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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 APRIL 2023
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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ANNUAL BUSINESS REPORT
(From January 1, 2022 to December 31, 2022)
THIS IS A SUMMARY OF THE ANNUAL 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 following table sets forth a summary of the Company’s consolidated subsidiaries:
Number of Consolidated Subsidiaries | ||||||||||||||||||||
Classification | Beginning of the Reporting Period | Additions | Subtractions | End of the Reporting Period | Number of Material Subsidiaries* | |||||||||||||||
Listed Companies | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Unlisted Companies | 23 | 3 | 1 | 25 | 10 | |||||||||||||||
Total | 23 | 3 | 1 | 25 | 10 |
* | “Material Subsidiary” means a subsidiary with total assets of Won 75 billion or more as of the end of the previous fiscal year. |
For a list of the Company’s subsidiaries as of December 31, 2022, see Note 1(2) of the notes to the Company’s audited consolidated financial statements attached hereto.
Changes in subsidiaries during the year ended December 31, 2022 are set forth below.
Change | Name | Remarks | ||
Additions | SAPEON Korea Inc. | Newly established by parent company | ||
SAPEON Inc. | Newly established by parent company | |||
SK M&Service Co., Ltd.
| Newly acquired by PS&Marketing Co., Ltd. | |||
Exclusions | Nowon Broadcasting Co., Ltd. | Acquired by SK Broadband Co., Ltd. during the reporting period | ||
— | — |
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 |
The Company’s businesses consist of (1) the wireless business including cellular voice, wireless data and wireless Internet services, (2) the fixed-line business including fixed-line telephone, high speed Internet, and data and network lease services, and (3) other businesses including commercial retail data broadcasting channel services, among others.
The Company’s wireless business, fixed-line business and other businesses account for 74.8%, 22.0% and 3.2%, respectively, of the Company’s revenue. The Company’s market shares in its key business segments were approximately 48% in the wireless business, excluding the mobile virtual network operator (“MVNO”) business, and approximately 29% in the high speed Internet business.
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Set forth below is a summary description of each of the Company’s businesses.
Classification | Material entities | Description of business | Proportion of revenue | |||
Wireless business | SK Telecom Co., Ltd. | Mobile telephone, wireless data, information and communications services, etc. | 74.8% | |||
PS&Marketing Co., Ltd. | ||||||
Service Ace Co., Ltd. | ||||||
SK O&S Co., Ltd. | ||||||
Fixed-line business | SK Broadband Co., Ltd. | Telephone, high-speed Internet, data, communications network leasing services, etc. | 22.0% | |||
SK Telink Co., Ltd. | ||||||
Home & Service Co., Ltd. | ||||||
Other businesses | SK stoa Co., Ltd. | Operation of commercial retail data broadcasting channel services | 3.2% | |||
Total | 100.0% |
The total number of the Company’s consolidated subsidiaries as of December 31, 2022 was 25, including SK Broadband Co., Ltd. (“SK Broadband”) and PS&Marketing Co., Ltd. (“PS&Marketing”).
E. | Credit Ratings |
(1) | Corporate bonds and other long-term securities |
Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
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, Inc. | Current rating | ||||
June 15, 2021 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
June 16, 2021 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
June 25, 2021 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
October 14, 2021 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
October 15, 2021 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
October 15, 2021 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
March 30, 2022 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
March 30, 2022 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
March 30, 2022 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
March 30, 2022 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
March 30, 2022 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
June 15, 2022 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
July 28, 2022 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
July 28, 2022 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
July 29, 2022 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
December 1, 2022 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
December 2, 2022 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
December 2, 2022 | Corporate bond | AAA (Stable) | NICE 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. |
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(2) | Commercial paper (“CP”) and short-term bonds |
Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
June 16, 2020 | CP | A1 | Korea Ratings | Current rating | ||||
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. | Regular rating | ||||
September 28, 2020 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
September 29, 2020 | CP | A1 | Korea Ratings | Regular rating | ||||
September 29, 2020 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
September 29, 2020 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
September 29, 2020 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
June 15, 2021 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 15, 2021 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 16, 2021 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 16, 2021 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 25, 2021 | CP | A1 | Korea Ratings | Current rating | ||||
June 25, 2021 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
October 14, 2021 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 14, 2021 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 15, 2021 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 15, 2021 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 15, 2021 | CP | A1 | Korea Ratings | Regular rating | ||||
October 15, 2021 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
November 3, 2021 | CP | A1 | Korea Investors Service, Inc. | Rating update | ||||
November 3, 2021 | Short-term bond | A1 | Korea Investors Service, Inc. | Rating update | ||||
June 15, 2022 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 15, 2022 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 20, 2022 | CP | A1 | Korea Ratings | Current rating | ||||
June 20, 2022 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
June 21, 2022 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 21, 2022 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
December 2, 2022 | CP | A1 | Korea Ratings | Regular rating | ||||
December 2, 2022 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
December 2, 2022 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
December 2, 2022 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
December 2, 2022 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
December 2, 2022 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular 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 | Credit rating agency | Rating type | ||||
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 30, 2021 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating | ||||
June 16, 2021 | Bonds denominated in foreign currency | A3 (Stable) | Moody’s Investors Service | Regular rating | ||||
June 21, 2021 | Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
December 8, 2021 | Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
February 25, 2022 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating | ||||
December 2, 2022 | Bonds denominated in foreign currency | A- (Positive) | Fitch Ratings | Regular rating |
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(4) | Listing (registration or designation) of Company’s shares and special listing status |
Listing (registration or designation) of | 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.
March 2008: Acquisition of Hanaro Telecom (the predecessor entity of SK Broadband)
May 2018: Acquisition of ADT CAPS Co., Ltd. (“Former ADT CAPS”) through the acquisition of shares of Siren Holdings Korea Co., Ltd.
December 2018: Comprehensive exchange of shares of SK Infosec Co., Ltd. (“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
November 2021: Spin-off of SK Square Co., Ltd. (“SK Square”) from SK Telecom (the “Spin-off”)
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, Jongno-gu, Seoul (December 20, 1999) |
• | 65 Euljiro, Jung-gu, Seoul (December 13, 2004) |
B. | Significant Changes in Management |
Date of change | Shareholder meeting | Appointment | Term Termination or | |||||
Newly appointed | Re-elected | |||||||
March 21, 2018 | General Meeting of Shareholders | Young Sang Ryu, Youngmin Yoon | — | — | ||||
March 26, 2019 | General Meeting of Shareholders | Seok-Dong Kim | — | Dae Sik Oh | ||||
March 26, 2020 | General Meeting of Shareholders | Yong-Hak Kim, Junmo Kim | Jung Ho Park, Dae Sik Cho, Jung Ho Ahn | Jae Hoon Lee, Jae Hyeon Ahn | ||||
March 25, 2021 | General Meeting of Shareholders | — | Young Sang Ryu, Youngmin Yoon | — | ||||
August 25, 2021 | — | — | — | Dae Sik Cho | ||||
October 12, 2021 | Extraordinary Meeting of Shareholders | Kyu-Nam Choi | — | — | ||||
November 1, 2021 | — | Young Sang Ryu | — | Jung Ho Park | ||||
March 25, 2022 | General Meeting of Shareholders | Jong Ryeol Kang | Seok-Dong Kim | — |
* | On August 25, 2021, Dae Sik Cho resigned from his position as a non-executive director. |
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* | On November 1, 2021, Jung Ho Park resigned from his position as the representative director following the Spin-off, and inside director Young Sang Ryu was appointed as representative director. |
* | The appointments of outside director candidates are expected to be decided at the 39th General Meeting of Shareholders, which is scheduled to be held after the date of business report submission. |
C. | Change in Company Name |
On March 28, 2019, in accordance with a resolution at its general meeting of shareholders, Iriver Ltd. (“Iriver”) changed its name to Dreamus Company, which has been eliminated from the Company’s consolidation scope following the Spin-off.
On April 17, 2019, Network O&S Co., Ltd. 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 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. As of October 26, 2021, ADT CAPS changed its name to SK shieldus Co., Ltd., which has subsequently been eliminated from the Company’s consolidation scope following the Spin-off.
D. | Mergers, Acquisitions and Restructuring |
[SK Telecom]
(1) 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 owned a 60% equity interest in FSK L&S Co., Ltd.
(2) 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 of which the Company owned a total of 58.1% of the issued and outstanding shares (44,157,506 shares), and acquired control, of id Quantique SA.
(3) 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. |
(4) 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%.
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(5) Exchange of shares of SK Infosec
On October 26, 2018, the Company announced the decision of the Company’s board of directors (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.
(6) 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 information and communications technology (“ICT”) businesses of the Company. On January 3, 2020, the Company acquired 3,631,355 shares of SK Stoa after obtaining governmental approvals.
(7) 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.
(8) Disposal of shares of SMC and Shopkick
On June 11, 2019, SKP America, LLC, a subsidiary of the Company, disposed of its 100% equity interest in SMC and SMC’s wholly-owned subsidiary Shopkick.
(9) 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.
(10) 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.
(11) 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.
(12) 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.
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* | See the report on “Decision to Spin Off Mobility Business” filed by the Company on October 16, 2020, for more information. |
(13) Spin-off of SK Square
The Company engaged in the Spin-off, comprising a horizontal spin-off of its business of managing the equity interests in certain investees engaged in, among other things, semiconductor and new ICT businesses and making new investments into a newly established company, SK Square. The Spin-off was conducted in order to (i) strengthen the competitiveness of, and concentrate capabilities relating to, the spun-off investments, (ii) increase the transparency of corporate governance and management stability and (iii) efficiently allocate management resources through changes in the corporate governance structure of the Company and SK Square, thereby facilitating appropriate market valuation and ultimately enhancing the corporate and shareholder values of the Company and SK Square. The Spin-off registration date was November 2, 2021.
* | See the report on “Decision on Spin-Off” filed by the Company on June 10, 2021, for more information. |
(14) Transfer of AI semiconductor business
On December 21, 2021, the Board of Directors resolved to approve an agreement for the transfer of the Company’s AI semiconductor business to facilitate the commercialization of the Company’s AI semiconductor technology and to improve management efficiency. The transfer was completed on January 4, 2022.
* | See the report on “Decision on Business Transfer” filed by the Company on December 22, 2021, for more information. |
[SK Broadband]
(1) 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.
(2) 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.
(3) 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 merged 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.
(4) 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 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.
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(5) Acquisition of business
On December 4, 2020, SK Broadband entered into a certain business transfer agreement to acquire the business-to-business (“B2B”) business of SK Telink Co., Ltd. (“SK Telink”) with the purpose of strengthening the market competitiveness of the B2B business through a reorganization of such business within the wider ICT business of the SK Group. The transfer was completed on March 31, 2021.
(6) Establishment of a subsidiary and acquisition of shares
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 as of March 2, 2021. On June 22, 2022, SK Broadband acquired 5,000,000 additional shares of Media S Co., Ltd. for Won 25 billion through a capital increase by allocation to shareholders.
(7) Merger
On March 30, 2022, SK Broadband’s board of directors approved the merger contract with Broadband Nowon Broadcasting Co., Ltd., as originally proposed. On October 5, 2022, the merger was completed.
[SK Telink]
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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 value of the transfer was Won 20.3 billion.
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[PS&Marketing]
(1) Acquisition of shares of SK M&Service Co., Ltd.
PS&Marketing acquired 3,099,112 shares of SK M&Service Co., Ltd. (representing a 100% equity interest) to strengthen its competitiveness in distribution and promote synergies within the ICT businesses of SK Telecom and its affiliates. The transaction was completed on February 9, 2022.
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3. Total Number of Shares
A. | Total Number of Shares |
(As of December 31, 2022) | (Unit: in shares) | |||||||||||||||
Classification | Share type | Remarks | ||||||||||||||
Common shares | Preferred shares | Total | ||||||||||||||
I. Total number of authorized shares | 670,000,000 | — | 670,000,000 | — | ||||||||||||
II. Total number of shares issued to date | 304,927,159 | — | 304,927,159 | — | ||||||||||||
III. Total number of shares retired to date | 86,094,015 | — | 86,094,015 | — | ||||||||||||
a. reduction of capital | — | — | — | — | ||||||||||||
b. retirement with profit | 86,094,015 | — | 86,094,015 | — | ||||||||||||
c. redemption of redeemable shares | — | — | — | — | ||||||||||||
d. others | — | — | — | — | ||||||||||||
IV. Total number of issued shares (II-III) | 218,833,144 | — | 218,833,144 | — | ||||||||||||
V. Number of treasury shares | 801,091 | — | 801,091 | — | ||||||||||||
VI. Number of outstanding shares (IV-V) | 218,032,053 | — | 218,032,053 | — |
* | Following the stock split of October 28, 2021 (the “Stock Split”) and the split-off of November 1, 2021, the total number of issued shares changed from 72,060,143 shares (par value of Won 500 per share) to 218,833,144 shares (par value of Won 100 per share). |
* | Number of treasury shares includes 54,032 treasury shares acquired relating to fractional shares from the Spin-off. |
B. | Treasury Shares |
(As of December 31, 2022) | (Unit: in shares) | |||||||||||||||||||||||||||
Acquisition methods | Type of shares | At the beginning of period | Changes | At the end of period | ||||||||||||||||||||||||
Acquired (+) | Disposed (-) | Retired (-) | ||||||||||||||||||||||||||
Acquisition pursuant to the Financial Investment Services and Capital Markets Act of Korea | Direct acquisition | Direct acquisition from market | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||||
Direct over-the-counter acquisition | Common shares | — | — | — | — | — | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||||
Tender offer | Common shares | — | — | — | — | — | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||||
Sub-total (a) | Common shares | — | — | — | — | — | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||||
Acquisition through trust and other agreements | Held by trustee | Common shares | — | — | — | — | — | |||||||||||||||||||||
Preferred shares | — | — | — | — | —�� | |||||||||||||||||||||||
Held in actual stock | Common shares | 1,196,960 | 395,869 | — | 801,091 | |||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||||
Sub-total (b) | Common shares | 1,196,960 | — | 395,869 | — | 801,091 | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||||
Other acquisition (c) | Common shares | 54,032 | — | 54,032 | — | — | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||||
Total (a+b+c) | Common shares | 1,250,992 | — | 449,901 | — | 801,091 | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — |
* | On January 24, 2022, the Company disposed 413,080 treasury shares for bonus payment purposes. |
* | On February 25, 2022, the Company disposed 7,598 treasury shares for bonus payment purposes. |
* | On May 2, 2022, the Company disposed 5,984 treasury shares for bonus payment purposes. |
* | On May 13, 2022, the Company disposed 23,239 treasury shares for bonus payment purposes. |
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4. Status of Direct Acquisitions and Disposal of Treasury Shares
(As of December 31, 2022) | (Unit: in shares and percentages) | |||||||||||||||||
Classification | Expected Acquisition (Disposal) Period | Expected Number of Shares (A) | Executed Number of Shares (B) | Execution Ratio (B/A) | Reporting Date | |||||||||||||
Start Date | End Date | |||||||||||||||||
Direct Disposal | Feb. 3, 2021 | Feb. 3, 2021 | 604,950 | 604,950 | 100 | % | Feb. 8, 2021 | |||||||||||
Direct Disposal | Jun. 21, 2021 | Jun. 21, 2021 | 2,500 | 2,500 | 100 | Jun. 22, 2021 | ||||||||||||
Direct Disposal | Oct. 25, 2021 | Dec. 16, 2021 | 2,526,553 | 2,526,553 | 100 | Dec. 20, 2021 | ||||||||||||
Direct Disposal | Jan. 24, 2022 | Jan. 24, 2022 | 413,080 | 413,080 | 100 | Jan. 27, 2022 | ||||||||||||
Direct Disposal | Feb. 25, 2022 | Feb. 25, 2022 | 7,598 | 7,598 | 100 | Feb. 28, 2022 | ||||||||||||
Direct Disposal | May 2, 2022 | May 2, 2022 | 5,984 | 5,984 | 100 | May 17, 2022 | ||||||||||||
Direct Disposal | May 13, 2022 | May 13, 2022 | 23,239 | 23,239 | 100 | May 17, 2022 |
* | The expected number of shares and executed number of shares reflect the effect of the Stock Split. |
5. Status of Trust Agreement on Repurchase of Treasury Shares
(As of December 31, 2022) | (Unit: in Won, percentages and number of instances) | |||||||||||||||||||||||||
Agreement Period | Maximum Value of Treasury Shares to be Acquired under Agreement (A) | Actual Value of Treasury Shares Acquired under Agreement (B) | Execution Ratio (B/A) | Change of Sales Direction | Reporting Date | |||||||||||||||||||||
Classification | Start Date | End Date | Number of Instances | Date | ||||||||||||||||||||||
Trust Agreement Termination | Aug. 28, 2020 | Apr. 30, 2021 | 99.93 | % | 0 | — | Apr. 30, 2021 |
6. Matters Concerning Articles of Incorporation
Date of Revision | General Meeting of Shareholders | Key Revisions | Reason for Revisions | |||
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 25, 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 | |||
October 12, 2021 | 1st Extraordinary General Meeting of Shareholders | Total number of authorized shares, par value per share | Stock Split from par value of Won 500 per share to par value of Won 100 per share | |||
March 25, 2022 | 38th General Meeting of Shareholders | The Company’s areas of business | To reflect the Company’s pursuit of new businesses including data and medical equipment businesses |
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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 Company’s 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 and (3) other businesses consisting of commercial retail data broadcasting channel business, among others.
Set forth below is a summary description of the business of each of the Company’s 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 | |||
SK M&Service Co., Ltd. | Database and online information services | |||
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 VOD | ||
Home & Service Co., Ltd. | System maintenance of high-speed Internet, IPTV and fixed-line services | |||
SK Telink Co., Ltd. | International wireless direct-dial “00700” services and MVNO business | |||
Other business | SK stoa Co., Ltd. | Operation of commercial retail data broadcasting channel services | ||
Atlas Investment | Investments | |||
SK Telecom Innovation Fund, L.P. | Investments |
[Wireless Business]
A. | Overview |
For the year ended December 31, 2022, the Company recorded Won 17.31 trillion in revenue and Won 1.61 trillion in operating profit, in each case on a consolidated basis. The increase in the number of 5G subscribers and rapid progress in new growth businesses such as its B2B business led to a steady growth in revenue, while the stabilizing market environment drove enhanced profitability. As of the year ended December 31, 2022, the number of the Company’s 5G subscribers reached 13.39 million. The Company’s performance continues to improve based on the competitiveness of its 5G services.
Wireless telecommunications companies provide services based on 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 telecommunications convergence products through its subsidiary, 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. (“Service Ace”) 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, provides customers with quality network services and provides the Company with technological know-how in network operations.
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The Company plans to maintain stable growth in the sales of its wireless business based on a solid increase in the number of 5G subscribers, while continuously enhancing profitability by pursuing efficient investments in, and operation of, its wireless networks and leveraging the stabilization of market competition.
The Company has been providing its customers with various subscription packages through “T Universe,” the Company’s subscription business, in partnership with domestic and international businesses. In addition, the Company is continually updating key functions and technologies of “A. (Adot),” the world’s first commercialized Korean language GPT-3-based service, in preparation of A.’s official service launch, while further strengthening the social and community functions of “ifland” with a goal to transform it into a globally leading metaverse service.
B. | Industry Characteristics |
The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless and leased line services, as well as sales intermediary services relating thereto and value-added services) and broadcasting and telecommunications convergence services (including IPTV and integrated fixed-line and mobile telecommunications 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 the size of the population that uses telecommunications services and telecommunications expenditures per capita. While it is possible for Korean telecommunications service providers to provide services abroad through acquisitions or otherwise, foreign telecommunications services markets have their own characteristics depending, among others, on the regulatory environment and demand for telecommunications services.
C. | Growth Potential |
The Korean mobile communications 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.
(Unit: in 1,000 persons) | ||||||||||||||
Classification | As of December 31, | |||||||||||||
2022 | 2021 | 2020 | ||||||||||||
Number of subscribers | SK Telecom | 30,452 | 29,696 | 29,089 | ||||||||||
Others (KT, LG U+) | 32,676 | 31,869 | 31,341 | |||||||||||
MVNO | 12,829 | 10,355 | 9,111 | |||||||||||
Total | 75,957 | 71,920 | 69,541 |
* | Source: Wireless telecommunications service data from the MSIT as of December 31, 2022. |
D. | Domestic and Overseas Market Conditions |
The Korean mobile communications market includes the entire population of Korea with mobile communications 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 of 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.
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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;
(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 December 31, | |||||||||||
2022 | 2021 | 2020 | ||||||||||
Mobile communications services | 48.2 | 48.2 | 48.1 |
* | Source: Wireless telecommunications service data from the MSIT as of December 31, 2022. |
E. | Competitive Strengths |
The Company successfully completed the Spin-off in 2021 to maximize shareholder value and launched “SKT 2.0.” Concurrently, the Company reorganized its business to center around five major business areas and is seeking maximization of overall corporate value by establishing and executing strategies optimized for each business segment and pursuing growth in each segment. For the year ended December 31, 2022, the Company recorded Won 17.31 trillion in operating revenue and Won 1.61 trillion in operating profit on a consolidated basis. The increase in the number of 5G subscribers and rapid progress in new growth businesses such as B2B led to a steady growth in sales, while stabilization of the market further bolstered an improvement in profits. The Company is continuing to enhance its profitability by leveraging its competitiveness in the 5G market and secured 13.39 million 5G subscribers as of December 31, 2022.
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 telecommunications 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. | Overview |
For the year ended December 31, 2022, SK Broadband recorded Won 4.16 trillion in revenue on a consolidated basis, which represented a 2.6% increase from Won 4.05 trillion for the year ended December 31, 2021. Such increase was primarily attributable to the growth of SK Broadband’s media business resulting from an increase in the number of subscribers and the growth of its B2B business resulting from, among other things, the operation of new data centers.
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SK Broadband’s business is divided into the media business segment, which provides IPTV and cable TV services, and the fixed-line business segment, which provides high-speed Internet, telecommunications, leased lines and data center services.
For the year ended December 31, 2022, SK Broadband’s media business segment recorded Won 1.88 trillion in revenue, which represented a 2.6% increase compared to the year ended December 31, 2021. For the year ended December 31, 2022, the fixed-line business segment recorded Won 2.27 trillion in revenue, which represented an 2.7% increase compared to the year ended December 31, 2021.
B. | Industry Characteristics |
The domestic telecommunications service industry displays the typical characteristics of a domestic industry given that its coverage area is limited to Korea. As a result, the size of the industry is greatly affected by the domestic economic factors including the domestic user population and the level of telecommunications service expenditures in light of the domestic income level. Domestic telecommunications companies may expand overseas through acquisitions or direct expansion, but the overseas telecommunications service industries are subject to inherently different industry characteristics from the domestic one, depending on the regulatory and demand characteristics of each country.
The broadcasting business involves the planning, programming or production of broadcasting programs and transmission to viewers through telecommunications facilities. The broadcasting market can be categorized into terrestrial broadcasting, fixed-line TV broadcasting, satellite broadcasting and programming-providing businesses, in each case pursuant to the Broadcasting Act, as well as Internet multimedia broadcasting business pursuant to the Internet Multimedia Broadcast Services Act. SK Broadband 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. The Internet multimedia broadcasting refers to the broadcasting of programs through a combination of various contents including data, video, voice, sound and/or e-commerce, including real-time broadcasting, while guaranteeing a consistent service quality through a bidirectional Internet protocol using a broadband integrated information network.
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.
In addition, 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. While 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+, the intensity of competition is growing as digitalization of communication technologies and devices leads to the convergence of fixed-line and wireless services, as well as broadcasting and telecommunications, and technology for faster data communications services is developed.
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.
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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 expansion of core infrastructure including data centers, which have seen an increase in market demand recently.
C. Growth Potential
(Unit: in persons) | ||||||||||||||
Classification | As of December 31, | |||||||||||||
2022 | 2021 | 2020 | ||||||||||||
Fixed-line Subscribers | High-speed Internet | 23,537,333 | 22,944,268 | 22,327,182 | ||||||||||
Fixed-line telephone | 11,621,413 | 12,211,954 | 12,859,279 | |||||||||||
IPTV | 20,203,451 | 19,346,812 | 17,872,297 | |||||||||||
Cable TV | 12,824,704 | 12,986,039 | 13,305,796 |
* | Source: MSIT website. |
* | High-speed Internet and fixed-line telephone subscribers represent the number of subscribers as of December 31, 2022, while IPTV and cable TV subscribers represent the average number of subscribers in the first half of 2022. |
D. | 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. Overall, the telecommunications services market is not expected to be particularly affected by economic downturns due to the low income elasticity of demand for telecommunications services.
E. Domestic and Overseas Market Conditions
Set forth below is the historical market share of the Company.
(Unit: in percentages) | ||||||||||||
Classification | As of December 31, | |||||||||||
2022 | 2021 | 2020 | ||||||||||
High-speed Internet (including resales) | 28.5 | 28.7 | 29.0 | |||||||||
Fixed-line telephone (including Voice over Internet Protocol (“VoIP”) | 17.8 | 17.5 | 16.8 | |||||||||
IPTV | 30.9 | 30.6 | 30.4 | |||||||||
Cable TV | 22.2 | 22.2 | 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. |
* | Since April 2021, VoIP subscribers of SK Telink have been included in the total clients of the Company. |
* | Market shares of High-speed Internet and Fixed-line telephone represent the market shares as of December 31, 2022 and market shares of IPTV and Cable TV represent the average market shares in the first half of 2022. |
SK Broadband is engaged in a number of business areas including high-speed Internet, home telephone, corporate business, IPTV and cable TV pursuant to the relevant communications regulations such as the Telecommunications Business Act, the Internet Multimedia Broadcast Services Act and the Broadcasting Act. 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+.
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[Other Businesses]
A. | Other businesses |
The commercial retail data broadcasting channel business offers an interactive service that integrates television home shopping and data home shopping services. Such integrated service allows television viewers to organize various product categories on the television screen and select and purchase desired products using a television remote control or mobile device, unlike traditional home shopping services that only allowed for real-time purchase through the relevant broadcast.
In order to secure core competencies at an early stage and achieve differentiation, the Company has been actively searching for high-efficiency television channels while increasing the competitiveness of its content production capacity by building the Company’s own media center and adopting a media wall with the objective of transforming it into an eco-friendly digital studio.
In addition to enhancing the convenience of shopping experience by offering various media content on its mobile live platform, the Company was the first in the industry to launch a cloud-based television application service, “Stoa ON,” which provides personalized digital television shopping services. Furthermore, the Company has been establishing itself as a leading shopping channel service provider by securing a diverse product portfolio and engaging in product development in areas ranging from fashion to health food.
2. Key Financial Data by Business Line
A. | Assets |
(Unit: in millions of Won and percentages) | ||||||||||||||||||||||||
Classification | As of December 31, | |||||||||||||||||||||||
2022 | 2021 | 2020* | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Wireless | 27,078,021 | 79 | % | 27,126,972 | 80 | % | 32,707,344 | 73 | % | |||||||||||||||
Fixed-line | 6,588,076 | 19 | % | 6,319,019 | 19 | % | 6,091,992 | 14 | % | |||||||||||||||
Other | 762,028 | 2 | % | 462,021 | 1 | % | 6,244,788 | 14 | % | |||||||||||||||
Subtotal | 34,428,124 | 100 | % | 33,908,011 | 100 | % | 45,044,125 | 100 | % | |||||||||||||||
Consolidation Adjustment | (3,119,862 | ) | — | (2,996,734 | ) | — | 2,862,832 | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 31,308,262 | — | 30,911,277 | — | 47,906,957 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | Includes assets that were spun-off to SK Square as part of the Spin-off. |
B. | Revenue |
(Unit: in millions of Won and percentages) | ||||||||||||||||||||||||
Classification | For the year ended December 31, | |||||||||||||||||||||||
2022 | 2021 | 2020* | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Wireless | 12,942,316 | 75 | % | 12,718,473 | 76 | % | 12,295,684 | 66 | % | |||||||||||||||
Fixed-line | 3,812,989 | 22 | % | 3,677,706 | 22 | % | 3,405,677 | 18 | % | |||||||||||||||
Other | 549,668 | 3 | % | 352,406 | 2 | % | 2,923,290 | 16 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 17,304,973 | 100 | % | 16,748,585 | 100 | % | 18,624,651 | 100 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | Based on revenue prior to the Spin-off. |
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C. | Operating Profit |
(Unit: in millions of Won and percentages) | ||||||||||||||||||||||||
Classification | For the year ended December 31, | |||||||||||||||||||||||
2022 | 2021 | 2020* | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Wireless | 1,334,306 | 81 | % | 1,123,147 | 78 | % | 1,031,887 | 80 | % | |||||||||||||||
Fixed-line | 311,083 | 19 | % | 294,070 | 21 | % | 258,973 | 20 | % | |||||||||||||||
Other | (2,102 | ) | 0 | % | 14,550 | 1 | % | 645 | 0 | % | ||||||||||||||
Subtotal | 1,643,287 | 100 | % | 1,431,767 | 100 | % | 1,291,505 | 100 | % | |||||||||||||||
Consolidation Adjustment | (31,216 | ) | — | (44,605 | ) | — | (42,927 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 1,612,070 | — | 1,387,162 | — | 1,248,578 | — | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
* Based on operating profit reflecting the Spin-off.
3. Updates on Major Products and Services
(Unit: in millions of Won and percentages) | ||||||||||||||||||||||||||||||
Business | For the year ended December 31, | |||||||||||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||||||||||||
Major Companies | Items | Major Trademarks | Consolidated Sales Amount | Ratio | Consolidated Sales Amount | Ratio | Consolidated Sales Amount | Ratio | ||||||||||||||||||||||
Wireless | SK Telecom Co., Ltd., PS&Marketing Co., Ltd., Service Ace Co., Ltd. SK M&Service Co., Ltd. | Mobile communications service, wireless data service, ICT service | T, 5GX, T Plan and others | 12,942,316 | 75 | % | 12,718,473 | 76 | % | 12,295,684 | 66 | % | ||||||||||||||||||
Fixed-line | SK Broadband Co., Ltd., SK Telink Co., Ltd. Home & Service Co., | Fixed-line phone, high- speed Internet, data and network lease service | B tv, 00700 international call, 7mobile and others | 3,812,989 | 22 | % | 3,677,706 | 22 | % | 3,405,677 | 18 | % | ||||||||||||||||||
Other | SK stoa Co., Ltd. | Commercial retail data broadcasting channel services and others | Stoa ON | 549,668 | 3 | % | 352,406 | 2 | % | 2,923,290 | 16 | % | ||||||||||||||||||
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|
| |||||||||||||||||||
Total | 17,304,973 | 100 | % | 16,748,585 | 100 | % | 18,624,651 | 100 | % | |||||||||||||||||||||
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|
4. Price Trends for Major Products
[Wireless Business]
As of December 31, 2022, based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,100 (including value-added tax) and the usage fee was Won 1.98 per second. Among the 4G-based plans, the “T-Plan Safe 4G” provides 4 GB of data and unlimited voice calls at Won 50,000 per month (including value-added tax). Among the 5G-based plans, the “Basic” plan provides 8 GB of data and unlimited voice calls at Won 49,000 per month (including value-added tax). The Company provides a variety of other subscription plans catered to subscriber demand, which may be reviewed on the Company’s website at www.tworld.co.kr.
[Fixed-line Business]
In July 2022, SK Broadband launched the “Nowadays Home Integration Plan,” which provides discounts for users subscribing to the Internet and IPTV (including telephone) services. The plan combines and simplifies the existing fixed-line integration plans (including “Home Integration Plan” and “Core Fee Plan”). The amount of discount varies by the Internet plan (at a speed of 100M/500M or higher). As for the Internet plan, the amount of discount ranges from Won 1,100 to Won 5,500, whereas the amount of discount for the IPTV plan is set as Won 2,200. A VOD coupon (Won 3,300/month) is additionally provided to customers who subscribe to premium internet plans and “B tv All” or higher IPTV plans.
In addition, in order to facilitate customers’ understanding of its service, SK Broadband modified some of the names of its Internet and IPTV products. English in the names were replaced with Korean, and the names were also changed to better reflect the characteristics of the products. For instance, “Wifi” was replaced with the Korean transcription of Wifi, and “Smart internet” was renamed to “Remote Care Internet.” As for IPTV, “B tv New Basic” was renamed to “B tv Economy,” and “B tv Choice” was renamed to “B tv Mini.”
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In September 2022, SK Broadband launched the “Nowadays Family Integration” plan, which provides a discount for users from the same family subscribing to the Internet, mobile and IPTV plans. The plan combines the existing fixed mobile integration plans for families (including “Whole Family Plan,” “Whole Family Free,” “TV plus,” etc.) with different terms of usage and provides additional benefits. The plan provides a discount from Won 4,400 and to Won 13,200 depending on the user’s Internet plan (at a speed of 100M/500M/or above 1G). As for mobile, the plan provides a discount from Won 3,500 to Won 24,000 depending on the number of mobile phone lines connected to the plan. If IPTV is added, the plan provides an additional discount of Won 1,100 and a free B tv data pack (worth Won 5,500) for mobile phones.
SK Broadband also provides a variety of other subscription plans based on consumer demand.
5. 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, 2022 | | | Network, systems and others | | | Capacity increase and quality improvement; systems improvement | | 2,215 | 2,215 | — | |||||||||||||
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| |||||||||||||||||||||||
Total | 2,215 | 2,215 | — | |||||||||||||||||||||||||
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|
B. Future Investment Plan
Business | Expected investment amount | Expected investment for each year | Investment effect | |||||||||
Asset type | Amount | 2023 | 2024 | 2025 | ||||||||
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 |
[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 | Year ended December 31, 2022 | 820 | To be determined | Securing subscriber network and equipment; quality and system improvement |
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6. Revenues
(Unit: in millions of Won) | ||||||||||||||||||||
Business | Sales type | Item | For the year ended December 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | |||||||||||||||
Wireless | Services | Mobile communication, wireless data, information communication | Export | 140,642 | 143,149 | 152,518 | ||||||||||||||
Domestic | 12,801,674 | 12,575,324 | 12,195,445 | |||||||||||||||||
Subtotal | 12,942,316 | 12,718,473 | 12,347,963 | |||||||||||||||||
Fixed-line | Services | Fixed-line, high-speed Internet, data, lease line service | Export | 183,812 | 139,846 | 127,618 | ||||||||||||||
Domestic | 3,629,177 | 3,537,860 | 3,304,600 | |||||||||||||||||
Subtotal | 3,812,989 | 3,677,706 | 3,432,218 | |||||||||||||||||
Other | Services | Commercial retail data broadcasting channel services | Export | — | — | — | ||||||||||||||
Domestic | 549,668 | 352,406 | 307,566 | |||||||||||||||||
Subtotal | 549,668 | 352,406 | 307,566 | |||||||||||||||||
Total | Export | 324,454 | 251,502 | 280,136 | ||||||||||||||||
Domestic | 16,980,519 | 16,497,083 | 15,807,611 | |||||||||||||||||
Total | 17,304,973 | 16,748,585 | 16,087,747 |
(Unit: in millions of Won) | ||||||||||||||||||||||||
For the year ended December 31, 2022 | Wireless | Fixed-line | Other | Sub total | Consolidation adjustment | After consolidation | ||||||||||||||||||
Total sales | 14,496,866 | 4,895,791 | 592,188 | 19,984,845 | (2,679,872 | ) | 17,304,973 | |||||||||||||||||
Internal sales | 1,554,550 | 1,082,802 | 42,520 | 2,679,872 | (2,679,872 | ) | — | |||||||||||||||||
External sales | 12,942,316 | 3,812,989 | 549,668 | 17,304,973 | — | 17,304,973 | ||||||||||||||||||
Depreciation and amortization | 2,738,547 | 981,838 | 22,730 | 3,743,115 | (121,790 | ) | 3,621,325 | |||||||||||||||||
Operating profit (loss) | 1,334,306 | 311,210 | (2,126 | ) | 1,643,390 | (31,320 | ) | 1,612,070 | ||||||||||||||||
Finance profit (loss) |
| (276,489 | ) | |||||||||||||||||||||
Gain from investments in associates and joint ventures |
| (81,707 | ) | |||||||||||||||||||||
Other non-operating profit (loss) |
| (17,722 | ) | |||||||||||||||||||||
Profit before income tax |
| 1,236,152 |
7. 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 December 31, 2022 are as follows:
[SK Telecom]
Borrowing date | Hedged item | Hedged risk | Contract type | Financial institution | Duration of contract | |||||
July 20, 2007 | Fixed rate foreign currency denominated bonds | Foreign currency risk | Cross currency swap | Morgan Stanley and four other banks | July 20, 2007 – July 20, 2027 | |||||
Apr. 16, 2018 | Fixed rate foreign currency denominated bonds | Foreign currency risk | Cross currency swap | The Export-Import Bank of Korea and three other banks | Apr. 16, 2018 – Apr. 16, 2023 | |||||
Aug. 13, 2018 | Fixed rate foreign currency denominated bonds | Foreign currency risk | Cross currency swap | Citibank | Aug. 13, 2018 – Aug. 13, 2023 | |||||
Dec. 19, 2018 | Floating rate Korean Won denominated borrowings | Interest rate risk | Interest rate swap | Credit Agricole CIB | Mar. 19, 2019 – Dec. 14, 2023 | |||||
Mar. 4, 2020 | Floating rate foreign currency denominated bonds | Foreign currency and interest rate risks | Cross currency interest rate swap | Citibank | Mar. 4, 2020 – June 4, 2025 |
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[SK Broadband]
Borrowing date | Hedged item | Hedged risk | Contract type | Financial institution | Duration of contract | |||||
Aug. 13, 2018 | Non-guaranteed foreign currency denominated bonds (face value of USD 300,000,000) | Foreign currency risk | Cross currency swap | Citibank | Aug. 13, 2018 – Aug. 13, 2023 |
Borrowing date | Hedged item | Hedged risk | Contract type | Financial institution | Duration of contract | |||||
Dec. 19, 2018 | Floating rate Korean Won denominated borrowings | Interest rate risk | Interest rate swap | Credit Agricole CIB | Mar. 19, 2019 – Dec. 14, 2023 |
8. Major Contracts
None.
9. R&D Investments
Set forth below are the Company’s R&D expenditures.
(Unit: in millions of Won except percentages) | ||||||||||||||||||
Category | For the year ended December 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | Remarks | ||||||||||||||
Raw material | 23 | 48 | 54 | — | ||||||||||||||
Labor | 113,297 | 122,445 | 122,906 | — | ||||||||||||||
Depreciation | 135,604 | 147,249 | 169,872 | — | ||||||||||||||
Commissioned service | 46,447 | 55,917 | 35,939 | — | ||||||||||||||
Others | 78,989 | 48,048 | 35,209 | — | ||||||||||||||
Total R&D costs | 374,360 | 373,707 | 363,980 | — | ||||||||||||||
Government Subsidies | — | — | — | — | ||||||||||||||
Accounting | Sales and administrative expenses | 340,864 | 347,711 | 353,198 | — | |||||||||||||
Development expenses (Intangible assets) | 33,495 | 25,996 | 10,782 | — | ||||||||||||||
R&D cost / sales amount ratio | 2.16 | % | 2.23 | % | 2.26 | % | — |
10. Other information relating to investment decisions
A. | Brand Management 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.
B. | Business-related Intellectual Property |
[SK Telecom]
As of December 31, 2022, the Company held 3,328 Korean-registered patents and 1,574 foreign-registered patents. The Company holds 713 Korean-registered trademarks. 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 December 31, 2022, SK Broadband held 287 Korean-registered patents and 80 foreign-registered patents (including those held jointly with other companies). It also holds 290 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.
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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 clearly recognizes the severity of the climate crisis and has been diligently fulfilling its social obligations by establishing a systematic and practical environmental management strategy system. Under the vision of “realizing a sustainable future based on ICT” and to achieve Net Zero by 2050, 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, the Company was one of the first information technology companies in Korea to join the RE100 (Renewable Electricity 100%) initiative and signed a green premium contract with Korea Electric Power Corporation. The Company has been implementing company-wide adoption of renewable energy through efforts such as installing solar power generation equipment in its office buildings and base stations. 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 2021, SK Broadband declared its goal to achieve Net Zero by 2045 in an effort to actively participate in the international community’s response to climate change. Prior to the declaration, SK Broadband had already subscribed to the RE100 initiative in 2020. Since 2021, SK Broadband has participated in Korea Electrical Power Corporation’s renewable energy power purchase program, “Green Premium,” to implement RE100 and is considering the installation of additional solar power generation facilities to self-produce and use renewable energy.
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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 December 31, 2022, 2021 and 2020 and for the years ended 2022, 2021 and 2020. The Company’s consolidated financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022 and 2021, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won except number of companies) | ||||||||||||
As of December 31, 2022 | As of December 31, 2021 | As of December 31, 2020 | ||||||||||
Assets | ||||||||||||
Current Assets | 7,219,196 | 6,352,665 | 8,775,086 | |||||||||
• Cash and Cash Equivalents | 1,882,291 | 872,731 | 1,369,653 | |||||||||
• Accounts Receivable – Trade, net | 1,970,611 | 1,913,511 | 2,188,893 | |||||||||
• Accounts Receivable – Other, net | 479,781 | 548,362 | 979,044 | |||||||||
• Others | 2,886,513 | 3,018,061 | 4,237,496 | |||||||||
Non-Current Assets | 24,089,066 | 24,558,612 | 39,131,871 | |||||||||
• Long-Term Investment Securities | 1,410,736 | 1,715,078 | 1,648,837 | |||||||||
• Investments in Associates and Joint Ventures | 1,889,289 | 2,197,351 | 14,354,113 | |||||||||
• Property and Equipment, net | 13,322,492 | 12,871,259 | 13,377,077 | |||||||||
• Goodwill | 2,075,009 | 3,869,769 | 4,436,194 | |||||||||
• Intangible Assets, net | 3,324,910 | 2,072,493 | 3,357,524 | |||||||||
• Others | 2,066,630 | 1,832,662 | 1,958,126 | |||||||||
Total Assets | 31,308,262 | 30,911,277 | 47,906,957 | |||||||||
Liabilities | ||||||||||||
Current Liabilities | 8,046,541 | 6,960,435 | 8,177,967 | |||||||||
Non-Current Liabilities | 11,106,525 | 11,615,704 | 15,332,747 | |||||||||
Total Liabilities | 19,153,066 | 18,576,139 | 23,510,714 | |||||||||
Equity | ||||||||||||
Equity Attributable to Owners of the Parent Company | 11,318,320 | 11,579,346 | 23,743,894 | |||||||||
Share Capital | 30,493 | 30,493 | 44,639 | |||||||||
Capital Surplus (Deficit) and Other Capital Adjustments | (11,567,117 | ) | (11,623,726 | ) | 677,203 | |||||||
Retained Earnings | 22,463,711 | 22,437,341 | 22,981,913 | |||||||||
Reserves | 391,233 | 735,238 | 40,139 | |||||||||
Non-controlling Interests | 836,876 | 755,792 | 652,349 | |||||||||
Total Equity | 12,155,196 | 12,335,138 | 24,396,243 | |||||||||
Total Liabilities and Equity | 31,308,262 | 30,911,277 | 47,906,957 |
(Unit: in millions of Won except per share data and number of consolidated subsidiaries) | ||||||||||||
For the year ended December 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | ||||||||||
Operating Revenue | 17,304,973 | 16,748,585 | 16,087,747 | |||||||||
Operating Profit | 1,612,070 | 1,387,162 | 1,248,578 | |||||||||
Profit Before Income Tax | 1,236,152 | 1,718,191 | 905,218 | |||||||||
Profit from Continued Operations | 947,831 | 1,271,395 | 683,956 | |||||||||
Profit from Discontinued Operations | — | 1,147,594 | 816,582 | |||||||||
Profit for the Period | 947,831 | 2,418,989 | 1,500,538 | |||||||||
Profit for the Period Attributable to Owners of the Parent Company | 912,400 | 2,407,523 | 1,504,352 | |||||||||
Profit for the Period Attributable to Non-controlling Interests | 35,431 | 11,466 | (3,814 | ) | ||||||||
Basic Earnings Per Share (Won) | 4,118 | 7,191 | 4,093 | |||||||||
Diluted Earnings Per Share (Won) | 4,116 | 7,187 | 4,092 | |||||||||
Total Number of Consolidated Subsidiaries | 25 | 23 | 49 |
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B. | Summary Financial Information (Separate) |
Below is the summary separate financial information of the Company as of December 31, 2022, 2021 and 2020 and for the years ended December 31, 2022, 2021 and 2020. The Company’s audited separate financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022 and 2021, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won) | ||||||||||||
As of December 31, 2022 | As of December 31, 2021 | As of December 31, 2020 | ||||||||||
Assets | ||||||||||||
Current Assets | 5,498,460 | 4,681,493 | 5,047,115 | |||||||||
• Cash and Cash Equivalents | 1,217,504 | 158,823 | 329,208 | |||||||||
• Accounts Receivable – Trade, net | 1,425,695 | 1,514,260 | 1,503,552 | |||||||||
• Accounts Receivable – Other, net | 435,096 | 520,956 | 434,713 | |||||||||
• Others | 2,420,165 | 2,487,454 | 2,779,642 | |||||||||
Non-Current Assets | 20,933,661 | 21,707,572 | 26,939,336 | |||||||||
• Long-Term Investment Securities | 1,155,188 | 1,476,361 | 983,688 | |||||||||
• Investments in Subsidiaries and Associates | 4,621,807 | 4,841,139 | 11,357,504 | |||||||||
• Property and Equipment, net | 9,519,663 | 9,318,408 | 9,157,548 | |||||||||
• Goodwill | 1,306,236 | 1,306,236 | 1,306,236 | |||||||||
• Intangible Assets, net | 2,693,400 | 3,203,330 | 2,665,083 | |||||||||
• Others | 1,637,367 | 1,562,098 | 1,469,277 | |||||||||
Total Assets | 26,432,121 | 26,389,065 | 31,986,451 | |||||||||
Liabilities | ||||||||||||
Current Liabilities | 6,236,135 | 5,426,477 | 5,076,404 | |||||||||
Non-Current Liabilities | 9,812,604 | 10,099,732 | 9,560,189 | |||||||||
Total Liabilities | 16,048,739 | 15,526,209 | 14,636,593 | |||||||||
Equity | ||||||||||||
Share Capital | 30,493 | 30,493 | 44,639 | |||||||||
Capital Surplus and Other Capital Adjustments | (4,506,693 | ) | (4,576,271 | ) | 289,134 | |||||||
Retained Earnings | 14,691,461 | 14,770,618 | 16,684,640 | |||||||||
Reserves | 168,121 | 638,016 | 331,445 | |||||||||
Total Equity | 10,383,382 | 10,862,856 | 17,349,858 | |||||||||
Total Liabilities and Equity | 26,432,121 | 26,389,065 | 31,986,451 |
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | ||||||||||
Operating Revenue | 12,414,588 | 12,102,830 | 11,746,630 | |||||||||
Operating Profit | 1,321,131 | 1,144,323 | 1,023,067 | |||||||||
Profit Before Income Tax | 1,146,250 | 1,369,347 | 941,455 | |||||||||
Profit for the Period | 869,490 | 1,073,823 | 758,792 | |||||||||
Basic Earnings Per Share (Won) | 3,921 | 3,183 | 2,044 | |||||||||
Diluted Earnings Per Share (Won) | 3,919 | 3,181 | 2,044 |
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2. 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.
The Company plans to set 30% to 40% of its “EBITDA – capital expenditures” on a separate basis as the total amount of dividends, subject to each fiscal year’s business environment and market conditions. The final determination of such dividends will be subject to approval at the Board of Directors’ meeting and general meeting of shareholders.
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 as of June 30 pursuant to the resolution of the Board of Directors. In order to further enhance the Company’s policy to provide continual shareholder return and in accordance with the global trend towards stable dividend distribution, the Company adopted a quarterly dividend distribution policy in place of its previous interim dividend distribution policy through the approval of certain amendments to the Company’s articles of incorporation at the 37th General Meeting of Shareholders held on March 25, 2021. On July 22, 2021, the Board of Directors resolved to approve the first quarterly dividends.
Furthermore, the Company repurchases its own shares from time to time to enhance its corporate value in consideration of the market price of the Company’s shares and its financial resources. In 2020 and 2021 to date, the Company purchased approximately Won 500 billion of treasury shares through a trustee. In May 2021, the Company canceled 8,685,568 units of previously acquired treasury shares, which represented 10.76% of the total number of shares issued at the time, to enhance shareholder value.
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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 year ended December 31, 2022 | As of and for the year ended December 31, 2021 | As of and for the year ended December 31, 2020 | |||||||||||
Par value per share (Won) | 100 | 100 | 500 | |||||||||||
(Consolidated) Net income | 912,400 | 2,407,523 | 1,504,352 | |||||||||||
(Separate) Net income | 869,490 | 1,073,823 | 758,792 | |||||||||||
Net income per share (Won) | 4,118 | 7,191 | 20,463 | |||||||||||
Total cash dividend | 723,843 | 716,990 | 715,080 | |||||||||||
Total stock dividends | — | — | — | |||||||||||
(Consolidated) Percentage of cash dividend to available income (%) | 79.3 | 29.8 | 47.5 | |||||||||||
Cash dividend yield ratio (%) | Common shares | 6.8 | 5.7 | 4.1 | ||||||||||
Preferred shares | — | — | — | |||||||||||
Stock dividend yield ratio (%) | Common shares | — | — | — | ||||||||||
Preferred shares | — | — | — | |||||||||||
Cash dividend per share (Won) | Common shares | 3,320 | 3,295 | 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 year ended December 31, 2020 includes an interim dividend of Won 1,000 per share. Cash dividend for the year ended December 31, 2021 includes quarterly dividends of Won 5,000 per share (not reflecting the effects of the Stock Split and the Spin-off) declared for the second and third quarters of 2021 and quarterly dividend of Won 1,660 per share (after reflecting the effects of the Stock Split and the Spin-off) declared for the fourth quarter of 2021. |
* | Cash dividend for the year ended December 31, 2022 includes quarterly dividends of Won 830 per share declared for the first, second, third and fourth quarters of 2022. |
* | Cash dividend per share for the year ended December 31, 2021 reflects the effect of the Stock Split and was calculated by dividing the total amount of cash dividends for the period by the number of shares as of December 31, 2021. |
* | Cash dividends shown above for the year ended December 31, 2022 are expected to be approved at the 39th General Meeting of Shareholders to be held on March 28, 2023. In the event that the dividend distribution does not become approved or terms of the distribution are amended, a report on such event will be disclosed. |
(1) | Distribution of cash dividends of Won 9,000 per share (exclusive of an interim dividend of Won 1,000 per share) was approved during the 36th General Meeting of Shareholders held on March 26, 2020. |
(2) | Distribution of interim dividends of Won 1,000 per share was approved during the 438th Board of Directors’ Meeting on July 21, 2020. |
(3) | Distribution of cash dividends of Won 9,000 per share (exclusive of an interim dividend of Won 1,000 per share) was approved during the 37th General Meeting of Shareholders held on March 25, 2021. |
(4) | Distribution of quarterly dividends of Won 2,500 per share was approved during the 453th Board of Directors’ Meeting on July 22, 2021. |
(5) | Distribution of quarterly dividends of Won 2,500 per share was approved during the 458th Board of Directors’ Meeting on November 1, 2021. |
(6) | Distribution of cash dividends of Won 1,660 per share (after reflecting the effects of the Stock Split and the Spin-off and excluding the quarterly dividends distributed in 2021) was approved during the 38th General Meeting of Shareholders to be held on March 25, 2022. |
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(7) | Distribution of quarterly dividends of Won 830 per share was approved during the 466th Board of Directors’ Meeting on April 28, 2022. |
(8) | Distribution of quarterly dividends of Won 830 per share was approved during the 469th Board of Directors’ Meeting on July 28, 2022. |
(9) | Distribution of quarterly dividends of Won 830 per share was approved during the 471th Board of Directors’ Meeting on October 27, 2022. |
(10) | Distribution of cash dividends of Won 830 per share was included in the agenda for the 39th General Meeting of Shareholders to be held on March 28, 2023. In the event that the dividend distribution does not become approved or terms of the distribution are amended, a report on such event will be disclosed. |
C. | Past Distributions of Dividends |
Number of consecutive dividends | Average dividend yield (%) | |||||
Interim dividends | Annual dividends | Past three years | Past five years | |||
22 | 29 | 5.6 | 4.9 |
3. Use of Direct Financing
A. | Use of Proceeds from Public Offerings |
[SK Telecom]
(As of December 31, 2022) | (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 | 78th | January 14, 2020 | Repayment of debt | 60,000 | Repayment of debt | 60,000 | — | |||||||||||||||
Corporate bond | 78th | January 14, 2020 | Working capital | 360,000 | Working capital | 360,000 | — | |||||||||||||||
Corporate bond | 79th | October 19, 2020 | Repayment of debt | 290,000 | Repayment of debt | 290,000 | — | |||||||||||||||
Corporate bond | 80th | January 15, 2021 | Repayment of debt | 310,000 | Repayment of debt | 310,000 | — | |||||||||||||||
Corporate bond | 81st | October 28, 2021 | Repayment of debt | 200,000 | Repayment of debt | 200,000 | — | |||||||||||||||
Corporate bond | 82nd | April 12, 2022 | Repayment of debt | 350,000 | Repayment of debt | 350,000 | — | |||||||||||||||
Corporate bond | 83rd | August 10, 2022 | Repayment of debt | 395,000 | Repayment of debt | 395,000 | — | |||||||||||||||
Corporate bond | 84th | December 14, 2022 | Repayment of debt | 310,000 | Repayment of debt | 310,000 | — |
[SK Broadband]
(As of December 31, 2022) | (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 49-1 | June 11, 2020 | Repayment of debt | 100,000 | Repayment of debt | 100,000 | — | |||||||||
Corporate bond | Series 49-2 | June 11, 2020 | Repayment of debt | 59,200 | Repayment of debt | 59,200 | — | |||||||||
Corporate bond | Series 49-2 | June 11, 2020 | Working capital | 40,800 | Working capital | 40,800 | — | |||||||||
Corporate bond | Series 50 | September 25, 2020 | Repayment of debt | 160,000 | Repayment of debt | 160,000 | — | |||||||||
Corporate bond | Series 51 | July 13, 2021 | Repayment of debt | 100,000 | Repayment of debt | 100,000 | — | |||||||||
Corporate bond | Series 52-1 | January 25, 2022 | Repayment of debt | 100,000 | Repayment of debt | 100,000 | — | |||||||||
Corporate bond (green bond) | Series 52-2 | January 25, 2022 | Repayment of debt | 50,000 | Repayment of debt | 50,000 | — |
* | Series 52-2 issued as of January 25, 2022 is an ESG bond (green bond). Series 52-2 was issued for the purpose of repayment of funds raised to be invested in the conversion of hybrid fiber-coaxial network to fiber-to-the-home network, which has a positive impact on the environment, and the proceeds from the bond offering were used for the intended purpose. See the ESG bond report published in the socially responsible investment bond segment of the Korea Exchange for more information on the use of proceeds from this ESG bond offering. |
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B. | Use of Proceeds from Private Offerings |
[SK Telecom]
None.
[SK Broadband]
None.
C. | Operation of Unused Proceeds |
[SK Telecom]
None.
[SK Broadband]
None.
4. Other Matters Related to Financial Information
A. | Restatement of the Financial Statements |
Pursuant to the resolutions of the Board of Directors and the General Meeting of Shareholders on June 10, 2021 and October 12, 2021, respectively, the Company conducted the Spin-off effective as of November 1, 2021. As a result of the Spin-off, the Company discontinued certain parts of the security, commerce and other businesses operated by its major subsidiaries, which were transferred to the newly established company. Accordingly, certain of the Company’s material subsidiaries, including One Store Co., Ltd., SK Planet Co., Ltd., Eleven Street Co., Ltd., Dreamus Company, SK shieldus Co., Ltd., Incross, T Map Mobility and SK M&Service Co., Ltd., were excluded from the scope of the Company’s consolidation. The Company classified and separately showed profit (loss) from such discontinued businesses in its consolidated statement of profit and loss for the year ended December 31, 2021 in the Company’s audit report and annual business report as of and for the year ended December 31, 2021 pursuant to the application of K-IFRS 1105. The consolidated statement of profit and loss for the year ended December 31, 2020 was restated accordingly for comparative purposes. Furthermore, the Spin-off caused a change in the Company’s business segments, which led to a restatement of prior years’ segment information, and the business of SK Stoa, which had previously been classified as part of the Company’s commerce segment, was reclassified as part of the Company’s other business segment.
B. | Loss Allowance |
(1) Loss Allowance of Trade and Other Receivables
(Unit: in millions of Won, except percentages) | ||||||||||||
For the year ended December 31, 2022 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,219,695 | 234,923 | 10.6 | % | ||||||||
Loans | 151,155 | 45,592 | 30.2 | % | ||||||||
Accounts receivable – other | 897,920 | 44,188 | 4.9 | % | ||||||||
Accrued income | 1,732 | — | 0.0 | % | ||||||||
Guarantee deposits | 280,945 | 300 | 0.1 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 3,551,447 | 325,003 | 9.2 | % | ||||||||
|
|
|
|
|
|
(Unit: in millions of Won, except percentages) | ||||||||||||
For the year ended December 31, 2021 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,160,498 | 238,881 | 11.1 | % | ||||||||
Loans | 138,181 | 45,385 | 32.8 | % |
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(Unit: in millions of Won, except percentages) | ||||||||||||
For the year ended December 31, 2022 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – other | 870,225 | 46,625 | 5.4 | % | ||||||||
Accrued income | 762 | — | 0.0 | % | ||||||||
Guarantee deposits | 278,759 | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 3,448,425 | 330,891 | 9.6 | % | ||||||||
|
|
|
|
|
|
(Unit: in millions of Won, except percentages) | ||||||||||||
For the year ended December 31, 2020 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,478,851 | 264,498 | 10.7 | % | ||||||||
Loans | 182,721 | 45,024 | 24.6 | % | ||||||||
Accounts receivable – other | 1,366,922 | 55,075 | 4.0 | % | ||||||||
Accrued income | 3,418 | 166 | 4.9 | % | ||||||||
Guarantee deposits | 285,507 | 300 | 0.1 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 4,317,419 | 365,063 | 8.5 | % | ||||||||
|
|
|
|
|
|
(2) Movements in Loss Allowance of Trade and Other Receivables
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | ||||||||||
Beginning balance | 330,891 | 365,063 | 346,399 | |||||||||
Effect of change in accounting policy | — | — | — | |||||||||
Increase of loss allowance | 30,064 | 37,547 | 59,184 | |||||||||
Reversal of loss allowance | — | — | — | |||||||||
Write-offs | (35,955 | ) | (57,215 | ) | (57,575 | ) | ||||||
Other | 3 | (14,504 | ) | 17,055 | ||||||||
|
|
|
|
|
| |||||||
Ending balance | 325,003 | 330,891 | 365,063 | |||||||||
|
|
|
|
|
|
(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, except percentages) | ||||||||||||||||||||
As of December 31, 2022 | ||||||||||||||||||||
Six months or less | From six months to one year | From one year to three years | More than three years | Total | ||||||||||||||||
Accounts receivable – general | 1,991,526 | 50,884 | 135,117 | 42,168 | 2,219,695 | |||||||||||||||
Percentage | 89.7 | % | 2.3 | % | 6.1 | % | 1.9 | % | 100.0 | % |
(4) Aging of Accounts Receivable
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Table of Contents
C. | Inventories |
(1) Detailed Categories of Inventories
(Unit: in millions of Won, except percentages) | ||||||||||||
Account Category | For the year ended December 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | |||||||||
Merchandise | 151,303 | 201,126 | 162,196 | |||||||||
Goods in transit | — | — | — | |||||||||
Other inventories | 15,052 | 3,511 | 9,247 | |||||||||
|
|
|
|
|
| |||||||
Total | 166,355 | 204,637 | 171,443 | |||||||||
|
|
|
|
|
| |||||||
Percentage of inventories to total assets [Inventories / Total assets] | 0.53 | % | 0.66 | % | 0.36 | % | ||||||
Inventory turnover [Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2}] | 13.67 | 6.20 | 7.60 |
(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 external auditors at the end of each year.
D. | Fair Value Measurement |
See Notes 2 and 36 of the notes to the Company’s audited consolidated financial statements attached hereto for more information.
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 | Fiscal Agent | |||||||
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 August 18, 2022 |
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Table of Contents
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series 63-1 | Apr. 23, 2013 | Apr. 23, 2023 | 230,000 | Apr. 17, 2013 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 63-2 | Apr. 23, 2013 | Apr. 23, 2033 | 130,000 | Apr. 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 66-2 | 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 | Mar. 4, 2016 | Mar. 4, 2026 | 90,000 | Feb. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 69-4 | Mar. 4, 2016 | Mar. 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 August 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
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 71-3 | Apr. 25, 2017 | Apr. 25, 2027 | 100,000 | Apr. 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 71-4 | Apr. 25, 2017 | Apr. 25, 2032 | 90,000 | Apr. 13, 2017 | 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 Won 5 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 August 18, 2022 |
32
Table of Contents
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
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 74-2 | 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 75-2 | Mar. 6, 2019 | Mar. 6, 2024 | 120,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-3 | Mar. 6, 2019 | Mar. 6, 2029 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-4 | Mar. 6, 2019 | Mar. 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 August 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency | Fiscal Agent | |||||||
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 August 18, 2022 |
33
Table of Contents
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series 77-2 | Oct. 22, 2019 | Oct. 22, 2024 | 70,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-3 | Oct. 22, 2019 | Oct. 22, 2029 | 40,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-4 | Oct. 22, 2019 | Oct. 22, 2039 | 60,000 | 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 August 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | 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 August 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | 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. |
34
Table of Contents
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 August 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount | Date of Fiscal | Fiscal Agent | |||||
Unsecured Bond – Series 80-1 | Jan. 15, 2021 | Jan. 14, 2024 | 80,000 | Jan. 5, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 80-2 | Jan. 15, 2021 | Jan. 15, 2026 | 80,000 | Jan. 5, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 80-3 | Jan. 15, 2021 | Jan. 15, 2031 | 50,000 | Jan. 5, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 80-4 | Jan. 15, 2021 | Jan. 15, 2041 | 100,000 | Jan. 5, 2021 | 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 August 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series 81-1 | Oct. 28, 2021 | Oct. 28, 2024 | 90,000 | Oct. 18, 2021 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 81-2 | Oct. 28, 2021 | Oct. 28, 2026 | 70,000 | Oct. 18, 2021 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 81-3 | Oct. 28, 2021 | Oct. 28, 2041 | 40,000 | Oct. 18, 2021 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 82-1 | April 12, 2022 | April 12, 2025 | 240,000 | March 31, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 82-2 | April 12, 2022 | April 12, 2027 | 70,000 | March 31, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 82-3 | April 12, 2022 | April 12, 2042 | 40,000 | March 31, 2022 | Korea Securities Finance Corp. |
35
Table of Contents
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 August 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series 83-1 | August 10, 2022 | August 8, 2025 | 300,000 | July 29, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 83-2 | August 10, 2022 | August 10, 2027 | 95,000 | July 29, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 84-1 | December 14, 2022 | December 13, 2024 | 100,000 | December 2, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 84-2 | December 14, 2022 | December 12, 2025 | 110,000 | December 2, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 84-3 | December 14, 2022 | December 14, 2027 | 60,000 | December 2, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 84-4 | December 14, 2022 | December 14, 2032 | 40,000 | December 2, 2022 | 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 | To be submitted subsequent to the filing of the this annual business report |
36
Table of Contents
[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 | 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 47-2 | Mar. 26, 2019 | Mar. 26, 2024 | 160,000 | Mar. 14, 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, 2025 | 160,000 | Sept. 15, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 51 | July 13, 2021 | July 12, 2024 | 100,000 | July 1, 2021 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 52-1 | Jan. 25, 2022 | Jan. 24, 2025 | 100,000 | Jan. 13, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 52-2 | Jan. 25, 2022 | Jan. 25, 2032 | 50,000 | Jan. 13, 2022 | Korea Securities Finance Corp. | |||||||
Total | — | — | 1,000,000 | — | — |
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 September 1, 2022 |
* | Beginning with Series 47, the maintenance of financial ratio requirement has changed to a consolidated basis. |
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IV. | MANAGEMENT’S DISCUSSION AND ANALYSIS |
1. Forward-Looking Statements
This section contains forward-looking statements with respect to the financial condition, results of operations and business of the Company and plans and objectives of the management of the Company. Forward-looking statements are not statements of historical facts and include statements about the Company’s beliefs and expectations. Such forward-looking statements include known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements.
The Company does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this section, and nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Such forward-looking statements were based on current plans, estimates and projections of the Company and the political and economic environment in which the Company will operate in the future, and therefore you should not place undue reliance on them.
Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events.
2. Overview
A. | Summary of Business Performance |
In 2022, difficult business conditions persisted both domestically and internationally in light of interest rate hikes and the Russia-Ukraine war. Despite adverse economic conditions, the Company’s revenue increased by 3.3% from 2021 to Won 17.3 trillion in 2022, and operating profit increased by 16.2% from 2021 to Won 1.6 trillion in 2022, mainly due to an increase in the Company’s 5G wireless subscribers and steady development in new growth businesses such as B2B.
5G wireless services, which the Company was the first in the world to commercialize in 2019, are propelling the growth of the Company’s wireless business, recording over 13.39 million subscribers as of December 31, 2022. The Company also maintained the growth of its paid television subscribers at 9.32 million subscribers as of December 31, 2022.
The Company’s assets increased by 1.3% from the previous year due to an increase in current assets including cash and cash equivalents, short-term financial instruments, accounts receivable-trade and accounts receivable-other. Liabilities increased by 3.1% from the previous year mainly due to an increase in current liabilities including short-term borrowings, accounts payable-trade and accounts payable-other.
Though uncertainties in the global economy are expected to persist in 2023, the Company plans to navigate through such headwinds by focusing on enhancing profitability through an increase in the number of 5G subscribers and efficient cost execution.
B. | Key Indicators of Consolidated Business Performance |
[SK Telecom]
(Unit: in billions of Won, except percentages) | ||||||||||||
As of December 31, 2022 | As of December 31, 2021 | Percentage Change from 2021 to 2022 | ||||||||||
Operating Revenue | 17,305.0 | 16,748.6 | 3.3 | % | ||||||||
Operating Profit | 1,612.1 | 1,387.2 | 16.2 | % | ||||||||
Operating Profit Margin (%) | 9.3 | 8.3 | 1.0 | %p | ||||||||
EBITDA | 5,367.4 | 5,207.0 | 3.1 | % | ||||||||
EBITDA Margin (%) | 31.0 | 31.1 | (0.1 | )%p |
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[SK Broadband]
(Unit: in billions of Won, except percentages) | ||||||||||||
As of December 31, 2022 | As of December 31, 2021 | Change from 2021 to 2022 | ||||||||||
Operating Revenue | 4,156.3 | 4,049.2 | 107.2 | |||||||||
Operating Profit | 305.7 | 275.6 | 30.1 | |||||||||
Operating Profit Margin (%) | 7.4 | 6.8 | 0.6 | %p | ||||||||
EBITDA | 1,275.9 | 1,221.3 | 54.6 | |||||||||
EBITDA Margin (%) | 30.7 | 30.2 | 0.5 | %p |
C. | Analysis of Change in Key Indicators |
The Company’s operating revenue continued to increase steadily in 2022 due to an increase in the number of SK Telecom’s 5G subscribers as well as SK Broadband’s paid-TV subscribers and an expansion in B2B sales, resulting in a 3.3% increase compared 2021. Operating profit increased by 16.2% in 2022 compared to 2021 due mainly to the growth of wireless and fixed-line businesses, a more stable competitive environment and the Company’s efforts to improve cost efficiency.
3. Analysis of Consolidated Financial Position
A. | General Factors Impacting Financial Position |
In 2022, uncertainties in the macroeconomic environment were heightened due to global monetary tightening and supply chain disruptions caused by the Russia-Ukraine war. This trend is expected to continue in 2023.
Despite adverse international and domestic economic conditions, the Company aimed to maximize overall corporate value by launching the “SKT 2.0” vision, redefining its business based on five major business groups (consisting of Wireless and Fixed-line Telecommunications, Media, Enterprise, AIVERSE and Connected Intelligence) and implementing optimized strategies for each business group.
Though it is possible that the rate of the net increase in the number of the Company’s 5G subscribers may slow down as the market begins to mature, there remains substantial potential for growth and optimistic expectations for increased data usage, which the Company plans to focus on in order to maintain revenue growth.
B. | Analysis of Financial Position |
(1) Analysis of Consolidated Financial Position
(Unit: in billions of Won, except percentages) | ||||||||||||
As of December 31, 2022 | As of December 31, 2021 | Percentage Change from 2021 to 2022 | ||||||||||
Current Assets | 7,219 | 6,353 | 13.6 | % | ||||||||
Non-Current Assets | 24,089 | 24,559 | (1.9 | )% | ||||||||
Total Assets | 31,308 | 30,911 | 1.3 | % | ||||||||
Current Liabilities | 8,047 | 6,960 | 15.6 | % | ||||||||
Non-current Liabilities | 11,107 | 11,616 | (4.4 | )% | ||||||||
Total Liabilities | 19,153 | 18,576 | 3.1 | % | ||||||||
Total Equity | 12,155 | 12,335 | (1.5 | )% |
* | The financial positions as of December 31, 2021 reflect the effects of the Spin-off. The financial statements as of and for the year ended December 31, 2022 are subject to approval at the 39th General Meeting of Shareholders to be held on March 28, 2023. In the event that the statements are not approved or are amended, a report on such event will be disclosed. |
(a) Assets
As of December 31, 2022, SK Telecom’s assets comprised 84.4% of the Company’s total assets on a consolidated basis.
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The Company’s total assets as of December 31, 2022 increased by 1.3% from the end of the previous year, primarily as a result of an increase in current assets including cash and cash equivalents, short-term financial instruments, accounts receivable-trade and accounts receivable - other.
(b) Liabilities
As of December 31, 2022, SK Telecom’s liabilities comprised 83.8% of the Company’s total liabilities on a consolidated basis.
The Company’s total liabilities as of December 31, 2022 increased by 3.1% from the end of the previous year primarily due to an increase in current liabilities including short-term borrowings, accounts payable-rade and accounts payable-other.
(2) Assets by business segment
(Unit: in millions of Won and percentages) | ||||||||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||
2022 | 2021 | 2020* | ||||||||||||||||||||||
Classification | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Wireless | 27,078,021 | 79 | % | 27,126,972 | 80 | % | 32,707,344 | 73 | % | |||||||||||||||
Fixed-line | 6,588,076 | 19 | % | 6,319,019 | 19 | % | 6,091,992 | 14 | % | |||||||||||||||
Other | 762,028 | 2 | % | 462,021 | 1 | % | 6,244,788 | 14 | % | |||||||||||||||
Subtotal | 34,428,124 | 100 | % | 33,908,011 | 100 | % | 45,044,125 | 100 | % | |||||||||||||||
Consolidation Adjustment | (3,119,862 | ) | — | (2,996,734 | ) | — | 2,862,832 | — | ||||||||||||||||
Total | 31,308,262 | — | 30,911,277 | — | 47,906,957 | — |
* | Includes assets that were spun-off to SK Square as part of the Spin-off. |
C. | Analysis of Results of Operations |
(1) Consolidated Results of Operations
(Unit: in billions of Won, except percentages) | ||||||||||||
For the year ended December 31, 2022 | For the year ended December 31, 2021 | Percentage Change from 2021 to 2022 | ||||||||||
Operating Revenue | 17,305 | 16,749 | 3.3 | % | ||||||||
Operating Expense | 15,693 | 15,361 | 2.2 | % | ||||||||
Operating Profit | 1,612 | 1,387 | 16.2 | % | ||||||||
Profit for the Year | 948 | 2,419 | (60.8 | )% |
* | The financial statements as of December 31, 2021 reflect the effects of the Spin-off. The financial statements as of December 31, 2022 are subject to approval at the 39th General Meeting of Shareholders to be held on March 28, 2023. In the event that the statements are not approved or are amended, a report on such event will be disclosed. |
(a) Operating Revenue
The Company’s operating revenue in 2022 increased by 3.3% compared to 2021 due to an increase in the number of SK Telecom’s 5G wireless subscribers and SK Broadband’s paid television subscribers, as well as growth of B2B sales. SK Telecom’s operating revenue increased by 2.6% compared to 2021 due to an increase in the number of 5G subscribers and a recovery in revenue from Roaming services. SK Broadband’s operating revenue increased by 2.6 % in 2022 compared to 2021 due to increases in the number of paid television subscribers, the utilization rate of data centers and the number of new B2B orders. SK stoa’s operating revenue increased by 4.1% in 2022 compared to 2021 due to a rebound in fashion-related sales that accompanied the easing of quarantine restrictions. The operating revenue of other subsidiaries increased by 23.2% in 2022 compared to 2021 due to events such as the new acquisition of SK M&Service.
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(b) Operating Profit
The Company’s operating profit increased by 16.2% in 2022 compared to 2021, mainly due to the growth of wireless and fixed-line businesses, a more stable competitive environment and the Company’s efforts to improve cost efficiency. SK Telecom’s operating profit increased by 18.6% in 2022 compared to 2021 due to revenue growth as well as a steady decreases in marketing expenses and depreciation. SK Broadband’s operating profit increased by 10.9% in 2022 compared to 2021 due to revenue growth and cost efficiency, while the operating profit of SK stoa decreased by 54.0% despite revenue growth due to an increase in company-wide operating expenses such as transmission commissions. Meanwhile, SK Telink’s operating profit increased by 212.0% in 2022 compared to 2021 due to increased revenue from international calls and decreased MVNO marketing expenses.
(c) Profit
The Company’s profit for the year decreased by 60.8% in 2022 from 2021, primarily due to a decrease in gains relating to investments in subsidiaries, associates and joint ventures following the Spin-off.
1) Operating performance by business
Each company in the consolidated entity is a separate legal entity providing independent services and products. The Company’s business segments consist of (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, and (3) other businesses consisting of commercial retail data broadcasting channel business, among others.
Set forth below is a summary description of the business of each of the Company’s 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 | |||
SK M&Service Co., Ltd. | Database and online information services | |||
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 VOD | ||
Home & Service Co., Ltd. | System maintenance of high-speed Internet, IPTV and fixed-line services | |||
SK Telink Co., Ltd. | International wireless direct-dial “00700” services and MVNO business | |||
Other business | SK stoa Co., Ltd. | Operation of commercial retail data broadcasting channel services | ||
Atlas Investment | Investments | |||
SK Telecom Innovation Fund, L.P. | Investments |
The Company’s wireless business, fixed-line business and other businesses accounted for 75%, 22% and 3%, respectively, of the Company’s operating revenue in 2022. The following table shows the breakdown of the Company’s operating revenue by business segment:
(Unit: in millions of Won and percentages) | ||||||||||||||||||||||||
For the year ended December 31, | ||||||||||||||||||||||||
2022 | 2021 | 2020* | ||||||||||||||||||||||
Classification | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Wireless | 12,942,316 | 75 | % | 12,718,473 | 76 | % | 12,295,684 | 66 | % | |||||||||||||||
Fixed-line | 3,812,989 | 22 | % | 3,677,706 | 22 | % | 3,405,677 | 18 | % | |||||||||||||||
Other | 549,668 | 3 | % | 352,406 | 2 | % | 2,923,290 | 16 | % | |||||||||||||||
Total | 17,304,973 | 100 | % | 16,748,585 | 100 | % | 18,624,651 | 100 | % |
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a) Wireless Communications Business
[1] Market Conditions
Wireless communications service has the characteristics of a domestic industry because its business area is limited to Korea. As a result, the size of the industry is greatly affected by domestic market conditions, including the population using domestic telecommunications services and the level of telecommunications expenditures by income level.
The Korean mobile communications 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 by leveraging 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.
[2] Analysis of Changes in Factors Affecting Results of Operations
[Number of Subscribers]
(Unit: in 1,000 persons, except percentages) | ||||||||||||||||
For the year ended December 31, 2022 | For the year ended December 31, 2021 | Change from 2021 to 2022 | Percentage Change from 2021 to 2022 | |||||||||||||
MNO Subscribers | 30,452 | 29,696 | 756 | 2.5 | % | |||||||||||
Monthly Churn Rate (%) | 0.7 | % | 0.8 | % | (0.1 | )%p | ||||||||||
5G Subscribers | 13,393 | 9,874 | 3,519 | 35.6 | % |
The number of MNO subscribers increased by 0.76 million during 2022 due to the increase in the number of IoT lines and the expansion of 5G network services, recording 30.45 million subscribers and a market share of 48.24%.
The Company maintained a record low annual churn rate of 0.7% in 2022, mainly attributable to innovations in distribution channels and rational market operations in response to the contactless social environment.
The number of 5G subscribers increased by 3.52 million through the launch of various new handsets, continual improvements in quality and customer service, and introduction of additional pricing plans, and the Company secured 13.39 million 5G subscribers as of December 31, 2022, recording a market share of 48.0%.
• | Average Monthly Revenue per Subscriber |
For the year ended December 31, 2022 | For the year ended December 31, 2021 | Change from 2021 to 2022 | Percentage Change from 2021 to 2022 | |||||||||||||
Billing ARPU (Won) | 30,546 | 30,517 | 29 | 0.1 | % |
* | The billing ARPU is derived by dividing total revenue of SK Telecom from voice service and data service (excluding revenue from MVNO subscribers) for the period by the monthly average number of subscribers that are not MVNO subscribers for the period, then dividing that number by the number of months in the period. |
The billing ARPU increased by 0.1% in 2022 compared to 2021 primarily due to increases in the number of 5G subscribers and the average customer data usage.
1st Quarter of 2022 | 2nd Quarter of 2022 | 3rd Quarter of 2022 | 4th Quarter of 2022 | |||||||||||||
Billing ARPU (Won) | 30,401 | 30,656 | 30,633 | 30,495 |
• | Capital Expenditures (SK Telecom on a separate basis) |
(Unit: in billions of Won) | ||||||||||||||||||
New investments and expansions | For the year ended December 31, 2022 | For the year ended December 31, 2021 | Change from 2021 to 2022 | Percentage Change from 2021 to 2022 | Method of financing | |||||||||||||
Network investment | 1,837 | 1,851 | (14 | ) | (0.8 | )% | Internal Cashflow | |||||||||||
Other investment | 378 | 328 | 50 | 15.2 | % | |||||||||||||
Total | 2,215 | 2,179 | 36 | 1.7 | % |
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In 2022, the Company invested Won 2.22 trillion in network facility to expand 5G service coverage and maintain network quality.
b) Fixed-Line Communications Business
[1] Market Conditions
The domestic telecommunications service industry is a domestic industry whose coverage area is limited to Korea, and the size of the industry is significantly affected by domestic economic factors, including the domestic user population and the level of telecommunications service expenditures by income level.
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. It is a mature market where the impact of general economic fluctuations is relatively low as the level of competition has stabilized due to a reduced degree of differentiation among players.
The price, quality and speed of services are the primary competitive factors, and in the case of IPTV business, advanced services based on new technology and content differentiation are emerging as competitive factors.
[2] Analysis of factors and impact of changes in operating revenue
[Market Share]
(Unit: in percentages) | ||||||||||||
Operating revenue | For the year ended December 31, 2022 | For the year ended December 31, 2021 | Percentage Change from 2021 to 2022 | |||||||||
High-speed Internet (including SKT resale) | 28.5 | 28.7 | (0.2 | )%p | ||||||||
Local calls (including Internet calls) | 17.8 | 17.5 | 0.3 | %p | ||||||||
IPTV | 30.9 | 30.6 | 0.3 | %p | ||||||||
Cable TV | 22.2 | 22.2 | — |
• | Media |
SK Broadband’s media business consists of IPTV and cable TV services, with the IPTV market driving consistent subscriber growth. SK Broadband recorded the largest net increase in the number of IPTV subscribers in 2022, which served as the primary factor for the company reaching a total of 9.32 million paid broadcasting subscribers as of December 31, 2022.
• | Fixed-line Telecommunications |
SK Broadband’s fixed-line telecommunications business consists of high-speed internet services, corporate business and residential telephone services. In its high-speed internet services, the number of subscribers to premium plans such as Giga Internet is increasing, reaching 6.7 million as of December 31, 2022. For corporate business, growth is being driven primarily by an increase in new orders and datacenter operational efficiency.
D. | New and Discontinued Operations |
(1) New Operations
None.
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(2) Discontinued Operations
(a) Reasons for Discontinuation
Pursuant to the resolution of the Extraordinary General Meeting of Shareholders on October 12, 2021, the Company conducted the Spin-off of certain of its operations for the purpose of managing the Company’s equity investments in semiconductor and new ICT companies as well as making new investments relating thereto. The effective date of the Spin-off was November 1, 2021. As a result of the Spin-off, the Company discontinued certain parts of its security, commerce and other businesses, which were transferred to the newly established company, SK Square.
Accordingly, certain of the Company’s material subsidiaries, including One Store Co., Ltd., SK Planet Co., Ltd., Eleven Street Co., Ltd., Dreamus Company, SK shieldus Co., Ltd., Incross, T Map Mobility and SK M&Service Co., Ltd., were excluded from the scope of the Company’s consolidation.
(b) Effects on Financial Position
The assets and liabilities excluded from the Company’s scope of consolidation pursuant to the Spin-off are as follows. As a result, the Company lost control of the businesses related to the Spin-off, and the difference in the book value of the transferred assets and liabilities was recognized as other paid-in capital in the Company’s consolidated financial statements.
(Unit: in millions of Won) | ||||
Amount | ||||
Current Assets | 2,608,601 | |||
Non-Current Assets | 19,269,615 | |||
Total Assets | 21,878,216 | |||
Current Liabilities | 2,161,458 | |||
Non-current Liabilities | 4,676,324 | |||
Total Liabilities | 6,837,782 | |||
Total Equity | 15,040,434 |
(c) Effects on Results of Operations
Financial information related to the businesses that were spun off pursuant to the Spin-off is as follows:
(Unit: in millions of Won) | ||||
As of December 31, 2021 | ||||
Operating Revenue | 2,383,083 | |||
Operating Expense | 2,370,758 | |||
Operating Profit | 12,325 | |||
Net profit before corporate tax | 1,352,746 | |||
Profits from discontinued operations | 1,147,594 |
(d) Effects on Liquidity
Cash flow information related to the businesses that were spun off pursuant to the Spin-off is as follows:
(Unit: in millions of Won) | ||||
As of December 31, 2021 | ||||
Cashflow from operating activities | 59,255 | |||
Cashflow from investing activities | (967,053 | ) | ||
Cashflow from financial activities | (88,872 | ) |
(e) Actions Taken on Discontinued Operations
The Company’s discontinued operations were transferred to SK Square pursuant to the resolution at the extraordinary shareholders’ meeting held on October 12, 2021.
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E. | Corporate Reorganization |
In 2023, SK Telecom has reorganized its internal structure in order to transform itself into an AI company.
As part of such reorganization, SK Telecom has established a three-prong strategy system to accelerate transformation into an AI company. Furthermore, by having Young Sang Ryu, the CEO of SK Telecom, simultaneously serve as the CEO of SK Broadband, the Company plans to pursue cooperation not only in its business areas, including fixed-line and wireless communication, media and enterprise businesses, but also in brand management and corporate culture. In addition, SK Telecom has strengthened its pool of chief-level officers in order to achieve its corporate vision through responsible management based on competency and experience.
F. | Effects of Exchange Rate Fluctuation |
The Company has exchange positions due to its income and expenditure from global operations. Foreign currencies in which exchange positions primarily are generated are U.S. dollars and Euros.
See Note 36(1) of the notes to the Company’s audited consolidated financial statements attached hereto for further information regarding the company’s exchange rate risk.
G. | Asset Impairment and Write-downs |
(1) | Impairment assessment of goodwill in cash-generating units of fixed-line businesses |
As described in Notes 3(12) and 16 of the notes to the Company’s audited consolidated financial statements attached hereto, the Company assesses impairment of goodwill allocated to a cash generating unit (“CGU”) at least annually or when there is an indication of possible impairment by comparing the carrying amount of a CGU to its recoverable amount based on value-in-use (“VIU”). The amount of goodwill allocated to the fixed-line telecommunications services CGU was Won 764,082 million as of December 31, 2022.
In carrying out the goodwill impairment assessment, the Company compares the carrying amount of the fixed-line telecommunications services CGU and its VIU based on discounted cash flow forecasts. The Company’s independent auditor has identified the goodwill impairment assessment for the fixed-line telecommunications services CGU as a key audit matter due to inherent uncertainties and significant judgment involved in management’s estimates of major assumptions such as estimates of future operating revenue, perpetual growth rate and discount rate, all of which have a significant impact on the determination of a VIU. The primary audit procedures performed by the independent auditor for this key audit matter include:
• | Assessing the competence and objectivity of the external specialist utilized by management; |
• | Evaluating the appropriateness of the valuation method and assumptions applied by management by involving the independent auditor’s internal specialist; |
• | Performing a sensitivity analysis for both the discount rate and the perpetual growth rate applied to discounted cash flow forecasts to assess the impact of changes in these key assumptions on the conclusion reached by management in its impairment assessment; |
• | Evaluating the reasonableness of management’s future cash flow forecasts by comparison with financial budgets approved by management; and |
• | Performing a retroactive assessment of the prior periods’ cash flow forecasts by comparison with the actual results. |
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(2) | Impairment assessment of non-financial assets |
The carrying amounts of the Company’s non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.
For more information on asset impairment, see the notes to the Company’s audited consolidated financial statements attached hereto.
H. | Annual Business Plan for 2023 |
The Company released the following management plan for 2023 through its earnings announcement on February 8, 2023.
(1) | Guidance for Fiscal Year 2023 |
• | Operating revenue (consolidated): Won 17.8 trillion |
I. | Other Factors that Affect Financial Position and Operating Results |
The Company is exposed to market risk, credit risk and liquidity risk. Market risk is further divided into exchange rate risk and interest rate risk. To manage these risk elements, the Company operates risk management policies and programs that closely monitor and respond to each risk element.
The Company’s financial assets subject to financial risk management include, among others, cash and cash equivalents, long- and short-term financial instruments, long- and short-term investment securities, accounts receivable – trade and accounts receivable – other. The Company’s financial liabilities include, among others, accounts payable-other, borrowings, debentures and lease liabilities.
For more information on financial risk management, see Note 36 of the notes to the Company’s audited consolidated financial statements attached hereto.
4. Liquidity, Financing and Expenses
A. | Liquidity |
The Company’s cashflow status is as follows:
(Units: in millions of Won) | ||||||||||||
As of December 31, 2022 | As of December 31, 2021 | As of December 31, 2020 | ||||||||||
Cash flow from operating activities | 5,159,317 | 5,031,279 | 5,821,876 | |||||||||
Cash flow from investing activities | (2,807,795 | ) | (3,486,189 | ) | (4,250,402 | ) | ||||||
Cash flow from financial activities | (1,349,882 | ) | (2,053,611 | ) | (1,457,579 | ) | ||||||
Increase (decrease) in cash and cash equivalents | 1,001,640 | (508,521 | ) | 113,895 | ||||||||
Cash and cash equivalents at the beginning of the period | 872,731 | 1,369,653 | 1,270,824 | |||||||||
Effects of exchange rate fluctuations on foreign-currency denominated cash and cash equivalents | 7,920 | 11,599 | (15,066 | ) | ||||||||
Cash and cash equivalents at the end of the period | 1,882,291 | 872,731 | 1,369,653 |
The Company classifies cash and cash equivalents to comprise cash balances, call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.
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As of December 31, 2022, the Company had cash and cash equivalent of Won 1,882.3 billion, an increase of Won 1,009.6 billion compared to the end of the previous year. The main reasons for the increase in cash and cash equivalents include an increase in long-term financial instruments (an increase of Won 330.0 billion compared to the end of the previous year), the issuance of debentures (an increase of Won 326.9 billion compared to the end of the previous year) and a net increase in short-term borrowings (an increase of Won 130.0 billion compared to the end of the previous year).
As of December 31, 2022, the Company’s debt-to-equity ratio (as calculated by dividing the interest-bearing financial debt by total equity) was 76.5%, compared to 71.6% as of December 31, 2021 and 43.9% as of December 31, 2020. The net debt-to-equity ratio (as calculated by the interest-bearing financial debt minus cash and marketable securities, divided by total equity) was 59.1%, 60.4% and 31.9% at the end of 2022, 2021 and 2020, respectively. Interest coverage ratio (EBITDA divided by interest expense) was 15.9, 14.8 and 13.8 at the end of each of 2022, 2021 and 2020, respectively. The Company continues to have sufficient liquidity.
The Company strives to secure sufficient liquidity by maintaining a sufficient level of cash and cash equivalents and securing credit limits from financial institutions. The Company maintains sufficient liquidity within its credit limit through active business activities.
B. | Financing |
(1) | Status and conditions of financing |
(a) | Short-term borrowings |
For information on short-term borrowings as of December 31, 2022 and 2021, see Note 18(1) of the notes to the Company’s audited consolidated financial statements attached hereto.
(b) | Long-term borrowings |
For information on long-term borrowings as of December 31, 2022 and 2021, see Note 18(2) of the notes to the Company’s audited consolidated financial statements attached hereto.
(c) | Debentures |
For information on debentures as of December 31, 2022 and 2021, see Note 18(3) of the notes to the Company’s audited consolidated financial statements attached hereto.
(2) | Maturity of borrowings |
The contractual maturity of the Company’s financial liabilities is as follows:
(Units: in millions of Won) | ||||||||||||||||||||
Classification | Book value | Cash flow according to the contract | Less than one year | One to five years | More than five years | |||||||||||||||
Account payables | 89,255 | 89,255 | 89,255 | — | — | |||||||||||||||
Borrowings* | 936,111 | 975,960 | 290,024 | 685,936 | — | |||||||||||||||
Debenture* | 8,366,694 | 9,469,549 | 2,074,631 | 5,077,080 | 2,317,838 | |||||||||||||||
Lease liabilities | 1,782,057 | 2,063,294 | 391,686 | 1,104,040 | 567,568 | |||||||||||||||
Other non-trade payables | 5,505,465 | 5,641,277 | 4,291,518 | 1,256,702 | 93,057 | |||||||||||||||
Total | 16,679,582 | 18,239,335 | 7,137,114 | 8,123,758 | 2,978,463 |
* | Includes interest payments. |
The Company does not expect this cash flow to occur significantly earlier or to be significantly different in amount.
(3) | Fulfillment conditions related to financing |
The debentures issued publicly by the Company between 2012 and 2022 are subject to certain covenants for investor protection, including maintaining specified financial ratios and limitations on liens, disposal of assets and changes in control.
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The Company is currently in compliance with all such covenants.
C. | Expenditures |
(1) | Capital Expenditures |
(Unit: in trillions of Won) | ||||||||||||||||||||
As of December 31, 2022 | As of December 31, 2021 | As of December 31, 2020 | Increase/Decrease | Percentage of Increase/Decrease | ||||||||||||||||
Capital Expenditures | 3.03 | 3.00 | 3.02 | 0.03 | 1.0 |
In 2022, the Company executed Won 3.03 trillion of capital expenditures to enhance the competitiveness of its wireless and fixed-line network infrastructure as well as to invest in growth businesses, including data center and AI-based services.
In the future, additional capital expenditures will be required to enhance the quality and competitiveness of the Company’s 5G network. However, the expected size, timing and source of funding of such expenditures remain pending subject to market conditions.
5. Commitments and Contingencies
For information on the Company’s commitments and contingencies, see Note 38 of the notes to the Company’s audited consolidated financial statements attached hereto.
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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 Matter | Critical Audit Matters | ||||
Year ended December 31, 2022 | Ernst & Young Han Young | Unqualified | — | Timing of revenue recognition related to the Company’s cellular services; impairment assessment of goodwill for the fixed-line telecommunications services cash generating unit | ||||
Year ended December 31, 2021 | KPMG Samjong Accounting Corp. | Unqualified | Spin-off and disclosure of discontinued operations in the consolidated financial statements | Revenue recognition; impairment assessment of goodwill for the fixed-line telecommunications services cash generating unit | ||||
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; impairment assessment of goodwill for the security services cash generating unit, assessment of fair value of customer relationship |
* | Note: All consolidated subsidiaries of the Company that are subject to audits and whose audits have been completed received unqualified audit opinions. |
* | The audit opinion is on the consolidated and separate financial statements. |
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 | |||||||||||||||||||
Year ended December 31, 2022 | | Ernst & Young Han Young | | Quarterly and semi-annual review | 2,700 | 24,100 | 2,700 | 24,100 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||||
Internal accounting system audit | ||||||||||||||||||||||
Year ended December 31, 2021 | | KPMG Samjong Accounting Corp. | | Quarterly and semi-annual review | 2,450 | 24,500 | 2,450 | 24,500 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||||
Internal accounting system audit | ||||||||||||||||||||||
Year ended December 31, 2020 | | KPMG Samjong Accounting Corp. | | Quarterly and semi-annual review | 2,360 | 23,600 | 2,360 | 23,600 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||||
Internal accounting system audit |
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C. | Non-Audit Services Contracts with Independent Auditors |
(Unit: in millions of Won) | ||||||||||
Period | Contract date | Service provided | Service duration | Fee | ||||||
Year ended December 31, 2022 | — | — | — | — | ||||||
Year ended December 31, 2021 | May 17, 2021 | Confirmation of financial information in connection with frequency reallocation application | May 17, 2021 –May 24, 2021 | 2 | ||||||
May 26, 2021 | Audit and review of financial statements of the newly established company and subsidiaries involved in the Spin-off | May 26, 2021 –July 28, 2021 | 1,143 | |||||||
August 5, 2021 | Review of carve-out financial statements in connection with the Spin-off | August 5, 2021 – August 13, 2021 | 10 | |||||||
Year ended December 31, 2020 | July 23, 2020 | Confirmation of financial information | July 23, 2020 – July 30, 2020 | 30 | ||||||
December 8, 2020 | Confirmation of financial information | December 8, 2020 – December 10, 2020 | 30 | |||||||
December 30, 2020 | Consulting services for new business group model research project | December 31, 2020 – February 12, 2021 | 90 |
D. | Discussions between Audit Committee and Independent Auditors |
Date | Attendance | Method | Key Matters Discussed | |||
February 22, 2022 | Company’s Audit Committee: 4 Accounting Firm’s Independent Auditor: 1 | In-person | Report on 2021 critical audit matters and results of audit of financial statements; report on results of 2021 internal accounting management system audit | |||
April 27, 2022 | Company’s Audit Committee: 4 Accounting Firm’s Independent Auditor: 1 | In-person | Report on 2021 Public Company Accounting Oversight Board audit results; report on 2022 audit plan and selection of critical audit matters | |||
July 27, 2022 | Company’s Audit Committee: 4 Accounting Firm’s Independent Auditor: 1 | In-person | Report on results of external auditors’ 2022 semi-annual review | |||
December 19, 2022 | Company’s Audit Committee: 4 Accounting Firm’s Independent Auditor: 2 | In-person | Report on the 2022 financial report internal control test result; report on audit plans at the end of the period | |||
February 22, 2023 | Company’s Audit Committee: 4 Accounting Firm’s Independent Auditor: 2 | In-person | Report on 2022 critical audit matters and results of audit of financial statements; report on results of 2022 internal accounting management system audit | |||
March 9, 2023 | Company’s Audit Committee: 4 Accounting Firm’s Independent Auditor: 2 | In-person | Report on 2022 audit; report on results of 2022 internal accounting management system audit |
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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: two inside directors, five independent directors and one non-executive director. The Board of Directors operates the following five committees: Independent Director Nomination Committee, Audit Committee, Future Strategy Committee, Compensation Committee, and ESG Committee.
(As of December 31, 2022) | ||||||
Total number | Inside directors | Non-executive director | Independent directors | |||
8 | Young Sang Ryu, Jong Ryeol Kang | Kyu-Nam Choi | Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon, Junmo Kim |
* | At the 38th General Meeting of Shareholders held on March 25, 2022, Jong Ryeol Kang was newly elected as an inside director, and Seok-dong Kim was re-elected as an independent director and a member of the audit committee. |
B. | Significant Activities of the Board of Directors |
Meeting | Date | Agenda | Approval | |||
461th (the 1st meeting of 2022) | January 17, 2022 | • 2021 KPI evaluation | Approved as proposed | |||
462th (the 2nd meeting of 2022) | January 20, 2022 | • Disposal of treasury shares • 2022 health and safety plan • Donations for ESG management (creation of social value) • Report for the period after the fourth quarter of 2021 | Approved as proposed Approved as proposed Approved as proposed — | |||
463th (the 3rd meeting of 2022) | February 8, 2022 | • Financial statements as of and for the year ended December 31, 2021 • Delegation of authority to obtain funding through long-term borrowings • Annual business report for the year ended December 31, 2021 • Amendment of agreements for implementation of mutual cooperation among member companies • Results of evaluation of the Board of Directors | Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
— | |||
464th (the 4th meeting of 2022) | February 24, 2022 | • Convocation of the 38th General Meeting of Shareholders • Compensation of representative director and inside director • Disposal of treasury shares • Donations to the Korea Fencing Federation • Report of internal accounting management • Results of evaluation of internal accounting management system | Approved as proposed Approved as proposed Approved as proposed Approved as proposed — — | |||
465th (the 5th meeting of 2022) | March 25, 2022 | • Election of the chairman of the Board of Directors • Appointment of committee member • Determination of KPIs for 2022 • Transactions with SK Inc. in the second quarter of 2022 | Approved as proposed Approved as proposed Approved as proposed Approved as proposed | |||
466th (the 6th meeting of 2022) | April 28, 2022 | • Compensation of internal directors • Disposal of treasury shares • Dividends for the first quarter of 2022 • Payment of operating expenses of SUPEX Council for 2022 • Report for the period after the first quarter of 2022 | Approved as proposed Approved as proposed Approved as proposed Approved as proposed — | |||
467th (the 7th meeting of 2022) | June 15, 2022 | • Transactions with SK Inc. in the third quarter of 2022 | Approved as proposed | |||
468th (the 8th meeting of 2022) | July 22, 2022 | • Strategic partnership with Hana Financial Group Inc. | Approved as proposed |
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Meeting | Date | Agenda | Approval | |||
469th (the 9th meeting of 2022) | July 28, 2022 | • Dividends for the second quarter of 2022 • Revisions to the Audit Committee regulations • Report for the first half of 2022 • Report for the period after the second quarter of 2022 • Major agenda for the first half of 2022 related to Governance Story (including key agenda for the second half of 2022) | Approved as proposed Approved as proposed — — — | |||
470th (the 10th meeting of 2022) | September 29, 2022 | • Transaction with SK Inc. in the fourth quarter of 2022 | Approved as proposed | |||
471st (the 11th meeting of 2022) | October 27, 2022 | • Dividends for the third quarter • Acquisition of the shares of Konan Technology • Payment of special KCCI membership fee to support the hosting of Busan World Expo • Lessons from the the Pangyo Data Center fire and the Company’s disaster/wartime responses • Impact and contingency plans responding to macroeconomic and environmental changes • Report for the period after the third quarter of 2022 | Approved as proposed Approved as proposed Approved as proposed
—
—
— | |||
472nd (the 12th meeting of 2022) | November 30, 2022 | • Organizational changes and appointment of board members | — | |||
473rd (the 13th meeting of 2022) | December 19, 2022 | • IT system maintenance transactions in 2023 • Transaction with SK Inc. in the first quarter of 2023 • Business plans for 2023 • Approval of limit on the issuance of electronic short-term bonds • Procurement and delegation of long-term borrowings • Allotment of operating expenses for business aircraft in 2023 • Transaction with SK Pinx in 2023 • Allotment of 2023 operating expenses for SK Academy • Results of compliance activities in 2022 and plans for 2023 | Approved as proposed Approved as proposed Approved as proposed Approved as proposed
Approved as proposed Approved as proposed
Approved as proposed Approved as proposed — | |||
474th (the 1st meeting of 2023) | February 7, 2023 | • Financial statements as of and for the year ended December 31, 2022 • Annual business report for the year ended December 31, 2022 • 2023 health and safety plan • Disposal of treasury stocks • Donations for ESG management (creation of social value) • 2022 KPI evaluation • Transaction with SK Broadband Inc. • Report for the period after the fourth quarter of 2022 • Public communication of 2023 business plans | Approved as proposed
Approved as proposed
Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed — — | |||
475th (the 2nd meeting of 2023) | February 23, 2023 | • Report of internal accounting management • Convocation of the 38th General Meeting of Shareholders • Compensation of representative director and inside director • Disposal of treasury shares • 2023 Donations to the Korea Fencing Federation • Results of evaluation of internal accounting management system | — Approved as proposed Approved as proposed Approved as proposed Approved as proposed — |
* | 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 |
(a) | Independent Director Nomination Committee (as of December 31, 2022) |
Total number | Names of Member Directors | Task | ||
3 | Young Sang Ryu, Seok-Dong Kim, Youngmin Yoon | 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) Strategy Committee (as of December 31, 2022)
Total number | Names of Member Directors | Task | ||
8 | Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon, Junmo Kim, Young Sang Ryu, Kyu-Nam Choi, Jong Ryeol Kang | Discuss mid- to long-term strategic direction, establish management goals and evaluate performance |
* | The Future Strategy Review Committee is a committee established by the resolution of the Board of Directors. |
(c) Compensation Committee (as of December 31, 2022)
Total number of persons | Names of Member Directors | Task | ||
4 | Yong-Hak Kim, Seok-Dong Kim, Junmo Kim, Kyu-Nam Choi | Nomination of CEO candidate(s) and review of CEO and inside director remuneration amount |
* | The Compensation Committee is a committee established by the resolution of the Board of Directors. |
(d) ESG Committee (as of December 31, 2022)
Total number | Names of Member Directors | Task | ||
4 | Jung Ho Ahn, Youngmin Yoon, Junmo Kim, Jong Ryeol Kang | Deliberation of plans and performance in the major areas of ESG, mandatory ESG disclosure matters and ESG stakeholder communication |
* | The ESG Committee is a committee established by the resolution of the Board of Directors. |
(e) Audit Committee (as of December 31, 2022)
Total number | Names of Member Directors | Task | ||
4 | Seok-Dong Kim, Yong-Hak Kim, Jung Ho Ahn, Youngmin Yoon | Review of financial statements and supervision of independent audit process, etc. |
* | The Audit Committee is a committee established under the provisions of the Articles of Incorporation and the Korean Commercial Code. |
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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 20, 2023 are set forth below.
Meeting | Date | Agenda | Approval | |||
The 1st meeting of 2022 | January 18, 2022 | • Plan for establishment of ethical management and risk management infrastructure | — | |||
The 2nd meeting of 2022 | February 7, 2022 | • Review of business and audit results for 2021 and business and audit plans for 2022 • Audit committee’s opinion on internal monitoring controls • Approval of services by independent auditor in 2022 | —
Approved as proposed Approved as proposed | |||
The 3rd meeting of 2022 | February 22, 2022 | • Evaluation of internal accounting management system operation • Review of business and audit results for 2021 • Review of audit results on internal accounting management system for 2021 • Evaluation of internal accounting management system • Review opinion of agenda and related documents for the 38th General Meeting of Shareholders • Audit report for fiscal year 2021 • Contract relating to gift distribution to fixed-line business customers | — — — Approved as proposed Approved as proposed
Approved as proposed Approved as proposed | |||
The 4th meeting of 2022 | March 24, 2022 | • Contributions to company employee welfare fund for 2022 • Contract for maintenance services of optical cables in 2022 • Contract for maintenance services of transmission equipment in 2022 | Approved as proposed Approved as proposed Approved as proposed | |||
The 5th meeting of 2022 | April 27, 2022 | • PCAOB audit results for fiscal year 2021 • Audit plan for fiscal year 2022 • Appointment of committee chairman | — — Approved | |||
The 6th meeting of 2022 | May 25, 2022 | • Recruitment of the Responsible Management Support Group • Approval of appointment of external auditor for non-audit service | — Approved as proposed | |||
The 7th meeting of 2022 | July 27, 2022 | • Review of business and audit results for the first half of 2022 and plans for the second half of 2022 • Evaluation of results of the 2021 external audit service • Review of results of external auditor’s review for the first half of 2022 | Approved as proposed
— — | |||
The 8th meeting of 2022 | August 24, 2022 | • AI CCTV transactions with SK shieldus | Approved as proposed | |||
The 9th meeting of 2022 | September 28, 2022 | • Results of the Responsible Management Support Group’s 2021 review • Service content transaction with A. tv | — Approved as proposed | |||
The 10th meeting of 2022 | October 27, 2022 | • Results of personnel transfer in accordance with the 2021 management diagnosis | — | |||
The 11th meeting of 2022 | November 23, 2022 | • Results of ethical management evaluation for 2022 • Results of leadership initiative evaluation for 2022 • Approval of internal audit director’s evaluation for 2022 • Approval of internal audit department’s organization for 2023 • Approval of appointment of internal audit director • Property sublease with SK Broadband • Resales of fixed-line products in 2023 with SK Broadband • Joint sales of integrated IPTV products with SK Broadband | — — Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed |
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Meeting | Date | Agenda | Approval | |||
The 12th meeting of 2022 | December 19, 2022 | • Results of 2022 financial statement internal control test; end of the period audit plans • Approval of external audit contract • Purchase of client device installment payment bonds from PS&M in 2022 • Goods and service transaction with SK Planet in 2023 • Goods and service transaction with SK Shieldus in 2023 • Goods and service transaction with SK Hynix in 2023 • Goods and service transaction with 11 Street in 2023 • Goods and service transaction with Dreamus Company in 2023 • Goods and service transaction with Waave in 2023 • Service management of client contact channels in 2023 • Delegation of consultations for unpaid amounts and collection of accounts receivable in 2023 • Base station maintenance services in 2023 • Exchange equipment operational support service in 2023 • Telecommunications equipment lease transactions in 2023 • Wired and wireless infrastructure construction transactions in 2023 • Purchase of communication subsidiary materials and general goods from Happy Narae in 2023 • Affiliate transaction with One Store in 2023 | —
Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed
Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed
Approved as proposed | |||
The 1st meeting of 2023 | February 6, 2023 | • Collective approval of the services provided by external auditors in 2023 • Ethical management performance for fiscal year 2022 and mid-term business audit plan for fiscal year 2023 • Status and results of evaluation of the Company’s ethical management disclosure | Approved as proposed Approved as proposed
— | |||
The 2nd meeting of 2023 | February 22, 2023 | • Evaluation of the operational status of internal accounting management system • Audit committee’s opinion on internal monitoring apparatus • Confirmation of agenda of the 39th General Meeting of Shareholders and opinions on document investigation • Audit report for the 39th period • Contracts related to the distribution of free gifts to fixed-line clients in 2023 • Operation of internal accounting management system • Audit results for fiscal year 2022 • Internal accounting management system audit results for fiscal year 2022 | Approved as proposed Approved as proposed Approved as proposed
Approved as proposed Approved as proposed — — — |
* | The internal accounting manager reported in writing the plans for the evaluation of internal accounting management system operation to the audit committee in April 2022. |
3. Shareholders’ Exercise of Voting Rights
A. | Voting System and Exercise of Minority Shareholders’ Rights |
(As of December 31, 2022)
Classification of Voting System | Cumulative voting system | Written voting system | Electronic voting system | |||
Adoption status | Selected | Not adopted | Adopted | |||
Implementation status | — | — | Conducted during the 38th General Meeting of Shareholders |
The Company implemented a proxy solicitation procedure for the 38th General Meeting of Shareholders, pursuant to which shareholders were permitted to provide written proxy to exercise their voting rights.
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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 December 31, 2022) | (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 | 65,668,397 | 30.01 | 65,668,397 | 30.01 | ||||||||||||||
Tae Won Chey | Officer of the Company | Common share | 303 | 0.00 | 303 | 0.00 | ||||||||||||||
Dong Hyun Jang | Officer of affiliated company | Common share | 762 | 0.00 | 762 | 0.00 | ||||||||||||||
Jung Ho Park | Officer of the Company | Common share | 10,932 | 0.00 | 21,530 | 0.01 | ||||||||||||||
Young Sang Ryu | Officer of the Company | Common share | 3,340 | 0.00 | 7,340 | 0.00 | ||||||||||||||
Yong-Hak Kim | Officer of the Company | Common share | 303 | 0.00 | 1,711 | 0.00 | ||||||||||||||
Seok-Dong Kim | Officer of the Company | Common share | 303 | 0.00 | 1,447 | 0.00 | ||||||||||||||
Youngmin Yoon | Officer of the Company | Common share | 303 | 0.00 | 1,447 | 0.00 | ||||||||||||||
Jung Ho Ahn | Officer of the Company | Common share | 303 | 0.00 | 1,447 | 0.00 | ||||||||||||||
Junmo Kim | Officer of the Company | Common share | 303 | 0.00 | 1,447 | 0.00 | ||||||||||||||
Kyu-nam Choi | Officer of the Company | Common share | 455 | 0.00 | 455 | 0.00 | ||||||||||||||
Poong Young Yoon | Officer of affiliated company | Common share | 2,733 | 0.00 | 2,733 | 0.00 | ||||||||||||||
Jong Ryeol Kang | Officer of the Company | Common share | 0 | 0.00 | 3,484 | 0.00 | ||||||||||||||
Total | Common share | 65,688,437 | 30.02 | 65,712,503 | 30.03 |
* | The number of shares owned and ownership ratio as of the beginning of the period do not account for the shares owned by Jong Ryeol Kang, who was newly appointed in March 2022. |
B. | Overview of the Largest Shareholder |
As of December 31, 2022, 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/.
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C. | Changes in Shareholdings of the Largest Shareholder and Related Persons |
Changes in shareholdings of the largest shareholder are as follows:
(As of December 31, 2022) | (Unit: in shares and percentages) | |||||||
Largest | Date of the change | 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, acquired 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, acquired 500 additional shares. | |||||
May 6, 2021 | 21,628,971 | 30.02 | Changes in equity ratio due to cancellation of treasury shares | |||||
June 21, 2021 | 21,629,471 | 30.02 | Independent directors, Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon and Junmo Kim, each acquired 100 shares (total of 500 shares) | |||||
October 12, 2021 | 21,629,621 | 30.02 | Kyu-Nam Choi, independent director of the Company, acquired 150 shares. | |||||
October 25, 2021 | 21,629,821 | 30.02 | Jung Ho Park, CEO of the Company, and Young Sang Ryu, inside director of the Company each acquired 100 additional shares (total of 200 shares). | |||||
October 28, 2021 | 108,149,105 | 30.02 | Changes in total number of shares due to stock-split | |||||
November 2, 2021 | 65,688,437 | 30.02 | Changes in total number of shares due to the Spin-off; Poong Young Yoon, inside director of SK Square, acquired 2,733 shares. | |||||
January 24, 2022 | 65,695,437 | 30.02 | Jung Ho Park, director of the Company’s affiliate, and Young Sang Ryu, representative director of the Company, acquired 3,000 and 4,000 shares, respectively. | |||||
February 25, 2022 | 65,703,035 | 30.02 | Jung Ho Park, director of the Company’s affiliate, acquired 7,598 shares. | |||||
March 25, 2022 | 65,706,519 | 30.03 | Jong Ryeol Kang, inside director of the Company, acquired 3,484 shares. | |||||
May 3, 2022 | 65,712,503 | 30.03 | Four independent directors of the Company, Youngmin Yoon, Jung Ho Ahn, Junmo Kim, Seok-dong Kim, each acquired 1,144 shares. Yong-Hak Kim, another independent director of the Company, acquired 1,408 shares. |
2. Distribution of Shares
A. | Shareholders with Ownership of 5% or Greater |
(As of December 31, 2022) | (Unit: in shares and percentages) | |||||||||
Name (title) | Common share | |||||||||
Number of shares | Ownership ratio | Remarks | ||||||||
SK Inc. | 65,668,397 | 30.01 | % | — | ||||||
National Pension Service | 16,846,066 | 7.69 | % | — | ||||||
Citibank ADR | 13,924,513 | 6.36 | % | — | ||||||
Shareholdings under the Employee Stock Ownership Program | — | — | — |
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B. | Minority Shareholders |
(As of December 31, 2022) | (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* | 203,268 | 203,335 | 99.97 | % | 109,394,365 | 218,833,144 | 50.0 | % |
* | 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 | December 2022 | November 2022 | October 2022 | September 2022 | August 2022 | July 2022 | ||||||||||||||||||||
Common stock | Highest | 50,500 | 51,200 | 50,900 | 53,500 | 53,600 | 55,800 | |||||||||||||||||||
Lowest | 47,400 | 49,550 | 48,550 | 50,000 | 51,000 | 51,600 | ||||||||||||||||||||
Average | 49,400 | 50,130 | 49,713 | 51,790 | 52,105 | 53,586 | ||||||||||||||||||||
Daily transaction volume | Highest | 1,014,486 | 1,059,219 | 1,002,982 | 1,729,473 | 4,088,039 | 814,554 | |||||||||||||||||||
Lowest | 302,592 | 209,709 | 269,878 | 472,882 | 238,404 | 295,367 | ||||||||||||||||||||
Monthly transaction volume | 10,436,138 | 10,657,162 | 9,723,797 | 17,128,150 | 17,408,500 | 11,831,889 |
B. | Foreign Securities Market (New York Stock Exchange) |
(Unit : in US$ and ADRs) | ||||||||||||||||||||||||||
Types | December 2022 | November 2022 | October 2022 | September 2022 | August 2022 | July 2022 | ||||||||||||||||||||
Depositary receipt | Highest | 21.44 | 21.45 | 19.88 | 21.54 | 22.80 | 23.61 | |||||||||||||||||||
Lowest | 20.50 | 19.60 | 18.77 | 18.94 | 21.01 | 21.99 | ||||||||||||||||||||
Average | 21.01 | 20.57 | 19.26 | 20.31 | 21.85 | 22.77 | ||||||||||||||||||||
Daily transaction volume | Highest | 659,400 | 850,400 | 877,800 | 1,254,800 | 1,073,500 | 675,800 | |||||||||||||||||||
Lowest | 212,900 | 195,500 | 295,700 | 327,200 | 223,800 | 237,800 | ||||||||||||||||||||
Monthly transaction volume | 7,389,900 | 8,908,200 | 10,487,400 | 13,924,400 | 9,327,200 | 7,915,500 |
VIII. | EMPLOYEES AND DIRECTORS |
1. Officers and Employees
A. | Employees |
(As of December 31, 2022) | (Unit: in persons and millions of Won) | |||||||||||||||||||||||||||||||||
Business segment | Gender | Number of employees | Average length of service (years) | Aggregate wage for the year of 2022 | 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 | 4,214 | — | 90 | — | 4,304 | 14.1 | 666,309 | 155 | |||||||||||||||||||||||||
— | Female | 929 | — | 180 | — | 1,109 | 8.5 | 115,481 | 104 | |||||||||||||||||||||||||
Total | 5,143 | — | 270 | — | 5,413 | 13.1 | 781,790 | 145 |
B. | Compensation of Unregistered Officers |
(As of December 31, 2022) | (Unit: in persons and millions of Won) | |||||||
Number of Unregistered Officers | Aggregate wage for the year of 2022 | Average wage per person | ||||||
99 | 51,970 | 525 |
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2. Compensation of Directors
A. | Amount Approved at the Shareholders’ Meeting |
(As of December 31, 2022) | (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 December 31, 2022) | (Unit: in millions of Won) | |||||||||||
Number of Directors | Aggregate Amount Paid | Average Amount Paid Per Director | Remarks | |||||||||
8 | 3,487 | 498 | — |
* | The number of directors includes one non-executive director who did not receive any compensation. |
* | The average amount paid per director excludes one non-executive director who did not receive any compensation. |
B-2. Amount by Classification
(As of December 31, 2022) | (Unit: in millions of Won) | |||||||||||||||
Classification | Number of Directors | Aggregate Amount Paid | Average Amount Paid Per Director | Remarks | ||||||||||||
Inside Directors | 3 | 2,656 | 1,328 | — | ||||||||||||
Independent Directors (Excluding Audit Committee Members) | 1 | 163 | 163 | — | ||||||||||||
Audit Committee Members | 4 | 668 | 167 | — | ||||||||||||
Auditor | — | — | — | — |
* | The number of directors includes one non-executive director who did not receive any compensation. |
* | The average amount paid per director excludes one non-executive director who did not receive any compensation. |
3. Individual Compensation of Directors and Officers
A. | Remuneration for Individual Directors (among those Paid over Won 500 Million per Year) |
(As of December 31, 2022) | (Unit: in millions of Won) | |||||||
Name | Position | Total remuneration | Payment not included in total remuneration | |||||
Young Sang Ryu | Representative Director | 2,137 | Stock options* | |||||
Jong Ryeol Kang | Inside Director | 519 | Stock options* |
* | See “VIII.4. Stock Options Granted and Exercised” below for details on the number of stock options, exercise price and exercise period. |
B. | Composition of Total Remuneration |
Name | Composition | |
Young Sang Ryu | Total remuneration: Won 2,137 million • Salary: Won 1,100 million • Bonus: Won 1,024 million • Other earned income: Won 13 million | |
Jong Ryeol Kang | Total remuneration: Won 519 million* • Salary: Won 519 million |
* | Bonus to Jong Ryeol Kang was paid before his appointment as a director. |
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C. | Remuneration for the Five Highest-Paid Officers (among those Paid over W500 Million per Year) |
(As of December 31, 2022) | (Unit: in millions of Won) | |||||||
Name | Position | Total remuneration | Payment not included in total remuneration | |||||
Jin Woo So | Vice Chairman | 3,354 | — | |||||
Jung Ho Park | Vice Chairman | 2,800 | Stock options* | |||||
Young Sang Ryu | Representative Director | 2,137 | Stock options* | |||||
Yong-Seop Yum | Head | 1,569 | — | |||||
Yong Chul Yoon | Officer | 1,297 | — |
* | See “VIII.4. Stock Options Granted and Exercised” below for details on the number of stock options, exercise price and exercise period. |
D. | Composition of Total Remuneration |
Name | Composition | |
Jin Woo So | Total remuneration: Won 3,354 million • Salary: Won 1,600 million • Bonus: Won 1,752 million • Other earned income: Won 2 million | |
Jung Ho Park | Total remuneration: Won 2,800 million • Bonus: Won 2,106 million • Stock options: Won 670 million • Other earned income: Won 25 million | |
Young Sang Ryu | Total remuneration: Won 2,137 million • Salary: Won 1,100 million • Bonus: Won 1,024 million • Other earned income: Won 13 million | |
Yong-Seop Yum | Total remuneration: Won 1,569 million • Salary: Won 825 million • Bonus: Won 743 million • Other earned income: Won 1 million | |
Yong Chul Yoon | Total remuneration: Won 1,297 million • Salary: Won 450 million • Bonus: Won 838 million • Other earned income: Won 9 million |
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4. Stock Options Granted and Exercised
A. | Stock Options Granted to Directors and Auditors |
(As of December 31, 2022) | ||||||||||||
Classification | Number of Directors | Fair Value of Stock Options (Won) | Remarks | |||||||||
Inside Directors (Excluding Independent Directors and Audit Committee Members) | 2 | 1,597,507,615 | — | |||||||||
Independent Directors (Excluding Audit Committee Members) | — | — | — | |||||||||
Audit Committee Members | — | — | — | |||||||||
Executives | 10 | 537,157,627 | ||||||||||
Total | 12 | 2,134,665,242 | — |
B. | Stock Options Granted and Exercised |
(As of December 31, 2022) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||||||||
Grantee | Relationship | Date of | Method of | Initially Granted | Changes during Reporting Period | Total Changes | Unexercised as of End of Reporting Period | Exercise | Exercise Price | |||||||||||||||||||||||||||
Exercised | Canceled | Exercised | Canceled | |||||||||||||||||||||||||||||||||
Young Sang Ryu | Inside Director | February 20, 2018 | Issuance of treasury stock, cash settlement | 4,123 | — | — | — | — | 4,123 | February 21, 2020 – February 20, 2023 | 50,824 | |||||||||||||||||||||||||
Young Sang Ryu | Inside Director | March 26, 2019 | Issuance of treasury stock, cash settlement | 5,265 | — | — | — | — | 5,265 | March 27, 2021 – March 26, 2024 | 50,862 | |||||||||||||||||||||||||
Young Sang Ryu | Inside Director | March 26, 2020 | Issuance of treasury stock, cash settlement | 7,145 | — | — | — | — | 7,145 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Young Sang Ryu | Inside Director | March 25, 2021 | Issuance of treasury stock, cash settlement | 18,190 | — | — | — | — | 18,190 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Young Sang Ryu | Inside Director | March 25, 2022 | Issuance of treasury stock, cash settlement | 196,850 | — | — | — | — | 196,850 | March 26, 2025 – March 25, 2029 | 56,860 | |||||||||||||||||||||||||
Young Sang Ryu | Inside Director | March 25, 2022 | Issuance of treasury stock, cash settlement | 98,425 | — | — | — | — | 98,425 | March 26, 2025 – March 25, 2029 | 56,860 | |||||||||||||||||||||||||
Jong Ryeol Kang | Inside Director | March 26, 2020 | Issuance of treasury stock, cash settlement | 6,219 | — | — | — | — | 6,219 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Jong Ryeol Kang | Inside Director | March 25, 2021 | Issuance of treasury stock, cash settlement | 7,136 | — | — | — | — | 7,136 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Jong Ryeol Kang | Inside Director | March 25, 2022 | Issuance of treasury stock, cash settlement | 21,743 | — | — | — | — | 21,743 | March 26, 2024 – March 25, 2027 | 56,860 |
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(As of December 31, 2022) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||||||||
Grantee | Relationship | Date of | Method of | Initially Granted | Changes during Reporting Period | Total Changes | Unexercised as of End of Reporting Period | Exercise | Exercise Price | |||||||||||||||||||||||||||
Exercised | Canceled | Exercised | Canceled | |||||||||||||||||||||||||||||||||
Jung Ho Park | Unregistered Officer | March 24, 2017 | Issuance of treasury stock, cash settlement | 67,320 | 67,320 | — | 67,320 | — | — | March 25, 2019 – March 24, 2022 | 49,350 | |||||||||||||||||||||||||
Jung Ho Park | Unregistered Officer | March 24, 2017 | Issuance of treasury stock, cash settlement | 67,320 | — | — | — | — | 67,320 | March 25, 2020 – March 24, 2023 | 53,298 | |||||||||||||||||||||||||
Jung Ho Park | Unregistered Officer | March 24, 2017 | Issuance of treasury stock, cash settlement | 67,320 | — | — | — | — | 67,320 | March 25, 2021 – March 24, 2024 | 57,562 | |||||||||||||||||||||||||
Jung Ho Park | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 337,408 | — | — | — | — | 337,408 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 4,157 | — | — | — | — | 4,157 | February 23, 2021 – February 22, 2024 | 53,052 | |||||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 5,028 | — | — | — | — | 5,028 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 5,830 | — | — | — | — | 5,830 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 9,341 | — | — | — | — | 9,341 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Dong Hwan Cho | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 4,631 | — | — | — | — | 4,631 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Dong Hwan Cho | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 5,375 | — | — | — | — | 5,375 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Dong Hwan Cho | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 8,697 | — | — | — | — | 8,697 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
HyunA Lee | Unregistered Officer | March 26, 2020 | Issuance of treasury stock, cash settlement | 4,631 | — | — | — | — | 4,631 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
HyunA Lee | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 8,746 | — | — | — | — | 8,746 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
HyunA Lee | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 12,884 | — | — | — | — | 12,884 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Myung Jin Han | Unregistered Officer | March 25, 2021 | Issuance of treasury stock, cash settlement | 4,403 | — | — | — | — | 4,403 | March 26, 2023 – March 25, 2026 | 50,276 |
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(As of December 31, 2022) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||||||||
Grantee | Relationship | Date of | Method of | Initially Granted | Changes during Reporting Period | Total Changes | Unexercised as of End of Reporting Period | Exercise | Exercise Price | |||||||||||||||||||||||||||
Exercised | Canceled | Exercised | Canceled | |||||||||||||||||||||||||||||||||
Myung Jin Han | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 11,274 | — | — | — | — | 11,274 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Bong Ho Lim | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 8,858 | — | — | — | — | 8,858 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Jin Won Kim | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 10,629 | — | — | — | — | 10,629 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Yong Joo Park | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 10,334 | — | — | — | — | 10,334 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Hee Sup Kim | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 7,086 | — | — | — | — | 7,086 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Jung Whan Ahn | Unregistered Officer | March 25, 2022 | Issuance of treasury stock, cash settlement | 8,858 | — | — | — | — | 8,858 | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Hyoung Il Ha | Officer of Affiliate | February 22, 2019 | Issuance of treasury stock, cash settlement | 4,749 | — | — | — | — | 4,749 | February 23, 2021 – February 22, 2024 | 53,052 | |||||||||||||||||||||||||
Hyoung Il Ha | Officer of Affiliate | March 26, 2020 | Issuance of treasury stock, cash settlement | 5,955 | — | — | — | — | 5,955 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Hyoung Il Ha | Officer of Affiliate | March 25, 2021 | Issuance of treasury stock, cash settlement | 11,418 | — | — | — | — | 11,418 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Hyoung Il Ha | Officer of Affiliate | March 25, 2022 | Issuance of treasury stock, cash settlement | 10,737 | — | 10,737 | — | 10,737 | — | March 26, 2024 – March 25, 2027 | 56,860 | |||||||||||||||||||||||||
Poong Young Yoon | Officer of Affiliate | February 22, 2019 | Issuance of treasury stock, cash settlement | 3,777 | 3,777 | — | 3,777 | — | — | February 23, 2021 – February 22, 2024 | 53,052 | |||||||||||||||||||||||||
Poong Young Yoon | Officer of Affiliate | March 26, 2020 | Issuance of treasury stock, cash settlement | 5,293 | — | — | — | — | 5,293 | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Poong Young Yoon | Officer of Affiliate | March 25, 2021 | Issuance of treasury stock, cash settlement | 10,203 | — | — | — | — | 10,203 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Sang Kyu Shin | Officer of Affiliate | March 25, 2021 | Issuance of treasury stock, cash settlement | 4,646 | — | — | — | — | 4,646 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Jae Seung Song | Officer of Affiliate | March 25, 2021 | Issuance of treasury stock, cash settlement | 8,047 | — | — | — | — | 8,047 | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Byung Hoon Ryu | Officer of Affiliate | March 25, 2021 | Issuance of treasury stock, cash settlement | 3,796 | — | — | — | — | 3,796 | March 26, 2023 – March 25, 2026 | 50,276 |
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(As of December 31, 2022) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||||||||
Grantee | Relationship | Date of | Method of | Initially Granted | Changes during Reporting Period | Total Changes | Unexercised as of End of Reporting Period | Exercise | Exercise Price | |||||||||||||||||||||||||||
Exercised | Canceled | Exercised | Canceled | |||||||||||||||||||||||||||||||||
Yoon Kim | — | March 26, 2020 | Issuance of treasury stock, cash settlement | 5,690 | — | 5,690 | — | 5,690 | — | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Yoon Kim | — | March 25, 2021 | Issuance of treasury stock, cash settlement | 6,407 | — | 6,407 | — | 6,407 | — | March 26, 2023 – March 25, 2026 | 50,276 | |||||||||||||||||||||||||
Seok Joon Huh | — | March 26, 2020 | Issuance of treasury stock, cash settlement | 5,624 | — | 5,624 | — | 5,624 | — | March 27, 2023 – March 26, 2027 | 38,452 | |||||||||||||||||||||||||
Seok Joon Huh | — | March 25, 2021 | Issuance of treasury stock, cash settlement | 6,863 | — | 6,863 | — | 6,863 | — | March 26, 2023 – March 25, 2026 | 50,276 |
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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
A. | Purchase and Dispositions of Investments |
(As of December 31, 2022) | (Unit: in millions of Won) | |||||||||||||||||||||||
Name (Corporate name) | Relationship | Purchase and Dispositions of Investments | Remarks | |||||||||||||||||||||
Type of Investment | Transaction Details | |||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||
Atlas Investment | Subsidiary | Shares | 155,656 | 3,744 | — | 159,400 | Capital increase | |||||||||||||||||
SAPEON Korea Inc. | Subsidiary | Shares | — | 19,108 | 19,108 | — | New acquisition/ disposal | |||||||||||||||||
SAPEON Inc. | Subsidiary | Shares | — | 48,456 | — | 48,456 | New acquisition | |||||||||||||||||
SK Square (listed) | Subsidiary | Shares | 51,371 | — | 51,371 | — | Disposal | |||||||||||||||||
SK Broadband | Subsidiary | Shares | 2,195,452 | 19,975 | — | 2,215,427 | Merger with Tbroad Nowon |
3. Transactions with the Largest Shareholder and Related Parties
(Unit: in millions of Won) | ||||||||||
Counterparty | Relationship | Type | Transaction Period | Transaction Details | Transaction Amount | |||||
PS&Marketing | Affiliate | Purchase | January 1, 2022 – December 31, 2022 | Marketing fees, etc. | 1,308,656 |
4. Related Party Transactions
See Note 37 of the notes to the Company’s audited 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 December 31, 2022) | (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 | 63,561 | 122,506 | 115,121 | 70,946 | — | — | ||||||||||||||||||||
Daehan Kanggun BCN Inc. | Investee | Long-term loans | 22,147 | — | — | 22,147 | — | — |
B. | Other transactions |
See Note 38 of the notes to the Company’s audited consolidated financial statements attached hereto for more information regarding other related party transactions.
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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
None.
2. Contingent Liabilities
A. | Legal Proceedings |
[SK Telecom]
As of December 31, 2022, 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 December 31, 2022, there were 33 pending lawsuits against SK Broadband (aggregate amount of claims of Won 12,049 million), and provisions in the amount of Won 1,324 million in connection with such lawsuits were recognized.
B. | Other Contingent Liabilities and Guarantees for Payment |
[SK Telecom]
None.
[SK Broadband]
As of December 31, 2022, SK Broadband has entered into revolving credit facilities with a limit of Won 149 billion with three 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.
SK Broadband has provided “geun” mortgage amounting to Won 1,513 million on certain of its buildings, including Gyeyang Guksa, in connection with leasing of such buildings.
SK Broadband has entered into a leased line contract and a resale contract for fixed-line telecommunications services with SK Telecom.
As of December 31, 2022, SK Broadband 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 | Contract and defect performance guarantee | 37,521 | ||||
Korea Content Financial Cooperative | Contract performance guarantee | 39,319 |
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[SK Stoa]
As of December 31, 2022, SK Stoa has been provided with the following material payment guarantees by other parties.
(Unit: in millions of Won) | ||||||
Guarantor | Guarantee Details | Guaranteed Amount | ||||
Kookmin Bank | Performance guarantee | 1,540 | ||||
Kookmin Bank | Revolving credit | 10,000 |
[SK M&Service]
As of December 31, 2022, SK M&Service has entered into the following credit facilities with financial institutions.
(Unit: billions of Won) | ||||
Financial Institution | Credit Limit | Details | ||
KEB Hana Bank | 10 | Working capital loan | ||
Industrial Bank of Korea | 15 | Working capital loan | ||
Shinhan Bank | 1 | Payment guarantee |
As of December 31, 2022, SK M&Service has been provided with the following material payment guarantees by other parties.
(Unit: in millions of Won) | ||||||
Guarantor | Guarantee Details | Guaranteed Amount | ||||
Korea Tourism Organization and 39 other companies | Transaction performance guarantee | 2,913 | ||||
SK Energy | Transaction performance guarantee | 700 |
[SK Telink]
As of December 31, 2022, SK Telink provided the following material payment guarantee to another party.
(Unit: in millions of Won) | ||||||||
Guarantor | Counterparty | Guaranteed Amount | Guarantee Details | |||||
SK Telink | Carrot General Insurance | 50 | Contract guarantee |
As of December 31, 2022, SK Telink 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 | Contract performance guarantee | 1,262 |
[SK Communications]
As of December 31, 2022, SK Communications provided the following material payment guarantee to another party.
(Unit: in millions of Won) | ||||||||
Guarantor | Counterparty | Guaranteed Amount | Guarantee Details | |||||
SK Communications | E-payment purchaser or right holder | 1,100 | Protect funds of users of electronic financial transactions |
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[PS&Marketing]
As of December 31, 2022, PS&Marketing 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 | Performance guarantee | 1,635 |
[Home&Service]
As of December 31, 2022, Home&Service 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 | Payment guarantees and warranties | 5,690 |
[Service Top]
As of December 31, 2022, Service Top 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 | Contract performance guarantee | 15 |
3. Status of Sanctions, etc.
[SK Telecom]
A. | Sanctions by Investigative or Juridical Agencies |
None.
B. | Sanctions by Administrative Agencies |
(1) Sanctions by Financial Supervisory Authorities
None.
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(2) Sanctions by the Korea Fair Trade Commission (the “KFTC”)
Date | Authority | Subject of Action | Sanction | Reason and the Relevant Law | Status of Implementation | Company’s Measures | ||||||
Mar. 18, 2021 | KFTC | SK Telecom | Decision of KFTC Meeting (No. 2021-075) • 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, KFTC 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 (“MRFTA”)) | - Filed an administrative proceeding to challenge the KFTC decision with the Seoul High Court (Apr. 28, 2021) - Ruled against the plaintiff (Nov. 9, 2022) - Appealed to the Supreme Court (Nov. 30, 2022) | Properly allocate sales commissions in accordance with court’s decision; strengthen compliance activities | ||||||
Aug. 25, 2021 | KFTC | SK Telecom | Decision of KFTC Meeting (No. 2021-224) • Correctional order (prohibition order against future actions) | Unfair support to Loen by reducing the payment agent fee for “Melon” service for two years from 2010 to 2011 (Article 23-1(7) of the MRFTA) | - Filed an administrative proceeding and applied for cancelation of execution of the KFTC decision with the Seoul High Court (Sept. 29, 2021) - Ruled against the plaintiff (Nov. 16, 2022) - Appealed to the Supreme Court (Dec. 7, 2022) | Strengthen compliance activities (despite low possibility of recurrence and minimal impact on the Company’s business) |
(3) Sanctions by Tax Authorities
None.
(4) Sanctions by Other Administrative or Public Institutions
Date | Authority | Subject of | Sanction | Reason and the Relevant | Status of | Company’s | ||||||
June 4, 2020 | Korea Communications Commission (“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 Act on the Protection, Use, Etc. of Location Information (“Location Information Act”) and Article 22 of Enforcement Decree) | Decision confirmed; report on implementation of correctional order and payment of fine 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 • Submission of implementation plan and report on implementation of correctional order including recurrence prevention plan • 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 Law | Status of Implementation | Company’s Measures | ||||||
Sept. 9, 2020 | KCC | SK Telecom | Decision of 49th KCC Meeting of 2020 • Correctional order • Submission of implementation plan and report on implementation of correctional order • 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 fine 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 | ||||||
Dec. 29, 2021 | KCC | SK Telecom | Decision of 59th KCC Meeting of 2021 • Announcement of correctional order • Establishment and submission of recurrence prevention plan • Fine of Won 1,490 million | Excessive financial support other than the disclosed subsidy for the sales of mobile terminal devices and discriminatory payment and payment inducement based on subscription type and rate plan (Articles 3-1, 4-5 and 15-2 of the MDDIA) | Decision confirmed; payment of fine completed and implementation plan submitted | Implement measures to prevent recurrence and establish a transparent incentive system for agents and distributors | ||||||
June 15, 2022 | KCC | SK Telecom | Decision of 29th KCC Meeting of 2022 • Announcement of correctional order • Improvement of operating procedures including fixed-line and wireless gift management system • Establishment and submission of recurrence prevention plan • Fine of Won 63.2 million | Unreasonably discriminatory practice based on subscription type and rate plan in providing gifts with values that are over or below 15% of the applicable limit in the Company’s sales of Internet-bundled plans (Article 50 of the Telecommunications Business Act, Article 42-1 of Enforcement Decree and Article 4 of Standards for Unfair User Discrimination in Providing Economic Benefits) | Decision confirmed; implementation plan (to be submitted by July 14) and payment of fine (to be paid by July 20) in process; scheduling of public announcement date (in late July) in progress | Immediately ceased such activities; improved fixed-line and wireless network gift registration system and service application process |
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[SK BROADBAND]
A. Sanctions by Investigative or Juridical Agencies
None.
B. Sanctions by Administrative Agencies
(1) Sanctions by Financial Supervisory Authorities
None.
(2) Sanctions by the KFTC
Date | Authority | Subject of Action | Sanction | Amount of Monetary Sanction | Reason and the Relevant | Status of Implementation | Company’s Measures | |||||||
Jan. 13, 2020 | KFTC | SK Broadband | 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) | — | Correctional order to prevent the post-merger entity from engaging in activities that may restrict competition in the pay TV market (Articles 7-1 and 16-1 of the MRFTA) | Submitted the implementation plan (approved by KFTC) | Implement the implementation plan | |||||||
Oct. 22, 2020 | KFTC | SK Broadband, Broadband Nowon | Correctional order (injunction and notice order); fine of Won 351 million | Won 351 million | 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) (Article 23-1(4) of the MRFTA and Articles 7-1 and 9-1 of the Fair Agency Transactions Act) | Filed an administrative proceeding | Improve work procedures to prevent errors in the future | |||||||
Mar. 29, 2021 | KFTC | SK Broadband | Correctional order and fine of Won 3.198 billion | Won 3.198 billion | Although SK Telecom and SK Broadband believe that they allocated sales commissions for sales of IPTV-bundled plans based on reasonable standard, KFTC 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 MRFTA) | On Apr. 28, 2021, SK Telecom filed an administrative proceeding and applied for suspension of execution of the KFTC decision (service of process delivered on Mar. 30, 2021) | To properly allocate sales commissions in accordance with court’s decision; strengthen compliance activities |
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(3) Sanctions by Tax Authorities
Date | Authority | Subject of Action | Sanction | Amount of Monetary Sanction | Reason and the Relevant | Status of Implementation | Company’s Measures | |||||||
Feb. 17, 2021 | Seoul Regional Tax Office | SK Broadband | Fine | Won 596 million | Violation of tax bill collection obligation (Article 10 (1-4) and Article 18 of the Punishment of Tax Offenses Act) | Paid the fine | Provide measures against collusion and prevent further recurrences |
(4) Sanctions by Other Administrative or Public Institutions
Date | Authority | Subject of Action | Sanction | Amount of Monetary Sanction | Reason and the Relevant | Status of Implementation | Company’s Measures | |||||||
Jan. 15, 2020 | MSIT | SK Broadband | Correctional order (resubmission of the business report for FY2018 to MSIT with mandated revisions); fine of Won 79 million | Won 79 million | Error in the assets/profits/costs categories of the telecommunications business report for FY2018, the submission of which is mandated by the Telecommunication Account Settlement and Reporting Regulations and Telecommunications Business Accounting Separation Criteria (Article 49 of the Telecommunications Business Act) | Submitted the revised business report for FY2018 (Feb. 3, 2020); Paid the fine (Feb. 7, 2020) | Improve business procedures to prevent errors | |||||||
Jan. 16, 2020 | MSIT | Tbroad | Correctional order (resubmission of the business report for FY2018 to MSIT with mandated revisions); Fine of Won 13 million | Won 13 million | Error in the assets/profits/costs categories of the telecommunications business report for FY2018, the submission of which is mandated by the Telecommunication Account Settlement and Reporting Regulations and Telecommunications Business Accounting Separation Criteria (Article 49 of the Telecommunications Business Act) | Submitted the revised business report for FY2018 (Jan. 3, 2020); paid the fine (Feb. 10, 2020) | Improve business procedures to prevent errors |
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Date | Authority | Subject of Action | Sanction | Amount of Monetary Sanction | Reason and the Relevant | Status of Implementation | Company’s Measures | |||||||
May 1, 2020 | Central Radio Management Service | 3 affiliated system operators of Tbroad | Fine of Won 6 million | Won 6 million (Won 2 million each for Namdong Broadcast, Saerom Broadcast and Seohai Broadcast) | Failed to submit monthly broadcasting results (Article 83 of the Broadcasting Act, Article 16 of the Act on Regulation of Violations of Public Order) | Paid the fine | — | |||||||
Sept. 9, 2020 | KCC | SK Broadband | Correctional order (improvement of relevant business practice); Fine of Won 251 million | Won 251 million | False, exaggerated or deceptive advertising that could potentially mislead users regarding key information about bundled products, such as component products, discount details and penalties, to induce subscription (Article 50-1(5) of the Telecommunications Business Act, Article 42-1-Table 4-5-f of its Enforcement Decree and Article 3-1-d of Bundling Sales Prohibition Standards) | Plan to comply with the correctional order | Improvement of business practice; fine payment | |||||||
Dec. 11, 2020 | Central Radio Management Service | 13 affiliated system operators of SK Broadband | Correctional order | — | Failure to distribute PP program fees, which was a condition for reauthorization (Article 99-1 of the Broadcasting Act) | — | Compliance with the correctional order | |||||||
Dec. 21, 2020 | MSIT | SK Broadband | Correctional order (resubmission of the business report for FY2019 to MSIT with mandated revisions); Fine of Won 101 million | Won 101 million | Error in the assets/profits/costs categories of the telecommunications business report for FY2019, the submission of which is mandated by the Telecommunication Account Settlement and Reporting Regulations and Telecommunications Business Accounting Separation Criteria (Article 49 of the Telecommunications Business Act) | Submitted the revised business report for FY2019 (Jan. 15, 2021); paid the fine (Jan. 25, 2021) | Improve business procedures to prevent errors |
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Date | Authority | Subject of Action | Sanction | Amount of Monetary Sanction | Reason and the Relevant | Status of Implementation | Company’s Measures | |||||||
Dec. 21, 2020 | MSIT | Tbroad | Correctional order (resubmission of the business report for FY2019 to MSIT with mandated revisions); Fine of Won 11 million | Won 11 million | Error in the assets/profits/costs categories of the telecommunications business report for FY2019, the submission of which is mandated by the Telecommunication Account Settlement and Reporting Regulations and Telecommunications Business Accounting Separation Criteria (Article 49 of the Telecommunications Business Act) | Submitted revised business report for FY2019 (Jan. 15, 2021); Paid the fine (Jan. 25, 2021) | Improve business procedures to prevent errors | |||||||
Feb. 16, 2021 | Central Radio Management Service | SK Broadband Sejong Broadcast | Fine | Won 2.8 million | Violated regulations on displaying sponsorship notice on public service advertisements (SK Broadband Sejong Broadcast) (Article 16 of the Act on Regulation of Violations of Public Order) | Paid the fine | — | |||||||
Apr. 20, 2021 | Central Radio Management Service | SK Broadband | Fine (Won 10 million) | Won 4 million | Illegally modified numbers were introduced during an illegal calling number modification blocking test for public and financial institutions as part of an inspection in 2020 (Failed to meet the requirements for appropriate technical measures to prevent harm to users) (Article 84-2 of the Telecommunications Business Act) | Paid the reduced amount of the fine (Won 4 million) | Analysis of the causes for the malfunctioning of the number theft blocking system and improvement of the system | |||||||
June 8, 2021 | Communication office of the KCC | SK Broadband | Fine (Won 3 million) | Won 3 million | Violated the Act on the Restriction of Transmission of Advertising Information for Commercial Purposes by requiring date of birth information from customers in order to stop receiving text message advertisements (Article 50(4) of the Information and Communications Network Act and Article 61(3) of its Enforcement Decree) | Paid the fine (July 6, 2021) | Improved the system so that users will no longer be asked to enter date of birth in order to stop receiving text message advertisements (Feb. 2021) |
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Date | Authority | Subject of Action | Sanction | Amount of Monetary Sanction | Reason and the Relevant | Status of Implementation | Company’s Measures | |||||||
Aug. 10, 2021 | KCC | SK Broadband | Correctional order (improvement of business practice) | — | Failure to explain or notify users that its high-speed Internet service was initiated without measuring the speed or without meeting the minimum guaranteed speed (Article 50 of the Telecommunications Business Act) | Submitted the correctional order implementation plan | Compliance with the correctional order | |||||||
Oct. 19, 2021 | KCC; Communication office of the KCC | SK Broadband | Fine (Won 8 million) | Fine (Won 8 million) | Insufficient implementation of necessary measures for addressing service vulnerabilities and insufficient follow-up response to reports of spam messages, including insufficient implementation of sanctions against companies that engage in mass texting of spam messages (Act on Promotion of Information and Communications Network Utilization and Information and Article 50-4(4) of the Broadcasting Act) | Paid the fine (November 10, 2021) | Improvement of the measures for addressing service vulnerabilities | |||||||
Dec. 14, 2021 | Central Radio Management Service | 9 affiliated system operators of SK Broadband | Correctional order | — | Failure to execute the local channel investment plan (Article 99-1 of the Broadcasting Act) | Submitted the correctional order implementation plan | Compliance with the correctional order | |||||||
Dec. 30, 2021 | MSIT | SK Broadband | Correctional order (resubmi-ssion of the business report for FY2020 to MSIT with mandated revisions); Fine of Won 50 million | Won 50 million | Error in the assets/profits/costs categories of the telecommunications business report for FY2020, the submission of which is mandated by the Telecommunication Account Settlement and Reporting Regulations and Telecommunications Business Accounting Separation Criteria (Article 49 of the Telecommunications Business Act) | Submitted the revised business report for FY2020 (Jan. 14, 2022); paid the fine (Jan. 24, 2022) | Improve business procedures to prevent errors |
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Date | Authority | Subject of Action | Sanction | Amount of Monetary Sanction | Reason and the Relevant | Status of Implementation | Company’s Measures | |||||||
Dec. 30, 2021 | MSIT | Tbroad | Correctional order (resubmission of the business report for FY2020 to MSIT with mandated revisions); Fine of Won 500 million | Won 5 million | Error in the assets/profits/costs categories of the telecommunications business report for FY2020, the submission of which is mandated by the Telecommunication Account Settlement and Reporting Regulations and Telecommunications Business Accounting Separation Criteria (Article 49 of the Telecommunications Business Act) | Submitted the revised business report for FY2020 (Jan. 14, 2022); paid the fine (Jan. 24, 2022) | Improve business procedures to prevent errors | |||||||
June 30, 2022 | KCC | SK Broadband | Correctional order; Fine of Won 1.093 billion | Won 1.093 billion | Discriminatory practice in providing gifts to the Company’s users as part of its telecommunication bundle products; Article 50-1 of the Telecommunications Business Act and Article 42-1 of Enforcement Decree | Submitted implementation plan; paid the fine (July 19) | Improve procedures; public announcement of correctional order | |||||||
Dec. 20, 2022 | MSIT | SK Broadband | Correctional order (resubmission of the business report for FY2021 to MSIT with mandated revisions); Fine of Won 97 million | Won 97 million | Error in the assets/profits/costs categories of the telecommunications business report for FY2021, the submission of which is mandated by the Telecommunication Account Settlement and Reporting Regulations and Telecommunications Business Accounting Separation Criteria (Article 49 of the Telecommunications Business Act) | Submitted the revised business report for FY2021 (Jan. 3, 2023); paid the fine (Jan. 10, 2023) | Improve business procedures to prevent errors |
4. Material Events Subsequent to the Reporting Period
(1) On February 7, 2023, the Board of Directors approved the disposal of treasury shares as follows:
Classification | Content | |
Kind and amount of shares | 324,580 common shares | |
Price of shares to be disposed | Won 46,250 per share | |
Estimated price of shares to be disposed | Won 15,012 million | |
Estimated date of disposal | February 9, 2023 ~ February 28, 2023 | |
Purpose of disposal | Payment of bonus with treasury shares | |
Method of disposal | Over-the-counter disposal |
(2) On February 7, 2023, the Board of Directors approved the annual dividend for 2022 as follows:
Classification | Content | |
Interim dividend amount | Cash dividend of Won 830 per share (Total: Won 180,967 million) | |
Dividend return rate (based on market price) | 1.7% | |
Dividend record date | December 31, 2022 | |
Dividend payment date | In accordance with Article 464-2 of the Commercial Code, within one month from the shareholder meeting |
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(3) On February 23, 2023, the Board of Directors approved the disposal of treasury shares as follows:
Classification | Content | |
Kind and amount of shares | 109,508 common shares | |
Price of shares to be disposed | Won 45,100 per share | |
Estimated price of shares to be disposed | Won 4,939 million | |
Estimated date of disposal | February 27, 2023 ~ March 26, 2023 | |
Purpose of disposal | Payment of bonus with treasury shares | |
Method of disposal | Over-the-counter disposal |
(4) On March 2, 2023, SK Broadband issued Series 53-1, 53-2 and 53-3 bearer-type unsecured bonds. The details of such issuance are as follows:
Issuing | Securities | Issue | Issue Date | Principal | Interest | Rating | Maturity | Repayment | Supervising | |||||||||
SK Broadband | Corporate bond | Public offering | March 2, 2023 | 50,000 | 4.206% | AA (Korea Ratings, Korea Investors Service, Inc., NICE Investors Service, Co., Ltd.) | February 28, 2025 | Not yet repaid | SK Securities, Mirae Asset Securities | |||||||||
SK Broadband | Corporate bond | Public offering | March 2, 2023 | 100,000 | 4.284% | AA (Korea Ratings, Korea Investors Service, Inc., NICE Investors Service, Co., Ltd.) | February 27, 2026 | Not yet repaid | SK Securities, Mirae Asset Securities | |||||||||
SK Broadband | Corporate bond | Public offering | March 2, 2023 | 90,000 | 4.371% | AA (Korea Ratings, Korea Investors Service, Inc., NICE Investors Service, Co., Ltd.) | March 2, 2028 | Not yet repaid | SK Securities, Mirae Asset Securities | |||||||||
Total | — | — | — | 240,000 | — | — | — | — | — |
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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/ Heejun Chung | |
(Signature) | ||
Name: | Heejun Chung | |
Title: | Senior Vice President |
Date: April 18, 2023
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SK TELECOM CO., LTD. AND SUBSIDIARIES
Consolidated Financial Statements
For the Year ended December 31, 2022
(With Independent Auditors’ Report Thereon)
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Ernst and Young Han Young Taeyoung Building, 111, Yeouigongwon-ro, Yeongdeungpo-gu, Seoul 07241 Korea
Tel: +82237876600 Fax: +8227835890 ey.com/kr |
(English Translation of a Report Originally Issued in Korean)
The Shareholders and Board of Directors
SK Telecom Co., Ltd.
Opinion
We have audited the accompanying consolidated financial statements of SK Telecom Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) which comprise the consolidated statement of financial position as of December 31, 2022, and the consolidated statement of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2022, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”).
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing (“KSA”). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
1. | Cut-off of revenue from cellular services. |
As described in notes 3 (23) and 4 (2) to the consolidated financial statements, the Group’s revenue from the cellular services is recognized based on data from a complex array of information technology systems which process a significant volume of transactions with its customers. Furthermore, the transactions involve a variety of contractual terms from new subscriptions to deactivations or churn, and changes of rate plans during the period. Therefore, we have identified timing of revenue recognition related to the Group’s cellular services as a key audit matter. Related revenue from the cellular services amounted toW10,253,217 million in 2022.
The primary procedures we performed to address this key audit matter included:
• | Inspecting major contracts with subscribers to assess whether the Group’s revenue recognition policies based on the terms and conditions as set out in the contracts, are consistent with reference to the requirements of KIFRS No. 1115; |
• | Testing internal controls relating to the timing of revenue recognition for the cellular services; and |
• | Evaluating the appropriateness of the timing of revenue recognition by recalculating the prorated revenue based on the subscribed rate plan and comparing it with the billing information. |
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2. | Impairment assessment of goodwill for the fixed-line telecommunication services cash generating unit |
As described in notes 3 (12) and 16 to the consolidated financial statements, the Group assesses impairment of goodwill allocated to a cash generating unit (“CGU”), at least, annually or when there is an indication of possible impairment by comparing the carrying amount of the CGU to its recoverable amount based on value-in-use (“VIU”). The amount of goodwill allocated to the fixed-line telecommunication services CGU isW764,082 million as of December 31, 2022.
In carrying out the goodwill impairment assessment, the Group compared the carrying amount of the fixed-line telecommunication services CGU and its value in use (“VIU”) based on discounted cash flow forecasts. We have identified the goodwill impairment assessment for the fixed-line telecommunication services CGU as a key audit matter due to the inherent uncertainties and significant judgement involved in management’s estimates around the major assumptions such as estimates of future operating revenue, perpetual growth rate and discount rate, all of which have a significant impact on the determination of the VIU.
The primary audit procedures we have performed for this key audit matter include:
• | Assessing the competence and objectivity of the external specialist utilized by management; |
• | Evaluating the appropriateness of the valuation method and assumptions applied by management by involving our internal specialist; |
• | Performing a sensitivity analysis for both the discount rate and the perpetual growth rate applied to the discounted cash flow forecasts to assess the impact of changes in these key assumptions on the conclusion reached by management in its impairment assessment; |
• | Evaluating the reasonableness of management’s future cash flow forecasts by comparison with financial budgets approved by management; and |
• | Performing a retroactive assessment of the prior periods’ cash flow forecasts by comparison with the actual results. |
Other Matter
The consolidated statement of financial position as of December 31, 2021, and the related consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended which have been audited by KPMG Samjong Accounting Corp., in accordance with KSA, whose report dated March 10, 2022 expressed an unqualified opinion. The accompanying consolidated statement of financial position as of December 31, 2021 presented for comparative purposes, is not different, in all material respects, from the above audited consolidated statement of financial position.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with KIFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
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Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with KSA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
• | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
• | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors’ report is Yoo, Jung Ho.
March 10, 2023
This report is effective as of March 10, 2023, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of independent auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to this report.
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SK TELECOM CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
The accompanying consolidated financial statements, including all footnote disclosures, have been prepared by, and are the responsibility of, the Group.
Ryu, Young-Sang
Chief Executive Officer
SK TELECOM CO., LTD.
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SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 2022 and 2021
(In millions of won) | Note | December 31, 2022 | December 31, 2021 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 5,35,36 | 872,731 | ||||||||||
Short-term financial instruments | 5,35,36 | 237,230 | 508,677 | |||||||||
Short-term investment securities | 10,35,36 | — | 5,010 | |||||||||
Accounts receivable – trade, net | 6,35,36,37 | 1,970,611 | 1,913,511 | |||||||||
Short-term loans, net | 6,35,36,37 | 78,590 | 70,817 | |||||||||
Accounts receivable – other, net | 6,35,36,37,38 | 479,781 | 548,362 | |||||||||
Contract assets | 8,36 | 83,058 | 76,698 | |||||||||
Prepaid expenses | 7 | 1,974,315 | 1,987,503 | |||||||||
Prepaid income taxes | 32 | 415 | 77 | |||||||||
Derivative financial assets | 22,35,36,39 | 168,527 | 30,110 | |||||||||
Inventories, net | 9 | 166,355 | 204,637 | |||||||||
Non-current assets held for sale | 41 | 6,377 | 8,734 | |||||||||
Advanced payments and others | 6,35,36 | 171,646 | 125,798 | |||||||||
|
|
|
| |||||||||
7,219,196 | 6,352,665 | |||||||||||
|
|
|
| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 5,35,36 | 375 | 375 | |||||||||
Long-term investment securities | 10,35,36 | 1,410,736 | 1,715,078 | |||||||||
Investments in associates and joint ventures | 12 | 1,889,289 | 2,197,351 | |||||||||
Investment property, net | 14 | 25,137 | 23,034 | |||||||||
Property and equipment, net | 13,15,37,38 | 13,322,492 | 12,871,259 | |||||||||
Goodwill | 11,16 | 2,075,009 | 2,072,493 | |||||||||
Intangible assets, net | 17 | 3,324,910 | 3,869,769 | |||||||||
Long-term contract assets | 8,36 | 49,163 | 41,580 | |||||||||
Long-term loans, net | 6,35,36,37 | 26,973 | 21,979 | |||||||||
Long-term accounts receivable – other | 6,35,36,37,38 | 373,951 | 275,238 | |||||||||
Long-term prepaid expenses | 7 | 1,073,422 | 1,069,148 | |||||||||
Guarantee deposits | 6,35,36,37 | 167,441 | 186,713 | |||||||||
Long-term derivative financial assets | 22,35,36,39 | 152,633 | 187,484 | |||||||||
Deferred tax assets | 32 | 6,860 | 128 | |||||||||
Defined benefit assets | 21 | �� | 175,748 | 18,427 | ||||||||
Other non-current assets | 6,35,36 | 14,927 | 8,556 | |||||||||
|
|
|
| |||||||||
24,089,066 | 24,558,612 | |||||||||||
|
|
|
| |||||||||
Total Assets | 30,911,277 | |||||||||||
|
|
|
|
(Continued)
1
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Financial Position, Continued
As of December 31, 2022 and 2021
(In millions of won) | Note | December 31, 2022 | December 31, 2021 | |||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable – trade | 35,36,37 | 190,559 | ||||||||||
Accounts payable – other | 35,36,37 | 2,427,906 | 2,071,870 | |||||||||
Withholdings | 35,36,37 | 803,555 | 790,489 | |||||||||
Contract liabilities | 8 | 172,348 | 166,436 | |||||||||
Accrued expenses | 26,35,36 | 1,505,549 | 1,295,404 | |||||||||
Income tax payable | 32 | 112,358 | 192,221 | |||||||||
Derivative financial liabilities | 22,35,36,39 | — | 52 | |||||||||
Provisions | 20,40 | 39,683 | 61,656 | |||||||||
Short-term borrowings | 18,35,36,39 | 142,998 | 12,998 | |||||||||
Current portion of long-term debt, net | 18,35,36,39 | 1,967,586 | 1,430,324 | |||||||||
Current portion of long-term payables – other | 19,35,36,39 | 398,874 | 398,823 | |||||||||
Lease liabilities | 35,36,37,39 | 386,429 | 349,568 | |||||||||
Other current liabilities | — | 35 | ||||||||||
|
|
|
| |||||||||
8,046,541 | 6,960,435 | |||||||||||
|
|
|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 18,35,36,39 | 6,524,095 | 7,037,424 | |||||||||
Long-term borrowings, excluding current installments, net | 18,35,36,39 | 668,125 | 353,122 | |||||||||
Long-term payables – other | 19,35,36,39 | 1,239,467 | 1,611,010 | |||||||||
Long-term lease liabilities | 35,36,37,39 | 1,395,628 | 1,184,714 | |||||||||
Long-term contract liabilities | 8 | 61,574 | 36,531 | |||||||||
Defined benefit liabilities | 21 | 61 | 13,157 | |||||||||
Long-term derivative financial liabilities | 22,35,36,39 | 302,593 | 321,084 | |||||||||
Long-term provisions | 20 | 79,415 | 65,339 | |||||||||
Deferred tax liabilities | 32 | 763,766 | 941,301 | |||||||||
Other non-current liabilities | 35,36,37 | 71,801 | 52,022 | |||||||||
|
|
|
| |||||||||
11,106,525 | 11,615,704 | |||||||||||
|
|
|
| |||||||||
Total Liabilities | 19,153,066 | 18,576,139 | ||||||||||
|
|
|
| |||||||||
Shareholders’ Equity: | ||||||||||||
Share capital | 1,23 | 30,493 | 30,493 | |||||||||
Capital surplus and others | 11,23,24,25,26 | (11,567,117 | ) | (11,623,726 | ) | |||||||
Retained earnings | 27 | 22,463,711 | 22,437,341 | |||||||||
Reserves | 28 | 391,233 | 735,238 | |||||||||
Equity attributable to owners of the Parent Company | 11,318,320 | 11,579,346 | ||||||||||
Non-controlling interests | 836,876 | 755,792 | ||||||||||
|
|
|
| |||||||||
Total Shareholder’s Equity |
| 12,155,196 | 12,335,138 | |||||||||
|
|
|
| |||||||||
Total Liabilities and Shareholder’s Equity | 30,911,277 | |||||||||||
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statement.
2
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Continuing operations | ||||||||||||
Operating revenue: | 4,37 | |||||||||||
Revenue | 16,748,585 | |||||||||||
|
|
|
| |||||||||
Operating expenses: | 37 | |||||||||||
Labor | 2,449,813 | 2,300,754 | ||||||||||
Commissions | 7 | 5,518,786 | 5,426,114 | |||||||||
Depreciation and amortization | 4 | 3,621,325 | 3,672,555 | |||||||||
Network interconnection | 715,285 | 749,599 | ||||||||||
Leased lines | 268,426 | 310,141 | ||||||||||
Advertising | 252,402 | 233,401 | ||||||||||
Rent | 143,747 | 140,418 | ||||||||||
Cost of goods sold | 9 | 1,268,124 | 1,167,417 | |||||||||
Others | 29 | 1,454,995 | 1,361,024 | |||||||||
|
|
|
| |||||||||
15,692,903 | 15,361,423 | |||||||||||
|
|
|
| |||||||||
Operating profit | 4 | 1,612,070 | 1,387,162 | |||||||||
Finance income | 4,31 | 179,838 | 155,133 | |||||||||
Finance costs | 4,31 | (456,327 | ) | (315,604 | ) | |||||||
Gain (loss) relating to investments in subsidiaries, associates and joint ventures, net | 4,12 | (81,707 | ) | 446,300 | ||||||||
Other non-operating income | 4,30 | 55,898 | 114,553 | |||||||||
Other non-operating expenses | 4,30 | (73,620 | ) | (69,353 | ) | |||||||
|
|
|
| |||||||||
Profit before income tax | 4 | 1,236,152 | 1,718,191 | |||||||||
Income tax expense | 32 | 288,321 | 446,796 | |||||||||
|
|
|
| |||||||||
Profit from continuing operations | 947,831 | 1,271,395 | ||||||||||
Profit from discontinued operations, net of taxes | 42 | — | 1,147,594 | |||||||||
|
|
|
| |||||||||
Profit for the year | 2,418,989 | |||||||||||
|
|
|
| |||||||||
Attributable to: | ||||||||||||
Owners of the Parent Company | 2,407,523 | |||||||||||
Non-controlling interests | 35,431 | 11,466 | ||||||||||
Earnings per share | 33 | |||||||||||
Basic earnings per share (in won) | 7,191 | |||||||||||
Basic earnings per share - continuing operations (in won) | 4,118 | 3,614 | ||||||||||
Diluted earnings per share (in won) | 4,116 | 7,187 | ||||||||||
Diluted earnings per share - continuing operations (in won) | 4,116 | 3,613 |
The accompanying notes are an integral part of the consolidated financial statement.
3
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Profit for the year | 2,418,989 | |||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit liabilities(asset) | 21 | 70,885 | 16,374 | |||||||||
Net change in other comprehensive income of investments in associates and joint ventures | 12,28 | — | 4,796 | |||||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income | 28,31 | (491,853 | ) | 920,871 | ||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||
Net change in other comprehensive income (loss) of investments in associates and joint ventures | 12,28 | 119,707 | 356,503 | |||||||||
Net change in unrealized fair value of derivatives | 22,28,31 | (21,366 | ) | 16,133 | ||||||||
Foreign currency translation differences for foreign operations | 28 | 16,401 | 47,515 | |||||||||
|
|
|
| |||||||||
Other comprehensive income (loss) for the year, net of taxes | (306,226 | ) | 1,362,192 | |||||||||
|
|
|
| |||||||||
Total comprehensive income | 3,781,181 | |||||||||||
|
|
|
| |||||||||
Total comprehensive income attributable to: | ||||||||||||
Owners of the Parent Company | 3,473,445 | |||||||||||
Non-controlling interests | 40,412 | 307,736 |
The accompanying notes are an integral part of the consolidated financial statement.
4
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2022 and 2021
(In millions of won) | ||||||||||||||||||||||||||||||||
Controlling interests | ||||||||||||||||||||||||||||||||
Note | Share capital | Capital surplus (deficit) and others | Retained earnings | Reserves | Sub-total | Non-controlling interests | Total equity | |||||||||||||||||||||||||
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 year | — | — | 2,407,523 | — | 2,407,523 | 11,466 | 2,418,989 | |||||||||||||||||||||||||
Other comprehensive income | 12,21,22,28,31 | — | — | 26,371 | 1,039,551 | 1,065,922 | 296,270 | 1,362,192 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | — | 2,433,894 | 1,039,551 | 3,473,445 | 307,736 | 3,781,181 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | 34 | — | — | (641,944 | ) | — | (641,944 | ) | (25,771 | ) | (667,715 | ) | ||||||||||||||||||||
Interim dividends | 34 | — | — | (355,804 | ) | — | (355,804 | ) | — | (355,804 | ) | |||||||||||||||||||||
Share option | 26 | — | 75,498 | — | — | 75,498 | 12,124 | 87,622 | ||||||||||||||||||||||||
Interest on hybrid bonds | 25 | — | — | (14,766 | ) | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||
Acquisition of treasury shares | 24 | — | (76,111 | ) | — | — | (76,111 | ) | — | (76,111 | ) | |||||||||||||||||||||
Disposal of treasury shares | 24 | — | 57,017 | — | — | 57,017 | — | 57,017 | ||||||||||||||||||||||||
Retirement of treasury shares | 24 | — | 1,965,952 | (1,965,952 | ) | — | — | — | — | |||||||||||||||||||||||
Changes from spin-off | 42 | (14,146 | ) | (14,460,588 | ) | — | (344,452 | ) | (14,819,186 | ) | (186,211 | ) | (15,005,397 | ) | ||||||||||||||||||
Changes in ownership in subsidiaries | 11 | — | 137,303 | — | — | 137,303 | (4,435 | ) | 132,868 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(14,146 | ) | (12,300,929 | ) | (2,978,466 | ) | (344,452 | ) | (15,637,993 | ) | (204,293 | ) | (15,842,286 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance, December 31, 2021 | (11,623,726 | ) | 22,437,341 | 735,238 | 11,579,346 | 755,792 | 12,335,138 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance, January 1, 2022 | (11,623,726 | ) | 22,437,341 | 735,238 | 11,579,346 | 755,792 | 12,335,138 | |||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | 912,400 | — | 912,400 | 35,431 | 947,831 | |||||||||||||||||||||||||
Other comprehensive income (loss) | 12,21,22,28,31 | — | — | 32,798 | (344,005 | ) | (311,207 | ) | 4,981 | (306,226 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | — | 945,198 | (344,005 | ) | 601,193 | 40,412 | 641,605 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | 34 | — | — | (361,186 | ) | — | (361,186 | ) | — | (361,186 | ) | |||||||||||||||||||||
Interim dividends | 34 | — | — | (542,876 | ) | — | (542,876 | ) | — | (542,876 | ) | |||||||||||||||||||||
Share option | 26 | — | 72,261 | — | — | 72,261 | — | 72,261 | ||||||||||||||||||||||||
Interest on hybrid bonds | 25 | — | — | (14,766 | ) | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||
Transactions of treasury shares | 24 | — | (2,683 | ) | — | — | (2,683 | ) | — | (2,683 | ) | |||||||||||||||||||||
Changes in ownership in subsidiaries | 11 | — | (12,969 | ) | — | — | (12,969 | ) | 40,672 | 27,703 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | 56,609 | (918,828 | ) | — | (862,219 | ) | 40,672 | (821,547 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance, December 31, 2022 | (11,567,117 | ) | 22,463,711 | 391,233 | 11,318,320 | 836,876 | 12,155,196 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statement.
5
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the year | 2,418,989 | |||||||||||
Adjustments for income and expenses | 39 | 4,719,438 | 3,473,779 | |||||||||
Changes in assets and liabilities related to operating activities | 39 | 118,106 | (568,695 | ) | ||||||||
|
|
|
| |||||||||
5,785,375 | 5,324,073 | |||||||||||
Interest received | 52,163 | 37,403 | ||||||||||
Dividends received | 16,388 | 327,906 | ||||||||||
Interest paid | (259,719 | ) | (306,634 | ) | ||||||||
Income tax paid | (434,890 | ) | (351,469 | ) | ||||||||
|
|
|
| |||||||||
Net cash provided by operating activities | 5,159,317 | 5,031,279 | ||||||||||
|
|
|
| |||||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | 264,693 | 162,565 | ||||||||||
Decrease in short-term investment securities, net | 5,010 | 32,544 | ||||||||||
Collection of short-term loans | 123,700 | 137,196 | ||||||||||
Decrease in long-term financial instruments | 330,032 | 343 | ||||||||||
Proceeds from disposals of long-term investment securities | 104,190 | 78,261 | ||||||||||
Proceeds from disposals of investments in associates and joint ventures | 342,645 | 100,634 | ||||||||||
Proceeds from disposals of non-current assets held for sale | 20,136 | — | ||||||||||
Proceeds from disposals of property and equipment | 15,792 | 61,425 | ||||||||||
Proceeds from disposals of intangible assets | 10,993 | 14,618 | ||||||||||
Collection of long-term loans | 1,134 | 4,166 | ||||||||||
Decrease in deposits | 10,056 | 6,941 | ||||||||||
Proceeds from settlement of derivatives | 1,542 | 1,495 | ||||||||||
|
|
|
| |||||||||
1,229,923 | 600,188 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term loans | (127,263 | ) | (100,209 | ) | ||||||||
Increase in long-term loans | (11,724 | ) | (9,877 | ) | ||||||||
Increase in long-term financial instruments | (330,032 | ) | (21 | ) | ||||||||
Acquisitions of long-term investment securities | (436,753 | ) | (286,566 | ) | ||||||||
Acquisitions of investments in associates and joint ventures | (11,065 | ) | (222,765 | ) | ||||||||
Acquisitions of property and equipment | (2,908,287 | ) | (2,915,851 | ) | ||||||||
Acquisitions of intangible assets | (138,136 | ) | (392,588 | ) | ||||||||
Increase in deposits | (12,146 | ) | (51,274 | ) | ||||||||
Cash outflow for business combinations, net | (62,312 | ) | (107,226 | ) | ||||||||
|
|
|
| |||||||||
(4,037,718 | ) | (4,086,377 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in investing activities | (3,486,189 | ) | ||||||||||
|
|
|
|
(Continued)
6
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Cash Flows, Continued
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Cash flows from financing activities: |
| |||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from short-term borrowings, net | — | |||||||||||
Proceeds from issuance of debentures | 1,200,122 | 873,245 | ||||||||||
Proceeds from long-term borrowings | 440,000 | 350,000 | ||||||||||
Increase in financial liabilities at FVTPL | — | 129,123 | ||||||||||
Cash inflows from settlement of derivatives | 768 | 332 | ||||||||||
Transactions with non-controlling shareholders | 31,151 | 444,124 | ||||||||||
|
| |||||||||||
|
| |||||||||||
1,802,041 | 1,796,824 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of short-term borrowings, net | — | (50,823 | ) | |||||||||
Repayments of long-term payables – other | (400,245 | ) | (426,267 | ) | ||||||||
Repayments of debentures | (1,390,000 | ) | (890,000 | ) | ||||||||
Repayments of long-term borrowings | (41,471 | ) | (286,868 | ) | ||||||||
Payments of dividends | (904,020 | ) | (1,028,520 | ) | ||||||||
Payments of interest on hybrid bonds | (14,766 | ) | (14,766 | ) | ||||||||
Repayments of lease liabilities | (401,054 | ) | (431,674 | ) | ||||||||
Acquisition of treasury shares | — | (76,111 | ) | |||||||||
Cash outflows resulting from spin-off | — | (626,000 | ) | |||||||||
Transactions with non-controlling shareholders | (367 | ) | (19,406 | ) | ||||||||
|
|
|
| |||||||||
(3,151,923 | ) | (3,850,435 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in financing activities | 39 | (1,349,882 | ) | (2,053,611 | ) | |||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents | 1,001,640 | (508,521 | ) | |||||||||
Cash and cash equivalents at beginning of the year | 872,731 | 1,369,653 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | 7,920 | 11,599 | ||||||||||
|
|
|
| |||||||||
Cash and cash equivalents at end of the year | 872,731 | |||||||||||
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statement.
7
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity |
(1) | General |
SK Telecom Co., Ltd. (the “Parent Company”) was incorporated in March 29, 1984, under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication 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 are listed on the Stock Market of Korea Exchange, and it’s depositary receipts (DRs) are listed on the New York Stock Exchange and the London Stock Exchange. As of December 31, 2022, the Parent Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Inc. | 65,668,397 | 30.01 | ||||||
National Pension Service | 16,846,066 | 7.69 | ||||||
Institutional investors and other shareholders | 131,671,103 | 60.17 | ||||||
Kakao Investment Co., Ltd. | 3,846,487 | 1.76 | ||||||
Treasury shares | 801,091 | 0.37 | ||||||
|
|
|
| |||||
218,833,144 | 100.00 | |||||||
|
|
|
|
These consolidated financial statements comprise the Parent Company and its subsidiaries (collectively referred to as the “Group”). SK Inc. is the ultimate controlling entity of the Parent Company.
On November 1, 2021, the date of spin-off, the Parent Company completed the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments (See note 42).
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(2) | List of subsidiaries |
The list of subsidiaries as of December 31, 2022 and 2021 is as follows:
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Dec. 31, 2022 | Dec. 31, 2021 | ||||||||||
Subsidiaries owned by the Parent Company | SK Telink Co., Ltd. | Korea | International telecommunication and Mobile Virtual Network Operator service | 100.0 | 100.0 | |||||||||
SK Communications Co., Ltd. | Korea | Internet website services | 100.0 | 100.0 | ||||||||||
SK Broadband Co., Ltd. | Korea | Fixed-line telecommunication services | 74.4 | 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 | 100.0 | 100.0 | ||||||||||
Atlas Investment | Cayman Islands | Investment | 100.0 | 100.0 | ||||||||||
SK Telecom Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
Happy Hanool Co., Ltd. | Korea | Service | 100.0 | 100.0 | ||||||||||
SK stoa Co., Ltd. | Korea | Other telecommunication retail business | 100.0 | 100.0 | ||||||||||
Broadband Nowon Co., Ltd.(*2) | Korea | Cable broadcasting services | — | 100.0 | ||||||||||
SAPEON Inc.(*2,3) | USA | Manufacturing non-memory and other electronic integrated circuits | 62.5 | — | ||||||||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | Korea | Operation of information and communication facility | 100.0 | 100.0 | |||||||||
Media S Co., Ltd. | Korea | Production and supply services of broadcasting programs | 100.0 | 100.0 | ||||||||||
Subsidiary owned by PS&Marketing Corporation | SK m&service Co., Ltd.(*2,4) | Korea | Database and Internet website service | 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 SAPEON Inc. | SAPEON Korea Inc.(*2,5) | Korea | Manufacturing non-memory and other electronic integrated circuits | 100.0 | — | |||||||||
Others(*6) | 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 its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of December 31, 2022 and 2021 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) | Details of changes in the consolidation scope for year ended December 31, 2022 are presented in note 1-(4). |
(*3) | The Parent Company newly established SAPEON inc. and the ownership interest of the Parent Company in SAPEON inc. has changed from 100% to 62.5% due to unequal paid-in capital increase of SAPEON Inc. incurred after the establishment for the year ended December 31, 2022. |
(*4) | PS&Marketing Corporation acquired 3,099,112 shares (100%) of SK m&service Co., Ltd. at |
(*5) | The Parent Company newly established SAPEON Korea Inc. and disposed the entire shares of SAPEON Korea Inc. to SAPEON Inc. at |
(*6) | Others are owned by Atlas Investment and another subsidiary of the Parent Company. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries |
1) | Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2022 is as follows: |
(In millions of won) | ||||||||||||||||||||
As of December 31, 2022 | 2022 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd. | 60,927 | 135,354 | 302,595 | 15,008 | ||||||||||||||||
SK Broadband Co., Ltd. | 6,245,484 | 3,134,949 | 3,110,535 | 4,162,093 | 212,816 | |||||||||||||||
PS&Marketing Corporation | 403,030 | 177,739 | 225,291 | 1,376,400 | 3,856 | |||||||||||||||
SERVICE ACE Co., Ltd. | 97,597 | 59,189 | 38,408 | 194,798 | 2,429 | |||||||||||||||
SERVICE TOP Co., Ltd. | 81,590 | 53,589 | 28,001 | 179,365 | 1,613 | |||||||||||||||
SK O&S Co., Ltd. | 121,755 | 70,280 | 51,475 | 331,715 | 2,059 | |||||||||||||||
Home & Service Co., Ltd. | 158,248 | 102,184 | 56,064 | 413,259 | (1,217 | ) | ||||||||||||||
SK stoa Co., Ltd. | 103,910 | 44,696 | 59,214 | 329,304 | 9,977 | |||||||||||||||
SK m&service Co., Ltd.(*) | 160,704 | 95,263 | 65,441 | 211,081 | 4,157 |
(*) | The financial information is the condensed financial information after the entity was included in the scope of consolidation. |
2) | Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2021 is as follows: |
(In millions of won) | ||||||||||||||||||||
As of December 31, 2021 | 2021 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit | |||||||||||||||
SK Telink Co., Ltd. | 52,821 | 122,016 | 313,404 | 8,846 | ||||||||||||||||
SK Broadband Co., Ltd. | 5,971,505 | 3,091,837 | 2,879,668 | 4,058,997 | 213,468 | |||||||||||||||
PS&Marketing Corporation | 478,745 | 263,457 | 215,288 | 1,445,540 | 3,179 | |||||||||||||||
SERVICE ACE Co., Ltd. | 99,059 | 66,496 | 32,563 | 197,146 | 2,519 | |||||||||||||||
SERVICE TOP Co., Ltd. | 72,026 | 46,067 | 25,959 | 185,452 | 2,066 | |||||||||||||||
SK O&S Co., Ltd. | 95,748 | 58,870 | 36,878 | 285,591 | 69 | |||||||||||||||
Home & Service Co., Ltd. | 131,947 | 90,775 | 41,172 | 405,255 | 550 | |||||||||||||||
SK stoa Co., Ltd. | 107,943 | 59,931 | 48,012 | 316,249 | 19,163 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(4) | Changes in subsidiaries |
1) | The list of subsidiaries that were newly included in consolidation for the year ended December 31, 2022 is as follows: |
Subsidiary | Reason | |
SAPEON Korea Inc. | Established by the Parent Company | |
SAPEON Inc. | Established by the Parent Company | |
SK m&service Co., Ltd. | Acquired by PS&Marketing Corporation |
2) | The list of subsidiaries that were excluded from consolidation for the year ended December 31, 2022 is as follows: |
Subsidiary | Reason | |
Broadband Nowon Co., Ltd. | Merged into SK Broadband Co., Ltd |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||
SK Broadband Co., Ltd.(*) | ||||
Ownership of non-controlling interests (%) | 25.3 | |||
As of December 31, 2022 | ||||
Current assets | ||||
Non-current assets | 5,076,410 | |||
Current liabilities | (1,707,805 | ) | ||
Non-current liabilities | (1,488,834 | ) | ||
Net assets | 3,228,076 | |||
Carrying amount of non-controlling interests | 816,676 | |||
2022 | ||||
Revenue | ||||
Profit for the year | 217,303 | |||
Total comprehensive income | 237,860 | |||
Profit attributable to non-controlling interests | 51,528 | |||
Net cash provided by operating activities | ||||
Net cash used in investing activities | (807,965 | ) | ||
Net cash used in financing activities | (415,908 | ) | ||
Effects of exchange rate changes on cash and cash equivalents | (584 | ) | ||
Net decrease in cash and cash equivalents | (39,663 | ) | ||
Dividends paid to non-controlling interests for the year ended December 31, 2022 |
(*) | The condensed financial information above is the consolidated financial information of the subsidiary and is reflected fair value adjustments that occurred a business combination. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||
SK Broadband Co., Ltd.(*) | ||||
Ownership of non-controlling interests (%) | 25.1 | |||
As of December 31, 2021 | ||||
Current assets | ||||
Non-current assets | 4,886,448 | |||
Current liabilities | (1,433,800 | ) | ||
Non-current liabilities | (1,717,074 | ) | ||
Net assets | 2,988,509 | |||
Carrying amount of non-controlling interests | 740,771 | |||
2021 | ||||
Revenue | ||||
Profit for the year | 198,268 | |||
Total comprehensive income | 214,003 | |||
Profit attributable to non-controlling interests | 52,935 | |||
Net cash provided by operating activities | ||||
Net cash used in investing activities | (615,510 | ) | ||
Net cash used in financing activities | (248,139 | ) | ||
Effects of exchange rate changes on cash and cash equivalents | (59 | ) | ||
Net increase in cash and cash equivalents | 208,599 | |||
Dividends paid to non-controlling interests for the year ended December 31, 2021 |
(*) | The condensed financial information above is the consolidated financial information of the subsidiary and is reflected fair value adjustments that occurred a business combination. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
2. | Basis of Preparation |
These consolidated financial statements were prepared in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”), as prescribed in the Act on External Audits of Stock Companies of Korea. The accompanying consolidated financial statements have been translated into English from Korean financial statements. In the event of any differences in interpreting the financial statements or the independent auditor’s report thereon, Korean version, which is used for regulatory reporting purposes, shall prevail.
The accompanying consolidated financial statements comprise the Group and the Group’s investments in associates and joint ventures.
The consolidated financial statements were authorized for issuance by the Board of Directors on February 7, 2023, which will be submitted for final approval at the shareholder’s meeting to be held on March 28, 2023.
(1) | Basis of measurement |
The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statement of financial position:
• | derivative financial instruments measured at fair value; |
• | financial instruments measured at fair value through profit or loss (“FVTPL”); |
• | financial instruments measured at fair value through other comprehensive income (“FVOCI”); |
• | liabilities measured at fair value for cash-settled share-based payment arrangement; and |
• | liabilities (assets) for defined benefit plans recognized at the total present value of defined benefit obligations less the fair value of plan assets. |
(2) | Functional and presentation currency |
Financial statements of Group entities within the Group are prepared in functional currency of each group entity, which is the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Company’s functional and presentation currency.
(3) | Use of estimates and judgments |
The preparation of the consolidated financial statements in conformity with KIFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.
1) | Critical judgments |
Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in notes for the following areas: consolidation (whether the Group has de facto control over an investee), and determination of stand-alone selling prices.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
2. | Basis of Preparation, Continued |
(3) | Use of estimates and judgments, Continued |
2) | Assumptions and estimation uncertainties |
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: loss allowance (notes 6 and 36), estimated useful lives of costs to obtain a contract (notes 7), property and equipment and intangible assets (notes 3 (7), (9), 13 and 17), impairment of goodwill (notes 3 (12) and 16), recognition of provision (notes 3 (17) and 20), measurement of defined benefit liabilities (notes 3 (16) and 21), transaction of derivative instruments (notes 3 (6) and 22) and recognition of deferred tax assets (liabilities) (notes 3 (25) and 32).
3) | Fair value measurement |
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established 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 KIFRS, 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 (unadjusted) market prices 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 or indirectly; 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 22 and note 36.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies |
The significant accounting policies applied by the Group in the preparation of its consolidated financial statements in accordance with KIFRS are included below. Except for certain standards and amendments which are effective for annual periods beginning on or after January 1, 2022, the significant accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2021. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
The new and amended standards and interpretations that are effective for annual periods beginning on or after January 1, 2022 are as follows. These amended standards had no significant impact on the Group’s consolidated financial statements.
• | Onerous Contracts – Cost of Fulfilling a Contract (Amendments to KIFRS 1037). |
• | Reference to Conceptual Framework (Amendments to KIFRS 1103). |
• | Property, Plant and Equipment: Proceeds before Intended Use (Amendments to KIFRS 1016). |
• | Annual Improvements to KIFRS 2018-2020. |
As described in note 42, the Parent Company carried out a spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments pursuant to the resolution of the Board of Directors on June 10, 2021 and approval of shareholders’ meeting on October 12, 2021. The Group has applied KIFRS 1105 Non-current Assets Held for Sale and Discontinued Operations, and accordingly, presented profit or loss of the spin-off business as discontinued operations.
(1) | Operating segments |
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group has three reportable segments as described in note 4. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(2) | Basis of consolidation |
1) | Business combination |
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.
In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.
Consideration transferred is generally measured at fair value, identical to the measurement of identifiable net assets acquired at fair value. The difference between the acquired company’s fair value and the consideration transferred is accounted for goodwill. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received, except if related to the costs to issue debt or equity securities recognized based on KIFRS 1032 and KIFRS 1109.
Consideration transferred does not include the amount settled in relation to the pre-existing relationship. Such amounts are generally recognized through profit or loss.
Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration through profit or loss.
2) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.
3) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(2) | Basis of consolidation, Continued |
4) | Loss of control |
If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.
5) | Interest in investees accounted for using the equity method |
Interest in investees accounted for using the equity method composed of interest in associates and joint ventures.
An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement has rights to the net assets of the arrangement.
The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.
6) | Intra-group transactions |
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.
7) | Business combinations under common control |
SK Inc. is the ultimate controlling entity of the Group. The assets and liabilities acquired under business combination under common control are recognized at the carrying amounts in the ultimate controlling shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.
(3) | Cash and cash equivalents |
Cash and cash equivalents comprise cash balances, call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.
(4) | Inventories |
Inventories are initially recognized at the acquisition cost and subsequently measured using the weighted average method. During the period, a perpetual inventory system is used to track inventory quantities, which is adjusted based on the physical inventory counts performed at the period end. When the net realizable value of inventories is less than cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current period as operating expenses.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets |
1) | Recognition and initial measurement |
Accounts receivable – trade and debt investments issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.
A financial asset (unless an accounts receivable – trade without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An accounts receivable – trade without a significant financing component is initially measured at the transaction price.
2) | Classification and subsequent measurement |
On initial recognition, a financial asset is classified as measured at:
• | FVTPL |
• | FVOCI – equity investment |
• | FVOCI – debt investment |
• | Financial assets at amortized cost |
A financial asset is classified based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
• | it is held within a business model whose objective is to hold assets to collect contractual cash flows; and |
• | its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
2) | Classification and subsequent measurement, Continued |
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
• | it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and |
• | its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
The following accounting policies are applied to the subsequent measurement of financial assets.
Financial assets at FVTPL | These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. | |
Financial assets at amortized cost | These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. | |
Debt investments at FVOCI | These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. | |
Equity investments at FVOCI | These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
3) | Impairment |
The Group estimates the expected credit losses (“ECL”) for the debt instruments measured at amortized cost and FVOCI based on the Group’s historical experience and informed credit assessment that includes forward-looking information. The impairment approach is decided based on the assessment of whether the credit risk of a financial asset has increased significantly since initial recognition. However, the Group applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for accounts receivable – trade and lease receivables from the initial recognition.
ECL is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e., the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).
At each reporting date, the Group assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the transferred assets.
4) | Derecognition |
Financial | assets |
The Group derecognizes a financial asset when:
• | the contractual rights to the cash flows from the financial asset expire; or |
• | it transfers the rights to receive the contractual cash flows in a transaction in which either: |
• | substantially all of the risks and rewards of ownership of the financial asset are transferred; or |
• | the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. |
The Group enters into transactions whereby it transfers assets recognized in its consolidated statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
4) | Derecognition, Continued |
Interest rate benchmark reform
When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortized cost changed as a result of interest rate benchmark reform, the Group updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met:
• | the change is necessary as a direct consequence of the reform; and |
• | the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e., the basis immediately before the change. |
When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Group first updated the effective rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applied the policies on accounting for modifications to the additional changes.
5) | Offsetting |
Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when the Group currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to settle the liability and realize the asset simultaneously.
A financial asset and a financial liability are offset only when the right to set off the amount is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.
(6) | Derivative financial instruments, including hedge accounting |
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.
1) | Hedge accounting |
The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designates derivatives as hedging instruments to hedge the variability in cash flow associated with highly probable forecasted transactions or firm commitments (a cash flow hedge).
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(6) | Derivative financial instruments, including hedge accounting, Continued |
1) | Hedge accounting, Continued |
Hedges directly affected by interest rate benchmark reform
When uncertainty arises about the interest rate benchmark designated as a hedged risk and the timing or the amount of the interest rate benchmark-based cash flows of the hedged item or of the hedging instrument as a result of IBOR reform, for the purpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Group assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.
For a cash flow hedge of a forecast transaction, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur.
The Group will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument
• | to a hedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item or instrument; or |
• | when the hedging relationship is discontinued. |
When the basis for determining the contractual cash flows of the hedged item or hedging instrument changes as a result of IBOR reform and therefore there is no longer uncertainty arising about the cash flows of the hedged item or the hedging instrument, the Group amends the hedge documentation of that hedging relationship to reflect the change(s) required by IBOR reform.
The Group amends the formal hedge documentation by the end of the reporting period during which a change required by IBOR reform is made to the hedged risk, hedged item or hedging instrument. These amendments in the formal hedge documentation do not constitute the discontinuation of the hedging relationship or the designation of a new hedging relationship.
If changes are made in addition to those changes required by interest rate benchmark reform to the financial asset or financial liability designated in a hedging relationship or to the designation of the hedging relationship, the Group determines whether those additional changes result in the discontinuation of hedging accounting. If the additional changes do not result in the discontinuation of hedging accounting, the Group amend the formal designation of the hedging relationship.
When the interest rate benchmark on which the hedged future cash flows had been based is changed as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Group deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows will be based.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(6) | Derivative financial instruments, including hedge accounting, Continued |
1) | Hedge accounting, Continued |
Cash flow hedge
When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.
2) | Other derivative financial instruments |
Other derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(7) | Property and equipment |
Property and equipment are initially measured at cost. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Property and equipment, subsequently, are carried at cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of property and equipment at cost or, if appropriate, as a separate item if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Property and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property and equipment is depreciated over its separate useful life.
Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized as other non-operating income (loss).
The estimated useful lives of the Group’s property and equipment are as follows:
Useful lives (years) | ||
Buildings and structures | 15 ~ 40 | |
Machinery | 3 ~ 15, 30 | |
Other property and equipment | 3 ~10 |
The Group reviews estimated residual values, expected useful lives, and depreciation methods annually at the end of each reporting date and adjusts, if appropriate. The change is accounted for as a change in an accounting estimate.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(8) | Borrowing costs |
The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets are not qualifying assets, and assets that are ready for their intended use or sale when acquired are not qualifying assets either.
To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period do not exceed the amount of borrowing costs incurred during the period.
(9) | Intangible assets |
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Intangible assets, except for goodwill, are amortized on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships and brand are expected to be available for use as there are no foreseeable limits to the periods. These intangible assets are determined as having indefinite useful lives and, therefore, not amortized.
The estimated useful lives of the Group’s intangible assets are as follows:
Useful lives (years) | ||
Frequency usage rights | 2.4 ~ 10 | |
Land usage rights | 5 | |
Industrial rights | 5, 10 | |
Development costs | 5 | |
Facility usage rights | 10, 20 | |
Customer relations | 3 ~ 15 | |
Other | 3 ~ 20 |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(9) | Intangible assets, Continued |
Expenditures on research activities are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.
(10) | Government grants |
Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grant’s conditions and that the grant will be received.
1) | Grants related to assets |
Government grants whose primary condition is that the Group purchases, constructs, or otherwise acquires a long-term asset are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense.
2) | Grants related to income |
Government grants which are intended to compensate the Group for expenses incurred are deducted from the related expenses.
(11) | Investment property |
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are reported at cost less accumulated depreciation and accumulated impairment losses.
Subsequent expenditures are recognized in carrying amount of an asset or as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs associated with routine maintenance and repairs are recognized in profit or loss as incurred.
Investment property, except for land, is depreciated on a straight-line basis over estimated useful lives of 30 years. In addition, right-of-use asset classified as investment property is depreciated using the straight-line basis from the commencement date to the end of the lease term.
The depreciation method, estimated useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(12) | Impairment of non-financial assets |
The carrying amounts of the Group’s non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.
The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying amount of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(13) | Leases |
A contract is or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
1) | Group as a lessee |
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(13) | Leases, Continued |
1) | Group as a lessee, Continued |
The right-of-use asset is subsequently depreciated using the straight-line basis from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
• | fixed payments, including in-substance fixed payments; |
• | variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
• | amounts expected to be payable under a residual value guarantee; and |
• | the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. |
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension of termination option of if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘property and equipment’ in the statement of financial position.
The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments on short-term leases and leases of low value assets as an expense on a straight-line basis over the lease term.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(13) | Leases, Continued |
2) | Group as a lessor |
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, is accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group applies KIFRS 1115 to allocate the consideration in the contract.
The Group applies derecognition and impairment requirements in KIFRS 1109 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.
(14) | Non-current assets held for sale |
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized.
A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(15) | Non-derivative financial liabilities |
The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liabilities.
1) | Financial liabilities at fair value through profit or loss |
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, these liabilities are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issue of the financial liability are recognized in profit or loss as incurred.
2) | Other financial liabilities |
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the issue of the financial liabilities. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.
3) | Derecognition of financial liability |
The Group extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Group recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.
When a financial liability is derecognized, the difference between the carrying amount and the consideration paid (including any transferred non-cash assets or liabilities assumed) is recognized in profit or loss.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(16) | Employee benefits |
1) | Short-term employee benefits |
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
2) | Other long-term employee benefits |
Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render related services. The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.
3) | Retirement benefits: defined contribution plans |
When an employee has rendered a service to the Group during a period, the Group recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Group recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.
4) | Retirement benefits: defined benefit plans |
At the end of reporting period, defined benefit liabilities relating to defined benefit plans are recognized at present value of defined benefit obligations net of fair value of plan assets.
The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.
Remeasurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.
When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(16) | Employee benefits, Continued |
5) | Termination benefits |
The Group recognizes a liability and expense for termination benefits at the earlier of the period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring that involves the payment of termination benefits. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.
(17) | Provisions |
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. If the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
If some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
A provision is used only for expenditures for which the provision was originally recognized.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(18) | Emissions Rights |
The Group accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission in Korea.
1) | Greenhouse Gases Emission Right |
Greenhouse Gases Emission Right consists of emission allowances, which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.
The Group derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.
2) | Emissions liability |
Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting period. The emissions liabilities are derecognized when they are surrendered to the government.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(19) | Transactions in foreign currencies |
1) | Foreign currency transactions |
Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Exchange differences arising from monetary items except for financial liabilities designated cashflow hedging instruments are recognized in profit or loss. If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange differences are also recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any foreign exchange differences are also recognized in profit or loss.
2) | Foreign operations |
If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate at the reporting date.
When a foreign operation is disposed, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.
(20) | Share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
When the Parent Company repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(21) | Hybrid bond |
The Group recognizes a financial instrument issued by the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.
(22) | Share-based payment |
For equity-settled share-based payment transaction, if the fair value of the goods or services received cannot be reliably estimated, the Group measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognized in profit or loss.
(23) | Revenue |
1) | Identification of performance obligations in contracts with customers |
The Group identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless and fixed-line telecommunications services, (2) sale of handsets and (3) providing other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Group allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The handset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of the contract term as stated in the subscription contract.
2) | Allocation of the transaction price to each performance obligation |
The Group allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Group uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service.
3) | Incremental costs of obtaining a contract |
The Group pays commissions to its retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Group’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Group capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(23) | Revenue, Continued |
4) | Customer loyalty programs |
The Group provides customer loyalty points to customers based on the usage of the service to which the Group allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount to be allocated to the loyalty program is measured according to the relative stand-alone selling price of the customer loyalty points. The amount allocated to the loyalty program is deferred as a contract liability and is recognized as revenue when loyalty points are redeemed.
5) | Consideration payable to a customer |
Based on the subscription contract, a customer who uses the Group’s wireless telecommunications services may receive a discount for purchasing goods or services from a designated third party. The Group pays a portion of the price discounts that the customer receives to the third party which is viewed as consideration payable to a customer. The Group accounts for the amounts payable to the third party as a reduction of the wireless telecommunications service revenue.
(24) | Finance income and finance costs |
Finance income comprises interest income on funds invested (including financial assets measured at fair value), dividend income, gains on disposal of financial assets at FVTPL, changes in fair value of financial instruments at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.
Finance costs comprise interest expense on borrowings, changes in fair value of financial instruments at FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures is recognized as it accrues in profit or loss using the effective interest rate method.
(25) | Income taxes |
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
The Group pays income tax in accordance with the tax-consolidation system when the Parent Company and its subsidiaries are economically unified.
1) | Current tax |
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and includes interests and fines related to income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(25) | Income taxes, Continued |
2) | Deferred tax |
Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Group and the reversal of existing temporary differences are considered in determining the future taxable profit.
The Group reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to offset the amount recognized and intends to settle the current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.
3) | Uncertainty over income tax treatments |
The Group assesses the uncertainty over income tax treatments pursuant to KIFRS 1012. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:
• | The most likely amount: the single most likely amount in a range of possible outcomes. |
• | The expected value: the sum of the probability-weighted amounts in a range of possible outcomes. |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(26) | Earnings per share |
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees, if any.
(27) | Discontinued operation |
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:
• | represents a separate major line of business or geographic area of operations; |
• | is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or |
• | is a subsidiary acquired only for a purpose of resale. |
When an operation is classified as a discontinued operation, the comparative statements of income and comprehensive income are re-presented as if the operation had been discontinued from the start of the comparative year.
(28) | Standards issued but not yet effective |
The new and amended standards and interpretations that are issued, but not yet effective for annual period beginning after January 1, 2022 are disclosed below. The following amendments are not expected to have a significant impact on the Group’s consolidated financial statements.
• | Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to KIFRS 1012) |
• | Classification of Liabilities as Current or Non-current (Amendments to KIFRS 1001). |
• | KIFRS 1117 Insurance Contracts and amendments to KIFRS 1117 Insurance Contracts. |
• | Disclosure of Accounting Polices (Amendments to KIFRS 1001). |
• | Definition of Accounting Estimates (Amendments to KIFRS 1008). |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
4. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides different services and merchandise. The Group’s reportable segments include: cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunication services, which include telephone services, internet services, and leased line services; and all other businesses, which include providing shopping channel and digital platform for selling products 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 years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||
Cellular services | Fixed-line telecommunication services | Others(*) | Sub-total | Adjustments | Total | |||||||||||||||||||
Total revenue | 4,895,791 | 592,188 | 19,984,845 | (2,679,872 | ) | 17,304,973 | ||||||||||||||||||
Inter-segment revenue | 1,554,550 | 1,082,802 | 42,520 | 2,679,872 | (2,679,872 | ) | — | |||||||||||||||||
External revenue | 12,942,316 | 3,812,989 | 549,668 | 17,304,973 | — | 17,304,973 | ||||||||||||||||||
Depreciation and amortization | 2,738,547 | 981,838 | 22,730 | 3,743,115 | (121,790 | ) | 3,621,325 | |||||||||||||||||
Operating profit (loss) | 1,334,306 | 311,210 | (2,126 | ) | 1,643,390 | (31,320 | ) | 1,612,070 | ||||||||||||||||
Finance income and costs, net |
| (276,489 | ) | |||||||||||||||||||||
Loss relating to investments in subsidiaries, associates and joint ventures, net |
| (81,707 | ) | |||||||||||||||||||||
Other non-operating income and expense, net |
| (17,722 | ) | |||||||||||||||||||||
Profit before income tax |
| 1,236,152 |
(In millions of won) | ||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||
Cellular services | Fixed-line telecommunication services | Others (*) | Sub-total | Adjustments | Total | Discontinued operations | ||||||||||||||||||||||
Total revenue | 4,790,641 | 362,978 | 19,368,026 | (2,619,441 | ) | 16,748,585 | 2,845,424 | |||||||||||||||||||||
Inter-segment revenue | 1,495,934 | 1,112,935 | 10,572 | 2,619,441 | (2,619,441 | ) | — | 462,341 | ||||||||||||||||||||
External revenue | 12,718,473 | 3,677,706 | 352,406 | 16,748,585 | — | 16,748,585 | 2,383,083 | |||||||||||||||||||||
Depreciation and amortization | 2,812,827 | 958,462 | 11,318 | 3,782,607 | (110,052 | ) | 3,672,555 | 287,412 | ||||||||||||||||||||
Operating profit (loss) | 1,123,147 | 294,070 | 14,550 | 1,431,767 | (44,605 | ) | 1,387,162 | 12,325 | ||||||||||||||||||||
Finance income and costs, net |
| (160,471) | (222,406 | ) | ||||||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
| 446,300 | 1,502,147 | |||||||||||||||||||||||||
Other non-operating income and expense, net |
| 45,200 | 60,680 | |||||||||||||||||||||||||
Profit before income tax |
| 1,718,191 | 1,352,746 |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
4. | Operating Segments, Continued |
(1) | Segment information for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*) | The Parent Company carried out a spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments for the year ended December 31, 2021. Accordingly, the Group reclassified SK stoa Co., Ltd. from Commerce Services segment to Others segment. |
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 years ended December 31, 2022 and 2021.
(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) | ||||||||||
2022 | 2021 | |||||||||
Goods and Services transferred at a point in time: |
| |||||||||
Cellular revenue | Goods(*1) | 959,932 | ||||||||
Fixed-line telecommunication revenue | Goods | 66,477 | 105,340 | |||||||
Other revenue | Others(*2) | 464,805 | 328,328 | |||||||
|
|
|
| |||||||
1,500,307 | 1,393,600 | |||||||||
|
|
|
| |||||||
Goods and Services transferred over time: |
| |||||||||
Cellular revenue | Wireless service(*3) | 10,253,217 | 10,100,368 | |||||||
Cellular interconnection | 471,163 | 493,820 | ||||||||
Other(*4) | 1,248,911 | 1,164,353 | ||||||||
Fixed-line telecommunication revenue | Fixed-line service | 156,662 | 217,000 | |||||||
Cellular interconnection | 21,209 | 69,769 | ||||||||
Internet Protocol Television(*5) | 1,816,130 | 1,786,765 | ||||||||
International calls | 180,689 | 162,379 | ||||||||
Internet service and miscellaneous(*6) | 1,571,822 | 1,336,453 | ||||||||
Other revenue | Miscellaneous | 84,863 | 24,078 | |||||||
|
|
|
| |||||||
15,804,666 | 15,354,985 | |||||||||
|
|
|
| |||||||
Discontinued operations | — | 2,383,083 | ||||||||
|
|
|
| |||||||
19,131,668 | ||||||||||
|
|
|
|
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
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 product sales-type data broadcasting channel use, and sales of goods through data broadcasting. |
(*3) | Wireless service 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 includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
5. | Deposits with Restrictions on Use |
Deposits which are restricted in use as of December 31, 2022 and 2021 are summarized as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents(*) | — | |||||||
Short-term financial instruments(*) | 79,514 | 79,500 | ||||||
Long-term financial instruments(*) | 375 | 372 | ||||||
|
|
|
| |||||
79,872 | ||||||||
|
|
|
|
(*) | Includes the followings: i) deposits restricted in use due to the court’s order for seizure and collection of bonds; and ii) charitable trust fund established by the Group, profits from which shall be donated to charitable institutions. As of December 31, 2022, such deposits and funds cannot be withdrawn before maturity. |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
6. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (234,919 | ) | 1,970,611 | |||||||||
Short-term loans | 79,298 | (708 | ) | 78,590 | ||||||||
Accounts receivable – other(*) | 522,091 | (42,310 | ) | 479,781 | ||||||||
Accrued income | 1,732 | — | 1,732 | |||||||||
Guarantee deposits (Other current assets) | 113,204 | — | 113,204 | |||||||||
|
|
|
|
|
| |||||||
2,921,855 | (277,937 | ) | 2,643,918 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 71,857 | (44,884 | ) | 26,973 | ||||||||
Long-term accounts receivable – other(*) | 375,829 | (1,878 | ) | 373,951 | ||||||||
Guarantee deposits | 167,741 | (300 | ) | 167,441 | ||||||||
Long-term accounts receivable – trade (Other non-current assets) | 14,165 | (4 | ) | 14,161 | ||||||||
|
|
|
|
|
| |||||||
629,592 | (47,066 | ) | 582,526 | |||||||||
|
|
|
|
|
| |||||||
(325,003 | ) | 3,226,444 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2022 include |
(In millions of won) | December 31, 2021 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (238,847 | ) | 1,913,511 | |||||||||
Short-term loans | 71,750 | (933 | ) | 70,817 | ||||||||
Accounts receivable – other(*) | 593,109 | (44,747 | ) | 548,362 | ||||||||
Accrued income | 762 | — | 762 | |||||||||
Guarantee deposits (Other current assets) | 92,046 | — | 92,046 | |||||||||
|
|
|
|
|
| |||||||
2,910,025 | (284,527 | ) | 2,625,498 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 66,431 | (44,452 | ) | 21,979 | ||||||||
Long-term accounts receivable – other(*) | 277,116 | (1,878 | ) | 275,238 | ||||||||
Guarantee deposits | 186,713 | — | 186,713 | |||||||||
Long-term accounts receivable – trade (Other non-current assets) | 8,140 | (34 | ) | 8,106 | ||||||||
|
|
|
|
|
| |||||||
538,400 | (46,364 | ) | 492,036 | |||||||||
|
|
|
|
|
| |||||||
(330,891 | ) | 3,117,534 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2021 include |
44
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
6. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on accounts receivable – trade measured at amortized costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
Beginning balance | Impair ment | Write-offs (*2) | Collection of receivables previously written-off | Business combination | Spin-off | Ending balance | ||||||||||||||||||||||
2022 | 27,053 | (42,296 | ) | 11,282 | 3 | — | 234,923 | |||||||||||||||||||||
2021(*1) | 31,546 | (65,852 | ) | 14,565 | 878 | (6,754 | ) | 238,881 |
(*1) | Includes amounts related to discontinued operations. |
(*2) | 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. Details of loss allowance on accounts receivable – trade as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||
Less than 6 months | 6 months ~ 1 year | 1 ~ 3 years | More than 3 years | |||||||||||||||
Telecommunications service revenue | Expected credit loss rate | 2.24 | % | 76.22 | % | 85.59 | % | 93.00 | % | |||||||||
Gross amount | 47,412 | 126,479 | 20,100 | |||||||||||||||
Loss allowance | 31,500 | 36,139 | 108,249 | 18,693 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Other revenue | Expected credit loss rate | 2.92 | % | 50.75 | % | 69.89 | % | 97.02 | % | |||||||||
Gross amount | 3,464 | 8,606 | 15,679 | |||||||||||||||
Loss allowance | 17,357 | 1,758 | 6,015 | 15,212 | ||||||||||||||
|
|
|
|
|
|
|
|
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.
45
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
7. | Prepaid expenses |
The Group pays commissions to its retail stores and authorized dealers, primarily for wireless and fixed-line telecommunication 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 December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts | 1,886,680 | |||||||
Others | 86,133 | 100,823 | ||||||
|
|
|
| |||||
1,987,503 | ||||||||
|
|
|
| |||||
Non-current assets: |
| |||||||
Incremental costs of obtaining contracts | 977,236 | |||||||
Others | 77,242 | 91,912 | ||||||
|
|
|
| |||||
1,069,148 | ||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization in connection with incremental costs of obtaining contracts recognized for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Amortization recognized | 2,634,134 |
(*) | Includes amounts related to discontinued operations. |
46
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
8. | Contract Assets and Liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The 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 December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | 118,278 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 18,544 | 18,397 | ||||||
Customer loyalty programs | 7,706 | 12,699 | ||||||
Fixed-line service contracts | 136,880 | 118,600 | ||||||
Others | 70,792 | 53,271 | ||||||
|
|
|
| |||||
202,967 | ||||||||
|
|
|
|
(2) | The amount of revenue recognized for the years ended December 31, 2022 and 2021 related to the contract liabilities carried forward from the prior periods are |
(In millions of won) | ||||||||||||||||
Less than 1 year | 1 ~ 2 years | More than 2 years | Total | |||||||||||||
Wireless service contracts | — | — | 18,544 | |||||||||||||
Customer loyalty programs | 6,141 | 1,048 | 517 | 7,706 | ||||||||||||
Fixed-line service contracts | 88,051 | 14,198 | 34,631 | 136,880 | ||||||||||||
Others | 59,612 | 10,935 | 245 | 70,792 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
26,181 | 35,393 | 233,922 | ||||||||||||||
|
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|
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|
47
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
9. | Inventories |
(1) | Details of inventories as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Acquisition cost | Write-down | Carrying amount | Acquisition cost | Write-down | Carrying amount | |||||||||||||||||||
Merchandise | (5,616 | ) | 151,303 | 204,545 | (3,419 | ) | 201,126 | |||||||||||||||||
Supplies | 15,052 | — | 15,052 | 3,511 | — | 3,511 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(5,616 | ) | 166,355 | 208,056 | (3,419 | ) | 204,637 | ||||||||||||||||||
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|
|
(2) | Inventories recognized as operating expenses for the years ended December 31, 2022 and 2021 are |
10. | Investment Securities |
(1) | Details of short-term investment securities as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||
Category | December 31, 2022 | December 31, 2021 | ||||||||
Beneficiary certificates | FVTPL | 5,010 |
(2) | Details of long-term investment securities as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||
Category | December 31, 2022 | December 31, 2021 | ||||||||
Equity instruments | FVOCI(*) | 1,510,428 | ||||||||
FVTPL | 44,440 | 57,830 | ||||||||
|
|
|
| |||||||
1,234,037 | 1,568,258 | |||||||||
Debt instruments | FVOCI | — | 1,177 | |||||||
FVTPL | 176,699 | 145,643 | ||||||||
|
|
|
| |||||||
176,699 | 146,820 | |||||||||
|
|
|
| |||||||
1,715,078 | ||||||||||
|
|
|
|
(*) | The Group designated investments in equity instruments that are not held for trading as financial assets at FVOCI, the amounts to those FVOCI as of December 31, 2022 and 2021 are |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations |
(1) | 2022 |
1) | Acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation: |
PS&Marketing Corporation obtained control over SK m&service Co., Ltd. by acquiring its 3,099,112 shares (100%) for the year ended December 31, 2022. As this transaction is a business combination under common control, the assets acquired and liabilities assumed were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements, and the difference between the consideration transferred and the carrying amounts of net assets was recognized as capital surplus and others. Subsequent to the acquisition of control, SK m&service Co., Ltd. recognizedW211,081 million of revenue andW4,157 million of net profit. Meanwhile, assuming that business combination occurred as of January 1, 2022, the Group would have recognized W250,108 million of revenue andW4,695 million of net profit.
(i) Summary of the acquiree
Information of acquiree | ||
Corporate name | SK m&service Co., Ltd. | |
Location | 16th floor, 34, Supyo-ro, Jung-gu, Seoul, Korea | |
CEO | Park, Jeong-Min | |
Industry | Database and internet website service |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of 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 | 10,547 | |||
Accounts receivable – trade and other, net | 76,035 | |||
Inventories, net | 3,349 | |||
Property and equipment, net | 27,138 | |||
Intangible assets, net | 12,462 | |||
Goodwill | 2,516 | |||
Other assets | 10,394 | |||
Accounts payable – trade and other | (53,894 | ) | ||
Income tax payable | (399 | ) | ||
Lease liabilities | (6,503 | ) | ||
Provisions | (991 | ) | ||
Defined benefit liabilities | (2,739 | ) | ||
Other liabilities | (18,337 | ) | ||
|
| |||
59,578 | ||||
|
| |||
III. Capital surplus and others(I-II) | ||||
|
|
49
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021 |
1) | Merger of ADT CAPS Co., Ltd. by SK Shieldus Co., Ltd.(Formerly, ADT CAPS Co, Ltd., at the time of merger, SK Infosec Co., Ltd.): |
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. 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 the consolidated financial statements. After the date of the merger, SK Infosec Co., Ltd. changed its name to ADT CAPS Co., Ltd. and then again, in October 2021, ADT CAPS Co., Ltd. changed its name to SK Shieldus Co., Ltd.
Identifiable assets acquired and liabilities assumed were transferred to spin-off company.
50
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
2) | Acquisition of Studio Dolphin Co., Ltd. by Dreamus Company: |
DREAMUS Company obtained control by acquiring 10,000 shares(100%) of Studio Dolphin Co., Ltd. for the year ended December 31, 2021. The consideration transferred wasW1,500 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW1,465 million was recognized as goodwill. Subsequent to the acquisition of control, Studio Dolphin Co., Ltd. recognized revenue ofW245 million and net loss ofW304 million and the amounts are included in profit or loss from discontinued operations.
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | Studio Dolphin Co., Ltd. | |
Location | 3rd floor, 10, Jandari-ro 7an-gil, Mapo-gu, Seoul, Korea | |
CEO | Kim, Dong-Hee | |
Industry | Music and sound recording business |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of 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 | 20 | |||
Accounts receivable – trade and other | 31 | |||
Other assets | 7 | |||
Accounts payable – trade and other | (4 | ) | ||
Short-term borrowings | (2 | ) | ||
Other liabilities | (17 | ) | ||
|
| |||
35 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
51
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
3) | Acquisition of YLP Inc. by Tmap Mobility Co., Ltd.: |
Tmap Mobility Co., Ltd. obtained control by acquiring 168,012 shares (100%) of YLP Inc. during the year ended December 31, 2021. The consideration transferred wasW79,000 million, among whichW55,598 million was paid in cash to acquire 118,242 shares (70.4%) and on June 29, 2021, T map Mobility Co., Ltd. issued 267,700 of its new common shares (with a fair value ofW23,402 million) to the shareholders of YLP Inc. in exchange for the remaining 49,770 shares (29.6%) owned by those shareholders. The difference between the fair value of net assets acquired and the consideration transferred amounting toW69,516 million was recognized as goodwill. Subsequent to the acquisition of control, YLP Inc. recognized revenue ofW20,488 million and net loss ofW1,632 million and the amounts are included in profit or loss from discontinued operations.
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | YLP Inc. | |
Location | 1740, Cheongwon-ro, Pyeongtaek-si, Gyeonggi-do, Korea | |
CEO | Lee, Hyeok-Ju | |
Industry | Freight forwarders and cargo agents |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
3) | Acquisition of YLP Inc. by Tmap Mobility Co., Ltd., Continued: |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
Fair value of shares of T map Mobility Co., Ltd. | 23,402 | |||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 1,897 | |||
Financial instruments | 4,000 | |||
Accounts receivable – trade and other, net | 4,480 | |||
Property and equipment, net | 431 | |||
Intangible assets, net | 3,595 | |||
Other assets | 325 | |||
Borrowings | (1,000 | ) | ||
Accounts payable – trade and other | (3,542 | ) | ||
Lease liabilities | (327 | ) | ||
Other liabilities | (48 | ) | ||
Deferred tax liabilities | (327 | ) | ||
|
| |||
9,484 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
53
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
4) | Acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd.: |
One Store Co., Ltd. obtained control by acquiring 60,000 shares (100%) of Rokmedia Co., Ltd. for the year ended December 31, 2021. The consideration transferred wasW40,000 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW33,641 million was recognized as goodwill. Subsequent to the acquisition of control, Rokmedia Co., Ltd. recognized revenue ofW10,915 million and net profit ofW1,066 million and the amounts are included in profit or loss from discontinued operation.
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | Rokmedia Co., Ltd. | |
Location | 3rd floor, 330, Seongam-ro, Mapo-gu, Seoul, Korea | |
CEO | Kang, Jun-Gyu / Kim, Jeong-Su | |
Industry | Publishing and telecommunications retail business |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
4) | Acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd., Continued: |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of 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 | 719 | |||
Financial instruments | 2,170 | |||
Accounts receivable – trade and other, net | 1,374 | |||
Inventories | 933 | |||
Other assets | 3,212 | |||
Short-term loans, net | 30 | |||
Property and equipment, net | 792 | |||
Intangible assets, net | 2,677 | |||
Accounts payable – trade and other | (1,885 | ) | ||
Contract liabilities | (1,401 | ) | ||
Borrowings | (1,485 | ) | ||
Provisions | (385 | ) | ||
Lease liabilities | (56 | ) | ||
Other liabilities | (111 | ) | ||
Deferred tax liabilities | (135 | ) | ||
Income tax payable | (90 | ) | ||
|
| |||
6,359 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
55
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
5) | Acquisition of GOOD SERVICE Co., Ltd. by Tmap Mobility Co., Ltd.: |
T map Mobility Co., Ltd. obtained control by acquiring 2,000 shares (100%) of GOOD SERVICE Co., Ltd. for the year ended December 31, 2021. The consideration transferred wasW10,000 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW4,844 million was recognized as goodwill. Subsequent to the acquisition of control, GOOD SERVICE Co., Ltd. recognized revenue ofW1,063 million and net profit ofW621 million and the amounts are included in profit or loss from discontinued operations.
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) Summary of the acquiree
Information of acquiree | ||
Corporate name | GOOD SERVICE Co., Ltd. | |
Location | 4th floor, 54, Daeheung-ro, Mapo-gu, Seoul, Korea | |
CEO | Kim, Seung-Wook | |
Industry | Surrogate driving service business and related business |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of 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 | 1,328 | |||
Financial instruments | 116 | |||
Accounts receivable – trade and other, net | 1,881 | |||
Property and equipment, net | 116 | |||
Intangible assets, net | 3,492 | |||
Accounts payable – trade and other | (883 | ) | ||
Other liabilities | (85 | ) | ||
Deferred tax liabilities | (696 | ) | ||
Lease liabilities | (113 | ) | ||
|
| |||
5,156 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
56
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures |
(1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||
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 | 324,860 | 63.3 | 339,976 | |||||||||||||||
HanaCard Co., Ltd. (*2) | Korea | — | — | 15.0 | 349,866 | |||||||||||||||
UniSK | China | 49.0 | 20,839 | 49.0 | 19,156 | |||||||||||||||
SK Technology Innovation Company | Cayman Islands | 49.0 | 69,375 | 49.0 | 86,301 | |||||||||||||||
SK MENA Investment B.V. | Netherlands | 32.1 | 14,296 | 32.1 | 15,343 | |||||||||||||||
SK Latin America Investment S.A. | Spain | 32.1 | 11,961 | 32.1 | 14,004 | |||||||||||||||
SK South East Asia Investment Pte. Ltd. | Singapore | 20.0 | 357,537 | 20.0 | 348,782 | |||||||||||||||
Pacific Telecom Inc.(*3) | USA | 15.0 | 48,542 | 15.0 | 43,789 | |||||||||||||||
SM. Culture & Contents Co., Ltd. | Korea | 23.1 | 59,611 | 23.1 | 60,261 | |||||||||||||||
Digital Games International Pte. Ltd.(*4) | Singapore | — | — | 33.3 | 2,208 | |||||||||||||||
Invites Healthcare Co., Ltd.(*5) | Korea | 31.1 | — | 27.1 | 26,474 | |||||||||||||||
Nam Incheon Broadcasting Co., Ltd. | Korea | 27.3 | 13,575 | 27.3 | 12,525 | |||||||||||||||
Home Choice Corp.(*3) | Korea | 17.8 | 4,456 | 17.8 | 3,052 | |||||||||||||||
Konan Technology Inc. | Korea | 20.8 | 8,366 | 26.5 | 3,639 | |||||||||||||||
CMES Inc.(*3,6) | Korea | 7.7 | 900 | — | — | |||||||||||||||
12CM JAPAN and others(*3,7) | — | — | 69,734 | — | 68,966 | |||||||||||||||
|
|
|
| |||||||||||||||||
|
|
|
| |||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||
Finnq Co., Ltd. (*8) | Korea | — | — | 49.0 | 7,255 | |||||||||||||||
UTC Kakao-SK Telecom ESG Fund(*9) | Korea | 48.2 | 5,710 | 48.2 | 2,000 | |||||||||||||||
|
|
|
| |||||||||||||||||
5,710 | 9,255 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
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|
57
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Investment in Korea IT Fund was classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | The Group disposed the entire shares of HanaCard Co., Ltd. to Hana Financial Group Inc. for |
(*3) | Although the Group holds less than 20% of equity interests in these investees, investments in such investees 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. |
(*4) | The Group disposed the entire shares of Digital Games International Pte. Ltd. and recognized |
(*5) | The Group recognized the carrying amount of investments in Invites Healthcare Co., Ltd. in entirety as an impairment loss for the year ended December 31, 2022. |
(*6) | As the Group obtained significant influence over the investee, |
(*7) | The Group additionally contributed |
(*8) | The Group disposed the entire shares of Finnq Co., Ltd. to Hana Financial Group Inc. for |
(*9) | The Group additionally contributed |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(2) | The market value of investments in listed associates as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
SM.Culture & Contents Co.,Ltd. | 22,033,898 | 65,220 | 4,485 | 22,033,898 | 98,822 | |||||||||||||||||||
Konan Technology Inc. | 28,250 | 1,179,580 | 33,323 | — | — | — |
(3) | The condensed financial information of significant associates as of and for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||
Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | ||||||||||
As of December 31, 2022 | ||||||||||||
Current assets | 1,223,426 | 146,589 | ||||||||||
Non-current assets | 414,804 | 2,050,001 | 3,034,335 | |||||||||
Current liabilities | — | 76,654 | 488,132 | |||||||||
Non-current liabilities | — | 276,525 | — | |||||||||
2022 | ||||||||||||
Revenue | 62,334 | 72,658 | ||||||||||
Profit (loss) for the year | 7,505 | (11,681 | ) | (17,504 | ) | |||||||
Other comprehensive income (loss) | (11,779 | ) | 58,034 | (34,220 | ) | |||||||
Total comprehensive income (loss) | (4,274 | ) | 46,353 | (51,724 | ) |
(In millions of won) | ||||||||||||||||
HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | |||||||||||||
As of December 31, 2021 | ||||||||||||||||
Current assets | 117,172 | 1,124,219 | 133,110 | |||||||||||||
Non-current assets | 465,333 | 419,632 | 1,849,102 | 2,853,184 | ||||||||||||
Current liabilities | 1,281,783 | — | 53,199 | 412,962 | ||||||||||||
Non-current liabilities | 6,284,587 | — | 316,470 | — | ||||||||||||
2021 | ||||||||||||||||
Revenue | 58,741 | 80,241 | 9,945 | |||||||||||||
Profit (loss) for the year | 250,484 | 50,107 | 933,475 | (188,678 | ) | |||||||||||
Other comprehensive income (loss) | 909 | (6,847 | ) | 326,661 | 304,700 | |||||||||||
Total comprehensive income | 251,393 | 43,260 | 1,260,136 | 116,022 |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(4) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
Korea IT Fund | 63.3 | 324,860 | — | 324,860 | ||||||||||||||||
SK China Company Ltd.(*) | 2,920,248 | 27.3 | 796,387 | 83,140 | 879,527 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*) | 1,787,685 | 20.0 | 357,537 | — | 357,537 |
(In millions of won) | ||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
HanaCard Co., Ltd. | 15.0 | 304,351 | 45,515 | 349,866 | ||||||||||||||||
Korea IT Fund | 536,804 | 63.3 | 339,976 | — | 339,976 | |||||||||||||||
SK China Company Ltd.(*) | 2,603,336 | 27.3 | 709,961 | 83,793 | 793,754 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*) | 1,743,908 | 20.0 | 348,782 | — | 348,782 |
(*) | Net assets of these entities represent net assets excluding those attributable to their non-controlling interests. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profit (loss) | Other comprehensive income (loss) | Other increase (decrease) | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | — | (19,395 | ) | 105,168 | — | 879,527 | ||||||||||||||||||
Korea IT Fund (*1) | 339,976 | — | 4,753 | (7,459 | ) | (12,410 | ) | 324,860 | ||||||||||||||||
HanaCard Co., Ltd. | 349,866 | (368,389 | ) | 17,749 | 774 | — | — | |||||||||||||||||
UniSK | 19,156 | — | 2,424 | (741 | ) | — | 20,839 | |||||||||||||||||
SK Technology Innovation Company | 86,301 | — | (22,923 | ) | 5,997 | — | 69,375 | |||||||||||||||||
SK MENA Investment B.V. | 15,343 | — | (2,059 | ) | 1,012 | — | 14,296 | |||||||||||||||||
SK Latin America Investment S.A. | 14,004 | — | (2,083 | ) | 40 | — | 11,961 | |||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 348,782 | — | (6,975 | ) | 15,730 | — | 357,537 | |||||||||||||||||
Pacific Telecom Inc. | 43,789 | — | 2,890 | 1,863 | — | 48,542 | ||||||||||||||||||
SM. Culture & Contents Co., Ltd. | 60,261 | 37 | (756 | ) | 69 | — | 59,611 | |||||||||||||||||
Digital Games International Pte. Ltd. | 2,208 | (1,757 | ) | (562 | ) | 111 | — | — | ||||||||||||||||
Invites Healthcare Co., Ltd.(*2) | 26,474 | — | (11,759 | ) | (74 | ) | (14,641 | ) | — | |||||||||||||||
Nam Incheon Broadcasting Co., Ltd.(*1) | 12,525 | — | 1,186 | — | (136 | ) | 13,575 | |||||||||||||||||
Home Choice Corp. | 3,052 | — | 1,403 | 1 | — | 4,456 | ||||||||||||||||||
Konan Technology Inc. | 3,639 | 5,451 | (710 | ) | (14 | ) | — | 8,366 | ||||||||||||||||
CMES Inc.(*3) | — | — | — | — | 900 | 900 | ||||||||||||||||||
12CM JAPAN and others(*4) | 68,966 | 1,873 | 1,245 | — | (2,350 | ) | 69,734 | |||||||||||||||||
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| |||||||||||||
2,188,096 | (362,785 | ) | (35,572 | ) | 122,477 | (28,637 | ) | 1,883,579 | ||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||
Finnq Co., Ltd. | 7,255 | (3,840 | ) | (3,617 | ) | 202 | — | — | ||||||||||||||||
UTC Kakao-SK Telecom ESG Fund | 2,000 | 4,000 | (290 | ) | — | — | 5,710 | |||||||||||||||||
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9,255 | 160 | (3,907 | ) | 202 | — | 5,710 | ||||||||||||||||||
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(362,625 | ) | (39,479 | ) | 122,679 | (28,637 | ) | 1,889,289 | |||||||||||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Dividends distributed by the associates are deducted from the carrying amount for the year ended December 31, 2022. |
(*2) | The Group recognized |
(*3) | As the Group obtained significant influence over the investee, |
(*4) | The acquisition for the year ended December 31, 2022 includes |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | 2021 | |||||||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profit (loss) | Other compre- hensive income (loss) | Other increase (decrease) | Spin-off | Ending balance | ||||||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||||||
SK China Company Ltd.(*1) | — | 274,066 | 95,696 | (131,141 | ) | — | 793,754 | |||||||||||||||||||||
Korea IT Fund(*1) | 323,294 | — | 31,734 | (4,336 | ) | (10,716 | ) | — | 339,976 | |||||||||||||||||||
HanaCard Co., Ltd. | 314,930 | — | 35,057 | (121 | ) | — | — | 349,866 | ||||||||||||||||||||
SK Telecom CS T1 Co., Ltd.(*2) | 53,010 | 4,888 | (8,769 | ) | (575 | ) | — | (48,554 | ) | — | ||||||||||||||||||
NanoEnTek, Inc.(*2) | 43,190 | — | 1,836 | (86 | ) | — | (44,940 | ) | — | |||||||||||||||||||
UniSK | 15,700 | — | 1,475 | 1,981 | — | — | 19,156 | |||||||||||||||||||||
SK Technology Innovation Company | 41,579 | — | 39,256 | 5,466 | — | — | 86,301 | |||||||||||||||||||||
SK MENA Investment B.V. | 14,043 | — | 2 | 1,298 | — | — | 15,343 | |||||||||||||||||||||
SK hynix Inc.(*1,2) | 12,251,861 | 19,482 | 1,542,757 | 197,473 | (170,937 | ) | (13,840,636 | ) | — | |||||||||||||||||||
SK Latin America Investment S.A. | 13,930 | — | (49 | ) | 123 | — | — | 14,004 | ||||||||||||||||||||
Grab Geo Holdings PTE. LTD.(*2) | 30,063 | — | — | — | — | (30,063 | ) | — | ||||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 311,990 | — | (18,218 | ) | 55,010 | — | — | 348,782 | ||||||||||||||||||||
Pacific Telecom Inc. | 39,723 | — | 1,598 | 2,468 | — | — | 43,789 | |||||||||||||||||||||
SM. Culture & Contents Co., Ltd. | 62,248 | 144 | (2,484 | ) | 353 | — | — | 60,261 | ||||||||||||||||||||
Contents Wavve Co., Ltd.(*2) | 75,803 | 100,000 | (20,716 | ) | — | — | (155,087 | ) | — | |||||||||||||||||||
Hello Nature Co., Ltd.(*2,3) | 11,969 | 9,980 | (10,899 | ) | (1 | ) | (1,730 | ) | (9,319 | ) | — | |||||||||||||||||
Digital Games International Pte. Ltd. | 6,449 | — | (4,529 | ) | 288 | — | — | 2,208 | ||||||||||||||||||||
Invites Healthcare Co., Ltd. | 25,536 | 7,000 | (5,968 | ) | (94 | ) | — | — | 26,474 | |||||||||||||||||||
Nam Incheon Broadcasting Co., Ltd.(*1) | 10,902 | — | 1,759 | — | (136 | ) | — | 12,525 | ||||||||||||||||||||
NANO-X IMAGING LTD.(*2) | 28,484 | (47 | ) | (2,049 | ) | — | 2,437 | (28,825 | ) | — | ||||||||||||||||||
Home Choice Corp. | 3,585 | — | (533 | ) | — | — | — | 3,052 | ||||||||||||||||||||
Carrot General Insurance Co., Ltd.(*4) | 13,469 | 12,289 | (6,666 | ) | (358 | ) | (8,734 | ) | (10,000 | ) | — | |||||||||||||||||
Bertis Inc.(*2) | — | 15,739 | (423 | ) | — | — | (15,316 | ) | — | |||||||||||||||||||
UT LLC(*2) | — | 86,319 | (7,773 | ) | — | — | (78,546 | ) | — | |||||||||||||||||||
SPARKPLUS Co., Ltd.(*2) | — | 34,166 | — | — | — | (34,166 | ) | — | ||||||||||||||||||||
12CM JAPAN and others(*2,5) | 65,750 | 9,038 | (2,869 | ) | 7,693 | (1,624 | ) | (5,383 | ) | 72,605 | ||||||||||||||||||
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14,312,641 | 298,998 | 1,837,595 | 362,278 | (322,581 | ) | (14,300,835 | ) | 2,188,096 | ||||||||||||||||||||
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Investments in joint ventures: | ||||||||||||||||||||||||||||
Dogus Planet, Inc.(*2) | 15,071 | — | (6,990 | ) | (1,447 | ) | — | (6,634 | ) | — | ||||||||||||||||||
Finnq Co., Ltd. | 13,342 | — | (5,969 | ) | (118 | ) | — | — | 7,255 | |||||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC(*2) | 5,850 | 9,048 | (1,276 | ) | — | 892 | (14,514 | ) | — | |||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC(*2) | 1,600 | — | — | — | 142 | (1,742 | ) | — | ||||||||||||||||||||
Techmaker GmbH(*2) | 5,609 | — | (94 | ) | 145 | — | (5,660 | ) | — | |||||||||||||||||||
WAVVE Americas Inc. (Formerly, Korea Content Platform, Inc.)(*2) | — | 30,191 | (14 | ) | — | 598 | (30,775 | ) | — | |||||||||||||||||||
UTC Kakao-SK Telecom ESG Fund | — | 2,000 | — | — | — | — | 2,000 | |||||||||||||||||||||
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41,472 | 41,239 | (14,343 | ) | (1,420 | ) | 1,632 | (59,325 | ) | 9,255 | |||||||||||||||||||
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340,237 | 1,823,252 | 360,858 | (320,949 | ) | (14,360,160 | ) | 2,197,351 | |||||||||||||||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Dividends received from the associates are deducted from the carrying amount for the year ended December 31, 2021. |
(*2) | Investment in SK Telecom CS T1 Co., Ltd. and twenty-three other associates and joint ventures were transferred to the spin-off company for the year ended December 31, 2021. In addition, profit or loss related to investments in associates and joint ventures, which are transferred to the spin-off company, are included in profit or loss from discontinued operations. |
(*3) | The Group recognized |
(*4) | The Parent Company has entered into an agreement whereby the entire shares of Carrot General Insurance Co., Ltd. will transfer to T map Mobility Co., Ltd. In accordance with the agreement, the Parent Company reclassified the investments in Carrot General Insurance Co., Ltd. amounting to |
(*5) | The acquisition for the year ended December 31, 2021 includes |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(6) | The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of December 31, 2022 are as follows: |
(In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||
2022 | Cumulative loss | 2022 | Cumulative loss | |||||||||||||
Wave City Development Co., Ltd. | 8,695 | — | — | |||||||||||||
Daehan Kanggun BcN Co., Ltd. and others | — | 5,780 | — | (124 | ) | |||||||||||
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14,475 | — | (124 | ) | |||||||||||||
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13. | Property and Equipment |
(1) | Property and equipment as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||
December 31, 2022 | ||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | |||||||||||||
Land | — | — | 1,005,857 | |||||||||||||
Buildings | 1,736,257 | (950,582 | ) | (450 | ) | 785,225 | ||||||||||
Structures | 935,276 | (668,019 | ) | (1,601 | ) | 265,656 | ||||||||||
Machinery | 37,100,715 | (29,185,881 | ) | (1,934 | ) | 7,912,900 | ||||||||||
Other | 1,771,890 | (1,273,655 | ) | (841 | ) | 497,394 | ||||||||||
Right-of-use assets | 2,555,685 | (766,350 | ) | (3,206 | ) | 1,786,129 | ||||||||||
Construction in progress | 1,069,331 | — | — | 1,069,331 | ||||||||||||
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(32,844,487 | ) | (8,032 | ) | 13,322,492 | ||||||||||||
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(In millions of won) | ||||||||||||||||
December 31, 2021 | ||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | |||||||||||||
Land | — | — | 972,800 | |||||||||||||
Buildings | 1,692,239 | (897,336 | ) | (450 | ) | 794,453 | ||||||||||
Structures | 922,637 | (629,757 | ) | (1,601 | ) | 291,279 | ||||||||||
Machinery | 35,770,485 | (27,771,040 | ) | (1,518 | ) | 7,997,927 | ||||||||||
Other | 1,718,337 | (1,230,128 | ) | (493 | ) | 487,716 | ||||||||||
Right-of-use assets | 2,229,945 | (669,389 | ) | (1,223 | ) | 1,559,333 | ||||||||||
Construction in progress | 767,751 | — | — | 767,751 | ||||||||||||
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(31,197,650 | ) | (5,285 | ) | 12,871,259 | ||||||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
13. | Property and Equipment, Continued |
(2) | Changes in property and equipment for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Deprecia- tion | Impairment | Business combination (*) | Ending balance | |||||||||||||||||||||||||
Land | 79 | (175 | ) | 30,364 | — | — | 2,789 | 1,005,857 | ||||||||||||||||||||||||
Buildings | 794,453 | 1,071 | (638 | ) | 36,219 | (54,463 | ) | — | 8,583 | 785,225 | ||||||||||||||||||||||
Structures | 291,279 | 2,288 | (32 | ) | 10,422 | (38,301 | ) | — | — | 265,656 | ||||||||||||||||||||||
Machinery | 7,997,927 | 560,889 | (49,586 | ) | 1,696,447 | (2,292,358 | ) | (419 | ) | — | 7,912,900 | |||||||||||||||||||||
Other | 487,716 | 780,382 | (938 | ) | (672,199 | ) | (105,730 | ) | (391 | ) | 8,554 | 497,394 | ||||||||||||||||||||
Right-of-use assets | 1,559,333 | 720,932 | (65,961 | ) | (27,579 | ) | (403,794 | ) | (3,133 | ) | 6,331 | 1,786,129 | ||||||||||||||||||||
Construction in progress | 767,751 | 1,564,345 | (1,709 | ) | (1,261,937 | ) | — | — | 881 | 1,069,331 | ||||||||||||||||||||||
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3,629,986 | (119,039 | ) | (188,263 | ) | (2,894,646 | ) | (3,943 | ) | 27,138 | 13,322,492 | ||||||||||||||||||||||
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(*) | Includes assets acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Deprecia- tion(*1) | Impairment(*2) | Business combina- tion(*3) | Spin-off | Ending balance | ||||||||||||||||||||||||||||
Land | 634 | (21,557 | ) | 24,789 | — | — | — | (70,389 | ) | 972,800 | ||||||||||||||||||||||||||
Buildings | 858,606 | 3,919 | (9,706 | ) | 47,612 | (55,818 | ) | — | 639 | (50,799 | ) | 794,453 | ||||||||||||||||||||||||
Structures | 317,403 | 2,482 | (6,124 | ) | 16,546 | (37,968 | ) | — | — | (1,060 | ) | 291,279 | ||||||||||||||||||||||||
Machinery | 8,376,212 | 593,225 | (44,477 | ) | 1,816,003 | (2,394,351 | ) | (1,054 | ) | — | (347,631 | ) | 7,997,927 | |||||||||||||||||||||||
Other | 653,616 | 830,277 | (2,286 | ) | (607,271 | ) | (180,980 | ) | (495 | ) | 193 | (205,338 | ) | 487,716 | ||||||||||||||||||||||
Right-of-use assets | 1,472,035 | 672,723 | (60,159 | ) | (9,610 | ) | (433,970 | ) | (1,223 | ) | 507 | (80,970 | ) | 1,559,333 | ||||||||||||||||||||||
Construction in progress | 659,882 | 1,695,316 | (1,071 | ) | (1,554,047 | ) | — | — | — | (32,329 | ) | 767,751 | ||||||||||||||||||||||||
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3,798,576 | (145,380 | ) | (265,978 | ) | (3,103,087 | ) | (2,772 | ) | 1,339 | (788,516 | ) | 12,871,259 | ||||||||||||||||||||||||
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(*1) | Includes amounts related to discontinued operations. |
(*2) | The Group recognized impairment losses for obsolete assets for the year ended December 31, 2021. |
(*3) | Includes assets acquired from the acquisition of YLP Inc. and another company by T map Mobility Co., Ltd. and from the acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
14. | Investment Property |
(1) | Investment property as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Acquisition cost | Accumulated depreciation | Carrying amount | Acquisition cost | Accumulated depreciation | Carrying amount | |||||||||||||||||||
Land | — | 6,115 | 6,071 | — | 6,071 | |||||||||||||||||||
Buildings | 21,490 | (14,606 | ) | 6,884 | 21,021 | (13,668 | ) | 7,353 | ||||||||||||||||
Right-of-use assets | 17,057 | (4,919 | ) | 12,138 | 12,577 | (2,967 | ) | 9,610 | ||||||||||||||||
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(19,525 | ) | 25,137 | 39,669 | (16,635 | ) | 23,034 | ||||||||||||||||||
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(2) | Changes in investment property for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||
2022 | ||||||||||||||||
Beginning balance | Transfer | Depreciation | Ending balance | |||||||||||||
Land | 44 | — | 6,115 | |||||||||||||
Buildings | 7,353 | 564 | (1,033 | ) | 6,884 | |||||||||||
Right-of-use assets | 9,610 | 4,124 | (1,596 | ) | 12,138 | |||||||||||
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4,732 | (2,629 | ) | 25,137 | |||||||||||||
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(In millions of won) | ||||||||||||
2021 | ||||||||||||
Beginning balance | Transfer | Ending balance | ||||||||||
Land | 6,071 | 6,071 | ||||||||||
Buildings | — | 7,353 | 7,353 | |||||||||
Right-of-use assets | — | 9,610 | 9,610 | |||||||||
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23,034 | 23,034 | |||||||||||
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(3) | The Group recognized lease income of |
(4) | The fair value of investment property is |
15. | Leases |
(1) | Group as a lessee |
1) | Details of the right-of-use assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Land, buildings and structures | 1,392,925 | |||||||
Others | 239,211 | 166,408 | ||||||
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1,559,333 | ||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
15. | Leases, Continued |
(1) | Group as a lessee, Continued |
2) | Details of amounts recognized in the consolidated statements of income for the years ended December 31, 2022 and 2021 as a lessee are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Depreciation of right-of-use assets(*): | ||||||||
Land, buildings and structures | 338,304 | |||||||
Others | 57,295 | 95,666 | ||||||
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433,970 | ||||||||
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Interest expense on lease liabilities | 23,998 |
(*) | Includes amounts related to discontinued operations. |
Expenses related to short-term leases and leases of low-value assets the Group recognized are immaterial.
3) | The total cash outflows due to lease payments for the years ended December 31, 2022 and 2021 amounted to |
(2) | Group as a lessor |
1) | Finance lease |
The Group recognized interest income ofW910 million andW2,053 million on lease receivables for the years ended December 31, 2022 and 2021, respectively. The amounts for the year ended December 31, 2021 include profit or loss from discontinued operations.
The following table sets out a maturity analysis for lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2022.
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 2 years | 3,707 | |||
2 ~ 3 years | 2,062 | |||
3 ~ 4 years | 509 | |||
4 ~ 5 years | 231 | |||
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Undiscounted lease payments | ||||
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Unrealized finance income | ||||
Net investment in the lease | 17,139 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
15. | Leases, Continued |
(2) | Group as a lessor, Continued |
2) | Operating lease |
The Group recognized lease income ofW246,279 million andW230,140 million for the years ended December 31, 2022 and 2021, respectively, of which variable lease payments received areW8,622 million andW17,686 million, respectively.
The following table sets out a maturity analysis of lease payments, presenting the undiscounted fixed payments to be received subsequent to December 31, 2022.
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 2 years | 132,802 | |||
2 ~ 3 years | 60,808 | |||
3 ~ 4 years | 9,424 | |||
4 ~ 5 years | 3,520 | |||
More than 5 years | 1,706 | |||
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16. | Goodwill |
(1) | Goodwill as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Goodwill related to merger of Shinsegi Telecom, Inc. | 1,306,236 | |||||||
Goodwill related to acquisition of SK Broadband Co., Ltd. | 764,082 | 764,082 | ||||||
Other goodwill | 4,691 | 2,175 | ||||||
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2,072,493 | ||||||||
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
16. | Goodwill, Continued |
(2) | Details of the impairment testing of Goodwill as of December 31, 2022 is as follows: |
Goodwill is allocated to the following CGUs for the purpose of impairment testing.
• | goodwill related to Shinsegi Telecom, Inc.(*1): Cellular services; |
• | goodwill related to SK Broadband Co., Ltd.(*2): Fixed-line telecommunication services; and |
• | other goodwill: Others. |
(*1) | Goodwill related to merger of Shinsegi Telecom, Inc. |
The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 6.7% (2021: 6.6%) (pre-tax annual discount rate for 2022 and 2021: 9.0% and 9.0%) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 0.0% (2021: 0.5%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term wireless telecommunication industry growth rate.
(*2) | Goodwill related to acquisition of SK Broadband Co., Ltd. |
The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 6.7% (2021: 7.1%) (pre-tax annual discount rate for 2022 and 2021: 8.5% and 9.2%) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 1.0% (2021: 1.0%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term fixed-line telecommunication industry growth rate
(3) | Details of the changes in goodwill for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Beginning balance | 3,357,524 | |||||||
Acquisition(*) | 2,516 | 111,928 | ||||||
Other | — | (43 | ) | |||||
Spin-off | — | (1,396,916 | ) | |||||
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Ending balance | 2,072,493 | |||||||
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(*) | It consists of goodwill recognized as PS&Marketing Corporation’s acquisition of SK m&service Co., Ltd for the years ended December 31,2022. It consists of goodwill recognized as T map Mobility Co., Ltd.’s acquisition of YLP Inc. and another company, goodwill recognized as DREAMUS Company’s acquisition of Studio Dolphin Co., Ltd. and goodwill recognized from One Store Co., Ltd.’s acquisition of Rokmedia Co., Ltd. for the year ended December 31, 2021 (See Note 11). |
As of December 31, 2022 and 2021, accumulated impairment losses areW33,441 million, respectively.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
17. | Intangible Assets |
(1) | Intangible assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment loss | Carrying amount | |||||||||||||
Frequency usage rights(*1) | (1,499,158 | ) | (186,000 | ) | 2,082,432 | |||||||||||
Land usage rights | 59,389 | (58,165 | ) | — | 1,224 | |||||||||||
Industrial rights | 94,238 | (30,068 | ) | (12,378 | ) | 51,792 | ||||||||||
Development costs | 14,497 | (14,213 | ) | — | 284 | |||||||||||
Facility usage rights | 157,651 | (142,654 | ) | — | 14,997 | |||||||||||
Customer relations | 505,063 | (204,882 | ) | — | 300,181 | |||||||||||
Club memberships(*2) | 116,401 | — | (24,430 | ) | 91,971 | |||||||||||
Other(*3) | 4,627,565 | (3,839,030 | ) | (6,506 | ) | 782,029 | ||||||||||
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(5,788,170 | ) | (229,314 | ) | 3,324,910 | ||||||||||||
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(In millions of won) | December 31, 2021 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment loss | Carrying amount | |||||||||||||
Frequency usage rights(*1) | (4,476,046 | ) | (186,000 | ) | 2,559,689 | |||||||||||
Land usage rights | 48,318 | (45,586 | ) | — | 2,732 | |||||||||||
Industrial rights | 92,332 | (36,342 | ) | (36 | ) | 55,954 | ||||||||||
Development costs | 34,393 | (34,193 | ) | — | 200 | |||||||||||
Facility usage rights | 156,062 | (138,188 | ) | — | 17,874 | |||||||||||
Customer relations | 507,581 | (180,324 | ) | — | 327,257 | |||||||||||
Club memberships(*2) | 113,300 | — | (24,806 | ) | 88,494 | |||||||||||
Other(*3) | 4,347,971 | (3,524,002) | (6,400) | 817,569 | ||||||||||||
(8,434,681 | ) | (217,242 | ) | 3,869,769 |
(*1) | The Parent Company was reassigned 800 MHz, 1.8 GHz and 2.1 GHz band of frequency licenses from the Ministry of Science and Information and Communication Technology (“ICT”) in exchange for |
(*2) | Club memberships are classified as intangible assets with indefinite useful lives and are not amortized. |
(*3) | Other intangible assets primarily consist of computer software and others. |
71
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
17. | Intangible Assets, Continued |
(2) | Changes in intangible assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment (*1) | Business Combination(*2) | Ending balance | |||||||||||||||||||||||||
Frequency usage rights | — | — | — | (477,257 | ) | — | — | 2,082,432 | ||||||||||||||||||||||||
Land usage rights | 2,732 | — | — | — | (1,508 | ) | — | — | 1,224 | |||||||||||||||||||||||
Industrial rights | 55,954 | 13,428 | (823 | ) | (103 | ) | (4,324 | ) | (12,343 | ) | 3 | 51,792 | ||||||||||||||||||||
Development costs | 200 | — | — | — | (573 | ) | — | 657 | 284 | |||||||||||||||||||||||
Facility usage rights | 17,874 | 1,396 | (2 | ) | 252 | (4,523 | ) | — | — | 14,997 | ||||||||||||||||||||||
Customer relations | 327,257 | — | — | — | (27,076 | ) | — | — | 300,181 | |||||||||||||||||||||||
Club memberships | 88,494 | 9,926 | (7,113 | ) | — | — | (725 | ) | 1,389 | 91,971 | ||||||||||||||||||||||
Other | 817,569 | 108,144 | (380 | ) | 189,075 | (342,776 | ) | (16 | ) | 10,413 | 782,029 | |||||||||||||||||||||
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132,894 | (8,318 | ) | 189,224 | (858,037 | ) | (13,084 | ) | 12,462 | 3,324,910 | |||||||||||||||||||||||
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(*1) | The Group recognized the difference between recoverable amount and the carrying amount of intangible assets amounting to |
(*2) | Includes assets acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amorti- zation (*1) | Reversal (Impairment) (*2) | Business Combina- tion(*3) | Spin-off | Ending balance | ||||||||||||||||||||||||||||
Frequency usage rights | 1,145,999 | — | — | (519,075 | ) | — | — | — | 2,559,689 | |||||||||||||||||||||||||||
Land usage rights | 4,720 | 175 | (76 | ) | — | (2,087 | ) | — | — | — | 2,732 | |||||||||||||||||||||||||
Industrial rights | 71,442 | 5,158 | (8 | ) | 390 | (6,377 | ) | (36 | ) | — | (14,615 | ) | 55,954 | |||||||||||||||||||||||
Development costs | 9,364 | 1,279 | (150 | ) | — | (3,210 | ) | — | — | (7,083 | ) | 200 | ||||||||||||||||||||||||
Facility usage rights | 21,880 | 1,690 | (21 | ) | 328 | (6,003 | ) | — | — | — | 17,874 | |||||||||||||||||||||||||
Customer relations | 919,863 | 4,854 | (461 | ) | — | (53,342 | ) | — | 4,705 | (548,362 | ) | 327,257 | ||||||||||||||||||||||||
Club memberships | 106,865 | 6,518 | (9,925 | ) | — | — | 653 | — | (15,617 | ) | 88,494 | |||||||||||||||||||||||||
Brands | 374,096 | — | — | — | — | — | — | (374,096 | ) | — | ||||||||||||||||||||||||||
Other | 995,199 | 80,713 | (4,580 | ) | 276,890 | (421,213 | ) | (111 | ) | 5,059 | (114,388 | ) | 817,569 | |||||||||||||||||||||||
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1,246,386 | (15,221 | ) | 277,608 | (1,011,307 | ) | 506 | 9,764 | (1,074,161 | ) | 3,869,769 | ||||||||||||||||||||||||||
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(*1) | Includes amounts related to discontinued operations. |
(*2) | The Group recognized the difference between recoverable amount and the carrying amount of intangible assets amounting to |
(*3) | Includes assets acquired from the acquisition of YLP Co., Ltd. and another company by T map Mobility Co., Ltd., and Rokmedia Co., Ltd. by One Store Co., Ltd. |
72
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
17. | Intangible Assets, Continued |
(3) | Research and development expenditures recognized as expense for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Research and development costs expensed as incurred | 406,672 |
(*) | Includes amounts related to discontinued operations. |
(4) | Details of frequency usage rights as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||
Amount | Description | Commencement of | Completion of | |||||||
800MHz license | LTE service | Jul. 2021 | Jun. 2026 | |||||||
1.8GHz license | 414,317 | LTE service | Dec. 2021 | Dec. 2026 | ||||||
2.6GHz license | 485,670 | LTE service | Sep. 2016 | Dec. 2026 | ||||||
2.1GHz license | 311,381 | W-CDMA and LTE service | Dec. 2021 | Dec. 2026 | ||||||
3.5GHz license | 712,594 | 5G service | Apr. 2019 | Nov. 2028 | ||||||
28GHz license | 4,766 | 5G service | Jan. 2021 | May. 2023 | ||||||
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18. | Borrowings and Debentures |
(1) | Short-term borrowings as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||
Lender | Annual interest rate (%) | Maturity | December 31, 2022 | December 31, 2021 | ||||||||||||
BNK Securities. Co.,Ltd. | 4.60 | Jan. 20, 2023 | — | |||||||||||||
KEB Hana Bank | 6.62 | Oct. 31, 2023 | 30,000 | — | ||||||||||||
Hana Financial Investment Co., Ltd.(*) | 6.30 | May. 29, 2023 | 4,642 | 4,642 | ||||||||||||
DB Financial Investment Co., Ltd.(*) | 6.30 | May. 29, 2023 | 2,785 | 2,785 | ||||||||||||
Shinhan Financial Investment Co., Ltd.(*) | 6.20 | Feb. 20, 2023 | 5,571 | 5,571 | ||||||||||||
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12,998 | ||||||||||||||||
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|
(*) | PanAsia Semiconductor Materials LLC., a subsidiary of the Parent Company, has pledged its |
73
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(2) | Long-term borrowings as of December 31, 2022 and 2021 are as follows: |
(In millions of won and thousands of other currencies) | ||||||||||||
Lender | Annual interest | Maturity | December 31, 2022 | December 31, 2021 | ||||||||
Korea Development Bank(*1) | 1.87 | Feb. 10, 2026 | 50,000 | |||||||||
Korea Development Bank(*2) | 3M CD + 0.71 | Dec. 21, 2022 | — | 12,500 | ||||||||
Credit Agricole CIB(*2,3) | 3M CD + 0.82 | Dec. 14, 2023 | 12,500 | 25,000 | ||||||||
Export Kreditnamnden | 1.70 | Apr. 29, 2022 | — | 6,746 | ||||||||
(USD 5,690 | ) | |||||||||||
Mizuho bank, Ltd. | 1.35 | May. 20, 2024 | 100,000 | 100,000 | ||||||||
DBS bank Ltd. | 1.32 | May. 28, 2024 | 200,000 | 200,000 | ||||||||
DBS bank Ltd. | 2.68 | Mar. 10, 2025 | 200,000 | — | ||||||||
Credit Agricole CIB | 3.30 | Apr. 29, 2024 | 50,000 | — | ||||||||
Mizuho Bank, Ltd. | 3.29 | Nov. 27, 2023 | 100,000 | — | ||||||||
Nonghyup Bank(*4) | MOR + 1.96 | Nov. 17, 2024 | 40,000 | — | ||||||||
Credit Agricole CIB | 4.89 | Nov. 28, 2025 | 50,000 | — | ||||||||
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| |||||||||
793,125 | 394,246 | |||||||||||
Less: present value discount | (13 | ) | (59 | ) | ||||||||
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793,112 | 394,187 | |||||||||||
Less: current portions | (124,987 | ) | (41,065 | ) | ||||||||
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353,122 | ||||||||||||
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|
(*1) | The long-term borrowings are to be repaid by installments on an annual basis from 2022 to 2026. |
(*2) | 3M CD rates are 3.98% and 1.29% as of December 31, 2022 and 2021, respectively. |
(*3) | The long-term borrowings are to be repaid by installments on an annual basis from 2020 to 2023. |
(*4) | 6M MOR rates are 4.35% as of December 31, 2022. |
74
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2022 and 2021 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2022 | December 31, 2021 | ||||||||||
Unsecured corporate bonds | Operating and | 2022 | 3.30 | — | 140,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2032 | 3.45 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | Operating fund | 2023 | 3.03 | 230,000 | 230,000 | |||||||||
Unsecured corporate bonds | 2033 | 3.22 | 130,000 | 130,000 | ||||||||||
Unsecured corporate bonds | 2024 | 3.64 | 150,000 | 150,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2024 | 2.82 | 190,000 | 190,000 | |||||||||
Unsecured corporate bonds | Operating and | 2022 | 2.40 | — | 100,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2025 | 2.49 | 150,000 | 150,000 | |||||||||
Unsecured corporate bonds | 2030 | 2.61 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 2.66 | 70,000 | 70,000 | |||||||||
Unsecured corporate bonds | 2030 | 2.82 | 90,000 | 90,000 | ||||||||||
Unsecured corporate bonds | Operating and | 2025 | 2.55 | 100,000 | 100,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2035 | 2.75 | 70,000 | 70,000 | |||||||||
Unsecured corporate bonds | Operating fund | 2026 | 2.08 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | 2036 | 2.24 | 80,000 | 80,000 | ||||||||||
Unsecured corporate bonds | 2026 | 1.97 | 120,000 | 120,000 | ||||||||||
Unsecured corporate bonds | 2031 | 2.17 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2022 | 2.17 | — | 120,000 | |||||||||
Unsecured corporate bonds | 2027 | 2.55 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2032 | 2.65 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2022 | 2.63 | — | 80,000 | |||||||||
Unsecured corporate bonds | Refinancing fund | 2027 | 2.84 | 100,000 | 100,000 | |||||||||
Unsecured corporate bonds | 2023 | 2.81 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds | 2028 | 3.00 | 200,000 | �� | 200,000 | |||||||||
Unsecured corporate bonds | 2038 | 3.02 | 90,000 | 90,000 | ||||||||||
Unsecured corporate bonds | Operating and | 2023 | 2.33 | 150,000 | 150,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2038 | 2.44 | 50,000 | 50,000 | |||||||||
Unsecured corporate bonds | Operating fund | 2022 | 2.03 | — | 180,000 | |||||||||
Unsecured corporate bonds | 2024 | 2.09 | 120,000 | 120,000 | ||||||||||
Unsecured corporate bonds | 2029 | 2.19 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2039 | 2.23 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Operating and | 2022 | 1.40 | — | 120,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2024 | 1.49 | 60,000 | 60,000 | |||||||||
Unsecured corporate bonds | 2029 | 1.50 | 120,000 | 120,000 | ||||||||||
Unsecured corporate bonds | 2039 | 1.52 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2049 | 1.56 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Operating fund | 2022 | 1.69 | — | 230,000 | |||||||||
Unsecured corporate bonds | 2024 | 1.76 | 70,000 | 70,000 | ||||||||||
Unsecured corporate bonds | 2029 | 1.79 | 40,000 | 40,000 | ||||||||||
Unsecured corporate bonds | 2039 | 1.81 | 60,000 | 60,000 | ||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2023 | 1.64 | 170,000 | 170,000 |
75
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2022 | December 31, 2021 | ||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 1.75 | 130,000 | 130,000 | |||||||||
Unsecured corporate bonds | 2030 | 1.83 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2040 | 1.87 | 70,000 | 70,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2025 | 1.40 | 140,000 | 140,000 | |||||||||
Unsecured corporate bonds | 2030 | 1.59 | 40,000 | 40,000 | ||||||||||
Unsecured corporate bonds | 2040 | 1.76 | 110,000 | 110,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2024 | 1.17 | 80,000 | 80,000 | |||||||||
Unsecured corporate bonds | 2026 | 1.39 | 80,000 | 80,000 | ||||||||||
Unsecured corporate bonds | 2031 | 1.80 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2041 | 1.89 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2024 | 2.47 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | 2026 | 2.69 | 70,000 | 70,000 | ||||||||||
Unsecured corporate bonds | 2041 | 2.68 | 40,000 | 40,000 | ||||||||||
Unsecured corporate bonds | 2025 | 3.80 | 240,000 | — | ||||||||||
Unsecured corporate bonds | 2027 | 3.84 | 70,000 | — | ||||||||||
Unsecured corporate bonds | 2042 | 3.78 | 40,000 | — | ||||||||||
Unsecured corporate bonds | 2025 | 4.00 | 300,000 | — | ||||||||||
Unsecured corporate bonds | 2027 | 4.00 | 95,000 | — | ||||||||||
Unsecured corporate bonds | 2024 | 4.79 | 100,000 | — | ||||||||||
Unsecured corporate bonds | 2025 | 4.73 | 110,000 | — | ||||||||||
Unsecured corporate bonds | 2027 | 4.74 | 60,000 | — | ||||||||||
Unsecured corporate bonds | 2032 | 4.69 | 40,000 | — | ||||||||||
Unsecured corporate bonds(*1) | Operating fund | 2022 | 2.26 | — | 150,000 | |||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2022 | 2.70 | — | 140,000 | |||||||||
Unsecured corporate bonds(*1) | 2023 | 2.93 | 80,000 | 80,000 | ||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2022 | 2.00 | — | 50,000 | |||||||||
Unsecured corporate bonds(*1) | 2024 | 2.09 | 160,000 | 160,000 | ||||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2022 | 1.71 | — | 80,000 | |||||||||
Unsecured corporate bonds(*1) | 2024 | 1.71 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds(*1) | 2026 | 1.86 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2023 | 1.48 | 100,000 | 100,000 | |||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2025 | 1.64 | 100,000 | 100,000 |
76
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2022 | December 31, 2021 | ||||||||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2025 | 1.41 | 160,000 | 160,000 | |||||||||||||||
Unsecured corporate bonds(*1) | 2024 | 1.69 | 100,000 | 100,000 | ||||||||||||||||
Unsecured corporate bonds(*1) | 2025 | 2.58 | 100,000 | — | ||||||||||||||||
Unsecured corporate bonds(*1) | 2032 | 2.92 | 50,000 | — | ||||||||||||||||
Unsecured global bonds | Operating fund | 2027 | 6.63 | | 506,920 (USD 400,000 | ) | | 474,200 (USD 400,000 | ) | |||||||||||
Unsecured global bonds | 2023 | 3.75 | | 633,650 (USD 500,000 | ) | | 592,750 (USD 500,000 | ) | ||||||||||||
Unsecured global bonds(*1) | Refinancing fund | 2023 | 3.88 | | 380,190 (USD 300,000 | ) | | 355,650 (USD 300,000 | ) | |||||||||||
Floating rate notes(*2) | Operating fund | 2025 | | 3M LIBOR +0.91 |
| | 380,190 (USD 300,000 | ) | | 355,650 (USD 300,000 | ) | |||||||||
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8,385,950 | 8,448,250 | |||||||||||||||||||
Less: discounts on bond | (19,256 | ) | (21,567 | ) | ||||||||||||||||
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8,366,694 | 8,426,683 | |||||||||||||||||||
Less: current portions of bonds | (1,842,599 | ) | (1,389,259 | ) | ||||||||||||||||
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| |||||||||||||||||
6,524,095 | 7,037,424 | |||||||||||||||||||
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|
(*1) | Unsecured corporate bonds were issued by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(*2) | 3M LIBOR rates are 4.75% and 0.21% as of December 31, 2022 and 2021, respectively. |
77
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
19. | Long-term Payables – other |
(1) | As of December 31, 2022 and 2021, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 17): |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Long-term payables – other | 2,090,715 | |||||||
Present value discount on long-term payables – other | (52,129 | ) | (80,882 | ) | ||||
Current installments of long-term payables – other | (398,874 | ) | (398,823 | ) | ||||
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| |||||
Carrying amount as of December 31 | 1,611,010 | |||||||
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|
|
(2) | The sum of portions repaid among the principal of long-term payables – other for the years ended December 31, 2022 and 2021 amounts at |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 3 years | 738,300 | |||
3 ~ 5 years | 460,538 | |||
More than 5 years | 91,387 | |||
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20. | Provisions |
Changes in provisions for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2022 | As of December 31, 2022 | |||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business combination | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration | 6,823 | (5,679 | ) | (1,767 | ) | (10 | ) | 991 | 115,089 | 36,998 | 78,091 | |||||||||||||||||||||||||
Emission allowance | 1,885 | 2,719 | — | (2,418 | ) | — | — | 2,186 | 2,186 | — | ||||||||||||||||||||||||||
Other provisions | 10,379 | 4,071 | (9,509 | ) | (3,080 | ) | (38 | ) | — | 1,823 | 499 | 1,324 | ||||||||||||||||||||||||
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13,613 | (15,188 | ) | (7,265 | ) | (48 | ) | 991 | 119,098 | 39,683 | 79,415 | ||||||||||||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
2021 | As of December 31, 2021 | |||||||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business combination | Spin-off | Ending balance | Current | Non-current | |||||||||||||||||||||||||||||||
Provision for restoration | 12,648 | (6,283 | ) | (440 | ) | 172 | — | (5,019 | ) | 114,731 | 59,204 | 55,527 | ||||||||||||||||||||||||||||
Emission allowance | 7,424 | 1,368 | (1,091 | ) | (5,816 | ) | — | — | — | 1,885 | 1,885 | — | ||||||||||||||||||||||||||||
Other provisions | 29,800 | 1,655 | (18,909 | ) | (1,820 | ) | — | 385 | (732 | ) | 10,379 | 567 | 9,812 | |||||||||||||||||||||||||||
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15,671 | (26,283 | ) | (8,076 | ) | 172 | 385 | (5,751 | ) | 126,995 | 61,656 | 65,339 | |||||||||||||||||||||||||||||
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
21. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Present value of defined benefit obligations | 1,035,016 | |||||||
Fair value of plan assets | (1,214,007 | ) | (1,040,286 | ) | ||||
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| |||||
Defined benefit assets(*) | (175,748 | ) | (18,427 | ) | ||||
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| |||||
Defined benefit liabilities | 61 | 13,157 | ||||||
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(*) | Since the 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) | Principal actuarial assumptions as of December 31, 2022 and 2021 are as follows: |
December 31, 2022 | December 31, 2021 | |||
Discount rate for defined benefit obligations | 5.09% ~ 5.71% | 2.35 ~ 3.29% | ||
Expected rate of salary increase | 2.00% ~ 8.37% | 2.00 ~ 5.29% |
Discount rate for defined benefit obligation is determined based on market yields of high-quality corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Group’s historical promotion index, inflation rate and salary increase ratio.
(3) | Changes in defined benefit obligations for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*1) | |||||||
Beginning balance | 1,278,550 | |||||||
Current service cost | 134,847 | 186,395 | ||||||
Interest cost | 32,572 | 28,617 | ||||||
Remeasurement - Demographic assumption | (28,222 | ) | (794 | ) | ||||
- Financial assumption | (84,532 | ) | (29,399 | ) | ||||
- Adjustment based on experience | 2,369 | 5,773 | ||||||
Business combinations(*2) | 29,357 | — | ||||||
Benefit paid | (79,117 | ) | (114,897 | ) | ||||
Spin-off | — | (318,476 | ) | |||||
Others(*3) | (3,970 | ) | (753 | ) | ||||
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| |||||
Ending balance | 1,035,016 | |||||||
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(*1) | Includes amounts related to discontinued operations. |
(*2) | Includes liabilities acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(*3) | Others include changes of liabilities due to employee’s transfers among affiliates for the years ended December 31, 2022 and 2021. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
21. | Defined Benefit Liabilities (Assets), Continued |
(4) | Changes in plan assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*1) | |||||||
Beginning balance | 1,127,163 | |||||||
Interest income | 32,910 | 24,550 | ||||||
Remeasurement | (18,622 | ) | (3,798 | ) | ||||
Contributions | 215,254 | 152,208 | ||||||
Benefit paid | (83,123 | ) | (100,511 | ) | ||||
Business combinations(*2) | 26,618 | — | ||||||
Spin-off | — | (157,522 | ) | |||||
Others | 684 | (1,804 | ) | |||||
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Ending balance | 1,040,286 | |||||||
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(*1) | Includes amounts related to discontinued operations. |
(*2) | Includes assets acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
The Group expects to contributeW191,597 million to the defined benefit plans in 2023.
(5) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the statement of income) for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Current service cost | 186,395 | |||||||
Net interest cost | (338 | ) | 4,067 | |||||
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190,462 | ||||||||
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(*) | Includes amounts related to discontinued operations. |
Costs related to the defined benefit except for the amounts transferred to construction in progress are included labor expenses and research and development expenses.
(6) | Details of plan assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Equity instruments | 25,083 | |||||||
Debt instruments | 174,385 | 228,534 | ||||||
Short-term financial instruments, etc. | 1,021,906 | 786,669 | ||||||
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1,040,286 | ||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
21. | Defined Benefit Liabilities (Assets), Continued |
(7) | As of December 31, 2022, effects on defined benefit obligations if each of significant actuarial assumptions changes within expectable and reasonable range are as follows: |
(In millions of won) | ||||||||
0.5% Increase | 0.5% Decrease | |||||||
Discount rate | 38,337 | |||||||
Expected salary increase rate | 38,500 | (36,315 | ) |
The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan and provides approximate values of sensitivity for the assumptions used.
A weighted average duration of defined benefit obligations as of December 31, 2022 and 2021 are 7.53 years and 9.19 years, respectively.
22. | Derivative Instruments |
(1) | Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, 2022 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||
Borrowing | Hedging Instrument (Hedged item) | Hedged risk | Financial institution | Duration of contract | ||||
Jul. 20, 2007 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000) | Foreign currency risk | Morgan Stanley and four other banks | Jul. 20, 2007 ~ Jul. 20, 2027 | ||||
Apr. 16, 2018 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 500,000) | Foreign currency risk | The Export-Import Bank of Korea and three other banks | Apr. 16, 2018 ~ Apr. 16, 2023 | ||||
Mar. 4, 2020 | Floating-to-fixed cross-currency interest rate swap (U.S. dollar-denominated bonds face value of USD 300,000) | Foreign currency risk and Interest rate risk | Citibank | Mar. 4, 2020 ~ Jun. 4, 2025 | ||||
Aug. 13, 2018 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000) | Foreign currency risk | Citibank | Aug. 13, 2018 ~ Aug. 13, 2023 | ||||
Dec. 19, 2018 | Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 12,500) | Interest rate risk | Credit Agricole CIB | Mar. 19, 2019 ~ Dec. 14, 2023 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
22. | Derivative Instruments, Continued |
(2) | SK Broadband Co., Ltd., a subsidiary of the Parent Company, entered into Total Return Swap(TRS) contract amounting to |
(3) | In relation to the business acquisition by SK Broadband Co., Ltd. for the year ended December 31, 2020 the Parent Company has entered into a shareholders’ agreement with the shareholders of the acquirees. Pursuant to the agreement, when certain conditions are met within a period of time subsequent to the merger, the shareholders of the acquirees can exercise their drag-along rights and require the Parent Company to sell its shares in SK Broadband Co., Ltd. Should the shareholders exercise their drag-along rights, the Parent Company also can exercise its call options over the shares held by those shareholders. The Group recognized a long-term derivative financial liability of |
The fair value of SK Broadband Co., Ltd.’s common stock was estimated using 5-year projected cash flows discounted at 6.7% per annum. The fair value of the derivative financial liability was determined by using the Binomial Model based on various assumptions including the price of common stock and its price fluctuations. The significant unobservable inputs used in the fair value measurement and inter-relationship between significant unobservable inputs and fair value measurement are as follows:
Significant unobservable inputs | Correlations between inputs and fair value measurements | |
Fair value of SK Broadband Co., Ltd.’s common stock | The estimated fair value of derivative financial liabilities would decrease (increase) if the fair value of common stock would increase (decrease) | |
Volatility of stock price | The estimated fair value of derivative financial liabilities would decrease (increase) if the volatility of stock price increase (decrease) |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
22. | Derivative Instruments, Continued |
(4) | The Group has entered into the agreement with Newberry Global Limited, whereby the Group has been granted subscription right and contingent subscription right to acquire Newberry series-C redeemable convertible preferred stock for the year ended December 31, 2020. The Group recognized derivative financial assets of |
The fair value of Newberry series-C redeemable convertible preferred stock (“RCPS”) was estimated using the fair value of Newberry Global Limited’s common stock which was estimated by using market approach and its price fluctuations. The fair value of derivative financial asset was determined by using the Binomial Model based on various assumptions including the price of RCPS and its price fluctuations. Meanwhile, if the fair value of RCPS, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative financial asset would increase (decrease). If the volatility of stock price, significant unobservable input used in the fair value measurement, increases (decrease), the estimated fair value of derivative financial asset would increase (decrease).
(5) | The Parent Company has entered into the agreement with HAEGIN Co., Ltd., whereby the Parent Company has been granted contingent subscription right to acquire HAEGIN Co., Ltd.‘s common stock for the year ended December 31, 2022. The Parent Company is able to exercise the right in accordance with the agreement when certain conditions are met and recognized long-term derivative financial assets of |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
22. | Derivative Instruments, Continued |
(6) | The fair value of derivative financial instruments to which the Group applies cash flow hedge is recorded in the consolidated financial statements as derivative financial assets, long-term derivative financial assets. As of December 31, 2022, details of fair values of the derivatives assets and liabilities are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||
Hedging instrument (Hedged item) | Cash flow hedge | Fair value | ||||||
Current assets: | ||||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000) | 44,365 | |||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 500,000) | 102,780 | 102,780 | ||||||
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 12,500) | 164 | 164 | ||||||
Non-current assets: | ||||||||
Fixed-to-fixed cross currency swap (U.S dollar denominated bonds face value of USD 400,000) | 82,735 | |||||||
Floating-to-fixed cross currency interest rate swap (U.S dollar denominated bonds face value of USD 300,000) | 37,107 | 37,107 | ||||||
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267,151 | ||||||||
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(7) | The fair value of derivatives held for trading is recorded in the consolidated financial statements as derivative financial assets, long-term derivative financial assets and long-term derivative financial liabilities. As of December 31, 2022, details of fair values of the derivative assets and liabilities are as follows: |
(In millions of won) | ||||||||
Held for trading | Fair value | |||||||
Current assets: | ||||||||
Contingent subscription right | 8,083 | |||||||
Subscription right | 13,135 | 13,135 | ||||||
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21,218 | 21,218 | |||||||
Non-current assets: | ||||||||
Contingent subscription right | 6,895 | 6,895 | ||||||
Total return swap | 25,896 | 25,896 | ||||||
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32,791 | 32,791 | |||||||
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54,009 | ||||||||
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Non-current liabilities: | ||||||||
Drag-along and call option rights | (302,593 | ) |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share Capital and Capital Surplus and Others |
(1) | Details of share capital as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Number of authorized shares(*1) | 670,000,000 | 670,000,000 | ||||||
Par value (in won)(*1) | 100 | 100 | ||||||
Number of issued shares | 218,833,144 | 218,833,144 | ||||||
Share capital: | ||||||||
Common share(*2) | 30,493 |
(*1) | As a result of stock split and the spin-off for the year ended December 31, 2021, the number of shares that the Parent Company is allowed to issue under its article of incorporation has changed from 220,000,000 shares with a par value of W500 to 670,000,000 shares with a par value of W100. |
(*2) | The Parent Company’s share capital decreased by W14,146 million as a result of spin-off for the year ended December 31, 2021. In addition, the Parent Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation, as a result, the Parent Company’s issued shares have decreased without change in share capital for the year ended December 31, 2021. Meanwhile, 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 issued shares have decreased without change in share capital. |
(2) | Changes in issued shares for the years ended December 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Issued shares as of January 1 | 218,833,144 | 80,745,711 | ||||||
Retirement of treasury shares(*1) | — | (8,685,568 | ) | |||||
Stock split(*2) | — | 288,240,572 | ||||||
Spin-off(*3) | — | (141,467,571 | ) | |||||
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Issued shares as of December 31 | 218,833,144 | 218,833,144 | ||||||
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(*1) | The Parent Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation for the year ended December 31, 2021. |
(*2) | The stock split of the Parent Company’s common share was approved at the shareholders’ meeting held on October 12, 2021, to increase the number of its outstanding shares, effective from October 28, 2021. The par value of issued shares has changed from |
(*3) | The allocation of new shares to shareholders of the spin-off company is based on the number of shares at par value of |
Surviving Company | Spin-off Company | |||
Company name | SK Telecom Co., Ltd. | SK Square Co., Ltd. | ||
Common shares (in the number of shares) | 0.6073625 | 0.3926375 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share Capital and Capital Surplus and Others, Continued |
(3) | Details of shares outstanding as of December 31, 2022 and 2021 are as follows: |
(In shares) | December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 218,833,144 | 801,091 | 218,032,053 | 218,833,144 | 1,250,992 | 217,582,152 |
(4) | Details of capital surplus and others as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Paid-in surplus | 1,771,000 | |||||||
Treasury shares (Note 24) | (36,702 | ) | (57,314 | ) | ||||
Hybrid bonds (Note 25) | 398,759 | 398,759 | ||||||
Share option (Note 26) | 2,061 | 47,166 | ||||||
Others (*) | (13,702,235 | ) | (13,783,337 | ) | ||||
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(11,623,726 | ) | |||||||
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(*) | 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. |
24. | Treasury Shares |
(1) | Treasury shares as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for the number of shares) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Number of shares | 801,091 | 1,250,992 | ||||||
Acquisition cost | 57,314 |
(2) | Changes in treasury shares for the years ended December 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Treasury shares as of January 1 | 1,250,992 | 9,418,558 | ||||||
Acquisition (*1) | — | 288,000 | ||||||
Disposal (*2) | — | (626,740 | ) | |||||
Retirement of treasury shares (*3) | — | (8,685,568 | ) | |||||
Stock split (*4) | — | 1,577,000 | ||||||
Spin-off (*5) | — | (719,955 | ) | |||||
Disposal (*6) | (449,901 | ) | (303 | ) | ||||
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Treasury shares as of December 31 | 801,091 | 1,250,992 | ||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
24. | Treasury Shares, Continued |
(2) | Changes in treasury shares for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | The Parent Company acquired 288,000 of its treasury shares for |
(*2) | The Parent Company distributed 626,240 treasury shares (acquisition cost: |
(*3) | The Parent Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation, as a result, the Parent Company’s issued shares have decreased without change in share capital for the year ended December 31, 2021. |
(*4) | The stock split of the Parent Company’s common stock was approved at the shareholders’ meeting held on October 12, 2021, to increase the number of its outstanding shares, effective from October 28, 2021. |
(*5) | 773,987 treasury shares, some of treasury shares held by the Parent Company, have been replaced common shares of SK Square Co., Ltd., spin-off company, due to spin-off for the year ended December 31, 2021. Meanwhile, the Parent Company acquired 54,032 of its treasury shares (acquisition cost: |
(*6) | The Parent Company distributed 303 treasury shares (acquisition cost: |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
25. | Hybrid Bonds |
Hybrid bonds classified as equity as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||
Type | Issuance date | Maturity(*1) | Annual interest rate(%)(*2) | December 31, 2022 | December 31, 2021 | |||||||||||||||||
Series 2-1 hybrid bonds | Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.70 | 300,000 | |||||||||||||||||
Series 2-2 hybrid bonds | Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.65 | 100,000 | 100,000 | ||||||||||||||||
Issuance costs | (1,241 | ) | (1,241 | ) | ||||||||||||||||||
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398,759 | ||||||||||||||||||||||
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As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Parent Company classified the hybrid bonds as equity.
These are subordinated bonds which rank before common shares in the event of a liquidation or reorganization of the Parent Company.
(*1) | The Parent Company has a right to extend the maturity without any notice or announcement. |
(*2) | Annual interest rate is determined as yield rate of 5-year national bond plus premium. According to the step-up clause, additional premium of 0.25% and 0.75%, respectively, after 10 years and 25 years from the issuance date are applied. |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. | Share based payment arrangement |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows: |
1) | Share-based payment arrangement with cash alternatives |
Series | ||||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5(*2) | 6(*2) | ||||||||||||||||||||||
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 (*1) (in share) | 67,320 | 67,320 | 4,124 | 8,907 | 5,266 | 376,313 | 87,794 | |||||||||||||||||||||
Exercise price (*1) (in won) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Exercise period | | 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 | | 3 years’ service from | | | 4 years’ service from | | | 2 years’ service from | | | 2 years’ service from | | | 2 years’ service from | | | 3 years’ service from the grant date |
| | 2 years’ service from the grant date |
|
Series | ||||||
7-1 | 7-2(*2) | |||||
Grant date | March 25, 2022 | |||||
Types of shares to be issued | Registered common shares | |||||
Grant method | Reissue of treasury shares, Cash settlement |
| ||||
Number of shares (in share) | 295,275 | 109,704 | ||||
Exercise price (in won) | 56,860 | 56,860 | ||||
Exercise period | Mar. 26, 2025 ~ Mar. 25, 2029 | | Mar. 26, 2024 ~ Mar. 25, 2027 |
| ||
Vesting conditions | 2 years’ service from the grant date | | 2 years’ service from the grant date |
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. | Share based payment arrangement, Continued |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued: |
2) | Cash-settled share-based payment arrangement |
2021 | 2022 | |||||||||||
Share appreciation rights of SK Telecom Co., Ltd. (*3) | Share appreciation rights of SK Square Co., Ltd. (*3) | Share appreciation rights of SK Telecom Co., Ltd. (*3) | ||||||||||
Grant date | January 1, 2021 | January 1, 2022 | ||||||||||
Grant method | Cash settlement | |||||||||||
Number of shares (*1) (in share) | 183,246 | 118,456 | 338,525 | |||||||||
Exercise price (*1) (in won) | 50,276 | 56,860 | ||||||||||
Exercise period | Jan. 1, 2023 ~ Mar. 28, 2024 | Jan. 1, 2024 ~ Mar. 25, 2025 | ||||||||||
Vesting conditions | 2 years’ service from the grant date | 2 years’ service from the grant date |
(*1) | Number of shares granted and exercise price are adjusted as a result of stock split and the spin-off for the year ended December 31, 2021, and the remaining part of 1-1st share option and 3rd share option were fully and partially exercised for the year ended December 31, 2022, respectively. |
(*2) | Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022 and 2021. |
(*3) | The Parent Company newly established the long-term incentive policy as part of the compensation related to the growth of corporate value and granted cash settled share appreciation rights to executives. Meanwhile, parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022. |
(2) | The Parent Company has changed the accounting treatment for share-based payment arrangements with cash alternatives from equity-settled share-based payment arrangements to cash-settled share-based payment arrangements for the year ended December 31, 2022. The fair value of the goods or services that the Parent Company acquired from its employees and the liability incurred at the date of reclassification is W4,221 million, which is included in accrued expenses as of December 31, 2022. The Parent Company recognized the difference between the fair value of the liability at the date of reclassification and amount of the share options that the Parent Company had already recognized as capital surplus and others. Share compensation expense for share-based payment arrangements with cash alternatives recognized for the year ended December 31, 2022 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, 2021 | ||||
For the year ended December 31, 2022 | 78,600 | |||
In subsequent periods | 40 | |||
|
| |||
|
|
The carrying amount of liabilities recognized by the Parent Company in relation to the cash-settled share-based payment arrangement isW906 million andW1,774 million as of December 31, 2022 and 2021, respectively.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. | Share based payment arrangement, Continued |
(3) | The Parent Company used binomial option pricing model in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows: |
1) | Share-based payment arrangement with cash alternatives |
(i) | SK Telecom Co., Ltd. |
(In won) | Series | |||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||||||
Risk-free interest rate | 3.67 | % | 3.70 | % | 3.65 | % | 3.70 | % | 3.70 | % | 3.76 | % | 3.74 | % | ||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | |||||||||||||||||||||
Share price on the remeasurement date | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | |||||||||||||||||||||
Expected volatility | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | ||||||||||||||
Expected dividends | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | ||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Per-share fair value of the option(*) | 250 | 947 | 357 | 1,639 | 2,289 | 9,628 | 3,837 |
(In won) | Series | |||||||
7-1 | 7-2 | |||||||
Risk-free interest rate | 3.75 | % | 3.76 | % | ||||
Estimated option’s life | 7 years | 5 years | ||||||
Share price on the remeasurement date | 47,400 | 47,400 | ||||||
Expected volatility | 20.80 | % | 20.80 | % | ||||
Expected dividends | 6.90 | % | 6.90 | % | ||||
Exercise price | 56,860 | 56,860 | ||||||
Per-share fair value of the option | 3,153 | 2,693 |
(ii) | SK Square Co., Ltd. |
(In won) | Series | |||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | 1.55 | % | ||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | |||||||||||||||||||||
Share price (Closing price on the preceding day)(*) | 52,500 | 52,500 | 48,700 | 51,800 | 50,600 | 34,900 | 49,800 | |||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | 25.70 | % | ||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | 4.00 | % | ||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Per-share fair value of the option(*) | 4,048 | 3,096 | 4,798 | 1,720 | 1,622 | 192 | 8,142 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. | Share based payment arrangement, Continued |
(3) | The Parent Company used binomial option pricing model 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: |
2) | Cash-settled share-based payment arrangement |
(In won) | 2021 | 2022 | ||||||||||
Share appreciation rights of SK Telecom Co., Ltd. | Share appreciation rights of SK Square Co., Ltd. | Share appreciation rights of SK Telecom Co., Ltd. | ||||||||||
Risk-free interest rate | 3.70 | % | 3.70 | % | 3.72 | % | ||||||
Estimated option’s life | 3.25 years | 3.25 years | 3.25 years | |||||||||
Share price on the remeasurement date | 47,400 | 33,550 | 47,400 | |||||||||
Expected volatility | 20.80 | % | 37.40 | % | 20.80 | % | ||||||
Expected dividends | 6.90 | % | 0.00 | % | 6.90 | % | ||||||
Exercise price(*) | 50,276 | 50,276 | 56,860 | |||||||||
Per-share fair value of the option | 2,308 | 1,760 | 1,625 |
(*) | Share price (closing price on the preceding day), exercise price and per-share fair value of the option are adjusted as a result of stock split and spin-off for the year ended December 31, 2021. |
Meanwhile, the Board of Directors of the Parent Company resolved to dispose its treasury shares for the purpose of allotment of shares as bonus payment on October 12, 2021. The transaction is equity-settled share-based payment transactions in accordance with KIFRS 1102 and 505,350 shares (before stock split) were granted on October 12, 2021 (i.e., grant date). 7,700 shares (before stock split) out of 505,350 shares (before stock split) were transferred to spin-off company on November 1, 2021. Vesting conditions are 6 months from the grant date and per-share fair value on the grant date are measured at W300,500 that is closing price of common shares on the grant date before stock split and spin-off. The fair value of these share-based payment on the grant date isW151,858 million, among which the awards with a fair value ofW9,935 million were transferred to spin-off company.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
27. | Retained Earnings |
(1) | Retained earnings as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Appropriated: | ||||||||
Legal reserve | 22,320 | |||||||
Reserve for business expansion | 9,631,138 | 11,631,138 | ||||||
Reserve for technology development | 4,365,300 | 4,365,300 | ||||||
|
|
|
| |||||
13,996,438 | 15,996,438 | |||||||
Unappropriated | 8,444,953 | 6,418,583 | ||||||
|
|
|
| |||||
22,437,341 | ||||||||
|
|
|
|
(2) | Legal reserve |
The Korean Commercial Act requires the Parent Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.
28. | Reserves |
(1) | Details of reserves, net of taxes, as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Valuation gain on FVOCI | 633,240 | |||||||
Other comprehensive gain of investments in associates and joint ventures | 173,477 | 53,770 | ||||||
Valuation gain on derivatives | 14,463 | 33,918 | ||||||
Foreign currency translation differences for foreign operations | 30,012 | 14,310 | ||||||
|
|
|
| |||||
735,238 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
28. | Reserves, Continued |
(2) | Changes in reserves for the years ended December 31, 2022 and 2021 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 as of January 1, 2021 | (392,333 | ) | 17,615 | (24,122 | ) | 40,139 | ||||||||||||||
Changes, net of taxes | 194,261 | 446,103 | 16,303 | 38,432 | 695,099 | |||||||||||||||
Balance as of December 31, 2021 | 53,770 | 33,918 | 14,310 | 735,238 | ||||||||||||||||
Changes, net of taxes | (459,959 | ) | 119,707 | (19,455 | ) | 15,702 | (344,005 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance as of December 31, 2022 | 173,477 | 14,463 | 30,012 | 391,233 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(3) | Changes in valuation gain (loss) on financial assets at FVOCI for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Balance as of January 1 | 438,979 | |||||||
Amount recognized as other comprehensive income for the year, net of taxes | (490,959 | ) | 627,833 | |||||
Amount reclassified to retained earnings, net of taxes | 31,000 | (12,429 | ) | |||||
Changes from spin-off, net of taxes | — | (421,143 | ) | |||||
|
|
|
| |||||
Balance as of December 31 | 633,240 | |||||||
|
|
|
|
(4) | Changes in valuation gain (loss) on derivatives for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Balance as of January 1 | 17,615 | |||||||
Amount recognized as other comprehensive income for the year, net of taxes | (25,630 | ) | 9,731 | |||||
Amount reclassified to profit, net of taxes | 6,175 | 6,572 | ||||||
|
|
|
| |||||
Balance as of December 31 | 33,918 | |||||||
|
|
|
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
29. | Other Operating Expenses |
Details of other operating expenses for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Communication | 32,462 | |||||||
Utilities | 401,025 | 350,678 | ||||||
Taxes and dues | 49,445 | 33,935 | ||||||
Repair | 435,572 | 425,606 | ||||||
Research and development | 340,864 | 347,711 | ||||||
Training | 39,632 | 31,761 | ||||||
Bad debt for accounts receivable – trade | 27,053 | 29,402 | ||||||
Travel | 15,684 | 7,813 | ||||||
Supplies and other | 113,839 | 101,656 | ||||||
|
|
|
| |||||
1,361,024 | ||||||||
|
|
|
|
30. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Other Non-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 39,136 | |||||||
Others | 39,913 | 75,417 | ||||||
|
|
|
| |||||
114,553 | ||||||||
|
|
|
| |||||
Other Non-operating Expenses: | ||||||||
Impairment loss on property and equipment and intangible assets | 3,135 | |||||||
Loss on disposal of property and equipment and intangible assets | 20,465 | 28,158 | ||||||
Donations | 13,125 | 12,800 | ||||||
Bad debt for accounts receivable – other | 3,011 | 3,995 | ||||||
Others | 19,992 | 21,265 | ||||||
|
|
|
| |||||
69,353 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
31. | Finance Income and Costs |
(1) | Details of finance income and costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Finance Income: | ||||||||
Interest income | 36,708 | |||||||
Gain on sale of accounts receivable – other | 1,043 | 27,725 | ||||||
Dividends | 2,552 | 12,039 | ||||||
Gain on foreign currency transactions | 21,283 | 10,987 | ||||||
Gain on foreign currency translations | 2,095 | 7,505 | ||||||
Gain relating to financial instruments at FVTPL | 94,393 | 60,169 | ||||||
|
|
|
| |||||
155,133 | ||||||||
|
|
|
|
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Finance Costs: | ||||||||
Interest expense | 279,737 | |||||||
Loss on sale of accounts receivable – other | 61,841 | — | ||||||
Loss on foreign currency transactions | 19,485 | 12,270 | ||||||
Loss on foreign currency translations | 3,814 | 6,764 | ||||||
Loss relating to financial instruments at FVTPL | 41,597 | 16,833 | ||||||
Loss on disposal of investment assets | 1,283 | — | ||||||
|
|
|
| |||||
315,604 | ||||||||
|
|
|
|
(2) | Details of interest income included in finance income for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Interest income on cash equivalents and financial instruments | 16,141 | |||||||
Interest income on loans and others | 30,481 | 27,709 | ||||||
|
|
|
| |||||
43,850 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
(3) | Details of interest expenses included in finance costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Interest expense on borrowings | 66,188 | |||||||
Interest expense on debentures | 217,475 | 224,144 | ||||||
Others | 85,096 | 52,010 | ||||||
|
|
|
| |||||
342,342 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
31. | Finance Income and Costs, Continued |
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2022 and 2021 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 6 and 36. |
1) | Finance income and costs |
(In millions of won) | ||||||||
2022 | ||||||||
Finance income | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 103,292 | |||||||
Financial assets at FVOCI | 1,495 | 1,283 | ||||||
Financial assets at amortized cost | 45,008 | 23,094 | ||||||
Derivatives designated as hedging instrument | — | 146 | ||||||
|
|
|
| |||||
150,571 | 127,815 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | 18,432 | — | ||||||
Financial liabilities at amortized cost | 10,835 | 328,512 | ||||||
|
|
|
| |||||
29,267 | 328,512 | |||||||
|
|
|
| |||||
456,327 | ||||||||
|
|
|
|
(In millions of won) | ||||||||
2021 | ||||||||
Finance income(*) | Finance costs(*) | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 67,503 | |||||||
Financial assets at FVOCI | 3,413 | 142,015 | ||||||
Financial assets at amortized cost | 48,940 | 12,262 | ||||||
Derivatives designated as hedging instrument | — | 600 | ||||||
|
|
|
| |||||
201,943 | 222,380 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | — | 8,036 | ||||||
Financial liabilities at amortized cost | 607 | 355,011 | ||||||
|
|
|
| |||||
607 | 363,047 | |||||||
|
|
|
| |||||
585,427 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
31. | Finance Income and Costs, Continued |
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2022 and 2021 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 6 and 36, Continued. |
2) | Other comprehensive income (loss) |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Financial Assets: | ||||||||
Financial assets at FVOCI | 920,871 | |||||||
Derivatives designated as hedging instrument | (21,548 | ) | 15,427 | |||||
|
|
|
| |||||
(513,401 | ) | 936,298 | ||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Derivatives designated as hedging instrument | 182 | 706 | ||||||
|
|
|
| |||||
937,004 | ||||||||
|
|
|
|
(5) | Details of impairment losses for financial assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Accounts receivable – trade | 31,546 | |||||||
Other receivables | 3,011 | 6,001 | ||||||
|
|
|
| |||||
37,547 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense |
(1) | Income tax expenses for the years ended December 31, 2022 and 2021 consist of the following: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Current tax expense: | ||||||||
Current year | 319,539 | |||||||
Current tax of prior years | 73,477 | 705 | ||||||
|
|
|
| |||||
348,379 | 320,244 | |||||||
|
|
|
| |||||
Deferred tax expense: | ||||||||
Changes in net deferred tax assets | (60,058 | ) | 331,704 | |||||
|
|
|
| |||||
Income tax expense: | ||||||||
Tax expense of continuing operation | 288,321 | 446,796 | ||||||
Tax expense of discontinued operation | — | 205,152 | ||||||
|
|
|
| |||||
651,948 | ||||||||
|
|
|
|
(2) | The difference between income taxes computed using the statutory corporate income tax rates and the recorded income taxes for the years ended December 31, 2022 and 2021 is attributable to the following: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Income taxes at statutory income tax rate | 834,146 | |||||||
Non-taxable income | (14,969 | ) | (13,924 | ) | ||||
Non-deductible expenses | 24,679 | 15,329 | ||||||
Tax credit and tax reduction | (10,300 | ) | (62,075 | ) | ||||
Changes in unrecognized deferred taxes | 21,057 | (68,589 | ) | |||||
Changes in tax rate | (42,307 | ) | (36,193 | ) | ||||
Income tax refund and others | (19,419 | ) | (16,746 | ) | ||||
|
|
|
| |||||
Income tax expense | 651,948 | |||||||
|
|
|
|
(*) | The aggregated amount of profit before income tax from continuing and discontinued operations. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense, Continued |
(3) | Deferred taxes directly charged to (credited from) equity for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Valuation gain (loss) on financial assets measured at fair value | (208,490 | ) | ||||||
Share of other comprehensive loss of investment in associates and joint ventures | (2,972 | ) | (34 | ) | ||||
Valuation gain (loss) on derivatives | 7,649 | (5,709 | ) | |||||
Remeasurement of defined benefit liabilities | (20,867 | ) | (3,780 | ) | ||||
Gain (loss) on disposal of treasury shares and others | (28,108 | ) | 26,970 | |||||
|
|
|
| |||||
(191,043 | ) | |||||||
|
|
|
|
(4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
2022 | ||||||||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Business combinations | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: |
| |||||||||||||||||||
Loss allowance | (2,315 | ) | — | — | 75,042 | |||||||||||||||
Accrued interest income | (166 | ) | (5,057 | ) | — | (2,680 | ) | (7,903 | ) | |||||||||||
Financial assets measured at fair value | (157,828 | ) | (19,592 | ) | 167,249 | — | (10,171 | ) | ||||||||||||
Investments in subsidiaries, associates and joint ventures | (31,817 | ) | 51,635 | (2,972 | ) | — | 16,846 | |||||||||||||
Property and equipment and intangible assets | (305,967 | ) | (46,895 | ) | — | 257 | (352,605 | ) | ||||||||||||
Provisions | 4,198 | (2,569 | ) | — | — | 1,629 | ||||||||||||||
Retirement benefit obligation | 52,332 | (875 | ) | (20,867 | ) | 29 | 30,619 | |||||||||||||
Valuation gain on derivatives | 6,336 | (1,217 | ) | 7,649 | — | 12,768 | ||||||||||||||
Gain (loss) on foreign currency translation | 21,378 | (745 | ) | — | — | 20,633 | ||||||||||||||
Incremental costs to acquire a contract | (749,871 | ) | 26,971 | — | — | (722,900 | ) | |||||||||||||
Contract assets and liabilities | (2,201 | ) | 6,480 | — | — | 4,279 | ||||||||||||||
Right-of-use assets | (389,502 | ) | (41,895 | ) | — | — | (431,397 | ) | ||||||||||||
Lease liabilities | 381,537 | 47,111 | — | — | 428,648 | |||||||||||||||
Others | 68,481 | 41,691 | (28,108 | ) | 3,652 | 85,716 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(1,025,733 | ) | 52,728 | 122,951 | 1,258 | (848,796 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: |
| |||||||||||||||||||
Tax loss carryforwards | — | 2,007 | — | — | 2,007 | |||||||||||||||
Tax credit | 84,560 | 5,323 | — | — | 89,883 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
84,560 | 7,330 | — | — | 91,890 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
60,058 | 122,951 | 1,258 | (756,906 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense, Continued |
(4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Business combinations | Spin-off | Ending | |||||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: |
| |||||||||||||||||||||||
Loss allowance | (8,397 | ) | — | — | (5,531 | ) | 77,357 | |||||||||||||||||
Accrued interest income | (1,631 | ) | (2,022 | ) | — | — | 3,487 | (166 | ) | |||||||||||||||
Financial assets measured at fair value | (81,055 | ) | (6,765 | ) | (208,490 | ) | — | 138,482 | (157,828 | ) | ||||||||||||||
Investments in subsidiaries, associates and joint ventures | (1,673,906 | ) | (281,035 | ) | (34 | ) | — | 1,923,158 | (31,817 | ) | ||||||||||||||
Property and equipment and intangible assets | (511,862 | ) | (42,456 | ) | — | (1,023 | ) | 249,374 | (305,967 | ) | ||||||||||||||
Provisions | 6,294 | (1,436 | ) | — | — | (660 | ) | 4,198 | ||||||||||||||||
Retirement benefit obligation | 102,285 | (3,563 | ) | (3,780 | ) | — | (42,610 | ) | 52,332 | |||||||||||||||
Valuation gain (loss) on derivatives | 14,767 | 210 | (5,709 | ) | — | (2,932 | ) | 6,336 | ||||||||||||||||
Gain (loss) on foreign currency translation | 21,774 | (396 | ) | — | — | — | 21,378 | |||||||||||||||||
Incremental costs to acquire a contract | (807,831 | ) | 53,492 | — | — | 4,468 | (749,871 | ) | ||||||||||||||||
Contract assets and liabilities | (2,606 | ) | 405 | — | — | — | (2,201 | ) | ||||||||||||||||
Right-of-use assets | (372,297 | ) | (35,851 | ) | — | — | 18,646 | (389,502 | ) | |||||||||||||||
Lease liabilities | 362,476 | 38,600 | — | — | (19,539 | ) | 381,537 | |||||||||||||||||
Others | 120,514 | (95,537 | ) | 26,970 | (135 | ) | 16,669 | 68,481 | ||||||||||||||||
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(2,731,793 | ) | (384,751 | ) | (191,043 | ) | (1,158 | ) | 2,283,012 | (1,025,733 | ) | ||||||||||||||
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Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: |
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Tax loss carryforwards | 88,223 | 7,915 | — | — | (96,138 | ) | — | |||||||||||||||||
Tax credit | 39,583 | 45,132 | — | — | (155 | ) | 84,560 | |||||||||||||||||
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127,806 | 53,047 | — | — | (96,293 | ) | 84,560 | ||||||||||||||||||
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(331,704 | ) | (191,043 | ) | (1,158 | ) | 2,186,719 | (941,173 | ) | ||||||||||||||||
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(5) | Details of temporary differences, unused tax loss carryforwards and unused tax credits carryforwards which are not recognized as deferred tax assets (liabilities), in the consolidated statements of financial position as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Loss allowance | 85,998 | |||||||
Investments in subsidiaries, associates and joint ventures | (434,253 | ) | (176,520 | ) | ||||
Other temporary differences | 61,817 | 61,368 | ||||||
Unused tax loss carryforwards | 229,410 | 347,889 | ||||||
Unused tax credit carryforwards | — | 34 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense, Continued |
The amount of unused tax loss carryforwards which are not recognized as deferred tax assets as of December 31, 2022 are expiring within the following periods:
(In millions of won) | ||||
Unused tax loss carryforwards | ||||
Less than 1 year | ||||
1 ~ 2 years | 11,544 | |||
2 ~ 3 years | 14,345 | |||
More than 3 years | 203,521 | |||
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33. | Earnings per Share |
Earnings per share is calculated as the profit attributable to the owners of the parent company for common stock and dilutive potential common stock, and details are as follows.
(1) | Basic earnings per share |
1) | Basic earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data) | ||||||||
2022 | 2021 | |||||||
Basic earnings per share attributable to owners of the Parent Company: |
| |||||||
Profit attributable to owners of the Parent Company | 1,217,520 | |||||||
Interest on hybrid bonds | (14,766 | ) | (14,766 | ) | ||||
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Profit from continuing operation attributable to owners of the Parent Company on common shares | 897,634 | 1,202,754 | ||||||
Profit from discontinued operation attributable to owners of the Parent Company on common shares | — | 1,190,003 | ||||||
Weighted average number of common shares outstanding | 217,994,490 | 332,761,592 | ||||||
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Basic earnings per share (in won) | ||||||||
Continuing operation | 3,614 | |||||||
Discontinued operation | — | 3,576 | ||||||
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
33. | Earnings per Share, Continued |
(1) | Basic earnings per share, Continued |
2) | The weighted average number of common shares outstanding for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In shares) | ||||||||
2022 | ||||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares as of January 1, 2022 | 218,833,144 | 218,833,144 | ||||||
Treasury shares as of January 1, 2022 | (1,250,992 | ) | (1,250,992 | ) | ||||
Disposal of treasury shares | 449,901 | 412,338 | ||||||
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| |||||
218,032,053 | 217,994,490 | |||||||
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(In shares) | ||||||||
2021 | ||||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares as of January 1, 2021 | 403,728,555 | 403,728,555 | ||||||
Treasury shares as of January 1, 2021 | (47,092,790 | ) | (47,092,790 | ) | ||||
Acquisition of treasury shares | (1,494,032 | ) | (1,383,241 | ) | ||||
Disposal of treasury shares | 3,134,003 | 1,022,242 | ||||||
Spin-off | (140,693,584 | ) | (23,513,174 | ) | ||||
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217,582,152 | 332,761,592 | |||||||
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(2) | Diluted earnings per share |
1) | Diluted earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data) | ||||||||
2022 | 2021 | |||||||
Profit from continuing operation attributable to owners of the Parent Company on common shares | 1,202,754 | |||||||
Profit from discontinued operation attributable to owners of the Parent Company on common shares | — | 1,190,003 | ||||||
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Adjusted weighted average number of common shares outstanding | 218,108,742 | 332,917,848 | ||||||
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Diluted earnings per share (in won) | ||||||||
Continuing operation | 3,613 | |||||||
Discontinued operation | — | 3,574 | ||||||
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2) | The adjusted weighted average number of common shares outstanding for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Outstanding shares as of January 1 | 217,582,152 | 356,635,765 | ||||||
Effect of treasury shares | 412,338 | (360,999 | ) | |||||
Effect of Spin-off | — | (23,513,174 | ) | |||||
Effect of share option | 114,252 | 156,256 | ||||||
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Adjusted weighted average number of common shares outstanding | 218,108,742 | 332,917,848 | ||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
34. | Dividends |
(1) | Details of dividends declared |
Details of dividend declared in Parent company for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won, except for face value and share data) | ||||||||||||||||||
Year | Dividend type | Number of shares outstanding | Face value (in won) | Dividend ratio | Dividends | |||||||||||||
2022 | Cash dividends (Interim) | 218,002,830 | 100 | 830 | % | |||||||||||||
Cash dividends (Interim) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
Cash dividends (Interim) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
Cash dividends (Year-end) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
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2021 | Cash dividends (Interim) | 217,616,645 | 100 | 1,635 | % | |||||||||||||
Cash dividends (Year-end) | 217,582,152 | 100 | 1,660 | % | 361,186 | |||||||||||||
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(2) | Dividends yield ratio |
Dividends yield ratios for the years ended December 31, 2022 and 2021 are as follows:
(In won) | ||||||||||||||
Year | Dividend type | Dividend per share | Closing price at year-end | Dividend yield ratio | ||||||||||
2022 | Cash dividends | 3,320 | 47,400 | 7.00 | % | |||||||||
2021 | Cash dividends | 3,295 | 57,900 | 5.69 | % |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
35. | Categories of Financial Instruments |
(1) | Financial assets by category as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 1,636,309 | — | 1,882,291 | ||||||||||||||||
Financial instruments | 148,365 | — | 89,240 | — | 237,605 | |||||||||||||||
Long-term investment securities(*) | 221,139 | 1,189,597 | — | — | 1,410,736 | |||||||||||||||
Accounts receivable – trade | — | — | 1,984,772 | — | 1,984,772 | |||||||||||||||
Loans and other receivables | 332,669 | — | 909,003 | — | 1,241,672 | |||||||||||||||
Derivative financial assets | 54,009 | — | — | 267,151 | 321,160 | |||||||||||||||
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1,189,597 | 4,619,324 | 267,151 | 7,078,236 | |||||||||||||||||
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|
(*) | The Group designated |
(In millions of won) | ||||||||||||||||||||||||
December 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 | — | — | 367,153 | — | 872,731 | |||||||||||||||||||
Financial instruments | 389,368 | — | — | 119,684 | — | 509,052 | ||||||||||||||||||
Short-term investment securities | 5,010 | — | — | — | — | 5,010 | ||||||||||||||||||
Long-term investment securities(*) | 203,473 | 1,510,428 | 1,177 | — | — | 1,715,078 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 1,921,617 | — | 1,921,617 | ||||||||||||||||||
Loans and other receivables | 459,959 | — | — | 735,958 | — | 1,195,917 | ||||||||||||||||||
Derivative financial assets | 34,933 | — | — | — | 182,661 | 217,594 | ||||||||||||||||||
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1,510,428 | 1,177 | 3,144,412 | 182,661 | 6,436,999 | ||||||||||||||||||||
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(*) | The Group designated |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
35. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||
December 31, 2022 | ||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Total | ||||||||||
Accounts payable – trade | 89,255 | 89,255 | ||||||||||
Derivative financial liabilities | 302,593 | — | 302,593 | |||||||||
Borrowings | — | 936,110 | 936,110 | |||||||||
Debentures | — | 8,366,694 | 8,366,694 | |||||||||
Lease liabilities(*) | — | 1,782,057 | 1,782,057 | |||||||||
Accounts payable - other and others | — | 5,505,465 | 5,505,465 | |||||||||
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| |||||||
16,679,581 | 16,982,174 | |||||||||||
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(In millions of won) | ||||||||||||||||
December 31, 2021 | ||||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable – trade | 190,559 | — | 190,559 | |||||||||||||
Derivative financial liabilities | 321,025 | — | 111 | 321,136 | ||||||||||||
Borrowings | — | 407,185 | — | 407,185 | ||||||||||||
Debentures | — | 8,426,683 | — | 8,426,683 | ||||||||||||
Lease liabilities(*) | — | 1,534,282 | — | 1,534,282 | ||||||||||||
Accounts payable - other and others | — | 5,524,692 | — | 5,524,692 | ||||||||||||
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| |||||||||
16,083,401 | 111 | 16,404,537 | ||||||||||||||
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(*) | 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. |
106
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management |
(1) | Financial risk management |
The Group is exposed to market risk, credit risk and liquidity 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, accounts receivable – trade and other, 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 occur are USD, EUR and others. 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. The Group manages currency risk arising from business transactions by using currency forwards, etc. 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.
Monetary assets and liabilities denominated in foreign currencies as of December 31, 2022 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 53,243 | 1,517,930 | ||||||||||||||
EUR | 5,626 | 7,602 | 20 | 27 | ||||||||||||
Others | — | 452 | — | 175 | ||||||||||||
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| |||||||||||||
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|
|
In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign debentures. (See note 22)
As of December 31, 2022, a hypothetical change in exchange rates by 10% would have increased (decreased) the Group’s profit before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (3,933 | ) | ||||||
EUR | 758 | (758 | ) | |||||
Others | 28 | (28 | ) | |||||
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| |||||
(4,719 | ) | |||||||
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107
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | 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, debentures 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 December 31, 2022, floating-rate borrowings and debentures amount toW52,500 million andW380,190 million, respectively, and the Group has entered into interest rate swaps to hedge interest rate risk related to the floating-rate borrowings amounting toW12,500 million and debentures as described in note 22.
If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the year ended December 31, 2022, would change byW400 million in relation to the floating-rate borrowings which has not entered into interest rate swaps.
As of December 31, 2022, the floating-rate long-term payables – other areW1,690,470 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the year ended December 31, 2022, would change byW16,905 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.
Interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Especially, in the case of LIBOR, all of the calculations were suspended as of December 31, 2021, except for the overnight, one month, three months, six months, and 12 months of USD LIBOR, and the aforementioned five USD LIBORs will also be suspended as of June 30, 2023. The alternative interest rate benchmark of USD LIBOR is the Secured Overnight Financing Rate(“SOFR”). Meanwhile, in case of Korean CD rate, the alternative interest rate benchmark has selected as Korea Overnight Financing Repo Rate(“KOFR”) and as part of interest rate benchmark reform, the interest rate has been disclosed through Korea Securities Depository since November 26, 2021. KOFR is calculated using the overnight RP rate as collateral for government bonds and monetary stabilization bonds. However, unlike LIBOR, calculation of CD rate will not be suspended, it is unclear when and how the transition to KOFR will take place.
The Group plans to include fallback clauses into financial instruments relating to LIBOR to which calculation has not been suspended yet, or change their LIBOR directly to alternative interest rates before the calculation is suspended. Meanwhile, The Group is closely monitoring market trends for CD rate-related financial instruments.
108
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk, Continued |
The Group’s financial instruments exposed to the risk arising from interest rate benchmark reform as of December 31, 2022 are indexed to the USD LIBOR. The Group is exposed to legal risk to amend the terms of contracts on the financial instruments subject to interest rate benchmark reform as well as process and operation risks to manage such amendments. In addition, the Group is exposed to the risk of monitoring the market trend regarding the alternative interest rate and establishing the corresponding risk management strategy. If the IBOR is designated as the hedged item, the Group is required to replace it to an alternative benchmark interest and review the effects on the hedging relationship. In addition, the Group is exposed to the risk of minimizing hedge ineffectiveness by aligning the method and timing of the transition to the alternative benchmark interest applied to the hedged item and the hedging instrument.
The Group evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.
Non-derivative financial liabilities
The Parent Company’s non-derivative financial liabilities subject to Interest rate benchmark reform as of December 31, 2021 were floating-rate bonds indexed to USD LIBOR. As explained above, the Group is discussing with the counterparty about including the fallback clauses as of December 31, 2022.
Derivatives |
The Group’s most derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (ISDA)’s master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021 and the transaction parties is required to adhere to ISDA protocol to include the same fallback clause to derivative contracts before January 25, 2021. The Group has adhered to ISDA protocol for transition to the alternative benchmark interest rate and the fallback clause will be included when counterparties adhere to the protocol to include. The Group’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.
Hedge | accounting |
The Group’s hedged items and hedging instruments as of December 31, 2022 are indexed to USD LIBOR. These benchmark rates are quoted each day and the IBOR cash flows are exchanged with counterparties as usual.
109
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk |
The maximum credit exposure as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents | 872,550 | |||||||
Financial instruments | 237,605 | 509,052 | ||||||
Investment securities | 900 | 2,077 | ||||||
Accounts receivable – trade | 1,984,772 | 1,921,617 | ||||||
Contract assets | 132,221 | 118,278 | ||||||
Loans and other receivables | 1,241,672 | 1,195,917 | ||||||
Derivative financial assets | 321,160 | 217,594 | ||||||
|
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| |||||
4,837,085 | ||||||||
|
|
|
|
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.
(i) | Accounts receivable – trade and contract assets |
The Group establishes a loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Details of changes in loss allowance for the year ended December 31, 2022 are included in note 6.
(ii) | Debt investments |
The credit risk arises from debt investments included inW237,605 million of financial instruments,W900 million of investment securities andW1,241,672 million of loans and other receivables. To limit the exposure to this risk, the Group transacts only with financial institutions with credit ratings that are considered to be low credit risk.
Most of the Group’s debt investments are considered to have a low risk of default and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term. Thus, the Group measured the loss allowance for the debt investments at an amount equal to 12-month expected credit losses.
Meanwhile, the Group monitors changes in credit risk at each reporting date. The Group recognized the loss allowance at an amount equal to lifetime expected credit losses when the credit risk on the debt investments is assumed to have increased significantly if it is more than 30 days past due.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
(ii) | Debt investments, Continued |
The Group’s maximum exposure to credit risk is equal to each financial asset’s carrying amount. The gross carrying amounts of each financial asset except for the accounts receivable – trade and derivative financial assets as of December 31, 2022 are as follows.
(In millions of won) | ||||||||||||||||
Financial assets at FVTPL | Financial assets at amortized cost | |||||||||||||||
12-month ECL | Lifetime ECL – not credit impaired | Lifetime ECL – credit impaired | ||||||||||||||
Gross amount | 994,868 | 5,592 | 87,862 | |||||||||||||
Loss allowance | — | (3,081 | ) | (3,314 | ) | (83,685 | ) | |||||||||
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| |||||||||
Carrying amount | 991,787 | 2,278 | 4,177 | |||||||||||||
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|
|
Changes in the loss allowance for the debt investments for the year ended December 31, 2022 are as follows:
(In millions of won) | ||||||||||||||||
12-month ECL | Lifetime ECL – not credit impaired | Lifetime ECL – credit impaired | Total | |||||||||||||
December 31, 2021 | 6,190 | 83,033 | 92,010 | |||||||||||||
Remeasurement of loss allowance, net | 1,571 | (1,517 | ) | 2,957 | 3,011 | |||||||||||
Transfer to lifetime ECL – not credit impaired | (1,277 | ) | 1,277 | — | — | |||||||||||
Transfer to lifetime ECL – credit impaired | — | (2,636 | ) | 2,636 | — | |||||||||||
Amounts written off | — | — | (6,594 | ) | (6,594 | ) | ||||||||||
Recovery of amounts written off | — | — | 1,653 | 1,653 | ||||||||||||
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| |||||||||
December 31, 2022 | 3,314 | 83,685 | 90,080 | |||||||||||||
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|
(iii) | Cash and cash equivalents |
The Group depositsW1,882,093 million of cash and cash equivalents as of December 31, 2022 (W872,550 million as of December 31, 2021) at banks and financial institutions with credit ratings above the certain level. Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considered that its cash and cash equivalents have low credit risk based on the credit ratings of the counterparties assigned by external credit rating agencies.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) | Liquidity risk |
The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Group maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of December 31, 2022 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 | 89,255 | 89,255 | — | — | ||||||||||||||||
Borrowings(*) | 936,110 | 975,960 | 290,024 | 685,936 | — | |||||||||||||||
Debentures(*) | 8,366,694 | 9,469,549 | 2,074,631 | 5,077,080 | 2,317,838 | |||||||||||||||
Lease liabilities | 1,782,057 | 2,063,294 | 391,686 | 1,104,040 | 567,568 | |||||||||||||||
Accounts payable – other and others(*) | 5,505,465 | 5,641,277 | 4,291,518 | 1,256,702 | 93,057 | |||||||||||||||
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18,239,335 | 7,137,114 | 8,123,758 | 2,978,463 | |||||||||||||||||
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(*) | Includes interest payables. |
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of December 31, 2022, 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 | |||||||||||||
Assets | 281,636 | 169,761 | 111,875 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(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 of the Group as of and for the year ended December 31, 2021.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity from the consolidated financial statements.
Debt-equity ratio as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Total liabilities | 18,576,139 | |||||||
Total equity | 12,155,196 | 12,335,138 | ||||||
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Debt-equity ratios | 157.57 | % | 150.60 | % | ||||
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(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 44,431 | 727,014 | 230,719 | 1,002,164 | ||||||||||||||||
Derivative hedging instruments | 267,151 | — | 267,151 | — | 267,151 | |||||||||||||||
FVOCI | 1,189,597 | 993,765 | — | 195,832 | 1,189,597 | |||||||||||||||
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1,038,196 | 994,165 | 426,551 | 2,458,912 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 302,593 | 302,593 | ||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 911,597 | — | 911,597 | ||||||||||||||||
Debentures | 8,366,694 | — | 7,813,420 | — | 7,813,420 | |||||||||||||||
Long-term payables – other | 1,638,341 | — | 1,614,934 | — | 1,614,934 | |||||||||||||||
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— | 10,339,951 | — | 10,339,951 | |||||||||||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
2) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2021 are as follows: |
(In millions of won) | December 31, 2021 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 55,455 | 1,359,915 | 182,951 | 1,598,321 | ||||||||||||||||
Derivative hedging instruments | 182,661 | — | 182,661 | — | 182,661 | |||||||||||||||
FVOCI | 1,511,605 | 1,344,434 | — | 167,171 | 1,511,605 | |||||||||||||||
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1,399,889 | 1,542,576 | 350,122 | 3,292,587 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 321,025 | 321,025 | ||||||||||||||||
Derivative hedging instruments | 111 | — | 111 | — | 111 | |||||||||||||||
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— | 111 | 321,025 | 321,136 | |||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 392,237 | — | 392,237 | ||||||||||||||||
Debentures | 8,426,683 | — | 8,679,472 | — | 8,679,472 | |||||||||||||||
Long-term payables – other | 2,009,833 | — | 2,010,852 | — | 2,010,852 | |||||||||||||||
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— | 11,082,561 | — | 11,082,561 | |||||||||||||||||
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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 financial assets at FVTPL) 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 to such valuation methods include swap rate, interest rate, and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
Interest rates used by the Group for the fair value measurement as of December 31, 2022 are as follows:
Interest rate | ||
Derivative instruments | 4.18% ~ 5.20% | |
Borrowings and debentures | 4.89% ~ 5.10% | |
Long-term payables – other | 4.59% ~ 5.06% |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
3) | There have been no transfers between Level 2 and Level 1 for the year ended December 31, 2022. The changes of financial instruments classified as Level 3 for the year ended December 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
Balance as of January 1, 2022 | Gain for the year | OCI | Acquisition | Disposal | Transfer | Balance as of December 31, 2022 | ||||||||||||||||||||||
FVTPL | 42,145 | 1,375 | 48,458 | (38,894 | ) | (5,316 | ) | 230,719 | ||||||||||||||||||||
FVOCI | 167,171 | — | 1,088 | 55,333 | (26,860 | ) | (900 | ) | 195,832 | |||||||||||||||||||
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42,145 | 2,463 | 103,791 | (65,754 | ) | (6,216 | ) | 426,551 | |||||||||||||||||||||
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FVTPL | 18,432 | — | — | — | — | (302,593 | ) |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amounts of financial instruments recognized of which offset agreements are applicable as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||
December 31, 2022 | ||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the consolidated statements of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (236,921 | ) | 8,914 | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (236,921 | ) | 7,588 |
(In millions of won) | ||||||||||||
December 31, 2021 | ||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the consolidated statements of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (189,424 | ) | 8,404 | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (189,424 | ) | 11,425 |
115
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate controlling entity | SK Inc. | |
Joint venture | UTC Kakao-SK Telecom ESG Fund | |
Associate | SK China Company Ltd. and 42 others | |
Others | The Ultimate controlling entity’s subsidiaries and associates and others |
As of December 31, 2022, the Group belongs to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Group.
(2) | Compensation for the key management |
The Parent Company considers registered directors (three executive and five 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 years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Salaries | 5,956 | |||||||
Defined benefits plan expenses | 761 | 2,845 | ||||||
Share option | 1,598 | 146 | ||||||
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| |||||
8,947 | ||||||||
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|
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.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||
2022 | ||||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others (*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 662,247 | 114,895 | |||||||||||
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Associates | F&U Credit information Co., Ltd. | 3,490 | 49,227 | 265 | ||||||||||
HanaCard Co., Ltd. (*3) | 8,932 | 1,820 | 22 | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 20,290 | — | — | |||||||||||
Others(*4) | 13,795 | 5,608 | 80 | |||||||||||
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46,507 | 56,655 | 367 | ||||||||||||
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Others | SK Innovation Co., Ltd. | 27,524 | 19,598 | — | ||||||||||
SK Energy Co., Ltd. | 4,585 | 710 | — | |||||||||||
SK Geo Centric Co., Ltd. | 925 | 1 | — | |||||||||||
SK Networks Co., Ltd.(*5) | 4,312 | 904,320 | 288 | |||||||||||
SK Networks Service Co., Ltd. | 6,110 | 71,432 | 7,891 | |||||||||||
SK Ecoplant Co., Ltd. | 3,330 | 112 | — | |||||||||||
SK hynix Inc. | 60,933 | 75 | — | |||||||||||
SK Shieldus Co., Ltd. | 39,455 | 147,731 | 35,854 | |||||||||||
Content Wavve Corp. | 6,797 | 108,760 | 229 | |||||||||||
Eleven Street Co., Ltd. | 71,972 | 31,589 | — | |||||||||||
SK Planet Co., Ltd. | 19,753 | 95,261 | 17,481 | |||||||||||
SK RENT A CAR Co., Ltd. | 14,992 | 15,891 | — | |||||||||||
SK Magic Co., Ltd. | 2,204 | 1,071 | — | |||||||||||
Tmap Mobility Co., Ltd. | 22,011 | 4,973 | 892 | |||||||||||
Onestore Co., Ltd. | 17,181 | 24 | — | |||||||||||
Dreamus Company | 7,235 | 85,193 | 649 | |||||||||||
UbiNS Co., Ltd. | 283 | 46,222 | 53,897 | |||||||||||
Happy Narae Co., Ltd. | 1,637 | 24,727 | 143,188 | |||||||||||
Others | 40,058 | 29,610 | 20,555 | |||||||||||
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| |||||||||
351,297 | 1,587,300 | 280,924 | ||||||||||||
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2,306,202 | 396,186 | |||||||||||||
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|
(*1) | Operating expenses and others include lease payments paid by the Group. |
(*2) | Operating expenses and others include |
(*3) | HanaCard Co., Ltd. was excluded from the related parties due to the disposal of the Group’s shares in the entity for the year ended December 31, 2022, and the transactions above occurred before the disposal. |
(*4) | Operating revenue and others include |
(*5) | Operating expenses and others include costs for handset purchases amounting to |
117
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | 2021 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 633,868 | 82,191 | |||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | 3,828 | 50,029 | — | ||||||||||
HanaCard Co., Ltd. | 17,962 | 4,374 | — | |||||||||||
SK Wyverns Co., Ltd.(*3) | 202 | 8,203 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 10,943 | — | — | |||||||||||
SK China Company Ltd.(*4) | 131,141 | — | — | |||||||||||
Others(*5) | 11,778 | 8,356 | — | |||||||||||
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| |||||||||
175,854 | 70,962 | — | ||||||||||||
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| |||||||||
Others | SK Innovation Co., Ltd. | 53,445 | 19,093 | — | ||||||||||
SK Energy Co., Ltd. | 18,970 | 1,250 | — | |||||||||||
SK Geo Centric Co., Ltd. | 33,435 | 9 | — | |||||||||||
SK TNS Co., Ltd.(*3) | 75 | 6,868 | 57,903 | |||||||||||
SKC Infra Service Co., Ltd.(*3) | 26 | 30,798 | 8,028 | |||||||||||
SK Networks Co., Ltd.(*6) | 14,439 | 1,055,512 | 24 | |||||||||||
SK Networks Service Co., Ltd. | 7,292 | 73,596 | 3,520 | |||||||||||
SK hynix Inc.(*7) | 285,104 | 199 | — | |||||||||||
Happy Narae Co., Ltd. | 6,899 | 20,229 | 133,625 | |||||||||||
SK Shieldus Co., Ltd.(*8) | 5,793 | 18,861 | 20,382 | |||||||||||
Content Wavve Co., Ltd. | 174 | 78,964 | — | |||||||||||
Eleven Street Co., Ltd. | 2,785 | 5,699 | — | |||||||||||
SK Planet Co., Ltd. | 2,048 | 16,747 | 6,081 | |||||||||||
SK hynix Semiconductor (China) Ltd. | 48,546 | — | — | |||||||||||
SK hynix system ic (Wuxi) Co., Ltd. | 20,807 | — | — | |||||||||||
SK ON Hungary Kft. | 38,413 | — | — | |||||||||||
SK RENT A CAR Co., Ltd. | 5,843 | 18,564 | — | |||||||||||
Dreamus Company | 795 | 20,074 | 396 | |||||||||||
SK m&service Co., Ltd. | 764 | 3,670 | 888 | |||||||||||
UbiNS Co., Ltd. | 415 | 42,335 | 50,847 | |||||||||||
Others | 156,055 | 30,762 | 23,428 | |||||||||||
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| |||||||||
702,123 | 1,443,230 | 305,122 | ||||||||||||
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2,148,060 | 387,313 | |||||||||||||
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118
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Operating expense and others include lease payments paid by the Group. |
(*2) | Operating expense and others include |
(*3) | Transactions occurred before the related party relationship terminated. |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating expenses and others include costs for handset purchases amounting to |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
119
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||
December 31, 2022 | ||||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. | 2,383 | 103,141 | |||||||||||
Associates | F&U Credit information Co., Ltd. | — | 64 | 5,682 | ||||||||||
SK USA, Inc. | — | — | 1,519 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 901 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,199 | — | |||||||||||
HanaCard Co., Ltd. | — | — | — | |||||||||||
Others | — | — | 65 | |||||||||||
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| |||||||||
22,147 | 4,164 | 7,266 | ||||||||||||
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| |||||||||
Others | SK Innovation Co., Ltd. | — | 9,726 | 33,091 | ||||||||||
SK Networks Co., Ltd. | — | 488 | 113,943 | |||||||||||
Mintit Co., Ltd. | — | 35,058 | 3 | |||||||||||
SK hynix Inc. | — | 15,494 | 311 | |||||||||||
Happy Narae Co., Ltd. | — | 31 | 31,979 | |||||||||||
SK Shieldus Co., Ltd. | — | 14,035 | 17,447 | |||||||||||
Content Wavve Corp. | — | 349 | 19,244 | |||||||||||
Incross Co., Ltd. | — | 3,774 | 16,152 | |||||||||||
Eleven Street Co., Ltd. | — | 6,797 | 13,026 | |||||||||||
SK Planet Co., Ltd. | — | 8,190 | 43,238 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 1,291 | 22,895 | |||||||||||
UbiNS Co., Ltd. | — | — | 21,179 | |||||||||||
Others(*3) | 16,475 | 13,996 | 41,890 | |||||||||||
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| |||||||||
16,475 | 109,229 | 374,398 | ||||||||||||
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| |||||||||
115,776 | 484,805 | |||||||||||||
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|
(*1) | As of December 31, 2022, the Parent Company recognized loss allowance amounting to |
(*2) | As of December 31, 2022, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
(*3) | During the year ended December 31, 2022, SK Telecom Innovation Fund, L.P., a subsidiary of the Parent Company, entered into a convertible loan agreement for USD 13,000,000 with id Quantique SA, classified as an other related party. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||||||||||||
December 31, 2021 | ||||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. | 2,092 | 69,652 | |||||||||||
Associates | F&U Credit information Co., Ltd. | — | 4 | 5,265 | ||||||||||
Wave City Development Co., Ltd.(*1) | — | 2,623 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,857 | — | |||||||||||
HanaCard Co., Ltd. | — | 529 | 48,020 | |||||||||||
Others | — | 84 | 1,197 | |||||||||||
|
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|
|
|
| |||||||||
22,147 | 7,097 | 54,482 | ||||||||||||
|
|
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|
|
| |||||||||
Others | SK Innovation Co., Ltd. | — | 3,022 | 38,022 | ||||||||||
SK Networks Co., Ltd. | — | 241 | 198,631 | |||||||||||
Mintit Co., Ltd. | — | 17,929 | 131 | |||||||||||
SK hynix Inc. | — | 11,526 | 166 | |||||||||||
Happy Narae Co., Ltd. | — | 6 | 49,349 | |||||||||||
SK m&service Co., Ltd. | — | 1,453 | 18,921 | |||||||||||
SK Shieldus Co., Ltd. | — | 2,649 | 24,593 | |||||||||||
Content Wavve Co., Ltd. | — | 183 | 9,873 | |||||||||||
Incross Co., Ltd. | — | 3,610 | 11,829 | |||||||||||
Eleven Street Co., Ltd. | — | 2,851 | 7,782 | |||||||||||
SK Planet Co., Ltd. | — | 668 | 31,652 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 116 | 16,715 | |||||||||||
UbiNS Co., Ltd. | — | 24 | 14,932 | |||||||||||
Others | — | 8,307 | 29,106 | |||||||||||
|
|
|
|
|
| |||||||||
— | 52,585 | 451,702 | ||||||||||||
|
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|
| |||||||||
61,774 | 575,836 | |||||||||||||
|
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|
|
(*1) | As of December 31, 2021, the Parent Company recognized loss allowance amounting to |
(*2) | As of December 31, 2021, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
121
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(5) | The Group has granted SK REIT Co., Ltd. The right of first offer regarding the disposal of real estate owned by the Group. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Group has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Group. |
(6) | The details of additional investments and disposal of associates and joint ventures for the year ended December 31, 2022 are as presented in note 12. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
38. | 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 ofW1,513 million as of December 31, 2022.
Meanwhile, PanAsia Semiconductor Materials LLC., a subsidiary of the Parent Company, has pledged itsW21,981 million of equity instruments at FVTPL onW12,998 million of short-term borrowings as of December 31, 2022.
(2) | Legal claims and litigations |
As of December 31, 2022, the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. In connection with those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected any of these claims or litigation will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.
(3) | 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 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 toW357,467 million andW493,277 million as of December 31, 2022 and 2021, respectively, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.
(4) | Commitment of the acquisition and disposal of shares |
The Board of Directors of the Parent Company resolved the acquisition and disposal of certain shares in order to strengthen the strategic alliance with Hana Financial Group Inc. (“HFG”) at the Board of Directors’ meeting held on July 22, 2022. In accordance with the resolution, as of July 27, 2022, the Parent Company disposed of its entire common shares of HanaCard Co., Ltd. (39,902,323 shares) and entire common shares of Finnq Co., Ltd. (6,370,000 shares) to HFG forW330,032 million andW5,733 million, respectively. Through the agreement with HFG, the Parent Company is obligated to acquire HFG’s common shares from July 27, 2022 to January 31, 2024, after depositingW330,032 million in a specific money trust, and the Parent Company completed the acquisition of the shares for the year ended December 31, 2022. As a part of the aforementioned transaction, as of July 27, 2022, the Parent Company disposed of its entire common shares of SK Square Co., Ltd. (767,011 shares) to HanaCard Co., Ltd. forW31,563 million, and HanaCard Co., Ltd. is obligated to acquire the Parent Company’s common shares from July 27, 2022 to January 31, 2024, after depositingW68,437 million in a specific money trust. Before March 31, 2025, the Parent Company, HFG, and HanaCard Co., Ltd. may not dispose of shares they have acquired or will acquire under the aforementioned transaction.
(5) | The acquisition cost of property and equipment and intangible assets to be incurred in subsequent periods under arrangements is |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Interest income | (43,850 | ) | ||||||
Dividends | (2,552 | ) | (14,132 | ) | ||||
Gain on foreign currency translations | (2,095 | ) | (10,753 | ) | ||||
Gain on sale of accounts receivable – other | (1,043 | ) | (27,725 | ) | ||||
Gain (loss) relating to investments in associates and joint ventures, net | 81,707 | (1,948,447 | ) | |||||
Gain on disposal of property and equipment and intangible assets | (15,985 | ) | (40,109 | ) | ||||
Gain on business transfer | — | (82,248 | ) | |||||
Gain relating to financial instruments at FVTPL | (94,393 | ) | (91,244 | ) | ||||
Other income | (6,515 | ) | (10,369 | ) | ||||
Interest expense | 328,307 | 342,342 | ||||||
Loss on foreign currency translations | 3,814 | 8,005 | ||||||
Loss on sale of receivables-other | 61,841 | — | ||||||
Income tax expense | 288,321 | 651,948 | ||||||
Expense related to defined benefit plan | 134,509 | 190,462 | ||||||
Share option | 84,463 | 91,646 | ||||||
Bonus paid by treasury shares | 25,425 | 29,643 | ||||||
Depreciation and amortization | 3,755,312 | 4,114,394 | ||||||
Bad debt for accounts receivables – trade | 27,053 | 31,546 | ||||||
Loss on disposal of property and equipment and intangible assets | 20,465 | 47,369 | ||||||
Impairment loss on property and equipment and intangible assets | 17,027 | 3,135 | ||||||
Bad debt for accounts receivable – other | 3,011 | 6,001 | ||||||
Loss relating to financial instruments at FVTPL | 41,597 | 76,142 | ||||||
Loss on disposal of investment assets | 1,283 | — | ||||||
Other financial fees | — | 142,015 | ||||||
Other expenses | 26,358 | 8,008 | ||||||
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3,473,779 | ||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Accounts receivable – trade | (95,374 | ) | ||||||
Accounts receivable – other | 54,988 | (152,038 | ) | |||||
Advanced payments | (25,377 | ) | (43,212 | ) | ||||
Prepaid expenses | 11,989 | 77,404 | ||||||
Inventories | 39,633 | (70,601 | ) | |||||
Long-term accounts receivable – other | (74,729 | ) | 83,658 | |||||
Contract assets | (13,400 | ) | (11,582 | ) | ||||
Guarantee deposits | 6,245 | 8,125 | ||||||
Accounts payable – trade | (101,465 | ) | 12,312 | |||||
Accounts payable – other | 369,693 | (109,476 | ) | |||||
Withholdings | 4,964 | (55,925 | ) | |||||
Contract liabilities | 18,910 | (2,158 | ) | |||||
Deposits received | 99 | (3,737 | ) | |||||
Accrued expenses | 116,039 | 7,505 | ||||||
Provisions | (20 | ) | (19,324 | ) | ||||
Long-term provisions | (13,792 | ) | (260 | ) | ||||
Plan assets | (132,131 | ) | (51,697 | ) | ||||
Retirement benefit payment | (79,117 | ) | (114,897 | ) | ||||
Others | (3,877 | ) | (27,418 | ) | ||||
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(568,695 | ) | |||||||
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(3) | Significant non-cash transactions for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Increase (decrease) in accounts payable – other relating to the acquisition of property and equipment and intangible assets | 1,063,800 | |||||||
Increase of right-of-use assets | 720,932 | 672,723 | ||||||
Change in assets and liabilities by spin-off (Note 42) | — | 14,379,397 | ||||||
Retirement of treasury shares | — | 1,965,952 | ||||||
Disposal of treasury shares (Congratulatory bonus for spin-off) | — | 114,373 | ||||||
Transfer from property and equipment to investment property | 4,732 | 23,034 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||
Non-cash transactions | ||||||||||||||||||||||||||||
January 1, 2022 | Cash flows | Exchange rate changes(*) | Fair value changes | Business combinations | Other changes | December 31, 2022 | ||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||||||
Short-term borrowings | 130,000 | — | — | — | — | 142,998 | ||||||||||||||||||||||
Long-term borrowings | 394,187 | 398,529 | — | — | — | 397 | 793,113 | |||||||||||||||||||||
Debentures | 8,426,683 | (189,878 | ) | 122,350 | — | — | 7,538 | 8,366,693 | ||||||||||||||||||||
Lease liabilities | 1,534,281 | (401,054 | ) | — | — | 6,503 | 642,327 | 1,782,057 | ||||||||||||||||||||
Long-term payables – other | 2,009,833 | (400,245 | ) | — | — | — | 28,753 | 1,638,341 | ||||||||||||||||||||
Derivative financial liabilities | 111 | — | — | (111 | ) | — | — | — | ||||||||||||||||||||
Derivative financial assets | (182,661 | ) | 768 | — | (85,258 | ) | — | — | (267,151 | ) | ||||||||||||||||||
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(461,880 | ) | 122,350 | (85,369 | ) | 6,503 | 679,015 | 12,456,051 | |||||||||||||||||||||
Other cash flows from financing activities: |
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Payments of cash dividends | ||||||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders | 31,151 | |||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders | (367 | ) | ||||||||||||||||||||||||||
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(888,002 | ) | |||||||||||||||||||||||||||
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(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||
Non-cash transactions | ||||||||||||||||||||||||||||||||
January 1, 2021 | Cash flows | Exchange rate changes(*) | Fair value changes | Business combina-tions | Spin-off | Other changes | December 31, 2021 | |||||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||||||||||
Short-term borrowings | (50,823 | ) | — | — | 1,825 | (48,510 | ) | 508 | 12,998 | |||||||||||||||||||||||
Long-term borrowings | 2,028,924 | 63,132 | 600 | — | 662 | (1,703,300 | ) | 4,169 | 394,187 | |||||||||||||||||||||||
Debentures | 8,579,743 | (16,755 | ) | 145,584 | — | — | (295,544 | ) | 13,655 | 8,426,683 | ||||||||||||||||||||||
Lease liabilities | 1,436,777 | (431,674 | ) | — | — | 497 | (85,322 | ) | 614,003 | 1,534,281 | ||||||||||||||||||||||
Long-term payables – other | 1,566,954 | (426,267 | ) | — | — | — | — | 869,146 | 2,009,833 | |||||||||||||||||||||||
Derivative financial liabilities | 54,176 | 332 | — | (42,282 | ) | — | (12,115 | ) | — | 111 | ||||||||||||||||||||||
Derivative financial assets | (65,136 | ) | — | — | (117,525 | ) | — | — | — | (182,661 | ) | |||||||||||||||||||||
Financial liabilities at FVTPL | — | 129,123 | — | 7,996 | — | (137,119 | ) | — | — | |||||||||||||||||||||||
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(732,932 | ) | 146,184 | (151,811 | ) | 2,984 | (2,281,910 | ) | 1,501,481 | 12,195,432 | |||||||||||||||||||||||
Other cash flows from financing activities: |
| |||||||||||||||||||||||||||||||
Payments of cash dividends | ||||||||||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||||||||||
Acquisition of treasury shares | (76,111 | ) | ||||||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders | 444,124 | |||||||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders | (19,406 | ) | ||||||||||||||||||||||||||||||
Cash outflow from spin-off | (626,000 | ) | ||||||||||||||||||||||||||||||
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(1,320,679 | ) | |||||||||||||||||||||||||||||||
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(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
40. | Emissions Liabilities |
(1) | The quantity of emissions rights allocated free of charge for each implementation year as of December 31, 2022 are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||
Emissions rights allocated free of charge | 814,842 | 1,387,671 | 1,410,823 | 3,613,336 |
(2) | Changes in emissions rights quantities the Parent Company held are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||
January 1 | (60,977 | ) | 306,234 | 281,234 | 526,491 | |||||||||||
Allocation at no cost | 814,842 | 1,387,671 | 1,410,823 | 3,613,336 | ||||||||||||
Additional allocation | 217,643 | — | — | 217,643 | ||||||||||||
Other changes | — | (8,049 | ) | 3,573 | (4,476 | ) | ||||||||||
Purchase | 68,471 | — | — | 68,471 | ||||||||||||
Surrender or shall be surrendered | (1,039,979 | ) | (1,424,476 | ) | (1,421,550 | ) | (3,886,005 | ) | ||||||||
Borrowing | — | 19,854 | 108,790 | 128,644 | ||||||||||||
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December 31 | — | 281,234 | 382,870 | 664,104 | ||||||||||||
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(3) | As of December 31, 2022, the estimated annual greenhouse gas emissions quantities of the Group are 1,533,206 tCO2-eQ. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
41. | Non-current Assets Held for Sale |
(1) | On February 25, 2021, the Parent Company has decided to dispose of the investments in an associate engaged in mobility business to T map Mobility Co., Ltd. pursuant to the approval of the Board of Directors and reclassified entire shares of the investments in associates as non-current assets held for sale. The disposal of the investment in the associate was completed in 2022 after the Financial Services Commission approved the transaction. |
(In millions of won) | ||||||
December 31, 2021 | ||||||
Investments in associates | Carrot General Insurance Co., Ltd. |
(2) | The Group classified investment securities scheduled to be liquidated as non-current assets held for sale as of December 31, 2022, and the details are as follows: |
(In millions of won) | ||||||
December 31, 2022 | ||||||
Investments in associates | Daekyo Wipoongdangdang Contents Korea Fund | |||||
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FVTPL | Digital Content Korea Fund | 3,645 | ||||
InterVest Fund | 107 | |||||
Central Fusion Content Fund | 1,563 | |||||
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5,315 | ||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
42. | Spin-off |
(1) | In accordance with the resolution of the Board of Directors held on June 10, 2021 and shareholders’ meeting held on October 12, 2021, the Parent Company completed the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments on November 1, 2021, and the registration of the spin-off was completed as of November 2, 2021. The details of the spin-off are as follows: |
Method of spin-off | Horizontal spin-off | |||
Company | SK Telecom Co., Ltd. (Surviving Company) | |||
SK Square Co., Ltd. (Spin-off Company) | ||||
Effective date of spin-off | November 1, 2021 |
(2) | The details of financial information due to the spin-off of its business of managing investments in semiconductor, New ICT and other business and making new investments are as follows: |
1) | Statements of Income |
The details of profit or loss of discontinued operations for the year ended December 31, 2021 are as follows:
(In millions of won) | ||||
2021 | ||||
Operating revenue | ||||
Operating expenses: | 2,370,758 | |||
Labor | 824,505 | |||
Commission | 349,344 | |||
Depreciation and amortization | 287,412 | |||
Network interconnection | 863 | |||
Advertising | 158,512 | |||
Rent | 2,754 | |||
Cost of goods sold | 426,161 | |||
Others | 321,207 | |||
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Operating profit | 12,325 | |||
Finance income | 47,417 | |||
Finance costs | 269,823 | |||
Gain relating to investments in associates and joint ventures | 1,502,147 | |||
Other non-operating income | 86,246 | |||
Other non-operating expenses | 25,566 | |||
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Profit before income tax | 1,352,746 | |||
Income tax expense | 205,152 | |||
Profit from discontinued operations, net of taxes | ||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
42. | Spin-off, Continued |
(2) | The details of financial information due to the spin-off of its business of managing investments in semiconductor, New ICT and other business and making new investments are as follows, Continued: |
2) | Statements of Cash Flows |
The details of cash flows from discontinued operations for the year ended December 31, 2021 is as follows:
(In millions of won) | ||||
2021 | ||||
Cash flows from operating activities | ||||
Cash flows from investing activities | (967,053 | ) | ||
Cash flows from financing activities | (88,872 | ) |
(3) | The details of assets and liabilities derecognized from the financial statements due to the spin-off of its business of managing investments in semiconductor, New ICT and other business and making new investments are as follows. Subsequent to the spin-off, the Parent Company lost control over the related businesses. The spin-off was accounted for by derecognizing all related assets and liabilities. The net assets of the spin-off business as of the spin-off date was recognized in capital surplus and others. |
(In millions of won) | ||||
Amount | ||||
Current assets | ||||
Non-current assets | 19,269,615 | |||
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Total assets | ||||
Current liabilities | ||||
Non-current liabilities | 4,676,324 | |||
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Total liabilities | ||||
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Net assets | ||||
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(4) | As of November 1, 2021, the Parent Company has split the business division for the purpose of new investments and management of shares in related investee companies belong to semiconductors and New ICT sector. The Parent Company has the obligation to jointly and severally reimburse the liabilities incurred by the Parent Company prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
43. | Subsequent Events |
On February 7, 2023, the Board of Directors of the Parent Company approved the disposal of treasury shares and details of the transaction are as follows:
Information of disposal | ||
Number of treasury shares | 324,580 Common shares | |
Price of the treasury shares per share (in won) | ||
Aggregate disposal value | ||
Disposal date | February 9, 2023 | |
Purpose of disposal | Allotment of shares as bonus payment | |
Method of disposal | Over-the-counter |
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SK TELECOM CO., LTD.
Separate Financial Statements
For the year ended December 31, 2022
(With the Independent Auditor’s Report Thereon)
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Ernst & Young Han Young Taeyoung Building, 111,Yeouigongwon-ro, Yeongdeungpo-gu, Seoul 07241 Korea | Tel: +82 2 3787 6600 Fax: +82 2 783 5890 ey.com/kr |
(English Translation of a Report Originally Issued in Korean)
The Shareholders and Board of Directors
SK Telecom Co., Ltd.
Opinion
We have audited the accompanying separate financial statements of SK Telecom Co., Ltd. (the “Company”) which comprise the separate statement of financial position as of December 31, 2022, and the separate statement of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the separate financial statements, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company as of December 31, 2022, and its separate financial performance and its separate cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”).
We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on the criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting in accordance with the Korean Standards on Auditing (“KSA”) issued by the Committee of Internal Control Operations, and our report dated March 10, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
We conducted our audits in accordance with KSA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Separate Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the separate financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
Key audit matter communicated below is a matter that, in our professional judgment, was of most significance in our audit of the separate financial statements of the current period. This matter was addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
Cut-off of revenues from the cellular services
As described in notes 3 (23) and 27 to the separate financial statements, the Company’s revenue from the cellular services is recognized based on data from a complex array of information technology systems which process a significant volume of transactions with its customers. Furthermore, the transactions involve a variety of contractual terms from new subscriptions to deactivations or churn, and changes of rate plans during the period. Therefore, we have identified timing of revenue recognition related to the Company’s cellular services as a key audit matter. Related revenue from the cellular services amounted toW10,463,131 million in 2022.
The primary procedures we performed to address this key audit matter included:
• | Inspecting major contracts with subscribers to assess whether the Company’s revenue recognition policies based on the terms and conditions as set out in the contracts, are consistent with reference to the requirements of KIFRS 1115; |
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• | Testing internal controls relating to the timing of revenue recognition for the cellular services; and |
• | Evaluating the appropriateness of the timing of revenue recognition by recalculating the prorated revenue based on the subscribed rate plan and comparing it with the billing information. |
Other matters
The separate statement of financial position as of December 31, 2021, and the related separate statement of income, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended which have been audited by KPMG Samjong Accounting Corp., in accordance with KSA, whose report dated March 10, 2022 expressed an unqualified opinion. The accompanying separate statement of financial position as of December 31, 2021 presented for comparative purposes is not different, in all material respects, from the above audited separate statement of financial position.
Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements
Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with KIFRS, and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements.
As part of an audit in accordance with KSA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
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• | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine this matter that was of most significant in the audit of the separate financial statements of the current period and is therefore the key audit matter. We describe this matter in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors’ report is Yoo, Jung Ho.
March 10, 2023
This report is effective as of March 10, 2023, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of independent auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the accompanying separate financial statements and may result in modifications to this report.
Table of Contents
SK TELECOM CO., LTD.
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
The accompanying separate financial statements, including all footnote disclosures, have been prepared by, and are the responsibility of, the Company.
Ryu, Young-Sang
Chief Executive Officer
SK TELECOM CO., LTD.
Table of Contents
SK TELECOM CO., LTD.
Separate Statements of Financial Position
As of December 31, 2022 and 2021
(In millions of won) | ||||||||||||
Note | December 31, 2022 | December 31, 2021 | ||||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 34,35 | 158,823 | ||||||||||
Short-term financial instruments | 4,34,35 | 169,829 | 379,000 | |||||||||
Accounts receivable – trade, net | 5,34,35,36 | 1,425,695 | 1,514,260 | |||||||||
Short-term loans, net | 5,34,35,36 | 70,043 | 62,724 | |||||||||
Accounts receivable – other, net | 5,34,35,36,37 | 435,096 | 520,956 | |||||||||
Contract assets | 7,35 | 12,100 | 10,078 | |||||||||
Prepaid expenses | 6 | 1,908,987 | 1,913,419 | |||||||||
Guarantee deposits | 5,34,35,36 | 63,516 | 51,739 | |||||||||
Derivative financial assets | 19,34,35,38 | 123,999 | 25,428 | |||||||||
Inventories, net | 23,355 | 8,962 | ||||||||||
Non-current assets held for sale | 40 | — | 20,000 | |||||||||
Advanced payments and others | 5,34,35 | 48,336 | 16,104 | |||||||||
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| |||||||||
5,498,460 | 4,681,493 | |||||||||||
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| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 4,34,35 | 354 | 354 | |||||||||
Long-term investment securities | 8,34,35 | 1,155,188 | 1,476,361 | |||||||||
Investments in subsidiaries, associates and joint ventures | 9,40 | 4,621,807 | 4,841,139 | |||||||||
Property and equipment, net | 10,12,36 | 9,519,663 | 9,318,408 | |||||||||
Investment property, net | 11 | 52,023 | 45,100 | |||||||||
Goodwill | 13 | 1,306,236 | 1,306,236 | |||||||||
Intangible assets, net | 14 | 2,693,400 | 3,203,330 | |||||||||
Long-term loans, net | 5,34,35,36 | 194 | 201 | |||||||||
Long-term accounts receivable – other | 5,34,35,37 | 377,858 | 287,179 | |||||||||
Long-term contract assets | 7,35 | 20,998 | 19,399 | |||||||||
Long-term prepaid expenses | 6 | 935,710 | 951,441 | |||||||||
Guarantee deposits | 5,34,35,36 | 92,019 | 106,091 | |||||||||
Long-term derivative financial assets | 19,34,35,38 | 126,737 | 152,084 | |||||||||
Defined benefit assets | 18 | 31,225 | — | |||||||||
Other non-current assets | 249 | 249 | ||||||||||
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|
|
| |||||||||
20,933,661 | 21,707,572 | |||||||||||
|
|
|
| |||||||||
Total Assets | 26,389,065 | |||||||||||
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|
|
(Continued)
1
Table of Contents
SK TELECOM CO., LTD.
Separate Statements of Financial Position, Continued
As of December 31, 2022 and 2021
(In millions of won) | ||||||||||||
Note | December 31, 2022 | December 31, 2021 | ||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable – other | 34,35,36 | 2,072,195 | ||||||||||
Contract liabilities | 7 | 80,654 | 72,624 | |||||||||
Withholdings | 34,35 | 604,681 | 608,069 | |||||||||
Accrued expenses | 34,35 | 871,095 | 764,863 | |||||||||
Income tax payable | 31 | 82,554 | 158,837 | |||||||||
Provisions | 17,39 | 31,651 | 54,137 | |||||||||
Short-term borrowings | 15,34,35,38 | 100,000 | — | |||||||||
Current portion of long-term debt, net | 15,34,35,38 | 1,383,097 | 976,195 | |||||||||
Lease liabilities | 34,35,36,38 | 337,320 | 316,169 | |||||||||
Current portion of long-term payables – other | 16,34,35,38 | 398,874 | 398,823 | |||||||||
Other current liabilities | 34,35 | 11,725 | 4,565 | |||||||||
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| |||||||||
6,236,135 | 5,426,477 | |||||||||||
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| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 15,34,35,38 | 5,705,873 | 5,835,400 | |||||||||
Long-term borrowings, excluding current installments, net | 15,34,35,38 | 640,000 | 300,000 | |||||||||
Long-term payables – other | 16,34,35,38 | 1,239,467 | 1,611,010 | |||||||||
Long-term contract liabilities | 7 | 12,745 | 9,149 | |||||||||
Long-term derivative financial liabilities | 19,34,35,38 | 302,593 | 321,025 | |||||||||
Long-term lease liabilities | 34,35,36,38 | 1,041,991 | 1,045,926 | |||||||||
Long-term provisions | 17 | 65,754 | 42,432 | |||||||||
Deferred tax liabilities | 31 | 754,321 | 883,311 | |||||||||
Defined benefit liabilities | 18 | — | 6,902 | |||||||||
Other non-current liabilities | 34,35 | 49,860 | 44,577 | |||||||||
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|
|
| |||||||||
9,812,604 | 10,099,732 | |||||||||||
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|
|
| |||||||||
Total Liabilities | 16,048,739 | 15,526,209 | ||||||||||
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|
| |||||||||
Equity: | ||||||||||||
Share capital | 1,20 | 30,493 | 30,493 | |||||||||
Capital surplus and others | 20,21,22,23 | (4,506,693 | ) | (4,576,271 | ) | |||||||
Retained earnings | 24,25 | 14,691,461 | 14,770,618 | |||||||||
Reserves | 26 | 168,121 | 638,016 | |||||||||
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|
|
| |||||||||
Total Shareholder’s Equity | 10,383,382 | 10,862,856 | ||||||||||
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|
|
| |||||||||
Total Liabilities and Shareholder’s Equity | 26,389,065 | |||||||||||
|
|
|
|
The accompanying notes are an integral part of the separate financial statements.
2
Table of Contents
SK TELECOM CO., LTD.
For the years ended December 31, 2022 and 2021
(In millions of won) | ||||||||||||
Note | 2022 | 2021 | ||||||||||
Operating revenue: | 27,36 | |||||||||||
Revenue | 12,102,830 | |||||||||||
Operating expenses: | 36 | |||||||||||
Labor | 992,964 | 953,849 | ||||||||||
Commissions | 6 | 4,792,121 | 4,817,920 | |||||||||
Depreciation and amortization | 2,693,630 | 2,766,981 | ||||||||||
Network interconnection | 532,621 | 561,321 | ||||||||||
Leased lines | 191,212 | 206,499 | ||||||||||
Advertising | 161,294 | 117,969 | ||||||||||
Rent | 121,067 | 115,271 | ||||||||||
Cost of goods sold | 544,286 | 470,565 | ||||||||||
Others | 28 | 1,064,262 | 978,132 | |||||||||
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| |||||||||
11,093,457 | 10,988,507 | |||||||||||
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|
| |||||||||
Operating profit | 1,321,131 | 1,114,323 | ||||||||||
Finance income | 30 | 134,965 | 435,635 | |||||||||
Finance costs | 30 | (387,606 | ) | (254,835 | ) | |||||||
Other non-operating income | 29 | 45,162 | 69,662 | |||||||||
Other non-operating expenses | 29 | (29,005 | ) | (49,489 | ) | |||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 9 | 61,603 | 54,051 | |||||||||
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|
| |||||||||
Profit before income tax | 1,146,250 | 1,369,347 | ||||||||||
Income tax expense | 31 | 276,760 | 295,524 | |||||||||
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|
|
| |||||||||
Profit for the year | 1,073,823 | |||||||||||
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| |||||||||
Earnings per share: | 32 | |||||||||||
Basic earnings per share (in won) | 3,183 | |||||||||||
Diluted earnings per share (in won) | 3,919 | 3,181 |
The accompanying notes are an integral part of the separate financial statements.
3
Table of Contents
SK TELECOM CO., LTD.
Separate Statements of Comprehensive Income
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Profit for the year | 1,073,823 | |||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit liabilities | 18 | (4,899 | ) | (9,379 | ) | |||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income | 26,30 | (481,023 | ) | 289,764 | ||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||
Net change in unrealized fair value of derivatives | 19,26,30 | (13,792 | ) | 16,807 | ||||||||
|
|
|
| |||||||||
Other comprehensive income (loss) for the year, net of taxes | (499,714 | ) | 297,192 | |||||||||
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| |||||||||
Total comprehensive income | 1,371,015 | |||||||||||
|
|
|
|
The accompanying notes are an integral part of the separate financial statements.
4
Table of Contents
SK TELECOM CO., LTD.
Separate Statements of Changes in Equity
For the years ended December 31, 2022 and 2021
(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, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income (loss): | 2,915,887 | (2,123,661 | ) | 398,759 | 1,481 | (903,332 | ) | 289,134 | 16,684,640 | 331,445 | 17,349,858 | |||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | — | — | — | 1,073,823 | — | 1,073,823 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 18,19,26,30 | — | — | — | — | — | — | — | (9,379 | ) | 306,571 | 297,192 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | — | — | — | — | — | 1,064,444 | 306,571 | 1,371,015 | |||||||||||||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | 33 | — | — | — | — | — | — | — | (641,944 | ) | — | (641,944 | ) | |||||||||||||||||||||||||||||||
Interim dividends | 33 | — | — | — | — | — | — | — | (355,804 | ) | — | (355,804 | ) | |||||||||||||||||||||||||||||||
Share option | 23 | — | — | — | — | 56,386 | 19,112 | 75,498 | — | — | 75,498 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | 22 | — | — | — | — | — | — | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||||||||||||
Acquisition of treasury shares | 21 | — | — | (76,111 | ) | — | — | — | (76,111 | ) | — | — | (76,111 | ) | ||||||||||||||||||||||||||||||
Disposal of treasury shares | 21 | — | — | 141,469 | — | — | (84,452 | ) | 57,017 | — | — | 57,017 | ||||||||||||||||||||||||||||||||
Retirement of treasury shares | 21 | — | — | 1,965,952 | — | — | — | 1,965,952 | (1,965,952 | ) | — | — | ||||||||||||||||||||||||||||||||
Changes from spin-off | 20,41 | (14,146 | ) | (1,144,887 | ) | 35,037 | — | (10,701 | ) | (5,767,210 | ) | (6,887,761 | ) | — | — | (6,901,907 | ) | |||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
(14,146 | ) | (1,144,887 | ) | 2,066,347 | — | 45,685 | (5,832,550 | ) | (4,865,405 | ) | (2,978,466 | ) | — | (7,858,017 | ) | |||||||||||||||||||||||||||||
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Balance, December 31, 2021 | 1,771,000 | (57,314 | ) | 398,759 | 47,166 | (6,735,882 | ) | (4,576,271 | ) | 14,770,618 | 638,016 | 10,862,856 | ||||||||||||||||||||||||||||||||
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Balance, January 1, 2022 | 1,771,000 | (57,314 | ) | 398,759 | 47,166 | (6,735,882 | ) | (4,576,271 | ) | 14,770,618 | 638,016 | 10,862,856 | ||||||||||||||||||||||||||||||||
Total comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | — | — | — | 869,490 | — | 869,490 | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | 18,19,26,30 | — | — | — | — | — | — | — | (29,819 | ) | (469,895 | ) | (499,714 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | — | — | — | — | — | 839,671 | (469,895 | ) | 369,776 | ||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Transactions with owners: | — | — | ||||||||||||||||||||||||||||||||||||||||||
Annual dividends | 33 | — | — | — | — | — | — | — | (361,186 | ) | — | (361,186 | ) | |||||||||||||||||||||||||||||||
Interim dividends | 33 | — | — | — | — | — | — | — | (542,876 | ) | — | (542,876 | ) | |||||||||||||||||||||||||||||||
Share option | 23 | — | — | — | — | 47,129 | 25,132 | 72,261 | — | — | 72,261 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | 22 | — | — | — | — | — | — | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||||||||||||
Transactions of treasury shares | 21 | — | — | 20,612 | — | (92,234 | ) | 68,939 | (2,683 | ) | — | — | (2,683 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | 20,612 | — | (45,105 | ) | 94,071 | 69,578 | (918,828 | ) | — | (849,250 | ) | ||||||||||||||||||||||||||||||||
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Balance, December 31, 2022 | 1,771,000 | (36,702 | ) | 398,759 | 2,061 | (6,641,811 | ) | (4,506,693 | ) | 14,691,461 | 168,121 | 10,383,382 | ||||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of the separate financial statements.
5
Table of Contents
SK TELECOM CO., LTD.
Separate Statements of Cash Flows
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the year | 1,073,823 | |||||||||||
Adjustments for income and expenses | 38 | 3,470,169 | 3,128,696 | |||||||||
Changes in assets and liabilities related to operating activities | 38 | 214,858 | (180,847 | ) | ||||||||
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| |||||||||
4,554,517 | 4,021,672 | |||||||||||
Interest received | 31,516 | 23,109 | ||||||||||
Dividends received | 50,927 | 326,759 | ||||||||||
Interest paid | (220,723 | ) | (202,547 | ) | ||||||||
Income tax paid | (343,956 | ) | (249,164 | ) | ||||||||
|
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| |||||||||
Net cash provided by operating activities | 4,072,281 | 3,919,829 | ||||||||||
|
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| |||||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | 201,376 | 137,000 | ||||||||||
Collection of short-term loans | 115,121 | 130,833 | ||||||||||
Decrease in long-term financial instruments | 330,032 | — | ||||||||||
Proceeds from disposals of long-term investment Securities | 55,114 | 17,116 | ||||||||||
Proceeds from disposals of investments in subsidiaries, associates and joint ventures | 382,114 | 139,668 | ||||||||||
Proceeds from disposals of non-current assets held for sale | 20,136 | — | ||||||||||
Proceeds from disposals of property and equipment | 12,795 | 55,658 | ||||||||||
Proceeds from disposals of intangible assets | 3,680 | 4,843 | ||||||||||
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| |||||||||
1,120,368 | 485,118 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term loans | (122,506 | ) | (97,628 | ) | ||||||||
Increase in long-term financial instruments | (330,032 | ) | — | |||||||||
Acquisitions of long-term investment securities | (372,672 | ) | (24,912 | ) | ||||||||
Acquisitions of investments in subsidiaries, associates and joint ventures | (93,215 | ) | (414,467 | ) | ||||||||
Acquisitions of property and equipment | (2,074,860 | ) | (1,863,200 | ) | ||||||||
Acquisitions of intangible assets | (91,914 | ) | (336,558 | ) | ||||||||
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| |||||||||
(3,085,199 | ) | (2,736,765 | ) | |||||||||
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| |||||||||
Net cash used in investing activities | (2,251,647 | ) | ||||||||||
|
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(Continued)
6
Table of Contents
SK TELECOM CO., LTD.
Separate Statements of Cash Flows
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from short-term borrowings | — | |||||||||||
Proceeds from long-term borrowings | 440,000 | 300,000 | ||||||||||
Proceeds from issuance of debentures | 1,050,820 | 507,876 | ||||||||||
Cash inflows from settlement of derivatives | 768 | 332 | ||||||||||
|
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| |||||||||
1,591,588 | 808,208 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of long-term borrowings | (7,096 | ) | (12,824 | ) | ||||||||
Repayments of long-term payables – other | (400,245 | ) | (425,349 | ) | ||||||||
Repayments of debentures | (970,000 | ) | (700,000 | ) | ||||||||
Payments of dividends | (904,020 | ) | (997,748 | ) | ||||||||
Payments of interest on hybrid bonds | (14,766 | ) | (14,766 | ) | ||||||||
Repayments of lease liabilities | (344,199 | ) | (341,186 | ) | ||||||||
Acquisition of treasury shares | — | (76,111 | ) | |||||||||
Cash outflows resulting from spin-off | — | (78,800 | ) | |||||||||
|
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| |||||||||
(2,640,326 | ) | (2,646,784 | ) | |||||||||
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|
|
| |||||||||
Net cash used in financing activities | (1,048,738 | ) | (1,838,576 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents |
| 1,058,712 | (170,394 | ) | ||||||||
Cash and cash equivalents at beginning of the year | 158,823 | 329,208 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | (31 | ) | 9 | |||||||||
|
|
|
| |||||||||
Cash and cash equivalents at end of the year |
| 158,823 | ||||||||||
|
|
|
|
The accompanying notes are an integral part of the separate financial statements.
7
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity |
SK Telecom Co., Ltd. (“the Company”) was incorporated in March 29, 1984, under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The head office of the Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The Company’s common shares are listed on the Stock Market of Korea Exchange, and it’s depositary receipts (DRs) are listed on the New York Stock Exchange and the London Stock Exchange. As of December 31, 2022, the Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Inc. | 65,668,397 | 30.01 | ||||||
National Pension Service | 16,846,066 | 7.69 | ||||||
Institutional investors and other shareholders | 131,671,103 | 60.17 | ||||||
Kakao Investment Co., Ltd. | 3,846,487 | 1.76 | ||||||
Treasury shares | 801,091 | 0.37 | ||||||
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| |||||
218,833,144 | 100.00 | |||||||
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On November 1, 2021, the date of spin-off the Company completed the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments. (See note 41)
2. | Basis of Preparation |
These separate financial statements were prepared in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”), as prescribed in the Act on External Audits of Stock Companies of Korea. The accompanying separate financial statements have been translated into English from Korean financial statements. In the event of any differences in interpreting the financial statements or the independent auditor’s report thereon, Korean version, which is used for regulatory reporting purposes, shall prevail.
These financial statements are separate financial statements prepared in accordance with KIFRS 1027, Separate Financial Statements, presented by a parent or an investor with joint control of or significant influence over an investee, in which the investments are accounted for at cost less impairment, if any.
The separate financial statements were authorized for issuance by the Board of Directors on February 7, 2023, which will be submitted for final approval at the shareholders’ meeting to be held on March 28, 2023.
(1) Basis of measurement
The separate financial statements have been prepared on the historical cost basis, except for the following material items in the separate statement of financial position:
• | derivative financial instruments measured at fair value; |
• | financial instruments measured at fair value through profit or loss (“FVTPL”); |
• | financial instruments measured at fair value through other comprehensive income (“FVOCI”); |
• | liabilities measured at fair value for cash-settled share-based payment arrangement; and |
• | liabilities (assets) for defined benefit plans recognized at the total present value of defined benefit obligations less the fair value of plan assets. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
2. | Basis of Preparation, Continued |
(2) Functional and presentation currency
These separate financial statements are presented in Korean won, which is the currency of the primary economic environment in which the Company operates.
(3) Use of estimates and judgments
The preparation of the separate financial statements in conformity with KIFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.
1) Critical judgments
Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the separate financial statements is included in notes for the following areas: financial risk management.
2) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes: loss allowance (notes 5 and 35), estimated useful lives of costs to obtain a contract (notes 3 (23), and 6), property and equipment and intangible assets (notes 3 (7), (9), 10 and 14), impairment of goodwill (notes 3 (12) and 13), recognition of provision (notes 3 (17) and 17), measurement of defined benefit liabilities (notes 3 (16) and 18), transaction of derivative instruments (notes 3 (6) and 19) and recognition of deferred tax assets (liabilities) (notes 3 (25) and 31).
3) 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 an 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, are 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 KIFRS, including the level in the fair value hierarchy in which such valuations should be classified.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
2. | Basis of Preparation, Continued |
(3) Use of estimates and judgments, Continued
3) Fair value measurement, Continued
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 (unadjusted) market prices 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 or indirectly; 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 is included in note 35.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies |
The significant accounting policies applied by the Company in the preparation of its separate financial statements in accordance with KIFRS are included below. Except for certain standards and amendments which are effective for annual periods beginning on or after January 1, 2022, the significant accounting policies applied by the Company in these separate financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2021. The Company has not early adopted any standards, and interpretations or amendments that have been issued but are not yet effective.
The new and amended standards and interpretations that are effective for annual periods beginning on or after January 1, 2022 are as follows. These amended standards had no significant impact on the Company’s separate financial statements.
• | Onerous Contracts – Cost of Fulfilling a Contract (Amendments to KIFRS 1037). |
• | Reference to Conceptual Framework (Amendments to KIFRS 1103). |
• | Property, Plant and Equipment: Proceeds before Intended Use (Amendments to KIFRS 1016). |
• | Annual Improvements to KIFRS 2018-2020. |
(1) Operating segments
The Company presents disclosures relating to operating segments on its consolidated financial statements in accordance with KIFRS 1108, Operating Segments, and such disclosures are not separately disclosed on these separate financial statements.
(2) Investments in subsidiaries, associates, and joint ventures
These separate financial statements are prepared and presented in accordance with KIFRS 1027, Separate Financial Statements. The Company applies the cost method to investments in subsidiaries, associates and joint ventures in accordance with KIFRS 1027. Dividends from subsidiaries, associates, and joint ventures are recognized in profit or loss when the right to receive the dividends is established.
The assets and liabilities acquired under business combination under common control are recognized at the carrying amounts in the ultimate controlling shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(3) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits, and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.
(4) Inventories
Inventories are initially recognized at the acquisition cost and subsequently measured using the average method. During the period, a perpetual inventory system is used to track inventory quantities, which is adjusted based on the physical inventory counts performed at the period end. When the net realizable value of inventories is less than cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current period as operating expenses.
(5) Non-derivative financial assets
1) Recognition and initial measurement
Accounts receivable – trade and debt investments issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.
A financial asset (unless an accounts receivable – trade without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An accounts receivable – trade without a significant financing component is initially measured at the transaction price.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) Non-derivative financial assets, Continued
2) Classification and subsequent measurement
On initial recognition, a financial asset is classified as measured at:
• | FVTPL |
• | FVOCI – equity investment |
• | FVOCI – debt investment |
• | Financial assets at amortized cost |
A financial asset is classified based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
• | it is held within a business model whose objective is to hold assets to collect contractual cash flows; and |
• | its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
• | it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and |
• | its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
2) | Classification and subsequent measurement, Continued |
The following accounting policies are applied to the subsequent measurement of financial assets.
Financial assets at FVTPL | These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. | |
Financial assets at amortized cost | These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. | |
Debt investments at FVOCI | These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. | |
Equity investments at FVOCI | These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss. |
3) Impairment
The Company estimates the expected credit losses (“ECL”) for the debt instruments measured at amortized cost and FVOCI based on the Company’s historical experience and informed credit assessment that includes forward-looking information. The impairment approach is decided based on the assessment of whether the credit risk of a financial asset has increased significantly since initial recognition. However, the Company applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for accounts receivable – trade and lease receivables from the initial recognition.
ECL is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e., the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).
At each reporting date, the Company assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the assets.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
4) Derecognition
Financial assets
The Company derecognizes a financial asset when:
• | the contractual rights to the cash flows from the financial asset expire; or |
• | it transfers the rights to receive the contractual cash flows in a transaction in which either: |
• | substantially all of the risks and rewards of ownership of the financial asset are transferred; or |
• | the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. |
The Company enters into transactions whereby it transfers assets recognized in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.
Interest rate benchmark reform
When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortized cost changed as a result of interest rate benchmark reform, the Company updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met:
• | the change is necessary as a direct consequence of the reform; and |
• | the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e., the basis immediately before the change. |
When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Company first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Company applied the policies on accounting for modifications to the additional changes.
5) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when the Company currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to settle the liability and realize the asset simultaneously.
A financial asset and a financial liability are offset only when the right to set off the amount is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(6) Derivative financial instruments, including hedge accounting
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.
1) Hedge accounting
The Company holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Company designates derivatives as hedging instruments to hedge the variability in cash flow associated with highly probable forecasted transactions or firm commitments (a cash flow hedge).
On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
Hedges directly affected by interest rate benchmark reform
When uncertainty arises about the interest rate benchmark designated as a hedged risk and the timing or the amount of the interest rate benchmark-based cash flows of the hedged item or of the hedging instrument as a result of IBOR reform, for the purpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Company assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.
For a cash flow hedge of a forecast transaction, the Company assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur.
The Company will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument
• | to a hedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item or instrument; or |
• | when the hedging relationship is discontinued. |
When the basis for determining the contractual cash flows of the hedged item or hedging instrument changes as a result of IBOR reform and therefore there is no longer uncertainty arising about the cash flows of the hedged item or the hedging instrument, the Company amends the hedge documentation of that hedging relationship to reflect the change(s) required by IBOR reform.
The Company amends the formal hedge documentation by the end of the reporting period during which a change required by IBOR reform is made to the hedged risk, hedged item or hedging instrument. These amendments in the formal hedge documentation do not constitute the discontinuation of the hedging relationship or the designation of a new hedging relationship.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(6) Derivative financial instruments, including hedge accounting, Continued
1) Hedge accounting, Continued
Hedges directly affected by interest rate benchmark reform, Continued
If changes are made in addition to those changes required by interest rate benchmark reform to the financial asset or financial liability designated in a hedging relationship or to the designation of the hedging relationship, the Company determines whether those additional changes result in the discontinuation of hedging accounting. If the additional changes do not result in the discontinuation of hedging accounting, the Company amend the formal designation of the hedging relationship.
When the interest rate benchmark on which the hedged future cash flows had been based is changed as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Company deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows will be based.
Cash flow hedge
When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.
2) Other derivative financial instruments
Other derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(7) Property and equipment
Property and equipment are initially measured at cost. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Property and equipment, subsequently, are carried at cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of property and equipment at cost or, if appropriate, as a separate item if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Property and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property and equipment is depreciated over its separate useful life.
Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized as other non-operating income (loss).
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(7) Property and equipment, Continued
The estimated useful lives of the Company’s property and equipment are as follows:
Useful lives (years) | ||
Buildings and structures | 15, 30 | |
Machinery | 3 ~ 8, 10, 30 | |
Other property and equipment | 4 ~10 |
The Company reviews estimated residual values, expected useful lives, and depreciation methods annually at the end of each reporting date and adjusts, if appropriate. The change is accounted for as a change in an accounting estimate.
(8) Borrowing costs
The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets are not qualifying assets, and assets that are ready for their intended use or sale when acquired are not qualifying assets either.
To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Company capitalizes during a period do not exceed the amount of borrowing costs incurred during the period.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(9) Intangible assets
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Intangible assets, except for goodwill, are amortized on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships are expected to be available for use as there are no foreseeable limits to the periods. These intangible assets are determined as having indefinite useful lives and, therefore, not amortized.
The estimated useful lives of the Company’s intangible assets are as follows:
Useful lives (years) | ||
Frequency usage rights | 2.4 ~ 10 | |
Land usage rights | 5 | |
Industrial rights | 5, 10 | |
Facility usage rights | 10, 20 | |
Other | 3 ~ 20 |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.
Expenditures on research activities are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(10) Government grants
Government grants are not recognized unless there is reasonable assurance that the Company will comply with the grant’s conditions and that the grant will be received.
1) Grants related to assets
Government grants whose primary condition is that the Company purchases, constructs or otherwise acquires a long-term asset are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense.
2) Grants related to income
Government grants which are intended to compensate the Company for expenses incurred are deducted from the related expenses.
(11) Investment property
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are reported at cost less accumulated depreciation and accumulated impairment losses.
Subsequent expenditures are recognized in carrying amount of an asset or as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Company and the cost of an asset can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs associated with routine maintenance and repairs are recognized in profit or loss as incurred.
Investment property, except for land, is depreciated on a straight-line basis over estimated useful lives of 30 years. In addition, right-of-use asset classified as investment property is depreciated using the straight-line basis from the commencement date to the end of the lease term.
The depreciation method, estimated useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(12) Impairment of non-financial assets
The carrying amounts of the Company’s non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.
The Company estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Company estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU, for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying amount of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(13) Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
1) Company as a lessee
At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line basis from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
• | fixed payments, including in-substance fixed payments; |
• | variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
• | amounts expected to be payable under a residual value guarantee; and |
• | the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(13) Leases, Continued
1) Company as a lessee, Continued
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company presents right-of-use assets that do not meet the definition of investment property in ‘property and equipment’ in the statement of financial position.
The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Company recognizes the lease payments on short-term leases and leases of low value assets as an expense on a straight-line basis over the lease term.
2) Company as a lessor
At inception or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Company applies KIFRS 1115 to allocate the consideration in the contract.
The Company applies derecognition and impairment requirements in KIFRS 1109 to the net investment in the lease. The Company further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(14) Non-current assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Company recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized.
A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
(15) Non-derivative financial liabilities
The Company classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement. The Company recognizes financial liabilities in the separate statement of financial position when the Company becomes a party to the contractual provisions of the financial liabilities.
1) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, these liabilities are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issue of the financial liability are recognized in profit or loss as incurred.
2) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the issue of the financial liabilities. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.
3) Derecognition of financial liability
The Company extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Company recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.
When a financial liability is derecognized, the difference between the carrying amount and the consideration paid(including any transferred non-cash assets or liabilities assumed) is recognized in profit or loss.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(16) Employee benefits
1) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
2) Other long-term employee benefits
Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render related services. The Company’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.
3) Retirement benefits: defined contribution plans
When an employee has rendered a service to the Company during a period, the Company recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Company recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.
4) Retirement benefits: defined benefit plans
At the end of reporting period, defined benefit liabilities relating to defined benefit plans are recognized at present value of defined benefit obligations net of fair value of plan assets.
The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Company recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.
Remeasurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.
When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Company recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(16) | Employee benefits, Continued |
5) Termination benefits
The Company recognizes a liability and expense for termination benefits at the earlier of the period when the Company can no longer withdraw the offer of those benefits and the period when the Company recognizes costs for a restructuring that involves the payment of termination benefits. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.
(17) Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. If the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
If some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
A provision is used only for expenditures for which the provision was originally recognized.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(18) Emissions Rights
The Company accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission in Korea.
1) Greenhouse Gases Emission Right
Greenhouse Gases Emission Right consists of emission allowances, which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.
The Company derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.
2) Emissions liability
Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting period. The emissions liabilities are derecognized when they are surrendered to the government.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(19) Transactions in foreign currencies
Transactions in foreign currencies are translated to the functional currency of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Exchange differences arising from monetary items except for financial liabilities designated cashflow hedging instruments are recognized in profit or loss. If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange differences are also recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any foreign exchange differences are also recognized in profit or loss.
(20) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
When the Company repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners.
(21) Hybrid bond
The Company recognizes a financial instrument issued by the Company as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.
(22) Share-based payment
For equity-settled share-based payment transaction, if the fair value of the goods or services received cannot be reliably estimated, the Company measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognized in profit or loss.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(23) Revenue
1) Identification of performance obligations in contracts with customers
The Company identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless telecommunications services and (2) sale other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Company allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The handset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of the contract term as stated in the subscription contract.
2) Allocation of the transaction price to each performance obligation
The Company allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Company uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service.
3) Incremental costs of obtaining a contract
The Company pays commissions to its retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Company’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Company capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods
4) Customer loyalty programs
The Company provides customer loyalty points to customers based on the usage of the service to which the Company allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount to be allocated to the loyalty program is measured according to the relative stand-alone selling price of the customer loyalty points. The amount allocated to the loyalty program is deferred as a contract liability and is recognized as revenue when loyalty points are redeemed.
5) Consideration payable to a customer
Based on the subscription contract, a customer who uses the Company’s wireless telecommunications services may receive a discount for purchasing goods or services from a designated third party. The Company pays a portion of the price discounts that the customer receives to the third party which is viewed as consideration payable to a customer. The Company accounts for the amounts payable to the third party as a reduction of the wireless telecommunications service revenue.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(24) | Finance income and finance costs |
Finance income comprises interest income on funds invested (including financial assets measured at fair value), dividend income, gains on disposal of financial assets at FVTPL, changes in fair value of financial instruments at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.
Finance costs comprise interest expense on borrowings, changes in fair value of financial instruments at FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures is recognized as it accrues in profit or loss using the effective interest rate method.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(25) Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
The Company pays income tax in accordance with the tax-consolidation system when the Company and its subsidiaries are economically unified.
1) Current tax
In accordance with the tax-consolidation system, the Company calculates current taxes on the consolidated taxable income for the Company and its subsidiaries that meet the criteria for the consolidated income tax returns and recognizes the income tax payable as current tax liabilities of the Company.
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and includes interests and fines related to income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.
2) Deferred tax
Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Company recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Company recognizes a deferred tax asset for all deductible temporary differences, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Company and the reversal of existing temporary differences are considered in determining the future taxable profit.
The Company reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(25) | Income taxes, Continued |
2) | Deferred tax, Continued |
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if the Company has a legally enforceable right to offset the amount recognized and intends to settle the current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.
3) Uncertainty over income tax treatments
The Company assesses the uncertainty over income tax treatments pursuant to KIFRS 1012. If the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Company reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:
• | The most likely amount – the single most likely amount in a range of possible outcomes. |
• | The expected value – the sum of the probability-weighted amounts in a range of possible outcomes. |
(26) Earnings per share
The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees, if any.
(27) Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective for annual period beginning after January 1, 2022 are disclosed below. The following amendments are not expected to have a significant impact on the Company’s separate financial statements.
• | Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to KIFRS 1012). |
• | Classification of Liabilities as Current or Non-current (Amendments to KIFRS 1001). |
• | KIFRS 1117 Insurance Contracts and amendments to KIFRS 1117 Insurance Contracts. |
• | Disclosure of Accounting Polices (Amendments to KIFRS 1001). |
• | Definition of Accounting Estimates (Amendments to KIFRS 1008). |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
4. | Deposits with Restrictions on Use |
Deposits which are restricted in use as of December 31, 2022 and 2021 are summarized as follows:
(In millions of won) | ||||||||||
December 31, 2022 | December 31, 2021 | |||||||||
Short-term financial | Charitable trust fund(*1) | 79,000 | ||||||||
instruments | Litigations-related seizure(*2) | 14 | — | |||||||
Long-term financial | Collateral deposits for time deposit(*3) | 130 | 130 | |||||||
instruments | Guarantee deposit | 12 | 12 | |||||||
Collateral deposit(*4) | 212 | 212 | ||||||||
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| |||||||
79,354 | ||||||||||
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|
|
|
(*1) | The charitable trust fund is for shared growth established by SK Group and profits from the charitable trust fund are only used for the purpose of financial support for small and medium-sized enterprises that cooperate with SK Group. As of December 31, 2022 the funds cannot be withdrawn before maturity ( |
(*2) | The deposit is restricted in use due to the court’s order for seizure and collection of bonds. |
(*3) | The deposit is for registration of electrical construction business and specialized energy construction business in accordance with Enforcement Decree of the Electrical Constriction Business Act and Enforcement Decree of the Framework Act on the Construction Industry, respectively. Accordingly, the deposit is restricted in use while the Company operates the businesses. |
(*4) | The deposit is for registration of mechanical facility construction business and general construction business in accordance with Enforcement Decree of the Framework Act on the Construction Industry. Accordingly, the deposit is restricted in use while the Company operates the businesses. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
5. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of December 31, 2022 and 2021 are as follows: |
(In millions of won)
December 31, 2022 | ||||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (86,231 | ) | 1,425,695 | |||||||||
Short-term loans | 70,751 | (708 | ) | 70,043 | ||||||||
Accounts receivable – other(*) | 467,800 | (32,704 | ) | 435,096 | ||||||||
Guarantee deposits | 63,516 | — | 63,516 | |||||||||
Accrued income | 1,168 | — | 1,168 | |||||||||
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2,115,161 | (119,643 | ) | 1,995,518 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 41,231 | (41,037 | ) | 194 | ||||||||
Long-term accounts receivable – other(*) | 377,858 | — | 377,858 | |||||||||
Guarantee deposits | 92,019 | — | 92,019 | |||||||||
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| |||||||
511,108 | (41,037 | ) | 470,071 | |||||||||
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| |||||||
(160,680 | ) | 2,465,589 | ||||||||||
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|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2022 include W332,669 million of financial instruments classified as fair value through profit or loss (“FVTPL”). |
(In millions of won) | December 31, 2021 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (92,762 | ) | 1,514,260 | |||||||||
Short-term loans | 63,358 | (634 | ) | 62,724 | ||||||||
Accounts receivable – other(*) | 556,141 | (35,185 | ) | 520,956 | ||||||||
Guarantee deposits | 51,739 | — | 51,739 | |||||||||
Accrued income | 331 | — | 331 | |||||||||
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| |||||||
2,278,591 | (128,581 | ) | 2,150,010 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 41,238 | (41,037 | ) | 201 | ||||||||
Long-term accounts receivable – other(*) | 287,179 | — | 287,179 | |||||||||
Guarantee deposits | 106,091 | — | 106,091 | |||||||||
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| |||||||
434,508 | (41,037 | ) | 393,471 | |||||||||
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(169,618 | ) | 2,543,481 | ||||||||||
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(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2021 include |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
5. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on accounts receivable – trade measured at amortized cost for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
Beginning balance | Impairment | Write-offs(*) | Collection of receivables previously written-off | Ending balance | ||||||||||||||||
2022 | 16,053 | (31,500 | ) | 8,916 | 86,231 | |||||||||||||||
2021 | 12,606 | (32,150 | ) | 9,998 | 92,762 |
(*) | 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. Details of loss allowance on accounts receivable – trade as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||
Less than 6 months | 6 months ~ 1 year | 1 ~ 3 years | More than 3 years | |||||||||||||||
Telecommunications service revenue | Expected credit loss rate | 0.87 | % | 44.81 | % | 67.26 | % | 91.10 | % | |||||||||
Gross amount | 17,000 | 43,748 | 15,807 | |||||||||||||||
Loss allowance | 9,620 | 7,618 | 29,424 | 14,400 | ||||||||||||||
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Other revenue | Expected credit loss rate | 1.61 | % | 58.24 | % | 64.67 | % | 96.71 | % | |||||||||
Gross amount | 3,005 | 7,325 | 14,203 | |||||||||||||||
Loss allowance | 4,946 | 1,750 | 4,737 | 13,736 | ||||||||||||||
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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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
6. | Prepaid Expenses |
The Company pays commissions to its retail stores and authorized dealers for wireless telecommunications services. 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 December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Current assets: | ||||||||
Incremental costs of obtaining contracts | 1,878,149 | |||||||
Others | 31,087 | 35,270 | ||||||
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1,913,419 | ||||||||
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Non-current assets: | ||||||||
Incremental costs of obtaining contracts | 931,655 | |||||||
Others | 30,964 | 19,786 | ||||||
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951,441 | ||||||||
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(2) | Incremental costs of obtaining contracts |
The amortization in connection with incremental costs of obtaining contracts recognized for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | 2022 | 2021 | ||||||
Amortization recognized | 2,591,940 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
7. | 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 December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | 29,477 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 18,544 | 18,397 | ||||||
Customer loyalty programs | 7,706 | 12,699 | ||||||
Others | 67,149 | 50,677 | ||||||
|
|
|
| |||||
81,773 | ||||||||
|
|
|
|
(2) | The amount of revenue recognized for the years ended December 31, 2022 and 2021 related to the contract liabilities carried forward from the prior periods are |
(In millions of won) | ||||||||||||||||
Less than 1 year | 1 ~ 2 years | More than 2 years | Total | |||||||||||||
Wireless service contracts | — | — | 18,544 | |||||||||||||
Customer loyalty programs | 6,141 | 1,048 | 517 | 7,706 | ||||||||||||
Others | 55,969 | 10,935 | 245 | 67,149 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
11,983 | 762 | 93,399 | ||||||||||||||
|
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|
|
|
|
38
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
8. | Investment Securities |
Details of long-term investment securities as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||
Category | December 31, 2022 | December 31, 2021 | ||||||||||
Equity instruments | FVOCI | (*) | 1,383,223 | |||||||||
Debt instruments | FVTPL | 88,403 | 93,138 | |||||||||
|
|
|
| |||||||||
1,476,361 | ||||||||||||
|
|
|
|
(*) | 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 December 31, 2022 and 2021 are |
39
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
9. | Investments in Subsidiaries, Associates and Joint Ventures |
(1) | Investments in subsidiaries, associates and joint ventures as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Investments in subsidiaries | 3,148,741 | |||||||
Investments in associates and joint ventures | 1,420,944 | 1,692,398 | ||||||
|
|
|
| |||||
4,841,139 | ||||||||
|
|
|
|
(2) | Details of investments in subsidiaries as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data)
�� | December 31, 2022 | December 31, 2021 | ||||||||||||||
Number of shares | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
SK Telink Co., Ltd. | 1,432,627 | 100.0 | 243,988 | |||||||||||||
SK Broadband Co., Ltd.(*1) | 299,052,435 | 74.4 | 2,215,427 | 2,195,452 | ||||||||||||
SK Communications Co., Ltd. | 43,427,530 | 100.0 | 24,927 | 24,927 | ||||||||||||
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 Telecom China Holdings Co., Ltd. | — | 100.0 | 48,096 | 48,096 | ||||||||||||
SK Telecom Americas, Inc. | 122 | 100.0 | 31,203 | 31,203 | ||||||||||||
Atlas Investment(*2) | — | 100.0 | 159,631 | 155,656 | ||||||||||||
SK stoa Co., Ltd. | 3,631,355 | 100.0 | 40,029 | 40,029 | ||||||||||||
Broadband Nowon Co., Ltd.(*1) | — | — | — | 19,975 | ||||||||||||
Quantum Innovation Fund I(*3) | — | 59.9 | 11,626 | 11,935 | ||||||||||||
SAPEON Korea Inc.(*4) | — | — | — | — | ||||||||||||
SAPEON Inc.(*5) | 4,000 | 62.5 | 48,456 | — | ||||||||||||
SK O&S Co., Ltd. and others | — | — | 41,619 | 41,619 | ||||||||||||
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|
| |||||||||||||
3,148,741 | ||||||||||||||||
|
|
|
|
40
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
9. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(2) | Details of investments in subsidiaries as of December 31, 2022 and 2021 are as follows, Continued: |
(*1) | SK Broadband Co., Ltd. merged with Broadband Nowon Co., Ltd., for the year ended December 31, 2022. |
(*2) | The Company additionally contributed |
(*3) | The Company additionally contributed |
(*4) | The Company newly established SAPEON Korea Inc., and disposed the entire shares of SAPEON Korea Inc. to SAPEON Inc. at |
(*5) | The Company newly established SAPEON Inc., and the ownership interest of the Company has changed from 100% to 62.5% due to unequal paid-in capital increase incurred after the establishment for the year ended December 31, 2022. |
41
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
9. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data)
December 31, 2022 | December 31, 2021 | |||||||||||||||
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 | ||||||||||||
HanaCard Co., Ltd.(*2) | — | — | — | 253,739 | ||||||||||||
SK Technology Innovation Company | 14,700 | 49.0 | 45,864 | 45,864 | ||||||||||||
S.M. Culture & Contents Co., Ltd. | 22,033,898 | 23.1 | 65,341 | 65,341 | ||||||||||||
SK South East Asia Investment Pte. Ltd. | 300,000,000 | 20.0 | 344,240 | 344,240 | ||||||||||||
Pacific Telecom Inc.(*3) | 1,734,109 | 15.0 | 36,487 | 36,487 | ||||||||||||
Digital Games International Pte. Ltd.(*4) | — | — | — | 4,539 | ||||||||||||
Invites Healthcare Co., Ltd.(*5) | 489,999 | 31.1 | — | 35,000 | ||||||||||||
CMES Inc.(*3,6) | 42,520 | 7.7 | 900 | — | ||||||||||||
Konan Technology Inc.(*7) | 1,179,580 | 20.8 | 22,413 | — | ||||||||||||
12CM JAPAN and others(*3,8) | — | — | 77,550 | 75,864 | ||||||||||||
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|
| |||||||||||||
1,414,944 | 1,683,223 | |||||||||||||||
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|
| |||||||||||||
Investments in joint ventures: | ||||||||||||||||
Finnq Co., Ltd.(*9) | — | — | — | 7,175 | ||||||||||||
UTC Kakao-SK Telecom ESG Fund(*10) | — | 48.2 | 6,000 | 2,000 | ||||||||||||
|
|
|
| |||||||||||||
6,000 | 9,175 | |||||||||||||||
|
|
|
| |||||||||||||
1,692,398 | ||||||||||||||||
|
|
|
|
(*1) | Investments in Korea IT Fund was classified as investment in associates as the Company does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | The Company disposed the entire shares of HanaCard Co., Ltd. to Hana Financial Group Inc. at |
(*3) | Although the Group holds less than 20% of equity interests in these investees, investments in such investees 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. |
(*4) | The Company disposed the entire shares of Digital Games International Pte. Ltd. and recognized |
(*5) | The Company recognized the carrying amount of investments in Invites Healthcare Co., Ltd. in entirety as an impairment loss for the year ended December 31, 2022. |
(*6) | As the Company obtained significant influence over the investee, |
(*7) | The Company acquired 1,179,580 shares (20.8%) of Konan Technology Inc. from SK Communications Co., Ltd., a subsidiary, at |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
9. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of December 31, 2022 and 2021 are as follows, Continued: |
(*8) | The Company additionally contributed |
(*9) | The Company disposed the entire shares of Finnq Co., Ltd. to Hana Financial Group Inc. for |
(*10) | The Company additionally contributed |
(4) | The market value of investments in listed associates as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
S.M.Culture & Contents Co., Ltd. | 22,033,898 | 65,220 | 4,485 | 22,033,898 | 98,822 | |||||||||||||||||||
Konan Technology Inc. | 28,250 | 1,179,580 | 33,323 | — | — | — |
43
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
10. Property and Equipment
(1) | Property and equipment as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||
December 31, 2022 | ||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated Impairment loss | Carrying amount | |||||||||||||
Land | — | — | 646,286 | |||||||||||||
Buildings | 1,264,103 | (700,677 | ) | (450 | ) | 562,976 | ||||||||||
Structures | 933,702 | (667,774 | ) | (1,601 | ) | 264,327 | ||||||||||
Machinery | 27,420,063 | (22,145,451 | ) | — | 5,274,612 | |||||||||||
Right-of-use assets | 2,033,034 | (660,568 | ) | — | 1,372,466 | |||||||||||
Other | 1,505,800 | (1,061,476 | ) | — | 444,324 | |||||||||||
Construction in progress | 954,672 | — | — | 954,672 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
(25,235,946 | ) | (2,051 | ) | 9,519,663 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
(In millions of won) | ||||||||||||||||
December 31, 2021 | ||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated Impairment loss | Carrying amount | |||||||||||||
Land | — | — | 621,614 | |||||||||||||
Buildings | 1,226,269 | (660,843 | ) | (450 | ) | 564,976 | ||||||||||
Structures | 922,053 | (629,639 | ) | (1,601 | ) | 290,813 | ||||||||||
Machinery | 26,529,864 | (21,198,379 | ) | — | 5,331,485 | |||||||||||
Right-of-use assets | 1,901,150 | (530,253 | ) | — | 1,370,897 | |||||||||||
Other | 1,487,120 | (1,047,138 | ) | — | 439,982 | |||||||||||
Construction in progress | 698,641 | — | — | 698,641 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
(24,066,252 | ) | (2,051 | ) | 9,318,408 | ||||||||||||
|
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44
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
10. | Property and Equipment, Continued |
(2) | Changes in property and equipment for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Ending balance | |||||||||||||||||||
Land | — | (89 | ) | 24,761 | — | 646,286 | ||||||||||||||||||
Buildings | 564,976 | 353 | (182 | ) | 39,082 | (41,253 | ) | 562,976 | ||||||||||||||||
Structures | 290,813 | 1,293 | (32 | ) | 10,428 | (38,175 | ) | 264,327 | ||||||||||||||||
Machinery | 5,331,485 | 108,792 | (43,577 | ) | 1,464,892 | (1,586,980 | ) | 5,274,612 | ||||||||||||||||
Right-of-use assets | 1,370,897 | 410,640 | (37,386 | ) | (18,651 | ) | (353,034 | ) | 1,372,466 | |||||||||||||||
Other | 439,982 | 759,010 | (728 | ) | (671,632 | ) | (82,308 | ) | 444,324 | |||||||||||||||
Construction in progress | 698,641 | 1,211,667 | (1,709 | ) | (953,927 | ) | — | 954,672 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2,491,755 | (83,703 | ) | (105,047 | ) | (2,101,750 | ) | 9,519,663 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Spin-off | Ending balance | ||||||||||||||||||||||
Land | 192 | (20,963 | ) | 13,777 | — | (9,763 | ) | 621,614 | ||||||||||||||||||||
Buildings | 587,958 | 2,320 | (9,064 | ) | 33,388 | (42,402 | ) | (7,224 | ) | 564,976 | ||||||||||||||||||
Structures | 316,895 | 1,939 | (6,124 | ) | 16,533 | (37,907 | ) | (523 | ) | 290,813 | ||||||||||||||||||
Machinery | 5,354,992 | 126,933 | (10,876 | ) | 1,442,988 | (1,581,897 | ) | (655 | ) | 5,331,485 | ||||||||||||||||||
Right-of-use assets | 1,323,111 | 457,977 | (45,320 | ) | (6,248 | ) | (358,623 | ) | — | 1,370,897 | ||||||||||||||||||
Other | 405,140 | 730,154 | (1,060 | ) | (612,213 | ) | (81,294 | ) | (745 | ) | 439,982 | |||||||||||||||||
Construction in progress | 531,081 | 1,237,476 | (626 | ) | (1,067,932 | ) | — | (1,358 | ) | 698,641 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
2,556,991 | (94,033 | ) | (179,707 | ) | (2,102,123 | ) | (20,268 | ) | 9,318,408 | |||||||||||||||||||
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45
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
11. | Investment Property |
(1) | Investment property as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Acquisition cost | Accumulated depreciation | Carrying amount | Acquisition cost | Accumulated depreciation | Carrying amount | |||||||||||||||||||
Land | — | 16,485 | 17,084 | — | 17,084 | |||||||||||||||||||
Buildings | 58,248 | (39,182 | ) | 19,066 | 60,138 | (38,370 | ) | 21,768 | ||||||||||||||||
Right-of-use assets | 23,505 | (7,033 | ) | 16,472 | 13,140 | (6,892 | ) | 6,248 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(46,215 | ) | 52,023 | 90,362 | (45,262 | ) | 45,100 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Changes in Investment property for the year ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||
2022 | ||||||||||||||||
Beginning balance | Transfer | Depreciation | Ending balance | |||||||||||||
Land | (599 | ) | — | 16,485 | ||||||||||||
Buildings | 21,768 | (743 | ) | (1,959 | ) | 19,066 | ||||||||||
Right-of-use assets | 6,248 | 18,015 | (7,791 | ) | 16,472 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
16,673 | (9,750 | ) | 52,023 | |||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||
2021 | ||||||||||||
Beginning balance | Transfer | Ending balance | ||||||||||
Land | 17,084 | 17,084 | ||||||||||
Buildings | — | 21,768 | 21,768 | |||||||||
Right-of-use assets | — | 6,248 | 6,248 | |||||||||
|
|
|
|
|
| |||||||
45,100 | 45,100 | |||||||||||
|
|
|
|
|
|
(3) | The Company recognized lease income of |
(4) | The fair value of investment property is |
46
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
12. | Leases |
(1) | Company as a lessee |
1) | Details of the right-of-use assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Land, buildings and structures | 1,139,024 | |||||||
Others | 258,508 | 231,873 | ||||||
|
|
|
| |||||
1,370,897 | ||||||||
|
|
|
|
2) | Details of amounts recognized in the separate statements of income for the years ended December 31, 2022 and 2021 as a lessee are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Depreciation of right-of-use assets: | ||||||||
Land, buildings and structures | 284,746 | |||||||
Others | 74,628 | 73,877 | ||||||
|
|
|
| |||||
358,623 | ||||||||
|
|
|
| |||||
Interest expense on lease liabilities | 18,863 |
Expenses related to short-term leases and low-value assets leases are immaterial.
3) | The total cash outflows due to lease payments for the years ended December 31, 2022 and 2021 amounted to |
47
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
12. | Lease, Continued |
(2) | Company as a lessor |
1) | Finance lease |
The Company recognized interest income ofW227 million andW340 million for lease receivables for the years ended December 31, 2022 and 2021, respectively.
The following table sets out a maturity analysis of lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2022.
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 2 years | 8,349 | |||
2 ~ 3 years | 2,479 | |||
|
| |||
Undiscounted lease payments | ||||
|
| |||
Unrealized finance income | 211 | |||
Net investment in the lease | 18,762 |
2) | Operating lease |
The Company recognized lease income ofW113,468 million andW115,450 million for the year ended December 31, 2022 and 2021, respectively, of which variable lease payments received areW8,622 million andW17,686 million, respectively.
The following table sets out a maturity analysis of lease payments, presenting the undiscounted fixed payments to be received subsequent to December 31, 2022.
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 2 years | 19,460 | |||
2 ~ 3 years | 3,414 | |||
3 ~ 4 years | 586 | |||
4 ~ 5 years | 9 | |||
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48
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
13. | Goodwill |
Goodwill as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Goodwill related to merger of Shinsegi Telecom, Inc. | 1,306,236 |
The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 6.7% (2021: 6.6%) (pre-tax annual discount rate for 2022 and 2021: 9.0%) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 0.0% (2021: 0.5%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the Company’s long-term wireless telecommunication industry growth rate. Management of the Company does not expect the total carrying amount of the CGU will exceed the total recoverable amount due to reasonably possible changes from the major assumptions used to estimate the recoverable amount.
14. | Intangible Assets |
(1) | Intangible assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||
December 31, 2022 | ||||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment loss | Carrying amount | |||||||||||||
Frequency usage rights(*1) | (1,499,158 | ) | (186,000 | ) | 2,082,432 | |||||||||||
Land usage rights | 36,819 | (35,692 | ) | — | 1,127 | |||||||||||
Industrial rights | 48,216 | (29,104 | ) | — | 19,112 | |||||||||||
Facility usage rights | 59,222 | (45,977 | ) | — | 13,245 | |||||||||||
Club memberships(*2) | 78,859 | — | (21,962 | ) | 56,897 | |||||||||||
Other(*3) | 3,671,908 | (3,151,321 | ) | — | 520,587 | |||||||||||
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|
|
|
|
|
|
| |||||||||
(4,761,252 | ) | (207,962 | ) | 2,693,400 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
(In millions of won) | ||||||||||||||||
December 31, 2021 | ||||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment loss | Carrying amount | |||||||||||||
Frequency usage rights(*1) | (4,476,046 | ) | (186,000 | ) | 2,559,689 | |||||||||||
Land usage rights | 41,006 | (38,557 | ) | — | 2,449 | |||||||||||
Industrial rights | 45,894 | (34,960 | ) | — | 10,934 | |||||||||||
Facility usage rights | 57,625 | (43,270 | ) | — | 14,355 | |||||||||||
Club memberships(*2) | 74,322 | — | (22,966 | ) | 51,356 | |||||||||||
Other(*3) | 3,509,532 | (2,944,985 | ) | — | 564,547 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
(7,537,818 | ) | (208,966 | ) | 3,203,330 | ||||||||||||
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49
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
14. | Intangible Assets, Continued |
(1) | Intangible assets as of December 31, 2022 and 2021 are as follows, Continued: |
(*1) | The Company was reassigned 800 MHz, 1.8 GHz and 2.1 GHz band of frequency licenses from the Ministry of Science and Information and Communication Technology (“ICT”) in exchange for |
(*2) | Club memberships are classified as intangible assets with indefinite useful lives and are not amortized. |
(*3) | Other intangible assets primarily consist of computer software and others. |
(2) | Changes in intangible assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Ending balance | |||||||||||||||||||
Frequency usage rights | — | — | — | (477,257 | ) | 2,082,432 | ||||||||||||||||||
Land usage rights | 2,449 | — | — | — | (1,322 | ) | 1,127 | |||||||||||||||||
Industrial rights | 10,934 | 13,428 | (824 | ) | (111 | ) | (4,315 | ) | 19,112 | |||||||||||||||
Facility usage rights | 14,355 | 1,396 | (2 | ) | 260 | (2,764 | ) | 13,245 | ||||||||||||||||
Club memberships | 51,356 | 6,113 | (572 | ) | — | — | 56,897 | |||||||||||||||||
Other | 564,547 | 70,977 | (382 | ) | 115,904 | (230,459 | ) | 520,587 | ||||||||||||||||
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| |||||||||||||
91,914 | (1,780 | ) | 116,053 | (716,117 | ) | 2,693,400 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment | Spin-off | Ending balance | |||||||||||||||||||||||||
Frequency usage rights | 1,145,999 | — | — | (519,075 | ) | — | — | 2,559,689 | ||||||||||||||||||||||||
Land usage rights | 4,103 | 140 | (42 | ) | — | (1,752 | ) | — | — | 2,449 | ||||||||||||||||||||||
Industrial rights | 9,659 | 4,783 | — | — | (3,508 | ) | — | — | 10,934 | |||||||||||||||||||||||
Facility usage rights | 15,061 | 1,690 | (21 | ) | 331 | (2,706 | ) | — | — | 14,355 | ||||||||||||||||||||||
Club memberships | 50,698 | 2,976 | (2,192 | ) | — | — | (126 | ) | — | 51,356 | ||||||||||||||||||||||
Other | 652,797 | 30,295 | (62 | ) | 167,388 | (285,065 | ) | — | (806 | ) | 564,547 | |||||||||||||||||||||
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| |||||||||||||||||
1,185,883 | (2,317 | ) | 167,719 | (812,106 | ) | (126 | ) | (806 | ) | 3,203,330 | ||||||||||||||||||||||
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50
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
14. | Intangible Assets, Continued |
(3) | Research and development expenditures recognized as expense for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Research and development costs expensed as incurred | 347,705 |
(4) | Details of frequency usage rights as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||
Amount | Description | Commencement of | Completion of | |||||||
800 MHz license | LTE service | Jul. 2021 | Jun. 2026 | |||||||
1.8 GHz license | 414,317 | LTE service | Dec. 2021 | Dec. 2026 | ||||||
2.6 GHz license | 485,670 | LTE service | Sept. 2016 | Dec. 2026 | ||||||
2.1 GHz license | 311,381 | W-CDMA and LTE service | Dec. 2021 | Dec. 2026 | ||||||
3.5 GHz license | 712,594 | 5G service | Apr. 2019 | Nov. 2028 | ||||||
28 GHz license | 4,766 | 5G service | Jan. 2021 | May. 2023 | ||||||
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| |||||||||
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51
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
15. | Borrowings and Debentures |
(1) | Short-term borrowings as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||
Lender | Annual interest rate (%) | Maturity | December 31, 2022 | |||||||
BNK Securities. Co.,Ltd. | 4.60 | Jan. 20, 2023 |
(2) | Long-term borrowings as of December 31, 2022 and 2021 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||
Lender | Annual interest rate (%) | Maturity | December 31, 2022 | December 31, 2021 | ||||||||||
Export Kreditnamnden | 1.70 | Apr. 29, 2022 | | 6,746 (USD 5,690 | ) | |||||||||
Mizuho Bank, Ltd. | 1.35 | May. 20, 2024 | 100,000 | 100,000 | ||||||||||
DBS Bank Ltd. | 1.32 | May. 28, 2024 | 200,000 | 200,000 | ||||||||||
DBS Bank Ltd. | 2.68 | Mar. 10, 2025 | 200,000 | — | ||||||||||
Credit Agricole CIB | 3.30 | Apr. 29, 2024 | 50,000 | — | ||||||||||
Mizuho Bank, Ltd. | 3.29 | Nov. 27, 2023 | 100,000 | — | ||||||||||
Nonghyup Bank(*) | MOR +1.96 | Nov. 17, 2024 | 40,000 | — | ||||||||||
Credit Agricole CIB | 4.89 | Nov. 28, 2025 | 50,000 | — | ||||||||||
|
|
|
| |||||||||||
Less present value discount | — | (18 | ) | |||||||||||
|
|
|
| |||||||||||
740,000 | 306,728 | |||||||||||||
Less current portions | (100,000 | ) | (6,728 | ) | ||||||||||
|
|
|
| |||||||||||
300,000 | ||||||||||||||
|
|
|
|
(*) | 6M MOR rates are 4.35% as of December 31, 2022. |
52
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
15. | Borrowings and Debentures, Continued |
(2) | Debentures as of December 31, 2022 and 2021 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2022 | December 31, 2021 | ||||||||||||||
Unsecured corporate bonds | Operating and | 2022 | 3.30 | — | 140,000 | |||||||||||||
Unsecured corporate bonds | refinancing fund | 2032 | 3.45 | 90,000 | 90,000 | |||||||||||||
Unsecured corporate bonds | Operating fund | 2023 | 3.03 | 230,000 | 230,000 | |||||||||||||
Unsecured corporate bonds | 2033 | 3.22 | 130,000 | 130,000 | ||||||||||||||
Unsecured corporate bonds | 2024 | 3.64 | 150,000 | 150,000 | ||||||||||||||
Unsecured corporate bonds | Refinancing fund | 2024 | 2.82 | 190,000 | 190,000 | |||||||||||||
Unsecured corporate bonds | Operating and | 2022 | 2.40 | — | 100,000 | |||||||||||||
Unsecured corporate bonds | refinancing fund | 2025 | 2.49 | 150,000 | 150,000 | |||||||||||||
Unsecured corporate bonds | 2030 | 2.61 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 2.66 | 70,000 | 70,000 | |||||||||||||
Unsecured corporate bonds | 2030 | 2.82 | 90,000 | 90,000 | ||||||||||||||
Unsecured corporate bonds | Operating and | 2025 | 2.55 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds | refinancing fund | 2035 | 2.75 | 70,000 | 70,000 | |||||||||||||
Unsecured corporate bonds | Operating fund | 2026 | 2.08 | 90,000 | 90,000 | |||||||||||||
Unsecured corporate bonds | 2036 | 2.24 | 80,000 | 80,000 | ||||||||||||||
Unsecured corporate bonds | 2026 | 1.97 | 120,000 | 120,000 | ||||||||||||||
Unsecured corporate bonds | 2031 | 2.17 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Refinancing fund | 2022 | 2.17 | — | 120,000 | |||||||||||||
Unsecured corporate bonds | 2027 | 2.55 | 100,000 | 100,000 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2032 | 2.65 | 90,000 | 90,000 | |||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2022 | 2.63 | — | 80,000 | |||||||||||||
Unsecured corporate bonds | Refinancing fund | 2027 | 2.84 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds | 2023 | 2.81 | 100,000 | 100,000 | ||||||||||||||
Unsecured corporate bonds | 2028 | 3.00 | 200,000 | 200,000 | ||||||||||||||
Unsecured corporate bonds | 2038 | 3.02 | 90,000 | 90,000 | ||||||||||||||
Unsecured corporate bonds | Operating and | 2023 | 2.33 | 150,000 | 150,000 | |||||||||||||
Unsecured corporate bonds | refinancing fund | 2038 | 2.44 | 50,000 | 50,000 | |||||||||||||
Unsecured corporate bonds | Operating fund | 2022 | 2.03 | — | 180,000 | |||||||||||||
Unsecured corporate bonds | 2024 | 2.09 | 120,000 | 120,000 | ||||||||||||||
Unsecured corporate bonds | 2029 | 2.19 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | 2039 | 2.23 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Operating and | 2022 | 1.40 | — | 120,000 | |||||||||||||
Unsecured corporate bonds | refinancing fund | 2024 | 1.49 | 60,000 | 60,000 | |||||||||||||
Unsecured corporate bonds | 2029 | 1.50 | 120,000 | 120,000 | ||||||||||||||
Unsecured corporate bonds | 2039 | 1.52 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | 2049 | 1.56 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | Operating fund | 2022 | 1.69 | — | 230,000 | |||||||||||||
Unsecured corporate bonds | 2024 | 1.76 | 70,000 | 70,000 | ||||||||||||||
Unsecured corporate bonds | 2029 | 1.79 | 40,000 | 40,000 | ||||||||||||||
Unsecured corporate bonds | 2039 | 1.81 | 60,000 | 60,000 | ||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2023 | 1.64 | 170,000 | 170,000 | |||||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 1.75 | 130,000 | 130,000 | |||||||||||||
Unsecured corporate bonds | 2030 | 1.83 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | 2040 | 1.87 | 70,000 | 70,000 |
53
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
15. | Borrowings and Debentures, Continued |
(2) | Debentures as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||
Purpose | Maturity | Annual interest rate (%) | December 31, 2022 | December 31, 2021 | ||||||||||||||
Unsecured corporate bonds | refinancing fund | 2025 | 1.40 | 140,000 | 140,000 | |||||||||||||
Unsecured corporate bonds | 2030 | 1.59 | 40,000 | 40,000 | ||||||||||||||
Unsecured corporate bonds | 2040 | 1.76 | 110,000 | 110,000 | ||||||||||||||
Unsecured corporate bonds | refinancing fund | 2024 | 1.17 | 80,000 | 80,000 | |||||||||||||
Unsecured corporate bonds | 2026 | 1.39 | 80,000 | 80,000 | ||||||||||||||
Unsecured corporate bonds | 2031 | 1.80 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds | 2041 | 1.89 | 100,000 | 100,000 | ||||||||||||||
Unsecured corporate bonds | refinancing fund | 2024 | 2.47 | 90,000 | 90,000 | |||||||||||||
Unsecured corporate bonds | 2026 | 2.69 | 70,000 | 70,000 | ||||||||||||||
Unsecured corporate bonds | 2041 | 2.68 | 40,000 | 40,000 | ||||||||||||||
Unsecured corporate bonds | 2025 | 3.80 | 240,000 | — | ||||||||||||||
Unsecured corporate bonds | 2027 | 3.84 | 70,000 | — | ||||||||||||||
Unsecured corporate bonds | 2042 | 3.78 | 40,000 | — | ||||||||||||||
Unsecured corporate bonds | 2025 | 4.00 | 300,000 | — | ||||||||||||||
Unsecured corporate bonds | 2027 | 4.00 | 95,000 | — | ||||||||||||||
Unsecured corporate bonds | 2024 | 4.79 | 100,000 | — | ||||||||||||||
Unsecured corporate bonds | 2025 | 4.73 | 110,000 | — | ||||||||||||||
Unsecured corporate bonds | 2027 | 4.74 | 60,000 | — | ||||||||||||||
Unsecured corporate bonds | 2032 | 4.69 | 40,000 | — | ||||||||||||||
Unsecured global bonds | Operating fund | 2027 | 6.63 | 506,920 | 474,200 | |||||||||||||
(USD 400,000 | ) | (USD 400,000 | ) | |||||||||||||||
633,650 | 592,750 | |||||||||||||||||
Unsecured global bonds | 2023 | 3.75 | (USD 500,000 | ) | (USD 500,000 | ) | ||||||||||||
Operating fund | 2025 | 3M LIBOR | 380,190 | 355,650 | ||||||||||||||
Floating rate notes(*) | +0.91 | (USD 300,000 | ) | (USD 300,000 | ) | |||||||||||||
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|
|
| |||||||||||||||
7,005,760 | 6,822,600 | |||||||||||||||||
Less discounts on bonds | (16,790 | ) | (17,733 | ) | ||||||||||||||
|
|
|
| |||||||||||||||
6,988,970 | 6,804,867 | |||||||||||||||||
Less current portions of bonds | (1,283,097 | ) | (969,467 | ) | ||||||||||||||
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|
|
| |||||||||||||||
5,835,400 | ||||||||||||||||||
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|
|
(*) | 3M LIBOR rates are 4.75% and 0.21% as of December 31, 2022 and 2021, respectively. |
54
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
16. | Long-Term Payables – Other |
(1) | As of December 31, 2022 and 2021, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 14): |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Long-term payables – other | 2,090,715 | |||||||
Present value discount on long-term payables – other | (52,129 | ) | (80,882 | ) | ||||
Current installments of long-term payables – other | (398,874 | ) | (398,823 | ) | ||||
|
|
|
| |||||
Carrying amount at year end | 1,611,010 | |||||||
|
|
|
|
(2) | The sum of portions repaid among the principal of long-term payables – other for the years ended December 31, 2022 and 2021 amounts at |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 3 years | 738,300 | |||
3 ~ 5 years | 460,538 | |||
More than 5 years | 91,387 | |||
|
| |||
|
|
17. | Provisions |
Changes in provisions for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | 2022 | As of December 31, 2022 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for restoration | 5,595 | (4,046 | ) | (664 | ) | 95,569 | 29,815 | 65,754 | ||||||||||||||||||||
Emission allowance | 1,885 | 2,369 | — | (2,418 | ) | 1,836 | 1,836 | — | ||||||||||||||||||||
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| |||||||||||||||
7,964 | (4,046 | ) | (3,082 | ) | 97,405 | 31,651 | 65,754 | |||||||||||||||||||||
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|
|
(In millions of won) | 2021 | As of December 31, 2021 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for restoration | 8,212 | (5,494 | ) | — | 94,684 | 52,252 | 42,432 | |||||||||||||||||||||
Emission allowance | 7,424 | 1,368 | (1,091 | ) | (5,816 | ) | 1,885 | 1,885 | — | |||||||||||||||||||
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| |||||||||||||||
9,580 | (6,585 | ) | (5,816 | ) | 96,569 | 54,137 | 42,432 | |||||||||||||||||||||
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55
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
18. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Present value of defined benefit obligations | 483,001 | |||||||
Fair value of plan assets | (539,847 | ) | (476,099 | ) | ||||
|
|
|
| |||||
6,902 | ||||||||
|
|
|
|
(2) | Principal actuarial assumptions as of December 31, 2022 and 2021 are as follows: |
December 31, 2022 | December 31, 2021 | |||||||
Discount rate for defined benefit obligations | 5.31 | % | 2.94 | % | ||||
Expected rate of salary increase | 8.37 | % | 5.15 | % |
Discount rate for defined benefit obligation is determined based on market yields of high-quality corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Company’s historical promotion index, inflation rate and salary increase ratio.
(3) | Changes in defined benefit obligations for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Binning balance | 464,846 | |||||||
Current service cost | 50,997 | 56,316 | ||||||
Interest cost | 15,094 | 11,228 | ||||||
Remeasurement | ||||||||
- Demographic assumption | (26,132 | ) | — | |||||
- Financial assumption | 25,392 | (903 | ) | |||||
- Adjustment based on experience | (6,059 | ) | 12,095 | |||||
Benefit paid | (28,932 | ) | (43,996 | ) | ||||
Spin-off | — | (17,811 | ) | |||||
Others(*) | (4,739 | ) | 1,226 | |||||
|
|
|
| |||||
Ending balance | 483,001 | |||||||
|
|
|
|
(*) | Others include changes in liabilities due to employee’s transfers among affiliates for the years ended December 31, 2022 and 2021. |
56
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
18. | Defined Benefit Liabilities, Continued |
(4) | Changes in plan assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Beginning balance | 457,425 | |||||||
Interest income | 15,296 | 10,802 | ||||||
Remeasurement | (10,898 | ) | (819 | ) | ||||
Contribution | 92,000 | 65,500 | ||||||
Benefit paid | (32,335 | ) | (40,103 | ) | ||||
Spin-off | — | (17,455 | ) | |||||
Others | (315 | ) | 749 | |||||
|
|
|
| |||||
Ending balance | 476,099 | |||||||
|
|
|
|
The Company expects to contributeW81,840 million to the defined benefit plans in 2023.
(5) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the separate statements of income) for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Current service cost | 56,316 | |||||||
Net interest cost | (202 | ) | 426 | |||||
|
|
|
| |||||
56,742 | ||||||||
|
|
|
|
Costs related to the defined benefit except for the amounts transferred to construction in progress are included in labor expenses and research and development expenses.
(6) | Details of plan assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Equity instruments | 13,712 | |||||||
Debt instruments | 96,134 | 148,906 | ||||||
Short-term financial instruments, etc. | 436,209 | 313,481 | ||||||
|
|
|
| |||||
476,099 | ||||||||
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|
|
|
(7) | As of December 31, 2022, effects on defined benefit obligations if each of significant actuarial assumptions changes within expectable and reasonable range are as follows: |
(In millions of won) | ||||||||
0.5% Increase | 0.5% Decrease | |||||||
Discount rate | 16,555 | |||||||
Expected salary increase rate | 16,404 | (15,627 | ) |
The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan and provides approximate values of sensitivity for the assumptions used.
A weighted average duration of defined benefit obligations as of December 31, 2022 and 2021 are 7.07 years and 9.16 years, respectively.
57
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
19. | Derivative Instruments |
(1) | Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, 2022 are as follows: |
(In thousands of foreign currencies) | ||||||||
Borrowing date | Hedging Instrument (Hedged item) | Hedged risk | Financial institution | Duration of contract | ||||
Jul. 20, 2007 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000) | Foreign currency risk | Morgan Stanley and four other banks | Jul. 20, 2007 ~ Jul. 20, 2027 | ||||
Apr. 16, 2018 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 500,000) | Foreign currency risk | The Export-Import Bank of Korea and three other banks | Apr. 16, 2018 ~ Apr. 16, 2023 | ||||
Mar. 4, 2020 | Floating-to-fixed cross-currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000) | Foreign currency risk and interest rate risk | Citibank | Mar. 4, 2020 ~ Jun. 4, 2025 |
(2) | In relation to the merger of SK Broadband Co., Ltd. for the year ended December 31, 2020, the Company has entered into a shareholders’ agreement with the shareholders of the acquirees. Pursuant to the agreement, when certain conditions are met within a period of time subsequent to the merger, the shareholders of the acquirees can exercise their drag-along rights and require the Company to sell its shares in SK Broadband Co., Ltd. should the shareholders exercise their drag-along rights, the Company also can exercise its call options over the shares held by those shareholders. The Company recognized a derivative financial liability of |
The fair value of SK Broadband Co., Ltd.’s common stock was estimated using 5-year projected cash flows discounted at 6.7% per annum. The fair value of the derivative financial liability was determined by using the Binomial Model based on various assumptions including the price of common stock and its price fluctuations. The significant unobservable inputs used in the fair value measurement and inter-relationship between significant unobservable inputs and fair value measurement are as follows:
Significant unobservable inputs | Correlations between inputs and fair value measurements | |
Fair value of SK Broadband Co., Ltd.’s common stock | The estimated fair value of derivative liabilities would decrease (increase) if the fair value of common stock would increase (decrease) | |
Volatility of stock price | The estimated fair value of derivative liabilities would decrease (increase) if the volatility of stock price increase (decrease) |
58
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
19. | Derivative Instruments, Continued |
(3) | The Company has entered into the agreement with Newberry Global Limited, whereby the Company has been granted subscription right and contingent subscription right to acquire Newberry series-C redeemable convertible preferred stock for the year ended December 31, 2020. The Company recognized derivative financial assets of |
The fair value of Newberry series-C redeemable convertible preferred stock (“RCPS”) was estimated using the fair value of Newberry Global Limited’s common stock which was estimated by using market approach and its price fluctuations. The fair value of derivative financial asset was determined by using the Binomial Model based on various assumptions including the price of RCPS and its price fluctuations. Meanwhile, if the fair value of RCPS, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative asset would increase (decrease). If the volatility of stock price, significant unobservable input used in the fair value measurement, increases (decrease), the estimated fair value of derivative asset would increase (decrease).
(4) | The Company has entered into the agreement with HAEGIN Co., Ltd., whereby the Company has been granted contingent subscription right to acquire HAEGIN Co., Ltd.‘s common stock for the year ended December 31, 2022. The Company is able to exercise the right in accordance with the agreement when certain conditions are met and recognized derivative financial assets of W6,895 million for the contingent subscription right as of December 31, 2022. The fair value of HAEGIN Co., Ltd.‘s common stock was estimated using 5-year projected cash flows discounted at 12% per annum. Meanwhile, if the fair value of HAEGIN Co., Ltd.‘s common stock, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative asset would increase (decrease). If the volatility of stock price, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative asset would increase (decrease). |
(5) | The fair value of derivative financial instruments to which the Company applies cash flow hedge is recorded in the financial statements as derivative financial assets and long-term derivative financial assets. As of December 31, 2022, details of fair values of the derivatives assets are as follows: |
(In millions of won, thousands of foreign currencies) | ||||||||
Hedging instrument (Hedged item) | Cash flow hedge | Fair value | ||||||
Current assets: | ||||||||
Fixed-to-fixed cross currency swap | 102,780 | |||||||
Non-current assets: | ||||||||
Fixed-to-fixed cross currency swap | 82,735 | 82,735 | ||||||
Floating-to-fixed cross currency interest rate swap | 37,107 | 37,107 | ||||||
|
|
|
| |||||
222,622 | ||||||||
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59
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
19. | Derivative Instruments, Continued |
(6) | The fair value of derivatives held for trading is recorded in the financial statements as derivative financial assets, long-term derivative financial assets, and long-term derivative financial liabilities. As of December 31, 2022, details of fair values of the derivative assets and liabilities are as follows: |
(In millions of won) | ||||||||
Held for trading | Fair value | |||||||
Current assets: | ||||||||
Contingent subscription right | 8,083 | |||||||
Subscription right | 13,136 | 13,136 | ||||||
|
|
|
| |||||
Non-current assets: | 21,219 | 21,219 | ||||||
Contingent subscription right | 6,895 | 6,895 | ||||||
|
|
|
| |||||
28,114 | ||||||||
|
|
|
| |||||
Non-current liabilities: | ||||||||
Drag-along and call option rights | (302,593 | ) |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
20. | Share Capital and Capital Surplus and Others |
(1) | Details of share capital as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Number of authorized shares(*1) | 670,000,000 | 670,000,000 | ||||||
Par value(*1) (in won) | 100 | 100 | ||||||
Number of issued shares | 218,833,144 | 218,833,144 | ||||||
Share capital: | ||||||||
Common share(*2) | 30,493 |
(*1) | As a result of stock split and the spin-off for the year ended December 31, 2021, the number of shares that the Company is allowed to issue under its article of incorporation has changed from 220,000,000 shares with a par value of |
(*2) | The Company’s share capital decreased by |
(2) | Changes in issued shares for the years ended December 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Issued shares as of January 1 | 80,745,711 | |||||||
Retirement of treasury shares(*1) | — | (8,685,568 | ) | |||||
Stock split(*2) | — | 288,240,572 | ||||||
Spin-off(*3) | — | (141,467,571 | ) | |||||
|
|
|
| |||||
Issued shares as of December 31 | 218,833,144 | |||||||
|
|
|
|
(*1) | The Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation for the year ended December 31, 2021. |
(*2) | The stock split of the Company’s common share was approved at the shareholders’ meeting held on October 12, 2021, to increase the number of its outstanding shares, effective from October 28, 2021. The par value of issued shares has changed from |
(*3) | The allocation of new shares to shareholders of the spin-off company is based on the number of shares at par value of |
Surviving Company | Spin-off Company | |||
Company name | SK Telecom Co., Ltd. | SK Square Co., Ltd. | ||
Common shares (in the number of shares) | 0.6073625 | 0.3926375 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
20. | Share Capital and Capital Surplus and Others, Continued |
(3) | Details of shares outstanding as of December 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 218,833,144 | 801,091 | 218,032,053 | 218,833,144 | 1,250,992 | 217,582,152 |
(4) | Details of capital surplus and others as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Paid-in surplus | 1,771,000 | |||||||
Treasury shares(Note 21) | (36,702 | ) | (57,314 | ) | ||||
Hybrid bonds(Note 22) | 398,759 | 398,759 | ||||||
Share option(Note 23) | 2,061 | 47,166 | ||||||
Others(*) | (6,641,811 | ) | (6,735,882 | ) | ||||
|
|
|
| |||||
(4,576,271 | ) | |||||||
|
|
|
|
(*) | The amount includes a change in equity amounting to |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
21. | Treasury Shares |
(1) | Treasury shares as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for the number of shares) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Number of shares | 801,091 | 1,250,992 | ||||||
Acquisition cost | 57,314 |
(2) | Changes in treasury shares for the years ended December 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Treasury shares as of January 1 | 1,250,992 | 9,418,558 | ||||||
Acquisition(*1) | — | 288,000 | ||||||
Disposal(*2) | — | (626,740 | ) | |||||
Retirement of treasury shares(*3) | — | (8,685,568 | ) | |||||
Stock split(*4) | — | 1,577,000 | ||||||
Spin-off(*5) | — | (719,955 | ) | |||||
Disposal(*6) | (449,901 | ) | (303 | ) | ||||
|
|
|
| |||||
Treasury shares as of December 31 | 801,091 | 1,250,992 | ||||||
|
|
|
|
(*1) | The Company acquired 288,000 of its treasury shares for |
(*2) | The Company distributed 626,240 treasury shares (acquisition cost: |
(*3) | The Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation, as a result, the Company’s issued shares have decreased without change in share capital for the year ended December 31, 2021. |
(*4) | The stock split of the Company’s common stock was approved at the shareholders’ meeting held on October 12, 2021, to increase the number of its outstanding shares, effective from October 28, 2021. |
(*5) | 773,987 treasury shares, some of treasury shares held by the Company, have been replaced common shares of SK Square Co., Ltd., spin-off company, due to spin-off for the year ended December 31, 2021. Meanwhile, the Company acquired 54,032 of its treasury shares (acquisition cost: |
(*6) | The Company distributed 303 treasury shares (acquisition cost: |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
22. | Hybrid Bonds |
Hybrid bonds classified as equity as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||||
Type | Issuance date | Maturity(*1) | Annual interest rate(%)(*2) | December 31, 2022 | December 31, 2021 | |||||||||||||||||||
Series 2-1 hybrid bonds | | Unsecured subordinated bearer bond | | June 7, 2018 | June 7, 2078 | 3.70 | 300,000 | |||||||||||||||||
Series 2-2 hybrid bonds | | Unsecured subordinated bearer bond | | June 7, 2018 | June 7, 2078 | 3.65 | 100,000 | 100,000 | ||||||||||||||||
Issuance costs | (1,241 | ) | (1,241 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
398,759 | ||||||||||||||||||||||||
|
|
|
|
As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Company classified the hybrid bonds as equity.
These are subordinated bonds which rank before common shares in the event of a liquidation or reorganization of the Company.
(*1) | The Company has a right to extend the maturity without any notice or announcement. |
(*2) | Annual interest rate is determined as yield rate of 5-year national bond plus premium. According to the step-up clause, additional premium of 0.25% and 0.75%, respectively, after 10 years and 25 years from the issuance date are applied. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share based payment arrangement |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows: |
1) | Share-based payment arrangement with cash alternatives |
Series | ||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5(*2) | 6(*2) | ||||||||
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(*1) (in share) | 67,320 | 67,320 | 4,124 | 8,907 | 5,266 | 376,313 | 87,794 | |||||||
Exercise price(*1) (in won) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||
Exercise period | 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 | 3 years’ service from the grant date | 4 years’ service from the grant date | 2 years’ service from the grant date | 2 years’ service from the grant date | 2 years’ service from the grant date | 3 years’ service from the grant date | 2 years’ service from the grant date |
Series | ||||
7-1 | 7-2(*2) | |||
Grant date | March 25, 2022 | |||
Types of shares to be issued | Registered common shares | |||
Grant method | Reissue of treasury shares, Cash settlement | |||
Number of shares (in share) | 295,275 | 109,704 | ||
Exercise price (in won) | 56,860 | 56,860 | ||
Exercise period | Mar. 26, 2025 ~ Mar. 25, 2029 | Mar. 26, 2024 ~ Mar. 25, 2027 | ||
Vesting conditions | 2 years’ service from the grant date | 2 years’ service from the grant date |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share based payment arrangement, Continued |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued: |
2) | Cash-settled share-based payment arrangement |
2021 | 2022 | |||||
Share appreciation rights of SK Telecom Co., Ltd.(*3) | Share appreciation rights of SK Square Co., Ltd.(*3) | Share appreciation rights of SK Telecom Co., Ltd.(*3) | ||||
Grant date | January 1, 2021 | January 1, 2022 | ||||
Grant method | Cash settlement | |||||
Number of shares(*1) | 183,246 | 118,456 | 338,525 | |||
(in share) | ||||||
Exercise price(*1) (in won) | 50,276 | 56,860 | ||||
Exercise period | Jan. 1, 2023 ~ Mar. 28, 2024 | Jan. 1, 2024 ~ Mar. 25, 2025 | ||||
Vesting conditions | 2 years’ service from the grant date | 2 years’ service from the grant date |
(*1) | Number of shares granted and exercise price are adjusted as a result of stock split and the spin-off for the year ended December 31, 2021, and the remaining part of 1-1st share option and 3rd share option were fully and partially exercised for the year ended December 31, 2022, respectively. |
(*2) | Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022. |
(*3) | The Company newly established the long-term incentive policy as part of the compensation related to the growth of corporate value and granted cash settled share appreciation rights to executives. Meanwhile, parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share based payment arrangement, Continued |
(2) | The Company has changed the accounting treatment for share-based payment arrangements with cash alternatives from equity-settled share-based payment arrangements to cash-settled share-based payment arrangements for the year ended December 31, 2022. The fair value of the goods or services that the Company acquired from its employees and the liability incurred at the date of reclassification is |
(In millions of won) | Share compensation expense | |||
As of December 31, 2021 | ||||
For the year ended December 31, 2022 | 78,600 | |||
In subsequent periods | 40 | |||
|
| |||
|
|
The carrying amount of liabilities recognized by the Company in relation to the cash-settled share-based payment arrangement isW906 million andW1,774 million as of December 31, 2022 and 2021, respectively.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share based payment arrangement, Continued |
(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: |
1) | Share-based payment arrangement with cash alternatives |
(i) | SK Telecom Co., Ltd. |
(In won) | Series | |||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||||||
Risk-free interest rate | 3.67 | % | 3.70 | % | 3.65 | % | 3.70 | % | 3.70 | % | 3.76 | % | 3.74 | % | ||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | |||||||||||||||||||||
Share price on the remeasurement date | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | |||||||||||||||||||||
Expected volatility | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | ||||||||||||||
Expected dividends | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | ||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Per-share fair value of the option(*) | 250 | 947 | 357 | 1,639 | 2,289 | 9,628 | 3,837 |
(In won) | Series | |||||||
7-1 | 7-2 | |||||||
Risk-free interest rate | 3.75 | % | 3.76 | % | ||||
Estimated option’s life | 7 years | 5 years | ||||||
Share price on the remeasurement date | 47,400 | 47,400 | ||||||
Expected volatility | 20.80 | % | 20.80 | % | ||||
Expected dividends | 6.90 | % | 6.90 | % | ||||
Exercise price | 56,860 | 56,860 | ||||||
Per-share fair value of the option | 3,153 | 2,693 |
(ii) | SK Square Co., Ltd. |
(In won) | Series | |||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | 1.55 | % | ||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | |||||||||||||||||||||
Share price (Closing price on the preceding day)(*) | 52,500 | 52,500 | 48,700 | 51,800 | 50,600 | 34,900 | 49,800 | |||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | 25.70 | % | ||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | 4.00 | % | ||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Per-share fair value of the option(*) | 4,048 | 3,096 | 4,798 | 1,720 | 1,622 | 192 | 8,142 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share based payment arrangement, Continued |
(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, Continued: |
2) | Cash-settled share-based payment arrangement |
(In won) | 2021 | 2022 | ||||||||||
Share appreciation rights of SK Telecom Co., Ltd. | Share appreciation rights of SK Square Co., Ltd. | Share appreciation rights of SK Telecom Co., Ltd. | ||||||||||
Risk-free interest rate | 3.70 | % | 3.70 | % | 3.72 | % | ||||||
Estimated option’s life | 3.25 years | 3.25 years | 3.25 years | |||||||||
Share price on the remeasurement date | 47,400 | 33,550 | 47,400 | |||||||||
Expected volatility | 20.80 | % | 37.40 | % | 20.80 | % | ||||||
Expected dividends | 6.90 | % | 0.00 | % | 6.90 | % | ||||||
Exercise price(*) | 50,276 | 50,276 | 56,860 | |||||||||
Per-share fair value of the option | 2,308 | 1,760 | 1,625 |
(*) | Share price (closing price on the preceding day), exercise price and per-share fair value of the option are adjusted as a result of stock split and spin-off for the year ended December 31, 2021. |
Meanwhile, the Board of Directors of the Company resolved to dispose its treasury shares for the purpose of allotment of shares as bonus payment on October 12, 2021. The transaction is equity-settled share-based payment transactions in accordance with KIFRS 1102 and 505,350 shares (before stock split) were granted on October 12, 2021(i.e., grant date). 7,700 shares (before stock split) out of 505,350 shares (before stock split) were transferred to spin-off company on November 1, 2021. Vesting conditions are six months from the grant date and per-share fair value on the grant date are measured atW300,500 that is closing price of common shares on the grant date before stock split and spin-off. The fair value of these share-based payment on the grant date isW151,858 million, among which the awards with a fair value ofW9,935 million were transferred to spin-off company.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
24. | Retained Earnings |
(1) | Retained earnings as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Appropriated: | ||||||||
Legal reserve | 22,320 | |||||||
Reserve for business expansion | 9,631,138 | 11,631,138 | ||||||
Reserve for technology development | 4,365,300 | 4,365,300 | ||||||
|
|
|
| |||||
13,996,438 | 15,996,438 | |||||||
Unappropriated | 672,703 | (1,248,140 | ) | |||||
|
|
|
| |||||
14,770,618 | ||||||||
|
|
|
|
(2) | Legal reserve |
The Korean Commercial Act requires the Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
25. | Statements of Appropriation of Retained Earnings |
Details of statements of appropriation of retained earnings for the years ended December 31, 2022 and 2021 are as follows:
Date of appropriation for 2022: March 28, 2023
Date of appropriation for 2021: March 25, 2022
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Unappropriated retained earnings | ||||||||
Unappropriated retained earnings | 23,938 | |||||||
Remeasurement of defined benefit liabilities | (4,899 | ) | (9,379 | ) | ||||
Reclassification of valuation loss on FVOCI | (24,920 | ) | — | |||||
Retirement of treasury shares | — | (1,965,952 | ) | |||||
Interim dividends: 2022: 2,490% on par value 2021: 1,635% on par value | (542,876 | ) | (355,804 | ) | ||||
Interest on hybrid bonds | (14,766 | ) | (14,766 | ) | ||||
Profit for the year | 869,490 | 1,073,823 | ||||||
|
|
|
| |||||
672,703 | (1,248,140 | ) | ||||||
|
|
|
| |||||
Reversal of appropriation of retained earnings: | ||||||||
Reserve for business expansion | (200,000 | ) | 2,000,000 | |||||
Reserve for technology development | (200,000 | ) | — | |||||
Appropriation of retained earnings: | ||||||||
Cash dividends: 2022: 830% on par value 2021: 1,660% on par value | 180,967 | 361,186 | ||||||
|
|
|
| |||||
(580,967 | ) | 1,638,814 | ||||||
|
|
|
| |||||
Unappropriated retained earnings to be carried over to subsequent year | 390,674 | |||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
26. | Reserves |
(1) | Details of reserves, net of taxes, as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Valuation gain on FVOCI | 613,010 | |||||||
Valuation gain on derivatives | 11,214 | 25,006 | ||||||
|
|
|
| |||||
638,016 | ||||||||
|
|
|
|
(2) | Changes in reserves for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||
Valuation gain (loss) on financial assets at FVOCI | Valuation gain (loss) on derivatives | Total | ||||||||||
Balance as of January 1, 2021 | 8,199 | 331,445 | ||||||||||
Changes, net of taxes | 289,764 | 16,807 | 306,571 | |||||||||
|
|
|
|
|
| |||||||
Balance as of December 31, 2021 | 613,010 | 25,006 | 638,016 | |||||||||
|
|
|
|
|
| |||||||
Balance as of January 1, 2022 | 613,010 | 25,006 | 638,016 | |||||||||
Changes, net of taxes | (456,103 | ) | (13,792 | ) | (469,895 | ) | ||||||
|
|
|
|
|
| |||||||
Balance as of December 31, 2022 | 11,214 | 168,121 | ||||||||||
|
|
|
|
|
|
(3) | Changes in valuation gain (loss) on financial assets at FVOCI for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Balance as of January 1 | 323,246 | |||||||
Amount recognized as other comprehensive income (loss) for the year, net of taxes | (481,023 | ) | 289,764 | |||||
Amount reclassified to retained earnings, net of taxes | 24,920 | — | ||||||
|
|
|
| |||||
Balance as of December 31 | 613,010 | |||||||
|
|
|
|
(4) | Changes in valuation gain (loss) on derivatives for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Balance as of January 1 | 8,199 | |||||||
Amount recognized as other comprehensive income (loss) for the year, net of taxes | (19,967 | ) | 10,450 | |||||
Amount reclassified to profit, net of taxes | 6,175 | 6,357 | ||||||
|
|
|
| |||||
Balance as of December 31 | 25,006 | |||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
27. | 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) | ||||||||
2022 | 2021 | |||||||
Products transferred at a point in time: |
| |||||||
Product sales | 59,469 | |||||||
Services transferred over time: |
| |||||||
Wireless service revenue(*1) | 10,463,131 | 10,257,440 | ||||||
Cellular interconnection revenue | 485,496 | 512,151 | ||||||
Others(*2) | 1,357,728 | 1,273,770 | ||||||
|
|
|
| |||||
12,306,355 | 12,043,361 | |||||||
|
|
|
| |||||
12,102,830 | ||||||||
|
|
|
|
(*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.
28. | Other Operating Expenses |
Details of other operating expenses for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Communication | 27,952 | |||||||
Utilities | 301,284 | 263,204 | ||||||
Taxes and dues | 37,538 | 23,505 | ||||||
Repair | 267,067 | 246,549 | ||||||
Research and development | 338,389 | 347,705 | ||||||
Training | 28,778 | 23,218 | ||||||
Bad debt for accounts receivable – trade | 16,053 | 12,606 | ||||||
Other | 48,112 | 33,393 | ||||||
|
|
|
| |||||
978,132 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
29. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Other Non-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 34,088 | |||||||
Others | 31,089 | 35,574 | ||||||
|
|
|
| |||||
69,662 | ||||||||
|
|
|
| |||||
Other Non-operating Expenses: | ||||||||
Loss on disposal of property and equipment and intangible assets | 14,108 | |||||||
Impairment loss on property and equipment and intangible assets | — | 126 | ||||||
Donations | 11,442 | 11,116 | ||||||
Bad debt for accounts receivable – other | 2,071 | 4,000 | ||||||
Others | 9,770 | 20,139 | ||||||
|
|
|
| |||||
49,489 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
30. | Finance Income and Costs |
(1) | Details of finance income and costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | 2022 | 2021 | ||||||
Finance Income: | ||||||||
Interest income | 26,818 | |||||||
Gain on sale of accounts receivable – other | 1,043 | 27,725 | ||||||
Dividends | 50,927 | 326,759 | ||||||
Gain on foreign currency transactions | 7,945 | 2,911 | ||||||
Gain on foreign currency translations | 345 | 239 | ||||||
Gain relating to financial instruments at FVTPL | 40,581 | 51,183 | ||||||
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| |||||
435,635 | ||||||||
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|
(In millions of won) | 2022 | 2021 | ||||||
Finance Costs: | ||||||||
Interest expenses | 238,971 | |||||||
Loss on sale of accounts receivable – other | 61,841 | — | ||||||
Loss on foreign currency transactions | 9,304 | 4,995 | ||||||
Loss on foreign currency translations | 961 | 50 | ||||||
Loss relating to financial instruments at FVTPL | 27,635 | 10,819 | ||||||
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| |||||
254,835 | ||||||||
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|
|
(2) | Details of interest income included in finance income for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | 2022 | 2021 | ||||||
Interest income on cash equivalents and short-term financial instruments | 5,061 | |||||||
Interest income on loans and others | 22,856 | 21,757 | ||||||
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| |||||
26,818 | ||||||||
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|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
30. | Finance Income and Costs, Continued |
(3) | Details of interest expenses included in finance costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | 2022 | 2021 | ||||||
Interest expense on borrowings | 6,721 | |||||||
Interest expense on debentures | 184,049 | 186,852 | ||||||
Others | 80,403 | 45,398 | ||||||
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| |||||
238,971 |
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2022 and 2021 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 5 and 35. |
1) | Finance income and costs |
(In millions of won) | 2022 | |||||||
Finance income(*) | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 89,329 | |||||||
Financial assets at FVOCI | 1,495 | — | ||||||
Financial assets at amortized cost | 26,987 | 10,245 | ||||||
Derivatives designated as hedging instrument | — | 146 | ||||||
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| |||||
62,948 | 99,720 | |||||||
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| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | 18,432 | — | ||||||
Financial liabilities at amortized cost | 4,152 | 287,886 | ||||||
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| |||||
22,584 | 287,886 | |||||||
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| |||||
387,606 | ||||||||
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|
(*) | Finance income does not include W49,433 million of dividends received from subsidiaries and associates for the year ended December 31, 2022. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
30. | Finance Income and Costs, Continued |
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2022 and 2021 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 5 and 35, Continued: |
1) | Finance income and costs, Continued |
(In millions of won) | ||||||||
2021 | ||||||||
Finance income(*) | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 10,179 | |||||||
Financial assets at FVOCI | 1,320 | — | ||||||
Financial assets at amortized cost | 24,793 | 1,775 | ||||||
Derivatives designated as hedging instrument | — | 600 | ||||||
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| |||||
110,093 | 12,554 | |||||||
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| |||||
Financial Liabilities: | ||||||||
Financial liabilities at amortized cost | — | 41 | ||||||
Derivatives designated as hedging instrument | 103 | 242,240 | ||||||
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| |||||
103 | 242,281 | |||||||
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| |||||
254,835 | ||||||||
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|
(*) | Finance income does not include W325,439 million of dividends received from subsidiaries and associates for the year ended December 31, 2021. |
2) | Other comprehensive income (loss) |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Financial Assets: | ||||||||
Financial assets at FVOCI | 289,764 | |||||||
Derivatives designated as hedging instrument | (13,792 | ) | 16,807 | |||||
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| |||||
(494,815 | ) | 306,571 | ||||||
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(5) | Details of impairment losses for financial assets for the year ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Accounts receivable – trade | 12,606 | |||||||
Other receivables | 2,071 | 4,000 | ||||||
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| |||||
16,606 | ||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
31. | Income Tax Expense |
(1) | Income tax expenses for the years ended December 31, 2022 and 2021 consist of the following: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Current tax expense: | ||||||||
Current year | 247,179 | |||||||
Current tax of prior years | 66,055 | (628 | ) | |||||
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| |||||
263,271 | 246,551 | |||||||
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| |||||
Deferred tax expense: | ||||||||
Changes in net deferred tax assets | 13,489 | 48,973 | ||||||
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| |||||
Income tax expense | 295,524 | |||||||
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|
(2) | The difference between income taxes computed using the statutory corporate income tax rates and the recorded income taxes for the years ended December 31, 2022 and 2021 is attributable to the following: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Income taxes at statutory income tax rate | 365,992 | |||||||
Non-taxable income | (8,814 | ) | (12,769 | ) | ||||
Non-deductible expenses | 9,870 | 5,542 | ||||||
Tax credit and tax reduction | (5,332 | ) | (54,372 | ) | ||||
Changes in unrecognized deferred taxes | (4,572 | ) | 11,915 | |||||
Income tax paid (refund) | 48,775 | (327 | ) | |||||
Changes in tax rate and other | (68,024 | ) | (20,457 | ) | ||||
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| |||||
Income tax expense | 295,524 | |||||||
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(3) | Deferred taxes directly charged to (credited from) equity for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Valuation gain (loss) on financial assets measured at fair value | (100,884 | ) | ||||||
Valuation gain (loss) on derivatives | 5,199 | (5,924 | ) | |||||
Remeasurement of defined benefit liabilities | (800 | ) | 2,631 | |||||
Gain (loss) on disposal of treasury shares | (28,108 | ) | 27,223 | |||||
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| |||||
(76,954 | ) | |||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
31. | Income Tax Expense, Continued |
(4) | Changes in deferred tax assets (liabilities) for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | 2022 | |||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Ending | |||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||
Loss allowance | (2,222 | ) | — | 43,512 | ||||||||||||
Accrued interest income | (87 | ) | (206 | ) | — | (293 | ) | |||||||||
Financial assets measured at fair value | (158,404 | ) | (20,714 | ) | 166,188 | (12,930 | ) | |||||||||
Investments in subsidiaries, associates and joint ventures | 59 | 4,975 | — | 5,034 | ||||||||||||
Property and equipment | (271,151 | ) | (74,603 | ) | — | (345,754 | ) | |||||||||
Retirement benefit obligation | 6,947 | (3,228 | ) | (800 | ) | 2,919 | ||||||||||
Valuation gain on derivatives | 11,846 | 1,067 | 5,199 | 18,112 | ||||||||||||
Gain (loss) on foreign currency translation | 21,368 | (744 | ) | — | 20,624 | |||||||||||
Incremental costs to acquire a contract | (744,267 | ) | 37,265 | — | (707,002 | ) | ||||||||||
Right-of-use assets | (359,798 | ) | 15,775 | — | (344,023 | ) | ||||||||||
Lease liabilities | 357,488 | (11,749 | ) | — | 345,739 | |||||||||||
Others | 122,394 | 35,572 | (28,108 | ) | 129,858 | |||||||||||
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| |||||||||
(18,812 | ) | 142,479 | (844,204 | ) | ||||||||||||
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| |||||||||
Tax credit | 84,560 | 5,323 | — | 89,883 | ||||||||||||
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| |||||||||
(13,489 | ) | 142,479 | (754,321 | ) | ||||||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
31. | Income Tax Expense, Continued |
(4) | Changes in deferred tax assets (liabilities) for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | 2021 | |||||||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Spin-off | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||||||
Loss allowance | (3,713 | ) | — | — | 45,734 | |||||||||||||||
Accrued interest income | (138 | ) | 51 | — | — | (87 | ) | |||||||||||||
Financial assets measured at fair value | (56,501 | ) | (1,019 | ) | (100,884 | ) | — | (158,404 | ) | |||||||||||
Investments in subsidiaries, associates and joint ventures | 1,314 | (2,247 | ) | — | 992 | 59 | ||||||||||||||
Property and equipment | (150,952 | ) | (120,202 | ) | — | 3 | (271,151 | ) | ||||||||||||
Retirement benefit obligation | 9,706 | (5,337 | ) | 2,631 | (53 | ) | 6,947 | |||||||||||||
Valuation gain (loss) on derivatives | 15,887 | 1,883 | (5,924 | ) | — | 11,846 | ||||||||||||||
Gain (loss) on foreign currency translation | 21,764 | (396 | ) | — | — | 21,368 | ||||||||||||||
Incremental costs to acquire a contract | (781,524 | ) | 37,257 | — | — | (744,267 | ) | |||||||||||||
Right-of-use assets | (352,193 | ) | (7,605 | ) | — | — | (359,798 | ) | ||||||||||||
Lease liabilities | 349,555 | 7,933 | — | — | 357,488 | |||||||||||||||
Others | 97,179 | (555 | ) | 27,223 | (1,453 | ) | 122,394 | |||||||||||||
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(93,950 | ) | (76,954 | ) | (511 | ) | (967,871 | ) | |||||||||||||
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| |||||||||||
Tax credit | 39,583 | 44,977 | — | — | 84,560 | |||||||||||||||
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| |||||||||||
(48,973 | ) | (76,954 | ) | (511 | ) | (883,311 | ) | |||||||||||||
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(5) | Details of temporary differences not recognized as deferred tax assets (liabilities) in the statements of financial position as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Loss allowance | 77,405 | |||||||
Investments in subsidiaries, associates and joint ventures | 483,857 | 502,098 | ||||||
Other temporary differences | 372,134 | 372,134 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
32. | Earnings per Share |
(1) | Basic earnings per share |
1) | Basic earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data) | ||||||||
2022 | 2021 | |||||||
Profit for the year | 1,073,823 | |||||||
Interest on hybrid bonds | (14,766 | ) | (14,766 | ) | ||||
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| |||||
Profit for the year on common shares | 854,724 | 1,059,057 | ||||||
Weighted average number of common shares outstanding | 217,994,490 | 332,761,592 | ||||||
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| |||||
Basic earnings per share (in won) | 3,183 | |||||||
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|
2) | The weighted average number of common shares outstanding for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In shares) | 2022 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2022 | 218,833,144 | 218,833,144 | ||||||
Treasury shares at January 1, 2022 | (1,250,992 | ) | (1,250,992 | ) | ||||
Disposal of treasury shares | 449,901 | 412,338 | ||||||
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| |||||
218,032,053 | 217,994,490 | |||||||
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|
(In shares) | 2021 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2021 | 403,728,555 | 403,728,555 | ||||||
Treasury shares at January 1, 2021 | (47,092,790 | )�� | (47,092,790 | ) | ||||
Acquisition of treasury shares | (1,494,032 | ) | (1,383,241 | ) | ||||
Disposal of treasury shares | 3,134,003 | 1,022,242 | ||||||
Spin-off | (140,693,584 | ) | (23,513,174 | ) | ||||
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| |||||
217,582,152 | 332,761,592 | |||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
32. | Earnings per Share, Continued |
(2) | Diluted earnings per share |
1) | Diluted earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data) | ||||||||
2022 | 2021 | |||||||
Profit for the year on common shares | 1,059,057 | |||||||
Adjusted weighted average number of common shares outstanding | 218,108,742 | 332,917,848 | ||||||
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| |||||
Diluted earnings per share (in won) | 3,181 | |||||||
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2) | The adjusted weighted average number of common shares outstanding for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Outstanding shares as of January 1 | 217,582,152 | 356,635,765 | ||||||
Effect of treasury shares | 412,338 | (360,999 | ) | |||||
Effect of spin-off | — | (23,513,174 | ) | |||||
Effect of share option | 114,252 | 156,256 | ||||||
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| |||||
Adjusted weighted average number of common shares outstanding | 218,108,742 | 332,917,848 | ||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
33. | Dividends |
(1) | Details of dividends declared |
Details of dividend declared for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won, except for face value and share data) | ||||||||||||||||||
Year | Dividend type | Number of shares outstanding | Face value (in won) | Dividend ratio | Dividends | |||||||||||||
2022 | Cash dividends (Interim) | 218,002,830 | 100 | 830 | % | |||||||||||||
Cash dividends (Interim) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
Cash dividends (Interim) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
Cash dividends (Year-end) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
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2021 | Cash dividends (Interim) | 217,616,645 | 100 | 1,635 | % | |||||||||||||
Cash dividends (Year-end) | 217,582,152 | 100 | 1,660 | % | 361,186 | |||||||||||||
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(2) | Dividends yield ratio |
Dividends yield ratios for the years ended December 31, 2022 and 2021 are as follows:
(In won) | ||||||||||||||
Year | Dividend type | Dividend per share | Closing price at year-end | Dividend yield ratio | ||||||||||
2022 | Cash dividends | 3,320 | 47,400 | 7.00 | % | |||||||||
2021 | Cash dividends | 3,295 | 57,900 | 5.69 | % |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
34. | Categories of Financial Instruments |
(1) | Financial assets by category as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 1,216,114 | — | 1,217,504 | ||||||||||||||||
Financial instruments | 90,815 | — | 79,368 | — | 170,183 | |||||||||||||||
Long-term investment securities(*) | 88,403 | 1,066,785 | — | — | 1,155,188 | |||||||||||||||
Accounts receivable – trade | — | — | 1,425,695 | — | 1,425,695 | |||||||||||||||
Loans and other receivables | 332,669 | — | 707,225 | — | 1,039,894 | |||||||||||||||
Derivative financial assets | 28,114 | — | — | 222,622 | 250,736 | |||||||||||||||
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1,066,785 | 3,428,402 | 222,622 | 5,259,200 | |||||||||||||||||
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(*) | The Company designated W1,066,785 million of equity instruments that are not held for trading as financial assets at FVOCI. |
(In millions of won) | ||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 133,823 | — | 158,823 | ||||||||||||||||
Financial instruments | 290,000 | — | 89,354 | — | 379,354 | |||||||||||||||
Long-term investment securities(*) | 93,138 | 1,383,223 | — | — | 1,476,361 | |||||||||||||||
Accounts receivable – trade | — | — | 1,514,260 | — | 1,514,260 | |||||||||||||||
Loans and other receivables | 459,959 | — | 569,262 | — | 1,029,221 | |||||||||||||||
Derivative financial assets | 25,001 | — | — | 152,511 | 177,512 | |||||||||||||||
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| |||||||||||
1,383,223 | 2,306,699 | 152,511 | 4,735,531 | |||||||||||||||||
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(*) | The Company designated W1,383,223 million of equity instruments that are not held for trading as financial assets at FVOCI. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
34. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||
December 31, 2022 | ||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Total | ||||||||||
Derivative financial liabilities | — | 302,593 | ||||||||||
Borrowings | — | 840,000 | 840,000 | |||||||||
Debentures | — | 6,988,970 | 6,988,970 | |||||||||
Lease liabilities(*) | — | 1,379,311 | 1,379,311 | |||||||||
Accounts payable – other and others | — | 5,009,512 | 5,009,512 | |||||||||
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| |||||||
14,217,793 | 14,520,386 | |||||||||||
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|
(In millions of won) | ||||||||||||
December 31, 2021 | ||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Total | ||||||||||
Derivative financial liabilities | — | 321,025 | ||||||||||
Borrowings | — | 306,728 | 306,728 | |||||||||
Debentures | — | 6,804,867 | 6,804,867 | |||||||||
Lease liabilities(*) | — | 1,362,095 | 1,362,095 | |||||||||
Accounts payable – other and others | — | 5,070,674 | 5,070,674 | |||||||||
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| |||||||
13,544,364 | 13,865,389 | |||||||||||
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|
|
(*) | 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. |
85
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | Financial Risk Management |
(1) | Financial risk management |
The Company is exposed to market risk, credit risk and liquidity 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 December 31, 2022 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 21,788 | 1,201,474 | ||||||||||||||
EUR | 316 | 427 | 20 | 27 | ||||||||||||
Others | — | 452 | — | 9 | ||||||||||||
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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. (See Note 19)
As of December 31, 2022, a hypothetical change in exchange rates by 10% would have increased (decreased) the Company’s income before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (2,094 | ) | ||||||
EUR | 40 | (40 | ) | |||||
Others | 44 | (44 | ) | |||||
|
|
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| |||||
(2,178 | ) | |||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | 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 analysis 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 December 31, 2022, floating-rate borrowings and debentures amount toW40,000 million andW380,190 million, respectively, and the Company has entered into interest rate swaps to hedge interest rate risk related to the floating-rate debentures as described in note 19. If the interest rate increases (decreases) by 1%p with all other variables held constant, profit before income taxes for the year ended December 31, 2022 would change byW400 million in relation to the floating-rate borrowings which has not entered into interest rate swaps.
As of December 31, 2022, the floating-rate long-term payables – other areW1,690,470 million. If the interest rate increases (decreases) by 1%p with all other variables held constant, profit before income taxes for the year ended December 31, 2022, would change byW16,905 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.
Interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Especially, in the case of LIBOR, all of the calculations were suspended as of December 31, 2021, except for the overnight, one month, three months, six months, and 12 months of USD LIBOR, and the aforementioned five USD LIBORs will also be suspended as of June 30, 2023. The alternative interest rate of USD LIBOR is the Secured Overnight Financing Rate(“SOFR”).
The Company plans to include fallback clauses into financial instruments relating to LIBOR to which calculation has not been suspended yet, or change their LIBOR directly to alternative interest rates before the calculation is suspended.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk, Continued |
Interest rate benchmark reform and associated risks, Continued
The Company’s financial instruments exposed to the risk arising from interest rate benchmark reform as of December 31, 2022 are indexed to the USD LIBOR. The Company is exposed to legal risk to amend the terms of contracts on the financial instruments subject to interest rate benchmark reform as well as process and operation risks to manage such amendments. In addition, the Company is exposed to the risk of monitoring the market trend regarding the alternative interest rate and establishing the corresponding risk management strategy. If the IBOR is designated as the hedged item, the Company is required to replace it to an alternative benchmark interest and review the effects on the hedging relationship. In addition, the Company is exposed to the risk of minimizing hedge ineffectiveness by aligning the method and timing of the transition to the alternative benchmark interest applied to the hedged item and the hedging instrument.
The Company evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.
Non-derivative financial liabilities
The Company’s non-derivative financial liabilities subject to Interest rate benchmark reform as of December 31, 2021 were floating-rate bonds indexed to USD LIBOR. As explained above, the Company is discussing with the counterparty about including the fallback clauses as of December 31, 2022.
Derivatives
The Company’s derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (ISDA)’s master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021 and the transaction parties is required to adhere to ISDA protocol to include the same fallback clause to derivative contracts before January 25, 2021. The Company has adhered to ISDA protocol for transition to the alternative benchmark interest rate and the fallback clause will be included when counterparties adhere to the protocol to include. The Company’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.
Hedge accounting
The Company’s hedged items and hedging instruments as of December 31, 2022 are indexed to USD LIBOR. These benchmark rates are quoted each day and the IBOR cash flows are exchanged with counterparties as usual.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk |
The maximum credit exposure as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents | 158,791 | |||||||
Financial instruments | 170,183 | 379,354 | ||||||
Investment securities | 900 | 900 | ||||||
Accounts receivable – trade | 1,425,695 | 1,514,260 | ||||||
Contract assets | 33,098 | 29,477 | ||||||
Loans and other receivables | 1,039,894 | 1,029,221 | ||||||
Derivative financial assets | 250,736 | 177,512 | ||||||
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3,289,515 | ||||||||
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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 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 Company establishes credit limits for each customer or counterparty.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
(i) | Accounts receivable – trade and contract assets |
The Company establishes a loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Details of changes in loss allowance for the year ended December 31, 2022 are included in note 5.
(ii) | Debt investments |
The credit risk arises from debt investments included inW170,183 million of financial instruments,W900 million of investment securities, andW1,039,894 million of loans and other receivables. To limit the exposure to this risk, the Company transacts only with financial institutions with credit ratings that are considered to be low credit risk.
Most of the Company’s debt investments are considered to have a low risk of default and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term. Thus the Company measured the loss allowance for the debt investments at an amount equal to 12-month expected credit losses.
Meanwhile, the Company monitors changes in credit risk at each reporting date. The Company recognized the loss allowance at an amount equal to lifetime expected credit losses when the credit risk on the debt investments is assumed to have increased significantly if it is more than 30 days past due.
The Company’s maximum exposure to credit risk is equal to each financial asset’s carrying amount. The gross carrying amounts of each financial asset except for the accounts receivable – trade and derivative financial assets as of December 31, 2022 are as follows:
(In millions of won) | ||||||||||||||||
Financial assets at FVTPL | Financial assets at amortized cost | |||||||||||||||
12-month ECL | Lifetime ECL – not credit impaired | Lifetime ECL – credit impaired | ||||||||||||||
Gross carrying amount | 783,134 | 7,015 | 70,893 | |||||||||||||
Loss allowance | — | (2,803 | ) | (3,315 | ) | (68,331 | ) | |||||||||
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Carrying amount | 780,331 | 3,700 | 2,562 | |||||||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
(ii) | Debt investments, Continued |
Changes in the loss allowance for the debt investments for the year ended December 31, 2022 are as follows:
(In millions of won) | ||||||||||||||||
12-month ECL | Lifetime ECL – not credit impaired | Lifetime ECL– credit impaired | Total | |||||||||||||
December 31, 2021 | 8,197 | 65,872 | 76,856 | |||||||||||||
Remeasurement of loss allowance, net | 1,232 | (1,517 | ) | 2,356 | 2,071 | |||||||||||
Transfer to lifetime ECL – not credit impaired | (1,216 | ) | 1,216 | — | — | |||||||||||
Transfer to lifetime ECL – credit impaired | — | (4,582 | ) | 4,582 | — | |||||||||||
Amounts written off | — | — | (6,131 | ) | (6,131 | ) | ||||||||||
Recovery of amounts written off | — | — | 1,653 | 1,653 | ||||||||||||
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December 31, 2022 | 3,314 | 68,332 | 74,449 | |||||||||||||
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(iii) | Cash and cash equivalents |
The Company depositsW1,217,467 million of cash and cash equivalents as of December 31, 2022 (W158,791 million as of December 31, 2021) at banks and financial institutions with credit ratings above the certain level.
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Company considered that its cash and cash equivalents have low credit risk based on the credit ratings of the counterparties assigned by external credit rating agencies.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | 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 equivalents 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 December 31, 2022 are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Borrowings(*) | 876,488 | 219,336 | 657,152 | — | ||||||||||||||||
Debentures(*) | 6,988,970 | 8,037,170 | 1,489,860 | 4,285,679 | 2,261,631 | |||||||||||||||
Lease liabilities | 1,379,311 | 1,503,072 | 340,351 | 933,686 | 229,035 | |||||||||||||||
Accounts payable – other and others(*) | 5,009,512 | 5,145,325 | 3,787,474 | 1,264,846 | 93,005 | |||||||||||||||
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15,562,055 | 5,837,021 | 7,141,363 | 2,583,671 | |||||||||||||||||
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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 December 31, 2022, 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 | |||||||||||||
Assets | 237,108 | 125,233 | 111,875 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | 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, 2021.
The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity from the separate financial statements.
Debt-equity ratio as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Total liabilities | 15,526,209 | |||||||
Total equity | 10,383,382 | 10,862,856 | ||||||
Debt-equity ratios | 154.56 | % | 142.93 | % |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | Financial Risk Management, Continued |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | 424,876 | 116,515 | 541,391 | ||||||||||||||||
Derivative hedging instruments | 222,622 | — | 222,622 | — | 222,622 | |||||||||||||||
FVOCI | 1,066,785 | 987,065 | — | 79,720 | 1,066,785 | |||||||||||||||
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987,065 | 647,498 | 196,235 | 1,830,798 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivative financial liabilities | — | — | 302,593 | 302,593 | ||||||||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 817,771 | — | 817,771 | ||||||||||||||||
Debentures | 6,988,970 | — | 6,488,453 | — | 6,488,453 | |||||||||||||||
Long-term payables – other | 1,638,341 | — | 1,614,934 | — | 1,614,934 | |||||||||||||||
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— | 8,921,158 | — | 8,921,158 | |||||||||||||||||
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(In millions of won) | December 31, 2021 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | 774,960 | 118,138 | 893,098 | ||||||||||||||||
Derivative hedging instruments | 152,511 | — | 152,511 | — | 152,511 | |||||||||||||||
FVOCI | 1,383,223 | 1,340,791 | — | 42,432 | 1,383,223 | |||||||||||||||
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1,340,791 | 927,471 | 160,570 | 2,428,832 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivative financial liabilities | — | ��� | 321,025 | 321,025 | ||||||||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 301,232 | — | 301,232 | ||||||||||||||||
Debentures | 6,804,867 | — | 7,058,585 | — | 7,058,585 | |||||||||||||||
Long-term payables – other | 2,009,833 | — | 2,010,852 | — | 2,010,852 | |||||||||||||||
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— | 9,370,669 | — | 9,370,669 | |||||||||||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | 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 December 31, 2022 and 2021 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 to 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 December 31, 2022 are as follows:
Interest rate | ||||
Derivative instruments | 4.18% ~ 5.20% | |||
Borrowings and debentures | 4.89% ~ 5.04% | |||
Long-term payables – other | 4.59% ~ 5.06% |
2) | There have been no transfers between Level 2 and Level 1 for the year ended December 31, 2022. The changes of financial assets and liabilities classified as Level 3 for the year ended December 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
Balance as of January 1, 2022 | Gain for the year | OCI | Acquisition | Disposal | Transfer | Balance as of December 31, 2022 | ||||||||||||||||||||||
Financial assets: |
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FVTPL | 2,455 | — | 19,784 | (23,862 | ) | — | 116,515 | |||||||||||||||||||||
FVOCI | 42,432 | — | 8,686 | 30,140 | (638 | ) | (900 | ) | 79,720 | |||||||||||||||||||
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2,455 | 8,686 | 49,924 | (24,500) | (900) | 196,235 | |||||||||||||||||||||||
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Financial liabilities: |
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FVTPL | 18,432 | — | — | — | — | (302,593 | ) |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
35. | 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 December 31, 2022 and 2021 are as follows:
(In millions of won) | December 31, 2022 | |||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the separate statement of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (82,987 | ) | — | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (82,987 | ) | 2,968 |
(In millions of won) | December 31, 2021 | |||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the separate statement of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (86,838 | ) | — | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (86,838 | ) | 4,684 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate controlling entity | SK Inc. | |
Subsidiaries | SK Broadband Co., Ltd. and 24 others(*) | |
Joint venture | UTC Kakao-SK Telecom ESG Fund | |
Associates | SK China Company Ltd. and 42 others | |
Others | The Ultimate controlling entity’s subsidiaries and associates and others. |
(*) | As of December 31, 2022, subsidiaries of the Company are as follows: |
Ownership | ||||||||
Subsidiary | 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. | 74.4 | 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 | ||||||
SK Telecom Americas, Inc | 100.0 | Information gathering and consulting | ||||||
Quantum Innovation Fund I | 59.9 | Investment | ||||||
SK Telecom Japan Inc. | 100.0 | Information gathering and consulting | ||||||
Happy Hanool Co., Ltd. | 100.0 | Service | ||||||
SK stoa Co., Ltd. | 100.0 | Other telecommunication retail business | ||||||
SAPEON Inc.(*2) | 62.5 | Manufacturing non-memory and other electronic integrated circuits | ||||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | 100.0 | Operation of information and communication facility | |||||
Media S Co., Ltd. | 100.0 | Production and supply services of broadcasting programs | ||||||
Subsidiary owned by PS&Marketing Corporation | SK m&service Co., Ltd.(*3) | 100.0 | Database and internet website service | |||||
Subsidiary owned by Quantum Innovation Fund I | PanAsia Semiconductor Materials LLC. | 66.4 | Investment | |||||
Subsidiary owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | 79.8 | Digital Contents sourcing service | |||||
Subsidiary owned by SAPEON Inc. | SAPEON Korea Inc.(*4) | 100.0 | Manufacturing non-memory and other electronic integrated circuits | |||||
Others(*5) | SK Telecom Innovation Fund, L.P. | 100.0 | Investment | |||||
SK Telecom China Fund I L.P. | 100.0 | Investment |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | 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 Company newly established SAPEON Inc. for the year ended December 31, 2022. |
(*3) | PS&Marketing Corporation acquired shares (100%) of SK m&service Co., Ltd. for the year ended December 31, 2022. |
(*4) | The Company newly established SAPEON Korea Inc., and disposed the entire shares of SAPEON Korea Inc. to SAPEON Inc. for the year ended December 31, 2022. |
(*5) | Others are owned by Atlas Investment and another subsidiary of the Company. |
As of December 31, 2022, 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 (three executive and five 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 years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Salaries | 5,956 | |||||||
Defined benefits plan expenses | 761 | 2,845 | ||||||
Share option | 1,598 | 146 | ||||||
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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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | 2022 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others (*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 575,336 | 74,929 | |||||||||||
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Subsidiaries | SK Broadband Co., Ltd. | 144,568 | 577,970 | 4,666 | ||||||||||
PS&Marketing Corporation(*3) | 9,414 | 1,298,018 | 1,224 | |||||||||||
SK O&S Co., Ltd. (*4) | 6,093 | 238,871 | 84,966 | |||||||||||
SK Telink Co., Ltd.(*5) | 105,052 | 16,135 | — | |||||||||||
SERVICE ACE Co., Ltd.(*6) | 19,080 | 123,773 | — | |||||||||||
SERVICE TOP Co., Ltd.(*7) | 16,359 | 128,163 | — | |||||||||||
SK Communications Co., Ltd. | 1,334 | 3,466 | 2,331 | |||||||||||
Broadband Nowon Co., Ltd.(*8) | 13,725 | — | — | |||||||||||
Others | 4,252 | 28,198 | 799 | |||||||||||
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319,877 | 2,414,594 | 93,986 | ||||||||||||
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Associates | F&U Credit information Co., Ltd. | 1,229 | 42,877 | 265 | ||||||||||
SK USA, Inc | — | 5,043 | — | |||||||||||
HanaCard Co., Ltd.(*9) | 2,629 | 1,133 | 22 | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 20,290 | — | — | |||||||||||
Others(*10) | 13,700 | 421 | 80 | |||||||||||
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37,848 | 49,474 | 367 | ||||||||||||
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Others | SK Innovation Co., Ltd. | 14,463 | 13,890 | — | ||||||||||
SK Networks Co., Ltd. | 1,396 | 15,020 | 288 | |||||||||||
SK Networks Service Co., Ltd. | 778 | 43,065 | 3,030 | |||||||||||
SK Energy Co., Ltd. | 2,239 | 302 | — | |||||||||||
Content Wavve Corp. | 6,781 | 108,745 | 175 | |||||||||||
Happy Narae Co., Ltd. | 143 | 15,199 | 129,375 | |||||||||||
SK Shieldus Co., Ltd. | 32,036 | 96,085 | 19,379 | |||||||||||
Eleven Street Co., Ltd. | 8,529 | 29,248 | — | |||||||||||
SK Planet Co., Ltd. | 7,965 | 84,257 | 9,850 | |||||||||||
SK hynix Inc. | 47,145 | 75 | — | |||||||||||
T Map Mobility Co., Ltd. | 13,810 | 4,925 | 892 | |||||||||||
Dreamus Company | 6,101 | 84,919 | 649 | |||||||||||
One Store Co., Ltd. | 16,610 | 1 | — | |||||||||||
UbiNS Co., Ltd. | — | 4,001 | 22,799 | |||||||||||
Others | 31,027 | 29,150 | 20,554 | |||||||||||
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| |||||||||
189,023 | 528,882 | 206,991 | ||||||||||||
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| |||||||||
3,568,286 | 376,273 | |||||||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Operating expense and others include lease payments paid 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 |
(*9) | HanaCard Co., Ltd. was excluded from the related parties due to the disposal of the Company’s shares in the entity for the year ended December 31, 2022, and the transactions above occurred before the disposal. |
(*10) | Operating revenue and others include |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | 2021 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others (*1) | Acquisition of property and equipment | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 532,220 | 46,108 | |||||||||||
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| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | 103,064 | 580,066 | 8,227 | ||||||||||
PS&Marketing Corporation(*3) | 9,889 | 1,399,844 | 785 | |||||||||||
SK O&S Co., Ltd. | 3,549 | 225,936 | 58,994 | |||||||||||
SK Telink Co., Ltd.(*4) | 80,605 | 37,647 | — | |||||||||||
SERVICE ACE Co., Ltd. | 10,261 | 125,023 | — | |||||||||||
SERVICE TOP Co., Ltd. | 8,371 | 133,403 | — | |||||||||||
Others | 5,442 | 18,595 | 879 | |||||||||||
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| |||||||||
221,181 | 2,520,514 | 68,885 | ||||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | 1,470 | 43,353 | — | ||||||||||
SK USA, Inc | — | 7,634 | — | |||||||||||
HanaCard Co., Ltd. | 3,483 | 2,928 | — | |||||||||||
SK Wyverns Co., Ltd.(*5) | 199 | 8,203 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 10,943 | — | — | |||||||||||
SK China Company Ltd.(*6) | 131,141 | — | — | |||||||||||
Others(*7) | 11,539 | 491 | — | |||||||||||
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| |||||||||
158,775 | 62,609 | — | ||||||||||||
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| |||||||||
Others | SK Innovation Co., Ltd. | 12,213 | 14,059 | — | ||||||||||
SK Networks Co., Ltd. | 1,685 | 10,005 | 24 | |||||||||||
SK Networks Service Co., Ltd. | 937 | 39,173 | 2,393 | |||||||||||
SK Telesys Co., Ltd. | 121 | 118 | 10,328 | |||||||||||
SK TNS Co., Ltd.(*5) | 52 | 5,856 | 38,169 | |||||||||||
SKC Infra Service Co., Ltd.(*5) | 17 | 5,739 | 98 | |||||||||||
UbiNS Co., Ltd. | 252 | 4,134 | 22,289 | |||||||||||
Happy Narae Co., Ltd. | 133 | 14,238 | 118,610 | |||||||||||
SK Shieldus Co., Ltd. (Formerly, ADT CAPS Co., Ltd.)(*8) | 27,784 | 78,032 | 20,850 | |||||||||||
Eleven Street Co., Ltd. | 5,084 | 18,901 | — | |||||||||||
SK Planet Co., Ltd. | 5,031 | 81,115 | 10,632 | |||||||||||
SK hynix Inc.(*9) | 208,916 | 87 | — | |||||||||||
Dreamus Company | 2,883 | 99,917 | 396 | |||||||||||
One Store Co., Ltd. | 15,511 | 1 | — | |||||||||||
SK m&service Co., Ltd. | 209 | 12,150 | 1,247 | |||||||||||
Content Wavve Co., Ltd. | 73 | 78,964 | — | |||||||||||
Others | 34,739 | 23,600 | 10,182 | |||||||||||
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| |||||||||
315,640 | 486,089 | 235,218 | ||||||||||||
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3,601,432 | 350,211 | |||||||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Operating expense and others include lease payments paid by the Company. |
(*2) | Operating expense and others include |
(*3) | Operating expense and others include |
(*4) | Operating revenue and others include |
(*5) | Transactions that occurred before the disposal. |
(*6) | Operating revenue and others include |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
(*9) | Operating revenue and others include |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. | 2,247 | 78,030 | |||||||||||
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| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 37,790 | 204,562 | ||||||||||
PS&Marketing Corporation | — | 1,393 | 64,880 | |||||||||||
SK O&S Co., Ltd. | — | 3 | 50,213 | |||||||||||
SK Telink Co., Ltd. | — | 17,921 | 18,684 | |||||||||||
SERVICE ACE Co., Ltd. | — | 379 | 26,720 | |||||||||||
SERVICE TOP Co., Ltd. | — | 2 | 26,536 | |||||||||||
SK Communications Co., Ltd. | — | 5 | 7,671 | |||||||||||
Others | — | 1,085 | 20,529 | |||||||||||
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— | 58,578 | 419,795 | ||||||||||||
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Associates | F&U Credit information Co., Ltd. | — | 5 | 4,775 | ||||||||||
Wave City Development Co., Ltd.(*1) | — | 901 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,199 | — | |||||||||||
SK USA, Inc | — | — | 1,519 | |||||||||||
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22,147 | 4,105 | 6,294 | ||||||||||||
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Others | SK hynix Inc. | — | 13,705 | 311 | ||||||||||
SK Planet Co., Ltd. | — | 6,648 | 28,097 | |||||||||||
Eleven Street Co., Ltd. | — | 454 | 8,018 | |||||||||||
One Store Co., Ltd. | — | 1,648 | 13,823 | |||||||||||
SK Shieldus Co., Ltd. | — | 13,324 | 12,473 | |||||||||||
SK Innovation Co., Ltd. | — | 5,592 | 32,305 | |||||||||||
SK Networks Co., Ltd. | — | 426 | 36,903 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 9,241 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 89 | 9,920 | |||||||||||
Incross Co., Ltd. | — | 2,335 | 15,527 | |||||||||||
UbiNS Co., Ltd. | — | — | 12,008 | |||||||||||
Mintit Co., Ltd. | — | 34,853 | — | |||||||||||
Happy Narae Co., Ltd. | — | — | 30,467 | |||||||||||
Content Wavve Co., Ltd. | — | 349 | 19,239 | |||||||||||
Dreamus Company | — | 146 | 3,659 | |||||||||||
Others | — | 8,184 | 11,683 | |||||||||||
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| |||||||||
— | 87,753 | 243,674 | ||||||||||||
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| |||||||||
152,683 | 747,793 | |||||||||||||
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|
(*1) | As of December 31, 2022, the Company recognized loss allowance amounting to |
(*2) | As of December 31, 2022, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | December 31, 2021 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. | 2,059 | 50,054 | |||||||||||
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| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 7,374 | 273,875 | ||||||||||
PS&Marketing Corporation | — | 1,247 | 66,097 | |||||||||||
SK O&S Co., Ltd. | — | 59 | 52,609 | |||||||||||
SK Telink Co., Ltd. | — | 15,765 | 20,826 | |||||||||||
SERVICE ACE Co., Ltd. | — | 466 | 24,791 | |||||||||||
SERVICE TOP Co., Ltd. | — | 2 | 24,859 | |||||||||||
SK Communications Co., Ltd. | — | 28 | 12,113 | |||||||||||
Others | — | 39 | 2,324 | |||||||||||
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| |||||||||
— | 24,980 | 477,494 | ||||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | — | 3 | 4,394 | ||||||||||
Wave City Development Co., Ltd.(*1) | — | 2,623 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,857 | — | |||||||||||
HanaCard Co., Ltd. | — | 433 | 42,110 | |||||||||||
Others | — | 71 | 1,104 | |||||||||||
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| |||||||||
22,147 | 6,987 | 47,608 | ||||||||||||
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| |||||||||
Others | SK hynix Inc. | — | 11,526 | 166 | ||||||||||
SK Planet Co., Ltd. | — | 661 | 25,337 | |||||||||||
Eleven Street Co., Ltd. | — | 486 | 7,555 | |||||||||||
One Store Co., Ltd. | — | 8 | 13,325 | |||||||||||
SK m&service Co., Ltd. | — | 1,363 | 17,754 | |||||||||||
SK Shieldus Co., Ltd. (Formerly, ADT CAPS Co., Ltd.) | — | 1,068 | 16,172 | |||||||||||
SK Innovation Co., Ltd. | — | 3,020 | 37,136 | |||||||||||
SK Networks Co., Ltd. | — | 108 | 33,613 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 7,374 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 116 | 11,069 | |||||||||||
Incross Co., Ltd. | — | 1,687 | 10,904 | |||||||||||
UbiNS Co., Ltd. | — | 1 | 9,886 | |||||||||||
Mintit Co., Ltd. | — | 17,868 | 131 | |||||||||||
Happy Narae Co., Ltd. | — | — | 48,484 | |||||||||||
Content Wavve Co., Ltd. | — | 183 | 9,865 | |||||||||||
Others | — | 7,529 | 7,198 | |||||||||||
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| |||||||||
— | 45,624 | 255,969 | ||||||||||||
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| |||||||||
79,650 | 831,125 | |||||||||||||
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|
(*1) | As of December 31, 2021, the Company recognized loss allowance amounting to |
(*2) | As of December 31, 2021, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
36. | Transactions with Related Parties, Continued |
(5) | The Company has granted SK REIT Co., Ltd. the right of first offer regarding the disposal of real estate owned by the Company. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Company has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Company. |
(6) | There were additional investments and disposal transactions in subsidiaries, associates and joint ventures for the year ended December 31, 2022 as presented in note 9. |
37. | Commitments and Contingencies |
(1) | Accounts receivable 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 toW357,467 million andW493,277 million as of December 31, 2022 and 2021, respectively, which the Company purchased according to the relevant comprehensive agreement, are recognized as accounts receivable – other and long-term accounts receivable – other.
(2) | Legal claims and litigations |
As of December 31, 2022, 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.
(3) | Obligation relating to spin-off |
The Company carried out the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments on November 1, 2021. The Company has obligation to jointly and severally reimburse the Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act.
(4) | Commitment of acquisition and disposal of certain shares |
The Board of Directors of the Company resolved the acquisition and disposal of certain shares in order to strengthen the strategic alliance with Hana Financial Group Inc.(“HFG”) at the Board of Directors’ meeting on held July 22, 2022. In accordance with the resolution, as of July 27, 2022, the Company disposed of its entire common shares of HanaCard Co., Ltd. (39,902,323 shares) and entire common shares of Finnq Co., Ltd. (6,370,000 shares) to HFG forW330,032 million andW5,733 million, respectively. Through the agreement with HFG, the Company is obligated to acquire HFG’s common shares from July 27, 2022 to January 31, 2024, after depositingW330,032 million in a specific money trust, and the Company completed the acquisition of the shares for the year ended December 31, 2022. As a part of the aforementioned transaction, as of July 27, 2022, the Company disposed of its entire common shares of SK Square Co., Ltd. (767,011 shares) to HanaCard Co., Ltd. forW31,563 million as well, and HanaCard Co., Ltd. is obligated to acquire the Company’s common shares from July 27, 2022 to January 31, 2024, after depositingW68,437 million in a specific money trust. Before March 31, 2025, the Company, HFG, and HanaCard Co., Ltd. may not dispose of shares they have acquired or will acquire under the aforementioned transaction.
(5) | The acquisition cost of property and equipment and intangible assets to be incurred in subsequent periods under arrangements is |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
38. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Gain on foreign currency translations | (239 | ) | ||||||
Interest income | (34,124 | ) | (26,818 | ) | ||||
Dividends | (50,927 | ) | (326,759 | ) | ||||
Gain relating to investments in subsidiaries, | (61,603 | ) | (54,051 | ) | ||||
Gain relating to financial instruments at FVTPL | (40,581 | ) | (51,183 | ) | ||||
Gain on disposal of property and equipment | (14,073 | ) | (34,088 | ) | ||||
Gain on sale of accounts receivable – other | (1,043) | (27,725 | ) | |||||
Other income | (5,126 | ) | (8,030 | ) | ||||
Loss on foreign currency translations | 961 | 50 | ||||||
Bad debt for accounts receivable – trade | 16,053 | 12,606 | ||||||
Bad debt for accounts receivable – other | 2,071 | 4,000 | ||||||
Loss relating to financial instruments at FVTPL | 27,635 | 10,819 | ||||||
Depreciation and amortization | 2,827,617 | 2,914,229 | ||||||
Loss on disposal of property and equipment | 5,722 | 14,108 | ||||||
Impairment loss on property and equipment | — | 126 | ||||||
Loss on sale of accounts receivable – trade | 61,841 | — | ||||||
Interest expense | 287,865 | 238,971 | ||||||
Expense related to defined benefit plan | 50,795 | 56,742 | ||||||
Bonus paid by treasury shares | 25,425 | 29,643 | ||||||
Share option | 76,314 | 77,270 | ||||||
Income tax expense | 276,760 | 295,524 | ||||||
Other expenses | 18,932 | 3,501 | ||||||
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| |||||
3,128,696 | ||||||||
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|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
38. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Accounts receivable – trade | (23,150 | ) | ||||||
Accounts receivable – other | 30,679 | (66,706 | ) | |||||
Advanced payments | (31,394 | ) | (298 | ) | ||||
Prepaid expenses | 4,432 | 139,096 | ||||||
Inventories | (14,392 | ) | (3,781 | ) | ||||
Long-term accounts receivable – other | (95,028 | ) | 61,199 | |||||
Long-term prepaid expenses | 12,990 | (49,775 | ) | |||||
Guarantee deposits | 5,983 | 7,853 | ||||||
Contract assets | (3,622 | ) | 1,755 | |||||
Accounts payable – other | 290,890 | (118,696 | ) | |||||
Withholdings | (3,388 | ) | (51,112 | ) | ||||
Deposits received | (4,149 | ) | (3,883 | ) | ||||
Accrued expenses | 37,239 | 10,668 | ||||||
Plan assets | (59,665 | ) | (25,397 | ) | ||||
Retirement benefit payment | (28,932 | ) | (43,996 | ) | ||||
Contract liabilities | 4,340 | (9,553 | ) | |||||
Others | (2,845 | ) | (5,071 | ) | ||||
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|
| |||||
(180,847 | ) | |||||||
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|
|
(3) | Significant non-cash transactions for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Increase (decrease) in accounts payable – other relating to the acquisition of property and equipment and intangible assets | 1,085,139 | |||||||
Increase of right-of-use assets | 410,640 | 457,977 | ||||||
Change in assets and liabilities by spin-off (Note 41) | — | 6,823,107 | ||||||
Retirement of treasury shares | — | 1,965,952 | ||||||
Disposal of treasury shares | — | 114,373 | ||||||
Transfer from property and equipment to investment property | 16,673 | 45,100 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
38. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||
Non-cash transactions | ||||||||||||||||||||||||
January 1, 2022 | Cash flows | Exchange rate changes(*) | Fair value changes | Other changes | December 31, 2022 | |||||||||||||||||||
Total liabilities from financing activities: | ||||||||||||||||||||||||
Short-term borrowings | 100,000 | — | — | — | 100,000 | |||||||||||||||||||
Long-term borrowings | 306,728 | 432,904 | — | — | 368 | 740,000 | ||||||||||||||||||
Debentures | 6,804,867 | 80,820 | 97,850 | — | 5,433 | 6,988,970 | ||||||||||||||||||
Lease liabilities | 1,362,095 | (344,199 | ) | — | — | 361,415 | 1,379,311 | |||||||||||||||||
Long-term payables – other | 2,009,833 | (400,245 | ) | — | — | 28,753 | 1,638,341 | |||||||||||||||||
Derivative financial assets | (152,512 | ) | 768 | — | (70,878 | ) | — | (222,622 | ) | |||||||||||||||
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| |||||||||||||
(129,952 | ) | 97,850 | (70,878 | ) | 395,969 | 10,624,000 | ||||||||||||||||||
Other cash flows from financing activities: | ||||||||||||||||||||||||
Payments of cash dividends | ||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
(918,786 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||||||
|
|
(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
38. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||
Non-cash transactions | ||||||||||||||||||||||||
January 1, 2021 | Cash flows | Exchange rate changes(*) | Fair value changes | Other changes | December 31, 2021 | |||||||||||||||||||
Total liabilities from financing activities: | ||||||||||||||||||||||||
Long-term borrowings | 287,176 | 553 | — | 391 | 306,728 | |||||||||||||||||||
Debentures | 6,875,240 | (192,124 | ) | 116,444 | — | 5,307 | 6,804,867 | |||||||||||||||||
Lease liabilities | 1,313,198 | (341,186 | ) | — | — | 390,083 | 1,362,095 | |||||||||||||||||
Long-term payables – other | 1,566,323 | (425,349 | ) | — | — | 868,859 | 2,009,833 | |||||||||||||||||
Derivative financial Liabilities | 41,018 | 332 | — | (41,350 | ) | — | — | |||||||||||||||||
Derivative financial assets | (62,306 | ) | — | — | (90,206 | ) | — | (152,512 | ) | |||||||||||||||
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|
| |||||||||||||
(671,151 | ) | 116,997 | (131,556 | ) | 1,264,640 | 10,331,011 | ||||||||||||||||||
Other cash flows from financing activities: | ||||||||||||||||||||||||
Payments of cash dividends | ||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||
Acquisition of treasury shares | (76,111 | ) | ||||||||||||||||||||||
Cash outflows for spin-off | (78,800 | ) | ||||||||||||||||||||||
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| |||||||||||||||||||||||
(1,167,425 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||||||
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|
(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
39. | Emissions Liabilities |
(1) | The quantity of emissions rights allocated free of charge for each implementation year as of December 31, 2022 are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||
Emissions rights allocated free of charge | 814,842 | 1,033,764 | 1,033,764 | 2,882,370 |
(2) | Changes in emissions rights quantities the Company held are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||
Beginning | (60,977 | ) | — | — | (60,977 | ) | ||||||||||
Allocation at no cost | 814,842 | 1,033,764 | 1,033,764 | 2,882,370 | ||||||||||||
Additional allocation | 217,643 | — | — | 217,643 | ||||||||||||
Other changes | — | (2,238 | ) | (2,238 | ) | (4,476 | ) | |||||||||
Purchase | 68,471 | — | — | 68,471 | ||||||||||||
Surrendered or shall be surrendered | (1,039,979 | ) | (1,051,380 | ) | (1,140,316 | ) | (3,231,675 | ) | ||||||||
Borrowing | — | 19,854 | 108,790 | 128,644 | ||||||||||||
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Ending | — | — | — | — | ||||||||||||
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(3) | As of December 31, 2022, the estimated annual greenhouse gas emissions quantities of the Company are 1,140,316 tCO2-eQ. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
40. | Non-current Assets Held for Sale |
On February 25, 2021, the Company has decided to dispose of the investments in an associate engaged in mobility business to T map Mobility Co., Ltd. pursuant to the approval of the Board of Directors and reclassified entire shares of the investments in associates as non-current assets held for sale. The disposal of the investments in associates was completed in 2022 after the Financial Services Commission approved the transaction.
(In millions of won) | ||||||
December 31, 2021 | ||||||
Investments in associates | Carrot General Insurance Co., Ltd. |
41. | Spin-off |
(1) | In accordance with the resolution of the Board of Directors held on June 10, 2021 and shareholders’ meeting held on October 12, 2021, the Company completed the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments on November 1, 2021, and the registration of the spin-off was completed as of November 2, 2021. The details of the spin-off are as follows: |
Method of spin-off | Horizontal spin-off | |
Company | SK Telecom Co., Ltd. (Surviving Company) | |
SK Square Co., Ltd. (Spin-off Company ) | ||
Effective date of spin-off | November 1, 2021 |
(2) | The spin-off was accounted for by derecognizing all related assets and liabilities. The net assets of the spin-off business as of spin-off date was recognized in Capital surplus and others. The details of assets and liabilities derecognized from the financial statements due to the spin-off of its business of managing investments in semiconductor, New ICT and other businesses and making new investments are as follows: |
(In millions of won) | ||||
Amount | ||||
Current assets | ||||
Non-current assets | 6,953,355 | |||
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Total assets | ||||
Current liabilities | ||||
Non-current liabilities | 106,903 | |||
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(3) | Obligation relating to spin-off |
The Company has obligation to jointly and severally reimburse the Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2022 and 2021
42. | Subsequent Events |
On February 7, 2023, the Board of Directors of the Company approved the disposal of treasury shares and the details of the transaction are as follows:
Information of disposal | ||
Number of treasury shares | 324,580 Common shares | |
Price of the treasury shares per share (in won) | ||
Aggregate disposal value | ||
Disposal date | February 9, 2023 | |
Purpose of disposal | Allotment of shares as bonus payment | |
Method of disposal | Over-the-counter |
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Audit opinion on internal control over financial reporting
The accompanying independent auditor’s report on internal control over financial reporting is attached as a result of auditing the internal control over financial reporting of SK Telecom Co., Ltd. (the “Company”) and the Separate financial statements of the Company for the year ended December 31, 2022 in accordance with the Article 8 of the Act on External Audit of Stock Companies.
Attachments:
1. | Independent auditor’s report on Internal Control over Financial Reporting |
2. | Report on the Operation of Internal Control over Financial Reporting |
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Ernst & Young Han Young Taeyoung Building, 111,Yeouigongwon-ro, Yeongdeungpo-gu, Seoul 07241 Korea
Tel: +82 2 3787 6600 Fax: +82 2 783 5890 ey.com/kr |
Independent auditor’s report on Internal Control over Financial Reporting
(Based on a report originally issued in Korean)
SK Telecom Co., Ltd.:
The Shareholders and Board of Directors
Opinion on Internal Control over Financial Reporting
We have audited SK Telecom Co., Ltd.’s (the “Company”) Internal Control over Financial Reporting (“ICFR”) as of December 31, 2022, based on the criteria established in Conceptual Framework for Designing and Operating ICFR (“ICFR Design and Operation Framework”) issued by the Operating Committee of Internal Control over Financial Reporting in the Republic of Korea (the “ICFR Committee”).
In our opinion, the Company’s ICFR has been effectively designed and operated, in all material respects, as of December 31, 2022, in accordance with the ICFR Design and Operation Framework.
We also have audited, in accordance with Korean Standards on Auditing (“KSA”), the separate statement of financial position as of December 31, 2022, the separate statements of income, comprehensive income, changes in equity, and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and our report dated March 10, 2023 expressed an unqualified opinion thereon.
Basis for Opinion on ICFR
We conducted our audit in accordance with KSA. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of ICFR section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the internal control over financial reporting in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Those Charged with Governance for ICFR
Management is responsible for designing, operating, and maintaining effective ICFR, and for its assessing the effectiveness of ICFR, included in the accompanying Report on the Operation of Internal Control over Financial Reporting.
Those charged with governance are responsible for overseeing the Company’s ICFR.
Auditors’ Responsibilities for the Audit of ICFR
Our responsibility is to express an opinion on the Company’s ICFR based on our audit. We conducted our audit in accordance with KSA. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective ICFR was maintained in all material respects.
Our audit of ICFR involves performing procedures to obtain audit evidence about whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including the assessment of the risks that a material weakness exists. An audit includes obtaining an understanding of internal control over financial reporting and testing and evaluating the design and operating effectiveness of ICFR based on the assessed risk.
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ICFR definition and Inherent Limitations
A Company’s ICFR implemented by those charged with governance, management, and other employees and is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”). The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with KIFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that ICFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The engagement partner on the audit resulting in this independent auditors’ report is Yoo, Jung Ho.
March 10, 2023
This report is effective as of March 10, 2023, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the Company’s ICFR and may result in modifications to this report. |
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Report on the Operation of Internal Control over Financial Reporting
English translation of a Report Originally Issued in Korean
To Shareholders, the Board of Directors and Audit Committee of
SK Telecom Co., Ltd.
We, as the Chief Executive Officer (“CEO”) and Internal Control over Financial Reporting (“ICFR”) Officer of SK Telecom Co., Ltd. (“the Company”), assessed the status of the design and operation of the Company’s ICFR for the year ending December 31, 2022.
The Company’s management including the CEO and ICFR Officer is responsible for designing and operating ICFR. We, as the CEO and ICFR Officer (collectively, “We”, “Our” or “Us”), evaluated whether the ICFR has been appropriately designed and is effectively operating to prevent and detect error or fraud which may cause material misstatement of the financial statements to ensure preparation and disclosure of reliable financial information.
We used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”)’ as the criteria for design and operation of the Company’s ICFR. We also conducted an evaluation of ICFR based on the ‘Management Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee.
Based on our assessment of ICFR operation, we concluded that the Company’s ICFR has been appropriately designed and is operating effectively in all material respects as of December 31, 2022, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’.
We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statements which might cause material misunderstandings of the readers, and we have reviewed and verified this report with sufficient care.
February 22, 2023
/s/ Kim, Jin Won |
Internal Control over Financial Reporting Officer |
/s/ Ryu, Young Sang |
Chief Executive Officer |
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