~~2019, our market share of the broadband Internet market was ~~25.7%~~25.6% in terms of number of subscribers compared to KT with ~~41.3%~~40.9% and LG U+ with ~~18.0%~~19.6%.

Our IPTV service competes with other providers of ~~such~~ pay TV services, including KT, LG U+ and cable companies. As of December 31, ~~2017,~~2019, our market share of the pay TV market (which includes IPTV, cable TV and satellite TV) in terms of number of subscribers was ~~13.4%~~14.9% compared to KT with ~~23.0%~~31.4% (including its IPTV and satellite TV services) and LG U+ with ~~10.9%~~24.9% (including its IPTV and cable TV services), and the collective market share of other pay TV providers ~~of 52.7%. With respect to our mobile IPTV business, we face competition from similar services provided by KT and LG U+~~was 28.8%. We also face increasing competition from global media streaming service providers such as Amazon Video and Netflix, which launched its services in Korea in January 2016.

Recently, the Korean fixed-line telecommunications industry has been going through significant consolidation involving major pay television service providers. 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. In April 2019, SK Broadband entered into an agreement with Tbroad, pursuant to which Tbroad will merge with and into SK Broadband. Upon the completion of such merger, we expect to own approximately 74.4% of SK Broadband’s total

outstanding shares following the issuance of SK Broadband’s shares to Tbroad’s shareholders. In addition, SK Telecom signed a separate share purchase agreement with Tbroad Co., Ltd. to acquire a 55.0% equity interest in Tbroad Nowon for a purchase price of Won 10.4 billion in cash.Both transactions have obtained all requisite regulatory and shareholder approvals and are expected to be completed as of April 30, 2020 and April 29, 2020, respectively. 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 thanone-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. While the expiration of such regulation has prompted the submission of a number of bills in the National Assembly to extend its application, it is uncertain whether any of such bills will be passed. An extension of such regulation may restrict our and our major competitors’ abilities to engage in further consolidation or otherwise significantly increase market share in the pay TV market. In addition, there is a pending bill in the National Assembly which proposes to require IPTV service providers to obtain approvals from the MSIT for any mergers or acquisitions orchange-of-control transactions.

~~E-Commerce~~Security Services

The physical 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 operated by ADT Caps competes with other large physical security service providers, including~~e-commerce~~S-1 and KT Telecop. As of December 31, 2019, our market share of the physical security services market was 32.4% in terms of the aggregate revenue of these three companies, compared toS-1 with 55.9% and KT Telecop with 11.6%.

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. SK Infosec’s information security services compete with other providers of similar products and services, such as Ahnlab, Inc., SECUi Corp. and WINS Co., Ltd.

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 variouse-commerce providers, including online open marketplaces ~~such as Gmarket, Auction~~ and

~~Interpark and online~~ social commerce operators such as Gmarket, Auction, Interpark, Coupang, ~~Ticket Monster~~Wemakeprice and ~~Wemakeprice.We~~TMon.We also face competition from 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. OurT-commerce business, SK stoa, primarily competes with other home shopping providers such as those listed above, as well as with variouse-commerce providers and traditional retailers.

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 into the following categories:

SK Hynix

As of December 31, ~~2017,~~2019, we held a 20.1% equity interest in SK Hynix, one of the world’s largest memory-chip makers by 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, ~~2017,~~2019, the fair value of our holding in SK Hynix was Won ~~11,176.7 billion, constituting 33.4% of our total assets as of such date.~~13,748.0 billion. We received dividend payments of Won 219.2 billion in 2019, Won 146.1 billion in 2018 and Won 87.7 billion in 2017 ~~Won 73.1 billion in 2016 and Won 43.8 billion in 2015~~ related to such shareholding. In ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, SK Hynix and its subsidiaries, on a consolidated basis, reported revenues of Won ~~30,109.4~~26,990.7 billion, Won ~~17,198.0~~40,445.1 billion and Won ~~18,798.0~~30,109.4 billion, respectively, profit before income tax of Won ~~13,439.6~~2,442.7 billion, Won ~~3,216.5~~21,341.0 billion and Won ~~5,269.1~~13,439.6 billion, respectively, and profit for the year of Won ~~10,642.2~~2,016.4 billion, Won ~~2,960.5~~15,540.0 billion and Won ~~4,323.6~~10,642.2 billion, respectively. The ~~increase~~decrease in SK Hynix’s revenues in ~~2017~~2019 was primarily due to ~~increases~~decreases in ~~both volume~~the demand for and average selling prices of DRAM and NAND flash products. As of December 31, ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, SK Hynix and its subsidiaries, on a consolidated basis, reported total assets of Won ~~45,418.5~~64,789.5 billion, Won ~~32,216.0~~63,658.3 billion and Won ~~29,677.9~~45,418.5 billion, respectively, and total equity of Won ~~33,820.1~~47,943.2 billion, Won ~~24,023.5~~46,852.3 billion and Won ~~21,387.7~~33,820.9 billion, respectively. For a more detailed discussion of the risks relating to our shareholding in SK Hynix, see “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 ADSs as well as our results of operation.”

~~Healthcare Business~~

We believe that the healthcare business is one of the new growth industries as society ages and medical and health technologies evolve and become integrated with ICT. In 2011, we began pursuing new opportunities in the healthcare business area by acquiring a 9.3% equity interest 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 2016, NanoEnTek received approvals from the U.S. Food and Drug Administration and the China Food and Drug Administration to market certain of its devices in the United States and China. In the first quarter of 2013, we also acquired a 49.0% equity interest in X’ian Tianlong Science and Technology Co., Ltd., 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.

KEB 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 KEB HanaCard Co., Ltd. (“KEB HanaCard”) in November 2014), a credit card services provider, for a total purchase price of Won 400.0 billion. As of December 31, ~~2017,~~2019, we held 15.0% of the total outstanding shares of KEB 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.

~~Hana-SK~~ ~~Fintech Corporation~~Wavve

In ~~order~~September 2019, in furtherance of our efforts to ~~provide an everyday finance platform,~~enhance the competitiveness of our media business and to promote its future growth, we ~~entered into~~acquired a minority equity stake in Content Wavve (formerly known as Content Alliance Platform Inc.), a joint venture ~~agreement with Hana Financial Group~~established by the three major terrestrial broadcasters in ~~July 2016. Combining~~Korea that operated the mobile OTT service “POOQ,” by investing Won 90.9 billion in cash and transferring our ~~leading~~former mobile ~~technology~~OTT service business “oksusu” to Content Wavve. Content Wavve combined oksusu and ~~big~~POOQ to launch a new integrated mobile OTT service “wavve” in September 2019. As of December 31, 2019, we held 30.0% of the total outstanding shares of Content Wavve.

Wavve offers over 240,000 titles ofvideo-on-demand contents, including a wide variety of real-time andon-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 ~~analysis capabilities with Hana Financial Group’s financial~~add-on plans for our wireless service~~Hana-SK~~ ~~Fintech Corporation provides innovative mobile financial services~~ subscribers. Certain types of contents, such as mobile asset management, easy payment and overseas wire transfer services and launched the finance platform “Finnq” in the third quarter of 2017.We hold a 49.0% equity interest in the joint venture, and Hana Financial Group holds the remaining 51.0%.movies, can also be purchased individually.

Law and Regulation

Overview

Korea’s telecommunications industry is subject to comprehensive regulation by the MSIT, which is responsible for information and telecommunications policies. The MSIT 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.

The MSIT is charged with regulating information and telecommunications and the KCC is charged with regulating the public interest aspects of and fairness in broadcasting.

Telecommunications service providers are currently classified into ~~three~~two categories: network service providers ~~value-added service providers,~~ and ~~specific~~value-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 ~~are~~were previously required to obtain a license from the MSIT 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 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 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 KCC 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 MSIT 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 MSIT 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 with~~notify the Minister of the MSIT 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 orpaid-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 andsub-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 thesub-subsidiary. Therefore, we and other subsidiaries of SK Holdings may not invest in any domestic affiliate that is also a member company of the SK Group, except in the case where we invest in our own subsidiary or where another subsidiary of SK Holdings invests in its own subsidiary.

•

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.

Rate ~~Regulation.~~Regulation ~~Most network~~

Network service providers whose sales proceeds exceed the amount prescribed by law must report to the MSIT the rates and contractual terms for each type of service they provide. However, 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 must obtain prior approval of the MSIT on our rates and terms of service; provided, however, that suchpre-approval

of the MSIT is not required, if we are planning to reduce the rates for any type of services that we provide under the MSIT-approved contractual terms. The MSIT’s policy is to approve rates if they are appropriate, fair and reasonable (that is, if the rates have been reasonably calculated, considering supply costs, profits, classification of costs and profits for each service, cost savings through changes in the way services are provided and the influence on fair competition, among others). The MSIT may order changes in the submitted rates if it deems the rates to be significantly unreasonable or against public policy. ~~On June 24, 2016, the Government~~Multiple bills have been proposed ~~a bill~~ to the National Assembly to change the approval requirement to a simple reporting requirement, which is the requirement for our competitors. However, ~~the bill is still under review by the relevantsub-committee~~ ~~and~~ there is no assurance as to ~~whether such bill~~which of these bills, if any, will be passed.

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, an MVNO system ~~has been adopted and is in effect until its expiration on September 22, 2019~~ under ~~the amended Telecommunications Business Act,~~ which ~~became effective on March 14, 2017.Under this system,~~ the MSIT 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 ~~MSIT.~~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,~~Such system, however, expired on September 22, 2019, which has prompted the submission of a bill in the National Assembly to extend its application. While it is uncertain whether such bill will be passed, we plan to continue allowing MVNOs to use our networks. Currently, thirteen MVNOs ~~have commenced providing~~provide 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 and (ii) entering into a separate agreement with subscribers imposing obligations to use a specific subscription plan as a condition for providing subsidies. The MDDIA also prohibited 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, which prohibition expired in September 2017. See “Item 5.A. Operating Results — Overview — New 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 their service without receiving subsidies. OnIn June ~~22,~~ 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 ~~change was~~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 ~~change was adopted~~we implemented in December ~~2017.~~2017 and July 2018, respectively. We ~~believe these Government measures will adversely affect our revenues and our results of operations. In addition, 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, or that such measures will not have a material adverse effect on our results of operations.~~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 MSIT sets and announces the standards for

determining the scope, procedures, compensation and other terms and conditions of such provision, interconnection orco-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 MSIT grants permits to additional telecommunications service providers.

Frequency ~~Allocation.~~Allocation

The MSIT 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 MSIT is required to give a public notice. The MSIT 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 MSIT for our frequency usage that are determined based upon our number of subscribers, frequency usage by our networks and other factors. For ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, the fee amounted to Won ~~150.3~~133.1 billion, Won ~~186.8~~151.7 billion and Won ~~189.8~~150.3 billion, respectively.

We currently use 10 MHz of bandwidth in the ~~800MHz~~800 MHz spectrum for our CDMA services, 2010 MHz of bandwidth in the 2.1 GHz spectrum for our WCDMA services, 2030 MHz of bandwidth in the 2.1 GHz spectrum, 20 MHz of bandwidth in the 800 MHz spectrum, 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 ~~spectrum~~bandwidth in the ~~2.3~~3.5 GHz ~~band~~spectrum for our ~~WiBro services.For~~5G services. We also plan to use 800 MHz of bandwidth in the 28 GHz spectrum for our 5G services in the future. 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 16 of the notes to our consolidated financial statements.

In April 2018, the MSIT announced that it plans to hold a frequency bandwidth auction in June 2018 to allocate bandwidths that are capable of utilizing 5G technology in preparation for the commercial launch of 5G networks in Korea. The MSIT plans to auction 280 MHz of bandwidth in the 3.5 GHz spectrum and 2.4 GHz of bandwidth in the 28 GHz spectrum. The MSIT announced that it expects to allocate such bandwidths in December 2018 in accordance with the results of the auction and that it will provide further details regarding the auction in May 2018.

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 ~~spectrum~~frequency 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 and regional paging service providers or any telecommunications service providers whose net annual revenue is less than an amount determined by the MSIT (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 andlow-income citizens, or contribute toward the supply of such universal services.The MSIT designates universal services and the service provider who is required to provide each service. Currently, under the MSIT 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 andlow-income citizens.

In addition to such universal services for handicapped andlow-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 MSIT guidelines, which differ from our accounting practices). ~~Our contribution amount for our fiscal year 2017 has not yet been determined.In 2016, our contribution amount was~~We paid such contributions amounting to Won 16.1 billion, Won 16.7 billion and Won 13.6 billion ~~for our fiscal year 2015. In 2015, our contribution amount was Won 21.1 billion for our fiscal year 2014. As~~in 2019, 2018 and 2017, 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 MSIT may require other corrective action.

As of December 31, ~~2017,~~2019, SK Holdings owned ~~20,363,452~~21,624,120 shares of our common stock, or ~~25.22%~~26.8% of our issued shares. As of December 31, ~~2017,~~2019, the two largest foreign shareholders of SK Holdings each held a 3.5% stake therein. If such foreign shareholders increase their shareholdings in SK Holdings to 15% or more and any such foreign shareholder constitutes the largest shareholder of SK Holdings, SK Holdings 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’ 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, ~~2017~~2019 (which we believe was ~~41.4%~~37.2%), would reach ~~66.7%~~63.4%, exceeding the 49.0% ceiling on foreign shareholding.

Furthermore, SK Holdings 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%. If a corrective order is issued to us by the MSIT arising from the violation of the foregoing foreign ownership limit, and we do not comply within the prescribed period under such corrective order, the MSIT 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 aone-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 MSIT 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 year~~three years or a penalty of Won 50150 million. See “Item 3.D. Risk Factors — Risks Relating to ~~Securities~~Our Business — If SK Holdings 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 ~~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 MSIT 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 MSIT 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. 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. 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, ~~2017,~~2019, SK Group members owned in aggregate ~~25.22%~~26.8% of the shares of our issued common 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, ~~2017:~~2019:


Location	Primary Use	Approximate Area in Square Feet
Seoul Metropolitan Area	Corporate Headquarters		988,447
	Regional Headquarters		~~607,249~~608,670
	Customer Service Centers		107,277
	Training Centers		~~616,845~~443,648
	Central Research and Development Center		482,719
	Others⁽¹⁾		~~1,248,744~~1,777,105
Busan	Regional Headquarters		~~363,282~~363,422
	Others⁽¹⁾		509,510
Daegu	Regional Headquarters		20,978
	Others⁽¹⁾		458,833
Jeolla and Jeju Provinces	Regional Headquarters		265,614
	Others⁽¹⁾		739,459
Chungcheong Province	Regional Headquarters		565,643
	Others⁽¹⁾		~~609,693~~
~~Daegu~~	~~Regional Headquarters~~		~~148,065~~
	~~Others~~⁽¹⁾		~~335,186~~
~~Jeolla and Jeju Provinces~~	~~Regional Headquarters~~		~~265,614~~
	~~Others~~⁽¹⁾		~~685,167~~
~~Chungcheong Province~~	~~Regional Headquarters~~		~~459,302~~
	~~Others~~⁽¹⁾		~~855,398~~774,905

(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 SKT-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 ~~4.E.~~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 ~~note~~notes 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 ~~four~~five segments: (1) cellular services, which include wireless voice and data transmission services, sales of wireless devices, IoT solutions and platform services,(2) fixed-line telecommunication services, which includefixed-line telephone services, broadband Internet services, advanced

media platform services (including IPTV) and business communications services,(3) ~~e-commerce~~security services, which include physical and information security services, (4) commerce services, which include our open marketplace platform, 11st, ourT-commerce business, SK stoa, and ~~other commerce solutions,~~related ancillary services, and ~~(4)~~(5) other businesses, which include our portal service, ~~our hardware~~marketing platform business and certain other ~~operations~~miscellaneous 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 monthlyplan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services andvalue-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 PS&Marketing. Other sources of revenue include revenue from our IoT solutions and platform services, including ~~artificial intelligence~~AI solutions, as well as other miscellaneous cellular services.

In ourfixed-line telecommunication services segment, we earn revenue principally from ourfixed-line telephone services and broadband Internet services and advanced media platform services (including IPTV) through monthlyplan-based fees and usage charges as well as interconnection fees paid to us by other telecommunications operators for use of ourfixed-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.

~~Oure-commerce~~In our security services segment, ~~became a separate reportable segment as of January 1, 2016.~~ we generate revenue from our physical and information security services businesses through our subsidiaries ADT Caps (which we acquired in October 2018 and subsequently merged with our former subsidiary NSOK) and SK Infosec (which we acquired in December 2018), respectively. ADT Caps earns revenue principally from physical security services through monthly plan-based fees and usage charges for value-added services paid by its subscribers. SK Infosec generates revenue primarily through consideration paid by customers under contracts for its information security platform and consulting services and solutions.

In our~~e-commerce~~ commerce services segment, we derive revenue from our subsidiaries Eleven Street, which wasspun-off as our new consolidated subsidiary from SK Planet ~~which earns~~in September 2018, and SK Stoa. Eleven Street generates revenue principally throughthird-party seller fees earned (including commissions) for transactions in which it acts as a selling agent to the “mini malls” on 11st, its online open marketplace platform, as well as advertising revenue ~~from 11st~~ and ~~its~~ other commerce ~~solutions. In March 2016,~~solutions from 11st. SK ~~Planet effected~~Stoa derives revenues throughthird-party seller fees earned (including commissions) for transactions in which it acts as a selling agent on SK stoa, its~~spin-off~~T-commerce of its former platform and T Store businesses by establishing SK TechX Co., Ltd. (“SK TechX”) and One Store, respectively. As a result, the results of operations from SK Planet’s former platform business and T store business were included in our~~e-commerce~~ ~~services segment prior to March 2016 but subsequently, such revenues are included in our others segment.~~network.

In our others segment, we earn revenue from ~~our hardware~~the marketing platform business of SK Planet, the music streaming service and audio device manufacturing businesses ~~through sales~~ of ~~projection display devices~~Dreamus and~~high-end~~ ~~audio devices, our security business operated by our subsidiary, NSOK, advertising revenue from~~ our “Nate” portal service operated by our subsidiary, SK ~~Communications,~~Communications.

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), theT-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunication services segment in the years ended December 31, 2018 and ~~sales commissions through~~2017, were reclassified as part of our ~~mobile application marketplaces. As discussed above,~~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 years ended December 31, 2018 and 2017, 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 years ended December 31, 2018 and 2017 in our consolidated audited financial statements have been recast to retroactively apply such changes in segmentation.

Furthermore, following thespin-off of Eleven Street from SK ~~TechX and One Store are included~~Planet, the remaining marketing platform business operations of SK Planet, which were previously part of our commerce services segment in the year ended December 31, 2017, were reclassified as part of our others segment ~~subsequent~~for the year ended December 31, 2018. As a result, the breakdown of our results of operations by operating segment for the year ended December 31, 2017 in our consolidated audited financial statements have been recast to ~~the spin-offs from SK Planet~~retroactively apply such change in ~~March 2016.~~segmentation.

Our cellular service revenue andfixed-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~~e-commerce~~ security 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 SK stoa to advertise and promote their products and services and the extent of such advertisement and promotion.

Among other factors, management uses operating profit of each reportable segment presented in accordance withK-IFRS (“segment operating profit”) in its assessment of the profitability of each reportable segment. The sum of segment operating profit for all four reportable segments differs from our operating profit presented in accordance with IFRS as issued by the IASB as segment operating profit 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 profit presented in accordance with IFRS as issued by the IASB and operating profit presented in accordance withK-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information underK-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:

New Rate Regulations. 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 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. OnIn June ~~22,~~ 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 ~~change was~~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 ~~change was adopted~~we implemented in December ~~2017.~~2017 and July 2018, respectively.

In ~~2017,~~2019, the total 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 25%. In ~~the fourth quarter of 2017,~~2019, approximately ~~60%~~55% of our new subscribers elected to receive discounted rates in lieu of handset subsidies compared to ~~47%~~60% in ~~the previous quarter.~~2018. As of December 31, ~~2017, approximatelyone-third~~2019, a substantial majority of our subscribers who elected to receive these discounted rates are receiving the increased 25% rate discount. ~~We expect that these~~These Government measures ~~will~~have adversely ~~affect~~affected our revenues and

results of operations as more subscribers ~~elect~~elected to receive the 25% rate discount. On the other hand, ~~we expect that~~ this ~~will~~has also ~~reduce~~led to a reduction of, or partially offset increases in, our marketing expenses as the ~~amount~~number of subscribers who have elected to receive handset subsidies ~~paid to subscribers will decline~~has declined, and ~~that this will also contribute~~has contributed to maintaining a stable churn rate.

With respect to handset 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. The prohibition from providing handset subsidies exceeding the amount set by the KCC (which was Won 330,000 from April 2015 to September 2017) expired in September 2017 pursuant to the expiration of the~~three-year~~ effective period of the relevant provision of the MDDIA. Although the expiration of this provision may lead to increased handset subsidies provided to subscribers among us and our competitors, we do not expect that the impact will be significant as a greater number of subscribers elect to receive discounted rates in lieu of such subsidies due to the increase in the applicable discount rate to 25% in September 2017.

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 Proceedings.”

Decrease in Interconnection Fees. Our wireless telecommunications services depend, in part, on our interconnection arrangements with domestic and internationalfixed-line and other wireless networks. Charges for interconnection affect our revenues and operating results. The MSIT 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 MSIT 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 ~~2017~~2019 and any further reduction in interconnection rates by the MSIT 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”) and average monthly revenue per subscriber including such MVNO subscribers (“ARPU including MVNO”). ~~Billing~~ 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 ~~1.2%~~3.6% to Won ~~35,216~~31,076 in ~~2017~~2019 from Won ~~35,636~~32,247 in ~~2016,~~2018, which represented a decrease of ~~1.3%~~7.6% from Won ~~36,118~~34,901 in ~~2015.~~2017. Our ~~total~~ ARPU including MVNO decreased by ~~0.8%~~4.2% to Won ~~40,800~~27,414 in ~~2017~~2019 from Won ~~41,126~~28,615 in ~~2016,~~2018, which represented a decrease of ~~2.6%~~8.2% from Won ~~42,221~~31,171 in ~~2015.~~2017. The decreases in ~~billing~~ ARPU and ~~total~~ ARPU including MVNO in ~~2017~~2019 and ~~2016~~2018 were primarily due to a decrease in revenue attributable to an increase in the number of subscribers who elected to receive discounted rates in lieu of receiving handset ~~subsidies. In addition, the decreases in billing ARPU~~subsidies and ~~total ARPU in 2017 were also partially due to~~ the increase in ~~the applicable~~such discount rate ~~offered to subscribers not receiving handset subsidies~~ from 20% to 25% starting in September 2017, as well as the additional rate discounts offered to low income customers, including those on government welfare programs and senior citizen recipients of the basic pension, starting in December 2017 and July 2018, respectively. Such decreases were offset in part by an increase in subscribers that subscribe to our higher-priced unlimited data usage plans and 5G plans.

Potential Effects ofCOVID-19. Demand for our products 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 globalCOVID-19 pandemic, which is likely to have a significant negative effect on the Korean economy. For example, an increase in unemployment among, and/or a decrease in disposable income of, our customers resulting from a deterioration of the Korean economy due toCOVID-19 may decrease demand for some of our products and services or cause an increase in delinquent subscriber accounts. While it is not possible to predict the duration or full magnitude of harm fromCOVID-19, a continued and prolonged outbreak ofCOVID-19 may have a material adverse effect on our business, financial condition and results of operations. See “Item 3.D. Risk Factors—Risks Relating to Our Business — The ongoing global pandemic ofCOVID-19 and any possible recurrence of other types of widespread infectious diseases may adversely affect our business, financial condition or results of operations.”

Explanatory Note Regarding Presentation of Certain Financial Information underK-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 withK-IFRS as adopted by the KASB, which we are required to file with the FSC and the Korea Exchange under the FSCMA.

K-IFRS requires operating profit, which is calculated as operating revenue less operating expense, to be separately presented on the consolidated statement of income. The presentation of operating profit 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 profit in the consolidated statements of income prepared in accordance withK-IFRS for the corresponding periods in certain respects. The table below sets forth a reconciliation of our operating profit 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, ~~2017~~2019 to the operating profit as presented in the consolidated statements of income prepared in accordance withK-IFRS.


	For the Year Ended December 31,									For the Year Ended December 31,
	2017			2016			2015			2019			2018			2017
	(In billions of Won)									(In billions of Won)
Operating profit pursuant to IFRS as issued by the IASB	￦	1,224.6		￦	1,303.4		￦	1,495.4		￦	1,000.9		￦	833.8		￦	1,224.6
Differences:
Other income pursuant to IFRS that are classified as othernon-operating income pursuant toK-IFRS
Other income pursuant to IFRS that are classified as othernon-operating income pursuant toK-IFRS:
Fee revenues		(1.4	)		(0.6	)		—			(0.6	)		(0.7	)		(1.4	)
Gain on disposal of property and equipment and intangible assets		(14.0	)		(6.9	)		(7.1	)		(8.9	)		(38.9	)		(14.0	)
Others		(16.6	)		(59.1	)		(23.8	)		(93.7	)		(32.3	)		(16.6	)

		(32.0	)		(66.6	)		(30.9	)		(103.2	)		(71.9	)		(32.0	)
Other operating expenses pursuant to IFRS that are classified as othernon-operating expenses pursuant toK-IFRS
Other operating expenses pursuant to IFRS that are classified as othernon-operating expenses pursuant toK-IFRS:
Loss on impairment of property and equipment and intangible assets		54.9			24.5			35.8			65.9			255.8			54.9
Loss on disposal of property and equipment and intangible assets		60.1			63.8			21.4			56.2			87.3			60.1
Donations		112.6			96.6			72.5			17.6			59.0			112.6
Bad debt for accounts receivable — other		5.8			40.3			15.3			5.8			7.7			5.8
Others		110.6			73.7			98.5			66.8			30.1			110.6

		344.0			298.9			243.5			212.3			439.9			344.0

Operating profit pursuant toK-IFRS	￦	1,536.6		￦	1,535.7		￦	1,708.0		￦	1,110.0		￦	1,201.8		￦	1,536.6

See note 5(2) of the 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, 2019, 2018 and 2017.

Critical Accounting Policies, Estimates And Judgments

Our consolidated financial statements are prepared in accordance with 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, fair value measurements of financial instruments, estimated useful lives and impairment oflong-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

A loss allowance is provided based on a review of the status of individual receivable accounts at the end of the year. We maintain loss allowances 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 receivable at the end of the period, past customer default experience and their credit status, and economic and industrial factors. In addition, following our adoption of IFRS 9,Financial Instruments, in the fiscal year beginning January 1, 2018, 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, which was the case under the previously applicable accounting standards. See “— Recently ~~Issued~~Adopted International Financial Reporting Standards — IFRS 9.” Loss allowance amounted to Won 346.4 billion as of December 31, 2019 and Won 376.0 billion as of December 31, 2018. If economic or specific industry trends worsen beyond our estimates, the loss allowances we have recorded may be materially adjusted in the future.

Fair Value Measurement of Financial Instruments

Subsequent to initial recognition, 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 notes 2(4) and 35(3) of the notes to our consolidated financial statements.

Impairment ofLong-lived Assets Including Frequency Usage Rights

Long-lived assets generally consist of property and equipment and definite-lived intangible assets. We review our depreciation and amortization methods, estimated useful lives and residual values oflong-lived assets at the end of each annual reporting period. If any such asset or cash-generating unit is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset or cash-generating unit exceeds the estimated recoverable amount. The recoverable amount of along-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, we 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 level of a cash-generating unit. The recoverable amounts of assets orcash-generating units may be determined based onvalue-in-use calculations, which require the use of estimates.

Our definite-lived intangible assets include our frequency usage rights, which have contractual lives of 5 to 10.25 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 is exposed to risks and challenges associated 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. If any such indication exists, we test for impairment utilizing the estimatedlong-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 no impairment of our frequency usage rights in 2019. See note 16 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 anynon-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 theacquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is not 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, we 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 level of a cash-generating unit. The recoverable amount of an asset or cash-generating unit to which goodwill has been 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 respectivecash-generating unit and the determination of an appropriate discount rate in order to calculate present value.

In 2019, we recognized Won 21.1 billion of impairment losses on goodwill compared to Won 166.8 billion of impairment losses on goodwill in 2018. 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. Impairment losses on goodwill in 2018 were mainly due to our recognition of impairment losses on goodwill relating to our former consolidated subsidiary Shopkick, which operated a mobile reward points-basedin-store shopping application. We disposed of our entire equity interest in Shopkick in June 2019.

As of December 31, 2019, the amount of goodwill allocated to our security services cash-genearting unit, which is primarily derived from the acquisition of LSH, was Won 1,173.0 billion, which remained unchanged from December 31, 2018. 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 2024 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 7.3%. 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 2019. 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 15(2) of the notes to our consolidated financial statements.

See notes 4(12) and 15 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, 2019 and 2018, unused tax loss carryforwards of Won 1,023.9 billion and Won 849.9 billion, respectively, were not recognized as deferred tax assets because we did not believe that their realization would be probable. The increase of Won 174.0 billion in unrecognized tax loss carryforwards in 2019 compared to 2018 was primarily related to the effects of consolidation of FSK L&S as well as the net loss incurred by some of our consolidated subsidiaries. See notes 4(26) and 31 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. Following our adoption of IFRS 15,Revenue from Contracts with Customers, in the fiscal year beginning January 1, 2018, 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

Following our adoption of IFRS 15 in the fiscal year beginning January 1, 2018, 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 such 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.

Recently Adopted International Financial Reporting Standards

IFRS 16

We ~~plan to adopt~~adopted IFRS ~~15, Revenue from Contracts with Customers and IFRS 9, Financial Instruments~~16,Leases, in the fiscal year beginning on January 1, ~~2018 and~~2019 using the modified retrospective method by recognizing the cumulative effect of initially applying IFRS 16 ~~Leases~~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 recognizeright-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 oflow-value assets. As a result, we recognizedright-of-use assets (as part of our property and equipment) of Won 654.4 billion and Won 709.4 billion and lease liabilities (as part of our financial liabilities) of Won 663.8 billion and Won 712.7 billion, in each case as of January 1, 2019 and December 31, 2019, respectively. For the year ended December 31, 2019, we recognized Won 360.6 billion of depreciation expenses relating to ourright-of-use assets and Won 15.5 billion of interest expenses relating to our lease liabilities. Lessor accounting remains similar to previous accounting policies.

As of December 31, 2019, we assess the lease term of a lease contract based on the assumption that the right to extend or terminate the lease is not enforceable if the lease contract requires the counterparty’s consent for its termination or extension. In December 2019, International Financial Reporting Interpretations Committee (“IFRIC”) issued its final agenda decision that the concept of penalty that should be considered in determining the enforceable period of a lease under IFRS 16 must be determined considering broader economics of the lease contract, rather than just the contractual termination payments. Furthermore, under such agenda, a lease is no longer enforceable when each of the parties to it has the right to terminate the lease without permission from the other party with no more than an insignificant penalty. Considering the type and number of lease contracts entered into as of and from January 1, 2019, we believe that we did not have sufficient time to complete the analysis on our lease portfolios to reflect the impact of such IFRIC agenda decision in our consolidated financial statements as of and for the year ended December 31, 2019. We are in the ~~year~~process of conducting such analysis, which we expect to complete during the first half of 2020, and we plan to apply such IFRIC agenda decision beginning ~~on January 1, 2019.~~ in 2020 as a change in our accounting policies. We expect such application to have the effect of increasing the lease term for certain of our lease contracts, and to result in an increase in ourright-of-use assets and lease liabilities.

See ~~note 4(28)~~notes 3, 4(13) and 4(14) of the notes to our consolidated financial statements for ~~a summary~~further details regarding the effects of ~~significant accounting standards that have been issued but not yet adopted.~~

IFRS 15 requires us to capitalize certain costs associated with commissions paid to sales agents to obtain new customer contracts, which we previously expensed. We pay commissions for each service contract to our ~~direct retail stores and authorized dealers. Upon~~ adoption of IFRS ~~15, we will recognize~~16 and significant accounting policies related to leases prior to and following the ~~commissions as prepaid expenses as these are the incremental costs~~adoption of ~~obtaining a contract and we will amortize such assets over the relevant expected service periods. In addition,~~ IFRS 16.

IFRS 15 requires us to allocate the transaction price of each performance obligation in a contract in proportion to its stand-alone selling price when we provide a wireless telecommunications service contract together with a digital handset to a customer. We expect that this change will negatively impact our wireless service revenue, but positively impact our wireless device sales revenue. In connection with this, the difference between the revenue recognized for the wireless device sale and the transaction price will be recorded as a contract asset that will be amortized over the expected wireless service period to offset the relevant wireless service revenue.

We ~~plan to adopt~~adopted IFRS 15,Revenue from Contracts with Customers, in the fiscal year beginning on January 1, 2018. We adopted IFRS 15 by recognizing the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of retained earnings as of January 1, 2018. We elected to apply IFRS 15 retrospectively only to contracts that were not completed as of January 1, 2018. ~~The following table sets forth~~

IFRS 15 is an accounting standard issued by the IASB that provides a comprehensive framework for determining whether, how much and when revenue is recognized. Pursuant to IFRS 15, we allocate revenue generated from our wireless and fixed-line telecommunication services based on our identification and satisfaction of our stand-alone performance obligations under applicable customer contracts. For example, in the case of contracts where we sell both a wireless device and subscription plan together to a single customer, from which a substantial portion of our overall revenue is generated, we allocate the portion of the overall transaction price related to the wireless device and immediately recognize such portion as revenue, whereas the portion related to the wireless subscription plan is allocated and recognized as revenue over the course of the customer contract period. Under IFRS 15, such allocation is made proportionately based on the stand-alone selling prices of the wireless device and subscription plan.

In addition to the revenue recognition model, IFRS 15 specifies how to account for the incremental costs of obtaining a contract, which in our case includes certain of our commissions paid to our retail stores and authorized dealers in connection with acquiring new customer contracts. IFRS 15 requires certain of such costs to be capitalized as assets and subsequently amortized over the applicable expected ~~financial impact~~contract periods calculated based on our historical experience on the duration of subscriber contracts.

In the case of our consolidated statement of income for the year ended December 31, 2018, the adoption of IFRS 15 had the effect of decreasing our operating revenue by Won 85.8 billion, and decreasing advertising expenses and commission expenses by Won 51.2 billion and Won 12.7 billion, respectively, for a total decrease in our operating expense by Won 66.1 billion. Therefore, the adoption of IFRS 15 resulted in decreases in operating profit and profit before income tax by Won 19.7 billion each. In addition, the adoption had the effect of decreasing our profit for the year by Won 88.2 billion and increasing our income tax expense by Won 68.5 billion. The adoption of IFRS 15 did not have a material impact on our consolidated statement of cash flows for the year ended December 31, 2018. See notes 4(23) and 4(24) of the notes to our consolidated financial ~~position~~statements for further details regarding significant accounting policies related to revenue prior to and following the adoption of IFRS 15.

IFRS 9

We adopted IFRS 9,Financial Instruments, in the fiscal year beginning on January 1, 2018. We adopted IFRS 9 by recognizing the cumulative effect of initially applying IFRS 9 as an adjustment to the opening balance of retained earnings as of January 1, ~~2018~~2018.

IFRS 9 requires all financial assets, on initial recognition, to be classified as financial assets at amortized cost, debt instruments at fair value through other comprehensive income, equity investments at fair value through other comprehensive income or financial assets at fair value through profit or loss. The classification is generally based on ~~our evaluation~~the business model in which a financial asset is managed and its contractual cash flow characteristics. In addition, IFRS 9 sets out an “expected credit loss” impairment model, under which we generally recognize impairment losses on debt instruments at an amount equal to ~~date.~~their twelve-month expected credit losses. However, with respect to debt instruments experiencing a significant increase in credit risk and accounts receivable – trade, we recognize impairment losses at an amount equal to their lifetime expected credit losses.

As of December 31,
2017
(Before adoption of
IFRS 15) Adjustments As of January 1,
2018
(After adoption
of IFRS 15)

(In billions of Won)
Current Assets
6,201.9 1,804.1 8,006.0
Accounts receivable — trade, net
2,126.0 (4.3 ) 2,121.7
Prepaid expenses
197.0 1,695.7 1,892.7
Contract assets — multiple performance obligations
— 112.2 112.2
Contract assets — right of return
— 0.5 0.5
Others
3,878.9 — 3,878.9
Non-Current Assets
27,226.8 718.8 27,945.6
Long-term prepaid expenses
90.8 693.3 784.1
Long-term contract assets — multiple performance obligations
— 30.4 30.4
Deferred tax assets
88.1 (4.9 ) 83.2
Others
27,047.9 — 27,047.9
Total Assets
33,428.7 2,522.9 35,951.6
Current Liabilities
7,109.1 12.5 7,121.6
Provisions
52.1 (0.2 ) 51.9
Contract liabilities
— 114.3 114.3
Receipts in advance
161.3 (161.3 ) —
Unearned revenue
175.7 (175.7 ) —
Withholdings
961.5 235.4 1,196.9
Others
5,758.5 — 5,758.5
Non-Current Liabilities
8,290.4 610.4 8,900.8
Long-term contract liabilities
— 19.1 19.1
Long-term unearned revenue
7.1 (7.1 ) —
Othernon-current liabilities
44.1 (0.9 ) 43.2
Deferred tax liabilities
978.7 599.3 1,578.0
Others
7,260.5 — 7,260.5
Total Liabilities
15,399.5 622.9 16,022.4
Equity attributable to owners of the Parent Company
17,842.2 1,900.0 19,742.2
Share capital
44.6 — 44.6
Capital surplus and others
196.4 — 196.4
Retained earnings
17,835.9 1,900.0 19,735.9
Reserves
(234.7 ) — (234.7 )
Non-controlling interests
187.0 — 187.0
Total Shareholders’ Equity
18,029.2 1,900.0 19,929.2

~~Our preliminary assessment of the financial impact resulting from the~~The adoption of IFRS 9 did not ~~indicate any~~have a material impact on our consolidated statement of income or our consolidated statement of cash flows for the year ended December 31, 2018. See notes 4(5) and 4(6) of the notes to our consolidated financial statements ~~if such adoptions were applied as of December 31, 2017. Our preliminary assessments in connection with IFRS 9~~for further details regarding significant accounting policies related to financial assets prior to and ~~15 set forth herein are subject to change. The expected impact of~~following the adoption of IFRS ~~16 on our consolidated results of operations and financial position is currently unknown or cannot be reasonably estimated.~~9.

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,														For the year ended December 31,
	2017				2016					2015					2019					2018				2017
	(In billions of Won, except percentages)														(In billions of Won, except percentages)
Operating revenue and other income	￦	17,552.0	100.0	%	￦	17,158.3		100.0	%	￦	17,167.6		100.0	%	￦	17,846.9		100.0	%	￦	16,945.9	100.0	%	￦	17,552.0	100.0	%
Revenue		17,520.0	99.8			17,091.8		99.6			17,136.7		99.8			17,743.7		99.4			16,874.0	99.6			17,520.0	99.8
Other income		32.0	0.2			66.5		0.4			30.9		0.2			103.2		0.6			71.9	0.4			32.0	0.2
Operating expenses		16,327.4	93.0			15,854.9		92.4			15,672.2		91.3			16,846.0		94.4			16,112.1	95.1			16,327.4	93.0
Operating profit		1,224.6	7.0			1,303.4		7.6			1,495.4		8.7			1,000.9		5.6			833.8	4.9			1,224.6	7.0
Profit before income tax		3,403.3	19.4			2,096.1		12.2			2,035.4		11.9			1,162.7		6.5			3,976.0	23.5			3,403.3	19.4
Income tax expense		745.7	4.2			436.0		2.5			519.5		3.0			300.7		1.7			844.0	5.0			745.7	4.2
Profit for the year		2,657.6	15.1			1,660.1		9.7			1,515.9		8.8			861.9		4.8			3,132.0	18.5			2,657.6	15.1
Attributable to:
Owners of the Parent Company		2,599.8	14.8			1,676.0		9.8			1,518.6		8.8			889.9		5.0			3,127.9	18.5			2,599.8	14.8
Non-controlling interests		57.8	0.3			(15.9	)	(0.1	)		(2.7	)	(0.0	)		(28.0	)	(0.2	)		4.1	0.0			57.8	0.3

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,
2017 2016 2015
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⁾
￦ 10,639.0 60.7 % ￦ 10,583.0 61.9 % ￦ 10,720.5 62.6 %
Cellular Interconnection
592.7 3.4 614.4 3.6 710.0 4.1
Wireless Device Sales
1,052.2 6.0 922.4 5.4 963.4 5.6
Miscellaneous⁽²⁾
978.2 5.6 885.1 5.2 875.4 5.1

Total Cellular Services Revenue
13,262.1 75.7 13,004.9 76.1 13,269.3 77.4

Fixed-line Telecommunication Services Revenue

Fixed-line Telephone Service
316.8 1.8 357.8 2.1 420.6 2.5
Fixed-line Interconnection
116.1 0.7 134.1 0.8 57.1 0.3
Broadband Internet Service
1,641.6 9.4 1,472.8 8.6 1,308.8 7.6
International Calling Service
89.4 0.5 96.0 0.6 99.1 0.6
Miscellaneous⁽³⁾
560.3 3.1 590.5 3.4 608.9 3.6

TotalFixed-line Telecommunication Services Revenue
2,724.2 15.5 2,651.2 15.5 2,494.5 14.6

E-commerce Services Revenue⁽⁴⁾⁽⁶⁾
1,044.2 6.0 1,001.3 5.9 1,060.0 6.2

Other Revenue

Portal Service⁽⁵⁾
44.0 0.3 54.2 0.3 71.8 0.4


	For the year ended December 31,
	2019					2018					2017
	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⁾	￦	9,532.4		53.7	%	￦	9,770.4		57.9	%	￦	10,639.0		60.7	%
Cellular Interconnection		494.3		2.8			532.2		3.2			592.8		3.4
Wireless Device Sales		1,032.0		5.8			989.1		5.9			958.2		5.5
Miscellaneous⁽²⁾		1,113.7		6.3			1,087.2		6.4			1,072.1		6.1

Total Cellular Services Revenue		12,172.4		68.6			12,378.9		73.4			13,262.1		75.7


	For the year ended December 31,																		For the year ended December 31,
	2017						2016						2015						2019						2018						2017
	Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue
	(In billions of Won, except percentages)																		(In billions of Won, except percentages)
Miscellaneous⁽⁴⁾⁽⁶⁾		445.5			2.5			380.2			2.2			241.1			1.4
*Fixed-line Telecommunication Services Revenue*
Fixed-line Telephone Service																				224.5			1.3			371.3			2.2			401.0			2.3
Fixed-line Interconnection																				92.3			0.5			95.8			0.6			116.0			0.7
Broadband Internet Service and Advanced Media Platform Service																				1,807.6			10.2			1,760.4			10.4			1,654.1			9.4
International Calling Service																				137.9			0.8			152.9			0.9			166.9			1.0
Miscellaneous⁽³⁾																				685.9			3.9			441.9			2.6			381.4			2.2

TotalFixed-line Telecommunication Services Revenue																				2,948.2			16.6			2,822.3			16.7			2,719.4			15.5

*Security Services Revenue⁽⁴⁾*																				1,109.5			6.3			284.3			1.7			92.0			0.5

*Commerce Services Revenue^{(3) (5)}*																				710.7			4.0			728.4			4.3			651.8			3.7

*Others Revenue*
Portal Service⁽⁶⁾																				18.4			0.1			15.7			0.1			25.1			0.1
Miscellaneous^{(4) (5) (7)}																				784.5			4.4			644.4			3.8			769.6			4.4

Total Other Revenue		489.5			2.8			434.4			2.5			312.9			1.8			802.9			4.5			660.1			3.9			794.7			4.5

*Total Revenue*		17,520.0			100.0			17,091.8			100.0			17,136.7			100.0			17,743.7			100.0			16,874.0			100.0			17,520.0			100.0

Total Revenue Growth		2.5	%					(0.3	)%					(0.2	)%					5.2	%					(3.7	)%					2.5	%
*Segment Operating Expense⁽⁷⁾*
*Segment Operating Expense*⁽⁸⁾
Cellular Services		11,548.1			65.9			11,205.8			65.6			11,591.0			67.6			11,258.3			63.4			11,079.0			65.7			11,548.1			65.9
Fixed-line Telecommunication Services		2,556.7			14.6			2,518.8			14.7			2,386.2			13.9			2,809.0			15.8			2,576.8			15.3			2,550.9			14.6
E-commerce Services		1,312.0			7.5			1,366.5			8.0			1,066.7			6.3
Security Services																				975.9			5.5			295.6			1.8			108.7			0.6
Commerce Services																				708.7			4.0			813.4			4.8			806.7			4.6
Others		566.6			3.2			465.0			2.7			384.8			2.2			881.8			5.0			907.4			5.4			969.0			5.5

*Total Segment Operating Expense*		15,983.4			91.2			15,556.1			91.0			15,428.7			90.0			16,633.7			93.7			15,672.2			92.9			15,983.4			91.2

*Segment Operating Profit*
Cellular Services		1,714.0			9.8			1,799.1			10.5			1,678.3			9.8			914.1			5.2			1,299.9			7.7			1,714.0			9.8
Fixed-line Telecommunication Services		167.5			0.9			132.4			0.8			108.3			0.6			139.2			0.8			245.5			1.5			168.5			1.0
E-commerce Services		(267.8	)		(1.5	)		(365.2	)		(2.1	)		(6.7	)		(0.0	)
Security Services																				133.6			0.8			(11.3	)		(0.1	)		(16.7	)		(0.1	)
Commerce Services																				2.0			0.0			(85.0	)		(0.5	)		(154.9	)		(0.9	)
Others		(77.1	)		(0.4	)		(30.6	)		(0.2	)		(71.9	)		(0.4	)		(78.9	)		(0.4	)		(247.3	)		(1.5	)		(174.3	)		(1.0	)

*Total Segment Operating Profit*	￦	1,536.6			8.8	%	￦	1,535.7			9.0	%	￦	1,708.0			10.0	%	￦	1,110.0			6.3	%	￦	1,201.8			7.1	%	￦	1,536.6			8.8	%

(1)	Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through monthlyplan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services andvalue-added service fees paid by ~~our~~ wireless subscribers.

(2)	Miscellaneous cellular services revenue includes revenue from our IoT solutions as well as other miscellaneous cellular services.

(3)

Miscellaneousfixed-line telecommunication services revenue includes revenues from business communications services (other thanfixed-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), theT-commerce business operations of SK Stoa, which were previously part of our fixed-line telecommunications services segment in the

years ended December 31, 2018 and 2017, 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 years ended December 31, 2018 and 2017 have been restated to retroactively apply such reclassification.

(4)

~~E-commerce~~

Security services revenue ~~is derived from SK Planet’s revenue, which~~ includes revenues from ~~11st,~~ADT Caps and SK Infosec. Such revenues, which were previously part of our ~~open marketplace platform,~~others segment in the years ended December 31, 2018 and ~~other commerce solutions.~~2017, were separated into a new security services segment for the year ended December 31, 2019. As a result, ~~of the respective spin-offs from SK Planet, the~~our results of operations ~~from SK Planet’s former platform business~~for the years ended December 31, 2018 and ~~T store business were included in oure-commerce~~ ~~services segment prior~~2017 have been restated to ~~March 2016 but subsequently,~~retroactively apply such ~~revenues are included in our others segment.~~new segmentation.

(5)

Commerce services revenue includes revenues from Eleven Street and SK Stoa, in each case as described above. Eleven Street wasspun-off as our new consolidated subsidiary from SK Planet in September 2018. Following suchspin-off, the remaining marketing platform business operations of SK Planet, which were previously part of our commerce services segment in the year ended December 31, 2017, were reclassified as part of our others segment for the year ended December 31, 2018. As a result, our results of operations for the year ended December 31, 2017 have been restated to retroactively apply such reclassification.

(6)	Portal service revenue includes revenues from “Nate,” our online portal service operated by SK Communications.

~~(6)~~(7)

Miscellaneous others revenue includes revenues from ~~our hardware~~the marketing platform business our security business operated by our subsidiary, NSOK, our marketing and sales solutions business operated by our subsidiary, M&Service, and our online open marketplace for mobile applications, among other operations. Additionally, as a resultoperations of ~~the respective spin-offs from~~ SK Planet ~~the results of operations from SK TechX~~as described above and ~~One Store are included in our others segment beginning March 2016 under miscellaneous others revenue.~~other businesses.

~~(7)~~(8)

toK-IFRS and pursuant to IFRS as issued by the IASB, see “— Explanatory Note Regarding Presentation of Certain Financial Information underK-IFRS.”

~~2017~~2019 Compared to ~~2016~~2018

Operating Revenue and Other Income. Our consolidated operating revenue and other income increased by ~~2.3%~~5.3% to Won ~~17,552.0~~17,846.9 billion in ~~2017~~2019 from Won ~~17,158.3~~16,945.9 billion in ~~2016,~~2018, due to ~~an increase~~increases in both operating revenue ~~offset in part by a decrease in~~and other income, as discussed below.

Our consolidated operating revenue increased by ~~2.5%~~5.2% to Won ~~17,520.0~~17,743.7 billion in ~~2017~~2019 from Won ~~17,091.8~~16,874.0 billion in ~~2016, primarily due to increases in cellular services revenue as well as revenue increases from our other three segments.~~

Our consolidated other income decreased by 51.9% to Won 32.0 billion in 2017 from Won 66.5 billion in 2016, primarily due to refunds received in 2016 in connection with the overturn of certain fines previously imposed on us by the FTC that we had paid compared to no such refunds in 2017.

~~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 2.0% to Won 13,262.1 billion in 2017 from Won 13,004.9 billion in 2016. The increase in our cellular services revenue was due to increases in wireless device sales, miscellaneous cellular services revenue and wireless service revenue, partially offset by a decrease in cellular interconnection revenue.

~~Wireless device sales revenue increased by 14.1% to Won 1,052.2 billion in 2017 from Won 922.4 billion in 2016,~~2018, primarily due to an increase in sales of handsets with relatively higher unit prices such as the Samsung Galaxy S8 and S8+, which were released in the second quarter of 2017, and the iPhone 8 and iPhone X, which were released in the fourth quarter of 2017.

~~Miscellaneous cellular~~security services revenue, ~~increased by 10.5%~~and to ~~Won 978.2 billion~~a much smaller extent, increases in ~~2017 from Won 885.1 billion in 2016, primarily because of an increase in~~others revenue ~~from our IoT solutions business.~~

~~Wireless service~~and fixed-line telecommunications services revenue, increased by 0.5% to Won 10,639.0 billion in 2017 from Won 10,583.0 billion in 2016, primarily attributable to an increase in the total number of wireless service subscribers and an increase in average monthly data usage to 6.0GB in 2017 from 5.2GB in 2016, despite the increase in the percentage of wireless service subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the MDDIA and the increase in the applicable discount rate to 25% in September 2017 from 20%.

~~Cellular interconnection revenue decreased by 3.5% to Won 592.7 billion in 2017 from Won 614.4 billion in 2016. The decrease was primarily attributable to decreases in interconnection rates andland-to-mobile~~ ~~call volume.~~

~~Fixed-line~~ ~~telecommunications services: The revenue of ourfixed-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 miscellaneousfixed-line~~ telecommunication services, increased by 2.8% to Won 2,724.2 billion in 2017 from Won 2,651.2 billion in 2016, primarily due to an increase in our broadband Internet service and advanced media platform service (including IPTV) revenue,were partially offset by decreases in ~~fixed-line telephone service~~cellular services revenue and ~~miscellaneous fixed-line telecommunication~~commerce services revenue.

Revenue from our broadband Internet service and advanced media platform service (including IPTV) increased by 11.5% to Won 1,641.6 billion in 2017 from Won 1,472.8 billion in 2016, primarily due to an increase in the number of IPTV subscribers to 4.4 million subscribers as of December 31, 2017 from 4.0 million subscribers as of December 31, 2016 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 11.5% to Won 316.8 billion in 2017 from Won 357.8 billion in 2016, primarily due to a decrease in the number of fixed-line telephone subscribers (including subscribers to VoIP services of SK Broadband and SK Telink) to 4.3 million as of December 31, 2017 from 4.5 million as of December 31, 2016 and a decrease in residential calling volume as a result of shifting consumer preferences toward wireless communication.

~~Miscellaneousfixed-line~~ telecommunication services revenue decreased by 5.1% to Won 560.3 billion in 2017 from Won 590.5 billion in 2016, primarily due to a decline in new contracts for business communications services provided by SK Broadband.

~~E-commerce~~ ~~services: The revenue of oure-commerce~~ services segment, which is primarily composed of revenues from 11st, our open marketplace platform, increased by 4.3% to Won 1,044.2 billion in 2017 from Won 1,001.3 billion in 2016, primarily due to an increase in revenue from mobile 11st as there was an increase in sales of products through which we received relatively high third-party seller fees, despite the disparate impact of the spin-offs of SK Planet’s former platform business and T store business on 2017 compared to 2016, where revenue from the~~spun-off~~ ~~entities was included ine-commerce~~ ~~services revenue prior to the spin-offs in 2016, but not in 2017.~~

Others: The revenue of our others segment, which is composed of revenue from our portal service and miscellaneous other revenue, increased by 12.7% to Won 489.5 billion in 2017 from Won 434.4 billion in 2016, due to an increase in miscellaneous other revenue. Miscellaneous other revenue increased by 17.2% to Won 445.5 billion in 2017 from Won 380.2 billion in 2016, primarily due to the disparate impact of the spin-offs of SK Planet’s former platform business and T store business on 2017 compared to 2016, where revenue from the~~spun-off~~ ~~entities was included in miscellaneous other revenue for the full year in 2017, but only a part of 2016.~~

~~Operating Expense.~~ Our consolidated operating expense increased by 3.0% to Won 16,327.4 billion in 2017 from Won 15,854.9 billion in 2016, primarily due to a 5.3% increase in depreciation and amortization to Won 3,097.5 billion in 2017 from Won 2,941.9 billion in 2016, a 2.0% increase in commissions to Won 5,486.3 billion in 2017 from Won 5,376.7 billion in 2016, a 5.2% increase in labor costs to Won 1,966.2 billion in 2017 from Won 1,869.8 billion in 2016 and a 19.2% increase in advertising expenses to Won 522.8 billion in 2017 from Won 438.5 billion in 2016, partially offset by a 8.3% decrease in network interconnection expenses to Won 875.0 billion in 2017 from Won 954.3 billion in 2016 and a 13.2% decrease in leased line expenses to Won 342.2 billion in 2017 from Won 394.4 billion in 2016.

~~The increase in depreciation and amortization was primarily due to the full year of amortization in 2017 of certain frequency bandwidth usage rights we acquired orre-licensed~~ ~~in 2016 compared to only partial year amortization in 2016 as well as the amortization of our sales management IT system software beginning in 2017.~~

~~The increase in commissions was attributable mainly to an increase in marketing costs relating to our wireless service, which was partially offset by a decrease in marketing costs relating to oure-commerce~~ services, the impact of certain value-added tax refunds relating to discount coupons received in 2017 and the decrease in commissions following the establishment of Home & Service Co., Ltd. (“Home & Service”) as described below.

~~The increase in labor costs was primarily due to the additional personnel on payroll in connection with the establishment in June 2017 of our subsidiary, Home & Service, which providesin-home~~ customer service primarily to our fixed-line telecommunication service subscribers. Prior to the establishment of Home & Service, we outsourced these services to a third party vendor and the related costs were classified as commissions.

The increase in advertising expenses was primarily due to an increase in advertising expenses by SK Planet and media and online advertising for B tv and oksusu, which was partially offset by a decrease in cellular services advertising.

~~The decrease in network interconnection expenses was mainly attributable to decreases inwireless-to-fixed-line~~ ~~andfixed-line-to-wireless~~ ~~interconnection rates.~~

The decrease in leased line expenses was primarily due to a decrease in the number of facilities that use leased lines due to the increase in facilities that opt to build their own network and a decrease in rates for leased lines.

~~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 othernon-operating~~ ~~expenses underK-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 underK-IFRS.”~~

Cellular services: The segment operating expense for our cellular services segment increased by 3.1% to Won 11,548.1 billion in 2017 from Won 11,205.8 billion in 2016, attributable mainly to increases in marketing costs to attract subscribers that purchase handsets with high unit prices and increases in depreciation and amortization for the reasons described above, partially offset by decreases in network interconnection and leased line expenses for the reasons described above and a decrease in frequency bandwidth usage fees.

~~Fixed-line~~ ~~telecommunication services: The segment operating expense for ourfixed-line~~ ~~telecommunication services segment increased by 1.5% to Won 2,556.7 billion in 2017 from Won 2,518.8 billion in 2016, primarily due to an increase in marketing costs to gain more subscribers to ourultra-high~~ ~~definition IPTV and high speed broadband Internet services and an increase in labor costs for the reasons described above.~~

~~E-commerce~~ ~~services: The segment operating expense for oure-commerce~~ services segment decreased by 4.0% to Won 1,312.0 billion in 2017 from Won 1,366.5 billion in 2016, primarily due to a decrease in marketing costs and the impact of the value-added tax refunds described above.

Others: The segment operating expense for our others segment increased by 21.8% to Won 566.6 billion in 2017 from Won 465.0 billion in 2016, primarily due to the disparate impact of the spin-offs of SK Planet’s former platform business and T store business on 2017 compared to 2016, where marketing costs of the~~spun-off~~ ~~entities was included in miscellaneous other revenue for the full year in 2017, but only a part of 2016.~~

~~Operating Profit.~~ Our consolidated operating profit decreased by 6.0% to Won 1,224.6 billion in 2017 from Won 1,303.4 billion in 2016, as the increase in operating expense outpaced the increase in operating revenue and other income in 2017.

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 four 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 underK-IFRS.”~~

Cellular services: The segment operating profit of our cellular services segment decreased by 4.7% to Won 1,714.0 billion in 2017 from Won 1,799.1 billion in 2016, 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 (which, with respect to each reportable segment, is segment operating profit divided by revenue from such segment, expressed as a percentage) of our cellular services segment decreased to 12.9% in 2017 from 13.8% in 2016.

~~Fixed-line~~ ~~telecommunication services: The segment operating profit of ourfixed-line~~ telecommunication services segment increased by 26.5% to Won 167.5 billion in 2017 from Won 132.4 billion in 2016, primarily due to an increase in revenue from our IPTV business as described above.As a result, the segment operating margin of our~~fixed-line~~ ~~telecommunication services segment increased to 6.1% in 2017 from 5.0% in 2016.~~

~~E-commerce~~ ~~services: The segment operating loss of oure-commerce~~ ~~services segment decreased by 26.7% to Won 267.8 billion in 2017 from Won 365.2 billion in 2016, primarily due to the impact of the value-added tax refunds described above.~~

Others: The segment operating loss of our others segment increased by 151.6% to Won 77.0 billion in 2017 from Won 30.6 billion in 2016, primarily due to the disparate impact of the spin-offs of SK Planet’s former platform business and T store business on 2017 compared to 2016.

~~Finance Income and Finance Costs.~~ Our finance income decreased by 36.3% to Won 366.6 billion in 2017 from Won 575.1 billion in 2016, primarily due to a significant decrease in gain on disposal of long-term investment securities to Won 4.9 billion in 2017 from Won 459.3 billion in 2016, which primarily related to the sale of our 15.0% interest in Loen Entertainment in February 2016 and the sale of our 1.4% interest in POSCO in November 2016, which was partially offset by a significant increase in gain on valuation of derivatives to Won 223.9 billion in 2017, primarily relating to the valuation of redeemable convertible preferred shares issued by Bluehole Inc. (“Bluehole”) that we hold, from Won 4.1 billion in 2016.

Our finance costs increased by 32.7% to Won 433.6 billion in 2017 from Won 326.8 billion in 2016, primarily due to an increase in other finance costs to Won 35.9 billion in 2017, relating to management fees paid in connection with our investment in Bluehole’s securities, from none in 2016 and an increase on loss of disposal of long-term investment securities to Won 36.0 billion in 2017 from Won 2.9 billion in 2016 primarily due to the disposal of our shares of Kakao Corporation, which we had obtained for our 15.0% interest in Loen Entertainment mentioned above, for Won 112.6 billion in cash in April 2017, through which we recognized a loss of Won 35.5 billion.

~~Gains (Losses) Related to Investments in Subsidiaries and Associates.~~ Gains related to investments in subsidiaries and associates increased by 312.4% to Won 2,245.8 billion in 2017 from Won 544.5 billion in 2016, primarily due to an increase in share of profits of SK Hynix to Won 2,175.9 billion in 2017 from Won 572.1 billion in 2016.Such increase was primarily due to an increase in SK Hynix’s profit for the year to Won 10,642.2 billion in 2017 from Won 2,960.5 billion in 2016.

~~Income Tax.~~ Income tax expense increased by 71.0% to Won 745.7 billion in 2017 from Won 436.0 billion in 2016 primarily due to a 62.4% increase in profit before income tax to Won 3,403.3 billion in 2017 from Won 2,096.1 billion in 2016. Our effective tax rate in 2017 increased by 1.1% to 21.9% from 20.8% in 2016, primarily for the reasons set forth above. Our effective tax rates in 2017 and 2016 were lower than the statutory tax rate of 24.2%, primarily due to a tax refund in 2017 and changes in unrecognized deferred taxes in 2016.

~~Profit for the Year.~~ Principally as a result of the factors discussed above, our profit for the year increased by 60.1% to Won 2,657.6 billion in 2017 from Won 1,660.1 billion in 2016. Profit for the year as a percentage of operating revenue and other income was 15.1% in 2017 compared to 9.7% in 2016.

~~2016 Compared to 2015~~

~~Operating Revenue and Other Income.~~ Our consolidated operating revenue and other income decreased by 0.1% to Won 17,158.3 billion in 2016 from Won 17,167.6 billion in 2015, due to a decrease in operating revenue, offset in part by an increase in other income, as discussed below.

Our consolidated operating revenue decreased slightly by 0.3% to Won 17,091.8 billion in 2016 from Won 17,136.7 billion in 2015, primarily due to decreases in wireless service revenue, cellular interconnection revenue,~~fixed-line~~ ~~telephone service revenue ande-commerce~~ services revenue, partially offset by increases in broadband Internet service and advanced media platform service revenue, miscellaneous revenue and fixed-line interconnection revenue, each as further discussed below.

Our consolidated other income increased by ~~115.2%~~43.5% to Won ~~66.5~~103.2 billion in ~~2016~~2019 from Won ~~30.9~~71.9 billion in ~~2015~~2018, primarily due to ~~refunds received~~the gain on the transfer of oure-sports business to SK Telecom CS T1 Co., Ltd., a joint venture with Comcast Spectacor that was newly established in ~~2016~~February 2019, as well as on the transfer of our former mobile OTT service business, “oksusu,” to Content Wavve in ~~connection with the overturn of certain fines previously imposed on us by the FTC that we had paid.~~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 ~~2.0%~~1.7% to Won ~~13,004.9~~12,172.4 billion in ~~2016~~2019 from Won ~~13,269.3~~12,378.9 billion in ~~2015.~~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.

~~cellular services revenue was due to decreases in our wireless service revenue, cellular interconnection revenue and wireless device sales.~~

Wireless service revenue decreased by ~~1.3%~~2.4% to Won ~~10,583.0~~9,532.4 billion in ~~2016~~2019 from Won ~~10,720.5~~9,770.4 billion in ~~2015,~~2018, primarily attributable to anthe continued increase in the ~~number~~percentage of wireless service subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the ~~MDDIA due to greater public awareness of the availability~~MDDIA. The impact of such ~~discounted rates as well as the~~decrease was partially offset by an increase in the ~~applicable discount rate~~number of subscribers that subscribe to ~~20% in April 2015 from 12% in October 2014.~~our higher-priced unlimited data usage plans and 5G plans.

Cellular interconnection revenue decreased by ~~13.5%~~7.1% to Won ~~614.4~~494.3 billion in ~~2016~~2019 from Won ~~710.0~~532.2 billion in ~~2015.~~2018. The decrease was primarily attributable to continued decreases in interconnection rates andland-to-mobile call ~~volume in 2016.~~volume.

Wireless device sales ~~decreased~~revenue increased by 4.3% to Won ~~922.4~~1,032.0 billion in ~~2016~~2019 from Won ~~963.4~~989.1 billion in ~~2015,~~2018, primarily ~~attributable~~due to ~~a decrease~~the launch of our 5G services in April 2019 and the ~~number~~ensuing sales of ~~wireless devices sold in 2016 as a result of the maturity of the wireless device market.~~higher-priced5G-compatible smartphones.

Miscellaneous cellular services revenue increased by 2.4% to Won 1,113.7 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 ourfixed-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 miscellaneousfixed-line telecommunication services, increased by ~~6.3%~~4.5% to Won ~~2,651.2~~2,948.2 billion in ~~2016~~2019 from Won ~~2,494.5~~2,822.3 billion in ~~2015,~~2018, primarily due to increases in our broadband Internet service and advanced media platform service ~~(including IPTV)~~ revenue and miscellaneous fixed-line ~~interconnection~~ telecommunications services revenue, partially offset by ~~decreases~~a decrease infixed-line telephone service ~~revenue, miscellaneous~~revenue.

Miscellaneousfixed-line telecommunication services revenue ~~and international calling service revenue.~~increased by 55.2% to Won 685.9 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 ~~IPTV)~~our IPTV service and former mobile OTT service, which was transferred to Content Wavve in September 2019) increased by ~~12.5%~~2.7% to Won ~~1,472.8~~1,807.6 billion in ~~2016~~2019 from Won ~~1,308.8~~1,760.4 billion in ~~2015,~~2018, primarily due to an increase in the number of IPTV subscribers to ~~4.0~~5.2 million subscribers as of December 31, ~~2016~~2019 from ~~3.5~~4.7 million subscribers as of December 31, ~~2015~~2018 and an increase in the ~~purchase~~number of ~~paid media content by IPTV subscribers.~~premium subscriptions with higher monthly rates and purchases of premium~~Fixed-line~~video-on-demand interconnection revenue increased by 134.9% to Won 134.1 billion in 2016 from Won 57.1 billion in 2015, primarily due to additional interconnection charges we received from KT and LG U+ as a result of certain changes to the methodology for calculating interconnection charges.content.

Fixed-line telephone service revenue decreased by ~~14.9%~~39.5% to Won ~~357.8~~224.5 billion in ~~2016~~2019 from Won ~~420.6~~371.3 billion in ~~2015,~~2018, primarily due to ~~a decrease~~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. ~~Miscellaneousfixed-line~~ telecommunication services revenue decreased by 3.0% to Won 590.5 billion in 2016 from Won 608.9 billion in 2015, primarily due to a decline in new contracts for business communications services provided by SK Broadband. International calling service revenue decreased by 3.1% to Won 96.0 billion in 2015 from Won 99.1 billion in 2015, primarily due to a decrease in international calling volume.

~~E-commerce~~

Security services: The revenue of our~~e-commerce~~ security services segment, which is ~~primarily~~composed of revenues from ADT Caps and SK Infosec, 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 revenues of ADT Caps for a full year in 2019 compared to a partial year in 2018 following the addition of the entities comprising ADT Caps as new consolidated subsidiaries 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, ourT-commerce network, decreased by ~~5.5%~~2.4% to Won ~~1,001.3~~710.7 billion in ~~2016~~2019 from Won ~~1,060.0~~728.4 billion in ~~2015,~~2018, primarily due to our continued strategic focus to optimize and improve the ~~spin-offs~~profitability of ~~SK Planet’s former platform business and T store business in March 2016 as revenues from these businesses were included in~~ our~~e-commerce~~ ~~services segment prior to the spin-offs but excluded thereafter.~~ 11st business.

Others: The revenue of our others segment, which is composed of revenue from our portal service and miscellaneous other revenue, increased by ~~38.8%~~21.6% to Won ~~434.4~~802.9 billion in ~~2016~~2019 from Won ~~312.9~~660.1 billion in ~~2015, due to an increase in miscellaneous other revenue. Miscellaneous other revenue increased by 57.7% to Won 380.2 billion in 2016 from Won 241.1 billion in 2015,~~2018, primarily due to the ~~spin-offs~~inclusion of ~~SK Planet’s former platform business~~revenues of newly consolidated subsidiaries, such as FSK L&S and ~~T store business as revenues from these businesses were included in our others segment beginning in March 2016.~~Incross.

Operating Expense. Our consolidated operating expense increased by ~~1.2%~~4.6% to Won ~~15,854.9~~16,846.0 billion in ~~2016~~2019 from Won ~~15,672.2~~16,112.1 billion in ~~2015,~~2018, primarily due to a ~~3.3% increase in commissions to Won 5,376.7 billion in 2016 from Won 5,207.0 billion in 2015 and a 3.4%~~20.6% increase in depreciation and amortization expenses to Won ~~2,941.9~~3,771.5 billion in ~~2016~~2019 from Won ~~2,845.3~~3,126.1 billion in ~~2015. Such increases were~~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 ~~6.0%~~56.2% decrease in ~~cost of products that have been resold~~rent expenses to Won ~~1,838.4~~231.9 billion in ~~2016~~2019 from Won ~~1,955.9~~529.5 billion in ~~2015.~~

~~The increase in commissions was attributable mainly to an increase in marketing costs relating to promotional activities for 11st, our open marketplace platform, which was partially offset by~~2018, a 3.2% decrease in ~~marketing costs relating~~other operating expenses to ~~our cellular services.~~Won 1,724.9 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 ~~amortization~~the recognition of ~~certain frequency bandwidth usage rights we acquired or~~depreciation expenses relating to our~~re-licensed~~right-of-use ~~in 2016~~assets following our adoption of IFRS 16, as well as the commencement of amortization of ~~software.~~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 ADT Caps in October 2018 and SK Infosec in December 2018, as well as the expansion of new businesses such as AI solutions and other platform services.

The decrease in ~~cost~~rent expenses was primarily due to the adoption of ~~products that have been resold~~IFRS 16, pursuant to which we recognized payments on certain of our leased real properties in 2019 as depreciation expenses onright-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 inwireless-to-fixed-line andfixed-line-to-wireless interconnection rates, as well as decreases in the number of ~~wireless devices resold in 2016.~~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 othernon-operating expenses underK-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.”~~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 ~~decreased~~increased by ~~3.3%~~1.6% to Won ~~11,205.8~~11,258.3 billion in ~~2016~~2019 from Won ~~11,591.0~~11,079.0 billion in ~~2015,~~2018, mainly attributable ~~mainly~~ to ~~a decrease~~an increase in marketing costs ~~due~~ to ~~the stabilized competitive environment due to the maturity of the LTE market~~promote our 5G services and the ~~implementation~~commencement of ~~the MDDIA as well as an increase in the number~~amortization of ~~subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the MDDIA.~~our frequency usage rights for our 5G services.

Fixed-line telecommunication services: The segment operating expense for ourfixed-line telecommunication services segment increased by ~~5.6%~~9.0% to Won ~~2,518.8~~2,809.0 billion in ~~2016~~2019 from Won ~~2,386.2~~2,576.8 billion in ~~2015,~~2018, primarily due to ~~an increase~~increases in labor costs, marketing costs to gain more subscribers to ourultra-high definition IPTV and high speed broadband Internet services and ~~an increase in expenses paid to obtain certain rights to media content.~~depreciation and amortization expenses.

~~E-commerce~~

Security services: The segment operating expense for our~~e-commerce~~ security services segment increased by ~~28.1%~~230.1% to Won ~~1,366.5~~975.9 billion in ~~2016~~2019 from Won ~~1,066.7~~295.6 billion in ~~2015,~~2018, primarily due to ~~an increase~~the inclusion of operating expenses of ADT Caps for a full year in ~~marketing costs relating~~2019 compared to ~~promotional activities for 11st, our online open marketplace, which more than offset~~a partial year in 2018 following the ~~impact~~addition of the ~~exclusion~~entities comprising ADT Caps as new consolidated subsidiaries in October 2018 and, to a much smaller extent, the inclusion of operating expenses of SK ~~Planet’s former platform and T store businesses from~~Infosec as a new consolidated subsidiary starting at the end of December 2018.

Commerce services: The segment operating expense for our~~e-commerce~~ commerce services segment ~~beginning~~decreased by 12.9% to Won 708.7 billion in ~~2016.~~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 ~~increased~~decreased by ~~20.8%~~2.8% to Won ~~465.0~~881.8 billion in ~~2016~~2019 from Won ~~384.8~~907.4 billion in ~~2015,~~2018, primarily ~~due to an increase~~as a result of cost-cutting efforts by SK Planet and other subsidiaries in ~~marketing costs relating to the impact of the inclusion of SK Planet’s former platform and T store businesses in the others segment beginning in 2016.~~this segment.

Operating Profit. Our consolidated operating profit ~~decreased~~increased by ~~12.8%~~20.0% to Won ~~1,303.4~~1,000.9 billion in ~~2016~~2019 from Won ~~1,495.4~~833.8 billion in ~~2015, due to~~2018, as the ~~decrease~~increase in operating revenue and other income ~~and~~outpaced the increase in operating ~~expense.~~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 onK-IFRS and the sum of segment operating profit for all ~~four~~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 withK-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under~~K-IFRS.”~~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~~decreased by ~~7.2%~~29.7% to Won ~~1,799.1~~914.1 billion in ~~2016~~2019 from Won ~~1,678.3~~1,299.9 billion in ~~2015,~~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 ourfixed-line telecommunication services segment decreased by 43.3% to Won 139.2 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 ourfixed-line telecommunication services segment decreased to 4.7% 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 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 44.6% to Won 142.0 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 11.6% to Won 429.8 billion in 2019 from Won 385.2 billion in 2018, primarily due to an increase in interest expense to Won 397.9 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 2,016.4 billion in 2019 from Won 15,540.0 billion in 2018.

Income Tax. Income tax expense decreased by 64.4% to Won 300.7 billion in 2019 from Won 844.0 billion in 2018 primarily due to a 70.8% decrease in profit before income tax to Won 1,162.7 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 tonon-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 861.9 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.

2018 Compared to 2017

Operating Revenue and Other Income. Our consolidated operating revenue and other income decreased by 3.5% to Won 16,945.9 billion in 2018 from Won 17,552.0 billion in 2017, due to a decrease in operating revenue, offset in small part by an increase in other income, as discussed below.

Our consolidated operating revenue decreased by 3.7% to Won 16,874.0 billion in 2018 from Won 17,520.0 billion in 2017, primarily due to a decrease in cellular services revenue, and to a much smaller extent, a decrease in others revenue, which were partially offset by increases in security services revenue, fixed-line telecommunication services revenue and commerce services revenue.

Our consolidated other income increased by 124.7% to Won 71.9 billion in 2018 from Won 32.0 billion in 2017, primarily due to the gain on the disposal of SK Broadband’s internet data center in Seoul.

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 6.7% to Won 12,378.9 billion in 2018 from Won 13,262.1 billion in 2017. 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 8.2% to Won 9,770.4 billion in 2018 from Won 10,639.0 billion in 2017, 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 and the decrease in revenues from our roaming services subsequent to the launch of our “Safe Automatic T Roaming” service in March 2018. Such decrease was also partly attributable to the adoption of IFRS 15, which caused us to recognize a smaller portion of the overall transaction price of contracts under which we sell both a wireless device and subscription plan together to a single customer as wireless service revenue than under the previously applicable accounting standards. See “— Recently Adopted International Financial Reporting Standards — IFRS 15.”

Cellular interconnection revenue decreased by 10.2% to Won 532.2 billion in 2018 from Won 592.8 billion in 2017. The decrease was primarily attributable to continued decreases in interconnection rates andland-to-mobile call volume.

Wireless device sales revenue increased by 3.2% to Won 989.1 billion in 2018 from Won 958.2 billion in 2017, primarily due to the adoption of IFRS 15, which caused us to recognize a greater portion of the overall transaction price of contracts under which we sell both a wireless device and subscription plan together to a single customer as wireless device sales revenue than under the previously applicable accounting standards, partly offset by a decrease in sales of

~~operating expense, as compared~~handsets due to ~~the decrease in segment revenue,~~lower customer demand for the reasons described above. As a result, the segment operating margin (which, with respect to each reportable segment, is segment operating profit divided by revenue from such segment, expressed as a percentage) of our cellular services segment increased to 13.8% in 2016 from 12.6% in 2015.new devices. See “— Recently Adopted International Financial Reporting Standards — IFRS 15.”

Miscellaneous cellular services revenue increased by 1.4% to Won 1,087.2 billion in 2018 from Won 1,072.1 billion in 2017, primarily because of an increase in revenue from our IoT solutions business.

Fixed-line telecommunications services: The revenue of ourfixed-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 miscellaneousfixed-line telecommunication services, increased by 3.8% to Won 2,822.3 billion in 2018 from Won 2,719.4 billion in 2017, primarily due to increases in our broadband Internet service and advanced media platform service revenue and miscellaneous fixed-line telecommunications services revenue, partially offset by decreases in fixed-line interconnection revenue and fixed-line telephone service revenue.

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 6.4% to Won 1,760.4 billion in 2018 from Won 1,654.1 billion in 2017, primarily due to an increase in the number of IPTV subscribers to 4.7 million subscribers as of December 31, 2018 from 4.4 million subscribers as of December 31, 2017 and an increase in the number of premium subscriptions with higher monthly rates and purchases of premiumvideo-on-demand content.

Miscellaneousfixed-line telecommunication services revenue increased by 15.9% to Won 441.9 billion in 2018 from Won 381.4 billion in 2017, primarily due to an increase in revenue from our business communications services.

Fixed-line telephone service revenue decreased by 7.4% to Won 371.3 billion in 2018 from Won 401.0 billion in 2017, primarily due to a decrease in the number of fixed-line telephone subscribers and residential calling volume as discussed above.

Fixed-line interconnection revenue decreased by 17.4% to Won 95.8 billion in 2018 from Won 116.0 billion in 2017, primarily due to a decrease in interconnection rates, as well as decreases in the number of fixed-line telephone subscribers (including subscribers to VoIP services of SK Broadband and SK Telink) to 4.1 million as of December 31, 2018 from 4.3 million as of December 31, 2017 and residential calling volume as a result of shifting consumer preferences toward wireless communication.

Security services: The revenue of our security services segment increased by 209.0% to Won 284.3 billion in 2018 from Won 92.0 billion in 2017, primarily due to the consolidation of revenues of ADT Caps starting in October 2018.

Commerce services: The revenue of our commerce services segment, which is primarily composed of revenues from 11st, our open marketplace platform, and SK stoa, ourT-commerce network, increased by 11.8% to Won 728.4 billion in 2018 from Won 651.8 billion in 2017, primarily due to an increase in revenue from SK stoa as a result of increased volume of merchandise sold through such channel.

Others: The revenue of our others segment, which is composed of revenue from our portal service and miscellaneous other revenue, decreased by 16.9% to Won 660.1 billion in 2018 from Won 794.7 billion in 2017, primarily due to the effects of the reorganization of SK Planet’s business operations.

Operating Expense. Our consolidated operating expense decreased by 1.3% to Won 16,112.1 billion in 2018 from Won 16,327.4 billion in 2017, primarily due to an 8.8% decrease in commissions to Won 5,002.6 billion in 2018 from Won 5,486.3 billion in 2017, a 4.8% decrease in cost of goods sold to Won 1,796.1 billion in 2018 from Won 1,886.5 billion in 2017 and a 7.6% decrease in network interconnection expenses to Won 808.4 billion in 2018 from Won 875.0 billion in 2017, partially offset by a 16.4% increase in labor costs to Won 2,288.7 billion in 2018 from Won 1,966.2 billion in 2017 and a 9.3% increase in other operating expenses to Won 1,782.4 billion in 2018 from Won 1,630.7 billion in 2017.

The decrease in commissions was attributable mainly to a decrease in marketing costs relating to our cellular services primarily caused by the continued maturing of the market for new wireless devices in 2018, partially offset by an increase in marketing costs relating to our fixed-line telecommunication services.

The decrease in cost of goods sold was primarily due to a decrease in the number of wireless devices resold in 2018.

The decrease in network interconnection expenses was mainly attributable to decreases inwireless-to-fixed-line andfixed-line-to-wireless interconnection rates, as well as decreases in the number of fixed-line telephone subscribers and calling volume.

The increase in labor costs was primarily due to the additional personnel on payroll in connection with our acquisition of ADT Caps in October 2018, as well as the establishment in June 2017 of our subsidiary, Home & Service Co., Ltd. (“Home & Service”), which providesin-home customer services primarily to our fixed-line telecommunication service subscribers that were previously outsourced to a third party vendor and the costs for which were classified as commissions prior to the establishment of Home & Service, and the expansion of new businesses such as AI solutions.

The increase in other operating expenses was primarily due to an increase in impairment loss on property and equipment and intangible assets to Won 255.8 billion in 2018, which mainly reflected impairment losses we recognized on the goodwill and intangible assets of Shopkick, from Won 54.9 billion in 2017.

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 othernon-operating expenses underK-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 underK-IFRS” and note 5(2) of the notes to our consolidated financial statements.

Cellular services: The segment operating expense for our cellular services segment decreased by 4.1% to Won 11,079.0 billion in 2018 from Won 11,548.1 billion in 2017, attributable mainly to a decrease in marketing costs in light of lower customer demand for new wireless devices and the completion of depreciation for some of our property and equipment.

Fixed-line telecommunication services: The segment operating expense for ourfixed-line telecommunication services segment increased by 1.0% to Won 2,576.8 billion in 2018 from Won 2,550.9 billion in 2017, primarily due to an increase in marketing costs to gain more subscribers to ourultra-high definition IPTV and high speed broadband Internet services and an increase in depreciation and amortization expenses.

Security services: The segment operating expense for our security services segment increased by 171.9% to Won 295.6 billion in 2018 from Won 108.7 billion in 2017, primarily due to the recognition of operating expenses related to ADT Caps following our acquisition thereof in October 2018.

Commerce services: The segment operating expense for our commerce services segment increased by 0.8% to Won 813.4 billion in 2018 from Won 806.7 billion in 2017, primarily due to the increase in the volume of merchandise sold through SK stoa.

Others: The segment operating expense for our others segment decreased by 6.4% to Won 907.4 billion in 2018 from Won 969.0 billion in 2017, primarily due to the effects of the reorganization of SK Planet’s business operations.

Operating Profit. Our consolidated operating profit decreased by 31.9% to Won 833.8 billion in 2018 from Won 1,224.6 billion in 2017, as the decrease in operating revenue and other income outpaced the decrease in operating expense in 2018.

presented in accordance with IFRS as issued by the IASB and operating profit presented in accordance withK-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information underK-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 24.2% to Won 1,299.9 billion in 2018 from Won 1,714.0 billion in 2017, due to the greater decrease in segment operating revenue as compared to the decrease 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 10.5% in 2018 from 12.9% in 2017.

Fixed-line telecommunication services: The segment operating profit of ourfixed-line telecommunication services segment increased by ~~22.1%~~45.7% to Won ~~132.4~~245.5 billion in ~~2016~~2018 from Won ~~108.3~~168.5 billion in ~~2015, primarily~~2017, due to the greater increase in segment operating revenue as compared to the increase in ~~revenue from our IPTV service despite~~segment operating expense, for the ~~increase in costs to expand our advanced media platform service business. As~~reasons described above.As a result, the segment operating margin of ourfixed-line telecommunication services segment increased to ~~5.0%~~8.7% in ~~2016~~2018 from ~~4.3%~~6.2% in ~~2015.~~2017.

~~E-commerce~~

Security services: The segment operating loss of our~~e-commerce~~ security services segment ~~increased significantly~~decreased by 32.3% to Won ~~365.2~~11.3 billion in ~~2016~~2018 from Won ~~6.7~~16.7 billion in ~~2015, primarily~~2017, due to the greater increase in segment operating revenue as compared to the increase in ~~marketing costs relating~~segment operating expense, for the reasons described above.As a result, the segment operating margin of our security services segment improved to ~~promotional activities for 11st described above.~~(4.0)% in 2018 from (18.2)% in 2017.

Commerce services: The segment operating loss of our commerce services segment decreased by 45.1% to Won 85.0 billion in 2018 from Won 154.9 billion in 2017, due to the greater increase in segment operating revenue as compared to the increase in segment operating expense, for the reasons described above.As a result, the segment operating margin of our commerce services segment improved to (11.7)% in 2018 from (23.8)% in 2017.

Others: The segment operating loss of our others segment ~~decreased~~increased by ~~57.4%~~41.9% to Won ~~30.6~~247.3 billion in ~~2016~~2018 from Won ~~71.9~~174.3 billion in ~~2015, primarily~~2017, due to the ~~inclusion~~greater decrease in segment operating revenue as compared to the decrease in segment operating expense as described above. As a result, the segment operating margin of ~~the results of operations from SK TechX and One Store in~~ our others segment ~~as described above.~~worsened to (37.5)% in 2018 from (21.9)% in 2017.

Finance Income and Finance Costs. Our finance income ~~increased~~decreased by ~~453.5%~~30.1% to Won ~~575.1~~256.4 billion in ~~2016~~2018 from Won ~~103.9~~366.6 billion in ~~2015,~~2017, primarily due to a significant decrease in gain on valuation of derivatives to Won 6.5 billion in 2018 from Won 223.9 billion in 2017, which primarily related to a significant increase in valuation of redeemable convertible preferred shares issued by Krafton in 2017. The effect of such decrease was partially offset by a significant increase in gain onrelating to financial assets at fair value through profit or loss to Won 83.6 billion in 2018, primarily relating to our disposal of~~long-term~~ ~~investment securities to~~ 200,000 redeemable convertible preference shares of Krafton in 2018, from less than Won ~~459.3~~0.1 billion in ~~2016 from Won 10.8 billion in 2015 relating to the sale of our 15.0% interest in Loen Entertainment in February 2016 and the sale of our 1.4% interest in POSCO in November 2016.~~2017.

Our finance costs decreased by ~~6.7%~~11.2% to Won ~~326.8~~385.2 billion in ~~2016~~2018 from Won ~~350.1~~433.6 billion in ~~2015~~2017, primarily due to a ~~75.7%~~ decrease in ~~impairment~~ loss ~~foravailable-for-sale~~ ~~financial assets to~~on disposal of long-term investment securities from Won ~~5.3~~36.0 billion in ~~2016 from Won 21.8 billion in 2015,~~2017, which was primarily due to ~~an increase~~the disposal of our shares of Kakao, to nil in ~~the fair value of certain of ouravailable-for-sale~~ ~~financial assets,~~2018, and a ~~2.4%~~ decrease in ~~interest expense to~~other finance costs from Won ~~290.5~~35.9 billion in ~~2016 from Won 297.7 billion~~2017, relating to management fees paid in ~~2015.~~connection with our investment in Krafton’s securities, to nil in 2018.

Gains (Losses) Related to Investments in ~~Subsidiaries~~Associates and ~~Associates.~~Joint Ventures. Gains related to investments in ~~subsidiaries~~associates and ~~associates decreased~~joint ventures increased by ~~30.7%~~45.7% to Won ~~544.5~~3,270.9 billion in ~~2016~~2018 from Won ~~786.2~~2,245.8 billion in ~~2015,~~2017, primarily due to ~~a 32.1% decrease~~an increase in share of profits of SK Hynix to Won ~~572.1~~3,238.1 billion in ~~2016~~2018 from Won ~~842.1~~2,175.9 billion in ~~2015.Such decrease~~2017.Such increase was primarily due to ~~the 31.5% decrease~~an increase in SK Hynix’s profit for the year to Won ~~2,960.5~~15,540.0 billion in ~~2016~~2018 from Won ~~4,323.6~~10,642.2 billion in ~~2015.~~2017.

Income Tax. Income tax expense ~~decreased~~increased by ~~16.1%~~13.2% to Won ~~436.0~~844.0 billion in ~~2016~~2018 from Won ~~519.5~~745.7 billion in ~~2015 notwithstanding~~2017 primarily due to a ~~3.0%~~16.8% increase in profit before income tax to Won ~~2,096.1~~3,976.0 billion in ~~2016~~2018 from Won ~~2,035.4~~3,403.3 billion in ~~2015,~~2017. Our effective tax rate in 2018 decreased to 21.2% from 21.9% in 2017. Our effective tax

rates in 2018 and 2017 were lower than the statutory tax rate of 27.5% and 24.2%, respectively, primarily due to changes in ~~the interpretation of certain~~unrecognized deferred taxes in 2018 and a tax ~~regulations allowing for the use~~refund in 2016 of tax loss carryforwards incurred by SK Planet relating to its loss on disposal of shares of SK Communications. Our effective tax rate in 2016 decreased by 4.8% to 20.8% in 2016 from 25.5% in 2015, primarily for the reasons set forth above.2017.

Profit for the Year. Principally as a result of the factors discussed above, our profit for the year increased by ~~9.5%~~17.9% to Won ~~1,660.1~~3,132.0 billion in ~~2016~~2018 from Won ~~1,515.9~~2,657.6 billion in ~~2015.~~2017. Profit for the year as a percentage of operating revenue and other income was ~~9.7%~~18.5% in ~~2016~~2018 compared to ~~8.8%~~15.1% in ~~2015.~~2017.

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,~~the Korean Statistical Information Service, annual inflation in Korea was 0.4% in 2019, 1.5% in 2018 and 1.9% in ~~2017, 1.0% in 2016 and 0.7% in 2015.~~2017.

Item 5.B.

Liquidity and Capital Resources

Liquidity

We had a working capital ~~deficit~~surplus (current ~~liabilities~~assets in excess of current ~~assets)~~liabilities) of Won ~~907.3~~314.6 billion as of December 31, ~~2017~~2019 and Won ~~447.5~~1,111.3 billion as of December 31, ~~2016.~~2018. The decrease in our working capital ~~deficits~~ as of

December 31, ~~2016 and 2017 were~~2019 compared to December 31, 2018 was primarily attributable to an increase in other accounts payable, which was mainly due to ~~working capital needs~~an increase in our investments in 5G networks, and our recognition of lease liabilities in 2019 pursuant to the ~~ordinary course~~adoption of ~~business.~~IFRS 16 starting January 1, 2019. See “— Recently Adopted International Financial Reporting Standards — IFRS 16.” 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 andshort-term investment securities of Won ~~2,218.9~~2,268.1 billion as of December 31, ~~2017~~2019 and Won ~~2,081.4~~2,747.5 billion as of December 31, ~~2016.~~2018. We had outstandingshort-term borrowings and current portion of long-term debt of Won ~~130.0~~1,037.9 billion as of December 31, ~~2017~~2019 and Won ~~2.6~~1,064.3 billion as of December 31, ~~2016.~~2018. As of December 31, ~~2017,~~2019, we had credit lines with several local banks that provided for borrowing of up to Won ~~440.0~~480.0 billion, all of which ~~Won 390.0 billion~~ 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 ~~1,457.7~~1,270.8 billion as of December 31, ~~2017~~2019 and Won ~~1,505.2~~1,506.7 billion as of December 31, ~~2016.~~2018. 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										Year ended December 31,									Change
	2017			2016			2015			2017 to 2016					2016 to 2015					2019			2018			2017			2019 to 2018					2018 to 2017
	(In billions of Won, except percentages)																			(In billions of Won, except percentages)
Net cash provided by operating activities		3,855.8			4,243.2			3,778.1			(387.4	)	(9.1	)%		465.1		12.3	%	￦	3,986.1		￦	4,332.6		￦	3,855.8		￦	(346.5	)	(8.0	)%	￦	476.8		12.4	%
Net cash used in investing activities		(3,070.6	)		(2,462.2	)		(2,880.5	)		(608.4	)	24.7			418.3		(14.5	)		(3,582.5	)		(4,047.7	)		(3,070.6	)		465.2		(11.5	)		(977.1	)	31.8
Net cash used in financing activities		(826.6	)		(1,044.8	)		(964.6	)		218.2		(20.9	)		(80.2	)	8.3			(636.8	)		(238.3	)		(826.6	)		(398.5	)	167.2			588.3		(71.2	)
Net increase (decrease) in cash and cash equivalents																					(233.2	)		46.6			(41.4	)		(279.9	)	N.A.			87.9		N.A.
Effect of exchange rate changes on cash and cash equivalents held in foreign currencies		(6.2	)		0.2			1.5			(6.4	)	N.A.			(1.3	)	(86.7	)		(2.6	)		2.4			(6.2	)		(5.0	)	N.A.			8.6		N.A.
Net increase (decrease) in cash and cash equivalents		(41.4	)		736.2			(67.0	)		(777.6	)	N.A.			803.2		N.A.
Cash and cash equivalents at beginning of period		1,505.3			768.9			834.4			736.4		95.8			(65.5	)	(7.8	)		1,506.7			1,457.7			1,505.3			49.0		3.4			(47.6	)	(3.2	)
Cash and cash equivalents at end of period		1,457.7			1,505.3			768.9			(47.6	)	(3.2	)		736.4		95.8			1,270.8			1,506.7			1,457.7			(235.9	)	(15.7	)		49.0		3.4

~~N.A.~~

~~= Not available~~

N.A. = Not available

Cash Flows from Operating Activities. Net cash provided by operating activities was Won 3,986.1 billion in 2019, Won 4,332.6 billion in 2018 and Won 3,855.8 billion in ~~2017, Won 4,243.2 billion in 2016 and Won 3,778.1 billion in 2015.~~2017. Profit for the year was Won 861.9 billion in 2019, Won 3,132.0 billion in 2018 and Won 2,657.6 billion in ~~2017, Won 1,660.1 billion in 2016 and Won 1,515.9 billion in 2015.~~2017. Net cash provided by operating activities in ~~2017~~2019 decreased by ~~9.1%~~8.0% from ~~2016~~2018 primarily due to an increase in ~~outstanding accounts receivable~~prepaid expenses at theyear-end ~~of 2017~~ 2019 compared to theyear-end ~~of 2016.~~ 2018. Net cash provided by operating activities in ~~2016~~2018 increased by ~~12.3%~~12.4% from ~~2015~~2017 primarily due to a decrease in our outstanding other accounts receivable at the ~~fulfillment of certain~~year-end ~~cash payment obligations on~~2018 compared to the ~~next business day after December 31, 2016, which was not a business day.~~year-end 2017.

Cash Flows from Investing Activities. Net cash used in investing activities was Won 3,582.5 billion in 2019, Won 4,047.7 billion in 2018 and Won 3,070.6 billion in ~~2017, Won 2,462.2 billion in 2016 and Won 2,880.5 billion in 2015.~~2017. Cash inflows from investing activities were Won 754.2 billion in 2019, Won 686.1 billion in 2018 and Won 456.8 billion in ~~2017,~~2017. Cash inflows in 2019 were primarily attributable to a decrease in short-term financial instruments, net of Won ~~1,140.7~~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 ~~2016 and~~cash.Cash inflows in 2018 were primarily attributable to proceeds from disposals of long-term investment securities of Won ~~914.5~~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 ~~2015.~~cash and the disposal of redeemable convertible preferred shares of Krafton for Won 130.0 billion in cash and the collection ofshort-term loans of Won 117.6 billion. Cash inflows in 2017 were primarily attributable to the collection ofshort-term loans of Won 216.7 billion and proceeds from disposals of long-term investment securities of Won 129.7 billion, mostly in connection with the disposal of our shares of Kakao ~~Corporation~~ for Won 112.6 billion in cash in April 2017. ~~Cash inflows in 2016 were primarily attributable to proceeds from disposals oflong-term~~ investment securities of Won 555.5 billion, mostly in connection with the disposal of our 15.0% interest in Loen Entertainment for shares of Kakao Corporation and Won 218.0 billion in cash in February 2016 and the disposal of our 1.4% interest in POSCO for Won 305.1 billion in November 2016, collection of~~short-term~~ ~~loans of Won 239.0 billion and decrease inshort-term~~ ~~financial instruments, net of Won 222.3 billion. Cash inflows in 2015 were primarily attributable to collection ofshort-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 KEB HanaCard for Won 176.3 billion.

Cash outflows for investing activities were Won 4,336.7 billion in 2019, Won 4,733.8 billion in 2018 and Won 3,527.4 billion in ~~2017, Won 3,602.9 billion in 2016 and Won 3,795.0 billion in 2015.~~2017. Cash outflows in ~~2017, 2016~~2019, 2018 and ~~2015~~2017 were primarily attributable to expenditures

related to the acquisition of property and equipment of Won ~~2,715.9~~3,375.9 billion, Won ~~2,490.5~~2,792.4 billion and Won ~~2,478.8~~2,715.9 billion, respectively, primarily in connection with the acquisition of 5G and LTE equipment, the expansion of our 5G network and the ~~expansion~~maintenance of our LTE network.

Cash Flows from Financing Activities. Net cash used in financing activities was Won 636.8 billion in 2019, Won 238.3 billion in 2018 and Won 826.6 billion in ~~2017, Won 1,044.8 billion in 2016 and Won 964.6 billion in 2015.Cash~~2017. Cash inflows from financing activities were Won 2,047.3 billion in 2019, Won 4,651.7 billion in 2018 and Won 1,261.8 billion in ~~2017, Won 861.6 billion in 2016 and Won 1,375.2 billion in 2015.~~2017. Such inflows were primarily driven by the issuance of debentures, which provided cash of Won 1,633.4 billion in 2019, Won 1,809.6 billion in 2018 and Won 973.3 billion in 2017, ~~Won 776.7 billion in 2016 and Won 1,375.0 billion in 2015~~ and proceeds fromlong-term borrowings, which provided cash of nil in 2019, Won 1,920.1 billion in 2018 and Won 120.0 billion in ~~2017 and Won 49.0 billion in 2016.~~2017. In ~~2017,~~2019, we also received proceeds of Won 300.0 billion from the disposal of our treasury shares to Kakao. In 2018, we received net proceeds ~~from short-term borrowings~~ of Won ~~127.4 billion.~~499.9 billion from the transfer of interests in subsidiaries tonon-controlling interests and of Won 398.8 billion from the issuance of hybrid securities.

Cash outflows for financing activities were Won 2,684.1 billion in 2019, Won 4,890.0 billion in 2018 and Won 2,088.4 billion in ~~2017, Won 1,906.5 billion in 2016 and Won 2,339.8 billion in 2015.~~2017. Cash outflows for financing activities included repayment of debentures, payment of dividends, repayments of other long-term ~~accounts payable~~payables, repayments of lease liabilities and ~~cash outflows from settlement~~repayment of ~~derivatives,~~long-term borrowings, among other items. Repayment of debentures were Won 940.0 billion in 2019, Won 1,488.0 billion in 2018 and Won 842.7 billion in ~~2017, Won 770.0 billion in 2016 and Won 620.0 billion in 2015.~~2017. Payment of dividends were Won ~~706.1~~718.7 billion in ~~2017,~~2019, Won 706.1 billion in ~~2016~~2018 and Won ~~668.5~~706.1 billion in ~~2015.~~2017. Repayments of otherlong-term ~~account~~ payables were Won 428.2 billion in 2019, Won 305.6 billion in 2018 and Won 305.5 billion in ~~2017,~~2017. Repayments of lease liabilities was Won ~~122.7~~393.4 billion in ~~2016~~2019. Repayment of long-term borrowings were Won 89.9 billion in 2019, Won 1,780.7 billion in 2018 and Won ~~191.4~~32.7 billion in 2015. Cash outflows from settlement of derivatives were Won 105.3 billion in 2017, none in 2016 and Won 0.7 billion in 2015. 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 a share exchange transaction (the “Share Exchange”) in June 2015 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.2017.

As of December 31, ~~2017,~~2019, we had totallong-term debt (excluding current portion) outstanding of Won ~~5,808.1~~9,226.0 billion, which included debentures in the amount of Won ~~5,596.6~~7,253.9 billion and bank and institutional borrowings in the amount of Won ~~211.5 billion.As~~1,972.1 billion. As of December 31, ~~2016,~~2018, we had totallong-term debt (excluding current portion) outstanding of Won ~~6,478.6~~8,587.6 billion, which included debentures in the amount of Won ~~6,338.9~~6,572.2 billion and bank and institutional borrowings in the amount of Won ~~139.7 billion.For~~2,015.4 billion. For a description of ourlong-term debt, see note 17 of the notes to our consolidated financial statements.

As of December 31, ~~2017,~~2019, we had (i) Won ~~5,285.8~~6,512.5 billion aggregate principal amount of KoreanWon-denominated debentures outstanding, of which SK Telecom issued Won ~~3,970.3~~5,040.0 billion, SK Broadband issued Won ~~1,310~~1,460.0 billion and ~~Iriver~~LSH issued Won ~~5.6~~12.5 billion, and (ii) Won ~~1,821.4~~1,736.7 billion aggregate principal amount of debentures outstanding denominated in U.S. dollars. The fixed interest rates of our debentures range from ~~1.00%~~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~~factors. We have a diversified maturity profile with respect to our debentures. See “— Contractual Obligations and Commitments” for more details.

As of December 31, ~~2017,~~2019, all of our foreigncurrency-denominatedlong-term borrowings and debentures, which in the aggregate amounted to ~~25.5%~~17.3% of our total outstandinglong-term debt, including the current portion and present value discount as of such date, was denominated in ~~Dollars.However,~~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

growth businesses in media, security, commerce, IoT solutions ~~media ande-commerce~~ and other innovative products and services offered through our platform services, including ~~artificial intelligence~~AI solutions.

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 ~~2018.~~2020. 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 ~~2017, 2016~~2019, 2018 and ~~2015:~~2017:

   Year ended December 31,
   2017    2016    2015
   (In billions of Won)
LTE Network
   1,131.8    1,104.0    1,022.7
WCDMA Network
   29.0    27.7    90.0
Fixed-line Network⁽¹⁾
   790.0    699.6    559.4
Other Network⁽²⁾
   436.2    376.3    332.4
Others⁽³⁾
   328.9    282.9    474.3






Total
   2,715.9    2,490.5    2,478.8


	Year ended December 31,
	2019		2018		2017
	(In billions of Won)
Wireless Networks⁽¹⁾	￦	2,514.3	￦	1,735.6	￦	1,597.0
Fixed-line Network⁽²⁾		815.8		776.8		790.0
Others⁽³⁾		45.8		280.0		328.9

Total	￦	3,375.9	￦	2,792.4	￦	2,715.9

(1)	~~Includes all capital expenditures made by SK Broadband.~~

~~(2)~~

Includes investments in our 5G, LTE, WCDMA, CDMA ~~WiBro~~ andWi-Fi networks as well as other capital expenditures related to our networks.

(2)	Includes all capital expenditures made by SK Broadband.

(3)	Includesnon-network related investments such as capital expenditures for product development and ~~maintenance and~~ upgrades of our information technology systems and equipment.

We set our capital expenditure budget for each upcoming year on an annual basis. Our actual capital expenditures in ~~2017, 2016~~2019, 2018 and ~~2015~~2017 were Won ~~2,715.9~~3,375.9 billion, Won ~~2,490.5~~2,792.4 billion and Won ~~2,478.8~~2,715.9 billion,

respectively. Of such amounts, we spent approximately ~~41.7%~~74.5%, ~~44.3%~~62.2% and ~~41.3%~~58.8% in ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, respectively, on capital expenditures related to ~~expanding~~building and enhancing ~~the quality of~~ our ~~LTE network.~~wireless networks. Our othernon-network related capital expenditures in ~~2017, 2016~~2019, 2018 and ~~2015~~2017 primarily related to developing new products and ~~maintenance and~~ upgrades to our information technology ~~systems.~~systems and equipment.

In ~~addition,~~particular, we have been making capital expenditures to build ~~more advanced networks based on LTE technology.~~and expand our 5G network. We commenced commercial ~~LTE~~5G services in ~~July 2011 and expanded~~April 2019. We have also been making capital expenditures to improve our LTE ~~network nationwide and launched our LTEmulti-carrier~~ ~~technology in 2012. We launched ourLTE-A~~ ~~service in June 2013, our widebandLTE-A~~ ~~service in June 2014, ourtri-bandLTE-A~~ ~~service in December 2014 and our five-bandLTE-A~~ ~~service in June 2017. For~~network.For a more detailed description of our 5G and LTE ~~network,~~networks, see “Item 4.B. Business Overview — Cellular Services — Digital Wireless ~~Network — LTE~~ Network.” We plan to continue to make capital investments in ~~2018~~2020 to ~~further improve~~build and expand our ~~LTE~~5G network and develop related technologies, as well as to ~~prepare for the commercialization of~~further improve our ~~future 5G~~LTE network.

The following table sets forth our payment obligations relating to our acquisitions of frequency usage rights.

Band 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

800MHz
CDMA(10M)

June 2011

208.3

2011

69.4

2013-2015

LTE(20M)
1.8GHz

LTE(35M)

20M Dec. 2011 248.8 2011 74.6 2012-2021
15M Sept. 2013 115.3 2013 43.2 2014-2021

2.1GHz
LTE(20M) Dec. 2001 650.0 2001 130.0 2007-2011
WCDMA(20M) Dec. 2016 141.2 2016 85.3 2017-2021
2.3GHz
WiBro(27M) March 2012 8.7 2012 2.9 2014-2016
2.6GHz
LTE(40M+20M) August 2016 332.5 2016 99.8 2017-2026


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
1.8 GHz	LTE (35 MHz)	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
2.1 GHz	WCDMA (10 MHz)		Dec. 2016		141.2		2016		85.3		2017-2021
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		15.5		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 2019, we made such annual payment in the amount of Won 29.2 billion. For more information, see note 16 of the notes to our consolidated financial statements.

We expect that our capital expenditure amount in ~~2018~~2020 will be ~~slightly higher~~lower than that of ~~2017.~~2019. Our expenditures will be for a range of projects, including investments to expand and improve ~~and expand~~our newly implemented 5G network, investments to maintain our LTE network andLTE-A services, investments to improve and expand ourWi-Fi network, investments to develop our IoT solutions and platform services business portfolio, including ~~artificial intelligence~~AI solutions, investments in research and development of 5G technology, investments in businesses that can potentially leverage our ~~future~~ 5G network, and funding formid- tolong-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. 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 ~~2018~~2020 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 choose to acquire in the frequency bandwidth auction expected to be held by the MSIT in June 2018.~~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. For more information regarding the frequency bandwidth auction expected to be held by the MSIT in June 2018, see “Item 4.B. Business Overview — Law and Regulation — Competition Regulation — Frequency Allocation.”

Repayment of Outstanding Debt. As of December 31, ~~2017,~~2019, our principal repayment obligations with respect tolong-term borrowings, bonds and ~~obligations under capital leases~~short-term borrowings outstanding were as follows for the periods indicated:

Year Ending December 31,
   Total
   (In billions of Won)
2018
   1,533.0
2019
   984.9
2020
   978.5
2021 and thereafter
   3,854.3

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.


Year Ending December 31,	Total
	(In billions of Won)
2020	￦	1,038.5
2021		940.6
2022		1,421.6
2023 and thereafter		6,914.4

Investments in New Growth Businesses. We may also require capital for investments to support our development of new growth businesses.

~~In August 2014, we acquired a 39.3% equity interest~~

We made capital contributions of ~~Iriver,~~Won 25.0 billion and Won 65.0 billion in 2017 and 2018, respectively, to Dreamus (formerly known as IRIVER LIMITED), a manufacturer of digital audio players and other portable media devices of which we had acquired a 39.3% equity interest in August 2014 and increased our equity interest to 49.0% in December ~~2014, for an aggregate purchase price~~2014. Dreamus also operates our music streaming service platform, FLO. As of

December 31, 2019, we had a 51.4% equity interest in Dreamus.

~~Won 54.5 billion.~~ In 2017, we ~~made capital contributions of Won 25.0 billion and~~acquired Life Design Company (formerly known as ~~of December 31, 2017, we had a 45.9% equity interest in Iriver.~~

In 2014 and 2015, we acquired an 83.9% interest in NSOK, a provider of residential and small business electronic security and other related alarm monitoring services, for an aggregate of Won 64.0 billion. In October 2016, we acquired the remaining 16.1% interest in NSOK through SK Telink.

~~In 2016, we acquired a 46.2% interest in SM Mobile Communications for Won 12.1 billion, which was subsequently merged into Iriver, and in 2017, we acquired SM~~S.M. Life Design Company Japan Inc.) for Won 30.0 billion, in light of potential synergies that may be achieved through the entertainment business.

In October 2018, we acquired ADT Caps by acquiring a 55.0% interest in LSH, which owns 100% of ADT Caps, for Won 696.7 billion. In December 2018, we merged NSOK with and into ADT CAPS Co., Ltd. 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 Holdings. In 2018, we also increased our interest in id Quantique from 4.6% as of December 31, 2017 to 65.6% as of December 31, 2018, through the acquisition of additional shares with Won 55.2 billion in cash and Won 5.7 billion incontribution-in-kind. Following our capital contribution in cash amounting to Won 12.2 billion in 2019, our equity interest in id Quantique increased to 66.8% as of December 31, 2019.

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, ~~2017~~2019 was Won ~~62.0 billion.This~~172.3 billion. This amount was reflected in our consolidated financial statements as a liability, which is net of deposits with insurance companies totaling Won ~~663.6~~965.7 billion to fund a portion of the employees’ severance indemnities.

Also see “Item 6.D. Employees — Employee Benefits” and note 2120 of the notes to our consolidated financial statements.

Dividends. Total cash outflows for payments of dividends amounted to Won ~~706.1~~718.7 billion in ~~2017,~~2019, Won 706.1 billion in ~~2016~~2018 and Won ~~668.5~~706.1 billion in ~~2015.~~2017.

In April ~~2018,~~2020, 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 ~~635.5~~658.2 billion.

Fair Value Measurement of Financial Instruments

~~Contractual Obligations~~Subsequent to initial recognition, financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income and ~~Commitments~~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 notes 2(4) and 35(3) of the notes to our consolidated financial statements.

Impairment ofLong-lived Assets Including Frequency Usage Rights

Long-lived assets generally consist of property and equipment and definite-lived intangible assets. We review our depreciation and amortization methods, estimated useful lives and residual values oflong-lived assets at the end of each annual reporting period. If any such asset or cash-generating unit is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset or cash-generating unit exceeds the estimated recoverable amount. The ~~following summarizes~~recoverable amount of along-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, we 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 level of a cash-generating unit. The recoverable amounts of assets orcash-generating units may be determined based onvalue-in-use calculations, which require the use of estimates.

results of operations and cash ~~obligations at December 31, 2017, and~~flows, we review the ~~effect~~frequency usage rights for any indication of impairment on an annual basis. If any such ~~obligations are expected to have on liquidity~~indication exists, we test for impairment utilizing the estimatedlong-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 no impairment of our frequency usage rights in 2019. See note 16 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 anynon-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 theacquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is not 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, we 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 level of a cash-generating unit. The recoverable amount of an asset or cash-generating unit to which goodwill has been 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 ~~periods:~~cash flows expected related to the respectivecash-generating unit and the determination of an appropriate discount rate in order to calculate present value.

   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
   7,097.0    1,491.4    1,837.0    1,340.0    2,428.6
Interest
   1,134.0    190.8    287.6    210.6    445.0
Long-term borrowings

Principal
   253.7    41.6    156.4    55.7    —
Interest
   14.1    6.3    6.4    1.4    —
Capital lease obligations

Principal
   —    —    —    —    —
Interest
   —    —    —    —    —
Operating leases
   —    —    —    —    —
Facility deposits
   6.5    0.6    —    —    5.9
Derivatives
   40.3    29.0    —    11.3    —
Otherlong-term payables⁽²⁾

Principal
   1,710.2    302.9    605.7    402.6    399.0
Interest
   71.3    5.8    37.9    16.5    11.1
Short-term borrowings
   130.0    130.0    —    —    —










Total contractual cash obligations
   10,457.0    2,198.4    2,931.0    2,038.1    3,289.6

~~(1)~~

See notes 4(12) and 15 of the notes to our consolidated financial statements.

Income Taxes

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 14 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. Following our adoption of IFRS 15,Revenue from Contracts with Customers, in the fiscal year beginning January 1, 2018, 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 378 of the notes to our consolidated financial statements.

Determination of Stand-Alone Selling Prices in Recognition of Revenue from Cellular Services

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.

As of December 31, 2019, we assess the lease term of a lease contract based on the assumption that the right to extend or terminate the lease is not enforceable if the lease contract requires the counterparty’s consent for its termination or extension. In December 2019, International Financial Reporting Interpretations Committee (“IFRIC”) issued its final agenda decision that the concept of penalty that should be considered in determining the enforceable period of a lease under IFRS 16 must be determined considering broader economics of the lease contract, rather than just the contractual termination payments. Furthermore, under such agenda, a lease is no longer enforceable when each of the parties to it has the right to terminate the lease without permission from the other party with no more than an insignificant penalty. Considering the type and number of lease contracts entered into as of and from January 1, 2019, we believe that we did not have sufficient time to complete the analysis on our lease portfolios to reflect the impact of such IFRIC agenda decision in our consolidated financial statements as of and for the year ended December 31, 2019. We are in the process of conducting such analysis, which we expect to complete during the first half of 2020, and we plan to apply such IFRIC agenda decision beginning in 2020 as a change in our accounting policies. We expect such application to have the effect of increasing the lease term for certain of our lease contracts, and to result in an increase in ourright-of-use assets and lease liabilities.

See notes 3, 4(13) and 4(14) of the notes to our consolidated financial statements for further details regarding the effects of our adoption of IFRS 16 and significant accounting policies related to leases prior to and following the adoption of IFRS 16.

IFRS 15

We adopted IFRS 15,Revenue from Contracts with Customers, in the fiscal year beginning on January 1, 2018. We adopted IFRS 15 by recognizing the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of retained earnings as of January 1, 2018. We elected to apply IFRS 15 retrospectively only to contracts that were not completed as of January 1, 2018.

In addition to the revenue recognition model, IFRS 15 specifies how to account for the incremental costs of obtaining a contract, which in our case includes certain of our commissions paid to our retail stores and authorized dealers in connection with acquiring new customer contracts. IFRS 15 requires certain of such costs to be capitalized as assets and subsequently amortized over the applicable expected contract periods calculated based on our historical experience on the duration of subscriber contracts.

In the case of our consolidated statement of income for the year ended December 31, 2018, the adoption of IFRS 15 had the effect of decreasing our operating revenue by Won 85.8 billion, and decreasing advertising expenses and commission expenses by Won 51.2 billion and Won 12.7 billion, respectively, for a total decrease in our operating expense by Won 66.1 billion. Therefore, the adoption of IFRS 15 resulted in decreases in operating profit and profit before income tax by Won 19.7 billion each. In addition, the adoption had the effect of decreasing our profit for the year by Won 88.2 billion and increasing our income tax expense by Won 68.5 billion. The adoption of IFRS 15 did not have a material impact on our consolidated statement of cash flows for the year ended December 31, 2018. See notes 4(23) and 4(24) of the notes to our consolidated financial statements for further details regarding significant accounting policies related to revenue prior to and following the adoption of IFRS 15.

IFRS 9

IFRS 9 requires all financial assets, on initial recognition, to be classified as financial assets at amortized cost, debt instruments at fair value through other ~~commitments~~comprehensive income, equity investments at fair value through other comprehensive income or financial assets at fair value through profit or loss. The classification is generally based on the business model in which a financial asset is managed and ~~contingencies.~~its contractual cash flow characteristics. In addition, IFRS 9 sets out an “expected credit loss” impairment model, under which we generally recognize impairment losses on debt instruments at an amount equal to their twelve-month expected credit losses. However, with respect to debt instruments experiencing a significant increase in credit risk and accounts receivable – trade, we recognize impairment losses at an amount equal to their lifetime expected credit losses.

~~Critical Accounting Policies, Estimates And Judgments~~The adoption of IFRS 9 did not have a material impact on our consolidated statement of income or our consolidated statement of cash flows for the year ended December 31, 2018. See notes 4(5) and 4(6) of the notes to our consolidated financial statements for further details regarding significant accounting policies related to financial assets prior to and following the adoption of IFRS 9.

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,
	2019					2018				2017
	(In billions of Won, except percentages)
Operating revenue and other income	￦	17,846.9		100.0	%	￦	16,945.9	100.0	%	￦	17,552.0	100.0	%
Revenue		17,743.7		99.4			16,874.0	99.6			17,520.0	99.8
Other income		103.2		0.6			71.9	0.4			32.0	0.2
Operating expenses		16,846.0		94.4			16,112.1	95.1			16,327.4	93.0
Operating profit		1,000.9		5.6			833.8	4.9			1,224.6	7.0
Profit before income tax		1,162.7		6.5			3,976.0	23.5			3,403.3	19.4
Income tax expense		300.7		1.7			844.0	5.0			745.7	4.2
Profit for the year		861.9		4.8			3,132.0	18.5			2,657.6	15.1
Attributable to:
Owners of the Parent Company		889.9		5.0			3,127.9	18.5			2,599.8	14.8
Non-controlling interests		(28.0	)	(0.2	)		4.1	0.0			57.8	0.3

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,
	2019					2018					2017
	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⁾	￦	9,532.4		53.7	%	￦	9,770.4		57.9	%	￦	10,639.0		60.7	%
Cellular Interconnection		494.3		2.8			532.2		3.2			592.8		3.4
Wireless Device Sales		1,032.0		5.8			989.1		5.9			958.2		5.5
Miscellaneous⁽²⁾		1,113.7		6.3			1,087.2		6.4			1,072.1		6.1

Total Cellular Services Revenue		12,172.4		68.6			12,378.9		73.4			13,262.1		75.7


	For the year ended December 31,
	2019						2018						2017
	Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue
	(In billions of Won, except percentages)
*Fixed-line Telecommunication Services Revenue*
Fixed-line Telephone Service		224.5			1.3			371.3			2.2			401.0			2.3
Fixed-line Interconnection		92.3			0.5			95.8			0.6			116.0			0.7
Broadband Internet Service and Advanced Media Platform Service		1,807.6			10.2			1,760.4			10.4			1,654.1			9.4
International Calling Service		137.9			0.8			152.9			0.9			166.9			1.0
Miscellaneous⁽³⁾		685.9			3.9			441.9			2.6			381.4			2.2

TotalFixed-line Telecommunication Services Revenue		2,948.2			16.6			2,822.3			16.7			2,719.4			15.5

*Security Services Revenue⁽⁴⁾*		1,109.5			6.3			284.3			1.7			92.0			0.5

*Commerce Services Revenue^{(3) (5)}*		710.7			4.0			728.4			4.3			651.8			3.7

*Others Revenue*
Portal Service⁽⁶⁾		18.4			0.1			15.7			0.1			25.1			0.1
Miscellaneous^{(4) (5) (7)}		784.5			4.4			644.4			3.8			769.6			4.4

Total Other Revenue		802.9			4.5			660.1			3.9			794.7			4.5

*Total Revenue*		17,743.7			100.0			16,874.0			100.0			17,520.0			100.0

Total Revenue Growth		5.2	%					(3.7	)%					2.5	%
*Segment Operating Expense*⁽⁸⁾
Cellular Services		11,258.3			63.4			11,079.0			65.7			11,548.1			65.9
Fixed-line Telecommunication Services		2,809.0			15.8			2,576.8			15.3			2,550.9			14.6
Security Services		975.9			5.5			295.6			1.8			108.7			0.6
Commerce Services		708.7			4.0			813.4			4.8			806.7			4.6
Others		881.8			5.0			907.4			5.4			969.0			5.5

*Total Segment Operating Expense*		16,633.7			93.7			15,672.2			92.9			15,983.4			91.2

*Segment Operating Profit*
Cellular Services		914.1			5.2			1,299.9			7.7			1,714.0			9.8
Fixed-line Telecommunication Services		139.2			0.8			245.5			1.5			168.5			1.0
Security Services		133.6			0.8			(11.3	)		(0.1	)		(16.7	)		(0.1	)
Commerce Services		2.0			0.0			(85.0	)		(0.5	)		(154.9	)		(0.9	)
Others		(78.9	)		(0.4	)		(247.3	)		(1.5	)		(174.3	)		(1.0	)

*Total Segment Operating Profit*	￦	1,110.0			6.3	%	￦	1,201.8			7.1	%	￦	1,536.6			8.8	%

(1)	Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through monthlyplan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services andvalue-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)

(4)

Security services revenue includes revenues from ADT Caps and SK Infosec. Such revenues, which were previously part of our others segment in the years ended December 31, 2018 and 2017, were separated into a new security services segment for the year ended December 31, 2019. As a result, our results of operations for the years ended December 31, 2018 and 2017 have been restated to retroactively apply such new segmentation.

(5)

(6)	Portal service revenue includes revenues from “Nate,” our online portal service operated by SK Communications.

(7)	Miscellaneous others revenue includes revenues from the marketing platform business operations of SK Planet as described above and other businesses.

(8)

“Segment operating expense” means operating expense for each reportable segment presented in accordance withK-IFRS and therefore does not include certain expenses that are classified as othernon-operating expenses underK-IFRS. For more information on the differences 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 underK-IFRS.”

2019 Compared to 2018

Operating Revenue and Other Income. Our consolidated operating revenue and other income increased by 5.3% to Won 17,846.9 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 ~~financial statements are prepared~~operating revenue increased by 5.2% to Won 17,743.7 billion in ~~accordance~~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 43.5% to Won 103.2 billion in 2019 from Won 71.9 billion in 2018, primarily due to the gain on the transfer of oure-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 1.7% to Won 12,172.4 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~~K-IFRS.~~land-to-mobile call volume.

Wireless device sales revenue increased by 4.3% to Won 1,032.0 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-priced5G-compatible smartphones.

Fixed-line telecommunications services: The ~~preparation~~revenue of ourfixed-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 miscellaneousfixed-line telecommunication services, increased by 4.5% to Won 2,948.2 billion in 2019 from Won 2,822.3 billion in 2018, primarily due to increases in our broadband Internet service and advanced media platform service revenue and miscellaneous fixed-line telecommunications services revenue, partially offset by a decrease in fixed-line telephone service revenue.

Miscellaneousfixed-line telecommunication services revenue increased by 55.2% to Won 685.9 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 1,807.6 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 premiumvideo-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 ADT Caps and SK Infosec, 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 revenues of ADT Caps for a full year in 2019 compared to a partial year in 2018 following the addition of the entities comprising ADT Caps as new consolidated ~~financial statements requires us~~subsidiaries in October 2018 and, to ~~make estimates~~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 ~~judgments that affect~~SK stoa, ourT-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 ~~reported amounts~~profitability of our 11st business.

Others: The revenue of our others segment, which is composed of revenue from our portal service and miscellaneous other revenue, increased by 21.6% to Won 802.9 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 4.6% to Won 16,846.0 billion in 2019 from Won 16,112.1 billion in 2018, primarily due to a 20.6% increase in depreciation and amortization expenses to Won 3,771.5 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 56.2% decrease in rent expenses to Won 231.9 billion in 2019 from Won 529.5 billion in 2018, a 3.2% decrease in other operating expenses to Won 1,724.9 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 ourright-of-useassets ~~liabilities, revenue and expenses~~following our adoption of IFRS 16, as well as the ~~disclosure~~commencement of ~~contingent assets~~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 ADT Caps in October 2018 and ~~liabilities. We continually evaluate~~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 ~~estimates and judgments including those related to allowances for doubtful accounts, fair value measurements of financial instruments, estimated useful lives and impairment of~~leased real properties in 2019 as depreciation expenses on~~long-lived~~right-of-use assets instead of as rent expenses. See “— Recently Adopted International Financial Reporting Standards — IFRS 16.”

The decrease in network interconnection expenses was mainly attributable to decreases inwireless-to-fixed-line and ~~income taxes. We base~~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 ~~estimates and judgments on historical experience and other factors~~segment operating expense with respect to each of our reportable segments, which do not include certain expenses that are ~~believed~~classified as othernon-operating expenses underK-IFRS. For more information on the difference between our consolidated operating expense pursuant to ~~be reasonable~~K-IFRS and pursuant to IFRS as issued by the IASB, see “— Explanatory Note Regarding Presentation of Certain Financial Information underK-IFRS” and note 5(2) of the ~~circumstances. Actual results may differ~~notes to our consolidated financial statements.

Cellular services: The segment operating expense for our cellular services segment increased by 1.6% to Won 11,258.3 billion in 2019 from ~~these estimates under different assumptions or conditions. We believe that~~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 ~~significant accounting policies,~~frequency usage rights for our 5G services.

Fixed-line telecommunication services: The segment operating expense for ourfixed-line telecommunication services segment increased by 9.0% to Won 2,809.0 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 ourultra-high definition IPTV and high speed broadband Internet services and depreciation and amortization expenses.

~~Allowances for Doubtful Accounts~~

~~An allowance for doubtful accounts is provided based on a review~~the addition of the ~~status~~entities comprising ADT Caps as new consolidated subsidiaries in October 2018 and, to a much smaller extent, the inclusion of ~~individual receivable accounts~~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 ~~year. We maintain allowances for doubtful accounts for estimated losses that result from the inability~~profitability of our ~~customers~~11st business.

Others: The segment operating expense for our others segment decreased by 2.8% to ~~make required payments. We base~~Won 881.8 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 20.0% to Won 1,000.9 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 ~~allowances~~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 onK-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 withK-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information underK-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 29.7% to Won 914.1 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.

2018 Compared to 2017

Our consolidated other income increased by 124.7% to Won 71.9 billion in 2018 from Won 32.0 billion in 2017, primarily due to the gain on the ~~likelihood~~disposal of ~~recoverability~~SK Broadband’s internet data center in Seoul.

The following sets forth additional information about our operating revenues with respect to each of ~~accounts receivable based on~~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 6.7% to Won 12,378.9 billion in 2018 from Won 13,262.1 billion in 2017. 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 8.2% to Won 9,770.4 billion in 2018 from Won 10,639.0 billion in 2017, primarily attributable to the ~~aging~~continued increase in the percentage of ~~accounts receivables at~~wireless service subscribers who elected to receive discounted rates in lieu of receiving handset subsidies pursuant to the ~~end~~MDDIA and the decrease in revenues from our roaming services subsequent to the launch of our “Safe Automatic T Roaming” service in March 2018. Such decrease was also partly attributable to the adoption of IFRS 15, which caused us to recognize a smaller portion of the ~~period, past~~overall transaction price of contracts under which we sell both a wireless device and subscription plan together to a single customer ~~default experience and their credit status, and economic and industrial factors. Allowance for doubtful accounts amounted~~as wireless service revenue than under the previously applicable accounting standards. See “— Recently Adopted International Financial Reporting Standards — IFRS 15.”

Cellular interconnection revenue decreased by 10.2% to Won ~~362.2~~532.2 billion in 2018 from Won 592.8 billion in 2017. The decrease was primarily attributable to continued decreases in interconnection rates andland-to-mobile call volume.

handsets due to lower customer demand for new devices. See “— Recently Adopted International Financial Reporting Standards — IFRS 15.”

Miscellaneous cellular services revenue increased by 1.4% to Won 1,087.2 billion in 2018 from Won 1,072.1 billion in 2017, primarily because of an increase in revenue from our IoT solutions business.

Fixed-line telecommunications services: The revenue of ourfixed-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 miscellaneousfixed-line telecommunication services, increased by 3.8% to Won 2,822.3 billion in 2018 from Won 2,719.4 billion in 2017, primarily due to increases in our broadband Internet service and advanced media platform service revenue and miscellaneous fixed-line telecommunications services revenue, partially offset by decreases in fixed-line interconnection revenue and fixed-line telephone service revenue.

Miscellaneousfixed-line telecommunication services revenue increased by 15.9% to Won ~~369.3~~441.9 billion in 2018 from Won 381.4 billion in 2017, primarily due to an increase in revenue from our business communications services.

The decrease in cost of goods sold was primarily due to a decrease in the number of wireless devices resold in 2018.

The decrease in network interconnection expenses was mainly attributable to decreases inwireless-to-fixed-line andfixed-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 othernon-operating expenses underK-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 underK-IFRS” and note 5(2) of the notes to our consolidated financial statements.

Fixed-line telecommunication services: The segment operating profit of ourfixed-line telecommunication services segment increased by 45.7% to Won 245.5 billion in 2018 from Won 168.5 billion in 2017, due to the greater increase in segment operating revenue as compared to the increase in segment operating expense, for the reasons described above.As a result, the segment operating margin of ourfixed-line telecommunication services segment increased to 8.7% in 2018 from 6.2% in 2017.

Security services: The segment operating loss of our security services segment decreased by 32.3% to Won 11.3 billion in 2018 from Won 16.7 billion in 2017, due to the greater increase in segment operating revenue as compared to the increase in segment operating expense, for the reasons described above.As a result, the segment operating margin of our security services segment improved to (4.0)% in 2018 from (18.2)% in 2017.

Others: The segment operating loss of our others segment increased by 41.9% to Won 247.3 billion in 2018 from Won 174.3 billion in 2017, due to the greater decrease in segment operating revenue as compared to the decrease in segment operating expense as described above. As a result, the segment operating margin of our others segment worsened to (37.5)% in 2018 from (21.9)% in 2017.

Finance Income and Finance Costs. Our finance income decreased by 30.1% to Won 256.4 billion in 2018 from Won 366.6 billion in 2017, primarily due to a significant decrease in gain on valuation of derivatives to Won 6.5 billion in 2018 from Won 223.9 billion in 2017, which primarily related to a significant increase in valuation of redeemable convertible preferred shares issued by Krafton in 2017. The effect of such decrease was partially offset by a significant increase in gain relating to financial assets at fair value through profit or loss to Won 83.6 billion in 2018, primarily relating to our disposal of 200,000 redeemable convertible preference shares of Krafton in 2018, from less than Won 0.1 billion in 2017.

Our finance costs decreased by 11.2% to Won 385.2 billion in 2018 from Won 433.6 billion in 2017, primarily due to a decrease in loss on disposal of long-term investment securities from Won 36.0 billion in 2017, which was primarily due to the disposal of our shares of Kakao, to nil in 2018, and a decrease in other finance costs from Won 35.9 billion in 2017, relating to management fees paid in connection with our investment in Krafton’s securities, to nil in 2018.

Gains (Losses) Related to Investments in Associates and Joint Ventures. Gains related to investments in associates and joint ventures increased by 45.7% to Won 3,270.9 billion in 2018 from Won 2,245.8 billion in 2017, primarily due to an increase in share of profits of SK Hynix to Won 3,238.1 billion in 2018 from Won 2,175.9 billion in 2017.Such increase was primarily due to an increase in SK Hynix’s profit for the year to Won 15,540.0 billion in 2018 from Won 10,642.2 billion in 2017.

Income Tax. Income tax expense increased by 13.2% to Won 844.0 billion in 2018 from Won 745.7 billion in 2017 primarily due to a 16.8% increase in profit before income tax to Won 3,976.0 billion in 2018 from Won 3,403.3 billion in 2017. Our effective tax rate in 2018 decreased to 21.2% from 21.9% in 2017. Our effective tax

rates in 2018 and 2017 were lower than the statutory tax rate of 27.5% and 24.2%, respectively, primarily due to changes in unrecognized deferred taxes in 2018 and a tax refund in 2017.

Profit for the Year. Principally as a result of the factors discussed above, our profit for the year increased by 17.9% to Won 3,132.0 billion in 2018 from Won 2,657.6 billion in 2017. Profit for the year as a percentage of operating revenue and other income was 18.5% in 2018 compared to 15.1% in 2017.

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 0.4% in 2019, 1.5% in 2018 and 1.9% in 2017.

Item 5.B.

Liquidity and Capital Resources

Liquidity

We had a working capital surplus (current assets in excess of current liabilities) of Won 314.6 billion as of December 31, ~~2016. As there was no significant change~~2019 and Won 1,111.3 billion as of December 31, 2018. The decrease in our ~~assumptions~~working capital as of December 31, 2019 compared to December 31, 2018 was primarily attributable to an increase in other accounts payable, which was mainly due to an increase in our investments in 5G networks, and ~~judgments~~our recognition of lease liabilities in 2019 pursuant to the adoption of IFRS 16 starting January 1, 2019. See “— Recently Adopted International Financial Reporting Standards — IFRS 16.” 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 andshort-term investment securities of Won 2,268.1 billion as of December 31, 2019 and Won 2,747.5 billion as of December 31, 2018. We had outstandingshort-term borrowings and current portion of long-term debt of Won 1,037.9 billion as of December 31, 2019 and Won 1,064.3 billion as of December 31, 2018. As of December 31, 2019, 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 1,270.8 billion as of December 31, 2019 and Won 1,506.7 billion as of December 31, 2018. 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
	2019			2018			2017			2019 to 2018					2018 to 2017
	(In billions of Won, except percentages)
Net cash provided by operating activities	￦	3,986.1		￦	4,332.6		￦	3,855.8		￦	(346.5	)	(8.0	)%	￦	476.8		12.4	%
Net cash used in investing activities		(3,582.5	)		(4,047.7	)		(3,070.6	)		465.2		(11.5	)		(977.1	)	31.8
Net cash used in financing activities		(636.8	)		(238.3	)		(826.6	)		(398.5	)	167.2			588.3		(71.2	)
Net increase (decrease) in cash and cash equivalents		(233.2	)		46.6			(41.4	)		(279.9	)	N.A.			87.9		N.A.
Effect of exchange rate changes on cash and cash equivalents held in foreign currencies		(2.6	)		2.4			(6.2	)		(5.0	)	N.A.			8.6		N.A.
Cash and cash equivalents at beginning of period		1,506.7			1,457.7			1,505.3			49.0		3.4			(47.6	)	(3.2	)
Cash and cash equivalents at end of period		1,270.8			1,506.7			1,457.7			(235.9	)	(15.7	)		49.0		3.4

N.A. = Not available

Cash Flows from Operating Activities. Net cash provided by operating activities was Won 3,986.1 billion in 2019, Won 4,332.6 billion in 2018 and Won 3,855.8 billion in 2017. Profit for the year was Won 861.9 billion in 2019, Won 3,132.0 billion in 2018 and Won 2,657.6 billion in 2017. Net cash provided by operating activities in 2019 decreased by 8.0% from 2018 primarily due to an increase in prepaid expenses at the year-end 2019 compared to the year-end 2018. Net cash provided by operating activities in 2018 increased by 12.4% from 2017 primarily due to a decrease in our outstanding other accounts receivable at theyear-end 2018 compared to theyear-end 2017.

Cash Flows from Investing Activities. Net cash used in investing activities was Won 3,582.5 billion in 2019, Won 4,047.7 billion in 2018 and Won 3,070.6 billion in 2017. Cash inflows from investing activities were Won 754.2 billion in 2019, Won 686.1 billion in 2018 and Won 456.8 billion in 2017. 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 ofshort-term loans of Won 117.6 billion. Cash inflows in 2017 were primarily attributable to the collection ofshort-term loans of Won 216.7 billion and proceeds from disposals of long-term investment securities of Won 129.7 billion, mostly in connection with the disposal of our shares of Kakao for Won 112.6 billion in cash in April 2017.

Cash outflows for investing activities were Won 4,336.7 billion in 2019, Won 4,733.8 billion in 2018 and Won 3,527.4 billion in 2017. Cash outflows in 2019, 2018 and 2017 were primarily attributable to expenditures related to the acquisition of property and equipment of Won 3,375.9 billion, Won 2,792.4 billion and Won 2,715.9 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 636.8 billion in 2019, Won 238.3 billion in 2018 and Won 826.6 billion in 2017. Cash inflows from financing activities were Won 2,047.3 billion in 2019, Won 4,651.7 billion in 2018 and Won 1,261.8 billion in 2017. Such inflows were primarily driven by the issuance of debentures, which provided cash of Won 1,633.4 billion in 2019, Won 1,809.6 billion in 2018 and Won 973.3 billion in 2017, and proceeds fromlong-term borrowings, which provided cash of nil in 2019, Won 1,920.1 billion in 2018 and Won 120.0 billion in 2017. In 2019, we also received proceeds of Won 300.0 billion from the disposal of our treasury shares to Kakao. In 2018, we received net proceeds of Won 499.9 billion from the transfer of interests in subsidiaries tonon-controlling interests and of Won 398.8 billion from the issuance of hybrid securities.

Cash outflows for financing activities were Won 2,684.1 billion in 2019, Won 4,890.0 billion in 2018 and Won 2,088.4 billion in 2017. Cash outflows for financing activities included repayment of debentures, payment of dividends, repayments of other long-term payables, repayments of lease liabilities and repayment of long-term borrowings, among other items. Repayment of debentures were Won 940.0 billion in 2019, Won 1,488.0 billion in 2018 and Won 842.7 billion in 2017. Payment of dividends were Won 718.7 billion in 2019, Won 706.1 billion in 2018 and Won 706.1 billion in 2017. Repayments of otherlong-term payables were Won 428.2 billion in 2019, Won 305.6 billion in 2018 and Won 305.5 billion in 2017. Repayments of lease liabilities was Won 393.4 billion in 2019. Repayment of long-term borrowings were Won 89.9 billion in 2019, Won 1,780.7 billion in 2018 and Won 32.7 billion in 2017.

As of December 31, 2019, we had totallong-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. As of December 31, 2018, we had totallong-term debt (excluding current portion) outstanding of Won 8,587.6 billion, which included debentures in the amount of Won 6,572.2 billion and bank and institutional borrowings in the amount of Won 2,015.4 billion. For a description of ourlong-term debt, see note 17 of the notes to our consolidated financial statements.

As of December 31, 2019, we had (i) Won 6,512.5 billion aggregate principal amount of KoreanWon-denominated debentures outstanding, of which SK Telecom issued Won 5,040.0 billion, SK Broadband issued Won 1,460.0 billion and LSH issued Won 12.5 billion, and (ii) Won 1,736.7 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 ~~aging~~offering size, maturity, interest rate environment at the time of ~~accounts receivables, past customer default experience~~the offering and ~~credit status,~~currency, among other factors. We have a diversified maturity profile with respect to our debentures. See “— Contractual Obligations and ~~economic~~Commitments” for more details.

As of December 31, 2019, all of our foreigncurrency-denominatedlong-term borrowings and ~~industrial factors, there was no significant change~~debentures, which in the ~~percentage~~aggregate amounted to 17.3% of ~~allowance~~our total outstandinglong-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 ~~doubtful accounts~~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, 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 ournext-generation growth businesses in media, security, commerce, IoT solutions and other innovative products and services offered through our platform services, including AI solutions.

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 2020. 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 2019, 2018 and 2017:


	Year ended December 31,
	2019		2018		2017
	(In billions of Won)
Wireless Networks⁽¹⁾	￦	2,514.3	￦	1,735.6	￦	1,597.0
Fixed-line Network⁽²⁾		815.8		776.8		790.0
Others⁽³⁾		45.8		280.0		328.9

Total	￦	3,375.9	￦	2,792.4	￦	2,715.9

(1)	Includes investments in our 5G, LTE, WCDMA, CDMA andWi-Fi networks as well as other capital expenditures related to our networks.

(2)	Includes all capital expenditures made by SK Broadband.

(3)	Includesnon-network related investments such as capital expenditures for product development and upgrades of our information technology systems and equipment.

We set our capital expenditure budget for each upcoming year on an annual basis. Our actual capital expenditures in 2019, 2018 and 2017 were Won 3,375.9 billion, Won 2,792.4 billion and Won 2,715.9 billion,

respectively. Of such amounts, we spent approximately 74.5%, 62.2% and 58.8% in 2019, 2018 and 2017, respectively, on capital expenditures related to building and enhancing our wireless networks. Our othernon-network related capital expenditures in 2019, 2018 and 2017 primarily related to developing new products and upgrades to our information technology systems and equipment.

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 2020 to build and expand our 5G network and develop related technologies, as well as to further improve 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
1.8 GHz	LTE (35 MHz)	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
2.1 GHz	WCDMA (10 MHz)		Dec. 2016		141.2		2016		85.3		2017-2021
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		15.5		2019-2023

We expect that our capital expenditure amount in 2020 will be lower than that of 2019. Our expenditures will be for a range of projects, including investments to expand and improve our newly implemented 5G network, investments to maintain our LTE network andLTE-A services, investments to improve and expand ourWi-Fi network, investments to develop our IoT solutions and platform services business portfolio, including AI solutions, investments in research and development of 5G technology, investments in businesses that can potentially leverage our 5G network, and funding formid- tolong-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. 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 2020 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, 2019, our principal repayment obligations with respect tolong-term borrowings, bonds and short-term borrowings outstanding were as follows for the periods indicated:


Year Ending December 31,	Total
	(In billions of Won)
2020	￦	1,038.5
2021		940.6
2022		1,421.6
2023 and thereafter		6,914.4

Investments in New Growth Businesses. We may also require capital for investments to support our development of new growth businesses.

We made capital contributions of Won 25.0 billion and Won 65.0 billion in 2017 and 2018, respectively, to Dreamus (formerly known as IRIVER LIMITED), a manufacturer of digital audio players and other portable media devices of which we had acquired a 39.3% equity interest in August 2014 and increased our equity interest to 49.0% in December 2014. Dreamus also operates our music streaming service platform, FLO. As of December 31, 2019, we had a 51.4% equity interest in Dreamus.

In 2017, we acquired Life Design Company (formerly known as S.M. Life Design Company Japan Inc.) for Won 30.0 billion, in light of potential synergies that may be achieved through the entertainment business.

In October 2018, we acquired ADT Caps by acquiring a 55.0% interest in LSH, which owns 100% of ADT Caps, for Won 696.7 billion. In December 2018, we merged NSOK with and into ADT CAPS Co., Ltd. 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 Holdings. In 2018, we also increased our interest in id Quantique from 4.6% as of December 31, 2017 ~~compared~~ to 65.6% as of December 31, 2018, through the ~~prior year. If economic~~acquisition of additional shares with Won 55.2 billion in cash and Won 5.7 billion incontribution-in-kind. Following our capital contribution in cash amounting to Won 12.2 billion in 2019, our equity interest in id Quantique increased to 66.8% as of December 31, 2019.

From time to time, we may make other investments in telecommunications or ~~specific industry trends worsen beyond~~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 ~~estimates,~~best interest.

Severance Payments. The defined benefit obligation, which is the ~~allowances~~total accrued and unpaid retirement and severance benefits for ~~doubtful accounts~~our employees, as of December 31, 2019 was Won 172.3 billion. This amount was reflected in our consolidated financial statements as a liability, which is net of deposits with insurance companies totaling Won 965.7 billion to fund a portion of the employees’ severance indemnities.

Also see “Item 6.D. Employees — Employee Benefits” and note 20 of the notes to our consolidated financial statements.

Dividends. Total cash outflows for payments of dividends amounted to Won 718.7 billion in 2019, Won 706.1 billion in 2018 and Won 706.1 billion in 2017.

In April 2020, we ~~have recorded may be materially adjusted in the future.~~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 658.2 billion.

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~~notes 2(4) and 35(3) of the notes to our consolidated financial statements.

Impairment ofLong-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 oflong-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 ~~loss~~to be recognized is ~~recognized when~~measured as the ~~asset’s~~amount 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 along-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 grouped~~we 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~~(level of a cash-generating ~~units).~~ unit. The recoverable amounts of assets orcash-generating units ~~are~~may be determined based onvalue-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 5 to 10.25 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 ~~presents~~is 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 ~~utilize~~test for impairment utilizing the estimatedlong-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 no impairment of our frequency usage rights in ~~2017.~~2019. See note 16 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 anynon-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 theacquisition-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 grouped~~we 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 as~~level of a cash-generating ~~units. Determining whether goodwill is impaired requires~~ unit. The recoverable amount of an ~~estimation of the value in use of the~~asset or cash-generating ~~units~~ unit 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 respectivecash-generating unit and the determination of an appropriate discount rate in order to calculate present value.

See ~~note~~notes 4(12) and 15 of the notes to our consolidated financial statements.

Income Taxes

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, ~~2017~~2019 and ~~2016,~~2018, unused tax loss carryforwards of Won ~~921.3~~1,023.9 billion and Won ~~755.1~~849.9 billion, respectively, were not recognized as deferred tax assets because we did not believe that their realization would be probable. The increase of Won ~~166.3~~174.0 billion in unrecognized tax loss carryforwards in ~~2017~~2019 compared to ~~2016~~2018 was primarily related to the effects of consolidation of FSK L&S as well as the net ~~losses~~loss incurred by ~~SK Planet.~~some of our consolidated subsidiaries. See ~~note~~notes 4(26) and 31 of the notes to our consolidated financial statements.

Prepaid Expenses

Determination of Stand-Alone Selling Prices in Recognition of Revenue from Cellular Services

Recently Adopted International Financial Reporting Standards

IFRS 16

As of December 31, 2019, we assess the lease term of a lease contract based on the assumption that the right to extend or terminate the lease is not enforceable if the lease contract requires the counterparty’s consent for its termination or extension. In December 2019, International Financial Reporting Interpretations Committee (“IFRIC”) issued its final agenda decision that the concept of penalty that should be considered in determining the enforceable period of a lease under IFRS 16 must be determined considering broader economics of the lease contract, rather than just the contractual termination payments. Furthermore, under such agenda, a lease is no longer enforceable when each of the parties to it has the right to terminate the lease without permission from the other party with no more than an insignificant penalty. Considering the type and number of lease contracts entered into as of and from January 1, 2019, we believe that we did not have sufficient time to complete the analysis on our lease portfolios to reflect the impact of such IFRIC agenda decision in our consolidated financial statements as of and for the year ended December 31, 2019. We are in the process of conducting such analysis, which we expect to complete during the first half of 2020, and we plan to apply such IFRIC agenda decision beginning in 2020 as a change in our accounting policies. We expect such application to have the effect of increasing the lease term for certain of our lease contracts, and to result in an increase in ourright-of-use assets and lease liabilities.

IFRS 15

In addition to the revenue recognition model, IFRS 15 specifies how to account for the incremental costs of obtaining a contract, which in our case includes certain of our commissions paid to our retail stores and authorized dealers in connection with acquiring new customer contracts. IFRS 15 requires certain of such costs to be capitalized as assets and subsequently amortized over the applicable expected contract periods calculated based on our historical experience on the duration of subscriber contracts.

In the case of our consolidated statement of income for the year ended December 31, 2018, the adoption of IFRS 15 had the effect of decreasing our operating revenue by Won 85.8 billion, and decreasing advertising expenses and commission expenses by Won 51.2 billion and Won 12.7 billion, respectively, for a total decrease in our operating expense by Won 66.1 billion. Therefore, the adoption of IFRS 15 resulted in decreases in operating profit and profit before income tax by Won 19.7 billion each. In addition, the adoption had the effect of decreasing our profit for the year by Won 88.2 billion and increasing our income tax expense by Won 68.5 billion. The adoption of IFRS 15 did not have a material impact on our consolidated statement of cash flows for the year ended December 31, 2018. See notes 4(23) and 4(24) of the notes to our consolidated financial statements for further details regarding significant accounting policies related to revenue prior to and following the adoption of IFRS 15.

IFRS 9

IFRS 9 requires all financial assets, on initial recognition, to be classified as financial assets at amortized cost, debt instruments at fair value through other comprehensive income, equity investments at fair value through other comprehensive income or financial assets at fair value through profit or loss. The classification is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. In addition, IFRS 9 sets out an “expected credit loss” impairment model, under which we generally recognize impairment losses on debt instruments at an amount equal to their twelve-month expected credit losses. However, with respect to debt instruments experiencing a significant increase in credit risk and accounts receivable – trade, we recognize impairment losses at an amount equal to their lifetime expected credit losses.

The adoption of IFRS 9 did not have a material impact on our consolidated statement of income or our consolidated statement of cash flows for the year ended December 31, 2018. See notes 4(5) and 4(6) of the notes to our consolidated financial statements for further details regarding significant accounting policies related to financial assets prior to and following the adoption of IFRS 9.

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,
	2019					2018				2017
	(In billions of Won, except percentages)
Operating revenue and other income	￦	17,846.9		100.0	%	￦	16,945.9	100.0	%	￦	17,552.0	100.0	%
Revenue		17,743.7		99.4			16,874.0	99.6			17,520.0	99.8
Other income		103.2		0.6			71.9	0.4			32.0	0.2
Operating expenses		16,846.0		94.4			16,112.1	95.1			16,327.4	93.0
Operating profit		1,000.9		5.6			833.8	4.9			1,224.6	7.0
Profit before income tax		1,162.7		6.5			3,976.0	23.5			3,403.3	19.4
Income tax expense		300.7		1.7			844.0	5.0			745.7	4.2
Profit for the year		861.9		4.8			3,132.0	18.5			2,657.6	15.1
Attributable to:
Owners of the Parent Company		889.9		5.0			3,127.9	18.5			2,599.8	14.8
Non-controlling interests		(28.0	)	(0.2	)		4.1	0.0			57.8	0.3

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,
	2019					2018					2017
	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⁾	￦	9,532.4		53.7	%	￦	9,770.4		57.9	%	￦	10,639.0		60.7	%
Cellular Interconnection		494.3		2.8			532.2		3.2			592.8		3.4
Wireless Device Sales		1,032.0		5.8			989.1		5.9			958.2		5.5
Miscellaneous⁽²⁾		1,113.7		6.3			1,087.2		6.4			1,072.1		6.1

Total Cellular Services Revenue		12,172.4		68.6			12,378.9		73.4			13,262.1		75.7


	For the year ended December 31,
	2019						2018						2017
	Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue
	(In billions of Won, except percentages)
*Fixed-line Telecommunication Services Revenue*
Fixed-line Telephone Service		224.5			1.3			371.3			2.2			401.0			2.3
Fixed-line Interconnection		92.3			0.5			95.8			0.6			116.0			0.7
Broadband Internet Service and Advanced Media Platform Service		1,807.6			10.2			1,760.4			10.4			1,654.1			9.4
International Calling Service		137.9			0.8			152.9			0.9			166.9			1.0
Miscellaneous⁽³⁾		685.9			3.9			441.9			2.6			381.4			2.2

TotalFixed-line Telecommunication Services Revenue		2,948.2			16.6			2,822.3			16.7			2,719.4			15.5

*Security Services Revenue⁽⁴⁾*		1,109.5			6.3			284.3			1.7			92.0			0.5

*Commerce Services Revenue^{(3) (5)}*		710.7			4.0			728.4			4.3			651.8			3.7

*Others Revenue*
Portal Service⁽⁶⁾		18.4			0.1			15.7			0.1			25.1			0.1
Miscellaneous^{(4) (5) (7)}		784.5			4.4			644.4			3.8			769.6			4.4

Total Other Revenue		802.9			4.5			660.1			3.9			794.7			4.5

*Total Revenue*		17,743.7			100.0			16,874.0			100.0			17,520.0			100.0

Total Revenue Growth		5.2	%					(3.7	)%					2.5	%
*Segment Operating Expense*⁽⁸⁾
Cellular Services		11,258.3			63.4			11,079.0			65.7			11,548.1			65.9
Fixed-line Telecommunication Services		2,809.0			15.8			2,576.8			15.3			2,550.9			14.6
Security Services		975.9			5.5			295.6			1.8			108.7			0.6
Commerce Services		708.7			4.0			813.4			4.8			806.7			4.6
Others		881.8			5.0			907.4			5.4			969.0			5.5

*Total Segment Operating Expense*		16,633.7			93.7			15,672.2			92.9			15,983.4			91.2

*Segment Operating Profit*
Cellular Services		914.1			5.2			1,299.9			7.7			1,714.0			9.8
Fixed-line Telecommunication Services		139.2			0.8			245.5			1.5			168.5			1.0
Security Services		133.6			0.8			(11.3	)		(0.1	)		(16.7	)		(0.1	)
Commerce Services		2.0			0.0			(85.0	)		(0.5	)		(154.9	)		(0.9	)
Others		(78.9	)		(0.4	)		(247.3	)		(1.5	)		(174.3	)		(1.0	)

*Total Segment Operating Profit*	￦	1,110.0			6.3	%	￦	1,201.8			7.1	%	￦	1,536.6			8.8	%

(1)	Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through monthlyplan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services andvalue-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)

(4)

(5)

(6)	Portal service revenue includes revenues from “Nate,” our online portal service operated by SK Communications.

(7)	Miscellaneous others revenue includes revenues from the marketing platform business operations of SK Planet as described above and other businesses.

(8)

2019 Compared to 2018

Our consolidated operating revenue increased by 5.2% to Won 17,743.7 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.

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 1.7% to Won 12,172.4 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.

Fixed-line telecommunications services: The revenue of ourfixed-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 miscellaneousfixed-line telecommunication services, increased by 4.5% to Won 2,948.2 billion in 2019 from Won 2,822.3 billion in 2018, primarily due to increases in our broadband Internet service and advanced media platform service revenue and miscellaneous fixed-line telecommunications services revenue, partially offset by a decrease in fixed-line telephone service revenue.

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 1,807.6 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 premiumvideo-on-demand content.

Security services: The revenue of our security services segment, which is composed of revenues from ADT Caps and SK Infosec, 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 revenues of ADT Caps for a full year in 2019 compared to a partial year in 2018 following the addition of the entities comprising ADT Caps as new consolidated subsidiaries 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, ourT-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.

The increase in depreciation and amortization expenses was primarily due to the recognition of depreciation expenses relating to ourright-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 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 onright-of-use assets instead of as rent expenses. See “— Recently Adopted International Financial Reporting Standards — IFRS 16.”

The decrease in network interconnection expenses was mainly attributable to decreases inwireless-to-fixed-line andfixed-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 othernon-operating expenses underK-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 underK-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 11,258.3 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.

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 ADT Caps for a full year in 2019 compared to a partial year in 2018 following the addition of the entities comprising ADT Caps as new consolidated subsidiaries 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.

Others: The segment operating expense for our others segment decreased by 2.8% to Won 881.8 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.

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 onK-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 withK-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information underK-IFRS” and note 5(2) of the notes to our consolidated financial statements.