Table of Contents
(Mark One) | ||
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2010 | ||
OR | ||
o | TRANSITION 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 | New York Stock Exchange* |
* | Not for trading, but only in connection with the registration of the American Depositary Shares. |
None
None
Table of Contents
Table of Contents
ii
Table of Contents
1
Table of Contents
• | 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. |
2
Table of Contents
Item 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Item 1.A. | Directors and Senior Management |
Item 1.B. | Advisers |
Item 1.C. | Auditor |
Item 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Item 3. | KEY INFORMATION |
Item 3.A. | Selected Financial Data |
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) | 10,979.6 | (2) | 11,821.5 | (2) | 13,951.0 | (2) | 14,512.3 | (2) | 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 | 10,529.4 | 11,192.0 | 11,132.5 | 12,619.9 | 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 |
3
Table of Contents
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) | ||||||||||||||||||||||||
BALANCE SHEET DATA | ||||||||||||||||||||||||
Korean GAAP: | ||||||||||||||||||||||||
Working Capital(6) | 1,455.5 | 1,796.2 | 793.6 | 1,475.7 | 1,057.7 | $ | 935.5 | |||||||||||||||||
Property and Equipment, Net | 4,507.3 | 4,969.4 | 7,437.7 | 8,165.9 | 7,864.6 | 6,956.1 | ||||||||||||||||||
Total Assets | 16,240.0 | 19,048.9 | 22,473.7 | 23,206.3 | 22,651.7 | 20,035.1 | ||||||||||||||||||
Non-current Liabilities(7) | 3,548.5 | 4,344.4 | 6,020.4 | 5,966.7 | 4,257.8 | 3,766.0 | ||||||||||||||||||
Capital Stock | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 39.5 | ||||||||||||||||||
Total Shareholders’ Equity | 9,483.1 | 11,687.6 | 11,824.4 | 12,344.6 | 12,478.6 | 11,037.2 | ||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||||||
Working Capital | 1,286.2 | 1,751.1 | 738.0 | 1,815.6 | 1,078.6 | $ | 954,0 | |||||||||||||||||
Total Assets(4) | 17,909.4 | 20,173.6 | 21,239.2 | 25,788.3 | 25,298.7 | 22,376.4 | ||||||||||||||||||
Total Shareholders’ Equity(4) | 10,718.4 | 12,897.6 | 12,562.0 | 14,260.8 | 14,572.7 | 12,889.4 |
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) | ||||||||||||||||||||||||
OTHER FINANCIAL DATA | ||||||||||||||||||||||||
Korean GAAP: | ||||||||||||||||||||||||
EBITDA(3)(8) | 3,881.2 | 4,370.1 | 4,009.9 | 4,262.5 | 4,729.5 | $ | 4,183.2 | |||||||||||||||||
Capital Expenditures(9) | 1,498.1 | 1,804.1 | 2,236.9 | 2,162.3 | 2,316.9 | 2,049.3 | ||||||||||||||||||
R&D Expenses(10) | 279.0 | 293.1 | 299.7 | 293.2 | 352.0 | 311.3 | ||||||||||||||||||
Internal R&D | 212.0 | 218.7 | 226.7 | 236.3 | 270.4 | 239.1 | ||||||||||||||||||
External R&D | 67.0 | 74.4 | 73.0 | 56.9 | 81.6 | 72.2 | ||||||||||||||||||
Depreciation and Amortization | 1,698.2 | 1,968.6 | 2,755.4 | 2,730.0 | 2,868.8 | 2,537.4 | ||||||||||||||||||
Cash Flow from Operating Activities(11) | 3,590.5 | 3,721.0 | 3,293.0 | 2,932.6 | 4,021.0 | 3,556.5 | ||||||||||||||||||
Cash Flow from Investing Activities(11) | (2,535.0 | ) | (2,415.4 | ) | (3,877.0 | ) | (1,826.0 | ) | (2,358.7 | ) | (2,086.2 | ) | ||||||||||||
Cash Flow from Financing Activities(11) | (952.4 | ) | (1,041.3 | ) | 866.8 | (1,207.0 | ) | (1,818.3 | ) | (1,608.3 | ) | |||||||||||||
Margins (% of total sales): | ||||||||||||||||||||||||
EBITDA Margin(8)(12) | 35.3 | % | 37.0 | % | 28.7 | % | 29.4 | % | 30.6 | % | 30.6 | % | ||||||||||||
Operating Margin(12) | 23.9 | 17.9 | 12.6 | 13.0 | 12.6 | 12.6 | ||||||||||||||||||
Net Margin(12) | 13.2 | 12.3 | 7.0 | 7.3 | 8.4 | 8.4 | ||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||||||
EBITDA(4)(8) | 4,527.7 | 3,909.5 | 3,146.7 | 4,155.6 | 4,613.4 | $ | 4,080.7 | |||||||||||||||||
Capital Expenditures(9) | 1,538.0 | 1,854.0 | 1,861.0 | 2,160.5 | 2,316.4 | 2,048.8 | ||||||||||||||||||
Cash Flow from Operating Activities(11) | 3,615.5 | 3,284.1 | 2,696.3 | 3,063.7 | 3,979.6 | 3,519.9 | ||||||||||||||||||
Cash Flow from Investing Activities(11) | (2,560.4 | ) | (2,436.2 | ) | (3,932.6 | ) | (2,124.6 | ) | (2,407.4 | ) | (2,129.3 | ) | ||||||||||||
Cash Flow from Financing Activities(11) | (940.6 | ) | (631.3 | ) | 1,118.7 | (840.0 | ) | (1,785.9 | ) | (1,579.6 | ) |
4
Table of Contents
As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010* | |||||||||||||||||||
SELECTED OPERATING DATA | ||||||||||||||||||||||||
Population of Korea (millions)(13) | 48.3 | 48.5 | 48.6 | 48.7 | 48.9 | 48.9 | ||||||||||||||||||
Our Wireless Penetration(14) | 42.0 | % | 45.3 | % | 47.4 | % | 50.6 | % | 50.6 | % | 50.6 | % | ||||||||||||
Number of Employees(15) | 7,676 | 9,485 | 10,626 | 10,714 | 20,143 | 20,143 | ||||||||||||||||||
Total Sales per Employee (in millions of Won and thousands of Dollars) | 1,430.4 | 1,246.3 | 1,312.9 | 1,354.5 | 766.3 | $ | 677.8 | |||||||||||||||||
Wireless Subscribers(16) | 20,271,133 | 21,968,169 | 23,032,045 | 24,269,553 | 25,705,049 | 25,705,049 | ||||||||||||||||||
Average Monthly Outgoing Voice Minutes per Subscriber(17) | 201 | 201 | 200 | 197 | 199 | 199 | ||||||||||||||||||
Average Monthly Revenue per Subscriber(18) | 40,220 | 40,154 | 38,526 | 38,171 | 37,287 | $ | 32.98 | |||||||||||||||||
Average Monthly Churn Rate(19) | 2.0 | % | 2.6 | % | 2.7 | % | 2.7 | % | 2.7 | % | 2.7 | % | ||||||||||||
Digital Cell Sites | 12,515 | 16,099 | 17,213 | 15,979 | 17,483 | 17,483 |
* | 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 of HELIO, LLC to Virgin Mobile USA, Inc. in August 2008, HELIO’s results of operations have been classified as discontinued operations. We 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 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 revenue, operating expenses, operating income and income before income taxes and minority interest for the years ended December 31, 2006, 2007, 2008 and 2009 have been revised 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 income for the year ended December 31, 2006 has been reclassified in accordance with SKAS No. 25. | |
(4) | Adjusted to retroactively reflect our acquisition of an additional 38.7% equity stake in SK Broadband in March 2008, increasing our total equity interest in SK Broadband to 43.4%. 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 interest for the years ended December 31, 2006, 2007, 2008, 2009 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. | |
(5) | Net income per share attributable to SK Telecom is calculated by dividing net income attributable to SK Telecom by the weighted average number of shares outstanding during the period. Diluted net income per share attributable to SK Telecom is calculated by dividing net income adjusted for dilution by potential dilutive weighted average number of shares outstanding during the period, taking into account the issuance of convertible bonds. | |
(6) | Working capital means current assets minus current liabilities. | |
(7) | Our monetary assets and liabilities denominated in foreign currencies are valued at the exchange rate of Won 929.6 to US$1.00 as of December 31, 2006, Won 938.2 to US$1.00 as of December 31, 2007, Won 1,257.5 to US$1.00 as of December 31, 2008, Won 1,167.6 to US$1.00 as of December 31, 2009 |
5
Table of Contents
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. See note 2(u) 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 property, plant and equipment. Under U.S. GAAP, interest costs incurred during the period required to complete an asset or ready an asset for its intended use are capitalized based on the interest rates a company pays on its outstanding borrowings. Under Korean GAAP, such interest costs are expensed as incurred. | |
(10) | Includes donations to Korean research institutes and educational organizations. See “Item 5.C. Research and Development”. | |
(11) | 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 operating income used in the calculation of these ratios exclude the operating revenue 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. | |
(13) | Population estimates based on historical data published by the National Statistical Office of Korea. | |
(14) | Wireless penetration is determined by dividing our subscribers by total estimated population, as of the end of the period. | |
(15) | Includes regular employees and temporary employees. The number of employees as of December 31, 2010 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”. | |
(16) | Wireless subscribers include those subscribers who are temporarily deactivated, including (1) subscribers who voluntarily deactivate temporarily for a period of up to three months no more than twice a year and (2) subscribers with delinquent accounts who may be involuntarily deactivated up to two months before permanent deactivation, which we determine based on various factors, including prior payment history. | |
(17) | The average monthly outgoing voice minutes per subscriber is derived by dividing the total minutes of outgoing voice usage for the period by the monthly average number of subscribers for the period, then dividing that number by the number of months in the period. The monthly average number of subscribers is derived by dividing (i) the sum of the average number of subscribers for each month in the period, calculated as the average of the number of subscribers on the first and last days of the relevant month, by (ii) the number of months in the period. | |
(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 |
6
Table of Contents
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 next generation service, such as CDMA 1xEV/ DO or WCDMA, by terminating their service and opening a new subscriber account. |
As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010* | |||||||||||||||||||
(In billions of Won and millions of dollars) | ||||||||||||||||||||||||
Korean GAAP: | ||||||||||||||||||||||||
Net Income | 1,449.6 | 1,562.3 | 972.3 | 1,055.6 | 1,297.2 | $ | 1,147.4 | |||||||||||||||||
LESS: Interest income(1) | (79.2 | ) | (92.6 | ) | (128.7 | ) | (186.4 | ) | (234.8 | ) | (207.7 | ) | ||||||||||||
ADD: Interest expense(1) | 237.8 | 234.0 | 337.9 | 439.9 | 396.5 | 350.7 | ||||||||||||||||||
Taxes(1) | 571.9 | 695.6 | 188.9 | 359.3 | 404.3 | 357.6 | ||||||||||||||||||
Depreciation and | 1,701.1 | 1,970.8 | 2,639.5 | 2,594.1 | 2,866.3 | 2,535.2 | ||||||||||||||||||
Amortization(1) | ||||||||||||||||||||||||
EBITDA | 3,881.2 | 4,370.1 | 4,009.9 | 4,262.5 | 4,729.5 | $ | 4,183.2 |
* | 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. |
As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010* | |||||||||||||||||||
(In billions of Won and millions of dollars) | ||||||||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||||||
Net Income(1) | 1,876.4 | 1,451.1 | 951.7 | 1,356.7 | 1,396.6 | $ | 1,235.3 | |||||||||||||||||
LESS: Interest income(2) | (85.9 | ) | (97.7 | ) | (125.4 | ) | (207.4 | ) | (225.0 | ) | (199.0 | ) | ||||||||||||
ADD: Interest expense(2) | 240.4 | 202.7 | 233.5 | 374.3 | 339.3 | 300.1 | ||||||||||||||||||
Taxes(2) | 686.7 | 576.7 | 161.9 | 486.7 | 389.1 | 344.3 | ||||||||||||||||||
Depreciation and Amortization(2) | 1,810.1 | 1,776.7 | 1,925.0 | 2,145.3 | 2,713.4 | 2,400.0 | ||||||||||||||||||
EBITDA(1) | 4,527.7 | 3,909.5 | 3,146.7 | 4,155.6 | 4,613.4 | $ | 4,080.7 |
7
Table of Contents
* | 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 |
(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.B. | Capitalization and Indebtedness |
Item 3.C. | Reasons for the Offer and Use of Proceeds |
8
Table of Contents
Item 3.D. | Risk Factors |
9
Table of Contents
10
Table of Contents
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
16
Table of Contents
• | 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. |
• | 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. |
17
Table of Contents
• | 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; |
18
Table of Contents
• | 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. |
19
Table of Contents
20
Table of Contents
• | a registration statement filed by us under the Securities Act is in effect with respect to those shares; or |
21
Table of Contents
• | the offering and sale of those shares is exempt from, or is not subject to, the registration requirements of the Securities Act. |
Item 4. | INFORMATION ON THE COMPANY |
Item 4.A. | History and Development of the Company |
22
Table of Contents
December 31, 2010, our share of the Korean wireless market was approximately 50.6%, based on number of subscribers, according to the KCC.
23
Table of Contents
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 |
(1) | Source: National Statistical Office of Korea. | |
(2) | Source: KCC. |
24
Table of Contents
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, | ||||||||||||||||||||
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 |
(1) | Source: KISA. | |
(2) | Source: KCC. Includes subscribers accessing Internet service using digital subscriber line, or xDSL, connections; cable modem connections; local area network, or LAN, connections;fiber-to-the-home, or FTTH, connections; and satellite connections. |
Item 4.B. | Business Overview |
• | Cellular voice services. We provide wireless voice transmission services to our subscribers through our backbone cellular networks and also offer wireless global roaming services through service agreements with various foreign wireless telecommunications service providers. (Accordingly, while “cellular voice services” principally refer to our core wireless voice transmission services, they also comprise our wireless voice and data global roaming services.) | |
• | 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 in September 2009. |
25
Table of Contents
• | 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” service, which makes use of global positioning system, or GPS, technology. In addition, we engage in industry productivity enhancement, or IPE, business that provides customized business solutions and applications to corporate customers. |
• | 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 further upgrading our WCDMA network to support HSUPA and HSPA+ technology and expanding the coverage area of our WiBro service, as well as introducing long term evolution, or LTE, service by July 2011. We plan to continue upgrading and expanding our backbone network infrastructure in line with new developments in wireless telecommunications technology. We believe that ensuring the quality and technical sophistication of our wireless networks will, among other things, allow us to provide our subscribers with top-quality service, 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” 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. |
26
Table of Contents
• | 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 a 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. | |
• | Pursue platform business and industry productivity enhancement 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. In addition, we plan to grow our industry productivity enhancement, or IPE, business division to generate greater value and growth for both us and our customers and partners around the globe. IPE is a concept that endeavors 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 and size of the business, we intend to expand and apply such IPE 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. | |
• | 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. |
27
Table of Contents
28
Table of Contents
• | 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. |
29
Table of Contents
30
Table of Contents
• | Wireless Entertainment and Community Services: We offer our subscribers a wide range of wireless entertainment-related contents and services, primarily through content-specific portal sites that we operate, including: |
• | MelOn,a music portal operated by our consolidated subsidiary, Loen Entertainment, Inc., that provides wireless access to a wide range of digital music contents. To aggregate and manage our digital music contents offerings, we also operate an integrated wireless and fixed-line MelOn website, which subscribers can access using wireless devices, such as their mobile phones, smartphones, tablet computers and MP3 players, as well as fixed-line devices, such as personal computers. As of December 31, 2010, we had approximately 14.9 million subscribers to our MelOn service; | |
• | Gaming Services,which we offer subscribers through our NATE portal. 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; | |
• | 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 purchasevideo-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; | |
• | 11thStreet,an online shopping mall that links wired and wireless shopping services. As of December 31, 2010, 11th Street had strengthened its position as one of the three biggest enterprises in its field. In 2011, we intend to continue to expand and reinforce our new businesses to capitalize on future commerce markets such as m-Commerce markets; |
31
Table of Contents
• | T Store, an online open marketplace for mobile applications. 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. |
• | Wireless News and Search Services: We offer our subscribers a range of wireless news and search services, including access to domestic and international news content, dictionary resources and real-time weather information. Subscribers can also search for and purchase books, DVD’s, CDs and lottery tickets, as well as download discount coupons for use at offline stores. |
32
Table of Contents
33
Table of Contents
• | 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. |
34
Table of Contents
35
Table of Contents
As of or for the Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In billions of Won) | ||||||||||||
Initial Subscription Fees | 400.2 | 403.8 | 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 | 11,579.1 | 12,091.6 | 12,838.7 | |||||||||
Additional Subscription Deposits | 2.7 | 2.7 | 2.4 | |||||||||
Refunded Subscription Deposits | 4.3 | 2.1 | 2.6 | |||||||||
Subscription Deposits at Period End | 4.8 | 5.4 | 5.2 |
(1) | Usage charges principally include revenues from monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, value-added-service fees, as well as international charges and interest on overdue subscriber accounts (net of telephone tax). | |
(2) | Other cellular revenue includes revenue from the sale and licensing of Internet platform solutions. |
36
Table of Contents
• | Data Plans, which target subscribers with high usage patterns for wireless data transmission and wireless Internet services. We offer various Data Plans that provide wireless data services for monthly fees ranging from Won 3,500 to Won 22,500. | |
• | Videoconferencing Plans, for subscribers to our 3G services, which we provide primarily using our WCDMA and CDMA EV-DO network. The basic monthly fee for our Videoconferencing Plans ranges between Won 3,500 and Won 9,000. |
37
Table of Contents
• | 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. |
38
Table of Contents
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 | % |
(1) | Average monthly churn rate for a period is the number calculated by dividing the sum of deactivations during the period by the simple average of the number of subscribers at the beginning and end of the period and dividing the quotient by the number of months in the period. Churn includes subscribers who upgrade to the next generation service, such as CDMA 1xEV/ DO or WCDMA, by terminating their service and opening a new subscriber account. |
39
Table of Contents
40
Table of Contents
Rate per Minute | ||||||||||||
Applicable Year | SK Telecom | KT | LG U+ | |||||||||
2006 | 33.13 | 40.06 | 47.01 | |||||||||
2007 | 32.78 | 39.60 | 45.13 | |||||||||
2008 | 33.41 | 38.71 | 39.09 | |||||||||
2009 | 32.93 | 37.96 | 38.53 | |||||||||
2010 | 31.41 | 33.35 | 33.64 | |||||||||
2011 | 30.50 | 31.75 | 31.93 |
41
Table of Contents
42
Table of Contents
• | POSCO. We currently own a 2.8% interest in the outstanding capital stock of POSCO, with a book value as of December 31, 2010 of Won 1,209.6 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% equity interest in SKY Property Management Ltd., with a book value as of December 31, 2010 of Won 268 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. |
43
Table of Contents
• | 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. |
44
Table of Contents
• | 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. |
45
Table of Contents
• | 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% or more of the member company’s capital or paid-in capital or for Won 10 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% 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 in the SK Group and information on transactions with certain related persons on a quarterly basis. |
46
Table of Contents
47
Table of Contents
48
Table of Contents
• | revoke our business license; | |
• | suspend all or part of our business; or | |
• | if the suspension of business is deemed to result in significant inconvenience to our customers or to be detrimental to the public interest, impose a one-time administrative penalty of up to 3% of the average of our annual revenue for the preceding three fiscal years. |
• | the acquisition by an entity (and its related parties) of 15% or more of the equity of a network services provider; | |
• | a change in the largest shareholder of a network services provider; |
49
Table of Contents
• | 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. |
Item 4.C. | Organizational Structure |
50
Table of Contents
Item 4.D. | Property, Plants And Equipment |
Approximate Area | ||||||
Location | Primary Use | in Square Feet | ||||
Seoul Metropolitan Area | Corporate Headquarters | 988,447 | ||||
Regional Headquarters | 1,095,997 | |||||
Customer Service Centers | 162,406 | |||||
Training Centers | 670,941 | |||||
Central Research and Development Center | 482,719 | |||||
Others(1) | 961,095 | |||||
Busan | Regional Headquarters | 363,282 | ||||
Others(1) | 569,177 | |||||
Daegu | Regional Headquarters | 40,279 | ||||
Others(1) | 332,726 | |||||
Cholla and Jeju Provinces | Regional Headquarters | 491,533 | ||||
Others(1) | 454,410 | |||||
Choongchung Province | Regional Headquarters | 751,710 | ||||
Others(1) | 470,726 |
(1) | Include cell sites. |
Item 4A. | UNRESOLVED STAFF COMMENTS |
Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
51
Table of Contents
Item 5.A. | Operating Results |
52
Table of Contents
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) | 38,526 | 38,171 | 37,287 | |||||||||
Average monthly revenue per subscriber, including interconnection revenue(4) | 43,016 | 42,469 | 41,374 |
(1) | Does not include minutes of incoming calls or minutes of use relating to the use of SMS, MMS and other wireless data services. | |
(2) | The average monthly outgoing voice minutes per subscriber is derived by dividing the total minutes of outgoing voice usage for the period by the monthly average number of subscribers for the period, then dividing that number by the number of months in the period. The monthly average number of subscribers is derived by dividing (i) the sum of the average number of subscribers for each month in the period, calculated as the average of the number of subscribers on the first and last days of the relevant month, by (ii) the number of months in the period. | |
(3) | The average monthly revenue per subscriber, excluding interconnection revenue, is derived by dividing the sum of total initial subscription fees, monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, value-added service fees and other miscellaneous revenues for the period by the monthly average number of subscribers for the period, then dividing that number by the number of months in the period. | |
(4) | The average monthly revenue per subscriber, including interconnection revenue, is derived by dividing the sum of total initial subscription fees, monthly plan-based fees, usage charges for outgoing voice and wireless data transmissions, charges for purchases of digital contents, value-added service fees, other miscellaneous revenues and interconnection revenue for the period by the monthly average number of subscribers for the period, then dividing that number by the number of months in the period. |
53
Table of Contents
54
Table of Contents
For the Year Ended December 31, | ||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||
(In billions of Won, except percentage data) | ||||||||||||||||||||||||
Operating Revenue | 13,951.0 | 100.0 | % | 14,512.3 | 100.0 | % | 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 | 972.3 | 7.0 | % | 1,055.6 | 7.3 | 1,297.2 | 8.4 | |||||||||||||||||
Depreciation and Amortization(2) | 2,599.2 | 18.6 | % | 2,593.5 | 17.9 | % | 2,723.6 | 17.6 | % |
(1) | Relates to results of operations 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. | |
(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. |
55
Table of Contents
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) | 10,403.1 | 74.6 | % | 10,734.4 | 74.0 | % | 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 | 13,951.0 | 100.0 | % | 14,512.3 | 100.0 | % | 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 | 12,190.7 | 87.4 | % | 12,631.1 | 87.0 | % | 13,493.1 | 87.4 | % |
(1) | Wireless services revenue includes initial subscription fees, monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, value-added-service fees and other miscellaneous cellular revenues, including international interconnection charges, interest on overdue subscriber accounts (net of telephone tax). | |
(2) | Other cellular revenue includes revenue from the sale and licensing of Internet platform solutions. | |
(3) | Includes revenues from broadband Internet service (including corporate data service) and fixed-line telephone service provided by SK Broadband Co., Ltd. and international calling service provided by SK Telink Co. Ltd., both of which are our consolidated subsidiaries. | |
(4) | Portal service revenue attributable to our subsidiaries (including SK Communications and Paxnet Co., Ltd., which operates Moneta, our financial portal site). | |
(5) | Miscellaneous revenue attributable 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, SK Telecom China Holdings Co., Ltd. and F&U Credit Information Co., Ltd.). |
56
Table of Contents
57
Table of Contents
58
Table of Contents
59
Table of Contents
60
Table of Contents
Item 5.B. | Liquidity and Capital Resources |
61
Table of Contents
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 | 3,293.0 | 2,932.6 | 4,021.0 | (360.4 | ) | (10.9 | )% | 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 | )% |
(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. |
62
Table of Contents
63
Table of Contents
64
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In billions of Won) | ||||||||||||
CDMA Network(1) | 148 | 274 | 465 | |||||||||
WCDMA Network | 905 | 939 | 800 | |||||||||
WiBro(2) | 405 | 147 | 125 | |||||||||
Others(3) | 779 | 802 | 927 | |||||||||
Total(4) | 2,237 | 2,162 | 2,317 | |||||||||
(1) | Includes our basic CDMA and CDMA EV-DO networks. | |
(2) | We commenced WiBro service in May 2006. | |
(3) | Includes investments in infrastructure consisting of equipment necessary for the provision of data services and marketing. | |
(4) | Also, see note 7 of the notes to our consolidated financial statements. |
65
Table of Contents
Year Ending December 31, | Total | |||
(In billions of Won) | ||||
2011 | 1,434.5 | |||
2012 | 1,179.7 | |||
2013 | 749.3 | |||
After 2013 | 2,071.4 |
66
Table of Contents
67
Table of Contents
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 | 4,580.9 | 876.7 | 1,741.0 | 837.7 | 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 | 7,286.2 | 2,392.5 | 2,255.8 | 1,103.0 | 1,534.9 |
(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 licenses. See note 8 of the notes to our consolidated financial statements. |
68
Table of Contents
69
Table of Contents
70
Table of Contents
71
Table of Contents
Item 5.C. | Research and Development |
As of and for the Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In billions of Won) | ||||||||||||
Internal R&D Expenses | 226.7 | 236.3 | 270.4 | |||||||||
External R&D Expenses | 73.0 | 56.9 | 81.6 | |||||||||
Total R&D Expenses | 299.7 | 293.2 | 352.0 |
• | Thenetwork technology R&D center,which has pioneered the development of 3G and 3.5G technologies. This center is developing next-generation network technologies, as well as core network equipment and new services. Current projects include the development 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. | |
• | Theplatform 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. | |
• | Theservice technology R&D center,which focuses on improving the quality and operation of our core networks; building a flexible service infrastructure that will support the introduction of new products and services and enable easy maintenance; and developing new services based on customer needs. Specifically, this center has been developing an array of value-added services, including T Store, T-Map and T-Smart Wallet services and related mobile applications. | |
• | Thecorporate R&D center,which is responsible for developing industry productivity enhancement solutions and otherbusiness-to-business services and other new technologies. Current projects include |
72
Table of Contents
the development of intelligent video security system, bio-informatics technology and bilateral encoded telecommunication technology. |
Item 5.D. | Trend Information |
Item 5.E. | Off-Balance Sheet Arrangements |
Item 5.F. | Tabular Disclosure of Contractual Obligations |
Item 5.G. | Safe Harbor |
Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Item 6.A. | Directors and Senior Management |
73
Table of Contents
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 |
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 |
74
Table of Contents
Item 6.B. | Compensation |
Item 6.C. | Board Practices |
• | 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. |
75
Table of Contents
Item 6.D. | Employees |
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 |
76
Table of Contents
Item 6.E. | Share Ownership |
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 |
77
Table of Contents
Item 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Item 7.A. | Major Shareholders |
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 | % |
* | Less than 0.00%. | |
(1) | Represents shares owned by our employee stock ownership association. See “Item 6.D. 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. | |
(3) | Based on the data collected by the KRX KOSPI Market under the Foreign Exchange Transaction Laws. | |
(4) | On January 9, 2009, the Company 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. |
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 |
(1) | Includes 8,707,696, 8,400,712 and 9,650,712 shares held in treasury as of December 31, 2008, 2009 and 2010, respectively. |
78
Table of Contents
(2) | SK Group’s ownership interest as of December 31, 2008, 2009 and 2010 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. |
Item 7.B. | Related Party Transactions |
79
Table of Contents
Item 7.C. | Interests of Experts and Counsel |
Item 8. | FINANCIAL INFORMATION |
Item 8.A. | Consolidated Statements and Other Financial Information |
80
Table of Contents
81
Table of Contents
Number of | ||||||||||||
Dividend | Total Amount | Shares Entitled | ||||||||||
Year Ended December 31, | per Share | of Dividends | to Dividend | |||||||||
(In Won) | (In billions of Won) | |||||||||||
2006 | 8,000 | 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 |
82
Table of Contents
Item 8.B. | Significant Changes |
Item 9. | THE OFFER AND LISTING |
Item 9.A. | Offering and Listing Details |
Item 9.B. | Plan of Distribution |
Item 9.C. | Markets |
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
Table of Contents
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 |
(1) | Both high and low prices are based on the daily closing prices for the period. |
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
Table of Contents
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 |
85
Table of Contents
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 |
86
Table of Contents
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 |
(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. |
Previous Day’s Closing Price | Rounded Down to | |||
Less than 5,000 | 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 |
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 | 2,959 | US $ | 4,223 | 10,565 | 8,708 | US $ | 12,427 | ||||||||||||||||
1982 | 334 | 3,001 | 4,012 | 9,704 | 6,667 | 8,914 |
87
Table of Contents
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 |
(1) | Converted at the noon buying rate on the last business day of the period indicated. |
88
Table of Contents
89
Table of Contents
Item 9.D | Selling Shareholders |
Item 9.E. | Dilution |
Item 9.F. | Expenses of the Issue |
Item 10. | ADDITIONAL INFORMATION |
Item 10.A. | Share Capital |
Item 10.B. | Memorandum and Articles of Incorporation |
• | information and communication 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; |
90
Table of Contents
• | 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. |
• | 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. |
91
Table of Contents
• | 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. |
92
Table of Contents
• | 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. |
93
Table of Contents
94
Table of Contents
95
Table of Contents
96
Table of Contents
• | 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. |
97
Table of Contents
98
Table of Contents
• | 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. |
• | 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. |
99
Table of Contents
100
Table of Contents
• | 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. |
• | 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. |
101
Table of Contents
102
Table of Contents
Item 10.C. | Material Contracts |
Item 10.D. | Exchange Controls |
• | 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. |
103
Table of Contents
• | 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. |
104
Table of Contents
• | 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; | |
• | 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. |
105
Table of Contents
106
Table of Contents
Item 10.E. | Taxation |
• | a dealer in securities or currencies; |
107
Table of Contents
• | 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 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. |
108
Table of Contents
109
Table of Contents
110
Table of Contents
Item 10.F. | Dividends and Paying Agents |
Item 10.G. | Statements by Experts |
Item 10.H. | Documents on Display |
111
Table of Contents
Item 10.I. | Subsidiary Information |
Item 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
112
Table of Contents
Maturities | ||||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||
(In billions of Won, except for percentage data) | ||||||||||||||||||||||||||||||||
Local currency: | ||||||||||||||||||||||||||||||||
Fixed rate | 818.3 | 12.3 | 601.8 | 198.2 | 196.5 | 658.3 | 2,485.3 | 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 | 1,920.9 | 1,117.4 | 726.0 | 578.4 | 247.0 | 1,128.7 | 5,718.4 | 6,101.1 |
(1) | Weighted average rates of the portfolio at the period end. |
Item 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
113
Table of Contents
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 |
Item 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Item 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Item 15. | CONTROLS AND PROCEDURES |
114
Table of Contents
Item 16. | RESERVED |
Item 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
115
Table of Contents
Item 16B. | CODE OF ETHICS |
Item 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Years Ended December 31, | ||||||||
2009 | 2010 | |||||||
(In millions of Won) | ||||||||
Audit Fees | 2,185.3 | 2,256.8 | ||||||
Audit-Related Fees | 252.2 | 360.8 | ||||||
Tax Fees | 177.3 | 177.7 | ||||||
All Other Fees | — | — | ||||||
Total | 2,614.8 | 2,795.3 |
Item 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
116
Table of Contents
Item 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
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 | 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) | 167,949 | 1,250,000 | — |
(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 |
Item 16G. | CORPORATE GOVERNANCE |
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, 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 composed of independent directors and management directors. |
117
Table of Contents
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 comprised solely of four independent directors. | |
Audit Committee Additional Requirements | ||
Listed companies must have an audit committee that is composed of more than three directors. | Our Audit Committee has 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 17. | FINANCIAL STATEMENTS |
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
Table of Contents
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
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-6 | ||||
F-8 | ||||
F-10 | ||||
F-13 |
F-1
Table of Contents
ON CONSOLIDATED FINANCIAL STATEMENTS
F-2
Table of Contents
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
F-3
Table of Contents
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 | 1,011,340 | 953,855 | 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 | 1,900,002 | 2,000,987 | 1,955,289 | 1,729,426 | ||||||||||||
Short-term loans, net of allowance for doubtful accounts of | 119,087 | 85,677 | 95,422 | 84,399 | ||||||||||||
Accounts receivable — other, net of allowance for doubtful accounts of | 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 | 155,360 | 91,830 | 89,956 | 79,565 | ||||||||||||
Long-term accounts receivable — trade, net of present value discount of | — | 32,392 | 22,418 | 19,828 | ||||||||||||
Long-term accounts receivable — other, net of present value discount of | 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 | 22,473,671 | 23,206,256 | 22,651,704 | $ | 20,035,118 | |||||||||||
F-4
Table of Contents
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) | 1,268,977 | 1,464,508 | 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 | 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 | 22,473,671 | 23,206,256 | 22,651,704 | $ | 20,035,118 | |||||||||||
F-5
Table of Contents
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) | 13,951,013 | 14,512,347 | 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
Table of Contents
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 | 972,338 | 1,055,606 | 1,297,176 | $ | 1,147,334 | |||||||||||
ATTRIBUTABLE TO: | ||||||||||||||||
Controlling interests | 1,215,719 | 1,247,182 | 1,379,613 | $ | 1,220,249 | |||||||||||
Non-controlling interests | (243,381 | ) | (191,576 | ) | (82,437 | ) | (72,915 | ) | ||||||||
972,338 | 1,055,606 | 1,297,176 | $ | 1,147,334 | ||||||||||||
NET INCOME PER SHARE FROM CONTINUING OPERATION (In Korean won and U.S. dollars) (Notes 2 and 19) | 16,554 | 17,173 | 19,098 | $ | 16.89 | |||||||||||
NET INCOME PER SHARE (In Korean won and U.S. dollars) (Notes 2 and 19) | 16,707 | 17,239 | 19,177 | $ | 16.96 | |||||||||||
DILUTED NET INCOME PER SHARE FROM CONTINUING OPERATION (In Korean won and U.S. dollars) (Notes 2 and 19) | 16,409 | 16,981 | 18,811 | $ | 16.64 | |||||||||||
DILUTED NET INCOME PER SHARE (In Korean won and U.S. dollars) (Notes 2 and 19) | 16,559 | 17,046 | 18,888 | $ | 16.71 | |||||||||||
F-7
Table of Contents
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 | 44,639 | 2,924,960 | (2,041,577 | ) | 1,591,258 | 8,914,970 | 253,383 | 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 | 44,639 | 2,958,854 | (2,159,389 | ) | 356,192 | 9,448,185 | 1,175,959 | 11,824,440 | ||||||||||||||||||||
Balance, January 1, 2009 | 44,639 | 2,958,854 | (2,159,389 | ) | 356,192 | 9,448,185 | 1,175,959 | 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 | 44,639 | 3,031,947 | (2,746,886 | ) | 915,306 | 9,909,753 | 1,189,866 | 12,344,625 | ||||||||||||||||||||
F-8
Table of Contents
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 | 44,639 | 3,031,947 | (2,746,886 | ) | 915,306 | 9,909,753 | 1,189,866 | 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 | 44,639 | 3,031,780 | (2,993,850 | ) | 639,632 | 10,603,399 | 1,153,049 | 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 | |||||||||||||
F-9
Table of Contents
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 | 972,338 | 1,055,606 | 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
Table of Contents
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 | (4,767 | ) | 14,130 | 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 | — | 2,994 | 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
Table of Contents
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 | 1,307,679 | 1,114,938 | 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) | 1,011,467 | 953,926 | 778,509 | $ | 688,580 | |||||||||||
F-12
Table of Contents
1. | GENERAL |
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 | |||||||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
b. | Principles of Consolidation |
F-13
Table of Contents
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 |
F-14
Table of Contents
c. | Cash Equivalents |
d. | Allowance for Doubtful Accounts |
2008 | 2009 | 2010 | ||||||||||
Beginning balance | 93,551 | 150,320 | 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 | 150,320 | 233,078 | 248,978 | |||||||||
F-15
Table of Contents
e. | Inventories |
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 |
f. | Securities (Excluding Equity Securities Accounted for Using the Equity Method) |
g. | Equity Securities Accounted for Using the Equity Method of Accounting |
F-16
Table of Contents
h. | Valuation of Long-term Accounts Receivable — Other |
i. | Property and Equipment |
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 |
j. | Intangible Assets |
k. | Government Subsidy |
F-17
Table of Contents
l. | Impairment Losses |
m. | Convertible Bonds and Bonds with Stock Purchase Warrants |
n. | Discounts on Bonds |
o. | Valuation of Long-term Payables |
p. | Provisions, Contingent Liabilities and Contingent Assets |
F-18
Table of Contents
• | 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. |
q. | Accrued Severance Indemnities |
F-19
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Beginning net balance | 44,322 | 53,815 | 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 | 53,815 | 57,655 | 62,904 | |||||||||
Ending balance: | ||||||||||||
Accrued severance indemnities | 122,401 | 134,044 | 159,176 | |||||||||
Deposits with insurance companies | (68,559 | ) | (76,383 | ) | (96,266 | ) | ||||||
National Pension Fund | (27 | ) | (6 | ) | (6 | ) | ||||||
Net balance | 53,815 | 57,655 | 62,904 | |||||||||
r. | Accounting for Leases |
• | 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. |
s. | Research and Development Costs |
F-20
Table of Contents
t. | Foreign-based Operations’ Translation Adjustment |
u. | Accounting for Foreign Currency Transactions and Translation Adjustment |
v. | Derivative Instruments |
w. | Revenue Recognition |
F-21
Table of Contents
x. | Income Taxes |
y. | Net Income Per Share |
z. | Handset Subsidies to Long-term Mobile Subscribers |
aa. | Use of Estimates |
ab. | Discontinued Operation |
F-22
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Revenue | 44,828 | 42,954 | 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) | (16,671 | ) | (4,794 | ) | 3,500 | |||||||
2008 | 2009 | 2010 | ||||||||||
Operating activities | 1,510 | 162 | 472 | |||||||||
Investing activities | (4,035 | ) | (119 | ) | 17,729 | |||||||
Financing activities | 2,596 | 1,900 | — | |||||||||
Net | 71 | 1,943 | 18,201 | |||||||||
2008 | 2009 | 2010 | ||||||||||
Revenue | 83 | 165 | 915 | |||||||||
Operating expense | (166 | ) | (114 | ) | (280 | ) | ||||||
Other income (expense) | (394 | ) | (511 | ) | 253 | |||||||
Income tax expense | — | — | — | |||||||||
Net income | (477 | ) | (460 | ) | 888 | |||||||
2008 | 2009 | 2010 | ||||||||||
Operating activities | 862 | 516 | 920 | |||||||||
Investing activities | 5,735 | (2,103 | ) | 8,277 | ||||||||
Financing activities | — | — | — | |||||||||
Net | 6,597 | (1,587 | ) | 9,197 | ||||||||
F-23
Table of Contents
2008 | 2009 | |||||||
Revenue | 3,384 | 2,770 | ||||||
Operating expense | (5,120 | ) | (3,653 | ) | ||||
Other income (expense) | — | 671 | ||||||
Income tax expense | 477 | 51 | ||||||
Net income | (1,259 | ) | (161 | ) | ||||
2008 | 2009 | |||||||
Operating activities | (1,531 | ) | (1,069 | ) | ||||
Investing activities | (23 | ) | (112 | ) | ||||
Financing activities | — | — | ||||||
Net | (1,554 | ) | (1,181 | ) | ||||
2008 | 2009 | |||||||
Revenue | 21,676 | 19,357 | ||||||
Operating expense | (18,699 | ) | (20,547 | ) | ||||
Other income (expense) | (2,874 | ) | 15,782 | |||||
Income tax expense | (28 | ) | (3,653 | ) | ||||
Net income | 75 | 10,939 | ||||||
2008 | 2009 | |||||||
Operating activities | 3,076 | 224 | ||||||
Investing activities | (112 | ) | 4,570 | |||||
Financing activities | — | — | ||||||
Net | 2,964 | 4,794 | ||||||
F-24
Table of Contents
2008 | ||||
Revenue | 116,607 | |||
Operating expense | (230,478 | ) | ||
Other income (expense) | (15,917 | ) | ||
Income tax expense | 109,579 | |||
Preacquisition net loss for subsidiary | — | |||
Net income | (20,209 | ) | ||
2008 | ||||
Operating activities | (213,899 | ) | ||
Investing activities | (51,631 | ) | ||
Financing activities | 9,015 | |||
Net | (256,515 | ) | ||
ac. | Reclassification in the prior year’s financial statements |
3. | INVENTORIES |
2008 | 2009 | 2010 | ||||||||||
Merchandise | 17,032 | 114,015 | 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 | 34,974 | 119,890 | 149,643 | |||||||||
F-25
Table of Contents
4. | INVESTMENT SECURITIES |
a. | Short-term Investment Securities |
Acquisition Cost | Fair Value | |||||||||||||||||||
at December 31, | at December 31, | Carrying Amount | ||||||||||||||||||
2010 | 2010 | 2008 | 2009 | 2010 | ||||||||||||||||
Trading Securities (Note) | 200,000 | 200,000 | 367,001 | 370,125 | 200,000 | |||||||||||||||
Current portion of long-term investment securities | 161,058 | 195,929 | 5,912 | 6,598 | 195,929 | |||||||||||||||
Total | 361,058 | 395,929 | 372,913 | 376,723 | 395,929 | |||||||||||||||
(Note) | The Company’s trading securities are all beneficiary certificates as of December 31, 2010, and distributions arising from beneficiary certificates are accounted for as accrued income. |
b. | Long-term Investment Securities |
2008 | 2009 | 2010 | ||||||||||
Available-for-sale equity securities | 3,102,833 | 2,096,297 | 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 | 3,105,295 | 2,536,659 | 1,684,244 | |||||||||
F-26
Table of Contents
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 | 68,559 | 178,760 | 676,716 | 201,600 | 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 | 973,263 | 3,102,833 | 2,096,297 | 1,847,788 | ||||||||||||||||||||||||
Less: current portion | (70,050 | ) | — | — | (193,811 | ) | ||||||||||||||||||||||
Long-term portion | 903,213 | 3,102,833 | 2,096,297 | 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 |
F-27
Table of Contents
2010. The Company recorded the remaining investment of 2,050,000 shares at its market value of | ||
(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 securities accounted for using the equity method toavailable-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 ( | |
(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 | |
(note f) | During the year ended 31, 2009, the Company recorded | |
(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 | |
(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 ( |
F-28
Table of Contents
Acquisition Cost | ||||||||||||||||||
at December 31, | Carrying Amount | |||||||||||||||||
Maturity | 2010 | 2008 | 2009 | 2010 | ||||||||||||||
Public bonds | (note a) | 429 | 1,260 | 475 | 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 | 30,260 | 2,350 | 440,362 | 30,267 | ||||||||||||||
(note a) | The maturities of public bonds as of December 31, 2010 are within 1 year for |
F-29
Table of Contents
(note b) | The maturities of bond-type beneficiary certificates as of December 31, 2009 are within one year is | |
(note c) | The 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 | |
(note e) | The face value of the convertible bonds is | |
(note f) | The face value of the convertible bonds are | |
(note g) | Loen Entertainment, Inc., the Company’s subsidiary, holds the convertible bonds. As the Company determined that the recoverable amount is lower than the acquisition cost. it recorded the entire amount 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. |
Acquisition Cost | ||||||||||||||||||||
at December 31, | Carrying Amount | |||||||||||||||||||
Maturity | 2010 | 2008 | 2009 | 2010 | ||||||||||||||||
Public bonds | (note | ) | — | 113 | 1,006 | — | ||||||||||||||
Less current portion ofheld-to-maturity securities | (1 | ) | (1,006 | ) | — | |||||||||||||||
Long-termheld-to-maturity securities | 112 | — | — | |||||||||||||||||
(note) | The maturities of all of the Company’s public bonds are within one year as of December 31, 2010. |
F-30
Table of Contents
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 | 2,402,333 | (1,462,221 | ) | 133 | 986 | 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 | 1,624,613 | (1,228,682 | ) | 5,562 | 6,349 | 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 | 941,231 | 592,080 | (231,282 | ) | (45 | ) | 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 | 407,842 | 452,520 | 138,693 | (467 | ) | 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 | 1,301,984 | (214,595 | ) | (53,365 | ) | (940 | ) | 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 | 998,588 | (165,722 | ) | (37,854 | ) | (1,035 | ) | 793,977 | ||||||||||||
F-31
Table of Contents
5. | EQUITY SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD |
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 | 190,000 | 118,698 | 96,798 | 109,314 | 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
Table of Contents
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 | 1,260,876 | 898,512 | 486,393 | 1,107,843 | ||||||||||||||||||||||||||||
(Note a) | The Company acquired 57,647,058 shares of in HanaSK Card Co.,Ltd. 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. | |
(Note b) | 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 toavailable-for-sale equity securities. | |
(Note c) | The Company replaced carrying value 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 Company participated in a proportionate capital increase of SK China Company Ltd. in the amount of | |
(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 the year ended December 31, 2010, the Company participated in the establishment of SK Fans Co.,Limited, SK Telecom Smart City Management Co.,Ltd., KIF Stonebridge Fund, PT. Melon Indonesia and Television Media Korea, respectively. | |
(Note g) | During the year ended December 31, 2010, the Company acquired 979,474 shares of convertible preferred stock of Packet One Network. As a result, the Company holds 27.2% ownership in Packet One Network. | |
(Note h) | During the year ended December 31, 2010, the Company acquired 3,387,916 shares 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 the year ended December 31, 2010, 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 | |
(Note k) | During the year ended December 31, 2010, SK Communications Co., Ltd., the Company’s subsidiary, acquired 701,000 shares or 19.95% equity interest of Etoos Co., Ltd. by converting convertible bonds of Etoos Co., Ltd (face value of |
F-33
Table of Contents
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. | — | 190,000 | 7,410 | (100,612 | ) | — | — | 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 | |||||||||||||||||||||||
350,966 | 612,557 | (29,374 | ) | (74,395 | ) | (1,214 | ) | 39,972 | 898,512 | |||||||||||||||||||||||
(note a) | Aircross Co., Ltd. was reclassified into in the equity securities accounted for using equity method from a consolidated subsidiary during the year ended December 31, 2008 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 | |
(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. |
F-34
Table of Contents
(note f) | Translation gain of | |
(note g) | The amount represent translation gain of |
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. | 96,798 | — | 13,063 | (547 | ) | — | — | 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
Table of Contents
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 | |||||||||||||||||||||
898,512 | 107,401 | (63,980 | ) | (18,959 | ) | (11,589 | ) | (424,992 | ) | 486,393 | ||||||||||||||||||||||
(note a) | Other decrease in investments in equity securities of AirCross Co., Ltd. is due to AirCross Co., Ltd’s liquidation during 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 ended December 31, 2009, investment (investee company) is included in the Company’s consolidation, resulting in a decrease 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 | |
(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. |
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. | 109,314 | — | 9,376 | 8 | — | — | 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
Table of Contents
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 | ||||||||||||||||||||||||
486,393 | 693,945 | (29,395 | ) | 1,133 | (3,402 | ) | (40,831 | ) | 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 |
F-37
Table of Contents
of | ||
(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 toavailable-for-sale equity securities.. |
For the Year Ended December 31, 2008 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | In(de)crease | Amortization | Balance | |||||||||||||
Harex Info Tech, Inc. | 701 | — | (351 | ) | 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 | 7,631 | 148,592 | (11,793 | ) | 144,430 | |||||||||||
F-38
Table of Contents
For the Year Ended December 31, 2009 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | In(de)crease | Amortization | Balance | |||||||||||||
Harex Info Tech, Inc. | 350 | — | (350 | ) | — | |||||||||||
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 | 144,430 | (90,332 | ) | (32,368 | ) | 21,730 | ||||||||||
For the Year Ended December 31, 2010 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | In(de)crease | Amortization | Balance | |||||||||||||
HanaSK Card Co., Ltd. | — | 70,690 | (2,895 | ) | 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 | 21,730 | 184,738 | (11,274 | ) | 195,194 | |||||||||||
F-39
Table of Contents
For the Year Ended December 31, 2008 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Decrease | Balance | |||||||||||||
SK China Company Ltd. | 1,086 | — | — | 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 | 5,867 | 57 | (602 | ) | 5,322 | |||||||||||
For the Year Ended December 31, 2009 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Decrease | Balance | |||||||||||||
SK China Company Ltd. | 1,086 | — | — | 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 | 5,322 | 2,834 | (856 | ) | 7,300 | |||||||||||
For the Year Ended December 31, 2010 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Decrease | Balance | |||||||||||||
SK China Company Ltd. | 1,086 | — | (263 | ) | 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 | 7,300 | 26 | (1,753 | ) | 5,573 | |||||||||||
F-40
Table of Contents
Total | Total | Net | ||||||||||||||
Assets | Liabilities | Revenue | Income (Loss) | |||||||||||||
SK Marketing & Company Co., Ltd. | 659,847 | 422,452 | 415,270 | 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. | 10,512 | 5,651 | 4,861 | 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
Table of Contents
6. | LOANS TO EMPLOYEES |
2008 | 2009 | 2010 | ||||||||||
Loans to employees’ stock ownership association | 74,878 | 58,198 | 43,487 | |||||||||
Loans to employees for housing and other | 15,488 | 30,848 | 26,427 | |||||||||
90,366 | 89,046 | 69,914 | ||||||||||
�� |
7. | PROPERTY AND EQUIPMENT |
Useful Lives | ||||||||||||||||
(Years) | 2008 | 2009 | 2010 | |||||||||||||
Land | 756,348 | 728,300 | 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 | 7,437,689 | 8,165,879 | 7,864,594 | |||||||||||||
For the Year Ended December 31, 2008 | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Beginning | Increase | Ending | ||||||||||||||||||||||||||
Balance | (Decrease) | Acquisition | Disposal | Transfer | Depreciation | Balance | ||||||||||||||||||||||
Land | 454,916 | 294,629 | 141 | (3,394 | ) | 10,056 | — | 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 | 4,969,354 | 2,350,018 | 2,236,930 | (104,478 | ) | (18,887 | ) | (1,995,248 | ) | 7,437,689 | ||||||||||||||||||
F-42
Table of Contents
For the Year Ended December 31, 2009 | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Beginning | Increase | Ending | ||||||||||||||||||||||||||
Balance | (Decrease) | Acquisition | Disposal | Transfer | Depreciation | Balance | ||||||||||||||||||||||
Land | 756,348 | (5,397 | ) | 19,326 | (42,902 | ) | 925 | — | 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 | 7,437,689 | 741,094 | 2,162,437 | (127,318 | ) | (11,245 | ) | (2,036,778 | ) | 8,165,879 | ||||||||||||||||||
For the Year Ended December 31, 2010 | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Beginning | Increase | Ending | ||||||||||||||||||||||||||
Balance | (Decrease) | Acquisition | Disposal | Transfer | Depreciation | Balance | ||||||||||||||||||||||
Land | 728,300 | 62 | 1,622 | (7,000 | ) | 2,818 | — | 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 | 8,165,879 | 951 | 2,316,876 | (151,959 | ) | (325,397 | ) | (2,141,756 | ) | 7,864,594 | ||||||||||||||||||
�� |
8. | INTANGIBLE ASSETS |
December 31, 2010 | Carrying Amounts | |||||||||||||||||||||||
Acquisition | Accumulated | Accumulated | ||||||||||||||||||||||
Cost | Amortization | Impairment | 2008 | 2009 | 2010 | |||||||||||||||||||
Goodwill | 2,945,582 | (1,321,271 | ) | (5,378 | ) | 1,899,739 | 1,737,966 | 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 | 7,727,833 | (3,961,511 | ) | (25,679 | ) | 3,978,145 | 3,992,325 | 3,740,643 | ||||||||||||||||
F-43
Table of Contents
For the Year Ended December 31, 2008 | ||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||
Beginning | Increase | |||||||||||||||||||||||||||||||
Balance | (Decrease) | Acquisition | Disposal | Transfer | Amortization | Impairment | Ending balance | |||||||||||||||||||||||||
Goodwill | 1,684,357 | 481,106 | 1,305 | (55 | ) | 1,197 | (267,078 | ) | (1,093 | ) | 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 | 3,433,962 | 981,328 | 149,341 | (10,865 | ) | 192,639 | (764,028 | ) | (4,232 | ) | 3,978,145 | |||||||||||||||||||||
For the Year Ended December 31, 2009 | ||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||
Beginning | Increase | Ending | ||||||||||||||||||||||||||||||
Balance | (Decrease) | Acquisition | Disposal | Transfer | Amortization | Impairment | Balance | |||||||||||||||||||||||||
Goodwill | 1,899,739 | 4,774 | 1,807 | (1,130 | ) | (261 | ) | (166,963 | ) | — | 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 | 3,978,145 | 447,548 | 120,771 | (9,211 | ) | 155,122 | (696,111 | ) | (3,939 | ) | 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 | 1,737,966 | 6,988 | 33,470 | — | 7,453 | (166,944 | ) | — | 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 | 3,992,325 | 3,135 | 158,062 | (8,579 | ) | 347,194 | (728,048 | ) | (23,446 | ) | 3,740,643 | |||||||||||||||||||||
F-44
Table of Contents
Amount | Description | Residual Useful lives | ||||||
Goodwill | 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 | Goodwill related to acquisition of SK Broadband Co., Ltd. | 17 years and 3 months | |||||
IMT license | 581,355 | Frequency use rights relating to W-CDMA service | (note a) | |||||
W-CDMA license | 98,335 | Frequency use rights relating toW-CDMA service | (note b) | |||||
WiBro license | 25,450 | WiBro service | (note c) | |||||
DMB license | 3,903 | 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) | With its application for a license to provide IMT 2000 service, the Company has a commitment to pay | |
(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 |
F-45
Table of Contents
(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 |
Annual | ||||||||||||||||
Maturity | Interest | |||||||||||||||
Year | Rate (%) | 2008 | 2009 | 2010 | ||||||||||||
Domestic general bonds | 2009 | 5.0 | 300,000 | — | — | |||||||||||
” | 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
Table of Contents
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 | 4,074,392 | 4,280,398 | 3,566,048 | |||||||||||||
(note a) | The 3-months Euro Yen LIBOR rate, the 3-months Euro Yen Tibor rate and the 3-month Libor rate as of December 31, 2010 are 0.19%, 0.34% and 0.30%, respectively. | |
(note b) | 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, SK Telink Co., 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 redemption 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. | |
(note e) | 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 of December 31, 2010 but has yet been redeemed. Exercise period of the second bearer, detachable bonds with stock warrants is from April 19, 2009 to January 23, 2012 and the exercise price is | |
(note g) | On April 7, 2009, the Company issued convertible bonds with a maturity of five years in the principal amount of US$332,528,000 for US$326,397,463 with conversion price of | |
Conversion of notes to common shares may be prohibited under the Telecommunications Law or other legal restrictions which restrains foreign governments, individuals and entities from owning more than 49% of the Company’s voting stock. If such 49% ownership limitation is violated due to the exercise of conversion rights, the Company will pay a bond holder a cash settlement which will be determined at the average price of one day after a holder exercises its conversion right or the weighted average price for the following five or twenty business days. The Company intends to sell treasury shares held in trust by the Company that corresponds to the number of shares of common stock that would have been delivered in the |
F-47
Table of Contents
absence of the 49% foreign shareholding restrictions. Unless either previously redeemed or converted, the notes are redeemable at 100% of the principal amount at maturity. | ||
In accordance with a resolution of the Board of Directors on January 27, 2010 and on July 22, 2010, conversion price has changed from |
10. | LONG-TERM BORROWINGS |
Final | Annual Interest | |||||||||||||||||
Lender | Maturity Year | Rate (%) (note a) | 2008 | 2009 | 2010 | |||||||||||||
Shinhan Bank (note a) | 2011 | 91 days CD yield + 0.25 | ||||||||||||||||
Korea Development Bank | 2011 | 91 days CD yield + 1.02 | ||||||||||||||||
Citibank | 2011 | 91 days CD yield + 1.20 | ||||||||||||||||
Nonghyup | 2011 | 91 days CD yield + 1.30 | ||||||||||||||||
Hana Bank | 2011 | 91 days CD yield + 1.50 | ||||||||||||||||
Nonghyup | 2011 | 91 days CD yield + 1.50 | ||||||||||||||||
Shinhan Bank | 2011 | 4.36 | — | — | ||||||||||||||
Korea Development Bank | 2011 | 3.52 | ||||||||||||||||
Kookmin Bank | 2012 | 4.29 | ||||||||||||||||
Korea Development Bank | 2013 | 4.29 | ||||||||||||||||
Small Business Corporation | 2009 | 5.25 | — | — | ||||||||||||||
Credit Agricole Bank | 2013 | 6M Libor + 0.29 | US$ | 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 | — | |||||||||||||||
Korea Development Bank | 2015 | 4.29 | — | — | ||||||||||||||
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 | ||||||||||||||||
Total | ||||||||||||||||||
US$ | 100,000 | US$ | 100,000 | US$ | 100,000 | |||||||||||||
— | — | CNY | 560,000 | |||||||||||||||
Equivalent in Korean won | ||||||||||||||||||
Less portion due within one year | (9,019 | ) | (12,345 | ) | (512,377 | ) | ||||||||||||
Long-term portion | ||||||||||||||||||
(note a) | As of December 31, 2010, the91-day CD yield is 2.80%. |
F-48
Table of Contents
Long-Term Borrowings | ||||||||||||||||
Long-Term | in Foreign Currencies | |||||||||||||||
Borrowings in | Foreign | Korean Won | ||||||||||||||
Year Ending December 31, | Korean Won | Currencies | Equivalent | Total | ||||||||||||
2011 | 512,377 | — | — | 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 | 538,153 | US$ | 100,000 CNY560,000 | 210,192 | 748,345 | |||||||||||
11. | SUBSCRIPTION DEPOSITS |
Deposit per | ||||||||||||||||
Service Type | Subscriber | 2008 | 2009 | 2010 | ||||||||||||
Cellular | 200,000 | 4,796 | 5,480 | 5,220 | ||||||||||||
12. | LEASES |
F-49
Table of Contents
Annual Lease | ||||||||||||
Year Ending December 31, | Payments | Interest | Principal | |||||||||
2011 | 50,065 | 4,597 | 45,468 | |||||||||
2012 | 30,508 | 2,381 | 28,127 | |||||||||
2013 | 17,678 | 1,094 | 16,584 | |||||||||
2014 | 15,761 | 397 | 15,364 | |||||||||
Total | 114,012 | 8,469 | 105,543 | |||||||||
Less portion due within one year | (45,468 | ) | ||||||||||
Finance lease liabilities | 60,075 | |||||||||||
Minimum | ||||
Lease | ||||
Year Ending December 31, | Payments | |||
2011 | 6,552 | |||
2012 | 4,459 | |||
2013 and thereafter | 1,904 | |||
Total | 12,915 | |||
F-50
Table of Contents
13. | ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES |
Foreign Currencies | Korean Won Equivalent | |||||||||||||||||||||||
2008 | 2009 | 2010 | 2008 | 2009 | 2010 | |||||||||||||||||||
Cash and cash equivalents | US$ | 7,269 | US$ | 3,885 | US$ | 3,774 | 9,140 | 4,536 | 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 | 60,175 | 49,477 | 121,958 | |||||||||||||||||||||
F-51
Table of Contents
Foreign Currencies | Korean Won Equivalent | |||||||||||||||||||||||
2008 | 2009 | 2010 | 2008 | 2009 | 2010 | |||||||||||||||||||
Accounts payable | US$ | 22,295 | US$ | 22,675 | US$ | 32,812 | 28,036 | 26,476 | 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 | 71,427 | 55,781 | 101,165 | |||||||||||||||||||||
14. | CAPITAL STOCK AND CAPITAL SURPLUS |
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 |
Number of | Capital | |||||||||||
Shares Issued | Capital Stock | Surplus | ||||||||||
At December 31, 2007 | 81,193,711 | 44,639 | 2,956,106 | |||||||||
Decrease of conversion of convertible bonds due to change in statutory tax rates | — | — | 1,544 | |||||||||
Gain on disposal of treasury stock (note 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 | 44,639 | 3,031,780 | |||||||||
(note a) | On January 23, 2008, treasury stock of 208,326 shares with carrying value totaling |
F-52
Table of Contents
tax effect of accumulated temporary differences related to the sold treasury stocks exceeded the loss on disposal of treasury stock. | ||
(note b) | During the year ended December 31, 2009, convertible bonds with principal amount of US$332,528,000 were issued and resulted in the increase in value of the conversion rights (capital surplus) of the convertible bonds (net of tax effect | |
(note c) | On January 9, 2009, the Company retired 448,000 shares of treasury stock and reduced retained earnings before appropriation in accordance with the Korean Commercial Law. The Company’s capital surplus was changed due to the tax effect of this share retirement. |
15. | RETAINED EARNINGS |
2008 | 2009 | 2010 | ||||||||||
Appropriated | 8,295,037 | 8,890,053 | 9,350,386 | |||||||||
Unappropriated | 1,153,148 | 1,019,700 | 1,253,013 | |||||||||
9,448,185 | 9,909,753 | 10,603,399 | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Legal reserve | 22,320 | 22,320 | 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 | |||||||||
8,295,037 | 8,890,053 | 9,350,386 | ||||||||||
a. | Legal Reserve |
b. | Reserves for Loss on Disposal of Treasury Stock and Research and Manpower Development |
c. | Reserve for Business Expansion and Technology Development |
F-53
Table of Contents
16. | TREASURY STOCK |
17. | INCOME TAXES |
2008 | 2009 | 2010 | ||||||||||
Currently | 494,163 | 610,561 | 525,488 | |||||||||
Changes in net deferred tax liabilities | (194,864 | ) | (254,891 | ) | (121,182 | ) | ||||||
Income tax expenses | 299,299 | 355,670 | 404,306 | |||||||||
F-54
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Income taxes at statutory income tax rate of 25% in 2008 and 22% in 2009 and 2010(*) | 315,091 | 308,109 | 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 | 299,299 | 355,670 | 404,306 | |||||||||
Effective tax rate | 23.43 | % | 25.30 | % | 24.16 | % | ||||||
(*) | Tax rate represents statutory tax rate in Korea. However, for certain foreign subsidiaries different tax rates are applied, in accordance with the respective tax jurisdictions. |
2008 | 2009 | 2010 | ||||||||||
Current: | ||||||||||||
Allowance for doubtful accounts | 33,073 | 56,573 | 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
Table of Contents
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 | (403,807 | ) | (312,809 | ) | (87,621 | ) | ||||||
Net Operating Loss | Tax Credit | |||||||
Year Ending December 31, | Carryforwards | Carryforwards | ||||||
2011 | 84,262 | 3 | ||||||
2012 | 175,075 | — | ||||||
2013 and thereafter | 810,983 | 356 | ||||||
Total | 1,070,320 | 359 | ||||||
F-56
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Consideration for conversion right | 1,545 | (19,445 | ) | — | ||||||||
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 | 499,776 | 8,795 | 77,936 | |||||||||
18. | COMPREHENSIVE INCOME |
2008 | 2009 | 2010 | ||||||||||||||||||||||
Profit and | Profit and | Profit and | ||||||||||||||||||||||
Loss Effect | Tax Effect | Loss Effect | Tax Effect | Loss Effect | Tax Effect | |||||||||||||||||||
Net income | 972,338 | 1,055,606 | 1,297,176 | |||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||
Unrealized gain on valuation of long-term investment securities, net | (1,216,771 | ) | 491,376 | 590,746 | (159,942 | ) | (204,611 | ) | 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 | ) | 485,485 | 559,114 | (157,444 | ) | (275,675 | ) | 72,935 | |||||||||||||||
Comprehensive income | (262,728 | ) | 1,614,720 | 1,021,501 | ||||||||||||||||||||
Attributable to: | ||||||||||||||||||||||||
Controlling interests | (19,347 | ) | 1,806,296 | 1,103,938 | ||||||||||||||||||||
Non-controlling interests | (243,381 | ) | (191,576 | ) | (82,437 | ) | ||||||||||||||||||
(262,728 | ) | 1,614,720 | 1,021,501 | |||||||||||||||||||||
F-57
Table of Contents
19. | NET INCOME PER SHARE |
2008 | 2009 | 2010 | ||||||||||
Net income from continuing operation attributable to the controlling interests | 1,204,562 | 1,242,387 | 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) | 16,554 | 17,173 | 19,098 | |||||||||
2008 | 2009 | 2010 | ||||||||||
Net income attributable to the controlling interests | 1,215,719 | 1,247,182 | 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 | 1,204,562 | 1,242,387 | 1,373,926 | |||||||||
2008 | 2009 | 2010 | ||||||||||
Net income attributable to the controlling interests | 1,215,719 | 1,247,182 | 1,379,613 | |||||||||
Weighted average number of common shares outstanding | 72,765,557 | 72,346,763 | 71,942,387 | |||||||||
Net income per share | 16,707 | 17,239 | 19,177 | |||||||||
F-58
Table of Contents
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 for the years ended December 31, 2008, 2009 and 2010, and 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 December 31, 2008. |
2008 | 2009 | 2010 | ||||||||||
Adjusted net income from continuing operation attributable to the controlling interests | 1,215,712 | 1,262,871 | 1,392,677 | |||||||||
Adjusted weighted average number of common shares outstanding | 74,090,301 | 74,367,734 | 74,033,383 | |||||||||
Net income per share | 16,409 | 16,981 | 18,811 | |||||||||
F-59
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Adjusted net income attributable to the controlling interest | 1,226,869 | 1,267,666 | 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 | 16,559 | 17,046 | 18,888 | |||||||||
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 | 1,215,719 | 72,765,557 | 16,707 | |||||||||
Effect of convertible bonds (note a) | 11,150 | 1,324,744 | ||||||||||
Diluted net income per share | 1,226,869 | 74,090,301 | 16,559 | |||||||||
For 2009 | ||||||||||||
Basic net income per share | 1,247,182 | 72,346,763 | 17,239 | |||||||||
Effect of convertible bonds (note a) | 20,484 | 2,020,971 | ||||||||||
Diluted net income per share | 1,267,666 | 74,367,734 | 17,046 | |||||||||
For 2010 | ||||||||||||
Basic net income per share | 1,379,613 | 71,942,387 | 19,177 | |||||||||
Effect of convertible bonds (note a) | 18,751 | 2,090,996 | ||||||||||
Diluted net income per share | 1,398,364 | 74,033,383 | 18,888 | |||||||||
(note a) | The effect of convertible bonds is an increase in net income related to interest expenses that would not be incurred, and increase in the weighted average number of common shares outstanding related to common shares that would be issued, assuming that the conversion of convertible bonds were made at the beginning of the period. |
F-60
Table of Contents
20. | DIVIDEND DISCLOSURE |
Fiscal | Number of Shares | Dividend | ||||||||||||||||
Year | Dividend Type | Outstanding | Face Value | Ratio | Dividends | |||||||||||||
2008 | Cash dividends (interim) | 72,793,003 | 500 | 200 | % | 72,793 | ||||||||||||
Cash dividends (year-end) | 72,524,203 | 500 | 1,680 | % | 609,203 | |||||||||||||
Total | 681,996 | |||||||||||||||||
2009 | Cash dividends (interim) | 72,345,003 | 500 | 200 | % | 72,345 | ||||||||||||
Cash dividends (year-end) | 72,344,999 | 500 | 1,680 | % | 607,698 | |||||||||||||
Total | 680,043 | |||||||||||||||||
2010 | Cash dividends (interim) | 72,344,999 | 500 | 200 | % | 72,345 | ||||||||||||
Cash dividends (year-end) | 71,094,999 | 500 | 1,680 | % | 597,198 | |||||||||||||
Total | 669,543 | |||||||||||||||||
2008 | 2009 | 2010 | ||||||||||
Dividends | 681,996 | 680,043 | 669,543 | |||||||||
Net income attributable to the controlling interest | 1,215,719 | 1,247,182 | 1,379,613 | |||||||||
Dividends payout ratio | 56.10 | % | 54.53 | % | 48.53 | % | ||||||
2008 | 2009 | 2010 | ||||||||||
Dividend per share | 9,400 | 9,400 | 9,400 | |||||||||
Stock price at the year-end | 209,000 | 169,500 | 173,500 | |||||||||
Dividends yield ratio | 4.49 | % | 5.55 | % | 5.42 | % | ||||||
21. | RESTRICTED DEPOSITS |
22. | COMMITMENTS AND CONTINGENCIES |
F-61
Table of Contents
23. | INSURANCE |
Asset | Risk | Book Value | Coverage | |||||||||
Inventories, property and equipment | Fire and comprehensive liability | US$ | 3,850 | |||||||||
4,987,033 | CNY | 1,100,000 | ||||||||||
24. | TRANSACTIONS WITH RELATED PARTIES |
Description | 2008 | 2009 | 2010 | |||||||||
Transactions | ||||||||||||
SK C&C Co., Ltd.: | ||||||||||||
Purchases of property and equipment | 232,238 | 237,459 | 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
Table of Contents
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 | 1,906 | 1,458 | 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
Table of Contents
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 | 2,477 | 1,070 | 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
Table of Contents
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 |
2008 | 2009 | 2010 | ||||||||||
Payee | ||||||||||||
(including outside directors) | 7 registered directors | 8 registered directors | 8 registered directors | |||||||||
Payroll | ||||||||||||
Severance indemnities | 556 | 276 | 702 | |||||||||
Total | ||||||||||||
26. | PROVISION |
2008 | 2009 | 2010 | ||||||||||
Beginning balance | 27,668 | 24,889 | 18,856 | |||||||||
Increase (provision) | 12,430 | 11,400 | 7,259 | |||||||||
Decrease (usage and reversal) | (15,209 | ) | (17,433 | ) | (9,056 | ) | ||||||
Ending balance | 24,889 | 18,856 | 17,059 | |||||||||
F-65
Table of Contents
Estimated | ||||||||
Amount | ||||||||
to be Paid | ||||||||
in Nominal | Current | |||||||
Expected Year of Usage (note a) | Value (note a) | Value | ||||||
2011 | 8,251 | 7,898 | ||||||
2012 | 4,779 | 4,379 | ||||||
2013 | 2,865 | 2,513 | ||||||
2014 | 1,717 | 1,442 | ||||||
2015 | 1,030 | 827 | ||||||
Ending balance | 18,642 | 17,059 | ||||||
(note a) | The above expected year of usage and the current value of the estimated amount to be paid are estimated based on historical usage experience. |
2008 | 2009 | 2010 | ||||||||||
Beginning balance | — | 339,696 | 609,733 | |||||||||
Increase (provision) | 433,276 | 695,330 | 941,586 | |||||||||
Decrease (subsidy payment) | (93,580 | ) | (425,293 | ) | (819,277 | ) | ||||||
Ending balance | 339,696 | 609,733 | 732,042 | |||||||||
Estimated | ||||||||
Amount | ||||||||
to be Paid | ||||||||
Expected Payment | in Nominal | Current | ||||||
for the Year Ended December 31, | Value | Value | ||||||
2011 | 663,740 | 652,564 | ||||||
2012 | 82,901 | 79,478 | ||||||
Ending balance | 746,641 | 732,042 | ||||||
27. | DERIVATIVE INSTRUMENTS |
F-66
Table of Contents
F-67
Table of Contents
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 | 118,889 | 82,950 | 201,839 | |||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Fix-to-fixed cross currency swap | U.S. dollar denominated bonds | US$ | 300,000 | Mar. 23, 2004 ~ Apr. 1, 2011 | 7,848 | — | 7,848 | |||||||||||||
Floating-to-fixed Interest rate swap | Long-term borrowings | 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 | |||||||||||||
25,112 | 5,043 | 30,155 | ||||||||||||||||||
F-68
Table of Contents
28. | CONSOLIDATED STATEMENTS OF CASH FLOWS |
2008 | 2009 | 2010 | ||||||||||
Write-offs of accounts receivable-trade | 37,079 | 43,898 | 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 |
30. | SEGMENT INFORMATION |
F-69
Table of Contents
For The Year Ended December 31, 2008 | ||||||||||||||||||||||||
Cellular | ||||||||||||||||||||||||
Telephone | Fixed-line | |||||||||||||||||||||||
Communication | Telecommunication | Consolidating | Consolidated | |||||||||||||||||||||
Service | Service | Other | Sub-total | Adjustments | Amount | |||||||||||||||||||
Total sales | 11,706,369 | 2,214,742 | 663,432 | 14,584,543 | (633,530 | ) | 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 | 12,485,712 | 2,262,451 | 600,503 | 15,348,666 | (836,319 | ) | 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 | 13,431,734 | 2,585,812 | 680,832 | 16,698,378 | (1,263,005 | ) | 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. | K-IFRS ADOPTION PLAN AND STATUS |
F-70
Table of Contents
32. | RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
F-71
Table of Contents
Note | Year Ended December 31, | ||||||||||||||||
Reference | 2008 | 2009 | 2010 | ||||||||||||||
Net income based on Korean GAAP | 972,338 | 1,055,606 | 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 | 951,737 | 1,356,682 | 1,396,621 | ||||||||||||||
Less net loss attributable to non-controlling interest | 121,129 | 123,044 | 128,470 | ||||||||||||||
Net income attributable to the Company | 1,072,866 | 1,479,726 | 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 | 11,406 | 17,812 | 21,187 | ||||||||||||||
— Diluted earnings per share | 11,327 | 17,575 | 20,829 | ||||||||||||||
Discontinued operation — Basic earnings per share | 3,338 | 2,641 | 12 | ||||||||||||||
— Diluted earnings per share | 3,279 | 2,570 | 12 | ||||||||||||||
F-72
Table of Contents
Note | Year Ended December 31, | |||||||||||||||
Reference | 2008 | 2009 | 2010 | |||||||||||||
Shareholders’ equity based on Korean GAAP Adjustments: | 11,824,440 | 12,344,625 | 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 | 12,562,019 | 14,260,772 | 14,572,733 | |||||||||||||
Controlling interest | 12,215,192 | 13,186,782 | 13,724,876 | |||||||||||||
Non-controlling interest | 346,827 | 1,073,990 | 847,857 | |||||||||||||
a. | Impairment of Investment Securities and Recoveries |
F-73
Table of Contents
b. | Goodwill and Other Intangible Assets |
F-74
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Gross carrying amount | 3,612,577 | 4,310,820 | 4,379,945 | |||||||||
Accumulated impairment | (119,712 | ) | (119,712 | ) | (119,712 | ) | ||||||
Ending of period | 3,492,865 | 4,191,108 | 4,260,233 | |||||||||
F-75
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Beginning of period | 3,599,135 | 3,492,865 | 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 | 3,492,865 | 4,191,108 | 4,260,233 | |||||||||
2008 | 2009 | 2010 | ||||||||||
Goodwill amount under Korean GAAP | 1,899,739 | 1,737,966 | 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 | 3,492,865 | 4,191,108 | 4,260,233 | |||||||||
F-76
Table of Contents
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) | 1,188,547 | (459,178 | ) | 1,188,547 | (549,507 | ) | 1,290,979 | (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 | 3,096,018 | (1,516,722 | ) | 3,767,759 | (2,034,724 | ) | 4,622,620 | (2,549,086 | ) | |||||||||||||||
c. | Capitalization of Foreign Exchange Losses or Gains and Interest Expenses |
F-77
Table of Contents
d. | Nonrefundable Activation Fees |
e. | Convertible Bonds Payable |
F-78
Table of Contents
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. |
f. | Derivative Instrument — Currency & Interest Rate Swaps |
F-79
Table of Contents
g. | Provision for credit loss |
h. | Consolidation of Variable Interest Entities |
F-80
Table of Contents
i. | Investment in Preferred Stock |
j. | Scope of Consolidations |
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 | ) |
F-81
Table of Contents
k. | Reclassification of Investment in Equity Securities of SK C&C Co., Ltd. |
F-82
Table of Contents
December 31, 2008 | ||||
Current assets | 890,816 | |||
Non-Current assets | 3,576,000 | |||
Total | 4,466,816 | |||
Current liabilities | 1,199,621 | |||
Non-Current liabilities | 1,027,722 | |||
Shareholder’s equity | 2,239,473 | |||
Total | 4,466,816 | |||
2008 | ||||
Operating revenue | 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 | 216,887 | |||
l. | Retroactive Application of Equity Method of Accounting |
F-83
Table of Contents
m. | Business Combination |
F-84
Table of Contents
SK Broadband | ||||
(“SKBB”) | ||||
(100%) | ||||
Current assets | 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 | 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 | 241,176 |
F-85
Table of Contents
TU Media | ||||
(100%) | ||||
Consideration for additional acquisition of TU Media | 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 | 76,756 | |||
Current assets | 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 | 15,739 | |||
Fair value of TU Media | 76,756 | |||
Less: Net assets | 15,739 | |||
Goodwill | 61,017 |
F-86
Table of Contents
SK Networks | ||||
Current assets | 11,834 | |||
Noncurrent assets | ||||
— Depreciable fixed assets | 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 | ) | ||
Total | 892,755 | |||
F-87
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Revenue | 13,540,293 | 13,978,799 | 14,276,742 | |||||||||
Earnings | 738,469 | 1,275,801 | 1,414,138 |
n. | Asset Securitization Transactions |
A. | Isolation of transferred financial assets. The transferred financial assets have been isolated from the transferor but presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership. Notwithstanding the isolation analysis, each entity involved 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. |
B. | Transferee’s rights to pledge or exchange. This condition is met if both of the following conditions are met: |
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, any of the following: |
F-88
Table of Contents
o. | Income Taxes |
F-89
Table of Contents
p. | Tax effect of the reconciling items |
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 | ) | |||||||
(Note a) | Certain goodwill amortization constitutes a non-deductible expense under local tax law and as such, the corresponding effects were not considered in the U.S. GAAP adjustment. | |
(Note b) | The amount represents the U.S. GAAP adjustment from our equity method investees and subsidiary. Due to continuing loss of the investees and subsidiary, the corresponding tax effect were not considered. | |
(Note c) | As of December 31, 2009, the amount represents non-controlling interest of S-Telecom which was consolidated under U.S. GAAP while accounted for as an equity method investee under Korean GAAP. Under Korean GAAP, 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. GAAP and vice versa. |
F-90
Table of Contents
(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 |
Gross | Gross | |||||||||||||||||||
Cost | Unrealized | Unrealized | Impairment | Fair | ||||||||||||||||
(Amortized Cost) | Gains | Losses | Losses | Value | ||||||||||||||||
At December 31, 2008: | ||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Equity securities | 1,878,049 | 681,260 | (73 | ) | (208,453 | ) | 2,350,783 | |||||||||||||
Debt securities | 5,696 | — | — | (552 | ) | 5,144 | ||||||||||||||
Held-to-maturity securities | 112 | — | — | — | 112 | |||||||||||||||
1,883,857 | 681,260 | (73 | ) | (209,005 | ) | 2,356,039 | ||||||||||||||
At December 31, 2009: | ||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Equity securities | 603,206 | 1,223,542 | (1,293 | ) | (4,997 | ) | 1,820,458 | |||||||||||||
Debt securities | 354,886 | — | (122 | ) | (884 | ) | 353,880 | |||||||||||||
Held-to-maturity securities | 1,006 | — | — | — | 1,006 | |||||||||||||||
959,098 | 1,223,542 | (1,415 | ) | (5,881 | ) | 2,175,344 | ||||||||||||||
At December 31, 2010: | ||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Equity securities | 417,196 | 994,103 | (446 | ) | (1,744 | ) | 1,409,109 | |||||||||||||
Debt securities | 34,962 | — | — | (2,702 | ) | 32,260 | ||||||||||||||
Held-to-maturity securities | — | — | — | — | — | |||||||||||||||
452,158 | 994,103 | (446 | ) | (4,446 | ) | 1,441,369 | ||||||||||||||
F-91
Table of Contents
r. | Determination of Acquisition Cost of Equity Interest in Subsidiary |
s. | Additional Equity Investment in Subsidiaries |
F-92
Table of Contents
t. | Loans Receivable for Stock Issued to Employee |
u. | Deferred Charges |
v. | Handset Subsidies to Long-time Mobile Subscribers |
w. | Comprehensive Income |
F-93
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Net income | 951,737 | 1,356,682 | 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 | 351,265 | 1,845,697 | 1,314,477 | |||||||||
x. | Discontinued Operation |
F-94
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Balance, beginning of the year | 12,897,647 | 12,562,019 | 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 | 12,562,019 | 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 ofavailable-for-sale securities, foreign-based operations’ translation adjustments in affiliates and stock transactions by affiliates. |
December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Current assets: | ||||||||||||
As reported | 5,422,447 | 6,370,631 | 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
Table of Contents
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 | 21,239,183 | 25,788,310 | 25,298,715 | |||||||||
F-96
Table of Contents
December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Current liabilities: | ||||||||||||
As reported | 4,628,821 | 4,894,936 | 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 | 8,677,164 | 11,527,538 | 10,725,982 | |||||||||
F-97
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Cash flows from operating activities based on Korean GAAP | 3,293,018 | 2,932,633 | 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 | 2,696,328 | 3,063,783 | 3,979,604 | |||||||||
Cash flows from investing activities based on Korean GAAP | (3,876,959 | ) | (1,826,005 | ) | (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 | (3,932,555 | ) | (2,124,649 | ) | (2,407,405 | ) | ||||||
Cash flows from financing activities based on Korean GAAP | 866,822 | (1,206,991 | ) | (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 | 1,118,706 | (839,986 | ) | (1,785,920 | ) | |||||||
The effect of exchange rate changes on cash and cash equivalents held in foreign currencies based on Korean GAAP | 37,371 | (7,405 | ) | (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 | 34,180 | (8,430 | ) | (4,415 | ) | |||||||
F-98
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Net increase (decrease) in cash and cash equivalents due to changes in consolidated subsidiaries based on Korean GAAP | 36,413 | 46,258 | (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 | (40,933 | ) | 299,138 | (38,601 | ) | |||||||
Pre-acquisition cash flows of subsidiaries based on Korean GAAP | 17,250 | — | (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 | — | (196,546 | ) | — | ||||||||
Increases in cash and cash equivalents due to merger based on Korea GAAP | — | — | — | |||||||||
Adjustments | — | — | 10,367 | |||||||||
Increase in cash and cash equivalents due to merger based on U.S. GAAP | — | — | 10,367 | |||||||||
Cash flows from discontinued operation based on Korean GAAP | (248,437 | ) | 3,669 | 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 | 8,007 | 2,026 | 9,196 | |||||||||
Cash and cash equivalents at beginning of the year based on Korean GAAP | 885,989 | 1,011,467 | 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 | 823,619 | 707,352 | 902,688 | |||||||||
Cash and cash equivalents at end of the year based on Korean GAAP | 1,011,467 | 953,926 | 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 | 707,352 | 902,688 | 665,514 | |||||||||
F-99
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Cash paid for interest (net of amounts capitalized) | 243,319 | 339,298 | 360,249 | |||||||||
Cash paid for income taxes | 422,506 | 557,005 | 660,316 | |||||||||
33. | ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP |
a. | Income Taxes |
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Currently payable | 494,163 | 610,561 | 525,488 | |||||||||
Deferred | (332,034 | ) | (127,409 | ) | (136,249 | ) | ||||||
162,129 | 483,152 | 389,239 | ||||||||||
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Income from continuing operation before income taxes and appropriate item | 1,196,266 | 1,850,028 | 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 | 162,129 | 483,152 | 389,239 | |||||||||
Effective tax rate | 14.54 | % | 26.42 | % | 21.58 | % | ||||||
F-100
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Current: | ||||||||||||
Allowance for doubtful accounts | 14,530 | 42,693 | 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 | (163,802 | ) | (233,215 | ) | 292 | |||||||
F-101
Table of Contents
2008 | 2009 | 2010 | ||||||||||
Beginning of period | 9,989 | 9,305 | 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 | 9,305 | 5,204 | 41,234 | |||||||||
b. | Fair Value of Financial Instruments |
F-102
Table of Contents
F-103
Table of Contents
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 | 914,228 | 914,228 | 1,371,150 | 1,371,150 | 1,232,666 | 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 | ||||||||||||||||||
7,733,619 | 9,818,373 | 8,809,283 | ||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||
Accounts payable | 1,107,202 | 1,107,202 | 1,467,399 | 1,467,399 | 1,629,414 | 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 | ||||||||||||||||||
6,473,845 | 8,663,449 | 7,788,852 | ||||||||||||||||||||||
(note a) | These carrying amounts represent the amounts determined under U.S. GAAP. |
F-104
Table of Contents
December, 31, | ||||||||||||||||
2008 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Trading securities | 367,002 | — | 367,002 | — | ||||||||||||
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 | — | ||||||||||||
3,041,414 | 2,350,783 | 690,631 | — | |||||||||||||
Liabilities: | ||||||||||||||||
Derivatives: | ||||||||||||||||
Currency swap | 210,468 | — | 210,468 | — | ||||||||||||
Interest rate swap | 31,718 | — | 31,718 | — | ||||||||||||
242,186 | — | 242,186 | — | |||||||||||||
F-105
Table of Contents
December, 31, | ||||||||||||||||
2009 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Trading securities | 370,126 | — | 370,126 | — | ||||||||||||
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 | — | ||||||||||||
2,848,543 | 1,820,458 | 1,028,085 | — | |||||||||||||
Liabilities: | ||||||||||||||||
Derivatives: | ||||||||||||||||
Currency swap | 53,032 | — | 53,032 | — | ||||||||||||
Interest rate swap | 17,228 | — | 17,228 | — | ||||||||||||
Conversion option | 60,412 | — | 60,412 | — | ||||||||||||
130,672 | — | 130,672 | — | |||||||||||||
December, 31, | ||||||||||||||||
2010 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Trading securities | 200,000 | — | 200,000 | — | ||||||||||||
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 | — | ||||||||||||
1,838,588 | 1,409,109 | 429,479 | — | |||||||||||||
Liabilities: | ||||||||||||||||
Derivatives: | ||||||||||||||||
Currency swap | 17,501 | — | 17,501 | — | ||||||||||||
Interest rate swap | 12,534 | — | 12,534 | — | ||||||||||||
Conversion option | 108,464 | — | 108,464 | — | ||||||||||||
138,499 | — | 138,499 | — | |||||||||||||
F-106
Table of Contents
c. | Accrued Severance Indemnities |
Year Ending December 31, | ||||
2011 | 669 | |||
2012 | 625 | |||
2013 | 845 | |||
2014 | 980 | |||
2015 | 2,682 | |||
2016 — 2020 | 57,286 | |||
Total | 63,087 | |||
F-107
Table of Contents
d. | Condensed Consolidated Income Statements under U.S. GAAP |
2008 | 2009 | 2010 | ||||||||||
Operating revenue: | ||||||||||||
Wireless services | 9,553,556 | 9,431,035 | 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 | 951,737 | 1,356,682 | 1,396,621 | |||||||||
Add non controlling interests in losses of consolidated subsidiaries | 121,129 | 123,044 | 128,470 | |||||||||
Net income attributable to the Company | 1,072,866 | 1,479,726 | 1,525,091 | |||||||||
e. | Segment |
f. | Transition to IFRS in 2011 |
F-108
Table of Contents
g. | Recent Changes in U.S. GAAP |
F-109
Table of Contents
(Registrant)
Title: | President, Co-Chief Executive Officer & |