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(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, 2005 | ||
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 shall 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 | New York Stock Exchange, Inc. | |
of Common Stock | ||
Common Stock, par value | New York Stock Exchange, Inc.* |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o |
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• | our ability to anticipate and respond to various competitive factors affecting the wireless telecommunications industry, including new services that may be introduced, changes in consumer preferences, economic conditions and discount pricing strategies by competitors; | |
• | our implementation of high-speed download packet access, or HSDPA, technology and wireless broadband internet, or WiBro, technology; | |
• | our plans to spend approximately Won 1.6 trillion for capital expenditures in 2006 for a range of projects, including expansion of our upgraded, HSDPA-ready WCDMA network, as well as investments in our wireless Internet-related businesses and our expected future capital expenditures on various initiatives; | |
• | 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 Ministry of Information and Communication, or the MIC, 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; 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. |
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Item 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Item 1A. | Directors and Senior Management |
Item 1B. | Advisers |
Item 1C. | Auditors |
Item 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Item 3. | KEY INFORMATION |
Item 3A. | Selected Financial Data |
As of or for the Year Ended December 31, | |||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||
(In billions of won and millions of dollars, except per share and percentage data) | |||||||||||||||||||||||||
INCOME STATEMENT DATA | |||||||||||||||||||||||||
Korean GAAP: | |||||||||||||||||||||||||
Total Operating Revenue(1) | 8,371.9 | 9,324.0 | 10,272.1 | 10,570.6 | 10,721.8 | US$ | 10,615.6 | ||||||||||||||||||
Cellular Service(1) | 8,203.0 | 9,156.8 | 10,091.8 | 10,297.6 | 10,361.9 | 10,259.3 | |||||||||||||||||||
Paging Service(2) | 8.8 | — | — | — | — | — | |||||||||||||||||||
Other(3) | 160.1 | 167.2 | 180.3 | 273.0 | 359.9 | 356.3 | |||||||||||||||||||
Operating Expenses | 6,047.4 | 6,526.4 | 7,167.0 | 8,130.9 | 8,051.2 | 7,971.5 | |||||||||||||||||||
Operating Income | 2,324.5 | 2,797.6 | 3,105.1 | 2,439.7 | 2,670.6 | 2,644.2 | |||||||||||||||||||
Income before Income Taxes and Minority Interest | 1,976.7 | 2,218.8 | 2,754.3 | 2,123.2 | 2,561.6 | 2,536.2 | |||||||||||||||||||
Income before Minority Interest | 1,126.4 | 1,520.3 | 1,965.3 | 1,493.4 | 1,868.3 | 1,849.8 | |||||||||||||||||||
Net Income | 1,146.0 | 1,487.2 | 1,966.1 | 1,491.5 | 1,873.0 | 1,854.5 | |||||||||||||||||||
Income per Share of Common Stock(4) | 13,242 | 17,647 | 26,187 | 20,261 | 25,443 | 25.19 | |||||||||||||||||||
Diluted Net Income per Share of Common Stock(4) | 13,242 | 17,647 | 26,187 | 20,092 | 25,036 | 24.79 | |||||||||||||||||||
Dividends Declared per Share of Common Stock(5) | 690 | 1,800 | 5,500 | 10,300 | 9,000 | 8.91 | |||||||||||||||||||
Weighted Average Number of Shares | 86,545,041 | 84,270,450 | 75,078,219 | 73,614,297 | 73,614,296 | 73,614,296 |
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As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | |||||||||||||||||||
(In billions of won and millions of dollars, except per share and percentage data) | ||||||||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||||||
Total Operating Revenue | 8,307.1 | 9,219.7 | 10,225.1 | 10,534.6 | 10,701.4 | US$ | 10,595.5 | |||||||||||||||||
Operating Expenses | 6,235.0 | 6,643.4 | 7,044.5 | 8,137.6 | 7,847.7 | 7,770.0 | ||||||||||||||||||
Operating Income | 2,072.1 | 2,576.3 | 3,180.6 | 2,397.0 | 2,853.7 | 2,825.5 | ||||||||||||||||||
Net Income | 1,111.6 | 1,301.1 | 2,062.7 | 1,553.1 | 2,027.6 | 2,007.5 | ||||||||||||||||||
Income per Share of Common Stock(4) | 12,844 | 15,440 | 27,475 | 21,097 | 27,543 | 27.27 | ||||||||||||||||||
Diluted Net Income per Share of Common Stock(4) | 12,844 | 15,439 | 27,475 | 20,918 | 27,089 | 26.82 | ||||||||||||||||||
BALANCE SHEET DATA | ||||||||||||||||||||||||
Korean GAAP: | ||||||||||||||||||||||||
Working Capital (Deficiency)(6) | 668.2 | (189.7 | ) | (461.4 | ) | 1,323.8 | 1,735.2 | US$ | 1,718.0 | |||||||||||||||
Fixed Assets — Net | 4,174.7 | 4,569.4 | 4,641.5 | 4,703.9 | 4,663.4 | 4,617.2 | ||||||||||||||||||
Total Assets | 13,326.3 | 14,228.7 | 13,818.2 | 14,283.4 | 14,704.8 | 14,559.2 | ||||||||||||||||||
Long-term Liabilities(7) | 3,498.4 | 3,693.4 | 3,193.5 | 4,010.7 | 3,513.9 | 3,479.1 | ||||||||||||||||||
Total Shareholders’ Equity | 6,149.3 | 6,231.9 | 6,093.8 | 7,205.7 | 8,327.5 | 8,245.1 | ||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||||||
Working Capital (Deficiency) | 729.6 | (108.2 | ) | (445.5 | ) | 1,311.3 | 1,587.2 | 1,571.5 | ||||||||||||||||
Total Assets | 13,841.0 | 15,720.7 | 15,586.2 | 15,576.8 | 16,351.2 | 16,189.3 | ||||||||||||||||||
Total Shareholders’ Equity | 5,820.1 | 6,356.2 | 7,014.7 | 8,237.0 | 9,472.4 | 9,378.6 | ||||||||||||||||||
OTHER FINANCIAL DATA | ||||||||||||||||||||||||
Korean GAAP: | ||||||||||||||||||||||||
EBITDA(8) | 3,932.4 | 3,954.1 | 4,706.4 | 4,085.8 | 4,434.2 | US$ | 4,390.3 | |||||||||||||||||
Capital Expenditures(9) | 1,382.1 | 2,024.7 | 1,647.6 | 1,631.9 | 1,416.6 | 1,402.6 | ||||||||||||||||||
R&D Expenses(10) | 153.7 | 253.3 | 300.7 | 336.1 | 321.1 | 317.9 | ||||||||||||||||||
Internal R&D | 130.7 | 194.3 | 235.8 | 267.1 | 252.0 | 249.5 | ||||||||||||||||||
External R&D | 23.0 | 59.0 | 64.9 | 69.0 | 69.1 | 68.4 | ||||||||||||||||||
Depreciation and Amortization | 1,759.6 | 1,543.3 | 1,646.3 | 1,752.5 | 1,675.5 | 1,658.9 | ||||||||||||||||||
Cash Flow from Operating Activities | 2,424.5 | 4,268.4 | 3,329.4 | 2,516.8 | 3,404.1 | 3,370.4 | ||||||||||||||||||
Cash Flow from Investing Activities | (1,973.4 | ) | (3,064.0 | ) | (1,415.1 | ) | (1,470.3 | ) | (1,938.2 | ) | (1,919.0 | ) | ||||||||||||
Cash Flow from Financing Activities | 331.2 | (1,418.2 | ) | (2,261.0 | ) | (968.6 | ) | (1,429.0 | ) | (1,414.9 | ) | |||||||||||||
Margins (% of total sales): | ||||||||||||||||||||||||
EBITDA Margin(8) | 47.0 | % | 42.4 | % | 45.8 | % | 38.7 | % | 41.4 | % | 41.4 | % | ||||||||||||
Operating Margin | 27.8 | 30.0 | 30.2 | 23.1 | 24.9 | 24.9 | ||||||||||||||||||
Net Margin | 13.7 | 15.9 | 19.1 | 14.1 | 17.5 | 17.5 | ||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||||||
EBITDA(8) | 3,859.1 | 3,620.7 | 4,679.1 | 3,970.4 | 4,412.2 | 4,368.5 | ||||||||||||||||||
Capital Expenditures(9) | 1,382.1 | 2,024.7 | 1,668.0 | 1,656.9 | 1,429.3 | 1,415.1 | ||||||||||||||||||
Cash Flow from Operating Activities | 2,428.3 | 3,606.2 | 3,144.3 | 3,228.9 | 3,293.8 | 3,261.2 | ||||||||||||||||||
Cash Flow from Investing Activities | (1,977.3 | ) | (2,892.5 | ) | (1,285.5 | ) | (1,634.1 | ) | (1,816.5 | ) | (1,798.5 | ) | ||||||||||||
Cash Flow from Financing Activities | 331.2 | (927.5 | ) | (2,205.5 | ) | (1,514.8 | ) | (1,439.3 | ) | (1,425.1 | ) |
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As of or for the Year Ended December 31, | ||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
SELECTED OPERATING DATA | ||||||||||||||||||||
Population of Korea (millions)(11) | 47.4 | 47.6 | 47.9 | 48.2 | 48.3 | |||||||||||||||
Our Wireless Penetration(12) | 32.0 | 36.1 | 38.2 | 39.0 | 40.4 | |||||||||||||||
Number of Employees(13) | 5,693 | 6,241 | 6,286 | 7,353 | 6,646 | |||||||||||||||
Total Sales per Employee (millions) | 1,470.6 | 1,494.0 | 1,634.1 | 1,437.6 | 1,613.3 | |||||||||||||||
Wireless Subscribers(14) | 15,179,163 | 17,219,562 | 18,313,315 | 18,783,338 | 19,530,117 | |||||||||||||||
Average Monthly Outgoing Voice Minutes per Subscriber(15) | 172 | 191 | 197 | 194 | 197 | |||||||||||||||
Average Monthly Revenue per Subscriber(16) | 36,400 | 38,383 | 39,739 | 39,689 | 40,205 | |||||||||||||||
Average Monthly Churn Rate(17) | 1.4 | % | 1.4 | % | 1.2 | % | 1.7 | % | 1.8 | % | ||||||||||
Digital Cell Sites(18) | 6,056 | 7,384 | 8,309 | 9,458 | 10,142 |
* | The conversion into Dollars was made at the rate of Won 1,010.0 to US$1.00. See note 2(a) of the notes to our consolidated financial statements. |
(1) | Includes revenues from SK Teletech Co., Ltd. of Won 702.4 billion for 2001, Won 534.0 billion for 2002, Won 612.0 billion for 2003, Won 649.8 billion for 2004 and Won 294.6 billion for 2005 from the sale of digital handsets and Won 1,339.9 billion for 2001, Won 1,043.2 billion for 2002, Won 1,017.1 billion for 2003, Won 849.4 billion for 2004 and Won 898.6 billion for 2005 of interconnection revenue. Following our sale of a 60% equity interest in SK Teletech to Pantech & Curitel in July 2005, our equity interest in the company was reduced to 29.1% (which subsequently became a 22.7% interest in Pantech following the merger of SK Teletech into Pantech in December 2005) and SK Teletech ceased to be our consolidated subsidiary. See “Item 4B. Business Overview — Interconnection”. | |
(2) | In March 2001, we transferred our paging business to Real Telecom Co., Ltd. (formerly known as INTEC Telecom Co., Ltd.) in exchange for 9.9% of Real Telecom’s newly issued shares and bonds with a principal amount of Won 9.5 billion that can be converted into an additional 7.8% interest in Real Telecom. Consequently, the results of the paging business are no longer included in our revenues after such date. | |
(3) | For more information about our other revenue, see “Item 5. Operating and Financial Review and Prospects” and “Item 4B. Business Overview”. | |
(4) | Income per share of common stock is calculated by dividing net income by the weighted average number of shares outstanding during the period. Diluted net income per share of common stock is calculated by dividing adjusted net income by adjusted weighted average number of shares outstanding during the period, taking into account the dilutive effect of stock options in 2002 and issuance of convertible bonds in 2004 and 2005. | |
(5) | On January 1, 2002, we adopted Statement of Korea Accounting Standards (“SKAS”) No. 6, “Events Occurring after Balance Sheet Date”. This statement requires that proposed cash dividends be reflected on the balance sheet when the appropriations are approved by shareholders which is similar to U.S. GAAP. In order to reflect this accounting change, our 2001 financial statements have been restated accordingly. | |
(6) | Working capital means current assets minus current liabilities. | |
(7) | Our monetary assets and liabilities denominated in foreign currencies are valued at the exchange rate of Won 1,326 to US$1.00 as of December 31, 2001, Won 1,200 to US$1.00 as of December 31, 2002, Won 1,198 to US$1.00 as of December 31, 2003, Won 1,044 to US$1.00 as of December 31, 2004 and Won 1,013.0 to US$1.00 as of December 31, 2005, the rates of exchange permitted under Korean GAAP as of those dates. See note 2(w) of the notes to our consolidated financial statements. |
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(8) | EBITDA refers to income before interest income, interest expense, taxes, depreciation and amortization. EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. 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, beginning January 1, 2003, such interest costs are expensed as incurred. Through the end of 2002, the accounting treatment for capitalizing interest costs under Korean GAAP was consistent with that under U.S. GAAP. |
(10) | Includes donations to Korean research institutes and educational organizations. See “Item 5C. Research and Development, Patents and Licenses, etc.”. |
(11) | Population estimates based on historical data published by the National Statistical Office of Korea. |
(12) | Wireless penetration is determined by dividing our subscribers by total estimated population, as of the end of the period. |
(13) | Includes regular employees and temporary employees. See “Item 6D. Employees”. Includes 1,332 Shinsegi employees as of December 31, 2001. |
(14) | 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. Wireless subscribers also include 3,311,874 Shinsegi subscribers as of December 31, 2001. |
(15) | The average monthly outgoing voice minutes per subscriber is computed by dividing the total minutes of outgoing voice usage for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. The monthly weighted average number of subscribers is the sum of the average number of subscribers for the month, calculated by taking the simple average number of subscribers at the beginning of the month and at the end of the month, divided by the number of months in the period. Shinsegi’s subscribers and outgoing voice minutes are included from 2001. |
(16) | The average monthly revenue per subscriber excludes interconnection revenue and is computed by dividing total initial connection fees, monthly access fees, usage charges for voice and data, international charges, value-added service fees; and interest on overdue accounts (net of telephone tax) for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. Including interconnection revenue, consolidated average monthly revenue per subscriber was Won 45,441 for 2001, Won 43,958 for 2002, Won 44,546 for 2003, Won 43,542 for 2004 and Won 44,167 for 2005. For information about the average monthly revenue per subscriber of SK Telecom and Shinsegi on a stand-alone basis, see “Item 5A. Operating Results — Overview”. |
(17) | 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 and dividing the quotient by the number of months in the period. Churn |
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includes subscribers who upgrade to CDMA lxRTT or CDMA 1xEV/ DO-capable handsets by terminating their service and opening a new subscriber account. |
(18) | Includes 1,685 cell sites of Shinsegi as of December 31, 2001. |
As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | |||||||||||||||||||
(In billions of won and millions of dollars) | ||||||||||||||||||||||||
Net Income | 1,111.6 | 1,301.1 | 2,062.7 | 1,553.1 | 2,027.6 | US$ | 2,007.5 | |||||||||||||||||
ADD: Interest income | (101.8 | ) | (90.8 | ) | (93.9 | ) | (86.7 | ) | (62.6 | ) | (62.0 | ) | ||||||||||||
Interest expense | 274.4 | 396.6 | 387.1 | 291.0 | 226.8 | 224.6 | ||||||||||||||||||
Taxes | 791.3 | 585.0 | 811.5 | 611.1 | 667.1 | 660.5 | ||||||||||||||||||
Depreciation and Amortization | 1,783.6 | 1,428.8 | 1,511.7 | 1,601.9 | 1,553.3 | 1,537.9 | ||||||||||||||||||
EBITDA | 3,859.1 | 3,620.7 | 4,679.1 | 3,970.4 | 4,412.2 | US$ | 4,368.5 | |||||||||||||||||
As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | |||||||||||||||||||
(In billions of won and millions of dollars) | ||||||||||||||||||||||||
Net Income | 1,146.0 | 1,487.2 | 1,966.1 | 1,491.5 | 1,873.0 | US$ | 1,854.5 | |||||||||||||||||
ADD: Interest income | (97.4 | ) | (86.0 | ) | (86.5 | ) | (80.5 | ) | (61.1 | ) | (60.5 | ) | ||||||||||||
Interest expense | 273.9 | 311.1 | 391.5 | 303.4 | 253.5 | 251.0 | ||||||||||||||||||
Taxes | 850.3 | 698.5 | 789.0 | 629.8 | 693.3 | 686.4 | ||||||||||||||||||
Depreciation and Amortization | 1,759.6 | 1,543.3 | 1,646.3 | 1,741.6 | 1,675.5 | 1,658.9 | ||||||||||||||||||
EBITDA | 3,932.4 | 3,954.1 | 4,706.4 | 4,085.8 | 4,434.2 | US$ | 4,390.3 | |||||||||||||||||
At End | Average | |||||||||||||||
Year Ended December 31, | of Period | Rate(1) | High | Low | ||||||||||||
2001 | 1,314 | 1,293 | 1,369 | 1,234 | ||||||||||||
2002 | 1,186 | 1,250 | 1,332 | 1,161 | ||||||||||||
2003 | 1,192 | 1,193 | 1,262 | 1,146 | ||||||||||||
2004 | 1,035 | 1,145 | 1,195 | 1,035 | ||||||||||||
2005 | 1,010 | 1,023 | 1,060 | 997 |
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Past Six Months | High | Low | ||||||
(Won per | ||||||||
US$1.00) | ||||||||
January 2006 | 1,003 | 959 | ||||||
February 2006 | 976 | 962 | ||||||
March 2006 | 982 | 967 | ||||||
April 2006 | 970 | 940 | ||||||
May 2006 | 952 | 927 | ||||||
June 2006 (through June 26, 2006) | 962 | 943 |
(1) | The average rates for the annual periods were calculated based on the average noon buying rate on the last day of each month (or portion thereof) during the period. The average rate for the monthly periods were calculated based on the average noon buying rate of each day of the month (or portion thereof). |
Competition may reduce our market share and harm our results of operations and financial condition. |
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Inability to successfully implement or adapt our network and technology to meet the continuing technological advancements affecting the wireless industry will likely have a material adverse effect on our financial condition, results of operation and business. |
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HSDPA technology may require significant capital and other expenditures for implementation which we may not recoup and such technology may be difficult to integrate with our existing technology and business. |
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Our growth strategy calls for significant investments in new businesses and regions, including businesses and regions in which we have limited experience. |
Due to the existing high penetration rate of wireless services in Korea, we are unlikely to maintain our subscriber growth rate, which could adversely affect our results of operations. |
Our business and results of operations may be adversely affected if we fail to acquire adequate additional spectrum or use our bandwidth efficiently to accommodate subscriber growth and subscriber usage. |
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We may have to make further financing arrangements to meet our capital expenditure requirements and debt payment obligations. |
Termination or impairment of our relationship with a small number of key suppliers for network equipment and for lease lines could adversely affect our results of operations. |
Our businesses are subject to extensive government regulation and any change in government policy relating to the telecommunications industry could have a material adverse effect on our results of operations and financial condition. |
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We are subject to additional regulation as a result of our market position, which could harm our ability to compete effectively. |
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Financial difficulties and charges of financial statement irregularities at our affiliate, SK Networks (formerly SK Global), may cause disruptions in our business. |
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Concerns that radio frequency emissions may be linked to various health concerns could adversely affect our business and we could be subject to litigation relating to these health concerns. |
Our businesses may be adversely affected by developments affecting the Korean economy. |
• | financial problems or lack of progress in restructuring of chaebols, or 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 of certain chaebols; | |
• | a slowdown in consumer spending; | |
• | adverse changes or volatility in foreign currency reserve levels, commodity prices, exchange rates, interest rates or stock markets; |
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• | adverse developments in the economies of countries that are important export markets for Korea, such as the United States, Japan and China, or in emerging market economies in Asia or elsewhere; | |
• | 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 manufacturing base from Korea to China); | |
• | social and labor unrest; | |
• | substantial decrease in market price of the Korean real estate market; | |
• | a decrease in tax revenues and a substantial increase in the Korean government’s expenditures for unemployment compensation and other social programs that, together, would lead to an increased government budget deficit; | |
• | geo-political uncertainty and risk of further attacks by terrorist groups around the world; | |
• | the recurrence of SARS or avian flu in Asia and other parts of the world; | |
• | 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; | |
• | hostilities involving oil producing countries in the Middle East and any material disruption in the supply of oil or increase in the price of oil; and | |
• | an increase in the level of tension or an outbreak of hostilities between North Korea and Korea or the United States. |
Depreciation of the value of the Won against the Dollar and other major foreign currencies may have a material adverse effect on our results of operations and on the prices of our common stock and the ADSs. |
• | an increase in the amount of Won required by us to make interest and principal payments on our foreign currency-denominated debt, which accounted for approximately 9.6% of our total consolidated long-term debt, including current portion, as of December 31, 2005; 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 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 shares; and | |
• | the secondary market price of the ADSs. |
Increased tensions with North Korea could have an adverse effect on us and the prices of our common stock and the ADSs. |
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If SK Corporation causes us to breach the foreign ownership limitations on shares of our common stock, we may experience a change of control. |
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If our convertible notes are converted by foreign holders and the conversion would cause a violation of the foreign ownership restrictions of the Telecommunications Business Law, or in certain other circumstances, we may sell common stock in order to settle the converting holders’ conversion rights in cash in lieu of delivering common stock to them, and these sales might adversely affect the market price of our common stock or ADRs. |
Sales of SK Telecom shares by companies in the SK Group, POSCO and/or other large shareholders may adversely affect the prices of SK Telecom’s common stock and the ADSs. |
Korea’s new legislation allowing class action suits related to securities transactions may expose us to additional litigation risk. |
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If an investor surrenders his ADSs to withdraw the underlying shares, he may not be allowed to deposit the shares again to obtain ADSs. |
An investor in our ADSs may not be able to exercise preemptive rights for additional shares and may suffer dilution of his equity interest in us. |
• | a registration statement filed by us under the U.S. Securities Act of 1933, as amended, is in effect with respect to those shares; or | |
• | the offering and sale of those shares is exempt from, or is not subject to, the registration requirements of the U.S. Securities Act. |
Short selling of our ADSs by purchasers of securities convertible or exchangeable into our ADSs could materially adversely affect the market price of our ADSs. |
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After the exchange of ADSs into the underlying common shares of SK Telecom, seller or purchasers of the underlying common shares may have to pay securities transaction tax upon the transfer of the shares. |
A holder of our ADSs may not be able to enforce a judgment of a foreign court against us. |
We are generally subject to Korean corporate governance and disclosure standards, which may differ from those in other countries. |
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• | Enhance the technical capabilities of our wireless networks to improve data transmission rates and service quality and to enable us to offer an increased range of services, including in connection with our development of new and improved wireless technologies. We have completed expanding the geographic coverage and subscriber capacity of our existing CDMA 1xRTT and CDMA 1xEV/ DO networks and are currently upgrading our existing WCDMA network to support HSDPA service, as well as expanding an HSPDA-ready version of our WCDMA network nationwide. In addition, we began to offer WiBro service to limited areas of metropolitan Seoul in June 2006, and intend to continue to expand our WiBro service coverage area. We believe we are a leader in the development and implementation of wireless technologies in Korea and that convergence among communications technologies, as well as between telecommunications and other industries, creates growth opportunities for incumbent telecommunications service providers, like us, whose existing infrastructure and know-how will provide a competitive advantage. We also pursue a research and development program designed to allow us to implement new wireless technologies as market opportunities arise. As a part of such program, we operate a network research and development center which is focused on wireless network design, digital cellular technologies and wireless telecommunications applications. | |
• | Retain and capitalize on our large, high-quality wireless subscriber base. With approximately 19.8 million subscribers as of April 30, 2006, we have the largest wireless subscriber base in Korea. We focus on maintaining and expanding our high-quality subscriber base through the provision of enhanced wireless services, particularly advanced Wireless Internet-based applications, at higher speeds than previously available. | |
• | Offer a broad range of new and innovative Wireless Internet contents and services. Through our integrated wireless and on-line portal, NATE, we plan to continue expanding the range of our Wireless Internet contents and services, with a view to increasing revenue from these services to complement our core cellular revenues. Our strategy includes the introduction of sophisticated multimedia services (such as June, a premium wireless data service that provides streaming multimedia video content through our |
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CDMA 1xEV/ DO and HSDPA technologies, as well as MelOn, our music portal service, GXG, our mobile gaming portal, and Cizle, our wireless Internet movie portal); mobile commerce services (such as Moneta, a wireless credit and payment system); community portal and mobile community portal services (such as Mobile Cyworld, which allows subscribers to access Cyworld, our on-line community portal service, using their cellular phone); and mobile finance services (such as M BANK, M-Stock and Moneta Card) that can be accessed using handsets and other devices, including personal computers, personal digital assistants and vehicle mounted terminals. | ||
• | Create new opportunities that arise from an increasingly convergent and ubiquitous era in mobile communications, including by pioneering new businesses. We seek to offer our customers a variety of innovative “convergent” services that create value and convenience for our customers. For example, we have launched new services, such as Telematics, Digital Home and mobile banking, that provide access to content and services previously available only through traditional media or requiring direct personal interface. In particular, we are focusing on new businesses that provide synergies with our existing services. For example, in May 2005, TU Media Corp., one of our affiliates, successfully launched satellite DMB service, which provides broadcasting of multimedia content by satellite to various portable and handheld devices. | |
• | Continue to seek opportunities in overseas markets. We continue to seek opportunities into various overseas markets, particularly to Asia. In March 2005, we established a joint venture with EarthLink, Inc., the third largest Internet service provider in the United States, and, in May 2006 we launched our Mobile Virtual Network Operator, or MVNO, service, under the brand name “HELIO”, to provide wireless voice and data services across the United States. We have also been providing CDMA cellular service, under the brand name, “S-Fone”, in Vietnam since 2003 and plan to expand our network coverage to all of Vietnam. In February 2004, through the launch of a joint venture company with China Unicom, we also began extending our wireless Internet service to China. In addition, in June 2006, our board of directors approved plans to subscribe for up to US$1 billion of convertible bonds issued by China Unicom convertible into 899,745,075 common shares of China Unicom. We expect the subscription to be consummated in July 2006. In the event all of such convertible bonds are converted into common shares, our equity interest in China Unicom would be 6.67%. |
• | Decommissioned Shinsegi’s former network and transferred Shinsegi’s subscribers to SK Telecom’s networks. We have allowed transferred subscribers to continue receiving services under their existing rate plans. However, after the merger, no new subscribers have been accepted under Shinsegi’s plans and further marketing efforts have been limited to the SK Telecom brands. Shinsegi’s subscribers do not have to purchase new handsets, are allowed to use the same mobile telephone numbers and have access to the same services as before the merger. | |
• | Re-allocated the spectrum formerly used by Shinsegi’s network to SK Telecom’s CDMA and CDMA 1xRTT networks. | |
• | Redeployed a portion of Shinsegi’s former network equipment to SK Telecom’s CDMA network or sold it to wireless operators outside of Korea. The remainder of Shinsegi’s network equipment was discarded and written off and we recorded an impairment loss of Won 185.8 billion in 2002. |
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As of December 31, | ||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
(In thousands, except for per population amounts) | ||||||||||||||||||||
Population of Korea(1) | 47,354 | 47,615 | 47,849 | 48,082 | 48,294 | |||||||||||||||
Wireless Subscribers(2) | 29,046 | 32,342 | 33,592 | 36,586 | 38,342 | |||||||||||||||
Wireless Subscribers per 100 Population | 61.3 | 67.9 | 70.2 | 76.1 | 79.4 | |||||||||||||||
Telephone Lines in Service(2) | 22,725 | 23,490 | 22,877 | 22,871 | 22,920 | |||||||||||||||
Telephone Lines per 100 Population | 48.0 | 49.3 | 47.8 | 47.6 | 47.5 |
(1) | Source: National Statistical Office of Korea |
(2) | Source: MIC |
(1) | Percentages may differ depending on method selected for determining population. |
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2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Wireless Internet Enabled Handsets | 23,874 | 29,085 | 31,431 | 35,016 | 37,202 | |||||||||||||||
WAP/ ME Type | 18,190 | 25,981 | 29,804 | 34,220 | 36,713 | |||||||||||||||
I-SMS Type | 5,684 | 3,104 | 1,627 | 797 | 489 | |||||||||||||||
Total Number of Wireless Subscribers | 29,046 | 32,342 | 33,592 | 36,586 | 38,342 | |||||||||||||||
Penetration of Advanced Handsets | 82.2 | % | 89.9 | % | 93.6 | % | 95.7 | % | 97.0 | % |
2001.12 | 2002.12 | 2003.12 | 2004.12 | 2005.12 | ||||||||||||||||
Number of Internet Users(1) | 24,380 | 26,270 | 29,220 | 31,580 | 33,010 | |||||||||||||||
Number of Broadband Subscribers(2) | 7,806 | 10,405 | 11,172 | 11,921 | 12,191 |
(1) | Source: Korea Network Information Center (KRNIC). |
(2) | Source: MIC. Broadband service includes xDSL (Digital Subscriber Line), Cable Modem, Apartment LAN (Local Area Network) and Satellite. |
Item 4B. | Business Overview |
• | Cellular services — we provide digital cellular services to our subscribers using CDMA (code division multiple access) technology, with our network covering approximately 99% of the Korean population; | |
• | Wireless Internet services — under our “NATE” brand name, we allow our wireless subscribers to access various websites designed for cellular use, such as access to entertainment-related contents and services and on-line financial services; and | |
• | Digital convergence and new businesses — we have pioneered new services that reflect the growing convergence between the telecommunications sector and other industries, including our provision of satellite DMB service, which enables satellite broadcasting to mobile devices; telematics service, which makes use of GPS technology; and our “Digital Home” service, which brings home maintenance and security into the mobile digital era. |
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• | Call Keeper service, which provides a record of missed calls in the event a subscriber’s mobile phone is engaged or switched off; | |
• | COLORing service, which plays a “ring back” melody in lieu of a conventional dial tone when callers dial a COLORing subscriber’s mobile phone; | |
• | Auto COLORing service, which periodically changes the default ring-back melody according to the subscriber’s music category selection; and | |
• | Perfect Call service, which combines Call Keeper service with a new service that alerts subscribers when a dialed number that was engaged when first dialed, is no longer engaged. |
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Multimedia |
Music Portal Service |
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Community Portal Service |
Wireless Entertainment Services |
M-Commerce |
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Satellite DMB |
Telematics Service |
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Digital Home |
Provision of Wireless Internet Platforms and Cellular Network Solutions to Foreign CDMA Network Operators |
Overseas Operations |
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Handset Manufacturing |
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International Calling Services |
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As of and for the Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
(In billions of won) | ||||||||||||
Initial Connection Fees | 176.6 | 198.4 | 232.3 | |||||||||
Monthly Access Fees | 3,132.2 | 3,266.1 | 3,365.1 | |||||||||
Usage Charges | 3,615.1 | 5,300.7 | 5,538.8 | |||||||||
Interconnection Revenue | 1,017.1 | 849.4 | 898.6 | |||||||||
Revenue from Sales of Digital Handsets(1) | 612.0 | 649.8 | 294.6 | |||||||||
Other Revenue(2) | 1,538.8 | 33.2 | 32.5 | |||||||||
Total | 10,091.8 | 10,297.6 | 10,361.9 | |||||||||
Additional Facility Deposits | 5.0 | 31.8 | 3.4 | |||||||||
Refunded Facility Deposits | 7.7 | 44.6 | 11.0 | |||||||||
Facility Deposits at Period End | 44.2 | 31.4 | 23.8 |
(1) | Until its sale to Pantech & Curitel in July 2005, our revenue from handset sales consisted of sales by our former subsidiary, SK Teletech. |
(2) | Other revenue includes revenue from value-added services, including voice-activated dialing, caller ID, call forwarding, call waiting and three-way calling. |
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Peak Usage | Off-Peak Usage | Night-Time Usage | ||||||||||||||||||
Included Airtime/ | Charges | Charges | Charges | |||||||||||||||||
Monthly Access Fee | Discount | (Per 10 Seconds) | (Per 10 Seconds)(2) | (Per 10 Seconds) | ||||||||||||||||
Standard | ||||||||||||||||||||
Regular | 13,000 | 10 minutes | 20 | 13 | 10 | |||||||||||||||
Slim | 12,500 | 19 | 19 | 19 | ||||||||||||||||
Family | 13,000 | 5 minutes | 18 | 12 | 9 | |||||||||||||||
Designated Number Discount | 16,000 | 20 | 20 | 20 | ||||||||||||||||
Three-Three(3) | 14,500 | — | — | — | ||||||||||||||||
Time | 16,000 | 7 minutes | 21 | 17 | 12 | |||||||||||||||
Pink Couple | 22,000 | 500 minutes | 20 | 20 | 20 | |||||||||||||||
Silver(4) | 11,000 | 30 minutes | 38 | 38 | 38 | |||||||||||||||
i-Kids(5) | 11,000 | 70 minutes | 20 | 20 | 20 | |||||||||||||||
Welfare 160/220(6) | 16,000 | Won 10,000 | 30 | 30 | 30 | |||||||||||||||
22,000 | Won 22,000 | 30 | 30 | 30 | ||||||||||||||||
TTL Plans | ||||||||||||||||||||
Standard | 15,000 | 20 | 20 | 20 | ||||||||||||||||
SMS | 25,000 | 19 | 19 | 19 | ||||||||||||||||
Regional | 15,500 | 7 minutes | 21 | 16 | 9 | |||||||||||||||
Designated Number | 16,000 | 20 | 20 | 20 | ||||||||||||||||
Pink Couple | 22,000 | 20 | 20 | 20 | ||||||||||||||||
Couple | 16,500 | 150 minutes | 20 | 20 | 9 | |||||||||||||||
Ting Plans | ||||||||||||||||||||
Text Premium | 26,000 | 30 | 30 | 30 | ||||||||||||||||
Buddy | 15,000 | 70 minutes | ||||||||||||||||||
Ting 500 | 15,000 | 60 minutes | 12 | 12 | 12 | |||||||||||||||
Ting 100 (Normal Rate) | 13,500 | 60 minutes | 35 | 18 | 9 | |||||||||||||||
Ting 100 (Vacation Rate) | 13,500 | 60 minutes | 24 | 24 | 9 | |||||||||||||||
Ting Start | 18,000 | 30 | 30 | 30 | ||||||||||||||||
Data Free Plan(7) | 26,000 | — | — | — | ||||||||||||||||
“Free Plans” | ||||||||||||||||||||
Free Holiday(8) | — | — | — | — | ||||||||||||||||
Free Everyday(9) | — | — | — | — | ||||||||||||||||
Free Plan for Calls Over 3 Minutes(10) | — | — | — | — |
(1) | Discounts may include free text messages, ring tone downloads, coloring and NATE minutes. | |
(2) | Excludes a 5% discount on domestic calls for customers who have subscribed to our cellular services for over 1 year; a 10% discount for customers who have subscribed to our cellular services over 2 years; a 15% |
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discount for customers who have subscribed to our cellular services over 3 years and a 20% discount for customers who have subscribed to our cellular services over 5 years. | ||
(3) | Under this plan, for the first three minutes of airtime we charge Won 20 per 10 seconds; we offer the fourth to sixth minutes free of charge; and charge Won 15 per 10 seconds for airtime thereafter. | |
(4) | Subscribers must be 65 years old or older and each subscriber is limited to enrolling in one Silver Plan. | |
(5) | Subscribers must be 12 years old or younger and each subscriber is limited to enrolling one i-Kid Plan. | |
(6) | This plan is limited to mentally or physically challenged subscribers. | |
(7) | Includes unlimited use of data service. This plan is offered from September 30, 2005 through September 30, 2006. | |
(8) | 11 hours of airtime on Sundays and public holidays, for an additional Won 10,000 per month. | |
(9) | 11 hours of airtime in excess of the average number of minutes used during the previous two months, for an additional Won 15,000 per month. |
(10) | 11 hours of domestic airtime for any airtime exceeding the first three minutes, for an additional Won 15,000 per month. |
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• | our expansion and technical enhancement of our digital network, 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 voicemail services, call-forwarding, caller ID, three-way calling and Wireless Internet services provided by NATE; and | |
• | our acquisition of Shinsegi. |
As of or for the Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Subscribers | 18,313,153 | 18,783,338 | 19,530,117 | |||||||||
Subscribers Growth Rate | 6.4 | % | 2.6 | % | 4.0 | % | ||||||
Activations | 3,688,312 | 4,407,087 | 5,057,176 | |||||||||
Deactivations | 2,594,721 | 3,936,884 | 4,310,397 | |||||||||
Average Monthly Churn Rate(1) | 1.2 | % | 1.7 | % | 1.8 | % |
(1) | Average monthly churn rate for a period is the number calculated by dividing the sum of deactivations during the period by the simple average of the number of subscribers at the beginning and end of the period and dividing the quotient by the number of months in the period. Churn includes subscribers who upgrade to CDMA 1xRTT or CDMA lxEV/ DO-capable handsets by terminating their service and opening a new subscriber account. |
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Period | SKT→KTF | SKT→LGT | KTF→SKT | KTF→LGT | LGT→SKT | LGT→KTF | Total | |||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||
First Quarter | 417,212 | 286,163 | — | — | — | — | 703,375 | |||||||||||||||||||||||
Second Quarter | 444,225 | 287,660 | — | — | — | — | 731,885 | |||||||||||||||||||||||
Third Quarter | 173,384 | 133,315 | 351,238 | 109,223 | — | — | 767,160 | |||||||||||||||||||||||
Fourth Quarter | 236,251 | 149,939 | 216,175 | 133,276 | — | — | 735,641 | |||||||||||||||||||||||
2005 | ||||||||||||||||||||||||||||||
First Quarter | 391,386 | 148,486 | 354,672 | 156,394 | 213,179 | 220,322 | 1,484,439 | |||||||||||||||||||||||
Second Quarter | 355,300 | 178,550 | 372,621 | 170,378 | 159,662 | 131,246 | 1,367,757 | |||||||||||||||||||||||
Third Quarter | 395,070 | 170,604 | 392,104 | 154,723 | 161,308 | 128,472 | 1,402,281 | |||||||||||||||||||||||
Fourth Quarter | 344,941 | 178,560 | 367,998 | 164,114 | 149,887 | 112,711 | 1,318,211 | |||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||||
January | 155,588 | 60,465 | 154,166 | 60,741 | 63,112 | 58,552 | 552,624 | |||||||||||||||||||||||
February | 164,413 | 62,672 | 166,271 | 67,880 | 60,338 | 61,534 | 583,108 | |||||||||||||||||||||||
March | 172,963 | 59,056 | 165,979 | 62,168 | 60,016 | 65,694 | 585,876 | |||||||||||||||||||||||
April | 81,071 | 37,869 | 91,112 | 35,164 | 41,186 | 34,884 | 321,286 | |||||||||||||||||||||||
Total | 3,331,804 | 1,753,339 | 2,632,336 | 1,114,061 | 908,688 | 813,415 | 10,553,643 | |||||||||||||||||||||||
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New Wireless Subscribers | |||||||||||||||||||||||||
SK Telecom | KTF | LGT | |||||||||||||||||||||||
Number of | Percentage | Number of | Percentage | Number of | Percentage | ||||||||||||||||||||
Period | Subscribers | of Total | Subscribers | of Total | Subscribers | of Total | |||||||||||||||||||
2004 | |||||||||||||||||||||||||
First Quarter | 1,210,435 | 41.5 | % | 1,060,250 | 36.4 | % | 644,709 | 22.1 | % | ||||||||||||||||
Second Quarter | 1,276,659 | 44.3 | % | 989,318 | 34.4 | % | 613,341 | 21.3 | % | ||||||||||||||||
Third Quarter | 547,146 | 39.4 | % | 501,154 | 36.1 | % | 341,810 | 24.6 | % | ||||||||||||||||
Fourth Quarter | 795,359 | 45.9 | % | 552,618 | 31.9 | % | 384,825 | 22.2 | % | ||||||||||||||||
2005 | |||||||||||||||||||||||||
First Quarter | 739,056 | 42.3 | % | 670,187 | 38.3 | % | 338,911 | 19.4 | % | ||||||||||||||||
Second Quarter | 713,151 | 46.2 | % | 516,628 | 33.4 | % | 314,811 | 20.4 | % | ||||||||||||||||
Third Quarter | 707,228 | 43.1 | % | 607,024 | 37.0 | % | 328,133 | 20.0 | % | ||||||||||||||||
Fourth Quarter | 662,731 | 42.1 | % | 528,244 | 33.6 | % | 381,800 | 24.3 | % | ||||||||||||||||
2006 | |||||||||||||||||||||||||
January | 245,324 | 43.9 | % | 186,804 | 33.5 | % | 126,092 | 22.6 | % | ||||||||||||||||
February | 262,623 | 45.4 | % | 191,535 | 33.1 | % | 124,525 | 21.5 | % | ||||||||||||||||
March | 250,407 | 46.0 | % | 171,461 | 31.5 | % | 122,587 | 22.5 | % | ||||||||||||||||
April | 164,076 | 44.5 | % | 118,983 | 32.2 | % | 85,964 | 23.3 | % | ||||||||||||||||
May | 196,569 | 43.4 | % | 140,814 | 31.1 | % | 115,273 | 25.5 | % |
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Year | SK Telecom | KTF | LGT | |||||||||
(Won/Minute) | ||||||||||||
2003 | 41.02 | 47.99 | 52.89 | |||||||||
2004 | 31.81 | 47.66 | 58.55 | |||||||||
2005 | 31.19 | 46.70 | 54.98 |
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Domestic Calls |
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International Calls |
International Roaming Arrangements |
CDMA Networks |
CDMA 1xRTT Network |
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WCDMA Network |
WiBro |
Network infrastructure |
• | 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); | |
• | base station transceiver subsystems, which manage the radio transmission by the equipment located at one or more cell sites, including radio-channel management, message transport and hand-off of calls between cell sites; | |
• | switching stations, which switch calls to the proper destinations; and | |
• | leased lines, microwave links or other connectionswhich link the switching stations, the cell sites and the public switched telephone networks of KT Corporation and Hanaro Telecom. |
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Switching | ||||||||
Cell Sites | Stations | |||||||
CDMA Network (excluding CDMA lxRTT and CDMA 1xEV/ DO) | 4.878 | 55 | ||||||
CDMA 1xRTT Network and CDMA 1xEV/ DO | 3.718 | 60 | ||||||
WCDMA | 1.546 | 6 | ||||||
WiBro(1) | — | — |
(1) | We first launched WiBro service in May 2006. |
Wireless Application Developers and Content Providers |
• | Information Technology and Content Providers. We hold investments in approximately 40 companies, with an aggregate book value of approximately Won 22.4 billion as of December 31, 2005. Such companies develop technology and content for use in our fixed-line and Wireless Internet businesses and help enable us to further develop of our multimedia platforms and networks. | |
• | Joint Ventures. Pursuant to an agreement entered into on March 20, 2003, we established UNISK, a joint venture company with China Unicom in December 2003. See “— Global Business — Overseas Operations”. In September 2003, we reached a business cooperation agreement with Teliasonera for the purpose of jointly developing and commercializing new businesses, cross-licensing, partnership exchange and joint advancement into overseas markets. On September 16, 2003, we signed a memorandum of understanding with Alcatel for joint development of a Mobile Payment Service by combining our Nemo with Alcatel’s Prepayment Instant Billing System. |
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• | Mobile Broadcasting Corporation. In September 2003, we entered into an agreement with Mobile Broadcasting Corporation, or MBCO, a wireless multi-media company in Japan, for the purpose of co-owning and launching a satellite for the satellite DMB business. MBCO is a developer and provider of content and technology related to wireless multimedia services and has developed new services in satellite DMB. Under the terms of the agreement, SK Telecom is committed to fund 34.7% of the cost of launching and maintaining the operations of the satellite, which is approximately Won 96.9 billion. As of December 31, 2005, we had invested a total of Won 27.3 billion and had a 7.3% interest in MBCO. We launched the satellite in March 2004. In March 2004, the MIC assigned us a frequency for satellite DMB. In October 2004, we granted the right to use our satellite, satellite orbit and frequency to TU Media Corp., one of our affiliates, which received a license from the MIC as a satellite DMB provider on December 30, 2004. On May 1, 2005, TU Media Corp. began to provide satellite DMB services. As of April 30, 2006, TU Media had over 500,000 subscribers. See “— Multimedia”. | |
• | Mobile Data and Digital Content Market. In order to generate new revenue from the growing mobile data and digital content market, we plan to increase our investment in the entertainment sector, particularly in music and movies. As mobile data and digital content market has become increasingly important in the growth of our business, we are seeking to secure valuable mobile data and digital contents by making equity investments in various content providers. In March 2005, we acquired 8 million shares, or 21.7% equity interest in iHQ Inc., for Won 14.46 billion, with an option to purchase 5 million additional shares from Mr. Hun-Tak Jeong, a majority shareholder of iHQ Inc. iHQ Inc. is an entertainment management firm producing films, managing entertainers and operating on-line game services. We exercised the option to purchase 5 million shares of iHQ on April 26, 2006, which purchase is expected to be consummated in July 2006. Following such purchase we will hold a 34.91% equity interest in iHQ. In August 2005, we also acquired a 60% stake in YBM Seoul Records Inc., Korea’s largest music recording company in terms of records released and revenues, for Won 27.9 billion. Through our acquisition of YBM, we are able to offer customers of our MelOn service access to an expanded digital music contents pool. Also, in July and October 2005, we and certain other Korean investment companies invested an aggregate Won 40 billion to establish three funds to invest in the music industry and seek strategic partnerships with recording companies. As of December 31, 2005, our contribution to the funds amounted to Won 39.6 billion. Furthermore, in September, October and December 2005, we and co-investors invested an aggregate Won 55.8 billion to establish four movie-production funds to strengthen our ability to obtain movie contents. We had invested Won 20 billion in the funds as of December 31, 2005. Such investments reflect our business strategy of diversification into new areas, such as media and entertainment. |
Other Investments |
• | Hanaro Telecom. As of December 31, 2005, we owned a 4.8% interest in the outstanding capital stock of Hanaro Telecom. On September 2, 2003, we purchased Won 120.0 billion of Hanaro Telecom commercial paper in order to provide Hanaro Telecom with short-term liquidity while it attempted to secure a foreign investor that would inject new capital into the company. The decision to provide liquidity support to Hanaro Telecom was made to protect the value of our stake in Hanaro Telecom. Following an investment in Hanaro Telecom by a consortium led by AIG and Newbridge, we disposed of the Hanaro Telecom commercial paper in December 2003. In May 2004, we purchased from Samsung Electronics Co., Ltd. 13,870,000 shares of Hanaro Telecom, representing 3.0% of the outstanding shares of Hanaro, for Won 39.3 billion as part of our strategic efforts in consideration of increasing convergence between wireless and fixed-line services. As a result of the acquisition, our equity interest in Hanaro had increased to 4.8% as of December 31, 2004, up from 1.8% as of December 31, 2003. Following Hanaro’s merger with Korea Thrunet in January 2006, we continue to hold a 4.8% equity interest in Hanaro. | |
• | Powercomm. We currently own a 5.0% interest in Powercomm Corporation, with a book value as of December 31, 2005, of Won 77.1 billion. For more information, see note 4 of the notes to our consolidated financial statements. Powercomm is an operator of fixed-line networks that provides |
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wholesale fixed-line network services, such as leased lines, to telecommunications, Internet and cable television service providers in Korea. We have no current plans to either increase or decrease our investment in Powercomm. | ||
• | SKC&C. We currently own a 30.0% equity interest in SKC&C Co., Ltd., with a book value as of December 31, 2005 of Won 168.2 billion. SKC&C is an information technologies services provider. Substantially all of SKC&C’s revenue is generated from services provided to member companies of the SK Group, including us. We are party to several service contracts with SKC&C related to development and maintenance of our information technologies systems. See “Item 7B. Related Party Transactions”. |
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Overview |
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• | 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. |
Rate Regulation |
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Interconnection |
Wireless Internet Network Co-Share |
Contributions to the Fund for Development of Information Telecommunications |
Universal Service Obligation |
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Frequency Allocation |
Competition Regulation |
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Number Portability |
Contribution to 114 Directory Service |
Foreign Ownership and Investment Restrictions and Requirements |
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Handset Subsidy Payments |
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Item 4C. | Organizational Structure |
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Item 4D. | Property, Plants And Equipment |
Approximate Area | ||||||
Location | Primary Use | in Square Feet | ||||
Seoul Metropolitan Area | Corporate Headquarters | 988,455 | ||||
Regional Headquarters | 1,095,992 | |||||
Customer Service Centers | 384,223 | |||||
Training Centers | 397,574 | |||||
Central Research and Development Center | 482,725 | |||||
Others | 547,061 | |||||
Busan | Regional Headquarters | 363,272 | ||||
Others | 237,056 | |||||
Daegu | Regional Headquarters | 153,573 | ||||
Others | 317,440 | |||||
Cholla and Jeju Provinces | Regional Headquarters | 265,595 | ||||
Others | 359,784 | |||||
Choongchung Province | Regional Headquarters | 459,240 | ||||
Others | 481,978 | |||||
Others | Seoul National University Research Center | 108,530 | ||||
KAIST SUPEX Management Center | 10,817 | |||||
Ewha University SK Telecom Center | 7,117 |
Item 4.A. | UNRESOLVED STAFF COMMENTS |
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Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Item 5A. | Operating Results |
Revenue |
Year Ended December 31, | |||||||||||||||||||||||||
2003 | 2004 | 2005 | |||||||||||||||||||||||
Percentage | Percentage | Percentage | |||||||||||||||||||||||
of Total | of Total | of Total | |||||||||||||||||||||||
Revenue | Revenue | Revenue | Revenue | Revenue | Revenue | ||||||||||||||||||||
(In billions of won, except percentages) | |||||||||||||||||||||||||
Cellular Revenue: | |||||||||||||||||||||||||
Wireless Services(1) | 8,462.7 | 82.4 | 8,798.4 | 83.2 | 9,168.7 | 85.5 | |||||||||||||||||||
Interconnection | 1,017.1 | 9.9 | 849.4 | 8.0 | 898.6 | 8.4 | |||||||||||||||||||
Digital Handset Sales(2) | 612.0 | 5.9 | 649.8 | 6.2 | 294.6 | 2.7 | |||||||||||||||||||
Total Cellular Revenue | 10,091.8 | 98.2 | 10,297.6 | 97.4 | 10,361.9 | 96.6 | |||||||||||||||||||
Other Revenue: | |||||||||||||||||||||||||
International Calling Service(3) | 97.4 | 1.0 | 126.3 | 1.2 | 138.7 | 1.3 | |||||||||||||||||||
Portal Service(4) | 42.0 | 0.4 | 85.0 | 0.8 | 126.9 | 1.2 | |||||||||||||||||||
Miscellaneous | 40.9 | 0.4 | 61.7 | 0.6 | 94.3 | 0.9 | |||||||||||||||||||
Total Other Revenue: | 180.3 | 1.8 | 273.0 | 2.6 | 359.9 | 3.4 | |||||||||||||||||||
Total Operating Revenue: | 10,272.1 | 100.0 | 10,570.6 | 100.0 | 10,721.8 | 100.0 | |||||||||||||||||||
Total Operating Revenue Growth | 10.2 | % | 2.9 | % | 1.4 | % |
(1) | Wireless services revenue includes initial connection fees, monthly access fees, usage charges, international charges, wireless Internet service fees, value-added-service fees and interest on overdue subscriber accounts (net of telephone tax). |
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(2) | Until July 2005, we consolidated revenues derived from sales of digital handsets made through our former subsidiary, SK Teletech. In July 2005, we sold 4,542,000 shares of SK Teletech owned by us to Pantech & Curitel, Inc., a Korean mobile handset manufacturer, reducing our equity interest in SK Teletech from 89.1% to 29.1%, which became a 22.7% equity interest in Pantech following the merger of SK Teletech (renamed SKY Teletech following our sale of the company to Pantech & Curitel) into Pantech in December 2005. |
(3) | Provided by SK Telink Co. |
(4) | Portal service revenue attributable to SK Communications Co., Ltd. and, since 2003, SK Communications and Paxnet Co., Ltd., and since 2005, SK Communications, Paxnet Co., Ltd. and U-Land Company Limited. |
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Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Outgoing Voice Minutes (In Thousands):(1) | 42,175,874 | 43,184,944 | 45,241,348 | |||||||||
Average Monthly Outgoing Voice Minutes Per Subscriber:(2) | 197 | 194 | 197 | |||||||||
Average Monthly Revenue Per Subscriber:(3)(4) | 39,739 | 39,689 | 40,205 |
(1) | Does not include minutes of incoming calls or minutes of use relating the use of short text messaging and data services. |
(2) | The average monthly outgoing voice minutes per subscriber is computed by dividing the total minutes of outgoing voice usage for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. The monthly weighted average number of subscribers is the sum of the average number of subscribers for the months calculated by taking the simple average number of subscribers at the beginning of the month and at the end of the month, divided by the number of months in the period. |
(3) | The average monthly revenue per subscriber excludes interconnection revenue and is computed by dividing total initial connection fees, monthly access fees, usage charges for voice and data, international charges, value-added service fees and interest on overdue subscriber accounts (net of telephone tax) for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. |
(4) | Including interconnection revenue, consolidated average monthly revenue per subscriber was Won 44,546 for 2003, Won 43,542 for 2004 and Won 44,167 for 2005. |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||||||||||
(In billions of won, except percentage data) | ||||||||||||||||||||||||
Operating Revenue | 10,272.1 | 100.00 | % | 10,570.6 | 100.00 | % | 10,721.8 | 100.00 | % | |||||||||||||||
Operating Expenses | 7,167.0 | 69.77 | 8,130.9 | 76.92 | 8,051.2 | 75.09 | ||||||||||||||||||
Operating Income | 3,105.1 | 30.23 | 2,439.7 | 23.08 | 2,670.6 | 24.91 | ||||||||||||||||||
Other Income | 261.4 | 2.54 | 199.4 | 1.89 | 392.6 | 3.66 | ||||||||||||||||||
Other Expenses | 612.2 | 5.96 | 516.0 | 4.88 | 501.6 | 4.68 | ||||||||||||||||||
Income Before Income Taxes and Minority Interest | 2,754.3 | 26.81 | 2,123.1 | 20.09 | 2,561.6 | 23.89 | ||||||||||||||||||
Income Taxes | 789.0 | 7.68 | 629.7 | 5.96 | 693.3 | 6.47 | ||||||||||||||||||
Minority Interest | 0.8 | 0.01 | (1.9 | ) | (0.02 | ) | 4.7 | 0.04 | ||||||||||||||||
Net Income | 1,966.1 | 19.14 | % | 1,491.5 | 14.10 | % | 1,873.0 | 17.47 | % | |||||||||||||||
Depreciation and Amortization(1) | 1,510.5 | 14.70 | % | 1,607.5 | 15.20 | % | 1,546.3 | 14.42 | % |
(1) | Excludes the depreciation and amortization allocated to internal research and development costs of Won 135.8 billion, Won 134.1 billion and Won 126.9 billion for the years ended December 31, 2003, 2004 and 2005, respectively. |
2005 Compared to 2004 |
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2004 Compared to 2003 |
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Item 5B. | Liquidity and Capital Resources |
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Cash Flow Analysis |
Year Ended December 31, | Change | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2003 to 2004 | 2004 to 2005 | ||||||||||||||||||||||||
(In billions of won, except percentages) | ||||||||||||||||||||||||||||
Net Cash Flow from Operating Activities | 3,329.4 | 2,516.8 | 3,404.1 | (812.6 | ) | (24.4 | )% | 887.3 | 35.3 | % | ||||||||||||||||||
Net Cash Used in Investing Activities | (1,415.1 | ) | (1,470.3 | ) | (1,938.2 | ) | (55.2 | ) | (3.9 | ) | (467.9 | ) | (31.8 | ) | ||||||||||||||
Net Cash Used in Financing Activities | (2,261.0 | ) | (968.6 | ) | (1,429.0 | ) | 1,292.4 | 57.2 | (460.4 | ) | (47.5 | ) | ||||||||||||||||
Net Cash Flow due to Changes in Consolidated Subsidiaries | 0.1 | (24.8 | ) | (29.1 | ) | (24.9 | ) | (249.0 | ) | (4.3 | ) | (17.3 | ) | |||||||||||||||
Equivalents | (346.6 | ) | 53.1 | 7.8 | 399.7 | 115.3 | (45.3 | ) | (85.3 | ) | ||||||||||||||||||
Cash and Cash Equivalents at Beginning of Period | 664.1 | 317.5 | 370.6 | (346.6 | ) | (52.2 | ) | 53.1 | 16.7 | |||||||||||||||||||
Cash and Cash Equivalents at End of Period | 317.5 | 370.6 | 378.4 | 53.1 | 16.7 | % | 7.8 | 2.1 | % | |||||||||||||||||||
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Capital Requirements and Resources |
Year Ended (Ending) December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
(In billions of won) | |||||||||||||
CDMA (95A/B, 1xRTT and EV-DO) Network3 | 737 | 728 | 376 | ||||||||||
WCDMA Network | 204 | 220 | 575 | ||||||||||
WiBro(1) | — | — | — | ||||||||||
Others(2) | 707 | 684 | 466 | ||||||||||
Total(3) | 1,648 | 1,632 | 1,417 | ||||||||||
(1) | We commenced WiBro service in May 2006. |
(2) | Includes investments in infrastructure consisting of equipment necessary for the provision of data services and marketing. |
(3) | Also, see note 7 of the notes to our consolidated financial statements. |
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Year Ending December 31, | Total | |||
(In billions of won) | ||||
2006 | 814.4 | |||
2007 | 708.6 | |||
2008 | 301.7 | |||
After 2008 | 1,389.8 |
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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 | 3,189.8 | 800.0 | 1,000.0 | 885.9 | 503.9 | ||||||||||||||||
Interest | 334.0 | 132.0 | 136.0 | 54.0 | 12.0 | ||||||||||||||||
Long-term borrowings | 0.2 | 0.1 | 0.1 | 0.0 | |||||||||||||||||
Capital lease obligations | 24.5 | 14.3 | 10.2 | — | — | ||||||||||||||||
Operating leases | — | — | — | — | |||||||||||||||||
Purchase obligations | 53.5 | 53.5 | — | — | |||||||||||||||||
Facility deposits | 38.7 | 14.9 | — | — | 23.8 | ||||||||||||||||
Derivatives | 73.0 | — | — | 13.0 | 60.0 | ||||||||||||||||
Investment commitment to HELIO | 99.3 | 79.5 | 19.8 | — | — | ||||||||||||||||
Other long-term payables(2) | |||||||||||||||||||||
Principal | 650.0 | — | 200.0 | 280.0 | 170.0 | ||||||||||||||||
Interest | 138.4 | 32.0 | 60.0 | 38.0 | 8.4 | ||||||||||||||||
Total contractual cash obligations(3) | 4,601.4 | 1,126.3 | 1,426.1 | 1,270.9 | 778.1 | ||||||||||||||||
(1) | We are contractually obligated to make severance payments to eligible employees we have employed for more than one year, upon termination of their employment, regardless of whether such termination is voluntary or involuntary. Accruals for severance indemnities are recorded based on the amount we would be required to pay in the event the employment of all our employees were to terminate at the balance date. However, we have not yet estimated cash flows for future periods. Accordingly, payments due in connection with severance indemnities have been excluded from this table. |
(2) | Related to acquisition of IMT license. See note 2(j) of the notes to our consolidated financial statements. |
(3) | This amount does not include our future investments in the CDMA market in Vietnam, which we expect to make through our overseas subsidiary SLD Telecom PTE. Ltd. under a business cooperation contract with Saigon Post & Telecommunication Service Corporation. See “Item 4B. Business Overview — Other Investments and Relationships” and “— Critical Accounting Policies, Estimates And Judgments —Off-Balance Sheet Arrangements”. |
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• | Through 2004, when our equity interests in the equity method investees were diluted as a result of the equity method investees’ direct sales of their unissued shares to third parties, the changes in the our proportionate equity of investees were accounted for as capital transactions. Effective January 1, 2005, such transactions are accounted for as income statement treatment, pursuant to adoption of SKAS No. 15, “Investments: Equity Method”. As a result of adopting SKAS No. 15, net income for the year ended December 31, 2005 increased by Won 6.3 billion (net of tax effect of Won 2.4 billion). | |
• | Through 2004, tax effects of temporary differences related to capital surplus or capital adjustments were excluded in determining the deferred tax assets or liabilities. Effective January 1, 2005, such tax effects of temporary differences are included in determining the deferred tax assets or liabilities, pursuant to adoption of SKAS No. 16 “Income Taxes”. Accordingly, adjustments made directly to capital surplus or capital adjustments, which result in temporary differences, are recorded net of related tax effects. In addition, effective January 1, 2005, deferred income tax assets and liabilities which were presented on the balance sheet as a single non-current net number through 2004, are separated into current and non-current portions. As a result of adopting SKAS No. 16, total assets and total liabilities as of December 31, 2005 increased by Won 67.6 billion and Won 97.8 billion, respectively, and total stockholders’ equity as of December 31, 2005 decreased by Won 30.2 billion, which was directly reflected in capital surplus or capital adjustments. See note 18 of the notes to our consolidated financial statements. |
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• | Through 2004, provisions were recorded at nominal value. Effective January 1, 2005, provisions are recorded at the present value when the effect of the time value of money is material, pursuant to adoption of SKAS No. 17 “Provisions, Contingent Liabilities and Contingent Assets”. SKAS No. 17 is prospectively applied and as a result of adopting such accounting standard, total liabilities as of December 31, 2005 decreased by Won 7.4 billion and ordinary income and net income for the year ended December 31, 2005 increased by Won 5.4 billion. See note 25 of the notes to our consolidated financial statements. |
Allowances for Doubtful Accounts |
Inventories |
Estimated Useful Lives |
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Impairment of Long-lived Assets Including the WCDMA Frequency Usage Right |
Impairment of Investment Securities |
Employee Stock Option Compensation Plan |
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Income Taxes |
Off-Balance Sheet Arrangements |
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As of and for the Year Ended | |||||||||||||
December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
(In billions of won) | |||||||||||||
Internal R&D Expenses | 235.8 | 267.1 | 252.0 | ||||||||||
External R&D Expenses | 64.9 | 69.0 | 69.1 | ||||||||||
Total R&D Expenses | 300.7 | 336.1 | 321.1 | ||||||||||
Internal Research and Development |
External Research and Development |
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Item 5D. | Trend Information |
Item 5E. | Off-Balance Sheet Arrangements |
Item 5F. | Tabular Disclosure of Contractual Obligations |
Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Item 6A. | Directors and Senior Management |
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Other Principal | ||||||||||||||||
Director | Expiration | Directorships and | ||||||||||||||
Name | Date of Birth | Since | of Term | Position | Positions | Business Experience | ||||||||||
Jung Nam Cho | Nov. 20, 1941 | 1995 | 2007 | Vice-Chairman and Representative Director | President & COO, SK Telecom | |||||||||||
Shin Bae Kim | Oct. 15, 1954 | 2002 | 2008 | CEO and Representative Director | Chairman, Korea Association of RFID/USN | Head of Strategic Planning Group, Shinsegi Telecomm, Inc.; Director, SK Telecom; Senior Vice President, SK Telecom; Director, KORMS | ||||||||||
Bang Hyung Lee | Aug. 20, 1955 | 2005 | 2008 | Executive Vice- President, Chief Marketing Officer and Head of Business Center | Head of Internet Business Group, SK Telecom; Head of Marketing Group, SK Telecom; Senior Accountant, Deloitte Haskin & Sells, USA | |||||||||||
Sung Min Ha | Mar. 24, 1957 | 2004 | 2007 | Senior Vice President and Chief Financial Officer | Representative Director, SK Capital | Head of Strategic Planning Group, SK Telecom; Director, SK Telink; Auditor, SK C&C; Chairman and Representative Director, SLD Telecom; Auditor, SK Teletech |
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Other Principal | ||||||||||||||||||
Director | Expiration | Directorships and | ||||||||||||||||
Name | Date of Birth | Since | of Term | Position | Positions | Business Experience | ||||||||||||
Dae Sik Kim | Jan. 11, 1955 | 2005 | 2008 | Independent Non- executive Director | Professor, Hanyang University; Committee Member, MOFE Advisory Committee on Financial Development | University of Pennsylvania, MBA (1981), Ph.D. (1987) | ||||||||||||
Yong Woon Kim | Oct. 4, 1943 | 2003 | 2006 | Independent Non- executive Director | Non-Standing Auditor, Pohang University of Science and Technology | Senior Executive Vice President (Legal Department, Seoul Office, Investment and Finance) and Director, POSCO; Standing Advisor, POSCO Research Institute | ||||||||||||
Dae Kyu Byun | Mar. 8, 1960 | 2005 | 2008 | Independent Non- executive Director | CEO & Representative Director, Humax Co., Ltd.; Head Vice-President, Korea Venture Business Association | Director, the Federation of Korea Information Industries; Representative Director, Guin Co.; Co-founder, Venture Leaders Club | ||||||||||||
Seung Taik Yang | Oct. 24, 1939 | 2005 | 2008 | Independent Non- executive Director | President, Tong- Myung University of Information Technology | Polytechnic Institute of Brooklyn, Ph.D.; 7th Minister, Ministry of Information and Communication | ||||||||||||
Jae Seung Yoon | Nov. 9, 1962 | 2002 | 2008 | Independent Non- executive Director | CEO & Representative Director; Daewoong Pharmaceutical Co., Ltd.; Vice-president, Insung Information Co., Ltd. | Public Prosecutor, The Seoul/Busan District Public Prosecutors’ Office; Auditor and Vice President, Daewoong Pharmaceutical Co., Ltd. | ||||||||||||
Sang C. Lee | Jan. 24, 1941 | 1999 | 2008 | Independent Non- executive Director | IT Consultant | Chairman, Communication Network Interface, Inc.; Chairman and CEO, Spectron Corp.; President, Scovill Fasteners, Inc.; Director of Organization, ITT Worldwide Corp.; Vice President, ITT Asia Pacific Corp. | ||||||||||||
Hyun Chin Lim | Apr. 26, 1949 | 2006 | 2009 | Independent Non- executive Director | Dean, Seoul National University, Professor, Central Officials Training Institute; Chairman, Korea Association of Sociology | Professor, Seoul National University |
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Item 6B. | Compensation |
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Number of | |||||||||||||||||||
Shares Allotted | Number of | ||||||||||||||||||
Options | |||||||||||||||||||
Name | Position | 2003 | 2004 | 2005 | Exercised | ||||||||||||||
Jung Nam Cho | Director | 0 | 0 | 0 | 0 | ||||||||||||||
Shin Bae Kim | Director | 0 | 0 | 0 | 0 | ||||||||||||||
Bang Hyung Lee | Director | 0 | 0 | 0 | 0 | ||||||||||||||
Sung Min Ha | Director | 0 | 0 | 0 | 0 | ||||||||||||||
Dae Sik Kim | Independent Non-executive Director | 0 | 0 | 0 | 0 | ||||||||||||||
Yong Woon Kim | Independent Non-executive Director | 0 | 0 | 0 | 0 | ||||||||||||||
Dae Kyu Byun | Independent Non-executive Director | 0 | 0 | 0 | 0 | ||||||||||||||
Seung Taik Yang | Independent Non-executive Director | 0 | 0 | 0 | 0 | ||||||||||||||
Jae Seung Yoon | Independent Non-executive Director | 0 | 0 | 0 | 0 | ||||||||||||||
Sang C. Lee | Independent Non-executive Director | 0 | 0 | 0 | 0 | ||||||||||||||
Hyun Chin Lim | Independent Non-executive Director | 0 | 0 | 0 | 0 | ||||||||||||||
Other Officers | 0 | 0 | 0 | 0 | |||||||||||||||
Total | 0 | 0 | 0 | 0 | |||||||||||||||
Item 6C. | 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. |
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NYSE Corporate Governance Standards | SK Telecom Corporate Governance Practice | |
Director Independence | ||
Listed companies must have a majority of independent directors. | Of the 11 members of our board of directors, 7 are independent directors. | |
Executive Session | ||
Listed companies must hold meetings solely attended by non-management directors to more effectively check and balance management directors. | Our Audit Committee, which is comprised solely of three independent directors, holds meetings whenever there are matters related to management directors, and such meetings are generally held once every month. | |
Nomination/ Corporate Governance Committee | ||
Listed companies must have a nomination/corporate governance committee composed entirely of independent directors. | Although we do not have a separate nomination/ corporate governance committee, we maintain an Independent Director Recommendation Committee composed of independent directors and management directors. |
NYSE Corporate Governance Standards | SK Telecom Corporate Governance Practice | |
Audit Committee | ||
Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. | We maintain an Audit Committee comprised solely of three independent directors. | |
Audit Committee Additional Requirements | ||
Listed companies must have an audit committee that is composed of more than three directors. | Our Audit Committee has three independent directors. | |
Shareholder Approval of Equity Compensation Plan | ||
Listed companies must allow its shareholders to exercise their voting rights with respect to any material revision to the 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 Law in connection with such matters, including the governance of the board of directors. | |
Code of Business Conduct and Ethics | ||
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or executive officers. | We have adopted a Code of Business Conduct and Ethics for all of our directors, officers and employees, and such code is also available on our website at www.sktelecom.com. |
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Item 6D. | Employees |
Regular | Temporary | |||||||||||
Employees | Employees | Total | ||||||||||
December 31, 2003 | 5,447 | 1,474 | 6,921 | |||||||||
December 31, 2004 | 6,421 | 932 | 7,353 | |||||||||
December 31, 2005 | 5,727 | 919 | 6,646 |
New | |||||||||||||||||||||||||
Marketing | Production | Research | Support | Business | Total | ||||||||||||||||||||
Regular Employees | 1,613 | 1,880 | 552 | 1,011 | 691 | 5,727 | |||||||||||||||||||
Temporary Employees | 669 | 148 | 6 | 80 | 16 | 919 | |||||||||||||||||||
Total | 2,282 | 2,028 | 558 | 1,091 | 687 | 6,646 | |||||||||||||||||||
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Item 6E. | Share Ownership |
Percentage | ||||||||||||||||||||
Number | of Total | Special | ||||||||||||||||||
of Shares | Shares | Voting | ||||||||||||||||||
Name | Position | Owned | Outstanding | Rights | Options | |||||||||||||||
Standing Directors: | ||||||||||||||||||||
Jung Nam Cho | Vice-Chairman and Representative | 0 | 0 | None | 6,150 | |||||||||||||||
Director | ||||||||||||||||||||
Shin Bae Kim | CEO and Representative Director | 1,270 | * | None | 1,650 | |||||||||||||||
Bang Hyung Lee | Executive Vice-President | 1,630 | * | None | 1,620 | |||||||||||||||
Sung Min Ha | Chief Financial Officer | 738 | * | None | 690 | |||||||||||||||
Non-Standing Directors: | ||||||||||||||||||||
Dae Sik Kim | Independent Non-executive Director | 0 | 0 | None | 1,000 | |||||||||||||||
Yong Woon Kim | Independent Non-executive Director | 0 | 0 | None | 0 | |||||||||||||||
Dae Kyu Byun | Independent Non-executive Director | 50 | * | None | 1,000 | |||||||||||||||
Seung Taik Yang | Independent Non-executive Director | 0 | 0 | None | 0 | |||||||||||||||
Jae Seung Yoon | Independent Non-executive Director | 200 | * | None | 1,000 | |||||||||||||||
Sang C. Lee | Independent Non-executive Director | 0 | 0 | None | 1,000 | |||||||||||||||
Hyun Chin Lim | Independent Non-executive Director | 0 | 0 | None | 0 |
* | Less than 1.0% |
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Item 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Item 7A. | Major Shareholders |
Percentage | Percentage | ||||||||||||
Total | Total | ||||||||||||
Number of | Shares | Shares | |||||||||||
Shareholder/Category | Shares | Issued | Outstanding | ||||||||||
Domestic Shareholders | |||||||||||||
SK Group(1) | 18,748,459 | 22.79 | % | 25.47 | % | ||||||||
POSCO | 2,991,496 | 3.64 | 4.06 | ||||||||||
Employees(2) | 297,246 | 0.36 | 0.40 | ||||||||||
Treasury shares(3) | 8,662,415 | 10.53 | N/A | ||||||||||
Officers and Directors | 4,688 | 0.01 | 0.01 | ||||||||||
Other Domestic Shareholders | 11,466,681 | 13.93 | 15.58 | ||||||||||
Foreign Shareholders | 40,105,726 | 48.74 | 54.48 | ||||||||||
Total Issued Shares | 82,276,711 | 100.00 | % | 100.00 | % | ||||||||
(1) | The SK Group’s ownership interest consists of the following as of December 31, 2005: |
Percentage | Percentage | |||||||||||
Total | Total | |||||||||||
Number of | Shares | Shares | ||||||||||
SK Group Member | Shares | Issued | Outstanding | |||||||||
SK Corporation | 17,663,127 | 21.47 | % | 24.00 | % | |||||||
SK Securities Co., Ltd. | 7 | 0.00 | 0.00 | |||||||||
SK Networks | 1,085,325 | 1.32 | 1.47 | |||||||||
18,748,459 | 22.79 | % | 25.47 | % | ||||||||
(1) | The SK Group is a group of affiliated entities. As of December 31, 2005, the ownership interests among the SK Group included, among others: |
• | SK Corporation owned: 21.47% of SK Telecom Co., Ltd., 40.97% of SK Networks, 46.22% of SKC and 72.13% of SK Shipping Co., Ltd. | |
• | SK Networks owned 1.32% of SK Telecom Co., Ltd., 17.71% of SK Shipping, 15% of SK Computer & Communications Co., Ltd., and 22.71% of SK Securities Co., Ltd. | |
• | SK Chemicals owned 0.83% of SK Corporation and 39.40% of SK Engineering and Construction. | |
• | SKC owned 6.2% of SK Chemicals, 10.16% of SK Shipping Co., Ltd. and 12.41% of SK Securities Co., Ltd. | |
• | SK Shipping Co., Ltd. owned 30.94% of SK Engineering and Construction. | |
• | SK Computer & Communications Co., Ltd. owned 11.16% of SK Corporation. | |
• | We owned 30.0% of SK Computer & Communications Co., Ltd. |
(2) | Represents shares owned by our employee stock ownership association. See “Item 6D. Employees”. |
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(3) | Treasury shares do not have any voting rights; includes 1,777,173 treasury shares that were deposited with Korea Securities Depository to be reserved and used to satisfy the conversion rights of the holders of US$329.5 million in zero coupon convertible notes that were sold in May 2004. |
As of December 31, | ||||||||||||
Shareholder | 2003 | 2004 | 2005 | |||||||||
(As a percentage of total | ||||||||||||
issued shares)(1) | ||||||||||||
SK Group | 24.60 | % | 24.03 | % | 22.79 | % | ||||||
SK Corporation | 21.47 | 21.47 | 21.47 | |||||||||
SK Networks(2) | 3.06 | 2.55 | 1.32 | |||||||||
POSCO(3) | 4.98 | 4.98 | 3.64 |
(1) | Includes 8,662,403, 8,662,415 and 8,662,415 shares held in treasury as of December 31, 2003, 2004 and 2005, respectively. |
(2) | SK Networks sold 418,000 shares in January 2004 and currently owns 1,085,325 shares. |
(3) | POSCO acquired these shares in connection with our acquisition of a 27.7% equity interest in Shinsegi. |
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Item 7B. | Related Party Transactions |
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Item 7C. | Interest of Experts and Counsel |
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Item 8. | FINANCIAL INFORMATION |
Item 8A. | Consolidated Statements and Other Financial Information |
FTC Proceedings |
MIC Proceedings |
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Multinet Litigation |
Coloring Litigation |
GNI Enterprise Litigation |
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Number of Shares | ||||||||||||
Dividend | Total Amount of | Entitled to | ||||||||||
Year Ended December 31, | per Share | Dividends | Dividend | |||||||||
(In won)(1) | (In billions of won) | |||||||||||
1997 | 90 | 5.6 | 62,169,720 | |||||||||
1998 | 118 | 7.6 | 64,258,670 | |||||||||
1999 | 185 | 15.4 | 83,284,110 | |||||||||
2000 | 540 | 48.1 | 89,079,034 | |||||||||
2001 | 690 | 57.3 | 82,993,404 | |||||||||
2002 | 1,800 | 151.7 | 84,299,698 | |||||||||
2003 | 5,500 | 404.9 | 73,614,308 | |||||||||
2004 | 10,300 | 758.2 | 73,614,296 | |||||||||
2005 | 9,000 | 662.5 | 73,614,296 |
(1) | Dividend per share and amount of shares entitled to dividend have been adjusted to give effect to the10-for-1 stock split of our common shares which became effective on April 21, 2000. |
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Item 8B. | Significant Changes |
Item 9. | THE OFFER AND LISTING |
Item 9A. | Offering and Listing Details |
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Prices(1) | ||||||||||||||||||
Average Daily | ||||||||||||||||||
Trading Volume | ||||||||||||||||||
Calendar Year | High(1) | Low(1) | Close | (Number of Shares) | ||||||||||||||
(Won per share) | ||||||||||||||||||
2001 | 295,000 | 165,000 | 268,000 | 242,254 | ||||||||||||||
First Quarter | 293,500 | 182,000 | 183,000 | 253,393 | ||||||||||||||
Second Quarter | 235,500 | 165,000 | 191,500 | 312,070 | ||||||||||||||
Third Quarter | 233,000 | 184,500 | 208,000 | 154,785 | ||||||||||||||
Fourth Quarter | 295,000 | 220,000 | 268,000 | 250,676 | ||||||||||||||
2002 | 299,000 | 209,500 | 229,000 | 261,482 | ||||||||||||||
First Quarter | 299,000 | 242,000 | 290,000 | 263,168 | ||||||||||||||
Second Quarter | 292,000 | 239,000 | 269,500 | 227,115 | ||||||||||||||
Third Quarter | 279,500 | 209,500 | 237,000 | 241,154 | ||||||||||||||
Fourth Quarter | 252,500 | 220,000 | 229,000 | 314,019 | ||||||||||||||
2003 | 235,000 | 142,000 | 199,000 | 327,689 | ||||||||||||||
First Quarter | 235,000 | 142,000 | 153,000 | 497,115 | ||||||||||||||
Second Quarter | 210,000 | 157,500 | 204,000 | 298,346 | ||||||||||||||
Third Quarter | 216,000 | 183,000 | 184,000 | 267,821 | ||||||||||||||
Fourth Quarter | 212,500 | 185,000 | 199,000 | 247,332 | ||||||||||||||
2004 | 238,500 | 154,500 | 197,000 | 179,712 | ||||||||||||||
First Quarter | 238,500 | 207,500 | 214,500 | 243,681 | ||||||||||||||
Second Quarter | 213,000 | 179,000 | 190,000 | 188,095 | ||||||||||||||
Third Quarter | 186,000 | 154,500 | 175,500 | 137,559 | ||||||||||||||
Fourth Quarter | 205,000 | 174,500 | 197,000 | 151,903 | ||||||||||||||
2005 | 216,500 | 163,500 | 181,000 | 187,053 | ||||||||||||||
First Quarter | 200,500 | 171,000 | 171,000 | 203,869 | ||||||||||||||
Second Quarter | 192,500 | 163,500 | 182,000 | 137,021 | ||||||||||||||
Third Quarter | 216,500 | 178,500 | 202,500 | 156,019 | ||||||||||||||
Fourth Quarter | 209,500 | 181,000 | 181,000 | 249,550 | ||||||||||||||
2006 (through June 26) | 237,500 | 176,000 | 201,000 | 197,780 | ||||||||||||||
First Quarter | 204,500 | 176,000 | 192,500 | 177,491 | ||||||||||||||
January | 192,000 | 176,000 | 192,000 | 221,563 | ||||||||||||||
February | 204,500 | 189,500 | 202,500 | 201,075 | ||||||||||||||
March | 203,000 | 187,500 | 192,500 | 113,984 | ||||||||||||||
Second Quarter (through June 26) | 237,500 | 188,500 | 201,000 | 220,204 | ||||||||||||||
April | 222,500 | 188,500 | 221,500 | 262,914 | ||||||||||||||
May | 237,000 | 207,500 | 225,500 | 182,659 | ||||||||||||||
June (through June 26) | 234,000 | 193,000 | 201,000 | 214,127 |
(1) | Both high and low prices are based on the daily closing prices for the period. |
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Prices(1) | ||||||||||||||||||
Average Daily | ||||||||||||||||||
Trading Volume | ||||||||||||||||||
Calendar Year | High(1) | Low(1) | Close | (Number of Shares) | ||||||||||||||
(US$ per ADS) | (Number of ADSs) | |||||||||||||||||
2001 | 28.94 | 13.50 | 21.62 | 710,410 | ||||||||||||||
First Quarter | 28.94 | 15.18 | 15.18 | 743,602 | ||||||||||||||
Second Quarter | 21.05 | 13.50 | 16.90 | 817,532 | ||||||||||||||
Third Quarter | 20.21 | 16.15 | 18.44 | 655,302 | ||||||||||||||
Fourth Quarter | 25.29 | 18.26 | 21.62 | 623,611 | ||||||||||||||
2002 | 26.75 | 19.25 | 21.35 | 684,421 | ||||||||||||||
First Quarter | 24.70 | 20.30 | 24.60 | 488,958 | ||||||||||||||
Second Quarter | 26.75 | 20.20 | 24.40 | 555,865 | ||||||||||||||
Third Quarter | 26.36 | 19.25 | 21.23 | 963,578 | ||||||||||||||
Fourth Quarter | 22.81 | 19.30 | 21.35 | 717,859 | ||||||||||||||
2003 | 21.85 | 12.83 | 18.65 | 743,316 | ||||||||||||||
First Quarter | 21.85 | 12.83 | 13.62 | 971,259 | ||||||||||||||
Second Quarter | 19.40 | 14.07 | 18.86 | 723,959 | ||||||||||||||
Third Quarter | 20.83 | 17.71 | 17.84 | 724,406 | ||||||||||||||
Fourth Quarter | 19.90 | 17.46 | 18.65 | 564,023 | ||||||||||||||
2004 | 25.01 | 17.28 | 22.25 | 911,823 | ||||||||||||||
First Quarter | 25.01 | 19.43 | 21.30 | 1,331,177 | ||||||||||||||
Second Quarter | 21.83 | 19.15 | 20.99 | 832,175 | ||||||||||||||
Third Quarter | 20.76 | 17.28 | 19.45 | 768,117 | ||||||||||||||
Fourth Quarter | 23.10 | 19.30 | 22.25 | 727,683 | ||||||||||||||
2005 | 23.14 | 18.96 | 20.29 | 882,342 | ||||||||||||||
First Quarter | 22.19 | 19.41 | 19.72 | 798,390 | ||||||||||||||
Second Quarter | 21.84 | 18.96 | 20.40 | 618,870 | ||||||||||||||
Third Quarter | 23.14 | 20.06 | 21.84 | 1,071,227 | ||||||||||||||
Fourth Quarter | 21.95 | 19.74 | 20.29 | 1,039,398 | ||||||||||||||
2006 (through June 26) | 27.70 | 20.62 | 22.54 | 983,033 | ||||||||||||||
First Quarter | 24.56 | 20.62 | 23.59 | 952,819 | ||||||||||||||
January | 23.23 | 20.62 | 23.23 | 1,123,040 | ||||||||||||||
February | 24.51 | 23.06 | 24.15 | 1,096,226 | ||||||||||||||
March | 24.56 | 23.00 | 23.59 | 686,335 | ||||||||||||||
Second Quarter (through June 26) | 27.70 | 22.54 | 22.54 | 1,015,329 | ||||||||||||||
April | 26.70 | 23.31 | 26.70 | 874,747 | ||||||||||||||
May | 27.70 | 24.91 | 26.10 | 1,073,577 | ||||||||||||||
June (through June 26) | 26.75 | 22.54 | 22.54 | 1,097,071 |
(1) | Both high and low prices are based on the daily closing prices for the period. |
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The Korea Exchange Inc. |
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Period Average | ||||||||||||||||||||||||
Price | ||||||||||||||||||||||||
Dividend | Earnings | |||||||||||||||||||||||
Year | Opening | High | Low | Closing | Yield(1)(%) | Ratio(2) | ||||||||||||||||||
1980 | 100.00 | 119.36 | 100.00 | 106.87 | 20.9 | 2.6 | ||||||||||||||||||
1981 | 97.95 | 165.95 | 93.14 | 131.37 | 13.2 | 3.1 | ||||||||||||||||||
1982 | 123.60 | 134.49 | 106.00 | 127.31 | 10.5 | 3.4 | ||||||||||||||||||
1983 | 122.52 | 134.46 | 115.59 | 121.21 | 6.9 | 3.8 | ||||||||||||||||||
1984 | 116.73 | 142.46 | 114.37 | 142.46 | 5.1 | 4.5 | ||||||||||||||||||
1985 | 139.53 | 163.37 | 131.40 | 163.37 | 5.3 | 5.2 | ||||||||||||||||||
1986 | 161.40 | 279.67 | 153.85 | 272.61 | 4.3 | 7.6 | ||||||||||||||||||
1987 | 264.82 | 525.11 | 264.82 | 525.11 | 2.6 | 10.9 | ||||||||||||||||||
1988 | 532.04 | 922.56 | 527.89 | 907.20 | 2.4 | 11.2 | ||||||||||||||||||
1989 | 919.61 | 1,007.77 | 844.75 | 909.72 | 2.0 | 13.9 | ||||||||||||||||||
1990 | 908.59 | 928.77 | 566.27 | 696.11 | 2.2 | 12.8 | ||||||||||||||||||
1991 | 679.75 | 763.10 | 586.51 | 610.92 | 2.6 | 11.2 | ||||||||||||||||||
1992 | 624.23 | 691.48 | 459.07 | 678.44 | 2.2 | 10.9 | ||||||||||||||||||
1993 | 697.41 | 874.10 | 605.93 | 866.18 | 1.6 | 12.7 | ||||||||||||||||||
1994 | 879.32 | 1,138.75 | 860.47 | 1,027.37 | 1.2 | 16.2 | ||||||||||||||||||
1995 | 1,013.57 | 1,016.77 | 847.09 | 882.94 | 1.2 | 16.4 | ||||||||||||||||||
1996 | 888.85 | 986.84 | 651.22 | �� | 651.22 | 1.3 | 17.8 | |||||||||||||||||
1997 | 653.79 | 792.29 | 350.68 | 376.31 | 1.5 | 17.0 | ||||||||||||||||||
1998 | 385.49 | 579.86 | 280.00 | 562.46 | 1.9 | 10.8 | ||||||||||||||||||
1999 | 587.57 | 1,028.07 | 498.42 | 1,028.07 | 1.1 | 13.5 | ||||||||||||||||||
2000 | 1,059.04 | 1,059.04 | 500.60 | 504.62 | 2.1 | 12.9 | ||||||||||||||||||
2001 | 520.95 | 704.50 | 468.76 | 693.70 | 1.7 | 16.4 | ||||||||||||||||||
2002 | 724.95 | 937.61 | 584.04 | 829.44 | 1.6 | 15.2 | ||||||||||||||||||
2003 | 635.17 | 822.16 | 515.24 | 810.71 | 2.0 | 11.8 | ||||||||||||||||||
2004 | 821.26 | 936.06 | 719.59 | 895.92 | 2.0 | 13.8 | ||||||||||||||||||
2005 | 893.71 | 1,379.37 | 870.84 | 1,379.37 | 1.8 | 10.6 | ||||||||||||||||||
2006 (though June 26) | 1,383.32 | 1,469.70 | 1,192.09 | 1,238.05 | N/A | N/A |
(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. |
(3) | Starting in April 2000, dividend yield and price earnings ratio of KOSPI 200, an index of 200 equity securities listed on the KRX Stock Market. Starting in April 2000, excludes classified companies, companies which did not submit annual reports to the KRX, and companies which received disqualified opinion from external auditors. |
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Rounded Down | ||||
Previous Day’s Closing Price | 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 |
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Market Capitalization | ||||||||||||||||||||||||
on the Last Day of Each Period | Average Trading Volume & Value | |||||||||||||||||||||||
Number of | ||||||||||||||||||||||||
Listed | (Millions of | (Thousands of | Thousands of | (Millions of | (Thousands of | |||||||||||||||||||
Year | Companies | Won) | Dollars)(1) | Shares | Won) | Dollars)(1) | ||||||||||||||||||
1980 | 352 | 2,526,553 | US $ | 3,828,691 | 5,654 | 3,897 | US $ | 5,905 | ||||||||||||||||
1981 | 343 | 2,959,057 | 4,224,207 | 10,565 | 8,708 | 12,433 | ||||||||||||||||||
1982 | 334 | 3,000,494 | 4,407,711 | 9,704 | 6,667 | 8,904 | ||||||||||||||||||
1983 | 328 | 3,489,654 | 4,386,743 | 9,325 | 5,941 | 7,468 | ||||||||||||||||||
1984 | 336 | 5,148,460 | 6,222,456 | 14,847 | 10,642 | 12,862 | ||||||||||||||||||
1985 | 342 | 6,570,404 | 7,380,818 | 18,925 | 12,315 | 13,834 | ||||||||||||||||||
1986 | 355 | 11,994,233 | 13,924,115 | 31,755 | 32,870 | 38,159 | ||||||||||||||||||
1987 | 389 | 26,172,174 | 33,033,162 | 20,353 | 70,185 | 88,584 | ||||||||||||||||||
1988 | 502 | 64,543,685 | 94,348,318 | 10,367 | 198,364 | 289,963 | ||||||||||||||||||
1989 | 626 | 95,476,774 | 140,489,660 | 11,757 | 280,967 | 414,431 | ||||||||||||||||||
1990 | 669 | 79,019,676 | 110,301,055 | 10,866 | 183,692 | 256,500 | ||||||||||||||||||
1991 | 686 | 73,117,833 | 96,182,364 | 14,022 | 214,263 | 281,850 | ||||||||||||||||||
1992 | 688 | 84,711,982 | 107,502,515 | 24,028 | 308,246 | 391,175 | ||||||||||||||||||
1993 | 693 | 112,665,260 | 139,419,948 | 35,130 | 574,048 | 676,954 | ||||||||||||||||||
1994 | 699 | 151,217,231 | 191,729,721 | 36,862 | 776,257 | 984,223 | ||||||||||||||||||
1995 | 721 | 141,151,399 | 182,201,367 | 26,130 | 487,762 | 629,614 | ||||||||||||||||||
1996 | 760 | 117,369,988 | 139,031,021 | 26,571 | 486,834 | 575,733 | ||||||||||||||||||
1997 | 776 | 70,988,897 | 50,161,742 | 41,525 | 555,759 | 392,707 | ||||||||||||||||||
1998 | 748 | 137,798,451 | 114,090,455 | 97,716 | 660,429 | 471,432 | ||||||||||||||||||
1999 | 725 | 349,503,966 | 305,137,040 | 278,551 | 3,481,620 | 3,039,654 | ||||||||||||||||||
2000 | 704 | 188,041,490 | 150,162,898 | 306,163 | 2,602,211 | 2,078,028 | ||||||||||||||||||
2001 | 689 | 225,850,076 | 194,784,979 | 473,241 | 1,997,420 | 1,520,685 | ||||||||||||||||||
2002 | 683 | 258,680,756 | 218,167,122 | 851,242 | 3,041,592 | 2,414,362 | ||||||||||||||||||
2003 | 684 | 355,362,626 | 297,960,530 | 542,010 | 2,216,636 | 1,858,580 | ||||||||||||||||||
2004 | 683 | 412,588,138 | 427,069,982 | 372,894 | 2,232,108 | 2,310,455 | ||||||||||||||||||
2005 | 702 | 655,074,595 | 648,588,707 | 467,629 | 3,157,662 | 3,126,398 | ||||||||||||||||||
2006 (through June 26) | 717 | 604,501,659 | 598,516,494 | 336,721 | 4,105,713 | 4,065,062 |
(1) | Converted at the noon buying rate in The City of New York for cable transfers in Won per US$1.00 as certified for customs purposes by the Federal Reserve Bank of New York. |
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Further Opening of the Korean Securities Market |
Protection of Customer’s Interest in Case of Insolvency of Securities Companies |
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Item 9D. | Selling Shareholders |
Item 9E. | Dilution |
Item 9F. | Expenses of the Issue |
Item 10. | ADDITIONAL INFORMATION |
Item 10A. | Share Capital |
Item 10B. | Memorandum and Articles of Association |
• | information and communication business; | |
• | sale and lease of subscriber handsets; | |
• | new media business; | |
• | advertising business; | |
• | mail order business; | |
• | business of leasing available and real estate property; | |
• | research and technology development relating to the first four items above; | |
• | overseas and import/export business relating to the first four items above; | |
• | manufacture and distribution business relating to the first four items above; |
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• | tourism; 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 or equity or other overseas assets in an amount equal to 5.0% or more of our shareholders’ equity under our most recent balance sheet; and | |
• | contribution of capital, loans or guarantees, acquisition of our subsidiaries’ assets or similar transactions with our affiliated companies in excess of Won 10 billion through one or a series of transactions. |
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• | 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 3.0% or more of our outstanding shares for at least six months; or | |
• | at the request of our audit committee. |
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• | 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. |
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• | before or at the time of the pre-release, the person to whom the pre-release is being made must represent to the ADR depositary in writing that it or its customer owns the shares of common stock or ADSs to be deposited and show evidence of the ownership to the ADR 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 will hold the shares of common stock or ADSs in trust for the ADR depositary until their delivery to the ADR depositary or custodian, reflect on his records the ADR depositary as owner of such shares of common stock or ADSs and deliver such shares of common stock upon the ADR 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. |
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• | 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. |
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• | the information contained in our notice to the ADR depositary including an English translation, or, if requested by us, a summary of the information provided by us; | |
• | 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. |
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• | 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. |
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• | 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, telex 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. |
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• | if the Government deems it necessary on account of war, armed conflict, natural disaster or grave and sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the MOFE 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 MOFE may take action to require any person who intends to effect or effects a capital transaction to deposit all or a portion of the means of payment acquired in such transactions with The Bank of Korea or certain other governmental agencies or financial institutions. |
• | Under 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 offerings of ADSs and stock dividends or other distributions related to the ADSs). | |
• | We can give no assurance that we would grant our consent, if our consent is required. 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 10B. Memorandum and Articles of Incorporation — Description of American Depositary Shares”. Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs. |
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• | 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; and | |
• | acquisition of shares by direct investment under the Foreign Investment Promotion Law. |
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• | a dealer in securities or currencies; | |
• | 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. |
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Dividends |
Sale or Other Disposition |
Foreign Tax Credit Considerations |
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• | a resident of Korea; | |
• | a corporation organized under Korean law; or | |
• | engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected. |
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Item 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Maturities | ||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||||
(In billions of won, except for percentage data) | ||||||||||||||||||||||||||||||||||
Local currency: | ||||||||||||||||||||||||||||||||||
Fixed rate | 795.2 | 692.0 | 297.9 | 297.8 | 194.6 | 189.3 | 2,466.7 | 2,509.5 | ||||||||||||||||||||||||||
Average weighted rate(1) | 5.53 | % | 5.57 | % | 5.00 | % | 5.00 | % | 4.00 | % | 3.00 | % | ||||||||||||||||||||||
Variable rate | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Average weighted rate(1) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Sub-total | 795.2 | 692.0 | 297.9 | 297.8 | 194.6 | 189.3 | 2,466.7 | 2,509.5 | ||||||||||||||||||||||||||
Foreign currency: | ||||||||||||||||||||||||||||||||||
Fixed rate | — | — | — | 341.7 | — | 301.0 | 642.7 | 647.5 | ||||||||||||||||||||||||||
Average weighted rate(1) | — | — | — | 0.00 | % | — | 4.25 | % | ||||||||||||||||||||||||||
Variable rate | 1.1 | 0.1 | — | — | — | — | 1.2 | 1.2 | ||||||||||||||||||||||||||
Average weighted rate(1) | 3.34 | % | 3.39 | % | 3.39 | % | 3.39 | % | — | — | ||||||||||||||||||||||||
Sub-total | 1.1 | 0.1 | — | 341.7 | — | 301.0 | 643.9 | 648.7 | ||||||||||||||||||||||||||
Total | 796.3 | 692.1 | 297.9 | 639.5 | 194.6 | 490.3 | 3,110.6 | 3,158.2 | ||||||||||||||||||||||||||
(1) | Weighted average rates of the portfolio at the period end. |
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Item 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
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 |
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Years Ended | |||||||||
December 31, | |||||||||
2005 | 2004 | ||||||||
(In millions of won) | |||||||||
Audit | 838.9 | 841.3 | |||||||
Audit Related | 86.7 | 127.7 | |||||||
Tax | 139.4 | 110.1 | |||||||
All Other Fees | 900.0 | 2,418.0 | |||||||
Total | 1,965.0 | 3,497.1 |
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Total Number of | |||||||||||||||||
Shares Purchased | Maximum Number of | ||||||||||||||||
Total Number of | Average | as Part of Publicly | Shares That May yet | ||||||||||||||
Shares | Price Paid | Announced Plans or | be Purchased Under | ||||||||||||||
Period | Purchased | per Share | Program | the Plans or Program | |||||||||||||
2004 | |||||||||||||||||
January | — | — | — | — | |||||||||||||
February | 12 | 173,500 | — | — | |||||||||||||
March | — | — | — | — | |||||||||||||
April | — | — | — | — | |||||||||||||
May | — | — | — | — | |||||||||||||
June | — | — | — | — | |||||||||||||
July | — | — | — | — | |||||||||||||
August | — | — | — | — | |||||||||||||
September | — | — | — | — | |||||||||||||
October | — | — | — | — | |||||||||||||
November | — | — | — | — | |||||||||||||
December | — | — | — | — | |||||||||||||
Total | 12 | 173,500 | — | — |
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Item 17. | FINANCIAL STATEMENTS |
Item 18. | FINANCIAL STATEMENTS |
Report of Independent Registered Public Accounting Firm | F-3 | |||
Consolidated balance sheets as of December 31, 2004 and 2005 | F-4 | |||
Consolidated statements of income for the years ended December 31, 2003, 2004 and 2005 | F-6 | |||
Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2003, 2004 and 2005 | F-8 | |||
Consolidated statements of cash flows for the years ended December 31, 2003, 2004 and 2005 | F-10 | |||
Notes to consolidated financial statements | F-14 |
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Number | Description | |||
1 | .1 | Memorandum and Articles of Association | ||
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 | ||
4 | .1 | Telecommunications Basic Law of 1983, as amended (English translation) | ||
4 | .2 | Enforcement Decree of the Telecommunications Basic Law, as amended (English translation) | ||
4 | .3 | Telecommunications Business Law of 1983, as amended (English translation) | ||
4 | .4 | Enforcement Decree of the Telecommunications Business Law (English translation)*** | ||
4 | .5 | Korean Commercial Code (together with English translation)* | ||
4 | .6 | Amendment to Korean Commercial Code dated December 29, 2001 (together with English translation)** | ||
4 | .7 | Korean Securities and Exchange Act, as amended (English translation) | ||
8 | .1 | List of Subsidiaries of SK Telecom Co., Ltd. | ||
11 | .1 | Code of Ethics 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 | ||
99 | .1 | Consent of Deloitte Anjin LLC |
* | Filed previously as exhibits to our Form 20-F filed on June 30, 2000. | |
** | Filed previously as exhibits to our Form 20-F filed on June 28, 2002. | |
*** | Filed previously as exhibits to our Form 20-F filed on May 31, 2005. |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-3 | |
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2005 | F-4 | |
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005 | F-6 | |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005 | F-8 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005 | F-10 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | F-14 |
F-1
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F-2
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F-3
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2003 | 2004 | 2005 | 2005 | |||||||||||||||
(In millions of Korean won) | (In thousands of | |||||||||||||||||
U.S. dollars | ||||||||||||||||||
(Note 2(a))) | ||||||||||||||||||
ASSETS | ||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||
Cash and cash equivalents (Notes 2 and 13) | 317,488 | 370,630 | 378,426 | $ | 374,679 | |||||||||||||
Short-term financial instruments (Notes 13, 21 and 22) | 154,922 | 12,730 | 106,592 | 105,537 | ||||||||||||||
Trading securities (Notes 2 and 4) | 893,217 | 654,779 | 777,472 | 769,774 | ||||||||||||||
Current portion of long-term investment securities (Notes 2 and 4) | 85,861 | 3,709 | 1 | 1 | ||||||||||||||
Accounts receivable — trade, net of allowance for doubtful accounts of | 1,579,153 | 1,720,201 | 1,684,119 | 1,667,445 | ||||||||||||||
Short-term loans, net of allowance for doubtful accounts of | 48,849 | 55,355 | 65,539 | 64,890 | ||||||||||||||
Accounts receivable — other, net of allowance for doubtful accounts of | 867,120 | 1,406,553 | 1,369,691 | 1,356,130 | ||||||||||||||
Inventories, net (Notes 2, 3, 23 and 24) | 31,516 | 52,321 | 7,784 | 7,707 | ||||||||||||||
Prepaid expenses | 68,256 | 84,933 | 104,124 | 103,093 | ||||||||||||||
Current deferred income tax assets (Notes 2 and 18) | — | — | 66,117 | 65,462 | ||||||||||||||
Accrued income and other | 23,143 | 29,482 | 38,715 | 38,331 | ||||||||||||||
Total Current Assets | 4,069,525 | 4,390,693 | 4,598,580 | 4,553,049 | ||||||||||||||
NON-CURRENT ASSETS: | ||||||||||||||||||
Property and equipment, net (Notes 2, 7, 12, 22, 23 and 24) | 4,641,547 | 4,703,922 | 4,663,369 | 4,617,197 | ||||||||||||||
Intangible assets, net (Notes 2 and 8) | 3,674,944 | 3,522,903 | 3,452,889 | 3,418,702 | ||||||||||||||
Long-term investment securities (Notes 2 and 4) | 879,193 | 948,101 | 1,220,208 | 1,208,127 | ||||||||||||||
Equity securities accounted for using the equity method (Notes 2 and 5) | 183,709 | 304,028 | 471,879 | 467,207 | ||||||||||||||
Long-term bank deposits (Note 21) | 352 | 10,351 | 1,479 | 1,464 | ||||||||||||||
Long-term loans, net of allowance for doubtful accounts of | 40,819 | 30,442 | 18,430 | 18,248 | ||||||||||||||
Guarantee deposits (Notes 13 and 24) | 270,255 | 289,015 | 168,559 | 166,890 | ||||||||||||||
Non-current deferred income tax assets (Notes 2 and 18) | — | — | 1,495 | 1,480 | ||||||||||||||
Other | 57,873 | 83,903 | 107,884 | 106,816 | ||||||||||||||
Total Non-Current Assets | 9,748,692 | 9,892,665 | 10,106,192 | 10,006,131 | ||||||||||||||
TOTAL ASSETS | 13,818,217 | 14,283,358 | 14,704,772 | $ | 14,559,180 | |||||||||||||
F-4
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2003 | 2004 | 2005 | 2005 | |||||||||||||||
(In millions of Korean won) | (In thousands of | |||||||||||||||||
U.S. dollars | ||||||||||||||||||
(Note 2(a))) | ||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||
Accounts payable (Notes 13, 22 and 24) | 1,317,162 | 1,205,682 | 1,047,779 | $ | 1,037,405 | |||||||||||||
Short-term borrowings (Notes 13 and 22) | 786,096 | 425,496 | 972 | 962 | ||||||||||||||
Income taxes payable | 402,559 | 273,495 | 370,822 | 367,150 | ||||||||||||||
Accrued expenses (Notes 2, 13 and 25) | 420,995 | 394,354 | 364,830 | 361,218 | ||||||||||||||
Dividend payable | 88 | 263 | 298 | 295 | ||||||||||||||
Withholdings | 184,304 | 196,534 | 216,622 | 214,477 | ||||||||||||||
Current portion of long-term debt, net (Notes 9, 10 and 12) | 1,364,264 | 498,278 | 809,573 | 801,557 | ||||||||||||||
Current portion of subscription deposits (Note 11) | 12,881 | 13,405 | 14,875 | 14,728 | ||||||||||||||
Current deferred income tax liabilities (Notes 2 and 18) | — | — | 44 | 44 | ||||||||||||||
Other | 42,561 | 59,386 | 37,558 | 37,187 | ||||||||||||||
Total Current Liabilities | 4,530,910 | 3,066,893 | 2,863,373 | 2,835,023 | ||||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||||
Bonds payable, net (Notes 2 and 9) | 2,261,868 | 2,891,843 | 2,314,208 | 2,291,295 | ||||||||||||||
Long-term borrowings (Notes 10 and 22) | 1,633 | — | 155 | 153 | ||||||||||||||
Subscription deposits (Note 11) | 44,197 | 31,440 | 23,770 | 23,535 | ||||||||||||||
Long-term payables — other, net of present value discount of | 564,119 | 577,337 | 591,587 | 585,730 | ||||||||||||||
Obligations under capital leases (Notes 2, 12 and 13) | — | — | 10,204 | 10,103 | ||||||||||||||
Accrued severance indemnities, net (Note 2) | 67,824 | 80,984 | 71,284 | 70,578 | ||||||||||||||
Non-current deferred income tax liabilities (Notes 2 and 18) | 226,029 | 306,052 | 401,156 | 397,184 | ||||||||||||||
Long-term currency swap (Notes 2 and 26) | — | 96,743 | 73,450 | 72,723 | ||||||||||||||
Guarantee deposits received and other (Notes 22 and 24) | 27,790 | 26,322 | 28,045 | 27,767 | ||||||||||||||
Total Long-Term Liabilities | 3,193,460 | 4,010,721 | 3,513,859 | 3,479,068 | ||||||||||||||
Total Liabilities | 7,724,370 | 7,077,614 | 6,377,232 | 6,314,091 | ||||||||||||||
COMMITMENTS AND CONTINGENCIES (Note 22) | ||||||||||||||||||
SHAREHOLDERS’ EQUITY: | ||||||||||||||||||
Capital stock (Notes 1 and 14) | 44,639 | 44,639 | 44,639 | 44,197 | ||||||||||||||
Capital surplus (Note 14) | 2,911,556 | 2,968,301 | 2,954,840 | 2,925,584 | ||||||||||||||
Retained earnings (Note 15) | 5,139,911 | 6,152,898 | 7,267,649 | 7,195,692 | ||||||||||||||
Capital adjustments: | ||||||||||||||||||
Treasury stock (Note 16) | (2,047,103 | ) | (2,047,105 | ) | (2,047,105 | ) | (2,026,837 | ) | ||||||||||
Unrealized profit (loss) on valuation of long-term investment securities, net (Notes 2 and 4) | (160,622 | ) | (92,975 | ) | (42,093 | ) | (41,676 | ) | ||||||||||
Equity in capital adjustment of affiliates, net (Notes 2 and 5) | 42,581 | 134,376 | 61,368 | 60,760 | ||||||||||||||
Loss on valuation of currency swap, net (Notes 2 and 26) | — | (49,452 | ) | (14,177 | ) | (14,037 | ) | |||||||||||
Stock options (Notes 2 and 17) | 3,741 | 4,833 | 3,480 | 3,446 | ||||||||||||||
Foreign-based operations’ translation adjustment (Note 2) | 3,159 | (7,969 | ) | (9,988 | ) | (9,889 | ) | |||||||||||
Minority interest in equity of consolidated subsidiaries (Note 2) | 155,985 | 98,198 | 108,927 | 107,849 | ||||||||||||||
Total Shareholders’ Equity | 6,093,847 | 7,205,744 | 8,327,540 | 8,245,089 | ||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 13,818,217 | 14,283,358 | 14,704,772 | $ | 14,559,180 | |||||||||||||
F-5
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2003 | 2004 | 2005 | 2005 | ||||||||||||||
(In thousands of | |||||||||||||||||
U.S. dollars, except | |||||||||||||||||
(In millions of Korean won, | for income per share | ||||||||||||||||
except for income per share) | (Note 2(a))) | ||||||||||||||||
OPERATING REVENUE (Notes 2, 24 and 28) | 10,272,081 | 10,570,615 | 10,721,820 | $ | 10,615,663 | ||||||||||||
OPERATING EXPENSES (Notes 2, 22 and 24) | |||||||||||||||||
Labor cost | (407,243 | ) | (464,778 | ) | (464,764 | ) | (460,162 | ) | |||||||||
Commissions paid | (2,314,558 | ) | (2,812,318 | ) | (2,859,638 | ) | (2,831,325 | ) | |||||||||
Depreciation and amortization (Notes 7 and 8) | (1,510,545 | ) | (1,607,478 | ) | (1,546,285 | ) | (1,530,975 | ) | |||||||||
Network interconnection (Note 28) | (771,553 | ) | (913,688 | ) | (989,417 | ) | (979,621 | ) | |||||||||
Leased line | (306,527 | ) | (375,227 | ) | (407,043 | ) | (403,013 | ) | |||||||||
Advertising | (376,424 | ) | (352,877 | ) | (279,390 | ) | (276,624 | ) | |||||||||
Research and development (Note 2) | (235,551 | ) | (267,107 | ) | (252,046 | ) | (249,550 | ) | |||||||||
Rent | (144,509 | ) | (178,310 | ) | (190,134 | ) | (188,251 | ) | |||||||||
Frequency usage | (129,525 | ) | (143,047 | ) | (156,098 | ) | (154,552 | ) | |||||||||
Repair | (96,464 | ) | (112,094 | ) | (131,719 | ) | (130,415 | ) | |||||||||
Provision for bad debts | (22,378 | ) | (29,181 | ) | (112,792 | ) | (111,675 | ) | |||||||||
Cost of goods sold | (560,859 | ) | (479,257 | ) | (240,746 | ) | (238,362 | ) | |||||||||
Other | (290,838 | ) | (395,504 | ) | (421,132 | ) | (416,964 | ) | |||||||||
Sub-total | (7,166,974 | ) | (8,130,866 | ) | (8,051,204 | ) | (7,971,489 | ) | |||||||||
OPERATING INCOME | 3,105,107 | 2,439,749 | 2,670,616 | 2,644,174 | |||||||||||||
OTHER INCOME: | |||||||||||||||||
Interest income (Note 4) | 86,485 | 80,459 | 61,143 | 60,538 | |||||||||||||
Dividends | 25,923 | 23,843 | 26,515 | 26,252 | |||||||||||||
Commissions | 80,180 | 26,891 | 32,738 | 32,414 | |||||||||||||
Equity in earnings of affiliates (Notes 2 and 5) | — | — | 20,949 | 20,742 | |||||||||||||
Foreign exchange and translation gains (Note 2) | 6,131 | 20,559 | 4,167 | 4,126 | |||||||||||||
Reversal of allowance for doubtful accounts | 1,555 | 759 | 450 | 446 | |||||||||||||
Gain on disposal and valuation of trading securities (Note 2) | 188 | 2,548 | 1 | 1 | |||||||||||||
Gain on disposal of investment assets (Notes 4 and 5) | 1,259 | 2,004 | 24,613 | 24,369 | |||||||||||||
Gain on disposal of consolidated subsidiary (Note 5) | — | — | 178,689 | 176,920 | |||||||||||||
Gain on disposal of property, equipment and intangible assets | 2,750 | 2,067 | 4,693 | 4,647 | |||||||||||||
Gain on transactions and valuation of currency forward and swap (Notes 2 and 26) | — | 2,850 | 2,578 | 2,552 | |||||||||||||
Other | 56,973 | 37,439 | 36,016 | 35,659 | |||||||||||||
Sub-total | 261,444 | 199,419 | 392,552 | 388,666 | |||||||||||||
F-6
Table of Contents
2003 | 2004 | 2005 | 2005 | ||||||||||||||
(In thousands of | |||||||||||||||||
U.S. dollars, except | |||||||||||||||||
(In millions of Korean won, | for income per share | ||||||||||||||||
except for income per share) | (Note 2(a))) | ||||||||||||||||
OTHER EXPENSES: | |||||||||||||||||
Interest and discounts | (391,482 | ) | (303,410 | ) | (253,472 | ) | (250,962 | ) | |||||||||
Donations | (91,487 | ) | (89,232 | ) | (145,325 | ) | (143,886 | ) | |||||||||
Equity in losses of affiliates (Notes 2 and 5) | (6,975 | ) | (11,954 | ) | (71,825 | ) | (71,114 | ) | |||||||||
Foreign exchange and translation losses (Note 2) | (10,230 | ) | (9,074 | ) | (4,178 | ) | (4,137 | ) | |||||||||
Loss on disposal and valuation of trading securities (Note 2) | (3,974 | ) | (232 | ) | (16 | ) | (16 | ) | |||||||||
Loss on disposal of investment assets | (45,403 | ) | (1,539 | ) | (4,017 | ) | (3,977 | ) | |||||||||
Loss on disposal and impairment of property, equipment and intangible assets (Note 2) | (13,784 | ) | (19,208 | ) | (6,783 | ) | (6,716 | ) | |||||||||
Loss on impairment of long-term investment securities (Notes 2 and 4) | (5,749 | ) | (33,654 | ) | (3,422 | ) | (3,388 | ) | |||||||||
Loss on transactions and valuation of currency forward and swap (Notes 2 and 26) | — | (15,818 | ) | — | — | ||||||||||||
Other | (43,131 | ) | (31,872 | ) | (12,564 | ) | (12,440 | ) | |||||||||
Sub-total | (612,215 | ) | (515,993 | ) | (501,602 | ) | (496,636 | ) | |||||||||
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST | 2,754,336 | 2,123,175 | 2,561,566 | 2,536,204 | |||||||||||||
INCOME TAXES (Notes 2 and 18) | (789,059 | ) | (629,761 | ) | (693,259 | ) | (686,395 | ) | |||||||||
INCOME BEFORE MINORITY INTEREST | 1,965,277 | 1,493,414 | 1,868,307 | 1,849,809 | |||||||||||||
MINORITY INTEREST IN NET LOSS (GAIN) OF CONSOLIDATED SUBSIDIARIES | 823 | (1,935 | ) | 4,671 | 4,625 | ||||||||||||
NET INCOME | 1,966,100 | 1,491,479 | 1,872,978 | $ | 1,854,434 | ||||||||||||
NET INCOME PER SHARE (Notes 2 and 19) (In Korean won and U.S. dollars) | 26,187 | 20,261 | 25,443 | $ | 25.19 | ||||||||||||
DILUTED NET INCOME PER SHARE (Notes 2 and 19) (In Korean won and U.S. dollars) | 26,187 | 20,092 | 25,036 | $ | 24.79 | ||||||||||||
F-7
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Total | |||||||||||||||||||||||||
Common | Capital | Retained | Capital | Minority | Shareholders’ | ||||||||||||||||||||
Stock | Surplus | Earnings | Adjustments | Interest | Equity | ||||||||||||||||||||
(In millions of Korean won) | |||||||||||||||||||||||||
Balance, January 1, 2003 | 2,884,382 | 4,873,205 | (2,295,770 | ) | 725,507 | 6,231,900 | |||||||||||||||||||
Net income | — | — | 1,966,100 | — | (823 | ) | 1,965,277 | ||||||||||||||||||
Acquisition of treasury stock (Note 16) | — | — | — | (1,379,337 | ) | — | (1,379,337 | ) | |||||||||||||||||
Retirement of treasury stock (Note 16) | — | — | (1,545,281 | ) | 1,524,683 | — | (20,598 | ) | |||||||||||||||||
Cash dividends paid (Note 20) | — | — | (151,739 | ) | — | — | (151,739 | ) | |||||||||||||||||
Excess unallocated purchase price (Note 14) | — | (230 | ) | — | — | — | (230 | ) | |||||||||||||||||
Issuance of common stock for the merger with SK IMT Co., Ltd. (Note 14) | 63 | 31,809 | — | — | — | 31,872 | |||||||||||||||||||
Gain on disposal of investments in common stock of subsidiary | — | 58 | — | — | — | 58 | |||||||||||||||||||
Equity in beginning retained earnings change of affiliates (Notes 2 and 5) | — | — | (33 | ) | — | — | (33 | ) | |||||||||||||||||
Cumulative effect of an accounting change (Note 2) | — | — | (2,341 | ) | — | (515 | ) | (2,856 | ) | ||||||||||||||||
Unrealized loss on valuation of long-term investment securities (Notes 2 and 4) | — | — | — | (56,505 | ) | — | (56,505 | ) | |||||||||||||||||
Equity in capital surplus and capital adjustment changes of affiliates (Note 2) | — | (4,463 | ) | — | 47,752 | — | 43,289 | ||||||||||||||||||
Stock compensation plans (Notes 2 and 17) | — | — | — | 1,289 | — | 1,289 | |||||||||||||||||||
Foreign-based operations’ translation adjustment (Note 2) | — | — | — | (356 | ) | — | (356 | ) | |||||||||||||||||
Decrease in minority interest in equity of consolidated subsidiaries | — | — | — | — | (568,184 | ) | (568,184 | ) | |||||||||||||||||
Balance, December 31, 2003 | 2,911,556 | 5,139,911 | (2,158,244 | ) | 155,985 | 6,093,847 | |||||||||||||||||||
Net income | — | — | 1,491,479 | — | 1,935 | 1,493,414 | |||||||||||||||||||
Cash dividends paid (Note 20) | — | — | (404,878 | ) | — | — | (404,878 | ) | |||||||||||||||||
Interim cash dividends paid (Note 20) | — | — | (73,614 | ) | — | — | (73,614 | ) | |||||||||||||||||
Excess unallocated purchase price (Note 14) | — | (77 | ) | — | — | — | (77 | ) | |||||||||||||||||
Consideration for conversion rights (Notes 2 and 14) | — | 67,279 | — | — | — | 67,279 | |||||||||||||||||||
Acquisition of treasury stock (Note 16) | — | — | — | (2 | ) | — | (2 | ) | |||||||||||||||||
Equity in capital surplus and capital adjustment changes of affiliates (Note 2) | — | (10,457 | ) | — | 91,795 | — | 81,338 | ||||||||||||||||||
Unrealized gain on valuation of long-term investment securities (Notes 2 and 4) | — | — | — | 67,647 | — | 67,647 | |||||||||||||||||||
Loss on valuation of currency swap (Note 2) | — | — | — | (49,452 | ) | — | (49,452 | ) | |||||||||||||||||
Stock compensation plans (Notes 2 and 17) | — | — | — | 1,092 | — | 1,092 | |||||||||||||||||||
Foreign-based operations’ translation adjustment (Note 2) | — | — | — | (11,128 | ) | — | (11,128 | ) | |||||||||||||||||
Decrease in minority interest in equity of consolidated subsidiaries | — | — | — | — | (59,722 | ) | (59,722 | ) | |||||||||||||||||
Balance, December 31, 2004 | 2,968,301 | 6,152,898 | (2,058,292 | ) | 98,198 | 7,205,744 | |||||||||||||||||||
F-8
Table of Contents
Total | |||||||||||||||||||||||||
Common | Capital | Retained | Capital | Minority | Shareholders’ | ||||||||||||||||||||
Stock | Surplus | Earnings | Adjustments | Interest | Equity | ||||||||||||||||||||
(In millions of Korean won) | |||||||||||||||||||||||||
Balance, January 1, 2005 | 2,968,301 | 6,152,898 | (2,058,292 | ) | 98,198 | 7,205,744 | |||||||||||||||||||
Net income | — | — | 1,872,978 | — | (4,671 | ) | 1,868,307 | ||||||||||||||||||
Cash dividends paid (Note 20) | — | — | (684,613 | ) | — | — | (684,613 | ) | |||||||||||||||||
Interim cash dividends paid (Note 20) | — | — | (73,614 | ) | — | — | (73,614 | ) | |||||||||||||||||
Deferred tax effect of temporary differences related to conversion rights (Note 14) | — | (18,502 | ) | — | — | — | (18,502 | ) | |||||||||||||||||
Transfer of stock option from capital adjustments to capital surplus (Notes 14 and 17) | — | 1,533 | — | (1,533 | ) | — | — | ||||||||||||||||||
Equity in capital surplus and capital adjustment changes of affiliates (Notes 2 and 5) | — | 3,508 | — | (73,008 | ) | — | (69,500 | ) | |||||||||||||||||
Unrealized gain on valuation of long-term investment securities (Notes 2 and 4) | — | — | — | 50,882 | — | 50,882 | |||||||||||||||||||
Gain on valuation of currency swap (Note 2) | — | — | — | 35,276 | — | 35,276 | |||||||||||||||||||
Stock compensation plans (Notes 2 and 17) | — | — | — | 180 | — | 180 | |||||||||||||||||||
Foreign-based operations’ translation adjustment (Note 2) | — | — | — | (2,020 | ) | — | (2,020 | ) | |||||||||||||||||
Decrease in minority interest in equity of consolidated subsidiaries | — | — | — | — | 15,400 | 15,400 | |||||||||||||||||||
Balance, December 31, 2005 | 2,954,840 | 7,267,649 | (2,048,515 | ) | 108,927 | 8,327,540 | |||||||||||||||||||
(In thousands of U.S. dollars) (Note 2(a)) | |||||||||||||||||||||||||
Balance, January 1, 2005 | $ | 44,197 | $ 2,938,912 | $ 6,091,978 | $ (2,037,913 | ) | $ 97,226 | $ 7,134,400 | |||||||||||||||||
Net income | — | — | 1,854,434 | — | (4,625 | ) | 1,849,809 | ||||||||||||||||||
Cash dividends paid | — | — | (677,835 | ) | — | — | (677,835 | ) | |||||||||||||||||
Interim cash dividends paid | — | — | (72,885 | ) | — | — | (72,885 | ) | |||||||||||||||||
Deferred tax effect of temporary differences related to conversion rights | — | (18,319 | ) | — | — | — | (18,319 | ) | |||||||||||||||||
Transfer of stock option from capital adjustments to capital surplus | — | 1,518 | — | (1,518 | ) | — | — | ||||||||||||||||||
Equity in capital surplus and capital adjustment changes of affiliates | — | 3,473 | — | (72,285 | ) | — | (68,812 | ) | |||||||||||||||||
Unrealized gain on valuation of long-term investment securities | — | — | — | 50,378 | — | 50,378 | |||||||||||||||||||
Gain on valuation of currency swap | — | — | — | 34,927 | — | 34,927 | |||||||||||||||||||
Stock compensation plans | — | — | — | 178 | — | 178 | |||||||||||||||||||
Foreign-based operations’ translation adjustment | — | — | — | (2,000 | ) | — | (2,000 | ) | |||||||||||||||||
Decrease in minority interest in equity of consolidated subsidiaries | — | — | — | — | 15,248 | 15,248 | |||||||||||||||||||
Balance, December 31, 2005 | $ | 44,197 | $ 2,925,584 | $ 7,195,692 | $ (2,028,233 | ) | $ 107,849 | $ 8,245,089 | |||||||||||||||||
F-9
Table of Contents
2003 | 2004 | 2005 | 2005 | |||||||||||||||
(In thousands | ||||||||||||||||||
of U.S. dollars | ||||||||||||||||||
(In millions of Korean won) | (Note 2(a))) | |||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||
Net income | 1,966,100 | 1,491,479 | 1,872,978 | $ | 1,854,434 | |||||||||||||
Expenses not involving cash payments: | ||||||||||||||||||
Depreciation and amortization | 1,649,902 | 1,752,530 | 1,675,528 | 1,658,939 | ||||||||||||||
Provision for severance indemnities | 65,375 | 58,151 | 47,073 | 46,607 | ||||||||||||||
Provision for bad debts | 23,304 | 43,144 | 115,731 | 114,585 | ||||||||||||||
Foreign currency translation loss | 2,546 | 2,179 | 981 | 971 | ||||||||||||||
Loss on disposal and valuation of trading securities | 3,974 | 232 | 16 | 16 | ||||||||||||||
Loss on disposal and impairment of property, equipment and intangible assets | 13,784 | 19,208 | 6,783 | 6,716 | ||||||||||||||
Loss on impairment of long-term investment securities | 5,749 | 33,654 | 3,422 | 3,388 | ||||||||||||||
Loss on disposal of investment assets | 45,403 | 1,539 | 4,017 | 3,977 | ||||||||||||||
Loss on transaction and valuation of currency forward and swap | — | 15,818 | — | — | ||||||||||||||
Equity in losses of affiliates | 6,975 | 11,954 | 71,825 | 71,114 | ||||||||||||||
Minority interest in net gain of consolidated subsidiaries | �� | — | 1,935 | — | — | |||||||||||||
Amortization of discounts on bonds and other | 73,655 | 46,274 | 51,846 | 51,333 | ||||||||||||||
Sub-total | 1,890,667 | 1,986,618 | 1,977,222 | 1,957,646 | ||||||||||||||
Income not involving cash receipts: | ||||||||||||||||||
Reversal of allowance for doubtful accounts | (1,555 | ) | (759 | ) | (450 | ) | (446 | ) | ||||||||||
Foreign currency translation gain | (668 | ) | (3,367 | ) | (658 | ) | (651 | ) | ||||||||||
Gain on disposal and valuation of trading securities | (188 | ) | (2,548 | ) | (1 | ) | (1 | ) | ||||||||||
Gain on disposal of investment assets | (1,555 | ) | (2,004 | ) | (24,613 | ) | (24,369 | ) | ||||||||||
Gain on disposal of consolidated subsidiary | — | — | (178,689 | ) | (176,920 | ) | ||||||||||||
Gain on disposal of property, equipment and intangible assets | (2,750 | ) | (2,067 | ) | (4,693 | ) | (4,647 | ) | ||||||||||
Gain on transactions and valuation of currency forward and swap | — | (2,850 | ) | (2,578 | ) | (2,552 | ) | |||||||||||
Equity in earnings of affiliates | — | — | (20,949 | ) | (20,742 | ) | ||||||||||||
Minority interest in net loss of consolidated subsidiaries | (823 | ) | — | (4,671 | ) | (4,625 | ) | |||||||||||
Other | (12,491 | ) | (12,129 | ) | (3,769 | ) | (3,731 | ) | ||||||||||
Sub-total | (20,030 | ) | (25,724 | ) | (241,071 | ) | (238,684 | ) | ||||||||||
F-10
Table of Contents
2003 | 2004 | 2005 | 2005 | ||||||||||||||
(In thousands | |||||||||||||||||
of U.S. dollars | |||||||||||||||||
(In millions of Korean won) | (Note 2(a))) | ||||||||||||||||
Changes in assets and liabilities related to operating activities: | |||||||||||||||||
Accounts receivable — trade | (159,160 | ) | (170,891 | ) | (210,957 | ) | (208,868 | ) | |||||||||
Accounts receivable — other | (48,789 | ) | (552,343 | ) | 22,284 | 22,063 | |||||||||||
Inventories | (4,056 | ) | (20,982 | ) | 8,297 | 8,215 | |||||||||||
Other current assets | (30,417 | ) | (5,549 | ) | (15,922 | ) | (15,764 | ) | |||||||||
Accounts payable | (396,700 | ) | (90,977 | ) | (34,441 | ) | (34,100 | ) | |||||||||
Income taxes payable | (11,597 | ) | (125,430 | ) | 88,477 | 87,601 | |||||||||||
Accrued expenses | 24,385 | (26,622 | ) | (12,944 | ) | (12,816 | ) | ||||||||||
Other current liabilities | 45,776 | 25,188 | (1,009 | ) | (999 | ) | |||||||||||
Deferred income taxes | 120,879 | 78,356 | 7,640 | 7,564 | |||||||||||||
Severance indemnity payments | (24,516 | ) | (27,582 | ) | (24,365 | ) | (24,124 | ) | |||||||||
Dividends received from affiliates | 621 | 755 | 785 | 777 | |||||||||||||
Deposits for group severance indemnities and other deposits | (24,727 | ) | (19,489 | ) | (32,869 | ) | (32,543 | ) | |||||||||
Transfer of accrued severance indemnities from affiliates and related companies | 955 | — | — | — | |||||||||||||
Sub-total | (507,346 | ) | (935,566 | ) | (205,024 | ) | (202,994 | ) | |||||||||
Net Cash Provided by Operating Activities | 3,329,391 | 2,516,807 | 3,404,105 | 3,370,402 | |||||||||||||
F-11
Table of Contents
2003 | 2004 | 2005 | 2005 | ||||||||||||||
(In thousands | |||||||||||||||||
of U.S. dollars | |||||||||||||||||
(In millions of Korean won) | (Note 2(a))) | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
Decrease (increase) in short-term financial instruments | 95,123 | 90,034 | (75,261 | ) | $ | (74,516 | ) | ||||||||||
Decrease (increase) in trading securities | (137,618 | ) | 240,204 | (122,710 | ) | (121,495 | ) | ||||||||||
Decrease in short-term loans | 51,612 | 89,447 | 60,530 | 59,931 | |||||||||||||
Decrease in long-term bank deposits | — | 50,006 | 2 | 2 | |||||||||||||
Proceeds from sale of current portion of long-term investment securities | 70,267 | 85,861 | 53,608 | 53,077 | |||||||||||||
Proceeds from sale of long-term investment securities | 762,896 | 17,658 | 40,889 | 40,484 | |||||||||||||
Proceeds from sale of equity securities accounted for using the equity method | 2,889 | 268 | 7,539 | 7,464 | |||||||||||||
Proceeds from sale of consolidated subsidiary | — | — | 290,966 | 288,085 | |||||||||||||
Decrease in long-term loans | 9,980 | 4,746 | 57 | 56 | |||||||||||||
Decrease in guarantee deposits | 67,410 | 22,096 | 142,131 | 140,724 | |||||||||||||
Decrease in other non-current assets | 50,758 | 36,287 | 36,110 | 35,753 | |||||||||||||
Proceeds from disposal of property and equipment | 12,828 | 10,116 | 34,179 | 33,841 | |||||||||||||
Proceeds from disposal of intangible assets | 2,248 | 2,291 | 107 | 106 | |||||||||||||
Increase in long-term loans | (60,145 | ) | (56,428 | ) | (59,008 | ) | (58,424 | ) | |||||||||
Increase in long-term bank deposits | (350 | ) | (60,005 | ) | (1,140 | ) | (1,129 | ) | |||||||||
Acquisition of long-term investment securities | (437,076 | ) | (54,132 | ) | (319,061 | ) | (315,902 | ) | |||||||||
Acquisition of equity securities accounted for using the equity method | (7,158 | ) | (21,086 | ) | (231,793 | ) | (229,498 | ) | |||||||||
Increase in long-term loans | (15,578 | ) | (35,291 | ) | (5,766 | ) | (5,709 | ) | |||||||||
Increase in guarantee deposits | (88,223 | ) | (40,957 | ) | (75,295 | ) | (74,550 | ) | |||||||||
Increase in other non-current assets | (54,090 | ) | (82,843 | ) | (86,803 | ) | (85,943 | ) | |||||||||
Acquisition of property and equipment | (1,647,639 | ) | (1,631,941 | ) | (1,416,622 | ) | (1,402,596 | ) | |||||||||
Acquisition of intangible assets | (56,745 | ) | (72,376 | ) | (199,494 | ) | (197,519 | ) | |||||||||
Acquisition of minority interest | (36,442 | ) | (64,247 | ) | (11,352 | ) | (11,240 | ) | |||||||||
Net Cash Used in Investing Activities | (1,415,053 | ) | (1,470,292 | ) | (1,938,187 | ) | (1,918,998 | ) | |||||||||
F-12
Table of Contents
2003 | 2004 | 2005 | 2005 | ||||||||||||||
(In thousands | |||||||||||||||||
of U.S. dollars | |||||||||||||||||
(In millions of Korean won) | (Note 2(a))) | ||||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
Increase in short-term borrowings | 108,669 | — | — | $ | — | ||||||||||||
Issuance of bonds payable | 688,737 | 1,205,727 | 193,683 | 191,765 | |||||||||||||
Increase in long-term borrowings | 13,532 | — | — | — | |||||||||||||
Payment of short-term borrowings | (12,087 | ) | (359,133 | ) | (376,929 | ) | (373,197 | ) | |||||||||
Payment of current portion of long-term debt | (939,176 | ) | (1,370,611 | ) | (500,033 | ) | (495,082 | ) | |||||||||
Repayment of bonds payable | — | (5,068 | ) | — | — | ||||||||||||
Payment of dividends | (151,739 | ) | (478,318 | ) | (758,192 | ) | (750,685 | ) | |||||||||
Decrease in facility deposits | (2,654 | ) | (12,757 | ) | (7,670 | ) | (7,594 | ) | |||||||||
Transaction of currency forward and swap | — | 2,821 | — | — | |||||||||||||
Net increase in treasury stock | (1,379,337 | ) | (2 | ) | — | — | |||||||||||
Increase in minority interest in equity of consolidated subsidiaries | 22,278 | 45,065 | 21,243 | 21,033 | |||||||||||||
Other | (609,262 | ) | 3,706 | (1,140 | ) | (1,129 | ) | ||||||||||
Net Cash Used in Financing Activities | (2,261,039 | ) | (968,570 | ) | (1,429,038 | ) | (1,414,889 | ) | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN CONSOLIDATED SUBSIDIARIES | 72 | (24,803 | ) | (29,084 | ) | (28,796 | ) | ||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (346,629 | ) | 53,142 | 7,796 | 7,719 | ||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | 664,117 | 317,488 | 370,630 | 366,960 | |||||||||||||
CASH AND CASH EQUIVALENTS AT END OF THE YEAR | 317,488 | 370,630 | 378,426 | $ | 374,679 | ||||||||||||
Cash paid for interest (net of amounts capitalized) | 328,890 | 264,224 | 203,259 | $ | 201,247 | ||||||||||||
Cash paid for income taxes | 675,122 | 679,262 | 588,296 | $ | 582,471 | ||||||||||||
F-13
Table of Contents
1. | GENERAL |
Percentage of | ||||||||
Number of | Total Shares | |||||||
Shares | Issued (%) | |||||||
SK Group | 18,748,459 | 22.79 | ||||||
POSCO | 2,991,496 | 3.64 | ||||||
Institutional investors and other minority shareholders | 51,874,341 | 63.04 | ||||||
Treasury stock | 8,662,415 | 10.53 | ||||||
82,276,711 | 100.00 | |||||||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
a. | Basis of Presentation |
b. | Principles of Consolidation |
F-14
Table of Contents
Ownership Percentage (%) | ||||||||||||||||||
Year of | ||||||||||||||||||
Subsidiary | Establishment | Primary Business | 2003 | 2004 | 2005 | |||||||||||||
SK Teletech Co., Ltd. | 61.66 | 89.13 | — | |||||||||||||||
SK Capital Co., Ltd. | 1995 | Finance | 100.00 | 100.00 | 100.00 | |||||||||||||
SK Telink Co., Ltd. | 1998 | Telecommunication services | 90.77 | 90.77 | 90.77 | |||||||||||||
SK Communications Co., Ltd. | 1999 | Internet website services | 92.69 | 93.44 | 92.37 | |||||||||||||
SK Wyverns Baseball Club Co., Ltd. | 2000 | Business related sports | 99.99 | 99.99 | 99.99 | |||||||||||||
Centurion IT Investment Association | 2001 | Investment association | 37.50 | 37.50 | 37.50 | |||||||||||||
Global Credit & information Corp. | 1998 | Credit and collection services | 50.00 | 50.00 | 50.00 | |||||||||||||
PAXNet Co., Ltd. | 1999 | Internet website services | 67.10 | 67.10 | 67.10 | |||||||||||||
Seoul Records, Inc. | 1982 | Release of music disc | — | — | 60.00 | |||||||||||||
SK Telecom International Inc. | 1995 | Internet website services | 100.00 | 100.00 | 100.00 | |||||||||||||
SLD Telecom PTE Ltd. | 2000 | Telecommunication services | 53.80 | 55.10 | 55.10 | |||||||||||||
SK Telecom China Co., Ltd. | 2002 | Telecommunication services | 100.00 | 100.00 | 100.00 | |||||||||||||
TU Media Corp. | 2003 | Digital multi media broadcasting service | 100.00 | 28.50 | 29.60 | |||||||||||||
U-Land Company Limited | 2004 | Telecommunication services | — | 100.00 | 100.00 | |||||||||||||
SK Telecom USA Holdings, Inc. | 2005 | Telecommunication services | — | — | 100.00 | |||||||||||||
The First Music Investment Fund of SK-PVC | 2005 | Investment association | — | — | 99.00 | |||||||||||||
The Second Music Investment Fund of SK-PVC | 2005 | Investment association | — | — | 99.00 | |||||||||||||
SK-KTB Music Investment Fund | 2005 | Investment association | — | — | 99.00 | |||||||||||||
IMM Cinema Fund | 2005 | Investment association | — | — | 48.39 |
F-15
Table of Contents
c. | Use of Estimates |
d. | Cash and Cash Equivalents |
e. | Allowance for Doubtful Accounts |
2003 | 2004 | 2005 | ||||||||||
Beginning balance | 60,542 | 65,327 | 71,090 | |||||||||
Write-offs | (17,593 | ) | (23,418 | ) | (49,181 | ) | ||||||
42,949 | 41,909 | 21,909 | ||||||||||
Provision for bad debt | 22,378 | 29,181 | 112,792 | |||||||||
Decrease from changes in consolidated subsidiaries | — | — | (1,202 | ) | ||||||||
End of year | 65,327 | 71,090 | 133,499 | |||||||||
f. | Inventories |
F-16
Table of Contents
g. | Securities (excluding securities accounted for using the equity method of accounting) |
h. | Investment Securities with 20% or More Ownership Interest |
i. | Property and Equipment |
j. | Intangible Assets |
F-17
Table of Contents
k. | Convertible Bonds |
l. | Discounts on Bonds |
m. | Valuation of Long-Term Payables |
n. | Provisions, Contingent Liabilities and Contingent Assets |
— | 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 and certain subsidiaries. |
F-18
Table of Contents
— | Present obligations arising out of 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. |
o. | Accrued Severance Indemnities |
2003 | 2004 | 2005 | |||||||||||
Beginning net balance | 48,519 | 67,824 | 80,984 | ||||||||||
Provision | 65,375 | 58,151 | 47,073 | ||||||||||
Payments to employees | (24,516 | ) | (27,582 | ) | (24,365 | ) | |||||||
Transfer from affiliated and related companies | 955 | — | — | ||||||||||
Net increase due to the changes in consolidated subsidiaries | 2,395 | 2,372 | 594 | ||||||||||
Deposits for severance indemnities | (24,904 | ) | (19,781 | ) | (33,002 | ) | |||||||
Ending net balance | 67,824 | 80,984 | 71,284 | ||||||||||
Ending balance: | |||||||||||||
Accrued severance indemnities | 218,914 | 251,314 | 267,855 | ||||||||||
Deposits with insurance companies | (144,861 | ) | (164,643 | ) | (191,354 | ) | |||||||
Transfer to the National Pension Fund | (6,229 | ) | (5,687 | ) | (5,217 | ) | |||||||
Net balance | 67,824 | 80,984 | 71,284 | ||||||||||
F-19
Table of Contents
Year ending December 31, | |||||
2006 | 248,710 | (note) | |||
2007 | 9 | ||||
2008 | 629 | ||||
2009 | 400 | ||||
2010 | 808 | ||||
2011Y2015 | 10,661 | ||||
Total | 261,217 | ||||
(note) | The future benefits in 2006 include early settlement of retirement benefit of |
p. | Accounting for Leases |
q. | Research and Development Costs |
r. | Derivative Instruments |
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s. | Revenue Recognition |
t. | Income Taxes |
u. | Net Income Per Share and Dilutive Net Income Per Share |
v. | Foreign-Based Operations’ Translation Adjustment |
w. | Accounting for Foreign Currency Transactions and Translation |
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x. | Accounting for Employee Stock Option Compensation Plan |
y. | Adoption of New Statements of Korea Accounting Standards (“SKAS”) |
— | Through 2004, when the Company’s equity interests in the equity method investees were diluted as a result of the equity method investees’ direct sales of their unissued shares to third parties, the changes in the Company’s proportionate equity of investees were accounted for as capital transactions. Effective January 1, 2005, such transactions are accounted for as income statement treatment, pursuant to adoption of SKAS No. 15, “Investments: Equity Method”. As a result of adopting SKAS No. 15, net income for the year ended December 31, 2005 increased by | |
— | Through 2004, tax effects of temporary differences related to capital surplus or capital adjustments were excluded in determining the deferred tax assets or liabilities. Effective January 1, 2005, such tax effects of temporary differences are included in determining the deferred tax assets or liabilities, pursuant to adoption of SKAS No. 16 “Income Taxes”. Accordingly, adjustments made directly to capital surplus or capital adjustments, which result in temporary differences, are recorded net of related tax effects. In addition, effective January 1, 2005, deferred income tax assets and liabilities which were presented on the balance sheet as a single non-current net number through 2004, are separated into current and non-current portions. As a result of adopting SKAS No. 16, total assets and total liabilities as of December 31, 2005 increased by | |
— | Through 2004, provisions were recorded at nominal value. Effective January 1, 2005, provisions are recorded at the present value when the effect of the time value of money is material, pursuant to adoption of SKAS No. 17 “Provisions, Contingent Liabilities and Contingent Assets”. SKAS No. 17 is prospectively applied and as a result of adopting such accounting standard, total liabilities as of December 31, 2005 decreased by |
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Table of Contents
z. | Reclassifications |
3. | INVENTORIES |
2003 | 2004 | 2005 | ||||||||||
Merchandise | 494 | 164 | 863 | |||||||||
Finished goods | 11,319 | 19,286 | 766 | |||||||||
Semi-finished goods | 4,216 | 7,019 | — | |||||||||
Raw materials | 7,442 | 14,791 | 493 | |||||||||
Supplies | 8,045 | 11,061 | 6,301 | |||||||||
Total | 31,516 | 52,321 | 8,423 | |||||||||
Less allowance for valuation loss | — | — | (639 | ) | ||||||||
Net | 31,516 | 52,321 | 7,784 | |||||||||
4. | INVESTMENT SECURITIES |
a. | Trading Securities |
Acquisition Cost | Fair Value at | Carrying Amount | ||||||||||||||||||
at December 31, | December 31, | |||||||||||||||||||
2005 | 2005 | 2003 | 2004 | 2005 | ||||||||||||||||
Stocks | 11 | 12 | — | 368 | 12 | |||||||||||||||
Public bonds | — | — | 18,499 | — | — | |||||||||||||||
Corporate bonds | — | — | 4,383 | — | — | |||||||||||||||
Beneficiary certificates | 777,460 | 777,460 | 870,335 | 654,411 | 777,460 | |||||||||||||||
Total | 777,471 | 777,472 | 893,217 | 654,779 | 777,472 | |||||||||||||||
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b. | Long-term Investment Securities |
2003 | 2004 | 2005 | ||||||||||
Available-for-sale equity securities | 824,392 | 896,508 | 923,821 | |||||||||
Available-for-sale debt securities | 14,315 | 5,158 | 296,273 | |||||||||
Held-to-maturity securities | 126,347 | 50,144 | 115 | |||||||||
Total | 965,054 | 951,810 | 1,220,209 | |||||||||
Less current portion | (85,861 | ) | (3,709 | ) | (1 | ) | ||||||
Long-term portion | 879,193 | 948,101 | 1,220,208 | |||||||||
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Ownership | Acquisition | ||||||||||||||||||||||||||||
Percentage (%) | Cost at | Fair Value | Carrying Amount | ||||||||||||||||||||||||||
Number of | at Dec. 31, | Dec. 31, | at Dec. 31, | ||||||||||||||||||||||||||
Shares | 2005 | 2005 | 2005 | 2003 | 2004 | 2005 | |||||||||||||||||||||||
(Investments in listed companies) | |||||||||||||||||||||||||||||
Digital Chosunilbo Co., Ltd. | 2,890,630 | 7.8 | 5,781 | 2,847 | 2,023 | 5,796 | |||||||||||||||||||||||
hanarotelecom incorporated | 22,090,000 | 4.8 | 121,677 | 56,440 | 26,838 | 71,019 | 56,440 | ||||||||||||||||||||||
KRTnet Corporation (formerly Korea Radio Wave Basestation Management) | 234,150 | 4.4 | 1,171 | 2,646 | 2,669 | 2,178 | 2,646 | ||||||||||||||||||||||
POSCO | 2,481,310 | 2.9 | 332,662 | 501,225 | 404,454 | 464,005 | 501,225 | ||||||||||||||||||||||
INNOTG Co., Ltd. | 59,473 | 0.4 | 1,695 | 83 | — | 152 | 83 | ||||||||||||||||||||||
HB Entertainment Co., Ltd. | 752,692 | 3.8 | 2,258 | 2,408 | — | — | 2,408 | ||||||||||||||||||||||
SK SECURITIES CO., Ltd. | — | — | — | (note a | ) | 1,877 | 2,418 | — | |||||||||||||||||||||
SINJISOFT Corporation | — | — | — | (note a | ) | — | 590 | — | |||||||||||||||||||||
Cowon System, Inc. | — | — | — | (note a | ) | — | 1,600 | — | |||||||||||||||||||||
sub-total | 465,244 | 438,685 | 543,985 | 568,598 | |||||||||||||||||||||||||
(Investments in non-listed companies) | |||||||||||||||||||||||||||||
Powercomm Co., Ltd. (note b) | 7,500,000 | 5.0 | 240,243 | 77,130 | 68,407 | 71,565 | 77,130 | ||||||||||||||||||||||
Japan MBCO | 54,000 | 7.3 | 27,332 | (note d | ) | 42,517 | 27,332 | 27,332 | |||||||||||||||||||||
Real Telecom Co., Ltd. | 398,722 | 8.3 | 5,981 | (note c | ) | 5,981 | — | — | |||||||||||||||||||||
Enterprise Networks Co., Ltd. | 423,244 | 4.0 | 14,438 | (note c | ) | 14,438 | — | — | |||||||||||||||||||||
Mirae Asset Life Insurance Co., Ltd. (formerly SK Life Insurance Co., Ltd.) | — | — | — | (note a | ) | 14,890 | 14,890 | — | |||||||||||||||||||||
Eonex Technologies Inc. | 144,000 | 14.1 | 3,600 | (note d | ) | 4,593 | 4,593 | 4,593 | |||||||||||||||||||||
WideThan Co., Ltd. | — | — | — | (note e | ) | 3,188 | 3,188 | — | |||||||||||||||||||||
The Korea Economic Daily | 2,792,759 | 13.8 | 13,964 | (note d | ) | 2,077 | 2,077 | 13,964 | |||||||||||||||||||||
Other | 121,290 | (notes d and f | ) | 33,210 | 32,472 | 32,212 | |||||||||||||||||||||||
sub-total | 426,848 | 189,301 | 156,117 | 155,231 | |||||||||||||||||||||||||
(Investments in funds) | |||||||||||||||||||||||||||||
Korea IT Fund | (note d | ) | 190,000 | 190,000 | 190,000 | ||||||||||||||||||||||||
Others | (notes d and g | ) | 6,406 | 6,406 | 9,992 | ||||||||||||||||||||||||
sub-total | 196,406 | 196,406 | 199,992 | ||||||||||||||||||||||||||
Total | 824,392 | 896,508 | 923,821 | ||||||||||||||||||||||||||
(note a) | The investments in common stock of SK Securities Co., Ltd., SINJISOFT Corporation, Cowon Systems, Inc. and Mirae Asset Life Insurance Co., Ltd. were all sold for the year ended December 31, 2005. |
(note b) | The Company recorded its investments in common stock of Powercomm Co., Ltd. at its fair value, which was estimated by an outside professional valuation company using the present value of expected future cash flow, and the unrealized loss on valuation of investments amounting to |
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Table of Contents
(note c) | Due to the impairment of the Company’s investments in common stock of Real Telecom Co., Ltd. and Enterprise Networks Co., Ltd., the Company recorded impairment losses of |
(note d) | As a reasonable estimate of fair value could not be made, the investment is stated at acquisition cost. The investments in common stock of Eonex Technologies Inc. was reclassified to available-for-sale securities from equity securities accounted for using the equity method during 2003, as the Company’s ownership in such investees decreased to less than 20% and the Company lost significant influence. Such securities were transferred to available-for-sale securities at the carrying amount valued using the equity method of accounting prior to the reclassification. |
(note e) | The investment in common stock of WiderThan Co., Ltd. was reclassified to equity securities accounted for using the equity method during 2005. Although the Company’s ownership in WiderThan Co., Ltd. is less than 20%, the Company exercises significant influence on the selection of directors and the investee has significant transactions with the Company. |
(note f) | Due to the impairment of their investments in common stock of CCK Van, Biznet Tech, Hanse Telecom, Cybird Korea and Venture Korea in 2003, Mobilewelcom Co., Ltd., CXP Inc., LoveHunt Inc. and others in 2004 and TeleMerc.com, Fibernett Co., Ltd. and others in 2005, the Company and certain subsidiaries recorded impairment losses of |
(note g) | Due to the impairment of their investments in cinema projects, the Company and certain subsidiaries recorded impairment losses of |
Acquisition | ||||||||||||||||||||
Cost at | Carrying Amount | |||||||||||||||||||
December 31, | ||||||||||||||||||||
Maturity | 2005 | 2003 | 2004 | 2005 | ||||||||||||||||
Public bonds | (note a | ) | 1,599 | 971 | 1,328 | 1,599 | ||||||||||||||
Currency stabilization bonds | (note b | ) | 294,891 | — | — | 294,674 | ||||||||||||||
Convertible bonds of Real Telecom Co., Ltd. (note c) | March 2004 | 10,655 | 9,514 | — | — | |||||||||||||||
Convertible bonds of Eonex Technologies, Inc. (note d) | January 2005 | — | 3,600 | 3,600 | — | |||||||||||||||
Other | — | 230 | 230 | — | ||||||||||||||||
Total | 14,315 | 5,158 | 296,273 | |||||||||||||||||
Less current portion of available-for-sale debt securities | (9,514 | ) | (3,700 | ) | — | |||||||||||||||
Long-term available-for-sale debt securities | 4,801 | 1,458 | 296,273 | |||||||||||||||||
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Table of Contents
(note a) | The maturities of public bonds as of December 31, 2003, 2004 and 2005 are as follows (in millions of Korean won): |
Maturity | 2003 | 2004 | 2005 | |||||||||
Within five years | 857 | 904 | 1,238 | |||||||||
Within ten years | 114 | 424 | 361 | |||||||||
971 | 1,328 | 1,599 | ||||||||||
(note b) | The maturities of currency stabilization bonds as of December 31, 2003, 2004 and 2005 are as follows (in millions of Korean won): |
Maturity | 2003 | 2004 | 2005 | |||||||||
Within five years | — | — | 294,674 |
(note c) | The convertible bonds of Real Telecom Co., Ltd. with a principal amount of |
(note d) | The convertible bonds of Eonex Technologies, Inc. were all settled in cash during the year ended December 31, 2005. |
Acquisition | ||||||||||||||||||||
Cost at | Carrying Amount | |||||||||||||||||||
December 31, | ||||||||||||||||||||
Maturity | 2005 | 2003 | 2004 | 2005 | ||||||||||||||||
Public bonds | (note a | ) | 115 | — | 144 | 115 | ||||||||||||||
Subordinated bonds of Mirae Asset Life Insurance Co., Ltd. (formerly SK Life Insurance Co., Ltd.) | (note b | ) | — | 50,000 | 50,000 | — | ||||||||||||||
Subordinated bonds of Nate Third Special Purpose Company | May 2004 | — | 27,464 | — | — | |||||||||||||||
Subordinated bonds of Nate Fourth Special Purpose Company | September 2004 | — | 25,393 | — | — | |||||||||||||||
Subordinated bonds of Nate Fifth Special Purpose Company | December 2004 | — | 23,490 | — | — | |||||||||||||||
Total | 126,347 | 50,144 | 115 | |||||||||||||||||
Less current portion of held-to-maturity securities | (76,347 | ) | (9 | ) | (1 | ) | ||||||||||||||
Long-term held-to-maturity securities | 50,000 | 50,135 | 114 | |||||||||||||||||
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(note a) | The maturities of public bonds as of December 31, 2005 is as follows (in millions of Korean won): |
Maturity | 2005 | |||
Within one year | 1 | |||
Within five years | 82 | |||
Within ten years | 32 | |||
115 | ||||
(note b) | The Subordinated bonds of Mirae Asset Life Insurance Co., Ltd. (formerly SK Life Insurance Co., Ltd.) were all early repaid during 2005. |
For the Year Ended December 31, 2003 | ||||||||||||||||
Beginning | Increase/ | Transferred to | Ending | |||||||||||||
Balance | (Decrease) | Realized Gain (Loss) | Balance | |||||||||||||
Digital Chosunilbo Co., Ltd. | (3,353 | ) | 419 | — | (2,934 | ) | ||||||||||
hanarotelecom incorporated | (101,788 | ) | 46,320 | — | (55,468 | ) | ||||||||||
KRTnet Corporation | 1,522 | (24 | ) | — | 1,498 | |||||||||||
POSCO | — | 71,792 | — | 71,792 | ||||||||||||
Powercomm Co., Ltd. | — | (171,836 | ) | — | (171,836 | ) | ||||||||||
SK Securities Co., Ltd. | (498 | ) | (3,176 | ) | — | (3,674 | ) | |||||||||
Total | (104,117 | ) | (56,505 | ) | — | (160,622 | ) | |||||||||
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For the Year Ended December 31, 2004 | ||||||||||||||||
Beginning | Increase/ | Transferred to | Ending | |||||||||||||
Balance | (Decrease) | Realized Gain (Loss) | Balance | |||||||||||||
Digital Chosunilbo Co., Ltd. | (2,934 | ) | (824 | ) | — | (3,758 | ) | |||||||||
hanarotelecom incorporated | (55,468 | ) | 4,811 | — | (50,657 | ) | ||||||||||
KRTnet Corporation | 1,498 | (491 | ) | — | 1,007 | |||||||||||
POSCO | 71,792 | 59,551 | — | 131,343 | ||||||||||||
INNOTG Co., Ltd. | — | (1,543 | ) | — | (1,543 | ) | ||||||||||
SINJISOFT Corporation | — | 460 | — | 460 | ||||||||||||
Powercomm Co., Ltd. | (171,836 | ) | 3,158 | — | (168,678 | ) | ||||||||||
Eonex Technologies Inc. | — | 2,011 | — | 2,011 | ||||||||||||
WiderThan Co., Ltd. | — | (27 | ) | — | (27 | ) | ||||||||||
SK Securities Co., Ltd. | (3,674 | ) | 541 | — | (3,133 | ) | ||||||||||
Total | (160,622 | ) | 67,647 | — | (92,975 | ) | ||||||||||
For the Year Ended December 31, 2005 | ||||||||||||||||||||||||
Transferred | Minority Interest in | |||||||||||||||||||||||
Beginning | Increase/ | to Realized | Equity of Consolidated | Tax Effect | Ending | |||||||||||||||||||
Balance | (Decrease) | Gain (Loss) | Subsidiaries | (Note) | Balance | |||||||||||||||||||
Digital Chosunilbo Co., Ltd. | (3,758 | ) | 3,772 | — | — | (4 | ) | 10 | ||||||||||||||||
hanarotelecom incorporated | (50,657 | ) | (14,580 | ) | — | — | 17,940 | (47,297 | ) | |||||||||||||||
KRTnet Corporation | 1,007 | 468 | — | — | (406 | ) | 1,069 | |||||||||||||||||
POSCO | 131,343 | 37,220 | — | — | (46,355 | ) | 122,208 | |||||||||||||||||
INNOTG Co., Ltd. | (1,543 | ) | (68 | ) | — | — | 443 | (1,168 | ) | |||||||||||||||
HB Entertainment Co., Ltd. | — | 150 | — | (94 | ) | (15 | ) | 41 | ||||||||||||||||
SK Securities Co., Ltd. | (3,133 | ) | 3,610 | (477 | ) | — | — | — | ||||||||||||||||
SINJISOFT Corporation | 460 | — | (460 | ) | — | — | — | |||||||||||||||||
Cowon Systems, Inc. | — | 585 | (585 | ) | — | — | — | |||||||||||||||||
Powercomm Co., Ltd. | (168,678 | ) | 5,565 | — | — | 44,856 | (118,257 | ) | ||||||||||||||||
Eonex Technologies Inc. | 2,011 | — | — | — | (553 | ) | 1,458 | |||||||||||||||||
WiderThan Co., Ltd. | (27 | ) | 27 | — | — | — | — | |||||||||||||||||
Currency stabilization bonds | — | (217 | ) | — | — | 60 | (157 | ) | ||||||||||||||||
Total | (92,975 | ) | 36,532 | (1,522 | ) | (94 | ) | 15,966 | (42,093 | ) | ||||||||||||||
(note) | Represents adjustments to reflect the tax effect of temporary differences directly charged or credited to unrealized gains (losses) on valuation of long-term investment securities, which are capital adjustment items, in accordance with SKAS No. 16 “Income Taxes”, which is effective January 1, 2005. |
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5. | EQUITY SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD |
Number of | Ownership | Acquisition | Net Asset | |||||||||||||||||||||||||
Shares at | Percentage (%) | Cost at | Value at | Carrying Amount | ||||||||||||||||||||||||
December 31, | at December 31, | December 31, | December 31, | |||||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | 2003 | 2004 | 2005 | ||||||||||||||||||||||
Pantech Co., Ltd. (formerly SK Teletech Co., Ltd.) | 25,570,306 | 22.7 | 26,309 | 54,939 | (note a) | — | — | 55,732 | ||||||||||||||||||||
SK C&C Co., Ltd. | 300,000 | 30.0 | 19,071 | 163,374 | 92,844 | 201,484 | 168,244 | |||||||||||||||||||||
STIC Ventures Co., Ltd. | 1,600,000 | 21.9 | 8,000 | 8,379 | 7,086 | 7,477 | 8,379 | |||||||||||||||||||||
TU Media Corp. | 12,922,266 | 29.6 | 64,611 | 31,350 | (note b) | — | 34,592 | 32,343 | ||||||||||||||||||||
VCASH Co., Ltd. | — | — | — | — | (note c) | 1,048 | — | — | ||||||||||||||||||||
Aircross Co., Ltd. | 600,000 | 38.1 | 300 | 966 | (note d) | 300 | 940 | 966 | ||||||||||||||||||||
WiderThan Co., Ltd. | 2,000,000 | 10.1 | 1,000 | 11,503 | (note e) | 3,188 | — | 11,503 | ||||||||||||||||||||
IHQ, Inc. | 8,000,000 | 21.6 | 14,440 | 8,488 | (note f) | — | — | 14,755 | ||||||||||||||||||||
Harex Info Tech, Inc. | 225,000 | 21.2 | 3,375 | 1,128 | (note g) | — | 3,375 | 2,530 | ||||||||||||||||||||
Skytel Co., Ltd. | 1,756,000 | 28.6 | 2,159 | 4,786 | 3,401 | 3,713 | 4,786 | |||||||||||||||||||||
SK China Company Ltd. | 28,160 | 20.7 | 3,195 | 1,571 | 1,683 | 830 | 485 | |||||||||||||||||||||
HELIO, LLC | 50,000,000 | 50.0 | 163,600 | 102,272 | (note h) | — | — | 102,272 | ||||||||||||||||||||
SK USA, Inc. | 49 | 49.0 | 3,184 | 3,279 | (note d) | 3,184 | 3,056 | 3,279 | ||||||||||||||||||||
SKT-QC Wireless Development Fund | — | — | — | 5,901 | 5,146 | — | ||||||||||||||||||||||
SKT-HP Ventures, LLC | 50.0 | 6,415 | 5,290 | 5,960 | 5,281 | 5,290 | ||||||||||||||||||||||
CDMA Mobile Phone Center | 40,286,825 | 50.0 | 75,680 | 40,810 | 49,444 | 25,117 | 40,810 | |||||||||||||||||||||
SK Mobile | — | — | — | — | — | 1,151 | — | |||||||||||||||||||||
Cyworld Japan Co., Ltd. | 500,000 | 100.0 | 4,466 | 3,252 | (note i) | — | — | 726 | ||||||||||||||||||||
Etoos Group Inc. | 3,036,353 | 20.5 | 3,095 | 1,005 | — | — | 2,586 | |||||||||||||||||||||
Other investments in affiliates | 17,709 | (note j) | 9,670 | 11,866 | 17,193 | |||||||||||||||||||||||
Total | 416,609 | 183,709 | 304,028 | 471,879 | ||||||||||||||||||||||||
(note a) | 60% equity interest in SK Teletech Co., Ltd. were sold to Curitel Communications, Inc. and the Company recorded a gain of |
(note b) | As the Company’s ownership in TU Media Corp. decreased from 100% to 28.5% in 2004, TU Media Corp. was excluded from the consolidation, effective January 1, 2004. And, the investments in common stock of TU Media Corp. are accounted for using the equity method of accounting. |
(note c) | The investments in common stock of VCASH Co., Ltd. were sold to Korea Railway Transportation Promotion Foundation in 2004. |
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(note d) | Effective January 1, 2004, the Company recorded its investments in Aircross Co., Ltd. and SK USA, Inc. using the equity method of accounting as changes in the Company’s portion of such investees’ equity amounts resulting from applying the equity method of accounting is material. |
(note e) | Effective January 1, 2005, the investment in common stock of WiderThan Co., Ltd. was reclassified to equity securities accounted for using the equity method. Although the Company’s ownership in WiderThan Co., Ltd. is less than 20%, the Company exercises significant influences on the selection of directors and the investee has significant transactions with the Company. |
(note f) | In February 2005, the Company acquired 8,000,000 shares of IHQ, Inc., an entertainment management company, for |
(note g) | Effective January 1, 2005, the Company recorded its investments in Harex Info Tech, Inc. using the equity method of accounting as changes in the Company’s portion of such investees’ equity amounts resulting from applying the equity method of accounting is material. |
(note h) | In the first quarter of 2005, the Company incorporated SK Telecom USA Holdings, Inc. with an initial investment of US$83 million in order to invest in and manage HELIO, LLC, a joint venture company in the Untied States of America, which was established in order to provide wireless telecommunication services in the United States of America (see Note 29. (b)). |
(note i) | Even though the Company and its subsidiary’s ownership interest is 100%, Cyworld Japan Co., Ltd. is excluded from the consolidation and accounted for using the equity method as its total assets at the beginning of the fiscal year were less than |
(note j) | As allowed under Korean GAAP, investments in equity securities of SK Telecom Europe Limited and certain others were not accounted for using the equity method of accounting, as changes in the Company’s portion of shareholders’ equity of such investees were not expected to be material. |
For the Year Ended December 31, 2003 | ||||||||||||||||||||||||||||||||||
Equity in | ||||||||||||||||||||||||||||||||||
Equity in | Equity in | Capital Surplus | ||||||||||||||||||||||||||||||||
Beginning | Earnings | Retained | and Capital | Dividend | Other | Ending | ||||||||||||||||||||||||||||
Balance | Acquisition | (Losses) | Earning | Adjustments | Received | Decrease | Balance | |||||||||||||||||||||||||||
SK C&C Co., Ltd. | 39,687 | — | 7,962 | — | 45,795 | (600 | ) | — | 92,844 | |||||||||||||||||||||||||
STIC Ventures Co., Ltd. | (note a) | 6,884 | — | 44 | (3 | ) | 161 | — | — | 7,086 | ||||||||||||||||||||||||
Eonex Technologies, Inc. | (note b) | 4,615 | — | (22 | ) | — | — | — | (4,593 | ) | — | |||||||||||||||||||||||
VCASH Co., Ltd. | (note a) | 2,232 | — | (1,353 | ) | (30 | ) | 199 | — | — | 1,048 | |||||||||||||||||||||||
WiderThan Co., Ltd. | 1,750 | — | 1,465 | — | (27 | ) | — | — | 3,188 | |||||||||||||||||||||||||
Skytel Co., Ltd. | 2,576 | — | 694 | — | 152 | (21 | ) | — | 3,401 | |||||||||||||||||||||||||
SK China Co., Ltd. | 3,482 | — | (1,864 | ) | — | 65 | — | — | 1,683 | |||||||||||||||||||||||||
SK-QC Wireless Development Fund | 5,993 | — | (79 | ) | — | (13 | ) | — | — | 5,901 | ||||||||||||||||||||||||
SKT-HP Ventures, LLC | 5,990 | — | 17 | — | (47 | ) | — | — | 5,960 | |||||||||||||||||||||||||
CDMA Mobile Phone Center | (note c) | 63,354 | — | (13,839 | ) | — | — | — | (71 | ) | 49,444 | |||||||||||||||||||||||
136,563 | — | (6,975 | ) | (33 | ) | 46,285 | (621 | ) | (4,664 | ) | 170,555 | |||||||||||||||||||||||
(note a) | Effective January 1, 2003, the Company’s investees including STIC Ventures Co., Ltd. and VCASH Co., Ltd., adopted SKAS No. 3, “Intangible Assets”. This statement requires that organization cost be |
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charged to expenses as incurred and the unamortized organization costs at January 1, 2003 be offset against the beginning retained earnings. To reflect the Company’s portion of the decrease in the beginning retained earnings of the investees, the Company reduced its beginning retained earnings of 2003. | |
(note b) | Investments in common stock of Eonex Technologies, Inc. were reclassified to available-for-sale securities as the Company’s ownership in Eonex Technologies, Inc. decreased to 16.1% from 22.5% during the first quarter of 2003. |
(note c) | The other decrease in investments in equity securities of CDMA Mobile Phone Center represents a translation loss incurred from translating the foreign currency financial statements of SLD Telecom PTE Ltd., an overseas subsidiary of the Company, which makes investments in CDMA Mobile Phone Center, into Korean won. |
For the Year Ended December 31, 2004 | ||||||||||||||||||||||||||||||
Equity in | ||||||||||||||||||||||||||||||
Equity in | Capital Surplus | |||||||||||||||||||||||||||||
Beginning | Earnings | and Capital | Dividend | Other | Ending | |||||||||||||||||||||||||
Balance | Acquisition | (Losses) | Adjustments | Received | Decrease | Balance | ||||||||||||||||||||||||
SK C&C Co., Ltd. | 92,844 | — | 13,322 | 95,918 | (600 | ) | — | 201,484 | ||||||||||||||||||||||
STIC Ventures Co., Ltd. | 7,086 | — | (123 | ) | 514 | — | — | 7,477 | ||||||||||||||||||||||
TU Media Corp. | 38,681 | — | (4,213 | ) | 124 | — | — | 34,592 | ||||||||||||||||||||||
VCASH Co., Ltd. | 1,048 | — | (657 | ) | — | — | (391 | ) | — | |||||||||||||||||||||
Aircross Co., Ltd. | (note a) | 300 | — | 659 | (19 | ) | — | — | 940 | |||||||||||||||||||||
WiderThan Co., Ltd. | (note b) | 3,188 | — | — | — | — | (3,188 | ) | — | |||||||||||||||||||||
Skytel Co., Ltd. | 3,401 | — | 1,070 | (603 | ) | (155 | ) | — | 3,713 | |||||||||||||||||||||
SK China Co., Ltd. | 1,683 | — | (595 | ) | (258 | ) | — | — | 830 | |||||||||||||||||||||
SK USA, Inc. | (note a) | 3,184 | — | 168 | (296 | ) | — | — | 3,056 | |||||||||||||||||||||
SK-QC Wireless Development Fund | 5,901 | — | 4 | (759 | ) | — | — | 5,146 | ||||||||||||||||||||||
SKT-HP Ventures, LLC | 5,960 | — | 62 | (741 | ) | — | — | 5,281 | ||||||||||||||||||||||
CDMA Mobile Phone Center | (note c) | 49,444 | 5,979 | (21,651 | ) | — | — | (8,655 | ) | 25,117 | ||||||||||||||||||||
212,720 | 5,979 | (11,954 | ) | 93,880 | (755 | ) | (12,234 | ) | 287,636 | |||||||||||||||||||||
(note a) | As their total assets at the beginning of 2004 were over |
(note b) | As the Company’s ownership in WiderThan Co., Ltd. decreased to 14.3% form 20% in 2004, investments in common stock of WiderThan Co., Ltd. are reclassified to available-for-sale securities in 2004. |
(note c) | SLD Telecom PTE Ltd. (“SLD”), an oversea subsidiary of the Company, accounted for the in-kind contribution of network equipment to CDMA Mobile Phone Center as an increase in the investment securities and the reimbursement in the amount equal to depreciation of such network equipment in accordance with the Business Co-Operation Contract between SLD and Saigon Post and Telecommunication Service Corp., a Vietnamese counterparty, was accounted for as a decrease in the investment. During the year ended December 31, 2004, SLD got such reimbursement of |
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For the Year Ended December 31, 2005 | ||||||||||||||||||||||||||||||
Equity in | ||||||||||||||||||||||||||||||
Capital | ||||||||||||||||||||||||||||||
Equity in | Surplus and | Other | ||||||||||||||||||||||||||||
Beginning | Earnings | Capital | Dividend | Increase | Ending | |||||||||||||||||||||||||
Balance | Acquisition | (Losses) | Adjustments | Received | (Decrease) | Balance | ||||||||||||||||||||||||
Pantech Co., Ltd. | (note a) | — | — | 93 | (183 | ) | — | 55,822 | 55,732 | |||||||||||||||||||||
SK C&C Co., Ltd. | (note b) | 201,484 | — | 18,102 | (50,742 | ) | (600 | ) | — | 168,244 | ||||||||||||||||||||
STIC Ventures Co., Ltd. | (note c) | 7,477 | — | (779 | ) | 317 | — | 1,364 | 8,379 | |||||||||||||||||||||
TU Media Corp. | 34,592 | 25,611 | (27,852 | ) | (8 | ) | — | — | 32,343 | |||||||||||||||||||||
Aircross Co., Ltd. | 940 | — | 26 | — | — | — | 966 | |||||||||||||||||||||||
WiderThan Co., Ltd. | (note d) | — | — | 868 | 7 | — | 10,628 | 11,503 | ||||||||||||||||||||||
IHQ, Inc. | (note c) | — | 14,440 | (197 | ) | 410 | — | 102 | 14,755 | |||||||||||||||||||||
Harex Info Tech, Inc. | (note e) | 3,375 | — | (845 | ) | — | — | — | 2,530 | |||||||||||||||||||||
Skytel Co., Ltd. | (note b) | 3,713 | — | 1,377 | (120 | ) | (184 | ) | — | 4,786 | ||||||||||||||||||||
SK China Company Ltd. | 830 | — | (295 | ) | (50 | ) | — | — | 485 | |||||||||||||||||||||
HELIO, LLC | (note f) | — | 123,586 | (21,550 | ) | — | — | 236 | 102,272 | |||||||||||||||||||||
SK USA, Inc. | 3,056 | — | 316 | (93 | ) | — | — | 3,279 | ||||||||||||||||||||||
SKT-QC Wireless Development Fund | (note g) | 5,146 | — | — | — | — | (5,146 | ) | — | |||||||||||||||||||||
SKT-HP Ventures, LLC | 5,281 | — | 167 | (158 | ) | — | — | 5,290 | ||||||||||||||||||||||
CDMA Mobile Phone Center | (note h) | 25,116 | 33,950 | (13,376 | ) | — | — | (4,880 | ) | 40,810 | ||||||||||||||||||||
SK Mobile | (note i) | 1,151 | 14,213 | (2,566 | ) | (22 | ) | — | (12,776 | ) | — | |||||||||||||||||||
Cyworld Japan Co., Ltd. | — | 4,466 | (3,867 | ) | 127 | — | — | 726 | ||||||||||||||||||||||
Etoos Group Inc. | — | 3,095 | (498 | ) | (11 | ) | — | — | 2,586 | |||||||||||||||||||||
292,161 | 219,361 | (50,876 | ) | (50,526 | ) | (784 | ) | 45,350 | 454,686 | |||||||||||||||||||||
(note a) | The other increase in investments in equity securities of Pantech Co., Ltd. is net of the carrying amount of the investment in equity securities of SK Teletech Co., Ltd. amounting to |
(note b) | The Company received dividends from SK C&C Co., Ltd. and Skytel Co., Ltd. and the corresponding amount was deducted from its equity method securities. |
(note c) | The other increases in investments in equity securities of STIC Ventures Co., Ltd. and IHQ, Inc. represent gains on disposal of investments in equity securities resulting from the dilution of the Company’s ownership as a result of the fact that investees sold its unissued shares to third parties directly. |
(note d) | The other increase in investments in equity securities of WiderThan Co., Ltd. represents the carrying amount of the investment in equity securities of WiderThan Co., Ltd. amounting to |
(note e) | Effective January 1, 2005, the Company recorded its investments in Harex Info Tech, Inc. using the equity method of accounting as changes in the Company’s portion of such investees’ equity amounts resulting from applying the equity method of accounting is material. |
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(note f) | The increase in investments in equity securities of HELIO, LLC represents a translation gain incurred from translating the financial statements of SK Telecom USA Holdings, Inc. denominated in foreign currency, which makes investments in HELIO, LLC, into Korean won. |
(note g) | Investment was fully liquidated due to dissolution of SKT-QC Wireless Development Fund during the year ended December 31, 2005. |
(note h) | During the year ended December 31, 2005, SLD got the reimbursement of |
(note i) | Effective January 1, 2005, SK Mobile became an equity method investee of SK Teletech Co., Ltd., a former subsidiary of the Company as changes in SK Teletech Co., Ltd.’s portion of such investee’s equity amounts resulting from applying the equity method of accounting was material. Effective July 1, 2005, the investment in equity securities of SK Teletech Co., Ltd. was reclassified to equity securities accounted for using the equity method, which resulted in the exclusion of SK Mobile from equity securities accounted for using the equity method. |
For the Year Ended December 31, 2003 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Amortization | Balance | |||||||||||||
SK C&C Co., Ltd. | 6,088 | — | (406 | ) | 5,682 | |||||||||||
For the Year Ended December 31, 2004 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Amortization | Balance | |||||||||||||
SK C&C Co., Ltd. | 5,682 | — | (406 | ) | 5,276 | |||||||||||
For the Year Ended December 31, 2005 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Amortization | Balance | |||||||||||||
Pantech Co., Ltd. | — | 820 | (27 | ) | 793 | |||||||||||
SK C&C Co., Ltd. | 5,276 | — | (406 | ) | 4,870 | |||||||||||
TU Media Corp. | — | 1,045 | (52 | ) | 993 | |||||||||||
IHQ, Inc. | — | 7,377 | (1,110 | ) | 6,267 | |||||||||||
Harex Info Tech, Inc. | — | 1,752 | (350 | ) | 1,402 | |||||||||||
Etoos Group Inc. | — | 1,914 | (333 | ) | 1,581 | |||||||||||
Total | 5,276 | 12,908 | (2,278 | ) | 15,906 | |||||||||||
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For the Year Ended December 31, 2004 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Decrease | Balance | |||||||||||||
SK China Company Ltd. | — | 1,086 | — | 1,086 | ||||||||||||
For the Year Ended December 31, 2005 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Decrease | Balance | |||||||||||||
SK China Company Ltd. | 1,086 | — | — | 1,086 | ||||||||||||
Cyworld Japan Co., Ltd. | — | 2,569 | (43 | ) | 2,526 | |||||||||||
Total | 1,086 | 2,569 | (43 | ) | 3,612 | |||||||||||
Market Price | ||||||||||||
per Share (in | Shares Owned | Market | ||||||||||
Korean Won) | by the Company | Price | ||||||||||
Pantech Co., Ltd. | 5,900 | 25,570,306 | 150,865 | |||||||||
WiderThan Co., Ltd. | 15,408 | 2,000,000 | 30,816 | |||||||||
IHQ, Inc. | 9,220 | 8,000,000 | 73,760 |
Total | Net Income | |||||||||||||||
Total Assets | Liabilities | Revenue | (Loss) | |||||||||||||
Pantech Co., Ltd. | 843,996 | 604,118 | 655,089 | (21,745 | ) | |||||||||||
SK C&C Co., Ltd. | 1,544,980 | 1,000,400 | 1,002,668 | 61,693 | ||||||||||||
STIC Ventures Co., Ltd. | 57,040 | 18,755 | 11,845 | (3,347 | ) | |||||||||||
TU Media Corp. | 393,945 | 287,966 | 21,550 | (96,487 | ) | |||||||||||
Aircross Co., Ltd. | 12,178 | 9,642 | 15,240 | 69 | ||||||||||||
WiderThan Co., Ltd. | 155,388 | 37,773 | 78,467 | 4,052 | ||||||||||||
IHQ, Inc. | 65,487 | 24,661 | 50,123 | 6,235 | ||||||||||||
Harex Info Tech, Inc. | 5,977 | 648 | 1,173 | (2,337 | ) | |||||||||||
Skytel Co., Ltd. | 23,812 | 6,387 | 13,580 | 4,824 | ||||||||||||
SK China Company Ltd. | 8,121 | 536 | 1,849 | (1,423 | ) | |||||||||||
HELIO, LLC | 225,322 | 20,733 | 24,812 | (43,100 | ) | |||||||||||
SK USA, Inc. | 8,387 | 1,695 | 8,139 | 646 | ||||||||||||
SKT-HP Ventures, LLC | 10,584 | 5 | 342 | 333 | ||||||||||||
CDMA Mobile Phone Center | 110,468 | 28,847 | 27,359 | (26,750 | ) | |||||||||||
Cyworld Japan Co., Ltd. | 4,689 | 1,914 | 9 | (1,594 | ) | |||||||||||
Etoos Group Inc. | 14,814 | 9,898 | 14,042 | (5,739 | ) |
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2003 | 2004 | 2005 | ||||||||||
Loans to employees’ stock ownership association | 33,788 | 22,546 | 14,586 | |||||||||
Loans to employees for housing and other (3 - 4%) | 8,587 | 8,859 | 4,799 | |||||||||
42,375 | 31,405 | 19,385 | ||||||||||
Useful | ||||||||||||||
Lives | ||||||||||||||
(Years) | 2003 | 2004 | 2005 | |||||||||||
Land | 449,377 | 466,459 | 466,562 | |||||||||||
Buildings and structures | 15, 30 | 1,081,134 | 1,445,593 | 1,484,360 | ||||||||||
Machinery | 3-6 | 8,440,624 | 9,584,526 | 10,510,486 | ||||||||||
Vehicles | 3-4 | 19,741 | 21,710 | 21,680 | ||||||||||
Other | 3-4 | 794,495 | 791,829 | 825,133 | ||||||||||
Construction in progress | 323,490 | 138,002 | 264,309 | |||||||||||
Total | 11,108,861 | 12,448,119 | 13,572,530 | |||||||||||
Less accumulated depreciation | (6,467,314 | ) | (7,744,197 | ) | (8,909,161 | ) | ||||||||
Property and equipment, net | 4,641,547 | 4,703,922 | 4,663,369 | |||||||||||
For the Year Ended December 31, 2003 | |||||||||||||||||||||||||
Beginning | Ending | ||||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Depreciation | Balance | ||||||||||||||||||||
Land | 439,915 | 6,381 | (4,793 | ) | 7,874 | — | 449,377 | ||||||||||||||||||
Buildings and structures | 778,832 | 9,393 | (4,599 | ) | 100,341 | (40,166 | ) | 843,801 | |||||||||||||||||
Machinery | 2,475,663 | 125,332 | (4,996 | ) | 1,360,240 | (1,285,271 | ) | 2,670,968 | |||||||||||||||||
Vehicles | 6,353 | 1,012 | (123 | ) | 63 | (3,137 | ) | 4,168 | |||||||||||||||||
Other | 515,722 | 861,333 | (4,329 | ) | (916,464 | ) | (106,519 | ) | 349,743 | ||||||||||||||||
Construction in progress | 352,932 | 644,188 | — | (673,630 | ) | — | 323,490 | ||||||||||||||||||
Total | 4,569,417 | 1,647,639 | (18,840 | ) | (121,576 | ) | (1,435,093 | ) | 4,641,547 | ||||||||||||||||
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For the Year Ended December 31, 2004 | |||||||||||||||||||||||||
Beginning | Ending | ||||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Depreciation | Balance | ||||||||||||||||||||
Land | 449,377 | 3,395 | (2,684 | ) | 16,372 | — | 466,460 | ||||||||||||||||||
Buildings and structures | 843,801 | 7,239 | (7,849 | ) | 366,296 | (42,945 | ) | 1,166,542 | |||||||||||||||||
Machinery | 2,670,968 | 108,238 | (8,098 | ) | 1,143,335 | (1,271,336 | ) | 2,643,107 | |||||||||||||||||
Vehicles | 4,168 | 3,744 | (425 | ) | 674 | (3,370 | ) | 4,791 | |||||||||||||||||
Other | 349,743 | 740,752 | (5,481 | ) | (697,135 | ) | (102,859 | ) | 285,020 | ||||||||||||||||
Construction in progress | 323,490 | 768,573 | (756 | ) | (953,305 | ) | — | 138,002 | |||||||||||||||||
Total | 4,641,547 | 1,631,941 | (25,293 | ) | (123,763 | ) | (1,420,510 | ) | 4,703,922 | ||||||||||||||||
For the Year Ended December 31, 2005 | |||||||||||||||||||||||||
Beginning | Ending | ||||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Depreciation | Balance | ||||||||||||||||||||
Land | 466,460 | 723 | (4,698 | ) | 4,077 | — | 466,562 | ||||||||||||||||||
Buildings and structures | 1,166,542 | 12,581 | (8,095 | ) | 35,472 | (55,406 | ) | 1,151,094 | |||||||||||||||||
Machinery | 2,643,107 | 54,681 | (18,990 | ) | 983,489 | (1,182,664 | ) | 2,479,623 | |||||||||||||||||
Vehicles | 4,791 | 1,620 | (250 | ) | (232 | ) | (2,530 | ) | 3,399 | ||||||||||||||||
Other | 285,020 | 766,708 | (3,741 | ) | (657,328 | ) | (92,277 | ) | 298,382 | ||||||||||||||||
Construction in progress | 138,002 | 580,309 | — | (454,002 | ) | — | 264,309 | ||||||||||||||||||
Total | 4,703,922 | 1,416,622 | (35,774 | ) | (88,524 | ) | (1,332,877 | ) | 4,663,369 | ||||||||||||||||
8. | INTANGIBLE ASSETS |
Acquisition | Accumulated | Accumulated | ||||||||||||||||||||||
Cost at | Amortization at | Impairment at | Carrying Amounts | |||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||
2005 | 2005 | 2005 | 2003 | 2004 | 2005 | |||||||||||||||||||
Goodwill | 2,409,303 | (540,301 | ) | (70 | ) | 2,129,980 | 1,994,339 | 1,868,932 | ||||||||||||||||
Frequency use rights | 1,384,433 | (200,141 | ) | — | 1,251,278 | 1,163,319 | 1,184,292 | |||||||||||||||||
Software development costs | 230,439 | (163,947 | ) | (501 | ) | 137,810 | 105,955 | 65,991 | ||||||||||||||||
Other | 623,545 | (288,445 | ) | (1,426 | ) | 155,876 | 259,290 | 333,674 | ||||||||||||||||
4,647,720 | (1,192,834 | ) | (1,997 | ) | 3,674,944 | 3,522,903 | 3,452,889 | |||||||||||||||||
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For the Year Ended December 31, 2003 | ||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Amortization | Balance | |||||||||||||||||||
Goodwill | 2,255,868 | 9,374 | — | (111 | ) | (135,151 | ) | 2,129,980 | ||||||||||||||||
Software development costs | 91,337 | 26,665 | — | 56,512 | (36,704 | ) | 137,810 | |||||||||||||||||
Frequency use rights | 1,259,253 | — | — | — | (7,975 | ) | 1,251,278 | |||||||||||||||||
Other | 114,777 | 28,982 | (7,275 | ) | 54,371 | (34,979 | ) | 155,876 | ||||||||||||||||
3,721,235 | 65,021 | (7,275 | ) | 110,772 | (214,809 | ) | 3,674,944 | |||||||||||||||||
For the Year Ended December 31, 2004 | ||||||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Amortization | Impairment | Balance | ||||||||||||||||||||||
Goodwill | 2,129,980 | 647 | — | — | (136,288 | ) | — | 1,994,339 | ||||||||||||||||||||
Software development costs | 137,810 | 6,235 | (3,349 | ) | 10,545 | (45,244 | ) | (42 | ) | 105,955 | ||||||||||||||||||
Frequency use rights | 1,251,278 | — | — | 7,800 | (95,759 | ) | — | 1,163,319 | ||||||||||||||||||||
Other | 155,876 | 65,494 | (865 | ) | 93,514 | (54,729 | ) | — | 259,290 | |||||||||||||||||||
3,674,944 | 72,376 | (4,214 | ) | 111,859 | (332,020 | ) | (42 | ) | 3,522,903 | |||||||||||||||||||
For the Year Ended December 31, 2005 | ||||||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Amortization | Impairment | Balance | ||||||||||||||||||||||
Goodwill | 1,994,339 | — | — | 9,223 | (134,630 | ) | — | 1,868,932 | ||||||||||||||||||||
Frequency use rights | 1,163,319 | 117,380 | — | — | (96,407 | ) | — | 1,184,292 | ||||||||||||||||||||
Software development costs | 105,955 | 1,472 | — | — | (41,436 | ) | — | 65,991 | ||||||||||||||||||||
Other | 259,290 | 80,642 | (342 | ) | 64,522 | (70,178 | ) | (260 | ) | 333,674 | ||||||||||||||||||
3,522,903 | 199,494 | (342 | ) | 73,745 | (342,651 | ) | (260 | ) | 3,452,889 | |||||||||||||||||||
Amount | Description | Residual Useful Lives | ||||||||
Goodwill | 1,820,884 | Goodwill related to acquisition of Shinsegi Telecomm, Inc. | 14 years and 3 months | |||||||
IMT license | 1,059,871 | Frequency use rights relating to WCDMA Service | (note a | ) | ||||||
WiBro license | 117,000 | WiBro Service | (note b | ) | ||||||
DMB license | 7,421 | DMB Service | 10 years and 6 months | |||||||
Software development costs | 65,991 | Software for business use | 1-5 years |
(note a) | Amortization of the IMT license commenced when the Company started its commercial IMT 2000 service in December 2003, using the straight-line method over the estimated useful life (13 years) of the IMT license which expires in December 2016. |
(note b) | The Company purchased the WiBro license from MIC on March 20, 2005. The license period is seven years from that date. Amortization of the WiBro license will be on a straight line basis over the remaining useful life from the commencement date of the Company’s commercial WiBro services. |
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Maturity | Annual Interest | |||||||||||||||||||||
Year | Rate (%) | 2003 | 2004 | 2005 | ||||||||||||||||||
Domestic general bonds | 2004 | 5.0-7.0 | 1,120,000 | — | — | |||||||||||||||||
” | 2005 | 6.0 | 500,000 | 500,000 | — | |||||||||||||||||
” | 2006 | 5.0-6.0 | 800,000 | 800,000 | 800,000 | |||||||||||||||||
” | 2007 | 5.0-6.0 | 700,000 | 700,000 | 700,000 | |||||||||||||||||
” | 2008 | 5.0 | 300,000 | 300,000 | 300,000 | |||||||||||||||||
” | 2009 | 5.0 | — | 300,000 | 300,000 | |||||||||||||||||
” | 2010 | 4.0 | — | — | 200,000 | |||||||||||||||||
” | 2011 | 3.0 | — | 200,000 | 200,000 | |||||||||||||||||
Dollar denominated bonds | ||||||||||||||||||||||
(US$200,078) | 2004 | 7.75 | 239,653 | — | — | |||||||||||||||||
(US$300,000) | 2011 | 4.25 | — | 313,140 | 303,900 | |||||||||||||||||
Convertible bonds (US$329,450) | 2009 | — | — | 385,885 | 385,885 | |||||||||||||||||
Bonds with stock purchase warrants (US$4,000) | 2006 | 6M Libor-0.3 | 4,791 | — | — | |||||||||||||||||
3,664,444 | 3,499,025 | 3,189,785 | ||||||||||||||||||||
Less discounts on bonds | (47,553 | ) | (51,467 | ) | (40,016 | ) | ||||||||||||||||
Less conversion right adjustments | — | (82,245 | ) | (65,218 | ) | |||||||||||||||||
Add long-term accrued interest | 491 | 24,808 | 24,808 | |||||||||||||||||||
Net | 3,617,382 | 3,390,121 | 3,109,359 | |||||||||||||||||||
Less portion due within one year | (1,355,514 | ) | (498,278 | ) | (795,151 | ) | ||||||||||||||||
Long-term portion | 2,261,868 | 2,891,843 | 2,314,208 | |||||||||||||||||||
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Final | ||||||||||||||||||||
Maturity | Annual Interest Rate | |||||||||||||||||||
Lender | Year | (%) | 2003 | 2004 | 2005 | |||||||||||||||
Korea Development Bank | 2004 | 3M Libor + 3.45 | US$4,478 | US$— | US$— | |||||||||||||||
Woori Bank | 2005 | Floating rate + 0.2 | 4,089 | — | — | |||||||||||||||
Fine Bank | 2008 | 3.50~3.90 | ¥— | ¥— | ¥14,802 | |||||||||||||||
Fine Bank | 2009 | 3.11 | — | — | 12,800 | |||||||||||||||
Total in foreign currency | US$8,567 | US$— | US$— | |||||||||||||||||
¥— | ¥— | ¥27,602 | ||||||||||||||||||
Equivalent in Korean won | 10,262 | — | 237 | |||||||||||||||||
Less portion due within one year | (8,629 | ) | — | (82 | ) | |||||||||||||||
Long-term portion | 1,633 | — | 155 | |||||||||||||||||
11. | SUBSCRIPTION DEPOSITS |
Deposit per | ||||||||||||||||
Service type | Subscriber | 2003 | 2004 | 2005 | ||||||||||||
Cellular | 200,000 | 44,197 | 31,440 | 23,770 |
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12. | LEASES |
Annual Lease | ||||||||||||
Payments | Interest | Principal | ||||||||||
2006 | 15,328 | 989 | 14,339 | |||||||||
2007 | 8,846 | 352 | 8,494 | |||||||||
2008 | 1,734 | 24 | 1,710 | |||||||||
Total | 25,908 | 1,365 | 24,543 | |||||||||
Less portion due within one year | (14,339 | ) | ||||||||||
Capital lease liabilities | 10,204 | |||||||||||
13. | ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES |
Foreign Currencies | Korean Won Equivalent | |||||||||||||||||||||||
2003 | 2004 | 2005 | 2003 | 2004 | 2005 | |||||||||||||||||||
Cash and cash equivalents | US$24,407 | US$4,875 | US$11,826 | 29,234 | 5,088 | 11,980 | ||||||||||||||||||
¥8 | ¥6 | — | — | — | — | |||||||||||||||||||
EUR17 | — | EUR3 | 26 | — | 3 | |||||||||||||||||||
GBP5 | — | — | 10 | — | — | |||||||||||||||||||
— | — | VND902,819 | — | — | 58 | |||||||||||||||||||
— | — | SG$30 | — | — | 18 | |||||||||||||||||||
Short-term financial instruments | US$31,492 | — | — | 37,721 | — | — | ||||||||||||||||||
Accounts receivable — trade | US$8,627 | US$19,284 | US$31,334 | 10,333 | 20,129 | 31,741 | ||||||||||||||||||
SG$743 | — | — | 522 | — | — | |||||||||||||||||||
— | — | EUR248 | — | — | 298 |
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Foreign Currencies | Korean Won Equivalent | |||||||||||||||||||||||
2003 | 2004 | 2005 | 2003 | 2004 | 2005 | |||||||||||||||||||
Accounts receivable — other | US$12,844 | US$2,989 | US$3,364 | 15,385 | 3,120 | 3,408 | ||||||||||||||||||
— | — | VND6,173,479 | — | — | 394 | |||||||||||||||||||
Guarantee deposits | US$193 | US$142 | — | 232 | 149 | — | ||||||||||||||||||
¥16,337 | ¥15,756 | ¥16,156 | 183 | 159 | 139 | |||||||||||||||||||
Total assets | 93,646 | 28,645 | 48,039 | |||||||||||||||||||||
Accounts payable — trade | S$15,432 | US$17,406 | US$28,360 | 18,485 | 18,169 | 28,728 | ||||||||||||||||||
¥555,277 | ¥26,240 | — | 6,217 | 266 | — | |||||||||||||||||||
Short-term borrowings | US$26,853 | US$19,392 | — | 32,164 | 20,241 | — | ||||||||||||||||||
¥2,255,431 | ¥438,499 | — | 25,252 | 4,438 | — | |||||||||||||||||||
EUR 7 | EUR 207 | — | 10 | 294 | — | |||||||||||||||||||
— | GBP260 | — | — | 522 | — | |||||||||||||||||||
Accounts payable — other | US$35,759 | US$13,539 | US$15,737 | 42,832 | 14,132 | 15,942 | ||||||||||||||||||
¥20,606 | ¥60,678 | ¥8,498 | 231 | 614 | 73 | |||||||||||||||||||
HK$267 | HK$217 | HK$254 | 41 | 29 | 33 | |||||||||||||||||||
CNY140 | CNY1 | — | 20 | — | — | |||||||||||||||||||
GBP304 | GBP 118 | GBP453 | 648 | 237 | 791 | |||||||||||||||||||
SG$5 | SG$5 | SG$22 | 3 | 3 | 13 | |||||||||||||||||||
EUR10 | EUR348 | EUR504 | 15 | 495 | 604 | |||||||||||||||||||
AU$1 | — | — | 1 | — | — | |||||||||||||||||||
CHF4 | — | CHF19 | 4 | — | 15 | |||||||||||||||||||
— | — | CAD2 | — | — | 2 | |||||||||||||||||||
— | — | VND11,823,640 | — | — | 755 | |||||||||||||||||||
Accrued expenses | US$71 | US$84 | — | 86 | 88 | — | ||||||||||||||||||
¥1,300 | — | — | 15 | — | — | |||||||||||||||||||
EUR 23 | — | — | 1 | — | — | |||||||||||||||||||
Obligation under capital leases including current portion | US$101 | — | — | 121 | — | — | ||||||||||||||||||
Total liabilities | 126,146 | 59,528 | 46,956 | |||||||||||||||||||||
14. | CAPITAL STOCK AND CAPITAL SURPLUS |
2003 | 2004 | 2005 | ||||||||||
Authorized shares | 220,000,000 | 220,000,000 | 220,000,000 | |||||||||
Issued shares | 82,276,711 | 82,276,711 | 82,276,711 | |||||||||
Outstanding shares, net of treasury stock | 73,614,308 | 73,614,296 | 73,614,296 |
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Number of | Capital | ||||||||||||
Shares Issued | Common Stock | Surplus | |||||||||||
At January 1, 2003 | 89,152,670 | 44,576 | 2,884,382 | ||||||||||
Excess unallocated purchase price (note a) | — | — | (230 | ) | |||||||||
Retirement of treasury stock (note b) | (7,002,235 | ) | — | — | |||||||||
Issuance of common stock for the merger with SK IMT Co., Ltd. (note c) | 126,276 | 63 | 31,809 | ||||||||||
Gain on disposal of investments In common stock of subsidiary | — | — | 58 | ||||||||||
Equity in capital surplus changes of affiliates | — | — | (4,463 | ) | |||||||||
At December 31, 2003 | 82,276,711 | 44,639 | 2,911,556 | ||||||||||
Excess unallocated purchase price (note a) | — | — | (77 | ) | |||||||||
Considerations for conversion right (note d) | — | — | 67,279 | ||||||||||
Equity in capital surplus changes of affiliates | — | — | (10,457 | ) | |||||||||
At December 31, 2004 | 82,276,711 | 44,639 | 2,968,301 | ||||||||||
Deferred tax effect of temporary difference related to conversion rights (note e) | — | — | (18,502 | ) | |||||||||
Transfer of stock option from capital adjustment (note f) | — | — | 1,533 | ||||||||||
Equity in capital surplus changes of affiliates | — | — | 3,508 | ||||||||||
At December 31, 2005 | 82,276,711 | 44,639 | 2,954,840 | ||||||||||
(note a) | During the years ended December 31, 2003 and 2004, the Company paid |
(note b) | The Company retired 4,457,635 shares and 2,544,600 shares of treasury stock on January 3, 2003 and August 20, 2003, respectively, and reduced unappropriated retained earnings in accordance with the Korean Commercial Laws. |
(note c) | The excess of acquired net assets over the par value of |
(note d) | The Company issued zero coupon convertible bonds in the principal amount of US$329,450,000 at US$324,923,469 with an initial conversion price of |
(note e) | The tax effect of temporary difference related to consideration for conversion rights was deducted directly from related components of stockholders’ equity, pursuant to adoption of SKAS No. 16 for the year ended December 31, 2005 (see Note 2(x)). |
(note f) | During the year ended December 31, 2005, the exercisable period for the stock options representing 17,800 shares, of which recognized compensation costs was |
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15. | RETAINED EARNINGS |
2003 | 2004 | 2005 | ||||||||||
Appropriated | 4,743,822 | 4,733,936 | 5,470,701 | |||||||||
Unappropriated | 396,089 | 1,418,962 | 1,796,948 | |||||||||
5,139,911 | 6,152,898 | 7,267,649 | ||||||||||
2003 | 2004 | 2005 | ||||||||||
Legal reserve | 22,288 | 22,320 | 22,320 | |||||||||
Reserve for improvement of financial structure | 33,000 | 33,000 | 33,000 | |||||||||
Reserve for loss on disposal of treasury stock | 221,197 | 477,182 | 477,182 | |||||||||
Reserve for research and manpower development | 559,198 | 776,296 | 822,061 | |||||||||
Reserve for business expansion | 3,908,139 | 3,425,138 | 4,116,138 | |||||||||
4,743,822 | 4,733,936 | 5,470,701 | ||||||||||
a. | Legal Reserve |
b. | Reserve for Improvement of Financial Structure |
c. | Reserves for Loss on Disposal of Treasury Stock and Research and Manpower Development |
d. | Reserve for Business Expansion |
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16. | TREASURY STOCK |
17. | STOCK OPTIONS |
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Recognized | ||||||||||||||||||||||||||||||||
Total | Compensation Cost | Compensation | Stock Option in Capital Adjustment | |||||||||||||||||||||||||||||
Compensation | Cost to be | |||||||||||||||||||||||||||||||
Grant Date | Cost | 2003 | 2004 | 2005 | Recognized | 2003 | 2004 | 2005 | ||||||||||||||||||||||||
March 17, 2000 (note a) | 1,533 | 128 | — | — | — | 1,533 | 1,533 | — | ||||||||||||||||||||||||
March 16, 2001 | 234 | 79 | 10 | — | — | 224 | 234 | 234 | ||||||||||||||||||||||||
March 8, 2002 | 3,246 | 1,082 | 1,082 | 180 | — | 1,984 | 3,066 | 3,246 | ||||||||||||||||||||||||
5,013 | 1,289 | 1,092 | 180 | — | 3,741 | 4,833 | 3,480 | |||||||||||||||||||||||||
(note a) | During the year ended December 31, 2005, the exercisable period for stock options representing 17,800 shares, for which the Company had recognized compensation cost of |
2003 | 2004 | 2005 | ||||||||||
Pro forma ordinary income (in millions of Korean won) | 2,751,221 | 2,121,238 | 2,561,268 | |||||||||
Pro forma ordinary income per common shares | 26,145 | 20,234 | 25,439 | |||||||||
Pro forma net income (in millions of Korean won) | 1,962,986 | 1,489,542 | 1,872,680 | |||||||||
Pro forma net income per common shares | 26,145 | 20,234 | 25,439 |
18. | INCOME TAXES |
2003 | 2004 | 2005 | ||||||||||
Currently | 668,180 | 551,405 | 685,541 | |||||||||
Changes in net deferred tax liabilities | 120,879 | 78,356 | 7,718 | |||||||||
Income tax expenses | 789,059 | 629,761 | 693,259 | |||||||||
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2003 | 2004 | 2005 | ||||||||||
Income taxes at statutory income tax rate of 27% in 2003 and 2004 and 25% in 2005 | 743,671 | 573,257 | 640,391 | |||||||||
Resident surtax payable | 74,367 | 57,326 | 64,039 | |||||||||
Tax credit for investments, technology and human resource development and others | (83,826 | ) | (89,080 | ) | (100,160 | ) | ||||||
Special surtax for agriculture and fishery industries and other | 13,685 | 13,736 | 18,838 | |||||||||
Goodwill amortization not deductible for tax purpose | 38,213 | 35,382 | 35,382 | |||||||||
Undistributed earnings (unrecognized deficit) of subsidiaries | (5,909 | ) | 11,011 | 4,846 | ||||||||
Effect of the change in income tax rate (note a) | (20,204 | ) | — | — | ||||||||
Other permanent differences | 15,327 | 28,581 | 12,973 | |||||||||
Increase (decrease) in valuation allowance | 13,735 | (452 | ) | 16,950 | ||||||||
Recorded income taxes | 789,059 | 629,761 | 693,259 | |||||||||
Effective tax rate | 28.65 | % | 29.66 | % | 27.06 | % | ||||||
(note a) | Pursuant to a revision in the Korean Corporate Income Tax Law during 2003, statutory corporate income tax rate including resident surtax is changed from 29.5% to 27.5%, effective January 1, 2005. Such change in statutory corporate income tax rate resulted in a decrease in deferred tax liabilities as of December 31, 2003 by |
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2003 | 2004 | 2005 | |||||||||||
Current (note a): | |||||||||||||
Allowance for doubtful accounts | — | — | 39,334 | ||||||||||
Write-off of doubtful accounts | — | — | 9,239 | ||||||||||
Accrued interest income | — | — | (1,229 | ) | |||||||||
Net operating loss carryforwards | — | — | 17 | ||||||||||
Tax credit carryforwards | — | — | 89 | ||||||||||
Other | — | — | 18,623 | ||||||||||
Net deferred tax assets — current | — | — | 66,073 | ||||||||||
Non-Current (note a): | |||||||||||||
Allowance for doubtful accounts | 22,039 | 19,649 | — | ||||||||||
Write-off doubtful accounts | 9,587 | 9,764 | — | ||||||||||
Accrued interest income | (2,026 | ) | (2,463 | ) | — | ||||||||
Trading securities | 1 | (561 | ) | — | |||||||||
Depreciation | 3,712 | (40,220 | ) | (47,472 | ) | ||||||||
Loss on impairment of investment securities | 30,757 | 32,851 | 32,959 | ||||||||||
Loss on disposition of properties | — | 11,480 | — | ||||||||||
Foreign currency translation loss | 774 | — | — | ||||||||||
Equity in losses of affiliates | (6,593 | ) | (12,671 | ) | (10,244 | ) | |||||||
Unrecognized deficit (undistributed earnings) of subsidiaries | (3,364 | ) | (9,434 | ) | 13,732 | ||||||||
Tax free reserve for research and manpower development | (182,518 | ) | (195,103 | ) | (211,208 | ) | |||||||
Tax free reserve for loss on disposal of treasury stock | (130,373 | ) | (130,372 | ) | (130,372 | ) | |||||||
Loss on valuation of foreign currency swap | — | — | 3,642 | ||||||||||
Loss on valuation of derivatives (capital adjustment) | — | — | 5,377 | ||||||||||
Considerations for conversion right | — | — | (18,502 | ) | |||||||||
Equity in Capital Adjustments of Affiliates | — | — | (21,967 | ) | |||||||||
Net operating loss carryforwards | 29,575 | 25,371 | 24,108 | ||||||||||
Tax credit carryforwards | 1,162 | 5,003 | — | ||||||||||
Other | 39,693 | 18,510 | 15,091 | ||||||||||
Total deferred tax liabilities | (187,574 | ) | (268,196 | ) | (344,856 | ) | |||||||
Valuation allowance for: | |||||||||||||
Depreciation | — | (5,321 | ) | (6,022 | ) | ||||||||
Net operating loss carryforwards | (29,575 | ) | (24,980 | ) | (23,523 | ) | |||||||
Other | (8,880 | ) | (7,555 | ) | (25,260 | ) | |||||||
Net deferred tax assets liabilities — non-current | (226,029 | ) | (306,052 | ) | (399,661 | ) | |||||||
(note a) | Effective January 1, 2005, deferred income tax assets and liabilities which were presented on the balance sheet as a single non-current net number through 2004, are separated into current and non-current portions, pursuant to adoption of SKAS No. 16 “Income Taxes”. Such newly adopted accounting |
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standards are prospectively applied as allowed by SKAS No. 16. As a result, the deferred income tax liabilities at December 31, 2003 and 2004 were not separated into current and non-current portions to reflect the effect of such new adoption of SKAS No. 16. |
Net Operating Loss | Tax Credit | |||||||
Year Ending December 31, | Carryforwards | Carryforwards | ||||||
2006 | 62 | 89 | ||||||
2007 | 2,302 | — | ||||||
2008 | 14,520 | — | ||||||
2009 | 52,892 | — | ||||||
2010 | 19,542 | — | ||||||
Total | 89,318 | 89 | ||||||
Considerations for conversion right | (18,502 | ) | |||
Unrealized loss on valuation of long-term investment securities | 15,966 | ||||
Equity in capital adjustment of affiliates, net | (24,119 | ) | |||
Loss on valuation of currency swap | 5,377 | ||||
Foreign-based operations’ translation adjustment | 2 | ||||
Total | (21,276 | ) | |||
19. | INCOME PER SHARE |
2003 | 2004 | 2005 | ||||||||||
Net income | 1,966,100 | 1,491,479 | 1,872,978 | |||||||||
Weighted average number of common shares outstanding | 75,078,219 | 73,614,297 | 73,614,296 | |||||||||
Net income per share | 26,187 | 20,261 | 25,443 | |||||||||
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Weighted | Weighted | ||||||||||||||
Number of | Number of | Number of | |||||||||||||
Date | Shares | Days | Shares | ||||||||||||
For 2003: | |||||||||||||||
At January 1, 2003 | — | 89,152,670 | 365/365 | 89,152,670 | |||||||||||
Treasury stock, at the beginning | — | (9,310,607 | ) | 365/365 | (9,310,607 | ) | |||||||||
Purchase of treasury stock | Jan. 10 | (3,809,288 | ) | 356/365 | (3,715,360 | ) | |||||||||
Purchase of fractional shares | Feb. 3 | (52 | ) | 332/365 | (47 | ) | |||||||||
Purchase of fractional shares | May 1 | (91 | ) | 233/365 | (58 | ) | |||||||||
Issuance of common stock | May 1 | 126,276 | 233/365 | 80,609 | |||||||||||
Treasury stock | (note a) | (2,544,600 | ) | — | (1,128,988 | ) | |||||||||
Total | 73,614,308 | 75,078,219 | |||||||||||||
For 2004: | |||||||||||||||
At January 1, 2004 | — | 82,276,711 | 366/366 | 82,276,711 | |||||||||||
Treasury stock, at the beginning | — | (8,662,403 | ) | 366/366 | (8,662,403 | ) | |||||||||
Purchase of fractional shares | Feb. 20 | (12 | ) | 316/366 | (11 | ) | |||||||||
Total | 73,614,296 | 73,614,297 | |||||||||||||
For 2005: | |||||||||||||||
At January 1, 2005 | — | 82,276,711 | 365/365 | 82,276,711 | |||||||||||
Treasury stock, at the beginning | — | (8,662,415 | ) | 365/365 | (8,662,415 | ) | |||||||||
Total | 73,614,296 | 73,614,296 | |||||||||||||
(note a) | Such treasury stock was acquired or disposed of on several different dates in 2003, and the weighted number of shares was calculated according to each transaction date. |
2003 | 2004 | 2005 | ||||||||||
Adjusted net income | 1,966,100 | 1,498,797 | 1,886,033 | |||||||||
Adjusted weighted average number of common shares outstanding | 75,078,219 | 74,596,777 | 75,332,996 | |||||||||
Diluted net income per share | 26,187 | 20,092 | 25,036 | |||||||||
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Average Weighted | Per-share | ||||||||||||
Net Income | Number of Shares | Amount | |||||||||||
(In millions of | (In Korean Won) | ||||||||||||
Korean Won) | |||||||||||||
For 2003 | |||||||||||||
Basic net income per share | 1,966,100 | 75,078,219 | 26,187 | ||||||||||
Effect of stock option (note a) | — | — | |||||||||||
Diluted net income per share | 1,966,100 | 75,078,219 | 26,187 | ||||||||||
For 2004 | |||||||||||||
Basic net income per share | 1,491,479 | 73,614,297 | 20,261 | ||||||||||
Effect of stock option (note a) | — | — | |||||||||||
Effect of convertible bonds (note b) | 7,318 | 982,480 | |||||||||||
Diluted net income per share | 1,498,797 | 74,596,777 | 20,092 | ||||||||||
For 2005 | |||||||||||||
Basic net income per share | 1,872,978 | 73,614,296 | 25,443 | ||||||||||
Effect of stock option (note a) | — | — | |||||||||||
Effect of convertible bonds (note b) | 13,055 | 1,718,700 | |||||||||||
Diluted net income per share | 1,886,033 | 75,332,996 | 25,036 | ||||||||||
(note a) | In the years ended December 31, 2003, 2004 and 2005, the assumed exercise of stock options was not reflected in diluted earnings per share because the exercise of stock options would not dilute the earnings per share. |
(note b) | The effect of convertible bonds are increase in net income related to interest expense that would not have incurred, and increase in the weighted average number of common shares outstanding related to common shares that would have been issued, assuming the conversion of convertible bonds issued on May 27, 2004 (see Note 9). |
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Fiscal | Number of | Face | Dividend | |||||||||||||||
Year | Dividend Type | Shares Outstanding | Value | Ratio | Dividends | |||||||||||||
2003 | Cash dividends | 73,614,308 | 500 | 1,100% | 404,878 | |||||||||||||
2004 | Cash dividends (interim) | 73,614,308 | 500 | 200% | 73,614 | |||||||||||||
Cash dividends (year-end) | 73,614,296 | 500 | 1,860% | 684,613 | ||||||||||||||
Total | 758,227 | |||||||||||||||||
2005 | Cash dividends (interim) | 73,614,296 | 500 | 200% | 73,614 | |||||||||||||
Cash dividends (year-end) | 73,614,296 | 500 | 1,600% | 588,915 | ||||||||||||||
Total | 662,529 | |||||||||||||||||
2003 | 2004 | 2005 | ||||||||||
Dividends | 404,878 | 758,227 | 662,529 | |||||||||
Net income | 1,966,100 | 1,491,479 | 1,872,978 | |||||||||
Dividends payout ratio | 20.59 | % | 50.84 | % | 35.37 | % | ||||||
2003 | 2004 | 2005 | ||||||||||
Dividend per share | 5,500 | 10,300 | 9,000 | |||||||||
Stock price at the year-end | 199,000 | 197,000 | 181,000 | |||||||||
Dividends yield ratio | 2.76 | % | 5.23 | % | 4.97 | % | ||||||
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Asset | Risk | Book Value | Coverage | |||||||||
Inventories and property and | US$68,000 | |||||||||||
equipment | Fire and comprehensive liability | 3,754,241 | 7,395,950 | |||||||||
Description | 2003 | 2004 | 2005 | ||||||||||
Transactions | |||||||||||||
SK Engineering & Construction Co., Ltd.: | |||||||||||||
Construction (note a) | 324,260 | 419,871 | 257,823 | ||||||||||
Commissions paid and other expense | 7,662 | 6,148 | 6,593 | ||||||||||
Commission income and other income | 776 | 1,348 | 2,580 | ||||||||||
SK Networks (formerly known as SK Global): | |||||||||||||
Purchases of property and equipment | 3,853 | 3,144 | 7,220 | ||||||||||
Purchases of inventory | — | — | 2,800 | ||||||||||
Commissions paid, leased line and other expense | 214,101 | 411,053 | 432,967 | ||||||||||
Sales of handsets and other income | 491,978 | 1,177,249 | 279,197 | ||||||||||
SK Corporation: | |||||||||||||
Purchases of property and equipment | 3,831 | 4,071 | 1,302 | ||||||||||
Commissions paid and other expense | 35,612 | 55,921 | 48,266 | ||||||||||
Commission income and other income | 5,370 | 8,826 | 9,243 | ||||||||||
SK Telesys: | |||||||||||||
Purchases of property and equipment | 188,111 | 188,822 | 294,829 | ||||||||||
Commissions paid and other expenses | 1,717 | 3,102 | 7,410 | ||||||||||
Commission income and other income | 385 | 879 | 575 | ||||||||||
SKC: | |||||||||||||
Purchases of inventories | 204,694 | 899,260 | 219,767 | ||||||||||
Disposal of inventories and other | 18 | — | — | ||||||||||
Commissions paid and other expenses | 3,120 | 2,192 | 13,316 | ||||||||||
Commission income and other income | 747 | 584 | 32 | ||||||||||
Innoace: | |||||||||||||
Purchases of property and equipment | 35,225 | 23,776 | 13,652 | ||||||||||
Commissions paid and other expenses | 314 | 4,337 | 2,109 | ||||||||||
Commission income and other income | 8,969 | 296 | 218 |
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Description | 2003 | 2004 | 2005 | ||||||||||
WiderThan Co., Ltd.: | |||||||||||||
Purchases of property and equipment | 22,643 | 3,780 | 13,248 | ||||||||||
Commissions paid and other expenses | 49,939 | 82,380 | 98,211 | ||||||||||
Commission income and other income | 665 | 2,216 | 2,277 | ||||||||||
SK C&C Co., Ltd.: | |||||||||||||
Purchases of property and equipment | 182,774 | 130,243 | 249,633 | ||||||||||
Commissions paid and other expenses (note b) | 284,319 | 295,562 | 322,856 | ||||||||||
Commission income and other income | 8,200 | 7,918 | 7,853 | ||||||||||
Balances | |||||||||||||
SK Engineering & Construction Co., Ltd.: | |||||||||||||
Accounts receivable | 92 | 76 | 97 | ||||||||||
Accounts payable | 63,442 | 135,213 | 21,326 | ||||||||||
Guarantee deposits received | 90 | 408 | 942 | ||||||||||
SK Networks (formerly known as SK Global): | |||||||||||||
Accounts receivable | 107,782 | 216,412 | 1,787 | ||||||||||
Guarantee deposits | 113 | 113 | 113 | ||||||||||
Accounts payable | 63,641 | 20,047 | 22,237 | ||||||||||
Guarantee deposits received | 719 | 955 | 2,700 | ||||||||||
SK Corporation: | |||||||||||||
Accounts receivable | 1,571 | 4,843 | 1,643 | ||||||||||
Guarantee deposits (note c) | 103,720 | 103,720 | 37,703 | ||||||||||
Accounts payable | 2,911 | 20,165 | 6,914 | ||||||||||
Guarantee deposits received | 10,194 | 10,194 | 6,174 | ||||||||||
SK Telesys: | |||||||||||||
Accounts receivable | 50 | 53 | 3 | ||||||||||
Accounts payable | 33,904 | 51,954 | 65,819 | ||||||||||
SKC: | |||||||||||||
Accounts receivable | 53,680 | 15,549 | — | ||||||||||
Guarantee deposits | — | 10,266 | — | ||||||||||
Accounts payable | 93,383 | 115,839 | — | ||||||||||
Innoace: | |||||||||||||
Accounts payable | 25,640 | 15,199 | 6,100 | ||||||||||
Guarantee deposits received | 1,069 | 2,138 | 2,138 | ||||||||||
Widerthan Co., Ltd.: | |||||||||||||
Accounts receivable | 30 | 102 | 61 | ||||||||||
Accounts payable | 9,762 | 9,847 | 17,398 | ||||||||||
SK C&C Co., Ltd.: | |||||||||||||
Accounts receivable | 245 | 480 | 91 | ||||||||||
Accounts payable | 72,715 | 77,871 | 174,884 | ||||||||||
Guarantee deposits received | 346 | 346 | 346 |
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(note a) | The Company is a party to several contracts with SK Engineering and Construction Co., Ltd. related to the construction of its new corporate headquarters in Ulchiro 2-ga, Chongro-gu, Seoul. Construction of its new headquarters was completed at the end of 2004. The total payment to SK Engineering & Construction Co., Ltd. for the demolition of existing buildings on the site and construction of the new building was |
(note b) | The Company and certain subsidiaries are party to an agreement with SK C&C Co., Ltd., pursuant to which SK C&C Co., Ltd. provides them with information technology services, dated as of December 28, 1998 and amended as of November 1, 1999. This agreement will expire on December 31, 2009, but may be terminated by the Company and certain subsidiaries without cause on a six months notice. The agreement provides that the parties will agree annually on the specific services to be provided and the monthly fees to be paid by the Company and certain subsidiaries. The Company and certain subsidiaries also enter into agreements with SK C&C Co., Ltd. from time to time for specific information technology-related projects. |
(note c) | On December 19, 2000, the Company entered into an agreement with SK Corporation for the sale and leaseback of the Company’s head office with the lease period from December 19, 2000 to March 31, 2004. Under the lease agreement, in January 2001 the Company deposited refundable leasehold key money of |
2003 | 2004 | 2005 | ||||||||||
Beginning balance | 86,139 | 103,679 | 61,596 | |||||||||
Present value discount (note a) | — | — | (7,415 | ) | ||||||||
Increase | 32,145 | 34,283 | 7,265 | |||||||||
Decrease | (14,605 | ) | (76,366 | ) | (9,274 | ) | ||||||
Ending Balance | 103,679 | 61,596 | 52,172 | |||||||||
(note a) | Effective January 1, 2005, pursuant to adoption of SKAS No. 17 (see Note 2(m)), Rainbow Points provision is recorded at the present value, which was recorded at nominal value through 2004. |
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Fair Value | ||||||||||||||||||||
Designated | ||||||||||||||||||||
Duration of | as Cash | Not | ||||||||||||||||||
Type | Hedged Item | Face Amount | Contract | Flow Hedge | Designated | Total | ||||||||||||||
Fix-to-fixed cross currency swap | US dollar denominated bonds | US$ | 300,000 | March 23, 2004- April 1, 2011 | 60,206 | — | 60,206 | |||||||||||||
Fix-to-fixed cross currency swap | US dollar denominated convertible bond | US$ | 100,000 | May 27, 2004- May 27, 2009 | — | 13,244 | 13,244 | |||||||||||||
60,206 | 13,244 | 73,450 | ||||||||||||||||||
27. | MERGERS AND ACQUISITIONS |
a. | Merger with SK IMT Co., Ltd. |
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b. | Merger with Cyworld Co., Ltd. |
Fair value of net assets merged | 152 | ||||||||
Merger cost | |||||||||
Fair value of common stock issued | 8,429 | ||||||||
Direct costs related to the merger (note) | 1,097 | 9,526 | |||||||
Goodwill | 9,374 | ||||||||
(note) | The direct costs related to the merger are the liquidation income tax of |
Aug. 1, 2003 | Dec. 31, 2002 | ||||||||
(Condensed balance sheets) | |||||||||
Current assets | 1,200 | 129 | |||||||
Non-current assets | 615 | 1,175 | |||||||
Total assets | 1,815 | 1,304 | |||||||
Current liabilities | 1,586 | 850 | |||||||
Long-term liabilities | 77 | 432 | |||||||
Total liabilities | 1,663 | 1,282 | |||||||
Common stock | 1,160 | 1,160 | |||||||
Capital surplus | 4,208 | 4,208 | |||||||
Deficit | (5,216 | ) | (5,346 | ) | |||||
Total equity | 152 | 22 | |||||||
Total liabilities and stockholders’ equity | 1,815 | 1,304 | |||||||
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Period from | |||||||||
Jan. 1, 2003 to | Year Ended | ||||||||
Jul. 31, 2003 | Dec. 31, 2002 | ||||||||
(Condensed statements of operations) | |||||||||
Operating revenue | 1,930 | 1,823 | |||||||
Operating expenses | (2,244 | ) | (2,694 | ) | |||||
Operating loss | (314 | ) | (871 | ) | |||||
Other income | 606 | 37 | |||||||
Other expenses | (163 | ) | (721 | ) | |||||
Net income (loss) | 129 | (1,555 | ) | ||||||
c. | Acquisition of Seoul Records, Inc. |
In Millions of | ||||
Korean Won | ||||
Fair value of net assets acquired | 23,796 | |||
Goodwill | 4,078 | |||
Acquisition cost | 27,874 | |||
28. | NETWORK INTERCONNECTION CHARGES |
29. | SUBSTANTIAL CHANGES IN THE BUSINESS ENVIRONMENT AND SUBSEQUENT EVENTS |
a. | Acquisition of WiBro License |
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b. | Establishment of HELIO, LLC., a Joint Venture Company in the U.S. |
c. | Acquisition of and Merger with Etoos Group Inc. |
d. | Additional Acquisition of SLD Telecom PTE Ltd. |
e. | Handset Subsidies to Long-term Mobile Subscribers |
f. | Request for the conversion of the convertible bond and the delivery of the treasury stock |
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g. | Resolution to acquire equity interest in IHQ, Inc. |
h. | Fine for improper payment of handset subsidies. |
30. | RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
a. | Deferred Income Taxes (see Note 2) |
b. | Deferred Charges (see Note 2) |
c. | Leases |
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d. | Marketable Securities and Investments Securities (see Note 2) |
• | Debt securities that the Company has the positive intent and ability to hold to maturity are classified asheld-to-maturity securities and reported at amortized cost. | |
• | Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in income. | |
• | Debt and equity securities not classified as eitherheld-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from income and reported in other comprehensive income. |
Gross | Gross | ||||||||||||||||
Cost | Unrealized | Unrealized | |||||||||||||||
(Amortized Cost) | Gains | Losses | Fair Value | ||||||||||||||
At December 31, 2003: | |||||||||||||||||
Debt securities | 895,401 | — | (2,184 | ) | 893,217 | ||||||||||||
At December 31, 2004: | |||||||||||||||||
Equity securities | 450 | — | (82 | ) | 368 | ||||||||||||
Debt securities | 652,372 | 2,039 | — | 654,411 | |||||||||||||
Total | 652,822 | 2,039 | (82 | ) | 654,779 | ||||||||||||
At December 31, 2005: | |||||||||||||||||
Equity securities | 11 | 1 | — | 12 | |||||||||||||
Debt securities | 777,460 | — | — | 777,460 | |||||||||||||
Total | 777,471 | 1 | — | 777,472 | |||||||||||||
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Gross | Gross | ||||||||||||||||||||
Cost (amortized | unrealized | unrealized | Impairment | ||||||||||||||||||
cost) | gains | losses | losses | Fair value | |||||||||||||||||
At December 31, 2003: | |||||||||||||||||||||
Equity securities | 427,472 | 73,290 | (6,608 | ) | (55,469 | ) | 438,685 | ||||||||||||||
Debt securities | 64,315 | — | — | — | 64,315 | ||||||||||||||||
491,787 | 73,290 | (6,608 | ) | (55,469 | ) | 503,000 | |||||||||||||||
At December 31, 2004: | |||||||||||||||||||||
Equity securities | 470,266 | 137,621 | — | (63,902 | ) | 543,985 | |||||||||||||||
Debt securities | 65,957 | — | — | (10,655 | ) | 55,302 | |||||||||||||||
536,223 | 137,621 | — | (74,557 | ) | 599,287 | ||||||||||||||||
At December 31, 2005: | |||||||||||||||||||||
Equity securities | 465,244 | 173,960 | (9,768 | ) | (60,838 | ) | 568,598 | ||||||||||||||
Debt securities | 307,490 | — | (217 | ) | (10,885 | ) | 296,388 | ||||||||||||||
772,734 | 173,960 | (9,985 | ) | (71,723 | ) | 864,986 | |||||||||||||||
e. | Impairment of Investment Securities and Recoveries |
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f. | Comprehensive Income |
g. | Business Combinations and Intangible Assets |
h. | Determination of Acquisition Cost of Equity Interest in Subsidiary |
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i. | Additional Equity Investment in Subsidiaries |
j. | Capitalization of Foreign Exchange Losses (or Gains) and Interest Expenses |
k. | Nonrefundable Activation Fees |
l. | Gain or Loss on Disposal of Subsidiary’s Stock |
m. | Employee Stock Option Compensation Plan |
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n. | Loans Receivable for Stock Issued to Employee |
o. | Discount on Leasehold Deposits |
p. | Asset Securitization Transactions |
• | The transferred assets have been isolated from the transferor and put beyond the reach of the transferor, or any consolidated affiliated of the transferor, and their creditors even in the event of bankruptcy or receivership of the transferor or any consolidated affiliate. | |
• | The transferee is a qualifying special-purpose entity (“QSPE”) and each holder of its beneficial interests (including both debt and equity securities) has the right to pledge, or the right to exchange its interests. If the issuing vehicle is not a QSPE, then sale accounting is only permitted if the issuing vehicle itself has the right to pledge or the right to exchange the transferred assets. | |
• | The transferor does not effectively maintain control over the transferred assets either through; |
(a) an agreement that calls for the transferor to repurchase the transferred assets (or to buy back securities of a QSPE held by third-party investors) before their maturity or | |
(b) the ability to unilaterally cause the SPE or QSPE to return specific assets; other than through a cleanup call. |
q. | Considerations for Conversion Right |
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r. | Currency Swap |
s. | Foreign Currency Translation |
t. | Sale of Stock by Equity Method Investee |
u. | Subscription Payable |
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v. | Equity Instrument to Be Received in Conjunction with Providing Services |
w. | Consolidation of Variable Interest Entities |
x. | Remeasurement of Stock Option |
y. | Presentation of Minority Interest as a Component of Shareholders’ Equity |
z. | Consolidated Subsidiary |
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Year Ended December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
Net income based on Korean GAAP | 1,966,100 | 1,491,479 | 1,872,978 | ||||||||||
Adjustments: | |||||||||||||
Deferred income tax adjustments due to difference in accounting principles | (7,342 | ) | (3,827 | ) | 30,857 | ||||||||
Tax effect of the reconciling items | (15,036 | ) | 22,515 | (4,717 | ) | ||||||||
Deferred charges | 2,660 | (60 | ) | (2,037 | ) | ||||||||
Capital leases | (906 | ) | 1,534 | (925 | ) | ||||||||
Intangible assets | (22,303 | ) | (18,546 | ) | (16,046 | ) | |||||||
Reversal of amortization of goodwill | 135,557 | 136,694 | 137,389 | ||||||||||
Capitalization of foreign exchange losses and interest expenses related to tangible assets | 21,617 | 24,454 | 3,231 | ||||||||||
Capitalization of interest expenses related to purchases of intangible assets | 427 | 5,285 | 5,272 | ||||||||||
Nonrefundable activation fees | (46,962 | ) | (36,048 | ) | (34,681 | ) | |||||||
Loss (gain) on disposal of subsidiary shares | 58 | — | — | ||||||||||
Stock option compensation plan | (3,114 | ) | (1,938 | ) | 49 | ||||||||
Loss on sale of accounts receivable and other in asset securitization | 7,437 | (14,476 | ) | — | |||||||||
Loss on impairment of investment securities | 24,727 | (8,434 | ) | 3,065 | |||||||||
Loss on valuation of currency swap | — | (49,452 | ) | 29,898 | |||||||||
Discount on leasehold deposits | (286 | ) | 422 | 230 | |||||||||
Considerations for conversion right | — | 1,016 | 14,044 | ||||||||||
Foreign currency translation | — | 2,458 | (2,458 | ) | |||||||||
Recovery of impaired investment securities | 115 | — | — | ||||||||||
Sales of stock by the equity method investee | — | — | (8,637 | ) | |||||||||
Consolidation of variable interest entity | — | — | 38 | ||||||||||
Net income based on U.S. GAAP | 2,062,749 | 1,553,076 | 2,027,550 | ||||||||||
Weighted average number of common shares outstanding | 75,078,219 | 73,614,297 | 73,614,296 | ||||||||||
Earnings per share based on U.S. GAAP: | |||||||||||||
Basic earnings per share | 27,475 | 21,097 | 27,543 | ||||||||||
Diluted earnings per share | 27,475 | 20,918 | 27,089 | ||||||||||
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December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
Shareholders’ equity based on Korean GAAP Adjustments: | 6,093,847 | 7,205,744 | 8,327,540 | ||||||||||
Deferred income tax adjustments due to difference In accounting principles | (45,317 | ) | (70,067 | ) | — | ||||||||
Tax effect of the reconciling items | 136,517 | 159,032 | 101,130 | ||||||||||
Deferred charges | 60 | — | (2,037 | ) | |||||||||
Capital leases | 239 | 1,773 | 847 | ||||||||||
Intangible assets | 1,019,951 | 1,009,591 | 993,547 | ||||||||||
Reversal of amortization of goodwill | 273,598 | 410,292 | 547,681 | ||||||||||
Capitalization of foreign exchange losses and interest expenses related to tangible assets | 19,842 | 44,294 | 47,522 | ||||||||||
Capitalization of interest expenses related to purchase of intangible assets | (68,945 | ) | (63,660 | ) | (58,388 | ) | |||||||
Nonrefundable activation fees | (239,174 | ) | (275,222 | ) | (309,903 | ) | |||||||
Loans receivable for stock issued to employees’ investor association | (33,788 | ) | (22,546 | ) | (14,586 | ) | |||||||
Minority interest in equity of consolidated affiliates | (155,985 | ) | (98,198 | ) | (108,927 | ) | |||||||
Loss on sale of accounts receivable and other in asset securitization | 14,476 | — | — | ||||||||||
Discount on leasehold deposits | (653 | ) | (231 | ) | — | ||||||||
Considerations for conversion right | — | (66,263 | ) | (52,220 | ) | ||||||||
Foreign currency translation | — | 2,458 | — | ||||||||||
Consolidation of variable interest entity | — | — | 228 | ||||||||||
Shareholders’ equity based on U.S. GAAP | 7,014,668 | 8,236,997 | 9,472,434 | ||||||||||
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Year Ended December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
Balance, beginning of the year | 6,356,176 | 7,014,668 | 8,236,997 | ||||||||||
Net income for the year | 2,062,749 | 1,553,076 | 2,027,550 | ||||||||||
Dividends | (151,739 | ) | (478,492 | ) | (758,227 | ) | |||||||
Issuance of common stock | 31,053 | — | — | ||||||||||
Unrealized gains on valuation of securities, net of tax | 50,033 | 55,156 | 23,042 | ||||||||||
Equity in capital surplus, retained earnings and capital adjustments of affiliates (note a) | 50,166 | 89,448 | (63,370 | ) | |||||||||
Retirement of treasury stock | (20,598 | ) | — | — | |||||||||
Treasury stock transactions | (1,379,337 | ) | (2 | ) | — | ||||||||
Foreign-based operations’ translation adjustments | (356 | ) | (11,128 | ) | (1,792 | ) | |||||||
Stock compensation plan | 4,403 | 3,030 | 274 | ||||||||||
Decrease in loans receivable for stock issued to employees’ investor association | 12,118 | 11,241 | 7,960 | ||||||||||
Balance, end of the year | 7,014,668 | 8,236,997 | 9,472,434 | ||||||||||
(note a) | This line item consists of the adjustments to the carrying amount of equity method investments based on the Company’s proportionate pickup in affiliates using the equity method of accounting, which are directly adjusted to stockholders’ equity of affiliates, such as unrealized gains or losses on valuation of available-for-sale securities, foreign-based operations’ translation adjustments in affiliates and stock transactions by affiliates. |
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December 31, | ||||||||||||||
2003 | 2004 | 2005 | ||||||||||||
Current assets: | ||||||||||||||
As reported | 4,069,525 | 4,390,693 | 4,598,580 | |||||||||||
U.S. GAAP adjustments: | ||||||||||||||
— loans receivable for stock issued to employees investor association | — | (4,123 | ) | (3,249 | ) | |||||||||
— deferred tax adjustments due to difference in accounting principles | 73,500 | 51,344 | — | |||||||||||
— tax effect of the reconciling items | (8,297 | ) | 25,234 | 31,381 | ||||||||||
— discount on leasehold deposits | 5,777 | 1,119 | — | |||||||||||
— asset securitization transactions | 478,298 | — | — | |||||||||||
— consolidation of variable interest entity | — | — | (4,889 | ) | ||||||||||
Current assets based on U.S. GAAP | 4,618,823 | 4,464,267 | 4,621,823 | |||||||||||
Non-current assets: | ||||||||||||||
As reported | 9,748,692 | 9,892,665 | 10,106,192 | |||||||||||
U.S. GAAP adjustments: | ||||||||||||||
— loans receivable for stock issued to employees’ investor association | (33,788 | ) | (18,423 | ) | (11,337 | ) | ||||||||
— intangible assets | 1,015,801 | 1,004,774 | 988,729 | |||||||||||
— reverse of amortization of goodwill | 273,598 | 410,292 | 547,681 | |||||||||||
— discount on leasehold deposits | (6,430 | ) | (1,349 | ) | — | |||||||||
— recovery of impaired investment securities | 34 | 34 | 34 | |||||||||||
— nonrefundable activation fees | 9,129 | 9,129 | 8,571 | |||||||||||
— capital lease | 3,301 | 1,773 | 847 | |||||||||||
— capitalization of foreign exchange losses and interest expense related to tangible assets | 19,842 | 44,294 | 47,522 | |||||||||||
— capitalization of interest expenses related to purchase of intangible assets | (68,945 | ) | (63,660 | ) | (58,388 | ) | ||||||||
— deferred charges | 6,154 | 12,969 | 7,933 | |||||||||||
— subscription payable | — | — | 40,014 | |||||||||||
— equity instrument to be received in conjunction with providing services | — | — | (2,055 | ) | ||||||||||
— consolidation of variable interest entity | — | — | 53,626 | |||||||||||
Non-current assets based on U.S. GAAP | 10,967,388 | 11,292,498 | 11,729,369 | |||||||||||
Total assets based on U.S. GAAP | 15,586,211 | 15,756,765 | 16,351,192 | |||||||||||
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December, 31 | ||||||||||||||
2003 | 2004 | 2005 | ||||||||||||
Current liabilities: | ||||||||||||||
As reported | 4,530,910 | 3,066,893 | 2,863,373 | |||||||||||
U.S. GAAP adjustments: | ||||||||||||||
— deferred charges | 31 | — | — | |||||||||||
— nonrefundable activation fees | 68,665 | 86,082 | 114,111 | |||||||||||
— asset securitization transactions | 463,822 | — | — | |||||||||||
— acquisition cost of equity interest in subsidiary | 886 | — | — | |||||||||||
— foreign currency translation | — | (26 | ) | — | ||||||||||
— subscription payable | — | — | 40,014 | |||||||||||
— equity instrument to be received in conjunction with providing services | — | — | (525 | ) | ||||||||||
— consolidation of variable interest entity | — | — | 17,671 | |||||||||||
Current liabilities based on U.S. GAAP | 5,064,314 | 3,152,949 | 3,034,644 | |||||||||||
Long-term liabilities: | ||||||||||||||
As reported | 3,193,460 | 4,010,721 | 3,513,859 | |||||||||||
U.S. GAAP adjustments: | ||||||||||||||
— deferred charges | 5,844 | 12,969 | 9,970 | |||||||||||
— nonrefundable activation fees | 179,638 | 198,269 | 204,363 | |||||||||||
— capital leases | 3,062 | — | — | |||||||||||
— deferred tax adjustments due to difference in accounting principles | 118,837 | 123,911 | — | |||||||||||
— tax effect of the reconciling items | (149,597 | ) | (141,080 | ) | (74,532 | ) | ||||||||
— considerations for conversion right | — | 66,263 | 52,220 | |||||||||||
— foreign currency translation | — | (2,432 | ) | — | ||||||||||
— equity instrument to be received in conjunction with providing services | — | — | (1,530 | ) | ||||||||||
— consolidation of variable interest entity | — | — | 631 | |||||||||||
Long-term liabilities based on U.S. GAAP | 3,351,244 | 4,268,621 | 3,704,981 | |||||||||||
Total liabilities based on U.S. GAAP | 8,415,558 | 7,421,570 | 6,739,625 | |||||||||||
Minority interests: | ||||||||||||||
As reported | 155,985 | 98,198 | 108,927 | |||||||||||
U.S. GAAP adjustments: | ||||||||||||||
— consolidation of variable interest entity | — | — | 30,206 | |||||||||||
Total minority interests based on U.S. GAAP | 155,985 | 98,198 | 139,133 | |||||||||||
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2003 | 2004 | 2005 | |||||||||||
Cash flows from operating activities based on Korean GAAP | 3,329,391 | 2,516,807 | 3,404,105 | ||||||||||
Adjustments: | |||||||||||||
Asset securitization transactions | (47,496 | ) | 469,883 | — | |||||||||
Trading security cash flows | (137,618 | ) | 240,204 | (122,710 | ) | ||||||||
Consolidation of variable interest entity | — | — | 12,444 | ||||||||||
Cash flows from operating activities based on US GAAP | 3,144,277 | 3,226,894 | 3,293,839 | ||||||||||
Cash flows from investing activities based on Korean GAAP | (1,415,053 | ) | (1,470,292 | ) | (1,938,187 | ) | |||||||
Adjustments: | |||||||||||||
Asset securitization transactions | (8,080 | ) | 76,347 | — | |||||||||
Trading security cash flows | 137,618 | (240,204 | ) | 122,710 | |||||||||
Consolidation of variable interest entity | — | — | (1,004 | ) | |||||||||
Cash flows from investing activities based on US GAAP | (1,285,515 | ) | (1,634,149 | ) | (1,816,481 | ) | |||||||
Cash flows from financing activities based on Korean GAAP | (2,261,039 | ) | (968,570 | ) | (1,429,038 | ) | |||||||
Adjustments: | |||||||||||||
Asset securitization transactions | 55,576 | (546,230 | ) | — | |||||||||
Consolidation of variable interest entity | — | — | (10,243 | ) | |||||||||
Cash flows from financing activities based on US GAAP | (2,205,463 | ) | (1,514,800 | ) | (1,439,281 | ) | |||||||
Cash and cash equivalents at end of the year based on Korean GAAP | 317,488 | 370,630 | 378,426 | ||||||||||
Adjustments: | |||||||||||||
Consolidation of variable interest entity | — | — | 1,197 | ||||||||||
Cash and cash equivalents at end of the year based on US GAAP | 317,488 | 370,630 | 379,623 | ||||||||||
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2003 | 2004 | |||||||
Cash flows from operating activities based on US GAAP, as previously reported | 3,281,274 | 2,985,935 | ||||||
Revision related to returns on equity securities-dividends | 621 | 755 | ||||||
Revision related to trading security cash flows | (137,618 | ) | 240,204 | |||||
Cash flows from operating activities based on US GAAP, as revised | 3,144,277 | 3,226,894 | ||||||
Cash flows from investing activities based on US GAAP, as previously reported | (1,422,512 | ) | (1,393,190 | ) | ||||
Revision related to returns on equity securities-dividends | (621 | ) | (755 | ) | ||||
Revision related to trading security cash flows | 137,618 | (240,204 | ) | |||||
Cash flows from investing activities based on US GAAP, as revised | (1,285,515 | ) | (1,634,149 | ) | ||||
31. | ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP |
a. | Income Taxes |
Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Currently payable | 668,180 | 551,405 | 685,541 | |||||||||
Deferred | 143,257 | 59,669 | (18,422 | ) | ||||||||
811,437 | 611,074 | 667,119 | ||||||||||
Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Income taxes at statutory income tax rate of 27% in 2003 and 2004 and 25% in 2005 | 776,030 | 584,843 | 670,776 | |||||||||
Resident surtax payable | 77,603 | 58,484 | 67,078 | |||||||||
Tax credit for investments, technology, human resource development and others | (83,826 | ) | (89,080 | ) | (100,160 | ) | ||||||
Special surtax for agriculture and fishery industries and other | 13,685 | 13,736 | 18,850 | |||||||||
Undistributed earnings of subsidiaries | (5,909 | ) | 11,011 | 4,846 | ||||||||
Effect of change in income tax rate | (7,943 | ) | — | — | ||||||||
Other permanent differences | 20,719 | 28,705 | 19,637 | |||||||||
Change in valuation allowance | 21,078 | 3,375 | (13,908 | ) | ||||||||
Recorded income taxes | 808,892 | 611,074 | 667,119 | |||||||||
Effective tax rate | 28.23 | % | 28.21 | % | 24.86 | % | ||||||
F-75
Table of Contents
December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
Current: | |||||||||||||
Allowance for doubtful accounts | 22,039 | 19,649 | 39,334 | ||||||||||
Write-off of doubtful accounts | 9,587 | 9,764 | 9,239 | ||||||||||
Marketable trading securities | 1 | (561 | ) | — | |||||||||
Accrued income | (2,026 | ) | (2,463 | ) | (1,229 | ) | |||||||
Net operating loss carryforwards | — | — | 17 | ||||||||||
Tax credit carryforwards | — | — | 89 | ||||||||||
Accrued expenses and other | 35,622 | 50,189 | 50,004 | ||||||||||
65,223 | 76,578 | 97,454 | |||||||||||
Non-current: | |||||||||||||
Depreciation | 3,935 | (34,371 | ) | (58,745 | ) | ||||||||
Loss on disposition of properties | — | 11,480 | — | ||||||||||
Loss on impairment and valuation of investment securities (note) | 74,928 | 58,419 | 32,959 | ||||||||||
Foreign exchange losses | 774 | — | — | ||||||||||
Equity in losses (earnings) of affiliates | (6,593 | ) | (12,671 | ) | (7,471 | ) | |||||||
Undistributed earnings of subsidiaries | (3,364 | ) | (9,434 | ) | 13,732 | ||||||||
Tax free reserve for technology development | (182,518 | ) | (195,103 | ) | (211,208 | ) | |||||||
Tax free reserve for loss on disposal of treasury stock | (130,373 | ) | (130,372 | ) | (130,372 | ) | |||||||
Tax credit carryforwards | 1,162 | 5,003 | — | ||||||||||
Net operating loss carryforwards | — | 25,371 | 24,108 | ||||||||||
Deferred charges and other | 46,780 | (7,205 | ) | 11,867 | |||||||||
(195,269 | ) | (288,883 | ) | (325,130 | ) | ||||||||
Total deferred tax assets (liabilities) | (130,046 | ) | (212,305 | ) | (227,676 | ) | |||||||
(note) | Unrealized gain on valuation of investment securities as of December 31, 2003, 2004 and 2005 were recorded as a separate component of shareholders’ equity, net of tax effect of |
F-76
Table of Contents
F-77
Table of Contents
2003 | 2004 | 2005 | ||||||||||||||||||||||||
Carrying | Carrying | Carrying | ||||||||||||||||||||||||
Amount | Amount | Amount | ||||||||||||||||||||||||
(Note a) | Fair Value | (Note a) | Fair Value | (Note a) | Fair Value | |||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||
Cash and cash equivalents and short-term financial instruments | 472,410 | 472,410 | 383,360 | 383,360 | 486,215 | 486,215 | ||||||||||||||||||||
Trading securities | 893,217 | 893,217 | 654,779 | 654,779 | 777,472 | 777,472 | ||||||||||||||||||||
Accounts receivable (trade and other) | 3,000,918 | 3,000,918 | 3,126,754 | 3,126,754 | 3,038,936 | 3,038,936 | ||||||||||||||||||||
Short-term loans | 41,933 | 41,933 | 51,232 | 51,232 | 62,290 | 62,290 | ||||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||||
Listed equity and debts | 503,000 | 503,000 | 599,287 | 599,287 | 864,986 | 864,986 | ||||||||||||||||||||
Non- listed equity (note b) | 385,707 | N/A | 352,523 | N/A | 353,168 | N/A | ||||||||||||||||||||
Long-term bank deposits | 352 | 352 | 10,351 | 10,351 | 1,479 | 1,479 | ||||||||||||||||||||
Long-term loans | 13,947 | 10,460 | 12,019 | 9,014 | 7,093 | 5,320 | ||||||||||||||||||||
5,311,484 | 5,190,305 | 5,591,639 | ||||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||
Accounts payable | 1,317,162 | 1,317,162 | 1,205,682 | 1,205,682 | 1,094,855 | 1,094,855 | ||||||||||||||||||||
Short-term borrowings | 1,236,197 | 1,236,197 | 425,496 | 425,496 | 4,614 | 4,614 | ||||||||||||||||||||
Bonds payable, long-term borrowings, convertible bonds, long-term payables — other and obligation under capital leases, including current portion | 4,201,707 | 4,283,402 | 4,044,258 | 4,211,926 | 3,763,135 | 3,825,813 | ||||||||||||||||||||
6,755,066 | 9,234,563 | 4,862,604 | ||||||||||||||||||||||||
(note b) | Investments in non — listed equity include the investments in the common stock of Powercomm Co., Ltd. (“Powercomm”). Korea Electric Power Corp. (“KEPCO”), the parent company of Powercomm, sold to Dacom Corporation 45.5% interest in Powercomm at |
F-78
Table of Contents
2003 | 2004 | 2005 | ||||||||||||
Net income | 2,062,749 | 1,553,076 | 2,027,550 | |||||||||||
Other comprehensive income: | ||||||||||||||
Available-for-sale securities | ||||||||||||||
Unrealized gain on investment securities | 93,738 | 67,645 | 34,915 | |||||||||||
Less impact of realized losses(gains) | (24,727 | ) | 8,434 | (3,065 | ) | |||||||||
Tax effect | (18,978 | ) | (20,923 | ) | (8,808 | ) | ||||||||
Net change from available-for-sale securities | 50,033 | 55,156 | 23,042 | |||||||||||
Foreign-based operations translation adjustments | (356 | ) | (11,128 | ) | (1,792 | ) | ||||||||
Total other comprehensive income | 49,677 | 44,028 | 21,250 | |||||||||||
Comprehensive income | 2,112,426 | 1,597,104 | 2,048,800 | |||||||||||
2003 | 2004 | 2005 | |||||||||||
Beginning of period | 3,400,110 | 3,400,155 | 3,408,989 | ||||||||||
Goodwill reclassifications to other intangibles assets | (16,437 | ) | — | — | |||||||||
Goodwill acquired during the period | 16,482 | 8,834 | 9,223 | ||||||||||
Goodwill impairment losses | — | — | — | ||||||||||
Ending of period | 3,400,155 | 3,408,989 | 3,418,212 | ||||||||||
F-79
Table of Contents
December 31, 2003 | December 31, 2004 | December 31, 2005 | |||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||
Gross | Gross | Gross | Amortization | ||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | Carrying | and | ||||||||||||||||||||
Amount | Amortization | Amount | Amortization | Amount | Impairment | ||||||||||||||||||||
Amortized intangible assets: | |||||||||||||||||||||||||
IMT license (13 years) | 1,188,547 | (7,548 | ) | 1,188,547 | (98,183 | ) | 1,188,547 | (188,193 | ) | ||||||||||||||||
Customer lists (4 years) | 99,783 | (64,088 | ) | 99,783 | (83,686 | ) | 99,783 | (99,783 | ) | ||||||||||||||||
Other (2 to 20 years) | 552,279 | (258,802 | ) | 718,291 | (354,021 | ) | 1,036,165 | (455,505 | ) | ||||||||||||||||
Total | 1,840,609 | (330,438 | ) | 2,066,621 | (535,890 | ) | 2,324,495 | (743,481 | ) | ||||||||||||||||
f. | Operating Revenue |
2003 | 2004 | 2005 | ||||||||||
Wireless services | 8,401,021 | 8,762,376 | 9,148,363 | |||||||||
Interconnection | 1,017,056 | 849,407 | 898,621 | |||||||||
Digital handset sales | 611,981 | 649,809 | 294,557 | |||||||||
Other | 180,306 | 272,974 | 359,911 | |||||||||
Total operating revenue | 10,210,364 | 10,534,566 | 10,701,452 | |||||||||
F-80
Table of Contents
g. | Segment |
h. | New Accounting Pronouncements |
F-81
Table of Contents
F-82
Table of Contents
SK TELECOM CO., LTD. | |
(Registrant) | |
/s/Shin Bae Kim | |
(Signature) | |
Shin Bae Kim | |
Chief Executive Officer and | |
Representative Director | |
(Name/ Title) |
Table of Contents
Number | Description | |||
1 | .1 | Memorandum and Articles of Association | ||
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 | ||
4 | .1 | Telecommunications Basic Law of 1983, as amended (English translation) | ||
4 | .2 | Enforcement Decree of the Telecommunications Basic Law, as amended (English translation) | ||
4 | .3 | Telecommunications Business Law of 1983, as amended (English translation) | ||
4 | .4 | Enforcement Decree of the Telecommunications Business Law (English translation)*** | ||
4 | .5 | Korean Commercial Code (together with English translation)* | ||
4 | .6 | Amendment to Korean Commercial Code dated December 29, 2001 (together with English translation)** | ||
4 | .7 | Korean Securities and Exchange Act, as amended (English translation) | ||
8 | .1 | List of Subsidiaries of SK Telecom Co., Ltd. | ||
11 | .1 | Code of Ethics 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 | ||
99 | .1 | Consent of Deloitte Anjin LLC |
* | Filed previously as exhibits to our Form 20-F filed on June 30, 2000. | |
** | Filed previously as exhibits to our Form 20-F filed on June 28, 2002. | |
*** | Filed previously as exhibits to our Form 20-F filed on May 31, 2005. |