20-F
As filed with the Securities and
Exchange Commission on June 30, 2009
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 20-F
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(Mark One)
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o
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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OR
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2008
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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OR
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o
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this
shell company report
For the transition period
from to
Commission file number
1-14418
SK Telecom Co., Ltd.
(Exact name of Registrant as
specified in its charter)
SK Telecom Co., Ltd.
(Translation of
Registrants name into English)
The Republic of Korea
(Jurisdiction of incorporation
or organization)
SK T-Tower
11, Euljiro 2-Ga, Jung-gu,
Seoul, Korea
(Address of principal executive
offices)
Mr. Kyung-hwan
Chung
11, Euljiro 2-Ga, Jung-gu,
Seoul, Korea
Telephone No.:
82-2-6100-2114
Facsimile No.:
82-2-6100-7827
(Name, telephone, email and/or
facsimile number and address of company contact
person)
Securities registered or to be
registered pursuant to Section 12(b) of the Act.
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Title of Each Class
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Name of Each Exchange on Which Registered
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American Depositary Shares, each representing one-ninth of one
shares of Common Stock
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New York Stock Exchange
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Common Stock, par value W500 per share
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New York Stock Exchange*
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* |
Not for trading, but only in connection with the registration of
the American Depositary Shares.
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Securities registered or to be
registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a
reporting obligation pursuant to Section 15(d) of the
Act.
None
Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close
of the period covered by the annual report.
72,486,015 shares of common stock, par value
W500 per share (not including
8,707,696 shares of common stock held by the company as
treasury shares)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this
filing:
U.S.
GAAP o IFRS o Other þ
Indicate by check mark which financial statement item the
registrant has elected to follow.
Item 17 o Item 18 þ
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
(APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
YEARS)
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court. Yes o No o
TABLE OF
CONTENTS
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CERTAIN
DEFINED TERMS AND CONVENTIONS USED IN THIS REPORT
All references to Korea contained in this report
shall mean The Republic of Korea. All references to the
Government shall mean the government of The Republic
of Korea. All references to we, us,
our or 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. All references to U.S.
shall mean the United States of America.
All references to KHz contained in this report shall
mean kilohertz, a unit of frequency denoting one thousand cycles
per second, used to measure band and bandwidth. All references
to MHz shall mean megahertz, a unit of frequency
denoting one million cycles per second. All references to
GHz shall mean gigahertz, a unit of frequency
denoting one billion cycles per second. All references to
Kbps shall mean one thousand binary digits, or bits,
of information per second. All references to Mbps
shall mean one million bits of information per second. Any
discrepancies in any table between totals and the sums of the
amounts listed are due to rounding.
In this report, we refer to third generation, or 3G,
technology and 3.5G technology. Second generation,
or 2G, technology was designed primarily with voice
communications in mind. On the other hand, 3G and 3.5G
technologies are designed to transfer both voice data and
non-voice, or multimedia, data, generally at faster transmission
speeds than was previously possible.
All references to Won, (Won) or
W in this report are to the
currency of Korea, all references to Dollars,
$ or US$ are to the currency of the
United States of America and all references to Yen
or ¥ are to the currency of Japan.
Pursuant to an amendment to the Government Organization Act,
effective as of February 29, 2008, the Ministry of
Information and Communication, or MIC, has become
the Ministry of Knowledge Economy and functions formerly
performed by the MIC are now performed separately by the
Ministry of Knowledge Economy, the Ministry of Culture, Sports
and Tourism, the Ministry of Public Administration and Security,
and, particularly, the Korea Communications Commission, or the
KCC. In this report, we refer to the MIC as the
relevant governmental authority in connection with any approval
granted or action taken by the MIC prior to such amendment to
the Government Organization Act and to such other relevant
governmental authority in connection with any approval granted
or action taken by such other relevant governmental authority
subsequent to such amendment.
Unless otherwise indicated, all financial information in this
report is presented in accordance with Korean generally accepted
accounting principles (Korean GAAP).
Unless otherwise indicated, translations of Won amounts into
Dollars in this report were made at the noon buying rate in The
City of New York for cable transfers in Won per US$1.00 as
certified for customs purposes by the Federal Reserve Bank of
New York (the noon buying rate). Unless otherwise
stated, the translations of Won into Dollars were made at the
noon buying rate in effect on December 31, 2008, which was
Won 1,262.0 to US$1.00. On June 19, 2009, the noon buying
rate was Won 1,264.2 to US$1.00. See Item 3.A.
Selected Financial Data Exchange Rates.
1
FORWARD-LOOKING
STATEMENTS
This report contains forward-looking statements, as
defined in Section 27A of the U.S. Securities Act of
1933, as amended, or the Securities Act, and Section 21E of
the U.S. Securities Exchange Act of 1934, as amended, or
the Exchange Act, that are based on our current expectations,
assumptions, estimates and projections about our company and our
industry. The forward-looking statements are subject to various
risks and uncertainties. Generally, these forward-looking
statements can be identified by the use of forward-looking
terminology such as anticipate, believe,
considering, depends,
estimate, expect, intend,
plan, planning, planned,
project and similar expressions, or that certain
events, actions or results may, might,
should or could occur, be taken or be
achieved.
Forward-looking statements in this annual report include, but
are not limited to, statements about the following:
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our ability to anticipate and respond to various competitive
factors affecting the wireless telecommunications industry,
including new services that may be introduced, changes in
consumer preferences, economic conditions and discount pricing
strategies by competitors;
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our implementation of high-speed downlink packet access, or
HSDPA, technology, high-speed uplink packet access, or HSUPA,
technology and wireless broadband internet, or WiBro, technology;
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our plans for capital expenditures in 2009 for a range of
projects, including investments in our backbone networks (and
expansion of our WiBro network in particular), investments to
improve our WCDMA network-based products and services,
investments in our wireless Internet-related and convergence
businesses and funding for mid-to long-term research and
development projects, as well as other initiatives, primarily
related to our ongoing businesses and in the ordinary course;
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our efforts to make significant investments to build, develop
and broaden our businesses, including developing and providing
wireless data, multimedia, mobile commerce and Internet services;
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our ability to comply with governmental rules and regulations,
including the regulations of the KCC, related to
telecommunications providers, rules related to our status as a
market-dominating business entity under the Korean
Monopoly Regulation and Fair Trade Act, or the Fair Trade Act,
and the effectiveness of steps we have taken to comply with such
regulations;
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our ability to manage effectively our bandwidth and to implement
timely and efficiently new bandwidth-efficient technologies;
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our expectations and estimates related to interconnection fees;
tariffs charged by our competitors; regulatory fees; operating
costs and expenditures; working capital requirements; principal
repayment obligations with respect to long-term borrowings,
bonds and obligations under capital leases; and research and
development expenditures and other financial estimates;
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the success of our various joint ventures and investments in
other telecommunications service providers;
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our ability to successfully manage our acquisition in 2008 of an
additional 38.7% stake in SK Broadband Co., Ltd. (formerly
hanarotelecom incorporated), or SK Broadband, a fixed-line
telecommunications operator and broadband Internet service
provider; and
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the growth of the telecommunications industry in Korea and other
markets in which we do business and the effect that economic,
political or social conditions have on our number of
subscribers, call volumes and results of operations.
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We caution you that reliance on any forward-looking statement
involves risks and uncertainties, and that although we believe
that the assumptions on which our forward-looking statements are
based are reasonable, any of those assumptions could prove to be
inaccurate, and, as a result, the forward-looking statements
based on those assumptions could be incorrect. Risks and
uncertainties associated with our business, include but are not
limited to, risks related to changes in the regulatory
environment; technology changes; potential litigation and
governmental actions; changes in the competitive environment;
political changes; foreign exchange currency risks; foreign
ownership limitations; credit risks and other risks and
uncertainties that are more fully described under the heading
Item 3. Key Information Risk
Factors and elsewhere in this report. In light of these
and other uncertainties, you should not conclude that we will
necessarily achieve any plans and objectives or projected
financial results referred to in any of the forward-looking
statements. We do not undertake to release the results of any
revisions of these forward-looking statements to reflect future
events or circumstances.
2
PART I
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Item 1.
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IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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Item 1.A.
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Directors
and Senior Management
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Not applicable.
Not applicable.
Not applicable.
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Item 2.
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OFFER
STATISTICS AND EXPECTED TIMETABLE
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Not applicable.
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Item 3.A.
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Selected
Financial Data
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You should read the selected consolidated financial and
operating data below in conjunction with the consolidated
financial statements and the related notes included elsewhere in
this report. The selected consolidated financial data for the
five years ended December 31, 2008 are derived from our
audited consolidated financial statements and related notes
thereto.
Our consolidated financial statements are prepared in accordance
with Korean GAAP, which differ in certain respects from
U.S. GAAP. For more detailed information you should refer
to notes 33 and 34 of the notes to our audited consolidated
financial statements included in this annual report.
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As of or for the Year Ended December 31,
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2004
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2005
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2006
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2007
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2008
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2008
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(In billions of Won and millions of Dollars, except per share
and percentage data)
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INCOME STATEMENT DATA
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Korean GAAP:
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Total Operating Revenue(1)
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W
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10,570.6
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W
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10,721.8
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W
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11,028.0
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W
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11,863.4
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(19)
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W
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14,021.0
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US$
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11,110.1
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Cellular Service(1)
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10,297.6
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10,361.9
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10,515.6
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11,016.1
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11,389.8
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9,025.2
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Broadband Internet and Fixed-line Telephone Service
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1,821.8
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1,443.5
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Other(2)
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273.0
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359.9
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512.4
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847.3
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(19)
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809.4
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641.4
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Operating Expenses
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8,130.9
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8,051.2
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8,406.9
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9,761.4
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(19)
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12,268.5
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9,721.5
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Operating Income
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2,439.7
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2,670.6
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2,621.1
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2,102.0
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(19)
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1,752.5
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1,388.6
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Income from Continuing Operation before Income Tax
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2,123.2
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2,561.6
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2,021.6
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2,285.8
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(19)
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1,258.7
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997.4
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Net Income(3)
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1,493.4
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1,868.3
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1,449.6
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1,562.3
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972.3
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770.4
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Net Income per Share(4)
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20,261
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25,443
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19,801
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22,696
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16,707
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13.24
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Diluted Net Income per Share(4)
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20,092
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25,036
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19,523
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22,375
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16,559
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13.12
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Dividends Declared per Share
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10,300
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9,000
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8,000
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9,400
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9,400
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7.45
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Weighted Average Number of Shares
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73,614,296
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73,614,296
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73,305,026
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72,650,909
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72,765,557
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72,765,557
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U.S. GAAP:
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Total Operating Revenue
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W
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10,534.6
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W
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10,701.4
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W
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10,541.8
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W
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11,212.4
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W
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11,157.6
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US$
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8,841.2
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Operating Expenses
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8,137.6
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7,847.7
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7,720.0
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9,144.3
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9,404.0
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7,451.7
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Operating Income
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2,397.0
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2,853.7
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2,821.8
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2,068.1
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1,753.6
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1,389.5
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Net Income(4)
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1,554.6
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2,019.6
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1,878.3
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1,505.3
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1,072.9
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850.2
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Net Income per Share(4)(5)
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21,118
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27,435
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25,624
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20,720
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14,744
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11.7
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Diluted Net Income per Share(4)(5)
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20,939
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26,983
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25,207
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20,730
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14,606
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11.6
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3
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As of or for the Year Ended December 31,
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2004
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2005
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2006
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2007
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2008
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2008
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(In billions of Won and millions of Dollars, except per share
and percentage data)
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BALANCE SHEET DATA
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Korean GAAP:
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Working Capital(6)
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W
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1,323.8
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W
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1,735.2
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W
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1,455.5
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W
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1,796.2
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W
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793.6
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US$
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628.9
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Property and Equipment, Net
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4,703.9
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4,663.4
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4,507.3
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4,969.4
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7,437.7
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5,893.6
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Total Assets
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14,283.4
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14,704.8
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16,240.0
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19,048.9
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22,473.7
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17,808.0
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Non-current Liabilities(7)
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4,010.7
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3,513.9
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3,548.5
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4,344.4
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6,020.4
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4,770.5
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|
Capital Stock
|
|
|
44.6
|
|
|
|
44.6
|
|
|
|
44.6
|
|
|
|
44.6
|
|
|
|
44.6
|
|
|
|
35.4
|
|
Total Shareholders Equity
|
|
|
7,205.7
|
|
|
|
8,327.5
|
|
|
|
9,483.1
|
|
|
|
11,687.6
|
|
|
|
11,824.4
|
|
|
|
9,369.6
|
|
U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital (Deficiency)
|
|
W
|
1,311.3
|
|
|
W
|
1,587.2
|
|
|
W
|
1,286.2
|
|
|
W
|
1,751.1
|
|
|
W
|
738.0
|
|
|
US$
|
584.8
|
|
Total Assets(4)
|
|
|
15,592.0
|
|
|
|
16,356.5
|
|
|
|
17,909.4
|
|
|
|
20,173.6
|
|
|
|
21,239.2
|
|
|
|
16,829.8
|
|
Total Shareholders Equity(4)
|
|
|
8,252.2
|
|
|
|
9,477.7
|
|
|
|
10,718.4
|
|
|
|
12,657.8
|
|
|
|
12,227.1
|
|
|
|
9,688.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
(In billions of Won and millions of Dollars, except per share
and percentage data)
|
|
|
OTHER FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Korean GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(3)(8)
|
|
W
|
4,087.7
|
|
|
W
|
4,429.5
|
|
|
W
|
3,879.1
|
|
|
W
|
4,366.0
|
|
|
W
|
4,008.4
|
|
|
US$
|
3,176.2
|
|
Capital Expenditures(9)
|
|
|
1,631.9
|
|
|
|
1,416.6
|
|
|
|
1,498.1
|
|
|
|
1,804.1
|
|
|
|
2,236.9
|
|
|
|
1,772.5
|
|
R&D Expenses(10)
|
|
|
336.1
|
|
|
|
321.1
|
|
|
|
279.0
|
|
|
|
293.1
|
|
|
|
299.7
|
|
|
|
237.5
|
|
Internal R&D
|
|
|
267.1
|
|
|
|
252.0
|
|
|
|
212.0
|
|
|
|
218.7
|
|
|
|
226.7
|
|
|
|
179.7
|
|
External R&D
|
|
|
69.0
|
|
|
|
69.1
|
|
|
|
67.0
|
|
|
|
74.4
|
|
|
|
73.0
|
|
|
|
57.8
|
|
Depreciation and Amortization
|
|
|
1,752.5
|
|
|
|
1,675.5
|
|
|
|
1,698.4
|
|
|
|
1,971.3
|
|
|
|
2,759.3
|
|
|
|
2,186.5
|
|
Cash Flow from Operating Activities
|
|
|
2,527.9
|
|
|
|
3,407.1
|
|
|
|
3,589.8
|
|
|
|
3,721.7
|
(20)
|
|
|
3,296.9
|
(20)
|
|
|
2,612.4
|
(20)
|
Cash Flow from Investing Activities
|
|
|
(1,470.3
|
)
|
|
|
(1,938.2
|
)
|
|
|
(2,535.2
|
)
|
|
|
(2,414.9
|
)(20)
|
|
|
(3,875.4
|
)(20)
|
|
|
(3,070.8
|
)(20)
|
Cash Flow from Financing Activities
|
|
|
(968.6
|
)
|
|
|
(1,429.0
|
)
|
|
|
(952.4
|
)
|
|
|
(1,041.3
|
)(20)
|
|
|
869.4
|
(20)
|
|
|
688.9
|
(20)
|
Margins (% of total sales):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Margin(8)(11)
|
|
|
38.7
|
%
|
|
|
41.3
|
%
|
|
|
35.2
|
%
|
|
|
36.8
|
%
|
|
|
29.5
|
%
|
|
|
29.5
|
%
|
Operating Margin(11)
|
|
|
23.1
|
|
|
|
24.9
|
|
|
|
23.8
|
|
|
|
17.7
|
|
|
|
12.1
|
|
|
|
12.1
|
|
Net Margin(11)
|
|
|
14.1
|
|
|
|
17.4
|
|
|
|
13.1
|
|
|
|
13.2
|
|
|
|
7.1
|
|
|
|
7.1
|
|
U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(4)(8)
|
|
W
|
3,971.9
|
|
|
W
|
4,404.2
|
|
|
W
|
4,527.4
|
|
|
W
|
3,960.9
|
|
|
W
|
3,277.4
|
|
|
US$
|
2,597.0
|
|
Capital Expenditures(9)
|
|
|
1,656.9
|
|
|
|
1,429.3
|
|
|
|
1,538.0
|
|
|
|
1,854.0
|
|
|
|
1,861.0
|
|
|
|
1,474.6
|
|
Cash Flow from Operating Activities
|
|
|
3,237.9
|
|
|
|
3,296.8
|
|
|
|
3,614.8
|
|
|
|
3,284.8
|
|
|
|
2,698.7
|
|
|
|
2,138.4
|
|
Cash Flow from Investing Activities
|
|
|
(1,634.1
|
)
|
|
|
(1,816.5
|
)
|
|
|
(2,560.6
|
)
|
|
|
(2,385.2
|
)
|
|
|
(3,926.9
|
)
|
|
|
(3,111.6
|
)
|
Cash Flow from Financing Activities
|
|
|
(1,514.8
|
)
|
|
|
(1,439.3
|
)
|
|
|
(940.6
|
)
|
|
|
(631.3
|
)
|
|
|
1,118.7
|
|
|
|
886.5
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
SELECTED OPERATING DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Population of Korea (millions)(12)
|
|
|
48.2
|
|
|
|
48.3
|
|
|
|
48.3
|
|
|
|
48.5
|
|
|
|
48.6
|
|
|
|
48.6
|
|
Our Wireless Penetration(13)
|
|
|
39.0
|
%
|
|
|
40.4
|
%
|
|
|
42.0
|
%
|
|
|
45.3
|
%
|
|
|
47.4
|
%
|
|
|
47.4
|
%
|
Number of Employees(14)
|
|
|
7,353
|
|
|
|
6,646
|
|
|
|
7,676
|
|
|
|
9,485
|
|
|
|
10,626
|
|
|
|
10,626
|
|
Total Sales per Employee (in millions of Won and thousands of
Dollars)
|
|
W
|
1,437.6
|
|
|
W
|
1,613.3
|
|
|
W
|
1,436.7
|
|
|
W
|
1,267.1
|
|
|
W
|
1,319.5
|
|
|
US$
|
1,045.6
|
|
Wireless Subscribers(15)
|
|
|
18,783,338
|
|
|
|
19,530,117
|
|
|
|
20,271,133
|
|
|
|
21,968,169
|
|
|
|
23,032,045
|
|
|
|
23,032,045
|
|
Average Monthly Outgoing Voice Minutes per Subscriber(16)
|
|
|
194
|
|
|
|
197
|
|
|
|
201
|
|
|
|
201
|
|
|
|
200
|
|
|
|
200
|
|
Average Monthly Revenue per Subscriber(17)
|
|
W
|
39,689
|
|
|
W
|
40,205
|
|
|
W
|
40,220
|
|
|
W
|
40,154
|
|
|
W
|
38,526
|
|
|
US$
|
30.53
|
|
Average Monthly Churn Rate(18)
|
|
|
1.7
|
%
|
|
|
1.8
|
%
|
|
|
2.0
|
%
|
|
|
2.6
|
%
|
|
|
2.7
|
%
|
|
|
2.7
|
%
|
Digital Cell Sites
|
|
|
9,458
|
|
|
|
10,142
|
|
|
|
12,515
|
|
|
|
16,099
|
|
|
|
17,213
|
|
|
|
17,213
|
|
|
|
|
* |
|
The translation into Dollars was made at the rate of Won 1,262.0
to US$1.00. See note 2(a) of the notes to our consolidated
financial statements. |
|
(1) |
|
Includes revenues from SK Teletech Co., Ltd. of Won
649.8 billion for 2004 and Won 294.6 billion for 2005
from the sale of digital handsets and Won 849.4 billion for
2004, Won 898.6 billion for 2005,
Won 1,033.4 billion for 2006, Won 1,062.2 billion
for 2007 and Won 1,149.2 billion for 2008 of
interconnection revenue. Following our sale of a 60% equity
interest in SK Teletech to Pantech & Curitel in July
2005, our equity interest in the company was reduced to 29.1%
(which subsequently became a 22.7% interest in Pantech following
the merger of SK Teletech into Pantech in December
2005) and SK Teletech ceased to be our consolidated
subsidiary. Following the exclusion of SK Teletech from
consolidation, we did not derive revenues from digital handset
sales. |
|
(2) |
|
For more information about our other revenue, see
Item 5. Operating and Financial Review and
Prospects and Item 4.B. Business Overview. |
|
(3) |
|
As of January 1, 2007, we adopted Statements of Korean
Accounting Standards, or SKAS No. 25. Pursuant to adoption
of SKAS No. 25, net income is allocated to equity holders
of the parent and minority interest. In addition, when a
subsidiary is purchased during the fiscal year, the
subsidiarys statement of income is included in
consolidation as though it had been acquired at the beginning of
the fiscal year, and pre-acquisition earnings are presented as a
separate deduction within the consolidated statements of income.
The consolidated statements of income for the years ended
December 31, 2006 appearing in our consolidated financial
statements included elsewhere in this report have been
reclassified in accordance with SKAS No. 25. |
|
(4) |
|
Adjusted to retroactively reflect our acquisition of an
additional 38.7% equity stake in SK Broadband in March 2008,
increasing our total equity interest in SK Broadband to 43.4%. |
|
(5) |
|
Net income per share is calculated by dividing net income
attributable to majority interest by the weighted average number
of shares outstanding during the period. Diluted net income per
share is calculated by dividing adjusted net income by adjusted
weighted average number of shares outstanding during the period,
taking into account the issuance of convertible bonds in 2004,
2005, 2006, 2007 and 2008. |
|
(6) |
|
Working capital means current assets minus current liabilities. |
|
(7) |
|
Our monetary assets and liabilities denominated in foreign
currencies are valued at the exchange rate of Won 1,044 to
US$1.00 as of December 31, 2004, Won 1,013 to US$1.00 as of
December 31, 2005, Won 930 to US$1.00 as of
December 31, 2006, Won 938 to US$1.00 as of
December 31, 2007 and Won 1,258 to US$1.00 as of
December 31, 2008, the rates of exchange permitted under
Korean GAAP as of those dates. See note 2(w) of the notes
to our consolidated financial statements. |
|
(8) |
|
EBITDA refers to income before interest income, interest
expense, taxes, depreciation and amortization. EBITDA is
commonly used in the telecommunications industry to analyze
companies on the basis of operating performance. Since the
telecommunications business is a very capital intense business,
capital |
5
|
|
|
|
|
expenditures and level of debt and interest expenses may have a
significant impact on net income for companies with similar
operating results. Therefore, for a telecommunications company
such as ourselves, we believe that EBITDA provides a useful
reflection of our operating results. We use EBITDA as a
measurement of operating performance because it assists us in
comparing our performance on a consistent basis as it removes
from our operating results the impact of our capital structure,
which includes interest expense from our outstanding debt, and
our asset base, which includes depreciation and amortization of
our property and equipment. However, EBITDA should not be
construed as an alternative to operating income or any other
measure of performance determined in accordance with Korean GAAP
or U.S. GAAP or as an indicator of our operating performance,
liquidity or cash flows generated by operating, investing and
financing activities. Other companies may define EBITDA
differently than we do. EBITDA under U.S. GAAP is computed using
interest income, interest expense, depreciation, amortization
and income taxes under U.S. GAAP, which may differ from Korean
GAAP for these items. |
|
(9) |
|
Consists of investments in property, plant and equipment. Under
U.S. GAAP, interest costs incurred during the period required to
complete an asset or ready an asset for its intended use are
capitalized based on the interest rates a company pays on its
outstanding borrowings. Under Korean GAAP, such interest costs
are expensed as incurred. |
|
(10) |
|
Includes donations to Korean research institutes and educational
organizations. See Item 5.C. Research and
Development. |
|
(11) |
|
Operating revenue and operating income used in the calculation
of these ratios for 2007 and 2008 include the operating revenue
and operating income from the discontinued operation, but
exclude the operating revenue and operating income of
newly-consolidated subsidiaries prior to the date of
consolidation. |
|
(12) |
|
Population estimates based on historical data published by the
National Statistical Office of Korea. |
|
(13) |
|
Wireless penetration is determined by dividing our subscribers
by total estimated population, as of the end of the period. |
|
(14) |
|
Includes regular employees and temporary employees. See
Item 6.D. Employees. |
|
(15) |
|
Wireless subscribers include those subscribers who are
temporarily deactivated, including (1) subscribers who
voluntarily deactivate temporarily for a period of up to three
months no more than twice a year and (2) subscribers with
delinquent accounts who may be involuntarily deactivated up to
two months before permanent deactivation, which we determine
based on various factors, including prior payment history. |
|
(16) |
|
The average monthly outgoing voice minutes per subscriber is
derived by dividing the total minutes of outgoing voice usage
for the period by the monthly average number of subscribers for
the period, then dividing that number by the number of months in
the period. The monthly average number of subscribers is derived
by dividing (i) the sum of the average number of
subscribers for each month in the period, calculated as the
average of the number of subscribers on the first and last days
of the relevant month, by (ii) the number of months in the
period. |
|
(17) |
|
The average monthly revenue per subscriber excludes
interconnection revenue and is derived by dividing the sum of
total initial subscription fees, monthly plan-based fees, usage
charges for outgoing voice calls, usage charges for wireless
data services, value-added service fees and other miscellaneous
revenues for the period by the monthly average number of
subscribers for the period, then dividing that number by the
number of months in the period. Including interconnection
revenue, average monthly revenue per subscriber was Won 43,542
for 2004, Won 44,167 for 2005, Won 44,599 for 2006, Won 44,416
for 2007 and Won 43,016 for 2008. |
|
(18) |
|
The average monthly churn rate for a period is the number
calculated by dividing the sum of voluntary and involuntary
deactivations during the period by the simple average of the
number of subscribers at the beginning and end of the period,
then dividing that number by the number of months in the period.
Churn includes subscribers who upgrade to CDMA lxRTT or CDMA
1xEV/ DO-capable handsets by terminating their service and
opening a new subscriber account. |
|
(19) |
|
As a result of our sale of HELIO LLC (HELIO) to
Virgin Mobile USA, Inc. in August 2008, HELIOs results of
operations have been classified as discontinued operations.
Operating revenue, operating expenses, operating income and
income before income taxes and minority interest for the year
ended December 31, 2007 have been revised to exclude
HELIOs results of operations. |
|
(20) |
|
Cash flow activities from discontinued operation for the years
ended December 31, 2007 and 2008 have been excluded. |
6
As a measure of our operating performance, we believe that the
most directly comparable U.S. and Korean GAAP measure to
EBITDA is net income. The following table reconciles our net
income under U.S. GAAP to our definition of EBITDA on a
consolidated basis for each of the five years ended
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008(1)
|
|
|
|
(In billions of Won and millions of Dollars)
|
|
|
U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income(2)
|
|
W
|
1,554.6
|
|
|
W
|
2,019.6
|
|
|
W
|
1,878.3
|
|
|
W
|
1,505.3
|
|
|
W
|
1,072.9
|
|
|
US$
|
850.2
|
|
LESS: Interest income
|
|
|
(86.7
|
)
|
|
|
(62.6
|
)
|
|
|
(86.8
|
)
|
|
|
(99.0
|
)
|
|
|
(121.8
|
)
|
|
|
(96.5
|
)
|
ADD: Interest expense
|
|
|
291.0
|
|
|
|
226.8
|
|
|
|
241.7
|
|
|
|
204.0
|
|
|
|
240.2
|
|
|
|
190.3
|
|
Taxes
|
|
|
611.1
|
|
|
|
667.1
|
|
|
|
686.8
|
|
|
|
576.9
|
|
|
|
161.7
|
|
|
|
128.1
|
|
Depreciation and Amortization
|
|
|
1,601.9
|
|
|
|
1,553.3
|
|
|
|
1,807.4
|
|
|
|
1,773.7
|
|
|
|
1,924.4
|
|
|
|
1,524.9
|
|
EBITDA(2)
|
|
W
|
3,971.9
|
|
|
W
|
4,404.2
|
|
|
W
|
4,527.4
|
|
|
W
|
3,960.9
|
|
|
W
|
3,277.4
|
|
|
US$
|
2,597.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The translation into Dollars was made at the rate of Won 1,262.0
to US$1.00. See note 2(a) of the notes to our consolidated
financial statements. |
|
(2) |
|
Adjusted to retroactively reflect our acquisition of an
additional 38.7% equity stake in SK Broadband in March 2008,
increasing our total equity interest in SK Broadband to 43.4%. |
The following table reconciles our net income under Korean GAAP
to our definition of EBITDA on a consolidated basis for each of
the five years ended December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Year Ended December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008(1)
|
|
|
|
(In billions of Won and millions of Dollars)
|
|
|
Korean GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
W
|
1,493.4
|
|
|
W
|
1,868.3
|
|
|
W
|
1,449.6
|
|
|
W
|
1,562.3
|
|
|
W
|
972.3
|
|
|
US$
|
770.4
|
|
LESS: Interest income
|
|
|
(80.5
|
)
|
|
|
(61.1
|
)
|
|
|
(80.0
|
)
|
|
|
(93.9
|
)(2)
|
|
|
(136.3
|
)(2)
|
|
|
(108.0
|
)
|
ADD: Interest expense
|
|
|
303.4
|
|
|
|
253.5
|
|
|
|
239.1
|
|
|
|
235.3
|
(2)
|
|
|
344.6
|
(2)
|
|
|
273.1
|
|
Taxes
|
|
|
629.8
|
|
|
|
693.3
|
|
|
|
572.0
|
|
|
|
694.5
|
(2)
|
|
|
188.9
|
(2)
|
|
|
149.7
|
|
Depreciation and Amortization
|
|
|
1,741.6
|
|
|
|
1,675.5
|
|
|
|
1,698.4
|
|
|
|
1,967.8
|
(2)
|
|
|
2,638.9
|
(2)
|
|
|
2,091.0
|
|
EBITDA
|
|
W
|
4,087.7
|
|
|
W
|
4,429.5
|
|
|
W
|
3,879.1
|
|
|
W
|
4,366.0
|
|
|
W
|
4,008.4
|
|
|
US$
|
3,176.2
|
|
|
|
|
(1) |
|
The translation into Dollars was made at the rate of Won 1,262.0
to US$1.00. See note 2(a) of the notes to our consolidated
financial statements. |
|
(2) |
|
In accordance with SKAS No. 25, which we adopted in 2007,
when a subsidiary is purchased during the fiscal year, the
subsidiarys statement of income is included in
consolidation as though it had been acquired at the beginning of
the fiscal year, and pre-acquisition earnings are presented as a
separate deduction within the consolidated statements of income.
For purposes of reconciling net income under Korean GAAP with
EBITDA, the interest income, interest expense, taxes and
depreciation and amortization amounts for 2007 and 2008 shown in
the table above exclude, with respect to subsidiaries newly
consolidated in 2007 or 2008, the income earned and expense
incurred by such subsidiaries prior to the date of
consolidation. In addition, interest income, interest expense,
taxes and depreciation and amortization amounts for 2007 and
2008 shown in the table above include income earned and expense
incurred from discontinued operations. As a result, the interest
income, interest expense, taxes and depreciation and
amortization amounts for 2007 and 2008 that appear in the table
above differ from those set forth in our consolidated statements
of income and consolidated statements of cash flows for the
years ended December 31, 2007 and 2008, respectively. |
7
Exchange
Rates
The following table sets forth, for the periods and dates
indicated, certain information concerning the noon buying rate
for translations of Won amounts into Dollars. We make no
representation that the Won or Dollar amounts we refer to in
this report could have been or could be converted into Dollars
or Won, as the case may be, at any particular rate or at all.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At End of
|
|
|
Average
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Period
|
|
|
Rate(1)
|
|
|
High
|
|
|
Low
|
|
|
|
(Won per US$1.00)
|
|
|
2004
|
|
|
1,035.1
|
|
|
|
1,139.3
|
|
|
|
1,195.1
|
|
|
|
1,035.1
|
|
2005
|
|
|
1,010.0
|
|
|
|
1,023.7
|
|
|
|
1,059.8
|
|
|
|
997.0
|
|
2006
|
|
|
930.0
|
|
|
|
950.1
|
|
|
|
1,002.9
|
|
|
|
913.7
|
|
2007
|
|
|
935.8
|
|
|
|
928.0
|
|
|
|
950.2
|
|
|
|
903.2
|
|
2008
|
|
|
1,262.0
|
|
|
|
1,105.8
|
|
|
|
1,507.9
|
|
|
|
935.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Past Six Months
|
|
|
|
High
|
|
|
Low
|
|
|
|
(Won per US$1.00)
|
|
|
December 2008
|
|
|
1,479.0
|
|
|
|
1,257.4
|
|
January 2009
|
|
|
1,391.5
|
|
|
|
1,292.3
|
|
February 2009
|
|
|
1,532.8
|
|
|
|
1,368.7
|
|
March 2009
|
|
|
1,570.1
|
|
|
|
1,334.8
|
|
April 2009
|
|
|
1,378.3
|
|
|
|
1,277.0
|
|
May 2009
|
|
|
1,277.0
|
|
|
|
1,232.9
|
|
June 2009 (through June 19, 2009)
|
|
|
1,269.0
|
|
|
|
1,232.1
|
|
Source: Federal Reserve Bank of New York.
|
|
|
(1) |
|
The average rates for the annual periods were calculated based
on the average noon buying rate on the last day of each month
(or portion thereof) during the period. |
On June 19, 2009, the noon buying rate was Won 1,264.2 to
US$1.00.
|
|
Item 3.B.
|
Capitalization
and Indebtedness
|
Not applicable.
|
|
Item 3.C.
|
Reasons
for the Offer and Use of Proceeds
|
Not applicable.
Competition
may reduce our market share and harm our results of operations
and financial condition.
We face substantial competition across all our businesses,
including our wireless telecommunications business, in Korea. We
expect competition to intensify as a result of consolidation of
market leaders and the development of new technologies, products
and services. We expect that such trends will continue to put
downward pressure on the prevailing tariffs we can charge our
subscribers. Also, continued competition from the other wireless
and fixed-line service providers has resulted in, and may
continue to result in, a substantial level of deactivations
among our subscribers. Subscriber deactivations, or churn, may
significantly harm our business and results of operations. In
2008, the churn rate in our wireless business ranged from 2.0%
to 3.6%, with an average churn rate of 2.7%, compared to an
average churn rate of 2.6% in 2007. Intensification of
competition in the future may cause our churn rates to increase.
In addition, increased competition may cause our marketing
expenses to increase as a
8
percentage of sales, reflecting higher advertising expenses and
other costs of new marketing activities, which may need to be
introduced to attract and retain subscribers.
Prior to April 1996, we were the only wireless
telecommunications service provider in Korea. Since then,
several new providers have entered the market, offering wireless
voice and data services that compete directly with our own.
Together, these providers had a market share of approximately
49.5%, in terms of numbers of wireless service subscribers, as
of December 31, 2008. Furthermore, in 2001, the Government
awarded three companies the licenses to provide high-speed third
generation, or 3G, wireless telecommunications services. In
Korea, this 3G license is also known as the IMT-2000
license. IMT-2000 is the global standard for 3G wireless
communications, as defined by the International
Telecommunication Union, an organization established to
standardize and regulate international radio and
telecommunications. One of these licenses was awarded to our
former subsidiary, SK IMT Co., Ltd., which was merged into us on
May 1, 2003, and the other two licenses were awarded to
consortia led by or associated with KT Corporation, Koreas
principal fixed-line operator that recently merged with KT
Freetel Co., Ltd., or KTF, one of our principal wireless
competitors before the merger, and to LG Telecom, Ltd., or LGT.
In addition, our wireless voice businesses compete with
Koreas fixed-line operators, and our wireless Internet
businesses compete with providers of fixed-line data and
Internet services.
Since 2000, there has been considerable consolidation in the
wireless telecommunications industry, resulting in the emergence
of stronger competitors. In 2000, KT Corporation acquired a
47.9% interest in Hansol M.Com (formerly Hansol PCS Co., Ltd.),
which was then the fifth largest wireless operator in terms of
numbers of wireless service subscribers. Hansol M.Com
subsequently changed its name to KT M.Com and merged into KTF in
May 2001. In May 2002, the Government sold its remaining 28.4%
stake in KT Corporation. In June 2009, KTF merged into KT
Corporation, which had held a 54.25% interest in KTF before the
merger. Such consolidation has created large, well-capitalized
competitors with substantial financial, technical, marketing and
other resources to respond to our business offerings. Future
business combinations and alliances in the telecommunications
industry may also create significant new competitors or enhance
the abilities of our competitors to offer more competitive
bundling services and could harm our business and results of
operations.
In addition, in March 2006 the MIC partially lifted, and in
March 2008 the KCC fully lifted, the prohibition on the
provision of handset subsidies, which had been in place since
June 2000. See Our businesses are subject to
extensive Government regulation and any change in Government
policy relating to the telecommunications industry could have a
material adverse effect on our results of operations and
financial condition. These decisions by the MIC and the
KCC have intensified competition among mobile service providers
and may increase our marketing expenses relating to the
provision of handset subsidies, which could, in turn, adversely
affect our results of operations.
Furthermore, in 2007, the MIC announced a road map
highlighting revisions in regulations to promote deregulation of
the telecommunications industry. In accordance with the road map
and pursuant to the Combined Sales Regulation, promulgated in
May 2007, telecommunications service providers are now permitted
to bundle their services, such as wireless data service,
wireless voice service, broadband Internet access service and
fixed-line telephone service, at a discounted rate; provided,
however, that we and KT Corporation, which are designated as
market-dominating business entities under the Telecommunications
Business Act, allow other competitors to employ the services
provided by us and KT Corporation, respectively, so that such
competitors can provide similar discounted package services. In
September 2007, the regulations under the Telecommunications
Business Act were amended to permit licensed transmission
service providers to offer local, domestic long-distance and
international telephone services, as well as broadband Internet
access and Internet phone services, without additional business
licenses. The introduction of bundled services may further
increase competition in the telecommunications sector, as well
as cause downward price pressure on the fees we charge for our
services, which, in turn, may have a material adverse effect on
our results of operations, financial position and cash flows.
We expect competition to intensify as a result of such
consolidation, regulatory changes and as a result of the rapid
development of new technologies, products and services. Our
ability to compete successfully will depend on our ability to
anticipate and respond to various competitive factors affecting
the industry, including new services that may be introduced,
changes in consumer preferences, economic conditions and
discount pricing strategies by competitors.
9
Inability
to successfully implement or adapt our network and technology to
meet the continuing technological advancements affecting the
wireless industry will likely have a material adverse effect on
our financial condition, results of operation, cash flows and
business.
The telecommunications industry has been characterized by
continual improvement and advances in technology and this trend
is expected to continue. For example, we and our competitors
have implemented technology upgrades from basic code division
multiple access, or CDMA, networks to more advanced high-speed
wireless telecommunications networks based on CDMA 1xRTT and
CDMA 1xEV-DO technology. Korean wireless telecommunications
companies, including us, have also implemented newer
technologies such as wide-band code division multiple access, or
WCDMA, which is the 3G technology implemented by us. In 2005, we
began to upgrade our WCDMA network to support high-speed
downlink packet access, or HSDPA, technology. HSDPA, which
represents an evolution of the WCDMA standard, is a more
advanced 3G technology than the initial WCDMA technology we
implemented and is sometimes referred to as 3.5G
technology. Our HSDPA-capable WCDMA network, which was completed
in March 2007, supports data transmission services at
significantly higher data transmission speeds than our basic
CDMA, CDMA 1xRTT and CDMA 1xEV-DO networks. We are currently
further upgrading our WCDMA network to support even more
advanced high-speed uplink packet access, or HSUPA, technology.
The more successful operation of a 3G network by a competitor,
including better market acceptance of a competitors
3G-based services, could materially and adversely affect our
existing wireless businesses as well as the returns on future
investments we may make in our 3G network or our other
businesses.
In addition, in March 2005, we also obtained a license from the
MIC to provide wireless broadband Internet, or WiBro, services.
WiBro enables us to offer high-speed and large-packet data
services, including wireless broadband Internet access to
portable computers and other portable devices, but does not
support voice transmission. We commercially launched WiBro
service in June 2006, initially to 24 hot zone
areas, which are neighborhoods and districts that we have
determined to be high-data traffic areas, in seven cities in
Korea. By the end of 2008, we had extended WiBro service to
hot zone areas in 42 cities throughout Korea.
In 2009, we plan to expand WiBro service to hot zone areas in
84 cities. Beyond 2009, our WiBro expansion plans will
depend, in part, on subscriber demand for WiBro services. As the
implementation of WiBro service in Korea is relatively new, we
cannot assure you that there will be sufficient demand for our
WiBro services. Our WiBro services may not be commercially
successful if market conditions are unfavorable or service
demand is weak.
For a more detailed description of our backbone networks, see
Item 4.B. Business Overview Digital
Cellular Network.
Our business could also be harmed if we fail to implement, or
adapt to, future technological advancements in the
telecommunications sector in a timely manner.
Implementation
of 3G and WiBro technologies has required, and may continue to
require, significant capital and other expenditures, which we
may not recoup.
We have invested significant capital and resources to develop
and implement our 3G technologies, including investments related
to the commercial development of WCDMA technology and the
build-out of our WCDMA network. In 2008, we invested Won
904.8 billion in capital expenditures related to expansion
and upgrade of our WCDMA network. We also expect to devote
additional capital resources in 2009 to enhance our 3G service
quality and increase our WCDMA network capacity. For a more
detailed description of our backbone networks, see
Item 4.B. Business Overview Digital
Cellular Network.
The demand for our 3G services may not be sufficient to recoup
our aggregate capital expenditures in developing and
implementing our 3G technologies, including costs related to the
procurement of our IMT-2000 license and construction of our
WCDMA network. Also, there may not be sufficient demand for our
3G services, as a result of competition or otherwise, to permit
us to recoup or profit from our investment.
We have also made, and intend to continue to make, capital
investments to develop and launch our WiBro services. In 2008,
we spent Won 404.8 billion in capital expenditures to build
and expand our WiBro network. We plan to spend additional
amounts to expand our WiBro network in 2009, and may make
further capital investments related to our WiBro service in the
future. Our WiBro-related investment plans are subject to
change, and will
10
depend, in part, on market demand for WiBro services, the
competitive landscape for provision of such services and the
development of competing technologies. We cannot assure you that
there will be sufficient demand for our WiBro services, as a
result of competition or otherwise, to permit us to recoup or
profit from our WiBro-related capital investments. KT
Corporation commercially launched its WiBro service in 2006. The
more successful operation of a WiBro network by KT Corporation,
or another competitor, including better market acceptance of a
competitors WiBro services, could also materially and
adversely affect our business.
Our
growth strategy calls for significant investments in new
businesses and regions, including businesses and regions in
which we have limited experience.
As a part of our growth strategy, we plan to selectively seek
business opportunities abroad. In February 2005, we established
a joint venture company, UNISK Information Technology Co., Ltd.,
with China Unicom Ltd. (China Unicom), Chinas
second largest mobile operator, to market and offer wireless
data services in China. In July 2006, we also acquired
US$1 billion in aggregate principal amount of China
Unicoms convertible bonds, which, in August 2007, we
converted into a 6.6% equity interest in China Unicom. In
October 2008, China Unicom merged with China Netcom Group
Corporation (Hong Kong) Limited, a leading broadband
communications and fixed-line telecommunications operator in
China. As a result of the merger, our equity interest in China
Unicom, which is the surviving entity after the merger,
decreased to 3.8% from 6.6%. We also have ongoing projects in
Vietnam. In addition, in May 2006 our subsidiary, HELIO,
launched cellular voice and data services across the United
States. In August 2008, together with EarthLink Inc., our joint
venture partner in HELIO, we sold our equity interest in HELIO
to Virgin Mobile USA, Inc., a provider of wireless
communications services in the United States that was founded as
a joint venture between Sprint Nextel and the Virgin Group, in
exchange for limited partnership units of Virgin Mobile USA,
L.P. (Virgin Mobile USA, Inc.s operating company),
equivalent to 11 million shares of Virgin Mobile USA,
Inc.s Class A common stock (valued at approximately
US$31 million at the time of sale). In addition, we
invested US$25 million of equity capital in Virgin Mobile
USA, Inc. in exchange for mandatory convertible preferred stock,
convertible into Virgin Mobile USA, Inc.s Class A
common stock. In connection with our investment in HELIO, we
have recognized a cumulative loss of Won 346 billion
through the end of 2008. See Item 4.B. Business
Overview Our Business Strategy Global
Business United States for more information
regarding our investments in HELIO and Virgin Mobile USA, Inc.
These global businesses may require further investment from us.
We continue to seek other opportunities to expand our business
abroad, particularly in Asia and the United States, as such
opportunities present themselves. For a more detailed
description of our investments in our global business, see
Item 4.B. Business Overview Our
Services Global Business.
We have also pursued convergence growth opportunities. For
example, in March 2008, we completed the acquisition of an
additional equity stake in SK Broadband, Koreas
second-largest fixed-line operator, for approximately Won 1.1
trillion and currently hold a 43.4% equity stake in the company.
While we are hoping to benefit from a range of synergies from
this acquisition, including by offering our customers bundled
fixed-line and mobile telecommunications services, we may not be
able to realize those expected benefits in the near term, or at
all. In particular, we may experience difficulties in
integrating SK Broadbands fixed-line telecommunications
and broadband Internet services with our existing products and
services and we may be unsuccessful in retaining
SK Broadbands existing customers. In addition, since
April 2008, customers of SK Broadband have filed lawsuits
against SK Broadband in the Seoul Central District Court,
alleging that SK Broadband had violated customers privacy,
and an investigation against SK Broadband was initiated by the
Seoul Central Prosecutors Office, the KCC and the Korea
Trade Commission. In connection with its investigation, the KCC
suspended SK Broadband from soliciting new subscribers for its
broadband Internet services for a period of 40 days from
July 1, 2008 and, in addition, imposed an administrative
fine of Won 178 million. As of April 23, 2009, the
number of plaintiffs was 23,591 and the aggregate amount of
damages claimed by such plaintiffs was approximately Won
24.2 billion. The case is currently pending before the
Seoul Central District Court. An adverse outcome of the
litigation may damage the reputation and business of SK
Broadband. For more information regarding this lawsuit, see
Item 8.A. Consolidated Statements and Other Financial
Information Legal Proceedings SK
Broadband Litigation.
We believe that we must continue to make significant investments
to build, develop and broaden our existing businesses, including
by developing and improving our wireless data, multimedia,
mobile commerce and Internet services. We will need to respond
to market and technological changes and the development of
services which we
11
may have little or no experience in providing. Entering into
these new businesses and regions in which we have limited
experience may require us to make substantial investments and,
in spite of such investments, we may still be unsuccessful in
these efforts to expand and diversify. We cannot assure you that
we will be able to recoup or profit from our investments in new
businesses and regions. In addition, when we enter into these
businesses and regions with partners through joint ventures or
other strategic alliances, we and those partners may have
disagreements with respect to strategic directions or other
aspects of business, or may otherwise be unable to coordinate or
cooperate with each other, any of which could materially and
adversely affect our operations in such businesses and regions.
Due to
the existing high penetration rate of wireless services in
Korea, we are unlikely to maintain our subscriber growth rate,
which could adversely affect our results of
operations.
According to data published by the KCC and our population
estimates based on historical data published by the National
Statistical Office of Korea, the penetration rate for the Korean
wireless telecommunications service industry as of
December 31, 2008 was approximately 93.8%, which is high
compared to many industrialized countries. Therefore, it is
unlikely that the penetration rates for wireless
telecommunications service in Korea will grow significantly. As
a result of the already high penetration rates in Korea for
wireless services coupled with our leading market share, we
expect our subscriber growth rate to decrease. Slowed growth in
penetration rates without a commensurate increase in revenues
through the introduction of new services and increased use of
our services by existing subscribers would likely have a
material adverse effect on our financial condition, results of
operations and cash flows.
Our
business and results of operations may be adversely affected if
we fail to acquire adequate additional spectrum or use our
bandwidth efficiently to accommodate subscriber growth and
subscriber usage.
One of the principal limitations on a wireless networks
subscriber capacity is the amount of spectrum available for use
by the system. We have been allocated 2 x 22.5 MHz of
spectrum in the 800 MHz band. As a result of bandwidth
constraints, our CDMA 1xRTT network is currently operating near
its capacity in the Seoul metropolitan area, although capacity
constraints are not as severe for transmissions utilizing CDMA
1xEV-DO technology. While we believe that we can address this
issue through system upgrades and efficient allocation of
bandwidth, inability to address such capacity constraints in a
timely manner may adversely affect our business, results of
operations, financial position and cash flows.
The growth of our wireless data businesses has been a
significant factor in the increased utilization of our
bandwidth, since wireless data applications are generally more
bandwidth-intensive than voice services. This trend has been
offset in part by the implementation of CDMA 1xEV-DO upgrades to
our CDMA 1xRTT network and, more recently, the completion of our
HSDPA-capable WCDMA network, which both enable more efficient
usage of our bandwidth than was possible on our basic CDMA and
CDMA 1xRTT networks. However, if the current trend of increased
data transmission use by our subscribers continues, or the
volume of the multimedia content we offer through our wireless
data services substantially grows, our bandwidth capacity
requirements are likely to increase. In the event we are unable
to maintain sufficient bandwidth capacity, our subscribers may
perceive a general slowdown of wireless services. Growth of our
wireless business will depend in part upon our ability to manage
effectively our bandwidth capacity and to implement efficiently
and in a timely manner new bandwidth-efficient technologies if
they become available. We cannot assure you that bandwidth
constraints will not adversely affect the growth of our wireless
business.
We may
have to make further financing arrangements to meet our capital
expenditure requirements and debt payment
obligations.
As a network-based wireless telecommunications provider, we have
had, and expect to continue to have, significant capital
expenditure requirements as we continue to build out, maintain
and upgrade our networks. We spent Won 2,236.9 billion for
capital expenditures in 2008 and we expect to spend a similar
amount for capital expenditures in 2009 for a range of projects,
including investments in our backbone networks (and expansion of
our WiBro network in particular), investments to improve our
WCDMA network-based products and services, investments in our
wireless Internet-related and convergence businesses and funding
for mid- to long-term research and development projects, as well
as other initiatives, primarily related to our ongoing
businesses and
12
in the ordinary course. In 2009, we plan to continue HSUPA
upgrades to our WCDMA network, as well as expand our WiBro
service to hot zone areas in 84 cities. For a
more detailed discussion of our capital expenditure plans and a
discussion of other factors that may affect our future capital
expenditures, see Item 5.B. Liquidity and Capital
Resources.
At December 31, 2008, we had approximately Won
2,118 billion in contractual payment obligations due in
2009 of which almost all involve repayment of debt obligations.
See Item 5.F. Tabular Disclosure of Contractual
Obligations.
We have not arranged firm financing for all of our current or
future capital expenditure plans and contractual payment
obligations. We have, in the past, obtained funds for our
proposed capital expenditure and payment obligations from
various sources, including our cash flow from operations as well
as from financings, primarily debt and equity financings. Any
material adverse change in our operational or financial
condition could impact our ability to fund our capital
expenditure plans and contractual payment obligations. Inability
to fund such capital expenditure requirements may have a
material adverse effect on our financial condition, results of
operations and business. In addition, although we currently
anticipate that the capital expenditure levels estimated by us
will be adequate to meet our business needs, such estimates may
need to be adjusted based on developments in technology and
markets. In the event we are unable to meet any such increased
expenditure requirements or to obtain adequate financing for
such requirements, on terms acceptable to us, or at all, this
may have a material adverse effect on our financial condition,
results of operations and business.
Termination
or impairment of our relationship with a small number of key
suppliers for network equipment and for leased lines could
adversely affect our results of operations, financial position
and cash flows.
We purchase wireless network equipment from a small number of
suppliers. We purchase our principal wireless network equipment
from Samsung Electronics Co., Ltd. and LG Nortel Co., Ltd. To
date, we have purchased substantially all of the equipment for
our CDMA 1xRTT and CDMA 1xEV-DO networks from Samsung
Electronics and substantially all of the equipment for our WCDMA
network, including the software and firmware used to implement
HSDPA and HSUPA upgrades, from Samsung Electronics and LG
Nortel. In addition, to date, we have purchased substantially
all of the equipment for our WiBro network from Samsung
Electronics. We believe Samsung Electronics currently
manufactures approximately half of the wireless handsets sold to
our subscribers. Although other manufacturers sell the equipment
we require, sourcing such equipment from other manufacturers
could result in unanticipated costs in maintenance and upkeep of
the CDMA 1xRTT, CDMA 1xEV-DO and WCDMA networks, as well as in
the planned expansion of our WiBro network. Inability to obtain
the needed equipment for our networks in a timely manner may
have an adverse effect on our business, financial condition,
results of operations and cash flows.
In addition, we rely on KT Corporation and SK Networks to
provide a substantial majority of the transmission lines we
lease. For a more detailed discussion of the lines we lease from
fixed-line operators, see Item 4.B. Business
Overview Digital Cellular Network
Network Infrastructure. In May 2009, we entered into an
agreement with SK Networks to purchase its leased line business
for Won 892.85 billion. The purchase remains subject to
regulatory approvals and approval by shareholders of SK
Networks. In addition, we will also assume
Won 627.8 billion of debt as part of the transaction.
We cannot assure you that we will be able to continue to obtain
the necessary equipment from one or more of our suppliers. Any
discontinuation or interruption in the availability of equipment
from our suppliers for any reason could have an adverse effect
on our results of operations. Inability to lease adequate lines
at commercially reasonable rates may impact the quality of the
services we offer and may result in damage to our reputation and
our business.
13
Our
businesses are subject to extensive Government regulation and
any change in Government policy relating to the
telecommunications industry could have a material adverse effect
on our results of operations, financial condition and cash
flows.
All of our businesses are subject to extensive governmental
supervision and regulation. The MIC has periodically reviewed
the tariffs charged by wireless operators and has, from time to
time, suggested tariff reductions. Although these suggestions
are not binding, we have in the past implemented some degree of
tariff reductions in response to MIC recommendations. After
discussions with the MIC, effective September 1, 2004, we
reduced our monthly plan-based fees by 7.1%. In addition, after
discussions with the MIC, we began to provide Caller ID service
to our customers free of charge from January 1, 2006. After
discussions with the MIC, in January 2007 we and other wireless
telecommunications providers, including KTF and LGT, reduced
usage fees for wireless Internet services by 30% and, in January
2008 we and other wireless telecommunications providers,
including KTF and LGT, reduced the usage fees for short
text message service, or SMS, from Won 30 per message to Won 20
per message.
The Government also plays an active role in the selection of
technology to be used by telecommunications operators in Korea.
The MIC adopted the WCDMA and CDMA2000 technologies as the only
standards available in Korea for implementing 3G services. The
KCC may impose similar restrictions on the choice of technology
used in future telecommunications services and it is possible
that technologies promoted by the Government in the future may
not provide the best commercial returns for us. In addition, the
KCC may revoke our licenses or suspend any of our businesses if
we fail to comply with its rules, regulations and corrective
orders, including the rules restricting beneficial ownership and
control and corrective orders issued in connection with any
violation of rules restricting beneficial ownership and control
or any violation of the conditions of our licenses. We believe
we are currently in compliance with the material terms of all
our cellular licenses, including our IMT-2000 and WiBro licenses.
Furthermore, the Government sets the policies regarding the use
of radio frequencies and allocates the spectrum of radio
frequencies used for wireless telecommunications. In December
2008, the KCC announced its plan to reallocate 20 MHz of
spectrum in the 800 MHz band that we are currently using to
other service providers in June 2011. The KCCs plan also
contemplates new allocations of 20 MHz of spectrum in the
900 MHz band, 40MHz of spectrum in the 2.1 GHz band
and 27MHz of spectrum in the 2.3 GHz band for wireless
telecommunication services. While we do not believe the
reallocation of spectrum will materially impact our ability to
maintain sufficient bandwidth capacity, the reallocation and new
allocation of the spectrum to our existing or new competitors
could increase competition among wireless service providers,
which may have an adverse effect on our business.
Our wireless telecommunications services depend, in part, on our
interconnection arrangements with domestic and international
fixed-line and other wireless networks. Our interconnection
arrangements, including the interconnection rates we pay and
interconnection rates we charge, affect our revenues and
operating results. The KCC determines the basic framework
for interconnection arrangements, including interconnection
policies relating to interconnection rates in Korea, and the MIC
has changed this framework several times in the past. We cannot
assure you that we will not be adversely affected by future
changes in the KCCs interconnection policies. See
Item 4.B. Business Overview
Interconnection Domestic Calls.
In January 2003, the MIC announced its plan to implement number
portability with respect to wireless telecommunications service
in Korea. The number portability system allows wireless
subscribers to switch wireless service operators while retaining
the same mobile phone number. In addition, in order to manage
the availability of phone numbers efficiently and to secure
phone number resources for the new services, the MIC has
required all new subscribers to be given numbers with the
010 prefix starting January 2004, and it has been
gradually retracting the mobile service identification numbers
which had been unique to each wireless telecommunications
service provider, including 011 for our cellular
services. We believe that the use of the common prefix
identification system has posed, and continues to pose, a
greater risk to us compared to the other wireless
telecommunications providers because, historically,
011 has had high brand recognition in Korea as the
premium wireless telecommunications service. The MICs
adoption of the number portability system has resulted in and
could continue to result in a deterioration of our market share
as a result of weakened customer loyalty, increased competition
among wireless service providers and higher costs of marketing
as a result of maintaining the number portability system,
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increased subscriber deactivations and increased churn rate, all
of which had, and may continue to have, an adverse effect on our
results of operations. See Item 5. Operating and
Financial Review and Prospects and Item 4.B.
Business Overview Law and Regulation
Competition Regulation Number Portability.
In the past, wireless telecommunications service providers
provided handsets at below retail prices to attract new
subscribers, offsetting a significant portion of the cost of
handsets. The rapid growth in penetration rate in past years
can, at least in part, be attributed to such subsidies on
handsets given to new subscribers. During the period between
June 2000 and March 2008, the MIC prohibited all wireless
telecommunications service providers, subject to certain
exceptions stipulated in the Telecommunications Business Act,
from providing any such handset subsidies. The MIC has, on
several occasions between March 2002 and February 2008, imposed
various types of sanctions and fines against us and the other
wireless service providers for violating restrictions on
providing handset subsidies and other activities that were
deemed to be disruptive to fair competition. We paid the fines
and believe that we have complied in all material respects with
the other sanctions imposed by the MIC. For details on these and
other Government penalties, see Item 8.A.
Consolidated Statements and Other Financial
Information Legal Proceedings. Beginning in
March 2006 the MIC partially lifted, and, in March 2008 fully
lifted, its prohibition on the provision of handset subsidies.
We currently provide subsidies of between Won 20,000 to Won
130,000 to subscribers who enter into long-term subscription
agreements of one to two years. As a result of the
Governments recent decision to allow handset subsidies, we
have faced increased competition from other mobile service
providers. The provision of handset subsidies has increased, and
may continue to increase, our marketing expenses, which in turn,
has had, and may continue to have, a material adverse effect on
our results of operations.
In addition, the KCC may revoke our licenses or suspend any of
our businesses if we fail to comply with its rules, regulations
and corrective orders, including the rules restricting
beneficial ownership and control or any violation of the
conditions of our licenses. Alternatively, in lieu of suspension
of our business, the KCC may levy a monetary penalty of up to 3%
of the average of our annual revenue for the preceding three
fiscal years. The revocation of our cellular licenses,
suspension of our business or imposition of monetary penalties
by the KCC could have a material adverse effect on our
business. We believe we are currently in compliance with the
material terms of all our cellular licenses.
We are
subject to additional regulations as a result of our dominant
market position in the wireless telecommunications sector, which
could harm our ability to compete effectively.
The KCCs policy is to promote competition in the Korean
telecommunications markets through measures designed to prevent
a dominant service provider in a telecommunications market from
exercising its market power to prevent the emergence and
development of viable competitors. We are currently designated
by the KCC as the market dominant service provider
in respect of our wireless telecommunications business. As such,
we are subject to additional regulations to which certain of our
competitors are not subject. For example, under current
Government regulations, we must obtain prior approval from the
KCC to change our existing rates or introduce new rates while
our competitors may generally change their rates or introduce
new rates at their discretion. See Item 4.B. Business
Overview Law and Regulation Competition
Regulation Rate Regulation. We could also be
required by the KCC to charge higher usage rates than our
competitors for future services. In addition, we were required
to introduce number portability earlier than our competitors,
KTF and LGT. The MIC also awarded the IMT-2000 license to
provide 3G services to LGT at a fee lower than our license fee
and on terms generally more favorable than the terms of our
license.
We qualify as a market-dominating business entity
under the Fair Trade Act. The Fair Trade Commission of Korea, or
the FTC, approved our acquisition of Shinsegi on various
conditions, one of which was that our and Shinsegis
combined market share of the wireless telecommunications market,
based on numbers of subscribers, be less than 50% as of
June 30, 2001. In order to satisfy this condition, we
reduced the level of our subscriber activations and adopted more
stringent involuntary subscriber deactivation policies beginning
in 2000 and ceased accepting new subscribers from April 1,
2001 through June 30, 2001. While we are no longer subject
to any market share limitations, our strategy is to maintain our
market share at the current levels. We can give no assurance
that the Government will not impose restrictions on our market
share in the future or that we will not undertake to voluntarily
restrict our market share in the future. If we are subject to
market share limitations in the future, our ability to compete
effectively will be impeded.
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The additional regulation to which we are subject has affected
our competitiveness in the past and may materially hurt our
profitability and impede our ability to compete effectively
against our competitors in the future.
Concerns
that radio frequency emissions may be linked to various health
concerns could adversely affect our business and we could be
subject to litigation relating to these health
concerns.
In the past, allegations that serious health risks may result
from the use of wireless telecommunications devices or other
transmission equipment have adversely affected share prices of
some wireless telecommunications companies in the United States.
We cannot assure you that these health concerns will not
adversely affect our business. Several class action and personal
injury lawsuits have been filed in the United States against
several wireless phone manufacturers and carriers, asserting
product liability, breach of warranty and other claims relating
to radio transmissions to and from wireless phones. Certain of
these lawsuits have been dismissed. We could be subject to
liability or incur significant costs defending lawsuits brought
by our subscribers or other parties who claim to have been
harmed by or as a result of our services. In addition, the
actual or perceived risk of wireless telecommunications devices
could have an adverse effect on us by reducing our number of
subscribers or our usage per subscriber.
Korea
is our most important market, and our current business and
future growth could be materially and adversely affected if
economic conditions in Korea deteriorate.
We are incorporated in Korea and a significant portion of our
operations is based in Korea. As a result, we are subject to
political, economic, legal and regulatory risks specific to
Korea. Recent difficulties affecting the U.S. and global
financial sectors, adverse conditions and volatility in the
U.S. and worldwide credit and financial markets,
fluctuations in oil and commodity prices and the general
weakness of the U.S. and global economies have increased
the uncertainty of global economic prospects in general and have
adversely affected the global and Korean economies. Any future
deterioration of the Korean and global economy could adversely
affect our business, financial condition, results of operations
and cash flows.
Developments that could have an adverse impact on Koreas
economy include:
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continuing difficulties in the housing and financial sectors in
the United States and elsewhere and the resulting adverse
effects on the global financial markets;
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adverse changes or volatility in foreign currency reserve
levels, commodity prices (including oil prices), exchange rates
(including fluctuation of the U.S. dollar or Japanese yen
exchange rates or revaluation of the Chinese renminbi), interest
rates and stock markets;
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substantial decreases in the market prices of Korean real estate;
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increasing delinquencies and credit defaults by consumer and
small and medium sized enterprise borrowers;
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declines in consumer confidence and a slowdown in consumer
spending;
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adverse developments in the economies of countries that are
important export markets for Korea, such as the United States,
Japan and China, or in emerging market economies in Asia or
elsewhere;
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the continued emergence of the Chinese economy, to the extent
its benefits (such as increased exports to China) are outweighed
by its costs (such as competition in export markets or for
foreign investment and the relocation of the manufacturing base
from Korea to China);
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social and labor unrest;
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a decrease in tax revenues and a substantial increase in the
Governments expenditures for fiscal stimulus measures,
unemployment compensation and other economic and social programs
that, together, would lead to an increased government budget
deficit;
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financial problems or lack of progress in the restructuring of
Korean conglomerates, other large troubled companies, their
suppliers or the financial sector;
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loss of investor confidence arising from corporate accounting
irregularities and corporate governance issues at certain Korean
conglomerates;
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the economic impact of any pending or future free trade
agreements, including the Free Trade Agreement recently
negotiated with the United States;
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geo-political uncertainty and risk of further attacks by
terrorist groups around the world;
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the recurrence of severe acute respiratory syndrome, or SARS, or
an outbreak of avian flu in Asia and other parts of the world;
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deterioration in economic or diplomatic relations between Korea
and its trading partners or allies, including deterioration
resulting from trade disputes or disagreements in foreign policy;
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political uncertainty or increasing strife among or within
political parties in Korea;
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hostilities involving oil producing countries in the Middle East
and any material disruption in the supply of oil or increase in
the price of oil; and
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an increase in the level of tension or an outbreak of
hostilities between North Korea and Korea or the
United States.
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Disruptions
in global credit and financial markets and the resulting
governmental actions around the world could have a material
adverse impact on our business and the ability to meet our
funding needs, and could cause the market value of the common
shares and ADSs to decline.
Global credit markets have been experiencing difficulties and
volatility since the second half of 2008. The market uncertainty
that started from the U.S. residential market further
expanded to other markets such as those for leveraged finance,
collateralized debt obligations and other structured products.
These developments have resulted in significant contraction,
de-leveraging and reduced liquidity in the global credit
markets, as well as bankruptcy or acquisition of, and government
assistance to, several major U.S. and European financial
institutions, beginning with the bankruptcy filing of Lehman
Brothers in September 2008. In response to such developments,
legislators and financial regulators in the United States and
other jurisdictions, including Korea, have implemented a number
of policy measures designed to add stability to financial
markets. However, the overall impact of these legislative and
regulatory efforts on the global financial markets is uncertain,
and they may not have the intended stabilizing effects. The
U.S. Securities and Exchange Commission, other regulators,
self-regulatory organizations and exchanges are authorized to
take extraordinary actions in the event of market emergencies,
and may effect changes in law or interpretations of existing
laws.
We are exposed to risks related to changes in the global and
Korean economic environments, changes in interest rates and
instability in the global financial markets. As liquidity and
credit concerns and volatility in the global financial markets
increased significantly, the value of the Won relative to the
Dollar has depreciated at an accelerated rate. Such depreciation
of the value of the Won may adversely affect our business. See
Depreciation of the value of the Won against
the Dollar and other major foreign currencies may have a
material adverse effect on our results of operations and the
market value of the common shares and ADSs. Furthermore,
as a result of adverse global and Korean economic conditions,
there has been a significant overall decline and continuing
volatility in securities prices of Korean companies, including
ours, which may result in trading and valuation losses on our
trading and investment securities portfolio. The Korea Stock
Price Index declined from 1,852.0 on May 30, 2008 to
1,363.8 on June 24, 2009. In addition, recent increases in
credit spreads, as well as limitations on the availability of
credit resulting from heightened concerns about the stability of
the markets generally and the strength of counterparties
specifically have led many lenders and institutional investors
to reduce or cease providing funding to borrowers, which may
negatively impact our liquidity and results of operation. Major
market disruptions and the current adverse changes in market
conditions and regulatory climate may further impair our ability
to meet our desired funding needs. We cannot predict how long
the current market conditions will last. These recent and
developing economic and governmental factors may have a material
adverse effect on our business and the ability to meet our
funding needs, as well as negatively affect the market prices of
the common shares and ADSs.
17
Depreciation
of the value of the Won against the Dollar and other major
foreign currencies may have a material adverse effect on our
results of operations and the market value of the common shares
and ADSs.
During the period from January 2, 2008 through
June 19, 2009, the value of the Won relative to the
U.S. dollar declined by approximately 26%, due primarily to
adverse economic conditions resulting from liquidity and credit
concerns and volatility in the global credit and financial
markets and repatriations by foreign investors of their
investments in the Korean stock market. For historical exchange
rate information, see Item 3.A. Selected Financial
Data Exchange Rate.
Substantially all of our revenues are denominated in Won.
Depreciation of the Won may materially affect our results of
operations because, among other things, it causes:
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an increase in the amount of Won required by us to make interest
and principal payments on our foreign currency-denominated debt,
which accounted for approximately 23% of our total consolidated
long-term debt, including current portion, as of
December 31, 2008; and
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an increase, in Won terms, of the costs of equipment that we
purchase from overseas sources which we pay for in Dollars or
other foreign currencies.
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Fluctuations in the exchange rate between the Won and the Dollar
will affect the Dollar equivalent of the Won price of the shares
of our common stock on the KRX KOSPI Market of the Korea
Exchange, or the KRX KOSPI Market. These fluctuations also will
affect:
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the amounts a registered holder or beneficial owner of ADSs will
receive from the ADR depositary in respect of dividends, which
will be paid in Won to the ADR depositary and converted by the
ADR depositary into Dollars;
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the Dollar value of the proceeds that a holder will receive upon
sale in Korea of the common shares; and
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the secondary market price of the ADSs.
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Increased
tensions with North Korea could have an adverse effect on us and
the market value of the common shares and ADSs.
Relations between Korea and North Korea have been tense
throughout Koreas modern history. The level of tension
between the two Koreas has fluctuated and may increase abruptly
as a result of current and future events. In recent years, there
have been heightened security concerns stemming from North
Koreas nuclear weapons and long-range missile programs and
increased uncertainty regarding North Koreas actions and
possible responses from the international community. In December
2002, North Korea removed the seals and surveillance equipment
from its Yongbyon nuclear power plant and evicted inspectors
from the United Nations International Atomic Energy Agency. In
January 2003, North Korea renounced its obligations under the
Nuclear Non-Proliferation Treaty. Since the renouncement, Korea,
the United States, North Korea, China, Japan and Russia have
held numerous rounds of six party multi-lateral talks in an
effort to resolve issues relating to North Koreas nuclear
weapons program.
In addition to conducting test flights of long-range missiles,
North Korea announced in October 2006 that it had successfully
conducted a nuclear test, which increased tensions in the region
and elicited strong objections worldwide. In response, the
United Nations Security Council passed a resolution that
prohibits any United Nations member state from conducting
transactions with North Korea in connection with any large scale
arms and material or technology related to missile development
or weapons of mass destruction and from providing luxury goods
to North Korea, imposes an asset freeze and travel ban on
persons associated with North Koreas weapons program, and
calls upon all United Nations member states to take cooperative
action, including through inspection of cargo to or from North
Korea. In response, North Korea agreed in February 2007 at the
six-party talks to shut down and seal the Yongbyon nuclear
facility, including the reprocessing facility, and readmit
international inspectors to conduct all necessary monitoring and
verifications. In June 2008, North Korea demolished the cooling
tower at its main reactor complex in Yongbyon. After reaching an
agreement with North Korea on a series of measure to verify
North Koreas efforts in dismantling its nuclear
program, the United States provisionally rescinded the
designation
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of the North Korea as a State Sponsor of Terrorism, effective
from October 11, 2008. However, on April 5, 2009,
North Korea launched a long-range rocket over the Pacific Ocean,
claiming that the launch intended to put an orbital satellite
into space. The United States Northern Command issued a
statement that North Koreas long-range rocket flew over
Japan, with its payload landing in the Pacific Ocean. On
April 13, 2009, the United Nations Security Council
unanimously passed a resolution that condemned North Korea for
the launch and decided to tighten sanctions against North Korea.
In response, North Korea announced on April 14, 2009 that
it would permanently pull out of nuclear disarmament talks and
restart its nuclear program. On May 25, 2009, North Korea
announced that it had successfully conducted a second nuclear
test and test-fired three short-range, surface-to-air missiles.
In response, the United Nations Security Council unanimously
passed a resolution on June 12, 2009 that condemned North
Korea for the nuclear test and tightened sanctions against North
Korea.
There can be no assurance that the level of tension on the
Korean peninsula will not escalate in the future. Any further
increase in tensions, which may occur, for example, if North
Korea experiences a leadership crisis, high-level contacts break
down or military hostilities occur, could have a material
adverse effect on our operations and the market value of the
common shares and ADSs.
If SK
Holdings causes us to breach the foreign ownership limitations
on shares of our common stock, we may experience a change of
control.
There is currently a 49% limit on the aggregate foreign
ownership of our issued shares. Under an amendment to the
Telecommunications Business Act, which became effective in May
2004, a Korean entity, such as SK Holdings, is deemed to be a
foreign entity if its largest shareholder (determined by
aggregating the shareholdings of such shareholder and its
related parties) is a foreigner and such shareholder (together
with the shareholdings of its related parties) holds 15% or more
of the issued voting stock of the Korean entity. As of
March 31, 2009, SK Holdings owned 18,748,452 shares of
our common stock, or approximately 23.22%, of our issued shares.
If SK Holdings were considered to be a foreign shareholder, then
its shareholding in us would be included in the calculation of
our aggregate foreign shareholding and our aggregate foreign
shareholding (based on our foreign ownership level as of
March 31, 2009, which we believe was 45.95%) would exceed
the 49% ceiling on foreign shareholding. As of March 31,
2009, a foreign investment fund and its related parties
collectively held a 2.11% stake in SK Holdings. We could breach
the foreign ownership limitations if the number of shares of our
common stock or ADSs owned by other foreign persons
significantly increases.
If our aggregate foreign shareholding limit is exceeded, the KCC
may issue a corrective order to us, the breaching shareholder
(including SK Holdings if the breach is caused by an increase in
foreign ownership of SK Holdings) and the foreign
investment fund and its related parties who own in the aggregate
15% or more of SK Holdings. Furthermore, if SK Holdings is
considered a foreign shareholder, it may not exercise its voting
rights with respect to the shares held in excess of the 49%
ceiling, which may result in a change in control of us. In
addition, the KCC may refuse to grant us licenses or permits
necessary for entering into new telecommunications businesses
until our aggregate foreign shareholding is reduced to below
49%. If a corrective order is issued to us by the KCC arising
from the violation of the foregoing foreign ownership limit, and
we do not comply within the prescribed period under such
corrective order, the KCC may:
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revoke our business license;
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suspend all or part of our business; or
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if the suspension of business is deemed to result in significant
inconvenience to our customers or to be detrimental to the
public interest, impose a one-time administrative penalty of up
to 3% of the average of our annual revenue for the preceding
three fiscal years.
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The amendment to the Telecommunications Business Act in May 2004
also authorizes the KCC to assess monetary penalties of up to
0.3% of the purchase price of the shares for each day the
corrective order is not complied with, as well as a prison term
of up to one year and a penalty of Won 50 million. For a
description of further actions that the KCC could take, see
Item 4.B. Business Overview Law and
Regulation Foreign Ownership and Investment
Restrictions and Requirements.
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If our
convertible notes are converted by foreign holders and the
conversion would cause a violation of the foreign ownership
restrictions of the Telecommunications Business Act, or in
certain other circumstances, we may sell common stock in order
to settle the converting holders conversion rights in cash
in lieu of delivering common stock or ADSs to them, and these
sales might adversely affect the market price of our common
stock or ADSs.
In April 2009, we sold US$332.528 million in 1.75%
convertible notes due 2014. As of May 31, 2009, these
convertible notes were convertible by the holders into shares of
our common stock at the rate of Won 230,010 per share. These
notes are held principally by foreign holders. If (1) the
exercise by the holder of the conversion right would be
prohibited by Korean law or we reasonably conclude that the
delivery of common stock or ADSs upon conversion of these notes
would result in a violation of applicable Korean law or
(2) we do not have a sufficient number of shares of our
common stock to satisfy the conversion right, then we will pay a
converting holder a cash settlement payment. In such situations,
we may sell such number of treasury shares held in trust for us
that corresponds to the number of shares of common stock that
would have been deliverable in the absence of the 49% foreign
shareholding restrictions imposed by the Telecommunications
Business Act or other legal restrictions. The number of shares
sold in these circumstances might be substantial. We cannot
assure you that such sales would not adversely affect the market
prices of our common stock or ADSs.
Sales
of our shares by SK Holdings, POSCO and/or other large
shareholders may adversely affect the market value of the common
shares and ADSs.
Sales of substantial amounts of shares of our common stock, or
the perception that such sales may occur, could adversely affect
the prevailing market price of the shares of our common stock or
ADSs or our ability to raise capital through an offering of our
common stock.
As of December 31, 2008, SK Holdings owned 23.09% and POSCO
owned 2.88% of our issued common stock, respectively. Neither of
them has agreed to any restrictions on its ability to dispose of
our shares. See Item 7.A. Major Shareholders.
We can make no prediction as to the timing or amount of any
sales of our common stock. We cannot assure you that future
sales of shares of our common stock, or the availability of
shares of our common stock for future sale, will not adversely
affect the market prices of the shares of our common stock or
ADSs prevailing from time to time.
Koreas
legislation allowing class action suits related to securities
transactions may expose us to additional litigation
risk.
The Securities-related Class Action Act of Korea enacted in
January 2004 allows class action suits to be brought by
shareholders of companies (including us) listed on the KRX KOSPI
Market for losses incurred in connection with purchases and
sales of securities and other securities transactions arising
from (i) false or inaccurate statements provided in the
registration statements, prospectuses, business reports and
audit reports and omission of material information in such
documents; (ii) insider trading; (iii) market
manipulation and (iv) unfair trading. This law permits 50
or more shareholders who collectively hold 0.01% of the shares
of a company to bring a class action suit against, among others,
the issuer and its directors and officers. It is uncertain how
the courts will apply this law. Litigation can be time-consuming
and expensive to resolve, and can divert management time and
attention from the operation of a business. We are not aware of
any basis under which such suit may be brought against us, nor
are any such suits pending or threatened. Any such litigation
brought against us could have a material adverse effect on our
business, financial condition and results of operations.
If an
investor surrenders his ADSs to withdraw the underlying shares,
he may not be allowed to deposit the shares again to obtain
ADSs.
Under the deposit agreement, holders of shares of our common
stock may deposit those shares with the ADR depositarys
custodian in Korea and obtain ADSs, and holders of ADSs may
surrender ADSs to the ADR depositary and receive shares of our
common stock. However, under the terms of the deposit agreement,
as amended, the depositary bank is required to obtain our prior
consent to any such deposit if, after giving effect to such
deposit, the total number of shares of our common stock
represented by ADSs, which was 17,942,962 shares as of
June 1, 2009,
20
exceeds a specified maximum, subject to adjustment under certain
circumstances. In addition, the depositary bank or the custodian
may not accept deposits of our common shares for issuance of
ADSs under certain circumstances, including (1) if it has
been determined by us that we should block the deposit to
prevent a violation of applicable Korean laws and regulations or
our articles of incorporation or (2) if a person intending
to make a deposit has been identified as a holder of at least 3%
of our common stock. See Item 10.B. Memorandum and
Articles of Incorporation Description of American
Depositary Shares. It is possible that we may not give the
consent. Consequently, an investor who has surrendered his ADSs
and withdrawn the underlying shares may not be allowed to
deposit the shares again to obtain ADSs.
An
investor in our ADSs may not be able to exercise preemptive
rights for additional shares and may suffer dilution of his
equity interest in us.
The Korean Commercial Code and our articles of incorporation
require us, with some exceptions, to offer shareholders the
right to subscribe for new shares in proportion to their
existing ownership percentage whenever new shares are issued. If
we offer any rights to subscribe for additional shares of our
common stock or any rights of any other nature, the ADR
depositary, after consultation with us, may make the rights
available to an ADS holder or use reasonable efforts to dispose
of the rights on behalf of the ADS holder and make the net
proceeds available to the ADS holder. The ADR depositary,
however, is not required to make available to an ADS holder any
rights to purchase any additional shares unless it deems that
doing so is lawful and feasible and:
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a registration statement filed by us under the Securities Act is
in effect with respect to those shares; or
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the offering and sale of those shares is exempt from, or is not
subject to, the registration requirements of the Securities Act.
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We are under no obligation to file any registration statement
with respect to any ADSs. If a registration statement is
required for an ADS holder to exercise preemptive rights but is
not filed by us, the ADS holder will not be able to exercise his
preemptive rights for additional shares. As a result, ADS
holders may suffer dilution of their equity interest in us.
Short
selling of our ADSs by purchasers of securities convertible or
exchangeable into our ADSs could materially adversely affect the
market price of our ADSs.
SK Holdings, through one or more special purpose vehicles, has
engaged and may in the future engage in monetization
transactions relating to its ownership interest in us. These
transactions have included and may include offerings of
securities that are convertible or exchangeable into our ADSs.
Many investors in convertible or exchangeable securities seek to
hedge their exposure in the underlying equity securities at the
time of acquisition of the convertible or exchangeable
securities, often through short selling of the underlying equity
securities or through similar transactions. Since a monetization
transaction could involve debt securities linked to a
significant number of our ADSs, we expect that a sufficient
quantity of ADSs may not be immediately available for borrowing
in the market to facilitate settlement of the likely volume of
short selling activity that would accompany the commencement of
a monetization transaction. This short selling and similar
hedging activity could place significant downward pressure on
the market price of our ADSs, thereby having a material adverse
effect on the market value of ADSs owned by you.
A
holder of our ADSs may not be able to enforce a judgment of a
foreign court against us.
We are a corporation with limited liability organized under the
laws of Korea. Substantially all of our directors and officers
and other persons named in this document reside in Korea, and
all or a significant portion of the assets of our directors and
officers and other persons named in this document and
substantially all of our assets are located in Korea. As a
result, it may not be possible for holders of our ADSs to effect
service of process within the United States, or to enforce
against them or us in the United States judgments obtained in
United States courts based on the civil liability provisions of
the federal securities laws of the United States. There is doubt
as to the enforceability in Korea, either in original actions or
in actions for enforcement of judgments of United States courts,
of civil liabilities predicated on the United States federal
securities laws.
21
We are
generally subject to Korean corporate governance and disclosure
standards, which may differ from those in other
countries.
Companies in Korea, including us, are subject to corporate
governance standards applicable to Korean public companies,
which may differ in some respects from standards applicable in
other countries, including the United States. As a
reporting company registered with the U.S. Securities and
Exchange Commission and listed on the New York Stock Exchange,
we are, and in the future will be, subject to certain corporate
governance standards as mandated by the Sarbanes-Oxley Act of
2002. However, foreign private issuers, including us, are exempt
from certain corporate governance requirements under the
Sarbanes-Oxley Act or under the rules of the New York Stock
Exchange. There may also be less publicly available information
about Korean companies, such as us, than is regularly made
available by public or non-public companies in other countries.
Such differences in corporate governance standards and less
public information could result in corporate governance
practices or disclosures that are perceived as less than
satisfactory by investors in certain countries.
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Item 4.
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INFORMATION
ON THE COMPANY
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Item 4.A.
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History
and Development of the Company
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As Koreas first wireless telecommunications service
provider, we have a recognized history of leadership and
innovation in the domestic telecommunications sector. Today, we
remain Koreas leading wireless telecommunications services
provider and have continued to pioneer the commercial
development and implementation of state-of-the-art wireless
technologies. We have also strengthened our global
competitiveness by expanding into key overseas markets and we
continue to look outside Korea for investment and growth
opportunities. We believe we are also a leader in developing new
products and services that reflect the increasing convergence of
telecommunications technologies, as well as the growing
synergies between the telecommunications sector and other
industries.
We provide our wireless telecommunications services principally
through backbone networks using CDMA and WCDMA technology. These
networks are, collectively, accessible to approximately 99% of
the Korean population. In addition, we also provide
wireless broadband Internet access through our WiBro service.
For a more detailed description of our backbone network
infrastructure, see Digital Cellular
Network below. Our advanced and extensive wireless
telecommunications infrastructure has enabled us to offer
high-quality cellular voice transmission services at competitive
prices, as well as to develop and deploy an increasingly
sophisticated range of wireless data and multimedia products and
services, including wireless Internet services, in step with
technological advancements and growing consumer demand. We
believe our network infrastructure also provides us with a
competitive advantage in pioneering new business opportunities
created by digital convergence.
As of December 31, 2008, we had approximately
23.0 million wireless subscribers throughout Korea, of
which 21.1 million owned Internet-enabled handsets capable
of accessing our wireless Internet services. As of
December 31, 2008, our share of the Korean wireless market
was approximately 50.5%, based on number of subscribers,
according to the KCC.
In March 2008, we completed the acquisition of an additional
38.7% equity stake in SK Broadband for approximately Won 1.1
trillion, increasing our total equity interest in SK Broadband
to 43.4%. Through SK Broadband, we currently provide
broadband Internet access service and other Internet-related
services, including
video-on-demand
and Internet protocol TV, or IP TV, services, as well as
fixed-line telephone services. As of December 31, 2008, we
had approximately 3.5 million broadband Internet access
subscribers and 2.1 million fixed-line telephone
subscribers.
On June 19, 2009, we had a market capitalization of
approximately Won 14.1 trillion (US$11.1 billion, as
translated at the noon buying rate of June 19,
2009) or approximately 1.96% of the total market
capitalization on the KRX KOSPI Market, making us the
9th largest company listed on the KRX KOSPI Market based on
market capitalization on that date. Our ADSs, each representing
one-ninth of one share of our common stock, have traded on the
New York Stock Exchange since June 27, 1996.
22
We established our telecommunications business in March 1984
under the name of Korea Mobile Telecommunications Co., Ltd.
We changed our name to SK Telecom Co., Ltd., effective
March 21, 1997. In January 2002, we merged with Shinsegi,
which was then the third-largest wireless telecommunications
service provider in Korea. Our registered office is at SK
T-Tower, 11, Euljiro 2-ga, Jung-gu, Seoul
100-999,
Korea and our telephone number is
82-2-6100-2114.
Korean
Telecommunications Industry
Established in March 1984, we became the first wireless
telecommunications service provider in Korea. We remained the
sole provider of wireless telecommunications services until
April 1996, when Shinsegi commenced cellular service. The
Government began to introduce competition into the fixed-line
and wireless telecommunications services markets in the early
1990s. During this period, the Government allowed new
competitors to enter the fixed-line sector, sold a controlling
stake in us to the SK Group, and granted a cellular license to
our first competitor, Shinsegi. In October 1997, three
additional companies, KTF, LGT, and Hansol PCS, began providing
wireless services under Government licenses granting them the
right to provide wireless telecommunications services.
In 2000 and 2001, the Korean wireless telecommunications market
experienced significant consolidation. In January 2002, Shinsegi
was merged into us. Additionally, two of the other wireless
telecommunications services operators merged. See
Item 4.B. Business Overview
Competition. Thus, there are currently three providers of
wireless voice telecommunications services in Korea, our
company, KT Corporation (into which KTF recently merged) and
LGT. According to the KCC, as of December 31, 2008, we had
50.5% market share of the Korean wireless telecommunications
market in terms of number of subscribers, while KTF and LGT had
market shares of 31.5% and 18.0%, respectively. Furthermore, in
June 2009, KTF merged into KT Corporation, which had held a
54.25% interest in KTF before the merger.
In December 2000, the MIC awarded to two companies the right to
receive a license to provide 3G services using WCDMA, an
extension of the Global System for Mobile Communication standard
for wireless telecommunications, which is the most widely used
wireless technology globally. These rights were awarded to two
consortia of companies, one led by our former subsidiary, SK IMT
Co., Ltd., and the other to a consortium that included KT
Corporation. SK IMT Co., Ltd. was merged into us on May 1,
2004. The right to acquire an additional license to operate a
network using CDMA2000 technology was awarded to LGT in August
2001, but was later revoked in July 2006.
A one-way mobile number portability, or MNP, system was first
implemented in the beginning of January 2004 when our
subscribers were allowed to transfer to KTF and LGT. From July
2004, a two-way MNP was implemented so that KTF subscribers
could transfer to us and LGT. A three-way MNP has been in effect
since January 2005 so that subscribers from each of the wireless
service providers may transfer to any other wireless service
provider. During 2006, 2007 and 2008, approximately
2.9 million, 3.4 million and 3.0 million,
respectively, of our subscribers migrated to our competitors.
Approximately 0.8 million, 1.1 million and
0.6 million of LGTs subscribers in 2006, 2007 and
2008, respectively, and approximately 2.1 million,
2.3 million and 2.5 million in 2006, 2007 and 2008,
respectively, of KTFs subscribers migrated to our service.
In January 2005, the Government granted each of KT Corporation
and us a license to offer WiBro service. Both KT Corporation and
we are currently expanding the coverage area of WiBro services.
23
Telecommunications industry growth in Korea has been among the
most rapid in the world, with fixed-line penetration increasing
from under five lines per 100 population in 1978 to 45.5 lines
per 100 population as of December 31, 2008, and wireless
penetration increasing from 7.0 subscribers per 100 population
in 1996 to 93.8 subscribers per 100 population as of
December 31, 2008. The table below sets forth certain
subscription and penetration information regarding the Korean
telecommunications industry as of the dates indicated:
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As of December 31,
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2004
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2005
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2006
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2007
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2008
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(In thousands, except for per population amounts)
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Population of Korea(1)
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48,082
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48,294
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48,297
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48,456
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48,607
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Wireless Subscribers(2)
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36,586
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38,342
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40,197
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43,498
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45,607
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Wireless Subscribers per 100 Population
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76.1
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79.4
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83.2
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89.8
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93.8
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Telephone Lines in Service(2)
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22,871
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22,920
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23,119
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23,130
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22,132
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Telephone Lines per 100 Population
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47.6
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47.5
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47.9
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47.7
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45.5
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(1) |
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Source: National Statistical Office of Korea. |
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(2) |
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Source: KCC. |
The Korean telecommunications industry is one of the most
developed in the world in terms of wireless penetration and in
terms of the growth of wireless data services, including
wireless Internet services. The wireless penetration rate, which
is calculated by dividing the number of wireless subscribers by
the population, was 93.8% as of December 31, 2008 and the
number of wireless subscribers has increased from approximately
3.2 million in 1996 to approximately 45.6 million as
of December 31, 2008.
Since the introduction of short text messaging in 1998,
Koreas wireless data market has grown rapidly. This growth
has been driven, in part, by the rapid development of wireless
Internet service since its introduction in the second half of
1999. All of the Korean wireless operators have developed
extensive wireless Internet service portals. As of
December 31, 2008, approximately 42.7 million of
Korean wireless subscribers owned Internet-enabled handsets
capable of accessing wireless Internet services. The table below
sets forth certain penetration information regarding the number
of Internet-enabled handsets and wireless subscribers in Korea
as of the dates indicated:
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As of December 31,
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2004
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2005
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2006
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2007
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2008
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(In thousands)
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Number of Wireless Internet Enabled Handsets
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35,017
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37,202
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38,894
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41,598
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42,740
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Total Number of Wireless Subscribers
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36,586
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38,342
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40,197
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43,498
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45,607
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Penetration of Wireless Internet Enabled Handsets
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95.7
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%
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97.0
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%
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96.8
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%
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95.6
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%
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93.7
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%
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Source: KCC.
In addition to its well-developed wireless telecommunications
sector, Korea has one of the largest Internet markets in the
Asia Pacific region. According to National Internet Development
Agency of Korea, or NIDA, the number of Internet subscribers in
Korea increased from approximately 3.1 million at the end
of 1998 to approximately 35.4 million at the end of 2008,
representing a 27.6% compound annual growth rate. From the end
of 2004 to the end of 2008, the number of broadband Internet
access subscribers increased from approximately
11.9 million to approximately 15.5 million,
representing a 6.7% compound annual growth rate. The table below
sets forth certain information regarding Internet users and
broadband subscribers as of the dates indicated:
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As of December 31,
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2004
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2005
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2006
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2007
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2008
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(In thousands)
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Number of Internet Users(1)
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31,580
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33,010
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34,120
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34,820
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35,360
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Number of Broadband Subscribers(2)
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11,921
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12,191
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14,043
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14,709
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15,475
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(1) |
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Source: NIDA. |
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(2) |
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Source: KCC. Includes subscribers accessing Internet service
using digital subscriber line, or xDSL, connections; cable modem
connections; local area network, or LAN, connections; and
satellite connections. |
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Item 4.B.
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Business
Overview
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Overview
We are Koreas leading wireless telecommunications services
provider and continue to pioneer the commercial development and
implementation of state-of-the-art wireless technologies. As of
December 31, 2008, we had approximately 23.0 million
wireless subscribers and our share of the Korean wireless market
was approximately 50.5%, based on the number of subscribers,
according to the KCC.
We provide the following core services:
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Cellular voice services. We provide wireless
voice transmission services to our subscribers through our
backbone cellular networks and also offer wireless global
roaming services through service agreements with various foreign
wireless telecommunications service providers. (Accordingly,
while cellular voice services principally refer to
our core wireless voice transmission services, they also
comprise our wireless voice and data global roaming services.)
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Wireless data services. We also provide
wireless data transmission services, including wireless Internet
access services, which allow subscribers to access a wide range
of online digital contents and services, as well as to send and
receive text and multimedia messages, using their mobile phones.
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Broadband Internet and fixed-line telephone
services. Through our consolidated subsidiary, SK
Broadband, we provide broadband Internet access service and
other Internet-related services, including
video-on-demand
and IP TV services. Through SK Broadband, we also provide local,
domestic long-distance and international long-distance
fixed-line telephone services to residential and commercial
subscribers. We currently own a 43.4% equity interest in SK
Broadband following our acquisition of a 38.7% equity stake in
the company in March 2008.
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Digital convergence and new businesses. We
have pioneered new services that reflect the growing convergence
within the telecommunications sector, as well as between the
telecommunications sector and other industries, including
satellite digital media broadcasting, or satellite DMB, service,
which enables satellite broadcasting to mobile devices and
Telematics service, which makes use of global
positioning system, or GPS, technology.
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In addition, we actively participate in various overseas
markets, including in the United States, China and Vietnam.
We provide our wireless services through our proprietary
backbone networks based on CDMA and WCDMA technology. We also
offer wireless data transmission and wireless Internet access
services through our WiBro network. For more information on our
backbone networks, see Digital Cellular
Network.
Our
Business Strategy
We believe that trends in the Korean telecommunications industry
during the next decade will mirror those in the global market
and will be characterized by rapid technological change, reduced
regulatory barriers and increased competition. Against the
backdrop of these industry trends, we aim to enhance shareholder
value by maintaining and consolidating our leading position in
the Korean market for wireless services, including wireless
voice and data transmission services, as well as by leveraging
our competitive strengths to exploit new opportunities arising
from increasing digital convergence and the globalization of the
telecommunications market.
Our principal strategies are to:
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Enhance the technical capabilities of our wireless networks
to improve data transmission rates and service quality and to
enable us to offer an increased range of services, including in
connection with our
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development of new and advanced wireless
technologies. We believe we have the most
extensive and advanced wireless telecommunications network in
Korea and we are committed to ensuring that our delivery
platforms keep pace with the latest technological advancements.
In March 2007, we completed the nationwide build-out of our
HSDPA-capable WCDMA network. We are currently further upgrading
our WCDMA network to support HSUPA technology and expanding the
coverage area of our WiBro service. We plan to continue
upgrading and expanding our backbone network infrastructure in
line with new developments in wireless telecommunications
technology. We believe that ensuring the quality and technical
sophistication of our wireless networks will, among other
things, allow us to provide our subscribers with top-quality
service, enable us to more quickly introduce the latest wireless
telecommunications products and services and allow us to
efficiently implement new wireless technologies as market
opportunities arise.
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Offer a broad range of new and innovative wireless data
contents and services. We plan to improve the
service quality and expand the range of our wireless data
contents and services, principally through our integrated
wireless and fixed-line Internet portal, NATE, with a view to
increasing revenues from these services to complement our core
cellular revenues. In particular, we believe demand for wireless
access to entertainment-related digital contents and services,
wireless access to community and social networking platforms and
wireless access to financial-related contents and services, or
m-commerce services, will continue to grow. We
continue to actively seek partnerships with, as well as
strategic investments in, digital media content providers,
financial services providers and wireless application developers
to improve the breadth and quality of the wireless data contents
and services we offer to our subscribers.
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Leverage our extensive network infrastructure, technical
know-how and leading market position to exploit opportunities
that arise from an increasingly convergent era in
telecommunications and to pioneer new
businesses. We believe that increasing
convergence among communications technologies, as well as
between the telecommunications sector and other industries,
creates growth opportunities for incumbent telecommunications
service providers, like us, whose existing infrastructure,
know-how and extensive subscriber base provide a competitive
advantage. We further believe that digital convergence will
support demand for increasingly integrated products and
services. In March 2008, we completed the acquisition of an
additional 38.7% equity stake in SK Broadband, Koreas
second-largest fixed-line operator, for approximately Won 1.1
trillion, increasing our total equity interest in SK Broadband
to 43.4%. We hope to benefit from a range of synergies from this
acquisition, including by offering our customers bundled
fixed-line and wireless services and by creating greater
convergence opportunities across our various media platforms. We
also plan to continue to improve our existing convergence
services, such as Telematics and the satellite DMB service
operated by our subsidiary, TU Media Corp., or TU Media.
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Continue global expansion by seeking opportunities in
overseas markets. We continue to seek
opportunities to expand into various overseas markets. In light
of the highly penetrated Korean wireless market, we believe that
strategic expansion into overseas markets offers important
opportunities for future growth. We plan to leverage our
homegrown technical expertise and operational know-how to gain
entry into foreign markets particularly those with
less mature
and/or
rapidly growing wireless telecommunications sectors. To this
end, we have made selective majority and minority investments in
mobile telecommunications companies operating in key foreign
markets and formed strategic alliances with many leading
international telecommunications service providers. We have also
actively participated in regional and international cooperative
organizations to reinforce our global competencies and keep pace
with advancements in overseas telecommunications markets. In
addition, we believe that our continued expansion into
international markets will better position us to ensure that our
network technologies and wireless applications remain compatible
with emerging global standards. We believe this will provide us
with a competitive advantage as the wireless telecommunications
paradigm moves toward increasingly interconnected regional
networks responsive to growing consumer demands for seamless
universal access to wireless products and services.
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26
Our
Services
We offer wireless digital voice and data transmission services
via networks that are, collectively, accessible to approximately
99% of the Korean population. We continually upgrade and
increase the capacity of our wireless networks to keep pace with
advancements in technology, the growth of our subscriber base
and the increased usage of voice and wireless data services by
our subscribers.
We first introduced digital cellular service using CDMA
technology in January 1996 and substantially completed the
geographic build-out of our basic CDMA network in 1998. In
October 2000, we began offering 2G wireless voice and data
transmission services on our more advanced CDMA 1xRTT network,
which we then fully upgraded to the even more advanced CDMA
1xEV-DO technology, beginning in 2002. Our CDMA networks cover
84 cities nationwide, or approximately 99% of the Korean
population.
We launched WCDMA services, our 3G wireless voice and data
transmission services, in 2003. In 2005, we completed commercial
development of HSDPA technology and integrated this technology
in the subsequent build-out of our WCDMA network. HSDPA, which
represents an evolution of the WCDMA standard, is a more
advanced 3G technology than the initial WCDMA technology we
implemented and is sometimes referred to as 3.5G
technology. In March 2007, we completed nationwide expansion of
our HSDPA-capable WCDMA network, which currently reaches
approximately 99% of the Korean population. In June 2007, we
commenced a further upgrade of our WCDMA network to support
HSUPA technology, which is currently in progress. Our WCDMA
network enables significantly faster and higher-quality voice
and data transmission than our 2G networks and supports more
sophisticated wireless data transmission services, including
video telephony and other multimedia communications. We believe
these enhanced transmission capabilities may encourage increased
subscriber usage of our services.
We also began to offer wireless broadband Internet access
through our WiBro service in May 2006. A data-only transmission
technology, WiBro supports wireless data transmission at even
higher speeds than possible on our WCDMA network. We believe
that our WiBro service will complement our other wireless
telecommunications services by allowing us to enhance our data
transmission service options in metropolitan areas where there
is a high demand for large packet data services, particularly
wireless Internet access. We currently offer WiBro service to
hot zone areas in 42 cities in Korea and plan
to expand coverage to hot zone areas in 84 cities by the
end of 2009.
For a more complete discussion of our backbone networks, see
Digital Cellular Network below.
Cellular
Voice Services
Our cellular voice services, which comprise basic wireless voice
transmission services and related value-added
services, as well as global roaming services, remain our core
business area. We derive revenues from our cellular voice
services principally through initial subscription fees,
plan-specific monthly fees, usage fees and value-added service
fees. For a more complete description of the fees we charge, see
Revenues, Rates and Facility Deposits
below.
To complement our basic voice transmission services, in recent
years, we have begun to offer increasingly sophisticated and
differentiated subscriber-oriented value-added services made
possible due to rapid advancements in network technology. Our
most popular value-added voice-related services in 2008 included
services that provide a record of missed calls in the event a
subscribers mobile phone is engaged or switched off, known
as our Call Keeper service; services that play a
ring back melody in lieu of a conventional dial tone
when callers dial a subscribers mobile phone, known as
COLORing service, as well as COLORing services that
periodically change the default ring-back melody according to
the subscribers music category selection, known as
Auto COLORing service; and services that alert
subscribers when a dialed number that was engaged when first
dialed, is no longer engaged.
T-Roaming Services. We also offer cellular
global roaming services, branded as our T-Roaming
service, through service agreements with various foreign
wireless telecommunications service providers. Global roaming
services allow subscribers traveling abroad to make and receive
calls, often using their regular mobile phone numbers.
Subscribers using EV-DO- and WCDMA-capable handsets are able to
make and receive calls using their regular mobile phone number
without changing their handsets. In addition, we provide global
roaming service to
27
foreigners traveling to Korea. In such cases, we generally
receive a fee from the travelers local wireless service
provider.
Our global roaming service is offered in three basic
technologies, in part depending on which mobile phone standards
are available in a particular region: CDMA, GSM and WCDMA
roaming. We currently offer CDMA voice roaming services in 21
countries, including countries in Asia, North and South America,
as well as, Guam, Saipan and New Zealand; GSM voice roaming
services in 167 countries, including countries in Europe, North
America, Africa, the Middle East and Asia; and WCDMA voice
roaming services in 65 countries, including countries in Asia,
Europe, the Middle East, Africa and Australia. In addition, we
offer global data roaming services in 79 countries, including
countries in Asia, Europe, North and South America, the Middle
East and Africa. In 2008, approximately 5.4 million
subscribers utilized our global roaming services. The global
roaming service we provide to foreigners traveling to Korea is
generally WCDMA-based.
In addition, we provide interconnection service to connect our
networks to domestic and international fixed-line and other
wireless networks. See Interconnection
below.
Wireless
Data Services (including Wireless Internet
Services)
Our wireless data transmission services represent a key and
growing business area. We currently offer our subscribers
wireless data communications services, as well as wireless
access to a wide variety of digital content and services,
including Internet-based content and services. We intend to
continue to build our wireless data services as a platform for
growth, extending our portfolio of wireless data services and
developing new content for our subscribers.
SMS and MMS Services. We provide wireless data
communication services, including our basic short text message
service, or SMS, which allows subscribers to send and receive
short text messages to and from their mobile phones. SMS, which
is also known as our phone mail service, continues
to be one of our most popular data transmission services. In
addition to text-only SMS, we also offer a multimedia message
service, or MMS. MMS allows subscribers to send and receive
multimedia messages containing graphic, audio and video clips to
and from their mobile phones. While MMS is possible through our
CDMA 1xEV-DO network, the implementation of WCDMA technology has
significantly increased the quality, speed and range of our
multimedia message services.
Wireless Internet Services. In addition to our
wireless data communications services, we also offer our
subscribers wireless access to the Internet, primarily through
our NATE portal, which is our integrated wired and
wireless Internet platform that utilizes wireless application
protocol, or WAP, technology, to provide a gateway between our
cellular network and the Internet. Through our NATE portal,
subscribers can access a wide variety of multimedia contents and
interactive services, as well as send and receive email and
instant text and multimedia messages, using their mobile phones
and other wireless devices. As of December 31, 2008,
approximately 21.1 million, or 91.8%, of our subscribers
owned Internet-enabled handsets capable of accessing our
wireless Internet services.
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Wireless Entertainment and Community
Services: We offer our subscribers a wide
range of wireless entertainment-related contents and services,
primarily through content-specific portal sites that we operate,
including:
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MelOn, a music portal operated by our consolidated
subsidiary, Loen Entertainment, Inc., that provides wireless
access to a wide range of digital music contents. To aggregate
and manage our digital music contents offerings, we also operate
an integrated wireless and fixed-line MelOn website, which
subscribers can access using wireless devices, such as their
mobile phones and MP3 players, as well as fixed-line devices,
such as personal computers. As of December 31, 2008, we had
approximately 11.5 million subscribers to our MelOn service;
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Gaming Services, we offer subscribers various mobile
gaming options through our NATE portal. For example, we offer a
variety of multi-player, interactive mobile games, as well as
anime-based mobile games. In addition, we also offer 3D mobile
games that subscribers can download to mobile phones and other
wireless devices equipped with a mobile gaming-specific chip;
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28
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Cizle, a movie portal, which provides subscribers access
to a broad range of movie-related contents. As with our MelOn
service, we operate an integrated wireless and fixed-line Cizle
website, which subscribers can access using both wireless and
fixed-line devices. Subscribers can also purchase movie tickets,
learn theater schedules and purchase
video-on-demand
contents through our Cizle portal; and
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Mobile Cyworld, a wireless web community portal site,
which is a mobile version of the Cyworld community site operated
by our subsidiary, SK Communications. For a more detailed
description of the fixed-line Cyworld portal, see
Other Products and Services Other
Portal Services Community Portal Service.
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Since November 2002, we have also provided our subscribers
access to multimedia content through June, a
wireless data service that provides streaming content, primarily
using our CDMA 1xEV-DO technology. Content provided through the
June service includes digital video and music downloads;
television programs, which can be viewed real-time; June
subscribers with EV-DO- or WCDMA-capable handsets can also
access the Internet through NATE.
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Wireless Financial Services: We also
offer our subscribers a range of wireless finance-related
contents and m-commerce services. Our wireless financial
businesses include:
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Moneta, a financial portal that allows subscribers to use
their mobile phones to access an array of financial contents and
services relating to securities trading, insurance, real estate
and personal asset management;
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T-cash, a mobile payment technology that allows
subscribers to use their mobile phones to pay for public
transportation fares in lieu of cash payment or pre-paid
transportation cards and to make payments at certain affiliated
stores. T-cash requires a WCDMA-capable handset with a built-in
universal subscriber identity module, or USIM, card;
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M-Banking, a banking portal, which provides access to
certain electronic banking services operated by participating
commercial banks, and, accordingly, enables subscribers to
perform certain banking transactions, such as account inquiries,
wire transfers and credit card payments, through their mobile
phones;
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11th Street,
an online shopping mall that links wired and wireless shopping
services; and
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Gifticon, a service that allows users to pay for and give
gifts using their mobile phone. Payments are settled wirelessly
and recipients are notified of their gifts by instant messaging
or via our NATE data service.
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Wireless News and Search
Services: We offer our subscribers a
range of wireless news and search services, including access to
domestic and international news content, dictionary resources
and real-time weather information. Subscribers can also search
for and purchase books, DVDs, CDs and lottery tickets, as well
as download discount coupons for use at offline stores.
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Broadband
Internet and Fixed-line Telephone Services
In March 2008, we completed the acquisition of an additional
38.7% equity stake in SK Broadband for approximately Won 1.1
trillion, increasing our total equity interest in SK Broadband
to 43.4%. Through SK Broadband, we currently provide
broadband Internet access service and other Internet-related
services, including
video-on-demand
and IP TV services, as well as fixed-line telephone services.
SK Broadband is the second largest provider of broadband
Internet access services in Korea in terms of both revenue and
subscribers and its network currently covers 80% of households
in Korea. Its fixed-line telephone services comprise local,
domestic long distance, international long distance and voice
over Internet Protocol, or VoIP, services. VoIP is an advanced
technology that transmits voice data through an Internet
Protocol network. SK Broadband has offered
video-on-demand
services since 2006 and has rolled out real-time IP TV services
since January 2009. For the year ended December 31, 2008,
SK Broadband had revenues of Won 1,861.4 billion and net
loss of Won 98.8 billion.
29
As of December 31, 2008, SK Broadband had approximately
3.5 million broadband Internet access subscribers. Its
market share of Korean broadband Internet access subscribers was
approximately 23%. Broadband Internet access services (including
revenues from
video-on-demand
services) accounted for 56% of SK Broadbands revenues for
the year ended December 31, 2008.
As of December 31, 2008, SK Broadband had 2.1 million
fixed-line telephone subscribers. Since the nationwide
implementation of fixed line number portability on
August 1, 2004, SK Broadband has been expanding the
coverage and subscriber base with its integrated services of
long distance and international telephony as well as VoIP
services. Fixed-line telephone services accounted for 30% of SK
Broadbands revenues for the year ended December 31,
2008.
Digital
Convergence and New Businesses
Digital convergence is the new paradigm in telecommunications.
While we acknowledge the increasing equivocation of conventional
industry boundaries as a potential threat, given the entrance of
non-traditional players into the mobile communications space, we
also view convergence as significant growth opportunity. We
believe that incumbent telecommunications service providers,
like us, with existing advanced infrastructure, technical
know-how and a large subscriber base, are especially well
positioned to pioneer new convergent businesses. In
recent years, we have focused on developing cross-over services
that provide synergies with our existing business.
One of our most recent efforts to pursue new opportunities in
the convergence business area is our acquisition of an
additional 38.7% stake in SK Broadband for Won 1.1 trillion in
March 2008, increasing our total equity interest in SK Broadband
to 43.4%. We are hoping to benefit from a range of synergies
from this acquisition, including by offering our customers
bundled fixed-line and mobile telecommunications services. We
also believe the acquisition creates opportunities to aggregate
and broadcast digital content across various media platforms.
Our other convergence services include:
Satellite DMB Business. In September 2003, we
entered into an agreement with Mobile Broadcasting Corporation
for the purposes of co-owning and launching a satellite for the
satellite DMB business. Under the terms of the agreement, we
committed to fund 34.7% of the cost of launching and
maintaining the operations of the satellite. The acquisition
cost of the satellite was approximately Won 205.2 billion,
of which our portion was Won 71.2 billion. DMB technology
allows broadcasting of multimedia content through transmission
by satellite to various mobile devices. For example, DMB
technology allows users to view satellite television broadcasts
on mobile phones, portable handsets or vehicle-mounted
televisions that are enabled to receive DMB transmission. TU
Media is currently developing new convergence services that
combine wireless telecommunications technologies with
traditional broadcasting contents, advertising contents and
retail services. We believe that this business will enable us to
improve the breadth of wireless multimedia services that we
already offer and remain competitive in the face of increasing
convergence in the telecommunications and broadcasting
industries.
We launched a satellite DMB in March 2004. In October 2004, we
granted the right to use the satellite DMB to our
then-affiliate, TU Media. TU Media began to provide commercial
satellite DMB services in May 2005 and today remains
Koreas sole operator of satellite digital mobile
broadcasting services. TU Media currently offers a range of
broadcast content including education, games, drama, music, news
and culture over more than 35 channels, including TUBOX, a
pay-per-view
movie channel that broadcasts movies before their DVD release.
As of December 31, 2008, TU Media had more than
1.8 million subscribers.
In February 2007, we purchased 4,615,798 new shares of TU Media
for Won 32.4 billion, increasing our equity interest from
29.6% as of December 31, 2006 to 32.7%. Following this
equity investment, TU Media became our consolidated subsidiary.
In March 2008, we made an additional Won 55.0 billion
capital contribution to TU Media, increasing our equity interest
to 44.2%. We are currently TU Medias largest shareholder.
Telematics Service. In February 2002, we
introduced a Telematics service called T-Map Navigation.
T-Map Navigation
is an interactive navigation service that uses GPS technology
and our NATE platform to transmit driving directions, real-time
traffic updates and emergency rescue assistance to wireless
devices, including vehicle-mounted devices and portable handsets.
30
We believe that Telematics also creates opportunities for
synergy between mobile telecommunications and other industries.
Under an agreement entered into in April 2002 with Renault
Samsung Motors and Samsung Electronics, we are co-developing a
customized Telematics system for use in Renault Samsung
vehicles. The implementation of more advanced 3G transmission
technologies has also facilitated the increased integration of
our wireless platforms customized for vehicular use and, in
particular, created synergies between our Telematics services
and satellite DMB broadcasting services. We offer bundled
Telematics and satellite DMB broadcasting services through a
single, integrated vehicle-mounted device.
Global
Business
We actively participate in various overseas markets,
particularly in the United States, China and Vietnam. We
continue to seek opportunities to expand our global business,
primarily through joint ventures and other strategic alliances
with local partners.
Our global business strategy is to focus primarily on those
regions in which we have already made strategic investments.
However, we will also continue to study new opportunities for
expansion into new regions abroad.
United States. On March 24, 2005, we and
EarthLink Inc., a major Internet services provider in the
United States, completed the formation of HELIO, LLC, a
Delaware limited liability company, to provide wireless voice
and data services in the United States. Together with our joint
venture partner, EarthLink Inc., we made a combined investment
in HELIO of US$440 million in cash and non-cash assets. In
2007 and the first half of 2008, we made additional equity
contributions of US$160 million, in aggregate, to HELIO.
In August 2008, together with EarthLink Inc., we sold our equity
interest in HELIO to Virgin Mobile USA, Inc., a provider of
wireless communications services in the United States that was
founded as a joint venture between Sprint Nextel and the Virgin
Group, in exchange for limited partnership units of Virgin
Mobile USA, L.P. (Virgin Mobile USA, Inc.s operating
company), equivalent to 11 million shares of Virgin Mobile
USA, Inc.s Class A common stock (valued at
approximately US$31 million at the time of sale). In
connection with the sale of HELIO, we and the Virgin Group each
invested US$25 million of equity capital in Virgin Mobile
USA, Inc. in exchange for mandatory convertible preferred stock,
convertible into Virgin Mobile USA, Inc.s Class A
common stock. The preferred shares carry a four-year maturity
and a 6% annual dividend. Subject to the approval by Virgin
Mobile USA, Inc.s shareholders, each share of the
preferred stock will be mandatorily convertible into Virgin
Mobile USA, Inc.s Class A common stock, at the
earlier of (i) August 22, 2012 and (ii) such time
as the market price of the Class A common stock exceeds
$8.50 per share. Subject to the approval by Virgin Mobile USA,
Inc.s shareholders, the preferred stock will also be
convertible at the option of the holder on or after
February 22, 2010, 18 months after the date of
issuance. Should Virgin Mobile USA, Inc. fail to obtain its
shareholders approval of the conversion feature, the
preferred stock will be mandatorily redeemed on August 22,
2012 at a cash redemption price equal to the stated value of
$1,000 per share. In December 2008, we exchanged all of our
limited partnership units of Virgin Mobile USA, L.P. for
approximately 11 million shares of Virgin Mobile USA,
Inc.s Class A common stock. We currently hold a
14.05% interest in Virgin Mobile USA, Inc., which would increase
to 16.6% if all of Virgin Mobile USA, Inc.s preferred
shares that we own are converted into Class A common stock.
Virgin Mobile USA, Inc. is a mobile virtual network operator,
commonly referred to as an MVNO, offering prepaid, or
pay-as-you-go, and, following the acquisition of HELIO, postpaid
wireless communications services, including voice, data, and
entertainment content, without owning a wireless network. It
offers its services over the nationwide wireless network owned
by Sprint Nextel. As of December 31, 2008, Virgin Mobile
USA, Inc. served approximately 5.4 million customers.
Since December 2004, we have been offering our COLORing solution
to Verizon Wireless, a major mobile phone service provider in
the United States. As an application service provider, we
receive an agreed percentage of Verizons COLORing service
related revenues.
China. In February 2004, we and China Unicom,
the second largest telecom operator and the only
CDMA-based
telecommunications service provider in China, established a
joint venture company called UNISK Information Technology
Co., Ltd., with an aggregate initial investment of approximately
US$6 million. We own a 49% stake of UNISK and China Unicom
holds a 51% stake. UNISK offers wireless Internet service in
China
31
under a brand name that means community of young
elites in Chinese. In addition, on July 5, 2006, we
purchased US$1 billion in aggregate principal amount of
zero coupon convertible bonds issued by China Unicom,
convertible into common shares of China Unicom. In August 2007,
we converted such bonds into shares representing a 6.6% equity
interest in China Unicom to become China Unicoms
second-largest shareholder. In October 2008, China Unicom merged
with China Netcom Group Corporation (Hong Kong) Limited, a
leading broadband communications and fixed-line
telecommunications operator in China. As a result of the merger,
our equity interest in China Unicom, which is the surviving
entity after the merger, decreased to 3.8% from 6.6%.
In July 2004, we, through our subsidiary
U-Land
Company Ltd., acquired ViaTech, an Internet portal service and
mobile contents provider in China, to enhance our wireless
Internet contents and expand our service area. Through ViaTech,
we offer a
Chinese-language
version of Cyworld to users in China. ViaTech had more than
8 million registered users of Cyworld as of
December 31, 2008.
In August 2006, we entered into a memorandum of understanding
with Chinas National Development and Reform Commission to
assist China develop TD-SCDMA technology, Chinas 3G
standard. To support joint research and development in 3G
multimedia services, value-added services and development of the
TD- SCDMA network, we and the Chinese government established a
research and development center in Beijing in February 2007. To
further facilitate the commercialization and implementation of
TD-SCDMA, we also opened a
TD-SCDMA
test center in Bundang, Korea in April 2007.
In February 2008, we, through our wholly-owned Chinese
subsidiary, SK Telecom China Holding Company, invested
US$15.6 million to acquire a 65.5% equity interest in
Shenzhen
E-eye High
Tech Co., Ltd., a global positioning system service company in
China. We believe the acquisition of Shenzhen
E-eye High
Tech will allow us to leverage opportunities created by the
rapidly growing telematics market in China.
In March 2008, we acquired a 42.2% equity interest in TR Music,
a major record label in China, for US$10.7 million. In
addition, in May 2008 we invested US$7.8 million to acquire
a 30.0% equity interest in Magic Tech Network, a Hong Kong
company that develops and publishes online games in China.
Vietnam. With a wireless telecommunications
service penetration rate of 73% as of December 31, 2008, we
believe that the Vietnamese mobile communication market offers
significant opportunity for future growth. In July 2003, our
subsidiary, SKT Vietnam PTE Ltd., entered into a business
cooperation contract with Saigon Post &
Telecommunication Services Corporation to establish a joint
venture company, S-Telecom, to provide mobile telecommunications
services and commercial CDMA service, the first of its kind in
Vietnam, under the brand name S-Fone. Pursuant to
such contract, in the event that the cash inflow for the
business is insufficient to cover the cash outflow necessary to
cover the expenditures necessary to operate the business, SKT
Vietnam and Saigon Post & Telecommunication Services
Corporation have agreed to equally contribute the necessary
working capital. We held a 73.3% equity interest in SKT Vietnam
as of December 31, 2008.
In December 2005, SKT Vietnam began expanding the CDMA network
to all of Vietnam in order to meet the needs of a growing
subscriber base. By September 2006, network coverage was
expanded to cover all 64 provinces, including Ho Chi Min and
Hanoi. S-Fone had approximately 6.4 million subscribers as
of December 31, 2008 and had a 10.3% market share according
to Vietnams Ministry of Posts and Telematics, based on the
number of wireless subscribers in Vietnam, as of such date.
Mongolia. In July 1999, we acquired a 27.8%
equity interest in Skytel Co., Ltd., Mongolias
second-largest cellular service provider, by providing
approximately Won 1.5 billion worth of analog
infrastructure. We, together with Skytel, have been providing
cellular service in Mongolia since July 1999, and CDMA service
since February 2001. In April 2001, we completed installation of
the equipment necessary to provide WAP service. In December
2002, we increased our equity interest in Skytel to 28.6%
through the subscription of newly issued common shares in return
for an additional investment of approximately US$500,000. As of
December 31, 2008, our equity interest in Skytel was 29.3%.
Regional and International Strategic
Alliances. We have also entered into various
strategic alliances with leading companies in the Asian and
European wireless telecommunications markets. For instance, we
are a member of the Bridge Alliance, the largest pan-Asian
alliance of its kind, which includes eleven of the regions
leading wireless service providers. In June 2007, we also signed
a memorandum of understanding with the Freemove
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Alliance, an alliance of leading European wireless service
providers, including Orange SA of France, Telecom Italia Mobile
S.p.A. of Italy,
T-Mobile
International AG & Co. AG of Germany and Teliasonera
Mobile Networks AB of Sweden, for the development of expanded
WCDMA-based roaming service in Europe. We plan to continue
improving customer service as well as service quality, by
developing co-marketing programs and other joint projects with
our regional and global partners and by further fostering our
regional and international alliances.
Provision of Wireless Internet Platforms and Cellular Network
Solutions to Foreign Cellular Network
Operators. We have also sought to expand our
global business through sales of our wireless Internet platforms
and cellular network solutions, as well as provision of
consulting services in the field of mobile communications. For
example, in July 2004, we entered into an agreement with TA
Orange, a GSM-based mobile communications operator in Thailand,
to provide wireless Internet platforms, including our NATE
portal platform, for US$6.3 million. We completed this
project in June 2005. In addition, we have also been successful
in exporting to other Asian countries and the United States, the
technological solutions underlying certain value-added and other
wireless services, such as our color mail solution, which is a
messaging service that allows subscribers to send messages
containing multimedia files including graphic, audio and video
clips.
Other
Products and Services
International Calling Services. Through our
90.8% owned subsidiary, SK Telink Co., Ltd., we provide
international telecommunications services, including direct-dial
as well as pre- and post-paid card calling services, bundled
services for corporate customers, voice services using Internet
protocol, Web-to-phone services, and data services. SK Telink
provides affordable international call services under the brand
name 00700 and has been offering commercial
long-distance telephony service since February 2005. SK Telink
also offers VoIP service through the Internet. SK Telink also
operates certain value-added domestic telephone services,
including a 080 service that allows companies to
establish toll-free customer service telephone
hotlines, for which all call charges would be paid by the
company, as well as a general corporate number
service that automatically routes calls made to a companys
general telephone number to the callers nearest local
branch.
Other
Portal Services.
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Fixed-line NATE portal service. Our
subsidiary, SK Communications, offers a fixed-line portal
service under our NATE brand name and at the website
www.NATE.com. NATE.com includes information and content
formerly offered under our Netsgo brand as well as the content
and services formerly available on Lycos Korea, which our
subsidiary, SK Communications Co., Ltd., acquired in 2002.
NATE.com offers a wide variety of content and services,
including an Internet search engine, as well as access to free
e-mail
accounts. SK Communications also operates NATE-ON, an instant
messaging service available to NATE users. NATE-ON allows users
to chat online using a variety of wireless, as well as wired,
devices, such as mobile phones, personal digital assistants and
portable computers.
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Community Portal
Service. Cyworld, also operated
by SK Communications, is one of the most popular online
community portal services in Korea. Cyworld is a social
networking site that encompasses an ever-expanding virtual forum
where users can meet to exchange information and ideas and share
multimedia contents, including through the publication of
personal homepages and blog sites. We have also sought to expand
our global reach by launching Cyworld service in overseas
markets, including the United States, Japan, China and Taiwan.
While retaining many aspects of the original Korean version that
make Cyworld unique among social networking sites, we have
redesigned foreign versions of Cyworld to make it more appealing
to local audiences. As of December 31, 2008, our Cyworld
portal service had over 24 million registered users
globally.
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In March 2004, we launched Mobile Cyworld, allowing
wireless subscribers to access the Cyworld portal community site
through their cellular phones.
In November 2007, SK Communications merged with Empas Corp., an
Internet search engine and portal site. We believe the merger
will create valuable convergence synergies among our NATE,
Cyworld and Empas services.
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Revenues,
Rates and Facility Deposits
Our wireless revenues are generated principally from initial
subscription fees, monthly plan-based fees, usage charges for
outgoing voice calls, usage charges for wireless data services,
value-added-service fees and interconnection revenue. The
following table sets forth information regarding our cellular
revenues (net of taxes) and facility deposits for the periods
indicated:
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As of or for the Year Ended December 31,
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2006
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2007
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2008
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(In billions of Won)
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Initial Subscription Fees
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W
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252.4
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W
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387.8
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W
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400.2
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Monthly Fees
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3,629.5
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3,949.8
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4,348.0
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Usage Charges(1)
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5,565.9
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5,598.4
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5,473.0
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Interconnection Revenue
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1,033.4
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1,062.2
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1,149.2
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Revenue from Sales of Digital Handsets
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Other Cellular Revenue(2)
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34.4
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17.9
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19.4
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Total
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W
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10,515.6
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W
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11,016.1
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W
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11,389.8
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Additional Facility Deposits
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W
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9.0
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W
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2.4
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2.7
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Refunded Facility Deposits
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11.7
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17.1
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4.3
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Facility Deposits at Period End
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21.1
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6.4
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4.8
|
|
|
|
|
(1) |
|
Usage charges principally include revenues from monthly
plan-based fees, usage charges for outgoing voice calls, usage
charges for wireless data services, value-added-service fees, as
well as international charges and interest on overdue subscriber
accounts (net of telephone tax). |
|
(2) |
|
Other cellular revenue includes revenue from the sale and
licensing of Internet platform solutions. |
We charge our new customers an initial subscription fee for
initial connection and service activation. In addition to the
initial subscription fee, we require our customers to pay
monthly plan-based fees, usage charges for outgoing voice calls
and usage charges for wireless data services. We do not charge
our customers for incoming calls, although we do receive
interconnection charges from KT Corporation and other companies
for calls from the fixed-line network terminating on our
networks and interconnection revenues from other wireless
network operators. See Interconnection.
Monthly plan-based fees for some plans include free airtime
and/or
discounts for designated calling numbers. We bill subscribers on
a monthly basis and subscribers may make payment at a bank, post
office, any of our regional headquarters or sales offices, or at
any of our authorized dealers.
We offer a variety of differentiated Standard Rate Plans that
are designed to meet a wide range of subscriber needs and
interests. Popular Standard Rate Plans include our couples
discount plan, region discount plan and friends and family
discount plan. The basic monthly fee for our Standard Rate Plans
ranges from Won 9,900 to Won 75,000.
In addition, we offer optional add-on service plans,
which may supplement the basic service plan a subscriber has
chosen, including:
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|
|
|
|
Data Plans, which target subscribers with high usage
patterns for wireless data transmission and wireless Internet
services. We offer various Data Plans that provide unlimited
wireless data services for monthly fees ranging from Won 3,500
to Won 41,500. We also offer a Data Plan that allows subscribers
to use up to Won 100,000 of wireless Internet services each
month for a fixed monthly fee of Won 10,000.
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|
|
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Videoconferencing Plans, for subscribers to our 3G
services, which we provide primarily using our WCDMA network.
The basic monthly fee for our Videoconferencing Plans ranges
between Won 3,500 and Won 9,000.
|
We also offer discounts to subscribers committing to long-term
contracts. To long-term subscribers who initially became our
subscribers as a result of Shinsegis merger into us in
January 2002 and who continue to remain our subscribers, we
offer discounts on monthly plan-based fees ranging from 5% to
20%. For all other long-term subscribers, we offer discounts on
usage charges ranging from 5% to 10%.
34
We began to provide Caller ID service to customers free of
charge commencing January 1, 2006. In January 2007, we
reduced our usage fees for wireless Internet services by 30%
and, in October 2007 we reduced usage fees for voice calls
between our subscribers by 50%. In addition, in January 2008 we
reduced our SMS usage charges from Won 30 per message to Won 20
per message. In March 2008, we reduced usage charges for voice
calls between family members by 50%. See Item 5.A.
Operating Results Overview.
For all calls made from our subscribers handsets in Korea
to any destination in Korea, we charge usage fees based on a
subscribers cellular rate plan. The fees are the same
whether the call is local or long distance. With respect to
international calls placed by a subscriber, we bill the
subscriber the international rate charged by the Korean
international telephone service provider through which the call
is routed. We remit to that provider the international charge
less our usage charges. See
Interconnection.
We offer a variety of value-added services, including our
COLORing, Auto COLORing, Call Keeper and Perfect Call services.
Depending on the rate plan selected by the subscriber, the
monthly fee may or may not include these value-added services,
except Caller ID and call waiting services, which are offered
free of charge to all beginning subscribers.
We offer wireless Internet access services to our subscribers
through NATE. Subscribers using our CDMA network may elect to
pay a monthly fee, which includes a fixed amount of airtime or
data packets, or may elect to pay on a variable, usage basis. A
subscriber using our CDMA 1xRTT and CDMA 1xEV-DO networks is
charged based on the amount of data that is transmitted to such
subscribers handset. Subscribers using our WCDMA network
are also charged based on the amount of data transmitted. The
data transmitted is measured in packets of 512 bytes. We charge
Won 4.55 per text packet, Won 0.9 per multimedia packet, for
large volume data transfers, and Won 1.75 per multimedia packet,
for smaller volume data transfers. In addition, we charge
subscribers for purchases of certain digital contents and for
certain wireless services, such as m-commerce transaction
services.
Until February 2007, we generally required new subscribers
(other than certain corporate and Government subscribers) to pay
a non-interest bearing facility deposit of Won 200,000, which we
utilized to offset a defaulting subscribers outstanding
account balance. In lieu of paying the facility deposit,
subscribers who meet the credit qualifications required by the
Seoul Guarantee Insurance Company could elect to be covered
under insurance provided by the Seoul Guarantee Insurance
Company. We paid a Won 10,000 premium to the Seoul Guarantee
Insurance Company on behalf of such subscribers. Since March
2007, we generally no longer require new subscribers to pay the
facility deposit. We refund the facility deposit to any existing
subscriber who had initially made a facility deposit and later
requests such facility deposit to be refunded. As a result of
the facility insurance program and the termination of the
facility deposit requirement, we have refunded a substantial
amount of facility deposits, and facility deposits decreased
from Won 21.1 billion as of December 31, 2006 to Won
4.8 billion as of December 31, 2008. We do not expect
to have to refund a significant amount of facility deposits in
the future, because we believe that most of our subscribers who
wish to have the facility deposit refunded have already done so.
Because we have been designated by the KCC as a market
dominant service provider, any modification to our fees,
charges or the terms and condition of our service, including
promotional rates and facility deposits, requires prior approval
by the KCC.
We also charge our customers a 10.0% value-added tax. We can
offset the value-added tax we collect from our customers against
value-added tax refundable to us by the Korean tax authorities.
We remit taxes we collect from our customers to the Korean tax
authorities. We record revenues in our financial statements net
of such taxes.
Subscribers
We had 23.5 million subscribers as of April 30, 2009,
representing a market share of 50.5%, the largest market share
among Korean wireless service providers. We believe that,
historically, our subscriber growth has been due to many
factors, including:
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our expansion and technical enhancement of our digital networks,
including with high-speed data capabilities;
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increasing consumer awareness of the benefits of wireless
telecommunications;
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35
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an effective marketing strategy;
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our focus on customer service;
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the introduction of new, value-added services, such as voicemail
services, call-forwarding, Caller ID, three-way calling and
wireless Internet services provided by NATE; and
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our acquisition of Shinsegi in January 2002.
|
The following table sets forth selected historical information
about our subscriber base for the periods indicated:
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|
|
|
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As of or for the Year Ended December 31,
|
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2006
|
|
|
2007
|
|
|
2008
|
|
|
Subscribers
|
|
|
20,271,133
|
|
|
|
21,968,169
|
|
|
|
23,032,045
|
|
Subscribers Growth Rate
|
|
|
3.8
|
%
|
|
|
8.4
|
%
|
|
|
4.8
|
%
|
Activations
|
|
|
5,573,799
|
|
|
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8,344,784
|
|
|
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8,493,340
|
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Deactivations
|
|
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4,832,783
|
|
|
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6,647,748
|
|
|
|
7,429,464
|
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Average Monthly Churn Rate(1)
|
|
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2.0
|
%
|
|
|
2.6
|
%
|
|
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2.7
|
%
|
|
|
|
(1) |
|
Average monthly churn rate for a period is the number calculated
by dividing the sum of deactivations during the period by the
simple average of the number of subscribers at the beginning and
end of the period and dividing the quotient by the number of
months in the period. Churn includes subscribers who upgrade to
CDMA 1xRTT or CDMA lxEV-DO-capable handsets by terminating their
service and opening a new subscriber account. |
We had 23.0 million wireless subscribers as of
December 31, 2008. For the year ended December 31,
2008, we had 8.5 million activations and 7.4 million
deactivations, representing an average monthly churn rate of
2.7% during the same period. Our subscribers include those
subscribers who are temporarily deactivated, including
(1) subscribers who voluntarily deactivate temporarily for
a period of up to three months no more than twice a year and
(2) subscribers with delinquent accounts who may be
involuntarily deactivated up to two months before permanent
deactivation, which we determine based on various factors,
including prior payment history.
Market
Share Limitations
As a condition to our merger with Shinsegi consummated in
January 2002, we were required to comply with certain market
share limitations imposed by the FTC. While we are no longer
subject to any market share limitations, our strategy is to
maintain our market share at current levels. We can give no
assurance that the Government will not impose restrictions on
our market share in the future. If we are subject to market
share limitations in the future, our ability to compete
effectively will be impeded, and our subscriber growth rate may
decline.
Number
Portability
Prior to January 2003, Koreas wireless telecommunications
system was based on a network-specific prefix system, in which a
unique prefix was assigned to all the phone numbers of a
specific network operator. We were assigned the 011
prefix, and all of our subscribers mobile phone numbers
began with 011 (former Shinsegi subscribers use the
017 prefix) and our subscribers could not change
their wireless phone service to another wireless operator and
keep their existing numbers. In January 2003, the MIC announced
a plan to implement number portability with respect to wireless
telecommunications services in Korea, allowing wireless
subscribers to switch wireless service operators while retaining
the same mobile phone number. As mandated by the MIC, we were
the first wireless telecommunications provider to introduce
number portability in January 1, 2004, allowing our
customers to transfer their numbers to our competitors. Our
competitors customers were not able to transfer their
number to our service, however, until KTF and LGT introduced
number portability beginning July 1, 2004 and
January 1, 2005, respectively. Subscribers who choose to
transfer to a different wireless operator have the right to
return to their original service provider without paying any
penalties within 14 days of their initial transfer.
36
In 2006, 2007 and 2008, respectively, approximately
2.9 million, 3.4 million and 3.0 million
subscribers switched their wireless telecommunications service
provider from us to KTF or LGT and approximately
2.8 million, 3.4 million and 3.1 million
subscribers switched from KTF or LGT to us.
In 2006, 2007 and 2008, respectively, we gained approximately
0.7 million, 1.6 million and 1.0 million new
subscribers, which represented approximately 39.9%, 51.1% and
50.4% of the aggregate number of new wireless subscribers gained
by us, KTF and LGT in each year.
In addition, in order to manage the availability of phone
numbers efficiently and to secure phone number resources for the
services, the MIC has begun to integrate mobile telephone
identification numbers into a common prefix identification
number 010 and to gradually retract the current
mobile service identification numbers which had been unique to
each wireless telecommunications service provider, including
011 for our cellular services, starting from 2004.
All new subscribers were given the 010 prefix
starting January 2004. We believe that the adoption of the
common prefix identification system has had, and may continue to
have, a greater negative effect on us than on our competitors
because, historically, 011 has had very high brand
recognition in Korea as the premium wireless telecommunications
service. Adoption of the number portability system has resulted
in, and may continue to result in, increased competition among
wireless service providers, increased subscriber deactivations,
increased churn rates and higher marketing costs.
For 2008, our churn rate ranged from 2.0% to 3.6%, with an
average churn rate of 2.7% for 2008, compared to an average
churn rate of 2.6% for 2007. We cannot assure you that our churn
rates will not increase in the future. See Item 3.D.
Risk Factors Our businesses are subject to extensive
Government regulation and any change in Government policy
relating to the telecommunications industry could have a
material adverse effect on our results of operations and
financial condition. In addition, for details regarding
certain fines imposed on us by the MIC in connection with our
marketing efforts related to the number portability system, see
Item 8.A. Consolidated Statements and Other Financial
Information Legal Proceedings MIC and
KCC Proceedings.
Marketing
and Service Distribution
Marketing,
Sales and Service Network
We market our services and provide after-sales service support
to customers through 27 sales centers, 37 branch offices
and a network of 1,115 authorized exclusive dealers located
throughout Korea. Our dealers are connected via computer to our
database and are capable of assisting customers with account
information. In addition, approximately 10,000 independent
retailers (principally handset dealers) assist new subscribers
to complete activation formalities, including processing
subscription applications.
Currently, authorized dealers are entitled to an initial
commission for each new subscriber registered by the dealer, as
well as an average ongoing commission calculated as a percentage
of that subscribers monthly plan-based and usage charges
from domestic calls for the first four years. In order to
strengthen our relationships with our exclusive dealers, we
offer a dealer financing plan, pursuant to which we provide to
each authorized dealer an interest-free or low-interest loan of
up to Won 2.0 billion with a repayment period of up to
three years. As of December 31, 2008, we had an aggregate
of Won 154.8 billion in loans to authorized dealers
outstanding.
In April 2009, we established a wholly-owned subsidiary to
diversify our sales activities. The new subsidiary,
PS & Marketing Co., Ltd., was established with an
investment of Won 150 billion and began operating 13 stores
in May 2009. We expect PS & Marketing Co., Ltd. to
expand its sales network focusing on areas that are not covered
by our existing sales network.
Over the last several years, competition in the wireless
telecommunications business has caused us to increase
significantly our marketing and advertising expenses and, with
continuing competition, we expect that such expenses will remain
high. In 2006, 2007 and 2008, advertising expenditures amounted
to 2.8%, 2.6% and 2.6% of our revenues, respectively.
37
Marketing
Strategies and Marketing Information Management
Next Generation Marketing Project. In December
2003, we launched our Next Generation Marketing
project to develop more effective marketing strategies and to
implement related improvements to our information technology
systems and infrastructure. In connection with this project, we
have, from time to time, engaged third-party service providers
to receive information technology consulting, design and other
related services. In particular, in June 2005, we entered into
an agreement with SK C&C Co., Ltd., or SK C&C, to
receive such marketing-related information technology consulting
and design services. The Next Generation Marketing project was
completed in October 2006. Information technology improvements
we have implemented in connection with this project include the
introduction of more advanced and integrated accounts
receivable, accounts payable and customer relationship
management systems, as well as more effective information
security controls. We believe these upgrades have enhanced our
ability to process and utilize marketing- and subscriber-related
data, which, in turn, has helped us to develop more effective
and targeted marketing strategies, as well as improved the
overall accuracy and management of certain financial data.
We currently operate a customer information system designed to
provide us with an extensive customer database. Our customer
information system includes a billing system that provides us
with comprehensive account information for internal purposes and
enables us to efficiently respond to customer requests. Our
customers can also change their service plans, verify the
charges accrued on their accounts, receive their bills online
and send text messages to our other subscribers through our
website at www.tworld.co.kr.
T-brand Marketing Strategy. To
increase brand awareness and promote our corporate image, in
August 2006, we launched our T-brand marketing
campaign. Our T brand signifies the centrality of
Telecommunications and Technology to our
business and also seeks to emphasize our commitment to providing
Top quality, Trustworthy products and
services to our customers. We have begun to market all new
products and services under the T brand, while
brands existing prior to August 2006 will be re-branded and
gradually integrated under the T brand umbrella.
Interconnection
Our networks interconnect with the public switched telephone
networks operated by KT Corporation and SK Broadband and,
through their networks, with the international gateways of KT
Corporation, LG DACOM Corporation and Onse Telecom Corporation,
as well as the networks of the other wireless telecommunications
service providers in Korea. These connections enable our
subscribers to make and receive calls from telephones outside
our networks. Under Korean law, service providers are required
to permit other service providers to interconnect to their
networks. If a new service provider desires interconnection with
the networks of an existing service provider but the parties are
unable to reach an agreement within 90 days, the new
service provider can appeal to the KCC.
For 2006, our total interconnection revenues were Won
1,033.4 billion and our total interconnection expenses were
Won 1,014.9 billion. For 2007, our total interconnection
revenues were Won 1,062.2 billion and our total
interconnection expenses were Won 1,078.7 billion. For
2008, our total interconnection revenues were Won
1,149.2 billion and our total interconnection expenses were
Won 1,327.4 billion. See note 30 of the notes to our
consolidated financial statements.
Domestic
Calls
Guidelines issued by the MIC require that all interconnection
charges levied by a regulated carrier take into account
(i) the actual costs to that carrier of carrying a call or
(ii) imputed costs. The interconnecting parties are
required to calculate the relevant imputed costs on an annual
basis. In the event of a dispute regarding the imputed costs,
the KCC is empowered to act as arbitrator.
Wireless-to-Fixed-line. According to our
interconnection arrangement with KT Corporation, for a call from
our wireless network to KT Corporations fixed-line
network, we collect the usage rate from our wireless subscriber
and in turn pay KT Corporation the interconnection charges based
on KT Corporations imputed costs.
38
Fixed-line-to-Wireless. The KCC determines
interconnection arrangements for calls from a fixed-line network
to a wireless network. For a call initiated by a fixed-line user
to one of our wireless service subscribers, the fixed-line
network operator collects our usage fee from the fixed-line user
and remits to us an interconnection charge. Interconnection with
KT Corporation accounts for substantially all of our
fixed-line-to-wireless interconnection revenue and expenses.
In July 2004, the MIC introduced a new method of calculating
interconnection rates for calls from fixed-line networks to
wireless networks, based on the long-run incremental cost of
each wireless service provider, taking into consideration
technology development and future expected costs. The long-run
incremental cost method has been adopted by other countries such
as the United States, the United Kingdom and Japan. The
interconnection rates paid by fixed-line network service
providers to each wireless network service provider are set out
below. The KCC announced the interconnection rates for 2008 and
2009 in December 2008, which were applied retroactively from
January 1, 2008.
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Rate per Minute
|
|
Applicable Year
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SK Telecom
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|
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KTF
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|
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LGT
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2005
|
|
W
|
31.19
|
|
|
W
|
46.70
|
|
|
W
|
54.98
|
|
2006
|
|
|
33.13
|
|
|
|
40.06
|
|
|
|
47.01
|
|
2007
|
|
|
32.78
|
|
|
|
39.60
|
|
|
|
45.13
|
|
2008
|
|
|
33.41
|
|
|
|
38.71
|
|
|
|
39.09
|
|
2009
|
|
|
32.93
|
|
|
|
37.96
|
|
|
|
38.53
|
|
Wireless-to-Wireless. The MIC implemented
interconnection charges for calls between wireless telephone
networks in Korea starting in January 2000. Under these
arrangements, the operator originating the call pays an
interconnection charge to the operator terminating the call. For
all operators, the amount of the charge is derived from our
imputed cost, which was Won 33.13 per minute, Won 32.78 per
minute and Won 33.41 per minute for 2006, 2007 and 2008,
respectively. Our revenues from the wireless-to-wireless charge
were Won 606.8 billion in 2006, Won 651.5 billion in
2007 and Won 745.3 billion in 2008. Our expenses from these
charges were Won 737.5 billion in 2006, Won
784.7 billion in 2007 and Won 821.3 billion in 2008.
The charges above were agreed among the parties involved and
confirmed by the KCC.
The increase in our interconnection rate for 2008, together with
an increase in incoming call volume in 2008, contributed to an
overall increase of Won 87.0 billion in interconnection
revenues. Our interconnection expenses, also increased in 2008
by Won 248.7 billion, primarily due to higher subscriber
numbers resulting in higher call volume. The Won
248.7 billion increase in interconnection expenses includes
the increase in the mobile-to-mobile interconnection expenses
that were paid to other wireless service providers.
International
Calls
With respect to international calls, if a call is initiated by a
wireless subscriber, we bill the wireless subscriber for the
international charges of KT Corporation, DACOM or SK Broadband,
and we receive interconnection charges from such operators. If
an international call is received by our subscriber, KT
Corporation, DACOM or SK Broadband pays interconnection
charges to us based on our imputed costs.
International
Roaming Arrangements
To complement the services we provide to our subscribers in
Korea, we offer international voice and data roaming services.
We charge our subscribers usage fees for global roaming service
and, in turn, pay foreign wireless network operators fees for
the corresponding usage of their network. For a more detailed
discussion of our global roaming services, see
Our Services Cellular Voice
Services above.
Digital
Cellular Network
We offer wireless voice and data telecommunications services
throughout Korea using digital wireless networks, including a
CDMA network, which currently reaches approximately 99% of the
population, a CDMA 1xRTT/CDMA 1xEV-DO network, which
currently reaches approximately 90% of the population, an
39
HSDPA-capable WCDMA network, which currently reaches
approximately 99% of the population and a WiBro network, which
currently services hot zone districts in
42 cities in Korea.
CDMA
Networks
CDMA technology is a continuous digital transmission technology
that accommodates higher throughput than analog technology by
using various coding sequences to allow concurrent transmission
of voice and data signals for wireless communication. In January
1996, we launched our first wireless network based on CDMA
technology and became the worlds first to commercialize
CDMA cellular service. Our CDMA-based network infrastructure has
been the core platform for our wireless telecommunications
business.
CDMA technology is currently in commercial operation in several
countries including Korea, Hong Kong and the United States. A
majority of the digital wireless networks currently in use
around the world are based on either the European Global System
for Mobile Communication standard or other time division
multiple access technologies. Unlike the continuous digital
transmission method of CDMA technology, these technologies break
voice signals into sequential pieces of a defined length, place
each piece into an information conduit at specific intervals and
then reconstruct the pieces at the end of the conduit.
CDMA
1xRTT and CDMA 1x EV-DO Networks
In October 2000, we began offering wireless voice and data
services on our CDMA 1xRTT network. CDMA 1xRTT is an advanced
CDMA-based technology that allows transmission of data at speeds
of up to 144 Kbps (compared to a maximum of 64 Kbps
for our basic CDMA network).
Unlike our CDMA network, our CDMA 1xRTT network has been
designed to allow upgrades in step with advances in wireless
technology. In the first half of 2002, we launched an upgrade of
our CDMA 1xRTT network to a more advanced technology called CDMA
1xEV-DO. CDMA 1xEV-DO is a CDMA-based technology, similar to
CDMA 1xRTT, but which enables data to be transmitted at speeds
of up to 2.4 Mbps. This higher transmission speed permits
interactive transmission of data required for videophone
services, a high-speed wireless Internet connection, as well as
a multitude of multimedia services. In 2004, we completed the
full upgrade of our CDMA 1xRTT network to CDMA 1xEV-DO
technology. For details of our capital expenditures relating to
CDMA 1xRTT and CDMA 1xEV-DO, see Item 5.B. Liquidity
and Capital Resources.
WCDMA
Network
WCDMA is a 3G, high capacity wireless communication system that
enables us to offer an even wider range of telecommunications
services, including cellular voice communications, video
telephony, data communications, multimedia services, wireless
Internet connection, automatic roaming and satellite
communications. We commenced provision of our 3G services using
on our
HSDPA-upgraded
WCDMA network on a limited basis in Seoul at the end of 2003. In
March 2005, we developed and launched dual band/dual mode
handsets, to offer seamless nationwide 3G service, an important
factor for a nationwide deployment of WCDMA services.
In 2005, we completed commercial development of HSDPA technology
and integrated this technology in the subsequent build-out of
our WCDMA network. HSDPA, which represents an evolution of the
WCDMA standard, is a more advanced 3G technology than the
initial WCDMA technology we implemented and is sometimes
referred to as 3.5G technology. In March 2007, we
completed nationwide expansion of our HSDPA-capable WCDMA
network, which currently reaches approximately 99% of the Korean
population. Our WCDMA network enables significantly faster and
higher-quality voice and data transmission and supports more
sophisticated wireless data transmission services, including
video telephony and other multimedia communications, than is
possible through our 2G networks. In June 2007, we began HSUPA
upgrades to our WCDMA network, which is currently in progress.
HSUPA technology represents yet the next stage in the evolution
of the WCDMA standard. In particular, while HSDPA enables
significantly improved downlink data transmission speeds, HSUPA
permits faster uplink speeds. Our implementation of HSDPA and
HSUPA technology will allow us to offer significantly improved,
and a wider range of, wireless data transmission services,
including more sophisticated multimedia digital contents and
products. We also plan to continue enhancing our 3G service
quality in 2009, including through the installation of
additional small cell sites or cellular repeaters to improve
reception quality in subterranean areas, buildings or any
40
remaining blind spots where reception quality may
not be optimal. For more information about our capital
expenditures relating to our WCDMA-based network, see
Item 5.B. Liquidity and Capital Resources, and
for more information about risks relating to our WCDMA-based
network, see Item 3.D. Risk Factors
Implementation of 3G and WiBro technologies has required, and
may continue to require, significant capital and other
expenditures, which we may not recoup.
WiBro
We have also received a license from the MIC to provide wireless
broadband, or WiBro services, which we believe will complement
our existing networks and technologies. WiBro is a data-only
transmission technology that enables high-speed wireless
broadband access to portable computers, mobile phones and other
portable devices. We conducted initial pilot testing of WiBro
service in limited areas of metropolitan Seoul in May 2006 and
currently service hot zone areas in 42 cities.
Hot zone areas are districts and neighborhoods that
are characterized by high levels of wireless data traffic,
primarily financial districts and university environs. We plan
to further expand service to hot zone areas in 84 cities by
the end of 2009. Beyond 2009, our WiBro expansion plans will
depend, in part, on subscriber demand for WiBro services.
Network
infrastructure
The principal components of our wireless networks are:
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Cell sites, which are physical locations equipped with
transmitters, receivers and other equipment that communicate by
radio signals with wireless handsets within range of the cell
(typically a 3 to 40 kilometer radius);
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|
|
Switching stations, which switch voice and data
transmissions to their proper destinations, which may be, for
instance, a mobile phone of one of our subscribers (for which
transmissions would originate and terminate on our wireless
networks), a mobile phone of a KT Corporation or LGT subscriber
(for which transmissions would be routed to KT
Corporations or LGTs wireless networks, as
applicable), a fixed-line telephone number (for which calls
would be routed to the public switched telephone network of a
fixed-line network operator), an international number (for which
calls would be routed to the network of a long distance service
provider) or an Internet site (for which transmissions may be
routed through our NATE portal); and
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|
Transmission lines, which link cell sites to switching
stations and switching stations with other switching stations.
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As of December 31, 2008, our CDMA, CDMA 1RTT, CDMA 1xEV-DO,
WCDMA and WiBro networks had an aggregate of 17,213 cell sites.
We purchase our principal digital wireless equipment for our
CDMA networks from LG Electronics and Samsung Electronics. We
have purchased substantially all of the equipment for our CDMA
1xRTT and CDMA 1xEV-DO networks from Samsung Electronics and
have purchased substantially all of the equipment for our WCDMA
network, including the software and firmware used to implement
HSDPA and HSUPA upgrades, from Samsung Electronics and LG
Nortel. We have purchased substantially all of the equipment for
our WiBro network from Samsung Electronics.
Most of the transmission lines we use, including virtually all
of the lines linking switching stations, as well as a portion of
the lines linking cell sites to switching stations, comprise
optical fiber lines that we own and operate directly. However,
we have not undertaken to install optical fiber lines to link
every cell site and switching station. In places where we have
not installed our own transmission lines, we lease lines from SK
Networks, KT Corporation and, to a lesser extent, SK Broadband
and LG Powercomm Co., Ltd. Under applicable Korean law, those
Korean fixed-line operators that satisfy applicable conditions
regarding market share and sales volume set forth in the
Telecommunications Business Act may not decline to provide
leased line services to us without reasonable cause. In May
2009, we entered into an agreement with SK Networks to purchase
its leased line business for Won 892.85 billion. The
purchase remains subject to regulatory approvals and approval by
shareholders of SK Networks. In addition, we will also assume
Won 627.8 billion of debt as part of the transaction.
41
We use a cellular network surveillance system. This system
oversees the operation of cell sites and allows us to monitor
our main equipment located throughout the country from one
monitoring station. The automatic inspection and testing
provided to the cell sites lets the system immediately rebalance
to the most suitable setting, and the surveillance system
provides automatic dispatch of repair teams and quick recovery
in emergency situations.
Other
Investments and Relationships
We have investments in several other businesses and companies
and have entered into various business arrangements with other
companies. Our principal investments fall into the following
categories:
Wireless
Content Providers and Application Providers
As part of our strategy to develop additional applications and
content for our wireless data services, we invest in companies
which develop wireless applications and provide Internet
content, including content accessible by users of our wireless
networks.
Digital Content Providers. We also hold
investments in companies that develop content for use in our
fixed-line and wireless Internet businesses, particularly in the
entertainment sector, to better capture growth opportunities
arising from the provision of varied, high-quality digital
contents. As wireless data transmission services have become
increasingly important in the growth of our business, we are
seeking to secure valuable mobile data and digital contents by
making equity investments in various content providers.
We currently hold a 37.1% equity interest in iHQ Inc., an
entertainment management firm that produces films, manages
entertainers and operates online game services. We also hold a
63.5% stake in Loen Entertainment Inc. (formerly, Seoul Records
Inc.), Koreas largest music recording company in terms of
records released and revenues. We currently hold a 63.7% equity
interest in Ntreev Soft Co., Ltd., an online game developer,
particularly known for its multi-player sports games and
anime-based games. Through our investments in companies such as
iHQ, Loen Entertainment and Ntreev Soft, we are able to offer
customers of our MelOn, Cizle and Gaming portal services access
to an expanded range of music- and entertainment-related digital
contents and mobile games, respectively.
In 2005, we and certain other Korean investment companies
invested an aggregate Won 40.0 billion to establish three
funds to invest in the music industry and seek strategic
partnerships with recording companies. As of December 31,
2008, our contribution to the funds amounted to Won
39.6 billion. In 2005 and in 2008, we and certain
co-investors invested an aggregate Won 74.7 billion to
establish five movie-production funds to strengthen our ability
to obtain movie content. We had invested Won 36.6 billion
in the funds as of December 31, 2008. Furthermore, in 2008,
we and certain co-investors invested an aggregate Won
105.4 billion to establish six additional funds to invest
in the production of various cultural contents, including movies
and television dramas. As of December 31, 2008, our
contribution to these funds amounted to Won 60.4 billion.
Such investments reflect our business strategy of
diversification into new areas, such as media and entertainment.
Wireless Application Developers. We hold
investments in companies that help enable us to further develop
and improve our wireless applications and multimedia platforms.
In particular, we have invested in developers of wireless
financial, or m-commerce, services, including companies that
provide wireless billing solutions; developers of wireless modem
devices; and developers of Internet search applications.
Other
Investments
Our other investments include:
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POSCO. We currently own a 2.8% interest in the
outstanding capital stock of POSCO, with a book value as of
December 31, 2008 of Won 943 billion. POSCO is the
largest fully integrated steel producer in Korea, and one of the
largest steel producers in the world.
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SK C&C. We currently own a 30.0% equity
interest in SK C&C, with a book value as of
December 31, 2008 of Won 677 billion. SK C&C is
an information technologies services provider. We are party to
several service contracts with SK C&C related to
development and maintenance of our information technologies
systems. See Item 7.B. Related Party
Transactions. We intend to dispose of our entire equity
interest in
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SK C&C in the initial public offering of SK
C&Cs common shares on the Korea Exchange, which is
currently on hold. We can provide no assurance that the initial
public offering will be consummated on a timely basis or at all.
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SKY Property Management. We currently own a
60.0% equity interest in SKY Property Management Ltd., with a
book value as of December 31, 2008 of Won 287 billion.
SKY Property Management was established in 2008 to manage
buildings and real estate developments in China, in which
affiliated companies of the SK Group had invested or will
invest.
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SK Marketing & Company. We currently
own a 50.0% equity interest in SK Marketing & Company
Co., Ltd., with a book value as of December 31, 2008 of Won
97 billion. SK Marketing & Company Co., Ltd.
provides marketing-related services to corporate and individual
clients.
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LG Powercomm. We currently own a 4.6% interest
in LG Powercomm Co., Ltd. (formerly Powercomm Corporation), with
a book value as of December 31, 2008 of Won
39 billion. LG Powercomm Co., Ltd. is an operator of
fixed-line networks that provides wholesale fixed-line network
services, such as leased lines, to telecommunications, Internet
and cable television service providers in Korea.
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For more information regarding our investment securities, see
note 4 of the notes to our consolidated financial
statements.
Competition
We were Koreas only provider of cellular
telecommunications services until April 1996, when Shinsegi
began offering its CDMA service. In 1996, the Government issued
three additional licenses to KTF, LGT and Hansol PCS to operate
CDMA services. Each of KTF, LGT and Hansol PCS commenced
operation of its CDMA service in October 1997.
Beginning in 2000, there has been considerable consolidation in
the wireless telecommunications industry, resulting in the
emergence of stronger competitors. In 2000, KT Corporation
acquired 47.9% of Hansol M.Coms outstanding shares and
renamed the company KT M.Com. KT M.Com merged into KTF in May
2001. In May 2002, the Government sold its remaining 28.4% stake
in KT Corporation. In June 2009, KTF merged into
KT Corporation, which had held a 54.25% interest in KTF
before the merger.
Significant advances in technology are occurring that may affect
our businesses, including the roll-out or the planned roll-out
by us and our competitors of advanced high-speed wireless
telecommunications networks based on technologies including CDMA
1xEV-DO, WCDMA, CDMA2000 and WiBro.
As of December 31, 2008, according to the KCC, KTF and LGT
had 14.4 million and 8.2 million subscribers,
respectively, representing approximately 31.5% and 18.0%,
respectively, of the total number of wireless subscribers in
Korea on such date. As of December 31, 2008, we had
23.0 million subscribers, representing a market share of
approximately 50.5%.
For a description of the risks associated with the competitive
environment in which we operate, see Item 3.D. Risk
Factors Competition may reduce our market share and
harm our results of operations and financial condition.
Under a multilateral agreement on basic telecommunications
services among the members of the World Trade Organization
effective November 1997, the Government has agreed to gradually
reduce the restrictions on foreign and individual shareholdings
in telecommunications service providers, including us, in Korea.
The relevant Korean law, the Telecommunications Business Act,
was amended to give effect to the provisions of the WTO
agreement. While the WTO agreement enables us to seek foreign
investors and strategic partners and to more easily take
advantage of opportunities for investments in overseas
telecommunications projects, it may also benefit our competitors
and further intensify competition in the domestic market.
43
Law and
Regulation
Overview
Koreas telecommunications industry is subject to
comprehensive regulation by the KCC, which is responsible for
information and telecommunications policies, radio and
broadcasting management. The KCC regulates and supervises a
broad range of communications issues, including:
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entry into the telecommunications industry;
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scope of services provided by telecommunications service
providers;
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allocation of radio spectrum;
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setting of technical standards and promotion of technical
standardization;
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rates, terms and practices of telecommunications service
providers;
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customer complaints;
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interconnection and revenue-sharing between telecommunications
service providers;
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disputes between telecommunications service providers;
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research and development budgeting and objectives of
telecommunications service providers; and
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competition among telecommunications service providers.
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Pursuant to an amendment to the Government Organization Act,
effective as of February 29, 2008, the Ministry of
Information and Communication, or MIC, has become the Ministry
of Knowledge Economy, and functions formerly performed by the
MIC are now performed separately by the Ministry of Knowledge
Economy, the Ministry of Culture, Sports and Tourism, the
Ministry of Public Administration and Security, and,
particularly, the KCC. In this report, we refer to the MIC as
the relevant governmental authority in connection with any
approval granted or action taken by the MIC prior to such
amendment and to such other relevant governmental authority in
connection with any approval granted or action taken by such
other relevant governmental authority subsequent to such
amendment.
Telecommunications service providers are currently classified
into three categories: network service providers, value-added
service providers, and specific service providers. We are
classified as a network service provider because we provide
telecommunications services with our own telecommunications
networks and related facilities. As a network service provider,
we are required to obtain a license from the KCC for each of the
services we provide. Our licenses permit us to provide cellular
services and third generation wireless services using WCDMA and
WiBro technology. Our cellular license did not provide for a
fixed term but, upon the amendment of the Radio Wave Act of
Korea in 2005, our cellular license is valid for five years
starting from 2006, our IMT-2000 license is valid for
15 years starting from 1999 and our WiBro license is valid
for seven years starting from 2005.
The KCC may revoke our licenses or suspend any of our businesses
if we fail to comply with its rules, regulations and corrective
orders, including the rules restricting beneficial ownership and
control and corrective orders issued in connection with any
violation of rules restricting beneficial ownership and control
or any violation of the conditions of our licenses.
Alternatively, in lieu of suspension of our business, the MIC
may levy a monetary penalty of up to 3% of the average of our
annual revenue for the preceding three fiscal years. A network
services provider that wants to cease its business or dissolve
must obtain KCC approval.
In September 2007, the enforcement regulations under the
Telecommunications Business Act were amended to permit licensed
telecommunications service providers to provide local,
long-distance and international telephone services, as well as
broadband Internet access and Internet phone services, without
additional business licenses.
In the past, the MIC has stated that its policy was to promote
competition in the Korean telecommunications market through
measures designed to prevent the dominant service provider in
any such market from exercising its market power in such a way
as to prevent the emergence and development of viable
competitors. While all network
44
service providers are subject to KCC regulation, we are subject
to increased regulation because of our position as the dominant
wireless telecommunications services provider in Korea.
Competition
Regulation
The KCC is charged with ensuring that network service providers
engage in fair competition and has broad powers to carry out
this goal. If a network service provider is found to be in
violation of the fair competition requirement, the KCC may take
corrective measures it deems necessary, including, but not
limited to, prohibiting further violations, requiring amendments
to the articles of incorporation or to service contracts with
customers, and requiring the execution or performance of, or
amendments to, interconnection agreements with other network
service providers.
In addition, we qualify as a market-dominating business
entity under the Fair Trade Act. Accordingly, we are
prohibited from engaging in any act of abuse, such as
unreasonably determining, maintaining or altering service rates,
unreasonably controlling the rendering of services, unreasonably
interfering with business activities of other business entities,
hindering unfairly the entry of newcomers or substantially
restricting competition to the detriment of the interests of
consumers.
Because we belong to the SK Group, which is a large business
group as designated by the FTC, we are subject to the following
restrictions under the Fair Trade Act:
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Restriction on debt guarantee among
affiliates. Any affiliate within the SK Group may
not guarantee the debts of another domestic affiliate, except
for certain guarantees prescribed in the Fair Trade Act, such as
those relating to the debts of a company acquired for purposes
of industrial rationalization, bid deposits for overseas
construction work or technology development funds.
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Restriction on cross-investment. A member
company of the SK Group may not acquire or hold shares in an
affiliate belonging to the SK Group that owns shares in the
member company.
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Public notice of board resolution on large-scale transactions
with specially related persons. If a member of
the SK Group engages in a transaction with a specially related
person in the amount of 10% or more of the members capital
or for Won 10 billion or more, the transaction must be
approved by a resolution of the members board of directors
and the member must publicly disclose the transaction.
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Restrictions on equity investments in other domestic
companies. Under the Fair Trade Act, a company
that is a member of a large business group as designated by the
FTC is generally required to limit its total investments in
other domestic companies to 40% of its non-consolidated net
assets. Depending on the time frame in which such a company
acquired shares in excess of the 40% ceiling, the FTC may issue
corrective orders requiring, for example, the disposition of the
shares held in excess of the 40% ceiling or imposing limitations
on the voting rights for such shares
and/or
monetary sanctions. We were subject to such restrictions on
equity investments in other domestic companies until
July 3, 2007, when the company formerly known as
SK Corporation underwent a corporate rehabilitation,
pursuant to which SK Corporation spun off substantially all of
its operating business divisions into a newly established
corporation named SK Energy Co., Ltd. and the surviving
company, renamed SK Holdings Co., Ltd., became a holding company
under the Fair Trade Act. As a holding company under the Fair
Trade Act, SK Holdings and its subsidiaries (including us), as
well as any subsidiaries of SK Holdings subsidiaries
(sub-subsidiaries), are exempted from the Fair Trade
Acts restrictions on equity investments in other domestic
companies. However, SK Group member companies that are not
subsidiaries (or sub-subsidiaries) of SK Holdings remain subject
to such restrictions on equity investments in other domestic
companies. In March 2009, an amendment to the Fair Trade Act
abolished such restrictions on total investments in other
domestic companies.
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Restrictions on investments by subsidiaries and
sub-subsidiaries of holding companies. The Fair
Trade Act prohibits subsidiaries of holding companies from
investing in, or holding shares of common stock of, domestic
affiliates that belong to the same large business group, unless
such domestic affiliates are their own subsidiaries.
Furthermore, sub-subsidiaries of holding companies are
prohibited from investing in, or holding shares of common stock
of, domestic affiliates that belong to the same large business
group, unless all shares issued by the affiliates are held by
the sub-subsidiary. Therefore, we and other subsidiaries of
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SK Holdings may not invest in any domestic affiliate that
is also a member company of the SK Group, except in the case
where we invest in our own subsidiary or where another
subsidiary of SK Holdings invests in its own subsidiary.
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Public notice of the current status of a business
group. Pursuant to a recent amendment to the
Enforcement Decree of the Fair Trade Act which became effective
in June 2009, a member company of the SK Group must publicly
disclose the general status of the SK Group, including the name,
business scope and financial status of affiliates, information
on the officers of affiliates, information on shareholding and
cross-investments between member companies in the SK Group and
information on transactions with certain related persons on a
quarterly basis.
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Number Portability. Previously, Koreas
wireless telecommunications system was based on a
network-specific prefix system in which a unique prefix was
assigned to all the phone numbers of a network operator. We were
assigned the 011 prefix, and all of our
subscribers mobile phone numbers began with
011 (former Shinsegi subscribers use the
017 prefix). Our subscribers could not change their
wireless phone service to another wireless operator and keep
their existing numbers. In January 2003, the MIC announced its
plan to implement number portability with respect to wireless
telecommunications services in Korea. The number portability
system allows wireless subscribers to switch wireless service
operators while retaining the same mobile phone number. However,
subscribers who switch operators must purchase a new handset, as
we use a different frequency than KT Corporation and LGT.
In accordance with the plan published by the MIC, the number
portability system was adopted by us starting from
January 1, 2004. KTF and LGT introduced number portability
beginning on July 1, 2004 and January 1, 2005,
respectively. For details of the number of subscribers who
transferred to the services of our competitors following the
implementation of the number portability system, see
Subscribers.
In addition, in order to manage the availability of phone
numbers efficiently and to secure phone number resources for the
new services, the MIC has begun to integrate mobile telephone
identification numbers into a common prefix identification
number 010 and to gradually retract the current
mobile service identification numbers which had been unique to
each wireless telecommunications service provider, including
011 for our cellular services, starting from
January 1, 2004. All new subscribers have been given the
010 prefix starting January 2004. For details of the
number of new subscribers for each of the major wireless
cellular providers following the adoption of the 010
prefix January 2004, see Subscribers.
For risks relating to number portability, see
Item 3.D. Risk Factors Our businesses are
subject to extensive Government regulation and any change in
Government policy relating to the telecommunications industry
could have a material adverse effect on our results of
operations, financial condition and cash flows.
Prohibitions on Handset Subsidies. Until
March 26, 2006, when an amendment to the Telecommunications
Business Act came into effect, telecommunications service
providers had been prohibited from providing handset subsidies
to attract new subscribers under the Telecommunications Business
Act. From March 27, 2006 until March 27, 2008, when
the prohibition on handset subsidies was fully lifted, the
prohibition on handset subsidies was subject to the following
exceptions:
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a telecommunications service provider could provide subsidies to
subscribers who had maintained their subscription with the same
telecommunications service provider for at least 18 months,
provided that no separate subsidy was provided to the
same subscriber for two years thereafter; or
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a telecommunications service provider that had provided a
particular telecommunications service for less than six years
could provide subsidies to subscribers of such service.
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Accordingly, until March 2008 we were permitted to provide
handset subsidies only to our subscribers who had been using our
services uninterruptedly for at least 18 months, or to our
subscribers who were subscribing to our HSDPA or WiBro services.
The Telecommunications Business Act required any
telecommunications service provider seeking to provide handset
subsidies to report to the KCC the qualifying criteria and range
of subsidy payments no later than 30 days prior to the
effective date of the applicable subsidy payment. Following the
full- lifting of the prohibition on handset subsidies in March
2008, telecommunications service providers are no longer subject
to the restrictions described above.
46
Rate Regulation. Most network service
providers must report to the KCC the rates and contractual terms
for each type of service they provide, but generally they may
set rates at their discretion. However, as the dominant network
services provider for specific services (based on having the
largest market share in terms of number of subscribers and
meeting certain revenue thresholds), we must obtain prior
approval of our rates and terms of service from the KCC. In each
of the years in which this requirement has been applicable, the
MIC has designated us for wireless telecommunications service
and KT Corporation for local telephone and Internet services, as
dominant network service providers subject to this approval
requirement. As a condition to its approval of our merger with
SK IMT, the MIC required that we submit the rates for our
third generation mobile services using WCDMA technology to the
MIC for approval prior to the launch of such services. The
KCCs policy is to approve rates if they are appropriate,
fair and reasonable (that is, if the rates have been reasonably
calculated, considering supply costs, profits, classification of
costs and profits for each service, cost savings through changes
in the way services are provided and the influence on fair
competition, among others). It may order changes if it deems the
rates to be significantly unreasonable or against public policy.
In May 2007, the MIC determined to terminate the monitoring of
whether we met the condition for the MICs approval of our
merger with SK IMT.
Furthermore, in 2007, the MIC announced a road map
highlighting revisions in regulations to promote deregulation of
the telecommunications industry. In accordance with the road map
and pursuant to the Combined Sales Regulation, promulgated in
May 2007, telecommunications service providers are now permitted
to bundle their services, such as wireless data service,
wireless voice service, broadband Internet access service and
fixed-line telephone service, at a discounted rate; provided,
however, that we and KT Corporation, which are designated as
market-dominating business entities under the Telecommunications
Business Act, allow other competitors to employ the services
provided by us and KT Corporation, respectively, so that such
competitors can provide similar discounted package services. In
September 2007, the regulations and provisions under the
Telecommunications Business Act were amended to permit licensed
transmission service providers to offer local, domestic
long-distance and international telephone services, as well as
broadband Internet access and Internet phone services, without
additional business licenses. The introduction of bundled
services may increase competition in the telecommunications
sector, as well as cause downward price pressure on the fees we
charge for our services, which, in turn, may have a material
adverse effect on our results of operations.
Interconnection. Dominant network service
providers such as ourselves that own essential infrastructure
facilities or that possess a certain market share are required
to provide interconnection of their telecommunications network
facilities to other service providers upon request. The KCC sets
and announces the standards for determining the scope,
procedures, compensation and other terms and conditions of such
provision, interconnection or co-use. We have entered into
interconnection agreements with KT Corporation, DACOM, Onse and
other network service providers permitting these entities to
interconnect with our network. We expect that we will be
required to enter into additional agreements with new operators
as the KCC grants permits to additional telecommunications
service providers.
Frequency Allocation. The KCC has the
discretion to allocate and adjust the frequency band for each
type of service. Upon allocation of new frequency bands or
adjustment of frequency bands, the KCC is required to give a
public notice. The KCC also regulates the frequency to be used
by each radio station, including the transmission frequency used
by equipment in our cell sites. All of our frequency allocations
are for an indefinite term. We pay fees to the KCC for our
frequency usage that are determined based upon our number of
subscribers, frequency usage by our networks and other factors.
For 2006, 2007 and 2008, the fee amounted to Won
159.0 billion, Won 166.4 billion and Won
163.9 billion, respectively.
In addition, we paid Won 650 billion of the Won 1.3
trillion cost of the IMT-2000 license in March 2001 and are
required to pay the remainder of the license cost in annual
installments for a five-year period from 2007 through 2011. For
more information, see note 2(l) and note 8 of the
notes to our consolidated financial statements for the years
ended December 31, 2006, 2007 and 2008.
Mandatory
Contributions and Obligations
Contributions to the Fund for Development of Information
Telecommunications. The Ministry of Knowledge
Economy has the authority to recommend to network service
providers that they provide funds for national research
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and development of telecommunications technology and related
projects. For 2007, the MIC recommended that we contribute 0.75%
of budgeted revenues (calculated pursuant to MIC guidelines that
differ from our accounting practices) to the Fund for
Development of Information Telecommunications operated by the
MIC.
In May 2002, the MIC announced significant changes to the
Government contribution system. Starting from 2002, the
contributions became mandatory, and the annual contribution
which was set at 1.0% of total revenues for the previous year
was lowered to 0.5% (0.75% for market dominant service providers
like us) of total revenues for the previous year, and will be
applicable only to those network service providers who have Won
30 billion in total sales for the previous year and have
recorded no net loss in the current period. Under the policy,
the maximum amount of the annual contribution to be made cannot
exceed 70% of the net profit for the corresponding period of
each company. Our contribution to this fund in 2006, 2007 and
2008 was Won 66.7 billion, Won 73.7 billion and Won
71.9 billion, respectively, based on the new MIC
requirement of 0.75% of MIC-calculated revenues.
Universal Service Obligation. All
telecommunications service providers other than value-added
service providers, specific service providers and regional
paging service providers or any telecommunications service
providers whose net annual revenue is less than an amount
determined by the KCC (currently set at
Won 30.0 billion) are required to provide
universal telecommunications services including
local telephone services, local public telephone services,
telecommunications services for remote islands and wireless
communication services for ships and telephone services for the
handicapped and low-income citizens, or contribute toward the
supply of such universal services. The KCC designates universal
services and the service provider who is required to provide
each service. Currently, we are required to offer free
subscription fee and a discount of between 35% to 50% of our
monthly fee for cellular services to the handicapped and the
low-income citizens.
In addition to such universal services for the handicapped and
low-income citizens, we are also required to make certain
monetary contributions to compensate for other service
providers costs for the universal services. The size of a
service providers contribution is based on its net annual
revenue (calculated pursuant to KCC guidelines which differ from
our accounting practices). In 2006, our contribution amount was
Won 27.3 billion for our fiscal year 2005. In 2007, our
contribution amount was Won 23.9 billion for our fiscal
year 2006. In 2008, our contribution amount was Won
32.8 billion for our fiscal year 2007. As a wireless
telecommunications services provider, we are not considered a
provider of universal telecommunications services and do not
receive funds for providing universal service. Other network
service providers that do provide universal services make all or
a portion of their contribution in the form of
expenses related to the universal services they provide.
Foreign
Ownership and Investment Restrictions and
Requirements
Because we are a network service provider, foreign governments,
individuals, and entities (including Korean entities that are
deemed foreigners, as discussed below) are prohibited from
owning more than 49% of our voting stock. Korean entities whose
largest shareholder is a foreign government or a foreigner
(together with any of its related parties) and owns 15% or more
of the outstanding voting stock are deemed foreigners. If this
49% ownership limitation is violated, certain of our foreign
shareholders will not be permitted to exercise voting rights in
excess of the limitation and the KCC may require other
corrective action.
As of March 31, 2009, SK Holdings owned
18,748,452 shares of our common stock, or approximately
23.22% of our issued shares. As of March 31, 2009, a
foreign investment fund and its related parties collectively
held a 2.11% stake in SK Holdings. If the foreign investment
fund and its related parties increase their shareholdings in
SK Holdings to 15% or more and such foreign investment fund
and its related parties collectively constitute the largest
shareholder of SK Holdings, SK Holdings will be considered a
foreign shareholder, and its shareholding in us would be
included in the calculation of our aggregate foreign
shareholding. If SK Holdings shareholding in us is
included in the calculation of our aggregate foreign
shareholding, then our aggregate foreign shareholding, assuming
the foreign ownership level as of March 31, 2009 (which we
believe was 45.95%), would reach 69.17%, exceeding the 49%
ceiling on foreign shareholding.
If our aggregate foreign shareholding limit is exceeded, the KCC
may issue a corrective order to us, the breaching shareholder
(including SK Holdings if the breach is caused by an increase in
foreign ownership of SK Holdings) and the foreign
investment fund and its related parties who own in the aggregate
15% or more of SK Holdings. Furthermore, SK Holdings may
not exercise its voting rights with respect to the shares held
in excess
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of the 49% ceiling, which may result in a change in control of
us. In addition, the KCC may refuse to grant us licenses or
permits necessary for entering into new telecommunications
businesses until our aggregate foreign shareholding is reduced
to below 49%. If a corrective order is issued to us by the KCC
arising from the violation of the foregoing foreign ownership
limit, and we do not comply within the prescribed period under
such corrective order, the KCC may:
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revoke our business license;
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suspend all or part of our business; or
|
|
|
|
if the suspension of business is deemed to result in significant
inconvenience to our customers or to be detrimental to the
public interest, impose a one-time administrative penalty of up
to 3% of the average of our annual revenue for the preceding
three fiscal years.
|
Additionally, the Telecommunications Business Act also
authorizes the KCC to assess monetary penalties of up to 0.3% of
the purchase price of the shares for each day the corrective
order is not complied with, as well as a prison term of up to
one year and a penalty of Won 50 million. See
Item 3.D. Risk Factors If SK Holdings
causes us to breach the foreign ownership limitations on shares
of our common stock, we may experience a change of control.
We are required under the Foreign Exchange Transaction Act to
file a report with a designated foreign exchange bank or with
the Ministry of Strategy and Finance, or the MOSF, in connection
with any issue of foreign currency denominated securities by us
in foreign countries. Issuances of US$30 million or less
require the filing of a report with a designated foreign
exchange bank, and issuances that are over US$30 million in
the aggregate within one year from the filing of a report with a
designated foreign exchange bank require the filing of a report
with the MOSF.
The Telecommunications Business Act provides for the creation of
a Public Interest Review Committee under the KCC to review
investments in or changes in the control of network services
providers. The following events would be subject to review by
the Public Interest Review Committee:
|
|
|
|
|
the acquisition by an entity (and its related parties) of 15% or
more of the equity of a network services provider;
|
|
|
|
a change in the largest shareholder of a network services
provider;
|
|
|
|
agreements by a network service provider or its shareholders
with foreign governments or parties regarding important business
matters of such network services provider, such as the
appointment of officers and directors and transfer of
businesses; and
|
|
|
|
a change in the shareholder that actually controls a network
services provider.
|
If the Public Interest Review Committee determines that any of
the foregoing transactions or events would be detrimental to the
public interest, then the KCC may issue orders to stop the
transaction, amend any agreements, suspend voting rights, or
divest the shares of the relevant network services provider.
Additionally, if a dominant network services provider (which
would currently include us and KT Corporation), together with
its specially related persons (as defined under the Financial
Investment Services and Capital Markets Act) holds more than 5%
of the equity of another dominant network services provider, the
voting rights on the shares held in excess of the 5% limit may
not be exercised.
Patents
and Licensed Technology
Access to the latest relevant technology is critical to our
ability to offer the most advanced wireless services and to
design and manufacture competitive products. In addition to
active internal and external research and development efforts as
described in Item 5.C. Research and
Development, our success depends in part on our ability to
obtain patents, licenses and other intellectual property rights
covering our products. We own numerous patents and trademarks
worldwide, and have applications for patents pending in many
countries, including Korea, Japan, China, the United States, and
Europe. Our patents are mainly related to CDMA technology and
wireless Internet applications. We also acquired a number of
patents related to WCDMA technology.
49
We also license a number of patented processes and trademarks
under cross-licensing, technical assistance and other
agreements. The most important agreement is with Qualcomm Inc.
and relates mainly to CDMA applications technology. This
agreement generally grants us a non-exclusive license to
manufacture handsets in return for royalty payment or a
sub-license to manufacture and sell certain products both in
Korea and overseas during a fixed, but usually renewable term.
We consider our technical assistance and licensing agreements to
be important to our business and believe that we will be able to
renew this agreement on commercially reasonable terms that will
not adversely affect our ability to use the relevant
technologies.
We are not currently involved in any material litigation
regarding patent infringement.
Organizational
Structure
We are a member of the SK Group, based on the definition of
group under the Fair Trade Act of Korea. As of
December 31, 2008, SK Group members owned in aggregate
23.09% of the shares of our issued common stock. The SK Group is
a diversified group of companies incorporated in Korea with
interests in, among other things, telecommunications, trading,
energy, chemicals, engineering and leisure industries. Until
mid-1994, our largest shareholder was KT Corporation (formerly
known as Korea Telecom Corp.), Koreas principal fixed-line
operator that recently merged with KTF, one of our principal
wireless competitors.
Significant
Subsidiaries
For information regarding our subsidiaries, see note 2(b)
of the notes to our consolidated financial statements.
|
|
Item 4.C.
|
Organizational
Structure
|
These matters are discussed under Item 4B. where relevant.
|
|
Item 4.D.
|
Property,
Plants And Equipment
|
The following table sets forth certain information concerning
our principal properties as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Approximate Area in
|
Location
|
|
Primary Use
|
|
Square Feet
|
|
Seoul Metropolitan Area
|
|
Corporate Headquarters
|
|
|
988,455
|
|
|
|
Regional Headquarters
|
|
|
1,095,992
|
|
|
|
Customer Service Centers
|
|
|
384,223
|
|
|
|
Training Centers
|
|
|
397,574
|
|
|
|
Central Research and Development Center
|
|
|
482,725
|
|
|
|
Others
|
|
|
639,791
|
|
Busan
|
|
Regional Headquarters
|
|
|
363,272
|
|
|
|
Others
|
|
|
237,057
|
|
Daegu
|
|
Regional Headquarters
|
|
|
153,578
|
|
|
|
Others
|
|
|
317,440
|
|
Cholla and Jeju Provinces
|
|
Regional Headquarters
|
|
|
265,595
|
|
|
|
Others
|
|
|
359,784
|
|
Choongchung Province
|
|
Regional Headquarters
|
|
|
459,240
|
|
|
|
Others
|
|
|
480,555
|
|
In December 2004, we constructed a building with an area of
approximately 82,624 square feet, of which we have full
ownership, for use as our corporate headquarters. We relocated
our corporate offices into the new building in January 2005. In
addition, we own or lease various locations for cell sites and
switching equipment. We do not anticipate that we will encounter
material difficulties in meeting our future needs for any
existing or prospective leased space for our cell sites. See
Item 4.B. Business Overview Digital
Cellular Network Network Infrastructure.
50
We maintain a range of insurance policies to cover our assets
and employees, including our directors and officers. We are
insured against business interruption, fire, lightening,
flooding, theft, vandalism, public liability and certain other
risks that may affect our assets and employees. We believe that
the types and amounts of our insurance coverage are in
accordance with general business practices in Korea.
|
|
Item 4A.
|
UNRESOLVED
STAFF COMMENTS
|
We do not have any unresolved comments from the
U.S. Securities and Exchange Commission, or the SEC, staff
regarding our periodic reports under the Exchange Act.
|
|
Item 5.
|
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
|
You should read the following discussion together with our
consolidated financial statements and the related notes thereto
which appear elsewhere in this annual report. We prepare our
financial statements in accordance with Korean GAAP, which
differs in some respects from U.S. GAAP. Notes 33 and
34 of the notes to our consolidated financial statements provide
a description of the significant differences between Korean GAAP
and U.S. GAAP as they relate to us and provide a
reconciliation to U.S. GAAP of our net income and
shareholders equity for fiscal years 2006, 2007 and 2008.
In addition, you should read carefully the section titled
Critical Accounting Policies, Estimates and
Judgments as well as note 2 of the notes to our
consolidated financial statements which provide summaries of
certain critical accounting policies that require our management
to make difficult, complex or subjective judgments relating to
matters which are highly uncertain and that may have a material
impact on our financial conditions and results of operations.
|
|
Item 5.A.
|
Operating
Results
|
Overview
We earn revenue principally from initial subscription fees and
monthly plan-based fees, usage charges for outgoing voice calls,
usage charges for wireless data services and value-added service
fees paid by subscribers to our wireless services and
interconnection fees paid to us by other telecommunications
operators for use of our network by their customers and
subscribers. Our revenue amount depends principally upon the
number of our wireless subscribers, the rates we charge for our
services, the frequency and volume of subscriber usage of our
services and the terms of our interconnection with other
telecommunications operators. Government regulation also affects
our revenues.
A number of recent developments have had or are expected to have
a material impact on our results of operations, financial
condition and capital expenditures. These developments include:
Market Share Limitations. We have historically
been, and continue to be, the market leader in the wireless
telecommunications sector in terms of number of subscribers. Our
wireless subscriber base has steadily increased over the years
from approximately 10.1 million subscribers at the end of
1999 to approximately 23.0 million subscribers at the end
of 2008. As a result of our dominant market share, we have been
designated by the Government as the market dominant
service provider in respect of our wireless
telecommunications business. As such, we are subject to
additional regulation to which certain of our competitors are
not subject. For a more detailed discussion of Government
mandated and voluntary measures we have undertaken to limit our
market share, see Item 4.B. Business
Overview Subscribers Market Share
Limitations and Item 4.D. Risk
Factors We are subject to additional regulation as a
result of our dominant market position in the wireless
telecommunications sector, which could harm our ability to
compete effectively. While we are no longer subject to any
market share limitations, our strategy is to maintain our market
share at current levels.
Number Portability and Common Prefix Identification
System. In January 2003, the MIC announced a plan
to implement number portability with respect to wireless
telecommunications service in Korea. The number portability
system allows wireless subscribers to switch wireless service
operators while retaining the same mobile phone number. In order
to manage the availability of phone numbers efficiently and to
secure phone number resources for new services, in January 2004,
the MIC also began implementing a plan to integrate all mobile
telephone numbers under the common prefix identification number
010, including by gradually retracting the
51
current mobile service identification numbers that had been
unique to each wireless telecommunications service provider. All
new subscribers have been given the 010 prefix
starting January 2004.
We believe that the adoption of the common prefix identification
system has had, and may continue to have, a greater negative
effect on us than on our competitors because, historically,
011 has had a very high brand recognition in Korea
as the premium wireless telecommunications service. Adoption of
the number portability system has resulted in, and may continue
to result in, increased competition among wireless service
providers and higher costs as a result of maintaining the number
portability system, increased subscriber deactivations,
increased churn rate and higher marketing costs. For a more
detailed discussion of the common prefix identification number
plan, see Item 4.B. Business Overview
Subscribers Number Portability and
Item 3.D. Risk Factors Our businesses are
subject to extensive Government regulation and any change in
Government policy relating to the telecommunications industry
could have a material adverse effect on our results of
operations, financial condition and cash flows.
Handset Subsidies. In March 2006, the MIC
partially lifted, and in March 2008 fully lifted, the
prohibition on the provision of handset subsidies, which had
been in place since June 2000, and began to allow mobile service
providers to subsidize the purchase of new handsets by certain
qualifying customers. As a result of the MICs decision to
allow handset subsidies, we have faced increased competition
from other mobile service providers. In addition, in order to
compete more effectively, we have begun providing such handset
subsidies, which has increased, and may continue to increase,
our marketing expenses. Since April 2008, we have also begun
offering installment payment plans for new handset purchases by
our new or existing subscribers, which has increased, and may
continue to increase, our capital requirements. For a more
detailed discussion of the change in handset subsidy regulation,
see Item 4.B. Business Overview Law and
Regulation Competition Regulation
Prohibitions on Handset Subsidies.
Changes in Tariffs and Interconnection
Fees. Under current regulations, we must obtain
prior KCC approval of the rates and fees we charge subscribers
for our cellular services. Generally, the rates we charge for
our services have been declining. We can give no assurance that
rate changes will not negatively affect our results of
operations. For more information about the rates we charge, see
Item 4.B. Business Overview Revenues,
Rates and Facility Deposits and Item 4.B.
Business Overview Law and Regulation
Competition Regulation Rate Regulation.
In addition, our wireless telecommunications services depend, in
part, on our interconnection arrangements with domestic and
international fixed-line and other wireless networks. Charges
for interconnection affect our revenues and operating results.
The KCC determines the basic framework for interconnection
arrangements in Korea and has changed this framework several
times in the past. We cannot assure you that we will not be
adversely affected by future changes in the KCCs
interconnection policies. Under our interconnection agreements,
we are required to make payments in respect of calls which
originate from our networks and terminate in the networks of
other Korean telecommunications operators, and the other
operators are required to make payments to us in respect of
calls which originate in their networks and terminate in our
network. For more information about our interconnection revenue
and expenses, see Item 4.B. Business
Overview Interconnection.
Average Monthly Outgoing Voice Minutes and Revenue per
Subscriber. The following table sets forth
selected information concerning our wireless telecommunications
network during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Outgoing voice minutes (in thousands)(1)
|
|
|
47,980,107
|
|
|
|
51,295,166
|
|
|
|
54,080,231
|
|
Average monthly outgoing voice minutes per subscriber(2)
|
|
|
201
|
|
|
|
201
|
|
|
|
200
|
|
Average monthly revenue per subscriber, excluding
interconnection revenue(3)
|
|
W
|
40,220
|
|
|
W
|
40,154
|
|
|
W
|
38,526
|
|
Average monthly revenue per subscriber, including
interconnection revenue(4)
|
|
W
|
44,599
|
|
|
W
|
44,416
|
|
|
W
|
43,016
|
|
52
|
|
|
(1) |
|
Does not include minutes of incoming calls or minutes of use
relating to the use of SMS, MMS and other wireless data services. |
|
(2) |
|
The average monthly outgoing voice minutes per subscriber is
derived by dividing the total minutes of outgoing voice usage
for the period by the monthly average number of subscribers for
the period, then dividing that number by the number of months in
the period. The monthly average number of subscribers is derived
by dividing (i) the sum of the average number of
subscribers for each month in the period, calculated as the
average of the number of subscribers on the first and last days
of the relevant month, by (ii) the number of months in the
period. |
|
(3) |
|
The average monthly revenue per subscriber, excluding
interconnection revenue, is derived by dividing the sum of total
initial subscription fees, monthly plan-based fees, usage
charges for outgoing voice calls, usage charges for wireless
data services, value-added service fees and other miscellaneous
revenues for the period by the monthly average number of
subscribers for the period, then dividing that number by the
number of months in the period. |
|
(4) |
|
The average monthly revenue per subscriber, including
interconnection revenue, is derived by dividing the sum of total
initial subscription fees, monthly plan-based fees, usage
charges for outgoing voice and wireless data transmissions,
charges for purchases of digital contents, value-added service
fees, other miscellaneous revenues and interconnection revenue
for the period by the monthly average number of subscribers for
the period, then dividing that number by the number of months in
the period. |
Our average monthly outgoing minutes of voice traffic per
subscriber remained constant in 2007 and decreased by 0.5% in
2008. We believe that this trend principally reflects the
existing high penetration rate of wireless services in Korea and
the general maturation of the Korean wireless market.
Our average monthly revenue per subscriber, excluding
interconnection revenue, decreased by 4.1% to Won 38,526 in
2008 from Won 40,154 in 2007 and decreased by 0.2% to Won 40,154
in 2007 from Won 40,220 in 2006. The decrease in average monthly
revenue per subscriber in 2008 was due to decreases in average
monthly revenue per subscriber from usage charges for wireless
data services, usage charges for outgoing voice calls and
initial subscription fees, partially offset by increases in
average monthly revenue per subscriber from monthly plan-based
fees and value-added and other service fees, as further
described in Operating Results below.
Acquisition of SK Broadband. In March 2008, we
completed the acquisition of an additional 38.7% equity stake in
SK Broadband, Koreas second-largest fixed-line operator,
for approximately Won 1.1 trillion, increasing our total equity
interest in SK Broadband to 43.4%. Following the acquisition, SK
Broadband became our consolidated subsidiary under Korean GAAP
and our results of operations in 2008 include those of SK
Broadband. For the year ended December 31, 2008, SK
Broadband and its subsidiaries had revenues of Won
1,886.3 billion and net loss of Won 178.3 billion.
Through SK Broadband, we currently provide broadband Internet
access service and other Internet-related services, including
video-on-demand
and IP TV services, as well as fixed-line telephone services.
Our results of operations may be adversely affected if we fail
to integrate SK Broadbands fixed-line telecommunications
and broadband Internet services with our existing products and
services or fail to retain SK Broadbands existing
customers. While we are hoping to benefit from a range of
synergies from this acquisition, including by offering our
customers bundled fixed-line and mobile telecommunications
services, we may not be able to realize those expected benefits
in the near term, or at all. For a more detailed discussion of
our acquisition of SK Broadband, see Item 4.B.
Business Overview Our Services Broadband
Internet and Fixed-line Telephone Services and
Item 3.D. Risk Factors Our growth
strategy calls for significant investments in new businesses and
regions, including businesses and regions in which we have
limited experience.
Operating Expenses and Operating Margins. Our
operating expenses consist principally of commissions paid to
authorized dealers and our subscribers (including, beginning in
March 2006, handset subsidies), depreciation and amortization,
network interconnection, labor costs, leased line expenses,
advertising expenses and rent expenses. Operating income
represented 23.8% of our operating revenue in 2006, 17.7% in
2007 and 12.5% in 2008. We cannot assure you that our operating
margin will not decrease in future periods.
53
Reclassification
of Prior Year Financial Statements
Through December 31, 2007, the Korean Accounting Standards
Board issued Statements of Korea Accounting Standards
(SKAS) No. 1 through No. 25. As of
January 1, 2007, we adopted SKAS No. 11, SKAS
No. 21 through SKAS No. 23 and SKAS No. 25.
Pursuant to adoption of SKAS No. 21, certain amounts that
had been classified as capital adjustments through 2006 are now
classified as accumulated other comprehensive income (loss). In
addition, certain amounts that had been classified as investment
assets through 2006 are now classified as other non-current
assets. The consolidated balance sheet as of December 31,
2006 appearing in our consolidated financial statements included
elsewhere in this report has been reclassified in accordance
with SKAS No. 21. Pursuant to adoption of SKAS No. 25,
net income is allocated to equity holders of the parent and
minority interest. In addition, when a subsidiary is purchased
during the fiscal year, the subsidiarys statement of
income is included in consolidation as though it had been
acquired at the beginning of the fiscal year, and
pre-acquisition earnings are presented as a separate deduction
within the consolidated statements of income. The consolidated
statement of income for the year ended December 31, 2006
appearing in our consolidated financial statements included
elsewhere in this report has been reclassified in accordance
with SKAS No. 25.
As a result of our sale of HELIO to Virgin Mobile USA, Inc. in
August 2008, HELIOs results of operations have been
classified as discontinued operations under Korean GAAP. The
consolidated statement of income and the consolidated statement
of cash flows for the year ended December 31, 2007
appearing in our consolidated financial statements included
elsewhere in this report have been reclassified to present
HELIOs results of operations and cash flow activities as
separate single-line items.
Operating
Results
The following table sets forth selected income statement data,
including data expressed as a percentage of operating revenue,
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In billions of Won, except percentage data)
|
|
|
Operating Revenue
|
|
W
|
11,028.0
|
|
|
|
100.0
|
%
|
|
W
|
11,863.4
|
|
|
|
100.0
|
%
|
|
W
|
14,021.0
|
|
|
|
100.0
|
%
|
Operating Expenses
|
|
|
8,406.9
|
|
|
|
76.2
|
|
|
|
9,761.4
|
|
|
|
82.3
|
|
|
|
12,268.5
|
|
|
|
87.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
2,621.1
|
|
|
|
23.8
|
|
|
|
2,102.0
|
|
|
|
17.7
|
|
|
|
1,752.5
|
|
|
|
12.5
|
|
Other Income
|
|
|
284.9
|
|
|
|
2.6
|
|
|
|
861.9
|
|
|
|
7.3
|
|
|
|
1,057.0
|
|
|
|
7.5
|
|
Other Expenses
|
|
|
884.4
|
|
|
|
8.0
|
|
|
|
678.1
|
|
|
|
5.7
|
|
|
|
1,550.8
|
|
|
|
11.1
|
|
Income Before Income Taxes and Minority Interest
|
|
|
2,021.6
|
|
|
|
18.3
|
|
|
|
2,285.8
|
|
|
|
19.3
|
|
|
|
1,258.7
|
|
|
|
9.0
|
|
Income Taxes
|
|
|
572.0
|
|
|
|
5.2
|
|
|
|
694.5
|
|
|
|
5.9
|
|
|
|
298.9
|
|
|
|
2.1
|
|
Preacquisition Net Loss of Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
21.1
|
|
|
|
0.2
|
|
|
|
32.7
|
|
|
|
0.2
|
|
Loss from Discontinued Operation(1)
|
|
|
|
|
|
|
|
|
|
|
(50.1
|
)
|
|
|
(0.4
|
)
|
|
|
(20.2
|
)
|
|
|
(0.1
|
)
|
Net Income Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority Interest
|
|
|
1,451.5
|
|
|
|
13.2
|
|
|
|
1,648.9
|
|
|
|
13.9
|
|
|
|
1,215.7
|
|
|
|
8.7
|
|
Minority Interests
|
|
|
(1.9
|
)
|
|
|
(0.0
|
)
|
|
|
(86.6
|
)
|
|
|
(0.7
|
)
|
|
|
(243.4
|
)
|
|
|
(1.7
|
)
|
Net Income
|
|
W
|
1,449.6
|
|
|
|
13.1
|
%
|
|
W
|
1,562.3
|
|
|
|
13.2
|
%
|
|
W
|
972.3
|
|
|
|
6.9
|
%
|
Depreciation and Amortization(2)
|
|
W
|
1,553.6
|
|
|
|
14.1
|
%
|
|
W
|
1,822.0
|
|
|
|
15.4
|
%
|
|
W
|
2,599.8
|
|
|
|
18.5
|
%
|
|
|
|
(1) |
|
Relates to results of operations of HELIO, which have been
classified as discontinued operations after our sale of HELIO to
Virgin Mobile USA, Inc. in August 2008. |
|
(2) |
|
Excludes the depreciation and amortization allocated to internal
research and development costs and manufacturing costs of Won
144.8 billion, Won 149.3 billion and Won
159.5 billion for the years ended December 31, 2006,
2007 and 2008, respectively. |
54
The following table sets forth additional revenue information
about our operations during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
of Total
|
|
|
|
|
|
of Total
|
|
|
|
|
|
of Total
|
|
|
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
|
|
|
|
(In billions of Won, except percentages)
|
|
|
Cellular Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless Services(1)
|
|
W
|
9,482.2
|
|
|
|
86.0
|
%
|
|
W
|
9,953.9
|
|
|
|
83.9
|
%
|
|
W
|
10,240.6
|
|
|
|
73.0
|
%
|
|
|
|
|
Interconnection
|
|
|
1,033.4
|
|
|
|
9.4
|
|
|
|
1,062.2
|
|
|
|
9.0
|
|
|
|
1,149.2
|
|
|
|
8.2
|
|
|
|
|
|
Total Cellular Revenue
|
|
|
10,515.6
|
|
|
|
95.4
|
|
|
|
11,016.1
|
|
|
|
92.9
|
|
|
|
11,389.8
|
|
|
|
81.2
|
|
|
|
|
|
Broadband Internet and Fixed-line Telephone Service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,821.8
|
|
|
|
13.0
|
|
|
|
|
|
Other Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Calling Service(2)
|
|
|
176.4
|
|
|
|
1.6
|
|
|
|
211.8
|
|
|
|
1.8
|
|
|
|
243.1
|
|
|
|
1.7
|
|
|
|
|
|
Portal Service(3)
|
|
|
165.6
|
|
|
|
1.5
|
|
|
|
178.7
|
|
|
|
1.5
|
|
|
|
216.4
|
|
|
|
1.5
|
|
|
|
|
|
Miscellaneous(4)
|
|
|
170.4
|
|
|
|
1.5
|
|
|
|
456.8
|
|
|
|
3.9
|
|
|
|
349.9
|
|
|
|
2.5
|
|
|
|
|
|
Total Other Revenue
|
|
|
512.4
|
|
|
|
4.6
|
|
|
|
847.3
|
|
|
|
7.1
|
|
|
|
809.4
|
|
|
|
5.8
|
|
|
|
|
|
Total Operating Revenue
|
|
W
|
11,028.0
|
|
|
|
100.0
|
%
|
|
W
|
11,863.4
|
|
|
|
100.0
|
%
|
|
W
|
14,021.0
|
|
|
|
100.0
|
%
|
|
|
|
|
Total Operating Revenue Growth
|
|
|
2.9
|
%
|
|
|
|
|
|
|
7.6
|
%
|
|
|
|
|
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Wireless services revenue includes initial subscription fees,
monthly plan-based fees, usage charges for outgoing voice calls,
usage charges for wireless data services, value-added-service
fees and other miscellaneous cellular revenues, including
international interconnection charges, interest on overdue
subscriber accounts (net of telephone tax) and revenue from the
sale and licensing of Internet platform solutions. |
|
(2) |
|
Provided by SK Telink Co. See Business Our
Services Other Products and Services
International Calling Services. |
|
(3) |
|
Portal service revenue attributable to our subsidiaries
(including SK Communications, Paxnet Co., Ltd., which operates a
financial portal site, and
U-Land
Company Limited, the Hong Kong-incorporated holding company
through which we hold our interest in ViaTech). |
|
(4) |
|
Miscellaneous revenue attributable to our subsidiaries
(including Commerce Planet Co., Ltd., which operates neotam.com,
an online outlet shopping mall, Morning365.com, an online
bookstore, and cherrya.com, an online cosmetics store; and TU
Media). |
2008
Compared to 2007
Operating Revenue. Our operating revenue
increased by 18.2% to Won 14,021.0 billion in 2008 from
Won 11,863.4 billion in 2007, principally due to the
inclusion of Won 1,886.3 billion of revenue in 2008 of
SK Broadband and its subsidiaries, which became our
consolidated subsidiaries in April 2008, and, to a lesser
extent, due to a 3.4% increase in our cellular revenue to Won
11,389.8 billion in 2008 from Won 11,016.1 billion
in 2007.
The increase in our cellular revenue was principally due to an
increase in our wireless services revenue, as well as an
increase in our interconnection revenue. Wireless services
revenue increased 2.9% to Won 10,240.6 billion in 2008 from
Won 9,953.9 billion in 2007, primarily as a result of a
6.8% increase in our average subscriber base in 2008 over 2007,
as well as increased subscriptions to service plans with higher
monthly charges, partially offset by a decrease in revenue from
wireless data services primarily as a result of the reduction of
the SMS charge rate implemented in January 2008.
Our average monthly revenue per subscriber, excluding
interconnection revenue, decreased by 4.1% to Won 38,526 in
2008 from Won 40,154 in 2007, which reflects the net effect of
several factors, including decreases in average monthly revenue
per subscriber from usage charges for wireless data services,
usage charges for
55
outgoing voice calls and initial subscription fees, partially
offset by increases in average monthly revenue per subscriber
from monthly plan-based fees and value-added and other service
fees. Our average monthly revenue per subscriber from wireless
data services, which includes usage charges for SMS and wireless
Internet services, decreased in 2008, attributable mainly to the
reduction of the SMS charge rate implemented in January 2008.
Our average monthly revenue per subscriber from usage charges
for outgoing calls decreased in 2008, primarily due to discounts
we offered for voice calls between subscribers. Our average
monthly minutes per user declined slightly to 200 minutes in
2008 from 201 minutes in 2007. Our average monthly revenue per
subscriber from monthly plan-based fees increased in 2008,
primarily as a result of increased subscriptions to service
plans with higher monthly charges. Our average monthly revenue
per subscriber from value-added and other service fees increased
in 2008, primarily due to an increase in revenues from global
roaming services.
Interconnection revenue increased by 8.2% to Won
1,149.2 billion in 2008 from Won 1,062.2 billion in
2007. The increase was due to increases in our interconnection
rates in 2008, as well as an increase in incoming call volume in
2008. See Item 4.B. Business Overview
Interconnection. Our average monthly revenue per
subscriber, including interconnection revenue, decreased by 3.2%
to Won 43,016 in 2008 from Won 44,416 in 2007.
Portal service revenues increased by 21.1% to Won
216.4 billion in 2008 from Won 178.7 billion in 2007,
primarily due to increased use by our subscribers of our
wireless Internet contents services, such as NATE and Cyworld
services.
International call service revenues increased by 14.8% to Won
243.1 billion in 2008 from Won 211.8 billion in 2007
as a result of general increases in outbound and inbound
international call traffic volume.
Miscellaneous revenue decreased by 23.4% to Won
349.9 billion in 2008 from Won 456.8 billion in 2007,
primarily as a result of decreases in revenues of our
subsidiaries engaged in electronic commerce and exclusion of
Aircross Co., Ltd. from consolidation.
Operating Expenses. Our operating expenses in
2008 increased by 25.7% to Won 12,268.5 billion from
Won 9,761.4 billion in 2007, primarily due to the
inclusion of expenses of Won 1,982.7 billion in 2008 of
SK Broadband and its subsidiaries, as well as increases in
commissions paid, depreciation and amortization and
interconnection expenses.
Commissions paid, including to our authorized dealers and to our
subscribers, increased by 20.5% to Won 4,884.8 billion
in 2008 from Won 4,055.1 billion in 2007, primarily
attributable to the inclusion of SK Broadband and its
subsidiaries commissions paid of Won 602.9 billion,
as well as an increase in handset subsidies paid to our existing
subscribers who changed their handsets and an increase in
expenses relating to our alliance arrangements with businesses
that agree to offer benefits to our subscribers. An increase in
non-marketing related commissions paid for global roaming
services, in line with increased usage of our expanded global
voice and data roaming services, also contributed to the
increase in commissions paid.
Depreciation and amortization increased 42.7% to Won
2,599.8 billion in 2008 from Won 1,822.0 billion in
2007, primarily due to the inclusion of SK Broadband and its
subsidiaries depreciation and amortization of
Won 521.1 billion, together with the continued high
level of capital expenditures related to expansion and upgrade
of our WCDMA network and an increase in our capital expenditures
related to expansion and upgrade of our WiBro network.
Interconnection expenses increased by 8.2% to Won
1,149.2 billion in 2008 from Won 1,062.2 billion in
2007, primarily due to higher subscriber numbers resulting in
higher call volume. See Item 4.B. Business
Overview Interconnection.
Operating Income. Our operating income
decreased by 16.6% to Won 1,752.5 billion in 2008 from
Won 2,102.0 billion in 2007 due to the factors
discussed above.
Other Income. Other income consists primarily
of foreign exchange and translation gains and gains on
transactions and valuation of currency swaps, as well as
interest income, dividend income and equity in earnings of
affiliates. Other income increased by 22.6% to Won
1,057.1 billion in 2008 from Won 861.9 billion in
2007, due primarily to foreign exchange and translation gains
for our investment in foreign currency-denominated assets and
gains on valuation of currency swaps hedging our foreign
currency-denominated debt, partially offset by a decrease
56
in gain on conversion of convertible bonds, which in 2007
included a one-time gain of Won 373.1 billion derived from
our conversion of China Unicom convertible bonds into shares,
and a decrease in equity in earnings of affiliates, which in
2007 reflected the recognition of previously unrealized gain on
the valuation of SK C&Cs investment in the common
stock of SK Energy Co., Ltd. As a percentage of operating
revenue, other income increased to 7.5% in 2008 compared to 7.3%
in 2007.
Other Expenses. Other expenses consist
primarily of losses on transactions and valuation of currency
swaps, interest and discount expenses, impairment losses on
investment securities and foreign exchange and translation
losses. Other expenses increased by 128.7% to Won
1,550.8 billion in 2008 from Won 678.1 billion in
2007. This increase was primarily attributable to losses on
valuation of currency swaps hedging our foreign
currency-denominated assets, foreign exchange and translation
losses for our foreign currency-denominated debt and an
impairment loss of Won 201.2 billion on our investment in
LG Powercomm Co., Ltd. For a discussion of the effect of
fluctuations in foreign exchange rates and our hedging
activities, see Item 11. Quantitative and Qualitative
Disclosure about Market Risk. As a percentage of operating
revenue, other expenses increased to 11.1% in 2008 compared to
5.7% in 2007.
Income Tax. Provision for income taxes
decreased by 57.0% to Won 298.9 billion in 2008 from
Won 694.5 billion in 2007. Our effective tax rate in
2008 decreased to 23.7% from an effective tax rate of 30.4% in
2007. The decreases in income tax and effective tax rate are
attributable primarily to the decrease in our income before
income tax, a tax refund for prior periods, decrease in
valuation allowance as a result of the sale of our investment in
HELIO and the decrease in deferred tax liabilities due to the
reduction of corporate income tax rate in December 2008 from the
current rate of 25% to 22% for 2009 and 20% for 2010 and
afterwards. See note 17 of the notes to our
consolidated financial statements.
Net Income. Principally as a result of the
factors discussed above, our net income, after adjusting for
minority interests, decreased by 37.8% to Won 972.3 billion
in 2008 from Won 1,562.3 billion in 2007. Net income as a
percentage of operating revenues was 6.9% in 2008 compared to
13.2% in 2007. Won 32.7 billion of pre-acquisition net loss
of SK Broadband, which was newly consolidated as of
April 1, 2008, was added to, and Won 20.2 billion of
loss from discontinued operation attributable to HELIO was
deducted from, the calculation of net income for 2008.
2007
Compared to 2006
Operating Revenue. Our operating revenue
increased by 7.6% to Won 11,863.4 billion in 2007 from
Won 11,028.0 billion in 2006, principally due to a
4.8% increase in our cellular revenue to Won
11,016.1 billion in 2007 from Won 10,515.6 billion in
2006 and a 168.1% increase in miscellaneous revenue to Won
456.8 billion in 2007 from Won 170.4 billion in 2006.
The increase in our cellular revenue was principally due to an
increase in our wireless services revenue, as well as an
increase in our interconnection revenue. Wireless services
revenue increased 5.0% to Won 9,953.9 billion in 2007 from
Won 9,482.2 billion in 2006, primarily as a result of an
8.4% increase in the number of our wireless subscribers to
approximately 22.0 million subscribers as of
December 31, 2007 from approximately 20.3 million
subscribers as of December 31, 2006, as well as increased
subscriptions to service plans with higher monthly charges.
Our average monthly revenue per subscriber, excluding
interconnection revenue, remained relatively flat in 2007
compared to 2006, decreasing by 0.2% to Won 40,154 in 2007 from
Won 40,220 in 2006, which reflects the net effect of several
offsetting factors, including decreases in average monthly
revenue per subscriber from usage charges for outgoing voice
calls, usage charges for wireless data services and
interconnection fees, partially offset by increases in average
monthly revenue per subscriber for initial subscription fees,
monthly plan-based fees and value-added and other service fees.
Our average monthly revenue per subscriber from usage charges
for outgoing calls decreased in 2007, primarily due to discounts
we offered for voice calls between subscribers. Our average
monthly minutes per user remained constant at 201 minutes in
2007. Our average monthly revenue per subscriber from wireless
data services, which includes usage charges for SMS and wireless
Internet services, decreased in 2007, primarily reflecting
discounts we implemented, beginning in January 2007, on wireless
data usage charges. Our average monthly revenue per subscriber
for initial subscription fees increased in 2007, primarily
reflecting
57
increased subscriber numbers. Our average monthly revenue per
subscriber from monthly plan-based fees increased in 2007,
primarily as a result of increased subscriptions to service
plans with higher monthly charges.
Interconnection revenue increased by 2.8% to Won
1,062.2 billion in 2007 from Won 1,033.4 billion in
2006. The increase was primarily due to increases in
mobile-to-mobile interconnection traffic volume, partially
offset by decreases in interconnection rates. See
Item 4.B. Business Overview
Interconnection. Our average monthly revenue per
subscriber, including interconnection revenue, decreased
slightly by 0.4% to Won 44,416 in 2007 from Won 44,599 in 2006.
Portal service revenues increased by 7.9% to Won
178.7 billion in 2007 from Won 165.6 billion in 2006,
primarily due to increased revenues of our subsidiary, SK
Communications, in part as a result of the merger of Empas into
SK Communications in November 2007.
International call service revenues increased by 20.1% to Won
211.8 billion in 2007 from Won 176.4 billion in 2006
as a result of general increases in outbound and inbound
international call traffic volume.
Miscellaneous revenue increased by 168.1% to Won
456.8 billion in 2007 from Won 170.4 billion in 2006,
primarily as a result of the inclusion of TU Media as a
consolidated subsidiary beginning in April 2007, as well as
revenues from our subsidiaries neotam.com, an online outlet
shopping mall, acquired in August 2007; Morning365.com, an
online bookstore, acquired in July 2007; and cherrya.com, on
online cosmetics store acquired in August 2007.
Operating Expenses. Our operating expenses in
2007 increased by 16.1% to Won 9,761.4 billion from Won
8,406.9 billion in 2006, primarily due to increases in
commissions paid, depreciation and amortization, cost of goods
sold and labor costs.
Commissions paid, including to our authorized dealers, increased
by 23.1% to Won 4,055.1 billion in 2007 from Won
3,293.2 billion in 2006, primarily attributable to our
increased marketing efforts to broaden our WCDMA subscriber
base, as well as increased commissions paid to authorized
dealers in connection with new subscriptions and, to a lesser
extent, increases in non-marketing related commissions paid for
global roaming services, in line with increased usage of our
expanded global voice and data roaming services.
Depreciation and amortization increased 17.3% to Won
1,822.0 billion in 2007 from Won 1,553.6 billion in
2006, primarily due to an increase in our capital expenditures
related to expansion and upgrade of our WCDMA network services.
Cost of goods sold increased by 97.0% to Won 239.1 billion
in 2007 from Won 121.4 billion in 2006, primarily due to
the inclusion of inventory costs of neotam.com, Morning365.com
and cherrya.com.
Labor costs increased by 10.8% to Won 544.7 billion in 2007
from Won 491.8 billion in 2006, primarily as a result of an
increase in salaries and an increase in the number of our
employees, as well as the inclusion of TU Media as consolidated
subsidiaries in April 2007.
Operating Income. Our operating income
decreased by 19.8% to Won 2,102.0 billion in 2007 from
Won 2,621.1 billion in 2006 due to the factors
discussed above.
Other Income. Other income consists primarily
of gain on conversion of convertible bonds and equity in
earnings of affiliates, as well as interest income, dividend
income and commissions. Other income increased by 202.6% to Won
861.9 billion in 2007 from Won 284.9 billion in 2006,
due primarily to a one-time gain of Won 373.1 billion
derived from our conversion of China Unicom convertible bonds
into shares in August 2007, as well as a more than four-fold
increase in equity in earnings of affiliates to Won
247.4 billion in 2007 from Won 45.8 billion in
2006. Such increase in equity in earnings of affiliates in 2007
was primarily attributable to a more than five-fold increase in
equity in earnings of SK C&C to Won 230.3 billion in
2007 from Won 37.8 billion in 2006, which was primarily a
result of the recognition of previously unrealized gain on the
valuation of SK C&Cs investment in the common stock
of SK Energy Co., Ltd. in connection with a change in the
accounting method used to account for such shares from
available-for-sale securities to securities accounted for using
the equity method, in the third quarter of 2007. Such change in
accounting treatment followed the corporate reorganization of
SK Corporation in July 2007 and subsequent changes in
shareholdings among SK Group member companies,
58
including changes in SK C&Cs equity interests in
SK Holdings and SK Energy. See Item 7.A. Major
Shareholders for more information regarding the corporate
reorganization of the entity formerly known as
SK Corporation. In the fourth quarter of 2007, our equity
interest in SK C&C was also reclassified to
available-for-sale securities from equity securities accounted
for using the equity method. See note 4(b) of the notes to
our consolidated financial statements for more information
regarding the reclassification of our investment in
SK C&C. As a percentage of operating revenue, other
income increased to 7.3% in 2007 compared to 2.6% in 2006.
Other Expenses. Other expenses consist
primarily of interest and discount expenses, equity in losses of
affiliates, external research and development costs and
donations. Other expenses decreased by 23.3% to
Won 678.1 billion in 2007 from Won 884.4 billion
in 2006. This decrease was primarily attributable to a one-time
payment of Won 144.0 billion in special severance
indemnities related to a change in our severance payment policy
in 2006 compared with no such payment in 2007. For a discussion
of the change in our severance payment policy in 2006, see
Item 6.D. Employees Employment Stock
Ownership Association and Other Benefits. Equity in losses
of affiliates also decreased by 17.0% to Won 175.5 billion
in 2007 from Won 211.5 billion in 2006, primarily due to
losses of Won 55.9 billion from our investments in Pantech
in 2006, which caused our investments in Pantech to be reduced
to zero, compared to no such losses in 2007, as well as a 76.6%
decrease in losses of TU Media to Won 5.9 billion in
2007 from Won 25.1 billion in 2006. As a percentage of
operating revenue, other expenses decreased to 5.7% in 2007
compared to 8.0% in 2006.
Income Tax. Provision for income taxes
increased by 21.4% to Won 694.5 billion in 2007 from
Won 572.0 billion in 2006. Our effective tax rate in
2007 increased to 30.4% from an effective tax rate of 28.3% in
2006. See note 17 of the notes to our consolidated
financial statements.
Net Income. Principally as a result of the
factors discussed above, our net income, after adjusting for
minority interests, increased by 7.8% to Won
1,562.3 billion in 2007 from Won 1,449.6 billion in
2006. Net income as a percentage of operating revenues was 13.2%
in 2007 compared to 13.1% in 2006. Won 21.1 billion of
pre-acquisition
net loss of TU Media, which was newly consolidated as of
April 1, 2007, was added to, and Won 50.1 billion
of loss from discontinued operation attributable to HELIO was
deducted from, the calculation of net income for 2007.
|
|
Item 5.B.
|
Liquidity
and Capital Resources
|
Capital
Resources
Liquidity
We had a working capital (current assets minus current
liabilities) surplus of Won 1,455.5 billion,
Won 1,796.2 billion and Won 793.6 billion as of
December 31, 2006, 2007 and 2008, respectively.
We had cash, cash equivalents, short-term financial instruments
and trading securities of Won 1,249.4 billion as of
December 31, 2006, Won 1,669.4 billion as of
December 31, 2007 and Won 1,746.8 billion as of
December 31, 2008. We had outstanding short-term borrowings
of Won 58.3 billion as of December 31, 2006, Won
24.6 billion as of December 31, 2007 and Won
627.7 billion as of December 31, 2008. As of
December 31, 2008, we had credit lines with several local
banks that provided for borrowings of up to Won
2,171.8 billion, of which Won 1,358.5 billion was
outstanding and Won 813.3 billion was available for
borrowing.
Operating cash flow and debt financing have been our principal
sources of liquidity. We had cash and cash equivalents of Won
1,011.5 billion as of December 31, 2008, Won
886.0 billion as of December 31, 2007 and
Won 486.0 billion as of December 31, 2006. We
believe that we have sufficient working capital available to us
for our current requirements and that we have a variety of
alternatives available to us to satisfy our financial
59
requirements to the extent that they are not met by funds
generated by operations, including the issuance of debt
securities and bank borrowings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2006 to 2007
|
|
|
2007 to 2008
|
|
|
|
(In billions of Won, except percentages)
|
|
|
Net Cash Flow from Operating Activities
|
|
W
|
3,589.8
|
|
|
W
|
3,721.7
|
|
|
W
|
3,296.9
|
|
|
W
|
131.9
|
|
|
|
3.7
|
%
|
|
W
|
(424.8
|
)
|
|
|
(11.4
|
)%
|
Net Cash Used in Investing Activities
|
|
|
(2,535.1
|
)
|
|
|
(2,414.9
|
)
|
|
|
(3,875.4
|
)
|
|
|
120.3
|
|
|
|
(4.7
|
)
|
|
|
(1,460.5
|
)
|
|
|
60.5
|
|
Net Cash Provided by (Used in) Financing Activities
|
|
|
(952.4
|
)
|
|
|
(1,041.3
|
)
|
|
|
869.4
|
|
|
|
(88.9
|
)
|
|
|
9.3
|
|
|
|
1,910.7
|
|
|
|
N/A
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Held in Foreign Currencies
|
|
|
(9.3
|
)
|
|
|
6.1
|
|
|
|
37.4
|
|
|
|
15.4
|
|
|
|
N/A
|
|
|
|
31.3
|
|
|
|
512.9
|
|
Net Cash Flow due to Changes in Consolidated Subsidiaries
|
|
|
14.6
|
|
|
|
102.1
|
|
|
|
36.4
|
|
|
|
87.5
|
|
|
|
600.7
|
|
|
|
(65.7
|
)
|
|
|
(64.3
|
)
|
Preacquisition Cash Flows of Subsidiaries(1)
|
|
W
|
|
|
|
W
|
(11.4
|
)
|
|
W
|
17.3
|
|
|
|
(11.4
|
)
|
|
|
N/A
|
|
|
W
|
28.6
|
|
|
|
N/A
|
|
Net Increase in Cash and Cash Equivalents due to Merger(2)
|
|
|
|
|
|
|
50.4
|
|
|
|
|
|
|
|
50.4
|
|
|
|
N/A
|
|
|
|
(50.4
|
)
|
|
|
(100.0
|
)
|
Cash Flows from Discontinued Operation(3)
|
|
|
|
|
|
|
(12.8
|
)
|
|
|
(256.5
|
)
|
|
|
(12.8
|
)
|
|
|
N/A
|
|
|
|
(243.7
|
)
|
|
|
1,907.6
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
W
|
107.6
|
|
|
W
|
400.0
|
|
|
W
|
125.5
|
|
|
W
|
292.4
|
|
|
|
271.7
|
|
|
W
|
(274.5
|
)
|
|
|
(68.6
|
)
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
378.4
|
|
|
|
486.0
|
|
|
|
886.0
|
|
|
|
107.6
|
|
|
|
28.4
|
|
|
|
400.0
|
|
|
|
82.3
|
|
Cash and Cash Equivalents at End of Period
|
|
W
|
486.0
|
|
|
W
|
886.0
|
|
|
W
|
1,011.5
|
|
|
W
|
400.0
|
|
|
|
82.3
|
%
|
|
W
|
125.5
|
|
|
|
14.2
|
%
|
N/A = Not applicable.
|
|
|
(1) |
|
In 2007, we adopted SKAS No. 25. Pursuant to SKAS
No. 25, when a subsidiary is acquired during the year, such
subsidiarys statement of income is included in
consolidation as if it had been acquired at the beginning of the
year, and pre-acquisition earnings (losses) are presented as
deduction (addition) at the bottom of the consolidated
statements of income. In addition, in connection with our
adoption of SKAS No. 25, we have also begun to present
pre-acquisition cash flows of subsidiaries as a separate
deduction (addition) at the bottom of our consolidated
statements of cash flows. |
|
(2) |
|
Net increase in cash and cash equivalents due to merger for the
year ended December 31, 2007 relates to the merger of Empas
into SK Communications in November 2007. |
|
(3) |
|
Relates to cash flow activities of HELIO, which have been
classified as discontinued operations after our sale of HELIO to
Virgin Mobile USA, Inc. in August 2008. |
Net Cash Flow from Operating Activities. Net
cash flow provided by operations was Won 3,589.8 billion in
2006, Won 3,721.7 billion in 2007 and Won
3,296.9 billion in 2008. Net income was Won
1,449.6 billion in 2006, Won 1,562.3 billion in 2007
and Won 972.3 billion in 2008.
Net Cash from Investing Activities. Net cash
used in investing activities was Won 2,535.1 billion in
2006, Won 2,414.9 billion in 2007 and Won
3,875.4 billion in 2008. Cash inflows from investing
activities were Won 714.2 billion in 2006, Won
296.7 billion in 2007 and Won 934.4 billion in 2008.
The primary contributor to such inflows, in 2006, related to
proceeds from the disposal of long-term investment securities of
Won 306.0 billion, largely attributable to the sale of Won
296.4 billion in aggregate amount of currency stabilization
bonds and, in 2007, largely related to the collection of
short-term loans of Won 119.6 billion. Cash inflows in 2008
largely related to proceeds from the disposal of long-term
investment securities of Won 386.7 billion and the
collection of short-term loans of Won 215.1 billion. Cash
outflows for investing activities were Won 3,249.3 billion
in 2006,
60
Won 2,711.6 billion in 2007 and Won
4,809.8 billion in 2008. The primary contributors to the
overall cash outflows for investing activities were expenditures
related to the acquisition of property and equipment, which were
Won 1,498.1 billion in 2006, Won 1,804.1 billion
in 2007 and Won 2,236.9 billion in 2008, all primarily
relating to expenditures in connection with the maintenance and
build-out of our wireless network, including upgrades to and
expansion of our HSDPA-capable WCDMA network, as well as initial
build-out of our WiBro network; increases in equity of
consolidated subsidiaries, which were Won 27.4 billion in
2006, Won 12.5 billion in 2007 and
Won 1,093.1 billion in 2008 (which was primarily due
to our acquisition of shares of SK Broadband in
March 2008); acquisitions of equity securities accounted
for using the equity method, which were Won 244.3 billion
in 2006, Won 76.6 billion in 2007 and Won
601.1 billion in 2008 (which was primarily due to our
investment in SKY Property Management Ltd. of Won
283.4 billion and investment in SK Marketing &
Company Co. Ltd. of Won 190.0 billion); and acquisitions of
long-term investment securities, which were Won
1,127.4 billion in 2006 (which was primarily due to our
purchase in July 2006 of convertible bonds issued by China
Unicom for US$1 billion), Won 371.4 billion in 2007
(which was primarily due to our purchase of beneficiary
certificates for Won 351.4 billion) and Won
31.4 billion in 2008.
Net Cash from Financing Activities. Net cash
used in financing activities was Won 952.4 billion in 2006
and Won 1,041.3 billion in 2007. Net cash provided by
financing activities was Won 869.4 billion in 2008. Cash
inflows from financing activities were primarily driven by
issuances of bonds, which provided cash of Won
385.0 billion in 2006, Won 761.1 billion in 2007 and
Won 1,307.7 billion in 2008. Proceeds from long-term
borrowings of Won 294.8 billion in 2006 and Won
510.6 billion in 2008 and proceeds from short-term
borrowings of Won 51.2 billion in 2006, Won
35.9 billion in 2007 and Won 473.0 billion in 2008
also contributed to cash inflows from financing activities. Cash
outflows for financing activities included payment of dividends,
repayments of current portion of long-term debt, repayment of
long-term borrowings and acquisition and retirement of treasury
stock, among other items. Payment of dividends were Won
662.8 billion in 2006, Won 581.3 billion in 2007 and
Won 682.5 billion in 2008. Repayments of current portion of
long-term debt were Won 815.3 billion in 2006,
Won 907.2 billion in 2007 and Won 558.1 billion
in 2008. Repayment of long-term borrowings were Won
0.4 billion in 2006, Won 93.3 billion in 2007 and Won
193.4 billion in 2008. The acquisition and retirement of
treasury shares also accounted for Won 209.1 billion, Won
118.5 billion and Won 63.5 billion of cash outflows
for financing activities in 2006, 2007 and 2008, respectively.
As of December 31, 2006, we had total long-term debt
(excluding current portion and facility deposits) outstanding of
Won 2,288.3 billion, which included bonds in the amount of
Won 1,995.3 billion and bank and institutional borrowings
in the amount of Won 293.0 billion. We had long-term
facility deposits of Won 21.1 billion as of
December 31, 2006. As of December 31, 2007, we had
total long-term debt (excluding current portion and facility
deposits) outstanding of Won 2,672.1 billion, which
included bonds in the amount of Won 2,348.7 billion and
bank and institutional borrowings in the amount of Won
323.4 billion. We had long-term facility deposits of Won
6.4 billion as of December 31, 2007. As of
December 31, 2008, we had total long-term debt (excluding
current portion and facility deposits) outstanding of Won
4,930.9 billion, which included bonds in the amount of
Won 4,074.4 billion and bank and institutional
borrowings in the amount of Won 856.5 billion. The increase
in our long-term debt in 2008 was primarily due to the inclusion
of SK Broadbands long-term debt (which amounted to Won
1,066.5 billion as of December 31, 2008), as well as
our incurrence of long-term debt to finance the acquisition of
shares of SK Broadband and our subscribers handset
purchases on installment payment plans. We had long-term
facility deposits of Won 4.8 billion as of
December 31, 2008. For a description of our long-term
liabilities, see notes 9, 10, 11 and 22 of the notes to our
consolidated financial statements.
As of December 31, 2008, substantially all of our foreign
currency-denominated long-term debt, which amounted to
approximately 23% of our total outstanding long-term debt,
including current portion as of such date, was denominated in
Dollars. Appreciation of the Won against the Dollar will result
in net foreign exchange and translation gains, while
depreciation of the Won against the Dollar will result in net
foreign exchange and translation losses. Changes in foreign
currency exchange rates will also affect our liquidity because
of the effect of such changes on the amount of funds required
for us to make interest and principal payments on our foreign
currency-denominated debt.
In late May 2004, we issued zero coupon convertible notes with a
maturity of five years in the principal amount of
US$329,450,000, with an initial conversion price of Won 235,625
per share of our common stock, subject to
61
certain redemption rights. Subsequently, the initial conversion
price was adjusted to Won 196,534 per share in accordance with
anti-dilution provisions contained in the terms of the notes.
During the year ended December 31, 2006, convertible notes
in the principal amount of US$25,210,000 were converted into
136,163 shares of our common stock and the principal amount
of the convertible notes decreased from US$329,450,000 to
US$304,240,000. During the year ended December 31, 2007,
holders of a principal amount of US$75,080,000 of convertible
notes exercised their conversion rights. In order not to exceed
the 49% limit on aggregate foreign ownership of our shares, we
converted only a portion of those convertible notes into shares.
See Item 4.B. Business Overview Law and
Regulation Foreign Ownership and Investment
Restrictions and Requirements for a more detailed
discussion of foreign share ownership restrictions. Accordingly,
a principal amount of US$38,820,000 of convertible notes were
converted into 216,347 shares of our common stock. In
addition, we paid Won 43.0 billion in cash to holders of a
principal amount of US$36,260,000 of convertible notes. As a
result of these transactions, the principal amount of the
convertible bonds decreased from US$304,240,000 to
US$229,160,000 in 2007. In 2008, none of the holders exercised
their conversion right. As of December 31, 2008,
1,324,744 shares of common stock were deposited with the
Korea Securities Depository and reserved in favor of the
noteholders conversion rights. In May 2009, we repaid all
outstanding zero coupon convertible notes at their maturity.
In June 2006, we issued floating rate discounted bills in the
aggregate principal amount of Won 200 billion. The
discounted bills have a five-year maturity and an interest rate
based on a
91-day
certificate of deposit yield plus 0.25%. In September and
November 2006, we issued Won-denominated corporate bonds, in
each case, in aggregate principal amount of Won
200 billion. These bonds will mature in September 2016 and
November 2013, respectively, and have annual interest rates of
5.0% and 4.0%, respectively. In October 2006, we also made
long-term borrowings in aggregate principal amount of
US$100 million with a maturity of seven years and an annual
interest rate based on six-month LIBOR plus 0.29%.
In July 2007, we issued U.S. dollar-denominated bonds in
the principal amount of US$400,000,000 with a maturity of twenty
years and an annual interest rate of 6.625%. In November 2007,
we issued Japanese Yen-denominated notes in the principal amount
of Japanese Yen 12,500,000,000 with a maturity of five years and
an annual interest rate based on Yen LIBOR plus 0.55%. In
November 2007, we issued Korean Won-denominated bonds in the
principal amount of Won 200 billion with a maturity of
seven years and an annual interest rate of 5.00%.
In March 2008, we issued two tranches of Korean Won-denominated
bonds, each tranche in the principal amount of Won
200 billion with an annual interest rate of 5.00%, maturing
in seven and ten years, respectively. In October 2008, we issued
Korean Won-denominated bonds in the principal amount of Won
250 billion with a maturity of five years and an annual
interest rate of 6.92% and Korean Won-denominated bonds in the
principal amount of Won 50 billion with a maturity of two
years and an annual interest rate of 6.77%. In November 2008, we
issued U.S. dollar-denominated notes in the principal
amount of US$150,000,000 with a maturity of two years and an
annual interest rate based on three-month U.S. dollar LIBOR
plus 3.05%.
In January 2009, we issued notes in the principal amounts of Won
40 billion and Yen 3 billion with maturities of seven
and three years, respectively, and annual interest rates of
5.54% and
3-month Euro
Yen LIBOR plus 2.50%, respectively. In March 2009, we issued
notes in the principal amounts of Won 230 billion and Yen
5 billion with maturities of seven and three years,
respectively, and annual interest rates of 5.94% and
3-month Euro
Yen TIBOR plus 2.50%, respectively. In April 2009, we issued
1.75% convertible notes with a maturity of five years in the
principal amount of US$332,528,000, with an initial conversion
price of Won 230,010 per share of our common stock, subject to
certain redemption rights. In May 2009, SK Broadband, our
consolidated subsidiary, filed a securities registration
statement in Korea in order to raise up to Won 300 billion
by selling its common shares through a rights offering. We
announced our plan to participate in the rights offering in
proportion to our 43.4% equity interest in SK Broadband. If
there are shares that are not subscribed by other shareholders,
we may purchase such unsubscribed shares, which will increase
our equity interest in SK Broadband. The subscription for and
purchase of shares of SK Broadband are expected to occur in July
2009.
We also have long-term liabilities in respect of facility
deposits received from subscribers, which stood at
Won 21.1 billion at December 31, 2006, Won
6.4 billion at December 31, 2007 and Won
4.8 billion at December 31,
62
2008. These non-interest bearing deposits were collected from
some subscribers when they initiated service and are returned
(less unpaid amounts due from the subscriber for our services)
when the subscribers service is deactivated. We generally
no longer collect these deposits from our subscribers. See
Item 4.B. Business Overview Revenues,
Rates and Facility Deposits.
Substantially all of our revenue and operating expenses are
denominated in Won. We generally pay for imported capital
equipment in Dollars. For a description of swap or derivative
transactions we have entered into, see Item 11.
Quantitative and Qualitative Disclosures about Market Risk.
Capital
Requirements
Historically, capital expenditures, repayment of outstanding
debt and research and development expenditures have represented
our most significant use of funds. In recent years, we have also
increasingly dedicated capital resources to develop new and
growing business areas, including our broadband Internet and
fixed-line telephone business, wireless Internet business,
convergence businesses and overseas operations, including
through acquisitions and strategic alliances. In addition, we
have used funds for the acquisition of treasury shares,
financing of our subscribers handset purchases on
installment payment plans and payment of retirement and
severance benefits.
To fund our scheduled debt repayment and planned capital
expenditures over the next several years, we intend to rely
primarily on funds provided by operations, as well as bank and
institutional borrowings, and offerings of debt or equity in the
domestic or international markets. We believe that these sources
will be sufficient to fund our planned capital expenditures for
2009. Our ability to rely on these alternatives could be
affected by the liquidity of the Korean financial markets or by
Government policies regarding Won and foreign currency
borrowings and the issuance of equity and debt. Our failure to
make needed expenditures would adversely affect our ability to
sustain subscriber growth and provide quality services and,
consequently, our results of operations.
Capital Expenditures. The following table sets
forth our actual capital expenditures for 2006, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
(In billions of Won)
|
|
|
CDMA Networks(1)
|
|
W
|
280
|
|
|
W
|
198
|
|
|
W
|
148
|
|
|
|
|
|
WCDMA Network
|
|
|
781
|
|
|
|
1,044
|
|
|
|
905
|
|
|
|
|
|
WiBro(2)
|
|
|
53
|
|
|
|
154
|
|
|
|
405
|
|
|
|
|
|
Others(3)
|
|
|
384
|
|
|
|
408
|
|
|
|
779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(4)
|
|
W
|
1,498
|
|
|
W
|
1,804
|
|
|
W
|
2,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes our basic CDMA, CDMA 1xRTT and CMDA EV-DO networks. |
|
(2) |
|
We commenced WiBro service in May 2006. |
|
(3) |
|
Includes investments in infrastructure consisting of equipment
necessary for the provision of data services and marketing. |
|
(4) |
|
Also, see note 7 of the notes to our consolidated financial
statements. |
We set our capital expenditure budget for an upcoming year on an
annual basis. Our actual capital expenditures in 2006 were Won
1,498.1 billion. Of such amount, we spent approximately Won
780.5 billion on capital expenditures related to upgrade
and expansion of our HSDPA-capable WCDMA network, Won
53.4 billion related to development and initial roll out of
our WiBro network, Won 279.9 billion related to general
upkeep of our CDMA 1xRTT and CMDA EV-DO networks and Won
384.3 billion on other capital expenditures and projects.
Our actual capital expenditures in 2007 were Won
1,804.1 billion. Of such amount, we spent approximately
Won 1,044.3 billion on capital expenditures related to
upgrade and expansion of our WCDMA network, Won
153.6 billion related to development and expansion of our
WiBro network, Won 198.4 billion related to general upkeep
of our CDMA 1xRTT and CMDA EV-DO networks and Won
407.8 billion on other capital expenditures and projects.
Our actual capital expenditures in 2008 were Won
2,236.9 billion. Of such amount, we spent approximately Won
904.8 billion on capital expenditures related to upgrade
and expansion of our WCDMA network, Won 404.8 billion
related to development
63
and expansion of our WiBro network, Won 148.2 billion
related to general upkeep of our CDMA 1xRTT and CMDA EV-DO
networks and Won 779.1 billion on other capital
expenditures and projects. We are required to pay the remainder
of the cost of our IMT-2000 license in annual installments for a
five-year period from 2007 through 2011. For more information,
see note 2(l) and note 8 of the notes to our
consolidated financial statements for the years ended
December 31, 2006, 2007 and 2008.
In March 2005, we obtained a license from the MIC to provide
WiBro services and paid the related Won 117.0 billion
WiBro license fee. We currently provide WiBro service to
hot zone areas in 42 cities. We are planning to
make additional capital expenditures in 2009 to build and expand
our WiBro network to hot zone areas in 84 cities, and we
may also make further capital investments to expand our WiBro
service in the future. Our investment plans are subject to
change depending on the market demand for WiBro services, the
competitive landscape for similar services and development of
competing technologies.
We expect that our capital expenditure amount in 2009 will be
similar to that of 2008. Our expenditures will be for a range of
projects, including investments in our backbone networks (and
our WiBro network in particular), investments to improve our
WCDMA network-based products and services, investments in our
wireless Internet-related and convergence businesses and funding
for mid-to long-term research and development projects, as well
as other initiatives, primarily related to our ongoing
businesses and in the ordinary course. However, our overall
expenditure levels and our allocation among projects remain
subject to many uncertainties. We may increase, reduce or
suspend our planned capital expenditures for 2009 or change the
timing and area of our capital expenditure spending from the
estimates described above in response to market conditions or
for other reasons. We may also make additional capital
expenditure investments as opportunities arise. Accordingly, we
periodically review the amount of our capital expenditures and
may make adjustments, including based on the current progress of
capital expenditure projects and market conditions. No assurance
can be given that we will be able to meet any such increased
expenditure requirements or obtain adequate financing for such
requirements, on terms acceptable to us, or at all.
Repayment of Outstanding Debt. As of
December 31, 2008, our principal repayment obligations with
respect to long-term borrowings, bonds and obligations under
capital leases outstanding were as follows for the periods
indicated:
|
|
|
|
|
Year Ending December 31,
|
|
Total
|
|
|
|
(In billions of Won)
|
|
|
2009
|
|
W
|
796.8
|
|
2010
|
|
|
727.4
|
|
2011
|
|
|
1,674.4
|
|
After 2011
|
|
|
2,743.9
|
|
We note that no commercial bank in Korea may extend credit
(including loans, guarantees and purchase of bonds) in excess of
20% of its shareholders equity to any one borrower. In
addition, no commercial bank in Korea may extend credit
exceeding 25% of the banks shareholders equity to
any one borrower and to any person with whom the borrower shares
a credit risk.
Investments in New Businesses and Global Expansion and Other
Needs. We may also require capital for
investments to support our development of growing businesses
areas, as well as the purchase of additional treasury shares and
shares of our affiliates.
For example, in March 2008, we completed the acquisition of an
additional 38.7% equity stake in SK Broadband, Koreas
second-largest fixed-line operator, for approximately Won 1.1
trillion, increasing our total equity interest in SK Broadband
to 43.4%. We may make additional capital investments in order to
develop SK Broadbands business in line with our
growth strategy.
In addition, we, via SK Telecom USA Holdings, Inc., our
wholly-owned subsidiary in the United States, had invested
US$380 million in HELIO as of June 30, 2008. In August
2008, we sold our equity interest in HELIO to Virgin Mobile USA,
Inc. in exchange for approximately 14.05% equity interest in
Virgin Mobile USA, Inc. In addition, we invested
US$25 million of equity capital in Virgin Mobile USA, Inc.
in exchange for mandatory convertible preferred stock,
convertible into Virgin Mobile USA, Inc.s Class A
common stock. For a more detailed
64
description of our investments in HELIO and Virgin Mobile USA,
Inc., see Item 4. Information on the
Company Item 4.B. Business Overview
Global Business Overseas Operations.
We have been providing CDMA cellular service in Vietnam since
2003 through our overseas subsidiary, SKT Vietnam, and
through S-Telecom, a joint venture between SKT Vietnam and
Saigon Post & Telecommunication Services
Corporation. In November 2005, our board of directors approved
an additional US$280 million investment in SKT Vietnam to
fund expansion of its CDMA network to all of Vietnam. In January
2006, we acquired 100 million additional shares of SKT
Vietnams unissued common stock for US$100 million,
increasing our equity interest in that company from 55.1% to
73.3%.
From time to time, we may make other investments in
telecommunications or other businesses, in Korea or abroad,
where we perceive attractive opportunities for investment. From
time to time, we may also dispose of existing investments when
we believe that doing so would be in our best interest.
Acquisition of Treasury Shares. In October
2001, in accordance with the approval of our board of directors,
we established trust funds with four Korean banks with a total
funding of Won 1.3 trillion for the purpose of acquiring our
shares at market prices plus or minus five percent. Each of the
trust funds has an initial term of three years but is terminable
at our option six months after the establishment of the trust
fund and at the end of each succeeding six-month period
thereafter. While held by the trust funds, our shares are not
entitled to voting rights or dividends. Upon termination of the
trust funds, we are required to resell the shares acquired by
the trust funds. In October 2004, we extended trust funds with a
balance of Won 982 billion, for another three years and, in
October 2007, we extended the trust funds with a balance of Won
982 billion, for an additional three years.
In a series of open market purchases in the period between
August 1, 2006 and August 14, 2006, we acquired
491,000 shares of our common stock at an aggregate purchase
price of Won 92.5 billion, all of which were cancelled on
August 17, 2006. In a subsequent series of open market
purchases in the period between September 4, 2006 and
September 27, 2006, we acquired an additional
592,000 shares of our common stock at an aggregate purchase
price of Won 116.6 billion, all of which were cancelled on
September 29, 2006. In connection with the cancellation of
these treasury shares, we reduced our retained earnings before
appropriations by Won 209.1 billion in accordance with
Korean law.
In a series of open market purchases in the period between
November 1, 2007 and December 31, 2007, we acquired
471,000 shares of our common stock at an aggregate purchase
price of Won 118.5 billion. In a series of open market
purchases in the period between December 2, 2008 and
December 30, 2008, we acquired 306,988 shares of our
common stock at an aggregate purchase price of Won
63.5 billion.
As of December 31, 2008, the total number of our common
stock outstanding was 72,486,015.
Financing of Installment Payment Plans. Since
April 2008, we have been offering installment payment plans for
new handset purchases by our new or existing subscribers. Under
installment payment plans, we provide financing to our new or
existing subscribers who wish to purchase new handsets on credit
and, in certain cases, charge fees or interest. As of
December 31, 2008, short-tem and long-term accounts
receivable (other), each net of present value discount, amounted
to Won 1,067.3 billion and Won 572.1 billion,
respectively, compared to Won 739.2 billion and zero,
respectively, as of December 31, 2007. These increases were
primarily attributable to the increase in purchases of new
handsets on installment payment plans, which has required, and
may continue to require, our capital resources.
Severance Payments. The total accrued and
unpaid retirement and severance benefits for our employees as of
December 31, 2008 of Won 53.8 billion was reflected in
our consolidated financial statements as a liability, which is
net of deposits with insurance companies totaling Won
68.6 billion to fund a portion of the employees
severance indemnities.
Effective March 31, 2006, we implemented certain changes to
our severance payment policy in respect of employees who had
joined our company on or before December 31, 2002. As a
result of such policy change, we required applicable employees
to receive and settle all severance benefits accrued as of
March 31, 2006. These accrued severance payments were made
in April 2006. As compensation for the mandatory early
settlement of their accrued severance benefits, we also paid
such employees additional special bonuses of Won
125.9 billion in
65
aggregate amount. We recorded the special bonus payments as
special severance indemnities in other expenses for the year
ended December 31, 2006. In 2006, we also sponsored a
voluntary early retirement plan with respect to certain eligible
employees. These early retirees were also paid special bonuses
of Won 18.1 billion in the aggregate, which amount was also
reflected in special severance indemnities in other expenses for
the year ended December 31, 2006. We may, in the future,
again sponsor early retirement plans, in part, to improve
operational efficiencies.
Also see Item 6.D. Employees Employee
Stock Ownership Association and Other Benefits and
note 2(s) of the notes to our consolidated financial
statements.
Dividends. Total payments of cash dividends
amounted to Won 662.8 billion in 2006, Won
581.3 billion in 2007 and Won 682.4 billion in 2008.
In April 2009, we distributed annual dividends at Won 8,400 per
share to our shareholders for an aggregate payout amount of Won
609.2 billion.
Contractual
Obligations and Commitments
The following summarizes our contractual cash obligations at
December 31, 2008, and the effect such obligations are
expected to have on liquidity and cash flow in future periods:
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Payments Due by Period(1)
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Less Than
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After
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Total
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1 Year
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1-3 Years
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4-5 Years
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5 Years
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(In billions of Won)
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Bonds
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Principal
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W
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4,876.1
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W
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737.7
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W
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1,554.9
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W
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1,280.5
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W
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1,303.0
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Interest
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1,413.3
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257.9
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393.2
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211.2
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551.0
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Long-term borrowings
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Principal
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865.5
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9.0
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723.5
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133.0
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Interest
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104.8
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39.4
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60.5
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4.9
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Capital lease obligations
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Principal
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201.1
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61.8
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111.9
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27.4
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Interest
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25.7
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13.0
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8.4
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3.6
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0.7
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Operating leases
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2.0
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0.7
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0.9
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0.4
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Facility deposits
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13.1
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8.3
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4.8
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Derivatives
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247.8
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190.4
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57.4
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Credit commitment to Virgin Mobile USA, Inc.
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21.2
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21.2
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Other long-term payables(2)
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Principal
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450.0
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130.0
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320.0
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Interest
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42.6
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20.4
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22.2
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Short-term borrowings
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627.7
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627.7
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Total contractual cash obligations(3)
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W
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8,890.9
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W
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2,117.5
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W
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3,252.9
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W
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1,661.0
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W
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1,859.5
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(1) |
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We are contractually obligated to make severance payments to
eligible employees we have employed for more than one year, upon
termination of their employment, regardless of whether such
termination is voluntary or involuntary. Accruals for severance
indemnities are recorded based on the amount we would be
required to pay in the event the employment of all our employees
were to terminate at the balance date. However, we have not yet
estimated cash flows for future periods. Accordingly, payments
due in connection with severance indemnities have been excluded
from this table. |
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(2) |
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Related to acquisition of IMT-2000 license. See note 2(l)
and note 8 of the notes to our consolidated financial
statements. |
66
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(3) |
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This amount does not include our future investments in the CDMA
market in Vietnam, which we expect to make through our overseas
subsidiary SKT Vietnam under a business cooperation contract
with Saigon Post & Telecommunication Service
Corporation. See Item 4.B. Business
Overview Global Business Overseas
Operations and Critical Accounting
Policies, Estimates And Judgments Off-Balance Sheet
Arrangements. |
See note 22 of the notes to our consolidated financial
statements for details related to our other commitments and
contingencies.
Inflation
We do not consider that inflation in Korea has had a material
impact on our results of operations in recent years. According
to data published by The Bank of Korea, annual inflation in
Korea was 2.2% in 2006, 2.5% in 2007 and 4.7% in 2008.
U.S.
GAAP Reconciliation
Our consolidated financial statements are prepared in accordance
with Korean GAAP, which differs in certain significant respects
from U.S. GAAP. For a discussion of significant differences
between Korean GAAP and U.S. GAAP, see notes 33 and 34
of our notes to consolidated financial statements.
Our net income in 2006 under U.S. GAAP is higher than under
Korean GAAP by Won 428.8 billion, primarily due to the
differing treatment of unrealized gains or losses on valuation
of convertible notes and reversal of goodwill amortization under
U.S. GAAP, partially offset by the tax effect of the
reconciling items. Our net income in 2007 under U.S. GAAP
is lower than under Korean GAAP by Won 56.9 billion,
primarily due to the differing treatment of unrealized gains or
losses on the valuation of convertible notes and the differing
treatment of nonrefundable activation fees under U.S GAAP,
partially offset by the differing treatment of reclassification
of our investment in the common stock of SK C&C, reversal
of goodwill amortization and the tax effect of reconciling items
under U.S. GAAP. Our net income in 2008 under
U.S. GAAP is higher than net income under Korean GAAP by
Won 100.5 billion, primarily due to the differing
treatment of loss on impairment of investment securities, the
reversal of goodwill amortization and goodwill impairment and
reclassification of our investment in the common stock of SK
C&C under U.S. GAAP, partially offset by differing
treatment in valuation of currency and interest rate swaps under
U.S. GAAP.
Our shareholders equity as of December 31, 2006, 2007
and 2008 under U.S. GAAP is higher than under Korean GAAP
by Won 1,235.3 billion, Won 970.1 billion, Won
390.8 billion, respectively, in each case, primarily due to
increases from the differing treatment of intangible assets,
reversal of goodwill amortization and goodwill impairment and
tax effect of the reconciling items, partially offset by
decreases from the differing treatment of nonrefundable
activation fees and minority interest of equity in consolidated
affiliates and, in 2008, reclassification of investment in the
common stock of SK Broadband.
New
Accounting Pronouncements under U.S. GAAP
In June 2006, the Emerging Issues Task Force (EITF)
reached a consensus on Issue
No. 06-3,
How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross Versus Net Presentation)
(EITF Issue
No. 06-3).
EITF Issue
No. 06-3
requires that companies disclose their accounting policy
regarding the gross or net presentation of certain taxes. Taxes
within the scope of EITF Issue
No. 06-3
are any tax assessed by a governmental authority that is
directly imposed on a revenue-producing transaction between a
seller and a customer and may include, but is not limited to,
sales, use, value added and some excise taxes. Effective
January 1, 2007, we adopted EITF Issue
No. 06-3
for our annual reporting period ended December 31, 2007.
The adoption of such accounting standards did not have an effect
on our consolidated financial position as of December 31,
2007.
In June 2006, the Financial Accounting Standard Board
(FASB) issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), an interpretation of
SFAS No. 109, Accounting for Income Taxes
(SFAS No. 109). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an
enterprises
67
financial statements in accordance with SFAS No. 109,
and prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax
position taken, or expected to be taken, in a tax return.
FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim
periods, disclosure and transition. Effective January 1,
2007, we adopted FIN 48 for our annual reporting period
ended December 31, 2007. As a result of our adoption of
FIN 48, retained earnings as of January 1, 2007
decreased by Won 11,853 million and income tax provision
for the year ended December 31, 2007 increased by Won
1,320 million.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurement
(SFAS No. 157), which provides guidance
for using fair value to measure assets and liabilities when
required for recognition or disclosure purposes.
SFAS No. 157 is intended to make the measurement of
fair value more consistent and comparable and improve
disclosures about these measures. Specifically,
SFAS No. 157 (1) clarifies the principle that
fair value should be based on the assumptions market
participants would use when pricing the asset or liability,
(2) establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions,
(3) clarifies the information required to be used to
measure fair value, (4) determines the frequency of fair
value measures and (5) requires companies to make expanded
disclosures about the methods and assumptions used to measure
fair value and the fair value measurements effect on
earnings. However, SFAS No. 157 does not expand the
use of fair value to any new circumstances or determine when
fair value should be used in the financial statements.
SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years, with some
exceptions. SFAS No. 157 is to be applied
prospectively as of the first interim period for the fiscal year
in which it is initially adopted, except for a limited form of
retrospective application for some specific items. In February
2008, the FASB issued Staff Position
No. 157-1,
Application of FASB Statement No. 157 to FASB
Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purpose of Lease
Classification or Measurement Under Statement 13
(FSP 157-1)
in order to amend SFAS No. 157 to exclude FASB
Statement No. 13, Accounting for Leases
(SFAS No. 13) and other accounting
pronouncements that address fair value measurements for purposes
of lease classification or measurement under
SFAS No. 13. In addition, in February 2008, the FASB
issued Staff Position
No. 157-2,
Effective Date of FASB Statement No. 157
(FSP 157-2),
which defers the effective date of SFAS No. 157 to
fiscal years beginning after November 15, 2008 for
non-financial assets and non-financial liabilities, except for
those that are recognized or disclosed at fair value in an
entitys financial statements on a recurring basis (at
least annually). We adopted SFAS No. 157,
FSP 157-1
and
FSP 157-2
in the first quarter of 2008, the impact of which is disclosed
in note 34(c) of the notes to our consolidated financial
statements.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities, Including an Amendment of FASB Statement
No. 115 (SFAS No. 159).
SFAS No. 159 permits entities to choose to measure
many financial instruments and certain other items at fair value
that are not currently required to be measured at fair value.
Unrealized gains and losses on items for which the fair value
option has been elected are required to be included in earnings.
SFAS No. 159 does not affect any existing accounting
literature that requires certain assets and liabilities to be
carried at fair value. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The
adoption of SFAS No. 159 did not have a material
impact on our results of operations, cash flows or financial
position.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141(R)) which replaces FASB
Statement No. 141. SFAS No. 141(R) establishes
principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest
in the acquiree and the goodwill acquired.
SFAS No. 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and
financial effects of the business combination.
SFAS No. 141(R) is effective for fiscal years
beginning after December 15, 2008. We are currently
evaluating the potential impact, if any, the adoption of
SFAS No. 141(R) may have on consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 160,
Non-controlling Interests in Consolidated Financial
Statements an amendment of Accounting Research
Bulletin No. 51
(SFAS No. 160). SFAS No. 160
establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent
and to the non-controlling interest,
68
changes in a parents ownership interest, and the valuation
of retained non-controlling equity investments when a subsidiary
is deconsolidated. SFAS No. 160 also establishes
disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the
non-controlling owners. This statement is effective for us
beginning January 1, 2009. We are currently evaluating the
potential impact of the adoption of SFAS No. 160 on
our consolidated financial position, results of operations and
cash flows.
In May 2008, the FASB issued FASB Staff Position (FSP) APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement) (FSP APB
14-1).
FSP APB 14-1
clarifies that convertible debt instruments that may be settled
in cash upon conversion (including partial cash settlement) are
not addressed by APB Opinion No. 14, Accounting for
Convertible Debt and Debt Issued with Stock Purchase
Warrants. Additionally, FSP APB
14-1
specifies that issuers of such instruments should separately
account for the liability and equity components in a manner that
will reflect the entitys nonconvertible debt borrowing
rate when interest cost is recognized in subsequent periods. FSP
APB 14-1 is
effective for financial statements issued for fiscal years
beginning after December 15, 2008. Early adoption is
prohibited. We are currently evaluating the impact of adopting
FSP APB 14-1
on our consolidated financial condition, results of operations
and cash flows.
In June 2008, the FASB ratified the consensus reached by the
EITF on Issue
07-5,
Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock (Issue
07-5). Under
Issue 07-5,
an instrument (or embedded feature) would not be considered
indexed to an entitys own stock if its settlement amount
is affected by variables other than those used to determine the
fair value of a plain vanilla option or forward
contract on equity shares, or if the instrument contains a
feature (such as a leverage factor) that increases exposure to
those variables. An equity-linked financial instrument (or
embedded feature) would not be considered indexed to the
entitys own stock if the strike price is denominated in a
currency other than the issuers functional currency. Issue
07-5 is
effective for us beginning on January 1, 2009, and we are
currently evaluating the impact of adopting Issue
07-5 on the
our consolidated financial condition, results of operations and
cash flows.
In December 2008, the FASB issued FSP
No. FAS 140-4
and
FIN 46R-8,
Disclosures by Public Entities (Enterprises) About
Transfers of Financial Assets and Interests in Variable Interest
Entities (FSP
No. FAS 140-4
and
FIN 46R-8).
FSP
No. FAS 140-4
and
FIN 46R-8
amends the disclosure requirements of SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities and FIN 46R and is
effective from the first reporting period ending after
December 15, 2008. The adoption of FSP
No. FAS 140-4
and
FIN 46R-8
did not have a material impact on our financial condition,
results of operations or cash flows.
In January 2009, the FASB issued FSP
No. EITF 99-20-1,
Amendments to the Impairment Guidance of EITF Issue
No. 99-20
(FSP
No. EITF 99-20-1).
FSP
No. EITF 99-20-1
amends the impairment guidance in EITF
No. 99-20
to align impairment guidance in
EITF 99-20
with that in SFAS No. 115 and related impairment
guidance. FSP
No. EITF 99-20-1
applies to beneficial interests within the scope of
EITF 99-20
and is effective for periods ending after December 15,
2008. The adoption of FSP
No. EITF 99-20-1
did not have a material impact on us.
In April 2009, the FASB issued FSP
No. 141R-1,
Accounting for Assets Acquired and Liabilities Assumed in
a Business Combination That Arise from Contingencies
(FSP
No. 141R-1).
FSP
No. 141R-1
amends and clarifies SFAS No. 141R, Business
Combinations, to address application issues raised by
preparers, auditors, and members of the legal profession on
initial recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising
from contingencies in a business combination. FSP
No. 141R-1
is effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition
date is on or after the first annual reporting period beginning
on or after December 15, 2008 and had no impact on our
financial condition, results of operations or cash flows.
In April 2009, the FASB issued FSP
No. FAS 115-2
and
FAS 124-2.
FSP
No. FAS 115-2
and
FAS 124-2
amends the
other-than-temporary
impairment guidance in GAAP for debt securities and the
presentation and disclosure requirements of
other-than-temporary
impairments on debt and equity securities in the financial
statements. This FSP does not amend existing recognition and
measurement guidance related to other-than temporary impairments
of equity securities. FSP
No. FAS 115-2
and
FAS 124-2
is effective for interim reporting periods ending after
June 15, 2009 with early adoption permitted. We did not
early adopt this FSP. We expect the adoption of this standard to
decrease the impact of impairments on our results of operations
in future periods when
69
compared to the impact we believes would have occurred without
this new accounting standard. We are currently evaluating the
impact of the adoption of FSP
No. FAS 115-2
and
FAS 124-2
to our financial condition, results of operations and cash flows.
Significant
Changes in Korean GAAP
On January 1, 2006, we adopted SKAS No. 18 through
No. 20. The adoption of such accounting standards did not
have an effect on our consolidated financial position as of
December 31, 2006 or our consolidated ordinary income and
net income for the year ended December 31, 2006.
On January 1, 2007, we adopted SKAS No. 11, SKAS
No. 21 through SKAS No. 23, and SKAS No. 25. The
adoption of such accounting standards did not have an effect on
our consolidated financial position as of December 31, 2007
or our consolidated net income for the year ended
December 31, 2007. Details of the primary changes due to
such adoption of these SKASs are as follows:
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Pursuant to adoption of SKAS No. 21, Preparation and
Presentation of Financial Statements, certain amounts
classified as capital adjustments through 2006 are classified as
accumulated other comprehensive income (loss) such
amounts include unrealized gain/loss on
available-for-sale
securities, equity in capital adjustments of affiliates and
gain/loss on valuation of derivative instruments. In addition,
certain amounts classified as investment assets through 2006 are
classified as other non-current assets such amounts
include long-term loans, guarantee deposits, long-term deposits
and others. The consolidated balance sheet as of
December 31, 2006, which appears in the consolidated
financial statements included elsewhere in this report, has been
reclassified in accordance with SKAS No. 21.
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Pursuant to adoption of SKAS No. 25, Consolidated
Financial Statements, net income is allocated to equity
holders of the parent and minority interest. In addition, when a
subsidiary is purchased during the year, such subsidiarys
statement of income is included in consolidation as though it
had been acquired as of January 1 of the relevant year, and
preacquisition earnings are presented as deduction at the bottom
of the consolidated statements of income. The accompanying
consolidated statement of income for the year ended
December 31, 2006, which appears in the consolidated
financial statements included elsewhere in this report, has been
reclassified in accordance with SKAS No. 25. In addition,
in connection with our adoption of SKAS No. 25, we also
began to present pre-acquisition cash flows of subsidiaries as a
separate deduction (addition) at the bottom of our consolidated
statements of cash flows.
|
The amended SKAS No. 25, Consolidated Financial
Statements, which is effective December 29, 2008 (but
the early adoption is allowed from 2008), clarifies that when
the parents ownership interest in a subsidiary is
increased after control is obtained, the difference between the
consideration for additional acquisition of interest and portion
of net asset of subsidiary, which had been previously recognized
as capital surplus, should be recognized as other capital
adjustment if the difference is negative amount and there is no
related capital surplus earned at previous transaction. As the
amended SKAS No. 25, Consolidated Financial
Statements is applied retroactively during the year ended
December 31, 2008, the 2006 and 2007 financial statements
presented comparatively are restated, which results in the
increase in capital surplus by
W16,072 million and
W31,146 million as of December 31,
2006 and 2007, respectively, and the decrease in other capital
adjustment by W16,072 million and
W31,146 million as of December 31,
2006 and 2007, respectively.
Critical
Accounting Policies, Estimates And Judgments
Our consolidated financial statements are prepared in accordance
with Korean GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenue and expenses as
well as the disclosure of contingent assets and liabilities. We
continually evaluate our estimates and judgments including those
related to revenue recognition, allowances for doubtful
accounts, inventories, useful lives of property and equipment,
intangible assets, investments, employee stock option
compensation plans and income taxes. We base our estimates and
judgments on historical experience and other factors that are
believed to be reasonable under the circumstances. Actual
results may differ from these estimates under different
assumptions or conditions. We also provide a summary of
significant differences between
70
accounting principles followed by us and our subsidiaries and
U.S. GAAP. We believe that of our significant accounting
policies, the following may involve a higher degree of judgment
or complexity:
Allowances
for Doubtful Accounts
An allowance for doubtful accounts is provided based on a review
of the status of individual receivable accounts at the end of
the year. We maintain allowances for doubtful accounts for
estimated losses that result from the inability of our customers
to make required payments. We base our allowances on the
likelihood of recoverability of accounts receivable based on
past experience and taking into account current collection
trends that are expected to continue. If economic or specific
industry trends worsen beyond our estimates, we increase our
allowances for doubtful accounts by recording additional
expenses.
Derivative
Instruments
We record rights and obligations arising from derivative
instruments as assets and liabilities, which are stated at fair
value. The gains and losses that result from the change in the
fair value of derivative instruments are reported in current
earnings. However, for derivative instruments designated as
hedging the exposure of variable cash flows, the effective
portions of the gains or losses on the hedging instruments are
recorded as accumulated other comprehensive income (loss) and
credited or charged to operations at the time the hedged
transactions affect earnings, and the ineffective portions of
the gains or losses are credited or charged immediately to
operations.
Estimated
Useful Lives
We estimate the useful lives of long-lived assets in order to
determine the amount of depreciation and amortization expense to
be recorded during any reporting period. The useful lives are
estimated at the time the asset is acquired and are based on
historical experience with similar assets as well as taking into
account anticipated technological or other changes. If
technological changes were to occur more rapidly than
anticipated or in a different form than anticipated, the useful
lives assigned to these assets may need to be shortened,
resulting in the recognition of increased depreciation and
amortization expense in future periods.
Impairment
of Long-lived Assets Including the WCDMA Frequency Usage
Right
Long-lived assets generally consist of property, plant and
equipment and intangible assets. We review long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In
addition, we evaluate our long-lived assets for impairment each
year as part of our annual forecasting process. An impairment
loss would be considered when estimated undiscounted future net
cash flow expected to result from the use of the asset and its
eventual disposition are less than its carrying amount. If such
assets are considered to be impaired, the impairment to be
recognized is measured as the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Our intangible assets include the WCDMA frequency usage right,
which has a contractual life of 15 years and is amortized
from the date commercial service is initiated through the end of
its contractual life, which is December 15, 2015. We
started to amortize this frequency usage right on
December 1, 2003. Because WCDMA presents risks and
challenges to our business, any or all of which, if realized or
not properly addressed, may have a material adverse effect on
our financial condition, results of operations and cash flows,
we review the WCDMA frequency usage right for impairment on an
annual basis. In connection with our review, we utilize the
estimated long-term revenue and cash flow forecasts. The use of
different assumptions within our cash flow model could result in
different amounts for the WCDMA frequency usage right. The
results of our review using the testing method described above
did not indicate any need to impair the WCDMA frequency usage
right for 2008.
Impairment
of Investment Securities
When the declines in fair value of individual
available-for-sale
and
held-to-maturity
securities below their acquisition cost are other than temporary
and there is objective evidence of impairment, the carrying
value of the securities is adjusted to their fair value with the
resulting valuation loss charged to current operations.
71
As part of this review, the investees operating results,
net asset value and future performance forecasts as well as
general market conditions are taken into consideration. If we
believe, based on this review, that the market value of an
equity security or a debt security may realistically be expected
to recover, the loss will continue to be classified as
temporary. If economies or specific industry trends worsen
beyond our estimates, valuation losses previously determined to
be recoverable may need to be charged as an impairment loss in
current operations.
Significant management judgment is involved in the evaluation of
declines in value of individual investments. The estimates and
assumptions used by management to evaluate declines in value can
be impacted by many factors, such as our financial condition,
earnings capacity and near-term prospects in which we have
invested and, for publicly-traded securities, the length of time
and the extent to which fair value has been less than cost. The
evaluation of these investments is also subject to the overall
condition of the economy and its impact on the capital markets.
Income
Taxes
We are required to estimate the amount of tax payable or
refundable for the current year and the deferred income tax
liabilities and assets for the future tax consequences of events
that have been reflected in our financial statements or tax
returns. This process requires management to make assessments
regarding the timing and probability of the tax impact. Actual
income taxes could vary from these estimates due to future
changes in income tax law or unpredicted results from the final
determination of each years liability by taxing
authorities.
We believe that the accounting estimate related to establishing
tax valuation allowances is a critical accounting
estimate because (i) it requires management to make
assessments about the timing of future events, including the
probability of expected future taxable income and available tax
planning opportunities, and (ii) the impact that changes in
actual performance versus these estimates could have on the
realization of tax benefits as reported in our results of
operations could be material. Managements assumptions
require significant judgment because actual performance has
fluctuated in the past and may continue to do so.
Off-Balance
Sheet Arrangements
In July 2003, SKT Vietnam (formerly SLD Vietnam), our overseas
subsidiary, entered into a business cooperation contract with
Saigon Post & Telecommunication Services Corporation
to establish cellular mobile communication services and provide
CDMA service throughout Vietnam. Pursuant to such contract, in
the event that the cash inflow for the business is insufficient
to cover the cash outflow necessary to cover the expenditures
necessary to operate the business, SKT Vietnam and Saigon
Post & Telecommunication Services Corporation have
agreed to contribute the necessary funds to the business and to
bear additional cash shortfalls, on an equal basis. With respect
to our involvement in the business, our maximum exposure to loss
was approximately Won 236.3 billion as of
December 31, 2008.
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Item 5.C.
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Research
and Development
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Overview
We maintain a high level of spending on our internal research
activity. We also donate funds to several Korean research
institutes and educational organizations that focus on research
and development activity. We believe that we must maintain a
substantial in-house technology capability to achieve our
strategic goals.
The following table sets forth our annual research and
development expenses:
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As of and for the
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Year Ended December 31,
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2006
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2007
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2008
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(In billions of Won)
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Internal R&D Expenses
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W
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212.0
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W
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218.7
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W
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226.7
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External R&D Expenses
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67.0
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74.4
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73.0
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Total R&D Expenses
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W
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279.0
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W
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293.1
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W
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299.7
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72
Our total research and development expenses were approximately
2.5% in 2006, 2.5% in 2007 and 2.1% in 2008, respectively, of
operating revenue.
Our external research and development expenses have been
influenced by the Ministry of Knowledge Economy, which makes
annual recommendations concerning our minimum level of
contribution to the Government-run Fund for Development of
Information and Telecommunications. The minimum level of
contribution recommended by the Ministry of Knowledge Economy
was 0.75% for each of 2006, 2007 and 2008. We are not obligated
to make donations to any other external research institutes.
Internal
Research and Development
The main focus of our internal research and development activity
is the development of new wireless technologies and services and
value-added technologies and services for our CDMA-based,
WCDMA-based and WiBro networks, such as wireless data
communications, as well as development of new technologies that
reflect the growing convergence between telecommunications and
other industries. In addition, together with the Chinese
government, we have been jointly researching and developing
Chinas TD-SCDMA technology. We spent approximately Won
226.7 billion on internal research and development in 2008.
Our internal research and development activity is centered at a
research center with
state-of-the-art
facilities and equipment established in January 1999 in
Bundang-gu, Sungnam-si, Kyunggi-do, Korea. To more efficiently
manage our research and development resources, our research and
development center is organized into three core areas:
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The access technology R&D center, which has
pioneered the development of 3G and 3.5G technologies. This
center is developing next-generation technologies, including
with a view toward leading global standardization of mobile
telecommunications technologies. Current projects include the
development of multimedia handsets and location-based services,
as well as development of network technologies, including with
respect to WiBro, personal area network, ubiquitous sensor and
broadband convergence networks, The access technology R&D
center is also spearheading our joint development of TD-SCDMA
technology with the Chinese government.
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The service technology R&D center, which focuses on
improving the quality and operation of our core networks;
building a flexible service infrastructure that will support the
introduction of new products and services and enable easy
maintenance; and developing new services based on customer
needs. Specifically, this center has been developing an array of
value-added services, including COLORing services and developing
new wireless data and convergent products and services.
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The technology innovation center, which is responsible
for developing and maintaining our overall management and
information technology infrastructure, including billing and
subscriber information security systems. The information
technology R&D center is also currently upgrading our
customer relationship management system.
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Each business unit also has its own research team that can
concentrate on specific short-term research needs. Such research
teams permit our research center to concentrate on long-term,
technology-intensive research projects. We aim to establish
strategic alliances with selected domestic and foreign companies
with a view to exchanging or jointly developing technologies,
products and services.
External
Research and Development
In addition to conducting research in our own facilities, we
have been a major financial supporter of other Korean research
institutes, and we have helped coordinate the Governments
effort to commercialize CDMA-based, WCDMA-based and WiBro
technology. We do not independently own intellectual property
rights in the technologies or products developed by any external
research institute.
73
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Item 5.D.
|
Trend
Information
|
These matters are discussed under Item 5.A. and
Item 5.B. above where relevant.
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Item 5.E.
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Off-Balance
Sheet Arrangements
|
These matters are discussed under Item 5.B. above where
relevant.
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Item 5.F.
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Tabular
Disclosure of Contractual Obligations
|
These matters are discussed under Item 5.B. above where
relevant.
These matters are discussed under Forward-Looking
Statements.
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Item 6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
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Item 6.A.
|
Directors
and Senior Management
|
Our board of directors has ultimate responsibility for the
management of our affairs. Under our articles of incorporation,
our board is to consist of at least three but no more than
twelve directors, more than a half of whom must be independent
non-executive directors. We currently have a total of eight
directors, five of whom are independent non-executive directors.
We elect our directors at a general meeting of shareholders with
the approval of at least a majority of those shares present or
represented at such meeting. Such majority must represent at
least one-fourth of our total issued and outstanding shares with
voting rights.
As required under relevant Korean laws and our articles of
incorporation, we have a committee for recommendation of
independent non-executive directors within the board of
directors, the Recommendation Committee. Independent
non-executive directors are appointed from among those
candidates recommended by the Recommendation Committee.
The term of offices for directors is until the close of the
third annual general shareholders meeting convened after he or
she commences his or her term. Our directors may serve
consecutive terms. Our shareholders may remove them from office
by a resolution at a general meeting of shareholders adopted by
the holders of at least two-thirds of the voting shares present
or represented at the meeting, and such affirmative votes also
represent at least one-third of our total voting shares then
issued and outstanding.
Representative directors are directors elected by the board of
directors with the statutory power to represent our company.
74
The following are the names and positions of our standing and
non-standing directors. The business address of all of our
directors is the address of our registered office at SK T-Tower,
11, Euljiro 2-ga, Jung-gu, Seoul
100-999,
Korea.
Standing directors are our full-time employees and executive
officers, and they also comprise the senior management, or the
key personnel who manage us. Their names, dates of birth and
positions at our company and other positions are set forth below:
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Other Principal
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Date of
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Director
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Expiration
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Directorships
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Name
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Birth
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Since
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of Term
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Position
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and Positions
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Business Experience
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Man Won Jung
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Oct. 5, 1952
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2009
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2012
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President, Chief Executive
Officer & Representative
Director
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CEO & President, SK Networks; Vice President, Internet
Business Divisional Group, SK Telecom; Vice President, Customer
Business Development Group, SK Corporation
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Sung Min Ha
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Mar. 24, 1957
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2004
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2010
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Head of Mobile Network
Operations Business
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Head of Strategic Planning Group, SK Telecom; Director, SK
Telink; Auditor, SK C&C; Chairman and Representative
Director, SKT Vietnam; Auditor,
SK Teletech
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Our current non-standing directors are as set forth below:
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Other Principal
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Date of
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Director
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Expiration
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Directorships
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Name
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Birth
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Since
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of Term
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Position
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and Positions
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Business Experience
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Jae Won Chey
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May. 16, 1963
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2009
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2012
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Vice Chairman & CEO, SK Gas
Vice Chairman & CEO, SK E&S
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Director, SK Holdings
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Executive Vice President, Head of Corporate Center, SK Telecom;
Executive Vice President, Head of Strategic Support Division, SK
Telecom
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Hyun Chin Lim
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Apr. 26, 1949
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2009
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2012
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Independent
Non-executive Director
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Dean, College of Social Science, Seoul National University
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President, Korea Sociological Association; Dean, Faculty of
Liberal Education, Seoul National University; President, Korean
Association of NGO Studies
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Dal Sup Shim
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Jun. 27, 1950
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2007
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2010
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Independent
Non-executive Director
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Research Fellow, Institute for Global Economics
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Auditor, Korea Credit Guarantee Fund; Financial Attaché,
Korean Embassy in the United States; Audit Officer, Korea
Customs Service; Tax & Customs Office, Ministry of Strategy
and Finance (formerly Ministry of Finance and Economy)
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Rak Young Uhm
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Jun. 23, 1948
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2008
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2011
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Independent
Non-executive Director
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Visiting Professor Graduate School of Public Administration,
Seoul National University
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Independent Non-executive Director, Tong Yang Insurance Co.,
Ltd., Non-Standing Director KOTRA; President, Korea Development
Bank
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Jay Young Chung
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Oct. 15, 1944
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2008
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2011
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Independent
Non-executive Director
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Professor, Graduate School of Business Administration, Sung Kyun
Kwan University
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Chief, Asia-Pacific Economic Association; Vice President, Sung
Kyun Kwan University; Independent Non-executive Director, POSCO
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Jae Ho Cho
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Jan. 18, 1955
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2008
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2011
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Independent
Non-executive Director
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Professor of Finance, College of Business Administration, Seoul
National University
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Director, Kyung Hee Foundation; Visiting Professor, Graduate
School of Economics, University of Tokyo, Advisory Committee
Member, Samsung Securities
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75
The aggregate of the remuneration paid and in-kind benefits
granted to the directors (both standing directors, who also
serve as our executive officers, and non-standing directors)
during the year ended December 31, 2008 totaled
approximately Won 5.0 billion.
Remuneration for the directors is determined by shareholder
resolutions. Severance allowances for directors are determined
by the board of directors in accordance with our regulation on
severance allowances for officers, which was adopted by
shareholder resolutions. The regulation provides for monthly
salary, performance bonus, severance payment and fringe
benefits. The amount of performance bonuses is independently
decided by a resolution of the board of directors.
In March 2002, pursuant to resolutions of the shareholders, and
in accordance with our articles of incorporation, certain of our
directors and officers were granted options to purchase our
common shares. In 2002, 70 officers were granted options to
purchase 65,730 common shares. The exercise price for the shares
is Won 267,000. Each stock option agreement also provides
for adjustments to the amount and exercise price of the shares
in cases where the share price may become diluted as a result of
issuance of new shares, stock dividends or mergers. No officer
exercised his option to purchase for shares granted in 2002. The
board of directors may, by resolution, cancel any
directors or officers stock options under certain
circumstances. Since 2003, none of our directors and officers
have been granted options to purchase our common shares.
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Item 6.C.
|
Board
Practices
|
For information regarding the expiration of each directors
term of appointment, as well as the period from which each
director has served in such capacity, see the table set out
under Item 6.A. Directors and Senior
Management, above.
Termination
of Directors, Services
Directors are given a retirement and severance payment upon
termination of employment in accordance with our internal
regulations on severance payments. Upon retirement, directors
who have made significant contributions to our company during
their term may be appointed to serve either as an advisor to us
or as an officer of an affiliate company.
Audit
Committee
Under relevant Korean laws and our articles of incorporation, we
are required to have an audit committee under the board of
directors. The committee is composed of at least three members,
two-thirds of whom must be independent non-executive directors
independent with respect to applicable rules. The members of the
audit committee are appointed annually by a resolution of the
board of directors. They are required to:
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examine the agenda for the general meeting of shareholders;
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examine financial statements and other reports to be submitted
by the board of directors to the general meeting of shareholders;
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review the administration by the board of directors of our
affairs; and
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examine the operations and asset status of us and our
subsidiaries.
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In addition, the audit committee must appoint independent
auditors to examine our financial statements. An audit and
review of our financial statements by independent auditors is
required for the purposes of a securities report. Listed
companies must provide such report on an annual, semi-annual and
quarterly basis to the Financial Services Commission of Korea,
or the FSC, and the KRX KOSPI Market.
76
Our audit committee is composed of three independent
non-executive directors: Dal Sup Shim, Hyun Chin Lim and Jae Ho
Cho, each of whom must be financially literate and independent
under the rules of the New York Stock Exchange as applicable.
The board of directors has determined that Jae Ho Cho is an
audit committee financial expert as defined under
the applicable rules of the SEC. See Item 16A. Audit
Committee Financial Expert.
Independent
Non-executive Director Nomination Committee
This committee is devoted to recommending independent
non-executive directors for the board of directors. The
objective of the committee is to help promote fairness and
transparency in the nomination of candidates for these
positions. The board of directors decides from time to time who
will comprise the members of this committee. The committee is
comprised of two executive directors and two independent
directors.
Capex
Review Committee
This committee is responsible for reviewing our business plan
(including the budget). It also examines major capital
expenditure revisions, and routinely monitors capital
expenditure decisions that have already been executed. The
committee is comprised of two executive directors and three
independent directors.
Compensation
Committee
This committee oversees our overall compensation scheme for
top-level executives and directors. It is responsible for
reviewing both the criteria for and level of compensation. It is
comprised of all independent directors, Hyun Chin Lim, Dal Sup
Shim, Rak Young Uhm, Jay Young Chung and Jae Ho Cho.
Corporate
Citizenship Committee
This committee was established to help us achieve world-class
sustainable growth and to help us fulfill our corporate social
responsibilities. It is comprised of two executive directors and
three independent directors.
The following table sets forth the numbers of our regular
employees, temporary employees and total employees as of the
dates indicated:
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Regular
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Temporary
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Employees
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Employees
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Total
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December 31, 2006
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6,178
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1,498
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7,676
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December 31, 2007
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7,524
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1,961
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9,485
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December 31, 2008
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8,964
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1,662
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10,626
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Labor
Relations
As of December 31, 2008, we had a company union comprised
of 8,964 regular employees. We have never experienced a work
stoppage of a serious nature. Every two years, the union and
management negotiate and enter into a new collective bargaining
agreement that has a two-year duration, which is focused on
employee benefits and welfare, except for employee wages, which
are separately negotiated on an annual basis. Our wage
negotiations completed in December 2007 resulted in an average
wage increase of 3.5% for 2007 from 2006. Our wage negotiations
completed in November 2008 resulted in an average wage increase
of 2% for 2008 from 2007. Our wage negotiations completed in
June 2009 resulted in a wage freeze for 2009. We consider our
relations with our employees to be good.
77
Employee
Stock Ownership Association and Other Benefits
Since April 1999, we have been required to contribute an amount
equal to 4.5% of employee wages toward a national pension plan.
Employees are eligible to participate in an employee stock
ownership association. We are not required to, and we do not,
make any contributions to the employee stock ownership
association, although through the Employee Welfare Fund we
subsidize the employee stock ownership association by providing
low interest rate loans to employees desiring to purchase our
stock through the plan in the case of a capitalization by the
association. On December 26, 2007 and January 23,
2008, we loaned Won 31.0 billion and Won 29.7 billion,
respectively, to our employee stock ownership association to
help fund the employee stock ownership associations
acquisition of our treasury shares. Such loans will be repaid
over a period of five years, beginning on the second anniversary
of each loan date. As of March 31, 2009, the employee stock
ownership association owned approximately 0.6% of our issued
common stock.
We are required to pay a severance amount to eligible employees
who voluntarily or involuntarily cease working for us, including
through retirement. This severance amount is based upon the
employees length of service with us and the
employees salary level at the time of severance. As of
December 31, 2008, the accrued and unpaid retirement and
severance benefits of Won 122.4 billion for all of our
employees are reflected in our consolidated financial statements
as a liability, of which a total of Won 68.6 billion was
funded. Under Korean laws and regulations, we are prevented from
involuntarily terminating a full-time employee except under
certain limited circumstances. In September 2002, we entered
into an employment stabilization agreement with the union. Among
other things, this agreement provides for a one-year guarantee
of the same wage level in the event that we reorganize a
department into a separate entity or we outsource an employee to
a separate entity where the wage is lower.
Under the Korean Intra-Company Labor Welfare Fund Law, we
may also contribute up to 5% of our annual earnings before tax
for employee welfare. Contribution amounts are determined
annually following negotiation with the union. The contribution
amount for 2006, which was decided in December 2006, was set at
2.1% of our annual earnings before tax, or Won
42.0 billion. The contribution amount for 2007, which was
decided in December 2007, was set at 0.9% of our earnings before
tax, or Won 20.0 billion. The contribution amount for 2008,
which was decided in December 2008, was set at 2.6% of our
earnings before tax, or Won 40 billion. The contribution
amount for 2009 has not yet been determined.
Effective March 31, 2006, we implemented certain changes to
our severance payment policy in respect of employees who had
joined our company on or before December 31, 2002. As a
result of such policy change, we required applicable employees
to receive and settle all severance benefits accrued as of
March 31, 2006. These accrued severance payments were made
in April 2006. As compensation for the mandatory early
settlement of their accrued severance benefits, we also paid
such employees additional special bonuses of Won
125.9 billion in aggregate amount. We recorded the special
bonus payments as special severance indemnities in other
expenses for the year ended December 31, 2006. In 2006, we
also sponsored a voluntary early retirement plan with respect to
certain eligible employees. These early retirees were also paid
special bonuses of Won 18.1 billion in the aggregate, which
amount was also reflected in special severance indemnities in
other expenses for the year ended December 31, 2006. We
may, in the future, again sponsor early retirement plans, in
part, to improve operational efficiencies.
In addition, we provide our employees with miscellaneous other
fringe benefits including housing loans, free medical
examinations, subsidized
on-site
child care facilities and sabbatical programs for long-term
employees.
78
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Item 6.E.
|
Share
Ownership
|
The following table sets forth the share ownership by our
standing and non-standing directors as of February 28, 2009:
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Percentage
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Number of
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of Total
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Special
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Shares
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Shares
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Voting
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Name
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Position
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Owned
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Outstanding
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Rights
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Options
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Standing Directors:
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Man Won Jung
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President, Chief Executive Officer and Representative Director
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100
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0
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None
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None
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Sung Min Ha
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Head of Mobile Network Operations Business
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738
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0
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None
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None
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Non-Standing Directors:
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|
Jae Won Chey
|
|
Independent Non-executive Director
|
|
|
0
|
|
|
|
0
|
|
|
|
None
|
|
|
|
None
|
|
Hyun Chin Lim
|
|
Independent Non-executive Director
|
|
|
0
|
|
|
|
0
|
|
|
|
None
|
|
|
|
None
|
|
Dal Sup Shim
|
|
Independent Non-executive Director
|
|
|
0
|
|
|
|
0
|
|
|
|
None
|
|
|
|
None
|
|
Rak Young Uhm
|
|
Independent Non-executive Director
|
|
|
0
|
|
|
|
0
|
|
|
|
None
|
|
|
|
None
|
|
Jay Young Chung
|
|
Independent Non-executive Director
|
|
|
0
|
|
|
|
0
|
|
|
|
None
|
|
|
|
None
|
|
Jae Ho Cho
|
|
Independent Non-executive Director
|
|
|
0
|
|
|
|
0
|
|
|
|
None
|
|
|
|
None
|
|
|
|
Item 7.
|
MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
|
|
Item 7.A.
|
Major
Shareholders
|
As of December 31, 2008, approximately 57.4% of our issued
shares were held in Korea by approximately
23,000 shareholders. The following table sets forth certain
information as of the close of our shareholders registry
on December 31, 2008 with respect to any person known to us
to be the beneficial owner of more than 5.0% of the shares of
our common stock and with respect to the total amount of such
shares owned by our employees and our officers and directors, as
a group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
Percentage
|
|
|
|
Number of
|
|
|
Total Shares
|
|
|
Total Shares
|
|
Shareholder/Category
|
|
Shares
|
|
|
Issued
|
|
|
Outstanding
|
|
|
Domestic Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
SK Holdings
|
|
|
18,748,452
|
|
|
|
23.09
|
%
|
|
|
25.85
|
%
|
Employees(1)
|
|
|
484,105
|
|
|
|
0.60
|
|
|
|
0.67
|
|
Treasury shares(1)(2)
|
|
|
8,707,696
|
|
|
|
10.73
|
|
|
|
N/A
|
|
Officers and Directors
|
|
|
10,707
|
|
|
|
0*
|
|
|
|
0*
|
|
Other Domestic Shareholders
|
|
|
16,331,922
|
|
|
|
20.11
|
|
|
|
19.30
|
|
Foreign Shareholders
|
|
|
34,607,448
|
|
|
|
42.62
|
|
|
|
47.72
|
|
Total Issued Shares
|
|
|
81,193,711
|
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
|
* |
|
Less than 0.00%. |
|
(1) |
|
Represents shares owned by our employee stock ownership
association. See Item 6.D. Employees. |
79
|
|
|
(2) |
|
Treasury shares do not have any voting rights; includes
1,324,744 treasury shares that were deposited with Korea
Securities Depository to be reserved and used to satisfy the
conversion rights of the holders of US$229.2 million in
zero coupon convertible notes that were sold in May 2004.
|
The following table sets forth significant changes in the
percentage ownership held by our major shareholders during the
past three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
Shareholder
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(As a percentage of total issued shares)(1)
|
|
|
SK Group(2)
|
|
|
22
|
.79
|
%
|
|
|
23
|
.09
|
%
|
|
|
23
|
.09
|
%
|
SK Holdings
|
|
|
21
|
.47
|
|
|
|
21
|
.75
|
|
|
|
23
|
.09
|
|
SK Networks
|
|
|
1
|
.32
|
|
|
|
1
|
.34
|
|
|
|
0
|
|
|
POSCO(3)
|
|
|
3
|
.64
|
|
|
|
2
|
.88
|
|
|
|
2
|
.88
|
|
|
|
|
(1) |
|
Includes 8,526,252, 8,609,034 and 8,707,696 shares held in
treasury as of December 31, 2006, 2007 and 2008,
respectively. |
|
(2) |
|
SK Groups ownership interest as of December 31, 2006
and December 31, 2007 consisted of the ownership interests
of SK Holdings and SK Networks. SK Groups ownership
interest as of December 31, 2008 consisted of the ownership
interest of SK Holdings only. |
|
(3) |
|
POSCO acquired these shares in connection with our acquisition
of a 27.7% equity interest in Shinsegi. |
Except as described above, other than companies in the SK Group
and POSCO, no other persons or entities known by us to be acting
in concert, directly or indirectly, jointly or severally, own in
excess of 5.0% of our total shares outstanding or exercise
control or could exercise control over our business.
On July 1, 2007, the company formerly known as SK
Corporation underwent a corporate rehabilitation, pursuant to
which SK Corporation spun off substantially all of its operating
business divisions into a newly established corporation named SK
Energy Co., Ltd. The surviving company currently operates as a
holding company, renamed SK Holdings Co., Ltd. Ownership of all
our shares held by SK Corporation immediately preceding the
rehabilitation passed to SK Holdings as of July 1, 2007.
As of March 31, 2009, SK Holdings held 23.22% of our shares
of common stock. For a description of our foreign ownership
limitation, see Item 3.D. Risk Factors If
SK Holdings causes us to breach the foreign ownership
limitations on shares of our common stock, we may experience a
change of control and Item 4.B. Business
Overview Law and Regulation Foreign
Ownership and Investment Restrictions and Requirements. In
the event that SK Holdings announces plans of a sale of our
shares, we expect to be able to discuss the details of such sale
with them in advance and will endeavor to minimize any adverse
effects on our share prices as a result of such sale.
There is currently a 49% limit on the aggregate foreign
ownership of our issued shares. As of March 31, 2009, SK
Holdings owned 18,748,452 shares of our common stock, or
approximately 23.22%, of our issued shares. As of March 31,
2009, a foreign investment fund and its related parties
collectively held a 2.11% stake in SK Holdings. Under the
Telecommunications Business Act, a Korean entity, such as SK
Holdings, is deemed to be a foreign entity if its largest
shareholder (determined by aggregating the shareholdings of such
shareholder and its related parties) is a foreigner and such
shareholder (together with the shareholdings of its related
parties) holds 15% or more of the outstanding voting stock of
the Korean entity. Thus, if the foreign investment fund and its
related parties increased their shareholdings in SK Holdings to
15% or more and such foreign investment fund and its related
parties collectively constituted the largest shareholder of SK
Holdings, SK Holdings would have been considered a foreign
shareholder, and its shareholding in us would have been included
in the calculation of our aggregate foreign shareholding.
If SK Holdings shareholding in us were included in the
calculation of our aggregate foreign shareholding, then our
aggregate foreign shareholding, assuming foreign ownership level
as of March 31, 2009 (which we believe was 45.95%), would
have reached 69.17%, exceeding the 49% ceiling on foreign
shareholding. If our aggregate foreign
80
shareholding limit is exceeded, the KCC may issue a corrective
order to us, the breaching shareholder (including SK Holdings if
the breach is caused by an increase in foreign ownership of SK
Holdings) and any foreign investment fund and its related
parties who may own in the aggregate 15% or more of SK Holdings.
Furthermore, SK Holdings may not exercise its voting rights with
respect to the shares held in excess of the 49% ceiling, which
may result in a change in control of us. In addition, the KCC
may refuse to grant us licenses or permits necessary for
entering into new telecommunications businesses until our
aggregate foreign shareholding is reduced to below 49%.
If a corrective order is issued to us by the KCC arising from
the violation of the foregoing foreign ownership limit, and we
do not comply within the prescribed period under such corrective
order, the KCC may
|
|
|
|
|
revoke our business license;
|
|
|
|
suspend all or part of our business; or
|
|
|
|
if the suspension of business is deemed to result in significant
inconvenience to our customers or to be detrimental to the
public interest, impose a one-time administrative penalty of up
to 3% of the average of our annual revenue for the preceding
three fiscal years.
|
The Telecommunications Business Act also authorizes the KCC to
assess monetary penalties of up to 0.3% of the purchase price of
the shares for each day the corrective order is not complied
with, as well as a prison term of up to one year and a penalty
of Won 50 million. See Item 3.D. Risk
Factors If SK Holdings causes us to breach the
foreign ownership limitations on shares of our common stock, we
may experience a change of control and
Item 4.B. Business Overview Law and
Regulation Foreign Ownership and Investment
Restrictions and Requirements.
As of May 31, 2009, the total number of shares of our
common stock outstanding was 72,345,003.
Other than as disclosed herein, there are no other arrangements,
to the best of our knowledge, which would result in a material
change in the control of us. Our major shareholders do not have
different voting rights.
|
|
Item 7.B.
|
Related
Party Transactions
|
SK
Networks
As of December 31, 2008, KT Corporation and SK Networks
provided a substantial majority of our leased lines. For a more
detailed discussion of the lines we lease from fixed-line
operators, see Item 4.B. Business
Overview Digital Cellular Network
Network Infrastructure. In May 2009, we entered into an
agreement with SK Networks to purchase its leased line business
for Won 892.85 billion. The purchase remains subject to
regulatory approvals and approval by shareholders of SK
Networks. In addition, we will also assume
Won 627.8 billion of debt as part of the transaction.
As of December 31, 2008, we had Won 1.1 billion of
accounts receivables from SK Network. As of the same date, we
had Won 71.8 billion of accounts payable to SK Networks,
mainly consisting of leased line charges and commissions to
dealers owned by SK Networks.
Other
Related Parties
On July 22, 2003, we acquired 2,481,310 shares of
POSCO common stock held by SK Holdings at a price of Won 134,000
per share in accordance with a resolution of our board of
directors dated July 22, 2003. We decided to purchase the
shares for strategic reasons in order to address overhang
concerns arising from POSCOs ownership of our shares. As
of December 31, 2008, POSCO owned 2.88% of our shares.
We are party to an agreement with SK C&C pursuant to which
SK C&C provides us with information technology services.
This agreement will expire on December 31, 2009 but may be
terminated by us at any time without cause on six months
prior notice. The agreement provides that the parties will agree
annually on the specific services to be provided and the monthly
fees to be paid by us. We also enter into agreements with SK
C&C from time to time for specific information
technology-related projects. The aggregate fees we paid to SK
C&C for information technology services amounted to Won
287.6 billion in 2006, Won 251.4 billion in 2007 and
Won 273.3 billion in 2008. We also purchase various
information technology-related equipment from SK C&C
81
from time to time. The total amount of such purchases was Won
215.8 billion for 2006, Won 205.7 billion for 2007 and
Won 232.2 billion for 2008.
We are part of the SK Group of affiliated companies. See
Item 7.A. Major Shareholders As disclosed in
note 24 of the notes to our consolidated financial
statements, we had related party transactions with a number of
affiliated companies of the SK Group during the year ended
December 31, 2008.
All other loans were made in the ordinary course of business, on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with unrelated persons and did not involve more
than the normal risks of non-collection or present other
unfavorable features.
In October 2005, we invested Won 25.6 billion to acquire an
additional 5,122,266 shares of common stock of TU Media to
increase our equity interest to 29.6%. In February 2007, we
purchased 4,615,798 new shares of TU Media for Won
32.4 billion, increasing our equity interest from 29.6% as
of December 31, 2006 to 32.7%. Following this equity
investment, TU Media became our consolidated subsidiary. In
March 2008, we made an additional Won 55.0 billion capital
contribution to TU Media, increasing our equity interest to
44.2%. We are currently TU Medias largest shareholder.
We have been providing CDMA cellular service in Vietnam since
2003 through our overseas subsidiary, SKT Vietnam PTE Ltd.
In November 2005, our board of directors approved an additional
US$280 million investment to expand our network coverage to
all Vietnam. In January 2006, we invested US$100 million in
this expansion project through the acquisition of
100 million additional shares of SKT Vietnam PTEs
unissued common stock for such amount.
In March 2005, we invested Won 14.4 billion to purchase
8,000,000 shares, representing a 21.5% equity stake, in
iHQ, one of Koreas largest entertainment companies and the
controlling shareholder of YTN Media, Inc. Following this
investment, we became iHQs second largest shareholder. In
connection with this transaction, we also received a call option
to purchase an additional 5,000,000 shares of iHQ,
exercisable in the period between March 15, 2006 and
April 30, 2006 at the price of Won 3,000 per share, in
respect of 3,000,000 shares, and the price of Won 9,176.24
per share, in respect of 2,000,0000 shares. We exercised
our call option in April 2006. The share purchase pursuant to
our exercise of the call option was consummated in July 2006,
when we invested an additional Won 27.4 billion to increase
our equity stake in iHQ to 34.1% and became its largest
shareholder. As a result of this increase in our equity
interest, iHQ became a consolidated subsidiary. In July 2007, we
further invested Won 10 billion in iHQ, increasing our
equity interest to 37.1%.
In December 2008, we transferred our MelOn business to our
consolidated subsidiary, Loen Entertainment Inc., to acquire an
additional 6,472,491 shares of its common stock and
increase our equity interest to 63.5% from 60.0%.
|
|
Item 7.C.
|
Interests
of Experts and Counsel
|
Not applicable.
|
|
Item 8.
|
FINANCIAL
INFORMATION
|
|
|
Item 8.A.
|
Consolidated
Statements and Other Financial Information
|
See Item 18. Financial Statements and pages F-1
through F-103.
Legal
Proceedings
FTC
Proceedings
In May 2006, the FTC ordered us to pay a fine of Won
660 million for price collusion with KTF and LGT. The FTC
charged that we, along with KTF and LGT, engaged in unfair
business practices in 2004 by agreeing to discontinue flat-rate
services. KTF and LGT were also fined Won 660 million and
Won 462 million, respectively. In December 2006, the FTC
fined us Won 330 million in respect of certain allegedly
anti-competitive tactics we employed in connection with MelOn,
our digital music portal. We paid such fine in April 2007 and
filed an appeal at
82
the Seoul High Court, an appellate court, which found in our
favor. The case is currently pending before the Supreme Court of
Korea.
In January 2009, the FTC fined us Won 1.3 billion for our
activities allegedly restricting competition in markets for
wireless Internet services. We paid such fine in March 2009. In
February 2009, the FTC fined us Won 500 million for
our activities allegedly restricting competition in markets for
personal digital assistant, or PDA, devices. We paid such fine
in April 2009 and filed an appeal at the Seoul High Court where
the case is currently pending.
MIC
and KCC Proceedings
When the MIC approved the merger of Shinsegi into us in January
2002, the MIC imposed certain conditions on us. The MIC
periodically reviews our compliance with the conditions related
to our merger with Shinsegi. On May 25, 2004, a policy
advisory committee to the MIC announced the results of its
review and stated that the committee believed that our market
dominance may significantly restrict competition in the
telecommunications market and that we have violated the
conditions related to our merger with Shinsegi by providing
subsidies to handset buyers. In June 2004, the MIC imposed a Won
11.9 billion fine on us and extended the post-merger
monitoring period until the end of 2006 pursuant to the policy
advisory committees recommendation. Such post-merger
monitoring period expired on December 31, 2006 and we are
no longer subject to any market share limitations. We can give
no assurance that the MIC will not take action that may have a
material adverse effect on our business, operations and
financial condition. See Item 3.D. Risk
Factors Our businesses are subject to extensive
Government regulation and any change in Government policy
relating to the telecommunications industry could have a
material adverse effect on our results of operations, financial
condition and cash flows.
In March 2006 and April 2006, the MIC ordered us to pay fines of
Won 13.8 billion and Won 7.8 billion, respectively,
with respect to our payment of improper handset subsidies. In
March 2006 and April 2006, KTF and LGT were also fined Won
3.7 billion and Won 1.5 billion and Won
2.1 billion and Won 700 million, respectively, in
respect of improper subsidy payments. We paid Won
13.8 billion in March 2006 and Won 7.8 billion in May
2006.
In May 2006, the MIC ordered us to pay fines of Won
1.1 billion, alleging that we had improperly solicited
subscribers to our value-added services. KTF and LGT were also
fined Won 290 million and Won 130 million,
respectively on the same grounds. We paid such fines in June
2006.
In June 2006 and December 2006, the MIC ordered us to pay fines
of Won 42.6 billion and 3.8 billion, respectively,
with respect to payments of improper handset subsidies. We paid
such fines in July 2006 and January 2007, respectively. KTF, LGT
and KT were also fined in June 2006 in the amounts of Won
12.0 billion, Won 15.0 billion, and Won
3.6 billion, respectively and KT was also fined in December
2006 in the amount of Won 1.0 billion.
In April 2007, the MIC imposed fines on us, KTF, LGT and KT of
Won 7.5 billion, Won 5.8 billion,
Won 4.7 billion and Won 1.6 billion, respectively
for allegedly improperly providing handset subsidies. We paid
such fines in May 2007.
In September 2007, the MIC imposed fines on us, KTF and KT for
violating regulations regarding number portability in the
amounts of Won 800 million, Won 200 million and Won
80 million, respectively. We paid such fine in October 2007.
In December 2007, the MIC imposed fines on us, KTF, LGT and KT
for improperly continuing to apply discounted youth rates to
subscribers who had reached legal majority in the amounts of Won
800 million, Won 200 million, Won
150 million and Won 50 million, respectively. We paid
such fine in January 2008.
In January 2008, the MIC ordered us, KTF and LGT to pay fines in
the amounts of Won 950 million, Won 250 million
and Won 150 million, respectively, alleging we had
improperly solicited subscribers to our value-added services. We
paid such fine in March 2008.
In February 2008, the MIC ordered us, KTF, LGT and KT to pay
fines of Won 600 million, Won 150 million, Won
100 million and Won 50 million, respectively, alleging
our authorized dealers had artificially inflated subscriber
numbers. We paid such fine in March 2008.
83
In September 2008, the KCC ordered us to pay a fine of Won
600 million alleging that we enrolled subscribers for our
T-Ring service without such subscribers consent. We paid
such fine in September 2008.
SK
Broadband Litigation
Since April 2008, customers of SK Broadband (then hanarotelecom
incorporated) have filed lawsuits against SK Broadband in the
Seoul Central District Court, alleging that subscribers
personal information was leaked due to the companys poor
data protection policies. The plaintiffs also alleged that
current and former employees were involved in the sale of
subscribers personal information, including resident
registration identification numbers, telephone numbers and
mailing addresses. As of April 23, 2009, the number of
plaintiffs was 23,591 and the aggregate amount of damages
claimed by such plaintiffs was approximately Won
24.2 billion. The case is currently pending before the
Seoul Central District Court. In addition, in April 2008, an
investigation against SK Broadband was initiated by the Seoul
Central Prosecutors Office, the KCC and the Korean Trade
Commission. The main subjects of this investigation include the
possible improper provision of broadband service by misusing
subscribers personal information and the violation of
standardized customer contracts by SK Broadband. In connection
with its investigation, the KCC suspended SK Broadband from
soliciting new subscribers for its broadband Internet services
for a period of 40 days from July 1, 2008 and, in
addition, imposed an administrative fine of Won 178 million
on the grounds that SK Broadband had violated the
Telecommunication Business Act and standard customer contracts.
SK Broadband paid such fine in July 2008.
Except as described above, neither we nor any of our
subsidiaries are involved in any litigation, arbitration or
administrative proceedings relating to claims which may have, or
have had during the twelve months preceding the date hereof, a
significant effect on our financial position or the financial
position of our subsidiaries taken as a whole, and, so far as we
are aware, no such litigation, arbitration or administrative
proceedings are pending or threatened.
Dividends
Annual dividends, if any, on our outstanding shares must be
approved at the annual general meeting of shareholders. This
meeting is generally held in March of the following year, and
the annual dividend is generally paid shortly after the meeting.
Since our shareholders have discretion to declare annual
dividends, we cannot give any assurance as to the amount of
dividends per share or that any dividends will be declared at
all. Interim dividends, if any, can be approved by a resolution
of our board of directors. Once declared, dividends must be
claimed within five years, after which the right to receive the
dividends is extinguished and reverted to us.
We pay cash dividends to the ADR depositary in Won. Under the
terms of the deposit agreement, cash dividends received by the
ADR depositary generally are to be converted by the ADR
depositary into Dollars and distributed to the holders of the
ADSs, less withholding tax, other governmental charges and the
ADR depositarys fees and expenses. The ADR
depositarys designated bank in Korea must approve this
conversion and remittance of cash dividends. See
Item 10.B. Memorandum and Articles of
Incorporation Description of American Depositary
Shares and Item 10.D. Exchange
Controls Korean Foreign Exchange Controls and
Securities Regulations.
The following table sets forth the dividend per share and the
aggregate total amount of dividends declared (including any
interim dividends), as well as the number of outstanding shares
entitled to dividends, with respect to the years indicated. The
dividends set out for each of the years below were paid in the
immediately following year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
Total Amount
|
|
|
Number of Shares
|
|
Year Ended December 31,
|
|
per Share
|
|
|
of Dividends
|
|
|
Entitled to Dividend
|
|
|
|
(In Won)
|
|
|
(In billions of Won)
|
|
|
|
|
|
2004
|
|
W
|
10,300
|
|
|
W
|
758.2
|
|
|
|
73,614,296
|
|
2005
|
|
|
9,000
|
|
|
|
662.5
|
|
|
|
73,614,296
|
|
2006
|
|
|
8,000
|
|
|
|
582.4
|
|
|
|
72,667,459
|
|
2007
|
|
|
9,400
|
|
|
|
682.4
|
|
|
|
72,584,677
|
|
2008
|
|
|
9,400
|
|
|
|
682.0
|
|
|
|
72,524,203
|
|
84
We distribute dividends to our shareholders in proportion to the
number of shares owned by each shareholder. The common shares
represented by the ADSs have the same dividend rights as other
outstanding common shares.
Holders of non-voting shares are entitled to receive dividends
in priority to the holders of common shares. The dividend on the
non-voting shares is between 9.0% and 25.0% of the par value as
determined by the board of directors at the time of their
issuance. If the dividends for common shares exceed the
dividends for non-voting shares, the holders of non-voting
shares will be entitled to participate in the distribution of
such excess amount with the holders of common shares. If the
amount available for dividends is less than the aggregate amount
of the minimum required dividend, holders of non-voting shares
will be entitled to receive such accumulated unpaid dividend
from dividends payable in the next fiscal year before holders of
common shares. There are no non-voting shares issued or
outstanding.
Under the Korean Commercial Code, we may pay an annual dividend
only out of the excess of our net assets, on a non-consolidated
basis, over the sum of (1) our stated capital and
(2) the total amount of our capital surplus reserve and
legal reserve accumulated up to the end of the relevant dividend
period. In addition, we may not pay an annual dividend unless we
have set aside as a legal reserve an amount equal to at least
10% of the cash portion of the annual dividend or until we have
accumulated a legal reserve of not less than one-half of our
stated capital. As a KRX KOSPI Market-listed company, we are
also required under the relevant laws and regulations to set
aside in reserve a certain amount each fiscal year until the
ratio of our own capital to total assets is at least 30%. We may
not use our legal reserve to pay cash dividends but may transfer
amounts from our legal reserve to capital stock or use our legal
reserve to reduce an accumulated deficit.
In addition, the Korean Commercial Code and our articles of
incorporation provide that, in addition to annual dividends, we
may pay interim dividends once during each fiscal year. Unlike
annual dividends, the decision to pay interim dividends can be
made by a resolution of the board of directors and is not
subject to shareholder approval. Any interim dividends must be
paid in cash to the shareholders of record as of June 30 of the
relevant fiscal year. In August 2008, we distributed such
interim dividends at Won 1,000 per share to our shareholders for
a total amount of Won 72.8 billion.
Under the Financial Investment Services and Capital Markets Act,
the total amount of interim dividends payable in a fiscal year
shall not be more than the net assets on the balance sheet of
the immediately preceding fiscal year, after deducting
(1) a companys capital in the immediately preceding
fiscal year, (2) the aggregate amount of its capital
reserves and legal reserves accumulated up to the immediately
preceding fiscal year, (3) the amount of earnings for
dividend payments confirmed at the general shareholders
meeting with respect to the immediately preceding fiscal year
and (4) the amount of legal reserve that should be set
aside for the current fiscal year following the interim dividend
payment. Furthermore, the rate of interim dividends for
non-voting shares must be the same as that for our common shares.
Our obligation to pay interim dividends expires if no claims to
such dividends are made for a period of five years from the
payment date.
|
|
Item 8.B.
|
Significant
Changes
|
Not applicable.
|
|
Item 9.
|
THE
OFFER AND LISTING
|
|
|
Item 9.A.
|
Offering
and Listing Details
|
These matters are described under Item 9.C. below where
relevant.
|
|
Item 9.B.
|
Plan
of Distribution
|
Not applicable.
85
The principal trading market for our common stock is the KRX
KOSPI Market. As of May 31, 2009, 72,345,003 shares of our
common stock were outstanding.
The ADSs are traded on the New York Stock Exchange and the
London Stock Exchange. The ADSs have been issued by the ADR
depositary and are traded on the New York Stock Exchange under
the ticker symbol SKM. Each ADS represents one-ninth
of one share of common stock. As of June 1, 2009, ADSs
representing 17,942,962 shares of our common stock were
outstanding.
Shares of
Common Stock
The following table sets forth the high, low and closing prices
and the average daily trading volume of the shares of common
stock on the KRX KOSPI Market since January 1, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices
|
|
|
Average
|
|
Calendar Year
|
|
High(1)
|
|
|
Low(1)
|
|
|
Close
|
|
|
Daily Trading Volume
|
|
|
|
(Won per shares)
|
|
|
(Number of shares)
|
|
|
2004
|
|
|
238,500
|
|
|
|
154,500
|
|
|
|
197,000
|
|
|
|
179,712
|
|
First Quarter
|
|
|
238,500
|
|
|
|
207,500
|
|
|
|
214,500
|
|
|
|
245,576
|
|
Second Quarter
|
|
|
213,000
|
|
|
|
179,000
|
|
|
|
190,000
|
|
|
|
188,095
|
|
Third Quarter
|
|
|
186,000
|
|
|
|
154,500
|
|
|
|
175,500
|
|
|
|
137,559
|
|
Fourth Quarter
|
|
|
205,000
|
|
|
|
174,500
|
|
|
|
197,000
|
|
|
|
151,903
|
|
2005
|
|
|
216,500
|
|
|
|
163,500
|
|
|
|
181,000
|
|
|
|
186,239
|
|
First Quarter
|
|
|
200,500
|
|
|
|
171,000
|
|
|
|
171,000
|
|
|
|
202,857
|
|
Second Quarter
|
|
|
192,500
|
|
|
|
163,500
|
|
|
|
182,000
|
|
|
|
137,021
|
|
Third Quarter
|
|
|
216,500
|
|
|
|
178,500
|
|
|
|
202,500
|
|
|
|
156,019
|
|
Fourth Quarter
|
|
|
209,500
|
|
|
|
181,000
|
|
|
|
181,000
|
|
|
|
249,550
|
|
2006
|
|
|
235,000
|
|
|
|
177,000
|
|
|
|
222,500
|
|
|
|
190,565
|
|
First Quarter
|
|
|
203,500
|
|
|
|
177,000
|
|
|
|
192,500
|
|
|
|
177,491
|
|
Second Quarter
|
|
|
235,000
|
|
|
|
190,000
|
|
|
|
204,000
|
|
|
|
216,607
|
|
Third Quarter
|
|
|
204,500
|
|
|
|
181,000
|
|
|
|
201,500
|
|
|
|
204,167
|
|
Fourth Quarter
|
|
|
233,000
|
|
|
|
195,000
|
|
|
|
222,500
|
|
|
|
163,534
|
|
2007
|
|
|
274,000
|
|
|
|
188,500
|
|
|
|
249,000
|
|
|
|
244,056
|
|
First Quarter
|
|
|
223,000
|
|
|
|
190,500
|
|
|
|
191,500
|
|
|
|
206,155
|
|
Second Quarter
|
|
|
215,000
|
|
|
|
188,500
|
|
|
|
213,000
|
|
|
|
220,091
|
|
Third Quarter
|
|
|
221,000
|
|
|
|
192,000
|
|
|
|
210,000
|
|
|
|
198,816
|
|
Fourth Quarter
|
|
|
274,000
|
|
|
|
204,500
|
|
|
|
249,000
|
|
|
|
349,701
|
|
2008
|
|
|
232,000
|
|
|
|
178,000
|
|
|
|
209,000
|
|
|
|
322,706
|
|
First Quarter
|
|
|
232,000
|
|
|
|
178,500
|
|
|
|
186,500
|
|
|
|
330,196
|
|
Second Quarter
|
|
|
212,000
|
|
|
|
180,000
|
|
|
|
190,500
|
|
|
|
265,973
|
|
Third Quarter
|
|
|
210,500
|
|
|
|
178,000
|
|
|
|
205,500
|
|
|
|
317,506
|
|
Fourth Quarter
|
|
|
227,500
|
|
|
|
187,500
|
|
|
|
209,000
|
|
|
|
374,768
|
|
2009 (through June 24)
|
|
|
218,000
|
|
|
|
170,500
|
|
|
|
173,000
|
|
|
|
378,180
|
|
First Quarter
|
|
|
218,000
|
|
|
|
181,500
|
|
|
|
192,000
|
|
|
|
341,322
|
|
January
|
|
|
218,000
|
|
|
|
204,000
|
|
|
|
207,500
|
|
|
|
365,646
|
|
February
|
|
|
204,000
|
|
|
|
187,500
|
|
|
|
187,500
|
|
|
|
326,534
|
|
March
|
|
|
195,000
|
|
|
|
181,500
|
|
|
|
192,000
|
|
|
|
333,758
|
|
Second Quarter (through June 24)
|
|
|
192,500
|
|
|
|
170,500
|
|
|
|
173,000
|
|
|
|
416,287
|
|
April
|
|
|
192,500
|
|
|
|
183,000
|
|
|
|
183,500
|
|
|
|
405,964
|
|
May
|
|
|
183,500
|
|
|
|
176,000
|
|
|
|
176,000
|
|
|
|
439,608
|
|
June (through June 24)
|
|
|
182,000
|
|
|
|
170,500
|
|
|
|
173,000
|
|
|
|
404,289
|
|
Source: Korea Exchange
|
|
|
(1) |
|
Both high and low prices are based on the daily closing prices
for the period. |
86
American
Depositary Shares
The following table sets forth the high, low and closing prices
and the average daily trading volume of the ADSs on the New York
Stock Exchange since January 1, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices
|
|
|
Average
|
|
Calendar Year
|
|
High(1)
|
|
|
Low(1)
|
|
|
Close
|
|
|
Daily Trading Volume
|
|
|
|
(US$ per ADS)
|
|
|
(Number of ADSs)
|
|
|
2004
|
|
|
25.01
|
|
|
|
17.28
|
|
|
|
22.25
|
|
|
|
915,441
|
|
First Quarter
|
|
|
25.01
|
|
|
|
19.43
|
|
|
|
21.30
|
|
|
|
1,331,177
|
|
Second Quarter
|
|
|
21.83
|
|
|
|
19.15
|
|
|
|
20.99
|
|
|
|
845,597
|
|
Third Quarter
|
|
|
20.76
|
|
|
|
17.28
|
|
|
|
19.45
|
|
|
|
768,117
|
|
Fourth Quarter
|
|
|
23.10
|
|
|
|
19.30
|
|
|
|
22.25
|
|
|
|
727,683
|
|
2005
|
|
|
23.14
|
|
|
|
18.96
|
|
|
|
20.29
|
|
|
|
882,342
|
|
First Quarter
|
|
|
22.19
|
|
|
|
19.41
|
|
|
|
19.72
|
|
|
|
798,390
|
|
Second Quarter
|
|
|
21.84
|
|
|
|
18.96
|
|
|
|
20.40
|
|
|
|
618,870
|
|
Third Quarter
|
|
|
23.14
|
|
|
|
20.06
|
|
|
|
21.84
|
|
|
|
1,071,227
|
|
Fourth Quarter
|
|
|
21.95
|
|
|
|
19.74
|
|
|
|
20.29
|
|
|
|
1,039,398
|
|
2006
|
|
|
27.70
|
|
|
|
20.62
|
|
|
|
26.48
|
|
|
|
866,527
|
|
First Quarter
|
|
|
24.56
|
|
|
|
20.62
|
|
|
|
23.59
|
|
|
|
952,819
|
|
Second Quarter
|
|
|
27.70
|
|
|
|
22.54
|
|
|
|
23.42
|
|
|
|
1,045,503
|
|
Third Quarter
|
|
|
24.16
|
|
|
|
21.14
|
|
|
|
23.63
|
|
|
|
789,033
|
|
Fourth Quarter
|
|
|
27.42
|
|
|
|
22.89
|
|
|
|
26.48
|
|
|
|
680,124
|
|
2007
|
|
|
33.33
|
|
|
|
22.46
|
|
|
|
29.84
|
|
|
|
1,379,370
|
|
First Quarter
|
|
|
26.41
|
|
|
|
22.46
|
|
|
|
23.42
|
|
|
|
1,046,780
|
|
Second Quarter
|
|
|
28.02
|
|
|
|
23.41
|
|
|
|
27.35
|
|
|
|
1,498,295
|
|
Third Quarter
|
|
|
30.30
|
|
|
|
26.15
|
|
|
|
29.70
|
|
|
|
1,498,032
|
|
Fourth Quarter
|
|
|
33.33
|
|
|
|
29.00
|
|
|
|
29.84
|
|
|
|
1,462,495
|
|
2008
|
|
|
27.96
|
|
|
|
14.63
|
|
|
|
18.18
|
|
|
|
1,762,329
|
|
First Quarter
|
|
|
27.96
|
|
|
|
19.90
|
|
|
|
21.61
|
|
|
|
1,992,134
|
|
Second Quarter
|
|
|
23.47
|
|
|
|
20.67
|
|
|
|
20.77
|
|
|
|
1,106,308
|
|
Third Quarter
|
|
|
22.29
|
|
|
|
18.68
|
|
|
|
18.82
|
|
|
|
1,663,854
|
|
Fourth Quarter
|
|
|
19.51
|
|
|
|
14.63
|
|
|
|
18.18
|
|
|
|
2,297,794
|
|
2009 (through June 23)
|
|
|
18.35
|
|
|
|
12.69
|
|
|
|
15.06
|
|
|
|
1,206,829
|
|
First Quarter
|
|
|
18.35
|
|
|
|
12.69
|
|
|
|
15.45
|
|
|
|
1,244,030
|
|
January
|
|
|
18.35
|
|
|
|
16.35
|
|
|
|
16.35
|
|
|
|
1,113,119
|
|
February
|
|
|
16.56
|
|
|
|
13.39
|
|
|
|
13.39
|
|
|
|
984,754
|
|
March
|
|
|
16.25
|
|
|
|
12.69
|
|
|
|
15.45
|
|
|
|
1,586,959
|
|
Second Quarter (through June 23)
|
|
|
16.53
|
|
|
|
15.00
|
|
|
|
15.06
|
|
|
|
1,167,759
|
|
April
|
|
|
16.42
|
|
|
|
15.00
|
|
|
|
15.67
|
|
|
|
1,153,857
|
|
May
|
|
|
16.53
|
|
|
|
15.38
|
|
|
|
15.73
|
|
|
|
1,227,860
|
|
June (through June 23)
|
|
|
15.86
|
|
|
|
15.02
|
|
|
|
15.06
|
|
|
|
1,114,224
|
|
Source: New York Stock Exchange
|
|
|
(1) |
|
Both high and low prices are based on the daily closing prices
for the period. |
87
The
Korean Securities Market
The
Korea Exchange Inc.
With the enactment of the Korea Stock and Futures Exchange Act,
which came into effect on January 27, 2005, the three
existing spot and futures exchanges (which were the Korea Stock
Exchange, Korean Futures Exchange, and KOSDAQ) and KOSDAQ
Committee, a
sub-organization
of Korea Securities Dealers Association, were merged and
integrated into the Korea Exchange Inc. (the Korea
Exchange) as a joint stock company. There are three
different markets run by the Korea Exchange: the KRX KOSPI
Market, the KRX KOSDAQ Market (the KRX KOSDAQ
Market), and the KRX Derivatives Market (the KRX
Derivatives Market). The Korea Exchange has two trading
floors located in Seoul, one for the KRX KOSPI Market and one
for the KRX KOSDAQ Market, and one trading floor in Busan for
the KRX Derivatives Market. The Korea Exchange is a limited
liability company, the shares of which are held by
(i) securities companies and futures companies that were
formerly members of the Korea Stock Exchange or the Korea
Futures Exchange, (ii) the Small Business Corporation,
(iii) the Korea Securities Finance Corporation and
(iv) the Korea Securities Dealers Association. Currently,
the Korea Exchange is the only stock exchange in Korea and is
run by membership, having most of Korean securities companies
and some Korean branches of foreign securities companies as its
members.
As of June 19, 2009, the aggregate market value of equity
securities listed on the KRX KOSPI Market was approximately Won
719.5 trillion. For the year ended December 31, 2008, the
average daily trading volume of equity securities was
approximately 355.2 million shares with an average
transaction value of Won 5,189.6 billion. For the period
from January 1, 2009 through June 19, 2009 the average
trading volume of equity securities was approximately
568.9 million shares with an average transaction value of
Won 5,915.2 billion.
The Korea Exchange has the power in some circumstances to
suspend trading in the shares of a given company or to de-list a
security. The Korea Exchange also restricts share price
movements. All listed companies are required to file accounting
reports annually, semi-annually and quarterly and to release
immediately all information that may affect trading in a
security.
The Government has in the past exerted, and continues to exert,
substantial influence over many aspects of the private sector
business community that can have the intention or effect of
depressing or boosting the market. In the past, the Government
has informally both encouraged and restricted the declaration
and payment of dividends, induced mergers to reduce what it
considers excess capacity in a particular industry and induced
private companies to offer publicly their securities.
The Korea Exchange publishes the Korea Composite Stock Price
Index, or KOSPI, every ten seconds, which is an index of all
equity securities listed on the KRX KOSPI Market. On
January 1, 1983, the method of computing KOSPI was changed
from the Dow Jones method to the aggregate value method. In the
new method, the market capitalizations of all listed companies
are aggregated, subject to certain adjustments, and this
aggregate is expressed as a percentage of the aggregate market
capitalization of all listed companies as of the base date,
January 4, 1980.
88
Movements in KOSPI are set out in the following table together
with the associated dividend yields and price to earnings ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield(1)
|
|
|
Earnings
|
|
Year
|
|
Opening
|
|
|
High
|
|
|
Low
|
|
|
Closing
|
|
|
(%)
|
|
|
Ratio(2)
|
|
|
1980
|
|
|
100.00
|
|
|
|
119.36
|
|
|
|
100.00
|
|
|
|
106.87
|
|
|
|
20.9
|
|
|
|
2.6
|
|
1981
|
|
|
97.95
|
|
|
|
165.95
|
|
|
|
93.14
|
|
|
|
131.37
|
|
|
|
13.2
|
|
|
|
3.1
|
|
1982
|
|
|
123.60
|
|
|
|
134.49
|
|
|
|
106.00
|
|
|
|
127.31
|
|
|
|
10.5
|
|
|
|
3.4
|
|
1983
|
|
|
122.52
|
|
|
|
134.46
|
|
|
|
115.59
|
|
|
|
121.21
|
|
|
|
6.9
|
|
|
|
3.8
|
|
1984
|
|
|
116.73
|
|
|
|
142.46
|
|
|
|
114.37
|
|
|
|
142.46
|
|
|
|
5.1
|
|
|
|
4.5
|
|
1985
|
|
|
139.53
|
|
|
|
163.37
|
|
|
|
131.40
|
|
|
|
163.37
|
|
|
|
5.3
|
|
|
|
5.2
|
|
1986
|
|
|
161.40
|
|
|
|
279.67
|
|
|
|
153.85
|
|
|
|
272.61
|
|
|
|
4.3
|
|
|
|
7.6
|
|
1987
|
|
|
264.82
|
|
|
|
525.11
|
|
|
|
264.82
|
|
|
|
525.11
|
|
|
|
2.6
|
|
|
|
10.9
|
|
1988
|
|
|
532.04
|
|
|
|
922.56
|
|
|
|
527.89
|
|
|
|
907.20
|
|
|
|
2.4
|
|
|
|
11.2
|
|
1989
|
|
|
919.61
|
|
|
|
1,007.77
|
|
|
|
844.75
|
|
|
|
909.72
|
|
|
|
2.0
|
|
|
|
13.9
|
|
1990
|
|
|
908.59
|
|
|
|
928.77
|
|
|
|
566.27
|
|
|
|
696.11
|
|
|
|
2.2
|
|
|
|
12.8
|
|
1991
|
|
|
679.75
|
|
|
|
763.10
|
|
|
|
586.51
|
|
|
|
610.92
|
|
|
|
2.6
|
|
|
|
11.2
|
|
1992
|
|
|
624.23
|
|
|
|
691.48
|
|
|
|
459.07
|
|
|
|
678.44
|
|
|
|
2.2
|
|
|
|
10.9
|
|
1993
|
|
|
697.41
|
|
|
|
874.10
|
|
|
|
605.93
|
|
|
|
866.18
|
|
|
|
1.6
|
|
|
|
12.7
|
|
1994
|
|
|
879.32
|
|
|
|
1,138.75
|
|
|
|
860.47
|
|
|
|
1,027.37
|
|
|
|
1.2
|
|
|
|
16.2
|
|
1995
|
|
|
1,013.57
|
|
|
|
1,016.77
|
|
|
|
847.09
|
|
|
|
882.94
|
|
|
|
1.2
|
|
|
|
16.4
|
|
1996
|
|
|
888.85
|
|
|
|
986.84
|
|
|
|
651.22
|
|
|
|
651.22
|
|
|
|
1.3
|
|
|
|
17.8
|
|
1997
|
|
|
653.79
|
|
|
|
792.29
|
|
|
|
350.68
|
|
|
|
376.31
|
|
|
|
1.5
|
|
|
|
17.0
|
|
1998
|
|
|
385.49
|
|
|
|
579.86
|
|
|
|
280.00
|
|
|
|
562.46
|
|
|
|
1.9
|
|
|
|
10.8
|
|
1999
|
|
|
587.57
|
|
|
|
1,028.07
|
|
|
|
498.42
|
|
|
|
1,028.07
|
|
|
|
1.1
|
|
|
|
13.5
|
|
2000
|
|
|
1,059.04
|
|
|
|
1,059.04
|
|
|
|
500.60
|
|
|
|
504.62
|
|
|
|
2.4
|
|
|
|
15.3
|
|
2001
|
|
|
520.95
|
|
|
|
704.50
|
|
|
|
468.76
|
|
|
|
693.70
|
|
|
|
1.7
|
|
|
|
29.3
|
|
2002
|
|
|
724.95
|
|
|
|
937.61
|
|
|
|
584.04
|
|
|
|
829.44
|
|
|
|
1.8
|
|
|
|
15.6
|
|
2003
|
|
|
635.17
|
|
|
|
822.16
|
|
|
|
515.24
|
|
|
|
810.71
|
|
|
|
2.1
|
|
|
|
10.1
|
|
2004
|
|
|
821.26
|
|
|
|
936.06
|
|
|
|
719.59
|
|
|
|
895.92
|
|
|
|
2.1
|
|
|
|
15.8
|
|
2005
|
|
|
893.71
|
|
|
|
1,379.37
|
|
|
|
870.84
|
|
|
|
1,379.37
|
|
|
|
1.7
|
|
|
|
11.0
|
|
2006
|
|
|
1,389.27
|
|
|
|
1,464.70
|
|
|
|
1,192.09
|
|
|
|
1,434.46
|
|
|
|
1.7
|
|
|
|
11.4
|
|
2007
|
|
|
1,435.26
|
|
|
|
2,064.85
|
|
|
|
1,355.79
|
|
|
|
1,897.13
|
|
|
|
1.4
|
|
|
|
16.8
|
|
2008
|
|
|
1,853.45
|
|
|
|
1,888.88
|
|
|
|
938.75
|
|
|
|
1,124.47
|
|
|
|
2.6
|
|
|
|
9.0
|
|
2009 (through June 19)
|
|
|
1,157.40
|
|
|
|
1,435.70
|
|
|
|
1,018.81
|
|
|
|
1,383.34
|
|
|
|
2.2
|
|
|
|
12.0
|
|
Source: Korea Exchange
|
|
|
(1) |
|
Dividend yields are based on daily figures. Before 1983,
dividend yields were calculated at the end of each month.
Dividend yields after January 3, 1984 include cash
dividends only. |
|
(2) |
|
The price to earnings ratio is based on figures for companies
that record a profit in the preceding year. |
KOSPI closed at 1,363.79 on June 24, 2009.
Shares are quoted ex-dividend on the first trading
day of the relevant companys accounting period. Since the
calendar year is the accounting period for the majority of
listed companies, this may account for the drop in KOSPI between
its closing level at the end of one calendar year and its
opening level at the beginning of the following calendar year.
89
With certain exceptions, principally to take account of a share
being quoted ex-dividend and ex-rights,
permitted upward and downward movements in share prices of any
category of shares on any day are limited under the rules of the
Korea Exchange to 15.0% of the previous days closing price
of the shares, rounded down as set out below:
|
|
|
|
|
Previous Days Closing Price W
|
|
Rounded Down to W
|
|
|
Less than 5,000
|
|
W
|
5
|
|
5,000 to less than 10,000
|
|
|
10
|
|
10,000 to less than 50,000
|
|
|
50
|
|
50,000 to less than 100,000
|
|
|
100
|
|
100,000 to less than 500,000
|
|
|
500
|
|
500,000 or more
|
|
|
1,000
|
|
As a consequence, if a particular closing price is the same as
the price set by the fluctuation limit, the closing price may
not reflect the price at which persons would have been prepared,
or would be prepared to continue, if so permitted, to buy and
sell shares. Orders are executed on an auction system with
priority rules to deal with competing bids and offers.
Due to a recent deregulation of restrictions on brokerage
commission rates, the brokerage commission rate on equity
securities transactions may be determined by the parties,
subject to commission schedules being filed with the Korea
Exchange by the securities companies. In addition, a securities
transaction tax of 0.15% of the sales price will generally be
imposed on the transfer of shares or certain securities
representing rights to subscribe for shares. A special
agricultural and fishery tax of 0.15% of the sales prices will
also be imposed on transfer of these shares and securities on
the KRX KOSPI Market. See Item 10.E.
Taxation Korean Taxation.
90
The following table sets forth the number of companies listed on
the KRX KOSPI Market, the corresponding total market
capitalization and the average daily trading volume at the end
of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Capitalization on the
|
|
|
|
|
|
|
Last Day of Each Period
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Average Daily Trading Volume, Value
|
|
|
|
Listed
|
|
|
(Billions of
|
|
|
(Millions of
|
|
|
Thousands
|
|
|
(Millions of
|
|
|
(Thousands
|
|
Year
|
|
Companies
|
|
|
Won)
|
|
|
US$)(1)
|
|
|
of Shares
|
|
|
Won)
|
|
|
of US$)(1)
|
|
|
1981
|
|
|
343
|
|
|
W
|
2,959
|
|
|
US$
|
4,223
|
|
|
|
10,565
|
|
|
W
|
8,708
|
|
|
US$
|
12,427
|
|
1982
|
|
|
334
|
|
|
|
3,001
|
|
|
|
4,012
|
|
|
|
9,704
|
|
|
|
6,667
|
|
|
|
8,914
|
|
1983
|
|
|
328
|
|
|
|
3,490
|
|
|
|
4,361
|
|
|
|
9,325
|
|
|
|
5,941
|
|
|
|
7,425
|
|
1984
|
|
|
336
|
|
|
|
5,149
|
|
|
|
6,207
|
|
|
|
14,847
|
|
|
|
10,642
|
|
|
|
12,829
|
|
1985
|
|
|
342
|
|
|
|
6,570
|
|
|
|
7,362
|
|
|
|
18,925
|
|
|
|
12,315
|
|
|
|
13,798
|
|
1986
|
|
|
355
|
|
|
|
11,994
|
|
|
|
13,863
|
|
|
|
31,755
|
|
|
|
32,870
|
|
|
|
37,991
|
|
1987
|
|
|
389
|
|
|
|
26,172
|
|
|
|
32,884
|
|
|
|
20,353
|
|
|
|
70,185
|
|
|
|
88,183
|
|
1988
|
|
|
502
|
|
|
|
64,544
|
|
|
|
93,895
|
|
|
|
10,367
|
|
|
|
198,364
|
|
|
|
288,571
|
|
1989
|
|
|
626
|
|
|
|
95,477
|
|
|
|
140,119
|
|
|
|
11,757
|
|
|
|
280,967
|
|
|
|
412,338
|
|
1990
|
|
|
669
|
|
|
|
79,020
|
|
|
|
109,872
|
|
|
|
10,866
|
|
|
|
183,692
|
|
|
|
255,412
|
|
1991
|
|
|
686
|
|
|
|
73,118
|
|
|
|
95,541
|
|
|
|
14,022
|
|
|
|
214,263
|
|
|
|
279,973
|
|
1992
|
|
|
688
|
|
|
|
84,712
|
|
|
|
107,027
|
|
|
|
24,028
|
|
|
|
308,246
|
|
|
|
389,445
|
|
1993
|
|
|
693
|
|
|
|
112,665
|
|
|
|
138,870
|
|
|
|
35,130
|
|
|
|
574,048
|
|
|
|
707,566
|
|
1994
|
|
|
699
|
|
|
|
151,217
|
|
|
|
190,762
|
|
|
|
36,862
|
|
|
|
776,257
|
|
|
|
979,257
|
|
1995
|
|
|
721
|
|
|
|
141,151
|
|
|
|
181,943
|
|
|
|
26,130
|
|
|
|
487,762
|
|
|
|
628,721
|
|
1996
|
|
|
760
|
|
|
|
117,370
|
|
|
|
138,490
|
|
|
|
26,571
|
|
|
|
486,834
|
|
|
|
928,418
|
|
1997
|
|
|
776
|
|
|
|
70,989
|
|
|
|
41,881
|
|
|
|
41,525
|
|
|
|
555,759
|
|
|
|
327,881
|
|
1998
|
|
|
748
|
|
|
|
137,799
|
|
|
|
114,261
|
|
|
|
97,716
|
|
|
|
660,429
|
|
|
|
547,619
|
|
1999
|
|
|
725
|
|
|
|
349,504
|
|
|
|
307,662
|
|
|
|
278,551
|
|
|
|
3,481,620
|
|
|
|
3,064,806
|
|
2000
|
|
|
704
|
|
|
|
188,042
|
|
|
|
148,415
|
|
|
|
306,163
|
|
|
|
2,602,211
|
|
|
|
2,053,837
|
|
2001
|
|
|
689
|
|
|
|
255,850
|
|
|
|
194,785
|
|
|
|
473,241
|
|
|
|
1,997,420
|
|
|
|
1,520,685
|
|
2002
|
|
|
683
|
|
|
|
258,681
|
|
|
|
216,071
|
|
|
|
857,245
|
|
|
|
3,041,598
|
|
|
|
2,540,590
|
|
2003
|
|
|
684
|
|
|
|
355,363
|
|
|
|
298,624
|
|
|
|
542,010
|
|
|
|
2,216,636
|
|
|
|
1,862,719
|
|
2004
|
|
|
683
|
|
|
|
412,588
|
|
|
|
398,597
|
|
|
|
372,895
|
|
|
|
2,232,109
|
|
|
|
2,156,419
|
|
2005
|
|
|
702
|
|
|
|
655,075
|
|
|
|
648,589
|
|
|
|
467,629
|
|
|
|
3,157,662
|
|
|
|
3,126,398
|
|
2006
|
|
|
731
|
|
|
|
704,588
|
|
|
|
757,622
|
|
|
|
279,096
|
|
|
|
3,435,180
|
|
|
|
3,693,742
|
|
2007
|
|
|
745
|
|
|
|
951,900
|
|
|
|
1,017,205
|
|
|
|
363,732
|
|
|
|
5,539,588
|
|
|
|
5,919,697
|
|
2008
|
|
|
763
|
|
|
|
576,888
|
|
|
|
457,122
|
|
|
|
355,205
|
|
|
|
5,189,644
|
|
|
|
4,112,238
|
|
2009 (through June 19)
|
|
|
757
|
|
|
|
719,468
|
|
|
|
569,109
|
|
|
|
568,914
|
|
|
|
5,915,222
|
|
|
|
4,679,024
|
|
Source: Korea Exchange
|
|
|
(1) |
|
Converted at the noon buying rate on the last business day of
the period indicated. |
The Korean securities markets are principally regulated by the
Financial Services Commission of Korea and became subject to the
Financial Investment Services and Capital Markets Act beginning
in February 2009. The law imposes restrictions on insider
trading and price manipulation, requires specified information
to be made available by listed companies to investors and
establishes rules regarding margin trading, proxy solicitation,
takeover bids, acquisition of treasury shares and reporting
requirements for shareholders holding substantial interests.
Further
Opening of the Korean Securities Market
A stock index futures market was opened on May 3, 1996 and
a stock index option market was opened on July 7, 1997, in
each case at the Korea Stock Exchange. Remittance and
repatriation of funds in connection with
91
investment in stock index futures and options are subject to
regulations similar to those that govern remittance and
repatriation in the context of foreign investment in Korean
stocks.
In addition, the Korea Stock Exchange opened new option markets
for stocks of seven companies including our shares of common
stock and common stock of six other companies on
January 28, 2002. Foreigners will be permitted to invest in
such options for individual stocks subject to certain procedural
requirements.
Starting from May 1, 1996, foreign investors were permitted
to invest in warrants representing the right to subscribe for
shares of a company listed on the Korea Stock Exchange or
registered on the KOSDAQ, subject to certain investment
limitations. A foreign investor may not acquire such warrants
with respect to shares of a class of a company for which the
ceiling on aggregate investment by foreigners has been reached
or exceeded.
As of December 30, 1997, foreign investors were permitted
to invest in all types of corporate bonds, bonds issued by
national or local governments and bonds issued in accordance
with certain special laws without being subject to any aggregate
or individual investment ceiling. The Financial Services
Commission of Korea sets forth procedural requirements for such
investments. The Government announced on February 8, 1998
its plans for the liberalization of the money market with
respect to investment in money market instruments by foreigners
in 1998. According to the plan, foreigners have been permitted
to invest in money market instruments issued by corporations,
including commercial paper, starting February 16, 1998 with
no restrictions as to the amount. Starting May 25, 1998,
foreigners have been permitted to invest in certificates of
deposit and repurchase agreements.
Currently, foreigners are permitted to invest in securities
including shares of most Korean companies which are not listed
on the KRX KOSPI Market nor the KRX KOSDAQ Market and in bonds
which are not listed.
Protection
of Customers Interest in Case of Insolvency of Financial
Investment Companies with a Brokerage License
Under Korean law, the relationship between a customer and a
financial investment company with a brokerage license in
connection with a securities sell or buy order is deemed to be
consignment and the securities acquired by a consignment agent
(i.e., the financial investment company with a brokerage
license) through such sell or buy order are regarded as
belonging to the customer in so far as the customer and the
consignment agents creditors are concerned. Therefore, in
the event of a bankruptcy or rehabilitation procedure involving
a financial investment company with a brokerage license, the
customer of such financial investment company is entitled to the
proceeds of the securities sold by such financial investment
company.
When a customer places a sell order with a financial investment
company with a brokerage license which is not a member of the
Korea Exchange and this financial investment company places a
sell order with another financial investment company with a
brokerage license which is a member of the Korea Exchange, the
customer is still entitled to the proceeds of the securities
sold received by the non-member company from the member company
regardless of the bankruptcy or rehabilitation of the non-member
company.
Under the Financial Investment Services and Capital Markets Act,
the Korea Exchange is obliged to indemnify any loss or damage
incurred by a counterparty as a result of a breach by its
members. If a financial investment company with a brokerage
license which is a member of the Korea Exchange breaches its
obligation in connection with a buy order, the Korea Exchange is
obliged to pay the purchase price on behalf of the breaching
member.
When a customer places a buy order with a non-member company and
the non-member company places a buy order with a member company,
the customer has the legal right to the securities received by
the non-member company from the member company because the
purchased securities are regarded as belonging to the customer
in so far as the customer and the non-member companys
creditors are concerned.
As the cash deposited with a financial investment company with a
brokerage license is regarded as belonging to such financial
investment company, which is liable to return the same at the
request of its customer, the customer cannot take back deposited
cash from the financial investment company with a brokerage
license if a bankruptcy or rehabilitation procedure is
instituted against such financial investment company and,
therefore, can suffer from loss or damage as a result. However,
the Depositor Protection Act provides that Korea Deposit
Insurance Corporation will, upon the request of the investors,
pay investors up to Won 50 million per investor in case of
such financial
92
investment companys bankruptcy, liquidation, cancellation
of securities business license or other insolvency events.
Pursuant to the Financial Investment Services and Capital
Markets Act, subject to certain exceptions, financial investment
companies with a brokerage license are required to deposit the
cash received from their customers with the Korea Securities
Finance Corporation, a special entity established pursuant to
the Financial Investment Services and Capital Markets Act.
Set-off or attachment of cash deposits by financial investment
companies with a brokerage license is prohibited. The premiums
related to this insurance under the Depositor Protection Act are
paid by financial investment companies with a brokerage license.
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Item 9.D.
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Selling
Shareholders
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Not applicable.
Not applicable.
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Item 9.F.
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Expenses
of the Issue
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Not applicable.
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Item 10.
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ADDITIONAL
INFORMATION
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Not applicable.
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Item 10.B.
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Memorandum
and Articles of Incorporation
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Description
of Capital Stock
This section provides information relating to our capital stock,
including brief summaries of material provisions of our articles
of incorporation, the Financial Investment Services and Capital
Markets Act, the Korean Commercial Code, the Telecommunications
Business Act and related laws of Korea, all as currently in
effect. The following summaries are subject to, and are
qualified in their entirety by reference to, our articles of
incorporation and the applicable provisions of the Financial
Investment Services and Capital Markets Act, the Korean
Commercial Code and the Telecommunications Business Act. We have
filed copies of our articles of incorporation and the
Telecommunications Business Act as exhibits to our annual
reports on
Form 20-F.
General
The name of our company is SK Telecom Co., Ltd. We are
registered under the laws of Korea under the commercial registry
number of
110111-0371346.
As specified in Article 2 (Objectives) of our articles of
incorporation, the companys objectives are the rational
management of the telecommunications business, development of
telecommunications technology, and contribution to public
welfare and convenience. In order to achieve these objectives,
we are engaged in the following:
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information and communication business;
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sale and lease of subscriber handsets;
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new media business;
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advertising business;
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mail order business;
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business of leasing available and real estate property;
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research and technology development relating to the first four
items above;
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overseas and import/export business relating to the first four
items above;
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manufacture and distribution business relating to the first four
items above;
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tourism
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electronic financial services business;
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film business (production, import, distribution and
screening); and
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any business or undertaking incidental or conducive to the
attainment of the objectives stated above.
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Currently, our authorized share capital is
220,000,000 shares, which consists of shares of common
stock, par value Won 500 per share, and shares of non-voting
stock, par value Won 500 per share (common shares and non-voting
shares together are referred to as shares). Under
our articles of incorporation, we are authorized to issue up to
5,500,000 non-voting preferred shares. As of May 31, 2009,
80,745,711 common shares were issued, of which
8,400,708 shares were held by us in treasury. We have never
issued any non-voting preferred shares. All of the issued and
outstanding common shares are fully-paid and non-assessable and
are in registered form. We issue share certificates in
denominations of 1, 5, 10, 50, 100, 500, 1,000 and
10,000 shares.
Board
of Directors
Meetings of the board of directors are convened by the
representative director as he or she deems necessary or upon the
request of three or more directors. The board of directors
determines all important matters relating to our business. In
addition, the prior approval of the majority of the independent
non-executive directors is required for certain matters, which
include:
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investment by us or any of our subsidiaries in a foreign company
or equity or other overseas assets in an amount equal to 5.0% or
more of our shareholders equity under our most recent
balance sheet; and
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contribution of capital, loans or guarantees, acquisition of our
subsidiaries assets or similar transactions with our
affiliated companies in excess of Won 10 billion through
one or a series of transactions.
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Resolutions of the board are adopted in the presence of a
majority of the directors in office and by the affirmative vote
of a majority of the directors present. No director who has an
interest in a matter for resolution may exercise his or her vote
upon such matter.
There are no specific shareholding requirements for
directors qualification. Directors are elected at a
general meeting of shareholders if the approval of a majority
vote of the shareholders present at such meeting is obtained,
and such majority also represents at least one-fourth of the
total number of shares outstanding. Under the Financial
Investment Services and Capital Markets Act, unless stated
otherwise in the articles of incorporation, holders of an
aggregate of 1% or more of the outstanding shares with voting
rights may request cumulative voting in any election for two or
more directors. However, our shareholders have opted not to
adopt cumulative voting.
The term of office for directors shall be until the close of the
third annual general shareholders meeting convened after
he or she commences his or her term. Our directors may serve
consecutive terms and our shareholders may remove them from
office at any time by a special resolution adopted at a general
meeting of shareholders.
Dividends
We distribute dividends to our shareholders in proportion to the
number of shares owned by each shareholder. The common shares
represented by the ADSs have the same dividend rights as other
outstanding common shares.
Holders of non-voting shares are entitled to receive dividends
in priority to the holders of common shares. The dividend on the
non-voting shares is between 9.0% and 25.0% of the par value as
determined by the board of directors at the time of their
issuance. If the dividends for common shares exceed the
dividends for non-voting shares, the holders of non-voting
shares will be entitled to participate in the distribution of
such excess amount with the holders of common shares. If the
amount available for dividends is less than the aggregate amount
of the minimum required dividend, holders of non-voting shares
will be entitled to receive such accumulated unpaid
94
dividend from dividends payable in the next fiscal year before
holders of common shares. There are no non-voting shares issued
or outstanding.
We declare dividends annually at the annual general meeting of
shareholders which is generally held within three months after
the end of the fiscal year. We pay the annual dividend shortly
after the annual general meeting to the shareholders of record
or registered pledges as of the end of the preceding fiscal
year. We may distribute the annual dividend in cash or in
shares. However, a dividend of shares must be distributed at par
value. If the market price of the shares is less than their par
value, dividends in shares may not exceed one-half of the annual
dividend. Our obligation to pay dividend expires if no claim to
dividend is made for five years from the payment date.
Under the Korean Commercial Code, we may pay an annual dividend
only out of the excess of our net assets, on a non-consolidated
basis, over the sum of (1) our stated capital and
(2) the total amount of our capital surplus reserve and
legal reserve accumulated up to the end of the relevant dividend
period. In addition, we may not pay an annual dividend unless we
have set aside as legal reserve an amount equal to at least
10.0% of the cash portion of the annual dividend or until we
have accumulated a legal reserve of not less than one-half of
our stated capital. We may not use legal reserve to pay cash
dividends but may transfer amounts from legal reserve to capital
stock or use legal reserve to reduce an accumulated deficit.
In addition, the Korean Commercial Code and our articles of
incorporation provide that, in addition to annual dividends, we
may pay interim dividends once during each fiscal year. Unlike
annual dividends, the decision to pay interim dividends can be
made by a resolution of the board of directors and is not
subject to shareholder approval. Any interim dividends must be
paid in cash to the shareholders of record as of June 30 of the
relevant fiscal year. In August 2008, we distributed such
interim dividends at Won 1,000 per share to our shareholders for
a total amount of Won 72.8 billion.
Under the Financial Investment Services and Capital Markets Act,
the total amount of interim dividends payable in a fiscal year
shall not be more than the net assets on the balance sheet of
the immediately preceding fiscal year, after deducting
(1) a companys capital in the immediately preceding
fiscal year, (2) the aggregate amount of its capital
reserves and legal reserves accumulated up to the immediately
preceding fiscal year, (3) the amount of earnings for
dividend payments confirmed at the general shareholders
meeting with respect to the immediately preceding fiscal year
and (4) the amount of legal reserve that should be set
aside for the current fiscal year following the interim dividend
payment. Furthermore, the rate of interim dividends for
non-voting shares must be the same as that for our common shares.
Our obligation to pay interim dividends expires if no claims to
such dividends are made for a period of five years from the
payment date.
Distribution
of Free Shares
In addition to paying dividends in shares out of our retained or
current earnings, we may also distribute to our shareholders an
amount transferred from our capital surplus or legal reserve to
our stated capital in the form of free shares. We must
distribute such free shares to all our shareholders in
proportion to their existing shareholdings.
Preemptive
Rights and Issuance of Additional Shares
We may at times issue authorized but unissued shares, unless
otherwise provided in the Korean Commercial Code, on terms
determined by our board of directors. All our shareholders are
generally entitled to subscribe to any newly-issued shares in
proportion to their existing shareholdings. We must offer new
shares on uniform terms to all shareholders who have preemptive
rights and are listed on our shareholders registry as of
the relevant record date. We must give public notice of the
preemptive rights regarding new shares and their transferability
at least two weeks before the relevant record date. Our board of
directors may determine how to distribute shares for which
preemptive rights have not been exercised or where fractions of
shares occur.
Under the Korean Commercial Code and our articles of
incorporation, we may issue new shares pursuant to a board
resolution to persons other than existing shareholders only if
(1) the new shares are issued for the purpose of issuing
depositary receipts in accordance with the relevant regulations
or through an offering to public investors and (2) the
purpose of such issuance is deemed necessary by us to achieve a
business purpose, including, but not limited
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to, the introduction of new technology or the improvement of our
financial condition. Under our articles of incorporation, only
our board of directors is authorized to set the terms and
conditions with respect to such issuance of new shares.
In addition, under our articles of incorporation, we may issue
convertible bonds or bonds with warrants, each up to an
aggregate principal amount of Won 400 billion, to persons
other than existing shareholders, where such issuance is deemed
necessary by us to achieve a business purpose, including, but
not limited to, the introduction of new technology or the
improvement of our financial condition.
Members of our employee stock ownership association, whether or
not they are our shareholders, generally have a preemptive right
to subscribe for up to 20.0% of the shares publicly offered
pursuant to the Financial Investment Services and Capital
Markets Act. This right is exercisable only to the extent that
the total number of shares so acquired and held by members of
our employee stock ownership association does not exceed 20.0%
of the sum of the number of shares then outstanding and the
number of newly-issued shares. As of March 31, 2009,
approximately 0.6% of the issued shares were held by members of
our employee stock ownership association.
General
Meeting of Shareholders
We generally hold the annual general meeting of shareholders
within three months after the end of each fiscal year. Subject
to a board resolution or court approval, we may hold an
extraordinary general meeting of shareholders:
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as necessary;
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at the request of holders of an aggregate of 3.0% or more of our
outstanding common shares;
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at the request of shareholders holding an aggregate of 1.5% or
more of our outstanding shares and preferred shares for at least
six months; or
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at the request of our audit committee.
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Holders of non-voting shares may request a general meeting of
shareholders only after the non-voting shares become entitled to
vote or enfranchised, as described under
Voting Rights below.
We must give shareholders written notice setting out the date,
place and agenda of the meeting at least two weeks before the
date of the general meeting of shareholders. However, for
holders of less than 1.0% of the total number of issued and
outstanding voting shares, we may give notice by placing at
least two public notices in at least two daily newspapers at
least two weeks in advance of the meeting. Currently, we use The
Korea Economic Daily News and Mail Business Newspaper, both
published in Seoul, for this purpose. Shareholders who are not
on the shareholders registry as of the record date are not
entitled to receive notice of the general meeting of
shareholders or attend or vote at the meeting. Holders of
non-voting shares, unless enfranchised, are not entitled to
receive notice of or vote at general meetings of shareholders.
Our general meetings of shareholders have historically been held
in or near Seoul.
Voting
Rights
Holders of our common shares are entitled to one vote for each
common share, except that voting rights of common shares held by
us (including treasury shares and shares held by bank trust
funds controlled by us), or by a corporate shareholder that is
more than 10.0% owned by us either directly or indirectly, may
not be exercised. The Korean Commercial Code and the Financial
Investment Services and Capital Markets Act permit cumulative
voting, under which voting method each shareholder would have
multiple voting rights corresponding to the number of directors
to be appointed in the voting and may exercise all voting rights
cumulatively to elect one director. However, our shareholders
have opted not to adopt cumulative voting.
Our shareholders may adopt resolutions at a general meeting by
an affirmative majority vote of the voting shares present or
represented at the meeting if the proportion of affirmative
votes also represent at least one-fourth of our total voting
shares then issued and outstanding. However, under the Korean
Commercial Code and our articles of incorporation, the following
matters, among others, require approval by the holders of at
least two-thirds
96
of the voting shares present or represented at a meeting, and
such affirmative votes also represent at least one-third of our
total voting shares then issued and outstanding:
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amending our articles of incorporation;
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removing a director;
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effecting any dissolution, merger or consolidation of us;
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transferring the whole or any significant part of our business;
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effecting our acquisition of all of the business of any other
company or a part of the business of any other company having a
material effect on our business;
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reducing our capital; or
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issuing any new shares at a price lower than their par value.
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In general, holders of non-voting shares are not entitled to
vote on any resolution or receive notice of any general meeting
of shareholders.
However, in the case of amendments to our articles of
incorporation, or any merger or consolidation of us, or in some
other cases which affect the rights or interests of the
non-voting shares, approval of the holders of non-voting shares
is required. We may obtain the approval by a resolution of
holders of at least two-thirds of the non-voting shares present
or represented at a class meeting of the holders of non-voting
shares, where the affirmative votes also represent at least
one-third of our total issued and outstanding non-voting shares.
In addition, if we are unable to pay dividends on non-voting
shares as provided in our articles of incorporation, the holders
of non-voting shares will become enfranchised and will be
entitled to exercise voting rights beginning at the next general
meeting of shareholders to be held after the declaration of
non-payment of dividends is made until such dividends are paid.
The holders of enfranchised non-voting shares have the same
rights as holders of common shares to request, receive notice
of, attend and vote at a general meeting of shareholders.
Shareholders may exercise their voting rights by proxy. A
shareholder may give proxies only to another shareholder, except
that a corporate shareholder may give proxies to its officers or
employees.
Holders of ADRs exercise their voting rights through the ADR
depositary, an agent of which is the record holder of the
underlying common shares. Subject to the provisions of the
deposit agreement, ADR holders are entitled to instruct the ADR
depositary how to vote the common shares underlying their ADSs.
Limitation
on Shareholdings
The Telecommunications Business Act prohibits foreign
governments, individuals, and entities (including Korean
entities that are deemed foreigners, as discussed below) from
owning more than 49% of our voting stock. Korean entities whose
largest shareholder is a foreign government or a foreigner
(together with any of its related parties) and owns 15% or more
of the outstanding voting stock are deemed foreigners. A
foreigner who has acquired shares of our voting stock in excess
of such limitation may not exercise its voting rights with
respect to the shares exceeding such limitation, and may be
subject to the KCCs corrective orders.
Rights
of Dissenting Shareholders
In some limited circumstances, including the transfer of all or
a significant part of our business or our merger or
consolidation with another company (with certain exceptions),
dissenting shareholders have the right to require us to purchase
their shares. To exercise this right, shareholders, including
holders of non-voting shares, must submit to us a written notice
of their intention to dissent before the general meeting of
shareholders. Then, within 20 days after the relevant
resolution is passed at a meeting, the dissenting shareholders
must request us in writing to purchase their shares. We are
obligated to purchase the shares of such dissenting shareholders
within one month after the expiration of the
20-day
period. The purchase price for the shares is required to be
determined through negotiation between the dissenting
shareholders and us. If we cannot agree on a price through
negotiation, the purchase price will be the average of
(1) the weighted average of the daily share prices on the
KRX KOSPI Market for the two-
97
month period before the date of the adoption of the relevant
board resolution, (2) the weighted average of the daily
share price on the KRX KOSPI Market for the one month period
before the date of the adoption of the relevant resolution and
(3) the weighted average of the daily share price on the
KRX KOSPI Market for the one week period before such date of the
adoption of the relevant resolution. However, a court may
determine this price if we or dissenting shareholders do not
accept the purchase price.
Registry
of Shareholders and Record Dates
Our transfer agent, Kookmin Bank, maintains the register of our
shareholders at its office in Seoul, Korea. It records and
registers transfers of shares on the register of shareholders
upon presentation of the share certificates.
The record date for annual dividends is December 31. For
the purpose of determining the shareholders entitled to annual
dividends, the registry of shareholders is closed for the period
from January 1 to January 31 of the following year. Further, for
the purpose of determining the shareholders entitled to some
other rights pertaining to the shares, we may, on at least two
weeks public notice, set a record date
and/or close
the register of shareholders for not more than three months. The
trading of shares and the delivery of share certificates may
continue while the register of shareholders is closed.
Annual
Report
At least one week before the annual general meeting of
shareholders, we must make our annual reports and audited
non-consolidated financial statements available for inspection
at our principal office and at all of our branch offices. In
addition, copies of annual reports, the audited non-consolidated
financial statements and any resolutions adopted at the general
meeting of shareholders will be available to our shareholders.
Under the Financial Investment Services and Capital Markets Act,
we must file with the Financial Services Commission of Korea and
the Korea Exchange (1) an annual securities report within
90 days after the end of our fiscal year, (2) a
half-year report within 45 days after the end of the first
six months of our fiscal year, and (3) quarterly reports
within 45 days after the end of the third month and the
ninth month of our fiscal year. Copies of these reports are or
will be available for public inspection at the Financial
Services Commission of Korea and the Korea Exchange.
Transfer
of Shares
Under the Korean Commercial Code, the transfer of shares is
effected by the delivery of share certificates. However, to
assert shareholders rights against us, the transferee must
have his or her name, seal and address registered on our
registry of shareholders, maintained by our transfer agent. A
non-Korean shareholder may file a sample signature in place of a
seal, unless he or she is a citizen of a country with a sealing
system similar to that of Korea. In addition, a non-resident
shareholder must appoint an agent in Korea authorized to receive
notices on his or her behalf and file his or her mailing address
in Korea.
Under current Korean regulations, the Korea Securities
Depository, foreign exchange banks (including domestic branches
of foreign banks), financial investment companies with a
dealing, brokerage or collective investment license and
internationally recognized custodians may act as agents and
provide related services for foreign shareholders. Certain
foreign exchange controls and securities regulations apply to
the transfer of shares by non-residents or non-Koreans. See
Item 10.D. Exchange Controls Korean
Foreign Exchange Controls and Securities Regulations.
Our transfer agent is Kookmin Bank, located at
24-3,
Yoido-dong, Yongdungpo-ku, Seoul, Korea.
Restrictions
Applicable to Shares
Pursuant to the Telecommunications Business Act, the maximum
aggregate foreign shareholding in us is limited to 49.0%. See
Item 4.B. Business Overview Law and
Regulation Foreign Ownership and Investment
Restrictions and Requirements. In addition, certain
foreign exchange controls and securities regulations apply to
the acquisition of securities by non-residents or non-Koreans.
See Item 10.D. Exchange Controls Korean
Foreign Exchange Controls and Securities Regulations.
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Acquisition
of Shares by Us
We generally may not acquire our own shares except in certain
limited circumstances, including, without limitation, a
reduction in capital. Under the Korean Commercial Code, except
in the case of a reduction of capital, any shares acquired by us
must be sold or otherwise transferred to a third party within a
reasonable time.
Notwithstanding the foregoing restrictions, pursuant to the
Financial Investment Services and Capital Markets Act, a listed
company may acquire common shares through purchases on the Korea
Exchange or through a tender offer or pursuant to trust
agreements with financial investment companies with a trust
license. The aggregate purchase price for the common shares may
not exceed the total amount available for distribution of
dividends at the end of the preceding fiscal year, less the
amount of dividends and mandatory reserves required to be set
aside for that fiscal year, subject to certain procedural
requirements.
In general, corporate entities in which we own a 50% or more
equity interest may not acquire our common shares. On
October 26, 2001, in accordance with the approval of our
board of directors, we established trust funds with four Korean
banks with a total funding of Won 1.3 trillion for the purpose
of acquiring our shares at market prices or within a range of
five percent of market prices. In October 2007, in accordance
with the approval of our board of directors, we extended such
trust funds with four Korean banks, but the total amount of
funding was reduced to Won 982 billion. For more details on
the trust funds, see Item 5.B. Liquidity and Capital
Resources.
Liquidation
Rights
In the event of our liquidation, assets remaining after payment
of all debts, liquidation expenses and taxes will be distributed
among shareholders in proportion to their shareholdings. Holders
of non-voting shares have no preference in liquidation. Holders
of debt securities have no preference over other creditors in
the event of liquidation.
Description
of American Depositary Shares
The following is a summary of the deposit agreement dated as of
May 31, 1996, as amended by amendment no. 1 dated as
of March 15, 1999, amendment no. 2 dated as of
April 24, 2000 and amendment no. 3 dated as of
July 24, 2002, among us, Citibank, N.A., as ADR depositary,
and all holders and beneficial owners of ADSs, as supplemented
by side letters dated as of July 25, 2002, October 1,
2002 and October 1, 2007. The deposit agreement is governed
by the laws of the State of New York. Because it is a summary,
this description does not contain all the information that may
be important to you. For more complete information, you should
read the entire deposit agreement and the ADR. The deposit
agreement has been filed as an exhibit to our registration
statement on
Form F-3
(File
No. 333-91304)
filed with the SEC. Copies of the deposit agreement are
available for inspection at the principal New York office of the
ADR depositary, currently located at 388 Greenwich Street,
14th Floor, New York, New York 10013, United States of
America, and at the principal London office of the ADR
depositary, currently located at Canada Square, Canary Wharf,
London, E14 5LB, England.
American
Depositary Receipts
The ADR depositary may execute and deliver ADRs evidencing the
ADSs. Each ADR evidences a specified number of ADSs, each ADS
representing one-ninth of one share of our common stock to be
deposited with the ADR depositarys custodian in Seoul, or
the Custodian. The Custodian is Korea Securities Depository,
located at 1328 Paeksok-Dong, Ilsan-Ku, Koyang,
411-770,
Kyunggi-Do, Seoul,
150-884,
Korea. Korea Securities Depository is also the institution
authorized under applicable law to effect book-entry transfers
of our common shares, known as the Custodian. An ADR
may represent any number of ADSs. We and the ADR depositary will
treat only persons in whose names ADRs are registered on the
books of the registrar as holders of ADRs.
Deposit
and Withdrawal of Shares of Common Stock
Notwithstanding the provisions described below, under the terms
of the deposit agreement, the deposit of shares and issuance of
ADSs may only be made if the total number of shares represented
by ADSs after such deposit does not exceed a specified maximum,
24,321,893 shares as of June 1, 2009. This limit will
be adjusted in certain
99
circumstances, including (1) increases upon the
cancellation of existing ADSs, (2) increases upon future
offerings of ADSs by us or our shareholders, (3) increases
for rights offerings and (4) adjustments for share
reclassifications. The limit also may be decreased in certain
circumstances. As of June 1, 2009, ADSs representing
17,942,962 shares of our common stock were outstanding.
Notwithstanding the foregoing, the ADR depositary and the
custodian may not accept deposits of shares of common stock for
issuance of ADSs (i) if it has been notified by us in
writing that we block deposits to prevent a violation of
applicable Korean laws or regulations or a violation of our
articles of incorporation or (ii) from a person intending
to make a deposit that identifies itself to the depositary and
that has been identified in writing by us as a holder of at
least 3% of our shares of common stock.
The shares of common stock underlying the ADSs are delivered to
the ADR depositarys custodian in book-entry form.
Accordingly, no share certificates will be issued for them, and
the ADR depositary will hold the shares of common stock through
the book-entry settlement system of the Custodian. The delivery
of the shares of common stock pursuant to the deposit agreement
will take place through the facilities of the Custodian in
accordance with its applicable settlement procedures. The ADR
depositary will execute and deliver ADSs if you or your broker
deposit shares or evidence of rights to receive shares of common
stock with the Custodian. Upon payment of its fees and expenses
and of any taxes or charges, such as stamp taxes or stock
transfer taxes or fees, the ADR depositary will register the
appropriate number of ADSs in the names you designate. The ADR
depositary and the ADR depositarys custodian will refuse
to accept shares of common stock for deposit whenever we
restrict transfer of shares of common stock to comply with
ownership restrictions under applicable law or our articles of
incorporation or whenever the deposit would cause the total
number of shares of common stock deposited to exceed a level we
determine from time to time. We may instruct the ADR depositary
to take certain actions with respect to a holder of ADSs who
holds in excess of the ownership limitation set forth in the
deposit agreement, including the mandatory sale or disposition
of the shares represented by the ADSs in excess of such
ownership limitations if, and to the extent, permitted by
applicable law.
You may surrender your ADRs to the ADR depositary to withdraw
the underlying shares of our common stock. Upon payment of the
fees and any governmental charges and taxes provided in the
deposit agreement, and subject to applicable laws and
regulations of Korea and our articles of incorporation, you will
be entitled to physical delivery or electronic delivery to an
account in Korea or, if permissible under applicable Korean law,
outside the United States, of the shares of common stock
evidenced by the ADRs and any other property at the time
represented by ADRs you surrendered. If you surrender an ADR
evidencing a number of ADSs not evenly divisible by nine, the
ADR depositary will deliver the appropriate whole number of
shares of common stock represented by the surrendered ADSs and
will execute and deliver to you a new ADR evidencing ADSs
representing any remaining fractional shares of common stock.
If you request withdrawal of shares of common stock, you must
deliver to the ADR depositary a written order directing the ADR
depositary to cause the shares of common stock being withdrawn
to be delivered to or upon the written order of the person
designated in your order, subject to applicable Korean laws and
the provisions of the deposit agreement.
Under the provisions of the deposit agreement, the ADR
depositary may not lend shares of common stock or ADSs. However,
subject to the provisions of the deposit agreement and
limitations established by the ADR depositary, the ADR
depositary may execute and deliver ADSs before deposit of the
underlying shares of common stock. This is called a pre-release
of the ADS. The ADR depositary may also deliver shares of common
stock upon cancellation of pre-released ADSs (even if the
cancellation occurs before the termination of the prerelease).
The ADR depositary may pre-release ADSs only under the following
circumstances:
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before or at the time of the pre-release, the person to whom the
pre-release is being made must represent to the ADR depositary
in writing that it or its customer owns the shares of common
stock or ADSs to be deposited and show evidence of the ownership
to the ADR depositarys satisfaction;
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before or at the time of such pre-release, the person to whom
the pre-release is being made must agree in writing that he will
hold the shares of common stock or ADSs in trust for the ADR
depositary until their delivery to the ADR depositary or
custodian, reflect on his records the ADR depositary as owner of
such shares of common stock or ADSs and deliver such shares of
common stock upon the ADR depositarys request;
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the pre-release must be fully collateralized with cash or
U.S. government securities;
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the ADR depositary must be able to terminate the pre-release on
not more than five business days notice; and
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the pre-release is subject to further indemnities and credit
regulations as the ADR depositary deems appropriate.
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The ADR depositary may retain for its own account any
compensation received by it in connection with the pre-release,
such as earnings on the collateral.
If you want to withdraw the shares of common stock from the
depositary facility, you must register your identity with the
Financial Supervisory Service of Korea before you acquire the
shares of common stock unless you intend to sell the shares of
common stock within three months. See Item 10.D.
Exchange Controls Korean Foreign Exchange Controls
and Securities Regulations Restrictions Applicable
to Shares.
Dividends,
Other Distributions and Rights
If the ADR depositary can, in its judgment and pursuant to
applicable law, convert Won (or any other foreign currency) into
Dollars on a reasonable basis and transfer the resulting Dollars
to the United States, the ADR depositary will as promptly as
practicable convert all cash dividends and other cash
distributions received by it on the deposited shares of common
stock into Dollars and distribute the Dollars to you in
proportion to the number of ADSs representing shares of common
stock held by you, after deduction of the fees and expenses of
the ADR depositary. If the ADR depositary determines that in its
judgment any currency other than Dollars it receives from us
cannot be converted and distributed on a reasonable basis, the
ADR depositary may distribute the currency it receives to the
extent permitted under applicable law or hold the currency for
your account if you are entitled to receive the distribution.
The ADR depositary will not be liable for any interest. Before
making a distribution, the ADR depositary will deduct any
withholding taxes that must be paid.
In the event that the ADR depositary or the ADR
depositarys custodian receives any distribution upon any
deposited shares of common stock in property or securities
(other than shares of common stock, non-voting shares or rights
to receive shares of common stock or non-voting shares), the ADR
depositary will distribute the property or securities to you in
proportion to your holdings in any manner that the ADR
depositary deems, after consultation with us, equitable and
practicable. If the ADR depositary determines that any
distribution of property or securities (other than shares of
common stock, non-voting shares or rights to receive shares of
common stock or non-voting shares) cannot be made
proportionally, or if for any other reason the ADR depositary
deems the distribution not to be feasible, the ADR depositary
may, after consultation with us, dispose of all or a portion of
the property or securities in such amounts and in such manner,
including by public or private sale, as the ADR depositary deems
equitable or practicable. The ADR depositary will distribute to
you the net proceeds of any such sale, or the balance of the
property or securities, after the deduction of the fees and
expenses of the ADR depositary.
If a distribution by us consists of a dividend in, or free
distribution of, our shares of common stock, the ADR depositary
may, with our approval, and will, if we request, deposit the
shares of common stock and either (1) distribute to you, in
proportion to your holdings, additional ADSs representing those
shares of common stock, or (2) reflect on the records of
the ADR depositary the increase in the aggregate number of ADSs
representing those number of shares of common stock, in both
cases, after the deduction of the fees and expenses of the ADR
depositary. If the ADR depositary deems that such distribution
for any reason is not feasible, the ADR depositary may adopt,
after consultation with us, any method as it may deem equitable
and practicable, including by public or private sale of all or
part of the shares of common stock received. The ADR depositary
will distribute to you the net proceeds of any such sale in the
same way as it does with cash. The ADR depositary will only
distribute whole ADSs. If the ADR depositary does not distribute
additional ADSs, then each outstanding ADS will also represent
the new shares so distributed.
If a distribution by us consists of a dividend in, or free
distribution of, non-voting shares, the ADR depositary will
deposit the non-voting shares under a non-voting shares deposit
agreement to be entered into among us, the ADR depositary and
all holders and beneficial owners of depositary shares. The ADR
depositary will deliver to you, in proportion to your holdings
of ADSs, depositary shares issued under the non-voting shares
deposit agreement
101
representing the number of non-voting shares received as such
dividend or distribution. If the ADR depositary deems such
distribution for any reason is not feasible, the ADR depositary
may adopt, after consultation with us, any method as it may deem
equitable and practicable, including by public or private sale
of all or part of the nonvoting shares received. The ADR
depositary will distribute to you the net proceeds of any such
sale in the same way as it does with cash. The ADR depositary
will only distribute whole depositary shares. We are not
obligated to list depositary shares representing non-voting
shares on any exchange.
If we offer holders of our securities any rights to subscribe
for additional shares of common stock or any other rights, the
ADR depositary may make these rights available to you. The ADR
depositary must first determine whether it is lawful and
feasible to do so. If the ADR depositary determines that it is
not lawful or feasible to make these rights available to you,
then upon our request, the ADR depositary will sell the rights
and distribute the proceeds in the same way as it would do with
cash. The ADR depositary may allow these rights that are not
distributed or sold to lapse. In that case, you will receive no
value for these rights.
If we issue any rights with respect to non-voting shares, the
securities issuable upon any exercise of such rights by holders
or beneficial owners will be depositary shares representing
those non-voting shares issued under the provisions of a
non-voting share deposit agreement.
If a registration statement under the Securities Act is required
with respect to the securities to which any rights relate in
order for us to offer the rights to you and to sell the
securities represented by these rights, the ADR depositary will
not offer such rights to you until such a registration is in
effect, or unless the offering and sale of such securities and
such rights to you are exempt from the registration requirements
of the Securities Act or any required filing, report, approval
or consent has been submitted, obtained or granted. We or the
ADR depositary will not be obligated to register the rights or
securities under the Securities Act or to submit, obtain or
request any filing, report, approval or consent.
The ADR depositary may not be able to convert any currency or to
sell or dispose of any distributed or offered property or rights
in a timely manner or at a specified price, or at all.
Record
Dates
The ADR depositary will fix a record date, after consultation
with us, in each of the following situations:
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any cash dividend or other cash distribution becomes payable;
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any distribution other than cash is made;
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rights are issued with respect to deposited shares of common
stock;
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the ADR depositary causes a change in the number of shares of
common stock that are represented by each ADS; or
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the ADR depositary receives notice of any shareholders
meeting.
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The record date will, to the extent practicable, be as near as
the record date fixed by us for the shares of common stock. The
record date will determine (1) the ADR holders who are
entitled to receive the dividend, distribution or rights, or the
net proceeds of the sale of the rights; or (2) the ADR
holders who are entitled to receive notices or exercise rights.
Voting
of the Underlying Shares of Common Stock
We will give the ADR depositary a notice of any meeting or
solicitation of shareholder proxies immediately after we
finalize the form and substance of such notice but not less than
14 days before the meeting. As soon as practicable after it
receives our notice, the ADR depositary will fix a record date,
and upon our written request, the ADR depositary will mail to
you a notice that will contain the following:
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the information contained in our notice to the ADR depositary
including an English translation, or, if requested by us, a
summary of the information provided by us;
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a statement that the ADR holders as of the close of business on
a specified record date will be entitled to instruct the ADR
depositary as to how to exercise their voting rights for the
number of shares of deposited shares of common stock, subject to
the provisions of applicable Korean law and our articles of
incorporation, which provisions, if any, will be summarized in
the notice to the extent that they are material; and
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a statement as to the manner in which the ADR holders may give
their instructions.
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Upon your written request received on or before the date set by
the ADR depositary for this purpose, the ADR depositary will
endeavor, in so far as practicable, to vote or cause to be voted
the deposited shares of common stock in accordance with the
instructions set forth in your written requests. The ADR
depositary may not itself exercise any voting discretion over
any deposited shares of common stock. You may only exercise the
voting rights in respect of 9 ADSs or multiples of 9 ADSs. ADR
holders may not be entitled to give instruction to vote the
shares represented by the ADSs if, and to the extent, the total
number of shares represented by the ADSs of an ADR holder
exceeds the limit set under applicable law. We can give no
assurance to you, however, that we will notify the ADR
depositary sufficiently in advance of the scheduled date of a
meeting or solicitation of consents or proxies to enable the ADR
depositary to make a timely mailing of notices to you, or that
you will receive the notices sufficiently in advance of a
meeting or solicitation of consents or proxies to give
instructions to the ADR depositary.
Inspection
of Transfer Books
The ADR depositary will keep books at its principal New York
office, which is currently located at 388 Greenwich Street,
14th Floor, New York, New York 10013, for the registration
and transfer of ADRs. You may inspect the books of the ADR
depositary as long as the inspection is not for the purpose of
communicating with holders in the interest of a business or
object other than our business or a matter related to the
deposit agreement or the ADRs.
Reports
and Notices
On or before the first date on which we give notice, by
publication or otherwise, of any meeting of shareholders, or of
any adjourned meeting of shareholders, or of the taking of any
action in respect of any cash or other distributions or the
offering of any rights in respect of the shares of common stock,
we will transmit to the Custodian and the ADR depositary
sufficient copies of the notice in English in the form given or
to be given to shareholders. We will furnish to the ADR
depositary English language versions of any reports, notices and
other communications that we generally transmit to holders of
our common stock, including our annual reports, with annual
audited consolidated financial statements prepared in conformity
with Korean GAAP and, if prepared pursuant to the Securities
Exchange Act of 1934, as amended, a reconciliation of net
earnings for the year and stockholders equity to
U.S. GAAP, and unaudited non-consolidated semiannual
financial statements prepared in conformity with Korean GAAP.
The ADR depositary will arrange for the prompt mailing of copies
of these documents, or, if we request, a summary of any such
notice provided by us to you or, at our request, make notices,
reports (other than the annual reports and semiannual financial
statements) and other communications available to you on a basis
similar to that for the holders of our common stock or on such
other basis as we may advise the ADR depositary according to any
applicable law, regulation or stock exchange requirement.
Notices to you under the deposit agreement will be deemed to
have been duly given if personally delivered or sent by mail or
cable, telex or facsimile transmission, confirmed by letter,
addressed to you at your address as it appears on the transfer
books of the ADR depositary or at such other address as you have
notified the ADR depositary.
In addition, the ADR depositary will make available for
inspection by holders at its principal New York office and its
principal London office any notices, reports or communications,
including any proxy soliciting materials, received from us that
we generally transmit to the holders of our common stock or
other deposited securities, including the ADR depositary. The
ADR depositary will also send to you copies of reports and
communications we will provide as provided in the deposit
agreement.
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Changes
Affecting Deposited Shares of Common Stock
In case of a change in the par value, or a
split-up,
consolidation or any other reclassification of shares of our
common stock or upon any recapitalization, reorganization,
merger or consolidation or sale of assets affecting us, any
securities received by the ADR depositary or the Custodian in
exchange for, in conversion of or in respect of deposited shares
of our common stock will be treated as new deposited shares of
common stock under the deposit agreement. In that case, ADSs
will, subject to the terms of the deposit agreement and
applicable laws and regulations, including any registration
requirements under the Securities Act, represent the right to
receive the new deposited shares of common stock, unless
additional ADRs are issued, as in the case of a stock dividend,
or unless the ADR depositary calls for the surrender of
outstanding ADRs to be exchanged for new ADRs.
Amendment
and Termination of the Deposit Agreement
We may agree with the ADR depositary to amend the deposit
agreement and the ADSs without your consent for any reason. If
the amendment adds or increases fees or charges, except for
taxes and other governmental charges or certain expenses of the
ADR depositary, or prejudices any substantial existing right of
ADR holders, it will only become effective 30 days after
the ADR depositary notifies you of the amendment. If you
continue to hold your ADSs at the time an amendment becomes
effective, you will be considered to have agreed to the
amendment and to be bound by the deposit agreement as amended.
Except as otherwise required by any mandatory provisions of
applicable law, no amendment may impair your right to surrender
your ADSs and to receive the underlying deposited securities.
The ADR depositary will terminate the deposit agreement if we
ask it to do so with 90 days prior written notice.
The ADR depositary may also terminate the deposit agreement if
the ADR depositary has notified us at least 90 days in
advance that it would like to resign and we have not appointed a
new depositary. In both cases, the ADR depositary must notify
you at least 30 days before the termination date.
If any ADRs remain outstanding after the date of termination,
the ADR depositary will stop performing any further acts under
the deposit agreement, except:
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to collect dividends and other distributions pertaining to the
deposited shares of common stock;
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to sell property and rights and the conversion of deposited
shares of common stock into cash as provided in the deposit
agreement; and
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to deliver deposited shares of common stock, together with any
dividends or other distributions received with respect to the
deposited shares of common stock and the net proceeds of the
sale of any rights or other property represented by those ADSs
in exchange for surrendered ADRs.
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At any time after the expiration of six months from the date of
termination, the ADR depositary may sell any remaining deposited
shares of common stock and hold uninvested the net proceeds in
an unsegregated account, together with any other cash or
property then held, without liability for interest, for the pro
rata benefit of the holders of ADSs that have not been
surrendered by then.
Charges
of ADR Depositary
The fees and expenses of the ADR depositary as agreed between us
and the ADR depositary include:
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taxes and other governmental charges;
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registration fees applicable to transfers of shares of common
stock on our shareholders register, or that of any entity
acting as registrar for the shares, to the name of the ADR
depositary or its nominee, or the Custodian or its nominee, when
making deposits or withdrawals under the deposit agreement;
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cable, telex and facsimile transmission expenses that are
expressly provided in the deposit agreement;
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expenses incurred by the ADR depositary in the conversion of
foreign currency into Dollars under the deposit agreement;
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a fee of up to US$5.00 per 100 ADSs, or portion thereof, for
execution and delivery of ADSs and the surrender of ADRs under
the deposit agreement; and
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a fee of up to US$0.02 per ADS held for cash distributions, a
sale or exercise of rights or the taking of any other corporate
action involving distributions to shareholders.
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General
Neither we nor the ADR depositary will be liable to you if
prevented or delayed by law, governmental authority, any
provision of our articles of incorporation or any circumstances
beyond our or its control in performing our or its obligations
under the deposit agreement. The deposit agreement provides that
the ADR depositary will hold the shares of common stock for your
sole benefit. Our obligations and those of the ADR depositary
under the deposit agreement are expressly limited to performing,
in good faith and without negligence, our and its respective
duties specified in the deposit agreement.
The ADSs are transferable on the books of the ADR depositary;
provided, however, that the ADR depositary may, after
consultation with us, close the transfer books at any time or
from time to time, when deemed expedient by it in connection
with the performance of its duties. As a condition precedent to
the execution and delivery of any ADSs, registration of
transfer,
split-up,
combination of any ADR or surrender of any ADS for the purpose
of withdrawal of deposited shares of common stock, the ADR
depositary or the Custodian may require payment from the
depositor of the shares of common stock or a holder of ADSs of a
sum sufficient to reimburse the ADR depositary for any tax or
other governmental charge and any stock transfer or registration
fee and payment of any applicable fees payable by the holders of
ADSs.
Any person depositing shares of common stock, any holder of an
ADS or any beneficial owner may be required from time to time to
file with the ADR depositary or the Custodian a proof of
citizenship, residence, exchange control approval, payment of
applicable Korean or other taxes or governmental charges, or
legal or beneficial ownership and the nature of their interest,
to provide information relating to the registration on our
shareholders register (or our appointed agent for the
transfer and registration of shares of common stock) of the
shares of common stock presented for deposit or other
information, to execute certificates and to make representations
and warranties as we or the ADR depositary may deem necessary or
proper or to enable us or the ADR depositary to perform our and
its obligations under the deposit agreement. The ADR depositary
may withhold the execution or delivery or registration of
transfer of all or part of any ADR or the distribution or sale
of any dividend or other distribution of rights or of the
proceeds from their sale or the delivery of any shares deposited
under the deposit agreement and any other securities, property
and cash received by the ADR depositary or the Custodian until
the proof or other information is filed or the certificates are
executed or the representations and warranties are made. The ADR
depositary shall provide us, unless otherwise instructed by us,
in a timely manner, with copies of any of these proofs and
certificates and these written representations and warranties.
The delivery and surrender of ADSs and transfer of ADSs
generally may be suspended during any period when our or the ADR
depositarys transfer books are closed or, if that action
is deemed necessary or advisable by us or the ADR depositary, at
any time or from time to time in accordance with the deposit
agreement. We may restrict, in a manner as we deem appropriate,
transfers of shares of common stock where the transfers may
result in ownership of shares of common stock in excess of
limits under applicable law. Except as described in
Deposit and Withdrawal of Shares of Common Stock
above, notwithstanding any other provision of the deposit
agreement, the surrender of outstanding ADRs and withdrawal of
Deposited Securities (as defined in the deposit agreement)
represented by the ADRs may be suspended, but only as required
in connection with (1) temporary delays caused by closing
the transfer books of the ADR depositary or the issuer of any
Deposited Securities (or the appointed agent or agents for such
issuer for the transfer and registration of such Deposited
Securities) in connection with voting at a shareholders
meeting or the payment of dividends, (2) payment of fees,
taxes and similar charges, or (3) compliance with any
United States or foreign laws or governmental regulations
relating to the ADRs or to the withdrawal of the Deposited
Securities.
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Governing
Law
The deposit agreement and the ADRs will be interpreted under,
and all rights under the deposit agreement or the ADRs are
governed by, the laws of the State of New York.
We have irrevocably submitted to the non-exclusive jurisdiction
of New York State or United States Federal Courts located in New
York City and waived any objection to legal actions or
proceedings in these courts whether on the ground of venue or on
the ground that the proceedings have been brought in an
inconvenient forum.
This submission was made for the benefit of the ADR depositary
and the holders and shall not limit the right of any of them to
take legal actions or proceedings in any other court of
competent jurisdiction nor shall the taking of legal actions or
proceedings in one or more jurisdictions preclude the taking of
legal actions or proceedings in any other jurisdiction (whether
concurrently or not), to the extent permitted under applicable
law.
Information
Relating to the ADR Depositary
Citibank, N.A. has been appointed as ADR depositary pursuant to
the deposit agreement. Citibank is an indirect wholly-owned
subsidiary of Citigroup Inc., a Delaware corporation whose
principal office is located in New York, New York. Citibank is a
global financial services organization serving individuals,
businesses, governments and financial institutions in
approximately 100 countries around the world.
Citibank was originally organized on June 16, 1812, and now
is a national banking association organized under the National
Bank Act of 1864 of the United States of America. Citibank is
primarily regulated by the United States Office of the
Comptroller of the Currency. Its principal office is at 399 Park
Avenue, New York, NY 10022.
The consolidated balance sheets of Citibank are set forth in
Citigroups most recent annual report on
Form 10-K
and quarterly report on
Form 10-Q,
each on file with the SEC.
Citibanks Articles of Association and By-laws, each as
currently in effect, together with Citigroups most recent
annual and quarterly reports will be available for inspection at
the Depositary Receipt office of Citibank, N.A., 388 Greenwich
Street, 14th Floor, New York, New York 10013.
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Item 10.C.
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Material
Contracts
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We have not entered into any material contracts since
January 1, 2006, other than in the ordinary course of our
business. For information regarding our agreements and
transactions with entities affiliated with the SK Group, see
Item 7.B. Related Party Transactions and
note 24 of the notes to our consolidated financial
statements. For a description of certain agreements entered into
during the past three years related to our capital commitments
and obligations, see Item 5B. Liquidity and Capital
Resources.
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Item 10.D.
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Exchange
Controls
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Korean
Foreign Exchange Controls and Securities Regulations
General
The Foreign Exchange Transaction Act and the Presidential Decree
and regulations under that Act and Decree, collectively referred
to as the Foreign Exchange Transaction Laws, regulate investment
in Korean securities by non-residents and issuance of securities
outside Korea by Korean companies. Non-residents may invest in
Korean securities pursuant to the Foreign Exchange Transaction
Laws. The Financial Services Commission of Korea has also
adopted, pursuant to its authority under the Financial
Investment Services and Capital Markets Act, regulations that
restrict investment by foreigners in Korean securities and
regulate issuance of securities outside Korea by Korean
companies.
Subject to certain limitations, the MOSF has authority to take
the following actions under the Foreign Exchange Transaction
Laws:
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if the Government deems it necessary on account of war, armed
conflict, natural disaster or grave and sudden and significant
changes in domestic or foreign economic circumstances or similar
events or circumstances,
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the MOSF may temporarily suspend performance under any or all
foreign exchange transactions, in whole or in part, to which the
Foreign Exchange Transaction Laws apply (including suspension of
payment and receipt of foreign exchange) or impose an obligation
to deposit, safe-keep or sell any means of payment to The Bank
of Korea or certain other governmental agencies or financial
institutions; and
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if the Government concludes that the international balance of
payments and international financial markets are experiencing or
are likely to experience significant disruption or that the
movement of capital between Korea and other countries are likely
to adversely affect the Won, exchange rate or other
macroeconomic policies, the MOSF may take action to require any
person who intends to effect or effects a capital transaction to
deposit all or a portion of the means of payment acquired in
such transactions with The Bank of Korea or certain other
governmental agencies or financial institutions.
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Government
Review of Issuances of ADSs
In order for us to issue ADSs in excess of US$30 million,
we are required to submit a report to the MOSF with respect to
the issuance of the ADSs prior to and after such issuance;
provided that such US$30 million threshold amount would be
reduced by the aggregate principal amount of any foreign
currency loans borrowed, and any securities offered and issued,
outside Korea during the one-year period immediately preceding
the reports submission date. The MOSF may at its
discretion direct us to take necessary measures to avoid
exchange rate fluctuation in connection with its acceptance of
report of the issuance of the ADSs.
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Under current Korean laws and regulations, the depositary is
required to obtain our prior consent for any proposed deposit of
common shares if the number of shares to be deposited in such
proposed deposit exceeds the number of common shares initially
deposited by us for the issuance of ADSs (including deposits in
connection with the initial and all subsequent issuances of ADSs
by us or with our consent and stock dividends or other
distributions related to the ADSs).
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In addition to such restrictions under Korean laws and
regulations, there are also restrictions on the deposits of our
common shares for issuance of ADSs. See Item 10.B.
Memorandum and Articles of Incorporation Description
of American Depositary Shares. Therefore, a holder of ADRs
who surrenders ADRs and withdraws shares may not be permitted
subsequently to deposit those shares and obtain ADRs.
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We submitted a report to and obtained acceptance thereof by the
MOSF for the issuance of ADSs up to an amount corresponding to
24,321,893 common shares. No additional Korean governmental
approval is necessary for the issuance of ADSs except that if
the total number of our common shares on deposit for conversion
into ADSs exceeds 24,321,893 common shares, we may be required
to file a report to and obtain acceptance thereof by the MOSF
with respect to the increase of such limit and the issuance of
additional ADSs.
Reporting
Requirements for Holders of Substantial Interests
Under the Financial Investment Services and Capital Markets Act,
any person whose direct or beneficial ownership of shares with
voting rights, certificates representing the rights to subscribe
for shares and equity-related debt securities including
convertible bonds and bonds with warrants (collectively referred
to as Equity Securities), together with the Equity
Securities beneficially owned by certain related persons or by
any person acting in concert with the person, accounts for 5.0%
or more of the total outstanding Equity Securities is required
to report the status and purpose (in terms of whether the
purpose of shareholding is to affect control over management of
the issuer) of the holdings to the Financial Services Commission
of Korea and the Korea Exchange within five business days after
reaching the 5.0% ownership interest threshold and promptly
deliver a copy of such report to the issuer. In addition, any
change (i) in the ownership interest subsequent to the
report which equals or exceeds 1.0% of the total outstanding
Equity Securities, or (ii) in the shareholding purpose is
required to be reported to the Financial Services Commission of
Korea and the Korea Exchange within five business days from the
date of the change. However, reporting deadline of such
reporting requirement is extended to (i) professional
investors, as defined under the Financial Investment Services
and Capital Markets Act, or (ii) persons who hold shares
for purposes other than management control by the tenth day of
the month immediately following the month of share acquisition
or change in their shareholding. Those who reported the purpose
of shareholding is to affect control over management of the
107
issuer are prohibited from exercising their voting rights and
acquiring additional shares for five days subsequent to the
report under the Financial Investment Services and Capital
Markets Act.
Violation of these reporting requirements may subject a person
to criminal sanctions such as fines or imprisonment and may
result in a loss of voting rights with respect to the ownership
of unreported Equity Securities exceeding 5.0%. Furthermore, the
Financial Services Commission of Korea may issue an order to
dispose of such non-reported Equity Securities.
In addition to the reporting requirements described above, any
person whose direct or beneficial ownership of our common shares
accounts for 10% or more of the total issued and outstanding
shares with voting rights (a major shareholder) must
report the status of
his/her
shareholding to the Securities and Futures Commission and the
Korea Exchange within five business days after
he/she
becomes a major shareholder. In addition, any change in the
ownership interest subsequent to the report must be reported to
the Securities and Futures Commission and the Korea Exchange by
the fifth business day of any changes in
his/her
shareholding. Violations of these reporting requirements may
subject a person to criminal sanctions, such as fines or
imprisonment.
Under the regulations of the Financial Services Commission
amended on February 4, 2009, (i) if a company listed
on the KRX KOSPI Market or a company listed on the KRX KOSDAQ
Market has submitted a public disclosure of material matters to
a foreign financial investment supervisory authority pursuant to
the laws of the foreign jurisdiction, then it must submit a copy
of the public disclosure and a Korean translation thereof to the
Financial Services Commission of Korea and the Korea Exchange,
and (ii) if a KRX KOSPI Market-listed company or KRX KOSDAQ
Market-listed company is approved for listing on a foreign stock
market or determined to be de-listed from the foreign stock
market or actually listed on, or de-listed from a foreign stock
market, then it must submit a copy of any document, which it
submitted to or received from the relevant foreign government,
foreign financial investment supervisory authority or the
foreign stock market, and a Korean translation thereof to the
Financial Services Commission of Korea and the Korea Exchange.
Restrictions
Applicable to ADSs
No Korean governmental approval is necessary for the sale and
purchase of ADSs in the secondary market outside Korea or for
the withdrawal of shares underlying ADSs and the delivery of
shares in Korea in connection with the withdrawal, provided that
a foreigner who intends to acquire the shares must obtain an
investment registration card from the Financial Supervisory
Service, as described below. The acquisition of the shares by a
foreigner must be reported by the foreigner or his standing
proxy in Korea immediately to the Governor of the Financial
Supervisory Service.
Persons who have acquired shares as a result of the withdrawal
of shares underlying the ADSs may exercise their preemptive
rights for new shares, participate in free distributions and
receive dividends on shares without any further governmental
approval.
In addition, under the regulations of the Financial Services
Commission, effective as of November 30, 2006, we are
required to file a securities registration statement with the
Financial Services Commission and such securities registration
statement has to become effective pursuant to the Financial
Investment Services and Capital Markets Act in order for us to
issue shares represented by ADSs, except in certain limited
circumstances.
Restrictions
Applicable to Shares
As a result of amendments to the Foreign Exchange Transaction
Laws and the regulations of Financial Services Commission of
Korea, together referred to as the Investment Rules, adopted in
connection with the stock market opening from January 1992 and
after that date, foreigners may invest, with limited exceptions
and subject to procedural requirements, in all shares of Korean
companies, whether listed on the KRX KOSPI Market or the KRX
KOSDAQ Market, unless prohibited by specific laws. Foreign
investors may trade shares listed on the KRX KOSPI
108
Market or the KRX KOSDAQ Market only through the KRX KOSPI
Market or the KRX KOSDAQ Market, except in limited
circumstances, including, among others:
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odd-lot trading of shares;
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acquisition of shares by a foreign company as a result of a
merger;
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acquisition or disposal of shares in connection with a tender
offer;
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acquisition of shares by exercise of warrant, conversion right
under convertible bonds, exchange right under exchangeable bonds
or withdrawal right under depositary receipts issued outside of
Korea by a Korean company (Converted Shares);
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acquisition of shares through exercise of rights under
securities issued outside of Korea;
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acquisition of shares as a result of inheritance, donation,
bequest or exercise of shareholders rights, including
preemptive rights or rights to participate in free distributions
and receive dividends;
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over-the-counter
transactions between foreigners of a class of shares for which
the ceiling on aggregate acquisition by foreigners, as explained
below, has been reached or exceeded;
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acquisition of shares by direct investment under the Foreign
Investment Promotion Law;
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acquisition and disposal of shares on an overseas stock exchange
market, if such shares are simultaneously listed on the KRX
KOSPI Market or KRX KOSDAQ Market and such overseas stock
exchange; and
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arms length transactions between foreigners in the event
all such foreigners belong to an investment group managed by the
same person.
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For
over-the-counter
transactions of shares between foreigners outside the KRX KOSPI
Market or the KRX KOSDAQ Market for shares with respect to which
the limit on aggregate foreign ownership has been reached or
exceeded, a financial investment company with a brokerage
license in Korea must act as an intermediary. Odd-lot trading of
shares outside the KRX KOSPI Market or the KRX KOSDAQ Market
must involve a financial investment company with a dealing
license in Korea as the other party. Foreign investors are
prohibited from engaging in margin transactions through
borrowing shares from financial investment companies with
respect to shares which are subject to a foreign ownership limit.
The Investment Rules require a foreign investor who wishes to
invest in shares for the first time on the KRX KOSPI Market or
the KRX KOSDAQ Market (including Converted Shares) and shares
being publicly offered for initial listing on the KRX KOSPI
Market or the KRX KOSDAQ Market to register its identity with
the Financial Supervisory Service prior to making any such
investment; however, the registration requirement does not apply
to foreign investors who acquire Converted Shares with the
intention of selling such Converted Shares within three months
from the date of acquisition of the Converted Shares or who
acquire the shares in an
over-the-counter
transaction or dispose of shares where such acquisition or
disposal is deemed to be a foreign direct investment pursuant to
the Foreign Investment Promotion Law. Upon registration, the
Financial Supervisory Service will issue to the foreign investor
an investment registration card which must be presented each
time the foreign investor opens a brokerage account with a
financial investment company or financial institution in Korea.
Foreigners eligible to obtain an investment registration card
include foreign nationals who have not been residing in Korea
for a consecutive period of six months or longer, foreign
governments, foreign municipal authorities, foreign public
institutions, international financial institutions or similar
international organizations, corporations incorporated under
foreign laws and any person in any additional category
designated by decree of the MOSF. All Korean offices of a
foreign corporation as a group are treated as a separate
foreigner from the offices of the corporation outside Korea for
the purpose of investment registration. However, a foreign
corporation or depositary issuing depositary receipts may obtain
one or more investment registration cards in its name in certain
circumstances as described in the relevant regulations.
Upon a foreign investors purchase of shares through the
KRX KOSPI Market or the KRX KOSDAQ Market, no separate report by
the investor is required because the investment registration
card system is designed to control and oversee foreign
investment through a computer system. However, where a foreign
investor acquires or sells
109
shares outside the KRX KOSPI Market and the KRX KOSDAQ Market,
such acquisition or sale of shares must be reported by the
foreign investor or his standing proxy to the Governor at the
time of each such acquisition or sale; provided, however, that a
foreign investor must ensure that any acquisition or sale by it
of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market
in the case of trades in connection with a tender offer, odd-lot
trading of shares or trades of a class of shares for which the
aggregate foreign ownership limit has been reached or exceeded,
is reported to the Governor by the Korea Securities Depository,
financial investment companies with a dealing or brokerage
license or securities finance companies engaged to facilitate
such transaction. In the event a foreign investor desires to
acquire or sell shares outside the KRX KOSPI Market or the KRX
KOSDAQ Market and the circumstances in connection with such sale
or acquisition do not fall within the exceptions made for
certain limited circumstances described above, then the foreign
investor must obtain the prior approval of the Governor. In
addition, in the event a foreign investor acquires or sells
shares outside the KRX KOSPI Market or the KRX KOSDAQ Market, a
prior report to the Bank of Korea may also be required in
certain circumstances. A foreign investor must appoint one or
more standing proxies among the Korea Securities Depository,
foreign exchange banks (including domestic branches of foreign
banks), financial investment companies with a dealing, brokerage
or collective investment license and certain eligible foreign
custodians which will act as a standing proxy to exercise
shareholders rights, or perform any matters related to the
foregoing activities if the foreign investor does not perform
these activities himself. Generally, a foreign investor may not
permit any person, other than its standing proxy, to exercise
rights relating to its shares or perform any tasks related
thereto on its behalf. However, a foreign investor may be
exempted from complying with these standing proxy rules with the
approval of the Governor in cases deemed inevitable by reason of
conflict between laws of Korea and the home country of the
foreign investor.
Certificates evidencing shares of Korean companies must be kept
in custody with an eligible custodian in Korea. The Korea
Securities Depository, foreign exchange banks (including
domestic branches of foreign banks), financial investment
companies with a dealing, brokerage or collective investment
license and certain eligible foreign custodians are eligible to
act as a custodian of shares for a non-resident or foreign
investor. A foreign investor must ensure that his custodian
deposits its shares with the Korea Securities Depository.
However, a foreign investor may be exempted from complying with
this deposit requirement with the approval of the Governor in
circumstances where compliance with that requirement is made
impracticable, including cases where compliance would contravene
the laws of the home country of such foreign investor.
Under the Investment Rules, with certain exceptions, foreign
investors may acquire shares of a Korean company without being
subject to any foreign investment ceiling. As one such
exception, designated public corporations are subject to a 40.0%
ceiling on the acquisition of shares by foreigners in the
aggregate. Designated public corporations may set a ceiling on
the acquisition of shares by a single person within 3.0% of the
total number of shares in their articles of incorporation.
Currently, Korea Electric Power Corporation is the only
designated public corporation which has set such a ceiling.
Furthermore, an investment by a foreign investor of not less
than 10.0% of the outstanding shares with voting rights of a
Korean company is defined as a direct foreign investment under
the Foreign Investment Promotion Law, which is, in general,
subject to the report to, and acceptance by, the Ministry of
Knowledge Economy of Korea, which delegates its authority to
foreign exchange banks or the Korea Trade-Investment Promotion
Agency under the relevant regulations. The acquisition of our
shares by a foreign investor is also subject to the restrictions
prescribed in the Telecommunications Business Act. The
Telecommunications Business Act generally limits the maximum
aggregate foreign shareholdings in us to 49.0% of the
outstanding shares. A foreigner who has acquired shares in
excess of such restriction described above may not exercise its
voting rights with respect to the shares exceeding such
limitations, and may be subject to corrective orders.
Under the Foreign Exchange Transaction Laws, a foreign investor
who intends to make a portfolio investment in shares of a Korean
company listed on the KRX KOSPI Market or the KRX KOSDAQ Market
must designate a foreign exchange bank at which he must open a
foreign currency account and a Won account exclusively for stock
investments. No approval is required for remittance into Korea
and deposit of foreign currency funds in the foreign currency
account. Foreign currency funds may be transferred from the
foreign currency account at the time required to place a deposit
for, or settle the purchase price of, a stock purchase
transaction to a Won account opened at a securities company.
Funds in the foreign currency account may be remitted abroad
without any governmental approval.
110
Dividends on shares are paid in Won. No governmental approval is
required for foreign investors to receive dividends on, or the
Won proceeds of the sale of, any such shares to be paid,
received and retained in Korea. Dividends paid on, and the Won
proceeds of the sale of, any such shares held by a non-resident
of Korea must be deposited either in a Won account with the
investors securities company or the investors Won
account. Funds in the investors Won account may be
transferred to his foreign currency account or withdrawn for
local living expenses, provided that any withdrawal of local
living expenses in excess of a certain amount is reported to the
tax authorities by the foreign exchange bank at which the Won
account is maintained. Funds in the investors Won account
may also be used for future investment in shares or for payment
of the subscription price of new shares obtained through the
exercise of preemptive rights.
Financial investment companies with a securities dealing,
brokerage or collective investment license are allowed to open
foreign currency accounts with foreign exchange banks
exclusively for accommodating foreign investors stock
investments in Korea. Through these accounts, these financial
investment companies may enter into foreign exchange
transactions on a limited basis, such as conversion of foreign
currency funds and Won funds, either as a counterparty to or on
behalf of foreign investors, without the investors having to
open their own accounts with foreign exchange banks.
United
States Taxation
This summary describes certain material U.S. federal income
tax consequences for a U.S. holder (as defined below) of
acquiring, owning, and disposing of common shares or ADSs. This
summary applies to you only if you hold the common shares or
ADSs as capital assets for tax purposes. This summary does not
apply to you if you are a member of a class of holders subject
to special rules, such as:
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a dealer in securities or currencies;
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a trader in securities that elects to use a mark-to-market
method of accounting for securities holdings;
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a bank;
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a life insurance company;
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a tax-exempt organization;
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a person that holds common shares or ADSs that are a hedge or
that are hedged against interest rate or currency risks;
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a person that holds common shares or ADSs as part of a straddle
or conversion transaction for tax purposes;
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a person whose functional currency for tax purposes is not the
U.S. dollar; or
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a person that owns or is deemed to own 10% or more of any class
of our stock.
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This summary is based on the Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed
regulations promulgated thereunder, and published rulings and
court decisions, all as currently in effect. These laws are
subject to change, possibly on a retroactive basis.
Please consult your own tax advisers concerning the
U.S. federal, state, local, and other tax consequences of
purchasing, owning, and disposing of common shares or ADSs in
your particular circumstances.
For purposes of this summary, you are a
U.S. holder if you are the beneficial owner of
a common share or an ADS and are:
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a citizen or resident of the United States;
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a U.S. domestic corporation; or
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otherwise subject to U.S. federal income tax on a net
income basis with respect to income from the common share or ADS.
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111
In general, if you are the beneficial owner of ADSs, you will be
treated as the beneficial owner of the common shares represented
by those ADSs for U.S. federal income tax purposes, and no
gain or loss will be recognized if you exchange an ADS for the
common share represented by that ADS.
Dividends
The gross amount of cash dividends that you receive (prior to
deduction of Korean taxes) generally will be subject to
U.S. federal income taxation as foreign source dividend
income and will not be eligible for the dividends received
deduction. Dividends paid in Won will be included in your income
in a U.S. dollar amount calculated by reference to the
exchange rate in effect on the date of your receipt of the
dividend, in the case of common shares, or the depositarys
receipt, in the case of ADSs, regardless of whether the payment
is in fact converted into U.S. dollars. If such a dividend
is converted into U.S. dollars on the date of receipt, you
generally should not be required to recognize foreign currency
gain or loss in respect of the dividend income.
Subject to certain exceptions for short-term and hedged
positions, the U.S. dollar amount of dividends received by
an individual prior to January 1, 2011 with respect to the
ADSs will be subject to taxation at a maximum rate of 15% if the
dividends are qualified dividends. Dividends paid on
the ADSs will be treated as qualified dividends if (i) the
ADSs are readily tradable on an established securities market in
the United States and (ii) we were not, in the year prior
to the year in which the dividend was paid, and are not, in the
year in which the dividend is paid, a passive foreign investment
company as defined for U.S. federal income tax purposes
(PFIC). The ADSs are listed on the New York Stock
Exchange, and will qualify as readily tradable on an established
securities market in the United States so long as they are
so listed. Based on our audited financial statements, we believe
that we were not a PFIC in 2007 or 2008 taxable year. In
addition, based on our audited financial statements and current
expectations regarding our income, assets and activities, we do
not anticipate becoming a PFIC for our 2009 taxable year.
Distributions of additional shares in respect of common shares
or ADSs that are made as part of a pro-rata distribution to all
of our stockholders generally will not be subject to
U.S. federal income tax.
Sale
or Other Disposition
For U.S. federal income tax purposes, gain or loss you
realize on a sale or other disposition of common shares or ADSs
generally will be treated as U.S. source capital gain or
loss, and will be long-term capital gain or loss if the common
shares or ADSs were held for more than one year. Your ability to
offset capital losses against ordinary income is limited.
Long-term capital gain recognized by an individual
U.S. holder generally is subject to taxation at reduced
rates.
Foreign
Tax Credit Considerations
You should consult your own tax advisers to determine whether
you are subject to any special rules that limit your ability to
make effective use of foreign tax credits, including the
possible adverse impact of failing to take advantage of benefits
under the income tax treaty between the United States and Korea.
If no such rules apply, you may claim a credit against your
U.S. federal income tax liability for Korean taxes withheld
from dividends on the common shares or ADSs, so long as you have
owned the common shares or ADSs (and not entered into specified
kinds of hedging transactions) for at least a
16-day
period that includes the ex-dividend date. Instead of claiming a
credit, you may, if you so elect, deduct such Korean taxes in
computing your taxable income, subject to generally applicable
limitations under U.S. tax law. Korean taxes withheld from
a distribution of additional shares that is not subject to
U.S. tax may be treated for U.S. federal income tax
purposes as imposed on general limitation income.
Such treatment could affect your ability to utilize any
available foreign tax credit in respect of such taxes.
Any Korean securities transaction tax or agriculture and fishery
special surtax that you pay will not be creditable for foreign
tax credit purposes.
Foreign tax credits will not be allowed for withholding taxes
imposed in respect of certain short-term or hedged positions in
securities and may not be allowed in respect of arrangements in
which a U.S. holders expected economic profit is
insubstantial.
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The calculation of foreign tax credits and, in the case of a
U.S. holder that elects to deduct foreign taxes, the
availability of deductions involve the application of complex
rules that depend on a U.S. holders particular
circumstances. You should consult your own tax advisers
regarding the creditability or deductibility of such taxes.
U.S.
Information Reporting and Backup Withholding Rules
Payments of dividends and sales proceeds that are made within
the United States or through certain
U.S.-related
financial intermediaries are subject to information reporting
and may be subject to backup withholding unless the holder
(i) is a corporation or other exempt recipient and
demonstrates this when required or (ii) provides a taxpayer
identification number and certifies that no loss of exemption
from backup withholding has occurred. Holders that are not
U.S. persons generally are not subject to information
reporting or backup withholding. However, such a holder may be
required to provide a certification of its
non-U.S. status
in connection with payments received within the United States or
through a
U.S.-related
financial intermediary.
Korean
Taxation
The following is a summary of the principal Korean tax
consequences to owners of the common shares or ADSs, as the case
may be, who are non-resident individuals or non-Korean
corporations without a permanent establishment in Korea to which
the relevant income is attributable or with which the relevant
income is effectively connected (Non-resident
Holders). The statements regarding Korean tax laws set
forth below are based on the laws in force and as interpreted by
the Korean taxation authorities as of the date hereof. This
summary is not exhaustive of all possible tax considerations
which may apply to a particular investor and potential investors
are advised to satisfy themselves as to the overall tax
consequences of the acquisition, ownership and disposition of
the common shares or ADSs, including specifically the tax
consequences under Korean law, the laws of the jurisdiction of
which they are resident, and any tax treaty between Korea and
their country of residence, by consulting their own tax advisors.
Tax on
Dividends
Dividends on the common shares or ADSs paid (whether in cash or
in shares) to a Non-resident Holder will be subject to Korean
withholding taxes at the rate of 22% (including local surtax) or
such lower rate as is applicable under a treaty between Korea
and such Non-resident Holders country of tax residence.
Free distributions of shares representing a capitalization of
certain capital surplus reserves may be subject to Korean
withholding taxes.
The tax is withheld by the payer of the dividend. Since the
payer is required to withhold the tax, Korean law does not
entitle the person who was subject to the withholding of Korean
tax to recover from the Government any part of the Korean tax
withheld, even if it subsequently produces evidence that it was
entitled to have tax withheld at a lower rate, except in certain
limited circumstances.
Tax on
Capital Gains
As a general rule, capital gains earned by Non-resident Holders
upon transfer of the common shares or ADSs are subject to Korean
withholding tax at the lower of (i) 11% (including local
surtax) of the gross proceeds realized or (ii) 22%
(including local surtax) of the net realized gains (subject to
the production of satisfactory evidence of the acquisition costs
and certain direct transaction costs), unless exempt from Korean
income taxation under the effective Korean tax treaty with the
Non-resident Holders country of tax residence.
However, a Non-resident Holder will not be subject to Korean
income taxation on capital gains realized upon the sale of the
common shares through the KRX KOSPI Market if the Non-resident
Holder (i) has no permanent establishment in Korea and
(ii) did not or has not owned (together with any shares
owned by any entity with certain special relationship with such
Non-resident Holder) 25% or more of the total issued and
outstanding shares of us at any time during the calendar year in
which the sale occurs and during the five calendar years prior
to the calendar year in which the sale occurs.
It should be noted that capital gains earned by you (regardless
of whether you have a permanent establishment in Korea) from a
transfer of ADSs outside Korea will generally be exempt from
Korean income taxation, provided
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that the ADSs are deemed to have been issued overseas. If and
when an owner of the underlying common shares transfers the ADSs
following the conversion of the underlying shares for ADSs, such
person will not be exempt from Korean income taxation and will
be obligated to file a corporate income tax return and pay tax
on gain realized from such transfer unless a purchaser or a
licensed financial investment company, as the case may be,
withholds and remits the tax on capital gains derived from
transfer of ADSs.
Inheritance
Tax and Gift Tax
Korean inheritance tax is imposed upon (1) all assets
(wherever located) of the deceased if at the time of his death
he was domiciled in Korea and (2) all property located in
Korea which passes on death (irrespective of the domicile of the
deceased). Gift tax is imposed in similar circumstances to the
above. The taxes are imposed if the value of the relevant
property is above a certain limit and vary according to the
identity of the parties involved.
Under Korean inheritance and gift tax laws, securities issued by
a Korean corporation are deemed to be located in Korea
irrespective of where they are physically located or by whom
they are owned.
Securities
Transaction Tax
Securities transaction tax is imposed on the transfer of shares
issued by a Korean corporation or the right to subscribe for
such shares generally at the rate of 0.5% of the sales price. In
the case of the transfer of shares listed on the KRX KOSPI
Market (such as the common shares), the securities transaction
tax is imposed generally at the rate of (i) 0.3% of the
sales price of such shares (including agricultural and fishery
special surtax thereon) if traded on the KRX KOSPI Market or
(ii) subject to certain exceptions, 0.5% of the sales price
of such shares if traded outside the KRX KOSPI Market.
Securities transaction tax or the agricultural and fishery
special surtax is not applicable if (i) the shares or
rights to subscribe for shares are listed on a designated
foreign stock exchange and (ii) the sale of the shares
takes place on such exchange.
Securities transaction tax, if applicable, must be paid by the
transferor of the shares or rights, in principle. When the
transfer is effected through a securities settlement company,
such settlement company is generally required to withhold and
pay (to the tax authority) the tax, and when such transfer is
made through a financial investment company with a brokerage
license only, such company is required to withhold and pay the
tax. Where the transfer is effected by a Non-resident Holder
without a permanent establishment in Korea, other than through a
securities settlement company or a financial investment company
with a brokerage license, the transferee is required to withhold
the securities transaction tax. Failure to do so will result in
the imposition of penalties equal to the sum of (i) between
10% to 40% of the tax amount due, depending on the nature of the
improper reporting, and (ii) 10.95% per annum on the tax
amount due for the default period.
Tax
Treaties
Currently, Korea has income tax treaties with a number of
countries, inter alia, Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Italy, Japan, Luxembourg,
Ireland, the Netherlands, New Zealand, Norway, Singapore,
Sweden, Switzerland, the United Kingdom and the United States of
America under which the rate of withholding tax on dividend and
interest is reduced, generally to between 5% and 16.5%
(including local surtax), and the tax on capital gains derived
by a non-resident from the transfer of securities issued by a
Korean company is often eliminated.
Each Non-resident Holder of common shares should inquire for
itself whether it is entitled to the benefits of a tax treaty
with Korea. It is the responsibility of the party claiming the
benefits of a tax treaty in respect of interest, dividend,
capital gains or other income to submit to us (or
our agent), the purchaser or the financial investment company
with a brokerage license, as the case may be, prior to or at the
time of payment, such evidence of tax residence of the party
claiming the treaty benefit as the Korean tax authorities may
require in support of its claim for treaty protection. In the
absence of sufficient proof, we (or our agent), the purchaser or
the financial investment company with a brokerage license, as
the case may be, must withhold tax at the normal rates.
114
Furthermore, in order for a non-resident of Korea to obtain the
benefits of tax exemption on certain Korean source income (e.g.,
capital gains and interest) under an applicable tax treaty,
Korean tax law requires such non-resident (or its agent) to
submit to the payer of such Korean source income an application
for a tax exemption along with a certificate of tax residency of
such non-resident issued by a competent authority of the
non-residents country of tax residence, subject to certain
exceptions. The payer of such Korean source income, in turn, is
required to submit such application to the relevant district tax
office by the ninth day of the month following the date of the
first payment of such income.
At present, Korea has not entered into any tax treaty relating
to inheritance or gift tax.
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Item 10.F.
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Dividends
and Paying Agents
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Not applicable.
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Item 10.G.
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Statements
by Experts
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Not applicable.
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Item 10.H.
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Documents
on Display
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We file reports, including annual reports on
Form 20-F,
and other information with the SEC pursuant to the rules and
regulations of the SEC that apply to foreign private issuers.
You may read and copy any materials filed with the SEC at the
Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
Any filings we make electronically will be available to the
public over the Internet at the SECs Website at
http://www.sec.gov.
Documents filed with annual reports and documents filed or
submitted to the SEC are also available for inspection at our
principal business office during normal business hours. Our
principal business office is located at SK T-Tower, 11, Euljiro
2-ga, Jung-gu, Seoul
100-999,
Korea.
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Item 10.I.
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Subsidiary
Information
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Not applicable.
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Item 11.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Exchange
Rate and Interest Rate Risks
We are exposed to foreign exchange rate and interest rate risk
primarily associated with underlying liabilities. We have
entered into floating-to-fixed cross currency swap contracts to
hedge foreign currency and interest rate risks with respect to
long-term borrowings of US$100 million borrowed in October
2006, Yen 12.5 billion borrowed in November 2007,
US$150 million borrowed in November 2008. We have also
entered into floating-to-fixed interest rate swap contracts to
hedge the interest rate risks of a floating rate discounted bill
with face amounts totaling Won 200 billion borrowed in June
2006 and long-term floating rate borrowings with face amounts
totaling Won 500 billion borrowed in July and August 2008.
In addition, we have entered into fixed-to-fixed cross currency
swap contracts to hedge the foreign currency risks of our
investment in U.S. dollar-denominated equity securities of
China Unicom and long-term borrowing of US$400 million
borrowed in July 2007.
See note 27 of the notes to our consolidated financial
statements. We may consider in the future entering into other
such transactions solely for hedging purposes.
The following discussion and tables, which constitute
forward looking statements that involve risks and
uncertainties, summarize our market-sensitive financial
instruments including fair value, maturity and contract terms.
These tables address market risk only and do not present other
risks which we face in the normal course of business, including
country risk, credit risk and legal risk.
115
Exchange
Rate Risk
Korea is our main market and, therefore, substantially all of
our cash flow is denominated in Won. We are exposed to foreign
exchange risk related to foreign currency denominated
liabilities. These liabilities relate primarily to foreign
currency denominated debt, all in Dollars and Yen. A 10% change
in the exchange rate between the Won and all foreign currencies
would result in a change in net liabilities (total monetary
liabilities minus total monetary assets) of approximately 0.74%
or Won 16.9 billion as of December 31, 2008.
Interest
Rate Risk
We are also subject to market risk exposure arising from
changing interest rates. The following table summarizes the
carrying amounts and fair values, maturity and contract terms of
our exchange rate and interest sensitive short-term and
long-term liabilities as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair Value
|
|
|
|
(In billions of Won, except for percentage data)
|
|
|
Local currency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
W
|
792.5
|
|
|
W
|
470.6
|
|
|
W
|
537.6
|
|
|
W
|
5.5
|
|
|
W
|
441.7
|
|
|
W
|
769.6
|
|
|
W
|
3,017.5
|
|
|
W
|
3,063.7
|
|
Average weighted rate(1)
|
|
|
6.33
|
%
|
|
|
5.93
|
%
|
|
|
6.15
|
%
|
|
|
5.91
|
%
|
|
|
5.75
|
%
|
|
|
5.20
|
%
|
|
|
|
|
|
|
|
|
Variable rate
|
|
|
300.3
|
|
|
|
0.1
|
|
|
|
700.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000.4
|
|
|
|
1,000.4
|
|
Average weighted rate(1)
|
|
|
7.31
|
%
|
|
|
3.25
|
%
|
|
|
4.93
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
1,092.8
|
|
|
|
470.7
|
|
|
|
1,237.6
|
|
|
|
5.5
|
|
|
|
441.7
|
|
|
|
769.6
|
|
|
|
4,017.9
|
|
|
|
4,064.1
|
|
Foreign currency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
|
279.6
|
|
|
|
|
|
|
|
375.6
|
|
|
|
649.9
|
|
|
|
|
|
|
|
494.0
|
|
|
|
1,799.1
|
|
|
|
2,202.5
|
|
Average weighted rate(1)
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
4.25
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
6.63
|
%
|
|
|
|
|
|
|
|
|
Variable rate
|
|
|
|
|
|
|
187.3
|
|
|
|
|
|
|
|
173.7
|
|
|
|
125.8
|
|
|
|
|
|
|
|
486.8
|
|
|
|
486.7
|
|
Average weighted rate(1)
|
|
|
0.00
|
%
|
|
|
4.51
|
%
|
|
|
0.00
|
%
|
|
|
1.38
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
279.6
|
|
|
|
187.3
|
|
|
|
375.6
|
|
|
|
823.6
|
|
|
|
125.8
|
|
|
|
494.0
|
|
|
|
2,285.9
|
|
|
|
2,689.2
|
|
Total
|
|
W
|
1,372.4
|
|
|
W
|
658.0
|
|
|
W
|
1,613.2
|
|
|
W
|
829.1
|
|
|
W
|
567.5
|
|
|
W
|
1,263.6
|
|
|
W
|
6,303.8
|
|
|
W
|
6,753.3
|
|
|
|
|
(1) |
|
Weighted average rates of the portfolio at the period end. |
A 1.0% change in interest rates would result in a change of
approximately 4.12% in the fair value of our liabilities
resulting in a Won 203.5 billion change in their value as
of December 31, 2008 and a Won 14,871 million
annualized change in interest expenses.
|
|
Item 12.
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Not applicable.
PART II
|
|
Item 13.
|
DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
|
None.
|
|
Item 14.
|
MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
|
None.
|
|
Item 15.
|
CONTROLS
AND PROCEDURES
|
Our management has evaluated, with the participation of our
Chief Executive Officers and Chief Financial Officer, the
effectiveness of our disclosure controls and procedures, as such
term is defined in
Rules 13a-15(e)
and
116
15d-15(e)
under the Exchange Act, as of December 31, 2008. There are
inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls
and procedures. Accordingly, even effective disclosure controls
and procedures can only provide reasonable assurance of
achieving their control objectives. Based upon our evaluation,
our Chief Executive Officers and Chief Financial Officer
concluded that our disclosure controls and procedures were
effective as of such date. Our disclosure controls and
procedures are designed to ensure that information required to
be disclosed by us in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SECs
rules and forms, and that it is accumulated and communicated to
our management, including our Chief Executive Officers and Chief
Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
Managements
Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act. Because of its inherent limitations,
internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial
statements would be prevented or detected. Also, projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Under the supervision
and with the participation of our management, including our
Chief Executive Officers and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the Republic of
Korea and accounting principles generally accepted in the United
States of America. Based on our evaluation, our management
concluded that our internal control over financial reporting was
effective as of December 31, 2008. The effectiveness of our
internal control over financial reporting as of
December 31, 2008 has been audited by Deloitte Anjin LLC,
an independent registered public accounting firm, as stated in
its report which is included herein.
Attestation
Report of the Registered Public Accounting Firm
The attestation report of our independent registered public
accounting firm is furnished in Item 18 of this
Form 20-F.
Changes
in Internal Control Over Financial Reporting
There has been no change in our internal control over financial
reporting during 2008 that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting.
|
|
Item 16A.
|
AUDIT
COMMITTEE FINANCIAL EXPERT
|
At our annual shareholders meeting in March 2008, our
shareholders elected the following three members of the Audit
Committee: Dal Sup Shim, Hyun Chin Lim and Jae Ho Cho. In
addition, they determined and designated that Jae Ho Cho is an
audit committee financial expert within the meaning
of this Item 16A. The board of directors have approved this
newly elected Audit Committee, and reaffirmed the determination
by our shareholders that Jae Ho Cho is an audit committee
financial expert and further determined that he is independent
within the meaning of applicable SEC rules and the listing
standards of the New York Stock Exchange. See
Item 6.C. Board Practices Audit
Committee for additional information regarding our Audit
Committee.
117
Code of
Ethics for Chief Executive Officer, Chief Financial Officer and
Controller
We have a code of ethics that applies to our Chief Executive
Officers, senior accounting officers and employees. We also have
internal control and disclosure policy designed to promote full,
fair, accurate, timely and understandable disclosure in all of
our reports and publicly filed documents. A copy of our code of
ethics is available on our website at www.sktelecom.com.
If we amend the provisions of our code of ethics that apply to
our Chief Executive Officers, Chief Financial Officer and
persons performing similar functions, or if we grant any waiver
of such provisions, we will disclose such amendment or waiver on
our website.
|
|
Item 16C.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The table sets forth the fees we paid to our independent
registered public accounting firm Deloitte Anjin LLC for the
year ended December 31, 2007 and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In millions of Won)
|
|
|
Audit Fees
|
|
W
|
1,220.5
|
|
|
W
|
1,687.0
|
|
Audit-Related Fees
|
|
W
|
81.1
|
|
|
W
|
|
|
Tax Fees
|
|
W
|
277.0
|
|
|
W
|
229.7
|
|
All Other Fees
|
|
W
|
|
|
|
W
|
|
|
Total
|
|
W
|
1,578.6
|
|
|
W
|
1,916.7
|
|
Audit Fees are the aggregate fees billed by
Deloitte Anjin LLC in 2007 and 2008, respectively, for the audit
of our consolidated annual financial statements, reviews of
interim financial statements and attestation services that are
provided in connection with statutory and regulatory filings or
engagements.
Audit-Related Fees are fees charged by
Deloitte Anjin LLC in 2007 and 2008, respectively, for assurance
and related services that are reasonably related to the
performance of the audit or review of our financial statements
and are not reported under Audit Fees. This category
comprises fees billed for advisory services associated with our
financial reporting.
Tax Fees are fees for professional services
rendered by Deloitte Anjin LLC in 2007 and 2008, respectively,
for tax compliance, tax advice on actual or contemplated
transactions.
Fees disclosed under the category All Other
Fees are fees for professional services rendered by
Deloitte Anjin LLC in 2007 and 2008, respectively, primarily for
business consulting.
Pre-Approval
of Audit and Non-Audit Services Provided by Independent
Registered Public Accounting Firm
Our audit committee pre-approves all audit services to be
provided by Deloitte Anjin LLC, our independent registered
public accounting firm. Our audit committees policy
regarding the pre-approval of non-audit services to be provided
to us by our independent auditors is that all such services
shall be pre-approved by the Audit Committee. Non-audit services
that are prohibited to be provided to us by our independent
auditors under the rules of the SEC and applicable law may not
be pre-approved. In addition, prior to the granting of any
pre-approval, our audit committee must be satisfied that the
performance of the services in question will not compromise the
independence of our independent registered public accounting
firm.
Our audit committee did not pre-approve any non-audit services
under the de minimis exception of
Rule 2-01
(c)(7)(i)(C) of
Regulation S-X
as promulgated by the SEC.
|
|
Item 16D.
|
EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
Not applicable.
118
|
|
Item 16E.
|
PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
The following table sets forth the repurchases of common shares
by us or any affiliated purchasers (as defined in
Rule 10b-18(a)(3)
of the Exchange Act) during the fiscal year ended
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
of Shares That
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
May yet be
|
|
|
|
|
|
|
|
|
|
as Part of Publicly
|
|
|
Purchased Under
|
|
|
|
Total Number of
|
|
|
Average Price Paid
|
|
|
Announced Plans
|
|
|
the Plans or
|
|
Period 2008
|
|
Shares Purchased
|
|
|
per Share
|
|
|
or
Program(2)
|
|
|
Program(2)
|
|
|
January
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
February
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
March
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
April
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
May
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
June
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
July
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
August
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
September
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
October
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
November
|
|
|
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
December
|
|
|
306,988(1
|
)
|
|
W
|
206,972
|
|
|
|
306,988
|
|
|
|
141,012
|
|
Total
|
|
|
306,988(1
|
)
|
|
W
|
206,972
|
|
|
|
306,988
|
|
|
|
141,012
|
|
|
|
|
(1) |
|
Purchased through open market transactions. |
|
(2) |
|
On October 24, 2008, we announced a plan to repurchase up
to 448,000 common shares during the period between
October 27, 2008 and January 26, 2009. In January
2009, we completed the repurchase under this plan by purchasing
the remaining 141,012 shares. |
119
|
|
Item 16G.
|
CORPORATE
GOVERNANCE
|
The following is a summary of the significant differences
between the New York Stock Exchanges corporate governance
standards and those that we follow under Korean law.
|
|
|
NYSE Corporate Governance Standards
|
|
Our Corporate Governance Practice
|
|
Director Independence
|
|
|
Listed companies must have a majority of independent directors.
|
|
Of the eight members of our board of directors, five are
independent directors.
|
Executive Session
|
|
|
Listed companies must hold meetings solely attended by
non-management directors to more effectively check and balance
management directors.
|
|
Our Audit Committee, which is comprised solely of three
independent directors, holds meetings whenever there are matters
related to management directors, and such meetings are generally
held once every month.
|
Nomination/Corporate Governance Committee
|
|
|
Listed companies must have a nomination/corporate governance
committee composed entirely of independent directors.
|
|
Although we do not have a separate nomination/ corporate
governance committee, we maintain an Independent Director
Recommendation Committee composed of independent directors and
management directors.
|
Audit Committee
|
|
|
Listed companies must have an audit committee that satisfies the
requirements of Rule 10A-3 under the Exchange Act.
|
|
We maintain an Audit Committee comprised solely of three
independent directors.
|
Audit Committee Additional Requirements
|
|
|
Listed companies must have an audit committee that is composed
of more than three directors.
|
|
Our Audit Committee has three independent directors.
|
Shareholder Approval of Equity Compensation Plan
|
|
|
Listed companies must allow its shareholders to exercise their
voting rights with respect to any material revision to the
companys equity compensation plan.
|
|
We currently have two equity compensation plans: a stock option
plan for officers and directors and employee stock ownership
plan for employees (ESOP). We manage such
compensation plans in compliance with the applicable laws and
our articles of incorporation, provided that, under certain
limited circumstances, the grant of stock options or matters
relating to ESOP are not subject to shareholders approval
under Korean law.
|
Corporate Governance Guidelines
|
|
|
Listed companies must adopt and disclose corporate governance
guidelines.
|
|
Although we do not maintain separate corporate governance
guidelines, we are in compliance with the Korean Commercial Code
in connection with such matters, including the governance of the
board of directors.
|
Code of Business Conduct and Ethics
|
|
|
Listed companies must adopt and disclose a code of business
conduct and ethics for directors, officers and employees and
promptly disclose any waivers of the code for directors or
executive officers.
|
|
We have adopted a Code of Business Conduct and Ethics for all of
our directors, officers and employees, and such code is also
available on our website at www.sktelecom.com.
|
120
PART III
|
|
Item 17.
|
FINANCIAL
STATEMENTS
|
Not applicable.
|
|
Item 18.
|
FINANCIAL
STATEMENTS
|
|
|
|
|
|
Index of Financial Statements
|
|
|
F-1
|
|
Report of Independent Registered Public Accounting Firm on
Consolidated Financial Statements
|
|
|
F-2
|
|
Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting
|
|
|
F-3
|
|
Consolidated balance sheets as of December 31, 2006, 2007
and 2008
|
|
|
F-4
|
|
Consolidated statements of income for the years ended
December 31, 2006, 2007 and 2008
|
|
|
F-6
|
|
Consolidated statements of stockholders equity for the
years ended December 31, 2006, 2007 and 2008
|
|
|
F-8
|
|
Consolidated statements of cash flows for the years ended
December 31, 2006, 2007 and 2008
|
|
|
F-11
|
|
Notes to consolidated financial statements for the years ended
December 31, 2006, 2007 and 2008
|
|
|
F-14
|
|
|
|
|
|
|
Number
|
|
Description
|
|
|
1
|
.1
|
|
Articles of Incorporation
|
|
2
|
.1*
|
|
Deposit Agreement dated as of May 31, 1996, as amended by
Amendment No. 1 dated as of March 15, 1999, Amendment No. 2
dated as of April 24, 2000 and Amendment No. 3 dated as of July
24, 2002, entered into among SK Telecom Co., Ltd., Citibank,
N.A., as Depositary, and all Holders and Beneficial Owners of
American Depositary Shares
|
|
8
|
.1
|
|
List of Subsidiaries of SK Telecom Co., Ltd.
|
|
12
|
.1
|
|
Certification of Principal Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
|
12
|
.2
|
|
Certification of Principal Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
|
13
|
.1
|
|
Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
|
|
13
|
.2
|
|
Certification of Principal Financial Officer Pursuant to
18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
|
|
15
|
.1**
|
|
Framework Act on Telecommunications, as amended (English
translation)
|
|
15
|
.2**
|
|
Enforcement Decree of the Framework Act on Telecommunications,
as amended (English translation)
|
|
15
|
.3**
|
|
Telecommunications Business Act, as amended (English translation)
|
|
15
|
.4**
|
|
Enforcement Decree of the Telecommunications Business Act
(English translation)
|
|
15
|
.5**
|
|
Amendment to the Government Organization Act
|
|
99
|
.1
|
|
Consent of Deloitte Anjin LLC
|
|
|
|
* |
|
Filed previously as exhibits to our
Form 20-F
filed on June 30, 2006. |
|
** |
|
Filed previously as exhibits to our
Form 20-F
filed on June 30, 2008. |
121
SIGNATURES
The registrant hereby certifies that it meets all of the
requirements for filing on
Form 20-F
and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.
SK TELECOM CO., LTD.
(Registrant)
Name: Man Won Jung
|
|
|
|
Title:
|
President, Chief Executive Officer &
|
Representative Director
Date: June 30, 2009
122
INDEX OF
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-6
|
|
|
|
|
F-8
|
|
|
|
|
F-11
|
|
|
|
|
F-14
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of
SK Telecom Co., Ltd.
We have audited the accompanying consolidated balance sheets of
SK Telecom Co., Ltd. and subsidiaries (the Company)
as of December 31, 2006, 2007 and 2008, and the related
consolidated statements of income, stockholders equity,
and cash flows for each of the three years in the period ended
December 31, 2008 (all expressed in Korean won). These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of SK
Telecom Co., Ltd. and subsidiaries at December 31, 2006,
2007 and 2008, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2008, in conformity with accounting principles
generally accepted in the Republic of Korea.
As discussed in Note 2 to the consolidated financial
statements, the Company adopted the amended Statements of Korea
Accounting Standards (SKAS) No. 25,
Consolidated Financial Statements, as of January 1,
2008.
Our audits also comprehended the translation of the Korean won
amounts into U.S. dollar amounts and, in our opinion, such
translation has been made in conformity with the basis stated in
Note 2(a) to the accompanying consolidated financial
statements. Such U.S. dollar amounts are presented solely
for the convenience of readers of the financial statements.
Accounting principles generally accepted in the Republic of
Korea vary in certain significant respects from accounting
principles generally accepted in the United States of America.
Information relating to the nature and effect of such
differences is presented in Notes 33 and 34 to the
consolidated financial statements.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
December 31, 2008, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated June 19, 2009 expressed an
unqualified opinion on the Companys internal control over
financial reporting.
Seoul, Korea
June 19, 2009
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Board of Directors and Stockholders of
SK Telecom Co., Ltd.
We have audited the internal control over financial reporting of
SK Telecom Co., Ltd. and subsidiaries (the Company)
as of December 31, 2008, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying
Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion
on the Companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2008, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
December 31, 2008 (all expressed in Korean won) of the
Company and our report dated June 19, 2009, expressed an
unqualified opinion on those financial statements, and included
explanatory paragraphs relating to (1) the Companys
adoption of the amended Statements of Korea Accounting Standards
(SKAS) No. 25, Consolidated Financial
Statements, (2) the translation of Korean won amounts
to U.S. dollar amounts and (3) information relating to
the nature and effect of differences between accounting
principles generally accepted in the Republic of Korea and
accounting principles generally accepted in the United States of
America.
Seoul, Korea
June 19, 2009
F-3
SK
TELECOM CO., LTD. AND SUBSIDIARIES
DECEMBER
31, 2006, 2007 AND 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation into
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Korean Won
|
|
|
(Note 2)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
(In thousands)
|
|
|
ASSETS
|
CURRENT ASSETS :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, net of government subsidy of nil,
W142 million and
W127 million as of December 31, 2006,
2007 and 2008 (Notes 2, 13 and 29)
|
|
W
|
485,972
|
|
|
W
|
885,847
|
|
|
W
|
1,011,340
|
|
|
$
|
801,379
|
|
Short-term financial instruments (Notes 21 and 22)
|
|
|
98,085
|
|
|
|
148,103
|
|
|
|
368,490
|
|
|
|
291,989
|
|
Short-term investment securities (Notes 2 and 4)
|
|
|
665,647
|
|
|
|
736,643
|
|
|
|
372,913
|
|
|
|
295,494
|
|
Accounts receivable trade, net of allowance for
doubtful accounts of W106,737 million,
W93,551 million and
W150,320 million as of December 31,
2006, 2007 and 2008 (Notes 2, 13 and 24)
|
|
|
1,800,606
|
|
|
|
1,774,935
|
|
|
|
1,900,002
|
|
|
|
1,505,548
|
|
Short-term loans, net of allowance for doubtful accounts of
W9,629 million,
W6,845 million and
W7,599 million as of December 31,
2006, 2007 and 2008 (Notes 2, 6 and 13)
|
|
|
69,745
|
|
|
|
84,570
|
|
|
|
119,087
|
|
|
|
94,364
|
|
Accounts receivable other, net of allowance for
doubtful accounts of W31,233 million,
W28,649 million and
W30,357 million as of December 31,
2006, 2007 and 2008 and present value discount of
W27,314 million as of December 31,
2008 (Notes 2, 13 and 24)
|
|
|
1,305,284
|
|
|
|
948,322
|
|
|
|
1,346,056
|
|
|
|
1,066,605
|
|
Inventories (Notes 2, 3 and 23)
|
|
|
19,778
|
|
|
|
47,052
|
|
|
|
34,974
|
|
|
|
27,713
|
|
Prepaid expenses
|
|
|
116,727
|
|
|
|
108,552
|
|
|
|
127,432
|
|
|
|
100,976
|
|
Current deferred income tax assets, net (Notes 2 and 17)
|
|
|
49,940
|
|
|
|
36,383
|
|
|
|
27,786
|
|
|
|
22,017
|
|
Currency swap (Notes 2 and 27)
|
|
|
16,660
|
|
|
|
|
|
|
|
8,236
|
|
|
|
6,526
|
|
Advanced payments and other
|
|
|
35,518
|
|
|
|
42,665
|
|
|
|
106,131
|
|
|
|
84,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
4,663,962
|
|
|
|
4,813,072
|
|
|
|
5,422,447
|
|
|
|
4,296,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net (Notes 2, 7, 12, 22, 23 and 24)
|
|
|
4,507,335
|
|
|
|
4,969,354
|
|
|
|
7,437,689
|
|
|
|
5,893,573
|
|
Intangible assets, net (Notes 2, 8 and 12)
|
|
|
3,518,411
|
|
|
|
3,433,962
|
|
|
|
3,978,145
|
|
|
|
3,152,254
|
|
Long-term financial instruments (Note 21)
|
|
|
10,445
|
|
|
|
15,535
|
|
|
|
114
|
|
|
|
90
|
|
Long-term investment securities (Notes 2 and 4)
|
|
|
2,475,418
|
|
|
|
5,058,519
|
|
|
|
3,105,295
|
|
|
|
2,460,614
|
|
Equity securities accounted for using the equity method
(Notes 2 and 5)
|
|
|
750,921
|
|
|
|
350,966
|
|
|
|
898,512
|
|
|
|
711,975
|
|
Long-term loans, net of allowance for doubtful accounts of
W19,117 million,
W23,079 million and
W26,376 million as of December 31,
2006, 2007 and 2008 (Notes 2 and 6)
|
|
|
18,569
|
|
|
|
84,906
|
|
|
|
155,360
|
|
|
|
123,106
|
|
Long-term accounts receivable other, net of present
value discount of W45,464 million as
December 31, 2008 (Note 2)
|
|
|
|
|
|
|
|
|
|
|
572,139
|
|
|
|
453,359
|
|
Guarantee deposits (Notes 13 and 24)
|
|
|
139,619
|
|
|
|
148,987
|
|
|
|
239,480
|
|
|
|
189,762
|
|
Long-term currency swap (Notes 2 and 27)
|
|
|
|
|
|
|
13,057
|
|
|
|
494,711
|
|
|
|
392,006
|
|
Long-term interest rate swap (Notes 2 and 27)
|
|
|
|
|
|
|
3,170
|
|
|
|
|
|
|
|
|
|
Non-current deferred income tax assets (Notes 2 and 17)
|
|
|
2,655
|
|
|
|
7,286
|
|
|
|
4,948
|
|
|
|
3,921
|
|
Other
|
|
|
152,633
|
|
|
|
150,121
|
|
|
|
164,831
|
|
|
|
130,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Assets
|
|
|
11,576,006
|
|
|
|
14,235,863
|
|
|
|
17,051,224
|
|
|
|
13,511,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
W
|
16,239,968
|
|
|
W
|
19,048,935
|
|
|
W
|
22,473,671
|
|
|
$
|
17,807,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-4
SK
TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation into
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Korean Won
|
|
|
(Note 2)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
(In thousands)
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable (Notes 13 and 24)
|
|
W
|
1,221,704
|
|
|
W
|
1,252,734
|
|
|
W
|
1,268,750
|
|
|
$
|
1,005,349
|
|
Short-term borrowings (Notes 21 and 22)
|
|
|
58,344
|
|
|
|
24,616
|
|
|
|
627,657
|
|
|
|
497,351
|
|
Income taxes payable
|
|
|
336,536
|
|
|
|
319,108
|
|
|
|
328,403
|
|
|
|
260,224
|
|
Dividend payable
|
|
|
268
|
|
|
|
308
|
|
|
|
227
|
|
|
|
180
|
|
Accrued expenses (Notes 2 and 26)
|
|
|
375,063
|
|
|
|
436,008
|
|
|
|
861,836
|
|
|
|
682,913
|
|
Withholdings
|
|
|
339,144
|
|
|
|
226,407
|
|
|
|
315,537
|
|
|
|
250,029
|
|
Current portion of long-term debt, net (Notes 2, 8, 9, 10
and 12)
|
|
|
797,042
|
|
|
|
634,990
|
|
|
|
936,009
|
|
|
|
741,687
|
|
Current portion of subscription deposits (Note 11)
|
|
|
17,576
|
|
|
|
7,564
|
|
|
|
8,281
|
|
|
|
6,562
|
|
Currency swap (Notes 2 and 27)
|
|
|
|
|
|
|
12,646
|
|
|
|
190,359
|
|
|
|
150,839
|
|
Current deferred income tax liabilities (Notes 2 and 17)
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
Advanced receipts and other
|
|
|
62,739
|
|
|
|
102,489
|
|
|
|
91,762
|
|
|
|
72,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
3,208,416
|
|
|
|
3,016,874
|
|
|
|
4,628,821
|
|
|
|
3,667,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds payable, net (Notes 2, 9 and 22)
|
|
|
1,995,323
|
|
|
|
2,348,661
|
|
|
|
4,074,392
|
|
|
|
3,228,520
|
|
Long-term borrowings (Notes 10 and 22)
|
|
|
293,026
|
|
|
|
323,421
|
|
|
|
856,471
|
|
|
|
678,662
|
|
Subscription deposits (Note 11)
|
|
|
21,140
|
|
|
|
6,425
|
|
|
|
4,796
|
|
|
|
3,800
|
|
Long-term payables other, net of present value
discount of W42,461 million,
W27,886 million and
W15,416 million as of December 31,
2006, 2007 and 2008 (Notes 2 and 8)
|
|
|
517,539
|
|
|
|
422,114
|
|
|
|
304,584
|
|
|
|
241,350
|
|
Obligations under capital lease (Notes 2, 12 and 22)
|
|
|
1,860
|
|
|
|
712
|
|
|
|
139,273
|
|
|
|
110,359
|
|
Accrued severance indemnities, net (Note 2)
|
|
|
22,284
|
|
|
|
44,322
|
|
|
|
53,815
|
|
|
|
42,643
|
|
Non-current deferred income tax liabilities, net (Notes 2
and 17)
|
|
|
532,639
|
|
|
|
1,044,758
|
|
|
|
408,755
|
|
|
|
323,895
|
|
Long-term currency swap (Notes 2 and 27)
|
|
|
112,970
|
|
|
|
110,911
|
|
|
|
23,947
|
|
|
|
18,975
|
|
Long-term interest swap (Notes 2 and 27)
|
|
|
454
|
|
|
|
|
|
|
|
33,499
|
|
|
|
26,544
|
|
Guarantee deposits received and other (Notes 2, 21, 24 and
26)
|
|
|
51,229
|
|
|
|
43,104
|
|
|
|
120,878
|
|
|
|
95,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Liabilities
|
|
|
3,548,464
|
|
|
|
4,344,428
|
|
|
|
6,020,410
|
|
|
|
4,770,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
6,756,880
|
|
|
|
7,361,302
|
|
|
|
10,649,231
|
|
|
|
8,438,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock (Notes 1 and 14)
|
|
|
44,639
|
|
|
|
44,639
|
|
|
|
44,639
|
|
|
|
35,372
|
|
Capital surplus (Note 14)
|
|
|
2,966,399
|
|
|
|
2,956,106
|
|
|
|
2,958,854
|
|
|
|
2,344,575
|
|
Capital adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock (Notes 1 and 16)
|
|
|
(2,014,927
|
)
|
|
|
(2,041,483
|
)
|
|
|
(2,055,620
|
)
|
|
|
(1,628,859
|
)
|
Loss on disposal of treasury stock (Notes 16 and 17)
|
|
|
(7,887
|
)
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
Other capital adjustment (Notes 2, 5 and 17)
|
|
|
(12,826
|
)
|
|
|
(31,146
|
)
|
|
|
(103,769
|
)
|
|
|
(82,226
|
)
|
Accumulated other comprehensive income (loss) (Note 18):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on valuation of long-term investment
securities, net (Notes 2, 4 and 17)
|
|
|
429,228
|
|
|
|
1,624,613
|
|
|
|
407,842
|
|
|
|
323,171
|
|
Equity in other comprehensive gain (loss) of affiliates, net
(Notes 2, 5 and 17)
|
|
|
107,324
|
|
|
|
1,727
|
|
|
|
(68,763
|
)
|
|
|
(54,487
|
)
|
Gain (loss) on valuation of currency swap, net (Notes 2, 17
and 27)
|
|
|
(16,487
|
)
|
|
|
(11,816
|
)
|
|
|
8,544
|
|
|
|
6,770
|
|
Gain (loss) on valuation of interest swap, net (Notes 2, 17
and 27)
|
|
|
(329
|
)
|
|
|
2,298
|
|
|
|
(26,129
|
)
|
|
|
(20,704
|
)
|
Foreign-based operations translation adjustment
(Note 2)
|
|
|
(29,726
|
)
|
|
|
(25,564
|
)
|
|
|
34,698
|
|
|
|
27,494
|
|
Retained earnings (Note 15)
|
|
|
7,847,434
|
|
|
|
8,914,970
|
|
|
|
9,448,185
|
|
|
|
7,486,676
|
|
Minority interest in equity of consolidated subsidiaries
(Note 2)
|
|
|
170,246
|
|
|
|
253,383
|
|
|
|
1,175,959
|
|
|
|
931,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
9,483,088
|
|
|
|
11,687,633
|
|
|
|
11,824,440
|
|
|
|
9,369,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
W
|
16,239,968
|
|
|
W
|
19,048,935
|
|
|
W
|
22,473,671
|
|
|
$
|
17,807,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
SK
TELECOM CO., LTD. AND SUBSIDIARIES
YEARS
ENDED DECEMBER 31, 2006, 2007 AND 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation into
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Korean Won
|
|
|
(Note 2)
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
(In millions except for per share data)
|
|
|
(In thousands
|
|
|
|
|
|
|
except for per
|
|
|
|
|
|
|
share data)
|
|
|
OPERATING REVENUE (Notes 2, 24, 30 and 32)
|
|
W
|
11,027,977
|
|
|
W
|
11,863,357
|
|
|
W
|
14,020,984
|
|
|
$
|
11,110,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES (Notes 24 and 30):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labor cost
|
|
|
(491,839
|
)
|
|
|
(544,713
|
)
|
|
|
(731,418
|
)
|
|
|
(579,571
|
)
|
Commissions paid
|
|
|
(3,293,197
|
)
|
|
|
(4,055,147
|
)
|
|
|
(4,884,819
|
)
|
|
|
(3,870,697
|
)
|
Depreciation and amortization (Notes 7 and 8)
|
|
|
(1,553,635
|
)
|
|
|
(1,821,972
|
)
|
|
|
(2,599,791
|
)
|
|
|
(2,060,056
|
)
|
Network interconnection
|
|
|
(1,014,913
|
)
|
|
|
(1,078,714
|
)
|
|
|
(1,327,417
|
)
|
|
|
(1,051,836
|
)
|
Leased line
|
|
|
(412,902
|
)
|
|
|
(410,408
|
)
|
|
|
(521,118
|
)
|
|
|
(412,930
|
)
|
Advertising
|
|
|
(307,190
|
)
|
|
|
(312,604
|
)
|
|
|
(363,412
|
)
|
|
|
(287,965
|
)
|
Research and development (Note 2)
|
|
|
(211,961
|
)
|
|
|
(218,652
|
)
|
|
|
(226,714
|
)
|
|
|
(179,647
|
)
|
Rent
|
|
|
(206,708
|
)
|
|
|
(234,006
|
)
|
|
|
(290,655
|
)
|
|
|
(230,313
|
)
|
Frequency usage
|
|
|
(158,958
|
)
|
|
|
(166,395
|
)
|
|
|
(163,938
|
)
|
|
|
(129,903
|
)
|
Repair
|
|
|
(150,848
|
)
|
|
|
(168,633
|
)
|
|
|
(226,858
|
)
|
|
|
(179,761
|
)
|
Provision for bad debts (Note 2)
|
|
|
(61,457
|
)
|
|
|
(48,835
|
)
|
|
|
(62,973
|
)
|
|
|
(49,899
|
)
|
Cost of goods sold (Note 2)
|
|
|
(121,381
|
)
|
|
|
(239,146
|
)
|
|
|
(233,200
|
)
|
|
|
(184,786
|
)
|
Other
|
|
|
(421,856
|
)
|
|
|
(462,177
|
)
|
|
|
(636,203
|
)
|
|
|
(504,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
(8,406,845
|
)
|
|
|
(9,761,402
|
)
|
|
|
(12,268,516
|
)
|
|
|
(9,721,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (Note 31)
|
|
|
2,621,132
|
|
|
|
2,101,955
|
|
|
|
1,752,468
|
|
|
|
1,388,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (Note 4)
|
|
|
79,969
|
|
|
|
93,838
|
|
|
|
136,006
|
|
|
|
107,770
|
|
Dividends
|
|
|
20,351
|
|
|
|
21,119
|
|
|
|
52,477
|
|
|
|
41,582
|
|
Rent
|
|
|
|
|
|
|
17,367
|
|
|
|
19,295
|
|
|
|
15,289
|
|
Commissions (Note 24)
|
|
|
33,226
|
|
|
|
32,196
|
|
|
|
17,148
|
|
|
|
13,588
|
|
Reversal of allowance for doubtful accounts
|
|
|
789
|
|
|
|
614
|
|
|
|
2,084
|
|
|
|
1,651
|
|
Foreign exchange and translation gains (Note 2)
|
|
|
4,412
|
|
|
|
12,091
|
|
|
|
478,394
|
|
|
|
379,076
|
|
Equity in earnings of affiliates (Notes 2 and 5)
|
|
|
45,787
|
|
|
|
247,382
|
|
|
|
24,894
|
|
|
|
19,726
|
|
Gain on disposal of investment assets
|
|
|
27,490
|
|
|
|
3,721
|
|
|
|
17,409
|
|
|
|
13,795
|
|
Gain on disposal of property and equipment and intangible assets
|
|
|
4,507
|
|
|
|
9,776
|
|
|
|
10,000
|
|
|
|
7,924
|
|
Gain on transactions and valuation of currency swap
(Notes 2 and 27)
|
|
|
16,660
|
|
|
|
10,799
|
|
|
|
265,142
|
|
|
|
210,097
|
|
Gain on transactions and valuation of interest swap
(Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Gain on conversion of convertible bonds (Note 4)
|
|
|
|
|
|
|
373,140
|
|
|
|
|
|
|
|
|
|
Gain on repayment of bonds
|
|
|
|
|
|
|
6,160
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
51,667
|
|
|
|
33,681
|
|
|
|
34,233
|
|
|
|
27,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
284,858
|
|
|
|
861,884
|
|
|
|
1,057,084
|
|
|
|
837,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-6
SK
TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation into
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Korean Won
|
|
|
(Note 2)
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
(In millions except for per share data)
|
|
|
(In thousands
|
|
|
|
|
|
|
except for per
|
|
|
|
|
|
|
share data)
|
|
|
OTHER EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and discounts
|
|
|
(239,138
|
)
|
|
|
(238,958
|
)
|
|
|
(366,022
|
)
|
|
|
(290,033
|
)
|
Donations
|
|
|
(103,348
|
)
|
|
|
(72,849
|
)
|
|
|
(100,224
|
)
|
|
|
(79,417
|
)
|
Foreign exchange and translation losses (Note 2)
|
|
|
(4,139
|
)
|
|
|
(12,966
|
)
|
|
|
(161,788
|
)
|
|
|
(128,200
|
)
|
Loss on valuation of short-term investment securities
(Notes 2 and 4)
|
|
|
|
|
|
|
(1,203
|
)
|
|
|
(8,358
|
)
|
|
|
(6,623
|
)
|
Equity in losses of affiliates (Notes 2 and 5)
|
|
|
(211,464
|
)
|
|
|
(175,474
|
)
|
|
|
(54,268
|
)
|
|
|
(43,002
|
)
|
Impairment loss on investment securities (Notes 2
and 4)
|
|
|
(27,696
|
)
|
|
|
(5,466
|
)
|
|
|
(223,207
|
)
|
|
|
(176,868
|
)
|
Loss on disposal of investment assets
|
|
|
(6,096
|
)
|
|
|
(1,190
|
)
|
|
|
(12,148
|
)
|
|
|
(9,626
|
)
|
Loss on disposal of property, equipment and intangible assets
|
|
|
(17,148
|
)
|
|
|
(30,680
|
)
|
|
|
(70,314
|
)
|
|
|
(55,716
|
)
|
Impairment loss on assets (Note 2)
|
|
|
(7,030
|
)
|
|
|
(10,634
|
)
|
|
|
(14,754
|
)
|
|
|
(11,691
|
)
|
Loss on transactions and valuation of currency swap
(Notes 2 and 27)
|
|
|
(9,258
|
)
|
|
|
(33,876
|
)
|
|
|
(441,207
|
)
|
|
|
(349,609
|
)
|
Loss on transactions and valuation of interest swap
(Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
(38
|
)
|
External research and development cost (Note 2)
|
|
|
(67,021
|
)
|
|
|
(74,388
|
)
|
|
|
(72,993
|
)
|
|
|
(57,839
|
)
|
Special severance indemnities (Note 2)
|
|
|
(144,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(48,053
|
)
|
|
|
(20,390
|
)
|
|
|
(25,488
|
)
|
|
|
(20,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
(884,412
|
)
|
|
|
(678,074
|
)
|
|
|
(1,550,819
|
)
|
|
|
(1,228,858
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATION BEFORE INCOME TAX
|
|
|
2,021,578
|
|
|
|
2,285,765
|
|
|
|
1,258,733
|
|
|
|
997,411
|
|
INCOME TAX FOR CONTINUING OPERATION (Notes 2 and 17)
|
|
|
572,026
|
|
|
|
694,487
|
|
|
|
298,850
|
|
|
|
236,807
|
|
PREACQUISITION NET LOSS OF SUBSIDIARIES
|
|
|
|
|
|
|
21,088
|
|
|
|
32,664
|
|
|
|
25,883
|
|
LOSS FROM DISCONTINUED OPERATION (Note 2)
|
|
|
|
|
|
|
(50,101
|
)
|
|
|
(20,209
|
)
|
|
|
(16,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
W
|
1,449,552
|
|
|
W
|
1,562,265
|
|
|
W
|
972,338
|
|
|
$
|
770,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE TO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority interests
|
|
W
|
1,451,491
|
|
|
W
|
1,648,876
|
|
|
W
|
1,215,719
|
|
|
$
|
963,327
|
|
Minority interests
|
|
|
(1,939
|
)
|
|
|
(86,611
|
)
|
|
|
(243,381
|
)
|
|
|
(192,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
1,449,552
|
|
|
W
|
1,562,265
|
|
|
W
|
972,338
|
|
|
$
|
770,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER SHARE FROM CONTINUING OPERATION (In Korean won
and U.S. dollars) (Notes 2 and 19)
|
|
W
|
19,801
|
|
|
W
|
23,143
|
|
|
W
|
16,453
|
|
|
$
|
13.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER SHARE (In Korean won and U.S. dollars)
(Notes 2 and 19)
|
|
W
|
19,801
|
|
|
W
|
22,696
|
|
|
W
|
16,707
|
|
|
$
|
13.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED NET INCOME PER SHARE FROM CONTINUING OPERATION (In
Korean won and U.S. dollars) (Notes 2 and 19)
|
|
W
|
19,523
|
|
|
W
|
22,813
|
|
|
W
|
16,309
|
|
|
$
|
12.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED NET INCOME PER SHARE (In Korean won and U.S. dollars)
(Notes 2 and 19)
|
|
W
|
19,523
|
|
|
W
|
22,375
|
|
|
W
|
16,559
|
|
|
$
|
13.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-7
SK
TELECOM CO., LTD. AND SUBSIDIARIES
YEARS
ENDED DECEMBER 31, 2006, 2007 AND 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Capital
|
|
|
Capital
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Minority
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Surplus
|
|
|
Adjustments
|
|
|
Income
|
|
|
Earnings
|
|
|
Interest
|
|
|
Equity
|
|
|
(In millions of Korean won)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2006
|
|
W
|
44,639
|
|
|
W
|
2,954,840
|
|
|
W
|
(2,043,625
|
)
|
|
W
|
(4,890
|
)
|
|
W
|
7,267,649
|
|
|
W
|
108,927
|
|
|
W
|
8,327,540
|
|
Cumulative effect of change in accounting policies (Note 2)
|
|
|
|
|
|
|
15,025
|
|
|
|
(15,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balance, January 1, 2006
|
|
|
44,639
|
|
|
|
2,969,865
|
|
|
|
(2,058,650
|
)
|
|
|
(4,890
|
)
|
|
|
7,267,649
|
|
|
|
108,927
|
|
|
|
8,327,540
|
|
Cash dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(588,914
|
)
|
|
|
|
|
|
|
(588,914
|
)
|
Interim dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73,714
|
)
|
|
|
|
|
|
|
(73,714
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,451,491
|
|
|
|
(1,939
|
)
|
|
|
1,449,552
|
|
Conversion of convertible bonds (Notes 9 and 16)
|
|
|
|
|
|
|
(3,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,733
|
)
|
Transfer of stock option from capital adjustments to capital
surplus (Notes 2 and 14)
|
|
|
|
|
|
|
234
|
|
|
|
(234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference between the acquisition cost and the net book value
incurred from the capital transactions between companies under
common control (Note 2)
|
|
|
|
|
|
|
|
|
|
|
(1,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,095
|
)
|
Equity in capital surplus changes of affiliates
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
Equity in other capital adjustment changes of affiliates
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
Treasury stock (Note 16)
|
|
|
|
|
|
|
|
|
|
|
32,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,178
|
|
Loss on disposal of treasury stock (Notes 16 and 17)
|
|
|
|
|
|
|
|
|
|
|
(7,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,887
|
)
|
Unrealized gain on valuation of long-term investment securities
(Notes 2 and 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
471,321
|
|
|
|
|
|
|
|
|
|
|
|
471,321
|
|
Equity in other comprehensive income changes of affiliates, net
(Notes 2 and 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,956
|
|
|
|
|
|
|
|
|
|
|
|
45,956
|
|
Foreign-based operations translation adjustment
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,737
|
)
|
|
|
|
|
|
|
|
|
|
|
(19,737
|
)
|
Gain on valuation of currency swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,311
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,311
|
)
|
Gain on valuation of interest rate swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(329
|
)
|
|
|
|
|
|
|
|
|
|
|
(329
|
)
|
Acquisition and retirement of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(209,078
|
)
|
|
|
|
|
|
|
(209,078
|
)
|
Increase in minority interest in equity of consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,258
|
|
|
|
63,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
W
|
44,639
|
|
|
W
|
2,966,399
|
|
|
W
|
(2,035,640
|
)
|
|
W
|
490,010
|
|
|
W
|
7,847,434
|
|
|
W
|
170,246
|
|
|
W
|
9,483,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2007
|
|
W
|
44,639
|
|
|
W
|
2,950,327
|
|
|
W
|
(2,019,568
|
)
|
|
W
|
490,010
|
|
|
W
|
7,847,434
|
|
|
W
|
170,246
|
|
|
W
|
9,483,088
|
|
Cumulative effect of change in accounting policies (Note 2)
|
|
|
|
|
|
|
16,072
|
|
|
|
(16,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balance, January 1, 2007
|
|
|
44,639
|
|
|
|
2,966,399
|
|
|
|
(2,035,640
|
)
|
|
|
490,010
|
|
|
|
7,847,434
|
|
|
|
170,246
|
|
|
|
9,483,088
|
|
Cash dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(508,672
|
)
|
|
|
|
|
|
|
(508,672
|
)
|
Interim dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72,668
|
)
|
|
|
|
|
|
|
(72,668
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,648,876
|
|
|
|
(86,611
|
)
|
|
|
1,562,265
|
|
Conversion of convertible bonds (Notes 9 and 16)
|
|
|
|
|
|
|
(11,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,116
|
)
|
Transfer of stock option from capital adjustments to capital
surplus (Notes 2 and 14)
|
|
|
|
|
|
|
3,247
|
|
|
|
(3,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference between the acquisition cost and the net book value
incurred from the capital transactions between companies under
common control (Note 2)
|
|
|
|
|
|
|
|
|
|
|
(30,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,086
|
)
|
Equity in capital surplus changes of affiliates
|
|
|
|
|
|
|
(2,424
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,424
|
)
|
Equity in other capital adjustment changes of affiliates
|
|
|
|
|
|
|
|
|
|
|
15,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,013
|
|
Treasury stock (Note 16)
|
|
|
|
|
|
|
|
|
|
|
(26,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,556
|
)
|
F-8
SK
TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS
EQUITY (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Capital
|
|
|
Capital
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Minority
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Surplus
|
|
|
Adjustments
|
|
|
Income
|
|
|
Earnings
|
|
|
Interest
|
|
|
Equity
|
|
|
Loss on disposal of treasury stock (Notes 16 and 17)
|
|
|
|
|
|
|
|
|
|
|
7,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,793
|
|
Unrealized gain on valuation of long-term investment securities
(Notes 2 and 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,195,385
|
|
|
|
|
|
|
|
|
|
|
|
1,195,385
|
|
Equity in other comprehensive income changes of affiliates, net
(Notes 2 and 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(105,597
|
)
|
|
|
|
|
|
|
|
|
|
|
(105,597
|
)
|
Foreign-based operations translation adjustment
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,162
|
|
|
|
|
|
|
|
|
|
|
|
4,162
|
|
Gain on valuation of currency swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,671
|
|
|
|
|
|
|
|
|
|
|
|
4,671
|
|
Gain on valuation of interest rate swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,627
|
|
|
|
|
|
|
|
|
|
|
|
2,627
|
|
Increase in minority interest in equity of consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169,748
|
|
|
|
169,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
W
|
44,639
|
|
|
W
|
2,956,106
|
|
|
W
|
(2,072,723
|
)
|
|
W
|
1,591,258
|
|
|
W
|
8,914,970
|
|
|
W
|
253,383
|
|
|
W
|
11,687,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2008
|
|
W
|
44,639
|
|
|
W
|
2,924,960
|
|
|
W
|
(2,041,577
|
)
|
|
W
|
1,591,258
|
|
|
W
|
8,914,970
|
|
|
W
|
253,383
|
|
|
W
|
11,687,633
|
|
Cumulative effect of change in accounting policies (Note 2)
|
|
|
|
|
|
|
31,146
|
|
|
|
(31,146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balance, January 1, 2008
|
|
|
44,639
|
|
|
|
2,956,106
|
|
|
|
(2,072,723
|
)
|
|
|
1,591,258
|
|
|
|
8,914,970
|
|
|
|
253,383
|
|
|
|
11,687,633
|
|
Cash dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(609,711
|
)
|
|
|
|
|
|
|
(609,711
|
)
|
Interim dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72,793
|
)
|
|
|
|
|
|
|
(72,793
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,215,719
|
|
|
|
(243,381
|
)
|
|
|
972,338
|
|
Conversion of convertible bonds (Notes 9 and 16)
|
|
|
|
|
|
|
1,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,544
|
|
Difference between the acquisition cost and the net book value
incurred from the capital transactions between companies under
common control (Note 2)
|
|
|
|
|
|
|
|
|
|
|
(75,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,329
|
)
|
Equity in capital surplus changes of affiliates
|
|
|
|
|
|
|
481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
481
|
|
Equity in other capital adjustment changes of affiliates
|
|
|
|
|
|
|
|
|
|
|
2,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,706
|
|
Treasury stock (Note 16)
|
|
|
|
|
|
|
723
|
|
|
|
(14,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,414
|
)
|
Loss on disposal of treasury stock (Notes 16 and 17)
|
|
|
|
|
|
|
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
|
|
Unrealized loss on valuation of long-term investment securities
(Notes 2 and 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,216,771
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,216,771
|
)
|
Equity in other comprehensive income changes of affiliates, net
(Notes 2 and 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,490
|
)
|
|
|
|
|
|
|
|
|
|
|
(70,490
|
)
|
Foreign-based operations translation adjustment
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,262
|
|
|
|
|
|
|
|
|
|
|
|
60,262
|
|
Gain on valuation of currency swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,360
|
|
|
|
|
|
|
|
|
|
|
|
20,360
|
|
Gain on valuation of interest rate swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,427
|
)
|
|
|
|
|
|
|
|
|
|
|
(28,427
|
)
|
Increase in minority interest in equity of consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,165,957
|
|
|
|
1,165,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
W
|
44,639
|
|
|
W
|
2,958,854
|
|
|
W
|
(2,159,389
|
)
|
|
W
|
356,192
|
|
|
W
|
9,448,185
|
|
|
W
|
1,175,959
|
|
|
W
|
11,824,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-9
SK
TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS
EQUITY (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Capital
|
|
|
Capital
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Minority
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Surplus
|
|
|
Adjustments
|
|
|
Income
|
|
|
Earnings
|
|
|
Interest
|
|
|
Equity
|
|
|
(In thousands of U.S. dollars) (Note 2 a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2008
|
|
$
|
35,372
|
|
|
$
|
2,317,718
|
|
|
( $
|
1,617,731
|
)
|
|
$
|
1,260,902
|
|
|
$
|
7,064,160
|
|
|
$
|
200,778
|
|
|
$
|
9,261,199
|
|
Cumulative effect of change in accounting policies (Note 2)
|
|
|
|
|
|
|
24,680
|
|
|
|
(24,680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balance, January 1, 2008
|
|
|
35,372
|
|
|
|
2,342,398
|
|
|
|
(1,642,411
|
)
|
|
|
1,260,902
|
|
|
|
7,064,160
|
|
|
|
200,778
|
|
|
|
9,261,199
|
|
Cash dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(483,131
|
)
|
|
|
|
|
|
|
(483,131
|
)
|
Interim dividends (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,680
|
)
|
|
|
|
|
|
|
(57,680
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
963,327
|
|
|
|
(192,853
|
)
|
|
|
770,474
|
|
Conversion of convertible bonds (Notes 9 and 16)
|
|
|
|
|
|
|
1,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,223
|
|
Difference between the acquisition cost and the net book value
incurred from the capital transactions between companies under
common control (Note 2)
|
|
|
|
|
|
|
|
|
|
|
(59,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59,690
|
)
|
Equity in capital surplus changes of affiliates
|
|
|
|
|
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
381
|
|
Equity in other capital adjustment changes of affiliates
|
|
|
|
|
|
|
|
|
|
|
2,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,143
|
|
Treasury stock (Note 16)
|
|
|
|
|
|
|
573
|
|
|
|
(11,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,628
|
)
|
Loss on disposal of treasury stock (Notes 16 and 17)
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
Unrealized loss on valuation of long-term investment securities
(Notes 2 and 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(964,161
|
)
|
|
|
|
|
|
|
|
|
|
|
(964,161
|
)
|
Equity in other comprehensive income changes of affiliates, net
(Notes 2 and 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,856
|
)
|
|
|
|
|
|
|
|
|
|
|
(55,856
|
)
|
Foreign-based operations translation adjustment
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,751
|
|
|
|
|
|
|
|
|
|
|
|
47,751
|
|
Gain on valuation of currency swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,133
|
|
|
|
|
|
|
|
|
|
|
|
16,133
|
|
Gain on valuation of interest rate swap (Notes 2 and 27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,525
|
)
|
|
|
|
|
|
|
|
|
|
|
(22,525
|
)
|
Increase in minority interest in equity of consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923,897
|
|
|
|
923,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
$
|
35,372
|
|
|
$
|
2,344,575
|
|
|
( $
|
1,711,085
|
)
|
|
$
|
282,244
|
|
|
$
|
7,486,676
|
|
|
$
|
931,822
|
|
|
$
|
9,369,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-10
SK
TELECOM CO., LTD. AND SUBSIDIARIES
YEARS
ENDED DECEMBER 31, 2006, 2007 AND 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
In millions of Korean Won
|
|
|
In thousands of
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
|
|
|
(Note 2a)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income:
|
|
W
|
1,449,552
|
|
|
W
|
1,562,265
|
|
|
W
|
972,338
|
|
|
$
|
770,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses not involving cash payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for severance indemnities
|
|
|
47,370
|
|
|
|
44,233
|
|
|
|
93,094
|
|
|
|
73,767
|
|
Depreciation and amortization
|
|
|
1,698,364
|
|
|
|
1,971,327
|
|
|
|
2,759,276
|
|
|
|
2,186,431
|
|
Allowance for doubtful accounts
|
|
|
86,321
|
|
|
|
58,272
|
|
|
|
73,325
|
|
|
|
58,102
|
|
Foreign currency translation loss
|
|
|
1,106
|
|
|
|
9,411
|
|
|
|
132,162
|
|
|
|
104,724
|
|
Loss on valuation of short-term investment securities
|
|
|
|
|
|
|
1,203
|
|
|
|
8,358
|
|
|
|
6,623
|
|
Equity in losses of affiliates
|
|
|
211,464
|
|
|
|
175,474
|
|
|
|
54,268
|
|
|
|
43,002
|
|
Impairment loss on investment securities
|
|
|
27,696
|
|
|
|
5,466
|
|
|
|
223,207
|
|
|
|
176,868
|
|
Loss on disposal of investment assets
|
|
|
6,096
|
|
|
|
1,190
|
|
|
|
12,148
|
|
|
|
9,626
|
|
Loss on disposal of property, equipment and intangible assets
|
|
|
17,148
|
|
|
|
30,680
|
|
|
|
70,314
|
|
|
|
55,716
|
|
Loss on disposal of consolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
724
|
|
|
|
574
|
|
Impairment loss on assets
|
|
|
7,030
|
|
|
|
10,634
|
|
|
|
14,754
|
|
|
|
11,691
|
|
Loss on transaction and valuation of currency swap
|
|
|
9,258
|
|
|
|
33,876
|
|
|
|
441,207
|
|
|
|
349,609
|
|
Loss on transaction of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
38
|
|
Amortization of discounts on bonds and other
|
|
|
51,077
|
|
|
|
47,640
|
|
|
|
46,586
|
|
|
|
36,915
|
|
Loss from discontinued operation
|
|
|
|
|
|
|
50,101
|
|
|
|
20,209
|
|
|
|
16,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
2,162,930
|
|
|
|
2,439,507
|
|
|
|
3,949,680
|
|
|
|
3,129,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income not involving cash receipts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign translation gain
|
|
|
924
|
|
|
|
5,373
|
|
|
|
428,575
|
|
|
|
339,600
|
|
Reversal of allowance for doubtful accounts
|
|
|
789
|
|
|
|
614
|
|
|
|
2,084
|
|
|
|
1,651
|
|
Equity in earnings of affiliates
|
|
|
45,787
|
|
|
|
247,382
|
|
|
|
24,894
|
|
|
|
19,726
|
|
Gain on valuation of trading securities
|
|
|
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
Gain on disposal of investment assets
|
|
|
27,490
|
|
|
|
3,721
|
|
|
|
17,409
|
|
|
|
13,795
|
|
Gain on disposal of consolidated subsidiaries
|
|
|
1,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on disposal of property, equipment and intangible assets
|
|
|
4,507
|
|
|
|
9,776
|
|
|
|
10,000
|
|
|
|
7,924
|
|
Gain on transactions and valuation of currency swap
|
|
|
16,660
|
|
|
|
10,799
|
|
|
|
265,142
|
|
|
|
210,097
|
|
Gain on transactions of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Gain on conversion of convertible bond
|
|
|
|
|
|
|
373,140
|
|
|
|
|
|
|
|
|
|
Gain on repayment of bonds
|
|
|
|
|
|
|
6,160
|
|
|
|
|
|
|
|
|
|
Gain on disposal of other non-current assets and other
|
|
|
3,075
|
|
|
|
13,623
|
|
|
|
6,036
|
|
|
|
4,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
100,788
|
|
|
|
670,716
|
|
|
|
754,142
|
|
|
|
597,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities related to operating
activities :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade
|
|
|
(161,914
|
)
|
|
|
43,020
|
|
|
|
72,097
|
|
|
|
57,129
|
|
Accounts receivable other
|
|
|
57,253
|
|
|
|
372,778
|
|
|
|
(383,668
|
)
|
|
|
(304,016
|
)
|
Inventories
|
|
|
(9,145
|
)
|
|
|
(8,895
|
)
|
|
|
(66,166
|
)
|
|
|
(52,429
|
)
|
Prepaid expenses
|
|
|
61,148
|
|
|
|
67,669
|
|
|
|
8,841
|
|
|
|
7,006
|
|
Advanced payments and other
|
|
|
5,865
|
|
|
|
(16,248
|
)
|
|
|
(59,552
|
)
|
|
|
(47,189
|
)
|
Long-term accounts receivables other
|
|
|
|
|
|
|
|
|
|
|
514
|
|
|
|
407
|
|
Accounts payable
|
|
|
161,611
|
|
|
|
(33,475
|
)
|
|
|
(104,300
|
)
|
|
|
(82,647
|
)
|
Income taxes payable
|
|
|
(44,637
|
)
|
|
|
(21,791
|
)
|
|
|
118,011
|
|
|
|
93,511
|
|
Accrued expenses
|
|
|
37,985
|
|
|
|
(9,723
|
)
|
|
|
405,084
|
|
|
|
320,986
|
|
Withholdings
|
|
|
123,003
|
|
|
|
(111,918
|
)
|
|
|
70,400
|
|
|
|
55,784
|
|
Current portion of subscription deposits
|
|
|
885
|
|
|
|
(8,220
|
)
|
|
|
(1,113
|
)
|
|
|
(882
|
)
|
Advance receipts and other
|
|
|
21,585
|
|
|
|
21,832
|
|
|
|
(20,367
|
)
|
|
|
(16,138
|
)
|
Deferred income taxes
|
|
|
(76,423
|
)
|
|
|
121,681
|
|
|
|
(194,865
|
)
|
|
|
(154,410
|
)
|
Dividends received from affiliates
|
|
|
1,318
|
|
|
|
2,184
|
|
|
|
1,214
|
|
|
|
962
|
|
Severance indemnity payments
|
|
|
(262,948
|
)
|
|
|
(13,732
|
)
|
|
|
(107,037
|
)
|
|
|
(84,815
|
)
|
Deposits for group severance indemnities and other
|
|
|
162,545
|
|
|
|
(14,518
|
)
|
|
|
(610,031
|
)
|
|
|
(483,384
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
78,131
|
|
|
|
390,644
|
|
|
|
(870,938
|
)
|
|
|
(690,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
3,589,825
|
|
|
|
3,721,700
|
|
|
|
3,296,938
|
|
|
|
2,612,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-11
SK
TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
In millions of Korean Won
|
|
|
In thousands of
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
|
|
|
(Note 2a)
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash inflows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in short-term investment securities, net
|
|
W
|
80,061
|
|
|
W
|
28,852
|
|
|
W
|
|
|
|
$
|
|
|
Decrease in short-term financial instruments, net
|
|
|
4,470
|
|
|
|
|
|
|
|
174,441
|
|
|
|
138,226
|
|
Collection of short-term loans
|
|
|
69,892
|
|
|
|
119,608
|
|
|
|
215,074
|
|
|
|
170,423
|
|
Decrease in long-term financial instruments
|
|
|
2
|
|
|
|
2,118
|
|
|
|
16,159
|
|
|
|
12,804
|
|
Collection of long-term loans
|
|
|
654
|
|
|
|
3,652
|
|
|
|
10,646
|
|
|
|
8,436
|
|
Proceeds from sales of long-term investment securities
|
|
|
305,953
|
|
|
|
4,804
|
|
|
|
386,740
|
|
|
|
306,450
|
|
Proceeds from sales of equity securities accounted for using the
equity method
|
|
|
80,014
|
|
|
|
20,258
|
|
|
|
8,292
|
|
|
|
6,571
|
|
Proceeds from disposal of consolidated subsidiary
|
|
|
39,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in guarantee deposits
|
|
|
71,164
|
|
|
|
32,594
|
|
|
|
26,361
|
|
|
|
20,888
|
|
Decrease in other non-current assets
|
|
|
19,940
|
|
|
|
30,444
|
|
|
|
40,913
|
|
|
|
32,419
|
|
Proceeds from disposal of property and equipment
|
|
|
14,353
|
|
|
|
30,429
|
|
|
|
45,533
|
|
|
|
36,080
|
|
Proceeds from disposal of intangible assets
|
|
|
1,630
|
|
|
|
6,739
|
|
|
|
9,496
|
|
|
|
7,525
|
|
Cash inflows from transaction of currency swap
|
|
|
|
|
|
|
17,242
|
|
|
|
727
|
|
|
|
576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
714,195
|
|
|
|
296,740
|
|
|
|
934,382
|
|
|
|
740,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash outflows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in short-term financial instruments, net
|
|
W
|
10,091
|
|
|
W
|
7,822
|
|
|
W
|
|
|
|
$
|
|
|
Increase in short-term investment securities, net
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
32
|
|
Increase in short-term loans
|
|
|
92,753
|
|
|
|
104,674
|
|
|
|
239,414
|
|
|
|
189,710
|
|
Increase in long-term financial instruments
|
|
|
|
|
|
|
652
|
|
|
|
6,086
|
|
|
|
4,823
|
|
Acquisition of long-term investment securities
|
|
|
1,127,396
|
|
|
|
371,394
|
|
|
|
31,420
|
|
|
|
24,897
|
|
Increase in long-term loans
|
|
|
12,623
|
|
|
|
100,006
|
|
|
|
35,290
|
|
|
|
27,964
|
|
Acquisition of equity securities accounted for using the equity
method
|
|
|
244,333
|
|
|
|
76,629
|
|
|
|
601,066
|
|
|
|
476,281
|
|
Increase in equity of consolidated subsidiaries
|
|
|
27,406
|
|
|
|
12,514
|
|
|
|
1,093,104
|
|
|
|
866,168
|
|
Increase in guarantee deposits
|
|
|
30,290
|
|
|
|
31,056
|
|
|
|
57,287
|
|
|
|
45,394
|
|
Increase in other non-current assets
|
|
|
132,349
|
|
|
|
78,853
|
|
|
|
96,303
|
|
|
|
76,308
|
|
Acquisition of property and equipment
|
|
|
1,498,142
|
|
|
|
1,804,148
|
|
|
|
2,236,930
|
|
|
|
1,772,528
|
|
Acquisition of intangible assets
|
|
|
73,964
|
|
|
|
115,102
|
|
|
|
149,341
|
|
|
|
118,337
|
|
Cash outflows from transaction of currency swap
|
|
|
|
|
|
|
8,769
|
|
|
|
263,495
|
|
|
|
208,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
3,249,347
|
|
|
|
2,711,619
|
|
|
|
4,809,776
|
|
|
|
3,811,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(2,535,152
|
)
|
|
|
(2,414,879
|
)
|
|
|
(3,875,394
|
)
|
|
|
(3,070,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash inflows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of bonds payable
|
|
W
|
384,990
|
|
|
W
|
761,117
|
|
|
W
|
1,307,679
|
|
|
$
|
1,036,196
|
|
Proceeds from short-term borrowings
|
|
|
51,230
|
|
|
|
35,946
|
|
|
|
472,958
|
|
|
|
374,769
|
|
Proceeds from long-term borrowings
|
|
|
294,800
|
|
|
|
|
|
|
|
510,577
|
|
|
|
404,578
|
|
Increase in guarantee deposits received and other
|
|
|
3,370
|
|
|
|
2,327
|
|
|
|
4,532
|
|
|
|
3,591
|
|
Proceeds from disposal of treasury stock
|
|
|
|
|
|
|
45,133
|
|
|
|
42,246
|
|
|
|
33,475
|
|
Cash inflows from transaction of currency swap
|
|
|
|
|
|
|
2,901
|
|
|
|
|
|
|
|
|
|
Increase in equity of consolidated subsidiaries
|
|
|
19,050
|
|
|
|
4,677
|
|
|
|
64,402
|
|
|
|
51,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
753,440
|
|
|
|
852,101
|
|
|
|
2,402,394
|
|
|
|
1,903,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash outflows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of current portion of long-term debt
|
|
|
815,287
|
|
|
|
907,176
|
|
|
|
558,107
|
|
|
|
442,240
|
|
Repayment of short-term borrowings
|
|
|
|
|
|
|
86,561
|
|
|
|
|
|
|
|
|
|
Repayment of long-term borrowings
|
|
|
404
|
|
|
|
93,336
|
|
|
|
193,400
|
|
|
|
153,250
|
|
Repayment of bonds payable
|
|
|
1,230
|
|
|
|
61,306
|
|
|
|
|
|
|
|
|
|
Payment of dividends
|
|
|
662,815
|
|
|
|
581,309
|
|
|
|
682,504
|
|
|
|
540,811
|
|
Decrease in subscription deposits
|
|
|
2,630
|
|
|
|
14,714
|
|
|
|
|
|
|
|
|
|
Cash outflows from transaction of currency swap
|
|
|
|
|
|
|
11,838
|
|
|
|
|
|
|
|
|
|
Acquisition and retirement of treasury stock
|
|
|
209,078
|
|
|
|
118,512
|
|
|
|
63,538
|
|
|
|
50,347
|
|
F-12
SK
TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
In millions of Korean Won
|
|
|
In thousands of
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
|
|
|
(Note 2a)
|
|
|
Decrease in equity of consolidated subsidiaries
|
|
|
|
|
|
|
6,607
|
|
|
|
24,863
|
|
|
|
19,701
|
|
Other
|
|
|
14,374
|
|
|
|
11,997
|
|
|
|
10,567
|
|
|
|
8,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
1,705,818
|
|
|
|
1,893,356
|
|
|
|
1,532,979
|
|
|
|
1,214,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Financing Activities
|
|
|
(952,378
|
)
|
|
|
(1,041,255
|
)
|
|
|
869,415
|
|
|
|
688,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
HELD IN FOREIGN CURRENCIES (Note 2)
|
|
|
(9,317
|
)
|
|
|
6,097
|
|
|
|
37,371
|
|
|
|
29,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN
CONSOLIDATED SUBSIDIARIES
|
|
|
14,568
|
|
|
|
102,079
|
|
|
|
36,413
|
|
|
|
28,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRE ACQUISITION CASH FLOWS OF SUBSIDIARIES
|
|
|
|
|
|
|
(11,396
|
)
|
|
|
17,250
|
|
|
|
13,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE IN CASH AND CASH EQUIVALENTS DUE TO MERGER
|
|
|
|
|
|
|
50,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM DISCONTINUED OPERATION (Note 2)
|
|
|
|
|
|
|
(12,777
|
)
|
|
|
(256,515
|
)
|
|
|
(203,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
107,546
|
|
|
|
400,017
|
|
|
|
125,478
|
|
|
|
99,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR (Note 29)
|
|
|
378,426
|
|
|
|
485,972
|
|
|
|
885,989
|
|
|
|
702,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF THE YEAR (Note 29)
|
|
W
|
485,972
|
|
|
W
|
885,989
|
|
|
W
|
1,011,467
|
|
|
$
|
801,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-13
SK
TELECOM CO., LTD. AND SUBSIDIARIES
YEARS
ENDED DECEMBER 31, 2006, 2007 AND 2008
SK Telecom Co., Ltd. (SK Telecom) was incorporated
in March 1984 under the laws of Korea to engage in providing
cellular telephone communication services in the Republic of
Korea. SK Telecom Co., Ltd. and its subsidiaries (the
Company) mainly provide wireless telecommunications
in the Republic of Korea and recently acquired foreign wireless
telecommunications operators in Vietnam, Mongolia, and the
United States of America. The Companys common shares and
depositary receipts (DRs) are listed on the Stock Market of
Korea Exchange (formerly Korea Stock Exchange) and
the New York and London Stock Exchanges, respectively. As of
December 31, 2008, the Companys total issued shares
are held by the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of
|
|
|
Total Shares
|
|
|
|
Shares
|
|
|
Issued (%)
|
|
|
SK Group
|
|
|
18,748,452
|
|
|
|
23.09
|
|
POSCO
|
|
|
2,341,569
|
|
|
|
2.88
|
|
Institutional investors and other minority stockholders
|
|
|
51,395,994
|
|
|
|
63.30
|
|
Treasury stock
|
|
|
8,707,696
|
|
|
|
10.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,193,711
|
|
|
|
100.00
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
The consolidated financial statements of the Company have been
prepared in conformity with accounting principles generally
accepted in the Republic of Korea. Significant accounting
policies followed in preparing the accompanying consolidated
financial statements are summarized as follows:
a. Basis
of Presentation
The Company maintains its official accounting records in Korean
won and prepares statutory consolidated financial statements in
Korean language (Hangul) in conformity with the accounting
principles generally accepted in the Republic of Korea
(Korean GAAP). Certain accounting principles applied
by the Company that conform with financial accounting standards
and accounting principles in the Republic of Korea may not
conform with accounting principles generally accepted in other
countries. Accordingly, these consolidated financial statements
are intended for use by those who are informed about Korean
accounting principles and practices. The accompanying
consolidated financial statements have been condensed,
restructured and translated into English with certain expanded
descriptions from the Korean language financial statements.
Certain information included in the Korean language financial
statements, but not required for a fair presentation of the
Companys financial position, results of operations,
changes in stockholders equity or cash flows, is not
presented in the accompanying consolidated financial statements.
The accompanying consolidated financial statements are stated in
Korean won, the currency of the country in which the Company is
incorporated and operates. The translation of Korean won amounts
into U.S. dollar amounts is included solely for the
convenience of readers of financial statements and has been made
at the rate of W1,262.00 to US$1.00, the Noon
Buying Rate in the City of New York for cable transfers in
Korean won as certified for customs purposes by the Federal
Reserve Bank of New York on the last business day of the period
ended December 31, 2008. Such translations into
U.S. dollars should not be construed as representations
that the Korean won amounts could be converted into
U.S. dollars at that or any other rate.
b. Principles
of Consolidation
The consolidated financial statements include the accounts of SK
Telecom and the following controlled subsidiaries as of
December 31, 2006, 2007 and 2008. Controlled subsidiaries
include (a) majority-owned entities
F-14
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
by SK Telecom or its controlled subsidiaries and (b) other
entities where SK Telecom or its controlled subsidiaries own
more than 30% of total outstanding common stock and is the
largest stockholder. Meanwhile, if the total assets of the
controlled subsidiaries at the beginning of fiscal year were
less than W7 billion, those investee are
excluded and accounted for using equity method in accordance
with Korean GAAP. All significant intercompany balances and
transactions have been eliminated in the consolidation
procedures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year of
|
|
|
|
|
Ownership Percentage (%)
|
|
Subsidiary
|
|
Establishment
|
|
|
Primary Business
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
SK Broadband Co., Ltd. (formerly hanarotelecom incorporated)
|
|
|
1997
|
|
|
Telecommunication services
|
|
|
4.8
|
|
|
|
4.8
|
|
|
|
43.42
|
|
SK Communications Co., Ltd.
|
|
|
1999
|
|
|
Internet website services
|
|
|
87.08
|
|
|
|
65.71
|
|
|
|
65.71
|
|
SK Telink Co., Ltd.
|
|
|
1998
|
|
|
Telecommunication services
|
|
|
90.77
|
|
|
|
90.77
|
|
|
|
90.77
|
|
SK Wyverns Baseball Club Co., Ltd.
|
|
|
2000
|
|
|
Business related sports
|
|
|
99.99
|
|
|
|
99.99
|
|
|
|
99.99
|
|
PAXNet Co., Ltd.
|
|
|
1999
|
|
|
Internet website services
|
|
|
59.74
|
|
|
|
59.74
|
|
|
|
59.74
|
|
F&U Credit information Co., Ltd. (formerly Global Credit
& information Corp)
|
|
|
1998
|
|
|
Credit and collection services
|
|
|
50.00
|
|
|
|
50.00
|
|
|
|
50.00
|
|
Loen Entertainment, Inc. (formerly Seoul Records, Inc.)
|
|
|
1982
|
|
|
Release of music disc
|
|
|
60.00
|
|
|
|
60.00
|
|
|
|
63.48
|
|
TU Media Corp.
|
|
|
2003
|
|
|
Satellite broadcasting services
|
|
|
29.58
|
|
|
|
32.70
|
|
|
|
44.15
|
|
IHQ, Inc.
|
|
|
1962
|
|
|
Business related entertainment
|
|
|
34.08
|
|
|
|
37.09
|
|
|
|
37.09
|
|
Ntreev Soft Co., Ltd.
|
|
|
2003
|
|
|
Game software
|
|
|
51.00
|
|
|
|
66.70
|
|
|
|
63.70
|
|
Commerce Planet Co., Ltd.
|
|
|
1997
|
|
|
Online shopping mall operation agency
|
|
|
|
|
|
|
100.00
|
|
|
|
100.00
|
|
The First Music Investment Fund of SK-PVC
|
|
|
2005
|
|
|
Investment association
|
|
|
99.00
|
|
|
|
99.00
|
|
|
|
99.00
|
|
The Second Music Investment Fund of SK-PVC
|
|
|
2005
|
|
|
Investment association
|
|
|
99.00
|
|
|
|
99.00
|
|
|
|
99.00
|
|
SK-KTB Music Investment Fund
|
|
|
2005
|
|
|
Investment association
|
|
|
99.00
|
|
|
|
99.00
|
|
|
|
99.00
|
|
IMM Cinema Fund
|
|
|
2005
|
|
|
Investment association
|
|
|
60.84
|
|
|
|
72.24
|
|
|
|
72.24
|
|
Michigan Global Cinema Fund
|
|
|
2006
|
|
|
Investment association
|
|
|
36.36
|
|
|
|
45.45
|
|
|
|
45.45
|
|
SK i-media Co., Ltd.
|
|
|
2006
|
|
|
Game software
|
|
|
60.00
|
|
|
|
60.00
|
|
|
|
100.00
|
|
CU Media, Inc. (formerly YTN Media, Inc)
|
|
|
2000
|
|
|
Broadcasting services
|
|
|
51.42
|
|
|
|
51.42
|
|
|
|
52.52
|
|
Konan Technology
|
|
|
1999
|
|
|
Multimedia contents
|
|
|
7.51
|
|
|
|
29.49
|
|
|
|
29.49
|
|
Broadband Media Co., Ltd. (formerly hanaromedia incorporated)
|
|
|
1997
|
|
|
Multimedia contents
|
|
|
|
|
|
|
|
|
|
|
100.00
|
|
HanaroDream Incorporated
|
|
|
2001
|
|
|
Internet website services
|
|
|
|
|
|
|
|
|
|
|
36.03
|
|
Broadband D&M Co., Ltd. (formerly hanaro Realty
Development & Management Co., Ltd.)
|
|
|
1998
|
|
|
Facilities Maintenance
|
|
|
|
|
|
|
|
|
|
|
100.00
|
|
Broadband CS Co., Ltd. (formerly hanaro Customer Service, Inc.)
|
|
|
1998
|
|
|
Telemarketing Service
|
|
|
|
|
|
|
|
|
|
|
100.00
|
|
Etoos Co., Ltd.
|
|
|
2008
|
|
|
Internet Education Service
|
|
|
|
|
|
|
|
|
|
|
100.00
|
|
K-net Culture
and Contents Venture Fund
|
|
|
2008
|
|
|
Investment association
|
|
|
|
|
|
|
|
|
|
|
59.00
|
|
Benex Digital Cultural Contents Fund
|
|
|
2008
|
|
|
Investment association
|
|
|
|
|
|
|
|
|
|
|
39.84
|
|
Benex Focus Limited Partnership II
|
|
|
2008
|
|
|
Investment association
|
|
|
|
|
|
|
|
|
|
|
66.67
|
|
Open Innovation Fund
|
|
|
2008
|
|
|
Investment association
|
|
|
|
|
|
|
|
|
|
|
98.52
|
|
SK Telecom China Co., Ltd.
|
|
|
2002
|
|
|
Telecommunication services
|
|
|
100.00
|
|
|
|
100.00
|
|
|
|
100.00
|
|
ULand Company Ltd.
|
|
|
2004
|
|
|
Telecommunication services
|
|
|
100.00
|
|
|
|
100.00
|
|
|
|
100.00
|
|
SKT Vietnam PTE., Ltd.
|
|
|
2000
|
|
|
Telecommunication services
|
|
|
73.32
|
|
|
|
73.32
|
|
|
|
73.32
|
|
SKT Americas, Inc. (formerly SK Telecom International Inc.)
|
|
|
1995
|
|
|
Internet website services
|
|
|
100.00
|
|
|
|
100.00
|
|
|
|
100.00
|
|
SK Telecom Advanced Tech & Service Center
|
|
|
2006
|
|
|
Mobile handset services
|
|
|
100.00
|
|
|
|
100.00
|
|
|
|
100.00
|
|
Cyworld China Holdings Limited
|
|
|
2006
|
|
|
Internet website services
|
|
|
|
|
|
|
100.00
|
|
|
|
100.00
|
|
SK Telecom China Holdings Co., Ltd.
|
|
|
2007
|
|
|
Internet website services
|
|
|
|
|
|
|
100.00
|
|
|
|
100.00
|
|
Centurion IT Investment Association
|
|
|
2001
|
|
|
Investment association
|
|
|
37.50
|
|
|
|
|
|
|
|
|
|
SK Telecom USA Holdings, Inc.
|
|
|
2005
|
|
|
Telecommunication services
|
|
|
100.00
|
|
|
|
100.00
|
|
|
|
|
|
Helio, Inc & LLC
|
|
|
2005
|
|
|
Mobile handset services
|
|
|
48.08
|
|
|
|
64.86
|
|
|
|
|
|
AirCross Co., Ltd.
|
|
|
2000
|
|
|
Advertising agency
|
|
|
38.10
|
|
|
|
100.00
|
|
|
|
|
|
SK Cyberpass, Inc.
|
|
|
2001
|
|
|
International telephone call services
|
|
|
70.54
|
|
|
|
70.54
|
|
|
|
|
|
F-15
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Effective July 1, 2006, IHQ, Inc. and its subsidiary, CU
Media, Inc. (formerly YTN Media, Inc) were included in the
consolidation of the accompanying financial statements as the
Company owned more than 30% of total outstanding common stock
and became the largest stockholder.
During the year ended December 31, 2007, TU Media Corp.,
Commerce Planet Co., Ltd., Michigan Global Cinema Fund and Konan
Technology became the controlled subsidiaries of the Company, as
the Company owns majority ownership interest or more than 30% of
total outstanding common stock and is the largest stockholder
other than Konan Technology. Konan Technology is owned by SK
Communications Co., Ltd. by 29.49% as of December 31, 2008.
As SK Communications Co., Ltd. has call option to acquire all
other stockholders common stocks and the call option are
exercisable at little or no economic cost, which is regarded as
de facto control of Konan Technology, Konan Technology was
included in consolidation even though the Companys
ownership interest is below 30%.
Effective January 1, 2007, Ntreev Soft Co., Ltd. and SK
i-media Co., Ltd. were included in the consolidation of the
accompanying consolidated financial statements as their total
assets at the beginning of that fiscal year were more than
W7 billion, in accordance with Korean GAAP.
Effective January 1, 2007, Centurion IT investment
Association was excluded in the consolidation of the
accompanying consolidated financial statements as it was
dissolved on February 28, 2008. It was accounted for using
the equity method of accounting from January 1, 2007.
Effective April 1, 2008, the Company acquired an additional
91,406,249 common shares of SK Broadband Co., Ltd. (formerly
hanarotelecom incorporated) which increased the Companys
ownership from 4.6% to 43.4%. As a result, SK Broadband Co.,
Ltd. and its subsidiaries, Broadband Media Co., Ltd., Hanaro
Dream Incorporated, Broadband D&M Co., Ltd. and Broadband
CS Co., Ltd., were included in the consolidation of accompanying
financial statements as the Company owned more than 30% of total
outstanding common stock and became the largest stockholder.
For the year ended December 31, 2008, Etoos Co., Ltd, a
newly established by SK Communications was included in the
consolidation.
During the year ended December 31, 2008, Benex Digital
Cultural Contents Fund, Benex Focus Limited Partnership II,
K-net Culture
and Contents Venture Fund and Open Innovation Fund became the
controlled subsidiaries of the Company, as the Company owns
majority ownership interest or more than 30% of total
outstanding common stock and is the largest stockholder.
Effective January 1, 2008, SK Telecom Advanced
Tech & Service Center, Cyworld China Holdings Limited
and SK Telecom China Holdings Co., Ltd. were included in the
consolidation of accompanying financial statements as its total
assets at the beginning of that fiscal year were more than
W7 billion, in accordance with Korean GAAP.
For the year ended December 31, 2008, SK Telecom USA
Holdings, Inc. which was incorporated to manage the
Companys investment to Helio LLC in 2005 was fully
liquidated. Meanwhile, for the year ended December 31,
2008, the equity interest in Helio held by SK Telecom USA
Holding, Inc. were exchanged into the equity interest in Virgin
mobile USA Inc. As a result, Helio Inc & LLC was
excluded from the consolidation.
Effective January 1, 2008, SK Cyberpass, Inc. was excluded
from the consolidation as its total assets at the beginning of
that fiscal year were less than
W7 billion, in accordance with Korean GAAP.
Effective January 1, 2008, Aircross Co., Ltd. was excluded
from the consolidation as it was liquidated in March 2009.
c. Use
of Estimates
The preparation of consolidated financial statements in
conformity with Korean GAAP requires management to make
estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities
F-16
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and the disclosure of contingent assets and liabilities at the
dates of the consolidated balance sheets, and the reported
amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates.
d. Cash
Equivalents
Cash equivalents are highly liquid investments and short term
financial instruments, which are readily convertible without
significant transaction cost, do not have significant risk from
changes in interest rates, and with original maturities of three
months or less.
e. Allowance
for Doubtful Accounts
Allowance for doubtful accounts is provided based on the
estimated collectability of individual accounts and historical
bad debt experience.
Details of changes in the allowance for doubtful accounts
receivable trade for 2006, 2007 and 2008 are as
follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Beginning balance
|
|
W
|
133,499
|
|
|
W
|
106,737
|
|
|
W
|
93,551
|
|
Write-offs
|
|
|
(90,780
|
)
|
|
|
(90,475
|
)
|
|
|
(50,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
42,719
|
|
|
|
16,262
|
|
|
|
43,486
|
|
Provision for doubtful accounts receivable-trade
|
|
|
61,457
|
|
|
|
48,835
|
|
|
|
62,973
|
|
Provision for doubtful accounts receivable-trade for the
discontinued operation
|
|
|
|
|
|
|
22,604
|
|
|
|
|
|
Increase (decrease) due to the changes in consolidated
subsidiaries
|
|
|
2,561
|
|
|
|
5,850
|
|
|
|
43,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
W
|
106,737
|
|
|
W
|
93,551
|
|
|
W
|
150,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
f. Inventories
Inventories are stated at the acquisition cost using the
following methods:
|
|
|
Assets
|
|
Methods
|
|
E-commerce
inventories
|
|
Moving average method
|
Replacement units for wireless telecommunication facilities and
supplies for sales promotion
|
|
Moving average method
|
Wireless device
|
|
FIFO
|
Books and CDs
|
|
FIFO
|
During the year, perpetual inventory systems are used to value
inventories, which are adjusted to physical inventory counts
performed at the end of the year. When the market value of
inventories is less than the acquisition cost, carrying amount
is reduced to the market value and any difference is charged to
current operations as operating expenses. A valuation loss of
W168 million and
W584 million was recorded for the years
ended December 31, 2006, 2007, respectively, and a reversal
of allowance for inventory valuation loss of
W168 million was recorded for the year
ended December 31, 2008.
g. Securities
(excluding securities accounted for using the equity method of
accounting)
Debt and equity securities are initially recorded at their
acquisition costs (fair value of consideration paid) including
incidental cost incurred in connection with acquisition of the
related securities and classified into trading,
F-17
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
available-for-sale and held-to-maturity (debt only) securities
depending on the acquisition purpose and nature. The acquisition
cost of the equity securities acquired by exercising a
conversion right is the carrying amount of the convertible bonds
exchanged. However, if those newly acquired equity securities
are marketable securities in an active trading market, the
acquisition cost of such equity securities is the market value
of those equity securities at the acquisition date and the
difference between the market value of the newly acquired equity
securities and the carrying amount of the exchanged convertible
bonds is charged to the current operation as gain or loss on
conversion.
Trading securities are stated at fair value with gains or losses
on valuation reflected in current operations.
Securities classified as available-for-sale are reported at fair
value. Unrealized gains or losses on valuation of
available-for-sale securities are included in accumulated other
comprehensive income (loss) and the unrealized gains or losses
are reflected in net income when the securities are sold or if
there is an objective evidence of impairment such as bankruptcy
of investees. Equity securities are stated at acquisition cost
if fair value cannot be reliably measured.
Held-to-maturity securities are presented at acquisition cost
after premiums or discounts are amortized or accreted,
respectively. The Company recognizes write-downs resulting from
declines in the fair value below its book value on the balance
sheet date if there is objective evidence of impairment. The
related write-downs are recorded as a loss on impairment of
investment securities.
Trading securities are presented in the current asset section of
the balance sheet, and available-for-sales and held-to-maturity
securities are presented in the current asset section of the
balance sheet if their maturities are within one year; otherwise
such securities are recorded in the non-current section of the
balance sheet.
h. Equity
Securities Accounted for Using the Equity Method of
Accounting
Investment securities of affiliated companies, in which the
Company has the ability to exercise significant influence, are
carried using the equity method of accounting, whereby the
Companys initial investment is recorded at cost and the
carrying value is subsequently increased or decreased to reflect
the Companys portion of stockholders equity of the
investee. Differences between the acquisition cost and net asset
fair value of the investee are amortized over 5 to 20 years
using the straight-line method. When applying the equity method
of accounting, unrealized inter-company gains and losses are
eliminated. In addition, the Company provides for additional
losses for those investments accounted for using the equity
method that are reduced to zero to the extent that the Company
has other investment assets related to the equity method
investees.
Assets and liabilities of foreign-based companies accounted for
using the equity method are translated at current rate of
exchange at the balance sheet date while profit and loss items
in the statement of earnings are translated at average rate and
capital account at historical rate. The translation gains and
losses arising from collective translation of the foreign
currency financial statements of foreign-based companies are
offset and the balance is remained as accumulated other
comprehensive income (loss) in the Companys
stockholders equity.
Under the equity method of accounting, the Company does not
record its share of losses of an affiliate when such losses
would make the Companys investment in such entity less
than zero unless the Company has guaranteed obligations of the
investee or is otherwise committed to provide additional
financial support. The Company provides for additional losses
for these investments accounted for using the equity method that
are reduced to zero to the extent that the Company has other
investment assets related to the equity method investees. In
addition, when the Companys share of equity interest in
the equity method investees increases as a result of capital
transactions of the investees with (or without) consideration,
the increase in the Companys proportionate shares in the
investees are treated as goodwill or negative goodwill and when
the Companys share of equity interest in the equity method
investees decrease as a result of capital transactions of the
investees with (or without) consideration, the decrease in the
Companys proportionate shares in the investees are
accounted for as gain or loss on disposal.
F-18
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
i. Troubled
Debt Restructuring
In case that contractual terms such as the face amount, interest
rate, or maturity are changed to alleviate the debtors
burdens in accordance with an agreement between the creditor and
the debtor, initiation of corporate reorganization procedures
under court trustee or under debtors management, the
Company recognizes the restructured receivables at present value
of the expected future cash flows discounted by the reasonable
interest rate and amortizes the difference between principal
amount and present value to interest income using the effective
interest rate method.
j. Valuation
of Long-term Accounts Receivable Other
Long-term accounts receivable are stated at the present value of
the expected future cash flows. Imputed interest amounts are
recorded in present value discount accounts which are deducted
directly from the related nominal receivable balances. Such
imputed interest is included in operations using the effective
interest rate method over the collection period.
k. Property
and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Major renewals and betterments, which prolong the
useful life or enhance the value of assets, are capitalized;
expenditures for maintenance and repairs are charged to expense
as incurred.
Depreciation is computed using the declining balance method
(except for buildings and structures acquired on or after
January 1, 1995 which are depreciated using straight-line
method) over the estimated useful lives of the related assets as
follows:
|
|
|
|
|
|
|
Assets
|
|
Depreciation Method
|
|
Useful Lives (Years)
|
|
|
Buildings and structures
|
|
Declining balance method (straight-line method)
|
|
|
15
~
50
|
|
Machinery
|
|
Declining balance method
|
|
|
3
~
9
|
|
Other
|
|
Declining balance method
|
|
|
3
~
5
|
|
Interest expenses and other financing charges for borrowings
related to the manufacture or construction of property and
equipment are charged to current operations as incurred.
l. Intangible
Assets
Intangible assets are stated at cost less amortization computed
using the straight-line method over 2 to 20 years.
The Company capitalizes the cost of internal-use software which
has a useful life in excess of one year. Capitalized
internal-use software costs are amortized using the
straight-line method over 5 years and are recorded in
intangible assets.
m. Government
Subsidy
Government subsidy, which is used for the acquisition of certain
assets, is accounted for as a deduction from the acquisition
cost of the acquired assets. Such subsidy amount is offset
against the depreciation or amortization of the acquired assets
during such assets useful life. Government subsidy, which
is required to be repaid, is recorded as a liability in the
balance sheet. Government subsidy with no repayment obligation,
which is used to purchase a designated asset or to develop a
certain technology, is presented as a deduction of the related
asset and is amortized against the depreciation or amortization
expense of the related asset. Government subsidy, contributed to
compensate for specific expenses, is offset against the related
expenses as incurred.
F-19
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
n. Impairment
Losses
When the recoverable amount of assets (that are not recorded at
fair value) including investment assets (except for trading and
available-for-sale investments in listed companies), property
and equipment, and intangible assets are significantly less than
the carrying value due to obsolescence, physical damage, decline
in market value or other causes, the carrying value is reduced
to the recoverable amount and any difference is charged to
current operation as an impairment losses.
o. Convertible
Bonds and Bonds with Stock Purchase Warrants
The proceeds from issuance of convertible bonds are allocated
between the conversion rights or warrant rights and the debt
issued; the portion allocable to the conversion rights is
accounted for as capital surplus with a corresponding conversion
right adjustment which is deducted from the related bonds. Such
conversion right adjustment is amortized to interest expense
using the effective interest rate method over the redemption
period of the convertible bonds. The portion allocable to the
conversion rights is measured by deducting the present value of
the debt at time of issuance from the gross proceeds from
issuance of convertible bonds, with the present value of the
debt being computed by discounting the expected future cash
flows (including call premium, if any) using the effective
interest rate applied to ordinary or straight debt of the
Company at the issuance date.
p. Discounts
on Bonds
Discounts on bonds are amortized to interest expense using the
effective interest rate method over the redemption period of the
bonds.
q. Valuation
of Long-term Payables
Long-term payables resulting from long-term installment
transactions are stated at present value of the expected future
cash flows. Imputed interest amounts are recorded in present
value discount accounts which are deducted directly from the
related nominal payable balances. Such imputed interest is
included in operations using the effective interest rate method
over the redemption period.
r. Provisions,
Contingent Liabilities and Contingent Assets
The Company recognizes a provision when i) it has a present
obligation as a result of a past event, ii) it is probable
that a disbursement of economic resources will be required to
settle the obligation, and iii) a reliable estimate can be
made of the amount of the obligation (see Note 26). When a
possible range of loss in connection with a probable loss
contingency as of the balance sheet date is estimable with
reasonable certainty, and some amount within that range appears
at the time to be a better estimate than any other amount within
the range, the Company accrues such amount. When no amount
within the range appears to be a better estimate than any other
amount, the minimum amount in that range is recorded.
The Company does not recognize the following contingent
obligations as liabilities:
|
|
|
|
|
Possible obligations related to past events, for which the
existence of a liability can only be confirmed upon occurrence
of uncertain future event or events outside the control of the
Company.
|
|
|
|
Present obligations arising from past events or transactions,
for which i) a disbursement of economic resources to
fulfill such obligations is not probable or ii) a
disbursement of economic resources is probable, but the related
amount cannot be reasonably estimated.
|
In addition, the Company does not recognize potential assets
related to past events or transactions, for which the existence
of an asset or future benefit can only be confirmed upon
occurrence of uncertain future event or events outside the
control of the Company.
F-20
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
s. Accrued
Severance Indemnities
In accordance with the policies of the Company, all employees
with more than one year of service are entitled to receive
severance indemnities, based on length of service and rate of
pay, upon termination of their employment. Accruals for
severance indemnities are recorded to approximate the amount
required to be paid if all employees were to terminate at the
balance sheet date.
SK Telecom and certain domestic subsidiaries have deposits with
insurance companies to fund the portion of the employees
severance indemnities which is in excess of the tax deductible
amount allowed under the Corporate Income Tax Law, in order to
take advantage of the additional tax deductibility for such
funding. Such deposits with outside insurance companies, where
the beneficiaries are their employees, totaling
W28,868 million,
W45,878 million and
W68,559 million as of December 31,
2006, 2007 and 2008, respectively, are deducted from accrued
severance indemnities.
In accordance with the Korean National Pension Fund Law, SK
Telecom and its domestic subsidiaries transferred a portion of
its accrued severance indemnities to the National Pension Fund
through March 1999. Such transfers, amounting to
W91 million,
W86 million and
W27 million as of December 31, 2006,
2007 and 2008, respectively, are deducted from accrued severance
indemnities.
Effective March 31, 2006, SK Telecom changed its policy for
the severance indemnities applicable to those employees who
joined SK Telecom before or on December 31, 2002 from
cumulative method, where employees are entitled to get paid more
than one month of salary for each year depending on the length
of service, to simple multiplier method, where employees are
paid one month of salary for each year regardless of their
service period in accordance with the resolution of SK
Telecoms joint labor-management conference held on
March 16, 2006. As a result of such policy change, SK
Telecom distributed early settlements to those eligible
employees on their accumulated severance indemnities as of
March 31, 2006 on a mandatory basis, and paid the
additional bonuses of W125,890 million for
those employees who received the mandatory distribution for
their early settlement as compensation for those employees.
The Company recorded such compensation costs as special
severance indemnities in other expenses for the year ended
December 31, 2006. In addition, SK Telecom executed the
early retirement program and the related special bonus of
W18,131 million were paid to eligible
employees and accounted for as special severance indemnities in
other expenses for the year ended December 31, 2006.
Changes in accrued severance indemnities for 2006, 2007 and 2008
are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Beginning net balance
|
|
W
|
71,284
|
|
|
W
|
22,284
|
|
|
W
|
44,322
|
|
Provision
|
|
|
47,370
|
|
|
|
44,233
|
|
|
|
93,094
|
|
Payments to employees
|
|
|
(262,948
|
)
|
|
|
(13,732
|
)
|
|
|
(107,037
|
)
|
Net increase due to the changes in consolidated subsidiaries
|
|
|
4,010
|
|
|
|
6,291
|
|
|
|
44,718
|
|
Changes in deposits for severance indemnities
|
|
|
162,568
|
|
|
|
(14,754
|
)
|
|
|
(21,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending net balance
|
|
W
|
22,284
|
|
|
W
|
44,322
|
|
|
W
|
53,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance :
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued severance indemnities
|
|
W
|
51,243
|
|
|
W
|
90,286
|
|
|
W
|
122,401
|
|
Deposits with insurance companies
|
|
|
(28,868
|
)
|
|
|
(45,878
|
)
|
|
|
(68,559
|
)
|
National Pension Fund
|
|
|
(91
|
)
|
|
|
(86
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance
|
|
W
|
22,284
|
|
|
W
|
44,322
|
|
|
W
|
53,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
t. Accounting
for Leases
A lease is classified as a finance lease or an operating lease
depending on the extent of transfer to the Company of the risks
and rewards incidental to ownership. If a lease meets any one of
the following criteria, it is accounted for as a finance lease:
|
|
|
|
|
The lease transfers ownership of the asset to the lessee by the
end of the lease term;
|
|
|
|
The lessee has the option to purchase the asset at a bargain
price and it is certain that the option will be exercised;
|
|
|
|
The lease term is for the major part (75% or more) of the
economic life of the asset even if title is not transferred;
|
|
|
|
At the date of lease commencement, the present value of the
minimum lease payments amounts to at least substantially all
(90% or more) of the fair value of the leased asset; or
|
|
|
|
The leased assets are of such a specialized nature that only the
lessee can use them without major modifications.
|
All other leases are treated as operating leases.
Assets and liabilities related to finance leases are recorded as
property and equipment and obligations under finance leases,
respectively, and the related interest is calculated using the
effective interest rate method and charged to expense. For
operating leases, the future minimum lease payments are expensed
ratably over the lease term while contingent rentals are
expensed as incurred.
u. Research
and Development Costs
The Company charges substantially all research and development
costs to expense as incurred. The Company incurred internal
research and development costs of
W211,961 million,
W218,652 million and
W226,714 million for the years ended
December 31, 2006, 2007 and 2008, respectively, and
external research and development costs of
W67,021 million,
W74,388 million and
W72,993 million for the years ended
December 31, 2006, 2007 and 2008, respectively.
v. Foreign-based
Operations Translation Adjustment
In translating the foreign currency financial statements of the
Companys overseas subsidiaries into Korean won, the
Company presents the translation gain or loss as a foreign-based
operations translation adjustment in the accumulated other
comprehensive income (loss) section of the balance sheet. The
translation gain or loss arises from the application of
different exchange rates; the year-end rate for balance sheet
items except stockholders equity, the historical rate for
stockholders equity and the daily average rate for
statement of income items.
w. Accounting
for Foreign Currency Transactions and Translation
SK Telecom and its domestic subsidiaries maintain their accounts
in Korean won. Transactions in foreign currencies are recorded
in Korean won based on the prevailing rate of exchange at the
dates of transactions. As allowed under Korean GAAP, monetary
assets and liabilities denominated in foreign currencies are
translated in the accompanying consolidated financial statements
at the Base Rates announced by Seoul Money Brokerage Services,
Ltd. on the balance sheet dates, which, for U.S. dollars,
were W929.60=US$1,
W938.20=US$1 and
W1,257.50=US$1 at December 31, 2006, 2007
and 2008, respectively. The resulting gains and losses arising
from the translation or settlement of such assets and
liabilities are included in current operations.
F-22
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
x. Derivative
Instruments
The Company records rights and obligations arising from
derivative instruments as assets and liabilities, which are
stated at fair value. The gains and losses that result from the
change in the fair value of derivative instruments are reported
in current earnings. However, for derivative instruments
designated as hedging the exposure of variable cash flows, the
effective portions of the gains or losses on the hedging
instruments are recorded as accumulated other comprehensive
income (loss) and credited/charged to operations at the time the
hedged transactions affect earnings, and the ineffective
portions of the gains or losses are credited/charged immediately
to operations.
y. Revenue
Recognition
The Company recognizes revenue when they are realized or
realizable and earned. Revenues are realized or realizable and
earned when the Company has persuasive evidence of an
arrangement, the goods have been delivered or the services have
been rendered to the customer, sales price is fixed or
determinable and collectability is reasonably assured.
The revenue of the Company is principally derived from
telecommunication service including data services and wireless
device sales. Telecommunication service consists of fixed
monthly charges, usage-related charges and non-refundable
activation fees. Fixed monthly charges are recognized in the
period earned. Usage-related charges are recognized at the time
services are rendered. Non-refundable activation fees are
recognized when the activation service was performed.
Meanwhile, the Company recognizes sales revenues on a gross
basis when the Company is the primary obligator in the
transactions with customers and if the Company merely acts an
agent for the buyer or seller from whom it earns a commission,
then sales revenues are recognized on a net basis.
SK Telecoms subsidiaries also sell products and
merchandises to customers and these sales are recognized at the
time products and merchandises are delivered.
z. Income
Taxes
Income tax expense is determined by adding or deducting the
total income tax and surtaxes to be paid for the current period
and the changes in deferred income tax assets and liabilities.
Deferred tax is recognized on differences between the carrying
amounts of assets and liabilities in the consolidated financial
statements and the corresponding tax bases used in the
computation of taxable profits. Deferred tax liabilities are
generally recognized for all taxable temporary differences with
some exceptions and deferred tax assets are recognized to the
extent that it is probable that taxable profits will be
available against which the deductible temporary differences can
be utilized. The carrying amount of deferred tax assets is
reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or
part of the assets to be recovered. Deferred income tax assets
and liabilities are classified into current and non-current
based on the classification of related assets or liabilities for
financial reporting purposes.
aa. Net
Income Per Share
Net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during the
period. Diluted net income per share of common stock is
calculated by dividing adjusted net income by adjusted weighted
average number of shares outstanding during the period, taking
into account the dilutive effect of stock option and convertible
bonds.
ab. Handset
Subsidies to Long-term Mobile Subscribers
Effective April 1, 2008, the Telecommunication Business Act
was revised to allow wireless carriers to provide handset
subsidies to customers without any restrictions. As a result,
the Company provides lump-sum handset
F-23
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
subsidies to customers who agree to use the Companys
service for the predetermined service period and the subsidies
are charged to commission paid as the related payments are made.
In case where the customers agree to use the Companys
service for the predetermined service period and purchase
handsets on installment basis, the subsidies are paid every
month over the installment period and the Company provides
provision for handset subsidies estimated to be paid based on
the historical experience (See note 26).
ac. Use
of Estimates
The Companys management makes reasonable estimates and
assumptions in preparing the financial statements in conformity
with accounting principles generally accepted in the Republic of
Korea. These estimates and assumptions can change according to
additional experiences, changes in circumstances, new
information and other and could differ from actual results.
ad. Reclassification
Certain reclassifications have been made in prior periods
financial statements to conform to classifications used in the
current period. Such reclassifications did not have an effect on
the previously reported net assets as of December 31, 2007
and 2006 or net income for the years then ended.
ae. Adoption
of New Statements of Korea Accounting Standards
(SKAS)
On January 1, 2006, the Company adopted SKAS No. 18
through No. 20. The adoption of such accounting standards
did not have an effect on the consolidated financial position of
the Company as of December 31, 2006 or the consolidated net
income of the Company for the year ended December 31, 2006.
On January 1, 2007, the Company adopted SKAS No. 11,
and No. 21 through No. 23, and No. 25. The
adoption of such accounting standards did not have an effect on
the consolidated financial position of the Company as of
December 31, 2007 or consolidated net income of the Company
for the year ended December 31, 2007. Details of primary
change due to such adoption of SKASs are as follows:
|
|
|
|
|
Pursuant to adoption of SKAS No. 21, Preparation and
Presentation of Financial Statements, certain amounts
classified as capital adjustments through 2006 are classified as
accumulated other comprehensive income (loss); such amounts
include unrealized gain/loss on available-for-sale securities,
equity in capital adjustments of affiliates and gain/loss on
valuation of derivative instruments. In addition, certain
amounts classified as investment assets through 2006 are
classified as other non-current assets; such amounts include
long-term loans, guarantee deposits, long-term deposits and
others. The accompanying consolidated balance sheets as of
December 31, 2005 and 2006, which are comparatively
presented, were reclassified in accordance with SKAS No. 21.
|
|
|
|
Pursuant to adoption of SKAS No. 25, Consolidated
Financial Statements, net income is allocated to majority
interest and minority interest. In addition, when a subsidiary
is purchased during the year, statement of income of the
subsidiary is included in the consolidation as though it had
been acquired at the beginning of the year, and pre-acquisition
earnings are presented as deduction at the bottom of the
consolidated statements of income. The accompanying consolidated
statements of income for the years ended December 31, 2005
and 2006, which are comparatively presented, were reclassified
in accordance with SKAS No. 25. In addition, in connection
with the Companys adoption of SKAS No. 25, the
Company also begun to present pre-acquisition cash flows of
subsidiaries as a separate deduction (addition) at the bottom of
the Companys consolidated statements of cash flows.
|
|
|
|
There is no significant change due to the adoption of SKAS
No. 11, No. 22 and No. 23.
|
The amended SKAS No. 25, Consolidated Financial
Statements, which is effective December 29, 2008,
clarifies that when the parents ownership interest in a
subsidiary is increased after control is obtained, the
F-24
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
difference between the consideration for additional acquisition
of interest and portion of net asset of subsidiary, which had
been previously recognized as capital surplus, should be
recognized as other capital adjustment if the difference is
negative amount and there is no related capital surplus earned
at previous transaction. As the amended SKAS No. 25,
Consolidated Financial Statements is applied
retroactively during the year ended December 31, 2008, the
2006 and 2007 financial statements presented comparatively are
restated, which results in the increase in capital surplus by
W16,072 million and
W31,146 million as of December 31,
2006 and 2007, respectively, and the decrease in other capital
adjustment by W16,072 million and
W31,146 million as of December 31,
2006 and 2007, respectively.
af. Discontinued
Operation
When a subsidiary is disposed during the year, the results of
its operations in the consolidated income statement are treated
as discontinued operation and should be presented as a single
item between income tax expenses for continuing operation and
net income.
On August 22, 2008, the Company disposed its investment in
Helio LLC which was incorporated to provide cellular telephone
communication service in the US to Virgin Mobile USA in
accordance with the agreement entered into on June 27,
2008. As a result, the operation of Helio LLC was presented as
discontinued operation.
And, the details from discontinued operation for the years ended
December 31, 2007 and 2008 are as following (In millions of
Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Revenue
|
|
W
|
|
|
|
W
|
154,805
|
|
|
W
|
116,607
|
|
Operating Expense
|
|
|
|
|
|
|
(446,348
|
)
|
|
|
(230,478
|
)
|
Other Income (expense)
|
|
|
|
|
|
|
(603
|
)
|
|
|
(15,917
|
)
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
109,579
|
|
Preacquisition net loss for subsidiary
|
|
|
|
|
|
|
242,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
W
|
(50,101
|
)
|
|
W
|
(20,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued operation for the years ended
December 31, 2007 and 2008 are as following (In millions of
Korean won)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Operating Activities
|
|
W
|
|
|
|
W
|
(38,749
|
)
|
|
W
|
(213,899
|
)
|
Investing Activities
|
|
|
|
|
|
|
(1,832
|
)
|
|
|
(51,631
|
)
|
Financing Activities
|
|
|
|
|
|
|
27,804
|
|
|
|
9,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
W
|
|
|
|
W
|
(12,777
|
)
|
|
W
|
(256,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meanwhile, total assets and liabilities related to discontinued
operation as of December 31, 2007 totaled
W224,583 million and
W160,968 million, respectively.
F-25
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories as of December 31, 2006, 2007 and 2008 consist
of the following (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Merchandise
|
|
W
|
1,167
|
|
|
W
|
42,787
|
|
|
W
|
17,032
|
|
Finished goods
|
|
|
2,282
|
|
|
|
4,054
|
|
|
|
4,079
|
|
Semi-finished goods
|
|
|
41
|
|
|
|
706
|
|
|
|
509
|
|
Raw materials
|
|
|
313
|
|
|
|
165
|
|
|
|
13
|
|
Supplies
|
|
|
16,782
|
|
|
|
3,733
|
|
|
|
14,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,585
|
|
|
|
51,445
|
|
|
|
35,738
|
|
Less allowance for valuation loss
|
|
|
(807
|
)
|
|
|
(4,393
|
)
|
|
|
(764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
W
|
19,778
|
|
|
W
|
47,052
|
|
|
W
|
34,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a. Short-term
Investment Securities
Short-term investment securities as of December 31, 2006,
2007 and 2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition Cost
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
at December 31,
|
|
|
at December 31,
|
|
|
Carrying Amount
|
|
|
|
2008
|
|
|
2008
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Trading securities(Note)
|
|
W
|
376,563
|
|
|
W
|
367,001
|
|
|
W
|
665,312
|
|
|
W
|
635,434
|
|
|
W
|
367,001
|
|
Current portion of long-term investment securities
|
|
|
7,545
|
|
|
|
5,912
|
|
|
|
335
|
|
|
|
101,209
|
|
|
|
5,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
384,108
|
|
|
W
|
372,913
|
|
|
W
|
665,647
|
|
|
W
|
736,643
|
|
|
W
|
372,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Note) |
|
The Companys trading securities are all beneficiary
certificates as of December 31, 2008, and the difference
between the fair value and acquisition cost was recorded in
other expenses as loss on valuation of short-term investment
securities. |
b. Long-term
Investment Securities
Long-term investment securities as of December 31, 2006,
2007 and 2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Available-for-sale equity securities
|
|
W
|
1,011,971
|
|
|
W
|
4,689,905
|
|
|
W
|
3,102,833
|
|
Available-for-sale debt securities
|
|
|
1,463,636
|
|
|
|
469,729
|
|
|
|
8,261
|
|
Held-to-maturity securities
|
|
|
146
|
|
|
|
94
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,475,753
|
|
|
|
5,159,728
|
|
|
|
3,111,207
|
|
Less current portion
|
|
|
(335
|
)
|
|
|
(101,209
|
)
|
|
|
(5,912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
W
|
2,475,418
|
|
|
W
|
5,058,519
|
|
|
W
|
3,105,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
b-(1). Available-for-sale
Equity Securities
Available-for-sale equity securities as of December 31,
2006, 2007 and 2008 are as follows (In millions of Korean won,
except for share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Carrying Amount
|
|
|
|
|
|
|
Ownership
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
(%)
|
|
|
Cost
|
|
|
Fair Value
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
(Investments in listed companies)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Chosunilbo Co., Ltd.
|
|
|
2,890,630
|
|
|
|
7.8
|
|
|
W
|
5,781
|
|
|
W
|
5,636
|
|
|
W
|
5,897
|
|
|
W
|
8,629
|
|
|
W
|
5,636
|
|
SK Broadband Co., Ltd. (formerly hanarotelecom incorporated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a
|
)
|
|
|
88,581
|
|
|
|
116,525
|
|
|
|
|
|
KRTnet Corporation
|
|
|
234,150
|
|
|
|
4.4
|
|
|
|
1,171
|
|
|
|
1,098
|
|
|
|
2,517
|
|
|
|
2,470
|
|
|
|
1,098
|
|
POSCO
|
|
|
2,481,310
|
|
|
|
2.8
|
|
|
|
332,662
|
|
|
|
942,898
|
|
|
|
766,725
|
|
|
|
1,426,753
|
|
|
|
942,898
|
|
DAEA TI Co., Ltd. (formerly Comas Interactive Co., Ltd.)
|
|
|
99,120
|
|
|
|
0.2
|
|
|
|
1,695
|
|
|
|
89
|
|
|
|
83
|
|
|
|
228
|
|
|
|
89
|
|
Extended Computing Environment Co., Ltd.
|
|
|
133,333
|
|
|
|
3.0
|
|
|
|
10
|
|
|
|
40
|
|
|
|
876
|
|
|
|
905
|
|
|
|
40
|
|
nTels Co., Ltd.
|
|
|
205,200
|
|
|
|
6.2
|
|
|
|
34
|
|
|
|
504
|
|
|
|
34
|
|
|
|
1,525
|
|
|
|
504
|
|
Qualcomm Inc.
|
|
|
55,805
|
|
|
|
0.1
|
|
|
|
2,756
|
|
|
|
2,514
|
|
|
|
|
|
|
|
2,060
|
|
|
|
2,514
|
|
China Unicom Ltd. (note b)
|
|
|
899,745,075
|
|
|
|
3.8
|
|
|
|
1,333,009
|
|
|
|
1,357,648
|
|
|
|
|
|
|
|
1,936,840
|
|
|
|
1,357,648
|
|
LG Powercomm Co., Ltd. (note c)
|
|
|
6,066,666
|
|
|
|
4.6
|
|
|
|
241,243
|
|
|
|
39,433
|
|
|
|
80,370
|
|
|
|
89,422
|
|
|
|
39,433
|
|
ZeroOne Interactive Co.,Ltd.(note d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,845
|
|
|
|
2,770
|
|
|
|
|
|
T-Entertainment Co., Ltd.
|
|
|
1,026,695
|
|
|
|
6.2
|
|
|
|
2,500
|
|
|
|
1,355
|
|
|
|
|
|
|
|
1,817
|
|
|
|
1,355
|
|
HB Entertainment Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,137
|
|
|
|
|
|
|
|
|
|
De Chocolate E&TF Co., Ltd.
|
|
|
709,219
|
|
|
|
2.7
|
|
|
|
1,000
|
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
660
|
|
C.C.S. Inc.
|
|
|
29,696
|
|
|
|
0.6
|
|
|
|
414
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
|
249
|
|
Medifron DBT Co., Ltd.
|
|
|
170,525
|
|
|
|
0.9
|
|
|
|
328
|
|
|
|
246
|
|
|
|
|
|
|
|
|
|
|
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sub-total
|
|
|
|
|
|
|
|
|
|
|
1,922,603
|
|
|
|
2,352,370
|
|
|
|
950,065
|
|
|
|
3,589,944
|
|
|
|
2,352,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Investments in non-listed companies)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SK C&C Co., Ltd. (note e)
|
|
|
6,000,000
|
|
|
|
30.0
|
|
|
|
501,652
|
|
|
|
676,716
|
|
|
|
|
|
|
|
1,037,604
|
|
|
|
676,716
|
|
Eonex Technologies Inc.
|
|
|
144,000
|
|
|
|
12.3
|
|
|
|
3,600
|
|
|
|
(note f
|
)
|
|
|
4,593
|
|
|
|
4,593
|
|
|
|
|
|
The Korea Economic Daily
|
|
|
2,585,069
|
|
|
|
13.8
|
|
|
|
13,964
|
|
|
|
(note g
|
)
|
|
|
13,964
|
|
|
|
13,964
|
|
|
|
13,964
|
|
Dreamline Corp.
|
|
|
1,520,373
|
|
|
|
8.9
|
|
|
|
16,160
|
|
|
|
(note h
|
)
|
|
|
|
|
|
|
|
|
|
|
8,519
|
|
Cheongsol
|
|
|
216,400
|
|
|
|
7.1
|
|
|
|
4,494
|
|
|
|
(note g
|
)
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
4,494
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
148,928
|
|
|
|
(note f, g
|
)
|
|
|
34,333
|
|
|
|
20,611
|
|
|
|
24,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sub-total
|
|
|
|
|
|
|
|
|
|
|
688,798
|
|
|
|
|
|
|
|
57,890
|
|
|
|
1,081,772
|
|
|
|
728,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Investments in funds)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
22,441
|
|
|
|
(note f
|
)
|
|
|
4,016
|
|
|
|
18,189
|
|
|
|
22,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sub-total
|
|
|
|
|
|
|
|
|
|
|
22,441
|
|
|
|
|
|
|
|
4,016
|
|
|
|
18,189
|
|
|
|
22,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
W
|
2,633,842
|
|
|
|
|
|
|
W
|
1,011,971
|
|
|
W
|
4,689,905
|
|
|
W
|
3,102,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a)
|
the first quarter of 2008, the Company acquired additional
91,406,249 shares of SK Broadband Co., Ltd. (formerly
hanarotelecom incorporated) common stock which increased the
Companys ownership from 4.6% to 43.4%. As the
Companys ownership in such investees increased to more
than 20% and the Company can exercise significant influence, the
investment in common stock of SK Broadband Co., Ltd. was
included in the consolidation of accompanying financial
statement.
|
|
(note b)
|
In accordance with the resolution of the Companys board of
directors on August 20, 2007, convertible bonds of China
Unicom Ltd. were converted into common stock and reclassified to
available-for sale equity securities from available-for-sale
debt securities. And, the related gain on conversion of
convertible bonds of W373,140 million was
recorded during the year ended December 31, 2007.
|
|
(note c)
|
As the common stocks of LG Powercomm Co., Ltd. were listed on
the stock Market of Korea Exchange during the year ended
December 31, 2008, the Company recorded the investment at
its market value as of December 31, 2008. In addition, as
the difference between the market value and carrying value of
the
|
F-27
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
investments is material and the market value is significantly
less than the acquisition cost over the long-term period, the
Company recorded W201,243 million of
impairment loss on investment securities during the year ended
December 31, 2008.
|
|
|
(note d)
|
During the year ended December 31, 2008, SK-KTB Music
Investment Fund, a subsidiary of the Company, sold 2,472,999
common shares of ZeroOne Interactive Co.,Ltd.
|
|
(note e)
|
The investment in common stock of SK C&C Co., Ltd. was
reclassified to available-for-sale securities from equity
securities accounted for using the equity method during the year
ended December 31, 2007, as SK C&C Co., Ltd. became
the ultimate parent company of the Company. The Company recorded
its investments in common stock of SK C&C Co., Ltd. at its
fair value, which was estimated with the assistance of an
outside professional valuation company using the present value
of expected future cash flows and the unrealized gain on
valuation of investments totals
W501,155 million (net of tax effect of
W190,093 million) and
W250,413 million (net of tax effect of
W79,947 million) as of December 31,
2007 and 2008, respectively.
|
|
|
(note f) |
Due to the impairment of the investment of Eonex Technologies
Inc. and others, the Company recorded
W17,486 million of impairment loss during
the year ended December 31, 2008.
|
|
|
(note g)
|
As a reasonable estimate of fair value could not be made, the
investment is stated at acquisition cost.
|
|
(note h)
|
The Company recorded its investment in common stock of Dreamline
Corp. at its fair value (W5,603 per share)
estimated using market approach and income approach valuation
method and related unrealized losses on valuation of the
investment are included in accumulated other comprehensive loss.
|
b-(2). Available-for-sale
Debt Securities
Available-for-sale debt securities as of December 31, 2006,
2007 and 2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Carrying Amount
|
|
|
|
Maturity
|
|
2008
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Public bonds
|
|
(note a)
|
|
W
|
1,260
|
|
|
W
|
51,313
|
|
|
W
|
51,353
|
|
|
W
|
1,260
|
|
Currency stabilization bonds
|
|
(note b)
|
|
|
|
|
|
|
49,894
|
|
|
|
49,713
|
|
|
|
|
|
Closed beneficiary certificates
|
|
Oct. 20, 2009
|
|
|
3,501
|
|
|
|
|
|
|
|
4,788
|
|
|
|
3,551
|
|
Bond-type beneficiary certificates
|
|
(note c)
|
|
|
3,000
|
|
|
|
5,072
|
|
|
|
360,641
|
|
|
|
1,868
|
|
Convertible bonds of China Unicom Ltd.
|
|
Jul. 5, 2009
|
|
|
|
|
|
|
1,276,703
|
|
|
|
|
|
|
|
|
|
Convertible bonds of Eonex Technologies, Inc.
|
|
Oct. 11, 2008
|
|
|
|
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
|
|
Convertible bonds of Empas Corp.
|
|
Oct. 18, 2009
|
|
|
|
|
|
|
78,670
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
|
|
2,134
|
|
|
|
984
|
|
|
|
2,234
|
|
|
|
1,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
9,895
|
|
|
|
1,463,636
|
|
|
|
469,729
|
|
|
|
8,261
|
|
Less current portion of available-for-sale debt securities
|
|
|
|
|
(7,544
|
)
|
|
|
(256
|
)
|
|
|
(101,209
|
)
|
|
|
(5,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term available-for-sale debt securities
|
|
|
|
W
|
2,351
|
|
|
W
|
1,463,380
|
|
|
W
|
368,520
|
|
|
W
|
2,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Interest income incurred from available-for-sale debt
securities for the years ended December 31, 2006, 2007 and
2008 were W7,991 million,
W4,800 million and
W5,226 million, respectively.
|
|
(note a)
|
The maturities of public bonds as of December 31, 2008 are
within 1 year for W159 million,
within 5 years for W1,089 million and
over 5 years for W12 million.
|
|
(note b)
|
Currency stabilization bonds were fully redeemed at their
maturities for the year ended December 31, 2008.
|
|
(note c)
|
The maturities of bond-type beneficiary certificates as of
December 31, 2008 are within 1 year.
|
b-(3). Held-to-maturity
Securities
Held-to-maturity securities as of December 31, 2006, 2007
and 2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition Cost at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Carrying Amount
|
|
|
|
Maturity
|
|
|
2008
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Public bonds
|
|
|
(note a
|
)
|
|
W
|
113
|
|
|
W
|
146
|
|
|
W
|
94
|
|
|
W
|
113
|
|
Less current portion of held-to-maturity securities
|
|
|
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term held-to-maturity securities
|
|
|
|
|
|
|
|
|
|
W
|
67
|
|
|
W
|
94
|
|
|
W
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Interest income incurred from held-to-maturity securities
for the years ended December 31, 2006, 2007 and 2008 were
W8 million,
W25 million and
W3 million, respectively.
|
|
(note a) |
The maturities of public bonds as of December 31, 2008 are
within 1 year for W1 million, within
5 years for W51 million and within
10 years for W61 million.
|
F-29
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
b-(4).
Changes in Unrealized Gains (Losses) on Valuation on Long-term
Investment Securities
The changes in unrealized gains (losses) on valuation on
long-term investment securities for the years ended
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
|
|
|
|
|
|
|
|
|
|
|
|
|
Transferred
|
|
|
Interest in Equity
|
|
|
|
|
|
|
Beginning
|
|
|
Increase/
|
|
|
to Realized
|
|
|
of Consolidated
|
|
|
Ending
|
|
|
|
Balance
|
|
|
(Decrease)
|
|
|
Gain (Loss)
|
|
|
Subsidiaries
|
|
|
Balance
|
|
|
Digital Chosunilbo Co., Ltd.
|
|
W
|
14
|
|
|
W
|
102
|
|
|
W
|
|
|
|
W
|
|
|
|
W
|
116
|
|
SK Broadband Co., Ltd. (formerly hanarotelecom incorporated)
|
|
|
(65,237
|
)
|
|
|
32,141
|
|
|
|
|
|
|
|
|
|
|
|
(33,096
|
)
|
KRTnet Corporation
|
|
|
1,475
|
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
1,346
|
|
POSCO
|
|
|
168,563
|
|
|
|
265,500
|
|
|
|
|
|
|
|
|
|
|
|
434,063
|
|
Comas Interactive Co., Ltd. (Formerly INNOTG Co., Ltd.)
|
|
|
(1,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,611
|
)
|
Extended Computing Environment Co., Ltd.
|
|
|
|
|
|
|
866
|
|
|
|
|
|
|
|
|
|
|
|
866
|
|
ZeroOne Interactive Co., Ltd.
|
|
|
|
|
|
|
(655
|
)
|
|
|
|
|
|
|
71
|
|
|
|
(584
|
)
|
HB Entertainment Co., Ltd.
|
|
|
56
|
|
|
|
(1,272
|
)
|
|
|
|
|
|
|
795
|
|
|
|
(421
|
)
|
LG Powercomm Co., Ltd.
|
|
|
(163,113
|
)
|
|
|
3,240
|
|
|
|
|
|
|
|
|
|
|
|
(159,873
|
)
|
Eonex Technologies Inc.
|
|
|
2,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,011
|
|
Public bonds
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Currency stabilization bonds
|
|
|
(217
|
)
|
|
|
906
|
|
|
|
(677
|
)
|
|
|
|
|
|
|
12
|
|
Convertible bonds of China Unicom Ltd.
|
|
|
|
|
|
|
319,648
|
|
|
|
|
|
|
|
|
|
|
|
319,648
|
|
Convertible bonds of Empas Corp.
|
|
|
|
|
|
|
33,820
|
|
|
|
|
|
|
|
(4,218
|
)
|
|
|
29,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
(58,059
|
)
|
|
|
654,163
|
|
|
|
(677
|
)
|
|
|
(3,352
|
)
|
|
|
592,075
|
|
Less tax effect (note a)
|
|
|
15,966
|
|
|
|
(179,894
|
)
|
|
|
186
|
|
|
|
895
|
|
|
|
(162,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
(42,093
|
)
|
|
W
|
474,269
|
|
|
W
|
(491
|
)
|
|
W
|
(2,457
|
)
|
|
W
|
429,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
|
|
|
|
|
|
|
|
|
|
|
|
|
Transferred
|
|
|
Interest in Equity
|
|
|
|
|
|
|
Beginning
|
|
|
Increase/
|
|
|
to Realized
|
|
|
of Consolidated
|
|
|
Ending
|
|
|
|
Balance
|
|
|
(Decrease)
|
|
|
Gain (Loss)
|
|
|
Subsidiaries
|
|
|
Balance
|
|
|
Digital Chosunilbo Co., Ltd.
|
|
W
|
116
|
|
|
W
|
2,731
|
|
|
W
|
|
|
|
W
|
|
|
|
W
|
2,847
|
|
SK Broadband Co., Ltd. (formerly hanarotelecom incorporated)
|
|
|
(33,096
|
)
|
|
|
27,944
|
|
|
|
|
|
|
|
|
|
|
|
(5,152
|
)
|
KRTnet Corporation
|
|
|
1,346
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
1,300
|
|
POSCO
|
|
|
434,063
|
|
|
|
660,028
|
|
|
|
|
|
|
|
|
|
|
|
1,094,091
|
|
DAEA TI Co., Ltd. (Formerly Comas Interactive Co., Ltd.)
|
|
|
(1,611
|
)
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
(1,466
|
)
|
Extended Computing Environment Co., Ltd.
|
|
|
866
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
895
|
|
nTels Co., Ltd.
|
|
|
|
|
|
|
1,490
|
|
|
|
|
|
|
|
|
|
|
|
1,490
|
|
Qualcomm Inc. Ltd.
|
|
|
|
|
|
|
(696
|
)
|
|
|
|
|
|
|
|
|
|
|
(696
|
)
|
China Unicom Ltd.
|
|
|
|
|
|
|
599,012
|
|
|
|
|
|
|
|
|
|
|
|
599,012
|
|
ZeroOne Interactive Co., Ltd.
|
|
|
(584
|
)
|
|
|
(1,147
|
)
|
|
|
|
|
|
|
189
|
|
|
|
(1,542
|
)
|
T-Entertainment Co., Ltd.
|
|
|
|
|
|
|
(682
|
)
|
|
|
|
|
|
|
74
|
|
|
|
(608
|
)
|
HB Entertainment Co., Ltd.
|
|
|
(421
|
)
|
|
|
421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LG Powercomm Co., Ltd.
|
|
|
(159,873
|
)
|
|
|
9,053
|
|
|
|
|
|
|
|
|
|
|
|
(150,820
|
)
|
SK C&C Co., Ltd.
|
|
|
|
|
|
|
691,248
|
|
|
|
|
|
|
|
|
|
|
|
691,248
|
|
Eonex Technologies Inc.
|
|
|
2,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,011
|
|
Public bonds
|
|
|
(4
|
)
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
(205
|
)
|
Currency stabilization bonds
|
|
|
12
|
|
|
|
(247
|
)
|
|
|
|
|
|
|
|
|
|
|
(235
|
)
|
Convertible bonds of China Unicom Ltd.
|
|
|
319,648
|
|
|
|
208,095
|
|
|
|
(527,743
|
)
|
|
|
|
|
|
|
|
|
Convertible bonds of Empas Corp.
|
|
|
29,602
|
|
|
|
|
|
|
|
(29,602
|
)
|
|
|
137
|
|
|
|
137
|
|
Beneficiary certificates
|
|
|
|
|
|
|
9,256
|
|
|
|
|
|
|
|
46
|
|
|
|
9,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
592,075
|
|
|
|
2,206,433
|
|
|
|
(557,345
|
)
|
|
|
446
|
|
|
|
2,241,609
|
|
Less tax effect (note a)
|
|
|
(162,847
|
)
|
|
|
(607,406
|
)
|
|
|
153,270
|
|
|
|
(13
|
)
|
|
|
(616,996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
429,228
|
|
|
W
|
1,599,027
|
|
|
W
|
(404,075
|
)
|
|
W
|
433
|
|
|
W
|
1,624,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
|
|
|
|
|
|
|
|
|
|
|
|
|
Transferred
|
|
|
Interest in Equity
|
|
|
|
|
|
|
Beginning
|
|
|
Increase/
|
|
|
to Realized
|
|
|
of Consolidated
|
|
|
Ending
|
|
|
|
Balance
|
|
|
(Decrease)
|
|
|
Gain (Loss)
|
|
|
Subsidiaries
|
|
|
Balance
|
|
|
Available-for-sales securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Chosunilbo Co., Ltd.
|
|
W
|
2,847
|
|
|
W
|
(2,992
|
)
|
|
W
|
|
|
|
W
|
|
|
|
W
|
(145
|
)
|
SK Broadband Co., Ltd. (formerly hanarotelecom incorporated)
|
|
|
(5,152
|
)
|
|
|
|
|
|
|
5,152
|
|
|
|
|
|
|
|
|
|
KRTnet Corporation
|
|
|
1,300
|
|
|
|
(1,373
|
)
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
POSCO
|
|
|
1,094,091
|
|
|
|
(483,855
|
)
|
|
|
|
|
|
|
|
|
|
|
610,236
|
|
DAEA TI Co., Ltd. (Formerly Comas Interactive Co., Ltd.)
|
|
|
(1,466
|
)
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,606
|
)
|
Extended Computing Environment Co., Ltd.
|
|
|
895
|
|
|
|
(865
|
)
|
|
|
|
|
|
|
|
|
|
|
30
|
|
nTels Co., Ltd.
|
|
|
1,490
|
|
|
|
(1,020
|
)
|
|
|
|
|
|
|
|
|
|
|
470
|
|
Qualcomm Inc. Ltd.
|
|
|
(696
|
)
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
(242
|
)
|
China Unicom Ltd.
|
|
|
599,012
|
|
|
|
(998,891
|
)
|
|
|
|
|
|
|
|
|
|
|
(399,879
|
)
|
LG Powercomm Co., Ltd.
|
|
|
(150,820
|
)
|
|
|
150,459
|
|
|
|
|
|
|
|
204
|
|
|
|
(157
|
)
|
ZeroOne Interactive Co., Ltd.
|
|
|
(1,542
|
)
|
|
|
|
|
|
|
1,730
|
|
|
|
(188
|
)
|
|
|
|
|
T-Entertainment Co., Ltd.
|
|
|
(608
|
)
|
|
|
(462
|
)
|
|
|
|
|
|
|
50
|
|
|
|
(1,020
|
)
|
De Chocolate E&TF Co., Ltd.
|
|
|
|
|
|
|
(341
|
)
|
|
|
|
|
|
|
214
|
|
|
|
(127
|
)
|
C.C.S. Inc.
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
25
|
|
|
|
(19
|
)
|
Medifron DBT Co., Ltd.
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
47
|
|
|
|
(36
|
)
|
Dreamline Corp.
|
|
|
|
|
|
|
(9,162
|
)
|
|
|
|
|
|
|
5,184
|
|
|
|
(3,978
|
)
|
Saeronet Broadcasting Co., Ltd.
|
|
|
|
|
|
|
(81
|
)
|
|
|
|
|
|
|
46
|
|
|
|
(35
|
)
|
SK C&C Co., Ltd.
|
|
|
691,248
|
|
|
|
(360,888
|
)
|
|
|
|
|
|
|
|
|
|
|
330,360
|
|
Eonex Technologies Inc.
|
|
|
2,011
|
|
|
|
(2,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Public bonds
|
|
|
(205
|
)
|
|
|
205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency stabilization bonds
|
|
|
(235
|
)
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds of Empas Corp.
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
Beneficiary certificates
|
|
|
9,302
|
|
|
|
(10,656
|
)
|
|
|
133
|
|
|
|
985
|
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
2,241,609
|
|
|
|
(1,721,511
|
)
|
|
|
7,015
|
|
|
|
6,567
|
|
|
|
533,680
|
|
Less tax effect (note a)
|
|
|
(616,996
|
)
|
|
|
492,830
|
|
|
|
(1,453
|
)
|
|
|
(219
|
)
|
|
|
(125,838
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
1,624,613
|
|
|
W
|
(1,228,681
|
)
|
|
W
|
5,562
|
|
|
W
|
6,348
|
|
|
W
|
407,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a) |
Represents adjustments to reflect the tax effect of temporary
differences directly charged or credited to unrealized gains
(losses) on valuation of long-term investment securities, which
are other comprehensive income (loss) items, in accordance with
SKAS No. 16 Income Taxes, which is effective
January 1, 2005.
|
F-32
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
EQUITY
SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD
|
Equity securities accounted for using the equity method as of
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won, except for share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Ownership
|
|
|
Acquisition
|
|
|
Net Asset
|
|
|
|
|
|
Carrying Amount
|
|
|
|
of Shares
|
|
|
Percentage (%)
|
|
|
Cost
|
|
|
Value
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
SK Marketing & Company Co., Ltd.
|
|
|
5,000,000
|
|
|
|
50.0
|
|
|
W
|
190,000
|
|
|
W
|
96,798
|
|
|
|
(note n
|
)
|
|
W
|
|
|
|
W
|
|
|
|
W
|
96,798
|
|
AirCross Co., Ltd.
|
|
|
1,575,000
|
|
|
|
100.0
|
|
|
|
2,440
|
|
|
|
7,289
|
|
|
|
(note d
|
)
|
|
|
1,477
|
|
|
|
|
|
|
|
7,289
|
|
SK C&C Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a
|
)
|
|
|
268,278
|
|
|
|
|
|
|
|
|
|
STIC Ventures Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note b
|
)
|
|
|
8,611
|
|
|
|
|
|
|
|
|
|
TU Media Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note c
|
)
|
|
|
7,214
|
|
|
|
|
|
|
|
|
|
Harex Info Tech, Inc.
|
|
|
225,000
|
|
|
|
21.2
|
|
|
|
3,375
|
|
|
|
245
|
|
|
|
|
|
|
|
1,805
|
|
|
|
1,118
|
|
|
|
596
|
|
SK Mobile
|
|
|
|
|
|
|
20.0
|
|
|
|
4,930
|
|
|
|
2,110
|
|
|
|
(note e
|
)
|
|
|
4,666
|
|
|
|
3,273
|
|
|
|
2,111
|
|
Skytel Co., Ltd.
|
|
|
1,951,777
|
|
|
|
29.3
|
|
|
|
2,159
|
|
|
|
13,858
|
|
|
|
|
|
|
|
5,823
|
|
|
|
7,743
|
|
|
|
13,858
|
|
SK China Company Ltd.
|
|
|
94,960
|
|
|
|
29.7
|
|
|
|
6,159
|
|
|
|
4,556
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
|
|
3,577
|
|
Helio, LLC & Helio, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note f
|
)
|
|
|
80,130
|
|
|
|
|
|
|
|
|
|
TR Entertainment
|
|
|
13,542,553
|
|
|
|
42.2
|
|
|
|
10,953
|
|
|
|
2,770
|
|
|
|
(note o
|
)
|
|
|
|
|
|
|
|
|
|
|
9,626
|
|
Virgin Mobile USA, Inc.
|
|
|
|
|
|
|
16.6
|
|
|
|
72,496
|
|
|
|
(57,084
|
)
|
|
|
(note p
|
)
|
|
|
|
|
|
|
|
|
|
|
62,096
|
|
SK Telecom China Holding Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note u
|
)
|
|
|
|
|
|
|
19,070
|
|
|
|
|
|
SK USA, Inc.
|
|
|
49
|
|
|
|
49.0
|
|
|
|
3,184
|
|
|
|
5,249
|
|
|
|
|
|
|
|
3,016
|
|
|
|
3,141
|
|
|
|
5,249
|
|
Korea IT Fund
|
|
|
190
|
|
|
|
63.3
|
|
|
|
190,000
|
|
|
|
210,735
|
|
|
|
(note g
|
)
|
|
|
193,061
|
|
|
|
210,568
|
|
|
|
210,735
|
|
Michigan Global Cinema Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note h
|
)
|
|
|
3,773
|
|
|
|
|
|
|
|
|
|
Centurion IT Investment Association
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note i
|
)
|
|
|
|
|
|
|
2,463
|
|
|
|
|
|
3rd Fund of Isu Entertainment
|
|
|
25
|
|
|
|
31.3
|
|
|
|
2,500
|
|
|
|
1,882
|
|
|
|
|
|
|
|
2,419
|
|
|
|
2,028
|
|
|
|
1,882
|
|
Magic Tech Network
|
|
|
4,500
|
|
|
|
30.0
|
|
|
|
8,494
|
|
|
|
2,162
|
|
|
|
(note g
|
)
|
|
|
|
|
|
|
|
|
|
|
7,725
|
|
SK Telecom Global Investment B.V.
|
|
|
18,000
|
|
|
|
100.0
|
|
|
|
26,044
|
|
|
|
31,807
|
|
|
|
(note r
|
)
|
|
|
|
|
|
|
|
|
|
|
31,807
|
|
SKY Property Mgmt. Ltd.
|
|
|
22,980
|
|
|
|
60.0
|
|
|
|
283,368
|
|
|
|
287,006
|
|
|
|
(note s
|
)
|
|
|
|
|
|
|
|
|
|
|
287,006
|
|
CDMA Mobile Phone Center
|
|
|
|
|
|
|
50.0
|
|
|
|
161,256
|
|
|
|
67,139
|
|
|
|
|
|
|
|
84,689
|
|
|
|
66,001
|
|
|
|
67,139
|
|
Wave City Development Co., Ltd.
|
|
|
380,000
|
|
|
|
19.0
|
|
|
|
1,967
|
|
|
|
1,908
|
|
|
|
(note t
|
)
|
|
|
|
|
|
|
|
|
|
|
1,908
|
|
SK Cyberpass, Inc.
|
|
|
33,196
|
|
|
|
84.9
|
|
|
|
6,372
|
|
|
|
3,809
|
|
|
|
(note m
|
)
|
|
|
1,780
|
|
|
|
|
|
|
|
4,068
|
|
E-Eye High
Tech
|
|
|
|
|
|
|
65.5
|
|
|
|
20,952
|
|
|
|
11,121
|
|
|
|
(note u
|
)
|
|
|
|
|
|
|
|
|
|
|
19,801
|
|
Cyworld Japan Co., Ltd.
|
|
|
1,250,000
|
|
|
|
100.0
|
|
|
|
10,584
|
|
|
|
1,169
|
|
|
|
|
|
|
|
4,362
|
|
|
|
4,091
|
|
|
|
3,690
|
|
Cyworld Incorporated
|
|
|
9,500,000
|
|
|
|
100.0
|
|
|
|
9,071
|
|
|
|
|
|
|
|
|
|
|
|
3,592
|
|
|
|
2,672
|
|
|
|
2,672
|
|
Prmaxsoftware tech.Co.,Ltd.
|
|
|
|
|
|
|
89.3
|
|
|
|
7,128
|
|
|
|
7,127
|
|
|
|
(note v
|
)
|
|
|
|
|
|
|
|
|
|
|
7,127
|
|
Mobile Money Ventures, LLC
|
|
|
|
|
|
|
50.0
|
|
|
|
8,821
|
|
|
|
5,283
|
|
|
|
(note w
|
)
|
|
|
|
|
|
|
|
|
|
|
5,283
|
|
SK Telecom Holdings America, Inc.
|
|
|
100
|
|
|
|
100.0
|
|
|
|
12,990
|
|
|
|
12,990
|
|
|
|
|
|
|
|
|
|
|
|
4,050
|
|
|
|
12,990
|
|
Benex Movie Expert Fund
|
|
|
810
|
|
|
|
46.6
|
|
|
|
8,100
|
|
|
|
8,045
|
|
|
|
(note x
|
)
|
|
|
|
|
|
|
|
|
|
|
8,045
|
|
Empas Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note j
|
)
|
|
|
36,474
|
|
|
|
|
|
|
|
|
|
SK i-media Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note k
|
)
|
|
|
11,312
|
|
|
|
|
|
|
|
|
|
Ntreev Soft Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note k
|
)
|
|
|
4,800
|
|
|
|
|
|
|
|
|
|
Konan Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note k
|
)
|
|
|
4,037
|
|
|
|
|
|
|
|
|
|
Other investment in affiliates
|
|
|
|
|
|
|
|
|
|
|
44,183
|
|
|
|
|
|
|
|
|
|
|
|
19,602
|
|
|
|
24,611
|
|
|
|
25,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
W
|
1,097,526
|
|
|
|
|
|
|
|
|
|
|
W
|
750,921
|
|
|
W
|
350,966
|
|
|
W
|
898,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(note a)
|
|
For the year ended December 31, 2007, the Companys
shares of SK C&C Co., Ltd. were increased to
6,000,000 shares from 300,000 shares as a result of SK
C&C Co., Ltd.s 20 to 1 stock split. In addition, the
investment in common stock of SK C&C Co., Ltd. was
reclassified to
available-for-sale
equity securities, as SK C&C Co., Ltd. became the ultimate
parent company of the Company by increasing its ownership
interest in SK Holdings Co., Ltd., a split-off company from SK
Corporation Co., Ltd. to 25.42% as of December 31, 2007.
|
(note b)
|
|
For the year ended December 31, 2007, the Company disposed
all of its 1,600,000 shares of STIC Ventures Co., Ltd.
|
(note c)
|
|
TU Media Corp. was newly included in consolidation effective
April 1, 2007 as the Companys ownership interest
increased to 32.7% and is the largest stockholder of TU Media
Corp.
|
(note d)
|
|
For the year ended December 31, 2007, the Company acquired
additional 975,000 shares of AirCross Co., Ltd. from
WiderThan Co., Ltd. and others, which increased the
Companys ownership interest from 38.1% to 100.0%.
Accordingly AirCross Co., Ltd. was newly included in
consolidation in 2007. However, for the year ended
December 31, 2008, AirCross Co., Ltd. Was excluded from the
consolidation and accounted for using the equity method as it
was fully liquidated during March 2009.
|
(note e)
|
|
On March 31, 2006, the Company acquired 42.5% interests of
common stock of SK Mobile from Pantech Co., Ltd. and others.
|
(note f)
|
|
In the first quarter of 2005, the Company incorporated SK
Telecom USA Holdings, Inc. with an initial investment of
US$83 million in order to invest and manage Helio, LLC, a
joint venture company in the United States of America, which was
established in order to provide wireless telecommunication
service in the United States of America. Through
December 31, 2007, the Company additionally invested in
Helio, LLC and the Companys ownership interest increased
to 64.9%. As a result, Helio, LLC became subsidiary and included
in consolidation effective November 1, 2007.
|
(note g)
|
|
The investment in Korea IT Fund was reclassified to equity
securities accounted for using the equity method for the year
ended December 31, 2006 as the Company has ability to
exercise significant influence on the investee. In accordance
with the Agreement of Korea IT Fund, the Company has voting
rights of 14.3%, while the Company invested 63.3% of total
capital contribution and has profit sharing rights of 63.3%.
|
(note h)
|
|
As TU Media Corp. became a subsidiary of the Company during the
year ended December 31, 2007, TU Media Corp.s
ownership interest in Michigan Global Cinema Fund added to the
Companys ownership interest in Michigan Global Fund for
the calculation of controlling ownership interest. As a result,
Michigan Global Cinema Fund was newly included in consolidation
effective April 1, 2007.
|
(note i)
|
|
Centurion IT Investment Association was deconsolidated as it was
dissolved on February 2008; instead, it was accounted for using
the equity method for the year ended December 31, 2007.
|
(note j)
|
|
Empas Corp. was merged into SK Communications Co., Ltd. during
the year ended December 31, 2007.
|
(note k)
|
|
Through the year ended December 31, 2006, these investees
were excluded from consolidation and accounted for using the
equity method even though the Companys ownership interest
is over majority because their total assets at the beginning of
the fiscal year were less than W7 billion
in accordance with Korean GAAP. However, as the investees
total assets as of December 31, 2006 increased to more than
W7 billion, these investees were included
in consolidation effective January 1, 2007.
|
(note l)
|
|
Even though the Companys ownership interest is over
majority, these investees are excluded from the consolidation
and accounted for using the equity method as their total assets
at the beginning of the fiscal year were less than
W7 billion, in accordance with Korean GAAP.
|
(note m)
|
|
Through the year ended December 31, 2006, SK Cyberpass,
Inc. was excluded from consolidation and accounted for using the
equity method even though the Companys ownership interest
is over majority because its total assets at the beginning of
the fiscal year were less than W7 billion
in accordance with Korean GAAP. As its total assets as of
December 31, 2006 increased to more than
W7 billion, these investees were included
in consolidation effective January 1, 2008. But, as its
total assets as of December 31, 2007 declined to below
W7 billion, it was accounted for using the
equity method again in 2008.
|
F-34
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(note n)
|
|
For the year ended December 31, 2008, the Company acquired
5,000,000 shares of SK Marketing & Company Co.,
Ltd. As a result, the Company holds 50.0% ownership in SK
Marketing & Company Co. Ltd.
|
(note o)
|
|
For the year ended December 31, 2008, the Company acquired
13,542,553 shares of TR Entertainment. As a result, the
Company holds 42.2% ownership in TR Entertainment.
|
(note p)
|
|
For the year ended December 31, 2008, the Company acquired
16.6% ownership in Virgin Mobile USA Inc. The company is
expected to exercise significant influence to Virgin Mobile USA
Inc. as the Company has the right to nominate the director for
the Virgin Mobile USA Inc. even though its ownership percentage
is below 20.0%
|
(note q)
|
|
For the year ended December 31, 2008, the Company acquired
4,500 shares of Magic Tech Network. As a result, the
Company holds 30.0% ownership in Magic Tech Network.
|
(note r)
|
|
For the year ended December 31, 2008, the Company
established in SKT Global Investment B.V. and holds 100%
ownership for the investee. However, SKT Global Investment B.V.
is accounted for using the equity method as its capital stock as
of incorporation is less W7 billion.
|
(note s)
|
|
For the year ended December 31, 2008, the Company acquired
22,980 shares of SKY Property Mgmt Ltd. As a result, the
Company holds 60.0% ownership for the investee. However, SKT
Global Investment B.V. is included in the equity securities
accounted for using the equity method as its capital as of
incorporation is less W7 billion.
|
(note t)
|
|
For the year ended December 31, 2008, the Company acquired
380,000 shares of Wave City Development Co., Ltd. As a
result, the Company holds 19.0% ownership for the investee. The
Company is expected to exercise significant influence to Wave
City Development Co., Ltd. as the Company have the right to
nominate the director for the Wave City Development Co., Ltd.
even though its ownership percentage is less than 20.0%.
|
(note u)
|
|
E-Eye High
Tech whose total assets are less
W7 billion as of December 31, 2007 is
included in the equity securities accounted for using the equity
method as SK Telecom China Holding Co., Ltd., a subsidiary of
the Company and parent company of
E-Eye High
Tech, is included in the consolidation for the year ended
December 31, 2008 as its total assets as of
December 31, 2007 was over W7 billion.
|
(note v)
|
|
For the year ended December 31, 2008, the Company acquired
89.3% of equity interest in Prmaxsoftware tech.Co.,Ltd. which is
accounted for using the equity method as their total assets at
the beginning of the fiscal year were less than
W7 billion.
|
(note w)
|
|
SKT America, Inc. (formerly SK Telecom International Inc.), a
wholly-owned subsidiary of the Company, acquired 50.0% of equity
interest in Mobile Money Ventures, LLC for the year ended
December 31, 2008.
|
(note x)
|
|
For the year ended December 31, 2008, the Company acquired
810 shares of Benex Movie Expert Fund. As a result, the
Company holds 46.6% ownership for the investee.
|
F-35
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Details of changes in investments in affiliates accounted for
using the equity method for the years ended December 31,
2006, 2007 and 2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surplus and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
Dividend
|
|
|
Increase
|
|
|
Ending
|
|
|
|
|
|
Balance
|
|
|
Acquisition
|
|
|
(Losses)
|
|
|
Income
|
|
|
Received
|
|
|
(Decrease)
|
|
|
Balance
|
|
|
Pantech Co., Ltd.
|
|
(note a)
|
|
W
|
55,732
|
|
|
W
|
|
|
|
W
|
(55,902
|
)
|
|
W
|
170
|
|
|
W
|
|
|
|
W
|
|
|
|
W
|
|
|
SK C&C Co., Ltd.
|
|
(note b)
|
|
|
168,244
|
|
|
|
|
|
|
|
37,825
|
|
|
|
63,199
|
|
|
|
(990
|
)
|
|
|
|
|
|
|
268,278
|
|
STIC Ventures Co., Ltd.
|
|
|
|
|
8,379
|
|
|
|
|
|
|
|
845
|
|
|
|
(613
|
)
|
|
|
|
|
|
|
|
|
|
|
8,611
|
|
TU Media Corp.
|
|
|
|
|
32,343
|
|
|
|
|
|
|
|
(25,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,214
|
|
AirCross Co., Ltd.
|
|
|
|
|
966
|
|
|
|
|
|
|
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,477
|
|
WiderThan Co., Ltd.
|
|
(note c)
|
|
|
11,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,503
|
)
|
|
|
|
|
IHQ, Inc.
|
|
|
|
|
14,755
|
|
|
|
|
|
|
|
(1,346
|
)
|
|
|
84
|
|
|
|
|
|
|
|
(13,493
|
)
|
|
|
|
|
Harex Info Tech, Inc.
|
|
|
|
|
2,530
|
|
|
|
|
|
|
|
(725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,805
|
|
SK Mobile
|
|
|
|
|
|
|
|
|
10,322
|
|
|
|
(5,520
|
)
|
|
|
(136
|
)
|
|
|
|
|
|
|
|
|
|
|
4,666
|
|
Skytel Co., Ltd.
|
|
(note b)
|
|
|
4,786
|
|
|
|
|
|
|
|
1,970
|
|
|
|
(605
|
)
|
|
|
(328
|
)
|
|
|
|
|
|
|
5,823
|
|
SK China Company Ltd.
|
|
|
|
|
485
|
|
|
|
|
|
|
|
(380
|
)
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Helio, LLC & Helio, Inc.
|
|
(note d)
|
|
|
102,272
|
|
|
|
76,933
|
|
|
|
(88,309
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,766
|
)
|
|
|
80,130
|
|
SK USA, Inc.
|
|
|
|
|
3,279
|
|
|
|
|
|
|
|
7
|
|
|
|
(270
|
)
|
|
|
|
|
|
|
|
|
|
|
3,016
|
|
Korea IT Fund
|
|
(note e)
|
|
|
|
|
|
|
|
|
|
|
2,339
|
|
|
|
722
|
|
|
|
|
|
|
|
190,000
|
|
|
|
193,061
|
|
Michigan Global Cinema Fund
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,773
|
|
3rd Fund of Isu Entertainment
|
|
|
|
|
2,500
|
|
|
|
|
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,419
|
|
SKT-HP Ventures, LLC
|
|
(note f)
|
|
|
5,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,290
|
)
|
|
|
|
|
CDMA Mobile Phone Center
|
|
(note g)
|
|
|
40,810
|
|
|
|
76,039
|
|
|
|
(21,474
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,686
|
)
|
|
|
84,689
|
|
Empas Corp.
|
|
|
|
|
|
|
|
|
37,092
|
|
|
|
(1,369
|
)
|
|
|
751
|
|
|
|
|
|
|
|
|
|
|
|
36,474
|
|
SK i-media Co., Ltd.
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
(636
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
11,312
|
|
Cyworld Japan Co., Ltd.
|
|
|
|
|
726
|
|
|
|
6,118
|
|
|
|
(2,549
|
)
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
4,362
|
|
Etoos Group Inc.
|
|
(note h)
|
|
|
2,586
|
|
|
|
|
|
|
|
(259
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,327
|
)
|
|
|
|
|
Cyworld Incorporated
|
|
|
|
|
524
|
|
|
|
8,547
|
|
|
|
(5,358
|
)
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
3,592
|
|
Other investments in affiliates
|
|
|
|
|
10,169
|
|
|
|
17,282
|
|
|
|
90
|
|
|
|
(640
|
)
|
|
|
|
|
|
|
3,318
|
|
|
|
30,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
471,879
|
|
|
W
|
244,333
|
|
|
W
|
(77,368
|
)
|
|
W
|
62,451
|
|
|
W
|
(1,318
|
)
|
|
W
|
139,253
|
|
|
W
|
750,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a)
|
|
Pantech Co., Ltd. suffered a significant loss due to
deterioration of its liquidity during the fourth quarter of
2006, which resulted in the Companys investments in
Pantech Co., Ltd. to be reduced to zero. Equity in losses of
affiliates that exceeded the carrying amount was
W43,543 million for the year ended
December 31, 2006.
|
(note b)
|
|
The Company received dividends from SK C&C Co., Ltd. and
Skytel Co., Ltd. and the corresponding amount was deducted from
its equity method securities.
|
(note c)
|
|
The Company sold all of investments in equity securities of
WiderThan Co., Ltd. for the year ended December 31, 2006
and recognized gains on disposal of investment in equity
securities of W21,780 million.
|
(note d)
|
|
Other decrease in investments in equity securities of Helio,
Inc. represents losses from disposal of investments in equity
securities of Helio, Inc. amounting to
W1,991 million resulting from the dilution
of the Companys ownership as a result of the fact that
investee sold its unissued shares to third parties directly, and
translation loss of W8,776 million
incurred from translating the foreign currency financial
statements of Helio, Inc. into Korean won.
|
F-36
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(note e)
|
|
Other increase in investments in Korea IT Fund is the carrying
amount transferred from
available-for-sale
equity securities.
|
(note f)
|
|
Investment was fully liquidated due to dissolution of SKT-HP
Ventures, LLC for the year ended December 31, 2006.
|
(note g)
|
|
For the year ended December 31, 2006, SLD received a cash
distribution of W5,978 million from CDMA
Mobile Phone Center, and such reimbursement decreased SLDs
investment in CDMA Mobile Phone Center. The amount was
equivalent to the depreciation from the contributed machinery
provided to CDMA Mobile Phone Center as an in-kind contribution
from SLD. In addition, translation loss of
W4,708 million incurred from translating
the foreign currency financial statements of SLD Telecom PTE
Ltd. into Korean won and such translation loss was accounted for
as a decrease in the investment in CDMA Mobile Phone Center.
|
(note h)
|
|
For the year ended December 31, 2006, Etoos Group Inc. was
merged into SK Communications Co., Ltd., the Companys
subsidiary.
|
F-37
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surplus and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
Dividend
|
|
|
Increase
|
|
|
Ending
|
|
|
|
|
|
Balance
|
|
|
Acquisition
|
|
|
(Losses)
|
|
|
Income
|
|
|
Received
|
|
|
(Decrease)
|
|
|
Balance
|
|
|
SK C&C Co., Ltd.
|
|
(notes a and d)
|
|
W
|
268,278
|
|
|
W
|
|
|
|
W
|
230,252
|
|
|
W
|
4,381
|
|
|
W
|
(1,260
|
)
|
|
(W
|
501,651
|
)
|
|
W
|
|
|
STIC Ventures Co., Ltd.
|
|
|
|
|
8,611
|
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
(8,373
|
)
|
|
|
|
|
TU Media Corp.
|
|
(note b)
|
|
|
7,214
|
|
|
|
|
|
|
|
(5,879
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,335
|
)
|
|
|
|
|
AirCross Co., Ltd.
|
|
(note c)
|
|
|
1,477
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,382
|
)
|
|
|
|
|
Harex Info Tech, Inc.
|
|
|
|
|
1,805
|
|
|
|
|
|
|
|
(687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,118
|
|
SK Mobile
|
|
|
|
|
4,666
|
|
|
|
|
|
|
|
(1,678
|
)
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
|
3,273
|
|
Skytel Co., Ltd.
|
|
(note d)
|
|
|
5,823
|
|
|
|
|
|
|
|
2,562
|
|
|
|
12
|
|
|
|
(654
|
)
|
|
|
|
|
|
|
7,743
|
|
SK China Company Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
Helio, Inc. & Helio, LLC
|
|
(note e)
|
|
|
80,130
|
|
|
|
18,527
|
|
|
|
(116,725
|
)
|
|
|
(38
|
)
|
|
|
|
|
|
|
18,106
|
|
|
|
|
|
SK USA, Inc.
|
|
|
|
|
3,016
|
|
|
|
|
|
|
|
96
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
3,141
|
|
Korea IT Fund
|
|
|
|
|
193,061
|
|
|
|
|
|
|
|
14,383
|
|
|
|
3,124
|
|
|
|
|
|
|
|
|
|
|
|
210,568
|
|
Michigan Global Cinema Fund
|
|
(note f)
|
|
|
3,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,773
|
)
|
|
|
|
|
3rd Fund of Isu Entertainment
|
|
(note g)
|
|
|
2,419
|
|
|
|
|
|
|
|
(891
|
)
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
2,028
|
|
Centurion IT Investment Association
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
777
|
|
|
|
|
|
|
|
1,651
|
|
|
|
2,463
|
|
CDMA Mobile Phone Center
|
|
(note h)
|
|
|
84,689
|
|
|
|
12,094
|
|
|
|
(20,651
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,131
|
)
|
|
|
66,001
|
|
Empas Corp.
|
|
(note i)
|
|
|
36,474
|
|
|
|
|
|
|
|
(6,397
|
)
|
|
|
24
|
|
|
|
|
|
|
|
(30,101
|
)
|
|
|
|
|
SK i-media Co., Ltd.
|
|
(note j)
|
|
|
11,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,312
|
)
|
|
|
|
|
Cyworld Japan Co., Ltd.
|
|
|
|
|
4,362
|
|
|
|
|
|
|
|
(391
|
)
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
4,091
|
|
Cyworld Incorporated
|
|
(note k)
|
|
|
3,592
|
|
|
|
|
|
|
|
(4,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,672
|
|
SK Telecom China Holding Co., Ltd.
|
|
|
|
|
|
|
|
|
19,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,070
|
|
Ntreev Soft Co., Ltd.
|
|
(note j)
|
|
|
4,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,800
|
)
|
|
|
|
|
Konan Technology
|
|
(note l)
|
|
|
4,037
|
|
|
|
|
|
|
|
(109
|
)
|
|
|
8
|
|
|
|
|
|
|
|
(3,936
|
)
|
|
|
|
|
SK Cyberpass, Inc.
|
|
(note j)
|
|
|
1,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,780
|
)
|
|
|
|
|
Cyworld Europe GmbH
|
|
(note m)
|
|
|
512
|
|
|
|
3,696
|
|
|
|
(4,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cyworld China (Holdings) Ltd.
|
|
(note m)
|
|
|
|
|
|
|
8,467
|
|
|
|
(8,467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investment in affiliates
|
|
(note m)
|
|
|
19,090
|
|
|
|
14,775
|
|
|
|
(5,244
|
)
|
|
|
176
|
|
|
|
(268
|
)
|
|
|
132
|
|
|
|
28,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
750,921
|
|
|
W
|
76,629
|
|
|
W
|
71,908
|
|
|
W
|
8,744
|
|
|
W
|
(2,182
|
)
|
|
W
|
(558,185
|
)
|
|
W
|
350,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a)
|
|
The investment in SK C&C Co., Ltd. was reclassified to
available-for-sale
security during the fourth quarter of 2007 as it became the
ultimate parent company of the Company.
|
(note b)
|
|
TU Media Corp. was included in the consolidation of accompanying
consolidated financial statements effective April 1, 2007,
as the Company acquired additional equity of TU Media Corp. in
February 2007.
|
F-38
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(note c)
|
|
AirCross Co., Ltd. was included in the consolidation of
accompanying consolidated financial statements effective
April 1, 2007, as the Company acquired additional equity of
AirCross Co., Ltd. in March 2007.
|
(note d)
|
|
The Company received dividends from SK C&C Co., Ltd. and
Skytel Co., Ltd.; the corresponding amount was deducted from its
equity method securities.
|
(note e)
|
|
Helio, Inc. & Helio LLC was included in the consolidation
of accompanying consolidated financial statements effective
November 2007, as the Company acquired additional equity of
Helio, LLC during the fourth quarter of 2007.
|
(note f)
|
|
As TU Media Corp. who had certain ownership interest of Michigan
Global Cinema Fund became a subsidiary of the Company in
February 2007, the Company became the largest stockholder owning
more than 30% of total outstanding common stock of Michigan
Global Cinema Fund and included Michigan Global Cinema Fund in
the consolidation of accompanying consolidated financial
statements effective April 1, 2007.
|
(note g)
|
|
Other increase in investments in equity securities of 3rd Fund
of Isu Entertainment resulted from additional investment by TU
Media Corp..
|
(note h)
|
|
For the year ended December 31, 2007, SKT Vietnam PTE Ltd.
(formerly SLD Telecom PTE Ltd.) received a cash distribution of
W10,728 million from CDMA Mobile Phone
Center, and such reimbursement decreased SKT Vietnam PTE
Ltds investment in CDMA Mobile Phone Center. The amount
was equivalent to the depreciation from the contributed
machinery provided to CDMA Mobile Phone Center as an in-kind
contribution from SKT Vietnam PTE Ltd. In addition, translation
gain of W597 million incurred from
translating the foreign currency financial statements of SKT
Vietnam PTE Ltd. into Korean won and such translation gain was
accounted for as an increase in the investment in CDMA Mobile
Phone Center.
|
(note i)
|
|
Other decrease in investments in equity securities of Empas
Corp. resulted from the merger between Empas Corp. and SK
Communications Co., Ltd.
|
(note j)
|
|
SK i-media Co., Ltd., Ntreev Soft Co., Ltd. and SK Cyberpass,
Inc. were newly included in the consolidation of the
accompanying financial statements as their total assets at the
beginning of 2007 increased to more than
W7 billion, in accordance with Korean GAAP.
|
(note k)
|
|
Equity in losses of affiliates amounting to W3,133 million
resulted from the additional recognition of equity losses for
short-term loans provided for by SK Communications Co., Ltd.
|
(note l)
|
|
Konan Technology which was a subsidiary of Empas Corp. was
included in the consolidation of accompanying consolidated
financial statements as SK Communications Co., Ltd. merged with
Empas Corp. for the year ended December 31, 2007.
|
(note m)
|
|
As carrying amounts of equity securities accounted for using the
equity method of Cyworld Europe GmbH, Cyworld China (Holdings)
Ltd. and Cyworld Vietnam became nil, the equity method
accounting was discontinued. Unrecognized losses because of the
discontinuance of the equity method were
W3,164 million as of December 31,
2007.
|
F-39
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surplus and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
Dividend
|
|
|
Increase
|
|
|
Ending
|
|
|
|
|
|
Balance
|
|
|
Acquisition
|
|
|
(Losses)
|
|
|
Income
|
|
|
Received
|
|
|
(Decrease)
|
|
|
Balance
|
|
|
SK Marketing & Company Co., Ltd.
|
|
|
|
W
|
|
|
|
W
|
190,000
|
|
|
W
|
7,410
|
|
|
W
|
(100,612
|
)
|
|
W
|
|
|
|
W
|
|
|
|
W
|
96,798
|
|
AirCross Co., Ltd.
|
|
(Note a)
|
|
|
|
|
|
|
|
|
|
|
2,261
|
|
|
|
|
|
|
|
|
|
|
|
5,028
|
|
|
|
7,289
|
|
Harex Info Tech, Inc.
|
|
|
|
|
1,118
|
|
|
|
|
|
|
|
(522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
596
|
|
SK Mobile
|
|
(Note c)
|
|
|
3,273
|
|
|
|
2,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,166
|
)
|
|
|
2,111
|
|
Skytel Co., Ltd.
|
|
|
|
|
7,743
|
|
|
|
|
|
|
|
5,189
|
|
|
|
2,140
|
|
|
|
(1,214
|
)
|
|
|
|
|
|
|
13,858
|
|
SK China Company Ltd.
|
|
|
|
|
137
|
|
|
|
2,963
|
|
|
|
164
|
|
|
|
313
|
|
|
|
|
|
|
|
|
|
|
|
3,577
|
|
TR Entertainment
|
|
|
|
|
|
|
|
|
10,953
|
|
|
|
(2,108
|
)
|
|
|
781
|
|
|
|
|
|
|
|
|
|
|
|
9,626
|
|
Virgin Mobile USA Inc.
|
|
|
|
|
|
|
|
|
29,693
|
|
|
|
(8,896
|
)
|
|
|
(1,504
|
)
|
|
|
|
|
|
|
42,803
|
|
|
|
62,096
|
|
SK Telecom China Holding Co., Ltd.
|
|
(Note d)
|
|
|
19,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,070
|
)
|
|
|
|
|
SK USA, Inc.
|
|
|
|
|
3,141
|
|
|
|
|
|
|
|
911
|
|
|
|
1,197
|
|
|
|
|
|
|
|
|
|
|
|
5,249
|
|
Korea IT Fund
|
|
|
|
|
210,568
|
|
|
|
|
|
|
|
4,771
|
|
|
|
(4,604
|
)
|
|
|
|
|
|
|
|
|
|
|
210,735
|
|
Centurion IT Investment Association
|
|
(Note e)
|
|
|
2,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,463
|
)
|
|
|
|
|
3rd Fund of Isu Entertainment
|
|
|
|
|
2,028
|
|
|
|
|
|
|
|
(146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,882
|
|
Magic Tech Network
|
|
|
|
|
|
|
|
|
8,494
|
|
|
|
(1,233
|
)
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
7,725
|
|
SK Telecom Global Investment B.V.
|
|
|
|
|
|
|
|
|
26,044
|
|
|
|
125
|
|
|
|
5,638
|
|
|
|
|
|
|
|
|
|
|
|
31,807
|
|
SKY Property Mgmt. Ltd.
|
|
|
|
|
|
|
|
|
283,368
|
|
|
|
(1,998
|
)
|
|
|
5,636
|
|
|
|
|
|
|
|
|
|
|
|
287,006
|
|
CDMA Mobile Phone Center
|
|
(Note f)
|
|
|
66,001
|
|
|
|
13,629
|
|
|
|
(25,766
|
)
|
|
|
|
|
|
|
|
|
|
|
13,275
|
|
|
|
67,139
|
|
Wave City Development Co., Ltd.
|
|
|
|
|
|
|
|
|
1,967
|
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,908
|
|
SK Cyberpass, Inc.
|
|
(Note b)
|
|
|
|
|
|
|
3,444
|
|
|
|
(1,584
|
)
|
|
|
980
|
|
|
|
|
|
|
|
1,228
|
|
|
|
4,068
|
|
Shenzhen
E-Eye High
Tech
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
|
20,952
|
|
|
|
19,801
|
|
Cyworld Japan Co., Ltd.
|
|
|
|
|
4,091
|
|
|
|
|
|
|
|
(539
|
)
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
3,690
|
|
Cyworld Incorporated
|
|
|
|
|
2,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,672
|
|
Prmaxsoftware tech.Co., Ltd.
|
|
|
|
|
|
|
|
|
7,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,127
|
|
Mobile Money Ventures, LLC
|
|
(Note g)
|
|
|
|
|
|
|
8,821
|
|
|
|
(4,189
|
)
|
|
|
|
|
|
|
|
|
|
|
651
|
|
|
|
5,283
|
|
SK Telecom Holdings America, Inc.
|
|
|
|
|
4,050
|
|
|
|
8,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,990
|
|
Benex Movie Expert Fund
|
|
|
|
|
|
|
|
|
8,100
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,045
|
|
Other investment in affiliates
|
|
|
|
|
24,611
|
|
|
|
7,010
|
|
|
|
(1,959
|
)
|
|
|
1,112
|
|
|
|
|
|
|
|
(5,340
|
)
|
|
|
25,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
350,966
|
|
|
W
|
612,557
|
|
|
W
|
(29,374
|
)
|
|
W
|
(88,321
|
)
|
|
W
|
(1,214
|
)
|
|
W
|
53,898
|
|
|
W
|
898,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a)
|
|
Aircross Co., Ltd. was included in the equity securities
accounted for using equity method as it was fully liquidated in
March 2009.
|
(note b)
|
|
SK Cyberpass, Inc was included in the equity securities
accounted for using equity method as its total assets at the
beginning of 2008 decreased to less than
W7 billion.
|
(note c)
|
|
Other decrease in investments in equity securities of SK Mobile
represent disposal of part of the equity shares.
|
(note d)
|
|
Other decreases in investments in equity securities of SK
Telecom China Holding Co., Ltd. resulted from the fact that SK
Telecom China Holding Co., Ltd. is included in consolidation for
the year ended December 31, 2008.
|
(note e)
|
|
Other decrease in investments in Centurion IT Investment
Association represents the collection of the Companys
investment from the full liquidation of Centurion IT Investment
Association.
|
F-40
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(note f)
|
|
Translation gain of W13,275 million
incurred from translating the foreign currency financial
statements of SKT Vietnam PTE Ltd. into Korean won and such
translation gain was accounted for as an increase in the
investment in CDMA Mobile Phone Center.
|
(note g)
|
|
The amount represent translation gain of
W651 million incurred from translating the
foreign currency financial statements of SKT Americas, Inc.
(formerly SK Telecom International inc.) into Korean won and
such translation gain was accounted for as an increase in the
investment in Mobile Money Ventures, LLC.
|
Details of changes in the differences between the acquisition
cost and net asset value of equity method investees at the
acquisition date for the years ended December 31, 2006,
2007 and 2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
In(De)crease
|
|
|
Amortization
|
|
|
Balance
|
|
|
Pantech Co., Ltd.
|
|
W
|
793
|
|
|
W
|
|
|
|
W
|
(793
|
)
|
|
W
|
|
|
SK C&C Co., Ltd.
|
|
|
4,870
|
|
|
|
|
|
|
|
(406
|
)
|
|
|
4,464
|
|
TU Media Corp.
|
|
|
993
|
|
|
|
|
|
|
|
(209
|
)
|
|
|
784
|
|
IHQ, Inc.
|
|
|
6,267
|
|
|
|
(5,533
|
)
|
|
|
(734
|
)
|
|
|
|
|
Harex Info Tech, Inc.
|
|
|
1,402
|
|
|
|
|
|
|
|
(351
|
)
|
|
|
1,051
|
|
SK Mobile
|
|
|
|
|
|
|
3,192
|
|
|
|
(3,192
|
)
|
|
|
|
|
Helio, Inc.
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
38
|
|
Empas Corp.
|
|
|
|
|
|
|
24,159
|
|
|
|
(1,208
|
)
|
|
|
22,951
|
|
Etoos Group Inc.
|
|
|
1,581
|
|
|
|
(1,553
|
)
|
|
|
(28
|
)
|
|
|
|
|
Other investments in affiliates
|
|
|
|
|
|
|
12,531
|
|
|
|
(1,086
|
)
|
|
|
11,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
15,906
|
|
|
W
|
32,834
|
|
|
W
|
(8,007
|
)
|
|
W
|
40,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
In(De)crease
|
|
|
Amortization
|
|
|
Balance
|
|
|
SK C&C Co., Ltd.
|
|
W
|
4,464
|
|
|
W
|
(4,160
|
)
|
|
W
|
(304
|
)
|
|
W
|
|
|
TU Media Corp.
|
|
|
784
|
|
|
|
(732
|
)
|
|
|
(52
|
)
|
|
|
|
|
IHQ, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harex Info Tech, Inc.
|
|
|
1,051
|
|
|
|
|
|
|
|
(350
|
)
|
|
|
701
|
|
SK Mobile
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helio, Inc.
|
|
|
38
|
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
Empas Corp.
|
|
|
22,951
|
|
|
|
(18,924
|
)
|
|
|
(4,027
|
)
|
|
|
|
|
Etoos Group Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ntreev Soft Co., Ltd.
|
|
|
1,785
|
|
|
|
(1,785
|
)
|
|
|
|
|
|
|
|
|
Konan Technology
|
|
|
3,859
|
|
|
|
(3,859
|
)
|
|
|
|
|
|
|
|
|
Other investments in affiliates
|
|
|
5,801
|
|
|
|
2,899
|
|
|
|
(1,770
|
)
|
|
|
6,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
40,733
|
|
|
W
|
(26,561
|
)
|
|
W
|
(6,541
|
)
|
|
W
|
7,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2008
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
In(De)crease
|
|
|
Amortization
|
|
|
Balance
|
|
|
Harex Info Tech, Inc.
|
|
W
|
701
|
|
|
W
|
|
|
|
W
|
(351
|
)
|
|
W
|
350
|
|
TR Entertainment
|
|
|
|
|
|
|
8,066
|
|
|
|
(1,210
|
)
|
|
|
6,856
|
|
Virgin Mobile USA Inc.
|
|
|
|
|
|
|
126,363
|
|
|
|
(7,183
|
)
|
|
|
119,180
|
|
Skytel Co., Ltd.
|
|
|
|
|
|
|
(1,387
|
)
|
|
|
1,387
|
|
|
|
|
|
SK China Company Ltd.
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
107
|
|
Magic Tech Network
|
|
|
|
|
|
|
6,181
|
|
|
|
(618
|
)
|
|
|
5,563
|
|
SK Cyberpass Inc.
|
|
|
|
|
|
|
304
|
|
|
|
(46
|
)
|
|
|
258
|
|
Shenzhen
E-Eye High
Tech
|
|
|
|
|
|
|
10,851
|
|
|
|
(2,171
|
)
|
|
|
8,680
|
|
Other investments in affiliates
|
|
|
6,930
|
|
|
|
(1,893
|
)
|
|
|
(1,601
|
)
|
|
|
3,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
7,631
|
|
|
W
|
148,592
|
|
|
W
|
(11,793
|
)
|
|
W
|
144,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of changes in unrealized intercompany gains incurred
from sales of assets for the years ended December 31, 2006,
2007 and 2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Increase
|
|
|
Decrease
|
|
|
Balance
|
|
|
Pantech Co., Ltd.
|
|
W
|
|
|
|
W
|
271
|
|
|
W
|
(271
|
)
|
|
W
|
|
|
SK China Company Ltd.
|
|
|
1,086
|
|
|
|
|
|
|
|
|
|
|
|
1,086
|
|
Cyworld Japan Co., Ltd.
|
|
|
2,526
|
|
|
|
681
|
|
|
|
(570
|
)
|
|
|
2,637
|
|
Cyworld Incorporated
|
|
|
|
|
|
|
1,888
|
|
|
|
(94
|
)
|
|
|
1,794
|
|
Other investments in affiliates
|
|
|
|
|
|
|
892
|
|
|
|
(104
|
)
|
|
|
788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
3,612
|
|
|
W
|
3,732
|
|
|
W
|
(1,039
|
)
|
|
W
|
6,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Increase
|
|
|
Decrease
|
|
|
Balance
|
|
|
SK China Company Ltd.
|
|
W
|
1,086
|
|
|
W
|
|
|
|
W
|
|
|
|
W
|
1,086
|
|
Cyworld Japan Co., Ltd.
|
|
|
2,637
|
|
|
|
|
|
|
|
(2,227
|
)
|
|
|
410
|
|
Cyworld Incorporated
|
|
|
1,794
|
|
|
|
|
|
|
|
(378
|
)
|
|
|
1,416
|
|
Other investments in affiliates
|
|
|
788
|
|
|
|
2,552
|
|
|
|
(385
|
)
|
|
|
2,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
6,305
|
|
|
W
|
2,552
|
|
|
W
|
(2,990
|
)
|
|
W
|
5,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2008
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Increase
|
|
|
Decrease
|
|
|
Balance
|
|
|
SK China Company Ltd.
|
|
W
|
1,086
|
|
|
W
|
|
|
|
W
|
|
|
|
W
|
1,086
|
|
Cyworld Japan Co., Ltd.
|
|
|
410
|
|
|
|
|
|
|
|
(410
|
)
|
|
|
|
|
Cyworld Incorporated
|
|
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
1,416
|
|
Other investments in affiliates
|
|
|
2,955
|
|
|
|
57
|
|
|
|
(192
|
)
|
|
|
2,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
5,867
|
|
|
W
|
57
|
|
|
W
|
(602
|
)
|
|
W
|
5,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The condensed financial information of the investees as of and
for the year ended December 31, 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Total
|
|
|
|
|
|
Net
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Revenue
|
|
|
Income (Loss)
|
|
|
SK Marketing & Company Co., Ltd.
|
|
W
|
593,884
|
|
|
W
|
400,287
|
|
|
W
|
133,271
|
|
|
W
|
14,823
|
|
AirCross Co., Ltd.
|
|
|
7,402
|
|
|
|
114
|
|
|
|
24,352
|
|
|
|
2,261
|
|
Harex Info Tech, Inc.
|
|
|
2,241
|
|
|
|
1,082
|
|
|
|
2,798
|
|
|
|
(812
|
)
|
Skytel Co., Ltd.
|
|
|
50,653
|
|
|
|
3,448
|
|
|
|
39,815
|
|
|
|
14,409
|
|
SK China Company Ltd.
|
|
|
16,449
|
|
|
|
1,101
|
|
|
|
11,632
|
|
|
|
(1,222
|
)
|
TR Entertainment
|
|
|
7,521
|
|
|
|
956
|
|
|
|
6,383
|
|
|
|
(2,129
|
)
|
SK USA, Inc.
|
|
|
12,028
|
|
|
|
1,316
|
|
|
|
9,710
|
|
|
|
1,860
|
|
Korea IT Fund
|
|
|
332,724
|
|
|
|
|
|
|
|
19,742
|
|
|
|
7,534
|
|
3rd Fund of Isu Entertainment
|
|
|
6,012
|
|
|
|
|
|
|
|
305
|
|
|
|
(390
|
)
|
Magic Tech Network
|
|
|
10,194
|
|
|
|
2,986
|
|
|
|
556
|
|
|
|
(2,049
|
)
|
SK Telecom Global Investment B.V.
|
|
|
31,845
|
|
|
|
39
|
|
|
|
286
|
|
|
|
125
|
|
SKY Property Mgmt. Ltd.
|
|
|
656,923
|
|
|
|
178,581
|
|
|
|
9,448
|
|
|
|
(3,330
|
)
|
CDMA Mobile Phone Center
|
|
|
451,998
|
|
|
|
317,719
|
|
|
|
73,803
|
|
|
|
(51,532
|
)
|
Wave City Development Co., Ltd.
|
|
|
27,413
|
|
|
|
17,371
|
|
|
|
523
|
|
|
|
(311
|
)
|
SK Cyberpass, Inc.
|
|
|
8,850
|
|
|
|
4,361
|
|
|
|
22,031
|
|
|
|
(2,454
|
)
|
Shenzhen
E-Eye High
Tech
|
|
|
17,557
|
|
|
|
579
|
|
|
|
5,965
|
|
|
|
1,462
|
|
Cyworld Japan Co., Ltd.
|
|
|
1,931
|
|
|
|
221
|
|
|
|
194
|
|
|
|
(868
|
)
|
Cyworld Incorporated
|
|
|
2,737
|
|
|
|
13,673
|
|
|
|
57
|
|
|
|
(5,821
|
)
|
Money Mobile USA, Inc.
|
|
|
12,404
|
|
|
|
1,838
|
|
|
|
|
|
|
|
(8,378
|
)
|
Virgin Mobile USA Inc.
|
|
|
480,661
|
|
|
|
825,373
|
|
|
|
479,739
|
|
|
|
(10,345
|
)
|
Benex Movie Expert Fund
|
|
|
17,428
|
|
|
|
146
|
|
|
|
82
|
|
|
|
(119
|
)
|
Short-term and long-term loans to employees as of
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Loans to employees stock ownership association
|
|
W
|
7,526
|
|
|
W
|
34,817
|
|
|
W
|
74,878
|
|
Loans to employees for housing and other
|
|
|
4,580
|
|
|
|
15,231
|
|
|
|
15,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
12,106
|
|
|
W
|
50,048
|
|
|
W
|
90,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On December 26, 2007 and January 23, 2008, we loaned
W 31.0 billion and W
29.7 billion, respectively, to our employee stock ownership
association to help fund the employee stock ownership
associations acquisition of our treasury shares. Such
loans will be repaid over a period of five years, beginning on
the second anniversary of each loan date.
F-43
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
7.
|
PROPERTY
AND EQUIPMENT
|
Property and equipment as of December 31, 2006, 2007 and
2008 are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Lives
|
|
|
|
|
|
|
|
|
|
|
|
(Years)
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Land
|
|
|
|
W
|
473,109
|
|
|
W
|
454,916
|
|
|
W
|
756,348
|
|
Buildings and structures
|
|
15-50
|
|
|
1,502,755
|
|
|
|
1,510,199
|
|
|
|
1,925,563
|
|
Machinery
|
|
3-9
|
|
|
11,380,257
|
|
|
|
12,909,629
|
|
|
|
18,572,546
|
|
Other
|
|
3-5
|
|
|
1,004,196
|
|
|
|
1,028,442
|
|
|
|
1,135,325
|
|
Construction in progress
|
|
|
|
|
132,831
|
|
|
|
308,955
|
|
|
|
356,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
14,493,148
|
|
|
|
16,212,141
|
|
|
|
22,745,932
|
|
Less accumulated depreciation
|
|
|
|
|
(9,985,813
|
)
|
|
|
(11,242,431
|
)
|
|
|
(15,305,773
|
)
|
Accumulated impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,197
|
)
|
Government subsidy
|
|
|
|
|
|
|
|
|
(356
|
)
|
|
|
(273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
W
|
4,507,335
|
|
|
W
|
4,969,354
|
|
|
W
|
7,437,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The governments declared standard value of land owned as
of December 31, 2006, 2007 and 2008 are
W519,234 million,
W561,326 million and
W895,866 million, respectively.
Details of changes in property and equipment for the years ended
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Acquisition
|
|
|
Disposal
|
|
|
Transfer
|
|
|
Depreciation
|
|
|
Balance
|
|
|
Land
|
|
W
|
466,562
|
|
|
W
|
115
|
|
|
W
|
(645
|
)
|
|
W
|
7,077
|
|
|
W
|
|
|
|
W
|
473,109
|
|
Buildings and structures
|
|
|
1,151,094
|
|
|
|
4,664
|
|
|
|
(849
|
)
|
|
|
14,262
|
|
|
|
(55,947
|
)
|
|
|
1,113,224
|
|
Machinery
|
|
|
2,479,623
|
|
|
|
65,819
|
|
|
|
(8,571
|
)
|
|
|
1,014,646
|
|
|
|
(1,152,632
|
)
|
|
|
2,398,885
|
|
Other
|
|
|
301,781
|
|
|
|
839,284
|
|
|
|
(17,308
|
)
|
|
|
(636,866
|
)
|
|
|
(97,605
|
)
|
|
|
389,286
|
|
Construction in progress
|
|
|
264,309
|
|
|
|
588,260
|
|
|
|
|
|
|
|
(719,738
|
)
|
|
|
|
|
|
|
132,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
4,663,369
|
|
|
W
|
1,498,142
|
|
|
W
|
(27,373
|
)
|
|
W
|
(320,619
|
)
|
|
W
|
(1,306,184
|
)
|
|
W
|
4,507,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
(Decrease)
|
|
|
Acquisition
|
|
|
Disposal
|
|
|
Transfer
|
|
|
Depreciation
|
|
|
Balance
|
|
|
Land
|
|
W
|
473,109
|
|
|
W
|
|
|
|
W
|
471
|
|
|
W
|
(20,362
|
)
|
|
W
|
1,698
|
|
|
W
|
|
|
|
W
|
454,916
|
|
Buildings and structures
|
|
|
1,113,224
|
|
|
|
5
|
|
|
|
4,998
|
|
|
|
(3,488
|
)
|
|
|
7,779
|
|
|
|
(56,438
|
)
|
|
|
1,066,080
|
|
Machinery
|
|
|
2,398,885
|
|
|
|
282,925
|
|
|
|
106,524
|
|
|
|
(8,420
|
)
|
|
|
1,333,354
|
|
|
|
(1,312,840
|
)
|
|
|
2,800,428
|
|
Other
|
|
|
389,286
|
|
|
|
19,008
|
|
|
|
1,034,181
|
|
|
|
(14,273
|
)
|
|
|
(964,200
|
)
|
|
|
(125,027
|
)
|
|
|
338,975
|
|
Construction in progress
|
|
|
132,831
|
|
|
|
5,941
|
|
|
|
669,793
|
|
|
|
(893
|
)
|
|
|
(498,717
|
)
|
|
|
|
|
|
|
308,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
4,507,335
|
|
|
W
|
307,879
|
|
|
W
|
1,815,967
|
|
|
W
|
(47,436
|
)
|
|
W
|
(120,086
|
)
|
|
W
|
(1,494,305
|
)
|
|
W
|
4,969,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
(Decrease)
|
|
|
Acquisition
|
|
|
Disposal
|
|
|
Transfer
|
|
|
Depreciation
|
|
|
Balance
|
|
|
Land
|
|
W
|
454,916
|
|
|
W
|
294,629
|
|
|
W
|
141
|
|
|
W
|
(3,394
|
)
|
|
W
|
10,056
|
|
|
W
|
|
|
|
W
|
756,348
|
|
Buildings and structures
|
|
|
1,066,080
|
|
|
|
319,266
|
|
|
|
10,984
|
|
|
|
(2,900
|
)
|
|
|
28,692
|
|
|
|
(67,310
|
)
|
|
|
1,354,812
|
|
Machinery
|
|
|
2,800,428
|
|
|
|
1,675,918
|
|
|
|
358,052
|
|
|
|
(55,090
|
)
|
|
|
1,600,116
|
|
|
|
(1,804,916
|
)
|
|
|
4,574,508
|
|
Other
|
|
|
338,975
|
|
|
|
(950
|
)
|
|
|
1,138,814
|
|
|
|
(29,633
|
)
|
|
|
(928,313
|
)
|
|
|
(123,022
|
)
|
|
|
395,871
|
|
Construction in progress
|
|
|
308,955
|
|
|
|
61,155
|
|
|
|
728,939
|
|
|
|
(13,461
|
)
|
|
|
(729,438
|
)
|
|
|
|
|
|
|
356,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
4,969,354
|
|
|
W
|
2,350,018
|
|
|
W
|
2,236,930
|
|
|
W
|
(104,478
|
)
|
|
W
|
(18,887
|
)
|
|
W
|
(1,995,248
|
)
|
|
W
|
7,437,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other increase (decrease) resulted from merger and the changes
in consolidated subsidiaries.
Intangible assets as of December 31, 2006, 2007 and 2008
are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Carrying Amounts
|
|
|
|
Acquisition
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Impairment
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Goodwill
|
|
W
|
2,998,512
|
|
|
W
|
(1,093,395
|
)
|
|
W
|
(5,378
|
)
|
|
W
|
1,775,695
|
|
|
W
|
1,684,357
|
|
|
W
|
1,899,739
|
|
Frequency use rights
|
|
|
1,385,120
|
|
|
|
(541,349
|
)
|
|
|
|
|
|
|
1,076,833
|
|
|
|
960,302
|
|
|
|
843,771
|
|
Software development costs
|
|
|
270,638
|
|
|
|
(232,872
|
)
|
|
|
(3,193
|
)
|
|
|
45,653
|
|
|
|
19,837
|
|
|
|
34,573
|
|
Customer relationships
|
|
|
504,156
|
|
|
|
(68,621
|
)
|
|
|
|
|
|
|
|
|
|
|
25,139
|
|
|
|
435,535
|
|
Other
|
|
|
1,628,458
|
|
|
|
(861,947
|
)
|
|
|
(1,984
|
)
|
|
|
620,230
|
|
|
|
744,327
|
|
|
|
764,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
6,786,884
|
|
|
W
|
(2,798,184
|
)
|
|
W
|
(10,555
|
)
|
|
W
|
3,518,411
|
|
|
W
|
3,433,962
|
|
|
W
|
3,978,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of changes in intangible assets for the years ended
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Acquisition
|
|
|
Disposal
|
|
|
Transfer
|
|
|
Amortization
|
|
|
Impairment
|
|
|
Balance
|
|
|
Goodwill
|
|
W
|
1,868,932
|
|
|
W
|
1,672
|
|
|
W
|
|
|
|
W
|
44,947
|
|
|
W
|
(139,806
|
)
|
|
W
|
(50
|
)
|
|
W
|
1,775,695
|
|
Frequency use rights
|
|
|
1,184,292
|
|
|
|
687
|
|
|
|
|
|
|
|
|
|
|
|
(108,146
|
)
|
|
|
|
|
|
|
1,076,833
|
|
Software development costs
|
|
|
65,991
|
|
|
|
1,946
|
|
|
|
|
|
|
|
9,340
|
|
|
|
(31,624
|
)
|
|
|
|
|
|
|
45,653
|
|
Other
|
|
|
333,674
|
|
|
|
69,659
|
|
|
|
(1,250
|
)
|
|
|
330,866
|
|
|
|
(112,604
|
)
|
|
|
(115
|
)
|
|
|
620,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
3,452,889
|
|
|
W
|
73,964
|
|
|
W
|
(1,250
|
)
|
|
W
|
385,153
|
|
|
W
|
(392,180
|
)
|
|
W
|
(165
|
)
|
|
W
|
3,518,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-45
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
(Decrease)
|
|
|
Acquisition
|
|
|
Disposal
|
|
|
Transfer
|
|
|
Amortization
|
|
|
Impairment
|
|
|
Balance
|
|
|
Goodwill
|
|
W
|
1,775,695
|
|
|
W
|
59,460
|
|
|
W
|
958
|
|
|
W
|
(124
|
)
|
|
W
|
6,092
|
|
|
W
|
(157,724
|
)
|
|
W
|
(
|
)
|
|
W
|
1,684,357
|
|
Frequency use rights
|
|
|
1,076,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(116,531
|
)
|
|
|
|
|
|
|
960,302
|
|
Software development costs
|
|
|
45,653
|
|
|
|
1,881
|
|
|
|
3,294
|
|
|
|
(5,673
|
)
|
|
|
1,679
|
|
|
|
(26,930
|
)
|
|
|
(67
|
)
|
|
|
19,837
|
|
Customer relationships
|
|
|
|
|
|
|
33,152
|
|
|
|
|
|
|
|
|
|
|
|
629
|
|
|
|
(8,642
|
)
|
|
|
|
|
|
|
25,139
|
|
Other
|
|
|
620,230
|
|
|
|
85,983
|
|
|
|
110,850
|
|
|
|
(5,750
|
)
|
|
|
129,729
|
|
|
|
(196,569
|
)
|
|
|
(146
|
)
|
|
|
744,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
3,518,411
|
|
|
W
|
180,476
|
|
|
W
|
115,102
|
|
|
W
|
(11,547
|
)
|
|
W
|
138,129
|
|
|
W
|
(506,396
|
)
|
|
W
|
(213
|
)
|
|
W
|
3,433,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
(Decrease)
|
|
|
Acquisition
|
|
|
Disposal
|
|
|
Transfer
|
|
|
Amortization
|
|
|
Impairment
|
|
|
Balance
|
|
|
Goodwill
|
|
W
|
1,684,357
|
|
|
W
|
481,106
|
|
|
W
|
1,305
|
|
|
W
|
(55
|
)
|
|
W
|
1,197
|
|
|
W
|
(267,078
|
)
|
|
W
|
(1,093
|
)
|
|
W
|
1,899,739
|
|
Frequency use rights
|
|
|
960,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(116,531
|
)
|
|
|
|
|
|
|
843,771
|
|
Software development costs
|
|
|
19,837
|
|
|
|
4,950
|
|
|
|
16,356
|
|
|
|
(1
|
)
|
|
|
10,769
|
|
|
|
(14,713
|
)
|
|
|
(2,625
|
)
|
|
|
34,573
|
|
Customer relationships
|
|
|
25,139
|
|
|
|
479,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,621
|
)
|
|
|
|
|
|
|
435,535
|
|
Other
|
|
|
744,327
|
|
|
|
16,255
|
|
|
|
131,680
|
|
|
|
(10,809
|
)
|
|
|
180,673
|
|
|
|
(297,085
|
)
|
|
|
(514
|
)
|
|
|
764,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
3,433,962
|
|
|
W
|
981,328
|
|
|
W
|
149,341
|
|
|
W
|
(10,865
|
)
|
|
W
|
192,639
|
|
|
W
|
(764,028
|
)
|
|
W
|
(4,232
|
)
|
|
W
|
3,978,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other increase (decrease) resulted from merger and change in
consolidated subsidiary.
The book value and residual useful lives of major intangible
assets as of December 31, 2008 are as follows (In millions
of Korean won):
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Description
|
|
Residual Useful Lives
|
|
Goodwill
|
|
W
|
1,434,898
|
|
|
Goodwill related to merger
of Shinsegi Telecomm, Inc.
|
|
11 years and 3 months
|
″
|
|
|
29,956
|
|
|
Goodwill related to merger
of Empas Corp.
|
|
3 years and 10 months
|
″
|
|
|
378,084
|
|
|
Goodwill related to acquire
of SK Broadband Co., Ltd.
|
|
19 years and 3 months
|
IMT license
|
|
|
772,762
|
|
|
Frequency use rights relating to
W-CDMA service
|
|
(note a)
|
WiBro license
|
|
|
65,699
|
|
|
WiBro service
|
|
(note b)
|
DMB license
|
|
|
5,310
|
|
|
DMB service
|
|
7 years and 6 months
|
Customer relationships
|
|
|
435,535
|
|
|
Customer relationships related
to acquisition of
SK Broadband Co., Ltd.
|
|
4 years and 9 months
|
|
|
|
(note a)
|
|
With its application for a license to provide IMT services, the
Company has a commitment to pay
W1,300,000 million to the Ministry of
Information Communication (MIC). SK IMT Co., Ltd.,
which was merged into SK Telecom on May 1, 2003, paid
W650,000 million in March 2001 and SK
Telecom is required to pay the remainder over 10 years with
an annual interest rate equal to the
3-year-
maturity government bond rate minus 0.75% (4.54% as of
December 31, 2008). The future payment obligations are
W130,000 million in 2009,
W150,000 million in 2010 and
W170,000 million in 2011. On
December 4, 2001, SK IMT Co., Ltd. received the IMT license
from MIC, and recorded the total license cost (measured
|
F-46
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
at present value) as an intangible asset. Amortization of the
IMT license commenced when the Company started its commercial
IMT service in December 2003, using the straight-line method
over the estimated useful life (13 years) of the IMT
license which expires in December 2016. The Company determined
the IMT license has a finite life, considering that renewal cost
is expected to be substantial. As of December 31, 2008, the
present value discount related to the current portion and
long-term portion of payments to be made to MIC amounts to
W805 million and
W15,416 million, respectively.
|
(note b)
|
|
The Company purchased the WiBro license from MIC on
March 30, 2005. The license period is seven years from the
purchase date. Amortization of the WiBro license commenced when
the Company started its commercial WiBro services on
June 30, 2006 using the straight line method over the
remaining useful life.
|
F-47
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Bonds as of December 31, 2006, 2007 and 2008 are as follows
(In millions of Korean won and thousands of U.S. dollars
and thousands of Japanese yen):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Rate (%)
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Domestic general bonds
|
|
2007
|
|
5.0-6.0
|
|
W
|
700,000
|
|
|
W
|
|
|
|
W
|
|
|
″
|
|
2008
|
|
5.0
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
|
|
″
|
|
2009
|
|
5.0
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
″
|
|
2010
|
|
4.0
~
6.77
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
250,000
|
|
″
|
|
2011
|
|
3.0
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
|
|
3 month Euro Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
″ (note a)
|
|
2012
|
|
Libor+0.55
|
|
|
|
|
|
|
104,166
|
|
|
|
174,236
|
|
″
|
|
2013
|
|
4.0
~
6.92
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
450,000
|
|
″
|
|
2014
|
|
5.0
|
|
|
|
|
|
|
200,000
|
|
|
|
200,000
|
|
″
|
|
2015
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
″
|
|
2016
|
|
5.0
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
200,000
|
|
″
|
|
2018
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
Unsecured private bonds
|
|
2008
|
|
6.07-6.14
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
″ (note b)
|
|
2009
|
|
6.51-7.48
|
|
|
|
|
|
|
34,584
|
|
|
|
23,205
|
|
″
|
|
2009
|
|
6.45
|
|
|
|
|
|
|
30,000
|
|
|
|
30,000
|
|
″ (note b)
|
|
2010
|
|
6.50-7.07
|
|
|
|
|
|
|
36,250
|
|
|
|
28,182
|
|
Unsecured public bonds
|
|
2008
|
|
5.50
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
″
|
|
2010
|
|
6.30-6.81
|
|
|
|
|
|
|
110,000
|
|
|
|
110,000
|
|
″
|
|
2011
|
|
9.08
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
Debentures (notes c and e)
|
|
2009
|
|
6.08
|
|
|
|
|
|
|
|
|
|
|
96,172
|
|
″ (notes c and f)
|
|
2010
|
|
8.75
~
9.25
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
″ (notes c and f)
|
|
2011
|
|
6.65
~
9.20
|
|
|
|
|
|
|
|
|
|
|
315,718
|
|
Dollar denominated bonds (US$300,000)
|
|
2011
|
|
4.25
|
|
|
278,880
|
|
|
|
281,460
|
|
|
|
377,250
|
|
Dollar denominated bonds (US$500,000) (notes c and g)
|
|
2012
|
|
7.0
|
|
|
|
|
|
|
|
|
|
|
656,251
|
|
Dollar denominated bonds (US$400,000)
|
|
2027
|
|
6.63
|
|
|
|
|
|
|
375,280
|
|
|
|
503,000
|
|
Floating rate notes
|
|
|
|
3-month
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$150,000) (note a)
|
|
2010
|
|
LIBOR rate +3.05
|
|
|
|
|
|
|
|
|
|
|
188,625
|
|
Private bonds (¥125,000)
|
|
2007
|
|
4.65
|
|
|
684
|
|
|
|
|
|
|
|
|
|
Convertible bonds (SK Telecom) (note d)
|
|
2009
|
|
|
|
|
356,356
|
|
|
|
268,415
|
|
|
|
268,415
|
|
Convertible bonds (IHQ, Inc.)
|
|
2008
|
|
|
|
|
18,356
|
|
|
|
|
|
|
|
|
|
Convertible bonds (YTN Media, Inc.)
|
|
2007
|
|
1.0
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Bond with stock purchase warrant (SK Communications Co., Ltd.)
|
|
2007
|
|
4.65
|
|
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub total
|
|
|
|
|
|
|
2,755,960
|
|
|
|
2,920,155
|
|
|
|
4,876,054
|
|
Less discounts on bonds
|
|
|
|
|
|
|
(39,422
|
)
|
|
|
(46,557
|
)
|
|
|
(77,182
|
)
|
Less conversion right adjustments
|
|
|
|
|
|
|
(46,079
|
)
|
|
|
(19,665
|
)
|
|
|
(5,733
|
)
|
Less warrant right adjustments
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
Add long-term accrued interest
|
|
|
|
|
|
|
23,854
|
|
|
|
17,256
|
|
|
|
17,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
2,694,290
|
|
|
|
2,871,189
|
|
|
|
4,810,395
|
|
Less portion due within one year
|
|
|
|
|
|
|
(698,967
|
)
|
|
|
(522,528
|
)
|
|
|
(736,003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
|
|
|
W
|
1,995,323
|
|
|
W
|
2,348,661
|
|
|
W
|
4,074,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(note a)
|
|
The 3-months
Euro Yen LIBOR rate and the
3-month
Libor rate as of December 31, 2008 are 0.83% and 1.425%,
respectively.
|
(note b)
|
|
These bonds are scheduled to repay in 3 years with a
two-year grace period.
|
(note c)
|
|
These bonds are debentures of SK Broadband Co., Ltd. which was
newly included in consolidation of accompanying consolidated
financial statements for the year ended December 31, 2008.
|
(note d)
|
|
The principal amount of these convertible bonds denominated in
U.S. dollar as of December 31, 2006, 2007 and 2008 are
US$304,240,000, US$229,160,000 and US$229,160,000, respectively.
|
(note e)
|
|
SK Broadband Co., Ltd. is required to keep the debt ratio lower
than 400% and prohibited from disposing or leasing of its
property and equipment more than
W1,000 billion in each fiscal year in
accordance with the covenant provision of related borrowings.
|
(note f)
|
|
SK Broadband Co., Ltd. is required to keep the debt ratio lower
than 1,000% and prohibited from disposing or leasing of its
property and equipment more than 20 times of its
stockholders equity in each fiscal year in accordance with
covenant provision of related borrowings.
|
(note g)
|
|
SK Broadband Co., Ltd. is required to propose tender offer to
purchase its outstanding bonds at 101% of principal if investors
other than foreign majority shareholders acquire more than 45%
equity interest in SK Broadband Co., Ltd., and its credit rating
is down-graded by designated credit rating agency (S&P,
Moodys) due to such change in management right.
|
All of the above bonds will be paid in full at maturities except
for bonds of mentioned at the above note b.
Convertible
Bonds Issued by SK Telecom
On May 27, 2004, the Company issued zero coupon convertible
bonds with a maturity of five years in the principal amount of
US$329,450,000 for US$324,923,469, with an initial conversion
price of W235,625 per share of the
Companys common stock, which was greater than market value
at the date of issuance. Subsequently, the initial conversion
price was changed to W203,516 per share in
accordance with anti-dilution protection. The Company may redeem
the principal amount after 3 years from the issuance date
if the market price exceeds 130% of the conversion price during
a predetermined period. On the other hand, the bond holders may
redeem their notes at 103.81% of the principal amount on
May 27, 2007 (3 years from the issuance date). The
conversion right may be exercised during the period from
July 7, 2004 to May 13, 2009 and the number of common
shares to be converted as of December 31, 2008 is
1,324,744 shares. Effective July 1, 2008, the
conversion price was changed from W204,636 to
W203,516 and the number of shares to be
converted was changed from 1,317,494 shares to
1,324,744 shares due to the payment of interim dividends in
accordance with the resolution of the Companys board of
directors of July 18, 2008.
Conversion of notes to common shares may be prohibited under the
Telecommunications Law or other legal restrictions which
restrains foreign governments, individuals and entities from
owning more than 49% of the Companys voting stock, if this
49% ownership limitation is violated due to the exercise of
conversion rights. In this case, the Company will pay a bond
holder as cash settlement determined at the average price of one
day after a holder exercises its conversion right or the
weighted average price for the following five business days. The
Company intends to sell treasury shares held in trust by the
Company that corresponds to the number of shares of common stock
that would have been delivered in the absence of the 49% foreign
shareholding restrictions. The Company entered into an agreement
with Credit Suisse First Boston International to reduce the
effect of fluctuation with respect to cash settlement payments
that may be more or less than the proceeds from sales of
treasury shares held in trust. Unless either previously redeemed
or converted, the notes are redeemable at 106.43% of the
principal amount at maturity.
During the year ended December 31, 2006, the convertible
bonds with a principal amount of US$25,210,000 were converted
into 136,613 shares of treasury stock (see Note 16),
and the principal amount of the convertible
F-49
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
bonds decreased from US$329,450,000 to US$304,240,000. In
addition, the consideration for conversion right (capital
surplus) decreased by W3,733 million (net
of tax effect of W1,416 million).
During the year ended December 31, 2007, the conversion
rights for the convertible bond with a principal amount of
US$75,080,000 were exercised. The Company paid
W42,962 million in cash to bond holders
with a principal amount of US$36,260,000 without delivering the
Companys common stocks due to the 49% ownership limitation
as explained above and the convertible bonds with principal
amount of US$38,820,000 were converted into 216,347 shares
of treasury stock (see Note 16). Therefore, the principal
amount of the convertible bonds decreased from US$304,240,000 to
US$229,160,000. In addition, the consideration for conversion
right (capital surplus) decreased by
W11,116 million (net of tax effect of
W4,216 million). In 2008, no conversion
right was exercised.
Convertible
Bonds and Bonds with Stock Purchase Warrants Issued by
Subsidiaries
In 2005, IHQ, Inc. (IHQ) and YTN Media, Inc.
(YTN) which were consolidated effective July 1,
2006, issued convertible bonds with the principal amount of
US$18,000,000 and W1,000 million,
respectively. As of December 31, 2006, IHQs
convertible bonds are convertible into IHQs common stock
at W7,359 (convertible rate of exchange:
1,034.70 = US$1) per share during the period from May 15,
2006 to November 15, 2008. Unless converted, these bonds
are redeemable for cash at 104.57% of the principal amount at
maturity. During the year ended December 31, 2007, all
convertible bonds were converted into common stocks, therefore
no convertible bonds are remained as of December 31, 2008.
As SK Communications Co., Ltd. merged with Etoos Group on
May 1, 2006, bonds with stock purchase warrants with the
principal amount of ¥125,000,000 were transferred to the
Company. During the year ended December 31, 2007, these
bonds were all redeemed at maturity, accordingly no bonds with
stock purchase warrants are remained as of December 31,
2008.
F-50
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-term borrowings as of December 31, 2006, 2007 and 2008
are as follows (In millions of Korean won, thousands of
U.S. dollars and thousands of Japanese yen):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
|
|
Annual Interest
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
Rate (%)
|
|
|
|
|
|
|
|
|
|
Lender
|
|
Year
|
|
(Note a)
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Shinhan Bank (note b)
|
|
2011
|
|
91 days CD yield + 0.25
|
|
W
|
200,000
|
|
|
W
|
200,000
|
|
|
W
|
200,000
|
|
Korea Development Bank
|
|
2011
|
|
91 days CD yield + 1.02
|
|
|
|
|
|
|
|
|
|
W
|
100,000
|
|
Citibank
|
|
2011
|
|
91 days CD yield + 1.20
|
|
|
|
|
|
|
|
|
|
W
|
100,000
|
|
Nonghyup
|
|
2011
|
|
91 days CD yield + 1.30
|
|
|
|
|
|
|
|
|
|
W
|
100,000
|
|
Hana Bank
|
|
2011
|
|
91 days CD yield + 1.50
|
|
|
|
|
|
|
|
|
|
W
|
150,000
|
|
Nonghyup
|
|
2011
|
|
91 days CD yield + 1.50
|
|
|
|
|
|
|
|
|
|
W
|
50,000
|
|
Shinhan Bank
|
|
2011
|
|
4.36
|
|
|
|
|
|
W
|
762
|
|
|
W
|
635
|
|
Korea Development Bank
|
|
2011
|
|
5.79
|
|
|
|
|
|
|
|
|
|
W
|
16,253
|
|
Kookmin Bank
|
|
2012
|
|
5.91
|
|
|
|
|
|
|
|
|
|
W
|
11,860
|
|
Korea Development Bank
|
|
2013
|
|
5.91
|
|
|
|
|
|
|
|
|
|
W
|
10,577
|
|
Small Business Corporation
|
|
2009
|
|
5.25
|
|
|
|
|
|
W
|
156
|
|
|
W
|
31
|
|
Calyon Bank
|
|
2013
|
|
6M Libor + 0.29
|
|
US$
|
50,000
|
|
|
US$
|
50,000
|
|
|
US$
|
50,000
|
|
DBS Bank
|
|
″
|
|
″
|
|
US$
|
25,000
|
|
|
US$
|
25,000
|
|
|
US$
|
25,000
|
|
SMBC
|
|
″
|
|
″
|
|
US$
|
25,000
|
|
|
US$
|
25,000
|
|
|
US$
|
25,000
|
|
Earthlink, Inc.
|
|
2010
|
|
10
|
|
|
|
|
|
US$
|
30,000
|
|
|
|
|
|
Industrial Bank of Korea
|
|
2008
|
|
3.50
~
3.90
|
|
¥
|
8,880
|
|
|
|
|
|
|
|
|
|
″
|
|
2009
|
|
3.11
|
|
¥
|
9,100
|
|
|
|
|
|
|
|
|
|
″
|
|
2010
|
|
2.50
~
4.00
|
|
|
|
|
|
W
|
641
|
|
|
W
|
384
|
|
Resona Bank
|
|
2010
|
|
1.85
|
|
|
|
|
|
¥
|
98,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
W
|
200,000
|
|
|
W
|
201,559
|
|
|
W
|
739,740
|
|
|
|
|
|
|
|
US$
|
100,000
|
|
|
US$
|
130,000
|
|
|
US$
|
100,000
|
|
|
|
|
|
|
|
¥
|
17,980
|
|
|
¥
|
98,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent in Korean won
|
|
|
|
|
|
W
|
293,101
|
|
|
W
|
324,346
|
|
|
W
|
865,490
|
|
Less portion due within one year
|
|
|
|
|
|
|
(75
|
)
|
|
|
(925
|
)
|
|
|
(9,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
|
|
|
W
|
293,026
|
|
|
W
|
323,421
|
|
|
W
|
856,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a)
|
|
At December 31, 2008, the
91-day CD
yield and the 6M LIBOR rate are 3.93% and 1.75%, respectively.
|
(note b)
|
|
This long-term a borrowings is classified as long-term borrowing
as the borrowing is to be rolled-over exceeding 1 year from
December 31, 2008 in accordance with the loan agreement.
|
F-51
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The repayment schedule of long-term borrowings at
December 31, 2008 is as follows (In millions of Korean won
and thousands of denominated in Yen):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Borrowing
|
|
|
|
|
|
|
|
|
|
in Foreign Currencies
|
|
|
|
|
|
|
Long-Term Borrowing
|
|
|
Foreign
|
|
|
Korean Won
|
|
|
|
|
Year Ending December 31,
|
|
in Korean Won
|
|
|
Currencies
|
|
|
Equivalent
|
|
|
Total
|
|
|
2009
|
|
W
|
9,019
|
|
|
|
|
|
|
|
|
|
|
W
|
9,019
|
|
2010
|
|
|
12,599
|
|
|
|
|
|
|
|
|
|
|
|
12,599
|
|
2011
|
|
|
710,856
|
|
|
|
|
|
|
|
|
|
|
|
710,856
|
|
2012
|
|
|
5,503
|
|
|
|
|
|
|
|
|
|
|
|
5,503
|
|
2013 and thereafter
|
|
|
1,763
|
|
|
US$
|
100,000
|
|
|
W
|
125,750
|
|
|
|
127,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
739,740
|
|
|
US$
|
100,000
|
|
|
W
|
125,750
|
|
|
W
|
865,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
SUBSCRIPTION
DEPOSITS
|
The Company receives facility guarantee deposits from
subscribers of cellular services at the subscription date. The
Company has no obligation to pay interest on these deposits and
returns all amounts to subscribers upon termination of the
subscription contract.
Long-term subscription guarantee deposits by service type held
as of December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won, except deposit per subscriber amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit per
|
|
|
|
|
|
|
|
|
|
|
Service Type
|
|
Subscriber
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Cellular
|
|
W
|
200,000
|
|
|
W
|
21,140
|
|
|
W
|
6,425
|
|
|
W
|
4,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company offers existing and new cellular subscribers the
option of obtaining credit insurance from Seoul Guarantee
Insurance Company (SGIC) in lieu of the facility
deposit. Existing subscribers who elect this option are refunded
their subscription deposits. As a result of this arrangement,
the balance of facility guarantee deposits has been decreasing.
Subscription deposits payable in current liabilities section
represents payable to subscribers who cancelled services.
F-52
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During the year ended December 31, 2005, the Company
acquired certain computer equipment and software from SK
C&C Co., Ltd. and succeeded SK C&C Co., Ltd. in
certain capital lease agreements between SK C&C Co., Ltd.
and HP Financial Service. YTN Media, Inc., which was
consolidated effective July 1, 2006, acquired certain
broadcasting equipment from HYOSUNG CAPITAL Co., Ltd. under
certain finance lease agreements. The acquisition cost of such
leased broadcasting equipment, computer equipment and software
totaled W265,625 million as of
December 31, 2008. Depreciation expense for the year ended
December 31, 2008 was
W45,807 million. The Companys
minimum future lease payments as of December 31, 2008 are
as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Lease
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Payments
|
|
|
Interest
|
|
|
Principal
|
|
|
2009
|
|
W
|
74,741
|
|
|
W
|
12,951
|
|
|
W
|
61,791
|
|
2010
|
|
|
74,650
|
|
|
|
8,401
|
|
|
|
66,249
|
|
2011
|
|
|
49,260
|
|
|
|
3,625
|
|
|
|
45,635
|
|
2012
|
|
|
28,147
|
|
|
|
758
|
|
|
|
27,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
226,798
|
|
|
W
|
25,735
|
|
|
|
201,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less portion due within one year
|
|
|
|
|
|
|
|
|
|
|
(61,790
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease liabilities
|
|
|
|
|
|
|
|
|
|
W
|
139,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company leased certain machinery and equipment under an
operating lease and the Companys minimum future lease
payments as of December 31, 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
Minimum Lease
|
|
Year Ending December 31,
|
|
Payments
|
|
|
2009
|
|
W
|
672,837
|
|
2010
|
|
|
460,046
|
|
2011
|
|
|
436,425
|
|
2012
|
|
|
410,590
|
|
2013 and thereafter
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
1,979,898
|
|
|
|
|
|
|
F-53
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
13.
|
ASSETS
AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
|
The details of monetary assets and liabilities denominated in
foreign currencies (except for bonds payable and long-term
borrowings denominated in foreign currencies described in
Notes 9 and 10) as of December 31, 2006, 2007 and
2008 are as follows (In millions of Korean won, thousands of
U.S. dollars, thousands of HK dollars, thousands of
Japanese yen, thousands of Singaporean dollars, thousands of
Euros, thousands of Great Britain pounds, thousands of Swiss
francs, thousands of Chinese Yuan, thousands of Vietnam dongs,
thousands of Canadian dollars and thousands of France francs):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currencies
|
|
|
Korean Won Equivalent
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Cash and cash equivalents
|
|
US$
|
1,330
|
|
|
US$
|
357,413
|
|
|
US$
|
7,269
|
|
|
W
|
1,236
|
|
|
W
|
335,325
|
|
|
W
|
9,140
|
|
²
|
|
|
EUR2
|
|
|
|
EUR117
|
|
|
|
EUR85
|
|
|
|
2
|
|
|
|
162
|
|
|
|
152
|
|
²
|
|
|
|
|
|
|
|
|
|
|
JPY1,313
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
Accounts receivable trade
|
|
US$
|
30,849
|
|
|
US$
|
26,818
|
|
|
US$
|
35,837
|
|
|
|
28,677
|
|
|
|
25,161
|
|
|
|
45,066
|
|
²
|
|
|
¥800
|
|
|
|
¥41,307
|
|
|
|
|
|
|
|
6
|
|
|
|
344
|
|
|
|
|
|
²
|
|
|
EUR248
|
|
|
|
EUR248
|
|
|
|
EUR187
|
|
|
|
303
|
|
|
|
343
|
|
|
|
332
|
|
²
|
|
|
|
|
|
|
CNY5,620
|
|
|
|
CNY5,620
|
|
|
|
|
|
|
|
722
|
|
|
|
1,035
|
|
Short-term loans
|
|
|
|
|
|
US$
|
2,419
|
|
|
US$
|
2,168
|
|
|
|
|
|
|
|
2,270
|
|
|
|
2,726
|
|
Accounts receivable other
|
|
US$
|
1,657
|
|
|
US$
|
965
|
|
|
US$
|
2
|
|
|
|
1,541
|
|
|
|
905
|
|
|
|
3
|
|
²
|
|
|
|
|
|
|
|
|
|
|
CNY7,888
|
|
|
|
|
|
|
|
|
|
|
|
1,452
|
|
Guarantee deposits
|
|
US$
|
17
|
|
|
US$
|
12
|
|
|
US$
|
8
|
|
|
|
16
|
|
|
|
11
|
|
|
|
9
|
|
²
|
|
|
¥21,536
|
|
|
|
¥16,912
|
|
|
|
¥17,397
|
|
|
|
168
|
|
|
|
141
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
31,949
|
|
|
W
|
365,384
|
|
|
W
|
60,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currencies
|
|
|
Korean Won Equivalent
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Accounts payable trade
|
|
|
|
|
|
US$
|
27,904
|
|
|
US$
|
22,295
|
|
|
W
|
|
|
|
W
|
26,179
|
|
|
W
|
28,036
|
|
²
|
|
|
|
|
|
|
¥1,251
|
|
|
|
¥1,251
|
|
|
|
|
|
|
|
10
|
|
|
|
17
|
|
²
|
|
|
|
|
|
|
|
|
|
|
FRF11,474
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Accounts payable other
|
|
US$
|
36,373
|
|
|
US$
|
22,596
|
|
|
US$
|
31,605
|
|
|
|
33,812
|
|
|
|
21,199
|
|
|
|
39,744
|
|
²
|
|
|
¥19,956
|
|
|
|
¥16,954
|
|
|
|
¥112,370
|
|
|
|
156
|
|
|
|
141
|
|
|
|
1,566
|
|
²
|
|
HK$
|
190
|
|
|
HK$
|
248
|
|
|
HK$
|
41
|
|
|
|
23
|
|
|
|
30
|
|
|
|
7
|
|
²
|
|
|
GBP48
|
|
|
|
GBP931
|
|
|
|
GBP38
|
|
|
|
88
|
|
|
|
1,745
|
|
|
|
70
|
|
²
|
|
SG$
|
6
|
|
|
SG$
|
27
|
|
|
SG$
|
1
|
|
|
|
4
|
|
|
|
18
|
|
|
|
1
|
|
²
|
|
|
EUR 813
|
|
|
|
EUR 588
|
|
|
|
EUR 1,116
|
|
|
|
993
|
|
|
|
812
|
|
|
|
1,983
|
|
²
|
|
|
CHF250
|
|
|
|
CHF250
|
|
|
|
|
|
|
|
190
|
|
|
|
208
|
|
|
|
|
|
²
|
|
CA$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
²
|
|
|
FRF11
|
|
|
|
FRF11
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
35,269
|
|
|
W
|
50,344
|
|
|
W
|
71,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
14.
|
CAPITAL
STOCK AND CAPITAL SURPLUS
|
The Companys outstanding capital stock consists entirely
of common stock with a par value of W500. The
number of authorized, issued and outstanding common shares as of
December 31, 2006, 2007 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Authorized shares
|
|
|
220,000,000
|
|
|
|
220,000,000
|
|
|
|
220,000,000
|
|
Issued shares
|
|
|
81,193,711
|
|
|
|
81,193,711
|
|
|
|
81,193,711
|
|
Outstanding shares, net of treasury stock
|
|
|
72,667,459
|
|
|
|
72,584,677
|
|
|
|
72,486,015
|
|
Significant changes in common stock and capital surplus in 2006,
2007 and 2008 are as follows (In millions of Korean won, except
for share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Capital
|
|
|
|
Shares Issued
|
|
|
Common Stock
|
|
|
Surplus
|
|
|
At December 31, 2005
|
|
|
82,276,711
|
|
|
|
44,639
|
|
|
|
2,969,865
|
|
Retirement of treasury stock (note a)
|
|
|
(1,083,000
|
)
|
|
|
|
|
|
|
|
|
Conversion of convertible bonds (note b)
|
|
|
|
|
|
|
|
|
|
|
(3,733
|
)
|
Transfer of stock options from capital adjustment (note c)
|
|
|
|
|
|
|
|
|
|
|
234
|
|
Equity in capital surplus changes of affiliates
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006
|
|
|
81,193,711
|
|
|
|
44,639
|
|
|
|
2,966,399
|
|
Conversion of convertible bonds (note d)
|
|
|
|
|
|
|
|
|
|
|
(11,116
|
)
|
Transfer of stock options from capital adjustment (note e)
|
|
|
|
|
|
|
|
|
|
|
3,246
|
|
Equity in capital surplus changes of affiliates
|
|
|
|
|
|
|
|
|
|
|
(2,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007
|
|
|
81,193,711
|
|
|
|
44,639
|
|
|
|
2,956,106
|
|
Decrease of conversion of convertible bonds due to change in
statutory tax rates
|
|
|
|
|
|
|
|
|
|
|
1,544
|
|
Gain on disposal of treasury stock (note f)
|
|
|
|
|
|
|
|
|
|
|
722
|
|
Equity in capital surplus changes of affiliates
|
|
|
|
|
|
|
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008
|
|
|
81,193,711
|
|
|
W
|
44,639
|
|
|
W
|
2,958,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a)
|
The Company retired 491,000 shares and 592,000 shares
of treasury stock on August 17, 2006 and September 29,
2006, respectively, and reduced retained earnings before
appropriation in accordance with Korean Commercial Code.
|
|
(note b)
|
For the year ended December 31, 2006, the convertible bonds
with principal amount of US$25,210,000 were converted into
136,163 shares of the Companys common stock. Such
conversion was settled by the Company by using its treasury
stocks. Related to this conversion transaction, the capital
surplus amount decreased by W3,733 million.
|
|
(note c)
|
For the year ended December 31, 2006, the exercisable
period for the stock options representing 43,390 shares, of
which recognized compensation costs were
W234 million, expired and the related
stock options of W234 million in capital
adjustments were transferred to capital surplus.
|
|
(note d)
|
For the year ended December 31, 2007, the convertible bonds
with principal amount of US$38,820,000 were converted into
216,347 shares of the Companys common stock. Such
conversion was settled by the
|
F-55
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
Company by using its treasury stocks (see note 16). Related
to this conversion transaction, the capital surplus amount
decreased by W11,116 million.
|
|
|
(note e) |
For the year ended December 31, 2007, the exercisable
period for the stock options representing 65,730 shares,
for which the Company recognized compensation costs of
W3,246 million, expired and the related
stock options of W3,246 million in capital
adjustments were transferred to capital surplus.
|
|
|
(note f) |
On January 23, 2008, treasury stock of 208,326 shares
with carrying value totaling
W49,401 million were sold to the
employees stock ownership association. As a result of
these transactions, tax effect of accumulated temporary
differences related to the sold treasury stocks exceeded loss on
disposal of treasury stock.
|
Retained earnings as of December 31, 2006, 2007 and 2008
are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Appropriated
|
|
W
|
6,679,235
|
|
|
W
|
7,335,037
|
|
|
W
|
8,295,037
|
|
Unappropriated
|
|
|
1,168,199
|
|
|
|
1,579,933
|
|
|
|
1,153,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
7,847,434
|
|
|
W
|
8,914,970
|
|
|
W
|
9,448,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The details of appropriated retained earnings as of
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Legal reserve
|
|
W
|
22,320
|
|
|
W
|
22,320
|
|
|
W
|
22,320
|
|
Reserve for improvement of financial structure
|
|
|
33,000
|
|
|
|
33,000
|
|
|
|
|
|
Reserve for loss on disposal of treasury stock
|
|
|
477,182
|
|
|
|
255,984
|
|
|
|
255,984
|
|
Reserve for research and manpower development
|
|
|
880,595
|
|
|
|
872,595
|
|
|
|
872,595
|
|
Reserve for business expansion
|
|
|
5,266,138
|
|
|
|
6,151,138
|
|
|
|
6,344,138
|
|
Reserve for technology development
|
|
|
|
|
|
|
|
|
|
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
6,679,235
|
|
|
W
|
7,335,037
|
|
|
W
|
8,295,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a. Legal
Reserve
The Korean Commercial Code requires the Company to appropriate
as a legal reserve at least 10% of cash dividends for each
accounting period until the reserve equals 50% of outstanding
capital stock. 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 capital stock.
b. Reserve
for Improvement of Financial Structure
Through 2006, the Financial Control Regulation for Listed
Companies in Korea required that at least 10% of net income (net
of accumulated deficit), and an amount equal to net gain (net of
related income tax, if any) on the disposal of property and
equipment should be appropriated as a reserve for improvement of
financial structure until the ratio of stockholders equity
to total assets reached 30%. However, this regulation was
nullified during the year ended December 31, 2007 and no
such requirement exists as of December 31, 2007 and 2008.
F-56
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
c. Reserves
for Loss on Disposal of Treasury Stock and Research and Manpower
Development
Reserves for loss on disposal of treasury stock and research and
manpower development were appropriated in order to recognize
certain tax deductible benefits through the early recognition of
future expenditures for tax purposes. These reserves will be
reversed from appropriated retained earnings in accordance with
the relevant tax laws. Such reversal will be included in taxable
income in the year of reversal.
d. Reserve
for Business Expansion and Technology Development
The reserve for business expansion and technology development
are voluntary and were approved by the board of directors and
stockholders.
Upon issuance of stock dividends and new common stock, and the
merger with Shinsegi Telecomm, Inc. and SK IMT Co., Ltd., the
Company acquired fractional shares totaling 77,970 shares
for W6,110 million through 2005. In
addition, the Company acquired 8,584,445 shares of treasury
stock in the market or through the trust funds for
W2,040,995 million through 2005 in order
to stabilize the market price of its stock. Meanwhile, the
Company retired 1,083,000 shares of common stock in
accordance with Korean Commercial law, which were acquired by
the Company in 2006 at W209,077 million.
As a result, retained earnings decreased by
W209,077 million. In addition, the loss on
disposal of treasury stock decreased by
W337 million for the year ended
December 31, 2007 to reflect the tax effect of change in
accumulated temporary differences related to treasury stocks
based on the prior year tax return.
In addition, during the year ended December 31, 2006 and
2007, the convertible bonds with a principal amount of US$25,210
thousand and US$75,080 thousand were converted into
136,163 shares and 216,347 shares of common stock,
respectively. Such conversion was settled by the Company by
using its treasury stock with carrying value totaling
W32,178 million and
W51,199 million, which resulted in loss on
disposal of treasury stock of
W7,887 million and gain on disposal of
treasury stock of W1,414 million,
respectively.
From November 9, 2007 through December 31, 2007, the
Company acquired 471,000 shares of treasury stock for
W118,511 million in order to stabilize the
market price of its stock in accordance with a resolution of the
board of directors on November 2, 2007. In addition, on
December 26, 2007 and January 23, 2008, treasury stock
of 171,871 shares and 208,326 shares with carrying
value totaling W40,756 million and
W49,401 million, respectively, were sold
to the employees stock ownership association. As a result
of these transactions, loss on disposal of treasury stock
decreased by W6,042 million for the year
ended December 31, 2007 and increased by
W7,155 million for the year ended
December 31, 2008.
Meanwhile, from December 2, 2008 through December 30,
2008, the Company acquired 306,988 shares of treasury stock
for W63,538 million in order to retire
them with retained earnings in accordance with a resolution of
Board of Directors on October 23, 2008.
Income tax expenses for the years ended December 31, 2006,
2007 and 2008 consist of the following (In millions of Korean
won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Currently
|
|
W
|
615,959
|
|
|
W
|
572,806
|
|
|
W
|
493,714
|
|
Changes in net deferred tax liabilities
|
|
|
(43,933
|
)
|
|
|
121,681
|
|
|
|
(194,864
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
W
|
572,026
|
|
|
W
|
694,487
|
|
|
W
|
298,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The difference between income taxes computed using the statutory
corporate income tax rates and the recorded income taxes for the
years ended December 31, 2006, 2007 and 2008 is
attributable to the following (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Income taxes at statutory income tax rate of 25% in 2006, 2007
and 2008
|
|
W
|
505,394
|
|
|
W
|
571,441
|
|
|
W
|
314,683
|
|
Resident surtax payable
|
|
|
50,539
|
|
|
|
57,144
|
|
|
|
31,468
|
|
Tax credit for investments, technology and human resource
development
|
|
|
(110,785
|
)
|
|
|
(105,819
|
)
|
|
|
(98,551
|
)
|
Special surtax for agriculture and fishery industries
|
|
|
20,183
|
|
|
|
17,855
|
|
|
|
17,528
|
|
Additional income tax (tax refund) for prior periods
|
|
|
|
|
|
|
8,148
|
|
|
|
(60,130
|
)
|
Goodwill amortization not deductible for tax purpose
|
|
|
38,447
|
|
|
|
35,382
|
|
|
|
35,382
|
|
Undistributed earnings of subsidiaries
|
|
|
1,496
|
|
|
|
5,326
|
|
|
|
3,196
|
|
Other permanent differences
|
|
|
24,717
|
|
|
|
3,664
|
|
|
|
18,045
|
|
Change in valuation allowance
|
|
|
42,035
|
|
|
|
101,346
|
|
|
|
37,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded income taxes
|
|
W
|
572,026
|
|
|
W
|
694,487
|
|
|
W
|
298,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
28.30
|
%
|
|
|
30.38
|
%
|
|
|
23.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tax effects of each type of temporary difference that gave
rise to a significant portion of the deferred tax assets and
liabilities at December 31, 2006, 2007 and 2008 are as
follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
W
|
21,701
|
|
|
W
|
17,289
|
|
|
W
|
33,073
|
|
Accrued interest income
|
|
|
(1,605
|
)
|
|
|
(2,073
|
)
|
|
|
(2,902
|
)
|
Accrued interest expense
|
|
|
|
|
|
|
|
|
|
|
21,856
|
|
Net operating loss carryforwards
|
|
|
1,121
|
|
|
|
5,406
|
|
|
|
7,606
|
|
Tax credit carryforwards
|
|
|
19
|
|
|
|
|
|
|
|
570
|
|
Other
|
|
|
28,704
|
|
|
|
15,756
|
|
|
|
(32,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets current
|
|
|
49,940
|
|
|
|
36,378
|
|
|
|
27,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(51,437
|
)
|
|
|
(42,671
|
)
|
|
|
(9,491
|
)
|
Loss on impairment of investment securities
|
|
|
33,269
|
|
|
|
41,105
|
|
|
|
99,149
|
|
Equity in losses (gains) of affiliates, net
|
|
|
3,968
|
|
|
|
(52,313
|
)
|
|
|
(3,458
|
)
|
Unrecognized deficit (undistributed earnings) of subsidiaries
|
|
|
34,005
|
|
|
|
86,497
|
|
|
|
(59,826
|
)
|
Tax free reserve for research and manpower development
|
|
|
(211,215
|
)
|
|
|
(151,259
|
)
|
|
|
(80,707
|
)
|
Tax free reserve for loss on disposal of treasury stock
|
|
|
(70,395
|
)
|
|
|
(70,396
|
)
|
|
|
|
|
Loss on valuation of foreign currency swap
|
|
|
6,188
|
|
|
|
6,188
|
|
|
|
(36,332
|
)
|
Loss on valuation of interest swap
|
|
|
125
|
|
|
|
(871
|
)
|
|
|
7,370
|
|
Loss on valuation of foreign currency swap (accumulated other
comprehensive income)
|
|
|
6,668
|
|
|
|
6,668
|
|
|
|
(1,490
|
)
|
Gain on conversion of convertible bond
|
|
|
|
|
|
|
(102,613
|
)
|
|
|
(82,091
|
)
|
Consideration for conversion right
|
|
|
(17,086
|
)
|
|
|
(12,870
|
)
|
|
|
(11,325
|
)
|
Equity in other comprehensive income of affiliates, net
|
|
|
(34,077
|
)
|
|
|
7,879
|
|
|
|
22,960
|
|
Unrealized loss (gain) on valuation of long-term investment
securities (accumulated other comprehensive income)
|
|
|
(163,992
|
)
|
|
|
(617,020
|
)
|
|
|
(123,636
|
)
|
Loss (Gain) on foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
(34,773
|
)
|
Net operating loss carryforwards
|
|
|
66,319
|
|
|
|
183,053
|
|
|
|
137,348
|
|
Tax credit carryforwards
|
|
|
48
|
|
|
|
35,399
|
|
|
|
39,345
|
|
Other
|
|
|
8,801
|
|
|
|
28,864
|
|
|
|
86,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(388,811
|
)
|
|
|
(654,360
|
)
|
|
|
(50,896
|
)
|
Valuation allowance for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
183
|
|
|
|
236
|
|
|
|
(11,686
|
)
|
Net operating loss carryforwards
|
|
|
(60,142
|
)
|
|
|
(182,726
|
)
|
|
|
(137,348
|
)
|
Equity in losses of affiliates and unrecognized deficit of
subsidiaries
|
|
|
(73,082
|
)
|
|
|
(161,081
|
)
|
|
|
(87,314
|
)
|
Loss (Gain) on foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
(34,773
|
)
|
Loss on impairment of investment securities
|
|
|
|
|
|
|
|
|
|
|
(18,387
|
)
|
Other
|
|
|
(8,132
|
)
|
|
|
(39,541
|
)
|
|
|
(63,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities non-current
|
|
W
|
(529,984
|
)
|
|
W
|
(1,037,472
|
)
|
|
W
|
(403,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The net operating loss carryforwards and tax credit
carryforwards of the Companys certain subsidiaries which
are expected to Reutilized as of December 31, 2008 which
are expected to Reutilized will expire as follows (In millions
of Korean won):
|
|
|
|
|
|
|
|
|
|
|
Net Operating Loss
|
|
|
Tax Credit
|
|
Year Ending December 31,
|
|
Carryforwards
|
|
|
Carryforwards
|
|
|
2009
|
|
W
|
4
|
|
|
W
|
570
|
|
2010
|
|
|
|
|
|
|
514
|
|
2011
|
|
|
|
|
|
|
328
|
|
2012
|
|
|
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
4
|
|
|
W
|
1,635
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets (liabilities) added to (deducted from)
capital surplus or accumulated other comprehensive income as of
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Consideration for conversion right
|
|
W
|
(17,086
|
)
|
|
W
|
(12,870
|
)
|
|
W
|
(11,325
|
)
|
Gain on disposal of treasury stock
|
|
|
(38,341
|
)
|
|
|
(36,339
|
)
|
|
|
(28,368
|
)
|
Equity in capital adjustments of affiliates
|
|
|
|
|
|
|
|
|
|
|
4,677
|
|
Stock option
|
|
|
|
|
|
|
(99
|
)
|
|
|
|
|
Unrealized loss (gain) on valuation of long-term investment
securities, net
|
|
|
(162,847
|
)
|
|
|
(616,996
|
)
|
|
|
(125,620
|
)
|
Equity in other comprehensive income of affiliates, net
|
|
|
(41,403
|
)
|
|
|
(716
|
)
|
|
|
(12,438
|
)
|
Loss on valuation of foreign currency swap
|
|
|
6,668
|
|
|
|
6,668
|
|
|
|
4,032
|
|
Loss (gain) on valuation of interest rate swap
|
|
|
125
|
|
|
|
(871
|
)
|
|
|
7,370
|
|
Foreign-based operations translation adjustment
|
|
|
(22
|
)
|
|
|
(32
|
)
|
|
|
193
|
|
Retained Earnings
|
|
|
|
|
|
|
30
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
(252,906
|
)
|
|
W
|
(661,225
|
)
|
|
W
|
(161,449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Details of comprehensive income for the years ended
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
Profit and
|
|
|
|
|
|
Profit and
|
|
|
|
|
|
Profit and
|
|
|
|
|
|
|
Loss Effect
|
|
|
Tax Effect
|
|
|
Loss Effect
|
|
|
Tax Effect
|
|
|
Loss Effect
|
|
|
Tax Effect
|
|
|
Net income
|
|
W
|
1,449,552
|
|
|
|
|
|
|
W
|
1,562,265
|
|
|
|
|
|
|
W
|
972,338
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on valuation of long-term investment securities,
net
|
|
|
471,321
|
|
|
W
|
(178,814
|
)
|
|
|
1,195,385
|
|
|
W
|
(454,149
|
)
|
|
|
(1,216,771
|
)
|
|
W
|
491,376
|
|
Equity in other comprehensive income of affiliates, net
|
|
|
45,956
|
|
|
|
(17,282
|
)
|
|
|
(105,597
|
)
|
|
|
40,687
|
|
|
|
(70,490
|
)
|
|
|
(11,722
|
)
|
Foreign-based operations translation adjustment
|
|
|
(19,737
|
)
|
|
|
(24
|
)
|
|
|
4,162
|
|
|
|
(10
|
)
|
|
|
60,262
|
|
|
|
226
|
|
Gain (loss) on valuation of currency swap, net
|
|
|
(2,311
|
)
|
|
|
1,291
|
|
|
|
4,671
|
|
|
|
|
|
|
|
20,360
|
|
|
|
(2,636
|
)
|
Gain (loss) on valuation of interest rate swap, net
|
|
|
(329
|
)
|
|
|
125
|
|
|
|
2,627
|
|
|
|
(996
|
)
|
|
|
(28,427
|
)
|
|
|
8,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
494,900
|
|
|
W
|
(194,704
|
)
|
|
|
1,101,248
|
|
|
W
|
(414,468
|
)
|
|
|
(1,235,066
|
)
|
|
W
|
485,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
W
|
1,944,452
|
|
|
|
|
|
|
W
|
2,663,513
|
|
|
|
|
|
|
W
|
(262,728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority interests
|
|
W
|
1,946,391
|
|
|
|
|
|
|
W
|
2,750,124
|
|
|
|
|
|
|
W
|
(19,347
|
)
|
|
|
|
|
Minority interests
|
|
|
(1,939
|
)
|
|
|
|
|
|
|
(86,611
|
)
|
|
|
|
|
|
|
(243,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
1,944,452
|
|
|
|
|
|
|
W
|
2,663,513
|
|
|
|
|
|
|
W
|
(262,728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operation per share and net income
per share for the years ended December 31, 2006, 2007 and
2008 are computed as follows (In millions of Korean won, except
for share data):
Net
income from continuing operation per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Net income from continuing operation attributable to the
majority interests
|
|
W
|
1,451,491
|
|
|
W
|
1,681,369
|
|
|
W
|
1,197,182
|
|
Weighted average number of common shares outstanding
|
|
|
73,305,026
|
|
|
|
72,650,909
|
|
|
|
72,765,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
W
|
19,801
|
|
|
W
|
23,143
|
|
|
W
|
16,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-61
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Net income from continuing operation attributable to the
majority interests for the years ended December 31, 2006,
2007 and 2008 are computed as follows (In millions of Korean
won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Net income attributable to the majority interests
|
|
W
|
1,451,491
|
|
|
W
|
1,648,876
|
|
|
W
|
1,215,719
|
|
The majority interests portion of net loss(income) from
discontinued operation attributable to the majority interests
|
|
|
|
|
|
|
32,493
|
|
|
|
(18,537
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operation attributable to the
majority interests
|
|
|
1,451,491
|
|
|
|
1,681,369
|
|
|
|
1,197,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Net income attributable to the majority interests
|
|
W
|
1,451,491
|
|
|
W
|
1,648,876
|
|
|
W
|
1,215,719
|
|
Weighted average number of common shares outstanding
|
|
|
73,305,026
|
|
|
|
72,650,909
|
|
|
|
72,765,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
W
|
19,801
|
|
|
W
|
22,696
|
|
|
W
|
16,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average number of common shares outstanding for
2006, 2007 and 2008 is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
Number
|
|
|
|
Date
|
|
Shares
|
|
|
Days
|
|
of Shares
|
|
|
For 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2006
|
|
|
|
|
82,276,711
|
|
|
365/365
|
|
|
82,276,711
|
|
Treasury stock, at the beginning of the year
|
|
|
|
|
(8,662,415
|
)
|
|
365/365
|
|
|
(8,662,415
|
)
|
Retirement of treasury stock
|
|
(note a)
|
|
|
(1,083,000
|
)
|
|
|
|
|
(373,546
|
)
|
Conversion of convertible bonds
|
|
(note b)
|
|
|
136,163
|
|
|
|
|
|
64,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
72,667,459
|
|
|
|
|
|
73,305,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2007
|
|
|
|
|
81,193,711
|
|
|
365/365
|
|
|
81,193,711
|
|
Treasury stock, at the beginning of the year
|
|
|
|
|
(8,526,252
|
)
|
|
365/365
|
|
|
(8,526,252
|
)
|
Acquisition of treasury stock
|
|
(note c)
|
|
|
(471,000
|
)
|
|
28/365
|
|
|
(36,337
|
)
|
Conversion of convertible bonds
|
|
(note d)
|
|
|
216,347
|
|
|
29/365
|
|
|
16,962
|
|
Disposal of treasury stock
|
|
|
|
|
171,871
|
|
|
6/365
|
|
|
2,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
72,584,677
|
|
|
|
|
|
72,650,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2008
|
|
|
|
|
81,193,711
|
|
|
366/366
|
|
|
81,193,711
|
|
Treasury stock, at the beginning of the year
|
|
|
|
|
(8,609,034
|
)
|
|
366/366
|
|
|
(8,609,034
|
)
|
Acquisition of treasury stock
|
|
(note c)
|
|
|
(306,988
|
)
|
|
|
|
|
(14,924
|
)
|
Disposal of treasury stock
|
|
|
|
|
208,326
|
|
|
344/366
|
|
|
195,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
72,486,015
|
|
|
|
|
|
72,765,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(note a)
|
The Company retired treasury stocks which were acquired on two
different dates during the year ended December 31, 2006,
and weighted number of shares was calculated considering each
transaction date.
|
|
(note b)
|
Treasury stocks were used to settle the conversion of the
convertible bonds on several different dates during the year
ended December 31, 2006, and weighted number of shares was
calculated considering each transaction date.
|
|
(note c)
|
The Company acquired treasury stocks on many different dates for
the years ended December 31, 2007 and 2008, and weighted
number of shares was calculated considering each transaction
date.
|
|
(note d)
|
Treasury stocks were used to settle the conversion of the
convertible bonds on several different dates during the year
ended December 31, 2007, and weighted number of shares was
calculated considering each transaction date.
|
Diluted net income from continuing operation per share and
diluted net income per share amounts for the years ended
December 31, 2006, 2007 and 2008 are computed as follows
(In millions of Korean won, except for share data):
Diluted
net income from continuing operation per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Adjusted net income from continuing operation attributable to
the majority interests
|
|
W
|
1,464,768
|
|
|
W
|
1,694,171
|
|
|
W
|
1,208,332
|
|
Adjusted weighted average number of common shares outstanding
|
|
|
75,025,926
|
|
|
|
74,263,655
|
|
|
|
74,090,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
W
|
19,523
|
|
|
W
|
22,813
|
|
|
W
|
16,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Adjusted net income attributable to the majority interest
|
|
W
|
1,464,768
|
|
|
W
|
1,661,678
|
|
|
W
|
1,226,869
|
|
Adjusted weighted average number of common shares outstanding
|
|
|
75,025,926
|
|
|
|
74,263,655
|
|
|
|
74,090,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
W
|
19,523
|
|
|
W
|
22,375
|
|
|
W
|
16,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-63
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The numerator and denominator of basic and diluted income per
share for the years ended December 31, 2006, 2007 and 2008
are as follows:
Diluted
net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Weighted
|
|
|
|
|
|
|
Net Income
|
|
|
Number of Shares
|
|
|
Per-Share Amount
|
|
|
|
(In Millions of
|
|
|
|
|
|
(in Korean Won)
|
|
|
|
Korean Won)
|
|
|
|
|
|
|
|
|
For 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
W
|
1,451,491
|
|
|
|
73,305,026
|
|
|
W
|
19,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of stock option (note a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of convertible bonds (note b)
|
|
|
13,277
|
|
|
|
1,720,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
W
|
1,464,768
|
|
|
|
75,025,926
|
|
|
W
|
19,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
W
|
1,648,876
|
|
|
|
72,650,909
|
|
|
W
|
22,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of stock option (note a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of convertible bonds (note b)
|
|
|
12,802
|
|
|
|
1,612,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
W
|
1,661,678
|
|
|
|
74,263,655
|
|
|
W
|
22,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
W
|
1,215,719
|
|
|
|
72,765,557
|
|
|
W
|
16,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of stock option (note a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of convertible bonds (note b)
|
|
|
11,150
|
|
|
|
1,324,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
W
|
1,226,869
|
|
|
|
74,090,301
|
|
|
W
|
16,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a)
|
For the years ended December 31, 2006, 2007 and 2008, the
outstanding stock options did not have a dilutive effect because
the exercise price exceeded the average market price of common
stock for the years ended December 31, 2006, 2007 and 2008,
respectively.
|
|
(note b)
|
The effect of convertible bonds is increase in net income
related to interest expenses that would not have incurred, and
increase in the weighted average number of common shares
outstanding related to common shares that would have been
issued, assuming that the conversion of convertible bonds were
made at the beginning of the period.
|
Net income from discontinued operation per share for the years
ended December 31, 2006, 2007 and 2008 are computed as follows
(In Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Net income(loss) attributable to the majority interest
|
|
W
|
|
|
|
W
|
(447
|
)
|
|
W
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-64
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Details of dividends which were declared for the years ended
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won, except for share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
|
Number of Shares
|
|
|
Face
|
|
|
Dividend
|
|
|
|
|
Year
|
|
|
Dividend Type
|
|
Outstanding
|
|
|
Value
|
|
|
Ratio
|
|
|
Dividends
|
|
|
|
2006
|
|
|
Cash dividends (interim)
|
|
|
73,713,657
|
|
|
W
|
500
|
|
|
|
200
|
%
|
|
W
|
73,714
|
|
|
|
|
|
Cash dividends (year-end)
|
|
|
72,667,459
|
|
|
W
|
500
|
|
|
|
1,400
|
%
|
|
|
508,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
582,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
Cash dividends (interim)
|
|
|
72,667,459
|
|
|
W
|
500
|
|
|
|
200
|
%
|
|
W
|
72,668
|
|
|
|
|
|
Cash dividends (year-end)
|
|
|
72,584,677
|
|
|
W
|
500
|
|
|
|
1,680
|
%
|
|
|
609,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
682,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
Cash dividends (interim)
|
|
|
72,793,003
|
|
|
W
|
500
|
|
|
|
200
|
%
|
|
W
|
72,793
|
|
|
|
|
|
Cash dividends (year-end)
|
|
|
72,524,203
|
|
|
W
|
500
|
|
|
|
1,680
|
%
|
|
|
609,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
681,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payout ratios for the years ended December 31,
2006, 2007 and 2008 are as follows (In millions of Korean won
and %):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Dividends
|
|
W
|
582,386
|
|
|
W
|
682,379
|
|
|
W
|
681,996
|
|
Net income attributable to the majority interest
|
|
|
1,451,491
|
|
|
|
1,648,876
|
|
|
|
1,215,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payout ratio
|
|
|
40.12
|
%
|
|
|
41.38
|
%
|
|
|
56.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends yield ratios for the years ended December 31,
2006, 2007 and 2008 are as follows (In Korean won and %):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Dividend per share
|
|
W
|
8,000
|
|
|
W
|
9,400
|
|
|
W
|
9,400
|
|
Stock price at the year-end
|
|
|
222,500
|
|
|
|
249,000
|
|
|
|
209,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends yield ratio
|
|
|
3.60
|
%
|
|
|
3.78
|
%
|
|
|
4.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a. At December 31, 2008, the Company has guarantee
deposits restricted for their checking accounts totaling
W75 million, and deposits restricted for
charitable trust for the benefit of the public amounting to
W10,000 million of which maturity is
February 8, 2009.
b. At December 31, 2008, certain short-term and
long-term bank deposits totaling
W112,658 million are secured for payment
guarantee of short-term borrowings, accounts payable, operating
lease and other.
|
|
22.
|
COMMITMENTS
AND CONTINGENCIES
|
a. As of December 31, 2008, we had credit lines with
several local banks that provided for borrowings of up to
W2,171.8 billion, of which
W1,358.5 billion was outstanding and
W813.3 billion was available for borrowing.
b. SK Broadband Co., Ltd., a subsidiary of the Company,
agreed to provide guarantees for loans of Broadband Media Co.,
Ltd. For the guarantee, SK Broadband Co., Ltd. has provided its
properties as collaterals of
F-65
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
W52,000 million to Korea Exchange Bank,
W52,000 million to Woori Bank,
W26,000 million to ABN AMRO Bank,
W39,000 million to Kookmin Bank and
W26,000 million to Korean Federation of
Community Credit Cooperatives, respectively, and its short-term
financial instruments as collaterals of
W11,200 million to Korean Federation of
Community Credit Cooperatives, respectively,
W15,000 million to Hana Bank,
W10,000 million to Nonghyup Agricultural
Cooperative Federation, W35,000 million to
Korea Exchange Bank, W20,000 million to
Kookmin Bank, and W10,000 million to Woori
Bank, respectively, as of December 31, 2008.
SK Broadband Co., Ltd. has provided guarantees for loans of
Broadband CS Co., Ltd., Broadband Seoul CS Co., Ltd., Broadband
Metropolitan CS Co., Ltd., Broadband Gwangju CS Co., Ltd., and
Broadband Busan CS Co, Ltd. For the guarantee, the Company has
provided its properties as collaterals of
W32,500 million to Kookmin Bank as of
December 31, 2008.
SK Broadband Co., Ltd.s board of directors resolved to
provide its time deposit up to
W20,000 million as collateral in order to
encourage members of Employee Stock Purchase Association (ESPA)
to contribute money to the ESPA, which will be used to purchase
the Companys shares in the market. In accordance with such
resolution, the Company has pledged its time deposit of
W8,565 million as of December 31, 2008
In addition, SK Broadband Co., Ltd. has provided its buildings
as mortgage of W26,300 million for leasing
of office.
c. Broadband CS Co., Ltd., a subsidiary of the Company, has
provided guarantees for loans of Broadband Seoul CS Co., Ltd.,
Broadband Metropolitan CS Co., Ltd., Broadband Gwangju CS Co.,
Ltd., and Broadband Busan CS Co., Ltd. For the guarantee,
Broadband CS Co., Ltd. has provided its properties as
collaterals of W6,500 million to Kookmin
Bank as of December 31, 2008
d. CU Media Inc., a subsidiary of the Company, has provided
its land and building with carrying amount of
W8,030 million and short-term financial
instrument W1,053 million as collateral to
Woori Bank for its short and long-term borrowings as of
December 31, 2008. In addition, CU Media Inc., has provided
to a blank note as collateral Hyosung Capital Co., Ltd. for its
capital lease.
e. TU Media Corp., a subsidiary of the Company, has
provided its broadcasting devices with carrying amount of
W43,267 million as collateral to Korea
Development Bank for its bond payables as of December 31,
2008. In addition, TU Media Corp., has provided its short-term
financial instrument of W30 million as
collateral to Hana Bank for the guarantee of wire transfer.
f. Commerce Planet Co., Ltd., a subsidiary of the Company,
has provided its short-term financial instrument of
W20 million as collateral to LG Household
and Healthcare, Ltd. for payment guarantee as of
December 31, 2008.
g. PAXNet Co., Ltd., a subsidiary of the Company, has
provided its short-term financial instrument of
W1,400 million as collateral to Korea
Investment Mutual Savings Bank in connection with its
security-backed loan business as of December 31, 2008.
h. Broadband D&M Co., Ltd. has provided its buildings
as mortgage of W1,791 million for leasing
of office as of December 31, 2008. In addition, note
receivables indorsed by Broadband D&M Co., Ltd., which has
not matured as of December 31, 2008, totaled
W1,087 million.
i. As of December 31, 2008, customers of SK Broadband
Co., Ltd. filed a lawsuit of
W23,031 million against SK Broadband Co.,
Ltd. for violating customers privacy. The ultimate outcome
of the lawsuit cannot presently be determined.
F-66
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2008, certain of the Companys assets
are insured with local insurance companies as follows (In
millions of Korean won and thousands of U.S. dollars):
|
|
|
|
|
|
|
|
|
|
|
Asset
|
|
Risk
|
|
Book Value
|
|
|
Coverage
|
|
|
Inventories and
|
|
|
|
|
|
|
|
US$
|
56,115
|
|
property and equipment
|
|
Fire and comprehensive liability
|
|
W
|
5,647,251
|
|
|
W
|
9,502,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.
|
TRANSACTIONS
WITH AFFILIATED COMPANIES
|
Significant related party transactions for the years ended
December 31, 2006, 2007 and 2008, and account balances as
of December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
SK Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
W
|
2,158
|
|
|
W
|
|
|
|
W
|
|
|
Commissions paid and other expense
|
|
|
40,694
|
|
|
|
|
|
|
|
177
|
|
Commission income and other income
|
|
|
13,877
|
|
|
|
829
|
|
|
|
313
|
|
SK Energy Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
3,001
|
|
Commissions paid and other expense
|
|
|
|
|
|
|
30,281
|
|
|
|
17,895
|
|
Commission income and other income
|
|
|
|
|
|
|
17,250
|
|
|
|
8,898
|
|
SK Engineering & Construction Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
235,872
|
|
|
|
307,702
|
|
|
|
256,548
|
|
Commissions paid and other expense
|
|
|
7,086
|
|
|
|
16,147
|
|
|
|
17,025
|
|
Commission income and other income
|
|
|
2,385
|
|
|
|
2,908
|
|
|
|
2,705
|
|
SK Networks Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
9,249
|
|
|
|
39,415
|
|
|
|
28,972
|
|
Commissions paid, leased line and other expense
|
|
|
490,437
|
|
|
|
710,228
|
|
|
|
753,036
|
|
Sales of handsets and other income
|
|
|
11,897
|
|
|
|
15,754
|
|
|
|
32,052
|
|
SK Telesys Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
231,233
|
|
|
|
264,150
|
|
|
|
270,133
|
|
Commissions paid and other expenses
|
|
|
6,567
|
|
|
|
13,027
|
|
|
|
9,078
|
|
Commission income and other income
|
|
|
2,170
|
|
|
|
2,687
|
|
|
|
1,967
|
|
SKC:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
21
|
|
|
|
21
|
|
|
|
26
|
|
Commission income and other income
|
|
|
1,155
|
|
|
|
1,135
|
|
|
|
1,005
|
|
Innoace Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
23,986
|
|
|
|
23,694
|
|
|
|
27,153
|
|
Commissions paid and other expenses
|
|
|
7,447
|
|
|
|
9,839
|
|
|
|
9,389
|
|
Commission income and other income
|
|
|
218
|
|
|
|
242
|
|
|
|
269
|
|
F-67
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
SK C&C Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
215,820
|
|
|
|
205,677
|
|
|
|
232,238
|
|
Commissions paid and other expenses
|
|
|
287,647
|
|
|
|
251,401
|
|
|
|
273,279
|
|
Commission income and other income
|
|
|
8,795
|
|
|
|
9,470
|
|
|
|
12,681
|
|
SK Networks Service:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
|
|
|
|
20,599
|
|
WALKERHILL Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
|
|
|
|
17,881
|
|
Commission income and other income
|
|
|
|
|
|
|
|
|
|
|
983
|
|
OK Cashbag Service Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
1,906
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
|
|
|
|
9,978
|
|
Commission income and other income
|
|
|
|
|
|
|
|
|
|
|
417
|
|
SK Mobile Energy., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
4,167
|
|
Commission income and other income
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Infosec Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
1,270
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
|
|
|
|
3,076
|
|
Commission income and other income
|
|
|
|
|
|
|
|
|
|
|
11
|
|
TU Media Corp. (note a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
573
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
1,798
|
|
|
|
|
|
|
|
|
|
Commission income and other income
|
|
|
57,866
|
|
|
|
|
|
|
|
|
|
AirCross Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
19,494
|
|
|
|
|
|
|
|
9,158
|
|
Commission income and other income
|
|
|
616
|
|
|
|
|
|
|
|
375
|
|
Pantech Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
400
|
|
|
|
|
|
|
|
|
|
Commission income and other income
|
|
|
16,605
|
|
|
|
|
|
|
|
|
|
Helio, Inc. & Helio, LLC:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
1,087
|
|
|
|
|
|
|
|
|
|
Commission income and other income
|
|
|
18,243
|
|
|
|
|
|
|
|
|
|
SK Marketing & Company Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
|
|
|
|
49,826
|
|
Commission income and other income
|
|
|
|
|
|
|
|
|
|
|
6,769
|
|
JYP Entertainment Corp.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
1,010
|
|
|
|
1,248
|
|
|
|
3,655
|
|
Commission income and other income
|
|
|
108
|
|
|
|
|
|
|
|
84
|
|
F-68
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
SK China Company Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
|
|
|
|
5,826
|
|
SK Telecom China Holdings Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
7,655
|
|
|
|
|
|
SK USA, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
2,303
|
|
|
|
2,617
|
|
|
|
3,032
|
|
CDMA Mobile Phone Center:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission income and other income
|
|
|
7,643
|
|
|
|
16,564
|
|
|
|
20,627
|
|
WS Entertainment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
295
|
|
|
|
1,081
|
|
|
|
|
|
Commission income and other income
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Others:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid and other expenses
|
|
|
|
|
|
|
4,444
|
|
|
|
896
|
|
Commission income and other income
|
|
|
1,006
|
|
|
|
|
|
|
|
468
|
|
Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
SK Engineering & Construction Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
W
|
258
|
|
|
W
|
310
|
|
|
W
|
203
|
|
Accounts payable
|
|
|
1,635
|
|
|
|
8,870
|
|
|
|
1,164
|
|
Guarantee deposits received
|
|
|
942
|
|
|
|
1,135
|
|
|
|
1,076
|
|
SK Networks Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
780
|
|
|
|
2,182
|
|
|
|
1,069
|
|
Guarantee deposits
|
|
|
113
|
|
|
|
113
|
|
|
|
330
|
|
Accounts payable
|
|
|
71,160
|
|
|
|
71,311
|
|
|
|
71,795
|
|
Guarantee deposits received
|
|
|
3,123
|
|
|
|
3,432
|
|
|
|
3,963
|
|
SK Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
5,058
|
|
|
|
775
|
|
|
|
46
|
|
Guarantee deposits
|
|
|
291
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
7,999
|
|
|
|
|
|
|
|
|
|
Guarantee deposits received
|
|
|
6,465
|
|
|
|
|
|
|
|
|
|
SK Energy Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
2,959
|
|
|
|
109
|
|
Guarantee deposits
|
|
|
|
|
|
|
134
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
4,404
|
|
|
|
3,548
|
|
Guarantee deposits received
|
|
|
|
|
|
|
248
|
|
|
|
|
|
SK Telesys Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
34
|
|
|
|
31
|
|
|
|
486
|
|
Accounts payable
|
|
|
51,663
|
|
|
|
30,205
|
|
|
|
20,533
|
|
SKC:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
121
|
|
|
|
71
|
|
|
|
81
|
|
F-69
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Innoace Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
26
|
|
|
|
10
|
|
Accounts payable
|
|
|
13,574
|
|
|
|
7,223
|
|
|
|
4,315
|
|
Guarantee deposits received
|
|
|
2,291
|
|
|
|
2,291
|
|
|
|
2,444
|
|
SK C&C Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
411
|
|
|
|
2,477
|
|
Guarantee deposits
|
|
|
|
|
|
|
|
|
|
|
140
|
|
Accounts payable
|
|
|
88,056
|
|
|
|
135,297
|
|
|
|
93,680
|
|
Guarantee deposits received
|
|
|
346
|
|
|
|
346
|
|
|
|
24
|
|
WALKERHILL Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
|
|
|
|
529
|
|
Guarantee deposits
|
|
|
|
|
|
|
|
|
|
|
900
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
4,011
|
|
TU Media Corp. (note a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
886
|
|
|
|
|
|
|
|
|
|
Guarantee deposits received
|
|
|
3,016
|
|
|
|
|
|
|
|
|
|
AirCross Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
|
|
|
|
57
|
|
Accounts payable
|
|
|
3,513
|
|
|
|
|
|
|
|
397
|
|
Guarantee deposits received
|
|
|
226
|
|
|
|
|
|
|
|
276
|
|
Pantech Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
440
|
|
|
|
|
|
|
|
|
|
ifilm Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
5,724
|
|
|
|
|
|
SK China Company Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
1,428
|
|
CDMA Mobile Phone Center:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
27,063
|
|
|
|
38,756
|
|
|
|
80,734
|
|
Accounts payable
|
|
|
67
|
|
|
|
65
|
|
|
|
87
|
|
SK Marketing & Company Co., Ltd.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
|
|
|
|
1,704
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
22,866
|
|
Guarantee deposits received
|
|
|
|
|
|
|
|
|
|
|
248
|
|
Others:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade and other
|
|
|
|
|
|
|
1,255
|
|
|
|
830
|
|
Accounts payable
|
|
|
588
|
|
|
|
413
|
|
|
|
774
|
|
Guarantee deposits received
|
|
|
|
|
|
|
|
|
|
|
133
|
|
|
|
|
(note a) |
|
These companies were included in the consolidation from the year
ended December 31, 2007 or 2008, accordingly transactions
and balances with the Company are eliminated. |
F-70
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
25.
|
COMPENSATION
FOR THE KEY MANAGEMENT
|
The Company considers registered directors who have substantial
roles and responsibility for planning, operating, and
controlling of the business as key management, and the
considerations given to the key management for the years ended
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Payee (including outside directors)
|
|
|
12 registered directors
|
|
|
|
8 registered directors
|
|
|
|
7 registered directors
|
|
Payroll
|
|
W
|
4,472
|
|
|
W
|
4,786
|
|
|
W
|
4,405
|
|
Severance indemnities
|
|
|
935
|
|
|
|
722
|
|
|
|
556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
5,407
|
|
|
W
|
5,508
|
|
|
W
|
4,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition, on March 8, 2002, the Company granted stock
options to its eight key members of the management, representing
15,110 shares at an exercise price of
W267,000 per share. The stock options fully
vested after three years from the date of grant and are
exercisable for two years upon vesting. During the first quarter
of 2007, the exercisable period elapsed and these stock options
representing 15,110 shares have expired.
|
|
a.
|
Provision
for point program
|
The Company, for its marketing purposes, grants Rainbow Points
and Point Box Points (the Points) to its subscribers
based on their usage of the Companys services.
Points provision was provided based on the historical
usage experience and the Companys marketing policy. Such
provision as of December 31, 2006, 2007 and 2008 totaled
W52,593 million,
W27,668 million and
W24,889 million was recorded as accrued
expenses or other non-current liabilities in accordance with the
expected points usage duration since balance sheet date.
Details of change in the provisions for such points for the
years ended December 31, 2006, 2007 and 2008 are as follows
(In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Beginning balance
|
|
W
|
52,172
|
|
|
W
|
52,593
|
|
|
W
|
27,668
|
|
Increase (provision)
|
|
|
10,757
|
|
|
|
15,137
|
|
|
|
12,430
|
|
Decrease (used and reversal)
|
|
|
(10,336
|
)
|
|
|
(40,062
|
)
|
|
|
(15,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
W
|
52,593
|
|
|
W
|
27,668
|
|
|
W
|
24,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Points expire after 5 years; thus, all unused points are
expired on their fifth anniversary. The expected year when
unused points as of December 31, 2008 are expected to be
used and the respective estimated monetary amount to be paid in
a given year are as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
Expected Year
|
|
Estimated Amount to be Paid
|
|
|
|
|
of the Usage (Note a)
|
|
in Nominal Value (Note a)
|
|
|
Current Value
|
|
|
2009
|
|
W
|
11,185
|
|
|
W
|
10,502
|
|
2010
|
|
|
7,307
|
|
|
|
6,442
|
|
2011
|
|
|
4,791
|
|
|
|
3,967
|
|
2012
|
|
|
3,156
|
|
|
|
2,453
|
|
2013
|
|
|
2,089
|
|
|
|
1,525
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
W
|
28,528
|
|
|
W
|
24,889
|
|
|
|
|
|
|
|
|
|
|
F-71
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(note a) |
|
The above expected year of the usage and the current value of
the estimated amount to be paid are estimated based on the
historical usage experience. |
b. Provision
for handset subsidy
The Company provides provision for handset subsidies to be
provided to the subscribers who purchase handsets on installment
basis. Refer to Note 2.(ab). Such provision was recorded as
accrued expenses or other non-current liabilities in accordance
with the expected points when the subsidies are paid. Details of
change in the provision for handset subsidies for the year ended
December 31, 2008 are as follows (In millions of Korean
won):
|
|
|
|
|
|
|
2008
|
|
|
Beginning balance
|
|
W
|
|
|
Increase (Provision)
|
|
|
433,276
|
|
Decrease (subsidy payment)
|
|
|
(93,580
|
)
|
|
|
|
|
|
Ending balance
|
|
W
|
339,696
|
|
|
|
|
|
|
The estimated monetary amount to be paid in a given year is as
follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
Expected Payment
|
|
Estimated Amount to be Paid
|
|
|
|
|
for the Year Ended December 31,
|
|
in Nominal Value
|
|
|
Current Value
|
|
|
2009
|
|
W
|
294,937
|
|
|
W
|
286,441
|
|
2010
|
|
|
57,272
|
|
|
|
53,255
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
W
|
352,209
|
|
|
W
|
339,696
|
|
|
|
|
|
|
|
|
|
|
|
|
27.
|
DERIVATIVE
INSTRUMENTS
|
a. Currency
swap contract to which the cash flow hedge accounting is
applied
The Company has entered into a
fixed-to-fixed
cross currency swap contract with Citibank, BNP Paribas and
Credit Suisse First Boston International to hedge the foreign
currency risk of unguaranteed U.S. dollar denominated bonds
with face amounts totaling US$300,000,000 at annual fixed
interest rate of 4.25% issued on April 1, 2004. As of
December 31, 2008, in connection with unsettled foreign
currency swap contract to which the cash flow hedge accounting
is applied, an accumulated loss on valuation of derivatives
amounting to W9,627 million (excluding tax
effect totaling W3,256 million and foreign
exchange translation loss arising from unguaranteed
U.S. dollar denominated bonds totaling
W32,460 million) was accounted for as
accumulated other comprehensive loss.
In addition, the Company has entered into a
fixed-to-fixed
cross currency swap contract with DBS Bank and six other banks
to hedge the foreign currency risk of U.S. dollar
denominated bonds with face amounts totaling US$500,000,000 at
annual fixed interest rate of 7.0% issued on February 1,
2005. As of December 31, 2008, in connection with unsettled
foreign currency swap contract to which the cash flow hedge
accounting is applied, an accumulated gain on valuation of
derivatives amounting to W17,077 million
(excluding foreign exchange translation loss arising from
U.S. dollar denominated bonds totaling
W159,650 million) was accounted for as
accumulated other comprehensive gain.
In addition, the Company has entered into a
floating-to-fixed
cross currency swap contract with Calyon bank to hedge the
foreign currency risk and the interest rate risk of
U.S. dollar denominated long-term borrowings with face
amounts totaling US$100,000,000 borrowed on October 10,
2006. As of December 31, 2008, in connection with unsettled
cross currency interest rate swap contract to which the cash
flow hedge accounting is applied, an accumulated loss on
valuation of derivatives amounting to
W3,515 million (net of tax effect totaling
W549 million and foreign exchange
translation loss arising from U.S. dollar denominated
long-term borrowings totaling
W30,950 million) was accounted for as
accumulated other comprehensive loss.
F-72
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In addition, the Company has entered into a
floating-to-fixed
cross currency swap contract with HSBC and SMBC Bank to hedge
the foreign currency risk and the interest rate risk of
unguaranteed Japanese yen denominated bonds with face amounts
totaling JPY12,500,000,000 issued on November 13, 2007. As
of December 31, 2008, in connection with unsettled cross
currency interest rate swap contract to which the cash flow
hedge accounting is applied, an accumulated gain on valuation of
derivatives amounting to W1,044 million
(net of tax effect totaling W1,232 million
and foreign exchange translation loss arising from unguaranteed
Japanese yen denominated bonds totaling
W70,168 million) was accounted for as
accumulated other comprehensive income.
In addition, the Company has entered into a
floating-to-fixed
cross currency swap contract with DBS and Calyon bank to hedge
the foreign currency risk and the interest rate risk of
U.S. dollar denominated bonds with face amounts totaling
US$150,000,000 borrowed on November 20, 2008. As of
December 31, 2008, in connection with unsettled cross
currency interest rate swap contract to which the cash flow
hedge accounting is applied, an accumulated gain on valuation of
derivatives amounting to W3,565 million
(net of tax effect totaling W1,006 million
and foreign exchange translation gain arising from
U.S. dollar denominated bonds totaling
W28,518 million) was accounted for as
accumulated other comprehensive income.
b. Interest
rate swap contract to which the cash flow hedge accounting is
applied
The Company has entered into a
floating-to-fixed
interest rate swap contract with Shinhan Bank to hedge the
interest rate risk of floating rate discounted bill with face
amounts totaling W200,000 million borrowed
on June 29, 2006. As of December 31, 2008, in
connection with unsettled interest rate swap contract to which
the cash flow hedge accounting is applied, an accumulated loss
on valuation of derivatives amounting to
W3,686 million (net of tax effect totaling
W1,040 million) was accounted for as
accumulated other comprehensive income.
In addition, the Company has entered into a
floating-to-fixed
interest rate swap contract with Nonghyup Bank and two other
banks to hedge the interest rate risk of long-term floating rate
borrowings with face amounts totaling
W500,000 million borrowed on July 28,
2008 between August 13, 2008. As of December 31, 2008,
in connection with unsettled interest rate swap contract to
which the cash flow hedge accounting is applied, an accumulated
loss on valuation of derivatives amounting to
W22,443 million (net of tax effect
totaling W6,330 million) was accounted for
as accumulated other comprehensive income.
c. Currency
swap contract to which the fair value hedge accounting is
applied
The Company has entered into a
fixed-to-fixed
cross currency swap contract with Hana Bank and other nine banks
to hedge the foreign currency risk of U.S. dollar
denominated equity securities of China Unicom. In connection
with unsettled foreign currency swap contract to which the fair
value hedge accounting is applied, loss on valuation of currency
swap of W12,646 million and
W190,359 million for the years ended
December 31, 2007 and 2008 was charged to current
operations.
d. Currency
swap contract to which the hedge accounting is not
applied
The Company has entered into a
fixed-to-fixed
cross currency swap contract with Credit Suisse First Boston
International to hedge foreign currency risk of unguaranteed
U.S. dollar denominated convertible bonds with face amounts
of US$329,450,000 issued on May 27, 2004. In connection
with unsettled
fixed-to-fixed
cross currency swap contract to which the hedge accounting is
not applied, loss on valuation of currency swap of
W9,258 and W623 million,
respectively, for the years ended December 31, 2006 and
2007, and gain on valuation of currency swap of
W31,361 million for the year ended
December 31, 2008, were charged to current operations.
In addition, the Company has entered into a
fixed-to-to
fixed cross currency swap contract with Hana Bank, Korea
Exchange Bank, Woori Bank, Citibank and Barclays Bank to hedge
foreign currency risk of unguaranteed U.S. dollar
denominated convertible bonds issued by China Unicom which was
acquired on July 5, 2006. In connection with unsettled
fixed-to-fixed
cross currency swap contract to which the cash flow hedge
accounting is
F-73
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
not applied, gain on valuation of currency swap of
W16,660 million for the year ended
December 31, 2006 were charged to current operations.
In addition, the Company has entered into
fixed-to-fixed
cross currency swap contract with Morgan Stanley Bank and two
other banks to hedge the foreign currency risk of unguaranteed
U.S. dollar denominated bonds with face amounts totaling
US$400,000,000 issued on July 20, 2007. In connection with
unsettled foreign currency swap contract to which the hedge
accounting is not applied, gain on valuation of currency swap of
W7,316 million and
W233,056 million for the years ended
December 31, 2007 and 2008, respectively, were charged to
current operations.
As of December 31, 2008, fair values of above derivatives
recorded in assets or liabilities and details of derivative
instruments are as follows (In thousands of U.S. dollars,
H.K. dollars, Japanese yen and millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
Designated
|
|
|
Designated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duration
|
|
as Cash
|
|
|
as Fair
|
|
|
Not
|
|
|
|
|
Type
|
|
Hedged Item
|
|
Amount
|
|
|
of Contract
|
|
Flow Hedge
|
|
|
Value Hedge
|
|
|
Designated
|
|
|
Total
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fix-to-fixed
cross
currency swap
|
|
U.S. dollar
denominated
convertible bond
|
|
US$
|
100,000
|
|
|
May 27, 2004
~
May 27, 2009
|
|
W
|
|
|
|
W
|
|
|
|
W
|
8,236
|
|
|
W
|
8,236
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fix-to-fixed
cross
currency swap
|
|
U.S. dollar
denominated bonds
|
|
US$
|
300,000
|
|
|
Mar. 23, 2004
~
Apr. 1, 2011
|
|
|
19,576
|
|
|
|
|
|
|
|
|
|
|
|
19,576
|
|
Fix-to-fixed
cross
currency swap
|
|
U.S. dollar
denominated bonds
|
|
US$
|
400,000
|
|
|
Jul. 20, 2007
~Jul. 20,
2017
|
|
|
|
|
|
|
|
|
|
|
240,372
|
|
|
|
240,372
|
|
Floating-to-fixed
cross currency
interest rate
swap
|
|
Japanese yen
denominated bonds
|
|
JPY
|
12,500,000
|
|
|
Nov. 13, 2007
~
Nov. 13, 2012
|
|
|
69,981
|
|
|
|
|
|
|
|
|
|
|
|
69,981
|
|
Floating-to-fixed
cross currency
interest rate swap
|
|
U.S. dollar
denominated long-term
borrowings
|
|
US$
|
100,000
|
|
|
Oct. 10, 2006
~
Oct. 10, 2013
|
|
|
26,886
|
|
|
|
|
|
|
|
|
|
|
|
26,886
|
|
Fix-to-fixed
cross
currency swap
|
|
U.S. dollar
denominated bonds
|
|
US$
|
500,000
|
|
|
Feb. 1, 2005
~Feb.
1, 2012
|
|
|
137,896
|
|
|
|
|
|
|
|
|
|
|
|
137,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
W
|
254,339
|
|
|
W
|
|
|
|
W
|
248,608
|
|
|
W
|
502,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fix-to-fixed
cross
currency swap
|
|
U.S. dollar
denominated
China Unicom
Equity
Securities
|
|
HK$
|
10,940,900
|
|
|
Sep. 11, 2008
~
Sep. 16, 2009
|
|
W
|
|
|
|
W
|
190,359
|
|
|
W
|
|
|
|
W
|
190,359
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fix-to-fixed
cross
currency swap
|
|
U.S. dollar
denominated bonds
|
|
US$
|
150,000
|
|
|
Nov 20, 2008
~
Nov 20, 2010
|
|
|
23,947
|
|
|
|
|
|
|
|
|
|
|
|
23,947
|
|
Floating-to-fixed
cross currency
interest rate
swap
|
|
Long-term borrowings
|
|
W
|
500,000
|
|
|
July 28, 2008
~
August 13, 2009
|
|
|
28,774
|
|
|
|
|
|
|
|
|
|
|
|
28,774
|
|
Floating-to-fixed
|
|
Long-term floating rate
|
|
|
|
|
|
Jun. 29, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
discounted bill
|
|
W
|
200,000
|
|
|
~
Jun. 29, 2010
|
|
|
4,725
|
|
|
|
|
|
|
|
|
|
|
|
4,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
W
|
57,446
|
|
|
W
|
190,359
|
|
|
W
|
|
|
|
W
|
247,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-74
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
28.
|
MERGERS
AND ACQUISITIONS
|
a. Merger
with Empas, Inc.
In order to maximize management synergy effect, enhance
management effectiveness and corporate value, SK Communications
Co., Ltd., a subsidiary of the Company, merged with Empas, Inc.
on November 1, 2007 with the resolution of its board of
directors of June 25, 2007.
Empas, Inc. issued new stocks to stockholders of SK
Communications Co., Ltd. The exchange ratio of common stocks
between SK Communications Co., Ltd. and Empas, Inc. was 1 to
3.5732182. While the legal acquirer was Empas, Inc. and the
legal acquiree was SK Communications Co., Ltd., the merger was
accounted for purchase method where SK Communications Co., Ltd.,
the legal acquiree, purchased Empas Corporation, the legal
acquirer, as the former stockholders of SK Communications Co.,
Ltd. obtained the majority voting rights of the merging company.
Details of the goodwill generated from the merger are as follows:
|
|
|
|
|
Description
|
|
In Millions of Korean Won
|
|
|
Fair value of acquired assets
|
|
W
|
101,613
|
|
Fair value of assumed liabilities
|
|
|
(56,872
|
)
|
Convertible bond issued by the acquirer
|
|
|
44,850
|
|
Deferred tax asset on temporary differences
|
|
|
3,991
|
|
|
|
|
|
|
Fair value of net assets
|
|
W
|
93,582
|
|
|
|
|
|
|
Consideration for merger
|
|
|
|
|
Fair value of stock issued
|
|
W
|
57,703
|
|
Carrying amount of equity method securities purchased prior to
merger
|
|
|
30,101
|
|
Convertible bond issued by the acquirer prior to merger
|
|
|
44,850
|
|
|
|
|
|
|
Total
|
|
|
132,654
|
|
|
|
|
|
|
Goodwill
|
|
W
|
39,072
|
|
|
|
|
|
|
F-75
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
29.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
The consolidated statements of cash flows are prepared using
indirect method.
Significant non-cash transactions for the years ended
December 31, 2006, 2007 and 2008 are as follows (In
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Conversion of convertible bonds
|
|
W
|
29,528
|
|
|
W
|
5,654
|
|
|
W
|
|
|
Retirement of treasury stocks
|
|
|
209,077
|
|
|
|
|
|
|
|
|
|
Write-offs of accounts receivable
|
|
|
90,780
|
|
|
|
67,313
|
|
|
|
37,079
|
|
Acquisition of property and equipment asset through financial
lease contract
|
|
|
|
|
|
|
|
|
|
|
76,364
|
|
Transfer from inventory to property and equipment tangible assets
|
|
|
|
|
|
|
|
|
|
|
46,749
|
|
Acquisition of machinery by accounts payable
|
|
|
|
|
|
|
|
|
|
|
39,640
|
|
Increase in assets due to merger
|
|
|
10,196
|
|
|
|
101,613
|
|
|
|
|
|
Increase in liabilities due to merger
|
|
|
9,851
|
|
|
|
56,872
|
|
|
|
|
|
Increase in assets due to the change in consolidated subsidiaries
|
|
|
93,581
|
|
|
|
541,809
|
|
|
|
2,923,398
|
|
Increase in liabilities due to the change in consolidated
subsidiaries
|
|
|
33,904
|
|
|
|
489,288
|
|
|
|
1,543,098
|
|
Cash and cash equivalents in the consolidated balance sheets is
as follows (In millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Cash and cash equivalents
|
|
W
|
485,972
|
|
|
W
|
885,989
|
|
|
W
|
1,011,467
|
|
Government subsidy
|
|
|
|
|
|
|
(142
|
)
|
|
|
(127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
485,972
|
|
|
W
|
885,847
|
|
|
W
|
1,011,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30.
|
NETWORK
INTERCONNECTION CHARGES
|
The Companys networks interconnect with the public
switched telephone networks operated by KT Corporation and SK
Broadband and, through their networks, with the international
gateways of KT Corporation, DACOM and Onse, as well as the
networks of the other wireless telecommunications service
providers in Korea. These connections enable the Companys
subscribers to make and receive calls from telephones outside
the Companys networks. Under Korean law, service providers
are required to permit other service providers to interconnect
to their networks for purposes of offering other services. If a
new service provider desires interconnection with the networks
of an existing service provider but the parties are unable to
reach an agreement within 90 days, the new service provider
can appeal to the Korea Communications Commission.
For the years ended December 31, 2006, 2007 and 2008, such
interconnection revenues amounted to
W1,033.4 billion,
W1,062.2 billion and
W1,149.2 billion, respectively, while
aggregate interconnection expenses amounted to
W1,014.9 billion,
W1,078.7 billion and
W1,327.4 billion, respectively.
a. Issuance
of unguaranteed bonds
On January 22, 2009, the Company issued unguaranteed bonds
with face amount of W40 billion and JPY
3 billion, respectively, in accordance with the resolution
of board of directors dated October 23, 2008. The bonds
F-76
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
bear an annual rate of 5.54% and
3-month Euro
Yen Libor+2.50%, respectively, and will be repaid in full at
their maturities, on January 22, 2016 and January 22,
2012, respectively.
In addition, on March 5, 2009, the Company issued
unguaranteed bonds with face amount of
W230 billion and JPY 5 billion,
respectively, in accordance with the resolution of board of
directors dated January 22, 2009. The bonds bear an annual
rate of 5.94% and
3-month Euro
Yen Tibor+2.50%, respectively, and will be repaid in full at
their maturities, on March 5, 2016 and March 5, 2012,
respectively.
b. Retirement
of treasury stock.
In accordance with the resolution of board of directors dated
October 23, 2008, the Company acquired 448,000 shares
treasury stocks for W92,476 million from
December 2, 2008 through January 7, 2009 and retired
those stocks with the Companys retained earnings on
January 9, 2009.
c. Issuance
of unguaranteed convertible bonds denominated in U.S
dollar
The Company issued convertible bonds with a maturity of five
years in the principal amount of US$332,528,000 with an initial
conversion price of W230,010 per share of the
Companys common stock in accordance with the resolution of
board of directors dated on March 13, 2009. The convertible
bonds bear annual interest rate of 1.75% and the conversion
right could be exercised during the period from May 18,
2009 to March 28, 2014.
d. Acquisition
of leased-line business from SK Networks Company
Ltd.
On May 21, 2009, the Company entered into an agreement with
SK Networks Company Ltd. to purchase its leased-line business
for W892,850 million. In addition, the
Company will also assume W627,815 million
of debt as part of the transaction. The expected acquisition
date is September 30, 2009. The acquisition price and the
date are subject to change, and the acquisition is subject to
approval by the shareholders of SK Networks Company Ltd.
e. Participation
in the capital stock increase of SK Broadband Co.,
Ltd.
In May 2009, SK Broadband, our consolidated subsidiary, filed a
securities registration statement in Korea in order to raise up
to W300 billion by selling its common
shares through a rights offering. We announced our plan to
participate in the rights offering in proportion to our 43.4%
equity interest in SK Broadband. If there are shares that are
not subscribed by other shareholders, we may purchase such
unsubscribed shares, which will increase our equity interest in
SK Broadband. The subscription for and purchase of shares of SK
Broadband are expected to occur in July 2009.
Through 2007, the Company had one reportable operating segment,
cellular telephone communication service. In 2008, the Company
acquired SK Broadband Co., Ltd., a fixed-line telephone service
provider and included it in the consolidation. As a result, the
Company has two operating segments, cellular telephone
communication services and fixed-line telecommunication service
from 2008. Cellular telephone communication services include
cellular voice service, wireless data service and wireless
Internet services. Fixed-line telecommunication services include
telephone services, Internet services, and leased line services.
Internet portal services and game manufacturing, etc. are
included in other segment.
F-77
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Details of each segment for the years ended 2008 are as follows
(in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cellular
|
|
|
Fixed-line
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telephone
|
|
|
Telecomm-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommuni-
|
|
|
unication
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
Consolidated
|
|
|
|
cation Service
|
|
|
Service
|
|
|
Other
|
|
|
Sub-total
|
|
|
Adjustments
|
|
|
Amount
|
|
|
Total sales
|
|
|
11,674,662
|
|
|
|
2,132,455
|
|
|
|
847,397
|
|
|
|
14,654,514
|
|
|
|
(633,530
|
)
|
|
|
14,020,984
|
|
Internal sales
|
|
|
127,301
|
|
|
|
59,753
|
|
|
|
446,476
|
|
|
|
633,530
|
|
|
|
(633,530
|
)
|
|
|
|
|
Net sales
|
|
|
11,547,361
|
|
|
|
2,072,702
|
|
|
|
400,921
|
|
|
|
14,020,984
|
|
|
|
|
|
|
|
14,020,984
|
|
Operating income
|
|
|
2,256,613
|
|
|
|
99,359
|
|
|
|
(603,504
|
)
|
|
|
1,752,468
|
|
|
|
|
|
|
|
1,752,468
|
|
Property and equipment and intangible assets
|
|
|
7,639,806
|
|
|
|
3,148,683
|
|
|
|
627,345
|
|
|
|
11,415,834
|
|
|
|
|
|
|
|
11,415,834
|
|
Depreciation
|
|
|
1,943,422
|
|
|
|
535,169
|
|
|
|
280,685
|
|
|
|
2,759,276
|
|
|
|
|
|
|
|
2,759,276
|
|
|
|
33.
|
RECONCILIATION
TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
|
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in
Korea (Korean GAAP), which differ in certain
respects from accounting principles generally accepted in the
United States of America (U.S. GAAP). The
significant differences are described below. Other differences
do not have a significant effect on either consolidated net
income or shareholders equity.
a. Income
Taxes
Effective January 1, 2007, the Company adopted FASB
Interpretation No. 48 Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109, for the U.S. GAAP purpose, which set
outs a consistent framework to used to determine the appropriate
level of tax reserve for uncertain tax positions. As a result of
the adoption, the retained earnings as of January 1, 2007
decreased by W13,218 million, the income
tax expenses for the year ended December 31, 2007 increased
by W1,320 million and income tax expenses
for the year ended December 31, 2008 decreased by
W2,778 million. Under Korea GAAP, there is
no such requirement related to the uncertain tax positions.
Under Korean GAAP, the effect of changes in tax law related to
items recorded directly in shareholders equity is recorded
directly in the shareholders equity. However, under
U.S. GAAP, the effect of changes in tax law related to
items directly in shareholders equity is recorded directly
in continuing operations in the period of enactment of the new
tax law. Due to such differences, for U.S GAAP purposes, the net
income for the year ended December 31, 2008 increased by
W30,066 million when compared to those
under Korean GAAP.
b. Deferred
Charges
Korean GAAP requires that bond issuance costs be deducted from
proceeds of bonds and certain development costs be recorded as
intangible assets. Under U.S. GAAP, bond issuance costs are
capitalized as deferred assets and amortized over the redemption
period of the related obligation. Due to such differences, for
U.S. GAAP purposes, net income for the year ended
December 31, 2006 increased by
W2,037 million, when compared to those
under Korean GAAP.
c. Leases
Until 1998, leases whose present value of minimum lease payments
exceeds 90% of the fair value of the leased equipment were not
capitalized under Korean GAAP, but are capitalized under
U.S. GAAP. Therefore, with respect to lease contracts
entered into prior to January 1, 1999, certain GAAP
difference adjustments for equipment, obligations under capital
leases, interest on capital leases and depreciation are required
to reconcile Korean GAAP
F-78
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to U.S. GAAP. Due to such differences, for U.S. GAAP
purposes, net income for the year ended December 31, 2006
decreased by W847 million when compared to
those under Korean GAAP.
d. Marketable
Securities and Investments Securities
Under Korean GAAP, non-marketable securities should be
classified as
available-for-sale
and carried at cost or fair value if applicable, with unrealized
holding gains and losses reported as other comprehensive income.
However, for U.S. GAAP purposes, investment in
non-marketable equity securities that do not have readily
determinable fair value, are accounted for under the cost
method. Due to such differences, for U.S. GAAP purposes,
the shareholders equity as of December 31, 2007
decreased by W21,015 million when compared
to those under Korean GAAP.
e. Impairment
of Investment Securities and Recoveries
Under U.S. GAAP, if the decline in fair value is judged to
be other than temporary, the cost basis of the individual
securities is written down to fair value as a new cost basis and
the amount of the write-down is included in current earnings.
Other than temporary impairment is determined based on
evidence-based judgment about a recovery of fair value up to (or
beyond) the cost of investment by considering the severity and
duration of the impairment in relation to the forecasted
recovery of fair value. Under Korean GAAP, if the collectible
value from the securities is less than acquisition costs with
objective evidence of impairment such as bankruptcy of
investees, an impairment loss is recognized. In addition, the
duration of the impairment in relation to the forecasted
recovery of fair value is not considered for Korean GAAP
purposes. Due to such differences, for U.S. GAAP purposes,
losses on impairment of investment securities for the years
ended December 31, 2006, 2007 and 2008 increased by
W421 million (net of minority interest
portion of W700 million),
W2,238 million (net of minority interest
portion of W189 million) and
W1,266 million (net of minority interest
portion of W125 million), respectively,
when compared to those under Korean GAAP. In addition, as
certain
available-for-sale
securities for which the impairment losses had been previously
recognized for U.S. GAAP purposes, but not for Korean GAAP
purposes, were sold or impairment loss recognized for Korea GAAP
purpose in 2008. As a result, some portion of losses of disposal
of such
available-for-sale
securities and impairment losses that were recognized for the
year ended December 31, 2008 for Korean GAAP purpose,
amounting to W173,798 million was reversed
for U.S. GAAP purpose.
Under Korean GAAP, the subsequent recoveries of impaired
available-for-sale
securities and
held-to-maturity
securities result in an increase of their carrying amount up to
the original acquisition cost, and the recovery gains are
reported in current operations up to the previously recognized
impairment loss as reversal of loss on impairment of investment
securities. Under U.S. GAAP, the subsequent increase in
carrying amount of the impaired and written down
held-to-maturity
securities is not allowed and the subsequent increase in fair
value of
available-for-sale
securities is reported in other comprehensive income.
Cumulative impairment amounts (net of minority interest portion)
of the above GAAP difference as of December 31, 2006, 2007
and 2008 are W177,627 million,
W179,865 million and
W7,332 million, respectively.
f. Comprehensive
Income
Until 2006, under Korean GAAP, there was no requirement to
present comprehensive income. Effective January 1, 2007,
revised Korean GAAP requires the disclosure of comprehensive
income and its components in consolidated financial statements.
However, the format of the disclosure under Korean GAAP is
different from that under U.S. GAAP. Under U.S. GAAP,
comprehensive income includes all changes in the
shareholders equity during a period except those resulting
from investments by, or distributions to owners, including
certain items not included in the current results of operations.
F-79
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
g. Business
Combinations and Intangible Assets
Effective July 1, 2001, U.S. GAAP requires the use of
the purchase method of accounting for all business combinations
other than those under common control. In addition, for fiscal
years beginning after December 31, 2001, goodwill, which
was related with subsidiaries and investees, and intangible
assets with indefinite useful life shall not be amortized;
however, they are subject to impairment tests on an annual basis
and at any other time if events occur or circumstances indicate
that the carrying amount of goodwill or other intangible assets
may not be recoverable. Circumstances that could trigger an
impairment test include but are not limited to a significant
adverse change in the business climate or legal factors; an
adverse action or assessment by a regulator; unanticipated
competition; loss of key personnel; the likelihood that a
significant portion of a reporting unit will be sold or
otherwise disposed; results of testing for recoverability of a
significant asset group within a reporting unit.
To test impairment of goodwill, the fair value of a reporting
unit which includes goodwill is compared with its carrying
amount of a reporting unit, including goodwill. If the carrying
amount of a reporting unit exceeds its fair value, the carrying
amount of the reporting unit goodwill is compared with the
implied fair value of goodwill. If the carrying amount of the
reporting unit goodwill exceeds the implied fair value of that
goodwill, an impairment loss is recorded in current operations.
For the years ended December 31, 2006, 2007, and 2008, the
Company recognized impairment loss of goodwill which was related
with subsidiaries of W12,524 million, nil
and W107,138 million including minority
interest portion of W33,053 million for
the reporting unit of a subsidiary as operating profits and cash
flows were lower than expected due to an increase in
competition. The fair value of that reporting unit was estimated
using the expected present value of future cash flows. The
Company does not have any intangible assets with indefinite
lives as of December 31, 2006, 2007 and 2008. Intangible
assets with finite lives will continue to be amortized over
their estimated useful lives.
Under Korean GAAP, business combinations involving other than
commonly controlled entities are accounted for as either a
purchase or a pooling of interests, depending on the specific
circumstances. However, in the case of the Company, no business
combinations have been accounted for using the pooling of
interest method under Korean GAAP. In a purchase combination,
the difference between the purchase consideration and the fair
value of the net assets acquired is accounted for as goodwill or
as negative goodwill. Goodwill and all other intangible assets
are amortized over its estimated economic life, generally not to
exceed 20 years.
The Company recorded amortization of goodwill, which was related
with subsidiaries and investees, for the years ended
December 31, 2006, 2007 and 2008 amounting to
W142,649 million,
W151,589 million and
W185,483 million, respectively, for Korean
GAAP purposes; these amortization was reversed for
U.S. GAAP purposes.
In addition, under Korean GAAP, certain development costs can be
recorded as intangible assets but U.S. GAAP requires that
development costs are charged to expense as incurred.
h. Determination
of Acquisition Cost of Equity Interest in
Subsidiary
Under U.S. GAAP, when a parent company acquires an equity
interest in a subsidiary in exchange for newly issued common
stock of the parent company, the acquisition cost of the equity
interest in a subsidiary is determined at the market price of
the parent companys common stock for a reasonable period
before and after the date the terms of the acquisition are
agreed to and announced. Under Korean GAAP, the acquisition cost
is determined at the closing market price of the parent
companys common stock when the common stock is actually
issued. In addition, there are certain other differences in the
methods of allocating cost to assets acquired. Due to such
differences, for U.S. GAAP purposes, the shareholders
equity as of December 31, 2006, 2007 and 2008 increased by
W28,358 million when compared to those
under Korean GAAP.
Under Korean GAAP, in a business combination between a publicly
traded company and a privately held company where an acquirer is
the privately held company and the acquirer issues its own
equity shares to the acquirees stockholders as purchase
proceeds, the cost of the acquired entity is determined based on
the fair value of
F-80
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the acquirers net assets. Under U.S. GAAP, it is
appropriate to use the market value of a publicly traded company
to value the acquisition when the acquiree is a publicly traded
company and the acquirer is a privately held company. Due to
such differences, for U.S. GAAP purposes, the
shareholders equity as of December 31, 2007 and 2008
increased by W67,227 million,
respectively, when compared to those under Korean GAAP.
i. Additional
Equity Investment in Subsidiaries
Under Korean GAAP, when additional interest is acquired after
acquiring a majority interest in a subsidiary, the differences
between the Companys acquisition cost of the additional
interest and the corresponding carrying amount of the acquired
additional interest in a subsidiary is presented as an
adjustment to capital surplus. Under U.S. GAAP, the cost of
an additional interest would be allocated based on the fair
value of net assets at the time the additional interest is
acquired, with the excess allocated to goodwill. Due to such
differences, for U.S. GAAP purposes, the shareholders
equity as of December 31, 2006, 2007 and 2008 increased by
W965,454 million,
W1,003,235 million and
W1,031,781 million, respectively, when
compared to those under Korean GAAP.
j. Capitalization
of Foreign Exchange Losses (Gains) and Interest
Expenses
Until 2002, under Korean GAAP, interest expenses and foreign
exchange losses (or foreign exchange gains) incurred on debt
used to finance the construction of property, plant and
equipment were capitalized (or offset against property
additions). Effective January 1, 2003, Korean GAAP was
revised to allow a company to charge such interest expense and
foreign exchange losses (or foreign exchange gains) to current
operations. For Korean GAAP purposes, the Company adopted in
2003 the accounting policy not to capitalize such financing
costs prospectively. Under U.S. GAAP, interest expenses
incurred on debt used to finance the construction of property,
plant and equipment are capitalized, while related foreign
exchange losses (or gains) are charged to current operations as
incurred. Due to such differences, for U.S. GAAP purposes,
the shareholders equity as of December 31, 2006, 2007
and 2008 increased by W56,788 million,
W57,742 million and
W62,098 million, respectively, when
compared to those under Korean GAAP.
Until 2002, under Korean GAAP, interest expense incurred on debt
used to finance the purchase of intangible assets was
capitalized until the asset was put in use. For U.S. GAAP
purposes, the Company charges such interest to current
operations as incurred. Effective January 1, 2003, Korean
GAAP was revised to allow a company to charge such interest
expense to current operations as incurred. For Korean GAAP
purposes, the Company adopted in 2003 the accounting policy not
to capitalize such interest expense. This accounting change has
been applied prospectively. Due to such differences, for
U.S. GAAP purposes, the shareholders equity as of
December 31, 2006, 2007 and 2008 decreased by
W53,116 million,
W47,844 million and
W42,572 million, respectively, when
compared to those under Korean GAAP.
k. Nonrefundable
Activation Fees
For U.S. GAAP purposes, the Company defers nonrefundable
activation revenues and costs and amortizes them over the
expected term of the customer relationship. As of
December 31, 2008, the expected term of the customer
relationship ranges from 36 months to 56 months. Under
Korean GAAP, the Company recognizes these revenues and costs
when the activation service is performed. Due to such
differences, for U.S. GAAP purposes, the shareholders
equity as of December 31, 2006, 2007 and 2008 decreased by
W326,042 million,
W376,367 million and
W398,358 million, respectively, when
compared to those under Korean GAAP.
l. Employee
Stock Option Compensation Plan
For Korean and U.S. GAAP purposes, the Company expenses the
value of stock options granted. Korean GAAP permits all entities
to exclude the volatility factor in estimating the value of
their stock options granted prior to December 31, 2003,
which results in measurement at minimum value. Under
U.S. GAAP, public entities are not permitted to exclude the
volatility factor in estimating the value of their stock
options. As all of the Companys stock
F-81
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
options were granted and vested prior to the effective date of
FAS 123(R), the Company accounted for employee stock option
compensation under FAS 123 for U.S. GAAP purposes.
m. Loans
Receivable for Stock Issued to Employee
U.S. GAAP generally requires that notes receivables for
capital stock issued to employees be reported as a reduction of
stockholders equity, while Korean GAAP allows for
recording such receivables as an asset.
n. Convertible
Bonds Payable
Under Korean GAAP, the proceeds from issuance of convertible
bonds are allocated between the conversion right and the debt
issued; the portion allocable to the conversion right is
accounted for as capital surplus, with corresponding conversion
right adjustment being deducted from related bonds. Such
conversion right adjustment is amortized into interest expenses
over the period of convertible bonds. Under U.S. GAAP,
convertible bonds are analyzed to evaluate whether a conversion
feature should be bifurcated from the debt host, separately
recorded and marked to market through earnings. If an embedded
conversion option in convertible bond could be net cash settled
upon the occurrence of an event which is outside of an
entitys control, the conversion feature should generally
be bifurcated. The conversion option, which is related to
U.S. dollar denominated convertible bonds with principal
amounts of US$329,450,000 issued on May 27, 2004, requires
bifurcation under U.S. GAAP, and the related fair value at
December 31, 2006, 2007 and 2008 is
W68,509 million,
W65,785 million and
W22,798 million, respectively. In
bifurcating between conversion option and convertible debt at
inception date, the Company recorded the conversion option at
fair value and determined the initial carrying value assigned to
the convertible debt as the difference between the basis of the
host debt and the fair value of the conversion option.
In addition, under Korean GAAP, the convertible bonds
denominated in a foreign currency are regarded as non-monetary
liabilities since they have equity-like characteristics, and the
Company does not recognize the associated foreign currency
transaction gain or loss. The redeemed portion of convertible
bonds is regarded as a monetary liability and subject to foreign
currency translation but there is no redeemed portion as of
December 31, 2006, 2007 and 2008. Under U.S. GAAP, the
convertible bonds denominated in a foreign currency are regarded
as a monetary liability and the resulting foreign currency
translation gain or loss is included in the results of
operations. The associated foreign currency translation gain
related to the convertible bonds is
W67,975 million for the year ended
December 31, 2006, and translation loss for the years ended
December 31, 2007 and 2008 is
W1,243 million and
W76,209 million, respectively.
o. Currency
and Interest Rate Swap
Under Korean GAAP, when all critical terms of the hedging
instrument and the hedged item are the same, a hedging
relationship is considered to be highly effective without
formally assessing hedge effectiveness. Under U.S. GAAP,
unless conditions to qualify for the shortcut method as
described in SFAS No. 133, Accounting for
Derivative instruments and Hedging Activities, as amended,
are met, a formal hedge effectiveness should be assessed to
qualify for a hedge accounting at inception of the hedge. The
Companys currency and interest rate swap, which qualified
as a cash flow hedge under Korean GAAP, did not qualify for the
shortcut method under U.S. GAAP and was recorded as
non-hedge. In addition, there are certain other differences in
the method of fair value measurement. Due to such differences,
for U.S. GAAP purposes, net income for the years ended
December 31, 2006 and 2008 decreased by
W4,056 million and
W478,874 million, respectively, and net
income for the year ended December 31, 2007 increased by
W8,295 million, when compared to those
under Korean GAAP.
p. Sale
of Stock by Equity Method Investee
Until 2004, under Korean GAAP, when the Companys equity
interests in the equity method investees were diluted as a
result of the equity method investees direct sales of
their unissued shares to third parties, the changes in the
Companys proportionate equity of investees was accounted
for as capital transactions. Effective January 1,
F-82
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2005, Korean GAAP was revised to account for such transactions
as income statement treatment. Under U.S. GAAP, such
transactions can be accounted for either as income statement
treatments or as capital transactions. For U.S. GAAP
purpose, the Companys accounting policy is to account for
such transactions as capital transactions. Due to such
differences, for U.S GAAP purposes, net income for the year
ended December 31, 2006 increased by
W7,440 million and net income for the year
ended December 31, 2007 decreased by
W6,392 million, when compared to those
under Korean GAAP. There was no GAAP difference in 2008.
q. Consolidation
of Variable Interest Entities
Under U.S. GAAP, if a business enterprise has a controlling
financial interest in a variable interest entity, which is
defined by FASB Interpretation No. 46 Revised
(FIN 46(R)), the assets, liabilities and
results of the activities of the variable interest entity should
be included in the consolidated financial statements with those
of the business enterprise. Under Korean GAAP, there is no
specific provision for the accounting treatment of variable
interest entities.
As a result of such difference, CDMA Mobile Phone Center (which
is a joint-venture with 50% owned by SKT Vietnam PTE Ltd., a
subsidiary of the Company, and recorded as equity method
investment under Korean GAAP) was included in the consolidated
financial statements for the years ended December 31, 2006,
2007 and 2008 under U.S. GAAP. CDMA Mobile Phone Center is
a wireless telecommunications service provider in Vietnam.
r. Convertible
Notes Receivable
Under Korean GAAP, the convertible notes entered into between
the Company and China Unicom Ltd. were treated as
available-for-sale
securities and reported at fair value. The unrealized gains or
losses on valuation of such convertible notes are included in
other comprehensive income. Under U.S. GAAP, the
convertible notes were considered as a hybrid instrument with a
conversion option embedded in a debt instrument. In accordance
with SFAS No. 133, Accounting for Derivative
instruments and Hedging Activities, the conversion option
was separated from the debt instrument and accounted for
separately. The conversion option was recorded at fair value
with gains and losses included in current earnings. The debt
instrument was classified as an
available-for-sale
debt security and reported at fair value. The Company recognized
interest income on the debt instrument as determined using the
effective interest method and unrealized holding gain and loss
of the difference between fair value and book value were
excluded from earnings and reported as a component of
stockholders equity. Due to such differences, for U.S GAAP
purposes, net income for the years ended December 31, 2006
increased by W365,751 million when
compared to those under Korean GAAP.
On August 20, 2007, the Company exercised the conversion
right for the convertible notes, accordingly they were converted
into common stocks of China Unicom Ltd. and reclassified to
available-for-sale
equity security. Under Korean GAAP, the acquisition cost of the
equity securities acquired by exercising the conversion right
shall be the carrying amount of the convertible bonds exchanged.
However, if those newly acquired equity securities are
marketable securities in an active trading market, the
acquisition cost of such equity securities shall be the fair
value of those equity securities at the acquisition date and the
difference between the fair value of the newly acquired equity
securities and the carrying amount of the exchanged convertible
bonds shall be recognized as gain or loss on conversion. As a
result of such conversion, the Company recognized gain on
conversion amounting to W373,140 million
under Korean GAAP. After the conversion, the investment in
equity securities of China Unicom Ltd. was classified as
available-for-sale
equity securities, reported at the fair value, and related
valuation gain was classified as other comprehensive income.
Under U.S. GAAP, the conversion option separated from the
debt instrument had been recorded at fair value until the
conversion and the unrealized holding gain and loss incurred
from the debt instrument until the conversion remains as other
comprehensive income. No conversion gain was recognized under
U.S. GAAP in 2007. As such, the conversion gain recognized
under Korean GAAP was reversed for U.S. GAAP purposes in
2007.
F-83
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
s.
|
Presentation
of Minority Interest as a Component of Shareholders
Equity
|
Korean GAAP requires the classification of minority interest in
equity of consolidated subsidiaries as a separate component of
shareholders equity. Under U.S. GAAP, minority
interest in equity of consolidated subsidiaries is presented
between liabilities and shareholders equity item in
consolidated balance sheets.
t. Scope
of Consolidations
Under Korean GAAP, as explained in Note 2(b) to the
consolidated financial statements, majority-owned subsidiaries
with total assets below W7 billion at
prior year end are not consolidated. However, U.S. GAAP
requires all majority-owned subsidiaries be consolidated. For
U.S GAAP purpose, the Company did not consolidate majority-owned
subsidiaries with total assets below
W7 billion at prior year end except for
SKY Property Mgmt. Ltd. and SK Telecom Global Investment B.V. in
2008 as the impact of such difference is immaterial.
In addition, under Korean GAAP, entities of which the Company or
a controlled subsidiary owns more than 30% of the total
outstanding voting stock and is the largest stockholder are
consolidated. However, U.S. GAAP generally requires that
any entity of which the Company owns twenty to fifty percent of
total outstanding voting stock be not consolidated if control
does not exist; rather that entity should be accounted for under
the equity method of accounting. Due to such differences, for
U.S. GAAP purposes, investments in IHQ, Inc., TU Media
Corp., CU Media, Inc., Benex Digital Culture Contents Fund, IMM
Cinema Fund, Michigan Global Cinema Fund and SK Broadband Co.,
Ltd. are excluded from consolidation and instead are accounted
for under the equity method of accounting, for the year ended
December 31, 2008. For other investments in entities where
the Company owns 30% to 50%, the consolidated financial
statements did not reflect an adjustment in the U.S. GAAP
reconciliation as the impact is immaterial. The condensed
financial information of the investees as of and for the year
ended December 31, 2008 applying equity method for the U.S
GAAP purpose only is as follows (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
Total
|
|
|
Total
|
|
|
|
|
|
Income
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Revenue
|
|
|
(Loss)
|
|
|
IHQ, Inc.
|
|
W
|
55,980
|
|
|
W
|
20,005
|
|
|
W
|
44,828
|
|
|
(W
|
16,671
|
)
|
TU Media Corp.
|
|
|
301,026
|
|
|
|
266,175
|
|
|
|
127,591
|
|
|
|
(30,859
|
)
|
CU Media, Inc.
|
|
|
32,031
|
|
|
|
13,174
|
|
|
|
27,312
|
|
|
|
(4,921
|
)
|
Benex Digital Culture Contents Fund
|
|
|
25,444
|
|
|
|
4
|
|
|
|
659
|
|
|
|
340
|
|
IMM Cinema Fund
|
|
|
17,884
|
|
|
|
7
|
|
|
|
918
|
|
|
|
(2,043
|
)
|
Michigan Global Cinema Fund
|
|
|
9,838
|
|
|
|
|
|
|
|
522
|
|
|
|
97
|
|
SK Broadband Co., Ltd.
|
|
|
3,400,357
|
|
|
|
2,198,465
|
|
|
|
1,367,881
|
|
|
|
(223,653
|
)
|
u. Handset
Subsidies to Long-time Mobile Subscribers
Under Korean GAAP, handset subsidies are recorded as operating
expenses. Under US GAAP, such amounts are recorded as reduction
of revenue.
v. Reclassification
of Investment in Equity Securities of SK C&C Co.,
Ltd.
During the year ended December 31, 2007, the Company
reclassified investment in equity securities of SK C&C Co.,
Ltd. from equity method investment to
available-for-sale
security because the SK C&C Co., Ltd. became the ultimate
parent of the Company in accordance with Korean GAAP. Under
Korean GAAP, the carrying amount of the equity investment at the
date that the Company ceased to apply equity method was the
Companys new acquisition cost and unrealized holding gain
and loss incurred after the reclassification were excluded from
earnings and were reported as other comprehensive income. Under
U.S. GAAP, however, the SK C&C Co., Ltd. was not
interpreted as the ultimate parent of the Company. As such,
equity investment continued to be treated as equity
F-84
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
method investments. Due to such differences, for U.S. GAAP
purposes, equity in earnings of investees increased by
W83,785 million and
W47,645 million, respectively, for the
years ended December 31, 2007 and 2008, whereas the
shareholders equity decreased by
W433,213 million and
W7,114 million, at December 31, 2007
and 2008, when compared to those under Korean GAAP. Meanwhile,
the condensed financial information of SK C&C Co., Ltd. as
of and for the years ended December 31, 2006, 2007 and 2008
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Current assets
|
|
W
|
400,994
|
|
|
W
|
663,791
|
|
|
W
|
890,816
|
|
Non-Current assets
|
|
|
1,505,237
|
|
|
|
3,052,281
|
|
|
|
3,548,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
1,906,231
|
|
|
W
|
3,716,072
|
|
|
W
|
4,439,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
W
|
542,917
|
|
|
W
|
810,141
|
|
|
W
|
1,199,621
|
|
Non-Current liabilities
|
|
|
483,934
|
|
|
|
904,821
|
|
|
|
1,021,529
|
|
Share holders equity
|
|
|
879,380
|
|
|
|
2,001,110
|
|
|
|
2,218,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
1,906,231
|
|
|
W
|
3,716,072
|
|
|
W
|
4,439,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Operating revenue
|
|
W
|
1,107,910
|
|
|
W
|
1,160,946
|
|
|
W
|
1,275,185
|
|
Operating expenses
|
|
|
(994,556
|
)
|
|
|
(1,081,361
|
)
|
|
|
(1,185,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
113,354
|
|
|
|
79,585
|
|
|
|
89,214
|
|
Other income (expenses), net
|
|
|
8,929
|
|
|
|
1,381,694
|
|
|
|
60,859
|
|
Provision for income taxes
|
|
|
(34,959
|
)
|
|
|
(405,709
|
)
|
|
|
11,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
W
|
87,324
|
|
|
W
|
1,055,570
|
|
|
W
|
161,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
x. Retroactive
Application of Equity Method of Accounting
The Company purchased an additional 38.7% of equity interests of
SK Broadband Co., Ltd. (SKBB) bringing its total
position to 43.4% in March of 2008. After the additional
acquisition of equity interest the investment was accounted for
under the equity method of accounting. Accordingly, the
investment in SK Broadband Co., Ltd. before the acquisition that
was previously accounted for under the fair value method was
changed to the equity method of accounting retroactively in a
manner consistent with the accounting for a
step-by-step
acquisition of a subsidiary. As a result of such retroactive
application of equity method of accounting on the SK Broadband
investment, net income for the year ended December 31,
2006, 2007 and 2008 decreased by
W2,168 million,
W797 million and
W21,025 million, respectively, and
shareholders equity as of December 31, 2006, 2007 and
2008 decreased by W20,140 million,
W41,296 million and
W62,382 million, respectively, when
compared to those under Korean GAAP.
F-85
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following reconciles net income for the years ended
December 31, 2006, 2007 and 2008 and shareholders
equity as of December 31, 2006, 2007 and 2008 under Korean
GAAP as reported in the consolidated financial statements to the
net income and shareholders equity amounts determined
under U.S. GAAP, giving effect to adjustments for the
differences listed above (in millions of Korean won, except per
share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Net income based on Korean GAAP
|
|
W
|
1,449,552
|
|
|
W
|
1,562,265
|
|
|
W
|
972,338
|
|
Adjustments :
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to minority interests
|
|
|
1,939
|
|
|
|
86,611
|
|
|
|
243,381
|
|
Deferred charges
|
|
|
2,037
|
|
|
|
|
|
|
|
|
|
Capital leases
|
|
|
(847
|
)
|
|
|
|
|
|
|
|
|
Loss on impairment of investment securities
|
|
|
(421
|
)
|
|
|
(2,238
|
)
|
|
|
172,532
|
|
Intangible assets
|
|
|
(260
|
)
|
|
|
(4,180
|
)
|
|
|
(8,086
|
)
|
Reversal of amortization of goodwill and goodwill impairment
|
|
|
128,327
|
|
|
|
145,772
|
|
|
|
107,934
|
|
Capitalization of foreign exchange losses and interest expenses
related to tangible assets
|
|
|
9,266
|
|
|
|
954
|
|
|
|
4,356
|
|
Capitalization of interest expenses related to purchases of
intangible assets
|
|
|
5,272
|
|
|
|
5,272
|
|
|
|
5,272
|
|
Nonrefundable activation fees
|
|
|
(16,139
|
)
|
|
|
(50,325
|
)
|
|
|
(21,991
|
)
|
Stock option compensation plan
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
Convertible bonds payable
|
|
|
48,118
|
|
|
|
(19,340
|
)
|
|
|
(30,407
|
)
|
Currency and interest rate swap
|
|
|
(4,056
|
)
|
|
|
8,295
|
|
|
|
(478,874
|
)
|
Sales of stock by the equity method investee
|
|
|
7,440
|
|
|
|
(6,392
|
)
|
|
|
|
|
Consolidation of variable interest entity
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
Convertible notes receivable
|
|
|
365,751
|
|
|
|
(412,383
|
)
|
|
|
|
|
Reclassification of SK C&C investment
|
|
|
|
|
|
|
83,785
|
|
|
|
47,645
|
|
Retroactive application of equity method of accounting on SKBB
investment
|
|
|
(2,168
|
)
|
|
|
(797
|
)
|
|
|
(21,025
|
)
|
FIN 48 effect
|
|
|
|
|
|
|
(1,320
|
)
|
|
|
2,778
|
|
Tax effect of the reconciling items
|
|
|
(115,268
|
)
|
|
|
109,368
|
|
|
|
46,947
|
|
Effect of changes in tax law
|
|
|
|
|
|
|
|
|
|
|
30,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income based on U.S. GAAP
|
|
W
|
1,878,361
|
|
|
W
|
1,505,347
|
|
|
W
|
1,072,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
73,305,026
|
|
|
|
72,650,909
|
|
|
|
72,765,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share based on U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
W
|
25,624
|
|
|
W
|
20,720
|
|
|
W
|
14,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
W
|
25,207
|
|
|
W
|
20,379
|
|
|
W
|
14,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-86
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Shareholders equity based on Korean GAAP Adjustments :
|
|
W
|
9,483,088
|
|
|
W
|
11,687,633
|
|
|
W
|
11,824,440
|
|
Investment securities without readily determinable fair value
|
|
|
|
|
|
|
(21,015
|
)
|
|
|
|
|
Intangible assets
|
|
|
993,802
|
|
|
|
1,096,547
|
|
|
|
1,151,974
|
|
Reversal of amortization of goodwill and goodwill impairment
|
|
|
676,008
|
|
|
|
821,780
|
|
|
|
929,714
|
|
Capitalization of foreign exchange losses and interest expenses
related to tangible assets
|
|
|
56,788
|
|
|
|
57,742
|
|
|
|
62,098
|
|
Capitalization of interest expenses related to purchase of
intangible assets
|
|
|
(53,116
|
)
|
|
|
(47,844
|
)
|
|
|
(42,572
|
)
|
Nonrefundable activation fees
|
|
|
(326,042
|
)
|
|
|
(376,367
|
)
|
|
|
(398,358
|
)
|
Loans receivable for stock issued to employees
|
|
|
(7,526
|
)
|
|
|
(34,816
|
)
|
|
|
(60,908
|
)
|
Convertible bonds payable
|
|
|
(1,347
|
)
|
|
|
(12,642
|
)
|
|
|
(43,049
|
)
|
Currency and interest rate swap
|
|
|
|
|
|
|
|
|
|
|
(45,503
|
)
|
Consolidation of variable interest entity
|
|
|
1,396
|
|
|
|
932
|
|
|
|
5,430
|
|
Reclassification of SK C&C investment
|
|
|
|
|
|
|
(433,213
|
)
|
|
|
(7,114
|
)
|
Retroactive application of equity method of accounting on SKBB
investment
|
|
|
(20,140
|
)
|
|
|
(41,296
|
)
|
|
|
(62,382
|
)
|
Minority interest in equity of consolidated affiliates
|
|
|
(170,246
|
)
|
|
|
(253,383
|
)
|
|
|
(1,175,959
|
)
|
FIN 48 effect
|
|
|
|
|
|
|
(13,173
|
)
|
|
|
(10,440
|
)
|
Tax effect of the reconciling items
|
|
|
85,674
|
|
|
|
226,877
|
|
|
|
87,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity based on U.S. GAAP
|
|
W
|
10,718,339
|
|
|
W
|
12,657,762
|
|
|
W
|
12,215,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in shareholders equity based on U.S. GAAP for
the years ended December 31, 2006, 2007 and 2008 are as
follows (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Balance, beginning of the year
|
|
W
|
9,477,689
|
|
|
W
|
10,718,339
|
|
|
W
|
12,657,762
|
|
Net income for the year
|
|
|
1,878,361
|
|
|
|
1,505,347
|
|
|
|
1,072,866
|
|
Accumulated effect of FIN 48 adoption through 2006
|
|
|
|
|
|
|
(11,853
|
)
|
|
|
|
|
Dividends
|
|
|
(662,628
|
)
|
|
|
(581,340
|
)
|
|
|
(682,504
|
)
|
Unrealized gain (loss) on valuation of securities, net of tax
|
|
|
183,155
|
|
|
|
959,452
|
|
|
|
(786,408
|
)
|
Equity in capital surplus, retained earnings and other
comprehensive income of affiliates (note a)
|
|
|
38,726
|
|
|
|
115,955
|
|
|
|
(64,825
|
)
|
Conversion of convertible bonds payable
|
|
|
23,624
|
|
|
|
2,010
|
|
|
|
(6,277
|
)
|
Treasury stock transactions
|
|
|
(209,078
|
)
|
|
|
(26,556
|
)
|
|
|
(14,137
|
)
|
Foreign-based operations translation adjustments
|
|
|
(18,570
|
)
|
|
|
3,698
|
|
|
|
64,807
|
|
Decrease (Increase) in loans receivable for stock issued to
employees
|
|
|
7,060
|
|
|
|
(27,290
|
)
|
|
|
(26,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of the year
|
|
W
|
10,718,339
|
|
|
W
|
12,657,762
|
|
|
W
|
12,215,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a) |
This line item consists of the adjustments to the carrying
amount of equity method investments based on the Companys
proportionate pickup in affiliates using the equity method of
accounting, which are directly adjusted to stockholders
equity of affiliates, such as unrealized gains or losses on
valuation of
available-for-sale
securities, foreign-based operations translation
adjustments in affiliates and stock transactions by affiliates.
|
F-87
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the significant balance sheet accounts
except for the above listed shareholders equity items to
the amounts determined under U.S. GAAP as of
December 31, 2006, 2007 and 2008 is as follows (in millions
of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
W
|
4,663,962
|
|
|
W
|
4,813,072
|
|
|
W
|
5,422,447
|
|
U.S. GAAP adjustments :
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred charges
|
|
|
|
|
|
|
|
|
|
|
406
|
|
Loans receivable for stock issued to employees
|
|
|
(2,208
|
)
|
|
|
(1,522
|
)
|
|
|
(1,252
|
)
|
Consolidation of variable interest entity
|
|
|
(8,809
|
)
|
|
|
(16,077
|
)
|
|
|
(55,967
|
)
|
Scope of consolidation
|
|
|
(40,189
|
)
|
|
|
(150,617
|
)
|
|
|
(836,324
|
)
|
Tax effect of the reconciling items
|
|
|
39,241
|
|
|
|
46,979
|
|
|
|
53,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets based on U.S. GAAP
|
|
|
4,651,997
|
|
|
|
4,691,835
|
|
|
|
4,582,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
11,576,006
|
|
|
|
14,235,863
|
|
|
|
17,051,224
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred charges
|
|
|
7,812
|
|
|
|
8,577
|
|
|
|
11,423
|
|
Capital lease
|
|
|
(576
|
)
|
|
|
(576
|
)
|
|
|
(576
|
)
|
Investment securities without readily determinable
fair value
|
|
|
|
|
|
|
(21,015
|
)
|
|
|
|
|
Intangible assets
|
|
|
989,595
|
|
|
|
1,140,555
|
|
|
|
1,145,269
|
|
Reverse of amortization of goodwill and goodwill
impairment
|
|
|
677,371
|
|
|
|
828,960
|
|
|
|
909,106
|
|
Capitalization of foreign exchange losses and
interest expense related to tangible assets
|
|
|
56,788
|
|
|
|
57,742
|
|
|
|
62,098
|
|
Capitalization of interest expenses related to
purchase of intangible assets
|
|
|
(53,116
|
)
|
|
|
(47,844
|
)
|
|
|
(42,572
|
)
|
Nonrefundable activation fees
|
|
|
8,108
|
|
|
|
6,167
|
|
|
|
8,099
|
|
Loans receivable for stock issued to employees
|
|
|
(5,318
|
)
|
|
|
(33,294
|
)
|
|
|
(59,656
|
)
|
Convertible bonds payable
|
|
|
(1,133
|
)
|
|
|
281
|
|
|
|
281
|
|
Currency and interest rate swap
|
|
|
|
|
|
|
|
|
|
|
(51,121
|
)
|
Consolidation of variable interest entity
|
|
|
54,731
|
|
|
|
54,890
|
|
|
|
76,022
|
|
Scope of consolidation
|
|
|
(32,735
|
)
|
|
|
(275,780
|
)
|
|
|
(2,386,994
|
)
|
Reclassification of SK C&C investment
|
|
|
|
|
|
|
(433,213
|
)
|
|
|
(7,114
|
)
|
Retroactive application of equity method of
accounting on SKBB investment
|
|
|
(20,140
|
)
|
|
|
(41,296
|
)
|
|
|
(62,382
|
)
|
FIN 48 effect
|
|
|
|
|
|
|
374
|
|
|
|
(1,621
|
)
|
Tax effect of the reconciling items
|
|
|
|
|
|
|
1,375
|
|
|
|
5,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets based on U.S. GAAP
|
|
|
13,257,393
|
|
|
|
15,481,766
|
|
|
|
16,656,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets based on U.S. GAAP
|
|
W
|
17,909,390
|
|
|
W
|
20,173,601
|
|
|
W
|
21,239,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-88
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December, 31
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
W
|
3,208,416
|
|
|
W
|
3,016,874
|
|
|
W
|
4,628,821
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred charges
|
|
|
|
|
|
|
|
|
|
|
406
|
|
Considerations for conversion right
|
|
|
|
|
|
|
|
|
|
|
26,577
|
|
Nonrefundable activation fees
|
|
|
142,697
|
|
|
|
170,761
|
|
|
|
218,284
|
|
Consolidation of variable interest entity
|
|
|
32,078
|
|
|
|
38,773
|
|
|
|
52,031
|
|
Scope of consolidation
|
|
|
(17,389
|
)
|
|
|
(285,677
|
)
|
|
|
(1,081,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities based on U.S. GAAP
|
|
W
|
3,365,802
|
|
|
W
|
2,940,731
|
|
|
W
|
3,844,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
3,548,464
|
|
|
|
4,344,428
|
|
|
|
6,020,410
|
|
U.S. GAAP adjustments :
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred charges
|
|
|
7,812
|
|
|
|
8,577
|
|
|
|
11,423
|
|
Considerations for conversion right
|
|
|
214
|
|
|
|
12,923
|
|
|
|
16,753
|
|
Nonrefundable activation fees
|
|
|
191,453
|
|
|
|
211,773
|
|
|
|
188,173
|
|
Currency and interest rate swap
|
|
|
|
|
|
|
|
|
|
|
(5,618
|
)
|
Consolidation of variable interest entity
|
|
|
227
|
|
|
|
296
|
|
|
|
698
|
|
Scope of consolidation
|
|
|
(19,563
|
)
|
|
|
(73,015
|
)
|
|
|
(1,373,619
|
)
|
FIN 48 effect
|
|
|
|
|
|
|
13,950
|
|
|
|
9,049
|
|
Tax effect of the reconciling items
|
|
|
(51,216
|
)
|
|
|
(183,709
|
)
|
|
|
(34,446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities based on U.S. GAAP
|
|
|
3,677,391
|
|
|
|
4,335,223
|
|
|
|
4,832,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities based on U.S. GAAP
|
|
W
|
7,043,193
|
|
|
W
|
7,275,954
|
|
|
W
|
8,677,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
W
|
170,246
|
|
|
W
|
253,383
|
|
|
W
|
1,175,959
|
|
U.S. GAAP adjustments :
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
|
|
|
|
47,604
|
|
|
|
31,704
|
|
Reversal of amortization of goodwill and goodwill
impairment
|
|
|
1,363
|
|
|
|
7,180
|
|
|
|
(21,317
|
)
|
Consolidation of variable interest entity
|
|
|
12,221
|
|
|
|
(1,188
|
)
|
|
|
(38,106
|
)
|
Scope of consolidation
|
|
|
(35,972
|
)
|
|
|
(67,094
|
)
|
|
|
(801,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minority interests based on U.S. GAAP
|
|
W
|
147,858
|
|
|
W
|
239,885
|
|
|
W
|
346,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-89
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table reconciles cash flows from operating,
investing and financing activities for the years ended
December 31, 2006, 2007 and 2008 and cash and cash
equivalents at December 31, 2006, 2007 and 2008 under
Korean GAAP, as reported in the consolidated financial
statements to cash flows from operating, investing and financing
activities for the years ended December 31, 2006, 2007 and
2008 and cash and cash equivalents at December 31, 2006,
2007 and 2008 under U.S. GAAP (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Cash flows from operating activities based on Korean GAAP
|
|
W
|
3,589,825
|
|
|
W
|
3,721,700
|
|
|
W
|
3,296,938
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading security cash flows
|
|
|
80,061
|
|
|
|
28,696
|
|
|
|
(40
|
)
|
Consolidation of variable interest entity
|
|
|
(48,721
|
)
|
|
|
35,777
|
|
|
|
7,010
|
|
Scope of consolidation
|
|
|
(6,384
|
)
|
|
|
11,363
|
|
|
|
(391,271
|
)
|
Pre-acquisition cash flows of subsidiaries
|
|
|
|
|
|
|
(36,372
|
)
|
|
|
|
|
Discontinued operation (Note a)
|
|
|
|
|
|
|
(476,412
|
)
|
|
|
(213,899
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities based on U.S. GAAP
|
|
W
|
3,614,781
|
|
|
W
|
3,284,752
|
|
|
W
|
2,698,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities based on Korean GAAP
|
|
W
|
(2,535,153
|
)
|
|
W
|
(2,414,879
|
)
|
|
W
|
(3,875,394
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading security cash flows
|
|
|
(80,061
|
)
|
|
|
(28,696
|
)
|
|
|
40
|
|
Increase in cash and cash equivalent due to merger
|
|
|
|
|
|
|
50,448
|
|
|
|
|
|
Consolidation of variable interest entity
|
|
|
37,611
|
|
|
|
(39,389
|
)
|
|
|
(11,006
|
)
|
Scope of consolidation
|
|
|
17,035
|
|
|
|
15,559
|
|
|
|
11,036
|
|
Pre-acquisition cash flows of subsidiaries
|
|
|
|
|
|
|
(1,784
|
)
|
|
|
|
|
Discontinued operation (Note a)
|
|
|
|
|
|
|
33,496
|
|
|
|
(51,631
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities based on U.S. GAAP
|
|
W
|
(2,560,568
|
)
|
|
W
|
(2,385,245
|
)
|
|
W
|
(3,926,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities based on Korean GAAP
|
|
W
|
(952,378
|
)
|
|
W
|
(1,041,255
|
)
|
|
W
|
869,415
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of variable interest entity
|
|
|
17,716
|
|
|
|
5,016
|
|
|
|
1,126
|
|
Scope of consolidation
|
|
|
(5,946
|
)
|
|
|
(2,475
|
)
|
|
|
239,147
|
|
Pre-acquisition cash flows of subsidiaries
|
|
|
|
|
|
|
64,674
|
|
|
|
|
|
Discontinued Operation (Note a)
|
|
|
|
|
|
|
342,777
|
|
|
|
9,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities based on U.S. GAAP
|
|
W
|
(940,608
|
)
|
|
W
|
(631,263
|
)
|
|
W
|
1,118,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of exchange rate changes on cash and cash equivalents
held in foreign currencies based on Korean GAAP
|
|
W
|
(9,317
|
)
|
|
W
|
6,097
|
|
|
W
|
37,371
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of variable interest entity
|
|
|
(5,302
|
)
|
|
|
37
|
|
|
|
938
|
|
Scope of consolidation
|
|
|
|
|
|
|
|
|
|
|
(4,129
|
)
|
Discontinued Operation (Note a)
|
|
|
|
|
|
|
(4,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of exchange rate changes on cash and cash equivalents
held in foreign currencies based on U.S. GAAP
|
|
W
|
(14,619
|
)
|
|
W
|
1,163
|
|
|
W
|
34,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-90
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Net increase in cash and cash equivalents due to changes in
consolidated subsidiaries based on Korean GAAP
|
|
W
|
14,568
|
|
|
W
|
102,079
|
|
|
W
|
36,413
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Scope of consolidation
|
|
|
(14,246
|
)
|
|
|
(81,218
|
)
|
|
|
(77,346
|
)
|
Discontinued operation (Note a)
|
|
|
|
|
|
|
54,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents due to
changes in consolidated subsidiaries based on U.S. GAAP
|
|
W
|
322
|
|
|
W
|
75,280
|
|
|
W
|
(40,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-acquisition cash flows of subsidiaries based on Korean GAAP
|
|
|
|
|
|
|
(11,396
|
)
|
|
|
17,250
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Scope of consolidation
|
|
|
|
|
|
|
|
|
|
|
(17,250
|
)
|
Pre-acquisition cash flows of subsidiaries
|
|
|
|
|
|
|
(26,518
|
)
|
|
|
|
|
Discontinued operation (Note a)
|
|
|
|
|
|
|
37,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-acquisition cash flows of subsidiaries based on U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increases in cash and cash equivalents due to merger based on
Korea GAAP
|
|
|
|
|
|
|
50,448
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents due to merger
|
|
|
|
|
|
|
(50,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents due to merger based on
U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued operation based on Korean GAAP
|
|
|
|
|
|
|
(12,777
|
)
|
|
|
(256,515
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operation (Note a)
|
|
|
|
|
|
|
12,777
|
|
|
|
256,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued operation based on U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the year based on
Korean GAAP
|
|
W
|
378,426
|
|
|
W
|
485,972
|
|
|
W
|
885,989
|
|
Adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of variable interest entity
|
|
|
1,197
|
|
|
|
2,501
|
|
|
|
3,942
|
|
Scope of consolidation
|
|
|
|
|
|
|
(9,541
|
)
|
|
|
(66,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the year based on U.S.
GAAP
|
|
W
|
379,623
|
|
|
W
|
478,932
|
|
|
W
|
823,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year based on Korean GAAP
|
|
W
|
485,972
|
|
|
W
|
885,989
|
|
|
W
|
1,011,467
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of variable interest entity
|
|
|
2,501
|
|
|
|
3,942
|
|
|
|
2,010
|
|
Scope of consolidation
|
|
|
(9,541
|
)
|
|
|
(66,312
|
)
|
|
|
(306,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year based on U.S GAAP
|
|
W
|
478,932
|
|
|
W
|
823,619
|
|
|
W
|
707,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Note a) |
The operation results of and cash flows from Helio LLC were
presented as continued operation for U.S. GAAP purpose
since the Company sold its investment in Helio LLC in exchange
for 16.6% interest in Virgin Mobile USA Inc., which now operates
Helio LLC essentially in the same manner.
|
F-91
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
34.
|
ADDITIONAL
DISCLOSURES REQUIRED BY U.S. GAAP
|
a. Income
Taxes
Income tax expense under U.S. GAAP for the years ended
December 31, 2006, 2007 and 2008 is as follows (in millions
of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Currently payable
|
|
W
|
615,959
|
|
|
W
|
564,480
|
|
|
W
|
493,714
|
|
Deferred
|
|
|
70,871
|
|
|
|
12,456
|
|
|
|
(332,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
686,830
|
|
|
W
|
576,936
|
|
|
W
|
161,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The difference between the actual income tax expense and the tax
expense computed by applying the statutory Korean corporate
income tax rates to income before taxes for the years ended
December 31, 2006, 2007 and 2008 is attributable to the
following (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Income taxes at statutory income tax rate of 25% in 2006, 2007
and 2008
|
|
W
|
641,840
|
|
|
W
|
507,200
|
|
|
W
|
278,354
|
|
Resident surtax payable
|
|
|
64,184
|
|
|
|
50,720
|
|
|
|
27,835
|
|
Tax credit for investments, technology, human resource
development and others
|
|
|
(110,785
|
)
|
|
|
(112,235
|
)
|
|
|
(158,681
|
)
|
Special surtax for agriculture and fishery industries and other
|
|
|
20,183
|
|
|
|
18,370
|
|
|
|
23,296
|
|
Tax effect from statutory tax rate change
|
|
|
|
|
|
|
|
|
|
|
(58,672
|
)
|
Undistributed earnings of subsidiaries
|
|
|
1,777
|
|
|
|
5,326
|
|
|
|
110
|
|
Other permanent differences
|
|
|
27,602
|
|
|
|
10,670
|
|
|
|
13,158
|
|
Change in valuation allowance
|
|
|
42,029
|
|
|
|
96,885
|
|
|
|
36,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded income taxes
|
|
W
|
686,830
|
|
|
W
|
576,936
|
|
|
W
|
161,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
27.00
|
%
|
|
|
28.45
|
%
|
|
|
14.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-92
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tax effects of temporary differences that resulted in the
deferred tax assets and liabilities at December 31, 2006,
2007 and 2008 computed under U.S. GAAP, and a description
of the financial statement items that created these differences
are as follows (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
W
|
21,251
|
|
|
W
|
16,391
|
|
|
W
|
14,530
|
|
Accrued interest income
|
|
|
(1,544
|
)
|
|
|
(1,971
|
)
|
|
|
(1,594
|
)
|
Net operating loss carryforwards
|
|
|
1,121
|
|
|
|
2,081
|
|
|
|
1
|
|
Tax credit carryforwards
|
|
|
19
|
|
|
|
|
|
|
|
570
|
|
Accrued expenses and other
|
|
|
68,264
|
|
|
|
66,857
|
|
|
|
66,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
89,111
|
|
|
W
|
83,358
|
|
|
W
|
80,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(64,915
|
)
|
|
|
(56,359
|
)
|
|
|
(33,262
|
)
|
Loss on impairment of investment securities
|
|
|
33,018
|
|
|
|
46,818
|
|
|
|
80,750
|
|
Equity in losses (earnings) of affiliates
|
|
|
(28,232
|
)
|
|
|
(121,855
|
)
|
|
|
(20,151
|
)
|
Undistributed earnings of subsidiaries
|
|
|
(17,179
|
)
|
|
|
(23,464
|
)
|
|
|
(59,122
|
)
|
Tax free reserve for technology development
|
|
|
(211,215
|
)
|
|
|
(151,259
|
)
|
|
|
(80,707
|
)
|
Tax free reserve for loss on disposal of treasury stock
|
|
|
(70,396
|
)
|
|
|
(70,396
|
)
|
|
|
|
|
Unrealized loss (gain) on valuation of long-term investment
securities (accumulated other comprehensive income)
|
|
|
(163,992
|
)
|
|
|
(523,761
|
)
|
|
|
(77,738
|
)
|
Tax credit carryforwards
|
|
|
24
|
|
|
|
24
|
|
|
|
1,066
|
|
Net operating loss carryforwards
|
|
|
6,178
|
|
|
|
327
|
|
|
|
|
|
Deferred charges and other
|
|
|
37,147
|
|
|
|
34,617
|
|
|
|
(55,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
(479,562
|
)
|
|
W
|
(865,308
|
)
|
|
W
|
(244,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
W
|
(390,451
|
)
|
|
W
|
(781,950
|
)
|
|
W
|
(163,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective January 1, 2007, we adopted FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48), which requires the use of a two-step approach for
recognizing and measuring tax benefits taken or expected to be
taken in a tax return and disclosures regarding uncertainties in
income tax positions. The first step is recognition: we
determine whether it is more likely than not that a tax position
will be sustained upon examination, including resolution of any
related appeals or litigation processes, based on the technical
merits of the position. In evaluating whether a tax position has
met the more-likely-than-not recognition threshold, we presume
that the position will be examined by the appropriate taxing
authority that has full knowledge of all relevant information.
The second step is measurement: a tax position that meets the
more-likely-than-not recognition threshold is measured to
determine the amount of benefit to recognize in the financial
statements. The tax position is measured at the largest amount
of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement. Differences between tax
positions taken in a tax return and amounts recognized in the
financial statements will generally result in one or more of the
following: an increase in a liability for income taxes payable,
a reduction of an income tax refund receivable, a reduction in a
deferred tax asset, or an increase in a deferred tax liability.
As a result of the adoption of FIN 48, the Company
recognized a W3,842 million increase in
the liability for unrecognized tax benefits, which was accounted
for as a W383 million increase to
goodwill, a W8,908 million decrease to
retained earnings and a W5,449 million net
increase to deferred tax liabilities as of January 1, 2007.
The
F-93
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
total unrecognized tax benefits attributable to uncertain tax
positions as of January 1, 2007 were
W9,565 million. Upon adoption, the total
unrecognized tax benefits included items that would favorably
affect the income tax provision by
W8,908 million, if recognized.
Effectively January 1, 2007, the Company adopted
FIN 48, which prescribe the recognition, measurement and
disclosure standards for uncertain in income tax positions.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits for the year ended December 31,
2007 and 2008 is as follows (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
Beginning of period
|
|
W
|
9,565
|
|
|
W
|
9,989
|
|
Gross increases for tax position of prior years
|
|
|
501
|
|
|
|
186
|
|
Gross decreases for tax position of prior years
|
|
|
(15
|
)
|
|
|
(2,629
|
)
|
Lapses of statues of limitations
|
|
|
|
|
|
|
(474
|
)
|
Gross increases for tax position of current year
|
|
|
|
|
|
|
2,233
|
|
Gross decreases for tax position of current year
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending of period
|
|
W
|
9,989
|
|
|
W
|
9,305
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized tax benefits at December 31, 2007 and
2008 are W9,212 million and
W7,375 million, respectively, that, if
recognized, would favorably affect the effective income tax
rate. The remaining unrecognized tax benefits relate to
temporary items that would not affect the effective income tax
rate.
The Company recognized any interest and penalties accrued
related to unrecognized tax benefits in income tax expense. The
Company had approximately W2,945 million
for the payment of interest and penalties accrued in the balance
sheet at January 1, 2007 and
W3,961 million and
W3,019 million in the balance sheet at
December 31, 2007 and 2008, respectively.
It is expected that the amount of unrecognized tax benefits will
also change for other reasons in the next 12 months;
however, we do not expect that change to have a significant
impact on our financial position or results of operations.
The Company files income tax returns in the Republic of Korea
jurisdiction and also files income tax returns in a number of
foreign jurisdictions. However, our foreign income tax activity
has been immaterial. The National Tax Service, or NTS, has
effectively completed the examination of our returns in the
Republic of Korea related to years prior to 2004.
In significant foreign jurisdictions, the 2004 through 2008 tax
years generally remain subject to examination by their
respective tax authorities.
F-94
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
b. Information
under U.S. GAAP with respect to Investments under
SFAS No. 115
Information with respect to
available-for-sale
and
held-to-maturity
securities under SFAS No. 115 at December 31, 2006,
2007 and 2008 is as follows (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Impairment
|
|
|
Fair
|
|
|
|
(Amortized Cost)
|
|
|
Gains
|
|
|
Losses
|
|
|
Losses
|
|
|
Value
|
|
|
At December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
W
|
348,077
|
|
|
W
|
440,148
|
|
|
W
|
|
|
|
W
|
(7,145
|
)
|
|
W
|
781,080
|
|
Debt securities
|
|
|
1,083,914
|
|
|
|
33,903
|
|
|
|
(46,107
|
)
|
|
|
(10,656
|
)
|
|
|
1,061,054
|
|
Held-to-maturity
securities
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
1,432,125
|
|
|
W
|
474,051
|
|
|
W
|
(46,107
|
)
|
|
W
|
(17,801
|
)
|
|
W
|
1,842,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
W
|
1,642,306
|
|
|
W
|
1,750,170
|
|
|
W
|
(683
|
)
|
|
W
|
(7,796
|
)
|
|
W
|
3,383,997
|
|
Debt securities
|
|
|
470,280
|
|
|
|
9,293
|
|
|
|
(439
|
)
|
|
|
(10,656
|
)
|
|
|
468,478
|
|
Held-to-maturity
securities
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
2,112,680
|
|
|
W
|
1,759,436
|
|
|
W
|
(1,122
|
)
|
|
W
|
(18,452
|
)
|
|
W
|
3,852,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
W
|
1,878,049
|
|
|
W
|
681,260
|
|
|
W
|
(73
|
)
|
|
W
|
(208,453
|
)
|
|
W
|
2,350,783
|
|
Debt securities
|
|
|
5,696
|
|
|
|
|
|
|
|
|
|
|
|
(552
|
)
|
|
|
5,144
|
|
Held-to-maturity
securities
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
1,883,857
|
|
|
W
|
681,260
|
|
|
W
|
(73
|
)
|
|
W
|
(209,005
|
)
|
|
W
|
2,356,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds from the sale of
available-for-sale
securities were W298,715 million,
W155 million and
W470,309 million for the years ended
December 31, 2006, 2007 and 2008, respectively. Gross
realized gains for the years ended December 31, 2006, 2007
and 2008 were W605 million, nil and
W14,466 million, respectively. Gross
realized losses for the years ended December 31, 2006, 2007
and 2008 were W30 million,
W3 million and
W500 million, respectively.
Gross unrealized losses of
W46,107 million,
W1,122 million and
W73 million at December 31, 2006,
2007 and 2008 for which impairment has not been recognized, have
been in a continuous unrealized loss position for less than
twelve months.
c. Fair
Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments as of
December 31, 2006, 2007 and 2008 for which it is
practicable to estimate that value:
Cash
and Cash Equivalents, Accounts Receivable (trade and other),
Short-term Loans, Accounts Payable and Short-term
Borrowings
The carrying amount approximates fair value because of the short
maturity of those instruments.
F-95
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Trading
Securities and Long-term Investment Securities
For investments in non-listed companies stock, a
reasonable estimate of fair value could not be made without
incurring excessive costs. Additional information pertinent to
these investments is provided in Note 4. The fair value of
investments in listed companies stock, public bonds, and
other marketable securities are estimated based on quoted market
prices for those or similar investments.
Long-term
Bank Deposits
The carrying amount approximates fair value as such long-term
bank deposits bear interest rates currently available for
similar deposits.
Long-term
Loans
The fair value of long-term loans is estimated by discounting
the future cash flows using the current interest rate of time
deposits with similar maturities.
Bonds
Payable, Bonds with Stock Warrant, Convertible Bonds, Long-term
Borrowings, Long-term Payable Other and Obligation
under Capital Leases
The fair value of these liabilities is estimated based on the
quoted market prices for the same or similar issues or on the
current interest rates offered for debt of the same remaining
maturities.
The following summarizes the carrying amounts and fair values of
financial instruments as of December 31, 2006, 2007 and
2008 (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Amount
|
|
|
Fair
|
|
|
Amount
|
|
|
Fair
|
|
|
Amount
|
|
|
Fair
|
|
|
|
(Note a)
|
|
|
Value
|
|
|
(Note a)
|
|
|
Value
|
|
|
(Note a)
|
|
|
Value
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and short-term financial instruments
|
|
W
|
576,017
|
|
|
W
|
576,017
|
|
|
W
|
956,441
|
|
|
W
|
956,441
|
|
|
W
|
914,228
|
|
|
W
|
914,228
|
|
Trading securities
|
|
|
665,312
|
|
|
|
665,312
|
|
|
|
635,434
|
|
|
|
635,434
|
|
|
|
367,002
|
|
|
|
367,002
|
|
Accounts receivable (trade and other)
|
|
|
3,065,481
|
|
|
|
3,065,481
|
|
|
|
2,642,195
|
|
|
|
2,642,195
|
|
|
|
2,893,283
|
|
|
|
2,893,283
|
|
Short-term loans
|
|
|
60,440
|
|
|
|
60,440
|
|
|
|
74,603
|
|
|
|
74,603
|
|
|
|
106,013
|
|
|
|
106,013
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed equity and debts
|
|
|
1,842,268
|
|
|
|
1,842,268
|
|
|
|
3,852,569
|
|
|
|
3,852,569
|
|
|
|
2,356,039
|
|
|
|
2,356,039
|
|
Non-listed equity and debts
|
|
|
141,138
|
|
|
|
N/A
|
|
|
|
128,718
|
|
|
|
N/A
|
|
|
|
75,028
|
|
|
|
N/A
|
|
Derivative instruments assets
|
|
|
16,660
|
|
|
|
16,660
|
|
|
|
16,227
|
|
|
|
16,227
|
|
|
|
318,373
|
|
|
|
318,373
|
|
Long-term bank deposits
|
|
|
10,430
|
|
|
|
10,430
|
|
|
|
15,512
|
|
|
|
15,512
|
|
|
|
75
|
|
|
|
75
|
|
Long-term loans
|
|
|
13,250
|
|
|
|
9,938
|
|
|
|
45,524
|
|
|
|
34,143
|
|
|
|
85,975
|
|
|
|
82,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
6,390,996
|
|
|
|
|
|
|
W
|
8,367,223
|
|
|
|
|
|
|
W
|
7,116,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
W
|
1,224,536
|
|
|
W
|
1,224,536
|
|
|
W
|
1,241,935
|
|
|
W
|
1,241,935
|
|
|
W
|
1,107,202
|
|
|
W
|
1,107,202
|
|
Short-term borrowings
|
|
|
63,612
|
|
|
|
63,612
|
|
|
|
11,737
|
|
|
|
11,737
|
|
|
|
180,827
|
|
|
|
180,827
|
|
Derivative instruments liabilities
|
|
|
113,424
|
|
|
|
113,424
|
|
|
|
123,557
|
|
|
|
123,557
|
|
|
|
242,186
|
|
|
|
242,186
|
|
Bonds payable, long-term borrowings, convertible bonds,
long-term payables other and obligation under
capital leases, including current portion
|
|
|
3,595,880
|
|
|
|
3,667,748
|
|
|
|
3,460,939
|
|
|
|
3,508,681
|
|
|
|
4,943,630
|
|
|
|
4,855,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
4,997,452
|
|
|
|
|
|
|
W
|
4,838,168
|
|
|
|
|
|
|
W
|
6,473,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(note a) |
These carrying amounts represent the amounts determined under
U.S. GAAP.
|
F-96
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
value hierarchy
On January 1, 2008, the Company adopted the provisions of
SFAS No. 157, Fair Value Measurements, for
all financial and nonfinancial assets and liabilities recognized
at fair value in the consolidated financial statements on a
recurring basis. The adoption of this statement did not change
our previous accounting for financial assets and liabilities.
The provisions of SFAS No. 157 will be applied to
nonfinancial assets and liabilities that are recognized at fair
value in the consolidated financial statements on a nonrecurring
basis beginning January 1, 2009. Upon application of the
remaining provisions of SFAS No. 157 on
January 1, 2009, the Company will provide additional
disclosures regarding our nonrecurring fair value measurements,
including our annual impairment review of goodwill and
intangible assets.
SFAS No. 157 defines fair value as the exchange price
that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction
between market participants on the measurement date.
SFAS No. 157 also establishes a three-tier fair value
hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs
when measuring fair value. These tiers include: Level 1,
defined as observable inputs such as quoted prices in active
markets; Level 2, defined as inputs other than quoted
prices in active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs in
which little or no market data exists, therefore requiring an
entity to develop its own assumptions.
The following fair value hierarchy table presents information
regarding our assets and liabilities measured at fair value on a
recurring basis as of December 31, 2008 (in millions of
Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December, 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
W
|
367,002
|
|
|
W
|
|
|
|
W
|
367,002
|
|
|
W
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
2,350,783
|
|
|
|
2,350,783
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
5,144
|
|
|
|
|
|
|
|
5,144
|
|
|
|
|
|
Held-to-maturity
securities
|
|
|
112
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency swap
|
|
|
318,373
|
|
|
|
|
|
|
|
318,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
3,041,414
|
|
|
W
|
2,350,783
|
|
|
W
|
690,631
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency swap
|
|
W
|
210,468
|
|
|
W
|
|
|
|
W
|
210,468
|
|
|
W
|
|
|
Interest rate swap
|
|
|
31,718
|
|
|
|
|
|
|
|
31,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W
|
242,186
|
|
|
W
|
|
|
|
|
242,186
|
|
|
W
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following methods and assumptions were used to estimate the
fair value of each class of financial instrument:
Securities
The Company classifies our securities within Level 1 of the
valuation hierarchy where quoted prices are available in an
active market. Level 1 securities include exchange-traded
equities. The Company generally classifies our securities within
Level 2 of the valuation hierarchy where quoted market
prices are not available. If quoted market prices are not
available, the Company determined the fair values of our
securities using pricing
F-97
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
models, quoted prices of securities with similar characteristics
or discounted cash flow models. These models are primarily
industry-standard models that consider various assumptions,
including time value and yield curve as well as other relevant
economic measures.
Derivatives
The majority of our derivatives are valued using internal models
that use as their basis readily observable marketing inputs,
such as time value, forward interest rates, volatility factors,
and current and forward market prices for foreign currency
exchange rates. The Company generally classify these instruments
within Level 2 of the valuation hierarchy. Such derivatives
include interest rate swap, cross currency swaps and foreign
currency derivatives.
SFAS No. 157 requires that the valuation of derivative
liabilities must take into account the Companys own
non-performance risk. Effective January 1, 2008, the
Company updated our derivative valuation methodology to consider
our own non-performance risk and counterparty non-performance
risk as observed through the credit default swap market and
based on prices for recent trades.
d. Comprehensive
Income
Comprehensive income for the years ended December 31, 2006,
2007 and 2008 is as follows (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Net income
|
|
W
|
1,878,361
|
|
|
W
|
1,505,347
|
|
|
W
|
1,072,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on investment securities
|
|
|
252,218
|
|
|
|
1,358,908
|
|
|
|
(1,080,978
|
)
|
Less impact of realized losses (gains)
|
|
|
446
|
|
|
|
(29,603
|
)
|
|
|
1,730
|
|
Tax effect
|
|
|
(69,509
|
)
|
|
|
(369,853
|
)
|
|
|
292,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change from
available-for-sale
securities
|
|
|
183,155
|
|
|
|
959,452
|
|
|
|
(786,408
|
)
|
Foreign-based operations translation adjustments
|
|
|
(18,570
|
)
|
|
|
3,698
|
|
|
|
64,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
|
|
|
164,585
|
|
|
|
963,150
|
|
|
|
(721,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
W
|
2,042,946
|
|
|
W
|
2,468,497
|
|
|
W
|
351,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
e. Goodwill
and other intangible assets
On January 1, 2002, the Company adopted
SFAS No. 142, Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill and
intangible assets with indefinite lives are no longer amortized,
however, they will be subject to periodic impairment tests as
prescribed by the statement and intangible assets that do not
have indefinite
F-98
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
lives are amortized over their useful lives. The following
tables present the additional disclosures required by this
statement.
Goodwill
Changes in the carrying amount of goodwill under U.S. GAAP
for the years ended December 31, 2006, 2007 and 2008 are as
follows (in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Beginning of period
|
|
W
|
3,418,212
|
|
|
W
|
3,419,114
|
|
|
W
|
3,599,135
|
|
Goodwill increase due to acquisition and subsidiary change
during the period
|
|
|
13,426
|
|
|
|
180,145
|
|
|
|
923
|
|
Goodwill impairment losses
|
|
|
(12,524
|
)
|
|
|
|
|
|
|
(107,138
|
)
|
Goodwill disposed of during the period
|
|
|
|
|
|
|
(124
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending of period
|
|
W
|
3,419,114
|
|
|
W
|
3,599,135
|
|
|
W
|
3,492,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Intangible Assets
The major components and average useful lives of other acquired
intangible assets under U.S. GAAP are as follows (in
millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
Amortization
|
|
|
Gross
|
|
|
Amortization
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
and
|
|
|
Carrying
|
|
|
and
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Impairment
|
|
|
Amount
|
|
|
Impairment
|
|
|
Amortized intangible assets :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMT license (13 years)
|
|
W
|
1,188,547
|
|
|
W
|
(278,521
|
)
|
|
W
|
1,188,547
|
|
|
W
|
(368,849
|
)
|
|
W
|
1,188,547
|
|
|
W
|
(459,178
|
)
|
Customer relationship (4 years)
|
|
|
99,783
|
|
|
|
(99,783
|
)
|
|
|
106,783
|
|
|
|
(99,783
|
)
|
|
|
106,783
|
|
|
|
(100,671
|
)
|
Software purchased (5 years)
|
|
|
883,004
|
|
|
|
(310,184
|
)
|
|
|
1,083,552
|
|
|
|
(478,849
|
)
|
|
|
1,216,273
|
|
|
|
(604,412
|
)
|
Software development cost (5 years)
|
|
|
242,164
|
|
|
|
(196,510
|
)
|
|
|
240,629
|
|
|
|
(223,508
|
)
|
|
|
207,294
|
|
|
|
(188,028
|
)
|
Other (2 to 20 years)
|
|
|
308,747
|
|
|
|
(98,035
|
)
|
|
|
455,910
|
|
|
|
(134,349
|
)
|
|
|
377,121
|
|
|
|
(164,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
W
|
2,722,245
|
|
|
W
|
(983,033
|
)
|
|
W
|
3,075,421
|
|
|
W
|
(1,305,338
|
)
|
|
W
|
3,096,018
|
|
|
W
|
(1,516,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset amortization expense for the years ended
December 31, 2006, 2007 and 2008 was
W244,025 million,
W332,056 million and
W426,760 million, respectively. It is
estimated to be W362,189 million,
W327,055 million,
W279,445 million,
W175,273 million and
W128,709 million for the years ending
December 31, 2009, 2010, 2011, 2012 and 2013, respectively,
primarily related to the IMT license, software purchased and
other.
F-99
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
f. Condensed
Consolidated Income Statements under U.S. GAAP
Condensed consolidated income statements under U.S. GAAP for the
years ended December 31, 2006, 2007 and 2008 are as follows
(in millions of Korean won):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Operating revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless services
|
|
W
|
9,025,209
|
|
|
W
|
9,531,488
|
|
|
W
|
9,553,556
|
|
Interconnection
|
|
|
1,033,390
|
|
|
|
1,062,195
|
|
|
|
1,149,196
|
|
Digital handset sales
|
|
|
|
|
|
|
51,714
|
|
|
|
16,425
|
|
Other
|
|
|
483,203
|
|
|
|
566,989
|
|
|
|
438,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue
|
|
|
10,541,802
|
|
|
|
11,212,386
|
|
|
|
11,157,552
|
|
Total operating expenses
|
|
|
(7,720,028
|
)
|
|
|
(9,144,306
|
)
|
|
|
(9,403,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
2,821,774
|
|
|
|
2,068,080
|
|
|
|
1,753,578
|
|
Other income (expenses), net
|
|
|
(135,742
|
)
|
|
|
(197,428
|
)
|
|
|
(556,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and appropriate item below
|
|
|
2,686,032
|
|
|
|
1,870,652
|
|
|
|
1,197,506
|
|
Provision for income taxes
|
|
|
(673,330
|
)
|
|
|
(483,963
|
)
|
|
|
(132,494
|
)
|
Minority interests in losses of consolidated subsidiaries
|
|
|
21,752
|
|
|
|
54,281
|
|
|
|
121,129
|
|
Equity in earnings (loss) of unconsolidated businesses, net of
income tax
|
|
|
(156,093
|
)
|
|
|
64,538
|
|
|
|
(113,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
W
|
1,878,361
|
|
|
W
|
1,505,347
|
|
|
W
|
1,072,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
g. Segment
The Company has one operating segment, which is cellular
telephone communication service. The Company does not deem each
subsidiary to be a reportable segment as it does not meet any of
the quantitative threshold in SFAS No. 131. Thus,
management does not believe information about the subsidiaries
segment would be useful to readers of the financial statements.
The operating results of SK Telecom are reviewed by the
Companys chief operating decision maker on a combined
basis that reflect the operating results of all service lines
taken as a whole. In addition, discrete financial information is
not available individually for expenses incurred in connection
with providing cellular services, wireless internet, digital
convergence, and other services provided by SK Telecom.
Therefore, the Company has one reportable segment, cellular
telephone communication service and all goodwill has been
allocated to this segment.
h. Supplemental
Information relating to Cash Flows
Supplemental Information relating to Cash Flows under U.S. GAAP
for the years ended December 31, 2006, 2007 and 2008 are as
follows (in millions of Korean won) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Cash paid for interest (net of amounts capitalized)
|
|
W
|
226,442
|
|
|
W
|
169,311
|
|
|
W
|
243,319
|
|
Cash paid for income taxes
|
|
|
660,188
|
|
|
|
591,672
|
|
|
|
422,506
|
|
F-100
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
i. Accrued
Severance Indemnities
The Company and certain subsidiaries expect to pay the following
future benefits for the next 10 years to their employees
upon their normal retirement age as follows (in millions of
Korean won) :
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
2009
|
|
W
|
1,492
|
|
2010
|
|
|
870
|
|
2011
|
|
|
1,890
|
|
2012
|
|
|
2,055
|
|
2013
|
|
|
1,373
|
|
2014
~
2018
|
|
|
28,468
|
|
|
|
|
|
|
Total
|
|
W
|
36,148
|
|
|
|
|
|
|
The above amounts were determined based on the employees
current salary rates and the number of service years that will
be accumulated upon their retirement date. These amounts do not
include amounts that might be paid to employees that will cease
working with the Company before their normal retirement age.
j. New
Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157
Fair Value Measurement which provides guidance for
using fair value to measure assets and liabilities when required
for recognition or disclosure purposes. SFAS No. 157
is intended to make the measurement of fair value more
consistent and comparable and improve disclosures about these
measures. Specifically, SFAS No. 157
(1) clarifies the principle that fair value should be based
on the assumptions market participants would use when pricing
the asset or liability, (2) establishes a fair value
hierarchy that prioritizes the information used to develop those
assumptions, (3) clarifies the information required to be used
to measure fair value, (4) determines the frequency of fair
value measures and (5) requires companies to make expanded
disclosures about the methods and assumptions used to measure
fair value and the fair value measurements effect on
earnings. However, SFAS No. 157 does not expand the
use of fair value to any new circumstances or determine when
fair value should be used in the financial statements.
SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years, with some
exceptions. SFAS No. 157 is to be applied
prospectively as of the first interim period for the fiscal year
in which it is initially adopted, except for a limited form of
retrospective application for some specific items. In February
2008, the FASB issued Staff Position No.
157-1
Application of FASB Statement No. 157 to FASB
Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purpose of Lease
Classification or Measurement Under Statement 13 in order
to amend SFAS No. 157 to exclude FASB Statement No. 13
Accounting for Leases and other accounting pronouncements
that address fair value measurements for purposes of lease
classification or measurement under SFAS 13. In addition,
in February 2008, the FASB issued Staff Position
No. 157-2
Effective Date of FASB Statement No. 157 which
defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008 for non-financial assets
and non-financial liabilities, except for those that are
recognized or disclosed at fair value in an entitys
financial statements on a recurring basis (at least annually).
The Company adopted SFAS No. 157,
FSP 157-1
and
FSP 157-2
in the 2008, the impact of which is disclosed in Note 34(c)
Fair value of financial instruments.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and Financial
Liabilities, Including an Amendment of FASB Statement
No. 115. SFAS No. 159 permits entities to
choose to measure many financial instruments and certain other
items at fair value that are not currently required to be
measured at fair value. Unrealized gains and losses on items for
which the fair value option has been elected are required to be
included in earnings. SFAS No. 159 does not affect any
existing accounting literature that requires certain assets and
liabilities to be carried at fair value. SFAS No. 159
is effective for fiscal years beginning after
F-101
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
November 15, 2007. The adoption of SFAS No. 159
did not have a material impact on the Companys result of
operations, cash flow or financial position.
In December 2007, the FASB issued SFAS No. 141
(revised 2007) Business Combinations which
replaces FASB Statement No. 141. SFAS No. 141(R)
establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill
acquired. SFAS No. 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and
financial effects of the business combination.
SFAS No. 141(R) is effective for fiscal years
beginning after December 15, 2008. The Company is currently
evaluating the potential impact, if any, the adoption of
SFAS No. 141(R) may have on consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 160,
Non-controlling Interests in Consolidated Financial
Statements an amendment of Accounting Research
Bulletin No. 51 (SFAS 160).
SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than
the parent, the amount of consolidated net income attributable
to the parent and to the non-controlling interest, changes
in a parents ownership interest, and the valuation of
retained non controlling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the
interests of the parent and the interests of the non controlling
owners. This statement is effective for the Company beginning
January 1, 2009. The Company is currently evaluating the
potential impact of the adoption of SFAS 160 on our
consolidated financial position, results of operations or cash
flows.
On May 9, 2008, the FASB issued FASB Staff Position (FSP)
APB 14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). This FSP clarifies that convertible debt
instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by APB
Opinion No. 14, Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants. Additionally, this FSP
specifies that issuers of such instruments should separately
account for the liability and equity components in a manner that
will reflect the entitys nonconvertible debt borrowing
rate when interest cost is recognized in subsequent periods.
This FSP is effective for financial statements issued for fiscal
years beginning after December 15, 2008. Early adoption is
prohibited. The Company is currently evaluating the impact of
adopting FSP APB 14 on the Companys consolidated financial
condition, operating results and cash flows.
In June 2008, the FASB ratified the consensus reached by the
EITF on Issue
07-5,
Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock (Issue
07-5). Under
Issue 07-5,
an instrument (or embedded feature) would not be considered
indexed to an entitys own stock if its settlement amount
is affected by variables other than those used to determine the
fair value of a plain vanilla option or forward
contract on equity shares, or if the instrument contains a
feature (such as a leverage factor) that increases exposure to
those variables. An equity-linked financial instrument (or
embedded feature) would not be considered indexed to the
entitys own stock if the strike price is denominated in a
currency other than the issuers functional currency. Issue
07-5 is
effective for the Company on January 1, 2009, and the
Company is currently evaluating the impact of adopting Issue
07-5 on the
Companys consolidated financial condition, operating
results and cash flows.
In December 2008, the FASB issued FSP
No. FAS 140-4
and
FIN 46R-8,
Disclosures by Public Entities (Enterprises) About
Transfers of Financial Assets and Interests in Variable Interest
Entities (FSP
No. FAS 140-4
and
FIN 46R-8).
FSP
No. FAS 140-4
and
FIN 46R-8
amends the disclosure requirements of SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and FIN 46R and is
effective for the first reporting period ending after
December 15, 2008, or December 31, 2008 for the
Company. The adoption of FSP
No. FAS 140-4
and
FIN 46R-8
did not have a material impact on the Companys financial
condition, results of operations or cash flows.
In January 2009, the FASB issued FSP
No. EITF 99-20-1,
Amendments to the Impairment Guidance of EITF Issue
No. 99-20
(FSP
No. EITF 99-20-1).
FSP
No. EITF 99-20-1
amends the impairment guidance in EITF
No. 99-20
to align impairment guidance in
EITF 99-20
with that in SFAS No. 115 and related impairment
guidance.
F-102
SK
TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
FSP
No. EITF 99-20-1
applies to beneficial interests within the scope of
EITF 99-20
and is effective for periods ending after December 15,
2008, or December 31, 2008 for the Company. The adoption of
FSP
No. EITF 99-20-1
did not have a material impact on the Company.
In April 2009, the FASB issued FSP
No. 141R-1,
Accounting for Assets Acquired and Liabilities Assumed in
a Business Combination That Arise from Contingencies (FSP
No. 141R-1). FSP
No. 141R-1
amends and clarifies SFAS No. 141R, Business
Combinations, to address application issues raised by preparers,
auditors, and members of the legal profession on initial
recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising
from contingencies in a business combination. FSP
No. 141R-1
is effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition
date is on or after the first annual reporting period beginning
on or after December 15, 2008, or January 1, 2009 for
the Company and had no impact on its financial condition,
results of operations or cash flows.
In April 2009, the FASB issued FSP
No. FAS 115-2
and
FAS 124-2.
FSP
No. FAS 115-2
and
FAS 124-2
amends the
other-than-temporary
impairment guidance in GAAP for debt securities and the
presentation and disclosure requirements of
other-than-temporary
impairments on debt and equity securities in the financial
statements. This FSP does not amend existing recognition and
measurement guidance related to other-than temporary impairments
of equity securities. FSP
No. FAS 115-2
and
FAS 124-2
is effective for interim reporting periods ending after
June 15, 2009, or June 30, 2009 for the Company, with
early adoption permitted. The Company did not early adopt this
FSP. The Company expects the adoption of this standard to
decrease the impact of impairments on its results of operations
in future periods when compared to the impact the Company
believes would have occurred without this new accounting
standard. The Company is currently evaluating the impact of the
adoption of FSP
No. FAS 115-2
and
FAS 124-2
to its financial condition, results of operations and cash flows.
F-103