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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF JUNE 2021
COMMISSION FILE NUMBER: 333-04906
SK Telecom Co., Ltd.
(Translation of registrant’s name into English)
65, Eulji-ro, Jung-gu
Seoul 04539, Korea
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
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QUARTERLY BUSINESS REPORT
(From January 1, 2021 to March 31, 2021)
THIS IS A SUMMARY OF THE QUARTERLY BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN WHICH IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION.
IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.
ALL REFERENCES TO THE “COMPANY” SHALL MEAN SK TELECOM CO., LTD. AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS CONSOLIDATED SUBSIDIARIES. REFERENCES TO “SK TELECOM” SHALL MEAN SK TELECOM CO., LTD., BUT SHALL NOT INCLUDE ITS CONSOLIDATED SUBSIDIARIES.
UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED FOR USE IN KOREA (“K-IFRS”) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. THE COMPANY HAS MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.
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I. | COMPANY OVERVIEW |
1. Company Overview
The Company’s quarterly business report for the three months ended March 31, 2021 includes the following consolidated subsidiaries:
Name | Date of | Principal Business | Total Assets as of Dec. 31, 2020 (millions of Won) | Material | ||||||
SK Telink Co., Ltd. | Apr. 9, 1998 | Telecommunication services and satellite broadcasting services | 176,872 | Material | ||||||
SK Communications Co., Ltd. | Sept. 19, 1996 | Internet portal and other Internet information services | 45,584 | |||||||
SK Broadband Co., Ltd. | Sept. 26, 1997 | Fixed-line telecommunication services, multimedia and Internet protocol TV (“IPTV”) services | 5,765,808 | Material | ||||||
PS&Marketing Co., Ltd. | Apr. 3, 2009 | Sale of telecommunication devices | 470,521 | Material | ||||||
Service Ace Co., Ltd. | Jun. 10, 2010 | Customer center management services | 96,258 | Material | ||||||
Service Top Co., Ltd. | Jun. 11, 2010 | Customer center management services | 69,496 | |||||||
SK O&S Co., Ltd. (formerly known as Network O&S Co., Ltd.) | Jun. 14, 2010 | Network maintenance services | 88,633 | Material | ||||||
SK Telecom China Holdings Co., Ltd. | Jul. 12, 2007 | Investment (holding company) | 48,684 | |||||||
SK Global Healthcare Business Group, Ltd. | Sept. 14, 2012 | Investment (SPC) | 2,675 | |||||||
YTK Investment Ltd. | Jul. 1, 2010 | Investment | 3,218 | |||||||
Atlas Investment | Jun. 24, 2011 | Investment | 128,039 | Material | ||||||
SKT Americas, Inc. | Dec. 29, 1995 | Information collection and management consulting services | 24,985 | |||||||
One Store Co., Ltd. | Mar. 1, 2016 | Contents distribution | 243,442 | Material | ||||||
SK Planet Co., Ltd. | Oct. 1, 2011 | Telecommunication and platform services | 536,981 | Material | ||||||
Eleven Street Co., Ltd. | Sept. 1, 2018 | E-commerce and Internet-related services | 999,225 | Material | ||||||
Dreamus Company (formerly known as Iriver Ltd.) | Jan. 20, 1999 | Online music services | 171,931 | Material | ||||||
ADT CAPS Co., Ltd. (formerly known as SK Infosec Co., Ltd.) | Jun. 26, 2000 | Information security services | 3,792,573 | Material | ||||||
Quantum Innovation Fund I | Dec. 3, 2018 | Investment | 25,354 | |||||||
SK telecom Japan Inc. | Mar. 1, 2018 | Information collection and management consulting services | 8,720 | |||||||
id Quantique Ltd. | Oct. 29, 2001 | QRNG technology development | 41,287 | |||||||
SK Telecom TMT Investment Corp. | Jan. 4, 2019 | Investment | 154,729 | Material | ||||||
FSK L&S Co., Ltd. | Oct. 20, 2016 | Logistics consulting services | 35,259 | |||||||
Incross Co., Ltd. | Aug. 13, 2007 | Advertising agency services | 177,694 | Material |
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Name | Date of | Principal Business | Total Assets as of Dec. 31, 2020 (millions of Won) | Material | ||||||
Happy Hanool Co., Ltd. | Aug. 8, 2019 | Services | 671 | |||||||
SK stoa Co., Ltd. | Dec. 1, 2017 | Commercial retail data broadcasting channel services | 107,982 | Material | ||||||
Broadband Nowon Broadcasting Co., Ltd. | Jun. 15, 2001 | Cable broadcasting services | 23,227 | |||||||
T map Mobility Co., Ltd. | Dec. 29, 2020 | Database and online information services | 170,381 | Material | ||||||
SK M&Service Co., Ltd. | Feb. 10, 2000 | Database and online information services | 129,738 | Material | ||||||
SK Planet Global Holdings Pte. Ltd. | Aug. 10, 2012 | Investment (holding company) | 361 | |||||||
SKP America LLC | Jan. 27, 2012 | Digital contents sourcing services | 43,826 | |||||||
K-net Culture and Contents Venture Fund | Nov. 24, 2008 | Investment partnership | 377,863 | Material | ||||||
Iriver Enterprises Ltd. | Jan. 14, 2004 | Management of Chinese subsidiary | 171 | |||||||
Iriver China Co., Ltd. | Jun. 24, 2004 | Electronic device manufacturing | 525 | |||||||
DongGuan Iriver Electronics Co., Ltd. | Jul. 6, 2006 | Electronic device manufacturing | 3 | |||||||
Life Design Company Inc. | June 25, 2008 | Merchandise business | 5,097 | |||||||
SKinfosec Information Technology (wuxi) Co., Ltd. | Aug. 21, 2019 | System software development and supply services | 8,285 | |||||||
CAPSTEC Co., Ltd. | Jan. 1, 2005 | Manned security services | 36,845 | |||||||
Home & Service Co., Ltd. | Jun. 5, 2017 | Information and telecommunication network maintenance | 124,197 | Material | ||||||
Media S Co., Ltd. | — | Movie, video and broadcasting program production | — | |||||||
Panasia Semiconductor Materials LLC | May 12, 2020 | Trust services and joint investment | 39,015 | |||||||
SK Planet Japan, K. K. | Mar. 14, 2012 | Digital contents sourcing services | 414 | |||||||
id Quantique LLC | Sept. 1, 2018 | Quantum information and communications services | 6,096 | |||||||
FSK L&S (Shanghai) Co., Ltd. | Jul. 29, 2010 | International cargo transportation agent | 34,922 | |||||||
FSK L&S (Hungary) Co., Ltd. | Sept. 13, 2019 | International cargo transportation agent | 8,605 | |||||||
FSK L&S Vietnam Company Limited | May 5, 2020 | International cargo transportation agent | 1,540 | |||||||
Infra Communications Co., Ltd. | Aug. 1, 2017 | Service operations | 2,156 | |||||||
Mindknock Co., Ltd. | Jan. 23, 2018 | Information services | 317 | |||||||
UT LLC | Apr. 1, 2021 | Database and online information services | — | |||||||
SK Telecom Innovation Fund, L.P. | Jan. 15, 2016 | Investment | 71,846 | |||||||
SK Telecom China Fund I L.P. | Sept. 14, 2011 | Investment | 14,193 |
* | “Material Subsidiary” means a subsidiary with total assets of Won 75 billion or more as of the end of the previous fiscal year. |
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Changes in subsidiaries during the three months ended March 31, 2021 are set forth below.
Change | Name | Remarks | ||
Additions | Media S Co., Ltd. | Newly established by SK Broadband Co., Ltd. | ||
UT LLC | Newly established by T map Mobility Co., Ltd. | |||
Exclusions | ADT CAPS Co., Ltd. | Merged into ADT CAPS Co., Ltd. (formerly known as SK Infosec Co., Ltd.) |
A. | Corporate Legal Business Name: SK Telecom Co., Ltd. |
B. | Date of Incorporation: March 29, 1984 |
C. | Location of Headquarters |
(1) | Address: 65 Euljiro, Jung-gu, Seoul, Korea |
(2) | Phone: +82-2-6100-2114 |
(3) | Website: http://www.sktelecom.com |
D. | Major Businesses |
(1) | Wireless business |
The Company provides wireless telecommunications services, characterized by its competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. The Company continues to maintain its reputation as the unparalleled premium network operator in the 3G, 4G and 5G markets on the basis of its technological leadership and network management technology. With the world’s first commercialization of 5G technology in 2019, the Company continues to maintain its position as the top network operator in the 5G era and strives to provide differentiated services to its customers.
In order to strengthen its sales channels, the Company has been offering a variety of fixed-line and wireless telecommunication convergence products through its subsidiary, PS&Marketing Co., Ltd. (“PS&Marketing”). PS&Marketing provides differentiated service to customers through the establishment of new sales channels and product development. Through its subsidiaries Service Ace Co., Ltd. and Service Top Co., Ltd., the Company operates customer service centers in Seoul and provides telemarketing services. Additionally, SK O&S Co., Ltd. (“SK O&S”), the Company’s subsidiary responsible for the operation of the Company’s networks, including its 5G network, provides customers with quality network services and provides the Company with technological know-how in network operations.
The Company plans to make efforts to evolve into a subscription product marketing company by sourcing a variety of services including music, over-the-top (“OTT”) contents, rental and insurance as well as big data that it has gained through its wireless business, while providing optimally personalized product packages leveraging artificial intelligence (“AI”) capabilities.
(2) | Fixed-line business |
SK Broadband Co., Ltd. (“SK Broadband”) is engaged in providing telecommunications, broadcasting and new media services and various other services that are permitted to be carried out by SK Broadband under relevant regulations, as well as business activities that are directly or indirectly related to providing those services. In 1999, SK Broadband launched its high-speed Internet service in Seoul, Busan, Incheon and Ulsan and currently provides such services nationwide. SK Broadband also commercialized its TV-Portal service in July 2006 and its IPTV service in January 2009 upon receipt of permit in September 2008. In April 2019, SK Broadband decided to launch an integrated OTT platform “wavve,” combining its OTT service “oksusu” with POOQ, an OTT service alliance of Korea’s three terrestrial broadcasters. SK Broadband is focusing on strengthening the competitiveness of the combined OTT service through an increased investment in content and thereby developing it into a key service in the 5G era. In addition, SK Broadband’s merger with Tbroad Co., Ltd. (“Tbroad”) obtained all requisite regulatory approvals in January 2020, and the merger became effective as of April 30, 2020.
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(3) | Security business |
In the field of security business, the Company has completed its converged security business portfolio ranging from physical security to information security through the acquisitions of material subsidiaries comprising the former ADT CAPS Co., Ltd. (“Former ADT CAPS”) and SK Infosec Co., Ltd. (“SK Infosec”). Due to a growing number of single-person households and increasing awareness for crime prevention, the security industry has been growing steadily in recent years. New markets for physical security have also been developing as a result of integrating cutting-edge information and communications technology (“ICT”), such as big data, Internet of Things (“IoT”) and AI, and bio-recognition technologies. The domestic market size of the physical security industry expanded from Won 3.6 trillion in 2012 to Won 5.5 trillion in 2017 (at an average annual growth rate of 8.7%), and is expected to grow to Won 7.9 trillion (at an average annual growth rate of 7.5%) in 2022. The Company plans to expand its security business into one of its major business areas by leveraging such industry growth as well as by seeking to evolve into a converged security company following the recently completed merger of SK Infosec and Former ADT CAPS and promoting synergies with its other ICT-based businesses.
(4) | Commerce business |
The Company is a leading player in the Korean e-commerce industry through its material subsidiary Eleven Street Co., Ltd. (“Eleven Street”), which operates an e-commerce platform service that connects various sellers and purchasers through its online and mobile platforms. The Company continues to evolve into a commerce portal by providing differentiated shopping-related services covering shopping information, product search and purchases, relying on the strength of the Company’s core principles of innovation supported by its advanced technological capabilities, including AI-based commerce search technology and customized recommendations based on big data analysis. In addition, the rapidly growing SK stoa Co., Ltd. (“SK Stoa”) will solidify its top position in the T-commerce market by strengthening its customer base secured through strategic marketing and product sourcing capabilities.
See “II.1. Business Overview” for more information.
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E. | Credit Ratings |
(1) | Corporate bonds and other long-term securities |
Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
February 20, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
February 20, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
February 20, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
May 31, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
June 4, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
June 18, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
July 15, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
July 15, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
July 15, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
October 4, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
October 7, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
October 8, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
December 26, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
December 27, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
December 27, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
June 16, 2020 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
June 18, 2020 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
June 22, 2020 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
September 28, 2020 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
September 29, 2020 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
September 29, 2020 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
December 30, 2020 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
January 4, 2021 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
January 4, 2021 | Corporate bond | AAA (Stable) | Korea Investors Service, Co., Ltd. | Current rating |
* | Rating definition: “AAA” - The certainty of principal and interest payment is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors. |
* | Rating definition: “AA” - The certainty of principal and interest payment is extremely high with very low investment risk, but has slightly inferior factors compared to “AAA” rating. |
(2) | Commercial paper (“CP”) and short-term bonds |
Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
May 31, 2019 | CP | A1 | Korea Ratings | Current rating | ||||
May 31, 2019 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
June 4, 2019 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 4, 2019 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 18, 2019 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 18, 2019 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
October 4, 2019 | CP | A1 | Korea Ratings | Regular rating | ||||
October 4, 2019 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
October 7, 2019 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 7, 2019 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 8, 2019 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 8, 2019 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
June 16, 2020 | CP | A1 | Korea Ratings | Current rating |
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Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
June 16, 2020 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
June 18, 2020 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 18, 2020 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 22, 2020 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 22, 2020 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
September 28, 2020 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
September 28, 2020 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
September 29, 2020 | CP | A1 | Korea Ratings | Current rating | ||||
September 29, 2020 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
September 29, 2020 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
September 29, 2020 | Short-term bond | A1 | Korea Investors Service Co., Ltd. | Current rating |
* | Rating definition: “A1” - Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors. |
(3) | International credit ratings |
Date of credit rating | Subject of rating | Credit rating of securities | Credit rating agency | Rating type | ||||
March 6, 2019 | Bonds denominated in foreign currency | A- (Negative) | S&P Global Ratings | Regular rating | ||||
May 30, 2019 | Bonds denominated in foreign currency | A3 (Negative) | Moody’s Investors Service | Regular rating | ||||
October 14, 2019 | Bonds denominated in foreign currency | A- (Negative) | Fitch Ratings | Regular rating | ||||
June 11, 2020 | Bonds denominated in foreign currency | A3 (Negative) | Moody’s Investors Service | Regular rating | ||||
October 6, 2020 | Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
March 4, 2021 | Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
March 30, 2021 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating |
(4) | Listing (registration or designation) of Company’s shares and special listing status |
Listing (registration or designation) | Date of listing (registration or designation) | Special listing | Special listing and applicable | |||
KOSPI Market of Korea Exchange | November 7, 1989 | Not applicable | Not applicable |
2. Company History
March 1984: Establishment of Korea Mobile Telecommunications Co., Ltd.
November 1989: Listing on the KOSPI Market of the Korea Exchange
March 1997: Change of name to SK Telecom Co., Ltd.
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March 2008: Acquisition of Hanaro Telecom (the predecessor entity of SK Broadband)
October 2011: Spin-off of SK Planet Co., Ltd. (“SK Planet”)
June 2015: Comprehensive exchange of shares of SK Broadband
May 2018: Acquisition of Former ADT CAPS through the acquisition of shares of Siren Holdings Korea Co., Ltd.
December 2018: Comprehensive exchange of shares of SK Infosec
April 2020: Merger of SK Broadband and Tbroad
December 2020: Spin-off of T map Mobility Co., Ltd. (“T Map Mobility”)
March 2021: Merger of SK Infosec and Former ADT CAPS
A. | Location of Headquarters |
• | 22 Dohwa-dong, Mapo-gu, Seoul (July 11, 1988) |
• | 16-49 Hangang-ro 3-ga, Yongsan-gu, Seoul (November 19, 1991) |
• | 267 Namdaemun-ro 5-ga, Jung-gu, Seoul (June 14, 1995) |
• | 99 Seorin-dong, Jongro-gu, Seoul (December 20, 1999) |
• | 65 Euljiro, Jung-gu, Seoul (December 13, 2004) |
B. | Significant Changes in Management |
At the 33rd General Meeting of Shareholders held on March 24, 2017, Jung Ho Park was elected as an inside director and Dae Sik Cho was elected as a non-executive director. Jae Hoon Lee and Jae Hyeon Ahn were re-elected as independent directors and members of the audit committee and Jung Ho Ahn was elected as an independent director. At the 34th General Meeting of Shareholders held on March 21, 2018, Young Sang Ryu was elected as an inside director and Youngmin Yoon was elected as an independent director and member of the audit committee of the Company’s board of directors (the “Board of Directors”). At the 35th General Meeting of Shareholders held on March 26, 2019, Seok-Dong Kim was elected as an independent director and member of the audit committee of the Board of Directors. At the 36th General Meeting of Shareholders held on March 26, 2020, Jung Ho Park was re-elected as an inside director, Dae Sik Cho was re-elected as a non-executive director, Jung Ho Ahn was re-elected as an independent director and member of the audit committee of the Board of Directors, Yong-Hak Kim was newly elected as an independent director and member of the audit committee and Junmo Kim was newly elected as an independent director. At the 36th General Meeting of Shareholders held on March 25, 2021, Young Sang Ryu was re-elected as inside director, and Youngmin Yoon was re-elected as an independent director and member of the audit committee of the Board of Directors.
C. | Change in Company Name |
On March 28, 2019, Iriver Ltd., one of the Company’s subsidiaries, changed its name to Dreamus Company in accordance with a resolution at its general meeting of shareholders.
On April 17, 2019, Network O&S Co., Ltd., one of the Company’s subsidiaries, changed its name to SK O&S Co., Ltd. pursuant to a resolution at its extraordinary meeting of shareholders.
On March 4, 2021, SK Infosec, one of the Company’s material subsidiaries, merged Former ADT CAPS with and into itself and changed its name to ADT CAPS Co., Ltd. (“ADT CAPS”) after the date of the merger.
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D. | Mergers, Acquisitions and Restructuring |
(1) | Exchange of shares of SK Communications Co., Ltd. (“SK Communications”) |
On November 24, 2016, the Board of Directors resolved to approve the payment of cash consideration in lieu of the issuance of shares of the Company in a comprehensive exchange of shares of SK Communications. The amount of cash consideration was based on a share exchange ratio of one common share of the Company to 0.0125970 common share of SK Communications. In February 2017, SK Communications became a wholly-owned subsidiary of the Company.
(2) | Acquisition of shares of Iriver |
The Company acquired 4,699,248 shares of Iriver at a purchase price of Won 5,320 in connection with a capital contribution. The Company’s equity interest in Iriver following the acquisition is 45.9%. See “Report on Important Business Matters (Decision on Capital Increase)” filed on July 17, 2017 by Iriver for more information.
* | Iriver changed its name to “Dreamus Company” pursuant to a resolution at its general meeting of shareholders on March 28, 2019. |
(3) Acquisition of newly issued shares of SK China Company Limited (“SK China”)
On July 28, 2017, the Company acquired newly issued shares of SK China to find investment opportunities in ICT and other promising areas of growth in China. In exchange for newly issued shares of SK China, the Company contributed its full equity interest in each of SKY Property Management Limited (“SKY”) and SK Industrial Development China Co., Ltd. (“SK IDC”) as well as cash, equal to the following amounts: 1) SKY stock: USD 276,443,440.64, 2) SK IDC stock: USD 108,072,007.67 and 3) Cash: USD 100,000,000.00. As a result of the acquisition, the Company holds 10,928,921 shares and a 27.27% of equity interest in SK China. See “Report on Decision on Acquisition of SK China Shares” filed by the Company on July 28, 2017 for more information about this transaction.
(4) Exchange of shares of SK Telink
On September 28, 2017, the Company disclosed a resolution approving the payment of cash consideration in lieu of the issuance of shares of SK Telecom in an exchange of shares of SK Telink. The amount of cash consideration was based on a share exchange ratio of 1:1.0687714. The exchange was completed on December 14, 2017, upon which exchange SK Telink became a wholly-owned subsidiary of the Company.
(5) Acquisition of shares of FSK L&S Co., Ltd.
On February 6, 2016, the Company acquired 2,415,750 shares of FSK L&S Co., Ltd. at a purchase price of Won 17.8 billion from SK Inc. (formerly known as SK Holdings Co., Ltd.) to utilize its logistics sharing infrastructure with its counterparties and pursue new business opportunities. As a result of the acquisition, the Company had a 60% equity interest in FSK L&S Co., Ltd.
(6) Acquisition of shares of id Quantique SA
In order to increase the value of the Company by enhancing its position as the top mobile network operator (“MNO”) through utilizing quantum cryptography and by generating returns from its global business, the Company acquired an additional 41,157,506 shares of id Quantique SA on April 30, 2018. As a result, the Company owns a total of 58.1% of the issued and outstanding shares (44,157,506 shares), and has acquired control, of id Quantique SA.
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(7) Acquisition of shares of Siren Holdings Korea Co., Ltd.
The Company acquired shares of Siren Holdings Korea Co., Ltd. (“SHK”), which wholly owned Former ADT CAPS, in order to strengthen its security business and expand its residential customer base. See “Report on Decision on Acquisition of Shares of Siren Holdings Korea Co., Ltd.” filed on May 8, 2018 for more information.
* | Siren Investments Korea Co., Ltd. merged with and into SHK with SHK as the surviving entity, following which CAPSTEC Co., Ltd. (“CAPSTEC”) and ADT SECURITY Co., Ltd. (“ADT SECURITY”), which were subsidiaries of Former ADT CAPS, became subsidiaries of SHK. |
* | SHK changed its name to Life & Security Holdings Co., Ltd. (“Life & Security Holdings”) in accordance with a resolution at its extraordinary meeting of shareholders on October 23, 2018, and Life & Security Holdings merged with SK Infosec on December 30, 2020. |
(8) Capital increase of Iriver
On July 26, 2018, the board of directors of Iriver, a subsidiary of the Company, resolved to approve a capital increase of Won 70,000 million through third-party allotment and subsequently issued 7,990,867 common shares. The Company participated in the capital increase and paid Won 65,000 million to subscribe 7,420,091 common shares of Iriver on August 10, 2018, resulting in an increase of the Company’s ownership interest from 45.9% to 53.7%.
(9) Exchange of shares of SK Infosec
On October 26, 2018, the Company announced the decision of the Board of Directors to approve the comprehensive exchange of shares of SK Infosec for shares of the Company. The share exchange ratio was one common share of the Company to 0.0997678 common share of SK Infosec. The share exchange was completed on December 27, 2018, upon which SK Infosec became a wholly-owned subsidiary of the Company.
(10) Acquisition of shares of SK Stoa
On April 25, 2019, the Board of Directors resolved to acquire the 100% equity interest in SK Stoa owned by SK Broadband, a subsidiary of the Company, in order to expand its T-commerce business and maximize synergies with other ICT businesses of the Company. On January 3, 2020, the Company acquired 3,631,355 shares of SK Stoa after obtaining governmental approvals.
(11) Acquisition of shares of Tbroad Nowon Broadcasting Co., Ltd. (“Tbroad Nowon”)
On April 26, 2019, the Board of Directors resolved to acquire shares of Tbroad Nowon to enhance the Company’s competitiveness in the media business pursuant to a share purchase agreement with Tbroad Nowon’s largest shareholder, Tbroad. The Company acquired a 55.00% equity interest, or 627,000 shares, of Tbroad Nowon at a purchase price of Won 10.4 billion. See the report on “Amendment Regarding Decision on Acquisition of Tbroad Nowon” filed by the Company on January 28, 2020 for more information.
(12) Disposal of shares of SMC and Shopkick
On June 11, 2019, SKP America, a subsidiary of the Company, disposed of its 100% equity interest in SMC and SMC’s wholly-owned subsidiary Shopkick.
(13) Acquisition of shares of Incross Co., Ltd. (“Incross”)
On June 28, 2019, the Company acquired 2,786,455 shares of Incross in order to strengthen its digital advertising business. The Company’s equity interest in Incross following the acquisition is 34.6%. See the report on “Decision on Acquisition of Shares of Incross” filed by the Company on April 11, 2019, as amended on June 3, 2019 for more information.
(14) Capital increase of Content Alliance Platform Inc. (“Content Alliance Platform”)
On September 18, 2019, the Company participated in a capital increase by Content Alliance Platform in the amount of Won 90 billion through third-party allotment in order to provide innovative media services and contents to customers and to enhance its competitiveness as a differentiated mobile OTT platform. See the report on “Participation in Capital Increase by Content Alliance Platform” filed by the Company on April 5, 2019, as amended on June 28, 2019.
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(15) Acquisition of newly-issued shares of Kakao Corp. (“Kakao”)
In order to pursue a strategic alliance with Kakao, the Company acquired newly-issued common shares of Kakao in the aggregate amount of approximately Won 300 billion through third-party allotment on November 5, 2019. Kakao acquired treasury shares of the Company. See the report on “Results of Disposal of Treasury Shares” filed by the Company on November 5, 2019 for more information.
(16) Spin-off of T Map Mobility
In order to strengthen the business expertise and enhance the efficiency of the Company’s mobility business, the Company engaged in a vertical spin-off of such business into T Map Mobility. The spin-off was a simple vertical spin-off, whereby the shareholder ownership composition remained the same, and it had no effect on the Company’s consolidated financial statements. The spin-off registration date was December 30, 2020.
* | See the report on “Decision to Spin Off Mobility Business” filed by the Company on October 16, 2020, for more information. |
[SK Broadband]
(1) Establishment of a subsidiary
On May 23, 2017, SK Broadband’s board of directors resolved to approve the establishment of a subsidiary. On June 5, 2017, SK Broadband established Home & Service Co., Ltd. (“Home & Service”), a subsidiary responsible for the management of customer service operations. Home & Service was incorporated by SK Broadband under the Korean Commercial Code. The subsidiary was capitalized at Won 46 billion and the Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on July 1, 2017.
(2) Spin-off
On August 16, 2017, SK Broadband’s board of directors resolved to approve the spin-off of its T-commerce subsidiary through a spin-off and subsequent establishment of a subsidiary pursuant to Article 530-2 and 530-12 of the Korean Commercial Code, with both companies from the simple vertical spin-off remaining as existing companies. The spin-off was effective as of December 1, 2017, and the subsidiary was capitalized at Won 15 billion, with SK Broadband holding a 100% equity interest. The Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on January 1, 2018.
(3) Transfer of business
On April 5, 2019, SK Broadband’s board of directors resolved to approve an agreement for the transfer of its OTT service, oksusu, to Content Alliance Platform (POOQ), a joint venture among KBS, MBC and SBS. The transaction was completed on September 18, 2019.
(4) Transfer of subsidiary shares
On April 24, 2019, SK Broadband’s board of directors approved the transfer of its 100% equity interest (3,631,355 shares) in SK Stoa, a subsidiary of SK Broadband, to SK Telecom. On December 30, 2019, the Ministry of Science and ICT (“MSIT”) approved the change in the largest capital contributor, and the transaction was completed on January 3, 2020.
(5) Merger of Tbroad, Tbroad Dongdaemun Broadcasting Co., Ltd. (“Tbroad Dongdaemun”) and Korea Digital Cable Media Center (“KDMC”) with and into SK Broadband (the “Tbroad Merger”)
On April 26, 2019, SK Broadband’s board of directors resolved to enter into a merger agreement pursuant to which Tbroad, Tbroad Dongdaemun and KDMC will merge with and into SK Broadband. On January 23, 2020, the parties entered into an amendment to the merger agreement due to changes in the merger timeline, and on March 26, 2020, the entry into the merger agreement was approved as proposed at the extraordinary general meeting of shareholders. The Tbroad Merger was completed as of April 30, 2020.
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(6) Transfer of business
On July 30, 2020, SK Broadband’s board of directors resolved to approve a certain MVNO Business Transfer Agreement in connection with the sale of its Mobile Virtual Network Operator (“MVNO”) business to Korea Cable Telecom Co., Ltd. The sale was a follow-up measure to, and a condition to MSIT’s approval of, the Tbroad Merger, and was carried out pursuant to the terms of the merger agreement for the Tbroad Merger. The transfer was completed on August 31, 2020.
(7) Acquisition of business
On December 4, 2020, SK Broadband entered into a certain business transfer agreement to acquire SK Telink’s Business-to-Business (“B2B”) business with the purpose of strengthening the market competitiveness of the B2B business through an reorganization of such business within the wider ICT business of the SK Group. The transfer was completed on March 31, 2021.
(8) Establishment of a subsidiary
On January 5, 2021, SK Broadband established Media S Co., Ltd., a subsidiary engaged in the production and supply of broadcasting programs, through a capital contribution of Won 23.0 billion (representing a 100% equity interest), and the subsidiary was added as a member of the SK Group by the Korea Fair Trade Commission as of March 2, 2021.
[SK Telink]
(1) Acquisition of shares of NSOK
In accordance with the resolution of its board of directors on September 22, 2016, SK Telink received a capital contribution of 408,435 shares (an 83.9% equity interest) of NSOK Co., Ltd. (“NSOK”) owned by SK Telecom. On October 25, 2016, SK Telink acquired the remaining 78,200 outstanding shares (a 16.1% equity interest) of NSOK, pursuant to which NSOK became a wholly-owned subsidiary of SK Telink.
In accordance with the resolution of its board of directors on April 12, 2017, SK Telink acquired 525,824 additional shares of NSOK pursuant to a rights offering for an aggregate amount of Won 40.0 billion (or Won 76,071 per share), resulting in SK Telink’s ownership of 1,012,459 shares (a 100% equity interest) of NSOK.
(2) Comprehensive exchange of shares
On September 28, 2017, SK Telink’s board of directors approved a comprehensive exchange of shares with SK Telecom, pursuant to which SK Telecom would acquire SK Telink’s remaining outstanding shares for cash consideration in lieu of issuance of shares of SK Telecom. The share exchange agreement was subsequently approved at the extraordinary general meeting of shareholders held on November 9, 2017.
Following the exchange, there were no changes to SK Telecom’s share ownership interest level or to management structure, and SK Telecom and SK Telink will remain as corporate entities. SK Telink became a wholly-owned subsidiary of SK Telecom and remains as an unlisted corporation, while SK Telecom remains as a listed corporation.
(3) Disposal of NSOK shares
Pursuant to the resolution of its board of directors on October 8, 2018, SK Telink entered into an agreement to sell 1,012,459 shares of NSOK (representing a 100.00% equity interest) to Life & Security Holdings. The date of sale was October 10, 2018, and the sale consideration amount was Won 100 billion. See “Report on Disposal of Shares of Related Party” filed on October 8, 2018 by SK Telink for more information about this transaction.
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(4) Change in location of headquarters
As of April 20, 2020, SK Telink changed the location of its headquarters to 144 Mapo T-town, Mapo-daero, Mapo-gu, Seoul pursuant to a resolution of its board of directors on April 16, 2020.
(5) Transfer of access ID business
On May 22, 2020, the board of directors of SK Telink resolved to transfer its access ID business and related assets to Former ADT CAPS, a related party, for Won 0.4 billion, effective as of May 31, 2020.
(6) Transfer of device business
On May 22, 2020, the board of directors of SK Telink resolved to transfer its device business and related assets to SK Networks Co., Ltd., a related party, for Won 4.4 billion, effective as of July 1, 2020. As such transfer qualified as a simplified business transfer, the board resolution served as requisite approval in lieu of approval by the general meeting of shareholders.
(7) Transfer of B2B business
On December 2, 2020, SK Telink held an extraordinary general meeting of shareholders, which resolved to transfer its B2B business and related assets to its affiliated company, SK Broadband. The transfer was completed on March 31, 2021, and the expected value of the transfer is Won 21 billion.
[Eleven Street]
(1) Establishment of Eleven Street
On July 31, 2018, the board of directors of SK Planet resolved to spin off its 11st business division (including Scinic, Gifticon and 11Pay) into a newly established company, Eleven Street, effective as of September 1, 2018. In the spin-off, newly issued shares of the spun-off company were allocated in proportion to the equity interest of the shareholders as of the date of such allocation, at a ratio of 0.14344419 newly issued share for 1 share of SK Planet (8,383,931 common shares).
(2) Capital increase of Eleven Street
Pursuant to the resolution of the board of directors on September 7, 2018, Eleven Street issued new shares through a third-party allotment in order to increase its capital, allocating all such new shares to Nile Holdings Co., Ltd. The payment date was September 28, 2018. After the capital increase, SK Telecom holds a 80.26% interest in Eleven Street. See “Report on Decision on Capital Increase of Eleven Street Co., Ltd.” filed by the Company on September 7, 2018 for more information.
(3) Acquisition of shares of Hello Nature Co., Ltd. (“Hello Nature”)
On October 10, 2018, Eleven Street acquired 281,908 shares of Hello Nature, a fresh food delivery service provider, from SK Planet for Won 29.9 billion. As a result of this acquisition, Eleven Street owns a 49.90% interest in Hello Nature.
(4) Share repurchase
Pursuant to the resolution at its general shareholders’ meeting held on March 26, 2019 approving a share repurchase and the resolution of its board of directors held on April 26, 2019 approving the terms of such repurchase, Eleven Street repurchased 158,429 units of its own shares from SK Planet for Won 42.5 billion and 203 units of its own shares from certain other shareholders (Young-hoon Jeon and four others) for Won 50 million, effective as of August 30, 2019, in order to enhance the value of its shares. As a result of this repurchase, Eleven Street owns 1.55% of its total shares issued as treasury shares.
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[ADT CAPS] (formerly known as SK Infosec)
(1) Comprehensive exchange of shares
On October 25, 2018, the board of directors of SK Infosec resolved to enter into a share exchange agreement with SK Telecom pursuant to which the shareholders of record of SK Infosec would be allotted 0.00997678 treasury share of SK Telecom in exchange for one common share of SK Infosec on December 27, 2018, after which SK Infosec would become a wholly-owned subsidiary of SK Telecom. The share exchange agreement was executed on November 26, 2018 and the comprehensive share exchange was completed on December 27, 2018.
(2) Merger of Life & Security Holdings
Pursuant to the resolution of SK Infosec’s board of directors on November 27, 2020, Life & Security Holdings merged with and into SK Infosec with the purpose of enhancing operational efficiency as of December 30, 2020.
(3) Merger of Former ADT CAPS
Pursuant to the resolution of SK Infosec’s board of directors on January 13, 2021, Former ADT CAPS merged with and into SK Infosec with the purpose of enhancing operating efficiency as of March 4, 2021. SK Infosec changed its name to ADT CAPS after the date of the merger.
[FORMER ADT CAPS]
(1) Merger of NSOK
Pursuant to resolutions of the board of directors on October 8, 2018 and the general meeting of shareholders on October 23, 2018, Former ADT CAPS merged NSOK with and into itself effective as of December 1, 2018 to seek new sources of growth, taking into account the growth potential of the physical security market.
(2) Merger of ADT SECURITY
Pursuant to resolutions of the board of directors on November 14, 2019 and the general meeting of shareholders on November 29, 2019, Former ADT CAPS completed the merger of ADT SECURITY with and into itself effective as of January 1, 2020 to enhance management efficiency.
(3) Acquisition of SK hystec’s business
On July 31, 2020, Former ADT CAPS acquired SK hystec inc.’s security construction and security service businesses with the purpose of strengthening its security business expertise and competitiveness.
(4) Merger of SK Infosec
On March 4, 2021, Former ADT CAPS merged with and into SK Infosec. SK Infosec changed its name to ADT CAPS after the date of the merger.
[SK Planet]
(1) Transfer of BENEPIA business
On May 29, 2017, the board of directors of SK Planet resolved to transfer the operations and assets related to its BENEPIA business for Won 7.5 billion to SK M&Service Co., Ltd. (“SK M&Service”) as of July 1, 2017.
(2) Spin-off of advertising agency business and sale of equity interest in SM Contents & Communications
On July 17, 2017, the board of directors of SK Planet resolved to (1) spin-off SK Planet’s advertising agency business as a newly established company, SM Contents & Communications, in order to strengthen the competitiveness of the business for future growth, which spin-off was effective as of October 1, 2017 and (2) sell 100% of its shares of SM Contents & Communications to SM Culture & Contents Co., Ltd. to further concentrate business capabilities and efficiently allocate management resources. The closing date of the sale transaction was October 24, 2017.
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(3) Spin-off of 11st business
On June 19, 2018, the board of directors of SK Planet resolved to spin off its 11st business (including Scinic, Gifticon and 11Pay) into a newly established company, effective as of September 1, 2018, in order to enhance the level of specialization and competitiveness of its businesses by strengthening their core competencies and obtain further growth potential of the businesses. See the “Report on Decision on Spin-off of SK Planet’s 11st Business” filed on June 19, 2018 for more information.
(4) Merger of SK TechX
On June 19, 2018, the board of directors of SK Planet resolved to merge SK TechX with and into SK Planet, effective as of September 1, 2018, with a merger ratio between SK Planet and SK TechX of 1:3.0504171, in order to enhance management efficiency and create synergies. See the “Report on Decision on Merger of SK TechX into SK Planet” filed on June 19, 2018 for more information.
(5) Capital reduction
SK Planet decided to reduce the par value of its shares from Won 500 to Won 150 to improve its financial structure through coverage of losses. The capital reduction is effective as of April 27, 2020.
[SK M&Service]
(1) Acquisition of SK Planet’s BENEPIA business
Pursuant to the resolutions of its board of directors and its extraordinary shareholders meeting held on May 29, 2017, SK M&Service decided to acquire SK Planet’s BENEPIA business (including agency service for the Flexible Benefit Plan and related tangible and intangible assets, goodwill, systems, etc.) for Won 7.5 billion on July 1, 2017.
(2) Change in location of headquarters
Pursuant to the resolution of its board of directors on August 25, 2020, SK M&Service changed the location of its headquarters to 16th Floor, 34, Supyo-ro, Jung-gu, Seoul as of September 4, 2020.
[Dreamus Company]
(1) Acquisition of shares of S.M. Life Design Company Japan Inc.
Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company approved a contract to acquire a total of 1,000,000 shares of S.M. Life Design Company Japan Inc. (a 100% equity interest) from S.M. Entertainment Japan Co., Ltd. with the purposes of entering foreign markets and maximizing business synergy. Dreamus Company acquired control of S.M. Life Design Company Japan Inc. upon its completion of payment for the shares on September 1, 2017.
(2) Merger of S.M. Mobile Communications JAPAN Inc.
Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company decided to merge with S.M. Mobile Communications JAPAN Inc., a contents and information distribution company, with the purpose of reinforcing its contents based device business and enhancing managerial efficiency. As of October 1, 2017, Dreamus Company merged S.M. Mobile Communications JAPAN Inc. into it with a merger ratio of 1:1.6041745, based on which Dreamus Company issued 4,170,852 new common shares.
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(3) Acquisition of important assets (Supply and distribution rights for music and digital contents)
On February 28, 2018, Dreamus Company entered into an agreement with S.M. Entertainment Co., Ltd. to acquire supply and distribution rights for music and digital contents of S.M. Entertainment Co., Ltd., JYP Entertainment Corporation and Big Hit Entertainment. Through this arrangement, the Company plans to increase sales by entering the music and sound recording industries and to create synergies through strategic alliances.
(4) Merger between subsidiaries
In order to achieve management efficiency and maximize organizational operation synergies, groovers Japan Co., Ltd. and SM Mobile Communications Japan Inc., each of which was a Japanese subsidiary of Dreamus Company, completed their merger with groovers Japan Co., Ltd. as the surviving entity, effective as of July 1, 2018.
(5) Investment in groovers Inc. (“Groovers”)
On July 26, 2018, the board of directors of Dreamus Company resolved to make an equity investment of Won 11,000 million (2,200,000 common shares) in Groovers for the purposes of providing operating funds to improve its financial structure and pursue new businesses. Payment was completed on July 27, 2018, and the Company’s ownership interest after such equity investment is 100%.
(6) Transfer of Music Mate business between Groovers and SK TechX
On August 31, 2018, pursuant to the resolutions of its board of directors and the extraordinary meeting of shareholders, each of which was held on June 28, 2018, Groovers acquired all properties, assets and rights related to the Music Mate streaming service from SK TechX for Won 3,570 million.
(7) Merger of Groovers
Pursuant to the resolution of its board of directors on December 26, 2018, Dreamus Company merged Groovers, a provider of music, contents and other services, with and into itself on March 1, 2019, in order to seek synergies by integrating management resources and enhance management efficiency. The merger was completed based on a merger ratio of 1:0 with no capital increase. The merger and merger registration were completed on March 1, 2019 and March 5, 2019, respectively. Since this merger qualified as a small-scale merger, the approval of the merger by a resolution of the board of directors substituted for the approval by a general meeting of shareholders.
(8) Disposal of shares of Iriver Inc.
Pursuant to the resolution of its board of directors on July 18, 2019, Dreamus Company disposed of all of its shares in Iriver Inc., effective as of September 1, 2019, with the goal of achieving sustainable growth of its device business by improving its financial structure and profitability and maintaining its business expertise and continuity of operations.
(9) Merger between subsidiaries
In order to achieve management efficiency and maximize organizational operation synergies, Life Design Company Inc. and groovers Japan Co., Ltd., each of which is a Japanese subsidiary of Dreamus Company, completed their merger with Life Design Company Inc. as the surviving entity, effective as of December 15, 2019.
[Incross]
(1) Spin-off of Infra Communications Co., Ltd. (“Infra Communications”)
Effective as of August 1, 2017, Incross spun off its business related to the operation agency service of the integrated mobile application marketplace “ONE Store” into a newly established company, Infra Communications, in order to strengthen the expertise and enhance management efficiency of each of its businesses, to respond effectively to the external environment by re-investing the value generated from each business into such business, and to grow and develop such business through strategic and efficient allocation of management resources.
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(2) Transfer of mobile advertising network business
Effective as of April 1, 2017, Incross acquired SK Planet’s mobile advertising network business, “Syrup Ad” with the purpose of strengthening the competitiveness of its advertising network business.
(3) Transfer of media representative business
Effective as of March 17, 2020, Incross acquired SK Stoa’s advertisement media agency and advertising agency businesses with the purpose of strengthening the competitiveness of its media lab business.
[T Map Mobility]
(1) Establishment of T Map Mobility
T Map Mobility was established through a vertical spin-off of SK Telecom’s mobility business effective as of December 29, 2020. T Map Mobility was established as a wholly-owned subsidiary of SK Telecom, with a share capital of Won 5 billion and 10,000,000 total shares issued.
(2) Capital increase
Pursuant to the resolution of the board of directors on February 23, 2021, T Map Mobility undertook a capital increase by issuing new shares (838,500 common shares) and allotting all such shares to SK Telecom. The payment date was March 5, 2021, and SK Telecom’s equity interest in T Map Mobility remained at 100% after the capital increase.
[One Store]
(1) Establishment of One Store
In March 2016, SK Planet spun off its T-store business and established One Store Co., Ltd. (“One Store”). The spin-off was in the form of a horizontal spin-off whereby SK Planet’s shareholder, SK Telecom, received shares of One Store in proportion to its equity interest as of the record date for the allotment of the newly-issued shares of One Store. SK Telecom was allotted 0.0842582 newly-issued shares of One Store (total 6,000,000 common shares) for each SK Planet share it held.
(2) Capital increase
Since its establishment, One Store undertook several rounds of capital increases pursuant to the resolutions of its board of directors. On March 8, 2016, One Store allotted 4,409,600 new shares to its shareholder, SK Telecom. On May 26, 2016, it issued 5,472,673 new shares through third-party allotment. On November 14, 2019, One Store issued new shares (consisting of 3,871,352 convertible preferred shares) through third-party allotment. In May 2020, it issued 240,450 additional shares pursuant to the exercise of stock options granted to directors and employees in April 2018. In addition, on March 8, 2021, One Store issued 800,000 new shares to KT and LG U+ through third-party allotment, and on March 31, 2021, it issued an additional 710,850 new shares following the exercise of certain stock options.
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(3) Share repurchase
In order to boost employee morale, on July 9, 2020, the board of directors of One Store resolved to repurchase shares. One Store repurchased 113,354 shares held by its employees for Won 2,854 million, after which treasury shares constitute 0.53% of its total shares issued.
3. Total Number of Shares
A. | Total Number of Shares |
(As of March 31, 2021) | (Unit: in shares) | |||||||||||||||
Classification | Share type | Remarks | ||||||||||||||
Common shares | Preferred shares | Total | ||||||||||||||
I. Total number of authorized shares | 220,000,000 | — | 220,000,000 | — | ||||||||||||
II. Total number of shares issued to date | 89,278,946 | — | 89,278,946 | — | ||||||||||||
III. Total number of shares retired to date | 8,533,235 | — | 8,533,235 | — | ||||||||||||
a. reduction of capital | — | — | — | — | ||||||||||||
b. retirement with profit | 8,533,235 | — | 8,533,235 | — | ||||||||||||
c. redemption of redeemable shares | — | — | — | — | ||||||||||||
d. others | — | — | — | — | ||||||||||||
IV. Total number of shares (II-III) | 80,745,711 | — | 80,745,711 | — | ||||||||||||
V. Number of treasury shares | 9,585,568 | — | 9,585,568 | — | ||||||||||||
VI. Number of shares outstanding (IV-V) | 71,160,143 | — | 71,160,143 | — |
* | On May 6, 2021, subsequent to the reporting period, the Company canceled 8,685,568 treasury shares (10.76% of the total number of issued shares). The total number of shares issued decreased from 80,745,711 shares to 72,060,143 shares. See the report on “Cancellation of Treasury Shares” filed by the Company on May 4, 2021 for more information. |
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B. | Treasury Shares |
(As of March 31, 2021) | (Unit: in shares) | |||||||||||||||||||||||||
Acquisition methods | Type of shares | At the beginning of period | Changes Acquired (+) Disposed (-) Retired (-) | At the end of period | ||||||||||||||||||||||
Acquisition pursuant to the Financial Investment Services and Capital Markets Act of Korea | Direct acquisition | Direct acquisition from market | Common shares | 7,609,263 | — | 120,990 | — | 7,488,273 | ||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Direct over-the-counter acquisition | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Tender offer | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Sub-total (a) | Common shares | 7,609,263 | — | 120,990 | — | 7,488,273 | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Acquisition through trust and other agreements | Held by trustee | Common shares | 1,809,295 | 288,000 | — | — | 2,097,295 | |||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Held in actual stock | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Sub-total (b) | Common shares | 1,809,295 | 288,000 | — | — | 2,097,295 | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Other acquisition (c) | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Total (a+b+c) | Common shares | 9,418,558 | 288,000 | 120,990 | — | 9,585,568 | ||||||||||||||||||||
Preferred shares | — | — | — | — | — |
* | On May 6, 2021, subsequent to the reporting period, the Company canceled 8,685,568 treasury shares (10.76% of the total number of issued shares). |
4. Status of Voting Rights
(As of March 31, 2021) | (Unit: in shares) |
Classification | Number of shares | Remarks | ||||||||
Total shares (A) | Common share | 80,745,711 | — | |||||||
Preferred share | — | — | ||||||||
Number of shares without voting rights (B) | Common share | 9,585,568 | Treasury shares | |||||||
Preferred share | — | — | ||||||||
Shares without voting rights pursuant to the Company’s articles of incorporation (the “Articles of Incorporation”) (C) | Common share | — | — | |||||||
Preferred share | — | — | ||||||||
Shares with restricted voting rights pursuant to Korean law (D) | Common share | — | — | |||||||
Preferred share | — | — | ||||||||
Shares with reestablished voting rights (E) | Common share | — | — | |||||||
Preferred share | — | — | ||||||||
The number of shares with exercisable voting right s (F = A - B - C - D + E) | Common share | 71,160,143 | — | |||||||
Preferred share | — | — |
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5. Dividends and Others
A. | Dividend Policy |
Our fundamental shareholder distribution policy seeks to enhance long-term shareholder returns through stable cash dividends based on the Company’s performance and through the enhancement of corporate value based on sustained growth. To this end, the Company strives to enhance its corporate value under its capital management principle of balancing investment for growth and shareholder returns. In addition, the Company determines its shareholder return in consideration of a comprehensive set of factors including its business performance, investment plans, financial status and prospects, and the Company may make shareholder return in the form of cash or shares in accordance with its articles of incorporation. Cash dividends are determined based on the Company’s consideration of investment needs for its continued future growth as well as its annual business performance and overall cash flow status. In the case of share dividends, the type of the shares to be distributed may be determined pursuant to the resolution of the Company’s general meeting of shareholders, to the extent there are multiple classes of shares outstanding. The Company distributes annual dividends to shareholders or pledgees registered on its shareholder’s register as of the end of each fiscal year, and the Company distributed an interim dividend once a year as of June 30 pursuant to the resolution of its board of directors. Certain changes to the Company’s articles of incorporation relating to quarterly dividends were approved at the 37th General Meeting of Shareholders held on March 25, 2021, as a result of which more diverse shareholder return policies are expected to be possible in the future.
(1) | Distribution of cash dividends was approved during the 35th General Meeting of Shareholders held on March 26, 2019. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(2) | Distribution of interim dividends of Won 1,000 was approved during the 426th Board of Directors’ Meeting on July 25, 2019. |
(3) | Distribution of cash dividends was approved during the 36th General Meeting of Shareholders held on March 26, 2020. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(4) | Distribution of interim dividends of Won 1,000 was approved during the 438th Board of Directors’ Meeting on July 21, 2020. |
(5) | Distribution of cash dividends was approved during the 37th General Meeting of Shareholders held on March 25, 2021. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
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B. | Dividends for the Past Three Fiscal Years |
(Unit: in millions of Won, except per share data and percentages) | ||||||||||||||||
Classification | As of and for the three months ended March 31, 2021 | As of and for the year ended December 31, 2020 | As of and for the year ended December 31, 2019 | |||||||||||||
Par value per share (Won) |
| 500 | 500 | 500 | ||||||||||||
(Consolidated) Net income |
| 558,265 | 1,504,352 | 888,698 | ||||||||||||
(Separate) Net income |
| 466,013 | 758,792 | 979,891 | ||||||||||||
Net income per share (Won) |
| 7,789 | 20,463 | 12,127 | ||||||||||||
Total cash dividend |
| — | 715,080 | 730,098 | ||||||||||||
Total stock dividends |
| — | — | — | ||||||||||||
(Consolidated) Percentage of cash dividend to available income (%) | — | 47.5 | 82.0 | |||||||||||||
Cash dividend yield ratio (%) | Common shares | — | 4.1 | 4.1 | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Stock dividend yield ratio (%) | Common shares | — | — | — | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Cash dividend per share (Won) | Common shares | — | 10,000 | 10,000 | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Stock dividend per share (share) | Common shares | — | — | — | ||||||||||||
Preferred shares | — | — | — |
* | The total amount of cash dividends was calculated by adding the total amount of cash dividends resolved at the general meeting of shareholders for the relevant fiscal year and any quarterly cash dividends paid during such fiscal year (including interim dividends) in accordance with applicable disclosure requirements. |
* | Consolidated net income is based on equity attributable to owners of the parent company. |
* | Cash dividend for the years ended December 31, 2020 and 2019 above include an interim dividend of Won 1,000 per share. |
C. | Past Distributions of Dividends |
Number of consecutive dividends | Average dividend yield (%) | |||||||||||||
Interim dividends | Annual dividends | Past three years | Past five years | |||||||||||
17 | 27 | 4.0 | 4.0 |
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6. Matters Concerning Articles of Incorporation
Date of Revision | General Meeting of | Key Revisions | Reason for Revisions | |||
March 26, 2019 | 35th General Meeting of Shareholders | Type of shares, change in transfer agent, etc. | Changes in accordance with the mandatory electronic registration of shares | |||
March 26, 2020 | 36th General Meeting of Shareholders | Specialized safety and health planning, etc. | Changes in accordance with amendments to the Industrial Safety and Health Act of Korea and to reflect the relevant revisions to SK Group-wide management policies under SK Management System | |||
March 26, 2021 | 37th General Meeting of Shareholders | Corporate governance charter, term of office of independent directors, dividends, etc. | To provide basis for adopting a corporate governance charter and quarterly dividends in the Articles of Incorporation and to reflect applicable amendments to the Korean Commercial Code |
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II. | BUSINESS |
1. Business Overview
Each company in the consolidated entity is a separate legal entity providing independent services and products. The business is primarily separated into (1) the wireless business consisting of cellular voice, wireless data and wireless Internet services, (2) the fixed-line business consisting of fixed-line telephone, high speed Internet, data and network lease services, among others, (3) commerce business, (4) security business and (5) other businesses consisting of platform services and online information services, among others.
Set forth below is a summary business description of material consolidated subsidiaries.
Classification | Company name | Description of business | ||
Wireless | SK Telecom Co., Ltd. | Wireless voice and data telecommunications services via digital wireless networks | ||
PS&Marketing Co., Ltd. | Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels | |||
SK O&S Co., Ltd. | Maintenance of switching stations | |||
Service Ace Co., Ltd | Management and operation of customer centers | |||
Fixed-line | SK Broadband Co., Ltd. | High-speed Internet, TV, telephone, commercial data and other fixed-line services and management of the transmission system for online digital contents Various media-related services, such as channel management services including video-on-demand (“VOD”) | ||
SK Telink Co., Ltd. | International wireless direct-dial “00700” services, voice services using Internet protocol and MVNO business | |||
Home & Service Co., Ltd. | System maintenance of high-speed Internet, IPTV and fixed-line services | |||
Security | (Former) ADT CAPS Co., Ltd.* | Unmanned machine-based security and manned security services | ||
SK Infosec Co., Ltd.* | Comprehensive information protection services and integrated computer system consulting and implementation services | |||
Commerce | Eleven Street Co., Ltd. | E-commerce and Internet-related businesses | ||
SK stoa Co., Ltd. | Operation of data broadcasting channel for sale of goods | |||
Other business | SK Planet Co., Ltd. | Information telecommunications business and development and supply of software | ||
One Store Co., Ltd. | Operation of mobile application store | |||
Dreamus Company | Online music service and distribution of records and digital content | |||
SK M&Service Co., Ltd. | System software development, distribution and technical support services and other online information services | |||
K-net Culture and Contents Venture Fund | Start-up investment support | |||
Atlas Investment | Investments | |||
SK Telecom TMT Investment Corp. | Investments | |||
Incross Co., Ltd. | Digital advertisement media lab business and video advertisement network platform business | |||
T map Mobility Co., Ltd. | Database and online information services |
* | In the three months ended March 31, 2021, SK Infosec completed the merger of Former ADT CAPS, a subsidiary of SK Infosec, with and into itself effective as of March 4, 2021 with the purpose of enhancing management efficiency. SK Infosec changed its name to ADT CAPS after the date of the merger. |
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[Wireless Business]
A. | Industry Characteristics |
The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless, leased line and value-added services) and broadcasting and telecommunications convergence services. Pursuant to the Telecommunications Business Act, the telecommunications services market can be further classified into basic telecommunications (fixed-line and wireless telecommunications), special category telecommunications (resale of telecommunications equipment, facilities and services) and value-added telecommunications (Internet connection and management, media contents and others). The size of the domestic telecommunications services market is determined based on various factors specific to Korea, including size of population that uses telecommunication services and telecommunications expenditures per capita. While it is possible for Korean telecommunication service providers to provide services abroad through acquisitions or otherwise, foreign telecommunication services markets have their own characteristics depending, among others, on the regulatory environment and demand for telecommunication services.
The Korean mobile communication market is considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced smartphones which enable the provision of New ICT services for advanced multimedia contents, mobile commerce, mobility and other related services. In addition, the ultra-low latency and high capacity characteristics of 5G networks as well as the advancement of AI are expected to accelerate the introduction of new services and the growth of IoT-based B2B businesses.
B. | Growth Potential |
(Unit: in 1,000 persons) | ||||||||||||||
Classification | As of March 31, | As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||||
Number of subscribers | SK Telecom | 29,308 | 29,089 | 28,648 | ||||||||||
Others (KT, LG U+) | 31,490 | 31,341 | 31,539 | |||||||||||
MVNO | 9,363 | 9,111 | 7,750 | |||||||||||
Total | 70,161 | 69,541 | 67,937 |
* | Source: Wireless subscriber data from the MSIT as of March 31, 2021. |
C. | Domestic and Overseas Market Conditions |
The Korean mobile communication market includes the entire population of Korea with mobile communication service needs, and almost every Korean is considered a potential user. Sales revenue related to data services has been growing due to the increasing popularity of smartphones and high-speed wireless networks. There is also a growing importance to the B2B segment, which creates added value by selling and developing various solutions. The telecommunications industry is a regulated industry requiring license and approval from the MSIT.
In the wireless business, industry players compete on the basis of the following three main competitive elements:
(i) brand competitiveness, which refers to the overall sense of recognition and loyalty experienced by customers with respect to services and values provided by a company, including the images created by a company’s comprehensive activities and communications on top of the actual services rendered;
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(ii) product and service competitiveness, which refers to the fundamental criteria for wireless telecommunications services, including voice quality, service coverage, broad ranges of rate plans, diversified mobile Internet services, price and quality of devices and customer service quality, as well as the ability to develop new services that meet customer needs in a market environment defined by convergence; and
(iii) sales competitiveness, which refers to novel and diversified marketing methods and the strength of the distribution network.
Set forth below is the historical market share of the Company (excluding MVNO subscribers).
(Unit: in percentages) | ||||||||||||
Classification | As of March 31, | As of December 31, | ||||||||||
2021 | 2020 | 2019 | ||||||||||
Mobile communication services | 48.2 | 48.1 | 47.6 |
* | Source: Wireless subscriber data from the MSIT as of March 31, 2021. |
D. | Business Overview and Competitive Strengths |
The Company is seeking to transform into a comprehensive ICT service provider. In light of the ongoing COVID-19 pandemic, the Company has quickly adapted to the contactless environment based on its diverse ICT portfolio and is continuing to show steady growth in each of its major business divisions, including MNO, media, security and commerce.
For the three months ended March 31, 2021, the Company recorded Won 4.78 trillion in operating revenue and Won 388.8 billion in profit for the period on a consolidated basis, and it recorded Won 2.98 trillion in operating revenue and Won 307.3 billion in profit for the period on a separate basis.
In the MNO business, the Company secured 6.74 million 5G subscribers as of March 31, 2021 through innovations and quality enhancements in its 5G services. The Company also solidified its status as the top MNO service operator while maintaining market stability through innovations in its distribution channels in response to the contactless environment and rational market operations. The Company was also ranked as the top service provider with respect to certain key metrics such as transmission speed in several 5G service quality evaluations conducted by the MSIT to date.
SK Telink, a consolidated subsidiary of the Company, operates its MVNO service, “SK 7Mobile,” which is offered at reasonable rates and provides excellent quality. SK Telink is increasing its efforts to develop low-cost distribution channels and create niche markets through targeted marketing towards customers including foreign workers, middle-aged adults and students.
SK O&S, a subsidiary of the Company responsible for the operation of the Company’s base stations and related transmission and power facilities, offers quality fixed-line and wireless network services to customers, including mobile office products to business customers. In addition, Service Ace is developing its competence as a marketing company while providing top-quality customer service.
PS&Marketing, a subsidiary of the Company, provides a sales platform for products of the Company and SK Broadband including fixed-line and wireless telecommunication products that address customers’ needs for various convergence products. PS&Marketing provides differentiated service to clients through the establishment of new sales channels and product development.
[Fixed-line Business]
A. | Industry Characteristics |
The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless, leased line and value-added services) and broadcasting and telecommunications convergence services (such as IPTV, cable TV and bundled fixed-line/wireless services). Pursuant to the Telecommunications Business Act, the telecommunications services market can be further classified into basic telecommunications (fixed-line and wireless telecommunications), special category telecommunications (resale of telecommunications equipment, facilities and services) and value-added telecommunications (Internet connection and management, media contents and others).
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The broadcasting business involves the planning, programming or production of broadcasting programs and transmission to viewers through telecommunication facilities. Pursuant to the Broadcasting Act, the broadcasting market can be categorized into terrestrial broadcasting, fixed-line TV broadcasting, satellite broadcasting and programming-providing businesses. The Company engages in the fixed-line TV broadcasting business, which is defined as the business of managing and operating fixed-line TV broadcasting stations (including their facilities and employees for the purpose of providing multi-channel broadcasting) and providing broadcasts through transmission and line facilities.
As a result of the government’s direct and indirect control over the fixed-line telecommunications industry, ranging from service licensing to business activities, the industry’s overall growth potential and degree of competition are greatly affected by the government’s regulatory policies. The fixed-line telecommunications industry is also a technology-intensive industry that evolves rapidly and continuously through the development of communications technology and equipment, which requires proactive responses in meeting the needs of subscribers by developing new services and penetrating the market. Fixed-line telecommunications services have become universal and essential means of communication and act as the foundation for integration and convergence with various other services. The essential nature of such services provides stable demand, resulting in low sensitivity to economic conditions.
The Korean fixed-line services industry is marked by a high level of market concentration, as the government is highly selective in granting telecommunications business licenses. The competitive landscape of the fixed-line and wireless services markets is dominated by its three leading operators, the Company (including SK Broadband), KT and LG U+. Growing competition within the industry has promoted rapid technological evolution, including the convergence of fixed-line and wireless services, as well as broadcasting and telecommunications.
In the high speed internet services market, the demand for faster and more reliable premium Giga Internet services is increasing due to the growth in usage of home mobile networks using Wi-Fi and an increased consumption of high-definition large media content.
With the mergers and acquisitions among IPTV service providers and multiple service operators, the paid broadcasting market has reorganized around IPTV operators, and companies are moving away from competition based on subscriber base expansion to competition based on media platform services. The transition to a contactless service society due to COVID-19 has led to increased consumption of paid content by viewers, accelerating competition through the ability to source unique contents. The Company expects new growth in the home platform domain by providing customized services using ICT convergence technologies such as AI and big data in addition to differentiated contents.
In the corporate business market, the Company is continuing its efforts to generate stable returns by securing growth drivers in new service areas such as cloud computing, while also strengthening its competitiveness in the traditional fixed line-based business through infrastructure expansion.
B. | Growth Potential |
(Unit: in persons) | ||||||||||||||
Classification | As of March 31, | As of December 31, | ||||||||||||
| 2021 | 2020 | 2019 | |||||||||||
Fixed-line Subscribers | High-speed Internet | 22,501,328 | 22,330,182 | 21,761,831 | ||||||||||
Fixed-line telephone | 12,694,751 | 12,859,279 | 13,600,362 | |||||||||||
IPTV | 17,489,664 | 17,489,664 | 16,440,059 | |||||||||||
Cable TV | 13,378,742 | 13,378,742 | 13,641,708 |
* | Source: MSIT website. |
C. | Cyclical Nature and Seasonality |
High-speed Internet and fixed-line telephone services operate in mature markets that are comparatively less sensitive to cyclical economic changes as the services provided by different operators have become less differentiated. TV services have become necessities that provide broadcasting, and the market, which is subject to a subscriber-based business model, has little sensitivity to cyclical economic changes. The telecommunications services market overall is not expected to be particularly affected by economic downturns due to the low income elasticity of demand for telecommunication services.
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D. | Domestic and Overseas Market Conditions |
Set forth below is the historical market share of the Company.
(Unit: in percentages)
Classification | As of March 31, | As of December 31, | ||||||||
2021 | 2020 | 2019 | ||||||||
High-speed Internet (including resales) | 28.9 | 29.0 | 25.1 | |||||||
Fixed-line telephone (including Voice over Internet Protocol (“VoIP”) | 16.8 | 16.8 | 16.8 | |||||||
IPTV | 30.3 | 30.3 | 30.3 | |||||||
Cable TV | 22.5 | 22.5 | 22.5 |
* | Source: MSIT website. |
* | With respect to Internet telephone, the market share was calculated based on market shares among the Company, KT and LG U+ and is based on the number of IP phone subscribers. |
In each of its principal business areas, SK Broadband principally competes on the basis of price, service quality and speed. In the IPTV business, the ability to offer complex services and differentiated contents are becoming increasingly important. General telecommunications businesses operate in a licensed industry with a high barrier of entry, which is dominated by SK Broadband, KT and LG U+.
E. | Business Overview and Competitive Strengths |
In the first quarter of 2021, SK Broadband recorded, on a consolidated basis, Won 967.0 billion in revenue, Won 75.4 billion in operating profit and Won 49.9 billion in profit. SK Broadband achieved a revenue growth of 17.6% compared to the first quarter of 2020 mainly as a result of the Tbroad Merger and a net increase in IPTV subscribers.
In the case of high-speed Internet, revenue increased compared to the first quarter of 2020 due to an increase in the proportion of subscribers of premium services, such as Giga Internet. The IPTV service business continued its solid growth compared to the first quarter of 2020 due to continued growth in the number of subscribers as well as platform sales, including advertising. Revenue from the corporate business increased compared to the first quarter of 2020 as a result of new leased lines and an increase in sales from internet data centers.
[Security Business]
A. | Industry Characteristics |
The security systems service business provides security services to governments, companies and individuals with the purpose of protecting tangible and intangible assets and human resources. Depending on the risk prevention method used, the security business can be classified into machine-based security, security system integration (“SI”), information security and manned security. Machine-based security operates by receiving information that is detected and transmitted by various sensors and cameras installed at the target facilities through control facility equipment and taking prompt and appropriate action, such as dispatching an agent or contacting the police or the fire department, if an abnormality is detected. Security SI is a service that integrates installation, operation, maintenance and repair of various equipment and systems by analyzing the appropriate security system for customer facilities, such as buildings, factories and schools. Manned security services deploy security personnel to areas subject to security, who perform on-site security services such as patrols and access control of buildings and facilities. The information security industry involves the business of providing security to business customers to prevent the leakage and hacking of data, including personal information. The industry can be categorized into the information security product business, which includes the development, manufacturing and distribution of information security products, and the information security service business, such as security consulting and managed security services. Information security products aim to form a secure cyber environment by protecting computer terminals and Internet communication channels, while information security services provide security across the overall ICT industry by providing security consulting services to companies on how to protect their information security assets or through managed security services, which prevent security breaches by hackers.
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The Company’s primary business in the physical security industry is its unmanned security and security SI services, and the Company’s primary business in the information security industry is its managed security and security consulting services. Its business areas consist of the following:
Classification | Product | |||
Physical Security | Machine-based security | CAPS service (unmanned security service), access control, view guard (CCTV), attendance management, drinking water management | ||
Security SI and maintenance and repair | Access control (entry and parking), CCTV (recording, camera, monitor, network equipment, etc.), other security systems | |||
Integrated security services (machine-based security + manned security) | Machine-based security services, manned security services (security, cleaning, concierge, etc.) | |||
Information Security | Managed security services | Information security breach detection and response services (remote managed security service and on-site managed security service) | ||
Security consulting | Evaluation of adequacy of information security system, suggestion of solutions to enhance security (information protection consulting, compliance consulting, etc.) | |||
Security solutions | Provision of hardware and software for information security (network security solution, system security solutions, etc.) |
B. | Growth Potential |
(1) Size of the domestic security industry
(Unit: in 100 millions of Won except percentages) | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Physical security industry | 40,736 | 39,396 | 37,449 | |||||||||
Cybersecurity industry | 20,952 | 20,185 | 19,186 | |||||||||
Total domestic security industry | 61,688 | 59,581 | 56,635 |
* | Source: 2020 Domestic and Global Security Market Forecast Report, Security News / Security World |
* | Figures for 2020 and 2021 are estimates. |
(2) Size of the domestic physical security industry
(Unit: in 100 millions of Won except percentages) | ||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||||
Amount | Percentage | Amount | Percentage | Amount | Percentage | Amount | Percentage | |||||||||||||||||||||||||
CCTV monitoring | 14,275 | 35.04 | % | 13,938 | 35.38 | % | 13,095 | 34.97 | % | 12,871 | 35.16 | % | ||||||||||||||||||||
Alarm monitoring | 2,695 | 6.62 | % | 2,601 | 6.60 | % | 2,574 | 6.87 | % | 2,526 | 6.90 | % | ||||||||||||||||||||
Comprehensive security services | 15,757 | 39.00 | % | 15,452 | 39.22 | % | 14,903 | 39.80 | % | 14,610 | 39.91 | % | ||||||||||||||||||||
Access Control | 4,432 | 10.88 | % | 4,184 | 10.62 | % | 4,069 | 10.87 | % | 3,983 | 10.88 | % | ||||||||||||||||||||
Biometric Recognition | 3,577 | 8.78 | % | 3,221 | 8.18 | % | 2,808 | 7,50 | % | 2,617 | 7.15 | % | ||||||||||||||||||||
Total | 40,736 | 100.00 | % | 39,396 | 100.00 | % | 37,449 | 100.00 | % | 36,607 | 100.00 | % |
* | Source: 2020 Domestic and Global Security Market Forecast Report, Security News / Security World |
* | Figures for 2020 and 2021 are estimates. |
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(3) Forecast of the domestic physical security industry
(Unit: in millions of Won) | ||||||||||||||||||
2025 | 2023 | 2021 | 2020 | |||||||||||||||
Physical Security Services | Dispatch security services | 1,945,651 | 1,835,418 | 1,731,430 | 1,729,700 | |||||||||||||
Video security services | 493,319 | 468,669 | 445,251 | 430,195 | ||||||||||||||
Other security services | 876,166 | 758,080 | 655,909 | 593,046 | ||||||||||||||
Total | 3,315,136 | 3,062,167 | 2,832,590 | 2,752,941 |
* | Source: “Study on Policy Plans for the Support of the Physical Security Industry of Gyeonggi-do,” published by the Gyeonggi-do Assembly in the second half of 2020. All figures are estimates. |
C. | Cyclical Nature and Seasonality |
The security business seeks to satisfy the basic need for safety and is less sensitive to economic fluctuations compared to other industries. Although the slowdown in the Korean economy and competition based on lower-cost alternatives has had a negative impact on industry growth, sustained growth is nevertheless expected due to the recent expansion of the industry into converged security markets with the integration of ICT.
D. | Domestic and Overseas Market Conditions |
The security industry is experiencing a rapid increase in demand for CCTV, access control and other security systems due to threats including crime, natural disasters and calamities and terrorism. With increased consumer interest in safety, demand for security system services is expected to continue to grow. To date, the Korean security market is characterized by an oligopoly dominated by three leading companies due to the high barriers to entry as a result of high initial investment costs of building large-scale network systems and the effects of brand loyalty. The traditional security industry, characterized by price competition aimed at increasing market share, is expanding into a converged security market with the integration of ICT. In addition, the global converged security market integrating ICT has recently been experiencing rapid growth and increased competition due to the entry of global information technology companies.
Furthermore, the importance of the information security industry is steadily increasing due to the diversified and increasingly advanced and intelligent attacks by hackers, and the demand for information security is expected to increase exponentially due to the digital transformation arising from advances in new technologies, such as AI, IoT, cloud and smart factories, as part of the fourth industrial revolution. Although global information security companies are demonstrating strength in the domestic information security market for products, the top three domestic companies have traditionally dominated the market for services.
The security industry, which received attention for pioneering a new market for day-to-day disease prevention measures in response to the COVID-19 pandemic, demonstrated growth despite various obstacles. In the post-COVID-19 era, which is expected to begin in 2022 after the wide administration of vaccines, the growth of the security industry is expected to accelerate further due to the convergence of physical security and cybersecurity as well as the advancement of integrated control centers for the stable operation and development of smart cities.
As a result, although the size of the domestic security market in 2020 failed to reach Won 6 trillion in light of the effects of COVID-19, it is expected to grow annually by 3.9% to Won 6.4 trillion in 2021 and by 5.2% to Won 6.3 trillion in 2022.
E. | Business Overview and Competitive Strengths |
For the three months ended March 31, 2021, ADT CAPS recorded Won 352.3 billion in revenue (consisting of Won 279.4 billion from the physical security business and Won 72.9 billion from the information security business) and Won 35.2 billion in operating profit, and it secured approximately 680,000 subscribers as of March 31, 2021, including subscribers to information security services.
Due to the saturation of the unmanned security market, there was no significant change in the number of ADT CAPS’ unmanned security contracts in 2020 compared to the previous year. However, ADT CAPS was able to maintain consistent growth in the number of new subscribers acquired through the SK distribution network and a continued increase in revenue from the CAPS Home and parking services. In addition, despite the economic downturn due to COVID-19, ADT CAPS was able to pave new markets for contactless access control and fever detection services using facial recognition and thermal imaging cameras.
Revenue from the information security business of ADT CAPS exceeded Won 300 billion, making ADT CAPS the first company to do so in the industry. ADT CAPS is widening the gap with the second-largest player in the information security market and has maintained its top position in the market for the past five years.
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Although the unmanned security market is expected to remain saturated in 2021, ADT CAPS will pursue efforts to improve the results of operations and service quality of its core unmanned security business through the development of products and market approaches that are tailored to the needs of various customers, while also improving its new security businesses, including the information security business, by enhancing its technologies and diversifying its product portfolio through further development efforts and the increased use of AI.
Former ADT CAPS merged with SK Infosec, a cybersecurity service provider, and the combined ADT CAPS is considering business synergies from various perspectives to provide a more diverse range of high-quality services to customers, including converged security products, in the future.
Unmanned security services range from crime prevention based on cutting-edge sensors and prompt dispatch of security personnel to follow-up services. With increased efforts to reduce false alarms, ADT CAPS continues to reduce dispatch and control costs, thereby improving service quality and ultimately generating new sources of revenue to establish a positive cycle for continuous growth.
Video security services provide objective security through full identification of subjects with the use of high-definition video, made convenient and safe through a diverse lineup of products and remote control services. Access security services provide outsider access control, employee attendance checks and even drinking water management, which are made user-friendly and convenient due to the integration of cutting edge AI-based technology such as fingerprint, facial and mobile recognition. ADT CAPS plans to continue advancing such technology-based services and deliver more convenient and safer security services to customers through innovative technologies.
The SI business provides comprehensive security solutions suitable for the management of large buildings, such as access control and energy, fire safety and parking management services. ADT CAPS is striving to provide customers with the best comprehensive security solution, including more economical and optimized products through the development of innovative technologies.
In the case of information security services, in addition to continuing to provide information protection consulting, security solutions, security system establishment and managed security services based on its know-how accumulated over the years, ADT CAPS is committed to securing new technologies, such as AI security and 5G security, in order to preemptively respond to increasingly intelligent and diversified cyberattacks and respond quickly to changes in the new ICT environment.
ADT CAPS established the first converged security management platform in Korea in response to the emergence of the converged security industry, which is becoming increasingly important as trends of hyper-connectivity, integration and digital transformation are affecting people’s lives and industries on a national level. ADT CAPS strives to become a global total security company by exploring new markets, discovering new business models and expanding advanced technologies through the convergence of physical security and information security, as well as other areas of technology.
[Commerce Business]
A. | Industry Characteristics |
Electronic commerce, or e-commerce, refers to transactions of goods and services that are processed electronically by information processing systems, such as personal computers, and can be classified into “online order” and “online order brokerage” businesses. The mail order brokerage business refers to the act of intermediating a transaction between a seller and a buyer by an online shopping mall, and the online order business refers to direct sales of goods and services by an online shopping mall. Online shopping malls can be categorized, based on the range of products that they handle, into special malls that handle products limited to specific categories and general malls that handle products across multiple categories. The Korean e-commerce market started to grow in the early 2000s with the spread of the Internet, and it is now going through a second period of growth in the form of mobile commerce as a result of the removal of time and space constraints on shopping following the proliferation of smartphones beginning in 2010, the simplification and improved convenience of payment services, the expansion of fast delivery services following intense competition in such services beginning in 2018, the combination of offline and online shopping experiences (omni-channel and O2O services) and advancements in personalization and recommendation services based on AI. Eleven Street, which operates an online order brokerage business, is known as an “open market business” operator within the e-commerce market. As a result of leading the trend of mobile commerce and pursuing innovative customer experience since the early stages of its business, Eleven Street has grown into a major player in the e-commerce market.
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B. | Growth Potential |
As of December 31, 2020, the size of the Korean e-commerce market was Won 161.1 trillion, accounting for approximately 34% of the total online and offline distribution market and demonstrating rapid growth at an annual average growth rate of over 19% for the past three years. In addition, mobile transactions accounted for 67.5% of the total e-commerce transaction value in 2020, after surpassing 50% for the first time in 2016. Considering the current acceleration in the shift of products traditionally sold offline, such as food products, food delivery services, apparels and household products, to the mobile e-commerce platform and with the expansion of contactless consumption of goods in light of COVID-19, mobile e-commerce is expected to continue its growth in the future.
Year | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
E-commerce transaction value (trillion Won) | 161.1 | 135.3 | 113.3 | 94.2 | 65.6 | |||||||||||||||
Annual growth rate | 19.1 | % | 19.3 | % | 20.3 | % | 43.6 | % | 21.5 | % |
* | Source: Statistics Korea, “Online Shopping Trends.” |
C. | Cyclical Nature and Seasonality |
While the commerce industry is inherently affected by fluctuations in the economy to a certain extent, their effect on the e-commerce market has been limited due to its ongoing rapid growth.
D. | Domestic and Overseas Market Conditions |
The mobile-centered online commerce market is expected to grow steadily due to the further growth potential of the Internet shopping population, the development of online business models by offline commerce operators and the growth of mobile commerce. New business models are expected to emerge and proliferate into new markets as diverse lifestyle services that go beyond commodities are incorporated into the area of commerce.
E. | Business Overview and Competitive Strengths |
Focusing on the 11st Marketplace, Eleven Street plans to continue expanding its commerce ecosystem and ultimately enhance its corporate value by providing diverse and innovative shopping experiences based on technology and strengthening customer benefits using synergies with other ICT businesses of the Company. In particular, Eleven Street recorded an operating profit in 2019, thereby successfully establishing a foundation for sustainable growth, and a positive growth in revenue in 2020 due to a meaningful increase in the transaction value through efficient execution of marketing expenses. Eleven Street has become a leader in the Korean e-commerce market through steady growth since the launch of 11st in 2008 by building customer trust and through effective marketing, despite its late entry into the online commerce market that was previously dominated by two players, Gmarket and Auction. Eleven Street has also firmly established itself as a market leader and top player in the Korean mobile commerce market by rapidly responding to the shift of the e-commerce market towards mobile platforms. In addition, Eleven Street has made efforts to gain the market’s confidence and improve customer satisfaction since the launch of 11st, resulting in recognition by certifications from KS-SQI (Service Quality Index) for thirteen consecutive years, KCSI (Consumer Satisfaction Index) for twelve consecutive years and CCM (Consumer Centered Management). Leveraging the large user base of 11st, Eleven Street plans to become a “leading commerce portal most trusted by users” by expanding the product offerings of 11st through expanded strategic partnerships with domestic and foreign players and upgrading services in order to evolve into a future-oriented commerce company, thereby continuing to strengthen the unique value of 11st as a commerce portal through improvements in customer’s convenience and continuous innovation.
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[Other Businesses]
OK Cashbag, operated by SK Planet, is a point-based loyalty marketing program which has grown to become a global top-tier loyalty marketing program since its inception in 1999. Customers have access to increased benefits through accumulation of loyalty reward points and partner companies use OK Cashbag as a marketing resource. As Korea’s largest loyalty mileage program, OK Cashbag maintains a leading position in the industry. The Company is continuing to develop its service in light of market conditions and customers’ needs to enhance its customers’ perception of point value and is reviewing and pursuing various plans to develop OK Cashbag into a service that goes beyond a mileage program that leverages the key competitiveness of OK Cashbag such as its platform and partnership network.
Syrup is a service that provides information about coupons and events based on time, place and occasion, thereby maximizing economic benefits for consumers, as well as a marketing tool based on consumption behavior data that enables its business partners to achieve smart, low-cost and high-efficiency marketing. Based on big data accumulated over the years, Syrup expanded its service to the area of mobile finance, which allows users to check their financial assets and provides an integrated process including recommendation for and subscription to customized financial products. The Company plans to continue developing Syrup to provide more practical benefits to its customers in their daily lives.
Incross, a material subsidiary of the Company, primarily focuses on the digital advertising media representative business, which involves establishing media strategies and executing advertising on behalf of advertisers and advertising agencies, its “Dawin” business, which is Korea’s first video advertising network platform, and “T deal,” which is an advertising service that combines SK Telecom’s text messaging, AI and commerce services. T deal is an advertising product that sends text messages with personalized product recommendations and links to online pages where the products can be purchased. In addition, Infra Communications, a subsidiary of Incross, provides operational services for the integrated mobile application market “ONE Store.”
FLO, launched in December 2018 by Dreamus Company, a material subsidiary of the Company, became the first music platform to discontinue its real-time music chart and introduced the “FLO Chart,” which applies AI and machine learning technologies to a music chart based on data collected over the past 24 hours, thus increasing reliability. As of March 31, 2021, FLO’s number of average unique visitors increased to 2.49 million, an increase of 0.18 million compared to the end of 2020, based on Dreamus Company’s internal data. In addition to its online music service, Dreamus Company operates a music records and digital content distribution business, artist merchandise business and device business under the “Astell&Kern” brand.
The Company’s mobility business was vertically spun off into a new company, T Map Mobility, in December 2020, and it is expected to enhance the its capabilities in the future through partnerships with global mobility business operators. The “T map” service provides maps, information on local areas, real-time traffic information and navigation services, and it has achieved a leading position in the domestic location-based service platform market. In addition, the Company is expanding its mobile platform base that connects daily lives by expanding into online-to-offline service areas such as “T map Public Transportation” services. The Company also continues to secure new subscribers by differentiating itself through services such as an AI-based driver assistant software named “T map x NUGU,” and it is continuing to further build a location-based platform by providing built-in solutions for automobile “infotainment” systems to car manufacturers while also providing services to link local information and advertising.
ONE Store, which was established through a horizontal spin-off from SK Planet in March 2016, launched its proprietary ONE Store App Market in June 2016 by integrating the mobile application marketplaces of the three leading domestic MNO companies and NAVER. ONE Store, which is pre-installed on Android-based mobile devices distributed by the three leading domestic MNO companies, offers over 20,000 mobile game titles, 200,000 mobile applications as well as various contents, including web novels and webtoons, and platform services including an e-commerce business. In its four years of operation, ONE Store has continually increased its market presence with an annual transaction value of over Won 800 billion, a cumulative membership-based user base of over 50 million and a monthly average user access of approximately 20 million.
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2. Updates on Major Products and Services
(Unit: in millions of Won and percentages) | ||||||||||||||
Business | Major Companies | Item | Major | Consolidated Sales Amount | Ratio | |||||||||
Wireless | SK Telecom Co., Ltd., Service Ace Co., Ltd. | Mobile communication service, wireless data service, ICT service | T, 5GX, T Plan and others | 3,117,599 | 65.2 | % | ||||||||
Fixed-line | SK Broadband Co., Ltd., Home & Service Co., Ltd. | Fixed-line phone, high speed Internet, data and network lease service | B tv, 00700 international call, 7mobile and others | 894,754 | 18.7 | % | ||||||||
Security | ADT CAPS Co., Ltd. | Manned and unmanned security, information security and others | CAPS, T&CAPS, B&CAPS and others | 322,916 | 6.8 | % | ||||||||
Commerce | Eleven Street Co., Ltd. SK stoa Co., Ltd. | E-commerce | 11st, 11Pay, Gifticon and others | 200,035 | 4.2 | % | ||||||||
Other | SK Planet Co., Ltd., One Store Co., Ltd., Dreamus Company, SK M&Service Co., Ltd., Incross Co., Ltd. | Information telecommunication, electronic finance, advertising, Internet platform service | OK Cashbag, ONE Store, FLO and others | 245,157 | 5.1 | % | ||||||||
Total | 4,780,461 | 100 | % |
3. Price Trends for Major Products
[Wireless Business]
As of December 31, 2020, based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,100 and the usage fee was Won 1.98 per second. Among the 4G-based “T-Plans”, the “Safe 4G” provides 4 GB of data and unlimited voice calls at Won 50,000 per month (including value-added tax). Among the “5GX Plans”, the “Slim Plan” provides 10 GB of data and unlimited voice calls at Won 55,000 per month (including value-added tax). The Company provides a variety of other subscription plans catered to subscriber demand.
[Fixed-line Business]
The fees charged by the Company for its services are changing as it launches a variety of subscription plans that satisfy customer needs. In February 2021, the Company launched the “The Slim Rate Plan” to reflect the preference of certain subscribers to receive rate discounts over promotional gifts when subscribing to new services, with discounted service fees ranging from Won 2,750 to Won 11,000 per month (based on a three-year subscription period), depending on the transmission speed and whether the subscription includes IPTV services. The Company also provides a variety of other subscription plans.
[Commerce Business]
Eleven Street acts as an intermediary in e-commerce transactions between sellers and buyers on 11st, and charges sellers sales commissions in accordance with the terms of use as consideration for execution of transactions, payment settlement and security measures. Although the amount of sales commissions vary by product category, it is generally set at market standard rates ranging from 10% to 12% of the transaction value. Such sales commission rate structure has largely remained unchanged since the launch of 11st, although Eleven Street occasionally offers temporary promotional reductions for certain periods in order to encourage transactions.
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4. Investment Status
[Wireless Business]
A. | Investment in Progress |
(Unit: in billions of Won) | ||||||||||||||||||||
Business | Classification | Investment period | Subject of investment | Investment effect | Expected investment amount | Amount already invested | Future investment | |||||||||||||
Network/Common | Upgrade/ New installation | Year ended December 31, 2021 | Network, systems and others | | Capacity increase and quality improvement; systems improvement | | To be determined | 165 | — | |||||||||||
Total | To be determined | 165 | — |
B. | Future Investment Plan |
(Unit: in billions of Won) | ||||||||||||
Business | Expected investment amount | Expected investment for each year | Investment effect | |||||||||
Asset type | Amount | 2021 | 2022 | 2023 | ||||||||
Network/Common | Network, systems and others | To be determined | To be determined | To be determined | To be determined | Upgrades to the existing services and expanded provision of network services including 5G | ||||||
Total | To be determined | To be determined | To be determined | To be determined |
* | The Company indicated during the earnings conference call held on February 3, 2021 that the level of capital expenditures for 2021 is expected to be similar to that of 2020. |
[Fixed-line Business]
A. | Investment in Progress and Future Investment Plan |
(Unit: in billions of Won) | ||||||||||
Purpose of investment | Subject of investment | Investment period | Amount already invested | Future investment | Investment effect | |||||
Coverage expansion, upgrade of media platform | Network, systems, internet data center and others | Three months ended March 31, 2021 | 55.4 | To be determined | Secure subscriber networks and equipment; quality and system improvements |
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5. Revenues
(Unit: in millions of Won) | ||||||||||||||||||
Business | Sales | Item | For the three months ended March 31, 2021 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | |||||||||||||
Wireless | Services | Mobile communication | Export | 28,335 | 152,518 | 141,496 | ||||||||||||
Domestic | 3,089,264 | 12,143,166 | 12,030,919 | |||||||||||||||
Subtotal | 3,117,599 | 12,295,684 | 12,172,415 | |||||||||||||||
Fixed-line | Services | Fixed-line, B2B data, high-speed Internet, IPTV | Export | 29,001 | 127,618 | 96,962 | ||||||||||||
Domestic | 865,753 | 3,278,058 | 3,445,469 | |||||||||||||||
Subtotal | 894,754 | 3,405,676 | 3,542,431 | |||||||||||||||
Security | Services | Personnel and system security, information security and others | Export | 4,037 | 16,696 | — | ||||||||||||
Domestic | 318,879 | 1,229,821 | 913,301 | |||||||||||||||
Subtotal | 322,916 | 1,246,517 | 913,301 | |||||||||||||||
Commerce | Services | E-commerce | Export | 279 | 1,299 | 3,829 | ||||||||||||
Domestic | 199,756 | 791,552 | 526,660 | |||||||||||||||
Subtotal | 200,035 | 792,851 | 530,489 | |||||||||||||||
Other | Services | Display and search ad., contents | Export | 15,413 | 50,129 | 81,844 | ||||||||||||
Domestic | 229,744 | 833,794 | 503,222 | |||||||||||||||
Subtotal | 245,157 | 883,923 | 585,066 | |||||||||||||||
Total | Export | 77,065 | 348,260 | 324,131 | ||||||||||||||
Domestic | 4,703,396 | 18,276,391 | 17,419,571 | |||||||||||||||
Total | 4,780,461 | 18,624,651 | 17,743,702 |
(Unit: in millions of Won) | ||||||||||||||||||||||||||||||||
For the three months ended March 31, 2021 | Wireless | Fixed | Security | Commerce | Other | Sub total | Internal transaction | After consolidation | ||||||||||||||||||||||||
Total sales | 3,505,198 | 1,162,627 | 350,497 | 203,696 | 315,940 | 5,537,958 | (757,497 | ) | 4,780,461 | |||||||||||||||||||||||
Internal sales | 387,599 | 267,873 | 27,581 | 3,661 | 70,783 | 757,497 | (757,497 | ) | — | |||||||||||||||||||||||
External sales | 3,117,599 | 894,754 | 322,916 | 200,035 | 245,157 | 4,780,461 | — | 4,780,461 | ||||||||||||||||||||||||
Depreciation and amortization | 700,105 | 232,436 | 64,819 | 8,444 | 17,231 | 1,023,035 | (26,553 | ) | 996,482 | |||||||||||||||||||||||
Operating profit (loss) | 309,025 | 81,169 | 27,771 | 160 | (13,467 | ) | 404,658 | (15,877 | ) | 388,781 | ||||||||||||||||||||||
Finance profit (loss) |
| (33,843 | ) | |||||||||||||||||||||||||||||
Gain from subsidiaries, investments in associates and joint ventures |
| 322,455 | ||||||||||||||||||||||||||||||
Other non-operating profit (loss) |
| 6,444 | ||||||||||||||||||||||||||||||
Profit before income tax |
| 683,837 |
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6. Derivative Transactions
A. | Current Swap Contract Applying Cash Flow Risk Hedge Accounting |
Currency and interest rate swap contracts under cash flow hedge accounting as of March 31, 2021 are as follows:
(Unit: in millions of Won and thousands of USD) | ||||||||||
Borrowing date | Hedged item | Hedged risk | Contract type | Financial institution | Duration of contract | |||||
Jul. 20, 2007 | Fixed rate foreign currency denominated bonds (face value of USD 400,000) | Foreign currency risk | Cross currency swap | Morgan Stanley and four other banks | Jul. 20, 2007 – Jul. 20, 2027 | |||||
Dec. 16, 2013 | Fixed rate foreign currency denominated loan (face value of USD 17,211) | Foreign currency risk | Cross currency swap | Deutsche Bank | Dec. 16, 2013 – Apr. 29, 2022 | |||||
Apr. 16, 2018 | Fixed rate foreign currency denominated bonds (face value of USD 500,000) | Foreign currency risk | Cross currency swap | The Export- Import Bank of Korea and three other banks | Apr. 16, 2018 – Apr. 16, 2023 | |||||
Mar. 4, 2020 | Floating rate foreign currency denominated bonds (face value of USD 300,000) | Foreign currency and interest rate risks | Cross currency interest rate swap | Citibank | Mar. 4, 2020 – Jun. 4, 2025 | |||||
Aug. 13, 2018 | Fixed rate foreign currency denominated bonds (face value of USD 300,000) | Foreign currency risk | Cross currency swap | Citibank | Aug. 13, 2018 – Aug. 13, 2023 | |||||
Dec. 20, 2016 | Floating rate Korean Won denominated loan (face value of KRW 9,188) | Interest rate risk | Interest rate swap | Korea Development Bank | Dec. 20, 2016 – Dec. 20, 2021 | |||||
Dec. 21, 2017 | Floating rate Korean Won denominated loan (face value of KRW 21,875) | Interest rate risk | Interest rate swap | Korea Development Bank | Dec. 21, 2017 – Dec. 21, 2022 | |||||
Dec. 19, 2018 | Floating rate Korean Won denominated loan (face value of KRW 34,375) | Interest rate risk | Interest rate swap | Credit Agricole CIB | Mar. 19, 2019 – Dec. 14, 2023 |
7. Major Contracts
None.
8. R&D Investments
Set forth below are the Company’s R&D expenditures.
(Unit: in millions of Won except percentages) | ||||||||||||||||||
Category | For the three months ended March 31, 2021 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | Remarks | ||||||||||||||
Raw material | 133 | 627 | 633 | — | ||||||||||||||
Labor | 44,879 | 163,426 | 125,248 | — | ||||||||||||||
Depreciation | 36,465 | 176,381 | 161,655 | — | ||||||||||||||
Commissioned service | 9,993 | 46,046 | 65,794 | — | ||||||||||||||
Others | 11,809 | 41,751 | 52,167 | — | ||||||||||||||
Total R&D costs | 103,279 | 428,230 | 405,497 | — | ||||||||||||||
Accounting | Sales and administrative expenses | 100,689 | 416,445 | 391,327 | — | |||||||||||||
Development expenses (Intangible assets) | 2,590 | 11,785 | 14,170 | — | ||||||||||||||
R&D cost / sales amount ratio | 2.16 | % | 2.30 | % | 2.29 | % | — |
9. Other information relating to investment decisions
A. | Trademark Policies |
The Company manages its corporate brand and other product brands in a comprehensive way to protect and increase their value. The Company operates an intranet system called “Comm.ON” in order to implement consistent communication with consumers across various areas including branding, design, marketing and public relations, and systematically manages the development, registration and licensing of brands through such system.
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B. | Business-related Intellectual Property |
[SK Telecom]
As of March 31, 2021, the Company held 3,306 Korean-registered patents and 1,213 foreign-registered patents. The Company holds 733 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “T” representing its brand. The designed alphabet “T” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to constant change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.
[SK Broadband]
As of March 31, 2021, SK Broadband held 300 Korean-registered patents and 142 foreign-registered patents (including those held jointly with other companies). It also holds 312 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “B” representing its brand. The designed alphabet “B” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to continual change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.
[SK Planet]
SK Planet holds 1,477 registered patents, 85 design marks, 940 registered trademarks and 4 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 229 U.S.-registered patents, 107 Chinese-registered patents, 65 Japanese-registered patents, 66 E.U.-registered patents (in each case including those held jointly with other companies) and 152 foreign registered trademarks.
[Eleven Street]
Eleven Street holds 131 registered patents, 12 registered design marks, 613 registered trademarks and 5 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 36 U.S.-registered patents (including those held jointly with other companies).
C. | Business-related Pollutants and Environmental Protection |
[SK Telecom]
The Company does not directly engage in any manufacturing and therefore does not undertake any industrial processes that emit pollutants into the air or industrial processes in which hazardous materials are used. Nevertheless, the Company is committed to fulfilling its social obligations with a sense of responsibility for its impact on the society and the environment on a company-wide basis. Under the vision of “realizing a sustainable future based on ICT,” the Company is making efforts to (1) preemptively respond to climate change, (2) improve its environmental management system and (3) create an eco-friendly green culture. To this end, in December 2020, the Company was one of the first companies in Korea to join the RE100 (Renewable Energy 100%) initiative, which aims to source 100% of its energy needs from renewable energy sources by 2050. In addition, the Company leads in energy savings and environmental protections based on ICT technology, and recently became the first company in the telecommunications industry to obtain carbon emission rights by reducing greenhouse gas through integration of telecommunications equipment and technology upgrades.
[SK Broadband]
SK Broadband does not directly engage in any manufacturing processes that emit environmental pollutants, and more than 99% of its greenhouse gas emissions is indirect emissions from its use of external electricity. SK Broadband was selected as a business subject to allocation of emission permits as part of Korea’s greenhouse gas emissions trading scheme that commenced in 2015, and it actively fulfills its obligations and consistently achieves the targets set by the government. In addition, SK Broadband continues to invest in environment-friendly facilities for its data centers and improve the stability and efficiency of its services.
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III. | FINANCIAL INFORMATION |
1. Summary Financial Information (Consolidated and Separate)
A. | Summary Financial Information (Consolidated) |
Below is the summary consolidated financial information of the Company as of March 31, 2021, December 31, 2020 and December 31, 2019 and for the three months ended March 31, 2021 and 2020 and the years ended December 31, 2020 and 2019. The Company’s unaudited consolidated financial statements as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won except number of companies) | ||||||||||||
As of March 31, 2021 | As of December 31, 2020 | As of December 31, 2019 | ||||||||||
Assets | ||||||||||||
Current Assets | 8,865,201 | 8,775,086 | 8,088,507 | |||||||||
• Cash and Cash Equivalents | 1,231,339 | 1,369,653 | 1,270,824 | |||||||||
• Accounts Receivable – Trade, net | 2,213,365 | 2,188,893 | 2,230,979 | |||||||||
• Accounts Receivable – Other, net | 1,164,322 | 979,044 | 903,509 | |||||||||
• Others | 4,256,175 | 4,237,496 | 3,683,195 | |||||||||
Non-Current Assets | 38,896,266 | 39,131,871 | 37,113,861 | |||||||||
• Long-Term Investment Securities | 1,914,573 | 1,648,837 | 857,215 | |||||||||
• Investments in Associates and Joint Ventures | 14,530,701 | 14,354,113 | 13,385,264 | |||||||||
• Property and Equipment, net | 12,900,472 | 13,377,077 | 12,933,460 | |||||||||
• Intangible Assets, net | 4,239,876 | 4,436,194 | 4,866,092 | |||||||||
• Goodwill | 3,357,473 | 3,357,524 | 2,949,530 | |||||||||
• Others | 1,953,171 | 1,958,126 | 2,122,300 | |||||||||
Total Assets | 47,761,467 | 47,906,957 | 45,202,368 | |||||||||
Liabilities | ||||||||||||
Current Liabilities | 8,099,553 | 8,177,967 | 7,851,673 | |||||||||
Non-Current Liabilities | 15,092,815 | 15,332,747 | 14,533,761 | |||||||||
Total Liabilities | 23,192,368 | 23,510,714 | 22,385,434 | |||||||||
Equity | ||||||||||||
Equity Attributable to Owners of the Parent Company | 23,897,174 | 23,743,894 | 22,950,227 | |||||||||
Share Capital | 44,639 | 44,639 | 44,639 | |||||||||
Capital Surplus (Deficit) and Other Capital Adjustments | 640,215 | 677,203 | 1,006,481 | |||||||||
Retained Earnings | 22,875,819 | 22,981,913 | 22,228,683 | |||||||||
Reserves | 336,501 | 40,139 | (329,576 | ) | ||||||||
Non-controlling Interests | 671,925 | 652,349 | (133,293 | ) | ||||||||
Total Equity | 24,569,099 | 24,396,243 | 22,816,934 | |||||||||
Total Liabilities and Equity | 47,761,467 | 47,906,957 | 45,202,368 | |||||||||
Number of Companies Consolidated | 50 | 49 | 48 |
(Unit: in millions of Won except per share data) | ||||||||||||||||
For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | |||||||||||||
Operating Revenue | 4,780,461 | 4,450,590 | 18,624,651 | 17,740,716 | ||||||||||||
Operating Profit | 388,781 | 301,298 | 1,349,324 | 1,108,177 | ||||||||||||
Profit Before Income Tax | 683,837 | 368,320 | 1,877,040 | 1,161,001 | ||||||||||||
Profit for the Period | 571,975 | 305,952 | 1,500,538 | 860,733 | ||||||||||||
Profit for the Period Attributable to Owners of the Parent Company | 558,265 | 308,544 | 1,504,352 | 888,698 | ||||||||||||
Profit for the Period Attributable to Non-controlling Interests | 13,710 | (2,592 | ) | (3,814 | ) | (27,965 | ) | |||||||||
Basic Earnings Per Share (Won) | 7,793 | 4,168 | 20,463 | 12,127 | ||||||||||||
Diluted Earnings Per Share (Won) | 7,789 | 4,168 | 20,459 | 12,127 |
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B. | Summary Financial Information (Separate) |
Below is the summary separate financial information of the Company as of March 31, 2021, December 31, 2020 and December 31, 2019 and for the three months ended March 31, 2021 and 2020 and the years ended December 31, 2020 and 2019. The Company’s unaudited separate financial statements as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020 and for the years ended December 31, 2020 and 2019, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won) | ||||||||||||
As of March 31, 2021 | As of December 31, 2020 | As of December 31, 2019 | ||||||||||
Assets | ||||||||||||
Current Assets | 5,017,246 | 5,047,115 | 4,998,465 | |||||||||
• Cash and Cash Equivalents | 130,635 | 329,208 | 497,282 | |||||||||
• Accounts Receivable – Trade, net | 1,501,819 | 1,503,552 | 1,479,971 | |||||||||
• Accounts Receivable – Other, net | 591,198 | 434,713 | 506,642 | |||||||||
• Others | 2,793,594 | 2,779,642 | 2,514,570 | |||||||||
Non-Current Assets | 26,770,237 | 26,939,336 | 26,619,167 | |||||||||
• Long-Term Investment Securities | 1,252,142 | 983,688 | 510,633 | |||||||||
• Investments in Subsidiaries and Associates | 11,402,236 | 11,357,504 | 10,578,158 | |||||||||
• Property and Equipment, net | 8,815,606 | 9,157,548 | 9,052,709 | |||||||||
• Intangible Assets, net | 2,499,847 | 2,665,083 | 3,461,152 | |||||||||
• Goodwill | 1,306,236 | 1,306,236 | 1,306,236 | |||||||||
• Others | 1,494,170 | 1,469,277 | 1,710,279 | |||||||||
Total Assets | 31,787,483 | 31,986,451 | 31,617,632 | |||||||||
Liabilities | ||||||||||||
Current Liabilities | 4,963,648 | 5,076,404 | 5,165,744 | |||||||||
Non-Current Liabilities | 9,543,932 | 9,560,189 | 9,067,989 | |||||||||
Total Liabilities | 14,507,580 | 14,636,593 | 14,233,733 | |||||||||
Equity | ||||||||||||
Share Capital | 44,639 | 44,639 | 44,639 | |||||||||
Capital Surplus and Other Capital Adjustments | 245,841 | 289,134 | 715,619 | |||||||||
Retained Earnings | 16,488,288 | 16,684,640 | 16,672,947 | |||||||||
Reserves | 501,135 | 331,445 | (49,306 | ) | ||||||||
Total Equity | 17,279,903 | 17,349,858 | 17,383,899 | |||||||||
Total Liabilities and Equity | 31,787,483 | 31,986,451 | 31,617,632 |
(Unit: in millions of Won except per share data) | ||||||||||||||||
For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | |||||||||||||
Operating Revenue | 2,980,718 | 2,924,506 | 11,746,630 | 11,421,342 | ||||||||||||
Operating Profit | 307,302 | 258,285 | 1,023,067 | 951,803 | ||||||||||||
Profit Before Income Tax | 580,865 | 486,758 | 941,455 | 1,184,878 | ||||||||||||
Profit for the Period | 466,013 | 404,754 | 758,792 | 979,891 | ||||||||||||
Basic Earnings Per Share (Won) | 6,496 | 5,484 | 10,221 | 13,393 | ||||||||||||
Diluted Earnings Per Share (Won) | 6,494 | 5,484 | 10,219 | 13,393 |
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2. Other Matters Related to Financial Information
A. | Restatement of the Financial Statements |
The accounting policies applied to the annual consolidated financial statements as of and for the fiscal year ended December 31, 2020 are applied to the interim consolidated financial statements as of and for the three months ended March 31, 2021.
In 2020, the Company changed its accounting policy related to the determination of lease terms based on the agenda decision “Lease Term and Useful Life of Leasehold Improvements” published by the International Financial Reporting Interpretations Committee (“IFRIC”) on December 16, 2019. The comparative financial information for the three months ended March 31, 2020 has been restated.
B. | Loss Allowance |
(1) | Loss Allowance of Trade and Other Receivables |
(Unit: in millions of Won) | ||||||||||||
For the three months ended March 31, 2021 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,506,805 | 268,142 | 11 | % | ||||||||
Loans | 157,716 | 50,331 | 32 | % | ||||||||
Accounts receivable – other | 1,512,232 | 55,076 | 4 | % | ||||||||
Accrued income | 4,536 | 166 | 4 | % | ||||||||
Guarantee deposits | 284,928 | 300 | 0 | % | ||||||||
Total | 4,466,217 | 374,015 | 8 | % | ||||||||
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2020 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,478,851 | 264,498 | 11 | % | ||||||||
Loans | 182,721 | 45,024 | 25 | % | ||||||||
Accounts receivable – other | 1,366,922 | 55,075 | 4 | % | ||||||||
Accrued income | 3,418 | 166 | 5 | % | ||||||||
Guarantee deposits | 285,507 | 300 | 0 | % | ||||||||
Total | 4,317,419 | 365,063 | 8 | % | ||||||||
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2019 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,497,396 | 249,501 | 10 | % | ||||||||
Loans | 147,937 | 48,054 | 32 | % | ||||||||
Accounts receivable – other | 1,298,477 | 48,379 | 4 | % | ||||||||
Accrued income | 3,977 | 166 | 4 | % | ||||||||
Guarantee deposits | 310,074 | 299 | 0 | % | ||||||||
Total | 4,257,861 | 346,399 | 8 | % |
(2) | Movements in Loss Allowance of Trade and Other Receivables |
(Unit: in millions of Won) | ||||||||||||
For the three months ended March 31, 2021 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | ||||||||||
Beginning balance | 365,063 | 346,399 | 376,045 | |||||||||
Effect of change in accounting policy | — | — | — | |||||||||
Increase of loss allowance | 7,547 | 59,184 | 28,841 | |||||||||
Reversal of loss allowance | — | — | — | |||||||||
Write-offs | (3,066 | ) | (57,575 | ) | (46,616 | ) | ||||||
Other | 4,471 | 17,054 | 17,650 | |||||||||
Ending balance | 374,015 | 365,062 | 346,399 |
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(3) | Policies for Loss Allowance |
The Company establishes loss allowances based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period and past customer default experience for the past three years. With respect to trade receivables relating to wireless telecommunications services, the Company considers the likelihood of recovery based on past customer default experience and the length of default in connection with the type of default (e.g., whether the customer’s service has been terminated or is continued). Consistent with customary practice, the Company writes off trade and other receivables for which the prescription period has passed or that are determined to be impossible or economically too costly to collect, including receivables that are less than Won 200,000 and more than six months overdue and receivables that have been determined to be the subject of identity theft.
(Unit: in millions of Won) | ||||||||||||||||||||
As of March 31, 2021 | ||||||||||||||||||||
Six months or less | From six months to one year | From one year to three years | More than three years | Total | ||||||||||||||||
Accounts receivable – general | 2,226,481 | 53,996 | 129,801 | 96,526 | 2,506,804 | |||||||||||||||
Percentage | 89 | % | 2 | % | 5 | % | 4 | % | 100 | % |
(4) | Aging of Accounts Receivable |
C. | Inventories |
(1) | Detailed Categories of Inventories |
(Unit: in millions of Won) | ||||||||||||
Account Category | For the three months ended March 31, 2021 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | |||||||||
Merchandise | 207,773 | 162,196 | 147,928 | |||||||||
Goods in transit | — | — | — | |||||||||
Other inventories | 13,748 | 9,247 | 14,954 | |||||||||
Total | 221,521 | 171,443 | 162,882 | |||||||||
Percentage of inventories to total assets [ Inventories / Total assets ] | 0.46 | % | 0.36 | % | 0.36 | % | ||||||
Inventory turnover [ Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2} ] | 6.99 | 7.60 | 7.79 |
(2) | Reporting of Inventories |
The Company holds handsets, ICT equipment for offline sales, etc. in inventory. The Company conducts physical due diligence of its inventories with its auditors at the end of each year.
D. | Fair Value Measurement |
See notes 2 and 29 of the notes to the Company’s unaudited consolidated financial statements as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020 for more information.
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E. | Key Terms of Debt Securities |
[SK Telecom]
The following are key terms and conditions of bonds issued by the Company. The compliance status is as of the date of the latest financial statements including the audit opinion of the independent auditor applicable to the determination of compliance status, except for the compliance status of the restriction on changes of ownership structure, which is as of the end of the reporting period.
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 61-2 | Dec. 27, 2011 | Dec. 27, 2021 | 190,000 | Dec. 19, 2011 | Hana Financial Investment Co., Ltd. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 50% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Not applicable | ||
Compliance Status | Not applicable | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 62-2 | Aug. 28, 2012 | Aug. 28, 2022 | 140,000 | Aug. 22, 2012 | Meritz Securities Co., Ltd. | |||||||
Unsecured Bond – Series 62-3 | Aug. 28, 2012 | Aug. 28, 2032 | 90,000 | Aug. 22, 2012 | Meritz Securities Co., Ltd. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Not applicable | ||
Compliance Status | Not applicable | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 63-1 | April 23, 2013 | April 23, 2023 | 230,000 | April 17, 2013 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 63-2 | April 23, 2013 | April 23, 2033 | 130,000 | April 17, 2013 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 64-2 | May 14, 2014 | May 14, 2024 | 150,000 | April 29, 2014 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 65-3 | Oct. 28, 2014 | Oct. 28, 2024 | 190,000 | Oct. 16, 2014 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 66-1 | Feb. 26, 2015 | Feb. 26, 2022 | 100,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 66-2 | Feb. 26, 2015 | Feb. 26, 2025 | 150,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 66-3 | Feb. 26, 2015 | Feb. 26, 2030 | 50,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 67-2 | July 17, 2015 | July 17, 2025 | 70,000 | July 9, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 67-3 | July 17, 2015 | July 17, 2030 | 90,000 | July 9, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 68-2 | Nov. 30, 2015 | Nov. 30, 2025 | 100,000 | Nov. 18, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 68-3 | Nov. 30, 2015 | Nov. 30, 2035 | 70,000 | Nov. 18, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 69-3 | March 4, 2016 | March 4, 2026 | 90,000 | Feb. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 69-4 | March 4, 2016 | March 4, 2036 | 80,000 | Feb. 22, 2016 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Not applicable | ||
Compliance Status | Not applicable | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 70-2 | June 3, 2016 | June 3, 2021 | 50,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 70-3 | June 3, 2016 | June 3, 2026 | 120,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 70-4 | June 3, 2016 | June 3, 2031 | 50,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 71-2 | April 25, 2017 | April 25, 2022 | 120,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 71-3 | April 25, 2017 | April 25, 2027 | 100,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 71-4 | April 25, 2017 | April 25, 2032 | 90,000 | April 13, 2017 | Korea Securities Finance Corp. |
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Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 5 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 72-2 | Nov. 10, 2017 | Nov. 10, 2022 | 80,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 72-3 | Nov. 10, 2017 | Nov. 10, 2027 | 100,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 73-2 | Feb. 20, 2018 | Feb. 20, 2023 | 100,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 73-3 | Feb. 20, 2018 | Feb. 20, 2028 | 200,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 73-4 | Feb. 20, 2018 | Feb. 20, 2038 | 90,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 74-1 | Sept. 17, 2018 | Sept. 17, 2021 | 100,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 74-2 | Sept. 17, 2018 | Sept. 17, 2023 | 150,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 74-3 | Sept. 17, 2018 | Sept. 17, 2038 | 50,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-1 | March 6, 2019 | March 6, 2022 | 180,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-2 | March 6, 2019 | March 6, 2024 | 120,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-3 | March 6, 2019 | March 6, 2029 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-4 | March 6, 2019 | March 6, 2039 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 76-1 | July 29, 2019 | July 29, 2022 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-2 | July 29, 2019 | July 29, 2024 | 60,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-3 | July 29, 2019 | July 29, 2029 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-4 | July 29, 2019 | July 29, 2039 | 50,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-5 | July 29, 2019 | July 29, 2049 | 50,000 | July 17, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 77-1 | Oct. 22, 2019 | Oct. 21, 2022 | 90,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-2 | Oct. 22, 2019 | Oct. 22, 2024 | 50,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-3 | Oct. 22, 2019 | Oct. 22, 2029 | 30,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-4 | Oct. 22, 2019 | Oct. 22, 2039 | 30,000 | Oct. 10, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 78-1 | Jan. 14, 2020 | Jan. 13, 2023 | 170,000 | Dec. 31, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 78-2 | Jan. 14, 2020 | Jan. 14, 2025 | 130,000 | Dec. 31, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 78-3 | Jan. 14, 2020 | Jan. 14, 2030 | 50,000 | Dec. 31, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 78-4 | Jan. 14, 2020 | Jan. 14, 2040 | 70,000 | Dec. 31, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 79-1 | Oct. 19, 2020 | Oct. 19, 2025 | 140,000 | Oct. 6, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 79-2 | Oct. 19, 2020 | Oct. 19, 2030 | 40,000 | Oct. 6, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 79-3 | Oct. 19, 2020 | Oct. 19, 2040 | 110,000 | Oct. 6, 2020 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 14, 2021 |
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[SK Broadband]
The following are key terms and conditions of bonds issued by SK Broadband.
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 43-2 | Oct. 5, 2016 | Oct. 5, 2021 | 120,000 | Sept. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 44 | Feb. 3, 2017 | Feb. 3, 2022 | 150,000 | Jan. 20, 2017 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 27, 2021 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||||||||||
Unsecured Bond – Series 45-2 | Oct. 11, 2017 | Oct. 11, 2022 | 140,000 | Sept. 20, 2017 | | Korea Securities Finance Corp. | |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 70% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 27, 2021 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series 46-2 | Feb. 1, 2018 | Feb. 1, 2023 | 80,000 | Jan. 19, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 47-1 | March 26, 2019 | March 26, 2022 | 50,000 | March 14, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 47-2 | March 26, 2019 | March 26, 2024 | 160,000 | March 14, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-1 | Sept. 24, 2019 | Sept. 23, 2022 | 80,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-2 | Sept. 24, 2019 | Sept. 24, 2024 | 100,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-3 | Sept. 24, 2019 | Sept. 23, 2026 | 50,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 49-1 | June 11, 2020 | June 9, 2023 | 100,000 | June 1, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 49-2 | June 11, 2020 | June 11, 2025 | 100,000 | June 1, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 50 | Sept. 25, 2020 | Sept. 25, 2020 | 160,000 | Sept. 15, 2025 | Korea Securities Finance Corp. |
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Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 70% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction on changes of ownership structure | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 27, 2021 |
* | Beginning with Series 47, the maintenance of financial ratio requirement has changed to a consolidated basis. |
IV. | MANAGEMENT’S DISCUSSION AND ANALYSIS |
Omitted in quarterly and semi-annual reports in accordance with applicable Korean disclosure rules.
V. | AUDITOR’S OPINION |
1. Independent Auditors and Audit Opinions
A. | Independent Auditor and Audit Opinion (Separate and Consolidated) |
Period | Independent auditor | Audit opinion | Emphasis of | Critical Audit Matters | ||||
Three months ended March 31, 2021 | KPMG Samjong Accounting Corp. | — | N/A | N/A | ||||
Year ended December 31, 2020 | KPMG Samjong Accounting Corp. | Unqualified | Retroactive application of change in accounting policy related to change to determination of lease period | Revenue recognition; assessment of impairment of cash-generating unit of security services, assessment of fair value of customer relationship | ||||
Year ended December 31, 2019 | KPMG Samjong Accounting Corp. | Unqualified | N/A | Revenue recognition; assessment of impairment of cash-generating unit of security services |
Note: All consolidated subsidiaries of the Company that are subject to audits and whose audits have been completed received unqualified audit opinions.
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B. | Audit Services Contracts with Independent Auditors |
(Unit: in millions of Won except number of hours) | ||||||||||||||||||||
Period | Auditors | Contents | Audit Contract | Actual Performance | ||||||||||||||||
Fee | Total number of hours | Fee | Total number of hours | |||||||||||||||||
Three months ended March 31, 2021 | KPMG Samjong Accounting Corp. | Quarterly review Separate financial statements audit Consolidated financial statements audit English financial statements review and other audit task | 2,460 | 24,600 | 0 | 1,342 | ||||||||||||||
Internal accounting system audit | ||||||||||||||||||||
Year ended December 31, 2020 | KPMG Samjong Accounting Corp. | Quarterly review Separate financial statements audit Consolidated financial statements audit English financial statements review and other audit task Internal accounting system audit | 2,360 | 23,600 | 2,360 | 23,600 | ||||||||||||||
Year ended December 31, 2019 | KPMG Samjong Accounting Corp. | Quarterly review Separate financial statements audit Consolidated financial statements audit English financial statements review and other audit task | 1,860 | 23,040 | 1,860 | 23,040 | ||||||||||||||
C. | Non-Audit Services Contracts with Independent Auditors |
(Unit: in millions of Won) | ||||||||
Period | Contract date | Service provided | Service duration | Fee | ||||
Three months ended March 31, 2021 | — | — | — | — | ||||
July 23, 2020 | Confirmation of financial information | July 23, 2020 – July 30, 2020 | 3 | |||||
Year ended December 31, 2020 | December 8, 2020 | Confirmation of financial information | December 8, 2020 – December 10, 2020 | 3 | ||||
December 30, 2020 | Consulting services for new business group model research project | December 31, 2020 – February 12, 2021 | 90 | |||||
Year ended December 31, 2019 | February 8, 2019 | Consulting for publication of 2018 integrated annual report | February 8, 2019 – June 30, 2019 | 120 | ||||
April 26, 2019 | Confirmation of financial information | April 26, 2019 – April 29, 2019 | 3 |
D. | Discussions between Audit Committee and Independent Auditors |
Date | Attendance | Method | Key Matters Discussed | |||
February 24, 2021 | Audit Committee: 4 Independent Auditor: 1 | In-person | Report on 2020 critical audit matters and results of audit of financials statements; report on results of 2020 internal accounting management system audit | |||
April 28, 2021 | Audit Committee: 4 Independent Auditor: 2 | In-person | Report on 2020 Public Company Accounting Oversight Board audit results; report on 2021 audit plan and selection of critical audit matters |
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VI. | CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS |
1. Board of Directors
A. | Overview of the Composition of the Board of Directors |
The Board of Directors is composed of eight members: five independent directors, two inside directors and one non-executive director. Within the Board of Directors, there are five committees: Independent Director Nomination Committee, Audit Committee, Compensation Committee, CapEx Review Committee and Corporate Citizenship Committee.
The Company is considering reorganizing the five committees within the Board of Directors into four committees, and will disclose any final decision made by the Board of Directors in its periodic report.
(As of March 31, 2021) | ||||||
Total number of persons | Inside directors | Non-executive director | Independent directors | |||
8 | Jung Ho Park, Young Sang Ryu | Dae Sik Cho | Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon, Junmo Kim |
At the 37th General Meeting of Shareholders held on March 25, 2021, Young Sang Ryu was re-elected as an inside director and Youngmin Yoon was re-elected as an independent director and a member of the audit committee.
Yong-Hak Kim, as a highly respected sociologist with knowledge and virtue that can contribute to the Company’s proactive pursuit of social value, has been elected as the chairman of the Board of Directors by the directors pursuant to Article 4(2) of the regulations of the Board of Directors.
B. | Significant Activities of the Board of Directors |
Meeting | Date | Agenda | Approval | |||
444th (the 1st meeting of 2021) | February 2, 2021 | - Financial statements as of and for the year ended December 31, 2020
- Annual business report for the year ended December 31, 2020
- Delegation of authority to obtain funding through long-term borrowings
- Disposal of treasury stock
- Donations for ESG management (creation of social value)
- Revisions to Audit Committee regulations
- Report of internal accounting management
- Report for the period after the fourth quarter of 2020 | Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed — — | |||
445th (the 2nd meeting of 2021) | February 25, 2021 | - Calling of 37th General Meeting of Shareholders
- Capital contribution to T Map Mobility and transfer of mobility assets
- Transactions with SK Pinx in 2021
- Transfer of certain assets including SK Futures Park
- Results of evaluation of internal accounting management system | Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
—
| |||
446th (the 3rd meeting of 2021) | March 25, 2021 | - Election of the chairman of the Board of Directors
- Re-election of compliance officer
- Transactions with SK Inc. in the second quarter of 2021
- Investment in Content Wavve Co., Ltd. to increase its competitiveness
- Occupational safety and health plan for 2021
- Additional transactions with SK Pinx in 2021
| Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed | |||
447th (the 4th meeting of 2021) | April 29, 2021 | - Termination of Share Repurchase Agreement
- Investment in SK Telecom TMT Investment Corp.
- Payment of operating expenses of SUPEX Council for 2021
- Transactions with SK Hynix in 2021
- Report for the period after the first quarter of 2021 | Approved as proposed
Approved as proposed
Approved as proposed
— | |||
448th (the 5th meeting of 2021) | May 4, 2021 | - Cancelation of treasury shares | Approved as proposed |
* The | line items that do not show approval are for reporting purposes only. |
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C. | Committees within Board of Directors |
(1) | Committee structure (as of March 31, 2021) |
(a) Independent Director Nomination Committee
Total number of persons | Members | Task | ||||||||||
Inside Directors | Independent Directors | |||||||||||
3 | Jung Ho Park | Seok-Dong Kim, Jung Ho Ahn | Nomination of independent directors |
* | Under the Korean Commercial Code, a majority of the members of the Independent Director Nomination Committee must be independent directors. |
(b) Compensation Review Committee
Total number of persons | Members | Task | ||||||||||
Inside Directors | Independent Directors | |||||||||||
3 | — | Yong-Hak Kim, Seok-Dong Kim, Junmo Kim | Review CEO remuneration system and amount |
* | The Compensation Review Committee is a committee established by the resolution of the Board of Directors. |
(c) Capex Review Committee
Total number | Members | Task | ||||||||
Inside Directors | Independent Directors | |||||||||
6 | Young Sang Ryu | | Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon, Junmo Kim | | Review major investment plans and changes thereto |
* | The Capex Review Committee is a committee established by the resolution of the Board of Directors. |
(d) Corporate Citizenship Committee
Total number | Members | Task | ||||||||
Inside Directors | Independent Directors | |||||||||
3 | — | Jung Ho Ahn, Youngmin Yoon, Junmo Kim | Review guidelines on corporate social responsibility (“CSR”) programs, etc. |
* | The Corporate Citizenship Committee is a committee established by the resolution of the Board of Directors. |
(e) Audit Committee
Total number | Members | Task | ||||||||
Inside Directors | Independent Directors | |||||||||
4 | — | | Seok-Dong Kim, Yong-Hak Kim, Youngmin Yoon, Jung Ho Ahn | | Review financial statements and supervise independent audit process, etc. |
* | The Audit Committee is a committee established under the provisions of the Articles of Incorporation and the Korean Commercial Code. |
2. Audit System
The Company’s Audit Committee consists of four independent directors, Seok-Dong Kim (chairman of the Audit Committee and financial and accounting expert), Yong-Hak Kim, Youngmin Yoon and Jung Ho Ahn.
Major activities of the Audit Committee as of March 31, 2021 are set forth below.
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Meeting | Date | Agenda | Approval | |||||
The 1st meeting of 2021 | February 1, 2021 | • Evaluation of internal accounting management system operation
• Review of business and audit results for 2020 and business and audit plans for 2021
• Auditor’s opinion on internal monitoring controls
• Approval of services by independent auditor in 2021 |
| —
—
Approved as proposed
Approved as proposed |
| |||
The 2nd meeting of 2021 | February 24, 2021 | • Audit results for fiscal year 2020
• Audit results for internal accounting management system for fiscal year 2020
• Evaluation of internal accounting management system
• Finalization of agenda and document review for the 37th General Meeting of Shareholders
• Audit report for fiscal year 2020
• Real estate transaction with SK Broadband
• Contract for customer appreciation gifts to fixed-line telephone customers for 2021 |
| —
—
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed |
| |||
The 3rd meeting of 2021 | March 24, 2021 | • Contributions to company employee welfare fund for 2021
• Contract for maintenance services of optical cables in 2021
• Contract for maintenance services of transmission equipment in 2021
|
| Approved as proposed
Approved as proposed
Approved as proposed |
| |||
The 4th meeting of 2021 | April 28, 2021 | • Audit plan for fiscal year 2021 | — |
* The | line items that do not show approval are for reporting purposes only. |
3. Shareholders’ Exercise of Voting Rights
A. | Voting System and Exercise of Minority Shareholders’ Rights |
Pursuant to the Articles of Incorporation as shown below, the cumulative voting system was first introduced in the general meeting of shareholders held in 2003.
Articles of Incorporation | Description | |
Article 32(3) (Election of Directors) | Cumulative voting under Article 382-2 of the Korean Commercial Code will not be applied for the election of directors. | |
Article 4 of the 12th Supplement to the Articles of Incorporation (Interim Regulation) | Article 32(3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general meeting of shareholders held in 2003. |
During the 34th general meeting of shareholders held on March 21, 2018, the Company adopted the electronic voting method. Pursuant to Article 368-4 of the Korean Commercial Code, the Company entrusted the Korea Securities Depository with the role of administering the electronic voting system, allowing shareholders to exercise their voting rights through electronic voting without attending the general meeting of shareholders.
Written voting system is not applicable. Minority shareholder rights were not exercised during the relevant period.
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VII. | SHAREHOLDERS |
1. Shareholdings of the Largest Shareholder and Related Persons
A. | Shareholdings of the Largest Shareholder and Related Persons |
(As of March 31, 2021) | (Unit: in shares and percentages) | |||||||||||||||||||||||
Name | Relationship | Type of share | Number of shares owned and ownership ratio | |||||||||||||||||||||
Beginning of Period | End of Period | |||||||||||||||||||||||
Number of shares | Ownership ratio | Number of shares | Ownership ratio | |||||||||||||||||||||
SK Inc. | Largest Shareholder | Common share | 21,624,120 | 26.78 | 21,624,120 | 26.78 | ||||||||||||||||||
Tae Won Chey | Officer of affiliated company | Common share | 100 | 0.00 | 100 | 0.00 | ||||||||||||||||||
Dong Hyun Jang | Officer of affiliated company | Common share | 251 | 0.00 | 251 | 0.00 | ||||||||||||||||||
Jung Ho Park | Officer of the Company | Common share | 2,500 | 0.00 | 3,500 | 0.00 | ||||||||||||||||||
Young Sang Ryu | Officer of the Company | Common share | 500 | 0.00 | 1,000 | 0.00 | ||||||||||||||||||
Total |
| Common share | 21,627,471 | 26.78 | 21,628,971 | 26.79 |
B. | Overview of the Largest Shareholder |
As of March 31, 2021, the Company’s largest shareholder was SK Inc. SK Inc. was established on April 13, 1991 and was made public on the securities market on November 11, 2009 under the identification code “034730.” SK Inc. is located at 26, Jong-ro, Jongno-gu, Seoul, Korea. SK Inc.’s telephone number is +82-2-2121-5114 and its website is https://www.sk-inc.com/.
C. | Changes in Shareholdings of the Largest Shareholder and Related Persons |
Changes in shareholdings of the largest shareholder are as follows:
(As of March 31, 2021) | (Unit: in shares and percentages) | |||||||||||
Largest Shareholder | Date of the change in the largest shareholder/ shareholding | Shares Held* | Holding Ratio | Remarks | ||||||||
SK Inc. | December 27, 2018 | 21,625,471 | 26.78 | SK Inc.’s interest in SK Infosec was transferred to the Company in exchange for the Company’s issuance of treasury shares to SK Inc. | ||||||||
February 17, 2020 | 21,627,471 | 26.78 | Jung Ho Park, CEO of the Company, purchased 1,500 additional shares; Young Sang Ryu, inside director of the Company, purchased 500 shares. | |||||||||
February 4, 2021 | 21,628,971 | 26.79 | Jung Ho Park, CEO of the Company, purchased 1,000 additional shares; Young Sang Ryu, inside director of the Company, purchased 500 additional shares. |
2. Distribution of Shares
A. | Shareholders with Ownership of 5% or Greater |
(As of March 31, 2021) | (Unit: in shares and percentages) | |||||||||||
Name (title) | Common share | |||||||||||
Number of shares | Ownership ratio | Remarks | ||||||||||
SK Inc. | 21,624,120 | 26.8 | % | — | ||||||||
SK Telecom | 9,585,568 | 11.9 | % | | Treasury shares | | ||||||
National Pension Service | 8,196,312 | 10.1 | % | — | ||||||||
Citibank ADR | 6,600,692 | 8.2 | % | — | ||||||||
Shareholdings under the Employee Stock Ownership Program | — | — | — |
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B. | Minority Shareholders |
(As of March 31, 2021) | (Unit: in shares and percentages) | |||||||||||||||||||||||
Classification | Shareholders | Ownership | ||||||||||||||||||||||
Number of minority shareholders | Total number of shareholders | Ratio (%) | Number of shares owned by minority shareholders | Total number of shares issued | Ratio (%) | |||||||||||||||||||
Minority shareholders* | 140,814 | 140,821 | 99.9 | % | 30,688,726 | 80,745,711 | 38.0 | % |
*Shareholders | who hold less than 1% of total shares issued. |
3. Share Price and Trading Volume in the Last Six Months
A. | Domestic Securities Market |
(Unit: in Won and shares) | ||||||||||||||||||||||||||
Types | March 2021 | February 2021 | January 2021 | December 2020 | November 2020 | October 2020 | ||||||||||||||||||||
Common stock | Highest | 275,000 | 258,500 | 270,000 | 249,000 | 248,500 | 242,500 | |||||||||||||||||||
Lowest | 244,000 | 243,500 | 237,000 | 236,500 | 237,500 | 214,000 | ||||||||||||||||||||
Average | 255,409 | 248,944 | 252,450 | 242,833 | 228,357 | 234,579 | ||||||||||||||||||||
Daily transaction volume | Highest | 1,101,946 | 744,401 | 1,358,231 | 600,115 | 526,025 | 860,420 | |||||||||||||||||||
Lowest | 178,239 | 270,191 | 371,161 | 177,141 | 230,773 | 147,788 | ||||||||||||||||||||
Monthly transaction volume | 7,052,935 | 7,193,340 | 12,026,412 | 6,750,652 | 7,342,612 | 5,630,992 |
B. | Foreign Securities Market (New York Stock Exchange) |
(Unit : in US$ and ADRs) |
| |||||||||||||||||||||||||
Types | March 2021 | February 2021 | January 2021 | December 2020 | November 2020 | October 2020 | ||||||||||||||||||||
Depositary receipt | Highest | 27.23 | 25.58 | 27.00 | 25.09 | 23.83 | 23.32 | |||||||||||||||||||
Lowest | 24.06 | 24.16 | 24.16 | 23.61 | 21.11 | 21.06 | ||||||||||||||||||||
Average | 25.15 | 24.88 | 25.38 | 24.53 | 22.81 | 22.63 | ||||||||||||||||||||
Daily transaction volume | Highest | 744,807 | 461,482 | 1,043,660 | 986,698 | 375,757 | 453,267 | |||||||||||||||||||
Lowest | 178,673 | 127,291 | 151,029 | 50,957 | 84,967 | 128,868 | ||||||||||||||||||||
Monthly transaction volume | 8,563,650 | 5,375,349 | 8,201,873 | 6,994,369 | 4,169,388 | 5,837,549 |
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VIII. | EMPLOYEES AND DIRECTORS |
1. Officers and Employees
A. | Employees |
(As of March 31, 2021) | (Unit: in persons and millions of Won) | |||||||||||||||||||||||||||||||||
Business segment | Gender | Number of employees | Average length of service (years) | Aggregate wage for the year of 2021 | Average wage per person | |||||||||||||||||||||||||||||
Employees without a fixed term of employment | Employees with a fixed term of employment | Total | ||||||||||||||||||||||||||||||||
Total | Part-time employees | Total | Part-time employees | |||||||||||||||||||||||||||||||
— | Male | 4,248 | — | 67 | — | 4,315 | 14 | 268,625 | 62 | |||||||||||||||||||||||||
— | Female | 884 | — | 169 | — | 1,053 | 9 | 44,656 | 42 | |||||||||||||||||||||||||
Total | 5,132 | — | 236 | — | 5,368 | 13 | 313,282 | 58 |
B. | Compensation of Unregistered Officers |
(As of March 31, 2021) | (Unit: in persons and millions of Won) | |||
Number of Unregistered Officers | Aggregate wage for the year of 2021 | Average wage per person | ||
102 | 31,238 | 306 |
2. Compensation of Directors
A. | Amount Approved at the Shareholders’ Meeting |
(As of March 31, 2021) | (Unit: in millions of Won) | |||
Classification | Number of Directors | Aggregate Amount Approved | ||
Directors | 8 | 12,000 |
B. | Amount Paid |
B-1. Total Amount
(As of March 31, 2021) | (Unit: in millions of Won) | |||||||||||||
Number of Directors | Aggregate Amount Paid | Average Amount Paid Per Director | Remarks | |||||||||||
8 | 3,480 | 435 | — |
B-2. Amount by Classification
(As of March 31, 2021) | (Unit: in millions of Won) | |||||||
Classification | Number of Directors | Aggregate Amount Paid | Average Amount Paid Per Director | Remarks | ||||
Inside Directors | 3 | 3,375 | 1,125 | — | ||||
Independent Directors (Excluding Audit Committee Members) | 1 | 21 | 21 | — | ||||
Audit Committee Members | 4 | 84 | 21 | — | ||||
Auditor | — | — | — | — |
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3. Individual Compensation of Directors and Officers
Omitted in quarterly reports in accordance with Korean disclosure rules.
4. Stock Options Granted and Exercised
A. | Stock Options Granted to Directors and Auditors |
(As of March 31, 2021) |
| |||||||||||
Classification | Number of Directors | Fair Value of Stock Options (millions of Won) | Remarks | |||||||||
Inside Directors | 3 | 32 | — | |||||||||
Independent Directors (Excluding Audit Committee Members) | 1 | — | — | |||||||||
Audit Committee Members | 4 | — | — | |||||||||
Total | 8 | 32 | — |
B. | Stock Options Granted and Exercised |
(As of March 31, 2021) |
| (Unit: in Won and shares) | ||||||||||||||||||||||||||||||||||
Grantee | Relationship with the Company | Date of Grant | Method of Grant | Initially Granted | Changes during Reporting Period | Total Changes | Unexercised as of End of Reporting Period | Exercise Period | Exercise Price | |||||||||||||||||||||||||||
Exercised | Canceled | Exercised | Canceled | |||||||||||||||||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | — | — | 22,168 | March 25, 2019– March 24, 2022 | 246,750 | |||||||||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | — | — | 22,168 | March 25, 2020 – March 24, 2023 | 266,490 | |||||||||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | — | — | 22,168 | Mach 25, 2021 – March 24, 2024 | 287,810 | |||||||||||||||||||||||||
Jung Ho Park | Inside Director | March 26, 2020 | Issuance of treasury stock, cash settlement | 111,106 | — | — | — | — | 111,106 | March 27, 2023 – March 26, 2027 | 192,260 | |||||||||||||||||||||||||
Young Sang Ryu | Inside Director | February 20, 2018 | Issuance of treasury stock, cash settlement | 1,358 | — | — | — | — | 1,358 | February 21, 2020 – February 20, 2023 | 254,120 | |||||||||||||||||||||||||
Young Sang Ryu | Inside Director | March 26, 2019 | Issuance of treasury stock, cash settlement | 1,734 | — | — | — | — | 1,734 | March 27, 2021 – March 26, 2024 | 254,310 |
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Young Sang Ryu | Inside Director | March 26, 2020 | Issuance of treasury stock, cash settlement | 2,353 | — | — | — | — | 2,353 | March 27, 2023 – March 26, 2027 | 192,260 | |||||||||||
Young Sang Ryu | Inside Director | March 25, 2021 | Issuance of treasury stock, cash settlement | 5,990 | — | — | — | — | 5,990 | March 26, 2023 – March 25, 2026 | 251,380 | |||||||||||
Jong Ryeol Kang | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 2,048 | — | — | — | — | 2,048 | March 27, 2023 – March 26, 2027 | 192,260 | |||||||||||
Jong Ryeol Kang | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 2,350 | — | — | — | — | 2,350 | March 26, 2023 – March 25, 2026 | 251,380 | |||||||||||
Hyoung Il Ha | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 1,564 | — | — | — | — | 1,564 | February 23, 2021 – February 22, 2024 | 265,260 | |||||||||||
Hyoung Il Ha | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 1,961 | — | — | — | — | 1,961 | March 27, 2023 – March 26, 2027 | 192,260 | |||||||||||
Hyoung Il Ha | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 3,760 | — | — | — | — | 3,760 | March 26, 2023 – March 25, 2026 | 251,380 | |||||||||||
Yoon Kim | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 1,874 | — | — | — | — | 1,874 | March 27, 2023 – March 26, 2027 | 192,260 | |||||||||||
Yoon Kim | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 2,110 | — | — | — | — | 2,110 | March 26, 2023 – March 25, 2026 | 251,380 | |||||||||||
Seok Joon Huh | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 1,852 | — | — | — | — | 1,852 | March 27, 2023 – March 26, 2027 | 192,260 | |||||||||||
Seok Joon Huh | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 2,260 | — | — | — | — | 2,260 | March 26, 2023 – March 25, 2026 | 251,380 | |||||||||||
Poong Young Yoon | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 1,244 | — | — | — | — | 1,244 | February 23, 2021 – February 22, 2024 | 265,260 | |||||||||||
Poong Young Yoon | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 1,743 | — | — | — | — | 1,743 | March 27, 2023 – March 26, 2027 | 192,260 | |||||||||||
Poong Young Yoon | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 3,360 | — | — | — | — | 3,360 | March 26, 2023 – March 25, 2026 | 251,380 |
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Seong Ho Ha | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 1,369 | — | — | — | — | 1,369 | | February 23, 2021 – February 22, 2024 | | 265,260 | |||||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 1,656 | — | — | — | — | 1,656 | | March 27, 2023 – March 26, 2027 | | 192,260 | |||||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 1,920 | — | — | — | — | 1,920 | | March 26, 2023 – March 25, 2026 | | 251,380 | |||||||||||||||||||||||||
Dong Hwan Cho | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 1,525 | — | — | — | — | 1,525 | | March 27, 2023 – March 26, 2027 | | 192,260 | |||||||||||||||||||||||||
Dong Hwan Cho | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 1,770 | — | — | — | — | 1,770 | | March 26, 2023 – March 25, 2026 | | 251,380 | |||||||||||||||||||||||||
HyunA Lee | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 1,525 | — | — | — | — | 1,525 | | March 27, 2023 – March 26, 2027 | | 192,260 | |||||||||||||||||||||||||
HyunA Lee | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 2,880 | — | — | — | — | 2,880 | | March 26, 2023 – March 25, 2026 | | 251,380 | |||||||||||||||||||||||||
Sang Kyu Shin | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 1,530 | — | — | — | — | 1,530 | | March 26, 2023 – March 25, 2026 | | 251,380 | |||||||||||||||||||||||||
Jae Seung Song | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 2,650 | — | — | — | — | 2,650 | | March 26, 2023 – March 25, 2026 | | 251,380 | |||||||||||||||||||||||||
Myung Jin Han | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 1,450 | — | — | — | — | 1,450 | | March 26, 2023 – March 25, 2026 | | 251,380 | |||||||||||||||||||||||||
Byung Hoon Ryu | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 1,250 | — | — | — | — | 1,250 | | March 26, 2023 – March 25, 2026 | | 251,380 |
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IX. | RELATED PARTY TRANSACTIONS |
1. Line of Credit Extended to the Largest Shareholder and Related Parties
None.
2. Transfer of Assets to/from the Largest Shareholder and Related Parties and Other Transactions
Purchase and Dispositions of Investments
(As of March 31, 2021) | (Unit: in millions of Won) | |||||||||||||||
Name (Corporate name) | Relationship | Purchase and Dispositions of Investments | Remarks | |||||||||||||
Type of Investment | Transaction Details | |||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||
Invites Healthcare Co., Ltd. | Affiliate | Shares | 28,000 | 7,000 | — | 35,000 | Capital increase | |||||||||
Invites Healthcare Co., Ltd. | Affiliate | Treasury Shares | — | 10,000 | — | 10,000 | Capital increase | |||||||||
Grab Geo Holdings PTE. LTD. | Overseas Affiliate | Shares | 30,517 | — | 30,517 | — | Disposal | |||||||||
Carrot General Insurance Co., Ltd. | Affiliate | Shares | 20,000 | — | 20,000 | — | Disposal | |||||||||
Broadband Nowon Broadcasting Co., Ltd. | Affiliate | Shares | 10,463 | 9,512 | — | 19,975 | Capital increase | |||||||||
T Map Mobility | Affiliate | Shares | 155,408 | 73,304 | — | 228,711 | Capital increase | |||||||||
Atlas | Overseas Affiliate | Shares | 143,097 | 5,061 | — | 148,158 | Capital increase | |||||||||
Quantum Innovation Fund I | Affiliate | Shares | 15,969 | 373 | — | 16,342 | Capital increase | |||||||||
Walden Riverwood Ventures LP | Overseas Affiliate | Shares | 23,392 | — | 3,162 | 20,230 | Capital increase | |||||||||
DCM V,L.P. | Overseas Affiliate | Shares | 3,576 | — | 2 | 3,574 | Capital increase |
Purchase and Disposition of Securities
In order to maximize the efficiency of each business entity, SK Telecom sold its shares of Grab Geo Holdings PTE. LTD. and Carrot General Insurance Co., Ltd., which were investment assets highly related to the mobility business, to T Map Mobility. The date of the resolution by the Board of Directors was February 25, 2021.
3. | Transactions with the Largest Shareholder and Related Parties |
(Unit: in millions of Won) |
| |||||||||||
Counterparty | Relationship with Counterparty | Type | Transaction Period | Transaction Details | Transaction Amount | |||||||
PS&Marketing | Affiliate | Purchase | January 1, 2021 – March 31, 2021 | Marketing fees, etc. | 353,437 |
4. Related Party Transactions
See note 30 of the notes to the Company’s unaudited consolidated financial statements attached hereto for more information regarding related party transactions.
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5. Other Related Party Transactions (excluding Transactions with the Largest Shareholder and Related Parties listed above)
A. | Provisional Payment and Loans (including loans on marketable securities) |
(As of March 31, 2021) | (Unit: in millions of Won) | |||||||||||||||||||||||||||||||
Name (Corporate name) | Relationship | Account category | Change details | Accrued interest | Remarks | |||||||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||||||||||
Baekmajang and others | Agency | | Long-term and short-term loans | | 96,766 | 15,733 | 41,580 | 70,919 | — | — | ||||||||||||||||||||||
Daehan Kanggun BCN Inc. | Investee | Long-term loans | 22,147 | — | — | 22,147 | — | — |
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X. | OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS |
1. Developments in the Items Mentioned in Prior Reports on Important Business Matters
A. | Summary Minutes of the General Meeting of Shareholders |
Date | Agenda | Resolution | ||
35th Fiscal Year Meeting of Shareholders (March 26, 2019) | 1. Approval of the financial statements for the year ended December 31, 2018
2. Amendments to Articles of Incorporation
3. Approval of award of stock options
4. Award of stock options
5. Election of an independent director
6. Election of an independent director as Audit Committee member
7. Approval of remuneration limit for directors | Approved (Cash dividend, Won 9,000 per share)
Approved
Approved
Approved
Approved (Seok-Dong Kim)
Approved (Seok-Dong Kim)
Approved (Won 12 billion) | ||
36th Fiscal Year Meeting of Shareholders (March 26, 2020) | 1. Approval of the financial statements for the year ended December 31, 2019
2. Amendments to Articles of Incorporation
3. Award of stock options
4. Election of directors
• Election of an inside director
• Election of a non-executive director
• Election of an independent director
• Election of an independent director
• Election of an independent director 5. Election of an independent director as Audit Committee member
• Election of an independent director as Audit Committee member
• Election of an independent director as Audit Committee member
6. Approval of remuneration limit for directors
7. Amendment of remuneration policy for executives | Approved (Cash dividend, Won 9,000 per share)
Approved
Approved
Approved (Jung Ho Park)
Approved (Dae Sik Cho)
Approved (Yong-Hak Kim)
Approved (Junmo Kim)
Approved (Jung Ho Ahn)
Approved (Yong-Hak Kim)
Approved (Jung Ho Ahn)
Approved (Won 12 billion) Approved | ||
1st Extraordinary Meeting of Shareholders of 2020 (November 26, 2020) | 1. Approval of spin-off plan | Approved | ||
37th Fiscal Year Meeting of Shareholders (March 25, 2021) | 1. Approval of the financial statements for the year ended December 31, 2020
2. Amendments to Articles of Incorporation
3. Award of stock options
4. Election of an inside director 5. Election of an independent director to serve as Audit Committee member
7.Approvalof remuneration limit for directors | Approved (Cash dividend, Won 9,000 per share)
Approved
Approved
Approved (Young Sang Ryu)
Approved (Youngmin Yoon)
Approved (Won 12 billion) |
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2. Contingent Liabilities
A. | Legal Proceedings |
[SK Telecom]
As of March 31, 2021, the Company is involved in various pending legal proceedings and the provisions recognized for these proceedings are not material. The management of the Company has determined that there are currently no present obligations in connection with proceedings for which no provision has been recognized. The management has also determined that the outcome of these proceedings will not have a significant impact on the Company’s financial position and operating performance.
[SK Broadband]
As of March 31, 2021, there were 27 pending lawsuits against SK Broadband (aggregate amount of claims of Won 23,050 million), and provisions in the amount of Won 11,189 million in connection with such lawsuits were recognized.
[SK Planet]
As of March 31, 2021, there were two pending lawsuits against SK Planet (aggregate amount of claims of Won 250 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
[Eleven Street]
As of March 31, 2021, there were four pending lawsuits against Eleven Street (aggregate amount of claims of Won 268 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
[ADT CAPS]
As of March 31, 2021, there were 22 pending lawsuits against ADT CAPS (aggregate amount of claims of Won 1,866 million), and provisions in the amount of Won 1,536 million in connection with such lawsuits were recognized.
[Incross]
As of March 31, 2021, there were no pending lawsuits against Incross. However, during the reporting period, one lawsuit on appeal in which Incross was the defendant was ruled against Incross. Incross considered filing an appeal to the Supreme Court of Korea, but decided not to pursue such appeal based on its determination that there will be no practical benefit. As of March 31, 2021, Incross recognized its best estimate for the amount to be paid as a result of the lawsuit as a provision, and it does not believe that the outcome of such lawsuit has a material impact on the its financial condition.
[SK Telink]
As of March 31, 2021, there were three pending lawsuits against SK Telink (aggregate amount of claims of Won 210 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
B. | Other Contingent Liabilities |
[SK Telecom]
None.
[SK Broadband]
As of March 31, 2021, SK Broadband has entered into revolving credit facilities with a limit of Won 210.8 billion with four financial institutions including Hana Bank in relation to its loans.
In connection with public offerings of notes, SK Broadband is subject to certain restrictions with respect to its debt ratio, third party payment guarantees and other limitations on liens.
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SK Broadband has provided “geun” mortgage amounting to Won 1,568 million on certain of its buildings, including Guri Guksa, in connection with leasing of such buildings.
SK Broadband has entered into a leased line contract and a resale contract for fixed-line telecommunication services with SK Telecom.
As of March 31, 2021, Seoul Guarantee Insurance Company has provided a performance guarantee of Won 34,791 million to SK Broadband in connection with the performance of certain contracts and the repair of any defects, and Korea Content Financial Cooperative has provided a performance guarantee of Won 40,228 million in connection with the performance of certain contracts.
[SK Planet]
As of March 31, 2021, SK Planet has entered into revolving credit facilities of up to Won 17 billion with Shinhan Bank and KEB Hana Bank.
As of March 31, 2021, Seoul Guarantee Insurance Company has provided guarantees of Won 3,446 million in total to SK Planet in connection with the performance of certain contracts and curing of defects.
[ADT CAPS]
As of March 31, 2021, ADT CAPS has entered into the following agreements with financial institutions, including loan agreements:
(Unit: in millions of Won) | ||||||||||
Financial Institution | Type of Loan | Line of Credit | Amount Borrowed | |||||||
Shinhan Bank and others | Acquisition financing | 2,050,000 | 1,950,000 | |||||||
KEB Hana Bank | General | 5,000 | 5,000 | |||||||
KEB Hana Bank | General | 27,000 | 27,000 | |||||||
Shinhan Bank | Revolving credit | 15,000 | 15,000 |
As of March 31, 2021, ADT CAPS has been provided with the following material payment guarantees by other parties:
(Unit: in millions of Won) | ||||||||
Guarantor | Guarantee Details | Guaranteed Amount | ||||||
Seoul Guarantee Insurance Company | Defect performance guarantee, etc. | 26,296 | ||||||
Seoul Guarantee Insurance Company | Fidelity guarantee | 69,305 |
As of March 31, 2021, ADT CAPS has entered into an accounts receivable-backed loan agreement with a credit limit of Won 58,000 million (of which ADT CAPS has borrowed Won 36,265 million) and a letter of credit of Won 2,000 million with KEB Hana Bank in order to make purchase payments
As of March 31, 2021, ADT CAPS has entered into an accounts receivable-backed loan agreement with a credit limit of Won 25,000 million (of which ADT CAPS has borrowed Won 4,236 million) with Kookmin Bank in order to make purchase payments.
In connection with ADT CAPS’ long-term loan in aggregate amount of Won 2,050 billion, it has provided its shares of CAPSTEC and an early repayment management account with Shinhan Bank (account number: 100-033-127083) as collateral.
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[Dreamus Company]
As of March 31, 2021, there is one pending lawsuit against Dreamus Company (claim of Won 30 million). The management cannot reasonably predict the outcome of this case or its impact on the Company’s financial statements due to the uncertainty of the amount to be paid by the Company.
As of March 31, 2021, Seoul Guarantee Insurance Company has provided a guarantee of Won 256 million in connection with the performance and curing of defects under certain contracts for the benefit of the relevant customer of Dreamus Company.
Dreamus Company has entered into agreements with certain domestic and foreign companies for the implementation of designs and technologies in connection with product manufacturing, pursuant to which it is paying certain fees for the revenues generated from applicable products and the use of patents. The aggregate amount of such fees paid in the first quarter of 2021 and the fourth quarter of 2020 were Won 191 million and Won 234 million, respectively, which were included in its cost of sales and selling and administrative expenses.
[One Store]
As of March 31, 2021, details of the major payment guarantees received by One Store from third parties are as follows:
(Unit: in millions of Won) | ||||||||
Guarantor | Guarantee Details | Guaranteed Amount | ||||||
KEB Hana Bank | Miscellaneous Won payment guarantee | 100 | ||||||
Seoul Guarantee Insurance Company | | E-commerce (payment method guarantee | )
| 2,140 |
[Incross]
As of March 31, 2021, Incross has pledged the following assets:
(Unit: in millions of Won) | ||||||||||
Pledged Assets | Agreement Details | Amount | Pledgee | |||||||
Short-term financial instruments | | Guarantee of contract performance | | 10,900 | NAVER Corporation | |||||
5,894 | Kakao Corp. | |||||||||
250 | Smart Media Representative Co., Ltd. | |||||||||
1,500 | SK Broadband | |||||||||
100 | Paradise Hotel | |||||||||
1,080 | KT | |||||||||
748 | Kakao Games Corp. | |||||||||
739 | LG U+ | |||||||||
|
| |||||||||
Total |
| 21,21 | ]1 | |||||||
|
|
As of March 31, 2021, Incross has entered into the following loan or transaction limit agreements on a consolidated basis:
(Unit: in millions of Won) | ||||||||
Counterparty | Agreement Details | Line of Credit | ||||||
KEB Hana Bank | Loan for general funds | 2,000 | ||||||
Woori Bank | Loan for general funds | 2,000 | ||||||
Industrial Bank of Korea | Loan for general funds | 4,100 | ||||||
|
| |||||||
Total |
| 8,100 | ||||||
|
|
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As of March 31, 2021, Incross provides KT Skylife Co., Ltd. with performance guarantees related to the payment of media advertisement fees in connection with advertisement agent services. No actual amount under such guarantee has been provided as of March 31, 2021.
As of March 31, 2021, Seoul Guarantee Insurance Company has provided a guarantee of Won 120 million (Won 127 million as of December 31, 2020) in connection with the guarantee of contract performance related to Incross’ operations.
Pursuant to Article 530-3(1) of the Korean Commercial Code, Incross’ SP business was spun off into a newly established company pursuant to a special resolution of its general shareholders’ meeting on March 28, 2014, and pursuant to Article 530-9(1) of the Korean Commercial Code, Incross and the new spun-off company are jointly liable for the repayment of debt incurred prior to the spin-off.
[SK M&Service]
As of March 31, 2021, SK M&Service has entered into the following agreements with financial institutions, including loan agreements:
(Unit: in millions of Won) | ||||||||||
Financial Institution | Type of Loan | Line of Credit | Amount Borrowed | |||||||
KEB Hana Bank | KRW | 5,000 | — | |||||||
Korea Development Bank | KRW | 10,000 | — |
As of March 31, 2021, Seoul Guarantee Insurance Company has provided SK M&Service with a performance guarantee in the amount of Won 1,477 million and Shinhan Bank has provided SK M&Service with a Won payment guarantee in the amount of Won 100 million.
[SK Stoa]
As of March 31, 2021, Kookmin Bank has provided a payment guarantee of Won 1.2 billion in connection with e-commerce transaction debt.
As of March 31, 2021, SK Stoa has entered into revolving credit facility of Won 10.0 billion with KEB Hana Bank.
3. Status of Sanctions, etc.
[SK Telecom]
Date | Authority | Subject of Action | Sanction | Reason and the Relevant | Status of | Company’s | ||||||
Mar. 20, 2019 | KCC | SK Telecom | Decision of 14th KCC Meeting of 2019
• Correctional order
• Fine of Won 975 million | Payment of subsidies exceeding 115% limit by dealers; payment of discriminatory subsidies by dealers; inducement of such payments in connection with operation of online business channels (Articles 4-5, 3-1(1) and 9-3 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; implemented compliance monitoring of online sales guidelines; revised online request system |
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Date | Authority | Subject of Action | Sanction | Reason and the Relevant | Status of | Company’s | ||||||
June 26, 2019 | KCC | SK Telecom | Decision of 31st KCC Meeting of 2019
• Correctional order
• Fine of Won 231 million | Refusal or delay of termination of user contract without just cause (Article 50-1(5) of the Telecommunications Business Act; Article 42-1(5) of the Enforcement Decree) | Decision confirmed; payment of fine and implementation of correctional order completed | Addressed issues discovered during investigation, such as outbound contact with customers regarding termination without customer consent | ||||||
July 9, 2019 | KCC | SK Telecom | Decision of 33rd KCC Meeting of 2019
• Correctional order
• Fine of Won 1.5 million | Failure to maintain subsidies without change for a minimum period of seven days (Article 4-3 of the MDDIA) | Decision confirmed; report on implementation of correctional order and payment of fine completed | Implemented improvements to work procedures (announce subsidies separately from public announcements on official website in case of notice of subsidies during pre-order period) | ||||||
June 4, 2020 | KCC | SK Telecom | Decision of 33rd KCC Meeting of 2020
• Correctional order
• Fine of Won 4 million | Obtaining consent from users for collection of personal location information through new contracts for mobile phones with material omissions instead of applicable terms of use for location information business (Article 18-1 of the Location Information Act and Article 22 of Enforcement Decree) | Decision confirmed; payment of fine and implementation of correctional order completed | Provided training to persons responsible for location information management, including representatives, and personnel handling location information | ||||||
July 8, 2020 | KCC | SK Telecom | Decision of 40th KCC Meeting of 2020
• Correctional order and submission of report
• Fine of Won 22.3 billion | Payment of subsidies exceeding 115% limit by dealers; payment of unreasonably discriminatory subsidies based on subscription type and rate plan; selection of certain dealers and instruction to and inducement of such subsidies by such dealers (Articles 3-1, 4-5 and 9-3 of the MDDIA) | Decision confirmed; payment of fine completed; implementation plan and report on implementation of correctional order submitted | Immediately ceased such activities; promoted measures to prevent recurrence, such as operation of voluntary consultative body regarding illegal online postings, standardization of incentive instructions/forms, establishment of record management system, development of monitoring activities of online retailers and expansion of the electronic subscription system |
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Date | Authority | Subject of Action | Sanction | Reason and the Relevant | Status of | Company’s Measures | ||||||
Sept. 9, 2020 | KCC | SK Telecom | Decision of 49th KCC Meeting of 2020
• Correctional order and submission of report
• Fine of Won 76 million | False, exaggerated or deceptive advertising through offline and online channels that could potentially mislead users regarding key information about bundled products, such as component products and discount details, to induce subscription (Article 50(1)-5 of the Telecommunications Business Act and Article 42(1) of Enforcement Decree) | Decision confirmed; payment of completed and implementation plan submitted | Immediately ceased such activities; implemented improvements to work procedures such as designation of manager for false or exaggerated advertising of bundled products, regular self-monitoring, strengthening of evaluation and employee training of dealers/agents | ||||||
Feb. 3, 2021 | KCC | SK Telecom | Decision of 4th KCC Meeting of 2021
• Submission of statistical data pursuant to Article 30 of the Location Information Act
• Establishment and submission of recurrence prevention plan
• Fine of Won 4.5 million | Delay of submission of semi-annual data on personal location information request and provision to the National Assembly’s Science, ICT, Broadcasting and Communications Committee on four occasions (Article 30(2) of the Location Information Act, Article 30(4) of Enforcement Decree) | Decision confirmed; receipt for payment of fine issued; recurrence prevention plan submitted | Specify roles and responsibilities for compiling/sending statistical data to KCC and National Assembly; establish system for submission process (within 15 days after end of second quarter); include relevant information in transition documents to prevent omission in connection with personnel/organizational change | ||||||
Mar. 18, 2021 | Fair Trade Commission (“FTC”) | SK Telecom | Decision of FTC Meeting (No. 2021-75)
• Correctional order (prohibition order against future actions) • Fine of Won 3,198 million | Although SK Telecom and SK Broadband believe that they allocated sales commissions for sales of IPTV-bundled plans based on reasonable standard, FTC determined that SK Telecom unfairly supported SK Broadband by paying for part of the sales commissions payable by SK Broadband (Article 23-1(7) of the Monopoly Regulation and Fair Trade Act) | On April 28, 2021, SK Telecom filed an administrative proceeding and applied for suspension of execution of the FTC decision (service of process delivered on March 30, 2021) | To properly allocate sales commissions in accordance with court’s decision; strengthen compliance activities |
[SK Broadband]
Date | Reason | Sanction | Relevant Law | Status of Implementation | Company’s Measures | |||||
January 23, 2019 | Failure to satisfy approval renewal conditions, including implementation of 2017 network investment plan | Correctional order | Article 99-1 of the Broadcast Act | Submitted correctional measures and implementation plan | Compliance with correctional order | |||||
February 25, 2019 | Failure to accurately report the number of high-speed Internet subscribers | Correctional order (for violation of the Telecommunications Business Act related to a misrepresentation of statistics) and fine of Won 2.8 million | Article 88-1, Article 92-1 and Article 104-5(17) of the Telecommunications Business Act | Submitted plans for implementation of correctional order, including improvement of relevant business procedures | Implement the correctional order and pay the fine |
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Date | Reason | Sanction | Relevant Law | Status of | Company’s Measures | |||||
March 15, 2019 | Failure to establish service rejection procedures against spammers | Fine of Won 4.8 million for breach of restrictions on rendering information transmission services | Articles 50-4 and 76 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. and Article 74 of its Enforcement Decree | Implemented improvements to advertisement transmission related activities and paid the fine (April 2018) | Implement procedures for denying services to spammers | |||||
June 13, 2019 | Provision of unfair benefits to related parties of Taekwang Group affiliates | Prosecution | Article 23-2 of the Monopoly Regulation and Fair Trade Act | Criminal investigation pending | Expected to be disposed as no right of arraignment due to merger | |||||
June 26, 2019 | Delaying, rejecting or restricting termination of user contracts without just cause | Correctional order (corrective measures for damaging users’ interests by restricting termination of high-speed Internet and bundled services) | Article 50-1(5) of the Telecommunications Business Act and Article 42-1(5) of its Enforcement Decree | Made an official announcement about having received the correctional order, improved operating procedures and paid the fine (Won 165 million). | Implement the correctional order and pay the fine | |||||
July 29, 2019 | Substantially restricting competition in a bidding process for a public sector-only network project by agreeing on the winning bidder, bidding participants and the bidding price in advance (SK Broadband was the first to voluntarily report the act of collusion and was granted exemption from applicable sanctions) | Correctional order (for unjustly restricting competition while participating in a bid for a public sector-only circuit project of public agencies) and fine of Won 32.7 million (SK Broadband was ultimately exempted from both the correctional order and the fine) | Article 19-1(3), Article 19-1(8) and Article 22-2(1)(2) of the Monopoly Regulation and Fair Trade Act, and Article 33 and Article 35-1 of its Enforcement Decree | Not applicable due to exemption | Conduct legal education regarding collusive bidding (July 1, 2019 to July 19, 2019) and establish measures to prevent recurrence, including an internal reporting channel related to collusion and a fast-track system for legal advice on related matters | |||||
August 28, 2019 | Provision of unfair benefits to related parties of Taekwang Group affiliates | Correctional order and fine (Tbroad: Won 177 million; Tbroad Dongdaemun: Won 4 million; Tbroad Nowon: Won 1 million; KDMC: Won 2 million) | Article 23-2 of the Monopoly Regulation and Fair Trade Act | Paid the fine | Administrative proceedings pending |
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Date | Reason | Sanction | Relevant Law | Status of Implementation | Company’s Measures | |||||
September 30, 2019 | Engaging in collusive bidding in public sector-only network project auctions from 2015 to 2017 | Prohibition from bidding in public sector auctions for three months | Article 76-1 of the Enforcement Decree of the Act on Contracts to which the State is a Party | Administrative proceedings withdrawn; three-month prohibition in effect beginning April 17, 2020 | Conduct legal education regarding collusive bidding (July 1, 2019 to July 19, 2019) and | |||||
November 29, 2019 | Substantially restricting competition in an auction for selection of a mobile messaging service provider by agreeing on the winning bidder in advance, and either intentionally participating or restraining from participating in the bid so that such agreed-upon bidder can win the bid (SK Broadband was the second to voluntarily report the act of collusion and was granted a reduction in fine from Won 301 million to Won 188 million) | Correctional order (for unjustly restricting competition while participating in a bid to be selected as a mobile messaging service provider for the Public Procurement Service) and fine of Won 188 million | Article 19-1(8), Article 21, Article 22, Article 22-2(1)(2), Article 55-3 of the Monopoly Regulation and Fair Trade Act and Article 9, Article 33, Article 35-1, Article 61 and Appendix 2 of its Enforcement Decree | Paid the fine | establish measures to prevent recurrence, including an internal reporting channel related to collusion and a fast-track system for legal advice on related matters | |||||
December 9, 2019 | Failure to satisfy approval renewal condition (implementation of 2018 plan) | Correctional order | Article 99-1 of the Broadcast Act | Submitted corrective action and implementation plan | Compliance with correctional order | |||||
December 9, 2019 | Violation of disclosure rules regarding corporate group status of five Taekwang group companies | Fine of Won 8 million | Articles 11-4 and 69-2(1) of the Monopoly Regulation and Fair Trade Act | Paid the fine | — | |||||
January 13, 2020 | Correctional order to prevent the post-merger entity from engaging in activities that may restrict competition in the pay TV market | Correctional order (prohibiting acts of restricting competition, such as unilaterally raising prices, reducing the number of channels and inducing switch to high-priced products, based on post-merger market share) | Articles 7-1 and 16-1 of the Monopoly Regulation and Fair Trade Act | Submitted implementation plans (approved by Korea Fair Trade Commission) | Implement implementation plans | |||||
January 15, 2020 | Failure to prepare and submit the Telecommunications Business Report for the year ended December 31, 2018 in compliance with the requirements under the Regulations on Accounting and Reporting of Telecommunications Businesses and the Accounting Classification Standards of Telecommunications Businesses, as such report contained errors in the classification of assets, income and expenses | Correctional order to amend its business report for the year ended December 31, 2018 to correct errors and submit it to the MSIT and fine of Won 79 million | Article 49 of the Telecommunications Business Act | Submitted the amended business report on February 3, 2020 and paid the fine on February 7, 2020 | Improve work procedures to prevent errors in the future |
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Date | Reason | Sanction | Relevant Law | Status of Implementation | Company’s Measures | |||||
January 16, 2020 | Failure to prepare and submit the Telecommunications Business Report for the year ended December 31, 2018 in compliance with the requirements under the Regulations on Accounting and Reporting of Telecommunications Businesses and the Accounting Classification Standards of Telecommunications Businesses, as such report contained errors in the classification of assets, income and expenses | Correctional order to amend its business report for the year ended December 31, 2018 to correct errors and submit it to the MSIT and fine of Won 13 million | Article 49 of the Telecommunications Business Act | Submitted the amended business report on January 31, 2020 and paid the fine on February 10, 2020 | Improve work procedures to prevent errors in the future | |||||
May 1, 2020 | Failure to submit monthly broadcasting results | Fine of Won 6 million | Article 83 of the Broadcast Act and Article 16 of the Regulation of Violations of Public Order Act | Paid the fine | — | |||||
September 9, 2020 | False, exaggerated or deceptive advertising of key information about bundled products, such as component products, discount rate or amount and termination fee, to induce subscription | Correctional order (to improve work procedures) and fine of Won 251 million | Article 50(1)-5 of the Telecommunications Business Act and Article 42(1) of Enforcement Decree) | To implement correctional order after receipt | Improve work procedures and pay fines | |||||
October 22, 2020 | 1. Unilateral change of fee payment criteria (provision of disadvantage)
2. Coercion of purchase of thrift phones (coercion of purchase)
3. Coercion of change of ownership of product (extortion of economic benefit) | Correctional order (injunction and notice) and fine of Won 351 million | Article 23(1)-4 of the Monopoly Regulation and Fair Trade Act Articles 7(1) and 9(1) of the Fair Agency Transactions Act | Administrative proceeding | Improve work procedures to prevent errors in the future | |||||
December 11, 2020 | Notification of administrative measures regarding violation of the Broadcast Act due to failure to satisfy program provider fee allocation criteria as approval renewal condition | Correctional order | Article 99-1 of the Broadcast Act | — | Compliance with correctional order |
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December 21, 2020 | Failure to prepare and submit the Telecommunications Business Report for the year ended December 31, 2019 in compliance with the requirements under the Regulations on Accounting and Reporting of Telecommunications Businesses and the Accounting Classification Standards of Telecommunications Businesses, as such report contained errors in the classification of assets, income and expenses | Correctional order to amend its business report for the year ended December 31, 2019 to correct errors and submit it to the MSIT and fine of Won 101 million | Article 49 of the Telecommunications Business Act | Submitted the amended business report on January 15, 2021 and paid the fine on January 25, 2021 | Improve work procedures to prevent errors in the future | |||||
December 21, 2020 | Failure to prepare and submit the Telecommunications Business Report for the year ended December 31, 2019 in compliance with the requirements under the Regulations on Accounting and Reporting of Telecommunications Businesses and the Accounting Classification Standards of Telecommunications Businesses, as such report contained errors in the classification of assets, income and expenses | Correctional order to amend its business report for the year ended December 31, 2019 to correct errors and submit it to the MSIT and fine of Won 11 million | Article 49 of the Telecommunications Business Act | Submitted the amended business report on January 15, 2021 and paid the fine on January 25, 2021 | Improve work procedures to prevent errors in the future | |||||
February 16, 2021 | Failure to place sponsorship notice in the center during public interest campaign broadcasting | Fine of Won 2.8 million | Article 16 of the Regulation of Violations of Public Order Act | Paid the fine | — | |||||
March 29, 2021 | Although SK Telecom and SK Broadband believe that they allocated sales commissions for sales of IPTV-bundled plans based on reasonable standard, FTC determined that SK Telecom unfairly supported SK Broadband by paying for part of the sales commissions payable by SK Broadband | Correctional order and fine of Won 3,198 million | Article 23-1(7) of the Monopoly Regulation and Fair Trade Act | On April 28, 2021, SK Telecom filed an administrative proceeding and applied for suspension of execution of the FTC decision (service of process delivered on March 30, 2021) | To properly allocate sales commissions in accordance with court’s decision; strengthen compliance activities |
[One Store]
• | Date: December 18, 2020 (notice date) |
• | Sanction: One Store received a fine of Won 6.4 million. |
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• | Reason and the Relevant Law: Violated Article 11-3 and Article 69-2 of the Monopoly Regulation and Fair Trade Act and regulations on disclosure of important matters by unlisted companies, etc. by reporting a 12.8% decrease in share ownership by the largest shareholder as of November 14, 2019 on April 9, 2020, after the due date of November 21, 2019. |
• | Status of Implementation: Paid the fine (January 29, 2021). |
• | Company’s Measures: Close review and monitoring of disclosure obligations to prevent recurrence of violation. |
4. Use of Direct Financing
A. | Use of Proceeds from Public Offerings |
[SK Telecom]
(Unit: in millions of Won) | ||||||||||||||||||
Category | Bond Series | Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference | |||||||||||||
Use | Amount | Use | Amount | |||||||||||||||
Corporate bond | 80th | January 15, 2021 | Repayment of debt | 310,000 | Repayment of debt | 310,000 | — | |||||||||||
Corporate bond | 79th | October 19, 2020 | Repayment of debt | 290,000 | Repayment of debt | 290,000 | — | |||||||||||
Corporate bond | 78th | January 14, 2020 | Working capital | 360,000 | Working capital | 360,000 | — | |||||||||||
Corporate bond | 78th | January 14, 2020 | Repayment of debt | 60,000 | Repayment of debt | 60,000 | — | |||||||||||
Corporate bond | 77th | October 22, 2019 | Working capital | 400,000 | Working capital | 400,000 | — | |||||||||||
Corporate bond | 76th | July 29, 2019 | Working capital | 70,000 | Working capital | 70,000 | — | |||||||||||
Corporate bond | 76th | July 29, 2019 | Repayment of debt | 330,000 | Repayment of debt | 330,000 | — | |||||||||||
Corporate bond | 75th | March 6, 2019 | Frequency usage right payments | 400,000 | Frequency usage right payments | 400,000 | — |
[SK Broadband]
(Unit: in millions of Won) | ||||||||||||||||||||||||||||
Category | Bond Series | Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference | |||||||||||||||||||||||
Use | Amount | Use | Amount | |||||||||||||||||||||||||
Corporate bond | | Series 47-1 |
| March 26, 2019 | | Repayment of debt (210,000) | | 50,000 | | Repayment of debt (210,000) | | 210,000 | — | |||||||||||||||
Corporate bond | | Series 47-2 |
| March 26, 2019 | 160,000 | — | ||||||||||||||||||||||
Corporate bond | | Series 48-1 |
| September 24, 2019 | | -Repayment of debt (186,200) -Working | | 80,000 | | -Repayment of debt (186,200) -Working | | 230,000 | — | |||||||||||||||
Corporate bond | | Series 48-2 | | September 24, 2019 | 100,000 | |||||||||||||||||||||||
Corporate bond | | Series 48-3 | | September 24, 2019 | 50,000 | |||||||||||||||||||||||
Corporate bond | | Series 49-1 | | June 11, 2020 | | -Repayment of debt (159,200) -Working | | 100,000 | | -Repayment of debt (159,200) -Working | | 200,000 | — | |||||||||||||||
Corporate bond | | Series 49-2 | | June 11, 2020 | 100,000 | |||||||||||||||||||||||
Corporate bond | | Series 50 | | September 25, 2020 | | Repayment of debt (160,000) | | 160,000 | | Repayment of debt (160,000) | | 160,000 | — |
* | Commercial papers and foreign bonds that do not require securities reports in Korea have been omitted. |
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B. | Use of Proceeds from Private Offerings |
[Dreamus Company]
(As of March 31, 2021) | (Unit: in millions of Won) | |||||||||||
Classification | Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference | ||||||||
Use | Amount | Use | Amount | |||||||||
Capital increase through third-party allotment (No. 4) | August 10, 2018 | Strengthening of contents business and establishment of infrastructure related to music industry | 70,000 | Operating expenses for music business and investment in contents | 70,000 | — |
C. | Material Events Subsequent to the Reporting Period |
(1) On April 14, 2021, the Company announced that it is considering a potential vertical spin-off and that any decision regarding the spin-off, if any, is expected to be made in the first half of 2021 and be disclosed at such time. For more information, see the report on “Consideration of Potential Horizontal Spin-off” filed on April 14, 2021.
(2) On May 6, 2021, the Company canceled 10.76% of its total number of issued shares. The total number of issued shares decreased from 80,745,711 shares to 72,060,143 shares. See the report on “Cancellation of Treasury Shares” filed on May 4, 2021 for more information.
(3) On March 25, 2021, the Board of Directors resolved to make an additional equity investment of Won 100 billion in Content Wavve Co., Ltd., a related party of the Company. The investment was completed on April 13, 2021.
(4) Decision on capital increase of Dreamus Company
① Date of the resolution of the board of directors: April 30, 2021
② Details
• | Type and amount of new shares: 13,135,673 preferred shares |
• | Amount: Won 70 billion |
• | Issue price: Won 5,329 per share |
• | Expected issue date: June 16, 2021 |
(5) Dreamus Company’s acquisition of bonds
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On May 13, 2021, the board of directors of Dreamus Company resolved to acquire FNC Investment’s unsecured convertible bonds in the amount of Won 20 billion through private placement.
(6) On April 1, 2021, T Map Mobility made a contribution-in kind of its T map Taxi business to UT LLC, a joint venture with Uber B.V.
(7) Pursuant to the resolution of the board of directors on April 14, 2021, T Map Mobility issued new shares (676,330 Series A shares) by third-party allotment in order to increase its capital, all of which were allotted to Uber Singapore Technology Pte. Ltd. The subscription date was April 15, 2021.
(8) On April 8, 2021, the board of directors of T Map Mobility resolved to undertake a capital increase by third-party allotment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SK Telecom Co., Ltd. | ||
(Registrant) | ||
By: /s/ Joongsuk Oh | ||
(Signature) | ||
Name: | Joongsuk Oh | |
Title: | Senior Vice President |
Date: June 15, 2021
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SK TELECOM CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Financial Statements
(Unaudited)
March 31, 2021 and 2020
(With Independent Auditors’ Review Report Thereon)
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Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
SK Telecom Co., Ltd.:
Reviewed financial statements
We have reviewed the accompanying condensed consolidated interim financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of March 31, 2021, the condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2021 and 2020, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034, Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ review responsibility
Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared fairly, in all material respects, in accordance with K-IFRS No.1034, Interim Financial Reporting.
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Other matters
The consolidated statement of financial position of the Group as of December 31, 2020, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 11, 2021, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2020, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.
The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.
KPMG Samjong Accounting Corp.
Seoul, Korea
May 14, 2021
This report is effective as of May 14, 2021, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
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SK TELECOM CO., LTD. (the “Parent Company”) AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF MARCH 31, 2021, AND DECEMBER 31, 2020, AND
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2021 AND 2020
The accompanying condensed consolidated interim financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Parent Company.
Park, Jung-Ho
Chief Executive Officer
SK TELECOM CO., LTD.
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SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Financial Position
As of March 31, 2021 and December 31, 2020
(In millions of won) | Note | March 31, 2021 | December 31, 2020 | |||||||||
Assets |
| |||||||||||
Current Assets: |
| |||||||||||
Cash and cash equivalents | 28,29 | 1,369,653 | ||||||||||
Short-term financial instruments | 28,29,31 | 1,348,982 | 1,426,952 | |||||||||
Short-term investment securities | 9,28,29 | 108,760 | 150,392 | |||||||||
Accounts receivable – trade, net | 5,28,29,30 | 2,213,365 | 2,188,893 | |||||||||
Short-term loans, net | 5,28,29,30 | 77,943 | 97,464 | |||||||||
Accounts receivable – other, net | 3,5,28,29,30,31 | 1,164,322 | 979,044 | |||||||||
Contract assets | 7,29 | 112,854 | 100,606 | |||||||||
Prepaid expenses | 3,6 | 2,158,281 | 2,128,349 | |||||||||
Prepaid income taxes | 26 | 656 | 1,984 | |||||||||
Derivative financial assets | 28,29 | 8,704 | 8,704 | |||||||||
Inventories, net | 8 | 221,521 | 171,443 | |||||||||
Non-current assets held for sale | 33 | 35,280 | — | |||||||||
Advanced payments and others | 3,5,28,29,30 | 183,194 | 151,602 | |||||||||
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|
|
| |||||||||
8,865,201 | 8,775,086 | |||||||||||
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| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 28,29 | 893 | 893 | |||||||||
Long-term investment securities | 9,28,29 | 1,914,573 | 1,648,837 | |||||||||
Investments in associates and joint ventures | 11 | 14,530,701 | 14,354,113 | |||||||||
Property and equipment, net | 3,12,13,30,31,33 | 12,900,472 | 13,377,077 | |||||||||
Goodwill | 10 | 3,357,473 | 3,357,524 | |||||||||
Intangible assets, net | 14 | 4,239,876 | 4,436,194 | |||||||||
Long-term contract assets | 7,29 | 50,557 | 47,675 | |||||||||
Long-term loans, net | 5,28,29,30 | 29,442 | 40,233 | |||||||||
Long-term accounts receivable – other | 3,5,28,29,30,31 | 292,834 | 332,803 | |||||||||
Long-term prepaid expenses | 3,6 | 1,086,614 | 1,063,711 | |||||||||
Guarantee deposits | 3,5,28,29,30 | 174,861 | 172,474 | |||||||||
Long-term derivative financial assets | 28,29 | 202,144 | 155,991 | |||||||||
Deferred tax assets | 26 | 73,438 | 105,088 | |||||||||
Defined benefit assets | 18 | 557 | 3,557 | |||||||||
Other non-current assets | 5,28,29 | 41,831 | 35,701 | |||||||||
|
|
|
| |||||||||
38,896,266 | 39,131,871 | |||||||||||
|
|
|
| |||||||||
Total Assets |
| 47,906,957 | ||||||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
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SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Financial Position, Continued
As of March 31, 2021 and December 31, 2020
(In millions of won) | Note | March 31, 2021 | December 31, 2020 | |||||||||
Liabilities and Shareholders’ Equity |
| |||||||||||
Current Liabilities: |
| |||||||||||
Accounts payable – trade | 28,29,30 | 372,909 | ||||||||||
Accounts payable – other | 28,29,30 | 2,269,621 | 2,484,466 | |||||||||
Withholdings | 28,29,30 | 1,577,907 | 1,410,239 | |||||||||
Contract liabilities | 7 | 230,723 | 229,892 | |||||||||
Accrued expenses | 3,28,29 | 1,435,161 | 1,554,889 | |||||||||
Income tax payable | 26 | 291,400 | 219,766 | |||||||||
Derivative financial liabilities | 28,29 | 42 | 77 | |||||||||
Provisions | 3,17,31 | 67,849 | 69,363 | |||||||||
Short-term borrowings | 15,28,29 | 109,998 | 109,998 | |||||||||
Current installments of long-term debt, net | 15,28,29 | 1,136,382 | 939,237 | |||||||||
Current installments of long-term payables – other | 16,28,29 | 219,249 | 424,600 | |||||||||
Lease liabilities | 3,28,29,30 | 423,979 | 359,936 | |||||||||
Other current liabilities | 719 | 2,595 | ||||||||||
|
|
|
| |||||||||
8,099,553 | 8,177,967 | |||||||||||
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|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 15,28,29 | 7,589,082 | 7,690,169 | |||||||||
Long-term borrowings, excluding current installments, net | 15,28,29,31 | 2,024,062 | 1,979,261 | |||||||||
Long-term payables – other | 16,28,29 | 938,563 | 1,142,354 | |||||||||
Long-term lease liabilities | 3,28,29,30 | 1,030,386 | 1,076,841 | |||||||||
Long-term contract liabilities | 7 | 29,993 | 30,704 | |||||||||
Defined benefit liabilities | 18 | 221,732 | 154,944 | |||||||||
Long-term derivative financial liabilities | 28,29 | 355,708 | 375,083 | |||||||||
Long-term provisions | 3,17 | 78,037 | 81,514 | |||||||||
Deferred tax liabilities | 3,26 | 2,740,839 | 2,709,075 | |||||||||
Other non-current liabilities | 3,28,29,30 | 84,413 | 92,802 | |||||||||
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|
| |||||||||
15,092,815 | 15,332,747 | |||||||||||
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|
| |||||||||
Total Liabilities |
| 23,192,368 | 23,510,714 | |||||||||
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|
| |||||||||
Shareholders’ Equity: | ||||||||||||
Share capital | 1,19 | 44,639 | 44,639 | |||||||||
Capital surplus and others | 19,20 | 640,215 | 677,203 | |||||||||
Retained earnings | 3,21 | 22,875,819 | 22,981,913 | |||||||||
Reserves | 22 | 336,501 | 40,139 | |||||||||
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| |||||||||
Equity attributable to owners of the Parent Company |
| 23,897,174 | 23,743,894 | |||||||||
Non-controlling interests |
| 671,925 | 652,349 | |||||||||
|
|
|
| |||||||||
Total Shareholders’ Equity |
| 24,569,099 | 24,396,243 | |||||||||
|
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|
| |||||||||
Total Liabilities and Shareholders’ Equity |
| 47,906,957 | ||||||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
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SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Income
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | Note | March 31, 2021 | March 31, 2020 | |||||||||
Operating revenue: | 3,4,30 | |||||||||||
Revenue | 4,450,590 | |||||||||||
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| |||||||||
Operating expenses: | 3,30 | |||||||||||
Labor | 816,409 | 742,769 | ||||||||||
Commission | 6 | 1,391,414 | 1,297,968 | |||||||||
Depreciation and amortization | 3,4 | 996,482 | 984,815 | |||||||||
Network interconnection | 193,937 | 194,970 | ||||||||||
Leased lines | 3 | 74,628 | 66,253 | |||||||||
Advertising | 75,217 | 73,954 | ||||||||||
Rent | 3 | 46,017 | 44,533 | |||||||||
Cost of goods sold | 8 | 388,648 | 348,971 | |||||||||
Others | 23 | 408,928 | 395,059 | |||||||||
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| |||||||||
4,391,680 | 4,149,292 | |||||||||||
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| |||||||||
Operating profit | 3,4 | 388,781 | 301,298 | |||||||||
Finance income | 3,4,25 | 66,530 | 38,999 | |||||||||
Finance costs | 3,4,25 | (100,373 | ) | (112,373 | ) | |||||||
Gain relating to investments in associates and joint ventures, net | 4,11 | 322,455 | 140,895 | |||||||||
Other non-operating income | 3,4,24 | 20,038 | 16,619 | |||||||||
Other non-operating expenses | 3,4,24 | (13,594 | ) | (17,118 | ) | |||||||
|
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| |||||||||
Profit before income tax | 4 | 683,837 | 368,320 | |||||||||
Income tax expense | 3,26 | 111,862 | 62,368 | |||||||||
|
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|
| |||||||||
Profit for the period |
| 305,952 | ||||||||||
|
|
|
| |||||||||
Attributable to: | ||||||||||||
Owners of the Parent Company | 308,545 | |||||||||||
Non-controlling interests | 13,710 | (2,593 | ) | |||||||||
Earnings per share | 3,27 | |||||||||||
Basic earnings per share (in won) | 4,168 | |||||||||||
Diluted earnings per share (in won) | 7,789 | 4,168 |
See accompanying notes to the condensed consolidated interim financial statements.
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SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Comprehensive Income
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | Note | March 31, 2021 | March 31, 2020 | |||||||||
Profit for the period |
| 305,952 | ||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit liabilities | 18 | (18,782 | ) | (23,050 | ) | |||||||
Net change in other comprehensive loss of investments in associates and joint ventures | 11,22 | (1,503 | ) | (991 | ) | |||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income | 22 | 169,679 | (20,269 | ) | ||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||
Net change in other comprehensive income of investments in associates and joint ventures | 11,22 | 114,619 | 110,778 | |||||||||
Net change in unrealized fair value of derivatives | 22 | (3,103 | ) | 4,581 | ||||||||
Foreign currency translation differences for foreign operations | 22 | 16,131 | 18,662 | |||||||||
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|
|
| |||||||||
Other comprehensive income for the period, net of taxes |
| 277,041 | 89,711 | |||||||||
Total comprehensive income |
| 395,663 | ||||||||||
|
|
|
| |||||||||
Total comprehensive income (loss) attributable to: | ||||||||||||
Owners of the Parent Company | 398,314 | |||||||||||
Non-controlling interests | 13,112 | (2,651 | ) |
See accompanying notes to the condensed consolidated interim financial statements.
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SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Changes in Equity
For the three-month periods ended March 31, 2021 and 2020
Attributable to owners | Non-controlling interests | Total equity | ||||||||||||||||||||||||||||||
(In millions of won) | Note | Share capital | Capital surplus (deficit) and others | Retained earnings | Reserves | Sub-total | ||||||||||||||||||||||||||
Balance, January 1, 2020 |
| 1,006,481 | 22,228,683 | (329,576 | ) | 22,950,227 | (133,293 | ) | 22,816,934 | |||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit (loss) for the period | — | — | 308,545 | — | 308,545 | (2,593 | ) | 305,952 | ||||||||||||||||||||||||
Other comprehensive income (loss) | 11,18,22 | — | — | (23,052 | ) | 112,821 | 89,769 | (58 | ) | 89,711 | ||||||||||||||||||||||
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— | — | 285,493 | 112,821 | 398,314 | (2,651 | ) | 395,663 | |||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | — | — | (658,228 | ) | — | (658,228 | ) | (5,765 | ) | (663,993 | ) | |||||||||||||||||||||
Share option | 20 | — | 32 | — | — | 32 | 615 | 647 | ||||||||||||||||||||||||
Interest on hybrid bonds | — | — | (3,692 | ) | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||
Changes in ownership in subsidiaries | — | (924 | ) | — | — | (924 | ) | (2,617 | ) | (3,541 | ) | |||||||||||||||||||||
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— | (892 | ) | (661,920 | ) | — | (662,812 | ) | (7,767 | ) | (670,579 | ) | |||||||||||||||||||||
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Balance, March 31, 2020 |
| 1,005,589 | 21,852,256 | (216,755 | ) | 22,685,729 | (143,711 | ) | 22,542,018 | |||||||||||||||||||||||
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Balance, January 1, 2021 |
| 677,203 | 22,981,913 | 40,139 | 23,743,894 | 652,349 | 24,396,243 | |||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the period | — | — | 558,265 | — | 558,265 | 13,710 | 571,975 | |||||||||||||||||||||||||
Other comprehensive income (loss) | 11,18,22 | — | — | (18,723 | ) | 296,362 | 277,639 | (598 | ) | 277,041 | ||||||||||||||||||||||
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— | — | 539,542 | 296,362 | 835,904 | 13,112 | 849,016 | ||||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | — | — | (641,944 | ) | — | (641,944 | ) | (5,763 | ) | (647,707 | ) | |||||||||||||||||||||
Share option | 20 | — | 47 | — | — | 47 | 216 | 263 | ||||||||||||||||||||||||
Interest on hybrid bonds | — | — | (3,692 | ) | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||
Acquisition of treasury shares | 19 | — | (72,982 | ) | — | — | (72,982 | ) | — | (72,982 | ) | |||||||||||||||||||||
Disposal of treasury shares | 19 | — | 29,642 | — | — | 29,642 | — | 29,642 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries | — | 6,305 | — | — | 6,305 | 12,011 | 18,316 | |||||||||||||||||||||||||
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— | (36,988 | ) | (645,636 | ) | — | (682,624 | ) | 6,464 | (676,160 | ) | ||||||||||||||||||||||
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Balance, March 31, 2021 |
| 640,215 | 22,875,819 | 336,501 | 23,897,174 | 671,925 | 24,569,099 | |||||||||||||||||||||||||
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See accompanying notes to the condensed consolidated interim financial statements.
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SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Cash Flows
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | Note | March 31, 2021 | March 31, 2020 | |||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the period | 305,952 | |||||||||||
Adjustments for income and expenses | 32 | 937,576 | 1,096,931 | |||||||||
Changes in assets and liabilities related to operating activities | 32 | (522,978 | ) | (346,172 | ) | |||||||
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986,573 | 1,056,711 | |||||||||||
Interest received | 9,034 | 9,233 | ||||||||||
Dividends received | 23 | 15 | ||||||||||
Interest paid | (69,616 | ) | (81,246 | ) | ||||||||
Income tax paid | (34,913 | ) | (2,030 | ) | ||||||||
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Net cash provided by operating activities | 891,101 | 982,683 | ||||||||||
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Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | 77,894 | — | ||||||||||
Decrease in short-term investment securities, net | 41,367 | 33,819 | ||||||||||
Collection of short-term loans | 43,047 | 28,835 | ||||||||||
Decrease in long-term financial instruments | — | 99 | ||||||||||
Proceeds from disposals of long-term investment securities | 14,681 | 6,948 | ||||||||||
Proceeds from disposals of investments in associates and joint ventures | 100,334 | — | ||||||||||
Proceeds from disposals of property and equipment | 2,401 | 2,121 | ||||||||||
Proceeds from disposals of intangible assets | 1,130 | 1,386 | ||||||||||
Collection of long-term loans | 1,246 | 1,213 | ||||||||||
Decrease in deposits | 1,879 | 10,918 | ||||||||||
Proceeds from settlement of derivatives | 403 | 85 | ||||||||||
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284,382 | 85,424 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term financial instruments, net | — | (111,209 | ) | |||||||||
Increase in short-term loans | (16,070 | ) | (37,824 | ) | ||||||||
Increase in long-term loans | (3,155 | ) | (1,930 | ) | ||||||||
Increase in long-term financial instruments | — | (90,290 | ) | |||||||||
Acquisitions of long-term investment securities | (15,018 | ) | (4,069 | ) | ||||||||
Acquisitions of investments in associates and joint ventures | (8,135 | ) | (9,113 | ) | ||||||||
Acquisitions of property and equipment | (755,139 | ) | (1,045,492 | ) | ||||||||
Acquisitions of intangible assets | (8,945 | ) | (21,295 | ) | ||||||||
Increase in deposits | (1,677 | ) | (4,730 | ) | ||||||||
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(808,139 | ) | (1,325,952 | ) | |||||||||
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Net cash used in investing activities | (1,240,528 | ) | ||||||||||
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See accompanying notes to the condensed consolidated interim financial statements.
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Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Cash Flows, Continued
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | Note | March 31, 2021 | March 31, 2020 | |||||||||
Cash flows from financing activities: |
| |||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from short-term borrowings, net | 339,381 | |||||||||||
Proceeds from issuance of debentures | 308,757 | 773,727 | ||||||||||
Proceeds from long-term borrowings | 50,000 | 597 | ||||||||||
Cash inflows from settlement of derivatives | — | 40,470 | ||||||||||
Transactions with non-controlling shareholders | 30,511 | — | ||||||||||
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389,268 | 1,154,175 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of long-term payable – other | (426,220 | ) | (426,275 | ) | ||||||||
Repayments of debentures | (280,000 | ) | (524,590 | ) | ||||||||
Repayments of long-term borrowings | (9,342 | ) | (9,313 | ) | ||||||||
Repayments of lease liabilities | (97,813 | ) | (94,093 | ) | ||||||||
Acquisition of treasury shares | (72,982 | ) | — | |||||||||
Transactions with non-controlling shareholders | (13,503 | ) | (3,660 | ) | ||||||||
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(899,860 | ) | (1,057,931 | ) | |||||||||
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Net cash provided by (used in) financing activities |
| (510,592 | ) | 96,244 | ||||||||
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| |||||||||
Net decrease in cash and cash equivalents |
| (143,248 | ) | (161,601 | ) | |||||||
Cash and cash equivalents at beginning of the period | 1,369,653 | 1,270,824 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | 4,934 | 8,543 | ||||||||||
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Cash and cash equivalents at end of the period |
| 1,117,766 | ||||||||||
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See accompanying notes to the condensed consolidated interim financial statements.
10
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity |
(1) | General |
SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications services in Korea. The head office of the Parent Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of March 31, 2021, the Parent Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Inc. (Formerly, SK Holdings Co., Ltd.) | 21,624,120 | 26.78 | ||||||
National Pension Service | 8,196,312 | 10.15 | ||||||
Institutional investors and other shareholders | 40,073,091 | 49.63 | ||||||
Kakao Co., Ltd. | 1,266,620 | 1.57 | ||||||
Treasury shares | 9,585,568 | 11.87 | ||||||
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80,745,711 | 100.00 | |||||||
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These condensed consolidated interim financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individually as “Group entity”). SK Inc. (Formerly, SK Holdings Co., Ltd.) is the ultimate controlling entity of the Parent Company.
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Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(2) | List of subsidiaries |
The list of subsidiaries as of March 31, 2021 and December 31, 2020 is as follows:
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Mar. 31, 2021 | Dec. 31, 2020 | ||||||||||
Subsidiaries owned by the Parent Company | SK Telink Co., Ltd. | Korea | Telecommunications and Mobile Virtual Network Operator service | 100.0 | 100.0 | |||||||||
SK Communications Co., Ltd. | Korea | Internet website services | 100.0 | 100.0 | ||||||||||
SK Broadband Co., Ltd. | Korea | Telecommunications services | 74.3 | 74.3 | ||||||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||||||
SERVICE ACE Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SERVICE TOP Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SK O&S Co., Ltd. | Korea | Base station maintenance service | 100.0 | 100.0 | ||||||||||
SK Telecom China Holdings Co., Ltd. | China | Investment (Holdings company) | 100.0 | 100.0 | ||||||||||
SK Global Healthcare Business Group, Ltd. | Hong Kong | Investment | 100.0 | 100.0 | ||||||||||
YTK Investment Ltd. | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
Atlas Investment | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
SKT Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
One Store Co., Ltd.(*2) | Korea | Telecommunications services | 48.4 | 52.1 | ||||||||||
SK Planet Co., Ltd. | Korea | Telecommunications services, system software development and supply services | 98.7 | 98.7 | ||||||||||
Eleven Street Co., Ltd.(*3) | Korea | E-commerce | 80.3 | 80.3 | ||||||||||
DREAMUS COMPANY | Korea | Manufacturing digital audio players and other portable media devices | 51.4 | 51.4 | ||||||||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.)(*4) | Korea | Information security service and unmanned security | 62.6 | 62.6 | ||||||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
id Quantique SA | Switzerland | Quantum information and communications service | 68.1 | 68.1 | ||||||||||
SK Telecom TMT Investment Corp. | USA | Investment | 100.0 | 100.0 | ||||||||||
FSK L&S Co., Ltd. | Korea | Freight and logistics consulting business | 60.0 | 60.0 | ||||||||||
Incross Co., Ltd.(*5) | Korea | Media representative business | 34.6 | 34.6 | ||||||||||
Happy Hanool Co., Ltd. | Korea | Service | 100.0 | 100.0 | ||||||||||
SK stoa Co., Ltd. | Korea | Other telecommunications retail business | 100.0 | 100.0 | ||||||||||
Broadband Nowon Co., Ltd.(*6) | Korea | Cable broadcasting services | 100.0 | 55.0 | ||||||||||
T map Mobility Co., Ltd. | Korea | Mobility business | 100.0 | 100.0 |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of March 31, 2021 and December 31, 2020 is as follows, Continued:
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Mar. 31, 2021 | Dec. 31, 2020 | ||||||||||
Subsidiaries owned by SK Planet Co., Ltd. | SK m&service Co., Ltd. | Korea | Database and Internet website service | 100.0 | 100.0 | |||||||||
SK Planet Global Holdings Pte. Ltd. | Singapore | Investment (Holdings company) | 100.0 | 100.0 | ||||||||||
SKP America LLC. | USA | Digital contents sourcing service | 100.0 | 100.0 | ||||||||||
K-net Culture and Contents Venture Fund | Korea | Capital investing in start-ups | 59.0 | 59.0 | ||||||||||
Subsidiaries owned by DREAMUS COMPANY | iriver Enterprise Ltd. | Hong Kong | Management of Chinese subsidiaries | 100.0 | 100.0 | |||||||||
iriver China Co., Ltd. | China | Sales and manufacturing of MP3 and 4 | 100.0 | 100.0 | ||||||||||
Dongguan iriver Electronics Co., Ltd. | China | Sales and manufacturing of e-book devices | 100.0 | 100.0 | ||||||||||
LIFE DESIGN COMPANY Inc. | Japan | Sale of goods in Japan | 100.0 | 100.0 | ||||||||||
Subsidiary owned by ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.) | SKinfosec Information Technology(Wuxi) Co., Ltd. | China | System software development and supply services | 100.0 | 100.0 | |||||||||
ADT CAPS Co., Ltd.(*4,7) | Korea | Unmanned security | — | 100.0 | ||||||||||
CAPSTEC Co., Ltd. | Korea | Manned security | 100.0 | 100.0 | ||||||||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | Korea | Operation of information and communications facility | 100.0 | 100.0 | |||||||||
Media s Co., Ltd.(*7) | Korea | Production and supply services of broadcasting programs | 100.0 | — | ||||||||||
Subsidiary owned by Quantum Innovation Fund I | Panasia Semiconductor Materials LLC. | Korea | Investment | 66.4 | 66,4 | |||||||||
Subsidiary owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 79.8 | 79.8 | |||||||||
Subsidiary owned by id Quantique SA | Id Quantique LLC | Korea | Quantum information and communications service | 100.0 | 100.0 | |||||||||
Subsidiaries owned by FSK L&S Co., Ltd. | FSK L&S(Shanghai) Co., Ltd. | China | Logistics business | 66.0 | 66.0 | |||||||||
FSK L&S(Hungary) Co., Ltd. | Hungary | Logistics business | 100.0 | 100.0 | ||||||||||
FSK L&S VIETNAM COMPANY LIMITED | Vietnam | Logistics business | 100.0 | 100.0 | ||||||||||
Subsidiaries owned by Incross Co., Ltd. | Infra Communications Co., Ltd. | Korea | Service operation | 100.0 | 100.0 | |||||||||
Mindknock Co., Ltd. | Korea | Software development | 100.0 | 100.0 | ||||||||||
Subsidiary owned by T map Mobility Co., Ltd. | UT LLC(*7) | Korea | Database and Internet website service | 100.0 | — | |||||||||
Others(*8) | SK Telecom Innovation Fund, L.P. | USA | Investment | 100.0 | 100.0 | |||||||||
SK Telecom China Fund I L.P. | Cayman Islands | Investment | 100.0 | 100.0 |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of March 31, 2021 and December 31, 2020 is as follows, Continued:
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company. |
(*2) | The ownership interest has changed due to unequal paid-in capital increase and third-party share option which was exercised for the three-month period ended March 31, 2021. Although the Parent Company owns less than 50% ownership of the investee, the management has determined that the Parent Company controls One Store Co., Ltd. as it has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders. |
(*3) | 80.3% of the shares issued by Eleven Street Co., Ltd. are owned by the Parent Company and 18.2% of redeemable convertible preferred shares with voting rights are owned by non-controlling shareholder. The Parent Company is obliged to guarantee dividend of at least 1% per annum of the preferred share’s issue price to the investor by the date on which Eleven Street Co., Ltd. is publicly listed or at the end of qualifying listing period, whichever occurs first. The present value of obligatory dividends amounting to |
(*4) | On March 4, 2021, SK Infosec Co., Ltd. merged with ADT CAPS Co., Ltd., a subsidiary of SK Infosec Co., Ltd., to improve management efficiency and changed its name to ADT CAPS Co., Ltd. |
(*5) | Although the Parent Company owns less than 50% of the investee, the management has determined that the Parent Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders’ meetings, and the fact that the Parent Company has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders. |
(*6) | The Parent Company acquired 513,000 shares (45%) of Broadband Nowon Co., Ltd. at |
(*7) | Details of changes in the consolidation scope for the three-month period ended March 31, 2021 are presented in note 1-(4). |
(*8) | Others are owned by Atlas Investment and another subsidiary of the Parent Company. |
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Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries |
Condensed financial information of the significant subsidiaries as of and for the three-month period ended March 31, 2021 is as follows:
(In millions of won) | As of March 31, 2021 | For the three-month period ended March 31, 2021 | ||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd. | 88,041 | 116,621 | 90,624 | 3,370 | ||||||||||||||||
Eleven Street Co., Ltd. | 1,013,148 | 563,007 | 450,141 | 131,304 | (6,550 | ) | ||||||||||||||
SK m&service Co., Ltd. | 148,558 | 91,904 | 56,654 | 53,474 | 1,878 | |||||||||||||||
SK Broadband Co., Ltd. | 5,708,606 | 3,013,996 | 2,694,610 | 968,597 | 51,198 | |||||||||||||||
K-net Culture and Contents Venture Fund | 377,682 | 65,896 | 311,786 | — | (1 | ) | ||||||||||||||
PS&Marketing Corporation | 460,250 | 247,739 | 212,511 | 368,030 | (125 | ) | ||||||||||||||
SERVICE ACE Co., Ltd. | 86,261 | 62,791 | 23,470 | 50,461 | 180 | |||||||||||||||
SERVICE TOP Co., Ltd. | 64,277 | 45,294 | 18,983 | 49,422 | 1,199 | |||||||||||||||
SK O&S Co., Ltd. | 81,490 | 47,112 | 34,378 | 56,567 | 318 | |||||||||||||||
SK Planet Co., Ltd. | 500,872 | 179,078 | 321,794 | 57,383 | (340 | ) | ||||||||||||||
DREAMUS COMPANY(*1) | 176,087 | 78,124 | 97,963 | 57,684 | 2,175 | |||||||||||||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.)(*2) | 3,098,794 | 2,771,032 | 327,762 | 350,497 | 4,902 | |||||||||||||||
One Store Co., Ltd. | 292,135 | 119,075 | 173,060 | 46,641 | (253 | ) | ||||||||||||||
Home & Service Co., Ltd. | 123,372 | 86,080 | 37,292 | 101,320 | 474 | |||||||||||||||
SK stoa Co., Ltd. | 108,050 | 76,185 | 31,865 | 72,392 | 3,372 | |||||||||||||||
FSK L&S Co., Ltd.(*3) | 70,204 | 36,166 | 34,038 | 69,133 | 2,682 | |||||||||||||||
Incross Co., Ltd.(*4) | 166,970 | 92,760 | 74,210 | 10,462 | 3,151 | |||||||||||||||
T map Mobility Co., Ltd. | 226,935 | 13,933 | 213,002 | 5,994 | (13,498 | ) |
(*1) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY. |
(*2) | The condensed financial information of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd and another subsidiary of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) and including profit and loss which ADT CAPS Co., Ltd. recognized prior to the merger. |
(*3) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and two other subsidiaries of FSK L&S Co., Ltd. |
(*4) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd. |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries, Continued |
Condensed financial information of the significant subsidiaries as of and for the year ended December 31, 2020 is as follows:
(In millions of won) | As of December 31, 2020 | 2020 | ||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd. | 60,702 | 116,170 | 351,334 | 18,010 | ||||||||||||||||
Eleven Street Co., Ltd. | 999,225 | 542,534 | 456,691 | 545,556 | (29,623 | ) | ||||||||||||||
SK m&service Co., Ltd. | 129,738 | 74,962 | 54,776 | 214,949 | 2,759 | |||||||||||||||
SK Broadband Co., Ltd. | 5,765,808 | 3,119,489 | 2,646,319 | 3,713,021 | 150,694 | |||||||||||||||
K-net Culture and Contents Venture Fund | 377,683 | 65,896 | 311,787 | — | (44,737 | ) | ||||||||||||||
PS&Marketing Corporation | 470,521 | 257,809 | 212,712 | 1,427,218 | (847 | ) | ||||||||||||||
SERVICE ACE Co., Ltd. | 96,258 | 71,890 | 24,368 | 206,612 | 2,905 | |||||||||||||||
SERVICE TOP Co., Ltd. | 69,496 | 51,584 | 17,912 | 195,479 | 2,592 | |||||||||||||||
SK O&S Co., Ltd. | 88,663 | 54,012 | 34,651 | 278,948 | 778 | |||||||||||||||
SK Planet Co., Ltd. | 536,981 | 214,846 | 322,135 | 276,462 | 1,305 | |||||||||||||||
DREAMUS COMPANY(*1) | 172,443 | 76,642 | 95,801 | 226,329 | (23,068 | ) | ||||||||||||||
SK Infosec Co., Ltd.(*2) | 2,927,396 | 2,550,936 | 376,460 | 1,327,150 | 14,227 | |||||||||||||||
One Store Co., Ltd. | 243,442 | 99,943 | 143,499 | 155,218 | 1,952 | |||||||||||||||
Home & Service Co., Ltd. | 124,197 | 88,740 | 35,457 | 397,754 | (20 | ) | ||||||||||||||
SK stoa Co., Ltd. | 107,982 | 79,339 | 28,643 | 268,693 | 17,154 | |||||||||||||||
FSK L&S Co., Ltd.(*3) | 66,117 | 35,192 | 30,925 | 205,623 | 3,022 | |||||||||||||||
Incross Co., Ltd.(*4) | 179,308 | 104,778 | 74,530 | 39,440 | 12,307 | |||||||||||||||
T map Mobility Co., Ltd. | 170,381 | 17,179 | 153,202 | — | (1,857 | ) |
(*1) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY. |
(*2) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd. and two other subsidiaries of SK Infosec Co., Ltd. and including profit and loss which Life Security & Holdings Co., Ltd. recognized prior to the merger. |
(*3) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and two other subsidiaries of FSK L&S Co., Ltd. |
(*4) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd. |
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Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(4) | Changes in subsidiaries |
1) | The list of subsidiaries that were newly included in consolidation for the three-month period ended March 31, 2021 is as follows: |
Subsidiary | Reason | |
Media s Co., Ltd. | Established by SK Broadband Co., Ltd. | |
UT LLC | Established by T map Mobility Co., Ltd. |
2) The list of subsidiary that was excluded from consolidation for the three-month period ended March 31, 2021 is as follows:
Subsidiary | Reason | |
ADT CAPS Co., Ltd. | Merged into ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the three-month period ended March 31, 2021 and as of and for the year ended December 31, 2020 are as follows: |
(In millions of won) | DREAMUS COMPANY | One Store Co., Ltd. | Eleven Street Co., Ltd. | ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.) | Incross Co., Ltd. | SK Broadband Co., Ltd. | ||||||||||||||||||
Ownership of non-controlling interests (%) | 48.6 | 51.1 | 18.2 | 37.4 | 54.6 | 24.9 | ||||||||||||||||||
As of March 31, 2021 | ||||||||||||||||||||||||
Current assets | 261,020 | 922,072 | 291,041 | 153,384 | 1,218,772 | |||||||||||||||||||
Non-current assets | 24,264 | 31,115 | 91,076 | 2,807,753 | 13,586 | 4,489,834 | ||||||||||||||||||
Current liabilities | (74,165 | ) | (112,998 | ) | (529,380 | ) | (415,949 | ) | (88,963 | ) | (1,310,180 | ) | ||||||||||||
Non-current liabilities | (3,959 | ) | (6,077 | ) | (33,627 | ) | (2,355,083 | ) | (3,797 | ) | (1,703,816 | ) | ||||||||||||
Net assets | 97,963 | 173,060 | 450,141 | 327,762 | 74,210 | 2,694,610 | ||||||||||||||||||
Fair value adjustment and others | — | — | (14,396 | ) | (1,189,445 | ) | — | (23,000 | ) | |||||||||||||||
Net assets on the consolidated financial statements | 97,963 | 173,060 | 435,745 | (861,683 | ) | 74,210 | 2,671,610 | |||||||||||||||||
Carrying amount of non-controlling interests | 48,310 | 88,849 | 80,526 | (322,269 | ) | 47,308 | 671,375 | |||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||
Revenue | 46,641 | 131,304 | 350,497 | 10,462 | 968,597 | |||||||||||||||||||
Profit (loss) for the period | 2,175 | (253 | ) | (6,550 | ) | 4,902 | 3,151 | 51,198 | ||||||||||||||||
Depreciation of the fair value adjustment and others | — | — | (99 | ) | (263 | ) | — | — | ||||||||||||||||
Profit (loss) for the period on the consolidated financial statements | 2,175 | (253 | ) | (6,649 | ) | 4,639 | 3,151 | 51,198 | ||||||||||||||||
Total comprehensive income (loss) | 2,029 | (269 | ) | (6,649 | ) | 4,706 | 3,151 | 48,291 | ||||||||||||||||
Profit (loss) attributable to non-controlling interests | 798 | (130 | ) | (1,229 | ) | 1,735 | 2,002 | 12,866 | ||||||||||||||||
Net cash provided by (used in) operating activities | 17,551 | (16,833 | ) | 52,169 | (2,891 | ) | 213,534 | |||||||||||||||||
Net cash provided by (used in) investing activities | (633 | ) | 135,084 | 31,861 | (61,834 | ) | (1,702 | ) | (222,978 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | (486 | ) | 29,509 | (3,624 | ) | (6,584 | ) | (3,775 | ) | (56,529 | ) | |||||||||||||
Effects of exchange rate changes on cash and cash equivalents | 1,078 | 4 | 354 | 282 | — | 121 | ||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | (21,361 | ) | 182,148 | 11,758 | (15,967 | ) | (8,368 | ) | (65,852 | ) | ||||||||||||||
Dividends declared to non-controlling interests | — | — | 11,515 | — | — |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the three-month period ended March 31, 2021 and as of and for the year ended December 31, 2020 are as follows, Continued: |
(In millions of won) | DREAMUS COMPANY | One Store Co., Ltd. | Eleven Street Co., Ltd. | ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.)(*) | Incross Co., Ltd. | SK Broadband Co., Ltd. | ||||||||||||||||||
Ownership of non-controlling interests (%) | 48.6 | 47.4 | 18.2 | 37.4 | 55.2 | 24.9 | ||||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||
Current assets | 215,672 | 896,828 | 306,520 | 165,668 | 1,179,743 | |||||||||||||||||||
Non-current assets | 26,165 | 27,770 | 102,397 | 2,620,876 | 13,640 | 4,586,065 | ||||||||||||||||||
Current liabilities | (72,762 | ) | (96,139 | ) | (508,427 | ) | (417,194 | ) | (101,065 | ) | (1,279,132 | ) | ||||||||||||
Non-current liabilities | (3,880 | ) | (3,804 | ) | (34,107 | ) | (2,133,742 | ) | (3,713 | ) | (1,840,357 | ) | ||||||||||||
Net assets | 95,801 | 143,499 | 456,691 | 376,460 | 74,530 | 2,646,319 | ||||||||||||||||||
Fair value adjustment and others | — | — | (14,297 | ) | (1,227,442 | ) | — | — | ||||||||||||||||
Net assets on the consolidated financial statements | 95,801 | 143,499 | 442,394 | (850,982 | ) | 74,530 | 2,646,319 | |||||||||||||||||
Carrying amount of non-controlling interests | 47,452 | 68,573 | 81,754 | (318,267 | ) | 46,010 | 665,020 | |||||||||||||||||
2020 | ||||||||||||||||||||||||
Revenue | 155,218 | 545,556 | 1,327,150 | 39,440 | 3,713,021 | |||||||||||||||||||
Profit (loss) for the year | (23,068 | ) | 1,952 | (29,623 | ) | 14,227 | 12,307 | 150,694 | ||||||||||||||||
Depreciation of the fair value adjustment and others | — | — | (492 | ) | (19,229 | ) | — | — | ||||||||||||||||
Profit (loss) for the year on the consolidated financial statements | (23,068 | ) | 1,952 | (30,115 | ) | (5,002 | ) | 12,307 | 150,694 | |||||||||||||||
Total comprehensive income (loss) | (22,740 | ) | 2,278 | (15,793 | ) | (3,758 | ) | 12,145 | 151,417 | |||||||||||||||
Profit (loss) attributable to non-controlling interests | (10,770 | ) | 930 | (5,565 | ) | (12,432 | ) | 7,568 | 27,240 | |||||||||||||||
Net cash provided by operating activities | 38,006 | 65,499 | 248,524 | 24,629 | 1,035,474 | |||||||||||||||||||
Net cash used in investing activities | (2,471 | ) | (62,816 | ) | (71,644 | ) | (229,130 | ) | (2,284 | ) | (844,454 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (2,329 | ) | (2,499 | ) | (18,059 | ) | 11,134 | (4,278 | ) | (93,259 | ) | |||||||||||||
Effects of exchange rate changes on cash and cash equivalents | (2,053 | ) | — | (385 | ) | (554 | ) | — | — | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | 8,370 | (27,309 | ) | (24,589 | ) | 29,974 | 18,067 | 97,761 | ||||||||||||||||
Dividends paid to non-controlling interests during the year ended December 31, 2020 | — | 5,000 | 17,273 | — | — |
(*) | The condensed financial information of SK Infosec Co., Ltd. includes profit and loss, cash flows which Life Security & Holdings Co., Ltd. recognized prior to the merger. |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
2. | Basis of Preparation |
(1) | Statement of compliance |
These condensed consolidated interim financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034, Interim Financial Reporting, as part of the period covered by the Group’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since December 31, 2020. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.
(2) | Use of estimates and judgments |
1) Critical judgments, assumptions and estimation uncertainties
The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2020.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
2. | Basis of Preparation, Continued |
(2) | Use of estimates and judgments, Continued |
2) | Fair value measurement |
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has established policies and processes with respect to the measurement of fair values, including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.
The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
• | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
• | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 29.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
3. | Significant Accounting Policies |
(1) | Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group’s consolidated financial statements as at and for the year ended December 31, 2020. The change in accounting policy will also be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2021. |
The Group has initially adopted Interest Rate Benchmark Reform Phase 2 – Amendments to K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument: Recognition and Measurement, K-IFRS No. 1107, Financial Instruments: Disclosures and K-IFRS No. 1116, Leases from January 1, 2021.
Interest Rate Benchmark Reform Phase 2 – Amendments provide exceptions as follows:
• | when a change required by interest rate benchmark reform occurs to a financial asset or financial liability measured at amortized cost, the Group updates the effective interest rate of the financial asset or financial liability rather than the carry amount and, |
• | when a change required by interest rate benchmark reform occurs to a hedged item and/or hedging instrument, the exception permits the hedge relationship to be continued without interruption. |
These amended standards are not expected to have a significant impact on the Group’s consolidated financial statements.
(2) | During the annual period ended December 31, 2020, the Group changed its accounting policy by applying agenda decision, Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment)—November 2019, published by International Financial Reporting Interpretations Committee (“IFRIC”) on December 16, 2019. Due to the changes in accounting policies in connection with the IFRIC agenda, the Group restated its comparative financial statements for the three-month period ended March 31, 2020. |
The following table summarizes the impacts of the change in accounting policy on the Group’s condensed consolidated interim financial statements.
1) | Consolidated statement of financial position |
(In millions of won) | ||||||||||||
(Unreviewed) | As of March 31, 2020 | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Assets | ||||||||||||
Accounts receivable – other, net | 8,454 | 1,410,201 | ||||||||||
Prepaid expenses and others | 3,567,886 | (11,629 | ) | 3,556,257 | ||||||||
Property and equipment, net | 11,987,720 | 630,050 | 12,617,770 | |||||||||
|
|
|
|
|
| |||||||
626,875 | 17,584,228 | |||||||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Accrued expenses and others | (341 | ) | 1,336,078 | |||||||||
Provisions | 139,337 | 21,966 | 161,303 | |||||||||
Lease liabilities | 696,202 | 615,961 | 1,312,163 | |||||||||
Deferred tax liabilities | 2,448,003 | (3,214 | ) | 2,444,789 | ||||||||
|
|
|
|
|
| |||||||
634,372 | 5,254,333 | |||||||||||
|
|
|
|
|
| |||||||
Shareholders’ Equity | ||||||||||||
Retained earnings | (7,497 | ) | 21,852,256 |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
3. | Significant Accounting Policies, Continued |
2) | Consolidated statement of income |
(In millions of won) | ||||||||||||
(Unreviewed) | For the three-month period ended March 31, 2020 | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Operating revenue | 194 | 4,450,590 | ||||||||||
Operating expenses: | ||||||||||||
Depreciation and amortization | 975,397 | 9,418 | 984,815 | |||||||||
Rent | 52,355 | (7,822 | ) | 44,533 | ||||||||
Leased lines | 66,917 | (664 | ) | 66,253 | ||||||||
Others | 3,053,691 | — | 3,053,691 | |||||||||
|
|
|
|
|
| |||||||
4,148,360 | 932 | 4,149,292 | ||||||||||
|
|
|
|
|
| |||||||
Operating profit | 302,036 | (738 | ) | 301,298 | ||||||||
Finance income | 38,978 | 21 | 38,999 | |||||||||
Finance costs | 109,891 | 2,482 | 112,373 | |||||||||
Other non-operating income | 16,725 | (106 | ) | 16,619 | ||||||||
Other non-operating expenses | 18,748 | (1,630 | ) | 17,118 | ||||||||
Gain relating to investments in associates and joint ventures, net | 140,895 | — | 140,895 | |||||||||
|
|
|
|
|
| |||||||
Profit before income tax | (1,675 | ) | 368,320 | |||||||||
Income tax expense | 63,148 | (780 | ) | 62,368 | ||||||||
|
|
|
|
|
| |||||||
Profit for the period | (895 | ) | 305,952 | |||||||||
|
|
|
|
|
| |||||||
Earnings per share: | ||||||||||||
Basic and diluted earnings per share (in won) | (13 | ) | 4,168 |
3) | Consolidated statement changes in equity and consolidated statement of cash flows |
The consolidated statement of changes in equity and consolidated statement of cash flows for the three-month period ended March 31, 2020 have been restated as a result of restated consolidated statement of financial position and statement of income.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
4. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides independent services and merchandise. The Group’s reportable segments are cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunications services, which include telephone services, internet services and leased line services; security services, which include unmanned security services, manned security services and system software development; commerce services, the open marketplace platform; and all other businesses, which include the Group’s internet portal services and other immaterial operations, each of which does not meet the quantitative threshold to be considered as a reportable segment and are presented collectively as others.
(1) | Segment information for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||||||||||
Cellular services | Fixed-line telecommu- nications services | Security services | Commerce services | Others | Sub-total | Adjustments | Total | |||||||||||||||||||||||||
Total revenue | 1,162,627 | 350,497 | 203,696 | 315,940 | 5,537,958 | (757,497 | ) | 4,780,461 | ||||||||||||||||||||||||
Inter-segment revenue | 387,599 | 267,873 | 27,581 | 3,661 | 70,783 | 757,497 | (757,497 | ) | — | |||||||||||||||||||||||
External revenue | 3,117,599 | 894,754 | 322,916 | 200,035 | 245,157 | 4,780,461 | — | 4,780,461 | ||||||||||||||||||||||||
Depreciation and amortization | 700,105 | 232,436 | 64,819 | 8,444 | 17,231 | 1,023,035 | (26,553 | ) | 996,482 | |||||||||||||||||||||||
Operating profit (loss) | 309,025 | 81,169 | 27,771 | 160 | (13,467 | ) | 404,658 | (15,877 | ) | 388,781 | ||||||||||||||||||||||
Finance income and costs, net |
| (33,843 | ) | |||||||||||||||||||||||||||||
Gain relating to investments in associates and joint ventures, net |
| 322,455 | ||||||||||||||||||||||||||||||
Other non-operating income and expenses, net |
| 6,444 | ||||||||||||||||||||||||||||||
Profit before income tax |
| 683,837 |
(In millions of won) | ||||||||||||||||||||||||||||||||
For the three-month period ended March 31, 2020 | ||||||||||||||||||||||||||||||||
Cellular services | Fixed-line telecommu- nications services | Security services | Commerce services | Others | Sub-total | Adjustments | Total | |||||||||||||||||||||||||
Total revenue | 1,003,986 | 289,806 | 190,334 | 263,779 | 5,158,000 | (707,410 | ) | 4,450,590 | ||||||||||||||||||||||||
Inter-segment revenue | 378,240 | 251,759 | 14,618 | 2,932 | 59,861 | 707,410 | (707,410 | ) | — | |||||||||||||||||||||||
External revenue | 3,031,855 | 752,227 | 275,188 | 187,402 | 203,918 | 4,450,590 | — | 4,450,590 | ||||||||||||||||||||||||
Depreciation and amortization | 729,245 | 202,468 | 50,061 | 8,878 | 15,456 | 1,006,108 | (21,293 | ) | 984,815 | |||||||||||||||||||||||
Operating profit (loss) | 252,084 | 42,645 | 31,452 | (338 | ) | (12,733 | ) | 313,110 | (11,812 | ) | 301,298 | |||||||||||||||||||||
Finance income and costs, net |
| (73,374 | ) | |||||||||||||||||||||||||||||
Gain relating to investments in associates and joint ventures, net |
| 140,895 | ||||||||||||||||||||||||||||||
Other non-operating income and expenses, net |
| (499 | ) | |||||||||||||||||||||||||||||
Profit before income tax |
| 368,320 |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
4. | Operating Segments, Continued |
(1) | Segment information for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued: |
Since there are no intersegment sales of inventory or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its businesses in Korea, and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.
No single customer contributed 10% or more to the Group’s total revenue for the three-month periods ended March 31, 2021 and 2020.
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows: |
(In millions of won) | For the three-month period ended | |||||||||
March 31, 2021 | March 31, 2020 | |||||||||
Goods and Services transferred at a point in time: | ||||||||||
Cellular revenue | Goods(*1) | 198,651 | ||||||||
Fixed-line telecommunication revenue | Goods | 20,081 | 24,591 | |||||||
Commerce services revenue | Goods | 18,669 | 16,070 | |||||||
Commerce | 58,110 | 50,574 | ||||||||
Security services revenue | Goods | 12,811 | 12,786 | |||||||
Other revenue | Goods | 15,608 | 11,982 | |||||||
Products | 7,229 | 7,573 | ||||||||
Others(*2) | 132,448 | 112,152 | ||||||||
|
|
|
| |||||||
502,358 | 434,379 | |||||||||
|
|
|
| |||||||
Goods and Services transferred over time: | ||||||||||
Cellular revenue | Wireless service(*3) | 2,484,044 | 2,433,761 | |||||||
Cellular interconnection | 121,108 | 124,581 | ||||||||
Other(*4) | 275,045 | 274,862 | ||||||||
Fixed-line telecommunication revenue | Fixed-line service | 49,745 | 49,001 | |||||||
Cellular interconnection | 19,325 | 21,019 | ||||||||
Internet Protocol Television(*5) | 436,087 | 333,732 | ||||||||
International calls | 41,535 | 36,073 | ||||||||
Internet service and miscellaneous(*6) | 327,981 | 287,811 | ||||||||
Commerce services revenue | Commerce service | 123,256 | 120,758 | |||||||
Security services revenue | Service(*7) | 310,105 | 262,402 | |||||||
Other revenue | Miscellaneous(*2) | 89,872 | 72,211 | |||||||
|
|
|
| |||||||
4,278,103 | 4,016,211 | |||||||||
|
|
|
| |||||||
4,450,590 | ||||||||||
|
|
|
|
25
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
4. | Operating Segments, Continued |
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows, Continued: |
(*1) | Cellular revenue includes revenue from sales of handsets and other electronic accessories. |
(*2) | Miscellaneous other revenue includes revenue from considerations received for the development and maintenance of system software and digital contents platform services. |
(*3) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers. |
(*4) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
(*5) | IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers. |
(*6) | Internet service revenue includes revenue from the high-speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
(*7) | Service revenue includes revenue from rendering security services. |
26
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
5. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (267,921 | ) | 2,213,365 | |||||||||
Short-term loans | 78,648 | (705 | ) | 77,943 | ||||||||
Accounts receivable – other(*) | 1,219,398 | (55,076 | ) | 1,164,322 | ||||||||
Accrued income | 4,536 | (166 | ) | 4,370 | ||||||||
Guarantee deposits (Other current assets) | 109,767 | — | 109,767 | |||||||||
|
|
|
|
|
| |||||||
3,893,635 | (323,868 | ) | 3,569,767 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 79,068 | (49,626 | ) | 29,442 | ||||||||
Long-term accounts receivable – other(*) | 292,834 | — | 292,834 | |||||||||
Guarantee deposits | 175,161 | (300 | ) | 174,861 | ||||||||
Long-term accounts receivable – trade (Other non-current assets) | 25,519 | (221 | ) | 25,298 | ||||||||
|
|
|
|
|
| |||||||
572,582 | (50,147 | ) | 522,435 | |||||||||
|
|
|
|
|
| |||||||
(374,015 | ) | 4,092,202 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of March 31, 2021 include |
(In millions of won) | December 31, 2020 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (264,256 | ) | 2,188,893 | |||||||||
Short-term loans | 98,366 | (902 | ) | 97,464 | ||||||||
Accounts receivable – other(*) | 1,034,119 | (55,075 | ) | 979,044 | ||||||||
Accrued income | 3,418 | (166 | ) | 3,252 | ||||||||
Guarantee deposits (Other current assets) | 112,733 | — | 112,733 | |||||||||
|
|
|
|
|
| |||||||
3,701,785 | (320,399 | ) | 3,381,386 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 84,355 | (44,122 | ) | 40,233 | ||||||||
Long-term accounts receivable – other(*) | 332,803 | — | 332,803 | |||||||||
Guarantee deposits | 172,774 | (300 | ) | 172,474 | ||||||||
Long-term accounts receivable – trade (Other non-current assets) | 25,702 | (242 | ) | 25,460 | ||||||||
|
|
|
|
|
| |||||||
615,634 | (44,664 | ) | 570,970 | |||||||||
|
|
|
|
|
| |||||||
(365,063 | ) | 3,952,356 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2020 include |
27
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
5. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized cost for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
January 1, 2021 | Impairment | Write-offs(*) | Collection of receivables previously written- off | March 31, 2021 | ||||||||||||||||
Accounts receivable – trade | 7,475 | (4,686 | ) | 855 | 268,142 | |||||||||||||||
Accounts receivable – other, etc. | 100,565 | (55 | ) | (297 | ) | 5,660 | 105,873 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
7,420 | (4,983 | ) | 6,515 | 374,015 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
January 1, 2020 | Impairment | Write-offs(*) | Collection of receivables previously written- off | March 31, 2020 | ||||||||||||||||
Accounts receivable – trade | 17,318 | (3,490 | ) | 4,106 | 267,435 | |||||||||||||||
Accounts receivable – other, etc. | 96,898 | 791 | (521 | ) | 997 | 98,165 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
18,109 | (4,011 | ) | 5,103 | 365,600 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
(*) | The Group writes off the trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy. |
(3) | The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. |
As the Group is a wireless and fixed-line telecommunications service provider, the Group’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified.
28
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
6. | Prepaid Expenses |
The Group pays commissions to its retail stores and authorized dealers for wireless and fixed-line telecommunications services. The Group capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.
(1) | Details of prepaid expenses as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Current assets: | ||||||||
Incremental costs of obtaining contracts | 2,016,570 | |||||||
Others | 135,988 | 111,779 | ||||||
|
|
|
| |||||
2,158,281 | 2,128,349 | |||||||
|
|
|
| |||||
Non-current assets: | ||||||||
Incremental costs of obtaining contracts | 1,009,567 | 982,952 | ||||||
Others | 77,047 | 80,759 | ||||||
|
|
|
| |||||
1,063,711 | ||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization and impairment losses in connection with incremental costs of obtaining contracts recognized for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Amortization and impairment losses recognized | 603,011 |
29
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
7. | Contract Assets and Liabilities |
In case of providing both wireless telecommunications services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Group recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | 148,281 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 19,698 | 22,026 | ||||||
Customer loyalty programs | 15,165 | 16,709 | ||||||
Fixed-line service contracts | 112,317 | 106,916 | ||||||
Security services | 32,719 | 30,597 | ||||||
Others | 80,817 | 84,348 | ||||||
|
|
|
| |||||
260,596 | ||||||||
|
|
|
|
(2) | The amount of revenue recognized for the three-month periods ended March 31, 2021 and 2020 related to the contract liabilities carried forward from the prior period are |
8. | Inventories |
(1) | Details of inventories as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
Acquisition cost | Write-down | Carrying amount | Acquisition cost | Write-down | Carrying amount | |||||||||||||||||||
Merchandise | (10,056 | ) | 207,773 | 172,762 | (10,566 | ) | 162,196 | |||||||||||||||||
Finished goods | 3,984 | (2,031 | ) | 1,953 | 3,730 | (1,879 | ) | 1,851 | ||||||||||||||||
Work in process | 2,645 | (948 | ) | 1,697 | 2,579 | (818 | ) | 1,761 | ||||||||||||||||
Raw materials | 11,704 | (7,404 | ) | 4,300 | 11,921 | (6,905 | ) | 5,016 | ||||||||||||||||
Supplies | 5,798 | — | 5,798 | 619 | — | 619 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(20,439 | ) | 221,521 | 191,611 | (20,168 | ) | 171,443 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Inventories recognized as operating expenses for the three-month periods ended March 31, 2021 and 2020 are |
30
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
9. | Investment Securities |
(1) | Details of short-term investment securities as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||
Category | March 31, 2021 | December 31, 2020 | ||||||||||
Beneficiary certificates | FVTPL | 150,392 |
(2) | Details of long-term investment securities as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||
Category | March 31, 2021 | December 31, 2020 | ||||||||||
Equity instruments | FVOCI | (*) | 1,454,361 | |||||||||
FVTPL | 67,368 | 67,833 | ||||||||||
|
|
|
| |||||||||
1,789,358 |
| 1,522,194 | ||||||||||
Debt instruments | FVOCI | 1,125 | 1,080 | |||||||||
FVTPL | 124,090 | 125,563 | ||||||||||
|
|
|
| |||||||||
125,215 | 126,643 | |||||||||||
|
|
|
| |||||||||
1,648,837 | ||||||||||||
|
|
|
|
(*) | The Group designated investment in equity instruments that are not held for trading as financial assets at FVOCI, the amounts to those FVOCI as of March 31, 2021 and December 31, 2020 are |
10. | Business Combinations |
(1) | 2021 |
On March 4, 2021, SK Infosec Co., Ltd., a subsidiary of the Parent Company, merged with ADT CAPS Co., Ltd., a subsidiary of SK Infosec Co., Ltd., to improve management efficiency. As this transaction is a business combination under common control, the acquired assets and liabilities were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements and there is no effect on the assets and liabilities of consolidated financial statements. In addition, SK Infosec Co., Ltd. changed its name to ADT CAPS Co., Ltd. since the merger date.
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Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
10. | Business Combinations, Continued |
(2) | 2020 |
1) | Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd.: |
On April 30, 2020, SK Broadband Co., Ltd., a subsidiary of the Parent Company, merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. in order to strengthen the competitiveness and enhance the synergy as a comprehensive media company. The considerations transferred included shares of SK Broadband Co., Ltd transferred based on the merger ratio and the obligations and rights pursuant to the shareholders’ agreement between the Parent Company and the acquiree’s shareholders, both measured at fair value as of April 30, 2020. The Group recognized the difference between the fair value of net assets acquired and the consideration transferred amounting toW405,639 million as goodwill.
The Group’s consolidated revenue and profit for the year would have beenW18,831,147 million andW1,516,857 million, respectively, if the acquisition has occurred on January 1, 2020. The Group cannot reasonably identify the acquiree’s revenue and profit for the year included in the consolidated statement of income, as the business of Tbroad Co., Ltd. and the other two companies were merged with the Group’s subsidiary, SK Broadband Co., Ltd, and no separate financial information post acquisition is available.
32
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
10. | Business Combinations, Continued |
(2) | 2020, Continued |
1) | Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., Continued: |
Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Fair value of shares of SK Broadband Co., Ltd. | ||||
Fair value of derivative liability(*1) | 320,984 | |||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 110,644 | |||
Short-term financial instruments | 6 | |||
Accounts receivable – trade and other | 66,241 | |||
Prepaid expenses | 36,324 | |||
Contract assets | 14,033 | |||
Long-term investment securities | 6,239 | |||
Investments in associates and joint ventures | 13,637 | |||
Property and equipment, net | 245,654 | |||
Intangible assets, net(*2) | 423,515 | |||
Other assets | 3,261 | |||
Deferred tax assets | 1,296 | |||
Accounts payable – trade and other | (105,179 | ) | ||
Contract liabilities | (1,674 | ) | ||
Income tax payable | (18,065 | ) | ||
Provisions | (2,755 | ) | ||
Defined benefit liabilities | (30 | ) | ||
Other liabilities | (15,655 | ) | ||
|
| |||
777,492 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
(*1) | The Parent Company has recognized fair value of obligations and rights in connection with the shareholders’ agreement with the acquiree’s shareholders as consideration for the business combination. |
33
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
10. | Business Combinations, Continued |
(2) | 2020, Continued |
1) | Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., Continued: |
(*2) | Identifiable intangible asset recognized by the Group in the business combination included customer relationships related to Tbroad Co., Ltd. and Tbroad Dongdaemun Broadcasting Co., Ltd. measured at fair value on the date of merger amounting to |
Type | Valuation technique | Siginificant unobservable inputs | Interrelationship between key unobservable inputs fair value measurement | |||
Customer relationships | MPEEM | • Estimated revenue per user • Future churn rates • Weighted average cost of capital (“WACC”) (7.7% for Tbroad Co., Ltd. and 8.3% for Tbroad Dongdaemun Broadcasting Co., Ltd.) | • The fair value of customer relationship will increase if expected revenue per subscriber increases and customer churn rate in the future and WACC decrease. • The fair value of customer relationship will decrease if expected revenue per subscriber decreases and customer churn rate in the future and WACC increase. |
2) | Acquisition of Broadband Nowon Co.,Ltd. by the Parent Company: |
The Parent Company has obtained control by acquiring 627,000 shares(55%) of Tbroad Nowon Broadcasting Co., Ltd. and Tbroad Nowon Broadcasting Co., Ltd. changed its name to Broadband Nowon Co., Ltd. during the year ended December 31, 2020. The consideration transferred wasW10,421 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW733 million was recognized as other non-operating income. Subsequent to the acquisition, Broadband Nowon Co., Ltd. recognized revenue ofW5,756 million and net profit ofW426 million.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | Broadband Nowon Co., Ltd. | |
Location | 21, 81gil, Dobong-ro, Gangbuk-gu, Seoul, Korea | |
CEO | Yoo, Chang-Wan | |
Industry | Cable broadcasting services |
34
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
10. | Business Combinations, Continued |
(2) | 2020, Continued |
2) | Acquisition of Broadband Nowon Co., Ltd. by the Parent Company, Continued: |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 18,106 | |||
Accounts receivable – trade and other | 1,122 | |||
Property and equipment, net | 1,784 | |||
Intangible assets, net | 360 | |||
Other assets | 595 | |||
Accounts payable – trade and other | (1,351 | ) | ||
Other liabilities | (336 | ) | ||
|
| |||
20,280 | ||||
III. Non-controlling interests: | 9,126 | |||
|
| |||
IV. Gain on bargain purchase(I-II+III) | ||||
|
|
35
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
10. | Business Combinations, Continued |
(2) | 2020, Continued |
3) | Acquisition of security equipment construction and security services business of SK hystec inc. by ADT CAPS Co., Ltd. |
ADT CAPS Co., Ltd., a subsidiary of the Parent Company, acquired the security equipment construction and security services business from SK hystec inc., a related party of the Group, in order to strengthen the expertise and the competitiveness of security business during the year ended December 31, 2020. The consideration transferred wasW8,047 million, among whichW2,958 million was paid in cash during the year ended December 31, 2020 and the remaining balance will be paid atW3,000 million annually in July 2021 and July 2022. The Group recognized the difference between the fair value of net assets acquired and the consideration transferred amounting toW2,892 million as goodwill.
Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Accounts receivable – trade and other | 6,787 | |||
Property and equipment, net | 363 | |||
Intangible assets, net | 6,460 | |||
Other assets | 4 | |||
Accounts payable – trade and other | (5,306 | ) | ||
Defined benefit liabilities | (1,227 | ) | ||
Deferred tax liabilities | (1,554 | ) | ||
Other liabilities | (372 | ) | ||
|
| |||
5,155 | ||||
|
| |||
III. Goodwill (I-II) | ||||
|
|
4) | Merger of Life & Security Holdings Co., Ltd. by SK Infosec Co., Ltd. |
SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve business management efficiency on December 30, 2020. As this transaction is a business combination under common control, the acquired assets and liabilities were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements and there is no effect on the assets and liabilities of consolidated financial statements. As a result of the merger, the Parent Company’s ownership interest of SK Infosec Co., Ltd. has changed from 100% to 62.6%.
36
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures |
(1) | Investments in associates and joint ventures accounted for using the equity method as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | December 31, 2020 | ||||||||||||||||||
Country | Ownership (%) | Carrying amount | Ownership (%) | Carrying amount | ||||||||||||||||
Investments in associates: | ||||||||||||||||||||
SK China Company Ltd. | China | 27.3 | 27.3 | |||||||||||||||||
Korea IT Fund(*1) | Korea | 63.3 | 323,309 | 63.3 | 323,294 | |||||||||||||||
KEB HanaCard Co., Ltd.(*2) | Korea | 15.0 | 324,994 | 15.0 | 314,930 | |||||||||||||||
SK Telecom CS T1 Co., Ltd.(*1) | Korea | 54.9 | 49,235 | 54.9 | 53,010 | |||||||||||||||
NanoEnTek, Inc. | Korea | 28.4 | 44,056 | 28.4 | 43,190 | |||||||||||||||
UniSK | China | 49.0 | 16,506 | 49.0 | 15,700 | |||||||||||||||
SK Technology Innovation Company | | Cayman Islands | | 49.0 | 60,725 | 49.0 | 41,579 | |||||||||||||
SK MENA Investment B.V. | Netherlands | 32.1 | 14,573 | 32.1 | 14,043 | |||||||||||||||
SK hynix Inc. | Korea | 20.1 | 12,348,004 | 20.1 | 12,251,861 | |||||||||||||||
SK Latin America Investment S.A. | Spain | 32.1 | 13,791 | 32.1 | 13,930 | |||||||||||||||
Grab Geo Holdings PTE. LTD. | Singapore | 30.0 | 30,063 | 30.0 | 30,063 | |||||||||||||||
SK South East Asia Investment Pte. Ltd. | Singapore | 20.0 | 337,059 | 20.0 | 311,990 | |||||||||||||||
Pacific Telecom Inc.(*2) | USA | 15.0 | 40,707 | 15.0 | 39,723 | |||||||||||||||
S.M. Culture & Contents Co., Ltd. | Korea | 23.3 | 60,421 | 23.3 | 62,248 | |||||||||||||||
Contents Wavve Co., Ltd. | Korea | 30.0 | 69,075 | 30.0 | 75,803 | |||||||||||||||
Hello Nature Co., Ltd. | Korea | 49.9 | 7,574 | 49.9 | 11,969 | |||||||||||||||
Digital Games International Pte. Ltd. | Singapore | 33.3 | 4,989 | 33.3 | 6,449 | |||||||||||||||
Invites Healthcare Co., Ltd.(*3) | Korea | 27.1 | 29,923 | 43.5 | 25,536 | |||||||||||||||
Nam Incheon Broadcasting Co., Ltd. | Korea | 27.3 | 11,472 | 27.3 | 10,902 | |||||||||||||||
NANO-X IMANGING LTD.(*2) | Israel | 5.7 | 29,676 | 5.6 | 28,484 | |||||||||||||||
Home Choice Corp.(*2) | Korea | 17.8 | 3,434 | 17.8 | 3,585 | |||||||||||||||
Carrot General Insurance Co., Ltd. | Korea | 21.4 | 10,844 | 21.4 | 13,469 | |||||||||||||||
12CM JAPAN and others(*2,4) | - | — | 68,109 | — | 65,750 | |||||||||||||||
|
|
|
| |||||||||||||||||
14,485,850 | 14,312,641 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||
Dogus Planet, Inc.(*5) | Turkey | 50.0 | 14,258 | 50.0 | 15,071 | |||||||||||||||
Finnq Co., Ltd.(*5) | Korea | 49.0 | 11,555 | 49.0 | 13,342 | |||||||||||||||
NEXTGEN BROADCAST SERVICES CO., LLC(*5) | USA | 50.0 | 11,762 | 50.0 | 5,850 | |||||||||||||||
NEXTGEN ORCHESTRATION, LLC(*5) | USA | 50.0 | 1,667 | 50.0 | 1,600 | |||||||||||||||
Techmaker GmbH(*5) | Germany | 50.0 | 5,609 | 50.0 | 5,609 | |||||||||||||||
|
|
|
| |||||||||||||||||
44,851 | 41,472 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
|
|
|
|
37
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(1) | Investments in associates and joint ventures accounted for using the equity method as of March 31, 2021 and December 31, 2020 are as follows, Continued: |
(*1) | Investments in Korea IT Fund and SK Telecom CS T1 Co., Ltd. were classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | These investments were classified as investments in associates as the Group can exercise significant influence through its right to appoint the members of the board of directors even though the Group has less than 20% of equity interests. |
(*3) | The Group disposed the entire shares of SK Telecom Smart City Management Co., Ltd. to Invites Healthcare Co., Ltd. during the year ended December 31, 2020 and additionally contributed |
(*4) | The Group disposed the entire shares of SK Wyverns Co., Ltd. and recognized |
(*5) | These investments were classified as investments in joint ventures as the Group has a joint control pursuant to the agreement with the other shareholders. |
(2) | The market value of investments in listed associates as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
NanoEnTek, Inc. | 7,600,649 | 54,041 | 8,620 | 7,600,649 | 65,518 | |||||||||||||||||||
SK hynix Inc. | 132,500 | 146,100,000 | 19,358,250 | 118,500 | 146,100,000 | 17,312,850 | ||||||||||||||||||
S.M. Culture & Contents Co., Ltd. | 1,820 | 22,033,898 | 40,102 | 1,630 | 22,033,898 | 35,915 | ||||||||||||||||||
NANO-X IMAGING LTD. | 46,984 | 2,607,466 | 122,509 | 49,678 | 2,607,466 | 129,534 |
38
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(3) | The condensed financial information of significant associates as of and for the three-month period ended March 31, 2021 and as of and for the year ended December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | ||||||||||||||||
As of March 31, 2021 | ||||||||||||||||||||
Current assets | 8,142,264 | 129,515 | 384,433 | 830,776 | ||||||||||||||||
Non-current assets | 56,733,131 | 303,040 | 380,973 | 1,846,936 | 1,740,185 | |||||||||||||||
Current liabilities | 9,830,992 | 986,452 | — | 34,469 | 195 | |||||||||||||||
Non-current liabilities | 12,908,427 | 5,608,190 | — | 350,896 | — | |||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||
Revenue | 306,149 | 33 | 17,819 | — | ||||||||||||||||
Profit (loss) for the period | 992,640 | 72,635 | 23 | 846 | (626 | ) | ||||||||||||||
Other comprehensive income | 277,135 | 412 | — | 1,000 | 104,168 | |||||||||||||||
Total comprehensive income | 1,269,775 | 73,047 | 23 | 1,846 | 103,542 |
(In millions of won) | ||||||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | ||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||
Current assets | 7,910,517 | 107,652 | 380,413 | 797,045 | ||||||||||||||||
Non-current assets | 54,602,900 | 298,438 | 402,812 | 1,706,634 | 1,672,412 | |||||||||||||||
Current liabilities | 9,072,360 | 897,594 | — | 51,025 | 67 | |||||||||||||||
Non-current liabilities | 10,192,396 | 5,531,968 | — | 308,606 | — | |||||||||||||||
For the year ended December 31, 2020 | ||||||||||||||||||||
Revenue | 1,231,815 | 52,330 | 107,791 | — | ||||||||||||||||
Profit (loss) for the year | 4,758,914 | 154,521 | 36,615 | 20,369 | (158,680 | ) | ||||||||||||||
Other comprehensive income (loss) | (107,378 | ) | (4,283 | ) | 9,647 | 42,921 | (390,851 | ) | ||||||||||||
Total comprehensive income (loss) | 4,651,536 | 150,238 | 46,262 | 63,290 | (549,531 | ) |
39
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(4) | The condensed financial information of significant joint ventures as of and for the three-month period ended March 31, 2021 and as of and for the year ended December 31, 2020 are as follows: |
(In millions of won) | ||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||
As of March 31, 2021 | ||||||||
Current assets | 25,324 | |||||||
Cash and cash equivalents | 8,562 | 21,366 | ||||||
Non-current assets | 30,878 | 7,513 | ||||||
Current liabilities | 47,942 | 8,641 | ||||||
Accounts payable, other payables and provision | 32,092 | 5,683 | ||||||
Non-current liabilities | 7,052 | 779 | ||||||
For the three-month period ended March 31, 2021 | ||||||||
Revenue | 33,229 | 981 | ||||||
Depreciation and amortization | (1,026 | ) | (1,145 | ) | ||||
Interest income | 255 | 3 | ||||||
Interest expense | (151 | ) | (10 | ) | ||||
Loss for the period | (1,692 | ) | (3,473 | ) | ||||
Total comprehensive loss | (4,540 | ) | (3,473 | ) |
(In millions of won) | ||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||
As of December 31, 2020 | ||||||||
Current assets | 26,781 | |||||||
Cash and cash equivalents | 9,083 | 23,936 | ||||||
Non-current assets | 30,408 | 8,530 | ||||||
Current liabilities | 46,186 | 7,367 | ||||||
Accounts payable, other payables and provisions | 28,145 | 5,094 | ||||||
Non-current liabilities | 10,031 | 879 | ||||||
For the year ended December 31, 2020 | ||||||||
Revenue | 3,937 | |||||||
Depreciation and amortization | (4,642 | ) | (4,417 | ) | ||||
Interest income | 1,878 | 29 | ||||||
Interest expense | (555 | ) | (51 | ) | ||||
Profit (loss) for the year | 7,030 | (19,426 | ) | |||||
Total comprehensive loss | (1,659 | ) | (19,426 | ) |
40
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(5) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
March 31, 2021 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
SK hynix Inc.(*1,2) | 20.1 | 11,181,593 | 1,166,411 | 12,348,004 | ||||||||||||||||
KEB HanaCard Co., Ltd. | 1,850,662 | 15.0 | 277,599 | 47,395 | 324,994 | |||||||||||||||
Korea IT Fund | 510,488 | 63.3 | 323,309 | — | 323,309 | |||||||||||||||
SK China Company Ltd.(*1) | 1,844,540 | 27.3 | 503,028 | 84,283 | 587,311 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) | 1,685,293 | 20.0 | 337,059 | — | 337,059 |
(In millions of won) | ||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
SK hynix Inc.(*1,2) | 20.1 | 11,082,048 | 1,169,813 | 12,251,861 | ||||||||||||||||
KEB HanaCard Co., Ltd. | 1,779,393 | 15.0 | 266,909 | 48,021 | 314,930 | |||||||||||||||
Korea IT Fund | 510,464 | 63.3 | 323,294 | — | 323,294 | |||||||||||||||
SK China Company Ltd.(*1) | 1,725,949 | 27.3 | 470,687 | 84,446 | 555,133 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) | 1,559,951 | 20.0 | 311,990 | — | 311,990 |
(*1) | Net assets of these entities represent net assets excluding those attributable to their non-controlling interests. |
(*2) | The ownership interest is based on the number of shares owned by the Parent Company divided by the total shares issued by the investee company. The Group applied the equity method using the effective ownership interest which is based on the number of shares owned by the Parent Company and the investee’s total shares outstanding. The effective ownership interest applied for the equity method is 21.36%. |
41
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended March 31, 2021 | |||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other compre- hensive income(loss) | Other increase (decrease) | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | — | 32 | 32,146 | — | 587,311 | |||||||||||||||||||
Korea IT Fund | 323,294 | — | 15 | — | — | 323,309 | ||||||||||||||||||
KEB HanaCard Co., Ltd. | 314,930 | — | 10,259 | (195 | ) | — | 324,994 | |||||||||||||||||
SK Telecom CS T1 Co., Ltd. | 53,010 | — | (3,699 | ) | (76 | ) | — | 49,235 | ||||||||||||||||
NanoEnTek, Inc. | 43,190 | — | 836 | 30 | — | 44,056 | ||||||||||||||||||
UniSK | 15,700 | — | 335 | 471 | — | 16,506 | ||||||||||||||||||
SK Technology Innovation Company | 41,579 | — | 17,314 | 1,832 | — | 60,725 | ||||||||||||||||||
SK MENA Investment B.V. | 14,043 | — | (1 | ) | 531 | — | 14,573 | |||||||||||||||||
SK hynix Inc.(*1) | 12,251,861 | — | 208,154 | 58,926 | (170,937 | ) | 12,348,004 | |||||||||||||||||
SK Latin America Investment S.A. | 13,930 | — | (36 | ) | (103 | ) | — | 13,791 | ||||||||||||||||
Grab Geo Holdings PTE. LTD. | 30,063 | — | — | — | — | 30,063 | ||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 311,990 | — | 4,235 | 20,834 | — | 337,059 | ||||||||||||||||||
Pacific Telecom Inc. | 39,723 | — | — | 984 | — | 40,707 | ||||||||||||||||||
S.M. Culture & Contents Co., Ltd. | 62,248 | — | (2,095 | ) | 268 | — | 60,421 | |||||||||||||||||
Contents Wavve Co., Ltd. | 75,803 | — | (6,728 | ) | — | — | 69,075 | |||||||||||||||||
Hello Nature Co., Ltd.(*2) | 11,969 | — | (2,665 | ) | — | (1,730 | ) | 7,574 | ||||||||||||||||
Digital Games International Pte. Ltd. | 6,449 | — | (1,583 | ) | 123 | — | 4,989 | |||||||||||||||||
Invites Healthcare Co., Ltd. | 25,536 | 7,000 | (2,617 | ) | 4 | — | 29,923 | |||||||||||||||||
Nam Incheon Broadcasting Co., Ltd. | 10,902 | — | 570 | — | — | 11,472 | ||||||||||||||||||
NANO-X IMANGING LTD. | 28,484 | — | — | — | 1,192 | 29,676 | ||||||||||||||||||
Home Choice Corp. | 3,585 | — | (151 | ) | — | — | 3,434 | |||||||||||||||||
Carrot General Insurance Co., Ltd. | 13,469 | — | (2,500 | ) | (125 | ) | — | 10,844 | ||||||||||||||||
12CM JAPAN and others(*3) | 65,750 | 2,007 | 970 | (958 | ) | 340 | 68,109 | |||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
14,312,641 | 9,007 | 220,645 | 114,692 | (171,135 | ) | 14,485,850 | ||||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||
Dogus Planet, Inc. | 15,071 | — | 611 | (1,424 | ) | — | 14,258 | |||||||||||||||||
Finnq Co., Ltd. | 13,342 | — | (1,669 | ) | (118 | ) | — | 11,555 | ||||||||||||||||
NEXTGEN BROADCAST SERVICES CO., LLC | 5,850 | 5,570 | — | — | 342 | 11,762 | ||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC | 1,600 | — | — | — | 67 | 1,667 | ||||||||||||||||||
Techmaker GmbH | 5,609 | — | — | — | — | 5,609 | ||||||||||||||||||
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| |||||||||||||
41,472 | 5,570 | (1,058 | ) | (1,542 | ) | 409 | 44,851 | |||||||||||||||||
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| |||||||||||||
14,577 | 219,587 | 113,150 | (170,726 | ) | 14,530,701 | |||||||||||||||||||
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42
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued: |
(*1) | Other increase (decrease) includes the dividends declared by SK hynix Inc. for the three-month period ended March 31, 2021. |
(*2) | The Group recognized |
(*3) | The acquisition for the three-month period ended March 31, 2021 includes |
43
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued: |
(In millions of won) | For the three-month period ended March 31, 2020 | |||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other compre- hensive income(loss) | Other increase (decrease) | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | — | (1,805 | ) | 24,484 | — | 591,138 | ||||||||||||||||||
Korea IT Fund | 311,552 | — | 134 | — | — | 311,686 | ||||||||||||||||||
KEB HanaCard Co., Ltd. | 294,756 | — | 3,916 | (1,549 | ) | — | 297,123 | |||||||||||||||||
SK Telecom CS T1 Co., Ltd. | 60,305 | — | (2,188 | ) | (94 | ) | — | 58,023 | ||||||||||||||||
NanoEnTek, Inc. | 42,127 | — | 604 | (57 | ) | — | 42,674 | |||||||||||||||||
UniSK | 14,342 | — | 80 | 623 | — | 15,045 | ||||||||||||||||||
SK Technology Innovation Company | 43,997 | — | 7 | 2,588 | — | 46,592 | ||||||||||||||||||
SK MENA Investment B.V. | 14,904 | — | 2 | 861 | — | 15,767 | ||||||||||||||||||
SK hynix Inc.(*1) | 11,425,325 | — | 134,978 | 72,208 | (146,100 | ) | 11,486,411 | |||||||||||||||||
SK Latin America Investment S.A. | 13,698 | — | (28 | ) | 303 | — | 13,973 | |||||||||||||||||
Grab Geo Holdings PTE. LTD. | 31,269 | — | (114 | ) | 311 | — | 31,466 | |||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 250,034 | — | 2,271 | 9,106 | — | 261,411 | ||||||||||||||||||
Pacific Telecom Inc. | 40,016 | — | 987 | 1,540 | — | 42,543 | ||||||||||||||||||
S.M. Culture & Contents Co., Ltd. | 63,469 | — | 433 | (71 | ) | — | 63,831 | |||||||||||||||||
Contents Wavve Co., Ltd. | 83,640 | — | (949 | ) | — | — | 82,691 | |||||||||||||||||
Hello Nature Co., Ltd.(*2) | 13,620 | — | (4,915 | ) | (60 | ) | (434 | ) | 8,211 | |||||||||||||||
Digital Games International Pte. Ltd. | — | 8,755 | — | — | — | 8,755 | ||||||||||||||||||
Invites Healthcare Co., Ltd. | — | 28,000 | — | — | — | 28,000 | ||||||||||||||||||
12CM JAPAN and others(*3) | 65,343 | (754 | ) | (1,420 | ) | 334 | 668 | 64,171 | ||||||||||||||||
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| |||||||||||||
13,336,856 | 36,001 | 131,993 | 110,527 | (145,866 | ) | 13,469,511 | ||||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||
Dogus Planet, Inc. | 15,921 | — | 2,212 | (804 | ) | — | 17,329 | |||||||||||||||||
Finnq Co., Ltd. | 22,880 | — | (2,279 | ) | — | — | 20,601 | |||||||||||||||||
NEXTGEN BROADCAST SERVICES CO., LLC | 7,961 | — | — | — | 446 | 8,407 | ||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC | 1,646 | — | — | — | 92 | 1,738 | ||||||||||||||||||
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| |||||||||||||
48,408 | — | (67 | ) | (804 | ) | 538 | 48,075 | |||||||||||||||||
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| |||||||||||||
36,001 | 131,926 | 109,723 | (145,328 | ) | 13,517,586 | |||||||||||||||||||
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|
|
(*1) | Other increase (decrease) includes the dividends declared by SK hynix Inc. for the three-month period ended March 31, 2020. |
(*2) | The Group recognized |
(*3) | The disposal for the three-month period ended March 31, 2020 includes |
44
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Investments in Associates and Joint Ventures, Continued |
(7) | The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of March 31, 2021 are as follows: |
(In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||
For the three-month period ended March 31, 2021 | Cumulative loss | For the three-month period ended March 31, 2021 | Cumulative loss | |||||||||||||
Wave City Development Co., Ltd. | 1,200 | — | — | |||||||||||||
Daehan Kanggun BcN Co., Ltd. and others | (4,598 | ) | 6,349 | — | (124 | ) | ||||||||||
|
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|
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|
|
| |||||||||
7,549 | — | (124 | ) | |||||||||||||
|
|
|
|
|
|
|
|
12. | Property and Equipment |
Changes in property and equipment for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Reclassified as held for sale | Ending balance | ||||||||||||||||||||||
Land | — | — | 5,836 | — | (20,507 | ) | 1,024,652 | |||||||||||||||||||||
Buildings | 858,606 | 280 | (158 | ) | 15,498 | (13,824 | ) | (8,669 | ) | 851,733 | ||||||||||||||||||
Structures | 317,403 | 524 | (1 | ) | 7,723 | (9,365 | ) | (6,104 | ) | 310,180 | ||||||||||||||||||
Machinery | 8,376,212 | 47,345 | (6,000 | ) | 368,505 | (604,038 | ) | — | 8,182,024 | |||||||||||||||||||
Other | 653,616 | 107,708 | (181 | ) | (89,973 | ) | (49,320 | ) | — | 621,850 | ||||||||||||||||||
Right-of-use assets | 1,472,035 | 192,210 | (83,916 | ) | — | (110,294 | ) | — | 1,470,035 | |||||||||||||||||||
Construction in progress | 659,882 | 122,243 | (86 | ) | (342,041 | ) | — | — | 439,998 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
470,310 | (90,342 | ) | (34,452 | ) | (786,841 | ) | (35,280 | ) | 12,900,472 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2020 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Ending balance | |||||||||||||||||||
Land | — | — | 3,583 | — | 984,972 | |||||||||||||||||||
Buildings | 867,408 | 693 | (1 | ) | 11,735 | (13,650 | ) | 866,185 | ||||||||||||||||
Structures | 347,069 | 19 | (7 | ) | 2,708 | (9,211 | ) | 340,578 | ||||||||||||||||
Machinery | 7,924,392 | 33,880 | (1,124 | ) | 535,388 | (596,970 | ) | 7,895,566 | ||||||||||||||||
Other | 731,066 | 206,707 | (729 | ) | (279,777 | ) | (50,323 | ) | 606,944 | |||||||||||||||
Right-of-use assets | 1,326,628 | 196,824 | (85,369 | ) | — | (109,996 | ) | 1,328,087 | ||||||||||||||||
Construction in progress | 755,508 | 178,338 | (7,337 | ) | (331,071 | ) | — | 595,438 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
616,461 | (94,567 | ) | (57,434 | ) | (780,150 | ) | 12,617,770 | |||||||||||||||||
|
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|
45
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
13. | Lease |
(1) | Details of the right-of-use assets as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Land, buildings and structures | 1,269,753 | |||||||
Others | 209,635 | 202,282 | ||||||
|
|
|
| |||||
1,472,035 | ||||||||
|
|
|
|
(2) | Details of amounts recognized in the condensed consolidated interim statements of income for the three-month periods ended March 31, 2021 and 2020 as a lessee are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2021 | March 31, 2020 | |||||||
Depreciation of right-of-use assets: | ||||||||
Land, buildings and structures | 89,506 | |||||||
Others | 20,119 | 20,490 | ||||||
|
|
|
| |||||
110,294 | 109,996 | |||||||
|
|
|
| |||||
Interest expense on lease liabilities | 5,579 | |||||||
Expenses related to short-term leases | 6,813 | 5,771 | ||||||
Expenses related to leases of low-value assets except for short-term leases | 962 | 770 |
(3) | The total cash outflows due to lease payments for the three-month periods ended March 31, 2021 and 2020 amounted to |
46
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
14. | Intangible Assets |
(1) | Changes in intangible assets for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Ending balance | |||||||||||||||||||
Frequency usage rights | — | — | — | (124,527 | ) | 1,808,238 | ||||||||||||||||||
Land usage rights | 4,720 | — | — | — | (594 | ) | 4,126 | |||||||||||||||||
Industrial rights | 71,442 | 1,655 | (1 | ) | (119 | ) | (1,555 | ) | 71,422 | |||||||||||||||
Development costs | 9,364 | 83 | — | — | (952 | ) | 8,495 | |||||||||||||||||
Facility usage rights | 21,880 | 180 | (3 | ) | 2 | (1,526 | ) | 20,533 | ||||||||||||||||
Customer relations | 919,863 | — | (56 | ) | — | (15,072 | ) | 904,735 | ||||||||||||||||
Club memberships(*1) | 106,865 | 1,334 | (418 | ) | — | — | 107,781 | |||||||||||||||||
Brands(*1) | 374,096 | — | — | — | — | 374,096 | ||||||||||||||||||
Other(*2) | 995,199 | 3,330 | (4 | ) | 44,437 | (102,512 | ) | 940,450 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
6,582 | (482 | ) | 44,320 | (246,738 | ) | 4,239,876 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2020 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Ending balance | |||||||||||||||||||
Frequency usage rights | — | — | — | (130,495 | ) | 2,517,006 | ||||||||||||||||||
Land usage rights | 7,349 | — | — | — | (906 | ) | 6,443 | |||||||||||||||||
Industrial rights | 66,824 | 102 | (50 | ) | 8,641 | (1,117 | ) | 74,400 | ||||||||||||||||
Development costs | 11,146 | 178 | (18 | ) | (53 | ) | (1,192 | ) | 10,061 | |||||||||||||||
Facility usage rights | 25,832 | 145 | — | 155 | (1,548 | ) | 24,584 | |||||||||||||||||
Customer relations | 591,371 | 31 | (79 | ) | 25 | (8,381 | ) | 582,967 | ||||||||||||||||
Club memberships(*1) | 80,410 | 1,292 | (856 | ) | — | — | 80,846 | |||||||||||||||||
Brands(*1) | 374,096 | — | — | — | — | 374,096 | ||||||||||||||||||
Other(*2) | 1,061,563 | 18,893 | (1,983 | ) | 56,489 | (104,969 | ) | 1,029,993 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
20,641 | (2,986 | ) | 65,257 | (248,608 | ) | 4,700,396 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | Club memberships and Brands are classified as intangible assets with indefinite useful lives and are not amortized. |
(*2) | Other intangible assets primarily consist of computer software and others. |
47
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
14. | Intangible Assets, Continued |
(2) | Details of frequency usage rights as of March 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||
Amount | Description | Commencement of amortization | Completion of amortization | |||||||||||||
800 MHz license | CDMA and LTE service | Jul. 2011 | Jun. 2021 | |||||||||||||
1.8 GHz license | 94,215 | LTE service | Sept. 2013 | Dec. 2021 | ||||||||||||
2.6 GHz license | 698,155 | LTE service | Sept. 2016 | Dec. 2026 | ||||||||||||
2.1 GHz license | 69,064 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||||||||
3.5 GHz license | 923,364 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||||
28 GHz license | 16,683 | 5G service | - | Nov. 2023 | ||||||||||||
|
| |||||||||||||||
|
|
15. | Borrowings and Debentures |
(1) | Short-term borrowings as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||
Lender | Annual interest rate (%) | March 31, 2021 | December 31, 2020 | |||||||||||||
Short-term borrowings | Citibank | 2.45 | 50,000 | |||||||||||||
KEB Hana Bank(*1) | FTP 1M + 1.01 | 27,000 | 27,000 | |||||||||||||
KEB Hana Bank(*2) | 6M financial I (bank) + 1.59 | 5,000 | 5,000 | |||||||||||||
Shinhan Bank(*2) | 6M financial I (bank) + 1.35 | 15,000 | 15,000 | |||||||||||||
Hana Financial Investment Co., Ltd. | 4.50 | 4,642 | 4,642 | |||||||||||||
DB Financial Investment Co., Ltd. | 4.50 | 2,785 | 2,785 | |||||||||||||
Shinhan Financial Investment Co., Ltd. | 4.50 | 5,571 | 5,571 | |||||||||||||
|
|
|
| |||||||||||||
109,998 | ||||||||||||||||
|
|
|
|
(*1) | 1M FTP rate are 1.20% and 1.14% as of March 31, 2021 and December 31, 2020, respectively. |
(*2) | 6M financial I (bank) rate are 0.80% and 0.92% as of March 31, 2021 and December 31, 2020, respectively. |
48
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
15. | Borrowings and Debentures, Continued |
(2) | Changes in the long-term borrowings for the three-month period ended March 31, 2021 are as follows: |
(In millions of won, thousands of other currencies) | ||||||||||||||
Lender | Annual interest rate (%) | Maturity | Book value | |||||||||||
Current | ||||||||||||||
Non-current | 1,979,261 | |||||||||||||
|
| |||||||||||||
As of January 1, 2021 | 2,028,924 | |||||||||||||
|
| |||||||||||||
New long-term borrowings: | ||||||||||||||
Korea Development Bank | 1.87 | Feb. 10, 2026 | 50,000 | |||||||||||
Repayments of long-term borrowings: | ||||||||||||||
Korea Development Bank(*1) | 3M CD + 0.61 | Dec. 20, 2021 | (3,062 | ) | ||||||||||
Korea Development Bank(*1) | 3M CD + 0.71 | Dec. 21, 2022 | (3,125 | ) | ||||||||||
Credit Agricole CIB(*1) | 3M CD + 0.82 | Dec. 14, 2023 | (3,125 | ) | ||||||||||
FAE | 0.00 | May 7, 2025 | | (30 (CHF 25 | ) ) | |||||||||
|
| |||||||||||||
(9,342 | ) | |||||||||||||
|
| |||||||||||||
Other changes(*2) |
| 1,623 | ||||||||||||
Current(*3) | 47,143 | |||||||||||||
Non-current(*3) | 2,024,062 | |||||||||||||
|
| |||||||||||||
As of March 31, 2021 | ||||||||||||||
|
|
(*1) | As of March 31, 2021, 3M CD rate is 0.75%. |
(*2) | Other changes include the effects on foreign currency translation of long-term borrowings and changes in present value discount for the three-month period ended March 31, 2021. |
(*3) |
|
49
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
15. | Borrowings and Debentures, Continued |
(3) | Changes in debentures for the three-month period ended March 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||
Purpose | Annual interest rate (%) | Maturity | Face value | Book value | ||||||||||||||
Current | 889,574 | |||||||||||||||||
Non-current | 7,716,782 | 7,690,169 | ||||||||||||||||
|
|
|
| |||||||||||||||
As of January 1, 2021 |
| 8,606,782 | 8,579,743 | |||||||||||||||
Debentures newly issued: | ||||||||||||||||||
Unsecured corporate bonds | Refinancing fund | 1.17 | Jan. 15, 2024 | 80,000 | 79,642 | |||||||||||||
1.39 | Jan. 15, 2026 | 80,000 | 79,678 | |||||||||||||||
1.80 | Jan. 15, 2031 | 50,000 | 49,811 | |||||||||||||||
1.89 | Jan. 15, 2041 | 100,000 | 99,626 | |||||||||||||||
|
|
|
| |||||||||||||||
310,000 | 308,757 | |||||||||||||||||
|
|
|
| |||||||||||||||
Debentures repaid: | ||||||||||||||||||
Unsecured corporate bonds | Operating fund | 1.80 | Mar. 4, 2021 | (100,000 | ) | (100,000 | ) | |||||||||||
Unsecured corporate bonds | Refinancing fund | 2.57 | Feb. 20, 2021 | (110,000 | ) | (110,000 | ) | |||||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2.59 | Feb. 1, 2021 | (70,000 | ) | (70,000 | ) | |||||||||||
|
|
|
| |||||||||||||||
(280,000 | ) | (280,000 | ) | |||||||||||||||
|
|
|
| |||||||||||||||
Other changes(*2) |
| 68,250 | 69,820 | |||||||||||||||
Current(*3) | 1,090,000 | 1,089,238 | ||||||||||||||||
Non-current(*3) | 7,615,032 | 7,589,082 | ||||||||||||||||
|
|
|
| |||||||||||||||
As of March 31, 2021 |
| 8,678,320 | ||||||||||||||||
|
|
|
|
(*1) | Unsecured corporate bonds were issued by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(*2) | Other changes include the effects on foreign currency translation of debentures and changes in present value discount on debentures for the three-month period ended March 31, 2021. |
(*3) |
|
50
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
16. | Long-Term Payables – Other |
(1) | Long-term payables – other as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Payables related to acquisition of frequency usage rights | 1,141,723 | |||||||
Other | 12,050 | 631 | ||||||
|
|
|
| |||||
1,142,354 | ||||||||
|
|
|
|
(2) | As of March 31, 2021 and December 31, 2020, details of long-term payables – other which consist of payables related to the acquisition of frequency usage rights are as follows (See note 14): |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Long-term payables – other | 1,626,040 | |||||||
Present value discount on long-term payables – other | (54,929 | ) | (59,717 | ) | ||||
Current installments of long-term payables – other | (219,249 | ) | (424,600 | ) | ||||
|
|
|
| |||||
Carrying amount at period end | 1,141,723 | |||||||
|
|
|
|
(3) | The principal amount of the long-term payables – other repaid for the three-month period ended March 31, 2021 and 2020 are |
(In millions of won) |
| |||
Amount | ||||
Less than 1 year | ||||
1~3 years | 413,385 | |||
3~5 years | 382,290 | |||
More than 5 years | 182,776 | |||
|
| |||
|
|
17. | Provisions |
Changes in provisions for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | As of March 31, 2021 | |||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Ending balance | Current | Non-current | |||||||||||||||||||||||||
Provision for restoration | 3,655 | (1,568 | ) | (318 | ) | 31 | 115,453 | 48,690 | 66,763 | |||||||||||||||||||||||
Emission allowance | 7,424 | 271 | — | (712 | ) | — | 6,983 | 6,983 | — | |||||||||||||||||||||||
Other provisions(*) | 29,800 | 1,061 | (7,405 | ) | (6 | ) | — | 23,450 | 12,176 | 11,274 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
4,987 | (8,973 | ) | (1,036 | ) | 31 | 145,886 | 67,849 | 78,037 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
51
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
17. | Provisions, Continued |
Changes in provisions for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued:
(In millions of won) | ||||||||||||||||||||||||||||||||
For the three-month period ended March 31, 2020 | As of March 31, 2020 | |||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Ending balance | Current | Non-current | |||||||||||||||||||||||||
Provision for restoration | 1,986 | (281 | ) | (887 | ) | 72 | 103,409 | 49,522 | 53,887 | |||||||||||||||||||||||
Emission allowance | 5,257 | 2,512 | — | — | — | 7,769 | 7,769 | — | ||||||||||||||||||||||||
Other provisions(*) | 57,385 | 1,348 | (8,239 | ) | — | (369 | ) | 50,125 | 31,618 | 18,507 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
5,846 | (8,520 | ) | (887 | ) | (297 | ) | 161,303 | 88,909 | 72,394 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
18. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Present value of defined benefit obligations | 1,278,550 | |||||||
Fair value of plan assets | (1,101,428 | ) | (1,127,163 | ) | ||||
|
|
|
| |||||
Defined benefit assets(*) | (557 | ) | (3,557 | ) | ||||
|
|
|
| |||||
Defined benefit liabilities | 221,732 | 154,944 | ||||||
|
|
|
|
(*) | Since Group entities neither have legally enforceable right nor intention to settle the defined benefit obligations of Group entities with defined benefit assets of other Group entities, defined benefit assets of Group entities have been separately presented from defined benefit liabilities. |
(2) | Changes in defined benefit obligations for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Beginning balance | 1,136,787 | |||||||
Current service cost | 48,245 | 47,609 | ||||||
Past service cost | — | 815 | ||||||
Interest cost | 7,184 | 5,252 | ||||||
Remeasurement | ||||||||
- Adjustment based on experience | 22,166 | 26,961 | ||||||
Benefit paid | (30,582 | ) | (26,324 | ) | ||||
Others | (2,960 | ) | 1,197 | |||||
|
|
|
| |||||
Ending balance | 1,192,297 | |||||||
|
|
|
|
52
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
18. | Defined Benefit Liabilities (Assets), Continued |
(3) | Changes in plan assets for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Beginning balance | 965,654 | |||||||
Interest income | 6,288 | 4,725 | ||||||
Remeasurement | (1,901 | ) | (526 | ) | ||||
Contributions | 12,002 | 17,969 | ||||||
Benefit paid | (37,991 | ) | (36,092 | ) | ||||
Others | (4,133 | ) | 2,039 | |||||
|
|
|
| |||||
Ending balance | 953,769 | |||||||
|
|
|
|
(4) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the condensed consolidated interim statements of income) and capitalized into construction-in-progress, for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Current service cost | 47,609 | |||||||
Past service cost | — | 815 | ||||||
Net interest cost | 896 | 527 | ||||||
|
|
|
| |||||
48,951 | ||||||||
|
|
|
|
53
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
19. | Share Capital and Capital Surplus and Others |
(1) | The Parent Company’s outstanding share capital consists entirely of common shares with a par value of |
(In millions of won, except for share data) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Number of authorized shares | 220,000,000 | 220,000,000 | ||||||
Number of issued shares(*1) | 80,745,711 | 80,745,711 | ||||||
Share capital: | ||||||||
Common share | 44,639 | |||||||
Capital surplus and others: | ||||||||
Paid-in surplus | 2,915,887 | 2,915,887 | ||||||
Treasury shares | (2,169,660 | ) | (2,123,661 | ) | ||||
Hybrid bonds(*2) | 398,759 | 398,759 | ||||||
Share option(Note 20) | 1,528 | 1,481 | ||||||
Others(*3) | (506,299 | ) | (515,263 | ) | ||||
|
|
|
| |||||
677,203 | ||||||||
|
|
|
|
(*1) | In 2002 and 2003, the Parent Company retired treasury shares with reduction of its retained earnings before appropriation. As a result, the Parent Company’s outstanding shares have decreased without change in share capital. |
(*2) | As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Group classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common stocks. |
(*3) | Others primarily consist of the excess of the consideration paid by the Group over the carrying amount of net assets acquired from entities under common control. |
(2) | There were no changes in share capital for the three-month periods ended March 31, 2021 and 2020 and details of shares outstanding as of March 31, 2021 and 2020 are as follows: |
(In shares) | March 31, 2021 | March 31, 2020 | ||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 80,745,711 | 9,585,568 | 71,160,143 | 80,745,711 | 7,609,263 | 73,136,448 |
(3) | Details of treasury shares as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won, except for share data) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Number of shares(*) | 9,585,568 | 9,418,558 | ||||||
Acquisition cost | 2,123,661 |
(*) | The Parent Company acquired 288,000 of its treasury shares for |
54
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Share Option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Parent Company | ||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | |||||||||
Grant date | March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | March 26, 2020 | March 25, 2021 | ||||||||||
Types of shares to be issued | Registered common shares | |||||||||||||||
Grant method | Reissue of treasury shares, cash settlement | |||||||||||||||
Number of shares (in shares) | 22,168 | 22,168 | 22,168 | 1,358 | 4,177 | 1,734 | 127,643 | 33,280 | ||||||||
Exercise price (in won) | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | 251,380 | ||||||||
Exercise period | Mar. 25, 2019 ~ Mar. 24, 2022 | Mar. 25, 2020 ~ Mar. 24, 2023 | Mar. 25, 2021 ~ Mar. 24, 2024 | Feb. 21, 2020 ~ Feb. 20, 2023 | Feb. 23, 2021 ~ Feb. 22, 2024 | Mar. 27, 2021 ~ Mar. 26, 2024 | Mar. 27, 2023 ~ Mar. 26, 2027 | Mar. 26, 2023 ~ Mar. 25, 2026 | ||||||||
Vesting conditions | 2 years’ service from the grant date | 3 years’ service from | 4 years’ service from the grant date | 2 years’ service from | 2 years’ service from | 2 years’ service from the grant | 3 years’ service from the grant | 2 years’ service from the grant |
DREAMUS COMPANY | ||||||
1-1 | 1-2 | 1-3 | ||||
Grant date | March 28, 2019 | March 28, 2019 | March 28, 2019 | |||
Types of shares to be issued | Common shares of DREAMUS COMPANY | |||||
Grant method | Issuance of new shares, reissue of treasury shares, cash settlement | |||||
Number of shares (in shares)(*) | 353,345 | 353,338 | 353,317 | |||
Exercise price (in won) | 9,160 | 9,160 | 9,160 | |||
Exercise period | Mar. 29, 2021~ Mar. 28, 2024 | Mar. 29, 2022~ Mar. 28, 2025 | Mar. 29, 2023~ Mar. 28, 2026 | |||
Vesting conditions | (a) 2 years’ service from the grant date (b) Average stock price for the exercise period is more than 150% of the exercise price | (a) 3 years’ service from the grant date (b) Average stock price for the exercise period is more than 150% of the exercise price | (a) 4 years’ service from the grant date (b) Average stock price for the exercise period is more than 150% of the exercise price |
55
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Share Option, Continued |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows, Continued: |
Incross Co., Ltd. | ||||||||||||||
4 | 5 | 6 | 7 | 8 | 9 | 10 | ||||||||
Grant date | March 7, 2017 | March 7, 2018 | March 7, 2019 | October 15, 2019 | March 10, 2020 | October 20, 2020 | March 5, 2021 | |||||||
Types of shares to be issued | Common shares of Incross Co., Ltd. | |||||||||||||
Grant method | Issuance of new shares, reissue of treasury shares, cash settlement | |||||||||||||
Number of shares (in shares)(*) | 8,025 | 9,900 | 6,600 | 59,225 | 19,800 | 3,300 | 19,775 | |||||||
Exercise price (in won) | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | 45,280 | 51,940 | |||||||
Exercise period | Mar. 7, 2020~ Mar. 6, 2023 | Mar. 7, 2021~ Mar. 6, 2024 | Mar. 7, 2022~ Mar. 6, 2025 | Oct. 15, 2022~ Oct. 14, 2025 | Mar. 10, 2023~ Mar. 9, 2026 | Oct. 20, 2023~ Oct. 19, 2026 | Mar. 5, 2024~ Mar. 4, 2027 | |||||||
Vesting conditions | 3 years’ service from the grant date | 3 years’ service from the grant date | 3 years’ service from the grant date | 3 years’ service from the grant date | 3 years’ service from the grant date | 3 years’ service from the grant date | 3 years’ service from the grant date |
ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
1-1 | 1-2 | 1-3 | 1-4 | |||||
Grant date | August 22, 2019 | |||||||
Types of shares to be issued | Registered common shares of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||
Grant method | Cash settlement | |||||||
Number of shares (in shares) | 161,541 | 87,562 | 230,581 | 203,223 | ||||
Exercise price (in won) | 20,579 | 20,579 | 22,225 | 24,003 | ||||
Exercise period | 1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||
2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
Vesting conditions | Service provided until December 31, 2019 | Service provided until December 31, 2020 | Service provided until December 31, 2020 | Service provided until December 31, 2021 |
56
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Share Option, Continued |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows, Continued: |
ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
2-1 | 2-2 | 2-3 | 2-4 | |||||
Grant date | December 30, 2020 | |||||||
Types of shares to be issued | Registered common shares of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||
Grant method | Cash settlement | |||||||
Number of shares (in shares) | 23,097 | 9,648 | 32,744 | 23,094 | ||||
Exercise price (in won) | 20,807 | 20,807 | 22,472 | 24,270 | ||||
Exercise period | 1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||
2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
Vesting conditions | Service provided until December 31, 2020 | Service provided until December 31, 2021 | Service provided until December 31, 2021 | Service provided until December 31, 2022 | ||||
ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
3-1 | 3-2 | 3-3 | FSK L&S Co., Ltd. | |||||
Grant date | January 26, 2021 | May 31, 2019 | ||||||
Types of shares to be issued | Registered common shares of ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.) | Common shares of FSK L&S Co., Ltd. | ||||||
Grant method | Cash settlement | Issuance of new shares | ||||||
Number of shares (in shares) | 126,637 | 126,637 | 126,638 | 43,955 | ||||
Exercise price (in won) | 20,807 | 22,472 | 24,270 | 10,000 | ||||
Exercise period | 1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.) | June 1, 2022 ~ May 31, 2025 | ||||||
2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing(June 30, 2022) of ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | ||||||||
Vesting conditions | Service provided until December 31, 2021 | Service provided until December 31, 2021 | Service provided until December 31, 2022 | 3 years’ service from the grant date |
(*) | Some of stock options granted by One Store Co., Ltd. and DREAMUS COMPANY that have not met the vesting conditions have been forfeited for the three-month period ended March 31, 2021. Some of the stock options granted by Incross Co., Ltd. and all of the remaining stock options granted by One Store Co., Ltd. have been exercised for the three-month period ended March 31, 2021. |
57
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Share Option, Continued |
(2) | Share compensation expense recognized for the three-month period ended March 31, 2021 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | ||||
Share compensation expense | ||||
As of December 31, 2020 | ||||
For the three-month period ended March 31, 2021 | 1,045 | |||
In subsequent periods | 5,185 | |||
|
| |||
|
|
(3) | The Group used the binomial option-pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows: |
(In won) | Parent Company | |||||||||||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | |||||||||||||||||||||||||
Risk-free interest rate | 1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | 1.55 | % | ||||||||||||||||
Estimated option’s life | 5 years | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | ||||||||||||||||||||||||
Share price | 262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | 174,500 | 249,000 | ||||||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | 25.70 | % | ||||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | 4.00 | % | ||||||||||||||||
Exercise price | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | 251,380 | ||||||||||||||||||||||||
Per-share fair value of the option | 27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 | 962 | 40,711 |
(In won) | DREAMUS COMPANY | |||||||||||
1-1 | 1-2 | 1-3 | ||||||||||
Risk-free interest rate | 1.73 | % | 1.77 | % | 1.82 | % | ||||||
Estimated option’s life | — | — | — | |||||||||
Share price | 8,950 | 8,950 | 8,950 | |||||||||
Expected volatility | 32.34 | % | 32.34 | % | 32.34 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 9,160 | 9,160 | 9,160 | |||||||||
Per-share fair value of the option | 1,976 | 2,189 | 2,356 |
58
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Share Option, Continued |
(3) | The Group used the binomial option-pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows, Continued: |
(In won) | Incross Co., Ltd. | FSK L&S Co., Ltd. | ||||||||||||||||||||||||||||||
4 | 5 | 6 | 7 | 8 | 9 | 10 | ||||||||||||||||||||||||||
Risk-free interest rate | 1.35 | % | 1.50 | % | 1.76 | % | 1.41 | % | 1.16 | % | 1.23 | % | 1.56 | % | 1.64 | % | ||||||||||||||||
Estimated option’s life | | 6 years | | | 6 years | | | 6 years | | | 6 years | | | 6 years | | | 6 years | | | 6 years | | — | ||||||||||
Share price | 43,843 | 27,300 | 17,000 | 22,050 | 21,800 | 40,300 | 49,250 | 10,455 | ||||||||||||||||||||||||
Expected volatility | 18.67 | % | 21.28 | % | 25.58 | % | 42.37 | % | 41.69 | % | 51.16 | % | 43.02 | % | 16.20 | % | ||||||||||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||||
Exercise price | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | 45,280 | 51,940 | 10,000 | ||||||||||||||||||||||||
Per-share fair value of the option | 9,423 | 7,277 | 4,887 | 9,209 | 7,813 | 18,491 | 20,398 | 1,420 |
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
1-1, 1-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 26,630 | 28,027 | 28,150 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 20,579 | 20,579 | 20,579 | |||||||||
Per-share fair value of the option | 6,051 | 7,448 | 7,571 | |||||||||
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
1-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 27,746 | 28,756 | 28,945 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 22,225 | 22,225 | 22,225 | |||||||||
Per-share fair value of the option | 5,521 | 6,531 | 6,720 | |||||||||
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
1-4 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 28,951 | 29,666 | 29,912 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 24,003 | 24,003 | 24,003 | |||||||||
Per-share fair value of the option | 4,948 | 5,663 | 5,909 |
59
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Share Option, Continued |
(3) | The Group used the binomial option-pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows, Continued: |
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
2-1, 2-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 26,784 | 28,128 | 28,261 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 20,807 | 20,807 | 20,807 | |||||||||
Per-share fair value of the option | 5,977 | 7,321 | 7,454 | |||||||||
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
2-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 27,913 | 28,865 | 29,064 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 22,472 | 22,472 | 22,472 | |||||||||
Per-share fair value of the option | 5,441 | 6,393 | 6,592 | |||||||||
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
2-4 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 29,132 | 29,817 | 30,070 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 24,270 | 24,270 | 24,270 | |||||||||
Per-share fair value of the option | 4,862 | 5,547 | 5,800 | |||||||||
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
3-1 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 26,784 | 28,128 | 28,261 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 20,807 | 20,807 | 20,807 | |||||||||
Per-share fair value of the option | 5,977 | 7,321 | 7,454 |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Share Option, Continued |
(3) | The Group used the binomial option-pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows, Continued: |
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
3-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 27,913 | 28,865 | 29,064 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 22,472 | 22,472 | 22,472 | |||||||||
Per-share fair value of the option | 5,441 | 6,393 | 6,592 | |||||||||
(In won) | ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.) | |||||||||||
3-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate | 0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated option’s life | 2 years | 2.5 years | 3 years | |||||||||
Share price (Closing price on the preceding day) | 29,132 | 29,817 | 30,070 | |||||||||
Expected volatility | 27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price | 24,270 | 24,270 | 24,270 | |||||||||
Per-share fair value of the option | 4,862 | 5,547 | 5,800 |
As FSK L&S Co., Ltd., and ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.), the subsidiaries of the Parent Company, are unlisted, the share price is calculated using the discounted cash flow model.
21. | Retained Earnings |
Retained earnings as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Appropriated: | ||||||||
Legal reserve | 22,320 | |||||||
Reserve for business expansion | 11,631,138 | 11,631,138 | ||||||
Reserve for technology development | 4,365,300 | 4,365,300 | ||||||
|
|
|
| |||||
15,996,438 | 15,996,438 | |||||||
Unappropriated | 6,857,061 | 6,963,155 | ||||||
|
|
|
| |||||
22,981,913 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
22. | Reserves |
(1) | Details of reserves, net of taxes, as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Valuation gain on FVOCI | 438,979 | |||||||
Other comprehensive loss of investments in associates and joint ventures | (279,218 | ) | (392,333 | ) | ||||
Valuation gain on derivatives | 14,882 | 17,615 | ||||||
Foreign currency translation differences for foreign operations | (7,821 | ) | (24,122 | ) | ||||
|
|
|
| |||||
40,139 | ||||||||
|
|
|
|
(2) | Changes in reserves for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI | Other comprehensive income (loss) of investments in associates and joint ventures | Valuation gain (loss) on derivatives | Foreign currency translation differences for foreign operations | Total | ||||||||||||||||
Balance at January 1, 2020 | (278,142 | ) | (920 | ) | (3,428 | ) | (329,576 | ) | ||||||||||||
Changes, net of taxes | (19,002 | ) | 109,796 | 4,581 | 17,446 | 112,821 | ||||||||||||||
Balance at March 31, 2020 | (168,346 | ) | 3,661 | 14,018 | (216,755 | ) | ||||||||||||||
Balance at January 1, 2021 | (392,333 | ) | 17,615 | (24,122 | ) | 40,139 | ||||||||||||||
Changes, net of taxes | 169,679 | 113,115 | (2,733 | ) | 16,301 | 296,362 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at March 31, 2021 | (279,218 | ) | 14,882 | (7,821 | ) | 336,501 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
23. | Other Operating Expenses |
Details of other operating expenses for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Communication | 10,592 | |||||||
Utilities | 87,808 | 86,393 | ||||||
Taxes and dues | 7,916 | 8,371 | ||||||
Repair | 90,031 | 80,530 | ||||||
Research and development | 100,689 | 110,315 | ||||||
Training | 6,649 | 8,232 | ||||||
Bad debt for accounts receivable – trade | 7,475 | 17,318 | ||||||
Travel | 3,219 | 5,181 | ||||||
Others | 95,058 | 68,127 | ||||||
|
|
|
| |||||
395,059 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
24. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Other non-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 1,549 | |||||||
Gain on business transfer | — | 12,451 | ||||||
Reversal of loss allowance for accounts receivable – other | 55 | — | ||||||
Reversal for loss on impairment on other investment securities | 5,021 | — | ||||||
Others | 12,224 | 2,619 | ||||||
|
|
|
| |||||
16,619 | ||||||||
|
|
|
| |||||
Other non-operating Expenses: | ||||||||
Loss on disposal of property and equipment and intangible assets | 7,085 | |||||||
Donations | 3,604 | 6,452 | ||||||
Bad debt for accounts receivable – other | — | 791 | ||||||
Others | 3,961 | 2,790 | ||||||
|
|
|
| |||||
17,118 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
25. | Finance Income and Costs |
(1) | Details of finance income and costs for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Finance Income: | ||||||||
Interest income | 12,949 | |||||||
Gain on sale of accounts receivable – other | 7,921 | 4,679 | ||||||
Dividends | 1,039 | 732 | ||||||
Gain on foreign currency transactions | 1,573 | 2,092 | ||||||
Gain on foreign currency translations | 8,427 | 10,568 | ||||||
Gain on settlement of derivatives | 141 | 7,537 | ||||||
Gain relating to financial assets at FVTPL | 35,179 | 442 | ||||||
|
|
|
| |||||
38,999 | ||||||||
|
|
|
| |||||
Finance Costs: | ||||||||
Interest expenses | 100,511 | |||||||
Loss on foreign currency transactions | 1,872 | 2,250 | ||||||
Loss on foreign currency translations | 6,231 | 7,002 | ||||||
Loss on settlement of derivatives | — | 1,866 | ||||||
Loss relating to financial assets at FVTPL | 5,775 | 744 | ||||||
|
|
|
| |||||
112,373 | ||||||||
|
|
|
|
(2) | Details of interest income included in finance income for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Interest income on cash equivalents and short-term financial instruments | 6,377 | |||||||
Interest income on loans and others | 7,040 | 6,572 | ||||||
|
|
|
| |||||
12,949 | ||||||||
|
|
|
|
(3) | Details of interest expenses included in finance costs for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Interest expense on borrowings | 25,805 | |||||||
Interest expense on debentures | 56,056 | 56,897 | ||||||
Others | 12,023 | 17,809 | ||||||
|
|
|
| |||||
100,511 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
25. | Finance Income and Costs, Continued |
(4) | Details of impairment losses for financial assets for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Accounts receivable – trade | 17,318 | |||||||
Other receivables | (55 | ) | 791 | |||||
|
|
|
| |||||
18,109 | ||||||||
|
|
|
|
26. | Income Tax Expense |
Income tax expense was calculated by considering current tax expense, adjusted to changes in estimates related to prior periods, and deferred tax expense due to origination and reversal of temporary differences.
27. | Earnings per Share |
(1) | Basic earnings per share |
1) | Basic earnings per share for the three-month periods ended March 31, 2021 and 2020 are calculated as follows: |
(In millions of won, except for share data) | For the three-month periods ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Profit attributable to owners of the Parent Company | 308,545 | |||||||
Interest on hybrid bonds | (3,692 | ) | (3,692 | ) | ||||
Profit attributable to owners of the Parent Company on common shares | 554,573 | 304,853 | ||||||
Weighted average number of common shares outstanding | 71,165,780 | 73,136,448 | ||||||
|
|
|
| |||||
Basic earnings per share (in won) | 4,168 | |||||||
|
|
|
|
2) | The weighted average number of common shares outstanding for the three-month periods ended March 31, 2021 and 2020 are calculated as follows: |
(In shares) | For the three-month period ended March 31, 2021 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2021 | 80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2021 | (9,418,558 | ) | (9,418,558 | ) | ||||
Acquisition of treasury shares | (288,000 | ) | (238,000 | ) | ||||
Disposal of treasury shares | 120,990 | 76,627 | ||||||
|
|
|
| |||||
71,160,143 | 71,165,780 | |||||||
|
|
|
|
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Earnings per Share, Continued |
(1) | Basic earnings per share, Continued |
2) | The weighted average number of common shares outstanding for the three-month periods ended March 31, 2021 and 2020 are calculated as follows, Continued: |
(In shares) | For the three-month period ended March 31, 2020 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2020 | 80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2020 | (7,609,263 | ) | (7,609,263 | ) | ||||
|
|
|
| |||||
73,136,448 | 73,136,448 | |||||||
|
|
|
|
(2) | Diluted earnings per share |
1) | Diluted earnings per share for the three-month period ended March 31, 2021 are calculated as follows: |
(In millions of won, except for share data) | For the three-month period ended March 31, 2021 | |||
Profit for the period on common shares | ||||
Adjusted weighted average number of common shares outstanding | 71,196,407 | |||
|
| |||
Diluted earnings per share (in won) | ||||
|
|
2) | The adjusted weighted average number of common shares outstanding for the three-month period ended March 31, 2021 are calculated as follows: |
(In shares) | For the three-month period ended March 31, 2021 | |||
Outstanding shares at January 1, 2021 | 71,327,153 | |||
Effect of treasury shares | (161,373 | ) | ||
Effect of share option | 30,627 | |||
|
| |||
Adjusted weighted average number of common shares outstanding | 71,196,407 | |||
|
|
For the three-month period ended March 31, 2020, diluted earnings per share are the same as basic earnings per share as there are no dilutive potential common shares.
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Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Categories of Financial Instruments |
(1) | Financial assets by category as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Debt instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | |||||||||||||||||||
Cash and cash equivalents | — | — | 1,231,339 | — | 1,231,339 | |||||||||||||||||||
Financial instruments | — | — | — | 1,349,875 | — | 1,349,875 | ||||||||||||||||||
Short-term investment securities | 108,760 | — | — | — | — | 108,760 | ||||||||||||||||||
Long-term investment securities(*) | 191,458 | 1,721,990 | 1,125 | — | — | 1,914,573 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 2,238,663 | — | 2,238,663 | ||||||||||||||||||
Loans and other receivables | 450,423 | — | — | 1,403,116 | — | 1,853,539 | ||||||||||||||||||
Derivative financial assets | 102,274 | — | — | — | 108,574 | 210,848 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1,721,990 | 1,125 | 6,222,993 | 108,574 | 8,907,597 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated |
(In millions of won) | December 31, 2020 | |||||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Debt instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | |||||||||||||||||||
Cash and cash equivalents | — | — | 1,369,653 | — | 1,369,653 | |||||||||||||||||||
Financial instruments | — | — | — | 1,427,845 | — | 1,427,845 | ||||||||||||||||||
Short-term investment securities | 150,392 | — | — | — | — | 150,392 | ||||||||||||||||||
Long-term investment securities(*) | 193,396 | 1,454,361 | 1,080 | — | — | 1,648,837 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 2,214,353 | — | 2,214,353 | ||||||||||||||||||
Loans and other receivables | 517,175 | — | — | 1,220,828 | — | 1,738,003 | ||||||||||||||||||
Derivative financial assets | 99,559 | — | — | — | 65,136 | 164,695 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1,454,361 | 1,080 | 6,232,679 | 65,136 | 8,713,778 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated |
67
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of March 31, 2021, and December 31, 2020, are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable – trade | 336,523 | — | 336,523 | |||||||||||||
Derivative financial liabilities | 333,099 | — | 22,651 | 355,750 | ||||||||||||
Borrowings | — | 2,181,203 | — | 2,181,203 | ||||||||||||
Debentures | — | 8,678,320 | — | 8,678,320 | ||||||||||||
Lease liabilities(*) | — | 1,454,365 | — | 1,454,365 | ||||||||||||
Accounts payable – other and others | — | 5,719,111 | — | 5,719,111 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
18,369,522 | 22,651 | 18,725,272 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
(In millions of won) | December 31, 2020 | |||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable – trade | 372,909 | — | 372,909 | |||||||||||||
Derivative financial liabilities | 333,099 | — | 42,061 | 375,160 | ||||||||||||
Borrowings | — | 2,138,922 | — | 2,138,922 | ||||||||||||
Debentures | — | 8,579,743 | — | 8,579,743 | ||||||||||||
Lease liabilities(*) | — | 1,436,777 | — | 1,436,777 | ||||||||||||
Accounts payable – other and others | — | 6,051,550 | — | 6,051,550 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
18,579,901 | 42,061 | 18,955,061 | ||||||||||||||
|
|
|
|
|
|
|
|
(*) | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
68
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Financial Risk Management |
(1) | Financial risk management |
The Group is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Group implements a risk management system to monitor and manage these specific risks.
The Group’s financial assets consist of cash and cash equivalents, financial instruments, investment securities and accounts receivable – trade and others, etc. Financial liabilities consist of accounts payable – trade and other, borrowings, debentures, lease liabilities and others.
1) | Market risk |
(i) | Currency risk |
The Group incurs exchange position due to revenue and expenses from its global operations. Major foreign currencies where the currency risk occurs are USD, EUR and JPY. The Group determines the currency risk management policy after considering the nature of business and the presence of methods that mitigate the currency risk for each Group entities. Currency risk occurs on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of each Group entity. The Group manages currency risk arising from business transactions by using currency forwards, etc.
Monetary assets and liabilities denominated in foreign currencies as of March 31, 2021 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 169,202 | 1,552,218 | ||||||||||||||
EUR | 13,400 | 17,799 | 10,038 | 13,333 | ||||||||||||
JPY | 346,032 | 3,555 | 193,496 | 1,988 | ||||||||||||
Others | 203 | 9,900 | 20 | 4,150 | ||||||||||||
|
|
|
| |||||||||||||
|
|
|
|
In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of March 31, 2021, a hypothetical change in exchange rates by 10% would have increased (decreased) the Group’s income before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (14,194 | ) | ||||||
EUR | 447 | (447 | ) | |||||
JPY | 156 | (156 | ) | |||||
Others | 575 | (575 | ) | |||||
|
|
|
| |||||
(15,372 | ) | |||||||
|
|
|
|
69
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) Interest rate risk
The interest rate risk of the Group arises from borrowings, debenture, and long-term payables – other. Since the Group’s interest-bearing assets are mostly fixed-interest bearing assets, the Group’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Group performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Group takes various measures, such as refinancing, renewal, alternative financing and hedging.
As of March 31, 2021, the floating-rate borrowings and debentures of the Group areW112,438 million andW340,050 million, respectively, and the Group has entered into interest rate swap agreements for most of floating rate borrowings and debentures to hedge interest rate risk. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes for the three-month period ended March 31, 2021 would change byW118 million in relation to the floating-rate borrowings that are exposed to interest rate risk.
As of March 31, 2021, the floating-rate long-term payables – other areW1,200,691 million. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes for the three-month ended March 31, 2021 would change byW3,002 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.
2) | Credit risk |
The maximum credit exposure as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Cash and cash equivalents | 1,369,423 | |||||||
Financial instruments | 1,349,875 | 1,427,845 | ||||||
Investment securities | 2,025 | 4,154 | ||||||
Accounts receivable – trade | 2,238,663 | 2,214,353 | ||||||
Contract assets | 163,411 | 148,281 | ||||||
Loans and other receivables | 1,853,539 | 1,738,003 | ||||||
Derivative financial assets | 210,848 | 164,695 | ||||||
|
|
|
| |||||
7,066,754 | ||||||||
|
|
|
|
70
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors. Based on such information, the Group establishes credit limits for each customer or counterparty.
The Group establishes a loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Group’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Group has a policy to deal only with financial institutions with high credit ratings. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of March 31, 2021.
3) | Liquidity risk |
The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalent balances and have enough liquidity through various committed credit lines. The Group maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of March 31, 2021 are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Accounts payable – trade | 336,523 | 336,523 | — | — | ||||||||||||||||
Borrowings(*) | 2,181,203 | 2,511,005 | 222,988 | 2,288,017 | — | |||||||||||||||
Debentures(*) | 8,678,320 | 9,853,748 | 1,318,186 | 5,486,972 | 3,048,590 | |||||||||||||||
Lease liabilities | 1,454,365 | 1,572,622 | 434,637 | 881,994 | 255,991 | |||||||||||||||
Accounts payable – other and others(*) | 5,719,111 | 5,781,352 | 4,769,842 | 827,919 | 183,591 | |||||||||||||||
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| |||||||||||
20,055,250 | 7,082,176 | 9,484,902 | 3,488,172 | |||||||||||||||||
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(*) | Includes interest payables. |
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
71
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) | Liquidity risk, Continued |
As of March 31, 2021, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 -5 years | More than 5 years | ||||||||||||||||
Assets | 109,998 | 17,490 | 95,979 | (3,471 | ) | |||||||||||||||
Liabilities | (22,651 | ) | (23,293 | ) | (973 | ) | (22,320 | ) | — | |||||||||||
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86,705 | 16,517 | 73,659 | (3,471 | ) | ||||||||||||||||
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(2) | Capital management |
The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Group is the same as that for the year ended December 31, 2020.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity; both are from the condensed consolidated interim financial statements.
Debt-equity ratio as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Total liabilities | 23,510,714 | |||||||
Total equity | 24,569,099 | 24,396,243 | ||||||
Debt-equity ratios | 94.40 | % | 96.37 | % |
72
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Financial Risk Management, Continued |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 55,462 | 530,183 | 267,270 | 852,915 | ||||||||||||||||
Derivatives hedging instruments | 108,574 | — | 108,574 | — | 108,574 | |||||||||||||||
FVOCI | 1,723,115 | 1,147,844 | — | 575,271 | 1,723,115 | |||||||||||||||
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1,203,306 | 638,757 | 842,541 | 2,684,604 | |||||||||||||||||
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| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 333,099 | 333,099 | ||||||||||||||||
Derivatives hedging instruments | 22,651 | — | 22,651 | — | 22,651 | |||||||||||||||
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| |||||||||||
— | 22,651 | 333,099 | 355,750 | |||||||||||||||||
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|
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|
| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 2,348,151 | — | 2,348,151 | ||||||||||||||||
Debentures | 8,678,320 | — | 9,101,965 | — | 9,101,965 | |||||||||||||||
Long-term payables – other | 1,157,812 | — | 1,163,094 | — | 1,163,094 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
— | 12,613,210 | — | 12,613,210 | |||||||||||||||||
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|
|
| |||||||||||
(In millions of won) | December 31, 2020 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 60,473 | 629,732 | 270,317 | 960,522 | ||||||||||||||||
Derivatives hedging instruments | 65,136 | — | 65,136 | — | 65,136 | |||||||||||||||
FVOCI | 1,455,441 | 885,452 | — | 569,989 | 1,455,441 | |||||||||||||||
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| |||||||||||
945,925 | 694,868 | 840,306 | 2,481,099 | |||||||||||||||||
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|
| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 333,099 | 333,099 | ||||||||||||||||
Derivatives hedging instruments | 42,061 | — | 42,061 | — | 42,061 | |||||||||||||||
|
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| |||||||||||
— | 42,061 | 333,099 | 375,160 | |||||||||||||||||
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| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 2,282,316 | — | 2,282,316 | ||||||||||||||||
Debentures | 8,579,743 | — | 9,085,324 | — | 9,085,324 | |||||||||||||||
Long-term payables – other | 1,566,954 | — | 1,582,805 | — | 1,582,805 | |||||||||||||||
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|
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|
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| |||||||||||
— | 12,950,445 | — | 12,950,445 | |||||||||||||||||
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73
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
1) | Fair value and carrying amount of financial assets and liabilities based on fair value hierarchy as of March 31, 2021 and December 31, 2020, are as follows, Continued: |
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI and FVPTL) is measured based on the bid price at the end of the reporting date.
The Group uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used for such valuation methods include swap rate, interest rate and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
Interest rates used by the Group for the fair value measurement as of March 31, 2021 are as follows:
Interest rate | ||
Derivative instruments | 0.14% ~ 3.90% | |
Borrowings and debentures | 0.96% ~ 2.36% | |
Long-term payables – other | 1.05% ~ 1.95% |
2) | There have been no transfers between Level 2 and Level 1 for the three-month period ended March 31, 2021. The changes of financial assets and liabilities classified as Level 3 for the three-month period ended March 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
Balance at January 1, 2021 | Gain for the period | OCI | Acquisition | Disposal | Transfer | Balance at March 31, 2021 | ||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||
FVTPL | 34,528 | 4,303 | 13,125 | (57,174 | ) | 2,171 | 267,270 | |||||||||||||||||||||
FVOCI | 569,989 | — | 3,389 | 1,893 | — | — | 575,271 | |||||||||||||||||||||
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| |||||||||||||||
34,528 | 7,692 | 15,018 | (57,174 | ) | 2,171 | 842,541 | ||||||||||||||||||||||
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| |||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||
FVTPL | — | — | — | — | — | (333,099 | ) |
74
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) | March 31, 2021 | |||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the condensed consolidated interim statement of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (222,878 | ) | 6,071 | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (222,878 | ) | 4,436 |
(In millions of won) | December 31, 2020 | |||||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statements of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Derivative instruments(*) | — | 8,015 | (453 | ) | 7,562 | |||||||||||||||
Accounts receivable – trade and others | 317,332 | (203,403 | ) | 113,929 | — | 113,929 | ||||||||||||||
|
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|
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|
| |||||||||||
(203,403 | ) | 121,944 | (453 | ) | 121,491 | |||||||||||||||
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|
|
|
| |||||||||||
Financial liabilities: | ||||||||||||||||||||
Derivative instruments(*) | — | 453 | (453 | ) | — | |||||||||||||||
Accounts payable – other and others | 301,996 | (203,403 | ) | 98,593 | — | 98,593 | ||||||||||||||
|
|
|
|
|
|
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|
| |||||||||||
(203,403 | ) | 99,046 | (453 | ) | 98,593 | |||||||||||||||
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|
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|
|
|
|
(*) | The balance represents the net amount under the standard terms and conditions of International Swaps and Derivatives Association. |
75
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
30. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) | |
Joint ventures | Dogus Planet, Inc. and 4 others | |
Associates | SK hynix Inc. and 56 others | |
Others | The Ultimate Controlling Entity’s subsidiaries and associates, etc. |
As of March 31, 2021, the Group is included to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Group.
(2) | Compensation for the key management |
The Parent Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operations and relevant controls of the business as key management. The compensation given to such key management for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Salaries | 4,849 | |||||||
Defined benefits plan expenses | 1,815 | 2,933 | ||||||
Share option | 32 | 32 | ||||||
|
|
|
| |||||
7,814 | ||||||||
|
|
|
|
Compensation for the key management includes salaries, non-monetary salaries and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
76
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
30. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended March 31, 2021 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.)(*2) | 285,366 | 2,168 | |||||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | 786 | 12,715 | — | ||||||||||
SK hynix Inc.(*3) | 200,383 | 134 | — | |||||||||||
KEB HanaCard Co., Ltd. | 20 | 842 | — | |||||||||||
SK Wyverns Co., Ltd.(*4) | 202 | 8,203 | — | |||||||||||
Content Wavve Co., Ltd. | 19 | 695 | — | |||||||||||
Others | 13,272 | 432 | — | |||||||||||
|
|
|
|
|
| |||||||||
214,682 | 23,021 | — | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | 2,761 | — | — | ||||||||||
SK Innovation Co., Ltd. | 12,101 | 4,631 | — | |||||||||||
SK Networks Co., Ltd.(*5) | 2,985 | 301,471 | 24 | |||||||||||
SK Networks Services Co., Ltd. | 1,746 | 17,225 | 12 | |||||||||||
SK Telesys Co., Ltd. | 70 | 1,366 | 1,562 | |||||||||||
SK TNS Co., Ltd. | 59 | 4,337 | 22,378 | |||||||||||
SK Energy Co., Ltd. | 2,410 | 408 | — | |||||||||||
SK hynix Semiconductor (China) Ltd. | 15,923 | — | — | |||||||||||
SK Battery Hungary Kft. | 9,304 | — | — | |||||||||||
SK Global Chemical Co., Ltd. | 2,779 | 8 | — | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | 3,506 | — | — | |||||||||||
Happy Narae Co., Ltd. | 2,081 | 4,604 | 4,941 | |||||||||||
Others | 31,699 | 37,824 | 5,593 | |||||||||||
|
|
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|
|
| |||||||||
87,424 | 371,874 | 34,510 | ||||||||||||
|
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|
| |||||||||
680,261 | 36,678 | |||||||||||||
|
|
|
|
|
|
(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include |
(*3) | Operating revenue and others include |
(*4) | Transactions with SK Wyverns Co., Ltd. occurred before disposal. |
(*5) | Operating expenses and others include costs for handset purchases amounting to |
77
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
30. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued: |
(In millions of won) | For the three-month period ended March 31, 2020 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.)(*2) | 291,614 | 2,144 | |||||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | 477 | 12,412 | — | ||||||||||
SK hynix Inc.(*3) | 159,579 | 61 | — | |||||||||||
KEB HanaCard Co., Ltd. | 151 | 787 | — | |||||||||||
SK Wyverns Co., Ltd. | 316 | 9,429 | — | |||||||||||
Others | 12,629 | 11,855 | — | |||||||||||
|
|
|
|
|
| |||||||||
173,152 | 34,544 | — | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | 4,595 | 1 | — | ||||||||||
SK Innovation Co., Ltd. | 18,010 | 4,140 | — | |||||||||||
SK Networks Co., Ltd.(*4) | 3,675 | 269,312 | 6 | |||||||||||
SK Networks Services Co., Ltd. | 1,237 | 17,519 | 103 | |||||||||||
SK Telesys Co., Ltd. | 98 | 2,566 | 658 | |||||||||||
SK TNS Co., Ltd. | 56 | 8,259 | 20,640 | |||||||||||
SK Energy Co., Ltd. | 2,104 | 74 | — | |||||||||||
SK hynix Semiconductor (China) Ltd. | 12,034 | — | — | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | 2,696 | 8 | — | |||||||||||
Happy Narae Co., Ltd. | 2,163 | 4,116 | 10,757 | |||||||||||
Others | 29,322 | 28,519 | 6,248 | |||||||||||
|
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|
|
| |||||||||
75,990 | 334,514 | 38,412 | ||||||||||||
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| |||||||||
660,672 | 40,556 | |||||||||||||
|
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|
|
|
|
(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include |
(*3) | Operating revenue and others include |
(*4) | Operating expenses and others include costs for handset purchases amounting to |
78
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
30. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) | 5,044 | 229,652 | |||||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | — | 18 | 5,633 | ||||||||||
SK hynix Inc. | — | 201,072 | 156 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 25,782 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 2,445 | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 634 | 76,546 | |||||||||||
Content Wavve Co., Ltd. | — | 408 | 20 | |||||||||||
Others | — | 2,643 | 155 | |||||||||||
|
|
|
|
|
| |||||||||
22,147 | 233,002 | 82,510 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | — | 1,754 | — | ||||||||||
SK Innovation Co., Ltd. | — | 7,521 | 38,995 | |||||||||||
SK Networks Co., Ltd. | — | 2,170 | 100,843 | |||||||||||
SK Networks Services Co., Ltd. | — | 550 | 5,900 | |||||||||||
SK Telesys Co., Ltd. | — | 21 | 3,460 | |||||||||||
SK TNS Co., Ltd. | — | 8 | 21,365 | |||||||||||
SK Energy Co., Ltd. | — | 2,437 | 2,086 | |||||||||||
SK hystec Co., Ltd. | — | 1,151 | 6,191 | |||||||||||
SK hynix Semiconductor (China) Ltd. | — | 5,538 | — | |||||||||||
SK Battery Hungary Kft. | — | 3,474 | — | |||||||||||
SK Global Chemical Co., Ltd. | — | 2,363 | 6 | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | — | 1,541 | 21 | |||||||||||
Happy Narae Co., Ltd. | — | 750 | 3,546 | |||||||||||
Others | — | 20,543 | 34,374 | |||||||||||
|
|
|
|
|
| |||||||||
— | 49,821 | 216,787 | ||||||||||||
|
|
|
|
|
| |||||||||
287,867 | 528,949 | |||||||||||||
|
|
|
|
|
|
(*1) | As of March 31, 2021, the Parent Company recognized loss allowance amounting to |
(*2) | As of March 31, 2021, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
79
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
30. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2021 and December 31, 2020 are as follows, Continued: |
(In millions of won) | December 31, 2020 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) | 6,449 | 64,373 | |||||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | — | 10 | 4,699 | ||||||||||
SK hynix Inc. | — | 33,773 | 128 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 25,782 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 2,779 | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 352 | 145,328 | |||||||||||
Content Wavve Co., Ltd. | — | 283 | 2,491 | |||||||||||
Others | — | 9,098 | 1,686 | |||||||||||
|
|
|
|
|
| |||||||||
22,147 | 72,077 | 154,332 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | — | 1,521 | 152 | ||||||||||
SK Innovation Co., Ltd. | — | 11,737 | 44,105 | |||||||||||
SK Networks Co., Ltd. | — | 2,245 | 108,233 | |||||||||||
SK Networks Services Co., Ltd. | — | 579 | 7,103 | |||||||||||
SK Telesys Co., Ltd. | — | 37 | 9,253 | |||||||||||
SK TNS Co., Ltd. | — | 263 | 89,915 | |||||||||||
SK Energy Co., Ltd. | — | 3,502 | 1,837 | |||||||||||
SK hystec Co., Ltd. | — | 494 | 6,085 | |||||||||||
SK hynix Semiconductor (China) Ltd. | — | 5,896 | — | |||||||||||
SK Battery Hungary Kft. | — | 2,075 | — | |||||||||||
SK Global Chemical Co., Ltd. | — | 1,142 | 5 | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | — | 795 | 21 | |||||||||||
Happy Narae Co., Ltd. | — | 720 | 16,534 | |||||||||||
Others | — | 15,564 | 120,575 | |||||||||||
|
|
|
|
|
| |||||||||
— | 46,570 | 403,818 | ||||||||||||
|
|
|
|
|
| |||||||||
125,096 | 622,523 | |||||||||||||
|
|
|
|
|
|
(*1) | As of December 31, 2020, the Parent Company recognized loss allowance amounting to |
(*2) | As of December 31, 2020, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
31. | Commitments and Contingencies |
(1) | Collateral assets and commitments |
SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount ofW1,568 million as of March 31, 2021.
In addition, ADT CAPS Co., Ltd.(Formerly, SK Infosec Co., Ltd.), a subsidiary of the Parent Company, has pledged its shares of CAPSTEC Co., Ltd. for the long-term borrowings with a face value ofW1,950,000 million and Incross Co., Ltd., a subsidiary of the Parent Company, has pledged itsW21,211 million of short-term financial instrument for performance guarantee as of March 31, 2021.
(2) | Legal claims and litigations |
As of March 31, 2021, the Group is involved in various legal claims and litigations. Provision recognized in relation to these claims and litigations is immaterial. In connection with those legal claims and litigations for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected that any of these claims or litigations will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.
Meanwhile, the pending litigation over the validity of partnership contract that SK Planet Co., Ltd., a subsidiary of the Parent Company, was involved as the defendant (Plaintiff: Nonghyup Bank) was settled by the agreement between the parties for the year ended December 31, 2018. As a result of the settlement, the credit card business partnership between the SK Planet Co., Ltd. and Nonghyup Bank will be maintained until April 2021, and the SK Planet Co., Ltd. is obligated to pay the commission fees based on the customers’ credit card usage until September 2021, the expiration date of the credit cards. The Group determined that the contract and the subsidiary agreements meet the definition of an onerous contract according to K-IFRS No.1037, for which the Group recognized provisions with the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. In this regard,W11,312 million are recognized as current provisions as of March of 31, 2021.
(3) | Accounts receivable from sale of handsets |
The sales agents of the Parent Company sell handsets to the Parent Company’s subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivables from handset sales with retail stores and authorized dealers and to transfer the accounts receivables from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivables from sale of handsets amounting toW494,904 million andW571,004 million as of March 31, 2021 and December 31, 2020, respectively, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
32. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Interest income | (12,949 | ) | ||||||
Dividends | (1,039 | ) | (732 | ) | ||||
Gain on foreign currency translations | (8,427 | ) | (10,568 | ) | ||||
Gain on settlement of derivatives | (141 | ) | (7,537 | ) | ||||
Gain on sale of accounts receivable – other | (7,921 | ) | (4,679 | ) | ||||
Gain relating to investments in associates and joint ventures, net | (322,455 | ) | (140,895 | ) | ||||
Gain on disposal of property and equipment and intangible assets | (2,738 | ) | (1,549 | ) | ||||
Gain on business transfer | — | (12,451 | ) | |||||
Gain relating to financial assets at FVTPL | (35,179 | ) | (442 | ) | ||||
Reversal for loss on impairment on other investment securities | (5,021 | ) | — | |||||
Other income | (6,405 | ) | (1,088 | ) | ||||
Interest expense | 86,495 | 100,511 | ||||||
Loss on foreign currency translations | 6,231 | 7,002 | ||||||
Income tax expense | 111,862 | 62,368 | ||||||
Expense related to defined benefit plan | 49,141 | 48,951 | ||||||
Share option | 1,045 | 1,019 | ||||||
Bonus paid by treasury shares | 29,642 | — | ||||||
Depreciation and amortization | 1,033,579 | 1,028,758 | ||||||
Bad debt for account receivables – trade | 7,475 | 17,318 | ||||||
Loss on disposal of property and equipment and intangible assets | 6,029 | 7,085 | ||||||
Bad debt(reversal) for accounts receivable – other | (55 | ) | 791 | |||||
Loss on settlement of derivatives | — | 1,866 | ||||||
Loss relating to financial assets at FVTPL | 5,775 | 744 | ||||||
Other expenses | 1,933 | 13,408 | ||||||
|
|
|
| |||||
1,096,931 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
32. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Accounts receivable – trade | 52,480 | |||||||
Accounts receivable – other | 8,928 | (30,469 | ) | |||||
Accrued income | — | 273 | ||||||
Advanced payments | (25,429 | ) | (17,620 | ) | ||||
Prepaid expenses | (53,064 | ) | 18,475 | |||||
Inventories | (50,572 | ) | (43,193 | ) | ||||
Long-term accounts receivable – other | 46,059 | 44,071 | ||||||
Contract assets | (16,689 | ) | 19,795 | |||||
Guarantee deposits | 474 | (5,046 | ) | |||||
Accounts payable – trade | (32,512 | ) | 12,961 | |||||
Accounts payable – other | (395,361 | ) | (348,355 | ) | ||||
Withholdings | 130,954 | 80,430 | ||||||
Contract liabilities | 14,912 | 15,278 | ||||||
Deposits received | 2,910 | (681 | ) | |||||
Accrued expenses | (126,783 | ) | (179,495 | ) | ||||
Provisions | (7,415 | ) | (7,053 | ) | ||||
Long-term provisions | 1,477 | (1,117 | ) | |||||
Plan assets | 25,989 | 18,123 | ||||||
Retirement benefit payment | (30,582 | ) | (26,324 | ) | ||||
Others | 5,090 | 51,295 | ||||||
|
|
|
| |||||
(346,172 | ) | |||||||
|
|
|
|
(3) | Significant non-cash transactions for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets | (626,509 | ) | ||||||
Increase of right-of-use assets | 192,210 | 196,824 | ||||||
Contribution in kind for investments | 7,000 | 4,702 |
33. | Non-current assets Held for Sale |
On February 25, 2021, the Parent Company has decided to dispose of certain land, buildings, structures and equipment (carrying value:W35,280 million) to E-MART Inc. pursuant to the approval of the board of directors and reclassified the property and equipment as non-current assets held for sale.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
34. | Subsequent Events |
(1) | The Parent Company is considering a potential corporate restructuring whereby the Parent Company will split into a wireless and fixed-line telecommunications company (including, among others, the Parent Company’s interest in SK Broadband Co., Ltd.) (the “Surviving Company”) and a holding company that holds interests in semiconductor and new information and communication technology (“New ICT”) businesses (including, among others, the Parent Company’s interest in SK hynix Inc., ADT CAPS Co., Ltd., Eleven Street Co., Ltd. and T map Mobility Co., Ltd.) (the “Spin-off Company”). The Surviving Company and the Spin-off Company will operate wireless and fixed-line telecommunication businesses and investment business as main business, respectively. A decision regarding the potential spin-off, if any, is expected to be made in the first half of 2021. The Parent Company will disclose such decision at such time. |
(2) | On March 25, 2021, the board of directors of the Parent Company made a resolution to additionally contribute of |
(3) | On May 4, 2021, the board of directors of the Parent Company made a resolution to the retirement of treasury shares, and the details are as follows: |
Type and the number of shares | 8,685,568 common shares | |
Amount to be retired | ||
Retirement date | May 6, 2021 | |
Acquisition of the shares which were retired | Treasury shares that were previously acquired by the Parent Company |
(4) | On April 30, 2021, the board of directors of the DREAMUS COMPANY, a subsidiary of the Parent Company, made a resolution to approve a third-party allotment offering of |
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SK TELECOM CO., LTD.
Condensed Separate Interim Financial Statements
(Unaudited)
March 31, 2021 and 2020
(With Independent Auditors’ Review Report Thereon)
Table of Contents
Table of Contents
Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
SK Telecom Co., Ltd.:
Reviewed financial statements
We have reviewed the accompanying condensed separate interim financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the condensed separate statement of financial position as of March 31, 2021, the condensed separate statements of income, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2021 and 2020, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034, Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of condensed separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ review responsibility
Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared fairly, in all material respects, in accordance with K-IFRS No.1034, Interim Financial Reporting.
Table of Contents
Other matters
The separate statement of financial position of the Company as of December 31, 2020, and the related separate statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 11, 2021, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2020, presented for comparative purposes, is consistent, in all material respects, with the audited separate financial statements from which it has been derived.
The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.
KPMG Samjong Accounting Corp.
Seoul, Korea
May 14, 2021
This report is effective as of May 14, 2021, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any. |
2
Table of Contents
SK TELECOM CO., LTD. (the “Company”)
CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS
AS OF MARCH 31, 2021, AND DECEMBER 31, 2020, AND
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2021 AND 2020
The accompanying condensed separate interim financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Company.
Park, Jung-Ho
Chief Executive Officer
SK TELECOM CO., LTD.
3
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Financial Position
As of March 31, 2021 and December 31, 2020
(In millions of won) | ||||||||||||
Note | March 31, 2021 | December 31, 2020 | ||||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 26,27 | 329,208 | ||||||||||
Short-term financial instruments | 26,27 | 459,000 | 516,000 | |||||||||
Short-term investment securities | 7,26,27 | 31,835 | 31,854 | |||||||||
Accounts receivable – trade, net | 4,26,27,28 | 1,501,819 | 1,503,552 | |||||||||
Short-term loans, net | 4,26,27,28 | 69,789 | 89,280 | |||||||||
Accounts receivable – other, net | 3,4,26,27,28,29 | 591,198 | 434,713 | |||||||||
Contract assets | 6,27 | 9,107 | 8,388 | |||||||||
Prepaid expenses | 3,5 | 2,053,772 | 2,052,515 | |||||||||
Guarantee deposits | 4,26,27,28 | 46,353 | 51,069 | |||||||||
Derivative financial assets | 26,27 | 8,704 | 8,704 | |||||||||
Inventories, net | 10,170 | 5,181 | ||||||||||
Non-current assets held for sale | 31 | 85,797 | — | |||||||||
Advanced payments and others | 4,26,27 | 19,067 | 16,651 | |||||||||
|
|
|
| |||||||||
5,017,246 | 5,047,115 | |||||||||||
|
|
|
| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 26,27 | 354 | 354 | |||||||||
Long-term investment securities | 7,26,27 | 1,252,142 | 983,688 | |||||||||
Investments in subsidiaries, associates and joint ventures | 8,31 | 11,402,236 | 11,357,504 | |||||||||
Property and equipment, net | 3,9,10,28,31 | 8,815,606 | 9,157,548 | |||||||||
Goodwill | 1,306,236 | 1,306,236 | ||||||||||
Intangible assets, net | 11 | 2,499,847 | 2,665,083 | |||||||||
Long-term loans, net | 4,26,27,28 | 421 | 6,518 | |||||||||
Long-term accounts receivable – other | 3,4,26,27,29 | 308,741 | 348,335 | |||||||||
Long-term contract assets | 6,27 | 23,124 | 22,844 | |||||||||
Long-term prepaid expenses | 3,5 | 939,436 | 903,961 | |||||||||
Guarantee deposits | 4,26,27,28 | 113,715 | 110,555 | |||||||||
Long-term derivative financial assets | 26,27 | 108,130 | 76,461 | |||||||||
Other non-current assets | 249 | 249 | ||||||||||
|
|
|
| |||||||||
26,770,237 | 26,939,336 | |||||||||||
|
|
|
| |||||||||
Total Assets | 31,986,451 | |||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
4
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Financial Position, Continued
As of March 31, 2021 and December 31, 2020
(In millions of won) | ||||||||||||
Note | March 31, 2021 | December 31, 2020 | ||||||||||
Liabilities and Shareholders’ Equity |
| |||||||||||
Current Liabilities: | ||||||||||||
Accounts payable – other | 26,27,28 | 1,955,472 | ||||||||||
Contract liabilities | 6 | 85,078 | 83,216 | |||||||||
Withholdings | 26,27 | 721,807 | 659,181 | |||||||||
Accrued expenses | 3,26,27 | 694,711 | 724,992 | |||||||||
Income tax payable | 24 | 235,692 | 154,144 | |||||||||
Provisions | 3,14 | 49,693 | 43,437 | |||||||||
Current installments of long-term debt, net | 12,26,27 | 782,492 | 712,105 | |||||||||
Lease liabilities | 3,26,27,28 | 309,402 | 313,422 | |||||||||
Current installments of long-term payables – other | 13,26,27 | 219,249 | 424,600 | |||||||||
Other current liabilities | 26,27 | 9,216 | 5,835 | |||||||||
|
|
|
| |||||||||
4,963,648 | 5,076,404 | |||||||||||
|
|
|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 12,26,27 | 6,260,120 | 6,175,576 | |||||||||
Long-term borrowings, excluding current installments, net | 12,26,27 | 6,425 | 6,167 | |||||||||
Long-term payables – other | 13,26,27 | 926,513 | 1,141,723 | |||||||||
Long-term contract liabilities | 6 | 7,200 | 8,110 | |||||||||
Long-term derivative financial liabilities | 26,27 | 342,926 | 362,002 | |||||||||
Long-term lease liabilities | 3,26,27,28 | 1,015,216 | 999,776 | |||||||||
Long-term provisions | 3,14 | 49,915 | 55,953 | |||||||||
Deferred tax liabilities | 3,24 | 849,966 | 756,873 | |||||||||
Defined benefit liabilities | 15 | 39,964 | 7,421 | |||||||||
Other non-current liabilities | 26,27 | 45,687 | 46,588 | |||||||||
|
|
|
| |||||||||
9,543,932 | 9,560,189 | |||||||||||
|
|
|
| |||||||||
Total Liabilities | 14,507,580 | 14,636,593 | ||||||||||
|
|
|
| |||||||||
Shareholders’ Equity: | ||||||||||||
Share capital | 1,16 | 44,639 | 44,639 | |||||||||
Capital surplus and others | 16,17 | 245,841 | 289,134 | |||||||||
Retained earnings | 3,18 | 16,488,288 | 16,684,640 | |||||||||
Reserves | 19 | 501,135 | 331,445 | |||||||||
|
|
|
| |||||||||
Total Shareholders’ Equity | 17,279,903 | 17,349,858 | ||||||||||
|
|
|
| |||||||||
Total Liabilities and Shareholders’ Equity | 31,986,451 | |||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
5
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Income
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | ||||||||||||
Note | March 31, 2021 | March 31, 2020 | ||||||||||
Operating revenue: | 3,20,28 | |||||||||||
Revenue | 2,924,506 | |||||||||||
Operating expenses: | 3,28 | |||||||||||
Labor | 247,545 | 204,527 | ||||||||||
Commission | 5 | 1,173,360 | 1,140,483 | |||||||||
Depreciation and amortization | 3 | 688,368 | 717,125 | |||||||||
Network interconnection | 141,269 | 144,094 | ||||||||||
Leased lines | 54,996 | 53,107 | ||||||||||
Advertising | 13,202 | 16,425 | ||||||||||
Rent | 3 | 29,555 | 31,808 | |||||||||
Cost of goods sold | 102,897 | 107,336 | ||||||||||
Others | 21 | 222,224 | 251,316 | |||||||||
|
|
|
| |||||||||
2,673,416 | 2,666,221 | |||||||||||
|
|
|
| |||||||||
Operating profit | 307,302 | 258,285 | ||||||||||
Finance income | 3,23 | 233,910 | 289,259 | |||||||||
Finance costs | 3,23 | (58,431 | ) | (70,900 | ) | |||||||
Other non-operating income | 3,22 | 3,529 | 13,878 | |||||||||
Other non-operating expenses | 3,22 | (5,445 | ) | (11,405 | ) | |||||||
Gain relating to investments in associates, net | 8 | 100,000 | 7,641 | |||||||||
|
|
|
| |||||||||
Profit before income tax | 580,865 | 486,758 | ||||||||||
Income tax expense | 3,24 | 114,852 | 82,004 | |||||||||
|
|
|
| |||||||||
Profit for the period | 404,754 | |||||||||||
|
|
|
| |||||||||
Earnings per share: | 3,25 | |||||||||||
Basic earnings per share (in won) |
| 5,484 | ||||||||||
Diluted earnings per share (in won) |
| 6,494 | 5,484 |
See accompanying notes to the condensed separate interim financial statements.
6
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Comprehensive Income
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | ||||||||||||
Note | March 31, 2021 | March 31, 2020 | ||||||||||
Profit for the period | 404,754 | |||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit liabilities | 15 | (16,729 | ) | (14,133 | ) | |||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income | 19 | 171,320 | (13,644 | ) | ||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||
Net change in unrealized fair value of derivatives | 19 | (1,630 | ) | 3,271 | ||||||||
|
|
|
| |||||||||
Other comprehensive income (loss) for the period, net of taxes | 152,961 | (24,506 | ) | |||||||||
|
|
|
| |||||||||
Total comprehensive income | 380,248 | |||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
7
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Changes in Equity
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | Capital surplus and others | |||||||||||||||||||||||||||||||||||||||||||
Note | Share capital | Paid-in surplus | Treasury shares | Hybrid bonds | Share option | Other | Sub-total | Retained earnings | Reserves | Total equity | ||||||||||||||||||||||||||||||||||
Balance, January 1, 2020 | 2,915,887 | (1,696,997 | ) | 398,759 | 1,302 | (903,332 | ) | 715,619 | 16,672,947 | (49,306 | ) | 17,383,899 | ||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | — | 404,754 | — | 404,754 | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | 15,19 | — | — | — | — | — | — | — | (14,133 | ) | (10,373 | ) | (24,506 | ) | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
— | — | — | — | — | — | — | 390,621 | (10,373 | ) | 380,248 | ||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | — | — | — | (658,228 | ) | — | (658,228 | ) | ||||||||||||||||||||||||||||||||
Share option | 17 | — | — | — | — | 32 | — | 32 | — | — | 32 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | — | — | — | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | — | — | 32 | — | 32 | (661,920 | ) | — | (661,888 | ) | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Balance, March 31, 2020 | 2,915,887 | (1,696,997 | ) | 398,759 | 1,334 | (903,332 | ) | 715,651 | 16,401,648 | (59,679 | ) | 17,102,259 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Balance, January 1, 2021 | 2,915,887 | (2,123,661 | ) | 398,759 | 1,481 | (903,332 | ) | 289,134 | 16,684,640 | 331,445 | 17,349,858 | |||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | — | 466,013 | — | 466,013 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 15,19 | — | — | — | — | — | — | — | (16,729 | ) | 169,690 | 152,961 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | — | — | — | — | — | 449,284 | 169,690 | 618,974 | |||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | — | — | — | (641,944 | ) | — | (641,944 | ) | ||||||||||||||||||||||||||||||||
Share option | 17 | — | — | — | — | 47 | — | 47 | — | — | 47 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | — | — | — | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||||||||||||
Acquisition of treasury shares | 16 | — | — | (72,982 | ) | — | — | — | (72,982 | ) | — | — | (72,982 | ) | ||||||||||||||||||||||||||||||
Disposal of treasury shares | 16 | — | — | 26,983 | — | — | 2,659 | 29,642 | — | — | 29,642 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | (45,999 | ) | — | 47 | 2,659 | (43,293 | ) | (645,636 | ) | — | (688,929 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Balance, March 31, 2021 | 2,915,887 | (2,169,660 | ) | 398,759 | 1,528 | (900,673 | ) | 245,841 | 16,488,288 | 501,135 | 17,279,903 | |||||||||||||||||||||||||||||||||
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See accompanying notes to the condensed separate interim financial statements.
8
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Cash Flows
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | ||||||||||||
Note | March 31, 2021 | March 31, 2020 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the period | 404,754 | |||||||||||
Adjustments for income and expenses | 30 | 610,058 | 642,784 | |||||||||
Changes in assets and liabilities related to operating activities | 30 | (285,507 | ) | (415,922 | ) | |||||||
|
|
|
| |||||||||
790,564 | 631,616 | |||||||||||
Interest received | 5,567 | 4,432 | ||||||||||
Interest paid | (54,959 | ) | (66,227 | ) | ||||||||
Income tax paid | (370 | ) | (421 | ) | ||||||||
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|
|
| |||||||||
Net cash provided by operating activities | 740,802 | 569,400 | ||||||||||
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|
|
| |||||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | 57,000 | — | ||||||||||
Collection of short-term loans | 41,580 | 27,190 | ||||||||||
Decrease in long-term financial instruments | — | 28 | ||||||||||
Proceeds from disposals of long-term investment securities | 5,312 | — | ||||||||||
Proceeds from disposals of investments in subsidiaries, associates and joint ventures | 100,000 | — | ||||||||||
Proceeds from disposals of property and equipment | 734 | 307 | ||||||||||
Proceeds from disposals of intangible assets | — | 1,033 | ||||||||||
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| |||||||||
204,626 | 28,558 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term financial instruments, net | — | (65,000 | ) | |||||||||
Increase in short-term loans | (15,733 | ) | (36,517 | ) | ||||||||
Acquisitions of long-term investment securities | (10,000 | ) | (327 | ) | ||||||||
Acquisitions of investments in subsidiaries, | (88,820 | ) | (49,126 | ) | ||||||||
associates and joint ventures | ||||||||||||
Acquisitions of property and equipment | (554,501 | ) | (826,183 | ) | ||||||||
Acquisitions of intangible assets | (2,160 | ) | (9,970 | ) | ||||||||
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| |||||||||
(671,214 | ) | (987,123 | ) | |||||||||
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| |||||||||
Net cash used in investing activities | (958,565 | ) | ||||||||||
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|
|
See accompanying notes to the condensed separate interim financial statements.
9
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Cash Flows, Continued
For the three-month periods ended March 31, 2021 and 2020
(In millions of won) | ||||||||||||
Note | March 31, 2021 | March 31, 2020 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from short-term borrowings, net | 210,000 | |||||||||||
Proceeds from issuance of debentures | 308,757 | 773,727 | ||||||||||
Cash inflows from settlement of derivatives | — | 40,470 | ||||||||||
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|
| |||||||||
308,757 | 1,024,197 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of long-term payables – other | (425,349 | ) | (425,349 | ) | ||||||||
Repayments of debentures | (210,000 | ) | (364,590 | ) | ||||||||
Repayments of lease liabilities | (73,215 | ) | (77,932 | ) | ||||||||
Acquisition of treasury shares | (72,982 | ) | — | |||||||||
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|
| |||||||||
(781,546 | ) | (867,871 | ) | |||||||||
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| |||||||||
Net cash provided by (used in) financing activities | (472,789 | ) | 156,326 | |||||||||
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|
| |||||||||
Net decrease in cash and cash equivalents | (198,575 | ) | (232,839 | ) | ||||||||
Cash and cash equivalents at beginning of the period | 329,208 | 497,282 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | 2 | 5 | ||||||||||
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|
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| |||||||||
Cash and cash equivalents at end of the period | 264,448 | |||||||||||
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|
|
See accompanying notes to the condensed separate interim financial statements.
10
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
1. | Reporting Entity |
SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications services in Korea. The head office of the Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of March 31, 2021, the Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Inc. (Formerly, SK Holdings Co., Ltd.) | 21,624,120 | 26.78 | ||||||
National Pension Service | 8,196,312 | 10.15 | ||||||
Institutional investors and other shareholders | 40,073,091 | 49.63 | ||||||
Kakao Co., Ltd. | 1,266,620 | 1.57 | ||||||
Treasury shares | 9,585,568 | 11.87 | ||||||
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| |||||
80,745,711 | 100.00 | |||||||
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|
|
2. | Basis of Preparation |
(1) | Statement of compliance |
These condensed separate interim financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034, Interim Financial Reporting, as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since December 31, 2020. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.
These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No. 1027, Separate Financial Statements, presented by a parent, an investor with joint control of or significant influence over an investee, in which the investments are accounted for at cost.
(2) | Use of estimates and judgments |
1) | Critical judgments, assumptions and estimation uncertainties |
The preparation of the condensed separate interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the separate financial statements as of and for the year ended December 31, 2020.
11
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
2. | Basis of Preparation, Continued |
(2) | Use of estimates and judgments, Continued |
2) | Fair value measurement |
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has established policies and processes with respect to the measurement of fair values, including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.
The Company regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Company assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
• | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
• | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 27.
12
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
3. | Significant Accounting Policies |
(1) | Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Company’s separate financial statements as at and for the year ended December 31, 2020. The change in accounting policy will also be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2021. |
The Company has initially adopted Interest Rate Benchmark Reform Phase 2 – Amendments to K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument: Recognition and Measurement, K-IFRS No. 1107, Financial Instruments: Disclosures and K-IFRS No. 1116, Leases from January 1, 2021.
Interest Rate Benchmark Reform Phase 2 – Amendments provide exceptions as follows:
• | when a change required by interest rate benchmark reform occurs to a financial asset or financial liability measured at amortized cost, the Company updates the effective interest rate of the financial asset or financial liability rather than the carry amount and, |
• | when a change required by interest rate benchmark reform occurs to a hedged item and/or hedging instrument, the exception permits the hedge relationship to be continued without interruption. |
These amended standards are not expected to have a significant impact on the Company’s separate financial statements.
(2) | During the annual period ended December 31, 2020, the Company changed its accounting policy by applying agenda decision, Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment)—November 2019, published by International Financial Reporting Interpretations Committee (“IFRIC”) on December 16, 2019. Due to the changes in accounting policies in connection with the IFRIC agenda, the Company restated its comparative financial statements for the three-month period ended March 31, 2020. |
The following table summarizes the impacts of the change in accounting policy on the Company’s condensed separate interim financial statements.
1) | Statement of financial position |
(In millions of won) | ||||||||||||
(Unreviewed) | As of March 31, 2020 | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Assets | ||||||||||||
Accounts receivable – other, net | 3,691 | 1,041,781 | ||||||||||
Prepaid expenses | 3,046,421 | (9,942 | ) | 3,036,479 | ||||||||
Property and equipment, net | 8,017,941 | 842,159 | 8,860,100 | |||||||||
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| |||||||
835,908 | 12,938,360 | |||||||||||
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| |||||||
Liabilities | ||||||||||||
Accrued expenses | (341 | ) | 630,135 | |||||||||
Provisions | 69,782 | 21,660 | 91,442 | |||||||||
Lease liabilities | 390,143 | 824,372 | 1,214,515 | |||||||||
Deferred tax liabilities | 655,595 | (2,604 | ) | 652,991 | ||||||||
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| |||||||
843,087 | 2,589,083 | |||||||||||
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| |||||||
Shareholders’ Equity | ||||||||||||
Retained earnings | (7,179 | ) | 16,401,648 |
13
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
3. | Significant Accounting Policies, Continued |
2) | Statement of income |
(In millions of won) | ||||||||||||
(Unreviewed) | For the three-month period ended | |||||||||||
March 31, 2020 | ||||||||||||
As reported | Adjustments | Restated | ||||||||||
Operating revenue | 1,661 | 2,924,506 | ||||||||||
Operating expenses: | ||||||||||||
Depreciation and amortization | 697,318 | 19,807 | 717,125 | |||||||||
Rent | 50,303 | (18,495 | ) | 31,808 | ||||||||
Others | 1,917,348 | (60 | ) | 1,917,288 | ||||||||
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| |||||||
2,664,969 | 1,252 | 2,666,221 | ||||||||||
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| |||||||
Operating profit | 257,876 | 409 | 258,285 | |||||||||
Finance income | 289,262 | (3 | ) | 289,259 | ||||||||
Finance costs | 67,772 | 3,128 | 70,900 | |||||||||
Other non-operating income | 14,201 | (323 | ) | 13,878 | ||||||||
Other non-operating expenses | 12,660 | (1,255 | ) | 11,405 | ||||||||
Gain relating to investments in associates, net | 7,641 | — | 7,641 | |||||||||
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| |||||||
Profit before income tax | (1,790 | ) | 486,758 | |||||||||
Income tax expense | 82,455 | (451 | ) | 82,004 | ||||||||
|
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|
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| |||||||
Profit for the period | (1,339 | ) | 404,754 | |||||||||
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|
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| |||||||
Earnings per share: | ||||||||||||
Basic and diluted earnings per share (in won) | (18 | ) | 5,484 |
3) | Statement of changes in equity and statement of cash flows |
The statement of changes in equity and statement of cash flows for the three-month period ended March 31, 2020 have been restated as a result of restated statement of financial position and statement of income.
14
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
4. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (106,998 | ) | 1,501,819 | |||||||||
Short-term loans | 70,494 | (705 | ) | 69,789 | ||||||||
Accounts receivable – other(*) | 625,913 | (34,715 | ) | 591,198 | ||||||||
Guarantee deposits | 46,353 | — | 46,353 | |||||||||
Accrued income | 419 | — | 419 | |||||||||
|
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|
|
|
| |||||||
2,351,996 | (142,418 | ) | 2,209,578 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 41,460 | (41,039 | ) | 421 | ||||||||
Long-term accounts receivable – other(*) | 308,741 | — | 308,741 | |||||||||
Guarantee deposits | 113,715 | — | 113,715 | |||||||||
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| |||||||
463,916 | (41,039 | ) | 422,877 | |||||||||
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| |||||||
(183,457 | ) | 2,632,455 | ||||||||||
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|
|
(*) | Gross and carrying amounts of accounts receivable – other as of March 31, 2021 include |
(In millions of won) | December 31, 2020 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (102,308 | ) | 1,503,552 | |||||||||
Short-term loans | 90,182 | (902 | ) | 89,280 | ||||||||
Accounts receivable – other(*) | 468,880 | (34,167 | ) | 434,713 | ||||||||
Guarantee deposits | 51,069 | — | 51,069 | |||||||||
Accrued income | 518 | — | 518 | |||||||||
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| |||||||
2,216,509 | (137,377 | ) | 2,079,132 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 47,619 | (41,101 | ) | 6,518 | ||||||||
Long-term accounts receivable – other(*) | 348,335 | — | 348,335 | |||||||||
Guarantee deposits | 110,555 | — | 110,555 | |||||||||
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| |||||||
506,509 | (41,101 | ) | 465,408 | |||||||||
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| |||||||
(178,478 | ) | 2,544,540 | ||||||||||
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|
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|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2020 include |
15
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
4. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized cost for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
January 1, 2021 | Impairment | Write-offs(*) | Collection of receivables previously written- off | March 31, 2021 | ||||||||||||||||
Accounts receivable – trade | 2,088 | (205 | ) | 2,807 | 106,998 | |||||||||||||||
Accounts receivable – other, etc. | 76,170 | 109 | (244 | ) | 424 | 76,459 | ||||||||||||||
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| |||||||||||
2,197 | (449 | ) | 3,231 | 183,457 | ||||||||||||||||
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(In millions of won) | ||||||||||||||||||||
January 1, 2020 | Impairment | Write-offs(*) | Collection of receivables previously written- off | March 31, 2020 | ||||||||||||||||
Accounts receivable – trade | 9,229 | (236 | ) | 2,581 | 115,330 | |||||||||||||||
Accounts receivable – other, etc. | 76,458 | 1,103 | (341 | ) | 440 | 77,660 | ||||||||||||||
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| |||||||||||
10,332 | (577 | ) | 3,021 | 192,990 | ||||||||||||||||
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(*) | The Company writes off the trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy. |
(3) | The Company applies the practical expedient that allows the Company to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Company uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. |
As the Company is a wireless telecommunications service provider, the Company’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Company transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Company is not exposed to significant credit concentration risk as the Company regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified.
16
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
5. | Prepaid Expenses |
The Company pays commissions to its retail stores and authorized dealers for wireless telecommunications services and for each service contract and installation contract secured. The Company capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Company expects to maintain its customers.
(1) | Details of prepaid expenses as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts | 2,022,314 | |||||||
Others | 45,691 | 30,201 | ||||||
|
|
|
| |||||
2,052,515 | ||||||||
|
|
|
| |||||
Non-current assets: |
| |||||||
Incremental costs of obtaining contracts | 885,951 | |||||||
Others | 14,769 | 18,010 | ||||||
|
|
|
| |||||
903,961 | ||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization in connection with incremental costs of obtaining contracts recognized for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Amortization recognized | 599,526 |
17
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
6. | Contract Assets and Liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Company allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Company recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | 31,232 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 19,698 | 22,026 | ||||||
Customer loyalty programs | 15,165 | 16,709 | ||||||
Others | 57,415 | 52,591 | ||||||
|
|
|
| |||||
91,326 | ||||||||
|
|
|
|
(2) | The amount of revenue recognized for the three-month periods ended March 31, 2021 and 2020 related to the contract liabilities carried forward from the prior period are |
7. | Investment Securities |
(1) | Details of short-term investment securities as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||
Category | March 31, 2021 | December 31, 2020 | ||||||||||
Beneficiary certificates | FVTPL | 31,854 |
(2) | Details of long-term investment securities as of March 31, 2021, and December 31, 2020, are as follows: |
(In millions of won) | ||||||||||||
Category | March 31, 2021 | December 31, 2020 | ||||||||||
Equity instruments | FVOCI | (*) | 916,387 | |||||||||
Debt instruments | FVTPL | 74,110 | 67,301 | |||||||||
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|
|
|
|
| |||||||
983,688 | ||||||||||||
|
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|
|
(*) | The Company designated investments in equity instruments that are not held for trading as financial assets at FVOCI, the amounts to those FVOCI as of March 31, 2021 and December 31, 2020 are |
18
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
8. | Investments in Subsidiaries, Associates and Joint Ventures |
(1) | Investments in subsidiaries, associates and joint ventures as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Investments in subsidiaries | 6,014,367 | |||||||
Investments in associates and joint ventures | 5,299,620 | 5,343,137 | ||||||
|
|
|
| |||||
11,357,504 | ||||||||
|
|
|
|
(2) | Details of investments in subsidiaries as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||
Number of shares | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
SK Telink Co., Ltd. | 1,432,627 | 100.0 | 243,988 | |||||||||||||
SK Broadband Co., Ltd. | 298,460,212 | 74.3 | 2,195,452 | 2,195,452 | ||||||||||||
SK Communications Co., Ltd. | 43,427,530 | 100.0 | 41,939 | 41,939 | ||||||||||||
PS&Marketing Corporation | 66,000,000 | 100.0 | 313,934 | 313,934 | ||||||||||||
SERVICE ACE Co., Ltd. | 4,385,400 | 100.0 | 21,927 | 21,927 | ||||||||||||
SK Planet Co., Ltd. | 69,593,562 | 98.7 | 404,833 | 404,833 | ||||||||||||
Eleven Street Co., Ltd. | 8,224,709 | 80.3 | 1,049,403 | 1,049,403 | ||||||||||||
DREAMUS COMPANY | 29,246,387 | 51.4 | 156,781 | 156,781 | ||||||||||||
SK Telecom China Holdings Co., Ltd. | — | 100.0 | 48,096 | 48,096 | ||||||||||||
SKT Americas, Inc. | 122 | 100.0 | 31,203 | 31,203 | ||||||||||||
Atlas Investment(*1) | — | 100.0 | 148,158 | 143,097 | ||||||||||||
One Store Co., Ltd.(*2) | 10,409,600 | 48.4 | 82,186 | 82,186 | ||||||||||||
id Quantique SA | 73,324,172 | 68.1 | 100,527 | 100,527 | ||||||||||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.)(*3) | 46,836,584 | 62.6 | 747,804 | 747,804 | ||||||||||||
SK Telecom TMT Investment Corp. | 80,000 | 100.0 | 94,136 | 94,136 | ||||||||||||
FSK L&S Co., Ltd. | 2,415,750 | 60.0 | 17,757 | 17,757 | ||||||||||||
Incross Co., Ltd.(*4) | 2,786,455 | 34.6 | 53,722 | 53,722 | ||||||||||||
SK stoa Co., Ltd. | 3,631,355 | 100.0 | 40,029 | 40,029 | ||||||||||||
Broadband Nowon Co., Ltd.(*5) | 1,140,000 | 100.0 | 19,975 | 10,463 | ||||||||||||
Quantum Innovation Fund I(*6) | — | 59.9 | 16,342 | 15,969 | ||||||||||||
T map Mobility Co., Ltd.(*7) | 10,838,500 | 100.0 | 228,711 | 155,408 | ||||||||||||
SK O&S Co., Ltd. and others | — | — | 45,713 | 45,713 | ||||||||||||
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| |||||||||||||
6,014,367 | ||||||||||||||||
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|
|
19
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(2) | Details of investments in subsidiaries as of March 31, 2021 and December 31, 2020 are as follows, Continued: |
(*1) | The Company additionally contributed |
(*2) | The ownership interest has changed from 52.1% to 48.4% due to unequal paid-in capital increase and third-party share option which was exercised for the three-month period ended March 31, 2021. Although the Company owns less than 50% ownership of the investee, the management has determined that the Company controls One Store Co., Ltd. as it has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders. |
(*3) | On March 4, 2021, SK Infosec Co., Ltd. merged with ADT CAPS Co., Ltd., a subsidiary of SK Infosec Co., Ltd., to improve management efficiency and changed its name to ADT CAPS Co., Ltd. |
(*4) | Although the Company owns less than 50% of the investee, the management has determined that the Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders’ meetings, and the fact that the Company has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders. |
(*5) | The Company acquired 513,000 shares (45%) of Broadband Nowon Co., Ltd. at |
(*6) | The Company additionally contributed |
(*7) | The Company additionally contributed |
20
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
Investments in Subsidiaries, Associates and Joint Ventures, Continued
(3) | Details of investments in associates and joint ventures as of March 31, 2021 and December 31, 2020, are as follows: |
(In millions of won, except for share data) | ||||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||
Number of shares | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
Investments in associates: | ||||||||||||||||
SK China Company Ltd. | 10,928,921 | 27.3 | 601,192 | |||||||||||||
Korea IT Fund(*1) | 190 | 63.3 | 220,957 | 220,957 | ||||||||||||
KEB HanaCard Co., Ltd.(*2) | 39,902,323 | 15.0 | 253,739 | 253,739 | ||||||||||||
NanoEnTek, Inc. | 7,600,649 | 28.4 | 51,138 | 51,138 | ||||||||||||
SK Technology Innovation Company | 14,700 | 49.0 | 45,864 | 45,864 | ||||||||||||
SK hynix Inc. | 146,100,000 | 20.1 | 3,374,725 | 3,374,725 | ||||||||||||
S.M. Culture & Contents Co., Ltd. | 22,033,898 | 23.3 | 65,341 | 65,341 | ||||||||||||
SK South East Asia Investment Pte. Ltd. | 300,000,000 | 20.0 | 344,240 | 344,240 | ||||||||||||
Pacific Telecom Inc.(*2) | 1,734,109 | 15.0 | 36,487 | 36,487 | ||||||||||||
Grab Geo Holdings PTE. LTD.(*3) | — | — | — | 30,517 | ||||||||||||
Content Wavve Co., Ltd. | 1,306,286 | 30.0 | 90,858 | 90,858 | ||||||||||||
SK Telecom CS T1 Co., Ltd.(*1) | 50,000 | 54.9 | 60,305 | 60,305 | ||||||||||||
Digital Games International Pte. Ltd. | 10,000,000 | 33.3 | 8,810 | 8,810 | ||||||||||||
Invites Healthcare Co., Ltd.(*4) | 489,999 | 27.1 | 35,000 | 28,000 | ||||||||||||
Carrot General Insurance Co., Ltd.(*3) | — | — | — | 20,000 | ||||||||||||
12CM JAPAN and others(*2,5) | — | — | 79,926 | 79,926 | ||||||||||||
|
|
|
| |||||||||||||
5,268,582 | 5,312,099 | |||||||||||||||
|
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|
| |||||||||||||
Investments in joint ventures: | ||||||||||||||||
Finnq Co., Ltd.(*6) | 6,370,000 | 49.0 | 25,429 | 25,429 | ||||||||||||
Techmaker GmbH(*6) | 12,500 | 50.0 | 5,609 | 5,609 | ||||||||||||
|
|
|
| |||||||||||||
31,038 | 31,038 | |||||||||||||||
|
|
|
| |||||||||||||
5,343,137 | ||||||||||||||||
|
|
|
|
(*1) | Investments in Korea IT Fund and SK Telecom CS T1 Co., Ltd. were classified as investment in associates as the Company does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | These investments were classified as investments in associates as the Company can exercise significant influence through its right to appoint the members of the board of directors even though the Company has less than 20% of equity interests. |
(*3) | The Company has entered into an agreement whereby the entire shares of Grab Geo Holdings PTE. LTD. and Carrot General Insurance Co., Ltd. will transfer to T map Mobility Co., Ltd. which is a subsidiary of the Company. In accordance with the agreement, the Company reclassified the entire shares of Grab Geo Holdings PTE. LTD. and Carrot General Insurance Co., Ltd. as non-current assets held for sale. (See note 31) |
(*4) | The Company disposed the entire shares of SK Telecom Smart City Management Co., Ltd. to Invites Healthcare Co., Ltd. during the year ended December 31, 2020 and additionally contributed |
21
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of March 31, 2021 and December 31, 2020, are as follows, Continued: |
(*5) | The Company disposed the entire shares of SK Wyverns Co., Ltd. and recognized |
(*6) | These investments were classified as investments in joint ventures as the Company has a joint control pursuant to the agreement with the other shareholders. |
(4) | The market value of investments in listed subsidiaries as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
DREAMUS COMPANY | 29,246,387 | 190,102 | 5,280 | 29,246,387 | 154,421 | |||||||||||||||||||
Incross Co., Ltd. | 60,300 | 2,786,455 | 168,023 | 54,000 | 2,786,455 | 150,469 |
(5) | The market value of investments in listed associates as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
NanoEnTek, Inc. | 7,600,649 | 54,041 | 8,620 | 7,600,649 | 65,518 | |||||||||||||||||||
SK hynix Inc. | 132,500 | 146,100,000 | 19,358,250 | 118,500 | 146,100,000 | 17,312,850 | ||||||||||||||||||
S.M.Culture & Contents Co., Ltd. | 1,820 | 22,033,898 | 40,102 | 1,630 | 22,033,898 | 35,915 |
22
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
9. | Property and Equipment |
Changes in property and equipment for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Reclassified as held for sale | Ending balance | ||||||||||||||||||||||
Land | — | — | 5,837 | — | (20,507 | ) | 623,701 | |||||||||||||||||||||
Buildings | 587,958 | 280 | (106 | ) | 15,668 | (10,420 | ) | (8,669 | ) | 584,711 | ||||||||||||||||||
Structures | 316,895 | 5 | — | 7,718 | (9,352 | ) | (6,104 | ) | 309,162 | |||||||||||||||||||
Machinery | 5,354,992 | 6,857 | (114 | ) | 325,666 | (396,445 | ) | — | 5,290,956 | |||||||||||||||||||
Right-of-use assets | 1,323,111 | 108,704 | (22,006 | ) | — | (91,608 | ) | — | 1,318,201 | |||||||||||||||||||
Other | 405,140 | 82,611 | (137 | ) | (90,240 | ) | (20,562 | ) | — | 376,812 | ||||||||||||||||||
Construction in progress | 531,081 | 63,968 | — | (282,986 | ) | — | — | 312,063 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
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|
| |||||||||||||||
262,425 | (22,363 | ) | (18,337 | ) | (528,387 | ) | (35,280 | ) | 8,815,606 | |||||||||||||||||||
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|
|
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2020 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Ending balance | |||||||||||||||||||
Land | — | — | 3,582 | — | 621,594 | |||||||||||||||||||
Buildings | 600,625 | 39 | (1 | ) | 11,708 | (10,321 | ) | 602,050 | ||||||||||||||||
Structures | 346,734 | 16 | (7 | ) | 2,708 | (9,209 | ) | 340,242 | ||||||||||||||||
Machinery | 5,074,665 | 7,309 | (103 | ) | 490,957 | (412,378 | ) | 5,160,450 | ||||||||||||||||
Right-of-use assets | 1,239,194 | 135,623 | (18,251 | ) | — | (96,469 | ) | 1,260,097 | ||||||||||||||||
Other | 500,887 | 179,360 | (304 | ) | (280,316 | ) | (23,022 | ) | 376,605 | |||||||||||||||
Construction in progress | 672,592 | 108,346 | (3,149 | ) | (278,727 | ) | — | 499,062 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
430,693 | (21,815 | ) | (50,088 | ) | (551,399 | ) | 8,860,100 | |||||||||||||||||
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23
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
10. | Lease |
(1) | Details of the right-of-use assets as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Land, buildings and structures | 1,095,216 | |||||||
Others | 216,785 | 227,895 | ||||||
|
|
|
| |||||
1,323,111 | ||||||||
|
|
|
|
(2) | Details of amounts recognized in the condensed separate interim statements of income for the three-month periods ended March 31, 2021 and 2020 as a lessee are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2021 | March 31, 2020 | |||||||
Depreciation of right-of-use assets: | ||||||||
Land, buildings and structures | 75,349 | |||||||
Others | 18,915 | 21,120 | ||||||
|
|
|
| |||||
96,469 | ||||||||
|
|
|
| |||||
Interest expense on lease liabilities | 4,960 |
Expenses related to short-term leases and low-value assets leases are immaterial.
(3) | The total cash outflows due to lease payments for the three-month periods ended March 31, 2021 and 2020 amounted to |
24
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
11. | Intangible Assets |
(1) | Changes in intangible assets for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||
Beginning balance | Acquisition | Transfer | Amortization | Ending balance | ||||||||||||||||
Frequency usage rights | — | — | (124,527 | ) | 1,808,238 | |||||||||||||||
Land usage rights | 4,103 | — | — | (465 | ) | 3,638 | ||||||||||||||
Industrial rights | 9,659 | 1,631 | — | (686 | ) | 10,604 | ||||||||||||||
Facility usage rights | 15,061 | 180 | 1 | (664 | ) | 14,578 | ||||||||||||||
Club memberships(*1) | 50,698 | 33 | — | — | 50,731 | |||||||||||||||
Other(*2) | 652,797 | 316 | 27,443 | (68,498 | ) | 612,058 | ||||||||||||||
|
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|
|
|
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|
| |||||||||||
2,160 | 27,444 | (194,840 | ) | 2,499,847 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2020 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Ending balance | |||||||||||||||||||
Frequency usage rights | — | — | — | (130,495 | ) | 2,517,006 | ||||||||||||||||||
Land usage rights | 5,708 | — | — | — | (549 | ) | 5,159 | |||||||||||||||||
Industrial rights | 12,054 | — | (45 | ) | — | (578 | ) | 11,431 | ||||||||||||||||
Facility usage rights | 15,524 | 145 | — | 151 | (646 | ) | 15,174 | |||||||||||||||||
Club memberships(*1) | 47,611 | 120 | (580 | ) | — | — | 47,151 | |||||||||||||||||
Other(*2) | 732,754 | 9,705 | (1,902 | ) | 56,182 | (75,151 | ) | 721,588 | ||||||||||||||||
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| |||||||||||||
9,970 | (2,527 | ) | 56,333 | (207,419 | ) | 3,317,509 | ||||||||||||||||||
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|
(*1) | Club memberships are classified as intangible assets with indefinite useful lives and are not amortized. |
(*2) | Other intangible assets primarily consist of computer software and others. |
(2) | Details of frequency usage rights as of March 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||
Amount | Description | Commencement of amortization | Completion of amortization | |||||||||||
800 MHz license | CDMA and LTE service | Jul. 2011 | Jun. 2021 | |||||||||||
1.8 GHz license | 94,215 | LTE service | Sept. 2013 | Dec. 2021 | ||||||||||
2.6 GHz license | 698,155 | LTE service | Sept. 2016 | Dec. 2026 | ||||||||||
2.1 GHz license | 69,064 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||||||
3.5 GHz license | 923,364 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||
28 GHz license | 16,683 | 5G service | — | Nov. 2023 | ||||||||||
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25
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
12. | Borrowings and Debentures |
(1) | There was no change in long-term borrowings for the three-month period ended March 31, 2021. |
(2) | Changes in debentures for the three-month period ended March 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
Purpose | Annual interest rate (%) | Maturity | Face value | Book value | ||||||||||||||||
Current | 699,664 | |||||||||||||||||||
Non-current | 6,195,600 | 6,175,576 | ||||||||||||||||||
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| |||||||||||||||||
As of January 1, 2021 |
| 6,895,600 | 6,875,240 | |||||||||||||||||
|
|
|
| |||||||||||||||||
Debentures newly issued: |
| |||||||||||||||||||
Unsecured corporate bonds | Refinancing fund | 1.17 | Jan. 15, 2024 | 80,000 | 79,642 | |||||||||||||||
1.39 | Jan. 15, 2026 | 80,000 | 79,678 | |||||||||||||||||
1.80 | Jan. 15, 2031 | 50,000 | 49,811 | |||||||||||||||||
1.89 | Jan. 15, 2041 | 100,000 | 99,626 | |||||||||||||||||
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| |||||||||||||||||
310,000 | 308,757 | |||||||||||||||||||
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|
| |||||||||||||||||
Debentures repaid: |
| |||||||||||||||||||
Unsecured corporate bonds | Operating fund | 1.80 | Mar. 4, 2021 | (100,000 | ) | (100,000 | ) | |||||||||||||
Refinancing fund | 2.57 | Feb. 20, 2021 | (110,000 | ) | (110,000 | ) | ||||||||||||||
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| |||||||||||||||||
(210,000 | ) | (210,000 | ) | |||||||||||||||||
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|
| |||||||||||||||||
Other changes(*1) |
| 54,600 | 55,617 | |||||||||||||||||
Current(*2) | 770,000 | 769,494 | ||||||||||||||||||
Non-current(*2) | 6,280,200 | 6,260,120 | ||||||||||||||||||
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|
|
| |||||||||||||||||
As of March 31, 2021 |
| 7,029,614 | ||||||||||||||||||
|
|
|
|
(*1) | Other changes include the effects on foreign currency translation of debentures and changes in present value discount on debentures for the three-month period ended March 31, 2021. |
(*2) |
|
26
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
13. | Long-Term Payables – Other |
(1) | As of March 31, 2021 and December 31, 2020, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 11): |
(In millions of won) |
| |||||||
March 31, 2021 | December 31, 2020 | |||||||
Long-term payables – other | 1,626,040 | |||||||
Present value discount on long-term payables – other | (54,929 | ) | (59,717 | ) | ||||
Current installments of long-term payables – other | (219,249 | ) | (424,600 | ) | ||||
|
|
|
| |||||
Carrying amount at period end | 1,141,723 | |||||||
|
|
|
|
(2) | The principal amount of long-term payables – other repaid for the three-month periods ended March 31, 2021 and 2020 are |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 3 years | 413,385 | |||
3 ~ 5 years | 382,290 | |||
More than 5 years | 182,776 | |||
|
| |||
|
|
14. | Provisions |
Changes in provisions for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended March 31, 2021 | As of March 31, 2021 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for restoration | 2,170 | (1,511 | ) | — | 92,625 | 42,710 | 49,915 | |||||||||||||||||||||
Emission allowance | 7,424 | 271 | — | (712 | ) | 6,983 | 6,983 | — | ||||||||||||||||||||
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| |||||||||||||||
2,441 | (1,511 | ) | (712 | ) | 99,608 | 49,693 | 49,915 | |||||||||||||||||||||
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|
|
(In millions of won) | For the three-month period ended March 31, 2020 | As of March 31, 2020 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for restoration | 832 | (144 | ) | (690 | ) | 83,673 | 43,009 | 40,664 | ||||||||||||||||||||
Emission allowance | 5,256 | 2,513 | — | — | 7,769 | 7,769 | — | |||||||||||||||||||||
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| |||||||||||||||
3,345 | (144 | ) | (690 | ) | 91,442 | 50,778 | 40,664 | |||||||||||||||||||||
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27
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
15. | Defined Benefit Liabilities |
(1) | Details of defined benefit liabilities as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Present value of defined benefit obligations | 464,846 | |||||||
Fair value of plan assets | (454,626 | ) | (457,425 | ) | ||||
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|
| |||||
7,421 | ||||||||
|
|
|
|
(2) | Changes in defined benefit obligations for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Beginning balance | 422,782 | |||||||
Current service cost | 14,086 | 14,063 | ||||||
Past service cost | — | 815 | ||||||
Interest cost | 2,725 | 2,480 | ||||||
Remeasurement | ||||||||
- Adjustment based on experience | 22,280 | 18,584 | ||||||
Benefit paid | (11,107 | ) | (10,841 | ) | ||||
Others | 1,760 | 2,303 | ||||||
|
|
|
| |||||
Ending balance | 450,186 | |||||||
|
|
|
|
(3) | Changes in plan assets for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Beginning balance | 397,689 | |||||||
Interest income | 2,680 | 2,257 | ||||||
Remeasurement | 304 | (159 | ) | |||||
Contribution | 10,000 | 15,000 | ||||||
Benefit paid | (17,111 | ) | (19,535 | ) | ||||
Others | 1,328 | 2,164 | ||||||
|
|
|
| |||||
Ending balance | 397,416 | |||||||
|
|
|
|
(4) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the condensed separate interim statements of income) and capitalized into construction-in-progress, for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Current service cost | 14,063 | |||||||
Past service cost | — | 815 | ||||||
Net interest cost | 45 | 223 | ||||||
|
|
|
| |||||
15,101 | ||||||||
|
|
|
|
28
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
16. | Share Capital and Capital Surplus and Others |
(1) | The Company’s outstanding share capital consists entirely of common shares with a par value of |
(In millions of won, except for share data) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Number of authorized shares | 220,000,000 | 220,000,000 | ||||||
Number of issued shares(*1) | 80,745,711 | 80,745,711 | ||||||
Share capital: | ||||||||
Common share | 44,639 | |||||||
Capital surplus and others: | ||||||||
Paid-in surplus | 2,915,887 | 2,915,887 | ||||||
Treasury shares | (2,169,660 | ) | (2,123,661 | ) | ||||
Hybrid bonds(*2) | 398,759 | 398,759 | ||||||
Share option(Note 17) | 1,528 | 1,481 | ||||||
Others | (900,673 | ) | (903,332 | ) | ||||
|
|
|
| |||||
289,134 | ||||||||
|
|
|
|
(*1) | In 2002 and 2003, the Company retired treasury shares with reduction of its retained earnings before appropriation. As a result, the Company’s outstanding shares have decreased without change in share capital. |
(*2) | As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Company classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common stocks. |
(2) | There were no changes in share capital for the three-month periods ended March 31, 2021 and 2020 and details of shares outstanding as of March 31, 2021 and 2020 are as follows: |
(In shares) | ||||||||||||||||||||||||
March 31, 2021 | March 31, 2020 | |||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 80,745,711 | 9,585,568 | 71,160,143 | 80,745,711 | 7,609,263 | 73,136,448 |
(3) | Details of treasury shares as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won, except for share data) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Number of shares(*) | 9,585,568 | 9,418,558 | ||||||
Acquisition cost | 2,123,661 |
(*) | The Company acquired 288,000 of its treasury shares for |
29
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
17. | Share Options |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Series | ||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | |||||||||
Grant date | March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | March 26, 2020 | March 25, 2021 | ||||||||||
Types of shares to be issued | Registered common shares | |||||||||||||||
Grant method | Reissue of treasury shares, Cash settlement | |||||||||||||||
Number of shares (in share) | 22,168 | 22,168 | 22,168 | 1,358 | 4,177 | 1,734 | 127,643 | 33,280 | ||||||||
Exercise price (in won) | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | 251,380 | ||||||||
Exercise period | Mar. 25, 2019 | Mar. 25, 2020 | Mar. 25, 2021 | Feb. 21, 2020 | Feb. 23, 2021 | Mar. 27, 2021 | Mar. 27, 2023 | Mar. 26, 2023 | ||||||||
~ | ~ | ~ | ~ | ~ | ~ | ~ | ~ | |||||||||
Vesting conditions | Mar. 24, 2022 2 years’ service from the grant date | Mar. 24, 2023 3 years’ service from the grant date | Mar. 24, 2024 4 years’ service from the grant date | Feb. 20, 2023 2 years’ service from the grant date | Feb. 22, 2024 2 years’ service from the grant date | Mar. 26, 2024 2 years’ service from the grant date | Mar. 26, 2027 3 years’ service from the grant date | Mar. 25, 2026 2 years’ service from the grant date |
(2) | Share compensation expense recognized for the three-month period ended March 31, 2021 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | ||||
Share compensation expense | ||||
As of December 31, 2020 | ||||
For the three-month period ended March 31, 2021 | 47 | |||
In subsequent periods | 1,423 | |||
|
| |||
|
|
(3) | The Company used binomial option-pricing model in the measurement of the fair value of share options at the grant date and the inputs used in the model are as follows: |
(In won) | Series | |||||||||||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | |||||||||||||||||||||||||
Risk-free interest rate | 1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | 1.55 | % | ||||||||||||||||
Estimated option’s life | 5 years | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | ||||||||||||||||||||||||
Share price | ||||||||||||||||||||||||||||||||
(Closing price on the preceding day) | 262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | 174,500 | 249,000 | ||||||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | 25.70 | % | ||||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | 4.00 | % | ||||||||||||||||
Exercise price | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | 251,380 | ||||||||||||||||||||||||
Per-share fair value of the option | 27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 | 962 | 40,711 |
30
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
18. | Retained Earnings |
Retained earnings as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Appropriated: | ||||||||
Legal reserve | 22,320 | |||||||
Reserve for business expansion | 11,631,138 | 11,631,138 | ||||||
Reserve for technology development | 4,365,300 | 4,365,300 | ||||||
|
|
|
| |||||
15,996,438 | 15,996,438 | |||||||
Unappropriated | 469,530 | 665,882 | ||||||
|
|
|
| |||||
16,684,640 | ||||||||
|
|
|
|
19. | Reserves |
(1) | Details of reserves, net of taxes, as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Valuation gain on FVOCI | 323,246 | |||||||
Valuation gain on derivatives | 6,569 | 8,199 | ||||||
|
|
|
| |||||
331,445 | ||||||||
|
|
|
|
(2) | Changes in reserves for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | ||||||||||||
Valuation gain (loss) on financial assets at FVOCI | Valuation gain (loss) on derivatives | Total | ||||||||||
Balance at January 1, 2020 | (7,308 | ) | (49,306 | ) | ||||||||
Changes, net of taxes | (13,644 | ) | 3,271 | (10,373 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at March 31, 2020 | (55,642 | ) | (4,037 | ) | (59,679 | ) | ||||||
|
|
|
|
|
| |||||||
Balance at January 1, 2021 | 323,246 | 8,199 | 331,445 | |||||||||
Changes, net of taxes | 171,320 | (1,630 | ) | 169,690 | ||||||||
|
|
|
|
|
| |||||||
Balance at March 31, 2021 | 6,569 | 501,135 | ||||||||||
|
|
|
|
|
|
31
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
20. | Operating Revenue |
Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Company’s revenue and future cash flows is as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Products transferred at a point in time: | ||||||||
Product sales | 15,157 | |||||||
Services transferred over time: | ||||||||
Wireless service revenue(*1) | 2,531,758 | 2,483,447 | ||||||
Cellular interconnection revenue | 127,750 | 131,528 | ||||||
Other(*2) | 311,296 | 294,374 | ||||||
|
|
|
| |||||
2,970,804 | 2,909,349 | |||||||
|
|
|
| |||||
2,924,506 | ||||||||
|
|
|
|
(*1) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through usage charges collected from the wireless subscribers. |
(*2) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
The Company has a right to consideration from a customer in an amount that corresponds directly with the value to the subscriber of the Company’s performance completed, thus, as a practical expedient, the Company recognizes revenue in the amount to which the Company has a right to invoice.
Most of the Company’s transactions are occurring in Korea as it principally operates its businesses in Korea.
21. | Other Operating Expenses |
Details of other operating expenses for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Communication | 7,647 | |||||||
Utilities | 65,516 | 67,059 | ||||||
Taxes and dues | 2,227 | 3,214 | ||||||
Repair | 48,779 | 52,279 | ||||||
Research and development | 83,499 | 94,017 | ||||||
Training | 4,311 | 6,117 | ||||||
Bad debt for accounts receivable – trade | 2,088 | 9,229 | ||||||
Others | 8,708 | 11,754 | ||||||
|
|
|
| |||||
251,316 | ||||||||
|
|
|
|
32
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
22. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Other non-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 753 | |||||||
Gain on business transfer | — | 12,451 | ||||||
Others | 2,804 | 674 | ||||||
|
|
|
| |||||
13,878 | ||||||||
|
|
|
| |||||
Other non-operating Expenses: | ||||||||
Loss on disposal of property and equipment and intangible assets | 2,748 | |||||||
Donations | 3,249 | 6,177 | ||||||
Bad debt for accounts receivable – other | 109 | 1,103 | ||||||
Others | 969 | 1,377 | ||||||
|
|
|
| |||||
11,405 | ||||||||
|
|
|
|
23. | Finance Income and Costs |
(1) | Details of finance income and costs for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Finance Income: | ||||||||
Interest income | 6,157 | |||||||
Gain on sale of accounts receivable – other | 7,921 | 4,679 | ||||||
Dividends | 184,599 | 265,852 | ||||||
Gain on foreign currency transactions | 581 | 707 | ||||||
Gain on foreign currency translations | 192 | 4,484 | ||||||
Gain on settlement of derivatives | — | 7,380 | ||||||
Gain relating to financial assets at FVTPL | 33,737 | — | ||||||
|
|
|
| |||||
289,259 | ||||||||
|
|
|
| |||||
Finance Costs: | ||||||||
Interest expense | 64,822 | |||||||
Loss on foreign currency transactions | 325 | 885 | ||||||
Loss on foreign currency translations | 15 | 3,154 | ||||||
Loss on settlement of derivatives | — | 1,866 | ||||||
Loss relating to financial assets at FVTPL | 44 | 173 | ||||||
|
|
|
| |||||
70,900 | ||||||||
|
|
|
|
33
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
23. | Finance Income and Costs, Continued |
(2) | Details of interest income included in finance income for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Interest income on cash equivalents and short-term financial instruments | 1,844 | |||||||
Interest income on loans and others | 5,918 | 4,313 | ||||||
|
|
|
| |||||
6,157 | ||||||||
|
|
|
|
(3) | Details of interest expense included in finance costs for three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Interest expense on borrowings | 1,882 | |||||||
Interest expense on debentures | 47,001 | 46,954 | ||||||
Others | 10,245 | 15,986 | ||||||
|
|
|
| |||||
64,822 | ||||||||
|
|
|
|
(4) | Details of impairment losses for financial assets for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Accounts receivable – trade | 9,229 | |||||||
Other receivables | 109 | 1,103 | ||||||
|
|
|
| |||||
10,332 | ||||||||
|
|
|
|
24. | Income Tax Expense |
Income tax expense was calculated by considering current tax expense, adjusted to changes in estimates related to prior periods, and deferred tax expense due to origination and reversal of temporary differences.
34
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
25. | Earnings per Share |
(1) | Basic earnings per share |
1) | Basic earnings per share for the three-month periods ended March 31, 2021 and 2020 are calculated as follows: |
(In millions of won, except for share data) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Profit for the period | 404,754 | |||||||
Interest on hybrid bonds | (3,692 | ) | (3,692 | ) | ||||
Profit for the period on common shares | 462,321 | 401,062 | ||||||
Weighted average number of common shares outstanding | 71,165,780 | 73,136,448 | ||||||
|
|
|
| |||||
Basic earnings per share (in won) | 5,484 | |||||||
|
|
|
|
2) | The weighted average number of common shares outstanding for the three-month periods ended March 31, 2021 and 2020 are calculated as follows: |
(In shares) | For the three-month period ended March 31, 2021 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2021 | 80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2021 | (9,418,558 | ) | (9,418,558 | ) | ||||
Acquisition of treasury shares | (288,000 | ) | (238,000 | ) | ||||
Disposal of treasury shares | 120,990 | 76,627 | ||||||
|
|
|
| |||||
71,160,143 | 71,165,780 | |||||||
|
|
|
|
(In shares) | For the three-month period ended March 31, 2020 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2020 | 80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2020 | (7,609,263 | ) | (7,609,263 | ) | ||||
|
|
|
| |||||
73,136,448 | 73,136,448 | |||||||
|
|
|
|
35
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
25. | Earnings per Share, Continued |
(2) | Diluted earnings per share |
1) | Diluted earnings per share for the three-month period ended March 31, 2021 is calculated as follows: |
(In millions of won, except for share data) | ||||
For the three-month period ended March 31, 2021 | ||||
Profit for the period on common shares | ||||
Adjusted weighted average number of common shares outstanding | 71,196,407 | |||
|
| |||
Diluted earnings per share (in won) | ||||
|
|
2) | The adjusted weighted average number of common shares outstanding for the three-month period ended March 31, 2021 is calculated as follows: |
(In shares) | ||||
For the three-month period ended March 31, 2021 | ||||
Outstanding shares at January 1, 2021 | 71,327,153 | |||
Effect of treasury shares | (161,373 | ) | ||
Effect of share option | 30,627 | |||
|
| |||
Adjusted weighted average number of common shares outstanding | 71,196,407 | |||
|
|
For the three-month period ended March 31, 2020, diluted earnings per share is the same as basic earnings per share as there are no dilutive potential common shares.
36
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
26. | Categories of Financial Instruments |
(1) | Financial assets by category as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
March 31, 2021 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 130,635 | — | 130,635 | ||||||||||||||||
Financial instruments | — | — | 459,354 | — | 459,354 | |||||||||||||||
Short-term investment securities | 31,835 | — | — | — | 31,835 | |||||||||||||||
Long-term investment securities(*) | 74,110 | 1,178,032 | — | — | 1,252,142 | |||||||||||||||
Accounts receivable – trade | — | — | 1,501,819 | — | 1,501,819 | |||||||||||||||
Loans and other receivables | 450,423 | — | 680,213 | — | 1,130,636 | |||||||||||||||
Derivative financial assets | 22,859 | — | — | 93,975 | 116,834 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1,178,032 | 2,772,021 | 93,975 | 4,623,255 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated |
(In millions of won) | ||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 329,208 | — | 329,208 | ||||||||||||||||
Financial instruments | — | — | 516,354 | — | 516,354 | |||||||||||||||
Short-term investment securities | 31,854 | — | — | — | 31,854 | |||||||||||||||
Long-term investment securities(*) | 67,301 | 916,387 | — | — | 983,688 | |||||||||||||||
Accounts receivable – trade | — | — | 1,503,552 | — | 1,503,552 | |||||||||||||||
Loans and other receivables | 517,175 | — | 523,813 | — | 1,040,988 | |||||||||||||||
Derivative financial assets | 22,859 | — | — | 62,306 | 85,165 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
916,387 | 2,872,927 | 62,306 | 4,490,809 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated |
37
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
26. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||
March 31, 2021 | ||||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Derivative financial liabilities | — | 21,942 | 342,926 | |||||||||||||
Borrowings | — | 19,423 | — | 19,423 | ||||||||||||
Debentures | — | 7,029,614 | — | 7,029,614 | ||||||||||||
Lease liabilities(*) | — | 1,324,618 | — | 1,324,618 | ||||||||||||
Accounts payable – other and others | — | 4,040,815 | — | 4,040,815 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
12,414,470 | 21,942 | 12,757,396 | ||||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||
December 31, 2020 | ||||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Derivative financial liabilities | — | 41,018 | 362,002 | |||||||||||||
Borrowings | — | 18,608 | — | 18,608 | ||||||||||||
Debentures | — | 6,875,240 | — | 6,875,240 | ||||||||||||
Lease liabilities(*) | — | 1,313,198 | — | 1,313,198 | ||||||||||||
Accounts payable – other and others | — | 4,446,539 | — | 4,446,539 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
12,653,585 | 41,018 | 13,015,587 | ||||||||||||||
|
|
|
|
|
|
|
|
(*) | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
38
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management |
(1) | Financial risk management |
The Company is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Company implements a risk management system to monitor and manage these specific risks.
The Company’s financial assets consist of cash and cash equivalents, financial instruments, investment securities, accounts receivable – trade and others, etc. Financial liabilities consist of accounts payable – other, borrowings, debentures, lease liabilities and others.
1) Market risk
(i) Currency risk
The Company is exposed to currency risk mainly on exchange fluctuations on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Company.
Monetary assets and liabilities denominated in foreign currencies as of March 31, 2021 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 12,385 | 1,213,210 | ||||||||||||||
EUR | 477 | 634 | — | — | ||||||||||||
JPY | 716 | 7 | 96,516 | 992 | ||||||||||||
Others | — | 180 | — | 19 | ||||||||||||
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| |||||||||||||
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|
|
In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of March 31, 2021, a hypothetical change in exchange rates by 10% would have increased (decreased) the Company’s income before income taxes as follows:
(In millions of won) |
| |||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (1,047 | ) | ||||||
EUR | 63 | (63 | ) | |||||
JPY | (98 | ) | 98 | |||||
Others | 16 | (16 | ) | |||||
|
|
|
| |||||
(1,028 | ) | |||||||
|
|
|
|
39
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk |
The interest rate risk of the Company arises from borrowings, debentures and long-term payables – other. Since the Company’s interest-bearing assets are mostly fixed-interest bearing assets, the Company’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Company performs various analyses to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Company takes various measures, such as refinancing, renewal, alternative financing and hedging.
As of March 31, 2021, floating-rate debentures amount to340,050 million, and the Company has entered into interest rate swaps to hedge interest rate risk related to the floating-rate debentures. Therefore, income before income taxes for the three-month period ended March 31, 2021 would not have been affected by the changes in interest rates of floating-rate debentures.W
As of March 31, 2021, the floating-rate long-term payables – other are1,200,691 million. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes for the period ended March 31, 2021, would change byW3,002 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.W
40
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk |
The maximum credit exposure as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) |
| |||||||
March 31, 2021 | December 31, 2020 | |||||||
Cash and cash equivalents | 329,176 | |||||||
Financial instruments | 459,354 | 516,354 | ||||||
Investment securities | 900 | 900 | ||||||
Accounts receivable – trade | 1,501,819 | 1,503,552 | ||||||
Contract assets | 32,231 | 31,232 | ||||||
Loans and other receivables | 1,130,636 | 1,040,988 | ||||||
Derivative financial assets | 116,834 | 85,165 | ||||||
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| |||||
3,507,367 | ||||||||
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Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Company evaluates the creditworthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors. Based on such information, the Company establishes credit limits for each customer or counterparty.
The Company establishes a loss allowance in respect of accounts receivable – trade and other. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Company’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Company has a policy to deal only with financial institutions with high credit ratings.
The amount of maximum exposure to credit risk of the Company is the carrying amount of financial assets as of March 31, 2021.
41
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) | Liquidity risk |
The Company’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalent balances and have enough liquidity through various committed credit lines. The Company maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of March 31, 2021 are as follows:
(In millions of won) |
| |||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 – 5 years | More than 5 years | ||||||||||||||||
Borrowings(*) | 20,014 | 13,452 | 6,562 | — | ||||||||||||||||
Debentures(*) | 7,029,614 | 8,118,857 | 965,691 | 4,155,039 | 2,998,127 | |||||||||||||||
Lease liabilities | 1,324,618 | 1,407,772 | 312,012 | 846,920 | 248,840 | |||||||||||||||
Accounts payable – other and others(*) | 4,040,815 | 4,108,086 | 3,095,282 | 829,213 | 183,591 | |||||||||||||||
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13,654,729 | 4,386,437 | 5,837,734 | 3,430,558 | |||||||||||||||||
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(*) | Includes interest payables. |
The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of March 31, 2021, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 – 5 years | More than 5 years | ||||||||||||||||
Assets | 95,400 | 17,490 | 81,381 | (3,471 | ) | |||||||||||||||
Liabilities | (21,942 | ) | (22,584 | ) | (931 | ) | (21,653 | ) | — | |||||||||||
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72,816 | 16,559 | 59,728 | (3,471 | ) | ||||||||||||||||
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42
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management, Continued |
(2) | Capital management |
The Company manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Company is the same as that for the year ended December 31, 2020.
The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity; both are from the condensed separate interim financial statements.
Debt-equity ratio as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Total liabilities | 14,636,593 | |||||||
Total equity | 17,279,903 | 17,349,858 | ||||||
Debt-equity ratios | 83.96 | % | 84.36 | % |
43
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management, Continued |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2021 and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured fair value: | ||||||||||||||||||||
FVTPL | — | 482,258 | 96,969 | 579,227 | ||||||||||||||||
Derivative hedging instruments | 93,975 | — | 93,975 | — | 93,975 | |||||||||||||||
FVOCI | 1,178,032 | 1,142,780 | — | 35,252 | 1,178,032 | |||||||||||||||
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1,142,780 | 576,233 | 132,221 | 1,851,234 | |||||||||||||||||
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| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivative financial liabilities | — | — | 320,984 | 320,984 | ||||||||||||||||
Derivative hedging instruments | 21,942 | — | 21,942 | — | 21,942 | |||||||||||||||
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| |||||||||||
— | 21,942 | 320,984 | 342,926 | |||||||||||||||||
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| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 19,983 | — | 19,983 | ||||||||||||||||
Debentures | 7,029,614 | — | 7,397,203 | — | 7,397,203 | |||||||||||||||
Long-term payables – other | 1,145,762 | — | 1,151,044 | — | 1,151,044 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
— | 8,568,230 | — | 8,568,230 | |||||||||||||||||
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| |||||||||||
(In millions of won) | December 31, 2020 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | 549,029 | 90,160 | 639,189 | ||||||||||||||||
Derivative hedging instruments | 62,306 | — | 62,306 | — | 62,306 | |||||||||||||||
FVOCI | 916,387 | 881,135 | — | 35,252 | 916,387 | |||||||||||||||
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| |||||||||||
881,135 | 611,335 | 125,412 | 1,617,882 | |||||||||||||||||
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| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivative financial liabilities | — | — | 320,984 | 320,984 | ||||||||||||||||
Derivative hedging instruments | 41,018 | — | 41,018 | — | 41,018 | |||||||||||||||
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| |||||||||||
— | 41,018 | 320,984 | 362,002 | |||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 19,131 | — | 19,131 | ||||||||||||||||
Debentures | 6,875,240 | — | 7,316,314 | — | 7,316,314 | |||||||||||||||
Long-term payables – other | 1,566,323 | — | 1,582,174 | — | 1,582,174 | |||||||||||||||
|
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| |||||||||||
— | 8,917,619 | — | 8,917,619 | |||||||||||||||||
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44
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2021 and December 31, 2020 are as follows, Continued: |
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.
The Company uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used for such valuation methods include swap rate, interest rate and risk premium, and the Company performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
Interest rates used by the Company for the fair value measurement as of March 31, 2021 are as follows:
Interest rate | ||
Derivative instruments | 0.14% ~ 1.81% | |
Borrowings and debentures | 0.96% ~ 1.75% | |
Long-term payables – other | 1.05% ~ 1.95% |
2) | There have been no transfers between Level 2 and Level 1 for the three-month period ended March 31, 2021. The changes of financial assets and liabilities classified as Level 3 for the three-month period ended March 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
Balance at January 1, 2021 | Valuation | Acquisition | Disposal | Balance at March 31, 2021 | ||||||||||||||||
Financial assets: |
| |||||||||||||||||||
FVTPL | 33,711 | 10,000 | (36,902 | ) | 96,969 | |||||||||||||||
FVOCI | 35,252 | — | — | — | 35,252 | |||||||||||||||
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| |||||||||||
33,711 | 10,000 | (36,902 | ) | 132,221 | ||||||||||||||||
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| |||||||||||
Financial liabilities: |
| |||||||||||||||||||
FVTPL | — | — | — | (320,984 | ) |
45
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
27. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of March 31, 2021 and December 31, 2020 are as follows:
(In millions of won) | ||||||||||
March 31, 2021 | ||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments | ||||||||
Financial assets: | ||||||||||
Accounts receivable – trade and others | (74,945 | ) | — | |||||||
Financial liabilities: | ||||||||||
Accounts payable – other and others | (74,945 | ) | 544 |
(In millions of won) | December 31, 2020 | |||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial | Relevant financial | Net amount | ||||||||||||
Financial assets: | ||||||||||||||||
Derivative instruments(*) | — | 8,015 | (453) | 7,562 | ||||||||||||
Accounts receivable – trade and others | 79,127 | (77,714 | ) | 1,413 | — | 1,413 | ||||||||||
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(77,714 | ) | 9,428 | (453) | 8,975 | ||||||||||||
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| |||||||||
Financial liabilities: | ||||||||||||||||
Derivative instruments(*) | — | 453 | (453) | — | ||||||||||||
Accounts payable – other and others | 77,714 | (77,714 | ) | — | — | — | ||||||||||
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| |||||||||
(77,714 | ) | 453 | (453) | — | ||||||||||||
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|
(*) | The balance represents the net amount under the standard terms and conditions of International Swaps and Derivatives Association. |
46
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) | |
Subsidiaries | SK Planet Co., Ltd. and 49 others(*) | |
Joint ventures | Dogus Planet, Inc. and 4 others | |
Associates | SK hynix Inc. and 56 others | |
Others | The Ultimate Controlling Entity’s other subsidiaries and associates, etc. |
(*) | As of March 31, 2021, subsidiaries of the Company are as follows: |
Subsidiary | Ownership percentage(%)(*1) | Primary business | ||||
Subsidiaries owned by the Company | SK Telink Co., Ltd. | 100.0 | Telecommunication and Mobile Virtual Network Operator service | |||
SK Communications Co., Ltd. | 100.0 | Internet website services | ||||
SK Broadband Co., Ltd. | 74.3 | Telecommunication services | ||||
PS&Marketing Corporation | 100.0 | Communications device retail business | ||||
SERVICE ACE Co., Ltd. | 100.0 | Call center management service | ||||
SERVICE TOP Co., Ltd. | 100.0 | Call center management service | ||||
SK O&S Co., Ltd. | 100.0 | Base station maintenance service | ||||
SK Telecom China Holdings Co., Ltd. | 100.0 | Investment (Holdings company) | ||||
SK Global Healthcare Business Group., Ltd. | 100.0 | Investment | ||||
YTK Investment Ltd. | 100.0 | Investment association | ||||
Atlas Investment | 100.0 | Investment association | ||||
SKT Americas, Inc. | 100.0 | Information gathering and consulting | ||||
One Store Co., Ltd.(*2) | 48.4 | Telecommunication services | ||||
SK Planet Co., Ltd. | 98.7 | Telecommunication services, system software development and supply services | ||||
Eleven Street Co., Ltd. | 80.3 | E-commerce | ||||
DREAMUS COMPANY | 51.4 | Manufacturing digital audio players and other portable media devices | ||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.)(*3) | 62.6 | Information security service and unmanned security | ||||
Quantum Innovation Fund I | 59.9 | Investment | ||||
SK Telecom Japan Inc. | 100.0 | Information gathering and consulting | ||||
id Quantique SA | 68.1 | Quantum information and communications service | ||||
SK Telecom TMT Investment Corp. | 100.0 | Investment | ||||
FSK L&S Co., Ltd. | 60.0 | Freight and logistics consulting business | ||||
Incross Co., Ltd.(*4) | 34.6 | Media representative business | ||||
Happy Hanool Co., Ltd. | 100.0 | Service | ||||
SK stoa Co., Ltd. | 100.0 | Other telecommunication retail business | ||||
Broadband Nowon Co., Ltd.(*5) | 100.0 | Cable broadcasting services | ||||
T Map Mobility Co., Ltd. | 100.0 | Mobility business | ||||
Subsidiaries owned by SK Planet Co., Ltd. | SK m&service Co., Ltd. | 100.0 | Database and internet website service | |||
SK Planet Global Holdings Pte. Ltd. | 100.0 | Investment (Holdings company) | ||||
SKP America LLC. | 100.0 | Digital contents sourcing service | ||||
K-net Culture and Contents Venture Fund | 59.0 | Capital investing in start-ups | ||||
Subsidiaries owned by DREAMUS COMPANY | iriver Enterprise Ltd. | 100.0 | Management of Chinese subsidiaries | |||
iriver China Co., Ltd. | 100.0 | Sales and manufacturing of MP3 and 4 | ||||
Dongguan iriver Electronics Co., Ltd. | 100.0 | Sales and manufacturing of e-book devices | ||||
LIFE DESIGN COMPANY Inc. | 100.0 | Sales of goods in Japan |
47
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
Subsidiary | Ownership percentage(%)(*1) | Primary business | ||||
Subsidiaries owned by ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.) | SKinfosec Information Technology(Wuxi) Co., Ltd. | 100.0 | System software development and supply services | |||
CAPSTEC Co., Ltd. | 100.0 | Manned security | ||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | 100.0 | Operation of information and communication facility | |||
Media s Co., Ltd.(*6) | 100.0 | Production and supply services of broadcasting programs | ||||
Subsidiary owned by Quantum Innovation Fund I | Panasia Semiconductor Materials LLC. | 66.4 | Investment | |||
Subsidiary owned by id Quantique SA | Id Quantique LLC | 100.0 | Quantum information and communications service | |||
Subsidiaries owned by FSK L&S Co., Ltd. | FSK L&S(Shanghai) Co., Ltd. | 66.0 | Logistics business | |||
FSK L&S(Hungary) Co., Ltd. | 100.0 | Logistics business | ||||
FSK L&S VIETNAM COMPANY LIMITED | 100.0 | Logistics business | ||||
Subsidiaries owned by Incross Co., Ltd. | Infra Communications Co., Ltd. | 100.0 | Service operation | |||
Mindknock Co., Ltd. | 100.0 | Software development | ||||
Subsidiary owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | 79.8 | Digital Contents sourcing service | |||
Subsidiary owned by T Map Mobility Co., Ltd. | UT LLC(*7) | 100.0 | Database and internet website service | |||
Others(*8) | SK Telecom Innovation Fund, L.P. | 100.0 | Investment | |||
SK Telecom China Fund I L.P. | 100.0 | Investment |
48
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Company or subsidiaries of the Company. |
(*2) | The ownership interest has changed from 52.1% to 48.4% due to unequal paid-in capital increase and third-party share option which was exercised for the three-month period ended March 31, 2021. Although the Company owns less than 50% ownership of the investee, the management has determined that the Company controls One Store Co., Ltd. as it has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders. |
(*3) | On March 4, 2021, SK Infosec Co., Ltd. merged with ADT CAPS Co., Ltd., a subsidiary of SK Infosec Co., Ltd., to improve management efficiency and changed its name to ADT CAPS Co., Ltd. |
(*4) | Although the Company owns less than 50% of the investee, the management has determined that the Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders’ meetings, and the fact that the Company has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders. |
(*5) | The Company acquired 513,000 shares (45%) of Broadband Nowon Co., Ltd. at |
(*6) | SK Broadband Co., Ltd. newly established Media s Co., Ltd. as its subsidiary for the three-month period ended March 31, 2021. |
(*7) | T Map Mobility Co., Ltd. newly established UT LLC as its subsidiary for the three-month period ended March 31, 2021. |
(*8) | Others are owned by Atlas Investment and another subsidiary of the Company. |
As of March 31, 2021, the Company is included in SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Company.
(2) | Compensation for the key management |
The Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operations and relevant controls of the business as key management. The compensation given to such key management for the three-month periods ended March 31, 2021 and 2020 are as follows:
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2021 | March 31, 2020 | |||||||
Salaries | 4,849 | |||||||
Defined benefits plan expenses | 1,815 | 2,933 | ||||||
Share option | 32 | 32 | ||||||
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|
|
| |||||
7,814 | ||||||||
|
|
|
|
Compensation for the key management includes salaries, non-monetary salaries and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
49
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2021 and 2020, are as follows: |
(In millions of won) | For the three-month period ended March 31, 2021 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) (*2) | 263,876 | 1,450 | |||||||||||
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| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | 23,388 | 135,122 | — | ||||||||||
PS&Marketing Corporation(*3) | 3,349 | 350,088 | 16 | |||||||||||
SK O&S Co., Ltd. | 845 | 55,696 | 805 | |||||||||||
SK Planet Co., Ltd. | 1,080 | 20,742 | — | |||||||||||
SK Telink Co., Ltd.(*4) | 20,535 | 10,211 | — | |||||||||||
SERVICE ACE Co., Ltd. | 2,938 | 31,878 | — | |||||||||||
SERVICE TOP Co., Ltd. | 2,103 | 35,225 | — | |||||||||||
Eleven Street Co., Ltd. | 909 | 3,273 | — | |||||||||||
One Store Co., Ltd. | 3,635 | — | — | |||||||||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.)(*5) | 13,967 | 16,337 | 328 | |||||||||||
DREAMUS COMPANY | 699 | 21,581 | — | |||||||||||
Others | 2,258 | 6,532 | 39 | |||||||||||
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| |||||||||
75,706 | 686,685 | 1,188 | ||||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | 190 | 10,757 | — | ||||||||||
SK hynix Inc.(*6) | 178,798 | 39 | — | |||||||||||
KEB HanaCard Co., Ltd. | 20 | 842 | — | |||||||||||
SK Wyverns Co., Ltd.(*7) | 199 | 8,203 | — | |||||||||||
Content Wavve Co., Ltd. | 7 | 695 | — | |||||||||||
Others | 7,117 | 138 | — | |||||||||||
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| |||||||||
186,331 | 20,674 | — | ||||||||||||
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|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | 480 | — | — | ||||||||||
SK Innovation Co., Ltd. | 2,201 | 3,509 | — | |||||||||||
SK Networks Co., Ltd. | 377 | 2,111 | 24 | |||||||||||
SK Networks Service Co., Ltd. | 169 | 9,037 | — | |||||||||||
SK Telesys Co., Ltd. | 33 | 76 | 980 | |||||||||||
SK TNS Co., Ltd. | 39 | 3,479 | 19,956 | |||||||||||
SK Energy Co., Ltd. | 374 | 20 | — | |||||||||||
SKC Infra Service Co., Ltd. | 4 | 2,578 | — | |||||||||||
SK ENS Co., Ltd. | 404 | — | — | |||||||||||
UbiNS Co., Ltd. | — | 196 | 778 | |||||||||||
Happy Narae Co., Ltd. | 28 | 3,720 | 4,422 | |||||||||||
Others | 2,357 | 3,090 | 117 | |||||||||||
|
|
|
|
|
| |||||||||
6,466 | 27,816 | 26,277 | ||||||||||||
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|
|
|
|
| |||||||||
999,051 | 28,915 | |||||||||||||
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|
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued: |
(*1) | Operating expense and others include lease payments by the Company. |
(*2) | Operating expense and others include |
(*3) | Operating expense and others include |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating revenue and others include |
(*7) | Transactions with SK Wyverns Co., Ltd. occurred before disposal. |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued: |
(In millions of won) | For the three-month period ended March 31, 2020 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) (*2) | 269,299 | 651 | |||||||||||
Subsidiaries | SK Broadband Co., Ltd. | 30,043 | 130,812 | — | ||||||||||
PS&Marketing Corporation(*3) | 3,496 | 308,731 | — | |||||||||||
SK O&S Co., Ltd. | 1,003 | 52,695 | 1,458 | |||||||||||
SK Planet Co., Ltd. | 615 | 20,719 | 244 | |||||||||||
SK Telink Co., Ltd.(*4) | 102,451 | 6,520 | 2 | |||||||||||
SERVICE ACE Co., Ltd.(*5) | 3,886 | 35,749 | — | |||||||||||
SERVICE TOP Co., Ltd. | 2,273 | 37,675 | — | |||||||||||
Eleven Street Co., Ltd. | 1,123 | 2,349 | — | |||||||||||
Life & Security Holdings Co., Ltd.(*6) | 10,191 | 23 | 134 | |||||||||||
One Store Co., Ltd. | 3,803 | 62 | — | |||||||||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.)(*7) | 20,072 | 7,443 | 42 | |||||||||||
DREAMUS COMPANY | 391 | 14,509 | — | |||||||||||
Others | 2,155 | 8,766 | 299 | |||||||||||
|
|
|
|
|
| |||||||||
181,502 | 626,053 | 2,179 | ||||||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | 224 | 11,130 | — | ||||||||||
SK hynix Inc.(*8) | 154,128 | 37 | — | |||||||||||
KEB HanaCard Co., Ltd. | 151 | 787 | — | |||||||||||
SK Wyverns Co., Ltd. | 298 | 9,404 | — | |||||||||||
Content Wavve Co., Ltd. | 9 | 9,836 | — | |||||||||||
Others | 6,734 | 1,987 | — | |||||||||||
|
|
|
|
|
| |||||||||
161,544 | 33,181 | — | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering & Construction Co., Ltd. | 2,304 | 1 | — | ||||||||||
SK Innovation Co., Ltd. | 10,542 | 3,335 | — | |||||||||||
SK Networks Co., Ltd. | 547 | 3,887 | — | |||||||||||
SK Networks Service Co., Ltd. | 137 | 9,866 | 3 | |||||||||||
SK Telesys Co., Ltd. | 61 | 220 | 508 | |||||||||||
SK TNS Co., Ltd. | 51 | 1,980 | 11,883 | |||||||||||
SK Energy Co., Ltd. | 913 | 7 | — | |||||||||||
SKC Infra Service Co., Ltd. | 8 | 1,939 | — | |||||||||||
SK ENS Co., Ltd. | 570 | — | — | |||||||||||
UbiNS Co., Ltd. | — | 143 | 1,383 | |||||||||||
Happy Narae Co., Ltd. | 25 | 2,887 | 9,794 | |||||||||||
Others | 3,052 | 1,648 | — | |||||||||||
|
|
|
|
|
| |||||||||
18,210 | 25,913 | 23,571 | ||||||||||||
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|
|
|
|
| |||||||||
954,446 | 26,401 | |||||||||||||
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|
|
|
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2021 and 2020 are as follows, Continued: |
(*1) | Operating expense and others include lease payments by the Company. |
(*2) | Operating expense and others include |
(*3) | Operating expense and others include |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating revenue and others include |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
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SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2021, and December 31, 2020 are as follows: |
(In millions of won) | March 31, 2021 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) | 1,436 | 222,244 | |||||||||||
|
|
|
|
|
| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 7,395 | 217,990 | ||||||||||
PS&Marketing Corporation | — | 1,664 | 75,312 | |||||||||||
SK O&S Co., Ltd. | — | 149 | 22,145 | |||||||||||
SK Planet Co., Ltd. | — | 927 | 16,726 | |||||||||||
SK Telink Co., Ltd. | — | 16,572 | 41,850 | |||||||||||
SERVICE ACE Co., Ltd. | — | 449 | 19,979 | |||||||||||
SERVICE TOP Co., Ltd. | — | 45 | 18,147 | |||||||||||
Eleven Street Co., Ltd. | — | 448 | 19,072 | |||||||||||
One Store Co., Ltd. | — | 267 | 12,502 | |||||||||||
SK m&service Co., Ltd. | — | 887 | 17,556 | |||||||||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.) | — | 10,434 | 10,554 | |||||||||||
SK Communications Co., Ltd. | — | 51 | 11,000 | |||||||||||
Others | — | 1,602 | 35,214 | |||||||||||
|
|
|
|
|
| |||||||||
— | 40,890 | 518,047 | ||||||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | — | 14 | 4,529 | ||||||||||
SK hynix Inc. | — | 177,029 | 156 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 25,782 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 2,445 | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 634 | 76,546 | |||||||||||
Others | — | 408 | 1 | |||||||||||
|
|
|
|
|
| |||||||||
22,147 | 206,312 | 81,232 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering and Construction Co., Ltd. | — | 460 | — | ||||||||||
SK Innovation Co., Ltd. | — | 3,335 | 38,465 | |||||||||||
SK Networks Co., Ltd. | — | 458 | 6,119 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 5,012 | |||||||||||
SK Telesys Co., Ltd. | — | 8 | 1,829 | |||||||||||
SK TNS Co., Ltd. | — | 5 | 18,693 | |||||||||||
SK Energy Co., Ltd. | — | 230 | 186 | |||||||||||
Others | — | 587 | 13,144 | |||||||||||
|
|
|
|
|
| |||||||||
— | 5,083 | 83,448 | ||||||||||||
|
|
|
|
|
| |||||||||
253,721 | 904,971 | |||||||||||||
|
|
|
|
|
|
(*1) | As of March 31, 2021, the Company recognized loss allowance amounting to |
(*2) | As of March 31, 2021, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
28. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2021 and December 31, 2020 are as follows, Continued: |
(In millions of won) | December 31, 2020 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. (Formerly, SK Holdings Co., Ltd.) | 1,593 | 44,035 | |||||||||||
|
|
|
|
|
| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 12,035 | 224,714 | ||||||||||
PS&Marketing Corporation | — | 1,686 | 69,301 | |||||||||||
SK O&S Co., Ltd. | — | 78 | 38,220 | |||||||||||
SK Planet Co., Ltd. | — | 412 | 23,886 | |||||||||||
SK Telink Co., Ltd. | — | 11,994 | 26,621 | |||||||||||
SERVICE ACE Co., Ltd. | — | 210 | 28,111 | |||||||||||
SERVICE TOP Co., Ltd. | — | 158 | 28,215 | |||||||||||
Eleven Street Co., Ltd. | — | 545 | 8,182 | |||||||||||
One Store Co., Ltd. | — | 267 | 12,320 | |||||||||||
SK m&service Co., Ltd. | — | 2,688 | 15,046 | |||||||||||
ADT CAPS Co., Ltd. (Formerly, SK Infosec Co., Ltd.) | — | 921 | 13,998 | |||||||||||
SK Communications Co., Ltd. | — | 28 | 11,052 | |||||||||||
Others | — | 1,791 | 25,729 | |||||||||||
|
|
|
|
|
| |||||||||
— | 32,813 | 525,395 | ||||||||||||
|
|
|
|
|
| |||||||||
Associates | F&U Credit information Co., Ltd. | — | 5 | 4,005 | ||||||||||
SK hynix Inc. | — | 6,991 | 127 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 25,782 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 2,779 | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 352 | 145,328 | |||||||||||
Others | — | 7,398 | 4,150 | |||||||||||
|
|
|
|
|
| |||||||||
22,147 | 43,307 | 153,610 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Engineering and Construction Co., Ltd. | — | 410 | 152 | ||||||||||
SK Innovation Co., Ltd. | — | 4,277 | 42,896 | |||||||||||
SK Networks Co., Ltd. | — | 371 | 4,533 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 6,328 | |||||||||||
SK Telesys Co., Ltd. | — | 33 | 4,331 | |||||||||||
SK TNS Co., Ltd. | — | 19 | 89,370 | |||||||||||
SK Energy Co., Ltd. | — | 525 | 233 | |||||||||||
Others | — | 2,192 | 26,640 | |||||||||||
|
|
|
|
|
| |||||||||
— | 7,827 | 174,483 | ||||||||||||
|
|
|
|
|
| |||||||||
85,540 | 897,523 | |||||||||||||
|
|
|
|
|
|
(*1) | As of December 31, 2020, the Company recognized loss allowance amounting to |
(*2) | As of December 31, 2020, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
55
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
29. | Commitments and Contingencies |
(1) | Accounts receivables from sale of handsets |
The sales agents of the Company sell handsets to the Company’s subscribers on an installment basis. The Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special-purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivable from sale of handsets amounting to494,904 million andW571,004 million as of March 31, 2021 and December 31, 2020, respectively, which the Company purchased according to the relevant comprehensive agreement, are recognized as accounts receivable – other and long-term accounts receivable – other.W
(2) | Legal claims and litigations |
As of March 31, 2021, the Company is involved in various legal claims and litigations. Provision recognized in relation to these claims and litigations is immaterial. In connection with those legal claims and litigations for which no provision was recognized, management does not believe the Company has a present obligation, nor is it expected that any of these claims or litigations will have a significant impact on the Company’s financial position or operating results in the event an outflow of resources is ultimately necessary.
56
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
30. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Gain on foreign currency translations | (4,484 | ) | ||||||
Interest income | (6,880 | ) | (6,157 | ) | ||||
Dividends | (184,599 | ) | (265,852 | ) | ||||
Gain relating to investments in associates | (100,000 | ) | (7,641 | ) | ||||
Gain relating to financial assets at FVTPL | (33,737 | ) | — | |||||
Gain on disposal of property and equipment and intangible assets | (725 | ) | (753 | ) | ||||
Gain on business transfer | — | (12,451 | ) | |||||
Gain on settlement of derivatives | — | (7,380 | ) | |||||
Gain on sale of accounts receivable – other | (7,921 | ) | (4,679 | ) | ||||
Loss on foreign currency translations | 15 | 3,154 | ||||||
Bad debt for accounts receivable – trade | 2,088 | 9,229 | ||||||
Bad debt for accounts receivable – other | 109 | 1,103 | ||||||
Loss relating to financial assets at FVTPL | 44 | 173 | ||||||
Depreciation and amortization | 723,227 | 758,818 | ||||||
Loss on disposal of property and equipment and intangible assets | 1,118 | 2,748 | ||||||
Interest expense | 58,047 | 64,822 | ||||||
Loss on settlement of derivatives | — | 1,866 | ||||||
Expense related to defined benefit plan | 14,131 | 15,101 | ||||||
Bonus paid by treasury shares | 29,642 | — | ||||||
Share option | 47 | 32 | ||||||
Income tax expense | 114,852 | 82,004 | ||||||
Other expenses | 792 | 13,131 | ||||||
|
|
|
| |||||
642,784 | ||||||||
|
|
|
|
57
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
30. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Accounts receivable – trade | 5,367 | |||||||
Accounts receivable – other | 35,519 | 39,943 | ||||||
Advanced payments | (2,362 | ) | (12,320 | ) | ||||
Prepaid expenses | (1,256 | ) | (24,514 | ) | ||||
Inventories | (4,989 | ) | (5,577 | ) | ||||
Long-term accounts receivable – other | 40,726 | 43,646 | ||||||
Long-term prepaid expenses | (36,123 | ) | 81,314 | |||||
Guarantee deposits | 2,633 | (4,334 | ) | |||||
Contract assets | (999 | ) | (2,180 | ) | ||||
Accounts payable – other | (343,775 | ) | (415,523 | ) | ||||
Withholdings | 62,626 | 10,791 | ||||||
Deposits received | 1,179 | (317 | ) | |||||
Accrued expenses | (33,800 | ) | (158,198 | ) | ||||
Plan assets | 7,111 | 4,535 | ||||||
Retirement benefit payment | (11,107 | ) | (10,841 | ) | ||||
Contract liabilities | 952 | 5,524 | ||||||
Others | (1,623 | ) | 26,762 | |||||
|
|
|
| |||||
(415,922 | ) | |||||||
|
|
|
|
(3) | Significant non-cash transactions for the three-month periods ended March 31, 2021 and 2020 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets | (531,113 | ) | ||||||
Increase of right-of-use assets | 108,704 | 135,623 | ||||||
Contribution in kind for investments | 7,000 | 4,702 |
58
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the three-month periods ended March 31, 2021 and 2020
31. | Non-current Assets Held for Sale |
(1) | On February 25, 2021, the Company has decided to dispose of the investments in certain associates engaged in mobility business to T map Mobility Co., Ltd. by approval of the board of directors and reclassified entire shares of the investments in associates as non-current assets held for sale. |
(In millions of won) | ||||||
March 31, 2021 | ||||||
Investments in associates | Grab Geo Holdings PTE. LTD. | |||||
Carrot General Insurance Co., Ltd. | 20,000 | |||||
|
| |||||
|
|
(2) | On February 25, 2021, the Company has decided to dispose of certain land, buildings, structures and equipment |
32. | Subsequent Events |
(1) | The Company is considering a potential corporate restructuring whereby the Company will split into a wireless and fixed-line telecommunications company (including, among others, the Company’s interest in SK Broadband Co., Ltd.) (the “Surviving Company”) and a holding company that holds interests in semiconductor and new information and communication technology (“New ICT”) businesses (including, among others, the Company’s interest in SK hynix Inc., ADT CAPS Co., Ltd., Eleven Street Co., Ltd. and T map Mobility Co., Ltd.) (the “Spin-off Company”). The Surviving Company and the Spin-off Company will operate wireless and fixed-line telecommunication businesses and investment business as main business, respectively. A decision regarding the potential spin-off, if any, is expected to be made in the first half of 2021. The Company will disclose such decision at such time. |
(2) | On March 25, 2021, the board of directors of the Company made a resolution to additionally contribute of |
(3) | On May 4, 2021, the board of directors of the Company made a resolution to the retirement of treasury shares, and the details are as follows: |
Type and the number of shares | 8,685,568 common shares | |
Amount to be retired | ||
Retirement date | May 6, 2021 | |
Acquisition of the shares which were retired | Treasury shares that were previously acquired by the Company |
59