Substantially all of our revenues are denominated in Won. Depreciation of the Won may materially affect our results of operations because, among other things, it causes:

an increase in the amount of Won required by us to make interest and principal payments on our foreign currency-denominated debt; and

an increase, in Won terms, of the costs of equipment that we purchase from overseas sources which we pay for in Dollars or other foreign currencies.


	•	~~an increase in the amount of Won required by us to make interest and principal payments on our foreign currency-denominated debt; and~~

	•	~~an increase, in Won terms, of the costs of equipment that we purchase from overseas sources which we pay for in Dollars or other foreign currencies.~~

Fluctuations in the exchange rate between the Won and the Dollar will affect the Dollar equivalent of the Won price of the ~~shares of~~ our common ~~stock~~shares on the KRX KOSPI Market of the Korea Exchange ~~or the KRX~~(the “KRX KOSPI ~~Market.~~Market”). These fluctuations also will affect:

the amounts a registered holder or beneficial owner of ADSs will receive from the American Depositary Receipt (“ADR”) depositary in respect of dividends, which will be paid in Won to the ADR depositary and converted by the ADR depositary into Dollars;

the Dollar value of the proceeds that a holder will receive upon sale in Korea of our common shares; and


	•	the amounts a registered holder or beneficial owner of ADSs will receive from the American Depositary Receipt (“ADR”) depositary in respect of dividends, which will be paid in Won to the ADR depositary and converted by the ADR depositary into Dollars;

	•	~~the Dollar value of the proceeds that a holder will receive upon sale in Korea of the common shares; and~~

	•	~~the secondary market price of the ADSs.~~

the secondary market price of our ADSs.

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

Rates.”

Risks Relating to Korea

~~Korea is our most important market,~~Unfavorable financial and ~~our current business and future growth could be materially and adversely affected if~~ economic ~~conditions~~developments in Korea ~~deteriorate.~~may have an adverse effect on us.

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. The economic indicators in Korea in recent years have shown mixed signs of growth and uncertainty, and future growth of the ~~Korean~~ economy is subject to many factors beyond our control.

~~Recent difficulties affecting the U.S. and global financial sectors,~~

In recent years, adverse conditions and volatility in the worldwide ~~credit and~~ financial markets, fluctuations in oil and commodity prices and the general weakness of the U.S. and global economy have ~~increased~~contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the Korean economy. ~~Due to recent liquidity and credit concerns and volatility in the global financial markets, the~~The value of the Won relative to major foreign currencies in general and the U.S. dollar in particular has also fluctuated ~~significantly~~widely. See “Item 3.A. Selected Financial Data — Exchange Rates.” A depreciation of the Won increases the cost of imported goods and services and the Won revenue needed by Korean companies to service foreign currency denominated debt. An appreciation of the Won, on the other hand, causes export products of Korean companies to be less competitive by raising their prices in ~~recent years.~~terms of the relevant foreign currency and reduces the Won value of such export sales. Furthermore, as a result of adverse global and Korean economic conditions, there has been continuing volatility in the stock prices of Korean companies. The Korea Composite Stock Price Index (“KOSPI”) declined from 1,897.1 on December 31, 2007 to 938.8 on October 24, 2008. While the KOSPI has recovered since 2008, closing at 1,971.7 on April 25, 2014, there is no guarantee that the stock prices of Korean companies will not decline again in the future. Future declines in the KOSPI and large amounts of sales of Korean securities by foreign investors and subsequent repatriation of the proceeds of such sales may continue to adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea and the ability of Korean companies to raise capital. Any future deterioration of the Korean or global economy could adversely affect our business, financial condition and results of ~~operations and cash flows.~~

operations.

Developments that could have an adverse impact on Korea’s economy in the future include:

difficulties in the financial sectors in Europe and elsewhere and increased sovereign default risks in selected countries and the resulting adverse effects on the global financial markets;

adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the U.S. dollar, the euro or the Japanese yen exchange rates or revaluation of the Chinese renminbi), interest rates, inflation rates or stock markets;


	•	difficulties in the housing and financial sectors in the United States and elsewhere and increased sovereign default risks in selected countries and the resulting adverse effects on the global financial markets;

	•	adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the U.S. dollar or Japanese Yen exchange rates or revaluation of the Chinese Renminbi), interest rates and stock markets;

	•	continuing adverse conditions 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;

	•	~~substantial decreases in the market prices of Korean real estate;~~

	•	~~increasing delinquencies and credit defaults by consumer and small- and medium-sized enterprise borrowers;~~

	•	~~declines in consumer confidence and a slowdown in consumer spending;~~

	•	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);

	•	~~social and labor unrest;~~

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

	•	~~financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;~~

	•	~~loss of investor confidence arising from corporate accounting irregularities and corporate governance issues at certain Korean conglomerates;~~

	•	~~the economic impact of any pending or future free trade agreements, including the free trade agreements with the United States and the European Union;~~

	•	~~geo-political uncertainty and risk of further attacks by terrorist groups around the world;~~

	•	~~the recurrence of severe acute respiratory syndrome or an outbreak of swine or avian flu in Asia and other parts of the world;~~

increasing levels of household debt;

continuing adverse conditions in the economies of countries and regions that are important export markets for Korea, such as the United States, Europe, Japan and China, or in emerging market economies in Asia or elsewhere;

any adverse economic impact from the recently commenced scale-down by the U.S. Federal Reserve Board of its “quantitative easing” stimulus program;

further decreases in the market prices of Korean real estate;

increasing delinquencies and credit defaults by retail and small- and medium-sized enterprise borrowers;

declines in consumer confidence and a slowdown in consumer spending;

difficulties in the financial sector in Korea, including the savings bank sector;


	•	~~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;~~

	•	~~political uncertainty or increasing strife among or within political parties in Korea;~~

	•	the occurrence of severe earthquakes, tsunamis or other natural disasters in Korea and other parts of the world, particularly in trading partners (such as the March 2011 earthquake and tsunami in Japan, which also resulted in the release of radioactive materials from a nuclear plant that had been damaged by the earthquake);

	•	~~hostilities or political or social tensions involving oil producing countries in the Middle East and North Africa and any material disruption in the supply of oil or increase in the price of oil; and~~

	•	~~an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.~~

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);

social and labor unrest;

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

financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;

loss of investor confidence arising from corporate accounting irregularities and corporate governance issues concerning certain Korean conglomerates;

increases in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population size in Korea;

the economic impact of any pending or future free trade agreements;

geo-political uncertainty and risk of further attacks by terrorist groups around the world;

natural disasters that have a significant adverse economic or other impact on Korea or its major trading partners;

the occurrence of severe health epidemics in Korea and other parts of the world;

deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy;

political uncertainty or increasing strife among or within political parties in Korea;

hostilities or political or social tensions involving oil producing countries in the Middle East and North Africa and any material disruption in the global supply of oil or increase in the price of oil;

an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States; and

changes in financial regulations in Korea.

~~Increased~~Escalations in tensions with North Korea could have an adverse effect on us and the market value of ~~the~~our common shares and ADSs.

Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of ~~current and~~ future events. In ~~recent years,~~particular, since the death of Kim Jong-il in December 2011, there have been heightened security concerns stemming from North Korea’s nuclear weapons and long-range missile programs and increased uncertainty regarding North Korea’s actions and possible responses from the international community. 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 Korea’s 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 May 2009, North Korea announced that it had successfully conducted a second nuclear test and~~test-fired~~ ~~three short-rangesurface-to-air~~ missiles. In response, the United Nations Security Council unanimously passed a resolution in June 2009 that condemned North Korea for the nuclear test and decided to expand and tighten sanctions against North Korea. In March 2010, a Korean warship was destroyed by an underwater explosion, killing many of the crewmen on board. The government formally accused North Korea of causing the sinking in May 2010, and North Korea has denied responsibility for the sinking and has threatened retaliation for any attempt to punish it for the act. In November 2010, North Korean forces fired more than one hundred artillery shells targeting Yeonpyeong Island located near the maritime border between Korea and North Korea on the west coast of the Korean peninsula, killing two Korean soldiers and two civilians as well as causing substantial property damage. Korea responded by firing approximately 80 artillery shells and putting the military on its highest alert level. The Government condemned North Korea for the act and vowed stern retaliation should there be further provocation.

~~In addition, there recently~~ has been increased uncertainty with respect to the future of North Korea’s political leadership and concern regarding its implications for political and economic stability in the region. ~~In September 2010,~~Although Kim ~~Jong-il,~~ ~~the North Korean ruler who reportedly suffered a stroke in August 2008, named~~Jong-il’s third son, Kim Jong-un, has assumed power as his ~~third son who is reported~~father’s designated successor, the long-term outcome of such leadership transition remains uncertain.

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

In April 2013, North Korea blocked access to the inter-Korean industrial complex in its border city of Gaeseong to South Koreans, while the U.S. deployed nuclear-capable stealth bombers and destroyers to Korean air and sea space.

In March 2013, North Korea stated that it had entered “a state of war” with Korea, declaring the 1953 armistice invalid, and put its artillery at the highest level of combat readiness to protest the Korea-United States allies’ military drills and additional sanctions imposed on North Korea for its missile and nuclear tests.

North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted three rounds of nuclear tests between October 2006 to February 2013, which increased tensions in the region and elicited strong objections worldwide. In response, the United Nations Security Council unanimously passed resolutions that condemned North Korea for the nuclear tests and expanded sanctions against North Korea, most recently in March 2013.

In December 2012, North Korea launched a satellite into orbit using a long-range rocket, despite concerns in the international community that such a launch would be in ~~his twenties,~~violation of the agreement with the United States as well as United Nations Security Council resolutions that prohibit North Korea from conducting launches that use ballistic missile technology.

In March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the ~~vice chairman~~de facto maritime boundary between Korea and North Korea on the west coast of the ~~Central Military Commission~~Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea for the ~~general of the North Korean army. Although Kim Jong-il has designated his son to~~attack and vowed stern retaliation should there be ~~his successor, the implementation of the succession plan remains uncertain.~~ further provocation.

North Korea’s economy also faces severe challenges. InFor example, in November 2009, the North Korean government redenominated its currency at a ratio of 100 to 1 as part of a currency reform undertaken in an attempt to control inflation and reduce income gaps. In tandem with the currency redenomination, the North Korean government banned the use or possession of foreign currency by its residents and closed down privately run markets, which led to severe inflation and food shortages. Such developments may further aggravate social and political tensions within North Korea.

Over the longer term, reunification of the two Koreas could occur. Reunification may entail a significant economic commitment by Korea. In President Lee Myung Bak’s national address in August 2010, he suggested the possible adoption of a reunification tax in order to prepare for the long-term economic burden associated with reunification. Such discussions on reunification are preliminary, and it has not been decided whether or when such tax would be implemented. If a reunification tax is implemented, it may lead to a decrease in domestic consumption,

~~which in turn may have a material adverse effect on the Korean economy. In addition, there~~There can be no assurance that the level of tension on the Korean peninsula will not escalate in the future. Any further increase in ~~tension,~~tensions, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between Korea and North Korea break down or military hostilities occur, could have a material adverse effect on our business, ~~financial condition and~~ results of operations and financial condition and the market value of our common ~~stock~~shares and ADSs.

Korea’s legislation allowing class action suits related to securities transactions may expose us to additional litigation risk.

The Securities-related Class Action Act of Korea enacted in January 2004 allows class action suits to be brought by shareholders of companies (including us) listed on the KRX KOSPI Market for losses incurred in connection with purchases and sales of securities and other securities transactions arising from ~~(i)~~(1) false or inaccurate statements provided in the registration statements, prospectuses, business reports, audit reports, semi-annual or quarterly reports and ~~audit~~material fact reports and omission of material information in such documents, ~~(ii)~~(2) insider trading, ~~(iii)~~(3) market manipulation and ~~(iv)~~(4) unfair trading. This law permits 50 or more shareholders who collectively hold 0.01% of the shares of a company to bring a class action suit against, among others, the issuer and its directors and officers. Because of the relatively recent enactment of the act, there is not enough judicial precedent to predict how the courts will apply the law. Litigation can be time-consuming and expensive to resolve, and can divert management time and attention from the operation of a business. We are not aware of any basis upon which such suit may be brought against us, nor are any such suits pending or threatened. Any such litigation brought against us could have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Securities

If SK Holdings causes us to breach the foreign ownership limitations on ~~shares of~~ our common ~~stock,~~shares, we may experience a change of control.

The Telecommunications Business Act currently sets a ~~49%~~49.0% limit on the aggregate foreign ownership of our issued shares. Under the Telecommunications Business Act, as amended, a Korean entity, such as SK Holdings Co., Ltd. (“SK Holdings”), is deemed to be a foreign entity if its largest shareholder (determined by aggregating the shareholdings of such shareholder and its related parties) is a foreigner and such shareholder (together with the shareholdings of its related parties) holds ~~15%~~15.0% or more of the issued voting stock of the Korean entity. As of December 31, ~~2010,~~2013, SK Holdings owned ~~18,748,452~~20,363,452 shares of our common stock, or approximately ~~23.22%~~25.22%, of our issued shares. If SK Holdings were considered to be a foreign shareholder, then its shareholding in us would be included in the calculation of our aggregate foreign shareholding and our aggregate foreign shareholding (based on our foreign ownership level as of December 31, ~~2010,~~2013, which we believe was ~~49.0%~~48.02%) would exceed the ~~49%~~49.0% ceiling on foreign shareholding. As of December 31, ~~2010,~~2013, a foreign investment fund and its related parties collectively held a ~~3.1%~~1.1% stake in SK Holdings. We could breach the foreign ownership limitations if the number of ~~shares of our~~ common ~~stock~~shares or ADSs owned by other foreign persons significantly increases.

If our aggregate foreign shareholding limit is exceeded, the ~~KCC~~MSIP may issue a corrective order to us, the breaching shareholder (including SK Holdings if the breach is caused by an increase in foreign ownership of SK Holdings) and the foreign investment fund and its related parties who own in the aggregate ~~15%~~15.0% 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%~~49.0% ceiling, which may result in a change in control of us. In addition, the ~~KCC~~MSIP 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%~~49.0%. For a description of further actions that the ~~KCC~~MSIP could take, see “Item 4.B. Business Overview — Law and Regulation — Foreign Ownership and Investment Restrictions and ~~Requirements”.~~

If our convertible notes are converted by foreign holders and such conversion causes 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.

Requirements.”

In April 2009, we sold US$332.5 million in 1.75% convertible notes due 2014, all of which currently remain outstanding. As of June 1, 2011, these convertible notes were convertible by the holders into shares of our common stock at the rate of Won 211,271 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 and/or other large shareholders may adversely affect the market value of ~~the~~our common ~~stock~~shares and ADSs.

Sales of substantial amounts of ~~shares of~~ our common ~~stock,~~shares, or the perception that such sales may occur, could adversely affect the prevailing market ~~price of the shares~~value of our common ~~stock~~shares or ADSs or our ability to raise capital through an offering of our common ~~stock.~~

shares.

As of December 31, ~~2010,~~2013, SK Holdings owned ~~23.22%~~25.22% of our total issued common ~~stock~~shares and has not agreed to any restrictions on its ability to dispose of our shares. See “Item 7.A. Major ~~Shareholders”.~~Shareholders.” We can make no prediction as to the timing or amount of any sales of our common ~~stock.~~shares. We cannot assure you that future sales of ~~shares of~~ our common ~~stock,~~shares, or the availability of ~~shares of~~ our common ~~stock~~shares for future sale, will not adversely affect the prevailing market ~~prices of the shares~~value of our common ~~stock~~shares or ADSs ~~prevailing~~ from time to time.

If an investor surrenders his or her ADSs to withdraw the underlying shares, he or she may not be allowed to deposit the shares again to obtain ADSs.

Under the deposit agreement, holders of ~~shares of~~ our common ~~stock~~shares may deposit those shares with the ADR depositary’s custodian in Korea and obtain ADSs, and holders of ADSs may surrender ADSs to the ADR depositary and receive ~~shares of~~ our common ~~stock.~~shares. However, under the terms of the deposit agreement, as amended, the depositary bank is required to obtain our prior consent to any such deposit if, after giving effect to such deposit, the total number of ~~shares of~~ our common ~~stock~~shares represented by ADSs, which was ~~24,321,893~~13,485,736 shares as of ~~June 1, 2011,~~March 31, 2014, 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%3.0% of our common ~~stock.~~shares. See “Item 10.B. Memorandum and Articles of Incorporation — Description of American Depositary ~~Shares”.~~Shares.” It is possible that we may not give the consent. Consequently, an investor who has surrendered his or her ADSs and withdrawn the underlying shares may not be allowed to deposit the shares again to obtain ADSs.

An investor in our ADSs may not be able to exercise preemptive rights for additional new shares and may suffer dilution of his or her equity interest in us.

The Korean Commercial Code and our articles of incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer a right to subscribe for additional new ~~shares of our~~ common ~~stock~~shares or any other rights of similar nature, the ADR depositary, after consultation with us, may make the rights available to an ADS holder or use reasonable efforts to dispose of the rights on behalf of the ADS holder and make the net proceeds available to the ADS holder. The ADR depositary, however, is not required to make available to an ADS holder any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:


	•	a registration statement filed by us under the Securities Act is in effect with respect to those shares; or

the offering and sale of those shares is exempt from, or is not subject to, the registration requirements of the Securities Act.


	•	~~the offering and sale of those shares is exempt from, or is not subject to, the registration requirements of the Securities Act.~~

We are under no obligation to file any registration statement with respect to any ADSs. If a registration statement is required for an ADS holder to exercise preemptive rights but is not filed by us, the ADS holder will not be able to exercise his or her preemptive rights for additional shares. As a result, ADS holders may suffer dilution of their equity interest in us.

Short selling of our ADSs by purchasers of securities convertible or exchangeable into our ADSs could materially adversely affect the market price of our ADSs.

SK Holdings, through one or more special purpose vehicles, has engaged and may in the future engage in monetization transactions relating to its ownership interest in us. These transactions have included and may include offerings of securities that are convertible or exchangeable into our ADSs. Many investors in convertible or exchangeable securities seek to hedge their exposure in the underlying equity securities at the time of acquisition of the convertible or exchangeable securities, often through short selling of the underlying equity securities or similar transactions. Since a monetization transaction could involve debt securities linked to a significant number of our ADSs, we expect that a sufficient quantity of ADSs may not be immediately available for borrowing in the market to facilitate settlement of the likely volume of short selling activity that would accompany the commencement of a monetization transaction. This short selling and similar hedging activity could place significant downward pressure on the market price of our ADSs, thereby having a material adverse effect on the market value of ADSs owned by you.

A holder of our ADSs may not be able to enforce a judgment of a foreign court against us.

We are a corporation with limited liability organized under the laws of Korea. Substantially all of our directors and officers and other persons named in this document reside in Korea, and all or a significant portion of the assets of our directors and officers and other persons named in this document and substantially all of our assets are located in Korea. As a result, it may not be possible for holders of our ADSs to effect service of process within the United States, or to enforce against us any judgments obtained from the United States courts based on the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws.

We are generally subject to Korean corporate governance and disclosure standards, which may differ from those in other countries.

Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies, which may differ in some respects from standards applicable in other countries, including the United States. As a reporting company registered with the ~~U.S. Securities and Exchange Commission~~SEC and listed on the New York Stock Exchange (the “NYSE”), we are, and in the future will be, subject to certain corporate governance standards as mandated by the Sarbanes-Oxley Act of ~~2002.~~2002 (the “Sarbanes-Oxley Act”). However, foreign private issuers, including us, are exempt from certain corporate governance requirements under the Sarbanes-Oxley Act or under the rules of the ~~New York Stock Exchange.~~NYSE. There

may also be less publicly available information about Korean companies, such as us, than is regularly made available by public or non-public companies in other countries. Such differences in corporate governance standards and less public information available could result in corporate governance practices or disclosures that are perceived as less than satisfactory by investors in certain countries.

There are special risks involved with investing in securities of Korean companies, including the possibility of restrictions being imposed by the Government in emergency circumstances.

As we are a Korean company and operate in a business and cultural environment that is different from that of other countries, there are risks associated with investing in our securities that are not typical for investments in securities of companies in other jurisdictions.

Under the Korean Foreign Exchange Transactions Law, if the Government deems that certain emergency circumstances, including sudden fluctuations in interest rates or exchange rates, extreme difficulty in stabilizing the balance of payments or substantial disturbance in the Korean financial and capital markets, are likely to occur, it may impose any necessary restriction such as requiring Korean or foreign investors to obtain prior approval from the Minister of Strategy and Finance for the acquisition of Korean securities or for the repatriation of interest, dividends or sales proceeds arising from Korean securities or from disposition of such securities or other transactions involving foreign exchange.


Item 4.	*INFORMATION ON THE COMPANY*


Item 4.A.	*History and Development of the Company*

As Korea’s first wireless telecommunications service provider, we have a recognized history of leadership and innovation in the domestic telecommunications sector. Today, we remain Korea’s leading wireless telecommunications services provider and have continued to pioneer the commercial development and implementation ofstate-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, WCDMA and ~~WCDMA~~LTE technologies. Collectively, these networks can access approximately ~~99%~~99.0% 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~~Wireless 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, ~~2010,~~2013, we had approximately ~~25.7~~27.4 million wireless subscribers throughout Korea, including the number of MVNO subscribers leasing our networks, of which ~~23.8~~25.7 million owned Internet-enabled handsets capable of accessing our wireless Internet services. As of
December 31, ~~2010,~~2013, our share of the Korean wireless market was approximately ~~50.6%~~50.0%, based on number of subscribers, according to the KCC.

MVNOs leasing our networks had a total of 1.1 million subscribers, representing a market share of approximately 2.0%.

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%. In September 2009, we acquired additional shares of SK Broadband’s common stock, increasing our equity stake to 50.6%. Through SK Broadband, we currently provide broadband Internet access service and other Internet-related services, includingvideo-on-demand and Internet protocol TV or (“IP ~~TV,~~TV”) services, as well as fixed-line telephone services. As of December 31, ~~2010,~~2013, we had approximately ~~4.0~~4.6 million broadband Internet access subscribers and ~~3.8~~4.8 millionfixed-line telephone subscribers (including subscribers to VoIP ~~services)~~services of SK Broadband and SK Telink).

In September 2009, we completed the acquisition of the leased-line business and related ancillary businesses of SK Networks for approximately Won 892.8 billion and assumed Won 611.4 billion of debt as part of the transaction. Historically, we have relied on KT and SK Networks to provide a substantial majority of the transmission lines we lease.

On ~~June 1, 2011,~~March 31, 2014, we had a market capitalization of approximately Won ~~12.9~~17.4 trillion (US$~~12.0~~16.3 billion, as translated at the noon buying rate of ~~June 1, 2011)~~March 31, 2014) or approximately ~~1.08%~~1.47% of the total market capitalization on the KRX KOSPI Market, making us the ~~19th~~12th 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~~NYSE since June 27, 1996.

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,~~65, Eulji-ro, Jung-gu, Seoul100-999, Korea and our telephone number is82-2-6100-2114.

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 1990’s. During this period, the Government allowed new competitors to enter the fixed-line sector, sold a controlling stake in us to the SK Group, and granted a cellular license to our first competitor, Shinsegi. In October 1997, three additional companies, KTF, LG Telecom and Hansol PCS, began providing wireless services under Government licenses to provide wireless telecommunications services.

In 2000 and 2001, the Korean wireless telecommunications market experienced significant consolidation. In January 2002, Shinsegi was merged into us. Additionally, two of the other wireless telecommunications services operators merged. See “Item 4.B. Business Overview — ~~Competition”.~~

Competition.”

There are currently three providers of wireless voice telecommunications services in Korea: our company, KT (into which KTF merged) and LG U+ (formerly, LG Telecom). According to the KCC, as of December 31, ~~2010,~~2013, the market share of the Korean wireless telecommunications market in terms of number of subscribers of KT and LG U+ was ~~31.6%~~approximately 30.1% and ~~17.8%~~19.9%, respectively (compared to our market share of ~~50.6%~~50.0%).

~~In December 2000, the MIC awarded to two companies the right to receive~~ MVNOs had a ~~license to provide 3G services using WCDMA, an extension~~combined market share of the Global System for Mobile Communication standard for wireless telecommunications, which is globally the most widely used wireless technology. 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. 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 LG Telecom in August 2001, but was later revoked in July 2006.

4.5%.

A one-way mobile number portability ~~or MNP,~~(“MNP”) system was first implemented in the beginning of January 2004 when our subscribers were allowed to transfer to KTF and LG Telecom. From July 2004, a two-way MNP system was implemented so that KTF subscribers could transfer to us and LG Telecom. A three-way MNP system 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 ~~2008, 2009~~2013, 2012 and 2010, approximately ~~3.0~~4.2 million, ~~3.0~~4.5 million and ~~3.6~~4.0 million, respectively, of our subscribers migrated to our competitors. Approximately ~~0.6~~1.3 million, ~~1.1~~1.7 million and ~~1.3~~1.4 million of LG U+’s subscribers in ~~2008, 2009~~2013, 2012 and ~~2010,~~2011, respectively, and approximately ~~2.5~~2.2 million, ~~2.0~~2.7 million and ~~2.4~~2.5 million of KT’s subscribers in ~~2008, 2009~~2013, 2012 and ~~2010,~~2011, respectively, migrated to our service.

In January 2005, the Government granted each of KTus and usKT a license to offer WiBro service. ~~Both KT and we are currently expanding the coverage area of WiBro services.~~

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 ~~39.4~~34.5 lines per 100 population as of December 31, ~~2010,~~2013, and wireless penetration increasing from 7.0 subscribers per 100 population in 1996 to ~~103.9~~106.9 subscribers per 100 population as of December 31, ~~2010.~~2013. The table below sets forth certain subscription and penetration information regarding the Korean telecommunications industry as of the dates indicated:

As of December 31,
2006 2007 2008 2009 2010
(In thousands, except for per population amounts)

Population of Korea(1) 48,297 48,456 48,607 48,747 48,875
Wireless Subscribers(2) 40,197 43,498 45,607 47,944 50,767
Wireless Subscribers per 100 Population 83.2 89.8 93.8 98.4 103.9
Telephone Lines in Service(2) 23,119 23,130 22,132 20,090 19,273
Telephone Lines per 100 Population 47.9 47.7 45.5 41.2 39.4


	As of December 31,
	2013		2012		2011		2010		2009
	(In thousands, except for per population amounts)
Population of Korea(1)		51,141		50,948		50,734		50,516		49,773
Wireless Subscribers(2)		54,681		53,624		52,507		50,767		47,944
Wireless Subscribers per 100 Population		106.9		105.3		103.5		100.5		96.3
Telephone Lines in Service(2)		17,620		18,261		18,633		19,273		20,090
Telephone Lines per 100 Population		34.5		35.8		36.7		38.2		40.4


(1)		Source: ~~National Statistical Office~~The Ministry of ~~Korea.~~Security and Public Administration.

(2)

Source: ~~KCC.~~MSIP.

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 ~~103.9%~~106.9% as of December 31, ~~2010~~2013 and the number of wireless subscribers has increased from approximately 3.2 million in 1996 to approximately ~~50.8~~54.7 million as of December 31, ~~2010.~~

2013.

Since the introduction of short text messaging in 1998, Korea’s wireless data market has grown rapidly. This growth has been driven, in part, by the rapid development of wireless Internet service since its introduction in the second half of 1999. All of the Korean wireless operators have developed extensive wireless Internet service portals.

As of December 31, ~~2010,~~2013, approximately ~~48.1~~50.9 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:

As of December 31,
2006 2007 2008 2009 2010
(In thousands)

Number of Wireless Internet Enabled Handsets 38,894 41,598 42,740 46,301 48,085
Total Number of Wireless Subscribers 40,197 43,498 45,607 47,944 50,767
Penetration of Wireless Internet Enabled Handsets 96.8 % 95.6 % 93.7 % 96.6 % 94.7 %


	As of December 31,
	2013			2012			2011			2010			2009
	(In thousands, except for percentage data)
Number of Wireless Internet-Enabled Handsets		50,858			50,420			49,297			48,085			46,301
Total Number of Wireless Subscribers		54,681			53,624			52,507			50,767			47,944
Penetration of Wireless Internet-Enabled Handsets		93.0	%		94.0	%		93.9	%		94.7	%		96.6	%

Source: ~~KCC.~~

MSIP.

In addition to its well-developed wireless telecommunications sector, Korea has one of the largest Internet markets in the Asia Pacific region. According to Korea Internet & Security Agency ~~or KISA,~~(“KISA”), the number of Internet ~~subscribers~~users in Korea increased from approximately 3.1 million ~~at the end of~~in 1998 to approximately ~~37.0~~40.1 million ~~at the end~~as of ~~2010,~~July 2013, representing a ~~23.0%~~18.6% compound annual growth rate. From the end of 2005 to the end of ~~2010,~~2013, the number of broadband Internet access subscribers increased from approximately 12.2 million to approximately ~~17.2~~18.7 million, representing a ~~7.2%~~5.5% compound annual growth rate. The table below sets forth certain information regarding Internet users and broadband Internet access subscribers as of the dates indicated:

As of December 31,
2006 2007 2008 2009 2010
(In thousands)

Number of Internet Users(1) 34,120 34,820 35,360 36,580 37,010
Number of Broadband Subscribers(2) 14,043 14,709 15,475 16,349 17,224


	As of December 31,
	2013			2012			2011			2010			2009
	(In thousands)
Number of Internet Users(1)		40,080	(2)		38,120	(2)		37,180	(2)		37,010	(3)		36,580	(3)
Number of Broadband Internet Access Subscribers(4)		18,738			18,253			17,860			17,224			16,349


(1)		Source: KISA.

(2)	As of July 2013, 2012 and 2011, respectively.

(3)	As of May 2010 and 2009, respectively.

(4)	Source: ~~KCC.~~MSIP. Includes subscribers accessing Internet service using digital subscriber line, or xDSL, connections; cable modem connections; local area network, or LAN, connections;fiber-to-the-home, or FTTH, ~~connections;~~connections and satellite connections.


Item 4.B.	*Business Overview*

Overview

We are Korea’s leading wireless telecommunications services provider and continue to pioneer the commercial development and implementation ofstate-of-the-art wireless technologies. We provide the following core services:


	•		Cellular voice services. We provide wireless voice transmission services to our subscribers through our backbone ~~cellular~~wireless 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.)

	•		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.

•

Broadband Internet and fixed-line telephone services. Through our consolidated subsidiary, SK Broadband, we provide broadband Internet access service and other Internet-related services, includingvideo-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 50.6% equity interest in SK Broadband following our acquisition of a 7.2% equity stake in ~~the company~~it in September 2009.


	•		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 11th Street, an online shopping mall, and T Store, an online open marketplace for mobile applications, as well as ~~“Telematics”~~a “telematics” service, which makes use of global positioning system ~~or GPS,~~(“GPS”) technology. ~~In addition, we~~We also engage in ~~industry productivity enhancement, or IPE,~~the B2B solutions business that provides customized business solutions and applications to corporate customers. In October 2011, in order to develop a management system and corporate culture that is more suitable for the platform business and facilitate the expeditious execution of business strategies for such business, we spun off our platform business, including 11th Street and T Store, to a new wholly-owned subsidiary, SK Planet. In February 2013, SK Marketing & Company Co., Ltd., which managed our “OK Cashbag” loyalty points system and advertising operations, was merged into SK Planet, enlarging SK Planet’s scope of operations. In addition, we recently began pursuing new growth opportunities in the healthcare business by making equity investments in medical device manufacturers in 2011 and 2013 and establishing a joint venture with the Seoul National University Hospital (“SNUH”) in 2012.

We provide our wireless services through our proprietary backbone networks based on CDMA, WCDMA and ~~WCDMA~~LTE technologies. 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”.~~

Wireless 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:


	•		Enhance the technical capabilities of our wireless networks to improve data transmission speed and service quality and to offer an increased range of services, including in connection with our 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~~In 2011, we further ~~upgrading~~upgraded our WCDMA network to support HSUPA and HSPA+ technology and ~~expanding~~expanded the coverage area of our WiBro service. We commenced commercial LTE services in July 2011 and LTE smartphone services in September 2011, and expanded the coverage area of our LTE services to nationwide by the end of April 2012. We launched our LTE multi-carrier service ~~as well as introducing long term evolution, or~~(which allows mobile devices to seamlessly wander between our LTE frequency spectrums) in the 1.8 GHz spectrum in July 2012 and expanded the coverage area of our LTE multi-carrier service ~~by July 2011.~~to metropolitan Seoul and the downtown areas of other major cities in Korea. We launched our LTE-A services in June 2013, applying carrier aggregation technology which combines spectrum frequencies to improve data transmission speed and capacity, and currently provide LTE-A services in 84 cities nationwide. In September 2013, we commenced wideband LTE services in Seoul utilizing 20MHz of bandwidth in the 1.8 GHz spectrum and plan to expand coverage nationwide in 2014. We also 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, to introduce the latest wireless telecommunications products and services more quickly and to efficiently implement new wireless technologies as market opportunities arise.

	•		Drive the growth of wireless Internet in Korea. In recent years, the Korean telecommunications industry has experienced significant growth in wireless Internet services as the number of smartphone users has increased rapidly. We plan to establish and maintain our leadership among smartphone users by securing a competitive smartphoneline-up and streamlining the subscription process and pricing structures to enable subscribers to easily access their mobile content from multiple devices. We also intend to focus on developing differentiated services and various platforms in order to achieve our goal of leading the Korean smartphone market.

•

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 ~~through 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”~~“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. We also intend to expand the operation of T Store ~~our online application store,~~ by constructing an environment where outstanding developers can be nurtured and high-quality content can be produced.


	•		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. We hope to create greater convergence opportunities across our various network platforms through various acquisitions, such as the acquisition of

an equity stake in SK Broadband, Korea’s second largest fixed-line operator, or the acquisition of athe leased-line business from SK Networks. We also plan to continue to improve our new convergence services, such as 11th Street ~~an online shopping mall,~~ and T Store, ~~an online open marketplace for mobile applications.~~and pursue new business opportunities in the healthcare business area.

	•		Pursue our platform business and ~~industry productivity enhancement~~our B2B solutions business. We laid the foundation for our platform business in 2010 by expanding various platforms, including our T Store and MelOn music services, as well as establishing support systems for third-party content developers. We plan to grow our platform business by sharing our telecommunication infrastructure with other service providers and application developers. To better respond to the increased demand in the platform industry to connect content providers with smartphone and tablet users, we spun off our platform business into a new wholly-owned subsidiary, SK Planet, in October 2011. SK Planet operates our platform business in the marketplace for digital content, T Store, and in the open marketplace for online shopping and m-commerce, 11th Street. We also plan to enhance our enterprise value by expanding into media platforms and advertising platforms. In addition, we plan to grow our ~~industry productivity enhancement, or IPE,~~B2B solutions business ~~division~~ to generate greater value and growth for both us and our customers and partners around the globe. ~~IPE is~~For example, in April 2014, we acquired a ~~concept that endeavors~~controlling interest in Neo S Networks Co., Ltd., a provider of residential and small business electronic security and other related alarm monitoring services. Through our B2B solutions business, we endeavor to provide customized value-added services such as applications and solutions to clients in different businesses based on ~~the~~ existing network infrastructure. Building on existing infrastructures, we anticipate that value-added services to business clients will generate greater revenues compared to the current B2B business model. Once we establish prototypes categorized by ~~business~~the type and size of the business, we intend to expand and apply such ~~IPE~~business models to other businesses in the same field. We are in the process of working with various clients in finance, education, health, shopping and other areas.

•

Pursue diversification and growth through our investment in the semiconductor business. In February 2012, we acquired a 21.05% equity stake in SK Hynix, one of the world’s largest memory-chip makers by revenue, and became its largest shareholder. By investing in the export-driven semiconductor business, we plan to achieve a more diversified business portfolio, as well as seek global growth opportunities utilizing SK Hynix’s overseas network.

•

Continue global expansion by seeking opportunities in overseas markets. We ~~participate in various overseas markets and~~ continue to seek opportunities to expand our global business. In light of the highly penetrated Korean wireless market, we believe that strategic expansion into overseas markets offers important opportunities for future growth.

Digital ~~Cellular~~Wireless Network

We offer wireless voice and data telecommunications services throughout Korea using digital wireless networks, including a CDMA network, a WCDMA network, an LTE network, a WiBro network and a Wi-Fi network. We ~~are currently building our LTE network with a goal of commencing~~commenced commercial LTE services in Seoul on July 1, 2011 and expanded the coverage area of our LTE services to 28 cities as of January 1, 2012. We further expanded the coverage area of our LTE services to nationwide by ~~July 2011.~~

the end of April 2012. As of December 31, 2013, we had 13.5 million LTE subscribers.

CDMA Network

CDMA technology is a continuous digital transmission technology that accommodates higher throughput than analog technology by using various coding sequences to allow concurrent transmission of voice and data signals for wireless communication. In January 1996, we launched our first wireless network based on CDMA technology and became the world’s first to commercialize 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.

In October 2000, we began offering wireless voice and data services on our CDMA2000 1X network. CDMA2000 1X is an advanced CDMA-based technology that allows transmission of data at speeds of up to 153.6 Kbps (compared to a maximum of 64 Kbps for our basic CDMA network). In the first half of 2002, we launched an upgrade of our CDMA2000 1X network to a more advanced technology called CDMA 1xEV-DO. CDMA 1xEV-DO is a CDMA-based technology, similar to CDMA2000 1X, but 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 CDMA2000 1X network to CDMA 1xEV-DO technology.

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, and automatic roaming. We commenced provision of our 3G services using ourHSDPA-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”~~3.5G technology. In March 2007, we completed the nationwide expansion of our HSDPA-capable WCDMA network, which currently reaches approximately ~~99%~~99.0% 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,~~May 2010, we ~~began~~commenced commercial HSUPA ~~upgrades~~services in 59 cities nationwide, including Seoul, and in October 2010, we commenced HSPA+ services in Seoul and have since expanded the services area for HSPA+ services to ~~our WCDMA network, which is currently in progress.~~the metropolitan Seoul area. HSUPA technology represents 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. ~~We are also currently implementing upgrades to enable more evolved high speed packet access, or HSPA+, service.~~ Our implementation of HSDPA, HSUPA and HSPA+ technology ~~will allow~~allows 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, including through the installation of additional small cell sites or cellular repeaters to improve reception quality in subterranean areas, buildings or any 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”.~~

Resources.”

WiBro Network

We received a license from the MIC in 2005 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 8493 cities.

We currently use our WiBro network as a backhaul for our mobile Wi-Fi network.

Wi-Fi Network

Wi-Fi technology enables our subscribers with Wi-Fi-capable devices such as smartphones, laptops and tablet computers to access mobile Internet at a speed faster than our WCDMA or WiBro networks, ~~while~~although the service range of each Wi-Fi hot zone is smaller than that of our WCDMA or WiBro networks. We started to build ~~our~~ Wi-Fi hot zones ~~from~~in 2010 and, as of ~~March~~December 31, ~~2011,~~2013, we had more than ~~32,000~~106,000 Wi-Fi hot zones in public areas such as shopping malls, restaurants, coffee shops, subways and airports where, generally, the demand for high-speed wireless Internet service is high. While each Wi-Fi hot zone typically has a radius of approximately20-30 meters, some of our Wi-Fi hot zones, including those installed at public transportation facilities and amusement parks, have much wider service areas. We plan to increase the number of Wi-Fi hot zones ~~substantially, as well as provide Wi-Fi services in~~to approximately 115,000 by the ~~5GHz range, where the radio traffic is light, in order to reduce radio interference and increase speed.~~

end of 2014.

LTE Network

We ~~are currently building more advanced networks~~commenced commercial wireless services based on LTE technology, which is generally referred to as a 4G technology, ~~with a goal~~on July 1, 2011 and expanded the coverage area of ~~commencing commercial~~our LTE services to nationwide by the end of April 2012. We launched our LTE multi-carrier service in the 1.8 GHz spectrum in July ~~2011.~~2012 and expanded the coverage area of our multi-carrier service to metropolitan Seoul and the downtown areas of six major cities, namely, Busan, Daegu, Daejeon, Incheon, Ulsan and Gwangju, in Korea. We launched our LTE-A services in June 2013, applying carrier aggregation technology which combines spectrum frequencies to improve data transmission speed and capacity, and currently provide LTE-A services in 84 cities nationwide. In September 2013, we commenced wideband LTE services in Seoul utilizing 20MHz of bandwidth in the 1.8 GHz spectrum and plan to expand coverage nationwide in 2014. Several wireless carriers in the United States, Europe and Asia commenced LTE

services in 2010 and 2011 and LTE technology ~~is expected to be~~has become widely accepted globally as the standard 4G technology. LTE technology enables data to be transmitted at a speed faster than our WCDMA or WiBro networks, up to 75 Mbps for downloading and up to 37.5 Mbps for uploading. ~~We expect that the~~LTE-A technology enables data to be transmitted at up to 150 Mbps for downloading and up to 75 Mbps for uploading. The faster data transmission speed of ~~the~~our LTE network ~~will allow~~has allowed us to offer significantly improved

wireless data transmission services, providing our subscribers with faster wireless access to multimedia content. We ~~are~~have been building new access networks and evolved packet cores for our LTE network, while we ~~plan to~~ utilize our existing WCDMA network for other parts of our LTE network.

Network ~~infrastructure~~Infrastructure

The principal components of our wireless networks are:


	•		Cell sites,which are physical locations equipped with transmitters, receivers and other equipment that communicate by radio signals with wireless handsets within range of the cell (typically a 3 to 40 kilometer radius);

	•		Switching stations,which switch voice and data transmissions to their proper destinations, which may be, for instance, a mobile phone of one of our subscribers (for which transmissions would originate and terminate on our wireless networks), a mobile phone of a KT or LG U+ subscriber (for which transmissions would be routed to KT’s or LG U+’s wireless networks, as applicable), a fixed-line telephone number (for which calls would be routed to the public switched telephone network of a fixed-line network operator), an international number (for which calls would be routed to the network of a long distance service provider) or an Internet site; and

•

Transmission lines,which link cell sites to switching stations and switching stations with other switching stations.

As of December 31, ~~2010,~~2013, our CDMA, WCDMA, LTE and WiBro networks had an aggregate of ~~17,483~~44,764 cell sites.

We have purchased substantially all of the equipment for our CDMA network from Samsung Electronics and have purchased substantially all of the equipment for our WCDMA network, including the software and firmware used to upgrade our WCDMA network, from Samsung Electronics and ~~LG Ericsson.~~Ericsson–LG. We have purchased substantially all of the equipment for our WiBro network from Samsung Electronics. We ~~plan to purchase~~have purchased substantially all of the equipment for our LTE network from Samsung Electronics, Ericsson–LG ~~Ericsson~~ and Nokia Siemens ~~Networks.~~

Networks B.V.

Most of the transmission lines we use, including virtually all of the lines linking switching stations, as well as a portion of the lines linking cell sites to switching stations, comprise optical fiber lines that we own and operate directly. However, we have not undertaken to install optical fiber lines to link every cell site and switching station. In places where we have not installed our own transmission lines, we have leased lines from SK Networks, KT and, to a lesser extent, SK Broadband and LG U+. In September 2009, we acquired athe leased-line business and related ancillary businesses ~~from~~of SK Networks for Won 892.8 billion and assumed Won 611.4 billion of debt as part of the transaction. We intend to increase the efficiency of our network utilization and provide optimal services by internalizing transmission lines.

We use a ~~cellular~~wireless network surveillance system. This system oversees the operation of cell sites and allows us to monitor our main equipment located throughout the country from one monitoring station. The automatic inspection and testing provided to the cell sites lets the system immediately rebalance to the most suitable setting, and the surveillance system provides for automatic dispatch of repair teams and quick recovery in emergency situations.

Our Services

We offer wireless digital voice and data transmission services via networks that collectively can access approximately ~~99%~~99.0% 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.

For a discussion of our backbone networks, see “— Digital ~~Cellular~~Wireless Network” above.

Cellular Voice Services

Our cellular voice services, which comprise basic wireless voice transmission services and related~~“value-added”~~ “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 plan-based fees, usage ~~fees~~charges for outgoing voice calls, roaming charges and value-added service fees. For a more complete description of the fees we charge, see “— Revenues ~~Rates~~ and ~~Subscription Deposits”~~Rates” below.

To complement our basic voice transmission services, in recent years, we have ~~begun to offer~~offered 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 ~~2010~~2013 included services that provide a record of missed calls in the event a subscriber’s 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 subscriber’s mobile phone, known as “COLORing” service, as well as COLORing services that periodically change the default ring-back melody according to the subscriber’s music category selection, known as “Auto COLORing” ~~service,~~service; and services that alert subscribers when a dialed number that was engaged when first dialed is no longer engaged.

We also launched a voice-over-LTE service, known as our “HD Voice” service, in August 2012. HD Voice service is a premium communication service which features high quality voice transmission, fast call connection, voice-to-video call switching and digital content sharing during calls. In addition, we launched our “T phone” service in February 2014. Our T phone service provides our customers with a number of convenient call functions, including a function to block spam calls and a function called “T114” that informs customers of the phone numbers of stores, hospitals and other facilities closest in proximity to the customer’s current location.

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~~EV-DO-, WCDMA- and LTE-capable handsetsare able to make and receive calls using their regular mobile phone number without changing their handsets. In addition, we provide global roaming service to foreigners traveling to Korea. In such cases, we generally receive a fee from the traveler’s local wireless service provider.

Our global roaming service is offered in ~~three~~four technologies, in part depending on which mobile phone standards are available in a particular region: CDMA, ~~GSM~~Global System for Mobile (“GSM”) Communication standard for wireless telecommunications, WCDMA and ~~WCDMA~~LTE roaming. We currently offer CDMA voice roaming services in 1914 countries, GSM voice roaming services in ~~183~~200 countries and WCDMA voice roaming services in 74105 countries. We currently do not provide any LTE voice roaming services. In addition, we offer CDMA data roaming services in 97 countries, GSM data roaming services in 76147 countries, ~~and~~ WCDMA data roaming services in 72104 countries and LTE data roaming services in ten countries. In ~~2010,~~2013, approximately ~~7.6~~10.5 million subscribers utilized our global roaming services.

SK Telink launched its pre-paid MVNO service in June 2012 and its post-pay MVNO service in January 2013.An MVNO leases the networks of a mobile network operator and provides wireless telecommunication services under its own brand and fee structure, without owning telecommunication networks or frequencies.

In addition, we provide interconnection service to connect our networks to domestic and internationalfixed-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.

We plan to take advantage of the efficiency of our wireless network in order to enable our clients to easily access the Internet. We are in the process of ~~expanding and~~ upgrading our main 3G network ~~as well as building an~~and our LTE ~~network for commercialization~~network. We commenced

commercial LTE services in July 2011, which are capable of supporting data transmission at a speed substantially faster than that of our 3G services, and expanded the coverage area of our LTE services to nationwide by ~~July 2011.~~the end of April 2012. We also continue to invest in our Wi-Fi network by, among other things, utilizing WiBro as a backhaul. We plan to increase the number of Wi-Fi hot zones ~~substantially, as well as provide Wi-Fi services in~~to approximately 115,000 by the ~~5GHz range, where the radio traffic is light, in order to reduce radio interference and increase speed.~~

end of 2014.

Wireless Data, 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 and other devices. 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”). 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 network, the implementation of WCDMA ~~technology~~and LTE technologies has significantly increased the quality, speed and range of our ~~multimedia message services.~~

MMS. In December 2012, we also launched a new all-IP service called “joyn.T,” an integrated mobile and SMS messaging service with additional features such as photo, video and location sharing that is available over various networks and mobile devices.

Wireless Internet Services. In addition to our wireless data communications services, we also offer our feature phone 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~~wireless network and the Internet. ~~We also provide our smartphone subscribers with direct access to the Internet using mobile Internet technology.~~ Through our NATE portal, our feature phone 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. We also provide our smartphone subscribers with direct access to the Internet using mobile Internet technology. As of December 31, ~~2010,~~2013, approximately ~~23.8~~25.7 million, or ~~92.7%~~94.0%, of our subscribers owned Internet-enabled handsets capable of accessing our wireless Internet services.


	•		Wireless Entertainment ~~and Community~~ Services: We offer our subscribers a wide range of wireless entertainment-related contents and services, primarily through content-specific and community portal sites that we operate, including:


	•		~~MelOn,~~Hoppin, a ~~music portal operated by our consolidated subsidiary, Loen Entertainment, Inc.,~~network-based personalized media platform through which we provide various video contents that ~~provides wireless access to a wide range of digital music contents. To aggregate~~can be viewed from multiple devices, including smartphones, tablets 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, smartphones, tablet computers and MP3 players, as well as fixed-line devices, such as personal computers. AsWe provide more than 50,000 titles of ~~December 31, 2010, we had approximately 14.9 million subscribers to our MelOn service;~~movies, television programs and music videos through Hoppin;

•

B tv Mobile, a mobile IP TV service operated by SK Broadband, which currently provides subscribers access to approximately 70 TV channels and 30,000 titles of movies and other video contents that can be downloaded to wireless devices;

	•		Gaming Services,which ~~we offer~~are provided by SK Planet to our subscribers through ~~our NATE portal.~~T Store. For example, we offer a variety of multi-player, interactive mobile games, as well as animation-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;~~chip. We continue to enhance our competitiveness in mobile gaming services by pursuing partnerships with global game companies so that T Store is the platform on which their games are initially published and provided before they become available on other platforms. We also plan to enhance the value of our mobile gaming services by upgrading our game center and expanding it globally.

	•	~~Nate Movie,~~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 website, which subscribers can access using both wireless and fixed-line devices. Subscribers can also purchase movie tickets, check theater schedules and purchase~~video-on-demand~~ ~~contents through our Nate portal; and~~

	•	~~Mobile Cyworld,~~a wireless web community portal site, which is a mobile version of the Cyworld community site operated by our subsidiary, SK Communications Co., Ltd. For a more detailed description of the fixed-line Cyworld portal, see “— Other Products and Services — Other Portal Services — Community Portal Service”.


	•	Wireless Financial and Commercial Services: We also offer our subscribers a range of wireless finance-related contents and m-commerce services. Our wireless financial and commercial businesses include:


	•	~~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;

	•	~~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;

	•	~~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;

	•	11^th11th Street,an online shopping mall operated by SK Planet that links wired and wireless shopping services. As of December 31, ~~2010,~~2013, 11th Street ~~had strengthened its position as~~continues to be one of the three biggest enterprises in its field. In ~~2011,~~2014, we intend to continue to expand and reinforce our ~~new businesses~~mobile version of 11th Street and to consider opportunities in overseas markets to capitalize on ~~future commerce markets such as m-Commerce~~developing m-commerce markets;


	•		T Store, an online open marketplace for mobile ~~applications.~~applications operated by SK Planet. T Store is open to, and operates with, other open markets such as the Android market and manufacturers’ open markets. We plan to construct an environment where outstanding developers of mobile applications can be nurtured and high-quality content can be produced; ~~and~~

•
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.~~service;


	•		~~Wireless News~~Smart Wallet, a service that allows users to conveniently manage membership card points and ~~Search Services: We offer our subscribers a range of wireless news~~payment methods such as coupons, Gifticon, credit cards and ~~search services, including~~gift vouchers on their mobile devices for both online and offline purchases;

•

T Stock, an integrated electronic stock trading service based on an application which provides access to ~~domestic and international news content, dictionary resources and real-time weather information. Subscribers can also search for and purchase books, DVD’s, CDs and lottery tickets,~~stock market information as well as ~~download discount coupons~~certain electronic stock trading services operated by participating securities companies and, accordingly, enables subscribers to perform certain stock trading transactions and view stock-related information through their mobile devices; and

•

OK Cashbag, a points-based loyalty program that allows users to accumulate points according to purchase amounts and use accumulated points to acquire goods and services from affiliated vendors, therefore enhancing benefits for ~~use at offline stores.~~our customers and supporting the marketing efforts of affiliated vendors.

Broadband Internet and 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 covers ~~85%~~89.6% of households in Korea as of December 31, ~~2010.~~2013. 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~~a technology that transmits voice data through an Internet Protocol network. SK Broadband has offeredvideo-on-demand services since 2006 and has rolled out real-time IP TV services since January 2009. For the year ended December 31, ~~2010,~~2013, SK Broadband had revenues of Won ~~2,111.8~~2,539.4 billion and net ~~loss~~profit of Won ~~60.6 billion.~~

12.3 billion, compared to revenues of Won 2,492.2 billion and net profit of Won 22.5 billion in 2012.

As of December 31, ~~2010,~~2013, SK Broadband had approximately ~~4.0~~4.6 million broadband Internet access subscribers. According to the KCC, its market share of Korean broadband Internet access subscribers was approximately ~~20.9%~~24.4%. Broadband Internet access services (including revenues fromvideo-on-demand services) accounted for ~~52.4%~~49.4% of SK Broadband’s revenues for the year ended December 31, ~~2010.~~

2013.

As of December 31, ~~2010,~~2013, SK Broadband had approximately ~~3.8~~4.6 million fixed-line telephone subscribers (including subscribers to VoIP services). 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 ~~27.3%~~23.0% of SK Broadband’s revenues for the year ended December 31, ~~2010.~~

2013.

In addition, through our 83.5% 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~~telephone service since February 2005. SK Telink also operates certain value-added ~~domestic~~residential telephone services, including a “080” service that allows companies to establish “toll-free” customer service telephone hotlines, for which all call charges are paid by the company, as well as a “general corporate number” service that automatically routes calls made to a company’s general telephone number to the caller’s nearest local branch. SK Telink also offers VoIP services with telephone numbers that have the “070” prefix and provides ~~satellite DMB service after~~low-priced residential telephone services with additional value-added services, including SMS, remote office, caller ID display and video call services as well as various commercial telephone services. As of December 31, 2013, SK Telink had 232,837 subscribers to its ~~merger with TU Media in November 2010.~~

VoIP services.

Digital Convergence and New Businesses

We believe that digital convergence is the new paradigm in telecommunications. While we acknowledge as a potential threat the increasing equivocation of conventional industry boundaries and the entrance of non-traditional players into the mobile communications space, we also view convergence as a 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 recent efforts to pursue new opportunities in the convergence business area is our acquisition of an equity stake in SK Broadband, as described above. In order to solidify our presence in the fixed-mobile convergence marketplace, in September 2009, we also acquired the leased line business of SK Networks. We are hoping to continue to benefit from a range of synergies from these acquisitions, including by offering our customers bundled fixed-line, mobile telecommunications, broadband Internet and IP TV, including mobile IP TV, services. We also believe the acquisitions create opportunities to aggregate and broadcast digital content across various media platforms.

In February 2010, we purchased shares newly issued by Hana SK Card, ~~Co., Ltd.,~~ a credit card and related services provider, for a total purchase price of Won ~~402~~400.0 billion. As a result, we currently hold 49.0% of the total outstanding shares of Hana SK Card. We expect that this acquisition of shares will enable us to provide cross-over services between ~~telecommunication~~telecommunications and finance.

We also believe that the healthcare business is one of the new growth industries as society ages and medical and health technologies evolve and become integrated with information and communication technologies (“ICT”). In 2011, we began pursuing new opportunities in the healthcare business area by acquiring a 9.3% equity interest in NanoEnTek Inc., a biotechnology and nanotechnology company manufacturing, among others, point-of-care diagnostics devices. In January 2012, we established a joint venture, Healthconnect Co., Ltd. (“Healthconnect”), with SNUH to develop a health management service model for mobile device users utilizing ICT and currently hold a 49.5% equity interest in Healthconnect. In March 2012, we established a new internal organization, the Health Group, dedicated to developing our healthcare business and related research and development efforts. We are also seeking opportunities in global healthcare markets. In the first quarter of 2013, we acquired a 49.0% equity interest in X’ian Tianlong Service and Technology Co., Ltd. (“Tianlong”), a Chinese medical device manufacturer.

In April 2014, we acquired a controlling interest in Neo S Networks Co., Ltd., a provider of residential and small business electronic security and other related alarm monitoring services. We expect that this acquisition will enable us to create synergies and provide cross-over services between our network services and home security and monitoring services.

Our other convergence and new businesses include:

Platform Business. ~~We laid the foundation for our~~Our platform business ~~in 2010 by expanding various~~provides business platforms ~~including our~~and technological support systems for third-party content developers and merchants. These platforms include T Store and ~~MelOn music services, as well as establishing support systems forthird-party~~ ~~content developers.~~11th Street, among others. We plan to grow our platform business by sharing our telecommunication infrastructure with other service providers and application developers. In addition, we plan to grow our ~~industry productivity enhancement, or IPE,~~B2B solutions business ~~division~~ to generate greater value and growth for both us and our customers and partners around the globe. For a discussion of ~~IPE,~~our B2B solutions business, see “— Our Business Strategy.”

In ~~May~~October 2011, ~~we announced our plan to spin off our platform business into a wholly-owned subsidiary~~ in order to develop a management system and corporate culture that is more suitable for the platform business and facilitate the expeditious execution of business ~~strategies. Details of the spin-off plan have not been decided yet~~strategies, we spun off our platform business into a new wholly-owned subsidiary, SK Planet. SK Planet operates T Store and ~~the plan is subject~~11th Street. It also plans to ~~the final approval~~enhance its enterprise value by ~~our Board of Directors.~~

~~Satellite DMB Business.~~ ~~In September 2003, we entered~~expanding its business into ~~an agreement with Mobile Broadcasting Corporation for the purposes of co-owning~~media 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 aggregate acquisition cost of the satellite was approximately Won 205.2 billion, of which we committed to pay 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. We believe that this business will enable us to improve the breadth of wireless multimedia services that we already offer and to 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, which began to provide commercial satellite DMB services in May 2005. In February 2007, we purchased 4,615,798 new shares of TU Media for Won 32.4 billion, increasing our equity interest 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%. In November 2010, TU Media merged with and into SK Telink Co., Ltd., our consolidated subsidiary. SK Telink is currently Korea’s sole operator of satellite DMB services. SK Telink currently offers a range of broadcast content including education, games, drama, music, news and culture over more than 35 channels, including TUBOX, aadvertising platforms.

~~pay-per-view~~ ~~movie channel that broadcasts movies before their DVD release. As of December 31, 2010, SK Telink had more than 1.8 million subscribers to its satellite DMB services.~~

Telematics Service. In February 2002, we introduced a ~~Telematics~~telematics service called T-Map ~~Navigation.~~Navigation, which is currently operated by our consolidated subsidiary, SK Planet. 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, includingvehicle-mounted devices and portable handsets.

We believe that ~~Telematics~~telematics also creates opportunities for synergy between mobile telecommunications and other industries. Under an agreement entered into in October 2010 with Renault Samsung Motors Co., Ltd. (“Renault Samsung”) and Samsung Electronics, we ~~are co-developing~~have co-developed a customized ~~Telematics~~telematics system to provide T-Map Navigation service in Renault Samsung ~~vehicles.~~vehicles and T-Map Navigation is now available on all models of Renault Samsung vehicles manufactured since September 2012. We have also agreed with Fine Digital Inc., the second largest producer of navigation devices in Korea, to provide T-Map Navigation services through navigation devices manufactured by it. The implementation of more advanced 3G and 4G transmission technologies has also facilitated the increased integration of our wireless platforms customized for vehicular ~~use~~use.

Advertising Service. In July 2011, we launched our mobile “in-app” advertising service called T Ad, which uses various smartphone applications as advertising media. T Ad can provide more efficient advertising service by specifically targeting a desired audience based on the user information we have. We plan to develop our T Ad service into a growing business model by collaborating with application developers and advertisers.

Social Networking Service. In the first quarter of 2012, SK Planet acquired Mad Smart Co., Ltd., which provides “tic-toc” service, in ~~particular, created~~order to expand its business to mobile communication and social networking services. Mobile social networking service, still in its early stage of development, presents ample opportunities for new businesses and is expected to grow rapidly in the future. SK Planet has focused on providing “tic-toc” in global markets and launched this service in Southeast Asia and the United States in October 2012 and Turkey in November 2013, expecting to secure its subscriber base by offering a wide range of services, including m-VoIP, multimedia contents sharing and connection with other mobile social networking services. SK Planet plans to continue to create synergies ~~between~~from the acquisition by combining its know-how in platform service and the strengths of “tic-toc” in social networking services in global markets. SK Planet developed “Frankly”, a mobile messenger service that built upon and customized “tic-toc” to local market condition and launched this service in the United States in September 2013 and Korea in October 2013. While “tic-toc” and “Frankly” are also offered in Korea, we do not believe this service will have any material adverse effect on the level of SMS usage by our ~~Telematics~~subscribers because free text messaging services ~~and satellite DMB broadcasting services. We offer bundled Telematics and satellite DMB broadcasting services through a single, integrated vehicle-mounted device.~~

were already popular before its launch.

Portal Services.


•		Fixed-line NATE portal service. Our subsidiary, SK Communications, offers a fixed-line portal service under our “NATE” brand name and at the websitewww.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, acquired in 2002. NATE.com offers a wide variety of content and services, including an Internet search engine, as well as access to freee-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.

•	~~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 anever-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 China. 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, 2010, our Cyworld portal service had over 80 million registered users globally, including 25 million in Korea and 55 million in China. In March 2004, we launched “Mobile Cyworld”, allowing wireless subscribers to access the Cyworld portal community site through their cellular phones. In September 2009, we launched an application store on Cyworld.

In November 2007, SK Communications merged with Empas Corp., an Internet search engine and portal site. We believe the merger created valuable convergence synergies among our ~~NATE, Cyworld and Empas services.~~service offerings. In ~~2009, we integrated~~March 2014, the Cyworld ~~website~~business was spun-off by SK Communications into ~~Nate.com,~~a newly formed employee-owned company, Cyworld Co., Ltd., and ~~the search traffic on Nate.com~~ has ~~grown substantially following the integration.~~

subsequently been operated independently from us and our Nate service.

Global Business

We participate in various overseas markets and continue to seek opportunities to expand our global business.

United States. ~~On March 24, 2005,~~In November 2010, we ~~entered into~~acquired a ~~joint venture with EarthLink Inc.,~~3.3% equity interest in LightSquared for approximately $60 million. LightSquared planned to build a ~~major Internet services provider~~wholesale wireless broadband network in the United States. However, LightSquared is currently in bankruptcy proceedings in the United States ~~and formed HELIO, LLC, a Delaware limited liability company,~~pursuant to provide wireless voice and data services in the United States. We and EarthLink Inc. 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, 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 Corporation and the Virgin Group, in exchange for limited partnership units of Virgin Mobile USA, L.P. (Virgin Mobile USA, Inc.’s operating company), which were valued at approximately US$31 million at the time of sale. In December 2008, we exchanged all of our limited partnership units of Virgin Mobile USA for approximatelyChapter 11 ~~million shares of Virgin Mobile USA, Inc.’s Class A common stock.~~

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. On November 24, 2009, Virgin Mobile USA, Inc. merged with Sprint Nextel Corporation. Pursuant to the terms~~ of the merger, all of the shares of Class A common stock owned by us, including Class A common stock issuable upon conversion of the preferred stock, were converted into the right to receive shares of series 1 voting common stock of Sprint Nextel Corporation. We received 1.2279 shares of such series 1 voting common stock of Sprint Nextel Corporation per one share of Class A common stock of Virgin Mobile USA, Inc. and cash in lieu of fractional shares. In 2010, we sold all of the shares of Sprint Nextel Corporation held by us.

Since December 2004, we have been also offering our COLORing solution to Verizon Wireless, a major mobile phone service provider in the United States. As an application service provider, we receive a previously agreed percentage of Verizon’s COLORing service related revenues.

U.S. Bankruptcy Code.

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 owned a 49% stake of UNISK and China Unicom held a 51% stake. 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 Unicom’s 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%. On November 5, 2009, we sold all of the shares of the common stock of China Unicom held by us to China Unicom. We no longer hold any shares in China Unicom.

~~In July 2004, we, through our subsidiaryU-Land~~ ~~Company Ltd., acquired ViaTech, an Internet portal service and mobile content provider in China, to enhance our wireless Internet content and expand our service area. Through ViaTech, we offer aChinese-language~~ ~~version of Cyworld to users in China. ViaTech had more than 55 million registered users of Cyworld as of December 31, 2010.~~

In August 2006, we entered into a memorandum of understanding with China’s National Development and Reform Commission to assist China develop TD-SCDMA technology, China’s 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, through our wholly-owned Chinese subsidiary, SK Telecom China Holding Company, we invested US$15.6 million to acquire a 65.5% equity interest in ShenzhenE-eye High Tech Co., Ltd. (“Shenzhen E-eye High Tech”), a ~~global positioning system~~GPS service company in China. In 2009, ShenzhenE-eye High Tech and SK Marketing & Company Co., Ltd. (which was subsequently merged into SK Planet in February 2013) established a joint venture to provide telematics services in Beijing, Shanghai and Shenzhen. We believe the acquisition of ShenzhenE-eye High Tech allows 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 Co., Ltd., 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 Co., Ltd., a Hong Kong company that develops and publishes online games in China.

In August 2010, we set up a joint venture with China Railway No. 2 Engineering Group to build and run a smart city system at Jinma Smart City Project in Chengdu, China. The joint venture was ~~founded~~funded with Won 2.8 billion of capital, with ~~60%~~60.0% and ~~40%~~40.0% of its shares owned by us and China Railway No. 2 Engineering Group, respectively.

~~Mongolia.~~

In ~~July 1999,~~the first quarter of 2013, we acquired a ~~27.8%~~49.0% equity interest in Skytel Co., Ltd., Mongolia’s second-largest cellular service provider, by providing approximately Won 1.5 billion worth of analog infrastructure. We, together with Skytel, have been providing cellular serviceTianlong, a Chinese medical device manufacturer, to enter the healthcare market 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. In 2010, we reduced our equity interest in Skytel to 17.0% by selling 820,943 shares and sold the remaining shares in January 2011.

China.

Malaysia. In July 2010, we acquired a 27.2% equity interest in Packet One ~~Network, or P1,~~Networks (“P1”), a Malaysian 4G WiMAX ~~Telecommunications~~telecommunications company and subsidiary of Green Packet Berhad, for US$101 million. In connection with P1’s plan to increase its capital, we ~~announced in May 2011 our plan to make~~made an additional investment of MYR50 million (approximately US$16.3 million)~~pro rata~~to in 2011, which increased our ownership ~~interest.~~interest to 28.2%. P1 is the first WiMAX service provider in the country which has established itself as the market leader in high-speed wireless broadband services. In February 2014, Green Packet Berhad entered into a share purchase agreement with Telekom Malaysia Berhad (“TM”), the largest fixed-line telecommunications provider in Malaysia, under which TM is expected to become P1’s largest shareholder by the third quarter of 2014. As data communication usage continues to increase in Malaysia, we expect to see potential LTE-related business opportunities as the second largest shareholder in P1.

Indonesia. In May 2010, we agreed with PT. Telekomunikasi Indonesia Tbk (“TELKOM”), the largest telecommunication company in Indonesia, to establish a joint venture to launch and operate a digital content exchange hub (“DCEH”) in Indonesia. DCEH is a new type of content distribution system to distribute digital content like music, games and video clips for access not only by consumers but also by online music stores and telephone operators. We ~~also consider such investment~~will provide management expertise in P1building the DCEH business platform and digital content, while TELKOM will provide its knowledge of the Indonesian market utilizing its position as ~~groundwork for our IPE business expansion abroad and expect the strategic relationship with P1 to create powerful synergies, attracting potential IPE customers and business partners~~a key player in the ~~process.~~

Indonesian telecommunication industry. In July 2013, SK Planet and PT. XL Axiata Tbk, an Indonesian mobile telecommunications provider, established an equally-held joint venture, XL Planet, to launch and operate m-commerce business, and in March 2014, launched an online shopping mall “Elevenia.”

Turkey. In June 2012, SK Planet and Dogus Group, a Turkish conglomerate engaged in various businesses, established an equally-held joint venture, Dogus Planet, to launch and operate m-commerce businesses based on the commerce platform of 11th Street, in Turkey. In March 2013, Dogus Planet launched n11.com, an online marketplace for the Turkish market.

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 region’s leading wireless service providers. In June 2007, we also signed a memorandum of understanding with ~~the Freemove Alliance,~~FreeMove, 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~~TeliaSonera Mobile Networks AB of Sweden, for the development of expanded WCDMA-based roaming service in Europe. We plan to continue to improve 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~~Wireless Network Solutions to Foreign ~~Cellular~~Wireless Network Operators. We have also sought to expand our global business through sales of our wireless Internet platforms and ~~cellular~~wireless network solutions, as well as provision of consulting services in the field of mobile communications. 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.

Revenues ~~Rates~~ and ~~Subscription Deposits~~Rates

Our ~~wireless~~cellular services revenues are generated ~~principally~~ from initial subscription fees, usage charges (which include monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, roaming charges and value-added-service ~~fees~~fees), interconnection revenue, revenue from sales of digital handsets and ~~interconnection~~miscellaneous cellular services revenue. The following table sets forth information regarding our cellular services revenues (net of taxes) and facility deposits for the periods indicated:

As of or for the Year Ended December 31,
2008 2009 2010
(In billions of Won)

Initial Subscription Fees W 400.2 W 403.8 W 326.2
Monthly Fees 4,348.0 4,945.0 5,453.6
Usage Charges(1) 5,654.9 5,385.6 5,277.5
Interconnection Revenue 1,149.2 1,158.0 1,141.2
Revenue from Sales of Digital Handsets — 185.3 534.4
Other Cellular Revenue(2) 26.8 13.9 105.8
Total W 11,579.1 W 12,091.6 W 12,838.7
Additional Subscription Deposits W 2.7 W 2.7 W 2.4
Refunded Subscription Deposits 4.3 2.1 2.6
Subscription Deposits at Period End 4.8 5.4 5.2


	Year Ended December 31,
	2013		2012		2011
	(In billions of Won)
Initial Subscription Fees	￦	379.8	￦	360.9	￦	369.4
Usage Charges(1)		10,621.3		10,230.6		10,078.2
Interconnection Revenue		845.0		860.3		1,090.9
Revenue from Sales of Digital Handsets		645.9		1,131.7		787.2
Miscellaneous Cellular Services Revenue(2)		823.5		635.5		750.6

Total	￦	13,315.5	￦	13,218.9	￦	13,076.3


(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~~roaming charges and interest on overdue subscriber accounts (net of telephone tax).

(2)

~~Other~~Miscellaneous cellular services revenue includes revenue from the resale of fixed-line telecommunication services, leased lines, Internet solutions business and other miscellaneous cellular services provided by SK Telecom. For the period from January 1, 2011 to September 30, 2011, miscellaneous cellular services revenue also includes revenue from the sale and licensing of Internet platform ~~solutions.~~solutions, which business was spun-off into SK Planet in October 2011 and subsequently included in revenues for our other businesses.

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 and other companies for calls from the fixed-line network terminating on our networks and interconnection revenues from other wireless network operators. See “— ~~Interconnection”.~~Interconnection.” Monthly plan-based fees for some plans include free airtimeand/or discounts for designated calling numbers. We bill subscribers on a monthly basis and subscribers may make ~~payment~~payments at a bank, post office or at any of our authorized dealers.

We offer a variety of differentiated ~~Standard Rate Plans~~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~~standard rate plans ranges from Won 10,000 to Won 110,000. We also offer ~~fixed rate~~fixed-rate plans to smartphone users with flat rates ranging from Won ~~35,000~~34,000 to Won ~~95,000~~100,000 per month.

Our most popular plans are our fixed-rate plans offering unlimited free voice calls between our subscribers and fixed-rate plans offered to subscribers to our 3G and LTE services.

In addition, we offer optional “add-on” service plans, which may supplement the basic service plan a subscriber has chosen, including:


	•		Data ~~Plans~~plans,, which target subscribers with high usage patterns for wireless data transmission and wireless Internet services. We offer various ~~Data Plans~~data plans that provide wireless data services for monthly fees ranging from Won ~~3,500~~1,000 to Won ~~22,500.~~19,000.

•

~~Videoconferencing Plans~~International roaming plans, for subscribers to our 3G ~~services, which we provide primarily using our WCDMA~~ and ~~CDMA EV-DO network.~~LTE services. The basic monthly fee for our ~~Videoconferencing Plans~~international roaming plans ranges between Won ~~3,500~~5,000 and Won ~~9,000.~~99,000.

~~The~~

Under the previous Government, the KCC ~~has~~ periodically reviewed the tariffs charged by wireless operators and has, from time to time, suggested tariff reductions. Although these suggestions ~~are~~were not binding, we ~~have in the past~~ implemented some tariff reductions in response to KCC recommendations. 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%~~30.0% and in October 2007 we began providing a ~~50%~~50.0% discount on usage fees between our subscribers for a fixed payment of Won 2,500 per month. 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%~~50.0%. In November 2009, we also adopted various tariff reduction measures, including a reduction of the initial subscription fee from Won 50,000 to Won 36,000 and an increase in discounts for long-term subscribers. In March 2010, we began to charge voice calls on a per-second basis, rather than per ten seconds as previously charged, and effectively reduced the usage charges. In ~~June~~September 2011, we ~~announced~~implemented further tariff reduction measures, including a reduction of the monthly fee by Won 1,000 for every subscriber, an exemption of SMS usage charges up to 50 messages per month and the introduction of flexible service plans for smartphone users. The MSIP, which has taken over the KCC’s tariff regulation function as of March 23, 2013, is planning to gradually reduce and abolish initial subscription fees by 2015 and may also suggest other tariff reductions. Any further tariff reductions we make in response to such suggestion may adversely affect our results of operations. See “Item 5.A. Operating Results — ~~Overview”.~~

Overview.”

For all calls made from our subscribers’ handsets in Korea to any destination in Korea, we charge usage fees based on a subscriber’s 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”.~~

Interconnection.”

We offer a variety of value-added services, including ~~our ring back tone (COLORing),~~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 feature phone subscribers through NATE or, in the case of smartphone ~~users,~~subscribers, directly using mobile Internet technology. Our subscribers may elect to pay a monthly fee, which includes a fixed amount of airtime or data packets or unlimited amount of data for certain monthly plans with higher monthly fees, or may elect to pay on a variable, usage basis. 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 subscription deposit of Won 200,000, which we utilized to offset a defaulting subscriber’s outstanding account balance. Since March 2007, we generally no longer require new subscribers to pay the subscription deposit. We refund the subscription deposit to any existing subscriber who had initially made a subscription deposit and later requests such subscription deposit to be refunded. As a result of the subscription insurance program and the termination of the subscription deposit requirement, we have refunded a substantial amount of subscription deposits, and subscription deposits decreased from Won 21.1 billion as of December 31, 2006 to Won 5.2 billion as of December 31, 2010. We do not expect to have to refund a significant amount of subscription deposits in the future, because we believe that most of our subscribers who wish to have the subscription deposit refunded have already done so.

Because we have been designated by the ~~KCC~~MSIP as a “market dominant service ~~provider”,~~provider,” any modification to our fees, charges or the terms and condition of our service, including promotional rates, ~~and subscription deposits,~~ requires prior approval by the ~~KCC; provided, however, that such~~MSIP. Such pre-approval of the ~~KCC~~MSIP is not required if we are planning to reduce the rates for each type of services that we provide under the ~~KCC-approved~~MSIP-approved contractual ~~terms.~~

terms; however, we still have a duty to report the rate reduction to the MSIP.

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 ~~26.0~~27.4 million wireless subscribers, including the number of MVNO subscribers leasing our networks, as of ~~March~~December 31, ~~2011,~~2013, representing a market share of ~~50.6%~~50.0%, the largest market share among Korean wireless service providers. We believe that, historically, our subscriber growth has been ~~due to~~affected by many factors, including:

our expansion and technical enhancement of our networks, including with high-speed data capabilities;

increasing consumer awareness of the benefits of wireless telecommunications;


	•	~~our expansion and technical enhancement of our networks, including with high-speed data capabilities;~~

	•	~~increasing consumer awareness of the benefits of wireless telecommunications;~~

	•	~~an effective marketing strategy;~~

	•	~~our focus on customer service;~~

	•	~~the introduction of new, value-added services, such as COLORing, wireless Internet services and various mobile applications; and~~

	•	~~our acquisition of Shinsegi in January 2002.~~

an effective marketing strategy;

our focus on customer service;

the introduction of new, value-added services, such as COLORing, wireless Internet services and various mobile applications; and

the negative impact from highly saturated and competitive wireless market conditions.

The following table sets forth selected historical information about our subscriber base for the periods indicated:

As of or for the Year Ended December 31,
2008 2009 2010

Wireless:
Subscribers 23,032,045 24,269,553 25,705,049
Subscribers Growth Rate 4.8 % 5.4 % 5.9 %
Activations 8,493,340 8,821,695 9,651,343
Deactivations 7,429,464 7,284,187 8,215,847
Average Monthly Churn Rate(1) 2.7 % 2.7 % 2.7 %
Broadband Internet:
Subscribers 3,543,669 3,846,597 4,001,907
Subscribers Growth Rate (3.1 )% 8.5 % 4.0 %
Fixed-line Telephone (including VoIP):
Subscribers 2,055,981 3,023,068 3,845,650
Subscribers Growth Rate 1.2 % 47.0 % 27.2 %


	As of or for the Year Ended December 31,
	2013			2012			2011
Wireless:
Subscribers(1)		27,352,482			26,961,045			26,552,716
Subscriber Growth Rate		1.5	%		1.8	%		3.1	%
Activations		7,755,292			8,643,852			9,466,938
Deactivations		7,363,858			8,235,523			8,619,271
Average Monthly Churn Rate(2)		2.3	%		2.6	%		2.7	%
Broadband Internet:
Subscribers		4,569,105			4,394,123			4,191,892
Subscriber Growth Rate		4.0	%		4.8	%		4.7	%
Fixed-line Telephone (including VoIP):
Subscribers		4,801,047			4,757,152			4,422,808
Subscriber Growth Rate		0.9	%		7.6	%		8.4	%


(1)	The number of subscribers as of December 31, 2013, 2012 and 2011 include 1,066,848 subscribers, 406,018 subscribers and 55,449 subscribers, respectively, of MVNOs that lease our wireless networks.

(2)

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 ~~the~~a next generation service, such as ~~CDMA 1xEV/ DO or WCDMA,~~LTE, by terminating their service and opening a new subscriber account.

We had ~~25.7~~27.4 million wireless subscribers as of December 31, ~~2010.~~2013, including the number of MVNO subscribers leasing our networks. For the year ended December 31, ~~2010,~~2013, we had ~~9.7~~7.8 million activations and ~~8.2~~7.4 million deactivations, representing an average monthly churn rate of ~~2.7%~~2.3% 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.

Number Portability

Prior to January 2003, Korea’s 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 subscriber’s 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 aits 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 KT and LG Telecom 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.

In ~~2008, 2009~~2013, 2012 and ~~2010,~~2011, respectively, approximately ~~3.0~~4.2 million, ~~3.0~~4.5 million and ~~3.6~~4.0 million subscribers switched their wireless telecommunications service provider from us to KT or LG U+, and approximately ~~3.1~~3.8 million, ~~3.1~~4.4 million and ~~3.7~~3.9 million subscribers switched from KT or LG U+ to us.

In ~~2008, 2009~~2013, 2012 and ~~2010,~~2011, respectively, we gained approximately ~~1.0~~0.4 million, ~~1.2~~0.4 million and ~~1.4~~0.8 million new subscribers, which represented approximately ~~50.4%~~37.1%, ~~52.9%~~36.6% and ~~50.8%~~59.3% of the aggregate number of new wireless subscribers gained by us, KT and LG U+ in each year.

In addition, in order to manage the availability of phone numbers efficiently and to secure phone number resources for ~~the~~wireless telecommunications services, the Government has ~~begun to integrate~~been integrating mobile telephone identification numbers into a common prefix identification number “010” since January 1, 2004, as further described in “ — Law 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 are given the “010” prefix starting January 2004. The KCC plans to continue to pursue the integration process and complete the integration process by around 2018, when all mobile telephone numbers would have the prefix identification number “010”.

Regulation — Competition Regulation — Number Portability.”

For ~~2010,~~2013, our churn rate ranged from ~~2.3%~~1.9% to ~~3.1%~~2.9%, with an average churn rate of ~~2.7%~~2.3% for ~~2010,~~2013, which ~~remained unchanged~~decreased by 0.3%p from ~~2009.~~2012. 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, KCC and ~~KCC Proceedings”.~~

MSIP Proceedings.”

Interconnection

Our wireless and fixed line networks interconnect with the public switched telephone networks operated by KT and SK Broadband and, through their networks, with the international gateways of KT, LG U+ 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 ~~2008,~~2013, our total interconnection revenues were Won ~~1,149.2~~923.7 billion and our total interconnection expenses were Won ~~1,327.4~~1,043.7 billion. For ~~2009,~~2012, our total interconnection revenues were Won ~~1,245.4~~958.7 billion, and our total interconnection expenses were Won ~~1,317.7~~1,057.1 billion. For ~~2010,~~2011, our total interconnection revenues were Won ~~1,237.5~~1,174.7 billion, and our total interconnection expenses were Won ~~1,316.3~~1,264.1 billion.

Our interconnection revenue decreased in 2013 by Won 35.0 billion and our interconnection expenses decreased in 2013 by Won 13.4 billion, primarily due to decreases in interconnection rates and a decrease inland-to-mobile and mobile-to-mobile call volume.

Domestic Calls

Guidelines issued by the ~~KCC~~MSIP 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 ~~KCC~~MSIP determines interconnection rates applicable to each carrier ~~every two years~~ based on the ~~actual~~increase or ~~imputed~~decrease in costs caused by changes in long-term traffic volume, taking into account other factors such as research results and ~~competitive environment, among others.~~

trends in technology development.

Wireless-to-Fixed-line. According to our interconnection arrangement with KT, for a call from our wireless network to KT’s fixed-line network, we collect the usage rate from our wireless subscriber and in turn pay KT the interconnection charges. Similarly, KT pays interconnection charges to SK Broadband for a call from KT’s wireless network to SK Broadband’s fixed-line network. The interconnection rate applicable to both KT and SK Broadband was Won ~~19.31~~16.57 per minute, Won ~~19.15~~16.58 per minute and Won 18.57 per minute for ~~2009, 2010~~2013, 2012 and 2011, respectively.

Fixed-line-to-Wireless. The ~~KCC~~MSIP 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 accounts for substantially all of our fixed-line-to-wireless interconnection revenue and expenses.

The interconnection rates paid by fixed-line network service providers to each wireless network service provider are set out below. In December 2010, the KCC announced that a single interconnection rate will apply to all wireless service providers starting from 2013, which will eliminate the cost benefit that KT and LG U+ currently derive from the differences in interconnection rates.

Rate per Minute
Applicable Year
SK Telecom KT LG U+

2006 W 33.13 W 40.06 W 47.01
2007 32.78 39.60 45.13
2008 33.41 38.71 39.09
2009 32.93 37.96 38.53
2010 31.41 33.35 33.64
2011 30.50 31.75 31.93

However, in November 2012, the KCC announced that it will continue to apply varied interconnection rates for the year 2013 considering the cost difference among wireless network service providers and our position as a market dominant service provider. These regulations remain effective, as the MSIP has not yet announced any plan to amend these regulations.

   Rate per Minute
Applicable Year
   SK Telecom    KT    LG U+
2009
   ￦ 32.93       ￦ 37.96       ￦ 38.53
2010
   31.41       33.35       33.64
2011
   30.50       31.75       31.93
2012
   27.05       28.03       28.15
2013
   26.27       26.98       27.04

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. The applicable interconnection rate is the same as the fixed-line-to-wireless interconnection rate set out in the table above.

Our revenues from thewireless-to-wireless charge were Won ~~745.3~~641.2 billion in ~~2008,~~2013, Won ~~774.0~~601.5 billion in ~~2009~~2012 and Won ~~767.4~~715.0 billion in ~~2010.~~2011. Our expenses from these charges were ~~Won 821.3~~615.6 billion in ~~2008,~~2013, Won ~~849.5~~639.8 billion in ~~2009~~2012 and Won ~~825.3~~766.5 billion in ~~2010.~~2011. The charges above were agreed among the parties involved and confirmed by the KCC.

Despite an increase in incoming call volume in 2010, the decrease in our interconnection rate for 2010 led to an overall decrease of Won 7.9 billion in interconnection revenues. Our interconnection expenses slightly decreased in 2010 by Won 1.4 billion, primarily due to a decrease in interconnection rates, partially offset by an increase in outgoing call volume in 2010.

International Calls

With respect to international calls, if a call is initiated by aour wireless ~~subscriber,~~subscribers, we bill the wireless subscriber for the international charges of KT, LG U+ or SK Broadband, and we receive interconnection charges from such operators. If an international call is received by our subscriber, KT, LG U+ or SK Broadband pays interconnection charges to us based on our imputed costs.

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.

Marketing and Service Distribution

Marketing, Sales and Service Network

We market our services and provide after-sales service support to customers through 27more than 20 marketing teams, 38more than 30 branch offices and a network of ~~1,179~~approximately 3,300 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 ~~15,000~~18,000 independent retailers 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 subscriber’s 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 4.0 billion with a repayment period of up to three years. As of December 31, ~~2010,~~2013, we had an aggregate of Won ~~80.0~~95.5 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~~&Marketing Co., Ltd. (“PS&Marketing”), was established with an investment of Won ~~150~~150.0 billion and began operating 13 stores in May 2009. As of December 31, ~~2010,~~2013, PS ~~& Marketing Co., Ltd.~~&Marketing had 42223 stores in 1484 cities in Korea with ~~1,233~~1,907 employees. In addition, we established two wholly-owned subsidiaries, Service Ace Co., Ltd. and Service Top Co., Ltd., in June 2010, in order to provide customer service directly through our subsidiaries to enhance the quality of services compared to outsourcing.

In April 2010, our authorized dealers for wireless services started to market SK Broadband’s broadband Internet and fixed-line telephone services, which we believe has contributed to the increase in the number of broadband Internet and fixed-line telephone subscribers.

Over the last several years, competition in the wireless telecommunications business has caused us to significantly increase ~~significantly~~ our marketing and advertising expenses. However, we expect such expenses to stabilize due to the KCC’s ~~new~~ guideline on marketing expenses recommending that telecommunication service providers limit their marketing expenses to ~~22%~~22.0% of their annual ~~sales.~~telecommunication service revenue, which was lowered to 20.0% of annual telecommunication service revenue with respect to fiscal years 2013, 2012 and 2011. While the guideline is not binding, we, as well as our competitors, nonetheless try to adhere to this guideline when feasible. Such marketing expenses include initial commissions, monthly commissions and retention commissions paid to our authorized dealers and subscribers, including handset subsidies, but do not include advertising expenses. In ~~2008, 2009~~2013, 2012 and ~~2010,~~2011, on a separate basis, such marketing expenses amounted to ~~26.2%~~24.8%, ~~26.9%~~26.6% and ~~26.5%~~23.7% of ~~our wireless~~SK Telecom’s revenues, respectively, and advertising expenses amounted to 1.8%, 1.7% and 1.9% of SK Telecom’s revenues, respectively. ~~In 2008, 2009~~For a more detailed discussion of this guideline, see “— Law and ~~2010, advertising expenditures amounted to 2.6%, 2.2% and 2.1% of our revenues, respectively.~~

Regulation — Competition Regulation — Rate Regulation.”

Marketing Strategies and Marketing Information Management

Information technology improvements. We have implemented certain information technology improvements in connection with marketing strategy, including customer management systems, as well as more effective information security controls. We believe these upgrades have enhanced our ability to process and utilize marketing- and subscriber-related data, which, in turn, has helped us to develop more effective and targeted marketing strategies.

We currently operate a customer information system designed to provide us with an extensive customer database. Our customer information system includes a billing system that provides us with comprehensive account information for internal purposes and enables us to efficiently respond to customer requests. Our customers can also change their service plans, verify the charges accrued on their accounts, receive their bills online and send text messages to our other subscribers through our website atwww.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 are marketing all our products and services under the “T” brand.

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 ~~63.5%~~15.0% stake in Loen Entertainment ~~Inc.~~ (formerly, Seoul Records Inc.), Korea’s 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. We also hold a 9.4% equity interest in iHQ, Inc., an entertainment management firm that produces films, manages entertainers and operates online game services. Through our investments in companies such as Loen Entertainment, ~~Ntreev Soft and iHQ,~~ we are able to offer customers of our MelOn music, movie 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 of 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, 2010, our contribution to the funds amounted to Won 19.8 billion. In addition, 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 ~~38.0~~22.5 billion in the funds as of December 31, ~~2010. Furthermore,~~2013. In addition, in 2008 and 2010, we and certain co-investors invested an aggregate

Won ~~105.4~~148.1 billion to establish six additional funds to invest in the production of various cultural contents, including movies and television dramas. As of December 31, ~~2010,~~2013, our contribution to these funds amounted to Won ~~66.3~~98.0 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;~~solutions, developers of wireless modem ~~devices;~~devices and developers of Internet search applications.

SK Hynix

In February 2012, we acquired a 21.05% equity stake in SK Hynix, one of the world’s largest memory-chip makers by revenue, for an aggregate purchase price of approximately Won 3.4 trillion, and became its largest shareholder. Approximately Won 1.0 trillion of the purchase price was paid to selling shareholders, who are Korean financial institutions that acquired SK Hynix’s shares as result of debt to equity swaps in 2005. The remainder of the purchase price was paid to SK Hynix for issuance of new shares and is expected to be used primarily for capital expenditures. By investing in the export-driven semiconductor business, we plan to achieve a more diversified business portfolio, as well as seeking global growth opportunities utilizing SK Hynix’s overseas network.

SK Hynix designs, manufactures and sells advanced memory semiconductor products, including DRAM and NAND flash products, used in various electronic devices. SK Hynix operates four wafer fabrication facilities in Korea and China. In 2013 and 2012, SK Hynix and its subsidiaries, on a consolidated basis, had revenues of Won 14,165.1 billion and Won 10,162.2 billion, respectively, profit before income tax of Won 3,074.9 billion and loss before income benefit of Won 199.3 billion, respectively, and profit for the year of Won 2,872.9 billion and loss for the year of Won 158.8 billion, respectively. As of December 31, 2013 and 2012, SK Hynix and its subsidiaries, on a consolidated basis, had total assets of Won 20,797.3 billion and Won 18,648.7 billion, respectively, and total equity of Won 13,066.9 billion and Won 9,739.4 billion, respectively.

Other Investments

Our other investments include:


	•		POSCO. We currently own a ~~2.8%~~1.42% interest in the outstanding capital stock of POSCO, with a book value as of December 31, ~~2010~~2013 of Won ~~1,209.6~~405.1 billion. POSCO is the largest fully integrated steel producer in Korea, and one of the largest steel producers in the world.

	•	~~SK C&C.~~ We sold 10,500,000 common shares of SK C&C held by us in SK C&C’s initial public offering in November 2009, sold an additional 2,450,000 shares to the Government of Kuwait in October 2010 and disposed of the remaining 2,050,000 shares to Kookmin Bank in exchange for a 0.91% stake in KB Financial Group, Kookmin Bank’s parent company, in a share swap arrangement in February 2011. As a result, our equity stake in SK C&C decreased from 30.0% in 2008 to 0% in 2011. 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”.

	•	SKY Property Management. We currently own a ~~60%~~33.0% equity interest in SKY Property Management Ltd. (“SKY Property Management”), with a book value as of December 31, ~~2010~~2013 of Won ~~268~~238.3 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.

	•	~~SK Marketing & Company.~~ We currently own a 50% equity interest in SK Marketing & Company Co., Ltd., with a book value as of December 31, 2010 of Won 119 billion. SK Marketing & Company Co., Ltd. provides marketing-related services to corporate and individual clients.

For more information regarding our investment securities, see note 48 of the notes to our consolidated financial statements.

Competition

We were ~~Korea’s~~the only ~~provider of cellular~~wireless telecommunications services ~~until~~provider in Korea prior to April 1996, when Shinsegi began offering its CDMA service. In 1996, the Government issued three additional licenses to KTF, LG Telecom and Hansol PCS to operate CDMA services. Each of KTF, LG Telecom and Hansol PCS commenced operation of its CDMA service in October 1997. 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. The other two licenses were awarded to LG Telecom, and to consortia led by or associated with KT. In addition, our wireless voice businesses compete with Korea’s fixed-line operators, and our wireless Internet businesses compete with providers of fixed-line data and Internet services.

Beginning in 2000, there has been considerable consolidation in the wireless telecommunications industry, resulting in the emergence of stronger competitors. In 2000, KT acquired 47.9% of Hansol ~~M.Com’s~~M.Com Co., Ltd.’s outstanding shares and renamed the company KT ~~M.Com.~~M.Com Co., Ltd. (“KT M.Com”). KT M.Com merged into KTF in May 2001. In June 2009, KTF merged into KT, which had held a 54.25% interest in KTF before the merger. In addition, in January 2010, LG DACOM and LG Powercomm merged into LG Telecom, which subsequently changed its name to LG ~~Uplus Corp.~~

U+. Such consolidation has created large, well-capitalized competitors with substantial financial, technical, marketing and other resources to respond to our business offerings.

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, WCDMA, CDMA2000, WiBro and LTE.

As of December 31, ~~2010,~~2013, according to the KCC, KT and LG U+ had ~~16.0~~16.5 million and ~~9.0~~10.9 million subscribers, respectively, representing approximately ~~31.6%~~30.1% and ~~17.8%~~19.9%, respectively, of the total number of wireless subscribers in Korea on such ~~date.~~date, each including the number of MVNO subscribers leasing its networks. As of December 31, ~~2010,~~2013, we had ~~25.7~~27.4 million subscribers, representing a market share of approximately ~~50.6%~~50.0%, including the number of MVNO subscribers leasing its networks. MVNOs leasing our networks had a total of 1.1 million subscribers, representing a market share of approximately 2.0%.

As of December 31, 2013, according to the KCC, KT and LG U+ had 7.9 million and 7.1 million LTE subscribers, respectively, compared to our 13.5 million LTE subscribers.

For a description of the risks associated with the competitive environment in which we operate, see “Item 3.D. Risk Factors — Risks Relating to Our Business — Competition may reduce our market share and harm our results of operations and financial ~~condition”.~~

condition.”

Law and Regulation

Overview

Korea’s telecommunications industry is subject to comprehensive regulation by the ~~KCC,~~MSIP, which is responsible for information and telecommunications ~~policies, radio and broadcasting management.~~policies. The ~~KCC~~MSIP regulates and supervises a broad range of communications issues, including:


	•	entry into the telecommunications industry;

	•	~~scope of services provided by telecommunications service providers;~~

	•	~~allocation of radio spectrum;~~

	•	~~setting of technical standards and promotion of technical standardization;~~

	•	~~rates, terms and practices of telecommunications service providers;~~

	•	~~customer complaints;~~

	•	~~interconnection and revenue-sharing between telecommunications service providers;~~

	•	~~disputes between telecommunications service providers;~~

	•	~~research and development budgeting and objectives of telecommunications service providers; and~~

	•	~~competition among telecommunications service providers.~~

scope of services provided by telecommunications service providers;

allocation of radio spectrum;

setting of technical standards and promotion of technical standardization;

rates, terms and practices of telecommunications service providers;

customer complaints;

interconnection and revenue-sharing between telecommunications service providers;

disputes between telecommunications service providers;

research and development budgeting and objectives of telecommunications service providers; and

competition among telecommunications service providers.

Pursuant to ~~an amendment~~amendments to the Government Organization Act and the Act on the Establishment and Operation of Korea Communications Commission, both effective as of ~~February 29, 2008,~~March 23, 2013, the ~~Ministry of Information~~MSIP was established. The MSIP is charged with regulating information and ~~Communication, or MIC, has become~~telecommunications, the ~~Ministry of Knowledge Economy, and functions~~function which was formerly performed by the KCC in the previous Government. The KCC, which had taken over the regulatory functions relating to information and telecommunications policies and radio and broadcasting management from the MIC ~~are now performed separately by~~in 2008, is currently charged with regulating the ~~Ministry~~public interest aspects of ~~Knowledge Economy, the Ministry of Culture, Sports~~ and ~~Tourism, the Ministry of Public Administration and Security, and, particularly, the KCC.~~fairness in broadcasting. In this annual report, we refer to the MIC and the KCC as the relevant governmental ~~authority~~authorities in connection with any approval granted or action

taken by the MIC or the KCC, as applicable, prior to such ~~amendment~~amendments and to ~~such~~the MSIP or other relevant governmental authority in connection with any approval granted or to be granted or action taken or to be taken by the MSIP or such other relevant governmental authority subsequent to such ~~amendment.~~

amendments.

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~~MSIP for the services we provide. Our licenses permit us to provide cellular services, ~~and~~ third generation wireless services using WCDMA and WiBro ~~technologies.~~technologies and fourth generation wireless services using LTE technology. Our cellular license is valid until 2021 after a10-year extension issued in June 2011, ourIMT-2000 license is valid until 2016, ~~and~~ our WiBro license is valid until ~~2012.~~

2019 after a 7-year extension issued in March 2012 and our LTE license is valid until December 2021.

The ~~KCC~~MSIP may revoke our licenses or suspend any of our businesses if we fail to comply with its rules, regulations and corrective orders, including the rules restricting beneficial ownership and control and corrective orders issued in connection with any violation of rules restricting beneficial ownership and control or any violation of the conditions of our licenses. Alternatively, in lieu of suspension of our business, the ~~KCC~~MSIP may levy a monetary penalty of up to 3%3.0% 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~~MSIP approval.

In the past, the Government has stated that its policy was to promote competition in the Korean telecommunications market through measures designed to prevent the dominant service provider in any such market from exercising its market power in such a way as to prevent the emergence and development of viable competitors. While all network service providers are subject to ~~KCC~~MSIP regulation, we are subject to increased regulation because of our position as the dominant wireless telecommunications services provider in Korea.

Competition Regulation

The KCC is charged with ensuring that network service providers engage in fair competition and has broad powers to carry out this goal. If a network service provider is found to be in violation of the fair competition requirement, the KCC may take corrective measures it deems necessary, including, but not limited to, prohibiting further violations, requiring amendments to the articles of incorporation or to service contracts with customers, requiring the execution or performance of, or amendments to, interconnection agreements with other network service providers and prohibiting advertisements to solicit new subscribers.

The KCC is required to consult with the Minister of the MSIP before it takes certain corrective measures.

In addition, we qualify as a “market-dominating business entity” under the Fair Trade Act. Accordingly, we are prohibited from engaging in any act of abusing our position as a market-dominating entity, such as unreasonably determining, maintaining or altering service rates, unreasonably controlling the rendering of services, unreasonably interfering with business activities of other business entities, hindering unfairly the entry of newcomers or substantially restricting competition to the detriment of the interests of consumers.

Because we are a member company of the SK Group, which is a large business group as designated by the FTC, we are subject to the following restrictions under the Fair Trade Act:


	•		Restriction on debt guarantee among affiliates. Any affiliate within the SK Group may not guarantee the debts of another domestic affiliate, except for certain guarantees prescribed in the Fair Trade Act, such as those relating to the debts of a company acquired for purposes of industrial rationalization, bid deposits for overseas construction work or technology development funds.

•

Restriction on cross-investment. A member company of the SK Group may not acquire or hold shares in an affiliate belonging to the SK Group that owns shares in the member company.


	•		Public notice of board resolution on large-scale transactions with specially related persons. If a member company of the SK Group engages in a transaction with a specially related person in the amount of ~~10%~~5.0% or more of the member company’s capital or paid-in capital or for Won 105.0 billion or more, the transaction must be approved by a resolution of the member company’s board of directors and the member company must publicly disclose the transaction.

•
Restrictions on 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 was generally required to limit its total investments in other domestic companies to ~~40%~~40.0% of its non-consolidated net assets. In March 2009, an amendment to the Fair Trade Act abolished such restrictions on total investments in other domestic companies.

	•		Restrictions on investments by subsidiaries andsub-subsidiaries of holding companies. The Fair Trade Act prohibits subsidiaries of holding companies from investing in, or holding shares of common stock of, domestic affiliates that belong to the same large business group, unless such domestic affiliates are their own subsidiaries. Furthermore, any subsidiaries of a holding company’s subsidiaries(“sub-subsidiaries”) are prohibited from investing in, or holding shares of common stock of, domestic affiliates that belong to the same large business group, unless all shares issued by the affiliates are held by thesub-subsidiary. Therefore, we and other subsidiaries of SK Holdings may not invest in any domestic affiliate that is also a member company of the SK Group, except in the case where we invest in our own subsidiary or where another subsidiary of SK Holdings invests in its own subsidiary.

•

Public notice of the current status of a business group. 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 inof the SK Group, ~~and~~ information on transactions with certain related persons and, if a member company engages in a transaction with an affiliated company in the amount of 5.0% or more of the member company’s quarterly sales or Won 5.0 billion or more, information on transactions with such affiliated company on a quarterly basis.

Number Portability. In January 2003, the ~~Government~~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. 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”.~~

Subscribers.”

In addition, the Government has ~~begun to integrate~~been integrating mobile telephone identification numbers into a common prefix identification number “010” and to gradually ~~retract~~retracting the current mobile service identification numbers which had been unique to each wireless telecommunications service provider, including “011” for our cellular services, ~~starting from~~since January 1, 2004. All new subscribers have been given the “010” prefix starting January 2004. As the next step in the “010” integration process, the mobile telephone number prefix for all 3G and LTE service users has been changed to “010” as of January 1, 2014. The ~~KCC~~MSIP plans to ~~continue to pursue the integration process and~~ complete the integration process by around 2018, when all mobile telephone numbers would have the prefix identification number ~~“010”.~~

“010.”

For risks relating to number portability, see “Item 3.D. Risk Factors — Risks Relating to Our Business — 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”.~~

flows.”

Rate Regulation. Most network service providers must report to the ~~KCC~~MSIP the rates and contractual terms for each type of service they provide. 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 the ~~KCC~~MSIP on our rates and terms of service; provided, however, that such pre-approval of the ~~KCC~~MSIP is not required, if we are planning to reduce the rates for ~~each~~any type of services that we provide under the ~~KCC-approved~~MSIP-approved contractual terms. In each ~~year~~of the previous years in which this requirement has been applicable, the KCC ~~has~~ designated us for wireless telecommunications service, and KT for local telephone and Internet services, as dominant network service providers that are subject to such approval requirement. As a condition to its approval of our merger with SK IMT Co., Ltd., the Government required that we submit the rates for our third generation mobile services using WCDMA technology to the Government for approval prior to the launch of such services. The KCC’s

policy iswas to approve rates if they are appropriate, fair and reasonable (that is, if the rates have been reasonably calculated, considering supply costs, profits, classification of costs and profits for each service, cost savings through changes in the way services are provided and the influence on fair competition, among others). The ~~KCC~~MSIP takes a similar approach in regulating the rates. The MSIP may order changes in the submitted rates if it deems the rates to be significantly unreasonable or against public policy. ~~In May 2007, the Government terminated the monitoring of whether we met the condition for the Government’s approval of our merger with SK IMT.~~

Furthermore, in 2007, the Government announced a “road map” highlighting revisions in regulations to promote deregulation of the telecommunications industry. In accordance with the road map and pursuant to the Combined Sales Regulation, promulgated in May 2007, telecommunications service providers are now permitted to bundle their services, such as wireless data service, wireless voice service, broadband Internet access service,fixed-line telephone service and ~~Internet protocol television, or~~ IP TV service, at a discounted rate; provided, however, that we and KT, as market-dominating business entities under the Telecommunications Business Act, allow other competitors to employ the services provided by us and KT, respectively, so that such competitors can provide similar discounted package services. In September 2007, the regulations and provisions under the Telecommunications Business Act were amended to permit licensed transmission service providers to offer local, domestic long-distance and international telephone services, as well as broadband Internet access and Internet phone services, without additional business licenses.

Moreover, under the amended Telecommunications Business Act, which became effective on September 23, 2010, an MVNO ~~(Mobile Virtual Network Operator)~~ system was ~~adopted. Under~~adopted for a duration of three years until September 22, 2013. The expiration date of the system ~~KCC~~was extended to September 22, 2016 under the amended Telecommunications Business Act, which became effective on August 13, 2013. Under this system, the MSIP may designate and obligate certain telecommunications services providers to allow ~~a mobile virtual network operator, or~~an MVNO, at such MVNO’s request, to use their telecommunication facilities at a rate mutually agreed upon that complies with the standards set by the ~~KCC.~~MSIP. We were designated as the only telecommunications services provider obligated to allow the other telecommunications services provider to use our telecommunications facilities. ~~An MVNO has~~To date, nine MVNOs have commenced ~~providing wireless data services in March 2011 and we expect that a few additional MVNOs will commence~~ providing wireless telecommunications services using the networks leased from ~~us beginning in the second half of 2011.~~

us.

On May 13, 2010, the KCC announced a guideline recommending that telecommunication service providers limit their marketing expenses to ~~22%~~22.0% of their annual ~~sales.~~sales, which was lowered to 20.0% of annual sales with respect to fiscal years 2013, 2012 and 2011. Such marketing expenses include initial commissions, monthly commissions and retention commissions paid to our authorized dealers and subscribers, including handset subsidies, but do not include advertising expenses. While the guideline is not binding, we, as well as our competitors, nonetheless try to adhere to ~~such~~this guideline when feasible. However, according to the KCC, we, KT and LG U+ failed to satisfy the limit on marketing expenses in 2013, 2012 and 2011. Given that the competition in the telecommunication industry continues to intensify, ~~such~~this limitation on our ability to ~~expend in~~spend on marketing expenses may have a material adverse effect on our business.

Interconnection. Dominant network service providers such as ourselves that own essential infrastructure facilities or possess a certain market share are required to provide interconnection of their telecommunications network facilities to other service providers upon request. The ~~KCC~~MSIP sets and announces the standards for determining the scope, procedures, compensation and other terms and conditions of such provision, interconnection or co-use. We have entered into interconnection agreements with KT, LG U+, Onse Telecom Corporation 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~~MSIP grants permits to additional telecommunications service providers.

Frequency Allocation. The ~~KCC~~MSIP 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~~MSIP is required to give a public notice. The ~~KCC~~MSIP also regulates the frequency to be used by each radio station, including the transmission frequency used by equipment in our cell sites. All of our frequency allocations are for a definite term. We pay fees to the ~~KCC~~MSIP for our frequency usage that are determined based upon our number of subscribers, frequency usage by our networks and other factors. For ~~2008, 2009~~2013, 2012 and ~~2010,~~2011, the fee amounted to Won ~~163.9~~207.7 billion, Won ~~159.7~~204.2 billion and Won ~~178.8~~216.8 billion, respectively.

In addition, we paid Won 650 billion of the Won 1.3 trillion as the 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. We are also required to pay the cost of our additional WCDMA license for 2 x 10 MHz of spectrum in the 2.1 GHz band that we acquired in May 2010 as discussed below in annual installments of Won 17.7 billion each year from 2012 through 2014. For more information, see note 8 of the notes to our consolidated financial statements for the years ended December 31, 2008, 2009 and 2010.

In February 2010, the KCC announced its final plan to reallocate 2 x 10 MHz of spectrum in the 800 MHz band that we ~~are currently~~were using to other service providers starting from July 2011. The KCC’s plan also ~~contemplates~~contemplated new allocations of 2 x 10 MHz of spectrum in the 900 MHz band and 2 x 10 MHz of spectrum in the 2.1 GHz band for wireless telecommunication services. KT and LG U+ have been allocated the spectrum in the 900 MHz and 800 MHz bands, respectively. We have been allocated an additional 2 x 10 MHz of spectrum in the 2.1 GHz band for our use until December 2016, which we have been using for our 3G services since October 2010. In addition, in ~~June~~August 2011 the KCC ~~announced its plan~~auctioned the right to ~~sell~~use 20 MHz of bandwidth in the 1.8 GHz spectrum, 20 MHz of

bandwidth in the 2.1 GHz spectrum and 10 MHz of bandwidth in the 800 MHz spectrum. ~~According~~In the auction, we acquired the right to use the ~~plan, the additional spectrum will be sold in August 2011 through an auction, in which a maximum of~~ 20 MHz of bandwidth ~~can be allocated~~in the 1.8 GHz spectrum at a price of Won 995.0 billion. We were initially obligated to pay the license fee in installments during the license period of 10 years. KT acquired the right to use the 10 MHz of bandwidth in the 800 MHz spectrum for Won 261.0 billion and LG U+ acquired the right to use the 20 MHz of bandwidth in the 2.1 GHz spectrum for Won 445.5 billion. In August 2013, the MSIP auctioned the right to use 15 MHz and 35 MHz of bandwidth in the 1.8 GHz spectrum and 80 MHz of bandwidth in the 2.6 GHz spectrum. We acquired the right to use the 35 MHz of bandwidth in the 1.8 GHz spectrum at a ~~service provider. We~~price of Won 1.08 trillion. In connection with this acquisition, we returned the right to use the previously acquired 20 MHz of bandwidth in the 1.8 GHz spectrum and ~~KT cannot bid~~the remaining installments of license fees for the 20 MHz totaling Won 614.5 billion were waived. Of the license fee for the bandwidth newly acquired in 2013, we paid Won 115.2 billion in 2013 and the remainder is payable in annual installments through the end of the license period in 2021. KT acquired the right to use the 15 MHz of bandwidth in the 1.8GHz spectrum for Won 900.0 billion and LG U+ acquired the right to use the 40 MHz of bandwidth in the 2.6 GHz spectrum for Won 479.0 billion. We currently use 10 MHz of bandwidth in the 800 MHz spectrum for our 2G services, 60 MHz of bandwidth in the 2.1 GHz spectrum for our 3G services and 20 MHz of bandwidth in the 800 MHz spectrum and 35 MHz of bandwidth in the 1.8 GHz spectrum for our LTE services, as well as 27 MHz of spectrum in the 2.3 GHz band for our WiBro services.

We paid Won 650.0 billion of the Won 1.3 trillion as the cost of the IMT-2000 license in March 2001 and paid the remainder of the license cost in annual installments for a five-year period from 2007 through 2011. We are required to pay the cost of our additional WCDMA license for 2 x 10 MHz of spectrum in the 2.1 GHz band ~~because~~that we acquired in May 2010 in annual installments of Won 17.5 billion each year from 2012 through 2014 and ~~KT already have a~~paid the first installment in 2012. We are also required to pay license fees for the additional frequency licenses in the 800 MHz and 1.8 GHz spectrums that we acquired in 2011. The license fee for the 30 MHz of bandwidth in the 800 MHz spectrum is Won 416.5 billion, of which Won 208.3 billion was paid in 2011 with the remainder payable in annual installments from 2013 through 2015. The first installment payment was made in 2013. The license fee for the 20 MHz of bandwidth in the 1.8 GHz spectrum was Won 995.0 billion, of which Won 74.6 billion, Won 74.6 billion and Won 248.8 billion was paid in 2013, 2012 and 2011, respectively, and the remainder which was payable in annual installments through the end of the license period has been waived in connection with our return of the right to use the 20 MHz bandwidth. The license fee for the 35 MHz of bandwidth in the 1.8 GHz spectrum was Won 1.08 trillion, of which Won 115.2 billion was paid in 2013, and the remainder is payable in annual installments through the end of the license period in 2021. In addition, we were reallocated 27 MHz of spectrum in the ~~2.1~~2.3 GHz ~~band. If we are allocated additional bandwidths, we expect to pay usage fees~~band for our WiBro service in March 2012. The license fee for such ~~bandwidths.~~

spectrum is Won 17.3 billion, of which Won 8.7 billion was paid in 2012, and the remainder is payable in annual installments from 2014 through 2016. For more information, see note 14 of the notes to our consolidated financial statements for the years ended December 31, 2013, 2012 and 2011, respectively.

For risks relating to the maintenance of adequate bandwidth capacity, see “Item 3.D. Risk Factors — Risks Relating to Ours Business — 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.”

Mandatory Contributions and Obligations

Contributions to the Fund for Development of Information Telecommunications. The ~~Ministry of Knowledge Economy~~MSIP has the authority to recommend to network service providers that they provide funds for national research and development of telecommunications technology and related projects. The required annual contribution is 0.5% (0.75% for market dominant service providers like us) of revenues attributable to key communications services (excluding revenues from ~~CDMA~~telecommunications service using an allotted frequency if the consideration for such allotted frequency has been paid) from wireless subscribers for the previous year, and is applicable only to those network service providers who have Won 3030.0 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%~~70.0% of the net profit for the corresponding period of each company.

We are ~~currently~~no longer required to ~~contribute 0.75% of budgeted revenues (calculated pursuant to the Ministry of Knowledge Economy guidelines that differ from our accounting practices)~~make any contributions to the Fund for Development of Information Telecommunications ~~operated by~~in light of the ~~Ministry of Knowledge Economy.~~decrease in revenues from our CDMA network and did not make any contribution to this fund in 2013 and 2012. Our contribution to this fund in ~~2008, 2009 and 2010~~2011 was Won ~~71.9 billion, Won 55.5 billion and Won 80.5 billion, respectively.~~

18.8 billion.

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~~MSIP (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~~MSIP designates universal services and the service provider who is required to provide each service. Currently, under the MSIP guidelines, we are required to offer free subscription and a discount of between ~~35%~~35.0% to ~~50%~~50.0% 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 provider’s contribution is based on its net annual revenue (calculated pursuant to ~~KCC~~the MSIP guidelines, which differ from our accounting practices). In ~~2008,~~2013, our contribution amount was Won ~~32.3~~192.3 billion for our fiscal year ~~2007.~~2012. In ~~2009,~~2012, our contribution amount was Won ~~31.0~~20.2 billion for our fiscal year ~~2008.~~2011. In ~~2010,~~2011, our contribution amount was Won ~~29.2~~34.1 billion for our fiscal year ~~2009.~~2010. As a wireless telecommunications services provider, we are not considered a provider of universal telecommunications services and do not receive funds for providing universal service. Other network service providers that do provide universal services make all or a portion of their “contribution” in the form of expenses related to the universal services they provide.

Foreign Ownership and Investment Restrictions and Requirements

Because we are a network service provider, and the exception for the foreign shareholding limit under the amended Telecommunications Business Act, which became effective on August 13, 2013, does not apply to us, foreign governments, individuals, and entities (including Korean entities that are deemed foreigners, as discussed below) are prohibited from owning more than ~~49%~~49.0% of our voting stock. Korean entities whose largest shareholder is a foreign government or a foreigner (together with any of its related parties) that owns ~~15%~~15.0% or more of the outstanding voting stock of such Korean entities are also deemed foreigners. If this ~~49%~~49.0% ownership limitation is violated, certain of our foreign shareholders will not be permitted to exercise voting rights in excess of the limitation, and the ~~KCC~~MSIP may require other corrective action.

As of December 31, ~~2010,~~2013, SK Holdings owned ~~18,748,452~~20,363,452 shares of our common stock, or approximately ~~23.22%~~25.22% of our issued shares. As of December 31, ~~2010,~~2013, a foreign investment fund and its related parties collectively held a ~~3.1%~~1.1% 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 December 31, ~~2010~~2013 (which we believe was ~~49.0%~~48.02%), would reach ~~72.22%~~73.24%, exceeding the ~~49%~~49.0% ceiling on foreign shareholding.

If our aggregate foreign shareholding limit is exceeded, the ~~KCC~~MSIP may issue a corrective order to us, the breaching shareholder (including SK Holdings if the breach is caused by an increase in foreign ownership of SK Holdings) and the foreign investment fund and its related parties who own in the aggregate ~~15%~~15.0% 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%~~49.0% ceiling, which may result in a change in control of us. In addition, the ~~KCC~~MSIP 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%~~49.0%. If a corrective order is issued to us by the ~~KCC~~MSIP 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~~MSIP may:

revoke our business license;

suspend all or part of our business; or


	•	~~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.

if the suspension of business is deemed to result in significant inconvenience to our customers or to be detrimental to the public interest, impose a one-time administrative penalty of up to 3.0% of the average of our annual revenue for the preceding three fiscal years.

Additionally, the Telecommunications Business Act also authorizes the ~~KCC~~MSIP 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 or a penalty of Won 50 million. See “Item 3.D. Risk Factors — Risks Relating to Securities — If SK Holdings causes us to breach the foreign ownership limitations on ~~shares of~~ our common ~~stock,~~shares, we may experience a change of ~~control”.~~

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,~~(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~~MSIP 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%~~ the acquisition by an entity (and its related parties) of 15.0% or more of the equity of a network services provider;

	•	~~a change in the largest shareholder 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.


	•	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~~MSIP 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), together with its specially related persons (as defined under the ~~Financial Investment Services and Capital Markets Act)~~FSCMA), holds more than 5%5.0% of the equity of another dominant network services provider, the voting rights on the shares held in excess of the 5%5.0% limit may not be exercised.

Patents and Licensed Technology

Access to the latest relevant technology is critical to our ability to offer the most advanced wireless 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”~~Development, Patents and Licenses, etc.,” our success depends in part on our ability to obtain patents, licenses and other intellectual property rights covering our products. We own numerous patents and trademarks worldwide, and have applications for patents pending in many countries, including Korea, Japan, China and the United States and in Europe. Our patents are mainly related to CDMA technology and wireless Internet applications. We have also acquired a number of patents related to WCDMA ~~technology.~~

technologies.

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 asub-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. For a description of the risks associated with our reliance on intellectual property, see “Item 3.D. Risk Factors — Risks Relating to Our Business — Our business relies on technology developed by us as well as technologies provided by third parties, and our business will suffer if we are unable to protect our proprietary rights, obtain new licensing agreements or renew existing licensing agreements with third ~~parties”.~~

parties.”

Seasonality of the Business

Our business is not affected by seasonality.


Item 4.C.	*Organizational Structure*

Organizational Structure

We are a member of the SK Group, based on the definition of “group” under the Fair Trade ~~Act of Korea.~~Act. As of December 31, ~~2010,~~2013, SK Group members owned in aggregate ~~23.2%~~25.22% 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 (formerly known as Korea Telecom Corp.), Korea’s principal fixed-line operator that merged with KTF, one of our principal wireless competitors.~~

Significant Subsidiaries

For information regarding our subsidiaries, see note ~~2(b)~~1(2) of the notes to our consolidated financial statements.


Item 4.D.	*Property, Plants ~~And~~and Equipment*

The following table sets forth certain information concerning our principal properties as of December 31, ~~2010:~~

2013:


Location	Primary Use			Approximate Area in Square Feet
		~~Approximate Area~~
~~Location~~	~~Primary Use~~	~~in Square Feet~~

Seoul Metropolitan Area	Corporate Headquarters		988,447
	Regional Headquarters		~~1,095,997~~607,249
	Customer Service Centers		~~162,406~~107,277
	Training Centers		~~670,941~~616,845
	Central Research and Development Center		482,719
	Others(1)		~~961,095~~1,002,724
Busan	Regional Headquarters		363,282
	Others(1)		~~569,177~~601,912
Daegu	Regional Headquarters		~~40,279~~153,603
	Others(1)		~~332,726~~258,081
~~Cholla~~ Jeolla and Jeju Provinces	Regional Headquarters		~~491,533~~265,614
	Others(1)		~~454,410~~660,350
~~Choongchung~~ Chungcheong Province	Regional Headquarters		~~751,710~~459,302
	Others(1)		~~470,726~~770,819


(1)		~~Include~~Includes cell sites.

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~~Wireless Network — Network ~~Infrastructure”.~~

Infrastructure.”

We maintain a range of insurance policies to cover our assets and employees, including our directors and officers. We are insured against business interruption, fire, 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 consolidated financial statements in accordance with ~~Korean GAAP, which differs in some respects from U.S. GAAP. Notes 32 and 33 of~~IFRS as issued by 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 2008, 2009 and 2010.IASB. In addition, you should read carefully the section titled “— Critical Accounting Policies, Estimates and Judgments” as well as note 23 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~~as well as 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. We also derive revenue from businesses operated by our consolidated subsidiaries, including broadband Internet and fixed-line telephone services offered by SK Broadband, various platform businesses conducted by SK Planet and handset sales made by PS&Marketing. Government regulation also affects our revenues.

Our operations are reported in three segments: (1) cellular services, which include cellular voice service, wireless data service and wireless Internet services, (2) fixed-line telecommunication services, which include fixed-line telephone services, broadband Internet services (including IP TV services) and leased line services and (3) others, which include our Internet portal services, online shopping services and other platform services, gaming services and other operations that do not meet the quantitative thresholds to be separately considered reportable segments.

Among other factors, management uses operating income of each reportable segment presented in accordance with K-IFRS (“segment operating income”) in its assessment of the profitability of each reportable segment. The sum of segment operating income for all three reportable segments differs from our operating income from continuing operations presented in accordance with IFRS by IASB as segment operating income does not include certain items such as gain and loss from disposal of property and equipment and intangible assets and impairment loss on property and equipment and intangible assets. For a reconciliation of operating income from continuing operations presented in accordance with IFRS by IASB and operating income presented in accordance withK-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”

In addition to the information set forth below, see note 5 of the notes to our consolidated financial statements for more detailed information regarding each of our reportable segments.

A number of recent developments have had or are expected to have a material impact on our results of operations, financial condition and capital expenditures. These developments include:

~~Number Portability and Common Prefix Identification System.~~Handset Subsidies. In ~~January 2003,~~March 2008, the Government 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 Government also began implementing a plan to integrate all mobile telephone numbers under the common prefix identification number “010”, including by gradually retracting the 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 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 Government partially lifted, and in March 2008~~ fully lifted ~~the~~a prohibition on the provision of handset subsidies ~~which had been in place since June 2000,~~ and ~~began to allow~~allowed mobile service providers to subsidize the purchase of new handsets by certain qualifying customers. In order to compete more effectively, we ~~have begun~~began providing such handset subsidies, which has increased, and may continue to increase, our marketing expenses. We provide handset subsidies to subscribers who agree to use our service for a predetermined service period and purchase handsets on an installment basis. Generally, handset subsidies may be provided to any subscriber that uses our service and purchases handsets either directly from us or through third parties. Since we do not recognize revenues from sales of handsets by third parties, the trends between

our digital handset sales and our provision for handset subsidies are not necessarily correlated. In 2013 and 2012, our provision for handset subsidies significantly decreased as we gradually ceased providing handset subsidies to subscribers. Starting in December 2011, we decreased the amount of handset subsidies provided per subscriber and beginning in August 2012, we ceased providing handset subsidies with respect to all handset purchases, with exceptions for a very limited number of handset models. The amount recognized as a provision for handset subsidies is our best estimate of the expenditure required to settle current obligations to relevant subscribers at the end of the reporting period, which is calculated as the sum of the present values of the monthly balances for handset subsidies over the relevant service periods, taking into account the customer retention rate for relevant subscribers. Since April 2008, we ~~have~~ also ~~begun~~began offering ~~long-term~~24-month installment payment plans ~~of 24 months~~ for new handset purchases by ~~our~~ new or existing subscribers, which has increased, and may continue to increase, our capital requirements. ~~However, on~~On May 13, 2010, the KCC announced a guideline recommending that telecommunication service providers limit their marketing expenses to ~~22%~~22.0% of their annual ~~sales.~~sales, and the limit was subsequently lowered to 20.0% of their annual sales for the years 2013, 2012 and 2011. Such marketing expenses include initial commissions, monthly commissions and retention commissions paid to our authorized dealers and subscribers, including handset subsidies, but do not include advertising expenses. This guideline remains effective. While the guideline is not binding, we, as well as our competitors, nonetheless try to adhere to such guideline when feasible, which may have a material adverse effect on our businesses and results of operations.

Furthermore, failure to comply with rules, regulations and corrective orders may lead to suspension of our business or imposition of monetary penalties. For example, in December 2012, the KCC imposed a suspension on each of us, KT and LG U+ from acquiring new subscribers during the first quarter of 2013, each for a period of more than 20 days, and imposed fines pursuant to its determination that we, KT and LG U+ provided handset subsidies to new subscribers which were not universally available. In March 2013, the KCC imposed additional fines on each of us, KT and LG U+ for the same reason after further investigations. In July 2013, the KCC again imposed additional fines on each of us, KT and LG U+ for the same reason. In December 2013, the KCC imposed additional fines on each of us, KT and LG U+, which amounted to a combined amount of approximately Won 106 billion, which is the largest fine ever imposed by the KCC for providing subsidies to subscribers which were not universally available. In March 2014, the MSIP imposed a suspension on each of us, KT and LG U+ from acquiring new subscribers for a period of 45 days, which is the longest suspension period imposed on us by the Government for providing subsidies to subscribers which were not universally available. The KCC also imposed an additional suspension of business on us for a period of seven days and on LG U+ for a period of 14 days and imposed a fine on each of us, KT and LG U+ for the same reason. The suspension of our business or imposition of monetary penalties by the Government could have a material adverse effect on our business.

Changes in Tariffs and Interconnection ~~Fees.~~Fees. Under current regulations, we must obtain prior ~~KCC~~MSIP approval of the rates and fees we charge subscribers for our cellular services. Generally, the rates we charge for our services have been declining. The KCC ~~has~~ periodically reviewed the tariffs charged by wireless operators and, ~~has,~~ from time to time, suggested tariff reductions. Although these suggestions ~~are~~were not binding, we ~~have~~had in the past implemented some tariff reductions in response to KCC recommendations. Most recently, in September 2011, we reduced the monthly fee by Won 1,000 for every subscriber, exempted SMS usage charges up to 50 messages per month and introduced flexible service plans for smartphone users. The MSIP, which has taken over the KCC’s tariff regulation function as of March 23, 2013, is planning to gradually reduce and abolish initial subscription fees by 2015. Pursuant to this policy objective, the MSIP discussed with us, KT and LG U+ gradually reducing and abolishing initial subscription fees and as a result of the discussions, we, KT and LG U+ reduced the initial subscription fee by 40% in December 2013. On January 1, 2014, the MSIP announced its plans to further reduce initial subscription fees in the second half of 2014 so that such fees would be reduced to 50% of the current fee levels, and we expect the remaining initial subscription fees to be abolished by 2015. The MSIP may also suggest other tariff reductions. Any further tariff reductions we make in response to such suggestion may adversely affect our results of operations. For more information about the rates we charge, see “Item 4.B. Business Overview — Revenues ~~Rates~~ and ~~Subscription Deposits”~~Rates” and “Item 4.B. Business Overview — Law and Regulation — Competition Regulation — Rate ~~Regulation”.~~

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~~MSIP determines the basic framework for interconnection arrangements,

including policies relating to interconnection rates in ~~Korea and has~~Korea. The KCC, which determined such basic framework under the previous Government, changed ~~this~~the basic framework for interconnection arrangements several ~~times in the past.~~times. 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”.~~

Interconnection.”

Average Monthly Outgoing Voice Minutes and Revenue per ~~Subscriber.~~Subscriber. The following table sets forth selected information concerning our wireless telecommunications network during the periods indicated:

Year Ended December 31,
2008 2009 2010

Outgoing voice minutes (in thousands)(1) 54,080,231 56,111,864 60,015,518
Average monthly outgoing voice minutes per subscriber(2) 200 197 199
Average monthly revenue per subscriber, excluding interconnection revenue(3) W 38,526 W 38,171 W 37,287
Average monthly revenue per subscriber, including interconnection revenue(4) W 43,016 W 42,469 W 41,374


	For the Year Ended December 31,
	2013		2012		2011
Outgoing voice minutes (in thousands)(1)		58,924,679		57,201,505		60,573,960
Average monthly outgoing voice minutes per subscriber(2)		181		179		192
Billing average monthly revenue per subscriber(3)	￦	34,551	￦	33,016	￦	33,178
Total average monthly revenue per subscriber(4)	￦	42,377	￦	40,128	￦	40,338


(1)		~~Does~~Includes only the minutes of outgoing calls of SK Telecom subscribers and 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 SK Telecom subscribers for each month in the period, calculated as the average of the number of SK Telecom subscribers on the first and last days of the relevant month, by (ii) the number of months in the period.

(3)		The billing 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~~SK Telecom and SK Planet revenues from voice ~~calls, usage charges for wireless~~service and data ~~services, value-added~~ service ~~fees and other miscellaneous revenues~~(but excluding revenue from MVNO subscribers) for the period by the monthly average number of subscribers that are not MVNO subscribers for the period, then dividing that number by the number of months in the period.

(4)

The total average monthly revenue per subscriber ~~including interconnection revenue,~~ is derived by dividing the sum of total SK Telecom and SK Planet revenues from voice service, data service, 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, as well as other revenues, for the period by the monthly average number of subscribers (including the number of MVNO subscribers leasing our networks) for the period, then dividing that number by the number of months in the period.

Our average monthly outgoing ~~minutes of~~ voice ~~traffic~~minutes per subscriber increased by 1.1% in 2013 but decreased by ~~1.5%~~6.8% in ~~2009 and increased by 1.0% in 2010.~~2012. We believe the increase in 2013 was caused by our ~~average monthly outgoing minutes~~introduction of unlimited voice plans in March 2013. We believe the decrease in 2012 was caused by an increase in the number of subscribers who subscribe to fixed-rate plans, an increase in the number of users who have ~~been relatively stable~~multiple wireless devices, as well as an increase in ~~recent years primarily due to~~ the ~~existing high penetration rate~~use of ~~wireless~~free text message or voice services ~~in Korea and the general maturation of the Korean wireless market.~~

over mobile Internet.

Our total average monthly revenue per subscriber ~~excluding interconnection revenue,~~increased by 5.6% to Won 42,377 in 2013 from Won 40,128 in 2012 but decreased by ~~0.9%~~0.5% to Won ~~38,171~~40,128 in ~~2009~~2012 from Won ~~38,526~~40,338 in ~~2008 and decreased by 2.3% to Won 37,287~~2011. The increase in ~~2010 from Won 38,171 in 2009. The decrease in~~total average monthly revenue per subscriber in ~~2009~~2013 was primarily due to ~~decreases~~increases in ~~average~~LTE subscribers who subscribe to data plans with higher monthly ~~revenue per subscriber from usage~~basic charges ~~for voice~~than our other wireless services and ~~initial subscription fees, partially offset by~~data service usage attributable to increases in ~~average monthly revenue per subscriber from monthly plan-based fees and wireless data services.~~the number of smartphone users. The decrease in total average monthly revenue per subscriber in ~~2010~~2012 was primarily due to decreases in ~~average~~voice service usage attributable to the increased use of free text message services by smartphone users, as well as a reduction of the monthly ~~revenue per~~fee by Won 1,000 for every subscriber effective from ~~usage charges for voice services and initial subscription fees,~~September 16, 2011, partially offset by increases in ~~average~~

53data service usage attributable to increases in the number of smartphone users and LTE subscribers who subscribe to data plans with higher monthly basic charges than our other wireless services.

~~monthly revenue per subscriber from value-added and other service fees, wireless data services and monthly plan-based fees as further described in “— Operating Results” below.~~

Acquisition of SK ~~Broadband Shares.~~Hynix Shares. In ~~March 2008,~~February 2012, we ~~completed the acquisition of an additional 38.7%~~acquired a 21.05% equity stake in SK ~~Broadband, Korea’s second-largest fixed-line operator,~~Hynix, one of the world’s largest memory-chip makers by revenue, for an aggregate purchase price of approximately Won ~~1.1~~3.4 trillion, ~~increasing our total equity interest in SK Broadband to 43.4%. In July 2009,~~and became its largest shareholder. As of December 31, 2013, we ~~acquired additional shares of SK Broadband’s common stock, and our~~held a 20.57% equity stake in SK ~~Broadband increased~~Hynix.

Cessation of DMB services. In 2012, we decided to ~~50.6%. Following~~cease SK Telink’s satellite DMB services due to the ~~2008 acquisition,~~accumulating loss resulting from the continuing decline in satellite DMB subscribers. We presented the loss from the cessation of the DMB business as of August 31, 2012 as loss from discontinued operation for the year ended December 31, 2012 and classified the related assets and liabilities as held for sale. We applied the accounting effects retrospectively, and accordingly re-presented the consolidated statements of income and the consolidated statements of comprehensive income for the year ended December 31, 2011. The consolidated statement of income data in this annual report for the year ended December 31, 2011 are the re-presented amounts.

Disposition of Loen Entertainment Shares. In 2013, SK ~~Broadband became~~Planet, our wholly-owned subsidiary, disposed of a 52.6% equity stake in Loen Entertainment, Korea’s largest music recording company in terms of records released and revenues, for an aggregate sale price of approximately Won 265.9 billion. As a result, Loen Entertainment ceased to be our consolidated subsidiary ~~under Korean GAAP~~as of July 18, 2013. We presented our profits from Loen Entertainment in 2013 as profits from discontinued operation for the year ended December 31, 2013. We applied the accounting effects retrospectively, and ~~our results~~accordingly re-presented the consolidated statements of ~~operations beginning~~income and the consolidated statements of comprehensive income for the years ended December 31, 2012 and 2011. The consolidated statement of income data in ~~2009 include those of SK Broadband. SK Broadband~~this annual report for the years ended December 31, 2012 and its subsidiaries had revenues of Won 1,886.3 billion, Won 1,904.9 billion and Won 2,122.4 billion and net loss of Won 178.3 billion, Won 263.0 billion and Won 120.8 billion for 2008, 2009 and 2010, respectively. 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”.

~~Acquisition of SK Networks Assets.~~ ~~In September 2009, we acquired~~2011 are the leased-line business and related ancillary businesses, including all assets, liabilities and other rights and obligations related to such businesses, of SK Networks. The acquisition price was Won 892.8 billion. As of September 30, 2009, the assets and liabilities of the businesses being acquired amounted to Won 635.9 billion and Won 611.4 billion, respectively.

~~Acquisition of Hana SK Card Shares.~~ In accordance with the resolution of our board of directors in December 2009, we purchased shares of Hana SK Card for Won 402 billion in February 2010. We currently hold 49% of the total outstanding shares of Hana SK Card.

re-presented amounts.

Operating Expenses and Operating ~~Margins.~~Margins. Our operating expenses consist principally of commissions paid to authorized dealers and our subscribers (including handset subsidies), depreciation and amortization, network interconnection, labor costs, cost of products that have been resold for handset sales, leased line ~~expenses, advertising~~and frequency license fees, rent expenses and ~~rent~~advertising expenses. Operating income from continuing operations represented ~~12.5%~~9.5% of our operating revenue and other income in ~~2008, 12.9%~~2013, 10.6% in ~~2009~~2012 and ~~12.6%~~13.6% in ~~2010.~~

2011.

~~Reclassification~~Explanatory Note Regarding Presentation of ~~Prior Year~~Certain Financial ~~Statements~~Information under K-IFRS

~~Reclassifications related~~

In addition to ~~discontinued operations for comparative purposes have been made~~preparing consolidated financial statements in accordance with IFRS as ~~follows. We~~issued by the IASB included in this annual report, we also prepare financial statements in accordance with K-IFRS as adopted by the KASB, which we are required to file with the FSC and ~~SK Communications Co., Ltd., one~~the Korea Exchange under the FSCMA.

Beginning with our financial statements prepared in accordance with K-IFRS as of ~~our subsidiaries, sold the Spicus division, a telephone English education division, to Spicus Inc., a subsidiary of Altos Ventures, in August 2009~~ and ~~sold Etoos Co., Ltd. to Cheong Sol in October 2009. Operating revenue, operating expenses, operating income and income before income taxes and minority interest~~ for the year ended December 31, ~~2008~~2012, we are required to adopt certain amendments to K-IFRS No. 1001, Presentation of Financial Statements, as adopted by KASB in 2012. The amendments require operating income, which is calculated as operating revenue less operating expense, to be separately presented on the consolidated statement of income. Operating expense represents expenses incurred in our main operating activities and includes cost of products that have been ~~revised~~resold and selling, general and administrative expenses. Accordingly, beginning with our consolidated statements of income prepared in accordance with K-IFRS for the year ended December 31, 2012, we present operating income in accordance with the amended K-IFRS No. 1001, Presentation of Financial Statements. The amendments were applied retroactively to ~~exclude~~our consolidated statement of income prepared in accordance with K-IFRS for the ~~Spicus division’s~~year ended December 31, 2011 and ~~Etoos’ results~~certain items in such consolidated statement of ~~operations. In addition,~~income were reclassified to conform to the presentation of operating income in the consolidated statement of income prepared in accordance with K-IFRS for the year ended December 31, 2012. Prior to the adoption of the amendments to K-IFRS No. 1001, Presentation of Financial Statements, the operating income we ~~sold shares~~presented in our consolidated statements of ~~iHQ, Inc.~~income prepared in ~~April~~accordance with K-IFRS took into account certain other operating revenue and ~~July 2010 and liquidatedSK-KTB~~ ~~Music Investment Fund in October 2010. Operating revenue,~~other operating expenses that are no longer included in the calculation of operating income ~~and~~pursuant to these amendments.

In our consolidated statements of income ~~before~~prepared in accordance with IFRS as issued by the IASB included in this annual report, such changes in presentation were not adopted. As a result, the presentation of operating income ~~taxes and minority interest~~from continuing operations in our consolidated statements of income prepared in accordance with IFRS as issued by the IASB included in this annual report differs from the presentation of operating income in the consolidated statements of income prepared in accordance with K-IFRS for the corresponding periods. The table below sets forth a reconciliation of our operating income from continuing operations as presented in our consolidated statements of income prepared in accordance with IFRS as issued by the IASB for the years ended December 31, ~~2008~~2013, 2012 and ~~2009~~

2011 to the operating income as presented in the consolidated statements of income prepared in accordance withK-IFRS after giving effect to the amendments to K-IFRS No. 1001, Presentation of Financial Statements, for each of the corresponding years.


	For the Year Ended December 31,
	2013			2012			2011
	(In billions of Won)
Operating income from continuing operations pursuant to IFRS by IASB	￦	1,578.4		￦	1,737.7		￦	2,162.7
Differences:
Other income pursuant to IFRS
Fee revenues		(7.3	)		(4.0	)		(5.3	)
Gain on disposal of property and equipment and intangible assets		(8.0	)		(162.6	)		(6.3	)
Others(1)		(59.7	)		(35.3	)		(38.1	)

		(75.0	)		(201.8	)		(49.6	)
Other operating expenses pursuant to IFRS that are classified as other non-operating expenses pursuant to K-IFRS
Loss on impairment of property and equipment and intangible assets		13.8			37.0			1.2
Loss on disposal of property and equipment and intangible assets		267.5			15.1			20.7
Donations		82.1			81.3			90.0
Bad debt for accounts receivable — other		22.2			30.1			12.8
Others(1)		122.2			30.7			28.4

		507.7			194.2			153.1

Operating income pursuant to K-IFRS	￦	2,011.1		￦	1,730.0		￦	2,266.2

(1)

Reversal of allowances for doubtful accounts amounting to Won 0.4 billion, Won 5.9 billion and Won 2.3 billion for the years ended December 31, 2013, 2012 and 2011, respectively, and reversal of provision for restoration of Won 0.03 billion for the year ended December 31, 2012, which are included in other income pursuant to IFRS as issued by the IASB, are deducted from other non-operating expenses pursuant to K-IFRS.

However, there is no impact on profit for the year or earnings per share for the years ended December 31, 2013, 2012 and 2011.

Accounting Standards Updates

We have adopted IFRS 13, Fair Value Measurement and changed our accounting policies in accordance with the amendments to IAS 19, Employee Benefits, for the year ended December 31, 2013 as well as other new and amended accounting pronouncements and we are aware of several recent accounting pronouncements that we have not yet adopted. See note 3 of the notes to our consolidated financial statements for a summary of IFRS 13, Fair Value Measurement, IAS 19, Employee Benefits and other new and amended accounting pronouncements that have been ~~revised~~adopted as well as a summary of recent accounting pronouncements that have not yet been adopted. The initial adoption of these new and amended accounting pronouncements is not expected to ~~exclude the iHQ, Inc.’s and SK-KTB Music Investment Fund’s~~have a significant impact on our consolidated results of ~~operations.~~

54operations or financial position.

Operating Results

The following table sets forth ~~selected~~summary consolidated income statement ~~data,~~information, including ~~data~~that expressed as a percentage of operating revenue and other income, for the periods indicated:

For the Year Ended December 31,
2008 2009 2010
(In billions of Won, except percentage data)

Operating Revenue W 13,951.0 100.0 % W 14,512.3 100.0 % W 15,435.4 100.0 %
Operating Expenses 12,190.7 87.4 12,631.1 87.0 13,493.1 87.4
Operating Income 1,760.3 12.6 1,881.2 13.0 1,942.3 12.6
Other Income 1,055.1 7.6 876.0 6.0 629.4 4.1
Other Expenses 1,537.9 11.0 1,351.4 9.3 898.0 5.8
Income from Continuing Operation before Income Tax 1,277.5 9.2 1,405.8 9.7 1,673.7 10.8
Income Tax for Continuing Operation 299.3 2.1 355.7 2.5 404.3 2.6
Preacquisition Net Loss of Subsidiaries 32.6 0.2 0.0 0.0 23.4 0.2
Income (Loss) from Discontinued Operation(1) (38.5 ) (0.3 ) 5.5 0.0 4.4 0.0
Net Income Attributable to:
Controlling Interests 1,215.7 8.7 1,247.2 8.6 1,379.6 8.9
Non-controlling Interests (243.4 ) (1.7 ) (191.6 ) (1.3 ) (82.4 ) (0.5 )
Net Income W 972.3 7.0 % 1,055.6 7.3 1,297.2 8.4
Depreciation and Amortization(2) W 2,599.2 18.6 % W 2,593.5 17.9 % W 2,723.6 17.6 %


	For the Year Ended December 31,
	2013					2012					2011
	(In billions of Won, except percentage data)
Operating Revenue and Other Income	￦	16,677.0		100.0	%	￦	16,343.3		100.0	%	￦	15,852.8		100.0	%
Revenue		16,602.1		99.6			16,141.4		98.8			15,803.2		99.7
Other income		74.9		0.4			201.9		1.2			49.6		0.3
Operating Expense		15,098.6		90.5			14,605.6		89.4			13,690.1		86.4
Operating Income from Continuing Operations		1,578.4		9.5			1,737.6		10.6			2,162.7		13.6
Profit before Income Tax		1,827.1		11.0			1,519.4		9.3			2,212.3		14.0
Income Tax Expense from Continuing Operations		400.8		2.4			288.2		1.8			601.9		3.8
Profit from Continuing Operations		1,426.3		8.6			1,231.2		7.5			1,610.3		10.2
Profit (Loss) from Discontinued Operation, Net of Income Taxes(1)		183.2		1.1			(115.5	)	(0.7	)		(28.3	)	(0.2	)
Profit (Loss) for the Year Attributable to:
Owners of the Parent Company		1,638.9		9.8			1,151.7		7.0			1,612.9		10.2
Non-controlling Interests		(29.4	)	(0.2	)		(36.0	)	(0.2	)		(30.8	)	(0.2	)
Profit for the Year		1,609.5		9.6			1,115.7		6.8			1,582.1		10.0


(1)		Relates to results of operations of ~~HELIO sold~~Loen Entertainment, which ceased being our consolidated subsidiary in July 2013, SK Telink’s DMB business, which was ceased in August ~~2008, the Spicus division sold in August 2009, Etoos~~2012, and SK i-Media Co., Ltd., which was sold in October ~~2009, iHQ, Inc. sold in April and July 2010 and SK-KTB Music Investment Fund liquidated in October 2010,~~2011, which have been classified as discontinued operations after such cessation, sale or liquidation.



~~(2)~~		Excludes the depreciation and amortization allocated to internal research and development costs and manufacturing costs of Won 156.2 billion, Won 136.5 billion and Won 145.2 billion for the years ended December 31, 2008, 2009 and 2010, respectively.

The following table sets forth additional information about our operations with respect to our reportable segments during the periods indicated:

Year Ended December 31,
2008 2009 2010
Percentage
Percentage
Percentage
of Total
of Total
of Total
Amount Revenue Amount Revenue Amount Revenue
(In billions of Won, except percentages)

Cellular Revenue:

Wireless Services(1) W 10,403.1 74.6 % W 10,734.4 74.0 % W 11,057.3 71.6 %
Interconnection 1,149.2 8.2 1,158.0 8.0 1,141.2 7.4
Digital Handset Sales — — 185.3 1.3 534.4 3.5
Other(2) 26.8 0.2 13.9 0.1 105.8 0.7
Total Cellular Revenue 11,579.1 83.0 12,091.6 83.4 12,838.7 83.2
Fixed-line Telecommunication Service(3)

Fixed-line Telephone Service 527.4 3.8 378.6 2.6 266.5 1.7
Interconnection — — 87.4 0.6 96.3 0.6
Broadband Internet Service 1,384.5 9.9 1,351.1 9.3 1,503.3 9.8
International Calling Service 243.0 1.7 275.0 1.9 298.1 1.9
Total Fixed-line Telecommunication Service 2,154.9 15.4 2,092.1 14.4 2,164.2 14.0
Other Revenue:

Portal Service(4) 199.7 1.5 201.1 1.4 239.1 1.5
Miscellaneous(5) 17.3 0.1 127.5 0.9 193.3 1.3
Total Other Revenue 217.0 1.6 328.6 2.3 432.4 2.8
Total Operating Revenue
W 13,951.0 100.0 % W 14,512.3 100.0 % W 15,435.3 100.0 %
Total Operating Revenue Growth 17.8 % 4.0 % 6.4 %
Operating Expenses:

Cellular 9,322.5 66.8 9,719.9 66.9 10,562.8 68.4
Fixed-line Telephone Service 2,132.1 15.3 2,263.2 15.6 2,342.8 15.2
Other 736.1 5.3 648.0 4.5 587.5 3.8
Total Operating Expenses
W 12,190.7 87.4 % W 12,631.1 87.0 % W 13,493.1 87.4 %


	Year Ended December 31,
	2013						2012						2011
	Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue			Amount			Percentage of Total Revenue
	(In billions of Won, except percentages)
*Cellular Services Revenue*
Wireless Service(1)	￦	11,001.1			66.3	%	￦	10,591.5			65.6	%	￦	10,447.6			66.1	%
Cellular Interconnection		845.0			5.1			860.3			5.3			1,090.9			6.9
Digital Handset Sales (2)		645.9			3.9			1,131.7			7.0			787.2			5.0
Miscellaneous(3)		823.5			5.0			635.5			3.9			750.6			4.7

Total Cellular Services Revenue		13,315.5			80.2			13,218.9			81.9			13,076.3			82.7

*Fixed-line Telecommunication Services Revenue*
Fixed-line Telephone Service(4)	￦	474.4			2.9	%	￦	485.9			3.0	%	￦	490.7			3.1	%
Fixed-line Interconnection		78.7			0.5			98.5			0.6			83.8			0.5
Broadband Internet Service(4)		1,023.2			6.2			865.0			5.4			1,000.5			6.3
International Calling Service(5)		127.0			0.8			144.1			0.9			163.6			1.0
Miscellaneous(6)		621.1			3.7			600.4			3.7			393.4			2.5

Total Fixed-line Telecommunication Services Revenue		2,324.4			14.0			2,193.9			13.6			2,131.9			13.5

*Other Revenue*
Commerce Service(7)	￦	742.6			4.5	%	￦	391.9			2.4	%	￦	99.9			0.6	%
Portal Service(8)		92.2			0.6			167.8			1.0			233.8			1.5
Miscellaneous(9)		127.4			0.8			168.9			1.0			261.3			1.7

Total Other Revenue		962.2			5.8			728.6			4.5			595.0			3.8

*Total Revenue*	￦	16,602.1			100.0	%	￦	16,141.4			100.0	%	￦	15,803.2			100.0	%

Total Revenue Growth		2.9	%					2.1	%					2.8	%
*Segment Operating Expense*(10)
Cellular Services	￦	11,329.4			68.2	%	￦	11,535.5			71.5	%	￦	10,898.2			69.0	%
Fixed-line Telecommunication Services		2,268.8			13.7			2,140.7			13.3			2,065.7			13.1
Others		992.8			6.0			735.1			4.6			573.1			3.6

*Total Segment Operating Expense*	￦	14,591.0			87.9	%	￦	14,411.3			89.3	%	￦	13,537.0			85.7	%

*Segment Operating Income*
Cellular Services	￦	1,986.1			12.0	%	￦	1,683.4			10.4	%	￦	2,178.1			13.8	%
Fixed-line Telecommunication Services		55.6			0.3			53.1			0.3			66.2			0.4
Others		(30.6	)		(0.2	)		(6.5	)		(0.0	)		21.9			0.1

*Total Segment Operating Income*	￦	2,011.1			12.1	%	￦	1,730.0			10.7	%	￦	2,266.2			14.3	%


(1)		Wireless ~~services~~service revenue includes revenue from cellular voice service, wireless data service and initial subscription ~~fees,~~fees. Revenue from cellular voice service is primarily composed of monthly plan-based fees, usage charges for outgoing voice calls, roaming charges and value-added service fees. Revenue from wireless data service is primarily composed of usage charges for ~~wireless~~SMS and MMS and revenues from outgoing data usage.

(2)	Digital handsets are sold by PS&Marketing, our consolidated subsidiary.

(3) Miscellaneous cellular services ~~value-added-service fees~~revenue includes revenue from the resale of fixed-line telecommunication services, leased lines, Internet solutions business and other miscellaneous cellular ~~revenues, including international interconnection charges, interest on overdue subscriber accounts (net of telephone tax).~~
~~(2)~~ ~~Other~~services provided by SK Telecom. For the period from January 1, 2011 to September 30, 2011, miscellaneous cellular services revenue also includes revenue from the sale and licensing of Internet platform ~~solutions.~~solutions, which business was spun off into SK Planet in October 2011 and subsequently included in our others segment.


(4)

~~(3)~~		~~Includes revenues from broadband~~Broadband Internet service (including ~~corporate data~~IP TV service) and fixed-line telephone service are provided by SK Broadband, ~~Co., Ltd. and international~~our consolidated subsidiary.

(5)	International calling service is provided by SK Telink, ~~Co. Ltd., both of which are~~ our consolidated ~~subsidiaries.~~subsidiary.

(6)	Miscellaneous fixed-line telecommunication services revenue includes revenues from leased line, corporate data and Internet solutions businesses provided by SK Broadband and VoIP services provided by SK Telink.

(7)

Commerce service revenue includes revenue from 11th Street, our online shopping mall operated by SK Planet, subsequent to the spin-off of SK Planet in October 2011. Prior to the spin-off of SK Planet, such revenue was included in miscellaneous cellular services revenue.


~~(4)~~	(8)	Portal service revenue ~~attributable to~~includes revenues from NATE, our ~~subsidiaries (including~~online portal service operated by SK Communications, and ~~Paxnet Co., Ltd., which operates Moneta, our financial portal site).~~Cyworld, a social networking service formerly operated by SK Communications. In March 2014, the Cyworld business was spun-off into an unaffiliated company.




~~(5)~~	(9)	Miscellaneous others revenue ~~attributable~~includes revenue from T Store, our online open marketplace for mobile applications operated by SK Planet, and certain other platform businesses operated by SK Planet, each subsequent to ~~our subsidiaries (including Loen Entertainment Inc., which operates MelOn music portal site that sells digital music contents, Ntreev Soft Co., Ltd., an on-line game developer,~~the spin-off of SK ~~Telecom China Holdings Co., Ltd. and F&U Credit Information Co., Ltd.).~~Planet in October 2011. Prior to the spin-off of SK Planet, such revenue from SK Planet’s platform businesses was included in miscellaneous cellular services revenue.

(10)

“Segment operating expense” means operating expense for each reportable segment presented in accordance with K-IFRS and therefore, does not include certain expenses that are classified as other non-operating expenses under K-IFRS. For more information on the difference between our consolidated operating expense pursuant to K-IFRS and pursuant to IFRS as issued by the IASB, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”

~~2010~~2013 Compared to ~~2009~~2012

Operating ~~Revenue.~~Revenue and Other Income. Our consolidated operating revenue and other income increased by 2.0% to Won 16,667.0 billion in 2013 from Won 16,343.3 billion in 2012, due to the following increases in operating revenue and other income.

Our consolidated operating revenue increased by ~~6.4%~~2.9% to Won ~~15,435.4~~16,602.1 billion in ~~2010~~2013 from Won ~~14,512.3~~16,141.4 billion in ~~2009,~~2012, primarily as a result of strong growth in the number of new subscribers to our LTE service, which entail higher revenues per subscriber, as well as improved revenues from our consolidated subsidiaries, including SK Planet, SK Broadband and PS&Marketing, which more than offset a decrease in revenues from digital handset sales.

Our consolidated other income decreased by 62.9% to Won 74.9 billion in 2013 from Won 201.8 billion in 2012 due to a ~~6.2%~~decrease in gain on disposal of property and equipment and intangible assets to Won 8.0 billion in 2013 from Won 162.6 billion in 2012, primarily attributable to sales of certain office buildings in 2012, partially offset by an increase in ~~our cellular revenue~~other income to Won ~~12,838.7~~66.6 billion in ~~2010~~2013 from Won ~~12,091.6~~33.4 billion in ~~2009, a 3.4%~~2012, due mainly to an increase in ~~our fixed-line telecommunication revenue~~value-added tax adjustments to Won ~~2,164.2~~10.3 billion in ~~2010~~2013 from Won ~~2,092.1~~5.5 billion in ~~2009 and a 31.6% increase in our other revenue to~~2012 as well as compensation for typhoon damage of Won ~~432.4~~4.5 billion in ~~2010 from Won 328.6 billion~~2013 which was not recognized in ~~2009.~~

2012.

The following sets forth additional information about our operating revenues with respect to each of our reportable segments.

Cellular Services Segment

~~Cellular Telephone Telecommunication Service Business~~

The ~~operating~~ revenue of our cellular ~~telephone telecommunication service business,~~services segment, which is composed of revenues from wireless ~~services,~~service, cellular interconnection, digital handset sales and ~~other~~miscellaneous cellular services, increased by ~~6.2%~~0.7% to Won ~~12,838.7~~13,315.5 billion in ~~2010~~2013 from Won ~~12,091.6~~13,218.9 billion in ~~2009.~~

2012.

The increase in our cellular services revenue was principally due to increases in our wireless service revenue and miscellaneous cellular services revenue, partially offset by decreases in digital handset sales and cellular interconnection revenue.

Wireless service revenue increased by 3.9% to Won 11,001.1 billion in 2013 from Won 10,591.5 billion in 2012, primarily due to an increase in revenue from monthly plan-based fees and wireless data services driven by an increased number of LTE subscribers and smartphone users who subscribe to fixed-price voice and data plans with higher monthly basic charges than our ~~digital handset sales, as well as an increase in our~~other wireless services, ~~revenue,~~ partially offset by a decrease in ~~interconnection revenue.~~ usage charges for outgoing voice calls. The decrease in usage charges for outgoing voice calls is primarily due to an increased number of subscribers who subscribe to fixed-price voice plans and our introduction of unlimited voice service features. Miscellaneous cellular services revenue increased by 29.6% to Won 823.5 billion in 2013 from Won 635.5 billion in 2012. The increase was primarily attributable to increases in revenue from our Internet solutions business, online shopping services, resale of fixed-line telecommunication services, number portability processing fees and other operating income to the extent attributable to the cellular services segment.

Digital handset sales ~~which commenced in April 2009, increased 188.4%~~decreased by 42.9% to Won ~~534.4~~645.9 billion in ~~2010~~2013 from Won ~~185.3~~1,131.7 billion in ~~2009,~~2012, primarily due to a decrease in handset sales to new subscribers, which was mainly attributable to an easing of marketing competition for new subscribers among us, KT and LG U+ in 2013 following disciplinary measures imposed by the Government. Cellular interconnection revenue decreased by 1.8% to Won 845.0 billion in 2013 from Won 860.3 billion in 2012. The decrease was due to decreases in interconnection rates in 2013 and decreases in land-to-mobile call volume.

Fixed-line Telecommunication Services Segment

The revenue of our fixed-line telecommunication services segment, which is composed of revenues from broadband Internet service (including IP TV service), fixed-line telephone service, international calling service, fixed-line interconnection and miscellaneous fixed-line telecommunication services, increased by 5.9% to Won 2,324.4 billion in 2013 from Won 2,193.9 billion in 2012, primarily due to an increase in revenue from our broadband Internet service.

Revenue from our broadband Internet service (including IP TV service) increased by 18.3% to Won 1,023.2 billion in 2013 from Won 865.0 billion in 2012, primarily as a result of ~~strong demand for smartphones. Wireless services~~an increase in revenue from our IP TV service attributable to an increased number of IP TV subscribers and increased purchases of premium product offerings.

Others Segment

The revenue of our others segment, which is composed of revenues from our commerce service and portal service and miscellaneous other revenue, increased ~~3.0%~~by 32.1% to Won ~~11,057.3~~962.2 billion in ~~2010~~2013 from Won ~~10,734.4~~728.6 billion in ~~2009,~~2012, due to an increase in revenue from our commerce service, partially offset by decreases in portal service revenue and miscellaneous other revenue.

Commerce service revenue increased by 89.5% to Won 742.6 billion in 2013 from Won 391.9 billion in 2012, primarily due to an increase in revenue generated by 11th Street.

Portal service revenue decreased by 45.1% to Won 92.2 billion in 2013 from Won 167.8 billion in 2012, primarily due to a decrease in advertising revenues from the portal services operated by SK Communications. Miscellaneous other revenue decreased by 24.6% to Won 127.4 billion in 2013 from Won 168.9 billion in 2012, primarily due to the cessation of revenue flows from Loen Entertainment after SK Planet, our wholly-owned subsidiary, disposed of a 52.6% equity stake in Loen Entertainment in July 2013 and it ceased being our consolidated subsidiary.

Operating Expense. Our consolidated operating expense in 2013 increased by 3.4% to Won 15,098.6 billion in 2013 from Won 14,605.6 billion in 2012, primarily due to a 30.1% increase in other operating expenses to Won 1,746.3 billion in 2013 from Won 1,342.0 billion in 2012, which was attributable mainly to an increase in loss on disposal of property and equipment and intangible assets to Won 267.5 billion in 2013 from Won 15.1 billion in 2012, which was primarily due to loss on disposal of various intangible assets, a 23.1% increase in labor cost to Won 1,561.4 billion in 2013 from Won 1,267.9 billion in 2012, which was attributable mainly to an increase in the

number of our employees resulting primarily from the merger of SK Marketing & Company Co., Ltd. into SK Planet in February 2013 and our new business initiatives, as well as a 9.9% increase in depreciation and amortization expenses to Won 2,661.6 billion in 2013 from Won 2,421.1 billion in 2012, which was attributable mainly to depreciation of our newly built-out LTE wireless network and amortization of our frequency license for the 35 MHz of bandwidth in the 1.8 GHz spectrum which we started using in 2013.

The following sets forth additional information about our segment operating expense with respect to each of our reportable segments, which do not include certain expenses that are classified as other non-operating expenses under K-IFRS. For more information on the difference between our consolidated operating expense pursuant toK-IFRS and pursuant to IFRS as issued by the IASB, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”

Cellular Services Segment

The segment operating expense for our cellular services segment decreased by 1.8% to Won 11,329.4 billion in 2013 from Won 11,535.5 billion in 2012, primarily due to a decrease in commission paid primarily attributable to an easing of marketing competition for new subscribers among us, KT and LG U+ in 2013, partially offset by increases in other operating expenses, labor costs and depreciation and amortization expenses for the reasons discussed above.

Fixed-line Telecommunication Services Segment

The segment operating expense for our fixed-line telecommunication services segment increased by 6.0% to Won 2,268.8 billion in 2013 from Won 2,140.7 billion in 2012, primarily due to an increase in marketing costs attributable mainly to increased media advertisements in connection with an expansion of our customer base, partially offset by a decrease in fees paid primarily attributable to a decrease in fixed-line network construction.

Others Segment

The segment operating expense for our others segment increased by 35.1% to Won 992.8 billion in 2013 from Won 735.1 billion in 2012, primarily due to an increase in marketing costs resulting from increased competition in the e-commerce market.

Operating Income from Continuing Operations. Our consolidated operating income from continuing operations decreased by 9.2% to Won 1,578.4 billion in 2013 from Won 1,737.7 billion in 2012, as the increase in operating expense and decrease in other income outpaced the increase in operating revenue.

Our segment operating income with respect to each of our reportable segments is based on K-IFRS and the sum of segment operating income for all three reportable segments differs from our consolidated operating income from continuing operations presented in accordance with IFRS by IASB. For a reconciliation of operating income from continuing operations presented in accordance with IFRS by IASB and operating income presented in accordance with K-IFRS, see “— Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.”

The segment operating income of our cellular services segment increased by 18.0% to Won 1,986.1 billion in 2013 from Won 1,683.4 billion in 2012, primarily due to an increase in revenue from monthly plan-based fees and wireless data services driven by an increased number of LTE subscribers and smartphone users who subscribe to fixed-price voice and data plans with higher monthly basic charges than our other wireless services, which was enhanced by a decrease in commissions paid relating to marketing expenses to acquire new subscribers. As a result, the segment operating margin (which, with respect to each reportable segment, is segment operating income divided by revenue from such segment, expressed as a percentage) of our cellular services segment increased to 14.9% in 2013 from 12.7% in 2012. The segment operating income of our fixed-line telecommunication services segment increased by 4.7% to Won 55.6 billion in 2013 from Won 53.1 billion in 2012, due to an increase in revenue from our broadband Internet service. The segment operating margin of our fixed-line telecommunication services segment remained stable at 2.4% in 2013 and 2012. However, the segment operating loss of our others segment increased significantly to Won 30.6 billion in 2013 from Won 6.5 billion in 2012, primarily due to decreased profitability of our e-commerce business resulting from increased competition in the e-commerce market.

Finance Income and Finance Costs. Our finance income decreased by 74.5% to Won 113.4 billion in 2013 from Won 444.6 billion in 2012, primarily due to a Won 273.3 billion decrease in gain on disposal of long-term investment securities to Won 9.3 billion in 2013 from Won 282.6 billion in 2012, which was mainly attributable to the sale in October 2012 of half of the POSCO shares we owned, as well as a 32.6% decrease in interest income to Won 65.6 billion in 2013 from Won 97.3 billion in 2012, which was mainly due to a general decrease in interest rates. Our finance costs decreased by 10.5% to Won 571.2 billion in 2013 from Won 638.3 billion in 2012, primarily due to a 72.7% decrease in other finance costs to Won 52.1 billion in 2013 from Won 190.6 billion in 2012 as a result of a decrease in impairment losses for our available-for-sale financial assets, and a 19.5% decrease in interest expense to Won 331.8 billion in 2013 from Won 412.4 billion as a result of decreases in our interest-bearing financial debt and interest rates, which was partially offset by a Won 126.4 billion increase in loss relating to financial liability at fair value through profit or loss to Won 134.2 billion in 2013 from Won 7.8 billion in 2012 as a result of valuation loss on our exchangeable bonds due to rising stock prices and loss on redemption of debentures upon the exercise of exchange claims.

Gains (Losses) Related to Investments in Subsidiaries and Associates. We recorded net gains related to investments in subsidiaries and associates of Won 706.5 billion in 2013 compared to net losses related to investments in subsidiaries and associates of Won 24.6 billion in 2012. The change to a net gain was primarily due to a Won 610.2 billion gain attributable to our investment in SK Hynix, in which we have a 20.57% interest. SK Hynix recorded profit for the year of Won 2,872.5 billion in 2013 compared to loss for the year of Won 158.8 billion in 2012, primarily as a result of increases in both average selling prices and unit sales of its dynamic random-access memory and NAND products.

Income Tax. Income tax expense from continuing operations increased by 39.1% to Won 400.8 billion in 2013 from Won 288.2 billion in 2012. Our effective tax rate in 2013 also increased by 2.9%p to 21.9% in 2013 from 19.0% in 2012. Our income tax expense from continuing operations and effective tax rate increased in 2013 compared to 2012 primarily due to a decrease in tax credits related to our capital expenditures in 2013, as well as a decrease in discretionary exemptions extended by the tax authority in 2013.

Profit (Loss) from Discontinued Operations. We recognized profit from discontinued operations of Won 183.2 billion in 2013 compared to loss from discontinued operations of Won 115.5 billion in 2012. The profit from discontinued operations in 2013 was related to Loen Entertainment, in which SK Planet, our wholly-owned subsidiary, disposed of a 52.6% equity stake for an aggregate sale price of approximately Won 265.9 billion and as a result, ceased to be our consolidated subsidiary in 2013. The loss from discontinued operations in 2012 was related to SK Telink’s former satellite DMB business, which was ceased during 2012.

Profit for the Year. Principally as a result of the factors discussed above, our profit for the year increased by 9.7% to Won 1,609.5 billion in 2013 from Won 1,115.7 billion in 2012. Profit for the year as a percentage of operating revenue and other income was 9.7% in 2013 compared to 6.8% in 2012.

2012 Compared to 2011

Operating Revenue and Other Income. Our consolidated operating revenue and other income increased by 3.1% to Won 16,343.3 billion in 2012 from Won 15,852.8 billion in 2011, due to the following increases in operating revenue and other income.

Our consolidated operating revenue increased by 2.1% to Won 16,141.4 billion in 2012 from Won 15,803.2 billion in 2011, primarily as a result of strong growth in the number of new subscribers to our LTE service, which entail higher revenues per subscriber, as well as improved revenues from our consolidated subsidiaries, including SK Planet, SK Broadband and PS&Marketing, which more than offset a decrease in revenues from our non-LTE subscribers.

Our consolidated other income increased by more than threefold to Won 201.8 billion in 2012 from Won 49.6 billion in 2011, due to an increase in gain on disposal of property and equipment and intangible assets to Won 162.6 billion in 2012 from Won 6.3 billion in 2011, primarily attributable to sales of certain office buildings in 2012.

The following sets forth additional information about our operating revenues with respect to each of our reportable segments.

Cellular Services Segment

The revenue of our cellular services segment, which is composed of revenues from wireless service, cellular interconnection, digital handset sales and miscellaneous cellular services, increased by 1.1% to Won 13,218.9 billion in 2012 from Won 13,076.3 billion in 2011.

The increase in our cellular services revenue was principally due to increases in our digital handset sales and wireless service revenue, partially offset by decreases in cellular interconnection revenue and miscellaneous cellular services revenue.

Digital handset sales increased by 43.8% to Won 1,131.7 billion in 2012 from Won 787.2 billion in 2011, primarily due to an increase in unit sales of LTE smartphones, which also have unit prices that are generally higher than those of other handsets. Wireless service revenue increased by 1.4% to Won 10,591.5 billion in 2012 from Won 10,447.6 billion in 2011, primarily due to an increase in revenue from wireless data services and monthly plan-based fees driven by an increased ~~subscription~~number of smartphone users and LTE subscribers who subscribe to fixed-price data and voice plans with higher monthly basic charges than our other wireless services, partially offset by a decrease in usage charges for outgoing voice calls. The decrease in usage charges for outgoing voice calls is primarily due to a decrease in ~~large part~~voice service usage attributable to ~~an increase in~~ the ~~number~~increased use of free text message services by smartphone users, as well as a ~~5.7% increase in our average~~reduction of the monthly fee by Won 1,000 for every subscriber ~~base in 2010 over 2009, partially offset by a decrease in revenue~~effective from ~~call charges as a result of increase in number of subscribers signing up for call plans with higher monthly basic charges and lower call charges.~~

~~Our average monthly revenue per subscriber, excluding~~September 16, 2011.

Cellular interconnection revenue decreased by ~~2.3%~~21.1% to Won ~~37,287~~860.3 billion in ~~2010~~2012 from Won 38,171 in 2009, due to decreases in average monthly revenue per subscriber from usage charges for outgoing voice calls and initial subscription fees, partially offset by increases in average monthly revenue per subscriber from value-added and other service fees, wireless data services and monthly plan-based fees. Our average monthly revenue per subscriber from usage charges for outgoing calls decreased in 2010, primarily due to increased subscription to call plans with higher monthly basic charges and lower call charges. Our average monthly revenue per subscriber from initial subscription fees decreased in 2010, primarily due to the reduction of our initial subscription fee from Won 50,000 to Won 36,000 per line from November 2009. Our average monthly revenue per subscriber from value-added and other service fees increased in 2010, primarily due to an increase in revenues from global roaming services and leased-line revenue. Our average monthly revenue per subscriber from wireless data services, which includes usage charges for SMS and wireless Internet services, increased in 2010, attributable mainly to an increase in revenue from data flat rate plans. Our average monthly revenue per subscriber from monthly plan-based fees increased in 2010, primarily as a result of increased subscription to our service plans with higher monthly basic charges.

~~Our average monthly minutes per user increased to 199 minutes in 2010 from 197 minutes in 2009.~~

~~Interconnection revenue decreased by 1.5% to Won 1,141.2~~1,090.9 billion in ~~2010 from Won 1,158.0 billion in 2009.~~2011. The decrease was due to decreases in interconnection rates in ~~2010, which more than offset~~2012 and decreases in land-to-mobile and mobile-to-mobile call volume. Miscellaneous cellular services revenue decreased by 15.3% to Won 635.5 billion in 2012 from Won 750.6 billion in 2011. The decrease was primarily attributable to the effects of the reclassification of revenues generated by our platform businesses from the cellular services segment to the others segment in connection with the spin-off of SK Planet in October 2011. If we had not reclassified such revenues, miscellaneous cellular services revenue would have increased by 21.0% to Won 1,074.6 billion in 2012 from Won 887.8 billion in 2011, primarily due to an increase in ~~incoming call volume. Our average monthly~~ revenue ~~per subscriber, including interconnection revenue, decreased 2.6% to Won 41,374 in 2010~~generated from ~~Won 42,469 in 2009.~~

11^th Street and other platform businesses.

Fixed-line Telecommunication ~~Service Business~~Services Segment

The ~~operating~~ revenue of our fixed-line telecommunication ~~service business,~~services segment, which is composed of revenues from broadband Internet service (including ~~corporate data~~IP TV service), fixed-line telephone service, ~~and~~ international calling service, fixed-line interconnection and miscellaneous fixed-line telecommunication services, increased by ~~3.4%~~2.9% to Won ~~2,164.2~~2,193.9 billion in ~~2010~~2012 from Won ~~2,092.1~~2,131.9 billion in ~~2009,~~2011, primarily due to ~~increases~~an increase in revenue from ~~broadband Internet service and international calling service,~~our miscellaneous fixed-line telecommunication services, partially offset by a decrease in revenue from our broadband Internet service.

Miscellaneous fixed-line ~~telephone service.~~

~~The~~telecommunication services revenue, including revenues from the leased line, corporate data and Internet solutions businesses, increased by 52.6% to Won 600.4 billion in 2012 from Won 393.4 billion in 2011, primarily due to an increase in ~~our~~ revenue from the construction of fixed lines for our B2B solutions business.

Revenue from our broadband Internet service (including IP TV service) decreased by 13.5% to Won 865.0 billion in ~~2010 resulted~~2012 from Won 1,000.5 billion in 2011, primarily ~~from the initiation~~as a result of ~~services to new corporate customers including members of SK Group as well as~~ an increase in the number of ~~individual~~existing subscribers subscribing to our bundled fixed-line and mobile telecommunications services, through which we offer broadband Internet services at a discounted rate, partially offset by an increase in revenue from our IP TV service attributable to an increased number of IP TV subscribers.

Others Segment

The revenue of our others segment, which is composed of revenues from our commerce service and portal service and miscellaneous other revenue, increased by 22.5% to Won 728.6 billion in 2012 from Won 595.0 billion in 2011, primarily due to an increase in revenue from our commerce service, partially offset by decreases in miscellaneous other revenue and portal service revenue. If we had not reclassified the revenues generated by our

platform businesses from the cellular services segment to the others segment in connection with the spin-off of SK Planet in October 2011, the revenue of our others segment would have decreased by 36.8% to Won 289.5 billion in 2012 from Won 457.8 billion in 2011.

Commerce service revenue increased by almost threefold to Won 391.9 billion in 2012 from Won 99.9 billion in 2011, primarily due to an increase in revenue generated by 11th Street.

Miscellaneous other revenue decreased by 35.4% to Won 168.9 billion in 2012 from Won 261.3 billion in 2011, primarily due to the cessation of revenue flows from our consolidated subsidiary, Ntreev Soft Co., Ltd. (“Ntreev”), after we sold our investment in Ntreev in February 2012. Portal service revenue decreased by 28.2% to Won 167.8 billion in 2012 from Won 233.8 billion in 2011, primarily due to a decrease in advertising revenues from the portal services operated by SK Communications.

Operating Expense. Our consolidated operating expense in 2012 increased by 6.7% to Won 14,605.6 billion in 2012 from Won 13,690.1 billion in 2011, primarily due to a 7.0% increase in commissions paid to Won 5,949.5 billion in 2012 from Won 5,560.1 billion in 2011, which was attributable mainly to an increase in marketing expenses to acquire new LTE subscribers and an increase in sales commission from increased smartphone sales, a 35.0% increase in cost of products that have been resold to Won 1,292.3 billion in 2012 from Won 957.1 billion in 2011, which was attributable mainly to an increase in LTE smartphone sales by PS&Marketing, as well as a 5.9% increase in depreciation and amortization expenses to Won 2,421.1 billion in 2012 from Won 2,286.6 billion in 2011, which was attributable mainly to an increase in our investment in wireless networks, including our LTE multi-carrier technology, and the amortization of our frequency license for the 1.8 GHz spectrum which we started using in 2012.

Cellular Services Segment

The segment operating expense for our cellular services segment increased by 5.8% to Won 11,535.5 billion in 2012 from Won 10,898.2 billion in 2011, primarily due to increases in commissions paid, cost of products that have been resold and depreciation and amortization expenses for the reasons discussed above, partially offset by a decrease in ~~average monthly revenue per subscriber. The increase~~network interconnection expenses primarily attributable to decreases in interconnection traffic volume and fee rates, as well as the effects of the reclassification of expenses incurred by our ~~international calling service revenue was~~platform businesses from the cellular services segment to the others segment in connection with the spin-off of SK Planet in October 2011. If we had not reclassified such expenses, segment operating expense of our cellular services segment would have increased by an additional Won 277.0 billion in 2012, primarily due to an increase in ~~call volume.~~ commissions related to SK Planet’s platform businesses.

Fixed-line Telecommunication Services Segment

The segment operating expense for our fixed-line telecommunication services segment increased by 3.6% to Won 2,140.7 billion in 2012 from Won 2,065.7 billion in 2011, primarily due to an increase in commissions paid related to increased revenue from fixed-line network construction, partially offset by a decrease in network interconnection expenses primarily attributable to decreases in interconnection traffic volume and fee rates.

Others Segment

The segment operating expense for our others segment increased by 28.3% to Won 735.1 billion in 2012 from Won 573.1 billion in 2011, primarily due to the reclassification of expenses incurred by our platform businesses from the cellular services segment to the others segment in connection with the spin-off of SK Planet in October 2011 as explained above with respect to the segment operating expense of our cellular services segment, partially offset by a decrease in expenses incurred by the portal services operated by SK Communications. If we had not reclassified these expenses, the segment operating expense of our others segment would have decreased by 25.9% to Won 329.5 billion in 2012 from Won 444.5 billion in 2011.

Operating Income from Continuing Operations. Our consolidated operating income from continuing operations decreased by 19.7% to Won 1,737.7 billion in 2012 from Won 2,162.7 billion in 2011, as the increase in operating expense outpaced the increase in operating revenue and other income, primarily with respect to our cellular services segment.

The segment operating income of our cellular services segment decreased by 22.7% to Won 1,683.4 billion in 2012 from Won 2,178.1 billion in 2011, primarily due to an increase in commissions paid relating to marketing expenses to acquire new LTE subscribers, which more than offset an increase in revenue from our cellular services segment of Won 142.6 billion. As a result, the segment operating margin (which, with respect to each reportable segment, is segment operating income divided by revenue from such segment, expressed as a percentage) of our cellular services segment decreased to 12.7% in 2012 from 16.7% in 2011. The segment operating income of our fixed-line ~~telephone~~telecommunication services segment decreased by 19.8% to Won 53.1 billion in 2012 from Won 66.2 billion in 2011, due to an increase in operating expenses, including commissions paid related to increased revenue from fixed-line network construction. The segment operating margin of our fixed-line telecommunication services segment decreased to 2.4% in 2012 from 3.1% in 2011. However, in our others segment, we recorded operating loss of Won 6.5 billion in 2012 compared to operating income of Won 21.9 billion in 2011. The change to operating loss in 2012 was primarily due to a decrease in ~~average monthly revenue per subscriber resulting~~operating income from ~~discounts offered to subscribers of bundled services.~~

the portal services operated by SK Communications.

~~Other Businesses~~

~~The operating revenue of our other businesses, which is composed of revenues from portal service~~Finance Income and ~~certain other revenue,~~Finance Costs. Our finance income increased by ~~31.6%~~1.0% to Won ~~432.4~~444.6 billion in ~~2010~~2012 from Won ~~328.6~~440.2 billion in ~~2009.~~

Portal service revenues increased 18.9% to Won 239.1 billion in 2010 from Won 201.1 billion in 2009 mainly due to an increase in advertisement revenue from our NATE portal. Miscellaneous revenue increased by 51.6% to Won 193.3 billion in 2010 from Won 127.5 billion in 2009 due among others to an increase in digital music sales at our MelOn music portal.

~~Operating Expenses.~~ ~~Our operating expenses in 2010 increased by 6.8% to Won 13,493.1 billion from Won 12,631.1 billion in 2009,~~2011, primarily due to ~~increases~~a 71.9% increase in ~~marketing expenses~~gain on disposal of long-term investment securities to Won 282.6 billion in 2012 from Won 164.4 billion in 2011, which was mainly attributable to the ~~form~~sale in October 2012 of ~~commissions paid and in cost~~half of ~~goods sold for our digital handset sales,~~the POSCO shares we owned, partially offset by a 41.4% decrease in ~~leased line expense.~~

~~Cellular Telephone Telecommunication Service Business~~

interest income to Won 97.3 billion in 2012 from Won 166.1 billion in 2011 as a result of a decrease in accounts receivable related to sales of handsets on installment payment plans. The ~~operating expenses~~accounts receivable related to sales of ~~our cellular telephone telecommunication service business~~handsets on installment payment plans have continued to decrease since September 2010, when Hana SK Card took over this financing from us. Our finance costs increased by ~~8.7%~~85.7% to Won ~~10,562.8~~638.3 billion in ~~2010~~2012 from Won ~~9,719.9~~343.8 billion in ~~2009,~~2011, primarily due to ~~increases in commissions paid and cost of goods sold, partially offset by~~ a ~~decrease in leased line expense. The~~38.8% increase in ~~commissions paid, including~~interest expense to ~~our authorized dealers and to our subscribers, was primarily attributable to increases~~Won 412.4 billion in ~~initial commissions and monthly commissions resulting~~2012 from Won 297.2 billion in 2011 as a result of an increase in our interest-bearing financial debt and an increase in other finance costs to Won 190.6 billion in 2012 from Won 12.8 billion in 2011 as a result of an increase in impairment losses for our available-for-sale financial assets.

Losses Related to Investments in Subsidiaries and Associates. Losses related to investments in subsidiaries and associates, net decreased by 47.6% to Won 24.6 billion in 2012 from Won 46.9 billion in 2011, primarily due to a Won 66.0 billion gain on the ~~number~~disposal of ~~new subscribers. The cost of goods sold increased~~our investment in Ntreev in February 2012 and a Won 6.9 billion gain attributable to our investment in SK Hynix, in which we have a 20.57% interest.

Income Tax. Income tax expense from continuing operations decreased by 52.1% to Won 288.2 billion in 2012 from Won 601.9 billion in 2011. Our effective tax rate in 2012 also decreased by 8.2%p to 19.0% in 2012 from 27.2% in 2011. Our income tax expense from continuing operations and effective tax rate decreased in 2012 compared to 2011 primarily due to an increase in ~~digital handset sales~~tax credits related to our capital expenditures in 2010, which was driven by strong demand for smartphones. The decrease in leased line expense resulted primarily from the increased use of our own transmission lines following our acquisition of SK Networks’ leased line business in September 2009.

~~Fixed-line Telecommunication Service Business~~

The operating expenses of our fixed-line telecommunication service business increased by 3.5% to Won 2,342.8 billion in 2010 from Won 2,263.2 billion in 2009, primarily due to an increase in license fees paid to the providers of broadcasting programs for our IP TV services,2012, as well as ~~an increase~~a tax refund received in ~~service fees paid~~2012 for previous years and as a result of tax audits conducted in ~~connection with the operation~~2011 for prior periods.

Loss from Discontinued Operations. We recognized loss from discontinued operations of ~~our customer service call centers.~~

~~Other Businesses~~

~~The operating expenses of our other businesses decreased by 9.3% to~~ Won ~~587.5~~115.5 billion in ~~2010 from~~2012 and Won ~~648.0~~28.3 billion in ~~2009, primarily due~~2011 related to SK Telink’s former satellite DMB business, which was ceased during 2012.

Profit for the ~~exclusion of operating expenses of certain subsidiaries that were excluded from consolidation in 2010.~~

~~Operating Income.~~ Our operating income increased by 3.2% to Won 1,942.3 billion in 2010 from Won 1,881.2 billion in 2009. Due to the factors discussed above, the operating income of our cellular telephone telecommunication service business decreased by 4.0% to Won 2,275.9 billion in 2010 from Won 2,371.6 billion in 2009, the operating loss of our fixed-line telecommunication service business increased by 4.4% to Won 178.5 billion in 2010 from Won 171.0 billion in 2009 and the operating loss of our other businesses decreased by 51.4% to Won 155.1 billion in 2010 from Won 319.4 billion in 2009.

~~Other Income.~~ Other income consists primarily of interest income, foreign exchange and translation gains and gains on transactions and valuation of derivatives, as well as dividend income and equity in earnings of affiliates. Other income decreased by 28.2% to Won 629.4 billion in 2010 from Won 876.0 billion in 2009, due primarily to a decrease in dividend income, partially offset by an increase in interest income. The decrease in dividend income was primarily due to the decrease in dividends from Global Opportunities Breakaway Fund, a venture capital fund, and our sale of China Unicom and SK C&C shares in 2009.

~~Other Expenses.~~ Other expenses consist primarily of interest and discount expenses, donations, external research and development cost, loss on disposal of property, equipment and intangible assets, as well as foreign exchange and translation losses and losses on transactions and valuation of derivatives. Other expenses decreased by 33.6% to Won 898.0 billion in 2010 from Won 1,351.4 billion in 2009. This decrease was primarily attributable to the incurrence in 2009 of a loss on our sale of China Unicom shares compared to no such loss in 2010, as well as a

~~decrease in interest and discount expenses and a decrease in net loss on transactions and valuation of derivatives, partially offset by an increase in donations.~~

~~Income Tax.~~ Income tax for continuing operation increased by 13.7% to Won 404.3 billion in 2010 from Won 355.7 billion in 2009. Our effective tax rate in 2010 decreased to 24.2% from an effective tax rate of 25.3% in 2009. Income taxes increased in 2010 compared to 2009 primarily due to an increase in our income from continuing operation before income tax.

~~Net Income.~~Year. Principally as a result of the factors discussed above, our ~~net income, after adjusting~~profit for~~non-controlling~~ ~~interests, increased~~ the year decreased by ~~22.9%~~29.5% to Won ~~1,297.2~~1,115.7 billion in ~~2010~~2012 from Won ~~1,055.6~~1,582.1 billion in ~~2009. Net income~~2011. Profit for the year as a percentage of operating ~~revenues~~revenue and other income was ~~8.4%~~6.8% in ~~2010~~2012 compared to ~~7.3%~~10.0% in ~~2009.~~

~~2009 Compared to 2008~~2011.

~~Operating Revenue.~~ Our operating revenue increased by 4.0% to Won 14,512.3 billion in 2009 from Won 13,951.0 billion in 2008, due to a 4.4% increase in our cellular revenue to Won 12,091.6 billion in 2009 from Won 11,579.1 billion in 2008 and a 51.4% increase in our other revenue to Won 328.6 billion in 2009 from Won 217.0 billion in 2008, partially offset by a 2.9% decrease in our fixed-line telecommunication revenue to Won 2,092.1 billion in 2009 from Won 2,154.9 billion in 2008.

~~Cellular Telephone Telecommunication Service Business~~

The operating revenue of our cellular telephone telecommunication service business, which is composed of revenues from wireless services, interconnection, digital handset sales and other services, increased by 4.4% to Won 12,091.6 billion in 2009 from Won 11,579.1 billion in 2008.

The increase in our cellular revenue was principally due to an increase in our wireless services revenue, as well as digital handset sales of Won 185.3 billion by PS & Marketing, a wholly-owned subsidiary, in 2009 compared to no such sales in 2008. Wireless services revenue increased 3.2% to Won 10,734.4 billion in 2009 from Won 10,403.1 billion in 2008, primarily as a result of a 5.1% increase in our average subscriber base in 2009 over 2008, as well as increased subscriptions to service plans with higher monthly charges, partially offset by a decrease in revenue from call charges as a result of increase in number of subscribers signing up for discount price plans.

Our average monthly revenue per subscriber, excluding interconnection revenue, decreased by 0.9% to Won 38,171 in 2009 from Won 38,526 in 2008, which reflects the net effect of several factors, including a decrease in call charges for voice services and sign up fees, partially offset by increases in average monthly revenue per subscriber from monthly fee plans. Our average monthly revenue per subscriber from wireless data services, which includes usage charges for SMS and wireless Internet services, increased in 2009, attributable mainly to an increase in revenue from flat rate data plans. Our average monthly revenue per subscriber from usage charges for outgoing calls decreased in 2009, primarily due to discounts we offered for voice calls between subscribers. Our average monthly minutes per user declined to 197 minutes in 2009 from 200 minutes in 2008. Our average monthly revenue per subscriber from value-added and other service fees increased in 2009, primarily due to an increase in revenues from global roaming services and leased-line revenue.

Interconnection revenue increased by 0.8% to Won 1,158.0 billion in 2009 from Won 1,149.2 billion in 2008. The increase was due to increases in incoming call volume, which more than offset the decrease in interconnection rates in 2009. Our average monthly revenue per subscriber, including interconnection revenue, decreased 1.3% to Won 42,469 in 2009 from Won 43,016 in 2008.

~~Fixed-line Telecommunication Service Business~~

The operating revenue of our fixed-line telecommunication service business, which is composed of revenues from broadband Internet service (including corporate data service), fixed-line telephone service and international calling service, decreased by 2.9% to Won 2,092.1 billion in 2009 from Won 2,154.9 billion in 2008, primarily due to a decrease in average monthly revenue per subscriber resulting from discounts offered to subscribers of bundled

services and a decrease in fixed-line call charges, partially offset by an increase in revenues from international calling service and an increase in the number of subscribers to our broadband Internet, IP TV and VoIP services.

~~Other Businesses~~

The operating revenue of our other businesses, which is composed of revenues from portal service and certain other revenue, increased by 51.4% to Won 328.6 billion in 2009 from Won 217.0 billion in 2008.

Portal service revenues increased 0.7% to Won 201.1 billion in 2009 from Won 199.7 billion in 2008 mainly due to an increase in revenue from Moneta, our financial portal. Miscellaneous revenue increased by 637.0% to Won 127.5 billion in 2009 from Won 17.3 billion in 2008 due among others to an increase in digital music sales at our MelOn music portal.

~~Operating Expenses.~~ Our operating expenses in 2009 increased by 3.6% to Won 12,631.1 billion from Won 12,190.7 billion in 2008, primarily due to increases in marketing expenses in the form of commissions paid and in cost of goods sold for our digital handset sales, partially offset by a decrease in leased line expense.

~~Cellular Telephone Telecommunication Service Business~~

The operating expenses of our cellular telephone telecommunication service business increased by 4.3% to Won 9,719.9 billion in 2009 from Won 9,322.5 billion in 2008, primarily due to increases in commissions paid, cost of goods sold and provision for bad debt, partially offset by a decrease in leased line expense. Commissions paid, including to our authorized dealers and to our subscribers, increased in 2009, primarily attributable to an increase in initial commissions resulting from intensified marketing competition and in the number of new subscribers. The cost of goods sold increased primarily due to the commencement of digital handset sales in April 2009. The increase in provision for bad debt resulted primarily from the increase in bad debt experience ratio from accounts~~receivable-trade.~~ ~~The decrease in leased line expense resulted primarily from the increased use of our own transmission lines following our acquisition of SK Networks’ leased line business in September 2009.~~

~~Fixed-line Telecommunication Service Business~~

The operating expenses of our fixed-line telecommunication service business increased by 6.1% to Won 2,263.2 billion in 2009 from Won 2,132.1 billion in 2008, primarily due to an increase in the marketing expenses paid in the form of commissions to the subscribers as a result of an increase in the number of subscribers.

~~Other Businesses~~

The operating expenses of our other businesses decreased by 12.0% to Won 648.0 billion in 2009 from Won 736.1 billion in 2008, primarily due to the exclusion of operating expenses of certain subsidiaries that were excluded from consolidation in 2009.

~~Operating Income.~~ Our operating income increased by 6.9% to Won 1,881.2 billion in 2009 from Won 1,760.3 billion in 2008. Due to the factors discussed above, the operating income of our cellular telephone telecommunication service business increased by 5.1% to Won 2,371.6 billion in 2009 from Won 2,256.6 billion in 2008 and the operating loss of our other businesses decreased by 38.5% to Won 319.4 billion in 2009 from Won 519.1 billion in 2008. In our fixed-line telecommunication service business, we had operating loss of Won 171.0 billion in 2009 compared to operating income of Won 22.8 billion in 2008.

~~Other Income.~~ Other income consists primarily of foreign exchange and translation gains and gains on transactions and valuation of derivatives, as well as interest income, dividend income and equity in earnings of affiliates. Other income decreased by 17.0% to Won 876.0 billion in 2009 from Won 1,055.2 billion in 2008, due primarily to a decrease in net foreign exchange and translation gain.

~~Other Expenses.~~ Other expenses consist primarily of interest and discount expenses, losses on transactions and valuation of derivatives, foreign exchange and translation losses and impairment loss on investment securities. Other expenses decreased by 12.1% to Won 1,351.4 billion in 2009 from Won 1,537.9 billion in 2008. This decrease

~~was primarily attributable to a decrease in net loss on transactions and valuation of derivatives and impairment loss on investment securities.~~

~~Income Tax.~~ Income tax for continuing operation increased by 18.8% to Won 355.7 billion in 2009 from Won 299.3 billion in 2008. Our effective tax rate in 2009 increased to 25.3% from an effective tax rate of 23.4% in 2008. Income taxes increased in 2009 compared to 2008 primarily due to an increase in our income from continuing operation before income tax and an increase in valuation allowance, which together more than offset a decrease in corporate income tax rate to 22% in 2009 from 25% in 2008.

~~Net Income.~~ ~~Principally as a result of the factors discussed above, our net income, after adjusting fornon-controlling~~ ~~interests, increased by 8.6% to Won 1,055.6 billion in 2009 from Won 972.3 billion in 2008. Net income as a percentage of operating revenues was 7.3% in 2009 compared to 7.0% in 2008.~~

Inflation

We do not consider ~~that~~ inflation in Korea ~~has~~to have had a material impact on our results of operations in recent years. According to data published by The Bank of Korea, annual inflation in Korea was ~~4.7%~~1.3% in ~~2008, 2.8%~~2013, 2.2% in ~~2009~~2012 and ~~2.9%~~4.0% in ~~2010.~~

2011.
Item 5.B. Liquidity and Capital Resources
Liquidity
We had a working capital deficit (current ~~assets minus~~liabilities in excess of current ~~liabilities) surplus~~assets) of Won ~~793.6 billion, Won 1,475.7 billion and Won 1,057.7~~945.8 billion as of December 31, ~~2008, 2009~~2013 and ~~2010, respectively.~~
Won 880.5 billion as of December 31, 2012. The working capital deficit as of December 31, 2013 was primarily caused by our acquisition of property and equipment in connection with the further expansion and enhancement of our LTE network in 2013 and our repayment of debt incurred in connection with the financing of our acquisition of an equity stake in SK Hynix as discussed below. The working capital deficit as of December 31, 2012 was primarily caused by our acquisition of property and equipment in connection with the further expansion and enhancement of our LTE network in 2012, the acquisition of a 21.05% equity stake in SK Hynix in February 2012 and our repayment of debt incurred in connection with the financing of such equity stake in SK Hynix. We plan to fund our current liabilities with the cash flow generated by our operations, proceeds from the disposal of investment securities or property and equipment that are no longer deemed profitable and proceeds from additional borrowings, as necessary.
We had cash, cash equivalents, short-term financial instruments and short-term investment securities of Won ~~1,752.7~~1,816.2 billion as of December 31, ~~2008,~~2013 and Won ~~1,682.3~~1,494.7 billion as of December 31, ~~2009 and Won 1,753.0 billion as of December 31, 2010.~~2012. We had outstanding short-term borrowings of Won ~~627.7~~260.0 billion as of December 31, ~~2008,~~2013 and Won ~~677.2~~600.2 billion as of December 31, ~~2009 and Won 529.6 billion as of December 31, 2010.~~2012. As of December 31, ~~2010,~~2013, we had credit lines with several local banks that provided for ~~borrowings~~borrowing of up to Won ~~1,357.2~~607.0 billion, of which Won ~~509.4~~260.0 billion was outstanding and Won ~~847.8~~347.0 billion was available for borrowing.
~~Operating cash flow~~
Cash flows from operating activities and debt financing have been our principal sources of liquidity. We had cash and cash equivalents of Won ~~778.5~~1,398.6 billion as of December 31, ~~2010,~~2013 and Won ~~953.9~~920.1 billion as of December 31, ~~2009 and Won 1,011.3 billion as of December 31, 2008.~~2012. 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 requirements to the extent that they are not met by funds generated by operations, including the issuance of debt securities and bank borrowings.

61

Year Ended December 31, Change
2013 2012 2011 2013 to 2012 2011 to 2012
(In billions of Won, except percentages)
Net Cash Provided by Operating Activities
￦ 3,558.6 ￦ 3,999.7 ￦ 6,306.4    ￦ (441.1 ) (11.0 )% ￦ (2,306.7 ) (36.6 )%
Net Cash Used in Investing Activities
(2,506.5 ) (5,309.6 ) (4,239.1 ) 2,803.1    (52.8 ) (1,070.5 ) 25.3
Net Cash Provided by (Used in) Financing Activities
(573.2 ) 585.3 (1,079.3 ) (1,158.5 ) N/A    1,664.6    N/A
Effect of Exchange Rate Changes on Cash and Cash Equivalents Held in Foreign Currencies
(0.4 ) (6.0 ) 3.4    5.6    (93.3 ) (9.4 ) N/A
Net Increase (Decrease) in Cash and Cash Equivalents
478.9 (724.7 ) 988.0    1,203.6    N/A    (1,712.7 ) N/A
Cash and Cash Equivalents at Beginning of Period
920.1 1,650.8 659.4    (730.7 ) (44.3 ) 991.4    150.3
Cash and Cash Equivalents at End of Period
1,398.6 920.1 1,650.8    478.5    52.0 % (730.7 ) (44.3 )%

Year Ended December 31, Change
2008 2009 2010 2008 to 2009 2009 to 2010
(In billions of Won, except percentages)

Net Cash Flow from Operating Activities W 3,293.0 W 2,932.6 W 4,021.0 W (360.4 ) (10.9 )% W 1,088.4 37.1 %
Net Cash Used in Investing Activities (3,877.0 ) (1,826.0 ) (2,358.7 ) 2,051.0 (52.9 ) (532.7 ) 29.2
Net Cash Provided by (Used in) Financing Activities 866.8 (1,207.0 ) (1,818.3 ) (2,073.8 ) N/A (611.3 ) 50.6
Effect of Exchange Rate Changes on Cash and Cash Equivalents Held in Foreign Currencies 37.4 (7.4 ) (5.2 ) (44.8 ) N/A 2.2 (29.7 )
Net Increase (Decrease) in Cash and Cash Equivalents due to Changes in Consolidated Subsidiaries 36.4 46.2 (18.2 ) 9.9 27.2 (64.4 ) N/A
Preacquisition Cash Flows of Subsidiaries 17.3 — (23.4 ) (17.3 ) N/A (23.4 ) N/A
Cash Flows from Discontinued Operation(1) (248.4 ) 4.0 27.4 252.4 N/A 23.4 585.0
Net Increase (Decrease) in Cash and Cash Equivalents 125.5 (57.6 ) (175.4 ) (183.0 ) N/A (117.8 ) 205.0
Cash and Cash Equivalents at Beginning of Period 886.0 1,011.5 953.9 125.5 14.2 (57.6 ) (5.7 )
Cash and Cash Equivalents at End of Period 1,011.5 953.9 778.5 (57.6 ) (5.7 )% (175.4 ) (18.4 )%
N/A = Not applicable.
~~(1)~~ Relates to cash flow activities of HELIO sold in August 2008, the Spicus division sold in August 2009, Etoos Co., Ltd. sold in October 2009, iHQ, Inc. sold in April and July 2010 and SK-KTB Music Investment Fund liquidated in October 2010, which have been classified as discontinued operations after such sale or liquidation.
~~Net~~ Cash ~~Flow~~Flows from Operating Activities.     Net cash ~~flow~~ provided by ~~operations~~operating activities was Won ~~3,293.0~~3,558.6 billion in ~~2008,~~2013, Won ~~2,932.6~~3,999.7 billion in ~~2009~~2012 and Won ~~4,021.0~~6,306.4 billion in ~~2010. Net income~~2011. Profit for the year was Won ~~972.3~~1,609.5 billion in ~~2008,~~
2013, Won ~~1,055.6~~1,115.7 billion in ~~2009~~2012 and Won ~~1,297.2~~1,582.1 billion in ~~2010.~~
2011. Net cash provided by operating activities in 2013 decreased by 11.0% from 2012, primarily due to a decrease in collections of other accounts receivable related to sales of handsets on installment payment plans and a decrease in other accounts payable. Net cash provided by operating activities in 2012 decreased by 36.6% from 2011, primarily due to a 29.5% decrease in profit for the year and a decrease in collections of other accounts receivable related to sales of handsets on installment payment plans in 2012. There have been no additional other accounts receivable related to sales of handsets on installment payment plans since September 2010, when Hana SK Card took over this financing from us.
Cash Flows from Investing Activities.     Net cash used in investing activities was Won ~~3,877.0~~2,506.5 billion in ~~2008,~~2013, Won ~~1,826.0~~5,309.6 billion in ~~2009~~2012 and Won ~~2,358.7~~4,239.1 billion in ~~2010.~~2011. Cash inflows from investing activities were Won ~~919.5~~1,251.8 billion in ~~2008,~~2013, Won ~~2,632.9~~1,831.2 billion in ~~2009~~2012 and Won ~~1,420.9~~725.9 billion in ~~2010. The primary contributor to such~~2011. Cash inflows in ~~2008, largely related~~2013 were primarily attributable to ~~a decrease in~~collection of short-term loans of Won 290.9 billion, proceeds from disposal of long-term investment securities of Won ~~382.7~~287.8 billion, mostly in connection with the merger of SK Marketing & Co., Ltd. into SK Planet in February 2013, proceeds from disposal of a subsidiary of Won 215.9 billion, mostly attributable to the sale in July 2013 of shares of Loen Entertainment, net proceeds from the disposition of non-current assets held for sale of Won 190.4 billion, relating to the sale of shares of SKY Property Management, and a decrease in short-term financial instruments, net of Won 186.4 billion, the proceeds of which were used to repay our outstanding debt. Cash inflows in 2012 were primarily attributable to proceeds from disposal of long-term investment securities of Won 511.4 billion, mostly relating to the sale in October 2012 of half of the POSCO shares we owned, a decrease in short-term financial instruments, net of Won 464.5 billion, the proceeds of which were used to repay our outstanding debt, collection of short-term loans of Won 282.7 billion, as well as proceeds from disposal of property and equipment of Won 271.1 billion, mostly relating to the sales of certain office buildings. Cash inflows in 2011 largely related to proceeds from disposal of long-term investment securities of Won 256.7 billion, including shares of SK C&C, and the collection of short-term loans of Won 212.9 billion and, in 2009, largely related to proceeds from sales of long-term investment securities of Won 1,966.9 billion, mostly relating to our sale of China Unicom and SK C&C shares. Cash inflows in 2010 largely related to proceeds from sales of long-term investment securities of Won 713.9 billion, mostly relating to the sale of our investments in bond funds. 194.6 billion.
Cash outflows ~~from~~for investing activities were Won ~~4,796.4~~3,758.3 billion in ~~2008,~~2013, Won ~~4,458.9~~7,140.8 billion in ~~2009~~2012 and Won ~~3,779.6~~4,964.9 billion in ~~2010. The primary contributors~~2011. Cash outflows in 2013 were primarily attributable to ~~the overall cash outflows for investing activities were~~ expenditures related to the acquisition of property and equipment ~~which~~of Won 2,879.1 billion, primarily in connection with the further expansion of our LTE network to provide nationwide coverage and to enhance and improve its quality. Cash outflows in 2012 were largely attributable to expenditures related to the acquisition of property and equipment of Won ~~2,236.4~~3,394.3 billion, primarily in ~~2008,~~connection with the further expansion of our LTE network to provide nationwide coverage and to enhance and improve its quality, and the acquisition of investments in associates of Won ~~2,162.3~~3,098.8 billion, primarily relating to our acquisition of a 21.05% equity stake in ~~2009~~SK Hynix. Cash outflows in 2011 largely related to expenditures related to the acquisition of property and equipment of Won ~~2,144.7~~2,960.6 billion, ~~in 2010, all~~ primarily relating to expenditures in connection with ~~the maintenance and build-out of our wireless network, including~~ upgrades to and expansion of our WCDMA network, as well as the initial build-out of our LTE network and expansion of our WiBro ~~network; increases~~network, as well as an increase in ~~equity of consolidated subsidiaries~~intangible assets of Won ~~1,093.1~~598.4 billion ~~in 2008 (which was~~ primarily ~~due to~~as a result of our acquisition of shares of SK Broadband in March 2008); acquisition of the leased line business of SK Networks for Won 894.8 billion in 2009; acquisitions of equity securities accounted for using the equity method, which were Won 595.3 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), Won 107.4 billion in 2009 and Won 693.9 billion in 2010 (which was primarily due to our investment in Hana SK Card and Packet One Network); and acquisitions of long-term investment securities, which were Won 28.9 billion in 2008, Won 539.0 billion in 2009 and Won 146.9 billion in 2010.
additional frequency licenses.
~~Net~~ Cash Flows from Financing Activities.     Net cash used in financing activities in 2013 was Won ~~1,207.0~~573.2 billion, ~~in 2009 and Won 1,818.3 billion in 2010. Net~~net cash provided by financing activities in 2012 was Won ~~866.8~~585.3 billion and net cash used in ~~2008.~~financing activities in 2011 was Won 1,079.3 billion. Cash inflows from financing activities were Won 1,852.2 billion in 2013, Won 4,245.3 billion in 2012 and Won 1,401.9 billion in 2011. Such inflows were primarily driven by ~~issuances~~the issuance of ~~bonds,~~debentures, which provided cash of
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Won ~~1,307.7~~1,328.7 billion in ~~2008,~~2013, Won ~~1,114.9~~2,098.4 billion in ~~2009~~2012 and Won ~~148.3~~1,129.5 billion in ~~2010. Proceeds~~2011, proceeds fromlong-term borrowings, which provided cash of Won ~~510.6~~105.1 billion in ~~2008,~~2013, Won ~~9.9~~2,059.0 billion in ~~2009~~2012 and Won ~~108.0~~92.4 billion in ~~2010~~2011, and the issuance of hybrid bonds in 2013, which provided cash of Won 398.5 billion. The proceeds from ~~short-term~~long-term borrowings in 2012 consist primarily of borrowings pursuant to a syndicated loan in connection with our acquisition of a 21.05% equity stake in SK Hynix.
Cash outflows for financing activities were Won ~~469.0~~2,425.4 billion in ~~2008,~~2013, Won ~~348.5~~3,660.0 billion in ~~2009~~2012 and Won ~~289.2~~2,481.2 billion in ~~2010 also contributed to cash inflows from financing activities.~~2011. Cash outflows for financing activities included payment of dividends, repayments of current portion of long-term debt, repayment of long-term borrowings, repayment of ~~bonds payable,~~debentures, acquisition ~~and retirement~~ of treasury stock and repayment of ~~short term~~short-term borrowings, among other items. Payment of dividends were Won ~~682.5~~655.9 billion in ~~2008,~~2013, Won ~~681.5~~655.1 billion in ~~2009~~2012 and Won ~~680.0~~668.3 billion in ~~2010.~~2011. Repayments of current portion of long-term debt were Won ~~558.1~~161.6 billion in ~~2008,~~2013, Won ~~851.1~~102.7 billion in ~~2009~~2012 and Won ~~579.3~~224.6 billion in ~~2010.~~2011. Repayment of long-term borrowings were Won ~~193.4~~467.2 billion in ~~2008,~~2013, Won ~~111.6~~1,660.5 billion in ~~2009~~2012 and Won ~~235.3~~512.4 billion in ~~2010.~~ 2011.
Repayment of ~~bonds payable~~debentures were Won ~~60.2~~772.0 billion in ~~2009~~2013, Won 1,145.7 billion in 2012 and Won ~~365.1~~842.2 billion in ~~2010. The acquisition and retirement of treasury shares also~~2011. Decrease in short-term borrowings, net accounted for Won ~~62.1 billion, Won 28.9~~340.2 billion and Won ~~210.4~~61.4 billion of cash outflows for financing activities in ~~2008, 2009~~2013 and ~~2010,~~2012, respectively. ~~Repayment~~We recorded a net increase of short-term borrowings ~~also~~of Won 174.2 billion in 2011. Acquisition of treasury shares accounted for Won ~~1,007.6~~208.0 billion of cash outflows for financing activities in ~~2009~~2011. We did not acquire any treasury shares in 2013 and ~~Won 324.3 billion in 2010.~~
2012.
As of December 31, ~~2008,~~2013, we had total long-term debt (excluding current ~~portion and subscription deposits)~~portion) outstanding of Won ~~4,930.9~~5,010.4 billion, which included ~~bonds~~debentures in the amount of Won ~~4,074.4~~4,905.6 billion and bank and institutional borrowings in the amount of Won ~~856.5~~104.8 billion. The increase in our long-term debt in 2008 was primarily due to the inclusion of SK Broadband’s 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. As of December 31, ~~2009,~~2012, we had total long-term debt (excluding current ~~portion and subscription deposits)~~portion) outstanding of Won ~~5,125.0~~5,348.5 billion, which included ~~bonds~~debentures in the amount of Won ~~4,280.4~~4,979.2 billion and bank and institutional borrowings in the amount of Won 844.6 billion. As of December 31, 2010, we had total long-term debt (excluding current portion and subscription deposits) outstanding of Won 3,802.0 billion, which included bonds in the amount of Won 3,566.0 billion and bank and institutional borrowings in the amount of Won 236.0369.2 billion. The decrease in our ~~long- term~~long-term debt ~~in 2010~~as of December 31, 2013 was primarily due to ~~a significant~~the redemption of long-term borrowings and reclassification of long-term debt to current portion of ~~our~~ long-term ~~debt being classified as current portion as of December 31, 2010.~~debt. For a description of our long-term liabilities, see ~~notes 9, 10, 11 and 22~~note 17 of the notes to our consolidated financial statements.
In September 2006, we issued Korean Won-denominated corporate bonds in an aggregate principal amount of Won 200.0 billion with a maturity of ten years and an annual interest rate of 5.0%.
In July 2007, we issued U.S. dollar-denominated bonds in the principal amount of US$400 million with a maturity of twenty years and an annual interest rate of 6.625%. In November 2007, we issued Korean Won-denominated bonds in the principal amount of Won 200.0 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 200.0 billion with an annual interest rate of 5.00%, maturing in seven and ten years, respectively.
In January 2009, we issued notes in the principal amounts of Won 40.0 billion with a maturity of seven years and annual interest rates of 5.54%. In March 2009, we issued notes in the principal amount of Won 230.0 billion with a maturity of seven years and an annual interest rate of 5.92%.
In December 2011, we issued floating rate notes in the principal amount of US$250 million with a maturity of three years and an annual interest rate based on LIBOR plus 1.60% and SG$65 million with a maturity of three years and an annual interest rate based on Singapore Swap Offered Rate, or SOR, plus 1.20%. In December 2011, we issued two tranches of Korean Won-denominated bonds in the principal amounts of Won 110.0 billion and Won 190.0 billion with maturities of five and ten years, respectively, and annual interest rates of 3.95% and 4.22%, respectively.
In June 2012, we issued Swiss Franc-denominated bonds in the principal amount of CHF 300 million with a maturity of five years and an annual interest rate of 1.75%.
In August 2012, we issued three tranches of Korean Won-denominated bonds in the following principal amounts with the following maturities and annual interest rates: (i) a principal amount of Won 170.0 billion with a maturity of seven years and an annual interest rate of 3.24%, (ii) a principal amount of Won 140.0 billion with a maturity of ten years and an annual interest rate of 3.30% and (iii) a principal amount of Won 90.0 billion with a maturity of twenty years and an annual interest rate of 3.45%.
In November 2012, we issued U.S. dollar-denominated bonds in the principal amount of US$700 million with a maturity of 5.5 years and an annual interest rate of 2.13%.
In January 2013, we issued Australian Dollar-denominated bonds in the principal amount of AUD 300 million with a maturity of four years and an annual interest rate of 4.75%.
In March 2013, we issued floating rate notes in the principal amount of US$300 million with a maturity of 17 years and an annual interest rate based on LIBOR plus 0.88%.
In April 2013, we issued two tranches of Korean Won-denominated bonds in the following principal amounts with the following maturities and annual interest rates: (i) a principal amount of Won 230.0 billion with a maturity of ten years and an annual interest rate of 3.03% and (ii) a principal amount of Won 130.0 billion with a maturity of twenty years and an annual interest rate of 3.22%.
In February 2011, SK Telink issued Korean Won-denominated bonds in the principal amount of Won 50.0 billion with a maturity of three years and an annual interest rate of 4.86%. In November 2011, SK Telink issued Korean Won-denominated bonds in the principal amount of Won 50.0 billion with a maturity of three years and an annual interest rate of 4.62%.
In April 2011, SK Broadband issued Korean Won-denominated bonds in the principal amount of Won 290.0 billion with a maturity of three years and an annual interest rate of 4.53%. In September 2011, SK Broadband issued Korean Won-denominated bonds in the principal amount of Won 100.0 billion with a maturity of three years and an annual interest rate of 4.40%. In January 2012, SK Broadband issued three tranches of Korean Won-denominated bonds in the following principal amounts with the following maturities and annual interest rates: (i) a principal amount of Won 110.0 billion with a maturity of three years and an annual interest rate of 4.09%, (ii) a principal amount of Won 110.0 billion with a maturity of three years and an annual interest rate of 4.14% and (iii) a principal amount of Won 100.0 billion with a maturity of five years and an annual interest rate of 4.28%. In October 2012, SK Broadband issued two tranches of Korean Won-denominated bonds in the principal amounts of Won 130.0 billion and Won 120.0 billion with maturities of three and five years, respectively, and annual interest rates of 3.14% and 3.27%, respectively. In October 2013, SK Broadband issued U.S. dollar-denominated bonds in the principal amount of US$300 million with a maturity of five years and an annual interest rate of 2.875%.
As of December 31, ~~2010, substantially all~~2013, a substantial portion of our foreign currency-denominated long-term borrowings, which amounted to approximately ~~43.2%~~37.0% of our total outstanding long-term debt, including current portion and present value discount as of such date, was denominated in Dollars. However, substantially all of our revenue and operating expenses are denominated in Won. We generally pay for imported capital equipment in Dollars. Appreciation of the Won against the Dollar will result in net foreign ~~exchange~~currency transaction and translation gains, while depreciation of the Won against the Dollar will result in net foreign ~~exchange~~currency transaction and translation losses. Changes in foreign currency exchange rates will also affect our liquidity because of the effect of such changes on the amount of funds required for us to make interest and principal payments on our foreigncurrency-denominated ~~debt.~~
On April 7, 2009, we issued convertible notes in the principal amount of US$332,528,000 with a maturity of five years and an annual interest rate of 1.75%. The aggregate net proceeds from the offering was US$326,397,463. We are required to redeem the convertible notes held by the holders thereof who exercise their put option, at their principal amount on the date of the third anniversary from the issuance date. After the third anniversary of the issuance date, we may redeem the convertible notes at our option if the price of the shares of our common stock during a pre-determined period (translated into Dollars at the then prevailing exchange rate) exceeds the conversion price (translated into Dollars at the exchange rate of Won 1,383.40 to US$1.00) by 30%. As of June 1, 2011, the conversion price was Won 211,271 per share of our common stock at the exchange rate of Won 1,383.40 to US$1.00. If the conversion of convertible notes into shares would exceed the 49% limit on aggregate foreign ownership of our shares, we intend to make cash payments to the holders of the convertible notes in lieu of the shares of our common stock. 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. As of June 1, 2011, a total of 2,177,389 shares would be issued upon the exercise of the conversion rights by all of the holders of the convertible notes.
~~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 a91-day~~ ~~certificate of deposit yield plus~~

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0.25%. In September and November 2006, we issued Won-denominated corporate bonds, in each case, in an 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 KoreanWon-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 four and three years, respectively, and annual interest rates of 5.54% and3-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 5.92% and~~3-month~~ Euro Yen TIBOR plus 2.50%, respectively. In April 2009, we issued floating rate notes in the principal amounts of US$220,000,000 with a maturity of three years and an annual interest rate based on LIBOR plus 3.15%. 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 participated in the rights offering in proportion to our 43.4% equity interest in SK Broadband and purchased 47,187,105 shares of SK Broadband’s common stock at Won 5,000 per share. As a result, our equity stake in SK Broadband has increased from 43.4% to 50.6%.
In February 2011, SK Telink, our consolidated subsidiary, issued Korean Won-denominated bonds in the principal amount of Won 50 billion with a maturity of three years and an annual interest rate of 4.86%. In April 2011, SK Broadband, our consolidated subsidiary, issued Korean Won-denominated bonds in the principal amount of Won 290 billion with a maturity of three years and an annual interest rate of 4.53%.
We also have long-term liabilities in respect of subscription deposits received from subscribers, which stood at Won 4.8 billion at December 31, 2008, Won 5.5 billion at December 31, 2009 and Won 5.2 billion at December 31, 2010. 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 subscriber’s service is deactivated. We generally no longer collect these deposits from our subscribers. See “Item 4.B. Business Overview — Revenues, Rates and Subscription Deposits”.
~~Substantially all of our revenue and operating expenses are denominated in Won. We generally pay for imported capital equipment in Dollars.~~debt. For a description of swap or derivative transactions we have entered into, among other transactions, to mitigate the effects of such losses, see “Item 11. Quantitative and Qualitative Disclosures about Market ~~Risk”.~~
Risk.”
Capital Requirements
Historically, capital expenditures, repayment of outstanding debt and research and development expenditures have represented our most significant use of funds. In recent years, we have also increasingly dedicated capital resources to develop and invest in new 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.~~alliances, as well as our investment in SK Hynix. 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.~~

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benefits, as well as for the acquisition of additional frequency licenses.
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,~~cash flows from operating activities, as well as bank and institutional borrowings, and offerings of debt or equity in the domestic or international markets. We believe that these sources will be sufficient to fund our planned capital expenditures for ~~2011.~~2014. 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 ~~2008, 2009~~2013, 2012 and ~~2010:~~

Year Ended December 31,
2008 2009 2010
(In billions of Won)

CDMA Network(1) W 148 W 274 W 465
WCDMA Network 905 939 800
WiBro(2) 405 147 125
Others(3) 779 802 927

Total(4) W 2,237 W 2,162 W 2,317

2011:
   Year Ended December 31,
   2013    2012    2011
   (In billions of Won)
WCDMA Network
   ￦ 124.2    ￦ 294.7    ￦ 989.4
LTE Network(1)
   1,439.4       1,767.1       233.7
WiBro Network
   19.4    18.7    28.2
Others(2)
   1,296.1    1,313.8    1,709.3






Total
   ￦ 2,879.1    ￦ 3,394.3    ￦ 2,960.6






(1) ~~Includes our basic CDMA and CDMA EV-DO networks.~~
~~(2)~~ We commenced ~~WiBro~~LTE service in ~~May 2006.~~July 2011.
~~(3)~~ (2) Includes investments in infrastructure consisting of our basic CDMA and CDMA 1xEV/ DO networks, equipment necessary for the provision of data services, Wi-Fi networks and ~~marketing.~~
~~(4)~~ ~~Also, see note 7 of the notes to our consolidated financial statements.~~marketing, as well as investments in SK Broadband’s fixed-line networks.
We set our capital expenditure budget for aneach upcoming year on an annual basis. Our actual capital expenditures in ~~2008~~2013 were Won ~~2,236.9~~2,879.1 billion. Of such amount, we spent approximately Won ~~904.8~~124.2 billion on capital expenditures related to the upgrade and ~~expansion~~maintenance of our WCDMA network, Won ~~404.8~~1,439.4 billion related to ~~development~~expanding and ~~expansion~~enhancing the quality of our LTE network, Won 19.4 billion related to the upgrade of our WiBro network ~~Won 148.2 billion related to general upkeep of our CDMA network~~ and Won ~~779.1~~1,296.1 billion on other capital expenditures and projects. Our actual capital expenditures in ~~2009~~2012 were Won ~~2,162.4~~3,394.3 billion. Of such amount, we spent approximately ~~Won 939.3~~294.7 billion on capital expenditures related to the upgrade and ~~expansion~~maintenance of our WCDMA network, Won ~~146.8~~1,767.1 billion related to ~~development~~expanding and ~~expansion~~enhancing the quality of our LTE network, Won 18.7 billion related to the upgrade of our WiBro network ~~Won 273.5 billion related to general upkeep of our CDMA network~~ and Won ~~802.8~~1,313.8 billion on other capital expenditures and projects. Our actual capital expenditures in ~~2010~~2011 were Won ~~2,316.5~~2,960.6 billion. Of such amount, we spent approximately ~~Won 800.0~~989.4 billion on capital expenditures related to the upgrade and expansion of our WCDMA network, Won ~~124.9~~233.7 billion related to building our LTE network, Won 28.2 billion related to development and expansion of our WiBro network, ~~Won 465.0 billion related to general upkeep of our CDMA network~~ and Won ~~926.6~~1,709.3 billion on other capital expenditures and ~~projects.~~
projects, including Won 590.8 billion related to the general upkeep of our CDMA network.
We paid Won ~~650~~650.0 billion of the Won 1.3 trillion as the cost of the IMT-2000 license in March 2001 and ~~are required to pay~~paid the remainder of the license cost in annual installments for a five-year period from 2007 through 2011. ~~In addition, we~~We are required to pay the cost of our additional WCDMA license for 2 x 10 MHz of spectrum in the 2.1 GHz band that we acquired in May 2010 in annual installments of Won ~~17.7~~17.5 billion each year from 2012 through ~~2014.~~2014 and paid the first installment in 2012. We are also required to pay license fees for the additional frequency licenses in the 800 MHz and 1.8 GHz spectrums that we acquired in 2011. The license fee for the 30 MHz bandwidth in the 800 MHz spectrum is Won 416.5 billion, of which Won 208.3 billion was paid in 2011 with the remainder payable in annual installments from 2013 through 2015. The first installment payment was made in 2013. The license fee for the 20 MHz of bandwidth in the 1.8 GHz spectrum was Won 995.0 billion, of which Won 74.6 billion, Won 74.6 billion and Won 248.8 billion was paid in 2013, 2012 and 2011, respectively, and the remainder which was payable in annual installments through the end of the license period, has been waived in connection with our return of the right to use the 20 MHz bandwidth. The license fee for the 35 MHz of bandwidth in the 1.8 GHz spectrum was Won 1.08 trillion, of which Won 115.2 billion was paid in 2013, and the remainder is payable in annual installments through the end of the license period in 2021. In addition, we were reallocated 27 MHz of spectrum in the 2.3 GHz band for our WiBro service in March 2012. The license fee for such spectrum is Won 17.3 billion, of which Won 8.7 billion was paid in 2012, and the remainder is payable in annual installments from 2014 through 2016. For more information, see note 814 of the notes to our consolidated financial statements for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010.~~
~~In March 2005, we obtained a license from the Government to provide WiBro services and paid the related Won 117.0 billion WiBro license fee.~~ 2011, respectively.
We currently provide WiBro service to “hot zone” areas in 8493 cities. We are not planning to make significant additional capital expenditures in ~~2011~~2014 to ~~build and~~ expand or enhance our WiBro network ~~to more extensive hot zone areas in the 84 cities, and~~as we ~~may also make further~~believe we have made sufficient capital investments to ~~expand our~~provide quality WiBro ~~service~~services in the ~~future.~~“hot zone” areas we deem suitable for WiBro service. 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.

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In addition, we ~~are currently~~have been making capital expenditures to build more advanced networks based on ~~long term evolution, or~~ LTE ~~technology, with a goal of commencing~~technology. We commenced commercial LTE services byin July ~~2011.~~2011 and expanded our LTE network nationwide and launched our LTE multi-carrier technology in 2012. We ~~may~~launched our LTE-A service in June 2013 and our wideband LTE service in September 2013. We plan to continue to make ~~further~~ capital investments in 2014 to further expand and enhance our LTE network and further develop ~~and expand LTE services in the future.~~
related technologies.
We expect that our capital expenditure amount in ~~2011~~2014 will be ~~similar to~~less than that of ~~2010.~~2013. Our expenditures will be for a range of projects, including investments into improve our ~~backbone networks,~~LTE network and deploy our LTE-A service, investments to ~~improve~~maintain our WCDMA network-based products and services, ~~investments to build our LTE network,~~ 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 the development of our new businesses such as our B2B solutions and healthcare businesses, as well as initiatives 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 ~~2011~~2014 or change the timing and area of our capital expenditure spending from the estimates described above in response to market conditions or for other reasons. We may also make additional capital expenditure investments as opportunities arise. Accordingly, we periodically review the amount of our capital expenditures and may make adjustments based on the current progress of capital expenditure projects and market conditions. No assurance can be given that we will be able to meet any such increased expenditure requirements or obtain adequate financing for such requirements, on terms acceptable to us, or at all.
Repayment of Outstanding Debt.    As of December 31, ~~2010,~~2013, 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)

2011 W 1,434.5
2012 1,179.7
2013 749.3
After 2013 2,071.4
Year Ending December 31,
   Total
   (In billions of Won)
2014
   ￦ 1,065.5
2015
   560.0
2016
   623.8
2017 and thereafter
   3,873.6
We note that no commercial bank in Korea may extend credit (including loans, guarantees and purchase of bonds) in excess of ~~20%~~20.0% of its shareholders’ equity to any one borrower. In addition, no commercial bank in Korea may extend credit exceeding ~~25%~~25.0% of the bank’s shareholders’ equity to any one borrower and to any person with whom the borrower shares a credit risk.
Investments in New 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,~~February 2012, we ~~completed the acquisition of an additional 38.7%~~acquired a 21.05% equity stake in SK Broadband, Korea’s second-largest fixed-line operator, for approximately Won 1.1 trillion, increasing our total equity interest in SK Broadband to 43.4%. In July 2009, we purchased additional shares of SK Broadband’s common stock, and as a result, our current equity stake increased to 50.6%. We may make additional capital investments in order to develop SK Broadband’s business in line with our growth strategy.
In September 2009, we also acquired a leased-line business and related ancillary businesses of SK Networks for the acquisition price of Won 892.8 billion. In connection with such acquisition, we also assumed liabilitiesHynix, one of the ~~businesses in the amount of Won 611.4 billion.~~
~~In February 2010, we purchased shares of Hana SK Card Co., Ltd.~~world’s largest memory-chip makers by revenue, for aan aggregate purchase price of approximately Won ~~402 billion. As a result, we are a major shareholder of Hana SK Card Co., Ltd. with a 49% equity stake.~~
3.4 trillion, and became its largest shareholder.
In ~~July 2010,~~April 2014, we acquired a ~~27.2% equity~~controlling interest in ~~Packet One Network, or P1,~~Neo S Networks Co., Ltd., a ~~Malaysian 4G WiMAX Telecommunications company~~provider of residential and subsidiary of Green Packet Berhad, for US$101 million. In connection with P1’s plan to increase its capital, we announced in May 2011 our plan to make an additional investment of MYR50 million (approximately US$16.3 million)~~pro rata~~to our ownership interest. For a more detailed description of our investments in P1, see “Item 4. Information on the Company — Item 4.B. Business Overview — Global Business — Overseas Operations”.

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small business electronic security and other related alarm monitoring services.
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,~~From time to time, we ~~established trust funds with four Korean banks with a total funding of Won 1.3 trillion for the purpose of acquiring our~~acquire treasury shares atthrough open 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. In October 2004, we extended the terms of the trust funds (then with a balance of Won 982 billion) for another three years, and, in October 2007, we extended the terms of the trust funds (then with a balance of Won 982 billion) for an additional three years. In October 2010, upon expiration of the terms of the trust funds, our shares held by the trust funds were transferred to us and are currently held by us as treasury shares.
purchases. In a series of open market purchases in the period between ~~December 2, 2008~~July 21, 2011 and ~~December 30, 2008,~~September 28, 2011, we acquired ~~306,988~~1,400,000 shares of our common stock at an aggregate purchase price of Won ~~63.5~~208.0 billion. ~~In January 2009, we acquired 141,016~~We did not acquire any treasury shares ~~of our common stock at an aggregate purchase price of Won 28.9 billion. In a series of open market purchases~~ in ~~the period between July 26, 2010~~2012 and ~~October 20, 2010, we acquired 1,250,000 shares of our common stock at an aggregate purchase price of Won 210.4 billion. As~~2013.As of December 31, ~~2010, the total number~~2013, we held 9,809,375 shares of ~~our~~ common stock ~~outstanding was 71,094,999.~~
as treasury shares and 80,745,711 shares of common stock were outstanding.
Financing of Installment Payment Plans.    ~~Since April 2008, we have been offering~~We had offered installment payment plans for new handset purchases by our new or existing ~~subscribers.~~subscribers before Hana SK Card, which is 51.0% owned by Hana Financial Group and 49% owned by us, took over this financing from us in September 2010. Under ~~installment payment~~these 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, ~~2010,~~2013, short-term accounts receivable (other), net of allowance for doubtful accounts, related to this financing amounted to Won 51.9 billion and no long-term accounts receivable (other) were recorded. As of December 31, 2012, short-term accounts receivable (other), net of allowance for doubtful accounts, related to this financing amounted to Won 74.4 billion and no long-term accounts receivable (other) were recorded. As of December 31, 2011, short-term and long-term accounts receivable (other), each net of allowance for doubtful accounts, ~~and present value discount,~~related to this financing amounted to Won ~~2,534.3~~541.3 billion and Won ~~527.1~~5.4 billion, ~~respectively, compared to Won 2,075.9 billion~~respectively.These decreases in 2013 and ~~Won 761.7 billion, respectively, as of December 31, 2009, and Won 1,346.1 billion and Won 572.1 billion, respectively, as of December 31, 2008. These increases~~2012 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. Since September 2010,~~because Hana SK Card ~~which is 51% owned by Hana Financial Group and 49% owned by us,~~ has taken over this financing from us since September 2010, reducing the amount of our capital resources required to finance these installment payment plans.
Severance Payments.    The defined benefit obligation, which is the total accrued and unpaid retirement and severance benefits for our employees, as of December 31, ~~2010 of~~2013 was Won ~~62.9 billion~~74.2 billion. This amount was reflected in our consolidated financial statements as a liability, which is net of deposits with insurance companies totaling Won ~~96.3~~238.3 billion to fund a portion of the employees’ severance indemnities.
Also see “Item 6.D. Employees — Employee Stock Ownership Association and Other Benefits” and note ~~2(q)~~21 of the notes to our consolidated financial statements.
Dividends.    Total cash outflows for payments of ~~cash~~ dividends amounted to Won ~~682.5~~655.9 billion in ~~2008,~~2013, Won ~~681.5~~655.1 billion in ~~2009~~2012 and Won ~~680.0~~668.3 billion in ~~2010.~~
2011.
In ~~March 2011,~~April 2014, we distributed annual dividends at Won 8,400 per share to our shareholders for an aggregate payout amount of Won ~~597.2~~595.9 billion.

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Contractual Obligations and Commitments
The following summarizes our contractual cash obligations at December 31, ~~2010,~~2013, and the effect such obligations are expected to have on liquidity and cash flow in future periods:

Payments Due by Period(1)
Less

Than
After
Total 1 Year 1-3 Years 4-5 Years 5 Years
(In billions of Won)

Bonds
Principal W 4,580.9 W 876.7 W 1,741.0 W 837.7 W 1,125.5
Interest 976.9 194.8 247.6 154.0 380.5
Long-term borrowings
Principal 748.3 512.4 143.2 70.2 22.5
Interest 41.5 19.7 13.5 7.1 1.2
Capital lease obligations
Principal 105.5 45.5 44.7 15.3 —
Interest 8.5 4.6 3.5 0.4 —
Operating leases 12.9 6.5 6.4 — —
Facility deposits 10.3 5.1 — — 5.2
Derivatives 30.2 15.4 14.8 — —
Other long-term payables(2)
Principal 223.1 170.0 35.4 17.7 —
Interest 18.5 12.2 5.7 0.6 —
Short-term borrowings 529.6 529.6 — — —
Total contractual cash obligations W 7,286.2 W 2,392.5 W 2,255.8 W 1,103.0 W 1,534.9
   Payments Due by Period(1)
   Total    Less
Than
1 Year    1-3 Years    4-5 Years    After
5 Years
   (In billions of Won)
Bonds

Principal
   ￦ 5,966.7       ￦ 1,024.1       ￦ 1,140.0       ￦ 2,113.9       ￦ 1,688.7
Interest
   1,164.8       206.9       297.2       224.1       436.6
Long-term borrowings

Principal
   132.9       22.0       39.9       28.4       42.6
Interest
   10.3       2.1       3.7       2.3       2.2
Capital lease obligations

Principal
   23.3       19.4       3.9       —       —
Interest
   0.8       0.7       0.1       —       —
Operating leases

Facility deposits
   2.9       0.5       —       —       2.4
Derivatives
   133.5       31.8       21.2       79.1       1.4
Other long-term payables(2)
      0.0       0.0       0.0       0.0
Principal
   1,107.7       207.6       310.9       235.7       353.5
Interest
   122.4       27.7       45.4       29.6       19.7
Short-term borrowings
   260.0       260.0       —       —       —










Total contractual cash obligations
   ￦ 8,925.3    ￦ 1,802.8    ￦ 1,862.3    ￦ 2,713.1    ￦ 2,547.1










(1)
We are contractually obligated to make severance payments to eligible employees we have employed for more than one year, upon termination of their employment, regardless of whether such termination is voluntary or
involuntary. Accruals for severance indemnities are recorded based on the amount we would be required to pay in the event the employment of all our employees were to terminate at the balance date. However, we have not yet estimated cash flows for future periods. Accordingly, payments due in connection with severance indemnities have been excluded from this table.
(2) Related to acquisition of ~~IMT-2000 and WCDMA~~frequency licenses. See note 816 of the notes to our consolidated financial statements.
See note 2236 of the notes to our consolidated financial statements for details related to our other commitments and contingencies.

~~U.S. GAAP Reconciliation~~Critical Accounting Policies, Estimates And Judgments
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 32 and 33 of our notes to consolidated financial statements.
Our net income in 2008 under U.S. GAAP is lower than net income under Korean GAAP by Won 20.6 billion, primarily due to the differing treatment of valuation of currency and interest rate swaps and loss on impairment of goodwill under U.S. GAAP, partially offset by differing treatment in loss on impairment of investment securities, the reversal of goodwill amortization, scope of consolidation and reclassification of our investment in the common stock of SK C&C under U.S. GAAP. Our net income in 2009 under U.S. GAAP is higher than net income under Korean GAAP by Won 301.1 billion, primarily due to the differing treatment of unrealized gains or losses on the valuation of convertible bonds payable, the reversal of goodwill amortization and valuation of currency and interest rate swap, partially offset by remeasuring our previously held equity interest in SK Broadband at its acquisition-date

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fair value and reclassification of our investment in the common stock of SK C&C under U.S. GAAP. Our net income in 2010 under U.S. GAAP is higher than net income under Korean GAAP by Won 99.4 billion, primarily due to the reversal of goodwill amortization, partially offset by differing treatment of valuation of currency and interest rate swaps.
Our shareholders’ equity as of December 31, 2008, 2009 and 2010 under U.S. GAAP is higher than under Korean GAAP by Won 737.6 billion, Won 1,916.1 billion and Won 2,094.1 billion, respectively, in each case, primarily due to increases from reversal of goodwill amortization, the differing treatment of additional equity investment in subsidiaries and tax effect of the reconciling items, partially offset by decreases from the differing treatment of nonrefundable activation fees for wireless service, goodwill impairment and scope of consolidation.
~~New Accounting Pronouncements under U.S. GAAP~~
In October 2009, guidance on Multiple-Deliverable Revenue Arrangements, which addresses how revenues should be allocated among all products and services included in our bundled sales arrangements, was newly issued. It establishes a selling price hierarchy for determining the selling price of each product or service, with vendor-specific objective evidence at the highest level, third-party evidence at the intermediate level, and a best estimate at the lowest level. It eliminates the residual method as an acceptable allocation method, and requires the use of the relative selling price method as the basis for allocation. It also significantly expands the disclosure requirements for such arrangements, including, potentially, certain qualitative disclosures. The requirements effective for the beginning of January 1, 2011 are not expected to have a material effect on our consolidated financial statements.
In January 2010, accounting guidance on Fair Value Measurements and Disclosures — Improving Disclosures about Fair Value Measurements, which required new disclosures and explanations for transfers of financial assets and liabilities between levels in the fair value hierarchy was revised. The new guidance clarifies that fair value measurement disclosures are required for each class of financial asset and liability, which may be a subset of a caption in the consolidated balance sheets, and those disclosures should include a discussion of inputs and valuation techniques. For financial assets and liabilities subject to lowest-level measurements (Level 3), the guidance further requires that we separately present purchases, sales, issuances, and settlements instead of netting these changes. The requirements effective for the beginning of January 1, 2010 did not have a material impact on our consolidated financial statements, and the portions of the guidance which are effective January 1, 2011 are not expected to have a material effect on our consolidated financial statements.
In July 2010, the accounting guidance for Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses were revised. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are effective for the fiscal year ended December 31, 2010, while the disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter of 2011. The disclosure requirements effective for the fiscal year ended December 31, 2010 did not have a material effect on our consolidated financial statements. The requirements effective for the first fiscal quarter of 2011 are not expected to have a material effect on our consolidated financial statements.
~~Significant Changes in Korean GAAP~~
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 parent’s 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. The amended SKAS No. 25, “Consolidated Financial Statements” was applied retroactively during the year ended December 31, 2008.
~~Transition to IFRS Starting in 2011~~
In March 2007, the Government announced that all companies listed on the Korea Exchange, including us, will be required to comply with the International Financial Reporting Standards (“IFRS”) adopted for use in Korea

69
starting January 1, 2011, with a transition date of January 1, 2010. In addition, for our SEC filing requirements we are required to comply with IFRS as issued by the International Accounting Standard Board (“IASB”). Starting in the first quarter of 2011, we currently prepare and report our financial statements under IFRS as adopted for use in Korea and publish such financial statements on the website of the Financial Supervisory Service of Korea as required under the applicable regulations and listing rules of the Korea Exchange. For our continued SEC reporting obligations, we will prepare and report our financial statements under IFRS as adopted for use in Korea and IFRS as issued by the IASB.
~~Critical Accounting Policies, Estimates And Judgments~~
~~Our consolidated financial statements are prepared in accordance with Korean GAAP.~~IFRS. The preparation of ~~these~~the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments including those related to ~~revenue recognition,~~ allowances for doubtful accounts, ~~inventories,~~fair value measurements of financial instruments, estimated useful lives and impairment of ~~property and equipment, intangible~~long-lived assets, ~~investments, employee stock option compensation~~impairment of goodwill, provisions, deferred revenue relating to initial subscription fees, retirement benefit plans and income taxes. We base our estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies, the following may involve a higher degree of judgment or complexity:
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 the aging of accounts receivables at the end of the period, past customer default experience and ~~taking into account current collection trends that are expected~~their credit status, and economic and industrial factors. Allowance for doubtful accounts amounted to ~~continue.~~Won 268.6 billion in 2012 and Won 296.5 billion in 2013. As there was no significant change in our assumptions and judgments including on the aging of accounts receivables, past customer default experience and credit status, and economic and industrial factors, there was no significant change in the percentage of allowance for doubtful accounts as of December 31, 2013 compared to the prior year. If economic or specific industry trends worsen beyond our estimates, ~~we increase our~~the allowances for doubtful accounts ~~by recording additional expenses.~~
we have recorded may be materially adjusted in the future.
~~Derivative~~Fair Value Measurement of Financial Instruments
~~We record rights and obligations arising from derivative instruments as~~
Subsequent to initial recognition, available-for-sale financial assets and ~~liabilities, which~~derivative financial assets 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~~with any gains or losses arising on remeasurement recognized in profit for the ~~hedging instruments are recorded as accumulated~~period or other comprehensive ~~income (loss)~~income. When measuring fair value, we use quoted prices in active markets to the extent such prices exist. The fair values of financial instruments, including derivative instruments, that are not traded in an active market are determined using valuation techniques that require management’s estimates of future cash flows and ~~credited or charged~~discount rates. Our management uses its judgment to ~~operations~~select a variety of methods and makes assumptions that are mainly based on market conditions existing at the ~~time the hedged transactions affect earnings, and the ineffective portions~~end of each reporting period. See note 4 of the ~~gains or losses are credited or charged immediately~~notes to ~~operations.~~
our consolidated financial statements.
Estimated Useful Lives of Long-lived Assets
We estimate the useful lives of long-lived assets in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period. The useful lives are estimated at the time ~~the~~a long-lived asset is acquired and are based on historical experience with similar assets as well as taking into account anticipated technological or other changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization expense in future periods.
See note 4 of the notes to our consolidated financial statements.
Impairment of Long-lived Assets Including the ~~WCDMA~~ Frequency Usage ~~Right~~Rights
Long-lived assets generally consist of property, plant and equipment and intangible assets. We review our depreciation and amortization methods, estimated useful lives and residual values of long-lived assets ~~for impairment whenever events or changes in circumstances indicate that~~at the ~~carrying amount~~end 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.~~reporting period. An impairment loss ~~would be considered~~is recognized when ~~estimated undiscounted future net cash flow expected to result from~~ the ~~use of the asset and its eventual disposition are~~asset’s recoverable amount is less than its carrying amount. The recoverable amount of a long-lived asset is the greater of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The recoverable amounts of cash-generating units are determined based on value-in-use calculations, which require the use of estimates. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the ~~fair value of the assets.~~

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estimated recovery value.
Our intangible assets include ~~the WCDMA~~our frequency usage ~~right,~~rights, which ~~has a~~have contractual ~~life~~lives of six to 15 years and isare amortized from the date commercial service is initiated through the end of ~~its~~their contractual ~~life, which is December 15, 2015. We started to amortize this~~lives. Because the use of frequency usage ~~right on December 29, 2003. Because WCDMA~~rights 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~~rights 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 recoverable amounts for ~~the WCDMA~~our frequency usage ~~right.~~rights. The results of our review using the testing method described above ~~did not indicate any need to impair the WCDMA~~resulted in no impairment of our frequency usage ~~right for 2010.~~
~~Provision for Point Program and Handset Subsidy~~
~~For its marketing purposes, we grant Rainbow Points and Point Box Points~~rights in 2013. See note 16 of the notes to our ~~subscribers based on their usage~~consolidated financial statements.
Impairment of ~~our services. Points are provided based on~~Goodwill
Goodwill is measured as the ~~historical usage experience~~excess of the sum of: (1) the consideration transferred, (2) the amount of any non-controlling interests in the acquiree and ~~our marketing policy. Such provision~~(3) the fair value of the acquirer’s previously held equity interest in the acquiree (if any), over the net fair value of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is ~~recorded as accrued expenses or other non-current liabilities in accordance with the expected points usage duration from~~not depreciated, but tested for impairment at the end of each annual reporting period or whenever there is an indication that the ~~reporting period. Points expire after 5 years~~asset may be impaired. Goodwill is carried at cost less accumulated impairment losses and ~~all unused points~~the impairment losses are ~~expired on their fifth anniversary.~~
not reversed. For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires our management to estimate the future cash flows expected related to the respective cash-generating unit and the determination of an appropriate discount rate in order to calculate present value. See note 15 of the notes to our consolidated financial statements.
Provisions for Handset Subsidy and Restoration
We provide handset subsidies to ~~the~~ subscribers who purchase handsets on an installment basis. ~~Such provision was recorded as accrued expenses or other non-current liabilities in accordance with~~When the ~~expected points when~~subscribers agree to use our services for a predetermined service period and purchase handsets on an installment basis, the subsidies are ~~paid.~~
~~Impairment of Investment Securities~~
~~When~~paid every month over the ~~declines~~installment period and we estimate a provision for handset subsidies to be paid, which is recognized as commissions paid in ~~fair value of individualavailable-for-sale~~operating expenses at the time telecommunication service contracts are made. Our provision for handset subsidies was Won 54.3 billion in 2013 compared to Won 353.8 billion in 2012 and~~held-to-maturity~~ ~~securities below their acquisition cost~~ Won 762.9 billion in 2011. Our provision for handset subsidies has decreased as we gradually ceased providing handset subsidies to subscribers.
We estimate restoration costs required to restore leased premises on which our cell sites and switching equipment are ~~other than temporary and there is objective evidence of impairment, the carrying value~~located after termination of the ~~securities is adjusted to their fair value with~~leases. These restoration costs are calculated on the ~~resulting valuation loss charged to~~basis of the identified costs for the current ~~operations.~~
~~As part of this review,~~financial year, extrapolated into the ~~investee’s 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~~management’s best estimates of future trends in prices, inflation, and other factors, and are discounted to present value at a risk-adjusted rate specifically applicable to the ~~market value~~relevant liability. Forecasts of ~~an equity security~~estimated future provisions are revised in light of future changes in business conditions or ~~a debt security~~technological requirements. See note 19 of the notes to our consolidated financial statements.
Deferred Revenue relating to Initial Subscription Fees
We charge initial subscription fees related to activation of many of our services, which are deferred and recognized as revenue over the expected terms of customer relationships. Our estimate of expected terms of customer
relationships is based on the historical retention rate, which 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~~differ in the ~~evaluation~~future. If the management’s estimation is amended, it may cause significant differences in the timing of ~~declines~~revenue recognition and amount recognized.
Retirement Benefit Plans
We have defined retirement benefit plans. The costs of providing benefits under the plans are determined using actuarial valuation methods that require management assumptions on discount rates, expected rates of salary increases and expected rates of returns on plan assets. These assumptions involve critical uncertainties due to the long-term nature of the retirement benefit plans. Due to changing market and economic conditions, the underlying key assumptions may differ from actual developments and may lead to significant changes in ~~value of individual investments. The estimates~~our defined retirement benefit plans. We immediately recognize all actuarial gains and losses arising from defined retirement benefit plans in retained earnings. If the estimated average discount rates by actuarial assumptions used in these valuations were increased by ~~management~~1%, then the estimated defined benefit obligations would have decreased by Won 22.8 billion, or 7.3% in total. If the expected rates of salary increase were increased by 1%, then the estimated defined benefit obligations would have increased by Won 25.3 billion, or 8.1% in total. Defined benefit liabilities were Won 74.2 billion in 2013, Won 86.5 billion in 2012 and Won 85.9 billion in 2011. Defined benefit liabilities in 2013 decreased by Won 12.3 billion compared to ~~evaluate declines in value can be impacted~~2012 due to an increase 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 condition0.4% of the ~~economy~~estimated average discount rate and ~~its impact on~~a decrease by 0.88% of the ~~capital markets.~~
expected rates of salary increase. See note 21 of the notes to our consolidated financial statements.
Income Taxes
We are required to estimate the amount of tax payable or refundable for the current year and the deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial statements or tax returns. This process requires management to make assessments regarding the timing and probability of the tax impact. Actual income taxes could vary from these estimates due to future changes in income tax law or unpredicted results from the final determination of each year’s liability by taxing authorities.
We believe that the accounting estimate related to ~~establishing~~assessment of deferred tax ~~valuation allowances~~assets for recoverability is a “critical accounting estimate” because ~~(i)~~(1) it requires management to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning opportunities, and ~~(ii)~~(2) the impact that changes in actual performance versus these estimates could have on the realization of tax benefits as reported in our results of operations could be material. Management’s assumptions require significant judgment because actual performance has fluctuated in the past and may continue to do so.

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As of December 31, 2013, 2012 and 2011, unused tax loss carryforwards of Won 669.9 billion, Won 792.8 billion and Won 836.8 billion, respectively, were not recognized as deferred tax assets because we did not believe that their realization would be probable. The decrease of Won 122.9 billion in unrecognized tax loss carryforwards in 2013 compared to 2012 and the decrease of Won 44.0 billion in 2012 compared to 2011 were primarily due to the expiration of unrecognized tax loss carryforwards. See note 30 of the notes to our consolidated financial statements.
Item 5.C. Research and Development, Patents and Licenses, etc.
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:

As of and for the Year Ended December 31,
2008 2009 2010
(In billions of Won)

Internal R&D Expenses W 226.7 W 236.3 W 270.4
External R&D Expenses 73.0 56.9 81.6
Total R&D Expenses W 299.7 W 293.2 W 352.0
   As of and for the Year Ended
December 31,
   2013    2012    2011
   (In billions of Won)
Internal R&D Expenses(1)
   ￦ 352.4       ￦ 304.6       ￦ 271.4
External R&D Expenses
   —       4.0       20.0






Total R&D Expenses
   ￦ 352.4       ￦ 308.6       ￦ 291.4






(1) Consists of research and development costs that are expensed as incurred and costs that are amortized during the respective period.
Our total research and development expenses were approximately 2.1% in ~~2008, 2.0%~~2013, 1.9% in ~~2009~~2012 and ~~2.3%~~1.8% in ~~2010,~~2011, respectively, of operating ~~revenue.~~
revenue and other income.
Our external research and development expenses have been influenced by the annual recommendations made by the Ministry of Knowledge Economy ~~which makes annual recommendations~~of the previous Government concerning our minimum level of contribution to the Government-run Fund for Development of Information Telecommunications. We were required to contribute 0.75% of our revenues attributable to our key communications services (excluding revenues from telecommunications service using an allotted frequency if the consideration for such allotted frequency has been paid) for 2011. We are no longer required to make any contributions to the Fund for Development of Information Telecommunications in light of the decrease in revenues from our CDMA network and ~~Telecommunications. The minimum level~~did not make any contribution to this fund in 2012 and 2013. Under the new Government, the MSIP supervises this Fund for Development of ~~contribution recommended by the Ministry of Knowledge Economy was 0.75%~~Information Telecommunications but has yet to make any recommendation for ~~each of 2008, 2009 and 2010.~~2013. We are not obligated to make donations to any other external research ~~institutes.~~
institute. See “Item 4.B. Business Overview — Law and Regulation — Mandatory Contributions and Obligations.”
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, LTE-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. We spent approximately Won ~~270.4~~352.4 billion on internal research and development in ~~2010.~~
2013.
Our internal research and development activity is centered at a research center withstate-of-the-art facilities and equipment established in January 1999 in Bundang-gu, ~~Sungnam-si, Kyunggi-do,~~Seongnam-si, Gyeonggi-do, Korea. To more efficiently manage our research and development resources, our research and development center is organized into ~~four~~five core areas:
•
Thenetwork technology R&D center,which has pioneered the development of 3G, 3.5G and ~~3.5G~~LTE technologies. This center is developing next-generation network technologies, as well as core network equipment and new services. Current projects include the ~~development~~improvement of LTE technology and the next generation transmission technology and the development of data femtocell and hybrid access points to improve network coverage, as well as location-based services and mobile voice blogging service.
•
The~~platform~~information technology R&D center,which is responsible for developing open platform, media and convergence technologies. Current projects include the development of wireless personal area network technologies, such as ZigBee technology and radio-frequency identification technology, as well as 3D conversion and electronic paper technologies.
• ~~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; developing new technologies relating to IT security, public cloud services, B2B solutions and next-generation IT technologies, as well as developing new services based on customer needs. ~~Specifically, this center has been developing an array of value-added services, including T Store, T-Map and T-Smart Wallet services and related mobile applications.~~
•
The~~corporate~~fusion technology R&D center, which is responsible for developing core semiconductor technology, smart storage system technology and quantum technology, including short-distance cryptographic communication technology.
•
Theemerging technology R&D center, which is responsible for developing base technologies such as high-quality voice recognition, sentence generation and other new technologies as well as future technologies such as core video and imaging technology and platform technology related to biographical data.
•
Thehealth care group,which is responsible for developing ~~industry productivity enhancement solutions~~diagnostic instruments and ~~otherbusiness-to-business~~ ~~services and other new technologies. Current projects include~~

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~~the development of intelligent video security system, bio-informatics~~chemicals by combining information technology and ~~bilateral encoded telecommunication technology.~~health care technology and analyzing computer data relating to health information as well as developing core technologies for medical devices.
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 Government’s effort to commercialize CDMA-based, WCDMA-based, LTE-based and WiBro technology. We do not independently own intellectual property rights in the technologies or products developed by any external research institute.
Item 5.D. Trend Information
These matters are discussed under Item 5.A. and Item 5.B. above where relevant.
Item 5.E. Off-Balance Sheet Arrangements
None.
Item 5.F. Tabular Disclosure of Contractual Obligations
These matters are discussed under Item 5.B. above where relevant.
Item 5.G. Safe Harbor
These matters are discussed under “Forward-Looking Statements.”
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Item 6.A. Directors and Senior Management
Our board of directors has ultimate responsibility for the management of our affairs. Under our articles of incorporation, our board is to consist of at least three but no more than twelve directors, more than half of whom must be independent non-executive directors. We currently have a total of 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 Independent Director Nomination Committee. Independent non-executive directors are appointed from among those candidates recommended by the Independent Director Nomination Committee.
The term of offices for directors is until the close of the third annual general shareholders meeting convened after he or she commences his or her term. Our directors may serve consecutive terms. Our shareholders may remove them from office by a resolution at a general meeting of shareholders adopted by the holders of at leasttwo-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.

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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,~~65, Eulji-ro, Jung-gu, Seoul100-999, 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:

Other

Principal

Date of
Director
Expiration
Directorships
Business
Name
Birth Since of Term Position and Positions Experience

Sung Min Ha Mar. 24, 1957 2011 2014 President, Co-Chief Executive Officer & Representative Director — Head of Mobile Network Operator Business, SK Telecom; CFO & Head of Strategic Planning Office, SK Telecom
Jin Woo So Dec. 20, 1961 2011 2014 Co-Chief Executive Officer & Representative Director; Head of Platform Business — Head of Convergence & Internet Business, SK Telecom; Head of Global Business, SK Telecom; CEO, SK Communications
Name
   Date of Birth    Director
Since    Expiration
of Term
Position

Other Principal
Directorships and
Positions

Business Experience
Sung Min Ha
   Mar. 24, 1957       2011       2017       President and Chief Executive Officer    Chairman of the SK SUPEX Council Strategy Committee    Head of Mobile Network Operator Business, SK Telecom; CFO & Head of Strategic Planning Office, SK Telecom
Dong Seob Jee
   Jul. 7, 1963       2012       2015       Head of Corporate Vision Department    —    Head of Corporate Strategy Department, Head of Marketing Strategy Department, and Head of MNO Strategy Department, SK Telecom
Dae Sik Cho
   Nov. 27, 1960       2013       2016       Executive Director    Chief Executive
Officer, SK Holdings    Chief Finance Officer, Head of Finance Division and Risk Management & Corporate Auditing Office, SK Holdings; Head of Business Management Office, SK Holdings
Our current non-standing directors are as set forth below:

Other

Principal

Date of
Director
Expiration
Directorships
Business
Name
Birth Since of Term Position and Positions Experience

Jae Won Chey May 16, 1963 2009 2012 Chairman of the Board of Directors Chairman, SK Networks; Vice Chairman & CEO, SK Holdings; Vice Chairman & CEO, SK Gas Vice Chairman & CEO, SK E&S Executive Vice President, Head of Corporate Center, SK Telecom; Executive Vice President, Head of Strategic Support Division, SK Telecom
Hyun Chin Lim Apr. 26, 1949 2009 2012 Independent Non-executive Director Professor, College of Social Science, Seoul National University President, Korea Sociological Association; Dean, College of Social Science, Seoul National University; President, Korean Association of NGO Studies
Dal Sup Shim Jun. 27, 1950 2010 2013 Independent Non-executive Director Senior Visiting Research Fellow, Institute for Global Economics Auditor, Korea Technology Investment Corp.; Auditor, Korea Credit Guarantee Fund; Financial Attaché, Korean Embassy in the United States; Audit Officer, Korea Customs Service; Director General for Customs & Tariff, Ministry of Finance and Economy
Rak Young Uhm Jun. 23, 1948 2011 2014 Independent Non-executive Director Visiting Professor Chung-Ang University Independent Non-executive Director, Tong Yang Insurance Co., Ltd., Non-Standing Director KOTRA; President, Korea Development Bank; Vice Minister, Ministry of Finance and Economy
Jay Young Chung Oct. 15, 1944 2011 2014 Independent Non-executive Director Honorary Professor, Sung Kyun Kwan University Chief, Asia-Pacific Economic Association; Vice President, Sung Kyun Kwan University; Independent Non-executive Director, POSCO
Jae Ho Cho Jan. 18, 1955 2011 2014 Independent Non-executive Director Professor, College of Business Administration, Seoul National University Director, Kyung Hee Foundation; Chair, Sub-committee for Capital Market Development, Financial Services Commission; Visiting Professor, Graduate School of Economics, University of Tokyo

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Name
Date of Birth Director
Since Expiration
of Term
Position

Other Positions

Business Experience
Dae Shick Oh
Nov. 28, 1954    2013    2016
Independent
Non-executive Director
Advisor, Bae, Kim & Lee LLC Outside Director, CJ Corporation, Head of Seoul Regional Tax Office; Head of Investigation Department, Korea National Tax Service
Hyun Chin Lim
Apr. 26, 1949    2012    2015    Independent Non-executive Director Professor, College of Social Science, Seoul National University President, Korea Sociological Association; Dean, College of Social Science, Seoul National University; President, Korean Association of NGO Studies
Jay Young Chung
Oct. 15, 1944    2011    2017    Independent Non-executive Director Honorary Professor, Sung Kyun Kwan University Chief, Asia-Pacific Economic Association; Vice President, Sung Kyun Kwan University; Independent Non-executive Director, POSCO
Jae Hoon Lee
Sep. 26, 1955    2014    2017    Independent Non-executive Director President, Association of Future Strategy Forum on Energy & Resources Development Vice Minister, Ministry of Knowledge Economy; Vice Minister, Ministry of Commerce, Industry and Energy; Assistant Minister, Ministry of Commerce, Industry and Energy
Jae Hyeon Ahn
Feb. 2, 1961    2014    2017    Independent Non-executive Director Vice President, College of Business, KAIST Dean, College of Information and Media Management, KAIST; President, Korea Media Management Association; Senior Technical Staff Member, AT&T Bell Labs
Involvement in Certain Legal Proceedings
In January 2012, Seoul Central Prosecutors’ Office indicted Mr. Jae Won Chey, our director at the time, and Mr. Tae Won Chey, the Chairman and Chief Executive Officer of SK Holdings, on charges of embezzlement and criminal breach of fiduciary duty alleging that they misappropriated Won 46.85 billion of our corporate funds and additional funds of our affiliates. On February 27, 2014, the Supreme Court of Korea confirmed the Seoul High Court’s decision, sentencing Mr. Jae Won Chey and Mr. Tae Won Chey to prison terms of three and a half years and four years, respectively.
Item 6.B. Compensation
The aggregate of the remuneration paid and in-kind benefits granted to the directors ~~(both~~(all standing directors, who also serve as our executive officers, and non-standing directors) during the year ended December 31, ~~2010~~2013 totaled approximately Won ~~3.7~~3.3 billion.
This amount included Won 635 million in salary and Won 631 million in bonus paid to Mr. Sung Min Ha, our President and Chief Executive Officer, and Won 308 million in salary and Won 286 million in bonus paid to Mr. Dong Seob Jee, head of our corporate vision department.
Remuneration for the directors is determined by shareholder resolution. 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 resolution. The regulation provides for monthly salary, performance bonus, severance payment and fringe benefits. The amount of performance bonuses is independently decided by a resolution of the board of directors.
In March 2002, pursuant to 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, which have all expired without being exercised. Since 2003, none of our directors and officers have been granted options to purchase our common shares.
Item 6.C. Board Practices
For information regarding the expiration of each director’s term of appointment, as well as the period from which each director has served in such capacity, see the table set out under “Item 6.A. Directors and Senior Management”, above.

Termination of Directors, 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~~ in accordance with applicable rules. The members of the audit committee are appointed annually by a resolution of the ~~board~~general meeting of ~~directors.~~shareholders. They are required to:
examine the agenda for the general meeting of shareholders;
examine financial statements and other reports to be submitted by the board of directors to the general meeting of shareholders;
• ~~examine the agenda for the general meeting of shareholders;~~
• ~~examine financial statements and other reports to be submitted by the board of directors to the general meeting of shareholders;~~
• ~~review the administration by the board of directors of our affairs; and~~
• ~~examine the operations and asset status of us and our subsidiaries.~~
review the administration by the board of directors of our affairs; and
examine the operations and asset status of us and our subsidiaries.
In addition, the audit committee must appoint independent auditors to examine our financial statements. An audit and review of our financial statements by independent auditors is required for the purposes of a securities report. Listed companies must provide such report on an annual, semi-annual and quarterly basis to the ~~Financial Services Commission of Korea, or the~~ FSC and the KRX KOSPI Market.
Our audit committee is composed of ~~four~~three independent non-executive directors: ~~Dal Sup Shim,~~Dae Shick Oh, Hyun Chin Lim and Jae ~~Ho Cho and Jay Young Chung,~~Hyeon Ahn, each of whom is financially literate and independent under the rules of the ~~New York Stock Exchange~~NYSE as applicable. The board of directors has determined that ~~Jae Ho Cho~~Dae Shick Oh is an “audit committee financial expert” as defined under the applicable rules of the SEC. See “Item 16A. Audit Committee Financial ~~Expert”.~~

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Expert.”
Independent Director Nomination Committee
This committee is devoted to recommending independent non-executive directors for the board of directors. The objective of the committee is to help promote fairness and transparency in the nomination of candidates for these positions. The board of directors decides from time to time who will comprise the members of this committee. The committee is comprised of ~~two~~one executive ~~directors~~director 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 one executive ~~officer~~director and ~~three~~four independent directors.

Compensation Review Committee
This committee oversees our overall compensation scheme for top-level executives and directors. It is responsible for reviewing both the criteria for and level of compensation. It is comprised of ~~all~~three independent directors, Hyun Chin Lim, ~~Dal Sup Shim, Rak Young Uhm,~~ Jay Young Chung and Jae ~~Ho Cho.~~
Hoon Lee.
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 one executive ~~officer~~director and ~~three~~four independent directors.
Item 6.D. Employees
The following table sets forth the numbers of our regular employees, temporary employees and total employees as of the dates indicated:

Regular
Temporary

Employees Employees Total

December 31, 2008 8,964 1,662 10,626
December 31, 2009 9,298 1,416 10,714
December 31, 2010 15,490 4,653 20,143
The number of our employees increased in 2010 primarily due to the establishment in 2010 of Service Ace Co., Ltd., Service Top Co., Ltd., and Network O&S Co., Ltd., our wholly-owned subsidiaries engaged in customer service and network maintenance. Employees of these subsidiaries were previously employed by third-party outsourcing companies.

   Regular
Employees    Temporary
Employees    Total
December 31, 2011
   15,480       5,475       20,955
December 31, 2012
   16,447       5,701       22,148
December 31, 2013
   21,546       2,243       23,789
Labor Relations
As of December 31, ~~2010, we~~2013, SK Telecom had a company union ~~comprised~~consisting of ~~15,490~~2,006 regular employees out of 3,976 total regular employees. We have never experienced a work stoppage of a serious nature. Every two years, the union and management negotiate and enter into a new collective bargaining agreement that has a two-year duration, which is focused on employee benefits and welfare. Employee wages are separately negotiated on an annual basis. Our wage negotiations for 2011 were completed in ~~November 2008~~September 2011 and resulted in an average wage increase of 2%3.0% for ~~2008 from 2007.~~SK Telecom employees. Our wage negotiations for 2012 were completed in ~~June 2009 resulted in a wage freeze for 2009. Our wage negotiations completed in December 2010~~April 2012 and resulted in an average wage increase of ~~2.5%~~4.0% for ~~2010 from 2009.~~SK Telecom employees. Our wage negotiations for ~~2011 has~~2013 were completed in October 2013 and resulted in an average wage increase of 1.5% for SK Telecom employees. Our wage negotiations for 2014 have not commenced yet. We consider our relations with our employees to be good.

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 we subsidize the employee stock ownership association through the Employee Welfare Fund by providing low interest

76
rate loans to employees who desire to purchase our stock through the plan in the event 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 association’s acquisition of our treasury shares. Such loans ~~will~~are to be repaid over a period of five years, beginning on the second anniversary of each loan date. We expect these loans to be repaid in full by 2015. As of ~~June 1, 2011,~~March 31, 2014, the employee stock ownership association owned approximately ~~0.4%~~0.15% of our issued common stock.
We are required to pay a severance amount to eligible employees who voluntarily or involuntarily cease employment with us, including through retirement. This severance amount is based upon the employee’s length of service with us and the employee’s salary level at the time of severance. As of December 31, ~~2010,~~2013, the defined benefit obligation, which is the accrued and unpaid retirement and severance benefits, of Won ~~159.2~~312.5 billion for all of our employees are reflected in our consolidated financial statements as a liability, of which a total of Won ~~96.3~~238.3 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 Basic Labor Welfare Act, we may also contribute up to 5%5.0% of our annual earnings before tax for employee welfare. Contribution amounts are determined annually following negotiation with the union. The contribution amount for ~~2008,~~2013, which was decided in December ~~2008,~~2013, was set at ~~2.6%~~1.64% of ~~our earnings~~SK Telecom’s profit before income tax on a separate basis, or Won ~~40.0~~20.0 billion. ~~We did not make the contribution in 2009.~~ The contribution amount for ~~2010,~~2012, which was decided in December ~~2010,~~2012, was set at ~~1.5%~~1.29% of ~~our earnings~~SK Telecom’s profit before income tax on a separate basis, or Won ~~27.2~~20.0 billion.
The contribution amount for 2011, which was decided in December 2011, was set at 0.4% of SK Telecom’s profit before income tax on a separate basis, or Won 10.0 billion.
In addition, we provide our employees with miscellaneous other fringe benefits including housing loans, free medical examinations, subsidizedon-site child care facilities and sabbatical programs for long-term employees.
Item 6.E. Share Ownership
The following table sets forth the share ownership by our standing and non-standing directors as of ~~June 1, 2011:~~

Percentage of

Number of
Total
Special

Shares
Shares
Voting

Name

Position
Owned Outstanding Rights Options

Standing Directors:

Sung Min Ha President, Co-Chief Executive Officer & Representative Director 738 0 None None
Jin Woo So Co-Chief Executive Officer & Representative Director; Head of Platform Business 0 0 None None
Non-Standing Directors:

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

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March 31, 2014:
Name

Position
   Number of
Shares
Owned    Percentage of
Total Shares
Outstanding    Special
Voting
Rights    Options
Standing Directors:

Sung Min Ha
   President & Chief Executive Officer    738       0       None       None
Dae Sik Cho
   Executive Director    0       0       None       None
Dong Seob Jee
   Head of Corporate Vision Department    0       0       None       None
Non-Standing Directors:

Hyun Chin Lim
   IndependentNon-executive Director    0       0       None       None
Dae Shick Oh
   IndependentNon-executive Director    0       0       None       None
Jay Young Chung
   IndependentNon-executive Director    0       0       None       None
Jae Hoon Lee
   IndependentNon-executive Director    0       0       None       None
Jae Hyeon Ahn
   IndependentNon-executive Director    0       0       None       None
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Item 7.A. Major Shareholders
As of the close of our shareholders’ registry on December 31, ~~2010,~~2013, approximately ~~51.62%~~51.98% of our issued shares were held in Korea by approximately ~~27,662~~17,892 shareholders. According to Citibank, N.A., depositary for our American Depositary Receipts, as of December 31, ~~2010,~~2013, there were ~~79,923~~44,407 U.S. holders ~~of record~~ of our American Depositary Receipts evidencing ADSs and ~~24,321,893~~13,677,811 shares of our common stock were held in the form of ADSs. As of such date, outstanding ADSs represented approximately ~~30.12%~~16.9% of our outstanding common ~~stock.~~
shares.
The following table sets forth certain information as of ~~June 1, 2011~~March 31, 2014 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~~shares 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 23.22 % 26.37 %
Employees(1) 321,394 0.40 0.45
Treasury shares(1)(2) 9,650,712 11.95 N/A
Officers and Directors 13,579 0 * 0 *
Other Domestic Shareholders 12,483,735 15.46 17.56
Foreign Shareholders(3)
Tradewinds Global Investors, LLC 4,050,518 5.02 5.70
Other Foreign Shareholders 35,477,321 43.94 49.90
Total Issued Shares(4) 80,745,711 100.00 % —
Total Outstanding Shares(5) 71,094,999 — 100.00 %
Shareholder/Category
   Number of
Shares    Percentage
Total Shares
Issued Percentage
Total Shares
Outstanding
Domestic Shareholders

SK Holdings
   20,363,452       25.22 % 28.71 %
Employees(1)
   120,723       0.15    0.17
Treasury shares(2)
   9,809,375       12.15    N/A
Officers and Directors
   6,074       0.01    0.01
Other Domestic Shareholders
   11,674,232       14.46    16.46
Foreign Shareholders(3)

Shareholders holding ADRs
   13,485,736       16.70    19.01
Shareholders holding common stock
   25,286,119       31.31    35.64
Total Issued Shares(4)
   80,745,711       100 % —
Total Outstanding Shares(5)
   70,936,336       —    100 %
* ~~Less than 0.00%.~~
(1) Represents shares owned by our employee stock ownership association. See “Item 6.D. ~~Employees”.~~Employees.”
(2) Treasury shares do not have any voting rights; includes 2,177,389 treasury shares that were deposited with Korea Securities Depository to be reserved and used to satisfy the conversion rights of the holders of US$332.5 million in 1.75% convertible notes that were sold in April 2009.rights.
(3) Based on the data collected by the KRX KOSPI Market under the Foreign Exchange Transaction Laws.
(4) On January 9, 2009, ~~the Company~~we purchased (using retained earnings) and cancelled 448,000 common shares. As a result of such retirement of common shares, the total number of shares decreased to 80,745,711 from 89,278,946 which is the total number of shares issued to date.
(5) Represents total issued shares excluding treasury shares.
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
2008 2009 2010
(As a percentage of total issued shares)(1)

SK Group(2) 23.09 % 23.22 % 23.22 %
SK Holdings 23.09 23.22 23.22
POSCO(3) 2.88 2.90 2.90
      As of December 31,
Shareholder
   2013 2012 2011
   (As a percentage of total
issued shares)(1)
SK Group(2)
   25.22 % 25.22 % 25.22 %
SK Holdings
   25.22    25.22    25.22
POSCO(3)
   0.00    0.00    2.90
(1) Includes ~~8,707,696, 8,400,712~~9,809,375, 11,050,712 and ~~9,650,712~~11,050,712 shares held in treasury as of December 31, ~~2008, 2009~~2013, 2012 and ~~2010,~~2011, respectively.

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(2) SK Group’s ownership interest as of December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011 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.~~Shinsegi and sold these shares in the first half of 2012.
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 reorganization, pursuant to which SK Corporation spun off substantially all of its operating business divisions into a newly established corporation named SK Energy Co., Ltd. The surviving company currently operates as a holding company, renamed SK ~~Holdings Co., Ltd.~~Holdings. Ownership of all our shares held by SK Corporation immediately preceding the reorganization passed to SK Holdings as of July 1, 2007.
As of ~~June 1, 2011,~~March 31, 2014, SK Holdings held ~~23.22%~~25.22% of our shares of common stock. For a description of our foreign ownership limitation, see “Item 3.D. Risk Factors — Risks Relating to Securities — If SK Holdings causes us to breach the foreign ownership limitations on ~~shares of~~ our common ~~stock,~~shares, we may experience a change of control” and “Item 4.B. Business Overview — Law and Regulation — Foreign Ownership and Investment Restrictions and ~~Requirements”.~~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.
As of ~~June 1, 2011,~~March 31, 2014, the total number of ~~shares of~~ our common ~~stock~~shares outstanding was ~~71,094,999.~~
70,936,336.
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
In September 2009, we acquired the leased-line business and related ancillary businesses from SK Networks for Won 892.76 ~~billion. We~~billion and assumed Won 611.44 billion of debt as part of the transaction. Prior to such acquisition, KT and SK Networks provided a substantial majority of our leased lines. For a more detailed discussion of the lines we lease from fixed-line operators, see “Item 4.B. Business Overview — Digital ~~Cellular~~Wireless Network — Network ~~Infrastructure”.~~
Infrastructure.”
As of December 31, ~~2010,~~2013, we had Won ~~3.2~~5.9 billion of accounts ~~receivables~~receivable from SK Networks. As of the same date, we had Won ~~99.3~~118.8 billion of accounts payable to SK Networks, mainly consisting of 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 POSCO’s ownership of our shares. AsIn the first half of ~~December 31, 2009,~~2012, POSCO ~~owned 2.9%~~sold all of our ~~shares.~~
shares that it owned and on October 8, 2012, we sold half of the POSCO shares we owned. We ~~are a party to an agreement with SK C&C pursuant to which SK C&C provides us with system maintenance services. This agreement will expire on December 31, 2013.~~ currently own 1.42% of POSCO’s shares.
We ~~also~~ enter into agreements with SK C&C Co., Ltd. (“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 ~~273.3~~357.9 billion in ~~2008,~~2013, Won ~~317.5~~324.2 billion in ~~2009~~2012 and Won ~~316.4~~321.4 billion in ~~2010.~~2011. We also purchase various information technology-related equipment from SK C&C from time to time. The total amount of such purchases was Won ~~232.2~~206.3 billion in 2013, Won 304.1 billion in 2012 and Won 299.2 billion for ~~2008, Won 237.5 billion in 2009 and Won 270.9 billion in 2010.~~2011. We are a party to several service agreements with SK C&C relating to the development and maintenance of our information technologies systems.

79
We are part of the SK Group of affiliated companies. See “Item 7.A. Major ~~Shareholders”~~Shareholders.” As disclosed in note 2432 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, ~~2010.~~
In March 2005, we invested Won 14.4 billion to purchase 8,000,000 shares, representing a 21.6% equity stake, in iHQ, Inc., or iHQ, one of Korea’s largest entertainment companies and the controlling shareholder of YTN Media, Inc. In 2006, as a result of an additional 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%. We sold 10,930,844 shares of iHQ’s common stock at Won 18.5 billion in April 2010 and 239,170 shares at Won 0.3 billion in July 2010. After such sales, our equity stake in iHQ decreased to 9.4%.
2013.
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-109.~~
G-75.
Legal Proceedings
FTC Proceedings
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 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. The Seoul High Court entered a judgment in our favor in April 2010, which was affirmed by the Supreme Court of Korea in August 2010. Pursuant to the court’s judgment, we were refunded the fine amount.
In June 2011, the FTC fined us Won 2.0 billion and Loen Entertainment, ~~Inc.,~~ our consolidated subsidiary at the time, Won 8.7 billion for activities allegedly restricting competition in markets for digital music services. We and Loen Entertainment paid such fine in August 2011 and filed appeals at the Seoul High Court and subsequently at the Supreme Court of Korea, where the case is currently pending.
In March 2012, the FTC fined us Won 21.9 billion for allegedly colluding with KT, LG U+, Samsung Electronics, LG Electronics and Pantech (which were also assessed separate fines) to inflate the prices of handsets while advertising that the handsets are ~~considering whether to file an appeal.~~
~~MIC and KCC Proceedings~~
In December 2007, the MIC imposed fines on us, KTF, LG Telecom 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.offered at a discount through subsidy plans. We paid such fine in ~~January 2008.~~
September 2012 and filed an appeal at the Seoul High Court, where the case is currently pending.
In ~~January 2008,~~July 2012, the ~~MIC ordered~~FTC fined us ~~KTF~~Won 25.0 billion for alleged violation of Article 23 of the Fair Trade Act relating to the payment of system management and ~~LG Telecom 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.~~operation fees. We paid such fine in ~~March 2008.~~
~~In February 2008,~~November 2012 and filed an appeal at the Seoul High Court, where the case is currently pending.
MIC, ~~ordered us, KTF, LG Telecom~~KCC 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.
~~In September 2008,~~MSIP Proceedings
On June 10, 2010, the KCC ordered us to pay a fine of Won ~~600 million alleging that we enrolled subscribers~~2.0 billion and issued a correction order for restricting USIM portability and thereby impeding our ~~T-Ring service without such~~ subscribers’ ~~consent.~~interests. We paid such fine and completed the improvement of the relevant procedures in September ~~2008.~~

80
2010.
On ~~December 30, 2008, we were fined in the amount of Won 50 million for a violation of Telecommunications Law involving the mismanagement of privacy policy. We paid such fine in January 2010.~~
~~On October 13, 2009,~~September 24, 2010, the KCC ordered us to pay a fine of Won ~~140 million~~12.9 billion and ~~publish~~issued a ~~newspaper notice in a case relating~~correction order for providing subsidies to ~~the subscription for mobile telephone services using national identification numbers of the deceased and~~ our ~~failure to verify the required documents.~~subscribers which were not universally available. We paid such fine and completed the improvement of the relevant procedures in ~~November 2009.~~
January 2011.
On December 2, 2010, the KCC ordered us to pay a fine of Won 6.2 billion alleging that we had improperly charged subscribers for wireless data transmitted without their request. We paid such fine in March 2011.
On February 21, 2011, the KCC ordered SK Broadband to pay a fine of Won 3.2 billion and issued a correction order for providing fee reductions to its high-speed Internet subscribers which were not universally available. SK Broadband paid such fine and completed the improvement of the relevant procedures in March 2012.
On September 19, 2011, the KCC ordered us to pay a fine of Won 6.9 billion and issued a correction order for providing subsidies to subscribers which were not universally available. We paid such fine in October 2011 and completed the improvement of the relevant procedures in January 2012.
On December 24, 2012, the KCC ordered us to pay a fine of Won 6.9 billion, which we paid in December 2012, imposed a suspension on acquiring new subscribers from January 31, 2013 to February 21, 2013 and issued a correction order for providing subsidies to subscribers which were not universally available. On March 14, 2013, the KCC imposed an additional fine of Won 3.1 billion on us for the same reason after further investigations. We paid such additional fine in April 2013. On July 18, 2013, the KCC imposed an additional fine of Won 36.5 billion on us for the same reason and we paid such fine in July 2013. On December 27, 2013, the KCC imposed an additional fine on us of Won 56.0 billion, which is the largest fine ever imposed by the KCC for providing handset subsidies to subscribers which were not universally available. We paid such additional fine in December 2013.
On March 7, 2014, the MSIP imposed a suspension on us from acquiring new subscribers for a period of 45 days, which is the longest suspension period imposed on us by the Government for providing subsidies to subscribers which were not universally available. On March 13, 2014, the KCC imposed an additional suspension of business on us for a period of seven days and imposed a fine of Won 16.7 billion on us for the same reason and we expect to pay such fine in the first half of 2014.
KT Interconnection Fee Litigation
In December 2010, we filed a lawsuit in the Seoul Central District Court against KT alleging that they paid us lower interconnection fees for intentionally bypassing our 3G spectrum and using our 2G network rather than our 3G network. In response, KT filed a counterclaim against us, alleging that we failed to respond to their request for information and that we intentionally delayed the interconnection for calls from fixed-line KT users to our wireless service subscribers and seeking damages of Won 33.7 billion. In September 2012, the Seoul Central District Court dismissed our lawsuit against KT and rendered a judgment that accepted KT’s claims in part. We filed an appeal at the Seoul High Court in October 2012, and in January 2014, the Seoul High Court overturned the District Court’s decision and rendered a judgment that accepted our claims in part. We and KT each filed an appeal at the Supreme Court of Korea in February 2014.
SK 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 company’s 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
In the second half of ~~March 31,~~ 2011, ~~the number of plaintiffs was 23,930 and the aggregate amount of damages claimed by such plaintiffs was approximately Won 24.1 billion. The case is currently pending before~~ the Seoul Central District ~~Court.~~
~~In addition,~~Court rendered judgments that accepted the plaintiffs’ claims in ~~April 2008,~~part, ordering a payment of Won 100,000 to Won 200,000 to each plaintiff who did not consent to the sale of personal information, which amounted to an ~~investigation~~aggregate of approximately Won 5.5 billion compared to the plaintiffs’ claims of approximately Won 24.7 billion. Both SK Broadband and the plaintiffs filed appeals at the Seoul High Court and the Seoul High Court affirmed the judgments of the Seoul Central District Court with respect to a few of these lawsuits. SK Broadband subsequently settled with all of the remaining plaintiffs and there are no outstanding claims against SK Broadband related to these lawsuits.
SK Communications Litigation
In July 2011, there was ~~initiated~~a leak of personal information of subscribers of NATE and Cyworld websites operated by SK Communications, our consolidated subsidiary. As of December 31, 2013, 22 lawsuits were filed against SK Communications, alleging that the ~~Seoul Central Prosecutor’s Office, the KCC and the Korean Trade Commission. The main subjects~~leak was caused by its poor management of ~~this investigation include the possible improper provision of broadband service by misusing~~ subscribers’ personal information and seeking damages of approximately Won 5.5 billion. With respect to a few of the ~~violation~~lawsuits, the relevant district courts have rendered judgments for the relevant plaintiffs’ claims in part and SK Communications has appealed such judgments to the applicable high courts. With respect to one of ~~standardized customer contracts~~these lawsuits, the relevant high court has rendered judgment for the relative plaintiff’s claims in part. Other cases remain pending at various high courts and district courts in Korea.
COLORing Litigation
In May 2010, Korea Music Copyright Association (“KOMCA”) filed a lawsuit against us seeking license fees for our COLORing service that plays music as ring tones. In February 2011, the court rendered a judgment against us ordering us to pay Won 570 million to KOMCA, which was affirmed by ~~SK Broadband.~~the appellate court in October 2011. We appealed the decision to the Supreme Court of Korea in November 2011. In ~~connection with its investigation,~~July 2013, the ~~KCC suspended SK Broadband from soliciting new subscribers~~Supreme Court of Korea overturned the appellate court’s decision and sent the case back to the appellate court for ~~its broadband Internet services for~~further deliberation. While we do not expect that the outcome of the litigation would have a ~~period~~material adverse impact on our business or results of ~~40 days from July 1, 2008 and, in addition, imposed an administrative fine of Won 178 million on~~operations, we may be required to pay increased on-going license fees to KOMCA if the ~~grounds that SK Broadband had violated the Telecommunication Business Act and standard customer contracts. SK Broadband paid such fine in July 2008.~~
final judgment is rendered against us.
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 depositary’s fees and expenses. The ADR depositary’s designated bank in Korea must approve this conversion and remittance of cash dividends. See “Item 10.B. Memorandum and Articles of Incorporation — Description of American Depositary Shares” and “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities ~~Regulations”.~~

81
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.

Number of
Dividend
Total Amount
Shares Entitled
Year Ended December 31,
per Share of Dividends to Dividend
(In Won) (In billions of Won)

2006 W 8,000 W 582.4 72,667,459
2007 9,400 682.4 72,584,677
2008 9,400 682.0 72,524,203
2009 9,400 680.0 72,344,999
2010 9,400 669.5 71,094,999
Year Ended December 31,
   Dividend
per Share    Total Amount
of Dividends    Number of
Shares Entitled
to Dividend
   (In Won)    (In billions of Won)
2009
   ￦ 9,400       ￦ 680.0       72,344,999
2010
   9,400       669.5       71,094,999
2011
   9,400       656.5       69,694,999 (1)
2012
   9,400       655.1       69,694,999
2013
   9.400       666.4       70,936,336
(1) The number of shares entitled to the interim dividend was 71,094,999.
We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. ~~The~~Our common shares represented by the ADSs have the same dividend rights as other outstanding common shares.
Holders of non-voting shares are entitled to receive dividends in priority to the holders of common shares. The dividend on the non-voting shares is between 9.0% and 25.0% of the par value as determined by the board of directors at the time of their issuance. If the dividends for common shares exceed the dividends for non-voting shares, the holders of non-voting shares will be entitled to participate in the distribution of such excess amount with the holders of common shares. If the amount available for dividends is less than the aggregate amount of the minimum required dividend, holders of non-voting shares will be entitled to receive such accumulated unpaid dividend from dividends payable in the next fiscal year before holders of common shares. There are no non-voting shares issued or outstanding.
We declare dividends annually at the annual general meeting of shareholders which is generally held within three months after the end of the fiscal year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record or registered pledges as of the end of the preceding fiscal year. We may distribute the annual dividend in cash or in shares. However, a dividend of shares must be distributed at par value. ~~If the market price of the shares is less than their par value, dividends~~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~~(3) legal reserve accumulated up to the end of the relevant dividend ~~period.~~period and (4) the increase in our net asset value resulting from the evaluation of our assets and liabilities that has not been offset against unrealized losses. In addition, we may not pay an annual dividend unless we have set aside as a legal reserve an amount equal to at least ~~10%~~10.0% of the cash portion of the annual dividend or until we have accumulated a legal reserve of not less
than one-half of our stated capital. We may not use our legal reserve to pay cash dividends but may transfer amounts from our legal reserve to capital stock or use our legal reserve to reduce an accumulated deficit.
In addition, the Korean Commercial 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 ~~2010,~~2013, we distributed such interim dividends at Won 1,000 per share to our shareholders for a total amount of approximately Won ~~72.3~~70.5 billion.
Under the ~~Financial Investment Services and Capital Markets Act,~~Korean Commercial Code, 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 company’s capital in the immediately preceding fiscal year, (2) the aggregate amount of its capital reserves and legal reserves accumulated up to the immediately preceding fiscal year, (3) the amount of earnings for dividend payments confirmed at the general shareholders’ meeting with respect to the immediately preceding fiscal year and (4) the amount of legal reserve that should be set aside for the current fiscal year following the interim dividend payment. Furthermore, the rate of interim dividends for non-voting shares must be the same as that for our common shares.

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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.
Item 9.C. Markets
The principal trading market for our common ~~stock~~shares is the KRX KOSPI Market. As of ~~June 1, 2011, 71,094,999~~March 31, 2014, 70,936,336 shares of our common stock were outstanding.
The ADSs are traded on the ~~New York Stock Exchange~~NYSE and the London Stock Exchange. The ADSs have been issued by the ADR depositary and are traded on the ~~New York Stock Exchange~~NYSE under the ticker symbol “SKM”. Each ADS represents one-ninth of one share of our common stock. As of ~~June 1, 2011,~~March 31, 2014, ADSs representing ~~approximately 24,321,893~~13,485,736 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~~our common shares ~~of common stock~~ on the KRX KOSPI Market since January 1, ~~2005:~~

Average Daily
Prices Trading
Calendar Year
High(1) Low(1) Close Volume
(Won per shares) (Number of shares)

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

83
2009:
   Prices    Average Daily
Trading
Volume
Calendar Year
   High(1)    Low(1)    Close
   (Won per shares)    (Number of shares)
2009
   218,000       166,000       169,500       332,913
First Quarter
   218,000       180,500       192,000       231,340
Second Quarter
   183,500       170,500       174,000       278,545
Third Quarter
   185,500       166,000       182,500       242,112
Fourth Quarter
   190,500       169,500       169,500       171,571
2010
   188,000       158,500       173,500       193,937
First Quarter
   188,000       168,500       173,500       306,532
Second Quarter
   178,000       158,500       160,500       202,245
Third Quarter
   171,500       158,500       171,500       145,561
Fourth Quarter
   180,500       168,500       173,500       127,235
2011
   172,500       131,000       141,500       214,788
First Quarter
   172,500       156,000       163,500       124,796
Second Quarter
   169,000       152,500       161,500       160,839
Third Quarter
   161,500       131,000       149,500       324,018
Fourth Quarter
   165,000       141,500       141,500       249,500
2012
   161,000       120,500       152,500       216,031
First Quarter
   146,000       134,500       139,500       193,924
Second Quarter
   142,500       120,500       125,000       284,712
Third Quarter
   153,000       125,000       147,000       208,276
Fourth Quarter
   161,000       145,500       152,500       177,955
2013
   238,500       150,000       230,000       212,769
First Quarter
   185,500       150,000       180,500       234,684
Second Quarter
   225,500       172,000       210,000       245,151
Third Quarter
   226,500       202,000       218,500       175,670
Fourth Quarter
   238,500       211,500       230,000       195,925
2014 (through April 25)
   229,000       196,500       204,500       190,961
First Quarter
   229,000       196,500       215,500       184,185
January
   229,000       205,500       216,500       176,445
February
   216,500       196,500       216,500       196,008
March
   219,000       203,500       215,500       180,296
Second Quarter (through April 25)
   217,000       198,000       204,500       212,717
April (through April 25)
   217,000       198,000       204,500       212,717

Average Daily
Prices Trading
Calendar Year
High(1) Low(1) Close Volume
(Won per shares) (Number of shares)

2009 218,000 166,000 169,500 332,913
First Quarter 218,000 180,500 192,000 231,340
Second Quarter 183,500 170,500 174,000 278,545
Third Quarter 185,500 166,000 182,500 242,112
Fourth Quarter 190,500 169,500 169,500 171,571
2010 188,000 158,500 173,500 193,937
First Quarter 188,000 168,500 173,500 306,532
Second Quarter 178,000 158,500 160,500 202,245
Third Quarter 171,500 158,500 171,500 145,561
Fourth Quarter 180,500 168,500 173,500 127,235
2011 (through June 27) 172,500 152,500 156,500 143,003
First Quarter 172,500 156,000 163,500 124,796
January 172,500 164,500 164,500 103,415
February 165,000 156,000 163,000 118,119
March 166,000 157,000 163,500 149,305
Second Quarter (through June 27) 169,000 152,500 156,500 161,913
April 166,000 157,500 162,500 125,907
May 169,000 160,000 160,000 198,397
June (through June 27) 160,000 152,500 156,500 163,382
Source: Korea Exchange
(1) Both high and low prices are based on the daily closing prices for the period.

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~~NYSE since January 1, ~~2005:~~

Average Daily
Prices Trading
Calendar Year
High Low Close Volume
(US$ per ADS) (Number of ADSs)

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
84
2009:
   Prices    Average Daily
Trading
Volume
Calendar Year
   High    Low    Close
   (US$ per ADS)    (Number of ADSs)
2009
   18.64       12.59       16.26       1,246,873
First Quarter
   18.35       12.59       15.45       1,280,533
Second Quarter
   16.73       14.84       15.15       1,161,833
Third Quarter
   17.50       14.82       17.45       990,400
Fourth Quarter
   18.64       15.97       16.26       1,788,667
2010
   19.13       14.73       18.63       1,288,546
First Quarter
   18.33       16.32       17.26       1,422,379
Second Quarter
   18.51       14.73       14.73       1,486,937
Third Quarter
   17.48       14.84       17.47       1,294,034
Fourth Quarter
   19.13       17.74       18.63       960,206
2011
   19.80       13.47       13.61       1,866,528
First Quarter
   19.02       16.83       18.81       1,639,731
Second Quarter
   19.80       17.36       18.70       1,640,469
Third Quarter
   18.77       13.47       14.07       2,125,730
Fourth Quarter
   15.89       13.49       13.61       2,060,180
2012
   16.41       10.85       15.83       1,758,414
First Quarter
   14.60       12.89       13.91       1,644,366
Second Quarter
   14.18       10.85       12.10       2,135,473
Third Quarter
   15.08       12.03       14.54       1,836,959
Fourth Quarter
   16.41       14.41       15.83       1,409,508
2013
   25.16       15.63       24.62       1,407,958
First Quarter
   18.72       15.63       17.87       1,884,190
Second Quarter
   22.45       16.91       20.33       1,724,433
Third Quarter
   22.79       19.42       22.70       848,082
Fourth Quarter
   25.16       22.12       24.62       1,204,890
2014 (through April 25)
   24.31       20.64       21.95       963,256
First Quarter
   24.31       20.74       22.57       952,847
January
   24.31       21.06       21.94       1,063,899
February
   22.56       20.74       22.38       1,073,892
March
   22.74       21.08       22.57       732,277
Second Quarter (through April 25)
   23.06       20.64       21.95       998,533
April (through April 25)
   23.06       20.64       21.95       998,533

Average Daily
Prices Trading
Calendar Year
High Low Close Volume
(US$ per ADS) (Number of ADSs)

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 18.64 12.59 16.26 1,246,873
First Quarter 18.35 12.59 15.45 1,280,533
Second Quarter 16.73 14.84 15.15 1,161,833
Third Quarter 17.50 14.82 17.45 990,400
Fourth Quarter 18.64 15.97 16.26 1,788,667
2010 19.13 14.73 18.63 1,288,546
First Quarter 18.33 16.32 17.26 1,422,379
Second Quarter 18.51 14.73 14.73 1,486,937
Third Quarter 17.48 14.84 17.47 1,294,034
Fourth Quarter 19.13 17.74 18.63 960,206
2011 (through June 27) 19.80 16.83 17.91 1,640,550
First Quarter 19.02 16.83 18.81 1,639,731
January 18.58 17.30 17.30 1,487,450
February 17.74 16.83 17.59 1,531,542
March 18.81 17.51 18.81 1,861,522
Second Quarter (through June 27) 19.80 17.36 17.91 1,641,397
April 19.02 18.24 18.98 1,034,245
May 19.80 17.69 17.69 2,204,262
June (through June 27) 18.27 17.36 17.91 1,658,389
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, asub-organization of Korea Securities Dealers Association, were merged and integrated into the Korea Exchange ~~Inc.~~ as a joint stock company. There are ~~three~~four different markets run by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market (the “KRX KOSDAQ Market”), the KRX KONEX Market and the KRX Derivatives Market. The Korea Exchange has ~~two~~three trading floors located in Seoul, one for the KRX KOSPI Market, one for the KRX KOSDAQ Market and one for the KRX ~~KOSDAQ~~KONEX Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a limited liability company, the shares of which are held by ~~(i)~~(1) securities companies and futures companies that were formerly members of the Korea Stock Exchange or the Korea Futures Exchange, ~~(ii)~~(2) the Small & Medium Business Corporation, ~~(iii)~~(3) the
Korea Securities Finance Corporation and ~~(iv)~~(4) the Korea ~~Securities Dealers~~Financial Investment Association. Currently, the Korea Exchange is the only stock exchange in Korea and is run by membership, having most of Korean securities companies and some Korean branches of foreign securities companies as its members.
As of ~~June 25, 2010,~~December 31, 2013, the aggregate market value of equity securities listed on the KRX KOSPI Market was approximately Won ~~953.1~~1,186.0 trillion. For the year ended December 31, ~~2009,~~2013, the average daily trading volume of equity securities was approximately ~~485.7 million shares with an average transaction value of Won 5,795.6 billion.~~
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~~For the period from January 1, 2010 through June 25, 2010 the average trading volume of equity securities was approximately 404.4~~328.3 million shares with an average trading value of Won ~~5,261.5~~3,993.4 billion.
For the year ended December 31, 2012, the average daily trading volume of equity securities was approximately 486.5 million shares with an average trading value of Won 4,823.6 billion. For the year ended December 31, 2011, the average daily trading volume of equity securities was approximately 353.8 million shares with an average trading value of Won 6,863.1 billion.
The Korea Exchange has the power in some circumstances to suspend trading in the shares of a given company or to de-list a security. The Korea Exchange also restricts share price movements. All listed companies are required to file accounting reports annually, semi-annually and quarterly and to release immediately all information that may affect trading in a security.
The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community that can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers an excess capacity in a particular industry and induced private companies to publicly offer their securities.
The Korea Exchange publishes the ~~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.
Movements in KOSPI are set out in the following table together with the associated dividend yields and price to earnings ratios:

Period Average
Dividend

Yield(1)
Price
Year
Opening High Low Closing (%) Earnings

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

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               Period Average
Year
   Opening    High    Low    Closing    Dividend
Yield(1)
(%)    Price
Earnings
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
               Period Average
Year
   Opening    High    Low    Closing    Dividend
Yield(1)
(%)    Price
Earnings(2)
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
   1,157.4       1,718.88       1,018.81       1,682.77       1.2       23.7
2010
   1,696.14       2,052.97       1,532.68       2,051.00       1.1       17.8
2011
   2,070.08       2,228.96       1,652.71       1,825.74       1.6       10.9
2012
   1,826.37       2,049.28       1,769.31       1,997.05       1.3       12.9
2013
   2,031.10       2,059.58       1,780.63       2,011.34       1.2       13.5
2014 (through April 25)
   1,967.19       1,008.61       1,886.85       1,971.66       1.2       14.7

Period Average
Dividend

Yield(1)
Price
Year
Opening High Low Closing (%) Earnings

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 1,157.4 1,718.88 1,018.81 1,682.77 1.2 23.7
2010 1,696.14 2,052.97 1,532.68 2,051.00 1.1 17.8
2011 (through June 27) 2,063.69 2,229.0 1,923.9 2,070.3 1.2 16.1
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 ~~2,094.4~~1,971.66 on ~~June 29, 2011.~~
April 25, 2014.
Shares are quoted “ex-dividend” on the first trading day of the relevant company’s accounting period. Since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year.
With certain exceptions, principally to take account of a share being quoted “ex-dividend” and ~~“ex-rights”,~~“ex-rights,” upward and downward movements in share prices of any category of shares on any day are limited under the rules of the Korea Exchange to 15.0% of the previous day’s closing price of the shares, rounded down as set out below:
Previous Day’s Closing PriceW
￦
   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”.~~
Taxation.”
The following table sets forth the number of companies listed on the KRX KOSPI Market, the corresponding total market capitalization and the average daily trading volume at the end of the periods indicated:

Market Capitalization on the

Last Day of Each Period Average Daily Trading Volume, Value
Number of

Listed
(Billions of
(Millions of
Thousands of
(Millions of
(Thousands of
Year
Companies Won) US$)(1) Shares Won) US$)(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
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Market Capitalization on the
Last Day of Each Period Average Daily Trading Volume, Value
Year
Number of
Listed
Companies (Billions of
Won) (Millions of
US$)(1) Thousands of
Shares (Millions of
Won) (Thousands of
US$)(1)
1981
343    ￦ 2,959    US$ 4,223    10,565    ￦ 8,708    US$ 12,427
1982
334    3,001    4,012    9,704    6,667    8,914
1983
328    3,490    4,361    9,325    5,941    7,425
1984
336    5,149    6,207    14,847    10,642    12,829
1985
342    6,570    7,362    18,925    12,315    13,798
1986
355    11,994    13,863    31,755    32,870    37,991
1987
389    26,172    32,884    20,353    70,185    88,183
1988
502    64,544    93,895    10,367    198,364    288,571
1989
626    95,477    140,119    11,757    280,967    412,338
1990
669    79,020    109,872    10,866    183,692    255,412
1991
686    73,118    95,541    14,022    214,263    279,973
1992
688    84,712    107,027    24,028    308,246    389,445
1993
693    112,665    138,870    35,130    574,048    707,566
1994
699    151,217    190,762    36,862    776,257    979,257
1995
721    141,151    181,943    26,130    487,762    628,721
1996
760    117,370    138,490    26,571    486,834    928,418
1997
776    70,989    41,881    41,525    555,759    327,881
1998
748    137,799    114,261    97,716    660,429    547,619
1999
725    349,504    307,662    278,551    3,481,620    3,064,806
2000
704    188,042    148,415    306,163    2,602,211    2,053,837
2001
689    255,850    194,785    473,241    1,997,420    1,520,685
2002
683    258,681    216,071    857,245    3,041,598    2,540,590
2003
684    355,363    298,624    542,010    2,216,636    1,862,719
2004
683    412,588    398,597    372,895    2,232,109    2,156,419
2005
702    655,075    648,589    467,629    3,157,662    3,126,398
2006
731    704,588    757,622    279,096    3,435,180    3,693,742
2007
746    951,900    1,017,205    363,732    5,539,588    5,919,697
2008
765    576,888    457,122    355,205    5,189,644    4,112,238
2009
770    887,316    762,528    485,657    5,795,552    4,980,494
2010
777    1,114,882    1,260,486    379,171    5,607,749    6,340,121
2011
791    1,041,999    899,438    353,759    6,863,146    5,924,166
2012
784    1,154,294    1,085,679    486,734    4,824,610    4,537,819
2013
777    1,185,974    1,123,826    328,325    3,993,422    3,784,158
2014 (through April 25)
770    1,174,879    1,128,606    233,289    3,721,007    3,574,454

Market Capitalization on the

Last Day of Each Period Average Daily Trading Volume, Value
Number of

Listed
(Billions of
(Millions of
Thousands of
(Millions of
(Thousands of
Year
Companies Won) US$)(1) Shares Won) US$)(1)

1983 328 3,490 4,361 9,325 5,941 7,425
1984 336 5,149 6,207 14,847 10,642 12,829
1985 342 6,570 7,362 18,925 12,315 13,798
1986 355 11,994 13,863 31,755 32,870 37,991
1987 389 26,172 32,884 20,353 70,185 88,183
1988 502 64,544 93,895 10,367 198,364 288,571
1989 626 95,477 140,119 11,757 280,967 412,338
1990 669 79,020 109,872 10,866 183,692 255,412
1991 686 73,118 95,541 14,022 214,263 279,973
1992 688 84,712 107,027 24,028 308,246 389,445
1993 693 112,665 138,870 35,130 574,048 707,566
1994 699 151,217 190,762 36,862 776,257 979,257
1995 721 141,151 181,943 26,130 487,762 628,721
1996 760 117,370 138,490 26,571 486,834 928,418
1997 776 70,989 41,881 41,525 555,759 327,881
1998 748 137,799 114,261 97,716 660,429 547,619
1999 725 349,504 307,662 278,551 3,481,620 3,064,806
2000 704 188,042 148,415 306,163 2,602,211 2,053,837
2001 689 255,850 194,785 473,241 1,997,420 1,520,685
2002 683 258,681 216,071 857,245 3,041,598 2,540,590
2003 684 355,363 298,624 542,010 2,216,636 1,862,719
2004 683 412,588 398,597 372,895 2,232,109 2,156,419
2005 702 655,075 648,589 467,629 3,157,662 3,126,398
2006 731 704,588 757,622 279,096 3,435,180 3,693,742
2007 746 951,900 1,017,205 363,732 5,539,588 5,919,697
2008 765 576,888 457,122 355,205 5,189,644 4,112,238
2009 770 887,316 762,528 485,657 5,795,552 4,980,494
2010 777 1,114,882 1,260,486 379,171 5,607,749 6,340,121
2011 (through June 27) 782 1,163,016 1,078,165 325,565 7,356,551 6,819,830
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~~FSC and became subject to the ~~Financial Investment Services and Capital Markets Act~~FSCMA beginning in February 2009. The law imposes restrictions on insider trading and price manipulation, requires specified information to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests.

Further Opening of the Korean Securities Market
Stock index futures market was opened on May 3, 1996 and a stock index option market was opened on July 7, 1997, in each case at the Korea Stock Exchange. Remittance and repatriation of funds in connection with investment in stock index futures and options are subject to regulations similar to those that govern remittance and repatriation in the context of foreign investment in Korean stocks.
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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~~FSC sets forth procedural requirements for such investments. The Government announced on February 8, 1998 its plans for the liberalization of the money market with respect to investment in money market instruments by foreigners in 1998. According to the plan, foreigners have been permitted to invest in money market instruments issued by corporations, including commercial paper, starting February 16, 1998 with no restrictions as to the amount. Starting May 25, 1998, foreigners have been permitted to invest in certificates of deposit and repurchase agreements.
Currently, foreigners are permitted to invest in securities including shares of most Korean companies that are not listed on the KRX KOSPI Market or the KRX KOSDAQ Market and in bonds that are not listed.
Protection of Customer’s Interest in Case of Insolvency of Financial Investment Companies with a Brokerage License
Under Korean law, the relationship between a customer and a financial investment company with a brokerage license in connection with a securities sell or buy order is deemed to be consignment and the securities acquired by a consignment agent (i.e., the financial investment company with a brokerage license) through such sell or buy order are regarded as belonging to the customer in so far as the customer and the consignment agent’s creditors are concerned. Therefore, in the event of a bankruptcy or rehabilitation procedure involving a financial investment company with a brokerage license, the customer of such financial investment company is entitled to the proceeds of the securities sold by such financial investment company.
When a customer places a sell order with a financial investment company with a brokerage license which is not a member of the Korea Exchange and this financial investment company places a sell order with another financial investment company with a brokerage license which is a member of the Korea Exchange, the customer is still entitled to the proceeds of the securities sold received by the non-member company from the member company regardless of the bankruptcy or rehabilitation of the non-member company.
Under the ~~Financial Investment Services and Capital Markets Act,~~FSCMA, the Korea Exchange is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a financial investment company with a brokerage license which is a member of the Korea Exchange breaches its obligation in connection with a buy order, the Korea Exchange is obliged to pay the purchase price on behalf of the breaching member.
When a customer places a buy order with a non-member company and the non-member company places a buy order with a member company, the customer has the legal right to the securities received by the non-member company from the member company because the purchased securities are regarded as belonging to the customer in so far as the customer and the non-member company’s creditors are concerned.
As the cash deposited with a financial investment company with a brokerage license is regarded as belonging to such financial investment company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the financial investment company with a brokerage license if a bankruptcy or
rehabilitation procedure is instituted against such financial investment company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that Korea Deposit Insurance Corporation will, upon the request of the investors, pay investors up to Won 50 million per investor in case of such financial investment company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events. Pursuant to the ~~Financial Investment Services and Capital Markets Act,~~FSCMA, subject to certain exceptions, financial investment companies with a brokerage license are required to deposit the cash received from their

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customers with the Korea Securities Finance Corporation, a special entity established pursuant to the ~~Financial Investment Services and Capital Markets Act.~~FSCMA. Set-off or attachment of cash deposits by financial investment companies with a brokerage license is prohibited. The premiums related to this insurance under the Depositor Protection Act are paid by financial investment companies with a brokerage license.
Item 9.D Selling Shareholders
Not Applicable.
Item 9.E. Dilution
Not Applicable.
Item 9.F. Expenses of the Issue
Not Applicable.
Item 10. ADDITIONAL INFORMATION
Item 10.A. Share Capital
Not Applicable.
Item 10.B. Memorandum and Articles of Incorporation
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,~~FSCMA, the Korean Commercial Code, the Telecommunications Business Act and related laws of Korea, all as currently in effect. The following summaries are subject to, and are qualified in their entirety by reference to, our articles of incorporation and the applicable provisions of the ~~Financial Investment Services and Capital Markets Act,~~FSCMA, 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 onForm 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 of110111-0371346. As specified in Article 2 (Objectives) of our articles of incorporation, as amended and approved at our general shareholders meeting held on March ~~12, 2010,~~22, 2013, the company’s objectives are the rational management of the telecommunications business, development of telecommunications technology, and contribution to public welfare and convenience. In order to achieve these objectives, we are engaged in the following:
information and communication business;
sale and lease of subscriber handsets;
• ~~information and communication~~
new media business;
advertising business;
mail order sales business;
real estate business (development, management and leasing, etc.) and chattel leasing business;
• ~~sale and lease of subscriber handsets;~~
• ~~new media business;~~
• ~~advertising business;~~
• ~~mail order business;~~
• ~~development, management and leasing of real estate properties;~~
• ~~research and technology development relating to the first four items above;~~
• ~~overseas and import/export business relating to the first four items above;~~
• ~~manufacture and distribution business relating to the first four items above;~~

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research and technology development relating to the first four items above;
overseas and import/export business relating to the first four items above;
manufacture and distribution business relating to the first four items above;
travel business;
• ~~tourism;~~
• ~~electronic financial services business;~~
• ~~film business (production, import, distribution and screening);~~
• ~~lifetime education and management of lifetime educational facilities;~~
• ~~electric engineering business;~~
• ~~information- and communication-related engineering and construction business;~~
• ~~ubiquitous city construction and related service business; and~~
• ~~any business or undertaking incidental or conducive to the attainment of the objectives stated above.~~
electronic financial services business;
film business (production, import, distribution and screening);
lifetime education and management of lifetime educational facilities;
electric engineering business;
information- and communication-related engineering business;
ubiquitous city construction and related service business;
any related business through investment, management and operation of our Korean or offshore subsidiaries and investment companies;
construction business, including the machine and equipment business; and
any business or undertaking incidental or conducive to the attainment of the objectives stated above.
Currently, our authorized share capital is 220,000,000 shares, which consists of shares of common stock, par value Won 500 per share, and shares of non-voting stock, par value Won 500 per share (common shares andnon-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 ~~June 1, 2011,~~March 31, 2014, 80,745,711 common shares were issued, of which ~~9,650,712~~9,809,375 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:
investment by us or any of our subsidiaries in a foreign company in equity or acquisition of such foreign company’s other overseas assets in an amount equal to 5.0% or more of our equity under our most recent balance sheet; and
contribution of capital, loans or guarantees, acquisition of our subsidiaries’ assets or similar transactions with our affiliated companies in excess of Won 10.0 billion through one or a series of transactions.
• investment by us or any of our subsidiaries in a foreign company in equity or acquisition of such foreign company’s other overseas assets in an amount equal to 5.0% or more of our shareholders’ equity under our most recent balance sheet; and
• contribution of capital, loans or guarantees, acquisition of our subsidiaries’ assets or similar transactions with our affiliated companies in excess of Won 10 billion through one or a series of transactions.
Resolutions of the board are adopted in the presence of a majority of the directors in office and by the affirmative vote of a majority of the directors present. No director who has an interest in a matter for resolution may exercise his or her vote upon such matter.
There are no specific shareholding requirements for director’s qualification. Directors are elected at a general meeting of shareholders if the approval of the holders of the majority of the voting shares present at such meeting is obtained and if such majority also represents at least one-fourth of the total number of shares outstanding. Under the Korean Commercial Code, unless otherwise stated in the articles of incorporation, holders of an aggregate of 1%1.0% or more of the outstanding shares with voting rights may request cumulative voting in any election for two or more directors. Our articles of incorporation do not permit cumulative voting for the election of directors.
The term of office for directors is until the close of the third annual general shareholders meeting convened after he or she commences his or her term. Our directors may serve consecutive terms and our shareholders may remove them from office at any time by a special resolution adopted at a general meeting of shareholders.
Dividends
We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. ~~The~~Our common shares represented by the ADSs have the same dividend rights as other outstanding common shares. For a detailed discussion of our dividend policy, see “Item 8.A. Consolidated Statements and Other Financial Information — ~~Dividends .”~~

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Dividends.”
Distribution of Free Shares
In addition to paying dividends in shares out of our retained or current earnings, we may also distribute to our shareholders an amount transferred from our capital surplus or legal reserve to our stated capital in the form of free shares. We must distribute such free shares to all our shareholders in proportion to their existing shareholdings.
Preemptive Rights and Issuance of Additional Shares
We may at times issue authorized but unissued shares, unless otherwise provided in the Korean Commercial Code, on terms determined by our board of directors. All our shareholders are generally entitled to subscribe to any newly-issued shares in proportion to their existing shareholdings. We must offer new shares on uniform terms to all shareholders who have preemptive rights and are listed on our shareholders’ registry as of the relevant record date. We must give public notice of the preemptive rights regarding new shares and their transferability at least two weeks before the relevant record date. Our board of directors may determine how to distribute shares for which preemptive rights have not been exercised or where fractions of shares occur.
Under the Korean Commercial Code and our articles of incorporation, we may issue new shares pursuant to a board resolution to persons other than existing shareholders only if (1) the new shares are issued for the purpose of issuing depositary receipts in accordance with the relevant regulations or through an offering to public investors and (2) the purpose of such issuance is deemed necessary by us to achieve a business purpose, including, but not limited to, the introduction of new technology or the improvement of our financial condition. If we make an allotment of new shares to persons other than our existing shareholders, we are required by the Korean Commercial Code to notify our existing shareholders of (a) the class and number of new shares, (b) the issuance price of new shares and the date set for the payment thereof, (c) in cases of no par value shares, the amount to be included in the paid-up capital out of the issuance price of new shares and (d) the method of subscription to new shares by no later than two weeks before the date of payment of the subscription price, or publicly announce such information. Under our articles of incorporation, only our board of directors is authorized to set the terms and conditions with respect to such issuance of new shares.
In addition, under our articles of incorporation, we may issue convertible bonds or bonds with warrants, each up to an aggregate principal amount of Won ~~400~~400.0 billion, to persons other than existing shareholders, where such issuance is deemed necessary by us to achieve a business purpose, including, but not limited to, the introduction of new technology or the improvement of our financial condition.
Members of our employee stock ownership association, whether or not they are our shareholders, generally have a preemptive right to subscribe for up to 20.0% of the shares publicly offered pursuant to the ~~Financial Investment Services and Capital Markets Act.~~FSCMA. This right is exercisable only to the extent that the total number of shares so acquired and held by members of our employee stock ownership association does not exceed 20.0% of the sum of the number of shares then outstanding and the number of newly-issued shares. As of March 31, ~~2010,~~2014, approximately ~~0.6%~~0.15% 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:
as necessary;
at the request of holders of an aggregate of 3.0% or more of our outstanding common shares;
• ~~as necessary;~~
• ~~at the request of holders of an aggregate of 3.0% or more of our outstanding common shares;~~
• ~~at the request of shareholders holding an aggregate of 1.5% or more of our outstanding shares and preferred shares for at least six months; or~~
• ~~at the request of our audit committee.~~
at the request of shareholders holding an aggregate of 1.5% or more of our outstanding shares and preferred shares for at least six months; or
at the request of our audit committee.
Holders of non-voting preferred shares may request a general meeting of shareholders only after thenon-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~~Maeil Business Newspaper, both published in Seoul, for this ~~purpose.~~purpose, but we may give notice in the future through electronic means. Shareholders who are not on the shareholders’ registry as of the record date are not entitled to receive notice of the general meeting of shareholders or

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attend or vote at the meeting. Holders ofnon-voting preferred shares, unless enfranchised, are not entitled to receive notice of or vote at general meetings of shareholders.
Our general meetings of shareholders have historically been held in or near Seoul.
Voting Rights
Holders of our common shares are entitled to one vote for each common share, except that voting rights of common shares held by us (including treasury shares and shares held by bank trust funds controlled by us), or by a corporate shareholder in which we own more than ~~10%~~10.0% equity interest, either directly or indirectly, may not be exercised. The Korean Commercial Code, unless otherwise stated in the articles of incorporation, permits cumulative voting, which would allow each shareholder to have multiple voting rights corresponding to the number of directors to be appointed in the voting and to exercise all voting rights cumulatively to elect one director. Our articles of incorporation do not permit cumulative voting for the election of directors.
Our shareholders may adopt resolutions at a general meeting by an affirmative majority vote of the voting shares present or represented at the meeting if such affirmative votes also represent at least one-fourth of our total voting shares then issued and outstanding. However, under the Korean Commercial Code and our articles of incorporation, the following matters, among others, require approval by the holders of at least two-thirds of the voting shares present or represented at a meeting, and such affirmative votes must also represent at least one-third of our total voting shares then issued and outstanding:
amending our articles of incorporation;
removing a director;
• ~~amending our articles of incorporation;~~
• ~~removing a director;~~
• ~~effecting any dissolution, merger or consolidation of us;~~
• ~~transferring the whole or any significant part of our business;~~
• ~~effecting our acquisition of all of the business of any other company or a part of the business of any other company having a material effect on our business;~~
• ~~reducing our capital; or~~
• ~~issuing any new shares at a price lower than their par value.~~
effecting any dissolution, merger or consolidation of us;
transferring the whole or any significant part of our business;
effecting our acquisition of all of the business of any other company or a part of the business of any other company having a material effect on our business;
reducing our capital; or
issuing any new shares at a price lower than their par value.
In general, holders of non-voting preferred shares are not entitled to vote on any resolution or receive notice of any general meeting of shareholders.
However, in case of amendments to our articles of incorporation, or any merger or consolidation of us, or in some other cases which affect the rights or interests of the non-voting preferred shares, approval of the holders of non-voting preferred shares is required. We may obtain the approval by a resolution of holders of at least two-thirds of the non-voting preferred shares present or represented at a class meeting of the holders of non-voting preferred shares, where the affirmative votes also represent at least one-third of our total issued and outstanding non-voting shares. In addition, if we are unable to pay dividends on non-voting preferred shares as provided in our articles of
incorporation, the holders of non-voting shares will become enfranchised and will be entitled to exercise voting rights beginning at the next general meeting of shareholders to be held after the declaration of non-payment of dividends is made until such dividends are paid. The holders of enfranchised non-voting preferred shares will have the same rights as holders of common shares to request, receive notice of, attend and vote at a general meeting of shareholders.
Shareholders may exercise their voting rights by proxy. A shareholder may give proxies only to another shareholder, except that a corporate shareholder may give proxies to its officers or employees.
Holders of ADRs exercise their voting rights through the ADR depositary, an agent of which is the record holder of the underlying common shares. Subject to the provisions of the deposit agreement, ADR holders are entitled to instruct the ADR depositary how to vote ~~the~~our common shares underlying their ADSs.

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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%~~49.0% of our voting stock. Korean entities whose largest shareholder is a foreign government or a foreigner (together with any of its related parties) that owns ~~15%~~15.0% or more of such Korean entities’ outstanding voting stock are deemed foreigners. A foreigner who has acquired shares of our voting stock in excess of such limitation may not exercise the voting rights with respect to the shares exceeding such limitation and may be subject to the ~~KCC’s~~MSIP’s corrective orders.
Rights of Dissenting Shareholders
Under Financial Investment Services and Capital Market Act, in some limited circumstances, including the transfer of all or a significant part of our business or our merger or consolidation with another company (with certain exceptions), dissenting shareholders have the right to require us to purchase their shares. To exercise this right, shareholders, including holders of non-voting shares, must submit to us a written notice of their intention to dissent before the general meeting of shareholders. Then, within 20 days after the relevant resolution is passed at a meeting, the dissenting shareholders must request us in writing to purchase their shares. We are obligated to purchase the shares of such dissenting shareholders within one month after the expiration of the20-day period. The purchase price for the shares is required to be determined through negotiation between the dissenting shareholders and us. If we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily share prices on the KRX KOSPI Market for the two-month period before the date of the adoption of the relevant board resolution, (2) the weighted average of the daily share price on the KRX KOSPI Market for the one month period before the date of the adoption of the relevant resolution and (3) the weighted average of the daily share price on the KRX KOSPI Market for the one week period before the date of the adoption of the relevant resolution. However, a court may determine the purchase price if we or dissenting shareholders do not accept the purchase price.
Registry of Shareholders and Record Dates
Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It records and registers transfers of shares on the register of shareholders upon presentation of the share certificates.
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 dateand/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,~~FSCMA, we must file with the ~~Financial Services Commission of Korea~~FSC and the Korea Exchange (1) an annual securities report within 90 days after the end of our fiscal year, (2) a mid-year report within 45 days after the end of the first six months of our fiscal year, and (3) quarterly reports within 45 days after the end of the third month and the ninth month of our fiscal year. Copies of these reports are or will be available for public inspection at the ~~Financial Services Commission of Korea~~FSC and the Korea Exchange.

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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-Korean citizens. See “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities ~~Regulations”.~~
Regulations.”
Our transfer agent is Kookmin Bank, located at~~24-3,~~ ~~Yoido-dong, Yongdungpo-ku,~~ 24, Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul, Korea.
Restrictions Applicable to Shares
Pursuant to the Telecommunications Business Act, the maximum aggregate foreign shareholding in us is limited to 49.0%. See “Item 4.B. Business Overview — Law and Regulation — Foreign Ownership and Investment Restrictions and ~~Requirements”.~~Requirements.” In addition, certain foreign exchange controls and securities regulations apply to the acquisition of securities by non-residents or non-Korean citizens. See “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities ~~Regulations”.~~
Regulations.”
Acquisition of Shares by Us
We ~~generally~~ may ~~not~~ acquire our own shares except in certain limited circumstances, including 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 an approval at the ~~Financial Investment Services and Capital Markets Act, a listed company may acquire its shares~~general meeting of ~~common stock~~shareholders, through purchases on the Korea Exchange or ~~through~~ a tender offer, or ~~pursuant to~~by acquiring the interests in a trust account holding our own shares through agreements with ~~financial investment~~trust companies ~~with a trust license.~~and asset management companies. The aggregate purchase price for the ~~common~~ shares may not exceed the total ~~distributable dividends. According~~amount available for distribution as dividends as of the end of the preceding fiscal year less the amount of dividends and mandatory reserves required to be set aside for that fiscal year, subject to certain procedural requirements.
Under the Korean Commercial Code, ~~the total distributable dividend is defined as the net income for the current fiscal year plus retained earnings carried over from previous years (or minus accumulated losses, as the case~~we may ~~be), reduced~~resell or transfer any shares acquired by us to a third party pursuant to an approval by the ~~amount~~Board of ~~earnings surplus reserved pursuant to the applicable provisions of the Korean Commercial Code.~~
Directors. In general, corporate entities in which we own a ~~50%~~50.0% or more equity interest may not acquire our common stock. Under the FSCMA, we are subject to certain selling restrictions with respect to the shares acquired by us. 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~~value or within a range of five percent of market ~~prices.~~value. In October 2007, in accordance with the approval of our board of directors, we extended the terms of such trust funds until October 2010, but the total amount of funding was reduced to Won ~~982~~982.0 billion. In October 2010, upon expiration of the terms of the trust funds, our shares held by the trust funds were transferred to us and are currently held by us as treasury shares. For more details on the trust funds, see “Item 5.B. Liquidity and Capital ~~Resources”.~~
Resources.”
Liquidation Rights
In the event of our liquidation, remaining assets after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to their shareholdings. Holders of non-voting preferred shares have no preference in liquidation. Holders of debt securities have no preference over other creditors in the event of liquidation.

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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 onForm F-3 (FileNo. 333-91304) filed with the SEC. Copies of the deposit agreement are available for inspection at the principal New York office of the ADR depositary, currently located at 388 Greenwich Street, 14th Floor, New York, New York 10013, United States of America, and at the principal London office of the ADR depositary, currently located at Canada Square, Canary Wharf, London, E14 5LB, England.
American Depositary Receipts
The ADR depositary may execute and deliver ADRs evidencing the ADSs. Each ADR evidences a specified number of ADSs, each ADS representing one-ninth of one share of our common stock to be deposited with the ADR depositary’s custodian in Seoul. Korea Securities Depository is the institution authorized under applicable law to effect book-entry transfers of our common shares, known as the “Custodian”. The Custodian is located at ~~1328 Paeksok-Dong, Ilsan-Ku, Koyang,411-770,~~358-8, Hosu-ro, ~~Kyunggi-Do, Seoul,150-884,~~Ilsandong-gu, Goyang-si, Gyeonggi-do 411-770, Korea. An ADR may represent any number of ADSs. We and the ADR depositary will treat only persons in whose names ADRs are registered on the books of the registrar as holders of ADRs.
Deposit and Withdrawal of Shares of Common Stock
Notwithstanding the provisions described below, under the terms of the deposit agreement, the deposit of shares and issuance of ADSs may only be made if the total number of shares represented by ADSs after such deposit does not exceed a specified maximum, 24,321,893 shares as of ~~June 1, 2011.~~March 31, 2014. This limit will be adjusted in certain circumstances, including (1) upon the cancellation of existing ADSs, (2) upon future offerings of ADSs by us or our shareholders, (3) rights offerings and (4) adjustments for share reclassifications. The limit also may be decreased in certain circumstances. As of ~~June 1, 2011,~~March 31, 2014, the outstanding ADSs represented ~~approximately 24,321,893~~13,485,736 shares of our common stock. Notwithstanding the foregoing, the ADR depositary and the Custodian may not accept deposits of shares of common stock for issuance of ADSs if it has been notified by us in writing that we block deposits to prevent a violation of applicable Korean laws or regulations or a violation of our articles of incorporation. In addition, the ADR depositary may not accept deposits of shares of common stock for issuance of ADSs from a person who identifies him-, her- or itself to the depositary, and has been identified in writing by us, as a holder of at least 3%3.0% of our shares of common stock.
The shares of common stock underlying the ADSs are delivered to the ADR depositary’s Custodian inbook-entry form. Accordingly, no share certificates will be issued but the ADR depositary will hold the shares of common stock through the book-entry settlement system of the Custodian. The delivery of the shares of common stock pursuant to the deposit agreement will take place through the facilities of the Custodian in accordance with its applicable settlement procedures. The ADR depositary will execute and deliver ADSs if you or your broker deposit shares or evidence of rights to receive shares of common stock with the Custodian. Upon payment of fees and expenses and any taxes or charges, such as stamp taxes or stock transfer taxes, the ADR depositary will register the appropriate number of ADSs in the names you designate. The ADR depositary and the ADR depositary’s Custodian will refuse to accept shares of common stock for deposit whenever we restrict transfer of shares of common stock to comply with ownership restrictions under applicable law or our articles of incorporation or whenever the deposit would cause the total number of shares of common stock deposited to exceed a level we determine from time to time. We may instruct the ADR depositary to take certain actions with respect to a holder of ADSs who holds in excess of the ownership limitation set forth in the deposit agreement, including the mandatory sale or disposition of the shares represented by the ADSs in excess of such ownership limitations if, and to the extent, permitted by applicable law.

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You may surrender your ADRs to the ADR depositary to withdraw the underlying shares of our common stock. Upon payment of the fees and any governmental charges and taxes provided in the deposit agreement, and subject to applicable laws and regulations of Korea and our articles of incorporation, you will be entitled to physical delivery or electronic delivery to an account in Korea or, if permissible under applicable Korean law, outside the United States, of the shares of common stock evidenced by the ADRs and any other property at the time represented by ADR you surrendered. If you surrender an ADR evidencing a number of ADSs not evenly divisible by nine, the ADR depositary will deliver the appropriate whole number of shares of common stock represented by the surrendered ADSs and will execute and deliver to you a new ADR evidencing ADSs representing any remaining fractional shares of common stock.
If you request withdrawal of shares of common stock, you must deliver to the ADR depositary a written order directing the ADR depositary to cause the shares of common stock being withdrawn to be delivered or to cause such delivery upon the written order of the person designated in your order, subject to applicable Korean laws and the provisions of the deposit agreement.
Under the provisions of the deposit agreement, the ADR depositary may not lend shares of common stock or ADSs. However, subject to the provisions of the deposit agreement and limitations established by the ADR depositary, the ADR depositary may execute and deliver ADSs before deposit of the underlying shares of common stock. This is called a pre-release of the ADS. The ADR depositary may also deliver shares of common stock upon cancellation of pre-released ADSs (even if the cancellation occurs before the termination of the pre-release). The ADR depositary may pre-release ADSs only under the following circumstances:
before or at the time of the pre-release, the person to whom the pre-release is being made must represent to the ADR depositary in writing that the person, or, in case of an institution its customer, owns the shares of common stock or ADSs to be deposited and show evidence of the ownership to the ADR depositary’s satisfaction;
before or at the time of such pre-release, the person to whom the pre-release is being made must agree in writing that he or she will hold the shares of common stock or ADSs in trust for the ADR depositary until their delivery to the ADR depositary or Custodian, reflect on his or her records the ADR depositary as owner of such shares of common stock or ADSs and deliver such shares of common stock upon the ADR depositary’s request;
• before or at the time of the pre-release, the person to whom the pre-release is being made must represent to the ADR depositary in writing that the person, or, in case of an institution its customer, owns the shares of common stock or ADSs to be deposited and show evidence of the ownership to the ADR depositary’s satisfaction;
• before or at the time of such pre-release, the person to whom the pre-release is being made must agree in writing that he or she will hold the shares of common stock or ADSs in trust for the ADR depositary until their delivery to the ADR depositary or Custodian, reflect on his or her records the ADR depositary as owner of such shares of common stock or ADSs and deliver such shares of common stock upon the ADR depositary’s request;
• ~~the pre-release must be fully collateralized with cash or U.S. government securities;~~
• ~~the ADR depositary must be able to terminate the pre-release on not more than five business day’s notice; and~~
• ~~the pre-release is subject to further indemnities and credit regulations as the ADR depositary deems appropriate.~~
the pre-release must be fully collateralized with cash or U.S. government securities;
the ADR depositary must be able to terminate the pre-release on not more than five business days’ notice; and
the pre-release is subject to further indemnities and credit regulations as the ADR depositary deems appropriate.
The ADR depositary may retain for its own account any compensation received by it in connection with the pre-release, such as earnings on the collateral.
If you want to withdraw the shares of common stock from the depositary facility, you must register your identity with the Financial Supervisory Service of Korea (the “FSS”) before you acquire the shares of common stock unless you intend to sell the shares of common stock within three months. See “Item 10.D. Exchange Controls — Korean Foreign Exchange Controls and Securities Regulations — Restrictions Applicable to ~~Shares”.~~
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

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receives to the extent permitted under applicable law or hold the currency for your account if you are entitled to receive the distribution. The ADR depositary will not be liable for any interest. Before making a distribution, the ADR depositary will deduct any withholding taxes that must be paid.
In the event that the ADR depositary or the ADR depositary’s Custodian receives any distribution upon any deposited shares of common stock in property or securities (other than shares of common stock, non-voting preferred stock or rights to receive shares of common stock or non-voting preferred stock), the ADR depositary will distribute the property or securities to you in proportion to your holdings in any manner that the ADR depositary deems, after consultation with us, equitable and practicable. If the ADR depositary determines that any distribution of property or securities (other than shares of common stock, non-voting preferred stock or rights to receive shares of common stock or non-voting preferred stock) cannot be made proportionally, or if for any other reason the ADR depositary deems the distribution not to be feasible, the ADR depositary may, after consultation with us, dispose of all or a portion of the property or securities in such amounts and in such manner, including by public or private sale, as the ADR depositary deems equitable or practicable. The ADR depositary will distribute to you the net proceeds of any such sale, or the balance of the property or securities, after the deduction of the fees and expenses of the ADR depositary.
If a distribution by us consists of a dividend in, or free distribution of, our shares of common stock, the ADR depositary may, with our approval, and will, if we request, deposit the shares of common stock and either (1) distribute to you, in proportion to your holdings, additional ADSs representing those shares of common stock, or (2) reflect on the records of the ADR depositary the increase in the aggregate number of ADSs representing those number of shares of common stock, in both cases, after the deduction of the fees and expenses of the ADR depositary. If the ADR depositary deems that such distribution for any reason is not feasible, the ADR depositary may adopt, after consultation with us, any method as it may deem equitable and practicable, including by public or private sale of all or part of the shares of common stock received. The ADR depositary will distribute to you the net proceeds of any such sale in the same way as it does with cash. The ADR depositary will only distribute whole ADSs. If the ADR depositary does not distribute additional ADSs, then each outstanding ADS will also represent the new shares so distributed.
If a distribution by us consists of a dividend in, or free distribution of, shares of non-voting preferred stock, the ADR depositary will deposit such shares of non-voting preferred stock under a non-voting preferred stock deposit agreement to be entered into among us, the ADR depositary and all holders and beneficial owners of depositary shares. The ADR depositary will deliver to you, in proportion to your holdings of ADSs, depositary shares issued under the non-voting preferred stock deposit agreement representing the number of non-voting shares received as such dividend or distribution. If the ADR depositary deems such distribution for any reason is not feasible, the ADR depositary may adopt, after consultation with us, any method as it may deem equitable and practicable, including by public or private sale of all or part of the nonvoting shares received. The ADR depositary will distribute to you the net proceeds of any such sale in the same way as it does with cash. The ADR depositary will only distribute whole depositary shares. We are not obligated to list depositary shares representing non-voting shares on any exchange.
If we offer holders of our securities any rights to subscribe for additional shares of common stock or any other rights, the ADR depositary may make these rights available to you. The ADR depositary must first determine whether it is lawful and feasible to do so. If the ADR depositary determines that it is not lawful or feasible to make these rights available to you, then upon our request, the ADR depositary will sell the rights and distribute the proceeds in the same way as it would do with cash. The ADR depositary may allow these rights that are not distributed or sold to lapse. In that case, you will receive no value for these rights.
If we issue any rights with respect to non-voting shares, the securities issuable upon any exercise of such rights by holders or beneficial owners will be depositary shares representing those non-voting shares issued under the provisions of a non-voting preferred stock deposit agreement.
If a registration statement under the Securities Act is required with respect to the securities to which any rights relate in order for us to offer the rights to you and to sell the securities represented by these rights, the ADR depositary will not offer such rights to you until such a registration is in effect, or unless the offering and sale of such securities and such rights to you are exempt from the registration requirements of the Securities Act or any
required filing, report, approval or consent has been submitted, obtained or granted. We or the ADR depositary will not be

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obligated to register the rights or securities under the Securities Act or to submit, obtain or request any filing, report, approval or consent.
The ADR depositary may not be able to convert any currency or to sell or dispose of any distributed or offered property or rights in a timely manner or at a specified price, or at all.
Record Dates
The ADR depositary will fix a record date, after consultation with us, in each of the following situations:
any cash dividend or other cash distribution becomes payable;
any distribution other than cash is made;
• ~~any cash dividend or other cash distribution becomes payable;~~
• ~~any distribution other than cash is made;~~
• ~~rights are issued with respect to deposited shares of common stock;~~
• ~~the ADR depositary causes a change in the number of shares of common stock that are represented by each ADS; or~~
• ~~the ADR depositary receives notice of any shareholders’ meeting.~~
rights are issued with respect to deposited shares of common stock;
the ADR depositary causes a change in the number of shares of common stock that are represented by each ADS; or
the ADR depositary receives notice of any shareholders’ meeting.
The record date will, to the extent practicable, be as near as the record date fixed by us for the shares of common stock. The record date will determine (1) the ADR holders who are entitled to receive the dividend, distribution or rights, or the net proceeds of the sale of the rights; or (2) the ADR holders who are entitled to receive notices or exercise rights.
Voting of the Underlying Shares of Common Stock
We will give the ADR depositary a notice of any meeting or solicitation of shareholder proxies immediately after we finalize the form and substance of such notice but not less than 14 days before the meeting. As soon as practicable after it receives our notice, the ADR depositary will fix a record date, and upon our written request, the ADR depositary will mail to you a notice that will contain the following:
the information contained in our notice to the ADR depositary including an English translation, or, if requested by us, a summary of the information provided by us;
a statement that the ADR holders as of the close of business on a specified record date will be entitled to instruct the ADR depositary as to how to exercise their voting rights for the number of shares of deposited shares of common stock, subject to the provisions of applicable Korean law and our articles of incorporation, which provisions, if any, will be summarized in the notice to the extent that they are material; and
• ~~the information contained in our notice to the ADR depositary including an English translation, or, if requested by us, a summary of the information provided by us;~~
• a statement that the ADR holders as of the close of business on a specified record date will be entitled to instruct the ADR depositary as to how to exercise their voting rights for the number of shares of deposited shares of common stock, subject to the provisions of applicable Korean law and our articles of incorporation, which provisions, if any, will be summarized in the notice to the extent that they are material; and
• ~~a statement as to the manner in which the ADR holders may give their instructions.~~
a statement as to the manner in which the ADR holders may give their instructions.
Upon your written request received on or before the date set by the ADR depositary for this purpose, the ADR depositary will endeavor, in so far as practicable, to vote or cause to be voted the deposited shares of common stock in accordance with the instructions set forth in your written requests. The ADR depositary may not itself exercise any voting discretion over any deposited shares of common stock. You may only exercise the voting rights in respect of nine ADSs or multiples of nine ADSs. ADR holders may not be entitled to give instruction to vote the shares represented by the ADSs if, and to the extent, the total number of shares represented by the ADSs of an ADR holder exceeds the limit set under applicable law. We can give no assurance to you, however, that we will notify the ADR depositary sufficiently in advance of the scheduled date of a meeting or solicitation of consents or proxies to enable the ADR depositary to make a timely mailing of notices to you, or that you will receive the notices sufficiently in advance of a meeting or solicitation of consents or proxies to give instructions to the ADR depositary.
Inspection of Transfer Books
The ADR depositary will keep books at its principal New York office, which is currently located at 388 Greenwich Street, 14th Floor, New York, New York 10013, for the registration and transfer of ADRs. You may
inspect the books of the ADR depositary as long as the inspection is not for the purpose of communicating with

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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,~~IFRS and unaudited non-consolidated semiannual financial statements prepared in conformity with ~~Korean GAAP.~~IFRS. The ADR depositary will arrange for the prompt mailing of copies of these documents, or, if we request, a summary of any such notice provided by us to you or, at our request, make notices, reports (other than the annual reports and semiannual financial statements) and other communications available to you on a basis similar to that for the holders of our common stock or on such other basis as we may advise the ADR depositary according to any applicable law, regulation or stock exchange requirement.
Notices to you under the deposit agreement will be deemed to have been duly given if personally delivered or sent by mail or cable, telegraph or facsimile transmission, confirmed by letter, addressed to you at your address as it appears on the transfer books of the ADR depositary or at such other address as you have notified the ADR depositary.
In addition, the ADR depositary will make available for inspection by holders at its principal New York office and its principal London office any notices, reports or communications, including any proxy soliciting materials, received from us that we generally transmit to the holders of our common stock or other deposited securities, including the ADR depositary. The ADR depositary will also send to you copies of reports and communications we will provide as provided in the deposit agreement.
Changes Affecting Deposited Shares of Common Stock
In case of a change in the par value, or asplit-up, consolidation or any other reclassification of ~~shares of~~ our common ~~stock~~shares or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting us, any securities received by the ADR depositary or the Custodian in exchange for, in conversion of or in respect of deposited shares of our common stock will be treated as new deposited shares of common stock under the deposit agreement. In that case, ADSs will, subject to the terms of the deposit agreement and applicable laws and regulations, including any registration requirements under the Securities Act, represent the right to receive the new deposited shares of common stock, unless additional ADRs are issued, as in the case of a stock dividend, or unless the ADR depositary calls for the surrender of outstanding ADRs to be exchanged for new ADRs.
Amendment and Termination of the Deposit Agreement
We may agree with the ADR depositary to amend the deposit agreement and the ADSs without your consent for any reason. If the amendment adds or increases fees or charges, except for taxes and other governmental charges or certain expenses of the ADR depositary, or prejudices any substantial existing right of ADR holders, it will only become effective 30 days after the ADR depositary notifies you of the amendment. If you continue to hold your ADSs at the time an amendment becomes effective, you will be considered to have agreed to the amendment and to be bound by the deposit agreement as amended. Except as otherwise required by any mandatory provisions of applicable law, no amendment may impair your right to surrender your ADSs and to receive the underlying deposited securities.
The ADR depositary will terminate the deposit agreement if we ask it to do so with 90 days’ prior written notice. The ADR depositary may also terminate the deposit agreement if the ADR depositary has notified us at least

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90 days in advance that it would like to resign and we have not appointed a new depositary. In both cases, the ADR depositary must notify you at least 30 days before the termination date.
If any ADRs remain outstanding after the date of termination, the ADR depositary will stop performing any further acts under the deposit agreement, except:
to collect dividends and other distributions pertaining to the deposited shares of common stock;
to sell property and rights and the conversion of deposited shares of common stock into cash as provided in the deposit agreement; and
• ~~to collect dividends and other distributions pertaining to the deposited shares of common stock;~~
• ~~to sell property and rights and the conversion of deposited shares of common stock into cash as provided in the deposit agreement; and~~
• to deliver deposited shares of common stock, together with any dividends or other distributions received with respect to the deposited shares of common stock and the net proceeds of the sale of any rights or other property represented by those ADSs in exchange for surrendered ADRs.
to deliver deposited shares of common stock, together with any dividends or other distributions received with respect to the deposited shares of common stock and the net proceeds of the sale of any rights or other property represented by those ADSs in exchange for surrendered ADRs.
At any time after the expiration of six months from the date of termination, the ADR depositary may sell any remaining deposited shares of common stock and hold uninvested the net proceeds in an unsegregated account, together with any other cash or property then held, without liability for interest, for the pro rata benefit of the holders of ADSs that have not been surrendered by then.
Charges of ADR Depositary
The fees and expenses of the ADR depositary as agreed between us and the ADR depositary include:
taxes and other governmental charges;
registration fees applicable to transfers of shares of common stock on our shareholders’ register, or that of any entity acting as registrar for the shares, to the name of the ADR depositary or its nominee, or the Custodian or its nominee, when making deposits or withdrawals under the deposit agreement;
• ~~taxes and other governmental charges;~~
• registration fees applicable to transfers of shares of common stock on our shareholders’ register, or that of any entity acting as registrar for the shares, to the name of the ADR depositary or its nominee, or the Custodian or its nominee, when making deposits or withdrawals under the deposit agreement;
• ~~cable, telegraph and facsimile transmission expenses that are expressly provided in the deposit agreement;~~
• ~~expenses incurred by the ADR depositary in the conversion of foreign currency into Dollars under the deposit agreement;~~
• ~~a fee of up to US$5.00 per 100 ADSs, or portion thereof, for execution and delivery of ADSs and the surrender of ADRs under the deposit agreement; and~~
• ~~a fee of up to US$0.02 per ADS held for cash distributions, a sale or exercise of rights or the taking of any other corporate action involving distributions to shareholders.~~
cable, telegraph and facsimile transmission expenses that are expressly provided in the deposit agreement;
expenses incurred by the ADR depositary in the conversion of foreign currency into Dollars under the deposit agreement;
a fee of up to US$5.00 per 100 ADSs, or portion thereof, for execution and delivery of ADSs and the surrender of ADRs under the deposit agreement; and
a fee of up to US$0.02 per ADS held for cash distributions, a sale or exercise of rights or the taking of any other corporate action involving distributions to shareholders.
For a detailed description of fees and charges payable by the holders of ADSs under the deposit agreement, see “Item 12.D. American Depositary Shares — Fees and Charges under ~~the~~ Deposit ~~Agreement”.~~
Agreement.”
General
Neither we nor the ADR depositary will be liable to you if prevented or delayed by law, governmental authority, any provision of our articles of incorporation or any circumstances beyond our or its control in performing our or its obligations under the deposit agreement. The deposit agreement provides that the ADR depositary will hold the shares of common stock for your sole benefit. Our obligations and those of the ADR depositary under the deposit agreement are expressly limited to performing, in good faith and without negligence, our and its respective duties specified in the deposit agreement.
The ADSs are transferable on the books of the ADR depositary, provided that the ADR depositary may, after consultation with us, close the transfer books at any time or from time to time, when deemed expedient by it in connection with the performance of its duties. As a condition precedent to the execution and delivery of any ADSs, registration of transfer,split-up, combination of any ADR or surrender of any ADS for the purpose of withdrawal of deposited shares of common stock, the ADR depositary or the Custodian may require payment from the depositor of the shares of common stock or a holder of ADSs of a sum sufficient to reimburse the ADR depositary for any tax or

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other governmental charge and any stock transfer or registration fee and payment of any applicable fees payable by the holders of ADSs.
Any person depositing shares of common stock, any holder of an ADS or any beneficial owner may be required from time to time to file with the ADR depositary or the Custodian a proof of citizenship, residence,
exchange control approval, payment of applicable Korean or other taxes or governmental charges, or legal or beneficial ownership and the nature of their interest, to provide information relating to the registration on our shareholders’ register (or our appointed agent for the transfer and registration of shares of common stock) of the shares of common stock presented for deposit or other information, to execute certificates and to make representations and warranties as we or the ADR depositary may deem necessary or proper or to enable us or the ADR depositary to perform our and its obligations under the deposit agreement. The ADR depositary may withhold the execution or delivery or registration of transfer of all or part of any ADR or the distribution or sale of any dividend or other distribution of rights or of the proceeds from their sale or the delivery of any shares deposited under the deposit agreement and any other securities, property and cash received by the ADR depositary or the Custodian until the proof or other information is filed or the certificates are executed or the representations and warranties are made. The ADR depositary shall provide us, unless otherwise instructed by us, in a timely manner, with copies of any of these proofs and certificates and these written representations and warranties.
The delivery and surrender of ADSs and transfer of ADSs generally may be suspended during any period when our or the ADR depositary’s transfer books are closed or, if that action is deemed necessary or advisable by us or the ADR depositary, at any time or from time to time in accordance with the deposit agreement. We may restrict, in a manner as we deem appropriate, transfers of shares of common stock where the transfers may result in ownership of shares of common stock in excess of limits under applicable law. Except as described in “Deposit and Withdrawal of Shares of Common Stock” above, notwithstanding any other provision of the deposit agreement, the surrender of outstanding ADRs and withdrawal of Deposited Securities (as defined in the deposit agreement) represented by the ADRs may be suspended, but only as required in connection with (1) temporary delays caused by closing the transfer books of the ADR depositary or the issuer of any Deposited Securities (or the appointed agent or agents for such issuer for the transfer and registration of such Deposited Securities) in connection with voting at a shareholders’ meeting or the payment of dividends, (2) payment of fees, taxes and similar charges, or (3) compliance with any United States or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of the Deposited Securities.
Governing Law
The deposit agreement and the ADRs will be interpreted under, and all rights under the deposit agreement or the ADRs are governed by, the laws of the State of New York.
We have irrevocably submitted to the non-exclusive jurisdiction of New York State or United States Federal Courts located in New York City and waived any objection to legal actions or proceedings in these courts whether on the ground of venue or on the ground that the proceedings have been brought in an inconvenient forum.
This submission was made for the benefit of the ADR depositary and the holders and will not limit the right of any of them to take legal actions or proceedings in any other court of competent jurisdiction nor will the taking of legal actions or proceedings in one or more jurisdictions preclude the taking of legal actions or proceedings in any other jurisdiction (whether concurrently or not), to the extent permitted under applicable law.
Information Relating to the ADR Depositary
Citibank, N.A. (“Citibank”) has been appointed as ADR depositary pursuant to the deposit agreement. Citibank is an indirect wholly-owned subsidiary of Citigroup Inc., a Delaware corporation whose principal office is located in New York, New York. Citibank is a global financial services organization serving individuals, businesses, governments and financial institutions in approximately 100 countries around the world.
Citibank was originally organized on June 16, 1812, and now is a national banking association organized under the National Bank Act of 1864 of the United States of America. Citibank is primarily regulated by the United States Office of the Comptroller of the Currency. Its principal office is at 399 Park Avenue, New York, NY 10022.

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The consolidated balance sheets of Citibank are set forth in Citigroup’s most recent annual report onForm 10-K and quarterly report onForm 10-Q, each on file with the SEC.
Citibank’s Articles of Association and By-laws, each as currently in effect, together with Citigroup’s most recent annual and quarterly reports will be available for inspection at the Depositary Receipt office of Citibank, N.A., 388 Greenwich Street, 14th Floor, New York, New York 10013.
Item 10.C. Material Contracts
We have not entered into any material contracts since January 1, ~~2008,~~2013, 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 2432 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”.~~
Resources.”
Item 10.D. Exchange Controls
Korean Foreign Exchange Controls and Securities Regulations
General
The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree, collectively referred to as the Foreign Exchange Transaction Laws, regulate investment in Korean securities bynon-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~~FSC has also adopted, pursuant to its authority under the ~~Financial Investment Services and Capital Markets Act,~~FSCMA, regulations that restrict investment by foreigners in Korean securities and regulate issuance of securities outside Korea by Korean companies.
Subject to certain limitations, the MOSF has authority to take the following actions under the Foreign Exchange Transaction Laws:
if the Government deems it necessary on account of war, armed conflict, natural disaster or grave and sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the 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, a foreign exchange stabilization fund, certain other governmental agencies or financial companies; and
if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience significant disruption or that the movement of capital between Korea and other countries are likely to adversely affect the Won, exchange rate or other macroeconomic policies, the 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, a foreign exchange stabilization fund, certain other governmental agencies or financial companies.
• if the Government deems it necessary on account of war, armed conflict, natural disaster or grave and sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the 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
• 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.
Under the regulations of the ~~Financial Services Commission~~FSC amended on February 4, 2009, ~~(i)~~(1) if a company listed on the KRX KOSPI Market or a company listed on the KRX KOSDAQ Market has submitted a public disclosure of material matters to a foreign financial investment supervisory authority pursuant to the laws of the foreign jurisdiction, then it must submit a copy of the public disclosure and a Korean translation thereof to the ~~Financial Services Commission of Korea~~FSC and the Korea Exchange, and ~~(ii)~~(2) if a KRX KOSPI Market-listed company or KRX KOSDAQ Market-listed company is approved for listing on a foreign stock market or determined to be de-listed from the foreign stock market or actually listed on, or de-listed from a foreign stock market, then it must submit a copy of any document, which it submitted to or received from the relevant foreign government, foreign financial investment supervisory authority or the foreign stock market, and a Korean translation thereof to the ~~Financial Services Commission of Korea~~FSC and the Korea Exchange.

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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 report’s 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.
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
• Under current Korean laws and regulations, the depositary is required to obtain our prior consent for any proposed deposit of common shares if the number of shares to be deposited in such proposed deposit
exceeds the number of common shares initially deposited by us for the issuance of ADSs (including deposits in connection with the initial and all subsequent issuances of ADSs by us or with our consent and stock dividends or other distributions related to the ADSs).
• In addition to such restrictions under Korean laws and regulations, there are also restrictions on the deposits of our common shares for issuance of ADSs. See “Item 10.B. Memorandum and Articles of Incorporation — Description of American Depositary Shares”. Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs.
In addition to such restrictions under Korean laws and regulations, there are also restrictions on the deposits of our common shares for issuance of ADSs. See “Item 10.B. Memorandum and Articles of Incorporation — Description of American Depositary Shares.” Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs.
We submitted a report to and obtained acceptance thereof by the 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,~~FSCMA, any person whose direct or beneficial ownership of shares with voting rights, certificates representing the rights to subscribe for shares and equity-related debt securities including convertible bonds and bonds with warrants (collectively referred to as “equity securities”), together with the equity securities beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5.0% or more of the total outstanding equity securities is required to report the status and purpose (in terms of whether the purpose of shareholding is to affect control over management of the issuer) of the holdings to the ~~Financial Services Commission of Korea~~FSC and the Korea Exchange within five business days after reaching the 5.0% ownership interest threshold and promptly deliver a copy of such report to the issuer. In addition, any change ~~(i)~~(1) in the ownership interest subsequent to the report which equals or exceeds 1.0% of the total outstanding equity securities, or ~~(ii)~~(2) in the shareholding purpose is required to be reported to the ~~Financial Services Commission of Korea~~FSC 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)~~(1) certain professional investors, as ~~defined~~specified under the ~~Financial Investment Services and Capital Markets Act,~~FSCMA, or ~~(ii)~~(2) 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 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.~~
FSCMA.
Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment and may result in a loss of voting rights with respect to the ownership of unreported equity securities exceeding 5.0%. Furthermore, the ~~Financial Services Commission of Korea~~FSC may issue an order to dispose of such non-reported equity securities.
In addition to the reporting requirements described above, any person whose direct or beneficial ownership of our common shares accounts for ~~10%~~10.0% or more of the total issued and outstanding shares with voting rights (a “major shareholder”) must report the status of his or her shareholding to the Securities and Futures Commission and the Korea Exchange within five business days after he or she becomes a major shareholder. In addition, any change in the ownership interest subsequent to the report must be reported to the Securities and Futures Commission and the

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Korea Exchange by the fifth business day of any changes in his or her shareholding. Violations of these reporting requirements may subject a person to criminal sanctions, such as fines or imprisonment.
Restrictions Applicable to ADSs
No Korean governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares underlying ADSs and the delivery of shares in Korea in connection with the withdrawal, provided that a foreigner who intends to acquire the shares must obtain an investment registration card from the ~~Financial Supervisory Service,~~FSS, as described below. The acquisition of the shares by a foreigner must be reported by the foreigner or his or her standing proxy in Korea immediately to the Governor of the ~~Financial Supervisory Service.~~
FSS (the “Governor”).
Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares without any further governmental approval.
In addition, we are required to file a securities registration statement with the ~~Financial Services Commission~~FSC and such securities registration statement has to become effective pursuant to the ~~Financial Investment Services and Capital Markets Act~~FSCMA in order for us to issue shares represented by ADSs, except in certain limited circumstances.
Restrictions Applicable to Shares
As a result of amendments to the Foreign Exchange Transaction Laws and the regulations of ~~Financial Services Commission of Korea,~~the FSC, together referred to as the Investment Rules, adopted in connection with the stock market opening from January 1992 and after that date, foreigners may invest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRX KOSPI Market or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRX KOSPI Market or the KRX KOSDAQ Market only through the KRX KOSPI Market or the KRX KOSDAQ Market, except in limited circumstances, including, among others:
odd-lot trading of shares;
acquisition of shares by a foreign company as a result of a merger;
• ~~odd-lot trading of shares;~~
• ~~acquisition of shares by a foreign company as a result of a merger;~~
• ~~acquisition or disposal of shares in connection with a tender offer;~~
• acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company (“converted shares”);
• ~~acquisition of shares through exercise of rights under securities issued outside of Korea;~~
• acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends;
•
acquisition or disposal of shares in connection with a tender offer;
acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company (“converted shares”);
acquisition of shares through exercise of rights under securities issued outside of Korea;
acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends;
over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded;
acquisition of shares by direct investment under the Foreign Investment Promotion Law;
acquisition and disposal of shares on an overseas stock exchange market, if such shares are simultaneously listed on the KRX KOSPI Market or KRX KOSDAQ Market and such overseas stock exchange;
arm’s length transactions between foreigners in the event all such foreigners belong to an investment group managed by the same person; and
acquisition and disposal of shares through alternative trading systems.
For over-the-counter ~~transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded;~~
• ~~acquisition of shares by direct investment under the Foreign Investment Promotion Law;~~
• ~~acquisition and disposal of shares on an overseas stock exchange market, if such shares are simultaneously listed on the KRX KOSPI Market or KRX KOSDAQ Market and such overseas stock exchange; and~~
• ~~arm’s length transactions between foreigners in the event all such foreigners belong to an investment group managed by the same person.~~
~~Forover-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

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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~~FSS prior to making any such investment; however, the registration requirement does not apply to foreign investors who acquire converted shares with the intention of selling such converted shares within three months from the date of acquisition of the converted shares or who acquire the shares in anover-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~~FSS will issue to the foreign investor an investment registration card which must be presented each time the foreign investor opens a brokerage account with a financial investment company or financial institution in Korea. Foreigners eligible to obtain an investment registration card include foreign nationals
who have not been residing in Korea for a consecutive period of six months or longer, foreign governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organizations, corporations incorporated under foreign laws and any person in any additional category designated by decree promulgated under the ~~Financial Investment Services and Capital Markets Act.~~FSCMA. All Korean offices of a foreign corporation as a group are treated as a separate foreigner from the offices of the corporation outside Korea for the purpose of investment registration. However, a foreign corporation or depositary issuing depositary receipts may obtain one or more investment registration cards in its name in certain circumstances as described in the relevant regulations.
Upon a foreign investor’s purchase of shares through the KRX KOSPI Market or the KRX KOSDAQ Market, no separate report by the investor is required because the investment registration card system is designed to control and oversee foreign investment through a computer system. However, where a foreign investor acquires or sells shares outside the KRX KOSPI Market and the KRX KOSDAQ Market, such acquisition or sale of shares must be reported by the foreign investor or such foreign investor’s standing proxy to ~~the Governor of the Financial Supervisory Service, or~~ the Governor at the time of each such acquisition or sale; provided, however, that a foreign investor must ensure that any acquisition or sale of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market in the case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor by the Korea Securities Depository, financial investment companies with a dealing or brokerage license or securities finance companies engaged to facilitate such transaction. In the event a foreign investor desires to acquire or sell shares outside the KRX KOSPI Market or the KRX KOSDAQ Market and the circumstances in connection with such sale or acquisition do not fall within the exceptions made for certain limited circumstances described above, then the foreign investor must obtain the prior approval of the Governor. In addition, in the event a foreign investor acquires or sells shares outside the KRX KOSPI Market or the KRX KOSDAQ Market, a prior report to the Bank of Korea may also be required in certain circumstances. A foreign investor must appoint one or more standing proxies among the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and certain eligible foreign custodians which will act as a standing proxy to exercise shareholders’ rights, or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. Generally, a foreign investor may not permit any person, other than his, her or its standing proxy, to exercise rights relating to its shares or perform any tasks related thereto on his, her or its behalf. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor in cases deemed inevitable by reason of conflict between laws of Korea and the home country of the foreign investor.
Certificates evidencing 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, her or its custodian deposits the shares with the Korea Securities Depository. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the

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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~~Trade, Industry and Energy of Korea, which delegates its authority to foreign exchange banks or the Korea Trade-Investment Promotion Agency under the relevant regulations. The acquisition of our shares by a foreign investor is also subject to the restrictions prescribed in the Telecommunications Business Act. The Telecommunications Business Act generally limits the maximum aggregate foreign shareholdings in us to 49.0% of
the outstanding shares. A foreigner who has acquired shares in excess of such restriction described above may not exercise the voting rights with respect to the shares exceeding such limitations and may be subject to corrective orders.
Under the Foreign Exchange Transaction Laws, a foreign investor who intends to make a portfolio investment in shares of a Korean company listed on the KRX KOSPI Market or the KRX KOSDAQ Market must designate a foreign exchange bank at which he, she or it must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the foreign currency account may be remitted abroad without any governmental approval.
Dividends on shares are paid in Won. No governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any such shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any such shares held by a non-resident of Korea must be deposited either in a Won account with the investor’s financial investment companies with a securities dealing, brokerage or collective investment license or the investor’s Won account. Funds in the investor’s Won account may be transferred to such investor’s foreign currency account or withdrawn for local living expenses, provided that any withdrawal of local living expenses in excess of a certain amount is reported to the tax authorities by the foreign exchange bank at which the Won account is maintained. Funds in the investor’s Won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.
Financial investment companies with a securities dealing, brokerage or collective investment license are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these financial investment companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors, without the investors having to open their own accounts with foreign exchange banks.
Item 10.E. Taxation
United States Taxation
This summary describes certain material U.S. federal income tax consequences for a U.S. holder (as defined below) of acquiring, owning, and disposing of common shares or ADSs. This summary applies to you only if you hold ~~the~~our common shares or ADSs as capital assets for tax purposes. This summary does not apply to you if you are a member of a class of holders subject to special rules, such as:
•
a dealer in securities or currencies;

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a trader in securities that elects to use a mark-to-market method of accounting for securities holdings;
a bank;
a life insurance company;
a tax-exempt organization;
• ~~a trader in securities that elects to use amark-to-market~~ ~~method of accounting for securities holdings;~~
• ~~a bank;~~
• ~~a life insurance company;~~
• ~~a tax-exempt organization;~~
• ~~a person that holds common shares or ADSs that are a hedge or that are hedged against interest rate or currency risks;~~
• ~~a person that holds common shares or ADSs as part of a straddle or conversion transaction for tax purposes;~~
• ~~a person whose functional currency for tax purposes is not the U.S. dollar; or~~
• ~~a person that owns or is deemed to own 10% or more of any class of our stock.~~
a person that holds common shares or ADSs that are a hedge or that are hedged against interest rate or currency risks;
a person that holds common shares or ADSs as part of a straddle or conversion transaction for tax purposes;
a person whose functional currency for tax purposes is not the U.S. dollar; or
a person that owns or is deemed to own 10.0% or more of any class of our stock.
This summary is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations promulgated thereunder, and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisers concerning the U.S. federal, state, local, and other tax consequences of purchasing, owning, and disposing of common shares or ADSs in your particular circumstances.
For purposes of this summary, you are a “U.S. holder” if you are the beneficial owner of a common share or an ADS and are:
a citizen or resident of the United States;
a U.S. domestic corporation; or
• ~~a citizen or resident of the United States;~~
• ~~a U.S. domestic corporation; or~~
• ~~otherwise subject to U.S. federal income tax on a net income basis with respect to income from the common share or ADS.~~
otherwise subject to U.S. federal income tax on a net income basis with respect to income from the common share or ADS.
In general, if you are the beneficial owner of ADSs, you will be treated as the beneficial owner of the common shares represented by those ADSs for U.S. federal income tax purposes, and no gain or loss will be recognized if you exchange an ADS for the common share represented by that ADS.
Dividends
The gross amount of cash dividends that you receive (prior to deduction of Korean taxes) generally will be subject to U.S. federal income taxation as foreign source dividend income and will not be eligible for the dividends received deduction. Dividends paid in Won will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of your receipt of the dividend, in the case of common shares, or the depositary’s receipt, in the case of ADSs, regardless of whether the payment is in fact converted into U.S. dollars. If such a dividend is converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual ~~prior to January 1, 2013~~ with respect to the ADSs will be subject to taxation at a maximum rate of ~~15%~~20.0% if the dividends are “qualified dividends”. Dividends paid on the ADSs will be treated as qualified dividends if ~~(i)~~(1) the ADSs are readily tradable on an established securities market in the United States and ~~(ii)~~(2) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company as defined for U.S. federal income tax purposes (“PFIC”). The ADSs are listed on the ~~New York Stock Exchange,~~NYSE, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. Based on our audited financial statements, as well as relevant market and shareholder data, we believe that we were not a PFIC with respect to our ~~2010~~2013 taxable year. In addition, based on our audited financial statements and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our ~~2011~~2014 taxable year.

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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~~our common shares or ADSs (and not entered into specified kinds of hedging transactions) for at least a16-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. holder’s expected economic profit is insubstantial.
The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions involve the application of complex rules that depend on a U.S. holder’s particular circumstances. You should consult your own tax advisers regarding the creditability or deductibility of such taxes.
U.S. Information Reporting and Backup Withholding Rules
Payments of dividends and sales proceeds that are made within the United States or through certainU.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the holder ~~(i)~~(1) is a corporation or other exempt recipient and demonstrates this when required or ~~(ii)~~(2) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons generally are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of itsnon-U.S. status in connection with payments received within the United States or through aU.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

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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%~~22.0% (including local income tax) or such lower rate as is applicable under a treaty between Korea and such Non-resident Holder’s country of tax residence. Free distributions of shares representing a capitalization of certain capital surplus reserves may be subject to Korean withholding taxes.
The tax is withheld by the payer of the dividend. 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%~~(1) 11.0% (including local income tax) of the gross proceeds realized or ~~(ii) 22%~~(2) 22.0% (including local income tax) of the net realized gains (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs), unless exempt from Korean income taxation under the effective Korean tax treaty with the Non-resident Holder’s country of tax residence.
However, a Non-resident Holder will not be subject to Korean income taxation on capital gains realized upon the sale of the common shares through the KRX KOSPI Market if the Non-resident Holder ~~(i)~~(1) has no permanent establishment in Korea and ~~(ii)~~(2) did not or has not owned (together with any shares owned by any entity with certain special relationship with such Non-resident Holder) ~~25%~~25.0% or more of the total issued and outstanding shares of us at any time during the calendar year in which the sale occurs and during the five calendar years prior to the calendar year in which the sale occurs.
It should be noted that capital gains earned by you (regardless of whether you have a permanent establishment in Korea) from a transfer of ADSs outside Korea will generally be exempt from Korean income taxation, provided that the ADSs are deemed to have been issued overseas. If and when an owner of the underlying common shares transfers the ADSs following the conversion of the underlying shares for ADSs, such person will not be exempt from Korean income taxation.
Inheritance Tax and Gift Tax
Korean inheritance tax is imposed upon (1) all assets (wherever located) of the deceased if at the time of his death he was domiciled 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~~our common shares), the securities transaction tax is imposed generally at the rate of ~~(i)~~(1) 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)~~(2) subject to certain exceptions, 0.5% of the sales price of such shares if traded outside the KRX KOSPI Market.

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Securities transaction tax or the agricultural and fishery special surtax is not applicable if ~~(i)~~(1) the shares or rights to subscribe for shares are listed on a designated foreign stock exchange and ~~(ii)~~(2) the sale of the shares takes place on such exchange.
Securities transaction tax, if applicable, must be paid by the transferor of the shares or rights, in principle. When the transfer is effected through a securities settlement company, such settlement company is generally required to withhold and pay (to the tax authority) the tax, and when such transfer is made through a financial investment company with a brokerage license only, such company is required to withhold and pay the tax. Where the transfer is effected by a Non-resident Holder without a permanent establishment in Korea, other than through a securities settlement company or a financial investment company with a brokerage license, the transferee is required to withhold the securities transaction tax. Failure to do so will result in the imposition of penalties equal to the sum of ~~(i)~~(1) between ~~10%~~10.0% to ~~40%~~40.0% of the tax amount due, depending on the nature of the improper reporting, and ~~(ii)~~(2) 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%5.0% and 16.5% (including local income tax), and the tax on capital gains derived by a non-resident from the transfer of securities issued by a Korean company is often eliminated.
Each Non-resident Holder of common shares should inquire for itself whether it is entitled to the benefits of a tax treaty with Korea. It is the responsibility of the party claiming the benefits of a tax treaty in respect of interest,
dividend, capital gains or “other income” to submit to us (or our agent), the purchaser or the financial investment company with a brokerage license, as the case may be, prior to or at the time of payment, such evidence of tax residence of the party claiming the treaty benefit as the Korean tax authorities may require in support of its claim for treaty protection. In the absence of sufficient proof, we (or our agent), the purchaser or the financial investment company with a brokerage license, as the case may be, must withhold tax at the normal rates.
Furthermore, in order for a non-resident of Korea to obtain the benefits of tax exemption on certain Korean source income (e.g., capital gains and interest) under an applicable tax treaty, Korean tax law requires suchnon-resident (or its agent) to submit to the payer of such Korean source income an application for a tax exemption along with a certificate of tax residency of such non-resident issued by a competent authority of the non-resident’s country of tax residence, subject to certain exceptions. The payer of such Korean source income, in turn, is required to submit such application to the relevant district tax office by the ninth day of the month following the date of the first payment of such income.
For a non-resident of Korea to obtain the benefits of treaty-reduced tax rates on certain Korean source income (e.g., capital gains and interest) under an applicable tax treaty, Korean tax law requires such non-resident (or its agents) to submit to the payer of such Korean source income an application for treaty-reduced tax rates prior to receipt of such Korean source income; provided, however, that an owner of ADSs who is a non-resident of Korea is not required to submit such application, if the Korean source income on the ADSs is paid through an account opened at the Korea Securities Depository by a foreign depository.
At present, Korea has not entered into any tax treaty relating to inheritance or gift tax.
Item 10.F. Dividends and Paying Agents
Not applicable.
Item 10.G. Statements by Experts
Not applicable.
Item 10.H. Documents on Display
We file reports, including annual reports onForm 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 at1-800-SEC-0330. Any filings we make electronically will be available to the public over the Internet at the SEC’s Website athttp://www.sec.gov.

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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,~~65, Eulji-ro, Jung-gu, Seoul100-999, Korea.
Item 10.I. Subsidiary Information
Not applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
~~Exchange Rate and Interest Rate Risks~~
We are exposed to foreign exchange rate and interest rate risk primarily associated with underlying ~~liabilities.~~ liabilities and to equity price risk as a result of our investment in equity instruments.
We have entered intofloating-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~~US$250 million of bonds issued in ~~November 2007, Yen 3 billion~~December 2011, SG$65 million of bonds issued in ~~January 2009~~December 2011 and ~~Yen 5 billion~~US$300 million of bonds issued in March ~~2009. We have also entered intofloating-to-fixed~~ interest rate swap contracts to hedge the interest rate risks with respect to long-term floating rate borrowings with face amounts totaling Won 500 billion borrowed in July and August 2008 and floating rate bonds with face amounts totaling US$220 million issued in April 2009.2013. In addition, we have entered intofixed-to-fixed cross currency swap contracts to hedge the foreign currency risks of US$~~300 million of bonds issued in April 2004 and US$~~400 million of bonds issued in July ~~2007. In addition, SK Broadband, one of our subsidiaries, has entered into afixed-to-fixed~~ ~~cross currency swap contract to hedge the foreign currency risks of US$500~~2007, CHF 300 million of bonds issued in ~~February 2005.~~
June 2012, US$700 million of bonds issued in November 2012 and AUD 300 million of bonds issued in January 2013. See note 2720 of the notes to our consolidated financial statements. We may consider in the future entering into other such transactions solely for hedging purposes.
The following discussion and tables, which constitute “forward looking statements” that involve risks and uncertainties, summarize our market-sensitive financial instruments including fair value, maturity and contract terms. These tables address market risk only and do not present other risks which we face in the normal course of business, including country risk, credit risk and legal risk.
Exchange Rate Risk
Korea is our main market and, therefore, substantially all of our cash flow is denominated in Won. We are exposed to foreign exchange risk related to foreign currency denominated liabilities. These liabilities relate primarily to foreign currency denominated debt, ~~all~~primarily in Dollars, Franc and ~~Yen.~~Australian Dollars. A ~~10%~~10.0% 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 ~~1.7%~~0.06% or Won ~~41.1~~1.7 billion as of December 31, ~~2010.~~

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2013. For a further discussion of our exchange rate risk exposures, see note 31(1) of the notes to our consolidated financial statements.
Interest Rate Risk
We are also subject to market risk exposure arising from changing interest rates. The following table summarizes the carrying amounts and fair values, maturity and contract terms of our exchange rate and interest sensitive short-term and long-term liabilities as of December 31, ~~2010:~~

Maturities
2011 2012 2013 2014 2015 Thereafter Total Fair Value
(In billions of Won, except for percentage data)

Local currency:
Fixed rate W 818.3 W 12.3 W 601.8 W 198.2 W 196.5 W 658.3 W 2,485.3 W 2,601.2
Average weighted rate(1) 5.68 % 5.28 % 5.26 % 5.16 % 5.13 % 5.44 %
Variable rate 761.1 — — — — — 761.1 761.1
Average weighted rate(1) 4.53 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
Sub-total 1,579.4 12.3 601.8 198.2 196.5 658.3 3,246.4 3,362.3
Foreign currency:
Fixed rate 341.5 570.7 10.3 380.2 16.1 470.5 1,789.3 2,056.1
Average weighted rate(1) 4.25 % 7.32 % 0.00 % 2.01 % 0.00 % 6.42 %
Variable rate — 534.4 113.9 — 34.4 — 682.7 682.7
Average weighted rate(1) 0.00 % 2.47 % 1.23 % 0.00 % 7.82 % 0.00 %
Sub-total 341.5 1,105.1 124.2 380.2 50.5 470.5 2,472.0 2,738.8
Total W 1,920.9 W 1,117.4 W 726.0 W 578.4 W 247.0 W 1,128.7 W 5,718.4 W 6,101.1
2013:
Maturities
2014 2015 2016 2017 2018 Thereafter Total Fair Value
(In billions of Won, except for percentage data)
Local currency:

Fixed-rate
￦ 877.8    ￦ 566.8    ￦ 584.9    ￦ 222.7    ￦ 195.0    ￦ 946.4    ￦ 3,393.6    ￦ 3,475.8
Average weighted rate(1)
4.23 % 4.22 % 5.20 % 3.73 % 5.14 % 3.42 %
Sub-total
877.8    566.8    584.9    222.    195.0    946.4    3,393.6    3,475.8
Foreign currency:

Fixed-rate
104.9    12.2    12.2    647.2    1,055.7    458.3    2,290.5    2,334.3
Average weighted rate(1)
1.75 % 1.70 % 1.70 % 3.07 % 2.37 % 6.26 %
Variable rate
316.7    —    —    —    —    315.1    631.8    631,8
Average weighted rate(1)
1.78    —    —    —    —    1.13
Sub-total
421.6    12.2    12.2    647.2    1,055.7    773.4    2,922.3    2,966.1
Total
￦ 1,299.4    ￦ 579.0    ￦ 597.1    ￦ 869.9    ￦ 1,250.7    ￦ 1,719.8    ￦ 6,315.9    ￦ 6,441.9
(1) Weighted average rates of the portfolio at the period end.
A 1.0% point change in interest rates would result in a change of approximately ~~3.45%~~15.2% in the fair value of our liabilities resulting in a Won ~~151.3~~979.4 billion change in their value as of December 31, ~~2010~~2013 and a Won ~~14.4~~3.2 billion annualized change in interest expenses.
For a further discussion of our interest rate risk exposures, see note 31(1) of the notes to our consolidated financial statements.
Equity Price Risk
We are also subject to market risk exposure arising from changes in the equity securities market, which affect the fair value of our equity portfolio. As of December 31, 2013, 2012 and 2011, a 10.0% increase in the equity indices where our available-for-sale equity instruments are listed, with all other variables held constant, would have increased our total equity by Won 63.4 billion, Won 58.4 billion and Won 119.2 billion, respectively, with a 10.0% decrease in the equity index having the opposite effect. The foregoing sensitivity analysis assumes that all variables other than changes in the equity index are held constant, and that our available-for-sale equity instruments had moved according to the historical correlation to the index, and as such, does not reflect any correlation between the equity index and other variables. For a further discussion of our equity price risk exposures, see note 31(1) of the notes to our consolidated financial statements.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
~~12.A.~~  ~~Debt Securities~~
Item 12.A. Debt Securities
Not applicable.
~~12.B.~~  ~~Warrants and Rights~~
Item 12.B. Warrants and Rights
Not applicable.
Item 12.C. ~~12.C.~~  Other Securities
~~Not applicable.~~
Not applicable.

Item 12.D.
~~12.D.~~  American Depositary Shares
~~Fees and Charges under Deposit Agreement~~
The ADR depositary will charge the party receiving ADSs up to $5.00 per 100 ADSs (or fraction thereof), provided that the ADR depositary has agreed to waive such fee as would have been payable by us in the case of (i) an offering of ADSs by us or (ii) any distribution of shares of common stock or any rights to subscribe for additional shares of common stock. The ADR depositary will not charge the party to whom ADSs are delivered against deposits. The ADR depositary will charge the party surrendering ADSs for delivery of deposited securities up to $5.00 per 100 ADSs (or fraction thereof) surrendered. The ADR depositary will also charge the party to whom any cash distribution, or for whom the sale or exercise of rights or other corporate action involving distributions to shareholders, is made with respect to ADSs up to $0.02 per ADS held plus the expenses of the ADR depositary on a per-ADS basis. We will pay the expenses of the ADR depositary and any entity acting as registrar for the shares only

~~113~~
Fees and Charges under Deposit Agreement
The ADR depositary will charge the party receiving ADSs up to $5.00 per 100 ADSs (or fraction thereof), provided that the ADR depositary has agreed to waive such fee as would have been payable by us in the case of (1) an offering of ADSs by us or (2) any distribution of shares of common stock or any rights to subscribe for additional shares of common stock. The ADR depositary will not charge the party to whom ADSs are delivered against deposits. The ADR depositary will charge the party surrendering ADSs for delivery of deposited securities up to $5.00 per 100 ADSs (or fraction thereof) surrendered. The ADR depositary will also charge the party to whom any cash distribution, or for whom the sale or exercise of rights or other corporate action involving distributions to shareholders, is made with respect to ADSs up to $0.02 per ADS held plus the expenses of the ADR depositary on a per-ADS basis. We will pay the expenses of the ADR depositary and any entity acting as registrar for the shares only as specified in the deposit agreement. The ADR depositary will pay any other charges and expenses of the ADR depositary and the entity acting as registrar for the shares.
Holders of ADRs must pay (1) taxes and other governmental charges, (2) share transfer registration fees on deposits of shares of common stock, (3) such cable, telex, facsimile transmission and delivery expenses as are expressly provided in the deposit agreement to be at the expense of persons depositing shares of common stock or holders of ADRs and (4) such reasonable expenses as are incurred by the ADR depositary in the conversion of foreign currency into United States dollars.
Notwithstanding any other provision of the deposit agreement, in the event that the ADR depositary determines that any distribution in property (including shares or rights to subscribe therefor or other securities) is subject to any tax or governmental charges which the ADR depositary is obligated to withhold, the ADR depositary may dispose of all or a portion of such property (including shares and rights to subscribe therefor) in such amounts and in such manner as the ADR depositary deems necessary and practicable to pay such taxes or governmental charges, including by public or private sale, and the ADR depositary will distribute the net proceeds of any such sale or the balance of any such property after deduction of such taxes or governmental charges to the holders of ADSs entitled thereto in proportion to the number of ADSs held by them respectively.
~~as specified in the deposit agreement. The ADR depositary will pay any other charges and expenses of the ADR depositary and the entity acting as registrar for the shares.~~
Holders of ADRs must pay (i) taxes and other governmental charges, (ii) share transfer registration fees on deposits of shares of common stock, (iii) such cable, telex, facsimile transmission and delivery expenses as are expressly provided in the deposit agreement to be at the expense of persons depositing shares of common stock or holders of ADRs and (iv) such reasonable expenses as are incurred by the ADR depositary in the conversion of foreign currency into United States dollars.
Notwithstanding any other provision of the deposit agreement, in the event that the ADR depositary determines that any distribution in property (including shares or rights to subscribe therefor or other securities) is subject to any tax or governmental charges which the ADR depositary is obligated to withhold, the ADR depositary may dispose of all or a portion of such property (including shares and rights to subscribe therefor) in such amounts and in such manner as the ADR depositary deems necessary and practicable to pay such taxes or governmental charges, including by public or private sale, and the ADR depositary will distribute the net proceeds of any such sale or the balance of any such property after deduction of such taxes or governmental charges to the holders of ADSs entitled thereto in proportion to the number of ADSs held by them respectively.
All such charges may be changed by agreement between the ADR depositary and us at any time and from time to time, subject to the deposit agreement. The right of the ADR depositary to receive payment of fees, charges and expenses shall survive the termination ~~of this deposit agreement and, as to any depositary, the resignation or removal of such depositary pursuant to the deposit agreement.~~
~~For a detailed summary of the deposit agreement, see “Item 10.B. Memorandum and Articles of Incorporation — Description of American Depositary Shares”.~~
~~Payments made by ADS Depositary~~
~~All fees and other direct and indirect payments reimbursed by the depositary are as following.~~

Year Ended
December 31,
2010
(In dollars)

Expenses for preparation of SEC filing and submission $ 1,062,591
Listing Fees $ 176,450
Education/Training $ 268,368
Corporate Action $ 833,025
Miscellaneous $ 51,230
Total
$ 2,391,664
~~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)~~ ~~and15d-15(e)~~ ~~under the Exchange Act, as of December 31, 2010. There are inherent limitations to the effectiveness of~~

~~114~~
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 SEC’s 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.
~~Management’s Annual Report on Internal Control Over Financial Reporting~~
~~Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inRules 13a-15(f)~~ ~~and15d-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, 2010. The effectiveness of our internal control over financial reporting as of December 31, 2010 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 thisForm 20-F.~~
~~Changes in Internal Control Over Financial Reporting~~
There has been no change in our internal control over financial reporting during 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
~~Item 16.~~ ~~RESERVED~~
~~Item 16A.~~ ~~AUDIT COMMITTEE FINANCIAL EXPERT~~
At our annual shareholders’ meeting in March 2011, our shareholders re-elected the following two members of the Audit Committee: Jay Young Chung 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 deposit agreement and, as to any depositary, the resignation or removal of such depositary pursuant to the deposit agreement.
For a detailed summary of the deposit agreement, see “Item 10.B. Memorandum and Articles of Incorporation — Description of American Depositary Shares.”
Payments made by ADS Depositary
All fees and other direct and indirect payments reimbursed by the depositary are as following:
   Year Ended
December 31,
2013
   (In Dollars)
Expenses for preparation of SEC filing and submission
   $ 843,100
Listing Fees
   $ 508,597
Education/Training
   $ 396,288
Corporate Action
   $ 746,969
Miscellaneous
   $ 748,138


Total
   $ 3,243,091


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 Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2013. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as of December 31, 2013. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (1992 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS as issued by the IASB. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2013.
Report of the Independent Registered Public Accounting Firm on the Effectiveness of our Internal Control Over Financial Reporting
The report of our independent registered public accounting firm, KPMG Samjong Accounting Corp. (“KPMG Samjong”), on the effectiveness of our internal control over financial reporting as of December 31, 2013 is included 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 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16. RESERVED
Item 16A. The board of directors have approved this re-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.

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AUDIT COMMITTEE FINANCIAL EXPERT
~~Item 16B.~~ ~~CODE OF ETHICS~~
~~Code of Ethics for Chief Executive Officer, Chief Financial Officer and Controller~~
We have a code of ethics that applies to our Chief Executive 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.
At our annual shareholders’ meeting in March 2014, our shareholders elected Jae Hyeon Ahn as a new member of our audit committee, replacing the resigned director and member of our audit committee, Jae Ho Cho and the resigned member of our audit committee, Jay Young Chung. The board of directors have approved this newly elected member of our audit committee. Dae Shick Oh is the chairman of our audit committee and was elected and designated an “audit committee financial expert” within the meaning of this Item 16A at a meeting of the board of directors in April 2014. The board of directors have further determined that Dae Shick Oh is independent within the meaning of applicable SEC rules and the listing standards of the NYSE. See “Item 6.C. Board Practices — Audit Committee” for additional information regarding our audit committee.
Item 16B. CODE OF ETHICS
Code of Ethics for Chief Executive Officer, Chief Financial Officer and Controller
We have a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, senior accounting officers and employees. We also have internal control and disclosure policy designed to promote full, fair, accurate, timely and understandable disclosure in all of our reports and publicly filed documents. A copy of our code of ethics is available on our website atwww.sktelecom.com. If we amend the provisions of our code of ethics that apply to our Chief Executive Officer, Chief Financial Officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website.
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The table sets forth the fees we paid to our independent registered public accounting firm KPMG Samjong and its affiliates for the years ended December 31, 2013 and 2012:
   Year Ended December 31,
   2013    2012
   (In millions of Won)
Audit Fees
   ￦ 2,102.0       ￦ 1,516.2
Audit-Related Fees
   ￦ 4.0       ￦ 83.0
Tax Fees
   ￦ 181.8       ￦ 29.6
All Other Fees
   ￦ 9.0       ￦ 35.0




Total
   ￦ 2,296.8       ￦ 1,663.8




“Audit Fees” are the aggregate fees billed by KPMG Samjong for the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements.
“Audit-Related Fees” are fees charged by KPMG Samjong for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” This category comprises fees billed for advisory services associated with our financial reporting.
“Tax Fees” are fees for professional services rendered by KPMG Samjong for tax compliance, tax advice on actual or contemplated transactions and tax planning services.
~~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, 2009 and 2010, respectively:~~

Years Ended December 31,
2009 2010
(In millions of Won)

Audit Fees W 2,185.3 W 2,256.8
Audit-Related Fees W 252.2 W 360.8
Tax Fees W 177.3 W 177.7
All Other Fees — —
Total
W 2,614.8 W 2,795.3
~~“Audit Fees”~~are the aggregate fees billed by Deloitte Anjin LLC in 2009 and 2010, 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 2009 and 2010, 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 2009 and 2010, respectively, for tax compliance, tax advice on actual or contemplated transactions and tax planning services.~~
Fees disclosed under the category “All Other Fees” are fees for professional services rendered by ~~Deloitte Anjin LLC in 2009 and 2010, respectively,~~KPMG Samjong, primarily for business ~~consulting.~~
consulting in connection with our internal control over financial reporting.
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,~~KPMG Samjong, our independent registered public accounting firm. Our audit committee’s policy regarding the pre-approval of non-audit services to be provided to us by our independent auditors is that all such services shall be pre-approved by ~~the Audit Committee.~~our audit committee. Non-audit services that are prohibited to be provided to us by our independent auditors under the rules of the SEC and applicable law may not be pre-approved. In addition, prior to the granting of any pre-approval, our audit committee must be satisfied that the performance of the services in question will not compromise the independence of our independent registered public accounting firm.
Our audit committee did not pre-approve any non-audit services under thede minimis exception ofRule 2-01 (c)(7)(i)(C) ofRegulation S-X as promulgated by the SEC.
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.

~~116~~
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~~
Neither we nor any “affiliated ~~purchasers” (as~~purchaser,” as defined inRule 10b-18(a)(3) of the Exchange ~~Act)~~Act, purchased any of our equity securities during the ~~fiscal year ended December 31, 2010.~~

Total Number of
Maximum Number of
Shares Purchased as
Shares That May Yet
Part of Publicly
be Purchased Under
Total Number of
Average Price Paid
Announced Plans or
the Plans or
Period 2010
Shares Purchased(1) per Share Program(2) Program(2)

January — — — —
February — — — —
March — — — —
April — — — —
May — — — —
June — — — —
July 135,000 W 166,255 135,000 1,115,000
August 435,000 165,796 435,000 680,000
September 370,074 165,403 370,074 309,926
October 309,926 174,750 309,926 —
November — — — —
December — — — —
Total 1,250,000 (1) W 167,949 1,250,000 —
period covered by this annual report.
~~(1)~~ ~~Purchased through open market transactions.~~
~~(2)~~ ~~On July 22, 2010, we announced a plan to repurchase up to 1,250,000 common shares during the period between July 23, 2010 and October 22, 2010.~~
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
Item 16G. CORPORATE GOVERNANCE
The following is a summary of the significant differences between the ~~New York Stock Exchange’s~~NYSE’s corporate governance standards and those that we follow under Korean law.
NYSE Corporate Governance Standards

Our Corporate Governance Practice
Director Independence

Listed companies must have a majority of independent directors.    Of the eight members of our board of directors, five are independent directors.
Executive Session

Listed companies must hold meetings solely attended by independent directors to more effectively check and balance management directors.    Our ~~Audit Committee,~~audit committee, which is comprised solely of four 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 Nomination Committee~~independent director nomination committee composed of independent directors and management directors.

~~117~~
Audit Committee

~~NYSE Corporate Governance Standards~~
~~Our Corporate Governance Practice~~
~~Audit Committee~~
Listed companies must have an audit committee that satisfies the requirements ofRule 10A-3 under the Exchange Act.    We maintain an ~~Audit Committee~~audit committee comprised solely of four independent directors.
NYSE Corporate Governance Standards
Our Corporate Governance Practice
Audit Committee Additional Requirements

Listed companies must have an audit committee that is composed of more than three directors.    Our ~~Audit Committee~~audit committee has four 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 company’s equity compensation plan.    We currently have two equity compensation plans: a stock option plan for officers and directors and employee stock ownership plan for employees (“ESOP”). We manage such compensation plans in compliance with the applicable laws and our articles of incorporation, provided that, under certain limited circumstances, the grant of stock options or matters relating to ESOP are not subject to shareholders’ approval under Korean law.
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 atwww.sktelecom.com.
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
PART III
Item 17. FINANCIAL STATEMENTS
Not applicable.
Item 18. FINANCIAL STATEMENTS
~~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, 2008, 2009 and 2010~~ ~~F-4~~
~~Consolidated statements of income for the years ended December 31, 2008, 2009 and 2010~~ ~~F-6~~
~~Consolidated statements of stockholders’ equity for the years ended December 31, 2008, 2009 and 2010~~ ~~F-8~~
~~Consolidated statements of cash flows for the years ended December 31, 2008, 2009 and 2010~~ ~~F-10~~
~~Notes to consolidated financial statements for the years ended December 31, 2008, 2009 and 2010~~ ~~F-13~~
~~118~~
~~Item 19.~~ ~~EXHIBITS~~

Number

Description

1 .1 Articles of Incorporation (incorporated by reference to Exhibit 1.1 to the Registrant’s Annual Report on Form 20-F filed on June 30, 2010)
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 (incorporated by reference to Exhibit 2.1 to the Registrant’s Annual Report on Form 20-F filed on June 30, 2006)
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, as amended (English translation)
15 .5 Amendment to the Government Organization Act (incorporated by reference to Exhibit 15.5 to the Registrant’s Annual Report on Form 20-F filed on June 30, 2008)

~~119~~
~~INDEX OF FINANCIAL STATEMENTS~~
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements for the years ended December 31, 2013 and 2012
   F-2
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements for the year ended December 31, 2011
F-3
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
F-4
Consolidated Statements of Financial Position as of December 31, 2013 and 2012
F-5
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011
F-7
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
F-8
Consolidated Statements of Changes in Equity for the years ended December 31, 2013, 2012 and 2011
F-9
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
F-11
Notes to the Consolidated Financial Statements for the years ended December 31, 2013, 2012 and 2011
F-13
Financial Statements of SK Hynix
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements for the year ended December 31, 2013
G-1
Consolidated Statements of Financial Position as of December 31, 2013 and 2012
G-2
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2013 and 2012
G-4
Unaudited Consolidated Statements of Changes in Equity for the year ended December 31, 2012
G-5
Consolidated Statements of Changes in Equity for the year ended December 31, 2013
G-6
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012
G-7
Notes to the Consolidated Financial Statements for the years ended December 31, 2013 and 2012
G-8
Item 19. EXHIBITS
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 (incorporated by reference to Exhibit 2.1 to the Registrant’s Annual Report on Form 20-F filed on June 30, 2006)
  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) (incorporated by reference to Exhibit 15.1 to the Registrant’s Annual Report on Form 20-F filed on April 30, 2013)
15.2 Enforcement Decree of the Framework Act on Telecommunications, as amended (English translation) (incorporated by reference to Exhibit 15.2 to the Registrant’s Annual Report on Form 20-F filed on June 30, 2011)
15.3 Telecommunications Business Act, as amended (English translation)
15.4 Enforcement Decree of the Telecommunications Business Act, as amended (English translation)
15.5 Government Organization Act, as amended (English translation)
INDEX OF FINANCIAL STATEMENTS
Index of Financial Statements
F-1
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements for the years ended December 31, 2013 and 2012
F-2
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements for the year ended December 31, 2011
   F-3
~~Consolidated statement~~Report of ~~financial position as of December 31, 2008, 2009 and 2010~~Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
   F-4
Consolidated ~~statements~~Statements of ~~income~~Financial Position as of December 31, 2013 and 2012
F-5
Consolidated Statements of Income for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011
   ~~F-6~~F-7
Consolidated ~~statements~~Statements of ~~stockholders’ equity~~Comprehensive Income for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011
   F-8
Consolidated ~~statements~~Statements of ~~cash flows~~Changes in Equity for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011
   ~~F-10~~F-9
~~Notes to consolidated financial statements~~Consolidated Statements of Cash Flows for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011
F-11
Notes to the Consolidated Financial Statements for the years ended December 31, 2013, 2012 and 2011
   F-13
Financial Statements of SK Hynix
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements for the year ended December 31, 2013
G-1
Consolidated Statements of Financial Position as of December 31, 2013 and 2012
G-2
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2013 and 2012
G-4
Unaudited Consolidated Statements of Changes in Equity for the year ended December 31, 2012
G-5
Consolidated Statements of Changes in Equity for the year ended December 31, 2013
G-6
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012
G-7
Notes to the Consolidated Financial Statements for the years ended December 31, 2013 and 2012
G-8

~~F-1~~
Report of Independent Registered Public Accounting Firm
~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~
~~ON CONSOLIDATED FINANCIAL STATEMENTS~~
To ~~the~~The Board of Directors and ~~Stockholders of~~
Shareholders
SK Telecom Co., Ltd.
:
We have audited the accompanying consolidated statements of financial position of SK Telecom Co., Ltd. and subsidiaries ~~(the “Company”)~~ as of December 31, ~~2008, 2009~~2013 and ~~2010,~~2012, and the related consolidated statements of income, ~~stockholders’~~comprehensive income, changes in equity and cash flows for ~~each~~the years then ended. These consolidated financial statements are the responsibility of SK Telecom Co., Ltd.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The accompanying consolidated financial statements of SK Telecom Co., Ltd. and subsidiaries for the ~~three years in the period~~year ended December 31, ~~2010 (all~~2011, were audited by other auditors whose report thereon dated March 13, 2012 (April 30, 2013, as to the effects of the retrospective adjustments of the broadcasting business of SK Telink Co., Ltd, as a discontinued operation as described in note 37 and the related retrospective segment presentation described in note 5), expressed an unqualified opinion on those financial statements.
We conducted our audits in ~~Korean won)~~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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SK Telecom Co., Ltd. and subsidiaries as of December 31, 2013 and 2012 and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
As further described in note 37 (1)(a) to the consolidated financial statements, SK Telecom Co., Ltd. disposed of a controlling equity interest in Loen Entertainment, Inc., during the year ended December 31, 2013. SK Telecom Co., Ltd. presented the results of operations of Loen Entertainment, Inc. as a discontinued operation in its consolidated financial statements for the year ended December 31, 2013. The comparative information in the consolidated financial statements for the years ended December 31, 2012 and 2011 has been restated to present Loen Entertainment as a discontinued operation. We have audited the retrospective presentation of Loen Entertainment, Inc. as a discontinued operation in 2011, as described in note 37(1)(a), and the related retrospective segment presentation as described in note 5.   In our opinion, such retrospective presentations are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2011 consolidated financial statements of SK Telecom Co., Ltd. and subsidiaries other than with respect to the retrospective discontinued operation presentation of Loen Entertainment, Inc. and the related retrospective segment presentation, and, accordingly, we do not express an opinion or any other form of assurance on the 2011 consolidated financial statements of SK Telecom Co., Ltd. and subsidiaries taken as a whole.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of SK Telecom Co., Ltd.’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992) and our report dated April 30, 2014, expressed an unqualified opinion on SK Telecom Co., Ltd.’s internal control over financial reporting.
/s/  KPMG Samjong Accounting Corp.
Seoul, Korea
April 30, 2014
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
SK Telecom Co., Ltd.
We have audited, before effects of the retrospective adjustments for the discontinued operations of Loen Entertainment, Inc. as described in note 37(1)(a) to the consolidated financial statements and the related retrospective adjustment to the segment disclosure described in note 5 to the consolidated financial statements, the accompanying consolidated statement of financial position of SK Telecom Co., Ltd. and subsidiaries (the “Company”) as of December 31, 2011, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s 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~~audit provides 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 atas of December 31, ~~2008, 2009 and 2010,~~2011 and the results of their operations and their cash flows for ~~each of~~ the ~~three years in the period~~year then ended, ~~December 31, 2010, in conformity with accounting principles generally accepted in the Republic of Korea.~~
~~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)~~International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
We were not engaged to audit, review, or apply any procedures to the ~~accompanying consolidated financial statements. Such U.S. dollar amounts are presented solely~~retrospective adjustments for the ~~convenience~~discontinued operations of ~~readers of the financial statements.~~
~~Accounting principles generally accepted~~Loen Entertainment, Inc. as described 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 32 and 33note 37(1)(a) to the consolidated financial ~~statements.~~
statements and the related retrospective adjustment to the segment disclosure described in note 5 to the consolidated financial statements and, accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective presentations were audited by other auditors.
/s/ Deloitte Anjin LLC
Seoul, Korea
March 13, 2012 (April 30, 2013 as to the effects of the retrospective adjustment of the broadcasting business of SK Telink Co., Ltd., as a discontinued operation as described in note 37 to the consolidated financial statements and the related retrospective segment presentation described in note 5 to the consolidated financial statements)
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Shareholders
SK Telecom Co., Ltd.:
We have ~~also~~ audited ~~in accordance with~~ the ~~standards of the Public Company Accounting Oversight Board (United States), the Company’s~~ internal control over financial reporting of SK Telecom Co., Ltd. as of December 31, ~~2010,~~2013, 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 29, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.~~
~~/s/  Deloitte Anjin LLC~~
~~Seoul, Korea~~
~~June 29, 2011~~

~~F-2~~
~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~
~~ON INTERNAL CONTROL OVER FINANCIAL REPORTING~~
~~To the Board of Directors and Stockholders of~~
(1992). 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, 2010, based on criteria established in~~~~Internal Control — Integrated Framework~~~~issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s~~’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on ~~the Company’s~~SK Telecom Co., Ltd.’s 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 company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s 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 company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of ~~the~~its 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~~prevent or ~~detected on a timely basis.~~detect misstatements. 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~~SK Telecom Co., Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2010,~~2013, based on ~~the~~ criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway ~~Commission.~~
Commission (1992).
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ~~the~~ consolidated statements of financial ~~statements~~position of SK Telecom Co., Ltd. and its subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the ~~year~~years then ended, ~~December 31, 2010 (all expressed in Korean won) of the Company~~ and our report dated ~~June 29, 2011,~~April 30, 2014, expressed an unqualified opinion on those consolidated financial ~~statements,~~statements.
/s/  KPMG Samjong Accounting Corp.
Seoul, Korea
April 30, 2014
SK TELECOM CO., LTD. and ~~included explanatory paragraphs relating to (1) the translation~~Subsidiaries
Consolidated Statements of ~~Korean won amounts to U.S. dollar amounts~~Financial Position
As of December 31, 2013 and ~~(2) information relating~~2012
   Note    December 31,
2013    December 31,
2012
      (In millions of won)
Assets

Current Assets:

Cash and cash equivalents
   33,34       ￦ 1,398,639       920,125
Short-term financial instruments
   6,33,34,35,36       311,474       514,417
Short-term investment securities
   9,33,34       106,068       60,127
Accounts receivable — trade, net
   7,33,34,35       2,257,316       1,954,920
Short-term loans, net
   7,33,34,35       79,395       84,908
Accounts receivable — other, net
   7,33,34,35       643,603       582,098
Prepaid expenses
      108,909       102,572
Derivative financial assets
   22,33,34       10       9,656
Inventories, net
   8,36       177,120       242,146
Assets classified as held for sale
   10       3,667       775,556
Advanced payments and other
   7,9,33,34       37,214       47,896




Total Current Assets
      5,123,415       5,294,421




Non-Current Assets:

Long-term financial instruments
   6,33,34       8,142       144
Long-term investment securities
   9,33,34       968,527       953,712
Investments in associates and joint ventures
   12       5,325,297       4,632,477
Property and equipment, net
   13,35,36       10,196,607       9,712,719
Investment property, net
   14       15,811       27,479
Goodwill
   15       1,733,261       1,744,483
Intangible assets, net
   16       2,750,782       2,689,658
Long-term loans, net
   7,33,34,35       57,442       69,299
Long-term prepaid expenses
   36       32,008       31,341
Guarantee deposits
   6,7,33,34,35       249,600       236,242
Long-term derivative financial assets
   22,33,34       41,712       52,992
Deferred tax assets
   30       26,322       124,098
Other non-current assets
   7,33,34       47,589       26,494




Total Non-Current Assets
      21,453,100       20,301,138




Total Assets
      ￦ 26,576,515       25,595,559




See accompanying notes 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.~~
~~/s/  Deloitte Anjin LLC~~
~~Seoul, Korea~~
~~June 29, 2011~~

~~F-3~~
consolidated financial statements.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~CONSOLIDATED STATEMENTS OF FINANCIAL POSITION~~
Consolidated Statements of Financial Position — (Continued)

~~DECEMBER~~As of December 31, ~~2008, 2009 AND 2010~~2013 and 2012

Translation into

U.S. Dollars

Korean Won (Note 2)
December 31,
December 31,
December 31,
December 31,

2008 2009 2010 2010
(In millions) (In thousands)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents, net of government subsidy of W127 million, W71 million and nil as of December 31, 2008, 2009 and 2010 (Notes 2, 13 and 28)
W 1,011,340 W 953,855 W 778,509 $ 688,580
Short-term financial instruments (Notes 21 and 22) 368,490 351,675 578,571 511,738
Short-term investment securities (Notes 2 and 4) 372,913 376,723 395,929 350,194
Accounts receivable — trade, net of allowance for doubtful accounts of W150,320 million, W233,078 million and W248,978 million as of December 31, 2008, 2009 and 2010 (Notes 2, 13 and 24)
1,900,002 2,000,987 1,955,289 1,729,426
Short-term loans, net of allowance for doubtful accounts of W7,599 million, W5,058 million and W2,987 million as of December 31, 2008, 2009 and 2010 (Notes 2, 6 and 13)
119,087 85,677 95,422 84,399
Accounts receivable — other, net of allowance for doubtful accounts of W30,357 million, W42,473 million and W46,685 million as of December 31, 2008, 2009 and 2010 and present value discount of W27,314 million, W8,478 million and W1,252 million as of December 31, 2008, 2009 and 2010 (Notes 2, 13 and 24)
1,346,056 2,075,949 2,534,284 2,241,539
Inventories (Notes 2, 3 and 23) 34,974 119,890 149,643 132,357
Prepaid expenses 127,432 143,414 164,936 145,884
Current deferred income tax assets (Notes 2 and 17) 27,786 205,291 199,790 176,711
Currency swap (Notes 2 and 27) 8,236 — — —
Advanced payments and other 106,131 57,170 120,616 106,683

Total Current Assets 5,422,447 6,370,631 6,972,989 6,167,511

NON-CURRENT ASSETS:
Property and equipment, net (Notes 2, 7, 12, 22, 23 and 24) 7,437,689 8,165,879 7,864,594 6,956,124
Intangible assets, net (Notes 2, 8 and 12) 3,978,145 3,992,325 3,740,643 3,308,547
Long-term financial instruments (Note 21) 114 6,580 264 234
Long-term investment securities (Notes 2 and 4) 3,105,295 2,536,659 1,684,244 1,489,690
Equity securities accounted for using the equity method
(Notes 2 and 5) 898,512 486,393 1,107,843 979,872
Long-term loans, net of allowance for doubtful accounts of W26,376 million, W32,114 million and W31,186 million as of December 31, 2008, 2009 and 2010 (Notes 2 and 6)
155,360 91,830 89,956 79,565
Long-term accounts receivable — trade, net of present value discount of W3,914 million and W2,303 million as of December 31, 2009 and 2010 (Note 2)
— 32,392 22,418 19,828
Long-term accounts receivable — other, net of present value discount of W45,464 million and nil as of December 31, 2008 and 2009
572,139 761,735 527,106 466,218
Guarantee deposits (Notes 13 and 24) 239,480 365,127 265,126 234,500
Long-term currency swap (Notes 2 and 27) 494,711 314,345 201,839 178,524
Non-current deferred income tax assets (Notes 2 and 17) 4,948 8,563 16,497 14,591
Other 164,831 73,797 158,185 139,914

Total Non-Current Assets 17,051,224 16,835,625 15,678,715 13,867,607

TOTAL ASSETS W 22,473,671 W 23,206,256 W 22,651,704 $ 20,035,118

~~F-4~~
   Note    December 31,
2013 December 31,
2012
      (In millions of won)
Liabilities and Equity

Current Liabilities:

Short-term borrowings
   17,33,34       ￦ 260,000    600,245
Current portion of long-term debt, net
   17,18,20,33,34       1,268,427    892,867
Accounts payable — trade
   33,34,35       214,716    253,884
Accounts payable — other
   33,34,35       1,864,024    1,811,038
Withholdings
   33,34,35       728,936    717,170
Accrued expenses
   33,34       988,193    890,863
Income tax payable
   30       112,316    60,253
Unearned revenue
      441,731    258,691
Derivative financial liabilities
   22,33,34       21,171    —
Provisions
   19       66,775    287,307
Advanced receipts and other
   33,34       102,931    108,272
Liabilities classified as held for sale
   10       —    294,305


Total Current Liabilities
      6,069,220    6,174,895


Non-Current Liabilities:

Debentures, net, excluding current portion
   17,33,34       4,905,579    4,979,220
Long-term borrowings, excluding current portion
   17,33,34       104,808    369,237
Long-term payables — other
   18,33,34       838,585    715,508
Long-term unearned revenue
      50,894    160,821
Finance lease liabilities
   20,33,34       3,867    22,036
Defined benefit obligations
   21       74,201    86,521
Long-term derivative financial liabilities
   22,33,34       103,168    63,599
Long-term provisions
   19       28,106    106,561
Deferred tax liabilities
   30       168,825    —
Other non-current liabilities
   33,34       62,705    62,379


Total Non-Current Liabilities
      6,340,738    6,565,882


Total Liabilities
      12,409,958    12,740,777


Equity

Share capital
   1,23       44,639    44,639
Capital surplus (deficit) and other capital adjustments
   23       (81,010 ) (288,883 )
Hybrid bonds
   25       398,518    —
Retained earnings
   26       13,102,495    12,124,657
Reserves
   27       (12,270 ) (25,636 )


Equity attributable to owners of the Parent Company
      13,452,372    11,854,777
Non-controlling interests
      714,185    1,000,005


Total Equity
      14,166,557    12,854,782


Total Liabilities and Equity
      ￦ 26,576,515    25,595,559


See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2013, 2012 and 2011
   Note    2013 2012 2011
      (In millions of won except for per share data)
Continuing operations

Operating revenue and other income:
   5,35
Revenue
      ￦ 16,602,054    16,141,409    15,803,174
Other income
   20,28       74,954    201,844    49,631


      16,677,008    16,343,253    15,852,805


Operating expense:
   35
Labor cost
   21       1,561,358    1,267,928    1,160,654
Commissions paid
      5,498,695    5,949,542    5,560,147
Depreciation and amortization
   5       2,661,623    2,421,128    2,286,566
Network interconnection
      1,043,733    1,057,145    1,264,109
Leased line
      448,833    468,785    474,018
Advertising
      394,066    384,353    360,972
Rent
      443,639    422,388    400,112
Cost of products that have been resold
      1,300,375    1,292,304    957,086
Other operating expenses
   28       1,746,283    1,342,025    1,226,412


Sub-total
      15,098,605    14,605,598    13,690,076


Operating income from continuing operations
   5       1,578,403    1,737,655    2,162,729
Finance income
   5,29       113,392    444,558    440,212
Finance costs
   5,29       (571,203 ) (638,285 ) (343,771 )
Gain (loss) related to investments in subsidiaries, associates and joint ventures, net
   5,12       706,509    (24,560 ) (46,897 )


Profit before income tax
      1,827,101    1,519,368    2,212,273


Income tax expense from continuing operations
   30       400,797    288,207    601,937


Profit from continuing operations
      1,426,304    1,231,161    1,610,336


Discontinued operation

Profit (loss) from discontinued operations, net of income taxes
   37       183,245    (115,498 ) (28,263 )


Profit for the year
      ￦ 1,609,549    1,115,663    1,582,073


Attributable to:

Owners of the Parent Company
      ￦ 1,638,964    1,151,705    1,612,889
Non-controlling interests
      (29,415 ) (36,042 ) (30,816 )
Earnings per share
   31
Basic earnings per share
      ￦ 23,211    16,525    22,848


Diluted earnings per share
      ￦ 23,211    16,141    22,223


Earnings per share — Continuing operations
   31
Basic earnings per share
      ￦ 20,708    18,015    23,339


Diluted earnings per share
      ￦ 20,708    17,583    22,699


See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2013, 2012 and 2011
      Note    2013 2012 2011
      (In millions of won)
Profit for the year
      ￦ 1,609,549    1,115,663    1,582,073
Other comprehensive income (loss)

Items that will not be reclassified to profit or loss, net of taxes:

Remeasurement of defined benefit obligations
   3,21       5,946    (15,048 ) (25,275 )
Items that may be reclassified subsequently to profit or loss, net of taxes:

Net change in unrealized fair value of available-for-sale financial assets
   3,27,29       2,009    (149,082 ) (433,546 )
Net change in other comprehensive income of investments in associates and joint ventures
   3,12,27       3,034    (82,513 ) (2,173 )
Net change in unrealized fair value of derivatives
   3,22,27,29       11,222    (23,361 ) 29,236
Foreign currency translation differences for foreign operations
   3,27       (3,714 ) (49,538 ) 40,673


      18,497    (319,542 ) (391,085 )


Total comprehensive income
      ￦ 1,628,046    796,121    1,190,988


Total comprehensive income attributable to:

Owners of the Parent Company
      ￦ 1,655,570    851,565    1,206,577
Non-controlling interests
      (27,524 ) (55,444 ) (15,589 )
See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2013, 2012 and 2011
   Controlling interest Non-
controlling
interests Total equity
   Share capital    Capital surplus
(deficit) and
other capital
adjustments Retained
earnings Reserves Sub-total
   (In millions of won)
Balance, January 1, 2011
   ￦ 44,639       (78,953 ) 10,721,249    643,056    11,329,991    1,078,008    12,407,999
Cash dividends
   —       —    (668,293 ) —    (668,293 ) (2,226 ) (670,519 )
Treasury stock
   —       (208,012 ) —    —    (208,012 ) —    (208,012 )
Total comprehensive income

Profit (loss)
   —       —    1,612,889    —    1,612,889    (30,816 ) 1,582,073
Other comprehensive income (loss)
   —       —    (23,320 ) (382,992 ) (406,312 ) 15,227    (391,085 )




   —       —    1,589,569    (382,992 ) 1,206,577    (15,589 ) 1,190,988
Effect of change in income tax rate
   —       (2,980 ) —    —    (2,980 ) —    (2,980 )
Changes in ownership in subsidiaries
   —       4,598    —    —    4,598    10,635    15,233




Balance, December 31, 2011
   ￦ 44,639       (285,347 ) 11,642,525    260,064    11,661,881    1,070,828    12,732,709




Balance, January 1, 2012
   ￦ 44,639       (285,347 ) 11,642,525    260,064    11,661,881    1,070,828    12,732,709
Cash dividends
   —       —    (655,133 ) —    (655,133 ) (2,133 ) (657,266 )
Total comprehensive income

Profit (loss)
   —       —    1,151,705    —    1,151,705    (36,042 ) 1,115,663
Other comprehensive loss
   —       —    (14,440 ) (285,700 ) (300,140 ) (19,402 ) (319,542 )




   —       —    1,137,265    (285,700 ) 851,565    (55,444 ) 796,121
Changes in ownership in subsidiaries
   —       (3,536 ) —    —    (3,536 ) (13,246 ) (16,782 )




Balance, December 31, 2012
   ￦ 44,639       (288,883 ) 12,124,657    (25,636 ) 11,854,777    1,000,005    12,854,782




See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~CONSOLIDATED STATEMENTS OF FINANCIAL POSITION~~Consolidated Statements of Changes in Equity — (Continued)

Translation into

U.S. Dollars

Korean Won (Note 2)
December 31,
December 31,
December 31,
December 31,

2008 2009 2010 2010
(In millions) (In thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable (Notes 13, 21 and 24) W 1,268,977 W 1,464,508 W 1,629,804 $ 1,441,539
Short-term borrowings (Notes 21 and 22) 627,657 677,235 529,568 468,396
Income taxes payable 328,403 395,720 259,967 229,937
Accrued expenses (Notes 2 and 26) 861,836 1,118,077 1,342,936 1,187,808
Withholdings 315,537 281,962 403,508 356,897
Current portion of long-term debt, net (Notes 2, 8, 9, 10 and 12) 936,009 805,946 1,601,229 1,416,265
Current portion of subscription deposits (Note 11) 8,281 7,511 5,137 4,544
Currency swap (Notes 2 and 27) 190,359 36,318 7,848 6,941
Interest rate swap (Notes 2 and 27) — — 7,546 6,674
Advanced receipts and other 91,762 107,660 127,758 113,000

Total Current Liabilities 4,628,821 4,894,937 5,915,301 5,232,001

NON-CURRENT LIABILITIES:
Bonds payable, net (Notes 2, 9 and 22) 4,074,392 4,280,398 3,566,048 3,154,120
Long-term borrowings (Notes 10 and 22) 856,471 844,640 235,968 208,710
Subscription deposits (Note 11) 4,796 5,480 5,220 4,617
Long-term payables — other, net of present value discount of W15,416 million, W5,837 million and W2,457 million as of December 31, 2008, 2009 and 2010 (Notes 2 and 8)
304,584 164,163 50,643 44,793
Obligations under finance lease (Notes 2, 12 and 22) 139,273 77,709 60,075 53,136
Accrued severance indemnities (Note 2) 53,815 57,655 62,904 55,638
Non-current deferred income tax liabilities, (Notes 2 and 17) 408,755 321,372 104,118 92,091
Long-term currency swap (Notes 2 and 27) 23,947 18,281 9,718 8,595
Long-term interest swap (Notes 2 and 27) 33,499 16,215 5,043 4,460
Guarantee deposits received and other (Notes 2, 21, 24 and 26) 120,878 180,781 158,017 139,765

Total Non-Current Liabilities 6,020,410 5,966,694 4,257,754 3,765,925

Total Liabilities 10,649,231 10,861,631 10,173,055 8,997,926

STOCKHOLDERS’ EQUITY:
Capital stock (Notes 1 and 14) 44,639 44,639 44,639 39,483
Capital surplus (Note 14) 2,958,854 3,031,947 3,031,780 2,681,567
Capital adjustments:
Treasury stock (Notes 1 and 16) (2,055,620 ) (1,992,083 ) (2,202,439 ) (1,948,027 )
Loss on disposal of treasury stock (Notes 16 and 17) — (716 ) (716 ) (633 )
Other capital adjustment (Notes 2, 5 and 17) (103,769 ) (754,087 ) (790,695 ) (699,359 )
Accumulated other comprehensive income (loss) (Note 18) :
Unrealized gains on valuation of long-term investment securities, net (Notes 2, 4 and 17) 407,842 998,588 793,977 702,262
Equity in other comprehensive gain (loss) of affiliates, net (Notes 2, 5 and 17) (68,763 ) (88,780 ) (84,183 ) (74,459 )
Gain (loss) on valuation of currency swap, net (Notes 2, 17 and 27) 8,544 23,485 (51,142 ) (45,234 )
Gain (loss) on valuation of interest swap, net (Notes 2, 17 and 27) (26,129 ) (10,932 ) (5,719 ) (5,058 )
Foreign-based operations’ translation adjustment (Note 2) 34,698 (7,055 ) (13,301 ) (11,765 )
Retained earnings (Note 15) 9,448,185 9,909,753 10,603,399 9,378,559
Non-controlling interest in equity of consolidated subsidiaries (Note 2) 1,175,959 1,189,866 1,153,049 1,019,856

Total Stockholders’ Equity 11,824,440 12,344,625 12,478,649 11,037,192

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY W 22,473,671 W 23,206,256 W 22,651,704 $ 20,035,118

For the years ended December 31, 2013, 2012 and 2011
      Controlling interest Non-
controlling
interests Total equity
   Share capital    Capital surplus
(deficit) and
other capital
adjustments Hybrid bonds    Retained
earnings Reserves Sub-total
   (In millions of won)
Balance, January 1, 2013
   ￦ 44,639       (288,883 ) —       12,124,657    (25,636 ) 11,854,777    1,000,005    12,854,782
Cash dividends
   —       —    —       (655,946 ) —    (655,946 ) (2,242 ) (658,188 )
Total comprehensive income

Profit (loss)
   —       —    —       1,638,964    —    1,638,964    (29,415 ) 1,609,549
Other comprehensive income
   —       —    —       3,240    13,366    16,606    1,891    18,497






   —       —    —       1,642,204    13,366    1,655,570    (27,524 ) 1,628,046
Issuance of hybrid bonds
   —       —    398,518       —    —    398,518    —    398,518
Interest on hybrid bonds
   —       —    —       (8,420 ) —    (8,420 ) —    (8,420 )
Treasury stock
   —       271,536    —       —    —    271,536    —    271,536
Business combination under common control
   —       (61,854 ) —       —    —    (61,854 ) —    (61,854 )
Changes in ownership in subsidiaries
   —       (1,809 ) —       —    —    (1,809 ) (256,054 ) (257,863 )






Balance, December 31, 2013
   ￦ 44,639       (81,010 ) 398,518       13,102,495    (12,270 ) 13,452,372    714,185    14,166,557






See accompanying notes to the consolidated financial statements.

~~F-5~~
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2013, 2012 and 2011
   2013 2012 2011
(In millions of won)
Cash flows from operating activities:

Cash generated from operating activities

Profit for the year
￦ 1,609,549    1,115,663    1,582,073
Adjustments for income and expenses (Note 38)
3,275,376    3,289,861    3,225,682
Changes in assets and liabilities related to operating activities
(Note 38)
(969,870 ) 204,308    2,180,223

Sub-total
3,915,055    4,609,832    6,987,978
Interest received
64,078    88,711    156,745
Dividends received
10,197    27,732    34,521
Interest paid
(300,104 ) (363,685 ) (301,632 )
Income tax paid
(130,656 ) (362,926 ) (571,217 )

Net cash provided by operating activities
3,558,570    3,999,664    6,306,395

Cash flows from investing activities:

Cash inflows from investing activities:

Decrease in short-term financial instruments, net
186,425    464,531    —
Decrease in short-term investment securities, net
—    65,000    125,000
Collection of short-term loans
290,856    282,658    194,561
Proceeds from disposals of long-term financial instruments
16    23    5
Proceeds from disposals of long-term investment securities
287,777    511,417    256,666
Proceeds from disposals of investments in associates and joint ventures
43,249    1,518    6,381
Proceeds from disposals of property and equipment
12,579    271,122    35,197
Proceeds from disposals of investment property
—    43,093    —
Proceeds from disposals of intangible assets
2,256    21,048    3,833
Net proceeds from the disposition of non-current assets held for sale
190,393    —    —
Collection of long-term loans
13,104    11,525    33,824
Decrease of deposits
8,509    41,785    —
Proceeds from disposals of other non-current assets
683    1,853    4,122
Proceeds from disposals of subsidiaries
215,939    89,002    —
Increase in cash due to acquisitions of subsidiaries
—    26,651    66,277

Sub-total
1,251,786    1,831,226    725,866
Cash outflows for investing activities:

Increase in short-term financial instruments, net
—    —    (412,256 )
Increase in short-term investment securities, net
(45,032 ) —    —
Increase in short-term loans
(279,926 ) (245,465 ) (233,189 )
Increase in long-term loans
(4,050 ) (3,464 ) (13,856 )
Increase in long-term financial instruments
(7,510 ) (16 ) (7,516 )
Acquisitions of long-term investment securities
(22,141 ) (92,929 ) (323,246 )
Acquisitions of investments in associates
(97,366 ) (3,098,833 ) (239,975 )
Acquisitions of property and equipment
(2,879,126 ) (3,394,349 ) (2,960,556 )
Acquisitions of investment property
—    (129 ) (86,285 )
Acquisitions of intangible assets
(243,163 ) (146,249 ) (598,437 )
Increase in asset held for sale
—    (51,831 ) —
Increase in deposits
(83,314 ) (43,534 ) —
Increase in other non-current assets
(1,830 ) (8,619 ) (3,071 )
Acquisition of businesses, net of cash acquired
(94,805 ) (43,389 ) —
Decrease in cash due to disposals of a subsidiaries
—    (12,003 ) (82,533 )
Cash outflows from transaction of derivatives
—    —    (4,007 )

Sub-total
(3,758,263 ) (7,140,810 ) (4,964,927 )

Net cash used in investing activities
￦ (2,506,477 ) (5,309,584 ) (4,239,061 )

See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~CONSOLIDATED STATEMENTS OF INCOME~~
Consolidated Statements of Cash Flows — (Continued)

~~YEARS ENDED DECEMBER~~For the years ended December 31, ~~2008, 2009 AND 2010~~2013, 2012 and 2011

Translation into

U.S. Dollars

Korean Won (Note 2)
2008 2009 2010 2010
(In millions except for per share data) (In thousands except

for per share data)

OPERATING REVENUE (Notes 2, 24 and 30) W 13,951,013 W 14,512,347 W 15,435,373 $ 13,652,373

OPERATING EXPENSES (Notes 24 and 30):
Labor cost (726,272 ) (718,598 ) (936,489 ) (828,312 )
Commissions paid (4,884,061 ) (5,140,173 ) (5,498,329 ) (4,863,196 )
Depreciation and amortization (Notes 7 and 8) (2,599,169 ) (2,593,474 ) (2,723,580 ) (2,408,969 )
Network interconnection (1,327,417 ) (1,317,696 ) (1,316,296 ) (1,164,246 )
Leased line (520,791 ) (434,280 ) (258,937 ) (229,026 )
Advertising (361,773 ) (341,366 ) (339,775 ) (300,526 )
Research and development (Note 2) (226,713 ) (236,269 ) (270,378 ) (239,146 )
Rent (289,154 ) (326,168 ) (349,773 ) (309,369 )
Frequency usage (163,938 ) (159,740 ) (178,815 ) (158,159 )
Repair (226,771 ) (253,467 ) (253,053 ) (223,822 )
Provision for bad debts (Note 2) (61,662 ) (199,933 ) (79,972 ) (70,734 )
Cost of goods sold (Note 2) (180,590 ) (338,030 ) (634,614 ) (561,307 )
Other (622,395 ) (571,918 ) (653,059 ) (577,622 )

Sub-total (12,190,706 ) (12,631,112 ) (13,493,070 ) (11,934,434 )

OPERATING INCOME (Note 30) 1,760,307 1,881,235 1,942,303 1,717,939

OTHER INCOME:
Interest income 134,793 186,427 235,556 208,346
Foreign exchange and translation gains (Note 2) 478,375 152,282 27,121 23,988
Equity in earnings of affiliates (Notes 2 and 5) 24,894 28,685 29,675 26,247
Gain on valuation of short-term investment securities (Note 2) — 14,086 — —
Gain on disposal of property and equipment and intangible assets 9,971 27,228 11,030 9,756
Gain on transactions and valuation of derivatives (Notes 2 and 27) 265,144 109,306 7,951 7,033
Other 141,981 357,952 318,093 281,349

Sub-total 1,055,158 875,966 629,426 556,719

~~F-6~~
   2013 2012 2011
(In millions of won)
Cash flows from financing activities:

Cash inflows from financing activities:

Proceeds from short-term borrowings
￦ —    —    174,222
Proceeds from issuance of debentures
1,328,694    2,098,351    1,129,533
Proceeds from long-term borrowings
105,055    2,059,004    92,367
Proceeds from issuance of hybrid bond
398,518    —    —
Cash inflows from transaction of derivatives
19,970    87,899    —
Increase in cash from the consolidated capital transaction
—    —    5,769

Sub-total
1,852,237    4,245,254    1,401,891
Cash outflows for financing activities:

Decrease in short-term borrowings, net
(340,245 ) (61,401 ) —
Repayments of current portion of long-term debt
(161,575 ) (102,672 ) (224,581 )
Repayments of debentures
(771,976 ) (1,145,691 ) (842,160 )
Repayments of long-term borrowings
(467,217 ) (1,660,509 ) (512,377 )
Cash outflows from transactions of derivatives
—    (5,415 ) (25,783 )
Repayments of finance lease liabilities
(20,342 ) (20,794 ) —
Payments of dividends
(655,946 ) (655,133 ) (668,293 )
Acquisition of treasury stock
—    —    (208,012 )
Decrease in cash from the consolidated capital transaction
(8,093 ) (8,372 ) —

Sub-total
(2,425,394 ) (3,659,987 ) (2,481,206 )

Net cash provided by (used in) financing activities
(573,157 ) 585,267    (1,079,315 )

Net increase (decrease) in cash and cash equivalents
478,936    (724,653 ) 988,019
Cash and cash equivalents at beginning of the year
920,125    1,650,794    659,405
Effects of exchange rate changes on cash and cash equivalents
(422 ) (6,016 ) 3,370

Cash and cash equivalents at end of the year
￦ 1,398,639    920,125    1,650,794

See accompanying notes to the consolidated financial statements.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~CONSOLIDATED STATEMENTS OF INCOME — (Continued)~~

Translation into

U.S. Dollars

Korean Won (Note 2)
2008 2009 2010 2010
(In millions except for per share data) (In thousands except

for per share data)

OTHER EXPENSES:
Interest and discounts (365,934 ) (439,921 ) (397,051 ) (351,186 )
Donations (100,119 ) (71,155 ) (123,293 ) (109,051 )
Foreign exchange and translation losses (Note 2) (161,761 ) (185,394 ) (16,264 ) (14,385 )
Equity in losses of affiliates (Notes 2 and 5) (47,104 ) (88,597 ) (59,070 ) (52,247 )
Loss on disposal of account receivable — other — (28,711 ) — —
Loss on disposal of property, equipment and intangible assets (70,307 ) (91,496 ) (69,841 ) (61,773 )
Loss on transactions and valuation of derivatives (Notes 2 and 27) (441,255 ) (164,646 ) (19,198 ) (16,980 )
External research and development cost (Note 2) (72,993 ) (56,867 ) (81,582 ) (72,158 )
Other (278,478 ) (224,662 ) (131,742 ) (116,524 )

Sub-total (1,537,951 ) (1,351,449 ) (898,041 ) (794,304 )

INCOME FROM CONTINUING OPERATION BEFORE INCOME TAX 1,277,514 1,405,752 1,673,688 1,480,354
INCOME TAX FOR CONTINUING OPERATION (Notes 2 and 17) 299,299 355,670 404,306 357,603
PREACQUISITION NET LOSS OF SUBSIDIARIES 32,664 — 23,406 20,702
INCOME(LOSS) FROM DISCONTINUED OPERATION (Note 2) (38,541 ) 5,524 4,388 3,881

NET INCOME W 972,338 W 1,055,606 W 1,297,176 $ 1,147,334

ATTRIBUTABLE TO:
Controlling interests W 1,215,719 W 1,247,182 W 1,379,613 $ 1,220,249
Non-controlling interests (243,381 ) (191,576 ) (82,437 ) (72,915 )

W 972,338 W 1,055,606 W 1,297,176 $ 1,147,334

NET INCOME PER SHARE FROM CONTINUING OPERATION
(In Korean won and U.S. dollars) (Notes 2 and 19) W 16,554 W 17,173 W 19,098 $ 16.89

NET INCOME PER SHARE
(In Korean won and U.S. dollars) (Notes 2 and 19) W 16,707 W 17,239 W 19,177 $ 16.96

DILUTED NET INCOME PER SHARE FROM CONTINUING OPERATION
(In Korean won and U.S. dollars) (Notes 2 and 19) W 16,409 W 16,981 W 18,811 $ 16.64

DILUTED NET INCOME PER SHARE
(In Korean won and U.S. dollars) (Notes 2 and 19) W 16,559 W 17,046 W 18,888 $ 16.71

~~See accompanying notes~~Notes to ~~consolidated financial statements.~~

~~F-7~~
the Consolidated Financial Statements
For the years ended December 31, 2013, 2012 and 2011
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~
~~YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010~~

Accumulated

Other
Non-
Total

Common
Capital
Capital
Comprehensive
Retained
Controlling
Stockholders’

Stock Surplus Adjustments Income Earnings Interest Equity
(In millions of Korean won)

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 rights (Notes 9 and 14) — 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 gain 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 non-controlling 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

Balance, January 1, 2009 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
Cash dividends (Note 20) — — — — (609,203 ) — (609,203 )
Interim dividends (Note 20) — — — — (72,345 ) — (72,345 )
Net income — — — — 1,247,182 (191,576 ) 1,055,606
Equity in retained earnings changes of affiliates, net (Notes 2 and 5) — — — — (11,589 ) — (11,589 )
Conversion rights (Notes 9 and 14) — 73,622 — — — — 73,622
Difference between the acquisition cost and the net book value incurred from the capital transactions between companies under common control (Note 2) — — 21,663 — — — 21,663
Equity in capital surplus changes of affiliates — 193 — — — — 193
Equity in capital adjustment changes of affiliates — — (5,346 ) — — — (5,346 )
Treasury stock (Note 16) — — (28,939 ) — — — (28,939 )
Loss on disposal of treasury stock (Notes 16 and 17) — (722 ) 91,760 — (92,477 ) — (1,439 )
Unrealized gain on valuation of long-term investment securities (Notes 2 and 4) — — — 590,746 — — 590,746
Equity in other comprehensive
income changes of affiliates, net (Notes 2 and 5) — — — (20,017 ) — — (20,017 )
Difference between the acquisition cost and net book value incurred
from the business acquisition between companies under common control — — (666,635 ) — — — (666,635 )
Foreign-based operations’ translation adjustment (Note 2) — — — (41,753 ) — — (41,753 )
Gain on valuation of currency swap (Notes 2 and 27) — — — 14,941 — — 14,941
Gain on valuation of interest rate swap (Notes 2 and 27) — — — 15,197 — — 15,197
Increase in non-controlling interest in equity of consolidated subsidiaries — — — — — 205,483 205,483

Balance, December 31, 2009 W 44,639 W 3,031,947 W (2,746,886 ) W 915,306 W 9,909,753 W 1,189,866 W 12,344,625

~~F-8~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — (Continued)~~

Accumulated

Other
Non-
Total

Common
Capital
Capital
Comprehensive
Retained
Controlling
Stockholders’

Stock Surplus Adjustments Income Earnings Interest Equity
(In millions of Korean won)

Balance, January 1, 2010 W 44,639 W 3,031,947 W (2,746,886 ) W 915,306 W 9,909,753 W 1,189,866 W 12,344,625
Cash dividends (Note 20) — — — — (607,698 ) — (607,698 )
Interim dividends (Note 20) — — — — (72,345 ) — (72,345 )
Net income — — — — 1,379,613 (82,437 ) 1,297,176
Difference between the acquisition cost and the net book value incurred from the capital transactions between companies under common control (Note 2) — — (7,971 ) — — — (7,971 )
Equity in capital surplus changes of affiliates — (167 ) — — — — (167 )
Equity in capital adjustment changes of affiliates — — (28,637 ) — — — (28,637 )
Treasury stock (Note 16) — — (210,356 ) — — — (210,356 )
Unrealized gain on valuation of long-term investment securities (Notes 2 and 4) — — — (204,611 ) — — (204,611 )
Equity in retained earnings changes of affiliate — — — — (5,924 ) — (5,924 )
Equity in other comprehensive income changes of affiliates, net (Notes 2 and 5) — — — 4,597 — — 4,597
Foreign-based operations’ translation adjustment (Note 2) — — — (6,246 ) — — (6,246 )
Gain on valuation of currency swap (Notes 2 and 27) — — — (74,627 ) — — (74,627 )
Gain on valuation of interest rate swap (Notes 2 and 27) — — — 5,213 — — 5,213
Increase in non-controlling interest in equity of consolidated subsidiaries — — — — — 45,620 45,620

Balance, December 31, 2010 W 44,639 W 3,031,780 W (2,993,850 ) W 639,632 W 10,603,399 W 1,153,049 W 12,478,649

(In thousands of U.S. dollars) (Note 2 a)
Balance, January 1, 2010 $ 39,483 $ 2,681,715 $ (2,429,583 ) $ 809,576 $ 8,765,038 $ 1,052,420 $ 10,918,649
Cash dividends (Note 20) — — — — (537,500 ) — (537,500 )
Interim dividends (Note 20) — — — — (63,989 ) — (63,989 )
Net income — — — — 1,220,249 (72,915 ) 1,147,334
Difference between the acquisition cost and the net book value incurred from the capital transactions between companies under common control (Note 2) — — (7,050 ) — — — (7,050 )
Equity in capital surplus changes of affiliates — (148 ) — — — — (148 )
Equity in other capital adjustment changes of affiliates — — (25,329 ) — — — (25,329 )
Treasury stock (Note 16) — — (186,057 ) — — — (186,057 )
Unrealized gain on valuation of long-term investment securities (Notes 2 and 4) — — — (180,975 ) — — (180,975 )
Equity in retained earnings of consolidated subsidiary previously accounted for as an equity method investee — — — — (5,239 ) (5,239 )
Equity in other comprehensive income changes of affiliates, net (Notes 2 and 5) — — — 4,066 — — 4,066
Foreign-based operations’ translation adjustment (Note 2) — — — (5,525 ) — — (5,525 )
Gain on valuation of currency swap (Notes 2 and 27) — — — (66,007 ) — — (66,007 )
Gain on valuation of interest rate swap (Notes 2 and 27) — — — 4,611 — — 4,611
Increase in non-controlling interest in equity of consolidated subsidiaries — — — — — 40,351 40,351

Balance, December 31, 2010 $ 39,483 $ 2,681,567 $ (2,648,019 ) $ 565,746 $ 9,378,559 $ 1,019,856 $ 11,037,192

~~See accompanying notes to consolidated financial statements.~~

~~F-9~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010~~

In Thousands

of U.S. Dollars

In Millions of Korean Won (Note 2 a)
2008 2009 2010 2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income W 972,338 W 1,055,606 W 1,297,176 $ 1,147,334

Expenses not involving cash payments :
Provision for severance indemnities 92,501 55,711 86,797 76,771
Depreciation and amortization 2,755,360 2,730,008 2,868,768 2,537,385
Allowance for doubtful accounts 70,662 216,663 96,324 85,197
Foreign currency translation loss 132,152 5,314 1,785 1,579
Equity in losses of affiliates 47,104 88,597 59,070 52,247
Loss on disposal of account receivable-other — 28,711 — —
Loss on disposal of property, equipment
and intangible assets 70,307 91,496 69,841 61,773
Loss on transaction and valuation of derivatives 441,255 164,646 19,198 16,980
Amortization of discounts on bonds 31,572 31,736 39,265 34,729
Loss from discontinued operation 38,541 — — —
Other expenses 269,785 178,460 57,161 50,558

Sub-total 3,949,239 3,591,342 3,298,209 2,917,219

Income not involving cash receipts:
Foreign translation gain 428,575 122,268 16,813 14,871
Equity in earnings of affiliates 24,894 28,685 29,675 26,247
Gain on valuation of trading securities — 14,086 — —
Gain on disposal of property, equipment
and intangible assets 9,971 27,228 11,030 9,756
Gain on transactions and valuation of derivatives 265,144 109,306 7,951 7,033
Interest income 1,779 56,448 10,424 9,220
Gain from discontinued operation — 5,524 4,388 3,881
Other 23,733 118,750 195,168 172,623

Sub-total 754,096 482,295 275,449 243,631

Changes in assets and liabilities related to operating activities:
Accounts receivable — trade 68,214 (217,896 ) 14,157 12,522
Accounts receivable — other (384,298 ) (811,129 ) (475,547 ) (420,615 )
Inventories (65,935 ) (187,673 ) (102,428 ) (90,596 )
Prepaid expenses 8,618 47,310 20,632 18,249
Advanced payments and other (57,241 ) (18,775 ) (89,520 ) (79,179 )
Long-term accounts receivables — other 514 (284,085 ) 213,479 188,819
Accounts payable (102,436 ) 190,718 167,995 148,589
Income taxes payable 118,011 73,431 (154,488 ) (136,642 )
Accrued expenses 405,081 292,573 204,507 180,884
Withholdings 70,431 (36,382 ) 133,643 118,205
Current portion of subscription deposits (1,519 ) (560 ) (42,351 ) (37,459 )
Advance receipts and other (24,004 ) 15,507 20,350 17,999
Deferred income taxes (194,416 ) (254,891 ) (121,182 ) (107,184 )
Dividends received from affiliates 1,214 — 3,402 3,009
Severance indemnity payments (106,241 ) (37,953 ) (63,185 ) (55,886 )
Deposits for group severance indemnities and other (610,456 ) (2,215 ) (28,379 ) (25,101 )

Sub-total (874,463 ) (1,232,020 ) (298,915 ) (264,386 )

Net Cash Provided by Operating Activities 3,293,018 2,932,633 4,021,021 3,556,536

~~F-10~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)~~

In Thousands

of U.S. Dollars

In Millions of Korean Won (Note 2 a)
2008 2009 2010 2010

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash inflows from investing activities:
Decrease in short-term investment securities, net W (4,767 ) W 14,130 W 168,316 $ 148,873
Decrease in short-term financial instruments, net 174,441 — — —
Collection of short-term loans 212,896 349,658 223,704 197,863
Proceeds from sales of long-term investment securities 382,740 1,966,866 713,873 631,411
Collection of long-term loans 10,646 43,183 18,561 16,417
Decrease in long-term financial instruments 16,159 10,809 299 264
Proceeds from sales of equity securities accounted
for using the equity method 8,292 10,663 58,431 51,681
Proceeds from disposal of consolidated subsidiary — 166 — —
Decrease in guarantee deposits 26,201 38,304 109,010 96,418
Decrease in other non-current assets 37,667 41,111 25,788 22,809
Proceeds from disposal of property and equipment 45,057 66,934 94,670 83,734
Proceeds from disposal of intangible assets 9,425 5,007 6,971 6,166
Cash inflows from transaction of derivatives 727 86,094 1,255 1,110

Sub-total 919,484 2,632,925 1,420,878 1,256,746

Cash outflows from investing activities:
Increase in short-term financial instruments, net W — W 2,994 W 199,576 $ 176,522
Increase in short-term investment securities, net 40 — — —
Increase in short-term loans 239,413 260,071 221,338 195,770
Increase in long-term financial instruments 6,080 6,516 55 49
Acquisition of long-term investment securities 28,910 539,036 146,941 129,967
Increase in long-term loans 34,090 20,766 36,052 31,887
Acquisition of equity securities accounted for using
the equity method 595,281 107,401 693,945 613,785
Increase in equity of consolidated subsidiaries 1,093,104 — — —
Increase in guarantee deposits 57,287 60,597 122,098 107,994
Increase in other non-current assets 94,623 107,835 52,964 46,845
Acquisition of property and equipment 2,236,440 2,162,255 2,144,674 1,896,934
Acquisition of intangible assets 147,680 118,828 126,653 112,023
Acquisition of lease line business — 894,783 — —
Cash outflows from transaction of currency swap 263,495 177,848 35,260 31,187

Sub-total 4,796,443 4,458,930 3,779,556 3,342,963

Net Cash Used in Investing Activities (3,876,959 ) (1,826,005 ) (2,358,678 ) (2,086,217 )

~~F-11~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)~~

In Thousands

of U.S. Dollars

In Millions of Korean Won (Note 2 a)
2008 2009 2010 2010

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash inflows from financing activities:
Issuance of bonds payable W 1,307,679 W 1,114,938 W 148,308 $ 131,176
Proceeds from short-term borrowings 468,958 348,505 289,246 255,834
Proceeds from long-term borrowings 510,577 9,885 108,044 95,563
Increase in guarantee deposits received and other 4,533 18,228 53,656 47,459
Proceeds from disposal of treasury stock 42,246 — — —
Increase in equity of consolidated subsidiaries 64,403 76,938 — —

Sub-total 2,398,396 1,568,494 599,254 530,032

Cash outflows from financing activities:
Repayment of short-term borrowings — 1,007,618 324,327 286,863
Repayment of current portion of long-term debt 558,107 851,142 579,334 512,413
Repayment of long-term borrowings 193,400 111,560 235,281 208,103
Repayment of bonds payable — 60,216 365,140 322,961
Payment of dividends 682,504 681,548 680,043 601,489
Acquisition and retirement of treasury stock 62,134 28,939 210,356 186,057
Decrease in equity of consolidated subsidiaries 24,862 10,211 9,025 7,982
Other 10,567 24,251 14,036 12,414

Sub-total 1,531,574 2,775,485 2,417,542 2,138,282

Net Cash Provided by (Used in) Financing Activities 866,822 (1,206,991 ) (1,818,288 ) (1,608,250 )

THE EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCIES (Note 2) 37,371 (7,405 ) (5,222 ) (4,619 )

NET INCREASE IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN CONSOLIDATED SUBSIDIARIES 36,413 46,258 (18,242 ) (16,135 )

PREACQUISITION CASH FLOWS OF SUBSIDIARIES 17,250 — (23,406 ) (20,702 )

CASHFLOWS FROM DISCONTINUED OPERATION (Note 2) (248,437 ) 3,969 27,398 24,233

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 125,478 (57,541 ) (175,417 ) (155,154 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR (Note 28) 885,989 1,011,467 953,926 843,734

CASH AND CASH EQUIVALENTS AT END OF THE YEAR (Note 29) W 1,011,467 W 953,926 W 778,509 $ 688,580

~~See accompanying notes to consolidated financial statements.~~

~~F-12~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010~~
1.
1.  Reporting Entity ~~GENERAL~~
(1)    General
SK Telecom Co., Ltd. (“~~SK Telecom”~~the Parent Company”) was incorporated in March 1984 under the laws of Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in ~~the Republic of~~ Korea. ~~SK Telecom Co., Ltd. and its subsidiaries (the “Company”)~~The Parent Company mainly ~~provide~~provides wireless telecommunications in ~~the Republic of~~ Korea. The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of December 31, ~~2010,~~2013, the Parent Company’s total issued shares are held by the following:

Percentage of
Number of Shares Total Shares Issued (%)
(Unaudited)

SK Group 18,748,452 23.22
POSCO 2,341,569 2.90
Institutional investors and other minority stockholders 50,004,978 61.93
Treasury stock 9,650,712 11.95

80,745,711 100.00

   Number of
shares    Percentage of
total shares issued (%)
SK Holdings Co., Ltd.
   20,363,452       25.22
National Pension Service
   4,760,489       5.90
Institutional investors and other minority stockholders
   45,812,395       56.73
Treasury stock
   9,809,375       12.15




Total number of shares
   80,745,711       100.00




These consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). SK Holdings Co, Ltd. is the ultimate controlling entity of the Parent Company.
(2)    List of subsidiaries
The list of subsidiaries as of December 31, 2013 and 2012 is as follows:
         Ownership (%)
Subsidiary
   Location
Primary business
   Dec. 31,
2013    Dec. 31,
2012
SK Telink Co., Ltd.
   Korea    Telecommunication service    83.5       83.5
M&Service Co., Ltd.(*)
   Korea    Data base and online information services    100.0       —
SK Communications Co., Ltd.
   Korea    Internet website services    64.6       64.6
PAXNet Co., Ltd.(*)
   Korea    Internet website services    —       59.7
Loen Entertainment, Inc.(*)
   Korea    Release of music disc.    —       67.6
Stonebridge Cinema Fund
   Korea    Investment association    56.0       57.0
Commerce Planet Co., Ltd.
   Korea    Online shopping mall operation agency    100.0       100.0
SK Broadband Co., Ltd.
   Korea    Telecommunication services    50.6       50.6
Broadband Media Co., Ltd.(*)
   Korea    Multimedia TV portal services    —       100.0
K-net Culture and Contents Venture Fund
   Korea    Investment association    59.0       59.0
Fitech Focus Limited Partnership II
   Korea    Investment association    66.7       66.7
Open Innovation Fund
   Korea    Investment association    98.9       98.9
PS&Marketing Corporation
   Korea    Communications device retail business    100.0       100.0
Service Ace Co., Ltd.
   Korea    Customer center management service    100.0       100.0
Service Top Co., Ltd.
   Korea    Customer center management service    100.0       100.0
Network O&S Co., Ltd.
   Korea    Base station maintenance service    100.0       100.0
BNCP Co., Ltd.
   Korea    Internet website services    100.0       100.0
SK Planet Co., Ltd.
   Korea    Telecommunication service    100.0       100.0
Madsmart, Inc.(*)
   Korea    Application software production    —       100.0
SK Telecom China Holdings Co., Ltd.
   China    Investment association    100.0       100.0
SKY Property Mgmt. Ltd.(*)
   Virgin Island    Real estate investment    —       60.0
Shenzhen E-eye High Tech Co., Ltd.
   China    Manufacturing    65.5       65.5
SK Global Healthcare Business Group., Ltd.
   Hong Kong    Investment association    100.0       100.0
SK China Real Estate Co., Ltd.(*)
   Hong Kong    Real estate investment    —       99.4
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
         Ownership (%)
Subsidiary
   Location
Primary business
   Dec. 31,
2013    Dec. 31,
2012
SK Planet Japan
   Japan    Digital contents sourcing service    100.0       100.0
SKT Vietnam PTE. Ltd.
   Singapore    Telecommunication service    73.3       73.3
SK Planet Global PTE. Ltd.
   Singapore    Digital contents sourcing service    100.0       100.0
SKP GLOBAL HOLDINGS PTE. LTD.(*)
   Singapore    Investment association    100.0       —
SKT Americas, Inc.
   USA    Information gathering and consulting    100.0       100.0
SKP America LLC.
   USA    Digital contents sourcing service    100.0       100.0
YTK Investment Ltd.
   Cayman    Investment association    100.0       100.0
Atlas Investment
   Cayman    Investment association    100.0       100.0
Technology Innovation Partners, LP.
   USA    Investment association    100.0       100.0
SK Telecom China Fund I L.P.
   Cayman    Investment association    100.0       100.0
(*) Changes in subsidiaries are explained in note 1-(4).
In accordance with the Group’s accounting policy relating to the scope of consolidation, small-sized subsidiaries including IM Shopping Inc. were excluded from the list of subsidiaries as the effects on the Group’s consolidated financial statements are not material considering both individual and overall quantitative and qualitative effects.
(3)    Condensed financial information of subsidiaries
Condensed financial information of subsidiaries as of and for the year ended December 31, 2013 is as follows:
Subsidiary
   Total
assets    Total
liabilities    Total
equity Revenue    Profit
(loss)
   (In millions of won)
SK Telink Co., Ltd.
   ￦ 252,475       125,807       126,668    433,276       16,024
M&Service Co., Ltd.(*1)
   68,587       32,626       35,961    130,178       4,176
SK Communications Co., Ltd.
   205,792       53,755       152,037    128,272       (41,893 )
Stonebridge Cinema Fund
   11,974       377       11,597    1       1,320
Commerce Planet Co., Ltd.
   26,237       27,333       (1,096 ) 56,565       587
SK Broadband Co., Ltd.
   3,044,349       1,916,721       1,127,628    2,539,366       12,306
K-net Culture and Contents Venture Fund
   16,181       12       16,169    —       (16,595 )
Fitech Focus Limited Partnership II
   21,446       —       21,446    —       (1,179 )
Open Innovation Fund
   27,996       —       27,996    —       (15,408 )
PS&Marketing Corporation
   277,300       141,356       135,944    1,095,647       1,369
Service Ace Co., Ltd.
   56,276       30,667       25,609    187,961       2,995
Service Top Co., Ltd.
   48,369       30,634       17,735    159,364       3,484
Network O&S Co., Ltd.
   56,677       32,353       24,324    198,664       2,060
BNCP Co., Ltd.
   12,108       6,433       5,675    14,819       (9,019 )
SK Planet Co., Ltd.
   2,528,054       766,841       1,761,213    1,378,211       201,556
SK Telecom China Holdings Co., Ltd.
   36,261       2,052       34,209    17,025       613
Shenzhen E-eye High Tech Co., Ltd.
   17,894       1,841       16,053    7,703       (789 )
SK Global Healthcare Business Group., Ltd.
   27,625       —       27,625    —       831
SK Planet Japan
   1,793       280       1,513    394       (1,635 )
SKT Vietnam PTE. Ltd.
   11,773       8,862       2,911    —       (28,086 )
SK Planet Global PTE. Ltd.
   697       149       548    331       (1,420 )
SKP GLOBAL HOLDINGS PTE. LTD.(*1)
   20,713       9       20,704    —       1,542
SKT Americas, Inc.
   33,876       1,315       32,561    9,207       (6,544 )
SKP America LLC.
   22,399       12       22,387    —       —
YTK Investment Ltd.
   42,118       —       42,118    —       (21,764 )
Atlas Investment(*2)
   40,218       101       40,117    —       (8,248 )
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(*1) Changes in subsidiaries are explained in note 1-(4).
(*2) The financial information of Atlas Investment includes financial information of Technology Innovation Partners, L.P. and SK Telecom China Fund I L.P., subsidiaries of Atlas Investment.
Condensed financial information of subsidiaries as of and for the year ended December 31, 2012 is as follows:
Subsidiary
   Total
assets    Total
liabilities    Total
equity Revenue    Profit
(loss)
   (In millions of won)
SK Telink Co., Ltd.
   ￦ 241,977       128,191       113,786    341,084       (74,951 )
SK Communications Co., Ltd.
   265,819       70,483       195,336    197,153       (35,334 )
PAXNet Co., Ltd.
   31,400       9,173       22,227    34,237       (156 )
Loen Entertainment, Inc.
   173,079       44,998       128,081    185,016       23,839
Stonebridge Cinema Fund
   10,965       903       10,062    509       5,707
Commerce Planet Co., Ltd.
   34,007       35,351       (1,344 ) 52,507       655
SK Broadband Co., Ltd.
   3,035,657       1,656,923       1,378,734    2,486,317       26,412
Broadband media Co., Ltd.
   50,574       320,727       (270,153 ) 90,602       (3,396 )
K-net Culture and Contents Venture Fund
   43,779       15       43,764    —       (1,778 )
Fitech Focus Limited Partnership II
   22,547       —       22,547    —       (3,934 )
Open Innovation Fund
   43,394       —       43,394    —       (788 )
PS&Marketing Corporation
   317,613       181,737       135,876    1,484,492       (9,662 )
Service Ace Co., Ltd.
   48,956       24,461       24,495    146,554       3,418
Service Top Co., Ltd.
   43,332       25,963       17,369    133,705       4,198
Network O&S Co., Ltd.
   165,818       140,853       24,965    377,909       7,970
BNCP Co., Ltd.
   24,000       9,367       14,633    26,167       (2,463 )
SK Planet Co., Ltd.
   1,647,965       381,620       1,266,345    1,034,697       11,977
Madsmart, Inc.
   1,591       724       867    635       (2,756 )
SK Telecom China Holdings Co., Ltd.
   35,233       1,782       33,451    25,755       (151 )
SKY Property Mgmt. Ltd.(*1)
   773,413       294,305       479,108    70,808       10,390
Shenzhen E-eye High Tech Co., Ltd.
   18,915       1,788       17,127    9,590       (1,068 )
SK Global Healthcare Business Group., Ltd.
   25,784       —       25,784    —       —
SK Planet Japan
   47       4       43    —       (63 )
SKT Vietnam PTE. Ltd.
   38,331       7,904       30,427    990       (8 )
SK Planet Global PTE. Ltd.
   636       130       506    —       (526 )
SKT Americas, Inc.
   36,378       784       35,594    10,712       (10,837 )
SKP America LLC.
   6,669       2,431       4,238    109       (3,301 )
YTK Investment Ltd.
   64,036       —       64,036    —       —
Atlas Investment(*2)
   51,065       205       50,860    —       (4,324 )
(*1) The financial information of SKY Property Mgmt. Ltd. includes the financial information of SK China Real Estate Co., Ltd., a subsidiary of Sky Property Mgmt. Ltd.
(*2) The financial information of Atlas Investment includes financial information of Technology Innovation Partners, L.P. and SK Telecom China Fund I L.P., subsidiaries of Atlas Investment.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
Condensed financial information of subsidiaries as of and for the year ended December 31, 2011 is as follows:
Subsidiary
   Total
assets    Total
liabilities    Total
equity Revenue    Profit
(loss)
   (In millions of won)
SK Telink Co., Ltd.
   ￦ 420,829       228,687       192,142    419,131       35,269
SK Communications Co., Ltd.
   319,948       84,282       235,666    262,140       (5,041 )
PAXNet Co., Ltd.
   33,949       11,461       22,488    33,004       (2,347 )
Loen Entertainment, Inc.
   157,104       48,386       108,718    167,273       21,398
Stonebridge Cinema Fund
   18,506       196       18,310    21       1,069
Ntreev Soft Co., Ltd.
   37,529       17,304       20,225    56,029       8,707
Commerce Planet Co., Ltd.
   49,729       51,057       (1,328 ) 75,038       (556 )
SK Broadband Co., Ltd.
   3,318,699       1,945,825       1,372,874    2,302,563       19,272
Broadband D&M Co., Ltd.
   11,872       7,399       4,473    46,433       (49 )
Broadband media Co., Ltd.
   89,915       356,816       (266,901 ) 66,526       (32,214 )
Broadband CS Co., Ltd.
   6,948       18,744       (11,796 ) 74,104       63
K-net Culture and Contents Venture Fund
   48,057       16       48,041    —       (113 )
Fitech Focus Limited Partnership II
   21,663       285       21,378    —       (10,358 )
Open Innovation Fund
   44,716       432       44,284    —       (427 )
PS&Marketing Co., Ltd.
   289,062       143,883       145,179    1,078,925       (31,820 )
Service Ace Co., Ltd.
   43,447       21,669       21,778    130,102       1,365
Service Top Co., Ltd.
   37,165       23,255       13,910    123,366       1,829
Network O&S Co., Ltd.
   80,249       61,555       18,694    199,653       5,646
BNCP Co., Ltd.
   28,631       11,397       17,234    17,860       1,877
Service-In Co., Ltd.
   3,247       759       2,488    6,225       (12 )
SK Planet Co., Ltd.
   1,677,730       423,903       1,253,827    280,722       11,014
SK Telecom China Holdings Co., Ltd.
   36,810       2,442       34,368    26,944       (232 )
SKY Property Mgmt. Ltd.(*1)
   820,639       317,038       503,601    51,204       6,386
Shenzhen E-eye High Tech Co., Ltd.
   23,569       3,744       19,825    14,703       2,007
SKT Vietnam PTE. Ltd.
   42,539       9,769       32,770    5,519       205
SKT Americas, Inc.
   42,681       1,280       41,401    18,468       (14,604 )
YTK Investment Ltd.
   51,218       —       51,218    —       —
Atlas Investment(*2)
   50,643       530       50,113    —       (2,056 )
(*1) The financial information of Sky Property Mgmt. Ltd. includes the financial information of SK China Real Estate Co., Ltd., a subsidiary of Sky Property Mgmt. Ltd.
(*2) The financial information of Atlas Investment includes financial information of Technology Innovation Partners, L.P. and SK Telecom China Fund I L.P., subsidiaries of Atlas Investment.
(4)    Changes in subsidiaries
The list of subsidiaries that were newly included or excluded from consolidation during the year ended December 31, 2013 is as follows:
1)    Newly included subsidiaries
2.  Subsidiary
~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Reason
M&Service Co., Ltd.
SK Planet Co., Ltd. acquired ownership interest in M&Service Co., Ltd.
SKP GLOBAL HOLDINGS PTE. LTD.
SK Planet Co., Ltd. established SKP GLOBAL HOLDINGS PTE. LTD.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
2)     Excluded subsidiaries
Subsidiary
Reason
PAXNet Co., Ltd.
The Parent Company sold its investment during the year.
Broadband media Co., Ltd.
Merged into SK Broadband Co., Ltd. during the year.
Madsmart, Inc.
Merged into SK Planet Co., Ltd. during the year.
SKY Property Mgmt. Ltd.
The Parent Company sold its investment during the year.
SK China Real Estate Co., Ltd.
The Parent Company sold its investment during the year.
Loen Entertainment, Inc.
The Parent Company sold its investment during the year.
(5)    Significant non-controlling interests of the Group for the years ended December 31, 2013 and 2012 are as follows. There were no dividends paid during the years ended December 31, 2013 and 2012 by subsidiaries of which non-controlling interests are significant.
   December 31, 2013
   SK Communications Co.,
Ltd. SK Broadband Co.,
Ltd.
   (In millions of won)
Ownership of non-controlling interests (%)
   35.4    49.4
Current assets
   ￦ 108,100    533,597
Non-current assets
   97,692    2,510,752
Current liabilities
   (51,868 ) (938,385 )
Non-current liabilities
   (1,887 ) (978,336 )
Net assets
   152,037    1,127,628
Adjustment for fair value
   —    113,478
Net assets of consolidated entities
   152,037    1,241,106
Carrying amount of non-controlling interests
   53,856    613,560
Revenue
   ￦ 128,272    2,539,366
Profit (loss) for the period
   (41,893 ) 12,306
Amortization of adjustment for fair value
   —    (30,977 )
Loss of the consolidated entities
   (41,893 ) (18,671 )
Total comprehensive loss
   (43,318 ) (13,059 )
Loss attributable to non-controlling interests
   (14,853 ) (9,231 )
Net cash provided by (used in) operating activities
   ￦ (22,867 ) 440,036
Net cash provided by (used in) investing activities
   41,788    (329,346 )
Net cash provided by (used in) financing activities
   19    (129,181 )
Net increase (decrease) in cash and cash equivalents
   18,940    (18,491 )
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
   December 31, 2012
   SK
Communications
Co., Ltd. SK
Broadband
Co.,
Ltd.(*1) SKY
Property
Mgmt.
Ltd.(*2)
   (In millions of won)
Ownership of non-controlling interests (%)
   35.4    49.4    40.0
Current assets
   ￦ 99,599    684,804    69,093
Non-current assets
   166,220    2,394,352    704,319
Current liabilities
   (64,811 ) (907,000 ) (51,068 )
Non-current liabilities
   (5,672 ) (1,061,608 ) (243,236 )
Net assets
   195,336    1,110,548    479,108
Adjustment for fair value
   —    144,455    —
Net assets of consolidated entities
   195,336    1,255,003    479,108
Carrying amount of non-controlling interests
   69,222    621,055    195,907
Revenue
   ￦ 197,153    2,492,160    70,808
Profit (loss) for the period
   (35,334 ) 22,499    10,390
Amortization of adjustment for fair value
   —    (72,192 ) —
Profit (loss) of the consolidated entities
   (35,334 ) (49,693 ) 10,390
Total comprehensive Income (loss)
   (36,785 ) 17,397    (23,948 )
Profit (loss) attribute to non-controlling interests
   (12,525 ) (24,595 ) 4,156
Net cash provided by (used in) operating activities
   ￦ (14,925 ) 375,848    16,258
Net cash provided by (used in) Investing activities
   5,319    (287,975 ) (396 )
Net cash provided by (used in) financing activities
   92    (224,837 ) (1,405 )
Net increase (decrease) in cash and cash equivalents
   (9,514 ) (136,964 ) 14,457
(*1) The financial information of SK Broadband Co., Ltd. includes the financial information of Broadband media Co., Ltd., a subsidiary of SK Broadband Co., Ltd.
(*2) The financial information of SKY Property Mgmt. Ltd. includes the financial information of SK China Real Estate Co., Ltd., a subsidiary of Sky Property Mgmt. Ltd.
2. Basis of Presentation
(1)    Statement of compliance
These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB.
The consolidated financial statements were authorized for issuance by the Board of ~~the Company~~Directors on February 6, 2014.
(2)    Basis of measurement
The consolidated financial statements have been prepared ~~in conformity with accounting principles generally accepted~~on the historical cost basis, except for the following material items in the ~~Republic~~statement of ~~Korea. Significant accounting policies followed~~financial position:
derivative financial instruments are measured at fair value
financial instruments at fair value through profit or loss are measured at fair value
available-for-sale financial assets are measured at fair value
liabilities for defined benefit plans are recognized at the net of the total present value of defined benefit obligations less the fair value of plan assets and unrecognized past service costs
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(3)    Functional and presentation currency
Financial statements of Group entities within the Group are presented in ~~preparing~~functional currency and the ~~accompanying consolidated~~currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are ~~summarized as follows:~~
~~a.  Basis of Presentation~~
~~The Company maintains its official accounting records~~presented in ~~Republic of~~ Korean won, ~~(Korean won)~~which is the Parent Company’s functional and ~~prepares statutory~~presentation currency.
(4)    Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting ~~principles generally accepted~~policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the ~~Republic of Korea (“Korean GAAP”)~~period in which the estimates are revised and in any future periods affected.
1)    Critical judgments
Information about critical judgments in applying accounting policies that have the ~~Korean language (Hangul). Certain accounting principles applied by~~most significant effect on the ~~Company that conform with financial accounting standards and accounting principles~~amounts recognized 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 informationis included in the ~~Korean language~~following notes: revenue and classification of investment property.
2)    Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial ~~statements, but not required~~year are included in the following notes: allowance for adoubtful accounts, estimated useful lives of property and equipments and intangible assets, impairment of goodwill, measurement of defined benefit obligation, recognition of deferred tax assets (liabilities), and commitments and contingencies.
3)    Fair value measurement
Management establishes fair ~~presentation~~value measurement policies and procedures as the Group’s accounting policies and disclosures require fair value measurements for the majority of financial and non-financial assets and liabilities. Such policies and procedures are executed by the ~~Company’s financial position,~~valuation division, which is responsible for the review of significant fair value measurements including fair values classified as level 3 in the fair value hierarchy, and the results of ~~operations, changes in stockholders’ equity~~which are directly reported to the finance executive.
Management regularly reviews unobservable significant inputs and valuation adjustments. If third party information such as prices available from an exchange, dealer, broker, industry group, pricing service or ~~cash flows,~~regulatory agency is ~~not presented in~~used for fair value measurements, the ~~accompanying consolidated financial statements.~~
~~The accompanying consolidated financial statements are stated in Korean won,~~valuation division reviews whether the ~~currency of~~valuation based on third party information includes classifications by levels within the ~~country in which~~fair value hierarchy and meets the ~~Company is incorporated and operates. The translation of Korean won amounts into U.S. dollar amounts is included solely~~requirements for the ~~convenience~~relevant standards.
Management uses the best observable inputs in market when measuring fair values of ~~readers of financial statements and has been made at~~assets or liabilities. Fair values are classified within the ~~rate of~~ W~~1,130.60 to US$1.00,~~fair value hierarchy based on inputs used in valuation methods, as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the ~~Noon Buying Rate in~~asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the ~~City of New York for cable transfers in Korean won as certified for customs purposes by the Federal Reserve Bank of New York~~asset or liability that are not based on the last business day of the year ended December 31, 2010. 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, 2008, 2009 and 2010. Controlled subsidiaries include (a) majority-owned entities by SK Telecom or its controlled subsidiaries and (b) other entities where SK Telecom or its controlled subsidiaries

~~F-13~~observable market data (unobservable inputs)
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~own more than 30%~~
For the years ended December 31, 2013, 2012 and 2011
If various inputs used to measure fair value of ~~total outstanding common stock~~assets or liabilities are transferred between levels of the fair value hierarchy, the Group classifies the assets and liabilities at the lowest level of inputs among the fair value hierarchy which is significant to the entire measured value and recognizes transfers between levels at the end of the reporting period of which such transfers occurred.
Information about assumptions used for fair value measurements are included in note 34.
(5)    Common control transactions
SK Holdings Co., Ltd. (“the Ultimate Controlling Entity”) is the ~~largest stockholder. Meanwhile, if~~Ultimate Controlling Entity of the ~~total~~Parent Company because it controls the Parent Company. Accordingly, gains and losses from business acquisitions and dispositions involving entities that are under the control of the Ultimate Controlling Entity are accounted for as common control transactions within equity.
3. Changes in Accounting Policies
The accounting policies have been applied consistently to all periods presented in these consolidated financial statements except for the following new standards, interpretations and amendments to existing standards mandatory for the Group for annual periods beginning on or after January 1, 2013:
IFRS 10, ‘Consolidated Financial Statements’
IFRS 11, ‘Joint Arrangements’
IFRS 12, ‘Disclosure of Interests in Other Entities’
IFRS 13, ‘Fair Value Measurement’
IAS 19, ‘Employee Benefits’
Amendments to IAS 1, ‘Presentation of Items of Other Comprehensive Income (“OCI”)’
Amendments to IFRS 7, ‘Disclosure of offsetting financial assets and financial liabilities’
Amendments to IAS 36, ‘Disclosure of recoverable amount of non-financial assets’
(1)    Subsidiaries
As a result of IFRS 10, the Group has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns.
In accordance with the transitional provision of IFRS 10, the Group reassessed the control conclusion for its investees at January 1, 2013, and there were no changes in the Group’s subsidiaries as a result of adopting this standard.
(2)    Joint arrangements
As a result of IFRS 11, the Group has changed its accounting policy for its interests in joint arrangements. Under IFRS 11, the Group has classified its interests in joint arrangements as either joint operations (if the Group has rights to the assets. and obligations for the liabilities, relating to an arrangement) or joint ventures (if the Group has rights only to the net assets of an arrangement). When making this assessment, the Group considered the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
Management has re-evaluated the Group’s involvement in its only joint arrangement and has reclassified the investment from a jointly controlled entity to a joint venture. Notwithstanding the reclassification, the investment continues to be recognized by applying the equity method and there has been no impact on the recognized assets, liabilities and comprehensive income of the Group.
(3)    Disclosure of interests in other entities
As a result of IFRS 12, the Group has expanded its disclosures about its interests in subsidiaries (see note 1) and equity-accounted investees (see note 12).
(4)    Fair value measurement
IFRS 13 has been amended to provide a single framework for fair value and information of fair value measurements when other standards requires or permits fair value measurements. The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard replaces disclosures relating to fair value measurements required by other standards including IFRS 7, and requires additional disclosures. The required disclosures are included in note 34.
(5)    Defined benefit pension plans
The Group changed its accounting policy for recognition of gains and losses relating to defined benefit pension plans in accordance with the amendments to IAS 19, ‘Employee Benefits’. The Group determines net interest costs for net defined benefit liabilities using the discount rates used for the measurement of defined benefit obligations at the beginning of ~~fiscal year were less than~~ W~~10 billion,~~the reporting period and considers changes in net defined benefit liabilities due to contributions and retirement benefit payments. Accordingly, net interests on net defined benefits liabilities consist of interest costs on defined benefits obligations, interest income on plan assets and, if applicable, interest on the effects of limitations on asset recognition. Prior to the amendments, the Group determined interest income on plan assets based on the long-term expected return rate. The adoption of this amendment did not have significant impact on the consolidated financial statements.
(6)    Presentation of other comprehensive income items
In accordance with the amendments, the Group classifies other comprehensive income items by nature and presents items as “items that will never be reclassified to profit or loss” and “items that are or may be reclassified to profit or loss.” Accordingly, the consolidated statements of comprehensive income for the years ended December 31, 2012 and 2011 have been re-presented.
(7)    Offsetting financial assets and liabilities
As described in note 34, the Group provides disclosures relating to offsetting financial assets and financial liabilities in accordance with the amendments to IFRS 7.
(8)    Disclosure of recoverable amount of non-financial assets
The Group early adopted the amendments to IAS 36. Accordingly, the Group makes the additional disclosures on required by the amendment when impairment losses are recognized and recoverable amounts are based on net fair value (see note 15).
4. Significant Accounting Policies
The significant accounting policies applied by the Group in preparation of its consolidated financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements except for those ~~investees~~as described in note 3.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(1)    Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group has three reportable segments which consist of cellular services, fixed-line telecommunication services and others, as described in note 5. Segment results that are ~~excluded~~reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
The group’s chief operating decision maker receives and reviews operating income based on Korean IFRS as the measure of segment profit and loss for each operating segment. Segment operating income differs from consolidated operating income from continuing operations used in the Group’s consolidated statements of income. Segment operating income does not include certain items such as fee revenues, gain/loss from disposal of property, plant, equipment and intangible assets, impairment losses on property, plant, equipment and intangible assets, donations, bad debt expense and penalties. The chief operating decision maker does not receive any information about segment assets and liabilities. Segment information does not include the Group’s discontinued operations information. Refer to note 37 for details on discontinued operations.
(2)    Basis of consolidation
(i)    Business combination
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.
Consideration transferred is generally measured at fair value, identical to the measurement of identifiable net assets acquired at fair value. If goodwill incurs as a result of business combination, the Group performs impairment test on an annual basis and recognizes gain from bargain purchases through profit or loss. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received excluding costs to issue debt or equity securities recognized based on IAS 32 and 39.
Consideration transferred does not include the amount settled in relation to the pre-existing relationship and the amount settled in relation to the pre-existing relationship is generally recognized through profit or loss.
Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration and recognizes through profit or loss.
Entire or certain portion of market-based measure of replacement award for share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the acquirer is included in measurement of contingent considerations. Portion of a replacement award that is part of the consideration transferred for the acquiree and the portion that is remuneration for post-combination service is determined by comparing market-based measure of the awards of acquire and replacement awards that is attributable to pre-combination service.
(ii)    Non-controlling interests
The Group measure at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets.
Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(iii)    Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.
(iv)    Loss of control
If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.
(v)    Interest in investees accounted for using the equity method
Interest in ~~accordance with Korean GAAP. All intercompany~~investees accounted for using the equity method composed of interest in associates and joint ventures. An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement have rights to the net assets of the arrangement.
The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.
(vi)    Intra-group transactions
Intra-group balances and transactions, ~~have been~~and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the ~~consolidation procedures.~~

Year of
Ownership Percentage (%)
Subsidiary
Establishment
Primary Business
2008 2009 2010

SK Broadband Co., Ltd. 1997 Telecommunication services 43.4 50.6 50.6
SK Communications Co., Ltd. 1999 Internet website services 65.7 64.8 64.7
SK Telink Co., Ltd. 1998 Telecommunication services 90.8 90.8 83.5
PS&Marketing Corporation 2009 Communications device retail business — 100.0 100.0
PAXNet Co., Ltd. 1999 Internet website services 59.7 59.7 59.7
F&U Credit information Co., Ltd. 1998 Credit and collection services 50.0 50.0 50.0
Loen Entertainment, Inc. 1982 Release of music disc 63.5 63.5 63.5
Ntreev Soft Co., Ltd. 2003 Game software 63.7 63.7 63.7
Commerce Planet Co., Ltd. 1997 Online shopping mall operation agency 100.0 100.0 100.0
Stonebridge Cinema Fund 2005 Investment association 72.2 72.2 57.0
SK i-media Co., Ltd. 2006 Game software 100.0 100.0 100.0
Broadband Media Co., Ltd. 1997 Multimedia contents 100.0 100.0 100.0
Broadband CS Co., Ltd. 1998 Telemarketing services — 100.0 100.0
Service ace Co., Ltd. 2010 Telemarketing services — — 100.0
Service Top Co., Ltd. 2010 Telemarketing services — — 100.0
Network O&S Co., Ltd. 2010 Network managed services — — 100.0
K-net Culture and Contents Venture Fund
2008 Investment association 59.0 59.0 59.0
2nd Benex Focus Investment Fund 2008 Investment association 66.7 66.7 66.7
Benex Movie Expert Fund 2009 Investment association 46.6 46.6 46.6
Open Innovation Fund 2008 Investment association 98.5 98.5 98.9
Benex Sector Limited Partnership IV 2008 Investment association — — 49.7
BMC Digital Culture and Contents Fund 2008 Investment association 39.8- 39.8 39.8
The Contents Com Co., Ltd. 2005 Software — — 100.0
PREGM Co., Ltd. 1999 Production of movies and videos — — 56.7
SK Telecom China Holdings Co., Ltd. 2007 Investment 100.0 100.0 100.0
Sky Property Mgmt., Ltd. 2008 Real Estate Investment 60.0 60.0 60.0
ShenzhenE-eye High Tech Co., Ltd.
2000 Manufacturing 65.5 65.5 65.5
SKT Vietnam PTE., Ltd. 2000 Telecommunication services 73.3 73.3 73.3
SKT Americas, Inc. 1995 Internet website services 100.0 100.0 100.0
SK Telecom Global Investment B.V 2008 Investment Association 100.0 100.0 100.0
Technology Venture Fund, LP 2010 Research and Development — — 100.0
YTK Investment Ltd 2010 Investment Association — — 100.0
SK Technology Innovation Company 2010 Research and Development — — 49.0
~~Effective January 1, 2010, Service ace Co., Ltd., Service Top Co., Ltd., Network O&S Co., Ltd.~~consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and ~~YTK Investment Ltd.~~unrealized loss are ~~included~~eliminated using the same basis if there are no evidence of asset impairments.
(vii)    Business combinations under common control
The assets and liabilities acquired from the combination of entities or business under common control are recognized at the carrying amounts in the ~~consolidation of the accompanying~~ultimate controlling shareholder’s consolidated financial ~~statements as these companies are the wholly-owned subsidiaries~~statements. The difference between consideration and carrying amount of ~~the Company. SK Technology Innovation Company~~net assets acquired is ~~included in the consolidation of the accompanying consolidation financial statements as the Company owns more than 30% of total outstanding common stock~~added to or subtracted from other capital adjustments.
(3)    Cash and ~~became the largest stockholder.~~
~~Effective January 1, 2010, Technology Venture Fund, LP.~~cash equivalents
Cash and ~~Broadband CS Co., Ltd., are included in the consolidation of the accompanying consolidated financial statements as their total assets at the beginning of that fiscal year were more than~~ W~~10 billion, in accordance~~cash equivalents comprise cash balances and call deposits with ~~Korean GAAP.~~

~~F-14~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
For the year ended December 31, 2010, Benex Sector Limited Partnership IV, The Contents Com Co., Ltd. and PREGM Co., Ltd. are included in the consolidation of the accompanying consolidated financial statements as the Company acquired controlling equity interest of the companies.
Effective January 1, 2010, The Second Music Investment Fund of SK-PVC, SK Telecom China Co., Ltd. and SK Telecom Advanced Tech & Service Center (STC) are excluded from the consolidation as its total assets at the beginning of that fiscal year were less than W~~10 billion, in accordance with Korean GAAP and are subsequently accounted for under the equity method.~~
~~On April 26, 2010, the Company disposed of 11,170,014 shares of IHQ, Inc. and as of December 31, 2010 has 3,790,330 shares, 9.4% of IHQ, Inc., remaining.~~
SK-KTB Music Investment Fund is excluded from the consolidation as the Company liquidated SK-KTB Music Investment Fund during October 2010, SK-KTB Music Investment Fund’s operation in the consolidated income statement is treated as a discontinued operation, and accordingly is presented as a single item between income tax expenses for continuing operation and net income. Refer to Note 2(ab)
~~TU Media Corp. is excluded from the consolidation as it merged into SK Telink Co., Ltd. during the year ended December 31, 2010.~~
c.   ~~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.~~
d.   ~~Allowance for Doubtful Accounts~~
~~Allowance for doubtful accounts is provided based on~~less from the ~~estimated collectability of individual accounts and historical bad debt experience.~~
~~Details~~acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the ~~allowance for doubtful accounts receivable — trade for 2008, 2009 and 2010 are as follows (in millions~~Group in the management of ~~Korean won):~~

2008 2009 2010

Beginning balance W 93,551 W 150,320 W 233,078
Write-offs (50,065 ) (115,720 ) (64,969 )

Net 43,486 34,600 168,109
Provision for doubtful accounts receivable-trade 61,662 199,933 79,972
Provision for doubtful accounts receivable-trade for the discontinued operation 1,311 158 16
Increase (decrease) due to the changes in consolidated subsidiaries 43,861 (1,613 ) 881

End of year W 150,320 W 233,078 W 248,978

~~F-15~~
its short-term commitments.
(4)    Inventories
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
e.   ~~Inventories~~
Inventories are stated at the acquisition cost using the ~~following methods:~~
~~Assets~~
~~Methods~~
~~Inventories fromE-commerce~~ ~~business~~
~~Moving average method~~
~~Replacement units for wireless telecommunication facilities and supplies for sales promotion~~ ~~Moving average method~~
~~Wireless device~~ ~~Individual method~~
~~Books and CDs~~ ~~FIFO~~
average method. During the ~~year,~~period, a perpetual inventory ~~systems are~~system is used to value inventories, which ~~are~~is adjusted to the physical inventory counts performed at the ~~year~~period end. When the ~~market~~net realizable value of inventories is less than the acquisition cost, the carrying amount is reduced to the ~~market~~net realizable value and any difference is charged to current operations as operating expenses. ~~Valuation loss~~Net realizable value is the estimated selling price in the ordinary course of W~~921 million was recorded for~~business, less the ~~year ended December 31, 2010~~estimated costs of completion and ~~reversal of allowance for inventory valuation loss of~~ W~~168 million~~selling expenses.
SK TELECOM CO., LTD. and W~~373 million were recorded for~~Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, ~~2008~~2013, 2012 and ~~2009, respectively.~~
f.   ~~Securities (Excluding Equity Securities Accounted for Using the Equity Method)~~
~~Debt~~2011
(5)    Non-derivative financial assets
The Group recognizes and ~~equity securities are initially recorded at their acquisition costs (fair value of consideration paid) including incidental cost incurred in connection with acquisition of~~measures non-derivative financial assets by the ~~related securities and classified into trading,available-for-sale~~ ~~andheld-to-maturity~~ ~~(debt only) securities depending on the acquisition purpose and nature.~~
~~Trading securities are stated~~following four categories: financial assets at fair value ~~with gains~~through profit or ~~losses on valuation reflected~~loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The Group recognizes financial assets in ~~current operations.~~
~~Securities~~the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Upon initial recognition, non-derivative financial assets are measured at their fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the asset’s acquisition or issuance.
(i)    Financial assets at fair value through profit or loss
A financial asset is classified as~~available-for-sale~~ financial assets are ~~reported~~classified at fair ~~value. Unrealized gains~~value through profit or ~~losses on valuation~~loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
(ii)    Held-to-maturity investments
A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Group has the positive intention and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest rate method.
(iii)    Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method except for loans and receivables of which the effect of discounting is immaterial.
~~available-for-sale~~(iv)    Available-for-sale financial assets ~~securities~~
Available-for-sale financial assets are ~~included~~those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables. Subsequent to initial recognition, they are measured at fair value, which changes in ~~accumulated~~fair value, net of any tax effect, recorded in other comprehensive income ~~(loss)~~in equity. Investments in equity instruments that do not have a quoted market price in an active market and the unrealized gains or losses are reflected in net income when the securities are sold as a part of gain (loss) on disposal of investment assets or if there is an objective evidence of impairment such as bankruptcy of investees as an impairment loss. Equity securities are stated at acquisition cost ifwhose fair value cannot be reliably ~~measured.~~
~~Held-to-maturity~~ ~~securities~~measured are measured at cost.
(v)    De-recognition of financial assets
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. If the Group retains substantially all the risks and rewards of ownership of the transferred financial assets, the Group continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.
(vi)    Offsetting between financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Group currently has a legally enforceable right to offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(6)    Derivative financial instruments, including hedge accounting
Derivatives are initially recognized at ~~acquisition cost after premiums or discounts~~fair value. Subsequent to initial recognition, derivatives are ~~amortized or accreted, respectively.~~ measured at fair value, and changes therein are accounted for as described below.
(i)    Hedge accounting
The ~~Company recognizes write-downs resulting from declines~~Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designated derivatives as hedging instruments to hedge the risk of changes in the fair value ~~below its book~~of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
Fair value hedge
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value for a derivative hedging instrument and the gain or loss on the ~~end~~hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the consolidated statement of income. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.
Cash flow hedge
When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.
(ii)    Separable embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately only if the following criteria have been met:
(a) the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract;
(b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
(c) the hybrid instrument is not measured at fair value with changes in fair value recognized in profit or loss.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
(iii)    Other derivative financial instruments
Changes in the fair value of other derivative financial instrument not designated as a hedging instrument are recognized immediately in profit or loss.
(7)    Impairment of financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting ~~period if~~date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of ~~impairment. The related write-downs are recorded~~the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. However, losses expected as a result of future events, regardless of likelihood, are not recognized.
Objective evidence that a financial asset is impaired includes following loss ~~on impairment~~events:
significant financial difficulty of ~~investment securities.~~the issuer or obligor;
a breach of contract, such as default or delinquency in interest or principal payments;
~~Trading securities are presented~~
the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
it becoming probable that the borrower will enter bankruptcy or other financial reorganization;
the disappearance of an active market for that financial asset because of financial difficulties; or
observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group
In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
If financial assets have objective evidence that they are impaired, impairment losses should be measured and recognized.
(i)    Financial assets measured at amortized cost
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. If it is not practicable to obtain the instrument’s estimated future cash flows, impairment losses would be measured by using prices from any observable current ~~asset section~~market transactions. The Group can recognize impairment losses directly or establish a provision to cover impairment losses. If, in a subsequent period, the amount of the ~~Statements of financial position,~~impairment loss decreases and~~available-for-sales~~ ~~andheld-to-maturity~~ ~~securities are presented~~ the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the ~~current~~debtor’s credit rating), the previously recognized impairment loss shall be reversed either directly or by adjusting an allowance account.
(ii)    Financial assets carried at cost
If there is objective evidence that an impairment loss has occurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset ~~section~~that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses shall not be reversed.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements of— (Continued)
For the years ended December 31, 2013, 2012 and 2011
(iii)    Available-for-sale financial ~~position if their maturities are within one year; otherwise such securities are recorded~~assets
When a decline in the ~~non-current section~~fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale shall not be reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed, with the amount of the ~~Statements~~reversal recognized in profit or loss.
(8)    Property, plant and equipment
Property, plant and equipment are initially measured at cost and after initial recognition, are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of ~~financial position.~~
property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent to initial recognition, an item of property, plant and equipment shall be carried at its cost less any accumulated depreciation and any accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of property, plant and equipment at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Property, plant and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property, plant and equipment is depreciated over its separate useful life.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized as other non-operating income (loss).
The estimated useful lives of the Group’s property, plant and equipment are as follows:
g.   ~~Equity Securities Accounted for Using the Equity Method of Accounting~~Useful lives (years)
Buildings and structures
15 ~ 40
Machinery
3 ~ 15
Other property, plant and equipment (“Other PP&E”)
4 ~ 10
~~Investment securities~~
Depreciation methods, useful lives and residual values are reviewed at the end of ~~affiliated companies,~~each reporting date and adjusted, if appropriate. The change is accounted for as a change in ~~which~~an accounting estimate.
(9)    Borrowing costs
The Group capitalizes borrowing costs directly attributable to the ~~Company has~~acquisition, construction or production of a qualifying asset as part of the ~~ability~~cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to ~~exercise significant influence,~~get ready for its intended use or sale. Financial assets and inventories that are ~~carried using~~manufactured or otherwise produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the ~~equity method~~Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
To the extent that the Group borrows funds specifically for the purpose of ~~accounting, whereby~~obtaining a qualifying asset, the ~~Company’s initial~~Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment ~~is recorded~~income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group shall determine the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate shall be the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period shall not exceed the amount of borrowing costs incurred during that period.
(10)    Intangible assets
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which club memberships are expected to be available for use, this intangible asset is determined as having indefinite useful lives and not amortized.
The estimated useful lives of the Group’s intangible assets are as follows:
Useful lives (years)
Frequency use rights
6 ~ 13
Land use rights
5
Industrial rights
5, 10
Development costs
5
Facility usage rights
10, 20
Customer relations
3 ~ 7
Other
3 ~ 20
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for as changes in accounting estimates.
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.
(11)    Government grants
Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grant’s conditions and that the grant will be received.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(i)    Grants related to assets
Government grants whose primary condition is that the Group purchase, construct or otherwise acquire long-term assets are deducted in calculating the carrying ~~value is subsequently increased or decreased to reflect the Company’s portion of stockholders’ equity~~amount of the ~~investee. Differences between~~asset. The grant is recognized in profit or loss over the ~~acquisition~~life of a depreciable asset as a reduction to depreciation expense.
(ii)    Grants related to income
Government grants which are intended to compensate the Group for expenses incurred are deducted from the related expenses.
(12)    Investment property
Property held for the purpose of earning rentals or benefiting from capital appreciation is classified as investment property. Investment property is initially measured at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at depreciated cost less any accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Group and ~~net asset fair value~~the cost of the ~~investee~~item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are ~~amortized~~recognized in profit or loss as incurred.
Investment property except for land, are depreciated on a straight-line basis over ~~5 to 20~~15~40 years ~~using~~as estimated useful lives.
Depreciation methods, useful lives and residual values are reviewed at the ~~straight-line method. When applying the equity method~~end of ~~accounting, unrealized inter-company gains~~each reporting date and ~~losses are eliminated and charged or credited to current operation.~~
~~Assets and liabilities of foreign-based companies~~adjusted, if appropriate. The change is accounted for ~~using~~as a change in an accounting estimate.
(13)    Impairment of non-financial assets
The carrying amounts of the ~~equity method~~Group’s non-financial assets, other than assets arising from employee benefits, inventories, deferred tax assets and non-current assets held for sale, are ~~translated at current rate of exchange~~reviewed at the end of the reporting period ~~while~~to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.
Management estimates the recoverable amount of an individual asset, if it is impossible to measure the individual recoverable amount of an asset, then management estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflect current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss if the carrying amount of an asset or a CGU exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from the goodwill acquired. Any impairment identified at the CGU level will first reduce the carrying value of goodwill and ~~loss items~~then be used to reduce the carrying amount of the other assets in the ~~statement~~CGU on a pro rata basis. Except for impairment losses in respect of ~~earnings~~goodwill which are ~~translated at average rate and capital account at historical rate. The translation gains and losses arising from~~

~~F-16~~never reversed, an impairment loss is
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~collective translation of~~
For the ~~foreign currency financial statements of foreign-based companies are offset~~years ended December 31, 2013, 2012 and ~~the balance is remained as accumulated other comprehensive income (loss)~~2011
reversed if there has been a change in the ~~Company’s stockholders’ equity.~~
~~Under~~estimates used to determine the equity method of accounting, the Company does not record its share of losses of an affiliate when such losses would make the Company’s investment in such entity less than zero unless the Company has guaranteed obligations of the investee orrecoverable amount. An impairment loss 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~~reversed only to the extent that the ~~Company has~~asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(14)    Leases
The Group classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other ~~investment~~leases are classified as operating leases.
(i) ��  Finance leases
At the commencement of the lease term, the Group recognizes as finance assets ~~related~~and finance liabilities in its consolidated statements of financial position, the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the ~~equity method investees. In addition, when~~amount recognized as an asset.
Minimum lease payments are apportioned between the ~~Company’s share~~finance charge and the reduction of ~~equity~~the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the ~~equity method investees increases as~~periods in which they are incurred.
The depreciable amount of a ~~result~~leased asset is allocated to each accounting period during the period of ~~capital transactions~~expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is no reasonable certainty that the lessee will obtain ownership by the end of the ~~investees with (or without) consideration,~~lease term, the ~~increase in~~asset is fully depreciated over the Company’s proportionate shares in the investees are treated as goodwill or negative goodwill and when the Company’s share of equity interest in the equity method investees decrease as a result of capital transactionsshorter of the ~~investees with (or without) consideration,~~lease term and its useful life. The Group reviews to determine whether the ~~decrease~~leased asset may be impaired.
(ii)    Operating leases
Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are recognized in ~~the Company’s proportionate shares in the investees are accounted for as gain~~profit or loss on ~~disposal.~~
h.   ~~Valuation of Long-term Accounts Receivable — Other~~
~~Long-term accounts receivable~~a straight-line basis over the period of the lease.
(iii)    Determining whether an arrangement contains a lease
Determining whether an arrangement is, or contains, a lease shall be based on the substance of the arrangement and requires an assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset or assets (the asset) and the arrangement conveys a right to use the asset.
At inception or reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a financial lease that it is impracticable to separate the payments reliably, the Group recognizes an asset and a liability at an amount equal to the fair value of the underlying asset that was identified as the subject of the lease. Subsequently, the liability shall be reduced as payments are ~~stated~~made and an imputed finance charge on the liability recognized using the purchaser’s incremental borrowing rate of interest.
(15)    Non-current assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. The assets or disposal group that are classified as non-current assets held for sale are
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
measured at the lower of their carrying amount and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized in accordance with IAS 36, ‘Impairment of Assets’.
A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
(16)    Non-derivative financial liabilities
The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.
(i)    Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.
(ii)    Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.
The Group derecognizes a financial liability from the consolidated statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
(17)    Employee benefits
(i)    Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
(ii)    Other long-term employee benefits
Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render the related service, and are calculated at the present value of the ~~expected~~amount of future ~~cash flows. Imputed interest amounts~~benefit that employees have earned in return for their service in the current and prior periods. Any changes from remeasurements are ~~recorded~~recognized through profit or loss in ~~present value discount accounts~~the period in 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.~~
i.   ~~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 the 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~~ 3~15
~~Other~~ ~~Declining balance method~~ 4~9
~~Interest expenses and other financing charges for borrowings related~~they arise.
(iii)    Retirement benefits: defined contribution plans
When an employee has rendered service to the ~~manufacture or construction of property and equipment are charged~~Group during a period, the Group recognizes the contribution payable to ~~current operations~~a defined contribution plan in exchange for that service as ~~incurred.~~
j.   ~~Intangible Assets~~
~~Intangible assets are stated at cost less amortization computed using~~a liability (accrued expense), after deducting any contribution already paid. If the ~~straight-line method over 2 to 20 years.~~
~~The Company capitalizes~~contribution already paid exceeds the ~~cost of internal-use software which has a useful life in excess of one year. Capitalized internal-use software costs are amortized using~~contribution due for service before the ~~straight-line method over 5 years and are recorded in intangible assets.~~
k.   ~~Government Subsidy~~
~~Government subsidy which has been received, in cash, that has not been used as~~end of the reporting period, ~~end, is presented on~~ the ~~face of~~Group recognizes that excess as an asset (prepaid expense) to the ~~statements of financial position, as net of~~extent that the prepayment will lead to a reduction in future payments or a cash ~~and cash equivalents.~~
For government subsidy which has been 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

~~F-17~~refund.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
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 Statements of financial position. 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.
l.   ~~Impairment Losses~~
When there is any indication of impairment such as significant decrease in the market value of an asset and carrying amount of property and equipment exceeds their estimated total future non-discounted cash flows from continued use or disposal, the carrying value is reduced to the recoverable amount, determined as present value of future cash flows, and any difference is charged to current operation as an 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) 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. Impairment losses forFor the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 were~~ W~~12,733 million,~~ W~~7,256 million and~~ W~~31,864 million, respectively.~~
m.   ~~Convertible Bonds and Bonds with Stock Purchase Warrants~~
2011
(iv)    Retirement benefits: defined benefit plans
As of the end of reporting period, defined benefits liabilities relating to defined benefit plans are recognized as present value of defined benefit obligations net of fair value of plan assets.
The ~~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~~calculation 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~~performed annually by an independent actuary using the ~~effective interest rate method over~~projected unit credit method. When the ~~redemption period~~fair value of ~~the convertible bonds. The portion allocable to the conversion rights is measured by deducting~~plan assets exceeds the present value of the ~~debt at time~~defined benefit obligation, the Group recognizes an asset, to the extent of ~~issuance from the gross proceeds from issuance of convertible bonds, with~~ the present value of any economic benefits available in the ~~debt being computed by discounting~~form of refunds from the ~~expected~~plan or reduction in the future ~~cash flows (including call premium, if any) using~~contributions to the ~~effective interest rate applied to ordinary or straight debt~~plan.
Remeasurements of the ~~Company~~net defined benefit liability comprise of actuarial gains and losses, the return on plan assets excluding amounts included in net interest on the net defined benefit liability, and any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and recognized in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the ~~issuance date.~~
n.   ~~Discounts on Bonds~~
~~Discounts on bonds are amortized to interest expense using the effective interest rate method over the redemption period~~beginning of the ~~bonds.~~
o.   ~~Valuation of Long-term Payables~~
~~Long-term payables resulting~~annual reporting period and considers changes in net defined benefit liability (asset) from ~~long-term installment transactions~~contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are ~~stated~~recognized through profit or loss.
When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes gain or loss on a settlement when the settlement of defined benefit plan occurs.
(v)    Termination benefits
The Group recognizes a liability and expense for termination benefits at ~~present value~~the earlier of the ~~expected future cash flows. Imputed interest amounts~~period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring. If benefits are ~~recorded in~~payable more than 12 months after the reporting period, then they are discounted to their present ~~value discount accounts which~~value.
(18)     Provisions
Provisions are ~~deducted directly from~~recognized when the ~~related nominal payable balances. Such imputed interest is included in operations using the effective interest rate method over the redemption period.~~
p.   ~~Provisions, Contingent Liabilities and Contingent Assets~~
~~The Company recognizes a provision when i) it~~Group has a present legal or constructive obligation as a result of a past event, ~~ii)~~ it is probable that ~~a disbursement~~an outflow of resources embodying economic ~~resources~~benefits 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~~obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a ~~possible range of loss in connection with a probable loss contingency as~~provision. Where the effect of the ~~end~~time value of money is material, provisions are determined at the present value of the ~~reporting period is estimable with reasonable certainty, and~~expected future cash flows.
Where some ~~amount within that range appears at~~or all of the ~~time~~expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement shall be recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a ~~better estimate than any other amount within the range, the~~

~~F-18~~
separate asset.
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~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.

q.   ~~Accrued Severance Indemnities~~
~~In accordance with the policies of the Company, all employees with more than one year of service~~Provisions 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 terminatereviewed at the end of each reporting period and adjusted to reflect the ~~reporting period.~~
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 W~~68,559 million,~~ W~~76,383 million and~~ W~~96,266 million as of December 31, 2008, 2009 and 2010, 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 W~~27 million,~~ W~~6 million and~~ W~~6 million as of December 31, 2008, 2009 and 2010, respectively, are deducted from accrued severance indemnities.~~

~~F-19~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Changes in accrued severance indemnities for 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010

Beginning net balance W 44,322 W 53,815 W 57,655
Provision for continuing operation 92,501 55,711 86,797
Provision for discontinued operation 593 372 276
Payments to employees for continuing operation (106,241 ) (37,953 ) (63,185 )
Payments to employees for discontinued operation (796 ) (403 ) (381 )
Net increase (decrease) due to the changes in consolidated subsidiaries 44,718 (4,349 ) 1,360
Changes in deposits for severance indemnities (21,282 ) (9,538 ) (19,618 )

Ending net balance W 53,815 W 57,655 W 62,904

Ending balance:
Accrued severance indemnities W 122,401 W 134,044 W 159,176
Deposits with insurance companies (68,559 ) (76,383 ) (96,266 )
National Pension Fund (27 ) (6 ) (6 )

Net balance W 53,815 W 57,655 W 62,904

r.   ~~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.~~current best estimates. If ~~a lease meets any one of the following criteria,~~ it is ~~accounted~~no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
A provision shall be used only 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~~expenditures for which 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.
s.   ~~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~~ W~~226,713 million,~~ W~~236,269 million and~~ W~~270,378 million for the years ended December 31, 2008, 2009 and 2010, respectively, and external research and development costs~~

~~F-20~~
provision was originally recognized.
(19)     Foreign currencies
(i)     Foreign currency transactions
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
of W~~72,993 million,~~ W~~56,867 million and~~ W~~81,582 million for the years ended December 31, 2008, 2009 and 2010, respectively.~~
t.   ~~Foreign-based Operations’ Translation Adjustment~~
In translating the foreign currency financial statements of the Company’s 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 Statements of financial position. The translation gain or loss arises from the application of different exchange rates; the year-end rate for Statements of financial position items except stockholders’ equity, the historical rate for stockholders’ equity and the daily average rate for statement of income items.
u.   ~~Accounting for Foreign Currency Transactions and Translation Adjustment~~
~~SK Telecom and its domestic subsidiaries maintain their accounts in Korean won.~~ Transactions in foreign currencies are ~~recorded in Korean won based on~~translated to the ~~prevailing rate~~respective functional currencies of Group entities at exchange rates at the dates of the transactions. ~~As allowed under Korean GAAP, monetary~~Monetary assets and liabilities denominated in foreign currencies are
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
retranslated to the functional currency using the reporting date’s exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
(ii)    Foreign operations
If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus they are expressed in the ~~accompanying consolidated financial statements~~functional currency of the foreign operation and translated at the ~~Base Rates announced~~closing rate.
When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.
(20)     Equity capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
When the Group repurchases its share capital, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The profits or losses from the purchase, disposal, reissue, or retirement of treasury shares are not recognized as current profit or loss. If the Group acquires and retains treasury shares, the consideration paid or received is directly recognized in equity.
(21)     Hybrid bond
The Group recognizes a financial instrument issued by ~~Seoul Money Brokerage~~the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.
(22)     Revenue
Revenue from the sale of goods, rendering of services or use of the Group assets is measured at the fair value of the consideration received or receivable. Returns, trade discounts and volume rebates are recognized as a reduction of revenue.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(i)    Services ~~Ltd.~~
Revenue from cellular services consists of revenue from basic charges, voice charges, data charges, data-roaming services and interconnection charges. Such revenues are recognized as services are performed. Revenues received for the activation of service are deferred and recognized over the average customer retention period.
Revenue from fixed-line services includes domestic short and long distance charges, international phone connection charges, and broadband internet services. Such revenues are recognized as the related services are performed.
Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.
(ii)    Goods sold
Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
(iii)    Customer loyalty programmes
For customer loyalty programmes, the fair value of the consideration received or receivable in respect of the initial sale is allocated between the award credits and the other components of the sale. The amount allocated to the award credits is estimated by reference to the fair value of the services to be provided with respect to the redeemable award credits. The fair value of the services to be provided with respect to the redeemable portion of the award credits granted to the customers in accordance with customer loyalty programmes is estimated taking into account the expected redemption rate and timing of the expected redemption. Considerations allocated to the award credits are deferred and revenue is recognized when the award credits are recovered and the Group performs its obligation to provide the service. The amount of revenue recognized is based on the relative size of the total award credits that are expected to be redeemed and the redeemed award credits in exchange for services.
(iv)    Bundled arrangements
When the Group sells both handsets and wireless services to subscribers, the Group recognizes these transactions separately as sales for handset sales and wireless telecommunication services.
(23)    Finance income and finance costs
Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established.
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or loss, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures are recognized in profit or loss using the effective interest rate method.
(24)    Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(i)    Current tax
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting ~~periods, which, for U.S. dollars, were~~ W~~1,257.50=US$1,~~ W~~1,167.60=US$1~~period and W~~1,138.90=US$1 at December 31, 2008, 2009 and 2010, respectively.~~any adjustment to tax payable in respect of previous years. The ~~resulting gains and losses arising~~taxable profit is different from the ~~translation~~accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or ~~settlement~~deductible in determining taxable profit (tax loss) of ~~such assets~~future periods, and ~~liabilities are included in current operations.~~
v.   ~~Derivative Instruments~~
~~The Company records rights and obligations arising from derivative instruments as assets and liabilities, which are stated at fair value.~~
~~For derivative instruments designated as hedges;~~non-taxable or non-deductible items that hedge against the exposure of variable cash flows, the effective portions of the gains or losses on the hedging instruments are recorded as part of 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 charged immediately to current earnings.
~~The gains and losses that result~~ from the ~~change in the fair value of derivative instruments are reported in current earnings.~~
w.   ~~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 Company’s revenue 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 Telecom’s subsidiaries also sell products and merchandises to customers and these sales are recognized at the time products and merchandises are delivered.~~

~~F-21~~
accounting profit.
(ii)    Deferred tax
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
x.   ~~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, onusing the asset-liability method, in respect of temporary differences between the carrying amounts of assets and liabilities ~~in the consolidated~~for financial ~~statements~~reporting purposes and the ~~corresponding~~amounts used for taxation purposes. The Group recognizes a deferred tax ~~bases used in the computation of taxable profits. Deferred tax liabilities are generally recognized~~liability for all taxable temporary differences associated with investments in subsidiaries and associates, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax ~~assets are recognized~~asset for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable ~~profits~~profit will be available against which the ~~deductible~~ temporary ~~differences~~difference can be utilized.
The carrying amount of a deferred tax ~~assets~~asset is ~~reduced~~reviewed at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable ~~profits~~profit will be available to allow the benefit of part or all ~~or part~~ of ~~the assets~~that deferred tax asset to be ~~recovered.~~ utilized.
Deferred ~~income~~ tax assets and liabilities are ~~classified into current and non-current~~measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the ~~classification~~end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, orand they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities ~~for financial reporting purposes.~~
y.   ~~Net Income Per Share~~
~~Net income~~and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.
(25)    Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is ~~computed~~calculated by dividing ~~net income~~the profit or loss attributable to ordinary shareholders of the Parent Company 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~~ordinary shares outstanding during the period, ~~taking into account~~adjusted for own shares held. Diluted EPS is determined by adjusting the ~~dilutive effect~~profit or loss attributable to ordinary shareholders and the weighted average number of ~~stock option and convertible bonds.~~
z.   ~~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 subsidies to customers who agree to use the Company’s serviceordinary shares outstanding, adjusted for own shares held, for the ~~predetermined service period~~effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.
(26)    Discontinued operations
A discontinued operation is a component of the ~~subsidies are charged to commission paid (operating expense) as the related payments are made. In case where the customers agree to use the Company’s service~~Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for 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 historical experience (See note 26).
~~aa.~~   ~~Use of Estimates~~
The Company’s 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.
~~ab.~~   ~~Discontinued Operation~~
~~When~~sale, or is a subsidiary acquired exclusively with a view to resale. When an operation is ~~disposed during the year, the results of its operations are treated~~classified as a discontinued operation, in the comparative consolidated statement of comprehensive income ~~statement and presented~~is re-presented as ~~a separate item between income tax expense for continuing~~if the operation ~~and net income. Meanwhile, comparative financial statements for~~had been discontinued from the ~~years endedDecember 31,~~ ~~2008 and 2009 were restated and separately present discontinued operation and cash flows relating to discontinued operation for the current year.~~
~~As a result of resolution~~start of the ~~Board of Directors on April 26, 2010, the Company sold its shares of IHQ Inc., a subsidiary of the Company. Accordingly, the Company presents the related income and loss in aggregate with other~~

~~F-22~~comparative period.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~discontinued operations during~~
For the ~~period,~~years ended December 31, 2013, 2012 and 2011
(27)    Recent accounting pronouncements, not yet adopted
The following accounting standards, interpretations and amendments are issued and will be effective for annual periods beginning on or after January 1, 2014 and have not been adopted early in preparing these consolidated financial statements.
(i)    IAS 32, Financial Instruments: Presentation (Amendments to IAS 32)
IAS 32, ‘Financial Instruments’ has been amended to clarify requirements for offsetting financial assets and financial liabilities by adding application guidance. The amendment is mandatorily effective for annual periods beginning on or after January 1, 2014. Management is in process of reviewing the impact on the adoption of the amendment.
(ii)    IAS 39, Financial Instruments: Recognition and Measurement (Amendments to IAS 39 and IFRS 9)
Amendments to IAS 39, Novation of Derivatives and Continuation of Hedge Accounting allows continuation of hedge accounting when derivative instruments designated as hedging instruments are novated to the central counter party as a ~~separate item.~~result of laws or regulations. The amendment is effective for annual periods beginning on or after January 1, 2014 and early adoption is permitted. Management believes the initial adoption of this standard will not have a significant impact on the Group’s consolidated financial condition and results of operations.
(iii)    IFRS 9, Financial Instrument
This standard introduces certain new requirements for classifying and measuring financial assets. IFRS 9 divides all financial assets that are currently in the ~~IHQ Inc.’s discontinued operation~~scope of IAS 39 into two classifications, those measured at amortized cost and those measured at fair value. The standard along with proposed expansion of IFRS 9 for classifying and measuring financial liabilities, and de-recognition of financial instruments, impairment, and hedge accounting is effective from annual reporting periods beginning on or after January 1, 2015 although entities are permitted to adopt earlier. Management is in process of reviewing the impact on the adoption of the new requirements.
(iv)    IFRIC 21, Levies
Liability to pay a levy imposed by governments on entities in accordance with legislation shall be recognized when the obligating event that gives rise to the recognition of a liability to pay a levy occurs. The interpretation is effective for annual periods beginning on or after January 1, 2014 and early adoption is permitted. Management is in process of reviewing the impact on the adoption of the interpretation.
5. Operating Segments
The Group’s operating segments have been determined to be each business unit, for which the Group provides independent services and merchandise. The Group’s reportable segments are: 1) cellular services, which include cellular voice service, wireless data service and wireless internet services, and 2) fixed-line telecommunication services, which include telephone services, internet services, and leased line services. All other operating segments, which include the Group’s Internet portal services and other operations, do not meet the quantitative thresholds to be considered reportable segments and are presented as Others.
Cellular 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. Others include the Group’s Internet portal services, game manufacturing and other immaterial operations.
On October 1, 2011, in accordance with the Parent Company’s Board of Directors resolution on July 19, 2011 and the shareholder’s general meeting held on August 31, 2011, the Parent Company spun off its platform business into a new wholly-owned subsidiary, SK Planet Co., Ltd. SK Planet operates the Group’s platform business such as
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
T Store, online marketplace for mobile application, 11 Street, online shopping mall. For periods prior to October 1, 2011, the Group did not maintain separate financial information for the platform business and it is not feasible for the Group to generate such information. For the periods after October 1, 2011, the information related to new platform business segment does not meet the quantitative thresholds for separate disclosures under IFRS 8 and is included in others segment.
The segment information of the Group as of and for the years ended December 31, ~~2008, 2009~~2012 and ~~2010 are~~2011 have been retrospectively restated to exclude the discontinued operation related to Loen Entertainment, Inc. See note 37(1)(a).
(1) Segment information as ~~follows (in millions~~ of ~~Korean won):~~

2008 2009 2010

Revenue W 44,828 W 42,954 W 19,357
Operating expense (53,825 ) (45,695 ) (21,137 )
Other income (expense) (7,674 ) (2,053 ) 5,280
Income tax benefit — — —

Net loss (income) W (16,671 ) W (4,794 ) W 3,500

~~Cash flows from IHQ, Inc.’s discontinued operation~~and for the years ended December 31, ~~2008, 2009,~~2013, 2012 and ~~2010 are~~2011 is as ~~follows (In millions of Korean won):~~

2008 2009 2010

Operating activities W 1,510 W 162 W 472
Investing activities (4,035 ) (119 ) 17,729
Financing activities 2,596 1,900 —

Net W 71 W 1,943 W 18,201

Asfollows:
   2013
   Cellular
services    Fixed-line
telecommu-
nication
services    Others Total
segments    Consolidation
adjustments Consolidated
amount
   (In millions of won)
Total revenue
   ￦ 14,501,829       2,972,642       1,741,599    19,216,070       (2,614,016 ) 16,602,054
Internal revenue
   1,186,297       648,253       779,466    2,614,016       (2,614,016 ) —
External revenue
   13,315,532       2,324,389       962,133    16,602,054       —    16,602,054
Depreciation and amortization
   2,019,531       522,155       119,937    2,661,623       —    2,661,623
Operating income (loss)
   1,986,106       55,625       (30,622 ) 2,011,109       (432,706 ) 1,578,403
Gain related to investments in subsidiaries, associates and joint ventures, net
            706,509
Finance income
            113,392
Finance costs
            (571,203 )


Profit from continuing operations before income tax
            1,827,101
   2012
   Cellular
services    Fixed-line
telecommu-
nication
services    Others Total
segments    Consolidation
adjustments Consolidated
amount
   (In millions of won)
Total revenue
   ￦ 14,475,379       3,018,156       1,469,457    18,962,992       (2,821,583 ) 16,141,409
Internal revenue
   1,256,475       824,295       740,813    2,821,583       (2,821,583 ) —
External revenue
   13,218,904       2,193,861       728,644    16,141,409       —    16,141,409
Depreciation and amortization
   1,735,193       578,969       106,966    2,421,128       —    2,421,128
Operating income (loss)
   1,683,431       53,115       (6,497 ) 1,730,049       7,606    1,737,655
Loss related to investments in subsidiaries, associates and joint ventures, net
            (24,560 )
Finance income
            444,558
Finance costs
            (638,285 )


Profit from continuing operations before income tax
            1,519,368
SK TELECOM CO., LTD. and Subsidiaries
Notes to the ~~Company liquidated SK-KTB Music Investment fund (“SK-KTB”), a subsidiary of~~Consolidated Financial Statements — (Continued)
For the ~~Company, during October 2010, the Company~~years ended December 31, 2013, 2012 and 2011
   2011
   Cellular
services    Fixed-line
telecommu-
nication
services    Others    Total
segments    Consolidation
adjustments Consolidated
amount
   (In millions of won)
Total revenue
   ￦ 14,000,833       2,853,562       842,460       17,696,855       (1,893,681 ) 15,803,174
Internal revenue
   924,566       721,613       247,502       1,893,681       (1,893,681 ) —
External revenue
   13,076,267       2,131,949       594,958       15,803,174       —    15,803,174
Depreciation and amortization
   1,666,703       574,399       45,464       2,286,566       —    2,286,566
Operating income (loss)
   2,178,070       66,231       21,896       2,266,197       (103,468 ) 2,162,729
Loss related to investments in subsidiaries, associates and joint ventures, net
               (46,897 )
Finance income
               440,212
Finance costs
               (343,771 )


Profit from continuing operations before income tax
               2,212,273
The following presents ~~the related income and loss in aggregate with other discontinued operations during the period, as a separate item. The details from SK-KTB’s discontinued operation~~segment results for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 are as follows (in millions~~2011 based on the previous segmentation before the spin-off of ~~Korean won):~~

2008 2009 2010

Revenue W 83 W 165 W 915
Operating expense (166 ) (114 ) (280 )
Other income (expense) (394 ) (511 ) 253
Income tax expense — — —

Net income W (477 ) W (460 ) W 888

~~Cash flows~~the platform business since it was not possible to present the new basis of segmentation for the entire years ended December 31, 2013, 2012 and 2011.
   2013
   Cellular
services    Fixed-line
telecommu-
nication
services    Others Total
segments    Consolidation
adjustments Consolidated
amount
   (In millions of won)
Total revenue
   ￦ 15,880,045       2,972,642       363,383    19,216,070       (2,614,016 ) 16,602,054
Internal revenue
   1,794,823       648,253       170,940    2,614,016       (2,614,016 ) —
External revenue
   14,085,222       2,324,389       192,443    16,602,054       —    16,602,054
Depreciation and amortization
   2,117,823       522,155       21,645    2,661,623       —    2,661,623
Operating income
   1,999,159       55,625       (43,675 ) 2,011,109       (432,706 ) 1,578,403
   2012
   Cellular
services    Fixed-line
telecommu-
nication
services    Others Total
segments    Consolidation
adjustments Consolidated
amount
   (In millions of won)
Total revenue
   ￦ 15,510,076       3,018,156       434,760    18,962,992       (2,821,583 ) 16,141,409
Internal revenue
   1,852,068       824,295       145,220    2,821,583       (2,821,583 ) —
External revenue
   13,658,008       2,193,861       289,540    16,141,409       —    16,141,409
Depreciation and amortization
   1,810,742       578,969       31,417    2,421,128       —    2,421,128
Operating income
   1,716,942       53,115       (40,008 ) 1,730,049       7,606    1,737,655
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
   2011
   Cellular
services    Fixed-line
telecommu-
nication
services    Others    Total
segments    Consolidation
adjustments Consolidated
amount
   (In millions of won)
Total revenue
   ￦ 14,280,299       2,853,562       562,994       17,696,855       (1,893,681 ) 15,803,174
Internal revenue
   1,066,874       721,613       105,194       1,893,681       (1,893,681 ) —
External revenue
   13,213,425       2,131,949       457,800       15,803,174       —    15,803,174
Depreciation and amortization
   1,683,254       574,399       28,913       2,286,566       —    2,286,566
Operating income
   2,186,654       66,231       13,312       2,266,197       (103,468 ) 2,162,729
Reconciliation of total segment operating income to consolidated operating income from ~~SK-KTB’s discontinued operation~~continuing operations for the years ended December 31, ~~2008, 2009,~~2013, 2012 and ~~2010~~2011 are as ~~follows (In millions~~follows:
   2013 2012 2011
   (In millions of won)
Total segment operating income
   ￦ 2,011,109    1,730,049    2,266,197
Other operating income:

Fees revenues
   7,303    3,982    5,264
Gain on disposal of property and equipment and intangible assets
   7,991    162,590    6,260
Others(*1)
   59,660    35,272    38,107


   74,954    201,844    49,631
Other operating expenses:

Impairment loss on property and equipment and intangible assets
   (13,770 ) (37,007 ) (1,237 )
Loss on disposal of property and equipment and intangible assets
   (267,468 ) (15,117 ) (20,659 )
Donations
   (82,057 ) (81,330 ) (89,976 )
Bad debt for accounts receivable — other
   (22,155 ) (30,107 ) (12,785 )
Others(*2)
   (122,210 ) (30,677 ) (28,442 )


   (507,660 ) (194,238 ) (153,099 )


Consolidated operating income from continuing operations
   ￦ 1,578,403    1,737,655    2,162,729


(*1) Others for the year ended December 31, 2013, 2012 and 2011 primarily consist of ￦10.3 billion, ￦5.6 billion and ￦3.3 billion of VAT refund, respectively.
(*2) Others for the year ended December 31, 2013 primarily consists of ￦96.5 billion of penalties. There were no such penalties in 2012 and 2011.
Intersegment sales and purchases are conducted on an arms-length basis and eliminated on consolidation. Since there are no intersegment sales of ~~Korean won):~~

2008 2009 2010

Operating activities W 862 W 516 W 920
Investing activities 5,735 (2,103 ) 8,277
Financing activities — — —

Net W 6,597 W (1,587 ) W 9,197

inventory, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its business in its domestic market in Korea. Domestic revenue for the years ended December 31, 2013, 2012 and 2011 amounts to ￦16,557 billion, ￦16,093 billion and ￦15,762 billion, respectively. Domestic non-current assets (excluding financial assets, investments in associates and joint ventures and deferred tax assets) as of December 31, 2013, 2012 and 2011 amount to ￦14,762 billion, ￦14,212 billion and ￦13,873 billion, and non-current assets outside of Korea amount to ￦1 billion, ￦680 billion and ￦751 billion, respectively.
No single customer contributed 10% or more to the Group’s total sales for the years ended December 31, 2013, 2012 or 2011.
Though the Group is expanding into new geographic regions, as of December 31, 2013, the Group still principally operates in its domestic market in Korea.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
The Group’s operating revenue is generated as follows:
   2013    2012    2011
   (In millions of won)
Cellular revenue

Wireless service(*1)
   ￦ 11,001,123       10,591,489       10,447,605
Cellular interconnection
   844,977       860,250       1,090,874
Digital handset sales(*2)
   645,914       1,131,657       787,237
Miscellaneous(*3)
   823,518       635,508       750,551






   13,315,532       13,218,904       13,076,267
Fixed-line telecommunication services revenue

Fixed line telephone service(*4)
   474,430       485,941       490,739
Fixed line interconnection
   78,731       98,460       83,804
Broadband internet service(*4)
   1,023,156       864,955       1,000,474
International calling service(*5)
   127,005       144,073       163,559
Miscellaneous(*6)
   621,067       600,432       393,373






   2,324,389       2,193,861       2,131,949
Others revenue

Commerce service(*7)
   742,616       391,894       99,891
Portal service(*8)
   92,153       167,815       233,832
Miscellaneous(*9)
   127,364       168,935       261,235






   962,133       728,644       594,958






Consolidated operating revenue
   ￦ 16,602,054       16,141,409       15,803,174






(*1) Wireless service revenue includes revenue from cellular voice service, wireless data service and initial subscription fees. Revenue from cellular voice service is primarily composed of monthly plan-based fees, usage charges for outgoing voice calls, roaming charges and value-added service fees. Revenue from wireless data service is primarily composed of usage charges for SMS and MMS and revenues from outgoing data usage.
(*2) Digital handsets are sold by PS&Marketing Co., Ltd., a consolidated subsidiary.
(*3) Miscellaneous cellular services revenue includes revenue from the resale of fixed-line telecommunication services, leased lines, Internet solutions business and other miscellaneous cellular services provided by the Parent Company as well as other operating revenue attributable to the cellular services segment. For the period from January 1, 2011 to September 30, 2011, miscellaneous cellular services revenue also includes revenue from the sale and licensing of Internet platform solutions, which business was spun-off into SK Planet in October 2011 and subsequently included in other segment.
(*4) Broadband Internet service (including IP TV service) and fixed-line telephone service are provided by SK Broadband, a consolidated subsidiary.
(*5) International calling service is provided by SK Telink, a consolidated subsidiary.
(*6) Miscellaneous fixed-line telecommunication services revenue includes revenues from leased line, corporate data and Internet solutions businesses provided by SK Broadband and VoIP services provided by SK Telink as well as other operating income attributable to the fixed-line telecommunications services segment.
(*7) Commerce service revenue includes sales from online shopping mall, such as, 11th Street. As the Parent Company acquired the ownership interests in SK Marketing & Company Co., Ltd. during 2013, commerce service revenue for the year ended December 31, 2013 include revenue from advertising and e-commerce agency.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(*8) Portal service revenue includes revenues from NATE, an online portal service, and Cyworld, our social networking service, each operated by SK Communications.
(*9) Miscellaneous others revenue includes revenue from T Store, online open marketplace for mobile applications operated by SK Planet as well as other operating income attributable to the others segment.
6. Restricted Deposits
Deposits which are restricted in use as of December 31, 2013 and 2012 are summarized as follows:
      December 31, 2013    December 31, 2012
      (In millions of won)
Short-term financial instruments Charitable fund(*1)
      ￦ 76,500       76,500
Guarantees for loans and other similar instruments(*2)
      —       149,000
Other
      5,134       16,087
Long-term financial instruments
      7,589       106
Guarantee deposits
      40       40




      ￦ 89,263       241,733




(*1) The Group established a trust fund for charitable purposes. Profits from the fund are donated to charitable institutions. As of December 31, 2013, the funds cannot be withdrawn.
(*2) For the year ended December 31, 2012, SK Broadband Co., Ltd., a subsidiary, had guaranteed certain loans of Broadband Media Co., Ltd. and provided short-term financial instruments as collateral. As of December 31, 2013, there are no guarantees for loans and other similar instruments.
7. Trade and Other Receivables
(1) Details of trade and other receivables as of December 31, 2013 and 2012 are as follows:
   December 31, 2013
   Gross
amount    Allowances for
impairment Carrying
amount
   (In millions of won)
Current assets:

Accounts receivable — trade
   ￦ 2,482,001       (224,685 ) 2,257,316
Short-term loans
   80,129       (734 ) 79,395
Accounts receivable — other
   715,405       (71,802 ) 643,603
Accrued income
   11,970       (29 ) 11,941
Others
   2,548       —    2,548




   3,292,053       (297,250 ) 2,994,803
Non-current assets:

Long-term loans
   84,176       (26,734 ) 57,442
Guarantee deposits
   249,600       —    249,600
Long-term accounts receivable — trade
   13,154       —    13,154




   346,930       (26,734 ) 320,196




   ￦ 3,638,983       (323,984 ) 3,314,999




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
   December 31, 2012
   Gross
amount    Allowances for
impairment Carrying
amount
   (In millions of won)
Current assets:

Accounts receivable — trade
   ￦ 2,166,293       (211,373 ) 1,954,920
Short-term loans
   86,789       (1,881 ) 84,908
Accounts receivable — other
   639,386       (57,288 ) 582,098
Accrued income
   8,857       (142 ) 8,715
Others
   431       —    431




   2,901,756       (270,684 ) 2,631,072
Non-current assets:

Long-term loans
   97,636       (28,337 ) 69,299
Guarantee deposits
   236,242       —    236,242
Long-term accounts receivable — trade
   15,024       (1,647 ) 13,377




   348,902       (29,984 ) 318,918




   ￦ 3,250,658       (300,668 ) 2,949,990




(2) The movements in allowances for doubtful accounts of trade and other receivables during the years ended December 31, 2013 and 2012 were as follows:
   2013 2012
   (In millions of won)
Balance at January 1
   ￦ 300,668    318,820
Increase of bad debt allowances
   79,330    82,500
Reversal of allowances for doubtful accounts
   (359 ) (5,902 )
Write-offs
   (76,697 ) (111,611 )
Collection of receivables previously written-off
   30,361    18,169
Net exchange differences and changes in consolidation scope
   (9,319 ) (1,308 )


Balance at December 31
   ￦ 323,984    300,668


(3) Details of overdue but not impaired, and impaired trade and other receivable as of December 31, 2013 and 2012 are as follows:
   December 31, 2013 December 31, 2012
   Accounts
receivable — trade Other
receivables Accounts
receivable — trade Other
receivables
   (In millions of won)
Neither overdue or impaired
   ￦ 1,882,607    938,131    1,589,911    976,882
Overdue but not impaired
   46,773    2,030    38,590    1,588
Impaired
   565,775    203,667    552,816    90,871


   2,495,155    1,143,828    2,181,317    1,069,341
Allowances for doubtful accounts
   (224,685 ) (99,299 ) (213,020 ) (87,648 )


   ￦ 2,270,470    1,044,529    1,968,297    981,693


The Group establishes allowances for doubtful accounts based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period, past customer default experience, customer credit status, and economic and industrial factors.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(4) The aging of overdue but not impaired accounts receivable as of December 31, 2013 and 2012 are as follows:
   December 31, 2013    December 31, 2012
   Accounts
receivable — trade    Other
receivables    Accounts
receivable — trade    Other
receivables
   (In millions of won)
Less than 1 month
   ￦ 12,036       20       4,067       171
1 ~ 3 months
   15,686       1,220       10,264       673
3 ~ 6 months
   3,610       516       10,507       101
More than 6 months
   15,441       274       13,752       643








   ￦ 46,773       2,030       38,590       1,588








8. Inventories
Details of inventories as of December 31, 2013 and 2012 are as follows:
   December 31, 2013    December 31, 2012
   Acquisition
cost    Write-
down of
inventory Carrying
amount    Acquisition
cost    Write-
down of
inventory Carrying
amount
   (In millions of won)
Merchandise
   ￦ 165,080       (3,152 ) 161,928       230,640       (1,784 ) 228,856
Finished goods
   1,711       (34 ) 1,677       3,525       (962 ) 2,563
Work in process
   —       —    —       309       —    309
Raw materials and supplies
   13,515       —    13,515       10,487       (69 ) 10,418








   ￦ 180,306       (3,186 ) 177,120       244,961       (2,815 ) 242,146








The amount of the inventory write-downs charged to statements of income and write off of inventories are as follows:
   2013 2012 2011
   (In millions of won)
Charged to cost of products that have been resold
   ￦ 1,498    510    3,157
Write-off upon sale
   (95 ) (2,844 ) (24 )


   1,403    (2,334 ) 3,133


There are no significant reversals of inventory write-downs for the periods presented.
9. Investment Securities
(1) Details of short-term investment securities as of December 31, 2013 and 2012 are as follows:
   December 31, 2013    December 31, 2012
   (In millions of won)
Beneficiary certificates(*)
   ￦ 102,828       56,160
Current portion of long-term investment securities
   3,240       3,967




   ￦ 106,068       60,127




(*) The distributions arising from beneficiary certificates as of December 31, 2013 were accounted for as accrued income.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(2) Details of long-term investment securities as of December 31, 2013 and 2012 are as follows:
   December 31, 2013 December 31, 2012
   (In millions of won)
Equity securities:

Marketable equity securities
   ￦ 638,445    584,035
Unlisted equity securities(*1)
   47,145    99,643
Equity investments(*2)
   239,354    223,370


   924,944    907,048
Debt securities:

Public bonds
   356    377
Investment bonds(*3)
   46,467    50,254


   46,823    50,631


Total
   971,767    957,679
Less current portion of long-term investment securities
   (3,240 ) (3,967 )


Long-term investment securities
   ￦ 968,527    953,712


(*1) Unlisted equity securities whose fair value cannot be measured reliably are recorded at cost.
(*2) Equity investments are recorded at cost.
(*3) The Group classified convertible bonds of NanoEnTek, Inc. (carrying amount as of December 31, 2013: ￦20,532 million), which were acquired during the year ended December 31, 2011, as financial assets at fair value through profit or loss. The difference between acquisition cost and fair value is accounted for as finance income (loss).
10. Assets and Liabilities Classified as Held for Sale
(1)    Subsidiary
For the year ended December 31, 2012, the Group classified assets and liabilities of a subsidiary, SKY Property Mgmt. Ltd., as held for sale as a result of ~~resolution~~the Board of Directors’ December 21, 2012 decision to dispose of the ~~board~~Group’s ownership interests of ~~directors~~27% in the subsidiary in order to utilize the proceeds for new business opportunities.
Non-current assets and liabilities held for sale as of December 31, 2012 are as follows:
December 31, 2012
(In millions of won)
Asset group held-for sale
￦ 773,413
Current assets(*1)
69,094
Non-current assets
704,319
Long-term prepaid expense
486,439
Investment property
186,682
Property and equipment
1,566
Other non-current assets
29,632
Liability group held-for-sale
294,305
Current liabilities
51,069
Non-current liabilities
243,236
(*1) Cash and cash equivalents of ￦51,831 million which are included in current assets are recognized as cash outflows from investing activities in the statements of cashflows as the cash equivalents are expected to be recovered through the disposal of assets and liabilities held for sale.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
The assets and liabilities classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.
The ownership interests were disposed on ~~July 23, 2009,~~January 11, 2013 to SK ~~Communications~~Innovation, Co., Ltd., a related party, and the Group recognized ￦140,689 thousand of a gain on disposal for the year ended December 31, 2013.
(2)    Investments in associates
Non-current assets held for sale relating to investments in associates as of December 31, 2013 and 2012 are as follows:
   December 31, 2013    December 31, 2012
   (In millions of won)
TR Entertainment(*1)
   ￦ 2,611       —
SK Fans Co., Ltd.(*2)
   1,056       2,143




   ￦ 3,667       2,143




(*1) A disposal contract for the Group’s entire ownership interests in TR Entertainment was entered into during the year ended December 31, 2013 and the investment in the associate was reclassified to non-current assets held for sale after an impairment loss of ￦4,019 million was recognized.
(*2) A disposal contract for the Group’s ownership interests in SK Fans Co., Ltd., an associate, was entered into during the year ended December 31, 2012. However, the contract was modified during the year ended December 31, 2013 and the difference between the contractual disposal amount and carrying amount of ￦1,088 million was recognized as an impairment loss.
11. Business Combinations
(1) In January 2013, the Parent Company acquired an additional 50% ownership interest in SK Marketing & Company Co., Ltd., advertising and e-commerce agency, from SK Innovation Co., Ltd., a related party under common control, through the additional purchase of shares and obtained control over SK Marketing & Company Co., Ltd., and its subsidiary, M&Service Co., Ltd.
Prior to the acquisition, the Parent Company owned 50% of SK Marketing & Company Co., Ltd. After obtaining control over SK Marketing & Company Co., Ltd, the Parent Company acquired the shares of SK Planet Co., Ltd. by investing its ownership interest of 100% of SK Marketing & Company Co., Ltd. as a form of investment in kind. On February 1, 2013, SK Planet Co., Ltd. merged with SK Marketing & Company Co., Ltd.
As the business combination occurred during the year ended December 31, 2013 and was a business combination between entities under common control, the difference between the consideration and book value of net assets was recognized in capital deficit and other capital adjustments in equity.
The Group recognized the revenues and profit of SK Marketing & Company Co., Ltd. from February 1, 2013 on which SK Marketing & Company Co., Ltd. was merged with SK Planet Co., Ltd., a subsidiary of the Parent Company, ~~sold~~and no discrete financial information related to SK Marketing & Company Co., Ltd. is available after the ~~Spicus division~~merger. As a result, it is impracticable for the Group to disclose the revenues and profit recorded by the ~~Company’s telephone english education division (“Spicus”),~~Group subsequent to

~~F-23~~ this acquisition date.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~Spicus Inc., a subsidiary of Altos Ventures, on August 1, 2009. The results of the Spicus’ discontinued operation for~~
For the years ended December 31, ~~2008~~2013, 2012 and ~~2009 are as follows (in millions of Korean won):~~

2008 2009

Revenue W 3,384 W 2,770
Operating expense (5,120 ) (3,653 )
Other income (expense) — 671
Income tax expense 477 51

Net income W (1,259 ) W (161 )

~~Cash flows from Spicus’ discontinued operation for the years ended December 31, 2008 and 2009 are as follows (In millions of Korean won):~~

2008 2009

Operating activities W (1,531 ) W (1,069 )
Investing activities (23 ) (112 )
Financing activities — —

Net W (1,554 ) W (1,181 )

SK Communications Co., Ltd., a subsidiary of the Company, sold all shares of Etoos Co., Ltd. to Cheong Sol as a resolution of the Board of Directors on October 19, 2009 and, as the payment, received a convertible bond, the face value of W50 billion. As a result, the Company presented its business of Etoos Co., Ltd. as discontinued operation and the details from Etoos Co., Ltd’s discontinued operation for the years ended December 31, 2008 and 2009 are as follows (in millions of Korean won):

2008 2009

Revenue W 21,676 W 19,357
Operating expense (18,699 ) (20,547 )
Other income (expense) (2,874 ) 15,782
Income tax expense (28 ) (3,653 )

Net income W 75 W 10,939

~~Cash flows from Etoos Co., Ltd.’s discontinued operation for the years ended December 31, 2008 and 2009 are as follows (In millions of Korean won):~~

2008 2009

Operating activities W 3,076 W 224
Investing activities (112 ) 4,570
Financing activities — —

Net W 2,964 W 4,794

On August 22, 2008, the Company disposed of its investment in Helio LLC (“Helio”) 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 was presented as discontinued operation

~~F-24~~
2011
(2) Consideration and assets and liabilities transferred as of the acquisition date are as follows:
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~and, the details from Helio’s discontinued operation for the years ended December 31, 2007 and 2008 are as following (in millions of Korean won):~~
   Amount
   ~~2008~~(In millions of won)
~~Revenue~~
Consideration paid
   W ~~116,607~~
Cash and cash equivalents
￦ 190,605
~~Operating expense~~
Investments in associates (carrying value)
141,534
332,139
Assets and liabilities transferred
Cash and cash equivalents
95,800
Accounts receivable — trade
132,514
Inventories
3,472
Property and equipment, and intangible assets
68,699
Other assets
457,431
Accounts payable — trade
   (~~230,478~~150,014 )
Other ~~income (expense)~~liabilities
   (~~15,917~~337,617 )
~~Income tax expense~~
   ~~109,579~~270,285
~~Preacquisition net loss for subsidiary~~
—

Amount recorded in capital surplus and other capital adjustments
   ￦ 61,854
~~Net income~~    W
~~(20,209~~ )

~~Cash flows from Helio’s discontinued operation for the year ended December 31, 2008 are as follows (In millions of Korean won):~~
12.
~~2008~~
~~Operating activities~~ W ~~(213,899~~ )
~~Investing activities~~ ~~(51,631~~ )
~~Financing activities~~ ~~9,015~~
~~Net~~ W ~~(256,515~~ )
~~ac.~~   ~~Reclassification~~Investments in ~~the prior year’s financial statements~~
For the purpose of improving the quality of the Company’s report, certain reclassifications have been made in the prior year’s financial statements to conform to the classifications used in the current year. The reclassification of prior year’s financial statements had no impact on equity or net income.
3.   ~~INVENTORIES~~
~~Inventories as of December 31, 2008, 2009 and 2010 consist of the following (in millions of Korean won):~~

2008 2009 2010

Merchandise W 17,032 W 114,015 W 144,647
Finished goods 4,079 2,324 3,406
Semi-finished goods 509 618 475
Raw materials 13 836 2,236
Supplies 14,105 2,488 1,077

Total 35,738 120,281 151,841
Less allowance for valuation loss (764 ) (391 ) (2,198 )

Net W 34,974 W 119,890 W 149,643

~~F-25~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
4.   ~~INVESTMENT SECURITIES~~
a.   ~~Short-term Investment Securities~~
~~Short-term investment securities as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

Acquisition Cost
Fair Value

at December 31,
at December 31,
Carrying Amount
2010 2010 2008 2009 2010

Trading Securities (Note) W 200,000 W 200,000 W 367,001 W 370,125 W 200,000
Current portion of long-term investment securities 161,058 195,929 5,912 6,598 195,929

Total W 361,058 W 395,929 W 372,913 W 376,723 W 395,929

~~(Note)~~ ~~The Company’s trading securities are all beneficiary certificates as of December 31, 2010,~~Associates and ~~distributions arising from beneficiary certificates are accounted for as accrued income.~~
b.  Joint Ventures ~~Long-term Investment Securities~~
~~Long-term investment securities as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010

Available-for-sale equity securities
W 3,102,833 W 2,096,297 W 1,847,788
Available-for-sale debt securities
8,261 445,954 32,385
Held-to-maturity securities
113 1,006 —

Total 3,111,207 2,543,257 1,880,173
Less current portion (5,912 ) (6,598 ) (195,929 )

Long-term portion W 3,105,295 W 2,536,659 W 1,684,244

~~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, 2008, 2009 and 2010 are as follows (in millions of Korean won, except for share data):~~

December 31, 2010 Carrying Amount
Number
Ownership
Acquisition

of Shares Percentage (%) Cost Fair Value 2008 2009 2010

Investments in listed companies

SK C&C Co., Ltd. (note a) 2,050,000 4.1 W 68,559 W 178,760 W 676,716 W 201,600 W 178,760
Digital Chosunilbo Co., Ltd. 2,890,630 7.8 5,781 8,527 5,636 6,995 8,527
KRTnet Corporation 234,150 4.4 1,171 1,520 1,098 1,573 1,520
POSCO 2,481,310 2.8 332,662 1,209,639 942,898 1,533,450 1,209,639
DAEA TI Co., Ltd. — — — — 89 — —
Extended Computing Environment Co., Ltd. — — — — 40 — —
nTels Co., Ltd. 205,200 6.2 34 871 504 1,161 871
IHQ, Inc. (note b) 3,790,770 9.4 3,830 6,823 — — 6,823
Qualcomm Inc. (note k) — — — — 2,514 — —
China Unicom Ltd. (note k) — — — — 1,357,648 — —
LG Powercomm Co., Ltd. (note k) — — — — 39,433 — —
Sprint Nextel (note c) — — — — — 74,215 —
Barunson 338,686 0.5 591 667 — — 667
De Chocolate E&TF Co., Ltd. — — — — 660 — —
Tesla Motors Inc. 83,017 — 2,845 2,518 — — 2,518
Medifron DBT Co., Ltd. — — — — 246 — —
C.C.S. Inc. and other — — 2,313 451 1,604 3,935 451

sub-total 417,786 1,409,776 3,029,086 1,822,929 1,409,776

Investments in non-listed companies

The Korea Economic Daily 2,585,069 13.8 13,964 (note g ) 13,964 13,964 13,964
Skytel Co. Ltd. (note e) 1,130,834 17.0 1,251 14,811 — — 14,811
Dreamline Corp. (note d) 1,520,373 8.9 16,160 8,695 8,519 8,849 8,695
iFinanceGlobal Co., Ltd 6,593 15.3 23,076 (note g ) — — 23,076
Other 156,033 (note f,g ) 28,823 21,719 25,462

sub-total 210,484 51,306 44,532 86,008

Investments in funds

Global Opportunities Breakaway Fund (note h) 244,183 256,882 — 175,140 256,882
Others (note i, j) 100,810 (note c,g ) 22,441 53,696 95,122

sub-total 344,993 22,441 228,836 352,004

Total W 973,263 W 3,102,833 W 2,096,297 W 1,847,788

Less: current portion (70,050 ) — — (193,811 )
Long-term portion W 903,213 W 3,102,833 W 2,096,297 W 1,653,977

~~(note a)~~ During the year ended December 31, 2009, the common stocks of SK C&C, the Company’s ultimate parent company, were listed on the Stock Market of Korea Exchange through an initial public offering (“IPO”), Upon SK C&C’s IPO, the Company sold 10,500,000 shares for W~~307,558 million resulting in gain on disposal of~~ W~~65,109 million. The Company additionally disposed 2,450,000 shares for~~ W~~202,333 million resulting in gain on disposal of~~ W~~145,762 million during the year ended December 31,~~

~~F-27~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
(1)
~~2010. The Company recorded the remaining investment of 2,050,000 shares at its market value of~~ W87,200 per share as of December 31, 2010. Meanwhile, the Company classified this security as short-term investment securities as the Company intends to dispose the security within one year. As of December 31, 2010, the Company accounted for accumulated gain on valuation of investmentsInvestments in ~~the amount of~~ W~~99,620 million (net of tax effect~~ W~~31,805 million) as unrealized gain on valuation of investments and treated as other comprehensive income.~~
~~(note b)~~ The Company disposed of 11,170,014 shares of IHQ Inc. stock during the year and has 3,790,330 shares (9.4% ownership) as of December 31, 2010. As a result, the Company reclassified book value of the remaining shares from equity securitiesassociates accounted for using the equity method to~~available-for-sale~~ ~~securities.~~
~~(note c)~~ The investment in common stock of Sprint Nextel and others were sold during the year ended December 31, 2010 and the difference between the disposal price and acquisition cost was recorded as loss on disposal of long term investment securities.
~~(note d)~~ ~~The Company recorded its investment in common stock of Dreamline Corp. at its fair value (~~W~~5,719 per share) estimated using market approach and income approach valuation method and related unrealized losses on valuation of the investment are recorded in accumulated other comprehensive loss.~~
~~(note e)~~ For the year ended December 31, 2010, the Company entered into a transfer agreement for common stock of Skytel Co., Ltd. and in accordance with the agreement, the Company sold 820,943 shares for the year ended December 31, 2010 and plans to dispose of its remaining shares in 2011. As a result, the Company reclassified the remaining shares from equity securities accounted for using the equity method to short-term investment securities and recorded the shares at their estimated selling price of W~~14,811 million~~ as of December 31, ~~2010.~~
~~(note f)~~ ~~During the year ended 31, 2009, the Company recorded~~ W~~6,245 million of impairment loss on investments in Mobinex Inc., Idea Culture Ltd., Alereon, Inc.~~2013 and 2012 are as ~~the Company deemed that the carrying amounts may not be recoverable in the future.~~
~~(note g)~~ ~~As a reasonable estimate of fair value could not be made, the investment is stated at acquisition cost.~~
~~(note h)~~ ~~The Company entered into a partnership arrangement with a foreign private equity fund during 2009. The Company recorded~~ W~~9,905 million (net tax effect of~~ W2,794 million), the difference between the acquisition cost and fair value as long term unrealized loss on valuation of investments as of December 31, 2010. The agreed aggregate investment amount is $200 million and the entire amount has been invested as of December 31, 2010.
~~(note i)~~ During the year ended 31, 2010, YTK Investment Ltd., the Company’s subsidiary, entered into a partnership arrangement with a domestic private equity fund. The agreed aggregate investment amount is $23 million and the entire amount has been invested as of December 31, 2010.
~~(note j)~~ During the year ended 31, 2010, YTK Investment Ltd., the Company’s subsidiary, entered into a partnership arrangement with a foreign private equity fund. The agreed aggregate investment amount is $200 million and $12 million has been invested as of December 31, 2010.
~~(note k)~~ ~~The investments in common stock of China Unicom Ltd. and others were all sold during the year ended December 31, 2009 and the difference between the disposal price (~~W~~1,655,085 million) and acquisition cost was recorded as gain or loss on disposal of long -term investment securities.~~follows:

~~F-28~~
      December 31, 2013    December 31, 2012
   Country    Ownership
percentage    Carrying
amount    Ownership
percentage    Carrying
amount
   (In millions of won)
Investments in associates

SK Marketing & Company Co., Ltd.(*1)
   Korea    —       ￦ —       50.0       ￦ 145,333
SK China Company Ltd.(*2)
   China    9.6       37,434       9.6       37,628
Korea IT Fund(*3)
   Korea    63.3       231,402       63.3       230,016
JYP Entertainment Corporation(*5)
   Korea    —       —       25.5       4,232
Etoos Co., Ltd. (*2)
   Korea    15.6       12,029       15.6       12,037
HanaSK Card Co., Ltd.
   Korea    49.0       378,616       49.0       378,457
Candle Media Co., Ltd.
   Korea    40.9       21,241       40.9       21,935
NanoEnTek, Inc. (*2)
   Korea    9.2       9,312       9.3       9,276
SK Industrial Development China Co., Ltd.
   Hong Kong    21.0       77,517       35.0       77,967
Packet One Network
   Malaysia    27.0       60,706       28.2       88,389
SK Technology Innovation Company
   Cayman    49.0       53,874       49.0       63,559
ViKi, Inc.(*6)
   USA    —    �� —       26.3       15,667
HappyNarae Co., Ltd.
   Korea    42.5       13,935       42.5       13,113
SK hynix Inc.(*8)
   Korea    20.6       3,943,232       21.1       3,328,245
SK MENA Investment B.V.
   Netherlands    32.1       13,477       32.1       13,666
SKY Property Mgmt. Ltd.(*4)
   Virgin Island    33.0       238,278       —       —
Xinan Tianlong Science and Technology Co., Ltd.(*7)
   China    49.0       26,562       —       —
Daehan Kanggun BcN Co., Ltd. and others
   —    —       164,976       —       170,747




Sub-total
         5,282,591          4,610,267




SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)

~~b-(2).  Available-for-sale~~ ~~Debt Securities~~
~~Available-for-sale~~ ~~debt securities as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

Acquisition Cost

at December 31,
Carrying Amount
Maturity 2010 2008 2009 2010

Public bonds (note a) W 429 W 1,260 W 475 W 429
Closed beneficiary certificates — 3,551 9 —
Bond-type beneficiary certificates (note b) — 1,868 305,668 —
Hybrid Tier 1 100 — — 114
Subordinated corporate bonds (note c) — — 90,980 —
Convertible bonds of MagicTech (note d) Mar. 2 2011 1,818 — 1,818 —
Convertible bonds of Spicus, Inc. (note e) Aug. 31, 2014 1,492 — 1,492 1,573
Convertible bonds of Etoos Co., Ltd (note f) (formerly Cheong Sol) Nov. 20, 2013 21,229 — 41,417 23,762
Convertible bonds of Mediacorp, Inc. (note g) Mar. 21, 2009 884 332 — —
Convertible bonds of Mobicle Dec. 18, 2012 1,500 — 1,500 1,500
Bond with Warrants of Displaytech May. 13, 2014 1,092 — 1,095 1,092
Bond with Warrants of SDN Company Ltd. Dec. 24, 2013 1,320 — — 1,401
Convertible bonds of SDN Company Ltd. Dec. 24, 2013 500 — — 514
Convertible bonds of Namsung Electronics Co., Ltd. Jul. 12, 2011 2,000 — — 2,000
Convertible bonds of XRONet Corporation Oct. 8, 2012 — — 500 —
Convertible bonds of PREGM Co., Ltd (note h) Dec. 22, 2014 — — 1,000 —
Others 1,250 — —

Total 32,364 8,261 445,954 32,385
Less current portion ofavailable-for-sale debt securities
(2,104 ) (5,911 ) (5,592 ) (2,118 )

Long-termavailable-for-sale debt securities
W 30,260 W 2,350 W 440,362 W 30,267

~~The Interest income incurred fromavailable-for-sale~~ ~~debt securities for~~For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 were~~ W~~5,226 million,~~ W~~289 million and~~ W~~27,746 million, respectively.~~
2011
      December 31, 2013    December 31, 2012
   Country    Ownership
percentage    Carrying
amount    Ownership
percentage    Carrying
amount
   (In millions of won)
Investments in joint ventures

Dogus Planet, Inc.
   Turkey    50.0       10,105       50.0       6,005
PT. Melon Indonesia
   Indonesia    49.0       3,230       49.0       4,447
Television Media Korea Ltd.
   Korea    51.0       8,659       51.0       11,758
PT XL Planet Digital(*7)
   Indonesia    50.0       20,712       —       —




Sub-total
         42,706          22,210




Total
         ￦ 5,325,297          ￦ 4,632,477




(*1)
~~(note a)~~ ~~The maturities of public bonds as of December 31, 2010 are within 1 year for~~ W~~4 million and within 5 years for~~ W~~425 million.~~

~~F-29~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~(note b)~~ ~~The maturities of bond-type beneficiary certificates as of December 31, 2009 are within one year is~~ W~~5,534 million and within five years is~~ W~~300,134 million.~~
~~(note c)~~ ~~The~~SK Marketing & Company purchased subordinated bonds issued by its special purpose company in the asset-backed securitization of accounts receivable-other resulting from its mobile phone dealer financing plan. For the year ended December 31, 2010 all of the bonds were collected.
~~(note d)~~ ~~As of December 31, 2010, Magic Tech Network~~ Co., ~~Ltd is under a liquidation process. As the Company determined that there will likely be no consideration from the liquidation, it recognized the carrying amount of~~ W~~1,818 million as an impairment loss on investment securities during the current period.~~
~~(note e)~~ ~~The face value of the convertible bonds is~~ W~~1,492 million and those are convertible~~Ltd. was merged into ~~298,502 shares at a price of~~ W~~5,000 each, at the date of 10 years after issuing date.~~
~~(note f)~~ ~~The face value of the convertible bonds are~~ W~~25,000 million (second:~~ W~~24,000 million, third:~~ W~~1,000 million) and those are convertible into 769,500 shares at prices from~~ W~~10,354 each to~~ W~~35,633 each until one month before maturities. In accordance with the agreement between~~ SK ~~Communications~~Planet Co., Ltd., a subsidiary of the Parent Company ~~and certain stockholders of Etoos Co., Ltd (formerly, Cheong Sol), the Company converted convertible bonds of which face value totals~~ W~~25,000 million~~ during the year ended December 31, ~~2010~~2013 (Refer to note 11).
(*2) Classified as investments in associates and accounted for under the ~~Company recognized conversion loss~~equity method as the Group can exercise significant influence through its participation on the board of W~~1,196 million~~directors.
(*3) Investment in Korea IT Fund was classified as ~~other income.~~investment in associates and accounted for under the equity method as the Group has less than 50% of voting rights, and therefore does not have control over Korea IT Fund under the agreement.
(*4) Reclassified from investment in subsidiaries to investment in associates due to the partial disposal of its shares.
~~(note g)~~(*5) Decreased as Loen Entertainment, Inc., ~~the Company’s subsidiary,~~which holds ~~the convertible bonds. As the Company determined that the recoverable amount is lower than the acquisition cost. it recorded the entire amount~~ownership interests in JYP Entertainment Corporation, has been classified as ~~an impairment loss on investment securities prior to 2009~~
~~(note h)~~ Open Innovation Fund, the Company’s subsidiary, holds the convertible bonds of PREGM Co., Ltd. who during the current year also became a subsidiary of the Company. As such, the transaction is eliminated as an intercompany transaction.
~~b-(3).  Held-to-maturity~~ ~~Securities~~
~~Held-to-maturity~~ ~~securities as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

Acquisition Cost

at December 31,
Carrying Amount
Maturity 2010 2008 2009 2010

Public bonds (note ) — W 113 W 1,006 W —
Less current portion ofheld-to-maturity securities
(1 ) (1,006 ) —

Long-termheld-to-maturity securities
W 112 W — W —

~~The Company disposed all of itsheld-to-maturity~~ ~~securities on March 31, 2010.~~
~~(note)~~ ~~The maturities of all of the Company’s public bonds are within one year as of December 31, 2010.~~non-current assets held for sale.

~~F-30~~
~~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, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

For the Year Ended December 31, 2008
Non Controlling

Transferred
Interest in Equity

Beginning
Increase/
to Realized
of Consolidated
Ending

Balance (Decrease) Gain (Loss) Subsidiaries Balance

Unrealized gains on valuation of long-term investment securities W 2,402,333 W (1,462,221 ) W 133 W 986 W 941,231
Unrealized losses on valuation of long-term investment securities (160,724 ) (259,291 ) 6,882 5,582 (407,551 )

Sub-total 2,241,609 (1,721,512 ) 7,015 6,568 533,680
Less tax effect (616,996 ) 492,830 (1,453 ) (219 ) (125,838 )

Total W 1,624,613 W (1,228,682 ) W 5,562 W 6,349 W 407,842

For the Year Ended December 31, 2009
Non-controlling

Transferred
Interest in Equity

Beginning
Increase/
to Realized
of Consolidated
Ending

Balance (Decrease) Gain (Loss) Subsidiaries Balance

Unrealized gains on valuation of long-term investment securities W 941,231 W 592,080 W (231,282 ) W (45 ) W 1,301,984
Unrealized losses on valuation of long-term investment securities (407,551 ) (12,028 ) 402,385 (430 ) (17,624 )

Sub-total 533,680 580,052 171,103 (475 ) 1,284,360
Less tax effect (125,838 ) (127,532 ) (32,410 ) 8 (285,772 )

Total W 407,842 W 452,520 W 138,693 W (467 ) W 998,588

For the Year Ended December 31, 2010
Non-controlling

Transferred
Interest in Equity

Beginning
Increase/
to Realized
of Consolidated
Ending

Balance (Decrease) Gain (Loss) Subsidiaries Balance

Unrealized gains on valuation of long-term investment securities W 1,301,984 W (214,595 ) W (53,365 ) W (940 ) W 1,033,084
Unrealized losses on valuation of long-term investment securities (17,624 ) 6,061 2,947 (289 ) (8,905 )

Sub-total 1,284,360 (208,534 ) (50,418 ) (1,229 ) 1,024,179
Less tax effect (285,772 ) 42,812 12,564 194 (230,202 )

Total W 998,588 W (165,722 ) W (37,854 ) W (1,035 ) W 793,977

~~F-31~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
(*6)
5.   ~~EQUITY SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD~~
~~Equity securities accounted for using the equity method as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won, except for share data):~~

December 31, 2010
Number
Ownership
Acquisition
Net asset
Carrying Amount
of Shares Percentage (%) Cost Value 2008 2009 2010

SK Marketing & Company Co., Ltd. 5,000,000 50.0 W 190,000 W 118,698 W 96,798 W 109,314 W 118,698
HanaSK Card Co., Ltd. 57,647,058 49.0 402,476 309,433 (note a ) — — 377,228
SK Wyverns Baseball Club Co., Ltd. 199,997 100.0 1,000 — — — —
Harex Info Tech, Inc. — — — — (note b ) 596 62 —
SK Mobile — 20 4,930 655 2,111 2,111 655
Skytel Co., Ltd. — — — — (note c ) 13,858 14,958 —
SK China Company Ltd. 720,000 22.5 49,529 47,396 (note d ) 3,577 3,918 46,573
SK Telecom China Co., Ltd. — 100.0 7,340 9,315 — — 9,315
TR Entertainment — 42.2 10,953 2,399 9,626 7,560 6,029
ULand Company Ltd. 20,100,100 100.0 23,570 4,137 — 4,445 2,869
SK USA, Inc. 49 49.0 3,184 5,551 5,249 5,498 5,551
Korea IT Fund 190 63.3 190,000 232,791 210,735 219,709 232,791
1st Music Investment Fund of SK-PVC 1,980 99.0 1,326 779 — 6,434 779
2nd Music Investment Fund of SK-PVC 1,980 99.0 874 749 — — 749
Michigan Global Cinema Fund 500 45.5 5,000 4,512 — 4,587 4,512
3rd Fund of Isu Entertainment 30 37.5 3,000 2,023 1,882 1,962 2,023
AirCross Co., Ltd. — — — — 7,289 — —
Virgin Mobile USA, Inc. — — — — 62,096 — —
SK Telecom Advanced Tech & Service Center — 100.0 6,989 9,667 �� — — 9,667
Magic Tech Network Co., Ltd. 4,500 30.0 8,494 — (note e ) 7,725 5,267 —
Wave City Development Co., Ltd. 382,000 19.1 1,967 1,391 1,908 1,532 1,391
Prmaxsoftware tech.Co., Ltd. — 97.2 11,665 100 7,127 2,432 100
SK Beijing Industrial Development Co., Ltd. — — — — — 18,009 —
Cyworld Japan Co., Ltd. — — — — 3,690 226 —
Daehan Kanggun BcN Co., Ltd. 1,461,486 29.0 7,307 7,264 — 7,262 7,264
SK Fans Co., Limited 312,245 51.0 13,775 4,017 (note f ) — — 12,738
SK Telecom Smart City Management Co., Ltd. 1,532,143 100.0 1,709 1,410 (note f ) — — 1,410
KIF Stonebridge Fund 700 20.8 700 670 (note f ) — — 670
PT. Melon Indonesia 4,900,000 49.0 6,492 6,210 (note f ) — — 6,210
Packet One Network 979,474 27.2 121,119 46,404 (note g ) — — 114,760
LightSquared Inc. 3,387,916 3.3 72,096 42,517 (note h ) — — 72,096
Television Media Korea Ltd. 18,564,000 51.0 18,568 18,328 (note f ) — — 18,328
JYP Entertainment Corporation 691,680 25.5 4,150 671 (note i ) — — 4,150
Broadband D&M Co., Ltd. 900,000 100.0 4,500 4,861 — 3,713 3,848
Hanaro Dream Incorporated — — — — (note j ) — 6,687 —
Konan Technology 78,550 29.5 13,456 3,178 — 3,320 3,695
Etoos Co., Ltd (formerly Cheong Sol) 701,000 15.6 18,993 277 (note k ) — — 13,501
Mobile Money Ventures, LLC — 50.0 8,821 3,206 5,283 5,614 3,206
Joynav Technology Co., Ltd. — 41.0 3,763 2,795 — 3,762 2,795
IM Shopping Inc. — 72.6 6,072 5,922 — 6,072 5,922
CU Media, Inc. — — — — — 15,119 —
LCNC Co., Ltd. 121,800 60.4 6,000 6,000 — — 6,000
Skyon Co., Ltd. — — — — — 15,000 —
SK Telecom Global Investment B.V. — — — — 31,807 — —
SKY Property Mgmt. Ltd. — — — — 287,005 — —
S-Telecom (formerly CDMA Mobile Phone Center) — — — — 67,139 — —
SK Cyberpass, Inc. — — — — 4,068 — —
ShenzhenE-Eye High Tech Co., Ltd.
— — — — 19,801 — —
Cyworld Incorporated — — — — 2,672 — —

~~F-32~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

December 31, 2010
Number
Ownership
Acquisition
Net asset
Carrying Amount
of Shares Percentage (%) Cost Value 2008 2009 2010

SK Telecom Holdings America, Inc. — — — — 12,990 — —
Benex Movie Expert Fund — — — — 8,045 — —
SK Telecom Europe Limited and other investment in affiliates — — 31,058 25,435 11,820 12,320

Total W 1,260,876 W 898,512 W 486,393 W 1,107,843

~~(Note a)~~ ~~The Company acquired 57,647,058 shares of in HanaSK Card Co.,Ltd.~~De-recognized during the year ended December 31, ~~2010. Though the Company holds 49% ownership in HanaSK card Co., Ltd., it does not have controlling power of HanaSK Card Co., Ltd.~~2013 upon disposal.
~~(Note b)~~(*7) ~~During~~Newly acquired investment during the year ended December 31, ~~2010, the Company’s~~2013.
(*8) The Group’s ownership ~~percentage of Harex Info Tech,~~interests in SK hynix Inc. decreased as investors of convertible bonds issued by SK hynix Inc. exercised their convertible rights during the ~~Company did not participate~~year ended December 31, 2013.
(2) The market price of investments in ~~Harex Info. Tech, Inc.’s issuance~~listed associates as of ~~new stock. As a result,~~December 31, 2013 and 2012 are as follows:
   December 31, 2013    December 31, 2012
   Market value
per share
(In won)    Number of
shares    Market
price    Market value
per share
(In won)    Number of
shares    Market
price
   (In millions of won, except for share and per share data)
Candle Media Co., Ltd.
   ￦ 810       21,620,360       17,512       858       21,620,360       18,550
NanoEnTek, Inc.
   5,170       1,807,130       9,343       3,915       1,807,130       7,075
SK hynix Inc.
   36,800       146,100,000       5,376,480       25,750       146,100,000       3,762,075
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(3) The financial information of the ~~Company reclassified its remaining shares~~significant investees as of ~~Harex Info Tech, Inc. from~~and for the ~~equity securities~~years ended December 31, 2013 and 2012 is as follows:
   As of and for the year ended December 31, 2013
   SK hynix
Inc.    HanaSK
Card Co.,
Ltd.    SKY
Property
Mgmt. Ltd.    Korea IT
Fund    Packet One
Network
   (In millions of won)
Current assets
   ￦ 6,653,123       4,687,020       106,122       132,968       45,936
Non-current assets
   14,144,175       211,376       695,653       232,566       206,973
Current liabilities
   3,078,240       2,053,942       137,544       6       106,038
Non-current liabilities
   4,652,200       2,155,165       163,540       —       87,989
Revenue
   14,165,102       853,506       76,834       8,161       97,137
Profit (loss) from continuing operations
   2,872,857       3,521       14,408       2,128       (44,441 )
Other comprehensive income
   6,594       1,906       55,403       —       —
Total comprehensive income (loss)
   2,879,451       5,427       69,811       2,128       (44,441 )
      As of and for the year ended December 31, 2012
   SK hynix
Inc. HanaSK
Card Co.,
Ltd. Korea IT
Fund    Packet One
Network
   (In millions of won)
Current assets
   ￦ 5,313,573    7,888,008    195,164       46,872
Non-current assets
   13,335,121    296,007    168,182       210,027
Current liabilities
   4,441,180    259,659    6       143,936
Non-current liabilities
   4,468,071    7,240,140    —       80,896
Revenue
   10,162,210    1,012,772    19,444       110,152
Profit (loss) from continuing operations
   (158,795 ) (29,571 ) 5,820       (42,830 )
Other comprehensive income (loss)
   (305,601 ) (2,653 ) —       2,259
Total comprehensive income (loss)
   (464,396 ) (32,224 ) 5,820       (40,571 )
(4) The condensed financial information of joint ventures as of and for the years ended December 31, 2013 and 2012 are as follows:
   As of and for the year ended December 31, 2013
   Television
Media Korea
Ltd. Dogus
Planet, Inc. PT. Melon
Indonesia PT XL Planet
Digital
   (In millions of won)
Current assets
   ￦ 18,106    25,508    7,423    31,241
Cash and cash equivalents
   14,532    10,723    4,428    30,288
Non-current assets
   5,143    9,935    1,658    5,801
Current liabilities
   6,385    15,471    2,338    2,133
Account payable, other payables and provisions
   6,385    15,386    2,338    2,133
Non-current liabilities
   359    142    100    14
Account payable, other payables and provisions
   359    1    —    14
Revenue
   14,139    7,509    7,475    —
Depreciation and amortization
   (4,004 ) (1,315 ) (397 ) (84 )
Interest income
   410    1,598    289    357
Interest expense
   —    (29 ) —    (3 )
Income tax expense
   —    —    —    (513 )
Profit (loss) from continuing operations
   (6,021 ) (29,278 ) (575 ) 3,606
Total comprehensive income (loss)
   (6,021 ) (29,278 ) (575 ) 3,606
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
   As of and for the year ended December 31, 2012
   Television
Media Korea
Ltd. Dogus
Planet, Inc. PT. Melon
Indonesia
   (In millions of won)
Current assets
   ￦ 22,449    7,735    7,770
Cash and cash equivalents
   10,562    6,085    6,882
Non-current assets
   6,056    7,349    2,265
Current liabilities
   5,724    2,970    832
Account payable, other payables and provisions
   5,323    2,631    821
Non-current liabilities
   199    104    78
Account payable, other payables and provisions
   —    104    —
Revenue
   12,115    —    1,218
Depreciation and amortization
   (2,886 ) (864 ) (442 )
Interest income
   758    539    418
Loss from continuing operations
   (6,873 ) (4,494 ) (572 )
Total comprehensive loss
   (6,873 ) (4,494 ) (572 )
(5) Adjustments of financial information of significant associates to carrying amounts attributable to the ownership interests in those associates as of December 31, 2013 and 2012 are as follows:

   December 31, 2013
   Net
assets    Ownership
interests
(%)    Net assets
attributable to
the ownership
interests    Cost-book
value
differentials    Carrying
amount
   (In millions of won)
Associates:

SK hynix Inc.(*)
   ￦ 13,066,474       20.6       2,687,806       1,255,426       3,943,232
HanaSK Card Co., Ltd.
   689,290       49.0       337,752       40,864       378,616
SKY Property Mgmt. Ltd.(*)
   494,004       33.0       163,021       75,257       238,278
Korea IT Fund
   365,528       63.3       231,402       —       231,402

   December 31, 2012
   Net
assets    Ownership
interests
(%)    Net assets
attributable to
the ownership
interests    Cost-book
value
differentials    Carrying
amount
   (In millions of won)
Associates:

SK hynix Inc.(*)
   ￦ 9,738,729       21.1       2,049,182       1,279,063       3,328,245
HanaSK Card Co., Ltd.
   684,216       49.0       335,266       43,191       378,457
Korea IT Fund
   363,340       63.3       230,016       —       230,016
(*) These entities prepare consolidated financial statements and net assets of these entities represent net assets attributable to owners of the Parent Company.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(6) Details of changes in investments in associates and joint ventures accounted for using the equity method to~~available-for-sale~~ ~~equity securities.~~for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)    2013
   Beginning
balance    Acquisition
and
disposition Share of
profits
(losses) Other
compre-
hensive
income
(loss) Impair-
ment
loss Other
increase
(decrease) Ending
balance
Investments in associates

SK Marketing & Company Co., Ltd.(*1)
   ￦ 145,333       —    (3,954 ) 155    —    (141,534 ) —
SK China Company Ltd.
   37,628       —    (7,643 ) 7,449    —    —    37,434
Korea IT Fund
   230,016       —    1,348    38    —    —    231,402
JYP Entertainment Corporation(*2)
   4,232       —    1,000    58    —    (5,290 ) —
Etoos Co., Ltd.
   12,037       —    56    (64 ) —    —    12,029
HanaSK Card Co., Ltd.
   378,457       —    (612 ) 771    —    —    378,616
Candle Media Co., Ltd.
   21,935       —    (782 ) 88    —    —    21,241
NanoEnTek, Inc.
   9,276       —    25    11    —    —    9,312
SK Industrial Development China Co., Ltd.
   77,967       —    (1,037 ) 587    —    —    77,517
Packet One Network
   88,389       25    (2,367 ) (1,843 ) (23,498 ) —    60,706
SK Technology Innovation Company
   63,559       —    (9,108 ) (577 ) —    —    53,874
ViKi, Inc.(*3)
   15,667       (14,636 ) (995 ) (36 ) —    —    —
HappyNarae Co., Ltd.
   13,113       —    822    —    —    —    13,935
SK hynix Inc.
   3,328,245       —    610,201    4,786    —    —    3,943,232
SK MENA Investment B.V.
   13,666       —    —    (189 ) —    —    13,477
SKY Property Mgmt. Ltd.(*4)
   —       —    5,532    43    —    232,703    238,278
Xinan Tianlong Science and Technology Co., Ltd.
   —       25,731    831    —    —    —    26,562
Daehan Kanggun BcN Co., Ltd. and others
   170,747       26,257    (17,899 ) (4,291 ) (5,547 ) (4,291 ) 164,976




Sub-total
   4,610,267       37,377    575,418    6,986    (29,045 ) 81,588    5,282,591




Investments in joint ventures

Dogus Planet, Inc.
   6,006       21,428    (13,027 ) (4,302 ) —    —    10,105
PT. Melon Indonesia
   4,447       —    (282 ) (935 ) —    —    3,230
Television Media Korea Ltd.
   11,757       —    (3,098 ) —    —    —    8,659
PT XL Planet Digital
   —       19,713    1,549    —    —    (550 ) 20,712




Sub-total
   22,210       41,141    (14,858 ) (5,237 ) —    (550 ) 42,706




Total
   ￦ 4,632,477       78,518    560,560    1,749    (29,045 ) 81,038    5,325,297




~~(Note c)~~ (*1) The ~~Company replaced carrying value~~entity was merged into SK Planet Co., Ltd., a subsidiary of the stock from equity securities accounted for using the equity method to short-term investment securities as the Company’s ownership interest decreased due to the disposal of 820,943 shares of Skytel Co., Ltd.
~~(Note d)~~ ~~The~~Parent Company ~~participated in a proportionate capital increase of SK China Company Ltd. in the amount of~~ W~~44,859 million.~~
~~(Note e)~~ As of December 31, 2010, Magic Tech Network Co., Ltd. is under liquidation process and as the Company determined that there will likely be no consideration for the liquidation, it recognized the entire carrying value amount as impairment loss on investment securities.
~~(Note f)~~ ~~During~~during the year ended December 31, ~~2010, the Company participated~~2013 (Refer to note 11).
(*2) Investment in ~~the establishment of SK Fans Co.,Limited, SK Telecom Smart City Management Co.,Ltd.~~JYP Entertainment Corporation decreased as Loen Entertainment, Inc., ~~KIF Stonebridge Fund, PT. Melon Indonesia and Television Media Korea, respectively.~~which holds ownership interests in JYP Entertainment Corporation, has excluded from consolidation scope.
~~(Note g)~~(*3) ~~During~~De-recognized upon disposal during the year ended December 31, ~~2010, the Company acquired 979,474 shares~~2013.
(*4) Investment in SKY Property Mgmt. Ltd. was reclassified from investments in subsidiaries to investments to associates as portion of ~~convertible preferred stock of Packet One Network. As a result, the Company holds 27.2%~~ ownership ~~in Packet One Network.~~
~~(Note h)~~ ~~During~~interests were disposed during the year ended December 31, ~~2010,~~2013.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(In millions of won)    2012
   Beginning
balance    Acquisition
and
disposition    Share of
profits
(losses)
(*1) Other
compre-
hensive
income
(loss) Impair-
ment
loss Other
increase
(decrease) Ending
balance
Investments in associates

SK Marketing & Company Co., Ltd.
   ￦ 128,320       —       17,585    (572 ) —    —    145,333
SK China Company Ltd.
   48,488       —       217    (11,077 ) —    —    37,628
Korea IT Fund
   230,980       —       (1,141 ) 177    —    —    230,016
JYP Entertainment Corporation
   4,008       —       282    (58 ) —    —    4,232
Etoos Co., Ltd.
   13,928       —       (1,891 ) —    —    —    12,037
HanaSK Card Co., Ltd.
   396,553       —       (16,842 ) (1,254 ) —    —    378,457
Candle Media Co., Ltd.
   11,814       5,853       3,619    361    —    288    21,935
NanoEnTek, Inc.
   10,470       —       (1,290 ) 96    —    —    9,276
SK Industrial Development China Co., Ltd.
   83,691       —       276    (6,000 ) —    —    77,967
Packet One Network
   103,409       2,387       (18,252 ) 845    —    —    88,389
SK Technology Innovation Company
   75,974       —       (7,320 ) (5,095 ) —    —    63,559
ViKi, Inc.
   17,799       —       (2,168 ) 36    —    —    15,667
HappyNarae Co., Ltd.
   12,250       —       863    —    —    —    13,113
SK hynix Inc.
   —       3,374,726       6,865    (53,346 ) —    —    3,328,245
SK MENA Investment B.V.
   —       14,485       16    (835 ) —    —    13,666
Daehan Kanggun BcN Co., Ltd. and others
   226,332       33,126       (15,293 ) (3,914 ) (48,039 ) (21,465 ) 170,747






Sub-total
   1,364,015       3,430,577       (34,472 ) (80,637 ) (48,039 ) (21,177 ) 4,610,267






Investments in joint ventures

PT. Melon Indonesia
   5,326       —       (468 ) (411 ) —    —    4,447
Television Media Korea Ltd.
   15,262       —       (3,504 ) —    —    —    11,758
Dogus Planet, Inc.
   —       8,932       (2,218 ) (709 ) —    —    6,005






Sub-total
   20,588       8,932       (6,190 ) (1,120 ) —    —    22,210






Total
   ￦ 1,384,603       3,439,509       (40,662 ) (81,757 ) (48,039 ) (21,177 ) 4,632,477






(*1) Losses relating to investments in subsidiaries, joint venture and associates on the ~~Company acquired 3,387,916 shares~~consolidated statements of ~~common stock of Lightsquared Inc. Though the Company holds only 3.3% ownership; it has an ability to exercise significant influence on Light squared Inc.~~
~~(Note i)~~ ~~During~~income for the year ended December 31, ~~2010,~~2012 includes share of profits (losses), impairment loss and losses on the Company and Loen Entertainment, Inc., the Company’s subsidiary, acquired 483,830 (17.8%) and 207,850 shares (7.65%) of JYP Entertainment, Corp., respectively, resulting from the full liquidation of 1st Music Investment Fund of SK-PVC
~~(Note j)~~ ~~SK Broadband Co., Ltd., the Company’s subsidiary, transferred the entire amount of Hanaro Dream, Inc. shares to Hanaro Dream, Inc. for~~ W~~6,937 million and~~ W~~250 million was accounted for as gain on~~ disposal of ~~equity securities accounted for using equity method.~~investments in associates of ￦1,581 million.
~~(Note k)~~(7) ~~During~~As the ~~year ended December 31, 2010, SK Communications Co., Ltd.,~~Group discontinued the ~~Company’s subsidiary, acquired 701,000 shares or 19.95% equity interest~~application of ~~Etoos Co., Ltd. by converting convertible bonds of Etoos Co., Ltd (face value of~~ W~~25,000 million) and applied~~ the equity method due to the ~~significant influence on Etoos Co., Ltd. Meanwhile,~~carrying amount of the ~~Company’s~~Group’s share being reduced to zero, the unrecognized accumulated equity ~~interest has decreased to 15.6% due to Etoos Co., Ltd.’s capital increase.~~losses as of December 31, 2013 are as follows:
~~F-33~~
(In millions of won)    Unrealized loss    Unrealized change in equity
   Year ended
December 31,
2013 Accumulated    Year ended
December 31,
2013 Accumulated
ULand Company Limited
   ￦ (150 ) 1,553       (130 ) (3 )
Wave City Development Co., Ltd.
   (965 ) 3,721       —    334




   ￦ (1,115 ) 5,274       (130 ) 331




SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~Details of changes in investments in affiliates accounted for using the equity method for~~
For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 are as follows (in millions of Korean won):~~

For the Year Ended December 31, 2008
Equity in Capital

Equity in
Surplus and 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
S-Telecom (formerly 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
ShenzhenE-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 Hodlings 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 (74,395 ) W (1,214 ) W 39,972 W 898,512

2011
13. Property and Equipment
(1) Property and equipment as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013
   Acquisition cost    Accumulated
depreciation Accumulated
impairment
loss Carrying
amount
Land
   ￦ 732,206       —    —    732,206
Buildings
   1,510,846       (554,155 ) —    956,691
Structures
   716,724       (351,773 ) —    364,951
Machinery
   24,994,337       (18,145,580 ) (1,698 ) 6,847,059
Other
   1,428,159       (894,217 ) (761 ) 533,181
Construction in progress
   762,519       —    —    762,519




   ￦ 30,144,791       (19,945,725 ) (2,459 ) 10,196,607




(In millions of won)
   December 31, 2012
   Acquisition cost    Accumulated
depreciation Accumulated
impairment
loss Carrying
amount
Land
   ￦ 704,908       —    —    704,908
Buildings
   1,391,489       (505,118 ) —    886,371
Structures
   681,905       (318,421 ) —    363,484
Machinery
   22,997,148       (16,558,093 ) (122,863 ) 6,316,192
Other
   1,609,034       (971,062 ) (760 ) 637,212
Construction in progress
   804,552       —    —    804,552




   ￦ 28,189,036       (18,352,694 ) (123,623 ) 9,712,719




~~(note a)~~(2) ~~Aircross Co., Ltd. was reclassified into~~Changes in property and equipment for the ~~equity securities accounted for using equity method from a consolidated subsidiary during the year~~years ended December 31, ~~2008~~2013 and 2012 are as ~~it was planned to be and was then 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~~ W~~7 billion, in accordance with then applicable Korean GAAP.~~
~~(note c)~~ ~~Other decrease in investments in equity securities of SK Mobile resulted from the disposal of some of its equity shares.~~
~~(note d)~~ ~~As of December 31, 2008, SK Telecom China Holding Co., Ltd is included in the Company’s consolidation, resulting in other decreases in the investment.~~
~~(note e)~~ ~~Other decrease in investments in Centurion IT Investment Association represents the collection of the Company’s investment from liquidation of Centurion IT Investment Association.~~follows:

~~F-34~~
(In millions of won)
2013
Beginning
balance Acquisition Disposal Transfer Depreciation Impairment Change of
consolidation
scope Ending
balance
Land
￦ 704,908    6,865    (200 ) 15,545    —    —    5,088    732,206
Buildings
886,371    1,128    (177 ) 112,827    (47,429 ) —    3,971    956,691
Structures
363,484    17,850    (18 ) 17,001    (33,366 ) —    —    364,951
Machinery
6,316,192    582,593    (13,183 ) 1,951,267    (1,990,850 ) —    1,040    6,847,059
Other
637,212    1,190,739    (7,032 ) (1,157,150 ) (133,682 ) —    3,094    533,181
Construction in progress
804,552    1,113,576    (31,146 ) (1,131,703 ) —    (1,275 ) 8,515    762,519

￦ 9,712,719    2,912,751    (51,756 ) (192,213 ) (2,205,327 ) (1,275 ) 21,708    10,196,607

SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(In millions of won)
2012
Beginning
balance Acquisi-
tion Disposal Transfer Deprecia-
tion Impair-
ment(*) Classified
as held
for sale Change
of
consolida-
tion scope Ending
balance
Land
￦ 730,361    1,499    (41,771 ) 14,819    —    —    —    —    704,908
Buildings
989,078    1,369    (62,699 ) 9,491    (50,868 ) —    —    —    886,371
Structures
301,115    65,541    (81 ) 30,632    (33,723 ) —    —    —    363,484
Machinery
5,493,572    547,874    (24,614 ) 2,188,882    (1,780,899 ) (108,623 ) —    —    6,316,192
Other
711,461    1,497,412    (4,593 ) (1,438,042 ) (124,426 ) (748 ) (1,566 ) (2,286 ) 637,212
Construction in progress
805,411    1,280,654    (810 ) (1,262,578 ) —    (18,125 ) —    —    804,552

��

￦ 9,030,998    3,394,349    (134,568 ) (456,796 ) (1,989,916 ) (127,496 ) (1,566 ) (2,286 ) 9,712,719

~~(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 the associated translation gain was accounted for as an increase in the investment in S-Telecom (formerly CDMA Mobile Phone Center).
~~(note g)~~ (*) The Group recognized ￦109,486 million of impairment loss on property and equipment in relation to the discontinuance of the Digital Multimedia Broadcasting service as recoverable amount ~~represent translation gain of~~ W~~651 million incurred~~is expected to be zero, and included the amount in loss from translating the foreign currency financial statements of Mobile Money Ventures, LLC by SKT Americas, Inc. (formerly SK Telecom International inc.), a subsidiary, into Korean won and the associated translation gain was accounted for as an increase in the investment in Mobile Money Ventures, LLC.discontinued operation.

For the Year Ended December 31, 2009
Equity in Capital

Equity in
Surplus and Other
Other

Beginning
Earnings
Comprehensive
Retained
Increase
Ending

Balance Acquisition (Losses) Income Earnings (Decrease) Balance

SK Marketing & Company Co., Ltd. W 96,798 W — W 13,063 W (547 ) W — W — W 109,314
AirCross Co., Ltd. (note a ) 7,289 — — — — (7,289 ) —
Harex Info Tech, Inc. 596 — (534 ) — — — 62
SK Mobile 2,111 — — — — — 2,111
Skytel Co., Ltd. 13,858 — 3,835 (2,735 ) — — 14,958
SK China Company Ltd. 3,577 — 739 (398 ) — — 3,918
TR Entertainment 9,626 — (1,894 ) (172 ) — — 7,560
Virgin Mobile USA Inc. (note b ) 62,096 — (11,529 ) 11 — (50,578 ) —
SK USA, Inc. 5,249 — 683 (434 ) — — 5,498
Korea IT Fund 210,735 — 7,562 1,412 — — 219,709
3rd Fund of Isu Entertainment 1,882 — 80 — — — 1,962
Magic Tech Network 7,725 — (2,403 ) (55 ) — — 5,267
SK Telecom Global Investment B.V. (note c ) 31,807 13,275 (65 ) 5 — (45,022 ) —
SKY Property Mgmt., Ltd. (note c ) 287,006 — (1,075 ) — — (285,931 ) —
S-Telecom (formerly CDMA Mobile Phone Center) 67,139 — (31,212 ) (14,248 ) — (21,679 ) —
Wave City Development Co., Ltd. 1,908 — (376 ) — — — 1,532
SK Cyberpass, Inc. (note d ) 4,068 — — — — (4,068 ) —
ShenzhenE-Eye High Tech
(note c ) 19,801 — — — — (19,801 ) —
Cyworld Japan Co., Ltd. 3,690 — (3,428 ) (36 ) — — 226
Cyworld Incorporated 2,672 — (2,672 ) — — — —
Prmaxsoftware tech.Co., Ltd. 7,127 4,538 (9,526 ) 293 — — 2,432
Mobile Money Ventures, LLC 5,283 7,694 (6,983 ) (380 ) — — 5,614
SK Telecom Holdings America, Inc. (note e ) 12,990 — 2,827 — — (15,817 ) —
Benex Movie Expert Fund (note c ) 8,045 — (303 ) — — (7,742 ) —
SK Wyverns Baseball Club Co., Ltd. (note f ) — — (193 ) — — 193 —
1st Music Investment Fund ofSK-PVC
(note f ) — — (124 ) 17 — 6,541 6,434
Michigan Global Cinema Fund (note f ) — — 9 — — 4,578 4,587
SK Beijing Industrial Development Co. — 23,709 (5,448 ) (252 ) — — 18,009
Daehan Kanggun BcN Co., Ltd. (note g ) — 6,803 (45 ) — — 504 7,262
Broadband D&M Co., Ltd. (note f ) — — 204 — — 3,509 3,713
Hanaro Dream Incorporated (note f ) — — (39 ) 309 — 6,417 6,687
Cyworld China Holdings Ltd. (note f ) — — (2,627 ) 125 — 2,502 —
Konan Technology (note f ) — — 19 (29 ) — 3,330 3,320
ULand Company Ltd. (note f ) — — (1,641 ) (424 ) — 6,510 4,445
CU Media, Inc (note f ) — — (2,055 ) — — 17,174 15,119
IM Shopping Inc. (note h ) — — — — — 6,072 6,072
Skyon Co., Ltd. — 15,000 — — — — 15,000
Joynav Technology Co., Ltd. — 4,111 (104 ) (245 ) — — 3,762

~~F-35~~
14. Investment Property
(1) Investment property as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013
   Acquisition
cost    Accumulated
depreciation Carrying
amount
Land
   ￦ 10,822       —    10,822
Buildings
   7,657       (2,668 ) 4,989




   ￦ 18,479       (2,668 ) 15,811




(In millions of won)
   December 31, 2012
   Acquisition
cost    Accumulated
depreciation Carrying
amount
Land
   ￦ 12,638       —    12,638
Buildings
   20,026       (5,185 ) 14,841




   ￦ 32,664       (5,185 ) 27,479




(2) Changes in investment property for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)
   2013
   Beginning
balance    Acquisition    Disposal    Transfer Depreciation Ending
balance
Land
   ￦ 12,638       —       —       (1,816 ) —    10,822
Buildings
   14,841       —       —       (8,737 ) (1,115 ) 4,989








   ￦ 27,479       —       —       (10,553 ) (1,115 ) 15,811








SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)

For the Year Ended December 31, 2009
Equity in Capital

Equity in
Surplus and Other
Other

Beginning
Earnings
Comprehensive
Retained
Increase
Ending

Balance Acquisition (Losses) Income Earnings (Decrease) Balance

Other investment in affiliates 25,434 32,271 (8,725 ) (1,176 ) (11,589 ) (24,395 ) 11,820

W 898,512 W 107,401 W (63,980 ) W (18,959 ) W (11,589 ) W (424,992 ) W 486,393

For the years ended December 31, 2013, 2012 and 2011
(In millions of won)
   2012
   Beginning
balance    Acquisition    Disposal Transfer Depreciation Classified
as held
for sale Ending
balance
Land
   ￦ 23,153       —       (10,737 ) 222    —    —    12,638
Buildings
   247,933       129       (22,619 ) (15,797 ) (8,123 ) (186,682 ) 14,841






   ￦ 271,086       129       (33,356 ) (15,575 ) (8,123 ) (186,682 ) 27,479






(3) Details of fair value of investment property as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013    December 31, 2012
   Carrying
amount    Fair value    Carrying
amount    Fair value
Land
   ￦ 10,822       6,595       12,638       15,228
Buildings
   4,989       4,737       14,841       13,949








   ￦ 15,811       11,332       27,479       29,177








The fair value of investment property was appraised on the basis of market price by an independent appraisal company.
(4)
~~(note a)~~ ~~Other decrease in investments in equity securities of AirCross Co., Ltd. is due to AirCross Co., Ltd’s liquidation during~~Income (expense) from investment property for the ~~period.~~
~~(note b)~~ ~~Other decrease in investments in equity securities of Virgin Mobile, Inc. and Helio Inc. resulted from the exchange of Sprint Nextel shares with those of the aforementioned companies.~~
~~(note c)~~ ~~During the year~~years ended December 31, ~~2009, investment (investee company) is included in the Company’s consolidation, resulting in a decrease~~2013, 2012 and 2011 are as follows:
(In millions of won)
   2013 2012 2011
Rent revenue
   ￦ 1,373    73,755    54,088
Operating expense
   (476 ) (57,049 ) (42,141 )
15. Goodwill
(1) Goodwill as of ~~in equity securities accounted for using the equity method.~~
~~(note d)~~ ~~Other decrease in investments in equity securities of SK Cyberpass, Inc. resulted from the disposal of shares.~~
~~(note e)~~ ~~Other decrease in investments in equity securities of SKT Holdings America, Inc. resulted from the exchange of equity interest with SKT Americas, Inc.~~
~~(note f)~~ ~~Investment is accounted for as an equity securities accounted for using equity method as its total assets at the beginning of 2009 decreased to less than~~ W~~10 billion, in accordance to Korean GAAP.~~
~~(note g)~~ ~~Other increase in investments in Daehan Kanggun BcN Co., Ltd. represents the increase through the acquisition of the lease line business from SK Networks Co., Ltd.~~
~~(note h)~~ ~~Due to SK Telecom Global Investment B.V. inclusion in the Company’s consolidation beginning the year ended~~ December 31, ~~2009, IM Shopping Inc., which SK Telecom Global Investment B.V., SK Global Investment has a 72.6% equity interest in, is included in the equity securities accounted for using equity method.~~2013 and 2012 are as follows:
(In millions of won)
   December 31,
2013    December 31,
2012
Goodwill related to acquisition of Shinsegi Telecom, Inc.
   ￦ 1,306,236       1,306,236
Goodwill related to acquisition of SK Broadband Co., Ltd.
   358,443       358,443
Other goodwill
   68,582       79,804




   ￦ 1,733,261       1,744,483




Goodwill is allocated to the following CGUs for the purpose of the impairment test.

For the Year Ended December 31, 2010
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 109,314 W — W 9,376 W 8 W — W — W 118,698
HanaSK Card Co., Ltd. — 402,476 (25,148 ) (100 ) — — 377,228
SK Wyverns Baseball Club Co., Ltd. — — 410 — — (410 ) —
Harex Info Tech, Inc. (note h ) 62 — — — — (62 ) —
SK Mobile 2,111 — (1,982 ) 526 — — 655
Skytel Co., Ltd. (note a, b ) 14,958 — 2,833 1,337 (444 ) (18,684 ) —
SK China Company Ltd. (note a ) 3,918 44,860 935 (2,192 ) — (947 ) 46,574
SK Telecom China Co., Ltd. (note c ) — — (205 ) 77 — 9,443 9,315
TR Entertainment 7,560 — (1,551 ) 20 — — 6,029
ULand Company Ltd. 4,445 — (1,612 ) 36 — — 2,869
SK USA, Inc. 5,498 — 191 (138 ) — — 5,551
Korea IT Fund (note b ) 219,709 — 13,942 2,098 (2,958 ) — 232,791
1st Music Investment Fund ofSK-PVC
(note d ) 6,434 — (138 ) 13 — (5,530 ) 779
2nd Music Investment Fund ofSK-PVC
(note c ) — — 25 — — 724 749
Michigan Global Cinema Fund 4,587 — (75 ) — — — 4,512
3rd Fund of Isu Entertainment 1,962 — 61 — — — 2,023
~~F-36~~Shinsegi Telecom, Inc.(*1): cellular services
SK Broadband Co., Ltd.(*2): fixed-line telecommunication services
Other: other
(*1) Shinsegi Telecom, Inc.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)

For the Year Ended December 31, 2010
Equity in Capital

Surplus and

Equity in
Other
Other

Beginning
Earnings
Comprehensive
Dividend
Increase
Ending

Balance Acquisition (Losses) Income Received (Decrease) Balance

SK Telecom Advanced Tech & Service Center — — 50 81 — 9,536 9,667
Magic Tech Network Co., Ltd. 5,267 — (4,858 ) (409 ) — — —
Wave City Development Co., Ltd. 1,532 — (141 ) — — — 1,391
Prmaxsoftware tech.Co., Ltd. 2,432 — (2,332 ) — — — 100
SK Beijing Industrial Development Co. (note a ) 18,009 — — — — (18,009 ) —
Cyworld Japan Co., Ltd. (note d ) 226 — — — — (226 ) —
Daehan Kanggun BcN Co., Ltd. 7,262 — 1 — — — 7,263
SK Fans Co., Limited — 13,775 (1,074 ) 37 — — 12,738
SK Telecom Smart City Management Co., Ltd. — 1,709 (192 ) (107 ) — — 1,410
KIF Stonebridge Fund — 700 (30 ) — — — 670
PT. Melon Indonesia — 6,492 13 (295 ) — — 6,210
Packet One Network — 121,119 (6,460 ) 101 — — 114,760
LightSquared Inc. — 72,096 — — — — 72,096
Television Media Korea Ltd. — 18,568 (240 ) — — — 18,328
JYP Entertainment Corporation — 4,150 — — — — 4,150
Broadband D&M Co., Ltd. 3,713 — 135 — — — 3,848
Hanaro Dream Incorporated (note a ) 6,687 — — — — (6,687 ) —
Konan Technology 3,320 — 374 — — — 3,694
Etoos Co., Ltd (formerly Cheong Sol) (note e ) — — (1,619 ) — — 15,120 13,501
Mobile Money Ventures, LLC 5,614 — (2,226 ) — — (182 ) 3,206
Joynav Technology Co., Ltd. 3,762 — (989 ) — — 22 2,795
IM Shopping Inc. 6,072 — — — — (149 ) 5,923
LCNC Co., Ltd. — 6,000 — — — — 6,000
CU Media, Inc (note f ) 15,119 — — — — (15,119 ) —
Skyon Co., Ltd. (note g ) 15,000 — (6,987 ) — — (8,013 ) —
SK Telecom Europe Limited and other investment in affiliates 11,820 2,000 118 40 — (1,658 ) 12,320

W 486,393 W 693,945 W (29,395 ) W 1,133 W (3,402 ) W (40,831 ) W 1,107,843

~~(note a)~~ Other decreases for Skytel Co., Ltd., SK China Company Ltd., SK Beijing Industrial Development Co., Limited, and Hanaro Dream, Inc. are due to the disposal of equity interests during the year ended December 31, 2010.
~~(note b)~~ ~~The Company received dividends from Skytel Co., Ltd. and Korea IT Fund; the corresponding amounts were deducted from the carrying amount of equity securities accounted for using the equity method.~~
~~(note c)~~ Other increase or decrease of the 2nd Music Investment Fund of SK-PVC and others incurred as they were excluded from consolidation and investments in those companies are accounted for using equity method.
~~(note d)~~ ~~Other increase or decrease of the 1st Music Investment Fund of SK-PVC and Cyworld Japan Co., Ltd due to liquidation during the year ended December 31, 2010.~~
~~(note e)~~ ~~Other increase or decrease of Etoos Co., Ltd. is replacement ofavailable-for-sale~~ ~~securities in the amount of~~ W~~18,993 million to equity securities accounted for using equity method, as SK Communications Co., Ltd., the Company’s subsidiary, converted convertible bonds of Etoos Co., Ltd (face value of~~ W~~25,000 million. In addition, the Company accounts for the changes in equity interests in the amount~~
~~F-37~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
of W~~3,872 million as loss on disposal of equity securities accounted for using equity method as the investee company increased its paid-in capital.~~
~~(note f)~~ ~~IHQ Inc., a formerly consolidated entity which during the year, due to the disposal of significant number of shares, became anavailable-for-sale~~ ~~investment. Accordingly, as IHQ Inc. owns CU Media, CU Media is longer accounted for as an equity method investment.~~
~~(note g)~~ During the period Skyon Co., Ltd. merged into PREGM Co., Ltd.. As a result, Benex Focus Limited Partnership II, a subsidiary, acquired shares of PREGM Co., Ltd.. As the Company has 56.69%. equity ownership of PREGM Co., Ltd., it is included in the Company’s consolidation during the year ended December 31, 2010.
~~(note h)~~ During the year ended December 31, 2010,the Company’s ownership percentage of Harex Info Tech, Inc. decreased as the Company did not participate in Harex Info. Tech, Inc.’s issuance of new stock. As a result, the Company reclassified its remaining shares of Harex Info Tech, Inc. from the equity securities accounted for using the equity method to~~available-for-sale~~ ~~equity securities..~~
~~Details of changes in the differences between the acquisition cost and net asset value of equity method investees at the acquisition date for~~For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 are as follows (in millions~~2011
The recoverable amount of ~~Korean won):~~

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
ShenzhenE-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

~~F-38~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

For the Year Ended December 31, 2009
Beginning
Ending

Balance In(de)crease Amortization Balance

Harex Info Tech, Inc. W 350 W — W (350 ) W —
TR Entertainment 6,856 — (1,613 ) 5,243
Virgin Mobile USA Inc. 119,180 (99,296 ) (19,884 ) —
Skytel Co., Ltd. — — — —
SK China Company Ltd. 107 — (107 ) —
Magic Tech Network 5,563 — (1,236 ) 4,327
Prmaxsoftware tech.Co., Ltd — 671 (671 ) —
Daehan Kanggun BcN Co. Ltd. — 45 (45 ) —
Hanaro Dream Incorporated — 87 (87 ) —
Cyworld Japan Co., Ltd. — 2,821 (2,821 ) —
Cyworld Incorporated — 1,664 (1,664 ) —
Konan Technology — 2,027 (715 ) 1,312
ULand Company Ltd. — 360 (240 ) 120
CU Media, Inc. — 10,972 (1,859 ) 9,113
SK Cyberpass Inc. 258 (258 ) — —
ShenzhenE-Eye High Tech
8,680 (8,680 ) — —
Other investments in affiliates 3,436 (745 ) (1,076 ) 1,615

Total W 144,430 W (90,332 ) W (32,368 ) W 21,730

For the Year Ended December 31, 2010
Beginning
Ending

Balance In(de)crease Amortization Balance

HanaSK Card Co., Ltd. W — W 70,690 W (2,895 ) W 67,795
TR Entertainment 5,243 — (1,613 ) 3,630
ULand Company Ltd. 120 — (120 ) —
Magic Tech Network Co., Ltd. 4,327 — (4,327 ) —
SK Fans Co., Limited — 9,180 (459 ) 8,721
Packet One Network — 67,952 404 68,356
LightSquared Inc. — 29,579 — 29,579
Television Media Korea Ltd. — 240 (240 ) —
Konan Technology 1,312 — (716 ) 596
Etoos Co., Ltd (formerly Cheong Sol) — 14,346 (1,308 ) 13,038
JYP Entertainment Corporation — 3,479 — 3,479
CU Media, Inc 9,113 (9,113 ) — —
Other investments in affiliates 1,615 (1,615 ) — —

Total W 21,730 W 184,738 W (11,274 ) W 195,194

~~F-39~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Details~~the CGU is based on its value in use calculated by applying the annual discount rate of ~~changes in unrealized intercompany gains incurred from sales of assets~~6.5% to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of 2.0% was applied for the cash flows expected to be incurred after five years ~~ended December 31, 2008, 2009~~ and ~~2010 are as follows (in millions of Korean won):~~

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

For the Year Ended December 31, 2009
Beginning
Ending

Balance Increase Decrease Balance

SK China Company Ltd. W 1,086 W — W — W 1,086
Broadband D&M Co., Ltd. — 931 (79 ) 852
Cyworld China Holdings Ltd. — 488 (258 ) 230
Konan Technology — 116 (14 ) 102
ULand Company Ltd. — 1,268 — 1,268
CU Media, Inc. — 31 (31 ) —
Cyworld Incorporated 1,416 — — 1,416
Other investments in affiliates 2,820 — (474 ) 2,346

Total W 5,322 W 2,834 W (856 ) W 7,300

For the Year Ended December 31, 2010
Beginning
Ending

Balance Increase Decrease Balance

SK China Company Ltd. W 1,086 W — W (263 ) W 823
ULand Company Ltd. 1,268 — — 1,268
Cyworld China Holdings Ltd. 230 — — 230
Broadband D&M Co., Ltd. 852 264 (103 ) 1,013
Konan Technology 102 — (23 ) 79
Cyworld Incorporated 1,416 — (1,416 ) —
Etoos Co., Ltd (formerly Cheong Sol) — (238 ) 52 (186 )
Other investments in affiliates 2,346 — — 2,346

Total W 7,300 W 26 W (1,753 ) W 5,573

~~F-40~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~The condensed financial information~~is not expected to exceed the Group’s long-term wireless business growth. Management of the ~~investees as of and for~~Group does not expect the ~~year ended December 31, 2010 is as follows (in millions of Korean won):~~

Total
Total
Net
Assets Liabilities Revenue Income (Loss)

SK Marketing & Company Co., Ltd. W 659,847 W 422,452 W 415,270 W 18,751
HanaSK Card Co., Ltd. 3,315,740 2,684,243 492,499 (58,914 )
SK Wyverns Baseball Club Co., Ltd. 5,039 7,566 30,685 (286 )
SK Mobile 3,658 382 — (7,054 )
SK China Company Ltd. 212,370 1,784 15,876 4,155
SK Telecom China Co.,Ltd. 9,469 153 — (205 )
TR Entertainment 6,549 864 11,026 146
ULand Company Ltd. 7,191 3,102 2,938 (1,387 )
SK USA, Inc. 22,035 10,706 9,303 10,358
Korea IT Fund 367,721 — 28,377 22,014
1st Music Investment Fund of SK-PVC 366 30 75 45
2nd Music Investment Fund of SK-PVC 477 29 155 125
Michigan Global Cinema Fund 9,785 90 20 (165 )
3rd Fund of Isu Entertainment 5,395 — 166 162
SK Telecom Advanced Tech & Service Center 9,761 94 — 50
Wave City Development Co., Ltd. 126,413 119,128 693 (734 )
Prmaxsoftware tech.Co.,Ltd. 103 — — (2,399 )
Daehan Kanggun BcN Co., Ltd. 165,754 140,707 — 4
SK Fans Co., Limited 16,588 8,712 6,975 (1,205 )
SK Telecom Smart City Management Co., Ltd. 1,487 77 — (119 )
KIF Stone Bridge Fund Co., Ltd 3,383 157 12 (143 )
PT. Melon Indonesia 13,759 1,085 — 27,371
Packet One Network 268,617 145,422 74,893 (59,635 )
Television Media Korea Ltd. 36,402 465 — (291 )
JYP Entertainment Corporation 15,186 12,550 21,680 904
Broadband D&M Co., Ltd. W 10,512 W 5,651 W 4,861 W 51,088
Konan Technology 15,590 4,814 14,596 3,620
Etoos Co., Ltd (formerly Cheong Sol) 74,938 73,164 29,719 (3,683 )
Mobile Money Ventures, LLC 9,407 2,996 4,472 (3,767 )
Joynav Technology Co., Ltd. 7,008 194 107 (2,411 )
IM Shopping Inc. 1,044 1,966 63 (1,498 )
LCNC Co., Ltd 9,729 175 12 (432 )

~~F-41~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
6.   ~~LOANS TO EMPLOYEES~~
~~Short-term and long-term loans to employees as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010

Loans to employees’ stock ownership association W 74,878 W 58,198 W 43,487
Loans to employees for housing and other 15,488 30,848 26,427

W 90,366 W 89,046 W 69,914
��
~~The Company loaned the~~total carrying amount ~~above to its employees through the Employee’s Stock Purchase Association (a pass-through organization) for employees’ acquisition~~ of the ~~Company’s treasury stocks through a compensatory employee stock purchase plan ( Refer to Note 16 Treasury Stocks). The loan~~CGU will ~~be repaid over a period of five years, beginning on~~exceed the ~~second anniversary of each loan date and will expire on December 25, 2014.~~
7.   ~~PROPERTY AND EQUIPMENT~~
~~Property and equipment as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

Useful Lives

(Years) 2008 2009 2010

Land W 756,348 W 728,300 W 725,802
Buildings and structures 15-50 1,925,563 2,158,124 2,179,601
Machinery 3-15 18,572,546 19,732,297 19,750,703
Other 4-9 1,135,325 1,163,537 1,404,770
Construction in progress 356,150 417,027 447,608

Total 22,745,932 24,199,285 24,508,484
Less accumulated depreciation (15,305,773 ) (16,030,884 ) (16,641,384 )
Accumulated impairment (2,197 ) (2,019 ) (2,019 )
Government subsidy (273 ) (503 ) (487 )

Property and equipment, net W 7,437,689 W 8,165,879 W 7,864,594

~~The Officially Assessed Land Prices, issued by the government, as of December 31, 2008, 2009 and 2010 was~~ W~~895,866 million,~~ W~~856,729 million and~~ W~~971,607 million, respectively.~~
~~Details of changes in property and equipment for the years ended December 31, 2008, 2009 and 2010 are as follows (In millions of Korean won):~~

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

~~F-42~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

For the Year Ended December 31, 2009
Other

Beginning
Increase
Ending

Balance (Decrease) Acquisition Disposal Transfer Depreciation Balance

Land W 756,348 W (5,397 ) W 19,326 W (42,902 ) 925 W — W 728,300
Buildings and structures 1,354,812 210,087 35,164 (18,766 ) (3,659 ) (74,283 ) 1,503,355
Machinery 4,574,508 531,991 345,558 (16,794 ) 1,553,959 (1,838,688 ) 5,150,534
Other 395,871 (2,615 ) 974,824 (28,117 ) (849,494 ) (123,807 ) 366,662
Construction in progress 356,150 7,028 787,565 (20,739 ) (712,976 ) — 417,028

Total W 7,437,689 W 741,094 W 2,162,437 W (127,318 ) W (11,245 ) W (2,036,778 ) W 8,165,879

For the Year Ended December 31, 2010
Other

Beginning
Increase
Ending

Balance (Decrease) Acquisition Disposal Transfer Depreciation Balance

Land W 728,300 W 62 W 1,622 W (7,000 ) W 2,818 W — W 725,802
Buildings and structures 1,503,355 1,956 13,838 (1,650 ) 8,490 (86,517 ) 1,439,472
Machinery 5,150,534 (71 ) 455,279 (91,874 ) 1,141,647 (1,926,994 ) 4,728,521
Other 366,662 (996 ) 982,906 (4,854 ) (692,282 ) (128,245 ) 523,191
Construction in progress 417,028 — 863,231 (46,581 ) (786,070 ) — 447,608

Total W 8,165,879 W 951 W 2,316,876 W (151,959 ) W (325,397 ) W (2,141,756 ) W 7,864,594
��
~~Changes denoted above include activities from both continuing and discontinued operations. Other increase (decrease) resulted from merger and the changes in consolidated subsidiaries.~~
8.   ~~INTANGIBLE ASSETS~~
~~Intangible assets as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

December 31, 2010 Carrying Amounts
Acquisition
Accumulated
Accumulated

Cost Amortization Impairment 2008 2009 2010

Goodwill W 2,945,582 W (1,321,271 ) W (5,378 ) W 1,899,739 W 1,737,966 W 1,618,933
Frequency use rights 1,487,552 (778,509 ) — 843,771 727,239 709,043
Land use right 424,339 (26,966 ) — 1,260 405,362 397,373
Software development costs 249,468 (212,669 ) (10,855 ) 34,573 35,950 25,944
Customer relationships 504,156 (252,078 ) — 435,535 343,743 252,078
Other 2,116,736 (1,370,018 ) (9,446 ) 763,267 742,065 737,272

Total W 7,727,833 W (3,961,511 ) W (25,679 ) W 3,978,145 W 3,992,325 W 3,740,643

~~F-43~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Details of changes in intangible assets for the years ended December 31, 2008, 2009 and 2010 are as follows (In millions of Korean won):~~

For the Year Ended December 31, 2008
Other

Beginning
Increase

Balance (Decrease) Acquisition Disposal Transfer Amortization Impairment Ending 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

For the Year Ended December 31, 2009
Other

Beginning
Increase
Ending

Balance (Decrease) Acquisition Disposal Transfer Amortization Impairment Balance

Goodwill W 1,899,739 W 4,774 W 1,807 W (1,130 ) W (261 ) W (166,963 ) W — W 1,737,966
Frequency use rights 843,771 — — — — (116,532 ) — 727,239
Land use right 1,260 418,016 — (2 ) — (13,912 ) — 405,362
Software development costs 34,573 (71 ) 17,547 — 4,208 (17,131 ) (3,176 ) 35,950
Customer relationships 435,535 (128 ) — — — (91,664 ) — 343,743
Other 763,267 24,957 101,417 (8,079 ) 151,175 (289,909 ) (763 ) 742,065

Total W 3,978,145 W 447,548 W 120,771 W (9,211 ) W 155,122 W (696,111 ) W (3,939 ) W 3,992,325

For the Year Ended December 31, 2009
Other

Increase

Beginning
(Decrease)
Ending

Balance (Note a) Acquisition Disposal Transfer Amortization Impairment Balance

Goodwill W 1,737,966 W 6,988 W 33,470 W — W 7,453 W (166,944 ) W — W 1,618,933
Frequency use rights 727,239 — — — 102,432 (120,628 ) — 709,043
Land use right 405,362 (190 ) — — 1,850 (9,649 ) — 397,373
Software development costs 35,950 (313 ) 13,598 (243 ) 279 (8,879 ) (14,448 ) 25,944
Customer relationships 343,743 — — — — (91,665 ) — 252,078
Other 742,065 (3,350 ) 110,994 (8,336 ) 235,180 (330,283 ) (8,998 ) 737,272

Total W 3,992,325 W 3,135 W 158,062 W (8,579 ) W 347,194 W (728,048 ) W (23,446 ) W 3,740,643

~~Changes denoted above include activities from both continuing and discontinued operations.~~
~~(note a) Other increase (decrease) relates~~total recoverable amount due to the ~~merger and~~reasonably possible changes from the major assumptions used to estimate the recoverable amount. Management believes that a reasonably possible change in ~~consolidated subsidiaries.~~

~~F-44~~
a key assumption would not cause the CGU’s carrying amount to exceed its recoverable amount.
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~The book value and residual useful lives of major intangible assets as of December 31, 2010 are as follows (in millions of Korean won):~~
~~Amount~~
~~Description~~
~~Residual Useful lives~~
~~Goodwill~~ W ~~1,177,574~~ ~~Goodwill related to merger of Shinsegi Telecomm, Inc.~~ ~~9 years and 3 months~~
” ~~14,327~~ ~~Goodwill related to merger of Empas Corp.~~ ~~1 year and 10 months~~
” ~~338,803~~ (*2) Goodwill related to acquisition of SK Broadband Co., Ltd.
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 6.4% to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of 2.2% was applied for the cash flows expected to be incurred after five years. Management of the Group does not expect the total carrying amount of the CGU will exceed the total recoverable amount due to the reasonably possible changes from the major assumptions used to estimate the recoverable amount. Management believes that a reasonably possible change in a key assumption would not cause the CGU’s carrying amount to exceed its recoverable amount.
(2) Details of changes in goodwill for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)
   2013 2012
Beginning balance
   ￦ 1,744,483    1,749,933
Goodwill increase due to acquisitions
   1,252    10,078
Impairment loss
   (9,981 ) (13,316 )
Other decrease(*)
   (2,493 ) (2,212 )


   ￦ 1,733,261    1,744,483


(*) Other decrease represents effects of exchange rate changes in relation to the foreign subsidiaries and reclassification of assets held for sale.
Accumulated impairment losses as of December 31, 2013 and 2012 are ￦9,981 million and ￦13,316 million, respectively.
16. Intangible Assets
(1) Intangible assets as of December 31, 2013 and 2012 are as follows:
(In millions of won)    2013
   Acquisition
cost    Accumulated
depreciation Accumulated
impairment Carrying
amount
Frequency use rights
   ￦ 3,033,879       (1,369,308 ) —    1,664,571
Land use rights
   48,031       (31,441 ) —    16,590
Industrial rights
   84,495       (25,732 ) —    58,763
Development costs
   138,802       (117,000 ) (11,675 ) 10,127
Facility usage rights
   143,937       (85,109 ) —    58,828
Customer relations
   14,222       (7,889 ) —    6,333
Memberships(*1)
   128,452       —    —    128,452
Other(*2)
   2,438,559       (1,630,374 ) (1,067 ) 807,118




   ￦ 6,030,377       (3,266,853 ) (12,742 ) 2,750,782




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(In millions of won)    2012
   Acquisition
cost    Accumulated
depreciation Accumulated
impairment Carrying
amount
Frequency use rights
   ￦ 2,837,385       (1,140,610 ) (2,907 ) 1,693,868
Land use rights
   42,041       (25,979 ) —    16,062
Industrial rights
   84,955       (24,851 ) —    60,104
Development costs
   171,256       (146,757 ) (11,079 ) 13,420
Facility usage rights
   142,283       (76,943 ) —    65,340
Customer relations
   52,792       (3,906 ) —    48,886
Memberships(*1)
   119,686       —    (732 ) 118,954
Other(*2)
   2,197,856       (1,518,585 ) (6,247 ) 673,024




   ￦ 5,648,254       (2,937,631 ) (20,965 ) 2,689,658




(*1) Memberships are classified as intangible assets with indefinite useful life and are not amortized.
(*2) Other intangible assets consist of computer software and usage rights to a research facility which the Group built and donated to a university which in turn the Group is given rights-to-use for a definite number of years.
(2) Details of changes in intangible assets for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)
2013
Beginning
balance Acquisition Disposal Transfer Amortization Impairment Change
of
consolida-
tion scope Ending
balance
Frequency use rights(*)
￦ 1,693,868    1,046,833    (814,213 ) —    (261,917 ) —    —    1,664,571
Land use rights
16,062    7,378    (279 ) —    (6,571 ) —    —    16,590
Industrial rights
60,104    2,045    (75 ) 485    (3,674 ) —    (122 ) 58,763
Development costs
13,420    594    —    650    (5,230 ) (1,448 ) 2,141    10,127
Facility usage rights
65,340    1,930    (75 ) 9    (8,376 ) —    —    58,828
Customer relations
48,886    1,293    —    1,856    (45,702 ) —    —    6,333
Memberships
118,954    2,828    (997 ) —    —    —    7,667    128,452
Other
673,024    111,972    (21,751 ) 325,529    (291,870 ) (1,695 ) 11,909    807,118

￦ 2,689,658    1,174,873    (837,390 ) 328,529    (623,340 ) (3,143 ) 21,595    2,750,782

(*) The Group newly acquired 1.8GHz frequency use rights through auction during the year ended December 31, 2013 and returned the existing 1.8GHz frequency use rights as partial consideration in connection with the new acquisition. Accordingly, the Group recognized ￦199,613 million of loss on disposal of property and equipment and intangible assets.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(In millions of won)
2012
Beginning
balance Acquisition Disposal Transfer Amortiza-
tion Impairment
(*) Change of
consolida-
tion scope Ending
balance
Frequency use rights
￦ 1,889,102    16,659    —    —    (208,986 ) (2,907 ) —    1,693,868
Land use rights
19,326    3,830    (142 ) —    (6,952 ) —    —    16,062
Industrial rights
59,474    4,313    —    687    (4,316 ) (6 ) (48 ) 60,104
Development costs
20,961    3,019    —    933    (6,940 ) (4,553 ) —    13,420
Facility usage rights
69,491    3,998    (121 ) 108    (8,136 ) —    —    65,340
Customer relations
141,818    578    —    —    (93,510 ) —    —    48,886
Memberships
117,711    6,363    (3,972 ) 396    —    (732 ) (812 ) 118,954
Other
677,920    115,498    (15,630 ) 194,442    (286,139 ) (11,200 ) (1,867 ) 673,024

￦ 2,995,803    154,258    (19,865 ) 196,566    (614,979 ) (19,398 ) (2,727 ) 2,689,658

(*) The Group recognized ￦12,101 million of impairment loss on intangible assets in relation to the frequency use rights of the discontinuance of Digital Multimedia Broadcasting service as recoverable amount is expected to be zero, and included the amount in loss from discontinued operation.
(3) Research and development expenditure recognized as expense for the years ended December 31, 2013, 2012 and 2011 are as follows:
   2013    2012    2011
Research and development costs expensed as incurred
   ￦ 352,385       304,557       271,382
(4) The carrying amount and residual useful lives of major intangible assets as of December 31, 2013 are as follows, all of which are amortized on a straight-line basis:
(In millions of won)
~~17 years and 3 months~~
~~IMT license~~Amount    ~~581,355~~
Description
Commencement
of amortization Completion of
amortization
W-CDMA license
￦ 294,245       Frequency use rights relating to W-CDMA service    ~~(note a)~~
~~W-CDMA license~~Dec. 2003       ~~98,335~~ Dec. 2016
W-CDMA license
48,933       Frequency use rights relating toW-CDMA service ~~(note b)~~
~~WiBro license~~    ~~25,450~~Oct. 2010 Dec. 2016
800MHz license
304,080 Frequency use rights relating to CDMA and LTE service Jul. 2011 Jun. 2021
1.8GHz license
1,004,960 Frequency use rights relating to LTE service Sep. 2013 Dec. 2021
WiBro license
12,353       WiBro service    ~~(note c)~~
~~DMB license~~Mar. 2012       ~~3,903~~ Mar. 2019
   ~~DMB service~~    ~~5 years and 6 months~~
~~Customer relationships~~    ~~252,078~~ ~~Customer relationships related to acquisition of SK Broadband Co., Ltd.~~ ~~2 years and 9 months~~
~~(note a)~~ ￦ 1,664,571 ~~With its application for a license to provide IMT 2000 service, the Company has a commitment to pay~~ W~~1,300,000 million to the Korea Communications Commission (“KCC” former Ministry of Information Communication). Of which,~~ W~~650,000 million was paid in March 2001 by SK IMT Co., Ltd. (a former subsidiary of the Company), which was merged into the Company on May 1, 2003,~~
17. Borrowings and ~~the remainder is required to be paid over 10 years with an annual interest rate equal to the 3-year-maturity government bond rate minus 0.75% (3.37%~~Debentures
(1) Short-term borrowings as of December 31, ~~2010). The remaining future obligation payment is~~ W~~170,000 million in 2011. On December 4, 2001, SK IMT Co., Ltd. received the IMT 2000 license from KCC,~~2013 and ~~recorded the total license cost (measured at present value)~~2012 are as ~~an intangible asset. As a result of the merger with SK IMT Co., Ltd., on May 1, 2003, the Company acquired the IMT license valued~~ W~~1,259,253 million and assumed the related long-term payable with principal amount of~~ W650,000 million. Amortization of the IMT license commenced when the Company started its commercial IMT 2000 service in December 2003, under a straight-line basis over the estimated useful life of the IMT license which expires in December 2016. As of December 31, 2010, the present value related to the current portion of payments to be made to KCC is W~~1,052 million.~~
~~(note b)~~ ~~On May 2010, the Company acquired an additionalW-CDMA~~ ~~license from KCC and recorded the total license cost (measured at present value) as an intangible asset. Amortization of theW-CDMA~~ license commenced when the Company started to use the additional W-CDMA frequency on October 7, 2010, on a straight-line method basis over the estimated useful life of the W-CDMA license which expires in December 2016. In addition, the Company has a commitment to pay W~~53,100 million to KCC with an annual interest equal to the government’s previous year public funds financing account rate minus 1% (3.58% as of December 31, 2010). The future payment obligation is~~ W~~17,700 million annually from 2012 to 2014. As of December 31, 2010, the present value of the long-term portion of payments to be made to KCC is~~ W~~2,457 million.~~follows:

~~F-45~~
(In millions of won)

Lender
   Annual
interest
rate (%)    December 31,
2013    December 31,
2012
Commercial paper
   Woori Bank, etc.    2.98~3.10       ￦ 200,000       130,000
Short-term borrowings
   Kookmin Bank, etc.    3.48~6.20       60,000       470,245




         ￦ 260,000       600,245




SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~(note c)~~ The Company purchased the WiBro license from KCC 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, on a straight line basis over the remaining useful life.
9.   ~~BONDS PAYABLE~~
~~Bonds as of~~
For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 are as follows (in millions of Korean won, thousands of U.S. dollars and thousands of Japanese yen):~~

Annual

Maturity
Interest

Year Rate (%) 2008 2009 2010

Domestic general bonds 2009 5.0 W 300,000 W — W —
” 2010 4.0~6.77 250,000 190,000 —
” 2011 3.0 200,000 200,000 200,000
” 2013 4.0~6.92 450,000 450,000 450,000
” 2014 5.0 200,000 200,000 200,000
” 2015 5.0 200,000 200,000 200,000
” 2016 5.0~5.92 200,000 470,000 470,000
” 2018 5.0 200,000 200,000 200,000
Unsecured private bonds (note b) 2009 6.51-7.48 23,205 — —
” 2009 6.45 30,000 — —
” (note b) 2010 6.50-7.07 28,182 20,000 —
Unsecured public bonds 2008 5.50 — — —
” 2010 6.30-6.81 110,000 110,000 —
” (note c) 2011 9.08 25,000 25,000 25,000
Debentures 2009 6.08 96,172 — —
” (note d) 2010 8.75~9.25 80,000 80,000 —
” (note d) 2011 6.65~9.20 315,718 315,718 315,718
” (note d) 2013 3.99 — — 150,000
Dollar denominated bonds (US$300,000) 2011 4.25 377,250 350,280 341,670
Dollar denominated bonds (US$500,000) (note e) 2012 7.0 656,251 611,301 596,951
Dollar denominated bonds (US$400,000) 2027 6.63 503,000 467,040 455,560
Yen denominated bonds (JPY15,500,000) (note a) 2012 3 month Euro
Yen
LIBOR+0.55~2.5 174,236 195,737 216,548
Yen denominated bonds (JPY5,000,000) (note a) 2012 3 month Euro
Yen
TIBOR+2.5 — 63,141 69,854
Floating rate notes (US$150,000) (note a) 2010 3-month
LIBOR
rate +3.05 188,625 175,140 —
Floating rate notes (US$220,000) (note a) 2012 3-month
LIBOR
rate +3.15 — 256,872 250,558
Bonds with warrants-bearer, detachable, first (note f) 2009 13.65 — — 10
Bonds with warrants-bearer, detachable, second (note f) 2012 14.23 — — 1,399
Convertible bonds (SK Telecom) 2009 — 268,415 — —
Convertible bonds (SK Telecom) (note g) 2014 1.75 — 437,673 437,673

Sub total 4,876,054 5,017,902 4,580,941
Less discounts on bonds (77,182 ) (82,333 ) (76,122 )

~~F-46~~
2011
(2) Long-term borrowings as of December 31, 2013 and 2012 are as follows:
(In millions of won and thousands of U.S. dollars)
Lender
   Annual interest
rate (%)    Maturity    December 31,
2013 December 31,
2012
Bank of Communications
   6M Libor + 0.29    Oct. 10, 2013    ￦ —

32,133
(USD 30,000

)
Bank of China
   6M Libor + 0.29    Oct. 10, 2013    —

21,422
(USD 20,000

)
DBS Bank
   6M Libor + 0.29    Oct. 10, 2013    —

26,778
(USD 25,000

)
SMBC
   6M Libor + 0.29    Oct. 10, 2013    —

26,778
(USD 25,000

)
Kookmin Bank and 13 others
   4.48    Feb. 14, 2015    —    350,000
Korea Development Bank
   2.89    Jun. 17, 2013    —    1,762
Korea Development Bank
   2.84    Jun. 16, 2014    1,648    4,942
Shinhan Bank
   2.84    Jun. 15, 2015    5,136    8,561
Kookmin Bank
   2.84    Jun. 15, 2015    8,124    9,749
Kookmin Bank
   2.84    Mar. 15, 2017    5,996    5,996
Kookmin Bank
   2.84    Mar. 15, 2018    8,600    —
Export Kreditnamnden(*)
   1.7    Apr. 29, 2022
99,975
(USD 94,736
) —


Sub-total
         129,479    488,121
Less present value discount on long-term borrowings
         (3,287 ) (1,667 )


         126,192    486,454
Less current portion of long-term borrowings
         (21,384 ) (117,217 )


Long-term borrowings
         ￦ 104,808    369,237


(*) For the year ended December 31, 2013, the Group obtained long-term borrowings from Export Kreditnamnden, an export credit agency. The long-term borrowings are redeemed by installment on an annual basis from 2014 to 2022.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)

Annual

Maturity
Interest

Year Rate (%) 2008 2009 2010

Less conversion right adjustments (5,733 ) (81,235 ) (64,735 )
Add long-term accrued interest 17,256 — —
Add premium on redemption of bonds — — 400

Net 4,810,395 4,854,334 4,440,484
Less portion due within one year (736,003 ) (573,936 ) (874,436 )

Long-term portion W 4,074,392 W 4,280,398 W 3,566,048

For the years ended December 31, 2013, 2012 and 2011
(3)
~~(note a)~~ ~~The 3-months Euro Yen LIBOR rate, the 3-months Euro Yen Tibor rate and the 3-month Libor rate~~Debentures as of December 31, ~~2010~~2013 and 2012 are ~~0.19%, 0.34% and 0.30%, respectively.~~as follows:
(In millions of won, thousands of U.S. dollars and thousands of other currencies)
   Purpose    Maturity    Annual interest
rate (%)    December 31,
2013 December 31,
2012
Unsecured private bonds
   Refinancing
fund    2016    5.00    ￦ 200,000    200,000
Unsecured private bonds
      2013    4.00    —    200,000
Unsecured private bonds
      2014    5.00    200,000    200,000
Unsecured private bonds
   Other fund    2015    5.00    200,000    200,000
Unsecured private bonds
      2018    5.00    200,000    200,000
Unsecured private bonds
      2013    6.92    —    250,000
Unsecured private bonds
      2016    5.54    40,000    40,000
Unsecured private bonds
      2016    5.92    230,000    230,000
Unsecured private bonds
   Operating
fund    2016    3.95    110,000    110,000
Unsecured private bonds
      2021    4.22    190,000    190,000
Unsecured private bonds
   Operating
and
refinancing
fund    2019    3.24    170,000    170,000
Unsecured private bonds
      2022    3.30    140,000    140,000
Unsecured private bonds
      2032    3.45    90,000    90,000
Unsecured private bonds
   Operating
fund    2023    3.03    230,000    —
Unsecured private bonds
      2033    3.22    130,000    —
Unsecured private bonds(*1)
      2014    4.86    20,000    20,000
Unsecured private bonds(*1)
      2015    4.62    10,000    10,000
Unsecured private bonds(*2)
      2013    3.99    —    150,000
Unsecured private bonds(*2)
      2014    4.53    290,000    290,000
Unsecured private bonds(*2)
      2014    4.40    100,000    100,000
Unsecured private bonds(*2)
      2015    4.09    110,000    110,000
Unsecured private bonds(*2)
      2015    4.14    110,000    110,000
Unsecured private bonds(*2)
      2017    4.28    100,000    100,000
Unsecured private bonds(*2)
      2015    3.14    130,000    130,000
Unsecured private bonds(*2)
      2017    3.27    120,000    120,000
Foreign global bonds
      2027    6.63

422,120
(USD 400,000

)

428,440
(USD 400,000

)
Exchangeable bonds(*5)
   Refinancing
fund    2014    1.75

96,147
(USD 91,109

)

405,678
(USD 332,528

)
Floating rate notes(*3)
   Operating
fund    2014    3M Libor + 1.60

263,825
(USD 250,000

)

267,775
(USD 250,000

)
Floating rate notes(*4)
      2014    SOR rate + 1.20

54,129
(SGD 65,000

)

56,906
(SGD 65,000

)
Swiss unsecured private bonds
      2017    1.75

356,601
(CHF 300,000

)

351,930
(CHF 300,000

)
Foreign global bonds
      2018    2.13

738,710
(USD 700,000

)

749,770
(USD 700,000

)
Australia unsecured private bonds
      2017    4.75

281,988
(AUD 300,000

)
—
Floating rate notes(*3)
      2020    3M Libor + 0.88

316,590
(USD 300,000

)
—
Foreign global bonds(*2)
      2018    2.88

316,590
(USD 300,000

)
—


Sub-total
            5,966,700    5,620,499
Less discounts on bonds
            (40,228 ) (43,500 )


            5,926,472    5,576,999
Less current portion of bonds
            (1,020,893 ) (597,779 )


            ￦ 4,905,579    4,979,220


SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
~~(note b)~~(*1) ~~Bonds~~Unsecured private bonds were ~~scheduled to be repaid in 3 years with a two-year grace period; the entire amount was repaid during the current year.~~
~~(note c)~~ ~~In accordance with the covenant provision of related borrowings,~~issued by SK Telink Co., ~~Ltd,~~Ltd., a subsidiary of the Company, is required to maintain its debt ratio lower than 1,000 percent until completion of the principal repayment obligation. If the subsidiary of the Company does not comply with the covenant provision until completion of the principal repayment, the Company may be required to perform an immediate redemptionParent Company.
(*2) Unsecured private bonds were issued by ~~written notification by resolution of bondholders committee.~~
~~(note d)~~ ~~According to the covenant provision of the related borrowings,~~ SK Broadband Co., Ltd., a subsidiary of the Company, is required to maintain its debt ratio lower than 1,000 percent and SK Broadband Co., Ltd. cannot dispose of its property and equipment more than twenty times of its net assets in any given fiscal year.Parent Company.
~~(note e)~~(*3) According to the covenants of foreign currency debentures, when a private person or other corporation except for AIG-Newbridge-TVG Consortium acquire more than 45% of ownership of SK Broadband Co., Ltd., a subsidiary of the Company, and its credit rating on global bond (US$500,000 thousand) is downgraded by S&P or Moody’s, SK Broadband Co., Ltd. shall offer a buy-back of all foreign currency debentures at the price of 101% of the principal. If the Company does not comply with the covenant, it may be required to perform an immediate redemption.
~~(note f)~~ ~~Bonds with stock warrants were issued by PREGM Co., Ltd., a subsidiary of the Company. First bearer, detachable bonds with stock warrants, have expired as~~As of December 31, ~~2010 but has yet been redeemed. Exercise period~~2013, 3M Libor rate is 0.24%.
(*4) As of ~~the second bearer, detachable bonds with stock warrants~~December 31, 2013, SOR rate is ~~from April 19, 2009 to January 23, 2012 and the exercise price is~~ W~~4,375 per share.~~0.21%.
~~(note g)~~ (*5) On April 7, 2009, the ~~Company~~Group issued ~~convertible~~exchangeable bonds with a maturity of five years in the principal amount of ~~US$~~USD 332,528,000 for ~~US$~~USD 326,397,463 with ~~conversion price~~a coupon rate of W~~230,010 per share of the Company’s common stock, which was greater than market value at the date of issuance. The Company~~1.75%.
The Group 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 principal amount after three years from the issuance date if the market price exceeds 130% of the exchange price during a predetermined period. The exchange right may be exercised during the period from May 18, 2009 to March 24, 2014.
Exchanges of notes for 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 Group’s voting stock. If such 49% ownership limitation is violated due to the exercise of exchange rights, the Group will pay the bond holder a cash settlement which will be determined at the average price of one day after a holder exercises its exchange right or the weighted average price for the following five or twenty business days. Unless either previously redeemed or exchanged, the notes are redeemable at 100% of the principal amount at maturity.
In accordance with a resolution of the general shareholder’s meeting on March 22, 2013 and a resolution of the Board of Directors’ meeting on July 25, 2013, the exchange price has changed from ￦197,760 to ￦189,121.
During 2013, the accumulated principal amount that was claimed for exchange is USD 268,977,000. For the year ended December 31, 2013, exchange of bonds in the principal amount of USD 170,223,000 was claimed and the Group granted 1,241,337 shares of treasury stock. The exchange of bonds in the principal amount of USD 98,754,000 was additionally claimed and cash was paid due to the limitation on foreign ownership under Article 6 of the Telecommunications Business Act. In addition, bonds in the principal amount of USD 6,505,000 were redeemed at par value due to the exercise of the Controlling Company’s early redemption rights.
As of December 31, 2013, exchange for the entire bonds in the principal amount of USD 57,046,000 was claimed and will be redeemed by cash during 2014. The Group recognized ￦134,232 million of financial costs in relation to the exchangeable bonds for the year ended December 31, 2013.
As of December 31, 2013, fair value of the exchangeable bonds is USD 91,108,508 and the exchange price is ￦189,121. The exchange price could be adjusted with the exchange rate of ￦1,383.40 per USD 1.
18. Long-term Payables — other hand, the bond holders may redeem their notes at 100% of the principal amount on April 7, 2012 (3 years from the issuance date). The conversion right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares that can be converted
(1) Long-term payables as of December 31, ~~2010 is 2,090,996 shares.~~
~~Conversion of notes to common shares may be prohibited under the Telecommunications Law or other legal restrictions which restrains foreign governments, individuals~~2013 and entities from owning more than 49% of the Company’s voting stock. If such 49% ownership limitation is violated due to the exercise of conversion rights, the Company will pay a bond holder a cash settlement which will be determined at the average price of one day after a holder exercises its conversion right or the weighted average price for the following five or twenty 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 the2012 are as follows:
~~F-47~~
(In millions of won)
   December 31, 2013    December 31, 2012
Payables related to acquisition of W-CDMA licenses
   ￦ 828,721       705,605
Other(*)
   9,864       9,903




   ￦ 838,585       715,508




(*) Other consists of vested compensation claims of employees who have rendered long-term service.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(2) As of December 31, 2013 and 2012, long-term payables – other consist of payables related to the acquisition of W-CDMA licenses for 2.1GHz, 800MHZ, 2.3GHz and 1.8GHz frequencies as follows:
(In millions of won)
   Period of
repayment    Coupon
rate(*1) Annual effective
interest rate(*2) December 31,
2013 December 31,
2012
2.1GHz
   2012~2014       3.58% 5.89% 17,533    35,067
800MHz
   2013~2015       3.51% 5.69% 138,833    208,250
2.3GHz
   2014~2016       3.00% 5.80% 8,650    8,650
1.8GHz
   2012~2021       2.43~3.00% 4.84~5.25% 942,675    671,625


      1,107,691    923,592
Present value discount on long-term payables—other
      (72,171 ) (60,021 )


      1,035,520    863,571
Current portion of long-term payables – other
      (206,799 ) (157,966 )


Carrying amount at December 31, 2013
      ￦ 828,721    705,605


(*1) The Group applied an annual interest rate equal to the previous year average lending rate of public funds financing account less 1%.
(*2) The Group estimated the discount rate based on its credit ratings and corporate bond yield rate as there is no market interest rate available for long-term account payables-other.
(3) The repayment schedule of long-term payables—other as of December 31, 2013 is as follows:
(In millions of won)
   Amount
2014
   ￦ 207,668
2015
   190,134
2016
   120,718
2017 and thereafter
   589,171


   ￦ 1,107,691


19. Provisions
(1) Changes in provisions for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)
For the year ended December 31, 2013 As of December 31, 2013
Beginning
balance Increase Utilization Reversal Other Ending
balance Current Non-current
Provision for handset subsidy(*1)
￦ 353,383    9,416    (308,876 ) —    —    53,923    53,334    589
Provision for restoration (*2)
39,895    5,679    (712 ) (4,211 ) (144 ) 40,507    13,441    27,066
Other provisions
590    —    (85 ) (17 ) (37 ) 451    —    451

￦ 393,868    15,095    (309,673 ) (4,228 ) (181 ) 94,881    66,775    28,106

SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(In millions of won)
For the year ended December 31, 2012 As of December 31, 2012
Beginning
balance Increase Utilization Reversal Other Ending
balance Current Non-current
Provision for handset subsidy
￦ 762,238    272,869    (677,416 ) (4,525 ) 217    353,383    279,977    73,406
Provision for restoration
36,379    3,915    (1,348 ) (32 ) 981    39,895    7,256    32,639
Other provisions
942    43    (49 ) —    (346 ) 590    74    516

￦ 799,559    276,827    (678,813 ) (4,557 ) 852    393,868    287,307    106,561

(*1) The Group recognizes a provision for handset subsidies given to the subscribers who purchase handsets on an installment basis. During the years ended December 31, 2013 and 2012, the Group’s provision for handset subsidies significantly decreased as it gradually ceased providing handset subsidies to subscribers.
The amount recognized as a provision for handset subsidies is the Group’s best estimate of the expenditure required to settle the current obligations to the relevant subscribers at the end of the reporting period, which is calculated as the sum of the present values of the monthly balances for handset subsidies over the relevant service periods, taking into account the customer retention rate for the relevant subscribers. The discount rate used in calculating the present values is based on AAA-rated corporate bonds with a two-year maturity. The customer retention rate is based on the Group’s historical retention rate.
(*2) In the course of the Group’s activities, base station and other assets are utilized on leased premises which are expected to have costs associated with restoring the location where these assets are situated upon ceasing their use on those premises. The associated cash outflows, which are long-term in nature, are generally expected to occur at the dates of exit of the assets to which they relate. These restoration costs are calculated on the basis of the identified costs for the current financial year, extrapolated into the future based on management’s best estimates of future trends in prices, inflation, and other factors, and are discounted to present value at a risk-adjusted rate specifically applicable to the liability. Forecasts of estimated future provisions are revised in light of future changes in business conditions or technological requirements. The Group records these restoration costs as property and equipments and subsequently allocates them to expense using a systematic and rational method over the asset’s useful life, and records the accretion of the liability as a charge to finance costs.
(2) The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period.
Key assumptions
Provision for handset subsidy
estimation based on historical service retention period data
Provision for restoration
estimation based on inflation assuming demolition of the relevant assets after six years
20. Lease
(1)    Finance Lease
The Group has leased certain telecommunication equipment under finance lease agreements with Cisco Systems Capital Korea Ltd. Finance lease liabilities as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31,
2013    December 31,
2012
Finance Lease Liabilities

Current portion of long-term finance lease liabilities
   ￦ 19,351       19,904
Long-term finance lease liabilities
   3,867       22,036




   ￦ 23,218       41,940




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
The Group’s related interest and principal as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013 December 31, 2012
   Minimum
lease
payment    Present
value Minimum
lease
payment    Present
value
Less than 1 year
   ￦ 20,039       19,351    21,375       19,904
1~5 years
   3,974       3,867    22,744       22,036






Subtotal
   24,013       23,218    44,119       41,940






Current portion of long-term finance lease liabilities
      (19,351 )    (19,904 )




Long-term finance lease liabilities
      ￦ 3,867       22,036




(2)    Operating Leases
The Group entered into operating leases and sublease agreements in relation to rented office space and the expected future lease payments and lease revenues (included in other operating income in the accompanying consolidated statements of income) are as follows:
(In millions of won)
   2013    2012
   Lease
payments    Lease
revenues    Lease
payments    Lease
revenues
Less than 1 year
   ￦ 32,842       2,422       36,411       1,636
1~5 years
   72,236       1,074       108,747       1,074
More than 5 years
   65,013       1,026       69,058       1,026








   ￦ 170,091       4,522       214,216       3,736








(3)    Sales and Leaseback
For the year ended December 31, 2013, the Group disposed a portion of its property and equipment and investment property, and entered into lease agreements with respect to those assets. This sale and leaseback transaction is accounted for as an operating lease and the gain on disposal of property and equipment and investment property is recognized as other operating income. The Group recognized ￦13,703 million of lease payments in relation to the operating lease agreement and ￦269 million in relation to the sublease agreement. Expected future lease payments and lease revenues are explained in Note 20-(2).
21. Defined Benefit Liabilities
(1) Details of defined benefit liabilities as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013 December 31, 2012
Present value of defined benefit obligations
   ￦ 312,494    244,866
Fair value of plan assets
   (238,293 ) (158,345 )


   ￦ 74,201    86,521


(2) Principal actuarial assumptions as of December 31, 2013 and 2012 are as follows:
~~absence of the 49% foreign shareholding restrictions. Unless either previously redeemed or converted, the notes are redeemable at 100% of the principal amount at maturity.~~
December 31, 2013 December 31, 2012
Discount rate for defined benefit obligations
~~In accordance with a resolution~~3.06%~4.34% 3.28%~4.75%
Expected rate of salary increase
3.05%~6.27% 3.00%~5.81%
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
Discount rate for defined benefit obligation is determined based on the Group’s credit ratings and yield rate of corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Group’s historical promotion index, inflation rate and salary increase ratio in accordance with salary agreement.
(3) Changes in defined benefit obligations for the ~~Board of Directors on January 27, 2010~~years ended December 31, 2013 and ~~on July 22, 2010, conversion price has changed from~~ W~~230,010 to~~ W~~220,000 and number of common shares that can be converted has changed from 1,999,997 shares to 2,090,996 shares due to the payment of periodic dividends and payment of interim dividends. During~~2012 are as follows:
             2013                      2012
Beginning balance
     ￦ 244,866         188,120
Current service cost
     89,802         77,060
Interest cost
     9,370         8,119
Remeasurement
- Demographic assumption
     (394 )      (905 )
- Financial assumption
     (12,371 )      7,329
- Adjustment based on experience
     6,475         13,518
Benefit paid
     (42,948 )      (46,066 )
Others(*)
     17,694         (2,309 )




Ending balance
     ￦ 312,494         244,866




(*) Others for the year ended December 31, ~~2010, no conversion was made.~~2013 include liabilities of ￦14,703 million transferred due to business combination, ￦(4,141) million for changes in consolidation scope, and transfers to construction in progress. Others for the year ended December 31, 2012 include effects of changes in consolidation scope of ￦(4,185) million in relation to the disposal of Ntreev Soft Co., Ltd. and transfers to construction in progress.
(4)
~~10.~~   ~~LONG-TERM BORROWINGS~~Changes in plan assets for the years ended December 31, 2013 and 2012 are as follows:
~~Long-term borrowings as~~
(In millions of won)
   2013 2012
Beginning balance
   ￦ 158,345    102,179
Interest income
   6,332    4,314
Actuarial gain (loss)
   122    447
Contributions by employer directly to plan assets
   85,683    60,533
Benefits paid
   (23,827 ) (9,108 )
Others(*)
   11,638    (20 )


Ending balance
   ￦ 238,293    158,345


(*) Others include assets of ￦14,334 million transferred due to business combination and effects of changes in consolidation scope of ￦(3,074) million for the year ended December 31, 2013.
The Group expects to make a contribution of ￦56,973 million to the defined benefit plans during the next financial year.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011
(5) Expenses recognized in profit and loss (included in labor cost in the accompanying consolidated statements of income) and capitalized into construction-in-progress for the years ended December 31, 2013, 2012 and 2011 are as follows:
(In millions of won)
   2013 2012 2011
Current service cost
   ￦ 89,802    77,060    63,925
Interest cost
   9,370    8,119    9,086
Expected return on plan assets
   (6,332 ) (4,314 ) (4,059 )


   ￦ 92,840    80,865    68,952


The above costs are ~~as follows (in millions of Korean won, thousands of U.S. dollars~~recognized in labor cost, research and ~~thousands of Japanese yen):~~

Final
Annual Interest

Lender

Maturity Year

Rate (%) (note a)
2008 2009 2010

Shinhan Bank (note a) 2011 91 days CD yield + 0.25 W200,000 W200,000 W—
Korea Development Bank 2011 91 days CD yield + 1.02 W100,000 W100,000 W100,000
Citibank 2011 91 days CD yield + 1.20 W100,000 W100,000 W100,000
Nonghyup 2011 91 days CD yield + 1.30 W100,000 W100,000 W100,000
Hana Bank 2011 91 days CD yield + 1.50 W150,000 W150,000 W150,000
Nonghyup 2011 91 days CD yield + 1.50 W50,000 W50,000 W50,000
Shinhan Bank 2011 4.36 W635 — —
Korea Development Bank 2011 3.52 W16,253 W9,752 W3,251
Kookmin Bank 2012 4.29 W11,860 W9,883 W5,930
Korea Development Bank 2013 4.29 W10,577 W10,577 W8,814
Small Business Corporation 2009 5.25 W31 — —
Credit Agricole Bank 2013 6M Libor + 0.29 US$ 30,000 US$ 30,000 US$ 30,000
Bank of China ” ” US$ 20,000 US$ 20,000 US$ 20,000
DBS Bank ” ” US$ 25,000 US$ 25,000 US$ 25,000
SMBC ” ” US$ 25,000 US$ 25,000 US$ 25,000
Korea Development Bank 2014 4.29 — W9,885 W9,885
Korea Development Bank 2015 4.29 — — W10,273
China Merchants Bank 2018 5.35 — — CNY 360,000
Korea Exchange Bank 2015 5.18~ 5.44 — — CNY 200,000
Industrial Bank of Korea 2010 2.78 W384 W128 W—

Total W739,740 W740,225 W538,153
US$ 100,000 US$ 100,000 US$ 100,000
— — CNY 560,000

Equivalent in Korean won W865,490 W856,985 W748,345
Less portion due within one year (9,019 ) (12,345 ) (512,377 )

Long-term portion W856,471 W844,640 W235,968

development, or capitalized into construction-in-progress.
(6) Details of plan assets as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013    December 31, 2012
Equity instruments
   ￦ 713       1,221
Debt instruments
   48,901       34,269
Short-term financial instruments, etc.
   188,679       122,855




   ￦ 238,293       158,345




Actual return on plan assets for the years ended December 31, 2013, 2012 and 2011 amounted to ￦6,472 million, ￦4,761 million and ￦3,011 million, respectively.
~~(note a)~~ (7) As of December 31, ~~2010, the91-day~~ ~~CD yield is 2.80%.~~2013, effects on defined benefit obligations if each of significant actuarial assumptions changes within potential reasonable range are as follows:

~~F-48~~
(In millions of won)
   Increase Decrease
Discount rate (if changed by 1%)
   ￦ (22,864 ) 25,216
Expected rate of salary increase
   25,305    (23,230 )
The sensitivity analysis does not consider dispersion of all cashflows that are expected from the plan and provides approximate values of sensitivity for the assumptions used.
Weighted average durations of defined benefit obligations as of December 31, 2013 and 2012 are 9.12 years and 9.04 years, respectively.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~The repayment schedule of long-term borrowings at~~
For the years ended December 31, ~~2010 is as follows (in millions of Korean won~~2013, 2012 and ~~thousands of U.S. dollars):~~

Long-Term Borrowings

Long-Term
in Foreign Currencies
Borrowings in
Foreign
Korean Won

Year Ending December 31,
Korean Won Currencies Equivalent Total

2011 W 512,377 W — W — W 512,377
2012 10,510 — — 10,510
2013 8,482 US$ 100,000
CNY59,929 124,196 132,678
2014 and thereafter 6,784 CNY 500,071 85,996 92,780

Total W 538,153 US$ 100,000
CNY560,000 W 210,192 W 748,345

2011
22. Derivative Instruments
(1) Currency swap contracts under cash flow hedge accounting as of December 31, 2013 are as follows:
~~11.~~  (In thousands of foreign currencies) ~~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, 2008, 2009 and 2010 are as follows (in millions of Korean won, except deposit per subscriber amounts):~~

Deposit per

Service Type
Subscriber 2008 2009 2010

Cellular W 200,000 W 4,796 W 5,480 W 5,220

~~Subscription deposits payable recorded as current liabilities represents payables to subscribers who have cancelled their services.~~
~~12.~~  Borrowing
date
Hedged item
Hedged risk
Contract
type
~~LEASES~~Financial
institution
Duration of
contract
Jul. 20,
2007
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)
Foreign currency
risk Currency swap Morgan Stanley and five other banks Jul. 20, 2007 ~
Jul. 20, 2027
Dec. 15,
2011
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000)
Foreign currency risk and the interest rate risk Currency interest rate swap United Overseas Bank Dec. 15, 2011 ~
Dec. 12, 2014
Dec. 15,
2011
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 250,000)
Foreign currency risk and the interest rate risk Currency interest rate swap DBS Bank and Citi Bank Dec. 15, 2011 ~
Dec. 12, 2014
Jun. 12,
2012
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000)
Foreign currency
risk Currency swap Citibank and five other banks Jun. 12, 2012 ~
Jun. 12, 2017
Nov. 1,
2012
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000)
Foreign currency
risk Currency swap Barclays and nine other banks Nov. 1, 2012~
May. 1, 2018
Jan. 17,
2013
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000)
Foreign currency
risk Currency swap BNP Paribas and three other banks Jan. 17, 2013 ~
Nov. 17, 2017
Mar. 7,
2013
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)
Foreign currency risk and the interest rate risk Currency interest rate swap DBS Bank Mar. 7, 2013 ~
Mar. 7, 2020
Oct. 29,
2013
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000)
Foreign currency
risk Currency swap Korea Development Bank and others Oct. 29, 2013 ~
Oct. 26, 2018
Dec. 16,
2013
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of USD 94,736)
Foreign currency
risk Currency swap Deutsche bank Dec. 16, 2013 ~
Apr. 29, 2022
SK Broadband Co., Ltd., a subsidiary, has leased certain equipment related to telecommunication under a finance lease agreement with Cisco Capital Korea. In addition, under certain finance lease agreements with KDB Capital Corp., and other lease companies, Broadband Media Co., Ltd., a subsidiary of the Company, has leased setup-boxes, sharers, etc. The acquisition cost of such leased setup-boxes, equipment and other totaled W~~198,226 million as of December 31, 2010. Accumulated depreciation for the leased assets as of December 31,~~

~~F-49~~
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~2010 is~~ W~~76,663 million. The Company’s minimum future lease payments as of~~
For the years ended December 31, ~~2010 are as follows (in millions of Korean won):~~

Annual Lease

Year Ending December 31,
Payments Interest Principal

2011 W 50,065 W 4,597 W 45,468
2012 30,508 2,381 28,127
2013 17,678 1,094 16,584
2014 15,761 397 15,364

Total W 114,012 W 8,469 105,543

Less portion due within one year (45,468 )

Finance lease liabilities W 60,075

~~The Company leased certain machinery~~2013, 2012 and ~~equipment under an operating lease and the Company’s related minimum future lease payments as of December 31, 2010 are as follows (In millions of Korean won):~~

Minimum

Lease

Year Ending December 31,
Payments

2011 W 6,552
2012 4,459
2013 and thereafter 1,904

Total W 12,915

~~F-50~~
2011
(2) As of December 31, 2013, fair values of the above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:
(In millions of won and thousands of foreign currencies)
   Fair value
   Cash flow hedge    Held for
trading
purpose    Total
Hedged item
   Accumulated
gain (loss) on
valuation of
derivatives Tax
effect Accumulated
foreign
currency
translation
gain (loss) Others
(*1)
Current assets:

Convertible bonds (available-for-sale securities) (Korean won denominated bonds face value of ￦1,500 million)(*2)
   ￦ —    —    —    —       10       10
Non-current assets:

Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)
   (42,772 ) (13,656 ) (34,853 ) 129,806       —       38,525
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)
   8,822    2,816    (8,451 ) —       —       3,187


Total assets
         ￦ 41,722


Current liabilities:

Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 250,000)
   5,871    1,875    (25,602 ) —       —       (17,856 )
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000)
   7    2    (3,324 ) —       —       (3,315 )
Non-current liabilities:

Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000)
   (5,275 ) (1,684 ) (6,902 ) —       —       (13,861 )
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000)
   (8,400 ) (2,682 ) (24,435 ) —       —       (35,517 )
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000)
   4,262    1,361    (53,295 ) —       —       (47,672 )
Fixed-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)
   (1,128 ) —    (1,830 ) —       —       (2,958 )
Fixed-to-fixed long-term borrowings (U.S. dollar denominated bonds face value of USD 94,736)
   (2,548 ) (813 ) 201    —       —       (3,160 )


Total liabilities
         ￦ (124,339 )


(*1) Cash flow hedge accounting has been applied to the relevant contract from May 12, 2010. Others represent gain on valuation of currency swap incurred prior to the application of hedge accounting and was recognized through profit or loss prior to the year ended December 31, 2012.
(*2) Fair value of the conversion option of convertible bonds held by SK Communications Co., Ltd., a subsidiary, amounting to ￦10 million was accounted for as derivative financial assets.
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the 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
For the years ended December 31, ~~2008, 2009~~2013, 2012 and 2010 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 Australian dollars, thousands of Canadian dollars, thousands of France francs and thousands of Thailand Baht):

Foreign Currencies Korean Won Equivalent
2008 2009 2010 2008 2009 2010

Cash and cash equivalents US$ 7,269 US$ 3,885 US$ 3,774 W 9,140 W 4,536 W 4,299
” EUR85 EUR9 EUR7 152 15 11
” JPY1,313 JPY35,930 — 18 454 —
” — — CNY150,621 — — 25,902
” — — SG$ 41 — — 37
Accounts receivable — trade US$ 35,837 US$ 36,119 US$ 63,291 45,066 42,173 72,106
” — JPY54,776 JPY59,566 — 692 831
” EUR187 EUR187 EUR203 332 313 307
” — — GBP3 — — 5
” — — AU$ 2 — — 2
” — — CA$ 1 — — 1
” CNY5,620 — CNY7,833 1,035 — 1,347
” — THB2,852 THB2,968 — 100 113
Short-term loans US$ 2,168 US$ 480 US$ 300 2,726 560 342
Accounts receivable — other US$ 2 US$ 182 US$ 14,271 3 212 16,253
” CNY7,888 CNY1,131 — 1,452 193 —
Guarantee deposits US$ 8 US$ 8 US$ 147 9 9 167
” JPY17,397 JPY17,397 JPY16,854 242 220 235

Total assets W 60,175 W 49,477 W 121,958

~~F-51~~
2011
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Foreign Currencies Korean Won Equivalent
2008 2009 2010 2008 2009 2010

Accounts payable US$ 22,295 US$ 22,675 US$ 32,812 W 28,036 W 26,476 W 37,370
” JPY1,251 JPY1,251 JPY76 17 16 1
” FRF11 FRF11 — 3 3 —
” — — CNY85,117 — — 14,638
” US$ 31,605 US$ 22,695 US$ 42,446 39,744 26,498 48,335
” JPY112,370 JPY99,742 JPY945 1,566 1,260 13
” HK$ 41 HK$ 19 HK$ 29 7 3 5
” GBP38 GBP78 GBP86 70 146 152
” SG$ 1 SG$ 1 SG$ 1 1 1 1
” EUR1,116 EUR810 EUR429 1,983 1,356 650
” — CHF19 — — 22 —

Total liabilities W 71,427 W 55,781 W 101,165

23.
~~14.~~  Share Capital and Capital Surplus (Deficit) and Other Capital Adjustments ~~CAPITAL STOCK AND CAPITAL SURPLUS~~
The Parent Company’s outstanding share capital ~~stock~~ consists entirely of common stock with a par value of W~~500.~~￦500. The number of authorized, issued and outstanding common shares asand capital surplus (deficit) and other capital adjustments As of December 31, ~~2008, 2009~~2013 and ~~2010~~2012 are as follows:

2008 2009 2010

Authorized shares 220,000,000 220,000,000 220,000,000
Issued shares 81,193,711 80,745,711 80,745,711
Outstanding shares, net of treasury stock 72,486,015 72,344,999 71,094,999
~~Significant changes in common capital and capital surplus in 2008, 2009 and 2010 are as follows (in millions of Korean won, except for share data):~~

Number of
Capital

Shares Issued Capital Stock Surplus

At December 31, 2007 81,193,711 W 44,639 W 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 a) — — 722
Equity in capital surplus changes of affiliates — — 482

At December 31, 2008 81,193,711 44,639 2,958,854
Issuance of convertible bonds (note b) — — 73,622
Gain on disposal of treasury stock (note c) (448,000 ) — (722 )
Equity in capital surplus changes of affiliates — — 193

At December 31, 2009 80,745,711 44,639 3,031,947
Equity in capital surplus changes of affiliates — — (167 )

At December 31, 2010 80,745,711 W 44,639 W 3,031,780

(In millions of won, except for share data)
   December 31, 2013 December 31, 2012
Authorized shares
   220,000,000    220,000,000
Issued shares(*1)
   80,745,711    80,745,711
Share capital

Common stock
   ￦ 44,639    44,639
Capital surplus (deficit) and other capital adjustments:

Paid-in surplus
   2,915,887    2,915,887
Treasury stock
   (2,139,683 ) (2,410,451 )
Loss on disposal of treasury stock
   (18,087 ) (18,855 )
Others(*2)
   (839,127 ) (775,464 )


   ￦ (81,010 ) (288,883 )


(*1)
~~(note a)~~ ~~On January 23, 2008, treasury stock of 208,326 shares with carrying value totaling~~ W~~49,401 million were sold to employees through a compensatory employee stock purchase plan. As a result of this transaction,~~
~~F-52~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~tax effect of accumulated temporary differences related to~~For the ~~sold treasury stocks exceeded the loss on disposal of treasury stock.~~
~~(note b)~~ ~~During the year~~years ended December 31, ~~2009, convertible bonds with principal amount of US$332,528,000 were issued~~2003, 2006 and ~~resulted in the increase in value of the conversion rights (capital surplus) of the convertible bonds (net of tax effect~~ W~~19,445 million).~~
~~(note c)~~ ~~On January 9,~~ 2009, the Parent Company retired 7,002,235 shares, 1,083,000 shares and 448,000 shares, respectively, of treasury stock ~~and~~which reduced its retained earnings before appropriation in accordance with the Korean Commercial Law. ~~The~~As a result, the Parent Company’s ~~capital surplus was changed due to~~outstanding shares have decreased without change in the ~~tax effect~~share capital.
(*2) Others primarily consist of ~~this share retirement.~~net losses on disposals of businesses and the excess of the consideration paid by the Group over the carrying values of net assets acquired from common control transactions with entities within the control of the Controlling Entity.
Changes in number of shares outstanding for the years ended December 31, 2013 and 2012 are as follows:
(In shares)    2013    2012
   Issued
shares    Treasury
stock Outstanding
shares    Issued
shares    Treasury
stock    Outstanding
shares
Beginning issued shares
   80,745,711       11,050,712    69,694,999       80,745,711       11,050,712       69,694,999
Disposal of treasury stock
   —       (1,241,337 ) 1,241,337       —       —       —










Ending issued shares
   80,745,711       9,809,375    70,936,336       80,745,711       11,050,712       69,694,999










24.
~~15.~~  Treasury Stock ~~RETAINED EARNINGS~~
~~Retained earnings~~
The Parent Company acquired treasury stock to provide stock dividends, merge with Shinsegi Telecom, Inc. and SK IMT Co, Ltd., increase shareholder value and to stabilize its stock prices when needed.
Treasury stock as of December 31, ~~2008, 2009~~2013 and ~~2010~~2012 are as ~~follows (in millions~~follows:
(In millions of won, shares)
   December 31, 2013    December 31, 2012
Number of shares
   9,809,375       11,050,712
Amount
   ￦ 2,139,683       2,410,451
In addition, the Parent Company granted 1,241,337 shares of ~~Korean won):~~

2008 2009 2010

Appropriated W 8,295,037 W 8,890,053 W 9,350,386
Unappropriated 1,153,148 1,019,700 1,253,013

W 9,448,185 W 9,909,753 W 10,603,399

treasury stock for ￦270,768 million from May 14, 2013 to October 24, 2013 as a result of exercise of exchange rights by the holders of exchangeable bonds.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
25. Hybrid Bonds
The Parent Company issued hybrid bonds at face amount on June 7, 2013 and details ~~of appropriated retained earnings~~ as of December 31, ~~2008, 2009 and 2010~~2013 are as ~~follows (in millions of Korean won):~~

2008 2009 2010

Legal reserve W 22,320 W 22,320 W 22,320
Reserve for loss on disposal of treasury stock 255,984 — —
Reserve for research and manpower development 872,595 672,595 658,928
Reserve for business expansion 6,344,138 7,045,138 7,519,138
Reserve for technology development 800,000 1,150,000 1,150,000

W 8,295,037 W 8,890,053 W 9,350,386

follows:
a.  (In millions of won)
Type
Issuance date
Maturity
Annual
interest
rate(%) ~~Legal Reserve~~Amount
Private hybrid bonds
Blank coupon unguaranteed subordinated bond June 7, 2013 June 7, 2073(*1) 4.21(*2) ￦ 400,000
Issuance costs
(1,482 )
￦ 398,518
Hybrid bonds issued by the Parent Company are classified as equity as there is no contractual obligation for delivery of financial assets to the bond holders. These are subordinated bonds which rank before common shareholders in the event of a liquidation or reorganization of the Parent Company.
(*1) The Parent Company has a right to extend the maturity under the same issuance terms without any notice or announcement. The Parent Company also has the right to defer interest payment at its sole discretion.
(*2) Annual interest rate is adjusted after five years from the issuance date.
26. Retained Earnings
(1) Retained earnings as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013    December 31, 2012
Appropriated:

Legal reserve
   ￦ 22,320       22,320
Reserve for research & manpower development
   155,766       220,000
Reserve for business expansion
   9,376,138       9,106,138
Reserve for technology development
   2,271,300       1,901,300




   11,825,524       11,249,758
Unappropriated
   1,276,971       874,899




   ￦ 13,102,495       12,124,657




(2) Legal reserve
The Korean Commercial Code requires the Parent Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding ~~capital stock.~~share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to ~~capital stock.~~
share capital.
(3)
b.   ~~Reserves~~Reserve for ~~Loss on Disposal of Treasury Stock and Research and Manpower Development~~research & manpower development
~~Reserves~~
The reserve for ~~loss on disposal of treasury stock and~~ research and manpower development ~~were~~was appropriated in order to recognize certain tax deductible benefits through the early recognition of future expenditures for tax purposes. These reserves will be reversed from appropriated and retained earnings in accordance with the relevant tax laws. Such reversal will be included in taxable income in the year of reversal.
c.   ~~Reserve for Business Expansion and Technology Development~~
~~The reserves for business expansion and technology development are voluntary and were approved by the board of directors and stockholders.~~

~~F-53~~
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~16.~~   ~~TREASURY STOCK~~
~~The Company acquired 8,707,696 shares of treasury stock in~~
For the ~~market for~~ W2,055,620 million through 2008 in order to provide stock dividends, issue new stocks, merge with Shinsegi Telecom, Inc. and SK IMT Co., Ltd., increase shareholder value, and to stabilize its stock price in the market.
~~On January 23, 2008, 208,326 shares of treasury stock with total carrying value of~~ W49,401 million were sold to employees through a compensatory employee stock purchase plan. In addition, the Company offered loans to its employees to purchase aforementioned shares through the Employees’ Stock Purchase Association (Refer to Note 6 Loans for Employees). As a result of this transaction, the Company recognized loss on disposal of treasury stock of W~~7,155 million and~~ W~~12,718 million of compensation expense for the year~~years ended December 31, ~~2008.~~
~~On January 9, 2009, in accordance with~~2013, 2012 and 2011
27. Reserves
(1) Details of reserves, net of taxes, as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013 December 31, 2012
Unrealized fair value of available-for-sale financial assets
   ￦ 208,529    207,063
Other comprehensive loss of investments in associates
   (172,117 ) (175,044 )
Unrealized fair value of derivatives
   (35,429 ) (46,652 )
Foreign currency translation differences for foreign operations
   (13,253 ) (11,003 )


   ￦ (12,270 ) (25,636 )


(2) Changes in reserves for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)    2013
   Unrealized fair
value of
available-for-
sale financial
assets Other compre-
hensive income
of investments in
associates Unrealized
fair value of
derivatives Foreign currency
translation
differences for
foreign
operations Total
Balance at January 1, 2013
   ￦ 207,063    (175,044 ) (46,652 ) (11,003 ) (25,636 )
Changes
   2,747    1,254    14,488    (2,250 ) 16,239
Tax effect
   (1,281 ) 1,673    (3,265 ) —    (2,873 )


Balance at December 31, 2013
   ￦ 208,529    (172,117 ) (35,429 ) (13,253 ) (12,270 )


(In millions of won)    2012
   Unrealized fair
value of
available-for-
sale financial
assets Other compre-
hensive income
of investments in
associates Unrealized
fair value of
derivatives Foreign currency
translation
differences for
foreign
operations Total
Balance at January 1, 2012
   ￦ 354,951    (93,599 ) (25,100 ) 23,812    260,064
Changes
   (194,929 ) (75,448 ) (26,114 ) (34,815 ) (331,306 )
Tax effect
   47,041    (5,997 ) 4,562    —    45,606


Balance at December 31, 2012
   ￦ 207,063    (175,044 ) (46,652 ) (11,003 ) (25,636 )


(3) Details of changes in unrealized fair value of available-for-sale financial assets for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)    2013
   Before taxes Income tax effect After taxes
Balance at January 1, 2013
   ￦ 272,917    (65,854 ) 207,063
Amount recognized as other comprehensive income during the year
   3,879    (1,529 ) 2,350
Amount reclassified through profit or loss
   (1,133 ) 249    (884 )


Balance at December 31, 2013
   ￦ 275,663    (67,134 ) 208,529


(In millions of won)    2012
   Before taxes Income tax effect After taxes
Balance at January 1, 2012
   ￦ 467,846    (112,895 ) 354,951
Amount recognized as other comprehensive income during the year
   (43,135 ) 10,249    (32,886 )
Amount reclassified through profit or loss
   (151,794 ) 36,792    (115,002 )


Balance at December 31, 2012
   ￦ 272,917    (65,854 ) 207,063


SK TELECOM CO., LTD. and Subsidiaries
Notes to the ~~resolution of Board of Directors on October 23, 2008,~~Consolidated Financial Statements — (Continued)
For the ~~Company additionally acquired 141,012 shares of treasury stock for~~ W~~28,938 million and concurrently retired 448,000 treasury shares which was accumulated to date, with the Company’s retained earnings, for~~ W~~92,477 million. As a result of these transactions, retained earnings decreased by~~ W~~92,476 million.~~
~~On December 15, 2009, the Company acquired 4 shares of treasury stock for~~ W~~7 million through the acquisition request of odd lot stock, resulting from the merger with Shinsegi Telecom, Inc.~~
~~In addition, from July 26, 2010 through October 20, 2010, the Company acquired 1,250,000 shares of treasury stock for~~ W~~210,356 million in accordance with a resolution of the Board of Directors on July 22, 2010.~~
~~As a result, treasury stocks amount to as of~~years ended December 31, ~~2010, 2009~~2013, 2012 and ~~2008 are 9,650,712 shares, 8,400,712 shares~~2011
(4) Details of changes in unrealized valuation of derivatives for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)    2013
   Before taxes Income tax effect After taxes
Balance at January 1, 2013
   ￦ (62,698 ) 16,046    (46,652 )
Amount recognized as other comprehensive income during the year
   11,833    (3,001 ) 8,832
Amount reclassified through profit or loss
   2,654    (263 ) 2,391


Balance at December 31, 2013
   ￦ (48,211 ) 12,782    (35,429 )


(In millions of won)    2012
   Before taxes Income tax effect    After taxes
Balance at January 1, 2012
   ￦ (36,583 ) 11,483       (25,100 )
Amount recognized as other comprehensive income during the year
   (29,883 ) 4,327       (25,556 )
Amount reclassified through profit or loss
   3,768    236       4,004




Balance at December 31, 2012
   ￦ (62,698 ) 16,046       (46,652 )




28. Other Operating Income and Expenses
Details of other operating income and ~~8,707,696 shares with acquisition costs of~~ W~~2,202,439 million,~~ W~~1,992,083 million and~~ W~~2,055,620, respectively.~~
~~17.~~   ~~INCOME TAXES~~
~~Income tax~~ expenses ~~for continuing operation~~ for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 consist of the following (in millions of Korean won):~~

2008 2009 2010

Currently W 494,163 W 610,561 W 525,488
Changes in net deferred tax liabilities (194,864 ) (254,891 ) (121,182 )

Income tax expenses W 299,299 W 355,670 W 404,306

~~F-54~~
2011 are as follows:
(In millions of won)
   2013    2012    2011
Other Operating Income:

Reversal of allowance for doubtful accounts
   ￦ 359       5,902       2,301
Gain on disposal of property and equipment and intangible assets
   7,991       162,590       6,260
Others(*1)
   66,604       33,352       41,070






   ￦ 74,954       201,844       49,631






Other Operating Expenses:

Communication expenses
   ￦ 62,193       69,585       64,131
Utilities
   227,593       197,559       168,201
Taxes and dues(*2)
   29,873       91,745       47,394
Repair
   252,344       223,247       250,801
Research and development
   352,385       304,557       271,382
Training
   40,446       39,407       38,033
Bad debt for accounts receivables — trade
   53,344       52,393       81,526
Travel
   31,762       31,380       32,742
Supplies and other
   189,224       143,882       106,733
Loss on disposal of property and equipment and intangible assets
   267,468       15,117       20,659
Loss on disposal of investment assets
   6,137       1,307       434
Impairment loss on property and equipment and intangible assets
   13,770       37,007       1,237
Donations
   82,057       81,330       104,516
Bad debt for accounts receivable — other
   22,155       30,107       12,785
Other(*)
   115,532       23,402       25,838






   ￦ 1,746,283       1,342,025       1,226,412






SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~The difference between income taxes computed using the statutory corporate income tax rates and the recorded income taxes for~~
For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 is attributable to the following (in millions of Korean won):~~

2008 2009 2010

Income taxes at statutory income tax rate of 25% in 2008 and 22% in 2009 and 2010(*) W 315,091 W 308,109 W 397,868
Resident surtax payable 31,509 30,811 39,787
Tax credit for investments, technology and human resource development (98,551 ) (98,242 ) (37,074 )
Special surtax for agriculture and fishery industries fund designated by government 17,528 16,521 6,720
Additional income tax (tax refund) for prior periods (53,913 ) 10,947 (7,508 )
Tax effect from statutory tax rate change (28,656 ) (3,353 ) (2,807 )
Goodwill amortization not deductible for tax purpose 35,382 31,136 31,136
Undistributed earnings (unrecognized deficit) of subsidiaries 3,196 (14,821 ) (315 )
Permanent differences 40,484 3,586 1,246
Increase (decrease) in valuation allowance 37,229 70,976 (24,747 )

Recorded income taxes W 299,299 W 355,670 W 404,306

Effective tax rate 23.43 % 25.30 % 24.16 %

2011
(*1) Others for the year ended December 31, 2013, 2012 and 2011, primarily consist of ￦10.3 billion, ￦5.6 billion and ￦3.3 billion of VAT refund, respectively.
(*) 2) ~~Tax rate represents statutory tax rate~~Penalties were included in ~~Korea. However, for certain foreign subsidiaries different tax rates are applied,~~taxes and dues until the year ended December 31, 2012 while penalties were included in ~~accordance with~~other starting from the ~~respective tax jurisdictions.~~year ended December 31, 2013.
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, 2008, 2009 and 2010 are as follows (in millions of Korean won):

2008 2009 2010

Current:
Allowance for doubtful accounts W 33,073 W 56,573 W 41,748
Accrued interest income (2,902 ) (1,662 ) (846 )
Accrued interest expense 21,856 35,179 40,260
Provision for handset subsidy — 128,785 160,625
Net operating loss carryforwards 7,606 — 117
Tax credit carryforwards 570 225 3
Other (32,417 ) (13,809 ) (42,117 )

Net deferred tax assets — current 27,786 205,291 199,790

Non-Current:
Depreciation (9,491 ) 6,112 29,575
Loss on impairment of investment securities 99,149 59,450 48,379
Equity in losses (gains) of affiliates, net (3,458 ) 2,468 10,197
Unrecognized deficit (undistributed earnings) of subsidiaries (59,826 ) 111,807 121,529
Tax free reserve for research and manpower development (80,707 ) (132,244 ) (80,761 )
Loss on valuation of foreign currency swap (36,332 ) (49,178 ) (36,647 )

~~F-55~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

2008 2009 2010

Loss on valuation of interest swap 7,370 3,392 —
Loss on valuation of foreign currency swap (accumulated other comprehensive income) (1,490 ) (5,365 ) 16,831
Gain on conversion of convertible bond (82,091 ) — —
Consideration for conversion right (11,325 ) (21,046 ) (14,188 )
Equity in other comprehensive income of affiliates, net 22,960 13,799 22,260
Unrealized loss (gain) on valuation of long-term investment securities (accumulated other comprehensive income) (123,636 ) (309,882 ) (186,213 )
Goodwill relevant to leased line — 189,372 140,809
Loss (gain) on foreign currency translation (34,773 ) (48,475 ) 21,831
Net operating loss carryforwards 137,348 176,532 217,769
Tax credit carryforwards 39,345 14,417 2,043
Other 86,061 52,945 (20,358 )

Total deferred tax assets (liabilities) (50,896 ) 64,104 293,056
Valuation allowance for:
Depreciation (11,686 ) (8,558 ) (9,006 )
Net operating loss carryforwards (137,348 ) (176,449 ) (215,399 )
Equity in losses of affiliates and unrecognized deficit of subsidiaries (87,314 ) (111,449 ) (83,458 )
Gain on foreign currency translation (34,773 ) (48,475 ) (21,831 )
Loss on impairment of investment securities (18,387 ) (18,033 ) (17,850 )
Other (63,403 ) (13,949 ) (33,133 )

Net deferred tax liabilities — non-current W (403,807 ) W (312,809 ) W (87,621 )

The expirations of the net operating loss carryforwards and tax credit carryforwards of the Company’s certain subsidiaries which are expected to be utilized are as follows (in millions of Korean won):

Net Operating Loss
Tax Credit

Year Ending December 31,
Carryforwards Carryforwards

2011 W 84,262 W 3
2012 175,075 —
2013 and thereafter 810,983 356

Total W 1,070,320 W 359

~~F-56~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Deferred tax assets (liabilities) added to (deducted from) capital surplus or accumulated other comprehensive income as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010

Consideration for conversion right W 1,545 W (19,445 ) W —
Gain on disposal of treasury stock 7,971 (1,533 ) —
Other capital adjustment — 190,245 50
Equity in capital adjustments of affiliates 4,677 (3,028 ) 4,788
Stock option 99 — —
Unrealized gain on valuation of long-term investment securities, net 491,375 (159,942 ) 55,435
Equity in other comprehensive income of affiliates, net (11,722 ) 11,028 (923 )
Loss (gain) on valuation of foreign currency swap (2,636 ) (4,244 ) 18,972
Loss (gain) on valuation of interest rate swap 8,241 (4,286 ) (1,257 )
Foreign-based operations’ translation adjustment 226 — 708
Other capital surplus — — 163

Total W 499,776 W 8,795 W 77,936

29.
~~18.~~  Finance Income and Costs ~~COMPREHENSIVE INCOME~~
~~Details of comprehensive income for the years ended December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010
Profit and
Profit and
Profit and

Loss Effect Tax Effect Loss Effect Tax Effect Loss Effect Tax Effect

Net income W 972,338 W 1,055,606 W 1,297,176
Other comprehensive income (loss):
Unrealized gain on valuation of long-term investment securities, net (1,216,771 ) W 491,376 590,746 W (159,942 ) (204,611 ) W 55,435
Equity in other comprehensive income of affiliates, net (70,490 ) (11,722 ) (20,017 ) 11,028 4,597 (923 )
Foreign-based operations translation adjustment 60,262 226 (41,753 ) — (6,246 ) 708
Gain (loss) on valuation of currency swap, net 20,360 (2,636 ) 14,941 (4,244 ) (74,628 ) 18,972
Gain (loss) on valuation of interest rate swap, net (28,427 ) 8,241 15,197 (4,286 ) 5,213 (1,257 )

Sub-total (1,235,066 ) W 485,485 559,114 W (157,444 ) (275,675 ) W 72,935

Comprehensive income W (262,728 ) W 1,614,720 W 1,021,501

Attributable to:
Controlling interests W (19,347 ) W 1,806,296 W 1,103,938
Non-controlling interests (243,381 ) (191,576 ) (82,437 )

W (262,728 ) W 1,614,720 W 1,021,501

~~F-57~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
(1)
~~19.~~   ~~NET INCOME PER SHARE~~
Net income from continuing operation per share and net income per share for the years ended December 31, 2008, 2009 and 2010 are computed as follows (in millions of Korean won, except for share data):
~~Net income from continuing operation per share~~

2008 2009 2010

Net income from continuing operation attributable to the controlling interests W 1,204,562 W 1,242,387 W 1,373,926
Weighted average number of common shares outstanding 72,765,557 72,346,763 71,942,387

Net income per share (in Korean won) W 16,554 W 17,173 W 19,098

~~Net income from continuing operation attributable to the controlling interests for the years ended December 31, 2008, 2009 and 2010 are computed as follows (in millions of Korean won):~~

2008 2009 2010

Net income attributable to the controlling interests W 1,215,719 W 1,247,182 W 1,379,613
The controlling interests’ portion of net loss (income) from discontinued operation attributable to the controlling interests (11,157 ) (4,795 ) (5,687 )

Net income from continuing operation attributable to the controlling interests W 1,204,562 W 1,242,387 W 1,373,926

~~Net income per share~~

2008 2009 2010

Net income attributable to the controlling interests W 1,215,719 W 1,247,182 W 1,379,613
Weighted average number of common shares outstanding 72,765,557 72,346,763 71,942,387

Net income per share W 16,707 W 17,239 W 19,177

~~F-58~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~The weighted average number of common shares outstanding for 2008, 2009 and 2010 is calculated as follows:~~

Weighted
Weighted
Number of
Number of
Number
Date Shares Days of Shares

For 2008:
Number of shares 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 a) (306,988 ) 18/365 (14,924 )
Disposal of treasury stock 208,326 344/366 195,804

Number of shares at December 31, 2008 (note b) 72,486,015 72,765,557

For 2009:
Number of shares at January 1, 2009 81,193,711 365/365 81,193,711
Treasury stock, at the beginning of the year (8,707,696 ) 365/365 (8,707,696 )
Acquisition of treasury stock (note a) (141,016 ) 360/365 (139,252 )

Number of shares at December 31, 2009 72,344,999 72,346,763

For 2010:
Number of shares at January 1, 2010 80,745,711 365/365 80,745,711
Treasury stock, at the beginning of the year (8,400,712 ) 365/365 (8,400,712 )
Acquisition of treasury stock (note a) (1,250,000 ) 118/365 (402,612 )

Number of shares at December 31, 2010 71,094,999 71,942,387

~~(note a)~~ ~~The Company acquired treasury stocks on various dates~~Details of finance income and costs for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010, and~~2011 are as follows:
(In millions of won)
   2013    2012    2011
Finance Income:

Interest income
   ￦ 65,560       97,318       166,065
Dividend income
   10,197       27,732       26,433
Gain on foreign currency transactions
   11,041       6,735       11,134
Gain on foreign currency translation
   4,401       4,065       1,985
Gain on disposal of long-term investment securities
   9,300       282,605       164,424
Gain on valuation of derivatives
   —       —       3,785
Gain on settlement of derivatives
   7,716       26,103       —
Gain on valuation of financial asset at fair value through profit or loss
   5,177       —       2,617
Gain on valuation of financial liability at fair value through profit or loss
   —       —       63,769






   ￦ 113,392       444,558       440,212






Finance Costs:

Interest expense
   ￦ 331,834       412,379       297,172
Loss on foreign currency transactions
   16,430       7,204       10,377
Loss on foreign currency translation
   2,634       4,608       6,409
Loss on disposal of long-term investment securities
   31,909       10,802       447
Loss on valuation of derivatives
   2,106       286       943
Loss on settlement of derivatives
   —       1,232       15,577
Loss on valuation of financial asset at fair value through profit or loss
   —       1,262       —
Loss relating to financial liability at fair value through profit or loss(*1)
   134,232       7,793       —
Loss on redemption of debentures
   —       2,099       —
Other finance costs(*2)
   52,058       190,620       12,846






   ￦ 571,203       638,285       343,771






(*1) Loss relating to financial liabilities at fair value through profit or loss for the ~~weighted number of shares is calculated at each transaction date respectively.~~
~~(note b)~~ ~~Amount excludes ex dividends shares of 38,188 shares acquired by the Company prior to year-end, which resulted in total number of shares of 72,524,203 shares as of~~year ended December 31, ~~2008.~~2013 related to exchangeable bonds (face amount of USD 326,397,463) due to the valuation loss from rising stock prices and loss on redemption of debenture upon the exchange claims.
~~Diluted net income from continuing operation per share~~
(*2) Refer to note 29(5).
(2) Details of interest income included in finance income for the years ended December 31, 2013, 2012 and 2011 are as follows:
(In millions of won)
   2013    2012    2011
Interest income on cash equivalents and deposits
   ￦ 41,907       57,029       61,577
Interest income on installment receivables and others
   23,653       40,289       104,488






   ￦ 65,560       97,318       166,065






SK TELECOM CO., LTD. and ~~diluted net income per share amounts for~~Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 are computed as follows (in millions of Korean won, except for share data):~~
2011
(3) Details of interest expense included in finance costs for the years ended December 31, 2013, 2012 and 2011 are as follows:
(In millions of won)
   2013    2012    2011
Interest expense on bank overdrafts and borrowings
   ￦ 28,600       147,741       60,271
Interest expense on debentures
   258,962       209,545       208,403
Interest on finance lease liabilities
   1,333       2,621       4,422
Others
   42,939       52,472       24,076






   ￦ 331,834       412,379       297,172






(4) Finance income and costs by categories of financial instruments for the years ended December 31, 2013, 2012 and 2011 are as follows. Bad debt expenses (reversal of allowance for doubtful accounts) for accounts receivable – trade, loans and receivables are excluded and are explained in note 7.
~~Diluted net~~(i)     Finance income ~~from continuing operation per share~~

2008 2009 2010

Adjusted net income from continuing operation attributable to the controlling interests W 1,215,712 W 1,262,871 W 1,392,677
Adjusted weighted average number of common shares outstanding 74,090,301 74,367,734 74,033,383

Net income per share W 16,409 W 16,981 W 18,811

~~F-59~~
(In millions of won)
   2013    2012    2011
Financial Assets:

Financial assets at fair value through profit or loss
   ￦ 5,177       —       3,013
Available-for-sale financial assets
   23,311       317,915       198,517
Loans and receivables
   62,211       90,177       171,415
Derivative financial instruments designated as hedged item
   7,716       26,103       —






   98,415       434,195       372,945






Financial Liabilities:

Financial liabilities at fair value through profit or loss
   —       —       67,158
Financial liabilities measured at amortized cost
   14,977       10,363       109






   14,977       10,363       67,267






   ￦ 113,392       444,558       440,212






(ii)     Finance costs
(In millions of won)
   2013    2012    2011
Financial Assets:

Financial assets at fair value through profit or loss
   ￦ 276       1,262       943
Available-for-sale financial assets
   83,967       201,423       13,293
Loans and receivables
   16,479       1,789       12,598
Derivative financial instruments designated as hedged item
   1,830       1,516       8,088






   102,552       205,990       34,922






Financial Liabilities:

Financial liabilities at fair value through profit or loss
   134,232       7,793       2,353
Financial liabilities measured at amortized cost
   334,419       424,502       301,360
Derivative financial instruments designated as hedged item
   —       —       5,136






   468,651       432,295       308,849






   ￦ 571,203       638,285       343,771






SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)

~~Diluted net income per share~~

2008 2009 2010

Adjusted net income attributable to the controlling interest W 1,226,869 W 1,267,666 W 1,398,364
Adjusted weighted average number of common shares outstanding 74,090,301 74,367,734 74,033,383

Diluted net income per share W 16,559 W 17,046 W 18,888

~~The numerator and denominator of basic and diluted income per share for~~For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011
(iii)    Other comprehensive income
(In millions of won)
   2013 2012 2011
Financial Assets:

Available-for-sale financial assets
   ￦ 2,009    (149,082 ) (433,546 )
Derivative financial instruments designated as hedged item
   12,240    (23,527 ) 20,890


   14,249    (172,609 ) (412,656 )


Financial Liabilities:

Derivative financial instruments designated as hedged item
   (1,018 ) 166    8,346


   (1,018 ) 166    8,346


   ￦ 13,231    (172,443 ) (404,310 )


(5) Details of impairment losses for financial assets for the years ended December 31, 2013, 2012 and 2011 are as follows.
(In millions of won)
   2013    2012    2011
Available-for-sale financial assets (*)
   ￦ 52,058       190,620       12,846
Bad debt for accounts receivable — trade
   53,344       52,393       81,526
Bad debt for accounts receivable — other
   22,155       30,107       12,785






   ￦ 127,557       273,120       107,157






(*) This is included in other finance costs (note 29(1)).
30. Income Tax Expense for Continuing Operations
(1) Income tax expenses for continuing operations for the years ended December 31, 2013, 2012 and 2011 consist of the following:
(In millions of won)
   2013 2012 2011
Current tax expense

Current tax payable
   ￦ 145,457    200,836    523,214
Adjustments recognized in the period for current tax of prior periods
   (16,696 ) (69,634 ) 90,389


   128,761    131,202    613,603


Deferred tax expense

Changes in net deferred tax assets
   266,601    103,480    (120,718 )
Tax directly charged to equity
   (3,584 ) 50,053    108,563
Changes in scope of consolidation
   8,919    (3,611 ) 330
Others (exchange rate differences, etc.)
   100    7,083    159


   272,036    157,005    (11,666 )


Income tax for continuing operation
   ￦ 400,797    288,207    601,937


SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(2) The difference between income taxes computed using the statutory corporate income tax rates and the actual income tax expense from continuing operations for the years ended December 31, 2013, 2012 and 2011 is attributable to the following:
(In millions of won)
   2013 2012 2011
Income taxes at statutory income tax rate
   ￦ 441,697    367,661    531,069
Non-taxable income
   (35,632 ) (5,039 ) (10,230 )
Non-deductible expenses
   74,311    19,410    7,994
Tax credit and tax reduction
   (37,893 ) (72,947 ) (42,572 )
Changes in unrealizable deferred taxes
   (13,285 ) 5,723    33,170
Additional income tax (refund) for prior periods
   (23,162 ) (32,071 ) 90,389
Deferred tax effect from statutory tax rate change for future periods
   (5,239 ) 5,470    (7,883 )


Income tax for continuing operation
   ￦ 400,797    288,207    601,937


For the year ended December 31, 2011, additional income tax for prior periods is recognized 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 2008
Basic net income per share W 1,215,719 72,765,557 W 16,707

Effect of convertible bonds (note a) 11,150 1,324,744

Diluted net income per share W 1,226,869 74,090,301 W 16,559

For 2009
Basic net income per share W 1,247,182 72,346,763 W 17,239

Effect of convertible bonds (note a) 20,484 2,020,971

Diluted net income per share W 1,267,666 74,367,734 W 17,046

For 2010
Basic net income per share W 1,379,613 71,942,387 W 19,177

Effect of convertible bonds (note a) 18,751 2,090,996

Diluted net income per share W 1,398,364 74,033,383 W 18,888

a result of the resolution of various tax matters during the finalization of Tax Authorities audits of the Parent Company’s tax returns from 2005 to 2009.
(3) Deferred taxes directly charged to (credited to) equity for the years ended December 31, 2013, 2012 and 2011 are as follows:
(In millions of won)
   2013 2012 2011
Net change in fair value of available-for-sale financial assets
   ￦ (1,281 ) 47,041    116,918
Share of other comprehensive income of associates
   1,673    (5,997 ) (1,280 )
Gain or loss on valuation of derivatives
   (3,265 ) 4,562    (9,103 )
Remeasurement of defined benefit obligations
   (466 ) 4,447    6,276
Loss on disposal of treasury stock
   (245 ) —    (2,980 )
Others
   —    —    (1,268 )


   ￦ (3,584 ) 50,053    108,563


SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(4) Details of changes in deferred tax assets (liabilities) for the years ended December 31, 2013 and 2012 are as follows:
(In millions of won)    2013
   Beginning Changes in
scope of
consolidation Deferred tax
expense
(income) Directly added
to (deducted
from) equity Other    Ending
Deferred tax assets (liabilities) related to temporary differences

Allowance for doubtful accounts
   ￦ 51,972    (2,323 ) 6,773    —    5       56,427
Accrued interest income
   (1,782 ) (756 ) (293 ) —    —       (2,831 )
Available-for-sale financial assets
   13,419    (45 ) (12,682 ) (1,281 ) —       (589 )
Investments in subsidiaries and associates
   66,969    51    (113,541 ) 1,673    4       (44,844 )
Property and equipment (depreciation)
   (272,940 ) 4,940    (65,633 ) —    —       (333,633 )
Provisions
   86,567    206    (72,470 ) —    —       14,303
Retirement benefit obligation
   16,849    151    (445 ) (466 ) —       16,089
Gain or loss on valuation of derivatives
   15,894    —    150    (3,265 ) —       12,779
Gain or loss on foreign currency translation
   19,652    —    (80 ) —    —       19,572
Tax free reserve for research and manpower development
   (31,093 ) —    (8,918 ) —    —       (40,011 )
Goodwill relevant to leased line
   68,675    —    (37,650 ) —    —       31,025
Unearned revenue (activation fees)
   97,110    —    (43,698 ) —    —       53,412
Others
   (23,804 ) (11,654 ) 80,350    (245 ) 91       44,738




   107,488    (9,430 ) (268,137 ) (3,584 ) 100       (173,563 )




Deferred tax assets related to unused tax loss carryforwards and unused tax credit carryforwards

Tax loss carryforwards
   16,609    18,350    (3,899 ) —    —       31,060
Tax credit carryforwards
   1    (1 ) —    —    —       —




   16,610    18,349    (3,899 ) —    —       31,060




   ￦ 124,098    8,919    (272,036 ) (3,584 ) 100       (142,503 )




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(In millions of won)    2012
   Beginning Changes in
scope of
consolidation Deferred tax
expense
(income) Directly added
to (deducted
from) equity Other Ending
Deferred tax assets (liabilities) related to temporary differences

Allowance for doubtful accounts
   ￦ 41,451    (126 ) 10,657    —    (10 ) 51,972
Accrued interest income
   (1,400 ) 29    (411 ) —    —    (1,782 )
Available-for-sale financial assets
   (79,778 ) (154 ) 46,310    47,041    —    13,419
Investments in subsidiaries and associates
   33,439    —    39,549    (5,997 ) (22 ) 66,969
Property and equipment (depreciation)
   (210,720 ) —    (62,220 ) —    —    (272,940 )
Provisions
   185,266    (31 ) (98,667 ) —    (1 ) 86,567
Retirement benefit obligation
   19,245    (801 ) (6,042 ) 4,447    —    16,849
Gain or loss on valuation of derivatives
   11,216    —    116    4,562    —    15,894
Gain or loss on foreign currency translation
   9,210    6    10,436    —    —    19,652
Tax free reserve for research and manpower development
   (53,460 ) 220    22,147    —    —    (31,093 )
Goodwill relevant to leased line
   116,287    —    (47,612 ) —    —    68,675
Unearned revenue (activation fees)
   116,512    —    (19,402 ) —    —    97,110
Others
   35,117    (1,981 ) (64,056 ) —    7,116    (23,804 )


   222,385    (2,838 ) (169,195 ) 50,053    7,083    107,488


Deferred tax assets related to unused tax loss carryforwards and unused tax credit carryforwards

Tax loss carryforwards
   4,419    —    12,190    —    —    16,609
Tax credit carryforwards
   774    (773 ) —    —    —    1


   5,193    (773 ) 12,190    —    —    16,610


   ￦ 227,578    (3,611 ) (157,005 ) 50,053    7,083    124,098


(5) Details of temporary differences, unused tax losses and unused tax credits which are not recognized as deferred tax assets (liabilities), as management does not believe it is probable that the deferred tax assets will be realizable in the future, in the consolidated statements of financial position as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013    December 31, 2012
Allowance for doubtful accounts
   ￦ 152,341       145,053
Investments in subsidiaries and associates
   719,974       869,486
Other temporary differences
   221,264       157,664
Unused tax loss carryforwards
   669,890       792,796
Unused tax credit carryforwards
   —       141




   ￦ 1,763,469       1,965,140




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(6) The expirations of the tax loss carryforwards which are not recognized as deferred tax assets as of December 31, 2013 are as follows:
(~~note a)~~In millions of won)
Tax loss carryforwards
Less than 1 year
￦ 2,746
1 ~ 2 years
1,087
2 ~ 3 years
4,894
More than 3 years
661,163
~~The effect~~
￦ 669,890
31. Earnings per Share
(1)     Basic earnings per share
1) Basic earnings per share for the years ended December 31, 2013, 2012 and 2011 are calculated as follows:
(In millions of won, shares)
   2013 2012    2011
Basic earnings per share attributable to owners of the Parent Company from continuing operation:

Profit attributable to owners of the Parent Company from continuing operations
   ￦ 1,463,097    1,255,526       1,647,527
Interest on hybrid bonds
   (8,420 ) —       —




Profit attributable to owners of the Parent Company from continuing operations on common shares
   1,454,677    1,255,526       1,647,527
Weighted average number of common shares outstanding
   70,247,592    69,694,999       70,591,937




Basic earnings per share from continuing operations (In won)
   ￦ 20,708    18,015       23,339




Basic earnings per share attributable to owners of the Parent Company:

Profit attributable to owners of the Parent Company
   ￦ 1,638,964    1,151,705       1,612,889
Interest on hybrid bond
   (8,420 ) —       —




Profit attributable to owners of the Parent Company on common shares
   1,630,544    1,151,705       1,612,889
Weighted average number of common shares outstanding
   70,247,592    69,694,999       70,591,937




Basic earnings per share (In won)
   ￦ 23,211    16,525       22,848




2) Profit attributable to owners of ~~convertible bonds is an increase in net income related to interest expenses that would not be incurred,~~the Parent Company from continuing operation for the years ended December 31, 2013, 2012 and ~~increase in~~2011 are calculated as follows:
(In millions of won)
   2013 2012    2011
Profit attributable to owners of the Parent Company
   ￦ 1,638,964    1,151,705       1,612,889
Results of discontinued operation attributable to owners of the Parent Company
   (175,867 ) 103,821       34,638




Profit attributable to owners of the Parent Company from continuing operation
   ￦ 1,463,097    1,255,526       1,647,527




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
3) The weighted average number of common shares outstanding ~~related to~~for the years ended December 31, 2013, 2012 and 2011 are calculated as follows:
(In shares)
   2013 2012 2011
Outstanding common shares
   80,745,711    80,745,711    80,745,711
Weighted number of treasury stocks
   (10,498,119 ) (11,050,712 ) (10,153,774 )


Weighted average number of common shares outstanding
   70,247,592    69,694,999    70,591,937


(2)     Diluted earnings per share
1) Diluted earnings per share for the years ended December 31, 2013, 2012 and 2011 are calculated as follows:
(In millions of won, shares)
   2013    2012    2011
Diluted earnings per share from continuing operations:

Profit attributable to owners of the Parent Company from continuing operations on common shares
   ￦ 1,454,677       1,255,526       1,647,527
Gain relating to exchangeable bonds(*)
   —       10,799       4,620
Diluted profit attributable to owners of the Parent Company from continuing operations on common shares
   1,454,677       1,266,325       1,652,147
Weighted average number of common shares outstanding
   70,247,592       72,021,148       72,784,039






Diluted earnings per share from continuing operations (In won)
   ￦ 20,708       17,583       22,699






Diluted earnings per share:

Diluted profit attributable to owners of the Parent Company
   ￦ 1,630,544       1,151,705       1,612,889
Gain relating to exchangeable bonds(*)
   —       10,799       4,620
Diluted profit attributable to owners of the Parent Company on common shares
   1,630,544       1,162,504       1,617,509
Weighted average number of common shares outstanding
   70,247,592       72,021,148       72,784,039






Diluted earnings per share (In won)
   ￦ 23,211       16,141       22,223






(*) The number of common shares ~~that would be issued, assuming that the conversion of convertible bonds were made at the beginning~~outstanding in respect of the ~~period.~~
~~Net incomes from discontinued operation~~exchangeable common shares of exchangeable bonds is excluded from the diluted earnings per share calculation for the year ended December 31, 2013 as the effect of exchangeable bond would have been anti-dilutive (the weighted average number of diluted shares of 688,744); thus, diluted earnings per share for the year ended December 31, 2013 is the same as basic earnings per share.
2) Adjusted weighted average number of common shares outstanding for the years ended December 31, 2013, 2012 and 2011 are calculated as follows:
(In shares)
   2013    2012    2011
Weighted average number of common shares outstanding
   70,247,592       69,694,999       70,591,937
Effect of exchangeable bonds(*)
   —       2,326,149       2,192,102






Adjusted weighted average number of common shares outstanding
   70,247,592       72,021,148       72,784,039






(*) Effect of exchangeable bonds represents weighted average number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds, which could be exchanged to treasury stock.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010 are~~ W~~153,~~ W~~66 and~~ W~~79, respectively~~

~~F-60~~
2011
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
(3)
~~20.~~   ~~DIVIDEND DISCLOSURE~~Basic earnings (loss) per share from discontinued operation
(In millions of won, shares)
   2013    2012 2011
Results of discontinued operation attributable to owners of the Parent Company
   ￦ 175,867       (103,821 ) (34,638 )
Weighted average number of common shares outstanding
   70,247,592       69,694,999    70,591,937




Basic earnings (loss) per share (In won)
   ￦ 2,503       (1,490 ) (491 )




Diluted earnings (loss) per share from discontinued operation is the same as basic loss per share from discontinued operation.
32. Dividends
(1)    Details of dividends ~~which were~~declared
Details of dividend declared for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011 are as ~~follows (in millions of Korean won, except for face value and share data):~~

Fiscal
Number of Shares
Dividend

Year

Dividend Type
Outstanding Face Value Ratio Dividends

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

2009 Cash dividends (interim) 72,345,003 W 500 200 % W 72,345
Cash dividends (year-end) 72,344,999 W 500 1,680 % 607,698

Total W 680,043

2010 Cash dividends (interim) 72,344,999 W 500 200 % W 72,345
Cash dividends (year-end) 71,094,999 W 500 1,680 % 597,198

Total W 669,543

follows:
(In millions of won, except for face value and share data)
  Year

Dividend type
   Number of
shares
outstanding    Face value
(In won)    Dividend
ratio Dividends
2013    Cash dividends (Interim)    70,508,482       500       200 % ￦ 70,508
   Cash dividends (Year-end)    70,936,336       500       1,680 % 595,865


            ￦ 666,373


2012    Cash dividends (Interim)    69,694,999       500       200 % ￦ 69,695
   Cash dividends (Year-end)    69,694,999       500       1,680 % 585,438


            ￦ 655,133


2011    Cash dividends (Interim)    71,094,999       500       200 % ￦ 71,095
   Cash dividends (Year-end)    69,694,999       500       1,680 % 585,438


            ￦ 656,533


(2)    Dividends payout ratio
Dividends payout ratios for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011 are as ~~follows (in millions of Korean won and %):~~

2008 2009 2010

Dividends W 681,996 W 680,043 W 669,543
Net income attributable to the controlling interest W 1,215,719 W 1,247,182 W 1,379,613

Dividends payout ratio 56.10 % 54.53 % 48.53 %

follows:
(In millions of won)
Year
   Dividends
calculated    Profit    Dividends payout ratio
2013
   ￦ 666,373       1,638,964       40.66 %
2012
   ￦ 655,133       1,151,705       56.88 %
2011
   ￦ 656,533       1,612,889       40.71 %
(3)    Dividends yield ratio
Dividends yield ratios for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011 are as ~~follows (in Korean won and %):~~

2008 2009 2010

Dividend per share W 9,400 W 9,400 W 9,400
Stock price at the year-end W 209,000 W 169,500 W 173,500

Dividends yield ratio 4.49 % 5.55 % 5.42 %

~~21.~~   ~~RESTRICTED DEPOSITS~~
~~a. At December 31, 2010, the Company has guarantee deposits restricted for their checking accounts totaling~~ W~~52 million and deposits restricted for charitable trust for the benefit of the public amounting to~~ W~~56,500 million.~~
~~b. At December 31, 2010, certain short-term and long-term financial instruments totaling~~ W~~167,675 million are secured for payment guarantee of short-term borrowings, accounts payable and others.~~
~~22.~~   ~~COMMITMENTS AND CONTINGENCIES~~
a. As of December 31, 2010, SK Broadband Co., Ltd., a subsidiary of the Company, agreed to provide guarantees for Broadband Media Co., Ltd.’s loans. For the guarantee, SK Broadband Co., Ltd. has provided its properties as collaterals as follows:W~~52,000 million to Woori Bank,~~ W~~65,000 million to Hana Bank,~~ W~~52,000 million to Kookmin Bank and~~ W~~26,000 million to the Korean Federation of Community Credit Cooperatives, respectively. The Company also provided its short-term financial instruments as collaterals as~~

~~F-61~~
(In won)
Year
   Dividend type    Dividend per share    Closing price at
settlement    Dividend yield ratio
2013
   Cash dividend    9,400    230,000    4.09%
2012
   Cash dividend    9,400    152,500    6.16%
2011
   Cash dividend    9,400    141,500    6.64%
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~follows:~~ W~~35,000 million to Hana Bank,~~ W~~65,000 million to Korea Exchange Bank,~~ W~~34,000 million to Nonghyup, and~~ W~~20,000 million to Woori Bank, respectively.~~
~~SK Broadband Co., Ltd. has provided guarantees for loans of Broadband CS Co., Ltd.~~
For the years ended December 31, 2013, 2012 and 2011
33. Categories of Financial Instruments
(1) Financial assets by categories as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31, 2013
   Financial
assets at
fair value
through
profit or
loss    Available-
for-sale
financial
assets    Loans and
receivables    Derivative
financial
instruments
designated
as hedged
item    Total
Cash and cash equivalents
   ￦ —       —       1,398,639       —       1,398,639
Financial instruments
   —       —       319,616       —       319,616
Short-term investment securities
   —       106,068       —       —       106,068
Long-term investment securities(*1)
   20,532       947,995       —       —       968,527
Accounts receivable — trade
   —       —       2,270,471       —       2,270,471
Loans and other receivables(*2)
   —       —       1,044,529       —       1,044,529
Derivative financial assets(*3)
   10       —       —       41,712       41,722










   ￦ 20,542       1,054,063       5,033,255       41,712       6,149,572










(In millions of won)
   December 31, 2012
   Financial
assets at
fair value
through
profit or
loss    Available-
for-sale
financial
assets    Loans and
receivables    Derivative
financial
instruments
designated
as hedged
item    Total
Cash and cash equivalents
   ￦ —       —       920,125       —       920,125
Financial instruments
   —       —       514,561       —       514,561
Short-term investment securities
   —       60,127       —       —       60,127
Long-term investment securities(*1)
   15,356       938,356       —       —       953,712
Accounts receivable — trade
   —       —       1,968,297       —       1,968,297
Loans and other receivables(*2)
   —       —       981,693       —       981,693
Derivative financial assets(*3)
   689       —       —       61,959       62,648










   ￦ 16,045       998,483       4,384,676       61,959       5,461,163










(*1) Long-term investment securities of which the embedded derivative (conversion right option), which should be separated from the main contract, could not be separately measured, were designated as financial assets at fair value through profit or loss.
(*2) Details of loans and other receivables as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31,
2013    December 31,
2012
Short-term loans
   ￦ 79,395       84,908
Accounts receivable – other
   643,603       582,098
Accrued income
   11,941       8,715
Other current assets
   2,548       431
Long-term loans
   57,442       69,299
Guarantee deposits
   249,600       236,242




   ￦ 1,044,529       981,693




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(*3) Derivative financial assets classified as financial assets at fair value through profit or loss is the fair value of conversion right of convertible bonds held by SK Communications Co., Ltd., a subsidiary of the Parent Company.
(2) Financial liabilities by categories as of December 31, 2013 and 2012 are as follows:
(In millions of won)    December 31, 2013
   Financial
liabilities
at fair
value
through
profit or
loss    Financial
liabilities
measured at
amortized
cost    Derivative
financial
instruments
designated
as hedged
item    Total
Accounts payable — trade
   ￦ —       214,716       —       214,716
Derivative financial liabilities
   —       —       124,339       124,339
Borrowings
   —       386,192       —       386,192
Debentures(*1)
   96,147       5,830,920       —       5,927,067
Accounts payable — other and others (*2)
   —       3,949,794       —       3,949,794








   ￦ 96,147       10,381,622       124,339       10,602,108








(In millions of won)    December 31, 2012
   Financial
liabilities at
fair value
through
profit or
loss    Financial
liabilities
measured at
amortized
cost    Derivative
financial
instruments
designated
as hedged
item    Total
Accounts payable — trade
   ￦ —       253,884       —       253,884
Derivative financial liabilities
   —       —       63,599       63,599
Borrowings
   —       1,086,699       —       1,086,699
Debentures(*1)
   405,678       5,171,322       —       5,577,000
Accounts payable — other and others (*2)
   —       3,646,486       —       3,646,486








   ￦ 405,678       10,158,391       63,599       10,627,668








(*1) Debentures of which the embedded derivative (conversion right option), which should be separated from the main contract, could not be separately measured, were designated as financial liabilities at fair value through profit or loss.
(*2) Details of accounts payable – other and other payables as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31,
2013    December 31,
2012
Accounts payable — other
   ￦ 1,864,024       1,811,038
Withholdings
   1,549       1,840
Accrued expenses
   988,193       890,863
Current portion of long-term payables — other
   226,151       177,870
Long-term payables — other
   838,585       715,508
Finance lease liabilities
   3,867       22,036
Other non-current liabilities
   27,425       27,331




   ￦ 3,949,794       3,646,486




SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
34. Financial Risk Management
(1) Financial risk management
The Group is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates, interest rates and equity prices. Management implements a risk management system to monitor and manage these specific risks.
The Group’s financial assets under financial risk management consist of cash and cash equivalents, financial instruments, available-for-sale financial assets, trade and other receivables. Financial liabilities consist of trade and other payables, borrowings, and debentures.
1) Market risk
(i)     Currency risk
The Group is exposed to currency risk mainly on exchange fluctuations on recognized assets and liabilities. The Group manages currency risk by currency forward, etc. if needed to hedge currency risk on business transactions. Currency risk occurs on forecasted transaction and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Group.
Monetary foreign currency assets and liabilities as of December 31, 2013 are as follows:
(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies)
   Assets    Liabilities
   Foreign
currencies    Won
translation    Foreign
currencies    Won
translation
USD
   127,972       ￦ 135,329       2,300,314       ￦ 2,424,243
EUR
   44,623       64,981       223       323
JPY
   97,776       982       9,605       99
AUD
   18       15       64,811       53,971
CHF
   —       —       298,039       280,145
SGD
   —       —       298,542       354,868
Others
   20,053       11,423       9,027       1,665




      ￦ 212,730          ￦ 3,115,314




In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (Refer to note 22)
As of December 31, 2013, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:
(In millions of won)
   If increased by 10% If decreased by 10%
USD
   ￦ (5,858 ) 5,858
EUR
   6,466    (6,466 )
JPY
   88    (88 )
SGD
   2    (2 )
Others
   976    (976 )


   ￦ 1,674    (1,674 )


SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(ii)     Equity price risk
The Group has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of December 31, 2013, available-for-sale equity instruments measured at fair value amount to ￦839,647 million.
(iii) Interest rate risk
Since the Group’s interest bearing assets are mostly fixed-interest bearing assets, as such, the Group’s revenue and operating cash flow are not influenced by the changes in market interest rates. However, the Group still has interest rate risk arising from borrowings and debentures.
Accordingly, management performs various analysis of interest rate risk, which includes refinancing, renewal, alternative financing and hedging instrument option, to reduce interest rate risk and to optimize its financing.
The Group’s interest rate risk arises from floating-rate borrowings and payables. As of December 31, 2013, floating-rate debentures amount to ￦634,544 million and the Group has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures (refer to note 22). If interest rate only increases (decreases) by 1%, income before income taxes for the year ended December 31, 2013 would not have been changed due to the interest expense from floating-rate borrowings and debentures.
2) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. The maximum credit exposure as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   2013    2012
Cash and cash equivalents
   ￦ 1,398,548       920,054
Financial instruments
   319,616       514,561
Available-for-sale financial assets
   35,174       35,623
Accounts receivable—trade
   2,270,471       1,968,297
Loans and receivables
   1,044,529       981,693
Derivative financial assets
   41,712       61,959
Financial assets at fair value through profit or loss
   20,532       15,356




   ￦ 5,130,582       4,497,543




To manage credit risk, management evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors; based on such information, the Group establishes credit limits for each customer or counterparty.
For the year ended December 31, 2013, the Group has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Group believes that the possibility of default is remote. Also, the Group’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivates. To minimize such risk, the Group has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets As of December 31, 2013.
In addition, the aging of trade and other receivables that are over due at the end of the reporting period but not impaired is stated in Note 7 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in note 29.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
3) Liquidity risk
The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Group maintains flexibly enough liquidity under credit lines through active operating activities.
Contractual maturities of financial liabilities as of December 31, 2013 are as follows:
(In millions of won)
   Carrying
amount    Contractual
cash flows    Less than 1
year    1 - 5 years    More than
5 years
Accounts payable — trade
   ￦ 214,716       214,716       214,685       31       —
Borrowings(*1)
   386,192       403,164       284,110       74,301       44,753
Debentures(*1)
   5,927,067       7,131,432       1,230,996       3,775,142       2,125,294
Accounts payable — other and others(*2)
   3,949,794       4,039,035       2,973,303       685,944       379,788










   ￦ 10,477,769       11,788,347       4,703,094       4,535,418       2,549,835










Management does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
(*1) Includes estimated interest to be paid and excludes discounts on bonds.
(*2) Excludes discounts on accounts payable-other and others.
As of December 31, 2013, periods which cash flows from cash flow hedge derivatives is expected to be incurred are as follows:
(In millions of won)
   Carrying
amount Contractual
cash flows Less than 1
year 1 - 5 years More
than 5
years
Assets
   ￦ 41,712    43,833    1,778    35,322    6,733
Liabilities
   (124,339 ) (133,481 ) (31,781 ) (100,253 ) (1,447 )


   ￦ (82,627 ) (89,648 ) (30,003 ) (64,931 ) 5,286


(2) Capital management
The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance. The overall strategy of the Group is the same as that of the Group as of and for the year ended December 31, 2012.
The Group monitors its debt-equity percentage as a capital management indicator. This percentage is calculated as total debt divided by total equity; the total debt and equity is extracted from the financial statements.
Debt-equity percentage as of December 31, 2013 and 2012 are as follows:
(In millions of won)
   December 31,
2013 December 31,
2012
Liabilities
   ￦ 12,409,958    12,740,777
Equity
   14,166,557    12,854,782


Debt-equity percentage
   87.60 % 99.11 %


SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(3)     Fair value
1) Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2013 are as follows:
(In millions of won)
   Carrying
amount    Level 1    Level 2    Level 3    Total
Financial assets that can be measured at fair value

Financial assets at fair value through profit or loss
   ￦ 20,542       —       20,532       10       20,542
Derivative financial assets
   41,712       —       41,712       —       41,712
Available-for-sale financial assets
   839,647       638,445       46,414       154,788       839,647










   ￦ 901,901       638,445       108,658       154,798       901,901










Financial assets that cannot be measured at fair value

Cash and cash equivalents(*1)
   ￦ 1,398,639       —       —       —       —
Available-for-sale financial assets(*1,2)
   214,416       —       —       —       —
Accounts receivable – trade and others(*1)
   3,315,000       —       —       —       —
Financial instruments(*1)
   319,616       —       —       —       —










   ￦ 5,247,671       —       —       —       —










Financial liabilities that can be measured at fair value

Financial liabilities at fair value through profit or loss
   ￦ 96,147       96,147       —       —       96,147
Derivative financial liabilities
   124,339       —       124,339       —       124,339










   ￦ 220,486       96,147       124,339       —       220,486










Financial liabilities that cannot be measured at fair value

Accounts payable – trade(*1)
   ￦ 214,716       —       —       —       —
Borrowings
   386,192       —       399,247       —       399,247
Debentures
   5,830,920       —       5,946,586       —       5,946,586
Accounts payable—other and others(*1)
   3,949,794       —       —       —       —










   ￦ 10,381,622       —       6,345,833       —       6,345,833










(*1) Does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are closed to the reasonable approximate fair values.
(*2) Equity instruments which do not have quoted price in an active market for the identical instruments (inputs for level 1) are measured at cost in accordance with IAS 39 as such equity instruments cannot be reliably measured using other methods.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
2) Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2012 are as follows:
(In millions of won)
Carrying
amount Level 1 Level 2 Level 3 Total
Financial assets that can be measured at fair value

Financial assets at fair value through profit or loss
￦ 16,045    —    15,356    689    16,045
Derivative financial assets
61,959    —    61,959    —    61,959
Available-for-sale financial assets
765,759    584,029    56,158    125,572    765,759

￦ 843,763    584,029    133,473    126,261    843,763

Financial assets that cannot be measured at fair value

Cash and cash equivalents(*1)
￦ 920,125    —    —    —    —
Available-for-sale financial assets(*1,2)
232,724    —    —    —    —
Accounts receivable – trade and others(*1)
2,949,990    —    —    —    —
Financial instruments(*1)
514,561    —    —    —    —

￦ 4,617,400    —    —    —    —

Financial liabilities that can be measured at fair value

Financial liabilities at fair value through profit or loss
￦ 405,678    405,678    —    —    405,678
Derivative financial liabilities
63,599    —    63,599    —    63,599

￦ 469,277    405,678    63,599    —    469,277

Financial liabilities that cannot be measured at fair value

Accounts payable – trade(*1)
￦ 253,884    —    —    —    —
Borrowings
1,086,699    —    1,100,464    —    1,100,464
Debentures
5,171,321    —    5,461,142    —    5,461,142
Accounts payable—other and others(*1)
3,646,486    —    —    —    —

￦ 10,158,390    —    6,561,606    —    6,561,606

(*1) Does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are closed to the reasonable approximate fair values.
(*2) Equity instruments which do not have quoted price in an active market for the identical instruments (inputs for level 1) are measured at cost in accordance with IAS 39 as such equity instruments cannot be reliably measured using other methods.
Fair value of the financial instruments that are traded in an active market (available-for-sale financial assets, financial liabilities at fair value through profit or loss, etc.) is measured based on the bid price at the end of the reporting date.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
Management uses various valuation methods for valuation of fair value of financial instruments that are not traded in an active market. Fair value of available-for-sale securities is determined using the market approach methods and financial assets through profit or loss are measured using the option pricing model. In addition, derivative financial contracts and long-term liabilities are measured using the present value methods. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and management performs valuation using the inputs which are consistent with natures of assets and liabilities being evaluated.
Interest rates used by the Group for the fair value measurement as of December 31, 2013 are as follows:
Interest rate
Derivative instruments
2.86% ~ 4.04%
Borrowings and debentures
3.12%
3) There have been no transfers from Level 2 to Level 1 in 2013 and changes of financial assets classified as Level 3 for the year ended December 31, 2013 are as follows:
   Balance at
Jan. 1    Acquisition    Loss for
the period Other
comprehensive
income    Disposal Others    Balance at
Dec. 31
   (In millions of won)
Financial assets at fair value through profit or loss
   ￦ 689       —       (276 ) —       (404 ) —       9
Available-for-sale financial assets
   125,572       54,950       (16,548 ) 7,901       (43,540 ) 26,454       154,789
(4) Enforceable master netting agreement or similar agreement
Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2013 are as follows:
   Gross financial
instruments
recognized    Gross offset
financial
instruments
recognized Net financial
instruments
presented on the
statements of
financial position    Relevant amount not offset
on the statements of
financial position    Net
amount
         Financial
instruments Cash
collaterals
received
Financial assets:

Derivatives(*)
   ￦ 28,871       —    28,871       (28,871 ) —       —
Accounts receivable – trade and other
   138,897       (127,055 ) 11,842       —    —       11,842








   167,768       (127,055 ) 40,713       (28,871 ) —       11,842








Financial liabilities:

Derivatives(*)
   43,536       —    43,536       (28,871 ) —       14,665
Accounts payable – trade and other
   127,055       (127,055 ) —       —    —       —








   ￦ 170,591       (127,055 ) 43,536       (28,871 ) —       14,665








(*) The Group entered into derivative contracts which include enforceable master netting arrangement in accordance with ISDA. Generally, all contracts made with the identical currencies are settled from one party to another by combining one net amount. In this case, all contracts are liquidated and paid off at net amount by evaluating liquidation value if credit events such as bankruptcy occur.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
ISDA agreements do not allow the Group to exercise rights of set-off unless credit events such as bankruptcy occur. Therefore, assets and liabilities recognized in accordance with the agreements cannot be offset as the Group does not have enforceable rights of set-off.
35. Transactions with Related Parties
(1) List of related parties
Relationship
Interest rate
Controlling Entity SK Holding Co., Ltd.
Subsidiaries SK Planet Co., Ltd. and 27 others (refer to note 1)
Joint ventures Dogus Planet, Inc. and three others
Associates SK hynix Inc. and 64 others
Affiliates The Controlling Entity’s investor using the equity method, the Controlling Company, and the Controlling Company’s subsidiaries and associates, etc.
(2) Compensation for the key management
The Parent Company considers registered directors who have substantial role and responsibility in planning, operating, and controlling of the business as key management. The compensation given to such key management for the years ended December 31, 2013, 2012 and 2011 are as follows:
   2013    2012    2011
   (In millions of won)
Salaries
   ￦ 2,263       8,893       9,643
Provision for retirement benefits
   1,012       799       837






   3,275       9,692       10,480






Compensation for the key management includes salaries, non-monetary salaries and contributions made in relation to the pension plan.
(3) Transactions with related parties for the years ended December 31, 2013, 2012 and 2011 are as follows:
         2013
Scope

Company
   Operating
revenue and
others    Operating
expense and
others    Acquisition of
property and
equipment    Loans
      (In millions of won)
Controlling Entity

SK Holding Co., Ltd.(*)
   ￦ 1,912       226,023       —       —
Associates

HappyNarae Co., Ltd.
   281       6,217       10,542       —

F&U Credit information Co., Ltd.
   1,753       43,931       —       —

HanaSK Card Co., Ltd.
   11,128       —       —       —

Others
   6,712       6,846       125       997








      19,874       56,994       10,667       997








Other

SK Engineering & Construction Co., Ltd.
   5,564       37,978       484,006       —

SK C&C Co., Ltd.
   4,041       357,945       206,298       —

SK Networks Co., Ltd.
   51,996       1,463,340       6,241       —

Others
   66,112       209,692       249,100       —








      127,713       2,068,955       945,645       —








Total
      ￦ 149,499       2,351,972       956,312       997








SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(*) Operating expense and others include ￦191,416 million of dividends paid by the Group.
         2012
Scope

Company
   Operating revenue
and others    Operating expense
and others    Acquisition of
property and
equipment
      (In millions of won)
Controlling Entity

SK Holding Co., Ltd.(*1)
   ￦ 1,339       224,667       —
Associates

F&U Credit information Co., Ltd.
   1,516       49,518       —

SK M&C
   11,874       155,397       9,051

HanaSK Card Co., Ltd.(*2)
   672,202       201,533       66

Others
   743       96,971       11,374






      686,335       503,419       20,491






Other

SK C&C Co., Ltd.
   4,441       324,171       304,102

SK Engineering & Construction Co., Ltd.
   5,384       55,007       687,059

SK Networks Co., Ltd.
   20,477       1,747,130       8,048

Others
   40,251       246,218       300,410






      70,553       2,372,526       1,299,619






Total
      ￦ 758,227       3,100,612       1,320,110






(*1) Operating expense and others include ￦171,053 million of dividends paid by the Group.
(*2) Operating revenue include discounts on accounts receivable related to sales of handsets on installment payment plans of PS&Marketing Corporation.
         2011
Scope

Company
   Operating revenue
and others    Operating expense
and others    Acquisition of
property and
equipment
      (In millions of won)
Controlling Entity

SK Holding Co., Ltd.(*1)
   ￦ 1,068       207,264       —
Associates

F&U Credit information Co., Ltd.
   1,609       45,433       —

SK M&C
   13,366       154,103       8,405

HanaSK Card Co., Ltd.
   168,234       284,111       33

Others
   1,627       57,484       15,126






      184,836       541,131       23,564







SK C&C Co., Ltd.
   15,607       321,437       299,170

SK Engineering & Construction Co., Ltd.
   6,213       55,109       386,144

SK Telesys Co., Ltd.
   61,561       44,639       265,851

SK Networks Co., Ltd.
   17,223       1,216,951       9,647

Others
   25,009       157,047       18,338






      125,613       1,795,183       979,150






Total
      ￦ 311,517       2,543,578       1,002,714






(*1) Operating expense and others include ￦176,235 million of dividends paid by the Group.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(*2) Operating revenue include discounts on accounts receivable related to sales of handsets on installment payment plans of PS&Marketing Corporation.
(4) Account balances as of December 31, 2013 and 2012 are as follows:
         2013
      Accounts receivable    Accounts payable
Scope

Company
   Loans    Accounts
receivable-trade,
and others    Accounts payable
–trade, and others
      (In millions of won)
Controlling Entity

SK Holding Co., Ltd.
   ￦ —       334       —
Associates

HappyNarae Co., Ltd.
   —       27       16,317

Wave City Development Co., Ltd.
   1,200       38,412       —

SK hynix Inc.
   —       392       —

HanaSK Card Co., Ltd.
   —       3,723       5,443

SK Wyverns Baseball Club Co., Ltd.
   1,425       —       —

Daehan Kanggun BcN Co., Ltd.
   22,102       —       —

Others
   —       268       492






      24,727       42,822       22,252






Other

SK Engineering & Construction Co., Ltd.
   —       988       92,058

SK Telesys Co., Ltd.
   —       412       70,467

SK C&C Co., Ltd.
   —       182       —

SK Networks. Co., Ltd.
   —       5,930       118,759

Others
   —       11,633       20,197






      —       19,145       301,481






Total
      ￦ 24,727       62,301       323,733






SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
         2012
      Accounts receivable    Accounts payable
Scope

Company
   Loans    Accounts
receivable-trade,
and others    Accounts payable
–trade, and others
      (In millions of won)
Controlling Entity

SK Holding Co., Ltd.
   ￦ —       310       —
Associates

SK Wyverns Baseball Club Co., Ltd.
   1,628       —       4,000

Wave City Development Co., Ltd.
   —       38,412       —

SK M&C
   —       6,127       109,531

SK China Company, Ltd.
   —       —       39,694

Daehan Kanggun BcN Co., Ltd.
   22,102       —       —

Others
   —       498       11,558






      23,730       45,037       164,783




Other

SK Engineering & Construction Co., Ltd.
   —       1,735       34,887

SK Telesys Co., Ltd.
   —       1,182       31,289

SK C&C Co., Ltd.
   —       369       144,308

SK Networks. Co., Ltd.
   —       34,055       285,325

Others
   —       18,416       24,678






      —       55,757       520,487






Total
      ￦ 23,730       101,104       685,270






(5) As of December 31, 2013, collateral and guarantee provided by the Group for the related parties’ financing purposes are as follows. There are no collateral or guarantee provided by related parties to the Group.
(6) M&Service Co., Ltd., a subsidiary of the Parent Company, entered into performance agreement with SK Energy Co., Ltd. and provides a blank note to SK Energy Co., Ltd., with regard to this transaction.
36. Commitments and Legal Claims and Litigations
(1) Collateral assets and commitments
SK Broadband Co., Ltd. has pledged its properties as collateral for leases on buildings in the amount of W~~16,900 million to Kookmin Bank as of December 31, 2010.~~
~~SK Broadband Co., Ltd.’s board of directors resolved to provide up to~~ W20,000 million of its time deposits as collateral for members of Employee Stock Purchase Association (ESPA) in order for employees to contribute money to the ESPA, which will be used to purchase the shares of SK Broadband Co., Ltd. in the market. In accordance with the resolution, SK Broadband Co., Ltd. has pledged its time deposits of W~~7,400~~￦14,900 million as of December 31, ~~2010.~~
~~b. Broadband Media~~2013.
(2) Legal claims and litigations
As of December 31, 2013, the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. For those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation for these matters, nor is it expected any of these claims or litigation will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
37. Discontinued Operations
(1) Discontinued operations
(a) On September 10, 2013, SK Planet Co., Ltd., a subsidiary of the Parent Company, ~~has provided notes amounting~~sold 52.6% of its ownership interests (13,294,369 shares) in Loen Entertainment, Inc., to W~~50,000 million as collateral~~Star Invest Holdings Limited. Consideration for the sale amounted to ~~Hana Bank for its short-term borrowings.~~
~~c. As of December 31, 2010, customers of SK Broadband Co., Ltd. have filed a lawsuit with a claim amount of~~ W~~24,113 million against SK Broadband Co., Ltd. for alleged violation of customers’ privacy. PAXNet Co., Ltd.,~~￦265,887 million. Loen Entertainment was a subsidiary of ~~the Company, has been filed a lawsuit~~SK Planet Co., Ltd. and is engaged in the ~~amount~~release of W~~2,200 million~~music discs as its primary business, The Group’s ownership interests after the disposition is 15.0% and Loen Entertainment, Inc. and is now accounted for ~~alleged patent infringement.~~under the equity method. The ~~ultimate outcome~~results of ~~these lawsuits cannot be presently determined.~~
~~23.~~   ~~INSURANCE~~
~~At December 31, 2010, certain~~operations of Loen Entertainment, Inc. prior to the date of disposal of the ~~Company’s assets are insured with local insurance companies~~Group’s controlling interest is presented as ~~follows (in millions of Korean won, thousands of U.S. dollars, and thousands of Chinese Yuan):~~

Asset

Risk

Book Value

Coverage

Inventories, property and equipment Fire and comprehensive liability US$ 3,850
W10,185,322
W 4,987,033 CNY 1,100,000

~~In addition,~~a discontinued operation. The comparative information in the ~~Company carries directors and officers liability coverage insurance totaling~~ W~~80,000 million.~~
~~24.~~   ~~TRANSACTIONS WITH RELATED PARTIES~~
~~Significant related party transactions~~consolidated financial statements for the years ended December 31, ~~2008, 2009~~2012 and ~~2010, and account balances~~2011 has been restated to present Loen Entertainment, Inc. as ofa discontinued operation.
(b) During the year ended December 31, ~~2008, 2009 and 2010 are as follows (in millions of Korean won):~~

Description
2008 2009 2010

Transactions

SK C&C Co., Ltd.:
Purchases of property and equipment W 232,238 W 237,459 W 270,865
Commissions paid and other expense 273,279 317,539 316,395
Commission income and other income 12,681 12,606 19,500
SK Corporation:
Purchases of property and equipment — 85 118
Commissions paid and other expense 177 26,688 33,787
Commission income and other income 313 863 1,486

~~F-62~~
2012, SK ~~TELECOM CO.~~Telink Co., ~~LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Description
2008 2009 2010

SK Energy Co., Ltd.:
Purchases of property and equipment 3,001 — —
Commissions paid and other expense 17,895 1,071 951
Commission income and other income 8,898 6,673 8,248
SK Engineering & Construction Co., Ltd.:
Purchases of property and equipment 256,548 344,739 357,786
Commissions paid and other expense 17,025 30,999 29,168
Commission income and other income 2,705 2,340 10,500
SK Telesys Co., Ltd.:
Purchases of property and equipment 270,133 237,015 336,265
Commissions paid and other expenses 9,078 110,192 46,513
Commission income and other income 1,967 1,652 12,361
SK Networks Co., Ltd.:
Purchases of property and equipment 28,972 1,513,804 9,252
Commissions paid, leased line and other expense 770,917 967,901 1,083,543
Sales of handsets and other income 33,035 45,349 28,494
SK Networks Service:
Purchases of property and equipment — — 663
Commissions paid and other expenses 20,599 28,009 54,049
Commission income and other income — 509 —
SKC:
Commissions paid and other expenses 26 26 26
Commission income and other income 1,005 909 1,010
M&SERVICE Co., Ltd.:
Purchases of property and equipment W 1,906 W 1,458 W 921
Commissions paid and other expenses 9,978 10,316 16,372
Commission income and other income 417 1,322 605
SK Mobile Energy., Ltd.:
Purchases of property and equipment 4,167 5,512 3,522
Commission income and other income 23 21 22
Infosec Co., Ltd.:
Purchases of property and equipment 1,270 349 1,656
Commissions paid and other expenses 3,076 1,218 6,324
Commission income and other income 11 6 19
SK Shipping Co., Ltd.:
Purchases of property and equipment — 23,870 —
Commission income and other income 568 2,775 3,370
SK pinx Co., Ltd.:
Purchases of property and equipment — — 3,317
Commissions paid and other expenses — — 196
~~F-63~~
~~SK TELECOM CO.~~Ltd., ~~LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Description
2008 2009 2010

MROKorea Co., Ltd.:
Purchases of property and equipment 119 3,802 7,041
Commissions paid and other expenses 2,545 3,677 5,761
Commission income and other income 12 19 161
Others:
Purchases of property and equipment — 12,777 —
Commissions paid and other expenses 1,074 24,758 4,011
Commission income and other income 4,120 4,318 4,235
Balances

SK C&C Co., Ltd.:
Accounts receivable — trade and other W 2,477 W 1,070 W 935
Guarantee deposits 140 — —
Accounts payable 93,680 260,732 203,031
Guarantee deposits received 24 5 3,585
SK Corporation:
Accounts receivable — trade and other 46 249 480
Accounts payable — 2 1,595
Guarantee deposits received — 23 —
SK Energy Co., Ltd.:
Accounts receivable — trade and other 109 1,323 1,204
Guarantee deposits — 96 96
Accounts payable 3,548 577 —
Guarantee deposits received — — 23
SK Engineering & Construction Co., Ltd.:
Accounts receivable — trade and other 203 208 2,610
Accounts payable 1,164 44,420 42,880
Guarantee deposits received 1,076 82 82
SK Telesys Co., Ltd.:
Accounts receivable — trade and other 486 242 14,207
Accounts payable 20,533 55,585 63,350
SK Networks Co., Ltd.:
Accounts receivable — trade and other 1,598 5,319 3,203
Guarantee deposits 1,230 5,730 5,513
Accounts payable 75,806 287,837 99,284
Guarantee deposits received 3,963 54,461 689
SK Networks Service Co., Ltd.:
Accounts receivable — trade and other — — 1
Accounts payable — 13,028 10,585
M&SERVICE Co., Ltd.:
Accounts receivable — trade and other — 967 1,591
Accounts payable — 7,514 4,036
~~F-64~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Description
2008 2009 2010

Infosec Co., Ltd.:
Accounts receivable — trade and other — — 2
Accounts payable — 6 3,045
MROKorea Co., Ltd.:
Accounts receivable — trade and other — — 6
Accounts payable — 1,855 1,985
Others:
Accounts receivable — trade and other 461 1,035 1,027
Guarantee deposits 1 1 —
Accounts payable 4,661 4,271 1,124
Guarantee deposits received — — 258
~~25.~~   ~~COMPENSATION FOR KEY MANAGEMENT~~
~~The Company considers registered directors who have substantial roles and responsibility for planning, operating, and controlling of the~~a subsidiary, ceased its broadcasting business ~~as key management, and the considerations given~~due to the ~~key management~~rapid decrease in satellite digital multimedia broadcasting subscribers along with the effects from smart phones, and other mobile devices.
(2) Results of discontinued operations
Results of discontinued operations included in the consolidated statements of income for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011 are as ~~follows (in millions~~follows. The consolidated statements of ~~Korean won):~~

2008 2009 2010

Payee
(including outside directors) 7 registered directors 8 registered directors 8 registered directors
Payroll W4,405 W6,422 W2,994
Severance indemnities 556 276 702

Total W4,961 W6,698 W3,696

income presented for comparative purposes was restated in order to present discontinued operation segregated from the continuing operations.
   2013 2012 2011
   (In millions of won)
Results of discontinued operations:

Operating revenue and other income
   ￦ 167,448    162,400    137,615
Operating expense
   (140,203 ) (291,809 ) (170,433 )


Operating income (loss) generated by discontinued operations
   27,245    (129,409 ) (32,818 )
Finance income and costs
   1,773    2,640    1,963
Gain (loss) related to investments in associates, net
   1,000    281    (252 )
Gain on disposal relating to discontinued operations
   214,352    —    —
Income tax benefit (expense)
   (61,125 ) 10,990    2,844


Profit (loss) generated by discontinued operations
   ￦ 183,245    (115,498 ) (28,263 )


Attributable to :

Owners of the Parent Company
   175,867    (103,821 ) (34,638 )
Non-controlling interests
   7,378    (11,677 ) 6,375
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
~~26.~~
~~PROVISION~~
~~a.  Provision for point program~~(3) Cash flows from (used in) discontinued operations
The Company, for marketing purposes, grants Rainbow Points and Point Box Points (the “Points”) to its subscribers based on their usage of the Company’s services. Points’ provision was provided based on the historical usage experience and the Company’s marketing policy. Such provision was recorded as accrued expenses or other non-current liabilities in accordance with the expected points’ usage duration the period end date.
~~Details of change in the provisions for such points~~
Cash flows from (used in) discontinued operations for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011 are as ~~follows (in millions of Korean won):~~

2008 2009 2010

Beginning balance W 27,668 W 24,889 W 18,856
Increase (provision) 12,430 11,400 7,259
Decrease (usage and reversal) (15,209 ) (17,433 ) (9,056 )

Ending balance W 24,889 W 18,856 W 17,059

~~F-65~~
follows:
   2013 2012 2011
   (In millions of won)
Cash flow from discontinued operations:

Net cash provided by (used in) operating activities
   ￦ 40,884    22,937    (4,286 )
Net cash provided by (used in) investing activities
   179,490    (19,931 ) (23,297 )
Net cash provided by (used in) financing activities
   (4,780 ) (13,774 ) 10,258


   ￦ 215,594    (10,768 ) (17,325 )


(4) Changes in financial condition relating to discontinued operations due to the disposal of ownership interests in Loen Entertainment, Inc. at the date of disposal is as follows:
Date of disposal
(In millions of won)
Cash and cash equivalents
￦ 55,527
Long-term and short-term financial instruments
42,404
Accounts receivable – trade
49,700
Property and equipment, and intangible assets
26,334
Other assets
39,526
Accounts payable – trade
(33,154 )
Defined benefit liabilities
(737 )
Other liabilities
(87,022 )
Decrease in net assets
92,578
Consideration received for disposal
264,245
Cash and cash equivalents disposed
(55,527 )
Net cash inflow
￦ 208,718
SK TELECOM CO., LTD. ~~AND SUBSIDIARIES~~
and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to the Consolidated Financial Statements — (Continued)
~~Points expire after 5 years. The expected year when unused points as of~~
For the years ended December 31, ~~2010 are expected to be used~~2013, 2012 and ~~the respective estimated monetary amount to be paid in a given year are as follows (In millions of Korean won):~~

Estimated

Amount

to be Paid

in Nominal
Current

Expected Year of Usage (note a)
Value (note a) Value

2011 W 8,251 W 7,898
2012 4,779 4,379
2013 2,865 2,513
2014 1,717 1,442
2015 1,030 827

Ending balance W 18,642 W 17,059

2011
38.
~~(note a)~~ ~~The above expected year~~Statements of ~~usage and the current value of the estimated amount to be paid are estimated based on historical usage experience.~~Cash Flows

(1) Adjustments for income and expenses from operating activities for the years ended December 31, 2013, 2012 and 2011 are as follows:
      2013 2012 2011
   (In millions of won)
Interest income
   ￦ (67,359 ) (99,967 ) (168,148 )
Dividend
   (10,197 ) (27,732 ) (26,433 )
Gain on foreign currency translation
   (4,401 ) (4,065 ) (1,985 )
Gain on disposal of long-term investment securities
   (9,300 ) (282,605 ) (164,454 )
Gain on valuation of derivatives
   —    —    (3,785 )
Gain on settlement of derivatives
   (7,716 ) (26,103 ) —
Loss (gain) related to investments in subsidiaries and associates, net
   (921,861 ) 24,279    47,149
Gain on disposal of property, equipment and intangible assets
   (7,991 ) (162,590 ) (6,275 )
Reversal of allowance for doubtful accounts
   (359 ) (5,902 ) (2,301 )
Gain on valuation of financial assets at fair value through profit or loss
   (5,177 ) —    (2,617 )
Gain on valuation of financial liabilities at fair value through profit or loss
   —    —    (63,769 )
Other income
   (3,951 ) (2,558 ) (1,732 )
Interest expenses
   331,834    412,379    297,172
Loss on foreign currency translation
   2,634    4,608    6,409
Loss on disposal of long-term investment securities
   31,909    10,802    447
Other finance costs
   52,058    190,621    12,846
Loss on valuation of derivatives
   2,106    286    943
Loss on settlement of derivatives
   —    1,232    15,577
Income tax expense
   461,922    277,217    —
Gain related to defined benefit plan
   92,840    80,865    599,093
Depreciation and amortization
   2,829,784    2,613,018    68,814
Bad debt expenses
   57,163    52,393    2,482,703
Loss on disposal of property and equipment and intangible assets
   267,702    15,117    83,748
Impairment loss on property and equipment and intangible assets
   14,399    160,210    21,136
Loss on valuation of financial assets at fair value through profit or loss
   —    1,262    2,580
Loss relating to financial liabilities at fair value through profit or loss
   134,232    7,793    —
Loss on redemption of debentures
   —    2,099    —
Bad debt for accounts receivable—other
   22,167    30,107    12,847
Impairment loss on other investment securities
   6,136    1,307    434
Other expenses
   6,802    15,788    15,283


   ￦ 3,275,376    3,289,861    3,225,682


~~b.  Provision for handset subsidy~~SK TELECOM CO., LTD. and Subsidiaries
~~The Company provides provision for handset subsidies to be provided~~
Notes to the ~~subscribers who purchase handsets on an installment basis (refer~~Consolidated Financial Statements — (Continued)
For the years ended December 31, 2013, 2012 and 2011
(2) Changes in assets and liabilities from operating activities for the years ended December 31, 2013, 2012 and 2011 are as follows:
(In millions of won)
   2013 2012 2011
Accounts receivable—trade
   ￦ (267,754 ) (183,238 ) 61,728
Accounts receivable—other
   (41,243 ) 288,739    1,617,947
Accrued income
   (502 ) 9,530    12,570
Advance payments
   (26,064 ) 40,664    30,734
Prepaid expenses
   (1,583 ) 18,525    64,165
Proxy paid V.A.T.
   (5,442 ) (963 ) —
Inventories
   (39,610 ) (108,904 ) (132,223 )
Other current assets
   —    —    (12,270 )
Long-term accounts receivables—other
   —    5,393    521,691
Guarantee deposits
   59,431    19,460    —
Accounts payable—trade
   (4,708 ) 74,923    4,528
Accounts payable—other
   (131,142 ) 260,158    66,048
Advanced receipts
   (2,916 ) (7,977 ) (4,721 )
Withholdings
   22,025    234,048    97,380
Deposits received
   (1,745 ) (6,089 ) —
Accrued expenses
   98,081    153,641    (24,961 )
Advanced V.A.T.
   (3,901 ) (3,955 ) —
Unearned revenue
   (188,589 ) (83,436 ) (55,799 )
Provisions
   (226,644 ) (373,213 ) —
Long-term provisions
   (72,398 ) (33,254 ) —
Plan assets
   (61,856 ) (51,422 ) (6,618 )
Retirement benefit payment
   (42,948 ) (46,066 ) (77,754 )
Other non-current liabilities
   —    —    4,697
Others
   (30,362 ) (2,256 ) 13,081


   ￦ (969,870 ) 204,308    2,180,223


(3) Significant non-cash transactions for the years ended December 31, 2013, 2012 and 2011 are as follows:
      2013    2012    2011
   (In millions of won)
Accounts payable—other related to acquisition of tangible assets and others
   ￦ 350,735       8,010       876,796
Transfer from available-for-sale financial assets to investment in associates
   —       8,130       —
Acquisition of new frequency use rights by returning the existing 1.8GHz frequency use rights
   614,600       —       —
39. Cash Dividends paid to the Parent Company
Cash dividends paid to ~~Note 2.(z)). 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~~Parent Company for the years ended December 31, ~~2008, 2009~~2013, 2012 and ~~2010~~2011 are as ~~follows (In millions~~follows:
      2013    2012    2011
   (In millions of won)
Cash dividends received from consolidated subsidiaries
   ￦ 13,657       5,739       6,537
Cash dividends received from associates
   —       —       8,091






   ￦ 13,657       5,739       14,628






Report of ~~Korean won):~~

2008 2009 2010

Beginning balance W — W 339,696 W 609,733
Increase (provision) 433,276 695,330 941,586
Decrease (subsidy payment) (93,580 ) (425,293 ) (819,277 )

Ending balance W 339,696 W 609,733 W 732,042

Independent Registered Public Accounting Firm
To The ~~estimated monetary amount~~Board of Directors and Shareholders
SK hynix, Inc.:
We have audited the accompanying consolidated statement of financial position of SK hynix, Inc. and subsidiaries as of December 31, 2013 and the related consolidated statements of comprehensive income (loss), changes in equity and cash flows for the year then ended. SK hynix, Inc.’s management is responsible for the preparation and fair presentation of these consolidated financial statements. Our responsibility is to ~~be paid~~express an opinion on these consolidated financial statements 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 the financial statements are free of material misstatement. Our audit of the consolidated financial statements included examining, on a ~~given~~test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SK hynix, Inc. and subsidiaries as of December 31, 2013 and the results of their operations and their cash flows for the year isthen ended in conformity with International Financial Reporting Standards as ~~follows (in millions~~issued by the International Accounting Standards Board.
/s/  KPMG Samjong Accounting Corp.
Seoul, Korea
April 21, 2014
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of ~~Korean won):~~

Estimated

Amount

to be Paid

Expected Payment
in Nominal
Current

for the Year Ended December 31,
Value Value

2011 W 663,740 W 652,564
2012 82,901 79,478

Ending balance W 746,641 W 732,042

Financial Position
~~27.~~
~~DERIVATIVE INSTRUMENTS~~
~~a.  Currency swap contract to which the cash flow hedge accounting~~
~~The Company has entered intofixed-to-fixed~~ cross currency swap contracts 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, ~~2010, in connection with its unsettled foreign currency swap contracts which cash flow hedge~~

~~F-66~~
2013 and 2012
   Note    2013    2012
(Unaudited)
      (In millions of won)
Assets

Current assets

Cash and cash equivalents
   5,7,8,10       ￦ 631,867       658,387
Short-term financial instruments
   5,7,8,11       2,154,532       1,126,229
Trade receivables, net
   5,7,8,12       1,941,675       1,719,521
Loans and other receivables, net
   5,7,12       323,759       125,055
Other financial assets
   5,7,11       245,808       —
Inventories, net
   13       1,178,300       1,509,331
Current tax assets
      9,242       12,719
Assets held for sale
   20       26,557       26,958
Other current assets
   14       141,384       135,373




      6,653,124       5,313,573




Non-current assets

Equity-accounted investees
   16       107,097       104,100
Available-for-sale financial assets
   5,7,15       158,770       44,297
Loans and other receivables, net
   5,7,12       43,090       19,127
Other financial assets
   5,7,11,41       2,017       525
Property, plant and equipment, net
   17       12,129,797       11,586,192
Intangible assets, net
   19       1,110,403       983,630
Investment property, net
   18       28,609       29,888
Deferred tax assets
   27       198,570       378,366
Other non-current assets
   14       365,821       188,995




      14,144,174       13,335,120




Total assets
      ￦ 20,797,298       18,648,693




See accompanying notes to the consolidated financial statements.
SK ~~TELECOM CO., LTD. AND SUBSIDIARIES~~
HYNIX, INC. and Subsidiaries

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~accounting is applied, an accumulated loss on valuation~~Consolidated Statements of ~~derivatives amounting to~~ W~~3,321 million (excluding tax effect totaling~~ W~~1,478 million and foreign exchange translation gain arising from unguaranteed U.S. dollar denominated bonds totaling~~ W~~3,049 million) is accounted for as accumulated other comprehensive loss.~~
~~The Company has entered into a~~Financial Position,  continued
~~floating-to-fixed~~ cross currency swap contract with Credit Agricole Corporate & Investment 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, ~~2010,~~2013 and 2012
   Note    2013 2012
(Unaudited)
      (In millions of won)
Liabilities

Current liabilities

Borrowings
   4,5,7,22       ￦ 870,320    2,719,197
Trade payables
   4,5,7       648,793    592,738
Other non-trade payables
   4,5,7,21       677,120    361,076
Other payables
   4,5,7       788,304    381,260
Other financial liabilities
   4,5,7,24,41       2,194    17,020
Provisions
   23       52,584    330,615
Current tax liabilities
      12,084    13,368
Other current liabilities
   25       26,840    25,906


      3,078,239    4,441,180


Non-current liabilities

Borrowings
   4,5,7,22       3,679,895    3,752,779
Other non-trade payables
   4,5,7,21       177,101    97,533
Other financial liabilities
   4,5,7,24,41       107,094    1,615
Defined benefit liabilities, net
   26       635,740    575,096
Other non-current liabilities
   25       52,370    41,048


      4,652,200    4,468,071


Total liabilities
      7,730,439    8,909,251


Equity

Equity attributable to owners of the Parent Company

Capital stock
   1,28       3,568,645    3,488,419
Capital surplus
   28       3,406,083    3,053,874
Accumulated other comprehensive loss
   30       (108,807 ) (115,402 )
Retained earnings
   29       6,201,322    3,313,265


      13,067,243    9,740,156
Non-controlling interests
      (384 ) (714 )


Total equity
      13,066,859    9,739,442


Total liabilities and equity
      ￦ 20,797,298    18,648,693


See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31, 2013 and 2012
      Note    2013 2012
(Unaudited)
      (In millions of won, except per
share information)
Revenue
   6       ￦ 14,165,102    10,162,210
Cost of sales
   33       (8,864,587 ) (8,550,989 )


Gross profit
      5,300,515    1,611,221
Selling and administrative expense
   33,34       (1,920,730 ) (1,838,570 )
Financial income
   36       560,570    689,709
Financial costs
   36       (747,329 ) (682,594 )
Share of profit of equity-accounted investees
   16       19,256    16,713
Other income
   35       368,513    67,130
Other expense
   35       (505,870 ) (62,910 )


Profit (loss) before income tax (benefit)
      3,074,925    (199,301 )
Income tax expense (benefit)
   37       202,068    (40,506 )


Profit (loss) for the year
      2,872,857    (158,795 )


Other comprehensive income (loss)

Line item that will never be reclassified to profit or loss:

Remeasurements of defined benefit liability, net of tax
   26       15,587    (82,872 )
Line items that are or may be reclassified to profit or loss:

Available-for-sale financial assets — net change in unrealized fair value, net of tax
   15       (655 ) (1,896 )
Foreign operations — foreign currency translation differences, net of tax
      8,419    (216,490 )
Equity-accounted investees — share of other comprehensive loss, net of tax
   16       (1,226 ) (4,343 )


Other comprehensive income (loss), net of tax
      22,125    (305,601 )


Total comprehensive income (loss) for the year
      ￦ 2,894,982    (464,396 )


Profit (loss) for the year attributable to:

Owners of the Parent Company
      ￦ 2,872,470    (158,886 )
Non-controlling interests
      387    91
Total comprehensive income (loss) for the year attributable to:

Owners of the Parent Company
      2,894,652    (464,267 )
Non-controlling interests
      330    (129 )
Earnings (loss) per share

Basic and diluted earnings (loss) per share (won)
   38       4,045    (233 )
See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Unaudited Consolidated Statements of Changes in ~~connection with~~Equity
For the year ended December 31, 2012
   Attributable to owners of the Parent Company
   Capital stock    Capital
surplus Accumulated
other
comprehensive
income (loss) Other
components
of equity Retained
earnings Total Non-
controlling
interests Total equity
   (In millions of won)
Balance at January 1, 2012
   ￦ 2,978,498       1,229,052    107,107    5,762    3,555,323    7,875,742    (471 ) 7,875,271
Total comprehensive loss

Loss for the year
   —       —    —    —    (158,886 ) (158,886 ) 91    (158,795 )
Other comprehensive loss
   —       —    (222,509 ) —    (82,872 ) (305,381 ) (220 ) (305,601 )




Total comprehensive loss
   —       —    (222,509 ) —    (241,758 ) (464,267 ) (129 ) (464,396 )




Transactions with owners of the Parent Company

Issuance of common stock
   509,250       1,816,726    —    —    —    2,325,976    —    2,325,976
Exercise of conversion rights
   52       210    —    —    —    262    —    262
Exercise of stock options
   619       4,400    —    (2,200 ) —    2,819    —    2,819
Expiration of stock options
   —       3,562    —    (3,562 ) —    —    —    —
Changes in the Parent Company’s ownership interest in subsidiaries
   —       (76 ) —    —    —    (76 ) (105 ) (181 )
Others
   —       —    —    —    (300 ) (300 ) (9 ) (309 )




Total transactions with owners of the Parent Company
   509,921       1,824,822    —    (5,762 ) (300 ) 2,328,681    (114 ) 2,328,567




Balance at December 31, 2012
   ￦ 3,488,419       3,053,874    (115,402 ) —    3,313,265    9,740,156    (714 ) 9,739,442




See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Changes in Equity
For the year ended December 31, 2013
   Attributable to owners of the Parent Company
   Capital stock    Capital
surplus    Accumulated
other
comprehensive
income (loss) Other
components
of equity    Retained
earnings    Total    Non-
controlling
interests Total equity
   (In millions of won)
Balance at January 1, 2013
   ￦ 3,488,419       3,053,874       (115,402 ) —       3,313,265       9,740,156       (714 ) 9,739,442
Total comprehensive income

Profit for the year
   —       —       —    —       2,872,470       2,872,470       387    2,872,857
Other comprehensive income (loss)
   —       —       6,595    —       15,587       22,182       (57 ) 22,125












Total comprehensive income
   —       —       6,595    —       2,888,057       2,894,652       330    2,894,982












Transactions with owners of the Parent Company

Exercise of conversion rights
   80,226       352,209       —    —       —       432,435       —    432,435












Total transactions with owners of the Parent Company
   80,226       352,209       —    —       —       432,435       —    432,435












Balance at December 31, 2013
   ￦ 3,568,645       3,406,083       (108,807 ) —       6,201,322       13,067,243       (384 ) 13,066,859












See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2013 and 2012
      Note    2013 2012
(Unaudited)
      (In millions of won)
Cash flows from operating activities

Cash generated from operating activities
   42       ￦ 6,521,553    2,420,894
Interest received
      58,888    81,931
Interest paid
      (199,553 ) (275,169 )
Dividends received
      17,414    12,098
Income tax paid
      (26,246 ) (28,103 )


Net cash provided by operating activities
      6,372,056    2,211,651


Cash flows from investing activities

Decrease in short-term financial instruments
      3,927,831    2,754,789
Increase in short-term financial instruments
      (4,956,446 ) (3,252,006 )
Decrease in long-term financial instruments
      11    —
Increase in long-term financial instruments
      (1,112 ) —
Proceeds from sale of held-to-maturity financial assets
      29,670    —
Acquisition of held-to-maturity financial assets
      (275,479 ) —
Collection of loans and other receivables
      2,728    11,640
Increase in loans and other receivables
      (5,969 ) (8,661 )
Cash inflows from transaction of derivatives
      3,656    2,419
Cash outflows from transactions of derivatives
      (6,550 ) (44,507 )
Proceeds from disposal of assets classified as held for sale
      —    23
Proceeds from disposal of available-for-sale financial assets
      331    11,190
Acquisition of available-for-sale financial assets
      (115,564 ) (3,618 )
Proceeds from disposal of property, plant and equipment
      15,509    35,809
Acquisition of property, plant and equipment
      (3,205,797 ) (3,772,879 )
Proceeds from disposal of intangible assets
      200    1,226
Acquisition of intangible assets
      (301,496 ) (159,072 )
Acquisition of investments in subsidiaries
   44       (3,648 ) (274,732 )


Net cash used in investing activities
      ￦ (4,892,125 ) (4,698,379 )


Cash flows from financing activities

Proceeds from borrowings
      ￦ 3,528,687    6,966,003
Repayments of borrowings
      (5,028,676 ) (7,377,491 )
Proceeds from issuance of common stock
      —      2,328,791
Acquisition of investments in subsidiaries
      —      (181 )


Net cash provided by (used in) financing activities
      (1,499,989 ) 1,917,122


Effect of movements in exchange rates on cash and cash equivalents
      (6,462 ) (15,795 )


Net decrease in cash and cash equivalents
      (26,520 ) (585,401 )
Cash and cash equivalents at the beginning of year
      658,387    1,243,788


Cash and cash equivalents at the end of year
      ￦ 631,867    658,387


See accompanying notes to the consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
1.    Reporting Entity
General information about SK hynix, Inc. (the “Parent Company” or the “Company”) and its ~~unsettled cross currency interest rate swap contract which cash flow hedge accounting~~subsidiaries (collectively “the Group”) is ~~applied, an accumulated loss~~as follows:
The Parent Company is engaged in the manufacture, distribution and sales of semiconductor products and its shares have been listed on ~~valuation of derivatives amounting to~~ W~~5,798 million (net of tax effect totaling~~ W~~1,193 million and foreign exchange translation loss arising from U.S. dollar denominated long-term borrowings totaling~~ W~~19,090 million) is accounted for as accumulated other comprehensive loss.~~
the Korea Exchange since 1996. The ~~Company has entered intofloating-to-fixed~~ ~~cross currency swap contracts with HSBC and SMBC Bank to hedge the foreign currency risk~~Parent Company’s headquarters are located in Icheon, South Korea, and the ~~interest rate risk of unguaranteed Japanese yen denominated bonds, with face amounts totaling JPY12,500,000,000 issued on November 13, 2007.~~ Group has manufacturing facilities in Icheon and Cheongju, South Korea, and Wuxi, China.
As of December 31, ~~2010, in connection with its unsettled cross currency interest rate swap contracts which cash flow hedge accounting is applied, an accumulated gain on valuation~~2013, the shareholders of ~~derivatives amounting~~the Parent Company and their shareholders are as follows:
Shareholder
   Number of
shares    Percentage of
ownership (%)
SK Telecom Co., Ltd.
   146,100,000       20.57
National Pension Service
   66,460,851       9.36
Share Management Council(*)
   12,961,976       1.82
Individual investors
   484,678,064       68.25




   710,200,891       100.00




(*) As of December 31, 2013, the number of shares held by each member of Share Management Council is as follows:
Shareholder
   Number of
shares    Percentage of
ownership (%)
Korea Exchange Bank
   10,092,500       1.42
Korea Finance Corporation
   1,214,309       0.17
Shinhan Bank
   850,000       0.12
Other financial institutions
   805,167       0.11




   12,961,976       1.82




According to W~~6 million (net of tax effect totaling~~ W~~1,525 million and foreign exchange translation loss arising from unguaranteed Japanese yen denominated bonds totaling~~ W~~70,581 million) is accounted for as accumulated other comprehensive income.~~
the share purchase agreement dated November 14, 2011, between SK ~~Broadband~~Telecom Co., Ltd. and the Share Management Council, the Share Management Council should exercise its voting right on the shares following SK Telecom Co., ~~a subsidiary~~Ltd.’s decision in designating officers of the Parent Company or other matters unless this conflicts with the Share Management Council’s interest.
Accordingly, in substance, SK Telecom Co., Ltd. has ~~entered into~~the voting rights over the Share Management Council’s shares as of December 31, 2013.
In addition, according to the share purchase agreement, SK Telecom Co., Ltd. or a third party designated by SK Telecom Co., Ltd. has share purchase option when the Share Management Council sells all or a part of its shares. The exercise period of the share purchase option would be automatically renewed until the shareholding of the Share Management Council drops below 10 million shares.
~~fixed-to-fixed~~ ~~cross currency swap contracts with Korea Development Bank~~SK HYNIX, INC. and ~~other five banks~~Subsidiaries
Notes 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.~~ Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
1.    Reporting Entity,  continued
As of December 31, ~~2010, in connection with its unsettled foreign currency swap contract~~2013, the Group’s consolidated subsidiaries is as follows:
Names of subsidiaries
   Number of
Shares    Ownership
(%)    Locations
Remarks
SK hyeng Inc.
   674,327       100       Korea    Domestic subsidiary
SK hystec Inc.
   277,203       100       Korea    Domestic subsidiary
SK hynix America Inc. (SKHYA)
   6,285,587       97.7       U.S.A.    Overseas sales subsidiary
Hynix Semiconductor Manufacturing America Inc. (HSMA)
   200,000,100       100       U.S.A.    Discontinued subsidiary
SK hynix Deutschland GmbH (SKHYD)
   Certificate       100       Germany    Overseas sales subsidiary
SK hynix Europe Holding Ltd. (SKHYE)
   -       100       U.K.    Under liquidation
SK hynix U.K. Ltd. (SKHYU)
   186,240,200       100       U.K.    Overseas sales subsidiary
SK hynix Asia Pte. Ltd. (SKHYS)
   196,303,500       100       Singapore    Overseas sales subsidiary
SK hynix Semiconductor India Pvt. Ltd. (SKHYIS)
   27,000       100       India    Overseas sales subsidiary
SK hynix Semiconductor HongKong Ltd. (SKHYH)
   170,693,661       100       Hong Kong    Overseas sales subsidiary
SK hynix Semiconductor (Shanghai) Co., Ltd. (SKHYCS)
   Certificate       100       China    Overseas sales subsidiary
SK hynix Japan Inc. (SKHYJ)
   20,000       100       Japan    Overseas sales subsidiary
SK hynix Semiconductor Taiwan Inc. (SKHYT)
   35,725,000       100       Taiwan    Overseas sales subsidiary
SK hynix Semiconductor (China) Ltd. (SKHYCL)
   Certificate       100       China    Manufacturing subsidiary
SK hynix Semiconductor (Wuxi) Ltd. (SKHYMC)
   Certificate       100       China    Manufacturing subsidiary
SK hynix (Wuxi) Semiconductor Sales Ltd. (SKHYCW)
   Certificate       100       China    Overseas sales subsidiary
SK hynix Italy S.r.l (SKHYIT)
   Certificate       100       Italy    Overseas R&D center
SK hynix memory solutions Inc. (SKHMS)
   105       100       U.S.A.    Overseas R&D center
SK hynix Flash Solution Taiwan (SKHYFST)
   Certificate       100       Taiwan    Overseas R&D center
SK APTECH Ltd. (SKAPTECH)
   50,000,000       100       Hong Kong    Holding company
SK hynix Semiconductor (Chongqing) Ltd. (SKHYCQL)
   Certificate       100       China    Manufacturing subsidiary
Subsidiaries newly included or excluded from the consolidation during the year ended December 31, 2013 is as follows:
Company
Reason
Newly included
SK hynix Flash Solution Taiwan (SKHYFST) Included in consolidation as subsidiaries due to acquisition of interests
SK APTECH Ltd. (SKAPTECH)
SK hynix Semiconductor (Chongqing) Ltd. (SKHYCQL)
Excluded
Ami Power Co., Ltd. Excluded from consolidation due to liquidation
SK HYNIX, INC. and Subsidiaries
Notes to ~~which~~ the ~~cash flow hedge accounting is applied, an accumulated gain on valuation~~Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
1.    Reporting Entity,  continued
Major subsidiaries’ summarized statements of ~~derivatives amounting to~~ W~~8,768 million (excluding foreign exchange translation loss arising from U.S. dollar denominated bonds totaling~~ W~~100,350 million) is accounted for~~financial position as accumulated other comprehensive income. Meanwhile, in connection with the currency swap contract, loss on valuation of currency swap which was incurred before application of hedge accounting, amounting to W~~46,856 million is charged to current operations.~~
~~In addition, the Company has entered into afloating-to-fixed~~ cross currency swap contract with Mizuho Corporation Bank to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen denominated bonds, with face amounts totaling JPY3,000,000,000 issued on January 22, 2009. As of December 31, ~~2010, in connection with its unsettled cross currency interest rate swap contract which cash flow hedge accounting is applied, an accumulated gain on valuation~~2013 and 2012 are as follows:
   2013    2012 (Unaudited)
   Assets    Liabilities    Equity    Assets    Liabilities    Equity
   (In millions of won)
SK hynix America Inc. (SKHYA)
   ￦ 964,682       911,513       53,169       867,351       836,418       30,933
SK hynix Asia Pte.Ltd. (SKHYS)
   231,649       164,390       67,259       146,471       80,538       65,933
SK hynix Semiconductor HongKong Ltd. (SKHYH)
   353,248       284,438       68,810       326,673       275,851       50,822
SK hynix Japan Inc. (SKHYJ)
   302,971       250,962       52,009       194,730       141,766       52,964
SK hynix Semiconductor Taiwan Inc. (SKHYT)
   240,489       197,975       42,514       276,666       238,930       37,736
SK hynix Semiconductor (China) Ltd. (SKHYCL)
   3,652,044       1,212,007       2,440,037       3,234,346       848,071       2,386,275
SK hynix Deutschland GmbH (SKHYD)
   98,150       63,706       34,444       82,039       50,918       31,121
SK hynix U.K. Ltd. (SKHYU)
   78,020       66,080       11,940       81,677       71,264       10,413
Major subsidiaries’ summarized statements of ~~derivatives amounting to~~ W~~2,076 million (net of tax effect totaling~~ W~~586 million and foreign exchange translation gain arising from unguaranteed Japanese yen denominated bonds totaling~~ W~~4,219 million) is accounted for as accumulated other~~ comprehensive ~~income.~~
~~In addition, the Company has entered into afloating-to-fixed~~ cross currency swap contract with Bank of Tokyo-Misubish Bank to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen denominated bonds, with face amounts totaling JPY5,000,000,000 issued on March 5, 2009. As of December 31, 2010, in connection with unsettled cross currency interest rate swap contract which cash flow hedge accounting is applied, an accumulated gain on valuation of derivatives amounting to W~~466 million (net of tax effect totaling~~ W~~131 million and foreign exchange translation gain arising from unguaranteed Japanese yen denominated bonds totaling~~ W~~8,758 million) was accounted for as accumulated other comprehensive income.~~
~~In addition, the Company has entered intofixed-to-fixed~~ cross currency swap contracts with Morgan Stanley and other five banks to hedge the foreign currency risk of unguaranteed U.S. dollar dominated bonds, with face amounts totaling US$400,000,000 at annual fixed interest rate of 6.63% issued on July 20, 2007. As of December 31, 2010, in connection with its unsettled foreign currency swap contracts which cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W~~54,179 million (excluding tax effect~~

~~F-67~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~totaling~~ W~~15,281 million and foreign exchange translation gain arising from unguaranteed U.S. dollar denominated bonds totaling~~ W1,930 million) is accounted for as other comprehensive income. Meanwhile, in connection with the currency swap contract, loss on valuation of currency swap which was incurred before application of hedge accounting, amounting to W~~129,806 million is charged to current operations.~~
~~b.  Interest rate swap contract to which the cash flow hedge accounting~~
~~The Company has entered into afloating-to-fixed~~ ~~interest rate swap contract with Nonghyup Bank and other two 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 12, 2011. As of December 31, 2010, in connection with its unsettled interest rate swap contract which cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W~~5,720 million (net of tax effect totaling~~ W~~1,826 million) is accounted for as accumulated other comprehensive loss.~~
~~c.  Interest rate swap contract to which the hedge accounting is not applied~~
~~The Company has entered into afloating-to-fixed~~ interest rate swap contract with DBS and Calyon Bank the interest rate risk of floating rate U.S. dollar denominated bonds with face amounts totaling US$220,000,000 issued on April 29, 2009. In connection with unsettled interest rate swap contract to which the hedge accounting is not applied, loss on valuation of currency swap of W~~1,671 million and~~ W~~3,372 million~~income for the years ended December 31, ~~2010~~2013 and ~~2009, respectively, are charged to current operations.~~
~~As of December 31, 2010, fair values the Company’s derivative instruments recorded in assets or liabilities and details~~2012 are as ~~follows (in thousands of U.S. dollars, Japanese yen~~follows:
   2013
   Sales    Profit    Total
comprehensive
income
   (In millions of won)
SK hynix America Inc. (SKHYA)
   ￦ 5,187,848       23,547       23,547
SK hynix Asia Pte.Ltd. (SKHYS)
   1,203,290       2,385       2,385
SK hynix Semiconductor HongKong Ltd. (SKHYH)
   3,022,397       19,471       19,471
SK hynix Japan Inc. (SKHYJ)
   790,736       10,335       10,447
SK hynix Semiconductor Taiwan Inc. (SKHYT)
   1,769,055       6,680       6,680
SK hynix Semiconductor (China) Ltd. (SKHYCL)
   1,718,074       23,611       23,611
SK hynix Deutschland GmbH (SKHYD)
   594,166       2,440       2,440
SK hynix U.K. Ltd. (SKHYU)
   494,305       1,743       1,743
   2012 (Unaudited)
   Sales    Profit    Total
comprehensive
income
   (In millions of won)
SK hynix America Inc. (SKHYA)
   ￦ 3,848,368       10,498       10,498
SK hynix Asia Pte.Ltd. (SKHYS)
   693,598       4,619       4,619
SK hynix Semiconductor HongKong Ltd. (SKHYH)
   1,889,126       3,548       3,548
SK hynix Japan Inc. (SKHYJ)
   736,702       13,410       13,416
SK hynix Semiconductor Taiwan Inc. (SKHYT)
   1,428,484       3,815       3,815
SK hynix Semiconductor (China) Ltd. (SKHYCL)
   2,400,043       244,995       244,995
SK hynix Deutschland GmbH (SKHYD)
   415,572       2,534       2,534
SK hynix U.K. Ltd. (SKHYU)
   399,810       3,260       3,260
SK HYNIX, INC. and ~~millions of Korean won):~~

Fair Value
Designated

Duration
as Cash
Not

Type

Hedged Item

Amount
of Contract Flow Hedge Designated Total

Non-current assets:

Floating-to-fixed cross currency swap
U.S. dollar denominated
long-term borrowings US$ 100,000 Oct. 10, 2006
~ Oct. 10, 2013 12,099 — 12,099
Fix-to-fixed cross currency swap
U.S. dollar denominated
bonds US$ 400,000 Jul. 20, 2007
~ Jul. 20, 2027 (71,390 ) 129,806 58,416
Floating-to-fixed cross currency swap
Japanese yen
denominated bonds JPY 12,500,000 Nov. 13, 2007
~ Nov. 13, 2012 69,062 — 69,062
Fix-to-fixed cross currency swap
U.S. dollar denominated
bonds US$ 500,000 Feb. 1, 2005
~ Feb. 1, 2012 109,118 (46,856 ) 62,262

Total assets
W 118,889 W 82,950 W 201,839

Current liabilities:

Fix-to-fixed cross currency swap
U.S. dollar denominated
bonds US$ 300,000 Mar. 23, 2004
~ Apr. 1, 2011 W 7,848 W — W 7,848
Floating-to-fixed Interest rate swap
Long-term borrowings W 500,000 Jul. 28, 2008
~ Aug. 12, 2011 7,546 — 7,546
Non-current liabilities

Floating-to-fixed cross currency interest swap
Japanese yen
denominated bonds JPY 3,000,000 Jan. 22, 2009
~ Jan. 22, 2012 1,557 — 1,557
Floating-to-fixed cross currency interest swap
Japanese yen
denominated bonds JPY 5,000,000 Mar. 05, 2009
~ Mar. 5, 2012 8,161 — 8,161
Floating-to-fixed Interest rate swap
U.S. dollar denominated
bonds US$ 220,000 Apr. 29, 2009
~ Apr.29, 2012 — 5,043 5,043

W 25,112 W 5,043 W 30,155

~~F-68~~
Subsidiaries
Notes to the Consolidated Financial Statements
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~28.~~   ~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~The consolidated statements of cash flows are prepared using indirect method.~~
~~Significant non-cash transactions for~~For the years ended December 31, ~~2008, 2009~~2013 and ~~2010~~2012
2.     Significant Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements are ~~as follows (in millions of Korean won):~~

2008 2009 2010

Write-offs of accounts receivable-trade W 37,079 W 43,898 W 65,192
Acquisition of property and equipment asset through finance lease contract 76,364 10,709 26,690
Transfer from inventory to property and equipment 46,749 97,767 67,694
Acquisition of machinery by accounts payable 39,640 32,150 —
Transfer from construction in progress to machinery and other property and equipment — 1,622,669 1,546,369
~~29.~~   ~~SUBSEQUENT EVENT~~
On February 11, 2011, the Company disposed its common stock investment in SK C&C Co, Ltd, an available for sale investment and the Company’s ultimate parent company, of 2,050,000 shares (ownership 4.1%) for W~~200,695 million or~~ W~~97,900 per common share.~~
~~30.~~   ~~SEGMENT INFORMATION~~
The Company’s segments are based on the management’s disaggregation of the Company for making operating decisions. Operating segments that have similar economic characteristics and are similar in terms of the nature of their products and services, the nature of the production process, the type or class of customer, and methods of distributionset out below. These policies have been ~~aggregated into a segment.~~
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 had two operating segments, cellular telephone communication services and fixed-line telecommunication service since 2008. Cellular telephone communication services include cellular voice service, wireless data service and wireless internet services. Fixed-line telecommunication services include telephone services and internet services.
Other segments that cannot be classified into the above-mentioned two segments have been combined and disclosed in an “Other” category below. Other consists primarily of the operations from the leased line services, internet portal services and game manufacturing.

~~F-69~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Details of each segment for~~consistently applied to all the years ~~ended December 31, 2008, 2009 and 2010 are as follows (in millions~~presented, unless otherwise stated.
2.1    Basis of ~~Korean won):~~

For The Year Ended December 31, 2008
Cellular

Telephone
Fixed-line

Communication
Telecommunication
Consolidating
Consolidated
Service Service Other Sub-total Adjustments Amount

Total sales W 11,706,369 W 2,214,742 W 663,432 W 14,584,543 W (633,530 ) W 13,951,013
Internal sales 127,301 59,752 446,477 633,530 (633,530 ) —
Net sales 11,579,068 2,154,990 216,955 13,951,013 — 13,951,013
Operating income 2,256,564 22,762 (519,019 ) 1,760,307 — 1,760,307
Property and equipment and intangible assets 7,640,698 3,337,532 437,604 11,415,834 — 11,415,834
Depreciation and amortization 1,943,422 535,169 �� 276,769 2,755,360 — 2,755,360

For The Year Ended December 31, 2009
Cellular

Telephone
Fixed-line

Communication
Telecommunication
Consolidating
Consolidated
Service Service Other Sub-total Adjustments Amount

Total sales W 12,485,712 W 2,262,451 W 600,503 W 15,348,666 W (836,319 ) W 14,512,347
Internal sales 394,114 170,299 271,906 836,319 (836,319 ) —
Net sales 12,091,598 2,092,152 328,597 14,512,347 — 14,512,347
Operating income 2,371,663 (171,049 ) (319,379 ) 1,881,235 — 1,881,235
Property and equipment and intangible assets 7,870,203 3,378,390 909,611 12,158,204 — 12,158,204
Depreciation and amortization 2,031,472 591,606 106,930 2,730,008 — 2,730,008

For The Year Ended December 31, 2010
Cellular

Telephone
Fixed-line

Communication
Telecommunication
Consolidating
Consolidated
Service service Other Sub-total Adjustments Amount

Total sales W 13,431,734 W 2,585,812 W 680,832 W 16,698,378 W (1,263,005 ) W 15,435,373
Internal sales 592,987 421,554 248,464 1,263,005 (1,263,005 ) —
Net sales 12,838,747 2,164,258 432,368 15,435,373 — 15,435,373
Operating income 2,275,907 (178,487 ) (155,117 ) 1,942,303 — 1,942,303
Property and equipment and intangible assets 7,564,433 3,321,625 719,179 11,605,237 — 11,605,237
Depreciation and amortization 2,189,653 585,038 94,077 2,868,768 — 2,868,768
~~31.~~  Preparation ~~K-IFRS ADOPTION PLAN AND STATUS~~
In accordance with IFRS adoption roadmap released by the Financial Supervisory Commission in March 2007, the Company is required to prepare financial statements under the Korean International Financial Reporting Standards~~(“K-IFRS”)~~ ~~beginning January 1, 2011. In April 2008, the Company set up a task force for the adoption and hired outside consulting firm to evaluate the impact thatK-IFRS~~ ~~may have on the Company’s financial~~

~~F-70~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~statements, as well as to train the Company’s employees. The Company performed the following for its preparation ofK-IFRS~~ ~~adoption:~~
(1) Analysis of impact on IFRS adoption and plan: The Company performed preliminary analysis on the impact that K-IFRS may have on the Company’s accounting policy, financial reporting and financial system.
(2) Designing and establishing: The Company performed analysis on the impact that K-IFRS may have on the Company’s accounting policy, financial reporting and financial system, and alternatives. The Company also trained its relevant employees. In addition, the Company made changes to its operating procedures and systems to process reliable financial data in accordance with K-IFRS.
~~As of December 31, 2010, the Company has completed the above procedures and is currently preparing financial statements in accordance with K-IFRS as of and after conversion date of January 1, 2011.~~
~~32.~~   ~~RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES~~
~~The~~These 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~~International Financial Reporting Standards as issued by the ~~United States~~International Accounting Standards Board (IASB). They were authorized for issue by the Parent Company’s board of ~~America (“U.S. GAAP”).~~

~~F-71~~
directors on January 27, 2014.
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
The ~~following reconciles net income for the years ended December 31, 2008, 2009 and 2010 and shareholders’ equity as~~preparation of ~~December 31, 2008, 2009 and 2010 under Korean GAAP as reported in~~ the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the ~~net income~~consolidated financial statements are disclosed in note 3.
2.2    Changes in Accounting Policy and ~~shareholders’ equity amounts determined under U.S. GAAP, giving effect to adjustments~~Disclosures
New standards, amendments and interpretations issued and effective for the ~~differences listed above (in millions~~financial year beginning January 1, 2013, and adopted by the Group are as follows:
Presentation of ~~Korean won, except per share amounts):~~

Note
Year Ended December 31,
Reference 2008 2009 2010
Net income based on Korean GAAP W 972,338 W 1,055,606 W 1,297,176
Adjustments:
Loss on impairment of investment securities 32 .a 172,597 2,896 1,020
Reversal of amortization of goodwill 32 .b 185,483 168,590 149,571
Goodwill impairment 32 .b (106,046 ) — —
Intangible assets 32 .b (10,932 ) (3,032 ) (3,566 )
Capitalization of foreign exchange losses and interest expenses related to tangible assets 32 .c 4,356 7,616 (545 )
Capitalization of interest expenses related to purchases of intangible assets 32 .c 5,272 5,272 5,272
Nonrefundable activation fees for wireless service only 32 .d (21,991 ) 40,659 9,931
Convertible bonds payable 32 .e (30,407 ) 103,657 (36,511 )
Currency and interest rate swap 32 .f (478,874 ) 543,802 (88,111 )
Provision for credit loss 32 .g — — 16,077
Consolidation of variable interest entity 32 .h (34,303 ) (36,260 ) —
Investment in preferred stock 32 .i — — 6,460
Scope of consolidation 32 .j 187,833 (3,920 ) 6,763
Reclassification of SK C&C investment 32 .k 47,645 (94,327 ) —
Retroactive application of equity method of accounting on SKBB investment 32 .l (21,025 ) — —
Business combination 32 .m — (340,979 ) 33,758
Asset Securitization Transactions 32 .n — 15,489 (15,489 )
FIN 48 effect 32 .o 2,778 2,711 (53,869 )
Effect of changes in tax law 32 .o 30,066 — —
Tax effect of the reconciling items 32 .p 46,947 (111,098 ) 68,684

Net income based on U.S. GAAP W 951,737 W 1,356,682 W 1,396,621
Less net loss attributable to non-controlling interest 121,129 123,044 128,470

Net income attributable to the Company W 1,072,866 W 1,479,726 W 1,525,091

Weighted average number of common shares outstanding 72,765,557 72,346,763 71,942,387

Earnings per share based on U.S. GAAP:
Continuing operation — Basic earnings per share W 11,406 W 17,812 W 21,187

    — Diluted earnings per share W 11,327 W 17,575 W 20,829

Discontinued operation — Basic earnings per share W 3,338 W 2,641 W 12

       — Diluted earnings per share W 3,279 W 2,570 W 12

Items of Other Comprehensive Income (Amendments to IAS 1)

~~F-72~~
IAS 19, Employee Benefits
IFRS 10, Consolidated Financial Statements
IFRS 11, Joint Arrangements
IFRS 12, Disclosures of Interests in Other Entities
IFRS 13, Fair Value Measurement
The nature and effects of the changes are explained below.
(a)    Presentation of Items of Other Comprehensive Income
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Note
Year Ended December 31,
Reference 2008 2009 2010

Shareholders’ equity based on Korean GAAP Adjustments: W 11,824,440 W 12,344,625 W 12,478,649
Reversal of amortization of goodwill 32.b 1,026,967 1,195,557 1,345,128
Goodwill impairment 32.b (118,570 ) (118,570 ) (118,570 )
Capitalization of foreign exchange losses and interest expenses related to tangible assets 32.c 62,098 69,714 69,169
Capitalization of interest expenses related to purchase of intangible assets 32.c (42,572 ) (37,300 ) (32,028 )
Nonrefundable activation fees for wireless service only 32.d (398,358 ) (357,699 ) (347,768 )
Convertible bonds payable 32.e (43,049 ) (32,459 ) (68,230 )
Currency and interest rate swap 32.f (45,503 ) 10,375 (6,511 )
Provision for credit loss 32.g — — 15,964
Consolidation of variable interest entity 32.h (32,676 ) — —
Investment in preferred stock 32.i — — 6,359
Scope of consolidation 32.j (801,413 ) (89,175 ) (93,187 )
Reclassification of SK C&C investment 32.k (7,114 ) — —
Retroactive application of equity method of accounting on SKBB investment 32.l (62,382 ) — —
Business combination 32.m — 94,236 116,410
Asset Securitization Transactions 32.n — 15,489 —
FIN 48 effect 32.o (10,440 ) (7,683 ) (61,552 )
Investment securities without readily determinable fair value 32.q — 8,833 5,000
Determination of acquisition cost of equity interest in subsidiary 32.r 130,791 130,791 130,791
Additional equity investment in subsidiaries 32.s 1,052,887 1,016,390 1,045,153
Loans receivable for stock issued to employees 32.t (60,908 ) (57,615 ) (43,052 )
Tax effect of the reconciling items 87,821 75,263 131,008
Shareholders’ equity based on U.S. GAAP W 12,562,019 W 14,260,772 W 14,572,733

Controlling interest W 12,215,192 W 13,186,782 W 13,724,876

Non-controlling interest W 346,827 W 1,073,990 W 847,857

The ~~significant differences~~amendment requires entities to group items presented in other comprehensive income based on whether they are ~~described below. Other differences do not have a significant effect~~potentially reclassifiable to profit or loss subsequently. The Group applies the amendment retroactively and there is no impact of the application of this amendment on ~~either consolidated net~~its total comprehensive income or ~~shareholders’ equity.~~
a.   ~~Impairment of Investment Securities and Recoveries~~
~~Under Korean GAAP, if~~loss.
(b)    Employee Benefits
The amendment requires entities to immediately recognize all actuarial gains and losses incurred in other comprehensive income or loss. All past service costs incurred are immediately recognized in accordance with the ~~collectible value from the securities is less than acquisition costs based on objective evidence such as bankruptcy of investees, an impairment loss is recognized. In addition, the duration~~change of the ~~impairment in relation to~~plan, and the ~~forecasted recovery of fair value is not considered for Korean GAAP purposes. Under U.S. GAAP, if the decline in fair value is judged to be other than temporary, the cost basis~~previous separate calculation of the ~~individual securities are written down to fair value as its new~~interest cost ~~basis~~ and the ~~amount~~expected returns on plan assets has been revised to calculate net interest expense (income) by applying the discount rate used in the defined benefit obligation measurement in the net defined benefit liabilities (assets). There is no material impact of the ~~write-down is recognized in~~
~~F-73~~
application of this amendment on the consolidated financial statements.
(c)    Consolidated Financial Statements
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
current earnings. Other than temporary impairment is determined based on evidence-based judgment related to potential recovery of the declined fair value up to (or beyond) the cost of investment in the future and the severity and duration of the impairment in relation to the forecasted recovery of fair value. Due to such differences, for U.S. GAAP purposes, losses on impairment of investment securities for the years ended December 31, 2008, 2009 and 2010 increased by W~~1,391 million nil and nil respectively, when compared to that under Korean GAAP.~~
~~Furthermore, certainavailable-for-sale~~ securities which impairment losses had been previously recognized, under U.S. GAAP but not for Korean GAAP purposes, were sold or impairment loss was recognized for Korean GAAP purposes during the year ended December 31, 2008, 2009 and 2010. As a result ~~disposal losses~~of IFRS 10, the Group has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from ~~such~~its involvement with the
~~available-for-sale~~ ~~securities~~SK HYNIX, INC. and ~~impairment losses that were recognized for Korean GAAP purposes, for the year ended December 31, 2008, 2009 and 2010 amounting to~~ W~~173,988 million,~~ W~~2,896 million and~~ W~~1,020 million respectively, which were reversed for U.S. GAAP purposes. Consequently for the years ended December 31, 2008, 2009 and 2010 a total decrease in impairment loss of~~ W~~172,597 million,~~ W~~2,896 million and~~ W~~1,020 million, occurred for U.S. GAAP purposes from Korean GAAP purposes.~~
~~Under Korean GAAP, any subsequent recoveries of impaired~~Subsidiaries
~~available-for-sale~~ ~~securities andheld-to-maturity~~ ~~securities are allowed and result in an increase of the securities’ carrying amount up~~Notes to the original acquisition cost, while the related recovery gains are reported in current earnings up to the previously recognized impairment loss amount; as reversal of loss on impairment of investment securities. Under U.S. GAAP, any subsequent increase in carrying amount of the impaired and written downConsolidated Financial Statements
~~held-to-maturity~~ ~~securities is not allowed and any subsequent increase in fair value ofavailable-for-sale~~ ~~securities is reported in other comprehensive income.~~ For the years ended December 31, ~~2008, 2009~~2013 and ~~2010 there~~2012
2.     Significant Accounting Policies,  continued
investee and ability to use its power to affect those returns. The adoption of this standard does not have ~~been no subsequent recoveries~~any impact on the consolidation scope in the consolidated financial statements.
(d)    Joint Arrangements
As a result of ~~impairedavailable-for-sale~~ ~~securities, as such there are no differences to reconcile between~~IFRS 11, the ~~two GAAPs.~~
~~The cumulative impairment amounts discussed above as of December 31, 2008, 2009 and 2010 are~~ W~~8,023 million,~~ W~~5,127 million and~~ W~~4,107 million respectively. These amounts represent declines~~Group has changed its accounting policy for its interests in ~~value reported~~joint arrangements. Under IFRS 11, the Group has classified its interests in retained earnings for U.S. GAAP purposes. However, for Korean GAAP purposes, these declines in value are reported in Accumulated Other Comprehensive Income. There is no GAAP difference in total shareholders’ equity, but rather within the components of shareholders’ equity — Retained Earning versus Accumulated Other Comprehensive Income. Hence, no related reconciling item exists from Korean GAAP shareholder’s equity to U.S. GAAP shareholder’s equity.
b.   ~~Goodwill and Other Intangible Assets~~
~~Amortization~~
~~Under Korean GAAP, business combinations involving other than commonly controlled entities are accounted for~~joint arrangements as either ~~a purchase~~joint operations (if the Group has rights to the assets, and obligations for the liabilities, relating to an arrangement) or ~~a pooling~~joint ventures (if the Group has rights only to the net assets of ~~interests, depending on~~an arrangement). When making this assessment, the ~~specific circumstances. In case~~Group considered the structure of the ~~Company, all business combinations are~~arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification. The Group has re-evaluated its involvement in its only joint arrangement and has reclassified the investment from a jointly controlled entity to a joint venture. Notwithstanding the reclassification, the investment continues to be accounted for using the purchase method under Korean GAAP. Under the purchase method, 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.
Under U.S. GAAP, effective July 1, 2001, the purchase method of accounting is required for all business combinations other than those under common control. In addition, for fiscal years beginning after December 31, 2001, goodwill related to a company’s subsidiaries and investees, and intangible assets with indefinite useful life are not 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.
~~Under Korean GAAP, the Company records amortization of goodwill related to the Company’s subsidiaries and~~ equity method ~~investees. Due to~~and there has been no impact on the ~~difference~~consolidated financial statements.
(e)    Disclosures of Interests in the scope of consolidation, as discussed in Note 32(j), certain investments (entities) considered as a subsidiary under Korean GAAP are considered as an equity method investee under U.S. GAAP and vice versa. Other Entities
As a result of IFRS 12, the Group has expanded its disclosures about its interests in subsidiaries (see Note 1) and equity-accounted investees (see Note 16).
(f)    Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other IFRSs. It unifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7. As a result, the Group has included additional disclosures in this regard (see Note 5).
In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s assets and liabilities.
New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2013, and not early adopted by the Group are as follows:
IAS 32, Financial Instruments: Presentation
The nature and effects of the changes are explained below.
(a)    Financial Instruments: Presentation
Amendment to IAS 32, Financial Instruments: Presentation, provides that the right to offset must not be contingent on a future event and must be legally enforceable in all of circumstances; and if an entity can settle amounts in a manner such that outcome is, in effect, equivalent to net settlement, the entity will meet the net settlement criterion. This amendment is effective for annual periods beginning on or after January 1, 2014, and the Group is assessing the impact of application of this amendment on its consolidated financial statements.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, ~~2008, 2009~~2013 and ~~2010,~~

~~F-74~~
2012
2.     Significant Accounting Policies,  continued
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
2.3    Consolidation
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
W~~156,126 million,~~ W~~160,091 million and~~ W~~143,718 million of goodwill amortization related to entities (considered as a consolidated subsidiary under U.S. GAAP) was reversed for U.S. GAAP purposes. And,~~ W~~29,357 million,~~ W~~8,499 million and~~ W5,853 million over the same period, of goodwill amortization relating to investments (considered as equity method investees under U.S. GAAP) was reversed for U.S. GAAP purposes. In total, goodwill amortization (including equity method investees goodwill amortization) of W~~185,483 million,~~ W~~168,590 million and~~ W~~149,571 million, respectively, was reversed over the same period.~~
~~As a result, under U.S. GAAP the Company’s shareholders’ equity increased as of December 31, 2008, 2009 and 2010; relating to amortization of goodwill by~~ W~~982,458 million,~~ W~~1,142,549 million and~~ W~~1,286,267 million, respectively, and relating to amortization of goodwill related to equity method investees by~~ W~~44,509 million,~~ W~~53,008 million and~~ W~~58,861 million over the same period, when compared to that under Korean GAAP. In total, under U.S. GAAP the Company’s shareholder’s equity increased as of December 31, 2008, 2009 and 2010, by~~ W~~1,026,967 million,~~ W~~1,195,557 million and~~ W~~1,345,128 million, respectively.~~
~~Impairment~~
Under U.S. GAAP, 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. A reporting unit is an operating segment, or one level below an operating segment.
The operating segments (i) that engage in business activities from which they earn revenues and expenses; (ii) whose operating results are regularly reviewed by the Company’s chief operating decision maker and (iii) for which discrete financial information is available consist of the Company and each and every subsidiary. And, there is no one level below an operating segment as discrete financial information for separate components of the Company is not available. To test impairment of goodwill, the fair value of a reporting unit which includes goodwill is compared with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, the carrying amount of the reporting unit goodwill is compared to the implied fair value of goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of goodwill, an impairment loss equal to such excess should be recognized in current operations; the loss recognized cannot exceed the carrying amount of goodwill. Under U.S. GAAP, for the years ended December 31, 2008, 2009 and 2010, the Company recognized additional impairment loss of goodwill which was related with subsidiaries of W106,046, nil and nil, respectively; 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. Due to such goodwill impairment, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by W~~118,570 million,~~ W~~118,570 million, and~~ W~~118,570 million, respectively, when compared to that under Korean GAAP.~~
~~Goodwill as of December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010

Gross carrying amount W 3,612,577 W 4,310,820 W 4,379,945
Accumulated impairment (119,712 ) (119,712 ) (119,712 )

Ending of period W 3,492,865 W 4,191,108 W 4,260,233

~~F-75~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Changes in the carrying amount of goodwill under U.S. GAAP for the years ended December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010

Beginning of period W 3,599,135 W 3,492,865 W 4,191,108
Goodwill increase due to acquisition and subsidiary change during the period 923 699,373 69,125
Goodwill impairment losses (107,138 ) — —
Goodwll disposed of during the period (55 ) (1,130 ) —

Ending of period W 3,492,865 W 4,191,108 W 4,260,233

~~A reconciliation of the recorded goodwill between U.S. GAAP and Korean GAAP as of December 31, 2008, 2009 and 2010 is as follows (in millions of Korean won):~~

2008 2009 2010

Goodwill amount under Korean GAAP W 1,899,739 W 1,737,966 W 1,618,933
Reversal of accumulated goodwill amortization for subsidiaries 982,458 1,142,549 1,286,267
Decrease of goodwill due to scope of consolidation (391,649 ) (383,494 ) (400,071 )
Acquisition of the investment in SK Broadband Co., Ltd. (Refer to Note 32.m) — 55,856 55,856
Acquisition of lease line business from SK Networks Co., Ltd. (Refer to Note 32.m) — 635,337 635,337
Merger of TU Media Corporation (Refer to Note 32.m) — — 61,017
Increase of goodwill due to acquisition cost adjustment (Refer to Note 32.r) 108,026 108,026 108,026
Increase of goodwill due to the additional equity investment in subsidiaries (Refer to Note 32.s) 1,012,861 1,013,438 1,013,438
Accumulated impairment loss (118,570 ) (118,570 ) (118,570 )

Goodwill amount under U.S GAAP W 3,492,865 W 4,191,108 W 4,260,233

~~Other Intangible Assets~~
Under Korean GAAP, certain development costs can be recorded as intangible assets. Under U.S. GAAP development costs are expensed as incurred. Due to this difference and certain other differences related to intangible assets, for U.S. GAAP purposes, net income for the years ended December 31, 2008, 2009 and 2010 decreased by W~~10,932 million,~~ W~~3,032 million and~~ W~~3,566 million, respectively, when compared to that under Korean GAAP.~~
The Company does not have any intangible assets with indefinite lives as of December 31, 2008, 2009 and 2010. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.

~~F-76~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~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, 2008 December 31, 2009 December 31, 2010
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 (459,178 ) W 1,188,547 W (549,507 ) W 1,290,979 W (643,932 )
Customer relationship (4 years) 106,783 (100,671 ) 363,202 (119,288 ) 363,202 (168,048 )
Software purchased (5 years) 1,216,273 (604,412 ) 1,392,644 (809,635 ) 1,688,913 (1,096,580 )
Software development cost (5 years) 207,294 (188,028 ) 225,073 (203,086 ) 240,897 (223,524 )
Other (2 to 20 years) 377,121 (164,433 ) 598,293 (353,208 ) 1,038,629 (417,002 )

Total W 3,096,018 W (1,516,722 ) W 3,767,759 W (2,034,724 ) W 4,622,620 W (2,549,086 )

~~Intangible asset amortization expense for the years ended December 31, 2008, 2009 and 2010 was~~ W~~426,760 million,~~ W~~520,180 million and~~ W~~506,636 respectively. It is estimated to be~~ W~~439,208 million,~~ W~~319,190 million,~~ W~~273,164 million,~~ W~~303,225 million and~~ W~~220,537 million for the years ending December 31, 2011, 2012, 2013, 2014 and 2015, respectively, primarily related to the IMT license, software purchased and other.~~
c.   ~~Capitalization of Foreign Exchange Losses or Gains and Interest Expenses~~
Under Korean GAAP, until the year ended December 31, 2002, interest expenses and foreign exchange losses or gains incurred were capitalized when they were related to debt used to finance the construction of property, plant and equipment (or offset against property additions). Effective January 1, 2003, under Korean GAAP, a company is allowed to charge such interest expense and foreign exchange losses or gains to current earnings. For Korean GAAP purposes, beginning the year ended December 31, 2003, the Company adopted the accounting policy not to capitalize such financing costs, on a prospective basis.
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 earnings as incurred. Due to such differences, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 increased by W~~62,098 million,~~ W~~69,714 million and~~ W~~69,169 million, respectively, and net income for the years ended December 31, 2008 and 2009 increased by~~ W~~4,356 million and~~ W~~7,616 million, respectively, and net income for the year ended December 31, 2010 decreased by~~ W~~545 million when compared to that under Korean GAAP.~~
Under Korean GAAP, until the year ended December 31, 2002, interest expense related to debt used to finance the purchase of intangible assets was capitalized until the asset was put in use. Under Korean GAAP, effective January 1, 2003, the guidance was revised to allow a company to charge such interest expense to current earnings as incurred. Beginning the year ended December 31, 2003, the Company adopted the accounting policy not to capitalize such interest expense and rather expense it in current earnings as incurred, on a prospective basis. For U.S. GAAP purposes, the CompanyGroup has ~~historically and will continue to charge such interest expense to current earning as incurred.~~
Due to the historical difference in recognizing interest expense related to debt used to finance the purchase of a intangible asset being capitalized under Korean GAAP and expensed under U.S. GAAP, up to the year ended December 31, 2003, shareholders’ equity as of December 31, 2008, 2009 and 2010 was less by W~~42,572 million,~~ W~~37,300 million, and~~ W~~32,028 million, respectively, and net income was greater by~~ W~~5,272 million in each~~

~~F-77~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~period, for U.S. GAAP purposes compared to that under Korean GAAP, as of and for the years ended December 31, 2008, 2009 and 2010.~~
d.   ~~Nonrefundable Activation Fees~~
~~Activation fees when the Company provides only Wireless Service~~
Under Korean GAAP, the Company recognizes nonrefundable activation revenues and costs when the activation service is performed. For U.S. GAAP purposes, the Company defers such revenues and costs and amortizes it over the expected term of the customer relationship. As of December 31, 2010, the expected term of the customer relationship ranged from 36 months to 37 months. Due to such differences in timing of revenue recognition, for U.S. GAAP purposes, net income for the year ended December 31, 2008 decreased by W~~21,991 million, and net income for the years ended December 31, 2009 and 2010 increased by~~ W~~40,659 million and~~ W~~9,931 million, respectively, when compared to that under Korean GAAP. In addition, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by~~ W~~398,358 million,~~ W~~357,699 million and~~ W~~347,768 million, respectively, when compared to that under Korean GAAP.~~
~~Activation fees when the Company provides both Wireless Service and Device~~
Beginning the year ended December 31, 2009, the Company provides both wireless services and devices. Under Korean GAAP, the Company recognizes nonrefundable activation revenues from the sale of its wireless services along with its devices when the activation service is performed. Under U.S. GAAP, the Company determined that the sale of its wireless services along with its devices constitutes a revenue arrangement with multiple deliverables under relevant accounting literature. The Company accounts for these arrangements as separate units of accounting, whereby the device and related services can be unbundled from one another and treated as separate units of accounting. However, under the guidance activation fees do not meet the criteria as set-forth under to be treated as a separate unit of accounting and is therefore recognized into revenue under the relative fair value method. Activation fees may be (i) recognized upfront with the device sale (the delivered item) to the extent the aggregate of the device and activation fee proceeds do not exceed the fair value of the device or (ii) deferred upon activation and recognized evenly over the service term (the undelivered item) to the extent the aggregate of the device and activation fee proceeds exceed the fair value of the device. For the periods ended December 31, 2009 and 2010, as the aggregate of the device and activation fee proceeds do not exceed the fair value of the device, all activation fees received for revenue arrangements with multiple deliverables were recognized upfront with the corresponding device sales and included in digital handset sales in the Company’s income statement. As a result, there is no effect from the GAAP difference in recognition of activation fee for the revenue arrangement with multiple deliverables in the current year.
e.   ~~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 a convertible bond could be net cash settled upon the occurrence of an event which is outside of an entity’s control, the conversion feature should generally be bifurcated. Meanwhile, under Korean GAAP, no such accounting requirement exists.
Under U.S. GAAP, the conversion option related to the U.S. dollar denominated convertible bonds with principal amounts of US$332,528,000 issued on April 7, 2009, requires bifurcation; the related fair value at

~~F-78~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~December 31, 2009 and 2010 were~~ W~~60,412 million and~~ W108,464 million. Additionally, the U.S. dollar denominated convertible bonds with principal amounts of US$329,450,000 issued on May 27, 2004, were redeemed during the year ended December 31, 2009 due to its maturity; related fair value of the conversion options at December 31, 2008 was W22,798 million. Upon bifurcation of the conversion option and convertible debt on 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 translation gain or loss. Under U.S. GAAP, the convertible bonds denominated in a foreign currency are regarded as a monetary liability and as such the resulting foreign currency translation gain or loss is included in the results of operations. The associated foreign currency translation loss recognized under U.S. GAAP, for the years ended December 31, 2008 is W~~76,209 million and foreign currency translation gain for the years ended December 31, 2009 and 2010 are~~ W~~40,938 million and~~ W~~10,043 million, respectively.~~
The adjustment amounts in our reconciliation of net income from Korean GAAP to net income based on U.S. GAAP is the aggregate of the GAAP differences in interest expense due to amortization of conversion right adjustment and gain or loss from the conversion of the bonds as well as the changes in fair value of the conversion option and the foreign currency translation gain or loss. The following is a schedule of the respective GAAP differences mentioned above for the years ended December 31, 2008, 2009 and 2010(in millions of Korean won):

2008 2009 2010

Changes in fair value of the conversion Options recognized under U.S. GAAP 42,987 40,510 (48,052 )
Foreign currency translation gain or loss recognized under U.S. GAAP (76,209 ) 40,938 10,043
Amortization of conversion right adjustments and others recognized under Korean GAAP 2,815 1,185 1,498
Foreign currency transaction gain (Note a) — 21,024 —

Total (30,407 ) 103,657 (36,511 )

~~(Note a)~~ ~~Amount represents gain incurred from redemption of the convertible bonds with principal amounts of US$329,450,000 for the year ended December 31, 2009.~~
~~Due to such differences, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by~~ W~~43,049 million,~~ W~~32,459 million and~~ W~~68,230 million respectively.~~
f.   ~~Derivative Instrument — Currency & Interest Rate Swaps~~
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 a formal assessment of hedge effectiveness. Under Korean GAAP, the Company qualified for certain cash flow hedge accounting. Under U.S. GAAP, at inception of the hedge, a formal hedge effectiveness assessment is required, to qualify for hedge accounting or a company can be exempted if it meets the shortcut method requirements. Under U.S. GAAP, the Company did not qualify for any hedge accounting. As a result, the has Company’s currency and interest rate swap, which qualified as a cash flow hedge under Korean GAAP, but did not qualify under U.S. GAAP.
Due to this difference, under Korean GAAP while only the realized mark to market changes in the Company’s currency and interest rate swaps are recognized in current earnings, under U.S. GAAP both realized and unrealized mark to market changes are recognized in current earnings, resulting in adjustments to net income; for the year

~~F-79~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~ended December 31, 2008 and 2010 a deduction of~~ W~~478,874 million and~~ W~~88,111 million, respectively, for the year ended December 31, 2009 an additional~~ W~~543,802 million, was recorded compared to that under Korean GAAP. And the shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by~~ W~~45,503 million, increased by~~ W~~10,375 million and decreased by~~ W~~6,511 million for U.S. GAAP purposes, when compared to that under Korean GAAP.~~
g.   ~~Provision for credit loss~~
The Company acquired 49% equity interest of HanaSK Card Co., Ltd. (the “HanaSK Card”) for the year ended December 31, 2010 and has accounted for the investment by using the equity method. Under Korean GAAP, the allowance for loan losses for financial institution is generally established based on the classification guidelines promulgated by the Financial Services Commission, which require that the minimum allowance be established based on the classification of the loan. As a result, the HanaSK Card has generally used these guidelines in establishing the minimum reserves and has additionally considered loan loss provisioning guidelines announced by the Financial Services Commission in November 2004. These guidelines include a requirement that financial institutions take into account “expected losses” with respect to credits in establishing their allowances for loan losses.
For U.S. GAAP purposes, the HanaSK Card has established the allowance for loan losses based on an evaluation of the historical performance of the loan portfolios. Allowance for loan losses for corporate loans that are not impaired is based principally on expected loss methodology.
~~Due to such difference mentioned above and including other miscellaneous GAAP differences, for U.S GAAP purposes, net income for the year ended December 31, 2010 increased by~~ W~~16,077 million when compared to that under Korean GAAP. In addition, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2010 increased by~~ W~~15,964 million when compared to that under Korean GAAP.~~
h.   ~~Consolidation of Variable Interest Entities~~
Under U.S. GAAP, if a business enterprise has a controlling financial interest in a variable interest entity (“VIE”), the assets, liabilities and results of the activities of the VIE should be included inprepared the consolidated financial statements in accordance with IFRS10, Consolidated Financial Statements.
(a)    Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Parent Company controls the corresponding investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those ofreturns through its power over the ~~business enterprise. Under Korean GAAP, there is no specific provision for the accounting treatment~~investee. Consolidation of ~~VIEs.~~
~~As a result of such difference, S-Telecom (formerly CDMA Mobile Phone Center);a joint-venture which is 50% owned by SKT Vietnam PTE Ltd.,~~ a subsidiary ofbegins from the ~~Company; which is an equity method investment under Korean GAAP was consolidated for U.S. GAAP purposes, for~~date the ~~years ended December 31, 2008. However, during the year ended December 31, 2009, SKT Vietnam PTE Ltd.,~~Group obtains control of a subsidiary ofand ceases when the Company entered into a binding agreement to discontinue its agreement with S-Telecom, resulting in SKT Vietnam PTE Ltd. no longer qualifying as a primary beneficiary of S-Telecom. Consequently, S-Telecom no longer qualified as a VIE for consolidation under U.S. GAAP. S-Telecom was deconsolidated and became an equity method investment of the Company as of December 31, 2009.
For the year ended December 31, 2010, new consolidation guidance became effective, whereas a company’s controlling interest over a VIE is demonstrated through both of the following; the power to direct the activities of a that most significantly impact the VIE’s economic performance; and a Company’s obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. However, subsequent to the deconsolidation of S-Telecom discussed above, the Company has no VIE that qualifies for consolidation under US GAAP as of December 31, 2010.
~~Due to such differences, for U.S GAAP purposes, net income for the years ended December 31, 2008, 2009 and 2010 decreased by~~ W~~34,303 million,~~ W~~36,260 million and nil, respectively, when compared to that under Korean~~

~~F-80~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~GAAP. In addition, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by~~ W~~32,676 million, nil and nil, respectively, when compared to that under Korean GAAP.~~
i.   ~~Investment in Preferred Stock~~
Under Korean GAAP, the Company can apply the equity method of accounting for an investment in preferred stocks if the Company can exercise significant influence on the investee through the investment. Under U.S. GAAP, unless the preferred stock is in-substance common stock, the Company cannot apply the equity method of accounting for preferred investments which are accounted for as~~available-for-sales~~ ~~equity securities.~~
~~As a result of such differences, the Company’s investment in Packet One Network which is an equity method investment under Korean GAAP, is accounted for asavailable-for-sales~~ ~~equity securities for U.S GAAP purpose. Due to the reversal of the equity loss for U.S. GAAP purposes, net income for the year ended December 31, 2010 increased by~~ W~~6,460 million when compared to that under Korean GAAP. In addition, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2010 increased by~~ W~~6,359 million when compared to that under Korean GAAP.~~
j.   ~~Scope of Consolidations~~
~~Under Korean GAAP, as explained in Note 2(b) to the consolidated financial statements, majority-owned subsidiaries with total assets below~~ W~~10 billion at prior year end are not consolidated. Under U.S. GAAP a company is required to consolidate all majority-owned subsidiaries regardless of total asset size, if it has~~Group loses control of the subsidiary. ~~However, for U.S GAAP purposes~~
The Group applies the ~~Company did not consolidate majority-owned subsidiaries with total assets below~~ W~~10 billion at prior year end as it believes the impact of such difference~~acquisition method to ~~be immaterial.~~
Under Korean GAAP, an entity is consolidated if the Company or a controlled subsidiary of the Company owns more than 30% of the total outstanding voting stock and is the largest stockholder. Under U.S. GAAP, generally an entity of which the Company owns 20% to 50% percent of total outstanding voting stock still may not be 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, F&U Credit information Co., Ltd., Benex Digital Culture Contents Fund, Benex Movie Expert Fund, Benex Sector Limited Partnership IV, The Contents Com Co., Ltd., PREGM Co., Ltd. and SK Technology Innovation Company are excluded from consolidation and are accounted for under the equity method of accounting, for the year ended December 31, 2010. 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 considered immaterial. The following is the condensed financial information of the investees accounted for under the equity method of accounting under U.S. GAAP but consolidated under Korean GAAP as of and for the year ended December 31, 2010 (In millions Korean won):

Total
Total
Net
Assets Liabilities Revenue Income (Loss)

F&U Credit information Co., Ltd. 14,141 6,043 47,767 213
BMC Digital Culture and Contents Fund 21,753 9 15 (1,819 )
Benex Movie Expert Fund 28,899 3 2,385 410
Benex Sector Limited Partnership IV 49,538 3 — (644 )
The Contents Com Co., Ltd. 14,916 1 54 398
PREGM Co., Ltd. 40,191 16,109 19,613 (23,691 )
SK Technology Innovation Company 52,949 1,849 — (1,678 )
~~Due to such consolidation scope differences, for U.S GAAP purposes, net income for the years ended December 31, 2008 and 2010 increased by~~ W~~187,833 million and~~ W~~6,763 million, respectively, and net income for the year ended December 31, 2009 decreased by~~ W~~3,920 million when compared to those under Korean GAAP. In addition, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by~~

~~F-81~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
W~~801,413 million,~~ W~~89,175 million and~~ W~~93,187 million respectively, when compared to that under Korean GAAP.~~
k.   ~~Reclassification of Investment in Equity Securities of SK C&C Co., Ltd.~~
~~Determining the Parent Company and appropriate Accounting of Equity Securities Investment~~
As of December 31, 2008, SK C&C held a 31% interest in SK Holdings; SK Holdings held a 23% interest in the Company and the Company in turn held a 30% interest in SK C&C. The three companies held equity interests in each other with voting rights, but no company had any legal or contractual right to be able to have control over the board of directors or equivalent governing body of one another. SK C&C is considered the Company’s ultimate parent under Korean GAAP. Under U.S. GAAP due to the difference in the two GAAPs’ accounting literature and common practice related to the conditions in what constitutes a controlling interest or not, SK C&C is not considered as the Company’s ultimate parent.
Under U.S. GAAP, the general condition for a controlling interest is ownership of a majority voting interest and therefore, as a general rule ownership by an investor, directly or indirectly, of over 50% of the outstanding voting shares of an investee is a condition indicative for the investee to be consolidated. Additionally, guidance indicates that the power to control may still exist with a non-majority (less than 50%) percentage of ownership by contract or otherwise. As a result, under U.S. GAAP, considering the ownership structure and voting percentages, the Company has accounted for its investment in each of the respective entities as an equity method investment.
Under Korean GAAP, the condition for a controlling interest is ownership of a majority voting interest, directly or indirectly. Alternatively a non-majority owner of over 30% of the total outstanding voting shares where such owner is also the largest shareholder is considered indicative of a controlling interest as described on Note 2.a “Principles of Consolidation”. Furthermore, the prevailing industry practices under Korean GAAP is that a company is considered to have control over its investee when it has historically appointed the majority of the board members and management of its investee, notwithstanding the lack of legal or contractual rights to do so.
As SK C&C holds a 31% interest and is the largest shareholder of SK Holdings, under Korean GAAP it is considered the parent company of SK Holdings. SK Holdings, in turn, is the largest shareholder of SK Telecom and has historically appointed the majority of the board members and management of SK Telecom notwithstanding its lack of legal or contractual right to do so. This indicates that SK Holdings has historically controlled the Company and should be considered the parent company of the Company; even though it had neither majority ownership nor legal or contractual right to have control over the board of directors or equivalent governing body. Therefore, SK C&C was considered to be the Company’s ultimate parent company.
~~Additionally, under Korean GAAP, a subsidiary — the Company, is presumed not to be able to have significant influence over its parent company — SK C&C, as such the Company should not~~ account for its investment in SK C&C under the equity method investment. As a result, during the year ended December 31, 2007, the Company reclassified its investment in equity securities of SK C&C Co., Ltd. from equity method investment to an~~available-for-sale~~ ~~security; as 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~~business combinations. The consideration transferred is measured at the date that the Company ceased to apply equity method was the Company’s new acquisition cost and the unrealized holding gains and losses incurred subsequent to the reclassifications are excluded from earnings and are reported within other comprehensive income.
Under U.S. GAAP, up to the year ended December 31, 2008, the Company owned 30% of SK C&C. When calculating the equity method adjustment, the Company’s investment in SK C&C was considered to be reduced by SK C&C’s indirect reciprocal holding of the Company through SK Holdings. As a result, the Company applied a 30% percentage to the financial information of SK C&C, after excluding SK C&C’s indirect reciprocal holding of the Company through SK Holdings, to compute the Company’s income related to its investment in SK C&C. The reciprocal interests effect of SK C&C’s ownership interest in the Company through SK Holdings for the year ended

~~F-82~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~December 31, 2008 totaled~~ W~~55,067 million. Refer below to the Company’s condensed financial information of SK C&C under U.S. GAAP.~~
~~2009~~
During the year ended December 31, 2009, the Company disposed of 21% of its shares in SK C&C and the Company’s ownership percentage decreased to 9%. As a result, the Company reclassified its investment in equity securities of SK C&C Co., Ltd. to~~available-for-sale~~ ~~securities reported at the fair value from equity method investment for U.S GAAP purposes; same as under Korean GAAP.~~
~~Due to such differences, for U.S. GAAP purposes, net income increased by~~ W~~47,645 million for the year ended December 31, 2008, and net income decreased by~~ W~~94,327 million for the year ended December 31, 2009 when compared to that under Korean GAAP. In addition, the shareholders’ equity decreased by~~ W~~7,114 million at December 31, 2008, when compared to that under Korean GAAP.~~
~~At December 31, 2009 and 2010, there is no GAAP difference as the Company’s investment in SK C&C Co., Ltd. is accounted for as anavailable-for-sale~~ ~~security reported at the fair value under both GAAP.~~
The following is the condensed financial information of SK C&C Co., Ltd. under U.S GAAP as discussed above, for the periods it was accounted for under the equity method, as of and for the year ended December 31, 2008 (in millions of Korean won):
~~December 31, 2008~~
~~Current assets~~ W ~~890,816~~
~~Non-Current assets~~ ~~3,576,000~~
~~Total~~ W ~~4,466,816~~
~~Current liabilities~~ W ~~1,199,621~~
~~Non-Current liabilities~~ ~~1,027,722~~
~~Shareholder’s equity~~ ~~2,239,473~~
~~Total~~ W ~~4,466,816~~
~~2008~~
~~Operating revenue~~ W ~~1,275,185~~
~~Operating expenses~~ ~~(1,185,971~~ )
~~Operating income~~ ~~89,214~~
~~Other income (expenses), net~~ ~~131,458~~
~~Provision for income taxes~~ ~~(3,785~~ )
~~Net income~~ W ~~216,887~~
l.   ~~Retroactive Application of Equity Method of Accounting~~
In March 2008, the Company purchased an additional 38.7% of equity interests of SK Broadband Co., Ltd. (“SKBB”), increasing its total percentage of ownership to 43.4%. At which point the Company began accounting for SKBB as a consolidated subsidiary under Korean GAAP.
~~Under Korean GAAP, when the investor is able to exercise significant influence through anstep-up~~ acquisition of an investee’s shares, investment difference shall be calculated as if the shares were acquired in a lump-sum purchase on the same date significant influence became exercisable. In such a case, consideration for acquisition shall be computed as the sum of the fair values of ~~shares~~the assets transferred, and identifiable assets acquired ~~until the date that immediately precedes the date~~

~~F-83~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~on which significant influence became exercisable~~ and the acquisition cost of shares additionally acquired on the date on which significant influence became exercisable. Unrealized gain or loss that arise on the fair-value valuation of the investee’s shares held until the date on which significant influence becomes exercisable shall be included in current earnings of the period that includes the applicable date of the equity method.
~~Under US GAAP, the investment in SKBB previously held before the acquisition~~liabilities and ~~accounted for under the fair value method is required to be changed to the equity method of accounting retroactively in a manner consistent with the accounting for astep-up~~ ~~acquisition of a subsidiary. As a result of such retroactive application of equity method of accounting on SKBB, net income for the years ended December 31, 2008 decreased by~~ W~~21,025 million, respectively, and shareholders’ equity as of December 31, 2008 decreased by~~ W~~62,382 million, when compared to that under Korean GAAP. Due to the additional purchase of SKBB discussed below, there is no GAAP difference for the year ended December 31, 2009.~~
During the year ended December 31, 2009, the Company acquired the additional 7.2% equity interest in SKBB, which resulted in the Company’s ownership increase to more than 50%, and as a result SKBB was included in the Company’s consolidation under U.S. GAAP. Refer to Note 32(m) for additional information related to the Company’s investment in SKBB.
m.   ~~Business Combination~~
~~(1)  Achieved-in-Stages~~
~~Under U.S. GAAP,~~contingent liabilities assumed in a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree to the fair value on the day the Company obtains control (due to the additional acquisition) and recognizes the resulting gain or loss, if any, in earnings. In prior reporting periods, the acquirer may have recognized its equity portion of the investee’s changes in other comprehensive income, if so, such amount shall be reclassified and included in the calculation of gain or loss as of the acquisition date. Under Korean GAAP, in a business combination achieved in stages, the acquirer is not required to remeasure its previously held equity interest in the acquiree.
~~(a)  Achieved-in-Stages:~~ ~~SKBB~~
~~During the year ended December 31, 2009, the Company acquired an additional 47,187,105 common shares or 7.2% of the outstanding shares of SKBB for~~ W241,176 million, which increased the Company’s ownership from 43.4% to 50.6%, at which point, its previous equity interest of 43.4% was remeasured by the closing market price of common stock of SKBB on the day the Company obtained control due to additional acquisitions. The fair value was evaluated at W~~548,114 million, at~~ W~~5,350 per share of SKBB common stock, resulting in a loss of~~ W~~439,920 million. Refer to Note 32 (l) above additional discussion on the Company previous ownership of 43.4%.~~

~~F-84~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~The Company’s allocation of purchase price to the acquired net assets of SKBB recorded at the fair value is as follows (in millions of Korean won):~~
~~SK Broadband~~
~~(“SKBB”)~~
~~(100%)~~
~~Current assets~~ W ~~793,889~~
~~Noncurrent assets~~
~~Investments~~ ~~61,799~~
~~Depreciable fixed assets~~ ~~2,114,023~~
~~Land~~ ~~297,946~~
~~Other long-term assets~~ ~~226,257~~
~~Identifiable intangible assets~~ ~~191,668~~
~~Total assets~~
~~3,685,582~~
~~Interest-bearing debts~~ ~~(1,775,416~~ )
~~Other liabilities~~ ~~(393,916~~ )
~~Total liabilities~~
~~(2,169,332~~ )
~~Net assets~~
W ~~1,516,250~~
~~Goodwill~~ ~~55,856~~
~~Less: Remeasured exisiting equity interest of SKBB~~ ~~(548,114~~ )
~~Less: Non-controlling interest of SKBB~~ ~~(782,816~~ )
~~Purchase price of 7.2% additional acquisition of SKBB~~
W ~~241,176~~
~~(b)  Achieved-in-Stages:~~ ~~SK Telink~~
~~(i)  SK Telink’s purchase of 100% of TU Media~~
As of December 31, 2009, SK Telecom had 44.2% interest in TU Media, an equity method investee of the Company and 90.8% interest in SK Telink, a consolidated subsidiary. On November 1, 2010, SK Telink purchased 100% of TU Media, in exchange for newly issued SK Telink shares, and merged the operations of TU media into SK Telink.
SK Telecom obtained control of TU Media as a result of SK Telink’s purchase of TU Media, and the transaction was accounted for as a business combination achieved in stages. Accordingly, SK Telecom’s previously held equity interest in TU media was remeasured to W~~41,237 million, resulting in a gain of~~ W~~6,368 million (~~W~~41,237 million less the~~ W~~34,869 million book value) in earnings.~~
~~SK Telecom recognized TU Media’s identifiable net assets at their fair values of~~ W~~15,739 million and goodwill of~~ W~~61,017 million. The fair value of the total consideration for TU Media was~~ W~~76,756 million; including the fair value of the previously held interest~~ W~~41,237 million, the fair value of the additional~~ W~~22,823 million acquisition, and the fair value of the non-controlling interest (at the consolidated level) of~~ W~~12,696 million. The fair value of the consideration was valued through a third party valuation specialist; both SK Telink and TU Media~~ are ~~not publicly traded and therefore do not have readily determinable market prices available.~~
SK Telecom’s ownership in SK Telink decreased from 90.8% to 83.5% as a result of SK Telink’s issuance of new shares in connection with the acquisition of TU Media. Refer below (b)(ii) related to SK Telecom’s decrease in ownership in SK Telink due to this transaction.

~~F-85~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
In addition, under Korean GAAP as TU Media is accounted for as a consolidated subsidiary, SK Telink’s purchase of TU Media’s shares was accounted for as an Under Common Control transaction. Refer below (3) for discussion on the Korean GAAP treatment and difference between the U.S. GAAP treatment discussed above.
~~The allocation of the consideration paid to the acquired net assets of TU media recorded at the fair value is as follows (in millions of Korean won):~~
~~TU Media~~
~~(100%)~~
~~Consideration for additional acquisition of TU Media~~ W ~~22,823~~
~~Fair value of previously held TU Media~~ ~~41,237~~
~~Fair value of noncontrolling interest of TU Media~~ ~~12,696~~
~~Fair value of TU Media~~
W ~~76,756~~
~~Current assets~~ W ~~36,554~~
~~Noncurrent assets~~
~~Depreciable fixed assets~~ ~~148,093~~
~~Identifiable intangible assets~~ ~~15,503~~
~~Other long-term assets~~ ~~11,925~~
~~Total assets~~ ~~212,075~~
~~Interest-bearing debts~~ ~~(176,974~~ )
~~Other liabilities~~ ~~(19,362~~ )
~~Total liabilities~~ ~~(196,336~~ )
~~Net assets~~
W ~~15,739~~
~~Fair value of TU Media~~ W ~~76,756~~
~~Less: Net assets~~ ~~15,739~~
~~Goodwill~~
W ~~61,017~~
~~(ii)  Decrease in ownership due to SK Telink’s issuance of additional shares~~
Prior to SK Telink’s purchase of TU Media, the Company owned 90.8% of SK Telink. On November 1, 2010, as part of the acquisition of TU Media, SK Telink issued new shares to all TU Media shareholders, including SK Telecom and other nonaffiliated entities, in exchange for TU Media shares.
Due to SK Telink’s (subsidiary) issuance of new shares, SK Telecom’s (parent) ownership in SK Telink decreased from 90.8% to 83.5%. However, overall, even though SK Telecom’s ownership decreased, due to the acquisition of additional TU Media shares through SK Telink, SK Telink’s book value (net assets) increased from W~~148,731 million to~~ W~~225,488 million; and concurrently, SK Telecom’s total carrying amount of SK Telink increased from~~ W~~176,239 million to~~ W~~188,191 million, from pre-merger to post-merger with TU Media, an increase of~~ W~~11,952 million in equity.~~
~~(2)  Acquisition-related Costs of the Acquirer~~
~~Under Korean GAAP, Costs incurred directly related to the business combination is capitalized as part of acquisition cost. But, under the revised U.S. GAAP regarding the “~~~~Business Combination~~~~”, effective January 1, 2009, such acquisition costs are accounted for separately from the business combination — generally expensed as incurred.~~

~~F-86~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~(3)  Under Common Control~~
Common control transactions are accounted for by the receiving entity based on the carrying amounts in the consolidated financial statements at the date of transfer. Under US GAAP, common control exists when (1) an individual or entity owns more than 50 percent of the voting interest of each entity; (2) immediate family members hold more than 50 percent of the voting interest of each entity, and there is no evidence that they will not vote in concert; or (3) a group of shareholders holds more than 50 percent of the voting interest of each entity and there is a written agreement that the shareholders will vote in concert. In addition to those conditions, under Korean GAAP, common control also exists when entities of which the Company or a controlled subsidiary owns more than 30% of the total outstanding voting stock and is the largest stockholder.
As a result, the Company’s acquisition of a leased line business from SK Networks Co., Ltd., the additional acquisition of SKBB interest and merger achieved in stages between SK Telink Co., Ltd and TU Media Corporation were treated under common control transactions under Korean GAAP. But as discussed above, for U.S GAAP purposes, the transactions were scoped out of as common control transactions and as such, the identifiable asset acquired and the liabilities assumed from the business were measured at their fair value on acquisition date.
~~Due to the differences in business combination accounting discussed above, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 increased by nil,~~ W~~94,236 million and~~ W~~116,410 million; while, net income for the years ended December 31, 2008, 2009 and 2010 decreased by nil,~~ W~~340,979 million and~~ W~~33,758 million when compared to that under Korean GAAP.~~
��
The additional information on the Company’s acquisitions which were treated under common control transactions under Korean GAAP but treated as acquisitions achieved in stages under U.S. GAAP is as follows;
~~(4)  Acquisition of leased line business from SK Networks Co., Ltd.~~
~~The identifiable assets acquired and the liabilities assumed from the business were~~initially measured at their fair values at the acquisition date. The ~~purchase price (~~W~~892,755 million~~Group recognizes any non-controlling interest in ~~cash) exceeded~~the acquiree on an acquisition-by-acquisition basis in the event of liquidation, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. All other non-controlling interests are measured at their acquisition-date fair values, unless another measurement basis is required by IFRSs. Acquisition-related costs are expensed as incurred.
Goodwill is recognized as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the identifiable net assets acquired. If this consideration is lower than the fair value of the net ~~tangible~~assets of the subsidiary acquired, the difference is recognized in profit or loss.
Balances of receivables and ~~identifiable intangible~~payables, income and expenses and unrealized gains on transactions between the Group subsidiaries are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
In transactions with non-controlling interests, which do not result in loss of control, the Group recognizes directly in equity any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received, and attribute it to the owners of the parent.
If the Group loses control of a subsidiary, any investment continuously retained in the subsidiary is remeasured at its fair value at the date when control is lost and any resulting differences are recognized in profit or loss.
(b)    Associates
Associates are all entities over which the Group has significant influence, and investments in associates are initially recognized at acquisition cost using the equity method. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. If there is any objective evidence that the investment in the associate is impaired, the Group recognizes the difference between the recoverable amount of the associate and its book value as impairment loss.
(c)    Joint Arrangements
A joint arrangement of which two or more parties have joint control is classified as either a joint operation or a joint venture. A joint operator has rights to the assets, ~~acquired~~and obligations for the liabilities, relating to the joint operation and recognizes the assets, liabilities, revenues and expenses relating to its interest in a joint operation. A joint venturer has rights to the net assets relating to the joint venture and accounts for that investment using the equity method.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
2.4    Operating Segments
An operating segment is a component of the Group that: 1) engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with other components of the group, 2) whose operating results are reviewed regularly by the Group’s chief operating decision maker (“CODM”) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. The Group’s CODM is the Board of Directors, who do not receive and therefore do not review discrete financial information for any component of the Group. Consequently, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic, product and customer information are provided in note 6 to these consolidated financial statements.
2.5    Foreign Currency Translation
(a)    Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the each entity operates (“the functional currency”). The consolidated financial statements are presented in Korean won, which is the Parent Company’s functional and presentation currency.
(b)    Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.
Exchange differences arising on non-monetary financial assets and liabilities such as equity instruments at fair value through profit or loss and available-for-sale equity instruments are recognized in profit or loss and included in other comprehensive income, respectively, as part of the fair value gain or loss.
(c)    Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Korean won at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Korean won at the exchange rates at the dates of the transactions.
Foreign currency differences are recognized in other comprehensive income (OCI) and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interest (NCI).
When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency differences arising from such item form part of the net investment in the foreign operation. Accordingly, such differences are recognized in OCI and accumulated in the translation reserve.
SK ~~Networks Co., Ltd.~~HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
2.6    Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.
2.7    Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However, the normal capacity is used for the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.
2.8    Financial Assets
(a)    Classification and Measurement
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, loans and receivables, and held-to-maturity financial assets. Regular purchases and sales of financial assets are recognized on the trade date.
At initial recognition, financial assets are measured at fair value plus, in the case of financial assets not carried at fair value through profit or loss, transaction costs. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the statement of income. After the initial recognition, available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables, and held-to-maturity investments are subsequently carried at amortized cost using the effective interest rate method.
Changes in fair value of financial assets at fair value through profit or loss are recognized in profit or loss and changes in fair value of available-for-sale financial assets are recognized in other comprehensive income. When the available-for-sale financial assets are sold or impaired, the fair value adjustments recorded in equity are reclassified into profit or loss.
(b)    Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the ~~Company recorded goodwill amounting to~~ W~~635,337 million in connection with this transaction. The allocation~~initial recognition of the ~~purchase price~~asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated.
Impairment of loans and receivables is presented as a deduction in an allowance account. Impairment of other financial assets is directly deducted from their carrying amount. The Group writes off financial assets when the assets are determined to be no longer recoverable.
The criteria that the Group uses to determine whether there is objective evidence of an impairment loss include:
Significant financial difficulty of the issuer or obligor;
A breach of contract, such as a default or delinquency in interest or principal payments;
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
For economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
It becomes probable that the borrower will enter bankruptcy or other financial reorganization;
The disappearance of an active market for that financial asset because of financial difficulties; or
Observable data suggesting that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, even though the decrease cannot be identified with respect to the individual financial assets in the portfolio, including:
(i) adverse changes in the payment status of borrowers in the portfolio;
(ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.
(c)    Derecognition
If the Group transfers a financial asset and the transfer does not result in derecognition because the Group has retained substantially of all risks and rewards of ownership of the transferred asset due to a recourse in the event the debtor defaults, the Group continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received. The related financial liability is classified as ‘borrowings’ in the statement of financial position (Note 22).
2.9    Derivative Financial Instruments
Derivatives are initially recognized at fair value on the date when a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of the derivatives that are not qualified for hedge accounting are recognized in the statement of income within ‘financial income and expenses’ according to the nature of transactions.
2.10    Property, Plant and Equipment
Property, plant and equipment is stated at its historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditures directly attributable to the acquisition of the items.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate the difference between their cost and their residual values over their estimated useful lives, as follows:
Buildings
10 – 50 years
Structures
10 – 30 years
Machinery
4 – 15 years
Vehicles
4 – 10 years
Other
3 – 15 years
The depreciation method, residual values and useful lives of property, plant and equipment are reviewed at the end of each reporting period and, if appropriate, accounted for as changes in accounting estimates.
2.11    Borrowing Costs
Borrowing costs incurred in the acquisition or construction of a qualifying asset are capitalized in the period when it is prepared for its intended use, and investment income earned on the temporary investment of borrowings made specifically for the purpose obtaining a qualifying asset is deducted from the borrowing costs eligible for capitalization during the period. Other borrowing costs are recognized as expenses for the period in which they are incurred.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
2.12    Government Grants
Government grants are recognized at their fair values when there is reasonable assurance that the grant will be received and the Group will comply with the conditions attaching to it. Government grants related to assets are presented by deducting the grants in arriving at the carrying amount of the assets, ~~acquired~~and grants related to income are deferred and presented by deducting the related expenses for the purpose of the government grants.
2.13    Intangible Assets
(a)    Goodwill
Goodwill is measured as explained in ‘Note 2.3 Consolidation’, and goodwill arises on the acquisition of subsidiaries and business are included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.
(b)    Industrial rights
Industrial rights are shown at historical cost. Industrial rights in a business combination are recognized as fair value at acquisition. Industrial rights have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of industrial rights over their estimated useful lives of five to ten years.
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized using straight-line method over their estimated useful lives of ten years.
(c)    Development Costs
Costs associated with research activities are recognized as an expense as incurred. Costs that are individually identifiable, controllable and directly attributable to development projects are recognized as intangible assets when all the following criteria are met:
It is technically feasible to complete the development project so that it will be available for use;
Management intends to complete the development project;
There is an ability to use or sell the development project;
It can be demonstrated how the development project will generate probable future economic benefits;
Ability to obtain adequate technical, financial and other resources to complete or use or sell the development project;
The expenditure attributable to the individual project during its development can be reliably measured.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Amortization of development costs based on the straight-line method over their useful lives (1 to 2 years) begins at the commencement of the commercial production of related development products. The Group tests annually for impairment of development cost.
(d)    Membership rights
Membership rights are regarded as intangible assets with indefinite useful life and not amortized because there is no foreseeable limit to the period over which the asset is expected to be utilized.
2.14    Investment Property
Property held to earn rentals or for capital appreciation or both is classified as investment property. Investment property is measured initially at its cost. After recognition as an asset, investment property is carried at cost less accumulated depreciation and impairment losses. Investment property, except for land, is depreciated using straight-line method over their estimated useful lives.
2.15    Impairment of Non-financial Assets
Goodwill or intangible assets with indefinite useful lives are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
2.16    Non-current Assets Held for Sale
Non-current assets are classified as assets held for sale (or disposal group) when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
2.17    Financial Liabilities
(a)    Classification and Measurement
Financial liabilities at fair value through profit or loss are financial instruments held for trading. Financial liabilities are classified in this category if incurred principally for the purpose of repurchasing them in the near term. Derivatives that are not designated as hedges or bifurcated from financial instruments containing embedded derivatives are also categorized as held-for-trading.
The Group classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss, financial guarantee contracts and financial liabilities that arise when a transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortized cost and presented as ‘trade payables’, ‘borrowings’, and ‘other financial liabilities’ in the statement of financial position.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
(b)    Derecognition
Financial liabilities are removed from the statement of financial position when it is extinguished, for example, when the obligation specified in the contract is discharged, cancelled or expired or when the terms of an existing financial liability are substantially modified.
2.18    Financial Guarantee Contract
Financial guarantees are initially measured at fair value on the date the guarantee was given. Subsequent to initial recognition, the Group’s liabilities under such guarantees are measured at the higher of the amounts below and recognized as ‘other financial liabilities’.
•
The amount calculated in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets; or
•
the initial amount, less accumulated amortization recognized in accordance with IAS 18, Revenue.
2.19    Compound Financial Instruments
Compound financial instruments are convertible bonds that can be converted into equity instruments at the option of the holder. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially on the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
2.20    Provisions
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation and the increase in the provision due to passage of time is recognized as interest expense.
2.21    Current and Deferred Income Tax
The tax expense for the period consists of current and deferred tax. Tax is recognized on the profit for the period in the statement of income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. The tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period.
Deferred tax is recognized for temporary differences arising between the tax bases of assets and liabilities ~~assumed~~and their carrying amounts as expected tax consequences at the recovery or settlement of the carrying amounts of the assets and liabilities. However, deferred tax assets and liabilities are not recognized if they arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized.
Deferred tax liability is recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, deferred tax asset is recognized for deductible temporary differences arising from
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
2.22    Employee Benefits
(a)    Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
(b)    Defined benefit plans
The Group’s net obligation in respect of its defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Group determines the net interest expense on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.
(c)    Share-based payments
Equity-settled share-based payments granted to employees are estimated at the grant date fair value of equity instruments and recognized as employee benefit expenses over the vesting period. The number of equity instruments expected to vest is re-measured with consideration to non-market vesting conditions at the end of the reporting period, with any changes from the original measurement recognized in the profit for the year and equity.
When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
(d)    Long-term employee benefits
The Group provides long-term employee benefits, which are entitled to employees with service period for five years and above. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. The Group recognizes service cost, net interest on long-term employee benefits and re-measurements as profit or loss for the year. These liabilities are valued annually by independent qualified actuaries.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
(e)    Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits at the earlier of the following dates: when the entity can no longer withdraw the offer of those benefits or when the entity recognizes costs for a restructuring.
2.23    Equity Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
When the Group repurchases its share capital, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The profits or losses from the purchase, disposal, reissue, or retirement of treasury shares are not recognized as current profit or loss. If the Group acquires and retains treasury shares, the consideration paid or received is directly recognized in equity.
2.24    Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or rendering of services arising from the normal activities of the Group. It is stated as net of value added taxes, returns, rebates and discounts, after elimination of intra-company transactions.
The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases its estimate on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
(a)    Sales of goods
Revenue from the sale of goods is recognized when products are delivered to the purchaser.
(b)    Interest income
Interest income is recognized using the effective interest method according to the time passed. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognized using the original effective interest rate.
(c)    Dividend income
Dividend income is recognized when the right to receive payment is established.
(d)    Royalty income
Royalty income is recognized on an accrual basis in accordance with the substance of the relevant agreements.
2.25    Leases
A lease is an agreement, whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases where all the risks and rewards of ownership are not transferred to the Group are classified as operating leases. Lease payments under operating leases are recognized as expenses on a straight-line basis over the lease term.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
2.     Significant Accounting Policies,  continued
Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases and recognized as lease assets and liabilities at the lower of the fair value of the leased property and the present value of the minimum lease payments on the opening date of the lease period.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership at the inception of the lease. A lease other than a finance lease is classified as an operating lease. Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred by the lessor in negotiating and arranging an operating lease is added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income.
A sale and leaseback transaction involves the sale of an asset and the leasing back of the same asset. If a sale and leaseback transaction results in a finance lease, any excess of sales proceeds over the carrying amount is not be immediately recognized as income by a seller-lessee (the Group). Instead, it is deferred and amortized over the lease term. If a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is established at fair value, any profit or loss is recognized immediately. Also, if the sale price is below fair value, any profit or loss is recognized immediately, unless the loss is compensated for by future lease payments at below market price, and it then is deferred and amortized in proportion to the lease payments over the period for which the asset is expected to be used. If the sale price is above fair value, the excess over fair value is deferred and amortized over the period for which the asset is expected to be used.
2.26    Finance income and finance costs
Financial income comprises interest income, dividend income, foreign exchange differences and gain from derivative instruments. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established.
Finance expense comprise interest expenses, foreign exchange differences, loss from derivative instruments and loss on redemption of debentures. Interest expense on borrowings and debentures are recognized in profit or loss using the effective interest rate method.
2.27    Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.
3.    Use of Judgments and Estimates
In preparing these consolidated financial statements, management has made judgments, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
3.    Use of Judgments and Estimates,  continued
(a)    Judgments
Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in the following notes:
Note 7 — classification of financial instruments
Note 17 — estimated useful lives of property, plant and equipment
(b)    Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending December 31, 2014 is included in the following notes:
Note 23 — recognition and measurement of provisions
Note 13 — net realizable value of inventories
Note 19 — impairment of goodwill
Note 26 — measurement of defined benefit obligations
Note 27 — deferred tax assets and liabilities
4.    Financial Risk Management
4.1    Financial Risk Factors
The Group’s activities are exposed to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by a central treasury department under policies approved by the board of directors. The Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and the investment of excess liquidity.
(a)    Market risk
i)    Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Euro and Japanese Yen. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities in foreign currencies and net investments in foreign operations.
At December 31, 2013, if the currency had weakened/strengthened by 10% against the US dollar with all other variables held constant, profit before income tax for the year would have been ￦59,654 million (2012: ￦218,037 million unaudited) lower/higher, mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated trade receivables and foreign exchange losses/gains on translation of US dollar-denominated borrowings and payables.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
4.    Financial Risk Management,  continued
At December 31, 2013, if the currency had weakened/strengthened by 10% against the Japanese Yen with all other variables held constant, profit before income tax for the year would have been ￦36,083 million (2012: ￦23,887 million unaudited) lower/higher, mainly as a result of foreign exchange gains/losses on translation of Japanese Yen-denominated trade receivables and foreign exchange losses/gains on translation of JapaneseYen-denominated trade payables.
At December 31, 2013, if the currency had weakened/strengthened by 10% against the Euro with all other variables held constant, profit before income tax for the year would have been ￦763 million (2012: ￦8,006 million unaudited) lower/higher, mainly as a result of foreign exchange gains/losses on translation of Euro-denominated trade receivables and foreign exchange losses/gains on translation of Euro-denominated trade payables.
ii)    Price risk
The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated statement of financial position as available-for-sale financial assets. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio.
The listed securities held by the Group are traded in active markets such as Korea Securities Dealers Automated Quotation (KOSDAQ) and Taiwan Stock Exchange (TWSE).
As of December 31, 2013 and 2012, the impacts of increases/decreases of the stock price by 20% with all other variables held constant on the Group’s equity are as follows:
      2013 2012 (Unaudited)
   20%
increase    20%
decrease 20%
increase    20%
decrease
   (In millions of won)
KOSDAQ
   ￦ 1,705       (1,705 ) 1,822       (1,822 )
TWSE
   3,343       (3,343 ) 3,529       (3,529 )
iii)    interest rate risk
Interest rate risk of the Group is defined as the risk that the interest expenses arising from borrowings will fluctuate because of changes in future market interest rate. The interest rate risk mainly arises through floating rate borrowings, and is partially offset by cash held at floating rates.
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (primarily quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts.
As of December 31, 2013, the Group is in a net borrowing position and is partially exposed to a risk of increase in interest rates. However, the Group adequately minimizes risks from changes in interest rate fluctuations by matching variable interest bearing borrowings with variable interest-bearing financial deposits.
At December 31, 2013, if interest rates on borrowings had been 100 basis points higher/lower with all other variables held constant, profit before income tax for the year would have been ￦15,272 million (2012: ￦16,220 million unaudited) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
4.    Financial Risk Management,  continued
(b)    Credit risk
The Group is exposed to credit risk which arises from counterparty’s non-performance of obligation. The credit risk mainly arises from operating activities and financial activities.
i)    Trade and other receivables
Credit risk is managed on group basis, and the Group is managing and analyzing the credit risk for each of its new clients before standard payment and delivery terms and conditions are offered. The Group operates a consistent trade receivables policy (TR Policy) to manage credit risk exposure. The purpose of the TR policy is to support timely decision-making and minimize loss by securing payment of TR. Assumed TR risk is especially mitigated with credit insurance, guarantees/collateral and internal credit limits. In order to manage the risk, a Global Credit Insurance Program is maintained with a reputable credit insurance company.
ii)    Other assets
Credit risk arises from cash and cash equivalents, financial instruments and deposits with banks and financial institutions, as well as credit exposures from short-term and long-term loans. The maximum exposure to credit risk as of each reporting date is the book value of assets. For banks and financial institutions, only independently rated parties with a high credit rating are accepted, and accordingly management does not expect any losses from non-performance by these counterparties.
(c)    Liquidity risk
Liquidity risk is defined as the risk that the Group is unable to meet its short-term payment obligations on time due to deterioration of its business performance or inability to access financing. The Group forecasts its cash flow and liquidity status and sets action plans on a regular base to manage liquidity risk proactively.
The Group invests surplus cash in interest-bearing current accounts, time deposits, demand deposits, marketable available-for-sale securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. As of December 31, 2013, the Group held cash equivalents and short-term financial instruments of approximately ￦631,801 million (2012: ￦658,338 million unaudited) and ￦2,091,188 million (2012: ￦1,050,006 million unaudited), respectively, that are expected to readily generate cash inflows for managing liquidity risk.
The analyses of the Group’s liquidity risk as of December 31, 2013 and 2012, are as follows:
      2013
   Less than
1 year    Between
1 year and
2 years    Between
2 years and
5 years    Over
5 years    Total
   (In millions of won)
Borrowings (other than finance lease)
   ￦ 940,422       1,721,781       844,633       1,228,487       4,735,323
Finance lease liabilities
   103,077       105,245       111,146       —       319,468
Trade payables
   648,793       —       —       —       648,793
Other payables
   801,425       —       —       —       801,425
Other non-trade payables
   658,733       66,180       131,565       —       856,478
Derivatives
   2,439       —       —       —       2,439
Financial guarantee contract
   28       —       —       —       28










   ￦ 3,154,917       1,893,206       1,087,344       1,228,487       7,363,954










SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
4.    Financial Risk Management,  continued
   2012 (Unaudited)
   Less than
1 year    Between
1 year and
2 years    Between
2 years and
5 years    Over
5 years    Total
   (In millions of won)
Borrowings (other than finance lease)
   ￦ 2,883,583       786,358       2,507,033       594,138       6,771,112
Finance lease liabilities
   112,585       103,512       217,282       —       433,379
Trade payables
   592,738       —       —       —       592,738
Other payables
   390,463       —       —       —       390,463
Other non-trade payables
   361,076       44,992       66,243       5,520       477,831
Derivatives
   4,871       —       —       —       4,871
Financial guarantee contract
   31       —       —       —       31










   ￦ 4,345,347       934,862       2,790,558       599,658       8,670,425










The table above analyzes the Group’s non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and includes estimated interest payments. The Group’s trading portfolio derivative instruments have been included at their fair value of ￦2,439 million (2012: ￦4,871 million unaudited) within the less than one-year time bucket as of December 31, 2013. These contracts are managed on a net-fair value basis rather than by maturity date. Net settled derivatives comprise interest rate swaps used by the Group to manage the Group’s interest rate profile.
4.2    Capital Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The debt-to-equity percentages and net borrowing percentages as of December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Total liabilities(A)
   ￦ 7,730,439    8,909,251
Total equity(B)
   13,066,859    9,739,442
Cash and cash equivalents and short-term financial instruments(C)
   2,786,399    1,784,616
Total borrowings(D)
   4,550,215    6,471,976
Debt-to-equity(A/B)
   59 % 91 %
Net borrowing(D-C)/B
   13 % 48 %
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
5.    Fair Value
5.1    Fair Value of Financial Instruments
The following table presents the Group’s book and fair values of financial instruments by categories as of December 31, 2013 and 2012:
      2013
   Book value    Level 1    Level 2    Level 3    Total
   (In millions of won)
Financial assets that can be measured at fair value

Short-term financial instruments
   ￦ 1,045,974       —       1,045,974       —       1,045,974
Other financial assets
   272       —       272       —       272
Available-for-sale financial assets
   31,966       31,966       —       —       31,966










   1,078,212       31,966       1,046,246       —       1,078,212










Financial assets that cannot be measured at fair value

Cash and cash equivalents(1)
   631,867       —       —       —       —
Available-for-sale financial assets(1),(2)
   126,804       —       —       —       —
Trade and other receivable(1)
   2,308,524       —       —       —       —
Short-term financial instruments(1)
   1,108,558       —       —       —       —
Other financial assets(1)
   247,553       —       —       —       —










   4,423,306       —       —       —       —










Financial liabilities that can be measured at fair value

Other financial liabilities
   109,288       —       109,288       —       109,288










   109,288       —       109,288       —       109,288










Financial liabilities that cannot be measured at fair value

Trade and other payables(1)
   1,437,097       —       —       —       —
Other non-trade payables(1)
   854,221       —       —       —       —
Borrowings
   4,550,215       —       4,785,180       —       4,785,180










   ￦ 6,841,533       —       4,785,180       —       4,785,180










SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
5.    Fair Value,  continued


   2012 (Unaudited)
   Book value    Level 1    Level 2    Level 3    Total
   (In millions of won)
Financial assets that can be measured at fair value

Other financial assets
   ￦ 198       —       198       —       198
Available-for-sale financial assets
   32,932       32,932       —       —       32,932










   33,130       32,932       198       —       33,130










Financial assets that cannot be measured at fair value

Cash and cash equivalents(1)
   658,387       —       —       —       —
Available-for-sale financial assets(1),(2)
   11,365       —       —       —       —
Trade and other receivable(1)
   1,863,703       —       —       —       —
Short-term financial instruments(1)
   1,126,229       —       —       —       —
Other financial assets(1)
   327       —       —       —       —










   3,660,011       —       —       —       —










Financial liabilities that can be measured at fair value

Other financial liabilities
   18,635       —       18,635       —       18,635










   18,635       —       18,635       —       18,635










Financial liabilities that cannot be measured at fair value

Trade and other payables(1)
   973,998       —       —       —       —
Other non-trade payables(1)
   458,609       —       —       —       —
Borrowings
   6,471,976       —       6,563,692       —       6,563,692










   ￦ 7,904,583       —       6,563,692       —       6,563,692










(1) Does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are close to the reasonable approximate fair values.
(2) Equity instruments which do not have quoted price in an active market for the identical instruments (inputs for level 1) are measured at cost in accordance with IAS 39 as fair values of such equity instruments cannot be reliably measured using other methods.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
5.    Fair Value,  continued
5.2    Financial Instruments Measured at Cost
The following table presents available-for-sale financial assets measured at cost as of December 31, 2013 and 2012:
   2013    2012
(Unaudited)
   (In millions of won)
JNT Frontier Private Equity Unit
   ￦ 1,307       1,400
SV M&A No.1 Equity Unit
   1,196       1,196
Seoul Investment Initial & Green
   1,868       1,900
TS 2011-4 Technology Transfer & Business Buildup Fund
   1,600       800
IMM investment
   786       499
L&S Investment
   1,124       565
Daishin Aju IB Investment Co., Ltd.
   1,518       500
KTC-NP-Growth
   540       —
Intellectual Discovery, Ltd.
   4,000       4,000
SKY Property Mgmt. Ltd.
   112,360       —
Equity investment in a construction guarantee association
   396       396
Others
   109       109




   ￦ 126,804       11,365




The equity instruments above are measured at cost as the variability of estimated cash flows is significant, and the probabilities of the various estimates cannot be reasonably assessed.
5.3    Fair Value Hierarchy
Assets measured at fair value or for which the fair value is disclosed are categorized within the fair value hierarchy, and the defined levels are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3: Inputs for the assets or liabilities that are not based on observable market data (that is, unobservable inputs).
There was no transfer between fair value hierarchy levels for the year ended December 31, 2013.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
5.    Fair Value,  continued
5.4    Valuation Techniques
The following table presents the valuation techniques of recurring and non-recurring fair value measurements and quoted prices classified as level 2.
   Fair value    Level
Valuation technique
   (In millions of won)
Short-term financial instruments:

Financial assets at fair value through profit or loss
   ￦ 1,045,974       2       Present value technique
Derivative assets:

Interest rates swap
   272       2       Present value technique
Derivative liabilities:

Interest rates swap
   2,439       2       Present value technique
Conversion option
   106,849       2       Option pricing model
6.    Geographic, Product and Customer Information
The Group’s revenue information by region based on the location of selling entities for the years ended December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Domestic
   ￦ 1,105,083       771,396
China
   3,038,355       1,901,742
Asia—other
   3,751,737       2,852,579
United States
   5,191,619       3,827,725
Europe
   1,078,308       808,768




   ￦ 14,165,102       10,162,210




The Group’s non-current assets (excluding financial assets, investments in joint venture and associates and deferred income tax assets) information by region based on the location of subsidiaries as of December 31, 2013 and 2012, are as follows:
      2013    2012
(Unaudited)
   (In millions of won)
Domestic
   ￦ 10,424,568       9,853,629
China
   2,912,948       2,638,507
Asia—other
   5,834       1,614
United States
   289,682       293,181
Europe
   1,598       1,775




   ￦ 13,634,630       12,788,706




SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
6.    Geographic, Product and Customer Information,  continued
Details of the Groups’ revenue by product and service types for the years ended December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Sale of goods:

DRAM
   ￦ 10,157,752       7,303,532
NAND Flash
   3,930,669       2,826,193
Sale of services
   76,681       30,908
Royalty income
   —       1,577




   ￦ 14,165,102       10,162,210




Revenue from a customer that constitutes more than 10% of the Group’s sales revenue for the year ended December 31, 2013 amounts to ￦ 2,457,867 million (2012: ￦ 2,154,986 million unaudited).
7.    Financial Instruments by Categories
Details of financial assets by category as of December 31, 2013 and 2012, are as follows:
   2013
   Assets at
fair value
through the
profit and loss    Available
for-sale
financial
assets    Held-to-
maturity
financial
assets    Loans and
receivables    Total
   (In millions of won)
Cash and cash equivalents
   ￦ —       —       —       631,867       631,867
Short-term financial instruments
   1,045,974       —       —       1,108,558       2,154,532
Trade receivables
   —       —       —       1,941,675       1,941,675
Other receivables
   —       —       —       366,849       366,849
Other financial assets
   272       —       245,808       1,745       247,825
Available-for-sale financial assets
   —       158,770       —       —       158,770










   ￦ 1,046,246       158,770       245,808       4,050,694       5,501,518










   2012 (Unaudited)
   Assets at
fair value
through the
profit and loss    Available
for-sale
financial
assets    Held-to-
maturity
financial
assets    Loans and
receivables    Total
   (In millions of won)
Cash and cash equivalents
   ￦ —       —       —       658,387       658,387
Short-term financial instruments
   —       —       —       1,126,229       1,126,229
Trade receivables
   —       —       —       1,719,521       1,719,521
Other receivables
   —       —       —       144,182       144,182
Other financial assets
   198       —       —       327       525
Available-for-sale financial assets
   —       44,297       —       —       44,297










   ￦ 198       44,297       —       3,648,646       3,693,141










SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
7.    Financial Instruments by Categories,  continued
Details of financial liabilities by category as of December 31, 2013 and 2012, are as follows:
   2013
   Liabilities at
fair value
through the
profit and loss    Liabilities
measured at
amortized
cost    Other    Total
   (In millions of won)
Borrowings
   ￦ —       4,550,215       —       4,550,215
Trade payables
   —       648,793       —       648,793
Other non-trade payables
   —       854,221       —       854,221
Other payables
   —       788,304       —       788,304
Other financial liabilities
   109,288       —       —       109,288








   ￦ 109,288       6,841,533       —       6,950,821








   2012 (Unaudited)
   Liabilities at
fair value
through the
profit and loss    Liabilities
measured at
amortized
cost    Other    Total
   (In millions of won)
Borrowings
   ￦ —       6,130,542       341,434       6,471,976
Trade payables
   —       592,738       —       592,738
Other non-trade payables
   —       458,609       —       458,609
Other payables
   —       381,260       —       381,260
Other financial liabilities
   18,635       —       —       18,635








   ￦ 18,635       7,563,149       341,434       7,923,218








SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
7.    Financial Instruments by Categories,  continued
Details of gain and loss of financial assets and liabilities by category for the years ended December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Loans and receivables

Interest income
   ￦ 59,262    80,154
Foreign exchange difference
   (61,819 ) (127,274 )
Impairment reversal
   2,250    460


   (307 ) (46,660 )


Available-for-sale financial assets

Other comprehensive loss
   (966 ) (1,566 )
Gain on disposal
   205    5,943
Dividend income
   2,381    216


   1,620    4,593


Held-to-maturity financial assets

Interest income
   853    —


   853    —


Assets at fair value through the profit and loss

Interest income
   6,296    —
Gain on valuation of derivatives
   73    198


   6,369    198


Liabilities measured at amortized cost

Interest expense
   (256,623 ) (317,926 )
Loss on redemption of debenture
   —    (10,470 )
Foreign exchange difference
   169,509    381,687


   (87,114 ) 53,291


Liabilities at fair value through the profit and loss

Loss on valuation of derivatives
   (90,652 ) (6,757 )
Loss on derivative transactions
   (2,894 ) (7,762 )


   (93,546 ) (14,519 )


   ￦ (172,125 ) (3,097 )


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
8.    Credit Risk of Financial Instruments
Details of credit quality of trade receivables that are not impaired and assessed by reference to external credit ratings as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Trade receivables that are not impaired

Group 1
   ￦ 1,395,349       1,241,089
Group 2
   423,209       363,589
Group 3
   125,555       117,013




   ￦ 1,944,113       1,721,691




Group 1 — Related party, public institutions, strategic counterparty with a high credit rating and others
Group 2 — Counterparty that limits credit risk by entering into export resale insurance contract with Korea Trade Insurance Corporation
Group 3 — Counterparty that limits credit risk by securing collaterals or guarantying bank payment for the counterparty
Details of credit quality of cash and cash equivalents and short-term financial instruments in consideration with financial institutions as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Cash and cash equivalents

Banks
   ￦ 598,455       367,829
Securities firms
   33,347       290,509
Others
   65       49




   631,867       658,387




Short-term financial instruments

Banks
   1,107,060       864,706
Securities firms
   1,047,472       261,523




   2,154,532       1,126,229




   ￦ 2,786,399       1,784,616




The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
As of December 31, 2013, maximum exposure of credit risk relating guarantees provided by the Group is ￦28 million (2012: ￦31 million unaudited) which will be paid upon request of guarantee as mentioned in Note 40.
9.    Derecognition of Financial Assets
The Group has entered into trade receivables discounting agreements with several financial institutions. There are no outstanding trade receivables discounted but not yet matured (2012: ￦341,434 million unaudited) as of
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
9.    Derecognition of Financial Assets,  continued
December 31, 2013. The Group is obliged to redeem upon default of the counterparties and accordingly, accounted for the above transactions as collateralized borrowings.
10.    Cash and Cash Equivalents
Cash and cash equivalents as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Cash on hand
   ￦ 66       49
Checking account
   59,157       94,879
Ordinary deposits
   12,705       7,816
Time deposits
   348,165       104,724
MMDA
   163,118       130,626
MMF and others
   48,656       320,293




   ￦ 631,867       658,387




As of December 31, 2013, there are no cash equivalents pledged as collateral.
11.    Short-term Financial Instruments and Other Financial Assets
Short-term financial instruments and other financial assets as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Short-term financial instruments

Time deposits
   ￦ 932,052       704,645
Specified money trust
   341,596       260,000
MMW
   704,378       —
RP
   120,000       160,000
CD
   55,000       —
MMDA
   8       61
Other
   1,498       1,523




   2,154,532       1,126,229




Other financial assets

Current

Held-to-maturity financial assets
   245,808       —




   245,808       —




Non-current

Long-term financial instruments
   1,745       327
Derivative assets
   272       198




   2,017       525




   ￦ 2,402,357       1,126,754




SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
11.    Short-term Financial Instruments and Other Financial Assets,  continued
Restricted short-term financial instruments and other financial assets as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
Description
   (In millions of won)
Short-term financial instruments
   ￦ 8       61       Restricted for government grants
   23,713       35,320       Pledged for borrowings
   5,023       6,238       Pledged for consumption tax
   —       4       Pledged for letters of credit
   34,600       34,600       Restricted for support small business





   63,344       76,223





Other financial assets
   308       308       Pledged for borrowings
   14       14       Bank overdraft guarantee deposit
   3       4       Value added tax deposit
   1,419       —       Deposit for import duties





   1,744       326





   ￦ 65,088       76,549





12.    Trade and Other Receivables
Details of current and non-current loans and other receivables as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Current

Other receivables
   ￦ 307,414       111,986
Accrued income
   11,071       8,569
Short-term loans
   2,665       1,823
Short-term guarantee deposits
   397       320
Deposits
   2,212       2,357




   323,759       125,055




Non-current

Long-term other receivables
   21,152       80
Long-term loans
   6,659       6,630
Guarantee deposits
   14,409       11,540
Long-term deposits
   870       877




   43,090       19,127




   ￦ 366,849       144,182




SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
12.    Trade and Other Receivables,  continued
Trade receivables and loans and other receivables, net of provision for impairment, as of December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Trade receivables
   ￦ 1,945,121    1,722,778
Less : provision for impairment
   (3,446 ) (3,257 )


Trade receivables — net
   1,941,675    1,719,521


Current loans and other receivables
   325,821    130,090
Less : provision for impairment
   (2,062 ) (5,035 )


Current loans and other receivables — net
   323,759    125,055


Non-current loans and other receivables
   55,600    31,966
Less : provision for impairment
   (12,510 ) (12,839 )


Non-current loans and other receivables — net
   43,090    19,127


   ￦ 2,308,524    1,863,703


Movements in the provision for impairment of trade receivables for the years ended December 31,2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Beginning
   ￦ 3,257       3,855
Provision for receivables impairment
   174       —
Unused amounts reversed
   —       (390 )
Effect of exchange rates
   15       (208 )




Ending
   ￦ 3,446       3,257




There were no write-offs of trade receivables in 2013 and 2012.
Movements in the provision for impairment of current loans and other receivables for the years ended December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Beginning
   ￦ 5,035    4,925
Provision for receivables impairment
   47    297
Receivables written off during the year as uncollectible
   (293 ) —
Unused amounts reversed
   (2,685 ) (153 )
Effect of exchange rates
   (42 ) (34 )


Ending
   ￦ 2,062    5,035


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
12.    Trade and Other Receivables,  continued
Movements in the provision for impairment of non-current loans and other receivables for the years ended December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Beginning
   ￦ 12,839    12,984
Provision for receivables impairment
   225    25
Receivables written off during the year as uncollectible
   (137 ) —
Unused amounts reversed
   (12 ) (239 )
Effect of exchange rates
   (405 ) 69


Ending
   ￦ 12,510    12,839


The aging analyses of trade receivables, loans and other receivables as of December 31, 2013 and 2012, are as follows:
   2013
      Overdue
   Not Past
due    Less than
3 months    Over
3 months
and less than
6 months    Over
6 months    Impaired    Total
   (In millions of won)
Trade receivables
   ￦ 1,940,110       3,784       205       14       1,008       1,945,121
Current loans and other receivables
   323,838       —       —       —       1,983       325,821
Non-current loans and other receivables
   43,436       —       —       —       12,164       55,600












   ￦ 2,307,384       3,784       205       14       15,155       2,326,542












   2012 (Unaudited)
      Overdue
   Not Past
due    Less than
3 months    Over
3 months
and less than
6 months    Over
6 months    Impaired    Total
   (In millions of won)
Trade receivables
   ￦ 1,720,446       980       186       79       1,087       1,722,778
Current loans and other receivables
   125,342       1       —       —       4,747       130,090
Non-current loans and other receivables
   19,202       —       —       —       12,764       31,966












   ￦ 1,864,990       981       186       79       18,598       1,884,834












SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
13.    Inventories
Details of inventories as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Finished goods
   ￦ 345,872       563,251
Work in progress
   608,402       683,352
Raw materials
   141,625       175,985
Supplies
   45,672       42,166
Goods in transit
   36,729       44,577




   ￦ 1,178,300       1,509,331




The amount of the inventories recognized as cost of sales is as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Inventories recognized as cost of sales
   ￦ 8,594,938       8,546,702
The changes in inventory valuation allowance during the years ended December 31, 2013 and 2012 are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Beginning balance
   ￦ 124,889    208,688
Charged to cost of sales
   5,388    18,699
Write-off upon sales
   (57,161 ) (102,498 )


Ending balance
   ￦ 73,116    124,889


There were no significant reversals of inventory write-downs recognized during 2013 and 2012.
14.    Other Current and Non-Current Assets
Details of other current and non-current assets as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Current Assets

Advance payments
   ￦ 7,405       4,255
Prepaid expenses
   128,125       123,197
Others
   5,854       7,921




   141,384       135,373




Non-current Assets

Long-term advance payments
   21       62
Long-term prepaid expenses(1)
   346,774       167,356
Others
   19,026       21,577




   365,821       188,995




   ￦ 507,205       324,368




(1) Long-term prepaid expenses primarily consist of prepaid royalty.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
15.    Available-for-sale Financial Assets
Available-for-sale financial assets as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   Number of
stock    Ownership
(%)    Acquisition
cost    Book
value    Book
value
   (In millions of won)
Hyundai Information Technology Co, Ltd.
   1,160,180       2.3       ￦ 3,481       1,885       2,251
HYUNDAI LOGISTICS CO., LTD.
   15,115       0.08       76       98       98
EQ bestech Co., Ltd.
   2,000       1.67       10       10       10
Itest Co., Ltd.
   481,780       1.04       1,166       768       990
Hyundai IBT Co., Ltd.
   2,528       0.01       63       4       5
Fidelix Co., Ltd.
   1,605,854       8.79       3,560       3,870       3,019
Futures Corp Technology Co., Ltd.
   60,000       10.44       300       —       —
iA, Inc. (formerly C&S Technology Co., Ltd.)
   1,031,590       3.9       4,508       3,389       3,389
Phison Electronics Corp.
   3,277,054       1.82       11,661       22,050       23,277
ProMos(1)
   201,600,000       7.93       21,847       —       —
L&S Investment
   Certificate       N/A       1,124       1,124       565
JNT Frontier Private Equity Unit
   Certificate       N/A       1,307       1,307       1,400
SV M&A No.1 Equity Unit
   Certificate       N/A       1,196       1,196       1,196
Daishin Aju IB Investment Co., Ltd.
   Certificate       N/A       1,518       1,518       500
Seoul Investment Early & Green Venture Fund
   Certificate       N/A       1,867       1,867       1,900
TS 2011-4 Technology Transfer & Business
   Certificate       N/A       1,600       1,600       800
IMM Investment
   Certificate       N/A       786       786       499
KTC-NP-Growth
   Certificate       N/A       540       540       —
Intellectual Discovery, Ltd.
   800,000       8.94       4,000       4,000       4,000
SKY Property Mgmt. Ltd.
   5,745       15       112,360       112,360       —
Equity investment in a construction guarantee association
   132       0.01       396       396       396
Others
         3,140       2       2






         ￦ 176,506       158,770       44,297






(1) Fully impaired in prior years.
Changes in the book value of available-for-sale financial assets for the years ended December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
At January 1
   ￦ 44,297    47,492
Acquisition
   115,564    3,618
Disposal
   (125 ) (5,247 )
Change in fair value
   (966 ) (1,566 )


At December 31
   ￦ 158,770    44,297


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
16.    Investments in Joint Venture and Associate
Details of investments in joint venture and associate as of December 31, 2013 and 2012, are as follows:
      2013    2012
(Unaudited)
Type

Investee
   Number
of stock    Ownership
(%)    Acquisition
cost    Net asset
value    Book
value    Book
value
      (In millions of won)
Associate
   Siliconfile Technologies Inc.(1)    2,358,832       27.93       ￦ 22,835       9,996       10,962       8,909
Joint venture

HITECH Semiconductor (Wuxi) Co., Ltd.
(HITECH)
   Certificate       45.00       90,149       96,135       96,135       95,191








            ￦ 112,984       106,131       107,097       104,100








(1) As of December 31, 2013, the market value of the Group’s interest in the entity’s publicly traded stock was ￦19,791 million (2012: ￦16,677 million unaudited).
Changes in investments in joint venture and associate for the years ended December 31, 2013 and 2012, are as follows:
   2013
   Siliconfile
Technologies Inc. HITECH Total
   (In millions of won)
At January 1
   ￦ 8,909    95,191    104,100
Dividend
   —    (15,033 ) (15,033 )
Share of profit
   2,152    17,104    19,256
Other equity movement
   (99 ) (1,127 ) (1,226 )


At December 31
   ￦ 10,962    96,135    107,097


   2012 (Unaudited)
   Siliconfile
Technologies Inc. HITECH Total
   (In millions of won)
At January 1
   ￦ 8,138    95,475    103,613
Dividend
   —    (11,883 ) (11,883 )
Share of profit
   826    15,887    16,713
Other equity movement
   (55 ) (4,288 ) (4,343 )


At December 31
   ￦ 8,909    95,191    104,100


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
16.    Investments in Joint Venture and Associate,  continued
Joint venture and associate’s summarized statements of financial position as of December 31, 2013 and 2012, are as follows:
      2013
   Locations    Current
assets    Non-
current
assets    Current
liabilities    Non-
current
liabilities
      (In millions of won)
Siliconfile Technologies Inc.
   Korea       ￦ 44,042       19,644       26,034       1,860
HITECH Semiconductor(Wuxi) Co., Ltd. (HITECH)
   China       213,172       353,432       182,036       170,935
      2012 (Unaudited)
   Locations    Current
assets    Non-
current
assets    Current
liabilities    Non-
current
liabilities
      (In millions of won)
Siliconfile Technologies Inc.
   Korea       ￦ 49,481       12,933       31,567       2,407
HITECH Semiconductor(Wuxi) Co., Ltd. (HITECH)
   China       180,509       397,564       129,219       237,317
Joint venture and associate’s summarized statements of comprehensive income for the years ended December 31, 2013 and 2012, are as follows:
   2013    2012 (Unaudited)
   Sales    Net
income    Comprehensive
income    Sales    Net
income    Comprehensive
income
   (In millions of won)
Siliconfile Technologies Inc.
   ￦ 131,914       7,708       7,708       131,126       3,083       3,083
HITECH Semiconductor(Wuxi) Co., Ltd. (HITECH)
   566,065       38,008       38,008       597,091       37,892       37,892
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
17.    Property, Plant and Equipment
Changes in property, plant and equipment for the years ended December 31, 2013 and 2012, are as follows:
2013
Land Buildings Structures Machinery Vehicles Others Construction
-in-progress Total
(In millions of won)
At January 1 net book amount
462,067    1,301,330    181,615    9,033,566    340    188,021    419,253    11,586,192

Changes during 2013

Additions
￦ 226    125    82    14,682    34    6,486    3,528,676    3,550,311
Business combination
—    —    —    47    —    12    —    59
Disposals
(33 ) (3,347 ) (690 ) (7,423 ) —    (565 ) (336 ) (12,394 )
Depreciation
—    (52,154 ) (19,600 ) (2,788,978 ) (148 ) (60,086 ) —    (2,920,966 )
Transfers
42,302    62,012    46,149    3,031,495    13    75,393    (3,257,364 ) —
Impairments
—    (985 ) (1,507 ) (88,407 ) —    —    (10,633 ) (101,532 )
Exchange differences
(164 ) 2,835    1,250    27,394    (12 ) (150 ) (3,026 ) 28,127

Ending net book amount
504,398    1,309,816    207,299    9,222,376    227    209,111    676,570    12,129,797

At December 31

Acquisition cost
504,398    1,853,434    533,333    31,885,948    2,412    741,869    676,570    36,197,964
Accumulated depreciation
—    (518,446 ) (304,622 ) (22,299,425 ) (2,185 ) (530,357 ) —    (23,655,035 )
Accumulated impairment
—    (24,841 ) (21,412 ) (356,843 ) —    (2,289 ) —    (405,385 )
Government grants
—    (331 ) —    (7,304 ) —    (112 ) —    (7,747 )

Net book amount
￦ 504,398    1,309,816    207,299    9,222,376    227    209,111    676,570    12,129,797

SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
17.    Property, Plant and Equipment,  continued
2012 (Unaudited)
Land Buildings Structures Machinery Vehicles Others Construction
-in-progress Total
(In millions of won)
At January 1 net book amount
￦ 462,586    1,224,520    185,961    8,425,712    452    155,103    444,974    10,899,308

Changes during 2012

Additions
338    654    101    30,549    107    3,689    3,909,085    3,944,523
Acquisition of subsidiaries
—    —    —    2,095    —    811    —    2,906
Disposals
—    (16 ) (620 ) (25,105 ) (40 ) (382 ) (7,784 ) (33,947 )
Depreciation
—    (49,783 ) (19,505 ) (2,925,699 ) (183 ) (61,406 ) —    (3,056,576 )
Transfers
—    139,905    21,654    3,671,679    25    92,299    (3,925,578 ) (16 )
Exchange differences
(857 ) (13,950 ) (5,976 ) (145,665 ) (21 ) (2,093 ) (1,444 ) (170,006 )

Ending net book amount
462,067    1,301,330    181,615    9,033,566    340    188,021    419,253    11,586,192

At December 31

Acquisition cost
462,067    1,792,237    486,984    29,149,281    2,537    677,361    419,253    32,989,720
Accumulated depreciation
—    (467,030 ) (285,441 ) (19,817,741 ) (2,197 ) (486,508 ) —    (21,058,917 )
Accumulated impairment
—    (23,877 ) (19,928 ) (289,951 ) —    (2,832 ) —    (336,588 )
Government grants
—    —    —    (8,023 ) —    —    —    (8,023 )

Net book amount
￦ 462,067    1,301,330    181,615    9,033,566    340    188,021    419,253    11,586,192

Depreciation expense of ￦2,616,341 million (2012: ￦2,859,445 million) has been charged to cost of sales, ￦154,673 million (2012: ￦179,425 million unaudited) to selling and administrative expenses, ￦122,471 million (2012: ￦nil unaudited) to casualty losses of other expenses and ￦27,481 million (2012: ￦17,706 million unaudited) has been capitalized as development costs for the year ended December 31, 2013.
Impairment of ￦101,532 million (2012: ￦nil unaudited) has been charged to casualty losses caused by a fire on the manufacturing facilities in Wuxi, China, which is included in other expenses (Note 35).
Certain amounts of the property, plant and equipment are pledged as collaterals for borrowings of the Group as of December 31, 2013 (Note 40).
During 2013, the Group has capitalized borrowing costs amounting to ￦7,687 million (2012: ￦5,859 million unaudited) on qualifying assets. Borrowing costs were capitalized at the weighted average rate of its general borrowings of 3.87% (2012: 2.96% unaudited) for the year ended December 31, 2013.
The Group leases certain machinery and others from ME Semiconductor Rental First L.L.C. and others under ~~U.S. GAAP~~finance lease agreements.
The book value of the machinery and others subject to finance lease agreement amounted to ￦242,187 million (2012: ￦355,365 million unaudited) as ~~follows (in millions~~ of ~~Korean won):~~
December 31, 2013. The machinery is pledged as collateral for the finance lease liabilities.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
17.    Property, Plant and Equipment,  continued
The Group leases certain machinery and others from Macquarie Capital and others under operating lease agreements. The payment schedule of minimum lease payments under operating lease agreements as of December 31, 2013, is as follows:
   Minimum lease payments
   ~~SK Networks~~(In millions of won)
~~Current assets~~
No later than 1 year
   W￦ ~~11,834~~10,122
~~Noncurrent assets~~
Later than 1 year
   2,093
~~— Depreciable fixed~~
￦ 12,215
As of December 31, 2013, certain inventories, property, plant and equipment, and investment properties are insured and details of insured assets is as follows:
Insured assets
Insured
amount    ~~773,608~~
~~— Land~~ ~~3,889~~
~~— Other long-term assets~~ ~~5,912~~
~~— Identifiable intangible assets~~ ~~132,135~~
~~Goodwill~~ ~~635,337~~
~~Interest-bearing debts~~ ~~(580,207~~ )
~~Other liabilities~~ ~~(19,285~~ )
~~Deferred tax liabilities~~ ~~(70,468~~ )
Insurance
company
      (In millions of won)
~~Total~~
Package insurance
   WProperty, plant and equipment, inventories and others ~~892,755~~ ￦ 34,926,444
Hyundai Marine & Fire
Insurance Co., Ltd. and others
Business interruption
Fire insurance
Property, plant and equipment, investment property
Erection all risks insurance
Property, plant and equipment
￦ 34,926,444
18.    Investment Property
Details of changes in investment property during the years ended December 31, 2013 and 2012, are as follows:
2013
   Buildings
(In millions
of won)
At January 1 net book amount
￦ 29,888
Changes during 2013
Depreciation
   (1,279 )
Closing net book amount
28,609
At December 31
Acquisition cost
48,390
Accumulated depreciation
(19,781 )
Net book amount
￦ 28,609

~~F-87~~
SK ~~TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~(5)  Pro forma information~~
~~SK Broadband Co., Ltd.’s revenue~~HYNIX, INC. and ~~net loss included in~~Subsidiaries
Notes to the ~~Company’s consolidated income statement~~Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
18.    Investment Property,  continued
2012
(Unaudited)
Buildings
(In millions
of won)
At January 1 net book amount
￦ 31,168
Changes during 2012
Depreciation
(1,280 )
Closing net book amount
29,888
At December 31
Acquisition cost
48,390
Accumulated depreciation
(18,502 )
Net book amount
￦ 29,888
The depreciation expense of ￦1,279 million (2012: ￦1,280 million unaudited) has been charged to ‘cost of sales’ for the year ended December 31, ~~2009, since acquisition date~~2013.
Rental income from investment property during the year ended December 31, 2013, is ￦4,283 million (2012: ￦4,666 million unaudited).
19.    Intangible Assets
Intangible assets as of ~~July 21, 2009, totaled~~ W~~977,386~~December 31, 2013 and 2012, are as follows:
   2013
   Goodwill Industrial
property
rights Development
costs Others Total
   (In millions of won)
At January 1 net book amount
   ￦ 633,170    92,188    223,188    35,084    983,630


Changes during 2013

Additions
   —    13,187    190,271    98,038    301,496
Business combinations
   2,905    —    —    684    3,589
Disposals
   —    (17,288 ) —    —    (17,288 )
Impairment
   —    —    —    (183 ) (183 )
Amortization
   —    (14,227 ) (136,534 ) (5,515 ) (156,276 )
Other
   (3,764 ) —    5    (806 ) (4,565 )


Ending net book amount
   632,311    73,860    276,930    127,302    1,110,403


At December 31

Acquisition cost
   632,311    164,125    595,943    161,329    1,553,708
Accumulated amortization and impairment
   —    (90,265 ) (319,013 ) (34,027 ) (443,305 )


Net book amount
   ￦ 632,311    73,860    276,930    127,302    1,110,403


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
19.    Intangible Assets,  continued
   2012 (Unaudited)
   Goodwill Industrial
property
rights Development
costs Others Total
   (In millions of won)
At January 1 net book amount
   ￦ 386,450    84,401    221,910    14,887    707,648


Changes during 2012

Additions
   —    28,302    130,576    194    159,072
Business combinations
   261,047    —    —    24,105    285,152
Disposals
   —    (5,680 ) —    (920 ) (6,600 )
Impairment
   —    —    —    (265 ) (265 )
Amortization
   —    (14,834 ) (129,298 ) (1,566 ) (145,698 )
Other
   (14,327 ) (1 ) —    (1,351 ) (15,679 )


Ending net book amount
   633,170    92,188    223,188    35,084    983,630


At December 31

Acquisition cost
   633,170    199,820    405,671    46,510    1,285,171
Accumulated amortization and impairment
   —    (107,632 ) (182,483 ) (11,426 ) (301,541 )


Net book amount
   ￦ 633,170    92,188    223,188    35,084    983,630


Amortization of ￦501 million ~~and~~ W~~133,737~~(2012: ￦54 million ~~respectively. SK Networks Co., Ltd.’s revenue and earnings~~unaudited) is included in the ~~Company’s consolidated~~‘cost of sales’ and ￦155,775 million (2012: ￦ 145,644 million unaudited) in ‘selling and administrative expenses’ in the statements of comprehensive income ~~statement~~ for the year ended December 31, ~~2009, since acquisition date of September 30, 2009, was~~ W~~29,752~~2013.
Among costs associated with development activities, ￦190,271 million ~~and~~ W~~3,053 million. TU Media Corporation’s revenue and net loss included in the Company’s consolidated income statement~~(2012: ￦130,576 million unaudited), that met capitalization criteria, were capitalized as development cost for the year ended December 31, ~~2010, since acquisition date~~2013. In addition, costs associated with research activities and other development expenditures that did not meet the criteria amounted to ￦968,804 million (2012: ￦975,057 million unaudited) were recognized as an expense as incurred in the statement of ~~November 1, 2010,~~comprehensive income for the year ended December 31, 2013.
Goodwill impairment reviews are undertaken annually. For the purposes of impairment reviews, goodwill is allocated to the CGUs to which it relates. As the Group has only one CGU like an operating segment, goodwill was W~~102,896 million and~~ W~~1,589 million, respectively.~~
~~The combined revenue and earnings~~allocated to one CGU. Recoverable amount of the ~~Company under U.S. GAAP had~~CGU was determined based on fair value less costs to sell, which was determined using the ~~acquisition of SKBB investment, SK Networks Co., Ltd.’s leased line business and merger of TU Media Corporation occurred~~current stock price as of ~~January 1, 2008, 2009~~December 31, 2013. No impairment loss of goodwill was recognized since on the recoverable amount is higher than carrying value of the CGU as of December 31, 2013.
20.    Non-current Assets Held for Sale
Details of changes in non-current assets held for sale during the years ended December 31, 2013 and ~~2010~~2012, are as ~~follows (in millions~~follows:
   2013 2012
(Unaudited)
   (In millions of won)
At January 1
   ￦ 26,958    29,033
Disposal
   (4 ) (5 )
Other
   (397 ) (2,070 )


At December 31
   ￦ 26,557    26,958


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
21.    Other Non-trade Payables
Details of ~~Korean won):~~

Year Ended December 31,
2008 2009 2010

Revenue W 13,540,293 W 13,978,799 W 14,276,742
Earnings 738,469 1,275,801 1,414,138
other non-trade payables as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Current

Accrued expenses
   ￦ 677,120       361,076




Non-current

Long-term other payables
   166,641       75,492
Long-term accrued expense
   616       3,531
Rent deposit payables
   9,844       18,510




   177,101       97,533




   ￦ 854,221       458,609




22.    Borrowings
Details of borrowings as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Current

Short-term borrowings
   ￦ 137,979       1,020,609
Current maturities of debentures
   —       299,697
Current maturities of convertible bonds
   —       980,316
Current maturities of long-term borrowings
   732,341       418,575




   870,320       2,719,197




Non-current

Long-term borrowings
   1,730,183       2,301,807
Debentures
   1,450,777       1,450,972
Convertible bonds
   498,935       —




   3,679,895       3,752,779




   ￦ 4,550,215       6,471,976




Details of short-term borrowings as of December 31, 2013 and 2012, are as follows:

Financial
Institutions
   Annual
Interest Rate (%)
at 2013    2013    2012
(Unaudited)
         (In millions of won)
Usance borrowings
   Kookmin Bank and other    0.65       ￦ 10,610       527,926
Borrowings on trade receivables collateral
   Shinhan Bank and other    —       —       341,434
Refinancing
   China Construction Bank and other    2.75       127,369       151,249




         ￦ 137,979       1,020,609




SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
22.    Borrowings, continued
Details of long-term borrowings as of December 31, 2013 and 2012, are as follows:

Financial Institutions

Annual
Interest Rate (%)
at 2013
2013 2012
(Unaudited)
(In millions of won)
Local currency loans

Borrowing for housing
Kookmin Bank 3.5 ￦ 24    28
Borrowings for childcare facilities
NH Bank 2 246    308
Funds for equipment
Korea Finance Corporation — —    25,000
Funds for equipment
Korea Finance Corporation Industrial Financial Debentures (4 years) +
0.93(2) 250,000    250,000
Funds for equipment
Korea Exchange Bank CD (91 days) +1.31(3) 50,000    50,000
Commercial paper
Hanyang Securities and other 3.63 ~ 3.9 370,000    370,000
Finance lease liabilities
ME Semiconductor Rental First LLC. 5.00 212,442    266,731

882,712    962,067

Foreign currency loans

General borrowings
Export Import Korea Bank 3M Libor + 3.15(4) 105,530    107,110
General borrowings(1)
SC Bank(1) 3M Libor + 3.00(4) 86,271    151,025
General borrowings
Hana Bank 3M Libor + 3.10(4) 23,744    48,200
General borrowings
Korea Development Bank
3M Libor +
3.06~3.36(4)
316,590    321,330
General borrowings
Comerica Bank 6.48 32,954    34,282
General borrowings
NK Bank and other
3M Libor +
3.19~3.79(4)
263,825    267,775
General borrowings
Agricultural Bank of China and other 3M Libor + 2.65(4) 280,212    118,839
Syndicated loans
Development Bank of China and other 3M Libor + 2.95(4) 298,787    425,659
Mortgage loans
HITECH 7.16 96,236    177,954
Finance lease liabilities
Good memory and other 4.7~7.16 81,615    122,919

1,585,764    1,775,093

2,468,476    2,737,160

Less: Discount on present value
(5,952 ) (16,778 )
Current maturities
(732,341 ) (418,575 )

￦ 1,730,183    2,301,807

(1)
n.   ~~Asset Securitization Transactions~~The Group entered into interest swap contracts with SC Bank for the interest on the foreign currency loans.
~~Under U.S. GAAP, a transfer~~
(2) As of December 31, 2013, Industrial Financial Debentures rate is 3.05%.
(3) As of December 31, 2013, CD 91 days rate is 2.66%.
(4) As of December 31, 2013, 3M Libor rate is 0.25%.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
22.    Borrowings, continued
Details of ~~financial assets in an asset securitization~~debentures as of December 31, 2013 and 2012, are as follows:

Maturity
Date
   Annual
Interest Rate (%)
at 2013    2013 2012
(Unaudited)
         (In millions of won)
Unsecured notes in local currency:

209th
   Sep. 9, 2013    —    ￦ —    300,000
210th
   Jan. 14, 2015    6.35    200,000    200,000
211th
   May 5, 2016    6.2    400,000    400,000
212th
   May 30, 2019    5.35    550,000    550,000
213th
   Sep. 4, 2017    3.72    200,000    200,000
Secured notes in foreign currency

Foreign 8th(1)
   Jun. 20, 2017    3M Libor+2.85    105,530    107,110


         1,455,530    1,757,110
Less: Discounts on debentures
         (4,753 ) (6,441 )
Current portion
         —    (299,697 )


         ￦ 1,450,777    1,450,972


(1) The Group is provided with USD 100 million of bank guarantee payment from Shinhan Bank as of December 31, 2013.
Details of convertible bonds as of December 31, 2013 and 2012, are as follows:

Maturity
Date
   Annual
Interest Rate (%)
at 2013    2013 2012
(Unaudited)
         (In millions of won)
Convertible bond in local currency


207th
   Sep. 5, 2013    —       ￦ —    440,499
Convertible bond in foreign currency

Foreign 7th(1)
   May. 14, 2015    2.65       527,650    535,550


         527,650    976,049
Add: Call premium on bonds
         —    70,952
Less: Conversion rights adjustment
         (26,434 ) (61,752 )
Discount on bonds
         (2,281 ) (4,933 )
Current portion
         —    (980,316 )


         ￦ 498,935    —


(1) As of December 31, 2012, the convertible bond was classified as current liabilities because the early redemption right was exercisable until April 14, 2013. Upon expiration of the early redemption right, in 2013, the convertible bond was reclassified as non-current liabilities as of December 31, 2013.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
22.    Borrowings, continued
Details of terms and conditions of conversion rights of convertible bond as of December 31, 2013, is ~~accounted for~~ as ~~a sale only if all of the following conditions are met;~~
follows:
A.   ~~Isolation~~
Details
Foreign 7th
Face value of ~~transferred financial assets.~~ convertible bond
USD 500,000,000
Convertible rate at face value
100%
Conversion term (per share)
Par value of ￦34,394
(KRW 1,133.8/USD 1)
Number of convertible shares
16,483,000 shares
Convertible periods
May 15, 2011 ~ Apr. 28, 2015
Deemed exercise date
The ~~transferred financial assets have been isolated from the transferor but presumptively beyond the reach~~first day of the ~~transferor and its creditors, even in bankruptcy or other receivership. Notwithstanding~~year of conversion
Finance lease liability
Lease liabilities are effectively secured as the rights to the leased asset belong to the lessor in the event of default.
Details of future minimum lease payments to the lessor as of December 31, 2013 and 2012, are as follows:
      2013 2012
(Unaudited)
   (In millions of won)
Total minimum lease payment

No later than 1 year
   ￦ 103,077    112,585
Between 1 and 5 years
   216,391    320,794


   319,468    433,379


Unearned finance income
   (25,410 ) (43,729 )
Net minimum lease payment

No later than 1 year
   90,139    94,372
Between 1 and 5 years
   203,919    295,278


   ￦ 294,058    389,650


Details of book value and fair value of non-current borrowings as of December 31, 2013 and 2012, are as follows:
   2013    2012 (Unaudited)
   Book value    Fair value    Book value    Fair value
   (In millions of won)
Long-term borrowings
   ￦ 1,730,183       1,759,397       2,301,807       2,339,963
Debentures
   1,450,777       1,501,810       1,450,972       1,504,532
Convertible bond
   498,935       653,653       —       —








   ￦ 3,679,895       3,914,860       3,752,779       3,844,495








SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
23.    Provisions
Details of changes in provisions during the years ended December 31, 2013 and 2012, are as follows:
   2013
   Sales returns Warranty Legal claims Total
   (In millions of won)
At January 1
   ￦ 5,305    2,949    322,361    330,615
Addition
   12,564    13,656    58,959    77,183
Reversal
   —    —    (211,152 ) (211,152 )
Utilization
   (5,305 ) (2,691 ) (158,762 ) (158,762 )
Foreign exchange difference and other
   —    —    14,700    14,700


At December 31
   ￦ 12,564    13,914    26,106    52,584


   2012 (Unaudited)
   Sales returns Warranty    Legal claims Total
   (In millions of won)
At January 1
   ￦ 3,806    —       349,661    353,467
Addition
   5,305    2,949       86,398    90,846
Reversal
   —    —       (70,490 ) (70,490 )
Utilization
   (3,806 ) —       (18,209 ) (18,209 )
Foreign exchange difference and other
   —    —       (24,999 ) (24,999 )




At December 31
   ￦ 5,305    2,949       322,361    330,615




Provisions for sales returns
The Group estimates the expected sales returns based on historical results and adjusts sales and cost of sales, respectively. Accordingly, related gross profit and estimated expenses related to the return (such as transportation costs) are recorded as provisions for sales returns.
Provisions for warranty
The Group estimates the expected warranty costs based on historical results and accrues provisions for warranty.
Provisions for legal claims
The Group recognizes provisions for legal claims when the Group has a present legal or constructive obligation as a result of past events and an outflow of resources required to settle the obligation is probable and the amount can be reliably estimated.
The Group was a defendant in lawsuits claimed by Rambus Inc. (“Rambus”), a developer of High- bandwidth chip connection technology, alleging that the Group’s certain DRAM products are infringing Rambus’ patents (“Patent Litigation”), and that the Group together with other major memory chip manufacturers conspired to prevent Rambus’ proprietary DRAM technology from becoming the standard computer memory technology (“Antitrust Litigation”). However, on June 11, 2013, the Group entered into a settlement and patent license agreement with Rambus, and pursuant to the agreement the Group and Rambus withdrew all outstanding disputes, including Patent Litigation and Antitrust Litigation, and the Group secured rights to use the Rambus’ patents for the next five years. The reversal of legal provision for the year ended December 31, 2013 was primarily due to settlement of Rambus litigation.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
24.    Other Financial Liabilities
Details of other financial liabilities as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Current

Derivative liabilities (Note 41)
   ￦ 2,194       17,020
Non-current

Derivative liabilities (Note 41)
   107,094       1,615




   ￦ 109,288       18,635




25.    Other Current and Non-current Liabilities
Details of other current and non-current liabilities as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Current

Unearned income
   ￦ 2,403       1,431
Withholdings
   21,180       19,915
Deposits received
   531       841
Advance receipts
   2,616       3,684
Other
   110       35




   26,840       25,906




Non-current

Long-term withholdings
   935       666
Other long-term employee benefit liabilities
   51,280       40,335
Long-term advance receipts
   155       —
Other
   —       47




   52,370       41,048




   ￦ 79,210       66,954




26.    Defined Benefit Liabilities
Defined benefit liabilities recognized in the statements of financial position as of December 31, 2013 and 2012, are determined as follows:
      2013 2012
(Unaudited)
   (In millions of won)
Present value of defined benefit obligations
   ￦ 656,080    592,171
Fair value of plan assets(1)
   (20,340 ) (17,075 )


   ￦ 635,740    575,096


(1) The contributions to the ~~isolation analysis, each entity involved~~National Pension Fund of ￦1,855 million are included in the ~~transfer is subject to the applicable guidance on whether it shall be consolidated. A set-off right is not an impediment to meeting the isolation condition.~~fair value of plan assets (2012: ￦1,952 million unaudited) as of December 31, 2013.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
26.    Defined Benefit Liabilities,  continued
The amounts recognized in the statements of comprehensive income for the years ended December 31, 2013 and 2012, are as follows:
      2013 2012
(Unaudited)
   (In millions of won)
Current service cost
   ￦ 98,095    81,034
Interest expenses
   28,079    27,152
Interest income
   (679 ) (456 )


   ￦ 125,495    107,730


The line items in which defined benefit plan related expenses are included for the years ended December 31, 2013 and 2012, are as follows:
      2013    2012
(Unaudited)
   (In millions of won)
Cost of sales (manufacturing costs)
   ￦ 73,950       68,462
Selling and administrative expenses
   51,545       39,268




   ￦ 125,495       107,730




The remeasurements recognized as other comprehensive loss for the year ended December 31, 2013, amount to ￦15,587 million (2012: ￦82,872 million unaudited), and cumulative remeasurements recognized as other comprehensive loss as of December 31, 2013 amount to ￦185,677 million.
As of December 31, 2013, the Group funded at approximately 2.91% (2012: 2.55% unaudited) of the total retirement benefit obligations through insurance plans with Hanwha Life Insurance Co., Ltd. and Samsung Insurance Co., Ltd.
Changes in the carrying amount of defined benefit obligations for the years ended December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
At January 1
   ￦ 592,171    471,290
Current service cost
   98,095    81,034
Interest expense
   28,079    27,152
Transferred from associates
   344    444
Benefits paid
   (46,538 ) (70,945 )
Remeasurements

- Actuarial gains and losses arising from changes in assumptions
   (18,324 ) 62,273
- Actuarial gains and losses arising from experience adjustments
   2,559    20,417
Other
   (306 ) 506


At December 31
   ￦ 656,080    592,171


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
26.    Defined Benefit Liabilities,  continued
The movements in the fair value of plan assets for the years ended December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
At January 1
   ￦ 17,075    12,591
Interest income
   679    456
Employer contribution
   4,131    5,994
Benefits paid
   (1,367 ) (1,784 )
Remeasurements
   (178 ) (182 )


At December 31
   ￦ 20,340    17,075


The actual return of plan assets for the year ended December 31, 2013, was ￦492 million (2012: ￦274 million unaudited).
The principal actuarial assumptions as of December 31, 2013 and 2012, are as follows:
B.   ~~Transferee’s rights~~2013 2012
(Unaudited)
Salary growth rate
4.92% ~ 6.18% 5.04% ~ 5.58%
Discount rate(1)
1.11% ~ 5.85% 1.65% ~ 5.03%
(1) Return on plan assets is the same as discount rate. As of December 31, 2013, 1.11% of discount rate was applied for SKHYJ, which comprises 0.2% of total defined benefit liabilities, and 4.26% to ~~pledge or exchange. This condition~~5.85% was applied for others. As of December 31, 2012, 1.65% of discount rate was applied for SKHYJ, which comprises 0.3% of total defined benefit liabilities, and 3.98% to 5.03% was applied for others (unaudited).
Plan assets as of December 31, 2013 and 2012, consist of the following:
   2013    2012
(Unaudited)
   (In millions of won)
Deposits
   ￦ 18,485       15,123
Other
   1,855       1,952




   ￦ 20,340       17,075




The sensitivity analysis of the defined benefit obligations as of December 31, 2013 to changes in the principal assumptions is as follows:
   Effect on defined benefit obligation
   Changes in
principal
assumption Increase in
principal
assumption Decrease in
principal
assumption
   (In millions of won)
Discount rate
   1 % ￦ (73,160 ) 86,732
Salary growth rate
   1 % 88,147    (75,494 )
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
26.    Defined Benefit Liabilities,  continued
sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position.
27.    Deferred Income Tax
The analysis of deferred tax assets and deferred tax liabilities as of December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Deferred tax assets

Deferred tax asset expected to be realized after more than 12 months
   ￦ 105,260    317,109
Deferred tax asset to be recovered within 12 months
   178,473    187,904


   283,733    505,013


Deferred tax liabilities

Deferred tax liability expected to be reversed after more than 12 months
   (79,090 ) (118,431 )
Deferred tax liability expected to be reversed within 12 months
   (6,073 ) (8,216 )


   (85,163 ) (126,647 )


Deferred tax assets, net
   ￦ 198,570    378,366


Change in deferred taxes for the years ended December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
At January 1
   ￦ 378,366    315,718
Recorded in profit or loss
   (180,928 ) 69,404
Tax charge (credit) relating to components of other comprehensive income
   311    (330 )
Exchange differences
   821    (6,426 )


At December 31
   ￦ 198,570    378,366


SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
27.    Deferred Income Tax,  continued
Changes in deferred income tax assets and liabilities for the years ended December 31, 2013 and 2012, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows:
   2013
   January 1,
2013 Profit or
loss Other
comprehensive
income    Currency
translation
differences December 31,
2013
   (In millions of won)
Deferred tax liabilities

Advanced depreciation provision
   ￦ (55,666)    —    —       —    (55,666 )
Valuation of derivatives
   (5,356 ) (96 ) —       —    (5,452 )
Gains on foreign currency translation
   (30,398 ) 27,801    —       —    (2,597 )
Conversion rights adjustment
   (14,944 ) 8,117    —       —    (6,827 )
Others
   (19,676 ) 4,720    311       23    (14,622 )




   (126,040 ) 40,542    311       23    (85,164 )




Deferred tax assets

Loss on valuation of inventories
   27,804    (8,915 ) —       (13 ) 18,876
Valuation of equity-method investments
   322,919    (111,402 ) —       4,817    216,334
Accumulated depreciation
   98,499    (6,214 ) —       544    92,829
Net defined benefits
   107,219    30,414    —       (55 ) 137,578
Deemed interest of suspense payment and other
   162,507    (117 ) —       —    162,390
Provisions and others
   104,468    (98,652 ) —       —    5,816
Impairment of available-for-sale financial assets
   36,964    3,170    —       —    40,134
Losses on foreign currency translation
   29,906    (27,360 ) —       —    2,546
Property, plant and equipment
   24,439    (9,222 ) —       —    15,217
Losses on valuation of derivative
   9,182    22,185    —       —    31,367
Tax loss carryforwards
   612,111    (538,748 ) —       (627 ) 72,736
Tax credit carryforwards
   658,899    (16,732 ) —       (46 ) 642,121
Others
   230,455    (18,423 ) —       (2,065 ) 209,967




   2,425,372    (780,016 ) —       2,555    1,647,911




Deferred income tax assets
   2,299,332    (739,474 ) 311       2,578    1,562,747
Deferred income tax assets not recognized
   (1,920,966 ) 558,546    —       (1,757 ) (1,364,177 )




Deferred income tax assets recognized
   ￦ 378,366    (180,928 ) 311       821    198,570




SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
27.    Deferred Income Tax,  continued
   2012 (Unaudited)
   January 1,
2012 Profit or
loss Other
comprehensive
income Currency
translation
differences December 31,
2012
   (In millions of won)
Deferred tax liabilities

Advanced depreciation provision
   ￦ (55,666)    —    —    —    (55,666 )
Valuation of derivatives
   (15,816 ) 10,460    —    —    (5,356 )
Gains on foreign currency translation
   (62,363 ) 31,965    —    —    (30,398 )
Conversion rights adjustment
   (25,923 ) 10,979    —    —    (14,944 )
Others
   (22,114 ) 2,634    (330 ) 134    (19,676 )


   (181,882 ) 56,038    (330 ) 134    (126,040 )


Deferred tax assets

Loss on valuation of inventories
   39,371    (11,508 ) —    (59 ) 27,804
Valuation of equity-method investments
   422,452    (99,533 ) —    —    322,919
Accumulated depreciation
   158,857    (49,335 ) —    (11,023 ) 98,499
Net defined benefits
   94,968    12,312    —    (61 ) 107,219
Deemed interest of suspense payment and other
   162,313    194    —    —    162,507
Provisions and others
   122,982    (18,514 ) —    —    104,468
Impairment of available-for-sale financial assets
   36,187    777    —    —    36,964
Losses on foreign currency translation
   100,517    (70,611 ) —    —    29,906
Property, plant and equipment
   24,689    (250 ) —    —    24,439
Losses on valuation of derivative
   26,844    (17,662 ) —    —    9,182
Tax loss carryforwards
   467,047    149,771    —    (4,707 ) 612,111
Tax credit carryforwards
   712,485    (53,373 ) —    (213 ) 658,899
Others
   120,628    120,097    —    (10,270 ) 230,455


   2,489,340    (37,635 ) —    (26,333 ) 2,425,372


Deferred income tax assets
   2,307,458    18,403    (330 ) (26,199 ) 2,299,332
Deferred income tax assets not recognized
   (1,991,740 ) 51,001    —    19,773    (1,920,966 )


Deferred income tax assets recognized
   ￦ 315,718    69,404    (330 ) (6,426 ) 378,366


Deferred income tax assets are recognized for deductible temporary differences and tax loss carryforwards to the extent that the realization of the related tax benefit through future taxable profits is probable.
As of December 31, 2013, the Group recognized the entire deferred income tax assets for loss carryforwards which are deductible from future taxable income. However, as of December 31, 2012, the Group did not recognize deferred income tax assets amounting to ￦225,155 million for a loss carryforwards of ￦928,469 million because it was not probable that future taxable profit will be available against which the Group can use the benefits therefrom (unaudited).
Also, the Group did not recognize deferred income tax assets of ￦799,182 million (2012: ￦1,036,912 million) in respect of deductable temporary differences amounting to ￦3,302,398 million (2012: ￦4,133,301 million) because it was not probable that future taxable profit will be available against which the Group can use the benefits therefrom.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
27.    Deferred Income Tax,  continued
For the year ended December 31, 2013, ￦108,433 million (2012: ￦140,711 million unaudited) of tax credit occurred which can be utilized in the future period. However, the Group did not recognize deferred income tax assets of ￦564,995 million (2012: ￦658,899 million unaudited) in respect of unused tax credit and others accumulated as of December 31, 2013.
On January 1, 2014, the Tax Reduction and Exemption Control Act in Korea was amended so that the minimum tax rate applied to taxable income in excess of ￦100 billion for the Parent Company after 2014 was revised from 16% to 17%. As of December 31, 2013, the Parent Company applied 16% as the minimum tax rate when measuring the amount of tax credit related deferred tax assets for which it is probable that the related tax benefit will be realized. If the Parent Company applied the 17% of minimum tax rate, deferred tax assets related to tax credit carryforwards would have decreased by ￦10,489 million.
On January 1, 2014, certain municipal corporate income tax rules were amended and effective on the same date that resulted in excluding tax credits from the basis of determining municipal corporate income tax. Accordingly, starting for the annual periods from 2014, the Parent Company will have larger municipal corporate income tax due to the impact from the income tax credits. If the amended municipal corporate income tax rules were applied at the end of 2013, deferred tax assets related to tax credit carryforwards would have decreased by ￦6,805 million.
Expiration schedule of tax loss carryforwards and tax credit carryforwards as of December 31, 2013 is as follows:
   Tax loss carryforwards    Tax credit carryforwards
   (In millions of won)
2014
   ￦ —       54,017
2015
   —       186,116
2016
   —       144,287
2017
   —       146,123
Thereafter
   258,529       111,578




   ￦ 258,529       642,121




28.    Share capital and Capital Surplus
Details of share capital and capital surplus as of December 31, 2013, is as follows:
Authorized shares
   Outstanding shares (1)    Par value (per share)    Paid in capital
   (In thousands of share capital, except for par value and paid-in capital)
9,000,000
   713,729       ￦ 5,000       ￦ 3,568,645 million
(1) As of December 31, 2013, the actual number of shares which the shareholders own is ~~met if both~~710,201 thousand shares and the difference of 3,528 thousand shares is the result of stock retirement.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
28.    Share capital and Capital Surplus,  continued
Changes in share capital and capital surplus during the years ended December 31, 2013 and 2012, are as follows:
Capital Surplus
Total
owned
shares Share
capital Share
premium Conversion
right
consideration Other Total
(In millions of won and in thousands of shares)
At January 1, 2012 (Unaudited)
￦ 592,172    2,978,498    685,177    72,350    471,525    4,207,550
Issuance of common stock
101,850    509,250    1,816,726    —    —    2,325,976
Exercise of conversion rights
10    52    229    (19 ) —    262
Exercise of stock options
124    619    4,400    —    —    5,019
Expiration of stock options
—    —    —    —    3,562    3,562
Others(1)
—    —    —    —    (76 ) (76 )

At December 31, 2012 (Unaudited)
694,156    3,488,419    2,506,532    72,331    475,011    6,542,293

At January 1, 2013
694,156    3,488,419    2,506,532    72,331    475,011    6,542,293
Exercise of conversion rights
16,045    80,226    381,612    (29,403 ) —    432,435

At December 31, 2013
￦ 710,201    3,568,645    2,888,144    42,928    475,011    6,974,728

(1) The Company purchased non-controlling interest of subsidiaries on September 30, 2012, and the difference between consideration paid and carrying amount of non-controlling interest was charged to capital surplus (unaudited).
In accordance with the Articles of Incorporation, shares can be retired and be distributed as dividends to the shareholders, and the total of number of shares retired as of December 31, 2013, is 3,528 thousand shares.
29.    Retained Earnings
Retained earnings as of December 31, 2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Legal reserve(1)
   ￦ 8,854       8,854
Discretionary reserve(2)
   235,506       235,506
Unappropriated retained earnings
   5,956,962       3,068,905




   ￦ 6,201,322       3,313,265




(1) The Commercial Code of the ~~following conditions~~Republic of Korea requires the Company to appropriate for each financial period, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued capital stock. The reserve is not available for cash dividends payment, but may be transferred to capital stock or used to reduce accumulated deficit. When the accumulated legal reserves (the sum of capital reserves and earned profit reserves) are ~~met:~~greater than 1.5 times the paid-in capital amount, the excess legal reserves may be distributed (in accordance with a resolution of the shareholders’ meeting).
~~1. Each transferee (or, if~~
(2) Discretionary reserve is a reserve for technology development.
SK HYNIX, INC. and Subsidiaries
Notes to the ~~transferee is an entity whose sole purpose is~~Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
30.    Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income as of December 31, 2013 and 2012, are as follows:
   2013 2012
(Unaudited)
   (In millions of won)
Gain on valuation of available-for-sale financial assets
   ￦ 7,824    8,479
Changes of equity from equity-method investments
   (8,338 ) (7,111 )
Cumulative effect of foreign currency translation adjustments
   (108,293 ) (116,770 )


   ￦ (108,807 ) (115,402 )


Details of changes in accumulated other comprehensive income for the years ended December 31, 2013 and 2012, are as follows:
      2013
   Beginning Increase
(Decrease) Reclassification
to profit or loss    Ending
   (In millions of won)
Gain on valuation of available-for-sale financial assets
   ￦ 8,479    (655 ) —       7,824
Changes of equity from equity-method investments
   (7,111 ) (1,227 ) —       (8,338 )
Cumulative effect of foreign currency translation adjustments
   (116,770 ) 8,477    —       (108,293 )




   ￦ (115,402 ) 6,595    —       (108,807 )




      2012 (Unaudited)
   Beginning Increase
(Decrease) Reclassification
to profit or loss    Ending
   (In millions of won)
Gain on valuation of available-for-sale financial assets
   ￦ 10,375    (1,896 ) —       8,479
Changes of equity from equity-method investments
   (2,768 ) (4,343 ) —       (7,111 )
Cumulative effect of foreign currency translation adjustments
   99,500    (216,270 ) —       (116,770 )




   ￦ 107,107    (222,509 ) —       (115,402 )




31.    Share-Based Payments
The Group granted share options to ~~engage in securitization or asset-backed financing activities~~directors and ~~that entity is constrained from pledging or exchanging the assets it receives, each third-party holder of its beneficial interests) has the right~~selected employees pursuant to ~~pledge or exchange the assets (or beneficial interests) it received.~~
~~2. No condition does both~~approval of the ~~following:~~
~~i. Constrains~~shareholders and the ~~transferee (or third-party holder~~Board of ~~its beneficial interests) from taking advantage~~Directors.
Changes in details of ~~its right to pledge or exchange~~
~~ii. Provides more than a trivial benefit to~~share-based payments during the ~~transferor~~
~~If the transferor, its consolidated affiliates included in the financial statements being presented,~~years ended December 31, 2013 and ~~its agents have no continuing involvement with the transferred financial assets, the sale condition is met.~~
2012, are as follows:
C.   Effective control. The transferor, its consolidated affiliates included in the financial statements being presented, or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets. A transferor’s effective control over the transferred financial assets includes, but is not limited to, any2013 2012
(Unaudited)
(In millions of ~~the following:~~won)
At January 1
￦ — 5,762
Exercised
— (2,200 )
Expired
— (3,562 )
At December 31
￦ — —
~~1. An agreement that both entitles~~
SK HYNIX, INC. and ~~obligates the transferor to repurchase or redeem them before their maturity~~

~~F-88~~
Subsidiaries
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~2. An agreement, other than through a cleanup call, that provides the transferor with both of the following:~~
~~i. The unilateral ability to cause the holder to return specific financial assets~~
~~ii. Amore-than-trivial-benefit~~ ~~attributable to that ability.~~
~~3. An agreement that permits the transferee to require the transferor to repurchase the transferred financial assets at a price that is so favorable~~Notes to the ~~transferee that it is probable that~~Consolidated Financial Statements
For the ~~transferee will require the transferor to repurchase them~~
However, under Korea GAAP, when a transfer of financial assets in an asset securitization is conducted in accordance with the Korean Asset Securitization Act which does not prohibit transferor to purchases subordinated bond of and provides credit enhancement to securitization vehicle, such transfer is generally accounted for as a sale of financial assets and the securitization vehicle is generally not consolidated into the transferor.
~~Due to such differences, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2009 and 2010 decreased by~~ W~~15,489 and nil, respectively, and net income for the year~~years ended December 31, ~~2009 increased by~~ W~~15,489 million~~2013 and ~~net income for the year ended December 31, 2010 decreased by~~ W~~15,489 when compared to that under Korean GAAP. As there was no transfer~~2012
31.    Share-Based Payments,  continued
Changes in details of ~~financial assets~~options and weighted-average exercisable prices during the years ended December 31, ~~2008 ,~~2013 and 2012, are as follows:
   2013    2012
(Unaudited)
   Weighted
average
exercise price    Options    Weighted
average
exercise price    Options
   (In thousands of shares, except for price)
At January 1
   —       —       ￦ 22,800       324
Granted
   —       —       —       —
Exercised
   —       —       ￦ 22,800       (124 )
Expired
   —       —       ￦ 22,800       (200 )








At December 31
   —       —       —       —








The weighted average fair value of options was determined using the Black-Scholes valuation model. The significant inputs into the model were weighted average share price at the grant date, exercise price, volatility of share price, dividend yield, an expected option life and an annual risk-free interest rate. For the year ended December 31, 2013, there is no ~~such GAAP differences were incurred~~expense recognized in the statement of comprehensive income for share options granted to ~~reconcile.~~
o.   ~~Income Taxes~~
directors and employees.
~~Uncertainty~~32.    Dividends
There was no dividend paid for the years ended December 31, 2013 and 2012, and there is no plan to declare any dividend as regards the year ended December 31, 2013.
33.    Expenses by Nature
Expense that are recorded as cost of sales, selling and administrative expenses in the statements of comprehensive income ~~taxes~~
~~Under U.S. GAAP, effective January 1, 2007,~~(loss) for the ~~Company adopted authoritative guidance on accounting for uncertainty in income taxes which set outs a consistent framework~~years ended December 31, 2013 and 2012, are as follows:
      2013    2012
(Unaudited)
   (In millions of won)
Changes in finished goods and WIP
   ￦ 292,330       (332,250 )
Raw materials and consumables
   2,328,140       2,677,328
Employee benefit expenses
   1,969,650       1,551,700
Depreciation and amortization
   2,956,040       3,193,513
Royalty expense
   187,611       167,352
Commission expense
   445,231       371,975
Utilities expense
   552,413       496,753
Repair expense
   1,031,023       911,792
Outsourcing expense
   952,457       1,015,512
Other
   70,422       335,884




   ￦ 10,785,317       10,389,559




SK HYNIX, INC. and Subsidiaries
Notes to ~~be used to determine~~ the ~~appropriate level of tax reserve for uncertain tax positions. No such accounting is required under Korean GAAP. As a result of~~Consolidated Financial Statements
For the ~~adoption, the income tax~~years ended December 31, 2013 and 2012
33.    Expenses by Nature,  continued
Employee benefit expenses for the years ended December 31, ~~2008~~2013 and ~~2009 decreased by~~ W~~2,778 million~~2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Wages and salaries
   ￦ 1,712,052       1,336,814
Defined benefits
   125,495       107,730
Other long-term employee benefits
   14,067       9,911
Termination benefits
   6,576       1,447
Social security costs and other
   111,460       95,798




   ￦ 1,969,650       1,551,700




34.    Selling and W~~2,711 million, respectively, whereas income tax~~Administrative Expenses
Selling and administrative expenses for the years ended December 31, ~~2010 increased by~~ W~~53,869 million. In addition, for U.S. GAAP purposes,~~2013 and 2012, are as follows:
      2013    2012
(Unaudited)
   (In millions of won)
Salaries
   ￦ 265,137       211,210
Defined benefit plan related expenses
   19,132       16,702
Employee benefits
   60,459       57,502
Commission expense
   158,107       161,783
Depreciation
   51,240       55,602
Amortization
   155,313       145,154
Research and development
   968,804       975,057
Exporting expense
   21,675       23,100
Legal cost
   11,374       34,204
Rental expense
   14,650       15,257
Taxes and dues
   17,912       10,231
Utility expense
   10,804       10,924
Freight expenses and custody charges
   11,526       13,812
Travel
   9,614       9,396
Supplies
   25,471       16,859
Maintenance
   19,890       11,649
Training expense
   10,284       15,660
Sales promotional expenses
   28,414       22,788
Repair expense
   28,061       8,772
Other
   32,863       22,908




   ￦ 1,920,730       1,838,570




SK HYNIX, INC. and Subsidiaries
Notes to the ~~shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by~~ W~~10,440 million,~~ W~~7,683 million and~~ W~~61,552 million, respectively, when compared to that under Korean GAAP.~~
Consolidated Financial Statements
~~Effect of change in tax law~~
~~Under Korean GAAP,~~For the effect of changes in tax law related directly to shareholders’ equity are recorded in the shareholders’ equity. Under U.S. GAAP, the effect of changes in tax law related to items directly in shareholders’ equity are recorded in continuing operations in the period of the new tax law enactment. Due to such differences and the new tax law enactment in Korea for U.S GAAP purposes, net income for the yearyears ended December 31, ~~2008 increased by~~ W~~30,066 million when compared that under Korean GAAP. There were no new tax law enactment impacts on net~~2013 and 2012
35.    Other Income and Expense
Other income for the years ended December 31, ~~2009~~2013 and ~~2010, respectively.~~

~~F-89~~
2012, are as follows:
      2013    2012
(Unaudited)
   (In millions of won)
Rental income
   ￦ —       17,425
Gain on disposal of assets held-for-sale
   —       18
Gain on disposal of property, plant and equipment
   9,560       3,231
Gain on disposal of intangible assets
   191       298
Insurance compensation(1)
   327,659       —
Miscellaneous(2)
   31,103       46,158




   ￦ 368,513       67,130




~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
p.   ~~Tax effect of the reconciling items~~
~~The applicable statutory tax rate used to calculate the tax effect of the reconciling items on the net income reconciliation between Korean GAAP and U.S. GAAP~~Other expenses for the years ended December 31, ~~2008, 2009~~2013 and ~~2010 were 27.5%, 24.2% and 24.2%, respectively. Such tax rates~~2012, are ~~inclusive of resident surtax of 2.5%, 2.2% and 2.2%. The following is a reconciliation of the tax effect of the reconciling items on net income (in millions Korean won):~~

2008 2009 2010

Net income based on U.S. GAAP 951,737 1,356,682 1,396,621
Net income based on Korean GAAP 972,338 1,055,606 1,297,176

Total GAAP adjustments on net income (20,601 ) 301,076 99,445
Adjustments related to tax items:
— FIN 48 effect (2,778 ) (2,711 ) 53,869
— Tax effect of the reconciling items (46,947 ) 111,098 (68,684 )
— Effect of changes in tax law (30,066 ) — —
Non-taxable adjustments:
— Reversal of amortization of goodwill (Note a) (179,116 ) (164,341 ) (171,254 )
— Goodwill impairment (Note a) 105,781 —
— Currency swap (Note b) (17,077 ) — 14,559
— Retroactive application of SK Broadband Investment (Note b) 21,025 — —
— Consolidation of variable interest entity (Note c) 34,303 36,260 —
— Scope of consolidation (Note d) (187,833 ) 3,920 (6,763 )
— Business combination (Note e) — 328,172 (7,520 )
— Provision for credit loss (Note b) — — (16,077 )
— Nonrefundable activation fees and others (Note b) 4,779 (3,635 ) (590 )

Taxable GAAP adjustments (318,530 ) 609,839 (103,015 )
Applicable tax rate 27.5 % 24.2 % 24.2 %

Tax effect (87,596 ) 147,581 (24,930 )
Tax effect from statutory tax rate change on reconciling item (Note f) 40,649 (36,483 ) (43,754 )

Tax effect of the reconciling items (46,947 ) 111,098 (68,684 )

as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Loss on disposal of property, plant and equipment
   ￦ 7,952       1,369
Loss on disposal of intangible assets
   17,278       5,672
Donation
   3,222       2,614
Loss on disposal of trade receivables
   3,317       1,031
Impairment losses of intangible assets
   183       265
Amortization of suspended assets
   3,254       10,041
Loss on disposal of assets held-for-sale
   4       —
Casualty losses(1)
   450,752       —
Miscellaneous(3)
   19,908       41,918




   ￦ 505,870       62,910




(1)
~~(Note a)~~ ~~Certain goodwill amortization constitutes~~For the year ended December 31, 2013, the Group recognized casualty losses of ￦450,752 million caused by a ~~non-deductible expense under local tax law~~fire on the manufacturing facilities located in Wuxi, China, which includes impairment losses on property, plant and ~~as such,~~equipment, impairment losses on inventories, depreciation of temporarily idle property, plant and equipment and others. The Group and insurance companies conduct the ~~corresponding effects were not considered in~~investigation and negotiation for the ~~U.S. GAAP adjustment.~~
~~(Note b)~~ loss amount and compensation amount according to insurance policies. The ~~amount represents the U.S. GAAP adjustment from our equity method investees and subsidiary. Due to continuing loss~~Group recognized insurance income of ~~the investees and subsidiary, the corresponding tax effect were not considered.~~
~~(Note c)~~ As￦327,659 million among negotiated amounts whose reimbursement is virtually certain as of December 31, ~~2009, the amount represents non-controlling interest~~2013.
(2) Miscellaneous income includes refunds from Ministry of ~~S-Telecom which was consolidated under U.S. GAAP while accounted~~Labor, gain on disposal of used parts, subsidy for ~~as an equity method investee under Korean GAAP. Under Korean GAAP,~~child-care leave, insurance compensation, reversal of litigation provision and etc.
(3) Miscellaneous expense includes disposal costs due to ~~the continued loss of S-Telecom, corresponding loss were no longer deductible.~~
~~(Note d)~~ The amount represents the certain entities’ non-deductible (or non-taxable earnings) recognized under U.S. GAAP. These entities are consolidated under Korean GAAP, while they are accounted for as an equity method investee under U.S. GAAPblackout, additions to litigation provision and ~~vice versa.~~etc.

~~F-90~~
SK ~~TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~(Note e)~~ The amount mainly represents the non-taxable adjustment related to the revaluation of pre-existing ownership of SKBB — step-acquisition acquisition, under U.S. GAAP; under Korean GAAP no revaluation of the pre-existing ownership was made.
~~(Note f)~~ Represents decrease of deferred tax liabilities due to an enactment of a new tax law. We applied 24.2%, 22% and 22% for years ended December 31, 2008, 2009 and 2010, respectively, to calculate current deferred tax assets or liabilities and long-term deferred tax assets or liabilities in accordance with the enacted tax law.
q.   ~~Marketable Securities and Investments Securities~~
~~Under Korean GAAP, non-marketable securities should be classified asavailable-for-sale~~HYNIX, INC. and carried at cost or fair value if applicable, with unrealized holding gains and losses reported as other comprehensive income. Under U.S. GAAP, investment in non-marketable equity securities that do not have a readily determinable fair value should be accounted for under the cost method. Due to such differences, for U.S. GAAP purposes, shareholders’ equity as of December 31, 2008, 2009 and 2010 increased by nil, W~~8,833 million and~~ W~~5,000 million, respectively, when compared to that under Korean GAAP.~~
~~Under Korean GAAP, all transaction costs that are directly attributable~~Subsidiaries
Notes to the acquisition of a security are included in the initial measurement of any security. But, under U.S. GAAP, fees paid to the seller less any fees received are included as part of the initial investment in the debt security that are classified asConsolidated Financial Statements
~~Held-to-Maturity~~ or~~Available-for-Sales~~ and are recognized as an adjustment to the yield of the debt security over its remaining life. All other costs incurred as part of the acquisition are expensed immediately as incurred. As the impact of such GAAP differences on the net income and shareholders’ equity as of and forFor the years ended ~~as of~~ December 31, ~~2008, 2009,~~2013 and ~~2010, no reconciling adjustment exists.~~
~~Information with respect to~~2012
~~available-for-sale~~ ~~andheld-to-maturity~~ ~~securities under U.S. GAAP guidance at December 31, 2008, 2009~~36.    Financial Income and ~~2010 is as follows (in millions of Korean won):~~

Gross
Gross

Cost
Unrealized
Unrealized
Impairment
Fair

(Amortized Cost) Gains Losses Losses Value

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

At December 31, 2009:
Available-for-sale
Equity securities W 603,206 W 1,223,542 W (1,293 ) W (4,997 ) W 1,820,458
Debt securities 354,886 — (122 ) (884 ) 353,880
Held-to-maturity securities
1,006 — — — 1,006

W 959,098 W 1,223,542 W (1,415 ) W (5,881 ) W 2,175,344

At December 31, 2010:
Available-for-sale
Equity securities W 417,196 W 994,103 W (446 ) W (1,744 ) W 1,409,109
Debt securities 34,962 — — (2,702 ) 32,260
Held-to-maturity securities
— — — — —

W 452,158 W 994,103 W (446 ) W (4,446 ) W 1,441,369

~~F-91~~
Expense
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Gross proceeds from the sale ofavailable-for-sale~~ ~~securities were~~ W~~470,309 million,~~ W~~1,662,501 million~~Financial income and W~~299,419 million~~expense for the years ended December 31, ~~2008, 2009~~2013 and ~~2010, respectively. Gross realized gains~~2012, are as follows:
      2013 2012
(Unaudited)
   (In millions of won)
Finance income

Interest income
   ￦ 66,411    80,154
Dividend income
   2,381    216
Foreign exchange differences
   485,411    598,986
Gain from derivative instruments
   6,163    4,409
Other
   204    5,944


   560,570    689,709


Finance expense

Interest expenses
   (256,623 ) (317,926 )
Foreign exchange differences
   (391,071 ) (335,468 )
Loss from derivative instruments
   (99,635 ) (18,730 )
Loss on redemption of debentures
   —    (10,470 )


   (747,329 ) (682,594 )


Net finance income (expense)
   ￦ (186,759 ) 7,115


37.    Income Tax
Income tax expense (benefit) for the years ended December 31, ~~2008, 2009~~2013 and ~~2010 were~~ W~~14,466 million,~~ W~~299,531 million~~2012, are as follows:
      2013 2012
(Unaudited)
   (In millions of won)
Current tax:

Current tax on profits for the year
   ￦ 22,728    29,555
Adjustments in respect of prior years
   (1,588 ) (657 )


Total current tax
   21,140    28,898


Deferred tax:

Origination and reversal of temporary differences
   180,928    (69,404 )


Total deferred tax
   180,928    (69,404 )


Income tax expense (benefit)
   ￦ 202,068    (40,506 )


SK HYNIX, INC. and W~~167,223 million, respectively. Gross realized losses~~Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
37.    Income Tax,  continued
The tax on the Group’s profit (loss) before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follows:
      2013 2012
(Unaudited)
   (In millions of won)
Profit (loss) before tax
   ￦ 3,074,925    (199,301 )


Tax calculated at domestic tax rates applicable to profits in the respective countries
   744,847    (89,590 )
Tax effects of:

Tax-exempt income
   76    (469 )
Non-deductible expenses
   13,545    4,123
Change in unrecognized deferred tax assets
   (558,546 ) 42,603
Others
   2,146    2,827


Income tax expense (benefit)
   ￦ 202,068    (40,506 )


The income taxes recorded directly in equity for the years ended December 31, ~~2008, 2009~~2013 and ~~2010 were~~ W~~500 million,~~ W~~53 million and~~ W~~18 million, respectively. Gross unrealized losses of~~ W~~73 million,~~ W~~1,415 million and~~ W~~446 million at December 31, 2008, 2009 and 2010 for which impairment has not been recognized, have been in a continuous unrealized loss position for less than twelve months.~~
r.   ~~Determination of Acquisition Cost of Equity Interest in Subsidiary~~
Under Korean GAAP, the acquisition cost is determined at the closing market price of the parent company’s common stock when the common stock is actually issued. Under U.S. GAAP, through year ended December 31, 2008, 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 company’s common stock for a reasonable period before and after the date the terms of the acquisition2012, are ~~agreed~~as follows:
   2013    2012
(Unaudited)
   (In millions of won)
Recognized in other comprehensive income: Gains (loss) of valuation of available-for-sale financial assets
   ￦ 311       (330 )
The income taxes (charged)/credited directly to ~~and announced. 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, ~~2008, 2009~~2013 and ~~2010 increased~~2012, are as follows:
      2013 2012 (Unaudited)
   Before
Tax Tax
(Charge)
Credit After
Tax Before
Tax Tax
(Charge)
Credit After
Tax
   (In millions of won)
Given on valuation of available-for-sale financial assets
   ￦ 10,825    (3,001 ) 7,824    11,791    (3,312 ) 8,479
Remeasurements of the net defined benefit liability
   (185,677 ) —    (185,677 ) (202,090 ) —    (202,090 )


   ￦ (174,852)    (3,001 ) (177,853 ) (190,299 ) (3,312 ) (193,611 )


38.    Earnings (Loss) per Share
Basic earnings (loss) per share is calculated by W~~28,358 million when compared~~dividing the profit attributable to ~~that under Korean GAAP. Beginning~~equity holders of the ~~year~~Company by the weighted average number of ordinary shares in issue during the year.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, ~~2009, due to new accounting guidance related to business combination issued, such GAAP differences no longer exist.~~
~~Under Korean GAAP, in a business combination between a publicly traded company~~2013 and a privately held company where an acquirer is the privately held company and the acquirer issues its own equity shares to the acquiree’s stockholders as purchase proceeds, the cost of the acquired entity is determined based on the fair value of the acquirer’s 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, 2008, 2009 and 2010 increased by W~~102,433 million in each period, when compared to that under Korean GAAP.~~
~~The combined effect of the differences discussed above, from Korean GAAP to U.S. GAAP to the shareholder’s equity as of December 31, 2008, 2009 and 2010 is an increase of~~ W~~130,791 million as of each period end.~~
s.  2012 ~~Additional Equity Investment in Subsidiaries~~
Historically, there has been a difference in accounting for additional equity investment in subsidiaries between Korean GAAP and U.S. GAAP. The difference was due to the difference in the accounting treatment guidance itself and the difference in scope of consolidation — an entity that may be consolidated for Korean GAAP purposes may not necessarily be consolidated for U.S. GAAP purposes and vice versa.
Under Korean GAAP, when additional interest is acquired after acquiring a controlling interest in a subsidiary, the differences between the Company’s 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, through year ended December 31, 2008, the cost of an additional interest was allocated based on the fair value of net assets acquired at the time the additional interest was acquired, with the excess allocated to goodwill. However, beginning the year ended December 31, 2009, due to the revised accounting guidance for U.S. GAAP related to business combination and non-controlling interest which was prospectively applied, the accounting treatment for additional interest acquired after acquiring a controlling interest in a subsidiary became the same under both GAAPs
~~As a result, due to the historical differences in GAAP, additional shareholders’ equity of~~ W~~1,012,861 million,~~ W~~1,013,438 million and~~ W~~1,013,438 million, as of December 31, 2008, 2009 and 2010 were adjusted for U.S. GAAP purposes compared to Korean GAAP. While due to the difference in scope of consolidation, additional~~

~~F-92~~
38.    Earnings (Loss) per Share,  continued
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~shareholders’ equity of~~ W~~40,026 million,~~ W~~2,952 million and~~ W~~31,715 million, as of December 31, 2008, 2009 and 2010 was recognized for U.S. GAAP purposes, compared to Korean GAAP. In total additional shareholders’ equity of~~ W~~1,052,887 million,~~ W~~1,016,390 million and~~ W1,045,153 million, as of December 31, 2008, 2009 and 2010 under U.S. GAAP is recognized. Going forward, except for a difference due to difference in scope of consolidation, there will no longer exist a GAAP difference related to accounting for additional equity investment in subsidiaries.
t.   ~~Loans Receivable for Stock Issued to Employee~~
Korean GAAP allows for recording notes receivables for capital stock issued to employees as an asset, while U.S. GAAP generally requires such receivables to be reported as a reduction of stockholders’ equity. Due to such differences, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2008, 2009 and 2010 decreased by W~~60,908 million,~~ W~~57,615 million and~~ W~~43,052 million, respectively, when compared to that under Korean GAAP.~~
u.   ~~Deferred Charges~~
Korean GAAP requires that bond issuance costs are deducted bonds proceeds. Under U.S. GAAP, bond issuance costs are capitalized as deferred assets and amortized over the redemption period of the related obligation.
v.   ~~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.~~
w.   ~~Comprehensive Income~~
Under Korean GAAP, until the year ended December 31, 2006, there was no requirement to present comprehensive income. Effective January 1, 2007, revised guidance requires the disclosure of comprehensive income and its components in consolidated financial statements. However, the format of such disclosure under Korean GAAP differs 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,

~~F-93~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~including certain items not included in the current results of operations. Comprehensive income under U.S. GAAP~~Basic earnings (loss) per share for the years ended December 31, ~~2008, 2009~~2013 and ~~2010~~2012, are as follows:
   2013    2012
(Unaudited)
   (In millions of won except for
shares and per share amounts)
Profit (loss) attributable to ordinary shareholders
   ￦ 2,872,470       (158,886 )
Weighted average number of ordinary shares outstanding(1)
   710,200,891       681,854,577




Basic earnings (loss) per share
   ￦ 4,045       (233 )




(1) Weighted average number of ordinary shares outstanding is calculated as follows:
      2013    2012
(Unaudited)
   (In shares)
Weighted average number of ordinary shares outstanding
   694,155,767       592,171,582
Exercise of conversion rights
   16,045,124       10,385
Exercise of stock options
   —       66,872
Issuance of share capital
   —       89,605,738




Adjusted number of ordinary shares outstanding
   710,200,891       681,854,577




Diluted earnings per share is computed by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group has potentially dilutive ordinary shares: convertible bond. The convertible bond is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense and foreign exchange differences less the tax effect.
   2013    2012
(Unaudited)
   (In millions of won except for
shares and per share amounts)
Profit (loss) attributable to ordinary shares
   ￦ 2,872,470       (158,886 )
Add : Convertible bond related benefits
   —       (438 )




Adjusted profit attributable to ordinary shares
   2,872,470       (159,324 )
Adjusted weighted average number of ordinary shares outstanding(1)
   710,200,891       682,727,787




Diluted profit (loss) per share
   ￦ 4,045       (233 )




The effect of the convertible bond related benefits is anti-dilutive for 2013.
(1) Adjusted weighted average number of ordinary shares outstanding is calculated as follows:
      2013    2012
(Unaudited)
   (In shares)
Weighted average number of ordinary shares outstanding
   710,200,891       681,854,577
Convertible bond
   —       873,210




Adjusted weighted average number of ordinary shares outstanding
   710,200,891       682,727,787




SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
39.    Related Party Transactions
Details of associate, joint venture and other related parties as of December 31, 2013, is as ~~follows (in millions of Korean won):~~

2008 2009 2010

Net income W 951,737 W 1,356,682 W 1,396,621

Other comprehensive income:
Available-for-sale securities

Unrealized gain (loss) on investment securities (1,080,978 ) 852,171 (209,845 )
Less impact of realized losses (gains) 1,730 (297,536 ) (51,438 )
Tax effect 292,840 (141,481 ) 55,875

Net change fromavailable-for-sale securities
(786,408 ) 413,154 (205,408 )
Foreign-based operations’ translation adjustments 67,057 (49,899 ) (6,246 )

Total other comprehensive income (719,351 ) 363,255 (211,654 )

Comprehensive income 232,386 1,719,937 1,184,967
Less comprehensive loss attributable to non controlling interest 118,879 125,760 129,510

Comprehensive income attributable to the Company W 351,265 W 1,845,697 W 1,314,477

follows:
x.  Type
~~Discontinued Operation~~Investee
Associate
Siliconfile Technologies Inc.
Joint venture
HITECH Semiconductor (Wuxi) Co., Ltd. (HITECH)
Other related parties
SK Telecom Co., Ltd., which has significant influence over the Group, SK Holdings Co., Ltd., which have control over SK Telecom Co., Ltd., SK C&C Company Ltd., which are controlled by the same key management personnel of the Group, and their subsidiaries.
~~As disclosed on Note 2.ab “Discontinued Operation”, during~~
Significant transactions for the ~~year~~years ended December 31, ~~2008,~~2013 and 2012, are as follows:

2013


Company
   Sales    Purchase    Asset
acquisition
      (In millions of won)
Associate
   Siliconfile Technologies Inc.    ￦ 100,975       1,585       —
Joint venture
   HITECH Semiconductor (Wuxi) Co., Ltd.    61,368       581,374       —
   SK Telecom    954       2,811       230
   SK Holdings Co., Ltd.(1)    —       20,583       —
   SK C&C Co., Ltd.    150       22,374       30,522
   SK Engineering & Construction Co., Ltd.    637       12,056       166,423
   SK Energy Co., Ltd.    13,103       28,258       —
Other related parties
   SK Networks Co., Ltd.(2)    —       927       112,360
   Ko-one energy service Co., Ltd.    —       20,452       —
   SK solmics Co., Ltd.    —       24,041       300

Chungcheong energy service
Co., Ltd.
   —       28,231       —
   HAPPYNARAE Co., Ltd.    62       59,624       7,763
   Others    261       9,095       332






      ￦ 177,510       811,411       317,930






(1) The Group entered into a contract with SK Holdings Co., Ltd. under which the Group pays royalty on the SK brand in proportion to sales amount from March 2012 to December 2014. For the year ended December 31, 2013, royalty on use of SK brand amounted to ￦18,251 million.
(2) The Group acquired 5,745 shares of Sky Property Management Ltd. at ￦112,360 million from SK Networks Co., Ltd., a related party, during 2013, and recognized them as available-for-sale securities as of December 31, 2013 (Note 15).
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
39.    Related Party Transactions,  continued

2012 (Unaudited)


Company
   Sales    Purchase    Asset
acquisition
      (In millions of won)
Associate
   Siliconfile Technologies Inc.    ￦ 107,132       931       —
Joint venture
   HITECH Semiconductor (Wuxi) Co., Ltd.    67,662       625,657       17,168
   SK Telecom    1,196       812       —
   SK Holdings Co., Ltd.(2)    —       7,860       —
   SK C&C Co., Ltd.    43       3,240       15,825
   SK Engineering & Construction Co., Ltd    —       —       1,817
Other related parties(1)
   Ko-one energy service Co., Ltd.    —       34,286       —
   SK solmics Co., Ltd.    —       8,967       387
   Chungcheong energy service Co., Ltd.    —       18,381       —
   HAPPYNARAE Co., Ltd.    36       24,271       563
   Others    135       4,128       1,015






      ￦ 176,204       728,533       36,775






(1) Transactions that occurred after February 14, 2012, the date when SK telecom Co., Ltd. obtained significant influence over the Group.
(2) The Group entered into a contract with SK Holdings Co., Ltd. under which the Group pays royalty on the SK brand in proportion to sales amount from March 2012 to December 2014. For the year ended December 31, 2012, royalty on use of SK brand amounted to ￦7,860 million (unaudited).
The balances of significant transactions as of December 31, 2013 and 2012, are as follows:

2013


Company
   Trade
receivables
and others    Loan    Other
payables    Borrowings
      (In millions of won)
Associate
   Siliconfile Technologies Inc.    ￦ 18,102       —       —       —
Joint venture
   HITECH Semiconductor (Wuxi) Co., Ltd.    11,356       —       2,828       101,093
   SK Telecom    —       —       419       —
   SK Holdings Co., Ltd.    —       —       2,332       —
   SK C&C Co., Ltd.    11       —       25,388       —
Other related parties
   SK Engineering & Construction Co., Ltd    234       —       82,238       —
   SK energy Co., Ltd.    76       —       5,802       —
   SK Networks Co., Ltd.    —       —       78       —
   SK solmics Co., Ltd.    —       —       3,116       —
   Chungcheong energy service Co., Ltd.    —       —       3,102       —
   HAPPYNARAE Co., Ltd.    22       —       13,670       —
   Others    —       —       1,579       —








      ￦ 29,801       —       140,552       101,093








SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
39.    Related Party Transactions,  continued

2012 (Unaudited)


Company
   Trade
receivables
and others    Loan    Other
payables    Borrowings
      (In millions of won)
Associate
   Siliconfile Technologies Inc.    ￦ 26,299       —       1       —
Joint venture
   HITECH Semiconductor (Wuxi) Co., Ltd.    9,515       —       46,670       179,204

SK Telecom
   887       —       287       —

SK C&C Co., Ltd.
   47       —       7,590       —
Other related parties
   SK Engineering & Construction Co., Ltd    —       —       1,344       —

SKC solmics Co., Ltd.
   —       —       2,353       —

Chungcheong energy service Co., Ltd.
   —       —       2,927       —

HAPPYNARAE Co., Ltd.
   14       —       8,983       —

Others
   —       —       558       —








      ￦36,762       —       70,713       179,204








Key management compensation
Key management includes the chief executive officer, subsidiary’s executives, directors and internal auditors. The compensation paid to key management for employee services for the years ended December 31, 2013 and 2012, are as follows:

Details
   2013    2012
(Unaudited)
      (In millions of won)
Short-term employee benefits
   Wages, salaries, bonus and other    ￦ 30,909       23,157
Post-employment benefits
   Retirement payment and other    4,546       2,859
Other long-term benefits
   Long-term employment allowance    6       1




      ￦ 35,461       26,017




Guarantees provided to others
Details of guarantees provided to others as of December 31, 2013, is as follows:
Amount
Remark
(In millions of won)
Employees
￦ 28 Guarantees for employees’ borrowings relating to employee stock ownership
40.    Commitments and Contingencies
Significant pending litigations and claims of the Group as of December 31, 2013
The Group is involved in various alleged patent infringement claims and litigation. No provisions have been made as management believes it not likely an outflow of Group resources will be required to settle these matters.
Technology and patent license agreements
The Group has entered into a number of patent license agreements with several companies. The related royalties are paid in a lump sum or running basis in accordance with the respective agreements. Lump-sum royalties are expensed over the contract period using the straight-line method.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
40.    Commitments and Contingencies,  continued
Contract for supply of industrial water
In March 2001, the Group and Veolia Water Industrial Development Co., Ltd. (“VWID”) entered into a contract for the purpose of purchasing industrial water from VWID for 12 years from March 2001 to March 2013. In December 2006, the contract was extended to March 2018, and subsequently amended due to the establishment of additional plants. According to the amended contract, the Group is obligated to pay base service charges which are predetermined and additional service charges which are variable according to the amount of water used.
Post- process service contract with HITECH
The Parent Company ~~disposed~~entered into an agreement with HITECH to be provided with post-process service by HITECH. In addition, HITECH entered into agreements to purchase corresponding machinery from the Parent Company and its subsidiary, SKHYMC. According to the contract, HITECH should use the machinery only for the purpose of providing the post-process service to the Group exclusively for the five years from its ~~investment~~establishment. In 2011, the Parent Company entered into an additional contract for the purpose of module service and HITECH purchased corresponding machinery from the Parent Company. According to the agreement, the Group is liable to guarantee a certain level of margin to HITECH.
Assets provided as collateral
Details of assets provided as collateral as of December 31, 2013, is as follows:
   Book value    Pledged amount    Remark
   (In millions of won)
Land
   ￦ 36,013
Buildings
   86,233       1,438,844       Borrowing
Machinery
   1,392,404





   ￦ 1,514,650       1,438,844





Other than the above assets provided as collateral, the finance lease assets of the Group are pledged as collateral for the finance lease liabilities in ~~Helio LLC~~accordance with finance lease contract.
SK HYNIX, INC. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
40.    Commitments and Contingencies,  continued
Financing agreements
Details of credit lines with financial institutions as of December 31, 2013, is as follows:
Financial
Institution
Commitment
Cur. Amount
(In millions of dollars, won and renminbi)
The Parent Company
Korea Exchange Import finance like usance USD 440
Bank and Other Export finance like bills bought USD 375
Comprehensive limit contract about Import & Export USD 1,200
Export trade receivables discounting agreements(1) USD 90
Trade receivables
discount agreement
KRW 100,000
SK hynix Semiconductor
Agricultural Bank Import finance like usance RMB 1,530
(China) Ltd. (SKHYCL)
of China and other USD 1,180
SK hynix America Inc. (SKHYA) and other sales entities
Citibank and other Accounts receivable factoring contracts which have no right to recourse USD 883
(1) Discount of trade receivables is only applicable to trade receivables from the customers, which were designated and authorized at the export trade receivables discounting agreements.
Details of guarantees provided to others as of December 31, 2013, is as follows:
Amount
Remark
(In millions of won)
Employees
￦ 28 Guarantees for employees’ borrowings relating to employee stock ownership
Capital commitments
As of December 31, 2013, the Group has ￦385,106 million (2012: ￦114,610 million unaudited) of commitments in relation to the capital expenditures on tangible assets.
41.    Derivative Financial Instruments
The Group has managed foreign exchange risk and cash-flow interest risk through interest and principal swaps, forward exchange, interest swap and currency option, and other derivative instruments. In addition, the Group bifurcated convertible options and separately accounted for these as derivative instruments which ~~was incorporated to provide cellular telephone communication service~~were embedded in the ~~U.S.~~foreign convertible bond. The Group recognized those options at fair value and resulting gain or loss is reflected in current operations.
SK HYNIX, INC. and Subsidiaries
Notes to ~~Virgin Mobile USA, Inc. Under Korean GAAP, when a subsidiary is disposed~~the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
41.    Derivative Financial Instruments,  continued
Details of ~~during the year, the results~~derivative financial assets and liabilities as of ~~its operations~~December 31, 2013 and 2012, are ~~treated~~ as ~~a discontinued operation~~follows:
      2013    2012
(Unaudited)
   Assets    Liabilities    Assets    Liabilities
   (In millions of won)
Current

Interest rates swap
   ￦ —       2,194       —       3,256
Embedded derivatives
   —       —       —       13,764








   —       2,194       —       17,020








Non-current

Interest rates swap
   272       245       198       1,615
Embedded derivative instruments
   —       106,849       —       —








   272       107,094       198       1,615








   ￦272       109,288       198       18,635








Details of gains and ~~as such the results of operations and cash flows of Helio LLC were presented as a discontinued operation~~losses from derivative instruments during the years ended December 31, ~~2008. For the year ended December 31, 2008,~~2013 and 2012, are as ~~the Company had significant influence over Virgin Mobile USA, Inc., it accounted for it as an equity method investment.~~
~~Under U.S. GAAP, as the Company had significant continuing involvement in legacy Helio LLC operations, now under Virgin Mobile USA, the results of operations~~follows:
      2013
   Gain on
valuation    Loss on
valuation    Gain on
transaction    Loss on
transaction
   (In millions of won)
Foreign currency forward contract
   ￦ —       —       3,630       5,308
Interest rates swap
   2,507       —       26       1,242
Embedded derivative instruments
   —       93,085       —       —








   ￦ 2,507       93,085       3,656       6,550








      2012 (Unaudited)
   Gain on
valuation    Loss on
valuation    Gain on
transaction    Loss on
transaction
   (In millions of won)
Foreign currency forward contract
   ￦ —       —       913       4,924
Interest and principal swap
   —       —       1,450       4,030
Interest rates swap
   1,359       613       675       1,858
Embedded derivative instruments
   —       7,305       12       —








   ￦ 1,359       7,918       3,050       10,812








SK HYNIX, INC. and cash flows of Helio LLC was as a continuing operation based on relevant discontinued operation accounting literature; while the Company considered its investment in Virgin Mobile USA., Inc., as an equity method investment.
~~During the year ended December 31, 2009, the Company exchanged its 16.6% equity interest in Virgin Mobile Inc. for 0.6% equity interest in Sprint Nextel due~~Subsidiaries
Notes to the merger between Sprint Nextel and Virgin Mobile Inc.. As a result, the Company no longer had significant continuing involvement in the legacy Helio LLC’s operation under Sprint Nextel nor significant influence over Sprint Nextel.
Under U.S. GAAP, based on relevant discontinued operation accounting literature, the results of operations and cash flows of Helio LLC for the year ended December 31, 2009 is still recognized as part of continuing operations. In addition, under both GAAPs, the Company recognizes its investment in Sprint Nextel as an~~available-for-sale~~Consolidated Financial Statements ~~equity investment. As such, a reconciling item between the two GAAPs no longer exists.~~
As disclosed on Note 2.ab “Discontinued Operation”, during the year ended December 31, 2010, the Company disposed of its investment in IHQ Inc. IHQ was a consolidating subsidiary under Korean GAAP, however, an equity method investee for U.S GAAP purposes. As a result, the results of its operations which was treated as a discontinued operation under Korean GAAP has been reversed and accounted for as equity loss for U. S GAAP purposes.

~~F-94~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~Changes in shareholders’ equity based on U.S. GAAP for~~For the years ended December 31, ~~2008, 2009~~2013 and ~~2010 are as follows (in millions of Korean won):~~

Year Ended December 31,
2008 2009 2010

Balance, beginning of the year W 12,897,647 W 12,562,019 W 14,260,772
Net income for the year 951,737 1,356,682 1,396,621
Dividends (682,504 ) (681,548 ) (680,043 )
Unrealized gain (loss) on valuation of securities, net of tax (786,408 ) 413,154 (205,408 )
Equity in capital surplus, retained earnings and other comprehensive income of affiliates (note a) (77,879 ) (168,712 ) 100,492
Conversion of convertible bonds payable (6,277 ) — —
Treasury stock transactions (14,137 ) (30,602 ) (210,355 )
Foreign-based operations’ translation adjustments 67,057 (49,899 ) (6,246 )
Decrease (Increase) in loans receivable for stock issued to employees (26,092 ) 3,293 14,563
Change in non-controlling interest 238,875 856,385 (97,663 )

Balance, end of the year W 12,562,019 W 14,260,772 14,572,733

~~(note a)~~ This line item consists of the adjustments to the carrying amount of equity method investments based on the Company’s proportionate equity 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.~~
~~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, 2008, 2009~~2012
42.    Cash Generated from Operations
Reconciliations between operating profit and ~~2010 is as follows (in millions of Korean won):~~

December 31,
2008 2009 2010

Current assets:
As reported W 5,422,447 W 6,370,631 W 6,972,989
U.S. GAAP adjustments:
— Deferred charges 406 5,174 2,201
— Investment securities without readily determinable fair value — — (3,986 )
— Loans receivable for stock issued to employees (1,252 ) (1,153 ) (10,551 )
— Consolidation of variable interest entity (55,967 ) — —
— Scope of consolidation (836,324 ) (91,039 ) (132,496 )
— Reclassification of SK C&C investment — 450,000 450,000
— Business combination — 4,340 —
— Asset Securitization Transactions — 505,839 —

~~F-95~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

December 31,
2008 2009 2010

— FIN 48 effect — 260 3
— Tax effect of the reconciling items 53,055 (111,279 ) (103,625 )

Current assets based on U.S. GAAP 4,582,365 7,132,773 7,174,535

Non-current assets:
As reported 17,051,224 16,835,625 15,678,716
U.S. GAAP adjustments:
— Deferred charges 11,423 25,646 19,705
— Capital lease (576 ) (576 ) (576 )
— Investment securities without readily determinable fair value — 8,833 8,986
— Determination of acquisition cost of equity interest in subsidiary 130,791 130,791 130,791
— Additional equity investment in subsidiaries 1,110,645 1,016,966 1,055,510
— Reversal of amortization of goodwill 931,509 1,195,557 1,281,530
— Investment in preferred stock — — 6,359
— Goodwill impairment (118,570 ) (118,570 ) (118,570 )
— Capitalization of foreign exchange losses and interest expense related to tangible assets 62,098 69,714 66,215
Capitalization of interest expenses related to purchase of intangible assets (42,572 ) (37,300 ) (32,028 )
— Nonrefundable activation fees 8,099 9,077 9,129
— Loans receivable for stock issued to employees (59,656 ) (56,462 ) (32,501 )
— Convertible bonds payable 281 281 —
— Currency and interest rate swap (51,121 ) 9,821 (4,620 )
— Provision for credit loss — — 15,964
— Consolidation of variable interest entity 76,022 — —
— Scope of consolidation (2,386,994 ) (209,942 ) 26,452
— Reclassification of SK C&C investment (7,114 ) (450,000 ) (450,000 )
— Asset Securitization Transactions — (90,980 ) —
— Business combination — 132,398 277,352
— Retroactive application of equity method of accounting on SKBB investment (62,382 ) — —
— FIN 48 effect (1,621 ) 382 352
— Tax effect of the reconciling items 5,332 184,276 185,414

Non-current assets based on U.S. GAAP 16,656,818 18,655,537 18,124,180

Total assets based on U.S. GAAP W 21,239,183 W 25,788,310 W 25,298,715

~~F-96~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

December 31,
2008 2009 2010

Current liabilities:
As reported W 4,628,821 W 4,894,936 W 5,915,300
U.S. GAAP adjustments:
— Deferred charges 406 5,174 198
— Considerations for conversion right 26,577 — 9
— Nonrefundable activation fees 218,284 215,692 190,891
— Consolidation of variable interest entity 52,031 — —
— Asset Securitization Transactions — 399,370 —
— Business combination — 4,340 2,003
— Scope of consolidation (1,081,778 ) (202,318 ) (12,416 )

Current liabilities based on U.S. GAAP 3,844,341 5,317,194 6,095,985

Non-current liabilities:
As reported 6,020,410 5,966,695 4,257,755
U.S. GAAP adjustments:
— Deferred charges 11,423 25,646 15,178
— Considerations for conversion right 16,753 32,740 68,230
— Nonrefundable activation fees 188,173 151,084 165,958
— Currency and interest rate swap (5,618 ) (554 ) (119 )
— Consolidation of variable interest entity 698 — —
— Scope of consolidation (1,373,619 ) (9,488 ) (444 )
— Business combination — 38,162 (3,553 )
— FIN 48 effect 9,049 8,325 61,907
— Tax effect of the reconciling items (34,446 ) (2,266 ) 65,085

Non-current liabilities based on U.S. GAAP 4,832,823 6,210,344 4,629,997

Total liabilities based on U.S. GAAP W 8,677,164 W 11,527,538 W 10,725,982

~~F-97~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~The following table reconciles~~net cash ~~flows~~inflow from operating ~~investing and financing~~ activities for the years ended December 31, ~~2008, 2009~~2013 and ~~2010~~2012, are as follows:
      2013 2012
(Unaudited)
   (In millions of won)
Profit (loss) for the year
   ￦ 2,872,857    (158,795 )
Income tax expense (benefit)
   202,068    (40,506 )
Defined benefit cost
   125,495    107,730
Depreciation
   2,922,245    3,057,856
Amortization
   156,276    145,698
Loss on foreign currency translation
   24,415    24,597
Interest expenses
   256,623    317,926
Gain on foreign currency translation
   (94,175 ) (211,345 )
Interest income
   (66,411 ) (80,154 )
Loss on derivative instruments
   93,472    14,321
Gain on equity method investments
   (19,256 ) (16,713 )
Loss on impairment of property, plant and equipment
   101,532    —
Others
   15,205    22,050
Changes in operating assets and liabilities

Increase in trade receivables
   (278,141 ) (322,127 )
Decrease (increase) inventories
   333,179    (335,580 )
Decrease (increase) in other receivables
   (249,778 ) 69,539
Increase (decrease) in trade payables
   113,552    (374 )
Increase (decrease) in other payables
   74,666    (56,749 )
Increase (decrease) in provision
   (127,052 ) 1,446
Payment of defined benefit liability
   (45,171 ) (69,161 )
Increase in other non-trade payables
   309,974    26,604
Others
   (200,022 ) (75,369 )


Cash generated from operations
   ￦ 6,521,553    2,420,894


Details of significant transaction without inflows and outflows of cash ~~and cash equivalents at December 31, 2008, 2009 and 2010 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, ~~2008, 2009~~2013 and ~~2010~~2012, are as follows:
      2013    2012
(Unaudited)
   (In millions of won)
Exercise of conversion rights
   ￦ 432,878       266
Transferred to non-current convertible bond due to expiration of early redemption rights
   486,569       —
Acquisition of property, plant and equipment subject to finance lease agreements
   —       216,682
43.    Transactions with Non-controlling Interests (Unaudited)
On September 30, 2012, the Parent Company acquired the non-controlling interest of domestic subsidiaries. The difference between carrying amount of the non-controlling interests in domestic subsidiaries and ~~cash~~consideration paid to the owners of non-controlling interest amounted to ￦76 million and ~~cash equivalents at December 31, 2008, 2009~~was charged to capital (Note 28).
SK HYNIX, INC. and ~~2010 under U.S. GAAP (in millions of Korean won):~~

2008 2009 2010

Cash flows from operating activities based on Korean GAAP W 3,293,018 W 2,932,633 W 4,021,021
Adjustments:
Trading security cash flows (40 ) (14 ) (168 )
Consolidation of variable interest entity 7,010 10,402 —
Scope of consolidation (389,761 ) (62,328 ) (41,249 )
Pre-acquisition cash flows of subsidiaries — 183,090 —
Discontinued operation (213,899 ) — —

Cash flows from operating activities based on U.S. GAAP W 2,696,328 W 3,063,783 W 3,979,604

Cash flows from investing activities based on Korean GAAP W (3,876,959 ) W (1,826,005 ) W (2,358,678 )
Adjustments:
Trading security cash flows 40 14 168
Consolidation of variable interest entity (11,006 ) (173 ) —
Scope of consolidation 7,001 (223,601 ) (48,895 )
Pre-acquisition cash flows of subsidiaries — (74,884 ) —
Discontinued operation (51,631 ) — —

Cash flows from investing activities based on U.S. GAAP W (3,932,555 ) W (2,124,649 ) W (2,407,405 )

Cash flows from financing activities based on Korean GAAP W 866,822 W (1,206,991 ) W (1,818,288 )
Adjustments:
Consolidation of variable interest entity 1,126 (11,802 ) —
Scope of consolidation 241,743 290,467 32,368
Pre-acquisition cash flows of subsidiaries — 88,340 —
Discontinued Operation 9,015 — —

Cash flows from financing activities based on U.S. GAAP W 1,118,706 W (839,986 ) W (1,785,920 )

The effect of exchange rate changes on cash and cash equivalents held in foreign currencies based on Korean GAAP W 37,371 W (7,405 ) W (5,222 )
Adjustments:
Consolidation of variable interest entity 938 (10 ) —
Scope of consolidation (4,129 ) (1,015 ) 807
Discontinued Operation — — —

The effect of exchange rate changes on cash and cash equivalents held in foreign currencies based on U.S. GAAP W 34,180 W (8,430 ) W (4,415 )

~~F-98~~
Subsidiaries
Notes to the Consolidated Financial Statements
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

2008 2009 2010

Net increase (decrease) in cash and cash equivalents due to changes in consolidated subsidiaries based on Korean GAAP W 36,413 W 46,258 W (18,242 )
Adjustments:
Consolidation of variable interest entity — (427 ) —
Scope of consolidation (77,346 ) 253,307 (20,359 )
Discontinued operation — — —

Net increase (decrease) in cash and cash equivalents due to changes in consolidated subsidiaries based on U.S. GAAP W (40,933 ) W 299,138 W (38,601 )

Pre-acquisition cash flows of subsidiaries based on Korean GAAP W 17,250 W — W (23,406 )
Adjustments:
Scope of consolidation (17,250 ) — 23,406
Pre-acquisition cash flows of subsidiaries — (196,546 ) —
Discontinued operation — — —

Pre-acquisition cash flows of subsidiaries based on U.S. GAAP W — W (196,546 ) W —

Increases in cash and cash equivalents due to merger based on Korea GAAP W — W — W —
Adjustments — — 10,367

Increase in cash and cash equivalents due to merger based on U.S. GAAP W — W — W 10,367

Cash flows from discontinued operation based on Korean GAAP W (248,437 ) W 3,669 W 27,398
Adjustments:
Scope of consolidation (71 ) (1,943 ) (18,202 )
Discontinued operation 256,515 — —

Cash flows from discontinued operation based on U.S. GAAP W 8,007 W 2,026 W 9,196

Cash and cash equivalents at beginning of the year based on Korean GAAP W 885,989 W 1,011,467 W 953,926
Adjustment:
Consolidation of variable interest entity 3,942 2,010 —
Scope of consolidation (66,312 ) (306,125 ) (51,238 )

Cash and cash equivalents at beginning of the year based on U.S. GAAP W 823,619 W 707,352 W 902,688

Cash and cash equivalents at end of the year based on Korean GAAP W 1,011,467 W 953,926 W 778,509
Adjustments:
Consolidation of variable interest entity 2,010 — —
Scope of consolidation (306,125 ) (51,238 ) (112,995 )

Cash and cash equivalents at end of the year based on U.S GAAP W 707,352 W 902,688 W 665,514

~~F-99~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

2008 2009 2010

Cash paid for interest (net of amounts capitalized) W 243,319 W 339,298 360,249

Cash paid for income taxes W 422,506 W 557,005 660,316

~~33.~~   ~~ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP~~
a.   ~~Income Taxes~~
~~Income tax expense for continuing operation under U.S. GAAP for~~For the years ended December 31, ~~2008, 2009~~2013 and ~~2010~~2012
44.    Business Combinations (Unaudited)
The Group acquired 100% of the share capital of SK hynix memory solutions Inc. (SKHMS) (formerly, Link_A_Media Devices Corporation(“LAMD”)), which is ~~as follows (in millions of Korean won):~~

Year Ended December 31,
2008 2009 2010

Currently payable W 494,163 W 610,561 W 525,488
Deferred (332,034 ) (127,409 ) (136,249 )

W 162,129 W 483,152 W 389,239

a Nand Flash controller developer, located in United States for ￦282,293 million and obtained control over SKHMS in August 2012.
The ~~difference between~~goodwill amounting to ￦261,047 million arising from 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, 2008, 2009 and 2010~~acquisition is attributable to the ~~following (in millions of Korean won):~~

Year Ended December 31,
2008 2009 2010

Income from continuing operation before income taxes and appropriate item W 1,196,266 W 1,850,028 W 1,790,574
Equity in earnings (loss) of unconsolidated business (81,215 ) (20,972 ) (5,602 )

1,115,051 1,829,056 1,784,972

Income taxes at statutory income tax rate of 25% in 2008 and 22% in 2009 and 2010 278,763 402,392 392,694
Resident surtax payable 27,876 40,239 39,269
Tax credit for investments, technology, human resource development and others (98,551 ) (98,242 ) (37,074 )
Special surtax for agriculture and fishery industries and other 23,296 16,521 6,720
Additional income tax (tax refund) for prior periods (60,130 ) 10,947 (7,508 )
Tax effect from statutory tax rate change (58,672 ) (29,001 ) (2,763 )
Undistributed earnings (unrecognized deficit) of subsidiaries 110 (17,511 ) (211 )
Other permanent differences 13,157 (30,945 ) (14,228 )
Change in valuation allowance 36,280 188,752 12,340

Recorded income taxes W 162,129 W 483,152 W 389,239

Effective tax rate 14.54 % 26.42 % 21.58 %

~~F-100~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
The tax effects of temporary differences that resulted in deferred tax assets and liabilities at December 31, 2008, 2009 and 2010 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):

Year Ended December 31,
2008 2009 2010

Current:
Allowance for doubtful accounts W 14,530 W 42,693 W 41,832
Accrued interest income (1,594 ) (980 ) (846 )
Provision for handset subsidy — 128,785 160,625
Net operating loss carryforwards 1 61 78
Tax credit carryforwards 570 225 1
Accrued expenses and other 66,868 (76,358 ) (105,477 )

80,375 94,426 96,213

Non-current:
Depreciation (33,262 ) (15,599 ) 7,570
Loss on impairment of investment securities 80,750 41,417 30,529
Equity in losses (earnings) of affiliates (20,151 ) (178,156 ) (64,773 )
Unrecognized deficit (undistributed earnings) of subsidiaries (59,122 ) 112,136 46,458
Tax free reserve for research and manpower development (80,707 ) (132,244 ) (80,761 )
Unrealized loss (gain) on valuation of long-term investment securities (accumulated other comprehensive income) (77,738 ) (164,542 ) (40,812 )
Property and equipment — (36,327 ) (26,600 )
Intangible assets — (27,405 ) (21,741 )
Tax credit carryforwards 1,066 531 357
Net operating loss carryforwards — 83 2,370
Deferred charges and other (55,013 ) 72,465 51,482

(244,177 ) (327,641 ) (95,921 )

Total deferred tax liabilities W (163,802 ) W (233,215 ) W 292

Under U.S. GAAP, effective January 1, 2007, the Company adopted authoritative guidance on accounting for uncertainty in income taxes which requires the use of a two-step approach for recognizing and measuring taxsynergy 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 recognizedecrease 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 returnR&D expenses and ~~amounts recognized in the financial statements will generally result in one or more of the following: an~~expected increase in sales as a ~~liability for income taxes~~

~~F-101~~
result of acquisition of SKHMS.
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability.~~
~~A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2008, 2009 and 2010 is as follows (in millions of Korean won):~~

2008 2009 2010

Beginning of period W 9,989 W 9,305 W 5,204
Gross increases for tax position of prior years 186 1,578 2
Gross decreases for tax position of prior years (2,629 ) (1,307 ) (525 )
Lapses of statues of limitations (474 ) (4,503 ) (506 )
Gross increases for tax position of current year 2,233 131 37,341
Gross decreases for tax position of current year — — (282 )

Ending of period W 9,305 W 5,204 W 41,234

~~Total unrecognized tax benefits at December 31, 2008, 2009 and 2010 are~~ W~~7,375 million,~~ W~~4,561 million and~~ W40,897 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 recognizes any interest and penalties accrued related to unrecognized tax benefits in income tax expense. The Company accrued approximately~~ W~~3,019 million,~~ W~~3,121 million and~~ W~~20,673 of interest and penalties at December 31, 2008, 2009 and 2010, 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, historically the Company’s foreign income tax activity has been immaterial. Through end of 2009, 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 major foreign jurisdictions, the 2005 through 2010 tax years generally remain subject to examination by their respective tax authorities.~~
In November 2010, NTS performed a tax examination for the Company’s open tax years from 2005 through 2009, in the Korean jurisdiction. NTS completed its examination during May 2011 and its preliminary assessment was issued in June 2011. As part of the Company’s year-end uncertain tax position assessment at December 31, 2010, the Company recognized tax positions for likely NTS assessments, that are considered to be greater than 50 percent of being realized upon ultimate NTS assessment, and recorded such amount. There is no significant difference between the amount recognized by the Company and the NTS’ preliminary assessment. And, in Korean jurisdiction, 2010 tax year remains open to examination.
b.   ~~Fair Value of Financial Instruments~~
The following ~~methods and assumptions were used to estimate~~table summarizes the consideration paid for SKHMS, the fair value of ~~each class of financial instruments under U.S. GAAP as of December 31, 2008, 2009~~assets acquired and ~~2010 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~~liabilities assumed at the ~~short maturity of those instruments.~~

~~F-102~~
acquisition date:
~~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.~~
~~Long-term Accounts Receivable (trade and other)~~
~~The fair value of long-term accounts receivables is estimated by discounting the future cash flows using the current interest rate applied to debtor.~~

~~F-103~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~The following summarizes the carrying amounts and fair values of financial instruments as of December 31, 2008, 2009 and 2010 (in millions of Korean won)~~

2008 2009 2010
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 914,228 W 914,228 W 1,371,150 W 1,371,150 W 1,232,666 W 1,232,666
Trading securities 367,002 367,002 370,126 370,126 200,000 200,000
Accounts receivable (trade and other) 2,893,283 2,893,283 4,441,094 4,441,094 4,483,658 4,483,658
Short-term loans 106,013 106,013 77,360 77,360 84,767 84,767
Investment securities:
Listed equity and debts 2,356,039 2,356,039 2,175,344 2,175,344 1,441,369 1,441,369
Non-listed equity and debts 75,028 N/A 282,189 N/A 562,760 N/A
Derivative instruments assets 318,373 318,373 303,073 303,073 197,219 197,219
Long-term bank deposits 75 75 6,556 6,556 117 117
Long-term accounts receivable (trade and other) 617,603 617,603 761,735 761,735 549,524 549,524
Long-term loans 85,975 64,481 29,746 29,336 57,203 56,667

W 7,733,619 W 9,818,373 W 8,809,283

Financial liabilities:
Accounts payable W 1,107,202 W 1,107,202 W 1,467,399 W 1,467,399 W 1,629,414 W 1,629,414
Short-term borrowings 180,827 180,827 1,020,399 1,020,399 523,710 523,710
Derivative instruments liabilities 242,186 242,186 130,672 130,672 138,499 138,499
Bonds payable, long-term borrowings, convertible bonds long-term payables — other and obligation under finance leases, including current portion 4,943,630 4,855,897 6,044,979 6,106,960 5,497,229 5,897,578

W 6,473,845 W 8,663,449 W 7,788,852

Amount
(~~note a)~~In millions of won)
Consideration
￦ 282,293
Recognized amounts of identifiable assets acquired and liabilities assumed(1)
~~These carrying amounts represent the amounts determined under U.S. GAAP.~~
~~Fair value hierarchy~~
On January 1, 2008, the Company adopted the provisions related to fair value measurements, to recognize all financial and nonfinancial assets and liabilities at fair value in the consolidated financial statements on a recurring basis. The adoption of such accounting guidance did not change our previous accounting for financial assets and liabilities. The provisions 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 provision on January 1, 2009, the Company has provided additional disclosures regarding its nonrecurring fair value

~~F-104~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
~~measurements, including its annual impairment review of goodwill and intangible assets. Refer to Note 32 (b) below for such disclosures made by the Company.~~
The fair value measurement guidance 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. The guidance 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 tables present information regarding our assets and liabilities measured at fair value on a recurring basis as of December 31, 2008, 2009 and 2010 (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 —

~~F-105~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

December, 31,

2009 Level 1 Level 2 Level 3

Assets:
Trading securities W 370,126 W — W 370,126 W —
Available for sale securities:
Equity securities 1,820,458 1,820,458 — —
Debt securities 353,880 — 353,880 —
Held-to-maturity securities
1,006 — 1,006 —
Derivatives:
Currency swap 303,073 — 303,073 —

W 2,848,543 W 1,820,458 W 1,028,085 W —

Liabilities:
Derivatives:
Currency swap W 53,032 W — W 53,032 W —
Interest rate swap 17,228 — 17,228 —
Conversion option 60,412 — 60,412 —

W 130,672 W — W 130,672 W —

December, 31,

2010 Level 1 Level 2 Level 3

Assets:
Trading securities W 200,000 W — W 200,000 W —
Available for sale securities:
Equity securities 1,409,109 1,409,109 — —
Debt securities 32,260 — 32,260 —
Held-to-maturity securities
— — — —
Derivatives:
Currency swap 197,219 — 197,219 —

W 1,838,588 W 1,409,109 W 429,479 W —

Liabilities:
Derivatives:
Currency swap W 17,501 W — W 17,501 W —
Interest rate swap 12,534 — 12,534 —
Conversion option 108,464 — 108,464 —

W 138,499 W — W 138,499 W —

~~The following methods and assumptions were used to estimate the fair value of each class of financial instrument:~~
~~Securities~~
The Company classifies its 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
~~F-106~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
classifies its 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 its securities using pricing 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 the Company’s derivatives are valued using internal models that use 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 classifies these instruments within Level 2 of the valuation hierarchy. Such derivatives include interest rate swap, cross currency swaps and foreign currency derivatives.
The accounting guidance requires that the valuation of derivative liabilities must take into account the Company’s own non-performance risk. Effective January 1, 2008, the Company updated its derivative valuation methodology to consider its own non-performance risk and counterparty nonperformance risk as observed through the credit default swap market and based on prices of recent trades.
c.
Current assets
~~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,

2011 W 669
2012 625
2013 845
2014 980
2015 2,682
2016 — 2020 57,286

Total W 63,087

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.

~~F-107~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
d.
Cash and cash equivalents
~~Condensed Consolidated Income Statements under U.S. GAAP~~ 4,542
~~Condensed consolidated income statements under U.S.GAAP for the years ended December 31, 2008, 2009 and 2010 are as follows (in millions of Korean won):~~

2008 2009 2010

Operating revenue:
Wireless services W 9,553,556 W 9,431,035 W 9,571,524
Interconnection 1,149,196 1,179,298 1,243,689
Digital handset sales 16,425 212,802 456,844
Fixed-line service — 842,215 1,766,572
Other 413,232 954,591 1,135,217

Total operating revenue 11,132,409 12,619,941 14,173,846
Total operating expenses (9,379,988 ) (10,745,536 ) (12,359,423 )

Operating income 1,752,421 1,874,405 1,814,423
Other income (expenses), net (556,678 ) (23,917 ) (23,849 )

Income from continuing operation before income taxes and appropriate item below 1,196,743 1,850,488 1,790,574
Provision for income taxes from continuing operation (162,129 ) (483,152 ) (389,239 )
Equity in earnings (loss) of unconsolidated Businesses (81,215 ) (20,972 ) (5,602 )
Income(loss) from discontinued operation, net of tax (1,662 ) 10,318 888

Net income W 951,737 W 1,356,682 W 1,396,621
Add non controlling interests in losses of consolidated subsidiaries 121,129 123,044 128,470

Net income attributable to the Company W 1,072,866 W 1,479,726 W 1,525,091

Trade receivables(2)
650
Inventories
14
Other current assets
822
Non-current assets
e.
Property, plant and equipment
1,621
Intangible assets
24,105
Other non-current assets
83
Current liabilities
Trade payables
6,574
Other current liabilities
3,627
Non-current liabilities
390
Fair value of net identifiable assets
￦ 21,246
~~Segment~~Goodwill
261,047
(1) Assets acquired and liabilities assumed were measured at their fair values.
(2) The gross contractual amount for trade accounts receivable due is ￦650 million and none of these is expected to be uncollectible.
The ~~Company acquired an additional 7.2% of the outstanding shares of SK Broadband Co., Ltd., a fixed-line telephone service provider, which began being consolidated under U.S. GAAP during~~acquisition-related costs amounting to ￦5,669 million were all expensed for the year ended December 31, ~~2009. (Refer to Note 32 (M) “~~~~Achieved-in-stages~~”) Beginning the year ended December 31, 2008, the Company has had two operation segments, which is the cellular telephone communication service segment and fixed-line telecommunication service segment. For the business2012.
The sales revenue of ~~each segment and detail information refer to Note 30.~~
f.   ~~Transition to IFRS in 2011~~
As of January 1, 2011, the Company began preparing its financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted for use in the Republic of Korea and IFRS as issued by the International Accounting Standards Board (“IASB”). The Company’s transition date to IFRSs is January 1, 2010.
Going forward, the Company will discontinue to report under Korean GAAP and will report under IFRS as issued by the IASB. As such, the Company’s 2010 consolidated financial statements under IFRSs may be materially different than the accompanying 2010 consolidated financial statements under Korean GAAP.

~~F-108~~
~~SK TELECOM CO., LTD. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~
g.   ~~Recent Changes in U.S. GAAP~~
~~In October 2009, guidance on Multiple-Deliverable Revenue Arrangements, which addresses how revenues should be allocated among all products and services~~SKHMS included in our bundled sales arrangements, was newly issued. It establishes a selling price hierarchy for determining the selling price of each product or service, with vendor-specific objective evidence at the highest level, third-party evidence at the intermediate level, and a best estimate at the lowest level. It eliminates the residual method as an acceptable allocation method, and requires the use of the relative selling price method as the basis for allocation. It also significantly expands the disclosure requirements for such arrangements, including, potentially, certain qualitative disclosures. The requirements effective for the beginning of January 1, 2011 are not expected to have a material effect on our consolidated financial statements.
In January 2010, accounting guidance on Fair Value Measurements and Disclosures — Improving Disclosures about Fair Value Measurements, which required new disclosures and explanations for transfers of financial assets and liabilities between levels in the fair value hierarchy was revised. The new guidance clarifies that fair value measurement disclosures are required for each class of financial asset and liability, which may be a subset of a caption in the consolidated ~~balance sheets,~~statement of comprehensive income after acquisition date was ￦4,289 million. SKHMS also contributed a net loss of ￦5,802 million over the same period.
Had SKHMS been consolidated from January 1, 2012, the sales of ￦13,490 million and ~~those disclosures should include a discussion~~net loss of ~~inputs and valuation techniques. For financial assets and liabilities subject to lowest-level measurements (Level 3),~~￦27,240 million would have been included in the ~~guidance further requires that we separately present purchases, sales, issuances, and settlements instead~~consolidated statement of ~~netting these changes.~~
In July 2010, the accounting guidance for Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses were revised. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are effective for the fiscal year ended December 31, 2010, while the disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter of 2011. The disclosure requirements effective for the fiscal year ended December 31, 2010 did not have a material effect on our consolidated financial statements. The requirements effective for the first fiscal quarter of 2011 are not expected to have a material effect on our consolidated financial statements.

~~F-109~~comprehensive income.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
~~SK TELECOM CO., LTD.~~
~~(Registrant)~~
~~/s/  Sung Min Ha~~
~~Name:     Sung Min Ha~~
SK TELECOM CO., LTD.
(Registrant)
~~Title:~~
/s/    Sung Min Ha
Name: Sung Min Ha
Title: President ~~Co-Chief~~& Chief Executive Officer &
   ~~Representative Director~~
Date: ~~June~~April 30, ~~2011~~
2014

OR
þ		þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
o	¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
~~Date of event requiring this shell company report~~
~~For the transition period from to~~


Title of Each Class		Name of Each Exchange on Which Registered
American Depositary Shares, each representing one-ninth of one share of Common Stock		New York Stock Exchange
Common Stock, par value W~~500~~￦500 per share		New York Stock Exchange*


		Page		~~Page~~

CERTAIN DEFINED TERMS AND CONVENTIONS USED IN THIS ANNUAL REPORT			1
FORWARD-LOOKING STATEMENTS			12

PART I			34
Item 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		34
Item 1.A.	Directors and Senior Management		34
Item 1.B.	Advisers		34
Item 1.C.	~~Auditor~~Auditors		34
Item 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		34
Item 3.	KEY INFORMATION		34
Item 3.A.	Selected Financial Data		34
Item 3.B.	Capitalization and Indebtedness		8
Item 3.C.	Reasons for the Offer and Use of Proceeds		8
Item 3.D.	Risk Factors		98
Item 4.	INFORMATION ON THE COMPANY		22
~~Item 4.A.~~	~~History and Development of the Company~~		22
~~Item 4.B.~~	~~Business Overview~~		25
Item ~~4.C.~~ 4.A.	~~Organizational Structure~~History and Development of the Company		5025
Item ~~4.D.~~ 4.B.	~~Property, Plants And Equipment~~Business Overview		5128
Item ~~4A.~~ 4.C.	~~UNRESOLVED STAFF COMMENTS~~Organizational Structure		5153
Item 5. 4.D.	Property, Plants and Equipment		53
Item 4A.	UNRESOLVED STAFF COMMENTS		54
Item 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		5154
Item 5.A.	Operating Results		5254
Item 5.B.	Liquidity and Capital Resources		6168
Item 5.C.	Research and Development,		72
~~Item 5.D.~~	~~Trend Information~~		73
~~Item 5.E.~~	~~Off-Balance Sheet Arrangements~~		73
~~Item 5.F.~~	~~Tabular Disclosure of Contractual Obligations~~		73
~~Item 5.G.~~	~~Safe Harbor~~		73
~~Item 6.~~	~~DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES~~		73
~~Item 6.A.~~	~~Directors~~ Patents and ~~Senior Management~~Licenses, etc.		73
~~Item 6.B.~~	~~Compensation~~		75
~~Item 6.C.~~	~~Board Practices~~		75
~~Item 6.D.~~	~~Employees~~		76
~~Item 6.E.~~	~~Share Ownership~~		77
Item 7. 5.D.	~~MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS~~Trend Information		78
~~Item 7.A.~~	~~Major Shareholders~~		78
~~Item 7.B.~~	~~Related Party Transactions~~		79
Item ~~7.C.~~ 5.E.	~~Interests of Experts and Counsel~~Off-Balance Sheet Arrangements		8079
Item 8. 5.F.	~~FINANCIAL INFORMATION~~Tabular Disclosure of Contractual Obligations		8079
Item ~~8.A.~~ 5.G.	~~Consolidated Statements and Other Financial Information~~Safe Harbor		8079
Item ~~8.B.~~ 6.	~~Significant Changes~~DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		8379


	As of or for the Year Ended December 31,
	2006			2007			2008			2009			2010		2010*
	(In billions of Won and millions of dollars, except per share and percentage data)

INCOME STATEMENT DATA
Korean GAAP:
Operating Revenue(1)	W	10,979.6	(2)	W	11,821.5	(2)	W	13,951.0	(2)	W	14,512.3	(2)	W	15,435.4	$	13,652.4
Operating Expenses		8,356.2	(2)		9,711.3	(2)		12,190.7	(2)		12,631.1	(2)		13,493.1		11,934.5
Operating Income		2,623.4	(2)		2,110.2	(2)		1,760.3	(2)		1,881.2	(2)		1,942.3		1,717.9
Income from Continuing Operation before Income Tax		2,026.6	(2)		2,284.5	(2)		1,277.5	(2)		1,405.8	(2)		1,673.7		1,480.4
Net Income(3)		1,449.6			1,562.3			972.3			1,055.6			1,297.2		1,147.4
Net Income per Share		19,801			22,696			16,707			17,239			19,177		16.96
Diluted Net Income per Share		19,523			22,375			16,559			17,046			18,888		16.71
Dividends Declared per Share		8,000			9,400			9,400			9,400			9,400		8.31
Weighted Average Number of Shares		73,305,026			72,650,909			72,765,557			72,346,763			71,942,387		71,942,387
U.S. GAAP:
Operating Revenue	W	10,529.4		W	11,192.0		W	11,132.5		W	12,619.9		W	14,173.8	$	12,536.5
Operating Expenses		7,705.8			9,123.9			9,380.1			10,745.5			12,359.4		10,931.7
Operating Income		2,823.6			2,068.1			1,752.4			1,874.4			1,814.4		1,604.8
Net Income(4)		1,876.4			1,451.1			951.7			1,356.7			1,396.6		1,235.3
Net Income per Share attributable to SK Telecom(4)(5)		25,624			20,720			14,744			20,453			21,199		18.75
Diluted Net Income per Share attributable to SK Telecom(4)(5)		25,207			20,379			14,606			20,145			20,841		18.43

	¨
~~(Mark One)~~
o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
o		¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


*		~~Not for trading, but only in connection with the registration of the American Depositary Shares.~~

Item 6.A.	Directors and Senior Management	79
Item 6.B.	Compensation	81
Item 6.C.	Board Practices	81	~~Page~~

Item 9. 6.D.	~~THE OFFER AND LISTING~~Employees	82
Item 6.E.	Share Ownership	83
Item ~~9.A.~~ 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	84
Item 7.A.	Major Shareholders	84
Item 7.B.	Related Party Transactions	85
Item 7.C.	Interests of Experts and Counsel	85
Item 8.	FINANCIAL INFORMATION	86
Item 8.A.	Consolidated Statements and Other Financial Information	86
Item 8.B.	Significant Changes	89
Item 9.	THE OFFER AND LISTING	89
Item 9.A.	Offering and Listing Details	8389
Item 9.B.	Plan of Distribution	8389
Item 9.C.	Markets	8389
Item 9.D.	Selling Shareholders	9096
Item 9.E.	Dilution	9096
Item 9.F.	Expenses of the Issue	9096


			Page
Item 10.	ADDITIONAL INFORMATION			9096
Item 10.A.	Share Capital			9096
Item 10.B.	Memorandum and Articles of Incorporation			9096
Item 10.C.	Material Contracts			~~103~~109
Item 10.D.	Exchange Controls			~~103~~109
Item 10.E.	Taxation			~~107~~
~~Item 10.F.~~	~~Dividends and Paying Agents~~			~~111~~
~~Item 10.G.~~	~~Statements by Experts~~			~~111~~
~~Item 10.H.~~	~~Documents on Display~~			~~111~~
~~Item 10.I.~~	~~Subsidiary Information~~			~~112~~
~~Item 11.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~			~~112~~
~~Item 12.~~	~~DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES~~			113
Item ~~12.A.~~ 10.F.	~~Debt Securities~~Dividends and Paying Agents			~~113~~117
Item ~~12.B.~~ 10.G.	~~Warrants and Rights~~Statements by Experts			~~113~~117
Item ~~12.C.~~ 10.H.	~~Other Securities~~Documents on Display			~~113~~117
Item ~~12.D.~~ 10.I.	~~American Depositary Shares~~Subsidiary Information			~~113~~117
Item 11.
~~PART II~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK				~~114~~117
Item ~~13.~~ 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			119
Item 12.A.	Debt Securities			119
Item 12.B.	Warrants and Rights			119
Item 12.C.	Other Securities			119
Item 12.D.	American Depositary Shares			119

PART II				120
Item 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			~~114~~120
Item 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			~~114~~120
Item 15.	CONTROLS AND PROCEDURES			~~114~~120
Item 16.	[RESERVED]			~~115~~121
Item 16A.	AUDIT COMMITTEE FINANCIAL EXPERT			~~115~~121
Item 16B.	CODE OF ETHICS			~~116~~121
Item 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES			~~116~~121
Item 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			~~116~~122
Item 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			~~117~~122
Item 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			~~117~~122
Item 16G.	CORPORATE GOVERNANCE			~~117~~122
Item 16H.	MINE SAFETY DISCLOSURE			123

PART III				123
Item 17.	FINANCIAL STATEMENTS			123
Item 18.	FINANCIAL STATEMENTS			124
Item 19.	EXHIBITS			124
EX-1.1
~~PART III~~EX-8.1		~~118~~
~~Item 17.~~
~~FINANCIAL STATEMENTS~~EX-12.1		~~118~~
~~Item 18.~~
~~FINANCIAL STATEMENTS~~EX-12.2		~~118~~
~~Item 19.~~
~~EXHIBITS~~EX-13.1		~~119~~
~~EX-8.1~~
~~EX-12.1~~EX-13.2
~~EX-12.2~~EX-15.3
~~EX-13.1~~EX-15.4
~~EX-13.2~~EX-15.5
~~EX-15.1~~
~~EX-15.2~~
~~EX-15.3~~
~~EX-15.4~~


	•	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;

	•	our implementation of high-speed downlink packet access, or HSDPA, technology, high-speed uplink packet access, or HSUPA, technology, evolved high-speed uplink packet access, or HSPA+, technology, wireless broadband Internet, or WiBro, technology and long term evolution, or LTE, technology;

	•	our plans for capital expenditures in 2011 for a range of projects, including investments in our backbone networks, investments to improve our WCDMA network-based products and services, investments to build our LTE network, 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;

	•	~~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;~~

	•	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;

	•	~~our ability to manage effectively our bandwidth and to implement timely and efficiently new bandwidth-efficient technologies;~~

	•	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;

	•	~~the success of our various joint ventures and investments in other telecommunications service providers;~~

	•	~~our ability to successfully manage our acquisition in 2008 and 2009 of a majority stake in SK Broadband Co., Ltd., a fixed-line telecommunications operator and broadband Internet service provider;~~

	•	~~our ability to successfully manage our acquisition in 2009 of the leased-line business of SK Networks Co., Ltd., which provides a substantial portion of the transmission lines we use;~~

	•	~~our ability to successfully manage our investment in Packet One Networks (Malaysia) Sdn. Bhd., a Malaysian wireless broadband company;~~

	•	~~our ability to successfully attract and retain subscribers under the KCC’s new guideline on the marketing expenses of the telecommunication service providers; and~~

	•	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.


Item 1.	*IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS*


*		~~The translation into Dollars was made at the rate of Won 1,130.6 to US$1.00. See note 2(a) of the notes to our consolidated financial statements.~~

(1)		Includes interconnection revenue of Won 1,033.4 billion for 2006, Won 1,062.2 billion for 2007, Won 1,149.2 billion for 2008, 1,245.4 billion for 2009 and Won 1,237.5 billion for 2010. Includes digital handset sales revenue of Won 185.3 billion in 2009 and Won 534.4 billion in 2010 from PS&Marketing which is our consolidated subsidiary.

~~(2)~~		As a result of ~~our sale~~the cessation of ~~HELIO, LLC to Virgin Mobile USA, Inc. in August 2008, HELIO’s results of operations have~~the satellite Digital Multimedia Broadcasting (“DMB”) services operated by SK Telink Co., Ltd. (“SK Telink”), SK Telink’s DMB business has been classified as discontinued operations. We applied the accounting effects retrospectively, and ~~SK Communications Co., Ltd., one of our subsidiaries, sold the Spicus division, a telephone English education division, to Spicus Inc., a subsidiary of Altos Ventures, in August 2009~~accordingly operating revenue and ~~sold Etoos Co., Ltd. to Cheong Sol in October 2009. In addition, we sold shares of iHQ, Inc. in April and July 2010 and liquidated SK-KTB Music Investment Fund in October 2010. Operating~~other income, revenue, operating ~~expenses,~~expense, operating income ~~and income~~from continuing operations, profit before income ~~taxes~~tax and ~~minority interest for the years ended December 31, 2006, 2007, 2008 and 2009~~profit from continuing operations have been ~~revised~~re-presented to exclude results of operations of ~~HELIO, the Spicus division, Etoos, iHQ, Inc. and SK-KTB Music Investment Fund.~~

~~(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 subsidiary’s 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 incomeSK Telink’s DMB business for the year ended December 31, ~~2006~~2011 and 2010, respectively.

(2)		As a result of the disposition of shares of Loen Entertainment by SK Planet Co., Ltd. (“SK Planet”), Loen Entertainment ceased to be our consolidated subsidiary and has been ~~reclassified in accordance with SKAS No. 25.~~

~~(4)~~		~~Adjusted~~classified as discontinued operations. We applied the accounting effects retrospectively, and accordingly operating revenue and other income, revenue, operating expense, operating income from continuing operations, profit before income tax and profit from continuing operations have been re-presented to ~~retroactively reflect our acquisition~~exclude results of an additional 38.7% equity stake in SK Broadband in March 2008, increasing our total equity interest in SK Broadband to 43.4%. According to revised Accounting Standard Codification Topic 810 “Consolidation,” net income (loss) attributable to the non-controlling interest is included in net income. The net loss attributable to the non-controlling interestoperations of Loen Entertainment for the ~~years~~year ended December 31, ~~2006, 2007, 2008, 2009~~2012, 2011 and 2010, ~~was Won (4.1 billion), Won (54.3 billion), Won (121.1 billion), Won (123.0 billion) and Won (128.5 billion),~~ respectively.

(3)
~~(5)~~		~~Net income~~Basic earnings per share ~~attributable to SK Telecom~~ is calculated by dividing ~~net income~~profit attributable to owners of SK Telecom by the weighted average number of common shares outstanding during the period. ~~Diluted net income~~Basic earnings per share ~~attributable to SK Telecom~~from continuing operations is calculated by dividing ~~net income~~profit from continuing operations attributable to owners of SK Telecom by the weighted average number of common shares outstanding during the period.


Item 1.B.	*Advisers*


Item 1.C.	*~~Auditor~~Auditors*


Item 3.	*KEY INFORMATION*


Item 3.A.	*Selected Financial Data*

(6)		Working capital means current assets minus current liabilities.


		~~and Won 1,138.9 to US$1.00 as of December 31, 2010, the rates of exchange permitted under Korean GAAP as of those dates.~~each reporting period. See note ~~2(u)~~3(21) of the notes to our consolidated financial statements.

(8)		EBITDA refers to income before interest income, interest expense, taxes, depreciation and amortization. EBITDA as used here is a non-GAAP measure and is commonly used in the telecommunications industry to analyze companies on the basis of operating performance. Since the telecommunications business is a very capital intensive business, capital 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~~cash outflows for the acquisition of property ~~plant~~ and equipment. ~~Under U.S. GAAP, interest~~

(9)		Consists of research and development 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 coststhat are expensed as ~~incurred.~~incurred and costs that are amortized during the respective period.

(10)		Includes donations to Korean research institutes and educational organizations. See “Item 4.B. Business Overview — Law and Regulation — Mandatory Contributions and Obligations” and “Item 5.C. Research and ~~Development”.~~Development, Patents and Licenses, etc.”

(11)		~~Cash flow activities from discontinued operation for the years ended December 31, 2006, 2007, 2008, 2009 and 2010 have been excluded.~~

~~(12)~~		Operating revenue and other income and operating income from continuing operations used in the calculation of these ratios exclude the operating revenue and other income and operating income from ~~the~~ discontinued ~~operation, but include the operating revenue and operating income of newly-consolidated subsidiaries prior to the date of consolidation.~~operations.


~~(13)~~(12)		Population ~~estimates based on historical data~~numbers reflect the number of registered residents as published by the ~~National Statistical Office~~Ministry of Security and Public Administration of Korea.


~~(14)~~(13)		Wireless penetration is determined by dividing our subscribers by total estimated population, as of the end of the period.


~~(15)~~(14)		Includes regular employees and temporary employees. The number of employees as of December 31, ~~2010~~2013, 2012 and 2011 includes employees of Service Ace Co., Ltd., Service Top Co., Ltd., and Network O&S Co., Ltd., ourwholly-owned subsidiaries established in 2010, who were previously employed by third-party outsourcing companies. See “Item 6.D. ~~Employees”.~~Employees.”


~~(16)~~(15)		Wireless subscribers include those subscribers who are temporarily deactivated, including ~~(1)~~(i) subscribers who voluntarily deactivate temporarily for a period of up to three months no more than twice a year and ~~(2)~~(ii) subscribers with delinquent accounts who may be involuntarily deactivated up to two months before permanent deactivation, which we determine based on various factors, including prior payment history. The number of subscribers as of December 31, 2013, 2012 and 2011 include 1,066,848 subscribers, 406,018 subscribers and 55,449 subscribers, respectively, of MVNOs that lease our wireless networks.


~~(17)~~(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 SK Telecom subscribers for each month in the period, calculated as the average of the number of SK Telecom subscribers on the first and last days of the relevant month, by (ii) the number of months in the period.

~~(18)~~		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

(17)
		~~in the period. Including interconnection revenue, average monthly revenue per subscriber was Won 44,599 for 2006, Won 44,416 for 2007, Won 43,016 for 2008, Won 42,469 for 2009 and Won 41,374 for 2010.~~

~~(19)~~		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 ~~the~~a next generation service, such as ~~CDMA 1xEV/ DO or WCDMA,~~LTE, by terminating their service and opening a new subscriber account.


*		~~The translation into Dollars was made at the rate of Won 1,130.6 to US$1.00. See note 2(a) of the notes to our consolidated financial statements.~~

~~(1)~~		In accordance with SKAS No. 25, which we adopted in 2007, when a subsidiary is purchased during the fiscal year, the subsidiary’s 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, 2008, 2009 and 2010 shown in the table above exclude, with respect to subsidiaries newly consolidated in 2007, 2008, 2009 or 2010 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 2006, 2007, 2008, 2009 and 2010 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, 2008, 2009 and 2010 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, 2008, 2009 and 2010, respectively.


*		~~The translation into Dollars was made at the rate of Won 1,130.6 to US$1.00. See note 2(a) of the notes to our consolidated financial statements.~~

~~(1)~~		~~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%.~~

~~(2)~~		Interest income, interest expense, taxes and depreciation and amortization amounts for 2006, 2007, 2008, 2009 and 2010 shown in the table above include income earned and expense incurred from discontinued operations.


	At End of		Average
Year Ended December 31,	Period		Rate(1)		High		Low
	(Won per US$1.00)

2006		930.0		954.3		1,002.9		913.7
2007		935.8		929.0		950.2		903.2
2008		1,262.0		1,098.7		1,507.9		935.2
2009		1,163.7		1,274.6		1,570.1		1,149.0
2010		1,130.6		1,155.7		1,253.2		1,104.0


	Past Six Months
	High		Low
	(Won per US$1.00)

December 2010		1,155.2		1,130.0
January 2011		1,128.1		1,111.0
February 2011		1,130.6		1,100.9
March 2011		1,135.6		1,097.3
April 2011		1,091.8		1,068.4
May 2011		1,101.6		1,065.5
June 2011 (through June 24)		1,091.2		1,073.9


Year Ended December 31,	At End of Period		Average Rate(1)		High		Low
Year Ended December 31,	At End of Period		Average Rate(1)		High		Low
	(Won per US$1.00)
2009		1,163.7		1,274.6		1,570.1		1,149.0
2010		1,130.6		1,155.7		1,253.2		1,104.0
2011		1,158.5		1,106.9		1,197.5		1,049.2
2012		1,063.2		1,126.2		1,185.0		1,063.2
2013		1,055.3		1,094.7		1,161.3		1,050.1


(1)		The average rates for the annual periods were calculated based on daily noon buying rates for cable transfers in New York City certified for customs purposes by the Federal Reserve Bank of New York.


Item 3.C.	*Reasons for the Offer and Use of Proceeds*


	Rate per Minute
Applicable Year	SK Telecom		KT		LG U+

2006	W	33.13	W	40.06	W	47.01
2007		32.78		39.60		45.13
2008		33.41		38.71		39.09
2009		32.93		37.96		38.53
2010		31.41		33.35		33.64
2011		30.50		31.75		31.93